Company News

9 April 2008

SEXUAL HEALTH GROUP PLC

PLUS Symbol: SHGP

Proposed acquisition of Pasante Healthcare Limited for £2,400,000

Placing of ordinary shares

General meeting

The Board of Sexual Health Group plc ("Sexual Health Group" or "the Company"), a national supplier of sexual health, patient hygiene and diagnostic products to customers including the NHS, announces that the Company has exchanged conditional contracts to acquire Pasante Healthcare Limited (Pasante), a privately owned business whose principal activity is the supply of sexual health products.

Highlights

• Consideration for the proposed acquisition of Pasante will be £2,400,000
  payable in cash on completion of the transaction;
• Transaction is conditional on the Company raising sufficient funds, and on
  the passing of shareholder resolutions authorising the Directors to allot
  the shares and disapply pre-emption rights
• Proposed placing to be up to 175,000,000 Ordinary Shares of the Company at a price of up to 5p per share;
• Pasante carries strong presence within NHS condom market and key national retail pharmacy and supermarket groups, and in the pregnancy diagnostic market with two complementary products sold to the NHS
• Application will be made for the new shares to be eligible for VCT / EIS
  relief; and
• General meeting to take place on 6 May 2008.

Terms of the proposed acquisition

Consideration for the proposed acquisition of Pasante will be £2,400,000 payable in cash on completion of the transaction. The transaction is conditional on the Company raising sufficient funds. It is proposed to raise such funds by way of a placing with institutional and other investors. Proposed placing is to be up to 175,000,000 Ordinary Shares of the Company at a price of up to 5p per share and Application will be made for the new shares to be eligible for EIS and VCT relief subject to the investment limits introduced by the Finance Act 2007. The Directors of Sexual Health Group intend to subscribe for new shares in the company to the value of £15,000. Working capital and part of the costs of the transaction are proposed to be financed from bank facilities.

Reasons for the acquisition

The Board believes that combining the businesses of Sexual Health Group and Pasante will create an excellent vehicle from which to develop the Group as a leading provider of products and services in the sexual health market, especially to the NHS. The combination builds on a shared ethos of innovative quality products, and high level added value customer service. Some of the benefits of the proposed enlarged group include:

• A very strong presence in the NHS condom market with an estimated combined 45 per cent market share;
• A retail presence within key national retail pharmacy and supermarket groups;
• A strong presence in the pregnancy diagnostic market with two complementary products sold to the NHS;
• Personal lubricant added to complement the condom range;
• Retail self diagnostic test range which can be built upon;
• Point of care diagnostics with the Insti(tm) HIV Test; and
• An experienced and successful UK sales force and sales management.

Background on Pasante

Pasante is a privately owned business whose principal activity is the supply of sexual health products including condoms, pregnancy tests, an HIV test and a range of self-diagnostic tests. Pasante is therefore similar to Sexual Health Group in its trading activities but operates on a substantially larger scale.

The turnover of Pasante in the eight months ended 31 January 2008 amounted to £2,136,000, equivalent to £3,332,000 on an annualised and seasonally adjusted basis. This compares to the turnover of Sexual Health Group in the ten months to 31 January 2008 of £566,000, equivalent to £704,000 on an annualised and seasonally adjusted basis. The adjusted net profit before tax of Pasante in the eight months to 31 January 2008 amounted to £226,000, equivalent to £395,000 on an annualised and seasonally adjusted basis and adjusted for non-recurring expenditure. The net assets of Pasante at 31 March 2008 amounted to at least £409,393.

The Pasante brand of condoms accounted for sales of 24.5 million condoms to the NHS in the financial year ended 31 May 2007, representing over 40 per cent of the NHS market, based on independent estimates of NHS purchases of 60 million condoms per annum. Pasante supplies significant educational and promotional support to its NHS customers, as does Sexual Health Group.

Pasante condoms have established a presence in the retail market supplying major retailers. Pasante also distributes TLC personal lubricants for use with condoms. The NHS is also the principal market for this product. Pasante distributes its MediCheck range of pregnancy tests to the NHS market. The two types of MediCheck test are complementary to the products of Sexual Health Group.

The SelfCheck range of home screening tests includes tests for Cholesterol, Blood Glucose, Stomach Ulcers, Urine Infection, Menopause, Bowel Health, and Prostate Health, and a Multi Drug Test. SelfCheck tests are sold via retail outlets and specialist internet retailers. Pasante also has a contract to supply the Inst(tm) HIV test to NHS Trusts.

The principal customer of Pasante is the NHS which accounted for 70 per cent of sales in the eight months to 31 January 2008. The balance is accounted for by major UK national supermarkets and retail pharmacy groups.Pasante operates from offices and a warehouse in Lancing, West Sussex. The Directors of Sexual Health Group consider that the location has sufficient capacity to double the combined turnover of Sexual Health Group and Pasante. Pasante was founded in 1995 and now has 22 employees. The Directors of Sexual
Health Group consider that the managers, sales force and staff in the business are capable of delivering Pasante's strategy as part of the future of Sexual Health Group.

Notice of General Meeting

The proposed placing of the Company's shares is subject to the shareholders of SHG authorising the Directors to allot the shares and disapply pre-emption rights. Accordingly, a General Meeting of the Company has been called for 6 May 2008 at 10 am. to approve resolutions relating to these matters.The Placing Shares will represent up to 82.36 per cent of the enlarged issued share capital of the Company (80.79 per cent fully diluted). The new shares will rank pari passu with existing Ordinary Shares and will carry all rights attaching thereto, including the right to receive and retain all dividends and other distributions declared made or paid thereon and will be issued free from all liens, charges and encumbrances and other interests.

The Directors of Sexual Health Group recommend shareholders to vote in favour of both of the resolutions, as they will be doing in respect of their own beneficial holdings amounting to 19,633,945 ordinary shares representing 52.38 per cent of the issued ordinary share capital of the Company.

Commenting on the proposed acquisition, Sexual Health Group Chairman, John French, said: "The Board is confident that the acquisition of Pasante will place SHG in a stronger position, and the strategy of the Directors of Sexual Health Group is to build on this foundation and to achieve further economies of scale and additional cost savings to strengthen the enlarged company in future and to make further complementary acquisitions in selected niche areas".

---ENDS---

The Directors of the Issuer accept responsibility for this announcement.

Enquiries:

Sexual Health Group Plc
John French, Chairman Mobile: 07836 722 482

Bishopsgate Communications Ltd. Tel: 020 7562 3367
Dominic Barretto / Jenni Herbert

Nexus Corporate Finance Ltd Tel: 020 7451 7050
Tony Brown, Director

Notes to Editors:

Sexual Health Group Plc is a national supplier of sexual health, patient hygiene and diagnostic products. The company presently supplies condoms and sexual lubricants to the UK National Health Service (NHS). Its aim is to supply innovative solutions to current sexual health issues by studying current trends and working alongside leading professionals who also work within sexual health.

The company is committed to developing and marketing high quality brands and products that will benefit health professionals and consumers alike in many areas of sexual health. The first of these product areas is condoms where the Group has established its own brand Condomania® that has already achieved a significant share of the NHS business.

The Group is ISO registered, and principally operates within the United Kingdom, but has some overseas sales.

For further information on Sexual Health Group please visit
www.sexualhealthgroup.com

 << return to Company News