Scientific Digital Imaging : 19 December 2016 - Equity Fundraising & Acquisition Download

SCIENTIFIC DIGITAL IMAGING PLC

Equity Fundraising & Acquisition

Scientific Digital Imaging (AIM: SDI, "SDI", the "Company" or the "Group"), the AIM quoted group focused on scientific and technology products for use in applications including life sciences, healthcare, astronomy, consumer manufacturing and art conservation, is pleased to announce the conditional acquisition of Astles Control Systems Limited ("Astles") for initial consideration of £3.446 million (the "Acquisition") and an equity fundraising of £3.1 million (before expenses) (the "Equity Fundraising").

Highlights

• Acquisition of Astles for initial consideration of £3.446 million on a debt free cash free basis, consisting of £3.336 million in cash and £0.100 million in new ordinary shares of 1 pence each in the capital of the Company ("Ordinary Shares") at a deemed price of 13 pence per Ordinary Share (the "Issue Price") with an additional earn-out of up to £1.354 million and additional payment for other net assets at completion;

• Astles designs, manufactures and supplies bespoke chemical dosing systems and operates in niche markets, predominantly two piece beverage can manufacture. In addition, servicing of installed systems provides a repeat business revenue stream;

• Conditional placing and subscription of 23,846,155 new Ordinary Shares at the Issue Price with institutional and other investors to raise gross proceeds of £3.1 million;

• Ken Ford, Chairman of the Company has subscribed in the Placing for 250,000 Ordinary Shares and Mike Creedon, Chief Executive of the Company, has subscribed at the Issue Price for 76,924 Ordinary Shares in the Subscription; and

• New Term Loan Facility to replace SDI's existing bank facilities, resulting in one new £1.16 million term loan which will be fully drawn following completion of the Acquisition. The Term Loan Facility will be at an interest rate of 4 per cent. plus the NatWest base rate which is currently 0.25 per cent and repayable over five years.

  Commenting on the Acquisition and the Equity Fundraising, Chairman Ken Ford said:

  "We are delighted to be acquiring Astles and look forward to integrating it into our existing Group. This acquisition continues our stated buy and build strategy and enables us to further diversify the products we can offer to customers as well as widening our addressable market and increasing cross selling opportunities. We are delighted by support shown by both new and existing institutional investors in the placing and we look forward to the future with confidence."

  Further information on the Acquisition and Equity Fundraising is set out below.

  General Meeting

  A Circular and notice convening the General Meeting, to be held at the offices of Birketts LLP at 22 Station Road, Cambridge CB1 2JB at 11.00 a.m. on 10 January 2017, will be posted to shareholders today and will be available from the Company's website at www.scientificdigitalimaging.com. The General

  Meeting has been convened to consider and if thought fit approve the proposals set out in the Circular and notice.

  The Directors consider the proposals set out in the Circular and notice to be in the best interests of the Company and the shareholders as a whole. The Directors who hold Ordinary Shares intend to vote in favour of the Resolutions in respect of their shareholdings, representing in aggregate approximately 1.67 per cent. of the Company's current issued share capital as at the date of this announcement.

  Unless otherwise defined herein, capitalised terms used in this announcement shall have the same meanings as defined in the Circular containing notice of the General Meeting, a copy of which will shortly be available on the Company's website www.scientificdigitalimaging.com.

  FOR FURTHER INFORMATION

  Scientific Digital Imaging Plc Ken Ford, Chairman Mike Creedon, Chief Executive Officer www.scientificdigitalimaging.com	01223 727144
  finnCap Ltd Ed Frisby/ Simon Hicks - Corporate Finance Mia Gardner - Corporate Broking	020 7220 0500
  JW Communications Julia Wilson - Investor & Public Relations	07818 430 877

  About Scientific Digital Imaging plc:

  Scientific Digital Imaging plc ("SDI") designs and manufactures scientific and technology products for use in applications including life sciences, healthcare, astronomy, consumer manufacturing and art conservation. SDI plans to continue to grow through its own technology advancements as well as strategic, complementary acquisitions.

  www.scientificdigitalimaging.com

  The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

  The following text is extracted from the Circular:

• INTRODUCTION

The Company today announced the conditional acquisition of Astles Control Systems Limited. The consideration payable by the Company is an initial consideration of £3.446 million with an additional earn-out of up to £1.354 million. The details of the conditions of the earn-out can be found in paragraph

2. The maximum consideration of £4.8 million payable will be financed by the Equity Fundraising, the issue of Consideration Shares, £0.85 million from the Company's existing cash resources and £0.75 million from the new Term Loan Facility.

The Company announced today a proposed Equity Fundraising of £3.1 million (before expenses). Ken Ford, Executive Chairman of the Company, and Mike Creedon, CEO of the Company, have subscribed for 250,000 Ordinary Shares and 76,924 Ordinary Shares respectively, also at the Issue Price. In addition, the Company intends to issue Peter Astles, seller of the majority of shares in Astles, 769,231 Ordinary Shares at the Issue Price as part of the total consideration of the Acquisition.

