Acquisition and Placing
Iomart Group PLC
07 March 2007
IOMART GROUP PLC
('iomart' or the 'Company')
Acquisition of a controlling interest in the data centre company Ezee DSL
Limited
and
Proposed placing of 20,000,000 new ordinary shares
Highlights
• iomart enters the data centre market with a conditional agreement to
acquire a 51 per cent stake in Ezee DSL Limited (to be renamed Easyspace
Datacentres Ltd) for £4.8 million in cash.
• KBC Peel Hunt has conditionally placed 20,000,000 Placing Shares to raise
£11 million at a price of 55 pence per share
• The Directors believe that they are acquiring their 51 per cent. stake at
a significant discount to the replacement cost of iomart's share of the
equipment, which the Directors estimate to be £14m
• The Directors are confident that the delivery of the Easyspace
Datacentres' business plan will result in iomart achieving entry into a
profitable and growing business at a relatively low earnings multiple.
• EGM to approve, inter alia, the Investment Agreement, to be held at the
offices of iomart Group plc on 30 March 2007 at 10:00am.
Certain definitions apply throughout this announcement and your attention is
drawn to the table at the end of this announcement where these definitions are
set out in full.
Angus MacSween, Chief Executive Officer said:
The Directors believe that the acquisition of a significant amount of high
quality data centre capacity which is close to being operational would, at this
point in the cycle, be highly opportunistic. Existing data centres are believed
to be close to capacity and new data centres are time-consuming to build and fit
out. Independent research suggests that occupancy rates for carrier neutral data
centres will be close to capacity by the end of 2007 and that prices for rack
space will nearly double from 2006 prices over the next three years.
We look forward to working with Dominic Marrocco (owner of Ezee DSL Limited) who
has a proven track record in the data centres market and believe his skills,
experience and enthusiasm will be highly beneficial to the group'.
For further information:
iomart Group plc
Angus MacSween 0141 931 6400
Nick Kuenssberg 07860 635 191
KBC Peel Hunt 020 7418 8900
Oliver Scott/Richard Kauffer
FORWARD LOOKING STATEMENTS
This announcement may contain forward-looking statements, including, without
limitation, statements containing the words 'believes', 'anticipates', 'expects',
and similar expressions. Such forward-looking statements involve unknown
risks, uncertainties and other factors which may cause the actual results,
financial condition, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Given
these uncertainties, prospective investors are cautioned not to place any undue
reliance on such forward-looking statements. The Company disclaims any
obligation to update any such forward-looking statements in this announcement to
reflect future events or developments.
The Placing Shares referred to in this announcement have not been and will not
be registered under the US Securities Act and may not be offered or sold in the
United States except pursuant to an exception from, or a transaction not subject
to, the requirements of the US Securities Act. There will be no public offer of
the Placing Shares in the United Kingdom, United States of America or elsewhere.
Introduction
iomart has today conditionally entered into an agreement to acquire a 51 per
cent stake in Ezee DSL Ltd (to be renamed Easyspace Datacentres Ltd) for £4.8
million in cash. Easyspace Datacentres will have up to five carrier neutral
co-location facilities in the UK with net useable space of approximately 55,000
square feet and the capacity to house up to 2,300 server racks. The Directors
believe that they are acquiring their 51 per cent. share of Easyspace
Datacentres at a significant discount to the replacement cost of iomart's share
of the equipment, which the Directors estimate to be £14 million, ignoring the
cost of and time required to fit out the buildings with adequate power supplies
and fibre access.
These data centres are in varying degrees of readiness for operation and, with
the exception of one of the data centres, none of these assets has ever been
used. The Directors estimate that Easyspace Datacentres will need to invest
approximately £2.3 million to upgrade the equipment at the five data centres in
order to make them fully operational. In addition, Easyspace Datacentres is
expected to require up to £3.1 million of working capital to support the growth
and development of its business. iomart and 186k, the current owner of Ezee DSL,
will contribute to Easyspace Datacentres' capital expenditure and working
capital requirements in proportion to their shareholding in Easyspace
Datacentres.
The consideration for iomart's stake in Easyspace Datacentres, together with its
share of the capital expenditure and working capital requirements as well as a
contingency reserve amounts to £10.3 million (net of expenses). This will be
funded by a placing of 20,000,000 Placing Shares at a placing price of 55p per
Ordinary Share representing 20.11 per cent. of the Enlarged Share Capital.
KBC Peel Hunt has agreed, as agent for the Company, to procure subscribers for
20,000,000 Placing Shares under the terms of the Placing. KBC Peel Hunt has
fully underwritten the Placing.
The Directors believe that the acquisition of a significant amount of high
quality data centre capacity, albeit requiring further investment to enable full
operation, would at this point in the cycle be highly opportunistic. Existing
data centres are expected to be close to capacity by the end of 2007 and new
data centres are time-consuming to build and fit out. Prices for rack space
are also forecast to nearly double over the next three years. Consequently the
Directors are confident that the delivery of the Easyspace Datacentres' business
plan will result in iomart achieving entry into a profitable and growing
business at a relatively low earnings multiple.
Information on iomart
iomart, a web based managed services company, was founded in 1998 and was listed
on AIM in April 2000. The group comprises three separate operating divisions:
Ufindus, Netintelligence and Easyspace. In the year ended 31 March 2006, iomart
generated a profit before tax of £4.0 million on revenue of £24.3 million. As at
31 March 2006, iomart had net assets of £18.7 million. Brief descriptions of
each of the Company's operating subsidiaries are set out below:
Ufindus - an internet Business Directory, providing a web marketing presence to
the business community.
Easyspace - a range of managed webhosting services ranging from complex
application hosting through to single dedicated servers, shared virtual hosting
and a full range of domain name services.
Netintelligence - leading edge 'software as a service' product set using client/
web technology to deliver a range of control and security services addressing a
market gap in the management of networks inhabited by more and more laptops and
mobile devices.
