Nominal value	€0.06 per preference share
Currency	Euro
Offer Price	€1.75
Offer Period	03 March 2021 till 30 March 2021
Placement Date	17 March 2021
No. of shares for sale	28,571,400

RS2 Software plc – An overview

RS2 Software plc is Malta’s only organisation in the global payments industry, having also a strong international presence throughout Europe, North America, Latin America (LATAM), Asia Pacific (APAC), and the Middle East. The Company is principally engaged in the development, installation, implementation, and marketing of its proprietary specialised cloud software for global financial institutions, under the trademark of BankWORKS®, through which it provides highly secure and scalable high-performing payment platform with a processing capability in excess of 80 million clearing transactions per hour and more than 8,600 authorisations per second.

The reportable business segments can be broadly categorised under Software Development and Implementation Services (Licensing), Managed Services, and Other Segments (Point-of-Sale (POS) services, Acquiring, and Financial Services). Software Development and Licensing remain the core business of RS2, supported by its subsidiaries in APAC, Latin America (LATAM) and Europe, while Managed Services are the competence and focus of the two subsidiaries, RS2 Smart Processing Ltd., servicing customers in Europe, Middle East, APAC, and LATAM, and RS2 Software INC., the Group’s US arm servicing mainly clients in North America. ‘Other Segments’ are core to the newly founded RS2 Financial Services GmbH and Kalicom Zahlungssysteme GmbH respectively. The integration of Kalicom Zahlungssysteme GmbH is under way and should be closed in October, including the rebranding of the company to RS2 Zahlungssysteme GmbH.

The Listing Authority has granted regulatory approval in respect of an offer of up to 28,571,400 preference shares in RS2 Software plc, having a nominal value of €0.06 per preference share at an offer price of €1.75. An amount not exceeding 14,285,700 preference shares is being reserved for subscription by financial intermediaries through an intermediaries’ offer. The remaining balance of 14,285,700 preference shares, together with any number of preference shares not taken up during the intermediaries’ offer shall be made available for subscription by preferred applicants.

Preferred applicants consist of:

1. Holders of ordinary shares in RS2 Software plc appearing on the share register as at February 19, 2021
2. RS2 employees, being those persons employed by the Company and its subsidiaries as at February 19, 2021.

Applications to subscribe with respect to the intermediaries’ offer shall be subject to a minimum of 150,000 preference shares and in multiples of 100 thereafter. Applications by preferred applicants and the general public shall be subject to a minimum of 1,000 preference shares and in multiples of 100 thereafter.

Subscription agreements with respect to the intermediaries’ offer may be submitted by financial intermediaries by latest March 17, 2021. Meanwhile, preferred applicants and the general public may subscribe for the preference shares by March 30, 2021, or such earlier date as may be determined by the company in case of over-subscription. The expected date of listing of the Preference Shares is April 16, 2021, while trading may commence as from the next business day.

The Preference Shares, because of their characteristics, would form part of the Company’s equity base and will be instrumental for the Company’s growth plans. The net proceeds from the Offer, expected to amount to approximately €48,959,950, shall be for the benefit of the Company and will be used to allow the Group embark onto its business expansion and transformation plan.

The points below outline the reason for the Offer:

1. increase the Group’s profile and brand awareness;
2. foster organic growth investment to ramp up and strengthen operations by focusing on Europe and North America as well as extending its reach to APAC and LATAM;
3. invest in organisation and regional expansion by scaling up sales, marketing and market communication;
4. invest further in its own acquiring business initially in Europe and the US and subsequently globally by following the Group’s customers base;
5. develop and execute the technology roadmap to enhance product capability and service offering;
6. support RS2 in pursuing growth over profitability in the medium term;
7. repay short-term bank facilities mainly composed of bank overdrafts taken to finance the Group’s investment in operating expenditure necessary to execute its growth plans; and
8. sign accretive add-on acquisitions of companies to enhance our capability, to scale and improve time to market through M&A transactions.

Points (i) to (vii) above will enable the Group to proceed with the following (there is no order of priority with which the funds will be applied):

• further investment in the United States (applying circa €4 million of the proceeds from the Offer);
• additional investment in the Merchant Solutions business (applying circa €6 million of the proceeds from the Offer);
• product enhancements in line with the Group’s strategic product road map (applying circa €5 million of the proceeds from the Offer); and
• the repayment of short-term bank facilities (applying circa €10 million of the proceeds from the Offer).

The balance from the proceeds pursuant to the offer of Preference Shares, amounting to the equivalent of a maximum of €25 million in Preference Shares will be applied towards the following, depending on future opportunities as they may arise:

• M&A transactions which will complement the Group’s business and growth plans (approximately €15 million); and
• further investments in the technical capability of the platform and the service offering ensuring a full automation for its operation including the Processing Solutions business, business intelligence within Software Solutions and a fully digitalized KYC/AML, merchant onboarding and payment gateway services for its Merchant Solutions business (approximatively €10 million).

