11th Nov 2005 15:41
Pursuit Dynamics PLC11 November 2005 11 November 2005 Pursuit Dynamics plc ("Pursuit Dynamics" or the "Company") Placing of 5,333,338 new Ordinary Shares at 150p per new Ordinary Share to raise approximately £8.0 million for the Company. The Pursuit Dynamics Board today announced its preliminary financial results forthe year ended 30 September 2005 and proposals for a capital raising to beeffected by means of a Placing of new Ordinary Shares at an issue price of 150pper new Ordinary Share to raise approximately £8.0 million (before expenses) forthe Company with institutional and certain other investors. The net proceeds of the Placing will be used to fund the next stage of theCompany's growth, for working capital purposes and to provide the Company with astrong balance sheet to help ensure that it is able to protect its intellectualproperty and demonstrate its financial strength to existing and potentialcustomers. Further details in relation to the proposed use of funds are set outbelow. Due to the size of the Placing relative to the Company's existing authority toallot shares free from statutory pre-emption rights, the Placing is conditional(amongst other things) upon the passing of a Resolution to enable the Placing totake place. For further information on Pursuit Dynamics, please visitwww.pursuitdynamics.com or contact: John Heathcote, CEOGary Pyle, CFOPursuit Dynamics plc+44 (0)1763 250 592 Rupert Krefting / Andrew CraigInvestec+44 (0)207 597 5970 Simon Hudson / Richard Sunderland / Rachel DrysdaleTavistock Communications+44 (0)207 920 3150 Background and history Pursuit Dynamics plc was incorporated in March 2001 as the holding company forPursuit Marine Drive Limited ("PMD"). PMD was formed in August 2000 to acquirethe intellectual property rights of an innovative marine propulsion system fromNew Millenium Engineering Pty Limited, a wholly-owned subsidiary of CarnegieCorporation Limited, an Australian publicly listed company and Alan Burns, theinventor of the technology. Pursuit Dynamics plc was admitted to AIM in May2001. The Company is headquartered in Hertfordshire UK and has a US office inDarien, Connecticut. The Company's PDX technology is based on a gas-driven supersonic shockwavesystem that produces controllable mixing, heating and flow rates. PursuitDynamics owns 100 per cent. of the intellectual property rights of the PDXtechnology. During the course of development of the marine propulsion system in2002, the Company identified various attributes of the system that made itpotentially attractive in a number of process industries. In 2003 the atomisingcharacteristics of the PDX were discovered. The markets in these industries wereperceived as being much larger, with commercial results expected to be achievedmore quickly, than the marine propulsion market. Since 2002, Pursuit Dynamicshas focused on the development of the process industry and atomisationapplications of the system. The Directors believe that Pursuit Dynamics' technology is applicable to anumber of process industries. Whilst to date the focus has been on foodmanufacturing, the Directors also believe that Pursuit Dynamics' atomisationtechnology has applications in areas such as fire suppression anddecontamination. Other process applications under development include those forwaste, brewing, oil and pulp and paper. PROCESS INDUSTRY APPLICATIONS The PDX technology in these industries is an effective and controllable reactor.The PDX technology uses condensable or non-condensable gases in a novel way toheat, mix and pump in a controlled manner. Energy that is input to the systemcan be biased towards any of the three primary duties (heating, mixing andpumping) outlined above as required. In addition, heat transfer is virtuallyinstantaneous and the mixing capability allows the production of particles thatcan be below one micron. The bore of the system is free of restrictions and thesystem can therefore pump large particles without clogging. Entrainment offurther gases, liquids and solids into the reactor are easily achieved. Thesystem lends itself to low maintenance and is easily cleaned, which areimportant attributes in process industries. The Company launched its first product, the PDX Sonic, into the food industry inJanuary 2005. Pursuit Dynamics has, since January 2005, licensed the PDX Sonicto a number of leading manufacturers in the food industry, including CampbellsGrocery Products Limited, Premier Foods and Geest Foods Limited in the UK,Verstegen Spices & Sauces B.V. in Holland and a major food manufacturer in theUSA and its first brewing application to Greene King Brewing Co Ltd in May 2005.In addition Pursuit Dynamics sold its first soft drinks manufacturingapplication to Coca Cola Enterprises Limited in November 2004. During 2005 Pursuit Dynamics developed a network of six distributors and twoagents across Europe and the USA for the PDX Sonic. The distributors havemanufacturing and system integrating capabilities and Pursuit Dynamics intendsto extend this distribution network in 2006. MARKETS The food and beverage manufacturing market is the first industry area that hasseen commercial development of the PDX technology. The Directors believe thatthe global market potential in this area is substantial. Food The advantages of the PDX technology in processed liquid food manufacture are: * Faster production - in some cases, up to fifteen times faster* Less energy used per kg of processed product* No burn-on* Minimal particulate damage* Low temperature, short time starch activation* Compact* Low maintenance* Easy to clean* Scalable