Acquisition
04 Junho 2003 - 4:02AM
UK Regulatory
RNS Number:8926L
Spring Group PLC
04 June 2003
Not for release, publication or distribution in or into the United States,
Canada, Australia, the Republic of Ireland or Japan
4 June 2003
Spring Group plc
Acquisition of the subsidiaries of Best International Group plc
Spring Group plc consolidates leadership position in UK IT staffing services
Spring Group plc ("Spring" or the "Group") announces that it has reached
agreement with Best International Group plc ("Best"), one of the UK's largest
privately owned IT recruitment and staffing solutions businesses, to acquire its
UK and European subsidiaries (the "Best Subsidiaries"). Through this
acquisition, the directors of Spring believe that Spring becomes the UK's
largest IT staffing services business by revenue.
Transaction highlights
* Consideration of #7.5 million comprises #3.5 million in unsecured loan
notes, #3.0 million in convertible unsecured loan notes and #1.0 million
in cash
* Spring to procure that the Best Subsidiaries repay amounts outstanding
under their invoice discounting facility
* In the year ended 31 December 2002, the Best Subsidiaries generated a
turnover of #85.6 million, gross profit of #12.8 million and made an
operating loss of #0.6 million
* At 31 May 2003, the Best Subsidiaries had over 850 contractors placed
at customer sites
Strategic benefits of the Acquisition
The acquisition of the Best Subsidiaries consolidates Spring's leadership
position in the UK IT staffing services sector and significantly strengthens
Spring's IT staffing business. In particular the acquisition:
* Improves Spring's market positioning with an expanded range of IT,
technology and telecoms staffing services
* Improves Spring's business mix by adding Best's higher gross margin IT
recruitment operations
* Creates economies of scale to enhance Spring's low cost operating model
Current trading
Since the announcement of Spring's preliminary results for the year ended 31
December 2002, the Group's IT and general recruitment businesses have continued
to make progress despite an uncertain economic environment and significant
competitive pressures. Trading at Spring's IT training business has, however,
been adversely impacted by difficult market conditions and its trading is
currently below the Board's expectations. The Group has further reduced its cost
base and trading for the Group as a whole remains in line with the Board's
expectations.
Since 31 December 2002, the management accounts of Best International Group show
that the Best Subsidiaries continue to trade in line with their budget and the
progress made during the fourth quarter of 2002 has been maintained.
The Board believes that through this acquisition the enlarged group will benefit
from its increased size and range of services and is therefore confident about
the enlarged group's prospects for the current financial year.
Commenting on the transaction, Richard Barfield, Chief Executive Officer of
Spring, said:
"The acquisition of the Best Subsidiaries is a logical step for Spring in line
with our strategy to position Spring as the market leader in IT staffing
services. Following the acquisition, Spring will offer its clients a
comprehensive range of products and services from an efficient operating model."
For further information please contact
Richard Barfield, Chief Executive Officer, Spring Group plc 0207 452 7644
Nicholas Naylor, Robert W. Baird Limited 0207 488 1212
Ben Atwell, Financial Dynamics Limited 0207 831 3113
Notes to Editors
Spring Group
Further information on Spring can be found at www.spring.com
Best
Further information on Best can be found at www.best-international.com
Not for release, publication or distribution in or into the United States,
Canada, Australia, the Republic of Ireland or Japan
Spring Group plc ("Spring" or the "Company")
Acquisition of the subsidiaries of Best International Group plc
4 June 2003
Introduction
Spring announces that it has reached agreement with Best International Group plc
("Best International Group") to acquire the UK and European subsidiaries of Best
International Group (the "Best Subsidiaries") for a consideration of #7.5
million (the "Acquisition").
Best International Group is one of the largest privately owned IT recruitment
and staffing solutions businesses in the UK, with #85.6 million in revenues in
the year ended 31 December 2002 and preferred supplier agreements for the
provision of IT recruitment services to a number of major UK corporations. Best
International Group has won a number of industry awards, including winner of the
IT Recruitment Consultancy of the Year at "Computing'' magazine's Industry
Awards in 2000 and 2002 and the Network Recruitment Consultancy of the year at
the Networking Industry Awards in 2001.
Spring's strategic aim is to create the UK's leading IT staffing and technology
recruitment company. The permanent and temporary IT recruitment businesses of
the Best Subsidiaries, together with their preferred supplier and managed
services businesses, will combine with Spring's existing IT staffing division to
create what the directors of Spring believe will be the largest IT staffing
services business, by revenue, in the UK. The Acquisition will, therefore, mark
a significant step towards fulfilling Spring's strategic objectives.
The consideration of #7.5 million payable under the acquisition agreement is to
be satisfied as follows:
* #3.5 million through the issue of unsecured loan notes, #500,000 of which is
being retained by Spring under the terms of a warranty given by Best
International Group against the net liabilities of the Best Subsidiaries on
completion of the Acquisition;
* #3.0 million through the issue of convertible unsecured loan notes;
and
* #1.0 million in cash.
On completion of the Acquisition, Spring will procure the repayment by the Best
Subsidiaries of amounts outstanding under their invoice discounting facility
with Barclays Bank plc.
The Board believes that it is important for the enlarged group to be able to
retain and motivate the management of the Best Subsidiaries. As a consequence
Spring will, subject to shareholder approval, grant options over 1.35 million
Spring ordinary shares to the management of the Best Subsidiaries, half of which
will be exercisable on the first anniversary of completion of the Acquisition,
with the balance being exercisable 18 months after completion of the
Acquisition.
