7 May 2019
("Koovs" or the "Company")
Future Group Further Funding
Koovs plc (AIM: KOOV), the Western fashion experts for online Indian consumers, is pleased to announce that, further to the Company's announcements on 7 March 2019 and 27 September 2018, following the granting of all necessary approvals in India, the Company has reached a binding agreement, part of it being subject to shareholder approval as referred to below, with Future Lifestyle Fashions Limited ("FLFL"), part of Future Group, India's largest retail group, on the mechanics for which FLFL will invest approximately a further £10.5 million into the Company. The implied blended investment price by FLFL for the full investment of approximately £10.5 million is 15 pence per new Ordinary Share - the same as that announced in 27 September 2018.
Future Group Further Funding Structure
The further investment from FLFL into the Company will occur in two tranches, with the second tranche being subject to shareholder approval at a general meeting to be convened shortly by the Company.
The first tranche of the funding involves FLFL subscribing for an amount of £3,667,125.04 at 8 pence per new ordinary share of £0.01 each in the Company ("Ordinary Share") (the "First Tranche"). As such, 45,839,063 new Ordinary Shares (the "First Tranche Shares") will be issued to FLFL following receipt of the subscription proceeds by the Company, which is expected by the end of the week. Following the issue of the First Tranche Shares, FLFL will hold 103,715,663 Ordinary Shares, representing 25.8 per cent. of the Company's then enlarged share capital.
The second tranche is conditional upon shareholder approval and, subject to such approval being forthcoming, will be invested in the form of a compulsorily convertible preference share ("CCPS") instrument. FLFL will subscribe £6,810,374.96 for 24,010,937 CCPSs which are compulsorily convertible on the first anniversary of issue (or at the option of FLFL, at an earlier date prior to the first anniversary, or in certain other circumstances by the Company) into 24,010,938 new Ordinary Shares (the "Second Tranche"). The implied investment price is approximately 28.36 pence per new Ordinary Share, which when combined with the investment into the First Tranche Shares implies a blended investment price by FLFL for the full investment of approximately £10.5 million of 15 pence per new Ordinary Share - the same as that announced in 27 September 2018. The CCPSs have no voting rights and rank behind, in terms of seniority, the existing convertible loan notes of Koovs. The CCPSs are non-participating and non-cumulative with a pre-determined dividend rate of 0.01% per annum, amount to a maximum of approximately £681.
If, for any reason, it is not possible to issue the CCPS instrument, and consequently the Second Tranche does not complete, then Koovs has the right (subject to shareholder and any other necessary approvals), but not the obligation, to buy back 21,391,563 Ordinary Shares held by FLFL for a nominal value (subject to such price being compliant with relevant rules and regulations) in order to ensure that the effective price (before factoring in the consideration that FLFL would receive as a result of such repurchase) of the First Tranche is 15p per new Ordinary Share issued. Any Ordinary Shares repurchased may be cancelled or held in treasury.
This new agreement with FLFL replaces the previous agreement with FLFL announced on 27 September 2018, the obligations under which have now fallen away.
The issue of the CCPS instrument requires the Company's articles of association to be amended, which requires shareholder approval. A shareholder circular, convening the necessary general meeting, will be sent to Shareholders shortly and a further announcement will be made at that time. Amending the Company's articles of association is treated as a special resolution and therefore requires 75 per cent. of votes cast to be in favour in order for the Second Tranche to proceed.
Strategic Partnership Update
FLFL operates over 400 stores in India with over six million square feet of retail space and owns and markets 30 exclusive fashion brands through branded stores, department stores and multi brand outlets, including its own Central and Brand Factory chains.
The strategic partnership with FLFL represents a transformational deal for the Koovs which is expected to deliver synergies across the value chain from manufacturing and distribution to market reach, marketing and customer engagement. A number of key projects and activities are already underway as part of the partnership between FLFL and Koovs, including, as announced on 7 March 2019, a Technology Services Agreement to develop, host and maintain an online platform for the Brand Factory retail format. For reference, the following initiatives are also in existence:
· Concessions opened in 3 Central stores in Delhi, and now rolling out to another 4 concessions in Central Stores in Bangalore (2 stores), Hyderabad and Pune. This agreement, which covers the initial three stores, signed on 3rd October 2018 for a term until 31st March 2020, is expected to generate revenue over the next 12 months of c. £0.1m and be profitable after deducting the cost of the goods sold and a 36% commission payable to FLFL on the value of goods sold. The additional four stores are expected to be on similar terms to the initial three stores
· Studio Services agreement to use Koovs' studio facilities to shoot catalogue images and videos for up to 1,000 products per month. This agreement, signed on the 20th December 2018 for a term of 24 months, is expected to generate revenue over the next 12 months of £0.2m and be profitable after deducting the costs of delivering the service. The Company will charge FLFL a fixed fee of 0.75m INR / £8.3k per month and additional fees based on the variable costs incurred by the Company.
