Proposed Acquisition of Time Care AB and Proposed Placing

 
TIDMALL 
 
Proposed Acquisition of Time Care AB and Proposed Placing 
27 November 2009 
 
                                             ALLOCATE SOFTWARE PLC 
                                         ("Allocate" or "the Company") 
 
                                   Proposed acquisition of Time Care AB and 
                                    Proposed placing to raise GBP8.3 million 
 
The  Board  of  Allocate  (the "Board") announces that it has agreed the terms of a proposed  acquisition  (the 
"Acquisition")  by the Company of Time Care AB ("Time Care"), a Swedish-based provider of workforce  management 
software,  with  a  strong focus on the healthcare market.  The Acquisition of Time Care will provide  Allocate 
with  a  strong geographic footprint in the Nordic region, particularly in Sweden, where Time Care has customer 
relationships with some 57 hospitals and 110 of Sweden's 290 municipalities.  The Acquisition of Time  Care  is 
currently expected by the Directors to be significantly earnings enhancing in the first full financial year  of 
ownership by Allocate. 
 
Allocate also today announces a placing of 15,100,000 new ordinary shares ("New Shares") at 55.0 pence per  New 
Share (the "Placing Price") to raise approximately GBP8.3 million (approximately GBP8.0 million net of expenses) to 
help fund the Acquisition (the "Placing").  The Placing has been fully underwritten by Numis Securities Limited 
("Numis"), subject to certain conditions set out in the placing agreement. 
 
The acquisition agreement provides for the purchase of the entire issued and to be issued share capital of Time 
Care from the vendors for a gross consideration of SEK 142.3 million (approximately GBP12.4 million)1.  As at the 
date  of  this announcement, vendors representing approximately 86.4 per cent. of the issued and to  be  issued 
share  capital of Time Care had signed the acquisition agreement.  It is anticipated that the remaining vendors 
will  sign up to the acquisition agreement prior to the completion of the Acquisition.  Time Care had net  cash 
balances  of  approximately  SEK 48.4 million as at 31 October 2009, of which  the  Board  has  estimated  that 
approximately  SEK 42.3 million represents profits generated from financial periods prior to  31  October  2009 
("Excess  Cash")  and  approximately SEK 6.1 million is required for working  capital  purposes  or  represents 
deferred income of Time Care as at that date.  Accordingly, the net consideration ("Net Consideration") for the 
Acquisition  is  SEK  100  million (approximately GBP8.7 million1), which is being funded  predominantly  by  the 
Placing, with the balance being satisfied from the Company's existing cash resources. 
 
The  Placing and consequently the Acquisition are conditional upon, inter alia, the resolutions to be  proposed 
at  a  general meeting of the Company to be held at 9.30 a.m. on 14 December 2009 (the "General Meeting") being 
passed  by  the requisite majority.  A circular containing a letter from the Chairman explaining the background 
to  and reasons for the Acquisition and the Placing, and containing the notice of General Meeting is being sent 
to shareholders today.  A copy of the circular and the notice of General Meeting will shortly be available from 
the Company's website at www.allocatesoftware.com. 
 
Subject  to, inter alia, the resolutions being passed by the requisite majority at the General Meeting,  it  is 
expected  that dealings of the New Shares will commence on AIM at 8.00 a.m. on 15 December 2009  and  that  the 
Acquisition will complete shortly after Admission. 
 
Transaction Rationale 
The  Board believes that an acquisition-led strategy to enter certain new geographic markets is beneficial  for 
the  Company, particularly where there are already established local providers which the company  can  look  to 
acquire with significant customer bases, as is the case in the Nordic region.  Accordingly, the Board concluded 
that  the  acquisition of a local provider of workforce management software in the Nordic region  would  be  an 
appropriate entry strategy. 
 
Allocate,  upon completion of the acquisition of Time Care, will be a leading workforce management provider  in 
the Swedish healthcare market. 
 
Over time the Directors would expect that the Acquisition of Time Care will generate some cost savings for  the 
enlarged  Allocate  group, particularly with regard to ongoing product development and support.   In  addition, 
there  are  expected  to  be  opportunities to generate incremental revenues from  cross-selling  products  and 
services. 
 
The Acquisition is currently expected by the Directors to be significantly earnings enhancing in the first full 
financial year of ownership by Allocate. 
 
Information on Time Care 
Time Care was founded in 1993 and is a leading provider of workforce management and optimation software for the 
healthcare market in Sweden.  Time Care has developed workforce management software for self-rostering,  giving 
employees  the ability to select their own work rosters subject to management-defined parameters.  It  is  also 
the  leading  external provider of workforce management software to the police force in Sweden. In total,  Time 
Care has over 200 clients. 
 
