Umeco, the specialist aerospace distribution and services group, announces that:

- it is to raise approximately £15.8 million, net of expenses, by way of a 2 for 9 rights issue at 475p per share; and

- it has entered into a major new contract with Rolls-Royce under which the Group will manage the supply of a wide range of small components to all the UK aerospace operations of Rolls-Royce.

The Rights Issue has been underwritten by CSFB de Zoete & Bevan other than in respect of 346,667 New Ordinary Shares for which irrevocable undertakings to subscribe have been received from the Directors and their connected parties.

Key points

>> The Group's existing contract to provide logistics services to manage the supply of a wide range of small components to Rolls-Royce's UK aerospace sub-assembly manufacturing sites has been extended to include all UK aerospace activities, including engine build and spares operations.

>> The new contract will have a term of up to ten years, preceded by a one year implementation period, commencing 1 January 2000. The estimated annual value of the materials to be managed by the Group in the first full year following implementation is in excess of £40 million.

>> The Group will receive a fee based on the annual value of materials to be managed during the ten year term of the contract and a significant implementation fee for the implementation period.

>> The net proceeds of the Rights Issue will be used to make a payment of £15 million to Rolls-Royce for the purchase of relevant inventory and to provide ongoing working capital.

>> The latest time and date for acceptance and payment in full under the Rights Issue is 3.00pm on 16 December 1999.

>> The Board of Umeco believes that the new agreement with Rolls-Royce and the application of the net proceeds of the Rights Issue should enhance the earnings per share of the Group from January 2000.

The Chief Executive of Umeco, Clive Snowdon, said today:

"We are extremely pleased that Rolls-Royce has decided to award Umeco this significantly extended contract and we look forward to a productive long-term relationship with them.

This contract further advances Umeco's objective of becoming a leading international provider of value-added services to the aerospace industry. The Group is in discussions with other companies on potential outsourcing contracts and continues to look forward to the future with confidence."