REG - TPXimpact Holdings - Acquisition of Peak Indicators and Swirrl

Tpximpact HoldingsAnnouncement

23/03/2022 07:00

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RNS Number : 6779F  TPXimpact Holdings PLC  23 March 2022

This announcement contains inside information

23 March 2022

TPXimpact Holdings PLC

("TPXimpact", "TPX", the "Group" or the "Company")

 

Acquisition of Peak Indicators Ltd and Swirrl IT Ltd

 

Trading Update

 

KITS earn out amendment

 

Two strategic acquisitions significantly improving the Group's data offering

 

TPXimpact Holdings PLC (AIM: TPX), the technology-enabled services company
focused on digital transformation, announces the conditional acquisition of
the entire issued share capital of both Peak Indicators Ltd ("Peak
Indicators") and Swirrl IT Ltd ("Swirrl") (the "Acquisitions"). The
Acquisitions are strategically important to TPX, significantly expanding the
Group's capabilities in artificial intelligence (AI), data science and
analytics.

 

Together they will form TPXimpact's AI & Data capability, opening a new
market opportunity that the Company has so far addressed by working with
associates. With 65 full-time staff members, this new capability will be
positioned to assist clients across TPX's target sectors in gaining stronger
insights to aid their decision making.

 

Trading Update

The revenue from the Acquisitions, combined with the Group's existing revenue
growth at the top end of market expectations,(1) puts the Group on track to
hit its FY23 £100m run rate revenue target around a year ahead of plan. Full
year revenue for FY22 is also anticipated to be in-line with market
expectations.

 

Highlights of the Acquisitions

 

 ●            Adds expertise in key areas of focus for the Group moving forward, with Peak
              Indicators providing AI, data science, data services and advanced analytics
              consultancy to the public and commercial sectors and Swirrl specialising in
              cloud-based data integration and dissemination

 ●            Reduces TPX's reliance on contractors to deliver certain professional services
              thereby having the potential to improve margins

 ●            Strengthens TPX's presence in the UK Public Sector by incorporating clients
              such as the Department for Environment, Forestry and Rural Affairs, the Office
              for National Statistics and Scottish Government
 ●            Further extends TPX's existing partnerships with technology companies such as
              Oracle, Infor Birst, Solidatus and Microsoft (Gold), allowing for additional
              referrals and a continued growth of its customer base

 ●            In line with the Group's strategy to build regional hubs across the UK and
              strengthens the Group's staffing objectives by incorporating successful
              Graduate and Degree Apprentice programmes which provide a highly skilled and
              diverse workforce that align to TPX's diversity and inclusivity values

 ●            The Acquisitions are expected to be immediately earnings enhancing

 

Neal Gandhi, Chief Executive Officer of TPXimpact, said:

 

"I am delighted to welcome the Peak Indicators and Swirrl teams to TPXimpact.
With a comprehensive and specialist range of data capabilities now in place,
these acquisitions represent another key strategic step forward for TPX in our
mission to take on the multitude of complex challenges facing the public and
commercial sectors and deliver sustainable digital change. More than ever, we
are now confident in our ability to bid for and win larger, more lucrative
contracts with our enhanced service offering."

 

"We're also delighted to announce that having reached run rate revenues of
approximately £100m through both these acquisitions and existing growth, we
are on track to achieve our original commercial vision a whole year ahead of
plan. This has been achieved at the same time as executing on our plan to
become a single, integrated organisation operating under the TPXimpact brand.
I'd like to thank all of our staff for their patience as we've pulled the
combined organisation together. We're excited to now focus on our FY25
commercial vision of achieving £200m revenues on a run rate basis by March
2025."

 

(1) Market expectations for revenue for the 12 months ended 31 March 2022 are
for £78.8m and the 12 months ended 31 March 2023 are for £91.2m.

 

Peak Indicators Ltd

 

Chesterfield-based Peak Indicators, founded in 2008, is a leading data science
services and analytics consultancy. It works with the UK Public and Commercial
sectors to provide deep technical skills in data engineering, business
analytics, data science and artificial intelligence. Peak Indicators has built
a strong client-base across both sectors with customers including Devon County
Council, HSBC, Northern Power Grid, North East Lincolnshire Council, the
Ministry of Defence and John Lewis, alongside a number of other commercial
sector companies.

 

Peak Indicators represents a strong fit for TPX, with both organisations' core
values aligned around commitment to people, customers and communities. Both
also have an ambition to promote diversity and inclusivity within the
technology sector. The Acquisition of Peak Indicators supports TPXimpact's aim
to kick-start digital careers among the communities in which it operates
through Peak Indicators' highly successful Graduate and Degree Apprentice
programmes, which has produced over 40% of their 50 full time employees.

