10th May 2007 08:16
IDOX PLC10 May 2007 IDOX plc 10 May 2007 IDOX plc ("IDOX" or the "Company") Acquisition of CAPS Solutions Limited 1. Introduction IDOX has conditionally agreed to acquire the entire issued share capital of CAPSSolutions Limited ("CAPS"), a privately owned, profitable UK-based companyfocused on the provision of software solutions, primarily to local authorities.The consideration for the Acquisition is to be satisfied by a cash payment of£21 million. In order to finance in part the Acquisition and provide the Enlarged Group withsufficient working capital, the Company proposes to raise £11.0 million (£9.6million after expenses) by way of a Placing of 146,666,667 New Ordinary Sharesat 7.5p per share. Certain Directors, who already have shareholdings in theCompany, and the Proposed Director are participating in the Placing and willsubscribe for a total of 5,066,667 Placing Shares having an aggregate value of£380,000 at the Placing Price. The Placing has been arranged by Noble & CompanyLimited. Due to the size of CAPS in relation to the Group, the Acquisition constitutes areverse takeover under the AIM Rules and is therefore subject to approval ofShareholders. Such approval is being sought at the EGM which has been convenedfor 10.00 a.m. on 4 June 2007. If the Resolutions are duly passed at the EGM, and the other conditions set outin the Acquisition Agreement and Placing Agreement are met, the Enlarged ShareCapital will be admitted to trading on AIM. Dealings on AIM in the EnlargedShare Capital are expected to commence on 5 June 2007 in respect of the VCTShares and Existing Ordinary Shares and on 6 June 2007 in respect of the Non-VCTShares. 2. Background to and reasons for the Acquisition Following completion of a strategic review in 2006, the Board announced inDecember 2006 that it intended to pursue a strategy of refocusing IDOX on itscore business of providing software, solutions and services to government andrelated bodies. Following a solid start to trading in the IDOX software businessfor the current financial year, the Board believes that the acquisition of CAPSwill re-affirm and reinforce this strategy and provide IDOX with: • significant earnings enhancement and synergistic revenue and certaincost reduction opportunities; • an opportunity to increase market share of the Enlarged Group; • a strengthening of IDOX's senior management team; • a strategic partnership with one of the world's leading GeographicalInformation Systems (GIS) software providers; and • a platform for further acquisition growth. 3. The market 3.1 Drivers and trends in ICT and other public sector spending Policy drivers The provision of public sector services has, in recent years, been the subjectof a number of government initiatives and studies, including: • The Modernising Government Programme, first published in 2000; • The Gershon Review, "Releasing Resources for the Frontline: IndependentReview of Public Sector Efficiency", published in 2004; • The e-government initiative, which was introduced after the Labourgovernment was elected in 1997; • The Transformational Government Strategy, issued in November 2005; • Strong and prosperous communities - The Local Government White Paper,published in October 2006; • The Lyons Report, published in March 2007; and • Government operational targets and the Pendleton surveys of e-planningservices available on local planning websites. The Directors expect that further initiatives aimed at improving the publicsector service delivery will be adopted in the foreseeable future driven by adesire to increase the quality and accessibility of public services. ICT isexpected to be a central element in the achievement of this objective. In the market report of Kable Limited ("Kable") of March 2007 entitled "UKpublic sector overview to 2012" ("Kable Report"), Kable anticipates that growthin public spending will slow to levels comparable with growth in the overalleconomy and that, in this context, growth in ICT spending will be constrained.The Directors believe that this will require the continued development ofsystems, services and solutions, provided increasingly by the private sector.The pressure will be to go on providing better public services, moreefficiently, for the same budget, within the constraints of the ComprehensiveSpending Review (CSR), which is currently underway. Local government ICT Local government accounts for the largest proportion of public sector ICTexpenditures, representing £3.5bn, or 25 per cent. of total UK public sector ICTexpenditure in 2006/07. The local government sector represents the keymarketplace for each of IDOX and CAPS. Following the expiry of the e-governmentdeadline in 2005, there was some slow-down in ICT spending growth in localgovernment, but this has recovered, and the sector is now growing again,although such growth may slow in the longer term. The Kable Report predicts thatlocal government ICT spend will expand at a compound annual growth rate of 6.6per cent. per annum between 2005/06 and 2011/12, compared with the average forthe public sector of 4.9 per cent. per annum. Local government ICT spend as aproportion of public sector ICT spend is expected to grow to 23.8 per cent. inFY2011/12, up from 21.6 per cent. in FY2005/06. Delivery of visible benefits The Directors believe that continued government pressure to improve front-lineservices, as envisaged in the Lyons Report, and other factors such asdemographic change, will put increasing pressure on public services in thefuture to deliver more, within the same overall budget. In addition, theDirectors expect that shortages of skilled staff in an ageing local governmentworkforce will necessitate improved and efficient processes using ICT ine-solutions. The Directors believe that productivity will therefore remain the key factorshaping public sector ICT investment, with a change in emphasis from theback-office to improved responsiveness and better communication with the public.For suppliers, the future value proposition to the public sector needs to begrounded in delivering business benefits that deliver a demonstrable return oninvestment and are visible to a wider constituency. The Transformational Government Strategy anticipated some of the key issues thatneed to be addressed in the CSR. It set out a vision for 21st centurygovernment, requiring three transformations: • services enabled by IT must be designed around the citizen or business,not the provider, and provided through modern, co-ordinated delivery channels; • Government must move to a shared services culture - in the front office,in the back office, in information and in infrastructure - and releaseefficiencies by standardisation, simplification and sharing; and • there must be a broadening and deepening of government's professionalismin terms of the planning, delivery, management, skills and governance of ITenabled change. The first of these transformation elements emphasises the central role that ICTwill need to play in order to deliver the above transformations. Local authorities have been encouraged, by the Government's e-governmentinitiative, to utilise the increased take-up of web-based services and broadbandby the public to communicate more efficiently with their stakeholders. TheDirectors believe that local authorities will continue to invest to use thismedium further to meet government standards. 