RNS Number:6572L
Cardpoint PLC
29 May 2003
Press Release 29 May 2003
Cardpoint plc ("Cardpoint" or "the Company")
Proposed acquisition of the entire issued share capital of
Securicor Cash Machine Limited ("SCM")
Cardpoint plc ("Cardpoint" or "the Company"), the first UK quoted independent
ATM deployer, announces today that it has conditionally agreed to acquire the
entire issued share capital of Securicor Cash Machine Limited ("SCM"), a wholly
owned subsidiary of Securicor plc, for a maximum consideration of up to #9.2
million.
Highlights
- SCM has an installed base of 1,232 ATMs with a further stock of 333 ATMs,
giving Cardpoint an estate of 2,068 ATMs, and making it the third largest
independent ATM deployer in the UK.
- Initial consideration of #5 million due on Completion, with the balance
of up to #4.2 million being due over the period to 30 September 2005.
All but #500,000 of the deferred consideration is subject to the
satisfaction of certain performance criteria.
- Cardpoint proposes to raise approximately #6 million (before expenses) by
way of a Placing and Open Offer of 11,334,867 Shares at 53p per share.
- The acquisition is classed as a reverse takeover and accordingly, the
proposals are conditional upon the approval of Shareholders, which is
being sought at an EGM to be held on 20 June 2003.
- A four year exclusive outsourcing arrangement with Securicor, to be
signed on completion of the acquisition, for all cash management,
installation and maintenance activities reducing operating and interest
costs.
- SCM's business model is similar to Cardpoint's, where it retains
ownership of the ATM and enters into a contractual agreement with the
site owner to provide and manage the ATM within the host's premises.
Mark Mills, Chief Executive Officer of Cardpoint plc, said: "The acquisition of
Securicor Cash Machine Limited is a significant milestone for us, as it gives
the Company critical mass and a faster route to profitability. Our team has
previously demonstrated its ability to maximise the value of an acquired estate
with the acquisition of Green Machine in October 2002, and we already have
customers lined up ready to install the ATMs in stock.
"The deal allows Cardpoint to focus on ATM deployment, increasing transaction
volumes, retail sales and merchandising complemented by Securicor's proven
experience as an end to end cash solutions provider through the Outsourcing
Arrangements. The acquisition is a win-win situation for both companies and as
we already work with Securicor we are extremely pleased to be extending our
existing relationship."
Jeff Anderson, Managing Director of Securicor Cash Machine Limited added: "We
are pleased to working with Cardpoint as a major ATM provider to supply
integrated ATM Cash Solutions building on our increasing ability to provide back
office forecasting and reconciliation as part of our ATM end to end service
management."
For further information, please contact:
Enquiries:
Cardpoint plc
Mark Mills, Chief Executive Officer Tel: +44 (0) 1253 785 808
mark.mills@cardpointplc.com www.cardpointplc.com
Evolution Beeson Gregory Limited
Mike Brennan / Henry Turcan Tel: +44 (0) 20 7488 4040
henry.turcan@evbg.com www.evbg.com
Media enquiries:
Bankside Consultants Limited Tel: +44 (0) 20 7444 4140
Ariane Vacher / Julian Bosdet
ariane.vacher@bankside.com www.bankside.com
CARDPOINT plc
29 May 2003
Acquisition of Securicor Cash Machine Limited
Placing and Open Offer of 11,334,867 Open Offer Shares at 53p per share
Admission of Enlarged Issued Share Capital to trading on the
Alternative Investment Market
Introduction
The Board of Cardpoint plc is delighted to announce that the Company has
conditionally agreed to acquire, subject, inter alia, to Shareholder approval,
the entire issued share capital of Securicor Cash Machine Limited ("SCM"). The
maximum consideration payable is #9.2 million in cash, of which #5.0 million is
due on Completion with the balance of up to #4.2 million being due over the
period to 30 September 2005. All but #500,000 of the deferred consideration is
subject to the satisfaction of certain performance criteria.
