Acquisition(s)
March 31 2004 - 6:27AM
UK Regulatory
Immediate release: 31 March 2004
Croma Group plc
("Croma" or "the Company")
Acquisition of R&D Design Services Limited
Placing of 40,000,000 New Ordinary Shares at 5.75p per share
Admission to trading on AIM
INTRODUCTION
The Board of Croma is delighted to announce that the Company has conditionally
agreed to acquire R&D Design Services Limited ("R&D Design"), a company which
designs, assembles and markets monitors for the airborne, sea borne and ground
surveillance markets. The acquisition of R&D Design constitutes a reverse
takeover under the AIM Rules and, as such, requires the approval of
Shareholders at the Extraordinary General Meeting of the Company to be held on
15 April 2004 ("the EGM").
COMPANY BACKGROUND
In June 2000, Croma completed the acquisition of the company formerly known as
Croma Optical Equipment Limited, which commenced trading in February 1998 to
originate, design, develop and market
high performance surveillance equipment and systems for civil and military
applications. It was subsequentlyre-named Croma Defence Systems Limited.
Following the acquisition of Croma Defence, the Company's initial efforts were
devoted to locating and moving premises to facilitate the development of a
limited number of products from prototype to production standard, and to
acquire new sales and technical support staff. The relocation was completed in
September 2000.
The following period saw the introduction and test marketing of the Company's
initial product range together with a drive to develop the sales of these
products.
The Company has subsequently concentrated on the development of a marketing
programme and the expansion of its product range. The product range has been
expanded through both the development by Croma Defence of new products and
through the acquisition by Croma Defence of rights to distribute the
products of other small manufacturers, where such products complement Croma's
existing core product range.
The Company raised approximately �240,000 (before expenses) from a private
placing in September 2003. The Company then raised approximately �1.65 million
(before expenses) from a placing and offer for subscription in December 2003
and its entire issued ordinary share capital was admitted to trading on AIM on
18 December 2003.
INFORMATION ON R&D DESIGN
R&D Design was established in 1997 to research, design, assemble and market
bespoke monitors for the
airborne and ground surveillance markets.
The monitors are used in both overt and covert surveillance operations. The
monitors use R&D Design's
MIST video enhancement technology which allows targets to be viewed through
mist or hazy conditions
which would otherwise be difficult or impossible to view using conventional
monitors. There are approximately 300 units in use globally with police,
military and border guard helicopters and aircraft. R&D Design has been
designated an approved supplier by the UK Home Office Framework Agreement for
UK Police Air Support Units and most police helicopters in the UK have R&D
Design's monitors installed in them.
The use of R&D Design's monitors amongst UK police forces has led to the
acceptance of these monitors for use in search and rescue helicopter and
fixed-wing operations. All UK coastguard search and rescue helicopters have
beenusing R&D Design's monitors for the past 5 years and they are currently
being fitted in the RAF's search and rescue helicopters. The monitors have also
been installed in the RAF's long range search and rescue aircraft and are in
use with a number of contractors in the North Sea oil industry. A foreign navy
took delivery of 12 of R&D Design's monitors for their search and rescue
operations in August and September 2003.
In 2003, R&D Design's monitors were installed on a prototype fast patrol boat
in Spain, and a second boat will be equipped in the second quarter of 2004. A
monitor has also been installed by a shipyard in Sweden in 2003 into a fast
patrol boat, and demonstrated to various potential customers worldwide. R&D
Design's monitors have alsobeen selected for Spanish Customs' fast patrol boat
programme. The Directors believe that the acceptance of R&D Design's monitors
for use in fast patrol boats in Scandinavia and Spain provides a significant
sales opportunity for R&D Design, as the EU has increased funding for EU
countries to build and equip fast patrol boats to combat the threats from
terrorism, drug smuggling and the illegal movement of immigrants. In the case
of Spain, there will be 25 of these boats in total, with similar numbers for
other EU countries having the same size of sea borders. The Directors believe
that this will lead to further contracts for fast combat boats to be equipped
with similar systems in countries outside the EU, and which have similar
requirements.
R&D Design has integrated the ability to display both radar and video in one
monitor and the Directors believe that this development will enhance R&D
Design's potential to integrate its monitors with other Radar manufacturers'
equipment in a similar fashion.
R&D Design has also designed several interface units which allow the
integration of different manufacturers' video and digital map systems for
displaying on Electronic Flight Instrumentation System ("EFIS"). The EFIS is
more commonly known as the "All-Glass Display cockpit", whereby the pilots have
the ability to view not only aircraft instrument information, but can now
select both video and digital map. The Directors believe these interface units
present an extremely important market opportunity, as physical space in today's
modern aircraft is always a problem and it is often physically impossible to
install an additional monitor on board.
