SRJ Technologies : to acquire STATS(UK) Limited

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ASX Announcement

CODE: SRJ

14 December 2021

SRJ TECHNOLOGIES GROUP PLC TO ACQUIRE STATS (UK)

LIMITED

Highlights

• SRJ Technologies has signed a share purchase agreement to acquire STATS (UK) Limited.
• STATS is a market leader in the provision of innovative, technology-led pressurised pipeline integrity solutions
• STATS generated revenue of A$78.9 million (£42.5 million) and EBITDA of A$11.3 million (£6.1 million) in FY2020.
• STATS has over 317 personnel and 8 offices in key target markets including UK, Canada, USA, Middle East and Asia Pacific.
• SRJ Technologies is undertaking a raise A$142 million to fund the purchase price for STATS and also provide working capital for the Combined Group.
• Morgans Corporate have been appointed as lead manager and underwriter.
• SRJ Technologies to apply to ASX for re-admission of its CDIs to trading on ASX.
• Leigh Howarth, the current CEO of STATS to be appointed as an Executive Director of SRJ Technologies.

Perth, Australia, 14 December 2021 - SRJ Technologies Group plc (ARBN 642 229 856) (ASX: SRJ) (SRJ or the Company) is pleased to announce that it has executed a share purchase agreement (SPA) to acquire 100% of the issued share capital of UK based company STATS (UK) Limited (STATS) (Acquisition), subject to customary conditions including SRJ obtaining the required shareholder approvals (refer to section 11(b) of this announcement for further details of the conditions). The consideration payable by the Company to STATS shareholders will comprise a combination of SRJ shares (traded on the ASX as CHESS Depositary Interests, CDIs) and cash, with STATS shareholders holding approximately 5% of the issued share capital in SRJ on completion of the Acquisition and re- compliance listing (Completion). Refer to Appendix 4 for details of the STATS shareholders. For the purpose of this announcement, SRJ and STATS are referred to following completion of the Acquisition as the Combined Group.

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"SRJ's vision is to become a global leader in asset integrity solutions for the energy industry, and this transaction will add value, differentiation and scale to SRJ. It will drive long-termgrowth with meaningful revenue synergy opportunities whilst delivering a highly responsive, solutions-ledservice to our clients"

Alexander Wood, CEO, SRJ

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The Acquisition supplements SRJ's business with a global energy business with a portfolio of disruptive technologies that are well positioned to capitalise on global energy market growth and the transition to green energy.

SRJ's acquisition of STATS, a market leader in the provision of innovative, technology-led pressurised pipeline integrity solutions, including its BISEP® and Tecno Plug® products, will accelerate SRJ's strategic priorities in the asset integrity market. SRJ will leverage the global presence of STATS to exploit cross-selling opportunities of SRJ's disruptive products and technologies, whilst also looking to capture the

significant growth opportunities in the energy transition sector with its broader range of asset integrity solutions.

A group structure chart of the Combined Group on Completion is set out in Appendix 1.

The Company has undertaken legal and financial due diligence enquiries into the assets, liabilities, financial position and performance, profits and losses, and prospects of STATS, to enable the board of the Company to be satisfied that the Acquisition is in the best interests of the Company and its shareholders. In particular, the Company and its advisers have reviewed materials relating to STATS and its subsidiaries, including corporate records and information disclosed by STATS to the Company, audited historical financial information and unaudited financial information and information maintained on public registers.

In connection with the Acquisition, the Company also intends to:

• undertake a fully underwritten offer of CDIs to raise A$142 million to fund the cash component of the purchase price for STATS and provide working capital for the Combined Group post-completion (Offer), with Morgans Corporate Limited (AFSL 235407) appointed as lead manager and underwriter;
• apply to ASX for re-admission of its CDIs to trading on ASX; and
• appoint Leigh Howarth (current CEO of STATS) as an Executive Director of the Company.

The Acquisition is unanimously endorsed and supported by the board of the Company.

1. About STATS

STATS is a private company limited by shares based in Scotland and incorporated on 16 February 1998.

STATS is a market leader in the provision of innovative, technology-led pressurised pipeline integrity solutions that provide leak-tight double block and bleed pipeline isolation, facilitating the safe and efficient maintenance and repair of critical pipeline infrastructure for the global energy industry - on land, offshore and subsea pipelines.

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Key information on STATS

• Market leading proprietary and patent protected technology service provider with a focus on the midstream energy infrastructure sector and capability across subsea, upstream and downstream segments
• Global footprint (8 strategically located offices) and blue-chip customer base with revenues split across North America, Europe, Middle East and Asia Pacific
• Large addressable market in an industry driven by legislation, regulation and increasing socioeconomic pressures
• Growing and highly resilient financial performance notwithstanding COVID-19 and commodity price cycles highlights differentiation and criticality of STATS solutions
• Energy transition and sustainability priorities provide favourable dynamics with the growing importance of gas in the global energy mix; technology relevant to emerging carbon capture and hydrogen sectors
• Experienced management team and highly skilled workforce with a client focused and solution orientated culture
• Focus in the lucrative opex market with significant capabilities around decommissioning and repurposing assets

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STATS provides innovative engineered technology solutions to the global energy industry from four primary product and service segments which are Isolation & Intervention, EPRS & Subsea, Process Plant Solutions and Repairs & Maintenance. These segments drive revenue through product sales, leasing of products and through provision of services.