The Data Centre Market
Data centres are designed to provide a secure environment for IT and
telecommunications equipment comprising racks of servers that use, process and
store data for computer applications. Critical requirements for these servers
are fibre access to one or more data networks, access to uninterrupted and
significant amounts of resilient power as well as cooling, security and fire
protection systems.
Whilst many organisations operate and maintain their own servers, it is becoming
increasingly common for organisations to outsource the location and to a lesser
extent maintenance of their servers to data centres that host servers for
multiple customers, also known as co-location centres. Data centres are able to
provide access to primary optical fibre networks and uninterrupted power
supplies in order to guarantee the operation of the customers' equipment. Key
drivers of this outsourcing trend include cost reduction, better security,
access to sufficient resilient power supplies and the requirement for off-site
disaster recovery solutions.
There are two basic models of co-location centre. Carrier specific facilities
have a single link to the fibre network and are operated by a single network
carrier to accommodate their own equipment, or to provide co-location services
to their corporate clients. By contrast, carrier neutral co-location centres are
speculative developments by independent third parties that offer organisations
serviced rack space for rent and access to multiple fibre networks alongside the
correct power requirements, a factor that is becoming increasingly important for
customers.
Following the downturn in the technology and telecommunications market in 2000,
there was significant global overcapacity of data centre space. However, with
the significant increase in internet content and usage, the development of
high-bandwidth services such as video-streaming, the increasing usage of IP
telephony and the development of the 'software as a service' model of software
distribution, the utilisation of data centre space has increased significantly
to a point at which data centre space and power is becoming scarce.
Independent research suggests that data centre prices will almost double between
2006 and 2010 and that the existing carrier neutral data centre capacity in the
UK will effectively run out by the end of 2007.
Information on 186k and Easyspace Datacentres
In the late 1990s Lattice Group PLC, a FTSE 100 company which had been demerged
from BG Group, invested £450 million in establishing a state of the art optical
fibre and data centre network throughout the UK under the name 186k. Following
the merger of Lattice Group PLC into National Grid Transco PLC in October 2002,
the merged group disposed of this network, part of its assets being sold to
Hutchinson 3G and the remainder, including data centres and the 186k name being
sold to Data Centre Holdings UK Ltd, a company owned by Dominic Marrocco. In a
corporate re-organisation in 2005 the data centre assets were vested in
Easyspace Datacentres, a wholly-owned subsidiary of 186k, a new company also
owned by Dominic Marrocco, which had been formed to use the 186k name.
186k itself is primarily an internet service provider, having consolidated a
number of smaller broadband providers, trading under the names 186k, Elite
Internet Services, Mailbox Internet and EFH Broadband, with a customer base in
excess of 14,000 broadband customers, with thousands more customers taking
associated products and services. 186k has two subsidiaries apart from its ISP
business. Invade International Ltd is a telephony management software
specialist, providing voice over internet protocol (VoIP) telephony.
In the last financial year to 31 August 2006, the unaudited accounts of the 186k
group showed revenues of £4.9 million, EBITDA of £1.3 million and net assets of
£8.9 million.
In mid 2006 iomart commenced negotiations with Mr Marrocco to utilise space in
Easyspace Datacentres' Glasgow data centre and currently has 34 of its server
racks located at this centre.
Summary of Data Centre Assets
The gross assets of Easyspace Datacentres as disclosed in their unaudited
accounts as at 31 August 2006 were £9 million (after a depreciation charge of
£0.6 million). These assets include two freehold data centre properties. In
addition, a leasehold data centre property in London will be leased by iomart at
completion. It is intended that a further two leasehold data centre properties
in Leeds and Leicester, or suitable alternatives, will be leased to Easyspace
Datacentres by December 2008. Details of the data centre locations are set out
in the table below:
Location Tenure and details Estimated server rack
capacity
Glasgow Freehold owned by Easyspace Datacentres 342
London To be sub-leased from National Grid Property Holdings Limited by 675
iomart Group plc. Lease due to expire in 2020.
Nottingham Freehold owned by Easyspace Datacentres 184
Leicester Proposed Leasehold 277
Leeds Proposed Leasehold 826
Total 2,304
Glasgow
The Glasgow data centre which was originally built in 2002, is located on an
industrial estate outside the City centre and is split into two sections, the
first of which was originally commissioned in 2002. The first is operational
and currently houses 34 server racks with capacity for a further 149 server
racks with a 2KW per rack power capacity, subject to the Directors estimate of
approximately £0.1 million being invested in additional network equipment and an
upgrade of the air-conditioning system.
The other part of the Glasgow data centre is currently non-operational, although
it does have power and fibre connectivity supplied. The Directors estimate that
this part of the centre will require approximately £0.5 million of capital
investment on items including upgraded power suppliers, air conditioning
equipment, networking and cabling equipment, fire detection/prevention and
security systems, in order to create capacity for another 159 server racks.
London
The London data centre is located in the City of London (EC2). The building has
dual 1,500kw power supplies and has been fitted out with electrical and
mechanical services comprising uninterrupted power supplies, cooling and air
conditioning systems, sufficient power to supply 2KW of power per rack, fibre
access, fire suppression and detection, building monitoring and security
systems. Based on an expert report commissioned by iomart, the Directors
estimate that the total replacement cost of the equipment in the facility would
in the region of £6.8 million.
The London data centre was originally commissioned in 2001 and all the equipment
was re-commissioned in mid 2006. The Directors estimate that capital
expenditure of approximately £0.2 million will be required in order to install
the necessary network equipment and re-commission the data centre again in order
for it to become fully operational with a capacity of 675 racks and ready for
immediate use.
Nottingham
The Nottingham data centre is located on an industrial estate outside the City
centre. The site is not currently operational and the Directors estimate that
an investment of approximately £0.2 million will be required to upgrade the
uninterruptible power supply and air conditioning systems as well as on other
items in order to achieve the potential site capacity of 184 server racks and
for the facility to become fully operational.
