Acquisition

RNS Number:4288T
Cyberes PLC
18 December 2003

             Cyberes PLC announces the proposed acquisition
         of Corporate Travel Holdings Limited for #2.25 million

 Placing of 8,865,000 Ordinary Shares at 10p per share and issue of a
Conversion Agreement to Sabre in respect of advances of up to #1.85 million

                       Extraordinary General Meeting



Cyberes plc, the travel services group, has conditionally agreed to purchase the
entire issued share capital of Corporate Travel Holdings Ltd (CTH) for a
consideration of #2.00 million in cash.  CTH will also be required to repay a
#250,000 debt owed to Tillnote Limited, a company related to the vendors of CTH.



Ian McNeill, Chairman of Cyberes PLC said,



'The Directors believe that this acquisition represents an excellent opportunity
to enhance the prospects of the Group and is a key element in building a
successful travel services organisation, underpinned by a market leading
proprietary technology.



'The principal reasons for the acquisition are:



*         CTH is a leading player in the corporate travel sector, complementing
Cyberes's focus on supporting more business travel orientated ITAs.



*         CTH offers Cyberes access to further travel content that it can
distribute through its reservation and booking system



*         The enlarged group will also have a far greater volume of business,
which allows it the opportunity for margin enhancement both in procurement and
efficiency terms.



*         The acquisition brings in a team of managers who are experienced in
the travel industry.



*         The Board expects that, following completion of the Acquisition, the
Group will become cash flow positive in the second half of the year ending 30
September 2004.



'Bringing the businesses together provides the opportunity to create a major
travel services group and generate the levels of margin associated with this
scale. This volume can be delivered at a reduced level of cost to the
competition through the use of Cyberes' proprietary technology, which allows
users to handle a significantly greater volume of bookings than a system based
on call centres.'



It is also proposed that Ian White, CTH's managing director, will join the
Cyberes board as Managing Director of Cyberes Travel Services, following
completion of the Acquisition.



Cyberes's preliminary results for the year ended 30th September 2003 have also
been released today in a separate announcement.



For further enquiries:

Tariq Malik/Mark Cant

Cyberes plc                                           01423 857420



Billy Clegg

Bell Pottinger Financial                             0207 861 3232



Jonathan Naess/Hugh Oram

Nabarro Wells & Co. Limited                          0207 710 7400



David Pannell

Durlacher Limited                                    0207 459 3600



Details of the Acquisition



The consideration payable to the vendors of CTH under the Acquisition Agreement
will be funded, conditional upon shareholder approval, partly by way of an
advance from Sabre of #1 million (the "Advance") in respect of transaction based
fees payable under existing arrangements between Cyberes and Sabre and partly by
way of a Placing of 8,865,000 new Ordinary Shares at 10p per share.  The net
proceeds of the Placing and the Advance will amount to approximately #1.72
million.  The balance of the consideration, the costs of integrating CTH's
businesses within the Cyberes Group (estimated by the Board to be approximately
#300,000) and additional working capital for the Enlarged Group will be provided
by new banking facilities of up to #2.75 million, which will be made available
to the Group, conditional upon the Acquisition.  Save for the arrangements with
Sabre described below, Cyberes currently has no indebtedness.  The Board
believes that given the cash generative profile of the Enlarged Group's
businesses, it is now appropriate to employ a limited degree of gearing to
finance the Group's working capital requirements.



Senior managers and directors within the Enlarged Group have subscribed for a
total of 2,415,000 Placing Shares at 10p per share (the "Placing Price").  Ian
White, who will join the Company's Board as Managing Director of Cyberes's
Travel Services division, has subscribed for 500,000 of these shares.  In
addition, Tillnote Limited has subscribed for a total of 2,500,000 of the
Placing Shares at the Placing Price.



