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IMImobile PLC

IMImobile PLC - Trading & COVID-19 Update and Equity Placing

RNS Number : 3378J
IMImobile PLC
09 April 2020
 

9 April 2020

 

This announcement contains inside information as stipulated under the Market Abuse Regulation (EU No 596/2014).

 

IMImobile PLC

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

 

Trading & COVID-19 Update and Equity Placing

 

IMImobile (AIM: IMO), a leading cloud communications software and solutions provider, today provides an update on trading amid the evolving COVID-19 situation and ahead of announcing its full year results for the year ended 31 March 2020. The Company has also separately announced its intention to launch a non-pre-emptive placing of new ordinary shares.

 

Financial highlights

·      Strong trading performance continued in the second half of the year with growth in all regions

·      Revenue up approximately 17% to at least £167.0m (FY19: £142.7m)

Organic revenue growth of approximately 7%

·      Gross profit up approximately 26% to at least £79.0m (FY19: £62.6m)

Organic growth of cloud communication products of approximately 15%, now representing over 80% of gross profit

Overall, organic gross profit growth of approximately 8%

·      Adjusted EBITDA1 up approximately 20% to at least £21.0m (FY19: 18.0m)

·      Net debt of £22.3m with gross cash converted from operations of over 90%

 

1Adjusted EBITDA is defined as operating profit/(loss) before depreciation, amortisation, acquisition related expenditure, impairment charges and share-based compensation.

 

Operational highlights

·     Growth across all sectors and regions for cloud communication platform, products and services

·   Strong momentum in North America having signed a significant new client, one of the world's largest retailers, for low-code CPaaS (Communications Platform as a Service) offering

·     Integration substantially completed for milestone acquisition of 3Cinteractive Corp ("3C")

·    Strong period of new client wins, partner acquisition and renewal of all major contracts falling during the period

·     Growing adoption of new richer messaging channels including RCS (Rich Communications Services), WhatsApp Business and Apple Business Chat

·   Continued product innovation by launching and taking live of new healthcare video consultation product, eClinic, for the NHS

·     Decline in Operator VAS and mobile payments in line with management expectations

 

COVID-19 update

 

The Company continues to monitor the situation closely and review the impact of COVID-19 across the business. In order to protect the health and safety of its team, clients and the communities it operates in, over 1,100 global employees have been transitioned to remote working. Business continuity has been unaffected with the Group continuing to provide a full service to clients.

 

Whilst there has been little impact to date, the Board appreciates the global severity of the pandemic and associated prevention measures, making the short-term outlook significantly more uncertain with its ultimate effect on the business and end customers yet to materialise. Notwithstanding the current lack of material impact, management have taken rapid steps to reduce costs in order to help offset reductions in messaging volumes and delayed projects. As a precautionary measure, the Company has introduced a hiring freeze and imposed early restrictions on travel. Temporary three-month employee salary reductions have also been introduced, including a 33% reduction for the Board, as well as arrangements for the furlough of certain UK employees. In addition, discretionary spend has been curtailed and all capital expenditure is being managed prudently. All management decisions are undertaken with a view to securing the financial strength of the Group whilst also ensuring the Company is in a strong position once conditions begin to normalise.

 

The Company is also involved with enabling additional emergency communications for customers, which should help to mitigate any negative impact. In addition, the Company has adapted its offering to provide customers with specific solutions such as video assistance for healthcare appointments or engineer call outs and enabling the setup of remote contact centres to support homeworking.

 

The Board believes that COVID-19 will have a limited impact on the business in the medium to long term due to the fundamental need for its customers to communicate and use digital channels for customer interaction. The Group's client base is well diversified across geographies and sectors and the long-term consequences may expand the demand for its services if, subsequently, there is an acceleration in digital transformation initiatives.

 

Equity placing - background to and reasons for

 

The last 12 months have been a period of significant investment and strategic progress for the Group. In August 2019, the Group completed the milestone strategic acquisition of 3C, which strengthened its position in North America and established a global leadership position in RCS Business Messaging. Apart from an increase in cross and up-sell opportunities, management have seen strong client wins across all regions, new product launches utilising new richer messaging channels, including Apple Business Chat, RCS and WhatsApp Business and have a strong pipeline of organic and inorganic growth opportunities.

 

Against this backdrop however, given the uncertainty surrounding the duration and impact of COVID-19, management have modelled scenarios on differing degrees of revenue impact, duration and periods of recovery reflecting a range of gross profit for FY21 of between £90m and a prudent downside scenario of £70m (FY20: c.£79.0m). Accordingly, the Board determined that in order to provide maximum financial flexibility to the Group, the Company should take proactive action and consult with major shareholders to raise a minimum of £15m of additional headroom. Whilst there has been little impact to date, should a material deterioration in trading occur over a prolonged period, the funds raised will provide sufficient flexibility to allow the Group to maintain an appropriate cost base to capitalise on future commercial opportunities, as well as ensuring the Group stays within its banking covenants. This proactive action will safeguard the investments and progress made to date and best position the Group for the future. Subject to demand the Company also intends to use additional funds raised within its existing 10 per cent. authority to take advantage of future growth opportunities.

 

IMImobile has therefore today separately announced its intention to conduct a non-pre-emptive placing of up to a maximum of 7,415,575 new ordinary shares of 10p each in the capital of the Company, representing approximately 10 per cent. of the existing issued share capital of the Company, at a price of 300p per share. The Board has concluded the Placing is in the best interests of shareholders and wider stakeholders and will promote the success of the Company.  This conclusion has been endorsed by that consultation with its major shareholders.

