Trading update & shareholding in Diagonal
microgen
Information Management Solutions
7 June 2004
Trading Update and Shareholding in Diagonal plc
Although IT markets generally continue to be inconsistent, Microgen has
experienced increased demand in several business sectors and consultant
utilisation across the Group is currently high. In addition, as the integration
of MMT Computing plc and Imago QA Ltd reach completion, the benefits of scale
from the Group's acquisition and integration strategy are being achieved. As a
result, trading performance during the first half of the year to 30 June 2004
is anticipated to be ahead of the Board's expectations.
The Board does not yet consider that market conditions for IT companies
generally have recovered in a sustainable and predictable manner. Therefore,
although actively recruiting to fill current demand and pleased with the
current performance of the Group, the Board continues to adopt its disciplined
approach to the operational management of the business.
The Board of Microgen anticipates issuing the Interim Results for the period
ending 30 June 2004 in late July.
Diagonal plc
Microgen plc has acquired a strategic shareholding in Diagonal plc ('Diagonal'
or the 'Company') by way of market purchases of 6,811,000 shares, equivalent to
7.46% of the issued share capital of Diagonal at a total cost of £2.7 million
in cash. The average purchase price of the shares was 38.9p and the maximum
price paid was 44.0p.
Diagonal plc comprises a number of business activities including SAP
consultancy, EAI consultancy, management consultancy, network/information
security, electronic records management and recruitment. In its published
audited accounts for the year ended 28 November 2003, Diagonal reported revenue
of £56.3 million, an operating profit before goodwill and exceptional items of
£2.0 million, and a loss on ordinary activities after tax of £3.0 million. At
28 November 2003, Diagonal's accounts show that it had net assets of £35.7
million including net funds of £12.2 million.
The results achieved by Microgen from the integration of the consultancy and
software businesses acquired in 2003 have confirmed Microgen's ability to
deliver tangible benefits from increasing the scale of the Group's operations.
Microgen considers that a combination with Diagonal plc could be attractive to
shareholders of both companies and has attempted to enter into dialogue with
the Diagonal Board on several occasions over the past two years. Following
Diagonal's most recent profits warning on 24 May 2004 and the decision of its
Chief Executive Officer to step aside, Microgen again contacted Diagonal with a
view to exploring a possible combination of the two groups.
The Board of Diagonal continues to be unreceptive, despite the recent
performance of the Company and Microgen's proposal being at a substantial
premium to the closing mid-market share price of 32 pence on 24 May 2004, the
date of the announcement that the Board of Diagonal had concluded that the
results for the year would not meet current market expectations, and prior to
Microgen's acquisition of its strategic shareholding in the Company.
Microgen continues to seek an active dialogue with Diagonal in order to
determine whether or not to make an Offer for the Company. Microgen has
indicated to the Diagonal Board that, should an Offer be made, it could be in
the range 50-55 pence per Diagonal share, unless either the Board of Diagonal
recommended an Offer by Microgen at a lower price or another offeror announces
a firm intention to make an offer at a lower price. The consideration would
either be entirely in new Microgen shares or may include a partial cash
alternative or may be a mix of cash and shares.
For the avoidance of doubt, this announcement does not constitute an
announcement of a firm intention to bid under Rule 2.5 of the City Code on
Takeovers and Mergers, or any inducement to accept any offer and there can be
no assurance that any offer will be forthcoming.
Contact:
Microgen plc
Martyn Ratcliffe, Executive Chairman 01753-847122
Mike Phillips, Group Finance Director
UBS 020-7567-8000
John Woolland
Rahul Luthra
Financial Dynamics
Giles Sanderson 020-7831-3113
www.microgen.co.uk
The directors of Microgen plc accept responsibility for the information
contained in this announcement except that the only responsibility accepted in
respect of the financial information concerning Diagonal plc, which has been
extracted from its annual report and accounts for the year ended 28 November
2003, is that it has been correctly and fairly reproduced or presented. Subject
thereto, to the best of their knowledge and belief (having taken all reasonable
care to ensure that such is the case) the information contained in this
announcement is in accordance with the facts and does not omit anything that is
likely to affect the import of such information.
For the purpose of Rule 2.10, Microgen announces that it has 86,933,134
ordinary shares in issue. The International Securities Identification Number
for Microgen ordinary shares is GB0005869531.
UBS Investment Bank is acting exclusively for Microgen and no one else in
connection with any potential offer for Diagonal and will not be responsible to
anyone other than Microgen for providing the protections afforded to customers
of UBS Investment Bank nor for providing advice in relation to any potential
offer for Diagonal.
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