TIDMCLCO
RNS Number : 8183I
Cloudcoco Group PLC
17 August 2021
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CONSTITUTE AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN
OFFER TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY ORDINARY
SHARES OF CLOUDCOCO GROUP PLC.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
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17 August 2021
CloudCoCo Group plc
("CloudCoCo", the "Group" or the "Company")
Acquisition of Systems Assurance Limited, proposed fundraising
of GBP2.1 million, Notice of General Meeting and change of
Nominated Adviser and Broker
CloudCoCo (AIM: CLCO), a UK provider of IT and communications
solutions to businesses and public sector organisations, is pleased
to announce the proposed acquisition of the entire issued share
capital of Systems Assurance Limited ("Systems Assurance"), an IT
group comprising a B2B value-added reseller ("VAR") and an
automated cloud-based VAR and IT managed service provider, and a
proposed fundraising of GBP2.1 million before expenses through a
conditional Placing.
Acquisition highlights
-- The net consideration for the Acquisition is GBP0.83m in cash
(GBP1.58m gross), subject to adjustment, and the grant of warrants
over four million Ordinary Shares
-- Systems Assurance is an IT group comprising a B2B VAR and an
automated cloud-based VAR and IT managed service provider
o For the year to 31 December 2020, unaudited results showed
Systems Assurance generated revenue of GBP6,093,000 and an adjusted
EBITDA of GBP209,000
-- Systems Assurance introduces a proven and scalable hardware
engine into CloudCoCo's existing business as well as expanding its
IT Managed Service offering, which will help increase operational
efficiency and drive margins
-- The e-commerce division of Systems Assurance will increase
the purchasing power of the Enlarged Group and broaden its product
range, as well as streamline its current processes and offer
greater efficiency and margin accretion through automation
-- The proposed Acquisition will increase CloudCoCo's customer
base and provide the opportunity for cross-selling and upselling of
its services
-- The Acquisition signals the start of the Company's 'Get
Bigger' phase, both organically and through acquisition, to provide
scale to the business. It follows the successful completion of 'Get
Well' and 'Get Fit' phases
Placing highlights
-- CloudCoCo has raised GBP 2.1 million before expenses through
a conditional Placing arranged by Allenby Capital of 210,000,000
new Ordinary Shares at a price of 1 penny per share
-- The Placing will fully fund the Acquisition of Systems Assurance
-- The Placing will also provide additional working capital to
fund integration of the Acquisition and will also provide headroom
that could be used to fund further acquisitions
-- The Placing was carried out at an approximate 13 per cent.
discount to the Company's closing price of 1.15 p per share on
Monday 16 August 2021
Further information on the Acquisition and Placing is set out
below.
Mark Halpin, Chief Executive of CloudCoCo, said :
"This Placing and Acquisition is set to be a transformative step
forwards for CloudCoCo. It sees us progress to the next stage in
our development - 'Get Bigger' - which will see us focus on scaling
the business while winning larger and longer contracts.
"I would like to welcome the Systems Assurance team to the fold.
They bring with them fantastic technology and an impressive
customer base that not only complement the existing CloudCoCo
business but will help unlock its potential through driving
substantial efficiency gains and introducing new cross-selling
opportunities.
"I am grateful to all those who have joined us on our journey
through the Placing. As well as making the Acquisition possible, it
has given us the opportunity to strengthen our balance sheet while
giving us headroom to explore further M&A activity - a key
focus for the Group in the short-term.
"This is the start of an exciting new chapter in the CloudCoCo
story and I look forward to reporting on further progress in due
course."
Key information
The Placing and Acquisition are subject to approval of the
Resolutions to grant the Directors authorities to allot and to
dis-apply pre-emption rights in relation to the allotment and issue
of the Placing Shares and the Fee Shares at the General Meeting
which is being convened for 10.00 a.m. on Thursday 2 September
2021.
The Acquisition and the Placing are expected to complete and
admission to trading on AIM of the Placing Shares and the Fee
Shares is expected to occur at 8.00 a.m. on Friday 3 September
2021.
A circular (the "Circular") will be posted to Shareholders today
setting out details of the Acquisition and the Placing, including
the background to and reasons for them, and to explain why the
Directors consider them to be in the best interests of the Company,
its Shareholders and stakeholders as a whole and recommend that
Shareholders vote in favour of the Resolutions to be proposed at
the General Meeting.
Change of Nominated Adviser and Broker
The Company is also pleased to announce the appointment of
Allenby Capital Limited as Nominated Adviser and sole Broker to the
Company with immediate effect.
Total voting rights
Subject to the passing of the Resolutions and following
Admission, the Company's total issued share capital will consist of
706,215,686 Ordinary Shares, with one voting right per share. The
Company does not hold any shares in treasury. Therefore, the total
number of Ordinary Shares and voting rights in the Company will be
706,215,686 from Admission. This figure may be used by shareholders
in the Company as the denominator for the calculations by which
they will determine if they are required to notify their interest
in, or a change in their interest in, the share capital of the
Company pursuant to the FCA's Disclosure Guidance and Transparency
Rules.