Leicester
The Leicester data centre is located on an industrial estate outside the City
centre. The data centre is split into two sections, the first of which was
originally commissioned in 2002 and is fitted out, but the Directors estimate it
requires an additional capital outlay of approximately £0.2 million to
re-commission the centre and upgrade the network equipment. In addition the
Directors estimate a further approximately £0.1 million is required to upgrade
the air-conditioning system in order for this part of the facility to service
its full capacity of 134 server racks.
The second part of the building is not yet fitted out but does have power and
data connectivity. The Directors estimate that an investment of approximately
£0.6 million will be required on items including upgraded power suppliers, air
conditioning equipment, networking and cabling equipment, fire detection/
prevention and security systems in order to create capacity for another 143
server racks.
Leeds
The Leeds data centre is located on an industrial estate outside the City centre
and is not yet fitted out, nor does it have any power or data connectivity
supply nor planning permission to operate as a data centre. All the equipment
is currently stored in a warehouse in Reading. The Directors estimate that it
will cost approximately £0.3 million to transfer and install the equipment and
to commission the data centre with air conditioning systems, network, cabling,
security and fire detection/prevention systems. In addition, an estimated
further £0.3 million would need to be invested in a power supply that will meet
the Directors' aspirations of delivering 2KW of power per rack for 826 server
racks.
Terms of the Investment Agreement
iomart will acquire 51 per cent. of the ordinary shares in Easyspace Datacentres
for a consideration of £4.8 million in cash on completion. All of this will be
used to repay an inter-company loan to 186k, Easyspace Datacentres' current
holding company, which is owned by Dominic Marrocco. 186k has agreed to invest
up to £1.3m of the consideration back into Easyspace Datacentres by way of
shareholder loan to meet its share of the initial working capital and capital
expenditure requirements.
On completion Easyspace Datacentres will own the equipment required to operate
five data centres and have the freehold titles for the Glasgow and Nottingham
buildings and a thirteen year leasehold for the London building, through a
sublet arrangement with iomart. It is a condition to completion that landlord's
consent is obtained in relation to the granting of the London lease. 186k will
be obliged to procure the assignment of the Leicester lease and also to procure
all necessary consents to allow the Leeds property to be used as a data centre.
Alternatively, it will be required to provide suitable substitute premises for
the assets and racks which would otherwise have been operated at Leeds and/or
Leicester
The Agreement requires an estimated £5.4 million to be invested in total in
Easyspace Datacentres. Such investment will be made by each shareholder on a
pro rata basis. The initial working capital will be in the form of shareholder
loans. Further capital expenditure or working capital requirements will be
determined by the board of directors of Easyspace Datacentres, two of whom will
be iomart representatives and the other of whom will be a 186k representative.
If either iomart or 186k fails to comply with its obligations to meet Easyspace
Datacentres' working capital or capital expenditure requirements up to agreed
limits, the party in default will transfer shares in Easyspace Datacentres to
the value of any shortfall made good by the other party. Further, if 186k fails
to deliver the assets to enable the properties to operate as data centres in
Leicester and Leeds, or the agreed alternatives, 186k will transfer a certain
pre-determined percentage of Easyspace Datacentres' share capital to iomart.
The Agreement contains an option for iomart to require 186k to sell its minority
shareholding in Easyspace Datacentres (a 'call option') and an option for 186k
to require iomart to purchase its remaining minority shareholding in Easyspace
Datacentres (a 'put option'). These options are exercisable at any time on or
after the second anniversary of the date of completion of the Agreement for a
period of five years (the 'option period'). The consideration required to
satisfy the option will be determined by reference to a formula valuing the 49%
held by 186k on the following basis:
- between 0.5x and 1.6x the annualised revenue of the
preceding quarter; the actual multiple will be determined by the operating
margin, excluding staff costs, achieved by Easyspace Datacentres in the
preceding quarter. The operating margin thresholds and the corresponding revenue
multiples are set out in the table below:
Operating margin achieved (excluding staff costs) Revenue multiple
< 30.0% 0.50x
30.0% - 34.9% 0.60x
35.0% - 39.9% 0.75x
40.0% - 44.9% 0.85x
45.0% 1.00x
45.1% - 49.9% 1.20x
50.0% - 54.9% 1.50x
> 55.0% 1.60x
- The consideration payable for the 49% minority stake will
be subject to a minimum of £4.8 million if the put option or call option is
exercised within the first six months that the option is exercisable. After this
period there will be no minimum consideration.
- The maximum consideration payable for the 49 per cent. minority
stake will be £20 million at all times.
On exercise of a put option within the first six months of the option period, at
least half of the consideration will be satisfied in cash and any excess may be
satisfied by Consideration Shares. On exercise of a put option after the first
six months of the option period, all the consideration may be satisfied in
Consideration Shares.
On exercise of a put option, 186k's shareholder loan will be repaid in cash if
less than £1.3 million. If the shareholder loan owed to 186k exceeds £1.3
million, the loan, in its entirety, will be satisfied through the issue of new
Consideration Shares.
In the event that the call option is exercised by iomart, the consideration
relating to 186k's shareholding in Easyspace Datacentres and the repayment of up
to £1.3 million of the shareholder loans owed to 186k will all be satisfied in
cash. Any shareholder loans owed to 186k exceeding £1.3 million will be repaid
out of free cash in Easyspace Datacentres from time to time.
iomart's Strategy
The Directors have over the past year been seeking ways to ensure iomart's long
term growth. They identified co-location and managed services as growth markets,
participation in which could enhance margins within iomart's existing businesses
as well as providing the Company with significant incremental revenue growth.
The Directors have a good knowledge of the data centre market, due to each of
iomart's operations either being a user or reseller of data centre space. In
addition, Angus MacSween co-founded a data centre business called AboveNet UK
Limited in March 1999 which was sold to Metromedia Fiber Networks Inc in
February 2000.
