Acquisition of Certus IT Limited and Placing

RNS Number : 2651P

SysGroup PLC

06 February 2019

6 FEBRUARY 2019

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES OR THE DISTRICT OF COLUMBIA), AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA, SINGAPORE OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL ("RESTRICTED JURISDICTIONS"). THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY. NEITHER THIS ANNOUNCEMENT NOR THE FACT OF ITS DISTRIBUTION SHALL FORM THE BASIS OF, OR BE RELIED ON IN CONNECTION WITH, ANY INVESTMENT DECISION IN RESPECT OF SYSGROUP PLC.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014.

PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

SysGroup Plc

("SysGroup" or the "Company" or, together with its subsidiaries, the "Group")

Acquisition of Certus IT Limited ("Certus"),

Placing of 26,315,792 new ordinary shares to raise approximately £10.0 million,

new £5.0 million banking facilities,

related party transaction

and

Notice of General Meeting

SysGroup, the award winning managed IT services and cloud hosting provider, is pleased to announce that it has conditionally agreed to acquire Certus IT Limited, a growing, profitable and cash-generative managed IT services and cloud hosting provider based in Newport, South Wales, for an initial cash consideration of £8.0 million on a debt free cash free and normalised working capital basis, increasing to a maximum cash consideration of £9.0 million dependent on the performance of Certus in the 12 month period following completion (the "Acquisition"). The Company also announces that it has conditionally raised £10.0 million, before expenses through the placing of 26,315,792 new ordinary shares of 1 pence each ("Ordinary Shares") in the capital of the Company (the "Placing Shares") at a price of 38 pence each to fund the acquisition (the "Placing").

The Acquisition is in line with the Group's stated strategy of augmenting its organic growth with select acquisitions. Certus is an established and growing managed services provider which has a complementary service offering, geographical reach and customer base to SysGroup. Certus will help to bolster the Group's existing managed service offerings, by expanding the Enlarged Group's current IaaS customers base, significantly adding to its managed connectivity portfolio and further strengthening the existing relationship with Dell EMC by upgrading the Group to gold partner status. In addition, the Group's consultative led sales approach and security focus will assist with generating cross-selling opportunities into the Certus customer base.

Strategic rationale for the Acquisition

Acceleration of the Group's growth and opportunity for value creation

· provides the Enlarged Group with critical mass in the managed IT services market and strengthens the Group's core service offering;

· broadens the Enlarged Group's penetration into new vertical markets, including into the Professional Services and Manufacturing sectors;

· provides cross-selling opportunities to offer Certus' customers the access to the capabilities and services of the Enlarged Group;

· enhances the Group's newly structured sales & marketing team;

· expands the Group's geographical coverage into South Wales and the M4 corridor; and

· brings Dell EMC Gold Partner status to the Enlarged Group, complementing SysGroup's portfolio of senior vendor partnerships.

Operational benefits

· provide the potential for economies of scale for the Enlarged Group by way of greater buying power;

· dilution of central costs;

· reduce the cost of the Group's existing footprint with the addition of Certus' datacentre;

· provides complimentary technical ability to support larger managed services projects; and

· further dilutes the Group's already low customer revenue concentration.

New Banking Facilities

The Company has also conditionally re-financed its existing term loan facility as a £1.75 million term loan over five years and arranged a new £3.25 million acquisition revolving credit facility with Santander to provide additional financial flexibility for the Group. The Banking Facilities have terms of five years with covenants that will be tested quarterly on a 12 month rolling basis relating to interest cover, net debt to Adjusted EBITDA leverage and debt service cover.

Commenting on the Transaction, Adam Binks, CEO of SysGroup, said:

"I am delighted to have completed the Placing and we are very pleased with the significant support we have received from both new and existing shareholders. The funds raised coupled with the new bank facilities will ensure the Group is well positioned to continue to invest in opportunities for growth. Further, I am excited to be welcoming both the Certus team and its customers to the SysGroup family. The addition of Certus to the Group represents a step-change in terms of the scale of the business, and we believe the enlarged Group will be better positioned to penetrate our target market and drive further growth. This acquisition fits within our strategy of growing the business organically and through strategic acquisitions, and we are excited by the prospects that lie ahead."

Information on Certus

Certus is a mid-sized end-to-end managed IT services provider based in Newport, South Wales. Certus was founded in 2000 and currently provides services to approximately 130 customers who typically have 50-250 users. Customers include Admiral, Confused.com, gocompare.com, Hugh James and London Executive Offices. Certus has contracted future income of approximately £8.7 million for the three years ending 31 December 2021, of which £4.4 million is contracted for the year to 31 December 2019.

Certus manages its own data centre footprint within the 250,000 sq ft Next Generation Data facility in Newport. Certus is well invested with 80 racks under management enabling the provision of contracted managed services and cloud services.

The existing executive management team of Certus will remain with the Enlarged Group after completion of the Acquisition, which the Board believes will assist with the integration of Certus within the Group.

Certus is a Gold Partner of Dell EMC and a Microsoft Gold Certified Partner; it was named Dell EMC's 'cloud partner of the year' in 2015 and now employs more than 40 members of staff.

Further details of the Acquisition and Placing

The Company has conditionally agreed to acquire Certus for an initial cash consideration of £8.0 million on a debt-free, cash-free and normalised working capital basis. Further contingent consideration of up to a maximum of £1.0 million may be payable subject to the achievement of financial performance criteria, based upon the financial performance of Certus (the "Earn-out Consideration") for the 12-month period following the completion of the Acquisition (the "Earn-out Period"). The Earn-out Consideration is structured such that for each £1 of EBITDA (subject to not less than 70 per cent. of gross profit being derived from recurring revenue) over £1.2 million that Certus generates during the Earn-out Period, SysGroup will pay £2.50 to the Vendors, capped at total Earn-out Consideration of £1.0 million. Completion of the Acquisition is conditional, amongst other things, on the receipt of the subscription monies relating to the Placing Shares.

The Acquisition will be funded through the conditional placing of £10.0 million (before expenses) through the proposed issue of 26,315,792 new Ordinary Shares (the "Placing Shares") at a price of 38 pence per Placing Share. The Placing is conditional upon, inter alia, the approval of shareholders at a general meeting to be held at the offices of Hill Dickinson LLP at 50 Fountain Street, Manchester, M2 2AS on 22 February 2019 at 10.00 a.m (the "General Meeting"). A shareholder circular and a notice convening the General Meeting will be sent to shareholders later today.

Shore Capital Stockbrokers Limited is acting as sole broker and bookrunner ("Bookrunner") in relation to the Placing.

Related party transactions

Gresham House Asset Management Limited and Canaccord Genuity Group Inc each hold an interest in more than 10 per cent. of the Company's Existing Ordinary Shares and are therefore considered related parties of the Company under the AIM Rules. Gresham House Asset Management Limited and Canaccord Genuity Group Inc have unconditionally agreed to subscribe for 5,620,386 Placing Shares and 3,421,053 Placing Shares respectively.

Michael Edelson, Chairman of the Company, has unconditionally agreed to subscribe for 131,579 Placing Shares and Praetura Group Limited, in which Michael Fletcher, a Non-Executive Director of the Company, has a controlling interest, has also unconditionally agreed to subscribe for 1,710,526 Placing Shares.

The participations in the Placing by Gresham House Asset Management Limited and Canaccord Genuity Group Inc are related party transactions under Rule 13 of the AIM Rules. The Directors consider, having consulted with the Company's Nominated Adviser, Shore Capital, that the terms of the related party transactions are fair and reasonable insofar as Shareholders are concerned.

The participations in the Placing by Michael Edelson and Praetura Group Limited are also related party transactions under Rule 13 of the AIM Rules. The independent Directors of the Company consider, having consulted with the Company's Nominated Adviser, Shore Capital, that the terms of the related party transactions are fair and reasonable insofar as Shareholders are concerned. The independent Directors of the Company comprise Adam Binks, Martin Audcent and Mark Quartermaine.

Extracts from the circular to be sent today to shareholders (the "Circular") providing further details of the Acquisition and Placing are set out below in Appendix I.

All defined terms used in this Announcement not otherwise defined have the meanings set out in the Circular.

