TIDMADT
RNS Number : 3672V
AdEPT Technology Group PLC
14 April 2021
14 April 2021
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
ADEPT TECHNOLOGY GROUP PLC
("AdEPT" or the "Company" or the "Group")
ACQUISITION OF DATRIX LIMITED
A substantial, strategically important acquisition in the
growing advanced cloud-based networks market
AdEPT, one of the UK's leading independent providers of managed
services for IT, connectivity, unified communications solutions,
and cloud services, is pleased to announce that yesterday it
completed the acquisition of the entire issued share capital of
Datrix Limited ("Datrix") for an initial cash consideration of
GBP9.0m (the "Acquisition"), which has been funded through the
Group's new bank facility.
Datrix is a well-established, award-winning supplier of advanced
cloud-based networking, communications, and cyber security
solutions, headquartered in London, with expertise in the growing
Software Defined Wide Area Networking ("SD-WAN") market.
This substantial, strategically important acquisition is wholly
in line with the Board's stated strategy to; a) grow both
organically and by acquisition, leveraging the Group's banking
facilities which are supported by a strong balance sheet and high
cash generation, b) to consolidate a fragmented market, through
complementary acquisitions with strong levels of recurring revenue
and margin, and c) continually bring enhanced capability to
customers.
Datrix fulfils all of these criteria, enhancing the Group's
capabilities and increasing its market share in a key cloud-centric
growth market and in complementary verticals.
Financial highlights:
-- Following the Acquisition, Group run-rate revenue and adjusted
EBITDA(1) for the year ended 31 March 2022 is expected to increase
by c.18% and c.13% respectively
-- Initial cash consideration of GBP9.0m on a debt free cash free
basis as at 31 March 2021, funded through the Group's new banking
facility
-- Datrix unaudited reported revenue in the 12 months ended 31
January 2021 of GBP10.7m, generating adjusted EBITDA(1) of GBP1.5m
and profit before tax of GBP0.6m
-- 63% of revenue and gross margin were generated from recurring
services for the 12 months ended 31 January 2021
-- The Acquisition is expected to be earnings enhancing in the
current financial year ending 31 March 2022, being the first(2)
full year of ownership
-- Earn-out consideration of up to GBP7.0m payable in cash based
on the performance of Datrix in the 12 months ending 31 March
2022
(1) Adjusted EBITDA is after GBP0.4m of synergies, comprising
staff savings post acquisition.
(2) Pursuant to the terms of the share purchase agreement, the
effective date of the acquisition is 1 April 2021
Operational highlights:
-- Datrix provides instant scale in the growing advanced cloud-based
networking market, expanding the Group's portfolio of core competencies
to include the latest technology, SD-WAN
-- With 63% of revenues generated from complementary customers in
the public sector, Datrix strengthens the Group's position on Local
and Central Government supplier frameworks and its presence in
key vertical markets, particularly the NHS
-- Strengthens AdEPT's cloud product portfolio, bringing additional
highly complementary, market-leading, Gartner Magic Quadrant products
to the Group, from significant new partner relationships
-- Experienced senior management team, who have transformed the business
since joining Datrix in 2019, are being retained by AdEPT and incentivised
to continue delivering growth
Background information
Datrix designs, delivers, and manages end-to-end enterprise
solutions for large, complex, multi-site, mission-critical
environments. Approximately 63% of revenue and gross margin is
generated from recurring services, with 63% of total revenue
generated from public sector customers.
The Acquisition provides instant scale, expanding the Group's
portfolio and creating core competencies in the latest secure cloud
technology, SD-WAN and related cyber security products.
The demand for such unified, secure cloud-based network and
communication solutions has been accelerated by the changes to
working lifestyles, driven by the pandemic, and this demand
continues to grow in both the public and private sectors. Datrix is
very well positioned to benefit from the increased need for these
new technologies.
Complementary vertical markets
Datrix has a strong customer base which is well aligned with
AdEPT's vertical market focus. The Datrix customer base includes
NHS Trusts, care homes, local authorities, universities, energy
companies, law firms and construction companies. As well as
bringing new customer relationships, the addition of Datrix
strengthens AdEPT's position on Local and Central Government
supplier frameworks.
This builds on the AdEPT expertise in this field, as evidenced
by the recent completion of the Kent wide NHS HSCN network
deployment benefitting over 400 NHS locations across the county,
including critical care hospitals, care homes and Doctor's
surgeries.
Gartner Magic Quadrant product strategy
The Datrix strategy is focused on the delivery of next
generation solutions from companies ranked as leaders by Gartner
within their Magic Quadrant methodology. Gartner is a widely
respected technology research and advisory firm. To be deemed a
leader by Gartner the product or company must excel based on their
vision and their ability to execute the vision within their
field.
Outstanding partner relationships
Datrix is a highly respected partner of Extreme Networks, a
provider of end-to-end networking solutions for large enterprises.
Datrix holds the ultimate Black Diamond Specialized Partner status
with Extreme. This status reflects that Datrix has significant
expertise and experience in their technologies and solutions.
Bringing benefits in terms of technical, marketing and pricing
support. Datrix is a premium partner with Cato Networks, which
provide converged SD-WAN and network security solutions delivered
as a cloud platform, and is also a Gold Partner of Palo Alto
Networks, a global leader in cyber security.
