Calnex Solutio. Regulatory News (CLX)

12 Dec 2006 08:00

Calyx Group PLC12 December 2006 For immediate release 12 December 2006 Calyx Group PLC ("Calyx" or the "Group") Acquisition of Mentec, Trading update, Revision of terms of Matrix Companies deferred consideration and Board change - Acquisition of Mentec, a leading ICT advanced infrastructure provider in the UK and Irish corporate markets, for a total consideration of €16m - Trading update - Early settlement agreement re deferred consideration for Matrix acquisition - Ian Smith resigns as a Director Acquistion of Mentec Calyx Group plc, one of the largest single source providers of Networked ITServices in both the United Kingdom and Ireland, is pleased to announce that theGroup has acquired Mentec International Limited (a UK company), MentecInternational Limited (an Irish company) and Transfare Solutions Limited (a UKcompany), (together "Mentec"), for a total consideration of €16 million. Based in Dublin and Leicestershire, Mentec is an innovative provider of ITproducts and services. Mentec supplies technical and managed services andapplications to a blue chip client base primarily in the public, manufacturing,distribution and professional services sectors throughout Ireland and the UK. An initial cash consideration of €9.75 million and Calyx shares with a value of€2.25 million was paid on completion of the acquisition. Further cashconsideration of €3 million will be paid, and shares to the value of €1 millionwill be issued, in June 2007. The cash consideration is being financed byincreasing an existing term loan facility by €12 million. The Mentec business has similar target markets as Calyx and their product andservice offering compliments the Group's existing business. Mentec's UK clientsinclude Plan International, Baxter Storey and Group 4 Technology; whilst inIreland they include The SWS Group, The Automobile Association and Dublin CityUniversity. Mentec provides a comprehensive range of solutions for UK and Irishorganisations that require an integrated and flexible business infrastructure.These solutions cover areas such as collaborative enterprise information,document management and workflow automation, ecommerce and applicationintegration. These provide organisations with the scalability, reliability andmanageability that today's agile businesses need to remain competitive. For theyear to 31 December 2005 Mentec turnover was €20.1m, EBITDA was €1.5m and netassets, excluding goodwill, were €1.1 million. The acquisition will allow Calyx to increase its value-add service offering aswell as enable considerable cross-selling opportunities throughout the Group. Trading update Trading in the Group's Irish business and in the Matrix Companies, acquired inJune 2006, has continued to be in line with expectations. However trading atCalyx (UK) Limited (formerly ITS which was acquired in October 2005) is behindexpectations for the current year, although this has recently turned around.This combined with an increased interest and depreciation charge means that theGroup now anticipates that the results for the year ended 31 December 2006 willbe marginally below current market expectations. The strategy of both the UK and Irish businesses is to increase the managedservices proportion of the overall business. This has been successfullyimplemented, particularly over the last few months, with some notable blue chipcontract wins such as Red Bee Media and Thus. As a result, the level ofrecurring business of the Group going into 2007, has increased to 37% of theGroup's budgeted turnover for 2007. The Group intends to continue to pursuethis strategy and although this will impact on the recognition of earnings forthe year ended 31 December 2007, it will lead to the development of a moretransparent business and will greatly enhance the quality of the Group'searnings. The Board remains confident that the Group will continue to growsubstantially both into and throughout 2007. Revised terms to the Matrix Companies deferred consideration As noted above, trading in the Matrix Companies acquired from Fujin Technologyplc, formerly known as Matrix Communications Group plc, ("Fujin") has been inline with expectations. As a result, it is expected that the Matrix Companieswill achieve the level of profit for the period to 31 December 2006 at which thefirst earn-out payment is payable in full. Accordingly and upon finalisation ofthe financial statements, it is expected that a cash payment of £3 million willbe made to Fujin in February 2007. Following discussions with the Group's advisers, an agreement has been enteredinto with Fujin to waive the requirement for the Matrix Companies to meet theprofit target for the five months to 31 May 2007 in order to trigger the secondearn-out payment. The agreement provides that should the first earn-out bepayable in full, an amount of between £1.25 million and £1.6 million will bepaid to Fujin on 29 June 2007 instead of the second earn-out, which would havebeen up to £2 million on achievement of the profit target. This agreement willallow for the earlier integration of the UK businesses, which is expected tooccur in early 2007. Additionally if at any time Fujin requests to be releasedfrom the lock-in over the approximately 2.5 million Calyx shares they hold, thiswill be granted. Board Change Ian Smith has today resigned from the Board of Calyx Group plc. Ian joined theBoard as Non-Executive Director in May 2006 following the acquisition of theMatrix Companies. Ian has assisted with the integration of the Matrix Companiesinto the Calyx Group and we thank him for his contribution over the last sixmonths. Commenting on the announcements today Maurice Healy, Calyx CEO said, "I am excited to be announcing that Mentec will be joining the Calyx Group asthey provide a key IT service to the corporate market place and their offeringsare completely complementary both in Ireland and in the UK to those alreadyoffered by the Calyx Group. The acquisition will allow Calyx to provide anincreased value-add service offering as well as cross-selling opportunitiesthroughout the Group. I am pleased we have increased our Managed Services in 2006. Although this focuswill impact on revenues recognised in the short term, this strategy will makeCalyx a stronger business with a higher proportion of revenues being of arecurring nature. I am also pleased to announce that the good trading performance from the MatrixCompanies that we acquired in May this year has provided me with confidence towaive the profit requirement for the second earn out payment which will allow anearlier integration of our UK businesses." Calyx Group plcMaurice Healy, Chief Executive +353 1 883 5509Peter Jenkins, Chief Financial Officer +44 (0)20 8439 9569 Buchanan CommunicationsTim Thompson/James Strong +44 (0)20 7466 5000 About Calyx Calyx is a major single-source provider of Networked IT solutions withoperations across the UK and Ireland. In the UK it operates from Hook, Rainford,East Grinstead, Swindon and Richmond and in Ireland it operates from Dublin,Cork and Limerick. Calyx is listed on both the AIM market in London and the IEXin Dublin. Calyx listed on AIM in March 2005 and on the IEX in May 2006. This information is provided by RNS The company news service from the London Stock Exchange