Dragontail raises A$8.8m in ASX secondary offering

Yehuda Shamai Photo: Yossi Cohen

The Israeli company provides a delivery optimization solution to Pizza Hut, KFC, and Domino's Pizza.

10 months after holding its IPO on the Australian Securities Exchange (ASX), Israeli software company Dragontail Systems Ltd. (ASX: DTS) has successfully completed a secondary offering. Dragontail, which provides a software solution that facilitates optimal management of deliveries for fast food chains, raised A$8.8 million (8.8 million Australian dollars, worth NIS 24 million), which it says it will use to support the next stage in its growth. The company said that demand for the offering had been strong.

The financing round was at A$0.22 per share, a 13.7% discount on the share's most recent closing price and a 1% discount on the average price over the past 15 days, but 10% higher than the share price in Dragontail's IPO in December 2016, when it raised A$6 million at A$0.20 per share. The share price reached a peak of A$0.33 in February, but has recently been traded at A$0.22-0.25. The company's market cap is A$44 million (NIS 120 million). Following the latest offering, the newly issued shares will constitute 19% of Dragontail's share capital.

Dragontail was founded by non-executive director Yehuda Shamai, who founded and managed the Israeli branch of Domino's Pizza, and who is currently the Israel franchise holder for Pizza Hut. The company's CEO is Ido Levanon. The company's customers include the branches of Pizza Hut in Israel, Canada, and Cyprus; the Kentucky Fried Chicken (KFC) branches in Asia and Cyprus; Canadian chain Cara; and Domino's Pizza. Dragontail provides end-to-end optimization of restaurant activity: management of the kitchen, packaging and preparation for delivery, the delivery itself, and customer relations management. The company says that its software solution, Algo, which manages deliveries, offers a significant saving by increasing the accuracy of delivery times, reducing work costs, and increasing the store's sales. At the same time, it enables the customer to track the status of his or her order.

According to Dragontail's presentation for its secondary offering, as of the end of the third quarter, the company was operating in 89 cities in seven countries, compared with 47 cities in three countries last year. The company last week announced a new contract with Israel chain Japanika.

Offering needed for continued growth

Dragontail's revenue in the first half of 2017 was still fairly modest, but reflected substantial growth in comparison with the corresponding period in 2016. Company revenue totaled $86,000 in the first half of this year, 60.5% more than in the first half of last year. At the same time, Dragontail's losses grew: its operating loss rose from $517,000 in the first half of 2016 to $2 million in the first half of this year, and its net loss totaled $1.7 million in the first half of this year, compared with $462,000 in the first half of 2016.

Dragontail had $2.5 million in cash and cash equivalents at the end of June. The company's financial statements bore a going concern warning, which stated that its ability to continue financing its planned growth depended on raising additional financing or generating more revenue from its business.

Upon the publication of its financial statements, Dragontail noted that it was taking steps to create infrastructure that would lead to "continued exponential growth." The company added that with huge customers like Pizza Hut, KFC, and Domino's Pizza, new customers are likely to join soon, and with its innovative technology, "The company is in a good position to continue its growth trend." Levanon said at the time, "The potential global market for the company's solutions is enormous, and we have only begun to realize this potential."

Dragontail Systems will use the proceeds from its offering to continue development of its software solutions, increase its investments in operations, up its spending on marketing in order to recruit new customers, and for general business needs.

"I am glad that Dragontail has received broad support from top-tier investment institutions in this offering," Levanon said. "I see a bright future before the company and its shareholders. The money raised will help us accelerate the pace of our growth and meet the demand from the expanding list of our customers."

Published by Globes [online], Israel Business News - www.globes-online.com - on October 24, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Yehuda Shamai Photo: Yossi Cohen
Yehuda Shamai Photo: Yossi Cohen
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