In order to fund the Acquisition Sabre has agreed to provide the Advance to the
Group, on the same terms as the Group's existing advance from Sabre of which
#0.85 million remains outstanding.  Sabre previously provided the Company with
an advance of a certain proportion of its future revenues under the Sabre
Marketing Agreement (described more fully below).  The aggregate amount of #1.85
million will be convertible into Ordinary Shares under a Conversion Agreement at
such rate as represents the higher of 85 per cent of the average mid market
price of the Ordinary Shares at the time of conversion or 10p per Ordinary
Share. This right of conversion will remain in place whilst any part of the
Advance or any earlier advance remains outstanding. The outstanding amounts will
not accrue interest unless the Sabre Marketing Agreement is terminated, in which
case interest accrues at up to a maximum 12% rate. In the event that
arrangements with Sabre are terminated by Sabre on notice (which cannot be
served by Sabre before 18 June 2005, save in the event of a breach by Cyberes)
such outstanding amounts are not repayable prior to 18 December 2005. In
addition, Sabre has the right, on a change in control of the Company or on a
sale of its business, to demand payment of all such outstanding amounts and
interest.



Information on Cyberes



Cyberes was established in June 2000 with the intention of using technology to
reduce costs and improve the control of managing travel product data, bookings,
itineraries and schedule changes. Since the Company listed on AIM in December
2000, it has been one of the fastest growing consolidators in the UK, as
measured by both turnover and airline arrangements. It has established itself as
a key supplier to travel agents and was the 14th largest carrier of seat only
passengers from the UK, per published ATOL figures for the year to April 2003
(22nd in the previous year).

Corporate structure

The Company has two main divisions within its corporate structure:



(i)                              Travel Services

In the UK, Cyberes is an independent travel product consolidator in its own
right. It currently offers hundreds of thousands of low tariff fares to hundreds
of destinations and has over 55 airline arrangements and has launched product
offerings for ferries and hotels. It derives revenue from the sales of these
tickets through its own travel reservation and booking system. It continues to
expand its product portfolio and is developing an insurance and car hire product
for launch in 2004.



(ii)                            Technology Services

The Company has used its proprietary, internet-based travel reservation
technology to simplify and enhance both the routes to market and the management
of travel bookings.  Effectively, the Cyberes system provides a "travel content
warehouse" and booking system that is used to stock Cyberes's fares and other
content, for use by ITA's.



The Company has also identified the opportunity for other travel distributors to
distribute their own content using this cost effective solution. In this case,
revenue will be derived either on a licensing or usage basis depending on
customer requirements.



Relationship with Sabre



On 20 March 2002, the Company signed an agreement with Sabre (the "Sabre
Marketing Agreement"), pursuant to which, inter alia, Sabre agreed to market
Cyberes's services to 350 of its smaller travel agent clients in UK, Eire and
Scandinavia and to pay a transaction based fee for each transaction made through
Sabre's system in conjunction with Cyberes's technology.  The Sabre Marketing
Agreement also provides for bonus payments to be made to Cyberes upon achieving
certain volume targets.



On 6 March 2003, the relationship was further strengthened by the appointment of
David Brown the Vice President of Sabre for Europe, as a non-executive Director
of Cyberes.



Cyberes has now launched the latest version of the Cyberes Booking System (CBS)
and began the roll out programme to key agents from 1 November 2003.



Cyberes will steadily accelerate its international offering and develop its
operations in Scandinavia and Ireland, further supporting the recent opening of
its Swedish office.



Market Dynamics



Over the last two years the travel market has suffered from the effects of
September 11th, the Iraqi war and the SARS virus. As a consequence consolidation
has occurred in the travel distribution market and the major players in the
market, who generate high volumes of business, have been able to strengthen
their purchasing power and negotiating position with the airlines and travel
vendors. For the same reasons the market has sought to adopt lower cost and more
efficient distribution systems.



Against this backdrop, Cyberes has been successful in obtaining organic growth.
As set out in the Company's preliminary results in Appendix II of this document,
in the last year the Company grew turnover by 21 per cent against a market that
has suffered significant decline, by taking market share from its rivals in the
UK market.



Over the same period CTH has also grown its turnover by 8 per cent., through
both organic development and acquisition and has been successful in adjusting
its business model to a fees based corporate solution, winning and retaining
corporate clients such as Haymarket Publications and Smith & Nephew.



