This announcement contains inside information for the purposes
of Article 7 of the UK version of Regulation (EU) No 596/2014 which
is part of UK law by virtue of the European Union (Withdrawal) Act
2018, as amended ("MAR"). Upon the publication of this announcement
via a Regulatory Information Service, this inside information is
now considered to be in the public domain.
13
June 2024
Petards Group
plc
("Petards" or the "Group")
Acquisition
Petards Group plc (AIM:
PEG), the AIM quoted developer
of advanced security and surveillance systems, is pleased to
announce that it has today conditionally agreed to acquire Affini
Technology Group Limited ("ATGL") and thereby indirectly its
wholly owned subsidiary, Affini Technology Limited ("Affini") (together the "Acquisition"). Affini is a UK based critical communications solutions
provider to the transport, blue light, energy, defence and
construction sectors.
Pursuant to the terms of the
Acquisition, the Company has agreed to acquire the entire issued
share capital of ATGL from Philip Williams, Peter Burridge, Ian
Carr, Michael Norfield and Andrew Woodhall (the "Sellers"). The Acquisition is only
conditional upon the release of certain bank security given by ATGL
and Affini. If such release is not obtained by 27 June 2024 (or
such later date as Petards and the Sellers shall agree in writing)
then the Acquisition will not proceed to completion.
The total consideration of the
Acquisition will be approximately £2.8 million comprising a payment
for adjusted net assets of £1.5 million, and a payment for goodwill
of £1.3 million. Net assets to be acquired are expected to include
cash in the region of £0.5 million. The consideration will be
satisfied by a payment of £2.5 million in cash ("Cash Consideration") and the issue of
4,176,810 new ordinary shares of one pence each in the capital of
the Company ("Ordinary
Shares"), with an aggregate value of £326,000 ("Consideration Shares") (which will,
following Admission represent, in aggregate 61,705,309 Ordinary
Shares then in issue). On completion of the Acquisition, £2.4
million will be paid in cash and all the Consideration Shares will
be allotted. A retention of £0.1 million will be paid in cash
once the conditions for its payment have been met.
The Sellers have each undertaken to
the Company and WH Ireland Limited not to dispose of their
Consideration Shares prior to the date falling 30 days following
the release of the announcement of the Company's preliminary
results for the year ending 31 December 2024, and furthermore have
agreed to customary orderly market restrictions in respect of the
Consideration Shares thereafter.
The Cash Consideration payable at
Completion is to be funded from existing cash resources of
approximately £1.7 million and £0.8 million from the Company's
unutilised bank overdraft facility provided by Santander UK plc
("Santander"), The
Company's total overdraft facility is £2.5 million.
Background and reasons for the Acquisition
Petards has a clear and established
strategy to grow both organically by exploiting the synergies
within the Group and by acquisition. The Board believes that the
acquisition of Affini, a profitable and cash generative business,
represents a further step in building the Group's target markets,
adds new capabilities and services to its product portfolio,
provides a strong recurring revenue stream, and has a clear fit
with the Group's strategy.
The Board believes that the
Acquisition will bring benefits that are highly complementary to
the Group and in-line with the key tenets of the Group's existing
strategy being to:
· focus upon the Group's core
products which are used in the rail, defence and traffic
industries: Affini currently offers
critical communication to the defence sector. The Acquisition will
provide a step change in the scale and reach of the Group's
critical communication capabilities particularly in the aviation,
and energy markets which have high barriers to entry.
· continue to invest in
developing technologies to enhance its product
portfolio: The Acquisition broadens
the Group's product portfolio and provides Affini with the
opportunity to cross sell its enhanced offering to the Group's
enlarged customer base;
· increase revenues both
organically by exploiting the synergies within the Group and by
acquisition: the Acquisition will
increase the Group's recurring revenues with approximately 50% of
Affini's £5.6m revenue for the financial year ended 31 December
2023 relating to managed services and maintenance;
· expand revenues globally into
the Group's target markets: Petards'
target markets are the rail, defence and
traffic industries: Affini operates in similar industries being the
transport, blue light, energy, defence and construction sectors;
and
· improve operating margins
through cost management.
