11th Oct 2007 07:00
Innovation Group PLC11 October 2007 The Innovation Group plc Proposed acquisition of Nobilas Claims and Fleet Solutions 11 October 2007 The Innovation Group plc ("Innovation" or the "Group") (LSE:TIG.L/TIG.LN), whichprovides outsourcing services and software solutions to the world's insurancemarkets, announces today that it has conditionally offered to acquire from AkzoNobel NV ("AN") certain businesses and assets of Nobilas Claims and FleetSolutions ("Nobilas") subject to Innovation shareholder approval and theconclusion of consultation procedures (the "Acquisition"). Immediately following completion of the Acquisition, Innovation will combine itsprofitable Innovation Motorcare business with that of Nobilas to provideservices on a pan-European basis to the insurance, leasing, fleet and rentalmarkets. Acquisition highlights: • Innovation has conditionally offered to buy Nobilas SAS (France), Nobilas GmbH (Germany), Nobilas Iberica SL (Spain), Nobilas UK Ltd and certain assets of Nobilas operations in the US, the Netherlands and Belgium for a total consideration of €0.85m (£0.59m) which will be satisfied from existing cash resources. The other existing activities of Nobilas are excluded from this transaction. • Nobilas is a strong brand in the €90 billion European accident claims market which is consolidating into a smaller number of cross border providers. Within this market, Nobilas provides services to pan-European and US customers that require automotive claims management outsourcing services. • The Acquisition is strategically complementary to Innovation's existing Motorcare business, a leading provider of motor accident and breakdown management services in the UK and Germany, and will provide Innovation with both additional volumes in the UK, Germany and the US and new customers in the new territories of France, Spain, the Netherlands and Belgium. Nobilas processes approximately 250,000 transactions per annum. • The Acquisition enables Innovation to establish a platform for the immediate growth of Innovation Motorcare on a pan-European basis at both a lower cost and lower risk than would result from organic expansion or country by country acquisitions. • For the year ended 31 December 2006, Nobilas reported revenues of €11.4m (£7.9m) and a loss before tax of €13.3m (£9.2m). These losses were incurred as a result of the considerable resource that has been invested by AN in establishing the business and in anticipation of servicing higher volumes. • Following extensive due diligence, the directors of Innovation (the " Directors") have developed a detailed integration plan which gives the Directors great confidence that, immediately following completion, Nobilas can be combined with Innovation Motorcare to result in significant synergies and improved efficiency. • The Directors anticipate that the one-off costs of this integration will be up to €8.0m (£5.5m) to be incurred in the year ending 30 September 2008. The Acquisition is expected to be earnings dilutive in the year ending 30 September 2008 but earnings enhancing for 2009*. However as stated in the Trading Update of today, the upward revision of the Group's expectations will be offset in 2008 by the financial impact of the Acquisition. • The Acquisition is conditional upon, inter alia, the approval of Innovation shareholders at an Extraordinary General Meeting to be convened in due course. Further details relating to the Acquisition are set out below. * This statement is not intended to constitute a profit forecast for thefinancial year ending 30 September 2008 or any other year, nor should thisstatement be interpreted to mean that earnings or earnings per share for thecurrent or future financial years will necessarily match or exceed the historicpublished earnings per share for either Innovation or Innovation and Nobilascombined. Hassan Sadiq, Chief Executive Officer of the Innovation Group plc, said: "Combining Nobilas with our existing Motorcare business enables Innovation toprovide automotive claims management outsourcing services on a pan-Europeanbasis, a service which our customers increasingly require. We have identifiedsignificant benefits from merging the two businesses and are confident of theprospects for the enlarged business." Hans Wijers, Chief Executive Officer of Akzo Nobel NV, said: "Nobilas has proved to be very successful and as a result of substantialinvestment has progressed extremely well in a relatively short space of time butas a company we are increasingly concentrating on our core expertise in thecoatings and chemicals industries and we needed to find a new owner who wasbetter positioned to take Nobilas to the next level." This summary should be read in conjunction with the full text of thisannouncement. A presentation to analysts will be held at 9.30am today at College Hill'soffices, The Registry, Royal Mint Court, London EC3N 4QN. The Group intends toannounce its preliminary results on 4 December 2007. Enquiries: The Innovation Group plc +44 (0) 1489 898300 Hassan Sadiq, Chief Executive OfficerPaul Hemsley, Group Finance Director College Hill +44 (0) 20 7457 2020 Sara MusgraveBen Way Proposed acquisition of Nobilas Claims and Fleet Solutions Introduction The Innovation Group plc ("Innovation" or the "Group") (LSE:TIG.L/TIG.LN), whichprovides