Director declaration
The Company announces the following disclosure in accordance
with Rule 17 and Schedule 2(g) of the AIM Rules for Companies. Andy
Mills was formerly a director of 3B Technical Services Limited at
the time that company was placed into liquidation in January 1997.
This disclosure was inadvertently omitted from the announcement of
Andy Mill's appointment to the Board of the Company on 21 October
2019.
Further information
The above summary should be read in conjunction with the full
text of this announcement below and the Circular. Extracts from the
Circular are set out below.
Capitalised terms used in this announcement have the meaning as
set out in the Definitions section at the end of this announcement
unless otherwise defined herein.
Contacts:
CloudCoCo Group plc Via Alma PR
Mark Halpin (CEO)
Darron Giddens (CFO)
Allenby Capital Limited - (Nominated Tel: +44 (0)20 3328
Adviser & Broker) 5656
Jeremy Porter / James Reeve - Corporate
Finance
Tony Quirke / Amrit Nahal - Equity
Sales
Alma PR - (Financial PR) Tel: +44 (0)20 3405
David Ison 0205
Josh Royston cloudcoco@almapr.co.uk
Kieran Breheny
About CloudCoCo
Supported by a team of industry experts and harnessing a diverse
ecosystem of partnerships with blue-chip technology vendors,
CloudCoCo makes it easy for businesses and public sector
organisations to work smarter, faster and more securely by
providing a single point of purchase for their connectivity,
telephony, cyber security, cloud, IT hardware and support
needs.
CloudCoCo has offices in Warrington and Leeds in the UK.
www.cloudcoco.co.uk
Extracts from the Circular
(References to pages or paragraphs and appendices below refer to
the relevant pages, paragraphs or appendices of the Circular and
references to 'this document' refer to the Circular).
1. Introduction
It was announced on 17 August 2021 that the Company has
conditionally agreed to acquire the entire issued share capital of
Systems Assurance, owner of the Systems Assurance Group, for a net
cash consideration of GBP836,000 (GBP1,581,600 gross), on a
cash-free debt-free basis, subject to any adjustment, and the grant
of warrants over four million Ordinary Shares on the terms set out
in paragraph 7 of this letter. The Systems Assurance Group is an IT
group delivering automated cloud-based solutions and managed IT
services to a wide range of public and private sector
organisations. It also provides VAR services to B2C customers.
The Company also announced a conditional placing of 210,000,000
new Ordinary Shares at a price of GBP0.01 per share to raise GBP2.1
million before expenses.
The Placing is subject to approval of the Resolutions to grant
the Directors authorities to allot and to dis-apply pre-emption
rights in relation to the allotment and issue of the Placing Shares
and the Fee Shares at the General Meeting which is being convened
for 10.00 a.m. on 2 September 2021.
The Acquisition and the Placing are expected to complete and
admission to trading on AIM of the Placing Shares and the Fee
Shares is expected to occur at 8.00 a.m. on 3 September 2021.
The purpose of this document is to give you further details of
the Acquisition and the Placing, including the background to and
reasons for them, and to explain why the Directors consider them to
be in the best interests of the Company, its Shareholders and
stakeholders as a whole and recommend that you vote in favour of
the Resolutions to be proposed at the General Meeting.
2. Background to the Company
CloudCoCo Group plc is a fast-growing Managed IT Services
Provider (MSP) and IT VAR to the UK public and private sectors.
CloudCoCo Limited was acquired by Adept4 plc in October 2019 and
the enlarged business changed its name to CloudCoCo Group plc in
November 2019. CloudCoCo Limited's founder, Mark Halpin, was
appointed as CEO of CloudCoCo Group plc in March 2020. The initial
goals of the incoming management team during the first half of the
financial year ended 30 September 2020 were to correct the legacy
issues associated with the Adept4 plc business, by focusing on
reducing customer churn, reducing costs and returning the business
to cash generation in spite of the challenges posed by Covid-19 - a
process known internally as the 'Get Well' phase.
Since then, the business has been transformed, successfully
progressing to and executing the 'Get Fit' stage of its plan,
focussing on winning new customers and enhancing the quality and
speed of its service while building out its offering around four
key areas of technology: Cloud, Cyber security, Connectivity and
Collaboration. It has done this whilst competing against large,
traditional IT services companies, challenging the often-lethargic
incumbent IT providers and establishing itself as an asset-light,
talent-rich cloud solutions business. In November 2020, CloudCoCo
launched the 'CoCo-One' programme, a comprehensive initiative
comprising a number of projects designed to empower colleagues,
including the issue of performance-based share options to all
qualifying staff.
CloudCoCo launched its new website at the start of the 2021
financial year and has continued to enrich it with content as well
as increasing its social media output. Traffic to the website was
up 29% (March 2021 versus October 2020) and LinkedIn followers
increased 19%. The Company has also combined its technical teams in
the Warrington and Leeds offices in order to improve efficiency and
knowledge sharing and to deliver faster and better projects. Its 50
staff deliver IT services on a 24 hour, seven days a week basis to
c.500 UK organisations.