Currently the market is being prosecuted via a distributor network and directsales. The distributor network provides sales, manufacturing, installation andcustomer support services. Pursuit Dynamics provides support to the distributorsas technical authority on the PDX technology and is the manufacturer of the PDXunits. The PDX Sonic, launched to the food and beverage industry in January 2005 hasbeen licensed within Europe and North America to customers that includeCampbells Grocery Products Limited, Premier Foods, Geest Foods Limited,Verstegen Spices & Sauces B.V. and a major food manufacturer in the USA. TheCompany has recently received a repeat order through its distributor network fora PDX Sonic from a leading UK food manufacturer of well-known brands.The continued commercialisation strategy is to increase the size of thedistributor network. Pursuit Dynamics' initial market focus is Western Europeand North America. Global 2003 annual sales of liquid food and prepared food processing machineryand equipment (including brewing equipment) are shown in the table below: $ million %US 574 16.0Canada 108 3.0Japan 269 7.5Europe 1,048 29.2Asia-Pacific 1,011 28.2Latin America 369 10.3Rest of the World 205 5.7 TOTAL 3,584 100.0 Source: Global Industry Analysts Inc Brewing Potential application areas for the PDX technology in the brewing processinclude clean in place ("CIP"), wort boiling and mashing in with initialapplication work being undertaken by Brewing Research International ("BRi") onbehalf of Pursuit Dynamics. BRi are experts in the brewing process and include anumber of major brewers amongst their members. The initial work suggested thatthe taste profile of beer and lager was not adversely affected by use of thePDX. Validation of the CIP application has been provided by Greene King BrewingCompany Limited in the UK which has successfully evaluated PDX technology in itsBury St. Edmunds brewery demonstrating energy savings in excess of 30 per cent.compared to its existing systems. Commercial validation of the technology is nowunderway in the wort boiling process with one of the world's largest breweries.Mashing validation is planned with a brewery in the UK. Both these applicationsutilise the PDX technology's ability to provide efficient heating, pumping andagitation simultaneously. Wort boiling can account for as much as 60 per cent.of a brewery's total steam demand (source: The Brewer International, June 2002).The commercialisation strategy is to develop the PDX technology with an industrythird party prior to licensing to OEMs. ATOMISATION The PDX atomisation technology is being adapted to address the fire suppressionand decontamination markets. Pursuit Dynamics is currently seeking partners inboth application areas. Fire suppression The capabilities of the PDX fire suppression technology, PDX FireMist, have beendemonstrated during a number of live fire trials in Sweden and the UK. The NavalResearch Laboratory in Washington recently issued a contract to Pursuit Dynamicsto trial FireMist aboard ex-USS Shadwell in Mobile Bay, Alabama. The trial iscurrently planned to be conducted in early 2006. The demonstrated performance ofFireMist indicates that it is more effective than any commercially availablewater mist fire suppression system at present. To the best of the Directors' knowledge FireMist, Pursuit Dynamics' firesuppression technology, produces water droplets smaller than those availablefrom other commercially available water mist fire suppression systems. Theresulting surface area per litre of water increase over that achievable bycompeting technologies (typically 1,400 square-metre/litre for FireMist versus120 square-metre/litre for other commercially available systems) contributes tothe system's ability to suppress certain types of fires more quickly thancompeting systems. FireMist is capable of projecting its small droplets todistances in excess of 20 metres, further contributing to its effectiveness in afire-suppression role. The fire suppression market represents a substantial opportunity. Currentestimates for the total size of the fire protection market are approximatelyEuro 30 billion p.a. (source: www.innovations-report.com/html/reports/studies/report_29292.html) and strong growth drivers exist for the future. Environmentalconsiderations have led to the phase-out of Halon as a fire suppressant andconcerns exist regarding the safety of carbon-dioxide systems. The change inperformance represented by PDX FireMist has the potential to increase the shareof existing markets enjoyed by water mist fire suppression technologies, inaddition to creating new markets due to the improvement in performance achievedby PDX FireMist. Pursuit Dynamics' strategy is to pursue a licensing agreement with a major OEMto develop, manufacture and distribute the Firemist products.Decontamination The PDX decontamination technology, PDX Basilisk, utilises the atomisationcapabilities of the system to disperse a decontaminant material into a dropletcloud, which is capable of staying in suspension for several minutes.The atomising derivatives of the PDX technology have been proven to produce notonly remarkably small droplets of water but to also allow these droplets to beprojected a considerable distance (in excess of 20 metres). These droplets canbe used as the carrier and delivery mechanism for decontaminating material thatneeds to be brought into contact with an airborne or surface threat agent.Trials have proven that PDX Basilisk does not significantly damage a number ofdecontamination chemicals when delivered via the system. In July 