In order to finance the Acquisition and provide the Enlarged Group with
additional working capital, Cardpoint also proposes to raise approximately #6.0
million (before expenses) by way of a Placing and Open Offer of 11,334,867 Open
Offer Shares at 53p per share. Under the terms of the Placing Agreement,
Evolution Beeson Gregory has agreed conditionally upon, inter alia, Admission to
procure placees, failing which, it has agreed to subscribe itself for the Open
Offer Shares to the extent that they are not taken up under the Open Offer. In
addition, the funds raised under the Placing and Open Offer will enable the
Group to draw down an additional #4.5 million from the increased debt facility
provided by Bank of Scotland.
Due to the size of SCM, the Acquisition is classed as a reverse takeover for the
purposes of the AIM Rules. Accordingly, the Proposals are conditional upon,
inter alia, the approval of Shareholders, which is being sought at an
Extraordinary General Meeting, to be held at 11:00 am on 20 June 2003 at the
offices of Evolution Beeson Gregory Limited.
Background to and reasons for the Proposals
Cardpoint was admitted to AIM in June 2002 with the stated intention of growing
its then existing estate of 188 automated teller machines ("ATMs"), commonly
known as cash machines, in the UK. This strategy has been pursued and the Group
currently owns and/or operates an estate of 503 independent ATMs, an increase of
over 167 per cent. in under one year. The majority of these are free-standing
and situated internally at motorway service areas, petrol stations, railway
stations, pubs, hospitals, hotels, shopping centres and large retail and leisure
outlets.
Cardpoint, which is a member of LINK, the payment processing network, receives a
fee for each transaction made at a Group ATM. Each cash withdrawal generates a
gross fee of typically #1.50 which is payable by the cardholder, whilst a charge
of 20.9p is payable by the cardholder's bank or building society in the case of
a balance enquiry or should the request for cash be refused.
The significant growth of the Group to date has been achieved both organically
and through acquisition. Whilst the Directors believe that the strength of the
Group's current pipeline of potential sites indicates the scope for continued
organic growth, the acquisition of the business and assets of Green Machine in
October 2002 confirmed the additional growth potential available to the Group as
a consolidator of the ATM industry and demonstrated management's ability to
successfully integrate other businesses.
The proposed acquisition of SCM represents a significant step in the Group's
development. As at 30 April 2003 SCM had 1,232 ATMs installed and a further 333
in stock.
The Directors believe that the Acquisition represents an opportunity to broaden
the Group's presence in the independent ATM marketplace. Furthermore, on
completion of the Acquisition, Cardpoint will enter into the Outsourcing
Arrangement which the Directors believe will enable the Enlarged Group to gain
significant operational benefits as well as improve operating margin.
Information on SCM
SCM is a wholly owned subsidiary of Securicor plc and was incorporated in 1977.
It largely remained dormant until the business of providing and managing
internal free standing ATMs was transferred into it with effect from 1 October
2000.
As at 30 April 2003, SCM had an installed base of 1,232 ATMs with further stock
of 333 ATMs. Of these, 1,078 are leased from IBM on five year operating leases
and the remainder are owned by SCM. The first ATM was installed in June 2000 as
part of a roll-out which saw approximately 900 machines being installed in the
first twelve months.
SCM's business model is similar to Cardpoint's. As such, SCM enters into a
contractual agreement with the Site owner to provide and manage the ATM within
the Host's premises. Typically, SCM's ATMs are situated within retail locations
on an individual site basis. The revenue model employed charges the customer
using the ATM a fee of typically #1.50 in cases where cash is withdrawn whilst
the card user's bank pays a fee of 20.9p to SCM for each balance enquiry and a
similar amount in the event of the card user being refused cash. Of the total
fee received by SCM, a small proportion is usually paid to the Site owner
pursuant to the contractual agreement. As with Cardpoint the installation,
maintenance, cash replenishment and processing functions of the ATMs are
outsourced.
Financial information on SCM
The financial information set out below summarises the financial record of SCM
for the three years ended 30 September 2002.
Year ended 30 September
2000 2001 2002
#'000 #'000 #'000
Turnover - 3,179 8,105
Gross profit - 189 1,410
Operating loss - (1,107) (222)
Loss on ordinary activities before taxation - (1,885) 896)
SCM has been unable to produce detailed financial information for the period of
trading from June 2000 (the date the first ATM was installed) to 30 September
2000 due to the financial results for this period being amalgamated within the
financial records of its holding company.
