Iqgeo Regulatory News (IQG)

Ubisense Group plc

(the "Company" or the "Group")

Proposed Sale of RTLS SmartSpace for up to £35.0m,

Proposed Change of Name to IQGeo and focus on myWorld product offering

Ubisense Group plc (AIM:UBI), a market leader in enterprise location intelligence solutions, is pleased to announce that it has signed a conditional agreement to sell its RTLS SmartSpace business unit, including the Ubisense brand, to a company that is owned and controlled by funds managed or advised by Investcorp Technology Partners, an affiliate of Investcorp Bank B.S.C. (the "Purchaser") for up to £35.0m on terms set out below (the "Sale").

Highlights:

· £30m to be paid in cash on completion (subject to adjustments for net debt and net working capital on completion) plus £2m in a rollover investment into the sold business and an additional £3m earn-out tied to 2018 and 2019 revenue performance;

· Assuming completion of the transaction, IQGeo Group plc (as the Company is proposed to be renamed on completion of the Sale - please see below) will be a focused and well-funded geospatial software company working with telecoms and utilities companies worldwide;

· The RTLS SmartSpace business unit liabilities arising as a result of the Reorganisation and Completion are expected to comprise a £0.8m tax liability and £2.3m lease liabilities (IFRS 16). The Group's £1.75m HSBC loan is also classified as an RTLS SmartSpace business unit liability which will be repaid on completion;

· In the audited results for the year ended 31 December 2017, the IQGeo business generated revenue of £16.5 million and a contribution of £4.4 million, and in the unaudited first half results for the period ending 30 June 2018, the IQGeo business generated revenue of £5.7 million and a contribution of £1.3 million;

· Part of the consideration from the disposal of SmartSpace will be used to continue the globalisation of IQGeo, in particular in markets where fiber broadband and 5G investments are expected to increase significantly over the next five years;

· Cash balances of the Group have increased to £6.8m as at 16 Nov 2018 from £5.8m as at 30 June 2018;

· Following completion of the Sale, the Board intends to return excess funds to Shareholders (subject to complying with all relevant law and regulation in effecting such return). Further details of the amount and timing of the return to shareholders will be made in due course.

The Board believes that the terms of the Sale are highly attractive and appropriately value the future growth of the RTLS SmartSpace business against the uncertain nature and timing of that growth.

Completion of the Sale is conditional on, amongst other things, the approval of the Company's shareholders (the "Shareholders") and accordingly, a shareholder circular will be posted shortly for the purpose of calling a general meeting of the Shareholders (the "General Meeting"). Details of the General Meeting as well as further information on the Sale and the conditions to completion of the Sale are set out below. Completion of the Sale is expected to occur in December 2018.

Ubisense Group plc will (assuming the Sale completes and becomes unconditional in all respects) be renamed IQGeo Group plc ("IQGeo") and will focus on the compelling market opportunities in the Company's "myWorld" product offering. A resolution to approve the change of the Company's name will also be proposed at the General Meeting and, should the name change be approved, the shares of IQGeo will trade on AIM under the ticker "IQG".

Richard Petti, CEO of Ubisense Group plc said

"This is an extremely positive change for both the RTLS SmartSpace and the IQGeo divisions which the Board believes is in the long-term best interests of both businesses. The proceeds will allow us to refocus and re-brand the retained business as IQGeo and to invest in its myWorld software business which has a significant market opportunity providing solutions to some of largest telecoms and utilities suppliers in the world. 

As I look ahead to the potential for IQGeo, I am excited about the prospect of building on the success of our myWorld enterprise software which has increased revenues by a CAGR of more than 35% since 2015. We have an excellent existing customer base across our target markets and a growing pipeline of new opportunities driven by worldwide growth in fiber broadband and 5G technology. From day one, the mission of the IQGeo team will be to build on existing foundations to create a global software business, with high levels of recurring revenues, high margins and strong cash flows".

