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23 July 2009

Invu plc ('Invu' or the 'Company')

Proposed Placing and Issue of Convertible Loan Notes to raise £1.5 million

Invu announces that it proposes to raise an aggregate of £1.5 million through a placing of 50 million new Ordinary Shares at a price of 2 pence per share and the issue of the Convertible Loan Notes (together 'the Issue').  The Company intends that the net proceeds of the Issue will be used to repay debt, for general working capital purposes and will provide the Company with the resources to execute its revised strategy, details of which are set out below. The Company has also today separately announced its preliminary results for the year ended 31 January 2009.  

The Placing is conditional, amongst other things, upon the Company obtaining approval from Shareholders granting authority to the Board to allot the Placing Shares and to disapply pre-emption rights which would otherwise apply to the allotment of the Placing Shares. The Placing is also conditional on the execution by the Company of the Convertible Loan Note Instrument and on Admission.  

The Placing Shares have been conditionally placed by Arbuthnot Securities with institutional and other investors, including certain Directors. Subject, inter alia, to the passing of the Resolutions at the General Meeting on 10 August 2009 and Admission, dealings in the Placing Shares are expected to commence on AIM at 8.00 a.m. on 12 August 2009.  The Placing Shares represent approximately 44.1 per cent. of the Company's existing issued share capital and will, when issued, represent approximately 30.7 per cent. of the Enlarged Share Capital.

The Company has received irrevocable undertakings to vote in favour of the Resolutions from Shareholders who in aggregate hold approximately 47.7 per cent. of the Company's existing issued share capital (including undertakings from each of the Directors in relation to their respective shareholdings).

Enquiries: 

Invu plc	01604 859893
Daniel Goldman, Non Executive Chairman
Colin Gallick, CEO
Financial Dynamics	020 7831 3113
Juliet Clarke/Haya Chelhot/Emma Appleton
Arbuthnot Securities	020 7012 2000
Tom Griffiths/Ben Wells

Proposed Placing and Issue of Convertible Loan Notes to raise £1.5 million 

Introduction

Invu announces that it proposes to raise an aggregate of £1.5 million through a placing of 50 million new Ordinary Shares at a price of 2 pence per share and the issue of the Convertible Loan Notes (together 'the Issue'). The Company intends that the net proceeds of the Issue will be used to repay debt, for general working capital purposes and will provide the Company with the resources to execute its revised strategy, details of which are set out below. The Company has also today separately announced its preliminary results for the year ended 31 January 2009.  

The Placing is conditional, amongst other things, upon the Company obtaining approval from Shareholders granting authority to the Board to allot the Placing Shares and to disapply pre-emption rights which would otherwise apply to the allotment of the Placing Shares. The Placing is also conditional on the execution by the Company of the Convertible Loan Note Instrument and on Admission.  

The Placing Shares have been conditionally placed by Arbuthnot Securities with institutional and other investors, including certain Directors. Subject, inter alia, to the passing of the Resolutions at the General Meeting on 10 August 2009 and Admission, dealings in the Placing Shares are expected to commence on AIM at 8.00 a.m. on 12 August 2009.  The Placing Shares represent approximately 44.1 per cent. of the Company's existing issued share capital and will, when issued, represent approximately 30.7 per cent. of the Enlarged Share Capital.

The Company has received irrevocable undertakings to vote in favour of the Resolutions from Shareholders who in aggregate hold approximately 47.7 per cent. of the Company's existing issued share capital (including undertakings from each of the Directors in relation to their respective shareholdings).

Background to and reasons for the Issue

The past financial year has been extremely challenging and the Company's performance has been disappointing. The Company has struggled to resolve long-standing issues, mainly relating to its debtors, which have had a substantial negative impact on losses and operating cash flow. This has led the Board to initiate the following significant changes in the management and operations of the Company. 

