Strategic Review
microgen
www.microgen.com
29 October 2013
Strategic Review
On 13 May, the Board of Microgen plc ("Microgen" or "Group") announced that it would be undertaking a strategic review ("Strategic Review" or "Review") and now provides the output from that process. The last formal review of the Group's strategy occurred in October 2008 and, taking into account market conditions, the Board at that time determined to maximise the return of capital to shareholders as the priority. As a result, the Board has to date returned in excess of 100% of its October 2008 market capitalisation (£37 million) to shareholders and, in addition, at 10 May 2013, Microgen had a market capitalisation of approximately £100 million, a substantial increase in shareholder value and return of capital over the period, confirming the success of the defined strategy over the past five years.
The 2013 Strategic Review has considered a diverse range of options for the Group and its Divisions, recognising that the business models of the Divisions are very different with limited synergies between them. The Board has particularly considered the most attractive method of delivering further value to shareholders over the medium term as the economic climate is slowly starting to improve. As a listed company, the public announcement of the Review has enabled the Board, with the assistance of Investec, to explore a far wider range of options and discussions than would have been feasible otherwise. As a result, this update is detailed in order to provide shareholders with an understanding behind the Board's conclusions from the Review and the future strategy of each operating Division and the Group.
1.0 Financial Systems Division
The Group's Financial Systems Division ("FSD") was created from the integration of a number of acquisitions in the financial services sector, many of which were loss-making at the time of acquisition, a strategy that has delivered significant value to shareholders over the years. Today, FSD provides high recurring revenue with adjusted operating margins consistently in excess of 45% over the past five years and good cash conversion.
Many of the markets for back-office software applications in the financial services sector are now mature with limited opportunity for growth. Due to the high costs and risks associated with the replacement of legacy systems, many organisations are enhancing and developing their existing infrastructure in preference to implementing new back-office systems. One exception is the Wealth Management sector, an area of the market that is growing, as banks and other financial services organisations invest in expanding their capabilities to offset declines in other business areas.
In recent years, FSD has been investing in the 5Series product designed for trust and fund administrators, an investment that has proven to be successful with new customer wins and product upgrades occurring in 2013, including the largest-ever procurement of the product which is currently being deployed. With an established market position and a competitive product offering, FSD is well placed to benefit from this market opportunity. Furthermore, the Strategic Review recognised the potential to strengthen the FSD position in the Wealth Management sector, which in total currently accounts for approximately half of the divisional revenue, through add-on acquisitions. The Board is now encouraging increased focus on such opportunities.
As a high margin business with a significant recurring revenue stream and excellent cash conversion in a mature market, the valuation model for FSD is based on traditional discounted cash flow models. The Strategic Review resulted in a number of parties expressing interest in acquiring this business. However, the Division is very well managed with tight cost control, so the opportunity for a financial buyer to "improve operational efficiency" is very limited. As such, there is a disconnect between the value derived from the consistent cash flow that FSD provides to Microgen and the value that a financially-oriented buyer would wish to pay in order to realise its return in due course. While the Board will always evaluate approaches, it does not consider it to be in Microgen shareholders' best interests to dispose of FSD at a material discount to its cash flow, particularly after the investment made in the 5Series product.
1.1 FSD Capital Structure
The Strategic Review therefore provided the catalyst for the Board to consider the capital structure of FSD and the opportunity for Microgen to manage the division using a more efficient capital model. Such a structure, with only modest leverage, could significantly improve the return on capital from this strong cash flow business and provide cash resources for FSD acquisitions and Group corporate purposes.
While private equity investors finance acquisitions on a deal-by-deal basis under an umbrella structure (fund), with debt secured on each individual entity, adopting such a model within a PLC has been challenging, as banks typically seek security against all assets across all group subsidiaries of the corporate entity. Nevertheless, following negotiations with a number of banks, the Board has agreed a £20 million bank loan, secured solely against the FSD business ("FSD Loan"). The FSD Loan is repayable over five years with an annual capital repayment of £3 million and the remainder at the end of the period. A very competitive interest margin has been agreed reflecting the consistent cash flow of FSD, with the interest rate fixed by an appropriate financial instrument at 3.24% over the five year period. Operating covenants are limited to FSD performance, based on net debt leverage, interest cover and a minimum cash balance of £3 million being held within FSD. Furthermore, in the event of a default by FSD, Microgen plc has the option, but not the obligation, to remedy.