For further information, please contact:

SysGroup plc

Adam Binks, CEO
Martin Audcent, CFO

+44 (0)151 559 1777

Shore Capital (Nomad & Sole Broker)

Edward Mansfield
Anita Ghanekar
Daniel Bush

+44 (0)20 7408 4090

Alma PR (Financial PR Adviser)

Josh Royston
Helena Bogle
Hilary Buchanan

+ 44 (0)20 3405 0206

About SysGroup

SysGroup is a leading provider of Managed IT Services, Cloud Hosting, and expert IT Consultancy. The Group delivers solutions that enable clients to understand and benefit from industry leading technologies and advanced hosting capabilities. SysGroup focuses on a customer's strategic and operational requirements - enabling clients to free up resources, grow their core business and avoid the distractions and complexity of delivering IT services.

The Group has offices in Liverpool, Coventry, London and Telford.

IMPORTANT NOTICE

Cautionary statement regarding forward-looking statements

Certain statements in this Announcement are forward-looking statements which are based on the Company's current expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These forward-looking statements, which may use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect", and words of similar meaning or the negative thereof, include all matters that are not historical facts and reflect the directors' beliefs and expectations and involve a number of risks, assumptions and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Statements contained in this Announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future.

Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Except as required by applicable law, neither the Company nor the Bookrunner assumes any responsibility or obligation to update or revise publicly or review any of the forward-looking statements contained herein, whether as a result of new information, future events or otherwise. You should not place undue reliance on any forward-looking statements, which speak only as of the date of this Announcement.

Information for distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment").

Notwithstanding the Target Market Assessment, Distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; Placing Shares offer no guaranteed income and no capital protection; and an investment in Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Bookrunner will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to Placing Shares. Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.

Notice to EEA investors

This Announcement (which is for information purposes only) is directed only at persons in member states of the European Economic Area (the "EEA") who are qualified investors within the meaning of article 2(1)(e) of Directive 2003/71/EC, as amended from time to time, including by Directive 2010/73/EU to the extent implemented in the relevant member state and includes any relevant implementing directive measure in any member state (the "Prospectus Directive") ("Qualified Investors").

Notice to United Kingdom investors

In the United Kingdom, this Announcement is directed only at Qualified Investors who are persons who (i) have professional experience in matters relating to investments falling within article 19(1) of The Financial Services and Markets Act (Financial Promotion) Order 2005, as amended ("FPO") and who fall within the definition of "investment professionals" in article 19(5) of the FPO or fall within the definition of "high net worth companies, unincorporated associations etc" in article 49(2)(a) to (d) of the FPO and (ii) are "qualified investors" as defined in section 86 of The Financial Services and Markets Act 2000, as amended ("FSMA"); or (c) persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as "Relevant Persons").

Your attention is drawn to the detailed terms and conditions of the Placing set out in Appendix II to this Announcement (which forms part of this Announcement).

Appendix II to this Announcement contains the detailed terms and conditions of the Placing and the basis on which investors agreed to participate in the Placing. The Placing has not been underwritten by Shore Capital Stockbrokers Limited. Placees are deemed to have read and understood this Announcement in its entirety, including Appendix II, and to have made their offer on the terms and subject to the conditions contained herein and to have given the representations, warranties, undertakings and acknowledgements contained in Appendix II to this Announcement.

The Placing Shares will be issued credited as fully paid and will rank pari passu with the existing Ordinary Shares, including the right to receive all dividends and other distributions (if any) declared, made or paid on or in respect of such shares after the date of their issue.

Basis on which information is presented

In this document, references to "pounds sterling", "£", "pence" and "p" are to the lawful currency of the United Kingdom. All times referred to in this document are, unless otherwise stated, references to London time.

APPENDIX I

CIRCULAR EXTRACTS

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

	2019
Announcement of the Proposals and publication of this document		6 February
Latest time and date for receipt of Forms of Proxy for the General Meeting		10.00 a.m. on 20 February
General Meeting		10.00 a.m. on 22 February
Admission, completion of the Placing and commencement of dealings in the Placing Shares		25 February
CREST accounts credited		25 February
Completion of the Acquisition		By 26 February
Dispatch of share certificates in respect of Placing Shares		By 18 March

STATISTICS RELATING TO THE ACQUISITION AND PLACING

Number of Existing Ordinary Shares as at the date of this document	23,103,898
Number of Placing Shares	26,315,792
Enlarged Share Capital on Admission	49,419,690
Placing Shares expressed as a percentage of the Enlarged Share Capital	53.2%
Placing Price	38p
Gross proceeds of the Placing	c£10million
Market capitalisation at the Placing Price on Admission	£18.8 million

1. Introduction

The Company today announced that it has entered into a conditional agreement with the Vendors to acquire the entire issued share capital of Certus for £8.0 million in cash, on a debt free cash free and normalised working capital basis. Further deferred consideration of up to £1.0 million may become payable in cash, subject to the financial performance of Certus in the 12 months following completion of the Acquisition. The Company is proposing to raise £10 million (before expenses) through a conditional placing of 26,315,792 Placing Shares at the Placing Price in order to finance the Acquisition, and provide working capital for the Enlarged Group. The Group has also conditionally re-financed its existing term loan facility as a £1.75 million term loan over five years and arranged a new acquisition revolving credit facility of £3.25 million over a five year term.

Certus is a growing, profitable and cash-generative managed IT services and cloud hosting provider based in Newport, South Wales, with a presence in South Wales and along the M4 corridor. In 2017 it generated annual revenues of £6.4 million - of which approximately 52 per cent. were recurring in nature.

The Board believes that the Acquisition is highly complementary to the Group and that it will provide the Company with an enhanced service offering, broader customer base and geographical reach, and the potential to deliver sales synergies, by cross selling services between the Group's and Certus's customer bases. The Board also believes that there is the potential for operating cost benefits through the addition of Certus's datacentre facility which could reduce the cost of the Group's existing footprint. The existing executive management of Certus will remain with the Group after the completion of the Acquisition.

Further details of the terms of the Acquisition and the Placing are set out below under the headings "Principal terms of the Acquisition" and "Details of the Placing and use of proceeds". The Placing Shares are being placed conditionally, amongst other things, on the passing of the Placing Resolutions at the General Meeting and Admission. Completion of the Acquisition is conditional, amongst other matters, on the receipt of the subscription monies relating to the Placing Shares. The Placing has not been underwritten.

2. Information on SysGroup

2.1. Introduction

SysGroup is an established managed services provider. Founded in 2007, SysGroup transformed itself from a mass-market web hosting provider to an IT services and cloud hosting provider in 2016, growing through both organic means and by acquisition. The Group now provides a range of cloud hosting, managed IT services and security solutions to its clients operating in different market verticals including insurance, retail, financial services, not for profit and education.

The Group has offices in Liverpool, London, Coventry and Telford and employs more than 80 people. SysGroup was awarded the 'Security Vendor of the Year - SME' award at the Computing Excellence Security Awards 2018 and has customers that include Home Bargains, the Royal Albert Hall, Sega and North Wales Police.

2.2. SysGroup's strategy

In 2016 SysGroup commenced a transition to focus on becoming a provider of managed IT services and cloud hosting. This transition was principally executed through the acquisitions of System Professional Ltd ("Sys-Pro") in 2016 and Rockford IT Ltd in 2017, as well as the disposal of the Group's SME mass market business in 2016.

SysGroup's focus is to expand its position as a provider of managed IT services to clients in the UK, typically with 50-500 users. The Board believes that a business focused on the provision of managed IT services offers a significant growth opportunity and the potential for increased margins and longer-term contracts, thereby providing greater revenue visibility. The strategy has resulted in the Company's growing revenue from £4.76 million in FY2016 to £10.45 million representing a CAGR of 48%. The Group has delivered year on year Adjusted EBITDA growth with Adjusted EBITDA progressing from £0.54 million in FY2016 to £1.00 million in FY2018 representing a CAGR of 36%. Managed services have grown to represent 68% of revenue in the last financial year, increasing from 53% in FY2016. In pursuit of this strategy, the Group has positioned itself as an extension of a customer's existing IT department, with an emphasis on consultative-led sales focusing on solutions rather than products to guide customers through the complexities and developments in the market. The process is supplemented by customer service and support. The Group invests in R&D to ensure its clients take advantage of the latest and best solutions available to them, with a vendor/cloud agnostic approach.

