mporium Group PLC Proposed acquisition and fundraising (0531O)

TIDMMPM

RNS Number : 0531O

mporium Group PLC

30 September 2019

This Announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 ("MAR"). In addition, market soundings (as defined in MAR) were taken in respect of the Placing with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this Announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.

30 September 2019

Mporium Group plc

("Mporium", the "Company" or the "Group")

Proposed acquisition and fundraising

Mporium Group plc (AIM: MPM), the technology firm delivering event-driven marketing, is pleased to announce that it has entered into non-binding heads of terms for the acquisition of the entire issued share capitals of Click Laboratories Limited and We Breathe Media Ltd (together, "Click Labs"), two companies under substantially common ownership operating a performance-based digital agency focused on the design, build and delivery of end-to-end multi-channel lead generation campaigns, for a maximum consideration of GBP5.5 million (the "Potential Acquisition"). Further details are set out below.

Highlights

-- Click Labs specialises in email-marketing as well as providing critical technology, tools and know-how to optimise lead generation performance which is highly complementary to Mporium's expertise in search, social and display marketing

-- Potential Acquisition expected to make a material positive contribution to the Group's performance in FY2019 and onwards, and is expected to accelerate Mporium's pathway to becoming net cash generative

-- The initial cash consideration and Potential Acquisition and ongoing working capital needs of the Group are proposed to be financed by an issue of new Ordinary Shares to existing and new investors to raise GBP1.25 million

About Click Labs

Click Labs specialises in email-marketing as well as providing critical technology, tools and know-how to optimise lead generation performance which is highly complementary to Mporium's expertise in search, social and display marketing. With years of experience, successful commercial execution and proprietary tools and technology to accelerate Mporium's commercial capacity and capability for both lead generation and technology licensing. Click Labs Group has historically generated revenues through a largely performance-based revenue model (e.g. Cost Per Potential Acquisition and Cost Per Lead).

The Board believes that the Potential Acquisition would make a material positive contribution to the group in FY2019 and onwards, and is expected to accelerate Mporium's pathway to becoming net cash generative. For the year ended 30 September 2018, Click Labs recorded turnover of GBP1.48 million, net profit of GBP0.17 million and had net assets of GBP0.11 million. Click Labs expects to show combined revenue of GBP2.8 million and EBIT of GBP0.4 million for the year to 30 September 2019.

Terms of the Potential Acquisition

The initial consideration for the Potential Acquisition will be satisfied by the payment of GBP0.5 million in cash and the issue of 400,000,000 Ordinary Shares ("Consideration Shares"), worth GBP2 million based on an issue price per Ordinary Share of 0.5 pence. Subsequently deferred consideration of up to GBP3 million will be payable in cash in 8 tranches over the next 24 months based on achievement of net profit targets. Due diligence remains ongoing in respect of the Potential Acquisition and the Potential Acquisition is subject to contract.

The fundraising

The Potential Acquisition, including associated costs, and the separate ongoing working capital needs of the Company are intended to be financed by way of placing shares (the "Subscription") to certain existing and new investors to raise GBP1.25 million by the issue of new Ordinary Shares of 0.5 pence each (the "Placing Shares") at a price of 0.5 pence per Ordinary Share (the "Placing Price").

Upon completion of the Placing, the investors will also receive warrants ("Warrants") exercisable between 10 December 2019 and 10 December 2021 with a subscription price of 1.5 pence per Warrant and on the basis of one Warrant for each Placing Share. The detailed terms of the Warrants are to be finalised and agreed with the relevant parties prior to admission of the Placing Shares and the Consideration Shares.

Posting of shareholder circular

The Directors anticipate that 650,000,000 new Ordinary Shares would be issued pursuant to, and upon completion of, the Placing and Potential Acquisition. In the interests of expediency, and notwithstanding that neither the Placing nor the Potential Acquisition are certain to proceed at this stage, a circular (the "Circular") seeking shareholder approval of the potential issue of the Consideration Shares, the Placing Shares and Ordinary Shares representing up to 20% of the issued share capital of the Company following the allotment of the Placing Shares and the Consideration Shares. Extracts from the circular is shown below and the Circular will be available on the Company's website at www.mporium.com.

Cautionary statement

The Potential Acquisition remains subject to satisfactory due diligence and contract, and therefore there can be no certainty that the Potential Acquisition or the Placing will complete. The Placing is not being underwritten and is conditional on receipt of funds from investors, completion of the Potential Acquisition and shareholder approval of the issue of the Placing Shares, the Consideration Shares and the grant of the Warrants.

