FST.L Regulatory News (FST)

7 November 2013

Toumaz Limited

Proposed placing to raise £17.7m to support SensiumVitals rollout and the development of digital radio and connected audio

Toumaz Limited (AIM: TMZ, 'Toumaz', or the 'Company'), a pioneer in low-power wireless semiconductor and software technologies, has raised £17.7m before expenses through the conditional placing ('Placing') of 442,500,000 new Ordinary Shares (the "Placing Shares") at a placing price of 4 pence per share. The Placing Shares have been placed and underwritten by Peel Hunt LLP ("Peel Hunt") with both new and existing institutional and other investors.

Highlights

· Conditionally raised £17.7m before expenses at 4 pence per share.

· Proceeds will support commercialisation of three key chip development programmes and development of the sales and marketing infrastructure for the SensiumVitals® wireless healthcare monitoring system ("SensiumVitals"), specifically (figures are approximate):

· Wireless Healthcare - £7.8 million to fund developments of SensiumVitals, the platform, establishing sales, and marketing organisation.

· Consumer Audio - £9.9 million to fund developments of the silicon platforms, next generation digital radio and connected audio platforms.

· The Placing is conditional, inter alia, on a resolution ("Resolution") being passed at a general meeting of the Company ("EGM" or "Extraordinary General Meeting") to disapply pre-emption rights in connection with the allotment of the Placing Shares.

Anthony Sethill, CEO of Toumaz, commented:

"With our first US commercial distribution deal for SensiumVitals now in place, along with CE marking and our first UK pilot agreed, we are building on the momentum that we have already achieved.

"The drive for further efficiency and better patient care in hospitals and beyond means that the global wireless patient monitoring market is forecast to grow eightfold in the next four years.

"This Placing enables us to invest further in becoming a key supplier within this dynamic new market, as well as to maintain our leading position in the digital radio and network audio space with innovative chip developments."

Enquiries:

About Toumaz (www.toumaz.com)

Toumaz Limited is a pioneer in low-power, wireless semiconductor and software technologies for healthcare and consumer audio. The Company has two divisions, Toumaz Healthcare and Frontier Silicon. Toumaz Healthcare develops wireless solutions for patient monitoring. Frontier Silicon provides chip, modules and software for digital radio and connected audio devices.

Introduction

On behalf of the Company Peel Hunt has raised £17.7m (before expenses) by way of a placing of 442,500,000 new ordinary shares of 0.25p each ("Ordinary Shares") at a price of 4 pence per share. The purpose of the Placing is to provide Toumaz with adequate cash resources to ensure it can successfully deliver on its strategy and growth plan going forward.

The Placing Price represents a discount of approximately 15.8 per cent. to the closing mid-market share price of 4.75 pence per Ordinary Share on 6 November 2013 (the latest practicable date prior to the date of this announcement). The Placing Shares will represent approximately 38.5 per cent. of the issued share capital of the Company prior to the issue of the Placing Shares. The Placing is conditional, inter alia, on the approval of shareholders of the Company ('Shareholders") at the EGM.

Background to and reasons for the Placing

The Company has made significant progress in all sections of its business in the 14 months since the acquisition of Frontier Silicon completed on 20 August 2012.

Healthcare

Following successful completion of the pilot of SensiumVitals at St John's Health Centre, Los Angeles, in April of this year, the Board was pleased to announce on 15 October 2013 that it had signed a significant new North American distribution agreement with NantHealth for SensiumVitals. This agreement replaces the previous agreement with NantHealth and reflects the growth in capabilities of the two companies, in particular NantHealth's 2012 acquisition of iSirona, a leader in patient monitoring device connectivity. iSirona will be the exclusive distributor of SensiumVitals in North America. As a leading provider of solutions which integrate medical devices into hospital electronic medical records systems, iSirona is able to offer direct sales relationships for SensiumVitals into the rapidly increasing number of hospitals (currently 250) into which it has introduced its products.

At the same time, Toumaz announced its first commercial order (of a six figure value) of SensiumVitals to be deployed at Hurley Medical Center in Flint, Michigan. For the first time, a wireless patient vital signs tracking system will be used in Accident & Emergency.

The Company also announced on 15 October 2013 that SensiumVitals had received CE marking under the EU Medical Devices Directive. The CE Mark allows the system to be sold throughout the European Union - this follows the system's US FDA 510k clearance received in July 2011.