Financial Information

RS2 Financial Statements	30.06.2020 (Unaudited)	30.06.2019 (Unaudited)	30.06.2020 (Unaudited)	30.06.2019 (Unaudited)
	The Group		The Company
	€	€	€	€
Revenue	10,837,304	11,219,122	10,140,278	9,041,242
Results from operating activities	(2,900,288)	360,902	1,607,923	1,250,785
Proft/(Loss) after tax	(3,646,165)	(247,342)	983,376	826,186

 

RS2 Statement of Financial Position	30.06.2020 (Unaudited)	31.12.2019 (Audited)	30.06.2020 (Unaudited)	31.12.2019 (Audited)
	The Group		The Company
	€	€	€	€
Total Assets	34,810,962	31,812,055	47,510,270	40,394,864
Total Liabilities	24,275,266	17,726,877	19,538,464	13,441,049
Net Assets	10,535,696	14,085,178	27,971,806	26,953,815

 

Potential Conflicts of Interest

Radi Abd El Haj is the indirect majority shareholder of the Company and has been nominated to the Board of Directors by ITM Holding Limited. Mr. David Price has been nominated to the Board of Directors by Barclays Bank plc, which is also a client of the Company. As of the date of this Prospectus, the Directors are not aware of any potential conflicts of interest which could relate to their roles within the Company.

Investment Risk Considerations

The risk factors set out below are a summary of the principle risks associated with the Preference Shares.

• The Company’s results can fluctuate and its ability to pay dividends is dependent on, amongst other things, it achieving sufficient profits. The Company may not pay dividends if the Directors believe this would cause the Company to be less adequately capitalised or that there are otherwise insufficient distributable reserves or for various other reasons. The Company currently intends to retain in the near future substantial parts of its earnings to finance the operation and expansion of its business in order to deliver high value creation for the shareholders. Any decision to declare and pay dividends will be made at the discretion of the Board and will depend on, among other things, applicable law, regulation, restrictions on the payment of dividends in financing arrangements that RS2 may from time to time enter into, the Company’s future profits and financial position, the Company’s distributable reserves, regulatory capital requirements, working capital requirements, finance costs, general \economic conditions and other factors the Board deems significant from time to time. The prospective dividend policy, set out in section 17 of the Registration Document, should be read accordingly. Furthermore, dividends on the Preference Shares are non-cumulative and therefore, if the Company does not declare dividends, Preference Shareholders will have no claim in respect of the non-payment and the Company has no obligation to pay those dividends in any future dividend period.
• The existence of an orderly and liquid market for the Preference Shares depends on a number of factors, including but not limited to, the presence of willing buyers and sellers of the Company’s Preference Shares at any given time and the general economic conditions in the market in which the Preference Shares are traded. Such factors are dependent upon the individual decisions of Preference Shareholders and the general economic conditions of the market, over which the Company has no control. Accordingly, there can be no assurance that an active secondary market for the Preference Shares will develop, or, if it develops, that it will continue. Furthermore, there can be no assurance that a Preference Shareholder will be able to sell or otherwise trade in the Preference Shares at all.
• Preference Shareholders will not have the right to vote at any general meeting of the Company save for specific circumstances as documented in the Company’s Memorandum and Articles of Association.
• A Preference Shareholder will bear the risk of any fluctuations in exchange rates between the currency of denomination of the Preference Shares (€) and the Preference Shareholder’s currency of reference, if different.
• The Preference Shares represent equity interests in the Company that entitle the holder to rank pari passu with all other holders of Ordinary Shares in the Company upon any distribution of assets in a winding up situation. The Preference Shares of the Company are subordinated to any other debt instruments in the Company’s capital structure, and will therefore be subject to greater credit risk than debt instruments of the Company.
• The terms and conditions of the admission to trading of the Preference Shares are based on Maltese law in effect as at the date of this Prospectus. No assurance can be given as to the impact of any possible judicial decision or change in Maltese law or administrative practice after the date of this Prospectus.
• No prediction can be made about the effect which any future public offerings of the Company’s Preference Shares, or any takeover or merger activity involving the Company, will have on the market price of the Preference Shares prevailing from time to time.
• In the event that the Company wishes to amend any of the rights of Preference Shareholders, it shall call a meeting of holders of Ordinary Shares and Preference Shares whereby Ordinary Shareholders shall have two (2) votes in respect of each Ordinary Share and Preference Shareholders shall have one (1) vote in respect of each Preference Share in accordance with the Company’s Memorandum and Articles of Association. These provisions permit defined majorities to bind all Preference Shareholders including those Preference Shareholders who did not attend and vote at the relevant meeting and any Preference Shareholders who voted in a manner contrary to the majority
• Application has been made to seek a listing of the Preference Shares on the Official List of the Malta Stock Exchange, which is a smaller market and less liquid than the more developed stock markets in Europe and the United States. Prior to the Offer, there has been no local trading market for preference shares with the same characteristics as the Preference Shares. The limited liquidity of the market for the Preference Shares could increase the price volatility of the Preference Shares and may impair the ability of a holder of Preference Shares to sell such Preference Shares in the market in the amount and at the price and time such holder wishes to do so.
• The price at which the Preference Shares will be traded, as well as the sales volume of the Preference Shares traded, will be subject to fluctuations. These movements may not necessarily be caused by the Company’s business activity or its results of operations, and may not necessarily be correlated to that of the Ordinary Shares trading. It is also possible that the Company’s results of operations or its business outlook may fall short of expectations, in which case the price of the Preference Shares could be negatively affected.
• An investment in the Company may not be suitable for all recipients of this Prospectus and prospective investors are urged to consult their advisers as to the suitability or otherwise of acquiring the Preference Shares before such acquisition.