Acquisition & Trading Update

1 Oct 2007 07:01

Carclo plc01 October 2007 For Immediate Release 1 October 2007 Carclo plc Acquisition of remaining minority interest in Conductive Inkjet Technology Limited and pre-close trading update The board of directors of Carclo plc ( the "Board" and "Carclo" respectively) ispleased to announce that it has entered into an agreement to increase its equityinvestment in Conductive Inkjet Technology Limited ("CIT") from 74.4% to 100%. In our Interim Management Statement of 15 August 2007 we reported continuedprogress at CIT across a broad range of applications including sensor and RadioFrequency Identification ("RFID") applications, photovoltaics and displays. CIThas highly attractive growth prospects in a number of established and emergingsectors. To ensure that these growth opportunities are developed effectively and that thefull benefit of this growth accrues to Carclo's shareholders, the Board hasdecided to acquire the remaining minority interest in CIT. Conductive Inkjet Technology CIT is a unique patented process to print pure metals onto plastics. The initialinvention was made by Xennia Technology Ltd ("Xennia") whilst undertaking anapplication development for mobile handsets on a contract funded by Carclo. Itwas recognised that the invention had applications well beyond mobile telephonyand therefore Carclo and Xennia formed a 50:50 joint venture to safeguard,develop and exploit the invention. In 2005, the partners agreed that Carcloshould take the lead in commercialising CIT and Carclo acquired a further 20%holding from Xennia at a cost of £1.6 million and thereby gained effectivemanagement control of CIT. In the past year, CIT has been funded through furtherissues of shares in which Xennia has not participated with the result thatCarclo's stake in CIT has increased to 74.4%. Since 2005, CIT has beenestablished as a dedicated advanced materials company adjacent to the SciencePark in Cambridge. CIT is now fully independent of Xennia and employs 11 people- primarily highly qualified chemists and engineers. CIT based products have commenced production within Carclo and evaluationsystems based on the MetalJet range have been sold to a number of advancedtechnology companies. The CIT process has been extended to printing on siliconand glass substrates, and to using laser technology to produce extremely finelines which are invisible to the eye. Further information on CIT applicationareas is included in Appendix 1. Acquisition Carclo has reached agreement with Xennia to acquire its 25.6% holding in CITwhich will become a 100% owned subsidiary of Carclo. The total considerationpayable to Xennia in connection with the acquisition will be a maximum of £2.07million. This implies an enterprise value for CIT of £11.47 million based on netdebt of £3.40 million as at 31 March 2007. The Board believes that thisrepresents excellent value given the rapidly expanding universe of applicationsfor the CIT. Carclo is paying Xennia an initial consideration of £1.07 million (the "InitialConsideration") for Xennia's 25.6% stake in CIT of which £0.97 million is in theform of 869,565 new Carclo shares at Friday's closing share price of 111 penceper share, and £0.10 million will be in cash. As part of the agreement, the saleof the consideration shares is subject to lock-up arrangements for one year suchthat any sale requires the written consent of Carclo. Carclo has also agreedthat CIT will separately pay Xennia £0.15 million for the release of certain ofits intellectual property rights relating to CIT, and £0.10 million fortransitional support. In addition, Carclo has agreed to pay Xennia a deferred consideration forXennia's 25.6% stake in CIT of up to £0.75 million, in cash, payable in June2010 (the "Deferred Consideration"). The first element of the DeferredConsideration is based upon 50% of the earnings before interest, tax,depreciation and amortisation ("EBITDA") generated by CIT in the financial yearending 31 March 2010 capped at £0.50 million. The second element is based uponsales of MetalJet 2000, 4000 and 5000 production platforms up to 31 March 2010and is capped at £0.25 million. Each MetalJet production platform is expected togenerate significant recurring revenues for CIT's patented inks. Pre-close trading update The board is pleased to report that the group has continued to trade in linewith its expectations since the issue of our Interim Management Statement on 15August 2007. In Technical Plastics we have seen good sales growth over the sameperiod last year despite the impact of the weaker US dollar on there-translation of sales from our businesses based in the USA and China. Marginprogression in our European businesses has been temporarily impacted by thecosts of integration of a number of new programmes and the rationalisationprogramme at our Slough facility. We expect a significantly stronger second halfperformance from this division. The Precision Products division has tradedstrongly throughout the first half of our financial year on the back of gooddemand for higher margin multiband antenna and its first half performance isexpected to be well ahead of the prior period. Appendix 1 CIT applications Sensors and RFID The development of the CIT process for high speed printing on PET polyester filmis now complete and commercial production has commenced. The newly launchedMetalJet 6000 and MetalJet 5000 platforms enable the CIT process to be used forthe production