As set out in the Company's half yearly results, published on 26 November 2018, the Group's strategy includes continuing to supplement organic growth with carefully considered acquisitions that can add both value, through breadth of service offering and additional sector specialisms, and scale to the existing operations of the Group.

2.3. The Group's services

The Group provides a range of managed IT and cloud hosting services to customers including: Public Cloud, Private Cloud and Hybrid Cloud; managed infrastructure; virtualisation; IT support; DRaaS and BaaS; IT security and penetration testing; enterprise grade and SLA backed connectivity; and cloud and technology consultancy services. Cloud hosting and managed services revenues represented 68 per cent of the Group's turnover in the year to 31 March 2018, growing by 32 per cent on the year to 31 March 2017.

The Group also acts as a reseller of products and services to customers. Value added reselling revenues represented 32 per cent of the Group's revenues in the year to 31 March 2018.

3. Current trading and prospects

On 26 November 2018 the Company announced its half-yearly report for the six months to 30 September 2018. The results demonstrated revenue growth of 47.3% to £5.8m with Adjusted EBITDA growth of 300% to £0.56m, with recurring managed IT Services growing to 77.8% of total revenue. The Board has continued to focus on delivering higher value managed services contracts which coupled with management of the Group's overhead base provides the Board with confidence of delivering its full year results to 31 March 2019 in line with market expectations.

4. Information on Certus

4.1. Overview of Certus

Certus is a mid-sized end-to-end managed IT services provider based in Newport, South Wales. Certus was founded in 2000 and currently provides services to approximately 130 customers who typically have 50-250 users. Customers include Admiral, Confused.com, gocompare.com, Hugh James and London Executive Offices. Certus had 134 on-going customers at 31 December 2017, the top ten customers represented 46 per cent. of invoiced revenue in the year ended 31 December 2017. The Company has contracted future income of approximately £8.7 million for the three year ends ending 31 December 2021, of which £4.4 million is contracted for the year to 31 December 2019.

The company manages its own data centre within the 250,000 sq ft Next Generation Data facility in Newport. Certus is well invested with 80 racks under management enabling the provision of contracted managed services and cloud services.

Certus is a Gold Partner of Dell EMC and a Microsoft Gold Certified Partner; it was named Dell EMC's 'cloud partner of the year' in 2015. Certus now employs more than 40 members of staff.

4.2. Services

Certus, as with SysGroup, provides end-to-end managed IT services to clients across the UK. The company has an emphasis, in revenue terms, on the following services:

o Managed services - Certus provides managed service contracts to customers, including: 24/7 outsourced IT service desk, IaaS, DRaaS and security solutions. The Certus service desk provides remote systems monitoring, back-up, software and licence updates and asset management services for customers and also offers remote and on-site end-user support. Managed IT service contracts with clients are typically for a three-year term.

o Consultancy - Certus works with its customers who require both cloud hosted and on-premise solutions. Through its consulting services division, Certus is able to support its clients on their transitional journey to the cloud by engaging in both short and long term projects on behalf of its customers. Solutions include migrations from on-premise infrastructure to cloud hosted infrastructure and refreshes of existing on-premise infrastructure.

o Value added resale - Certus provides complete vendor management services to its customers supported by its relationships with suppliers such as Dell EMC and Arrow ECS. Complimentary to the managed services offering customers can rely on Certus for the supply, provision and deployment of their on-premise hardware requirements which is in support of the end-to-end solutions provided.

4.3. Summary financial results of Certus

Set out below are the audited financial results of Certus for the years ending 31 December 2016 and 31 December 2017, prepared under FRS 102:

Profit and loss

£'000	2016¹	2017¹
Revenue	5,369	6,397
Gross Profit	2,630	2,994
EBITDA²	428	535
EBITDA margin (%)	8.0%	8.4%
Profit after tax	23	172

Balance sheet

£'000	2016	2017
Gross assets	3,777	3,017
Net assets	1,294	566

Note:

1. Source: audited statutory accounts of Certus

2. Before restructuring costs

5. Background and reasons for the Acquisition

Certus grew revenue by 19 per cent and EBITDA 25 per cent in the year to 31 December 2017. 52 per cent of its 2017 revenue was recurring in nature. The Board believes that the Acquisition will add scale to the Enlarged Group, broaden its geographical reach and customer base, enhance its service offering, and provide scale benefits, as described further below.

The existing executive management team of Certus will remain with the Enlarged Group after the completion of the Acquisition, which the Board believes will assist with the integration of Certus into the Group.

5.1. Acceleration of the Group's growth and opportunity for value creation

The Board believe that the Acquisition provides the following benefits to the Group:

· provides the Enlarged Group with critical mass in the managed IT services market and strengthens the Group's core service offering;

· broadens the Enlarged Group's penetration into new vertical markets, including into the Professional Services and Manufacturing sectors;

· provides cross-selling opportunities to offer Certus' customers the access to the capabilities and services of the Enlarged Group;

· enhances the Group's newly structured Sales & Marketing team;

· expands the Group's geographical coverage into South Wales and the M4 corridor; and

· brings Dell EMC Gold Partner status to the Enlarged Group, complementing SysGroup's portfolio of senior vendor partnerships.

5.2. Operational benefits

The Board believes that Certus will also bring operational benefits to the Enlarged Group:

· provide the potential for economies of scale for the Enlarged Group by way of greater buying power

· dilution of central costs;

· reduce the cost of the Group's existing footprint with the addition of Certus' datacentre;

· provides complimentary technical ability which could support larger managed services projects; and

· further dilutes the Group's already low customer revenue concentration.

6. Principal terms of the Acquisition

6.1. Acquisition Agreement

Under the terms of the Acquisition Agreement, the Company has conditionally agreed to acquire Certus from the Vendors for an Initial Consideration of £8.0 million to be satisfied in cash (the "Initial Consideration") on a debt-free, cash-free and normalised working capital basis.

The Acquisition Agreement contains warranties and indemnities in favour of SysGroup customary for a transaction of this nature. The warranties relating to the Vendors' title to the shares being sold and their capacity to sell such shares were given on signing of the Acquisition Agreement and will be repeated prior to completion of the Acquisition ("Completion"). The remaining warranties relating to the business of Certus were also given on signing of the Acquisition Agreement and will be repeated prior to Completion and SysGroup has, amongst other things, a right to terminate in the event the Placing Agreement is terminated or there is a material breach of any of the warranties. Completion of the Acquisition is conditional, amongst other things, on the receipt of the subscription monies relating to the Placing Shares.

6.2. Earn out consideration

Under the Acquisition Agreement, further contingent consideration of up to a maximum of £1.0 million may be payable subject to the achievement of financial performance criteria (the "Earn-out Consideration"). Payment of the Earn-out Consideration is based upon the financial performance of Certus for the 12 month period following the completion of the Acquisition ("Completion"), (the "Earn-out Period"). The Earn-out Consideration is structured such that for each £1 of EBITDA (subject to not less than 70 per cent. of gross profit being derived from recurring revenue) over £1.2 million that Certus generates during the Earn-out Period, SysGroup will pay £2.50 to the Vendors, capped at total Earn-out Consideration of £1.0 million.

7. Details of Placing and use of proceeds

The Company has conditionally raised approximately £10 million (before commissions and expenses) through the conditional placing of the Placing Shares at the Placing Price.

The Placing Shares, when issued, will represent approximately 53.2 per cent. of the Company's Enlarged Share Capital immediately following Admission. The Placing Shares will rank in full for all dividends with a record date on or after the date of Admission and otherwise equally with the Ordinary Shares in issue from the date of Admission. It is expected that the Placing Shares will be admitted to trading on AIM on 25 February 2019.

The Placing (which is not being underwritten) is conditional, amongst other things, upon:

(a) the Placing Agreement becoming unconditional in all respects (save for Admission) and not having been terminated in accordance with its terms prior to Admission;

(b) the Placing Resolutions set out in the Notice of General Meeting being approved by Shareholders; and

(c) Admission of the Placing Shares becoming effective on or before 8.00 am on 25 February 2019 or such later date as the Company and Shore Capital may agree, being no later than 8.00 am on 31 March 2019.