outsourcing services and software solutions to the world's insurancemarkets, announces today that it has conditionally offered to acquire from AkzoNobel NV ("AN") certain businesses and assets of Nobilas Claims and Fleetsolutions ("Nobilas") subject to Innovation shareholder approval and theconclusion of consultation procedures (the "Acquisition"). Immediately following completion of the Acquisition, Innovation will combine itsprofitable Innovation Motorcare business with that of Nobilas to provideservices on a pan-European basis to the insurance, leasing, fleet and rentalmarkets. The Acquisition is conditional upon, inter alia, the approval of Innovationshareholders which is to be sought at an Extraordinary General Meeting ("EGM").A circular containing further details of the Acquisition and convening the EGMwill be sent to shareholders as soon as possible. Information on Nobilas Nobilas was established as a separate business unit by AN in 2004 to be aleading international accident management service provider to the fleet leasingand insurance sectors. Nobilas has since developed a significant internationalrepairer network through acquisition and organic growth, largely centered withinEurope, and has been attempting to gain customers to match its infrastructure.Utilising this network, Nobilas provides a suite of automotive claims processeson a contract basis to customers both locally and on a pan-European basis.Nobilas has operations in France, Germany, Spain, Belgium, the Netherlands, theUK and the US handling approximately 250,000 transactions per annum and employsapproximately 300 people. The other activities of Nobilas are excluded from theAcquisition. Nobilas provides outsourcing services and accident management including firstnotice of loss call centres, repair management, loss assessment, working capitalmanagement, uninsured loss recovery, supplier network management and managementinformation. This is a €90 billion market which the board believes isconsolidating into a smaller number of cross-border providers and Nobilas hasbeen well positioned to provide capacity to pan-European and US customers. AN has now decided to focus on the chemicals and coatings industries and Nobilaswas therefore put up for sale in June 2007. Financial information on Nobilas The table below sets out the key unaudited financial results of Nobilas for theyear ended 31 December 2006 after adjustment for Innovation's accountingpolicies under IFRS: •m £mRevenue 11.4 7.9Loss before tax(1) (13.3) (9.2)Gross assets 18.8 12.7 (1) Excludes a management charge of €8.2m (of which €1.6m was in respect ofamortisation) which was levied on Nobilas by the Nobilas head office company inthe year ended 31 December 2006 and which is not included as part of theAcquisition. The substantial historic losses incurred by Nobilas are a result of theconsiderable resource that has been invested by AN in establishing the businessand in anticipation of servicing higher volumes. Following extensive due diligence, the directors of Innovation ("Directors")have developed a detailed integration plan, details of which are set out below,which gives them great confidence that, immediately following completion,Nobilas can be combined with Innovation Motorcare to result in significantlyreduced costs and improved efficiency. The Directors anticipate that theone-off costs of this integration will be up to €8.0m (£5.5m) to be incurred inthe year ending 30 September 2008. The Acquisition is expected to be earnings dilutive for the year ending 30September 2008 but earnings enhancing for 2009*. However as stated in theTrading Update of today, the upward revision of the Group's expectations will beoffset in 2008 by the financial impact of the Acquisition. * This statement is not intended to constitute a profit forecast for thefinancial year ending 30 September 2008 or any other year, nor should thisstatement be interpreted to mean that earnings or earnings per share for thecurrent or future financial years will necessarily match or exceed the historicpublished earnings per share for either Innovation or Innovation and Nobilascombined. Background to and reasons for the Acquisition Innovation has been an established provider of accident management services inboth the UK and Germany since the acquisition of the Innovation Motorcarenetwork in November 2000. Innovation Motorcare is a profitable and expandingbusiness which currently handles approximately 200,000 claims per annum. On a worldwide basis, the Innovation Group has core competencies in theprovision of first notice of loss call centres, repair management, lossassessment, working capital management, supplier network management andmanagement information. Additionally, as a provider of technology to insuranceand other risk carriers, it builds and operates the underlying business systemsthat are required to manage the scale of the underlying processes. In particular, the Directors believe that the Acquisition is strategicallyimportant and will provide the following benefits: • Pan-European presence - following the Acquisition, Innovation will be positioned as the only independent company with the ability to deliver automotive claims management outsourcing services on a pan-European basis. The Acquisition will consolidate Innovation Motorcare's existing