3. Background to and reasons for the Acquisition and the Placing
The next phase of the Company's three-part plan is to 'Get
Bigger' both organically and through acquisition to provide scale
to the business. The proposed Acquisition and associated Placing
introduces a proven and scalable hardware engine into CloudCoCo's
existing business as well as expanding its IT Managed Service
offering. This will help to increase operational efficiency and
improve margins. The e-commerce division of the Systems Assurance
Group will increase the purchasing power of the Enlarged Group and
broaden its product range. The e-commerce engine will also
streamline CloudCoCo's current processes and offer greater
efficiency and margin accretion through automation.
Further, the proposed Acquisition will increase CloudCoCo's
customer base and provide the opportunity for cross-selling and
upselling more of its services.
The Placing will strengthen CloudCoCo's balance sheet and
provides greater flexibility for further acquisitions. After costs
of the Placing and Acquisition, the Placing is expected to net
GBP1.77 million to enable the Company to acquire Systems Assurance
for a net cash consideration of GBP836,000, on a cash-free
debt-free basis . The remaining GBP0.93 million raised from the
Placing will provide the Enlarged Group with working capital to
fund integration of the Acquisition and will also provide headroom
that could be used to fund further acquisitions, with some
potential opportunities already identified to grow the enlarged
business. The Board may determine that certain of the Placing
proceeds may be applied to pay down a portion of the outstanding
MXC Loan Notes, subject to the availability of free cash.
4. Information on Systems Assurance
The Systems Assurance Group was founded in 1992 and seeks to
reduce their customers' overall spending on IT hardware and
services by providing global bids on its customers' hardware and
services' requirements directly with the suppliers. The Systems
Assurance Group comprises two businesses based in Sheffield,
Systems Assurance and More Computers:
-- Systems Assurance is an automated cloud-based IT VAR and IT
managed service provider to a wide range of public and private
sector organisations (www.systemsassurance.com).
-- More Computers is a B2C VAR (www.morecomputers.com).
The Systems Assurance Group has developed an automated
Electronic Data Interchange (EDI)
e-commerce platform that connects customers directly to c.100
product and service providers and presents users with a live
marketplace of c.650,000 IT products available to order online. The
platform instantaneously places orders with the product and service
providers for direct delivery to a customer's site. The platform
uses price intelligence to monitor like for like product pricing
and availability from competitors during each day to ensure value
to its customers. In addition to attracting customers from its own
website, the Systems Assurance Group generates a large number of
sales from Amazon and eBay combined.
Systems Assurance
Systems Assurance provides subscription services including
Microsoft Office 365, Dynamics 365, Azure, software maintenance and
other subscriptions, providing recurring revenue. It also sells
general computer hardware including desktops, laptops, printers and
accessories, from brands including HP, IBM, Sony, Microsoft, Apple
and more.
Systems Assurance can also provide additional installation and
consultancy for products including Office 365, SharePoint,
telephony products, and migration from existing applications. The
company has access to a wide range of products from UK based
distributors allowing it to offer a "one-stop shop" for multiple
hardware and software vendors to its customer base. All products
are directly dispatched from suppliers, with tracking notices being
sent to reduce the risk of holding slow-moving stock.
Systems Assurance has grown a 125 strong B2B customer base over
25 years, with 5 of the top 10 customers by revenue having been
loyal to the company for over 11 years. The customers are managed
by 3 in-house sales executives, who have been with the company
between 7 and 23 years. Excluding directors, the Systems Assurance
Group employs a total of 11 staff. The two owner directors will
remain with the company for a period after the Acquisition to
ensure successful handover and integration into CloudCoCo. There is
considerable scope to expand the team at Systems Assurance's
Sheffield premises that can hold up to 60 staff.
Systems Assurance attracts new customers through direct
marketing and online marketing campaigns via LinkedIn and Twitter.
The company has a prospect database of over 11,000 potential new
clients across a wide range of sectors and targets its campaigns
based on market trends.
The company receives referrals and marketing funds as a
Microsoft Gold partner with additional opportunities available to
exploit this further and will also tender for business with
existing customers. Accreditations include IBM Preferred Reseller,
HPE Authorised Reseller and Cisco Certified Partner, which will
increase the CloudCoCo ecosystem and accreditations.
More Computers
More Computers is an online retailer selling computer equipment
and consumer electronics throughout the UK via its own websites
using the "More" branding such as MoreFrom.com, MoreLaptops.co.uk,
MorePhones.co.uk and MoreGaming.co.uk, as well as selling on
Amazon, eBay and other marketplaces. More Computers utilises Google
Shopping, organic search, price comparison websites and marketplace
referrals to attract new customers, whilst maintaining in-house
technology to monitor competitor prices and direct targeted
advertising.
The More Computers business prides itself on the level of its
customer service and lack of hidden charges (e.g. credit card
surcharges, delivery fees, cancellation fees and standard rate
telephone numbers) and transparency of its terms and conditions.
This fits with the CloudCoCo business ethos. The VAR business
accounted for c.GBP2.6 million of revenue for the financial year
ended 31 December 2020.
More Computers utilises an in-house developed eCommerce platform
to manage sales, logistics, pricing intelligence and marketing,
thereby reducing supplier costs and maintaining control over
ordering.
