1 Feb 2016 07:00
Castleton Technology Plc
("Castleton", the "Company" or the "Group")
Acquisition of Kypera Holdings Limited
Strategic Acquisition, adding a new dimension, new customers and new geographies
Castleton, the software and managed services provider to the public and not-for-profit sectors, is pleased to announce that on 29th January 2016, it acquired Kypera Holdings Limited ("Kypera") for a net cash consideration of £3.5 million (the "Acquisition").
Highlights
· Kypera provides fully integrated housing management and finance software to over 140 customers
· Offices in the UK and Australia, as well as a presence in New Zealand and South Africa offering further international opportunities for the Group
· Sales of £2.4 million, of which 55% are recurring, and EBITDA of £0.4 million for the year to 31 October 2015
· Strategic acquisition which enables Castleton to offer the only truly integrated, single Enterprise Resource Planning ("ERP") platform solution in the social housing sector
· Providing unrivalled functionality in an on premise, hybrid or fully hosted offering via Castleton Managed Services
· A unique "one stop" proposition to the sector
· Kypera's system uses the latest Microsoft.NET technology;
· Providing powerful and versatile reporting options
· Offering lower purchase, implementation, training and maintenance costs
· Compatible with Castleton's existing product set
· Group now supports over 500 of the UK's total 1,700 social housing associations
Ian Smith, Chief Executive of Castleton, said:
"This is a critical acquisition for us. Kypera adds a whole new level to Castleton's offer. We are now the only truly integrated, single ERP platform solution able to meet every aspect of our customers' needs - the only "one stop shop" serving the sector. Kypera also increases our international reach, something we are planning to build on in the future."
Contacts:
Castleton Technology PLC
Ian Smith, CEO
Haywood Chapman, CFO
+44 845 241 0220
MXC Capital Markets LLP (Financial Adviser)
Marc Young/ Charlotte Stranner
+44 20 7965 8149
finnCap Ltd (Nominated adviser and broker)
Jonny Franklin-Adams/ Simon Hicks
+44 20 7220 0500
About Castleton
Castleton offers a range of software and infrastructure services to the public and not-for-profit sectors, providing its customers with significant improvements in service, performance and insight. The acquisition of Kypera adds a powerful dimension to Castleton's services to the social housing sector, enabling the Group to offer a unique end-to-end solution to its customers.
Further Details on Kypera
Kypera has developed a modern housing and finance management system using the latest Microsoft.NET technology. The system enables customers to handle critical operational and management processes within their organisations more effectively and efficiently. Kypera's complete in-house solution includes scoping, project management, implementation, importing of historic data, testing and training.
Kypera's product suite includes:
· Kypera Housing: a comprehensive housing management system which assists housing professionals by making complex tasks like managing housing arrears and raising repairs straightforward, accurate and fast. It is a fully integrated and modular system, providing flexibility so that customers can choose what they need, when they need it.
· Kypera Financials: an advanced finance system which seamlessly integrates with Kypera Housing. Like Kypera Housing, it is built using independent modules performing functions such as receipt and payment processing, budgeting and forecasting and debt management.
· Kypera XLR: a Microsoft Excel add-on for reporting on all other Kypera applications. It automatically extracts data from the other applications into an Excel spreadsheet, enabling analysis of data and delivery of reports.
Kypera has over 140 customers across the private, public and not-for-profit sectors within the UK, Australia, New Zealand and South Africa. In the year to 31 October 2015, Kypera generated revenues of £2.4 million, of which 20% were generated by its Australian subsidiary, and EBITDA of £0.4 million. As at 31 October 2015, it had gross assets of £2.4 million.
Consideration for the Acquisition was £5.0 million, paid wholly in cash and including a cash for cash payment of £1.5 million, resulting in net consideration of £3.5 million.
Financing of the Acquisition
The Acquisition was financed by an extension to the Company's existing facilities with Barclays Plc ("Barclays") and the issue of £3.5 million of convertible loan notes.
Bank Facilities
The Company has entered into a £1.0 million extension to its current term loan with Barclays in addition to a £0.5 million extension to its existing overdraft facility, taking the total available overdraft to £2.5 million.
Convertible Loan Notes
The Company has issued £3.5 million of unsecured convertible loan notes ("Loan Notes"). The Loan Notes have a 5 year term and carry interest at a rate of 5% per annum. The Loan Notes are capable of being converted into new ordinary shares of 2 pence each in the capital of Castleton ("Ordinary Shares") at a price of 85.6 pence per Ordinary Share, representing a 5% premium to the mid closing price of an Ordinary Share on 28 January 2016, the day immediately prior to completion. Conversion is at the option of the holder at any time during the 5 year term. The Company can redeem the Loan Notes from the third anniversary of issue, assuming the Loan Notes have not already been converted into Ordinary Shares.
MXC Capital Limited ("MXC Capital"), a substantial shareholder in the Company, has subscribed for £1.5 million of the Loan Notes. The remaining £2 million of Loan Notes were subscribed for by the Business Growth Fund Plc ("BGF").
BGF is the UK's most active growth capital investor in small and mid-sized companies, with up to £2.5bn to invest. BGF is backed by five of the UK's main banking groups - Barclays, HSBC, Lloyds, RBS and Standard Chartered but is a fully independent organisation. This is BGF's fifth investment into a quoted public company.
Related Party Transactions
The issue of the Loan Notes to MXC Capital is considered a related party transaction under the AIM Rules for Companies on the basis that MXC Capital is a substantial shareholder in the Company and Ian Smith, CEO of Castleton, is a substantial shareholder of MXC Capital. In addition, the Company is paying a corporate finance advisory fee of £125,000 to MXC Capital Markets LLP ("MXCM") for advisory services in relation to the Acquisition (the "Advisory Fee") under an existing engagement with MXCM which is retained as corporate finance adviser to the Company. The payment of the Advisory Fee is considered to be a related party transaction under the AIM Rules for Companies on the basis that MXC Capital is the ultimate controlling party of MXC Capital Markets LLP.
The independent directors (being David Payne, Phil Kelly, Davinder Sanghera, Haywood Chapman and Caro Bell) consider, having consulted with finnCap Ltd, that the terms of the Loan Notes and the Advisory Fee are fair and reasonable insofar as shareholders of the Company are concerned.