3.2 Implications for IDOX and CAPS IDOX and CAPS are both well placed to benefit from the legislative driversoutlined above and the Directors believe that the products of the two businessesare set to enable the change so demanded. IDOX capitalised on the early expenditure in e-government by being an earlyadopter of browser and database technology to deliver cost effective imagestorage solutions to local government. Added to this, its further development ofprocess workflow, records management, electronic forms, and consultancy servicesofferings, means that it is able to offer local government an easilyconfigurable solution or service to manage the vast quantity of informationgenerated by it. CAPS' nine "UNI-form" software modules and related consultancy and servicesprovide legislatively up-to-date front- to back-office solutions which reflectrelevant legislation, which currently integrate with IDOX products to delivermore efficient processes that enable local authorities to deliver the citizen-and business-centric services outlined in the Transformational GovernmentStrategy. CAPS' solutions make information and services available to citizensand businesses via the local authority's website. CAPS' systems are able tocommunicate with other third party applications to interchange data, providingclients with opportunities to improve the way they make data work for them,reducing duplication and improving inter-departmental co-operation. 4. Information on IDOX 4.1 History IDOX is an information management company, specialising in the development anddelivery of software products, services and people predominantly to the publicsector. It counts half the UK local authorities as customers. IDOX has been a supplier to the public sector since 1995, when it delivered asolution for the planning department of Wandsworth Council two years before thee-government initiative began. This established the platform for continuingdevelopment of IDOX software for local authority purposes. IDOX was admitted to AIM in December 2000. Between 2002 and 2004, IDOX madethree corporate acquisitions to expand its offering to incorporate informationmanagement services, recruitment and the provision of content, including theacquisition of TFPL Limited, a specialist recruitment and information servicesbusiness, in May 2004. During 2006 the Board re-organised the business into three clearly defineddivisions: • IDOX Software; • Information Solutions; and • Recruitment. At the same time, the Board re-affirmed a corporate strategy concentrating onthe core IDOX Software division, with plans to divest non-core businesses,including Recruitment. 4.2 IDOX's businesses a) IDOX Software IDOX Software is one of the largest providers of solutions for managing paperand electronic records in local government in the UK. The modules within itsproduct portfolio enable an organisation to capture, store, manage, preserve andpublish information. At the core of the portfolio is a document and recordsrepository which has the facility to handle many types of documentation,including multimedia, electronic documents, forms and email, or scanned imagesfrom paper. All of the information stored within IDOX Software is easilysearchable and can be made available on the internet for use by the public, onan intranet for use by internal staff or on an extranet for use by partnerorganisations via its Web Access module. Product portfolio Each implementation of the IDOX Software document management system can bespecifically tailored to the customer's requirements. IDOX's six modules,described below, are available individually or in a variety of combinations. • Document Management - An award-winning, flexible and easy-to-usedocument management system which can be implemented in a single department orthroughout an entire organisation. Used in day-to-day case management, thisapplication seeks to reduce the costs associated with managing paper andelectronic files. • Workflow - Winner of the IM2000 Award for best workflow product, theWorkflow module provides a solution to the problems of information management.The concept of Workflow involves the automation of a business process in whichdocuments, information or tasks are distributed from one user to another or onedepartment to another. • Knowledge Management - This component integrates optical characterrecognition (OCR) software with a free text search facility that uses leadinginternet technology, allowing simple or complex free text searches on the titleas well as the content of documents stored in the document management system. • Web Access - Provides organisations with a powerful and cost effectivemethod of accessing, managing and publishing documents and information over theinternet - whether via the organisation's own website, another hosted website,an extranet or an intranet. The Web Access module enriches existing websites byproviding user registration, document display, feedback, online forms andelectronic payment. • XML Forms - Enables both internal staff and external customers tocomplete electronic forms using a web browser, enabling an organisation tocompletely replace paper forms with electronic forms and negating the need forthe re-entry of data. • XML Server - The XML server complements the total suite of products byproviding the most advanced set of XML (eXtensible Mark-up Language) integrationfunctionality available. Together with XML Forms, XML Server allows end-to-endintegration of data from the internet. If a member of the public completes anelectronic form on the website, this