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August 18, 2005

XKO pays $70m for utility debt collector UBM

Financial software provider XKO Group Plc is paying up to GBP47.5m ($70m) for UBM Ltd, which provides a service to collect debts written off by utilities.

By CBR Staff Writer

The deal, which is classed as a reverse takeover, is unusual because XKO has said its mission is to act as a consolidator in the UK market for ERP software though the board has said it has continued to examine other related opportunities in IT services and application management areas.

UBM offers revenue assurance services to utilities, using its own software to identify billing errors and recovering money owed in return for a percentage. It has grown rapidly with operating income increasing 101% to GBP1.17m ($2.1m) in the year to June 30 on sales 58% higher at GBP7.86m ($14.1m).

Clearly, this growth is expected to continue because XKO is paying GBP27m ($48.5m) up front and the remaining GBP20.5m ($36.8m) over the next two years dependent on UBM hitting unspecified profit targets.

XKO believes UBM has growth prospects in a number of underdeveloped target markets and its software and skilled 45-strong workforce combine to generate significant barriers to entry for possible competitors.

To pay for the acquisition, which directors say will be materially earnings-enhancing in the first full year, it has taken out a new GBP12m ($21.5m) bank facility and plans to raise GBP6.7m ($12m) through the sale of shares.

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