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Acquisition of ANNOVA Systems GmbH

Released 07:00 24-Nov-2016

RNS Number : 9908P
24 November 2016

The information communicated in this announcement includes inside information for the purposes of Article 7 of Regulation 596/2014


                                                                     SCISYS PLC



Acquisition of media software solutions company ANNOVA Systems GmbH

For a maximum consideration of €27.83m (£23.8m)


SCISYS PLC ("SCISYS", the "Company" or "Group"; AIM SSY), the supplier of bespoke software systems, IT based solutions and support services to the media, broadcast, space, government, defence and commercial sectors, is pleased to announce the conditional acquisition of ANNOVA Systems GmbH ("ANNOVA"), a leading provider of media software solutions, based in Munich, Germany.



·    Initial acquisition consideration of €11.35m (£9.7m) in cash

·    Initial consideration to be principally funded from a new bank loan provided by Deutsche Bank

·    Three-year earn-out of up to €16.48m (£14.09m) in cash or shares  subject to achievement of key commercial targets

·    Leading supplier of software based editorial solutions, principally to the Northern European media sector

·    Highly complementary to SCISYS' Media & Broadcast division with significant synergy benefits expected and considerable international growth opportunities for the enlarged business

·    Strong customer base including public and commercial broadcasters across Europe, including the BBC under a 12 year contract

·    Significant own IP content based on proprietary "best in class" OpenMedia software

·    Cash-generative business with a strong order book, growing pipeline of prospects and robust revenue visibility

·    Highly competent and experienced workforce

·    For the year ended 31 December 2015, ANNOVA generated German GAAP revenues of €7.5m, EBIT of €1.1m and operating cashflow of €1.4m

·    Acquisition expected to be strongly  earnings enhancing from 2017 onwards

·    Completion expected by the end of 2016


Commenting, Mike Love, Chairman of SCISYS, said:

"We are delighted to have concluded the acquisition of ANNOVA and welcome its directors, employees, clients and stakeholders to SCISYS.  We have been looking for the compelling next acquisition for SCISYS for a number of years and this acquisition meets our criteria: it is an important strategic step for SCISYS, putting us in a stronger market position, not only within our existing German operations, but across Europe more broadly. ANNOVA is a business that we know well. The acquisition adds a highly capable provider of news broadcast software systems that has demonstrated the quality of its products through its impressive customer base in a number of important European markets in which we are active.

"Our enlarged operations will be able to offer cutting-edge software solutions to the international media and broadcast sector with ANNOVA's OpenMedia product strongly complementing the dira! product suite of our existing Media & Broadcast division.  Both products and solutions target similar broadcast clients providing strong scope for synergies.

"We are looking forward to working with the ANNOVA management and team to realise the exciting growth opportunities that this transaction will create."


Michael Schüller, the CEO and major shareholder of ANNOVA, added:

"Joining forces with SCISYS is an exciting step forward for the ANNOVA team, enabling us to take the business to a new level. With SCISYS we get a perfect partner, providing us with an opportunity to offer customers a new best-of-breed solution with exciting synergies across our product portfolios. The entire team at ANNOVA is delighted to be joining forces with SCISYS on a common path to win new customers and innovative future projects."


For further information please contact:



+44 (0)1249 466 466

Mike Love


Klaus Heidrich

Chief Executive Officer

Chris Cheetham

Finance Director

finnCap (NOMAD & Broker)

+44 (0)20 7220 0500

Julian Blunt

Corporate Finance

Mia Gardner

Corporate Broking


Tom Cooper/Paul Vann

+44 (0) 20 7933 8780

+44 (0)797 122 1972


Investor Lunch Programme


SCISYS will be holding an Investor Lunch in London for Private Client Investment Managers and Private Investors on 29 November 2016. Those wishing to attend should contact Tom Cooper on or 020 7933 8780 or 0797 122 1972 for further details.



Employing nearly 450 staff, SCISYS group is a leading developer of Information and Communications Technology services, e-Business, web and mobile applications and advanced technology solutions. The Company operates in a broad spectrum of market sectors including Media & Broadcast, Space, Government and Defence and Commercial sectors. SCISYS clients are predominantly blue chip and public sector organisations. Customers include the Environment Agency, the Ministry of Defence, Airbus Defence & Space, Arqiva, Vodafone, the European Space Agency, Eumetsat, the BBC, RNLI, AON, Interflora and the National Trust. The Company has UK offices in Chippenham, Bristol, Leicester and Reading and two offices located in Germany. More information is available at 

1.   Information on ANNOVA

ANNOVA ( with its initial roots going back to 1989, is a leading supplier of newsroom editorial solutions in the media sector. It has a robust business model based on its mature OpenMedia software solution. With its latest major version release  launched in 2014, OpenMedia provides next-generation newsroom system functionality, enabling story-centric workflows for news to be created for distribution on any medium. OpenMedia software licence sales are complemented by the sale of professional and consultancy services.

