Tpximpact Hldg Regulatory News (TPX)

This announcement contains inside information

23 March 2022

TPXimpact Holdings PLC

("TPXimpact", "TPX", the "Group" or the "Company") 

Acquisition of Peak Indicators Ltd and Swirrl IT Ltd

Trading Update

KITS earn out amendment

Two strategic acquisitions significantly improving the Group's data offering

TPXimpact Holdings PLC (AIM: TPX), the technology-enabled services company focused on digital transformation, announces the conditional acquisition of the entire issued share capital of both Peak Indicators Ltd ("Peak Indicators") and Swirrl IT Ltd ("Swirrl") (the "Acquisitions"). The Acquisitions are strategically important to TPX, significantly expanding the Group's capabilities in artificial intelligence (AI), data science and analytics.

Together they will form TPXimpact's AI & Data capability, opening a new market opportunity that the Company has so far addressed by working with associates. With 65 full-time staff members, this new capability will be positioned to assist clients across TPX's target sectors in gaining stronger insights to aid their decision making. 

Trading Update

The revenue from the Acquisitions, combined with the Group's existing revenue growth at the top end of market expectations,1 puts the Group on track to hit its FY23 £100m run rate revenue target around a year ahead of plan. Full year revenue for FY22 is also anticipated to be in-line with market expectations.

Highlights of the Acquisitions

Neal Gandhi, Chief Executive Officer of TPXimpact, said:

"I am delighted to welcome the Peak Indicators and Swirrl teams to TPXimpact. With a comprehensive and specialist range of data capabilities now in place, these acquisitions represent another key strategic step forward for TPX in our mission to take on the multitude of complex challenges facing the public and commercial sectors and deliver sustainable digital change. More than ever, we are now confident in our ability to bid for and win larger, more lucrative contracts with our enhanced service offering."

"We're also delighted to announce that having reached run rate revenues of approximately £100m through both these acquisitions and existing growth, we are on track to achieve our original commercial vision a whole year ahead of plan. This has been achieved at the same time as executing on our plan to become a single, integrated organisation operating under the TPXimpact brand. I'd like to thank all of our staff for their patience as we've pulled the combined organisation together. We're excited to now focus on our FY25 commercial vision of achieving £200m revenues on a run rate basis by March 2025."

1 Market expectations for revenue for the 12 months ended 31 March 2022 are for £78.8m and the 12 months ended 31 March 2023 are for £91.2m.

Peak Indicators Ltd

Chesterfield-based Peak Indicators, founded in 2008, is a leading data science services and analytics consultancy. It works with the UK Public and Commercial sectors to provide deep technical skills in data engineering, business analytics, data science and artificial intelligence. Peak Indicators has built a strong client-base across both sectors with customers including Devon County Council, HSBC, Northern Power Grid, North East Lincolnshire Council, the Ministry of Defence and John Lewis, alongside a number of other commercial sector companies.

Peak Indicators represents a strong fit for TPX, with both organisations' core values aligned around commitment to people, customers and communities. Both also have an ambition to promote diversity and inclusivity within the technology sector. The Acquisition of Peak Indicators supports TPXimpact's aim to kick-start digital careers among the communities in which it operates through Peak Indicators' highly successful Graduate and Degree Apprentice programmes, which has produced over 40% of their 50 full time employees.

The acquisition of Peak Indicators will be immediately accretive for TPXimpact, with Peak Indicators delivering revenues of £3.28m and an Adjusted EBITDA of £0.19m in the 12 months to 30 September 2021. Peak Indicators is debt free and with a strong bookings and revenue pipeline. Management is confident that Peak Indicators can deliver EBITDA in excess of £0.5min the 12 months to 30 September 2022.

TPXimpact has entered into a conditional agreement to acquire all of the shares in Peak Indicators Ltd from Andy Ball, Helen Ball, Antony Heljula and Kate Heljula. The acquisition of Peak Indicators is expected to complete in the first half of April 2022, conditional upon its key contracts remaining in force in the period between exchange and completion.

The total consideration for the acquisition of Peak Indicators (the "Peak Indicators Consideration") is £3.46m with £1.35m being satisfied in cash and £2.11m being satisfied through the issue and allotment of 938,888 ordinary shares in TPXimpact at a price of 225 pence per share, (the "Peak Indicators Consideration Shares"). The cash portion of the Peak Indicators Consideration will be funded through the Company's own cash reserves. After payment of the Peak Indicators Consideration, the Company's net debt position will remain well below 1x EBITDA on a pro forma basis. The Peak Indicators Consideration is all payable subject to and on completion of the acquisition.

The Peak Indicators Consideration Shares will be subject to lock-in and orderly market arrangements with one-third of the Peak Indicators Consideration Shares being released on each of the first three anniversaries of completion of the acquisition The orderly market provisions will apply to all of the Peak Indicators Consideration Shares until the fourth anniversary of completion.

Following the issue of the Peak Indicators Consideration Shares, the Swirrl Consideration Shares and the transfer and cancellation of the Returned Shares (as defined below), Andy Ball, Helen Ball, Antony Heljula and Kate Heljula will together hold 938,888 ordinary shares in TPXimpact, representing in aggregate 1.1% of the then issued share capital.

Andy Ball and Antony Heljula, Founders of Peak Indicators Ltd, said:

"From the inception of Peak Indicators, we have strived to create a company that is committed to our people, our customers and our community. These core values align with those of TPXimpact and we are excited to join them in using our collective skills to continue improving the world around us.

We are excited to join another purpose-led business in the next stage of our growth journey. As part of the TPXimpact team, we look forward to continuing to deliver impactful change."