presence in the UK and German markets and adds new territories in France, Spain, the Belgium, the Netherlands, Austria and Switzerland; • Established platform for immediate growth - enables Innovation to invest in a business where start up risks and costs have already been incurred and therefore provides Innovation with a lower cost, faster route to implementing its strategy than developing the Innovation Motorcare business organically; • Claims volume - Nobilas handles approximately 250,000 transactions per annum and significant transaction volumes will be added in each of Innovation's target markets; • New customers in new markets - Nobilas brings new blue chip customers to the Group and Innovation will extend its European service offering to customers from insurance to the leasing, car rental and fleet management sectors; • One stop solution to customers - the Nobilas service is designed to provide the complete range of services to customers facilitating new opportunities with existing Innovation customers; • Synergies - the UK and German operations of Nobilas will be operationally combined with those of Innovation and this is anticipated to secure significant synergies. In addition, Innovation will combine Nobilas business systems with its own technology products; and • Senior management - Nobilas brings experienced European and US senior management to further strengthen Innovation Motorcare's existing management. Overall, the Acquisition strengthens Innovation's existing business and helpsthe Group to significantly increase its scale and capability at a time whencustomers are seeking larger and 'one stop shop' solutions to meet their needs. Structure of enlarged Group The Nobilas operations will become part of the existing European and USoperations of the Group on completion. The assets acquired will be added to theportfolio of products and services that the Group's sales team presents to itscustomers. Integration plan The Board recognises that successful integration of the Nobilas operations withthe Group's existing operations is critical to the long term success of theAcquisition. Accordingly, a detailed integration plan has been developed. Keyfeatures of the integration plan include: • achieving a consistent operating model in all relevant countries in line with the existing Innovation model; • developing and sustaining a country by country based management structure with individuals taking ownership for their geographies; • rationalisation of the combined operations in the UK, the US and Germany; and • harmonising key functions such as human resources, remuneration policies and practices and standardising financial controls and reporting procedures. The board believes that the implementation of the integration plan will enablethe Group to maximise the benefits of the Acquisition and minimise businessdisruption during the integration period. Principal terms Innovation has conditionally offered to acquire Nobilas France SAS, Nobilas GmbH(Germany), Nobilas Iberica SL (Spain), Nobilas UK Ltd and specific customercontracts and other assets of Nobilas operations in the US, the Netherlands andBelgium for a consideration of approximately €0.85m (£0.59m). The offer issubject to Innovation shareholder approval and the conclusion of consultationprocedures. Excluded from this transaction and retained by AN are theinternational operations of Nobilas which include the head office management ofthe various operating companies that are being acquired. At completion, by wayof a working capital adjustment, AN will settle to/from Innovation by way ofpayment/receipt all or any assets/liabilities that exist at that date. Theamount to be paid, by Innovation under the working capital adjustment (if any)is not expected to be material in the context of the consideration. Funding The consideration of €0.85m (£0.59m) and integration costs (including one-offintegration costs of up to €8m (£5.5m)) are being financed entirely fromexisting Innovation cash resources. Innovation's current trading and prospects Innovation has today announced separately a trading update for the year ended 30September 2007 which contains the following statement: "The Innovation Group plc ("Innovation" or the "Group") (LSE:TIG.L/TIG.LN),which provides outsourcing services and software solutions to the world'sinsurance providers, today announces a trading update for the year ended 30September 2007. The results are ahead of the Board's expectations in constantcurrency, and in line with the Board's expectations post currency effect. The transformation into a technology-led BPO provider is now complete,reflecting the fact that approximately 77% of Innovation's revenues are nowrecurring. Innovation signed several multi-million pound recurring revenuecontracts with blue chip clients including the Group's largest ever BPO dealwith Royal and SunAlliance, estimated to be worth more than £25 million overfive years. Like BPO, software revenue is up year on year, reflecting a significant increasein both recurring software and solution delivery revenue. The IBM relationship delivered good progress in 2007 and the integration ofUS-based First Notice Systems (acquired in January 2007) has exceeded internalplans. The Board is pleased with the progress of the business to date and encouraged bythe current high