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Nasstar Trading Statement & Board Change

In news / By Lydia Cooper / 01 February 2017

The Board of Nasstar is pleased to report that full year trading for the year to 31 December 2016 closed out well. Trading from the recently acquired Modrus has been in line with expectations, whilst second half trading for the Group overall gives the Directors confidence that full year adjusted EBITDA* will be in line with expectations. This outcome has been achieved despite a degree of underperformance at VESK which has been offset by a robust performance from the rest of the Group. Results for the year ended 31 December 2016 are expected to be released on 24th April 2017.

New business sales in 2017 have started strongly with the addition of four new fully managed customer contracts that will generate in excess of £1m of recurring revenues over their three year terms. All four new clients sit within Nasstar's existing vertical focus sectors whilst further consolidating the existing high percentage of recurring revenues enjoyed by the Group.

The second half of 2016 saw the addition of Modrus to the Group which broadened Nasstar's end to end managed service portfolio bringing increased capabilities and technologies in the telephony and networking space. These services have already been successfully cross-sold into the wider Group's customer base. In addition Modrus expanded the vertical market penetration of the Group, adding Property Services and Media as strong vertical markets.

Cost synergies identified at the time of the Modrus acquisition have already begun to be realised though much remains to be done this year. Further activities will continue during 2017 with a view to maximising consolidation benefits in 2018. The principal opportunity lies with investing in the planned consolidation to take the Group's use from six UK datacentres to two; consolidating in this way saves on data centre costs whilst the resulting reduction in server infrastructure provides further power and licensing costs savings. It is also the intention to consolidate the managed services technical platforms which will facilitate the closer integration of technical teams and provide the Group with the most efficient platform to deliver future growth. The Directors anticipate the realisation of these projects during 2017 and 2018 will bring improved EBITDA percentages in 2018.

The Directors are pleased to report that as a result of bank covenant leverage targets being surpassed during 2016, the Group benefited from the ratchet down of interest on its fixed term loan. As a result, from November 2016 the interest margin over base rate moved from 2.95% to 2.75%. Net debt at the end of 2016 was £2.8m.

It was very pleasing to receive significant external industry validation of the Group during 2016 with the award by Citrix at their worldwide hosting summit of the 2016 "Citrix Networking Partner of the Year". Many of Nasstar's solutions use Citrix technologies; as such the award further demonstrates and ratifies the strength and depth of the Nasstar offering.

The rebranding of the subsidiaries continued in the second half of 2016 with both the Ltd and Kamanchi Ltd subsidiaries undertaking a full Nasstar rebrand with their respective names changing to Nasstar Group Ltd and Nasstar for Recruitment Ltd. Similar rebranding is planned for VESK and Modrus during 2017.

In respect of the performance within VESK, referred to above, falling short of ambitious 2016 targets, the Directors had built in specific protection in the relevant acquisition agreement. This protection comprised performance-related deferred consideration of up to £318,750, which has not been triggered, together with a right to claw back initial consideration in the event of further EBITDA shortfall. Accordingly, by an agreement to be entered into in due course between the relevant parties, claw back will take place from James Mackie, VESK's founder, and one other member of the VESK vendor group in the sum of £461,960 in total, which is to be satisfied by the cancellation of 5,279,544 of the initial consideration shares allotted to them at the time of VESK's acquisition in October 2015.
This process will be structured as a buy-back (and subsequent cancellation of the relevant shares) by the Company, of part of these Members' respective holdings of Nasstar shares out of distributable reserves in consideration, in effect, for the write-off of the claw-back amount due from them.

In order to give effect to the above an ordinary resolution will need to be passed by shareholders. The appropriate resolution will be put to members at the Company's next AGM which is due to take place in May 2017. In the intervening period the affected shareholders have agreed to waive any dividends declared and also to refrain from voting, in respect of the relevant ordinary shares.

Subsequently, James Mackie will be leaving the Group with immediate effect. His position as Head of Sales for the Group will be filled by the internal promotion of Mark Flynn, who previously led the sales function at Modrus. Mark will report directly to Nigel Redwood.

Finally, David Redwood has decided to retire from his position as non-executive Deputy Chairman with effect from today. This will leave a balanced board of Chairman Lord Daresbury, CEO Nigel Redwood, FD Niki Redwood and non-executive Directors Nick Bate and Mike Read.

Nasstar Chairman, Lord Daresbury commented:

"I would like to put on record our thanks for the immense contribution David has made to Nasstar. He was the founder of, the business that reversed into Nasstar in 2013 which marked the start of a transformational three years for Nasstar. David has been a stalwart of the hosting industry since its inception and we wish him well in his retirement.

2017 has started in encouraging fashion with some significant new client wins and will see Nasstar deliver the cost synergies available to it from the Modrus and VESK acquisitions. We also expect to see continued improvements in operating margins as a result of our acquisitive and organic growth strategies".

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

*Comprising earnings adjusted for interest, taxation, depreciation, amortisation, exceptional items and share based payments.

For further information, please contact:-

Nasstar plc +44 (0) 1952 225 000
Nigel Redwood, Chief Executive Officer
Niki Redwood, Finance Director

finnCap Limited (Nominated Adviser & Broker) +44 (0) 20 7220 0500
Julian Blunt, James Thompson (Corporate Finance)
Stephen Norcross (Corporate broking)

About Nasstar plc
Nasstar ( and its wholly owned operating businesses provide hosted managed and cloud computing services that enable subscribers to access their corporate desktop, files, applications, data and email in the Cloud rather than using local server infrastructure. Nasstar specialise in building bespoke cloud hosted services to manage a client's entire application set, tailor made to suit specific industries, designing public, private and hybrid cloud solutions to meet the objectives of the client. The solution is a highly scalable service that provides benefits including anywhere access to computing, a standardised corporate solution that can be accessed globally and in multiple languages and cost savings when compared to the traditional IT ownership model, replacing capital expenditure with a simple usage based payment model.

Nasstar (AIM:NASA) was founded in 1998, admitted to AIM in December 2005, acquired Limited in a reverse takeover in January 2014, Kamanchi Limited in July 2014, VESK in October 2015 and Modrus Limited in September 2016.


Lydia Cooper

Lydia Cooper

Group Marketing Manager at Nasstar.

Telford, Shropshire
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