data is then pushed straight through intothe back office application with no need to re-enter data at any point in theprocess. Managed Services IDOX has developed its managed services expertise by providing its flagshipservice, UKPlanning, to local authorities over the past six years. UKPlanningrepresents an end-to-end e-planning solution for local authorities and theircitizens. It is designed to provide Planning & Building Control departments withan efficient means of realising e-government targets quickly, whilst reducingthe risk of administering applications, both online and offline. It removes theneed for planning and building control departments to set up their own internetsolution and, more importantly, keep the information up to date. Planningapplications are scanned and indexed using IDOX software and displayed on thecouncils' websites, and on the UKPlanning website, for public review andcomment. Applications can also be made online. b) Information Solutions Following its reorganisation in 2006, the Information Solutions divisionprovides services in two key areas: • Consultancy & Training, provided by the TFPL Consultancy & Training ("C&T") team (part of IDOX's wholly-owned subsidiary, TFPL Limited, acquired in May2004), is the first. This part of the business is focussing increasingly uponElectronic Content Management consultancy and solutions and also provides a widerange of courses on many aspects of information work; and • Content, where IDOX's team is one of the leading information providerson community, economic, environmental and physical regeneration and developmentin the UK. Consultancy & Training TFPL C&T offers clients expert advice and training to allow them to design,implement and deliver knowledge and information management solutions. Recentproject wins have included significant content migration, content integrationand taxonomy development assignments. C&T also specialises in consultancy in theareas of knowledge management, library and information services and recordsmanagement. The C&T team helped many public sector clients prepare for theimplementation of the Freedom of Information Act in 2005 through information andrecords audits, strategy and process development, procedures and awarenessseminars and training sessions. The team's training service provides both open and in-house courses in allaspects of knowledge, information and records management. The team also developsbespoke awareness and learning programmes for groups of clients. Content IDOX is one of the leading information providers on community, economic,environmental and physical regeneration and development in the UK. This includesforward planning and development control issues, e-government and ModernisationAgenda, enterprise development, lifelong learning, social inclusion issues andhealth and housing. To satisfy the need for relevant information, IDOX scans all issues of over 500journals and periodicals annually, looking for high quality, informativearticles on policy, its interpretation and its implementation, across a widerange of subjects, topics and issues. It also receives many newsletters, pressreleases, email alerts and eBulletins. In 2000, the British Library assessedIDOX's collection of semi-published materials as better than its own or thatheld by the former London Research Centre. c) Recruitment IDOX's recruitment offering is provided through its TFPL business. TFPL operatesa recruitment agency for knowledge, information, records, web & contentmanagement and for information provider positions. Services provided includeexecutive search and the placement of permanent, interim and contract personnelin all positions requiring knowledge, information, library, records or webcontent management skills and experience. The Directors believe that TFPL's key ability is to fill positions which requirea blend of industry experience, technical knowledge and management capability.To this end, TFPL maintains an extensive database of interviewed candidates atall levels from graduate through to chief executive and additionally assiststhem with career guidance and training. In the last 12 months it has extendedits services to provide specialist IT recruitment to its clients, adding to itscore services of information knowledge recruitment and information providerrecruitment. As announced in December 2006, the Board plans to divest non-core businesses,including recruitment. 5. Information on CAPS 5.1 History CAPS believes that it is the UK market leader in case management solutions whichare spatially enabled and which are developed exclusively for local governmentdepartments and agencies, bringing together information about land, people andproperty. It was formed in 1999 when its current owner, ESRI (Holdings) Ltd,purchased Norsk Data's local government business unit known as NDlg. Sincethen, CAPS has enjoyed a five-fold increase in revenues and a significantincrease in market share. Today it employs more than 150 people and hasapproximately 235 local authority customers, representing over 50 per cent. ofthe total number of local authorities in the UK. 5.2 CAPS' business CAPS works closely with local authorities to deliver technology products andservices that drive efficiencies, delivering a better service to citizens andbusinesses whilst helping local authorities to meet e-government targets. Itsrange of solutions brings together a number of UNI-form and partner products toaddress key issues at the heart of the e-government drive for efficiency andbest practice in local authority administration and service provision, such as: • Handling geographic information; • Land charges; • Integration with legacy applications; • Effective data and communication management; • Public access to information; • Licensing administration; and • Planning administration. Local authority processes, for which CAPS supplies its solutions, have thepropensity to create a substantial amount of paper documentation and IDOX has,in some instances, supplied a document management module which sits alongsideCAPS' information integration solutions. This allows the electronic managementof the significant volume of paper that accumulate in processes like planningapplications, and access to it via the web. UNI-form UNI-form is a suite of nine integrated core software modules and solutions plusa Gazetteer Management System and a range of sub-modules designed to enablelocal authorities to meet government targets for efficient service