Drumz Plc - Circ re Acquisition and ReAdmission to AIM
PR Newswire
London, April 5
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER ARTICLE 7 OF THE EU REGULATION 596/2014 AS IT FORMS PART OF THE UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
THIS ANNOUNCEMENT, INCLUDING THE APPENDICES TO THIS ANNOUNCEMENT, AND THE INFORMATION CONTAINED IN IT, IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, REPUBLIC OF IRELAND, JAPAN OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO.
THIS ANNOUNCEMENT, INCLUDING THE APPENDICES TO THIS ANNOUNCEMENT, IS FOR INFORMATION PURPOSES ONLY AND DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY. THIS ANNOUNCEMENT AND THE APPENDICES DO NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES OF DRUMZ PLC IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT SHOULD BE READ IN ITS ENTIRETY. THE DEFINITIONS USED IN THIS ANNOUNCEMENT ARE SET OUT IN APPENDIX III OF THIS ANNOUNCEMENT.
5 April 2023
DRUMZ PLC
(“Drumz” or the “Company”)
Acquisition of Acuity Risk Management Limited
Approval of waiver of obligations under Rule 9 of the Takeover Code
Placing and Subscription of 32,222,222 New Ordinary Shares at 4.5 pence per share
Share Reorganisation
Admission to trading on AIM
Change of Name
and
Notice of General Meeting
Drumz plc (AIM: DRUM), the investing company focused on building value in technology, is pleased to announce that it has conditionally agreed terms to acquire Acuity Risk Management Limited (“ARM”), a supplier of Governance, Risk, Compliance (“GRC”) software and services. Drumz currently owns 25 per cent. of the issued share capital of ARM and it is proposing to acquire the balance of the issued and to be issued share capital.
Highlights
· Acquisition of ARM for a total consideration of approximately £3.6 million. The Consideration will be satisfied by the payment of £0.5 million in cash and the issue of 45,709,570 New Ordinary Shares which at closing mid-market price of 6.75 pence per Existing Ordinary Share on 3 April 2023 as adjusted by the Share Reorganisation, being the latest practicable date prior to the publication of this announcement, are valued at £3.1 million.
- In addition, Acquisition Options over 2,420,506 New Ordinary Shares may be granted to the Founders in the event that the Company’s share price does not at any time exceed an average of 6.99 pence on any five consecutive trading days during the three months immediately following Admission.
- A conditional placing and subscription to raise £1.45 million (before expenses) by the issue of 32,222,222 New Ordinary Shares at a price of 4.5 pence per New Ordinary Share (the Issue Price represents a discount of approximately 33.3 per cent. to the Closing Price.
- Clear Capital has been appointed as a Joint Broker with immediate effect
- The key performance indicators of ARM are:
- monthly recurring revenue: £0.14 million as at 28 February 2023 (30 September 2022: £0.13 million, 31 March 2022: £0.10 million)
- forward contracted revenue: £2.17 million as at 28 February 2023 (30 September 2022: £1.99 million, 31 March 2022: £2.17 million)
- renewal rate: 96 per cent. as at 28 February 2023 (30 September 2022: 96 per cent., 31 March 2022: 82 per cent.)
- sales pipeline: £3.83 million as at 22 March 2023 (30 September 2022: £1.67 million, 31 March 2022: £1.36 million).
· Subject to, inter alia, shareholder approval and admission to trading on AIM, the Acquisition and Placing are expected to complete on 25 April 2023.
· Subject to, inter alia, shareholder approval and admission to trading on AIM, the Company will change its name to Acuity RM Group plc and TIDM will be (AIM:ACRM)
The acquisition of ARM will constitute a reverse takeover pursuant to Rule 14 of the AIM Rules for Companies and as such will require Shareholder approval. The Admission Document is being posted today to shareholders which sets out in more detail the background and reasons for the Acquisition, the Placing, Subscription, Change of Name, and certain other proposals and also includes a notice of General Meeting. A General Meeting of the Company is being convened for 10:00 a.m. on 24 April 2023 at the offices of Marriott Harrison LLP 80 Cheapside London EC2V 6EE. The Admission Document will be available on the Company's website: www.drumzplc.com and following Admission on Company’s new website: www.acuityrmgroup.com.
Angus Forrest, CEO of Drumz said: “We are delighted to announce Drumz’s acquisition of Acuity Risk Management Ltd (Acuity). Over the past two and a half years we have worked closely with the Acuity team. Since we invested the business has taken greater control of its activities particularly sales and marketing resulting in consistent growth and improvement in the Key Performance Indicators. We believe this is a very exciting time and stage in the Company’s development as it expands its activities in North America, the world’s largest market for Governance, Risk and Compliance (GRC). GRC is a large market - $14bn in 2022 rising to $27bn in 2027 (MarketsandMarkets).”
Simon Marvell, CEO of ARM said: “Drumz has been a great supporter of Acuity since its original investment in September 2020. Over the intervening period, Drumz has helped us to strengthen our commercial team and grow the business. We operate in a large and fast-growing market so we are delighted and excited to be proceeding with this transaction which we believe will help us to raise our profile as a public company and further accelerate development of the business and its expansion in new markets”.
The expected timetable of principal events is set out in Appendix II to this Announcement. Capitalised terms have the meaning set out in Appendix III to this Announcement.
For further information:
| Drumz plc | 020 3582 0566 |
| Angus Forrest, Chief Executive Officer | |
| WH Ireland (NOMAD & Joint Bookrunner) | www.whirelandcb.com |
| Mike Coe / Sarah Mather | 020 7220 1666 |
| Peterhouse Capital Limited (Joint Bookrunner) | |
| Lucy Williams / Duncan Vasey | 020 7469 0936 |
| Clear Capital Markets Limited (Joint Bookrunner) Andrew Blaylock | 020 3869 6080 |
ADDITIONAL INFORMATION
- Introduction
On 5 April 2023, the Company announced that it had conditionally agreed terms to acquire Acuity Risk Management Limited (“ARM”), a supplier of Governance, Risk, Compliance (“GRC”) software and services. Drumz currently owns 25 per cent. of the issued share capital of ARM and it is proposing to acquire the balance of the issued and to be issued share capital for a total consideration of approximately £3.6 million. The Consideration will be satisfied by the payment of £0.5 million in cash and the issue of 45,709,570 New Ordinary Shares which at the Closing Price are valued at £3.1 million. In addition, Acquisition Options over 2,420,506 New Ordinary Shares may be granted to the Founders in the event that the Company’s share price does not at any time exceed an average of 6.99 pence on any five consecutive trading days during the three months immediately following Admission.
