Mi-Pay Group PLC (LON:MPAY), the leading provider of outsourced digital transformation and mobile payment solutions to Tier 1 Mobile Network Operators and Mobile Virtual Network Operators, has today provided a trading update for the year ended 31 December 2017, ahead of announcing its final results on 17th April 2018 and announces a number of orderly succession planning changes that have been made to the Board with immediate effect, which will additionally deliver future reductions to the Company’s monthly operating costs.
In addition, as part of this restructure, we are pleased to announce a placing comprising of £260,000 of new investment from existing shareholders, a Director and a strategic investment by Huub Sparnaay, the founder of one of Mi-Pay’s trading partners, Alphacomm B.V. and the reinvestment by certain Directors of deferred salaries of £257,631 previously accrued. These investments have been effected by a placing of Placing Shares (as defined below) in the Company under the authorities granted at the Company’s last AGM.
Trading update
Trading for the year ended 31 December 2017 has been in line with expectations. The Company processed £95 million in payment transactions (2016: £83 million) increasing Transaction Services Revenues by £0.1 million to £2.7 million (2016: 2.6 million) with total revenue for the year expected to be £3.1 million (2016: £3.3 million). We continue to focus on driving long-term transaction based revenue growth from our new and existing clients.
As previously announced, this growth is underpinned by a contract extension from our largest client, which despite new commercial terms reducing 2017 Transaction Services Revenues by £0.2 million, is expected to drive long-term incremental growth. In addition, in the last quarter of 2017, the Company delivered a new direct fraud management service in Europe and new payment services in the Asia Pacific Region which we expect to help to drive incremental revenues in 2018.
This was achieved whilst maintaining high payment success rates and low fraud levels which is expected to deliver gross margins during the year of £2.0 million (2016: £2.1 million).
The Company’s cash position at 31 December 2017 was £2.9 million (£3.5 million as at 31 December 2016).
The impact of new commercial terms for the contract extension referred to above will restrict 2018 revenue growth, however we expect to continue to see strong transaction growth, maintain strong gross margins and, when aligned with our reduced cost base, we continue to expect profitability for the year ended 31 December 2018 to be in line with market expectations.
Placing
Mi-Pay is pleased to announce that it has today placed 4,141,048 new ordinary shares of 10p nominal value each (‘Placing Shares’) at a placing price of 12.5p per share (the “Placing Price”) (the ‘Placing’).
The Placing delivers:-
1. Gross proceeds (before expenses) totaling £260,000, comprising of a £150,000 strategic investment by Huub Sparnaay (via his investment company No Blue Potato B.V), a £50,000 investment by Michael Dickerson and £60,000 investment by Helium Special Situations Fund Limited.
2. The conversion to Placing Shares of £257,631 deferred salaries previously accrued that had not been paid to directors of Mi-Pay, which has the beneficial effect of reducing Mi-Pay’s liabilities.
The Placing Shares will rank pari passu with all of the Company’s existing ordinary shares of 10 pence each. Application has been made for admission of the Placing Shares to trading on AIM and dealings are expected to commence on or around 6 March 2018.
Use of Proceeds
The new cash of £260,000 will be invested in the Company’s fraud management platform and used for general working capital, including to support (following a successful trial) a new long-term fraud services contract with Alphacomm B.V.
Total Voting Rights
Following the issue of the Placing Shares, the number of Ordinary Shares in the Company in issue will increase to 45,734,277. There are no ordinary shares held in treasury. Therefore, in accordance with the FCA’s Disclosure and Transparency Rule 5.6.1, the Company confirms that following Admission, the total number of voting rights in the Company will be 45,734,277.
Related Party Transaction
Michael Dickerson, Allen Atwell, Albion Capital Group LLP and Helium Special Situations Fund Limited are subscribing for 2,000,000, 201,048, 260,000 and 480,000 Ordinary Shares respectively pursuant to the Placing and each has entered into a subscription letter with the Company. The participation of Michael Dickerson and Allen Atwell (being directors of the Company) and that of Albion Capital Group LLP and Helium Special Situations Fund Limited (being substantial shareholders) in the Placing, will constitute related party transactions for the purpose of AIM Rule 13 (the ‘Related Party Transactions’).
The directors of the Company that are independent of the respective related party transaction consider, having consulted with Zeus Capital, the Company’s nominated adviser, that the terms of the Related Party Transactions are fair and reasonable insofar as Shareholders are concerned.
The level of participation in the Placing by each Director, and their resulting interest in the Company is shown below:
|
Director |
Existing shareholding |
Placing participation |
Total number of shares held post Placing |
Percentage of Enlarged Share Capital |
|
Seamus Keating |
345,454 |
– |
345,454 |
0.76% |
|
Michael Dickerson |
570,553 |
2,000,000 |
2,570,553 |
5.62% |
|
John Beale |
135,729 |
– |
135,729 |
0.30% |
|
Allen Atwell |
135,872 |
201,048 |
336,920 |
0.74% |
|
Ed Lascelles |
– |
– |
– |
– |
Board changes
As part of the Company’s next stage of development, Seamus Keating, Chairman of the Company, will become a Non-Executive Director and will continue to the Chair of the Company’s Audit and Risk Committee, Michael Dickerson will move from the position of Chief Executive Officer to Executive Chairman and will chair the Company’s Nominations Committee and John Beale will move from Chief Financial Officer to Chief Executive Officer. John will continue his duties as Chief Financial Officer in the interim until a suitable successor is appointed. Ed Lascelles will become the chair of the Company’s Remuneration Committee. Allen Atwell, our Chief Technical Officer, will become a Non-Executive Director and a Technology consultant to the Group.
Following these changes, the board will comprise:
|
– |
Michael Dickerson (Executive Chairman) |
|
– |
John Beale (CEO and acting CFO) |
|
– |
Seamus Keating (Non Executive Director) |
|
– |
Allen Atwell (Non Executive Director) |
|
– |
Ed Lascelles (Non Executive Director) |
Share options
The Company is also taking the opportunity to ensure that the Company’s share option arrangements for staff and directors are appropriately priced and held. Following discussions with the Company’s senior employees, the Company has issued options over a total of 3,750,000 Ordinary Shares (under the terms of the Company’s existing share option scheme), with an exercise price of 13 pence per Ordinary Share. Within this award, options have been granted to directors of the Company, with an option over 750,000 Ordinary Shares granted to each of Michael Dickerson, Seamus Keating and John Beale and an option over 250,000 Ordinary Shares granted to Allen Atwell. The new share options are subject to vesting criteria linked to the profitability of the Company.
In addition, existing share options over 3,763,425 Ordinary Shares with an exercise price of 41 pence have been cancelled, or foregone, such that the total number of shares under option is the 3,750,000 referred to above.
Notice of Results
Mi-Pay will be announcing its Annual Results for the 12 months ended 31 December 2017, on Tuesday 17th April 2018. Management will be hosting a presentation for analysts on the day of results at 11:00am at the offices of IFC Advisory,15 Bishopsgate, London, EC2N 3AR. Analyst who wish to attend should register their interest with Heather Armstrong on heather.armstrong@investor-focus.co.uk or by telephoning 0203 934 6634.