delivery byimproving the administration and management of the delivery of services. Each ofthe modules relates to a particular local government service and managesenquiries, applications and implementation of the service. Each module workseffectively as a comprehensive stand alone solution or in conjunction with otherUNI-form modules, or with third party products and applications. Each solutionis designed by government experts to meet the needs of the following localauthority services: • Building control - assisting control officers to administer buildingregulations; • Contaminated land - collection and collation of information andlicensing; • Environmental health - support to council officers: scheduling ofactivities, monitoring of sources of concern; the building of a fullenvironmental health profile of an area; • Estates management* - recording and storing of property asset data; • Licensing - used for the granting, updating, extending or cancelling ofa licence; • Planning - allows planning officers to review all relevant property andownership data for any planning application, view a map and other spatial dataof the area against local developments and utilities, as well as to manage thewhole process from the application, through environmental and waste checks,building and planning control, final permission and production of documents; • Private sector housing - a central repository of housing information foranalysis, monitoring, modelling of property needs and for the administration ofgrant allocations and inspections; • Land charges - faster delivery of information through automation ofsearches; • Trading standards - fulfilment of consumer protection obligations bytrading standards officers; • Gazetteer Management System (GMS)* - a central database includinggeographical information updated by applicants and case officers. The databaseis used for publication or to enable on-line enquiry. With the help of inbuiltgraphical information functionality, GMS provides visual representations of datain the form of maps, to help users assess and make decisions based onlocation-specific information; • Local development framework - centralisation, publication and on-lineinspection of records, policies and documents, relating to local service plans; • Street naming and numbering - management of naming process frombeginning to end; and • Anti-social behaviour - recording, processing and managing informationabout acts of antisocial behaviour. The UNI-form modules utilise software supplied by ESRI (UK) Limited, asubsidiary of the Vendor and ESRI Inc., a U.S. Corporation which is not part ofthe Vendor's Group. Such software provided by ESRI Inc. and ESRI (UK) Limitedwill be used by CAPS pursuant to the terms of a Master Licence Agreement andBusiness Partner Agreement respectively, details of which are set out inparagraphs 12.4 and 12.5 of Part V of the admission document. * These solutions are also supplied by ESRI (UK) Limited, a subsidiary of theVendor, as part of its business of designing and developing geographicinformation system (GIS) technology. 6. Competition The experience of the Directors leads them to believe that IDOX has a number ofcompetitors in the local authority marketplace. Anite Group plc is a UK fullylisted company, with one of its divisions focusing on software in the publicsector. Northgate Information Solutions plc is also a fully listed UK companywhich delivers software applications and outsourcing solutions to a number ofsectors including local government. Civica plc is an AIM listed company whichprovides consulting, software and managed services to the public sector andregulated services. CAPS' key competitors can be broken down into two distinct categories: (1) those whose portfolios cover a similar broad range of softwareapplications - including Northgate Information Solutions and Civica; and (2) those who specialise in providing business process softwareapplications to one or only a few areas of relevance to local authorities (buttend to be particularly strong niche players in those areas). These includeOcella, Swift LG, MIS, Innogistic and Plantech. CAPS is a leading provider of solutions relating to land, people and property.It has a portfolio that can integrate seamlessly across local authorityfunctions, whilst also providing strong stand alone solutions within individualdepartments. IDOX is a supplier of document management systems that focusessolely on local government. As a result the Directors believe that no othersupplier has an equivalent depth of market knowledge in this area. Large systems integrator organisations who would typically offer to outsourcethe whole of an authority's IT operations work with specialist providers likeIDOX and CAPS to provide the business process applications needed byauthorities. The Enlarged Group will provide a larger single supplier option forthese organisations and the Directors believe it will remain a highlycompetitive part of any outsourcing arrangement or consortium. 7. IDOX audited results for year ended 31 October 2006 The following summarises IDOX's financial performance for its last threeaccounting periods, showing the actual results for 2004-2006. Year ended 31 October 2004 Year ended 31 October 2005 Year ended 31 October 2006Turnover £9.6m £14.2m £13.0mOperating profit / (loss) £0.0m £0.8m £(0.7)mProfit / (loss) after tax £0.4m £1.6m £(1.0)m All of the revenue of IDOX is derived from within the European Union. 8. CAPS audited results for year ended 31 December 2006 The following summarises CAPS' financial performance for its last threeaccounting periods, showing the actual results for 2004-2006. Year ended 31 December 2004 Year ended 31 December 2005 Year ended 31 December 2006Turnover £11.3m £15.3m £16.4mOperating profit £1.2m £1.8m £1.4mProfit after tax £0.8m £1.4m £0.9m All of the revenue of CAPS is derived from within the European Union, except foran immaterial amount which is derived from the Bahamas. 