Acquisition & Placing

RNS Number : 3147R

GB Group PLC

02 November 2011

 



NOT FOR DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE SUCH DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL

GB Group plc

£11.2 million Acquisition of Capscan Parent Ltd

Acquisition, Proposed Vendor Placing and Cash Placing

GB Group plc ("GB Group" or the "Group" or the "Company"), the leading Identity Management specialist, announces that it has conditionally agreed to acquire Capscan Parent Ltd ("Capscan" or the "Acquisition"), a leading supplier of customer registration and address management software solutions for a consideration of £11.2 million net of cash acquired to be satisfied by the net proceeds of the placing and the cash on the Group's balance sheet.

In addition, Peel Hunt LLP ("Peel Hunt") has conditionally placed 20 million new Ordinary Shares with new institutional investors, existing institutional investors and Directors at the Placing Price of 40 pence per Share to raise approximately £8 million for the Company. The Placing has been fully underwritten by Peel Hunt, subject to certain conditions set out in the underwriting agreement.

The Board believes that the Acquisition will:

·      be earnings enhancing in the Group's first full financial year as part of the enlarged Group;

·      significantly advances the Groups Strategy to lead in the market for Identity Management estimated by the Directors to be circa £435m in the UK and significantly more globally, and;

·      continues the Company's stated strategy of expanding both organically and by acquisition;

Information on Capscan

Capscan is a leading supplier to the estimated £75 million⁽¹⁾ and growing UK customer registration and address management software solutions market and also has a growing presence in the international address management market.  Its products and services are used in markets such as Financial Services, Retail and Leisure to help organisations rapidly verify accurate customer address details, an important attribute of Identity Management. Capscan is headquartered in London, employees 54 people and has approximately 1,800 customers.

For the year ended 31 March 2011, Capscan returned revenues of £6.8 million, adjusted EBITDA⁽²⁾ of £1.2 million and  net assets as at that date were £3.9 million.

Reasons for the Acquisition

The Management believes that the Acquisition:

·      significantly advances the Groups Strategy to lead in the market for Identity Management estimated by the Directors to be circa £435m in the UK and significantly more globally;

·      creates the clear number 2 in the UK customer registration and address management software solutions market;

·      will create cross-sell and up-sell opportunities for the combined client base from GB Group's wider Identity Management products and services;

·      delivers functionality and software integrations that GB Group would, without the acquisition, have had to replicate and also provides additional sales and software development resource; 

·      will generate accelerated international reach for the Group's global Identity Management aspirations, where GB Group also offers wider age and identity verification for business operating in countries such as USA, Canada, Germany, Australia and South Africa, in addition to Capscan's international addressing capabilities in 240 countries;

·      offers good synergy opportunities for technology, data agreements and supplier relationships and will improve the enlarged Group's operating margins; and

·      is expected to be earnings enhancing in its first full year as part of the enlarged Group.

Background to Customer Registration and Address Management Software Solutions Market

An accurate postal address is an important item of Identity data in the vast majority of business transactions.  An accurate postal address is used to identify a person's location for a wide range of needs such as validating financial transactions, rapidly recording a new customer's personal data, delivering items to a location in a timely maner and billing customers.  Addresses are also valuable from a legal perspective to place charging orders and bind contractual agreements between parties.  In addition, addresses are also used to quickly help to confirm the location of individuals in emergency situations and help determine government policy.

Customer Registration and Address management software solutions provide rapid access to the Royal Mail Postcode Address File ("PAF"), which is a universally published UK postal address reference database, licenced by Royal Mail.   Several thousand organisations have integrated PAF into call centres, web sites, CRM and billing systems. Both GB Group and Capscan enhance the PAF file for their customers with additional population reference data and propietery software toolkits which provide clients with added value in these deployments.

With more than 1.25 million changes to PAF a year (i.e. new addresses, amendments & deletions), end users require regular software and PAF updates, whereby users can also up-date their existing customer address records to achieve bulk postal discounts, reduce goods returned error rates and comply with UK Data Protection Act requiring organisations to keep data accurate and up-to-date.

While the market for customer registration and address management software solutions is well established, with growth of circa 3%⁽³⁾ per annum, margins are attractive and competitive switching is low because of the complexity of integration with third party applications and the overhead of maintaining and enhancing this complex data set.

For the end user, customer registration and address management software solutions provide operational cost savings and efficiencies as a result of the ability to:

·      rapidly record a full postal address from just a postcode and house number, saving people time and reducing data entry errors.

·      accurately capturing customer delivery information for efficient distribution and billing.

·      benefit from standardised address structures which warrant postal Mailsort discounts on bulk mailings.

·      de-duplicate customer records to minimise wasted customer service and mailing costs.

From an International Addressing perspective more organisations need to verify and maintain accurate postal address information in many different country specific characters, symbols and address compositions dependent upon the local geography.  Capscan has strong credentials in International Addressing solutions, helping to administer cross boarder trading with access to postal data for 240 countries.

