REG - TPXimpact Holdings - Acquisition of RedCortex Ltd

Tpximpact HoldingsAnnouncement

09/12/2021 07:00

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RNS Number : 0527V  TPXimpact Holdings PLC  09 December 2021

This announcement contains inside information

 

9 December 2021

TPXimpact Holdings PLC

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

 

Acquisition of RedCortex Ltd

 

Leading digital transformation consultancy to the Welsh Public Sector becomes
part of TPXimpact

 

TPXimpact Holdings PLC (AIM: TPX), the technology-enabled services company
focused on digital transformation, announces the acquisition of the entire
issued share capital of RedCortex Ltd ("RedCortex") (the "Acquisition"), a
digital and cloud-based transformation consultancy.

 

Cardiff-based RedCortex, founded in 2016, is a leading technology services
supplier to the Welsh Public Sector, particularly focused on healthcare and
transport alongside Government and local authority projects in the region.
Clients include NHS Wales, the Welsh Government, Transport for Wales and a
number of Local Authorities as well as other public sector institutions
outside of Wales.

 

The opportunity in Wales is significant, with a £2.5 billion annual spending
boost announced in the Government's October 2021 budget and spending
review(1).

 

Acquisition rationale:

 ●            Strengthens TPX's existing foothold in the Welsh Public Sector
 ●            Continues the Company's operational momentum in line with its strategy to
              build regional hubs across the UK
 ●            Extends the Company's Microsoft stack capabilities with RedCortex being a Gold
              Partner across multiple disciplines which further advances its ability to
              perform partnership programmes with Microsoft of significant value, improving
              the Company's ability to bid for projects requiring this skillset
 ●            Adds an established apprenticeship programme to TPX's long-term staffing
              strategy, taking school leavers from South Wales and turning them into digital
              professionals
 ●            Reduces TPX's reliance on contractors to deliver certain professional services

 

The Acquisition is profitable and immediately enhances EPS for TPXimpact.
RedCortex has experienced strong growth over the last two years and
successfully delivered revenues of £4.5m, an Adjusted EBITDA(2) of £0.8m and
net profit after tax of £0.8m in the 12 months to 31 August 2021. With strong
bookings and revenue pipeline, the Board is expecting both RedCortex's revenue
and Adjusted EBITDA to grow significantly in the current financial year.

 

The total consideration for the Acquisition (the "Consideration") is
£13.355m, with £6.355m being satisfied in cash and £7.0m being satisfied
through the issue and allotment of 2,645,302 ordinary shares in TPXimpact at a
price of 264.62 pence, being the 30-day volume-weighted average mid-market
price on the day prior to announcement (the "Consideration Shares"). The cash
portion of the Consideration will be funded through the Company's own cash
reserves and an extension of its RCF facility with HSBC. After payment of the
Consideration, the Company's net debt position will remain well below 1x
EBITDA on a pro forma basis.

 

Neal Gandhi, Chief Executive Officer of TPXimpact, said:

 

"Following a period of strong growth, I am delighted to announce further
execution of our acquisitive strategy with the addition of RedCortex to
TPXimpact.

 

Bringing RedCortex's extensive experience across the healthcare, transport,
education and local authority sectors into TPX enhances even further our
ability to continue delivering impactful change.

 

RedCortex's apprenticeship programme is a very exciting addition to our
long-term HR strategy and contributes towards our ESG vision of kickstarting
digital careers.

 

While we have an existing presence in Wales through our acquisition of
Arthurly, the addition of RedCortex to TPXimpact will consolidate our position
in what is a very attractive market for digital transformation, allowing us to
bid for larger government contracts and continue delivering strong organic
growth."

Martyn Mathews and Martin Britton, Founders of RedCortex, said:

 

"We're proud to become part of a highly successful organisation such as
TPXimpact, where not only our technology aligns, but more importantly our
visions and values.

From RedCortex's beginning, we have strived to create a team that delivers
tangible change for our clients, providing value and excellence in everything
we do. Our responsibility to be a force for good in society remains uppermost
in our vision and objectives.

TPXimpact bears the hallmarks of a progressive organisation, where achieving
success in both business and purpose are equally important. We are delighted
to be part of the team. "

Additional information on the acquisition and lock-up

TPXimpact has acquired all of the shares in RedCortex Ltd from Martin Britton
and Martyn Matthews.

 

The Consideration Shares will be subject to lock-in and orderly market
arrangements with 1,322,650 being released from lock-in on 1 April 2023 and
the balance on 1 April 2024. The orderly market provisions will apply to all
of the Consideration Shares until 1 April 2025.

 

Following the issue of the Consideration Shares, Martin Britton and Martyn
Matthews will hold 1,322,651 and 1,322,651 ordinary shares in TPXimpact
respectively, representing 3.02% in aggregate of the then issued share
capital.

 

Admission and total voting rights

An application has been made for the admission of the Consideration Shares to
trading on AIM which is expected to take place on or around 15 December
2021. Following this issue, the Company's issued share capital will comprise
87,613,920 Ordinary Shares and this is the total number of voting rights in
the Company. There are no shares 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.

 

 

1
https://www.gov.uk/government/news/record-18-billion-a-year-for-wales-in-budget

2 Adjusted EBITDA is a non-IFRS measure that the Company believes is
appropriate to use to measure RedCortex's performance and is defined as
adjusted earnings before interest, tax, depreciation and amortisation. The
adjustments made to reported EBITDA include the normalisation of directors
salaries (and associated costs), the unwinding of deferred revenue, certain
exceptional recruitment costs and consultancy costs relating to the
acquisition

 

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

 David Poutney

 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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