Progility Regulatory News (PGY)

30 Jun 2006 07:02

ILX Group PLC30 June 2006 30 June 2006 ILX Group plc Acquisition of The Corporate Training Group Limited and Placing of 3.3 million new Ordinary Shares ILX Group plc ('ILX Group'), the AIM quoted vocational training company, ispleased to announce it has entered into a conditional agreement to acquire TheCorporate Training Group Limited ('CTG'), a leading financial training company. Key Points: • The acquisition of CTG brings considerable scale and effectively doubles the profitability of the current ILX Group business • For the year to 31 December 2005 Corporate Training Group recorded a normalised profit before tax of £1.149 million from turnover of £3.318 million • Initial consideration of £7 million - £5 million in cash and £2 million to be satisfied by the issue of 2.5 million new Ordinary Shares • Up to £5 million earn out depending on the achievement of profit targets, payable on or before 30 June 2007 and 30 June 2008 • Initial consideration represents a multiple of 6.1 times normalised profit before tax for the year end 31 December 2005 • The Directors expect that the Acquisition will be earnings enhancing in the current financial year • All CTG management to remain with ILX • Charles Stanley Securities has conditionally placed 3,275,468 New Ordinary Shares at 80p with new and existing institutional investors on behalf of the Company to raise approximately £2.62 million. Ken Scott, Chief Executive of ILX Group, said "The acquisition of CTG is a major step change for the ILX Group. It will bringconsiderable scale and will effectively double the profitability of the currentILX Group business. CTG's focus provides us with a golden opportunity to extendour current business model. The market for financial training is large, welldefined and provides the prospect of good levels of organic growth. In addition, there are cross selling opportunities for ILX Group, plus real andpresent prospects for developing e-learning products for the banking and financemarket, thereby extending the CTG proposition. I am very pleased to welcomePeter and the team to the ILX Group. Together we have in my opinion, thepotential for an exciting future." Peter Evans, Managing Director of The Corporate Training Group Limited, said "We are delighted to be combining with ILX Group, with whom we look forward tobeing able to rapidly grow our business and exploit the clear synergies acrossthe enlarged group." For further information, please contact: ILX Group Charles Stanley Securities Parkgreen CommunicationsKen Scott Philip Davies Ben KnowlesJon Pickles Anthony Noakes Tel: 020 7493 3713Tel: 020 7371 4444 Tel: 020 7149 6457 Mob: 07900 346 978www.ilxgroup.com ben.knowles@parkgreenmedia.com The Corporate Training Group Houlihan Lokey Howard & ZukinPeter EvansTel: 020 7490 4770 Tim Medakwww.ctguk.com Ronan Nash Tel: 020 7839 3355 Introduction The CTG business was founded in 1996 and is based in Clerkenwell, London. Itprovides in-house financially focused classroom training courses to major globalorganisations. CTG undertakes a wide variety of projects both in the UK andinternationally ranging from multi-subject, multi-location programmes stretchingover months or years, to short, intensive one-to-one coaching. The business hasan established blue chip client base, predominantly in the investment bankingsector, where ongoing training requirements are of particular importance. The Initial Consideration, to be paid at Completion, will be satisfied by way of£5 million in cash and £2 million via the issue of 2.5 million new OrdinaryShares. The cash element of the Initial Consideration will be financed by amixture of debt and equity. Up to an additional £5 million is also available byway of an earn out, which will also be paid dependent upon CTG achieving certainprofit targets in 2007 and 2008. In the opinion of the Directors, the acquisition of CTG will complement theGroup's existing activities and allow ILX to extend its reach in the vocationaltraining market whilst providing opportunities to offer the Group's existingservices to CTG's clients. The Board expects that the Acquisition will beearnings enhancing in the Group's current financial year to 31 March 2007. To enable the Company to satisfy the cash element of the Initial Considerationpayable in respect of the Acquisition, the Company intends to utilise theproceeds raised under the Placing. The balance of the consideration will besatisfied out of the Bank Facility. Shareholder approval is required to enablethe Company to allot shares pursuant to the Placing other than on a pre-emptivebasis which would otherwise require those shares to be offered first to existingshareholders. Completion of the Acquisition is conditional, inter alia, upon shareholderapproval, the successful completion of the Placing and Admission. Background to and Reasons for the Acquisition The Board's strategy for ILX Group is to build a market leading presencespecialising in vocational education and training and developed