Northgate says it has received a takeover approach
Posted 13 December 2007 - 08:42 AM
The firm, which posted first-half results on Tuesday, had seen its shares fall nearly 30 percent this week following analyst downgrades, but they recovered to close up more than 20 percent at 72 pence, valuing the business at 419 million pounds ($856 million).
"There is no doubt someone has come in on the back of the low share price. It was trading at seven times earnings earlier today," an analyst said, on condition of anonymity.
"The company was not a screaming buy but the business was fundamentally sound," he added.
The company was the subject of takeover approaches last year from private equity, but they were rejected over price.
Newspaper reports at the time said the offer put forward was 100 pence a share, and the analyst said it was possible the firm could fetch a bid price at least closer to that level.
"I think we've got a way to go above the 72 pence level, although 100 pence might be a little ambitious," he said, although the firm was trading at 80 pence before the credit crisis emerged in July.
Northgate added in a statement it had noted "inaccurate market commentary" concerning its debt facilities. It said its net debt stood at 416 million pounds and it was trading "comfortably" within its covenants.
Analysts at Numis had downgraded the firm to "sell" on Tuesday. They said in a note that any trading weakness over the next year "could lead to a covenant breach".
The company, which provides software and IT services to human resources and local government customers in particular, said a further statement would be made in due course. It declined to comment further.
Northgate reported first-half turnover up 49 percent at 246.3 million pounds on Tuesday, on adjusted operating profit up 23 percent at 31.5 million, which was within consensus forecasts.
[Note: I still retain the 80 shares I was given when the company was originally floated!]
Posted 21 December 2007 - 05:44 PM
(Clearly the Christmas drinks will be on me - Rob has probably started already, judging by his typing!)
Happy Holidays to you all!
Edited by Chris Pepper, 21 December 2007 - 05:47 PM.
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