Disposal

RNS Number : 4128A

Anite PLC

01 August 2008

 



1 August 2008

Anite plc

Proposed Disposal of Public Sector division 

Notice of General Meeting

Anite plc ('Anite' or 'the Company'), the international software and solutions company, today announces that it has entered into a conditional agreement with Northgate Information Solutions UK Limited ('Northgate') to dispose of Anite Public Sector Holdings Limited, whose two wholly-owned subsidiaries carry on the local government and secure information systems businesses (together ''Anite Public Sector'') for a total cash consideration of £54.3 million payable at completion, subject to the settlement of a £3.8 million receivable owed by Anite to Anite Public Sector and a working capital adjustment following the Completion ('the Proposed Disposal'). 

Highlights

• Agreement to dispose of Anite Public Sector for a total cash consideration of £54.3 million payable at Completion, subject to the settlement of a £3.8 million receivable owed by Anite to Anite Public Sector and a working capital adjustment following the completion.

• The disposal is consistent with enabling Anite's management to focus wholly on continuing the transformation of Anite into a leading global software business with wireless telecommunications at the heart of its business.

• A profit on disposal of approximately £28.0 million will be included in Anite's results for its financial year ending 30 April 2009, however the disposal is expected to be dilutive to underlying Group earnings over the same period.

• The proceeds of the disposal will be utilised in the near term to:

  • reduce Anite's bank borrowings by £25 million;

  • provide greater flexibility for the Company to purchase its shares under the authority granted by shareholders; and

  • provide funds to make acquisitions.

• The disposal is conditional on shareholder approval and on the transaction not being referred by the Office of Fair Trading to the Competition Commission.

• A general meeting of Anite to consider and, if thought fit, approve the disposal will be held at 10.00am on Friday 29 August 2008.

Commenting, Steve Rowley, Chief Executive said:

'The proposed sale of Anite Public Sector marks another phase in the transformation of Anite. It reinforces our commitment to positioning Wireless as the heart of our business whilst aiming to reduce the conglomerate discount that affects the valuation of our shares.  

'Using the proceeds of the sale, we will pay down part of our bank borrowings, continue to invest in Wireless and maximise the potential of Travel whilst taking advantage of acquisition opportunities to strengthen our position, especially in wireless telecommunications.'

A conference call for analysts and investors will be held at 8.30am today; please call or e-mail Will Henderson at Smithfield for details (020 7360 4900 or [e-mail])

For further information, please contact:	www.anite.com
Anite plc	01753 804000
Steve Rowley, Chief Executive Christopher Humphrey, Group Finance Director
Arma Partners	020 7290 8100
Adam de Courcy Ling/John Meehan
Landsbanki	020 7426 9000
Simon Bridges/Dan Webster
Smithfield	020 7360 4900
Reg Hoare/Will Henderson

This document includes statements which are, or may be deemed to be, 'forward-looking statements'. These forward-looking statements can be identified by the use of forward-looking terminology, including (without limitation) the terms 'believes', 'estimates', 'plans', 'anticipates', 'targets', 'aims', 'continues', 'expects', 'intends', 'may', 'will', 'would', or 'should' or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters which are not historical facts. They appear in a number of places throughout this document and include statements regarding the Group's intentions, beliefs or current expectations concerning, among other things, the Group's results of operations, financial condition, liquidity, prospects, growth strategies and the industries in which the Group operates. By their-nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including without limitation, conditions in the markets, market position of the Group, earnings, financial position, cash flows, return on capital, anticipated investments and capital expenditures, changing business or other market conditions and general economic conditions. These and other factors could adversely affect the outcome and financial effects of the Group and events described herein. Forward-looking statements contained in this document based on these trends or activities should not be taken as a representation that such trends or activities will continue in future. The forward-looking statements contained in this document speak only as at the date of this document. Except to the extent required by applicable law, the Listing Rules or the Disclosure and Transparency Rules, Anite will not necessarily update any of them in light of new information or future events and undertakes no duty to do so.

  Proposed Disposal of the entire issued share capital of Anite Public Sector Holdings Limited

Notice of General Meeting

Introduction

Today, Anite, the international software and solutions company, announced that it has entered into a conditional agreement (the 'Agreement') with Northgate Information Solutions UK Limited  to dispose of its subsidiary Anite Public Sector Holdings Limited, whose two wholly-owned subsidiaries carry on the Anite local government business (the 'Anite Local Government Business') and the secure information solutions business (the 'SIS Business', and together with the Anite Local Government Business 'Anite Public Sector'), for a total cash consideration of £54.3 million payable at completion, subject to the settlement of a £3.8 million receivable owed by Anite to Anite Public Sector and a working capital adjustment following completion (the ''Proposed Disposal''). In view of the size of the Proposed Disposal, it is conditional upon shareholder approval. The resolution to approve the Proposed Disposal will be proposed at a general meeting to be held at 10.00am on Friday 29 August 2008.  The Proposed Disposal is also conditional on the Office of Fair Trading confirming in writing that it will not refer the transaction to the Competition Commission. If the conditions are not satisfied by 31 October 2008, either party may terminate the Agreement.

