Acquisition of Innicor

Sondex PLC
21 September 2006

Sondex plc

21 September 2006



  NOT FOR DISTRIBUTION OR TRANSMISSION, DIRECTLY OR INDIRECTLY, IN OR INTO THE
    UNITED STATES, CANADA, AUSTRALIA, JAPAN AND THE REPUBLIC OF SOUTH AFRICA



                                   Sondex plc
                          ("Sondex" or the "Company")
      Acquisition of Innicor Subsurface Technologies Inc. ("Innicor") and
                     Firm Placing and Placing & Open Offer



Sondex, a leading international downhole technology supplier to the oil & gas
industry, today announces the recommended cash offer to acquire Innicor a
Canadian based designer, manufacturer and provider of downhole completions
equipment to the oil & gas industry. The Company also announces that it is
proposing to raise approximately £40 million (net of expenses) by way of a Firm
Placing and a Placing & Open Offer.



Summary



Acquisition:

  • Recommended cash offer to acquire all of the outstanding common shares in
    the capital of Innicor (the "Offer") a company traded on the Toronto Stock
    Exchange.
  • The Offer, which has been unanimously recommended by the board of Innicor,
    is being made on the basis of C$3.75 per Innicor Share, valuing the fully
    diluted share capital of Innicor at approximately C$72.8 million (£34.7
    million) and Sondex has received undertakings to accept the Offer from
    holders of 51.1% of Innicor Shares.
  • Innicor designs, manufactures and services subsurface equipment in the
    completion and
    work-over of oil & gas wells. Innicor is headquartered in Calgary, Alberta,
    Canada and is listed on the Toronto Stock Exchange (Ticker: TSX: IST).
  • The Directors believe the acquisition of Innicor is in line with Sondex's
    stated strategy and is expected to bring opportunities for further expansion
    both organically and via "bolt on" acquisitions that can be high growth and
    cash generative.
  • The acquisition of Innicor is expected to be accretive to earnings per
    share and cashflow of the Enlarged Group in the first full year following
    completion of the acquisition of Innicor.
  • The proposed acquisition of Innicor is subject to the approval of Sondex
    Shareholders at the EGM.



Fundraising:

  • The Company proposes, subject inter alia to Shareholder approval, to raise
    approximately £40 million (net of expenses) by the issue of 15,678,571 New
    Ordinary Shares at 280 pence each by way of a Firm Placing and Placing &
    Open Offer.
  • It is intended that the net proceeds of the Firm Placing and Placing &
    Open Offer will be used to finance the acquisition of Innicor and the
    further growth of the Group. Sondex has also arranged new facilities with
    the Bank to fund the working capital requirements of the Enlarged Group.



Trading Update:

  • Market conditions have remained favourable as operators of oil & gas
    fields continue to turn to sophisticated technologies and instruments, such
    as those supplied by the Group, to optimize production from maturing oil &
    gas fields.
  • First half revenues continued to benefit from these conditions and are
    expected to be over 50% higher than the same period last year.
  • Gross margins remain consistent and the Group has continued to invest in
    research and development.
  • Recent acquisitions of AES and Bluestar are performing well.




Commenting on the acquisition of Innicor, Martin Perry, Chief Executive of
Sondex said:



"Innicor is an innovative business with a highly regarded management team. We
believe that this is an exceptional fit with Sondex and are delighted to have
gained the Innicor Board's recommendation for our offer.



On finalisation of the acquisition, Innicor will form the basis for a new '
completions division' at Sondex adding to the range of products and services
offered to our international customer base.



The continued increases in revenues, both from strong organic growth and
successful acquisitions, positions Sondex well for its future development."



For further information, please contact:


Sondex                                               Tel: [phone]
Martin Perry (Chief Executive)
Chris Wilks (Finance Director)

Investec                                             Tel: [phone]
James Grace / Patrick Robb

College Hill                                         Tel: [phone]
Nick Elwes / Paddy Blewer



www.sondex.com



For further information about Innicor please visit:

www.innicor.com



This announcement has been issued by, and is the sole responsibility of Sondex.



