Mark Braund, CEO of RedstoneConnect, commented: “The proposed disposal of our Systems Integration and Managed Services divisions represents another exciting development in the evolution of our business. Since the acquisition of Connect IB in 2016, we have been developing our Smart Software solution capabilities with a particular focus on OneSpace, our occupancy management software solution.
Employee mobility and agile working is driving demand as commercial real estate becomes more of a user experience business. We firmly believe that the significant global demand for workspace management solutions coupled with the market leading suite of services already being deployed within our Software division, creates an ideal base from which to accelerate our growth.
Our strategic focus on creating greater levels of recurring, annuity based revenues, and improving the earnings visibility of the Group, underpins the Board’s commitment to becoming a fast-growing workspace management software company delivering long term shareholder value.”
RedstoneConnect (AIM: REDS), a leading provider of technology and services for smart buildings and commercial spaces, today announced that it has conditionally agreed to sell Comunica Holdings Limited and Commensus Limited (which together comprise the Company’s Systems Integration and Managed Services divisions) to Excel I.T. Services Limited, a leading IT infrastructure company and support partner to global corporations, for a total consideration of GBP21.6 million in cash (“the Disposal”). GBP19.6 million of the consideration is payable in cash on Completion and up to a further GBP2 million will become payable on or before final completion of an already contracted project by Redstone Converged Solutions Ltd (a subsidiary of Comunica Holdings Limited) provided such project is carried out on a profitable basis. In addition, intercompany loans as at 31 January 2018 of, in aggregate, approximately GBP1.4 million owed by the Company to the Sale Group are being waived as part of the Disposal.
The Disposal is of sufficient size relative to that of the Existing Group to constitute a disposal resulting in a fundamental change of business pursuant to Rule 15 of the AIM Rules and Completion is, therefore, conditional upon the approval of Shareholders.
A circular to shareholders containing a notice of General Meeting is being posted to shareholders today and will be available on the Company’s website www.redstoneconnect.com. The General Meeting is to be held at 10.00 a.m. on 15 June 2018 at the offices of DAC Beachcroft LLP, 100 Fetter Lane, London EC4A 1BN. The Company has received irrevocable undertakings from the Directors and certain other Shareholders and a letter of intent to vote in favour of the Resolution in respect of holdings totalling in aggregate 7,169,351 Ordinary Shares, representing approximately 34.4 per cent. of the Company’s issued share capital.
Capitalised terms in this announcement shall have the same meaning ascribed to them in the Circular.
Background to and reasons for the Disposal
— RedstoneConnect is focused on technologies that make real estate more efficient and businesses more effective as a result
-- RedstoneConnect currently has three business divisions:
o Systems Integration – integrated and digital infrastructure for buildings and commercial spaces;
o Managed Services – IT support services and hosted cloud-based IT support services; and
o Software – software to improve building-user experience, utilisation and efficiency, with the Connect software platform and OneSpace occupancy management software solution.
— Following the acquisition of Connect IB in March 2016, the Board has been focused on both broadening and developing its software capabilities, which includes the mapping and wayfinding of smart buildings and occupancy management solutions
— The Systems Integration and Managed Services divisions operate in more mature markets and therefore the Board believes that higher levels of growth are available to the Company’s Software division
— Following the Disposal, management will be able to focus exclusively on expanding the Company’s Software business (the “Continuing Group”)
Deal rationale
The Board sees significant opportunities for growth in the smart software and co-working space technology markets especially in the agile working and the connected office environment, a core target market for the Group’s occupancy management software solution, OneSpace.
The Board believes that there is a change in the business environment where employee mobility and agile working is challenging modern organisations to adapt their approach to effective and efficient use of the workspace. This is driving demand for workspace management solutions. In 2017, the global market for occupancy analytics based software services was estimated to be worth $1.5 billion with the market size forecast to grow by a compound annual growth rate of approximately 25% to over $4.6 billion by 2022. The Board believes that its existing OneSpace software solution is well positioned to address this market opportunity.
The Disposal will provide the Board with the opportunity to accelerate the growth of the Company’s Software division, highlighted by the following:
— It creates a focused operational base from which to execute the Board’s strategy of becoming a leading software and SaaS driven company, focused on the high growth smart buildings and co-working space technology markets;
-- It provides investment capital to accelerate the Company's technology platform, through the:
o further development of OneSpace to broaden the functionality and modular offering, thereby increasing the market opportunity from multi-national enterprises and increasing mid-market reach;
o acceleration of the Company’s routes to market by further investment to expand its sales and marketing capability, both through adding to the Group’s direct sales capability and opening additional indirect sales channels through partnership arrangements; and
o balance sheet strength to capitalise on potential acquisition opportunities that not only broaden RedstoneConnect’s suite of software products in the smart building and co-working space markets but that also expand the Company’s geographical reach and/or bring with them a relevant established client base.
With the Continuing Group focused exclusively as a software business, it is the Board’s aspiration that through the additional investment in the Group, complemented by value enhancing acquisitions, the Company will benefit from anticipated growth in the occupancy analytics sector and evolve into a leading international workspace management software company with high margin SaaS and licence based revenues.
