Acquisition and Capital Facility Completed
ASX Announcement: P2P
22 February 2019
ACQUISITION AND CAPITAL FACILITY COMPLETED
P2P Transport Limited (ASX: P2P) (P2P), one of Australia’s largest passenger transport fleet providers and includes the Black & White Cabs (BWC) dispatch service and now a leader in mobile digital out-of-home (DOOH) advertising on taxis is pleased to announce the acquisition of 62 vehicles in Perth that deliver significant incremental EBITDA opportunity and the successful completion of a finance facility.
P2P fleet expansion with an additional 62 vehicles in Perth
- Annualised EBITDA contribution of $600k to $800k
- Synergy savings of circa $400k by converting vehicles to the Black & White Cabs network
- Includes vertically integrated facilities of workshop and panel shop services
- Consideration mostly of P2P shares
A$3 million finance facility for strategic growth
- Growth capital enables the continued rapid expansion of Black & White Cabs and Adflow Digital Out of Home (DOOH) solution across the Eastern Seaboard
- Strategic fleet growth will continue to be funded by the existing $10m Westpac facility
- Continued strong utilisation in Sydney and Brisbane while Melbourne and the Gold Coast remain competitive taxi markets
- Conversion of vehicles to BWC accelerated in Melbourne and Sydney with 145 vehicles added since January 2019
- Adflow achieved 100% utilisation of static backs for March and currently increasing capacity in most capital cities through the P2P fleet
While Fleet Services has focused on improving utilisation, Network Services (Black & White Cabs) and taxi advertising (Adflow) have continued to grow. Growth in both these divisions has been faster than anticipated accelerating the need for additional cash reserves.
P2P has continued the expansion of Black & White Cabs (BWC) into the Sydney and Melbourne markets thorugh company owned vehicles and external customers. To date P2P has converted 220 vehicles to the BWC network with 145 completed since the 1st of January. All vehicles converted to BWC results in the existing network expense converted to BWC revenue increasing EBITDA per vehicles by approximately $7,000 per vehicle per annum.
At the same time Adflow, both digital and static, has successfully grown the overall market having achieved a run rate of annualised sales of approximately $4.5 million based on March contracted sales. The network has 1,500 static taxi backs with capacity fully sold on all vehicles for the next 6 weeks meaning new taxi advertising bookings are unable to access rear static advertising services until at least April. This is a further confirmation of the attractiveness of taxi specific mobile outdoor advertising and provides complimentary opportunities for digital and static wraps.
Growth in this market has exceed expectations resulting in the Company seeking to expand static capacity across the eastern seaboard to meet demand. Such rapid growth has resulted in unforeseen one-off installation and execution cost which will require additional cash reserves to fund receivables and settlements.
Westpac continues to strongly support the business with its $10m growth facility which is currently at $7m drawn. While not actively seeking Fleet Service growth the existing facility provides adequate capacity for strategic (earning accretive) acquisition which may arise from time to time. Today’s announced 62 vehicles acquisition in Perth represents a strategic footprint that compliments the existing P2P fleet and adds workshop, panel shop and supporting services to the business. This will result in additional vehicles converted to the BWC network over the next 6 months.
P2P has secured a flexible finance facility of $3.0 million to assist with the short-term capital requirements outlined above. With the ability to repay the facility via scrip or cash, the Companys intention is to repay the facility in cash, the business has secured what is expected to be a non-dilutionary source of capital on favourable terms.
This strengthens the position of the company and provides the capital support to continue the accelerated BWC and Adflow strategic roadmap.
ACQUISITION OF COMBINED TAXI MANAGEMENT PERTH
P2P has agreed to acquire the business and assets of Combined Taxi Management of Perth (CTM). Whilst the business is not actively seeking opportunities this was a compelling acquisition to add to the existing vehicles in the Perth market.
P2P’s long term strategy of having a national footprint for the provision of network operations, fleet services and advertising is further enhanced by this strategic acquisition.
Key Elements of the Acquisition Agreement
- Assets of CTM to be acquired, include:
- 62 vehicles
- Parts, stock and supplies
- Work shop and panel shop facilities
- Ownership of IP related to London Cabs
- The purchase price will be paid predominately by the issue of P2P shares on completion, which will be approximately 1.3m shares subject to adjustments prior to completion.
- Completion anticipated to be on 1 April 2019
The current premises of CTM will transfer to P2P and will give P2P local workshop and panel shop facilities with capacity for further fleet growth.
