The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Especially them that bought in first thing! Could have sold ages ago and done better, but having said that I have sold some ( not enough ) towards the top and gone back in towards the bottom twice. So that helped - not too shabby. A reasonable enough run over the years. To be honest, though I was optimistic, I'm tending towards relief - the blurb doesn't look exactly rosy for the foreseeable.
Anyway, that appears to be that. Over and out.
Taking everything into account, I consider we have come out of this very well.
Good news as far as I can see. Hopefully it will be swiftly effected.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION
FOR IMMEDIATE RELEASE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
15 April 2020
RECOMMENDED CASH ACQUISITION
of
CASTLETON TECHNOLOGY PLC
by
MRI SOFTWARE LIMITED
a wholly-owned subsidiary of
MRI SOFTWARE LLC
to be effected by means of a Scheme of Arrangement
under Part 26 of the Companies Act 2006
Summary
· The boards of MRI Software LLC ("MRI") and MRI Software Limited ("Bidco") and the board of directors of Castleton Technology plc ("Castleton") (the "Castleton Board" or the "Castleton Directors") are pleased to announce that they have reached agreement on the terms of a recommended cash offer to be made by Bidco for the entire issued and to be issued ordinary share capital of Castleton (the "Acquisition"). The Acquisition will be implemented by way of a scheme of arrangement.
· Under the terms of the Acquisition, each Castleton Shareholder will be entitled to receive:
for each Castleton Share: 95 pence in cash
· The Acquisition price represents a premium of approximately:
· 42.9 per cent. to the undisturbed Closing Price of 66.5 pence per Castleton Share on 14 April 2020 (being the last Business Day prior to the date of this announcement);
· 35.2 per cent. to the three month volume weighted average price of 70.3 pence per Castleton Share to 14 April 2020 (being the last Business Day before the date of this announcement); and
· 42.1 per cent. to the six month volume weighted average price of 66.9 pence per Castleton Share to 14 April 2020 (being the last Business Day before the date of this announcement).
· The Acquisition values the entire issued and to be issued ordinary share capital of Castleton at approximately £82.8 million on a fully diluted basis.
· If, on or after the date of this announcement, any dividend and/or other distribution and/or other return of capital is declared, made or paid or becomes payable in respect of the Castleton Shares, Bidco reserves the right to reduce the consideration payable under the terms of the Acquisition for the Castleton Shares by an amount up to the amount of such dividend and/or distribution and/or return of capital, in which case any reference in this announcement to the consideration payable under the terms of the Acquisition will be deemed to be a reference to the consideration as so reduced.
Recommendation
· The Castleton Directors, who have been so advised by finnCap as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the Castleton Directors, finnCap has taken into account the commercial assessments of the Castleton Directors.
·
Yes, that's recognised ".......the group remains well placed once the customer base assesses and commits to the inevitable future in cloud or hybrid software delivery. With 48% of revenue and 44% of EBITDA delivered in the first half (1H19: 49% and 47%), we look to the benefits of execution to deliver a solid 2H and a return to cloud-derived growth in visibility and quality of earnings into FY21. Target 130p reiterated."
So it's still a matter of when, but I don't know how the second half been affected by last 3 months. And when is when?
I have just been reading that consumers aspirations have changed and that whereas fully managed cloud only was seen as the ultimate goal, it is now hybrid IT - a choice foreseen by Castleton. https://www.housing-technology.com/a-private-journey-to-the-cloud/
I think there'll be business for the sector when Covid desists, time to move to the cloud, mobile and at home working, all the things to automate and future-proof working practices. But just for now Castleton probably as ' stuffed' in the sector as their competitors, though working hard to be helpful with future prospects in mind. Once the ' firefighting ' is done, the bigger and more costly and profitable things will fall to be considered and implemented. And I don't know of any reason why Castleton won't be competitive - been preparing for cloud, managed transition for ages, with customers in 'deep consideration' mode and not buying much at all.
We know they gave up buying one offs a while back, hence the drop, whilst they looked at the bigger picture and what they wanted to commit to. No idea when they'll start spending again. But they have a need for effective tech, and recent events have very likely reinforced that.
There is more than one way of looking at it, and MRI see value, but on balance and taking Castleton's large customer base and established position as an innovative and responsive market leader into account, housing associations may see merit in an accessible UK incorporated 'housing only' business, rather than a cog in the wheel of a larger diversified American entity.
Smaller ( turnover £17m ) competitor Orchard has been bought by MRI software, an American company. TechmarketView comments "As part of MRI, Orchard will be able to accelerate the expansion of its offering. The risk is that it will become less visible as a specialist provider."
I thought Kestrel were likely leaving us slowly, but they've gone up a percent. Long termers will know they trade CTP a little. But they may intend to raise their stake again over time.
I agree. I note that Castleton appears to have been busy in assisting customers with SMS staff communication, having created a same-day 'shortened' solution. Though more major decisions may be delayed due to business upheaval and more pressing immediate human need, when it comes to the wash-up it is not hard to see that tech will play an even more important part in underpinning future proofing of housing associations' evolving business needs.
As was said when the business was formed, housing associations have a need for technology to administer housing, and tenants and therefore that need are going nowhere. The benefits of mobile working, and automated responses requiring fewer staff, should be becoming increasingly evident.
We are waiting on updates. The share price has so far shown remarkable resilience within the context of global markets.