The unaudited financial results of R&D Design for the three years ended 31
January 2004 are summarised
asfollows:
Year ended Year ended Year ended
31 January 31 January 31 January
2004 2003 2002
� � �
Turnover 1,198,728 415,210 303,264
Gross profit 834,862 209,066 139,016
Profit after tax 491,930 93,763 43,148
REASONS FOR THE ACQUISITION
The Board's stated strategy, inter alia, is to grow Croma, both organically and
through acquisitions, into a significant specialist supplier of surveillance
equipment and security related products to the military, law enforcement
agencies, customs agencies and immigration authorities in the UK and overseas.
The Directors believe that R&D Design's product range complements Croma's
product range and potentially increases the scope foran exchange of technology
and for cross selling products of both companies. In addition, the Directors
believe that R&D Design has established a strong brand with rapidly growing
sales which Croma has the financial resources to continue growing.
PRINCIPAL TERMS OF THE ACQUISITION
The Company has agreed, conditional upon the passing of the Resolution at the
EGM, to purchase the entire issued share capital of R&D Design from the Vendors
for an initial cash consideration of �2.5 million and two possible additional
tranches payable in 2005 and 2006 depending on the performance of R&D Design.
The total consideration payable for R&D Design, including the initial and any
additional consideration, is capped at �4 million.
The initial consideration is expected to be satisfied by a cash payment to the
Vendors on 19 April 2004.
Each tranche of additional cash consideration will be satisfied within 10
business days of agreement on the adjusted pre-tax profits of R&D Design for
the relevant financial period.
The Acquisition Agreement is conditional, inter alia, on the passing of the
Resolution at the EGM and
admission of the Company's entire issued ordinary share capital to trading on
AIM.
CURRENT TRADING AND PROSPECTS
Croma reported an operating loss of �528,986 for the year ended 30 June 2003
and an operating loss of
�261,552 for the six months ended 31 December 2003.
Croma Defence continues to establish new relationships in terms of
distribution. Interest in the Company's product range and inworking with the
Company has been expressed by companies based in Israel, the Czech Republic,
Hong Kong, Malaysia, the USA, Spain, Greece, Turkey, Italy, the Netherlands and
Australia. The Directors are confident that the number of opportunities to
provide quotations will continue to increase and they are confident that many
of these quotations should result in firm orders for Croma.
THE PLACING
The Company proposes to issue 40,000,000 new ordinary shares of 5p each
("Placing Shares") by way of a placing ("the Placing").
The Placing Shares will, on admission to AIM, rank pari passu in all respects
with the existing ordinary shares of Croma currently in issue, including all
rights to receive dividends and other distributions declared paid or madeafter
the date of issue. The Placing has been fully underwritten by Seymour Pierce.
The Placing is conditional, inter alia, on the placing agreement having become
unconditional in all respects and not having been terminated in accordance with
its terms. The placing agreement is conditional, inter alia, on admission of
the Company's entire issued ordinary share capital to trading on AIM
("Admission"). It is expected that Admission will become effective and that
dealings in the Placing Shares will commence at 8.00 a.m. on 16 April 2004 (or
such later date, being not later than 30 April 2004, as Seymour Pierce and the
Company may agree). If Admission has not so occurred, application monies will
be returned to applicants without interest as soon thereafter as is
practicable.
REASONS FOR THE PLACING AND THE OFFER FOR SUBSCRIPTION AND USE OF
PROCEEDS
The Company proposes to raise �2.11 million (net of expenses) by the issue of
the Placing Shares. The net proceeds of the Placing will be used to fundthe
Acquisition.
FURTHER INFORMATION
Further information regarding all aspects of the Acquisition and the Placing is
set out in the prospectus published by the Company today and posted to all
shareholders of Croma.
ACTION TO BE TAKEN
Form of Proxy
A Form of Proxy has today been posted to all shareholders of Croma for use in
respect of the EGM. Whether or not Shareholders intend to be present at the
EGM, they are asked to complete, sign and return the Form of Proxy to the
Company's registrars, Neville Registrars Limited, Neville House, 18 Laurel
Lane, Halesowen, West Midlands B63 3DA as soon as possible but in any event so
as to arrive no later than 9.30 a.m. on 13 April 2004. The completion and
return of a Form of Proxy will not preclude Shareholders from attending the EGM
and voting in person should they wish to do so. Accordingly, whether or not
Shareholders intend to attend the EGM in person, they are urged to complete and
return the Form of Proxy as soon as possible.
EXPECTED TIMETABLE OF EVENTS
Publication date of this document 31 March 2004
Latest time and date for receipt of the Form of Proxy 9.30 a.m. on 13 April
2004
Extraordinary General Meeting 9.30 a.m. on 15 April
2004
Trading to commence in the enlarged issued share 8.00 a.m. on 16 April
capital on AIM and, 2004
where applicable, Placing Shares credited to CREST
Completion of the Acquisition 19 April 2004
Where applicable, definitive share certificates for 23 April 2004
Placing Shares despatched by
For any further information please contact,
John French, Chairman and Chief Executive
Croma Group plc - 01432 373 030 / 07836 722 482
Ben Simons / Chris Roberts
Hansard Communications
020 7245 1100 / 0771 309 0135
END
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