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Wednesday 19 April 2017

Tax Systems building strong foundations

logoThe top management of this relative new-comer to AIM, headed by CEO Gavin Lyons (a partner of MXC Capital), had identified the market for the automation of Corporation Tax reporting as providing significant growth potential. As a result, a shell company (ECO City Vehicles plc) was used to buy Tax Computer Systems Ltd (TCSL) in July of last year and reverse it onto the public market as Tax Systems plc (AIM: TAX). TCSL had a long history in the business, an established software platform and broad UK customer base, as well as £12.8m of revenue in 2015 and an EBITDA margin consistently around the 50% level. The acquisition was transacted at an Enterprise Value of £73m.

Today’s results show the performance of Tax Systems plc since the acquisition to the end of the calendar year. Revenue totalled £5.8m, with EBITDA of £2.7m. An operating loss of £3.2m and £0.8m of Finance charges drove a pre-tax loss of £4m. The company had net debt of £24m at the year end. Annual software licence sales totalled £5m, some 80% of the Group total.

Management’s key next step was to buy Little British Battler OSMO, for its ability to extract data automatically from diverse accounting systems and to significantly alter the economics of building tax returns. (Corporation tax appears to get ever more complex and Brexit will probably make it even more so). This acquisition generates a significant element of differentiation as Tax Systems sets out to serve companies as they move to quarterly tax reporting and respond to the government’s policy of “Making Tax Digital” by 2020.

Tax Systems’ goal is to provide end-to-end and substantially automated solutions for tax departments. With the progress already made, it seems to be building good foundations for an exciting future.

Posted by Peter Roe at '09:34' - Tagged: acquisition   software   tax  

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