Croma Group plc is not afraid of taking on acquisitions. Since listing on AIM in early 2004, the company has taken out quite a few companies in it?s attempt to build up much needed critical mass to become a profitable business.
Croma listed at 5.5p a share and since then the share price really hasn?t done a whole lot. However, the companies market capitalisation has nearly doubled as the number of shares in issue has risen from around 50 million on listing to just over 100 million today. Croma designs, develops and produces overt and covert surveillance, security and defence related products. One of Croma?s more notable contract wins was with Thales, the French defence group, to supply 52 flat panel monitor for naval applications.
Today Croma kept up it?s acquisition trail and dilution of shareholders with the announcement that it had bought Vigilant ltd, a Scottish based company that specialises in asset protection. Croma said that Vigilant will operate as a stand alone company, but that the company saw potential for cross-selling services between the groups divisions. Croma is paying a total sum of £804,000 for Vigilant, of which £225,000 will be in cash and the rest of the consideration will be paid for with shares priced at 6.5p/share, a 20% premium to today?s share price. Vigilant recorded profits before tax of £88,000 on £1.2 million revenues in the year ending 31st December, 2004. Croma also added that Vigilant will be rewarded with further payments up to a maximum of approximately £2.2 million if certain performance related targets in 2006.
Not stopping for breath, Croma also updated the market on a second acquisition it is pursuing. The company has mentioned previously that it had it?s eye on a biometrics company, and today Croma re-affirmed that due diligence was ongoing and that they hoped to make an announcement shortly. Croma recently placed 6.5 million shares with institutional investors at 5p to partially fund the current acquisitions.
No doubt investors will be hoping that Croma?s bolt on acquisitions will eventually lead to a strong order book and healthy revenues, ,and despite Croma?s lacklustre share price performance, the company has been continually upbeat about it?s prospects in the industry. Hopefully Croma is building a long term and sustainable business and won?t fall into the common mistake of taking on more than it can chew.