Time  Care  is  headquartered  in Stockholm, Sweden and operates principally  in  Sweden.   Time  Care  has  41 
employees, of which eight are involved in product development, and in the year ended 31 December 2008 (based on 
Time  Care's audited consolidated financial accounts for that period), generated revenues of approximately  SEK 
56.1  million  (approximately  GBP4.6  million2), and achieved earnings  before  interest  and  tax  ("EBIT")  of 
approximately SEK 12.6 million (approximately GBP1.0 million2), representing an EBIT margin of some 23 per cent. 
 
Key products and services 
 
Time Care has the following principal software products: 
Time  Care  Planning - a modular suite of workforce management products covering rostering, resource  planning, 
reporting and costing. 
Time Care Pool - a module for managing temporary staffing needs. 
Time Care Scheduler - an optimisation suite for roster optimisation. 
Time Care Doctor - a modular suite for the scheduling of doctors. 
All software is written in .NET. 
Time Care also provides the following services: 
PLT Services - staff logistics consultancy services to aid companies in maximising resource management. 
Training & Consultancy - relating to the implementation of Time Care's applications 
 
Customer base 
According to unaudited monthly management accounts, in the six months ended 30 June 2009, some 83 per cent.  of 
Time  Care's  revenues  were generated from healthcare customers, up from 76 per cent. in  the  year  ended  31 
December  2008.  Of the balance of Time Care's revenues in the year ended 31 December 2008, 21 per  cent.  were 
generated  from  private sector (non-healthcare) customers and 3 per cent. from other public sector  customers. 
In  Sweden,  healthcare is controlled through local authorities.  Time Care has 12 out of 21 of  the  country's 
county councils, with some 25 per cent. of council customers using more than one Time Care product, and 110 out 
of  290  of  the country's municipalities as customers, with some 47 per cent. of municipality customers  using 
more  than  one  Time Care product.  In addition, Time Care's management estimates that Time  Care's  workforce 
management software supports some 57 hospitals in Sweden. 
 
Time Care's workforce management software is also used to manage the scheduling of the police force.  According 
to Time Care's management, 15 of the 21 police districts in Sweden are customers of Time Care. 
In  the  financial year ended 31 December 2008, approximately 97 per cent. of Time Care's total  revenues  were 
derived from customers based in Sweden, with the balance being derived from a small international customer base 
across Denmark, Netherlands, Iceland and Belgium. 
 
Business model 
Time  Care  generates  revenues  from  perpetual  software licences,  subscription  fees,  annual  support  and 
maintenance, hosting, implementation services and human logistics services.  Time Care's revenues are typically 
generated from one-off licence fees followed by an annual maintenance support fee, which usually amount  to  20 
to  25  per cent. of the licence fee per annum.  In addition, since 2008, Time Care has begun selling  licences 
through a licence rental model over a period of 18 to 36 months.  In the financial year ended 31 December 2008, 
software licences and subscription fees accounted for approximately 31 per cent. of total revenues, support and 
maintenance  (contracted  revenues which are recurring in nature) were approximately  35  per  cent.  of  total 
revenues  and  implementation services and human logistics services were approximately 32 per  cent.  of  total 
revenues. 
 
Financial overview 
The  following  summarised financial information on Time Care has been extracted from its audited  consolidated 
accounts for the years ended 31 December 2007 and 2008 and the unaudited management accounts for the 10  months 
ended 31 October 2009: 
                                             Year ended 31 December       Year ended 31   10 months ended 31 
                                                               2007       December 2008         October 2009 
                                                             (SEKm)              (SEKm)               (SEKm) 
Net Sales                                                      46.7                56.1                 49.9 
EBIT                                                           12.1                12.6                  9.0 
  as % of Net Sales                                           25.9%               22.6%                18.0% 
Net Assets                                                     24.8                40.0                 49.8 
 
In  the  financial year ended 31 December 2008, total product development costs, which are all written  off  as 
incurred, were SEK 10.0 million, representing some 18 per cent. of the revenues in that financial period. 
 
Management and employees of Time Care 
The  Company does not expect a complex integration of Time Care into the Allocate group and key members of Time 
Care's  management  team are expected to remain in place after the Acquisition, thereby  mitigating  the  risks 
arising from a change of ownership. 
 