This innovative ring-fenced, capital structure for a PLC subsidiary, while not highly leveraged, emulates a private equity model for FSD. While EBIT will be unchanged by the capital structure, PBT will clearly reduce, although the Group will have a correspondingly reduced tax charge. The proceeds from the FSD Loan will be allocated such that £5 million will be retained by FSD for add-on acquisition opportunities and working capital, with the remainder being transferred by dividend to Microgen plc for other corporate purposes (see below).
1.2 FSD Summary
In conclusion, with a high margin, high recurring revenue business model delivering strong cash flow, and an established management team in place, the Board has determined that the most attractive option for Microgen shareholders is to retain this cash flow within the Group. From an operating perspective, the Strategic Review concluded that FSD should focus on increasing the proportion of the Division derived from the Wealth Management sector through both organic growth and add-on acquisitions. Since FSD was created through the integration of a series of acquisitions, the business has a track record of delivering substantial shareholder value through such a strategy. The Division's non-core business activities should continue to be managed for profit and cash to support investments in market sectors of higher potential. As a result, the key performance indicators for FSD will be : Operating Income; Return on Capital Employed ("ROCE"); Recurring Revenue; and growth in the Wealth Management sector.
The FSD cash-focused operating model has provided an opportunity to review the capital structure and increase the debt leverage in this business in order to deliver a substantial improvement in ROCE. The Board has negotiated a very competitive debt structure, secured solely on the FSD operating business, but with the Group option, but not obligation, to remedy in the event of default. This innovative, ring-fenced model supports, and is consistent with, the different strategies of the FSD and MASD Divisions.
2.0 Microgen Aptitude Solutions Division ("MASD")
2.1 Background and the Big Data Opportunity
In 2011, a report issued by McKinsey Global Institute ("McKinsey") defined Big Data as "datasets whose size is beyond the ability of typical database software tools to capture, store, manage and analyse" and also noted that "as technology advances over time, the size of datasets that qualify as big data will also increase". Reflecting the growing recognition of the challenges associated with managing and processing large data volumes, industry analyst Gartner included "Strategic Big Data" in the top 10 Strategic Technology Trends for 2013, although history would indicate that technology adoption tends to lag behind the recognition of the challenge/opportunity.
Even before the term "Big Data" had been conceived, Microgen recognised the potential growth in transaction processing volumes and the challenges/opportunity therefrom. Microgen Aptitude targets the capture, processing and management of high volumes of structured data, in order to ensure that analysis, or onward transfer to output or accounting systems, is undertaken on high quality, auditable data. Most Microgen Aptitude solutions are developed for business financial functions within large organisations, where data integrity and auditability are essential components of the Big Data project. From its infancy, Microgen Aptitude incorporated in-memory processing, multi-threading and parallel processing technologies to process large data volumes, technologies designed specifically to address Big Data applications.
In looking to the evolution of the Big Data market, the Board believes that transaction processing volumes will continue to rise and that the capture, processing, and management requirements of Big Data solutions will remain complex and challenging. As a result, notwithstanding that Microgen Aptitude performance currently satisfies/exceeds current market requirements, the next generation product is now in development and is currently scheduled for launch in 2015. This next generation is designed to satisfy transaction processing volume requirements for Microgen customers into the next decade, ensuring that Microgen maintains its technology leadership market position. (As with all product development within Microgen, the costs of this development have been, and continue to be, expensed on an annual basis with no capitalisation.)
2.2 MASD Operational Strategy
MASD solutions are generally enterprise critical, with potentially long life cycles, particularly within financial services organisations. Therefore, despite Microgen's long standing and consistently strong financial performance and balance sheet, some sales prospects remain risk-averse particularly in the recent economic environment. While the Division's excellent reference customer base is testament to the performance and quality of the Microgen Aptitude products and solutions, the size of the Microgen Group can be an inhibitor for some prospective customers, a situation exacerbated by the Division's UK base when addressing the key US market.
The major competitor for Microgen Aptitude remains a bespoke (software code-based) solution developed by in-house IT departments. While large corporate policies/practices can often prove challenging to a modest British company, Microgen Aptitude based solutions provide considerable benefits over custom-coded solutions, including an agile development model enabling fast, incremental prototyping and business-IT collaboration to produce a faster time-to-market. The proven platform performance also incorporates extensive operational/development features (eg auditability, roll-back, multi-user change control, error handling, multi-lingual user interface, integrated debugger etc) which, combined with the stability of the technology, typically results in lower costs of development and support.
