Ava Risk GroupAcquires Manchester-based GJD Manufacturing LimitedSmall Company Champion 6 hr agoBy Elric Langton | 1 August 2022
Mike and Elric have a financial interest in AVA Risk GroupAva Risk Group Limited (ASX: AVA) has announced it has entered into a Sale and Purchase Agreement to acquire 100% of the shareholding of MTD Holdings Limited, the parent company and Manchester-based GJD Manufacturing Limited (GJD). The Company further advises that completion has subsequently occurred today.This latest M&A activity is strategic in nature but also boosts the enlarged group’s revenues of an already profitable Company. It also opens the door wider for a growing OEM base in the UK and European markets and, dare I say, the “five eyes” security alliance between Australia, Canada, New Zealand, the UK and the USA.There will also be an element of cross synergy between the group of Companies operating in similar fields of security. So, for example, BQT, FFT and GJD will have a lot of common technical synergies, where cross-selling and cost reductions will help boost the business and profitability over time.A large part of the enlarged GJD shareholders is taking part of their 40% value in escrow-held AVA shares, which is a sign of confidence and commitment to the future. GJD is an award-winning, UK-based security equipment designer and manufacturer specialising in security space detection and intruder detection systems. Its products include professional-grade external detector equipment, infrared and white-light LED illuminators, and Automatic Number Plate Recognition cameras.
GJD counts some of the UK and Europe’s most security-conscious end users as customers and has a growing OEM sales channel across multiple sectors, including well-known multinational engineering and technology companies. Key transaction terms:£5.9 (circa A$10.25) million headline enterprise value£4.5 (circa A$7.82) million equity value purchase price to be paid 60% in cash and 40% in Ava sharesShares issued as consideration will be subject to a staggering escrow period, such that one-third of the shares will be released after 12 months, one-third after 18 months and the remaining third after 24 months.The cash consideration will be funded out of Ava’s existing cash resources. Its cash balance on 30 June 2022 was circa A$15.2 million. In addition, approximately 11.8 million consideration shares will be issued within Ava’s securities issuance capacity pursuant to ASX Listing Rule 7.1. GJD FY2021 (year-end 30 September) highlights include:£4.6 (circa A$7.95) million revenue£0.92 (circa A$1.6) million EBITDA*Gross Profit Margin of 46%Domestic UK sales were approximately 50%, and mainland Europe sales were approximately 37% (total revenue). International and another revenue account for the balance of 13% of total sales.OEM sales, which include Automatic Number Plate Recognition camera technology, grew 50% from FY2020 to £1.9 million (accounting for 41% of total sales).
Commenting on the acquisition, Ava Risk Group Chief Executive Officer, Rob Broomfield, said, “We are delighted to welcome the GJD management team, employees and shareholders to the Ava Group. The acquisition is an exciting opportunity to increase our global reach and access to new customers, particularly in the large markets of the UK and Europe. Our combined product portfolio is highly relevant to our respective end customers, and we can turbocharge their distribution by combining GJD’s go-to-market access with Ava’s current growth strategy. Importantly, this transaction represents significant strategic value for both FFT and BQT and is complementary to their existing growth initiatives.” GJD Chairman, and major shareholder, Mark Tibbenham, said, “Our strategic fit with Ava has been obvious for some time, and we are very pleased to have found a world-class home for GJD’s employees and customers. We will continue capitalising on the growing global demand for our award-winning products. I am very excited to be a shareholder in Ava and about the value we can create as a combined business.” GJD ProductsGJD’s product offering falls into three categories:
Particularly interesting '' It also opens the door wider for a growing OEM base in the UK and European markets and, dare I say, the “five eyes” security alliance between Australia, Canada, New Zealand, the UK and the USA.There will also be an element of cross synergy between the group of Companies operating in similar fields of security. So, for example, BQT, FFT and GJD will have a lot of common technical synergies, where cross-selling and cost reductions will help boost the business and profitability over time''
AVA Price at posting:
25.5¢ Sentiment: Buy Disclosure: Held
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