KOOV.L Regulatory News (KOOV)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

For immediate release

11 January 2016

Koovs plc

Proposed Capital Raising of 17,800,000 new Ordinary Shares at 25 pence per share

Introduction

Koovs plc ("Koovs", the "Company" and, together with its subsidiary undertakings, the "Group") (AIM: KOOV.L) today announces that it proposes to raise gross proceeds of approximately £4.5 million through the issue of an aggregate of 17,800,000 new ordinary shares of one penny each ("Ordinary Shares") in the capital of the Company ("New Ordinary Shares") at 25 pence per New Ordinary Share (the "Issue Price") (the "Capital Raising").

The New Ordinary Shares represent approximately 65.7 per cent. of the existing issued share capital of the Company and the Issue Price represents a premium of approximately 6.4 per cent. to the closing mid-market price of 23.5 pence per Ordinary Share on 8 January 2016, being the last trading day immediately preceding the publication of this announcement.

Mary Turner, Chief Executive Officer of Koovs commented:

"This Capital Raising represents the next phase in the process to build our business and reflects the significant confidence that our major shareholders have in our prospects."

"We are already seeing the initial impact of our investment in marketing to build the Koovs brand. With targeted media and a standout creative we are achieving very good results. We will be building on this momentum in the next phase of our marketing campaign and look to continue accelerated growth into 2016"

"Following completion of the Capital Raising announced today, and along with the £1.1 million Directors' subscriptions in October 2015, the Company will have raised approximately £5.6 million which will be invested in increased marketing and the broadening of the product range as well as to invest in capital expenditure and fund working capital as the Company continues its rapid growth trajectory."

Background to and reasons for the Capital Raising

Background

Koovs offers a fashion-forward, value-focused concept for young, fashionable, technology savvy and aspirational consumers in India, with a wide range of branded and private label apparel products. The product is 'up to the minute' affordable western fashion inspired by international runways and global street culture. Koovs.com has started to build a community with rich content to enable its target customers to interact and have conversations about fashion.

The Company was admitted to trading on the AIM market ("AIM") of London Stock Exchange plc (the "London Stock Exchange") on 10 March 2014. At this time, the Company owned 57.5 per cent. of the issued share capital of Koovs Marketing Consulting Private Limited ("Koovs India"), an Indian business supplying branded and private-label garments and accessories to Marble E-retail Private Limited on an exclusive basis for subsequent sale through the Koovs.com e-commerce website.

The key investment proposition behind the Company was, and continues to be, the size and growth of the Indian retail market, the favourable demographic shifts in India and the anticipated step-change in e-commerce activity in India. The Group's vision is to build Koovs.com into India's number one western fashion destination by 2020 and with a focus on growing market share to greater than 10 per cent. (currently at approximately one per cent.).

The five steps which the directors of the Company (the "Directors" or the "Board") consider to be key to achieving this vision are:

· to build Koovs' private label and establish fashion credibility;

· to bring strong international brands to the new Indian consumer;

· to extend Koovs.com's fashion credentials by bringing both established and new designs to the consumer in India through exclusive design collaborations;

· to develop delivery and price promises for the consumer that are reliable, affordable and price-worthy; and

· to use technology to power the consumers' fashion needs.

Future strategy and targets

Koovs has built a distinctive position in the market and, among the fashion press and its customer base, has established strong fashion-forward credentials providing a solid platform for growth. The Directors believe the Group's next steps to achieving its vision and capture market share are to:

· invest in the product range, leveraging the Group's fashion credibility to extend and broaden into new categories and to develop a fashion basics range to underpin the trend ranges; and

· invest in the brand, amplifying the Koovs brand using a blend of high profile media activities and innovative activations.

Currently, Koovs' product mix is significantly weighted towards trend-led product offers (approximately 60 per cent. of its current offer) which caters to a limited range of end-uses (primarily party wear). Broadening the product offering into new categories will widen the range of end-uses and therefore widen Koovs' potential customer base.

The first phase has been to develop a main fashion range, and this is now broadening into additional categories such as casual wear and work wear, along with an entry priced fashion basics range. The Group's target product mix for trend-led, main fashion and fashion basics is 30 per cent., 50 per cent. and 20 per cent. respectively.

Koovs' brand awareness is currently very low and will be increased through investment in a carefully targeted marketing campaign across a broad range of media, particularly off-line media such as print, television, cinema and out-of-home displays, as well as through activation activities such as participation in music and fashion events. This will be supported by a continuation of the on-line marketing including i-video and social media.

The initial campaign launched in November 2015 will be followed-up by specific campaigns for spring and autumn of 2016. These will be monitored and amended in real-time to ensure effectiveness of the investment. CommsTracker, a MediaCom brand awareness tool, predicts, on the basis of the projected marketing spend, Koovs brand awareness levels of over 25 per cent. after the autumn 2016 campaign.

