TIDMGRA
RNS Number : 3557A
Grafenia plc
22 September 2022
Prior to publication, the information contained within this
announcement was deemed by the Company to constitute inside
information as stipulated under the UK Market Abuse Regulation.
With the publication of this announcement, this information is now
considered to be in the public domain.
22 September 2022
Grafenia plc
("Grafenia", the "Company" or the "Group")
Acquisition of Vertical Plus Limited ("Vertical Plus")
Grafenia plc (AIM: GRA) is pleased to announce that, subject to
the completion conditions set out below, it has agreed to acquire
the entire issued share capital of Vertical Plus Limited, an
ecommerce software business, based in Plymouth, on a debt free/cash
free basis.
The total consideration of up to GBP2.88m will be satisfied in
cash. The acquisition is expected to be cash flow generative and
earnings enhancing in the first year after acquisition.
The initial consideration comprises cash of GBP1.25m to be paid
on completion, together with a deferred consideration of GBP1.00m
to be paid on the first anniversary of completion. Up to a further
GBP0.63m is payable over three years, contingent upon the
achievement of certain targets relating to the future financial
performance of Vertical Plus (the "Earn--out").
Completion of the acquisition is conditional on (i) the
completion of short form sale and purchase agreements by minority
shareholders of Vertical Plus; and (ii) funds being raised by
Grafenia via the bond facility put in place in 2020.
The Company is seeking to raise GBP4.25m via an issue of bonds,
GBP1. 25m of which will be used for the initial consideration due
on the acquisition of Vertical Plus Limited, with the balance being
used to finance the acquisition of other potential acquisitions
currently in the pipeline, which have a combined turnover of
c.GBP4.0m, adjusted EBIT of c.GBP1.3m and valuations typically
between 4 and 5 times adjusted EBIT. As detailed in our
announcement of 27 July 2022, our acquisition strategy is a little
different today. We've refocused our search on software
businesses.
About Vertical Plus Limited
Vertical Plus provides a range of growth-focused ecommerce
solutions sold to customers on a fully managed basis. The software
platform enables and simplifies the implementation of large
inventory ecommerce.
The business was founded in 2001 and operated by David Gadd
(current CEO) and Nicola Bonning (current MD). Nicola will step
down on completion of the acquisition whilst David Gadd will remain
in a part time consultancy basis for 12 months. Vertical Plus
currently has 25 employees.
The unaudited financial statements for Vertical Plus for the
year ended 31 March 2022 reported revenue of GBP2.01m, EBIT of
GBP0.25m, and closing net assets of GBP1.29m.
Acquisition Rationale
Vertical Plus meets the criteria set out in our acquisition
strategy. Take a look at www.grafenia.com/acquisition to see the
full detail. It also complements our core offering and provides
cross-selling opportunities across our Nettl network.
Terms of the Acquisition
The GBP1.25m initial consideration will be funded from the cash
proceeds of bonds which the Company will look to issue.
The GBP1.00m deferred consideration and the Earn--out, if
payable, of up to GBP0.63m, will be satisfied in cash. The Earn-out
comprises:
-- GBP0.21m dependent on Vertical Plus achieving certain
earnings targets for the 12 months following acquisition;
-- GBP0.21m dependent on Vertical Plus achieving certain
earnings targets for the subsequent 12 months; and
-- GBP0.21m dependent on Vertical Plus achieving certain
earnings targets for the subsequent 12 months.
Gavin Cockerill , Acting CEO of Grafenia said: "We're delighted
to have Vertical Plus join Grafenia. It's culturally and
strategically aligned. The ecommerce solution we provide our Nettl
partners can be enhanced with the solutions Vertical Plus provides.
We're excited about the growth potential our route to market could
help bring. This is another step toward growing our software
nucleus."
David Gadd , joint founder of Vertical Plus said: "We see
Grafenia as the right owners for our software business. It's a
natural, organic fit. Working with the Nettl network gives Vertical
Plus the potential of nationwide reach. This further increases
revenue growth for Vertical Plus, while also enhancing the offering
for our current clients."
Trading Update
Since the announcement of our final results for the year ended
31 March 2022 on 27 July 2022, we're pleased to announce that
trading has continued to improve compared to the last financial
year. We said that trading was slightly ahead of our internal
forecasts. That has continued.
In our annual report, we discussed the ongoing transition of our
business and the sale of our manufacturing hub, Works Manchester,
as announced on 19 May 2022. They became our largest Works Maker.
Our teams have worked hard to ensure that transition has been
smooth. We'd like to thank everyone involved for successfully
managing the process and maintaining an integrated supply chain
through our platform, for our partners.
In the period since then (Jun-Aug) total revenue was 11% higher,
like for like, than the same period last year.
Our Platform
Since the start of the financial year, we've continued to add
new Nettl partners in the UK and US. As detailed in our most recent
annual report, last year we experienced some churn in partner
count. Particularly those partners who found it difficult to
diversify from selling just print during COVID affected times.
We've made some improvements in the onboarding process and have
seen churn rates reduce.
We continue to listen to feedback from our partners and extend
the capabilities of our platform. Most recently we've improved
enquiry management with 'The Pipeline' and made it easier for
partners to build proposals, estimates, jobs and orders using their
own Standard Price List items. Our aim is to equip our partners
with the tools they'll need in the studio of tomorrow.
Outlook
Like many businesses, we continue to see inflationary pressures.
However, given our improved trading to date and reduced cost base,
alongside the acquisition of Vertical Plus, we remain confident of
reaching our mid-term objective of 10-15% EBITDA on a monthly run
rate.
For further information:
Grafenia plc
Gavin Cockerill (Acting CEO) 07968 510 662
Allenby Capital Limited (Nominated Adviser and broker) 0203 328 5656
David Hart / Piers Shimwell
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END
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