The Company also announces that it has conditionally raised £1.45 million (before expenses) pursuant to a Placing and Subscription, with certain institutions and other investors, through the proposed issue of 32,222,222 New Ordinary Shares at a price of 4.5 pence per New Ordinary Share. The Placing and Subscription are conditional (amongst other things) upon the passing of certain resolutions in order to ensure that the Directors have the necessary authorities and powers to allot the New Ordinary Shares.
The Issue Price represents a discount of approximately 33.3 per cent. to the Closing Price.
In conjunction with the Acquisition, Placing and Subscription the Existing Directors believe it is appropriate to undertake a share reorganisation to simplify the number and pricing of the Company’s Existing Ordinary Shares. Details of the Share Reorganisation which will comprise a consolidation and sub-division are set out in paragraph 6 below.
The Directors believe that it is appropriate, should the Acquisition be approved by Shareholders at the General Meeting and be completed, that the name of the Company be changed to Acuity RM Group plc to reflect the business of the Enlarged Group.
The Placing, and Subscription, Acquisition and Change of Name are conditional (amongst other things) upon the passing of certain resolutions in order to ensure that the Directors have the necessary authorities and powers to allot the New Ordinary Shares. As a result, a number of proposals are to be put to Shareholders at the General Meeting.
The Acquisition, if completed, will constitute a reverse takeover of the Company under Rule 14 of the AIM Rules and is, therefore, subject to the approval of Shareholders at the General Meeting.
The Founders are presumed to be acting in concert for the purposes of the Takeover Code. On Admission the Concert Party will hold 44,973,171 New Ordinary Shares, as a result of the issue of the Concert Party Consideration Shares, representing approximately 37.16 per cent. of the Enlarged Ordinary Share Capital. In addition if all the Acquisition Options, held by or to be issued to the Founders were exercised (and no other Options or Adviser Warrants were exercised) the Founders would hold a total of 47,393,677 New Ordinary Shares, representing 38.39 per cent. of the Company’s then issued New Ordinary Share capital. Under Rule 9 of the Takeover Code, the Concert Party would normally be obliged to make an offer as a result of the (1) Concert Party Consideration Shares and (2) the exercise of the Acquisition Options, to all Shareholders (other than the Concert Party) to acquire their New Ordinary Shares for cash at the Closing Price. The Panel has agreed to waive this obligation, subject to the approval of the Independent Shareholders on a poll of the Waiver Resolution at the General Meeting.
On completion of the Acquisition and readmission to AIM the Company will own 100 per cent. of the shares of ARM and be treated as a trading company for the purposes of the AIM Rules. The Enlarged Group’s strategy will be to develop its business to deliver long term, sustainable growth in shareholder value. In the short to medium term this is expected to come from organic growth and thereafter may also come from complementary acquisitions.
2. Background on the Company and reasons for the Acquisition
Drumz was incorporated under the name J. Billam Limited in 1935 and in 1964 it became a public company with its shares traded on the London Stock Exchange. In June 1995, its name changed to Billam PLC and in 1997 its shares were admitted to AIM. In 2000, it became an investing company on AIM. It subsequently changed its name to Energiser Investments plc in 2008 and to Drumz in 2020. Drumz is an investing company admitted to trading on AIM with an investment policy focused principally, but not exclusively, on acquiring investments in technology businesses based in Europe.
Drumz currently has two investments, being a 25 per cent. shareholding in ARM and a 5.85 per cent. legacy shareholding in KCR. Drumz is proposing to acquire the remaining issued shares and to be issued shares in ARM as part of the Proposals. Further details on ARM are set out in paragraph 3 below. KCR is an AIM listed property business focused on the residential sector and the Existing Directors are looking to dispose of this investment, which is outside the Company’s current investment policy. However, in common with many smaller companies, there is limited liquidity in the shares of KCR and therefore the Board is not able to give a view on when or if a disposal of this investment might be effected.
On 4 September 2020, Drumz acquired a 20 per cent. stake in ARM and Angus Forrest was appointed chairman of the board of ARM as a board representative of Drumz. On 6 September 2021 Drumz exercised an option to acquire a further five per cent., thereby increasing its shareholding to 25 per cent.
Since Drumz’s investment, the focus of the ARM Directors has been on increasing the commercialisation of ARM. Contract terms have been revised and all sales of ARM’s risk management software, STREAM®, have been on a SaaS or private cloud (on-premise) subscription basis. Sales and marketing activities have been revised and strengthened, with a new digital marketing programme and the sales team has been strengthened through a combination of recruitment, training and management. This has resulted in several new customer wins including a major UK broadcaster, a US technology company and a German engineering company. STREAM® is currently being used by around 70 organisations, across the UK, Germany, US and other territories.
ARM has demonstrated strong growth over the past two years and the Existing Directors believe that there continue to be opportunities for rapid organic expansion and therefore the Acquisition presents the Company and its Shareholders with what the Directors believe is an exciting opportunity.
Accordingly, the Existing Directors propose that, subject to approval of the Resolutions by the Shareholders at the General Meeting, the Company should acquire the entire issued share capital of ARM not already owned by Drumz.
3. Summary information on ARM
ARM was incorporated on 18 December 2019 as a limited company and commenced trading in March 2020 when it acquired the trade and assets of Acuity RM LLP.