 

Financial position

 

As at 31 March 2020, the Company had net debt of £22.3m and gross debt of £47.4m having fully drawn on its £20.0m revolving credit facility, with a resultant net debt / adjusted EBITDA - capitalised development ratio of approximately 1.4x which is well below the covenant level of 2.75x. The Group's balance sheet is robust, with a free cash position, after considering intra-month movements in working capital.

 

Covenants are tested quarterly and test adjusted leverage being less than 2.75x adjusted EBITDA - capitalised development and cashflow cover being no more than 1.25x. The Group expects to be able to meet all covenant tests in FY21.

 

Trading Update Year to 31 March 2020

 

Cloud Communication Products

 

It has been a good period of strategic and commercial progress for the Group's cloud communication product set which now represents over 80% of Group gross profit. The broader market for cloud-based communication products (Communication Platform as a Service - "CPaaS") continues to grow strongly, with the Group's cloud communication platform, products and services business growing organically by 15% during the period.   

 

In Europe, the Group has seen gross profit growth driven by new client wins and cross selling to existing accounts of additional products. The business has also invested further in partnerships and signed, through competitive tender processes, new partnerships with telecom and business services companies. The Group has renewed all major contracts falling during the year and there is good momentum going into the new financial year with a strong pipeline of new business.  The acquisition of UK contact centre provider, Rostrvm, completed in December 2019, is progressing very well with initial integration work completed and the generation of early sales for the enhanced cloud contact centre offering.

 

The MEA and APAC regions have also experienced a solid trading performance enhanced by the growth of new messaging channels such as RCS and WhatsApp Business and the implementation of automation technologies for major utility companies and banks.

 

The Group's North American business continues to make strong progress and the Board is significantly encouraged having been selected by one of the world's largest retailers for its CPaaS offering ('IMIconnect') following a competitive tender process.  This project is now in deployment and provides clear evidence of the relevance of the product suite in North America, the largest addressable market for the Group's product set.  In August 2019, the Company acquired 3C. and the integration of that acquisition is now substantially complete with the consolidation of all North American operations under one team and management structure as well as common business systems and processes. The focus since acquisition has been to introduce the Group's communication product set to 3C's customers and several opportunities are now being progressed.

 

Management are very encouraged by the significant pipeline of opportunities created across all regions of the Group and in particular the progress made in the USA, the largest single addressable market for the Group's product set.   

 

Operator VAS (Value Added Service) and Mobile Payments

 

The Group's operator VAS and mobile payments business experienced a decline of 13% in line with management expectations. This is predominately due to structural changes in the market for mobile operator value added services.

 

However, despite these headwinds, the business has seen new demand from mobile operators to move existing telco VAS infrastructure to the cloud.

 

Jay Patel, Group Chief Executive of IMImobile, commented: "We are pleased to report that the positive trading momentum from the first half continued through the remainder of the year, and that we have delivered another year of good growth. Our enhanced foundations in the US and consolidation of operations are now delivering results, and the recent strategic client wins in that market represents a significant step forward for the Group.

 

The COVID-19 situation is evolving rapidly. There is currently no certainty regarding the impact and duration on our business and our customers. We continue to monitor the situation and macroeconomic climate closely. We are focussed on taking actions to protect our people's health and to secure the strength of our financial position and operations. The Group's recurring revenue base from long-standing, blue-chip customers, strong pipeline and healthy cash generation gives us confidence of the Group's long-term prospects. I would like to thank employees, customers, shareholders and partners for their support and commitment during these uncertain times." 

 

 

This announcement is released by IMImobile plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

 

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, the person responsible for releasing this announcement is Mike Jefferies, Group CFO.

- ENDS -

 

For further information, please contact:

 

IMImobile PLC

c/o Alma PR

Jay Patel, Group Chief Executive Officer

 

Mike Jefferies, Group Chief Financial Officer

 

 

 

Alma PR

Tel: +44 (0)20 3405 0205

Hilary Buchanan

IMImobile@almapr.co.uk

Rebecca Sanders-Hewett

 

Susie Hudson

 

 

 

Investec Bank - Nominated Adviser and Joint Broker

Tel: +44 (0)20 7597 5970

Henry Reast

 

Virginia Bull

 

Tejas Padalkar

 

 

 

N+1 Singer - Joint Broker

Tel: +44 (0)20 7496 3000

Tom Salvesen

 

Justin McKeegan

Iqra Amin

 

 

 

About IMImobile PLC

 

IMImobile is a communications software provider whose solutions enable enterprises to automate digital customer communications and interactions to improve customer experience and reduce operating costs.

 

IMImobile's enterprise cloud communications software platform orchestrates customer interactions, connecting existing business systems with digital communications channels. Organisations that trust us to deliver smarter digital customer engagement include Hermes, Centrica, AA, O2, EE, BT, Walgreens, Tracfone, Ooredoo, Best Buy, Express, three of the major retail banks in the UK and public-sector organisations globally.

 

IMImobile is headquartered in London with offices across the UK, Hyderabad, Toronto, Boca Raton, Dubai and Johannesburg and has over 1,100 employees worldwide. IMImobile is quoted on the London Stock Exchange's AIM market with the TIDM code IMO.

 

 

 


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