TIDMCLCO TIDMIDE
RNS Number : 6007P
Cloudcoco Group PLC
20 October 2021
The information contained within this announcement is deemed by
the Company to constitute inside information pursuant to Article 7
of EU Regulation 596/2014 as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018 as amended.
20 October 2021
CloudCoCo Group plc
("CloudCoCo", the "Company" or the "Group")
Acquisition of IDE Group Connect Limited and Nimoveri
Limited
CloudCoCo (AIM: CLCO), a leading UK provider of Managed IT
services and communications solutions to private and public sector
organisations, is pleased to announce two further acquisitions to
support its stated goal of becoming a significant player in the
fast-growing UK Technology sector.
-- CloudCoCo acquires IDE Group Connect Limited ("IDE Group
Connect") and Nimoveri Limited ("Nimoveri") (together,
the "Acquisitions") from IDE Group Holdings PLC for a
deferred consideration of GBP250,000.
-- Revenues from the Acquisitions were GBP13.6 million, with
93% of those revenues being from recurring Managed Services
contracts, and combined adjusted EBITDA* was GBP(0.8)
million in the unaudited accounts for the year to 31 December
2020.
-- CloudCoCo management has identified a number of immediate
steps that can be implemented to help drive profitability
across the enlarged Group.
-- The Acquisitions will provide CloudCoCo with circa 660
additional clients and a significant opportunity to upsell
and cross sell services across the Group.
About the Acquisitions
IDE Group Connect is a specialist cloud, advanced support,
connectivity and co-location data centre provider. Prior to being
acquired by CloudCoCo it was part of IDE Group Holdings PLC
("IDE").
IDE Group Connect has circa 570 customers, mainly comprising of
large private sector organisations. 40 of these organisations are
IT managed service customers and 530 are data centre and networking
customers, operating across infrastructure located in 33 data
centres across the UK. The IDE Group Connect business recorded an
adjusted EBITDA* of GBP(0.9) million on revenues of GBP13.1 million
in the unaudited accounts for the year to 31 December 2020, with
93% of those revenues being contracted and recurring.
In June 2021, IDE acquired Nimoveri Limited, an IT managed
services business, and which is now a subsidiary of IDE Group
Connect. Nimoveri has circa 90 customers in the SME space and
recorded an adjusted EBITDA of GBP0.1 million on revenues of GBP0.5
million in the unaudited accounts for the year to 31 December 2020.
CloudCoCo is pleased to report that Adam Eaton, founder of Nimoveri
and current Managing Director of IDE Group Connect will lead a
short and accelerated full rebrand and integration programme.
The majority of colleagues joining CloudCoCo from the
Acquisitions are technically accredited engineers across the
Microsoft stack as well as in cloud infrastructure, data centres,
networking, IT support and digital transformation. This adds to the
array of talented technical staff already in CloudCoCo.
Strategic Rationale
CloudCoCo has a goal of becoming one of the UK's fastest growing
IT Services company, through organic growth and continuing its buy
and build strategy. Its acquisition strategy focuses on identifying
companies with talented individuals operating in businesses that
are subscale and can benefit from being part of a larger
organisation. The Group's growth strategy is to drive additional
revenue from existing customers whilst also targeting larger
clients that have significant IT budgets. CloudCoCo aims to become
the supplier of choice in the industry by offering exceptionally
high levels of service at a price point that is competitive in the
marketplace.
Since the acquisition of CloudCoCo Limited by Adept4 plc in
October 2019 and subsequent name change to CloudCoCo Group plc, the
new management team has successfully turned the business around
through a simple focus on doing the basics right - this included
re-organising and re-energising customer support teams, reducing
response and resolution times, optimising the sales function,
rationalising costs, and promoting a strong company culture. This
process was known internally as the 'get well' phase.
Management has since progressed through to the 'get fit' phase -
where there was a greater emphasis on new business development.
With the fundraising and acquisition of Systems Assurance and More
Computers in August 2021, CloudCoCo entered the 'get bigger' phase
with a focus on building scale through profitable and sustainable
growth.
The management of CloudCoCo has identified IDE Group Connect and
Nimoveri as being an excellent fit for the Group. Together they
bring a significantly enlarged customer base with a host of new
cross-selling opportunities, significant contracted recurring
revenue, new technological capabilities, and talented colleagues
with skillsets that complement the existing CloudCoCo
workforce.
Management sees significant potential in the acquired businesses
and believes that through adopting the same disciplined approach
used to address Adept4's legacy issues, it can improve customer
retention, increase sales, reduce costs and ultimately generate
meaningful profits. This will be the immediate focus for the
CloudCoCo management team.
