RNS Number:1093Z
Cardpoint PLC
26 May 2004
Press Release 26 May 2004
Cardpoint plc
("Cardpoint" or "the Group")
Acquisition of the HBOS Remote Cash Machine Estate
Firm Placing of 24,000,000 New Ordinary Shares and Placing and Open Offer of
4,085,791 New Ordinary Shares at 125p per New Ordinary Share
Admission of the Enlarged Share Capital to trading on AIM
Cardpoint plc, the provider of electronic payment transactions, announced on 17
May 2004 that it was at an advanced stage of negotiations to acquire a number of
cash machines from HBOS. The Board is now delighted to announce that the
Company has conditionally agreed to acquire, subject to shareholder approval,
816 cash machines in locations away from bank branches for a maximum
consideration of up to #75 million.
Highlights
- Cardpoint is acquiring, subject to Shareholder approval, 816 cash machines from HBOS situated in locations away
from bank and estate agency branches
- a consideration of up to #75 million is payable, #40 million payable in cash on completion with the remainder
deferred until on or about 14 January 2005 and subject to the achievement of certain performance criteria
- Cardpoint proposes to raise approximately #35 million (before expenses) by way of an issue of a total of
28,085,791 Ordinary Shares at 125 pence per share. #30 million of which is to be raised by way of Firm Placing
and approximately #5 million by way of Placing and Open Offer
- an additional #25 million, required to fund the balance of the initial consideration and the Enlarged Group's
working capital, will be raised by way of debt financing which is being provided by Bank of Scotland
- the deferred consideration will be paid to HBOS through an issue of up to #35 million unsecured loan notes
- the acquisition is classified as a 'reverse takeover' under the AIM Rules and the proposals are conditional on
Shareholder approval which is being sought at an EGM to be held on 18 June 2004
- Interim Results published today demonstrate the success of Cardpoint's business model and strategy, with
turnover of #13.8 million (2003: #2.9 million)
Mark Mills, Chief Executive Officer of Cardpoint, said: "This latest acquisition
is a significant leap forward for the Company and will make us the largest
quoted independent cash machine operator in the UK, proving that our strategy of
organic growth and growth by acquisition continues to be successful. It also
introduces us to an established estate of 'through the wall' machines with
considerably higher transaction volumes and a number of large corporate
customers."
- Ends -
Enquiries:
Cardpoint plc
Mark Mills, Chief Executive Officer Tel: +44 (0) 1253 785 808
www.cardpointplc.com
Evolution Beeson Gregory
Mike Brennan / Henry Turcan Tel: +44 (0) 20 7071 4300
N M Rothschild & Sons Limited
Andrew Thomas Tel: +44 (0) 161 827 3800
Media enquiries:
Bankside
Henry Harrison-Topham / Ariane Vacher Tel: +44 (0) 20 7444 4140
ariane.vacher@bankside.com www.bankside.com
Jpeg photo's of Mark Mills, CEO of Cardpoint are available from Bankside.
Acquisition of the HBOS Remote Cash Machine Estate
Firm Placing of 24,000,000 New Ordinary Shares and Placing and Open Offer of
4,085,791 New Ordinary Shares at 125p per New Ordinary Share
Admission of the Enlarged Share Capital to trading on AIM
Introduction
On 17 May 2004, your Board announced that the Company was at an advanced stage
in negotiations to acquire a number of Cash Machines from HBOS. Today, the
Company has conditionally agreed to acquire, subject, inter alia, to Shareholder
approval, the HBOS Remote Estate, further details of which are set out below.
The HBOS Remote Estate comprises an estate of 816 Cash Machines currently owned
and operated by HBOS and situated in locations away from bank and estate agency
branches (typically located at retail outlets, petrol stations and railway
stations). The consideration payable is up to #75 million, #40 million of which
is payable in cash on Completion with the remainder, the Deferred Consideration,
payable on or about 14 January 2005, subject to the achievement of the
Performance Criteria.
