Disposal

 

TIDMNSV 
 
RNS Number : 2148L 
NetServices PLC 
04 May 2010 
 
30 April 2010 
 
                                NetServices PLC 
                  ("NetServices", the "Company" or the "Group") 
 
      Proposed Disposal of WAN Services Limited and the trade and assets of 
                                NetServices plc, 
                        Adoption of Investing Policy and 
                         Change of name to Accumuli plc 
                                      and 
                            Notice of General Meeting 
 
 
HIGHLIGHTS 
 
·    NetServices has conditionally agreed the proposed disposal of WAN Services 
Limited and the trade and assets of NetServices plc to GCI Telecom Group Limited 
for a total cash consideration of GBP3.2 million 
 
·    General Meeting convened for 18 May 2010 to seek Shareholders' approval as 
this Disposal would result in a fundamental change of business by  the Group 
according to Rule 15 of the AIM Rules 
 
·     On Completion, it is proposed that the Company's name should be changed to 
Accumuli plc 
 
·    Shareholders, who are interested, in aggregate, in 17,546,817 Ordinary 
Shares, representing approximately 53 per cent. of the Company's issued share 
capital, have irrevocably undertaken to vote in favour of the Resolutions 
 
·    The Company has despatched a circular to Shareholders setting out the 
reasons for, and principal terms of the Disposal, and also details of the 
Company's proposed investing policy following Completion, and to seek 
Shareholders' approval in accordance with Rule 15 of the AIM Rules and for the 
proposed change of name 
 
Graham Norfolk, Chairman of NetServices, commented: 
 
"The Board believes the disposal of the business to GCI Telecom Group Limited is 
the best way forward for the Company and its shareholders. 
 
"At the Preliminary results in November 2009, we reported the various successes 
of the business, including becoming a Cisco Premier Partner.  However, despite a 
significant restructuring and a refocused strategy, revenues were difficult to 
predict and were taking time to come through.  Therefore, we believe the assets 
of the business will perform better within the larger GCI group. 
 
"Following Completion, and with GBP3.2 million consideration, we are proposing 
an investing policy to acquire companies operating in the fast growing IT 
services, technology and communications sectors. This is an area where Ian 
Smith, one of our Directors has significant experience, and we believe it has 
attractive near term opportunities for Shareholders." 
 
                                     -Ends- 
 
For further information, please contact: 
 
+-----------------------+-------------------------+ 
| NetServices PLC       | Tel No: 0870 753 0900   | 
|                       |                         | 
+-----------------------+-------------------------+ 
| Mark Vickers, Chief   |                         | 
| Executive             |                         | 
+-----------------------+-------------------------+ 
| Ian Winn, Finance     |                         | 
| Director              |                         | 
+-----------------------+-------------------------+ 
|                       |                         | 
+-----------------------+-------------------------+ 
| Arbuthnot Securities  | Tel No: 020 7012 2000   | 
| Limited               |                         | 
+-----------------------+-------------------------+ 
| Tom                   |                         | 
| Griffiths/Alasdair    |                         | 
| Younie                |                         | 
+-----------------------+-------------------------+ 
|                       |                         | 
+-----------------------+-------------------------+ 
| TS Communications     | Tel: [phone]      | 
| Melanie Miotte        | Mob: [phone]      | 
|                       | [e-mail] | 
+-----------------------+-------------------------+ 
|                       |                         | 
+-----------------------+-------------------------+ 
 
 
 
 
      Proposed Disposal of WAN Services Limited and the trade and assets of 
                                NetServices plc, 
                        Adoption of Investing Policy and 
                         Change of name to Accumuli plc 
                                      and 
                            Notice of General Meeting 
 
Introduction 
 
The Company announces that it has conditionally exchanged contracts for the 
proposed disposal of WAN Services Limited and the trade and assets of 
NetServices plc (subject to the exclusion of certain property assets and their 
associated indebtedness, an investment in an unlisted business and net cash 
balances) (the "Business") to GCI for a total cash consideration of GBP3.2 
million. A General Meeting is to be held on 18 May 2010 to seek Shareholders' 
approval for this disposal, as it would result in a fundamental change of 
business by the Group pursuant to Rule 15 of the AIM Rules.  The disposal of the 
Business will also involve the sale of the trade name, "NetServices", and it is 
therefore proposed that the Company's name should be changed to Accumuli plc. 
 
