GOS Systems’ intention to float on AIM gets international coverage
GOS Systems plc has announced its intention to apply for the admission of its ordinary share capital to trading on AIM to raise approximately £8m. Dealings in the Group’s shares on AIM are expected to commence in August 2013.
The announcement has been covered and analysed by several prominent news outlets and Twitter users:
U.K. Cyber-Startup GOS Plans IPO to Tap Homeland Security Spurt
15 July2012, 9:56AM By Alex Pashley
July 15 (Bloomberg) — U.K. cyber-protection and monitoring specialist GOS Systems Plc said it plans to raise 8 million pounds ($12 million) to fund purchases and add sales offices as it seeks to expand in the fast-growing homeland security market.
GOS, whose customers include Western law-enforcement bodies and Middle Eastern government agencies, plans to trade on London’s Alternative Investment Market starting next month, the company, based in the U.K. capital, said in a statement today.
The market for homeland security services is likely to grow 7 percent annually to reach $280 billion by 2018, spurred by concerns about the safety of Internet traffic, the company said, citing a Visiongain Ltd. report. GOS had sales of 3.5 million pounds last year, including the planned purchase of Deltenna Ltd., with earnings before interest, tax, depreciation and amortization of 300,000 pounds.
“The threats our customers face each day from terrorist or criminal groups are real, growing and constantly changing,”
Chairman Peter McKee said in the statement. “Dealing effectively with those threats requires smart, capable and intelligent technology – and that is precisely what GOS provides.”
GOS, which was founded 18 months ago, plans to purchase high-performance antenna specialist Deltenna with some of the proceeds of the listing, for which Panmure Gordon Ltd. will act as broker and adviser.
The company says its products provide customers with targeted-intelligence gathering capability, including the exploitation of features of 3G and future 4G cellular networks.
GOS Systems float plan
15 July 2013
GOS Systems, a London-based technology company specialising in development of surveillance applications, has outlined plans to raise £8m by listing on the Alternative Investment Market.
The flotation, which is being managed by Panmure Gordon, is likely to value the business at almost £30m.
Tapping into the market for security
July 15 2013 Nic Fildes
A company that develops technology designed to tap the phones of terrorists and protect the identity of spies and informants is set to float in London.
GOS Systems plans to raise £8 million via a float on AIM that is expected to value the homeland security specialist at about £30 million. Panmure Gordon is acting as broker, with the shares set to start trading in August.
The company runs its own telecoms network used by security agencies and the police to protect the identities of field operatives and informants. It also gathers data by tapping phones and monitoring the internet usage of suspects.
Don McQueen, the chief executive of GOS, said that the collection of data on suspects was an essential tool in combating crime and terrorism. He said that the company had not been put off floating the business at a time when surveillance is the subject of keen public debate.
“It’s right that governments have the right to do this via a very targeted, warrant-based method to keep the nation secure. Terrorists are getting smarter,” he said.
The company has swept up smaller players with great technology but low ambitions and will add Deltenna, a mobile technology specialist, using the funds it raises from the float in a £5 million deal.
The company, which is based in London but will operate in Chippenham, Wiltshire, is the brainchild of Peter McKee, its 70-year-old chairman, who previously was head of the AIM-listed TRL Electronics. He said there was a “major gap” in the market for a mid-sized specialist: “The bang for the buck we get here from engineers is incredible compared with the US. The Americans do high-spending stuff, but they’re not that clever.”
GOS is still early in its development, with revenue of £3.5 million and operating profit of £300,000.
GOS Systems to list on AIM
15 July 2013
Homeland security technology business GOS Systems has announced its intention to list on AIM to raise approximately £8m, which will partly be to fund the acquisition of Deltanna, its fourth acquisition to date. Dealings in the shares of the 18 month old company are expected to commence in August 2013. We met with Chairman Peter McKee and CEO Don McQueen prior to the announcement to get the details.
Founded just 18 months ago by Chairman Peter McKee, GOS provides various combinations of software, hardware and related services in the areas of intelligence gathering and secure communications. McKee has long experience in the defence communications market having been CEO of TRL Electronics through its IPO and subsequent sale to L-3 Communications and, before that, worked for Raytheon in various senior positions. Meanwhile, McQueen was previously with managed data services provider GCI Telecom.
GOS’s customers include law enforcement, homeland security and military organisations as well as systems integrators in the defence, security and telecommunications markets. GOS also targets other contractors, OEMs and small agencies serving niche market segments. Headquartered in London, GOS also has offices in Denmark, with further regional sales and support hubs planned in Singapore and Dubai.
McQueen noted that, over the last decade, there has been a change in direction in homeland security spending from military hardware to intelligence focused expenditure which has opened up an opportunity for mid-market homeland security technology vendors. As we saw in 2008 with BAE Systems’ acquisition of Detica, this change has not gone unnoticed by the larger players in the homeland security market, although McQueen believes that, when a niche technology vendor is subsumed into a larger organisation, there is a tendency for it to lose its agility and focus, which becomes an issue in a rapidly changing and evolving market.
Meanwhile, McQueen told us that other competition for GOS comes from very small, geographically focused, engineer-led businesses that are relatively under-resourced and lack a clear sales and marketing strategies. However, despite the lack of direction, these smaller vendors often have rich IP and have formed the basis of GOS as it stands today, having acquired three businesses (Aappro Ltd, Golden Orb Networks, Spectronic Systems) to create the company. By adding an effective sales and market strategy to the acquired technologies, GOS is looking to position itself as a lead mid-market player in the homeland security market.
