RNS Number:7471W
Creston PLC
4 January 2001
CRESTON plc ('Creston' or 'the Company')
Creston plc acquires Synergie Consulting and Marketing Sciences
Creston plc, the FTSE-quoted former property company, announces that, subject
to shareholder consent, it intends to reposition itself as a marketing
services group operating a "buy-and-build" strategy. It will seek to acquire
high quality niche businesses which individually lack the infrastructure or
resources to fulfill their potential.
Don Elgie, a former UK and Europe Operations Director for Saatchi & Saatchi
Plc, will become Chief Executive of Creston plc on the Company's acquisition
of Synergie Consulting Limited, a private company Mr Elgie founded for the
purpose of developing the concept which Creston will now adopt. The
consideration payable to Mr Elgie will be 260,420 new Ordinary Shares in
Creston. At the same time, Tim Alderson is to become Finance Director of
Creston.
Creston also announces the first significant acquisition in line with its new
strategy. Marketing Sciences Limited ('Marketing Sciences') is a full service
international market research company with associates around the world.
Creston will acquire Marketing Sciences for an initial consideration of #8.5
million, satisfied by #2.5 million cash, the issuance of loan notes to the
value of #4.7 million in Loan Notes and #1.3 million through the issue of
1,354,167 new Creston Ordinary Shares at an agreed price of 96 pence per
Ordinary Share ('the Acquisition Price'). The principal vendors of Marketing
Sciences are warranting pre-tax profits for the year ended 30 November 2000 of
#1.025 million.
Further consideration of up to approximately #7.7 million may also become
payable at the end of a three year earn-out period, dependent on the
performance of Marketing Sciences over that period. For the maximum additional
consideration to become payable, Marketing Sciences must generate average
annual pre-tax profits of at least #2.0 million in the three years to 30
November 2003.
Marketing Sciences has over 30 major blue-chip clients which operate across a
range of sectors, including fast moving consumer goods, durables, retail,
financial, business to business and pharmaceutical. Marketing Sciences'
expertise includes branded products such as Visualiser, a virtual shopping
system which creates digitally any retail or consumer environment; Packmaster,
a quantitative pack testing system for computerised impact testing techniques;
and Spacemaster, which uses advanced modelling techniques to determine the
sales effectiveness of alternative fixture layouts in retail environments.
The repositioning of Creston in this way requires that it should reapply for
Admission to the Official List. A circular detailing these acquisitions and
accompanying Listing Particulars have been lodged with the Stock Exchange and
sent to shareholders.
An EGM has been called on 29 January 2001.
Commenting on the announcement, David Marshall, Chairman of Creston plc, said:
"In selecting a new strategic direction for Creston we have been seeking an
acquisition in a vibrant sector which combines the best aspects of the new and
old economies. The areas within the marketing services sector which we shall
concentrate on have enjoyed strong and consistent growth, even during
recessionary periods".
Don Elgie, Chief Executive designate of Creston plc, said:
"This marks a first step in the implementation of Creston plc's buy-and-build
strategy. We are already working on a number of other targeted acquisitions
and intend to achieve the development of Creston into a marketing services
group with real critical mass. Marketing services groups are consolidating
into a small number of large companies; we believe there is an excellent
opportunity for a new group to enter the market.
"Our first acquisition, Marketing Sciences, has an outstanding management team
and an excellent position in UK and international markets. The management team
will help Creston identify further complementary acquisitions in the UK and
internationally."
Commenting on the announcement Paul Harrison, Managing Director of Marketing
Sciences, said:
"This is an opportunity to grow Marketing Sciences more aggressively and in
new directions as a part of Creston plc."
For further information and copies of the circular please contact:
Richard Fallowfield Cardew&Co. 020 7930 0777
Jonathan Rooper Cardew&Co. 020 7930 0777
Notes for editors
Creston plc is currently a shell company which had cash of #9.98 million as at
30 September 2000. It was formerly a property company. Based on the
Acquisition Price, new Creston will have a market capitalisation of
approximately #10.8 million post the transactions.
Donald Elgie (aged 54), Chief Executive designate
Donald Elgie has spent much of his career in advertising and marketing. He was
a founding shareholder in Grandfield Rork Collins & Partners Limited, going on
to become UK and Europe Operations Director for Saatchi & Saatchi Plc. He has
spent the last two years developing the concept which is being taken on by
Creston plc.