9. Current trading, prospects and strategy IDOX The Directors believe that the Company's strategy to focus on its core businessof providing software, solutions and services to local government has beenvalidated by a number of new customer wins in IDOX's core market place. Overall,since October 2006, trading has delivered a strong performance, with improvedrevenue growth in the Software division. Software division The Software division has a growing prospect pipeline from new and existingclients interested in the Company's new products. New contract wins include a new Revenues and Benefits corporate system atCaerphilly County Borough Council, being the Company's largest Revenues andBenefits order yet. Further Revenues and Benefits orders were secured with Oadby& Wigston Borough and Herefordshire Councils. Other recent contracts securedsince October 2006 have included a corporate Electronic Document RecordManagement System (EDRMS) for Chichester City Council and a corporate solutionfor Fife Fire and Rescue. In relation to the Company's Planning, Licensing and Building Control publicaccess system, the Company won two contracts; one with Sevenoaks DistrictCouncil for its Online Planning Solution; and the other with WestNorthamptonshire Development Corporation, for the provision of its UK Planningmanaged service. These contract wins bring the total number of new software systems contract winssince October 2006 to seven. Information Solutions division The Information Solutions division is increasingly specialising in EnterpriseContent Management (ECM) consultancy and solutions. The division saw growth inorders from government and media clients. Consultancy contract wins, includingthe British Army, Department of Education and Skills and Yell amongst others,are delivering double digit revenue growth compared to the first half yearending 30 April 2006. The Information Solutions division initiated a project in April 2007 to completea global electronic content migration project for a large internationalprofessional services organisation. Recruitment division The higher margin permanent recruitment business continues to expand in both thetraditional markets and specialist IT appointments. The lower margin contractrecruitment business revenues remain below levels enjoyed in 2005 but themonthly revenue run rate has recovered from the low point in mid 2006. CAPS CAPS' primary focus of delivering business process applications software andconsultancy and training services to the local government market continues togenerate success. Financial performance for the first quarter of 2007 has beenin line with expectations and the forward sales opportunities pipeline remainsstrong from both existing and new customers. The launch of two new software sub-modules, Street Naming & Numbering andPlanning Expert System have been received well by prospective customers and aregenerating sales opportunities. 10. The opportunity The combination of the two businesses will result in an entity with pro formahistoric sales of over £29 million per annum, which the Directors believe willprovide the Enlarged Group with increased credibility to bid for larger, morecomplex contracts. The complementary products and services will also present the Group withconsiderable cross-selling opportunities. Between them, the two businessessupply their products to 70 per cent. of the number of local and developmentauthorities in the UK but only 12 per cent. use both IDOX and CAPS products. TheDirectors believe, therefore, that there is a significant opportunity tocross-sell into the combined customer base. In addition, the Board hasidentified in excess of £1.5 million of annualised cost savings which itbelieves can be implemented after the Acquisition is completed. The direct customer relationship created through CAPS and the access to CAPS'GIS mapping technology will allow bundling of CAPS and IDOX products, providinglocal authority departments with a full end-to-end solution, providing thecustomer with a pre-integrated solution, reducing the likelihood that a customerwill look to a third party to provide a document management solution andimproving the Enlarged Group's prospects of partnering in tenders with largerintegrators in the sector. The Directors believe that the Acquisition will deliver significant and tangiblebenefits for Shareholders and will provide IDOX with an excellent and enlargedplatform for further growth. The Board's strategy is for the Enlarged Group tobe the leading provider of front- to back-office solutions to the localauthority segment for land, property and people-based services. 11. Principal terms of the Acquisition The Company has agreed to acquire the entire issued share capital of CAPS for acash payment of £21 million to the Vendor. The Acquisition Agreement isconditional, inter alia, upon: (1) the passing of the Resolutions; (2) successful conclusion of the Placing; and (3) Second Admission occurring on or before 30 June 2007. It is expected that completion of the Acquisition and Second Admission will takeplace on 6 June 2007. Further details of the Acquisition Agreement are containedin paragraph 12.3 of Part V of the admission document. 12. Board of the Enlarged Group The Board of IDOX currently consists of Martin Brooks, Richard Kellett-Clarke,Peter Lilley, Nigel Oxbrow, John Wisbey, and Christopher Wright. SteveAinsworth, the current managing director of CAPS, will join the Board as ChiefExecutive Officer following the Acquisition and Martin Brooks will revert to hisprevious role of Chairman. The board of IDOX following completion of theAcquisition will therefore comprise: Martin Brooks, age 56, Chairman Martin Brooks was founding chief executive officer of Financial TimesInformation, now FT Interactive, the world's leading supplier of securitiesvaluation data from 1994 to 1998. Prior to that he was Managing Director ofExtel Financial Ltd., part of a career spanning 30 years in information,publishing and IT, starting with the Financial Times in 1977. His more recentassignments include chairing the publishing arm of The Institute of CharteredAccountants in England and Wales until 2002. Steve Ainsworth, age 41, Chief Executive Officer Steve is currently managing director of CAPS with responsibility for the overallleadership and management of the company and specific responsibility forfinancial and commercial issues. Steve joined CAPS as commercial director in2004 and was promoted to his current role in early 2005. Since this time CAPShas doubled in size from £8.5 million turnover and £0.5 million profit to over£16 million turnover and £1.5 million profit and from 85 staff to more than 150.Prior to joining CAPS, Steve was managing director of a small business and ITconsultancy company that he founded. He also spent three years as a director ofluxury housebuilder, Laing Homes. In his role at Laing, and previously in hisfive years as a principal consultant at PwC, Steve engaged in many businessperformance