Toumaz has also secured the first UK pilot deployment of SensiumVitals with Spire Healthcare, a leading UK provider of private healthcare. The pilot will start in a Spire Healthcare hospital in early 2014. Spire has 38 hospitals across the UK and has earned a reputation as a leader in patient care.

The Company can now build upon these recent successes as a strong foundation to move towards its goals for the coming 2-3 years for a successful roll out of SensiumVitals in the US and other key European markets.

At the same time, the Company has clear objectives for its product development roadmap:

· acceleration of take-up through improved cost efficiency - to be achieved by reducing the cost of the system's hubs (by two thirds) and extending the range of the patch by a factor of three; and

· positioning the product as a replacement technology by offering the capability to measure a full set of vital signs by adding ECG, SpO2 and blood pressure to the system's existing capabilities.

Over the next five years, the global hospital wireless patient / vital signs monitoring market is forecast to grow eightfold - from $47m in 2012 to $370m in 20171. Drivers for this growth include: political and regulatory pressure to improve patient care and drive cost efficiencies in hospitals; allocation of dedicated spectrum for wireless healthcare applications in the US (with good prospects for the same in Europe); and potential for enabling technologies, such as SensiumVitals, to transform levels of care.

1 - Source: ON World "Health & Wellness Wireless Sensor Networks" Report 2013

Digital Radio

Frontier Silicon ('Frontier') is the number one provider of technology solutions for Digital Radio with approximately 80% share of the DAB consumer market. Customers include leading brands, such as Sony, Philips, Pure, Panasonic, LG, Grundig and Bose. The Company is well-positioned to benefit from growth in digital radio markets - as a growing number of markets adopt digital radio and more mature territories move towards Digital Switchover (DSO). The Company is currently developing its fourth generation chip, Chorus 4.

Over the next five years, the DAB / DAB+ consumer and automotive aftermarket sectors are expected almost to double from $35m to $66m. Growth is expected both in the UK, the largest digital radio market, and internationally.

In the UK, digital radio sales have been relatively flat for the last three years2 - at about 2m units p.a. However, sales could be significantly enhanced by the Government's decision on Digital Switchover, a decision that is currently planned for 16 December 2013. 

2 - Source: Ofcom Digital Radio Report 2013

International growth prospects are also encouraging - in particular, following the successful launch of DAB+ in Germany in 2011. In the first eight months of 2013, sales of DAB+ radios in Germany have grown 69% year-on-year3.

3 - Source: GfK

As a leader in the digital radio chip market, a key focus for Frontier Silicon is to retain market share. In the last six months, Frontier's market share has been stable - with little immediate prospect of this position weakening.

Longer term, the Company's investment in its next generation chip, Chorus 4, is designed to meet any competitive challenge. Chorus 4 will be an integrated chip (Chorus 3 currently comprises four chips), offering significant cost and power consumption savings over current solutions. Chorus 4 will also be a multi-standard chip able to address global markets. The first non-DAB / DAB+ market the Company plans to enter is the US HD Radio market.

The Chorus 4 development is well-progressed - samples are expected before the end of 2013; and first revenues are expected in the final quarter of 2014.

Connected Audio

Frontier Silicon is establishing itself as a successful innovator in the rapidly emerging Connected Audio market. The Company's primary focus is on solutions offering Wi-Fi connectivity - the segment of the market expected to show the strongest growth over the next four years. Frontier's position has been strengthened by recent agreements with Spotify and Imagination Technologies.

Connectivity is transforming the world of audio devices - with the proportion of audio devices with connectivity expected to grow from 20% today to 50% in 2017. This growth is being driven by the adoption and usage of smart devices and cloud-based content streaming services. The connected audio market is based on two standards, Bluetooth and Wi-Fi, with the former currently accounting for over 80% of solutions. However, over the next four years, Wi-Fi is expected to grow its share (due to its superior functionality and a narrowing of the price gap between solutions for the two standards) and, by 2017, is expected to account for 55% of the market. In terms of value, the global Wi-Fi Connected Audio market is expected to grow from $99m in 2012 to $349m in 20174.

4 - Source: Frontier Silicon analysis

Frontier's recent performance in Connected Audio has been very encouraging.

First, sales of the Company's Xenif Wi-Fi chip saw strong growth in Q2 2013, following the US launch of Pure's Jongo wireless speakers (powered by Xenif) which have been sold into Wal-Mart, Target and Best Buy.

