Published: Wednesday November 02, 2011


GB Group plc
£11.2 million Acquisition of Capscan Parent Ltd

Acquisition, Proposed Vendor Placing and Cash Placing

GB Group plc ("GB Group" or the "Group" or the "Company"), the leading Identity Management specialist, announces that it has conditionally agreed to acquire Capscan Parent Ltd ("Capscan" or the "Acquisition"), a leading supplier of customer registration and address management software solutions for a consideration of £11.2 million net of cash acquired to be satisfied by the net proceeds of the placing and the cash on the Group's balance sheet.

In addition, Peel Hunt LLP ("Peel Hunt") has conditionally placed 20 million new Ordinary Shares with new institutional investors, existing institutional investors and Directors at the Placing Price of 40 pence per Share to raise approximately £8 million for the Company. The Placing has been fully underwritten by Peel Hunt, subject to certain conditions set out in the underwriting agreement.

The Board believes that the Acquisition will:

be earnings enhancing in the Group's first full financial year as part of the enlarged Group; 
significantly advances the Groups Strategy to lead in the market for Identity Management estimated by the Directors to be circa £435m in the UK and significantly more globally, and; 
continues the Company's stated strategy of expanding both organically and by acquisition; 
Information on Capscan

Capscan is a leading supplier to the estimated £75 million(1) and growing UK customer registration and address management software solutions market and also has a growing presence in the international address management market. Its products and services are used in markets such as Financial Services, Retail and Leisure to help organisations rapidly verify accurate customer address details, an important attribute of Identity Management. Capscan is headquartered in London, employees 54 people and has approximately 1,800 customers.

For the year ended 31 March 2011, Capscan returned revenues of £6.8 million, adjusted EBITDA(2) of £1.2 million and net assets as at that date were £3.9 million.

Reasons for the Acquisition

The Management believes that the Acquisition:

significantly advances the Groups Strategy to lead in the market for Identity Management estimated by the Directors to be circa £435m in the UK and significantly more globally; 
creates the clear number 2 in the UK customer registration and address management software solutions market; 
will create cross-sell and up-sell opportunities for the combined client base from GB Group's wider Identity Management products and services; 
delivers functionality and software integrations that GB Group would, without the acquisition, have had to replicate and also provides additional sales and software development resource; 
will generate accelerated international reach for the Group's global Identity Management aspirations, where GB Group also offers wider age and identity verification for business operating in countries such as USA, Canada, Germany, Australia and South Africa, in addition to Capscan's international addressing capabilities in 240 countries; 
offers good synergy opportunities for technology, data agreements and supplier relationships and will improve the enlarged Group's operating margins; and 
is expected to be earnings enhancing in its first full year as part of the enlarged Group. 
Background to Customer Registration and Address Management Software Solutions Market

An accurate postal address is an important item of Identity data in the vast majority of business transactions. An accurate postal address is used to identify a person's location for a wide range of needs such as validating financial transactions, rapidly recording a new customer's personal data, delivering items to a location in a timely maner and billing customers. Addresses are also valuable from a legal perspective to place charging orders and bind contractual agreements between parties. In addition, addresses are also used to quickly help to confirm the location of individuals in emergency situations and help determine government policy.

Customer Registration and Address management software solutions provide rapid access to the Royal Mail Postcode Address File ("PAF"), which is a universally published UK postal address reference database, licenced by Royal Mail. Several thousand organisations have integrated PAF into call centres, web sites, CRM and billing systems. Both GB Group and Capscan enhance the PAF file for their customers with additional population reference data and propietery software toolkits which provide clients with added value in these deployments.

With more than 1.25 million changes to PAF a year (i.e. new addresses, amendments & deletions), end users require regular software and PAF updates, whereby users can also up-date their existing customer address records to achieve bulk postal discounts, reduce goods returned error rates and comply with UK Data Protection Act requiring organisations to keep data accurate and up-to-date.

While the market for customer registration and address management software solutions is well established, with growth of circa 3%(3) per annum, margins are attractive and competitive switching is low because of the complexity of integration with third party applications and the overhead of maintaining and enhancing this complex data set.

For the end user, customer registration and address management software solutions provide operational cost savings and efficiencies as a result of the ability to:

rapidly record a full postal address from just a postcode and house number, saving people time and reducing data entry errors. 
accurately capturing customer delivery information for efficient distribution and billing. 
benefit from standardised address structures which warrant postal Mailsort discounts on bulk mailings. 
de-duplicate customer records to minimise wasted customer service and mailing costs. 
From an International Addressing perspective more organisations need to verify and maintain accurate postal address information in many different country specific characters, symbols and address compositions dependent upon the local geography. Capscan has strong credentials in International Addressing solutions, helping to administer cross border trading with access to postal data for 240 countries.

To read the announcement in full please click here.