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28 January 2013
Handset Testing significantly expands its performance testing offering
Anite plc ("Anite" or the "Group"), the leading provider of software solutions to the international wireless and leisure travel industries, today announces the acquisition of the Propsim® channel emulation product set of Elektrobit Corporation ("EB"), of Finland.
Acquisition highlights - the transaction
· Anite is acquiring EB's Propsim® business activity ("Propsim") which comprises a range of radio channel emulation¹ (fader) hardware and software products, associated R&D capability, sales and marketing capacity and fulfillment resources
· Propsim develops radio frequency (RF) channel emulation test equipment, utilising a laboratory based platform and a suite of associated software applications
· Consideration of €31m (c.£26m) will be paid in full in cash on completion on 31st January 2013, on a cash free/debt free basis, from Anite's existing cash and banking facilities
· EB reported the following results for Propsim:
− in the year to 31 December 2011 revenues of €14.1m with a pro-forma €1.5m operating profit
− in the year to 31 December 2012 revenues are expected to be reported at €16.1m with an operating profit of €1.3m
− these results include allocation of EB's central and group overheads - these costs, estimated at c.€1m will not be incurred by Anite in the future
· Before transaction and integration costs the acquisition is expected to enhance Anite's adjusted earnings per share in the first full year of ownership.
Acquisition highlights - operational
· Propsim provides a leading range of wireless performance testing products which enables Anite to expand into performance testing, a market that is adjacent to Anite's core test markets
· Propsim is based in Oulu, Finland
· Propsim is a good fit with and will be integrated into Anite's Handset Testing business
· Also opens up a new opportunity in network infrastructure testing with a strong existing network equipment manufacturing client base
· Like Anite, Propsim is recognised as a technology leader in its field and recently augmented its product set with the launch of two new products in 2012.
Commenting on the acquisition Christopher Humphrey, Anite's Chief Executive said:
"The increasing market demand for more integrated wireless laboratory test solutions makes Anite a natural fit for Propsim. Anite's established market and technology leadership, and its substantial global sales and support footprint, combined with the acknowledged expertise and market leading channel emulation solutions in the Propsim brand, creates a dedicated supplier with a more complete product offering.
"The product line we are buying is an excellent addition and a good fit with Anite's Handset Testing business and the acquisition is expected to be enhancing to adjusted earnings."
¹ channel emulation is defined as the simulation of the characteristics of wireless signals in the real-world environment
For further information please contact:
Anite plc www.anite.com/@AniteNews
Christopher Humphrey, Chief Executive 01252 775200
Richard Amos, Group Finance Director
Reg Hoare/Giles Robinson/Naomi Lane 020 3128 8100
A conference call for analysts will be held today at 9.00am.
Please contact Giles Robinson or Naomi Lane at MHP Communications
on email@example.com or 020 3128 8788 for dial-in details.
Reasons for and benefits of the acquisition
Anite's stated strategy is to maintain its position as a global leader in wireless test solutions, by investing in technological leadership, expanding into adjacent markets and executing on its roadmap.
Overall, Anite's established market and technology leadership, combined with Propsim's recognised expertise in channel emulation solutions, will enable Anite's Handset Testing business to establish an immediate and significant strategic position in the performance testing market. This market is estimated to be worth c.£90m annually and is growing.
Anite's focus on performance testing is being driven by Anite's major network operator customers who are incorporating performance testing into their IOT device testing programmes, as well as by the Global Certification Forum (GCF), the independent certification scheme for mobile phones and wireless devices, which is introducing performance as part of its conformance test certification scheme in 2013. The evolution of LTE 4G is also driving an increased need for performance testing as the complexity of new devices and technologies is impacting the quality of consumer experience.
The Propsim products are highly complementary to Handset Testing's existing product portfolio - they are lab-based simulations of the characteristics of wireless signals in the real network environment. Anite is planning to launch further internally developed software functionality in this area to give it the underlying technology to address the majority of the performance testing market.
New network infrastructure testing opportunity
As around 45% of Propsim's revenues are typically derived from network equipment manufacturers through the use of channel emulators in the laboratory to test base station equipment during R&D, this acquisition provides Anite's Handset Testing business with a new customer base, as well as offering the opportunity to grow channel emulators further in its core Handset Testing customer markets.
Propsim is based in Oulu, Finland where Anite's Network Testing business is also based. The latter business was also acquired from EB. 54 employees will transfer to Anite as a result of this transaction, of which nearly half are in research and development. Propsim also has offices in the US and China. EB was founded in 1985 and has a strong market reputation for its Propsim technology which retains a top two global market leading position. Propsim will be fully integrated into Anite's existing Handset Testing business.
Propsim develops radio frequency (RF) channel emulation test equipment, utilising a laboratory based platform and a suite of associated software applications. The equipment is designed to simulate the characteristics of wireless signals in the real-world environment.
Propsim has a strong existing global customer list including network operators, chipset and handset manufacturers and network equipment manufacturers. Maintenance revenues are derived from this existing installed base.
Propsim forms part of EB's Wireless business. As such its results are stated after the allocation of certain costs which will not be transferring to Anite but which in part will be covered by Anite's existing infrastructure. The pro-forma results for Propsim, extracted from the management accounts for EB's Wireless business for the year ended 31 December 2011 (being the date of the last published audited financial statements for Elektrobit Corporation), show revenues of €14.1m with a pro-forma €1.5m operating profit. In the year ended 31 December 2012, the business made good progress with revenues expected to be €16.1m and operating profit €1.3m.
Propsim's profits were reported including certain centrally allocated costs which will not be transferred with the business. Anite therefore expects to make profit improvements through integration into its Handset Testing business. Conservative synergies of c.€1m are expected from the cost base over time. These will help enable Propsim's operating margins to improve over time towards the Group's average. Anite anticipates the business continuing its recent strong performance and track record in the medium-term given the opportunities in this dynamic market.
The acquisition comprises the entire issued share capital of Elektrobit System Test Oy on a cash and debt free basis, together with certain assets in the USA and China. The consideration of €31m (c.£26m) will be paid in full in cash on completion on 31 January 2013, with an adjustment for any fluctuations from normal working capital levels to be paid later based on closing accounts.
Gross assets being acquired for the business amounted to c.€9m as at 31 December 2012. The book value of net assets to be transferred on completion is expected to be €5.3m.
Anite is financing the cash consideration from its existing resources, comprising of its net cash (which stood at £16.8m as at 31 October 2012) and through drawing £17.5m of its previously undrawn £20m revolving bank facility. Part of the facility draw-down will be conducted in Euros. Given the expected short-term nature of these borrowings, Anite does not intend to enter into any additional hedging arrangements.
The Board expects that the acquisition will enhance Anite's adjusted earnings in the first full year of ownership.
Notice of IMS
Anite will issue an Interim Management Statement covering the period 1 November 2012 to 10 March 2013 on Monday, 11 March 2013.
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