Swirrl Ltd

Stirling-based Swirrl IT Ltd, is a cloud-based open data consultancy specialist with a focus on data integration and dissemination in public sector organisations. Through its 'PublishMyData' platform, Swirrl works to help government organisations better manage and distribute their data, so that analysts can find, understand and apply it to important problems.

Data integration and dissemination is an area of growing importance to governments as a means to tackle large and complex interconnected challenges such as climate change, improved healthcare and challenges facing the economy.

Swirrl has amassed a strong client base within the public sector and will strengthen TPX's foothold in this market. Customers include the Department for Environment, Forestry and Rural Affairs, the Office for National Statistics, Scottish Government and the Department for Levelling Up Housing and Communities.

The acquisition of Swirrl will be immediately earnings enhancing for TPX. It achieved revenues of £1.9m and Adjusted EBITDA of £0.5m in the 12 months to April 2021. Swirrl is debt-free and expects strong revenue growth for the year ending 5 April 2022.

TPXimpact has entered into a conditional agreement to acquire all of the shares in Swirrl IT Ltd from Bill Roberts, Ric Roberts and Sarah Roberts. The acquisition of Swirrl is expected to complete in the first half of April 2022, conditional upon its key contracts remaining in force in the period between exchange and completion.

The total consideration for this acquisition (the "Swirrl Consideration") is £3.2m with £1.2m being satisfied in cash and £2.0m being satisfied through the issue and allotment of 888,888 ordinary shares in TPXimpact at a price of 225 pence per share (the "Swirrl Consideration Shares"). The cash portion of the Swirrl Consideration will be funded through the Company's own cash reserves. An additional amount of £1.1m in respect of available cash in Swirrl in excess of its working capital requirements (subject to customary adjustment following the preparation of completion accounts) will be paid to the sellers within 3 days of completion. After payment of the Swirrl Consideration, the Company's net debt position will remain below 1x EBITDA on a pro forma basis. The Swirrl Consideration is all payable subject to and on completion of the acquisition.

The Swirrl Consideration Shares will be subject to lock-in and orderly market arrangements until 1 April 2024. The orderly market provisions will apply to all of the Consideration Shares until 1 April 2025.

Following the issue of the Peak Indicators Consideration Shares and the Swirrl Consideration Shares and the transfer and cancellation of the Returned Shares (as defined below), Bill Roberts, Ric Roberts and Sarah Roberts will together hold 888,888 ordinary shares in TPXimpact, representing in aggregate 1.0% of the then issued share capital.

Bill Roberts and Ric Roberts, Founders of Swirrl IT Ltd, said:

"We are very proud of the business we have built to date and are excited to mark this milestone in our growth as we join TPXimpact. The extra resources and broad range of expertise in TPXimpact will help us to scale up our work to transform how the public sector manages and uses data, opening up new opportunities for our customers and staff."

Amendment agreement

Further to the announcement made by the Group on 1 March 2021 in relation to the acquisition of Keep IT Simple LTD ("KITS"), TPX has agreed with Grant Harris, by way of an amendment agreement dated 22 March 2022 (the "Amendment Agreement") to amend the terms of the sale and purchase agreement entered into 26 February 2021 pursuant to which TPX acquired the entire issued share capital of KITS (the "KITS SPA"). These changes have been made in order to remove from the KITS SPA a number of operational restrictions so as to enable TPX to fully integrate the KITS business within the TPXimpact single brand. The removal of these restrictions will enable TPX to drive faster organic growth and greater profitability through the new integrated structure.

Under the terms of the KITS SPA, TPX had the right to claw back up to 3,888,889 of the ordinary shares in the capital of TPX that had been allotted and issued to Grant Harris as consideration for the acquisition of KITS (the "KITS Consideration Shares") if KITS' revenues do not meet a target of £26.8m in either the calendar year 2022 or the calendar year 2023. TPX has agreed in the Amendment Agreement to delete the clawback mechanism from the KITS SPA. Under the terms of the Amendment Agreement, it has been agreed that Grant Harris will return to TPX, for nil consideration, 972,222 of the KITS Consideration Shares (the "Returned Shares"). The Returned Shares will be cancelled by TPX immediately following their registration in the name of TPX. . 

The Amendment Agreement is a related party transaction under Rule 13 of the AIM Rules. The directors of TPX consider, having consulted with Stifel Nicolaus Europe Limited, that the terms of the Amendment Agreement are fair and reasonable insofar as TPX's shareholders are concerned.

 Total voting rights

Following the cancellation of the Returned Shares (but before the issue of the Peak Consideration Shares and the Swirrl Consideration Shares), the entire issue share capital of the Company shall comprise 87,386,595 Ordinary Shares and this is the total number of voting rights in the Company. No shares are held in treasury.

This figure may be used by shareholders as the denominator for the calculation by which they may determine if they are required to notify their interest in, or change to their interest in, the Company under the FCA's Disclosure Guidance and Transparency Rules.

The person responsible for this announcement is Oliver Rigby, CFO.

Enquiries:

About TPXimpact

TPXimpact exists to transform the organisations, services and systems that underpin society and that drive business success. It applies strategic and creative thinking, technology, innovative design and user-centred approaches to bring about numerous improvements which together multiply the impact of change. The Company works closely with its clients in agile, multidisciplinary teams that span organisational design, technology, and digital experiences. It shares a deep understanding of people and behaviours and a philosophy of putting people and communities at the heart of every transformation.

The business is being increasingly recognised as a leading alternative digital transformation provider to the UK public services sector, with c.75% of its client base representing the public sector and c.25% representing the commercial sector.

More information is available at www.tpximpact.com.