SSY.L Regulatory News (SSY)

17 Jul 2006 12:42

CODASciSys PLC17 July 2006 CODASciSys plc - Correction The proposed demerger announcement released under RNS 2654G on 17 July 2006contains an error with respect to the anticipated latest time and date forlodging transfers of Ordinary Shares in order for the transferee to beregistered by the Demerger Record Date. The announcement stated this date to be6.00 p.m. on 22 September 2006. The expected latest time and date for lodgingtransfers of Ordinary Shares in order for the transferee to be registered by theDemerger Record Date is 6.00 p.m. on 25 September 2006, the Demerger RecordDate. The correct version of the full announcement issued earlier this morning is asbelow. Proposed Demerger Background The Directors of CODASciSys announced on 4 July 2006 the Demerger of theCompany's CODA and Business Collaborator Divisions from the CODASciSys Group.The Demerger is to be effected by the transfer of two of the Company'ssubsidiaries, CODA Group Holdings Limited and SquareSum Limited, to a newlyincorporated public limited company, CODA plc, which will in return issue CODAShares to Qualifying Shareholders, conditional on its admission to trading onAIM. At the same time the terms of a special dividend of 25 pence per CODASciSysShare and a proposed level of interim dividend of 0.55 pence per CODASciSysShare and 0.75 pence per CODA Share were announced (such interim dividends to bepaid following completion of the Demerger). This level of interim dividend wouldbe equivalent to an interim dividend of 2.8 pence per CODASciSys Sharepre-Demerger. The Demerger is conditional upon, amongst other things, shareholders approvingthe Resolutions at the Extraordinary General Meeting of the Company to be heldon Thursday 10 August 2006. A Circular containing a Notice of an Extraordinary General Meeting to be held atnoon on Thursday 10 August 2006, and a Draft Admission Document for CODA plc,will today be sent to shareholders. Background and Reasons for Recommending the Proposals As shareholders will be aware, the CODASciSys Group carries on three distinctbusinesses through three separate divisions, namely the CODA Division, theSciSys Division and the Business Collaborator Division. The objective of the proposed Demerger is to separate the CODA Division and theBusiness Collaborator Division from the SciSys Division by dividing theCODASciSys Group into two independently operated publicly traded companies, tobe known as CODA plc and SciSys plc. Under the Proposals the entire issued sharecapital of CODA Group Holdings Limited (the holding company for the CODADivision) and SquareSum Limited (the holding company for the BusinessCollaborator Division) will be transferred from CODASciSys plc to a new holdingcompany, CODA plc. This transfer will take place by way of a demerger asdescribed in more detail below. CODASciSys plc will change its name to SciSysplc and will continue as the holding company for the SciSys Division. The SciSys Division now primarily sells the services of consultants whereas theCODA Division is primarily product driven. The CODA Division has sales andmarketing teams who sell both directly and indirectly to commercial and certainpublic sector customers, whereas the SciSys Division engages in long termturnkey projects whose ultimate customers are predominantly governmental orquasi-governmental bodies. Whilst the SciSys Division operates in the UK andGermany, the CODA Division is now an international business operating out of 18locations in 13 countries around the world. Although all three divisions of the CODASciSys Group are involved in thedevelopment of software and the provision of IT services, each serves a separatecustomer base and the business models for the CODA Division and the BusinessCollaborator Division on the one hand and the SciSys Division on the other handare different. In particular, the customer base of and services provided by theCODA Division and the Business Collaborator Division are markedly different fromthose provided by the SciSys Division. The current strong performance of all three divisions of the CODASciSys Groupagainst a back drop of good growth prospects in all those divisions has allowedthe Board to assess its strategic options from a position of strength. The Boardhas concluded that it is the right time to separate the two distinct parts ofCODASciSys Group's business by way of a demerger and believe that the proposedDemerger will help secure the following advantages: - Greater management focus on each respective division and alignment of management incentivisation with the interests of shareholders; - Enable shareholders to choose between an interest in the SciSys Division and a separate interest in the CODA and Business Collaborator Divisions, each of which have different business models; and - The growth potential and underlying performance of both businesses will be more transparent