TIDMPINN
RNS Number : 4751Z
Pinnacle Technology Group PLC
27 May 2016
Pinnacle Technology Group plc
(the "Company", "Group" or "Pinnacle")
Acquisition of adept4 Limited
GBP5m funding from the Business Growth Fund plc
Proposed Change of Name
Notice of General Meeting
Pinnacle Technology Group plc, the AIM listed provider of 'IT as
a Service', is pleased to announce that it has acquired the entire
issued share capital of adept4 Limited ("adept4"), a provider of
cloud based IT services and solutions headquartered in Warrington
(the "Acquisition"), funded through the issue of GBP5 million of
unsecured loan notes to the Business Growth Fund Plc ("BGF").
Pinnacle also announces the Company's intention to change its name
to adept4 plc.
Highlights
-- adept4 provides IT as a Service encompassing fully managed IT
service contracts, cloud based services, professional services,
software support and development
-- Dedicated, ITIL aligned, 24x7x365 service desk
-- A Tier 1 Microsoft SPLA and Cloud Service Provider with a
track record in the adoption of Microsoft Azure plus partner status
with leading technology vendors such as Cisco, Veeam and VMware
-- c. 60 customers with average contract lengths of three to six years
-- A strong management team with experience of both organic and
acquisition growth all of whom remain in the business
-- In the year to 31 December 2015 adept4 generated revenue of
GBP5.0 million and EBITDA of GBP0.75 million
-- 67% recurring revenue, expected to increase due to a growing
long term support contract base and organic growth
-- Strong free cash flow generation in excess of 90% of EBITDA
-- Initial consideration of GBP4.5 million satisfied in cash
plus deferred consideration of GBP1 million in cash, payable in
January 2018. Further contingent consideration of up to GBP1.5
million in cash payable in March 2018, subject to performance
criteria for the year to 31 December 2017
-- Acquisition part financed through issue of GBP5 million loan
notes to the BGF with an associated option to subscribe for shares
at a price of 6 pence per share, representing a 43% uplift from the
February placing price of 4.2 pence
-- Focus is now on building a strong, asset light, 'IT as a
Service' business with an experienced operational management team
and scalable platform, focussed on North England
-- Post completion, Pinnacle will have cash at bank of GBP4.3 million
-- Following recent disposals of legacy Pinnacle trade and
assets, the Company proposes changing its name to adept4 plc
Gavin Lyons, Executive Chairman of Pinnacle, commented:
"This is a pivotal moment for Pinnacle as it completes the
turnaround of the business which we set out to do in January 2016.
Having executed five acquisitions and three disposals in just over
four months we have moved from a loss making company with
liabilities to a sustainable operational platform with healthy
gross profit margins and high recurring revenues.
Our focus is now on the integration of our acquisitions so that
we can scale our asset light, 'IT as a Service' proposition we have
for UK SME business. Our strategy remains the same and we will
continue to focus on growing the company organically and through
acquisition."
A circular will be sent to shareholders (the "Circular") giving
notice of a general meeting of Pinnacle (the "General Meeting") to
be held on 13 June 2016 at 10.00 a.m. at the offices of DAC
Beachcroft LLP, 100 Fetter Lane, London EC4A 1BN. A copy of the
Circular will be available on the Company's website
www.pinnacletechnology.co.uk.
For further information, please
contact:
Pinnacle Technology Group plc
Gavin Lyons, Executive Chairman
Ian Winn, Finance Director and
Chief Operating Officer 0208 185 6393
N+1 Singer (Nominated Adviser
and Broker)
Shaun Dobson
Jen Boorer 020 7496 3000
MXC Capital Markets LLP
Charlotte Stranner 020 7965 8149
Further Details on adept4
adept4 provides IT as a Service encompassing fully managed IT
service contracts, cloud based services, professional services,
software support and development. The business was founded in 2007
and has been jointly owned by three directors, Peter Birkett, Paul
Talbot and Steve Cosgrove, since 2009. All three directors are
remaining with the business post acquisition. adept4 is
headquartered in Warrington with offices in Brighton and Aberdeen
and delivers both remote and on-site support throughout the UK and
internationally. adept4 has a dedicated professional services team
comprising a mix of software, infrastructure and project management
who are able to transition customers into a fully managed service,
supported by a 24x7x365, UK based helpdesk.