around a basketof high value business models. The Directors expect that this will be achievedthrough a combination of organic growth and by careful acquisition. In the opinion of the Directors, the Company has now gained considerablemomentum, in terms of both organic growth in the expanding PRINCE2 and ITILmarkets and through the acquisition and successful integration of previousacquisitions. Against this background, and with profits and cash being generated, the Boardhas identified CTG as an excellent acquisition opportunity that will bring anumber of benefits and opportunities to the Enlarged Group. Information on CTG Started in 1996, CTG is headed by Managing Director, Peter Evans who is also oneof the co-founders. Peter, together with David Mignano, Pat Eckersall, PeterScollen and Innes Wright, make up the board of directors and senior managementteam as well as being the majority shareholders. All are qualified accountantsand all are also full time trainers in the business. The intention is thatPeter and his team will remain with ILX and will continue to run CTG. Intotal, the business employs 16 people full time, of which 12 are trainers. Regarded as one of the leading companies in its sector, CTG has seen revenuegrow 86% from 2003 to 2005 and normalised operating profits rise from £0.604million to £1.149 million for the same period. CTG benefits from a large and highly visible order book, arising from thestrength of the customer relationship and the nature of the courses that itoperates. By way of illustration, revenue for the year ended 31 December 2006(excluding recharged expenses) is already expected to be £3.650 million based onactual revenues for January to June 2006 and bookings for the remainder of theyear as at June 2006, compared to actual revenue for the year ended 31 December2005 (also excluding recharged expenses) of £3.096 million. The CTG business has historically been seasonal in that its busiest period isfrom July to November, with August as the peak training month, reflecting thegraduate and associate training programmes undertaken for major investmentbanks. This complements the current ILX Group seasonality which is heavilyweighted to the December to March period. The Directors believe that an important feature of the CTG model is that the keyclient relationships are maintained by CTG management, as opposed to being inthe control of training consultants. This makes the long term clientrelationship more robust and provides improved opportunities to offer additionalservices to existing clients. There are also other markets within the total vocational training landscape withsimilar characteristics to the ILX Group Best Practice model but which arecurrently outside the reach of ILX Group. CTG represents one such area; bankingand finance training fits the Company's criteria as it is a large market whichis well defined by accepted industry standards plus it provides the prospect ofgood levels of future organic growth as well as a platform for futureacquisitions. As CTG brings expertise in investment banking training and cross sellingopportunities to ILX Group, there are real and current prospects for developinge-learning products for the banking and finance market. The acquisition of CTGwill bring considerable scale and will effectively double the size of thecurrent ILX Group business. Following the Acquisition, it is intended that CTG will operate as a semiautonomous division within the Enlarged Group. The Directors intend that CTGwill continue to extend its existing client relationships, particularly byutilising existing ILX Group capabilities in the area of e-learning;establishing new client relationships in the investment banking sector andacross the existing customer base of ILX Group. Financial Information on CTG CTG's financial year end is 31 December and a summary of its performance in thelast three years is set out below: Profit & Loss Account 2005 2004 2003(year to 31 December) £000 £000 £000 Turnover 3,318 2,464 1,784 Normalised Profit before Tax 1,149 826 604 In the above table, CTG's normalised profit before tax represents the reportedoperating profit after adjustment to reflect the commercial salaries that willbe paid to CTG's senior management following the Acquisition. CTG's year end has historically been 31 December but this will be changed tomatch that of the Company. Terms of the Acquisition The Initial Consideration of £7 million, to be paid at Completion, will besatisfied as to £5 million in cash and as to £2 million by the issue ofConsideration Shares (valued at the Placing Price). In addition, £700,000 of theInitial Consideration will be withheld in escrow until the end of the earn-outperiod and released on or before 30 June 2008 provided the average annualpre-tax profit of CTG over the two year period ended 31 March 2008 exceeds£1.149 million. The cash element of the Initial Consideration will be settledout of the net proceeds from the Placing and from the Bank Facility. The Initial Consideration is subject to net assets of