Background to, reasons for, and benefits of the Proposed Disposal

Anite's Strategy

Anite's aim is to be the leading supplier of industry-specific IT solutions in the sectors in which we operate, which have historically been wireless telecommunications, travel and the public sector. During the last couple of years, we have made significant progress in implementing our strategy to achieve this objective through a combination of investment in our products, strategic acquisitions to strengthen our position and disposals to sharpen our focus across our three divisions. As a result, Anite has been transforming from a UK-centric, public sector and IT consulting and services business into a global software business with a stronger focus on wireless telecommunications.

The Board has also been aware that the ownership of these separate businesses, focused as they are on disparate sectors, has led to a stock market valuation which reflects a structural discount and that the sale of Anite Public Sector is likely to reduce the scale of this discount.

Focus on Wireless Business and Travel Business

Over the last two years, the wireless telecoms division of the Group (the 'Wireless Business') has been positioned at the heart of Anite's business. This follows the historic growth of the Wireless Business, which now represents a greater proportion of Anite's operating profits and revenues, and the acquisitions of Nemo and Invenova which have been incorporated within it. In parallel, the Board has also stated its intention to maximise the potential of the travel division of the Group (the 'Travel Business').

The Board believes that the best growth and profitability prospects for the Company as a whole are likely to be in the Wireless Business and the Travel Business, reflecting their strong market positions and growth prospects, internationally.

Recent background of Anite Public Sector

Given the growth of the Wireless Business and the Travel Business, Anite Public Sector has reduced in significance for the Group. Although it has improved its performance in recent years, it has been constrained by a number of factors. During the period between 2004 and 2007, significant time and cost was expended integrating previous acquisitions, resolving the State of Victoria contract and on improving the performance of the Pericles product set. These activities proved to be significant constraints to developing the business, not least as acquisition opportunities were inevitably taken up by Anite's peer group. 

The Directors also believe that in this sector customers would be best served by bigger and more dedicated suppliers. In this context, Anite Public Sector now lacks critical mass when compared to its peers.

Summary

For these reasons, the Board has concluded that Anite's best option is to dispose of Anite Public Sector to a dedicated public sector specialist who will be able to focus wholly on the business. At the same time, the Proposed Disposal is consistent with enabling Anite's management to focus wholly on continuing the transformation of Anite into a leading global software business with wireless telecommunications at the heart of its business.

Summary information on the Sale Group

Anite Public Sector comprises two discrete businesses, held within Anite Public Sector Limited (the Anite Local Government Business) and Anite Secure Information Solutions Limited (the SIS Business). Both companies are wholly-owned subsidiaries of Anite Public Sector Holdings Limited. 

Local Government Business

The Anite Local Government Business is a market leader in providing software and solutions in certain niche areas of UK local government, such as document management and social care solutions. Other areas of operation include local tax collection and benefit payments. Its customer base currently includes 70% of the total number of local authorities in the UK. It employs around 460 staff, and is based in Milton Keynes, with offices in Manchester, Slough, Glasgow and Hemel Hempstead.

SIS Business

The SIS Business is a supplier of secure information systems and solutions to the police, home affairs, criminal justice and defence markets in the UK. Its customer base includes police services, central government and criminal justice agencies and the Ministry of Defence which use its surveillance, intelligence gathering, recognition, biometric, security and fraud solutions. It employs around 150 staff, and is based in Slough, with offices in Manchester, St Neots and Glasgow.

Summary financial information

The sale group, comprising Anite Public Sector Holdings Limited and its subsidiaries (the 'Sale Group'), as a whole contributed operating profit of £5.6 million and profit before tax of £5.5 million on revenues of £62.4 million in the financial year ended 30 April 2008. As at 30 April 2008 the Sale Group had gross assets of £58.2 million.

Of this, the Anite Local Government Business reported operating profit of £4.5 million and profit before tax of £4.4 million on revenues of £43.9 million in the financial year ended 30 April 2008. As at 30 April 2008 the Anite Local Government Business had gross assets of £45.8 million. The SIS Business reported operating profit of £1.1 million and profit before tax of £1.1 million on revenues of £18.5 million in the financial year ended 30 April 2008. As at 30 April 2008 the SIS Business had gross assets of £12.4 million.

