| Tue 7 May 2002, 0:00 | | Softline Limited |
|
(Incorporated in the Republic of South Africa)
(Registration number 1977/002304/06)
Share code: SFT ISIN Code: ZAE 000012316
("Softline")
ACQUISITION OF MICROPAY PTY LIMITED, AUSTRALIA
1. Introduction
Further to the cautionary announcement dated 11 March 2002 and the
subsequent cautionary renewal announcement dated 22 April 2002, Softline is
pleased to advise shareholders that it has concluded an agreement to acquire
MicrOpay Pty Limited ("MicrOpay"), a leading provider of payroll software
and associated services for the small to medium sized enterprise ("SME")
market in Australia, from the Commonwealth Bank of Australia ("Commonwealth
Bank"). The acquisition is for a consideration of A$9.89 million
(approximately R55,5 million) and will be funded through existing cash
resources and debt.
The acquisition of MicrOpay follows a period of internal focus by Softline
management with activities centred on consolidating international
acquisitions, enhancing the organic performance of its operations and
streamlining the business. MicrOpay provided an excellent opportunity for
Softline to enter the Australian payroll software market by acquiring the
leading brand, thereby extending the reach of Softline's core business
around the globe.
Rationale for the acquisition:
- MicrOpay is a direct fit with Softline's core accounting and payroll
software businesses.
- MicrOpay has an estimated 30% share of the Australian payroll market and a
strong, established customer base, thus providing Softline with rapid entry
into this market segment.
- The acquisition further strengthens Softline's existing penetration of the
Australian SME business software market.
- The addition of MicrOpay to Softline's existing presence in Australia
through Sybiz and HandiSoft provides the group with a comprehensive, well
branded accounting, payroll and tax software offering for the SME market. -
Softline is now firmly established as a key technology provider to the SME
business community.
- The strong similarities between Softline's existing payroll software
businesses and the business of MicrOpay, provides many opportunities to
transfer knowledge, expertise and strategies within the group.
- The nature of the payroll industry dictates that MicrOpay's business, like
the group's existing payroll businesses, is naturally predisposed to a
recurring revenue model, providing a predictable and sustainable earnings
stream, and is line with Softline's continued focus on building its global
recurring revenue base.
- The acquisition fulfils Softline's key acquisition criteria by providing
the group with an established installed base of users, technology and
substantial brand equity. In addition MicrOpay has a profitable track record
and a high cash conversion ratio.
Background on MicrOpay
MicrOpay was established in Sydney in 1985, and was acquired by Commonwealth
Bank in 1995. MicrOpay has operations located in New South Wales, Victoria,
South and Western Australia, with Queensland being serviced through an
agency agreement. MicrOpay has established a leading position in Australia
and based on independent research holds approximately 30% of the small and
medium size business payroll market. A significant portion of its revenue is
of a recurring nature arising from annual fees levied for the use of the
latest software and for legislative changes requiring software updates in
respect of tax and other payroll issues.
Salient terms of the agreement
With effect from 1 April 2002, Softline will acquire 100% of MicrOpay for a
total consideration, in Australian dollars, of A$9,89 million (approximately
R55,5 million). The consideration is to be funded through Softline's
existing offshore cash resources and by debt funding that will be serviced
out of MicrOpay's cash flows providing a natural hedge to the Australian
dollar denominated debt. Commonwealth Bank has provided a funding facility,
which will be utilised to the extent deemed appropriate by Softline.
Although Softline has sufficient offshore cash resources to fund the
purchase price, the group has elected to fund the acquisition utilising a
combination of cash and debt. The decision has been made so as to secure the
appropriate measure of flexibility and balance sheet efficiency.
The acquisition is subject to certain conditions precedent, including inter
alia the approval of the South African Reserve Bank. Shareholders will be
informed of the fulfilment or otherwise of these conditions in due course.
Financial effects
The financial effects have been calculated on the basis of the assumptions
given below.
Before the After the Percentage
acquisition acquisition change
(cents) (cents) (%)
Sustainable earnings 28.3 30.7 8.5
per share (cents)
Basic earnings per 6.1 6.6 8.2
share (cents)
Net asset value per 119.4 119.4 0.0
share (cents)
Net tangible asset 85.9 76.4 (11.1)
value per share
(cents)
- The value of the net assets acquired amounts to R55.5 million as at 31
March 2002, comprising tangible net assets of R19 million.
- Earnings attributable to the net assets acquired amounted to R12.2 million
for the 12-month period ended 31 March 2002.
- The effect on sustainable earnings per share and basic earnings per share
is calculated assuming that the results of MicrOpay for the period ended 31
March 2002 were consolidated together with Softline's latest published full
year results for the year ended 31 March 2001. The pro-forma financial
effects are based on Softline's full year results in preference to its
interim results at 30 September 2001, in order to provide a more meaningful
disclosure of the pro forma impact of MicrOpay's current results for the
twelve months ended 31 March 2002.
- The calculation of the revised earnings takes into account the effect of
interest payable and foregone, and in the case of basic earnings per share,
the amortisation of intangibles.
- The effect on net asset value per share and tangible net asset value per
share is calculated assuming that the net assets of MicrOpay as at 31 March
2002 were consolidated with the Softline balance sheet as at 31 March 2001
so as to be consistent with the calculations showing the effects on earnings
per share.
- The exchange rate used is R5.61 to AUD1.
Withdrawal of cautionary announcement
With the conclusion of the agreement, shareholders are no longer required to
exercise caution when dealing in their Softline shares.
Sandton
7 May 2002
Sponsor Attorneys
Cazenove Fluxman Rabinowitz Raphaely Weiner
Auditors Attorneys (Australia)
Charles Orbach & Co Freehills
Bankers
Commonwealth Bank of Australia