Tim Alderson (aged 44), Finance Director designate
Tim Alderson worked as the corporate finance manager at Thames Water Plc and
was then promoted to the post of Finance Director of the Products and Service
Division. While in this post he supervised the restructuring of the division.
He subsequently worked as a Principal in the management consultancy arm of
KPMG.
Further details of the proposed transactions are set out below:
Background to and reasons for the Acquisitions
Since the disposal of almost its entire property portfolio in March 2000,
Creston plc ("Creston") has been essentially a cash shell. On 20 December 2000
the Company announced the disposal of its remaining dormant property related
subsidiaries.
The board of Creston proposes to reposition Creston as the holding company of
a marketing services group and to reapply to the Official List following the
proposed acquisition of Marketing Sciences, which due to its nature and size
will be a reverse takeover under the Listing Rules.
Following the decision to cease the Company's property activities, there were
two principal options open to the Company: either to make further payments to
Shareholders by way of a capital reorganisation or to seek a new business
activity for Creston.
After careful consideration, the Directors have decided that a capital
reorganisation, which would be necessary to return further cash to
shareholders, could not be implemented either expeditiously or cheaply. The
Directors have examined a number of new business opportunities and have now
concluded that it is in the best interests of the Shareholders as a whole that
the Company should pursue a new business activity. To this end the Company has
conditionally agreed to undertake the Proposed Transaction.
The effect of the Proposed Transaction will be to reposition Creston as a
marketing services group with the aim of embarking on a buy-and-build
strategy. The Directors believe that opportunities exist in the marketing
services sector to acquire independent businesses in specialised market
segments. In return, the Company will offer such businesses assistance in
realising their growth ambitions by providing an umbrella infrastructure and
resources.
The Directors believe that the criteria for further acquisitions in this
sector to meet are to:
* fit strategically under the banner proposition of consumer motivation
and understanding
* have the potential to generate synergistic income through either
networking into other clients of companies in the Enlarged Group or
through generating new product offerings in conjunction with other parts
of the Enlarged Group;
* have like-minded, ambitious management styles;
* be sound financially, with positive cashflow and strong growth
prospects.
Conditional on completion of the Acquisitions, Don Elgie has agreed to join
the Enlarged Board as Chief Executive to lead the implementation of this
strategy, which he developed within Synergie. On Admission, Tim Alderson will
also join the Enlarged Board as Finance Director. Further details regarding
the Proposed Directors are included in the Listing Particulars accompanying
this document.
The Company's strategy will be to take advantage of what the Enlarged Board
believes is the trend in marketing towards clients wishing to market and
communicate on a one-to-one basis with consumers.
This trend has led to the success of a number of innovative companies which
offer premium services such as market research, direct marketing, customer
relationship marketing ("CRM") and telemarketing. The Enlarged Board also
believes that there is great growth potential in providing consultancy advice
on marketing over the internet and on e-commerce marketing strategies. The
Enlarged Board believes there is great potential to identify synergistic
benefits between businesses operating in these spheres.
The Enlarged Board's intention is to leverage the perceived opportunity
offered by the existence of high quality niche businesses which as stand-alone
entities may not have the infrastructure or resources to fulfil the potential
of the services which they offer. The Company will aim to provide the backbone
to encourage such businesses to co-operate within the Enlarged Group on growth
opportunities while at the same time aiming to minimise overhead costs. The
Enlarged Board also believes that a group profile may have a greater impact
than can be sustained by such individual businesses alone.
The first acquisition is in the niche segment of market research. Marketing
Sciences has been identified as the initial acquisition in the Company's new
strategy because of its current position in its UK markets and because of the
expertise of its management team, which has been evidenced by the performance
of Marketing Sciences in recent years. On Admission, Keith Bates and Paul
Harrison (the principal Marketing Sciences shareholders) will continue to work
full-time in the Enlarged Group.
They and the management of each further company to be acquired in future will
be represented on an operating board for the Enlarged Group, which will report
to the Enlarged Board. The Enlarged Board expects that the management of
Marketing Sciences will assist in identifying further acquisitions to
complement the Enlarged Group's services both in the UK and overseas.
Information on Marketing Sciences
Introduction
Marketing Sciences was founded in 1977 as a data modelling and analytical
consultancy. Since 1983 Marketing Sciences has established itself as a full
service market research consultancy which still retains a high level of
in-house statistical expertise. The range of activities and services has been
developed and the company's resources, including a large interviewer field
force, enable Marketing Sciences to offer a wide and varied service to its
clients.