Consideration and Placing 
The acquisition agreement provides for the purchase of the entire issued and to be issued share capital of Time 
Care  from the vendors for a Net Consideration of SEK 100 million (approximately GBP8.7 million).  As at the date 
of  this  announcement, vendors representing approximately 86.4 per cent. of the issued and to be issued  share 
capital  of Time Care had signed the acquisition agreement.  It is anticipated that the remaining vendors  will 
sign  up to the acquisition agreement prior to the completion of the Acquisition.  A squeeze out procedure will 
be used, if necessary, to compulsorily acquire any remaining shares in Time Care in the event that Allocate has 
acquired 90 per cent. or more of the issued and to be issued share capital of Time Care at completion. 
 
The Net Consideration payable is based on Time Care's balance sheet as at 31 October 2009 and there will be  no 
completion  accounts.  The Net Consideration for the Acquisition is being funded predominantly by  the  Placing 
with  the balance being satisfied in cash from the Company's existing cash resources.  Excess Cash of SEK  42.3 
million  beyond a normalised level of working capital will be acquired SEK for SEK through the use of  a  short 
term  bridge financing facility.  The estimated total costs of the Acquisition and the Placing are expected  to 
be approximately GBP0.9 million (exclusive of VAT). 
 
The Company is proposing to raise GBP8.3 million (approximately GBP8.0 million net of expenses) by way of a placing 
of  15,100,000  New  Shares  to  help fund the Acquisition.  The Placing Price of  55.0  pence  per  New  Share 
represents a discount of approximately 5.2 per cent. to the closing price of 58.0 pence per ordinary  share  on 
26  November  2009 (being the last business day prior to this announcement).  Under the terms  of  the  placing 
agreement, Numis, as agent for the Company, has agreed to use its reasonable endeavours to procure placees  for 
the  New  Shares at the Placing Price or, failing which, itself to subscribe for the New Shares at the  Placing 
Price.   The  New Shares represent approximately 25.2 per cent. of the issued share capital of the  Company  as 
enlarged by the New Shares (the "Enlarged Share Capital"). 
 
The Placing is conditional, inter alia, upon: 
(i)     the resolutions to be proposed at the General Meeting being passed without amendment; 
(ii)    the  placing  agreement becoming unconditional in all respects (save for admission) and it  not  having 
        been terminated; and 
(iii)   admission  of the New Shares to trading on AIM ("Admission") becoming effective by not later than  8.00 
        a.m. on 15 December 2009 (or such later time and date as the Company and Numis may agree, not being later than 
        8.00 a.m. on 29 December 2009). 
 
The  placing  agreement  also  contains certain warranties (subject to limitations  which  are  normal  for  an 
agreement  of this type) given by the Company in favour of Numis as to certain matters relating to the  Company 
and its business.  In addition, the Company has given certain undertakings to Numis and has agreed to indemnify 
Numis  in  relation  to certain liabilities it may incur in respect of the Placing.  Numis  has  the  right  to 
terminate  the  placing agreement in certain circumstances prior to Admission including  inter  alia,  (i)  for 
certain force majeure events or other events involving certain material adverse changes or prospective material 
adverse  changes  relating to the Allocate group or (ii) in the event of a breach of the  warranties  or  other 
obligations of the Company set out in the placing agreement. 
 
The  Company has agreed to pay to Numis a placing and underwriting commission together with certain  costs  and 
expenses incurred in connection with the Placing. 
 
Application  will  be made to the London Stock Exchange for the New Shares to be admitted to  trading  on  AIM. 
Subject  to, inter alia, the resolutions being passed by the requisite majority at the General Meeting,  it  is 
expected that Admission will become effective and that trading in the New Shares will commence on AIM  at  8.00 
a.m. on 15 December 2009.  The completion of the Acquisition is anticipated to occur shortly after Admission. 
The  New  Shares  will, when issued and fully paid, rank pari passu in all respects with the existing  ordinary 
shares,  including  the  right  to receive any dividend or other distribution  declared,  made  or  paid  after 
Admission. 
 
Directors' participation in the Placing 
The  following  Directors  have  agreed  to subscribe for New Shares at  the  Placing  Price  in  the  Placing. 
Immediately after Admission, it is expected that these Directors will have the following shareholdings: 
 
Director                          Number of New Shares    Total number of ordinary            Percentage of the 
                                 subscribed for in the   shares held following the       Enlarged Share Capital 
                                               Placing       Placing and admission 
Ian Bowles                                  125,000(1)                     348,500                        0.58% 
Mark Loveland                                   25,000                   1,550,000                        2.59% 
(1)     Mr Bowles has subscribed for the New Shares through his Self Invested Personal Pension ("SIPP"). 
 
Related party transactions 
 
Herald  Investment  Management Limited ("Herald") and Gartmore Investment Management Limited  ("Gartmore")  are 
existing  substantial shareholders in Allocate and each has agreed to subscribe for New Shares in the  Placing. 
Herald has agreed to subscribe for 2,200,000 New Shares and Gartmore has agreed to subscribe for 1,900,000  New 
Shares,  and  each  such participation constitutes a related party transaction within the meaning  of  the  AIM 
Rules. 
 
