loss before tax post-exceptional items of GBP1.584m. Cash and cash equivalents have declined to GBP2.524m (including restricted cash of approximately GBP1.0m) from GBP5.816m. Accordingly, losses have continued to grow and the Independent Directors feel that there is limited likelihood of a dividend being declared in the medium term. Constraints on cash have affected and continue to affect all business units and the nature of the SDI Group structure means that a loss or a reduction of financing facilities in a subsidiary could result in SDI itself being exposed to this loss or funding requirement. Following an approach by the Management Team in May 2010, the Independent Directors have held detailed discussions regarding the terms of the Offer. These discussions have resulted in the indicative offer being revised from 2.6 pence per SDI Share to incorporating an additional element (the Contingent Consideration) that may result in SDI Shareholders who accept the Offer receiving up to an additional 0.8 pence per SDI Share (except in the case of the Management Team each of whom has waived their entitlement to receive such Contingent Consideration (as set out in more detail at paragraph 4 above). The Independent Directors have evaluated the proposals from FSU Investments on behalf of SDI Shareholders as a whole. They have weighed the benefits of maintaining an independent London listing against the operational constraints of running a publicly traded company in unprecedented economic circumstances. The Independent Directors consider that, whilst there is some potential for future growth as the retail sector recovers which could bring improved financial performance and an increase in equity value for investors, any future growth is uncertain as to the amount and timing and shareholders should be given the opportunity to realise value from their investment in cash immediately as there is a risk that the trading environment could continue to decline or worsen. In considering whether to recommend the revised offer, the Independent Directors have also taken account of the recent and current trading record and the expected net tangible assets of the SDI Group at completion. The announcement released to the market on 10 May 2010 stated that cash resources remained constrained and that SDI was assessing alternative options to the approach from management in order to maximise value for SDI Shareholders and ensure SDI had sufficient working capital to meet its needs. These options included discussions with other potential bidders however no alternative bids were forthcoming. The Independent Directors believe that there are very limited alternative options available to SDI to be successful in raising capital in the medium term. Accordingly, the Independent Directors, who have been so advised by Cenkos, believe the Offer to be fair and reasonable. In providing advice to the Independent Directors Cenkos have taken into account the commercial assessment of the Independent Directors. Accordingly, the Independent Directors unanimously recommend that (i) SDI Shareholders accept the Offer; and (ii) the Independent Shareholders vote in favour of the Resolution at the General Meeting, as the Independent Directors have irrevocably undertaken (or in the case of Richard Arkle intends) to do in respect of their entire beneficial holdings comprising, in aggregate, 0.30 per cent. of SDI's existing issued ordinary share capital. 6. Background to and reasons for the Offer and future plans for SDI The Management Team have significant experience of over ten years in SDI's business and believe that they are best placed to deliver improved performance in SDI in a private environment. While they understand the inherent risk of the business operations given the difficult and challenging trading environment, as set out in paragraph 5 above, they believe that the business would be best placed in a private environment where it could cut the costs associated with its listing and also restructure without the same degree of public scrutiny. 7. Management Arrangements The Management Team has irrevocably undertaken to accept the Offer in respect of their 28,538,993 SDI Shares (having an approximate value of GBP742,014 before tax based on the value of the Offer) owned by them, and to waive any right that they might have to the Contingent Consideration. Such persons have also irrevocably instructed FSU Investments to apply the aggregate cash consideration that they would otherwise be entitled to receive in respect of such SDI Shares (taking account of the fact that they have each waived any entitlement that they might have to Contingent Consideration) in subscribing for ordinary shares of ten pence each in the share capital of FSU Investments. FSU Investments Shares will not be listed on any stock exchange. In order to give effect to the Management Arrangements, each of the Management Team has entered into the irrevocable undertakings to accept the Offer as described above. Each of the Management Team has also entered into the Investment Agreement which provides for cash subscriptions to be made for FSU Investments Shares as set out above. Further details of the Investment Agreement will be set out in the Offer Document. Cenkos considers that the terms of the arrangements between FSU Investments and each of the Management Team are fair and reasonable, so far as the Independent Shareholders are concerned. The Offer will be conditional on, inter alia, the Independent Shareholders approving the Management Arrangements. Such approval must, as required by Rule 16.2 of the City Code, be by an ordinary resolution passed on a poll at a general meeting (or any adjournment thereof) of SDI. Notice of such General Meeting will be contained in the Offer Document. 8. Information on FSU Investments FSU Investments is a newly-incorporated company which has been formed for the purposes of making the Offer. FSU Investments will, on completion of the Offer, be owned by the Management Team. FSU Investments has not traded since its date of incorporation nor has it entered into any obligations other than in connection with the Offer and the financing of the Offer. The directors of FSU Investments are Gordon Smith, Andrea di Bella, John Hamilton, Paul Mess, Jean-Marc Moulin and Darcy De Thierry. 9. Financing of the Offer FSU Investments will fund all of the Cash Consideration under the terms of the Offer using its own cash. Vollman Brothers is satisfied that sufficient cash resources are available to FSU Investments to satisfy the full acceptance of the Offer (excluding the Contingent Consideration, payment of which is not guaranteed and is subject to future events) in full. FSU Investments will fund the Contingent Consideration payable (if any) under the terms of the Offer using funds which should become available to PEP following the anticipated release of Bonded Cash currently used as security against overdraft[s] for the German businesses carried on by PEP. Such funds will be advanced to FSU Investments by way of intra-group loans. Further information on the financing of the Offer will be set out in the Offer Document. 10. Information on SDI SDI is a specialist in the design, build and support of warehouse handling systems in the international retail and order fulfilment sectors. The SDI Group provides consultancy services and designs its customers' warehousing and distribution systems with end products including sortation and picking systems, automated retrieval systems and conveyor systems, together with the supporting IT infrastructure. The SDI Group's main operations are in the UK and Germany with a presence in France, Italy, Spain, and the Netherlands. SDI was admitted to trading on AIM in July 2007. In April 2008 SDI acquired four materials handling companies from PEP in Germany. Following a deterioration in the global economy post IPO and a subsequent contraction of the retail sector in the US and Europe, SDI divested its loss making US and Chilean businesses in December 2008. During 2010 SDI has continued to be affected by the challenging economic environment in the retail sector in Europe and customers have continued to delay commencement of capital projects which affects SDI. For the year ended 31 March 2010 SDI had revenues of GBP32.070m, loss before tax pre-exceptional items of GBP1.143m and a loss before tax post exceptional items of GBP18.766m and cash and cash equivalents of GBP2.524m (including restricted cash of GBP1.0m). Current Trading The Board of SDI is continuing to reduce overheads and restructure the business to reduce losses. However, the Company has continued to see delays in customers commencing capital spend projects and also extension of payment terms. As a result, cash continues to be monitored closely. 11. Directors, management and employees FSU Investments recognises the skills, technical ability and experience of the existing management and employees of the SDI Group. The FSU Investments Board has given assurances to the Independent Directors that, if the Offer becomes or is declared unconditional in all respects, the existing employment rights, including pension rights, of all management and employees of the SDI Group will be safeguarded. FSU Investments has confirmed that its plans for SDI do not involve any immediate change in the conditions of employment of SDI employees or location of SDI Group's places of business. The Independent Directors welcome the assurances received from FSU Investments above as they are, in the view of the Independent Directors, in the interests of the SDI Group and its employees. (MORE TO FOLLOW) Dow Jones Newswires July 16, 2010 02:00 ET (06:00 GMT)