The Strategic Review therefore considered the current business model and the challenges in increasing adoption of the Microgen Aptitude technology and accelerating growth. While clearly correlated, "adoption" and "growth" strategies can actually differ when the business model comprises both software and consultancy revenues. In enterprise-critical applications, sales cycles can also be protracted. Reconciling these challenges was a key consideration for the Board and through the Review, it became apparent that some of the challenges of MASD could be addressed:
· Partners : Over a number of years, MASD has developed a relationship with Teradata and has an active programme of joint marketing activities. This partner model not only expands the Microgen sales and marketing presence and provides access to a much larger account base, but also addresses some of the customer-perceived risks associated with the scale of MASD. As a result, the Division has recently been exploring an additional technology partner opportunity which is now well advanced and, if successful, is anticipated to be launched in the first half of 2014.
· Geographic Market : The North American market is generally the source of early adopters for software technology. While MASD has had a US presence for some time, the scale of this operation is currently modest, with the vast majority of MASD resource being based in Europe. The Strategic Review has brought this issue into sharper focus and the Board has now determined that greater investment (sales, pre-sales and delivery resource) in the North American market is essential.
· Consultancy : MASD consultants are highly capable and very experienced with a combination of technical, accounting and industry expertise. They are correspondingly expensive and limited in terms of availability, but are highly respected by customers in the architecture and delivery phases of a new project. However the cost of follow-on projects using these same consultants, when the same level of expertise is often not required, can inhibit the potential opportunity within a customer account. The Review has therefore identified the need for a broader and lower-cost resource pool in order to increase adoption of the Microgen Aptitude software. This could be achieved by establishing an application development team at the Microgen development facility in Wroclaw, Poland and/or through greater cooperation with established systems integrators; both avenues are now being explored.
· Solution Development : Recognising the opportunity to use the Microgen Aptitude technology, performance and functionality, MASD has developed a number of solutions targeted at demanding financial business applications, where competitor offerings are limited and lack either performance or functionality. (For example, the Microgen Accounting Hub application has only one significant direct (global US-based) competitor, against which Microgen successfully competes by incorporating functional differentiation and higher performance.) This model is consistent with both the Partner and Consultancy strategies outlined above, but requires investment to extend the range of applications.
· Hadoop : Much of the Big Data market investment, and associated hype, is being targeted at applications based around Hadoop, to the extent that some analysts regard the market and the technology as synonymous. While gaining traction in some areas, Hadoop has not yet become core technology for the processing of structured data in financial, enterprise-critical applications and no major MASD customer or prospect has to date required Hadoop capability. However Microgen Aptitude was designed to be database/data storage architecture agnostic and operates with most mainstream high performance architectures. As such, a Hadoop Hive interface for Microgen Aptitude will be available in the first half of 2014.
The above evolution of the operational strategy builds on the MASD foundations established. However, it is apparent that investment will be required to undertake some of these actions and realise the potential. As part of the Strategic Review, the Board therefore considered the relative merits of such an investment programme relative to alternative strategic options.
2.3 Delivering Shareholder Value from MASD
The Strategic Review considered whether a disposal of MASD to a larger organisation or financial buyer would be an attractive option for Microgen shareholders at the present time. In evaluating this alternative, the Board concluded that higher corporate transaction valuations are achieved for new technologies when the market becomes mainstream rather than niche. Nascent, high potential IT markets attract considerable investment funds and generate a proliferation of companies, but the most attractive valuations generally correlate with the scale of adoption of a technology application. Moreover, in the earlier phases of the market development, it is the technology adoption, reflected in software revenue growth, rather than short-term profitability that is attractive to potential acquirers and therefore generates value for shareholders.
As the IT market has matured, in recent years acquisitive corporations have increasingly been attracted to businesses where the underlying revenue is recurring, albeit such revenue models produce inherently lower growth rates along with the lower volatility. Similarly, in valuation terms, consultancy revenues are less attractive to acquisitive major software suppliers where the majority of such services tend to be provided by third parties. These conclusions reaffirm the Board's consistent preferred strategy of annual software licencing, producing recurring revenues, as the right approach to value creation and the Board's previously defined objective of increasing license revenue both in absolute terms and as a proportion of the divisional revenue.
Therefore the Board concluded that, as the Big Data market gains momentum, transaction valuations are likely to become more attractive than at this early market stage, although the hype related to Hadoop may create some short-term anomalies. However, in order to realise the valuation potential, the MASD strategy needs to invest in pursuing a more aggressive approach to software adoption and revenue growth.