· An agreement to sell a curated selection of FLFL products on the Koovs platform. This agreement, signed on the 28th September 2018 for a term of 36 months, is expected to generate revenue over the next 12 months of between £0.2m and £0.3m and be profitable after deducting the costs of the goods sold. The goods will be supplied to the Company on a sale or return basis, and the cost of the goods sold will be determined to ensure the Company makes a 30% gross profit on goods sold at full price and a 23% gross profit on goods sold at a discount.
Related Party Transaction
For the purposes of the AIM Rules for Companies (the "AIM Rules"), FLFL is a substantial shareholder in the Company and therefore treated as a related party. As such, the entering into the aforementioned funding agreement with FLFL constitutes a related party transaction.
The directors of the Company, other than Avni Biyani, who represents FLFL on the board of the Company, having consulted with Strand Hanson Limited in its capacity as the Company's nominated adviser for the purposes of the AIM Rules, consider the terms of the new funding agreement with FLFL to be fair and reasonable insofar as shareholders are concerned.
Admission to Trading and Total Voting Rights
The Company has made an application to the London Stock Exchange for the 45,839,063 First Tranche Shares to be admitted to trading on AIM. It is expected that admission will become effective on or around 13 May 2019 ("Admission").
Following Admission, the Company's enlarged issued share capital will comprise 401,939,356 Ordinary Shares with voting rights. The Company does not hold any shares in treasury, therefore the total number of Ordinary Shares in the Company with voting rights will be 401,939,356. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company.
Mary Turner, Chief Executive Officer of Koovs plc, commented: "With the full amount of the new funds now confirmed, subject to shareholder approval, and the strategic partnership with FLFL already demonstrating value to both parties, we remain convinced of the long term potential for the Indian online fashion market and for Koovs in particular."
For further information please contact:
Mary Turner / Robert Pursell
Tel: +44 (0) 20 7151 0170
Strand Hanson Limited (Nominated & Financial Adviser)
James Harris / Ritchie Balmer / Georgia Langoulant
Tel: +44 (0) 20 7409 3494
Whitman Howard Limited (Corporate Broker)
Nick Lovering (Corporate) / Mark Murphy (Institutional Sales)
Tel: +44 (0) 20 7659 1234
Adam Lloyd / Fiona Norman
Tel: +44 (0)20 3757 6880
The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No.596/2014 and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.
Notes to Editors:
· Koovs is a UK business that has built KOOVS.COM into India's leading online western fashion destination. Koovs' fashion brands are designed and developed in London exclusively for the young Indian fashion market where two thirds of the population are under the age of 35. It has 2.7m online social followers
· The tremendous potential of the Indian fashion market has been further underlined by the Strategic Partnership with Future Lifestyle Fashions Limited (FLFL) which is part Future Group - one of India's leading retail businesses and one of the top 10 fashion apparel companies in the world
· Koovs' proprietary online technology platform powers KOOVS.COM and is a proven market-leading success in India's rapidly expanding e-commerce market. The capability and scalability of the platform has been recognised by FLFL which has contracted Koovs to build and maintain the online platform for its Brand Factory retail format. For more information, please visit www.koovs.com and follow us on Facebook, LinkedIn, Twitter @mykoovs and Instagram @koovsfashion.
About Future Group
Future Group is one of India's leading consumer, retail and services companies covering fashion, food and homewares. It owns over 60 brands, operates close to 2,000 retail stores spanning over 22 million square feet and attracts a footfall of over 500 million a year. Future Group sells in the region of 300 million garments a year, making it one of the top 10 fashion apparel companies in the world. Future Group also has one of India's most unique and rapidly-growing digital payment platforms, Future Pay, which has an active user base of over 6.5 million
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