REG - Curtis Banks Grp PLC - Acquisition of Talbot and Muir and Dunstan Thomas

Curtis BanksAnnouncement

23/07/2020 07:30

RNS Number : 8676T
  
Curtis Banks Group PLC
  
23 July 2020
  
 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014 ("MAR") AND THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION, RELEASE, TRANSMISSION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR IN ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL
 
Curtis Banks Group plc
("Curtis Banks", the "Company" or the "Group")
Acquisition of Talbot and Muir and the fintech provider Dunstan Thomas
Trading Update
 
Curtis Banks, one of the UK's leading SIPP providers, is delighted to announce that it has entered into agreements to acquire Talbot and Muir Limited ("Talbot and Muir") for an initial consideration of £16.5 million and to acquire the fintech provider Dunstan Thomas Group Limited ("Dunstan Thomas"), for an initial consideration of up to £21.5 million (the "Acquisitions") to be funded through cash and an equity placing.
 
The Group is separately announcing this morning an equity placing to raise gross proceeds of up to approximately £25 million (the "Placing").
 
Highlights
·      Two high-quality businesses being acquired, focused on Curtis Banks' resilient core market:
o  Talbot and Muir is a high-quality provider of SIPPs and SSAS products, with a strong market reputation, reinforcing Curtis Banks' position as a leading SIPP provider
o  Dunstan Thomas is a fintech provider delivering technology and business solutions, for wealth managers, platforms and providers, with an established client base and track record of repeat and recurring revenue. 
·      The Acquisitions have a compelling strategic rationale in line with Curtis Banks' strategy of delivering growth organically and through acquisition, increasing its scale and adding revenue streams in the following areas:
o  Talbot and Muir delivers additional scale through 6,600 plans, Assets under Administration ("AuA") of approximately £3.6bn as at 31 December 2019 and their existing IFA relationships
o   Dunstan Thomas supports the successful delivery and execution of Curtis Banks' own technology strategy and provides the Group with access to a broader product and service offering for both its existing and future clients and other target markets.
·      The acquisition of Talbot and Muir is conditional on regulatory approval and completion of the Placing; the acquisition of Dunstan Thomas is not inter conditional on the Placing.
·      The Acquisitions are expected to be materially earnings enhancing in the first full year of ownership.
·      An analyst and investor conference call will be held at 9.00 a.m. today.
Despite a challenging market environment, Curtis Banks is trading in line with market forecasts as at the end of May 2020. The outlook for the remainder of the financial year is likely to be affected by COVID-19 and the uncertainty created, however the directors have full confidence in the Company's business model and operations. Following the outbreak of COVID-19, Curtis Banks acted quickly and successfully implemented its Business Continuity Plan. The welfare of its employees and clients remains a key priority and the Company was able to able to adapt to remote working conditions with productivity largely unaffected and as such new business growth to the end of June 2020 is ahead of same period last year.
 
Will Self, CEO of Curtis Banks, said: 
"We continue to look for the right types of business to grow Curtis Banks in the right way and believe Talbot and Muir and Dunstan Thomas are excellent strategic fits.
"Talbot and Muir and Curtis Banks are comparable in terms of culture, service offering, distribution routes and client base and further consolidates our market position as one of the largest UK providers of SIPPs and SSAS products. We are confident this bolt-on acquisition will deliver materially enhanced earnings for Curtis Banks.
"We recently invested in a new digital platform, underpinning the launch of Your Future SIPP, and bringing Dunstan Thomas into our Group will deliver on our stated growth strategy. Dunstan Thomas is a fintech provider, and as our largest supplier we've worked with them for more than five years now. We see Dunstan Thomas as a core enabler for our future growth, delivering solutions that support advisers and their high net worth and mass affluent clients, both within our current market and more broadly to the financial services market. We are very excited to have this business as part of the Curtis Banks Group."
 
