SDI Group Regulatory News (SDI)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, CANADA, JAPAN, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION. THIS ANNOUNCEMENT SHOULD BE READ IN ITS ENTIRETY. FURTHER DETAILS OF THE ACQUISITION AND PLACING ARE SET OUT BELOW.

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND SHALL NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY NEW ORDINARY SHARES OF SCIENTIFIC DIGITAL IMAGING PLC.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED IN ARTICLE 7 OF THE MARKET ABUSE REGULATION NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

Scientific Digital Imaging plc

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

(AIM: SDI)

Acquisition of business and assets of Graticules 

Placing to raise approximately £2.5m

PrimaryBid Offer

The Board of Scientific Digital Imaging plc, the AIM quoted group focused on the design and manufacture of scientific and technology products for use in digital imaging and sensing and control applications, including life sciences, healthcare, astronomy, manufacturing and art conservation, is pleased to announce that it has acquired the business and assets of Graticules, a division of Pyser Optics Limited ("Graticules") for a total consideration of £3.4m (the "Acquisition").

The Board is also pleased to announce that it has raised approximately £2.5m by the issue of 7,276,410 new ordinary shares of 1 pence each (the "Ordinary Shares") (the "Placing Shares") pursuant to a placing (the "Placing") at 34 pence per share (the "Issue Price"). The Placing is conditional on admission ("Admission") of the Placing Shares to trading on AIM becoming effective in accordance with the AIM rules for companies ("AIM Rules"). In addition, the Company intends shortly to announce a proposed offer for subscription via PrimaryBid to raise up to a further £0.1m (being the amount that the Company is permitted to raise under their remaining existing authorities to issue and allot Ordinary Shares) (the "PrimaryBid Offer"), providing an opportunity to new and existing retail investors.

Further details of the Acquisition and Placing are set out below and this announcement should be read in its entirety.

A further announcement launching the PrimaryBid Offer will be made shortly. The PrimaryBid Offer is expected to begin at 4:31 p.m. today and remain open until 9.00 p.m. today.

Highlights:

· Acquisition of Graticules for a total consideration of £3.4m funded using the Company's existing bank facilities

· Graticules designs and manufactures specialist graticules and electro-optical products; applying chemical etchings and micropatterns to glass, film and metal foil products, serving the microscopy, metrology, education, scientific and defence markets

· For the year ended 31 March 2018, Graticules achieved revenue of £1.93m, gross profit of £1.05m and EBIT of £0.65m*

· Complementary acquisition for the Group's Digital Imaging segment

· The significantly oversubscribed Placing introduces new institutional investors to the shareholder register

· A further announcement launching the PrimaryBid Offer will be made shortly. The PrimaryBid Offer is expected to begin at 4:31 p.m. today and remain open until 9.00 p.m.

· The Acquisition is expected to be earnings enhancing in FY20, and immediately at adjusted EPS

*Proforma, includes allocated cost

The Acquisition

The Company has acquired the business and assets of Graticules, a division of Pyser Optics Limited, for a total cash consideration of £3.4m. The Acquisition is in line with the Group's strategy of acquiring complementary businesses and the Board has identified areas within Graticules with potential for growth.

The Placing

The Placing will be effected via the issue of, in aggregate, 7,276,410 new Ordinary Shares (the "Placing Shares") at the Issue Price to raise gross proceeds of approximately £2.5m which will be used to strengthen the balance sheet of the Company by reducing its net debt position following the acquisition of Graticules.

Ken Ford, Chairman of SDI said:

"The acquisition of Graticules will be another step in our Group's growth strategy and is a complementary fit providing new areas targeted for growth. The Acquisition is in line with our previously announced strategy of organic and acquisitive growth and is expected to be earnings enhancing in its first full year of ownership. The pipeline of potential acquisitions also remains strong. We welcome the Graticules team to the Group."

The PrimaryBid Offer

A further announcement will be made regarding the PrimaryBid Offer shortly.

Enquiries:

About SDI

Scientific Digital Imaging plc ("SDI") designs and manufactures scientific and technology products for use in digital imaging and sensing and control applications including life sciences, healthcare, astronomy, manufacturing and art conservation. SDI operates through its company divisions: Applied Thermal Control, Astles, Atik Cameras, Sentek and Synoptics, as well as the recently acquired, Fistreem, and Thermal Exchange.

SDI continues to grow by developing its own technology advancements and by improving its global distribution footprint, as well as through pursuing strategic, complementary acquisitions.

No statement in this announcement is intended to be a profit forecast or estimate and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

Further information on Graticules

Graticules, previously a division of Pyser Optics Limited, focuses on applying chemical etchings and micropatterns to glass, film and metal foil products, serving the microscopy, metrology, education, scientific and defence markets.

Graticules was founded in 1946 and was acquired by Pyser Optics Limited in 1997, which was purchased by Privet Capital in 2015. Graticules has 25 staff based in Kent. Approximately 50% of sales are through dealers with the remainder direct sales (laboratories, OEMs and defence). Product ranges are standard products (including apertures, microscopy grids and graticules), custom products (custom made versions of the standard products) and Inspecta (a range of magnification and portable microscope products). Graticules is profitable and cash generative with scope for growth and expansion into wider global markets. For the year ended 31 March 2018, Graticules achieved revenue of £1.93m, gross profit of £1.05m and EBIT of £0.65m*.