The Directors believe that the acquisition of a significant amount of high
quality data centre capacity which is close to being operational would, at this
point in the cycle, be highly opportunistic. Existing data centres are believed
to be close to capacity and new data centres are time-consuming to build and fit
out. Independent research suggests that occupancy rates for carrier neutral data
centres will be close to capacity by the end of 2007 and that prices for rack
space will nearly double from 2006 prices over the next three years.
On the completion of this acquisition the Directors will take the opportunity to
review strategically all of the Group's areas of operation. In principle they
consider that the opportunity presented by this acquisition will lead to its
future core business being in the complex hosting and co-location market and
will consider how the other areas of business fit within this. Consequently
iomart expects a period of investment, focusing on growth and accordingly a
change in dividend policy to reflect its increasing working capital
requirements.
Easyspace Datacentres' Strategy
Dominic Marrocco will be Chief Executive of Easyspace Datacentres. Mr Marrocco
has significant expertise in this market having founded Firstnet in 1996 as an
internet service provider, an integral part of whose service was the provision
of data centre services. One of the reasons for structuring this transaction so
that 186k retains a substantial minority interest is to retain the services of
Dominic Marrocco and to incentivise him to build Easyspace Datacentres into a
substantial business with good margins and long term sustainable revenues.
Easyspace Datacentres' marketing proposition will be centred around the
provision of high quality co-location assets with resilient power supply of 2KW
per rack and a high quality responsive customer service.
With its lack of operational history, Easyspace Datacentres does not have any of
the legacy problems associated with longer established data centres such as
reduced priced contracts that were entered into when there was significant
overcapacity in the market or inefficiently used space as a result of centres
being filled in a piecemeal fashion. The Directors intend to capitalise on this
by targeting customers requiring a blend of services ranging from the provision
of dedicated and single servers, or managed service and co-location facilities,
to fully supported data centre solutions. It is anticipated that customers will
be signed up on contracts ranging from 12 months to 5 years, but with an average
of 3 years. It is expected that charges for services and space will be made on
a monthly basis in advance.
The Directors intend to manage the blend of these services in each data centre
as well as the nature of the contracts in order to create a high margin business
with a highly visible stream of future revenues and low churn rates.
In order to minimise working capital requirements, the Directors intend to
stagger the commissioning of each data centre. Their initial focus will be on
securing customers for the already operational Glasgow data centre as well as to
commission the London data centre and make it operational as soon as possible.
Space in the London centre will start to be marketed shortly after completion to
prospective customers including Tier 2 banks and other large organisations for
whom a high quality, secure and resilient offering is a key business
requirement.
As the London and Glasgow centres start to fill, the Directors intend to
commission the other data centres; however, the Directors recognise that their
roll-out plans will need to remain flexible in order to capitalise on specific
opportunities as they arise. The order in which data centres open will be
demand-led. It is expected that regional data centre customers will include
public sector organisations and smaller corporates. Some of these regional
centres will also be marketed as remote disaster recovery facilities for London
based organisations.
Reasons for and details of the Placing
The Placing will raise approximately £10.3 million (net of expenses). Of these
net proceeds, £4.8 million will be used to fund the cash element of the initial
consideration due under the Investment Agreement. Of the balance, £1.15 million
will be used to fund iomart's share of Easyspace Datacentres' capital
expenditure requirements and £1.6 million will be used to fund iomart's share of
the anticipated working capital needed to support the growth and development of
Easyspace Datacentres' business. The remainder will be kept for contingency
purposes.
Under the terms of the Placing Agreement, KBC Peel Hunt, as agent for iomart,
has agreed conditionally to use reasonable endeavours to place 20,000,000
Placing Shares with investors procured by it at 55p per share. KBC Peel Hunt
will subscribe for any Placing Shares which are not taken up under the Placing.
The Placing price of 55 pence per Placing Share is at a discount of 29.03 per
cent below the closing middle market price of 77.5 pence per Ordinary Share on 6
March 2007 being the day before announcement of the Placing, which the Directors
consider to be fair and reasonable given the size of the Placing.
The Board had hoped to provide existing Shareholders with the opportunity to
participate in the fundraising through an offer of new Ordinary Shares on a
pre-emptive basis. However, the Board concluded, having taken appropriate
advice, that it was not in the best interests of the Company to make available
such a pre-emptive offer due to the time and cost involved and the necessity to
complete the Investment Agreement successfully in a timely manner.
The Placing is conditional, inter alia, upon:
- the Investment Agreement becoming unconditional in accordance with
its terms;
- all Resolutions being passed at the EGM; and
- Admission.
Settlement and dealings
Application will be made to the London Stock Exchange for the Placing Shares to
be admitted to trading on AIM. It is expected that, subject to the passing of
the Resolutions at the EGM, Admission will become effective on 2 April 2007. The
Placing Shares will, when issued, rank pari passu in all respects with the
Existing Ordinary Shares including the right to receive dividends and other
distributions declared following Admission.
Interests of Directors following the Placing
Immediately following the Placing, the Directors' interests in the Company
will be as follows:
Directors and proposed Number of Total number of Percentage
Placing Shares shares held interest in the
Director subscribed following the Enlarged Share
Placing Capital
Nick Kuenssberg 91,000 1,060,400 1.07%
Angus MacSween 91,000 19,286,304 19.40%
Richard Logan 45,500 45,500 0.05%
Sarah Haran 9,100 720,704 0.72%
Mark Hallam 9,100 1,324,767 1.33%
Stuart Forrest - 1,689,284 1.70%
Fred Shedden 18,200 744,588 0.75%
Chris Batterham 9,100 45,621 0.05%
Dominic Marrocco 91,000 91,000 0.09%
Appointment of Dominic Marrocco
The Board of iomart has invited Dominic Marrocco to become a director of iomart
immediately on the Investment Agreement becoming unconditional in all respects.