ARM is an established provider of risk management services. ARM’s award-winning STREAM® is a GRC software platform, which collects data about organisations to improve business decisions and management. It is used by around 70 organisations in markets including government, utilities, defence, broadcasting, manufacturing and healthcare. Most customers use it for managing cybersecurity and IT risks and for compliance with ISO 27001 and other standards and regulations. STREAM® is sold on a SaaS or private cloud delivery (on-premise) basis, typically with a three year licence, invoiced annually in advance. Sales are made directly through the Company’s own sales team and via a growing network of partners in the UK and the US.
The Directors believe that Acuity is well placed to continue to build market share in the growing GRC market which was valued at c.$14.9 billion in 2022 and is expected to grow strongly to c.$27.1 billion in 2027, as more organisations accept the need and importance to manage the risks affecting them (Source: MarketsandMarketsTM).
ARM is headquartered and operates from its office in the UK (London). ARM currently employs or contracts with 19 people, all of whom are UK based.
The table below sets out a summary of financial information on ARM, prepared in accordance with IFRS, for the periods indicated. As this is only a summary, Shareholders are advised to read the Admission Document and not rely solely on this summarised information.
Summary historical financial information of ARM
| Unaudited | Unaudited | |||
| Audited | Audited | Six | Six | |
| Year | Period* | months | months | |
| ended | ended | ended | ended | |
| 31 March | 31 March 30 September 30 September | |||
| 2022 | 2021 | 2022 | 2021 | |
| £’000 | £’000 | £’000 | £’000 | |
| Revenue | 1,558 | 1,226 | 853 | 735 |
| Gross profit | 1,455 | 1,123 | 788 | 683 |
| EBITDA** | (319) | (411) | (289) | (185) |
| Loss from operations | (525) | (599) | (385) | (293) |
*Being the period from incorporation on 18 December 2019
**Earnings before interest, tax, depreciation and amortisation
The Directors believe that two of the largest drivers of enterprise value for a business using a SaaS/ subscriptions model are growth rate and scale. Since Drumz invested in ARM, ARM has been focused on building its commercial infrastructure to enable it to accelerate its growth and achieve greater scale.
- Principal terms of the Acquisition
On 5 April 2023, the Company entered into the Acquisition Agreements with the Founders and the Option Holders pursuant to which the Company has conditionally agreed to acquire the entire issued and to be issued share capital of ARM, not already owned by Drumz. The Sellers comprise (i) the Founders and (ii) the Option Holders (who are certain employees of ARM that have been granted options over shares in ARM).
The Company entered into the SPA with the Founders on 5 April 2023. The options held by the Option Holders will be exercised and the shares issued as a result of that exercise shall be acquired by the Company on Completion pursuant to the terms of the Option Holder SPAs, which were entered into by the Company and each of the Option Holders on 5 April 2023.
The total consideration for the Acquisition is £3.6 million, to be satisfied as to £0.5 million payable in cash and 45,709,570 New Ordinary Shares with a value of £3.1 million at the Closing Price.
In addition, Acquisition Options over 2,420,506 New Ordinary Shares have been granted to the Founders in the event that the Company’s share price does not at any time exceed an average of 6.99 pence on any five consecutive trading days during the three months immediately following Admission.
The Cash Consideration and 44,973,171 Consideration Shares will be paid/issued to the Founders pursuant to the SPA. 736,399 Consideration Shares will be issued to the Option Holders pursuant to the Option Holder SPAs.
Completion is conditional, inter alia, on the approval of the Resolutions at the General Meeting, Admission and no material adverse change having occurred in respect of ARM prior to Completion.
Pursuant to the SPA, the Founders have also agreed to enter into new service agreements with the Company and have entered into the Lock-in Deeds.
- Change of Name
To reflect the new direction of the Company, the Board is proposing to change the name of the Company to:
“Acuity RM Group plc”
The change of name will become effective once the Registrar of Companies has issued a new certificate of incorporation on the change of name. This is expected to occur on or around 2 May 2023. The tradeable instrument display mnemonic (“TIDM”) of the Company is expected to change to AIM:ACRM effective from 8.00 a.m. on or around 2 May 2023.
- Share Reorganisation
The Directors believe that the Company’s current capital structure, with 419,822,048 Existing Ordinary Shares of 0.1p each in issue and a share price at a fraction of a penny, is unwieldly in volume for a company of Drumz’s market capitalisation and should therefore be simplified. The Share Reorganisation will, if implemented, result in a smaller number of shares in issue, which the Existing Directors believe is more appropriate for a company of Drumz’s size, and will allow the Company’s share price to be traded at a more realistic level.
In addition, there are several hundred shareholders with holdings of shares which are worth less than £19 and which the Directors believe are simply uneconomic and/or unviable for shareholders to trade. Furthermore the cost of administering the register of shareholders and circularising them as required by law and by the Articles is disproportionately high.
For these reasons the Directors consider it both appropriate and beneficial to the Company and to the Shareholders to undertake the Share Reorganisation.
Under the Share Reorganisation, 1,952 new Ordinary Shares will be issued at a price of 0.1p per share to ensure that as part of the Share Reorganisation an exact whole number of Consolidated Ordinary Shares is issued. Following this, the Ordinary Shares in issue at the Record Date will be consolidated into Consolidated Ordinary Shares on the basis of one Consolidated Ordinary Share for every 2,000 Ordinary Shares. Each Consolidated Ordinary Share will then be sub-divided into 200 New Ordinary Shares and 1,800 New Deferred Shares.
Most Shareholders will not, at the Record Date, hold a number of Existing Ordinary Shares that is exactly divisible by the consolidation ratio. The result of the Consolidation, if approved, will be that such Shareholders will be left with a fractional entitlement to a resulting New Ordinary Share. Any such fractions as a result of the Consolidation will be aggregated and, following the Sub-division, the Directors will (in accordance with the Articles) sell the aggregated shares in the market for the benefit of the relevant Shareholders.
The proceeds from the sale of the fractional entitlements shall be distributed pro rata amongst the relevant Shareholders save that where a Shareholder is entitled to an amount which is less than £10 it will (in accordance with the Articles) not be distributed to such Shareholder but will be retained for the Company’s benefit.
