4 Dec 2017 07:00
Castleton Technology PLC
("Castleton", the "Company" or the "Group")
Acquisition of Kinetic Information Systems Pty Ltd
Castleton Technology plc (AIM: CTP), the software and managed services provider to the public and not-for-profit sectors, is pleased to announce the acquisition of Kinetic Information Systems Pty Ltd ("Kinetic"), the leading provider of software solutions to the Community Housing sector in Australia, for an initial cash consideration of AU$2.0 million (£1.14 million*) and a deferred cash payment of AU$0.5 million (£0.3 million*) (the "Acquisition"). A further cash payment of up to AU$0.5 million (£0.3 million*) may also be payable dependent on financial performance.
Highlights
· Kinetic is Australia's leading provider of enterprise resource planning ("ERP") software solutions for the Australian Community Housing sector
· Proprietary Kinetic Housing Schema software platform
· Strong relationships with Community Housing providers, Government Housing departments and other key industry stakeholders
· Consistent track record of strong revenue and EBITDA growth
· Revenue of AU$2.3 million (£1.3 million*) and normalised EBITDA of AU$0.6 million (£0.3 million*) for the year to 30 June 2017
· Strategic acquisition to enable Castleton to leverage Kinetic's market leading status and enhance the Group's existing operations in Australia's growing Community Housing sector
· Kinetic adds scale, customers, skills, market knowledge and specific Australian IPR
· Kinetic adds over 50 customers into which Castleton can cross-sell its other products with the combined customer base giving Castleton circa 40% of the market share for Tier 1 providers in Australia
· Kinetic management and staff to remain within the Group to target further growth in Australia
· Acquisition is expected to be earnings enhancing in the coming financial year to 31 March 2019
· Ability to expand Kinetic's offering into other geographies such as New Zealand and additional sectors such as Aged Care and the National Disability Insurance Scheme
Dean Dickinson, Chief Executive of Castleton, said:
"This strategic acquisition enables us to capitalise on the significant opportunities that Australia's growing Community Housing sector presents, using the capabilities that the Group has developed to successfully serve the UK market. Kinetic has a great reputation for delivering quality software and services on time and on budget, evidenced by its near 100% customer retention over the last 10 years. The Acquisition also enables us to cross-sell Castleton's other products and services into Kinetic's customer base, a strategy which continues to bear fruit among our customers in the UK and Ireland."
* calculated with an exchange rate of AU$1: £0.57
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About Castleton Technology plc
Castleton Technology plc is a leading supplier of complementary software and managed services to the public and not-for-profit sectors. The Group is a 'one stop shop', providing integrated housing systems via the Cloud, working in partnership with its customers and resellers to help drive efficiencies whilst improving controls and customer service. www.castletonplc.com
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
Further Details on Kinetic
Kinetic is a specialist ERP software and implementation services provider focusing on the Community Housing sector in Australia.
ERP Software
Kinetic initially provided solutions to organisations through the resale of ERP and Business Intelligence ("BI") software. Kinetic has now developed a proprietary system, Kinetic Housing Schema, which is a Community Housing solution that transforms the standard ERP and BI software into a fully integrated solution for the Community Housing sector. This proprietary technology is combined with third party products dependent on client requirements. The three pillar offerings underpinning Kinetic's ERP software solutions are:
· MYOB Greentree: MYOB Greentree is a low-cost, high performance Tier 2 ERP software solution purpose built for the mid-size market. Greentree is a fully integrated, modular system making it a solution that can be readily adapted to meet the needs of a diverse range of businesses across various industries.
· Kinetic Housing Schema: this has been developed over the past 7 years by Kinetic and takes Greentree's core functionality, integrates it with BI solutions, and tailors these to the Community Housing sector. Kinetic has also created a data warehouse for Kinetic Housing Schema to allow regulatory, statutory and KPI measurement that is specific to both Local, State and Federal levels of Government.
· QlikView: QlikView is a business intelligence software solution that aims to deliver true self-service business intelligence without the use of intermediaries. It aggregates and consolidates data from a variety of data sources and integrates these into a single end-user interface.
ERP Implementation Consulting Services
Kinetic has also developed consulting methodologies covering the implementation and support of ERP projects termed IMPACT and MOMENTUM respectively.
· IMPACT: the Kinetic IMPACT methodology was developed to handle the successful implementation of Tier 2 ERP solutions by taking the useful aspects of the Tier 1 solution, Prince 2, and refining them to meet the speed and practicalities that Tier 2 requires. This is combined with Kinetic's project management skills to provide structured and seamless implementation.
· MOMENTUM: the MOMENTUM support offering provides ongoing support and includes the resolution of day to day or operational issues as well as the continual evaluation of ERP systems to ensure they are fully functional and still aligned with the business' objectives.
Kinetic has over 50 customers, the majority of whom are Community Housing providers with average retention of 10 years. In the year to 30 June 2017, Kinetic generated revenues of AU$2.3 million (£1.3 million*) and normalised EBITDA of AU$0.6 million (£0.3 million*). As at 30 June 2017 the business had gross assets of AU$1.6 million (£0.9 million*), including cash of AU$1.2 million (£0.7 million). Kinetic was acquired on a cash and debt free basis, with a normalised level of working capital.
The Acquisition is expected to be earnings enhancing in the coming financial year to 31 March 2019.
Terms of the Acquisition
Consideration for the Acquisition was an initial cash payment of AU$2 million (£1.14 million*) with a deferred cash payment of AU$0.5 million (£0.3 million*) payable on the second anniversary of completion. A further cash payment of up to AU$0.5 million (£0.3 million*) may be paid to the vendors on or before 31 October 2018 dependent on Kinetic's EBITDA for the year ended 30 June 2018.
The initial cash consideration for the Acquisition was financed through the Company's existing facilities with Barclays Plc.