As a result, the Company is required to issue a circular to Shareholders setting 
out the reasons for, and principal terms of, the Disposal, and also details of 
the Company's proposed investing policy following Completion, and to seek 
Shareholders' approval therefore in accordance with Rule 15 of the AIM Rules. A 
notice convening a General Meeting for 10.00 a.m. on 18 May 2010 to consider the 
Resolutions is accordingly set out at the end of the circular which has been 
sent to Shareholders. Shareholders, who are interested, in aggregate, in 
17,546,817 Ordinary Shares, representing approximately 53 per cent. of the 
Company's issued share capital, have irrevocably undertaken to vote in favour of 
the Resolutions. 
 
Set out below is further information in relation to the Disposal and the 
Continuing Group's proposed investing policy following Completion. 
 
Information on WAN Services Limited and the trade and assets of NetServices plc 
being disposed of 
 
WAN Services together with all NetServices' customer contracts, computer 
equipment, supplier contracts and staff represent all, or substantially all, of 
the Company's business and assets. The Business is a Cisco powered managed 
services provider, focused on managed, business to business, unified networks. 
It delivers innovative, integrated managed networking services focused around 
its core Multi Protocol Label Switching ("MPLS") network. 
 
The Business is Cisco accredited, providing experienced and knowledgeable 
engineering and pre-sales consultancy services and PRINCE2 and ITIL qualified 
project management and service delivery. 
 
In the year ended 31 August 2009, the latest period for which audited accounts 
have been published, the Business reported revenue of GBP5.9 million and a gross 
profit of GBP2.4 million and as at 31 August 2009, had net assets of GBP0.05 
million. 
 
The Company has also announced its unaudited interim results for the six months 
ended 28 February 2010. The Business reported revenue of GBP2.3 million and 
gross profit of GBP0.8 million and as at 28 February 2010, it had negative net 
assets of GBP0.2 million and cash of GBP0.1 million. 
 
Background to and reasons for the Disposal 
 
The Company's Ordinary Shares were admitted to trading on AIM on 8 March 2006. 
The Company raised approximately GBP5.0 million (before expenses) through the 
issue of 7,042,254 Ordinary Shares at 71p per share. In addition the placing 
also comprised the sale of 8,450,704 Ordinary Shares to raise approximately 
GBP6.0 million for the Company's founder, Andrew Hogan. 
 
At the time of admission of the Company's Shares to AIM ("Admission"), 
NetServices provided a range of network services, focused on broadband 
connections and managed services. The Company operated a mixed sales 
distribution strategy weighted towards an indirect business model selling 
products and services through a customer base of wholesalers and resellers, 
reselling to both small and medium sized enterprises ("SMEs") and telecom 
companies. Following Admission, the Company's distribution base through which it 
intended to distribute other services was significantly and adversely affected 
by an intense broadband price and distribution war.  A combination of customer 
default, margin pressure from increases in costs that could not be passed on and 
regulatory change led the Company to determine that it wished to strategically 
withdraw from those customer contracts where it was incapable of generating the 
required rate of return. Subsequently, in May 2007, the Company sold 
approximately 170 reseller contracts to 186k Ltd for a total cash consideration 
of approximately GBP1.1 million. 
 
The Business has in recent times focused on winning managed service business, 
utilising its knowledge and expertise and its recently attained Cisco 
accreditations. In the financial year ended 31 August 2009, the Company achieved 
certification in the following areas: 
 
·         Cisco Master Managed Services Channel Program ("MSCP") Partner in 
Connectivity and Security, one of only a handful of such partners in the UK; 
·         Cisco MSCP Host-Agent, which allows the Company to be used by 
out-of-country MSCP Partners to provide UK services to its UK clients; 
·          Cisco Premier Partner; and 
·          Investors in People - bronze level. 
 