improvement projects and activities to transform the performance ofmany organisations. He has also held a number of positions within localgovernment. Richard Kellett-Clarke, age 52, Chief Financial Officer and Chief OperatingOfficer Richard has over 20 years of board experience. He was most recently financedirector of Brady plc. Prior to this he was managing director of AFX NEWS Ltd.He has held a variety of finance directorships with companies such as ExtelFinancial Ltd (now FT Interactive), Eurotherm Ltd (now part of Invensys plc),and Pickwick Group plc, as well as IT Director of Financial Times InformationLtd. John Wisbey, age 51, Non-Executive Director John Wisbey is chairman and chief executive officer of Lombard Risk Managementplc, an AIM quoted company that specialises in software for bank regulatoryreporting, risk management and valuation. He is also the former chairman ofIDOX. Before founding Lombard Risk Management plc, he worked for 12 years atKleinwort Benson Limited in various positions in London and the Far East. Hislast position there was as Head of Option Trading and a director in the SwapGroup. Christopher Wright, age 49, Non-Executive Director Christopher Wright was Global Head of Dresdner Kleinwort Capital from 1995 to2003 and a Group board member of Dresdner Kleinwort Benson. He is now a directorof Merifin Capital Group and advisory director of Campbell Lutyens and CoLimited. He is also a non-executive director of Lombard Risk Management plc,Quester VCT plc, Roper Industries Inc and other public and private companies inthe USA and elsewhere. Rt. Hon Peter Lilley MP, age 63, Non-Executive Director Peter Lilley, MP for Hitchin and Harpenden, held two major cabinet posts in thelast Conservative Government. He was Parliamentary Private Secretary toMinisters for Local Government from 1983-84. He was appointed Secretary of Statefor Trade and Industry from 1990-92, becoming Secretary of State for SocialSecurity from 1992-97. He was previously a director for Greenwell MontaguLimited. He is currently a non-executive director of JP Morgan FlemingsClaverhouse Investment Trust and a Member of the Advisory Board of the School ofManagement at the University of Southampton. Nigel Oxbrow, age 54, Non-Executive Director Managing Director of TFPL Limited until October 2006, Nigel has over 30 years ofexperience in the knowledge and information world and regularly advises clientson knowledge management and information management issues. He is a frequentspeaker at knowledge and information management conferences and a keencommentator on industry changes. Nigel is currently involved in many knowledgemanagement forums, and is on the advisory committees for Leeds, Loughborough andLong Island Universities. Previously he has been a member of the BritishStandards Institution's Knowledge Management Committee, chairman of EUSIDIC -the European Association of Information Services, a member of the UKGovernments' Library and Information Services Council, vice-president of theInstitute of Information Scientists, a member of the Board of Trustees of DublinCore Metadata Initiative, and a board director of the Special LibrariesAssociation. Nigel founded TFPL in 1987. 13. Share Incentive Arrangements The Directors believe that the Company's success is highly dependent on thequality and loyalty of its senior executives including both employees anddirectors. To assist in the recruitment, retention and motivation of highquality employees, the Directors believe that the Company must have an effectiveremuneration strategy. The Directors consider that an important part of theCompany's remuneration strategy is the ability to award equity incentives and,in particular, share options. Since 2000, the Company has adopted a series ofoptions and other share incentive arrangements designed to meet the requirementsof the Company at the time and to satisfy the various tax and other regulatoryrequirements applicable at the time. The overall limit of the number of shares available under all the differentarrangements was originally set at 15 per cent. of issued share capital and hasbeen maintained. Further details of the share incentive arrangements currently in existencetogether with details of the subsisting options as at the date of the admissiondocument are set out in paragraph 4 of Part V of the admission document. 14. Corporate governance The Directors acknowledge the importance of the principles set out in theCombined Code. Although compliance with the Combined Code is not compulsory forAIM companies, the Directors intend to continue to apply the principles as faras practicable and appropriate for a public company of its size as follows: Board The board will continue to meet regularly and will be responsible for strategy,performance, approval of major capital projects and the framework of internalcontrols. The board has a formal schedule of matters specifically reserved to itfor decision. To enable the board to discharge its duties, the directors willreceive appropriate and timely information. Briefing papers are distributed toall directors in advance of board meetings, while all directors have access tothe advice and services of the Company Secretary, who is responsible forensuring that procedures of the board are followed and that applicable rules andregulations are complied with. The articles of association provide thatdirectors are subject to re-election at the first opportunity after theirappointment and each member of the board will voluntarily submit to re-electionat intervals of three years thereafter. Audit committee The audit committee is made up of Christopher Wright (Chairman), Peter Lilleyand John Wisbey. The committee meets at least twice a year and meetings will bearranged in conjunction with the publication of the Enlarged Group's financialstatements. The committee will, inter alia, monitor the financial integrity ofthe Enlarged Group, review financial information, review accounting policies,clarity of disclosures, internal controls and risk management systems and theEnlarged Group's internal audit requirement and oversee the relationship withexternal auditors. Remuneration committee The remuneration committee is made up of Peter Lilley (Chairman), John Wisbeyand Christopher Wright. The committee meets not less than twice a year.Appointments to the committee are for a period of up to three years which may beextended for two further three year periods. The committee determines and agreeswith the board the framework for the remuneration and benefits of the executivedirectors and such members of the executive management team as it is designatedto consider. The remuneration of the non-executive directors is a matter for theexecutive directors. The committee reviews the appropriateness of theremuneration policy in the light of all relevant factors and has regard to theprovisions and recommendations of the Combined Code, the AIM Rules andassociated guidance. Nomination committee The nomination committee is made up of Peter Lilley (Chairman), John Wisbey andChristopher Wright. AIM compliance committee In line with new regulations, the Company intends to establish an AIM compliancecommittee in the near future. 