2.4 MASD Summary
MASD became profitable in 2009 and has been consistently profitable thereafter by adopting a blended software and services business model. During the financial and economic turmoil of recent years, this prudent model has been successful in delivering value to shareholders and has enabled considerable (expensed) investment in product development. As the economic situation stabilises and the market progressively recognises the need, challenge and opportunity of managing Big Data, Microgen is well positioned to benefit.
However, realising the potential value for shareholders in the medium term requires a focus on, and investment in, increasing market penetration of Microgen Aptitude solutions to deliver growth in recurring software-based revenues, not short-term profitability; the MASD key performance indicator in future will be revenue growth, particularly recurring software-based revenue. The primary areas of investment relate to sales and marketing activities, particularly in the USA, together with applications development (not core product) within the MASD development operation in Poland. However, the level of investment in MASD is being set such that the Division should remain profitable and cash flow positive. While this provides a significant increase in investment in the MASD business, it is relatively modest relative to the market potential, but provides a balanced investment profile at this stage.
In the Board's opinion, whilst maintaining Microgen's financial prudence, the potential shareholder value creation warrants the investment and pursuit of this opportunity. The Board also recognises that MASD customers and prospects require a stable long-term supplier for their enterprise-critical solutions. This is particularly important for a modest UK-based company in a market where sales cycles are complex and protracted, reflecting the long term nature of customer investments. Therefore, the Board intends to allocate a proportion of the Group's cash resources to the MASD Division, providing a strong balance sheet for the operating business.
While the Strategic Review addressed a number of operational and business strategy matters for MASD, the challenge associated with the modest scale of Microgen remains and cannot be solved within the Division although, as noted in Section 2.2 above, the Board has identified some methods to mitigate the perception. This was a key concern throughout the Review and the Board has explored a number of different scenarios. The Corporate Strategy outlined in Section 3 seeks to address this limitation.
3.0 Corporate Strategy
Microgen plc has been listed since 1984 and has undergone a number of transformations during its corporate history. Although the Group's two current operating divisions were created by acquisition, they have very different business models and the Strategic Review has identified the further divergence of their respective strategies for value creation. In recent years, consistent with the market and economic instability, both divisions have pursued a conservative strategy, enabling Microgen to maintain a very respectable performance and to return significant cash to shareholders through this challenging period. As the first signs of economic optimism start to appear, the Microgen 2013 Strategic Review has been timely.
The strategy for the development of each of the Divisions has now been defined to enable them to operate as independent business units, but with oversight of operations and strategy from the Group and the continued benefit from some shared services functions, although Group overhead roles and costs will reduce. Each Division should be able to finance its operating strategy independent of the Group and the capital structure of each Division reflects the Divisional business requirements, strategy and performance metrics. Add-on acquisitions will be evaluated to enhance the divisional operations and realisations will be considered as appropriate.
The Board considers that following the Strategic Review, the Company will have significant cash resources surplus to operating requirements. Total gross cash will be in excess of £45 million, with £20 million debt through the FSD Loan. While some of the cash resources may be used to pursue add-on acquisition opportunities to accelerate the strategies of the divisions, there are two alternative applications of these resources, namely :
· To continue returning cash to shareholders; and/or
· To increase the scale of Microgen by returning to an acquisition strategy.
Prior to 2008, Microgen pursued a disposal and acquisition model, transforming the company from a financially challenged microfiche and printing business across six countries into its current form. In 2008, due to the market conditions at that time, the Board suspended major acquisition activities and adopted the risk-averse strategy of returning capital to shareholders. The Strategic Review highlighted that it is the combination of these strategies which has delivered significant value to Microgen shareholders and the Board considers that the more stable economic environment provides an opportunity to develop this strategy further. In summary, the Group strategy will be to "Acquire, Enhance and Realise" with cash being returned to shareholders upon realisation. (Further detail provided in 3.1 below)
Consistent with this model while recognising the need to remain a credible acquirer, the Board is proposing to undertake a tender offer ("Tender") to return up to £10 million to shareholders. The proposed Tender will be at a floating strike price of between 120 pence and 130 pence per share. A circular to shareholders will be distributed shortly. Upon completion of the Tender, Microgen will have returned approximately 130% of its October 2008 market capitalisation to shareholders over the past five years.
The Board also recognises the importance of dividends to some shareholders and the Strategic Review has taken this factor into account. As a result, the Board does not anticipate any reduction in dividend levels.
