IN its latest expansion move, Silvermines, the engineering company, plans to acquire the British based Continental Microwave Group (CM) for up to £14 million sterling. The deal will be funded by the proceeds of a placing and open offer which will raise £12.6 million.
Silvermines has also announced interim results showing a rise in profit before tax from £1,308,000 to £1,528,000 in the six months ended June 30th 1996. Further growth is anticipated. Shareholders benefit with a rise in the interim dividend from 0.30p net per share to 0.35p.
The initial consideration will amount to £10 million cash. An adjustment will be based on the net asset value of CM on completion of the deal. If the net assets are lower than £7.5 million, the consideration will be reduced, if they are higher, the consideration will be increased. However, the maximum will be £14 million. The intended purchase will have to be approved by Silvermines's shareholders.
CM is on a recovery path, having spent £4.5 million on new product development over the past few years, said Silvermines group managing director, Mr Clem Jansen. CM recorded a fall in profits before tax from £1,775,000 in 1994 to £257,000 in 1995 due to a cost reduction programme. Profits should recover to around £700.000 this year, according to Mr Jansen, who noted the company has "considerable upside drive" as it has "under performing assets".
The benefits from new products and an expansion in China and South East Asia will come through in 1997. The deal, he added, will be earnings enhancing next year and fits into the group's overall development strategy.
The CM group consists of three companies: CML, the main business based in Bedfordshire; RFT based in Connecticut, US; and TRU-LON, based at Royston Hertfordshire. The main application of CM's broadcast products is in the transmission of signals from an event via a studio and then by redistribution throughout Britain. The CM and RET portfolio covers applications such as electronic news gathering, satellite news gathering, portable microwave links and other transmission devices. TRU-LON is a specialist manufacturer of printed circuit boards.
Silvermines said it would continue to employ the senior management and technical personnel. None, however, will be joining the Silvermines board.
The placing and open offer involves 16.8 million new Silvermines shares. The open offer is on the basis of one new share at 78p per share (80p sterling) for every four shares held. The issues have been fully underwritten by Greig Middleton & Co and Riada Corporate Finance. Mr Jansen said there has been a very good response from institutional shareholders. Some 30 per cent of the company is controlled by Irish investors.
The latest results are not directly comparable because the last remaining business in the environmental control division was sold to its management team in May. The level of orders in the first half is described as "encouraging". Sales rose from £26.6 million to £27.5 million. Profit before interest was virtually unchanged at £1.66 million and lower interest costs led to the profit growth at the pre tax level. Earnings per share grew from 1.63p to 1.72p. Gearing amounts to 25 per cent.
Silvermines's motion technology division had "solid progress", with a 28 per cent increase in sales. The CCTV and security division continued to invest in new product development. The electrical division had an "enhanced" order book.
The group continued to develop its markets in China and South Fast Asia. It says it is encouraged by the trend of new business in the area.