Details on Mr Dominic Anthony Marrocco, aged 33, are as follows:
Dominic Marrocco has extensive experience in data centre services. Mr Marrocco
set up his first business, Firstnet Services Ltd in 1996. Firstnet was an
internet service provider, an integral part of whose service was the provision
of secure data centre hosting facilities. In 2000 Minorplanet Systems plc
acquired a 51 per cent interest in Firstnet for approximately £6 million. This
was followed by the sale of 100 per cent. of Firstnet to Pipex in 2004. Since
then Dominic has built up the 186k group and its businesses by acquisition and
development.
Dominic will enter into a service agreement with Easyspace Datacentres pursuant
to which he is to be paid an annual salary of £90,000. The service agreement is
terminable upon the giving of six months' written notice by either party.
Dominic has ten current directorships; 186k Ltd, Ezee DSL Ltd, Elite Internet
Services Ltd, ISL Solutions Limited, Idesta Holdings Ltd, Idesta Solutions Ltd,
Domain Estates Ltd, Data Centre Holdings UK Ltd, Magicwasted Ltd and Magicwasted
Housing Ltd. Within the last five years he was a director, in addition to the
above of Firstnet Services Ltd (now Pipex Communications Ltd), and Onyx Internet
Ltd. Dominic has confirmed that there are no other matters to be disclosed in
relation to Schedule 2 paragraph (g) of the AIM Rules.
Current Trading and Prospects
Since we reported the interim results for the 6 months ended 30 September 2006,
Easyspace which provides a full range of hosting, domain name, search and design
services has continued to show encouraging levels of new business and has been
trading broadly in line with our expectations. Sales at Ufindus, our internet
directory services company, have also continued to grow, albeit not at the rate
previously anticipated. This was largely due to difficulties encountered with
establishing the new Carlisle office, which has since been closed down.
The momentum of Netintelligence orders reported in our interims has not
materialised as expected due to delays in winning new orders as well as serious
malpractice by a sales person. This malpractice was quickly identified and
appropriate action taken. Consequently, the level of new Netintelligence orders
is well below that envisaged at the time of our interim announcement with
current monthly sales orders in the region of £20,000.
Encouragingly, the Company is in discussions regarding a licensing opportunity
for Netintelligence. If completed, in line with current discussions, this would
largely offset the performance at Netintelligence and Ufindus as a result of
which the Group would achieve full year profits close to its target for the year
ending 31 March 2007.
The Directors believe that the completion of the proposed acquisition of the 51
per cent. stake in Easyspace Datacentres will significantly enhance the growth
prospects for the Group. In order to capitalise on iomart's entry into this
growth area, and recognising the possibility of further expansion in the data
centre market, the Directors expect that they will be reinvesting all excess
cash generated by the Group to further grow the business.
In conjunction with the Company's auditors, Grant Thornton, the Directors are
undertaking a review of the likely implications of complying with IFRS. This
review is expected to be completed before the end of the financial year at which
time the Directors will make a decision about whether to implement IFRS for the
audit of the financial year ended March 2007, or whether to adopt it for the
financial year commencing on 1 April 2007 as required by the AIM Rules.
Extraordinary General Meeting
The approval of the Investment Agreement and to allot shares for cash to persons
other than Shareholders is subject to the prior approval of shareholders at an
EGM to be held at the at the offices of iomart Group plc, Lister Pavilion,
Kelvin Campus, West of Scotland Science Park, Glasgow, G20 0SP on 30 March 2007
at 10:00 am.
Circular
The circular containing information of the proposed Investment Agreement and
Placing including EGM details is being posted today to shareholders.
Timetable
• Latest time and date for receipt of Forms of Proxy : 10:00 am on 28 March
2007
• Extraordinary General Meeting : 10:00 am on 30 March 2007
• Dealings of Placing Shares at 8:00am on 2 April 2007
APPENDIX 1
TERMS AND CONDITIONS OF THE PLACING
For Invited Placees only - Important Information
1. Eligible Participants
This Appendix, including the terms and conditions of the Placing set out below,
is directed only at persons who are FSMA Qualified Investors.
In this Appendix 'you' or 'Placee' means any person who is or becomes committed
to subscribe for Placing Shares under the Placing.
Members of the public are not eligible to take part in the Placing.
2. Overseas jurisdictions
The distribution of this announcement and the Placing and/or issue of ordinary
shares in certain other jurisdictions may be restricted by law. No action has
been taken by the Company or KBC Peel Hunt that would permit an offer of
ordinary shares or possession or distribution of this announcement or any other
offering or publicity material relating to such ordinary shares in any
jurisdiction where action for that purpose is required. FSMA Qualified
Investors who seek to participate in the Placing must inform themselves about
and observe any such restrictions. In particular, this announcement does not
constitute an offer to sell or issue or the solicitation of an offer to buy or
subscribe for ordinary shares in the capital of the Company in the United
States, Canada, Japan or Australia or in any other jurisdiction in which such
offer or solicitation is or would be unlawful. The Placing Shares have not been
and will not be registered under the US Securities Act or under the securities
laws of any State or other jurisdiction of the United States, and, subject to
certain exceptions, may not be offered or sold, resold or delivered, directly or
indirectly in or into the United States, or to, or for the account or benefit
of, any US persons (as defined in Regulation S under the US Securities Act). No
public offering of the Placing Shares is being made in the United States. No
money, securities or other consideration from any person inside the United
States is being solicited pursuant to this announcement or the Placing.
3. Placing
This Appendix gives details of the terms and conditions of, and the mechanics of
participation in, the Placing. KBC Peel Hunt will arrange the Placing as agent
for and on behalf of the Company. KBC Peel Hunt will determine in its absolute
discretion the extent of each Placee's participation in the Placing, which will
not necessarily be the same for each Placee. No commissions will be paid to or
by Placees in respect of their agreement to subscribe for any Placing Shares.
