Placing and Acquisition

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, CANADA, JAPAN, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION. THIS ANNOUNCEMENT SHOULD BE READ IN ITS ENTIRETY. FURTHER DETAILS OF THE ACQUISITION AND PLACING ARE SET OUT BELOW.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND SHALL NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY NEW ORDINARY SHARES OF ELECOSOFT PLC.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED IN ARTICLE 7 OF THE MARKET ABUSE REGULATION NO. 596/2014 (“MAR”). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

6 November 2018

Elecosoft Plc

(“Elecosoft” or the “Company”) 

Acquisition of Active Online GmbH (“Active Online”)

Placing to raise £2.25 million

Elecosoft (AIM: ELCO), a developer of award winning software applications and related services within the architectural, engineering, construction and owner/operator sectors, is pleased to announce that it has signed an agreement for the acquisition of Active Online GmbH (“Active Online“) for an initial consideration of €3.45m (comprising cash and ordinary shares) and a potential further  bonus payment of up to €0.4m dependent on the attainment of specific performance and financial targets in the 3 years following completion (the “Acquisition“).

The Board announces that it has also raised funds via an equity placing to raise £2.25m at 70 pence per new Ordinary Share, conditional on Admission (as defined and further explained below).

Further details of the Acquisition and Placing are set out below and this announcement should be read in its entirety.

Acquisition Highlights:

·      Active Online is headquartered in Wesel, Germany and has developed a range of software applications for the visualisation of soft furnishings.

·      Its expert knowledge and expertise include the photorealistic product digitisation; the development of unique virtual rendering techniques for internet applications; and efficient data-cloud management techniques.

·      For the year ended 31 December 2017, Active Online achieved 17% revenue growth to €2.5m, of which 21% were recurring revenues attributable to data management and 32% of revenues are repeatable from existing customers in digitising material and image editing. In the same year, EBITDA was €0.24m and profit before tax was €0.124m.

·      The Board of Elecosoft has identified significant synergistic opportunities that they expect to arise as a consequence of close co-operation between Active Online and Elecosoft’s ESIGN GmbH (“ESIGN“) subsidiary.

·      ESIGN is a flooring internet visualisation business and Active Online’s soft furnishing visualisation will provide the opportunity to create a unique online interior platform for visualising all types and designs of interior coverings and flooring with the capability to transfer product data related to products included in the visualisation along the whole supply chain.

·      In conjunction with this, Active Online has already made considerable capital investment in areas including scanning facilities and their database of materials, in addition to virtual reality and augmented reality (“VR/AR”) technologies, elements which Elecosoft’s ESIGN business does not yet have and currently outsources.

·      The Acquisition is expected to be earnings enhancing within its first full financial year.

The Placing

The Board further announces a placing of 3,214,285 new ordinary shares of 1 penny each in the capital of the Company (“Ordinary Shares“) at a price of 70 pence per Ordinary Share (the “Placing Price” and the “Placing Shares“) to raise gross proceeds of £2.25 million (the “Placing) which will be used, inter alia to expedite the integration of Active Online with ESIGN, Elecosoft’s existing international online visualisation business.

The Acquisition

Active Online is a visualisation software business which specialises in soft furnishings and materials, such as curtains and blinds, fabrics, upholstery, paint and wallpaper, and also provides visualisation of different materials, colours and styles in photographic room scenes. Founded in 1999, and based in Wesel, North-West Germany, Active Online has 29 employees.

The Group has an existing company, ESIGN, that specialises in visualisation software for flooring and hard surfaces and accounted for c.10% of the Group’s revenue in the full year to 31 December 2017. 

Active Online’s software focuses on the digitisation of textile visualisation, and together with ESIGN will enhance the Group’s existing portfolio by adding new products and technical capabilities as well as cross-selling and upselling opportunities with the new Active Online products and existing ESIGN product.

The Directors have identified sales opportunities within the combined customer base of Active Online and ESIGN as well as with other Elecosoft Group companies, along with cost synergies.

The Acquisition is expected to be earnings enhancing within its first full financial year.

John Ketteley, Executive Chairman of the Company, commented:

“We look forward very much to working with our new colleagues at Active Online. When we make acquisitions, we look closely at the quality and flair of the management and people involved, at the technology and quality of the software, and at the potential opportunities for collaboration with companies in the Elecosoft Group. Active Online will bring with it an outstanding team of software developers; and AR and VR capabilities together with synergistic opportunities to develop new internet visualisation tools for the interior market worldwide.

