News

Gladstone today boosted its defences against a hostile takeover bid with respectable full year results and another scathing attack on suitor Constellation Software Inc.

The firm, which develops management systems for schools and health clubs, reported a 9% increase in pre-tax profits for the year to August to £1.76m on sales up 4% to £9.55m. Underlying profit rose by 15.5% to £1.91m.

But much of the focus was on its defence against an unsolicited, "opportunistic" and "wholly inadequate" offer of 25p a share in cash from Canada's Constellation, valuing the British firm at just £13.5m.

"The board firmly believes that the offer fails to fully take account of Gladstone's robust operational capabilities, strong balance sheet, the quality of its products, its investment in a new technology platform and its entry into the education market," it said.

"Gladstone shares are worth significantly more than 25p."

Bosses urged shareholders to reject the offer and should not complete the form of acceptance received with Constellation's offer document.

"Gladstone's shareholders should ignore Constellation's opportunistic offer, which is wholly inadequate, and substantially undervalues Gladstone," said chairman and chief executive Said Ziai.

Some of the company's biggest investors holding more than 21% of the voting share capital agree. Former board members Jeremy Stokes with a 16% stake and Derick Martin with over 4% intend to turn down the offer.

Ziai said Gladstone's cash balance alone is worth 9.5p per a share, while the benefits of the group's significant investment programme have not yet flowed into the trading results of the business.

The bid followed Constellation's purchase of 13.86m shares, or 28.84% of Gladstone, in March. It wanted a seat on the board, but Gladstone refused, claiming the Canadians were potential competitors.

"A Constellation-nominated director would create a real risk of conflict of interest, given Constellation's competing business operations," read today's statement.

Gladstone, which has already enjoyed success within the gym membership software sector, is now looking to crank up its education business, primed for "significant" growth over the next few years.

Its software allows schools to install cashless catering systems, access control and other forms of smartcard technology. It points out that plenty of cash has been earmarked for spend on Information and Communication Technologies (ICT) as part of the British government's multi-billion pound Building Schools for the Future (BSF) programme.