TPXIMPACT HOLDINGS PLC

M&A Activity • Dec 9, 2021

National Storage Mechanism | Additional information

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 review1.

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 EBITDA2 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) Oliver Rigby (CFO) Stifel Nicolaus Europe Limited (Nomad and Joint Broker) Alex Price Fred Walsh	Via Alma PR +44 (0) 207 710 7600
Dowgate Capital Limited (Joint Broker) James Serjeant David Poutney	+44 (0) 203 903 7715
Alma PR (Financial PR) Susie Hudson Kieran Breheny Matthew Young	tpx@almapr.co.uk +44 (0) 203 405 0205

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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