The proceeds of the placing will provide the means to accelerate the integration of Active Online and ESIGN and the continued enhancement and development of our software technologies.”

Enquiries:

About Elecosoft plc

Elecosoft plc is an AIM-listed (ELCO-GB) software company with interests based principally in the UK, Sweden, Germany, Benelux, and the US. Elecosoft develops award winning software applications and related services to the architectural, engineering, construction and owner/operator sectors.

Elecosoft delivers a portfolio of software for project management, estimation, visualisation, Building Information Modelling (BIM), property management and digital marketing disciplines.

Elecosoft’s software and services are used during early planning stages through to construction and facilities management, driving the performance and day-to-day operations of its customers’ businesses.

Elecosoft’s broad, and increasingly integrated, product offering opens up exciting prospects to cross-sell and expand internationally as it grows its re-seller network

For further information please visit www.elecosoft.com.

Further information on Active Online

Active Online was founded in 1999 and is based in Wesel, North-West Germany with 29 employees. Active Online also owns 75% of Active Online SL, a visualisation company, based in Barcelona, Spain.

Active Online develops and provides visualisation software for soft furnishings and is a direct competitor of ESIGN. The senior management of Active Online will be joining the Elecosoft Group.

For the year ended 31 December 2017, Active Online achieved revenue of €2.5m (c.£2.2m), of which 21% were recurring revenues attributable to data management. A further 32% of revenues are repeatable from existing customers in digitising material and image editing. In the same financial year, EBITDA was €0.24m (c.£0.21m) and profit before tax was €0.124m (c.£0.11m). Active Online achieved 17% revenue growth in 2017 and made significant capital investment in the business including: investment in a scanning facility – a scanner for all products and a database of materials and software development and VR/AR technologies (technology that ESIGN does not yet have).

Reasons for the Acquisition & Use of Proceeds

Elecosoft intends to deploy the net proceeds of the Placing as a means to accelerate the integration of Active Online and ESIGN and the continued enhancement and development of our software technologies.

The Acquisition will provide significant cross-selling and upselling opportunities across new product ranges and geographies. Further justifications for the acquisition include:

·      The deal is expected to be earnings enhancing in its first full financial year.

·     Significant synergies identified between ESIGN and Active Online’s operations, including the additional ability for ESIGN to begin the in-house scanning of materials, a process which they currently outsource, with an expected cost saving of around €150k per annum as well as a new joint sales and marketing strategy.

·     Expansion of ESIGN’s geographical reach. Active Online’s operational base is in Wesel, North-West Germany, but its operations span across Europe, including the 75% ownership of Active Online SL, a Barcelona based visualisation company, also included in the Acquisition.

·     The addition of Active Online’s large base of customers to ESIGN’s existing customer base, and a large global addressable market, where visualisation software is not yet widely used.

·    Active Online has already made significant capital investment in scanning facilities and a database of materials, as well as in software development and VR/AR technologies.

Current trading

The Company announced its interim financial results for the period to 30 June 2018 on 12 September 2018. The Company continues to trade in line with its expectations and its assessment of outlook and the market remains unchanged. 

Principal Terms and Conditions of the Acquisition

The Company has entered into an agreement with the vendors of Active Online (the “Vendors“) pursuant to which it has agreed to acquire the entire issued share capital of Active Online (the “Acquisition Agreement“). The initial consideration for the Acquisition is €3.45m (c. £3.03m), comprising €2.95m (c. £2.59m) initial cash consideration to all vendors together and approximately €0.5m (c. £0.44m) via the issue of 597,004 new Ordinary Shares at 73.55 pence, being the average closing price in the 5 days from 29 October 2018 to 2 November 2018 (the “Consideration Shares“) to the two founder directors. In addition, up to a further €0.4m bonus will be payable to the two founder directors equally over 3 years based on financial and commercial objectives set for 2019, 2020 and 2021. The Consideration Shares will be locked-in for a period of 3 years following Admission.

