BLTG.L Regulatory News (BLTG)

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, NEW ZEALAND OR ANY JURISDICTION WHERE TO DO SO MIGHT CONSTITUTE A VIOLATION OF LOCAL SECURITIES LAWS OR REGULATIONS. 

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN BLANCCO TECHNOLOGY GROUP PLC OR ANY OTHER ENTITY IN ANY JURISDICTION.

PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

11 July 2019

Blancco Technology Group PLC

("Blancco" or the "Group")

Placing to raise £10 million

Acquisition of Inhance Technology and Consulting Agreement with ZroBlack LLC

Strong trading momentum continues with FY2019 profit ahead of market expectations

Blancco Technology Group (AIM: BLTG), a leading global provider of mobile device diagnostics and secure data erasure solutions, is pleased to announce that it has agreed to acquire YouGetItBack Limited, trading as Inhance Technology ("Inhance"), for a total consideration of €5.25 million (the "Acquisition").

Blancco has raised £10 million, before expenses, through a placement of 8,000,000 new ordinary shares of 2p each in the capital of the Group at 125p per share (the "Placing Shares") (the "Placing"). The net proceeds of the Placing will be used: (i) to fund the cash element (€3.25 million) of the total consideration for the Acquisition, (ii) to refinance US$1.5 million of capital expenditure in relation to the development of certain IP with ZroBlack LLC ("ZroBlack") and (iii) to pay down a proportion of the Group's current indebtedness and for general working capital purposes. Peel Hunt LLP and Panmure Gordon (UK) Limited have acted as joint bookrunners for the Placing (the "Joint Bookrunners"). 

The Placing Price represents a discount of 1.96% to the closing middle market price of 127.5 pence per existing ordinary share on 10 July 2019, being the last Business Day before the announcement of the Placing.

Acquisition of Inhance

Inhance was established in 2005 in Cork, Ireland and was initially focused on security tagging software, specifically for mobile handsets. In 2018, following a period of significant Research & Development investment, Inhance launched a mobile diagnostic product. The diagnostic solution is a retail focussed, app-based solution experience that enables consumers to easily establish a trade in value for their handset and complete a trade in transaction without having to visit a retail store.

Inhance has experienced good growth in revenues arising from the diagnostic solution, including winning its largest contract for the product to date in May 2019, which is expected to result in revenues of approximately US$50,000 per month when it is fully implemented by the current calendar year end. The majority of Inhance's sales pipeline is now focused on the diagnostics product. Inhance currently operates without a sales or marketing function and Blancco believes that the combination of Inhance's diagnostic solution with Blancco's sales and marketing team will significantly enhance its growth prospects.

Inhance reported revenue of €1.2 million (FY 2017: €1.4 million) and an operating loss of €1.0 million (FY 2017: loss €1.5 million), for the 12 months ended 31 December 2018. During 2018, the average headcount was 18 (2017: 16). Inhance had net assets of €0.2 million at 31 December 2018.

The Acquisition is expected to be earnings enhancing to the Group in the first full year of ownership to 30 June 2020.

Inhance is being acquired for a total consideration of €5.25 million, €3.25 million of which is to be satisfied in cash and €2 million of which is to be satisfied through the issue of 1,311,264 new ordinary shares in the capital of the Group (the "Consideration Shares").

Application has been made for the 8,000,000 Placing Shares and 1,311,264 Consideration Shares to be admitted to trading on AIM ("Admission") and it is expected that Admission will take place on or around 15 July 2019.

The Placing, the allotment of the Placing Shares and the allotment of the Consideration Shares are being made pursuant to existing authorities to allot shares and disapply pre-emption rights under section 551 of the Companies Act 2006, which the Directors were given at the Group's Annual General Meeting held on 12 December 2018.

Following Admission, the Placing Shares and Consideration Shares will rank pari passu with the existing Ordinary Shares, the total number of Ordinary Shares in issue will be 74,508,903 and the total number of voting rights will also be 74,508,903. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Group under the FCA's Disclosure and Transparency Rules.