Investec Investment Banking, a division of Investec Bank (UK) Limited, which is
authorised and regulated by the Financial Services Authority and is a member of
the London Stock Exchange plc, is acting exclusively for Sondex in connection
with the acquisition of Innicor, Firm Placing and Placing & Open Offer and is
not acting for any person other than Sondex and will not be responsible to any
person other than Sondex for providing the protections afforded to its customers
or for providing advice on the transactions and arrangements proposed in this
announcement.



This announcement is for information only and does not constitute an offer or
invitation to acquire or dispose of any securities or investment advice in any
jurisdiction.



Past performance is no guide to future performance and persons needing advice
should consult an independent financial advisor.



The information contained in this announcement is not for release, publication
or distribution, directly or indirectly, to persons in the United States,
Canada, Australia, Japan or the Republic of South Africa. This announcement is
not an offer of securities for sale into the United States. The Placing Shares
have not and will not be registered under the US Securities Act of 1933, as
amended and may not be offered or sold directly or indirectly, in the United
States absent registration or an exemption from registration. There will be no
public offering of securities in the United States. The Placing Shares have not
and will not be registered with any regulatory authority of any State within the
United States.



Appendix 1 contains the definitions of certain terms used in this announcement.



This summary should be read in conjunction with the full text of the following
announcement.


  NOT FOR DISTRIBUTION OR TRANSMISSION, DIRECTLY OR INDIRECTLY, IN OR INTO THE
   UNITED STATES,  CANADA, AUSTRALIA, JAPAN AND THE REPUBLIC OF SOUTH AFRICA



                                   Sondex plc

                          ("Sondex" or the "Company")

      Acquisition of Innicor Subsurface Technologies Inc. ("Innicor") and
                     Firm Placing and Placing & Open Offer



1. Introduction



Sondex has agreed to make a recommended cash offer to acquire all of the
outstanding common shares in the capital of Innicor (the "Offer"). The Offer
values the fully diluted share capital of Innicor at approximately C$72.8
million (£34.7 million). As at 30 June 2006 Innicor had net debt of C$8.4
million (£4.0 million).



Due to the size of the Offer in relation to the Group, it constitutes a Class 1
transaction under the Listing Rules and accordingly the Company is required to
obtain the prior approval of Shareholders to completion of the Offer. The Offer
is conditional, inter alia, upon such approval being obtained.



The Company also, subject inter alia to Shareholder approval, proposes to raise
approximately £40 million (net of expenses) by the issue of 15,678,571 New
Ordinary Shares at 280 pence each by way of a Firm Placing and Placing & Open
Offer. Of the 15,678,571 New Ordinary Shares being issued, 7,575,481 have been
placed firm and 8,103,090 have been conditionally placed, subject only to
clawback by Qualifying Shareholders in each case, with institutional and other
investors by Investec. Qualifying Shareholders will have the right to subscribe
for the Open Offer Shares in accordance with the terms of the Open Offer.
Qualifying Shareholders will not be offered the right to subscribe for the Firm
Placed Shares.



It is intended that the net proceeds of the Firm Placing and Placing & Open
Offer will be used to finance the consideration due under the Offer and the
balance to provide funding for the further growth of the Group. Sondex has also
arranged new facilities with the Bank to fund the working capital requirements
of the Enlarged Group and, in the event that the Firm Placing and the Placing &
Open Offer does not proceed but the Offer becomes unconditional in accordance
with its terms, to finance the consideration due under the Offer.



A prospectus incorporating a notice of Extraordinary General Meeting and setting
out the background to and reasons for the Proposals will be sent to Shareholders
in due course.

2. Information on Innicor



Innicor is headquarted in Calgary, Alberta, Canada and its shares are traded on
the Toronto Stock Exchange. Innicor designs, manufactures and services
subsurface equipment in the completion and
work-over of oil & gas wells.



Innicor's product offerings include perforating systems, liner hangers, flow
control equipment and completion tools such as packers, profile nipples and
sliding sleeves. Innicor holds a number of patents on its tool designs and
continues to invest in the research and development of new products and tools.