The Cisco certification provides third party validation of the Group's skills, 
access to significant discounts on hardware, access to Cisco marketing resources 
and access to Cisco management to provide sales opportunities.  In October 2009 
the Business became accredited as a "White Label Network Operations Centre 
("NOC") Provider" by Cisco. 
 
In its audited results for the year ended 31 August 2009, the Company reported 
revenue of GBP5.9 million reflecting the loss of a hosting contract and 
attrition in its non-core revenue. Gross profit was GBP2.4 million and an EBITDA 
loss of GBP0.1 million which produced an operating loss before non-recurring 
costs of GBP0.3 million. The non-recurring costs related to a staff redundancy 
programme, the write-off of legacy networking equipment and professional fees 
relating to a strategic review of the business. At 31 August 2009, the Group had 
GBP0.6 million gross cash balances. 
 
Since the release of its full year results, the Company has completed a 
subscription by one of its Shareholders, Ian Smith, the Executive Chairman of 
Avisen plc, another AIM quoted company, and former Chief Executive of Xploite 
plc. Mr Smith invested GBP0.1 million at 3.5p per share and at the same time, 
the Company granted Mr Smith an option exercisable for one year over GBP2 
million of new Ordinary Shares at 8.7p per share to fund a suitable acquisition. 
Mr Smith was appointed a Non-executive Director of the Company following his 
investment. 
 
Despite the Company's investment in its Cisco accreditation, it has continued to 
struggle to convert its technical expertise into revenue generating 
opportunities. In the Company's results for the year ended 31 August 2009, it 
acknowledged that the Directors would continue to review strategic opportunities 
to improve shareholder value. 
 
As referred to above, the Company's unaudited results for the six months ended 
28 February 2010, reported revenues of GBP2.3 million, gross profit of GBP0.8 
million and loss before tax of GBP0.3 million, which is in line with 
management's expectations. 
 
The Directors believe that the Disposal is the optimum way to maximise 
shareholder value. The aggregate cash consideration of GBP3.2 million is greater 
than the Company's market capitalisation as at 29 April 2010, being the most 
recent practicable business day prior to the date of this announcement. On 
Completion, the Company will have net cash of approximately GBP3.2 million to 
enable it to pursue its investing policy, further details of which are set out 
below. Following Completion, it is intended that 29 employees will move to GCI 
with the Business which constitutes all employees currently employed by the 
Business excluding the non-executive Directors and Mark Vickers (Chief Executive 
Officer), Ian Winn (Finance Director) and Alan Jarvis (Chief Information 
Officer). 
 
4.         Principal terms and conditions of the Disposal 
 
Under the terms of the Disposal Agreements, the Company has agreed to; 
 
4.1       prior to Completion, transfer the trading business, supplier and 
customer contracts selected employee contracts, assets and liabilities of 
NetServices to NetServices UK a new company wholly owned by NetServices; 
4.2       sell the entire issued share capital of WAN Services to GCI; and 
4.3       sell the entire issued share capital of to NetServices UK to GCI 
 
for total cash consideration of GBP3.2 million. The Disposal is conditional upon 
the passing of the Disposal Resolution at the General Meeting. 
 
The total cash consideration will be adjusted by reference to the Completion 
Balance Sheet. 
 
Following the Disposal and the expiry of a one month consultancy agreement for 
the provision of consulting and support services to GCI, it is anticipated that 
Mark Vickers, Alan Jarvis, and Steven Hartley, non-Executive Director, will step 
down from the Board and leave the Company. 
 
The Disposal also involves the sale of the trade name, "NetServices" to GCI, 
which will therefore require the approval by Shareholders at the General Meeting 
of a change of the Company's name to Accumuli plc. 
 