Graham Muir, Talbot and Muir Director said:
"Having founded the business in 1993 with Brian Talbot we have continued to pride ourselves on our award winning market offerings and products.  To continue to grow and develop the business we felt the time was right to look for a partner that was a strategic fit and has the same values as we do.  
"We have been considering a number of strategic opportunities and it became clear that Curtis Banks offered the ideal combination of retaining our Nottingham and Leeds offices and product range. I have been impressed for many years by the drive and vision of Will Self and his colleagues and I feel that the Talbot and Muir business will fit well within the Curtis Banks Group.  We look forward to continuing to deliver the high quality Talbot and Muir service that has built our reputation over the last 27 years and being part of the group."
 
Chris Read, CEO of Dunstan Thomas, commented:
"We are delighted at the prospect of joining the Curtis Banks Group and driving more investment into the business. After 34 years as an independent business, we believe it is the right time to join forces to create a new larger entity in the market with new propositions to take advantage of the changing shape of the commercial and economic landscape. We are keen to assure all our clients, that we are committed to delivering further capability in our products for the whole market to benefit from."
 
Conference call and investor presentation details
 
An analyst and investor conference call will be held at 9:00 a.m. today. The webcast details are as follows:
URL: https://zoom.us/j/4590543225?pwd=UDhhbTFCRWJEZkRwTG9vSnlFZ1Qrdz09  
Meeting ID: 459-054-3225 
Dial in details for audio only: 153131 
Audio only: +44 208 080 6592
 
Presentation slides will be available from 7:00 a.m. today by going to the Investor Relations section of Curtis Banks' website using the following link: https://www.curtisbanks.co.uk/investor-reports-presentations/ 
 
Contact:
 



Curtis Banks Group plc 


www.curtisbanks.co.uk 




Will Self - Chief Executive Officer


+44 (0) 117 9107910




Dan Cowland - Chief Financial Officer


















Peel Hunt LLP (Nominated Adviser & Joint Broker)


+44 (0) 20 7418 8900




James Britton








Rishi Shah


















Nplus1 Singer Capital Markets Limited (Joint Broker)


+44 (0) 20 7496 3000




Mark Taylor








Rachel Hayes


















Camarco (Financial PR)


+44 (0) 20 3757 4984




Ed Gascoigne-Pees








Georgia Edmonds








Jake Thomas







 
MAR information
For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Will Self, CEO. 
 
Background
Curtis Banks is one of the United Kingdom's leading administrators of self-invested pension products, principally SIPPs and SSASs and has successfully developed, through a combination of organic growth and acquisitions, into one of the largest UK providers of these products. At 31 December 2019 the Group administered approximately £29.1bn of pension assets on behalf of over 76,000 active clients.
Acquisitions are a core component of Curtis Banks' growth strategy. The Company is committed to exploring opportunities to add scale and expand its offering through complementary acquisitions.
 
Overview of the Talbot and Muir Acquisition
Curtis Banks has agreed to acquire Talbot and Muir, the SIPP and SSAS provider, for a total consideration of up to £25.25m.
Founded in 1993 Talbot and Muir is a high-quality provider of SIPPs and SSAS products with over 6,600 plans, Assets under Administration ("AuA") of approximately £3.6bn and 71 employees across offices in Nottingham and Leeds as at 31 December 2019.
 
Figures in the table below are taken from audited accounts.
 



(Year ending 31 December)


2017


2018


2019


CAGR




Revenue


£3.7m


£3.9m


£5.0m


16%




EBITDA


£1.2m


£1.2m


£1.8m


24%



 
The acquisition of Talbot and Muir is conditional on regulatory approval and completion of the Placing. 
 
