News blog

600 Group

  • BY: Andrew Hore |
  • POSTED: 17/02/2015 |

600 Group has acquired 80% of US-based laser marking business TYKMA Inc, which will fit well with its existing fast-growing laser marking division. 

The initial payment is $4.68m (£3.04m) and this will be financed by a £6.739m five-year, 8% loan note issue. Existing shareholder loans of £1.55m are being converted into the loan notes and £951,000 will be used to repay other loans. Subscribers for the loan notes receive warrants to subscribe for shares at 20p each – a premium to the market price. A maximum of £8.5m can be raised through the loan notes. The loan notes will be listed on the Bermuda Stock Exchange.

TYKMA’s management retains 20% of the business which could be acquired by 600 Group could at a later date.  Even so, the business will be integrated with the Electrox business, which has an updated range of laser marking machines. TYKMA boss David Grimes will become chief executive of the merged division.

In 2014, Ohio-based TYKMA generated revenues of $8.4m and a net operating income of $730,000. The combined business should benefit from increased scale and additional engineering expertise. There will be some debt taken on with the acquisition.

The laser marking business has potential to grow significantly and produce high margins, although Electrox’s profit has been held back in recent times by the cost of investing in new products.

The acquisition is earnings enhancing, although net debt will be £11.6m at the end of March 2015. The 2015-16 profit forecast has been upgraded by 23% to £2.95m, while earnings per share, after minority interests, were increased by 15% to 2.52p.

Chief executive Nigel Rogers has acquired 150,000 shares at 15.797p each, which takes his stake to 1.67%.

At 17.13p a share, 600 Group is valued at £m. The shares are trading on less than seven times 2015-16 earnings, falling to five in 2016-17.

AIM Journal February 2015 available.

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