In order to finance the Acquisition, Cardpoint proposes to raise approximately
#35 million (before expenses) by way of an issue of a total of 28,085,791 New
Ordinary Shares at 125p per share. Of this amount, #30 million is proposed to
be raised by way of the Firm Placing and approximately #5 million by way of the
Placing and Open Offer, both of which are fully underwritten by Evolution Beeson
Gregory. Of the New Ordinary Shares, 24,000,000 will be issued pursuant to the
Firm Placing and the balance of 4,085,791 New Ordinary Shares are being offered
to Qualifying Shareholders under the Open Offer on the basis of:
1 Open Offer Share for every 8 Existing Ordinary Shares held on the Record Date
Qualifying Shareholders may apply for Open Offer Shares in excess of their Basic
Entitlement but such excess applications will only be satisfied to the extent
that other Qualifying Shareholders do not apply for their Basic Entitlements in
full.
Cardpoint proposes to raise an additional #25 million required to fund the
balance of the Initial Consideration and the Enlarged Group's working capital by
way of the Debt Financing which is being provided by the Bank of Scotland. Any
Deferred Consideration that may become payable will be paid to HBOS through an
issue of up to #35 million of Unsecured Loan Notes.
The Acquisition is classified as a "reverse takeover" under the AIM Rules by
virtue of its size and is conditional upon, inter alia, the approval of
Shareholders, which is being sought at an Extraordinary General Meeting, the
notice for which has been sent to shareholders. The Existing Ordinary Shares
were suspended from trading on AIM on 17 May 2004, but such suspension is
expected to cease today on publication of the AIM admission document in respect
of this transaction. Application has been made for the New Ordinary Shares to
be issued pursuant to the Issue to be admitted to AIM and the existing Cardpoint
shares to be re-admitted to AIM, which it is expected will become effective on
21 June 2004. Further details of the Firm Placing, the Placing and Open Offer
and the Acquisition are set out in the AIM admission document, copies of which
have been sent to Shareholders today and are available at the offices of
Evolution Beeson Gregory Limited (9th Floor, 100 Wood Street, London EC2V 7AN).
Information on Cardpoint
Cardpoint was admitted to AIM in June 2002 at which time it operated an estate
of 188 ATMs, commonly known as Cash Machines, in the UK. Through the successful
implementation of its stated strategy of aggressive growth, both by organic
means and through acquisition, Cardpoint now operates two separate but
complementary divisions comprising over 2,100 cash machines and 3,400 electronic
mobile phone top-up terminals.
The majority of the Group's Cash Machines are fee charging ("charging") and
fully managed by Cardpoint. They are predominantly free standing and situated
internally at high footfall locations such as motorway service areas, petrol
stations, railway stations, pubs, hospitals, shopping centres and large retail
and leisure outlets. Typically, the Group enters into five to seven year
contracts with individual site owners or corporate hosts. Many of the Group's
Hosts are large corporations which commonly enter into exclusive agreements with
Cardpoint for the provision of Cash Machines in all of their locations. Recent
examples include five year exclusive contracts with Welcome Break and Roadchef,
which envisage the installation of a minimum of 115 and 71 Cash Machines
respectively over five years.
The Electronic Mobile Phone Top-up Division was established following the
acquisition in June 2003 of PT Distribution Limited, which at the time operated
approximately 2,900 mobile phone top-up terminals. This acquisition was a
complementary business to the Group's core Cash Machine operations both in terms
of Hosts and business processes.
Information on the HBOS Remote Estate
Cardpoint Remote is acquiring 816 Remote Cash Machines which are currently owned
and operated by HBOS. All of these Cash Machines are "through-the-wall"
machines in locations such as service stations, convenience stores, train
stations and shopping villages. A contract in respect of these Cash Machines
typically exists between the site owner and HBOS of, initially, between 2 and 5
years. Approximately 67 per cent. of the Cash Machines within the HBOS Remote
Estate have been installed as part of multi-site contracts with large corporate
customers. HBOS has recently undertaken a major equipment upgrade across its
entire estate.
The HBOS Remote Estate is predominantly located in mature locations and
generates significantly higher transaction volumes than the existing Cardpoint
Cash Machine estate. Unlike Cardpoint, HBOS does not charge cardholders for the
use of its Remote Cash Machines; all revenues are currently generated through
interchange fees payable by the cardholder's bank or building society.
The table below shows the average historic monthly transaction volumes per Cash
Machine in the HBOS Remote Estate for the year ended 31 December 2003 compared
to Cardpoint's Cash Machine estate for the 12 months ended 31 March 2004. It
can be seen that average transaction volumes generated by the Cash Machines
within the HBOS Remote Estate are approximately ten times those for the
Cardpoint Cash Machine estate.