ZroBlack Consulting Agreement

In April 2019, Blancco entered into a consulting agreement with ZroBlack under which its development team agreed to develop intellectual property ("IP") for Blancco that enables the Group's erasure and diagnostic solutions to reduce significantly the amount of time that it will take to complete diagnostic and erasure processes on a mobile handset (the "Consulting Agreement").

Under the terms of the Consulting Agreement, Blancco has paid US$1.5 million to ZroBlack for its development team to work alongside Blancco's developers to further develop this IP and significant progress has already been made. Blancco made this payment from its existing cash resources. In addition, a revenue share arrangement is in place whereby 14.5% of revenue generated from sales to new customers that incorporate the ZroBlack technology will be paid to ZroBlack up until April 2022. It is anticipated that the solution will be made available to customers within three months. 

Strategic rationale

Blancco operates in three markets: Mobile, Enterprise and ITAD. The Group holds a market leading position in ITAD and is well positioned to be a leader in the provision of erasure products in the Enterprise market. The Directors believe that the Acquisition and the development of the IP relating to the ZroBlack Consulting Agreement will significantly enhance Blancco's offering specifically to the retail sector within the mobile segment and will provide Blancco with a broad diagnostic and erasure offering. They will also allow diagnostic and erasure processes to complete in the shortest time, a key requirement for many of the Group's current and potential customers. The Directors also believe that the Acquisition and investment in ZroBlack IP will add complementary services and products to the Group's mobile segment and allow the Group to upsell services to shared customers, as well as opening opportunities with new clients.

It is anticipated that the software-based nature of the Inhance solution will enable it to be very quickly integrated within the Blancco offering. Blancco has a sales and marketing presence in over 15 countries around the world that will quickly be able to offer the combined solution to existing and prospective mobile customers and accelerate annual revenue growth. Recent research has estimated that the volume of handsets being traded in will increase from 140 million in 2017 to 290 million in 2022. The value of these handsets is also increasing at a significant rate as the value of brand-new handsets continues to increase.

Current Trading

Further to the trading update issued on 1 May 2019, the Group is pleased to report that trading momentum continues to be positive and that, while revenue remains in line, profit for the financial year ended 30 June 2019 will be ahead of current market consensus. This performance has been achieved through a combination of an improved mix of high growth margin revenues and some delays in the cost impact of investments made in the current financial year. The Group is also pleased to report that cash conversion has been better than expected, notwithstanding the US$1.5 million investment in the ZroBlack agreement, with net cash of approximately £0.1 million as at 30 June 2019 (30 June 2018: net debt of £2.7 million).

Matt Jones, Chief Executive Officer of Blancco, commented;

"Blancco is well placed in each of its target markets: Mobile, Enterprise and ITAD. The acquisition of Inhance and the development of the IP relating to the ZroBlack Consulting Agreement provides Blancco with a full suite of products for diagnostic and erasure solutions in the mobile sector and places the Group in a position to cement its position as a market leader.

"We are confident that the initiatives that we have laid out today will make a meaningful contribution to Blancco's future growth, further accelerating rates of revenue and profit growth, over and above those increases that we have announced today and earlier this year."

For further information:

About Blancco

Blancco Technology Group plc is a leading global provider of mobile device diagnostics and secure data erasure solutions. For more information, please visit www.blanccotechnologygroup.com.

Important notice

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 ("MAR"). For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of Blancco by Lorraine Young Company Secretaries Limited, Company Secretary of Blancco.

Market Soundings, as defined in MAR, were taken in respect of the proposed Placing with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. That inside information in relation to the Placing is set out in this Announcement and has been disclosed as soon as possible in accordance with paragraph 7 of Article 17 of MAR. Therefore, those persons that received inside information in a Market Sounding are no longer in possession of inside information relating to the Group and its securities.

This announcement has been issued by Blancco and is the sole responsibility of Blancco. This announcement is for information purposes only and does not constitute an offer to sell or an invitation to subscribe for or a solicitation of an offer to buy or subscribe for any securities in any jurisdiction including in which such an offer or solicitation is unlawful and is not for distribution in or into, without limitation, the United States, Canada, Australia, Japan or the Republic of South Africa or New Zealand (the "Restricted Jurisdictions") or to US persons (within the meaning of Regulation S of the United States Securities Act 1933 (as amended) (the "Securities Act")).