The Placing is not conditional on the Acquisition completing and therefore there is a risk, albeit the Directors consider it unlikely, that the Placing will complete and the Acquisition will not complete. The Directors believe that if Admission occurs and therefore the Placing completes, it is unlikely that the Acquisition will not complete. Consequently, given the nature of the risk, the Directors have not considered it necessary to consider alternative uses for the net proceeds from the Placing if the Acquisition does not complete, apart from that the Company would use the net proceeds in a way which is in the best interests of the Shareholders as a whole, including to provide additional working capital for the Enlarged Group.

7.1. Settlement and dealings

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will become effective and that dealings in the Placing Shares will commence on 25 February 2019, subject to the passing of the Placing Resolutions at the General Meeting.

The Placing Shares being issued pursuant to the Placing will, on Admission, rank in full for all dividends and other distributions declared, made or paid on the Ordinary Shares after Admission and will otherwise rank pari passu in all respects with the issued Ordinary Shares.

7.2. Use of proceeds

The Company intends to use the net proceeds of the Placing to finance the Acquisition and to provide additional working capital for the Enlarged Group.

8. New Banking Facilities

The Company has conditionally re-financed its existing term loan facility as a £1.75 million term loan over five years and arranged a new £3.25 million acquisition revolving credit facility with Santander to provide additional financial flexibility for the Group. The Banking Facilities have terms of five years with covenants that will be tested quarterly on a 12 month rolling basis relating to interest cover, net debt to Adjusted EBITDA leverage and debt service cover.

9. Working Capital

The Directors are of the opinion, having made due and careful enquiry, that, taking into account the net proceeds of the Placing, the new Banking Facilities and the existing cash resources available to the Enlarged Group, the Enlarged Group has sufficient working capital for its present requirements, that is for at least 12 months from the date of Admission.

10. Related party transactions

Following Admission, the interests in the Company of Gresham House Asset Management Limited, Canaccord Genuity Group Inc, Michael Edelson and Praetura Group Limited will be as follows:

Shareholder	Number of Existing Ordinary Shares¹	Percentage of existing share capital¹	Number of New Ordinary Shares	Percentage of Enlarged Share Capital
Gresham House Asset Management Limited	4,603,700	19.93	10,224,086	20.7
Canaccord Genuity Group Inc	3,153,976	13.65	6,575,029	13.3
Michael Edelson	726,600	3.14	858,179	1.74
Praetura Group Limited²	Nil	Nil	1,710,526	3.46

¹As at 3 December 2018

² Michael Fletcher, a Non-Executive Director of the Company, has a controlling interest in Praetura Group Limited

11. Irrevocable undertakings

The Company has received irrevocable undertakings to vote in favour of the Resolutions from Directors who hold, or are interested in, an aggregate of 872,642 Existing Ordinary Shares, representing 3.78 per cent. of the Company's current issued share capital.

APPENDIX II

TERMS AND CONDITIONS OF THE PLACING

IMPORTANT INFORMATION ON THE PLACING FOR INVITED PLACEES ONLY. MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT DOES NOT ITSELF CONSTITUTE AN OFFER FOR THE SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY.

THIS ANNOUNCEMENT (INCLUDING THIS APPENDIX) (THE "ANNOUNCEMENT") IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF IRELAND THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL.

The price of shares and any income expected from them may go down as well as up and investors may not get back the full amount invested upon disposal of the shares. Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.

Capitalised terms not otherwise defined in this appendix are as defined in the Circular relating to the Placing of which this appendix forms a part. References in these Terms and Conditions to Shore Capital refer to Shore Capital Stockbrokers Limited and/or Shore Capital and Corporate Limited as the context admits. References to Bookrunner refer to Shore Capital Stockbrokers Limited.

These Terms and Conditions do not constitute an offer or invitation to acquire, underwrite or dispose of, or any solicitation of any offer or invitation to acquire, underwrite or dispose of, any Placing Shares or other securities of the Company to any person in any jurisdiction to whom it is unlawful to make such offer, invitation or solicitation in such jurisdiction. Persons who seek to participate in the Placing ("Placees") must inform themselves about and observe any such restrictions and must be persons who are able to lawfully receive this Announcement in their jurisdiction. In particular, these Terms and Conditions do not constitute an offer or invitation (or a solicitation of any offer or invitation) to acquire, underwrite or dispose of or otherwise deal in any Placing Shares or other securities of the Company in the United States of America, its territories and possessions ("United States"), Canada, Australia, Japan, Republic of Ireland or the Republic of South Africa or in any other jurisdiction in which any such offer, invitation or solicitation is or would be unlawful ("Restricted Jurisdiction").

The Placing Shares have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "Securities Act") or under the securities laws or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold, taken up, renounced, delivered or transferred, directly or indirectly, in the United States or to or by a person resident in or for the account of any person in the United States absent registration under the Securities Act or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States.

No public offering of the Placing Shares is being made in the United Kingdom or elsewhere. Members of the public are not eligible to take part in the placing and no public offering of Placing Shares is being or will be made. This Announcement and the terms and conditions set out and referred to in it are directed only at persons selected by Shore Capital who are (a) persons in member states of the European Economic Area (other than the United Kingdom) who are "qualified investors" falling within the meaning of article 2(1)(e) (as amended) of the EU Prospectus Directive (which means directive 2003/71/EC (as amended) and includes any relevant implementing directive measure in any member state) (the "Prospectus Directive"); (b) if in the United Kingdom, to persons who (i) have professional experience in matters relating to investments falling within article 19(1) of The Financial Services and Markets Act (Financial Promotion) Order 2005, as amended ("FPO") and who fall within the definition of "investment professionals" in article 19(5) of the FPO or fall within the definition of "high net worth companies, unincorporated associations etc" in article 49(2)(a) to (d) of the FPO and (ii) are "qualified investors" as defined in section 86 of The Financial Services and Markets Act 2000, as amended ("FSMA"); or (c) persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as "Relevant Persons").

No action has been taken by the Company, Shore Capital, or any of their respective directors, officers, partners, agents, employees or affiliates that would permit an offer of the Placing Shares or possession or distribution of this Announcement or any other publicity material relating to such Placing Shares in any jurisdiction where action for that purpose is required. Persons receiving this Announcement are required to inform themselves about and to observe any restrictions contained in this Announcement.

This Announcement does not itself constitute an offer for sale or subscription of any securities in the Company. This Announcement and the terms and conditions set out herein must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which this Announcement relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. Distribution of this Announcement in certain jurisdictions may be restricted or prohibited by law. Persons distributing this announcement must satisfy themselves that it is lawful to do so.

These Terms and Conditions apply to Placees, each of whom confirms his or its agreement, whether by telephone or otherwise, with Shore Capital to subscribe and pay for Placing Shares in the Placing, and hereby agrees with the Bookrunner and the Company to be legally and irrevocably bound by these Terms and Conditions which will be the Terms and Conditions on which the Placing Shares will be acquired in the Placing and each such Placee is deemed to have read and understood this Announcement in its entirety (including this appendix) and to be providing the representations, warranties, undertakings, agreements and acknowledgements contained in this appendix.

These Terms and Conditions must not be acted on or relied on by persons who are not Relevant Persons. Any investment or investment activity to which the Terms and Conditions set out herein relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. A Placee may not assign, transfer, or in any manner, deal with its rights or obligations under the agreement arising from the acceptance of the Placing, without the prior written agreement of the Bookrunner or in accordance with all relevant requirements.

All times and dates in this appendix are references to times and dates in London (United Kingdom).

Any indication in this Announcement of the price at which the Company's shares have been bought or sold in the past cannot be relied upon as a guide to future performance. Persons needing advice should consult an independent financial adviser. No statement in this Announcement is intended to be a profit forecast and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

Shore Capital and Corporate Limited, which is authorised and regulated by the FCA, acts as nominated adviser to the Company for the purposes of the AIM Rules. Shore Capital Stockbrokers Limited is a member of the London Stock Exchange and is authorised and regulated by the FCA. Shore Capital and Corporate Limited and Shore Capital Stockbrokers Limited are acting exclusively for the Company and for no one else in connection with the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Shore Capital or for providing advice in relation to the Placing, or any other matters referred to in this Announcement.

