Software4Sport floated on the Alternative Investment Market (AIM) recently, providing Elderstreet Investments Limited and NatWest IT Fund with an exit from their 1998 investment in the company when a newco, called CSL, was formed to support the management buyout/ buy-in. NatWest Acquisition Finance provided senior debt for the MBO/ MBI. At the time of the float Elderstreet Downing VCT plc held 34.27 per cent, NatWest IT Fund 34.27 per cent, and Elderstreet Capital Partners Nominees Ltd held 23.92 per cent. The remaining 7.54 per cent belonged to Glenn Jackson.
Elderstreet had provided an additional GBP1 million just prior to the late August float, which along with the float proceeds has been earmarked to accelerate the development of Software4Sports products and services with the aim of helping it win market share.
In addition to the company’s development, a proportion of the net proceeds, which are from funds not qualifying for EIS/VCT relief, will be used to fully repay the balance of NatWest’s senior debt. This is approximately GBP247,000, together with accrued interest of GBP7,000.
In total the company has around GBP3.5 million to spend, since the float raised about GBP2.5 million for the company leaving it with a market capitalisation of GBP9 million.
Software4Sport, via broker Seymour Pierce, who fully underwrote the transaction, placed 30,000,000 ordinary shares with institutional and other investors, equivalent to 33.33 per cent of the company’s issued share capital at the time of its admission to AIM.
As part of the flotation agreement Elderstreet and NatWest IT Fund are to capitalise their loan notes in CSL that is, convert them into equity holdings in the company. Taken together these loan notes amount to GBP3,060,000 against which will be issued a total of 47,418,331 ordinary shares that is 52.69 per cent of the company’s issued share capital at the time of admission. At the same time the company will pay Elderstreet and NatWest IT Fund the outstanding accrued interest of GBP141,506.63 on the loan notes.
NatWest, which provided debt on the original transaction, has also agreed to convert a proportion of its term loan (around one quarter) into equity. As a result, NatWest IT Fund was issued 2,380,000 ordinary shares.
Michael Jackson, who is both the company’s non-executive chairman and managing director of Elderstreet, participated in the share placing and subscribed for 1,000,000 ordinary shares.
Although floated as Software4Sport the company CSL since its 1998 MBO/ MBI changed its name only recently to reflect the change in business focus in the last two years. What is now Software4Sport was a business that was originally established in 1984 to provide software solutions for recruitment applications. It subsequently developed a full Customer Relationship Management system and extended its range of services and clients to manufacturing, utilities and service companies.
In 1996 it signed up its first client in the football industry and has gone on to extend that presence into sports such as rugby and cricket both in its domestic market in the UK and overseas. Two years later when Elderstreet and NatWest IT Fund invested in the company Alistair Hardie joined as chief executive.
Having looked at existing customers taking the Customer Relationship Management software package it was felt there was the most potential in the sports market and this is where energies have been focused. A full 45 per cent of revenue in the six months to 29 February 2000 was derived from selling to professional football, rugby and cricket clubs. Clients include the FA Premiership clubs Bradford City, Chelsea, Derby County, Newcastle United, Southampton and Sunderland, major rugby union clubs Leicester Tigers and Northampton Saints, and numerous overseas sports clubs. The company has also provided the ticketing software for the 1999 Cricket World Cup requiring the issue of half a million tickets.
Future plans for Software4Sport include the development of an Application Service Provider which will allow less wealthy sports clubs to use the company’s TALENT software on a rental basis over the Internet. The software is also being developed to allow the company’s products to be used via digital television, and a kiosk or WAP enabled telephone. And an Internet-based real time sales process is under development to enable memberships, season tickets and match day tickets to be bought online.