Securicor plc has made a significant investment in the rapid development of SCM.
Turnover has increased sharply as indicated in the table above, reaching in
excess of #8m in the year ended 30 September 2002 from a standing start in June
2000. During this period, gross margin has improved and loss before tax has
reduced as the business developed sufficient scale to support the fixed costs of
entry into the independent ATM marketplace. Progress has continued to be made
since the year end and the Directors anticipate that the increasing maturity of
its ATM estate together with increased cash withdrawal charges and additional
cost savings will result in positive cash flow generation and significant
progress towards profitability being made in the current year.
Working capital and losses to date have been funded by way of a loan from
Securicor plc. The intra-group debt arising, which amounted to #5,418,000 at 30
September 2002, is to be written off at Completion. Of the 1,115 ATMs installed
at 30 September 2002, 1,078 are the subject of operating leases with IBM; the
balance, plus a further 470 ATMs held in stock, are owned by SCM. The operating
leases are for a 5 year term and allow for a payment holiday up front (typically
3 months) with payments made quarterly in advance. As at 30 September 2002
outstanding payments under these operating leases amounted to #8,898,122.
Operating information on SCM
SCM undertook a rapid roll out of ATMs during the 12 months following
installation of its first ATM in June 2000, primarily in retail locations. The
focus at the outset of operations was to establish market share. Many of these
Sites were hastily selected which resulted in a large number of subsequent Site
terminations; some 25 per cent. of the ATMs installed prior to 31 March 2002
have now been relocated to alternative Sites.
The operating data for the last six quarters is as follows:
Quarter to: 31/12/01 31/03/02 30/06/02 30/09/02 31/12/02 31/03/03
Avg. no of installed ATMs 716 803 921 1,039 1,137 1,188
Turnover (#) 1,628,025 1,811,208 2,223,145 2,443,390 2,417,134 2,486,339
Avg. no. of transactions per
ATM 2,529 2,279 2,455 2,428 2,341 2,341
Avg. fee per cash withdrawal 129p 145p 145p 143p 139p 139p
Like Cardpoint, in the year 2000 SCM charged a standard cash withdrawal fee of
#1.00. This standard fee was increased in January 2001 and January 2002 to #1.25
and #1.50, respectively. The Company does not currently achieve the standard fee
as an average because it has deployed 24 non-surcharging ATMs during the last 6
months and has approximately 171 ATMs which continue to charge between #1.00 and
#1.25 for a cash withdrawal.
SCM's business model is predicated on a significantly lower number of
transactions per ATM than Cardpoint's estate. The Directors believe that this is
primarily due to the size of the Host's premises in which the majority of the
ATMs are situated and the consequent comparative reduced footfall. Whilst SCM
does have some corporate agreements, the majority of its estate is deployed in
single unit stores, an area not previously focused on to the same extent by
Cardpoint. However, whilst the revenue per ATM is less than that of a Cardpoint
ATM, this is compensated to a significant extent by SCM's lower operating costs.
Terms of the Acquisition
By an agreement dated 28 May 2003, Cardpoint Services Limited has agreed to
acquire the entire issued share capital of Securicor Cash Machine Limited
subject, inter alia, to Shareholder approval. The maximum consideration for the
Acquisition of #9.2 million comprises both initial consideration and deferred
consideration, both of which are to be satisfied in cash. The initial
consideration of #5 million is payable on completion. Deferred consideration of
up to #1.6 million for the year to 30 September 2003 and up to #1.6 million for
the year to 30 September 2004 is payable subject to SCM's ATM estate achieving
certain transaction targets in those years. A further #0.5 million is payable by
8 quarterly installments of #62,500 commencing on 1 October 2003 and #0.5
million is payable if the size of the Enlarged Group's estate of ATMs does not
reach 2,100 ATMs at any time on or before 30 September 2004. The maximum amount
of deferred consideration payable could be #4.2 million although the Directors'
projections for the Enlarged Group show that in excess of 2,100 ATMs will be
installed by 30 September 2004 and consequently the assumed maximum deferred
consideration is #3.7 million.