ANNOVA benefits from a well established customer base and enjoys an expanding maintenance and support business, both of which generate long-term recurring revenues.  It is a growing, high-margin business with a strong market position, capable of winning new major customers worldwide on a regular basis, which creates further long-term customer relationships. It already operates a small team in the UK, which gives ANNOVA an advantage in establishing further business in the UK, as well as supporting existing customers.

With journalists and editors as end-users, and its team of approximately 70 staff at its Munich headquarters and offices in London and Paris, ANNOVA predominantly focuses on large and medium-scale commercial and public TV and radio broadcasters. Its solutions are aimed at editorial workflows and cover all media types, including television, radio and online solutions.

ANNOVA's current customer base includes major public and commercial broadcasters in Germany, Switzerland, France, Belgium and Turkey. In 2015, ANNOVA won a substantial 12 year contract with the BBC for the supply of its OpenMedia solution - replacing a previous newsroom system (the "BBC Contract").

More than 50,000 daily users work with ANNOVA's well-established core newsroom software product, OpenMedia. The ANNOVA team has 20 years' experience in providing end-to-end solutions for modern news workflows, and supplies one of the most innovative software solutions for advanced journalistic workflows and news-planning systems to public and private broadcasters in the TV, radio and online broadcasting fields.

Reported according to German GAAP, ANNOVA's trading performance is summarised in the table below. Net Assets as at 31 December 2015 were €1.5m. ANNOVA currently has no borrowings.

Figures in € m












EBIT margin





ANNOVA has a strong order book (expected to exceed €30m at the end of 2016) and pipeline of new business prospects that, in the view of the SCISYS Board, position ANNOVA well to make substantial progress in the remainder of 2016 and beyond.

2.   Acquisition rationale

ANNOVA's operations are highly complementary to the Group's existing media and broadcast business.  The two businesses share a number of common customers and have a long history of working together.  In the Board's view this reduces the risk profile associated with an acquisition of this type.

The two businesses will be able to work together to improve sales into their combined customer base to provide more innovative and enhanced solutions to their existing customer base as well as to prospective customers in new international markets. 

ANNOVA has demonstrated considerable recent success in winning upgrade contracts for ageing newsroom computer systems and expects further momentum from the BBC Contract, in particular, acting as a strong international reference site.  The current global installed base of newsroom computer systems is currently estimated to be in excess of 20,000.  Market intelligence from IABM, the international trade association for suppliers of broadcast and media technology, identifies SCISYS and ANNOVA as top-five suppliers in their respective niches.

The combined operation will be able to  access and increase its share of the global US$1.3bn System Automation and Control segment better, which according to IABM will grow by 4% per annum to 2019.

As such the synergy opportunities from this acquisition are believed to be high and the Board expects the acquisition to be strongly earnings enhancing for the Group. The management of ANNOVA are highly incentivised through the earn-out potential of the deal.

As a product-based software solutions business, ANNOVA has similar operating margins to the Group's existing Media & Broadcast division, yielding 15% at the EBIT level in 2015, which comfortably exceeds SCISYS' average EBIT margin and should result in an improved overall Group margin profile going forward.  ANNOVA receives revenues in both euro and sterling, complementing the Group's natural internal hedging balance, given the spread of operations across UK and Germany.

The SCISYS Board believes the acquisition of ANNOVA will provide the Group with a number of significant benefits including: 


·         It offers a step-change to the Group’s growth potential in terms of revenue and margins;
·         Working side by side, the businesses will have a significantly increased presence and brand awareness in the media and broadcast sector, particularly in Europe where ANNOVA is a market leader, providing scope for further market development in other currently untapped international markets;
·         ANNOVA’s OpenMedia product and solutions ideally complement SCISYS Media & Broadcast’s dira! product suite, which is currently focused on audio playout solutions, broadening the Group’s product offering and delivering better access to a much larger part of the media & broadcast technology market;
·         With an excellent level of cultural fit, ANNOVA’s highly competent and experienced technical workforce will add complementary domain knowledge and expertise to customers’ benefit;
·         The retention of ANNOVA’s strong and committed management team will add to Group capability; 
·         SCISYS’s size and proven standing, structure and processes will provide ANNOVA with a robust platform to successfully continue its growth trajectory;
·         In combination, the businesses will benefit from cross-selling potential and will gain critical mass to better address the international media broadcast market; 
·         The addition of further licence- and product-based revenue to the Group with a growing recurring support and maintenance revenue stream will add to the already high visibility of future revenues of SCISYS.