The rights attaching to the New Ordinary Shares will be identical in all respects to those of the Existing Ordinary Shares.
The New Deferred Shares created as a result of the Sub-division will have the same rights and restrictions as the Existing Deferred Shares. These rights are minimal, thereby rendering the Deferred Shares effectively valueless. The rights attaching to the Deferred Shares can be summarised as follows:
- they will not entitle holders to receive any dividend or other distribution or to receive notice or speak or vote at general meetings of the Company;
- they will have no rights to participate in a return of assets on a winding up;
- they will not be freely transferable;
- the creation and issue of further shares will rank equally or in priority to the Deferred Shares;
- the passing of a resolution of the Company to cancel the Deferred Shares or to effect a reduction of capital shall not constitute a modification or abrogation of their rights; and
- the Company shall have the right at any time to purchase all of the Deferred Shares in issue for an aggregate consideration of £1.00.
There are no immediate plans to purchase or to cancel the Deferred Shares, although the Directors propose to keep the situation under review.
Shareholders who hold more than 2,000 Existing Ordinary Shares, before the Share Reorganisation, will continue to hold approximately the same percentage of the Company’s ordinary share capital post the Share Reorganisation. However, Shareholders will be diluted by the issue of the Consideration Shares, the Placing Shares, the Subscription Shares and the Adviser Shares.
Existing share certificates will cease to be valid following the Share Reorganisation. New share certificates in respect of the New Ordinary Shares will be issued by first class post at the risk of the Shareholder within 10 business days of Admission. No certificates will be issued in respect of the New Deferred Shares, nor will CREST accounts of Shareholders be credited in respect of any entitlement to the New Deferred Shares. No application will be made for the New Deferred Shares to be admitted to trading on AIM or any other investment exchange.
CREST Shareholders will have their CREST accounts credited with their New Ordinary Shares following Admission, which is expected to be on 25 April 2023.
- Details of the Placing and Subscription
The Company has raised approximately £1.45 million (before expenses) pursuant to the Placing, through the proposed issue of 31,000,000 Placing Shares by the Company at the Issue Price. The Company has raised a further approximately £55,000 (before expenses) pursuant to the Subscription, through the proposed issue of 1,222,222 Subscription Shares by the Company at the Issue Price. The Placing and Subscription Shares in aggregate represent approximately 26.6 per cent. of the Enlarged Ordinary Share Capital).
After the expenses of the Proposals, estimated to be £0.55 million (excluding VAT) in total, of which £50,000 will be settled by the issue of the Adviser Shares, the Company is expected to received approximately £0.95 million from the Placing. WH Ireland have agreed that part of the fees and commissions payable under the Placing Agreement will be satisfied via the issue by the Company of the Adviser Shares, treated as fully paid, on Admission.
The Issue Price represents a discount of 33.3 per cent. to the Closing Price .
The Existing Directors (other than Nick Clark) intend to subscribe for up to 2,000,000 New Ordinary Shares (a total aggregate amount of approximately £90,000 at the Issue Price) as part of the Placing and Subscription. This intention is not legally binding and any subscriptions by the Existing Directors pursuant to the Placing and Subscription will be announced through the Regulatory News Service.
The Placing and Subscription are conditional, among other matters, on the passing of the Resolutions to be proposed at the General Meeting granting authority to the Directors to allot the New Ordinary Shares on a non-pre-emptive basis and on Admission.
The Company, the Directors and Joint Bookrunners have entered into the Placing Agreement relating to the Placing which contains customary warranties from the Company in favour of the Joint Bookrunners in relation to, inter alia, the accuracy of the information in the Admission Document and other matters relating to the Company, ARM and the Enlarged Group’s business. In addition, the Company has agreed to indemnify the Joint Bookrunners in relation to certain liabilities that they may incur in respect of the Placing.
- Use of Placing and Subscription proceeds
The net proceeds of the Placing and Subscription are expected to be approximately £0.95 million and are intended to be used for:
- the Cash Consideration of £0.5 million;
- the further expansion of the technical and sales and marketing team and from Q4 2023 investment in STREAM® (particularly the development of its web application) of approximately £0.3 million and;
- additional working capital for the Enlarged Group of approximately £0.15 million.
As at 28 February 2023, the amounts owed to and from certain ARM Directors will be settled in full, resulting in a net outflow of approximately £80,175.
9. Existing Directors, Proposed Director and corporate governance
The Existing Directors will remain on the Board post Admission and Simon Marvell will be appointed to the Board effective from and conditional on Admission.
On Admission the Board will comprise:
- Simon Bennett, Independent Non-Executive Chairman
- Angus Forrest, Chief Executive Officer
- Simon Marvell, Executive Director
- Nick Clark, Non-Executive Director
- John Wakefield, Independent Non-Executive Director
It is expected that Simon Marvell will retire as a Director during the course of 2023 at which time it is anticipated Kerry Chambers will be appointed to the Board. Following his resignation from the Board, it is expected that Simon will continue as a non-executive director of ARM and be available to the Enlarged Group on a consultancy basis.
10. Current trading
(a) Drumz plc
On 16 September 2022 the Company announced its interim results for the six months ended 30 June 2022. On 4 November 2022 the Company announced it had published a circular convening a general meeting for ordinary shareholders in order to adopt new articles and amend the class rights of deferred shares and a class meeting for holders of deferred shares approving the amendment of the class rights of deferred shares. On 22 November 2022 the Company announced that the resolution proposed at the general meeting was duly passed and that the class meeting was adjourned as it was inquorate. On 29 November 2022 the Company announced that the resolution proposed at the adjourned class meeting was duly passed. On 5 April 2023, the Company announced the proposed Acquisition of ARM, approval of waiver of obligations under Rule 9 of the Takeover Code, the conditional Placing and Subscription to raise £1.45 million and the proposed Share Reorganisation.