Bringing the businesses together provides the opportunity to create a major
travel services group and generate the levels of margin associated with this
scale. This volume can be delivered at a reduced level of cost to the
competition through the use of Cyberes proprietary technology, which allows
users to handle a significantly greater volume of bookings than a system based
on call centres.



Board appointment



It is proposed that Ian White will join the Cyberes board as Managing Director
of Cyberes Travel Services, following completion of the Acquisition. Aged 42,
Ian White was Managing Director of Stellaris Business Travel for four years
prior to leaving to start up CTH, which he has built into a group with #32
million of turnover. During his time at CTH Ian has demonstrated his ability to
establish a successful business and retail travel operation and has successfully
integrated a number of acquisitions.



The Directors consider that Ian, with 22 years of experience in corporate travel
together with the CTH management team with whom he built the CTH business from
start-up 7 years ago, will strengthen the existing Cyberes Travel Services
division and make a significant contribution to the performance of the division
overall.  Ian will be paid a salary of #70,000 per annum and will receive health
cover, pension contributions and a car commensurate with his position within the
Group and will benefit from a defined incentive scheme which will include
performance related options and bonus arrangements.  Ian White's terms of
employment will include provision for a 12 months notice period.



He will be supported in this process by Dianne Court, a new sales director of
the Travel Services Division.  Dianne has been recruited from Gold Medal Travel,
the largest consolidator and seat only provider in the UK, where she was the
General Manager Sales for the last 5 years. She will roll out the new technology
to current agents and accelerate the Enlarged Group's customer acquisition
programme.



Share options



The Board proposes to grant performance based share options in respect of up to
2,500,000 Ordinary Shares in order to incentivise Ian White, senior managers and
employees from CTH.  This will take up most of the available headroom under the
Share Option Schemes.



In order to be in a position to attract further managerial talent as well as to
reward and incentivise recently recruited executives and other employees of the
Group the Board proposes to amend the rules of the Unapproved Share Option
Scheme and the Enterprise Management Incentives Scheme to increase the maximum
number of unissued Ordinary Shares that can be allocated to Options granted
under the Schemes from 10% to 15% of the issued ordinary share capital.  In
addition, the Board proposes to increase the limit on individual participation
in the Unapproved Share Option Scheme from four to eight times that individual's
taxable pay (excluding benefits in kind).  An individual can be granted options
in any ten year period with an aggregate exercise price not exceeding such
limit.



Information on CTH



CTH is the 27th largest business travel agent in the UK.  In the year ended 30
June 2003, CTH had a turnover of #32.5 million (2002: #30 million), generating
profits before tax of #204,000 (2002: #113,000).



The following table sets out the key financial information relating to CTH,
which has been extracted from CTH's audited accounts for the three years ended
30 June 2001, 2002 and 2003.
                                       audited                  audited                  audited

                                    year ended               year ended               year ended

                                  30 June 2001             30 June 2002             30 June 2003
                                         #'000                    #'000                    #'000
Turnover                                25,690                   30,077                   32,503
Gross profit                             2,610                    2,816                    3,480
Profit before tax                          250                      113                      204



The Board estimates that CTI's audited accounts for the years ended 30 June
2001, 2002 and 2003 included a number of charges that would not have been
charged within the Enlarged Group or are non-recurring. These included
management charges payable to Tillnote Limited, group loan interest and one-off
costs associated with computers and refurbishment.



CTI has five divisions comprising the core business travel division, three
smaller niche specialty agency businesses and a leisure travel division.  These
divisions are described below in order of their relative contribution to the CTI
business:



CTI Business Travel

The largest division within the group and the most innovative in terms of
pricing and product sourcing. With over 250 clients it is one of the largest
independent corporate travel agents in the North of England. The business is
continuing to develop with relationships in the USA and has actively managed and
acquired customers such as Smith and Nephew and Joy Mining.