Each Placee will be required to pay to KBC Peel Hunt, on the Company's behalf,
the Placing Price as the subscription sum for each Placing Share agreed to be
subscribed by it under the Placing in accordance with the terms set out in this
Appendix. Each Placee's obligation to subscribe and pay for Placing Shares
under the Placing will be owed to each of the Company and KBC Peel Hunt. Each
Placee will be deemed to have read this announcement in its entirety. To the
fullest extent permitted by law, neither KBC Peel Hunt nor any other KBC Person
shall have any liability to Placees or to any person other than the Company in
respect of the Placing.
4. Participation and settlement
Participation in the Placing is only available to persons who are invited to
participate in it by KBC Peel Hunt.
A Placee's commitment to subscribe for a fixed number of Placing Shares under
the Placing will be agreed orally with KBC Peel Hunt. Such agreement will
constitute a legally binding commitment on your part to subscribe for that
number of Placing Shares at the Placing Price on the terms and conditions set
out or referred to in this Appendix and subject to the Company's memorandum and
articles of association. After such agreement is entered into a written
confirmation will be dispatched to you by KBC Peel Hunt confirming the number of
Placing Shares that you have agreed to subscribe, the aggregate amount you will
be required to pay for those Placing Shares and settlement instructions. It is
expected that such written confirmations will be despatched on the date of this
announcement, that the 'trade date' for settlement purposes will be Friday 30
March 2007 and the 'settlement date' will be Monday 2 April 2007.
A settlement instruction form will accompany each written confirmation and, on
receipt, should be completed and returned to Jamie Reynolds at KBC Peel Hunt by
fax on 020 7972 0112 by 3.00 p.m. on Friday 9 March 2007.
Settlement of transactions in the Placing Shares (ISIN:GB0004281639) will take
place within the CREST system, subject to certain exceptions, on a 'delivery
versus payment' (or 'DVP') basis. You should settle against CREST ID: 546. KBC
Peel Hunt reserves the right to require settlement for and delivery of the
Placing Shares to Placees by such other means that it deems appropriate if
delivery or settlement is not possible or practicable within the CREST system
within the timetable set out in this announcement or would not be consistent
with the regulatory requirements in any Placee's jurisdiction.
If Placing Shares are to be delivered to a custodian or settlement agent, please
ensure that the written confirmation is copied and delivered immediately to the
appropriate person within that organisation.
5. No Prospectus
No prospectus has been or will be submitted for approval by the FSA in relation
to the Placing or the Placing Shares. Placees' commitments in respect of
Placing Shares will be made solely on the basis of the information contained in
this announcement and on the terms contained in it.
6. Placing Shares
The Placing Shares will, when issued, be credited as fully paid and will rank
pari passu in all respects with the existing issued ordinary shares.
Application will be made for the admission of the Placing Shares to trading on
AIM. It is expected that Admission will take place, and dealings in the Placing
Shares will commence, on 2 April 2007.
7. Placing Agreement
KBC Peel Hunt has today entered into the Placing Agreement with the Company
under which KBC Peel Hunt has, on the terms and subject to the conditions set
out in the Placing Agreement, agreed to use its reasonable endeavours as agent
of the Company to procure subscribers for Placing Shares at the Placing Price
and, to the extent it does not do so, itself as underwriter to subscribe for the
relevant Placing Shares at the Placing Price.
8. Placing conditions
The Placing is conditional, inter alia, on (a) the passing of the EGM
Resolutions, (b) the Investment Agreement becoming unconditional in accordance
with its terms, (c) the Placing Agreement not being terminated in accordance
with its terms, (d) Admission taking place not later than 8.00 a.m. on 2 April
2007, and (e) the Placing Agreement becoming unconditional in all other
respects.
KBC Peel Hunt reserves the right (with the agreement of the Company) to waive or
extend the time and or date for the fulfilment of any of the conditions in the
Placing Agreement to a time no later than 8.00 am on 16 April 2007 ('the Long
Stop Date').
If any condition in the Placing Agreement is not fulfilled or waived by KBC Peel
Hunt by the relevant time, the Placing will lapse and your rights and
obligations pursuant to the Placing shall cease and terminate at such time.
The Placing Agreement may be terminated by KBC Peel Hunt at any time prior to
Admission in certain circumstances including, inter alia, following a material
breach of the Placing Agreement by the Company or the occurrence of certain
force majeure events. The exercise of any right of termination of the Placing
Agreement, any waiver of any condition to the Placing Agreement and any decision
by KBC Peel Hunt whether or not to extend the time for satisfaction of any
condition to the Placing Agreement or otherwise in respect of the Placing shall
be within KBC Peel Hunt's absolute discretion. KBC Peel Hunt shall have no
liability to you in the event of any such termination, waiver or extension or in
respect of any decision whether to exercise any such right of termination,
waiver or extension.
9. Payment default
Your entitlement to receive any Placing Shares will be conditional on KBC Peel
Hunt's receipt of payment by the relevant time to be stated in the written
confirmation referred to above, or by such later time and date as KBC Peel Hunt
may in its absolute discretion determine. KBC Peel Hunt may, in its absolute
discretion, waive such condition, and shall not be liable to you in the event of
it deciding whether to waive or not to waive such condition.
If you fail to make such payment by the required time for any Placing Shares (1)
the Company may release itself (if it decides, at its absolute discretion, to do
so) and will be released from all obligations it may have to allot and/or issue
any such Placing Shares to you or at your direction which are then unallotted
and/or unissued, (2) the Company may exercise all rights of lien, forfeiture and
set-off over and in respect of any such Placing Shares to the fullest extent
permitted under its articles of association or otherwise by law and to the
extent that you then have any interest in or rights in respect of any such
shares, (3) the Company or, as applicable, KBC Peel Hunt may sell (and each of
them is irrevocably authorised by you to do so) all or any of such shares on
your behalf and then retain from the proceeds, for the account and benefit of
the Company or, where applicable, KBC Peel Hunt (i) any amount up to the total
amount due to it as, or in respect of, subscription monies, or as interest on
such monies, for any Placing Shares, (i) any amount required to cover any stamp
duty or stamp duty reserve tax arising on the sale, and (iii) any amount
required to cover dealing costs and/or commissions necessarily or reasonably
incurred by it in respect of such sale, and (4) you shall remain liable to the
Company and to KBC Peel Hunt for any loss which it may suffer as a result of it
(i) not receiving payment in full for such Placing Shares by the required time,
and/or (ii) the sale of any such Placing Shares to any other person at whatever
price and on whatever terms are actually obtained for such sale by or for it.