CTG at Completion being£20,000, with an adjustment (upward and downward) on a pound for pound basis tocompensate for any shortfall, or any excess up to a maximum of £300,000. Any additional consideration which may become payable will be contingent uponoperating profits of CTG in the years ended 31 March 2007 and 2008 reachingcertain levels. This Contingent Consideration, which is subject to a maximum of£5.0 million in aggregate, will be paid in two instalments: on or by 30 June2007, and on or by 30 June 2008. The first instalment of the Contingent Consideration will be payable on thebasis of 9 times the excess of CTG's pre tax profits for the year ended 31 March2007 over £1.149 million. This payment will be capped at £2.5 million. £1.0million will be paid in cash with the remainder in cash or shares at the optionof the Company. The second instalment of the Contingent Consideration will be payable on thebasis of 9 times the excess of CTG's pre tax profits for the year ended 31 March2008 over £1.426 million. This payment will be also capped at £2.5 million. Aswith the first earn-out payment, £1.0 million will be paid in cash with theremainder in cash or shares at the option of the Company. A mechanism exists whereby if CTG's pre-tax profits for the year ended 31 March2007 exceed the level at which the maximum first instalment is payable, theseexcess profits can be transferred to the second year. Full details are given inthe Circular to shareholders. Current Trading and Prospects On 21 June 2006, the Company announced preliminary results for the year ended 31March 2006, which showed turnover for the full year of £6.913 million, anincrease of 76%, and operating profit of £1.001 million, an increase of 30%. The Company reported significant growth in sales from its core PRINCE2 and ITILmarkets and the Board is confident in continued growth for 2007. As detailed in the paragraph headed "Information on CTG" above, CTG has enjoyeda strong start to the year to 31 December 2006 and the Board anticipates thatthis performance should be carried through to the end of the year. The Terms of the Placing and Use of Proceeds Charles Stanley has agreed to use its reasonable endeavours to place 3,275,468Ordinary Shares on behalf of the Company, representing a total of 17.60 percent. of the total issued share capital of the Company, (following the Placingand the issue of the Consideration Shares). The Placing is conditional, interalia, upon Admission. The Placing is intended to raise £2.62 million before expenses of the Placingand the Acquisition. The proceeds from the Placing will be used to fund part of the InitialConsideration, costs of the Acquisition and Placing and for general workingcapital expenses. Application will be made for the Placing Shares and theConsideration Shares to be admitted to trading on AIM and it is anticipated thatAdmission will become effective and that dealings will commence on 26 July 2006. The Placing is not a rights issue or open offer and New Ordinary Shares will notbe offered generally to Shareholders, whether on a pre-emptive basis orotherwise. The considerable extra cost and delay involved in a rights issue oropen offer would not be in the best interests of the Company in thecircumstances. At the request of certain institutional investors, the Directors of the Companyhave participated in the Placing. Paul Lever and Ken Scott have agreed toacquire 37,500 New Ordinary Shares, Jon Pickles has agreed to acquire 25,000 NewOrdinary Shares and John Davies has agreed to acquire 12,500 New OrdinaryShares. This participation is a related party transaction for the purposes ofthe AIM Rules. Following Completion, the Directors will have the following interests in theissued Ordinary Share capital (as enlarged by the Placing and the Acquisition): Name of Director Shareholding Percentage Paul Lever 83,700 0.45%Ken Scott 147,585 0.79%John Davies 49,100 0.26%Jon Pickles 107,212 0.58% Lock - In Arrangements The Vendors have irrevocably undertaken not to dispose of any interest they havein the Consideration Shares issued to them as part of the Initial Considerationuntil the first anniversary from Completion. Thereafter the Vendors have agreedthat for a further period of 12 months that any sales of Ordinary Shares will becarried out only via Charles Stanley, as the Company's Broker. In addition theyhave undertaken that in respect of any further Ordinary Shares issued to them asContingent Consideration they will only dispose of any interest therein for aperiod of 12 months from their issue via Charles Stanley as the Company'sbroker. New Bank Facilities The Company has entered into the Bank Facility under which HSBC Bank plc (the "Bank") has agreed to make available a term facility of £3 million (the "TermFacility") and a revolving credit facility of £1 million (the "Revolving Credit") (together the "Facilities"). The Facilities are available to fund theAcquisition and in addition the Revolving Credit Facility is also available forgeneral working capital purposes. Expected