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Toople Plc

Toople to acquire DMS Holding

Toople (LON:TOOP), a provider of bespoke telecom services to UK SMEs, has today announced that the Company has conditionally agreed to acquire the entire issued share capital of DMS Holding in conjunction with the completion of a book build for the placing by the Company’s brokers, Turner Pope and Novum, of 1,200,000,000 new Ordinary Shares (“Placing Shares”) at 0.1 pence per Ordinary Shares (“Placing Price”) to raise gross proceeds of £1.2 million. Toople’s results for the year ended 30 September 2019 were published earlier today.

DMS Holding is the holding company for DMSL, a company which provides unified communication services in the UK.  DMSL commenced trading in 2002 and has over 15 years’ experience of providing broadband connectivity, mobile and fixed voice and cloud services.  The consideration for the Acquisition is £1.56 million, subject to post completion adjustment, to be satisfied by a cash payment of £460,000, the issue of 1,050,000,000 new Ordinary Shares in Toople (the “Consideration Shares”) at the Placing Price, and the issue of Options to acquire up to 800,000 new Ordinary Shares.

Under the terms of the proposed Placing, the Placees will receive 600,000,000 Placing Warrants calculated on the basis of one Placing Warrant for every two Placing Shares acquired.  Each Placing Warrant entitles the holder to subscribe for 1 new Ordinary Share at the Placing Price at any time during the period commencing on Admission and expiring at midnight on the third anniversary thereof.

The Acquisition and the Placing is conditional upon, inter alia:

(i)            approval by the UK Listing Authority of a prospectus to be published by the Company in connection with the Placing (the “Prospectus”) and the publication by the Company of the Prospectus in accordance with the Prospectus Rules;

(ii)           approval of the Resolutions at a general meeting of the Company to be held at the offices of Fieldfisher at Riverbank House, 2 Swan Lane, London EC4R 3TT at 09:00 a.m. on 17 February 2020.

(iii)          the Placing Shares being admitted to listing on the Official List (standard listing segment) and to trading on the London Stock Exchange’s main market for listed securities (“Admission”) on or around 18 February 2020 (or such later date as may be agreed by the Company, Novum and Turner Pope).

The Company has also agreed to issue £1,625,000 of zero coupon secured Loan Notes to HomeSelect Finance pursuant to the Loan Note Instrument to raise net proceeds of £1,235,000.  The net proceeds of the Placing together with the funds raised through the issue of the Loan Notes will be used to provide the initial cash consideration for DMS Holding and to provide general working capital for the Enlarged Group. 

Highlights of the Acquisition and Information on DMSL

·      DMSL is a family owned business, which acts as a BT Premier reseller principally in the B2B market

·      In the year to 30 April 2019, DMSL’s turnover was £3.1 million, with a profit before taxation of £331,282

·      The Company is responsible for over 250,000 BT customers and over 400,000 Revenue Generating Units

·      Headquartered in Bishop Stortford, the company also has sales and quality operations based in the same Durban site as Toople’s sales and marketing operations

·      DMSL currently offers a portfolio of business services and products, from a single phone line to a multi-site unified comms VoIP platform, delivered via a network of telecoms and IT carriers and content providers across the UK including BT Business, BT Global Services, Gamma , EE, Vonage, Talktalk Business and 02

·      DMSL has multiple revenue streams including: upfront cash and recurring revenue from BT activities; recurring revenues from directly managed and contracted customers; and revenue share with resellers

·      Once completed the combined Group will be of larger scale opening up opportunities to benefit from operational gearing and operating efficiencies

·      DMSL is cash generative, accelerating Toople’s timeline to achieve profitability and positive cash generation

Andy Hollingworth, CEO of Toople, commented:

“This is a transformational acquisition for Toople with strong operational and market synergies as DMSL operates primarily in the B2B space and also offers hosted telephony.  They have a comparatively low churn rate with many customers on 12 month auto-renew at the end of their initial contract term.  When you combine this with their stable margins driven from BT commissions and high margin on directly contracted VOIP growth it makes for an attractive proposition.

“Financially it makes perfect sense as DMSL is already profitable and has been for a number of years.  As a result, the combined business will accelerate to EBITDA profitability and cash self-sufficiency, reducing the historic reliance on the market to provide funds for working capital.  It also provides us with far more predictable and controllable income streams. Significant synergies have been identified to improve overall Group profitability and cash generation and there is the possibility for further margin enhancement once direct business has been migrated onto Toople’s proprietary Merlin platform.

“As well as bringing immediate cash inflow on a monthly basis, the acquisition should substantially de-risk the entire business model and can help accelerate cash conversion from customers.”

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.