Colin Gallick appointed as CEO

The Board asked the founder and then CEO of the Company, David Morgan, to step down in order to identify a new CEO to take the Company forward. David was replaced as CEO on an interim basis by Bernard Fisher at the beginning of January 2009, who was then replaced by Colin Gallick on 16 April 2009 in the role of CEO. Colin is an experienced software executive with a strong track record of 25 years in the technology industry, during which time he has successfully focused on growth technology companies. Both of these appointees were given a mandate to arrest the negative cash flow and stabilise the position with both the Company's employees and its reseller channel. Colin has been instrumental in developing the Company's revised strategy, further details of which are set out below, which is now being implemented.

Historic issues addressed

The Board has addressed the three key factors that have led to the current situation, namely:

(i)    The aftermath of the release of the Series 6 product 

As mentioned in the Company's previous announcements, after a period of difficulties from the initial release of Series 6, significant investment has brought the product to a position where it is now robust and reliable. The Board believes that Series 6 has now been strongly welcomed into the market as a leading document management product. 

The issues with Series 6 had a significant impact on the deployments of out-products to end-users and the level of InvuCare renewals, and a strongly adverse effect on sales, profit and cash. Since the resolution of the major product issues, the Company has experienced much higher levels of InvuCare renewals, back to levels over 80%, having reached well under 50% at its lowest point. 

(ii)    High level of debtors

The Series 6 issues, coupled with a high level of stock in the reseller channel, left the Company with a very high level of debtors across a number of its reseller channel partners. Despite attempts to do so, the Company was unable to reduce this level of debtors, resulting in significant cash out flow which weakened the Company's balance sheet. Radical action has now been taken by the Company to reduce stock in the reseller channel and to adjust the Company's focus to sales by partners to end users, with a consequential change to the Company's accounting policy with respect to revenue recognition.

In addition, the remuneration policy with regards to both sales executives and also channel partners has been changed to incentivise purely against sales by partners to their customers, rather than sales made by Invu to those reseller channel partners.

These changes are already having an impact across the business, and although the transition is challenging, the Company is now seeing the positive effects of this as sales, profits and cash become more closely synchronised.

(iii)    Non-core product initiatives

Over the last few years the Company has developed non-core products, which the Board has decided to discontinue. The Company has refocused on its core business: being the lead vendor of document management solutions to the SME market, and has created a roadmap solely in support of the core product set around Series 6. 

The Company will seek ways to monetise the Ergo technology in the future through third party licensing of the technology, and the possible generation of future licence revenue. To that end, Invu has signed a non-exclusive licensing agreement with Wagumo, a company controlled by David Morgan, the Company's former CEO.  

 

Bank financing

As part of the transition phase, the Company's bankers, Bank of Scotland, agreed a revolving working capital facility of £750,000. However, the Board has decided that it is in the best interests of the Company and its shareholders to reduce reliance on bank financing for the Company's working capital. As a result, the Company is taking steps to replace this facility and to provide additional working capital with alternative sources of funding, which will include non-bank debt finance, and also the funds raised in the Placing and by the issue of the Convertible Loan Notes.

On 26 May 2009, the Company announced that it had entered into an agreement with one of its substantial shareholders, Tyne & Wear Holdings Limited ('Tyne & Wear'), pursuant to which Tyne & Wear has agreed to provide a term loan facility of up to £0.5 million at an initial annual interest rate of 12.5 per cent. repayable on or before 31 December 2010.

In addition, the Company has agreed in principle the terms of a £0.5 million secured loan with Shore Capital Limited, acting as the investment manager of the Puma Venture Capital Trusts. The loan, which remains subject to contract, will be repayable on 31 January 2011 and bear interest at 7 per cent. per annum.

Revised Strategy

As CEO, Colin has formulated the following strategy to take the Company back to growth and profit. The main points of the plan are:

(i)    Re-engage with existing successful partners

The Company has a loyal base of channel partners, who have continued to perform despite the recent difficult period. The Company plans to consolidate the channel from currently over 170 partners to around 50 partners in order to focus its attention on the more successful partners.