Details of the Outsourcing Arrangements
As part of the arrangements for the Acquisition, Cardpoint Services Limited has
agreed, on Completion, to outsource the day to day operation of its entire ATM
estate to SCC. SCC will provide ATM installation, cash forecasting and ordering,
ATM replenishment, ATM monitoring, cash reconciliation, first line maintenance
and hardware maintenance. The Directors believe that the terms of these
arrangements will enable the Enlarged Group to gain significant operational
benefits as well as margin improvement. Furthermore, the arrangements provide
for performance related payments to be made to SCC in the event of pre-agreed
performance criteria being exceeded, and thereby benefiting both Cardpoint and
SCC, and for compensation being payable to Cardpoint Services Limited in
circumstances where they are not met.
Financial effects of the Proposals
The Outsourcing Arrangements, together with overhead and other cost savings
arising from the integration of SCM, will increase the Group's operating margin.
As a result of this and the increased level of turnover, the Directors expect
the Acquisition to be significantly earnings enhancing in the years to 30
September 2003 and 2004 and for it to accelerate the Group's profitability and
positive cash flow generation.
The illustrative pro forma statement of net assets of the Enlarged Group shows
net assets of #7.194 million following Completion.
Conditional upon the Proposals, Bank of Scotland has agreed to increase the debt
facility provided at the time of flotation from #5 million to #7 million. The
net proceeds of the Placing and Open Offer will allow the Enlarged Group access
to draw down a further #4.5 million in addition to the #1.5 million currently
drawn down.
Goodwill representing the difference between the fair value of the consideration
and the fair value of the net assets acquired, of approximately #5.2 million,
will arise as a result of the Acquisition. This will be amortised over 5 years.
Financial information on Cardpoint
The Company has today announced its unaudited interim results for the six months
ended 31 March 2003. These show turnover of #2,936,000, an increase of over 157
per cent. compared with the six months ended 31 March 2002. During the same
period, the operating loss before goodwill amortisation has only increased from
#183,000 to #320,000 despite the dramatic increase in the size of the estate and
its subsequent relative lack of maturity.
Set out below is a summary of the operating data which indicates both the growth
in the number of ATMs installed and the ability of the management to increase
the fee received whilst still growing overall turnover:
Quarter to: 31/12/01 31/03/02 30/06/02 30/09/02 31/12/02 31/03/03
Avg. no of installed ATMs 169 175 179 233 401 425
Turnover (#) 566,548 678,973 871,691 1,064,575 1,403,589 1,457,716
Avg. no. of transactions per
ATM 3,925 4,421 5,029 4,646 3,829 3,531
Avg. fee per cash withdrawal 131p 143p 150p 150p 154p 158p
Note: 1 The Group obtained VAT exemption on 1 November 2001 and switched note
provision from Woolwich plc to Girobank plc during the quarter ended 31 March
2002. For the purposes of consistency, turnover in the relevant periods has been
stated gross of VAT and Woolwich plc's costs in order to reflect the Group's
current situation.
Since June 2002, the Company has been able to dramatically increase the speed of
its roll-out of ATMs due to the resources available following its successful
flotation on AIM. Consequently the reduction in the average number of
transactions per ATM reflects the greater proportion of immature ATMs within the
Group's estate than has historically been the case. The Group's business model
anticipates that an ATM will achieve maturity in 18 months and the comparison of
actual contribution per ATM against expected contribution continues to reaffirm
the Directors' belief in the quality of the Group's ATM locations.
As previously highlighted, Cardpoint's strategy is to continuously maximise the
revenue receivable from the estate of ATMs.
The acquisition of the business and assets of Green Machine in October 2002 and
its subsequent integration into the Group and development demonstrates, in the
Directors' opinion, management's ability to monitor and improve key performance
indicators. At the time of the acquisition the average cash withdrawal charge
for a Green Machine ATM was #1.33 which by 31 March 2003 had been increased to
an average of #1.73.
Despite this price increase, by focusing on the customer awareness of the
presence of the ATM through increased signage and heightened visibility of the
ATM both outside and within the Host premises, management have been able to
increase the transaction volumes during the period.