level of demand for its services across the globe. Thisdemand, supported by an encouraging pipeline of prospects, together with higherthan expected levels of future recurring revenue, leads the Board to reviseupwards its expectations for the year to 30 September 2008*. Announced separately today is the proposed strategic acquisition of Nobilaswhich will combine with Innovation's Motorcare business to provide pan-Europeancapability. The aforementioned upward revision of the Group's expectations willbe offset in 2008 by the financial impact of the Acquisition. The Acquisitionis expected to be earnings enhancing from 2009 *." * This statement is not intended to constitute a profit forecast for thefinancial year ending 30 September 2008 or any other year, nor should thisstatement be interpreted to mean that earnings or earnings per share for thecurrent or future financial years will necessarily match or exceed the historicpublished earnings per share for either Innovation or Innovation and Nobilascombined. Shareholder approval and timetable Due to the ratio of Nobilas' losses in relation to Innovation's profit for theyear ended 30 September 2006, the Acquisition is a Class 1 transaction under theListing Rules published by the UK Listing Authority ("Listing Rules") and istherefore subject to Innovation shareholder approval which will be sought at anEGM to be convened in due course. A circular to shareholders incorporatingnotice of the EGM will be dispatched to shareholders as soon as possible. Enquiries: The Innovation Group plc +44 (0) 1489 898300 Hassan Sadiq, Chief Executive OfficerPaul Hemsley, Group Finance Director College Hill +44 (0) 20 7457 2020 Sara MusgraveBen Way General: This announcement has been issued by, and is the sole responsibility of, TheInnovation Group plc. Hoare Govett Limited, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting as sole financial adviser, sponsorand broker to the Company and no one else in connection with the Acquisition,and will not be responsible to anyone other than the Company for providing theprotections afforded to its clients or for providing advice in relation to theAcquisition, or any other matters referred to in this announcement. This announcement contains forward-looking statements, which are based on theBoard's current expectations and assumptions and involve known and unknown risksand uncertainties that could cause actual results, performance or events todiffer materially from those expressed or implied in such statements. It isbelieved that the expectations reflected in these statements are reasonable, butthey may be affected by a number of variables which could cause actual resultsor trends to differ materially. Each forward-looking statement speaks only as ofthe date of the particular statement. Except as required by the Listing Rules,the London Stock Exchange or otherwise by law, the Company expressly disclaimsany obligation or undertaking to release publicly any updates or revisions toany forward-looking statements contained herein to reflect any change in theCompany's expectations with regard thereto or any change in events, conditionsor circumstances on which any such statement is based. No statement in this announcement is intended to be a profit forecast or toimply that the earnings of Innovation for the current year or future years willnecessarily match or exceed the historical or published earnings of Innovationor Nobilas Claims and Fleet Solutions. Notes to editors: The Innovation Group plc ("Innovation" or "Group") provides outsourcing servicesand software solutions to insurers and other risk carriers. The softwaresolutions are designed for the handling of policy and claims administrativeprocesses within the insurance industry. The solutions can be utilised inconnection with the Group's outsourcing operations or implemented on a standalone basis. Approximately 77% of the Innovation Group's total revenues are nowrecurring with the remainder coming from the sale and support of its softwaresolutions. The Group provides software and outsourcing services on a non-brandedbasis and does not perform insurance underwriting functions. The global BPO market is estimated to grow at 14% CAGR from 2007 to 2010according to IDC (May 2006) and outpace IT services. In North America, BPO isestimated to grow by an 8.8% compound annual growth rate to $100 billion by2009. Gartner 2005. Datamonitor, August 2006, has also said there has been a continued increase inthe propensity to outsource business processes in the insurance industry with47% of insurers using one or more BPO services in 2006 compared to 41% in 2005.Claims and policy administration BPO (Innovation's specialty) are the highestpriority business functions for BPO and among the fastest growing BPO areas. Innovation has over 220 global clients including the Ford Motor Company, Aviva,AXA Insurance, Royal & SunAlliance, Toyota (South Africa) and Zurich (UK). TheGroup processes more than 3 million claims per year with 20% direct claims costsaving achieved. The software operates in 8 languages and the Group hasapproximately 2000 people across offices in North America, the UK, Germany,South Africa, Australia and Japan. www.innovation-group.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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