Financial information on Datrix
The valuation of the business was based on the unaudited
management accounts of Datrix, for the 12 months to 31 January
2021, reported revenue of GBP10.7m, up 8% on the previous 12
months' revenue of GBP9.9m. Gross margin rose 36% from GBP3.1m to
GBP4.2m, driven by an increase in contracts for highly secure
enterprise networks and professional services. The business was
restructured, during this period, to match the new product focus
and EBITDA improved from a loss of GBP1.1m, in the prior 12 months,
to a profit of GBP1.1m. Net liabilities and gross assets at 31
January 2021 were GBP1.7m and GBP3.8m, respectively.
Additionally, as a result of the Acquisition, the Group expects
to generate cost synergies of GBP0.4m in the year ending 31 March
2022.
Terms of the Acquisition
Initial consideration of GBP9.0m of Datrix on a debt free, cash
free basis as at 31 March 2021 is payable in cash. Pursuant to the
terms of the share purchase agreement, the effective date of the
acquisition is 1 April 2021. Further earn-out consideration of up
to GBP7.0m may be payable in cash dependent upon the trading
performance of Datrix in the 12-month period ending 31 March
2022.
The total consideration will be funded out of AdEPT's new bank
facility, announced as part of the Trading Update announced on 7
April 2021, with headroom in the facility to support further
acquisitive growth alongside the payment of the outstanding
deferred consideration.
Management
The key management of Datrix are retained in their current
capacity, with a clear focus on expanding the Group's presence in
advanced cloud-centric networking. The Datrix operations will be
migrating to the new One AdEPT platform, creating improved
operational and financial insight. Under AdEPT's ownership, Datrix
will be led by a current Managing Director of Datrix, Mark Thomas,
who will report directly to AdEPT CEO, Phil Race.
Mahmood Chaudhri, Datrix exiting CEO, will be retained in a
consultancy role during the earn-out period.
Financial impact of the Acquisition
The Board expects the Acquisition to be earnings enhancing in
the year ending 31 March 2022, being the first full year of
ownership.
Following the Acquisition, the Group run-rate revenue and
adjusted EBITDA(1) for the year ended 31 March 2022 is expected to
increase by c.18% and c.13% respectively, including the GBP0.4m of
cost synergies the Group expects to generate for this period.
Phil Race, Chief Executive of AdEPT, said:
"This acquisition is a game-changer for AdEPT, taking us to the
forefront of next generation networking delivery. The AdEPT Group
already has a strong presence in the networking and cyber security
arena, as evidenced by the delivery of the mission critical Kent
NHS network, the deployment of the secure Fortinet firewall across
London schools, and through offerings on our AdEPT owned hybrid
cloud platform, Nebula.
Datrix, with the outstanding new products and partners it
brings, builds significantly on our capabilities, adding scale and
extending both our expertise and our solution breadth, which will
benefit our customers in this large and growing marketplace.
"Datrix is a high-quality business with a well-established
customer base, generating strong levels of recurring revenue and a
cash generative, capex light, business model.
We are delighted that the key members of the Datrix senior
management team have chosen to join us. I look forward to working
with them over the coming years and, on behalf of the Board,
welcome them wholeheartedly to AdEPT."
Mark Thomas, Managing Director of Datrix, added:
"We are delighted to become part of the AdEPT Technology Group.
From the outset, it was clear that the solution set we take to
market is complementary to AdEPT's, and that the combination of
AdEPT and Datrix expertise will bring benefits to both parties, and
crucially to our customers. Our joint presence in the NHS will
undoubtedly create new opportunities and being part of a larger
group will help us capitalise on the growing and substantial market
for advanced cloud-centric networks and cyber security."
For more information please contact:
AdEPT Technology Group Plc
Ian Fishwick, Chairman Tel: 07720 555 050
Phil Race, Chief Executive Tel: 07798 575 338
John Swaite, Finance Director Tel: 01892 550 243
N+1 Singer (Nominated Adviser
& Broker)
Shaun Dobson / Iqra Amin Tel: 020 7496 3000
Belvedere Communications
Cat Valentine Tel: 07715 769 078
Keeley Clarke Tel: 07967 816 525
adeptpr@belvederepr.com
This announcement has been released by John Swaite, Finance
Director, on behalf of the Company.
About AdEPT:
AdEPT Technology Group plc is one of the UK's leading
independent providers of managed services for IT, unified
communications, connectivity and voice solutions. AdEPT's tailored
services are used by thousands of customers across the UK and are
brought together through the strategic relationships with tier-1
suppliers such as Openreach, BT Wholesale, Virgin Media, Avaya,
Microsoft, Dell and Apple.
AdEPT is quoted on AIM, operated by the London Stock Exchange
(Ticker: ADT). For further information please visit:
www.adept.co.uk .
For further information about Datrix:
https://www.datrix.co.uk/
About SD-WAN - advanced cloud-based networking:
Networks were historically designed to support a collection of
locations, joined by fixed connections, where the locations held
both users and their data, all within a firewall to protect
information.
This has changed dramatically in recent years, accelerated by
the pandemic, with users requiring remote access to systems from
any location. Information needs to pass via the unpredictable
internet, and via owned and managed networks. Data sets can be
substantial, and security and performance challenges are
exacerbated by the remote nature of users, who may not be 'living'
within a firewall. Furthermore, applications can reside either
within a company network or hosted virtually in the Cloud.
This new world needs to connect groups of users securely, in a
resilient and highly performant way, to their applications, and
their data - all in a flexible manner which can be changed
readily.
Enter the new world of SD-WAN and Secure Access Service Edge
technology (SASE), encompassing the latest technologies and
advanced services, which allow networks and their security to be
controlled, managed, adapted, and monitored, through software, in a
cost-effective way.
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END
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