Save for the responsibilities and liabilities, if any, of Shore Capital under FSMA or the regulatory regime established thereunder or in respect of fraudulent misrepresentation, no representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by or on behalf of Shore Capital or by its affiliates, agents, directors, officers and employees as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefor is expressly disclaimed.

EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL, REGULATORY, TAX, BUSINESS AND RELATED ASPECTS OF AN ACQUISITION OF PLACING SHARES.

Persons who are invited to and who choose to participate in the Placing, by making an oral or written offer to acquire Placing Shares, including any individuals, funds or others on whose behalf a commitment to acquire Placing Shares is given, will be deemed to have read and understood this Announcement in its entirety and to be making such offer on the Terms and Conditions, and to be providing the representations, warranties, acknowledgements and undertakings, contained in this appendix. In particular each such Placee represents, warrants and acknowledges that:

i. it is a Relevant Person (as defined above) and undertakes that it will acquire, hold, manage or dispose of any Placing Shares that are allocated to it for the purposes of its business;

ii. it is acquiring the Placing Shares for its own account or for an account with respect to which it exercises sole investment discretion; and

iii. if it is in a member state of the EEA and/or if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, that any Placing Shares acquired by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in any member state of the EEA in circumstances which may give rise to an offer of securities to the public other than an offer or resale in a member state of the EEA which has implemented the Prospectus Directive to Qualified Investors, or in circumstances in which the prior consent of the Bookrunner has been given to each such proposed offer or resale.

The Bookrunner makes no representation to any Placees regarding an investment in the Placing Shares.

Terms of the Placing

The Bookrunner has, prior to the notification of this Announcement to a regulatory information service, entered into the Placing Agreement with the Company under which the Bookrunner has undertaken, on the terms and subject to the conditions set out therein, to use its reasonable endeavours as agent of the Company to procure Placees for the Placing Shares. This appendix gives details of the terms and conditions of, and the mechanics for participation in, the Placing.

Each Placee's commitment to subscribe for Placing Shares under the Placing will be agreed (orally or otherwise) with the Bookrunner and such agreement will constitute a binding irrevocable commitment by a Placee, subject to the Terms and Conditions set out in this appendix, to subscribe for and pay for Placing Shares ("Placing Participation") at the price per Placing Share notified to Placees ("Placing Price"). Such commitment is not capable of variation, termination or rescission by the Placee in any circumstances except fraud. Upon making this oral offer, each Placee has an immediate, separate, irrevocable and binding obligation owed to the Bookrunner, as agent for the Company, to pay the Bookrunner (or as it may direct) in cleared funds an amount equal to the product of the Placing Price and the total number of Placing Shares such Placee has agreed to subscribe for in the Placing. All such obligations are entered into by the Placee with the Bookrunner acting in its capacity as agent of the Company and are therefore directly enforceable by the Company.

Each Placee's allocation of Placing Shares has been agreed between the Bookrunner and the Company and will be confirmed orally to each Placee by the Bookrunner (as agent for the Company). A contract note confirming this allocation, the aggregate amount owed by such Placee to the Bookrunner and settlement instructions ("Contract Note") will be despatched shortly. The oral confirmation to such Placee by the Bookrunner (as agent for the Company) constitutes an irrevocable legally binding commitment upon that person (who will at that point become a Placee) in favour of the Bookrunner and the Company to subscribe for the number of Placing Shares allocated to it at the Placing Price on the terms and conditions set out in this Appendix and in accordance with the Company's articles of association. All obligations under the Placing will be subject to fulfilment of the conditions referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Right to terminate the Placing Agreement". By participating in Placing, each Placee agrees that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.

The Bookrunner and its respective affiliates are entitled to enter bids as principal in the Placing.

Irrespective of the time at which a Placee's allocation pursuant to the Placing is confirmed, settlement for all Placing Shares to be subscribed for pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".

The Company confirms that the Placing Shares will when issued, subject to the constitution of the Company, rank pari passu in all respects and form one class with the existing Ordinary Shares of the Company in issue on Admission, including the right to receive dividends or other distributions after the date of issue of the Placing Shares, if any. The Placing Shares are or will be issued free of any encumbrance, lien or other security interest.

Application for Admission

Application will be made to the London Stock Exchange ("LSE") for Admission of the Placing Shares to trading on the AIM Market operated by the LSE ("AIM"). Subject to the resolutions being passed at the general meeting of shareholders, the details of which are set out in the Circular, it is anticipated that Admission of the Placing Shares to trading on AIM will become effective at 8.00am on 25 February 2019 and that dealings in the Placing Shares will commence at that time and date for normal account settlement.

Scaling back

Shore Capital (after consulting with the Company) reserves the right to scale back the number of Placing Shares to be subscribed by any Placee or the number of Placing Shares to be subscribed for by all Placees in aggregate. Shore Capital also reserves the right not to offer allocations of Placing Shares to any person and not to accept offers to subscribe for Placing Shares or to accept such offers in part rather than in whole. Shore Capital shall be entitled to effect the Placing by such method as it shall in its sole discretion lawfully determine in the exercise of its appointment and the powers, authority and discretion conferred on it as Bookrunner.

To the fullest extent permissible by law, Shore Capital nor any holding company thereof, nor any subsidiary, branch or affiliate of Shore Capital (each an "Affiliate") nor any person acting on behalf of any of the foregoing shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, neither Shore Capital, nor any of its Affiliates nor any person acting on behalf of any such person shall have any liability to Placees in respect of its conduct of the Placing.

Placing Agreement

Pursuant to the Placing Agreement, Shore Capital has agreed on behalf of and as agent of the Company to use its reasonable endeavours to procure persons to subscribe for the Placing Shares at the Placing Price, subject to these Terms and Conditions. The Placing will not be underwritten.

Conditions of the Placing

The obligations of Shore Capital under the Placing Agreement are conditional, inter alia, on:

· the Acquisition Agreement:

a) not having lapsed or been terminated;

b) not having been amended, altered or revised without Shore Capital's prior written approval or consent; and

c) having become unconditional in all respects (subject only to (a) Admission, (b) any conditions relating to the Placing Agreement having become unconditional or not having terminated prior to Admission and (c) payment of the consideration due on completion thereof) and having been completed in accordance with its terms and with the Directors not being aware of any breach under the Acquisition Agreement;

· the passing of the resolutions set out in the notice of general meeting set out at the end of the Circular;

· none of the warranties in the Placing Agreement being untrue or inaccurate or misleading at the date of the agreement and at the date of Admission and no fact or circumstance having arisen which would render any of the warranties untrue or inaccurate or misleading when repeated at Admission;

· Admission taking place not later than 8.00am on 25 February 2019 or such later time or date as the Company and Shore Capital may otherwise agree (but not being later than 8.00am on the Long Stop Date).

The Placing Agreement will contain, inter alia, certain warranties and indemnities from the Company for the benefit of Shore Capital.

If any of the conditions contained in the Placing Agreement ("Conditions") are not fulfilled (or, where appropriate, waived in whole or part by Shore Capital) by the times and dates stated (or such later dates as Shore Capital and the Company may agree, being not later than 31 March 2019, or where no such dates are specified, 31 March 2019) the Placing Agreement shall cease and determine and no party to the Placing Agreement will have any claim against any other party for costs, damages, charges, compensation or otherwise except that, amongst other things, Shore Capital shall return to prospective Placees, in accordance with the Terms and Conditions, any monies received from them.

The Bookrunner may, in their absolute discretion and upon such terms as it thinks fit, waive or extend the time for fulfilment of all or any part of any of the Conditions which are capable of waiver or extension by them but provided that the latest time for fulfilment of any Condition shall not be later than 8.00 am on 25 February 2019. Any such waiver or extension will not affect Placees' commitments as set out in this Announcement.