Strategy
The Group's strategy continues to be to grow its estate of ATMs, both
organically and by acquisition, and to grow the transaction volumes and yield
per transaction. The interim statement announced today highlights the progress
made to date. Moreover, the acquisition of the business of Green Machine has
allowed management to demonstrate that it has the ability to both integrate a
business and improve the performance and financial return from an estate of ATMs
through close monitoring of transaction data and increased signage to improve
awareness.
The Acquisition represents a significant development in the execution of this
strategy because of its size and as a consequence of the broadening of the
criteria which determine an acceptable Host site. As indicated above, the
majority of the SCM ATMs are situated within single site Hosts where transaction
volumes are comparatively lower than those generated by Cardpoint ATMs. However,
due to the lower operating and capital costs, the SCM ATMs are capable of being
profitable and cashflow positive at these reduced transaction volumes. Further
significance is added by the Outsourcing Arrangements which the Directors
believe will enable the Enlarged Group to achieve significant operational
benefits as well as margin improvement.
In addition to existing transactional revenues received from ATMs, the Enlarged
Group will seek to broaden its income stream. As announced in December 2002
Cardpoint has signed contracts with Vodafone and mmO2 for the provision of
airtime top-ups for pre-pay mobile telephones at its ATMs via the LINK network.
Furthermore, the Directors will consider acquiring or developing additional
businesses where it can be demonstrated that they will add value and benefit
from the Enlarged Group's core skills of maximising value from secure payment
terminals in retail locations. In this respect, the Group is currently in early
discussions with a view to acquiring a business which provides airtime top-ups
for pre-pay mobile phones using secure authorisation terminals situated in
approximately 3,000 retail outlets. The Directors believe that were this
acquisition to proceed it would be earnings enhancing for the Enlarged Group and
could be financed without recourse to additional financing.
Competition
The Enlarged Group's competitors consist primarily of other independent ATM
deployers. Whilst banks and building societies represent competition by virtue
of their established market presence, the Enlarged Group's target marketplace of
ATM sites is, in the Directors' belief, unsuitable for the current and perceived
future deployment criteria employed by the majority of banks and building
societies.
The Group's competitors include Bank Machine Limited (previously the operation
of Euronet Services (UK) Limited), Hanco ATM Systems Limited, Moneybox
Corporation Limited and TRM Corporation. The Directors believe that the
combination of the Group's relationships with existing Hosts, many of whom are
currently, or are capable of becoming, multi-site Hosts together with the
professionalism of the pre and post sales service provided by the Group enable
it to differentiate its service offering from its competition.
Cardpoint's current trading and the Enlarged Group's prospects
As set out in the interim statement announced today the Company continues to
make excellent progress.
The demand for cash continues to grow strongly. Within the UK, transaction
volumes on ATMs increased by approximately 45 per cent. from 1,151 million in
2000/2001 to 1,664 million in 2001/2002. This trend has continued in 2003 with
495 million transactions having been processed and #15,918m having been
dispensed in the first 3 months of this year, increases of 20.5 per cent. and
21.0 per cent. respectively year on year. Whilst ATMs situated within bank
branches dominate the market, the number of ATMs installed by IADs at 28
February 2003 grew to 10,595, an increase of over 47 per cent. during the
preceding 12 months.
The scale and diversity of the installed base, together with the strength of the
pipeline of prospective sites, when set against this positive market background,
allow the Directors to view the Enlarged Group's prospects with considerable
optimism.
Details of the Placing and Open Offer
The Placing and Open Offer, which is fully underwritten by Evolution Beeson
Gregory, will raise approximately #6.0 million, before expenses. Evolution
Beeson Gregory, on behalf of the Company, is offering Qualifying Shareholders
11,334,867 Open Offer Shares at 53p per share, payable in full on acceptance, on
the following basis:
8 Open Offer Shares for every 15 Existing Ordinary Shares
held on the Record Date, and so in proportion for any other number of Existing
Ordinary Shares then held.
