ACT Group Plc is finally coming out in the open and making an agreed offer for London EC1-based financial software house Quotient Plc that values it at UKP27.4m. ACT is offering one new ACT share and 98 pence in cash for each Quotient with an all-cash alternative of 190 pence a share. ACT either owns or has irrevocable undertakings for 41% of Quotient’s issued share capital. Quotient will become part of ACT Financial Systems where its financial software packages are said to complement those of the Financial Systems business. ACT chairman Roger Foster thinks that Quotient’s profitability has been impacted in the past by its large research and development programme and the cost of establishing its international network. Quotient reported pre-tax profits of UKP1m on turnover of UKP22m for 1990. The financial company’s investment in research and development on its software is something that ACT intends to harvest, commenting that Quotient’s high-value-added packaged software will account for a substantially increased proportion of ACT’s revenue in the current financial year. Possibly more pertinent, however, is Quotient’s international network consisting of offices in Paris, Frankfurt, New York, Tokyo and Sydney that analysts estimate would cost ACT approximately UKP5m to set up. Furthermore, although ACT may have paid slightly over the odds for Quotient – a price closer to UKP18m than the UKP27.4m it is paying was doing the rounds as recently as last Friday Quotient has begun the successful and lucrative penetration of the Japanese market, having won orders from Dai-ichi Kangyo, Mitsubishi Trust & Banking Corp and Tokai Bank, as well as signing a high-profile development deal with Fujitsu Ltd in December to create applications for international financial institutions to run on Fujitsu’s M-series mainframes. And those relatively backward continental bourses will need to spend big to equip for the more integrated European securities markets that are expected to evolve after 1992. So far Roger Foster’s decision to sell off the Apricot Computer Hardware division to Mitsubishi Electric Corp nearly a year ago has been vindicated, since ACT Group Plc has grown pre-tax profit by 58% to a little under UKP13m over the year on turnover that fell 30% to just under UKP99m. The hardware arm was sold on May 21 1990 and accounts for UKP5m of ACT’s turnover for the year and a UKP38,000 trading loss. The sale has inflated the group’s net profitability through a UKP12m extraordinary item, but the pre-tax profit growth is a clearer indication of the strength of ACT’s software and services activities during a year that has proved economically difficult for many rival UK software companies. ACT currently has five operating divisions: those selling into finance, health and central government markets and the networking and computer services businesses that sell direct to large users. All divisions are said to have traded profitably during the year. If all Quotient’s owners take the cash alternative, ACT’s UKP27m net cash will be cleaned out – but Quotient has some UKP3m cash.