For FY2020 based on STATS' FY2020 audited accounts, STATS generated revenue of A$78.9 million (£42.5 million) and EBITDA of A$11.3 million (£6.1 million). STATS has over 317 personnel and 8 offices in key target markets including UK, Canada, USA, Middle East and Asia Pacific.

"The two groups share a similar DNA that is driven by a solutions-led approach to our client's asset integrity issues. We are truly excited by the prospect of this next stage in STATS growth, not only to offer additional innovative solutions to our clients, but to do it with a trusted and capable SRJ team. We are fully aligned with SRJ's purpose and aspirations, and together, we will continue to support our clients with safe, reliable and technically superior solutions and continuous innovation."

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The key management of STATS are Peter Duguid	Leigh Howarth, CEO, STATS
(Executive Chairman), Leigh Howarth (Chief
Executive Officer), Doug Krokosz (Engineering

Director), Steven Byers (Chief Operating Officer), Angus Bowie (Regional Director, Middle East & Asia), Stephen Rawlinson (Regional Director, North America), Lisa Mitchell (Commercial Director), and Ron James (Sale Director).

Further information about STATS, including key risks associated with the STATS business, is set out in Appendix 2.

In the past 6 months, STATS has not issued any securities. Prior to the Company's completion of the Acquisition, 44,776 options and warrants will be exercised such that STATS will not have any options or warrants on issue as at completion of the Acquisition with STATS receiving £941,000 as payment for the exercise price for those options and warrants.

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2. Strategic rationale for the Acquisition

For SRJ, the Acquisition presents an attractive opportunity to achieve market acceleration by expanding global client relationships and locations, supported by opportunities presented by an energy industry in transition. Combined, SRJ and STATS' complementary businesses present an opportunity to drive growth with multiple external strategic levers driving demand for products and services, including:

• Environmental focus. With the increased emphasis on Environmental, Social and Governance (ESG), pledges have been made on environmental performance with emission monitoring being a key focus. SRJ and STATS's leak containment solutions in combination with digital monitoring will assist in ensuring emission release is minimised.
• Greater industry regulations. Energy operators are now required to comply with a range of safety, environmental, emissions and material standards. This tighter regulatory framework provides opportunities for the Combined Group's asset integrity solutions.
• Grid decarbonisation. The anticipated exponential rise of renewable energy sources and repurposing of global assets to reflect this shift has already commenced, alongside asset abandonment. The Combined Group can assist with asset repurposing involving pipeline tie-ins to existing infrastructure, removal and replacement of old equipment with those more suitable to CO2/hydrogen services and modifying process pipework to enable safe transportation of gases. Asset abandonment work will include isolation and line plugging.
• Renewables. Together with clean energies, renewables are expected to grow significantly, and facilities required for renewable energy production will follow a familiar path from design through to decommissioning. Once repurposed, these will likely experience similar maintenance issues to existing energy facilities, which are expected to generate an emerging market for the Combined Group.
• Digitalisation. This enables large amounts of data to be collected and analysed which can provide the information required to manage assets more effectively. With the availability of reliable low-cost sensors and wireless technology, large amounts of data can be monitored in real time to detect sources of fugitive emissions, pipework corrosion and machinery performance degradation; all areas that can be supported by the Combined Group.

The acquisition of STATS will bolster SRJ's suite of asset integrity management products and solutions and enable it to provide its customers with a wider and integrated approach to managing asset integrity. There are six key areas that the acquisition of STATS will enable SRJ to address:

• To leverage the global presence of STATS to exploit cross-selling opportunities of SRJ's disruptive products and technologies. The Combined Group will deliver a highly responsive solutions-led service to an evolving industry
• To offer a broader range of safe, reliable and technically superior solutions through continued innovation driven by customer demand
• To increase the level of integrated solutions thereby creating value for both SRJ's clients and the Combined Group

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• To achieve market acceleration by expanding global client relationships
• To capture significant growth opportunities in the energy transition sector with a broad range of asset integrity solutions
• To provide access to capital markets, via the ASX, which will facilitate investment in strategic locations and product solutions yet to be targeted/developed to their full potential by STATS

Acquisition highlights

• Strong industry tailwinds

Large and growing addressable market with ageing assets, driven by increasing regulatory pressure on energy sector operators together with energy transition opportunities drive ongoing demand for solutions.

• Management team & culture

Highly skilled management team with significant global experience in the oil and gas industry with complementary 'solutions-led' culture.

• Intellectual property

Portfolio of registered intellectual property with 30 patent families, totalling 139 applications, of which 126 are granted patents and 13 pending applications across 20+ countries.

• Competitive advantage

Solutions-led approach complemented by a suite of innovative asset integrity management products and solutions providing customers with an integrated, end-to- end approach to managing asset integrity.

• Sales leverage

Strategically aligned with global partners, providing access to blue chip clients in North America, Europe, Middle East and Asia Pacific together with a consulting team that establishes credibility with customers and provides visibility of existing and emerging problems facing the Combined Group's customers.

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