Right to terminate the Placing Agreement

Shore Capital may, in its absolute discretion, terminate the Placing Agreement (inter alia) if: (i) it becomes aware of any circumstance resulting in a material breach of the warranties given to them in the Placing Agreement at the date of the agreement or when repeated on Admission; (ii) the Company is in material breach of any provision of the Placing Agreement or the Acquisition Agreement; (iii) an event or other matter (including, without limitation, any change or development in economic, financial, political, diplomatic or other market conditions or any change in applicable law or regulation) has occurred or is reasonably likely to occur which, in the opinion of Shore Capital, is (or will if it occurs be) reasonably likely to materially and adversely affect the assets, financial position or the business or prospects of the Company and which Shore Capital considers to be material in the context of the Placing or to the Acquisition and/or Admission or otherwise makes it impractical or inadvisable for Shore Capital to perform its obligations under the Placing Agreement; (iv) an event or omission which would materially and adversely affect the financial position and/or prospects of the Group taken as a whole, the Target or the Enlarged Group (as defined therein) or which in the reasonable opinion of Shore, in good faith, is or will be or may be materially prejudicial to the Company or to the Acquisition and/or Admission or to the Placing or to the acquisition of the Placing Shares by Placees.

The exercise by Shore Capital of a right of termination (or any right of waiver exercisable by Shore Capital) contained in the Placing Agreement or the exercise of any discretion under the Terms and Conditions set out herein is within the absolute discretion of Shore Capital and Shore Capital will not have any liability to Placees whatsoever in connection with any decision to exercise or not exercise any such rights.

By accepting the Placing Shares referred to in the Announcement to which this appendix is annexed, each Placee agrees that, without having any liability to such Placee, Shore Capital may exercise the right: (i) to extend the time for fulfilment of any of the conditions in the Placing Agreement (provided that Placees' commitments are not extended beyond the Long Stop Date); (ii) to, in its absolute discretion, waive, in whole or in part, fulfilment of certain of the conditions (but not including Admission); or (iii) to terminate the Placing Agreement, in each case without consulting Placees (or any of them).

If any of the conditions in the Placing Agreement are not satisfied (or, where relevant, waived), the Placing Agreement is terminated or the Placing Agreement does not otherwise become unconditional in all respects, the Placing will not proceed and all funds delivered by Placees to Shore Capital pursuant to the Placing and this appendix will be returned to Placees at their risk without interest, and Placees' rights and obligations under the Placing shall cease and determine at such time and no claim shall be made by Placees in respect thereof.

Registration and settlement

Irrespective of the time at which the Placee's allocation(s) pursuant to the Placing is/are confirmed, settlement for all Placing Shares to be acquired pursuant to the Placing will be required to be made on the basis explained below.

Settlement of transactions in the Placing Shares following Admission will take place on a delivery versus payment basis in accordance with the instructions set out in the trade confirmation within the CREST system ("CREST") (subject to certain exceptions). Shore Capital reserves the right to require settlement for, and delivery of, the Placing Shares (or a portion thereof) to Placees by such other means that it may deem necessary if delivery or settlement is not possible or practicable within CREST within the timetable set out in the Announcement or would not be consistent with the regulatory requirements in the jurisdiction of any Placee.

Subject to the resolutions being passed at the general meeting of shareholders, the details of which are set out in the Circular, it is expected that settlement will take place at 8.00 am on 25 February 2019 unless otherwise notified by the Bookrunner.

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of 2 percentage points above LIBOR, with interest compounded on a daily basis.

Each Placee is deemed to agree that, if it does not comply with these obligations, Shore Capital may sell any or all of the Placing Shares allocated to that Placee on such Placee's behalf and retain from the proceeds, for its account and benefit (as agent for the Company), an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax or securities transfer tax (together with any interest or penalties) which may arise in any jurisdiction upon the sale of such Placing Shares on such Placee's behalf. By communicating a bid for Placing Shares, each Placee confers on Shore Capital all such authorities and powers necessary or desirable to carry out any such sale and agrees to ratify and confirm all actions which Shore Capital lawfully takes in pursuance of such sale.

If Placing Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the Contract Note is copied and delivered immediately to the relevant person within that organisation.

The Company confirms that, insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax or securities transfer tax.

Placees will not be entitled to receive any fee or commission in connection with the Placing.

Further Terms, Confirmations and Warranties

By participating in the Placing, each Placee (and any person acting on such Placee's behalf) irrevocably makes the following confirmations, acknowledgements, representations, warranties and/or undertakings (as the case may be) to Shore Capital (in its capacity as Bookrunner and agent of the Company) and the Company and their respective directors, agents and advisers, in each case as a fundamental term of its offer to acquire and subscribe for Placing Shares:

1 each Placee confirms, represents and warrants that it has read and understood the Announcement (including this appendix) in its entirety and acknowledges that its Placing Participation will be governed by the terms, conditions, representations, warranties, acknowledgements, agreements and undertakings in this appendix;

2 each Placee acknowledges and agrees that its Placing Participation on the Terms and Conditions set out in this appendix is legally binding, irrevocable and is not capable of termination or rescission by such Placee in any circumstances and that it has the funds available to pay the Placing Price in respect of the Placing Shares for which it has given a commitment under the Placing;

3 each Placee confirms, represents and warrants that it has not relied on, received or requested nor does it have any need to receive, any prospectus, offering memorandum, listing particulars or any other document (other than the Announcement), any information given or any representations, warranties, agreements or undertakings (express or implied), written or oral, or statements made at any time by the Company or Shore Capital or by any subsidiary, holding company, branch or associate of the Company or Shore Capital or any of their respective officers, directors, agents, employees or advisers, or any other person in connection with the Placing, the Company and its subsidiaries or the Placing Shares and that in making its application under the Placing it is relying solely on the information contained in the Announcement and this appendix and it will not be relying on any agreements by the Company and its subsidiaries or Shore Capital, or any director, employee or agent of the Company or Shore Capital other than as expressly set out in this appendix, for which neither Shore Capital nor any of its directors and/or employees and/or person(s) acting on its behalf shall to the maximum extent permitted under law have any liability except in the case of fraud;

4 each Placee acknowledges that the content of this Announcement and any information publicly announced to a Regulatory Information Service by or on behalf of the Company on or prior to the date of this Announcement is exclusively the responsibility of the Company and that none of the Bookrunner, any of its Affiliates, directors, officers, employees or agents, or any person acting on behalf of any of them has or shall have any responsibility or liability for any information, representation or statement contained in this Announcement or any information previously or subsequently published by or on behalf of the Company and will not be liable for any Placee's decision to participate in the Placing based on any information, representation or statement contained in this Announcement, any information previously published by or on behalf of the Company or otherwise. Each Placee further represents, warrants and agrees that the only information on which it is entitled to rely and on which such Placee has relied in committing itself to subscribe for the Placing Shares is contained in this Announcement, any information publicly announced to a Regulatory Information Service by or on behalf of the Company on or prior to the date of this Announcement, such information being all that it deems necessary to make an investment decision in respect of the Placing Shares, and that it has neither received nor relied on any other information given or investigations, representations, warranties or statements made by either of the Bookrunner or the Company, or any of their respective affiliates or any person acting on behalf of any of them (including in any research report prepared by any of them) and none of the foregoing persons will be liable for any Placee's decision to accept an invitation to participate in the Placing based on any such other information, representation, warranty or statement. Each Placee further acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in deciding to participate in the Placing and that neither the Bookrunner nor any of its Affiliates have made any representations to it, express or implied, with respect to the Company, the Placing and the Placing Shares or the truth, accuracy, completeness or adequacy of any publicly available information about the Company or any other information that has otherwise been made available to Placees concerning the Company, whether at the date of publication, the date of this Announcement or otherwise, and each of them expressly disclaims any liability in respect thereof. Nothing in this paragraph or otherwise in this Announcement excludes the liability of any person for fraudulent misrepresentation made by that person;

5 each Placee confirms, represents and warrants that it is sufficiently knowledgeable to understand and be aware of the risks associated with, and other characteristics of, the Placing Shares and, among others, of the fact that it may not be able to resell the Placing Shares except in accordance with certain limited exemptions under applicable securities legislation and regulatory instruments;

6 each Placee confirms, represents and warrants, if a company or partnership, that it is a valid and subsisting company or partnership and has all the necessary capacity and authority to execute its obligations in connection with the Placing Participation and confirms, represents and warrants that any person who confirms to Shore Capital on behalf of a Placee an agreement to subscribe for Placing Shares is duly authorised to provide such confirmation to Shore Capital;