The Directors believe Affini is a
highly complementary business and will be a good cultural fit with
the existing Group. It has an experienced executive leadership
team, who are remaining with the business with strong engineering
expertise, consistent business values and principles, an aligned
commercial approach and comparable operational procedures. The
Directors believe that these factors will help reduce integration
risk.
Information on Affini
Affini is a UK based critical
communications solutions provider to the transport, blue light,
energy defence and construction sectors. Affini's expertise covers
the entire life cycle, enabling it to offer an end-to-end service
from strategy and design to maintenance and service
management.
Affini delivers voice, video and
data communication solutions alongside telematics, telemetry and
asset/people tracking services. Its revenue is principally derived
from project work, consultancy, maintenance and managed services,
the latter generating recurring revenues and embedding customer
relationships. Affini supplies services to a number of blue chip
clients, with many customer relationships spanning 10 years or
more.
The Affini business originates from
1974 when the radio division of the organisation that formed
British Airways was carved out as a separate business.
Historically, Affini's core capability was the design, deployment
and ongoing maintenance of critical communications networks within
the aviation sector. The foundation of these solutions
focused on radio technologies, for both landside and airside
Private Mobile Radio (PMR) networks as well as ground to air
communications within airports.
Following a strategic decision in
2019, Affini has targeted new markets where its skillset can be
deployed and where high barriers to entry and operation exist and
it has subsequently entered new sectors including in 2019 - blue
light (fire and rescue), in 2020 - construction and nuclear and in
2021 - defence.
Affini operates in five key
sectors:
· Transport: Within the transport
sector, Affini currently operates in the following sub
sectors:
- Aviation: Affini owns infrastructure at 24 airports across the
UK and has exclusive access to radio frequency spectrum and holds
Ofcom licences for the exclusive use of radio frequency spectrum at
key aviation sites across the UK as well as all relevant airside
permits required to operate within the sector;
- Rail: maintaining smooth and efficient communications in busy
rail environments, its solutions can be rolled out on railway
infrastructure across the UK; and:
- Bus: fully connected passenger transport solutions to dispatch
control and communications.
· Blue
light: Affini maintains critical communications infrastructure in the
UK, including airports, used and relied
upon by the emergency services. Its
coverage is essential to ensure service communications are
maintained in the event of emergencies.
In
addition, specifically for the fire services, Affini has developed
fire ground solutions, designed to provide critical communications
in harsh environments whilst providing cross compatibility with
existing technology.
· Energy:
Within the energy market, Affini currently
operates in the following sub sectors:
- Nuclear: Affini is providing
the construction communications for Hinkley Point C and Sizewell C,
developing a blueprint for the construction communications for
additional new nuclear power generation sites required to deliver
the UK Government's January 2024 "Civil Nuclear: Roadmap to 2050;
and
- Other
utilities: Affini has delivered
several consultancy projects for National Grid and continues to
pursue opportunities associated with communications in power
tunnels and sub stations. It also has longstanding customer
relationships within the gas sector.
· Defence: Affini is a framework supplier to Crown Commercial and through
this framework agreement was selected to provide maintenance and
managed services at His Majesty's Naval Base Clyde. Other defence
opportunities are expected through the framework;
· Construction: through its experience in construction communications for
Hinkley Point C, Affini has developed relationships with major
contractors and construction companies.
Affini's business model focuses on
acquiring customers in defensible markets with high barriers to
entry. Clients are won based on Affini's reputation and technical
ability for the delivery of critical communications systems. Once
embedded, Affini acts as a technology partner, continually adding
services and/or technology solutions to enhance a customer's
operational efficiency. Affini is technology agnostic in its
approach, ensuring it can provide the best solution for the
customer's requirement.
