· Acquisition of Kizen, supplier of compliance solution to asset management
· 10 client contracts helps consolidate strong position in South African asset
In line with its strategy to acquire complementary multi-product offerings and its growth plans, StatPro, the AIM listed provider of portfolio analytics solutions for the global asset management industry, is pleased to announce the acquisition of Kizen (Pty) Limited (“Kizen”), a South African based supplier of compliance software solutions to asset managers.
StatPro is acquiring 100 per cent of Kizen for an initial cash consideration of £0.51 million, to be funded from the Group’s existing resources. The initial cash consideration will be adjusted by Kizen’s net assets as at 30 April 2006, which are estimated at approximately £0.07 million. Deferred cash consideration will be payable by StatPro based on a multiple of between 2.2 and 2.8 times the incremental recurring revenue generated by the product acquired per annum for each of the three years following the earlier of (i) six months after completion of the acquisition and (ii) the first sales contract for the product achieved outside
the South African market. The maximum total cash consideration payable is £7.50 million.
The Board of StatPro expects the acquisition of Kizen to be earnings enhancing in its first full year of trading following the acquisition.
Background to and reasons for the acquisition
StatPro’s strategy is to expand its product offerings and global reach by organic investment and complementary acquisitions. The acquisition of Kizen brings a compliance product at a time when there is increasing focus by asset managers on managing their risks and monitoring the compliance of their portfolios against client mandates. The product, which will be marketed as StatPro Portfolio Compliance, will be integrated with the StatPro product suite and is complementary, in particular, with the StatPro Risk Management system.
Compliance is a high growth area and has not been fully integrated with analytics systems to date. StatPro intends to combine its Risk and Performance systems with the Compliance system to provide clients and prospects with outstanding control capacity. Kizen’s product is a new generation of software and has proved itself by gaining a strong market position in South Africa in less than two years. Combined with StatPro’s broad distribution capabilities, strong client base and market position, the Board of StatPro believes that StatPro Portfolio Compliance will be a great success.
Kizen was established in Cape Town by Robert Chung, Neil Hampton, Robin Kemper and Chris Stefano in 2003. This team developed its compliance product, and now has 10 clients all based in South Africa. Kizen reported total revenue of R6.0 million (approximately £0.54 million) for the year ended 28 February 2006, of which approximately £0.32 million related to discontinued operations as the company is now focussing on the recurring revenue from the compliance product. Revenue for the year ended 28 February 2005 was R2.2 million. Profit before tax amounted to R1.3 million (approximately £0.11 million) in the year ended 28
February 2006 compared to a loss before tax of R0.2 million (approximately £0.02 million) in the previous year.
As stated in the announcement on 18 April of its acquisition of ALPHAI, StatPro has an established track record of identifying and acquiring small entrepreneurial businesses which have excellent products and technical skills. By combining these successful entrepreneurial teams into the expanding StatPro global distribution network, and providing the investment and support to take the products to the next stage of development, the Group has been able to generate enhanced shareholder value. This is the seventh such acquisition that StatPro has completed since March 2000.
StatPro South Africa
Kizen has six employees including the four founding directors located in its Cape Town office. The operations will be integrated within the Group’s existing South African operations of five people also based in Cape Town led by Andrew Peddar, Managing Director of StatPro South Africa.
The acquisition thus also helps reinforce StatPro’s strong existing position in the South African asset management market where the Group will have combined recurring revenues of approximately £1.0 million.
Notice of AGM trading update
The Group plans to release a trading update on 17 May 2006, the day of its Annual General Meeting.
Commenting on the acquisition Justin Wheatley, Chief Executive of StatPro Group,
said: “We believe that compliance is a high growth area and that there will be considerable sales benefits in offering fully integrated systems to our global client base.
“Through the acquisition of Kizen in South Africa and our recent acquisition in Australia, we have considerably strengthened our operations in two key markets in a short space of time.
We intend to continue to build the Group through similar targeted expansion.”
Commenting on the transaction Neil Hampton, Director of Kizen, said: “We are
delighted to be joining the team at StatPro and look forward to integrating our product to enable us to fulfil our international expansion ambitions for our compliance product.”
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