The original business of Innicor was founded in 1999 as Core Oils Tools and has
since that date expanded both organically and via acquisition. In May 2001
Innicor acquired a listing on the Toronto Stock Exchange via a merger with
Codorna Resources an existing Canadian public company.



Since May 2001 Innicor has made five acquisitions:



  • May 2002, Independent Oils Tools Inc, a completion services company, based
    in Brooks, Alberta for C$0.9 million.
  • July 2002, Prime Perforating Systems Inc, a supplier and manufacturer of
    perforating equipment based in Calgary for C$2.1 million.
  • April 2003, Summit Tool Services Inc, a supplier of subsurface equipment
    used in drilling, completion and workover of oil & gas wells based in Reed
    Deer, Alberta for C$0.2m.
  • May 2004, the Polar Completions division of Precision Drilling Technology
    Services Group Inc, based in Calgary for C$14.0 million. Polar Completions
    was a full service provider of completion tools and liner hanger systems
    with its own integrated engineering, manufacturing and technical service
    components.
  • February 2005, Innicor purchased certain assets in the form of proprietary
    intellectual property related to tool designs from Noram Tools Services Inc.
    for an aggregate purchase price of C$750,000 consisting of C$250,000 in cash
    and the issuance of 169,906 common shares of Innicor.



Innicor currently operates from two manufacturing sites and 13 services sites,
all in Canada and has approximately 277 employees. Over 20% of Innicor's total
revenue is generated from international oilfield markets. Innicor is the only
Canadian manufacturer of shaped charges.



The Directors consider that Innicor operates in growing markets and estimate the
global market for Innicor's products in millions of US$ as follows:


                                             Estimate                           Forecast


Year (US $ millions)                  2003       2004   2005          2006     2007     2008     2009
Perforating equipment                  327        353    464           539      564      610      671
Completion services                  2,727      2,910  3,852         4,489    4.587    4,733    5,149



The historical financial record of Innicor is as follows:


Profit and Loss Account                               2006             2005             2004             2003
                                                  6m ended        12m ended        12m ended        12m ended
(Canadian GAAP)                                    30 June      31 December      31 December      31 December


                                                       C$               C$               C$               C$
Revenue                                        31,290,148       55,259,619        40,999,278      23,194,731
Cost of goods sold                             15,567,037       29,821,206        23,330,054      14,658,824
Gross margin                                   15,723,111       25,438,413        17,669,224       8,535,907
Operating Expenses
Salaries and wages                              7,271,904       12,035,817         8,604,325       3,531,444
General and administrative                      4,005,153        7,201,055         5,421,253       2,991,985
Foreign exchange (gain)  loss                     (3,497)          106,326           206,761         202,533
Interest                                          171,059          375,498           301,500         301,258
Depreciation and amortization                     521,127          807,777           492,146         302,950
                                               11,965,746       20,526,473        15,025,985       7,330,170
Income (loss) before income taxes               3,757,365        4,911,940        2,643,239        1,205,737
Provision for (recovery of) income taxes        1,342,061        1,985,619        1,081,148          305,658
Net income (loss)                               2,415,304        2,926,321        1,562,091          900,079
Net income (loss) per share
Basic                                                0.13             0.16             0.10             0.08
Diluted                                              0.13             0.16             0.10             0.08





Balance Sheet                                       2006           2005          2004          2003
                                                 as at        as at 31          as at         as at
(Canadian GAAP)                                  30 June       December   31 December   31 December 

                                                     C$             C$            C$            C$
Assets
Current  Assets
Cash and cash equivalents                             -              -             -       299,147
Accounts receivable                           9,110,938     10,554,833    10,130,872     5,509,664
Inventory                                    23,168,288     18,825,910    16,394,272     6,872,860
Prepaid expenses and deposits                 1,895,546      1,054,905       231,038       200,333
Income taxes recoverable                              -              -             -        21,071
                                             34,174,772     30,435,648    26,756,182    12,903,075
Capital assets                               13,286,544     11,695,846     9,817,524     5,090,523
Future  income tax assets                             -              -        67,809         6,150
Goodwill                                      2,331,781      2,331,781     2,331,781     2,331,781


