IMS SA (58/2018) Acquisition of an entity from the Issuer's industry

The Management Board of IMS S.A. ("Company", "Issuer"), in reference to ESPI reports 41/2018 and 47/2018, informs that today it signed the purchase agreement for 100% shares in APR Sp. z o.o. based in Katowice ("APR") and an investment agreement ("Agreement") specifying the terms of settlements with existing shareholders and other important issues after the acquisition. The parties to the Agreement are: IMS S.A. as a buyer, three natural persons holding jointly 100% shares in APR as the transferor and APR itself. The entire settlement will take place in cash.
APR is a company operating for several years in the audiomarketing industry, whose business model is based on providing music services to outlets. APR currently has slightly over 3,000 locations, to which it provides audio subscription services in Poland and abroad. After the acquisition, the Issuer's Capital Group will have a total of approx. 17,000 subscription locations.
The acquisition of APR is a very important step for the Issuer aimed at consolidating the sensory marketing market in Poland and strengthening the position of the Issuer as the market leader in Poland even stronger. Joining APR to the IMS Capital Group is also very important from the point of view of a significant strengthening of the Issuer's Capital Group's position in the audiomarketing economic segment, in which the Issuer began operating from the beginning of this year and in which the majority of competing companies operate.
The Management Board of the Issuer sees numerous synergies resulting from the acquisition of APR. These synergies include, first of all, the possibility of introducing a broad portfolio of IMS Group services to some of the APR customers - aromatamarketing, Digital Signage, audio advertising services, event services (revenue synergies). There are also significant opportunities for cost savings (cost synergies).
Acquisition of 100% shares in APR takes place in the earn-out model, on terms identical to those described in the term sheet from 9 August 2018 (ESPI announcement 41/2018).
A very important part of the payment to the current APR owners (who are also members of the management board of the company) will depend on the profits APR will earn for the IMS Capital Group. The key provisions of the Agreement are as follows:
1. The Issuer paid the existing owners of APR for the purchase of all shares the total price of PLN 3 750 000.00 gross,ie PLN 1,250,000.00 gross for each of the current owners of APR.
2. Additional payment for shares will depend on the net profit generated in the period 01.07.2019 - 30.06.2020, i.e. in the period when APR will be in the structures of the IMS Group. The payment will vary between PLN 1,550,000.00 gross, ie PLN 516,666.67 gross for each of APR's current owners, with a net profit of at least PLN 700,000.00 to PLN 4,800,000.00 gross, ie PLN 1,600,000.00 gross for each of the current APR owners with a net profit of at least PLN 1 600 000.00. The Issuer estimates that the net profit of APR in the period 01/07/2019 - 30/06/2020 will amount to PLN 1.0-3.3 million.
For the purposes of calculations indicated in point 2 above, for determining the net profit, calculated in accordance with IFRS, all cost synergies are taken into account after IMS acquires shares in APR and part of the profit resulting from the sale of products and services of the current IMS Group, i.e. from the sale of advertising and event services, aromamarketing and Digital Signage . This part of the net profit resulting from the revenues from the sale of products and services of the current IMS Group may not exceed 20% of the net profit achieved from the current APR activity.
The Issuer's Management Board estimates that the sum of payments mentioned in points 1 and 2 will amount to ca. 5-8 times the net profit generated by APR for the IMS Group in the period from 01/07/2019 to 30/06/2020.
3. If APR does not pay in the period from 01/07/2019 - 30/06/2020 at least PLN 700,000.00 net profit calculated in accordance with the rules described above but at the same time greater than PLN 400,000.00, the existing APR shareholders will pay to IMS amount in the total amount of PLN 300,000.00 (PLN 100,000.00 each of the existing shareholders). In the case of generating a net profit in the above In the period of PLN 400,000.00 or less, the existing APR partners will pay to IMS the total amount of PLN 750,000.00 (PLN 250,000.00 each of the existing shareholders). All of the above the amounts are secured with notarial declarations of submission to enforcement.
4. In order to further motivate APR's existing partners to achieve the best financial results in subsequent years, the Issuer will make an additional payment for the Shares acquired earlier, for the periods specified below, toequal distribution between existing APR shareholders:
i. 01.07.2020-30.06.2021 - 25% of APR net profit for this period,
ii. 01.07.2021-30.06.2022 - 25% of APR net profit for this period,
iii. 01.07.2022-30.06.2023 - 25% of APR net profit for this period,
iv. 01.07.2023-30.06.2024 - 25% of the APR net profit for this period.
Net profit means net profit calculated in accordance with IFRS, with no exclusions described in point 2 above.
5. The existing APR partners who are also board members are guaranteed a place on the board for a period of 5 years from signing the Agreement. Remuneration members of the management board are determined based on the principles of remuneration of management board members in the Issuer's subsidiaries. The Issuer has the right to appoint the majority of the management in APR.
6. Each of the existing partners of APR today signed a non-competition agreement. This agreement provides for a ban on competition for a period of 5 years from the completion by a given partner of cooperation with the IMS Capital Group. The penalty for breaking the competition ban is PLN 700,000.
Selected financial data of APR Sp. z o.o. (prepared in accordance with the Accounting Act, not audited by the auditor) for the last two completed financial years, i.e. 2017 and 2016, are as follows:
Year 2017
Revenues: PLN 2,342,000 PLN
EBIT: 455 thousand PLN
EBITDA: PLN 555 thousand PLN
Net profit: PLN 389 thousand PLN
Fixed assets: PLN 868 thousand PLN
Inventory: 125 thousand PLN
Receivables: PLN 298 thousand PLN
Cash: PLN 129 thousand PLN
Equity: PLN 566 thousand PLN
Liabilities: PLN 879 thousand PLN
Year 2016
Revenues: PLN 1 078 thousand PLN
EBIT: PLN 69 thousand PLN
EBITDA: 115 thousand PLN
Net profit: PLN 50,000 PLN
Fixed assets: PLN 707 thousand PLN
Inventory: 53,000 PLN
Receivables: 62 thousand PLN
Cash: 56 thousand PLN
Equity: 177 thousand PLN
Liabilities: PLN 707 thousand PLN

Source: company website, investor relations, current and periodic reports.

Company information
Company name:IMS SA
Adress: ul. Puławska 366 02-819 Warszawa
Phone:+48 22 8706776

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