Acquisition of ICON

17 Oct 2016

Elecosoft plc

(“Elecosoft” or “the Company”)

Acquisition of ICON

The Board of Elecosoft announces the acquisition of Integrated Computing & Office Networking Limited (“ICON”) for a total consideration of £2.4 million.

ICON is a leading Software as a Service (“SaaS”) provider of building information and related data management and storage systems, principally to the UK retail sector. The acquisition is consistent with Elecosoft’s strategy of investment in SaaS technology to grow its customer reach and strengthen its position as an international provider of innovative, market-leading visual software applications.

ICON is a profitable software business with a high profile blue-chip customer base which includes seven of the top ten UK retailers, namely, ASDA, Boots, the Central England Co-operative, John Lewis, Morrisons, Sainsbury’s and Waitrose.

The directors of both Elecosoft and ICON are confident that the combination of ICON’s SaaS business with Elecosoft’s visualisation, estimation and project management software will enable the combined businesses to access new markets, benefit from cross-selling opportunities and enhance the significant recurring revenue generated by their respective software solutions.

Background to the acquisition

ICON is a web solutions software development company whose solutions enable organisations to track and manage the specifications of a portfolio of properties through a single platform. All building-related information, from physical fittings to decorative items, is stored in the cloud-based solution and can be duplicated and customised as necessary when a new property is added. At present, the ICON System is used primarily by large retailers operating numerous properties whilst needing to maintain a consistent brand.

The Company believes that there are significant opportunities both to leverage the expertise of ICON’s developers in the SaaS field and to cross sell ICON and Elecosoft’s products to customers.

ICON is based in Market Harborough, Leicestershire, and employs 16 staff.  The business reported revenues of £0.7 million for the year to 31 October 2015 and is on track to report revenues of £0.9 million for the year to 31 October 2016. In the year ended 31 October 2015, it generated a normalised pre-tax profit of £0.2m and had net assets of £0.3m.

Chris Lovelock, a founder of ICON, will remain a Director of the company.

Financing

The acquisition will be financed by a fixed term loan of £1.8 million, which will be amortised over 4 years at an interest rate of 2.75 per cent above Barclays base rate and by the issue of 2,222,223 Ordinary Shares of 1p each in Elecosoft (“Ordinary Shares”) at 27p per share.

Seller will not for a period of 12 months, without the prior written consent of Elecosoft, make any disposal of any Consideration Shares except through Elecosoft’s broker at the relevant date (appointed by the Buyer in accordance with the AIM Rules).

The Board of Elecosoft anticipates that the acquisition will be earnings neutral in the period ending 31 December 2016 and earnings enhancing thereafter.

Application for Admission

Application has been made for 2,222,223 Ordinary Shares to be admitted to trading on AIM. Admission is expected to become effective on 20th October 2016. Following Admission, Elecosoft will have 77,089,350 Ordinary Shares. All Ordinary Shares shall have equal voting rights and none of the Ordinary Shares are held in treasury. The total number of voting rights in the Company immediately following Admission will therefore be 77,089,350.

John Ketteley, Executive Chairman of Elecosoft plc, said:

“I am pleased to announce the acquisition of ICON, which represents a significant milestone in the development of Elecosoft. ICON is an accomplished and well established UK software business with excellent SaaS technology and strong domain knowledge. It has a 20-year record of delivering tailored, Internet-based solutions and has assembled an enviable client list in that period.

I would like to extend a warm welcome to the ICON team. We look forward to working closely with them as we continue to pursue our objective of becoming a leading international software provider in the markets we serve.

Referring recently to ICON Orbit, ICON’s browser based BIM model viewer, Jim Awe, Chief Software Architect at Autodesk Inc. was quoted as saying:

“For far too long, developers have been forced to sync associated data back into the original 3D model where it doesn’t really belong.  What ICON has done is an awesome demonstration of the principle of Internet-enabled design data.  The data can reside and be managed in the appropriate place, but is still visible and accessible in the context of the model.“

I believe that the above compliment to ICON’s technical capability from such an eminent source, gives a good indication of the strategic benefits that we can expect to be felt across the wider portfolio of Elecosoft products as we work with our new ICON colleagues.”

For the purposes of Article 7 of EU Regulation 596/2014, this announcement contains inside information.

About Elecosoft

Elecosoft is listed on the Alternative Investment Market in London (AIM: ELCO). It is a specialist international provider of software and related services to the architectural, engineering, construction and digital marketing industries from centres of excellence in the UK, Sweden, Germany and the US. Elecosoft’s market leading software solutions are developed by teams in the United Kingdom, Sweden and Germany; and its software programs cover project management, construction site management, estimating, timber engineering, 3D design and visualisation, and cloud based digital marketing solutions.

For more information, please visit www.elecosoft.com