Marketing Sciences has over 30 major blue-chip clients operating across a
range of sectors including the fast moving consumer goods, durables, retail,
financial, business to business and pharmaceutical sectors.
Products and Services
The services offered by Marketing Sciences include the following branded
products:
PACKMASTER An international quantitative pack testing system which includes
use of computerised impact testing techniques.
PRICEMASTER A suite of pricing research techniques intended to enable clients
to optimise their pricing strategy.
BRANDMASTER An analysis tool which examines the relationship between the price
and the image of a brand.
SPACEMASTER Advanced modelling techniques are utilised to determine the sales
effectiveness of alternative fixture layouts in terms of range of brands,
position and facings.
CADI An interactive qualitative technique which allows the development of
design solutions in real time through multimedia computer technology.
STRATEGIST Multivariable analysis techniques which are intended to provide new
insights for decision making based upon market (usage and attitude) studies.
COUNTDOWN A volume estimation product which is employed in the early stages of
product development to determine sales for any type of product or service.
VISUALISER A virtual shopping system which is intended to provide the ability
to create digitally any retail or customer service environment.
Business Development and Prospects
Marketing Sciences has expanded its business through the recruitment of
specialist researchers and the development of a wider branded service. This
organic growth has been complemented in recent years by a number of strategic
moves designed to further accelerate the growth of business:
Mobile Sensory Testing Services Limited (''MSTS'')
In November 1999 Marketing Sciences acquired MSTS for #250,000 payable on
completion and a further #250,000 payable dependent upon MSTS's results in
the year to 31 August 2000. Marketing Sciences paid this further
consideration in September 2000.
MSTS has developed expertise in the areas of sensory analysis and
profiling of products, with a particular focus on the food and drink
sectors. MSTS has established over many years an expert panel of some 300
consumers, picked on the basis of their sensory abilities. Mapping
techniques are utilised to add value to the panel data. The company has
already begun to license use of the panel to companies outside the UK, and
this is seen to be an area of future opportunity.
The acquisition of MSTS should enable Marketing Sciences to offer its
clients a more complete product development research service combining
sensory profiling and consumer testing.
Visualizer LLC
In October 1998 Marketing Sciences formed Visualizer LLC, a 50/50 joint
venture with Howard Ziment and Cynthia Schlegel, controlling shareholders
of US market research company Ziment, to exploit the potential of the
Visualiser product in the USA. Marketing Sciences provides the multimedia
expertise and creates the Visualiser films, whilst Ziment provides local
client servicing and research resources. All fees and costs are shared
equally between Marketing Sciences and Ziment.
The Research Alliance
In 1993 The Research Alliance, a worldwide network of independent market
research companies, now numbering some 20 members, was founded. Marketing
Sciences is a member of The Research Alliance and its secretariat operates
from Marketing Sciences' Winchester base. This network of members and
associates enables Marketing Sciences to conduct market research,
including its branded services, in most of the major markets of the world.
Market
Market research involves exploring market trends, views and opinions of
customers and gathering all data so collected into a useful form so companies
can act on the information provided for the purposes of strategic planning and
product development.
The market research sector has experienced consistent growth over the last ten
years with an average 11% growth per annum. The total UK market research
market was estimated to be worth approximately #1.0 billion in 1999 (source:
BMRA). The sector showed resilience in the 1990-1992 recession during which
period it grew by 1.7% (source: AMSO) in the face of a decrease of 1.4% in UK
gross domestic product over the same period (source: Office for National
Statistics).
Competition
Marketing Sciences believes it regularly competes against some of the largest
market research companies in the UK including NOP Research Group, Research
International, Millward Brown, BMRB Research and MORI.
Trading History
The following summary of the financial performance of Marketing Sciences over
the three years ended 31 August 2000 is extracted without material adjustment
from an Accountants' Report in the Listing Particulars issued today:
Year ended 31 August
1998 1999 2000
#'000 #'000 #'000
Turnover 5,063 5,741 6,716
Operating profit 410 406 707
Profit before tax 471 484 757
Profit after tax 349 352 536
The above results include the consolidation of results of MSTS since its
acquisition in November 1999 and Marketing Sciences' share of results of
Visualizer LLC since it began material trading in January 2000.
As at 31 August 2000 the audited consolidated net assets of Marketing Sciences
amounted to #1,964,000.
