Disposal

Castleton Technology Plc

 ("Castleton" or "the Company")

Disposal

Castleton announces that it has agreed to sell the trade and certain assets of its subsidiary Maxima Information Group Limited ("MIG") to PDMS UK Limited ("PDMS") for a total cash consideration of £752,000 ("the Disposal"). The Disposal completes the Company's restructuring as it embarks on its strategy of building a leading provider of IT managed services to the public and not for profit sectors.

The Disposal is for a total consideration of £752,000; £300,000 is payable immediately and £300,000 is due by 30 September 2014, with the balance of £152,000 due by 31 March 2015 subject to certain conditions being met including the continuance of certain customer contracts. Castleton will retain certain assets and liabilities associated with MIG, principally £130,000 of recoverable debtors, some legacy assets (fully written down and of limited value) and leasehold property. Further, Castleton has had the benefit of already collecting circa £200,000 of annual maintenance revenues in the current year so will achieve an exit enterprise valuation for the business approaching £1 million.

MIG's sole trading division (following the sale of QAD in March 2014) is ABS, a software business focused on supporting a range of its own developed and proprietary ERP, reservation and ticketing and payroll software products (www.ferrysoftware.co.uk). ABS' services include the provision of software, hardware, development and continued support. While the business contains a good software product and a skilled management team, it is clear to the Board that the business requires investment and new commercial partners in order to sustain its market position and attract new customers.

In the year ended 31 March 2014 MIG (excluding QAD) generated £1.5 million of revenue and returned a profit before tax of £305,000 (adjusted to reflect certain attributable group and back office costs that relate to MIG that will not recur post disposal). The profitability of the ABS business and assets is expected to be materially lower in future financial periods under Castleton ownership without investment and the new strategic focus that a larger organisation can offer. However, under PDMS ownership the Board believes the business has better prospects.

Castleton intends to utilise the proceeds from the Disposal to further its stated strategy of building a leading provider of IT managed services to the public and not for profit sectors.

Commenting on the Disposal Ian Smith, CEO said:

"The Disposal represents the end of the restructuring of the Company and we can now focus fully on our strategy of building a leading provider of IT managed services to the public and not for profit sectors. I would like to personally thank the staff of MIG for all their efforts over the past few years of uncertainty for the division, I am sure they will make a positive contribution to PDMS' business."

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