to investors as separate AIM quoted companies. Terms of the Demerger A new holding company, CODA plc, has been incorporated in preparation for theproposed Demerger. The Demerger will be effected by the Company declaring adividend in specie equal to the book value of the Company's shareholdings inCODA Group Holdings Limited and SquareSum Limited on Demerger, which will besatisfied by the transfer of CODA Group Holdings Limited and SquareSum Limitedto CODA in consideration for which CODA will allot and issue each QualifyingShareholder with CODA Shares, credited as fully paid, on the following basis: 3 CODA Shares for each CODASciSys Share held at the Demerger Record Date. Following the implementation of the DemergerCODA will be owned by Qualifying Shareholders with each Qualifying Shareholderowning the same proportion of the total issued share capital of CODA as hecurrently owns in CODASciSys. The total number of CODA Shares in issue will bethree times the number of CODASciSys Shares in issue as at the Demerger RecordDate. The Demerger is conditional upon, amongst other things, the passing of theResolutions and, the approval of the High Court and Admission. Application willbe made for the CODA Shares to be admitted to trading on AIM. It is currentlyanticipated that Admission will take place and that dealings in CODA Shares willcommence during the final week of September 2006. An integral part of the Proposals is the proposed reduction of capital ofCODASciSys to be effected by a cancellation of the entire amount standing to thecredit of its share premium account. As at 12 July 2006, the amount standing tothe credit of the share premium account of CODASciSys was £43,070,107. In orderto implement the Demerger, CODASciSys requires sufficient distributable reservesto permit it to declare a dividend equal to the book value of the DemergedSubsidiaries, so that the Demerger may be effected by way of a dividend inspecie. As at 31 December 2005 the accumulated profit and loss account ofCODASciSys stood at approximately £7 million. The Special Dividend will reducethese distributable reserves to approximately £500,000. By statute, the share premium account of a company is treated asnon-distributable, and its cancellation can only take place therefore if, first,it is approved by shareholders by special resolution and, second, it is thenconfirmed by the High Court. It is estimated that the Cancellation of SharePremium, as at the date of the High Court order approving such cancellation,will increase the distributable reserves of the Company by approximately £43.7million which is approximately equal to the estimated book value of the DemergedSubsidiaries which are to be transferred by way of dividend in specie to CODAplc under the terms of the Demerger Agreement. The Board believes that therewill still remain a prudent level of distributable reserves within the SciSysGroup following the Demerger so as to enable dividends to be paid to createdistributable reserves in the Company and give greater security to itsshareholders regarding the future maintenance by the Company of its dividendpolicy. Information regarding CODA CODA is one of the UK's leading providers of international financial softwaresystems for medium to large enterprises. Following the Demerger CODA willconsist of two operating divisions, the CODA Division and the BusinessCollaborator Division. Based on 2005 revenues the CODA Division would representapproximately 96.1 per cent. of the pro forma revenue of the CODA Group. TheCODA Division provides a complete suite of IT software products and relatedservices to meet the needs of finance departments - from 'best of class'financial accounting and procurement systems, through planning, budgeting,consolidation, reporting and analytics, to compliance management. In addition toworking readily with the CODA Division's financial management applications, theCODA Division's analytic, consolidation and compliance solutions are designed tointegrate with other leading operational systems. The CODA Division's productoffering is underpinned by expert consultancy, education and support services,delivered by teams of experienced accountants and technology specialists. Based on 2005 revenues Business Collaborator would represent approximately 3.9per cent. of the pro forma revenue of the CODA Group. Business Collaboratorprovides specialist software which uses internet technologies to providecustomers with extranet, intranet, knowledge management and other similarsoftware solutions. The table below is extracted from the Draft Admission Document and summarisesthe trading record of the Demerged Subsidiaries for the three years ended 31December 2005: Year ended 31 Year ended 31 Year ended 31 December 2003 December 2004 December 2005 £m £m £m Turnover 46.3 45.8 50.6Growth (1.0%) 10.3% EBITDA* 9.1 7.8 10.2Margin 19.5% 17.1% 20.1% EBITA* 7.3 6.2 8.9Margin 15.8% 13.5% 17.5% Profit for