 

The acquisition of Peak Indicators will be immediately accretive for
TPXimpact, with Peak Indicators delivering revenues of £3.28m and an Adjusted
EBITDA of £0.19m in the 12 months to 30 September 2021. Peak Indicators is
debt free and with a strong bookings and revenue pipeline. Management is
confident that Peak Indicators can deliver EBITDA in excess of £0.5min the 12
months to 30 September 2022.

 

TPXimpact has entered into a conditional agreement to acquire all of the
shares in Peak Indicators Ltd from Andy Ball, Helen Ball, Antony Heljula and
Kate Heljula. The acquisition of Peak Indicators is expected to complete in
the first half of April 2022, conditional upon its key contracts remaining in
force in the period between exchange and completion.

 

The total consideration for the acquisition of Peak Indicators (the "Peak
Indicators Consideration") is £3.46m with £1.35m being satisfied in cash and
£2.11m being satisfied through the issue and allotment of 938,888 ordinary
shares in TPXimpact at a price of 225 pence per share, (the "Peak Indicators
Consideration Shares"). The cash portion of the Peak Indicators Consideration
will be funded through the Company's own cash reserves. After payment of the
Peak Indicators Consideration, the Company's net debt position will remain
well below 1x EBITDA on a pro forma basis. The Peak Indicators Consideration
is all payable subject to and on completion of the acquisition.

 

The Peak Indicators Consideration Shares will be subject to lock-in and
orderly market arrangements with one-third of the Peak Indicators
Consideration Shares being released on each of the first three anniversaries
of completion of the acquisition The orderly market provisions will apply to
all of the Peak Indicators Consideration Shares until the fourth anniversary
of completion.

 

Following the issue of the Peak Indicators Consideration Shares, the Swirrl
Consideration Shares and the transfer and cancellation of the Returned Shares
(as defined below), Andy Ball, Helen Ball, Antony Heljula and Kate Heljula
will together hold 938,888 ordinary shares in TPXimpact, representing in
aggregate 1.1% of the then issued share capital.

 

Andy Ball and Antony Heljula, Founders of Peak Indicators Ltd, said:

 

"From the inception of Peak Indicators, we have strived to create a company
that is committed to our people, our customers and our community. These core
values align with those of TPXimpact and we are excited to join them in using
our collective skills to continue improving the world around us.

 

We are excited to join another purpose-led business in the next stage of our
growth journey. As part of the TPXimpact team, we look forward to continuing
to deliver impactful change."

 

Swirrl Ltd

 

Stirling-based Swirrl IT Ltd, is a cloud-based open data consultancy
specialist with a focus on data integration and dissemination in public sector
organisations. Through its 'PublishMyData' platform, Swirrl works to help
government organisations better manage and distribute their data, so that
analysts can find, understand and apply it to important problems.

 

Data integration and dissemination is an area of growing importance to
governments as a means to tackle large and complex interconnected challenges
such as climate change, improved healthcare and challenges facing the economy.

 

Swirrl has amassed a strong client base within the public sector and will
strengthen TPX's foothold in this market. Customers include the Department for
Environment, Forestry and Rural Affairs, the Office for National Statistics,
Scottish Government and the Department for Levelling Up Housing and
Communities.

 

The acquisition of Swirrl will be immediately earnings enhancing for TPX. It
achieved revenues of £1.9m and Adjusted EBITDA of £0.5m in the 12 months to
April 2021. Swirrl is debt-free and expects strong revenue growth for the year
ending 5 April 2022.

 

TPXimpact has entered into a conditional agreement to acquire all of the
shares in Swirrl IT Ltd from Bill Roberts, Ric Roberts and Sarah Roberts.
The acquisition of Swirrl is expected to complete in the first half of April
2022, conditional upon its key contracts remaining in force in the period
between exchange and completion.

 

The total consideration for this acquisition (the "Swirrl Consideration") is
£3.2m with £1.2m being satisfied in cash and £2.0m being satisfied through
the issue and allotment of 888,888 ordinary shares in TPXimpact at a price
of 225 pence per share (the "Swirrl Consideration Shares"). The cash portion
of the Swirrl Consideration will be funded through the Company's own cash
reserves. An additional amount of £1.1m in respect of available cash in
Swirrl in excess of its working capital requirements (subject to customary
adjustment following the preparation of completion accounts) will be paid to
the sellers within 3 days of completion.  After payment of the Swirrl
Consideration, the Company's net debt position will remain below 1x EBITDA on
a pro forma basis.  The Swirrl Consideration is all payable subject to and on
completion of the acquisition.