5. F inancial Information on the Systems Assurance Group
For the year to 31 December 2019, the Systems Assurance Group
generated revenue of GBP5,561,000 and an Adjusted EBITDA of
GBP184,000. For the year to 31 December 2020, the unaudited results
showed that the Systems Assurance Group generated revenue of
GBP6,093,000 and an Adjusted EBITDA of GBP209,000. The unaudited
net assets of the Systems Assurance Group at 31 December 2020 were
GBP920,000.
The net cash consideration for the Acquisition of GBP836,000
represents four times Adjusted EBITDA for the year to 31 December
2020, and the Warrants are also being granted. The Acquisition is
being completed on a cash-free debt-free basis adjusted for actual
working capital.
6. Strategy for the Enlarged Group
The B2B Managed IT Services division of Systems Assurance
complements CloudCoCo's own Managed IT service operations.
CloudCoCo plans to scale and further integrate the Systems
Assurance e-commerce platform with additional recurring IT managed
service providers, such as Microsoft and Trend Micro, to offer
customers the ability to securely manage their IT estate remotely.
The acquisition of the e-commerce platform will allow CloudCoCo to
lower costs, and improve speed, accuracy, and business efficiency.
This will benefit both CloudCoCo's existing business as well as any
future acquisitions.
The More Computers business and the EDI platform will better
enable CloudCoCo to challenge the incumbent IT providers by
delivering enterprise grade on-demand IT products and services to
its customers. CloudCoCo will also expand the EDI platform to cover
software licensing and potentially telephony where CloudCoCo
already has a presence.
7. Principal terms of the Acquisition
The Acquisition will be made pursuant to the Acquisition
Agreement. Under this, CloudCoCo Holdings has agreed to acquire
Systems Assurance for gross consideration of GBP1,581,600 in cash,
subject to adjustment (if any) following preparation of a
completion balance sheet, and the grant of the Warrants. The cash
consideration is payable within three Business Days of Completion.
The Sellers, Christopher Wheater and Simon Lewington, are directors
of the Systems Assurance Group.
The Warrants to be granted on Completion will be exercisable at
a price of 1.5 pence per share and can be exercised in the period
of time commencing six months after the date of Completion up to
and including the date being the tenth anniversary of the date of
Completion. The Warrants will be granted as to 2,000,000 Warrants
to Simon Lewington and 2,000,000 Warrants to Christopher Wheater.
The Warrants are only transferable to a permitted transferee (which
includes a holder's privileged relations (for example, spouse,
civil partner, parent, children and grandchild), family trust or
trustees of such family trust). The exercise of the Warrants is
conditional upon (a) as at the date of the relevant notice of
exercise, the Current Market Price (being the average of the
closing price published by the London Stock Exchange for the
Ordinary Shares for the five consecutive Business Days ending on
the Business Day immediately preceding such date) being not less
than 2 pence; and (b) the prior six months' revenue from New
Customers or Qualifying Customers of the company (as such terms are
defined in the Warrant Instrument) being at least GBP3,200,000,
calculated on the last day of the calendar month starting 50 days
before the date of the relevant notice of exercise.
Under the Acquisition Agreement, the Acquisition is conditional,
inter alia, on the passing of the Resolutions (without amendment)
by the Shareholders at the General Meeting and Admission. The
Acquisition Agreement contains the usual warranties given by the
Sellers in favour of CloudCoCo Holdings in relation to the Systems
Assurance Group. The Sellers have also, amongst other things, given
non-competition undertakings for a period of 24 months following
Completion, given non-solicitation undertakings for a period of 30
months following Completion and agreed at any time after Completion
not to use the names "Systems Assurance", "MoreFrom", "More
Computers" or any similar names intended to be confused or capable
of confusion therewith.
In addition, the Company has also agreed to award certain
Systems Assurance Group employees EMI Options over two million new
Ordinary Shares exercisable at a price of 1.5 pence per share.
These EMI Options will be exercisable after the second anniversary
of Completion. These EMI options will be awarded after
Completion.
8. Details of the Placing
The Company is proposing to raise up to GBP2.1 million (before
expenses) through the issue of the Placing Shares at the Placing
Price. The Placing Price represents a discount of approximately 13
per cent. to the closing mid-market price of 1.15 pence per
Ordinary Share on 16 August 2021, being the Last Practicable Date.
The Placing Shares will represent approximately 29.74 per cent. of
the Enlarged Issued Share Capital.
Allenby has entered into the Placing Agreement with the Company
whereby Allenby has agreed, as agent for and on behalf of the
Company, to use its reasonable endeavours to procure subscribers
for the Placing Shares at the Placing Price conditionally upon,
inter alia:
-- the Placing Agreement becoming unconditional and not being
terminated by Allenby in accordance with its terms;
-- in respect of the Placing, the Acquisition Agreement having
become unconditional in all respects;
-- in respect of the Placing, the Resolutions having been passed without amendment; and
-- Admission of the Placing Shares becoming effective by not
later than 8.00 a.m. on 3 September 2021 (or such later time and/or
date as Allenby and the Company may agree, but not later than 8.00
a.m. on 17 September 2021).
Allenby may in its absolute discretion waive the conditions
referred to above, other than that relating to Admission.