the financial year (pre 5.2 4.7 7.2amortisation)Margin 11.3% 10.3% 14.2% Notes: *pre profit on sale of fixed assets Information regarding CODASciSys after the Demerger Following the Demerger CODASciSys will consist of the SciSys Division alone andas such proposes to change its name to SciSys plc. The SciSys Division providesIT services, bespoke software and applications management predominantly togovernment and quasi-government organisations within the space, public sectorand defence sectors. It has high levels of retained custom with a largeproportion of its business being conducted through long-term frameworkcontracts. - Space: the SciSys Division's principal activities are the supply of custom software for the control and monitoring of satellite orbital positions and on-board equipment, as well as software and services for processing data transmitted to Earth. Customers include the European Space Agency. - Public Sector: the SciSys Division's work for this sector is dominated by the Environment Agency since the SciSys Division is the preferred development partner for the modernisation of its regulatory programme. The SciSys Division has worked on the National Flood and Coastal Defence Database, and has enhanced the Permits Administration System in fields such as reservoir enforcement and surveillance. Customers include the Environment Agency. - Defence: the SciSys Division is involved in battlefield digitisation and provides specialist consultancy to a variety of defence agencies. Customers include the Ministry of Defence. Relationship between CODASciSys and CODA following the Demerger Following the Demerger and Admission, CODASciSys plc (renamed as SciSys plc) andCODA plc and their respective subsidiaries will operate as independent groups.CODA plc's issued ordinary share capital will be admitted to trading on AIM andSciSys plc's status as an AIM quoted company will otherwise remain unchanged.Certain contractual arrangements will continue to exist between the two groupsfollowing the Demerger, further details of which are set out in the Circular. Dividend policy of CODASciSys As announced on 4 July 2006, the Directors propose to pay a one-off specialdividend of 25 pence per CODASciSys Share prior to the Demerger. The record dateand payment date announced was 28 July 2006 and 11 August 2006 respectively. TheSpecial Dividend is expected to be the last dividend paid by CODASciSys toshareholders prior to the Demerger. Also on 4 July 2006 the Directors announceda proposed level of interim dividend of 0.55 pence per CODASciSys Share and 0.75pence per CODA Share, each to be paid following completion of the Demerger. Thislevel of interim dividend would be equivalent to an interim dividend of 2.8pence per CODASciSys Share pre-Demerger and both would be paid in October 2006.This is earlier than the usual payment month for interim dividends made by theCompany because the Board considers it appropriate to shorten the period betweenthe declaration of its dividends and their payment. After the Demerger, the directors of both companies intend to adopt progressivedividend policies, which would reflect the growth in each company's earnings andcash flow generated from operations, whilst maintaining an appropriate level ofdividend cover and having regard to further development of each company'sactivities. Following the Demerger it is envisaged that interim dividends will be paid byeach company in October and final dividends in June of each year. Management and operation Following the Demerger Graham Steinsberg, Bryan Hucker, Jeremy Roche, CliffPreddy, Mark Wells and Mike Greig will resign from the Board and be appointed tothe board of directors of CODA plc. Dave Belmont will act as company secretaryfor all members of the CODA Group. The Directors of CODASciSys who will form the continuing board of SciSys plcwill be Mike Love, Mark Hampson and David Jones. Following the Demerger, SteveHill will be appointed as a director and chief financial officer of SciSys plcand Steve Brignall will be appointed as an executive director of SciSys plc.Steve Hill will also take over from Dave Belmont as company secretary to allmembers of the SciSys Group. No other changes are contemplated to the operation or management of theCODASciSys Group as a consequence of the Demerger. Appointment of Steve Hill and Steve Brignall Conditional on the Demerger becoming effective, Mr Steve Hill will be appointedas the chief financial officer of CODASciSys plc with effect from completion ofthe Demerger. Mr Hill's current service agreement is with SciSys Limited and wasentered into on 27 March 2006. Under the agreement, Mr Hill is obliged toperform such duties and exercise such powers at any place of business of theCODASciSys Group as his employer may from time to time assign to him inconnection with the business of the CODASciSys Group and to devote his wholetime and attention to the business of