The proposed marketing strategy will negatively impact Group earnings in the short term as the Group absorbs the additional costs whilst building the brand. In the longer term, however, the Directors believe that this marketing strategy will leave Koovs in a stronger position, further growing its brand awareness, market share, sales and, in due course, profitability. The Group's target is to grow market share from 1 per cent. to 5 per cent. by the financial year ending 31 March 2017, and achieve 12 to 15 per cent. market share by the financial year ending 31 March 2019.

Current trading and funding requirement

The Group has experienced improved performance in the first nine months of the financial year ending 31 March 2016 and is on track to meet the Directors' expectations.

The Group's current level of cash resources is not sufficient to fund the plans outlined above and it is for this reason that the Company is seeking further equity capital from existing and new investors by way of the Capital Raising. The Company estimates its funding requirement to be approximately £35 million over the next three years of which approximately £5.6 million will have been successfully raised following the completion of the Capital Raising.

Proposed capital reorganisation  

On 16 October 2015, the Company announced that as part of its next fundraising, in order to regularise the Group structure, the Board was considering an opportunity to acquire further shares in Koovs India from Infotel E-Commerce Private Limited, a company controlled by the Nahata family. This has not been possible to effect as part of the Capital Raising but remains a short term objective. It is anticipated that the Board will look to normalise the Group structure in conjunction with any future fundraisings.

Details of the Capital Raising

The Capital Raising comprises subscriptions by Nextwave Ventures and Lord Waheed Alli for an aggregate of 14,800,000 New Ordinary Shares (the "Subscriptions") and a placing with an existing institutional investor of 3,000,000 New Ordinary Shares (the "Placing"), in each case at the Issue Price.

Peel Hunt LLP ("Peel Hunt") is acting as nominated adviser, broker and sole bookrunner to the Company in connection with the Placing.

The New Ordinary Shares represent approximately 65.7 per cent. of the existing issued share capital of the Company and the Issue Price represents a premium of approximately 6.4 per cent. to the closing mid-market price of 23.5 pence of an Ordinary Share on 8 January 2016, being the last trading day immediately preceding the publication of this Announcement.

The New Ordinary Shares, when issued, will be fully paid and will rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid after the date of issue.

The Capital Raising is conditional upon, among other things, certain resolutions (the "Resolutions") to give the Directors authority to allot the New Ordinary Shares being duly passed by shareholders at a general meeting of the Company (the "General Meeting") to be held at the offices of Peel Hunt, Moor House, 120 London Wall, London EC2Y 5ET at 11.00 a.m. on 28 January 2016, upon Admission becoming effective and the placing agreement between the Company and Peel Hunt not being terminated in accordance with its terms.

Application will be made for the New Ordinary Shares to be admitted to trading on AIM ("Admission"). Admission and dealings in the New Ordinary Shares is expected to take place at 8.00 a.m. on 29 January 2016. Following Admission, the Company will have 44,883,691 Ordinary Shares in issue.

A circular containing, amongst other things, the notice convening the General Meeting is expected to be published by the Company later today and will be available on the Company's website www.koovs.com/corporate.

Related party transactions and intentions of the Directors

Lord Waheed Alli, a Director of the Company, and Silvergate Investments Limited (which is a company wholly owned by Lord Waheed Alli), together hold a total of 7,299,218 Ordinary Shares representing 26.9 per cent. of the existing issued share capital of the Company. Lord Waheed Alli has agreed to subscribe for 5,600,000 New Ordinary Shares in the Capital Raising. Following completion of the Subscriptions, Lord Waheed Alli and his connected persons will have an interest in 12,899,218 Ordinary Shares which represent 28.7 per cent. of the enlarged issued share capital of the Company (the "Enlarged Issued Share Capital").

Nextwave Ventures Pte. Limited, a company connected to Mr Anant Nahata, a Director of the Company, has agreed to subscribe for 9,200,000 New Ordinary Shares in the Capital Raising. Following completion of the Subscriptions, Anant Nahata and his connected persons will have an interest in 12,822,283 Ordinary Shares which represent 28.6 per cent. of the Enlarged Issued Share Capital.

Michinoko Limited holds a total of 4,621,855 Ordinary Shares representing 17.1 per cent. of the existing share capital of the Company. Michinoko Limited has agreed to subscribe for 3,000,000 New Ordinary Shares in the Capital Raising. Following completion of the Capital Raising, Michinoko Limited will have an interest in 7,621,855 Ordinary Shares which represent 17.0 per cent. of the Enlarged Issued Share Capital.

Lord Waheed Alli, Nextwave Ventures Pte. Limited and Michinoko Limited will in each case be treated as a "related party" for the purposes of Rule 13 of the AIM Rules for Companies in relation to the participation by them (or their associates) in the Capital Raising.