Strategic rationale 
The Acquisition is part of Curtis Banks' strategy of delivering growth organically and through acquisitions. It is expected that the acquisition will be earnings enhancing.  The intention is for Talbot and Muir to continue to trade under its own brand as a subsidiary of the Curtis Banks Group.
The Acquisition reinforces Curtis Banks' position as a leading SIPP provider delivering additional scale through 6,600 plans, AuA of approximately £3.6bn as at 31 December 2019 and new IFA relationships. 
Talbot and Muir shares a strong cultural and structural alignment with Curtis Banks, particularly in relation to its product offering, customer profile and operating models.
Curtis Banks is currently part-way through the delivery of its own technology strategy that will see its SIPP administration architecture upgraded across the Group, driving internal efficiencies and external attractiveness. It is anticipated that these benefits will extend to Talbot and Muir and its customers over the longer term. Following the Dunstan Thomas acquisition, Talbot and Muir clients will have access to a broader product and service offering.
The Group expects the acquisition of Talbot and Muir to be materially earnings enhancing in the first full financial year of ownership, as well as deliver revenue synergies and longer-term growth.
 
Transaction Terms 
Under the terms of the acquisition, the total consideration will comprise of:
·      An initial consideration of £16.5 million 
·      A deferred consideration of up to £8.75 million, payable over two-years based on the level of combined EBITDA in the two years from completion of the transaction.
Both the upfront and deferred consideration is payable in cash.
Estimated current year EBITDA multiple of 6.3x based on initial consideration. An average annual EBITDA of £3.9 million is required to maximise the deferred consideration payable in the two years from completion of the transaction, which if achieved, would represent an EBITDA multiple of 6.5x.
 
Overview of the Dunstan Thomas acquisition
Curtis Banks has agreed to acquire Dunstan Thomas, a fintech provider, for a total consideration of up to £27.5 million.  Dunstan Thomas delivers technology solutions and services for wealth managers, platforms and providers under licence. 
Dunstan Thomas has 93 staff across offices in Watford and Portsmouth providing the Imago and Integro CX product families to the SIPP, wealth and platform markets. Dunstan Thomas has two product solutions: 
·      Imago is a suite of fully integrated solutions that provide savings and retirement modelling tools, illustration and review systems, automation, client portals, dashboards, and policy administration systems; and 
·      Integro CX is an award-winning portal solution with third-party integration capabilities, workflow technology and a controllable API. Integro CX delivers portal and dashboard technology solutions for wealth managers, platforms and providers.
Dunstan Thomas provides the technology behind Curtis Banks' new secure portal, reducing the time advisers spend on administration, as well as providing support for Curtis Banks' Navision administration system.  
 
Figures in the table below are normalised figures.
 



(Year ending 30 September)


2017


2018


2019


CAGR




Revenue


£7.0m


£11.0m


£10.5m


23%




EBITDA 


£1.1m


£3.3m


£2.7m


55%



 
The acquisition of Dunstan Thomas is not inter conditional on the Placing. 
 
Strategic rationale
The Acquisition is part of Curtis Banks' strategy of delivering growth through organic and acquisitive means and diversifying revenue base to complementary sources. It is expected that the acquisition will be earnings enhancing.  The intention is for Dunstan Thomas to continue to trade under its own brand as a subsidiary of the Curtis Banks Group.
The Acquisition supports the successful delivery and execution of Curtis Banks' own technology strategy driving internal efficiencies and external attractiveness while giving it access to broader product and service offering for existing and future customers.
In addition, it brings the opportunity to take Curtis Banks' product offering to other target markets.
Dunstan Thomas has a well-established, diversified client base across sub-sectors in the provision of retirement solutions with a track record of repeat and recurring revenue across their products and support services.
The Group expects the acquisition of Dunstan Thomas to be materially earnings enhancing in the first full financial year of ownership, as well as deliver revenue synergies and longer-term growth.
 
Transaction Terms 
Under the terms of the Acquisition, the total consideration will comprise of:
·      An initial consideration of up to £21.5 million 
·      A deferred consideration of up to £6 million payable in three-years based on the level of EBITDA generated in the three years to 31 December 2022.
Both the upfront and deferred consideration is payable in cash.
Estimated current year EBITDA multiple of 6.7x based on initial consideration. An aggregate of £10.9 million of EBITDA over 36 months to 31 December 2022 is required to be delivered by Dunstan Thomas to maximise the deferred consideration. The maximum consideration payable represents an EBITDA multiple of 7.6x.


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