For further information contact:

Ubisense Group plc +44 (0) 1223 535170

Richard Petti

Tim Gingell

finnCap Ltd +44 (0) 20 7220 0500

Henrik Persson, Anthony Adams (Corporate Finance)

Tim Redfern, Richard Chambers (ECM)

Tulchan Communications LLP +44 (0) 20 7353 4200

James Macey White, Matt Low, Deborah Roney

Financial information on IQGeo

In the audited results for the year ended 31 December 2017, the Geospatial myWorld business generated revenue of £16.5 million and a contribution of £4.4 million. In the unaudited first half results for the period ending 30 June 2018, the Geospatial myWorld business generated revenue of £5.7 million and a contribution of £1.3 million. Allocating relevant central costs gives unaudited operating profit of £0.2 million for the year ending 31 December 2017 and an operating loss of £0.5 million for the period ending 30 June 2018.

Financial information on RTLS SmartSpace

In the audited results for the year ended 31 December 2017, the RTLS SmartSpace business generated revenue of £10.8 million and contribution of £1.4 million, whilst in the unaudited first half results for the period ending 30 June 2018, the RTLS SmartSpace business generated revenue of £4.6m and a contribution of £0.1 million. Allocating relevant central costs gives unaudited operating loss of £3.3 million for the year ending 31 December 2017 and £2.2 million for the period ending 30 June 2018. The value of the RTLS SmartSpace business' net assets (unaudited) at 30 June 2018 was £7.6 million (excluding intercompany balances).

Introduction to the proposed creation of IQGeo

IQGeo's flagship product myWorld enables its telecoms and utilities customers to dynamically integrate the different elements of their technology ecosystem in a fast and non-intrusive way, creating an operations hub that helps visualize and manage the status of people, data and things across the entire enterprise. myWorld customers enable a connected enterprise using data and location intelligence that increases the speed, accuracy and productivity of both new build and maintenance operations by up to 25%.

Growth in IQGeo's target markets are being driven by significant increases in global data consumption which is encouraging the global deployment of broadband fiber to homes and businesses, 5G mobile infrastructure densification as well as the on-going need that utility companies have to upgrade ageing infrastructure while maintaining margins and improving safety.

IQGeo's global target market consists of over 2,500 enterprise customers worldwide that we value at £3-4bn over the next 5 years. The business already benefits from a blue-chip customer base that includes over 30,000 users at some of largest telecoms and utilities suppliers in the world as well as a management team with strong experience in both telco and geospatial solutions.

IQGeo's myWorld revenues have grown 39% CAGR from 2015 to 2017, thanks to consistent growth in its principal markets of telco, fiber and utilities infrastructure. During this period, gross margins have consistently improved thanks to the increased focus on software and the shift of the revenue mix away from third party consulting services. As IQGeo evolves its product offerings to include more subscription and SaaS based offerings we expect the revenue mix to include higher proportions of recurring revenue with corresponding improvements in projected cashflows for the business.

Background to the transaction and use of proceeds

While Ubisense's Geospatial myWorld and RTLS SmartSpace business units share common high-level objectives, the technology and target markets have remained different. Significant opportunity exists for both businesses in markets that are demonstrating exciting change and accelerating growth. By separating them into two independent groups with separate ownership, the Directors believe that each business will be able to pursue its own growth trajectory, investing as required to enhance the solution offerings to their separate customer bases.

Following completion of the Sale of the RTLS SmartSpace business, IQGeo will be a focused software company working exclusively with leading telecoms and utilities companies worldwide and the Board will be able to focus on the significant opportunities apparent in the communications and utility sectors for productivity enhancing open platform support for geospatial systems.

The net proceeds of the Sale will significantly bolster the Group's cash balances, which have increased to £6.8m as at 16 Nov 2018 from £5.8m as at 30 June 2018.

Following completion, the Group intends to maintain a strong balance sheet and to drive the expansion of IQGeo business in the following areas:

- Further product development to expand the capabilities of the myWorld Capture, Fiber Planning, network asset and Salesforce app products including subscription and cloud based offerings;

- Investment in sales to increase the speed and depth of approach to the market and, in particular, the largest prospects in Europe and Asia where fiber broadband and 5G investments are expected to increase significantly over the next five years; and

- The launch a cloud-based version of myWorld which will offer end-to-end solution for a much broader utilities and telecoms market that is normally outside the scope of traditional geospatial vendors.

Subject to the need to adequately fund the above plans and maintain strong cash balances, the Board expects to return excess funds to Shareholders (subject to complying with all relevant law and regulation in effecting such return). The exact amount and timing of the return to shareholders cannot be guaranteed and accordingly further announcements will be made in due course.