The Directors (excluding Lord Waheed Alli and Anant Nahata), having consulted with Peel Hunt in its capacity as the Company's nominated adviser for the purposes of the AIM Rules for Companies, consider the terms on which Lord Waheed Alli, Nextwave Ventures Pte. Limited and Michinoko Limited will subscribe for New Ordinary Shares in the Capital Raising to be fair and reasonable insofar as Shareholders are concerned.

Recommendation and importance of the vote

The Directors consider the Capital Raising to be in the best interests of the Company and shareholders as a whole. Accordingly, the Directors unanimously intend to recommend shareholders to vote in favour of the Resolutions to be proposed at the General Meeting as they intend to do so in respect of their (and their connected persons') beneficial holdings amounting, in aggregate, to 12,300,136 Ordinary Shares, representing approximately 45.4 per cent. of the existing issued ordinary share capital of the Company.

Whilst the Directors believe that alternative sources of funding are potentially available to the Group, they are of the view that the terms associated with such funding would be significantly more onerous than those of the Capital Raising. It is therefore of the utmost importance that shareholders vote in favour of the Resolutions. If the Resolutions are not passed by the shareholders at the General Meeting and the Capital Raising does not proceed, the Company will need to seek alternative sources of funding but given the current stage of the Company's development this outcome is unlikely to be favourable to Shareholders.

Important Notice

The distribution of this announcement and any other documentation associated with the Capital Raising into jurisdictions other than the United Kingdom may be restricted by law. Persons into whose possession these documents come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws or regulations of any such jurisdiction. In particular, such documents should not be distributed, forwarded to or transmitted, directly or indirectly, in whole or in part, in, into or from the United States, Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction where to do so may constitute a violation of the securities laws or regulations of any such jurisdiction (each a "Restricted Jurisdiction").

The New Ordinary Shares have not been and will not be registered under the US Securities Act 1933 (as amended) (the "US Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States and, accordingly, may not be offered, sold, resold, taken up, transferred, delivered or distributed, directly or indirectly, within the United States except in reliance on an exemption from the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States.

There will be no public offer of the New Ordinary Shares in the United States. The New Ordinary Shares are being offered and sold outside the US in reliance on Regulation S under the US Securities Act. The New Ordinary Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the US or any other US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares or the accuracy or adequacy of this announcement. Any representation to the contrary is a criminal offence in the US.

The New Ordinary Shares have not been and will not be registered under the relevant laws of any state, province or territory of any Restricted Jurisdiction and may not be offered, sold, resold, taken up, transferred, delivered or distributed, directly or indirectly, within any Restricted Jurisdiction except pursuant to an applicable exemption from registration requirements. There will be no public offer of New Ordinary Shares in Australia, Canada, Japan, or the Republic of South Africa.

This announcement is for information purposes only and does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in any jurisdiction and should not be relied upon in connection with any decision to subscribe for or acquire any of the New Ordinary Shares.

This announcement has been issued by, and is the sole responsibility of, the Company. No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorised by the Company or Peel Hunt. Subject to the AIM Rules for Companies, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this announcement or that the information contained in it is correct at any subsequent date.

Peel Hunt, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting for the Company and no one else in connection with the Capital Raising and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Capital Raising and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Capital Raising or any matters referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on Peel Hunt by the Financial Services and Markets Act 2000 or the regulatory regime established thereunder, Peel Hunt does not accept any responsibility whatsoever for the contents of this announcement, and makes no representation or warranty, express or implied, for the contents of this announcement, including its accuracy, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company or the New Ordinary Shares or the Capital Raising, and nothing in this announcement is or shall be relied upon as, a promise or representation in this respect whether as to the past or future. Peel Hunt accordingly disclaims to the fullest extent permitted by law all and any liability whether 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.

No statement in this announcement is intended to be a profit forecast or estimate and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the Directors' current intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the Company's markets. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this announcement are based on certain factors and assumptions, including the Directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Whilst the Directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by law or by the AIM Rules for Companies, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the Directors' expectations or to reflect events or circumstances after the date of this announcement.

This announcement should not be considered a recommendation by the Company, Peel Hunt or any of their respective directors, officers, employees, advisers or any of their respective affiliates, parent undertakings, subsidiary undertakings or subsidiaries of their parent undertakings in relation to any purchase of or subscription for the New Ordinary Shares. Price and volumes of, and income from, securities may go down as well as up and an investor may not get back the amount invested. It should be noted that past performance is no guide to future performance. Persons needing advice should consult an independent financial adviser.

Neither the content of the Company's website nor any website accessible by hyperlinks to the Company's website is incorporated in, or forms part of, this announcement.