                                             49,793,097     44,463,275    38,973,296    20,331,529
Liabilities
Current liabilities
Accounts payable and accrued liabilities      7,228,809      7,526,488     7,672,663     2,542,994
Other                                         5,884,442      3,093,742     2,615,814     6,035,674
                                             13,113,251     10,620,230    10,288,477     8,578,668
Obligations under capital leases              2,539,523      2,675,256     1,610,470       832,817
Future income tax liability                     548,098        335,605             -             -


                                             16,200,872     13,631,091    11,898,947     9,411,485
Shareholders' equity
Share capital                                25,514,699     25,321,934    24,715,864    10,214,239
Contributed surplus                             500,830        348,858       123,414        32,825
Retained  earnings                            7,576,696      5,161,392     2,235,071       672,980
                                             33,592,225     30,832,184    27,074,349    10,920,044
                                             49,793,097     44,463,275    38,973,296    20,331,529



The financial information above has been extracted, without material adjustment,
from the audited consolidated financial statements of Innicor for the three
years ended 31 December 2005 and the financial statements of Innicor for the six
months ended 30 June 2006.



No material adjustments need to be made to Innicor's financial statements to
achieve consistency with Sondex's accounting policies and accordingly no
reconciliation has been included.



3. Background to and reasons for the acquisition of Innicor



Sondex has a clear strategy of growth as a supplier of technology to the
upstream oil & gas industry. Its principal clients are oilfield service
companies and national oil companies. The strategy has been consistently
followed by a combination of:

  • investment in in-house technology development (£4.7 million was expended
    on research and development in the year ended 28 February 2006);
  • investment in international expansion (the Company has 10 locations in 8
    countries worldwide and has approximately 425 staff) and
  • through acquisition (four successful acquisitions in the last three
    years).



The area of market focus has been consistently identified as technology which
will assist with recovery of oil from identified oil & gas fields and in
particular the areas of technology associated with drilling and wireline.



Sondex's origins were in the design of instrumentation used in production
logging. These products were enhanced by in-house design to become an
established system for monitoring flow conditions in oil or gas wells during
production. The Directors believe that Sondex Production Logging Tools are now
established and optimized as an industry standard around the world. A number of
related product lines have been added through both in-house design and
technology licensing, the combination becoming the Sondex Wireline Division.
This division was also expanded by two acquisitions: Computer Sonic Systems Inc.
in Calgary, Canada for C$3.7 million (£1.8 million) in 2003, and AES in
Louisiana, USA for up to US$14.0 million (£7.9 million) in December 2005, each
of which brought complementary wireline products. These product lines together
with Sondex's other wireline products are sold through Sondex's international
network of offices.



In line with the strategy of broadening the range of products within its area of
market focus, Sondex acquired Aberdeen based Geolink, for £31.5 million in July
2004. Geolink's product lines are for measurement and logging while drilling,
which enable reservoir engineers to position a well in the required location to
optimize production and also to evaluate the geological formations which are
being drilled through. Since acquiring Geolink, Sondex has increased research
and development investment and added international sales and marketing resource.
Geolink now forms the basis of the Sondex Drilling Division and its product
range has recently been enhanced by the acquisition in July 2006 of Calgary
based Bluestar. Bluestar provides measurement and drilling tools for vertical
wells and positive Pulse Environments. Bluestar's products are complementary to
those of Geolink and provide strong sales in North America. The consideration
for the acquisition of Bluestar comprises an initial payment of C$5.5 million
(£2.6 million) with further earn out potential of up to C$17.25 million (£8,21
million) in total over three years, of which C$7.4 million (£3.5 million) can be
satisfied by the issue of new Ordinary Shares. In the year ended 31 May 2006 the
unaudited management accounts of Bluestar recorded revenues of C$5.9 million
(£2.8 million) and operating profit of C$1.9 million (0.9 million).



Having established the Wireline Division and the Drilling Division, the
acquisition of Innicor will enable the Company to establish a Completions
Division.



Perforating products create a channel into the rocks which enable the oil or gas
to flow in to a well after it has been drilled and cased.