Under the Placing Agreement, certain warranties have been given
by the Company to Allenby concerning, inter alia, the accuracy of
this document and the presentation to potential investors
(together, the "Placing Documents"), the affairs of the Company and
certain taxation and other matters, and certain indemnities have
been given by the Company in relation to Allenby's involvement in
the Placing and Admission.
Allenby has agreed to a percentage of its commission being
settled via the allotment and issue to it of the Fee Shares.
The Placing Agreement will be capable of being terminated by
Allenby at its absolute discretion at any time before Admission if,
inter alia, (i) any statement in the Placing Documents has become
untrue, inaccurate or, incomplete in any material respect or
misleading or matters have arisen which would, if the Placing
Documents were issued at that time, constitute an omission from
them; or (ii) any warranty in the Placing Agreement would, if
repeated at Admission, be untrue, inaccurate or misleading in any
respect; or (iii) there have occurred certain force majeure events
which in the sole judgement of Allenby prejudice the success of the
Placing, or which makes it, in the sole judgement of Allenby,
impractical to proceed with the Placing and/or Admission and/or to
market Ordinary Shares on the terms and in the manner set out in
the Placing Documents.
For the avoidance of doubt, Allenby is not underwriting the
Placing.
9. Use of Placing Proceeds
The proceeds from the Placing will be used as follows:
-- GBP0.84 million for the Acquisition net cash consideration;
-- GBP0.93 million for working capital; and
-- GBP0.33 million for Acquisition and fundraising fees.
Subject to the availability of free cash, the Board may
determine to use a portion of the Placing proceeds to repay part of
the outstanding MXC Loan Notes.
10. Settlement and dealings
Application will be made to the London Stock Exchange for the
Placing Shares and the Fee Shares to be admitted to trading on AIM.
It is expected that Admission will occur at 8.00 a.m. on 3
September 2021.
The Placing Shares and the Fee Shares will rank pari passu in
all respects with the Existing Ordinary Shares, including the right
to receive all dividends and other distributions declared, made or
paid on the Existing Ordinary Shares on or after Admission.
Following the issue of the Placing Shares and the Fee Shares, the
total number of issued Ordinary Shares in the Company will be
706,215,686.
11. Director participation in the Placing and substantial shareholder
Simon Duckworth, Non-Executive Chairman, has subscribed for
Placing Shares in the Placing at the Placing Price, as set out
below:
Director Current shareholding No. Placing Total shareholding Percentage
Shares acquired on Admission held on Admission
Simon Duckworth 9,500,000 12,000,000* 21,500,000* 3.04*
*includes shares held by his wife following completion of the
Placing
In addition, 110,000,000 Placing Shares have been subscribed by
Mark Ward, former CEO and founder of IT Managed Services business
Hunter Macdonald, who will become a new shareholder in the Company
upon Admission and will then hold 15.58 per cent. of the Enlarged
Issued Share Capital.
12. Current trading of the Company
The recent financial performance of CloudCoCo was set out in the
Company's unaudited interim results announcement released on 09
June 2021. The success of management's actions is reflected in the
Company's financial results. In its interims to March 2021, Trading
EBITDA increased 435% to GBP364,000 (H1 FY20: GBP68,000; H2 FY20:
GBP193,000) with H1 FY21 revenue and total contract value
increasing over H2 FY20 in spite of the continued effects of the
Covid-19 pandemic on its end markets. CloudCoCo's cash position
also improved with cash at bank increasing c.GBP300,000 to
c.GBP600,000 at 31 March 2021 (H1 FY20: c.GBP300,000; H1 FY21:
c.GBP600,000). Commenting on the outlook for the second half in the
interim results announcement, CloudCoCo said it continued to see
demand for its services and further progress in developing its
partnership ecosystem. It commented at the time that with an
increasing pipeline of opportunities despite the ongoing impact of
Covid-19, it remained confident in its prospects for the second
half of FY21, facilitated by the easing of restrictions.
13. The General Meeting
The Directors do not currently have sufficient authority to
allot all the Placing Shares, the Fee Shares or grant the Warrants.
Accordingly, the Directors are seeking the approval of Shareholders
at the General Meeting to allot the Placing Shares, the Fee Shares
and grant the Warrants. You will find set out at the end of this
document a Notice of General Meeting to be held at the offices of
DAC Beachcroft LLP, The Walbrook Building, 25 Walbrook, London EC4N
8AF on 2 September 2021 at 10.00 a.m. at which the Resolutions will
be proposed.
Resolution 1, which will be proposed as an ordinary resolution,
is to authorise the Directors to allot the Placing Shares and Fee
Shares in connection with the Placing, to grant the Warrants in
connection with the Acquisition and otherwise to allot relevant
securities up to an aggregate nominal amount of GBP2,354,052
(representing approximately one third of the Enlarged Issued Share
Capital) provided that such authority shall expire on the date
being fifteen months from the date of the passing of the resolution
or, if earlier, the conclusion of the next annual general meeting
of the Company.
