Mondas plc, the AIM listed Financial Markets software specialist, has today announced details of a proposed amendment to the terms of its existing CULS to extend its redemption date, enhance the conversion rights and reduce the annual coupon payable.
At the same time the company has announced details to raise £1,000,000 through a placing of additional CULS on the amended terms.
Background and reasons for the Proposed Amendments and the Placing
The CULS are due for redemption on 31 October 2007. Although the Company is trading well, following improving trading conditions in the financial markets and the recent acquisitions of Eclipse and Blue Curve, the Mondas directors believe that the Company may not have the necessary financial resources available to redeem the CULS in 15 months' time. It is clearly desirable to eliminate any uncertainty caused by this situation and, accordingly, the Mondas directors propose to amend the terms of the CULS as set out below. The Mondas directors believe that this, together with the proposed placing, will strengthen the Company's financial position, particularly when it are being evaluated as a vendor of large and complex systems to the financial sector. The proposed amendments to the terms of the CULS, together with the net proceeds of the placing of Additional CULS, which amount to approximately £0.92 million after expenses, will allow the Company to expand its sales and marketing capability, to continue product development, to provide working capital and to take advantage of the growth opportunities presented to it.
Current trading and reasons for funding
The return of confidence in the financial markets has increased demand for Mondas's products. This has been demonstrated by an increased level of contracts ith new and existing customers, a shortening of sale cycles and a sales pipeline which is both growing in value and increasing in quality. Since the start of January, Mondas has sold new systems to Panmure Gordon, JM Finn, and Brewin Dolphin Securities. More recently, the Company has announced a significant contract with a major global bank based in the UK. Furthermore, it has made its first US sale to Ferris Baker Watts, for an application service provider ('ASP') model of its Blue Curve research management product. This system went into live production in June 2006.
The Business Systems Division, which sells applications to the education sector, has concluded contracts with three colleges and nine schools as new users for its Resource 32000 accounting software solution, which add to its existing user base of approximately 150 education sector users. This represents approximately 25 per cent. of Colleges of Further Education in the UK. This division benefits from approximately £1.4m of contracted recurring support revenue and has traditionally enjoyed strong cash flows.
These improving trading conditions and profitability across all divisions have enabled Mondas to make a small profit in the six month period ended 30 June 2006 after interest. The Company continues to trade broadly in line with internal expectations.
Mondas directors have identified opportunities for growth which they cannot currently fully exploit due to financial resource constraints. These include but are not limited to:
- the delivery of further financial sector products through the ASP model. This delivery model should allow the Company to address new markets with both existing and future products
- local resources to take advantage of the strengthening US pipeline of business both from new and existing customers. The US market has shown itself to be receptive to Mondas' financial sector products and appears to have growth potential
- and an increasing customer requirement for web-based technology within the Business Systems Division, which demands further investment in this area to remain competitive and to build on the increasing market share established by this division
Furthermore, the Company is committed to growth, not only organically, but by acquisition. In order to deliver this growth, the Mondas directors believe that
investment in repositioning and rebranding the company as an acquirer and developer of software businesses will support that commitment.
As the Company grows through the success of its existing divisions and the successful acquisition of further businesses, it needs to invest in infrastructure and programs to support that growth.
The Proposed Amendments to the terms of the CULS
The principal amendments are as follows:
- the amendment of the redemption date of the CULS from 31 October 2007 to 31 October 2011
- the amendment, with effect from but not including, 31 August 2006, of the rate of the interest from 8.75 per cent to 8 per cent
- and the enhancement of the conversion rights from two ordinary shares for every £1 nominal of CULS to four ordinary shares for every £1 nominal of CULS and the inclusion of appropriate adjustments to the conversion rights in the event of a bonus issue or rights issue