3.   Acquisition structure and consideration

Under the terms of the share purchase agreement, SCISYS has, through its wholly owned subsidiary SCISYS Deutschland Holding GmbH (the "Purchaser"), entered into an agreement with Annova Holding GmbH (the "Seller") for the purchase of the entire issued share capital of ANNOVA (the "Acquisition Agreement").

The purchase price comprises an initial cash payment of €11.35m, plus incremental earn-out payments of up to €16.48m in total, calculated by reference to multiples of between 8.5 and 10.5 times ANNOVA's average EBITDA performance for the financial years to 31 December 2016, 2017 and 2018 less, in each case, an amount equal to €12.5m plus aggregate earn-out payments already paid at the relevant point in time.  All of the earn-out payments are conditional on the achievement of certain key commercial milestones in respect of the BBC Contract and are payable in cash or new ordinary shares in SCISYS PLC ("New Shares").  The extent to which all the earn-out payments may be satisfied in New Shares is subject to a maximum upper limit of 24 per cent.  The effective issue price for New Shares will be the average market price over the relevant earn-out year. The extent to which New Shares are used to satisfy earn-out payments is at the discretion of SCISYS, save for the first earn-out payment (in respect of the year to 31 December 2016) which is subject to a minimum limit of 10 per cent in New Shares (subject to admission to AIM).

To the extent that New Shares are issued for the purposes of the acquisition they will be subject to a 36-month lock-in period, subject to customary exceptions.

All key members of ANNOVA's management team are expected to remain with ANNOVA for at least the duration of the earn-out period.

Under the terms of the Acquisition Agreement, €2.5m of the initial cash consideration will be retained by ANNOVA by way of security in the event of any future claims against the Seller.

The Acquisition Agreement is conditional on the satisfaction of a number of customary pre-completion formalities.  Pending completion of the acquisition, which is expected to take place on or around 31 December 2016, the parties to the Acquisition Agreement have certain rights of withdrawal.

A further announcement will be made in due course upon completion of the Acquisition Agreement.

4.   Acquisition funding

The Initial Consideration of €11.35m will be principally financed through an unsecured loan with Deutsche Bank of €10.0m, subject to the Acquisition Agreement and associated banking documents being executed and Deutsche Bank completion arrangements,  with the balance funded from internal resources. The loan is at a fixed annual interest rate of 2.9 per cent. and is repayable in instalments between 2017 and 2021.

The earn-out payments of up to €16.48m in total will be paid following finalisation of ANNOVA's results for each of the years to 31 December 2016, 2017 and 2018.  To the extent that these earn-out obligations are satisfied in cash (as opposed to New Shares) they will be funded through a combination of the Group's cash reserves, prevailing senior debt facilities or through the placing of interest bearing, second ranking, non-convertible loan notes ("Loan Notes") being established through Lesmoir-Gordon, Boyle & Co Limited ("LGB") under a new loan note programme of up to £5m. The Loan Notes' terms as to tenor, repayment terms and coupon will be fixed at the date of issue of each tranche.

In the event that the Board of SCISYS elects to use the notes to satisfy a payment of deferred consideration the Loan Notes would be subject to a separate marketing arrangement by LGB at each issue. It is intended that the Loan Notes will be admitted to trading on the Bermuda Stock Exchange ("BSX"), accordingly each issue of Loan Notes would be subject to their admission to BSX.

The first tranche of Loan Notes of approximately £1.5m (the "Seeding Tranche") is intended to be issued during December 2016, prior to completion of the ANNOVA acquisition. The Seeding Tranche is expected to be issued for a term of three years and at a coupon of between 7 and 8 per cent. Although the placing of Loan Notes is not underwritten nor is the subscription for such notes committed at this stage, Mike Love, Chairman of SCISYS, has confirmed his intention to participate in the Seeding Tranche in the amount of £0.5m, subject to contract. Mike Love's participation in the Seeding Tranche will be a related party transaction within the meaning of the AIM Rules. The Board of SCISYS (excluding Mike Love) considers, having consulted with the Company's nominated adviser, finnCap Ltd, that Mike Love's participation in the Seeding Tranche is fair and reasonable insofar as the Company's shareholders are concerned.

Exchange Rate

Where relevant in this announcement, unless otherwise stated, Euro amounts have been converted into Sterling at £1: €1.17.


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Acquisition of ANNOVA Systems GmbH - RNS