Ideagen PLC Acquisition of Covalent Software Ltd (4674G)

TIDMIDEA

RNS Number : 4674G

Ideagen PLC

08 August 2016

8 August 2016

Ideagen PLC

("Ideagen" "the Company" or "the Group")

Acquisition of Covalent Software Ltd

Ideagen PLC (AIM: IDEA), a leading supplier of Information Management software to highly regulated industries, is pleased to announce the acquisition of the entire issued share capital of Covalent Software Limited ("Covalent") for a net cash consideration of GBP3.6m ("the Acquisition") payable from Ideagen's existing cash reserves.

Highlights

-- Covalent is a profitable and cash generative software company that has developed a leading Governance, Risk and Compliance ("GRC") cloud-based software platform primarily for the Public Sector and Financial Services markets.

-- Based in Taunton, Covalent currently employs 37 staff and has approximately 200 customers generating approximately GBP2.2m of revenue annually of which GBP1.9m is recurring.

-- The Acquisition is in line with the Group's strategy of acquiring complementary businesses with strong IP and recurring revenues. Covalent has outstanding IP that can be readily integrated with the Group's existing product set to build a broader and more valuable GRC solution.

   --     The Acquisition is expected to be immediately earnings enhancing. 

-- Covalent's unaudited total revenues for the six months to 30 June 2016 were GBP1.1m which generated EBITDA of GBP0.16m.

-- Ideagen will benefit from a saving relating to outgoing Covalent directors of approximately GBP0.18m per annum. A proportion of this will be realised in the current financial year following a period of handover and integration.

-- Ideagen has identified approximately GBP0.1m of further synergies, which the Directors anticipate will be achievable during the 12 month period ending 30 April 2018.

David Hornsby, CEO of Ideagen, commented; "Covalent will be a valuable addition to the Group and is in line with our strategy of acquiring business that have strong IP and healthy recurring revenues. Covalent has established an extremely compelling value proposition and brings to the Group a complementary cloud solution offering, a talented workforce and long-term customer relationships which further consolidates our position in the NHS, local government and financial services verticals."

Enquiries:

 
 Ideagen plc                    01629 699100 
 David Hornsby, Chief 
  Executive 
 Graeme Spenceley, Finance 
  Director 
 
 finnCap Limited                020 7220 0500 
 Stuart Andrews/James 
  Thompson (Nomad) 
 Stephen Norcross (Corporate 
  Broking) 
 
 Alma PR                        020 8004 4218 
 Hilary Buchanan 
 Josh Royston 
 

Consideration

Total cash consideration payable at completion is GBP4.7 m.

Covalent has net cash reserves of GBP1.1m, giving net cash consideration of GBP3.6m. The net consideration will be met from Ideagen's existing cash reserves (30 April 2016: GBP6.3m).

In the year ended 31 December 2015 Covalent generated revenues of GBP2.07m and EBITDA excluding capitalisation of development costs of GBP0.24m.

Acquisition Rationale

The Acquisition is in line with the Group's strategy of acquiring businesses with strong IP and recurring revenues that supply GRC Solutions to regulated sectors. Covalent has outstanding IP that can be readily integrated with the Group's existing product set to build a broader and more valuable GRC solution, which will provide significant cross selling opportunities and a strong platform for future growth. Covalent's solutions are delivered via its cloud-based platform and further enhances Ideagen's cloud development strategy, which the Directors believe is an area of significant growth area for the Group.

Covalent has a talented workforce, which will add to the R&D, support and sales functions of Ideagen. Covalent's Finance and Operations Director, Steve Maggs will remain with the enlarged Group and will be appointed to the role of Director of the Covalent Business Unit, reporting directly to Barnaby Kent, COO of Ideagen, on completion of the Acquisition.

About Covalent

Covalent, a Taunton based software company established in 2003, has developed and commercialised a proprietary GRC platform which has gained significant traction in the UK Public Sector.

Covalent currently employs 37 staff and has approximately 200 customers across the NHS, Local Government, Housing Association and Financial Services sectors.

Covalent has recently released a Cloud Based version of its software following approximately 40 man years of development which has driven strong growth in recurring revenues.

Covalent reported unaudited revenue of approximately GBP2.07m and generated EBITDA excluding capitalisation of development costs of GBP0.24m for the year ended 31 December 2015. In addition Covalent currently has recurring revenues of approximately GBP1.9m per annum. Covalent is debt free with current cash balances of approximately GBP1.1m. As at 31 December 2015 Covalent had gross assets of GBP2.0m.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014

This information is provided by RNS

The company news service from the London Stock Exchange

END

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August 08, 2016 02:00 ET (06:00 GMT)