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Monday 04 December 2017

Castleton buys and builds down under

Castleton logoCastleton Technology has already ‘bought and built’ (see Castleton H1 revenue up 11%  and work back) over the last couple of years to establish a position in the social housing sector in the UK. Now, it is doing the same in Australia where, up until now, it has had a very small footprint (c12 customers and £0.5m of turnover).

The software and managed service provider to the public and not-for-profit sectors has announced the acquisition of Kinetic Information Systems Pty Ltd, “the leading provider of software solutions to the Community Housing sector in Australia”. Kinetic has over 50 customers on its books and a c40% share of the market for Tier 1 providers in Australia. Impressively, it claims a 100% customer retention over the last ten years. We understand that competitors, like UK-headquartered SDM Housing Software, as well as local Australian firms, have a small footprint in comparison.

There will be plenty of opportunity to cross-sell Castleton’s UK software into the Australian market, where the market trend is mimicking the UK's 20 years ago, i.e. more housing stock is being pushed to social housing providers. Kinetic has three pillar offerings underpinning its ERP software solutions: MYOB GreenTree, a Tier 2 ERP software solution; QlikView, business intelligence software; and its proprietary Kinetic Housing Schema software platform, which takes the standard ERP and BI software and creates a fully integrated solution (and contributes c10-15% of revenues). The company also has a strong consultancy revenue stream. But there are plenty of Castleton offerings that Kinetic doesn’t touch currently, like CRM, document management or mobile solutions.

All in all, this looks like a neat acquisition for Castleton, which brings with it the possibility of rapid expansion within the region (and indeed, into other countries like New Zealand, or adjacent sectors). With turnover of AU$2.3m (c£1.3m) and normalised EBITDA of AU$0.6m (c£0.3m), the deal (initial cash consideration of AU$2.0m (c£1.14m), a deferred cash payment of AU$0.5 million (c£0.3m) and a further payment dependent on performance to June 2018) looks fair. Now we’ll just take bets on whether SDM is the next acquisition target…!

Posted by Georgina O'Toole at '09:50' - Tagged: localgovernment   erp   acquisition   software   M&A   BI   socialhousing   Australia  

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