Acquisition terms
The Acquisitions were acquired from IDE on a normalised net cash
basis for a consideration of GBP250,000, funded via a loan note
from IDE for GBP250,000 to be repaid over five years with an annual
interest rate of Bank of England base rate +3% with no payments due
in the first six months. The net assets acquired under the
transaction equate to GBP250,000, including a cash balance of
GBP400,000.
In addition, IDE will provide CloudCoCo with a working capital
facility of up to GBP500,000 to help fund the initial restructure
of the IDE Group Connect business. Amounts drawn will be
convertible into new ordinary shares of CloudCoCo at 1p per share
if not repaid by 19 October 2022.
IDE and CloudCoCo have also undertaken to agree terms of a
Transitional Services Agreement by
29 November 2021 to ensure a smooth transition over a number of
months of various contracts and shared services.
The consideration terms reflect the current financial state of
the IDE Group Connect business, the limited-scope warranties
offered by IDE and the small number of unprofitable contracts
contained within the business. Returning the IDE Group Connect
business to profitability and seeking to restructure these
unprofitable contracts will be the initial areas of focus for the
CloudCoCo team. CloudCoCo has identified a number of good
opportunities within the Acquisitions as outlined above.
The acquisition of IDE Group Connect and Nimoveri is a related
party transaction pursuant to rule 13 of the AIM Rules for
Companies, due to MXC Guernsey Limited owning 10.6 per cent. of the
Company's issued share capital and 34.8 per cent. of IDE's issued
share capital. The Directors of the Company (save for Jill
Collighan who is not deemed independent for this purpose) consider,
having consulted with the Company's Nominated Adviser, that the
terms of the transaction are fair and reasonable insofar as the
Company's shareholders are concerned.
Commenting on the Acquisitions, Mark Halpin, CEO of CloudCoCo,
said:
" The acquisition of IDE Group Connect and Nimoveri is truly
transformational for CloudCoCo and provides us with the scale
required to target bigger customers with larger budgets, as well as
serving as a great catalyst for future expansion.
Together, the Acquisitions will almost double our current
annualised revenues to around GBP27 million and take our customer
base to more than 1,000, with a multitude of new sales
opportunities across the board including enhanced private, hybrid
and multi-cloud transformation projects through the addition of
customer infrastructure in 33 data centres.
We have demonstrated our ability to reset, recover and grow
businesses of this nature by keeping things simple, and we are
confident we will be able to replicate the success of the past
couple of years with the acquired businesses.
I've been very impressed with the IDE Group Connect and Nimoveri
teams. They are exceptionally talented and will complement the
CloudCoCo group. I would like to take this opportunity to welcome
them to the CloudCoCo family.
To all our customers and partners across the enlarged Group, I
would like to reiterate the Company's commitment to ensuring you
receive the best possible experience when you choose to work with
CloudCoCo, and to all colleagues - new and old - the Chairman and
Board thank you for your support. The dedication and passion of our
people has been fundamental to the real progress we have made so
far and will continue to be as we move into this next exciting
phase of development."
*Adjusted EBITDA is defined by IDE as earnings before interest,
tax, depreciation, amortisation, impairment charges, exceptional
items, loss on disposal of fixed assets and share-based payments.
In 2020, IDE Group plc reviewed the carrying value of goodwill,
trademarks and customer relationships, contracts and other assets
relating to IDE Group Connect Limited which resulted in an
impairment charge of GBP14.0m for the year to 31 December 2020.
Contacts:
CloudCoCo Group plc Via Alma PR
Mark Halpin (CEO)
Darron Giddens (CFO)
Allenby Capital Limited - (Nominated Tel: +44 (0)20 3328
Adviser & Broker) 5656
Jeremy Porter / Freddie Wooding - Corporate
Finance
Tony Quirke / Amrit Nahal - Sales &
Corporate Broking
Alma PR - (Financial PR) Tel: +44 (0)20 3405
David Ison 0205
Josh Royston cloudcoco@almapr.co.uk
Kieran Breheny
About CloudCoCo Group plc
Supported by a team of industry experts and harnessing a diverse
ecosystem of partnerships with blue-chip technology vendors,
CloudCoCo makes it easy for private and public sector organisations
to work smarter, faster and more securely by providing a single
point of purchase for their connectivity, telephony, cyber
security, cloud, IT hardware and support needs.
CloudCoCo has offices in Warrington, Leeds and Sheffield in the
UK.
www.cloudcoco.co.uk
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