adept4 has expanded rapidly through a mixture of organic growth
and targeted acquisition to extend the business' service offering
and access new sectors. adept4's recent focus has been on
generating monthly recurring contracted revenue and extending the
lengths of its contracts which currently average between three and
six years. It has an existing customer base of c.60 and the vast
majority of its larger customers have been acquired via referral,
both from other customers and its technology partners, in
particular Microsoft.
adept4 was awarded Tier 1 Microsoft SPLA and Cloud Service
Provider status in November 2015. The business is increasingly
moving towards the asset light, cloud-based platform, MS Azure,
which as well as incurring lower licensing and data centre expenses
also reduces implementation costs and offers a broad range of
cloud-based products. Other key vendor partners include VMware,
Veeam, Cisco, BT and HP.
For the year ended 31 December 2015, adept4 revenues amounted to
GBP5.0 million, of which 67% were recurring, with a profit before
tax of GBP0.51 million. EBITDA for the year to 31 December amounted
to GBP0.75 million with over 90% of EBITDA converted to free cash
flow. Gross assets as at 31 December 2015 were GBP1.9 million. The
business currently employs 46 people.
Initial consideration for the Acquisition was GBP4.5 million in
cash. Deferred consideration of GBP1 million in cash is payable in
January 2018. In addition there is a potential earn-out payment of
up to GBP1.5 million in cash in March 2018, dependent on certain
performance criteria for the 12 months to 31 December 2017.
Financing of the Acquisition
The initial consideration was financed by the issue of GBP5
million unsecured loan notes ("Loan Notes") to the Business Growth
Fund Plc ("BGF"). The Loan Notes have a 7 year term, with
redemption permissible from the third anniversary and required from
the fifth anniversary, and carry interest at a rate of 8% per
annum. In addition, Pinnacle has agreed to grant the BGF an option
to subscribe for 50,000,000 ordinary shares of 1 pence each in the
capital of the Company ("Ordinary Shares") at a price of 6 pence
per Ordinary Share (the "Option"). The issue of the Option is
conditional on the passing of certain shareholder resolutions at
the General Meeting. In the event that shareholders do not approve
the resolutions required to grant the Option, this will result in
the Loan Notes having to be repaid immediately. However, Pinnacle
has secured sufficient irrevocable undertakings from certain
shareholders to vote in favour of the resolutions for the
resolutions to be passed. Further details on the irrevocable
undertakings can be found below.
Change of Name
With the recent disposal of the trade and assets of Pinnacle
CDT, which completed the disposal of all the legacy Pinnacle
businesses, the Directors feel it is now appropriate to rebrand the
Group. adept4 has created a strong, defined brand in its locality
and the Directors believe that it makes sense to use this brand for
the Group as a whole. Therefore, subject to the shareholders'
approval by way of a special resolution, it is proposed that the
name of the Company be changed to adept4 plc shortly after the
General Meeting. If the resolution to approve the change of name of
the Company is passed at the General Meeting, the Company's TIDM
will be changed to AD4, and its website address will be changed to
www.adept4.co.uk.
Notice of General Meeting
The Directors do not currently have sufficient authority to
grant the Warrants or the power to change the Company's name.
Accordingly, the Directors are seeking the approval of shareholders
at the General Meeting to grant the Warrants and change the
Company's name to adept4 plc. Set out at the end of the Circular is
a Notice of General Meeting of the Company to be held at the
offices of DAC Beachcroft LLP, 100 Fetter Lane, London EC4A 1BN on
13 June 2016 at 10.00 a.m. at which the resolutions will be
proposed.
Irrevocable Undertakings
All of the Directors, in addition to certain other shareholders,
have irrevocably undertaken to vote in favour of the resolutions to
be proposed at the General Meeting to approve the grant of the
Option, in respect of the 174,125,820 ordinary shares held by them,
representing approximately 76.7 per cent. of the issued share
capital of Pinnacle.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQBRGDUCSDBGLL
(END) Dow Jones Newswires
May 27, 2016 02:00 ET (06:00 GMT)
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