The Acquisition is conditional upon shareholders approving the resolutions to be
proposed at the extraordinary general meeting of the Company, expected to be
held on 23 June 2003 (the "Extraordinary General Meeting").
Information on the Best Subsidiaries
Best International Group was founded in 1997. Today it is one of the largest
privately owned IT recruitment and staffing solutions businesses in the UK. The
Best Subsidiaries, which include all the trading businesses of Best
International Group in the UK and Europe but exclude its US subsidiary, operate
throughout the UK from offices located in London, Bristol, Birmingham,
Manchester and Edinburgh. As at 31 May 2003, the Best Subsidiaries had over 850
contractors placed at customer sites and 179 permanent employees.
The Best Subsidiaries provide a broad range of IT staffing, recruitment and
permanent placement services including executive search and selection,
recruitment outsourcing, managed services and outplacement and graduate hire
programmes.
During the year ended 31 December 2002, the Best Subsidiaries generated a
turnover of #85.6m (2001: #104.6m) and an operating loss of #0.6m (2001:
operating profit of #1.0m). The results of the Best Subsidiaries in 2002 reflect
the weak market conditions affecting the IT recruitment sector as a whole.
Despite these weak market conditions, the Best Subsidiaries have gained market
share and have reduced their operating costs during 2002. As at 31 December
2002, the Best Subsidiaries had net liabilities of #6.3m, of which intragroup
indebtedness and a shareholder's loan of #3.5m will be forgiven on completion of
the Acquisition.
As at 31 December 2002, the Best Subsidiaries had net debt of #5.5m which
included a shareholder loan of #0.8 million (which will be released on
completion of the Acquisition) and an invoice discounting facility of which #5.2
million was utilised at 31 December 2002. Spring will procure that the Best
Subsidiaries will repay the amounts outstanding under the invoice discounting
facility on completion of the Acquisition.
Background to, and reasons for, the Acquisition
The directors of Spring believe that the Acquisition will significantly
strengthen Spring's IT staffing division, with the potential in due course to
provide growth opportunities for the Group's other divisions.
Since early 2000, demand for contract and permanent IT staff has fallen, putting
contractor pay rates and IT recruitment consultancies' gross margins under
pressure. Spring has responded to these pressures by selling or closing non-core
businesses and reducing its cost base. At the same time, Spring has invested in
new technology and services to broaden its range of offerings. This investment
programme included the development of the hy-phen business to become a
significant force in the recruitment managed services sector. In addition, the
acquisition of Triage Limited in May 2002 has enabled the Group to develop into
one of the UK's leading specialist skills technology recruitment companies. As a
consequence of these actions, Spring has increased market share and improved its
product and portfolio mix with improved gross margins.
Following these initiatives, Spring is now gaining market share with an
efficient low-cost operating platform, a growing number of strategic brands, and
a strong balance sheet.
Spring will benefit from the Acquisition in the following ways:
* Complementary permanent businesses - the Best Subsidiaries' permanent IT
staff recruitment business, particularly its higher value services such as
campaign and executive search, will be combined with Spring's permanent
recruitment business to create a complete range of permanent IT staffing
services.
* Enhanced "spot" business - the Best Subsidiaries' "spot" temporary staffing
business will be combined with Spring's smaller "spot" business, delivering
opportunities for revenue growth and margin improvement.
* Combination of contingent and permanent managed services - hy-phen, a
leader in the provision of managed services for contract IT staff, will be
combined with the Best Subsidiaries' 'Zebra' managed service for permanent
IT staff, to create what the Spring directors believe will be the leading
provider of both contingent and permanent IT staffing managed services in
the UK.
* Client opportunities - the Best Subsidiaries have established client
relationships that are complementary to Spring's client base. The Enlarged
Group will aim to market its enhanced range of service and technology
offerings to this combined client base.
* Improved efficiency - the Acquisition will provide scope to improve back
office productivity, to optimise property utilisation and to spread
technology costs.
The directors believe that the Acquisition will advance Spring's strategic
goals, that the commercial prospects for the enlarged group will be enhanced and
that the Acquisition will be earnings enhancing for the Spring Group in its
first full year of ownership. This statement should not be interpreted to mean
that the enlarged group's future earnings per share will necessarily be greater
than its historical earnings per share.
Current trading and prospects
Since the announcement of Spring's preliminary results for the year ended 31
December 2002, the Group's IT and general recruitment businesses have continued
to make progress despite an uncertain economic environment and significant
competitive pressures. Trading at Spring's IT training business has, however,
been adversely impacted by difficult market conditions and its trading is
currently below the Board's expectations. The Group has further reduced its cost
base and trading for the Group as a whole remains in line with the Board's
expectations.
Since 31 December 2002, the management accounts of Best International Group show
that the Best Subsidiaries continue to trade in line with their budget and the
progress made during the fourth quarter of 2002 has been maintained.
The Board believes that through this acquisition the enlarged group will benefit
from its increased size and range of services and is therefore confident about
the enlarged group's prospects for the current financial year.
A circular containing full details of the Acquisition and convening the
Extraordinary General Meeting is expected to be dispatched to the Company's
shareholders later today.
Words and expressions defined in the circular to be issued by the Company in
relation to the Acquisition shall, unless the context provides otherwise, have
the same meaning in this announcement.
For further information please contact
Richard Barfield, Chief Executive Officer, Spring Group plc 0207 452 7644
Nicholas Naylor, Robert W. Baird Limited 0207 488 1212
Ben Atwell, Financial Dynamics Limited 0207 831 3113
Notes to Editors
Spring Group
Further information on Spring can be found at www.spring.com
Best
Further information on Best can be found at www.best-international.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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