Resolution 2, which will be proposed as a special resolution and
which is conditional upon the passing of Resolution 1, dis-applies
Shareholders' statutory pre-emption rights (which require a company
to offer new shares for cash first to Existing Shareholders in
proportion to their holdings) in relation to the allotment of the
Placing Shares and the Fee Shares in connection with the Placing,
the grant of the Warrants in connection with the Acquisition and
grants further authority for any future allotment of equity
securities for cash on a non-pre-emptive basis up to an aggregate
nominal amount of GBP706,216 (representing approximately 10 per
cent. of the Enlarged Issued Share Capital) provided that such
authority shall expire on the date being fifteen months from the
date of the passing of the resolution or, if earlier, the
conclusion of the next annual general meeting of the Company.
The majority required to pass Resolution 2 above is not less
than 75 per cent. of the votes cast. Resolution 1 above requires a
simple majority in order to be passed.
Shareholders should read the Notice of General Meeting at the
end of this document for the full text of the Resolutions and for
further details about the General Meeting.
The attention of Shareholders is also drawn to the voting
intentions of the Directors and connected parties as set out in the
paragraph entitled "Recommendation" below.
Shareholders will find accompanying this document a Form of
Proxy for use in connection with the General Meeting. The Form of
Proxy should be completed and returned in accordance with the
instructions thereon so as to be received by Computershare Investor
Services PLC, as soon as possible and in any event not later than
48 hours (excluding non-Business Days) before the time of the
General Meeting.
The number of Ordinary Shares a Shareholder holds as at the
Voting Record Time will determine how many votes a Shareholder or
his proxy will have on the poll.
Covid-19
Notwithstanding the lifting of the Covid-19 restrictions on 19
July 2021, the Board strongly recommends that, due to the ongoing
Covid-19 pandemic, continued uncertainty and risk of infection,
shareholders do not attend the General Meeting but instead appoint
the chairman of the meeting to exercise their right to vote. This
approach is being taken to protect the health and well-being of the
Company's shareholders, directors, advisers and other team members.
The minimum number of directors or employees of the Company will
attend to ensure that the General Meeting is quorate.
Please note we may have to limit numbers at the General Meeting
in order to maintain social distancing and if you do attend in
person, you may be requested to wear a mask. The Company is closely
monitoring developments relating to Covid-19 and if it becomes
necessary to alter the arrangements of the General Meeting
shareholders will be notified via our website and, where
appropriate, announced via a Regulatory Information Service. Please
do not attend the General Meeting in person if you have symptoms
that may be caused by Covid-19, or if you are waiting for a test,
if you have received a positive Covid-19 test result, or live with
someone with Covid-19 symptoms, or with someone who has tested
positive for Covid-19.
If you would like to vote on the resolutions, you can appoint a
proxy to exercise your right to vote at the General Meeting. As
such, you are strongly encouraged to appoint the chairman of the
General Meeting to act as your proxy as any other named person is
also strongly recommended not to attend in person.
You are requested to register your proxy votes as soon as
possible but in any event by no later than 10.00 a.m. on 31 August
2021.
At the General Meeting itself, voting on all resolutions will be
conducted by way of a poll.
14. Irrevocable Undertakings
Insofar as they are interested in Ordinary Shares, the Directors
(save for Jill Collighan) have given irrevocable undertakings to
the Company to vote in favour of the Resolutions (and, where
relevant, to procure that such action is taken by the relevant
registered holders if that is not them), in respect of their entire
beneficial holdings totalling, in aggregate, 183,702,210 Ordinary
Shares, representing approximately 37.09 per cent. of the Company's
issued share capital.
In addition, MXC Guernsey Limited has given an irrevocable
undertaking to the Company to vote in favour of the Resolutions to
be proposed at the General Meeting (and, where relevant, to procure
that such action is taken by the relevant registered holders if
that is not them) in respect of its beneficial holding totalling,
in aggregate, 75,066,275 Ordinary Shares, representing
approximately 15.16 per cent. of the Company's existing issued
share capital.
In total, therefore, the Company has received irrevocable
undertakings to vote in favour of the Resolutions in respect of
holdings totalling in aggregate 258,768,485 Ordinary Shares,
representing approximately 52.25 per cent. of the Company's
existing issued share capital.
15. Action to be taken by Existing Shareholders
A Form of Proxy for use at the General Meeting accompanies this
document. The Form of Proxy should be completed and signed in
accordance with the instructions thereon and returned to the
Company's registrars, Computershare Investor Services PLC at The
Pavilions, Bridgwater Road, Bristol BS13 8AE, as soon as possible,
but in any event so as to be received by no later than 10.00 a.m.
on 31 August 2021 (or, if the General Meeting is adjourned, 48
hours (excluding any part of a day that is not a Business Day)
before the time fixed for the adjourned meeting).
If you are in any doubt as to what action you should take, you
are recommended to seek your own personal financial advice from
your broker, bank manager, solicitor, accountant, or other
independent financial adviser authorised under FSMA if you are
resident in the United Kingdom or, if not, from another
appropriately authorised independent financial adviser,
immediately.