Completion systems allow for production zones to be isolated or separated and,
later in life, for non productive zones to be by-passed whilst the new
technology area of liner hangers enables wells to be completed at deeper levels
and in deviated situations in order to optimize recovery.



Innicor, established in 1999 and grown through both organic means and also
acquisition, has established a strong presence in Canada and has a growing
reputation internationally for completions products.



Innicor will form a third division for Sondex, bringing critical mass and
expertise. Many of Innicor's customers are potentially the same as those of
Sondex, but Innicor has a more direct link to the oil & gas companies through
the need to contract directly with them for completion installations.



It is envisaged, as has happened in Sondex's Wireline and Drilling Divisions,
that Innicor will form the platform for introducing new technologies to the
completions market. Sondex's international distribution will assist in giving
Innicor products access to additional markets world-wide, and Innicor's
distribution in Canada will give incremental opportunities for other Sondex
products in that territory.



The unaudited results for Innicor for the four consecutive quarters ended 30
June 2006 show total revenues of C$62.7 million (£29.9 million) and pre-tax
profit of C$7.3 million (£3.5 million).



The Offer values the fully diluted shares of Innicor at approximately C$72.8
million (£34.7 million). As at 30 June 2006 Innicor had net debt of C$8.4
million (£4.0 million). Using the value of the Offer and Innicor's pre-tax
profit for the four quarters ended 30 June 2006, the Offer represents a multiple
of approximately 10 times pre-tax profits.



The Directors believe the acquisition of Innicor is in line with Sondex's stated
strategy and is expected to bring opportunities for further expansion both
organically and via "bolt on" acquisitions that can be high growth and cash
generative. The experienced management of Innicor is expected to remain with the
business with appropriate incentives in place.



The Board expects that the acquisition of Innicor will be accretive to earnings
per share and cashflow of the Enlarged Group in the first full year following
completion.



On the basis set out below, the pro-forma net assets of the Enlarged Group,
following the acquisition of Innicor and the Firm Placing and Placing & Open
Offer are expected to be £101.9 million. The figure of £101.9 million is based
on the audited net assets of Sondex at 28 February 2006 of £59.9 million and the
net proceeds of the Firm Placing and Placing & Open Offer of approximately £40
million. The difference between the cost of the acquisition of Innicor and
Innicor's net assets as at 30 June 2006 has been treated as goodwill. Included
in the pro forma net assets figure of £101.9 million is net bank debt of £34.5
million.



4. Principal terms of the Offer



Sondex and Innicor have entered into a pre-acquisition agreement ("Agreement").
Under the terms of the Agreement, Sondex (or a subsidiary of Sondex) will,
through a new company which is to be incorporated in Canada, offer to purchase
all the issued and outstanding common shares of Innicor for C$3.75 per share in
cash pursuant to the Offer. The Offer is conditional upon Sondex acquiring at
least 90% of the Innicor Shares and is subject to other conditions usual in
offers for public companies in Canada.



The Agreement provides that Innicor will pay Sondex a non-completion fee of C$3
million in certain circumstances. Innicor has agreed not to solicit further
offers or initiate discussions or negotiations with any third party concerning
the sale of Innicor, subject to fiduciary obligations. If the Offer does not
complete in certain circumstances, Sondex is liable to reimburse Innicor for
reasonable expenses capped at C$300,000.



The Agreement also contains certain warranties and representations from Innicor
to Sondex which are usual in a transaction of this nature.



In connection with the Offer, certain major shareholders and all of the
directors and officers of Innicor have entered into lock-up agreements with
Sondex pursuant to which they have agreed to tender all of their common shares
to the Offer, subject to certain exceptions, representing in the aggregate
approximately 9.3 million common shares and approximately 0.7 million options
over common shares representing not less than 51.1% of the Innicor Shares.



The transaction is subject to Canadian regulatory approvals and other conditions
customary in offers for Canadian companies. As required by the Listing Rules,
the Offer is also conditional on the approval of the transaction by Shareholders
at an EGM.



