ERP.com a takeover target

By Iain Scott, ITWeb group consulting editor

Johannesburg, 16 Feb 2006

E-business services and integration company ERP.com Holdings has entered into discussions with an unnamed potential buyer.

The group announced late yesterday afternoon that it had received an expression of interest from a company interested in acquiring it.

No further details have been disclosed and market commentators say the identity of the potential bidder is a mystery to them. One market watcher says the acquirer is not likely to be a company of the size of Dimension Data or Business Connexion, but could be a medium-sized player.

The market reacted immediately to the announcement with the ERP.com share closing 10c or 5.71% up at 185c.

Trade volumes were significantly higher than average, with about 1.12 million shares worth R2.06 million changing hands. The share`s average daily volumes are just less than 160 000.

With 175.7 million shares in issue, the group had a market capitalisation of R325.05 million at the end of yesterday, up from R307.48 million at the close of trade on Tuesday.

The share was trading unchanged this morning.

ERP.com was founded in 1999 and listed on the JSE`s venture capital sector the same year. After completing a full three-year term on that board, it moved to the main board in November 2002.

Subsidiary iserve is a SAP reseller and SAP national service partner, SecureData is an IT security company, and Solutions for Business Intelligence supplies knowledge management solutions. Customised Solutions, a Citrix partner, is an integrated business solutions provider.

The group has consistently improved its financial results, growing turnover from R69 million in the year to July 2001 (when its market capitalisation was just R29 million) to R285 million in the 2005 financial year.

Net margins - a reflection of how much of every rand of turnover ends up as bottom-line profit - have also been relatively high. In the last financial year, the results reflected a net margin of 15.1%, compared with 18% the previous year and 14.5% in the 2003 financial year.

This is mainly because of the high-margin security business, which accounted for 53% of turnover in the 2005 financial year. A market commentator says the security business is where the real value of the group lies.

"It`s a good company. The business is very well run and generating profits. It would be a pity if it were sold," the market watcher says.

ERP.com CEO Dean Brazier was in meetings this morning and could not be reached for further comment.