Information on Synergie
Synergie is a company wholly owned by Don Elgie. It has not traded and its
only material tangible assets on Admission will be #100,000 of cash. Creston
will acquire Synergie from Don Elgie for the issue of 260,420 new Ordinary
Shares. The purchase of Synergie will recognise the goodwill perceived to
exist in Synergie due to the development by Don Elgie of the buy-and- build
strategy in the marketing services sector which the Enlarged Group is to
pursue.
Current trading and prospects
On 20 December 2000, the Company announced the disposal of all of its dormant
property related subsidiaries. The ongoing trading activities of the Enlarged
Group will be carried out entirely through the Marketing Sciences Group.
Since 31 August 2000, the date to which audited accounts were last produced,
the Enlarged Board believes that the Marketing Sciences Group has traded
satisfactorily. The Marketing Sciences Group has also been engaged on several
new assignments for both existing and new clients since 31 August 2000. Whilst
there is always competitive pressure on the prices which the Marketing
Sciences Group can charge clients for their products and services, prices and
margins have been maintained and are not expected by the Enlarged Board to
fall within the current financial year. The Enlarged Board also believes that
the level of enquiries for future business for the Marketing Sciences Group is
encouraging.
The Enlarged Board has also been actively seeking opportunities for further
acquisitions which fit with the buy-and-build strategy for the Enlarged Group.
The Enlarged Board believes that the prospects for future growth of the
Enlarged Group are promising.
Following the Acquisitions, the Enlarged Group will continue to have
significant cash balances which are likely to be applied to meet, in part, the
cost of funding future acquisitions. As such any future acquisitions made by
the Company could be treated as a reverse takeover under the Listing Rules.
The effect of this is that upon announcement of any acquisition the listing of
the Ordinary Shares could be suspended. In order to maintain its listing in
that event, the Company, as enlarged by any further acquisition, would need to
reapply to be listed on the Official List and meet the suitability
requirements of the Listing Rules.
Warrants and Options
The Directors have decided to offer holders of the 9,599,194 issued ordinary
shares in Creston ("the Existing Ordinary Shares") Warrants which, if
exercised, will provide additional funding to be used in the implementation of
the Enlarged Group's buy-and-build strategy without the attendant costs of a
rights issue or other equity fundraising at a later date.
Subject only to Admission, the Company will on completion of the Acquisitions
issue Warrants to subscribe for new Ordinary Shares to all Shareholders at the
close of business on the Record Date on the basis of one Warrant for every
five Ordinary Shares held. Where the number of Ordinary Shares held by a
Shareholder is not exactly divisible by five, the number of Warrants to be
issued to that Shareholder will be rounded down to the nearest whole number.
Ignoring such rounding, the number of Warrants to be issued would be
approximately 1,919,839.
These Warrants will be exercisable during six specified periods of 42 days,
each immediately following the date of publication of successive interim and
annual accounts for the Company, beginning with the interim accounts for the
period ending 30 September 2001. For the first two periods, the exercise price
will be 115 pence per Ordinary Share. For the next pair of periods, the
exercise price will be 125 pence per Ordinary Share and for the final pair of
periods, the exercise price will be 135 pence per Ordinary Share.
To incentivise employees of the Enlarged Group, subject to shareholder
approval at the EGM, an employee share option scheme will be introduced with
effect from Admission, pursuant to which the Company is to grant options to
subscribe for 600,000 Ordinary Shares to Don Elgie and options to subscribe
for 212,000 Ordinary Shares to Tim Alderson, in each case at the Acquisition
Price. Under the terms of the Share Option Scheme, the total number of
unissued Ordinary Shares under option must not exceed 10% of the issued share
capital of the Company in the ten year period from the date of adoption of the
scheme.
Service contracts of proposed directors of Creston
Under an agreement dated 3 January 2001 and made between the Company and
Mr DH Elgie, the Company has agreed, conditionally upon and with effect
from Admission, to employ Mr Elgie, and Mr Elgie has agreed to serve, as
Chief Executive of the Company. Mr Elgie's employment is terminable by 12
months' notice given by him or the Company, such notice not to expire
until after the date falling two years after Admission.
Mr Elgie's annual salary will be #180,000 per annum, to be reviewed during
each year. Mr Elgie will also be entitled to an annual bonus (not to
exceed 50 per cent of base salary) dependent on the Company's annual
growth in diluted earnings per share, together with a one-off bonus of #
30,000 payable dependent on the level of Marketing Sciences' consolidated
profit before taxation for the period from 1 December 2000 to 31 March
2001. In addition, Mr Elgie will be entitled to a further annual bonus
(not to exceed 50 per cent of base salary) dependent on the Company's
average annual growth in diluted earnings per share. Mr Elgie is not
entitled to receive any further benefits in kind.