Further information regarding the Sale

The Group is in the process of an internal reorganisation in order to separate the business, assets and liabilities of the RTLS SmartSpace business unit from the rest of the Group. It is the RTLS SmartSpace business unit that the Company has conditionally agreed to sell to the Purchaser. This restructuring is not conditional upon shareholder approval or any of the other conditions explained below.

The Purchaser (named Abyssinian Bidco Limited) is a wholly owned subsidiary of Abyssinian Topco Limited. Abyssinian Topco Limited is owned and controlled by Investcorp Technology Partners, an affiliate of Investcorp Bank B.S.C.

The maximum consideration payable for the Sale is an aggregate of £35.0 million comprising £30.0 million payable on completion (on a cash free/debt free basis) plus £2.0 million in a rollover investment into the sold business (to be effected by the issue to the Company of shares in Abyssinian Topco Limited ("Consideration Shares")) and an earn-out of up to £3.0 million on the following terms:

- £1.5 million contingent on the sold business achieving an agreed 2018 revenue target in 2018 and, subject to it meeting the agreed target in 2019 referred to be below, in 2019; and

- £1.5 million contingent on the sold business achieving an agreed 2019 revenue target.

At the date of this announcement, the Board intends to retain the Consideration Shares (which will comprise in the region of 5% of the issued share capital of Abyssinian Topco Limited) following completion of the Sale. This strategy will be reviewed on an ongoing basis.

The RTLS SmartSpace business unit liabilities arising as a result of the Reorganisation and Completion are expected to comprise a £0.8m tax liability and £2.3m lease liabilities (IFRS 16). The HSBC loan (being in the region of £1.75m) is also classified as an RTLS SmartSpace business unit liability which will be repaid on completion. These amounts will be deducted from the £30.0m payable in cash on completion. Professional fees associated with the Sale (including VAT) and reorganisation are expected to be in the region of £2.1m. Accordingly, the net initial cash proceeds of the Sale are expected to be in the region of £23.0m.

Completion is conditional upon the following matters:

a) the completion of the restructuring referred to above;

b) the Shareholders passing the Sale Resolution at the General Meeting to approve the Sale in accordance with the AIM Rules; and

c) the approval of the German Federal Cartel Office (Bundeskartellamt) to the Sale;

If any of the conditions above are not satisfied or, if capable of waiver by the Purchaser, not waived by the Purchaser, the Sale will not take place.

Subject to the approval of Shareholders and the other conditions noted above, the Sale is expected to complete in December.

On completion of the Sale and following a transition period, the Company intends to move to a new head office.

General Meeting, Voting recommendation and irrevocable undertakings

A shareholder circular will be posted shortly for the purpose of calling a general meeting of the Company's shareholders (the "General Meeting") at which a resolution to approve the Sale will be proposed. A resolution to approve the change of the Company's name to IQGeo Group plc will also be proposed at the General Meeting. The General Meeting will be held on 13 December 2018 at 9.30am at the offices of Ubisense Group plc, St. Andrew's House, St. Andrew's Road, Cambridge CB4 1DL.

The Directors (excluding Peter Harverson, who remains on temporary leave of absence for medical treatment) intend to unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting as they have irrevocably undertaken to do in respect of their beneficial holdings amounting, in aggregate, to 6,594,358 Ordinary Shares, representing approximately 9.0% of the existing ordinary share capital of the Company. In addition, Kestrel Partners LLP have irrevocably undertaken to vote in favour of the Resolutions in respect of the 19,045,493 Ordinary Shares under their discretionary management, representing approximately 26.1% of the existing ordinary share capital of the Company. Combined these irrevocable undertakings represent approximately 35.1% of the existing ordinary share capital of the Company.

Sole financial advisor

KPMG LLP* acted as sole financial advisor to Ubisense Group plc with regard to the Sale.

*KPMG LLP, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company and for no-one else in connection with the matters referred to in this announcement and will not be responsible to any person other than the Company for providing the protections afforded to clients of KPMG LLP, nor for providing advice in relation to the matters referred to herein. Neither KPMG LLP nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of KPMG LLP in connection with the matters referred to in this announcement, or otherwise.