The Directors and certain existing Shareholders have irrevocably undertaken that
they will not take up some or all of their entitlements under the Open Offer to
an aggregate of 3,677,482 Open Offer Shares, representing 32.4 per cent. of the
Open Offer Shares. These 3,677,482 Open Offer Shares have conditionally been
placed firm by Evolution Beeson Gregory, as agent for the Company, with
institutional and other investors at the Issue Price. Evolution Beeson Gregory,
as agent for the Company, has also conditionally agreed to place the balance of
7,657,385 Open Offer Shares with institutional and other investors, subject to a
right of recall to the extent required to satisfy valid applications under the
Open Offer.
To the extent that Evolution Beeson Gregory is unable to procure placees for the
Open Offer Shares at the Issue Price, Evolution Beeson Gregory will subscribe at
the Issue Price for any of the Open Offer Shares for which valid applications
are not received from Qualifying Shareholders under the Open Offer.
The Open Offer Shares, when issued and fully paid, will rank pari passu in all
respects with the Existing Ordinary Shares, including the right to receive all
dividends and other distributions hereafter declared, made or paid on the
Existing Ordinary Shares.
The Open Offer is conditional, inter alia, upon:
* the passing of the Resolutions to be proposed at the EGM;
* the Placing Agreement having become unconditional in all respects (save in
respect of any condition relating to the Acquisition Agreement becoming
unconditional in all respects) and not being terminated in accordance with its
terms;
* the Acquisition Agreement having become unconditional in all respects
(save in respect of any condition relating to the Placing Agreement becoming
unconditional in all respects); and
* Admission.
Application will be made for Open Offer Shares to be admitted to trading on AIM.
It is expected that Admission will become effective and dealings will commence
in the Open Offer Shares on 23 June 2003.
Extraordinary General Meeting
A notice convening the Extraordinary General Meeting of the Company to be held
at 11.00 a.m. at the offices of Evolution Beeson Gregory, The Registry, Royal
Mint Court, London EC3N 4LB on 20 June 2003 has been sent to Shareholders today.
The following resolutions will be proposed at the EGM:
Resolution No. 1 will be proposed as an ordinary resolution for the purpose of:
(a) approving the Acquisition; and
(b) authorising the Directors, pursuant to section 80 of the Act, to allot up to
20,000,000 Ordinary Shares.
Resolution No. 2 will be proposed as a special resolution to:
(a) empower the Directors, pursuant to section 95 of the Act, to allot the 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) increase the borrowing powers of the Directors to accommodate the facility
agreement to be entered into Bank of Scotland.
Recommendation
The Directors of Cardpoint plc consider that the Proposals are in the best
interests of the Company and its Shareholders as a whole.
Accordingly, the Directors have unanimously recommended Shareholders to vote in
favour of the Resolutions as they have irrevocably undertaken to do in respect
of their own shareholdings amounting to 6,365,492 Existing Ordinary Shares
(representing approximately 29.95 per cent. of the existing issued ordinary
share capital of the Company).
In addition the Company has received irrevocable undertakings from certain other
Shareholders holding 3,017,534 Existing Ordinary Shares, representing
approximately 14.20 per cent. of the existing issued ordinary share capital of
the Company, to vote in favour of the Resolutions. Consequently the Company has
received irrevocable undertakings to vote in favour of the Resolutions from
Shareholders holding, in aggregate, 9,383,026 Existing Ordinary Shares,
representing approximately 44.15 per cent of the existing issued ordinary share
capital of the Company.
TIMETABLE OF PRINCIPAL EVENTS
Record Date for the Open Offer close of business on 27 May 2003
Latest time and date for splitting of Application Forms (to
satisfy bona fide market claims only) 3.00 p.m. on 17 June 2003
Latest time and date for receipt of Forms of Proxy for the
EGM 11.00 a.m. on 18 June 2003
Latest time and date for receipt of Application Forms and
payment in full under the Open Offer 3.00 p.m. on 19 June 2003
Extraordinary General Meeting 11.00 a.m. on 20 June 2003
Readmission on the Exiting Ordinary Shares and Admission and
dealings commence in the Open Offer Shares 8.00 a.m. on 23 June 2003
CREST stock accounts credited 23 June 2003
Definitive share certificates despatched by 30 June 2003
Words and expressions defined in the prospectus of the Company dated 29 May 2003
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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