TIDMIDEA
RNS Number : 5970B
Ideagen PLC
10 June 2019
10(th) June 2019
Ideagen PLC
("Ideagen" the "Company" or the "Group")
Acquisition of Redland Solutions Ltd
Ideagen PLC (AIM: IDEA), a leading supplier of Integrated Risk
Management software to highly regulated industries, is pleased to
announce the acquisition of the entire issued share capital of
Redland Solutions Ltd ("Redland") for a net consideration of
GBP15.8m (the "Acquisition").
Highlights
- Redland is a fast growing, profitable RegTec SaaS company
supplying software to the financial services industry
- Redland's leading SaaS platform 'Insight' provides banks,
investment managers, asset managers and insurance companies with
solutions that underpin the Senior Manager & Certification
Regime (SMCR) and individual employee competency
- Insight is used by over 40 organisations including 7 FTSE 100 and 2 Fortune 100 companies
- Customers include Nomura, Santander, Investec, Hargreaves Lansdown, and Rathbones
- Current Annual Recurring Revenue (ARR) is approximately GBP3m
- an increase of 50% from April 2018
- Current run rate revenues are approximately GBP4.2m* and
current run rate costs are approximately GBP2.7m
- Cash generation of > 100% of EBITDA in the year to 31 March 2019
- The acquisition is immediately earnings enhancing and is
expected to add mid-single digit accretion within the current
financial year
*ARR book at May 31(st) plus Last Twelve Months of services
revenue
Consideration for the Acquisition
The total net consideration payable is GBP15.8m in cash being
GBP17.5m gross consideration less cash balances in Redland of
approximately GBP1.7m. A further GBP0.5m will be payable in 12
months based on certain ARR targets being achieved.
The consideration will be funded from an extended revolving
credit facility with NatWest Bank. The facility is for up to GBP28m
for three years, carries interest at 2% over LIBOR and is secured
by debentures and guarantees over the Group's assets.
David Hornsby, Executive Chairman of Ideagen, commented:
"Redland is an extremely valuable addition to the Group and is
in line with our strategy of acquiring Integrated Risk Management
businesses that have strong IP and growing recurring revenues.
Financial Services is an important vertical market for Ideagen and
the combination of Redland's Insight Platform with Ideagen's
Pentana will provide a compelling proposition covering internal
audit, risk management, certification and SMCR compliance"
Further information with regard to the SMCR and individual
competency market opportunity and Redland is set out below.
The information communicated in this announcement includes
inside information for the purposes of Article 7 of Regulation
596/2014
Enquiries:
Ideagen plc 01629 699100
David Hornsby, Executive Chairman
Ben Dorks, Chief Executive
Graeme Spenceley, Finance Director
finnCap Limited 020 7220 0500
Henrik Persson/James Thompson
(Nomad)
Alice Lane (ECM)
Canaccord Genuity Limited
Simon Bridges
Richard Andrews 020 7523 8000
SMCR Market Drivers
Following the 2008 financial crisis, and subsequent review of
the financial services industry, Parliament sought to replace the
UK Approved Persons Regime (APR) with a regime that was more
focused on senior managers and individual responsibility. This
resulted in the creation of a new Senior Managers and Certification
Regime (SMCR). The SMCR has been in force for banks, deposit takers
and PRA designated investment firms since March 2016. The SMCR is
to be extended to cover all regulated financial services firms from
9 December 2019.
This new regulation directly impacts the most senior employees,
including all C-suite members, in an organisation. In the largest
firms many hundreds of individuals are captured by SMCR.
Furthermore, Conduct Recording and Breach Management is required
for all employees with the exception of specified ancillary
staff.
The complexity and scale of managing SMCR means that if a firm
has over 100 employees, the use of manual systems or customised HR
software is extremely challenging. The risk to the firm, and
individually to senior managers of personal fines and sanctions for
failing to demonstrate effective controls is driving the need for
systems specifically designed to manage the regime
Insight as a solution to SMCR
The complexity and scale of managing SMCR means technology is
the only workable solution for most firms. The risk to the firm and
individually to senior managers, of personal fines and sanctions,
for failing to demonstrate the effective controls, is in the
opinion of the Group, too significant to rely on manual or
customised solutions.
Compounding this complexity is the fact that SMCR applies at the
Legal Entity level and many firms consist of multiple Legal
Entities. This requires multiple Responsibility Maps and Statement
of Responsibilities for Senior Managers with roles in several firms
within a group with more emphasis on consistency, change
management, version control and interactions between entities.
Redland's clients have selected Insight as a best of breed
platform to help them manage Risk and Compliance, and specifically
SMCR, in a more effective, safer way than is possible with manual
or customised solutions. Insight offers an opportunity for firms to
apply more stringent controls that mitigate the risk of human
oversight or inefficiency by automating compliance and implementing
a system that places transparency at the heart of business
operations.
The cost and pace of regulatory change is cited by many Chief
Risk Officers and Chief Compliance Officers as one of the biggest
and highest priority risks in the industry and it is likely that
regulatory change will increase further.
Information on Redland Solutions Ltd.
Redland is a multi-award-winning market leader in financial
services SaaS RegTech. The company is based in based in Bromsgrove
and was founded in 2001 as a consulting company advising banks and
pension funds on systems design and development. The company has
since evolved from a service to a software business through the
development of Insight, a fully integrated Accountability and
Competence SaaS Platform which is recognised by the industry as
market leading.
The critical nature of the functions its solutions perform means
that Redland has board level visibility amongst its clients (which
include 7 FTSE 100 and 2 Fortune 100 companies) consisting of
banks, wealth management, investment management, asset management
and insurance companies. Redland's reputation as a trusted
Compliance partner is corroborated by a high level of client
advocacy amongst tier one and tier two financial services
organisations. Clients include Santander, Old Mutual, Openwork, JM
Finn, Legal and General NFU, M&G, Nomura, Charles Stanley and
Homeserve.
The Company currently employs 30 people across Sales, Marketing,
R&D and Support. The majority of the operational management
including Co-Founder Carl Redfern and Operations Director Mick
Catherall will remain with the business. Executive Chairman, Joel
Turland and Chief Executive Gary Muchmore left the business on
completion of the acquisition
Redland revenues for the year to 31 March 2019 were GBP3.6m with
operating profits of GBP1.2m. Net assets as of 31 March 2019 were
GBP1.2m.
About Ideagen plc
Ideagen is a UK-headquartered, global technology company quoted
on the London Stock Exchange AIM market (Ticker: IDEA.L).
The Group provides software and services to organisations
operating within highly regulated industries such as aviation,
banking and finance and life science, with its main operational
premises spread throughout the UK, EU, US, Middle East and SE
Asia.
With an excellent portfolio of software products including
Q-Pulse, Coruson, Pentana Audit and PleaseReview, Ideagen helps its
clients reduce costs, improve operational efficiency, strengthen
compliance and oversight and anticipate and manage every detail of
risk.
Currently, more than 4,700 organisations use Ideagen's products
including seven of the top 10 UK accounting firms, all of the top
aerospace and defence companies and 75% of the world's leading
pharmaceutical firms.
Ideagen's diverse and varied customer base includes many
well-known, global brands such as British Airways, Aggreko, BAE,
Ryanair, US Navy, KLM, BBVA, Bank of New York, Commerzbank,
Meggitt, Heineken, Johnson Matthey, Haeco Group and European
Central Bank. As well as this, Ideagen counts 180 hospitals across
the UK and US amongst its client base.
For further information please visit www.ideagen.com.
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END
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