3.1 Acquisition/Investment Strategy
The technology market in recent years has changed significantly with many former technology sectors now being mature with minimal, if any, underlying growth, and some, eg pc hardware, in decline. Such industry evolutions are not unique to technology markets, but recognising the underlying market sector maturity, changing trends and future demands, requires a dissonant combination of entrepreneurship and management discipline, in order to invest in potential opportunities while reducing costs in order to maximise profitability and cash flow as sectors mature.
With a strong track record of delivering value to shareholders through technology acquisitions and returning cash to shareholders, the Board proposes to use the retained cash resources to pursue :
· Acquisitions and/or strategic investments to accelerate the development of one or both of the existing Divisions;
· Acquisitions and/or strategic investments where investment in the target business could significantly enhance value (a strategy similar to MASD);
· Acquisitions and/or strategic investments where value could be created by realigning the cost base of the target business to reflect the market sector maturity (a strategy similar to the development of FSD).
Increasing shareholder value over the medium term will remain the Board's objective and the Board has defined the profile of potential acquisitions/investments broadly :
· Acquisitions/investments may or may not have any synergies with the current operating divisions;
· A technology-focus will be retained, but acquisitions/investments may or may not be software oriented;
· Acquisitions/investments not related to the current Divisions will have existing scale and the Board is not intending to invest in start-up or early-stage companies;
· Add-on acquisitions for existing operations outside the UK will be considered but new business areas will have a predominantly UK base;
· Strategic investments are defined by the Board as being significant shareholdings less than 100% but where Microgen has substantial operational influence.
In summary, Microgen plc will become a holding company for a series of technology businesses and strategic investments, operated as independent business units. The Board will seek to realise the value of each holding at an appropriate time and a larger Group structure should facilitate realisations, as the retained businesses should remain viable. As the Board has demonstrated in recent years, returning excess cash to shareholders will remain a priority and it is anticipated that the majority of proceeds from realisations will be returned using mechanisms appropriate at the time. While the Board will retain sufficient cash resources to be a credible acquirer, the Board anticipates seeking the support of shareholders for additional resources if appropriate.
4.0 Management Incentive Schemes
In November 2008, the Board introduced the VERBS incentive scheme, explained in detail in the Group's Annual Reports, which was approved by shareholders. The value enhancement delivered to shareholders over the past five years affirms the effectiveness of this scheme in aligning management and shareholder interests during this period. However, while VERBS was established as a ten year incentive scheme, as with all incentive schemes the Board believes that the appropriateness of the scheme should be reviewed as the Company evolves. In the case of VERBS, the Strategic Review has highlighted the potential for divergence between management and shareholders' interests, together with the potential for VERBS to deter new investors. Therefore the Remuneration Committee is recommending the cancellation of the VERBS scheme.
In making this recommendation, particularly in the context of the substantial value delivered and cash returned to shareholders since the inception of VERBS, the Remuneration Committee also recognise the need to retain and incentivise key staff, since there have been minimal long term share incentives awarded in recent years. It is therefore proposed, subject to shareholder approval, to undertake a one-off grant of up to 3 million options under the Group's Performance Share Plan ("PSP") with a typical vesting term, subject to Remuneration Committee discretion in a small minority of personal situations, of 65% in three years and 35% in five years. It is proposed that 50% of these grants to each individual will not be subject to performance conditions but will require continuous employment, and the remainder will be subject to performance conditions based on Total Shareholder Return ("TSR"). These one-off grants would include awards of 500,000 options under the PSP to each of the Group Finance Director, MASD Managing Director and FSD Managing Director. (For reference, as reported in the 2012 Annual Report, a hypothetical realisation at the market capitalisation at 31 December 2012, would have generated a VERBS payout to management of up to £8.0 million.)
The Remuneration Committee will, from 2014, reintroduce a regular programme of PSP share awards, subject to performance conditions aligned with shareholders' interests. However, as a small capitalisation company with a full list on the London Stock Exchange, the Board's active programme of returning cash to shareholders in recent years severely limits the number of awards that may be granted under ABI guidelines. The Board is therefore concerned about the ability to attract, incentivise and retain key employees. As a result, the Board will be seeking shareholder approval to waive ABI guidelines but to limit PSP awards from 2014 to a maximum of 750,000 per annum, equivalent to approximately 1% of the anticipated issued share capital following the Tender. This authority will be sought for a period of 3 years (2014, 2015 and 2016) after which the Board will review.
