NASA.L Regulatory News (NASA)

Nasstar plc

("Nasstar", "Company" or "Group")

Acquisition of VESK Group

Nasstar (stock code: NASA), a provider of hosted managed and cloud computing services, is pleased to announce the acquisition of the business and assets of VESK Virtual Desktop LLP, Appiam Ltd and VESK Ltd (together the "VESK Group" or "VESK").

Total consideration for the acquisition of the VESK Group is £7,807,102 and is being satisfied as to £6,375,000 in cash, funded from the Company's existing bank and new facilities put in place for the purpose of this acquisition, and £1,432,102 by the issue of 18,431,172 new Nasstar Ordinary Shares at a price of 7.77 pence per share (Note 1). All the new Ordinary Shares will be locked in for a period of eighteen months (subject to certain agreed exempt circumstances).

The cash element of the total consideration will be paid as to £6,056,250 on 8th October 2015 with deferred consideration of £318,750 being paid in November 2016 subject to confirmation of VESK's EBITDA performance in completion accounts for the 12 month period ended 30 September 2016. The cash element of the deferred consideration may be adjusted downwards if VESK's EBITDA as derived from the completion accounts is below an agreed amount. The acquisition is expected to be immediately earnings enhancing.

VESK comprises three separate legal entities under common ownership. Unaudited consolidated management accounts of VESK Group for the year ended 31 May 2015 reported turnover of £2.5m, Pre Tax Profit of £0.6m, with Net Assets of £0.8M as at that date.

James Mackie, the Managing Director and founder of VESK who has been instrumental to their success, will remain employed as Group Sales Director following completion. The Board of Nasstar has been looking to recruit a Group Sales Director to work with its Head of Sales and believes James will be a very strong addition to the Group. James is a thought leader in Cloud computing, giving talks all over the world at events such as the Open Storage Summit in California, Datacentre World in London and the Cloud Storage Summit in Amsterdam. James was appointed by Citrix Inc as Chairman of the European Citrix XenServer User group for two years running. As Managing Director at VESK, James has overseen the future technical roadmap, strategic growth and innovation of the business. Forming part of his long term incentive plan James will receive 9,446,590 new Options over Ordinary Shares which will be granted at 7.77 pence per share. The new Options will be exercisable in tranches of one third each, subject to the share price of Nasstar achieving levels of no less than 10 pence per Ordinary Share, 15 pence per Ordinary Share and 20 pence per Ordinary Share, in each case for a continuous three month period.

The VESK management and technical team is very well respected within the industry and will remain with the Group to drive the business forward. VESK employs 20 full time staff in its London office, further enhancing the Group's technical resource in that location.

Rationale for the Acquisition

The acquisition of VESK is consistent with Nasstar's stated expansion strategy of organic growth augmented by selective acquisitions where the Company can add intellectual property, technical expertise and sector knowledge.

VESK is one of the largest pure play hosted desktop provider in the UK after Nasstar and has doubled in size each year for the past four years. VESK has a very strong brand and reputation for excellent technical expertise, service and continual uptime. As a testament to VESK's security and resilience VESK was appointed by the Cabinet Office to be a G-Cloud Provider, thus being the first hosted desktop provider in the UK to procure directly to UK Government, up to Business Impact Level (BIL) 3. BIL3 information assurance permits VESK to store and process data for schools, Local Authorities and Fire & Rescue Services.

The VESK acquisition secures a further significant foothold in the legal sector for Nasstar, with VESK adding a further 13 law firms representing approximately 520 legal users of hosted desktop to the Group's customer base, placing Nasstar at the head of the Hosted Desktop market for the legal sector delivering Hosted Desktop services to approximately 50 legal firms with approximately 3,200 legal professional end users.

Importantly however, the G-Cloud accreditation offers Nasstar an established route to building a new vertical market to complement its existing focus in the legal, recruitment and finance verticals. In addition, one of VESK's largest clients is Whistl (formerly TNT), which when added to the Nasstar's current customer, APC, creates a foundation for building a vertical specialism in the logistics sector.

VESK has established a loyal customer base totaling 250 contracted recurring revenue clients with over 4,360 contracted hosted desktop end users and 1,559 additional hosted email end users. 3,510 of the hosted desktop users are live today, whilst the remaining 850 users will go live throughout the remainder of 2015. This will mean that the Enlarged Group will have a total of 12,010 hosted desktop users and 6,209 SaaS based users.

VESK Group brings to Nasstar additional data centre presence in both London & Singapore. This expands the opportunity to grow existing services in the Asia region, as Nasstar already delivers services to a number of recruitment clients in Singapore. Having a data centre presence in that region will open up new opportunities to deliver more services.

Nasstar sees potential for both revenue and cost synergies to be achieved, similar to the original Nasstar and e-know.net reverse. There is potential for data centre consolidation as well as the opportunity to target the VESK Group's customer base with Nasstar's expanded product portfolio.

VESK are winners of the 2013 Green IT Awards, finalists of the 2014 BCS (The Chartered Institute of IT) Cloud Provider of the year awards and their primary data centre is reported to be 100% carbon neutral.

VESK key financial information

In line with how Nasstar reports its financial KPIs, following the roll out of the remaining contracted 850 users referenced above, VESK's financial KPIs are expected to be:-

James Mackie, Managing Director of VESK, said:

"I am extremely excited for VESK and me personally to be joining Nasstar. The potential for growth within our market place is significant, and joining forces in this way further enhances our ability to take advantage of the opportunity within the cloud sector. VESK brings Nasstar an established position in new vertical markets, a very talented set of employees and a happy customer base. I am delighted to become Group Sales Director and look forward to working with the Nasstar team for many years to come"

Nigel Redwood, Chief Executive Officer of Nasstar, commented:

"The acquisition of VESK opens up new vertical markets for us; I am very encouraged by the opportunity generated by the G-Cloud certification. VESK have been a significant competitor in our space and I have respected their achievements for a number of years. Quality experienced technical resource is hard to come by in our industry and this acquisition brings us an additional skilled team of 20, further adding to our local resource pool in London. VESK also has an established customer base and brand within the legal sector and therefore this acquisition also ticks a number of the strategic aims that we set ourselves in our acquisition strategy. James is a very strong addition to the team and I am looking forward to working with another pioneer of our industry"

Note 1

Application has been made for the new Ordinary Shares to be admitted to trading on AIM ("Admission"). Admission is expected to occur on 8th October 2015. The new Ordinary Shares shall rank pari passu with the existing issued ordinary shares. Immediately following Admission there will be 384,875,619 Ordinary Shares of 1p each in issue. The acquisition is conditional on Admission.

For further information, please contact:

Nasstar plc +44 (0) 1952 225 000

Nigel Redwood, Chief Executive Officer

Niki Redwood, Finance Director

finnCap Limited (Nominated Adviser & Broker) +44 (0) 20 7220 0500

Julian Blunt, James Thompson (Corporate Finance)

Stephen Norcross (Corporate broking)

Gresham PR (Financial PR) +44 (0) 7866 805 108

Neil Boom