In addition to part-financing the Potential Acquisition, the Placing is required in October 2019 to support the Group in meeting its short-term working capital requirements. Should the Placing not complete as expected, the Company would need urgently to consider alternative options to address this need. Assuming the full Placing proceeds are received, the Company believes, based on the current expected trading performance and growth initiatives of the Group (together with the benefits and costs associated with the Potential Acquisition), that it has adequate working capital for at least the remainder of the financial year. The Company is currently loss making and is dependent on external investment and may require further support in the future.

Further announcements will be made, as appropriate.

Mporium's Chief Executive Officer, Tom Smith, said:

"This complementary Potential Acquisition is an exciting and transformative opportunity, and one which offers operational and financial benefits. By incorporating the highly experienced team at Click Labs we believe we can significantly strengthen our market positioning in this area.

"Mporium is excited by the synergies and opportunities we hope this transaction will bring, allowing us to further enhance and diversify our offering. We believe that the enlarged group will have the expertise, capability and scale to become a full-service provider in performance marketing, offering advertisers a significant competitive advantage and driving revenue and margin growth across our business.

"Following the restructuring in July 2019, Mporium has a leaner business model, with the right management in place and a clear strategy and target market, and this Potential Acquisition is the next step on our path to growth. I look forward to updating the market in due course as we look to complete and integrate this Potential Acquisition into the Group."

- Ends -

Enquiries

 
Mporium:                                 020 3841 8411 
Tom Smith, Chief Executive Officer 
 
finnCap (NOMAD / Joint Broker):          020 7220 0500 
Henrik Persson / Kate Bannatyne (Corporate Finance) 
 Andrew Burdis (Corporate Broking) 
 
  Novum Securities Limited (Joint 
  Broker): 
  Colin Rowbury (Corporate Broking)      020 7399 9427 
 
  Yellow Jersey PR:                      020 3004 9512 
Sarah Hollins 
 Joe Burgess 
 Annabel Atkins 
 

About Mporium Group PLC

Mporium is a software company delivering high performance advertising campaigns through its proprietary technology platform, IMPACT. Mporium delivers automation and innovation to the advertising industry and the IMPACT platform enables customers to identify and leverage moments when there are significant changes in the levels of consumer engagement. Advertisers using the platform can optimise their campaigns through event-driven marketing, targeting audiences at the exact moments when consumer interest is at its highest. Further information can be found at www.mporium.com

Extracts from the Circular

Introduction

On 30 September 2019, the Company announced that it had entered into non-binding heads of terms to acquire (the "Proposed Acquisition") the entire issued share capitals of Click Laboratories Limited and We Breathe Media Ltd, two companies under substantially common ownership (together, "Click Labs") for a total of GBP0.5 million in cash and GBP2 million in new Ordinary Shares (the "Consideration Shares"), and additional payments (the "Earn-Out") of up to GBP3 million to be made if specified net profit targets are met. In addition, the Company announced that it had conditionally raised approximately GBP1.25 million by way of subscription, from existing and new investors, for a total of 250,000,000 new Ordinary Shares ("Subscription Shares"), at a subscription price of 0.5 pence per Subscription Share.

Due diligence in respect of Click Labs remains ongoing and the Proposed Acquisition is subject to contract.

Proposed Acquisition of Click Labs

The initial consideration, payable in cash on or around completion ("Completion") of the Proposed Acquisition, will be satisfied by the payment of GBP0.5 million in cash and the issue of 400,000,000 Ordinary Shares, worth GBP2 million based on an issue price per Ordinary Share of 0.5 pence on Completion.

The Earn-Out is calculated as 50% of net profit after tax generated by Click Labs, with certain adjustments to reflect agreed intercompany arrangements. The Earn-Out will run for 24 months from Completion and will be satisfied by payments to be made in eight tranches over 24 months, with an adjustment to be made at the end of each relevant financial year to reflect the year's actual net profit after tax.

The number of Consideration Shares to be issued will be calculated by reference to the Placing price. One half of the Consideration Shares will be subject to a one year lock up period and the other half will be subject to a two year lock up period restricting any sale or transfer of these shares.

Placing

The Company has conditionally raised approximately GBP1.25 million by way of subscription for a total of 250,000,000 new Ordinary Shares, at a subscription price of 0.5 pence per Subscription Share.

Upon completion of the Subscription, the investors will also receive warrants ("Warrants") exercisable between 10 December 2019 and 10 December 2021 and on the basis of one Warrant for each Placing Share with a subscription price of 1.5 pence per Warrant. The detailed terms of the Warrants are to be finalised and agreed with the relevant parties prior to Admission.

Further details of the Subscription are set out below at section below 3 headed "Details of the Fundraising".

Background and rationale for the Placing, Proposed Acquisition and use of proceeds

Background on the Company

The Company is a software company delivering high performance advertising campaigns through its proprietary technology platform, IMPACT. It delivers automation and innovation to the advertising industry and the IMPACT platform enables customers to identify and leverage moments when there are significant changes in the levels of consumer engagement. Advertisers using the platform can optimise their campaigns through event-driven marketing, targeting audiences at the exact moments when consumer interest is at its highest. Further information can be found at www.mporium.com.

