TIDMAFRN
RNS Number : 1441B
Aferian PLC
31 May 2023
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated by the
Market Abuse Regulation (EU) No.596/2014, as it forms part of UK
law by virtue of the European Union (Withdrawal) Act 2018 ("MAR").
Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
31 May 2023
Aferian plc
("Aferian", the "Company" or the "Group")
Additional funding secured and trading update
Aferian plc (LSE AIM: AFRN), the B2B video streaming solutions
company, today announces that it has secured additional cash
funding by way of a shareholder loan facility of up to GBP3.25
million from its largest shareholder, Kestrel Partners LLP. The
securing of this shareholder loan provides additional headroom in
respect of the covenants in the Group's existing bank facility.
Donald McGarva, CEO of Aferian plc, commented:
"This additional cash funding puts the Group in a stronger
financial position and gives us adequate headroom over our
covenants. The Board remains confident in the long - term prospects
of the Group. The management team and I can now continue to focus
on delivering value to both shareholders and our customers in the
fast - growing video streaming market, which is rapidly becoming
the most popular way to consume video."
Current trading and outlook
Trading remains broadly in line with the trading and outlook
communicated in our full year results announcement on 16 May 2023.
Aferian's position in the fast-growing video streaming market gives
the Board confidence in the long-term prospects for the Group.
Demand for 24i's streaming video solutions remains strong and
management expect to report growth in the first half of the current
financial year. The management team are focussed on accelerating
profitability in the second half of the year.
For the Amino division, as previously announced, the impact of
the wider macro-economic situation has continued for longer than
expected. Management continues to have confidence in Amino's strong
medium-term sales pipeline. As previously announced, the division's
full year revenue is expected to be significantly lower than the
prior year.
Actions previously communicated to deliver significant
efficiencies in the Group's cost base during the first quarter of
2023 have delivered results. To further improve the cash generation
of the Group in the second half of the current financial year,
management will take additional action to reduce the cost base of
the Amino division, whilst preserving its ability to grow when the
market for streaming devices normalises. This is anticipated to
generate cost-savings in the current financial year of circa $1.3
million and annualised cost-savings of circa $3 million, an element
of which will include capitalised research and development
costs.
Net debt, covenants and Shareholder Loan
As announced on 16 May 2023, following the investment made in
inventory within the Amino business and Amino's lower than expected
sales, the Group is in a net debt position.
Since March 2023 the Group has remained in active discussions
with its senior loan facility providers to seek solutions in order
to increase forecast headroom over its senior loan facility
covenants. Failure to comply with financial covenants associated
with the Group's existing senior loan facilities could potentially
result in the facilities being withdrawn.
Today, Aferian has secured a shareholder loan facility of up to
GBP3.25 million arranged by its largest shareholder, Kestrel
Partners LLP ("Kestrel") ("Shareholder Loan"). This funding will
provide additional headroom based on the covenant definitions of
the Group's existing senior loan facilities.
Additionally, the Group has agreed with its existing loan
facility providers to:
-- exclude finance charges and debt arising from the Shareholder
Loan from the calculation of covenants; and
-- reduce the total available loan facility from $50 million
to $25.4 million.
The Group is subject to a monthly minimum liquidity and
quarterly Interest Cover, Fixed Charge Cover Ratio and Gross
Leverage financial covenants. The quarterly covenants are tested at
the end of May, August, November and February. The Group is also
subject to an annual limitation on certain capital expenditure.
Whilst in advance of securing the Shareholder Loan the Group
remained in compliance with its senior loan facilities covenants,
as stated in the Group's final results announcement for the year
ended 30 November 2022, management's sensitised forecasts indicated
that there was a risk that the Group might breach its covenants at
future test dates. The securing of the Shareholder Loan provides
additional headroom over the senior loan facilities covenants.
In addition, as part of the discussions with the Group's senior
loan facility providers, the senior loan facility providers had
considered that an independent business review ("IBR") might have
been required, the substantial cost of which would have been met by
Aferian. The Directors believe this would have been a material
distraction for management. Having secured this additional funding,
discussions regarding the need for an IBR have now ceased with the
Group's existing loan facility providers, freeing up management
time to focus on the actions required to improve business
performance.