the CODASciSys Group. He is entitled toreceive a base salary of £65,000 per annum and a variable element of salary upto an amount of £15,000 based on the achievement of certain CODASciSys Groupprofits and personal performance targets. He is also entitled to a car or carallowance, private health care, permanent health assurance, life insurance equalto 110 per cent. of pensionable salary and pension contributions payable by hisemployer. The first six months of Mr Hill's employment is a probationary periodduring or at the end of which SciSys Limited may terminate his employment by onemonth's written notice and SciSys Limited may extend such probationary period byany further such period it determines by serving written notice. Subject to suchprobation, Mr Hill's employment continues until terminated by either partyserving on the other not less than 12 months' written notice. The agreementcontains restrictive covenants for a period of 12 months following terminationand no benefits, other than those accruing during any notice period, are payableon termination of employment. Save in respect of his appointment as a directorof the Company, Mr Hill's current employment terms will not change as a resultof the Demerger. Conditional on the Demerger becoming effective, Mr Stephen Brignall will beappointed as an executive director of CODASciSys plc with effect from completionof the Demerger. Mr Brignall's current service agreement is with SciSys Limitedand was entered into on 1 July 1999. Under this agreement Mr Brignall is obligedto perform such duties and exercise such powers at any place of business of theCODASciSys Group as his employer may from time to time assign to him inconnection with the business of the CODASciSys Group and is required to devotehis whole time and attention to the business of the CODASciSys Group. He isentitled to receive a base salary of £80,000 per annum and a variable element ofsalary of up to an amount of £30,000 based on the achievement of certainCODASciSys Group profits and personal performance targets. He is also entitledto a car or car allowance, private health care, permanent health insurance, lifeinsurance equal to 110 per cent. of pensionable salary and pension contributionspayable by his employer. The agreement provides for termination by either partyserving on the other not less than 12 months' written notice. The agreementcontains restrictive covenants for a period of 12 months following terminationand no benefits, other than those accruing during any notice period, are payableon termination of employment. Save in respect of his appointment as a directorof the Company, Mr Brignall's current employment terms will not change as aresult of the Demerger. Extraordinary General Meeting The Extraordinary General Meeting is being convened to seek shareholder consentto give effect to the Proposals and certain related matters. Shareholders will be asked to considerand vote on the Resolutions set out in the notice of EGM at the end of theCircular. The three resolutions proposed are to seek shareholders' approval for: (a) the Cancellation of Share Premium; (b) the Demerger; and (c) the change of name of the Company to "SciSys plc" conditional upon the Demerger taking effect. Recommendation The Board, which has received financial advice from Bridgewell, the Company'sNominated Adviser and Broker, considers the Resolutions to be in the bestinterests of the Company and its shareholders as a whole. In providing itsfinancial advice to the Board, Bridgewell has placed reliance on the Board'scommercial assessment of the Demerger. Accordingly, in the Circular, the Board unanimously recommends that theCompany's shareholders vote in favour of the Resolutions as they intend to do inrespect of approximately 5.6 million CODASciSys Shares in which they arebeneficially interested amounting to approximately 21.8 per cent. of theexpected issued share capital of the Company prior to completion of theDemerger. Timetable Latest time and date for receipt of Form of Proxy 12.00 p.m. on 8 August 2006 Extraordinary General Meeting 12.00 p.m. on 10 August 2006 Special Dividend Record Date 6.00 p.m. on 28 July 2006 Payment of the Special Dividend 11 August 2006 Latest time and date for lodging transfers of Ordinary Shares in 6.00 p.m. on 25 September 2006order for transferee to be registered by the Demerger Record Date Expected Demerger Record Date 6.00 p.m. on 25 September 2006 Expected effective date of the Demerger 26 September 2006 Expected admission and commencement of dealings in CODA Shares on 8 a.m. on 26 September 2006AIM CREST members accounts credited with CODA Shares 26 September 2006 Despatch of definitive share certificates for CODA Shares (other October 2006than in respect of shares held through CREST) Interim Dividends Record Date 6.00 p.m. on 13 October 2006 Payment of the Interim Dividends 27 October 2006 All references are to London time unless