On 11 June 2019, the Company initiated a major restructuring to refocus the business on the performance-led division, which accounted for the majority of its revenues in the first quarter of the current financial year. As part of this restructuring, the Company has made the decision to streamline the Mporium Agency offering to improve and simplify adoption of the technology by way of improved self-serve capability. As such, the Company adopted a licensing model and significantly reduced the managed service part of the offering. In addition, the legacy Fast Web Media (FWM) business was divested.

This restructuring was completed in July 2019.

Information on Click Labs

Click Labs is a digital agency focussed on the design, build and delivery of end-to-end multi-channel lead generation campaigns. Based in the UK, Click Labs have delivered over 2000 campaigns for more than 300 brands in 15 markets across a range of verticals spanning automotive, finance, claims management, sports, gaming and healthcare. Click Laboratories Limited was incorporated in 2013 and Click Labs has successfully built and grown a profitable performance-based business (e.g. Cost Per Acquisition and Cost Per Lead), driven by its years of experience in email marketing and lead generation. Click Labs has 4 employees.

For the year ended 30 September 2018, Click Labs recorded turnover of GBP1.48 million, net profit of GBP0.2 million and had net assets of GBP0.11 million. Click Labs expects to show combined revenue of GBP2.8 million and EBIT of GBP0.4 million for the year to 30 September 2019.

We Breathe Media only commenced operations in January 2019 and has not yet prepared financial statements. Further information will be provided in due course.

Rationale for the Proposed Acquisition

Click Labs specialises in email-marketing as well as providing critical technology, tools and know-how to optimise lead generation performance which is highly complementary to Mporium's expertise in search, social and display marketing. With years of experience, successful commercial execution and proprietary tools and technology to accelerate Mporium's commercial capacity and capability for both lead generation and technology licensing.

The Board believes that the Proposed Acquisition would make a material positive contribution for the group in FY2019 and onwards and is expected to accelerate Mporium's pathway to becoming net cash generative.

Mporium focuses on growing rapidly in the performance marketing segment and building lead generation and customer acquisition capability. Its performance division, previously named MporiumX, was created in H2 2018 to deploy its technology within performance-based verticals such as sports and consumer claims, with ambition to grow into other sectors such as financial and betting. Click Labs have traditionally focused on the same verticals but have a stronger experience within betting and financial verticals.

As such, the Board considers the Proposed Acquisition a complementary bolt-on and transformative transaction, creating an integrated end-to-end lead generation and customer acquisition solution enabling the combined entity to become a full-service provider lead generation provider.

The Board believes that the Proposed Acquisition would make a material positive contribution for the group in FY2019 and onwards and is expected to accelerate Mporium's pathway to becoming net cash generative. In addition, The Board believe that the Proposed Acquisition will materially enhance Mporium's product capability and deliver strong commercial synergies over and beyond the combination of the two teams.

Further, it is anticipated that the combined businesses will relocate to new offices in January 2020, thereby reducing the annual group operating expenses run-rate to around GBP3 million, which is less than 50% of the Company's run-rate prior to the recent restructuring and Proposed Acquisition.

Use of proceeds

The net proceeds of the Placing will be used by the Company principally to finance the cash element of the consideration due in respect of the Proposed Acquisition, together with associated transaction costs, and to provide additional working capital for the enlarged business.

Details of the Fundraising

The Company proposes to raise gross proceeds of GBP1,250,000 through the issue of the Subscription Shares at the Subscription Price to certain investors. The Subscription Price represents a discount of 40 per cent. to the closing middle market price of 0.84 pence on 27 September 2019, being the last practicable date prior to the Company's announcement of 30 September 2019. The Subscription Shares will represent 19.3 per cent. of the Company's Enlarged Share Capital immediately following Admission.

In addition, conditional on Admission and Completion, the relevant investors will also be granted Warrants over Ordinary Shares exercisable between 10 December 2019 and 10 December 2021 with an exercise price of 1.5 pence per Ordinary Share.

The Board believes that raising equity finance using the flexibility provided by a non-pre-emptive placing is the most appropriate and optimal structure for the Company in the circumstances.

The Subscription Shares and the Consideration Shares when issued will rank pari passu with the Ordinary Shares and will rank in full for any dividends and distributions paid or made in respect of the Ordinary Shares following Admission.

Application will be made for the Subscription Shares and the Consideration Shares to be admitted to trading on AIM. It is expected that dealings in the Subscription Shares will commence on AIM on 25 October 2019.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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September 30, 2019 02:03 ET (06:03 GMT)