5.         Irrevocable Undertakings 
 
The Company has received irrevocable undertakings from certain Shareholders 
(including all of the Directors who hold Ordinary Shares) to vote in favour of 
the Resolutions in respect of in aggregate 17,546,817 Ordinary Shares, 
representing approximately 53 per cent. of the Company's issued share capital. 
 
6.         Investing policy 
 
The Company will seek to identify further ways to create value for Shareholders 
through acquisitions in the Information Communication Technology market. The 
Board believes that there are attractive near term opportunities to acquire 
assets, either quoted or non quoted, and through combining aligned businesses, 
to create value through a combination of revenue growth and synergistic cost 
savings. 
 
In future, it is expected that Accumuli will operate as a holding company, 
providing strategic and financial management to individual operating divisions. 
These divisions will continue to be run independently with separate management, 
thus enhancing future disposal potential.  In order to achieve this, it is 
anticipated that Ian Smith, non-Executive Director, will increasingly play a far 
more active role in this strategy utilising his experience and contacts, with 
support provided by Graham Norfolk, who will continue to operate as 
non-Executive Chairman and Ian Winn who will remain as Finance Director in a 
day-to-day executive role. 
 
The investing strategy of the Company will be to acquire controlling stakes, 
either through the issue of securities or for cash, in quoted and non-quoted 
companies operating in the IT services, technology and communications sectors. 
The acquisition strategy will be focused on a limited number of 'buy and build' 
opportunities, with the intention of realising value for Shareholders through a 
future exit. 
 
As a result of the Disposal and in accordance with AIM Rule 15, the investing 
policy must now be approved by Shareholders in general meeting and the Company 
must implement the investing policy within 12 months of Completion, otherwise 
trading in the Company's Ordinary Shares on AIM will be suspended in accordance 
with AIM Rule 40.  If following suspension of the Ordinary Shares in accordance 
with AIM Rule 40, the Ordinary Shares have not been re-admitted to trading on 
AIM within six months, the admission of the Ordinary Shares to trading on AIM 
will be cancelled. 
 
7.         Unaudited Net Assets of the Continuing Group 
 
Immediately after Completion, the unaudited net assets of the Continuing Group 
are expected to be approximately GBP3.7 million, comprising an unlisted 
investment, mortgaged properties and cash balances. 
 
The above position is stated before the payment of any professional and other 
costs associated with the Disposal, subsequent rationalising of the executive 
management, Completion Balance Sheet adjustments (if any) required by the 
Disposal Agreements and any corporate taxation which may become payable as a 
consequence of the Disposal. 
 
8.         General Meeting 
 
The Disposal constitutes a transaction by the Company resulting in a fundamental 
change of business for the purpose of Rule 15 of the AIM Rules, and accordingly 
each of completion of the Disposal, the adoption of the investing policy and the 
change of name to be effective following Completion requires the consent of the 
Shareholders in a general meeting. 
 
The General Meeting has been convened for 10.00 a.m. on 18 May 2010 to be held 
at the offices of Halliwells LLP, 3 Hardman Square, Manchester M3 3EB. 
 