Under an agreement dated 3 January 2001 and made between the Company and
Mr TB Alderson, the Company has agreed, conditionally upon and with effect
from Admission, to employ Mr Alderson, and Mr Alderson has agreed to
serve, as Finance Director of the Company. Mr Alderson's employment is
terminable by six months' notice given by him or the Company at any time
on or after the date falling six months after Admission.
Mr Alderson's annual salary will be#100,000 per annum, to be reviewed
during each year of the term. Mr Alderson will also be entitled to an
annual bonus (not to exceed 20 per cent of base salary) dependent on the
Company's annual growth in diluted earnings per share. In addition, Mr
Alderson may be entitled to a further discretionary annual bonus (not to
exceed 20 per cent of base salary) dependent on the achievement of a set
of performance targets to be agreed by the Remuneration Committee before
the start of each financial year. Mr Alderson is not entitled to receive
any further benefits in kind.
Acquisition structuring
The initial consideration payable on completion of the Marketing Sciences
Acquisition will be approximately #8.5 million, to be satisfied as to
approximately #2.5 million in cash, #4.7 million by the issue of loan notes
and #1.3 million by the issue of 1,354,167 new Ordinary Shares at the
Acquisition Price. These shares to be issued to the Marketing Sciences vendors
("the Initial Acquisition Shares") will represent approximately 12.1 per cent
of the enlarged share capital of the Company on Admission.
Accounts will be drawn up for Marketing Sciences for the year ended 30
November 2000. If the audited adjusted consolidated profit before interest and
taxation in those accounts is less than #1.025 million, Keith Bates and Paul
Harrison (the principal Marketing Sciences shareholders) will pay to the
Company an amount equal to the shortfall multiplied by 7.14. In addition,
Keith Bates and Paul Harrison have warranted that the net assets of Marketing
Sciences in the Completion Accounts will not be less than #2.1 million, of
which at least #1.2 million is expected to be cash. If the net assets in the
Completion Accounts are below #2.1 million, Keith Bates and Paul Harrison will
pay to the Company an amount equal to the shortfall (less any amount payable
due to a shortfall in the profit before tax and interest in the Completion
Accounts as above).
The final consideration payable will be dependent upon Marketing Sciences'
performance up to 30 November 2003. Of this final consideration, Keith Bates
and Paul Harrison may be paid an interim consideration of a maximum of #0.5
million in loan notes and 208,333 new Ordinary Shares on Marketing Sciences
meeting profit targets in intervening years. The balance of any additional
consideration will be payable in a mixture of Ordinary Shares and loan notes
and payable only after accounts for the year to 30 November 2003 have been
audited.
The maximum final consideration possible under the earn-out is approximately #
7.7 million, which would only be payable if aggregate consolidated profit
before taxation of at least #6.0 million had been generated by Marketing
Sciences in the three year period to 30 November 2003.
The Initial Acquisition Shares will rank pari passu with the Existing Ordinary
Shares including the right to receive all dividends or other distributions
declared, paid or made after Admission.
The Proposed Transaction requires the approval of Shareholders. A circular and
accompanying Listing Particulars are being sent to shareholders today. An EGM
has been convened for 29 January 2001 at which resolutions will be proposed,
inter alia, to approve the Acquisitions and to grant authorities to the
Directors to allot the new Ordinary Shares to be issued in relation to the
Proposed Transaction.
Suspension of dealings
The Existing Ordinary Shares were suspended from listing on the Official List
and from trading on the London Stock Exchange today. Application has been made
by the Company for the Existing Ordinary Shares and for the Initial
Acquisition Shares to be admitted to the Official List. Dealings in the
Existing Ordinary Shares are expected to recommence on 5 January 2001.
Dealings in the Initial Acquisition Shares are expected to begin on 30 January
2001.
Copies of circular to shareholders and listing particulars
Copies of the circular to shareholders dated 4 January 2001 and the listing
particulars dated 4 January 2001 are available for inspection during normal
business hours on any weekday (Saturdays and public holidays excluded) at the
offices of Smith & Williamson, No 1 Riding House Street, London W1A 3AS, from
the date of this announcement for a period of 14 days.
4 January 2001
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