Transfer of the shares in Active Online to the Company will take place immediately upon admission of the Placing Shares and Consideration Shares to trading on the AIM market (“AIM”) of London Stock Exchange plc (the “London Stock Exchange”), (“Admission”) which is expected to take place on or before 8.00 a.m. on 9 November 2018.

Details of the Placing and Placing Agreement

Subscribers for the Placing Shares have, pursuant to the Placing Agreement, been procured by finnCap, as agent for the Company, comprising existing institutional investors.

The Placing Price represents a discount of approximately 3.4 per cent. to the closing mid-market close price of the Ordinary Shares on 5 November 2018 (being the last practicable dealing day prior to the date of this announcement). The Placing Shares will represent approximately 3.93 per cent. of the ordinary share capital as enlarged by the Placing and Acquisition and will, when issued, rank pari passu in all other respects with the Company’s existing Ordinary Shares.

The Placing Shares, when issued, will be fully paid and will rank pari passu in all respects with the existing ordinary shares of 1 pence each in the capital of the Company, including the right to receive all dividends and other distributions declared, made or paid after the date of issue.

Application has been made for the Placing Shares and the Consideration Shares to be admitted to trading on the AIM. Admission is expected to take place on or before 8.00 a.m. on 9 November 2018.  The Placing is conditional upon, among other things, the Acquisition Agreement having been entered into and not having been terminated in accordance with its terms, Admission becoming effective and the placing agreement between the Company and the Bookrunner (the “Placing Agreement“) not being terminated in accordance with its terms. Following Admission, the Company will have 81,819,407 Ordinary Shares in issue.

Expected Timetable of Principal Events

Admission Statistics

Exchange rate of 1:0.8782 EUR to GBP used throughout

Forward-looking statements

This announcement contains statements about Elecosoft that are or may be deemed to be “forward-looking statements”.

All statements, other than statements of historical facts, included in this announcement may be forward-looking statements. Without limitation, any statements preceded or followed by, or that include, the words “targets”, “plans”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “should”, “anticipates”, “estimates”, “projects”, “would”, “could”, “continue” or words or terms of similar substance or the negative thereof, are forward-looking statements. Forward-looking statements include, without limitation, statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects and (ii) business and management strategies and the expansion and growth of the operations of Elecosoft.

These forward-looking statements are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Investors should not place undue reliance on such forward-looking statements and, save as is required by law or regulation (including to meet the requirements of the AIM Rules, the Prospectus Rules and/or the FSMA), Elecosoft does not undertake any obligation to update publicly or revise any forward-looking statements (including to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based). All subsequent oral or written forward-looking statements attributed to Elecosoft or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements contained in this announcement are based on information available to the Directors of Elecosoft at the date of this announcement, unless some other time is specified in relation to them, and the posting or receipt of this announcement shall not give rise to any implication that there has been no change in the facts set forth herein since such date.

Important Information

This Announcement or any part of it does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States (including its territories and possessions, any state of the United States and the District of Columbia), Canada, Australia, the Republic of South Africa, Japan or any other jurisdiction in which the same would be unlawful. No public offering of the Placing Shares is being made in any such jurisdiction.

All offers of the Placing Shares will be made pursuant to an exemption under the Prospectus Directive from the requirement to produce a prospectus. In the United Kingdom, this Announcement is being directed solely at persons in circumstances in which section 21(1) of the Financial Services and Markets Act 2000 (as amended) (the “FSMA”) does not apply.

The Placing Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this Announcement. Any representation to the contrary is a criminal offence in the United States. The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada, no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; the relevant clearances have not been, and will not be, obtained for the South Africa Reserve Bank or any other applicable body in the Republic of South Africa in relation to the Placing Shares and the Placing Shares have not been, nor will they be, registered under or offering in compliance with the securities laws of any state, province or territory of Australia, Canada, Japan or the Republic of South Africa. Accordingly, the Placing Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction outside the United Kingdom.

finnCap Ltd is authorised and regulated by the Financial Conduct Authority (the “FCA”) in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing, and finnCap Ltd will not be responsible to anyone (including any placees) other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this Announcement.

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by finnCap Ltd or by any of its affiliates or agents as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefor is expressly disclaimed.

No statement in this Announcement is intended to be a profit forecast or estimate, and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

Neither the content of the Company’s website nor any website accessible by hyperlinks on the Company’s website is incorporated in, or forms part of, this Announcement.