Panoply Holdings PLC – Acquisition of FutureGov & Total voting rights

Panoply Holdings PLC – Acquisition of FutureGov & Total voting rights

The Panoply Holdings PLC, the digitally native technology services Group, announces the acquisition of the entire issued share capital of FutureGov Limited, a leader in digital service design for the public sector and health sector.   

FutureGov has been changing public sector organisations through digital transformation for over a decade, using design, technology and organisation development approaches to create public services fit for the 21st century. As well as adding further service capabilities FutureGov brings strong existing client relationships, including Homes England, Essex County Council, Stockport Council, London Borough of Hackney, North East Lincolnshire Council and NHS Digital. As The Panoply's largest acquisition to date it also adds significant scale to the Group, which will employ circa 305 staff in total following completion of the Acquisition. 

FutureGov was incorporated in 2008 and in the year to 31 December 2018 generated revenues of £6.4m, an EBITDA of £1.52m and profit before tax of £1.45m. The acquisition of FutureGov is expected to be immediately earnings enhancing for the Group. 

The Acquisition transforms the shape of The Panoply, with circa 45% of Group revenue, on a proforma basis, originating from the health and public sectors following completion. The combination of FutureGov's wealth of experience and The Panoply's extended capabilities creates a very strong disrupter in these sectors, challenging the status-quo of larger organisations. The Group is now able to offer public sector clients an end-to-end service from discovery through to live digital transformation programmes, which is entirely tailored to the needs of the industry.

FutureGov's Chief Executive Officer, Dominic Campbell, will take on a Group-wide role of Managing Director, Public Sector and Health. His focus will be on securing transformational projects into the sector through the provision of a compelling alternative to the incumbent digital service providers. There are no proposed changes to The Panoply's board of directors as a result of the Acquisition. 

The initial consideration for the Acquisition will be £11.8m, satisfied though the payment of circa £6m cash and the issue of 6,612,397 new ordinary shares in The Panoply. In addition, The Panoply has also procured, on Completion, the repayment of loan notes issued by FutureGov to certain shareholders with a principal amount totalling £500,000 by FutureGov (the "Loan Notes"). 80% of the cash consideration is being paid to external investors in FutureGov or former employees. Demonstrating their belief in The Panoply, the FutureGov management team will receive 90% of the consideration due to them in shares in The Panoply and 10% in cash on completion, with all of any earn out consideration to be received in shares in The Panoply. 

The Panoply has entered into a three year £5m revolving credit facility with HSBC (the "RCF Facility") pursuant to which £3.55m will be drawn-down to pay a proportion of the cash consideration payable pursuant to the Acquisition. HSBC has taken security over The Panoply and all of the Group's material subsidiaries and their assets in connection with the RCF Facility. The RCF Facility contains customary terms and covenants, including financial covenants.  

As at 31 May 2019, assuming all payments in connection with the Acquisition had been made as at that date, the Group retained cash reserves of approximately £4.75m. 

Neal Gandhi, Chief Executive Officer of The Panoply said:

"FutureGov in every way reflects our own ethos, as a digitally native company built for the demands of the 21st century. It has built its reputation in the health and public sector with many projects with local authorities and other government bodies creating 21st century citizen services in areas as diverse as housing, transport, children's and adults' social care and health. We are excited by the opportunities that this opens up to all of our Group companies. Having started our dialogue only a few months ago, we are already bidding jointly for several deals totalling more than £4m. 

This is our largest acquisition to date, demonstrating the continued success of our proposition to target companies and our post-acquisition operating model. We are proud to be delivering on our ambitions and building a Group that is both profitable and purpose-led." 

Dominic Campbell, Chief Executive Officer of FutureGov said:

"We're proud of our track record of growth, with over a decade of experience working in the public sector, and more recently, rapid growth in health. We're keen to keep this momentum going and, in The Panoply, we've found a Group which clearly shares our purpose of providing an alternative to the incumbent digital transformation players. As part of the Group we will help to build the future, by growing the depth and breadth of our capabilities and scale, whilst retaining what makes us unique.

With this deal, we're pleased to repay the faith and investment that our key investors Surrey County Council and Nesta have shown us over the past five years, returning a significant return on their investment for onward investment in public service delivery and social impact."

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