2005, Pursuit Dynamics announced the signing of a one year contract withDARPA, a US governmental defence research agency, to investigate and trial itsPDX Basilisk decontamination system. The contract award was in response to BroadAgency Announcement (BAA) 04-40. DARPA is an agency of the United States Department of Defense responsible forthe development of new technology for use by the US military. The contractcovers the use of Pursuit Dynamics' PDX Basilisk decontamination system withinthe scope of BAA 04-40, which seeks innovative concepts in systems and componenttechnologies to address a variety of chemical, biological and radiologicalthreats, including threats to buildings and urban environments. Pursuit Dynamics' commercialisation strategy is to continue to prosecute productdevelopment in conjunction with experts in the field whilst approachingpotential license partners who have demonstrated the capability to win andmanage defence contracts. Oil and gas The oil and gas industries present a major market opportunity. In 2004 theCanadian oil sands production surpassed 1.0 million barrels per day and isexpected to more than double by 2015. It is estimated that future investment inoil sands projects could exceed C$60 billion in addition to the C$20 billionalready invested (source: Canada's Oil Sands: Opportunities and Challenges to2015, National Energy Board 2004). Initial trials have demonstrated the capability of the PDX technology tosuccessfully separate bitumen from oil sands. In addition, the PDX separation ofbitumen has achieved Alberta Energy and Utilities Board guidelines forseparation (90 per cent. for high grade material) but has achieved this withoutthe use of chemical surfactants; a point that the Directors believe hasimportant environmental benefits. Pursuit Dynamics plc has created a subsidiary company; Pursuit Resources Limited('PRL'), with the owners of the oil service company TM Services Limited, PeterTaylor and Peter Blakey to accelerate the commercialisation of the technology inthis sector. PRL is 80 per cent. owned by Pursuit Dynamics plc and 20 per cent.owned by Peter Taylor and Peter Blakey. PRL, together with industry consultants Pervin and Gertz, Inc., have identifieda number of potential application areas of the PDX technology in addition tobitumen separation from oil sands. To commercialise the technology, PRL intends to engage with one or more oil andgas companies to license various oil and gas applications.Other industry areas A range of further potential application areas have been identified for the PDXtechnology by Pursuit Dynamics. The Directors believe that a number of thesejustify further investigation and development, including: Waste processing Initial trials with a waste processing company in Canada have recently beencompleted. The trials cover applications that are predominantly oil based andinitial indications are that substantial cost savings are available in thisfield to operators of the PDX technology. Pasteurisation Third party analysis from CCFRA Technology Ltd has demonstrated the system'sability to kill Enterococcus faecalis (a vegetative pathogen substitute) fasterand at lower temperatures than can be achieved by temperature alone. Thepotential benefits of lower temperature pasteurisation include reduced energyfrom heating and cooling. Dairy A substantial market (estimated at 600 million tonnes in 2003 (source: Bulletinof the International Dairy Federation), with turnover of the worlds top 20 dairycompanies being $93 billion in 2003 (source: Bulletin of the 2003 World DairySituation)), the dairy industry requires a range of heating, mixing andhomogenisation duties for applications as varied as the manufacture of UHT milkto recombined and reconstituted milk products. Animal health Trials with a major chemical manufacturer have demonstrated its proprietarybranded chemical used for disinfection remains largely undamaged whendistributed through the PDX Basilisk decontamination system. Bio-fuel Screening trials, verified by CCFRA Technology Ltd, have proven the PDXcapability to activate starches at lower temperatures than is conventionallypossible. Inlet fog boosting Turbine output can be increased by up to 20 per cent. through cooling of inletair (source: http://www.meefog.com/turbine/gtbd-04.html). The air intake ofturbines can be cooled through the addition of a fine water mist. Independentscreening of PDX FireMist has proven finer droplet size than that quoted by aleading mist technology in this field. Pulp and paper A substantial market and heavy user of energy (2003 Pulp production 185 milliontonnes; 2003 Paper production 339 million tonnes (source: PPI Annual Review ofWorld Pulp & Paper Statistics)). Screening trials are underway with a globalpaper manufacturer. Pharmaceutical A substantial industry (2002 global turnover $400.6 billion (source: IMS WorldReview 2003)) where manufacturing processes include heating, mixing and pumpingduties. Chemical World chemical sales in 2004 were estimated at Euro 1,776 billion (source:www.cefic.org/factsandfigures/graphs/profile/graph01.html). A major potentialindustry area for PDX fluid heating, mixing, and pumping duties. Use of proceeds The Directors believe that the Placing will principally give the Company: (a) the opportunity to accelerate the development of the Company's direct sales force in key territories including North America and Europe; (b) greater visibility, customer accountability and financial strength both to its existing clients as well as prospective clients, which should lead to enhanced opportunities for