(b) ARM
The unaudited results of ARM for the six months ended 30 September 2022 show revenue of £0.85 million up 16 per cent. on the equivalent period and an increased loss before tax of £0.40 million principally as a result of larger administrative costs and reflecting the investment in sales and marketing team. Since 30 September 2022, ARM has continued to trade in line with the ARM Directors’ expectations.
The key performance indicators of ARM as sourced from its unaudited management information are:
- monthly recurring revenue: £0.14 million as at 28 February 2023 (30 September 2022: £0.13 million, 31 March 2022: £0.10 million)
- forward contracted revenue: £2.17 million as at 28 February 2023 (30 September 2022: £1.99 million, 31 March 2022: £2.17 million)
- renewal rate: 96 per cent. as at 28 February 2023 (30 September 2022: 96 per cent., 31 March 2022: 82 per cent.)
- sales pipeline: £3.83 million as at 22 March 2023 (30 September 2022: £1.67 million, 31 March 2022: £1.36 million).
Progress continues to be made in the development of Acuity’s partner channel. In addition, the number of consultants at existing partners CGI and PA Consulting engaging with Acuity is increasing and two new referral partners (Security Scorecard and Mastercard RiskRecon, both from the US) have been taken on since 30 September 2022. Furthermore, some potentially significant new partner opportunities are emerging both in the UK and US.
The ARM Directors expect that ARM’s revenue for the year ending 31 March 2023 will be second half weighted and believe that ARM is on track for revenue of circa £1.75 million for the year. The ARM Directors will be targeting revenue of over £3 million for the year ending 31 March 2024.
11. Strategy of the Enlarged Group
On completion of the Acquisition and readmission to AIM the Company will own 100 per cent. of the shares of ARM and be treated as a trading company for the purposes of the AIM Rules. The Enlarged Group’s strategy will be to develop its business to deliver long term, sustainable growth in shareholder value. In the short to medium term this is expected to come from organic growth and thereafter may also come from complementary acquisitions.
The Group will be focused on key business objectives including:
- accelerate revenue growth both organically in existing and other global markets;
- further penetrate existing markets by forging stronger customer and partner relationships;
- improve productivity;
- continue to invest in developing STREAM® to enhance its offering; and
- become a profitable and cash generative group.
The Directors believe that Acquisition and Admission will facilitate growth opportunities of the Enlarged Group.
The principal place of business of Acuity and the Enlarged Group will move to 80 Cheapside, London, EC2V 6EE with effect from 1 May 2023.
12. Lock-in and orderly market arrangement
(a) Lock-in
The Company, the Joint Bookrunners and the Founders (who together will hold 37.16 per cent. of the Enlarged Ordinary Share Capital) have entered into the Lock-in Deeds, pursuant to which the Founders have agreed that subject to certain customary exceptions, (i) for a period of 12 months from the date of Completion, neither they nor their connected persons shall transfer or dispose of the Concert Party Consideration Shares or shares which they hold upon exercise of any options or warrants over New Ordinary Shares granted to them without the prior permission of the Company and the Joint Bookrunners and (ii) for a further period of 12 months, the Founders shall, and will use best endeavours to procure that their associates shall, only transfer or dispose of New Ordinary Shares in which they have a beneficial interest through or with the agreement of the Joint Bookrunners (provided that such broker’s terms are competitive to the terms being offered by other brokers and the sale price is at least equivalent to the price that the relevant transferee can obtain elsewhere), in order to maintain an orderly market in the New Ordinary Shares.
(b) Orderly market arrangements
The Existing Directors have entered into the Orderly Market Deeds, pursuant to which they have agreed that subject to certain customary exceptions, for a period of 24 months from the date of Admission, they shall, and will use best endeavours to procure that their associates shall, only transfer or dispose of New Ordinary Shares in which they have a beneficial interest through or with the agreement of the Joint Bookrunners (provided that such broker’s terms are competitive to the terms being offered by other brokers and the sale price is at least equivalent to the price that the relevant transferee can obtain elsewhere), in order to maintain an orderly market in the New Ordinary Shares.
13. Admission, settlement, CREST and dealings
Application will be made to the London Stock Exchange for the Enlarged Ordinary Share Capital to be admitted to trading on AIM, conditional on (amongst other things) Shareholders’ approval at the General Meeting. It is expected that Admission will become effective and that dealings in the Enlarged Ordinary Share Capital will commence at 8.00 a.m. on 25 April 2023.
Following Admission, share certificates in respect of the New Ordinary Shares are expected to be despatched by post to subscribers who wish to receive New Ordinary Shares in certificated form by no later than 10 business days following Admission.
In respect of subscribers in the Placing who wish to receive Placing Shares in uncertificated form, New Ordinary Shares are expected to be credited to their CREST stock accounts at 8.00 a.m. on 2 May 2023. The Company reserves the right to issue any New Ordinary Shares in certificated form should it consider this to be necessary or desirable.
14. Share options
The Company has share options outstanding over 15 million Existing Ordinary Shares. Of the 15 million options, 11 million are exercisable at 0.65 pence per share (equivalent to 1.1 million exercisable at 6.5 pence per New Ordinary Share, post the Share Reorganisation) and four million are exercisable at an exercise price of 0.55 pence per Ordinary Share (equivalent to 0.4 million exercisable at 5.5 pence per New Ordinary Share, post the Share Reorganisation).
The Directors believe that the success of the Company will depend to a high degree on the future performance of key employees in executing the Company’s growth strategy. Therefore, following Admission, the Company intends to establish a share option scheme as an important means of retaining, attracting and motivating key employees and contractors, and also for aligning the interests of the management team with those of Shareholders.
The Company shall have a pool of shares available for employee and management share options equivalent to 10 per cent. of the entire issued share capital of the Company from time to time.
15. Adviser Warrants
The Company has agreed to issue Adviser Warrants on Admission over an aggregate of 2,149,999 New Ordinary Shares to Peterhouse and Clear Capital.