15. Dividend policy Following the Company's maiden dividend of 0.05p per Ordinary Share, which waspaid earlier in 2007, it is the Directors' intention to maintain a progressivedividend policy. 16. Reasons for Placing and use of proceeds The net proceeds of the Placing of New Ordinary Shares receivable by the Companywill be approximately £9.6 million. These will be used to satisfy part of theconsideration payable for the Acquisition and to provide the Enlarged Group withsufficient working capital to enable it to implement its strategy. Certain Directors, who already have shareholdings in the Company, and theProposed Director are participating in the Placing and will subscribe for atotal of 5,066,667 Placing Shares having an aggregate value of £380,000 at thePlacing Price. The Placing is to be conducted in two tranches, with Second Admission in respectof the Non-VCT Shares taking place subsequent to, and conditional upon, FirstAdmission in respect of the Existing Ordinary Shares and VCT Shares. TheDirectors have been advised that by structuring the admission of the VCT andNon- VCT Shares in this manner, VCTs will be able to participate in the Placingwhich would otherwise not be the case if the VCT and Non-VCT Shares wereadmitted to trading simultaneously, as the gross asset limit for VCT investmentwould be exceeded by receipt of the combined proceeds of the placing of the VCTand Non-VCT Shares. Investors should be aware that Noble has the right, in the event that SecondAdmission does not occur by 8.00 a.m. on 30 June 2007, or such later date asNoble may agree, to terminate its obligations under the Placing Agreement inrespect of Second Admission and the placing of the Non-VCT Shares in addition toits rights to terminate the Placing Agreement prior to First Admission inaccordance with its terms. The New Ordinary Shares will represent approximately 42.9 per cent. of theEnlarged Share Capital of the Company immediately following Admission. ThePlacing Price represents a discount of approximately 3.3 per cent. to the shareprice of 7.75p per share at close of business on 9 May 2007. The New Ordinary Shares will, on the relevant admission, rank pari passu in allrespects with the Existing Ordinary Shares and will have the right to receiveall dividends and other distributions thereafter declared, made or paid inrespect of the issued ordinary share capital of the Company. It is expected that the net proceeds of the Placing of New Ordinary Shares willbe received by the Company on or around 7 June 2007. In the event that First Admission becomes effective but Second Admission doesnot, the proceeds relating to the First Admission will be invested on a shortterm basis while the Board explores methods of returning such proceeds to therelevant Placees. 17. Banking Facility The Company has entered into committed bank facilities with Bank of Scotlandtotalling £11.6 million. Draw-down of funds will be conditional, inter alia, onSecond Admission. These facilities will be used by the Company to part financethe Acquisition. Details of these bank facilities are summarised in paragraph12.6 of Part V of the admission document. 18. Admission to AIM and dealings The Acquisition constitutes a reverse takeover under the AIM Rules and istherefore dependent upon the approval of Shareholders being given at theExtraordinary General Meeting, notice of which is set out at the end of theadmission document. A resolution will be proposed at the EGM to approve theAcquisition. If all of the Resolutions are duly passed at the EGM, and the otherconditions set out in the Placing Agreement are met, applications will be madefor the Enlarged Share Capital to be admitted to trading on AIM. It is anticipated that First Admission will become effective and that dealingswill commence in the Existing Ordinary Shares and the VCT Shares at 8.00 a.m. on5 June 2007 and that Second Admission will become effective and that dealingswill commence in the Non-VCT Shares at 8.00 a.m. on 6 June 2007. If the Resolutions are not all duly passed, the Existing Ordinary Shares willcontinue to be traded on AIM and the New Ordinary Shares will not be issued oradmitted to AIM. 19. Extraordinary General Meeting An Extraordinary General Meeting of the Company will be held at the offices ofMemery Crystal LLP, 44 Southampton Buildings, London WC2A 1AP at 10.00 a.m. on 4June 2007. At the EGM, the following resolutions will be considered by theholders of the Existing Ordinary Shares and, if thought fit, passed: (1) an ordinary resolution to approve the acquisition by the Companyof CAPS Solutions Limited on the terms and subject to the conditions containedin the Acquisition Agreement. (2) an ordinary resolution to increase the authorised share capitalof the Company from £2,970,000 to £6,500,000 by the creation of 353,000,000 newOrdinary Shares of £0.01 each. (3) an ordinary resolution to authorise the directors to allotrelevant securities of the Company up to an aggregate nominal amount of£2,903,672. (4) a special resolution to empower the directors to allot equitysecurities pursuant to the authority conferred by resolution 3 above providedthat this power shall be limited to: (i) the allotment of up to 146,666,667 New Ordinary Shares in connectionwith the Placing; (ii) the allotment of equity securities for cash in connection with anyrights issue or pre-emptive offer in favour of holders of equity securitiesgenerally; and (iii) the allotment, otherwise than pursuant to sub-paragraphs (i) and (ii)above, of equity securities for cash up to an aggregate nominal amount of£512,891. Resolutions (1) to (3), as ordinary resolutions, will require a simple majorityof those voting in person or, on a poll, by proxy in favour of the resolutions.Resolution 4, as a special resolution, will require approval by not less than 75per cent. of the votes cast by Shareholders voting in person or, on a poll, byproxy. 