REG - Jaywing PLC - Acquisition of Midisi Limmited

JaywingAnnouncement

26/08/2022 11:15

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RNS Number : 3982X  Jaywing PLC  26 August 2022

 

26 August 2022

 

Jaywing Plc

("Jaywing" or the "Company")

Acquisition of Midisi Limited

 

Jaywing Plc (AIM: JWNG), the marketing and data science business specialising
in integrated marketing and risk and data consulting, is pleased to announce
that it has agreed to acquire Midisi Limited ("Midisi"), a marketing software
development business (the "Acquisition").

 

Midisi owns the intellectual property rights for the 'Decision' software
Jaywing currently sells under a licence arrangement.

 

The Decision Software

 

Decision is an award-winning Artificial Intelligence solution for online
marketing activity that Jaywing currently sells to certain clients which
enables them to automate Pay-Per-Click advertising management.  Decision is a
fully automated and self-learning tool that adapts to market supply and demand
in near real-time.  Decision uses algorithms to combine evidence from
multiple data sources to enable Jaywing's clients to make actionable decisions
to maximise performance, be it sales, leads or other goals.  The system works
within an evidence-based mathematical framework, underpinned by probability
theory.

Decision takes multiple first and third-party data sources and optimises
performance based on objectives set by each client. Once implemented by a
client, the Decision tool operates continuously in near real time, and the
Directors believe that its self-adapting approach is significantly more
efficient than competing models based around human intervention.

Decision works with bidding platforms, including Google, and has shown in
tests that it can produce superior results against client-specific objectives
by bringing in additional data sources.  It can be tailored to diverse
scenarios and can also be integrated into clients' CRM systems.

 

The current arrangements with Midisi

 

Jaywing currently sells Decision to clients via a licensing arrangement with
Midisi, which generates revenues of approximately £460k per annum for the
Company, from just 6 clients. Revenues are currently subject to a licence fee
of 50% of the gross revenues to Jaywing from Decision which are payable to
Midisi.  After the licence fee, Jaywing currently earns approximately £230k
of net revenue in its P&L from sales of Decision.   Key clients include
ADT, who use Decision to automatically align advertising spend to current
local engineer availability.  The software connects directly to their
Salesforce CRM system to monitor and learn from actual sales appointments.

 

The benefits to Jaywing of the Acquisition

 

The Acquisition would enable Jaywing to take full ownership of the IP for
Decision, thus providing a full revenue contribution from Decision sales. The
costs of running Decision are relatively fixed and the planned further growth
of Decision sales to existing and new customers is expected to help improve
Jaywing's overall margins as well as increase its recurring revenues.  The
Acquisition will provide a core platform for establishing an in-house Research
& Development unit within Jaywing to develop and introduce new
technologies to solve client challenges.  The Directors believe that there is
a strong commercial rationale for the Acquisition.

Revenue growth and continuing development of the software will be supported by
retention of the expertise and knowledge of three of Midisi's shareholders -
one as a Jaywing employee and two via a consultancy agreement.

The Directors believe that the Acquisition will be immediately
earnings-enhancing from the retention of 100% of revenues, and that both the
revenue and profit will increase over time as Jaywing focuses on adding new
clients and developing the proposition further.

 

Details of the Acquisition

 

The initial consideration for the Acquisition is £400,000, to be paid from
Jaywing's existing cash resources, plus excess cash of £845,230.  Further
fixed payments totalling £1.4m will be paid at 6-monthly intervals over 42
months, plus an additional performance-related earn-out payable at 6-monthly
intervals between months 13 and 49, funded out of planned cashflows generated
from Decision revenues.  The earn-out relates to revenues generated from
Decision, and the maximum earn-out payment is capped at £3.2m. Following the
Acquisition, the incremental revenue contributions delivered by Decision are
estimated to be at least £5.7m over 42 months, based on planned growth in the
client base and enhancements to other existing Jaywing services. This would
generate earn-out payments totalling £1.7m.

 

For its financial year ended 30 April 2022, Midisi generated revenues, EBITDA
and profit before tax of £231,849, £149,169 and £146,411 respectively, and
as at 30 April 2022, had gross assets of £934,223.

 

Andrew Fryatt, Chief Executive, commented:

 

"Digital marketing has now overtaken all other forms of marketing spend in the
UK, and this acquisition enables Jaywing to significantly enhance its
automation and use of AI, which gives us a strong advantage in this market.
The acquisition will be earnings-enhancing from the outset, with the removal
of the existing licence fee arrangement, and offers huge potential for
accelerating growth over the next few years."

 

This announcement contains inside information.

 

Enquiries:

Jaywing plc

Andrew Fryatt (CEO) Tel: 0333 370 6500

 

Cenkos Securities plc

Nicholas Wells

Callum Davidson (Nominated Adviser) Tel: 0207 397 8920

 

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