5. Current trading and prospects



Market conditions have remained favourable as operators of oil & gas fields
continue to turn to sophisticated technologies and instruments, such as those
supplied by the Group, to optimize recovery from maturing oil & gas fields.
Revenues for the first half of the financial year have continued to benefit from
these good market conditions and the strong position of the Group's products in
their markets and are expected to be over 50% higher than the same period last
year.



Growth in revenues has been largely organic but with contributions from the
acquisitions made by the Group in the last year; AES acquired in December 2005,
and Bluestar (now Sondex Drilling Tools Inc) have both performed well. The like
for like growth has been generated from both the wireline and drilling division
of the company. North America has had a particularly good period, but the broad
spread of sales throughout the world has continued.



Whilst historically the Company has relied heavily on the second half of the
year to provide the annual profitability due to high proportion of sales being
made in the second half, the current year has seen a smoothing of the expected
annual revenue due to the improvements in production capacity made over the past
year.



The Group's businesses have enjoyed consistent gross margins and have continued
to invest in research and development.



The Directors are confident in the underlying financial and trading prospects in
the current financial year.



6. Interim results and dividends



It is expected that the Company will announce its interim results for the six
months to 31 August 2006 at the end of October 2006.



The Company's dividend policy is to ensure that Shareholders continue to benefit
from the growth in the Group's business, while providing sufficient funds for
investment in future growth. It is the Directors' intention that they will
maintain this policy following the acquisition of Innicor and the Firm Placing
and Placing & Open Offer.



The New Ordinary Shares issued as part of the Firm Placing and Placing & Open
Offer will not be entitled to receive any interim dividend which may be paid in
respect of the six months ended 31 August 2006.



7. Principal terms of the Firm Placing and Placing & Open Offer



The Company is proposing to raise approximately £40 million (net of expenses)
through the Firm Placing and Placing & Open Offer. The Firm Placing is in
respect of 7,575,481 New Ordinary Shares and the Placing & Open Offer is in
respect of 8,103,090 New Ordinary Shares. Of the 15,678,571 New Ordinary Shares
being issued, 7,575,481 have been placed firm and 8,103,090 have been
conditionally placed, subject only to clawback by Qualifying Shareholders in
each case, with institutional and other investors by Investec. Qualifying
Shareholders will have the right to subscribe for the Open Offer Shares in
accordance with the terms of the Open Offer. Qualifying Shareholders will not be
offered the right to subscribe for the Firm Placed Shares. The net proceeds of
the Firm Placing and Placing & Open Offer will be used to fund the acquisition
of Innicor and to finance the expected future expansion of the Group.



The fundraising is to be structured by way of the Firm Placing and Placing &
Open Offer in order to strengthen the Company's shareholder base by allowing,
subject to Shareholder approval, new institutional shareholders to subscribe for
new Ordinary Shares on a firm basis through the Placing, whilst at the same time
providing existing Shareholders with the opportunity to participate in the
fundraising to an extent through the Open Offer.



Qualifying Shareholders will be invited to subscribe for Open Offer Shares in
the Open Offer at the Issue Price on the following basis:



            1 Open Offer Share for every 7 Existing Ordinary Shares



registered in the names of Qualifying Shareholders at the close of business on
the Record Date, and so in proportion for any other number of Existing Ordinary
Shares then registered. The full terms and conditions of the Open Offer will be
set out in the Prospectus.



The New Ordinary Shares will, when allotted and fully paid, rank pari passu in
all respects with Existing Ordinary Shares save that they will not be entitled
to receive any interim dividend which may be paid in respect of the six months
ended 31 August 2006.



Under the terms of the Placing Agreement, Investec as agent for the Company, has
placed with institutional and other investors the Firm Placed Shares and the
Open Offer Shares at the Issue Price, of which the Open Offer Shares have been
conditionally placed, subject only to clawback by Qualifying Shareholders in
order to meet valid acceptances pursuant to the terms of the Open Offer. To the
extent that Investec does not procure placees for the New Ordinary Shares it has
agreed itself to subscribe for such New Ordinary Shares.