Interest may be charged in respect of payments not received by KBC Peel Hunt for
value by the required time referred to above at the rate of two percentage
points above the base rate of Barclays Bank plc.
10. Placees' warranties and undertakings to the Company and KBC Peel
Hunt
By agreeing with KBC Peel Hunt to subscribe Placing Shares under the Placing you
will irrevocably acknowledge and confirm and warrant and undertake to, and agree
with, each of the Company and KBC Peel Hunt (in its capacity as underwriter of
the Placing and in its capacity as placing agent), in each case as a fundamental
term of your application for Placing Shares and of the Company's obligation to
allot and/or issue any Placing Shares to you or at your direction, that:
(a) you agree to and accept all the terms set out in this
announcement;
(b) your rights and obligations in respect of the Placing will
terminate only in the circumstances described in this announcement and will not
be capable of rescission or termination by you in any circumstances;
(c) this announcement, which has been issued by the Company, is the
sole responsibility of the Company;
(d) you have not been, and will not be, given any warranty or
representation in relation to the Placing Shares or to the Company or to any
other member of its Group in connection with the Placing, other than by the
Company as included in this announcement or to the effect that the Company is
not now in breach of its obligations under the AIM Rules to disclose publicly in
the correct manner all such information as is required to be so disclosed by the
Company;
(e) you have not relied on any representation or warranty in reaching
your decision to subscribe Placing Shares under the Placing, save as given or
made by the Company as referred to in the previous paragraph;
(f) you are not a customer of KBC Peel Hunt in relation to the
Placing and KBC Peel Hunt is not acting for you in connection with the Placing
and will not be responsible to you in respect of the Placing for providing
protections afforded to its customers;
(g) you have not been, and will not be, given any warranty or
representation by any KBC Person in relation to the Placing Shares or the
Company or any other member of its Group;
(h) you will pay the full subscription amount as and when required in
respect of all Placing Shares allocated to you in accordance with such terms and
will do all things necessary on your part to ensure that payment for such shares
and their delivery to you or at your direction is completed in accordance with
the standing CREST instructions (or, where applicable, standing certificated
settlement instructions) that you have in place with KBC Peel Hunt or put in
place with KBC Peel Hunt with its agreement;
(i) you are entitled to subscribe for Placing Shares under the laws
of all relevant jurisdictions which apply to you and you have complied, and will
fully comply, with all such laws (including where applicable, the
Anti-Terrorism, Crime and Security Act 2001, the Proceeds of Crime Act 2002, and
the Money Laundering Regulations 2003) and have obtained all governmental and
other consents (if any) which may be required for the purpose of, or as a
consequence of, such subscription, and you will provide promptly to KBC Peel
Hunt such evidence, if any, as to the identity of any person which it may
request from you (for the purpose of its complying with such Regulations or
otherwise in connection with your participation in the Placing) in the form and
manner requested by KBC Peel Hunt on the basis that any failure by you to do so
may result in the number of Placing Shares that are to be allotted and/or issued
to you or at your direction pursuant to the Placing being reduced to such
number, or to nil, as KBC Peel Hunt may decide at its sole discretion;
(j) you have complied and will comply with all applicable provisions
of the FSMA with respect to anything done or to be done by you in relation to
any Placing Shares in, from or otherwise involving the United Kingdom and you
have not made or communicated or caused to be made or communicated, and you will
not make or communicate or cause to be made or communicated, any 'financial
promotion' in relation to Placing Shares in contravention of section 21 of FSMA;
(k) you are a FSMA Qualified Investor;
(l) you are acting as principal only in respect of the Placing or, if
you are acting for any other person in respect of Placing (1) you are both an '
authorised person' for the purposes of FSMA and a 'qualified investor' as
defined at Article 2.1(e)(i) of Directive 2003/71/EC (known as the Prospectus
Directive) acting as agent for such person, and (2) such person is either (i) a
FSMA Qualified Investor or (ii) a 'client' (as defined in section 86(2) of FSMA)
of yours that has engaged you to act as his agent on terms which enable you to
make decisions concerning the Placing or any other offers of transferable
securities on his behalf without reference to him;
(m) nothing has been done or will be done by you in relation to the
Placing or to any Placing Shares that has resulted or will result in any person
being required to publish a prospectus in relation to the Company or to any
ordinary shares in accordance with FSMA or the UK Prospectus Rules or in
accordance with any other laws applicable in any part of the European Union or
the European Economic Area;
(n) you are not, and are not acting in relation to the Placing as
nominee or agent for, a person who is or may be liable to stamp duty or stamp
duty reserve tax in respect of any agreement to acquire (or any acquisition of)
shares or other securities at a rate in excess of 0.5% (including, without
limitation, under sections 67, 70, 93 or 96 of the Finance Act 1986 concerning
depositary receipts and clearance services), and the allocation, allotment,
issue and/or delivery to you, or any person specified by you for registration as
holder, of Placing Shares will not give rise to a liability under any such
section;
(o) you will not treat any Placing Shares in any manner that would
contravene any legislation applicable in any territory or jurisdiction and no
aspect of your participation in the Placing will contravene any legislation
applicable in any territory or jurisdiction in any respect or cause the Company
or KBC Peel Hunt to contravene any such legislation in any respect;
(p) (applicable terms and expressions used in this paragraph have the
meanings that they have in Regulation S made under the US Securities Act) (1)
none of the Placing Shares has been or will be registered under the US