(ii)    Dominate existing, and grow new, vertical markets

The Company is successful in certain vertical markets, such as independent financial advisers, accountants, and construction. In most of these markets there remains significant potential for long term growth, and the Company plans to develop specific strategies to secure that growth and allow Invu to dominate these and other selected markets, including in particular the legal sector. 

(iii)    Extend into the 'M' of the SME market

The Company has always focused on the 'S' of the SME market. The Board believes that there is a significant opportunity for the Company to sell to medium size companies as well. The key is to identify partners who are already selling into this market. The Company has launched an initiative to recruit several new partners that will be dedicated to the 'Invu for Enterprise' product, to be launched later this year. The Boards aims to concentrate on partners with higher quality and size in order to assist market penetration particularly with larger customers. 

(iv)    Return to market-driven innovation

After previous development of non-core products, the Company now needs to refocus on its aim to be the dominant vendor of document management to SMEs. This is currently being implemented, and the plan will be presented to partners and customers later in the year. The key is to return to being a market-driven company creating solutions for customers that are easy to use, and price efficient.

Use of proceeds from the Issue 

The Company is intending to raise an aggregate of £1.5 million (approximately £1.4 million net of expenses) through the Issue. The funds raised will be used to repay the Company's current bank facilities and to provide the necessary working capital for the Company to begin executing its revised strategy during 2009.  

The Directors consider that the net proceeds of the Issue, together with the Company's available debt facilities, will provide the funding necessary to pursue the Company's strategy.

Details of the Issue

The Company is proposing to raise £1.5 million (before expenses) by means of the Issue. Pursuant to the terms of the Placing Agreement, Arbuthnot, as agent for Invu, has agreed to use its reasonable endeavours to place the Placing Shares (and the Notes) with investors procured by it. The Issue is not underwritten.

The Placing Price of 2 pence per Placing Share represents a discount of approximately 16 per cent. to the closing mid-market price of 2.38 pence per Ordinary Share on 22 July 2009, being the last dealing day prior to the date of this announcement.

The issue of the Placing Shares is conditional, amongst other things, on:

(i)    the passing of the Resolutions;

(ii)    the execution by the Company of the Convertible Loan Note Instrument; 

(iii)    Admission; and

(iv)    the Placing Agreement not being terminated prior to Admission.

The Company has received irrevocable undertakings to vote in favour of the Resolutions from Shareholders who in aggregate hold approximately 47.7 per cent. of the Company's existing issued share capital (including undertakings from each of the Directors in relation to their respective shareholdings). 

Application will be made to London Stock Exchange plc for the Placing Shares to be admitted to trading on AIM. The Placing Shares are expected to be admitted to AIM and to commence trading at 8.00 a.m. on 12 August 2009.

The Placing Agreement contains warranties given by the Company with respect to its business and certain matters connected with the Issue. In addition, the Company has given certain indemnities to Arbuthnot in connection with the Placing and Arbuthnot's performance of services in relation to the Issue.

Details of the Convertible Loan Notes

The principal terms and conditions of the Convertible Loan Notes are as follows:

(a)    the nominal amount of the Convertible Loan Notes shall be £1; Herald's principal amount shall be
        £300,000 and Unicorn's shall be £200,000;

(b)     Noteholders may convert each Note into 40 new Ordinary Shares (a conversion price of 2.5 
         pence per Ordinary Share); 

(c)    any Notes not converted shall be redeemed on 12 August 2014; the Noteholders at their
        discretion shall be entitled to convert any Notes into new Ordinary Shares in the Company at 
        any time from 12 August 2012;

(d)    interest on the Notes shall accrue at 7 per cent. per annum and shall be paid to the Noteholders
        twice a year semi-annually; and

(e)    any Notes outstanding and not redeemed on 12 August 2014 shall be converted into Ordinary 
        Shares.

The issue of the Convertible Loan Notes will not proceed unless the Placing Agreement becomes unconditional in all respects (other than Admission). 

Application will be made to London Stock Exchange plc for all Ordinary Shares (if any) issued pursuant to Convertible Loan Notes to be admitted to trading on AIM (if and as applicable).  

