Castleton Technology PLC Acquisition of Deeplake Digital (7729M)

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RNS Number : 7729M

Castleton Technology PLC

10 January 2019

Castleton Technology PLC

("Castleton " or the "Group")

Acquisition of Complementary Communications Software

Castleton Technology plc (AIM: CTP), the software and managed services provider to the public and not-for-profit sectors, is pleased to announce the acquisition of Deeplake Digital Limited ("Deeplake Digital") for cash consideration of GBP1.8 million. Deeplake Digital provides digital technology for landlord and tenant communication, specifically in the social housing sector, via SMS, e-mail and social media platforms using its own proprietary software.

Highlights

-- Acquisition of complementary software, bolstering Castleton's existing suite and enabling the Group to enhance its operations across its customer base

   --     Additional annualised revenue of GBP0.8 million and normalised EBITDA of GBP0.3 million 
   --     80% of the revenue is recurring 
   --     Expected to be earnings accretive in the full financial year ending 31 March 2020 

Castleton will acquire 100% of the share capital of Deeplake Digital, which owns the proprietary Deeplake Communications Manager software, the market leader in digital customer communication technology for landlord and tenant communication in the UK.

Deeplake Digital has strong relationships with more than 90 housing associations, and the acquisition will add 60 additional annual contracts with existing Castleton customers and 30 annual contracts with new customer names to Castleton which will increase the opportunity for Castleton to cross-sell its other products to the enlarged customer base.

The acquisition will add annualised revenue of GBP0.8 million, of which 80% is recurring in nature, and normalised EBITDA of GBP0.3 million based on the year to 30 June 2018. The acquisition is expected to be earnings enhancing in the next full financial year to 31 March 2020. The existing key staff in Deeplake Digital will join Castleton, ensuring high quality delivery and continuity.

Dean Dickinson, Chief Executive of Castleton, said:

"This strategic acquisition enables us to capitalise on the significant opportunities within the Social Housing market's ongoing market shift towards digitalisation, building on the capabilities that the Group has already successfully developed. Deeplake Digital adds scale, customers, skills, market knowledge and specific digital communication intellectual property and has a great reputation for delivering a quality product and service, evidenced by its high customer retention levels over the past ten years. This acquisition provides additional cross-selling opportunities into Deeplake Digital's customer base, in line with the Group's growth strategy."

 
Enquiries:Castleton Technology plc                        Tel. [phone] 
  Dean Dickinson, Chief Executive Officer 
  Haywood Chapman, Chief Financial Officer 
 finnCap Ltd                                     Tel. [phone] 
  Jonny Franklin-Adams / Simon Hicks (Corporate 
  Finance) Andrew Burdis (ECM) 
 Alma PR                                         Tel. [phone] 
  Rebecca Sanders-Hewett/ Helena Bogle/ 
  Josh Royston 
 

About Castleton Technology plc

Castleton Technology plc is a leading supplier of complementary software and managed services to the public and not-for-profit sectors. The Group is a 'one stop shop', providing integrated housing systems via the Cloud, working in partnership with its customers and resellers to help drive efficiencies whilst improving controls and customer service. www.castletonplc.com

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Further information on Deeplake Digital

Deeplake Digital has developed a modern communications management platform using the latest Microsoft.NET technology in line with the existing Castleton development stack.

Deeplake Digital supports more than 90 Social Landlords in the UK with tenant communication solutions offering a range of digital platforms including Tenant Portal, Smartphone Apps, SMS, Email and Social Media.

Pre-configured Housing Modules allow Landlords to deploy information very quickly by providing prepared messages, automated workflows, data interfaces and reports pre-built for each department. This results in a comprehensive and easy to use digital communication solution, which integrates with customer's Housing Management System for simple deployment.

Since the business started 10 years ago, the average retention of Deeplake Digital's customers is over six years. In the year to 30 June 2018, the Deeplake Digital business generated revenues of GBP0.8 million and normalised EBITDA of GBP0.3 million. Deeplake Digital was acquired on a cash and debt free basis, with a normalised level of working capital.

Terms of the Acquisition

Consideration for the Acquisition is an upfront cash payment of GBP1.8 million. The cash consideration for the Acquisition is being financed through the Group's existing cash reserves and a refinancing of the Group's existing facilities with Barclays Plc. Barclays have extended the existing facilities by GBP1.5 million to GBP4.0 million with an extension of the term of 19 months and a reduction in interest rate of 0.25% to 2.25% above LIBOR.

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January 10, 2019 06:30 ET (11:30 GMT)