of thin metal inkjet printed circuitry on sheet or reel formatwhich is appropriate for uses ranging from RFID antennas to sensors, keypads,switches and other printed circuits. The first production line of the MetalJet6000, a high speed reel to reel inkjet printing line developed with our Americanpartner, Preco Inc, is currently being installed in the USA. This contractmanufacturing facility is aimed at supplying a wide range of RFID antennas andflexible circuitry to prospective purchasers of the entire system. The facility,which should generate significant future ink revenues, is expected to beoperational in January 2008. We currently have a high level of interest in ourtechnology from a number of leading players in the RFID industry, and aretargeting a further three sales of MetalJet 6000 systems by March 2009. Photovoltaics Global production of solar cells is growing significantly with industry revenuesforecast to rise rapidly over the next five years. The majority of the new solarinstallations are now taking place within Europe which accounts for nearly onethird of the world's solar cell manufacturing. The industry is interested inapplying non-contact printing processes such as ink-jet to allow thinner siliconwafers to be safely handled without breakages. CIT is collaborating with threeof the major European solar cell producers in the development of a range ofinkjet materials to be used in the solar cell manufacturing process. In the first process developed by CIT, a catalytic inkjet fluid is printed ontothe anti-reflective surface of a solar cell to produce a pure silverinterconnect. The wafer is then fired under special conditions to produce anohmic contact between the silver interconnect and the photovoltaic junction.This technology potentially increases the efficiency of the solar cell byallowing narrower line widths and more conductive materials to be used. A secondprocess, also developed by CIT, uses a CIT ink to etch away selectively theanti-reflection coating on the surface of the solar cell allowing theinterconnect to be made directly onto the silicon. This process has thecapability to produce more efficient cells than current production methodsallow. CIT has engaged ISC Konstanz, an international solar energy research facility,to support these developments. Displays CIT has a patented technology to write extremely fine lines using lasers - linewidths of five microns have been demonstrated which are invisible to the humaneye. This ink technology can also be used with the existing mask alignerequipment used to produce flat panel displays. Solid state displays generally require a transparent electrode on the top ofeach pixel. This electrode is usually made of Indium Tin Oxide ( "ITO" ) whichis transparent but has limited conductivity. CIT's fine line technology can beused to provide a conductivity boost to the ITO electrode. In some displayapplications the CIT technology can actually replace the ITO electrode. The CITtechnology therefore potentially allows displays to operate much moreefficiently, significantly extending the range of passive matrix addresseddisplays and enabling the application of new display materials such as OrganicLed Emitting Diodes ("OLED"). CIT is nearing completion of a DTI funded development programme with CambridgeDisplay Technology Limited ("CDT") using its fine line technology to producefeature sizes down to approximately five microns in the production of a fullsize back plane demonstrator based on CDT's P-OLED colour display design. Together with a partner company, CIT is currently seeking DTI support tocommence a further eighteen month development programme to develop a prototypeproduction process for the manufacture of OLED displays using CIT's conductivetracks for direct pixel connection. An objective of this programme is to utiliseour technology in a prototype facility using existing flat panel displayproduction equipment. Commercialisation could therefore materialise quiterapidly following a successful conclusion of the development. CIT has joined a second DTI funded programme headed by Epigem Limited to producean alternative lower cost material to ITO. This two year programme, which isexpected to start on 1 October 2007, is aimed at producing a viable ITOalternative by October 2009. CIT's fine line technology has the potential to radically change the way thatflat panel displays are designed and manufactured and therefore could generatesubstantial commercial revenues. - Ends- Enquiries: Carclo plc 01924 268040Ian Williamson, Chief Executive Weber Shandwick Financial 020 7067 0700Richard Hews/James White Notes to Editors About Carclo (LSE: CAR) • Carclo plc is a global supplier of technical plastic components. It is a public company whose shares are quoted on the London Stock Exchange. • 75% of sales are derived from the supply of fine tolerance, injection moulded plastic components, which are used in medical, automotive, telecom and electronics products. This business, Carclo Technical Plastics, operates internationally in a fast growing and dynamic market underpinned by rapid technological development. • 25% of sales are derived from the supply of manufactured systems to the automotive and aerospace industries. • Carclo's strategy is to grow rapidly in low cost manufacturing regions and to develop new technologies and products to underpin future growth. This information is provided by RNS The company news service from the London Stock Exchange