The Group has today drawn GBP1.125 million of the Shareholder
Loan. The Group has the option, until 31 July 2023, to draw the
remaining GBP2.125 million. Net debt as at 31 May 2023 is expected
to be circa $13 million and is expected to reduce over the
remainder of the financial year as inventory levels reduce.
It is the Board's intention to seek alternative funding to
replace the un-drawn element of the Shareholder Loan before 31 July
2023.
Terms of the Shareholder Loan
Certain funds managed by Kestrel (together the "Lenders") have
provided an unsecured term loan facility of up to GBP3.25 million.
Amounts drawn under this facility (including accrued interest) are
(if not prepaid) repayable on 31 March 2025, unless extended at the
Company's option to 31 March 2026 and 31 March 2027.
The main terms of the Shareholder Loan are as follows:
-- an arrangement fee of 2.0 per cent. of the value of the
Shareholder Loan;
-- unsecured and subordinated to all indebtedness with the
Group's existing senior loan facility lenders;
-- 10.0 per cent. annual coupon, with interest rolling up
on a quarterly basis, paid in kind;
-- pre-payable at the Company's option at any time, subject
to a make-whole payment to the Lenders;
-- further utilisations are subject to limited customary
finance facility draw-down conditions precedent (including
the ability to issue the related Warrants (as defined
below)); and
-- four warrants issued for every GBP1.00 of Shareholder
Loan drawn. Warrants are over new ordinary shares of 1p
each ("Ordinary Shares"), are exercisable and transferrable
after 18 months, have a 10-year duration and a strike
price of 17p per Ordinary Share (the "Warrants").
The dilutive impact of the Warrants issuable to the Lenders,
should the Shareholder Loan be fully drawn, would be to increase
Aferian's issued share capital by 13 million new Ordinary Shares,
representing approximately 15 per cent. of Aferian's current issued
share capital. Following today's drawing of GBP1.125 million of the
Shareholder Loan, Warrants over 4.5 million Ordinary Shares are
issuable to the Lenders, representing approximately 5.2 per cent.
of Aferian's issued share capital. Full exercise of the Warrants
over 4.5 million Ordinary Shares issuable in connection with
today's drawing of the Shareholder Loan would result in cash
proceeds of GBP765,000 payable to Aferian and full exercise of all
Warrants issuable in connection with the Shareholder Loan if it
were fully drawn would result in cash proceeds of GBP2.21 million
payable to Aferian.
Kestrel (who acts as agent for the Lenders under the Shareholder
Loan) has confirmed to the Company that it has no current intention
of exercising any of the Warrants in circumstances that would give
rise to an obligation to make a mandatory offer for the Company
under Rule 9 of the City Code on Takeovers and Mergers ("Takeover
Code").
The Shareholder Loan is not subject to any financial covenants
though the Lenders' consent will be required in the event that
during the life of the Shareholder Loan Aferian wishes to:
-- pay any dividends; or
-- make any acquisitions; or
-- dispose of material parts of the Group's business;
-- enter into any additional loan facilities;
-- undertake any restructuring of the Group that would materially
and adversely affect the interests of the Lenders; or
-- enter into a related party transaction to which Rule 13
of the AIM Rules for Companies applies
The Board has not made any decision on dividends payable for the
current financial year, although any decision to pay a dividend
would require the consent of Kestrel.
Relationship Agreement
Today the Group entered into a relationship agreement with
Kestrel. The key terms of this agreement are as follows:
-- Kestrel has the right to nominate one person for appointment
as a director of the Company providing that Kestrel (together
with its individual partners and their affiliates), indirectly
or directly, holds no less than 20 per cent, of the voting
rights of the Company;
-- all transactions, agreements or arrangements entered into
between a member of the Group and Kestrel and/or any of
its associates will be conducted at arm's length and on
arm's length commercial terms;
-- Kestrel shall exercise its voting rights to procure, so
far as it is able to do so by the exercise of such rights,
that directors independent of Kestrel shall at all times
constitute a majority of the Aferian board;
-- Kestrel and its associates will not propose any resolution
or other action to cancel the trading of the Company's
shares from trading on AIM without the Board's approval;
and
-- Kestrel and its associates will not undertake any action
to obtain or consolidate control of the Company or seek
to do so, otherwise than in accordance with the Takeover
Code.