                                  DEFINITIONS 
 
+----------------+------------------------------------------+ 
| "AIM"          | a market operated by London Stock        | 
|                | Exchange plc                             | 
+----------------+------------------------------------------+ 
| "AIM           | the AIM Rules for Companies published by | 
| Rules"         | the London Stock Exchange from time to   | 
|                | time (including, without limitation, any | 
|                | guidance notes or statements of          | 
|                | practice) which govern the rules and     | 
|                | responsibilities of companies whose      | 
|                | shares are admitted to trading on AIM    | 
+----------------+------------------------------------------+ 
| "Arbuthnot     | Arbuthnot Securities Limited, the        | 
| Securities"    | Company's nominated adviser and broker   | 
+----------------+------------------------------------------+ 
| "Board" or     | the board of directors of the Company    | 
| "Directors"    |                                          | 
+----------------+------------------------------------------+ 
| "Business"     | the Company's trade and assets and the   | 
|                | shares in WAN Services which together    | 
|                | form the assets being disposed of under  | 
|                | the Disposal Agreements                  | 
+----------------+------------------------------------------+ 
| "Cash          | the cash consideration of approximately  | 
| Consideration" | GBP1.2 million payable by GCI pursuant   | 
|                | to the Disposal Agreement for the        | 
|                | purchase of all shares in NetServices UK | 
|                | and WAN Services                         | 
+----------------+------------------------------------------+ 
| "Company"      | NetServices plc                          | 
| or             |                                          | 
| "NetServices"  |                                          | 
+----------------+------------------------------------------+ 
| "Completion"   | completion of the Disposal, expected to  | 
|                | be on 18 May 2010                        | 
+----------------+------------------------------------------+ 
| "Completion    | means the combined balance sheet of WAN  | 
| Balance        | Services and NetServices UK as at        | 
| Sheet"         | completion of the Disposal Agreement     | 
+----------------+------------------------------------------+ 
| "Completion    | means the statement showing the amount   | 
| Statement"     | of cash, debt and working capital to be  | 
|                | prepared, based on the financial         | 
|                | information contained in the Completion  | 
|                | Balance Sheet, and finalised in          | 
|                | accordance with the Disposal Agreement   | 
+----------------+------------------------------------------+ 
| "Continuing    | the Company following Completion         | 
| Group"         |                                          | 
+----------------+------------------------------------------+ 
| "Disposal"     | the proposed disposal of the Business    | 
|                | pursuant to the terms and conditions of  | 
|                | the Disposal Agreement                   | 
+----------------+------------------------------------------+ 
| "Disposal      | the conditional sale and purchase        | 
| Agreements"    | agreements both dated 30 April 2010      | 
|                | between the Company and GCI relating to  | 
|                | the Disposal                             | 
+----------------+------------------------------------------+ 
| "Disposal      | the resolution to be proposed at the     | 
| Resolution"    | General Meeting to approve the Disposal  | 
+----------------+------------------------------------------+ 
| "GCI"          | GCI Telecom Group Limited                | 
+----------------+------------------------------------------+ 
| "General       | the general meeting of the Company       | 
| Meeting"       | convened for 10.00 a.m. on 18 May 2010,  | 
| or "GM"        | and any adjournment thereof              | 
+----------------+------------------------------------------+ 
| "Group"        | the Company and its subsidiaries as at   | 
|                | the date of this announcement            | 
+----------------+------------------------------------------+ 
| "NetServices   | NetServices UK Limited, a newly formed   | 
| UK"            | company set up for the purposes of       | 
|                | acquiring the business and assets of the | 
|                | Company not held by WAN Services  and to | 
|                | be sold to GCI pursuant to the Disposal  | 
|                | Agreements                               | 
+----------------+------------------------------------------+ 
|                |                                          | 
+----------------+------------------------------------------+ 
| "Ordinary      | ordinary shares of 0.25p each in the     | 
| Shares" or     | capital of the Company                   | 
| "Shares"       |                                          | 
+----------------+------------------------------------------+ 
| "Resolutions"  | the resolutions before Shareholders at   | 
|                | the General Meeting                      | 
+----------------+------------------------------------------+ 
| "Shareholders" | holders of Ordinary Shares               | 
+----------------+------------------------------------------+ 
|                |                                          | 
+----------------+------------------------------------------+ 
| "Total         | the Cash Consideration plus the amount   | 
| Cash           | required to settle the indebtedness of   | 
| Consideration" | Net Services UK and WAN Services  to     | 
|                | NetServices at Completion, subject at    | 
|                | all times to this aggregate amount       | 
|                | equalling GBP3.2 million                 | 
+----------------+------------------------------------------+ 
"WAN Services"               WAN Services Limited 
 
 
END 
 
 
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