The Firm Placing and Placing & Open Offer will be conditional on the Placing
Agreement becoming unconditional in all respects and not being terminated before
8.00 a.m. the business day following the Offer being declared or becoming
unconditional in all respects (or such later time and/or date, being not later
than 8.00 a.m. on 30 November 2006 as Investec and the Company may agree). The
principal conditions to the Placing and Open Offer Agreement are:



(i)                  the passing of the Resolutions at the EGM or any
adjournment thereof;

(ii)                the Offer becoming or being declared unconditional in all
respect;

(iii)               the Facilities Agreement having become unconditional in all
respects; and

(iv)               Admission having become effective by no later than 8.00 a.m.
the business day following the Offer being declared or becoming unconditional in
all respects 2006 or such later time and/or date as Investec and the Company may
agree (but in any event not later than 8.00 a.m. on 30 November 2006).



Under the terms of the Placing Agreement, Investec has the right to terminate
its obligations under the Placing Agreement in the event of, inter alia, any of
the warranties contained therein not being true in any material respect, or a
breach by the Company in any material respect of the Placing Agreement.



8. Extraordinary General Meeting



The acquisition of Innicor is a Class 1 transaction for the Company under the
Listing Rules and it is therefore subject to Shareholder consent. Accordingly,
the Company will convene the Extraordinary General Meeting through a notice
which will be set out in the Prospectus.



In addition, and for the purpose of effecting the Firm Placing and Placing &
Open Offer, a resolution which, if passed, will authorise: (i) an increase in
the Company's authorised share capital from £8 million to £10 million by the
creation of 20 million additional Ordinary Shares; (ii) the Directors to issue
and allot up to 16 million Ordinary Shares; and (iii) the Directors to issue up
to 8 million Ordinary Shares on a non-pre-emptive basis.



In order to comply with Canadian Securities regulations, the resolutions to
approve (a) the acquisition of Innicor; and (b) the Firm Placing and Placing &
Open Offer are not conditional upon one another. In the event that the
resolution to approve the Firm Placing and Placing & Open Offer are not approved
and the resolution to approve the Offer is approved, the new facilities arranged
with the Bank incorporates a facility to enable the Company to complete the
acquisition of Innicor even if the Firm Placing and Placing & Open Offer does
not proceed.



For further information please contact:


Sondex                                               Tel: [phone]
Martin Perry (Chief Executive)
Chris Wilks (Finance Director)

Investec                                             Tel: [phone]
James Grace / Patrick Robb

College Hill                                         Tel: [phone]
Nick Elwes / Paddy Blewer



www.sondex.com



For further information about Innicor please visit:



www.innicor.com



This announcement has been issued by, and is the sole responsibly of, Sondex.



Investec Investment Banking, a division of Investec Bank (UK) Limited, which is
authorised and regulated by the Financial Services Authority and is a member of
the London Stock Exchange plc, is acting exclusively for Sondex in connection
with the acquisition of Innicor, Firm Placing and Placing & Open Offer and is
not acting for any person other than Sondex and will not be responsible to any
person other than Sondex for providing the protections afforded to its customers
or for providing advice on the transactions and arrangements proposed in this
announcement.



This announcement is for information only and does not constitute an offer or
invitation to acquire or dispose of any securities or investment advice in any
jurisdiction.



Past performance is no guide to future performance and persons needing advice
should consult an independent financial advisor.



The information contained in this announcement is not for release, publication
or distribution, directly or indirectly, to persons in the United States,
Canada, Australia, Japan or the Republic of South Africa. This announcement is
not an offer of securities for sale into the United States. The Placing Shares
have not and will not be registered under the US Securities Act of 1933, as
amended and may not be offered or sold directly or indirectly, in the United
States absent registration or an exemption from registration. There will be no
public offering of securities in the United States. The Placing Shares have not
and will not be registered with any regulatory authority of any State within the
United States.



Appendix 1 contains the definitions of certain terms used in this Announcement.