Part of the £8m to be raised from the IPO will be used by GOS to complete the acquisition of Deltenna, which will add compact and high performance wireless products deployed in mobile telecommunications networks to its portfolio. No financials are given for Deltenna but we estimate revenues of around £1m. McQueen said that, following its fourth acquisition, GOS will look to concentrate on organic growth, although would not rule out further acquisitions if they were deemed to be value enhancing.
GOS intends to use the remainder of the funds raised at IPO to invest in sales and marketing, which includes opening offices in Singapore and Dubai as mentioned above, as well as for R&D purposes and to also bolster its balance sheet to make it easier to bid for larger proposals.
Turning to the group’s financials, for calendar 2012 GOS recorded EBITDA of £0.3m on revenues of £3.5m on a pro forma basis. However, for the current year McQueen told us that the group expects to make a loss due to increased investment, but is confident that the company will quickly return to profitability in 2014. GOS expects to float with a market cap of between £20m and £30m which, assuming that Deltenna will add £1m of revenue and that all the cash raised is used for the purchase and to fund losses, suggests a valuation of around 4-7x trailing revenues.
First Thoughts
We can perhaps best describe GOS as the ears to Digital Barriers eyes in terms of homeland security. Comparing the two companies further, whilst Digital Barriers continued along an aggressive M&A strategy post IPO, GOS looks to be more of an organic play earlier on in life. If this turns out to be the case, we see the ability to concentrate on organic growth at an early stage as beneficial for a company in what appears to be a high growth market. Moreover, McQueen was keen to highlight that the businesses that GOS has acquired already have strong customer relationships in a market that has high barriers to entry.
Turning to the IPO valuation, a market cap of £20-30m, would certainly price GOS at a premium to the current software sector valuation, as well as the current trailing EV/Sales multiple for Digital Barriers of 3.6x. As we have seen with WANdisco and Outsourcery, although IPOs have been relatively sparse in recent years, these young companies increasingly seem able to detach themselves from the valuations of comparable companies already listed on AIM, often with no clear reason as to why this should be the case. We therefore wait with interest to see if this cohort of new companies is able to maintain this premium.
GOS Systems the latest tech firm to announce plans to float
By John Harrington July 15 2013, 1:40pm
“The market for our products is growing and the opportunity to deliver meaningful sales traction is real,” said GOS chairman Peter McKee.
The queue of tech firms looking to float on London’s junior market is getting longer, with cyber-security outfit GOS Systems announcing an initial public offering (IPO).
The company intends to raise £8mln through the flotation, which will go towards a kitty for bolt-on acquisitions and the expansion of the global sales network.
GOS is an international homeland security business that provides advanced intelligence gathering and secure communication products and solutions to law enforcement agencies, security agencies and commercial entities around the world.
On a pro forma basis, the newly integrated group posted turnover of £3.5 million in calendar 2012 with underlying earnings (EBITDA) of £0.3 million.
Panmure Gordon is acting as nominated adviser (nomad) and broker to the group. Trading in the company’s shares is expected to start in August.
“GOS stands at the forefront of the fast growing international homeland security market and is well positioned for growth. The threats our customers face each day from terrorist or criminal groups are real, growing and constantly changing. Dealing effectively with those threats requires smart, capable and intelligent technology – and that is precisely what GOS provides,” claimed Peter McKee, chairman of GOS Systems.
Details of the planned IPO were announced on Monday, the same day that another tech company, video game developer Frontier Developments (LON:FDEV), made its debut on AIM.
Canaccord Genuity is Frontier’s nominated adviser and broker.
The Frontier flotation itself follows hot on the heels of Friday’s listing of Keywords Studio (LON:KWS), another company in the computer game business, although in Keywords’ case, it is focused on language, testing and localisation services.
Keywords raised £28mln through its flotation, and was valued at around £60mln on its first day of trading, making it the largest tech flotation of the year so far on AIM.
As the trickle of flotations turns into a stream, brokers, who rely on income from a steady flow of new issues, have been cheered by the upturn in activity.
“It definitely seems to be busy at the moment,” said Matt Butlin, the head of Equities at small cap specialist, Allenby Capital.
“We’re out on the road with an IPO [initial public offering] as well, and we’re hearing, when we go to see funds, they are seeing quite a lot at the moment, so there’s definitely a pick-up in IPO activity,” Butlin suggested.
Nic Fildes – The Times
3,385 Followers
GOS targets £30m IPO. UK tech company protects identity of informants and spies and provides surveillance tools: http://t.co/TF8cpzw0rQ
https://twitter.com/LovesickHank/status/356677816491839489
Richard Partington – Investment Banking reporter, Financial News, Dow Jones
1,293 Followers
Panmure Gordon running the £8m IPO of GOSSystems on AIM: http://www.investegate.co.uk/gos-systems-plc/rns/intention-to-float/201307150700092722J/ …
Dan Coatsworth – Share Magazine reporter
609 Followers
Coming to Aim in August: GOS Systems – provides security info and products. Buying a wireless products group at IPO. http://t.co/MyzaeMlXbD
https://twitter.com/SharesMagDan/status/356663646656532480