16. Recommendation
The Directors consider that the Proposals and the Resolutions
are in the best interests of the Company and would promote the
success of the Company for the benefit of its Shareholders as a
whole. Accordingly, the Directors unanimously recommend that
Shareholders vote in favour of the Resolutions to be proposed at
the General Meeting as they and their immediate families and
connected persons (within the meaning of section 252 of the Act)
intend to do in respect of their aggregate holdings of 185,883,816
Ordinary Shares representing approximately 37.53 per cent. of the
Existing Issued Share Capital.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Event 2021
Announcement of the Proposals 17 August
Publication and posting of this document 17 August
and Form of Proxy
Latest time and date for receipt of 10.00 a.m. on 31 August
Forms of Proxy
General Meeting 10.00 a.m. on 2 September
Announcement of the result of the General 2 September
Meeting
Expected completion date of the Acquisition 3 September
Admission of the Placing Shares and 8.00 a.m. on 3 September
the Fee Shares to trading on AIM
CREST accounts credited (where applicable) 3 September
Despatch of definitive share certificates within 10 days of Admission
(where applicable)
Notes:
References to times in this document are to London time (unless
otherwise stated).
Each of the above times and/or dates is subject to change at the
absolute discretion of the Company and Allenby. If any of the above
times and/or dates should change, the revised times and/or dates
will be announced through a Regulatory Information Service.
STATISTICS
Placing Price (per share) GBP0.01
Number of Existing Ordinary Shares at the Last
Practicable Date 495,225,686
Number of Placing Shares 210,000,000
Number of Fee Shares 990,000
Number of Warrants 4,000,000
Enlarged Issued Share Capital 706,215,686
Placing Shares as a percentage of the Enlarged 29.74 per cent.
Issued Share Capital
Gross proceeds of the Placing GBP2.1 million
Estimated net proceeds of the Placing GBP1.77 million
Market capitalisation of the Company at the GBP7,062,156
Placing Price following the issue of the Placing
Shares and the Fee Shares
DEFINITIONS
The following definitions apply throughout this document unless
the context otherwise requires:
"Acquisition" the proposed acquisition by CloudCoCo Holdings
of Systems Assurance pursuant to the terms
of the Acquisition Agreement;
"Acquisition Agreement" the share purchase agreement dated 16 August
2021 between the Sellers and CloudCoCo Holdings
relating to the Acquisition;
"Act" the Companies Act 2006 (as amended);
"Adjusted EBITDA" Trading EBITDA adjusted to exclude Director's
remuneration costs and audit and accounting
fees;
"Admission" admission of the Placing Shares and the Fee
Shares to trading on AIM, which is expected
to occur at 8.00 a.m. on 3 September 2021;
"AIM" the AIM market operated by the London Stock
Exchange;
"AIM Rules" the rules and guidance notes for AIM companies
and their nominated advisers issued by the
London Stock Exchange from time to time relating
to AIM traded securities and the operation
of AIM;
"Allenby" Allenby Capital Limited, a limited liability
company incorporated and registered in England
and Wales with registered number 06706681,
authorised and regulated by the FCA, and the
Company's nominated adviser and broker;
"Business Day" a day on which dealings in domestic securities
may take place on the London Stock Exchange;
"Certificated form" an ordinary share recorded on a company's share
or "in Certificated register as being held in certificated form
form" (namely, not in CREST);
"Company" or "CloudCoCo CloudCoCo Group plc, a company incorporated
" and registered in England and Wales with registered
number 05259846;
"Completion" completion of the Acquisition in accordance
with the Acquisition Agreement;
"CloudCoCo Holdings" CloudCoCo Holdings Limited, a company incorporated
and registered in England and Wales with registered
number SC102302, a wholly owned subsidiary
of the Company;
"CloudCoCo Limited" CloudCoCo Limited, a company incorporated and
registered in England and Wales with registered
number 10989039, a wholly owned subsidiary
of the Company;
"CREST" the relevant system (as defined in the CREST
Regulations) in respect of which Euroclear
is the operator (as defined in those regulations);
"CREST Regulations" the Uncertificated Securities Regulations 2001
(S.I. 2001 No. 3755) (as amended);
"Directors" or the directors of the Company whose names are
"Board" set out on page 6 of this document, or any
duly authorised committee thereof;
"EMI Options" options over Ordinary Shares in the Company
granted pursuant to the Company's EMI share
option scheme;
"Enlarged Group" the Group, as enlarged by the Acquisition;
"Enlarged Issued the entire issued ordinary share capital of
Share Capital" the Company following completion of the Placing;
"Euroclear" Euroclear UK & Ireland Limited, the operator
of CREST;
"Existing Group" the Company and its subsidiary undertakings
as at the date of this document;
"Existing Ordinary the 495,225,686 Ordinary Shares in issue at
Shares" the date of this document, all of which are
admitted to trading on AIM;
"Existing Shareholders" the holders of Ordinary Shares as at the date
of this document;
"Fee Shares" 990,000 Ordinary Shares to be allotted and
issued to Allenby on Admission, further details
of which are set out in paragraph 8 of this
document;
"FCA" the Financial Conduct Authority;
"Form of Proxy" the form of proxy for use in connection with
the General Meeting which accompanies this
document;
"FSMA" the Financial Services and Markets Act 2000
(as amended);
"FY20" the financial year ended 30 September 2020
of the Company;
"FY21" the financial year ending 30 September 2021
of the Company;