Securities Act, (2) none of the Placing Shares may be offered, sold, taken up or
delivered, directly or indirectly, into or within the United States except
pursuant to an exemption from, or in transactions not subject to, the
registration requirements of the US Securities Act, (3) you are not within the
United States and (unless you will be subscribing Placing Shares pursuant to an
exemption referred to above in this paragraph) you are not a US person, (4) you
have not offered, sold or delivered and will not offer sell or deliver any of
the Placing Shares to persons within the United States, directly or indirectly,
(5) neither you, your affiliates, nor any persons acting on your behalf, have
engaged or will engage in any directed selling efforts with respect to the
Placing Shares, (6) you will not be subscribing Placing Shares with a view to
resale in or into the United States, and (7) you will not distribute any
offering material relating to Placing Shares, directly or indirectly, in or into
the United States or to any persons resident in the United States;
(q) KBC Peel Hunt may (at its absolute discretion) satisfy its
obligations to procure Placees by itself agreeing to become a Placee in respect
of some or all of the Placing Shares or by nominating any other KBC Person or
any person associated with any KBC Person to do so or by allowing officers of
the Company and/or employees of Group companies to subscribe Placing Shares
under the Placing at the Placing Price;
(r) time is of essence as regards your obligations under this
Appendix;
(s) you shall indemnify and hold each of the Company and KBC Peel Hunt
harmless, on an after tax basis, from any and all costs, claims, liabilities and
expenses (including legal fees and expenses) arising out of or in connection
with any breach by you of the terms in this Appendix;
(t) this Appendix and any contract which may be entered into between
you and KBC Peel Hunt and/or the Company pursuant to it or the Placing shall be
governed by and construed in accordance with the laws of England, for which
purpose you submit to the exclusive jurisdiction of the courts of England and
Wales as regards any claim, dispute, or matter arising out of or relating to
this Appendix or such contract, except that each of the Company and KBC Peel
Hunt shall have the right to bring enforcement proceedings in respect of any
judgement obtained against you in the courts of England and Wales in the courts
of any other relevant jurisdiction; and
(u) nothing in this Appendix shall exclude any liability of any person
for fraud on its part. All times and dates in this announcement are subject to
amendment at the discretion of KBC Peel Hunt, except that in no circumstances
will the date scheduled for Admission be later than the Long Stop Date.
Definitions
'186k' 186k Limited, a private limited company registered in
England and Wales with number 4937421 and having its
registered office at 195 North Street, Leeds, LS7
2AA, and the current owner of Ezee DSL Ltd
'Admission' the admission to AIM of the Placing Shares
'AIM' AIM, a market operated by the London Stock Exchange
plc
'AIM Rules' the current version of London Stock Exchange's
publication titled 'AIM Rules for Companies'
'Board' the board of directors of the Company
'Company' or 'iomart' iomart Group plc, a company registered in Scotland
with registered number SC204560 and having its
registered office at Lister Pavilion, Kelvin Campus,
West of Scotland Science Park, Glasgow G20 0SP
'Consideration new Ordinary Shares to the maximum value of the
Shares' consideration in respect of the put and call option,
or the 186k shareholder loan, to be priced at a
discount of 7.5 per cent. to the average closing mid
market price of the Company's Ordinary Shares in the
10 business days prior to the Company acquiring the
additional shares in Easyspace Datacentres
'Directors' the directors of the Company
'Easyspace the new company name of Ezee DSL Ltd following
Datacentres' completion
'EGM' the Extraordinary General Meeting of the Company
convened for 10 a.m. on 30 March 2007
'Enlarged Share the Company's issued share capital immediately after
Capital' the completion of the Placing
'Existing Ordinary the Ordinary Shares currently in issue at 7 March
Shares' 2007
'Ezee DSL Ltd' Ezee DSL Ltd, a company registered in England and
Wales with number 5532548 and having its registered
office at Northwood House, 195 North Street, Leeds,
LS7 2AA, the name of which is to be changed to
Easyspace Datacentres Limited following completion
'Form of Proxy' the form of proxy for use in connection with the EGM
'FSA' the Financial Services Authority
'FSMA' the Financial Services and Markets Act 2000
'FSMA Qualified a person who is a 'qualified investor' as referred to
Investor' at section 86(7) of FSMA and at or to whom any
private communication relating to the Company that is
a 'financial promotion' (as such term is used in
relation to FSMA) may lawfully be issued, directed or
otherwise communicated without the need for it to be
approved, made or directed by an 'authorised person'
as referred to in FSMA
'IFRS' International Financial Reporting Standards
'Investment the investment agreement entered into on 7 March 2007
Agreement' between iomart and 186k relating to Easyspace
Datacentres
'KBC Peel Hunt' KBC Peel Hunt Ltd
'KBC Person' any person being (i) KBC Peel Hunt, (ii) an
undertaking which is a subsidiary undertaking of KBC
Peel Hunt, (iii) a parent undertaking of KBC Peel
Hunt or (other than KBC Peel Hunt) a subsidiary
undertaking of any such parent undertaking, or (iv) a
director, officer, agent or employee of any such
person
'Ordinary Shares' the ordinary shares of 1p each in the Company
'Placees' persons who agree to subscribe Placing Shares
pursuant to the Placing
'Placing' the conditional placing by KBC Peel Hunt of the
Placing Shares pursuant to the Placing Agreement
'Placing Agreement' the agreement dated 7 March 2007 between the Company
and KBC Peel Hunt relating to the Placing
'Placing Price' 55p
'Placing Shares' 20,000,000 Ordinary Shares to be placed pursuant to
the Placing
'Resolutions' the resolutions set out in the notice of EGM dated 7
March 2007
'Shareholders' holders of Ordinary Shares
'UK' or 'United the United Kingdom of Great Britain and Northern
Kingdom' Ireland
'United States' the United States of America, its territories and
possessions, any State of the United States and the
District of Columbia
'US Securities Act' the US Securities Act of 1933
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