Timetable of Principal Events Publication of the Circular to Shareholders 30 June 2006Latest time and date for receipt of completed Forms of Proxy for the 10 a.m. on 23 July 2006EGM Extraordinary General Meeting 10 a.m. on 25 July 2006Completion of the Acquisition 26 July 2006Dealings in New Ordinary Shares expected to commence on AIM 26 July 2006 Definitions in this announcement bear the same meaning as those in the Circularto be sent to Shareholders today. The Circular will be available from theoffices of Charles Stanley Securities at 25 Luke Street, London EC2A 4AR duringnormal business hours on any weekday (Saturday, Sunday and public holidaysexcepted) until 31 July 2006. Editors' notes Further information on CTG There are twelve full time trainers who are supported, as required, by a networkof associate trainers. CTG provides courses in the following areas: • Accounting and Analysis International accounting standards (IAS/IFRS), US GAAP, accounting for financialproducts, M&A accounting, finance for non financial managers. • Modelling Courses are provided in financial excel, forecasting techniques, buildingintegrated models, comparable company and transaction modelling, mergermodelling and LBO modelling. • Credit Courses are provided in credit risk analysis, financial structuring, facility/legal documentation, project and export finance. Tailoring of the trainingprovided is carried out through assessing the special risks on an individualindustry basis and analysing the specific business needs of the individualorganisation or department which requires training. • Valuation CTG provides a comprehensive list of courses in this area, including corporatefinance, cost of capital, company valuation, corporate strategy, contemporaryequity analysis and 'blue book'. Courses range from basic valuation fundamentalsthrough to the latest techniques involved in contemporary equity analysis and M&A valuation. • Financial Markets CTG provides investment management, money markets, debt markets, equity markets,derivatives, securitisation, high-yield, IPO process, and 'purple book' trainingprogrammes at all levels from beginner to senior staff members. • Management Development Courses in this area include negotiation skills, presentation skills, timemanagement and 'train the trainer' courses, which aim to enable employees at alllevels in a client's organisation to perform more efficiently, become moreeffective at managing themselves and better skilled in managing their team CTG Management Peter Evans, Founder and Managing Director: Peter obtained his PhD from the LSEin 1985 and qualified as a chartered accountant with Moore Stephens in 1988. Asa chartered accountant he specialised in the investment banking sector spendingperiods on secondment to a merchant bank. He has worked with numerous globalinvestment banks (research and corporate advisory) and multinationalcorporations (including in the Technology, Retail and Energy sectors) developingand delivering specialist training programmes with a generic focus on equityvaluation and shareholder wealth creation. Previously with a London basedtraining company, he specialises in equity valuation & shareholder wealthcreation training. David Mignano, Founder and Finance Director: David qualified as an ACA withKPMG. After working as an accountant in the City he became a trainerspecialising in tax and accounting. He now specialises in the areas of capitalmarkets, accounting and analysis, and financial modelling. Pat Eckersall, Founder and Director: After graduating from LiverpoolUniversity, Pat qualified as an ACA with Arthur Andersen. She specialised inauditing and advising manufacturing and retail companies. She then joined aLondon-based training company where she was head of the Audit and FinancialReporting teams. Pat now heads up the accounting and analysis faculty at CTG. Peter Scollen, HR Director: Peter qualified as an ACCA while working forAlexandra Workwear plc. Peter entered the training market with a London basedexam training company where he delivered training and was also responsible fortutor training and development. Since joining CTG, Peter has focused onfinancial markets and products training whilst also heading up both thefinancial markets and management development faculties. Innes Wright, Director: After graduating from St. Andrews, Innes qualified as anACA with PricewaterhouseCoopers. He then joined a London-based training companywhere he taught financial accounting. He joined CTG in 1996 where he initiallyspecialised in accounting. Innes introduced and developed the financialmodelling product within CTG and heads that faculty. All of CTG's management team are also shareholders in CTG and they, togetherwith two other employee shareholders, will continue to be employed by theEnlarged Group following the Acquisition. In addition, all CTG employees willbecome eligible to participate in the ILX Group existing share option schemes. ENDS This information is provided by RNS The company news service from the London Stock Exchange