Checkit share plunge as ends formal sales process without agreement

Checkit PLC on Monday said it has ended a formal sale process after failing to strike a deal it felt able to recommend to shareholders.

In response, shares in the Cambridge, England-based workflow management software provider plunged 32% to 15.27 pence each in London on Tuesday.

In a statement, Checkit explained that the FSP, launched in March attracted interest from a broad range of potential strategic and financial acquirers.

Checkit said it received non-binding offers from three "credible" potential acquirers following initial due diligence at 22p, 25p and a range of 31p to 33p per share.

"Following discussions with the first two parties, the board concluded that it was not possible to agree a valuation at a level which it considered it could recommend to shareholders, and those proposals did not progress. The third party subsequently decided not to proceed, having concluded that an acquisition of Checkit did not fit closely enough with its existing business," the firm explained.

Chekcit said it received verbal indications of interest from other credible potential acquirers in the range of 20p to 25p per share which it did not pursue, and one verbal indication of 40p which that party did not progress.

As of Monday, Checkit said it is not in receipt of any approaches and has therefore ended the FSP.

Checkit said the process has reinforced its view that it represents a strategically relevant platform within an attractive and consolidating market.

The news came as Checkit reported an improved first-half financial performance.

Pretax loss narrowed to £1.2 million in the half year ended July 31 from £2.5 million the year prior.

Adjusted earnings before interest, tax, depreciation and amortisation from continuing operations totalled £300,000 compared to losses of £900,000 a year ago.

Revenue rose 3.3% to £6.3 million from £6.1 million, with recurring revenue representing 97% of revenue compared to 96% a year ago.

Annual recurring revenue from continuing operations increased by 4.1%, or 5% on a constant currency basis, to £12.8 million from £12.3 million.

Checkit explained that the retirement of a legacy product supplied to a single customer removed £1.6 million of ARR and around £700,000 of annualised cost.

The firm said first-half results provide "tangible" evidence of Checkit's stronger financial foundations.

"With 97% recurring revenue, a materially lower operating cost base and the simplification arising from the retirement of the legacy product and platform unification, the group is increasingly well positioned to deliver operating leverage and sustainable growth," it said.

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