Cardpoint HBOS
Cash Machines Cash Machines
Average number of transactions per month per Cash 949 9,400
Machine
The Directors believe that the comparatively high number of transactions
generated by Cash Machines within the HBOS Remote Estate when compared with
Cardpoint's operating data reflects four principal factors:
* Quality of site: the HBOS Remote Estate has been installed for an average of more than 4 years. This
reflects the fact that banks and building societies began installing remote Cash Machines prior to the
existence of IADs. Consequently they were able to secure prime sites which benefit from high levels of
footfall and therefore transactions.
* "Through-the-wall" Cash Machines which are available 24 hours, 365 days per annum: through-the-wall
machines are usually situated on the exterior of the site and benefit from high levels of customer
familiarity which increases usage.
* Service speed: through-the-wall Cash Machines are typically able to process at a faster rate than a
freestanding machine.
* Free usage: under HBOS ownership, the Remote Cash Machines being acquired have not charged a withdrawal
fee.
Following Completion, the Directors will seek to convert a proportion of the
HBOS Remote Estate to the Cardpoint model which, subject, inter alia, to the
number of Cash Machines converted and the number of transactions retained
post-conversion, would result in the generation of materially higher revenues
than have historically been generated by the HBOS Remote Estate.
Financial effects of the Acquisition
The consideration payable for the HBOS Remote Estate is up to #75 million, #40
million of which is payable in cash on Completion with the remainder, the
Deferred Consideration, payable on or about 14 January 2005, subject to the
achievement of the Performance Criteria. The Acquisition consideration and
working capital requirements of the Enlarged Group are being funded by the
proceeds of the Issue, and a new acquisition debt and working capital facility
of #25 million being provided by Cardpoint's principal bankers, Bank of
Scotland, and up to #35 million in Unsecured Loan Notes.
The unaudited pro forma statement of net assets of the Enlarged Group, showing
the effects of the Acquisition, the Firm Placing and the Placing and Open Offer
is set out in the AIM Admission document and shows net assets of #38.8 million
following Completion, assuming that the maximum consideration payable of #75
million is paid. Goodwill representing the difference between the fair value of
the Consideration and the fair value of the net assets acquired of approximately
#61.8 million will arise as a result of the Acquisition, assuming the maximum
consideration of #75 million becomes payable. This will be amortised over five
years and will have a material impact on the reported profitability of the
Group. Shareholders are reminded that the amortisation of goodwill is purely an
accounting adjustment and does not necessarily reflect the underlying
profitability of the business nor its actual cash flow. Consequently,
Shareholders should consider the anticipated effect on normalised earnings per
Ordinary Share which, inter alia, ignores the impact of goodwill.
Prior to any management action to convert a meaningful proportion of the HBOS
Remote Estate to the Cardpoint model, the Acquisition would, in the Directors'
belief, be cash flow positive although it would be earnings dilutive.
Whilst it is difficult to predict with certainty the contribution of the
Acquisition, the Group believes that it will be able to achieve a Conversion
Rate and Retention Rate that will result in a material increase in turnover of
the Enlarged Group in future financial years. On this basis, and given that the
Group expects to be able to continue to reduce relative operating costs as a
result of the increased scale of the Enlarged Group, the Group expects the
Acquisition to be significantly earnings enhancing (on the basis of normalised
earnings per share) in its first full year.
Principal terms of the Acquisition
By an agreement dated 26 May 2004, Cardpoint Remote has conditionally agreed to
acquire the HBOS Remote Estate subject, inter alia, to Shareholder approval.
The consideration for the Acquisition is up to #75 million, #40 million of which
is payable in cash on Completion with the remainder, the Deferred Consideration,
payable on or about 14 January 2005, subject to the achievement of the
Performance Criteria.
Deferred Consideration
The Deferred Consideration comprises a maximum payment of #35 million payable on
or about 14 January 2005. This consideration, if payable, will be satisfied by
the issue to HBOS of Unsecured Loan Notes redeemable by no later than 31
December 2008. Further details are included in the AIM Admission Document.