The Placing Shares and the Consideration Shares have not been and will not be registered under the Securities Act or under the applicable securities laws of any state in the United States or any Restricted Jurisdiction and, unless an exemption under such act or laws is available may not be offered for sale or subscription or sold or subscribed directly or indirectly within the Restricted Jurisdictions or for the account or benefit of any national, resident or citizen of the Restricted Jurisdictions. No public offering of securities will be made in the United States. The distribution of this announcement in other jurisdictions may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions.

Peel Hunt, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom and Panmure Gordon, which is authorised and regulated by the Financial Conduct Authority, are acting exclusively for Blancco and for no one else in connection with the Placing and will not be responsible to anyone other than Peel Hunt and Blancco for providing the protections afforded to clients of Panmure Gordon, respectively, nor for providing advice in relation to the Placing or any other matters referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on the Joint Bookrunners by the Financial Services and Markets Act 2000, as amended ("FSMA") or the regulatory regime established thereunder, none of the Joint Bookrunners accept any responsibility whatsoever or make any representation or warranty, express or implied, for the contents of this announcement including its accuracy, completeness or verification or for any statement made or purported to be made by it, or on its behalf, in connection with the Group, the Placing Shares or the Placing and nothing in this announcement shall be read as a promise or representation in this respect whether as to the past or future. The Joint Bookrunners accordingly disclaim all and any liability whatsoever arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.

Members of the public are not eligible to take part in the Placing. In member states of the European Economic Area (the ''EEA''), this announcement is being distributed only to and is directed only at persons who are ''qualified investors'' within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC) (as amended, including by Directive 2010/ 73/EU, to the extent such amendments have been implemented in the relevant Member State and including any relevant implementing measure in the relevant Member State) (''Qualified Investors'').

This announcement is being distributed only to, and is directed only at, persons in the United Kingdom who have professional experience in matters relating to investments who fall within the definition of ''investment professionals'' in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, (the ''Order'') or are high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts or other persons falling within Articles 49(2)(a)-(d) of the Order and who in each case are also Qualified Investors (together, "Relevant Persons"). Any investment activity to which this announcement relates is available only to, and will be engaged in only with, Relevant Persons. No person who is not a Relevant Person may rely on this announcement.

This announcement is not being distributed by, nor has it been approved for the purposes of section 21 of FSMA by, a person authorised under FSMA. This announcement is being distributed and communicated to persons in the United Kingdom only in circumstances in which section 21(1) of FSMA does not apply.

Recipients of this announcement should conduct their own investigation, evaluation and analysis of the business, data and property described in this announcement. This announcement does not constitute a recommendation concerning any investor's options with respect to the Placing. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each shareholder or prospective investor should consult with his or her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.

The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its accuracy or completeness. The information in this announcement is subject to change. Neither the contents of the Group's website nor any website accessible by hyperlinks on the Group's website is incorporated in, or forms part of, this announcement.

Forward-looking statements

This announcement contains statements about Blancco that are or may be deemed to be "forward-looking statements".

All statements, other than statements of historical facts, included in this announcement may be forward-looking statements. Without limitation, any statements preceded or followed by, or that include, the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "should", "anticipates", "estimates", "projects", "would", "could", "continue" or words or terms of similar substance or the negative thereof, are forward-looking statements. Forward-looking statements include, without limitation, statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects and (ii) business and management strategies and the expansion and growth of the operations of Blancco.

These forward-looking statements are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Investors should not place undue reliance on such forward-looking statements and, save as is required by law or regulation (including to meet the requirements of the AIM Rules, the Prospectus Rules and/or the FSMA), Blancco does not undertake any obligation to update publicly or revise any forward-looking statements (including to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based). All subsequent oral or written forward-looking statements attributed to Blancco or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements contained in this announcement are based on information available to the Directors of Blancco at the date of this announcement, unless some other time is specified in relation to them, and the posting or receipt of this announcement shall not give rise to any implication that there has been no change in the facts set forth herein since such date.

Information to Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of (a) retail investors, (b) investors who meet the criteria of professional clients and (c) eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, Distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Joint Bookrunners will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Placing Shares.

Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.