growth; (c) the opportunity to accelerate investment in the development of further applications of the Company's core intellectual property into such industries as brewing, decontamination and fire suppression; (d) funds for the Company to seek appropriate office space for the further development of the Company outside the M25 close to London; (e) the financial capability to defend its key protected and patented intellectual property from infringement and appropriation worldwide; and (f) an enhanced ability to recruit and retain employees involved in developing and growing the business. Terms of the Placing On 11 November 2005, Pursuit Dynamics plc entered into a Placing Agreementpursuant to which Investec will act as Pursuit Dynamics plc's agent to use itsreasonable endeavours to procure subscribers for the Placing Shares at thePlacing Price and failing which to subscribe for any unsubscribed shares itself.Investec, on behalf of Pursuit Dynamics plc, has conditionally placed a total of5,333,338 new Ordinary Shares with institutional and certain other investors atthe Placing Price to raise £8.0 million (before expenses). The Placing Shareswill represent approximately 10.5 per cent. of the enlarged Share Capital. ThePlacing is fully underwritten by Investec. The Placing Shares will, when issued and fully paid, rank pari passu in allrespects with the Existing Ordinary Shares and will rank in full for alldividends and other distributions declared, made or paid thereafter on theissued share capital of Pursuit Dynamics plc. Dividend policy The Directors' current intention is to retain the Company's earnings in theforeseeable future to finance growth and expansion. It is however the Directors'intention to pay dividends when the Company has funds surplus to its expansionrequirements and it is prudent to do so. Current trading and prospects of the Company The Board today released preliminary results for the Company in relation to theyear ended 30 September 2005 and made the following statement regarding theCompany's outlook: Outlook Having spent nearly five years researching and developing the PDX technology, weare now very firmly in the phase of commercialisation. Our business model isdesigned to be flexible enough to accommodate the most efficient and effectivemethod of securing entry to any target industry and market. In the case of thefood processing industry we have chosen to penetrate the market via worldwidedistributors - reducing the costs borne by Pursuit Dynamics but increasingopportunities to secure customers. Since the launch of the PDX Sonic range atthe beginning of the year, this has proved to be an effective model. Other markets we are currently addressing include oil and gas (via our agreementwith specialists in this area), fire suppression (where we intend to follow alicensing model), decontamination (also likely to be addressed via licensing)and brewing, where we have been running trials with a major brewery group sinceMay of this year. The Board is confident that the current financial year will see additionalmilestones achieved as we continue to develop and grow. I look forward toupdating shareholders on further progress at the time of the Annual GeneralMeeting in January. Extraordinary General Meeting It is expected that a circular setting out further details of the Placing andincorporating a notice of extraordinary general meeting will be sent toshareholders later today and that an extraordinary general meeting will takeplace on 5 December 2005. Admission to AIM and dealings Application will be made for the Placing Shares to be admitted to trading on AIMand it is anticipated that Admission will become effective and that trading inthe Placing Shares on AIM will commence on the 6 December 2005. Venture Capital Trust/Enterprise Initiative Scheme eligibility The Company has previously issued qualifying shares under the Venture CapitalTrust/Enterprise Initiative Schemes and has applied to Her Majesty's Revenue &Customs for confirmation that the Ordinary Shares to be issued pursuant to thePlacing will also qualify for such schemes. DEFINITIONS The following definitions apply throughout this release: "Admission" - Admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM rules, as published by the London Stock Exchange "AIM" - AIM, a market of the London Stock Exchange "Board" or "Directors" - the existing directors of the Company at the date of this release "Investec" - Investec Bank (UK) Limited "OEM" - original equipment manufacturers "Ordinary Shares" - ordinary shares of one penny each in the capital of the Company "Placing" - the conditional placing by Investec of the Placing Shares at the Placing Price on the terms set out in the Placing Agreement "Placing Agreement" - the agreement dated 11 November 2005 entered into between Pursuit Dynamics and Investec and the executive Directors in relation to the Placing "Placing Price" - 150 pence per Ordinary Share "Resolution" - the special resolution to be proposed at the extraordinary general meeting to, inter alia, approve the increased share capital of Pursuit Dynamics' Directors to allot the Placing Shares and disapply pre-emption rights in relation to the allotment of the Placing Shares "UK" - the United Kingdome of Great Britain and Northern Ireland "US" or "United States" or "USA" - the United States of America (including the states of the United States and the District of Columbia), its possessions and territories and all areas subject to its jurisdiction This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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