The CTM fleet has recently been operating at approximately 84% utilisation which is anticipated to generate an EBITDA contribution of between $150,000 to $200,000 for the period 1 April to 30 June 2019. The 62 CTM vehicles are complementary to the Black & White Cabs network, which currently has 340 vehicles operating in the Perth market. All CTM vehicles will be transitioned to the Black & White Cabs network over the coming 6 months which is anticipated to generate an additional incremental EBITDA of circa $7,000 per vehicle per annum. Additionally, Adflow digital taxi top and static back advertising will be expanded into the fleet complimenting the existing vehicles in the Perth market.
DEBT FUNDING OF $3M SECURED
In order to provide the Company with a sufficient working capital buffer as it grows new revenue business, in particular associated with Adflow, the Company has entered into with MEF I, L.P. (MEF or Investor) for A$3.0 million by way of the issue of a convertible security. The amount will be fully drawn following completion of definitive transaction documents. Key terms and conditions are outlined in Annexure A. The convertible note may be repaid by P2P in cash or scrip. It is the company’s intention to repay the note in cash and as such would be non-dilutionary.
MEF was introduced by one of the company’s strategic advisors. MEF has provided similar short-term loan structure to other ASX listed companies with a positive outcome. Westpac is fully aware of the transaction and has provided the Company with a letter of consent.
Matthew Reynolds, Chairman, commented “2018 was a year in which the company accelerated the strategic roadmap by 12-18 months and securing this funding provides the platform for continuing the momentum that has been created. The facility provides the capital for growth today with the flexibility to continue to build the business as opportunities present.”
“The finance facility and relationship with MEF ensures that P2P Transport is funded to continue to rapidly grow a vertical business that captures revenues from static and digital advertising on the vehicles, revenue from the dispatch of work to the vehicles and revenues from renting the vehicles to drivers.” Said Tom Varga, Managing Director.
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Primary dispatch is defined as the provision of technology to a vehicle that complies with all regulatory requirements in any given market and is the main source of security, driver management and booking dispatch for that vehicle and specifically includes the branding on the vehicle for identification.
Secondary dispatch is defined as a supplementary device that that still complies with the regulatory requirements for the dispatch of bookings however as a primary devices will already existing in the vehicles it is not required to have branding or identification on the vehicles and is not responsible for driver management and security.
For further information, contact:
P2P Transport Limited
+61 499 991 745
About P2P Transport Limited
P2P Transport is one of Australia’s largest fleet management businesses focussed on the point-to-point passenger transport industry, with 2600 vehicles across Australia, and is the largest mobile advertising provider of both static and digital (DOOH) advertising in the passenger transport industry.
P2P Transport’s fleet includes a range of taxis, corporate and ride-share vehicles servicing each segment of the point-to-point passenger transport industry.
Zevra, Black & White Cabs, Adflow, and Australia Wide Chauffeur Cars are amongst some of the brands managed by P2P Transport.
P2P Transport’s business model is premised on the control of all key stages of the fleet management lifecycle, from vehicle acquisition, in-house customization and vehicle servicing, driver support, and fleet management and administration.
- P2P has received A$3.0 million following completion of definitive transaction documents, in exchange for the issue of Convertible Notes by P2P with a face value of USD$1.10 each (Face Value).
- P2P will redeem the Convertible Notes over a 15 month period, with 60 days before the first redemption and then redemptions are due on a monthly basis over the remaining 13 months.
- The Convertible Notes may be redeemed by P2P paying cash or issuing shares (or both). Repayments made in cash will be at a 10% premium to Face Value. Shares may be issued to redeem Convertible Notes provided that the 15 day VWAP of P2P’s shares prior to conversion is at least A$0.30 and, if so, the conversion price will be the lower of (a) A$0.65; or (b) a 10% discount from the lowest daily VWAP over ten (10) days prior to the conversion date.
- The Convertible Notes are convertible at any time by the Investor at a price of A$0.65 per share and it may also accelerate up to 3 monthly payments provided that the 15 day VWAP prior to conversion is at least A$0.30 and, if so, the conversion price will be the lower of (a) A$0.65 ; or (b) a 10% discount from the lowest daily VWAP over ten (10) days prior to the conversion date.
- The Convertible Notes bear no interest.
- The Convertible Notes have a maturity date of 15 months after their respective issue dates.
- The Company has the option to repay the Convertible Notes at any time at 10% premium to Face Value.
- The Convertible Notes are secured against the assets of the Company.
- The Investor will receive a commitment fee of 5% of the investment amount at the funding payable in shares.
- There is a cap on the maximum number of shares that P2P may be required to issue under the Convertible Notes of 11,702,504 shares.
- If necessary, the Company will seek shareholder approval to issue any additional shares in accordance with the Convertible Notes facility.
- The Investor shall be subject to certain trading restrictions on shares received from the Company for the commitment fee or conversion of the Convertible Notes, which may be removed upon certain equity conditions or in the event of a default.
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