Principal terms of the Proposed Disposal

On 31 July 2008, Anite and Anite Systems, a direct wholly-owned subsidiary of Anite, entered into an agreement with Northgate pursuant to which Anite Systems agreed, subject to Shareholder approval, to sell all of the Group's shares in Anite Public Sector Holdings Limited.

Northgate has agreed to pay a total consideration of £54.3 million in cash for 100% of the share capital and voting rights of Anite Public Sector Holdings Limited, subject to the settlement of a £3.8 million receivable owed by Anite to Anite Public Sector and a working capital adjustment following completion. The consideration will be paid at Completion.

Completion is conditional upon the passing of the resolution to approve the Proposed Disposal at the General Meeting and on the Office of Fair Trading confirming in writing that it will not refer the transaction to the Competition Commission. If the conditions are not satisfied by 31 October 2008, either party may terminate the Agreement.

Financial effects of the Proposed Disposal

The disposal will enable management to focus wholly on the Wireless Business and the Travel Business and to operate a more efficient company structure. The Board also believes that the disposal price is a fair reflection of the value of Anite Public Sector, taking into account its prospects and market position as outlined above, and that the timing is right in terms of the long term prospects for this business.

For all these reasons, the Board believes that a disposal at this time will maximise long term shareholder value.

A profit on disposal of approximately £28.0 million will be included in Anite's results for its financial year ending 30 April 2009. However, the Proposed Disposal is expected to be dilutive to underlying Group earnings for the financial year ending 30 April 2009. The Board intends to take action to mitigate this dilution including, as appropriate, continuing investment in growth opportunities, acquisitions and buying back Anite shares.

The results of Anite Public Sector in the financial year ending 30 April 2009, for the period it is still owned by Anite, will be treated as a discontinued operation in Anite's 2009 annual report and accounts.

Anite Public Sector occupies a substantial part of Anite's offices in Slough. As a result of the Proposed Disposal, only the Travel Business and certain head office functions will remain, occupying part of the building. Consequently, a provision for vacant space of £5 million will be made in Anite's accounts for the year ending 30 April 2009 for the period up to the first break period of the lease in November 2012. The spare space will be actively marketed to attempt to mitigate the cash exposure. Including this provision and the related deferred tax credit of £1.4 million, the net profit impact of the Proposed Disposal is expected to be approximately £24.4 million.

Application of the proceeds of the Proposed Disposal

The proceeds of the disposal will be utilised in the near term to reduce Anite's bank borrowings by £25 million, to provide greater flexibility for the Company to purchase its shares under the authority granted by shareholders, and to provide funds to make acquisitions.

The Board sees further opportunities to build the Wireless Business in terms of investing both in new and enhanced products, and making further acquisitions either of complementary technologies or to enter adjacent markets.

In relation to the Travel Business, the Board sees opportunities to continue to expand the business internationally following successes with customers in Germany, Ireland and Northern Europe. This will be achieved either through organic investment or by selective acquisitions.

Current trading and prospects

The Group announced its preliminary results for the year ended 30 April 2008 on 18 July 2008, which included the following statement on current trading:

'In our drive to continue creating long-term shareholder value, we will maintain our focus on investing in growth markets, on meeting customers' needs and on maximising opportunities from advances in technology.

In our Wireless Division, we will continue to take advantage of growth in emerging regions and from advances in technology, will maintain our investment in development and focus on increasing our sales to network operators, and will build on our relationship with Agilent. We believe that the current negative trends in demand for 2G and 3G systems will continue throughout the current year. We will commence shipments of our 4G (LTE) Systems towards the end of 2008, although we do not expect to see the full benefits come through to the bottom line until the 2009/2010 financial year. We will also continue to look for acquisitions, particularly in the network testing market, which is fragmented and is likely to consolidate.

A strong order book indicates that the Travel Division will continue to make good progress, although the price of fuel and the risk of recession is of increasing concern to tour operators. @comRes is making the progress we predicted, and we are confident that it will build on its initial success. We expect the division to increase its business outside the UK in the coming year, particularly in Germany and northern Europe.

The Public Sector division is now in good shape. It is expected to continue to improve its overall performance led by Local Government.

Taking the seasonality of our Wireless business into account, the current year has had a satisfactory start with trading ahead of the same period last year.'

The Board's outlook has not changed since the preliminary results announcement.

- Ends -

 

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