The  Directors consider, having consulted with Numis, the Company's nominated adviser, that the  terms  of  the 
subscription by Herald and Gartmore pursuant to the Placing are fair and reasonable insofar as Shareholders are 
concerned. 
 
Current trading 
The  Directors  believe that the Company continues to make significant progress despite  the  current  economic 
climate.   Allocate continues to expand its addressable markets both within the UK and overseas.  In  addition, 
the  Company's  recent announcement (on 17 November 2009) of a strategic partnership with NHS Professionals  to 
deliver  long-term  fully integrated workforce management services to NHS organisations  reinforces  Allocate's 
position within the e-Rostering market for Healthcare in the UK.  As a result, the Directors are confident that 
the Company's performance for the full year will be in line with their expectations. 
 
General Meeting 
In  order  that the Company is able to implement the issue of the Placing Shares it will be necessary  for  the 
Company  to increase its authorised share capital, authorise the Directors to allot the New Shares and disapply 
statutory  pre-emption rights in respect of the New Shares.  Resolutions to this effect will be proposed  at  a 
General Meeting to be held at the offices of the Company, 180 Piccadilly, London W1J 9ER, at 9.30 a.m.  on.  14 
December 2009.  A circular containing the notice of General Meeting is being posted to shareholders today,  and 
a  copy  of the circular and the notice of General Meeting will shortly be available from the Company's website 
at www.allocatesoftware.com. 
 
 
Commenting on the Acquisition, Ian Bowles, CEO of Allocate, said: 
 
"Our business strategy for the healthcare sector is to be the leading supplier of workforce optimisation 
solutions in Europe.  The acquisition of Time Care gives us a solid position in the Nordic region. 
Furthermore, the self-rostering application from Time Care is seen as a key addition to our existing workforce 
optimisation portfolio. 
 
"We are delighted with the support that we have received for the Placing and Acquisition from both our existing 
shareholders and from new investors, which resulted in the Placing being substantially oversubscribed." 
 
Leendert Venema, CEO of Time Care, said: 
"The  strategic  fit  between Allocate and Time Care is excellent for both customers and staff.   The  enlarged 
group is now one of the leading providers of workforce management software for the healthcare sector in Europe. 
Healthcare  is  rapidly emerging as one of the most exciting areas of the workforce management software  market 
and  the  enlarged  group is well positioned to exploit this opportunity.  We look forward to  contributing  to 
Allocate's continued strong growth." 
 
Enquiries: 
 
Allocate Software plc                                               Tel: [phone] 
Ian Bowles - Chief Executive Officer 
Simon Thorne - Chief Financial Officer 
 
Numis Securities Limited 
Nominated adviser - Michael Meade / Brent Nabbs                     Tel: [phone] 
Corporate Broking - James Black 
 
Strata Partners (Financial Adviser)                                 Tel: [phone] 
Edward Roskill 
 
Hansard Group                                                       Tel: [phone] 
Justine James 
 
 
Strata  Partners, which is authorised and regulated in the United Kingdom by the Financial Services  Authority, 
is  Allocate's exclusive financial adviser for the Acquisition. Strata Partners is acting exclusively  for  the 
Company and will not be responsible to any other person for providing the protections afforded to customers  of 
each  of  them  nor for providing advice in relation to the contents of this announcement or any  other  matter 
referred to herein. 
 
Numis  Securities  Limited, which is authorised and regulated in the United Kingdom by the  Financial  Services 
Authority  and  is a member of the London Stock Exchange, is Allocate's nominated adviser and  broker  for  the 
purposes  of  the  AIM Rules. Numis Securities Limited is acting exclusively for the Company and  will  not  be 
responsible  to any other person for providing the protections afforded to customers of each of  them  nor  for 
providing advice in relation to the contents of this announcement or any other matter referred to herein. 
The distribution of this announcement in jurisdictions other than the UK may be restricted by law and therefore 
persons  into  whose  possession this document comes should inform themselves about and observe  any  of  those 
restrictions.   Any  failure  to  comply with any of those restrictions  may  constitute  a  violation  of  the 
securities laws of any such jurisdiction. 
 
 
_______________________________ 
1 Exchange rate of GBP1 = 11.50 SEK as at 26 November 2009, being the last business day prior to this 
announcement 
2 Average exchange rate from 1 January 2008 to 31 December 2008 of GBP1 = 12.102 SEK 
 
 
Allocate Software plc