REG - Netcall PLC - Acquisition of Govtech Holdings Limited

NetcallAnnouncement

07/08/2024 07:00

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RNS Number : 4476Z  Netcall PLC  07 August 2024

7 August 2024

 

NETCALL PLC

("Netcall", the "Company" or the "Group")

 

Acquisition of Govtech Holdings Limited

 

Extending Local Government footprint and enhancing Liberty portfolio with
innovative digital solutions

 

Netcall plc (AIM: NET), a leading provider of intelligent automation and
customer engagement software, is pleased to announce the acquisition of
Govtech Holdings Limited((1)), a digital process automation company (the
"Acquisition").

 

Highlights:

 ·             Complementary offering to Netcall's existing suite of Liberty solutions,
               expanding the portfolio and increasing the Group's customer base within Local
               Government
 ·             Expected to be immediately earnings enhancing, with Govtech operating a
               compatible cloud recurring revenue model
 ·             Substantial cross-selling potential across the portfolio
 ·             Initial cash consideration of £9.6 million, including £1.5 million relating
               to cash retained by Govtech, with an additional earnout, resulting in a
               maximum consideration of up to £13.0 million

 

About Govtech

 

Govtech (www.govtech.co.uk (http://www.govtech.co.uk) ) is a technology
company specialising in digital process automation, with a strong focus on
local government revenues and benefits processes. Its platform handles
approximately 30 million transactions annually, achieving up to 80% automation
for its customers. This high level of automation results in significant
productivity savings, with up to a 50% increase in efficiency for revenues and
benefits teams, leading to an improved citizen experience and faster service
delivery.

 

Headquartered in Cirencester, Gloucestershire, Govtech serves around 50 local
authorities including Leeds City Council, The City of Edinburgh Council and
Bristol City Council. All 39 employees, including the founders, will remain
with Netcall and continue to be based in Cirencester.

 

For the financial year ended 31 March 2024, Govtech reported a 17% increase in
revenue to £3.5 million (2023: £3.0 million), adjusted EBITDA((2)) of
£0.79m (2023: £0.65m), and a profit before tax of £0.73 million (2023:
£0.59 million). Gross assets as of 31 March 2024 were £3.1 million (2023:
£2.6 million). Annual recurring revenue from cloud subscriptions grew by 13%
to £3.4 million (2023: £3.0 million). At the time of completion, Govtech
expects to have approximately £1.5 million in cash. All figures are
unaudited.

 

Acquisition Rationale

 

The acquisition of Govtech is expected to be immediately earnings enhancing
for Netcall. It significantly strengthens the Group's market share in the
local government sector, increasing the Group's customer base from 26% to 34%
of UK councils. Additionally, it provides an entry into councils' revenues and
benefits function, complementing Netcall's existing applications across
housing and social care processes for local government.

 

Govtech's solutions will be integrated into Netcall's Liberty platform,
alongside its existing automation capabilities, such as AI-enhanced citizen
experience technology, chatbots, robotic process automation, and rapid
application development. This integration will create substantial new
opportunities for cross-selling within the expanded portfolio, thereby
increasing the stickiness of the Liberty platform across various council
functions.

 

Consideration for the Acquisition

 

The total consideration for the Acquisition is up to £13.0 million. The
initial consideration is £9.6 million, payable in cash from Netcall's
existing cash resources. Of this, £9.15 million is payable on completion,
while £0.45 million is held back and deferred for 12 months.

 

Of the up to £3.4 million of contingent consideration, up to £0.4 million is
payable in cash, subject to Govtech achieving specific financial metrics
within 12 months of the acquisition date. The balance of up to £3.0 million
of consideration is contingent on Govtech meeting certain financial hurdles
and achieving an Annual Contract Value ("ACV") growth target of £5.2 million
within two years of the acquisition.

 

Payments related to financial hurdles will be measured annually and paid
entirely in cash. Payments relating to ACV will also be measured annually,
with two-thirds paid in cash and one-third in Netcall shares. Any Netcall
shares issued will be subject to a 12-month lock-in for Govtech's management
shareholders.

 

James Ormondroyd, Chief Executive of Netcall, commented: "The acquisition of
Govtech significantly expands our presence in the local government sector,
strengthening our product proposition and providing substantial new cross
selling opportunities, while adding to our growing base of recurring revenues.
We look forward to welcoming the Govtech team to Netcall and are confident in
the Group's continued success."

 

((1)) Govtech Solutions Limited ("Govtech") is the trading subsidiary of
Govtech Holdings Limited. Govtech Holdings Limited was owned by the Govtech
management team, comprising Andrew Melvin, Nigel Phillips, Mark Hanson and
Andrew Williams, who collectively held 95.4% of the company, the remaining
4.6% was owned by Morgan Lloyd SIPP Trustees Limited.

( )

((2)) Profit before interest, tax, depreciation and amortisation adjusted to
exclude the effects of share-based payments, acquisition, impairment, profit
or loss on disposals, contingent consideration and non-recurring transaction
costs.

 

For further enquiries, please contact:

 

 Netcall plc                                                  Tel. +44 (0) 330 333 6100
 James Ormondroyd, CEO
 Richard Hughes, CFO
 Henrik Bang, Non-Executive Chair

 Canaccord Genuity Limited (Nominated Adviser and Broker)     Tel. +44 (0) 20 7523 8000
 Simon Bridges / Andrew Potts

 Singer Capital Markets (Joint Broker)                        Tel. +44 (0) 20 7496 3000
 Charles Leigh-Pemberton / Asha Chotai

 Alma Strategic Communications                                Tel. +44 (0) 20 3405 0205
 Caroline Forde / Hilary Buchanan / Emma Thompson

 

About Netcall

Netcall's Liberty software platform with Intelligent Automation and Customer
Engagement solutions helps organisations digitally transform their businesses
faster and more efficiently, empowering them to create a leaner, more
customer-centric organisation.

Netcall's customers span enterprise, healthcare and government sectors. These
include two-thirds of the NHS Acute Health Trusts and leading corporates
including Legal and General, Lloyds Banking Group, Aon and Santander.

For further information, please go to www.netcall.com (http://www.netcall.com)
.

Prior to publication the information communicated in this announcement was
deemed by the Company to constitute inside information for the purposes of
article 7 of the Market Abuse Regulations (EU) No 596/2014 as amended by
regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations No
2019/310 ('MAR'). With the publication of this announcement, this information
is now considered to be in the public domain.

 

 

 

 

 

 

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