Revenue is generated from projects,
managed service, maintenance, consultancy and ad hoc works. Affini
generates a large majority of its revenues from project based work,
with recurring revenues being obtained from its managed services,
its Affini Matrix and Radius SaaS platforms and through 24/7
maintenance and monitoring.
Affini is headquartered at offices
near Heathrow and operates from three principal sites across the
UK. As at 31 May 2024, Affini employed 36 people including highly
skilled communications engineers and has access to more than 25
accredited sub-contract engineers, all of whom are UK
based.
Financial information
Affini's unaudited accounts filed
for the 14 months ended 31 December 2022 prepared under FRS 102,
adjusted to add back group management charges, showed revenues of
£6,323,000, gross profit of £2,590,000, EBITDA of £1,249,000 and
operating profit of £732,000.
Affini's unaudited management
accounts for the year ended 31 December 2023, adjusted to add back
group management charges, showed revenues of £5,604,000, gross
profit of £2,121,000, EBITDA of £652,000 and operating profit of
£401,000, and net assets of £2,276,000.
Banking facilities
The Company has recently entered
into a new overdraft facility with Santander which may be utilised
to fund the Group's working capital and any other purpose which
Santander may approve. The facility is for up to £2.5 million and
is secured by a fixed and floating charge over the assets of the
Company. Interest is payable on drawn funds at the Bank of
England's base rate plus 2.5 per cent.
Admission and Total Voting Rights
Application will be made to the
London Stock Exchange for the Consideration Shares to be admitted
to trading on AIM on completion of the Acquisition ("Admission"). In addition application
has been made for 180 Ordinary Shares to be admitted that were
issued pursuant to a loan note conversion in December 2017
("Loan Note Shares") and it
is expected that such Admission will occur at 8.00 a.m. on 18 June
2024. The Consideration Shares will be issued credited as fully
paid and together with the Loan Note Shares and together with the
Loan Note Shares will rank in full for all dividends and other
distributions declared, made or paid after the admission of the
Consideration Shares, respectively and will otherwise be identical
to and rank on Admission pari passu in all respects with the
existing Ordinary shares.
Following Admission, the Company
will have 61,705,309 Ordinary Shares in issue, of which 1,000,000
are held in treasury. Accordingly, the total number of voting
rights in the Company will be 60,705,039 and shareholders may use
this figure as the denominator for the calculations by which they
will determine if they are required to notify their interest in, or
a change to their interest in, the Company under the FCA's
Disclosure Guidance and Transparency Rules.
Commenting, Raschid Abdullah, Petards Chairman
said: "We will be delighted to
welcome Affini and its staff to the Petards Group and look forward
to working together in growing the expanded Group during this
exciting new phase in Petards development. This strategic
acquisition will both significantly
increase the Group's scale and revenues, while complementing its
present operations. As well as being complementary to the
Group's existing activities within Defence, Traffic and Rail, it
will broaden its reach into new sectors, including those of Energy,
Aviation and Buses."
Ian
Carr, Affini's CEO commented: "We
are looking forward to joining the Petards Group which shares our
passion for delivering innovative technology, expertise and
exceptional customer service. From Affini's strong heritage in
critical communications within the aviation sector, I am proud that
in recent years we have expanded into new markets, added new
technologies, and secured prestigious projects across the bus,
rail, energy, construction, and defence sectors. With Petards
operating across many similar and complementary markets, I believe
this represents a significant strategic milestone for the business
and will enhance its ability to take advantage of the growth
opportunities in its target markets."
Contacts:
Petards Group plc
|
www.petards.com
|
Raschid Abdullah,
Chairman
|
Mb: 07768 905004
|
|
|
WH
Ireland Limited, Nomad and Joint Broker
|
https://www.whirelandplc.com/capital-markets
|
Mike Coe, Sarah Mather
|
Tel: 020 7220 1666
|
|
|
Hybridan LLP, Joint Broker
|
www.hybridan.com
|
|
Claire Louise Noyce
|
Tel: 020 3764 2341
claire.noyce@hybridan.com
|
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