 

The Swirrl Consideration Shares will be subject to lock-in and orderly market
arrangements until 1 April 2024. The orderly market provisions will apply to
all of the Consideration Shares until 1 April 2025.

 

Following the issue of the Peak Indicators Consideration Shares and the Swirrl
Consideration Shares and the transfer and cancellation of the Returned Shares
(as defined below), Bill Roberts, Ric Roberts and Sarah Roberts will together
hold 888,888 ordinary shares in TPXimpact, representing in aggregate 1.0% of
the then issued share capital.

 

Bill Roberts and Ric Roberts, Founders of Swirrl IT Ltd, said:

 

"We are very proud of the business we have built to date and are excited to
mark this milestone in our growth as we join TPXimpact. The extra resources
and broad range of expertise in TPXimpact will help us to scale up our work to
transform how the public sector manages and uses data, opening up new
opportunities for our customers and staff."

 

Amendment agreement

Further to the announcement made by the Group on 1 March 2021 in relation to
the acquisition of Keep IT Simple LTD ("KITS"), TPX has agreed with Grant
Harris, by way of an amendment agreement dated 22 March 2022 (the "Amendment
Agreement") to amend the terms of the sale and purchase agreement entered into
26 February 2021 pursuant to which TPX acquired the entire issued share
capital of KITS (the "KITS SPA").  These changes have been made in order to
remove from the KITS SPA a number of operational restrictions so as to enable
TPX to fully integrate the KITS business within the TPXimpact single brand.
The removal of these restrictions will enable TPX to drive faster organic
growth and greater profitability through the new integrated structure.

Under the terms of the KITS SPA, TPX had the right to claw back up to
3,888,889  of the ordinary shares in the capital of TPX that had been
allotted and issued to Grant Harris as consideration for the acquisition of
KITS  (the "KITS Consideration Shares") if KITS' revenues do not meet a
target of £26.8m in either the calendar year 2022 or the calendar year 2023.
TPX has agreed in the Amendment Agreement to delete the clawback mechanism
from the KITS SPA.  Under the terms of the Amendment Agreement, it has been
agreed that Grant Harris will return to TPX, for nil consideration, 972,222 of
the KITS Consideration Shares (the "Returned Shares"). The Returned Shares
will be cancelled by TPX immediately following their registration in the name
of TPX.  .

The Amendment Agreement is a related party transaction under Rule 13 of the
AIM Rules.  The directors of TPX consider, having consulted with Stifel
Nicolaus Europe Limited, that the terms of the Amendment Agreement are fair
and reasonable insofar as TPX's shareholders are concerned.

 Total voting rights

 

Following the cancellation of the Returned Shares (but before the issue of the
Peak Consideration Shares and the Swirrl Consideration Shares), the entire
issue share capital of the Company shall comprise 87,386,595 Ordinary Shares
and this is the total number of voting rights in the Company.  No shares are
held in treasury.

This figure may be used by shareholders as the denominator for the calculation
by which they may determine if they are required to notify their interest in,
or change to their interest in, the Company under the FCA's Disclosure
Guidance and Transparency Rules.

 

The person responsible for this announcement is Oliver Rigby, CFO.

 

Enquiries:

 

 TPXimpact Holdings

 Neal Gandhi (CEO)                Via Alma PR

 Oliver Rigby (CFO)

 Stifel Nicolaus Europe Limited   +44 (0) 207 710 7600

 (Nomad and Joint Broker)

 Alex Price

 Fred Walsh

 Dowgate Capital Limited          +44 (0) 203 903 7715

 (Joint Broker)

 James Serjeant

 Russell Cook

 Alma PR                          tpx@almapr.co.uk

 (Financial PR)                   +44 (0) 203 405 0205

 Susie Hudson

 Kieran Breheny

 Matthew Young

 

About TPXimpact

 

TPXimpact exists to transform the organisations, services and systems that
underpin society and that drive business success. It applies strategic and
creative thinking, technology, innovative design and user-centred approaches
to bring about numerous improvements which together multiply the impact of
change. The Company works closely with its clients in agile, multidisciplinary
teams that span organisational design, technology, and digital experiences. It
shares a deep understanding of people and behaviours and a philosophy of
putting people and communities at the heart of every transformation.

 

The business is being increasingly recognised as a leading alternative digital
transformation provider to the UK public services sector, with c.75% of its
client base representing the public sector and c.25% representing the
commercial sector.

 

More information is available at www.tpximpact.com.

 

 

 

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