The issue of the New Shares is conditional on, inter alia, the passing of the GM Resolutions by Shareholders.

The purpose of this Circular is to outline the reasons for the Equity Fundraising and the Acquisition and to explain why the Board considers the Proposals to be in the best interests of the Company and the Shareholders as a whole.

The Directors unanimously recommend that you vote in favour of the GM Resolutions, as they intend to do in respect of their own beneficial holdings of Ordinary Shares which amount to, in aggregate, approximately 1.67 per cent. of the Existing Shares.

1. THE FUNDING OF THE ACQUISITION AND THE ACQUISITION

   SDI announced earlier today the conditional Acquisition of Astles for up to £4.8 million on a debt free cash free basis, with an additional payment for other net assets at completion. The initial consideration due of £3.446 million will be satisfied by £3.346 million paid in cash and £0.1 million by the issue of 769,231 Consideration Shares.

   The maximum earn-out of £1.354 million would be triggered in full by Astles reporting a profit before tax of greater than, or equal to, £1.2 million and the additional earn-out would be paid in cash following the publication of the Group's audited annual report and accounts for the year ended 30 April 2017.

   The maximum consideration due of £4.8 million would be funded using £0.85 million of SDI's existing cash resources, £0.1 million through the issue of the Consideration Shares, £3.1 million from the Equity Fundraising and £0.75 million provided in the form of the New Loan Facility, of which further information can be found in paragraph 3. The new Term Loan Facility will be fully drawn following completion of the Acquisition.

   Astles designs, manufactures, supplies and services bespoke chemical dosing systems and operates in niche markets, predominantly two piece beverage can manufacture. Astles makes sales of its chemical dosing systems via its direct sales channel and also undertakes its own maintenance and servicing for clients. Astles' chemical dosing solutions include control systems, pumps, parts, sensors and maintenance. Over the 14 months to July 2016, Astles' product mix comprised:

   Percentage of total revenue
   Spares sales	38 per cent.
   System sales for new plants or new lines in existing plants	33 per cent.

   Service contracts/visits	21 per cent.
   Systems sales as upgrade or replacement in existing plants	8 per cent.

   Astles' average product life is 10 years and the price of a system ranges from c. £15,000 to £90,000 (with an average price of £50,000). Astles sells its systems into a range of market sectors with approximately 85 per cent. of sales in to two piece beverage can manufacturing. Other customers include various industrial companies including companies in the automotive sector. Growth within Astles has predominantly been driven by a focus on export markets and on new factory sales opportunities. Currently exports account for c.75 per cent. of Astles' turnover with sales worldwide.

   Astles' audited accounts for the financial year ended 30 April 2016 reported revenues of £1.914 million and profit before tax of £0.873 million.

   Astles believes that its focus on quality and services has helped it grow and maintain its high margins and it prides itself on its service levels. The majority of Astles' sales are within the canning industry and its significant customers in Astles' 2016 financial year include: Rexam Beverage Can group of companies, Ball Beverage Packaging group of companies, Crown Beverage Can group of companies, Nampak group of companies, Ardagh group of companies, Stolle Europe Limited, Carnaud Metalbox group of companies and Roeslein & Associates Inc.

   Astles will continue to operate from its leased Princes Risborough premises with Peter Astles continuing to run Astles on completion of the Acquisition until 30 April 2017, after which he will be employed by the Company on a part time basis for a further two years. His role in this time will include the attendance of SDI Board meetings.

   The Acquisition is in line with SDI's strategy of selective acquisitions and the Board believes that the integration risk relating to the Acquisition to SDI and its Shareholders is low. The Acquisition will increase SDI's repeat business revenue streams and is expected to result in the Acquisition being earnings enhancing in the first full year of ownership. In addition, Astles is a current customer of Sentek, a subsidiary of SDI which designs and manufactures PH and conductivity sensors for water based applications. The Acquisition presents an opportunity to grow Sentek's sensor sales.

2. EXISTING AND NEW TERM LOAN FACILITY

   The Company has entered into the Term Loan Facility to fund part of the maximum consideration payable pursuant to the Acquisition.

   The Term Loan Facility will replace SDI's existing bank facilities, resulting in one, new £1.16 million term loan which will be fully drawn following completion of the Acquisition. The new Term Loan Facility is at an interest rate of 4 per cent. plus the NatWest base rate which is currently 0.25 per cent repayable over 5 years.

3. BACKGROUND TO AND REASONS FOR THE EQUITY FUNDRAISING

   The Company intends to utilise the proceeds of the Equity Fundraising to part fund the maximum consideration payable pursuant to the Acquisition and for transaction costs associated with the Equity Fundraising and Acquisition.

4. CURRENT TRADING

The current trading of the Company is in line with expectations and the Company looks forward to reporting its unaudited interim results for the six months to 31 October 2016 in the second half of January 2017.