16. Dividend policy
As the Company is in the early stages of executing its growth plan, the Directors intend to reinvest any future earnings for the foreseeable future to finance the growth of the Enlarged Group and to provide capital growth for Shareholders. The Directors will however consider the payment of dividends when it becomes commercially prudent to do so in accordance with applicable laws and subject always to the Enlarged Group having sufficient cash and distributable reserves for this purpose.
17. General Meeting and Resolutions
The Admission Document will contain a notice convening a General Meeting of the Company to be held at 10:00 a.m. on24 April 2023 at the offices of Marriott Harrison LLP 80 Cheapside London EC2V 6EE at which resolutions will be proposed to, inter alia, approve the authorities required in order to effect the Acquisitions, the Placing, the Share Reorganisation and certain other shareholder authorities.
APPENDIX I
STATISTICS FOR THE SHARE REORGANISATION, ACQUISITION, PLACING,
VENDOR PLACING AND ADMISSION
Number of Existing Ordinary Shares in issue at the date of this announcement 419,822,048
Number of Existing Ordinary Shares in issue immediately following the General Meeting 419,824,000
Number of Consolidated Ordinary Shares immediately following the Consolidation 209,912
Number of New Ordinary Shares immediately following the Sub-division 41,982,400
Issue Price 4.5 pence
Number of Placing Shares 31,000,000
Number of Subscription Shares 1,222,222
Number of Consideration Shares 45,709,570
Number of Adviser Shares 1,111,111
Enlarged Ordinary Share Capital on Admission 121,025,303
Number of Existing Deferred Shares in issue at the date of this announcement 2,268,113,165
Number of New Deferred Shares issued pursuant to the Share Reorganisation 377,841,600
Number of Deferred Shares in issue immediately following Admission 2,645,954,765
Number of Options, Acquisition Options and Adviser Warrants on Admission 6,070,505
Placing Shares and Subscription Shares as a percentage of the Enlarged Ordinary 26.6 per cent.
Share Capital
Consideration Shares as a percentage of the Enlarged Ordinary Share Capital 37.8 per cent.
Gross proceeds of the Placing and Subscription £1.45 million
Net proceeds of the Placing and Subscription (net of expenses and the issue of £0.95 million
the Adviser Shares)
Market capitalisation of the Company on Admission* £5.45 million
TIDM of the Existing Ordinary Shares “DRUM”
TIDM of the New Ordinary Shares** “ACRM”
LEI 213800JHJFKALDJA5X97
ISIN of the Existing Ordinary Shares GB00B06CZD75
SEDOL of the Existing Ordinary Shares B06CZD7
ISIN of the New Ordinary Shares GB00BR0WHY71
SEDOL of the New Ordinary Shares BR0WHY7
* based on the Issue Price
** the new TIDM shall become effective only if the Resolutions are passed at the General Meeting and once the Registrar of Companies has issued a change of name certificate
APPENDIX II
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
| 2023 | |
| Publication and posting of the Admission Document (including Notice of General Meeting), and Form of Proxy | 5 April |
| Latest time and date for receipt of Forms of Proxy and receipt of electronic proxy appointments via the CREST system | 10:00 a.m. on 20 April |
| General Meeting | 10:00 a.m. on 24 April |
| Record Date | 6.00 p.m. on 24 April |
| Admission effective and trading in the Enlarged Ordinary Share Capital expected to commence on AIM | 8.00 a.m. on 25 April |
| Completion of the Acquisition expected | 8.00 a.m. on 25 April |
| Expected date for CREST accounts to be credited in respect of New Ordinary Shares following the Share Reorganisation | 8.00 a.m. on 25 April |
| Expected date for CREST accounts to be credited in respect of Placing Shares | 8.00 a.m. on 2 May |
| Despatch of definitive share certificates (where applicable) in respect of New Ordinary Shares to be held in certificated form | within 10 business days of Admission |
| Expected date of Name and TIDM change | 8.00 a.m. on or around 2 May |
Notes:
All of the above timings refer to UK time. All future times and/or dates referred to in this Announcement are subject to change at the discretion of the Company and the Joint Bookrunners.
Any changes to the above dates and times will be notified by the Company via RIS announcements.
APPENDIX III
DEFINITIONS
“£” or “UK pounds sterling” the lawful currency of the United Kingdom
“$” or “US dollars” the lawful currency of the United States of America
“Acuity” the business operated by ARM and previously operated by Acuity RM LLP
“Acuity RM LLP” Acuity RM LLP, a limited liability partnership incorporated in England and Wales with registered number OC314841 with its registered office at Wey Court West, Union Road, Farnham, GU9 7PT and formerly known as Acuity Risk Management LLP
“Acquisition” the proposed acquisition by the Company of the entire issued and to be issued share capital of ARM not already owned by Drumz pursuant to the Acquisition Agreement
“Acquisition Agreements” the SPA and the Option Holder SPAs
“Acquisition Options” option over 2,420,506 New Ordinary Shares exercisable in the event that the Company’s share price does not at any time exceed an average of 6.99 pence on any five consecutive trading days during the three months immediately following Admission
“ARM” Acuity Risk Management Limited, a private limited company incorporated in England and Wales with registered number 12369714 and with its registered office at Wey Court West, Union Road, Farnham, GU9 7PT
“ARM Directors” Angus Forrest, Simon Marvell, Richard Mayall and Kerry Chambers
“acting in concert” has the meaning given to it in the Takeover Code
“Admission” the admission of the Enlarged Ordinary Share Capital to trading on AIM and that admission becoming effective in accordance with the AIM Rules for Companies