                                   APPENDIX 1

                                  DEFINITIONS

The following definitions apply throughout this announcement, unless the context
otherwise requires:

"AES"                          Applied Electronic Systems Inc.
"Admission"                    admission of the New Ordinary Shares to the Official List becoming
                               effective in accordance with the Listing Rules and to trading on the London
                               Stock Exchange's market for listed securities being granted
"Application Form"             the application form accompanying the Prospectus on which Qualifying
                               Shareholders may apply for Open Offer Shares under the Open Offer
"Bank"                         Halifax Bank of Scotland PLC
"Bluestar"                     Bluestar Tools
"Board" or "Directors"         the directors of the Company as at the date of this announcement
"C$"                           Canadian Dollars
"Canadian GAAP"                generally accepted accounting principles in Canada
"Enlarged Group"               the Group as enlarged by its acquisition of Innicor
"Existing Ordinary Shares"     the 56,721,635 Ordinary Shares in issue at the date of this announcement
"Extraordinary General Meeting the extraordinary general meeting of the Company to be held at at Nabarro
" or "EGM"                     Nathanson, Lacon House, Theobald's Road, London, WC1X 8RW, notice of which
                               is set out in Prospectus
"Facilities Agreement"         an amended and restated facilities agreement between (1) the Bank, (2)
                               Sondex and (3) certain other members of the Group
"Firm Placing"                 the placing of the Firm Placed Shares by Investec on behalf of the Company
                               pursuant to the Placing Agreement
"Firm Placed Shares"           7,575,481 New Ordinary Shares
"Geolink"                      Geolink International Limited
"Group"                        the Company and its subsidiaries at the date of this announcement
"Innicor Shares"               the issued common shares in the capital of Innicor and any common shares of
                               Innicor issued after the date of the Offer pursuant to the exercise of
                               outstanding options over common shares of Innicor
"Investec"                     Investec Bank (UK) Limited, acting through its division Investec Investment
                               Banking
"Issue Price"                  280 pence per New Ordinary Share
"Listing Rules"                the listing rules made by the UK Listing Authority for the purposes of Part
                               VI of the Financial Services Market Act 2000 as amended from time to time
"London Stock Exchange" or "   London Stock Exchange plc
LSE"
"New Ordinary Shares"          15,678,571 new Ordinary Shares proposed to be allotted and issued pursuant
                               to the Firm Placing and Placing & Open Offer
"Offer Price"                  C$3.75 per Innicor Share
"Official List"                the Official List of the UK Listing Authority
"Open Offer"                   the conditional offer, being made by Investec on behalf of the Company,
                               inviting Qualifying Shareholders to subscribe for the Open Offer Shares at
                               the Issue Price on the terms and subject to the conditions set out in the
                               Prospectus and the Application Form
"Open Offer Shares"            8,103,090 New Ordinary Shares which are being made available to Qualifying
                               Shareholders at the Issue Price pursuant to the Open Offer
"Ordinary Shares"              ordinary shares of 10 pence each in the capital of the Company
"Placing"                      the placing of the Open Offer Shares by Investec on behalf of the Company
                               at the Issue Price pursuant to the Placing Agreement
"Placing Agreement"            the conditional agreement dated 21 September 2006 between the Company and
                               Investec relating to the Firm Placing and Placing & Open Offer
"Proposals"                    the acquisition of Innicor, the Firm Placing, Placing & Open Offer and the
                               Resolutions  to be proposed at the EGM permitting the Board to issue
                               securities under section 80 and section 95 of the Companies Act 1985, as
                               amended
"Prospectus"                   a document comprising a combined prospectus and circular setting out the
                               reasons for the Proposals, which is expected to be sent to Shareholders in
                               October 2006
"Qualifying Shareholders"      holders of Ordinary Shares on the register of members of the Company at the
                               close of business on the Record Date;
"Record Date"                  the record date for the Open Offer to be set out in the Prospectus
"Resolutions"                  the resolutions to be set out in the Notice of Extraordinary General
                               Meeting in the Prospectus
"Shareholder"                  a holder of Existing Ordinary Shares
"UK Listing Authority" or "    the Financial Services Authority acting in its capacity as the competent
UKLA"                          authority for the purposes of Part VI of the Financial Services Market Act
                               2000 as amended from time to time






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