5.0 Group and Board Structure
In undertaking the Strategic Review, the Board has concluded that the operating divisions should be managed by the Divisional Managing Directors and associated management teams with the Group roles providing a Holding Company function, including corporate governance, corporate/strategic direction and operational oversight. In this context, and following the announcement on 9 August 2013 regarding the retirement of Mr David Sherriff, the Board has considered the requirements of the corporate roles within Microgen plc and is proposing not to appoint a new Group Chief Executive. (Following completion of the Strategic Review, Mr Sherriff has now resigned from the Board and will cease to be an employee on 31 October 2013. He will receive £121,000 in line with his contracted notice period.) The Board has therefore appointed an Executive Chairman and whilst the Board recognises that this structure may not be compliant with the UK Corporate Governance Code, the Board will maintain a majority of independent non-executive Directors, ensuring continued robust corporate governance.
The Divisional Managing Directors, Tom Crawford (MASD) and Simon Baines (FSD), will in future attend Board Meetings by invitation. Mr Crawford (45) joined Microgen in 2003 and was appointed Head of the MASD USA operations in 2010 before being promoted to Managing Director of MASD in 2013, a role that divides his time between Boston and London. Mr Baines (42) joined Microgen in 2010 as Managing Director of FSD, prior to which he had spent six years in private equity covering financial services technology companies.
Martyn Ratcliffe has been a significant investor (currently 5.3 million shares, equivalent to 6.4%) and the Chairman of Microgen for 15 years, initially restructuring the printing/microfiche business through a series of acquisitions and disposals prior to the 2008 review, which resulted in a more conservative strategy reflecting market conditions at that time, and now initiating and leading the 2013 Strategic Review. In making this appointment, the Board has requested, and Mr Ratcliffe has agreed, that, for a period of 3 years, he will not take any executive or non-executive roles, apart from those related to Microgen or his position as Executive Chairman of Sagentia Group plc, without the Board's prior consent.
Mr Ratcliffe will receive a fixed salary without pension contributions or other benefits and is not eligible for the Management Bonus Scheme. (The Remuneration Committee in exceptional circumstances may award a discretionary bonus.) Throughout his tenure as Chairman, Mr Ratcliffe has also excluded himself from the normal schedule of share option grants, with awards to him being specifically approved by shareholders. The Remuneration Committee intend to continue this best practice and is proposing an award of between 500,000 and 2.5 million PSP options, subject to achieving challenging hurdle performance conditions based on the Microgen closing share price being in the range of £2.00 to £3.00 (defined as 20 consecutive trading days and adjusted for cash returns to shareholders excluding ordinary dividends). An additional vesting condition of the award is that Mr Ratcliffe will increase his personal shareholding to not less than 5.5 million shares, reflecting his commitment to the future of Microgen. (Mr Ratcliffe has also confirmed that he will not participate in the proposed Tender.)
6.0 Summary
In initiating the Microgen 2013 Strategic Review, the Board was intent on evaluating a wide range of options in order to continue to generate value for Microgen shareholders over the medium term. Due consideration was given to the possibility of disposals of the operating businesses and this activity provided valuable benchmarks against which to measure alternative scenarios and input to the Board on delivering future value enhancement. This extensive Review has resulted in Divisional and Group strategies that the Board considers to be the most attractive over the medium term and offer Microgen shareholders the potential to benefit from the capabilities and technologies within the Group.
The key outcomes from the Strategic Review include :
· A significant increase in investment in MASD to pursue the potential from the Big Data market opportunity;
· An innovative capital structure for FSD enabling a significant increase in return on capital from the Division;
· A corporate strategy based on acquisitions/investments to increase the scale of the Group using the cash resources available;
· A further return of cash to shareholders bringing the total cash returned in the past 5 years to approximately 130% of the October 2008 market capitalisation.
In conclusion, the Board believes that the Microgen 2013 Strategic Review has achieved many, potentially conflicting, objectives. A strong balance sheet has been maintained; further cash returned to shareholders; investment resources provided to enable Microgen Aptitude to develop its potential; and cash resources released to enable the Group to increase in scale. This balancing of business objectives and shareholder requirements has been challenging but the outcome should provide an excellent platform for the Microgen Group as the Company enters its next phase.
Contacts
Martyn Ratcliffe, Chairman 020-7496-8100
Philip Wood, Group Finance Director
James Melville-Ross, FTI Consulting 020-7831-3113
Lucy Delaney, FTI Consulting
Rowena Murray, Investec Bank Plc 020-7597 5970
Andrew Pinder, Investec Bank Plc
This information is provided by RNS
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