AdEPT Technology Group PLC Acquisition and Extension of Bank Facility (1707X)

TIDMADT

RNS Number : 1707X

AdEPT Technology Group PLC

26 April 2019

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain

AdEPT Technology Group Plc

("AdEPT" or the "Company")

Acquisition of Advanced Computer Systems Group Limited

and

Extension of Bank Facility

AdEPT Technology Group plc, one of the UK's leading independent providers of managed services for IT, connectivity, unified communications solutions and cloud services, announces that it has signed an agreement to acquire the entire issued share capital of Advanced Computer Systems Group Limited and its trading subsidiary Advanced Computed Systems Limited ("ACS"), (together referred to as "ACS Group") a well-established UK based specialist provider of IT services focused on the education sector.

Acquisition highlights

   --    Initial consideration of GBP5.24 million less the net debt of ACS Group at 31 March 2019 
   --    Expected to be earnings enhancing from completion 
   --    AdEPT group revenue run rate anticipated to increase by approximately 9% 

-- Highly complementary IT services product set with SAGE expertise that can be cross sold into AdEPT clients

-- ACS Group further enhances the AdEPT education strategy with approximately 200 schools and academy trust customers

   --    Highly experienced vendors to remain with ACS Group 

Strategic rationale

ACS Group offers its clients the delivery of IT solutions and is focused on the education sector with complementary software support expertise around SAGE and SIMS. The highly skilled team, together with the well-matched customer base and product set at ACS Group will complement AdEPT's existing IT managed services offering where AdEPT provides services to thousands of schools and academy trusts.

ACS Group, based in Doncaster, provides a geographical extension to the existing education focused centre of excellence of AdEPT based in Orpington, and offers an opportunity for cross-sell the software and applications developed by the in-house software team at AdEPT. Post-acquisition the Company will look to consolidate supplier agreements and integrate various services of ACS Group into the Orpington office of AdEPT.

ACS Group is our second acquisition in Yorkshire, following the acquisition of ETS Communications Limited ("ETS") in November 2018. The IT skills of ACS Group are highly complementary to the unified communications expertise of ETS and it is anticipated that they will work closely together.

AdEPT and ACS Group have both adopted capital asset light strategies which are highly cash generative and are dedicated to offering a full suite of IT services.

Further details of the acquisition are set out below.

Phil Race, Chief Executive of AdEPT, commented:

"We are delighted to have acquired such a high-quality business with the highly experienced vendors remaining with ACS Group post-acquisition. AdEPT has an existing education focused IT service operation in Orpington - the acquisition of ACS Group builds on this capability and extends the geographical reach of AdEPT's IT services to Yorkshire. ACS Group has a well-developed customer base with long term relationships, which builds upon AdEPT's existing strong education presence. The acquisition is expected to be earnings enhancing from completion."

Kevin McEwen, Managing Director of ACS, commented:

"After having operated the business for 20 years we felt the time right to look for a new home in order to provide our clients and prospects with a broader range of products and services. Our education focus, providing a broad range of expertise to more than 200 educational establishments, alongside our commercial clients means that AdEPT is an incredibly complementary home for our business. We very much look forward to working with the team at AdEPT on the integration and evolution of our business over the coming years."

Extension of Bank Facility

   --    Debt facility enlarged to GBP40 million 
   --    Increased capacity to support acquisition growth strategy 

The Board of AdEPT also announces that it has signed a GBP5 million extension to its existing GBP35 million 5-year revolving credit facility agreement, enlarging the total debt facility to GBP40 million. The incremental GBP5 million tranche of the revolving credit facility is available in the period through to 30 June 2020. The remaining GBP35 million of the revolving credit facility remains available for the 5-year term to 31 January 2022.

The enlarged facility is to be provided by Barclays Bank Plc ("Barclays") and The Royal Bank of Scotland Plc ("RBS) on an equal basis. The facility will be used by AdEPT to fund acquisition of businesses that extend the AdEPT product set and by being part of the AdEPT group, will benefit from economies of scale. The commercial terms of the enlarged facility remain the same as the existing facility.

Ian Fishwick, Chairman of AdEPT, commented:

"We are delighted to have obtained the continued support of the teams at RBS and Barclays to provide an enlarged syndicated debt facility. This enlarged bank facility provides the Company with additional funding to undertake the acquisition of ACS Group as AdEPT continues with its strategy of acquiring and integrating earnings enhancing businesses."

Further details on the acquisition of ACS

Information on ACS Group

ACS Group, founded in 1999, is an independent IT service provider based in Doncaster with 20 years' experience. ACS Group is focused on providing IT services and has a strong public sector presence, including managing and supporting the IT function of approximately 200 schools and academy trusts.

Both of the vendors of ACS Group are to be retained in their current capacity within the business for a period of at least 12 months post-acquisition.

The statutory accounts of ACS Group for the year ended 31 December 2018 reported turnover, operating profit and profit before tax of GBP5.46 million, GBP0.91 million and GBP0.85 million respectively. There was no capital expenditure in the year ended 31 December 2018. Net and gross assets at that date were GBP0.19 million and GBP1.50 million respectively.

Consideration

Initial consideration of GBP5.24 million less the net debt of ACS Group at 31 March 2019 ("Net Debt") is payable in cash. Pursuant to the terms of the share purchase agreement, the effective date of the acquisition is 1 April 2019. Further consideration of up to GBP2.26 million may be payable in cash dependent upon the trading performance of ACS Group in the 12-month period ending 31 March 2020.

The total consideration will be funded out of AdEPT's enlarged bank facility, with headroom in the facility to support further acquisitive growth and payment of outstanding deferred consideration obligations.

For more information please contact:

 
 
  AdEPT Technology Group Plc 
   Ian Fishwick, Chairman            07720 555 050 
   Phil Race, Chief Executive         07798 575 338 
   John Swaite, Finance Director      01892 550 243 
 Cantor Fitzgerald Europe 
  Nominated Adviser & Broker 
  Phil Davies/Will Goode              020 7894 7000 
 

This announcement has been released by John Swaite, Finance Director, on behalf of the Company.

About AdEPT Technology Group plc:

AdEPT Technology Group plc is one of the UK's leading independent providers of managed services for IT, unified communications, connectivity and voice solutions. AdEPT's tailored services are used by thousands of customers across the UK and are brought together through the strategic relationships with tier-1 suppliers such as Openreach, BT Wholesale, Virgin Media, Avaya, Microsoft, Dell and Apple.

AdEPT is quoted on AIM, operated by the London Stock Exchange (Ticker: ADT). For further information please visit: www.adept.co.uk

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April 26, 2019 02:01 ET (06:01 GMT)