“Admission Document” the admission document dated 5 April 2023, to be issued by the Company to Shareholders, explaining inter alia the Acquisition, Placing, Subscription, Share Reorganisation and incorporating the notice of General Meeting
“Adviser Shares” 1,111,111 New Ordinary Shares to be issued by the Company on Admission to WH Ireland in satisfaction, in part, of the fees and commissions payable by the Company pursuant to the Placing Agreement
“Adviser Warrants” the warrants to be issued, conditional on Admission, by the Company to Peterhouse and Clear Capital
“AIM” AIM, the market of that name operated by the London Stock Exchange
“AIM Rules” together, the AIM Rules for Companies, and, where the context requires, the AIM Rules for Nominated Advisers
“AIM Rules for Companies” the rules and guidance for companies whose shares are admitted to trading on AIM entitled “AIM Rules for Companies” published by the London Stock Exchange as amended from time to time
“AIM Rules for the rules and guidance for nominated advisers entitled “AIM Rules
Nominated Advisers” for Nominated Advisers” published by the London Stock Exchange as amended from time to time
“Announcement” this announcement
“Articles” the articles of association of the Company at the date of this Announcement
“Board” the board of directors of the Company
“Business Day” a day (other than Saturday, Sunday or a public holiday), on which clearing banks in the City of London are generally open for business
“Cash Consideration” the cash element of the Consideration payable by the Company to the Founders pursuant to the SPA, being £500,000
“certificated” or Existing Ordinary Shares or where the context requires, New
“in certificated form” Ordinary Shares, which are evidenced by the issue of share certificates and are recorded on the register as being held in certificated form
“Change of Name” the proposed change of name of the Company to Acuity RM Group plc
“Clear Capital” Clear Capital Markets Limited, a company incorporated in England and Wales with registered number 09294557 and with its registered office at 12th Floor, Broadgate Tower – Office 1213 20 Primrose Street, London, England, EC2A 2EW
“Closing Price” the closing mid-market price of 6.75 pence per Existing Ordinary Share on 3 April 2023, as adjusted by the Share Reorganisation, being the latest practical day prior to publication of this Announcement
“Companies Act” the Companies Act 2006 (as amended)
“Company” or “Drumz” Drumz plc, a public limited company incorporated in England and Wales with registered number 00298654 and with its registered office at Burnham Yard, London End, Beaconsfield, Buckinghamshire, HP9 2JH
“Completion” completion of the Acquisition in accordance with the Acquisition Agreement
“Concert Party” the Founders
“Concert Party Consideration Shares” the 44,973,171 Consideration Shares being allotted and issued to the Founders
“Consideration” the consideration payable, under the Acquisition Agreement, in respect of the Acquisition, comprising the Cash Consideration, the Consideration Shares and the Acquisition Options
“Consideration Shares” the 45,709,570 New Ordinary Shares to be allotted and issued at the Closing Price by the Company to the Sellers pursuant to the Acquisition Agreements
“Consolidation” the proposed consolidation of every 2,000 Existing Ordinary Shares into one Consolidated Ordinary Share
“Consolidated Ordinary Share” the ordinary shares of 200p each arising from the Consolidation
“CREST” the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the operator (as defined in those regulations)
“CREST Manual” the compendium of documents entitled “CREST Manual” issued by Euroclear from time to time and comprising the CREST Reference Manual, the CREST Central Counterparty Service Manual, the CREST International Manual, the CREST Rules, the CSS Operations Manual and the CREST Glossary of Terms
“CREST Regulations” the Uncertificated Securities Regulations 2001 (SI2001/3755)
“Deferred Shares” the Existing Deferred Shares and the New Deferred Shares
“Directors” the Existing Directors and/or the Proposed Director, as the context requires
“Disclosure Guidance and the disclosure guidance and transparency rules issued by the FCA
Transparency Rules” acting in its capacity as the competent authority pursuant to Part VI of FSMA
“Enlarged Group” the Company, and, subject to Completion, ARM
“Enlarged Ordinary Share Capital” the issued ordinary share capital of the Company on Admission, comprising the New Ordinary Shares
“eGRC” enterprise governance, risk and compliance
“Executive Directors” Angus Forrest and Simon Marvell
“Existing Deferred Shares” the deferred shares of 0.1p each in the capital of the Company
“Existing Directors” Angus Forrest, Simon Bennett, John Wakefield and Nick Clark, being the directors of the Company as at the date of this Announcement
“Existing Issued Ordinary the 419,822,048 Ordinary Shares in issue as at the date of this
Share Capital” or document “Existing Ordinary Shares”
“FCA” the Financial Conduct Authority
“Form of Proxy” the form of proxy accompanying the Admission Document for use in connection with the General Meeting
“Founders” the founders of ARM, being Simon Marvell and Richard Mayall
“FSMA” the Financial Services and Markets Act 2000 (as amended)
“GDPR” the General Data Protection Regulation (GDPR), being a legal framework that sets guidelines for the collection and processing of personal information of individuals within the European Union (EU)
“GRC” governance, risk and compliance
“General Meeting” the general meeting of the Company to be held at the offices of Marriott Harrison LLP 80 Cheapside London EC2V 6EE on 24 April 2023 at 10.00 a.m.