20. Irrevocable undertakings The Company has received irrevocable undertakings from the Directors, andcertain other shareholders to vote, or to procure the votes of Ordinary Sharesheld, in favour of the Resolutions to be proposed at the EGM in respect of atotal of 94,677,248 Ordinary Shares representing approximately 48.5 per cent. ofthe Existing Ordinary Shares. 21. VCT Qualifying Holding Status On the basis of the information provided, HM Revenue & Customs has givenprovisional assurance that IDOX will comply with the requirements of Chapter 4of Part 6 of the Income Tax Act 2007 in respect of monies raised by a VCT by anissue of shares or securities prior to 6 April 2006 and that the Ordinary Shareswill be eligible shares for the purposes of VCTs. The continuing status of theVCT Shares as a qualifying holding for VCT purposes will be conditional, interalia, upon the Company and the VCT continuing to satisfy the relevantrequirements. 22. Recommendation The Directors unanimously recommend that Shareholders vote in favour of theResolutions to be proposed at the EGM, as they have irrevocably undertaken to doin respect of their own beneficial shareholdings amounting to, in aggregate,34,129,042 Ordinary Shares (representing 17.5 per cent. of the Existing OrdinaryShares). DEFINITIONS In this announcement, where the context permits, the expressions set out belowshall bear the following meanings: "Acquisition" the proposed acquisition, by IDOX, of the entire issued share capital of CAPS pursuant to the Acquisition Agreement; "Acquisition Agreement" the conditional agreement, dated 9 May 2007, between the Vendor and the Company relating to the sale and purchase of the entire issued share capital of CAPS, more particularly described at paragraph 12.3 of Part V of the admission document; "Act" the Companies Act 1985, as amended or substituted by the Companies Act 2006; "Admission" the admission of the Enlarged Share Capital to trading on AIM following completion of the Placing; "AIM" AIM, an exchange regulated market operated by the London Stock Exchange; "AIM Rules" the rules applicable to AIM companies, as published by the London Stock Exchange from time to time; "Board" or "Directors" the existing directors of IDOX, being Martin Brooks, Richard Kellett-Clarke, John Wisbey, Christopher Wright, Peter Lilley and Nigel Oxbrow; "CAPS" CAPS Solutions Limited, a company incorporated in England and Wales with registered number 3760128; "Combined Code" the combined code on corporate governance issued by the Financial Reporting Council, as amended from time to time; "Company" or "IDOX" IDOX plc, a company incorporated in England and Wales with registered number 3984070; "Companies Acts" the Companies Acts as defined in section 2 of the Companies Act 2006; "CREST" the computerised settlement system used to facilitate the transfer of title of shares in uncertificated form operated by CRESTCo Limited for UK, Irish and international securities; "CREST Regulations" the Uncertificated Securities Regulations 2001 (SI 2001/3755), as amended; "Enlarged Group" the Group following completion of the Acquisition, including CAPS; "Enlarged Share Capital" the Ordinary Shares in issue immediately following Second Admission; "Existing Ordinary Shares the Ordinary Shares in issue at the date of the admission document;" "Extraordinary General the extraordinary general meeting of the Company to be held at 10.00 a.m. on 4 JuneMeeting" or "EGM" 2007, at the offices of Memery Crystal LLP, notice of which is set out at the end of the admission document; "First Admission" the admission of the Existing Ordinary Shares and the VCT Shares to trading on AIM becoming effective in accordance with the AIM Rules; "Form of Proxy" the form of proxy accompanying the admission document for use by Shareholders in connection with the EGM; "FSA" the Financial Services Authority, the single statutory regulator under FSMA; "FSMA" the Financial Services and Markets Act 2000, as amended; "FY" financial year; "Group" IDOX and its subsidiary undertakings at the date of the admission document; "LIBOR" the London Inter-Bank Offered Rate; "London Stock Exchange" London Stock Exchange plc; "New Ordinary Shares" 146,666,667 new Ordinary Shares, comprising the VCT Shares and the Non-VCT Shares, to be issued pursuant to the Placing; "Noble" Noble & Company Limited, a company incorporated in Scotland with registered number SC127487 and having its registered office at 76 George Street, Edinburgh EH2 3BU and regulated by the FSA; "Non-VCT Shares" the New Ordinary Shares other than the VCT Shares; "Official List" the Official List maintained by the FSA in accordance with section 74(1) of FSMA for the purposes of Part VI of FSMA; "Ordinary Shares" ordinary shares of 1p each in the capital of the Company; "Placing" the conditional placing by Noble on behalf of the Company of the Placing Shares at the Placing Price pursuant to the Placing Agreement; "Placing Agreement" the conditional agreement dated, 10 May 2007, between the Company, the Directors, the Proposed Director and Noble relating to the Placing, summary details of which are set out in paragraph 12.1 of Part V of the admission document; "Placing Price" 7.5p per Placing Share; "Placing Shares" the New Ordinary Shares to be subscribed for at the Placing Price pursuant to the Placing; "Proposed Director" Steven Mark Ainsworth; "Prospectus Rules" The Prospectus Rules published by the FSA from time to time; "Resolutions" the resolutions set out in the notice of Extraordinary General Meeting set out at the end of the admission document; "Second Admission" the admission of the Non-VCT Shares to trading on AIM becoming effective in accordance with the AIM Rules; "Shareholders" holders of Ordinary Shares from time to time; "Share Option Plans" the share option agreements and schemes summarised in paragraph 4 of Part V of the admission document; "Takeover Code" the Takeover Code published by the Panel on Takeovers and Mergers; "VCT Shares" 58,695,000 new Ordinary Shares to be placed with certain VCTs pursuant to the Placing which are expected to be treated as a qualifying holding for the purposes of VCT legislation; "VCT" Venture Capital Trust; and "Vendor" ESRI Holdings Limited. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Idox Group