Related Party Transactions
The Shareholder Loan constitutes a related party transaction
under the AIM Rules for Companies by virtue of Kestrel being a
substantial shareholder in the Company and Max Royde, Non-Executive
Director of the Company, being a managing partner of Kestrel. The
Directors (excluding Max Royde) consider, having consulted with
Investec, the Company's nominated adviser, that the terms of the
transaction are fair and reasonable in so far as shareholders are
concerned.
The person responsible for the release of this announcement on
behalf of the Company for the purposes of MAR is Mark Carlisle.
For further information please contact:
+44 (0)1223
Aferian plc 598197
Donald McGarva, Chief Executive Officer
Mark Carlisle, Chief Financial Officer
+44 (0)20 7597
Investec plc (NOMAD and Broker) 5970
David Anderson / Patrick Robb / Nick Prowting
/ Cameron MacRitchie
+44 (0)20 3727
FTI Consulting LLP (Financial communications) 1000
Matt Dixon / Emma Hall / Tom Blundell
Important information
Certain statements, statistics and projections in this
announcement are or may be forward looking. By their nature,
forward -- looking statements involve a number of risks,
uncertainties or assumptions that may or may not occur and actual
results or events may differ materially from those expressed or
implied by the forward-looking statements. Accordingly, no
assurance can be given that any particular expectation will be met
and reliance should not be placed on any forward-looking statement.
Accordingly, forward-looking statements contained in this
announcement regarding past trends or activities should not be
taken as representation that such trends or activities will
continue in the future. You should not place undue reliance on
forward-looking statements, which are based on the knowledge and
information available only at the date of this announcement's
preparation.
Investec Bank plc ("Investec"), which is authorised in the
United Kingdom by the Prudential Regulation Authority ("PRA") and
regulated in the UK by the Financial Conduct Authority ("FCA") and
the PRA, is acting exclusively for the Company and no one else in
connection with the subject matter of this announcement and shall
not be responsible to anyone other than the Company for providing
the protections afforded to clients of Investec, nor for providing
advice in connection with any matter referred to herein. Neither
Investec nor any of its affiliates (nor any of its or their
respective directors, officers, employees, representatives or
agents) owes or accepts any duty, liability or responsibility
whatsoever (whether direct, indirect, consequential, whether in
contract, in tort, under statute or otherwise) to any person who is
not a client of Investec in connection with this announcement, any
statement contained herein or otherwise.
About Aferian plc
Aferian plc (AIM: AFRN) is a B2B video streaming solutions
company. Our end-to-end solutions bring live and on-demand video to
every kind of screen. We create the forward-thinking solutions that
our customers need to drive subscriber engagement, audience
satisfaction, and revenue growth.
It is our belief that successful media companies and services
will be those that are most consumer-centric, data driven and
flexible to change. We focus on innovating technologies that enable
our customers to stay ahead of evolving viewer demand by providing
smarter, more cost-effective ways of delivering end-to-end modern
TV and video experiences to consumers. By anticipating
technological and behavioural audience trends, our software
solutions empower our customers to heighten viewer enjoyment, drive
growth in audience share and ultimately their profitability.
Aferian plc has two operating companies: 24i, which focusses on
streaming video experiences, and Amino, which connects Pay TV to
streaming services. Our two complementary companies combine their
products and services to create solutions which ensure that people
can consume TV and video how and when they want it. Our solutions
deliver modern TV and video experiences every day to millions of
viewers globally, via our growing global customer base of over 500
service providers.
Aferian plc is traded on the London Stock Exchange's AIM stock
market (AIM: symbol AFRN). Headquartered in Cambridge, UK, the
Company has over 350 staff located in 11 offices, including in such
major European cities as Amsterdam, Helsinki, Copenhagen and Brno,
as well as in San Francisco and Hong Kong.
For more information, please visit www.aferian.com
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END
MSCGUGDUBDXDGXB
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