*Proforma, includes allocated cost

Reasons for the Acquisition

The Acquisition is in line with the Group's strategy of acquiring complementary businesses. Graticules is a profitable cash generative business and the Board has identified areas within Graticules with potential for growth. Graticules is a:

· good fit within existing Digital Imaging segment, and integration risk is considered low;

· long-established business with loyal dealer and OEM diversified customer base;

· strong divisional management team enthusiastic at opportunity to develop the business as part of the SDI Group;

· growing with existing products and customers, but with further scope to expand; and

· the Acquisition is expected to be earnings enhancing in FY20, and immediately at adj. EPS* level

*Before acquisition and fundraising costs, amortisation of acquired intangibles, reorganisation costs and share based payments

Current trading

The Company announced its interim results for the period to 31 October 2018 on 18 December 2018. The Company also announced the acquisition of Thermal Exchange Limited for a consideration of £1.1m on 4 February 2018. As at 31 Jan 2019, the Company had £1.1m of net cash (unaudited), which excludes payment for Thermal Exchange (completed on 1 February 2019) of £1.1m. The Company continues to trade comfortably in line with its expectations.

Related Party Transaction

BGF Investment Management Limited ("BGF") has agreed to subscribe for 760,583 Placing Shares pursuant to the Placing. BGF is a related party of the Company for the purposes of the AIM Rules by virtue of its status as a Substantial Shareholder holding 10 per cent. or more of the Existing Ordinary Shares (the "BGF Related Party Transaction"). The Directors consider, having consulted with finnCap, that the terms of the BGF Related Party Transaction are fair and reasonable insofar as shareholders of the Company are concerned.

Details of the Placing and Placing Agreement

Subscribers for the Placing Shares have, pursuant to the placing agreement between the Company and finnCap (the "Placing Agreement"), been procured by finnCap, as agent for the Company.

The Issue Price represents a discount of approximately 7.5 per cent. to the closing mid-market price of the Ordinary Shares of 36.75p on 11 February (being the last practicable dealing day prior to the date of this announcement). The Placing Shares will represent approximately 7.8 per cent. of the Ordinary Share capital as enlarged by the Placing and will, when issued, rank pari passu in all other respects with the Company's existing Ordinary Shares.

Application has been made for the Placing Shares to be admitted to trading on the AIM. Admission is expected to take place at 8.00 a.m. on 15 February 2019. The Placing is conditional upon, among other things, Admission becoming effective and the Placing Agreement not being terminated prior to Admission in accordance with its terms. Following Admission, the Company will have 96,909,834 Ordinary Shares in issue, excluding any shares issued pursuant to the Primary Bid Offer.

Following the closing of the PrimaryBid Offer, the Company will make a further announcement.

Expected Timetable of Principal Events

Admission Statistics

*Excludes any shares issued pursuant to the PrimaryBid Offer

Forward-looking statements

This announcement contains statements about SDI that are or may be deemed to be "forward-looking statements".

All statements, other than statements of historical facts, included in this announcement may be forward-looking statements. Without limitation, any statements preceded or followed by, or that include, the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "should", "anticipates", "estimates", "projects", "would", "could", "continue" or words or terms of similar substance or the negative thereof, are forward-looking statements. Forward-looking statements include, without limitation, statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects and (ii) business and management strategies and the expansion and growth of the operations of SDI.

These forward-looking statements are not guarantees of future performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such persons and the environment in which each will operate in the future. Investors should not place undue reliance on such forward-looking statements and, save as is required by law or regulation (including to meet the requirements of the AIM Rules, the Prospectus Rules and/or the FSMA), SDI does not undertake any obligation to update publicly or revise any forward-looking statements (including to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based). All subsequent oral or written forward-looking statements attributed to SDI or any persons acting on their behalf are expressly qualified in their entirety by the cautionary statement above. All forward-looking statements contained in this announcement are based on information available to the Directors of SDI at the date of this announcement, unless some other time is specified in relation to them, and the posting or receipt of this announcement shall not give rise to any implication that there has been no change in the facts set forth herein since such date.

Important Information

This Announcement or any part of it does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States (including its territories and possessions, any state of the United States and the District of Columbia), Canada, Australia, the Republic of South Africa, Japan or any other jurisdiction in which the same would be unlawful. No public offering of the Placing Shares is being made in any such jurisdiction.

All offers of the Placing Shares will be made pursuant to an exemption under the Prospectus Directive from the requirement to produce a prospectus. In the United Kingdom, this Announcement is being directed solely at persons in circumstances in which section 21(1) of the Financial Services and Markets Act 2000 (as amended) (the "FSMA") does not apply.

The Placing Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this Announcement. Any representation to the contrary is a criminal offence in the United States. The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada, no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; the relevant clearances have not been, and will not be, obtained for the South Africa Reserve Bank or any other applicable body in the Republic of South Africa in relation to the Placing Shares and the Placing Shares have not been, nor will they be, registered under or offering in compliance with the securities laws of any state, province or territory of Australia, Canada, Japan or the Republic of South Africa. Accordingly, the Placing Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction outside the United Kingdom.

finnCap Ltd is authorised and regulated by the Financial Conduct Authority (the "FCA") in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing, and finnCap Ltd will not be responsible to anyone (including any placees) other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this Announcement. finnCap is not acting for the Company in relation to the PrimaryBid Offer.

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by finnCap Ltd or by any of its affiliates or agents as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefor is expressly disclaimed.

No statement in this Announcement is intended to be a profit forecast or estimate, and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this Announcement.