CTI Leisure

This division in turn comprises three distinct service offerings:

*         The Prestige Travel Shop provides tailor made holidays for social
category A and B consumers, with a significant repeat business rate.

*         The Cruise Shop is an appointed retailer for all the major cruise
liner companies and has developed a niche in tailor made holidays in the fastest
growing sector of the travel market.

*         The Flight Shop is a retail flight only specialist selling to the
general public via the Internet and traditional travel agency methods.



Global Events

An incentive company that hosts and manages promotions activities linked to
salesman remuneration schemes or customer loyalty schemes, which has specialised
to date, in serving the building industry.



CTI Marine

CTI Marine is a specialist travel provider that arranges itineraries for
shipping and offshore companies.



CTI Sports

A niche division that was recently set up to represent various European
facilities that have both pre-season and mid season training facilities.
Customers including 10 of the top 12 UK Rugby Super League teams.



Extraordinary General Meeting



To enable the implementation of the Acquisition, the Placing and issue of the
Conversion Agreement (the "Proposals"), it is necessary for the Company's
Shareholders to pass the resolutions set out in a Circular (the "Resolutions")
which will be sent to Shareholders today containing notice of an EGM of the
Company to be held at 9.30 am on 12 January 2004 at 2 Park Lane, Leeds LJ3 1ES.




The Resolutions will enable the Company to increase its share capital ("Increase
Resolution") and to extend the existing powers of the Board to allot unissued
Ordinary Shares ("Allotment Authority") and, subject to the limits therein
contained, to allot Ordinary Shares for cash other than to existing Shareholders
in proportion to their shareholdings ("Disapplication Authority").



Under the Increase Resolution, the authorised share capital of the Company will
be increased to #8,000,000 by the creation of 30,000,000 new Ordinary Shares.



Under the Allotment Authority, the Board will have the authority to implement
the Proposals and to allot up to a further #1,860,057 of relevant securities,
representing 33 per cent of the enlarged issued share capital of the Company
following the implementation of the Proposals (assuming full exercise of the
conversion rights under the Conversion Agreement) and full exercise of current
options.



Under the Disapplication Authority, the Board will have the authority to
implement the Proposals, provided that where this is for cash otherwise than to
existing Shareholders in proportion to their existing holdings and otherwise
than to implement the Placing, the Acquisition, the exercise in full of the
conversion rights under the Conversion Agreement and the exercise of current and
proposed options, this authority will be limited to a maximum amount of
#368,653.  This amount represents 10 per cent of the enlarged issued share
capital of the Company following the Placing and Acquisition.



In order to implement the proposed changes to the Unapproved Share Option Scheme
and the Enterprise Management Incentives Scheme, shareholder approval is also
required as set out resolution 4 in the notice of EGM (the "Share Option
Resolution"). Copies of the rules of the relevant share option schemes marked to
show the proposed changes are available for inspection at the registered office
of the Company and at the offices of Hammonds, 7 Devonshire Square, Cutlers
Gardens, London EC2M 4YH during normal business hours on any weekday (Saturdays
and public holidays excepted) up to and including the time of the EGM and will
be available at the EGM.



Recommendation



The Circular contains the Board's recommendation that the Proposals contained in
the Circular are in the best interests of the Company and its Shareholders as a
whole.  Accordingly the Directors unanimously recommend Shareholders to vote in
favour of the Resolutions  (other than the Share Option Resolution) to be
proposed at the EGM. Because of their potential participation in the Share
Option Schemes the Directors cannot recommend Shareholders to vote in favour of
the Share Option Resolution but have confirmed that they believe that the
proposed amendments are in the best interests of the Company. The Directors have
undertaken to vote in favour of all the Resolutions in respect of their
shareholdings amounting to 6,182,254 existing Ordinary Shares, representing
approximately 22.1 per cent. of the Company's existing issued share capital. In
addition, the holders of 3,483,496 existing Ordinary Shares, representing
approximately 12.4 per cent. of the Company's existing issued share capital,
have irrevocably undertaken to vote in favour of the Resolutions.




                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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