A copy of the draft Convertible Loan Note Instrument will be available for inspection at the Company's registered office, The Beren Blisworth Farm, Stoke Road, Blisworth, Northampton, Northamptonshire NN7 3DB from the date of this document to the time and date of the General Meeting and at the offices of Arbuthnot at Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR for 15 minutes prior to and during the General Meeting.

Related Party Transactions

As part of the Placing, Tyne & Wear (a substantial shareholder in the Company, as defined in the AIM Rules) has agreed to subscribe for 12.5 million Placing Shares (the 'Tyne & Wear Transaction'). Furthermore, Colin Gallick and Bernard Fisher, each a director of the Company, has agreed to subscribe for 2,500,000 and 500,000 Placing Shares respectively (the 'Directors' Transaction').  The above transactions are classified as transaction with a related party for the purposes of the AIM Rules.

In accordance with the AIM Rules, the Directors, excluding Daniel Goldman, having consulted with the Company's nominated adviser, Arbuthnot, consider that the terms of the Tyne & Wear Transaction are fair and reasonable insofar as Shareholders are concerned.

In accordance with the AIM Rules, the Directors, excluding Colin Gallick and Bernard Fisher, having consulted with the Company's nominated adviser, Arbuthnot, consider that the terms of the Directors' Transaction are fair and reasonable insofar as Shareholders are concerned.

General Meeting

It is proposed that the General Meeting will be held at the offices of Arbuthnot at Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR at 10.00 a.m. on 10 August 2009 at which the Resolutions will be proposed.

The Company has received irrevocable undertakings to vote in favour of the Resolutions from Shareholders who in aggregate hold approximately 47.7 per cent. of the Company's existing issued share capital (including undertakings from each of the Directors in relation to their respective shareholdings).

Enquiries: 

Invu plc	01604 859893
Daniel Goldman, Non Executive Chairman
Colin Gallick, CEO
Financial Dynamics	020 7831 3113
Juliet Clarke/Haya Chelhot/Emma Appleton
Arbuthnot Securities	020 7012 2000
Tom Griffiths/Ben Wells

Definitions

Unless the context otherwise requires, the following meanings apply throughout this announcement: -

'Admission'	the admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules
'AIM'	AIM, a market operated by London Stock Exchange plc
'AIM Rules'	the rules published by London Stock Exchange plc relating to AIM, being the AIM Rules for Companies and the AIM Rules for Nominated Advisers
'Arbuthnot'	Arbuthnot Securities Limited
'Board' or 'Directors'	the board of Directors of the Company
'Company' or 'Invu'	Invu plc
'Convertible Loan Notes' or 'Notes'	the 500,000 £1 convertible unsecured loan notes to be constituted by the Convertible Loan Note Instrument and issued to the Noteholders
'Convertible Loan Note Instrument'	the draft convertible loan note instrument constituting the Notes to be executed by the Company following the General Meeting
'Enlarged Share Capital'	the Company's issued share capital immediately following Admission
'General Meeting'	the General Meeting of the Company proposed to be convened for 10.00 a.m. on 10 August 2009 (or any adjournment thereof),
'Herald'	Herald Investment Management Limited
'Noteholders'	Unicorn and Herald
'Ordinary Shares'	the ordinary shares of 1 pence each in the Company
'Placing'	the conditional placing by Arbuthnot of the Placing Shares at the Placing Price pursuant to the Placing Agreement
'Placing Agreement'	the conditional agreement dated 23 July 2009 between (1) the Company and (2) Arbuthnot relating to the Placing
'Placing Price'	2 pence per Placing Share
'Placing Shares'	50,000,000 new Ordinary Shares to be placed pursuant to the Placing at the Placing Price
'Resolutions'	the resolutions to be proposed at the General Meeting
'Shareholders'	holders of Ordinary Shares
'Unicorn'	Unicorn VCT plc
'United Kingdom' or 'UK'	the United Kingdom of Great Britain and Northern Ireland

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