“HMRC” His Majesty’s Revenue & Customs
“Independent Shareholders” the Shareholders save for those Shareholders who are participating in the Placing and Subscription
“IFRS” International Financial Reporting Standards
“Issue Price” 4.5 pence per New Ordinary Share
“ISO 27001” a specification for an information security management system, a framework of policies and procedures that includes all legal, physical and technical controls involved in an organisation’s information risk management processes
“Joint Bookrunners” WH Ireland, Peterhouse and Clear Capital
“KCR” KCR Residential REIT plc
“Lock-in Deeds” the lock-in deeds entered into between the Company, WH Ireland, Peterhouse, Clear Capital and each of the Founders
“London Stock Exchange” London Stock Exchange plc
“Market Abuse Regulation” the Market Abuse Regulation (2014/596/EU) (incorporating the technical standards, delegated regulations and guidance notes, published by the European Commission, London Stock Exchange, the FCA and the European Securities and Markets Authority) as it applies in the UK by virtue of the European Union (Withdrawal) Act 2018, as amended from time to time
“New Deferred Shares” the deferred shares of 0.1p each in the capital of the Company arising from the Share Reorganisation
“New Ordinary Shares” the new ordinary shares of 0.1p each in the capital of the Company arising from the Share Reorganisation
“Non-Executive Directors” each of Simon Bennett, John Wakefield and Nick Clark
“Notice of General Meeting” the notice convening the General Meeting
“Official List” the Official List of the FCA
“on-premise” IT infrastructure hardware and software applications that are hosted on-site
“Options” rights to acquire New Ordinary Shares
“Option Holder SPAs” the agreements to be entered into on Completion between each (1) Option Holder and (2) the Company
“Option Holders” certain employees of ARM who hold options over shares in the capital of ARM
“Orderly Market Deeds” the orderly market deeds entered into between the Company, WH Ireland and the Existing Directors
“Ordinary Shares” the ordinary shares of 0.1p each in the capital of the Company
“Peterhouse” Peterhouse Capital Limited, a company incorporated in England and Wales with registered number 02075091 and with its registered office at 3rd Floor, 80 Cheapside, London, EC2V 6EE
“Placing” the conditional placing by the Joint Bookrunners of the Placing Shares with investors at the Issue Price pursuant to the Placing Agreement
“Placing Agreement” the agreement dated 5 April 2023 between the Company, the Existing Directors, the Proposed Director and Joint Bookrunners relating to the Placing
“Placing Shares” the 31,000,000 New Ordinary Shares to be issued, pursuant to the Placing at the Issue Price
“Proposals” the Share Reorganisation, Acquisition, the Rule 9 Waiver, the Placing, the Subscription, the Change of Name, the Resolutions and Admission
“Proposed Director” Simon Marvell to be appointed as a director of the Company
“QCA Code” the Corporate Governance Code for Small and Mid-sized quoted companies as published by the Quoted Companies Alliance from time to time
“Registrar” Neville Registrars Limited, a company incorporated in England and Wales with registered number 04770411 and with its registered office at Neville House, Steelpark Road, Halesowen, West Midlands, B62 8HD
“Resolutions” the resolutions to be proposed at the General Meeting, each a “Resolution”
“Rule 9 Waiver” the waiver by the Panel (which is conditional on the Waiver Resolution) of the obligations that would otherwise arise for the Concert Party to make a general offer for the Enlarged Group under Rule 9 of the Takeover Code as a consequence of the allotment and issue of the Concert Party Consideration Shares to the Concert Party pursuant to the Proposals, granted by the Panel conditional upon approval of the Waiver Resolution by Independent Shareholders voting on a poll
“SaaS” Software as a Service, being a method of software delivery and licencing in which software is accessed online via a subscription, as opposed to the more traditional method of acquiring a perpetual licence via a single upfront payment and installing the software on an individual computer or server
“Sellers” the Founders and the Option Holders
“Shareholders” holders of Existing Ordinary Shares each individually being a “Shareholder”
“Share Reorganisation” the proposed Consolidation and Sub-division
“SPA” the conditional agreement dated 5 April 2023 between (1) the Founders and (2) the Company
“Sub-division” the proposed sub-division of each Consolidated Ordinary Share into 200 New Ordinary Shares and 1,800 New Deferred Shares
“Subscription” the conditional subscription of the Subscription Shares by certain investors
“Subscription Shares” 1,222,222 New Ordinary Shares to be issued pursuant to the Subscription at the Issue Price
“STREAM®” STREAM® Integrated Risk Manager, ARM’s award-winning, proprietary GRC software platform
“Takeover Code” or “Code” the City Code on Takeovers and Mergers issued from time to time by or on behalf of the Panel
“Takeover Panel” or “Panel” the Panel on Takeovers and Mergers
“TIDM” tradable instrument display mnemonic
“uncertificated” or recorded on a register of securities maintained by Euroclear UK &
“in uncertificated form” International Limited in accordance with the CREST Regulations as being in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST
“United Kingdom” or “UK” the United Kingdom of Great Britain and Northern Ireland
“US” or “United States” the United States of America
“US Securities Act” the United States Securities Act of 1933 (as amended)
“WH Ireland” WH Ireland Limited, a company incorporated in England and Wales with registered number 02002044 and with its registered office 24 Martin Lane, London EC4R 0DR
“Waiver Resolution” an ordinary resolution to be voted on by Independent Shareholders (on a poll) at the General Meeting
FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact, contained in this Announcement constitute “forward-looking statements”. In some cases forward-looking statements can be identified by terms such as “expects”, “predicts”, “anticipates”, “may”, “should”, “will”, “intends”, “plans”, “believes”, “targets”, “seeks”, “estimates”, “aims”, “projects”, “pipeline” and variations of such words and similar expressions (including their negative or other variations) are intended to identify such forward-looking statements and expectations. These statements are not guarantees of future performance or the ability to identify and consummate investments and involve certain risks, uncertainties, outcomes of negotiations and due diligence and assumptions that are difficult to predict, qualify or quantify. These forward-looking statements are not based on historical facts but rather on the Directors’ expectations regarding the Enlarged Group’s future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to management. Forward-looking statements involve significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions, competition and other regulatory changes, actions by governmental authorities, the availability of capital markets, reliance on key personnel and other factors, many of which are beyond the control of the Company. These forward-looking statements are subject to, among other things, the risk factors described in the Admission Document. Although the forward-looking statements contained in this Announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. Potential investors should therefore not place undue reliance on forward-looking statements (which speak only as of the date of this Announcement). No reliance should be put on any written or oral forward-looking statements that the Company, or persons acting on its behalf, may issue. Forward-looking statements contained in this Announcement based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future and no forward-looking statement contained in this Announcement is intended to provide any representation, assurance or guarantee as to future events or results. The Company will comply with its obligations to publish updated information as required by FSMA, the Market Abuse Regulation and/or the AIM Rules for Companies or otherwise by law and/ or by any regulatory authority but assumes no further obligation to publish additional information. Subject to any requirement under applicable legislation or regulation, the Company will not (and expressly disclaims any undertaking or obligation to) publicly release any revisions it may make to any forward-looking statements or other information that may occur due to any change in its expectations or to reflect events or circumstances after the date of this Announcement.