"General Meeting" a duly convened general meeting (or any adjournment
thereof) of the Shareholders at which the Resolutions
will be proposed to be held at the offices
of DAC Beachcroft LLP, The Walbrook Building,
25 Walbrook, London EC4N 8AF at 10.00 a.m.
on 2 September 2021, notice of which is set
out in the Notice of General Meeting;
"Group" the Company and its subsidiaries;
"Last Practicable 16 August 2021;
Date"
"London Stock Exchange" London Stock Exchange plc;
"More Computers" More Computers Limited, a company incorporated
and registered in England and Wales with registered
number 04666684;
"MXC Loan Notes" the GBP3.5 million of unsecured fixed rate
loan notes issued to MXC Guernsey Limited,
repayable on 21 October 2024;
"Notice of General the notice convening the General Meeting which
Meeting" is set out at the end of this document;
"Ordinary Shares" the ordinary shares of 1 penny each in the
capital of the Company;
"Placees" persons who have conditionally agreed to subscribe
for the Placing Shares;
"Placing" the conditional placing of the Placing Shares
by Allenby, as agent on behalf of the Company,
with the Placees pursuant to the terms of the
Placing Agreement, further details of which
are set out in this document;
"Placing Agreement" the conditional agreement dated 17 August 2021
between the Company and Allenby in relation
to the Placing, further details of which are
set out in this document;
"Placing Price" GBP0.01;
"Placing Shares" 210,000,000 new Ordinary Shares to be issued
pursuant to the Placing;
"Proposals" the Acquisition and the Placing;
"Prospectus Regulation the prospectus regulation rules made by the
Rules" FCA pursuant to section 73A of FSMA;
"Register" the register of members of the Company maintained
by Computershare Investor Services PLC, a company
incorporated and registered in England and
Wales with registered number 03498808;
"Resolutions" the resolutions set out in the Notice of General
Meeting;
"Restricted Jurisdiction" Australia, Canada, Japan, New Zealand, the
Republic of South Africa or the United States;
"Sellers" Christopher Wheater and Simon Lewington;
"Shareholders" holders of Ordinary Shares;
"Systems Assurance" Systems Assurance Limited, a company incorporated
and registered in England and Wales with registered
number 02691103;
"Systems Assurance Systems Assurance and its subsidiary More Computers;
Group"
"Trading EBITDA" earnings before net finance costs, tax, depreciation,
amortisation, plc costs, dividends, exceptional
items and share based-payments;
"UK" or "United the United Kingdom of Great Britain and Northern
Kingdom" Ireland;
"uncertificated" an Ordinary Share recorded on a company's share
or "in uncertificated register as being held in uncertificated form
form" in CREST and title to which, by virtue of the
CREST Regulations, may be transferred by means
of CREST;
"US Person(s)" has the meaning given in the United States
Securities Act 1933 (as amended);
"VAR" Value Added Reseller;
"Voting Record Time" 6.30 p.m. on 31 August 2021;
"Warrant Instrument" the warrant instrument to be executed by the
Company on Completion creating the Warrants;
and
"Warrants" warrants over, in aggregate, four million Ordinary
Shares to be granted to the Sellers on Completion,
further details of which are set out in paragraph
7 of this document.
Notice to Distributors
Solely for the purposes of the product governance requirement
contained in Chapter 3 of the FCA Product Intervention and Product
Governance Sourcebook (together, the "UK Product Governance
Requirements"), and disclaiming all and any liability, whether
arising in tort, contract or otherwise, which any "manufacturer"
(for the purposes of the UK Product Governance Requirements) may
otherwise have with respect thereto, the Placing Shares have been
subject to a product approval process, which has determined that
the Placing Shares are: (i) compatible with an end target market of
retail investors and investors who meet the criteria of
professional clients and eligible counterparties, as defined under
the FCA Handbook Conduct of Business Sourcebook, and ii) eligible
for distribution through all permitted distribution channels (the
"Target Market Assessment").
Notwithstanding the Target Market Assessment, distributors
should note that: the price of the Placing Shares may decline and
investors could lose all or part of their investment; the Placing
offer no guaranteed income and no capital protection; and an
investment in the Placing is compatible only with investors who do
not need a guaranteed income or capital protection, who (either
alone or in conjunction with an appropriate financial or other
adviser) are capable of evaluating the merits and risks of such an
investment and who have sufficient resources to be able to bear any
losses that may result therefrom. The Target Market Assessment is
without prejudice to the requirements of any contractual, legal or
regulatory selling restrictions in relation to the Placing.
Furthermore, it is noted that, notwithstanding the Target Market
Assessment, Allenby Capital Limited will only procure investors who
meet the criteria of professional clients and eligible
counterparties. For the avoidance of doubt, the Target Market
Assessment does not constitute: (a) an assessment of suitability or
appropriateness for the purposes of the FCA Handbook Conduct of
Business Sourcebook COBS 9A and 10A respectively; or (b) a
recommendation to any investor or group of investors to invest in,
or purchase, or take any other action whatsoever with respect to
the Placing Shares.
Each distributor is responsible for undertaking its own target
market assessment in respect of the Placing Shares and determining
appropriate distribution channels.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
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