Performance Criteria
The amount of Deferred Consideration payable is dependent upon the achievement
of certain Performance Criteria. The key determinant is the number of customer
contracts assigned to Cardpoint in the period between Completion and 31 December
2004. The maximum amount of Deferred Consideration payable of #35 million will
only become payable if contracts relating to all 816 Cash Machines are assigned
to Cardpoint Remote, or alternatively new contracts are entered into by 31
December 2004. In addition, the amount of Deferred Consideration payable is
subject to downward adjustment dependent upon the outcome of certain
transitional arrangements between HBOS and Cardpoint Remote in the period
between Completion and 31 December 2004.
Financial information on Cardpoint
The Company has today announced its unaudited interim results for the six months
ended 31 March 2004. These results clearly demonstrate the success of the
Company's strategy of organic and acquisitive growth with turnover of #13.8m for
the first six months of the year (2003: #2.9 million) exceeding that for the
previous financial year as a whole. Gross profit generated reached #3.8 million
(2003: #0.4 million) and operating profit prior to the amortisation of goodwill
increased to #0.4 million compared to a loss of #0.3 million in the six months
to 31 March 2003.
Current trading and prospects
The acquisition of the HBOS Remote Estate will provide the Enlarged Group with a
considerable opportunity to build on Cardpoint's existing profitable business.
The Directors believe that the opportunity to acquire a Cash Machine estate with
such significant transaction numbers, capable of conversion to the Cardpoint
model, greatly enhances the Group's prospects. The focus of the Enlarged Group
will initially be to maximise the revenue generation of the HBOS Remote Estate
whilst retaining the momentum of the Group's organic growth in the UK and in
Germany. As a leading consolidator in a growth industry which is expected to
consolidate further, the prospects for the Enlarged Group are extremely
encouraging.
As set out in the interim statement announced today, Cardpoint continues to
demonstrate the strength of its business model by reporting increased
profitability and cash flow generation.
Cardpoint operates in a growth sector and by increasing critical mass the
Company is not only able to grow the overall group turnover but also improve the
operating margin as a result of the operational gearing of the business model.
Following Completion, the Company will own and/or operate nearly 3,000 Cash
Machines. This positions the Company well to take advantage of service and
revenue opportunities in areas such as electronic mobile phone top-up and PIN
change services.
Extraordinary General Meeting
The AIM Admission document includes a notice convening the Extraordinary General
Meeting of the Company to be held at the offices of Evolution Beeson Gregory,
100 Wood Street, London, EC2V 7AN at 10.00 a.m. on 18 June 2004. The following
Resolutions will be proposed at the EGM:
An ordinary resolution will be proposed for the purposes of:
a) approving the Acquisition; and
b) authorising the Directors, pursuant to section 80 of the Act, to allot up to new Ordinary Shares up to a
nominal amount of #2,500,000.
A special resolution will be proposed for the purposes of:
a) Empowering the Directors, pursuant to section 95 of the Act, to allot the New Open Offer Shares and to
allot equity securities (as defined in the Act) for cash without complying with the statutory pre-emption
rights, to the extent specified in the resolution; and
b) increasing the borrowing powers of the Directors under the Articles to accommodate the Debt Financing.
Expected timetable of principal events
2004
Record Date for the Open Offer close of business on 24 May
Latest time and date for splitting the Application Forms 3.00 pm on 15 June
(to satisfy bone fide market claims only)
Latest time and date for receipt of Forms of Proxy for the EGM 10:00 am on 16 June
Latest time and date for receipt of completed Application Forms and payment in full
under the Open Offer 3:00 pm on 17 June
Extraordinary General Meeting 10:00 am on 18 June
Readmission of the Existing Ordinary Shares and Admission and dealings commence in
the New Ordinary Shares 8:00 am on 21 June
CREST stock accounts credited in respect of the New Ordinary Shares 21 June
Despatch of definitive share certificates in respect of New Ordinary Shares to be 28 June
held in certificated form by
This announcement does not constitute an offer to sell any securities in the
United States. The issue of the ordinary shares in connection with the
Acquisition and the offer and sale of ordinary shares in the Issue have not
been, and will not be, registered under the US securities Act of 1933, as
amended (the "Securities Act"), and such ordinary shares may not be offered,
sold or delivered to, nor may the open offer be accepted by, any US Person (as
such term is defined under Regulation S under the Securities Act).
Words and expressions where defined in the AIM Admission Document issued by the
Company and dated 26 May 2004 shall, unless the context provides otherwise, have
the same meaning in this announcement.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
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