TIDMSTY
RNS Number : 3798K
Styles & Wood Group PLC
21 September 2016
21 September 2016
Styles&Wood Group plc
("Styles&Wood" or the "Group")
Acquisition of Keysource Limited
Styles&Wood, the integrated property services and project
delivery specialist, is pleased to announce that it has acquired
the entire issued share capital of specialist critical facilities
and data centre services provider, Keysource Limited ("Keysource"),
for an initial consideration of approximately GBP2.0 million to be
satisfied in cash and shares (the "Acquisition"). An additional
payment will be made to reflect any excess working capital over and
above the ongoing requirements of the business. The Board expects
this to amount to GBP2.5 million; such payment will be covered by
the cash inherited in Keysource at the completion date. The Board
envisages the Acquisition to be earnings enhancing in FY 2017.
Highlights of the Acquisition
-- Initial consideration to be satisfied by a cash payment of
GBP1.0 million and the issue of 257,365 new ordinary shares to the
vendors of Keysource, who will remain with the business;
-- Potential further deferred consideration of up to GBP5.0
million, to be satisfied in cash and shares, subject to the
achievement of certain financial performance criteria over the
three year period ending 31 December 2018;
-- Acquisition in line with Styles&Wood's strategic focus on
diversifying its service offering across key sectors;
-- Enhances the Group's service line capabilities in
technologies and critical facilities including data centres;
-- Provides new opportunities to broaden work streams to both existing and new customers;
-- Overall market for data centres is forecast to reach over
GBP1.1bn by the end of 2020, representing annual growth of
3-4%*;
-- Acquisition funded from the Group's existing financial resources; and
-- Expected to be earnings enhancing in FY 2017.
Note: *AMA Research: Data Centre Construction Market Report UK
2016-2020 Analysis
Information on Keysource
Based in Horsham, Sussex and incorporated in 1998, Keysource
currently employ in excess of 60 staff and is one of the UK's
leading critical facilities and data centre services providers. The
company specialises in delivering engineering and technology
services and solutions for customers in their business critical
environments. The management team has over 30 years' experience
working with some of the world's leading organisations to support
critical applications and facilities across a diverse range of
sectors, including commercial, banking, education and
industrial.
In the audited financial year ended 31 December 2015, Keysource
delivered revenues of GBP18.7 million, and underlying pre-tax
profits of GBP0.1 million. Net assets as at 31 December stood at
GBP2.2 million.
As part of the Acquisition, all Keysource employees will remain
employed by Keysource Limited which will be positioned within
Styles&Wood Group.
Rationale for the Acquisition
The Acquisition presents Styles&Wood with an opportunity to
further expand its services to include data centre and critical
facilities work to its customers. The new national framework
appointment of the Group by one of the world's leading financial
institutions, announced on 31 August 2016, includes work on
critical facilities and data centres. Keysource were
Styles&Wood's partner on this successful tender, and the
on-going relationship was beneficial in obtaining the appointment.
The Board envisage being able to offer Keysource's services to its
other banking framework customers.
Terms of the Acquisition
Keysource has been acquired for an initial consideration of
GBP2.0 million, net of GBP2.5 million of free cash acquired, and
with no borrowings. The initial consideration is to be satisfied by
a cash payment of GBP1.0 million funded through the Group's
existing cash resources and the issue of 257,365 new ordinary
shares in the capital of Styles&Wood (the "Consideration
Shares"). The Consideration Shares are being issued to the founder
of Keysource, Mike West, and certain senior management who will
remain with the enlarged group. Following the Acquisition Mike West
will hold 232,944 ordinary shares.
Further contingent consideration of up to GBP5.0 million
("Deferred Consideration") may be payable, in cash and shares
("Earn-out Shares"), subject to the achievement of certain
financial performance criteria for the three year period ending 31
December 2018, details of which are set out below. The Deferred
Consideration, if payable, is expected to be self-funding from
future cash-flows generated by the enlarged Group based on the
challenging financial targets set.
Deferred Consideration
The level of Deferred Consideration due is dependent on the
future profitability of Keysource:
-- FY 2016 - Subject to the achievement of a minimum adjusted*
profit before tax ("PBT") of GBP0.49 million, the Group will pay
100% of PBT generated (capped at GBP1.0 million);
-- FY 2017 - Subject to the achievement of a minimum PBT of
GBP0.86 million, the Group will pay 90% of PBT generated (capped at
GBP2.0 million); and
-- FY 2018 - Subject to the achievement of a minimum PBT of
GBP0.94 million, the Group will pay 75% of PBT generated (capped at
GBP2.0 million).
Note: *Adjusted for transaction and associated restructuring
costs
The first GBP500,000 of any deferred consideration payable will
be satisfied in cash. Thereafter, any excess over GBP500,000 will
be satisfied in cash and shares at the discretion of
Styles&Wood up to a maximum of 50% in shares.
Lock-in and orderly market provision
Under the terms of the acquisition agreement, Mike West has
entered into an irrevocable undertaking not to dispose (save in
certain specified circumstances) of any interest in his
Consideration Shares for a period of one year from issue and for a
period of one year from the date of issue in respect of his
Earn-out Shares (in each case, the "Lock-in period").
Mike West has also undertaken that he will not dispose of any
interest in Consideration Shares or Earn-out Shares for a period of
12 months following expiry of the relevant Lock-in period unless
such disposal is effected through Shore Capital.
Application has been made to London Stock Exchange plc for the
Consideration Shares to be admitted to trading on AIM. Admission of
the Consideration Shares to trading on AIM is expected to take
place on 26 September 2016. On admission of the Consideration
Shares, the enlarged issued share capital of the Group will be
7,334,950 ordinary shares of 1p each.
Tony Lenehan, Chief Executive Officer, commented:
"We are delighted to announce the acquisition of Keysource. The
data centre market is a sector we have been looking to access for
some time and believe it has strong growth prospects driven by a
combination of macro and regulatory factors.
The acquisition follows our successful consortium arrangement
with Keysource on an ongoing major banking framework and we have
been very impressed with the team's expertise and project delivery
capabilities.
Styles&Wood has a proven diversification strategy which has
strengthened our client relationships across our focus sectors.
This acquisition further reinforces our strategic vision and will
enable us to widen our service offering to both existing and new
customers and create new sustainable business opportunities for the
group as a whole."
Enquiries:
Styles&Wood Group plc Tel 0161 926 6000
Tony Lenehan, Chief Executive
Officer
Philip Lanigan, Group Finance
Director
Shore Capital Tel 0207 408 4090
Edward Mansfield/Mark Percy
FTI Consulting Tel 0203 727 1000
Oliver Winters/James Styles
This information is provided by RNS
The company news service from the London Stock Exchange
END
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