otherwise stated. Each of the times and dates in the above timetable are based on CODASciSys'current expectations and may be subject to change. Financial Information The financial information relating to the CODA Group in this announcement doesnot constitute statutory accounts within the meaning of section 240 of the Act.Statutory accounts for each company in the CODASciSys Group (with the exceptionof the Company), in respect of which the auditors gave unqualified reports andwhich did not contain a statement under section 237 of the Act, for thefinancial years ended 31 December 2003, 31 December 2004 and 31 December 2005have been filed with the Registrar of Companies. CODA has not filed statutoryaccounts since its incorporation on 29 June 2006. CODASciSys plc Tel. 01249 466466 Bryan Hucker, Group Financial Director Bridgewell Limited Tel. 0207 003 3000 Ian Dighe / Simon Bridges Pelham Public Relations Limited Tel. 020 7743 6670 / 07802 442486 Archie Berens / Philip Dennis Definitions "Act" or "Companies Act" the Companies Act 1985 (as amended); "Admission" the admission of the CODA Shares to trading on AIM becoming effective in accordance with the AIM Rules; "AIM" the market of that name operated by the London Stock Exchange; "AIM Rules" the rules published by the London Stock Exchange governing admission to, and the operation of, AIM; "Board" or "Directors" the board of directors of CODASciSys; "Bridgewell" Bridgewell Limited which is regulated in the United Kingdom by the FSA; "Business Collaborator Division" the business carried on by Business Collaborator Limited, a subsidiary of the Company; "Business Day" a day (excluding Saturdays, Sundays and UK public holidays) on which banks are generally open for business in the City of London; "Cancellation of Share Premium" the cancellation of the share premium account of CODASciSys pursuant to section 135 of the Act; "Circular" the circular to be sent to shareholders on 17 July 2006 containing the notice of the EGM; "CODA" CODA plc (company number 5861419); "CODA Division" the business carried on by CODA Group Holdings Limited and its subsidiaries and CODA (IT Services) Limited; "CODA Group" CODA and the Demerged Subsidiaries; "CODA Shares" ordinary shares of 25 pence each in the capital of CODA; "CODASciSys" or the "Company" CODASciSys plc (company number 3426416); "CODASciSys Group" CODASciSys and its subsidiaries immediately prior to the Demerger; "CODASciSys Shares" or "Ordinary Shares" ordinary shares of 25 pence each in the capital of CODASciSys; "CREST" the relevant system (as defined in the Regulations) in respect of which CRESTCo Limited is the Operator (as defined in the Regulations); "Demerged Subsidiaries" CODA Group Holdings Limited and SquareSum Limited and their respective subsidiaries and subsidiary undertakings; "Demerger" the proposed demerger of the CODA Division and the Business Collaborator Division pursuant to the Proposals; "Demerger Agreement" the demerger agreement entered into between CODASciSys, CODA and SciSys Limited on 14 July 2006 relating to the Proposals; "Demerger Record Date" 6.00 p.m. on such date during September 2006 as the Directors may determine; "Draft Admission Document" the draft admission document relating to CODA plc; "EBITA" Earnings Before Interest, Tax and Amortisation; "EBITDA" Earnings Before Interest, Tax, Depreciation and Amortisation; "Extraordinary General Meeting" or "EGM" the extraordinary general meeting of shareholders (or any adjournment thereof), notice of which will be sent to shareholders on 17 July 2006; "Form of Proxy" form of proxy for use by shareholders in respect of the EGM; "FSA" the Financial Services Authority; "Interim Dividends" the proposed interim dividends of 0.55 pence per CODASciSys Share and 0.75 pence per CODA Share announced by the Company on 4 July 2006; "Interim Dividends Record Date" 6.00 p.m. on 13 October 2006 or such different time and/or date as the Directors or directors of CODA plc, as appropriate, may determine; "London Stock Exchange" the London Stock Exchange plc; "Qualifying Shareholders" holders of CODASciSys Shares at the Demerger Record Date; "Proposals" the Demerger, the Cancellation of Share Premium and Admission; "Registrar of Companies" the Registrar of Companies as defined in section 744 of the Companies Act; "Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 /No.3755); "Resolutions" the resolutions to be proposed at the EGM; "SciSys Division" the business carried on by SciSys Limited and its subsidiaries; "SciSys Group" the Company and its subsidiaries immediately following the Demerger; "Special Dividend" the special dividend of 25 pence per Ordinary Share; "Special Dividend Record Date" 6.00 p.m. on 28 July 2006 or such different time and /or date as the Directors may determine; and "UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland. 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