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SBS Group (SBG)

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Friday 01 October, 1999

SBS Group


1 October 1999
                      SBS Group plc
          Acquisition of Applied Concepts, Inc.
SBS  Group  plc  (SBS),  the  AIM-quoted  specialist   IT
staffing business, today announces that it has agreed  to
acquire Applied Concepts Inc. (ACI), a New York-based  IT
staffing   business  specialising  in  the   fast-growing
telecommunications industry, for a maximum  consideration
of  $10.6m (£6.5m).
Established in 1979 and wholly owned by Alan Waksman, ACI
currently has 90 contractors on direct assignment and  an
additional  140 through its 'partnering' programme.   Its
major  clients  include AT&T, Bell Atlantic,  Lucent  and
Telcordia.  In  the year ended 31 October 1998,  ACI  had
turnover  of  $7.0m (£4.3m) and adjusted earnings  before
taxation  of $0.3m (£0.2m).  As at 31 October  1998,  ACI
had net assets of $0.65m (£0.4m).
In the case of AT&T, a sizeable and long-standing client,
ACI is one of that company's Prime Vendors.  Given AT&T's
substantial  on-going requirements, ACI  has  established
'partnering'   arrangements  with   other   US   staffing
companies who do not have Prime Vendor status to  provide
AT&T  with further IT staff.  This allows ACI to generate
additional  income.  At present, ACI  both  directly  and
through  its 'partnering' programme, provides  AT&T  with
approximately 180 contractors.
Mr  Waksman has entered into an agreement to continue  as
the  Executive President of ACI.  Thereafter, SBS has the
option  to  retain him as a consultant.  Mr Waksman  will
report  to  Michael Kiely, the director  responsible  for
SBS's North American operations.
SBS  is  paying  $6.8m  (£4.1m) upon  completion  of  the
transaction  and  an additional amount  of  up  to  $0.7m
(£0.4m)  upon  achievement  of  specified  gross   profit
targets  for the year to 31 October 1999. This represents
a multiple of 4.9 times forecast adjusted earnings before
taxation  for  the  year  ending  31  October  1999.   An
additional  amount  of up to  $3.1m (£1.9m)  will  become
payable  upon  the achievement of specified gross  profit
targets  for  the  year  ending  31  October  2000.   The
acquisition is expected to be earnings enhancing for  the
year  ending  31  August  2000  (before  amortisation  of
goodwill) and will be funded by bank borrowings.
Prior  to closing on or before 1 November 1999, SBS  will
convene an Extraordinary General Meeting to increase  the
company's   borrowing  power  under   its   articles   of
association.    The  company  has  received   irrevocable
undertakings  from  shareholders  holding  51.9%  of  the
issued share capital of the company to vote in favour  of
the necessary resolution.
The  acquisition  of  ACI is also a significant  step  in
SBS's  proven international development strategy and  its
strategy  of  developing  its  telecommunications-related
business which currently accounts for approximately 12.5%
of  group  turnover.  SBS's current clients  within  this
sector  include  AT&T  (in  Europe),  Cable  &  Wireless,
Cellnet,  Eircell, Lucent (in Europe), Nokia, Nortel  and
Vodafone AirTouch.
This  acquisition  will build on the  organic  growth  in
SBS's US business. During the past eighteen months, SBS's
US  business has enjoyed strong growth and in  particular
in  the  first  half of this year reported  turnover  and
profit  before  taxation  increasing  by  79%  and  1021%
respectively  over  the  corresponding  period   in   the
previous year.
SBS's  existing  US operations account for  approximately
14%  of group turnover and 26% of profits before tax. ACI
will  double  the  size  of  SBS's  US  activities,  thus
increasing  significantly the proportion of  the  group's
gross profit derived beyond the UK and providing a better
spread  of risk across the group's operations in the  UK,
Continental  Europe and USA. Following this  transaction,
the  geographic  split  in group turnover  for  the  year
ending  31 October 2000 is expected to be as follows:  UK
46%, Continental Europe 28% and North America 26%.
As  has  been the case with previous acquisitions, cross-
fertilisation between clients and SBS operating companies
is expected.
Current trading
SBS  will announce preliminary results for the year ended
31  August 1999 during November 1999. Despite a  slowdown
in  the market for IT contractors witnessed in the second
half of the year, due to the so-called Y2K micro-climate,
SBS's profit before taxation for the year ended 31 August
1999  will  not be less than £2.2m, a 40% improvement  on
last year.
Commenting  on the acquisition, Gary Jones,  SBS's  Chief
Executive, said:
'ACI  is an excellent and complementary acquisition which
brings  with  it  new clients and skilled management  and
personnel.   It adds significantly to SBS's  presence  in
the   fast-growing  telecommunications  sector  and  will
greatly enhance SBS's US operations. I am confident  that
the   acquisition  of  ACI  will  improve  SBS's   future
'I  am pleased with SBS's expected out-turn for the  year
to  31  August,  1999  given  recent  challenging  market
conditions.  The result continues the group's  impressive
annual  improvement in profitability since flotation.  On
balance,  trading is expected to remain subdued  for  the
forthcoming six months, however, thereafter I look to the
future with considerable optimism'.
For further information, please contact:
SBS Group plc                               0207 240 7575
Gary Jones, Chief Executive
Phil Holt, Finance Director
Ludgate Communications                      0207 253 2252
Tim Davis
Notes to editors
On  26 April, 1999, SBS announced interim results for the
six  months ended 28 February, 1999.  The highlights were
as  follows: turnover increased by 150% to £28.3m  (1998:
£11.3m);  operating profit increased  by  154%  to  £1.6m
(1998: £0.6m); pre-tax profits increased by 158% to £1.4m
(1998: £0.5m); fully diluted earnings per share increased
by  100%  to 9.64p (1998: 4.82p); and an interim dividend
increased by 50% to 1.50p per share (1998: 1.00p).
SBS  joined  the Alternative Investment Market  in  June,
1997.   Since  then it has also acquired  JCC  Group  for
£4.5m in March 1998; and Quest Recruitment for £0.43m  in
June 1998.
Any   references  in  this  statement  relating  to   the
acquisition of ACI being earnings enhancing should not be
interpreted to mean that future earnings per share of SBS
would  necessarily be greater than its historic  earnings
per share (before amortisation of goodwill).

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