Sources:

⁽¹⁾        Current revenues from competition

⁽²⁾        Adjusted EBITDA is earnings before interest tax, depreciation and amortisation and adjusted for non-recurring management charges and forex losses on non-trading activities 

⁽³⁾        Royal Mail End User Insight presentation

Directors' Dealings

Certain of the directors or persons connected to them intend to subscribe for Vendor Placing Shares as detailed below:

Director	Number of existing shares	Number of Vendor Placing Shares subscribed	Number of shares held following the Placing	Percentage interest in the Enlarged Share Capital
DA Rasche	382,000	375,000	757,000	0.71%
RA Law	1,309,574	175,000	1,484,574	1.39%
D Wilson	-	112,500	112,500	0.11%
RM Linford	200,000	50,000	250,000	0.23%
AW Green	250,000	100,000	350,000	0.33%

Half yearly results

The Company has also announced today its half yearly results for the 6 months ended 30 September 2011 and these are included in a separate announcement.

Vendor placing and Cash Placing

The consideration is primarily being satisfied by way of a vendor placing of 15,750,000 ordinary shares (the 'Vendor Placing') of 2.5 pence each in the capital of GB Group ('Ordinary Shares') (the 'Vendor Placing Shares').

In addition, the Company announces that it will raise a further £1.7 million through the placing of 4,250,000 Ordinary Shares (the 'Cash Placing Shares') (the 'Cash Placing') for the purposes of these Cash Placing Shares being able to qualify for VCT relief.  The net proceeds of the Cash Placing will be used by the Company to defray the costs of the Placing and the Acquisition and strengthen the balance sheet.

In total 20 million Ordinary Shares (representing the Vendor Placing  Shares and the Cash Placing Shares) are being placed with certain institutional investors by Peel Hunt LLP ("Peel Hunt") at a placing price of 40 pence per Ordinary Share (the 'Placing'), representing a discount of 6.98 per cent to the closing middle price of 43 pence per Ordinary Share on 1 November 2011, the latest date prior to this announcement.  The Placing has been fully underwritten by Peel Hunt.  The 20 million New Ordinary Shares will represent 23.1 per cent.  of the issued share capital of the Company prior to the issue of the New Ordinary Shares, which is within the existing Directors' authority to allot shares.  

The New Ordinary Shares are not being offered to Shareholders on a pre-emptive basis because the Board has concluded, having taken appropriate advice, that it is not in the best interests of the Company to make such a pre-emptive offer due to the time and cost involved and the necessity to complete the Acquisition successfully in a timely manner.

Application has been made for 20 million Ordinary Shares (representing the Vendor Placing Shares and the Cash Placing Shares (the 'New Ordinary Shares') to be admitted to trading on AIM.  It is expected that dealings in the Cash Placing Shares will commence on Thursday 3 November 2011 and the Vendor Placing Shares will be admitted to trading on Friday 4^th November.  The New Ordinary Shares will, when issued, rank pari passu in all respects with the existing ordinary shares in the Company.  Following the issue of the New Ordinary Shares, the total number of issued ordinary shares in the Company will be 106,461,356. The Placing is conditional, amongst other things, on the underwriting agreement between the Company and Peel Hunt becoming unconditional and not being terminated.

Richard Law, GB Group Chief Executive, commented:

"We are delighted to welcome Capscan and its employees to GB Group. Capscan is an excellent business and this acquisition brings together the number 2 and number 3 operators in this important and growing market of customer registration. The combination of GB Group and Capscan consolidates an already strong presence in the UK market and enhances our ability to provide international services which we see as a key growth area.

We expect the acquisition to enable GB Group to make further progress towards higher operating margins over the medium term as a result of increased scale, efficient operation and competitive differentiation. Strong cash flows should continue to enable us both to reward shareholders and invest in further value creating acquisitions.

The placing has also enabled the Company to broaden its institutional shareholder base which will help improve the liquidity in the shares going forward. We warmly welcome our new institutional shareholders and, at the same time, I would like to thank our existing shareholders for their continued support at what promises to be an exciting time for the Group."

Ends

For further information please contact:

GB Group plc                                                                                                                         01244 657333

Richard Law, Chief Executive

Dave Wilson, Finance Director

Peel Hunt (Nominated Adviser and Broker)                                                                  020 7418 8900

Richard Kauffer

Daniel Harris

Weber Shandwick Financial                                                                                               020 7067 0700

Nick Oborne

John Moriarty

Notes to Editors:

About GB Group plc

The most successful organisations recognise the value of understanding your individual identity - who you are, what you need and what you like. GB Group combines this concept of identity with technology to create an environment of trust so that organisations can connect, communicate and transact with consumers safely, responsibly and profitably. We call this Identity Management.

GB Group has four complementary Identity Management offerings:

·      ID Verification, which provides the ability to verify consumers' identities remotely, without the physical presentation of documentation, in order to combat ID fraud, money laundering and restrict access to age-related purchases and gambling.

·      ID Customer Registration, which includes software and services for quick and accurate customer registration and validation of records.

·      ID Marketing Services, which provides database services so our clients can better understand, target and retain their customers and offers accurate and up-to-date identity information for their contact strategies.

·      ID Tracing Services, which provides the largest and most accurate picture of the UK's population and properties in order to locate and contact the right individual, first time.

This enables our clients to make informed business decisions based on a thorough knowledge of consumer identity and behaviour, leading to more effective communication and interaction with the customer.

GB Group is listed on the London Stock Exchange (GBG). For more information, please visit GB's website: www.gb.co.uk.

GB Group - because identity matters™

 

END

 

 

MSCFSFFUFFFSEFF