Journeo Regulatory News (JNEO)

26 Jul 2006 07:01

TG21 Plc26 July 2006 For release: 26 July 2006 TG21 plc ("the Group") Trading Update and Strategic Investment TG21, the niche provider of business solutions to the automotive, publictransport, cellular and insurance markets, today issues a further trading updateon its legacy Distribution and Services businesses. It also announces astrategic investment in Cyberlyne Communications Limited, a specialist in thesupply and installation of on-board CCTV for public transport vehicles. Trading Update Further to our AGM trading update in May sales in the second quarter for ourDistribution businesses have continued the trend from the previous quarter, withthe majority of sales coming from low margin portable satellite navigationsystems. As previously indicated, this lower margin sales mix is impacting theprofitability of the business. Accordingly, we are taking steps to achievefurther overhead savings and are examining exit strategies for some sectors ofthis business. We have also seen disappointing sales in our Services businesses in the secondquarter. Despite our appointment as a black-box installation contractor to anumber of insurance companies introducing Pay As You Drive ('PAYD') insuranceschemes, delays in these projects which are beyond our control, are expected tohave a significant impact on the profitability of this business in the currentyear. Consequently after taking into account reorganisation costs in our legacyDistribution business and the investment already made in infrastructure tosupport the PAYD services business, we are expecting our Distribution andServices businesses to make only a small operating profit contribution for theyear to December 2006. On the positive side, our public transport vehicle CCTV business, 21st Century,continues to make good progress and is expected to continue to make a positivecontribution to operating profit in the second half, even after taking intoaccount the investment in new technologies. We are pleased to announce today that we have entered into a strategic alliancewith one of the other major CCTV systems suppliers in this sector which willallow us broaden our customer and product base. Strategic Investment in Cyberlyne Communications Limited TG21 has entered into a loan and share option agreement with CyberlyneCommunications Limited ("CCL"). Under the agreement TG21 has made a loan of £430,000 to CCL bearing interestfrom 1 January 2007 at 9.3%. In parallel with the loan agreement, CCL hasgranted an option to TG21 to acquire 50% of CCL's share capital for a nominalvalue of £100. TG21 has also been granted a second option to acquire theremaining 50% of the share capital for £1,000,000 if TG21 chose to exercise theoption before 30 April 2007 or the higher of £1,000,000 in cash or the cashequivalent of five times CCL's 2007 operating profit before management chargesif the option is exercised after completion of the CCL's 2007 accounts. The consideration for both options is to be paid in cash and both options willlapse if not exercised by 30 June 2009. TG21 will provide management services toCCL in the interim period before the second option is exercised and in returnwill receive a monthly fee of £3,000 plus a 100% share of CCL's 2007 profit. Theprofit share is to be credited back in the event that TG21 do not take up thesecond option in 2008. CCL is a private company based in the North East of England. It specialises inthe supply and installation of on-board CCTV for public transport vehicles.CCL's customers include First Bus, Go-Ahead and Translink. Combining CCL with21st Century would significantly strengthen TG21's presence in the publictransport CCTV market. Peter Ward, Chairman of TG21, commented: "The performance of our legacy businesses is disappointing, but reflects thefact that they are operating in mature markets. However they are still very cashgenerative and this has allowed us to finance our expansion into markets withgood growth opportunities such as public transport CCTV. The link up with CCL isparticularly significant in giving us access to a wider customer base in thepublic transport sector and an own brand product which we believe will leverageour investment in 21st Century." TG21 will announce its interim results for the six months to 30 June 2006 on 21August 2006. Ends For enquiries please contact: Peter WardChairmanorWilson JenningsFinance Director 020 8710 4000 Notes to editors About TG21 TG21 plc is a niche provider of business solutions to the automotive, publictransport, cellular and insurance markets. It operates via 3 core divisions:Public transport CCTV, Services & Distribution. TG21 holds a 75% stake in 21st Century, a fast growing provider of CCTV andBlack Box recording systems to the UK public transport sector. This Black Boxtechnology, pioneered by the aviation industry, offers features above and beyondstandard CCTV. 21st Century is the preferred supplier to Arriva UK Bus In the Services division, TG21 provides Insurance Services such as claimshandling and fulfillment, related to theft of in-car entertainment systems. TG21provides a professional call centre and engineer response. Major customersinclude Royal Bank of Scotland and Norwich Union. TG21 also provides TechnicalServices, which include mobile vehicle installation of hands-free mobile phonekits for Vodafone. TG21's Distribution division focuses on the distribution of automotive andmotorcycle products to the UK specialist aftermarket, to include security,speed-camera warning, audio, navigation, multi-media systems. TG21 employs around 250 staff with offices in Mitcham, Tamworth, Blackburn andRuncorn. About Cyberlyne Communications Limited CCL provides CCTV solutions to bus operators, local authorities andmanufacturers. It is currently undertaking work for First Group (Glasgow andLondon), Translink (Northern Ireland) and Go-Ahead (North East). CCL hassupplied in excess of 6,000 CCTV systems to the public transport market sinceits formation in 1998 and has designed its own digital recorder which isassembled at its head office in Bishop Auckland. This information is provided by RNS The company news service from the London Stock Exchange