TIDMEKT
RNS Number : 0335Z
Elektron Technology PLC
15 May 2019
Elektron Technology Plc
(AIM: EKT, "Elektron" or the "Group")
Acquisition
Elektron Technology Plc is pleased to announce that it has
acquired Next Control Systems Limited ("Next"), for a cash
consideration of GBP10.5m, inclusive of GBP1.7m of cash in Next as
at the date of completion. The price represents a multiple of 6.6X
2018 EBITDA and the deal is expected to be immediately earnings
accretive for Elektron.
Next is an excellent strategic fit for Checkit, providing
technology and software that enables management teams to monitor,
control and optimise business processes. Next will be combined with
Checkit to create a global leader in the field of real-time
operations management.
This is a transformational deal for Checkit, immediately adding
scale and one which the Board believes will significantly
accelerate the path to profitability at Checkit.
Background on Next
Next, based in Fleet, Hampshire, UK, has been helping management
teams to improve productivity and profitability for over 25
years.
Through its Tutela brand (www.tutelamedical.com) Next is a
leader in high-end service based temperature monitoring for
healthcare and life sciences within the UK. In addition, through
its Next and Axon brands (www.nextcontrols.com; www.axon.eco) it
provides data related Building Energy Management System ("BEMS")
services. Next has a major relationship with a leading UK retailer
covering smart building and plant technologies.
Benefits of the Transaction
Checkit's services transform the performance of common low and
medium volume operational processes in global industries, moving
them from form based systems, spreadsheets and even pen and paper
to the Cloud, through a subscription based SaaS model.
The acquisition of Next, which is a compelling strategic fit,
will add immediate scale to Checkit, increasing turnover eight-fold
and providing significant opportunities for further sales growth
and improvements to operational capabilities, including:
Ø Offering opportunities to cross sell Checkit's Work Management
product to Next's customer base
Ø Diversifying that customer base and extend the offering across
additional sectors alongside the food service sector (which was
previously predominant in Checkit)
Ø Enhancing Checkit's existing range of sensors
Ø Improving operational capability
Ø Bringing domain knowledge of the BEMS market
Ø Leveraging Next sales capabilities to improve Checkit organic
growth in the UK and overseas
Financial Impact
In the year ending 31 December 2018 Next's audited operating
profit was GBP1.2 million on turnover of GBP10.7 million (2017:
GBP1.2 million on turnover of GBP9.8 million). Next's 2018 audited
accounts state that 57% of income (2017: 54%) was in the form of
recurring revenue relating to software services provided. The
remaining income related to one-off charges for consultancy and
other IoT services and hardware.
The management accounts for the four months to 30 April 2019
show an operating profit of GBP0.5 million year to date on turnover
of GBP3.7 million (2018 GBP0.4 million on turnover of GBP3.3
million). It is expected that the acquisition will be immediately
earnings accretive for Elektron.
Audited net assets (excluding cash) were GBP1.7 million at 31
December 2018.
The acquisition of Next was funded from the Group's existing
cash reserves which as at 31 January 2019 stood at GBP10.1 million.
The Group has taken the opportunity to put in a place a GBP3
million bank overdraft facility which combined with its existing
invoice discount facilities of up to GBP3m will provide the Group
with up to GBP6m of facilities for working capital purposes.
Commenting on the transaction, Keith Daley, Executive Chair of
Elektron Technology said
"The acquisition of Next marks another milestone for Checkit. It
further significantly enhances our value proposition in
capabilities, services and demonstration of scale. We look forward
to realising the many opportunities offered by the combination of
Checkit and Next."
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) No 596/2014.
For further enquiries:
Elektron Technology plc +44 (0) 1223 371 000
www.elektron-technology.com
Keith Daley (Executive Chairman)
John Wilson (Chief Executive Officer)
Andrew Weatherstone (Chief Financial Officer & Company
Secretary)
Yellowstone Advisory (Investor Relations)
Alex Schlich
+44 (0) 7710 164 120
N+1 Singer (Nominated Adviser & Broker)
Shaun Dobson / Jen Boorer (Corporate Finance) +44 (0) 20 7496
3000
Rachel Hayes (Corporate Broking)
Forward looking statements
This document contains forward looking statements with respect
to the business, strategy and plans of Elektron Technology plc and
its current goals and expectations relating to its future financial
condition and performance. Statements that are not historical
facts, including statements about Elektron or management's beliefs
and expectations, are forward looking statements. By their nature,
forward looking statements involve risk and uncertainty because
they relate to events and depend on circumstances that will occur
in the future. Elektron's actual future results may differ
materially from the results expressed or implied in these forward
looking statements as a result of a variety of factors among other
things, the economic and business circumstances occurring from time
to time in the countries, sectors and business segments in which
the Group operates. The forward looking statements contained in
this document are made as of the date hereof, and Elektron
undertakes no obligation to update any of its forward looking
statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
ACQAIMPTMBMBBPL
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