RMS.L Regulatory News (RMS)

Strat Aero plc / Index: AIM / TIDM: AERO / Sector: Support Services

30 September 2015

Strat Aero plc ("Strat Aero", the "Company" or the "Group")

Acquisition of Leading UAV Surveying & Inspection Company

Strat Aero plc, an international aerospace company focused on the rapidly emerging Unmanned Aerial Vehicle ('UAV') sector, is pleased to announce that it has entered into a Share Purchase Agreement for the acquisition of Geocurve Holdings Limited ('Geocurve'), a privately owned company, which specialises in the provision of UAV operated topographical surveys and inspection services to a blue chip customer base, including the UK's Environment Agency ('EA'), EDF Energy, Carillion, and the RSPB ('the Acquisition'). The Acquisition is in line with the more expansive strategy adopted by the new management team to rapidly build a vertically integrated UAV offering, covering all aspects of the value chain including software, hardware and services.

Geocurve brings a unique 3-D Modelling UAV based mapping solution and highly experienced team of specialist surveyors and UAV operators

· Proprietary UAV based mapping solution for flood defences considered to be far superior to anything else in the industry - successfully mapped the whole Norfolk Broads National Park, initially as sub-contractors and latterly as direct EA contractors, whom Geocurve has worked with across multiple UK sites

· Holds the only known authority from the Civil Aviation Authority ('CAA') to fly UAVs in congested urban areas and conduct surveys, inspections and various other projects in previously prohibited areas

· CAA approval, best in class UAV 3-D mapping solution, along with the development of more advanced sensor technology, puts Geocurve in a strong position to win additional contracts

· In-house 3-D modelling software is easily transferrable to other new sectors such as quarries and the construction industry throughout the UK where water/material quantities are important issues

The combination of Geocurve and Strat Aero provides multiple cross-selling and expansion opportunities

· Intention to roll out Geocurve's capabilities internationally - two initial countries currently being explored

· Strat Aero intends to leverage Geocurve's data analytical capability by developing a number of key data analysis centres built around the Company's existing Digital Data Management ('DDM') system in Houston to facilitate the 'control' of client interface and output, and the rapid roll-out of its Inspection services globally

· Supportive regulatory backdrop: the new Building Information Modelling (BIM) construction industry standards being implemented in the UK lend themselves perfectly to a DDM solution - Geocurve will use Strat Aero's DDM software to develop such a solution and deliver a new software service as part of the roll out of UAV based inspection services to larger clients in new sectors

· Geocurve are developing additional product offerings within the security and agriculture industries which will also have extensive international applications

· Significant after market for acquired data with customers seeking to purchase data at prices potentially more profitable than the initial contracts with Water companies and County Councils - proprietary data seen as increasingly valuable

Cost of acquisition attractively structured on an earn-in basis

· Cost of acquisition set at one times Geocurve's sales for the year ended 31 March 2016 up to a maximum of £1.5m - subject to defined profitability levels being achieved

o Initial payment of £440,000 based on sales to August 2015, 50% in cash and 50% in new ordinary shares of Strat Aero. The initial payment is to be paid on the later of (a) 20 business days from completion or (b) 5 business days from satisfaction of the conditions in the Share Purchase Agreement.

o Instalment payments can be made in cash or new ordinary shares or a combination (as mutually agreed between the parties) with the Final payment in cash after Geocurve's year end accounts are available to 31 March 2016.

Tony Dunleavy, CEO of Strat Aero, said: "Geocurve is the first of a series of acquisitions the new management team has been evaluating, all of which have the potential to fast track Strat Aero's transformation into the first fully integrated global solutions provider focused on the rapidly growing UAV market. As evidenced by Geocurve's pioneering survey over the Norfolk Broads National Park, the combination of UAVs and highly innovative software solutions and sensors are revolutionising business practices in multiple sectors, and we intend to be at the forefront of this disruptive technology.

"Thanks to an established track record with a blue chip client base, a state of the art 3-D modelling platform perfect for flood defence mapping and other surveying uses and a unique authority from the CAA, Geocurve is well placed to win additional work, not only in their traditional markets but also in new sectors such as construction, security and agriculture. Acquiring, analysing and managing data not only satisfies the initial contracts, but also provides Geocurve with an additional valuable revenue stream, as the data is proprietary and therefore available for resell to new clients. This is the business model we have adopted at Strat Aero. As well as being a one stop UAV technology offering, covering all of a client's needs including hardware, software solutions, and services, we are looking to become the owner of a significant database, one which we believe will prove to be highly valuable in the years ahead. Finally, Geocurve immediately gives us the expertise on the ground to implement our inspections strategy cross the expanding Strat Aero Group."

Perran Bonner of Geocurve said, "It has been gratifying to meet the new management and the founders of Strat Aero and to realise that their vision of the expanding UAV market was so close to our own. We are looking forward to leading Strat Aero's international growth in Inspection Services across a variety of sectors."

Gary Nel of Geocurve said, "Having pioneered the use of UAV technology alongside traditional engineering services in the UK, as demonstrated by our work in the Norfolk Broads National Park, it is very satisfying that, as part of Strat Aero, we will now be able to take advantage of the significant growth we envisage in the sector, both at home in the UK and abroad."

Background to Geocurve

Geocurve is comprised of two subsidiary companies, UKAerovision Limited and GN Site Engineers Limited, which have a combined 5 years of commercial UAV/UAS operations and over 80 years of engineering/surveying experience, distinguishing them from the general UAV inspections market. Geocurve comprises of a team of specialist surveyors and UAV/UAS operators, encompassing the skills of engineering, site engineering, surveying, GIS database, 3D modelling, UAV/UAS operations, airborne surveillance and hydrographic modelling. The team includes: 8 engineers, 2 data analysts, 4 UAV pilots, 1 pilot, 2 boat operators and a chartered engineer.

Geocurve is perfectly located in Tollsbury, UK on the extensive Essex coastline, an area of strategic flood defence, renewable energy and the industrious Thames Gateway. They are in the process of undergoing chartership as well as moving to a larger premises to accommodate additional staff and facilities needed to accommodate recent and anticipated growth. Their assets include 9 unmanned aerial platforms with multiple sensor options (both Fixed wing and Multi Rotor), Hydrographical & survey equipment and sensors, as well as land vehicles and fixtures and fittings.

The founders of Geocurve are Perran Bonner, who will immediately become Strat Aero's Director of UAV Services and Gary Nel, who will become Strat Aero's Director of Engineering and Survey Services. Perran's background before UKAerovision was in global airbourne ISR (intelligence, reconnaissance & Surveillance) and Gary's was in global engineering for major construction and utility companies.

GN Site Engineers Limited reported profits of £38,443 for the 12 month period ended 31 March 2015. UK Aerovision Limited reported profits of £63,300 for the 15 Month period ended 31 March 2015. The consolidated total asset values as at 31 March 2015 amounted to £214,903. Net asset values at 31 March 2015 are as follows: GN Site Engineers Limited £9,088 and UK Aerovision Limited £11,500.

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Notes

Strat Aero plc is a multi-divisional international aerospace services company, focussed primarily on the provision of complete client solutions in the Unmanned Aerial System ('UAS' market), which is predicted to show exponential growth over the coming decade. Civilian, law enforcement and military applications in UASs are expected to be a dynamic growth sector in the aerospace industry over the next 10 years with the UAS market forecast to grow to more than US$82.1 billion between 2015 and 2025 (AUVSI Economic Report 2013) and the global airborne Intelligence, Surveillance and Reconnaissance ('ISR') market estimated to grow to US$19.23 billion by 2023.