7 each Placee agrees that the entry into the Placing Agreement or the exercise by Shore Capital of any right of termination or any right of waiver exercisable by Shore Capital contained in the Placing Agreement or the exercise of any discretion is within the absolute discretion of Shore Capital, and Shore Capital will not have any liability to any Placee whatsoever in connection with any decision to exercise or not exercise any such rights. Each Placee acknowledges that if: (i) any of the conditions in the Placing Agreement are not satisfied (or, where relevant, waived); (ii) the Placing Agreement is terminated; or (iii) the Placing Agreement does not otherwise become unconditional in all respects; the Placing will lapse and such Placee's rights and obligations in relation to the Placing shall cease and determine at such time and no claim shall be made by any Placee in respect thereof;

8 each Placee acknowledges and agrees that Shore Capital does not act for, and that it does not expect Shore Capital to have any duties or responsibilities towards, such Placee, including, without limitation, for providing protections afforded to customers or clients of Shore Capital under the FCA's Conduct of Business Sourcebook or advising such Placee with regard to its Placing Participation and that such Placee is not, and will not be, a customer or client of Shore Capital as defined by the FCA's Conduct of Business Sourcebook in connection with the Placing. Likewise, Shore Capital will not treat any payment by such Placee pursuant to its Placing Participation as client money and governed by the FCA's Client Assets Sourcebook;

9 each Placee undertakes and agrees that it will be responsible for any stamp duty or stamp duty reserve tax or securities transfer tax in relation to the Placing Shares comprised in its Placing Participation and that neither Shore Capital nor the Company will be responsible for any liability to stamp duty or stamp duty reserve tax or securities transfer tax in relation to the Placing Shares comprised in such Placee's Placing Participation;

10 each Placee acknowledges and agrees that the Placing Participation confirmed orally by each Placee to the Bookrunner (as agent for the Company) and further confirmed by the Contract Note is a legally binding contract between it and Shore Capital and the Company subject to any scaling back, as described above, in the Bookrunner's absolute discretion and the Terms and Conditions of such Placee's Placing Participation will be governed by, and construed in accordance with, the laws of England and Wales, to the exclusive jurisdiction of whose courts such Placee irrevocably agrees to submit;

11 each Placee agrees that it will ensure delivery and payment is completed in accordance with the settlement instructions set out in the Contract Note and acknowledges and agrees that time shall be of the essence as regards such Placee's obligations pursuant to its Placing Participation;

12 each Placee acknowledges and agrees that it is the responsibility of such Placee (if it is outside of the United Kingdom) to satisfy itself that, in doing so, such Placee complies with the laws and regulations of any relevant territory in connection with its Placing Participation and that it obtains any requisite governmental or other consents and observes any other applicable formalities;

13 each Placee acknowledges and agrees that the Announcement does not constitute an offer to sell, or the solicitation of an offer to subscribe for or buy, Placing Shares in any jurisdiction in which such an offer or solicitation is unlawful. Accordingly, such Placee acknowledges and agrees that the Placing Shares may not, subject to certain limited exceptions, be offered or sold, directly or indirectly, in or into the United States, any province of Canada or Australia, Japan, Republic of Ireland or the Republic of South Africa or offered or sold to, or for the account or benefit of, a national, citizen or resident of the United States, any province of Canada or Australia, Japan, Republic of Ireland or the Republic of South Africa, in each case subject to limited exemptions, or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction;

14 each Placee acknowledges and agrees that the Placing Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or jurisdiction of the United States, or the relevant Canadian, Japan, Republic of Ireland ese, Australian or South African securities legislation and therefore the Placing Shares may not be offered, sold, transferred or delivered directly or indirectly into the United States, Canada, Japan, Republic of Ireland, Australia or the Republic of South Africa or their respective territories and possessions, subject to limited exemptions, and in the case of the United States, pursuant to an exemption from, or in a transaction not subject to the registration requirements of the Securities Act and in compliance with United States securities laws;

15 each Placee confirms, represents and warrants that it has complied with all relevant laws of all relevant territories, obtained all requisite governmental or other consents which may be required, in connection with its Placing Participation and complied with all requisite formalities and paid any issue, transfer or other taxes due in connection with its offer commitment in any territory and that it has not taken any action or omitted to take any action which will or may result in Shore Capital, the Company or any of their respective directors, officers, agents, employees or advisers acting in breach of the legal or regulatory requirements of any territory in connection with the Placing or such Placee's Placing Participation;

16 each Placee confirms, represents and warrants if it is receiving the Placing in circumstances under which the laws or regulations of a jurisdiction other than the United Kingdom would apply, that it is a person to whom the Placing Shares may be lawfully offered under that other jurisdiction's laws and regulations;

17 each Placee confirms, represents and warrants if it is a resident in any EEA state which has implemented the Prospectus Directive (other than the United Kingdom), it is a "qualified investor" within the meaning of the law in the Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive; and (ii) a "professional client" or an "eligible counterparty" within the meaning of Article 4(1)(11) and Article 24(2), (3) and (4), respectively, of Directive 2004/39/EC as implemented into national law of the relevant EEA state;

18 each Placee confirms, represents and warrants if it is outside the United Kingdom, neither this Announcement nor any other offering, marketing or other material in connection with the Placing constitutes an invitation, offer or promotion to, or arrangement with, it or any person whom it is procuring to subscribe for Placing Shares pursuant to the Placing unless, in the relevant territory, such offer, invitation or other course of conduct could lawfully be made to it or such person and such documents or materials could lawfully be provided to it or such person and Placing Shares could lawfully be distributed to and subscribed and held by it or such person without compliance with any unfulfilled approval, registration or other regulatory or legal requirements;

19 each Placee confirms, represents and warrants if it is a resident in the UK: i) it is a "qualified investor" within the meaning of Section 86(7) of FSMA and ii) it is a person of a kind described in Article 19 and/or Article 49 of the FPO and it understands that the information contained in this Appendix is only directed at any of the following: (A) persons falling within Article 19 of the FPO having professional experience in matters relating to investments; (B) persons falling within Article 49 of the FPO (including companies and unincorporated associations of high net worth and trusts of high value); (C) persons falling within Article 43(2) of the FPO or (D) persons to whom it would otherwise be lawful to distribute it; and that, accordingly, any investment or investment activity to which this Appendix relates is available to it as such a person or will be engaged in only with it as such a person;

20 each Placee confirms, represents and warrants that it does not have a registered address in and is not a citizen, resident or national of, any jurisdiction in which it is unlawful to make or accept an offer of the Placing Shares and it is not acting on a non-discretionary basis for any such person;

21 each Placee confirms, represents and warrants that its subscription for Placing Shares does not trigger, in the jurisdiction in which such Placee is resident or located: (i) any obligation to prepare or file a prospectus or similar document or any other report with respect to such subscription; (ii) any disclosure or reporting obligation of the Company; or (iii) any registration or other obligation on the part of Shore Capital or the Company;

22 that it and any person acting on its behalf is entitled to acquire the Placing Shares under the laws of all relevant jurisdictions which apply to it and that it has fully observed such laws and obtained all such governmental and other guarantees, permits, authorisations, approvals and consents which may be required thereunder and complied with all necessary formalities and that it has not taken any action or omitted to take any action which will or may result in the Bookrunner, the Company or any of their respective affiliates acting in breach of the legal or regulatory requirements of any jurisdiction in connection with the Placing;

23 each Placee confirms, represents and warrants it is acting as principal and for no other person and that its Placing Participation will not give any other person a contractual right to require the issue or sale by the Company of any Placing Shares;

24 each Placee confirms, represents and warrants that in accepting its Placing Participation it is not applying for registration as, or as a nominee or agent for, a person who is or may be a person mentioned in sections 67 to 72 inclusive and sections 93 to 97 inclusive of the UK Finance Act 1986;

25 each Placee confirms, represents and warrants that, to the extent applicable to it, it is aware of its obligations in connection with the Market Abuse Regulation (Regulation 596/2014), UK Criminal Justice Act 1993, Terrorism Act 2006, Anti-Terrorism Crime and Security Act 2001, Money Laundering Regulations, the Proceeds of Crime Act 2002 and the Financial Services and Markets Act 2000 (each as amended), it has identified its clients in accordance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and it has complied fully with its obligations pursuant to those Regulations;

26 each Placee acknowledges and agrees that all times and dates in the Announcement and the Terms and Conditions set out in this appendix may be subject to amendment and that Shore Capital will notify it of any such amendments;

27 where it is acquiring the Placing Shares for one or more managed accounts, it represents, warrants and undertakes that it is authorised in writing by each managed account to acquire the Placing Shares for each managed account and it has full power to make the acknowledgements, representations and agreements herein on behalf of each such account;

28 that if it is a pension fund or investment company, it represents, warrants and undertakes that its acquisition of Placing Shares is in full compliance with applicable laws and regulations;

29 each Placee acknowledges and agrees that no term of the agreement confirmed by the Contract Note shall be enforceable under the Contracts (Rights of Third Parties) Act 1999 by any person other than the Company or Shore Capital or any affiliate of Shore Capital or any Indemnified Persons (as hereinafter defined);

30 each Placee acknowledges that any of its monies held or received by Shore Capital will not be subject to the protections conferred by the Financial Conduct Authority ("FCA")'s Client Money Rules;

31 each Placee confirms and agrees that, in connection with any permitted transfer, the Company or the Bookrunner will have the right to obtain, as a condition to such transfer, a legal opinion of counsel, in form and by counsel satisfactory to the Company or the Bookrunner, that no Securities Act registration is or will be required along with appropriate certifications by the transferee as to the 'Accredited Investor' status and/or other appropriate matters;

32 each Placee confirms, represents and warrants that it has not distributed, forwarded, transferred or otherwise transmitted the Announcement or any other presentation or offering materials concerning the Placing Shares within the United States, nor will it do any of the foregoing. Such Placee further confirms that it understands that the information in the Announcement, including financial information, may be materially different from any disclosure that would be provided in a United States offering;

33 each Placee confirms, represents and warrants that if it has received any confidential price sensitive information about the Company in advance of the Placing, it has received such information within the market soundings regime provided for in article 11 of MAR and associated delegated regulations and has not: (a) dealt in the securities of the Company; (b) encouraged or required another person to deal in the securities of the Company; or (c) disclosed such information to any person, prior to the information being made publicly available;

34 each Placee confirms, represents and warrants that, in making its investment decision with respect to the Placing Shares:

34.1 it has not relied on the Company or any of its respective affiliates or on any document published by any of them (other than the Announcement);

34.2 it has the ability to bear the economic risk of its investment in the Placing Shares and has no need for liquidity with respect to its investment in the Placing Shares;

34.3 it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits, risks and suitability of investing in the Placing Shares, and is able to sustain a complete loss of any investment in the Placing Shares;

34.4 it has investigated independently and made its own assessment and satisfied itself concerning the relevant tax, legal, currency and other economic considerations relevant to its investment in the Placing Shares, including any federal, state and local tax consequences, affecting it in connection with its subscription for and any subsequent disposal of the Placing Shares;

34.5 if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, the Placing Shares purchased by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the European Economic Area which has implemented the Prospectus Directive other than "qualified investors" as defined in Article 2.1(e) of the Prospectus Directive, or in circumstances in which the prior consent of the Bookrunner has been given to the offer or resale; and

34.6 it has not offered or sold and will not offer or sell any Placing Shares to the public in any member state of the European Economic Area except in circumstances falling within Article 3(2) of the Prospectus Directive which do not result in any requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive;

35 each Placee acknowledges and agrees that neither the Bookrunner, nor any of its Affiliates or any person acting on behalf of any of them, is making any recommendations to it, or advising it regarding the suitability or merits of any transactions it may enter into in connection with the Placing and that it is not entitled to the protections afforded to clients of Shore Capital in connection with the Placing and that neither Shore Capital nor any of its Affiliates nor any of its respective officers, directors, employees or advisers shall be liable for any losses (including, without limitation, loss of profit, loss of business or opportunity and special interest or consequential losses), damages or costs of the Placee save as a result of fraud or for death or personal injury;

36 each Placee acknowledges and agrees the Placing does not constitute a recommendation or financial product advice and the Bookrunner has not had regard to its particular objectives, financial situation and needs;

37 each Placee acknowledges that the Company, Shore Capital, CREST, the registrar, any transfer agent, any distributors or dealers and their respective affiliates and others will rely on the truth and accuracy of the foregoing warranties, acknowledgements, representations, undertakings and agreements, and agrees to notify the Company and Shore Capital promptly in writing if any of its warranties, acknowledgements, representations, undertakings or agreements set out above cease to be accurate and complete and to indemnify and hold harmless on an after-tax basis the Company, Shore Capital and any of their respective officers, directors, agents, employees or advisers ("Indemnified Persons") from and against any and all loss, damage, liability or expense, including reasonable costs and attorneys' fees and disbursements, which an Indemnified Person may incur by reason of, or in connection with, any representation or warranty made by such Placee as set out above not having been true when made, any misrepresentation made or any failure by such Placee to fulfil any of its undertakings or agreements set out above or any other document such Placee provides to the Company or Shore Capital. Such Placee irrevocably authorises each of the Company and Shore Capital to produce a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby;

38 acknowledges that it irrevocably appoints any member or officer of the Bookrunner as its agent for the purposes of executing and delivering to the Company and/or its registrars any documents on its behalf necessary to enable it to be registered as the holder of any of the Placing Shares agreed to be taken up by it under the Placing; each Placee acknowledges that the rights and remedies of Shore Capital and the Company under these Terms and Conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise of one right or remedy will not prevent the exercise of the other rights and/or remedies;

39 each Placee acknowledges and agrees that its commitment to subscribe for Placing Shares on the terms set out herein and in the trade confirmation will continue notwithstanding any amendment that may in future be made to the Terms and Conditions of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Company's or the Bookrunner's conduct of the Placing;

40 each Placee acknowledges and agrees that in connection with the Placing, the Bookrunner and any of its Affiliates acting as an investor for its own account may take up shares in the Company and in that capacity may retain, purchase or sell for its own account such shares in the Company and any securities of the Company or related investments and may offer or sell such securities or other investments otherwise than in connection with the Placing. Accordingly, references in this Announcement to shares being issued, offered or placed should be read as including any issue, offering or placement of such shares in the Company to the Bookrunner and any of its Affiliates acting in such capacity. In addition, the Bookrunner may enter into financing arrangements and swaps with investors in connection with which the Bookrunner may from time to time acquire, hold or dispose of such securities of the Company, including the Placing Shares. Neither of the Bookrunner nor any of its Affiliates intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so;

41 authorises and instructs the Bookrunner, the Company and their respective agents to receive and hold any personal data and information of or belonging to the Placee which is received in relation to the Placing, and it consents to the lawful use by the Bookrunner, the Company and their respective agents of such data and information for the purposes of the Placing; and

42 each Placee undertakes that it (and any person acting on its behalf) will make payment for the Placing Shares allocated to it in accordance with the Announcement and these Terms and Conditions on the due time and date set out herein, failing which the relevant Placing Shares may be placed with other subscribers or sold as Shore Capital may in its sole discretion determine and without liability to such Placee and such Placee will remain liable for any shortfall below the net proceeds of such sale and the placing proceeds of such Placing Shares and may be required to bear the liability for any stamp duty or stamp duty reserve tax (together with any interest or penalties due pursuant to or referred to in these Terms and Conditions) which may arise upon the placing or sale of such Placee's Placing Shares on its behalf.

The foregoing acknowledgements, agreements, undertakings, representations, warranties and confirmations are given for the benefit of the Company and the Bookrunner (for their own benefit and, where relevant, the benefit of their respective officers and affiliates and any person acting on their behalf) and are irrevocable. Each Placee, and any person acting on behalf of a Placee, acknowledges that the neither the Company nor the Bookrunner owes any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings or indemnities in the Placing Agreement.

Responsibility

The Terms and Conditions set out in this appendix and the Announcement of which it forms part have been issued by the Company and are the sole responsibility of the Company.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

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