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Nektan plc

Nektan provide business update, proposed capital restructuring & placing

Nektan plc (LON:NKTN), the fast-growing international gaming technology platform and services provider, today announced a business update, proposed capital restructuring and placing.

Jim Wilkinson, Non-Executive Chairman of Nektan, said:

“The proposed placing and associated strengthening of the Group’s balance sheet through the conversion and extension of its Convertible Loan Notes is a very important development for Nektan and, if successful, will leave us in a materially stronger position.  I thank the CLN Holders for their support in this regard.

The Group remains convinced that its technology platform is well placed in the markets in which it operates. With a significant number of integrations expected to be delivered during the course of 2019 and a pipeline of exciting opportunities, the Group believes it has reached a transformational stage and has an exciting future ahead.”

Business Update

The Group is pleased to provide the following business update.

B2B

As previously announced, B2B revenues in FY19 grew by 308.3% over FY18 to £0.98m.

The Group is currently live with over 12 partners in 6 markets across Asia and Africa and has integrations underway with new partners in these markets. During the remainder of 2019, the Group expects the following integrations to complete:

·      Europe: 2 sites in September, 2 in October and 4 in December;

·      India: 2 sites in September, 2 in October and 3 in November; and

·      Taiwan: 3 in October and 1 in November.

Many of the parties with which the Group is undertaking integrations are well established brands in their respective geographies and the Group believes that revenues from these integrations, if successful, have the potential to transform the Group’s financial results.

Nektan has recently completed an integration with Betika in Kenya. The integration was completed within 4 weeks and the site went live in July 2019. After 7 weeks’ live trading, the Group has seen Gross Gaming Revenue (‘GGR’) increase week-on-week, with the number of bets exceeding 1.6 million daily.

B2C

Following the significant growth experienced in recent years and through H1 FY19, as previously announced, H2 FY19 saw a decline in revenues due to the continued impact of increased UK taxation and player verifications. In light of this, the Group has engaged with a number of its partners and, subject to the delivery of certain items, has gained support from a significant number of these to re-initiate significant marketing spend which should in turn see revenue growth return.

At the same time, the Group has taken the opportunity to re-align its cost base to current prospects.  Under the current structure, on a fully allocated basis, the Group expects the division to breakeven on a monthly EBITDA basis towards the end of the current financial year.

Proposed capital restructuring and placing

The Group is proposing to raise a minimum of £3.0m (net of expenses) for working capital purposes by way of an equity placing of new ordinary shares (“Proposed Placing”). Subject to the successful completion of the Proposed Placing, the Company has reached agreements to restructure the:

·    Series A and Series B convertible loan notes (‘CLNs’); and

·    Directors’ loans from Gary Shaw, Executive Director, and Venture Tech Assets (‘VTA’), a company connected to Sandeep Reddy, Non-Executive Director.

As part of the support received from certain shareholders, the Company has entered into an agreement to receive £0.35 million of the proceeds from the Proposed Placing by way of an unsecured loan whilst the conditional transactions complete. The unsecured loan carries a coupon of 10% per annum and is repayable on demand.

The Proposed Placing is also subject to shareholders’ approval.

It is intended that the Proposed Placing will remain open for orders to be submitted until 5.00p.m. on 25 September 2019 and an announcement on the result of the Proposed Placing will be made shortly thereafter.

Should the Proposed Placing not be successful, it is likely that the Company will require further funding in order to continue as a going concern and that therefore the Directors would, if required, seek additional capital through an alternate fundraising and/or asset sales or part sales.

CLNs

Series A

The Series A CLNs have a principal of £3.5m and accrued interest to 30 June 2019 of £0.4m giving a total of £3.9m. The Company has agreed with holders representing a majority of the Series A convertible loan notes to amend the terms of the Series A convertible loan notes which will trigger full conversion of the Series A convertible loan notes, including both the underlying principal and accrued interest at the placing price per share. 

Series B

The Series B CLNs have a principal of £1.1m with interest paid quarterly on a coupon of 10%. The Company is in advanced negotiations with the noteholder and expects:

·      To extend the repayment date by 3 years from 29 April 2020 to 31 March 2023;

·      The noteholder will waive their right to the coupon until 1 January 2021 from when a coupon of 5% per annum will become payable; and

·      All other conditions of the Series B convertible loan notes will remain as per the original agreement, with the Company having the ability to convert the Series B convertible loan notes where the Company’s share price for 10 dealing days prior to serving the notice to convert is equal to or above the conversion price, which is defined as 125% of the price at which new ordinary shares were last issued.

Directors’ Loans

The Company has also agreed with Gary Shaw and VTA to defer the redemption date of their respective directors’ loans amounting to, in aggregate, £1.3m to 29 April 2021.  This is subject to the Company’s nominated adviser, Shore Capital, confirming that the amended terms of the shareholder loans are fair and reasonable insofar as the Company’s shareholders are concerned.

HMRC

The Company is continuing to make payments to HMRC in relation to the current amount owing of approximately £4.6m for UK point of consumption tax.

Conditionality

Each of the Proposed Placing, conversion of the Series A convertible loan notes, restructuring of the Series B convertible loan notes and extension of the Directors’ Loans are inter-conditional. 

The Company intends to publish a circular in due course containing details of the Proposed Placing and debt conversions and a notice convening a general meeting to approve the issue of the new ordinary shares (the “Circular”). Further announcements will be made as appropriate.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.