Interims – mapping out a steady second half
Interims reveal performance in line with unchanged expectations, bar IFRS16 amendments and minor tweaks since the October update. The merging of the two former divisions to create ‘One Castleton’ is expected to deliver benefits, along with rightsizing of the Professional Services team and a focus away from competing for low-margin Hardware revenue. New contract wins such as three Managed Services deals in the period show the continuing opportunity, as well as gaining preferred supplier status to the National Housing Federation (the Housing Association industry body). The Housing Association customer base has increased to 595 (FY19: 591), of whom 52% (FY19: 50%) take more than one product; the contracted order backlog has increased 5% since 1H19; recurring revenues constitute 66% of revenue into 2H20, giving confidence in forecasts; and the group remains well placed once the customer base assesses and commits to the inevitable future in cloud or hybrid software delivery. With 48% of revenue and 44% of EBITDA delivered in the first half (1H19: 49% and 47%), we look to the benefits of execution to deliver a solid 2H and a return to cloud-derived growth in visibility and quality of earnings into FY21. Target 130p reiterated.
Yes. And Castleton Community is the prime example of a cloud-based 'lite' product with enough of the basic modules for a smaller association to buy as a comprehensive package. One off, and scaleable. But associations have been slow to commit to an encompassing cloud strategy. And the larger ones, with existing products and contracts with several providers, possibly more so. And in the meantime spend has been limited. Ponderous stuff for them.
Given Castleton's strong market position and cloud preparedness, and NHF recommended and all that, I would reasonably expect a decent measure of contract success when they choose to commit - but the market has to move before anybody can take advantage of the new opportunities.
Hopefully it'll be a bit like they used to say about buses.
Actually, FinnCap put all this in a nutshell on 5th. November, so I'll post their heading summary and leave it there.
In the absence of anything else from the company, and whatever the reason for selling, these ongoing trades and the Long Path holdings at least indicate that those better placed to make enquiries see value at this price and higher. Let us hope their judgment is sound, and that the suggested material improvement materialises at year end. My take on that is, with its established position in the social housing market, Castleton will make quite considerable ground when the providers start making decisions on the larger public/private cloud solution contracts. ie not so much if, as when. And in the meantime, there are the lesser though important stand alone products, such as Castleton Community.
And similarly another 250,000, yet to show on here.
And another 50.000 anyway. Possibly same buyer/seller, inter party through FinnCap.
At least 200,000 shares changed hands at sp.
In Housing Tech Mag out today.
Castleton’s Splink instant payment platform
Castleton Technology has partnered with payment specialists Splink to deliver an instant payment platform for tenants to pay their rent, chargeable repairs and set up payment plans.
Castleton Collect is a simple, frictionless and instant payment management solution which removes much of the hassle associated with making one-o and recurring payments and can be integrated into housing providers’ existing omni-channel strategies. The payment links can be embedded into various tenant ‘touch-points’ such as traditional back-o ce systems, apps used by mobile workers and self-service portals and apps used by tenants themselves.
Ian Niblock, director of development and product strategy, Castleton Technology, said, “Whether you’re engaging with your tenants directly in their homes, receiving or making telephone calls regarding payments or encouraging your tenants to move towards digital self-service options, this payment platform can be used by both housing providers and their tenants to make payments quickly and easily.
“Our partnership with Splink is basedon the ability of its payment platform to integrate with so many of our existing solutions. At every single resident interaction, be that by phone, face-to- face, text message or portal, you can now encourage positive payment behaviours by going beyond just a payment reminder and providing a secure link to make payments instantly possible.”
John Quinn, chairman, Splink, said, “There is no denying that universal credit is causing major revenue de cits in housing. We can help combat rent arrears – Splink’s platform is already being used widely across di erent sectors where 92 per cent of our customers get paid on the same day that they send a payment request.”
Heavy promotion of this product now,
https://www.castletonplc.com/news/switch-to-digital-sms-communication-see-how-much-you-can-save-6-month-commitment-free-trial/,
which was sold into 90 associations when acquired, leaving 600 or so Castleton customers as potential. The product is popular, with those it has reached, and has excellent customer retention over many years, producing 80% recurring revenue.
Castleton's greater penetration of the market with other solutions should carry this on a cross-sell basis.
New case study for prospective customers.
https://www.castletonplc.com/news/case-study-lewisham-homes-improves-resident-communication-rent-collection-times-with-sms-messaging/
And a general follow-up to that
https://www.castletonplc.com/news/improving-tenant-engagement-do-you-want-to-spend-8-per-letter-or-8-pence-per-text/
Arises from acquisition of Deeplake Digital - expected to be earnings enhancing during this financial year.
https://www.lse.co.uk/rns/CTP/castleton-technology-acquisition-of-deeplake-digital-uyzaxxptmhq7xky.html
It may be helping us towards what they said in November. "The Company is confident that revenue, EBITDA and cash generation will show a material improvement in the second half of the year."
Brand new over 3% shareholder notified yesterday. Long Path in at 5%
Large exchanges continuing. At least £253k changed hands there.
Trade magazine Housing Technology out today, featuring Castleton CRM and the Scottish Borders App amongst all the rest. Still banging on about IOT in housing, but that is thought to be realistically 5 - 10 years off for real adoption, and dependent upon standardisation of fittings, boilers and the like at new-build. 'I believe we will see the mass adoption of IoT in the housing sector within a decade, largely driven by refurbishment programmes and new builds, which will increase the number of properties that are ‘IoT ready’. Castleton's Agile mobile is IOT ready, and in the meantime it's offerings are competitive, and progressive, as evidenced by the NHF appointment as preferred supplier.