Xploite CEO to invest own cash in Net Services

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Xploite CEO to invest own cash in Net Services

Microscope contributor

Xploite CEO Ian Smith is to plough up to £2.1m of new equity into Cisco managed network services provider NetServices to help finance a roll up of companies in the sector.

He already owns 2.4% of the AIM-listed firm but is proposing to subscribe for 3.3m new shares at £115,000 with an option to invest a further £2m at 8.7 pence per share - nearly double today's price of 4.75p - by the end of 2010.

In a statement to the market, Manchester-based NetServices said the managed services market in which it operated was littered by firms flogging "me-too" solutions all of which operated the same or similar network footprint.

"This means that they all have equipment in and between the major Data Centres in the UK, effectively duplicating costs on both infrastructure and people. A great number of these companies have annual turnover of below £15 million," it said.

"There are undoubtedly significant synergistic cost benefits to be obtained from executing a buy and build strategy in this sector, and one or two companies have already commenced doing this," NetServices added.

The board at NetServices spent £400,000 in fiscal 2008 to upgrade the core network, building a platform on which its technical skills and services are delivered. It also scaled down its direct sales force to focus on key partners.

The firm said today that the directors recognised it "lacked scale" and there was a "disconnect between the intrinsic value of the technical capability" built by the business and its £1.4m market capitalisation, however it is bullish about its future.

Upon completion of the subscription which needs to be approved by shareholders on 6 January, Smith will own 12.2% of NetServices and will be made non-exec director.

Smith - who has a track record of buying and building companies, had been due to get back on the acquisition trail with Xploite in the autumn following the summer sale of Anix to ACS for £31.5m in cash.

However, the firm then decided to return £9.5m to shareholders after deciding small scale acquisitions were more preferable.

 


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