Second, the Company has recently launched Roma, a Wi-Fi and Bluetooth solution based on the Xenif chip, offering synchronised multi-room connectivity. The solution has been developed in close collaboration with Imagination Technologies, from whom Frontier licensed the Caskeid audio synchronisation technology and FlowAudio content platform. Roma was launched in September 2013, with products expected in stores before the end of the year.

In September 2013, the Company announced an agreement with Spotify whereby Frontier Silicon will provide solutions to device manufacturers to support Spotify Connect, a new service which integrates Spotify's mobile music service with connected devices within the home. Several brands have already committed to this service, among them Argon in Scandinavia, Hama in Germany and Revo in the UK.

Finally, the Company is currently working on the development of its new Symphony solution, a wireless chip delivering high quality mass market audio via Wi-Fi and Bluetooth. Longer term this chip will act as a platform to address the Internet of Things. The design of this chip is expected to be complete in H2 2014 - with first revenues being generated H1 2016.

Use of Proceeds

The gross proceeds of the placing of £17.7m will be used to support commercialisation of the three key chip development programmes and development of the sales and marketing infrastructure for SensiumVitals. Details of the specific use of funds are set out below (figures are approximate).

· Wireless Healthcare - £7.8 million to fund developments of SensiumVitals, the platform, establishing sales, and marketing organization.

· Consumer Audio - £9.9 million to fund developments of the silicon platforms, next generation digital radio and connected audio platforms.

Current trading and prospects

Toumaz reported in its half yearly results on 23 September 2013 that trading was in line with the Board's expectations and the Company's key strategic market development and that new product development programmes were running to plan. As a result, the business is expected to see considerable growth in its financial metrics in the medium term.

Revenues for the half year to 30 June 2013, were £8.2m with an EBITDA loss of £5.6m. The cash position was £8.0m at 30 June 2013.

Details of the Placing

The Company is proposing to raise £17.7 million before expenses by means of the Placing.

Peel Hunt, as agent for the Company, has conditionally placed the Placing Shares with placees at a price of 4 pence per Placing Share on the terms set out in a placing agreement entered into between the Company and Peel Hunt (the "Placing Agreement"). The Placing is conditional, inter alia, upon the passing of the Resolution, the Placing Agreement becoming unconditional in all respects and admission of the Placing Shares to trading on AIM ("Admission") occurring on or before 26 November 2013 or such later date as is agreed in writing between the Company and Peel Hunt, but in any event not later than 8.00 a.m. on 31 December 2013.

Under the Placing, Imagination Technologies Group Plc ("Imagination") has conditionally agreed to subscribe for 48,412,980 Ordinary Shares at the Placing Price. Of this, a total of 24,206,490 shares are to be satisfied in cash and the balance against certain sums owing by the Company to Imagination.

The Placing Shares will, following Admission, rank pari passu with the existing issued Ordinary Shares and will have the right to receive all dividends and other distributions declared, made or paid in respect of the issued Ordinary Share capital of the Company following Admission.

The terms and conditions applicable to the Placing are set out in the Placing Agreement. Peel Hunt has agreed to use its reasonable endeavours to procure placees for the Placing Shares. The obligations of the parties are conditional as described above. The Placing Agreement contains certain warranties given by the Company concerning the accuracy of information given in the circular to Shareholders to be published in connection with the Placing ("Circular") and other matters relating to the Company and its business.

Application has been made to the London Stock Exchange Plc for the Placing Shares to be admitted to trading on AIM conditional on the Resolution being passed at the Extraordinary General Meeting. The Placing Shares are expected to be admitted to AIM and commence trading at 8.00 a.m. on 26 November 2013.

The Placing is being made on a non-pre-emptive basis as the time and costs associated with a pre-emptive offer are considered by the Directors to be excessive. The making of a pre-emptive offer would require the production of a prospectus which would have to comply with the Prospectus Rules and be pre-vetted and approved by the UK Listing Authority.

Directors Participation 

The Directors have participated in the Placing as follows:

5 - the shares subscribed by Richard Steeves will be held in the name of his wife.

Extraordinary General Meeting

The Extraordinary General Meeting of the Company will be held at the offices of Taylor Wessing LLP at 5 New Street Square London EC4A 3TW at 10 a.m. on 25 November 2013, to consider and, if thought appropriate, pass the Resolution as a special resolution to dis-apply pre-emption rights in connection with the allotment of the Placing Shares.

Timetable