CTP.L Regulatory News (CTP)

8 November 2010

Redstone plc

("Redstone", "the Company" or "the Group")

Acquisition of Fujin Systems Limited

Redstone plc (AIM:RED.L), the network-based provider of end to end managed services, has acquired Fujin Systems Limited ("Fujin"). Fujin is an ICT integration specialist with specific strengths in the installation and management of advanced Ethernet technologies, next generation security and high availability core data services. Fujin specialises in data centre consolidation in a number of key vertical markets including research, media and on-line gaming. The initial consideration payable is £0.4 million, with a maximum of a further £2.5 million payable after 31 October 2011, subject to the achievement of certain performance criteria detailed below.

Fujin was established in late 2009 by a team of experienced ICT professionals with a track record in building ICT businesses focussed on serving mid market and enterprise market customers. Through its network of established industry relationships the business has already partnered itself with a number of leading edge technology manufacturers, including Brocade and Arista. Fujin has recently delivered solutions for a national UK broadcaster, The European Centre for Medium Range Weather Forecasting, Express Newspapers and the University of Westminster and has a good pipeline of prospects. Fujin has delivered turnover of £1.4m in the 9 months ended 30 September 2010 yielding a gross profit of £311,000 and a loss before tax of £57,000.

Key terms of the acquisition

Total consideration payable is up to £2.9 million payable as below:

§ £0.4 million payable in cash on completion;

§ £2.5 million payable subject to achieving profit before tax target of £560,000 for the year ended 31 October 2011 to be settled by:

- the issue of £2.0 million of new ordinary shares in Redstone ; and

- the payment of £0.5 million in cash.

There will be an adjustment to the consideration payable should Fujin not achieve the targeted profit before tax of £560,000 for the year to 31 October 2011, subject to a maximum adjustment of £2.5 million. The adjustment mechanism provides for a reduction of approximately £10 for every £1 of shortfall in targeted profit before tax for the year ended 31 October 2011. The equity eligible for issuance, being up to £2.0 million of deferred consideration, shall be priced at the quoted closing share price of Redstone plc on 5 November 2010 for the non related party shareholders of Fujin and will be priced at market price on 8 November 2010 for the related parties detailed below.

Relationship with Brocade

Fujin is a Brocade Premier Partner and the management team at Fujin have a long standing working relationship with Brocade and its forebears. The management of both Redstone and Fujin believe that the Brocade relationship will provide significant cross selling opportunities to the wider Redstone group.

Related Party Transaction

The acquisition of Fujin is classified as a related party transaction under the AIM Rules for Companies as Ian Smith, Chairman, and Tony Weaver, Chief Executive, are each interested in approximately 21 per cent. of the ordinary share capital of Fujin.

The independent Directors of Redstone (being Peter Hallett, Richard Ramsay and David Payne) consider, having consulted with finnCap Limited, that the terms of the transaction are fair and reasonable insofar as shareholders of Redstone are concerned.

Peter Hallett, CFO of Redstone, commented: "We are delighted to have been able to acquire Fujin. The process was led by the Non Executive Directors and myself and we have agreed a deal structure which aligns the consideration payable by Redstone to the earnings to be delivered by Fujin in the year to 31 October 2011, and which also incentivises the management of Fujin to continue to build upon their already impressive sales growth and market position."

Tony Weaver, CEO of Redstone added: "Ian and I have worked with the management of Fujin previously. They have an outstanding track record which was the reason we personally helped to finance the business last year. The addition of significant new technology partnerships that they bring complements Redstone's existing offering and will promote good cross selling opportunities. The acquisition is an initial and important strategic step in adding to Redstone's market proposition as we reposition the business as a leading network-based provider of end to end managed services."

ENQUIRIES: