Private equity approach lifts Civica shares

Shares in Civica, the Aim-listed public sector software and services company, jumped by 12 per cent on Tuesday after it said a private equity group had made an approach regarding a possible offer for the company.

“Civica announces today that it has received an unsolicited preliminary approach from a private equity fund,” the company said in a statement.

“Discussions are at an early stage and this approach may or may not lead to an offer being made for the company.” It declined to name the potential bidder.

The announcement of a bid approach is further evidence of growing private equity interest in the UK software and services sector.

It follows Monday’s private equity-backed merger of Computer Services Group, the UK back-office software company, and Iris Software.

Hellman & Friedman, the private equity group, bought both CSG and Iris from HG Capital, mid-market private equity group, in a deal with an enterprise value of £500m.

Civica’s shares jumped 31p to 282p in early trading on news of the bid approach but they have struggled since Simon Downing, chief executive and Michael Stoddard,finance director, sold all their shares in the company on March 22.

The pair said their decision was motivated by tax concerns and said they retained unexercised share options. But, the announcement wiped 5.3 per cent from the share price, after a downgrade by Seymour Pierce, the broker, to “underperform.”

In April Mark Pearman, the former chief executive of Torex Retail, resigned his position as non-executive director of Civica.

Mr Pearman said he wanted to concentrate on his role as chief executive of XN, the former Torex operations that he bought from the retail software group in December.

Separately on Tuesday Civica announced interim results for the six months to 31 March.

Revenues increased 11 per cent to £62.8m (£56.5m) helped by a good performance from its local government unit, including 27 new software contract wins with local councils

The company made a pre-tax profit of £0.91m compared with a loss £2.32m for the same period last year, aided by a solid performance from its education operations, which supply library management systems.

However, market conditions in its enforcement and security business “remained challenging”, the company said, and overall revenues in the sector fell 18 per cent.

Earnings per share were 0.2p ((5.0p)). The company plans to pay an interim dividend of 0.8p (0.73p).