Creston Plc Acquisition

RNS Number:7816D
Creston PLC
14 November 2002

CRESTON PLC

Creston Plc announces acquisition of EMO Group Limited

London, 14 November 2002 - Creston Plc ("Creston"), the quoted marketing
services company, today announces the proposed acquisition of EMO Group Limited
("EMO"), a specialist channel marketing agency and marketing communications
group, for a maximum total consideration of #5.7 million. EMO will have net
assets of some #1.2 million on Completion.

EMO employs 57 people in Swindon and Bristol. EMO's strategy is to support
national brand advertising with marketing programmes and communications in their
clients' sales channels. Unlike traditional agencies, EMO does not focus purely
on broadcast communications or advertising; rather it works with the client,
examining whatever path the customer takes to a product and making positive use
of every point of contact between them and the brand.

EMO has an impressive list of clients including BMW (GB) Ltd, Andreas Stihl and
Intel Corporation. EMO has a highly successful digital division, e-MO, which
provides consultancy for website, internet, intranet and extranet design to meet
the marketing demands of a digital age.

The initial consideration for the acquisition of EMO will be financed by #2.5
million in cash supported by #1.2 million of Convertible Loan Notes 2006. A
deferred payment of up to #2 million will be payable subject to challenging
performance targets being met in the period to 31st March 2006. The management
team at EMO will be represented on the Operating Board of Creston.

EMO is Creston's first acquisition since the successful purchases of Marketing
Sciences Limited and The Real Adventure Marketing Communications Limited in
January 2001 and November 2001 respectively. Both of these acquisitions have
fulfilled the Creston philosophy of 'buy-and-build'. Marketing Sciences Limited
will report an increase in operating profit for the first half of 2002/03 of
271%, and Real Adventure will turn in an increase in operating profits of 34%
for the same time period. While the industry faces the double pressures of
struggling revenues and client retention, both recent acquisitions have
performed strongly.

A circular detailing the acquisition and containing the notice of an
Extraordinary General Meeting to approve the transaction to be held on 2nd
December 2002 will be sent to shareholders today.

Commenting on the announcement, Don Elgie, Chief Executive of Creston Plc, said:

"Since relaunching Creston as a marketing services group in January 2001, we
have made significant progress in our 'buy-and-build' strategy, tightly focussed
within our identified sectors. Building on this strategy, we have now
conditionally agreed to acquire EMO Group Limited. We believe that this will
make an excellent addition to the Group, providing a growing number of
opportunities for operational and financial synergies."

Glenn Orr, Chairman of EMO Group Limited said:

"We are delighted to become part of the Creston group. It is very important to
us and our clients that we retain our core ethos, and by agreeing to the deal we
can achieve this at the same time as being able to tap into the expertise that
is available from being part of a larger marketing services group."

For further information and copies of the circular, please contact:

Don Elgie, Chief Executive Creston Plc 020 7930 9757

Andrew Nicolls Penrose Financial 020 7786 4881

James Montgomerie Penrose Financial 020 7786 4863

Notes to editors:

Creston Plc is a marketing services group that was refocused in Jan 2001 in
order to take advantage of the considerable opportunities identified by the
Board in the marketing services arena. Creston is growing both organically and
through acquisition. Its defining characteristic is capitalising upon the way
that the market is moving towards having a one to one relationship with
customers. In addition to expanding within the UK, the Board will also be
looking for opportunities to expand internationally.

Creston's strategy is to acquire companies that complement one another. Each
acquisition will be chosen not just for its quality, but also for its potential
to generate additional income through co-operation and cross fertilisation with
other companies in the Group. Target markets include: market research, direct
marketing, CRM, telemarketing, e-marketing, public relations, channel marketing
and field marketing. Highly cyclical sectors like advertising and design will
be avoided for the time being.

Acquisitions made to date include Marketing Sciences Limited, which specialises
in quantitative and qualitative research, and The Real Adventure Marketing
Communications Limited, which works across direct marketing and CRM. Together,
they boast a range of blue-chip clients including Unilever, Kimberley Clark,
Tesco and Lloyds Black Horse.

Further details of the proposed transaction are set out below:

Background to and reasons for the Acquisition

Since obtaining shareholder approval to reposition Creston as a marketing
services group in January 2001, we have made significant progress in our 'buy
and build' strategy tightly focused in our sector.

* The acquisition in January 2001 of Marketing Sciences Limited, an
international quantitative and qualitative market research company, based in
Winchester.

* The acquisition in November 2001 of The Real Adventure Marketing
Communications Limited, a national marketing communications company, based in
Bath.

Building further on our strategy we have now conditionally agreed to acquire EMO
Group Limited, a national channel marketing communications company based in
Swindon and Bristol.

The Board believe that EMO will make an excellent addition to the Group,
providing a growing number of opportunities for operational and financial
synergy. The Board also believe that EMO will add to the critical mass of
Creston without substantial additional head-office costs and it is expected by
the Board to be earnings enhancing in the current year.

Information on EMO

EMO is an independent national channel marketing communications company, based
in Swindon. EMO was bought out by two of the current Directors, Glenn Orr and
Simon McLaven in 1991. It has three operating subsidiaries, Emery McLaven Orr
Limited ("EMOL"), John Bowler Associates Limited trading as CTC ("CTC") and Sky
Rock Communications Limited (previously called Star-Fish Networks Online
Limited) ("Sky Rock"). The focus of EMOL's business is channel marketing and
marketing communications covering all the paths a customer takes to the product
and ultimately their purchasing decision. EMOL's task for clients is to ensure
that every point of customer contact is working to maximum efficiency. This can
cover in-store/showroom point of sale material, web site creation as well as the
design, targeting and delivery of direct mail and advertising material. EMOL has
a blue chip client base, its largest client, BMW (GB) Limited, having been with
the company since 1994.

CTC, based in Bristol, is a marketing communications agency with an advertising
heritage. Its largest client, Andreas Stihl Limited, is a premier European
professional and consumer gardening and forestry tools brand that has been with
the agency since 1998. The Board believes there is scope to add direct marketing
and PR expertise through the tactical acquisition of either staff or small
businesses.

On 14 October 2002, Sky Rock acquired an internet systems design and technical
business, based in the same building as CTC in Bristol, which was previously a
supplier to EMOL, from a company now called Riot Communications Limited.

Financial information

On 20 February 2002 EMO disposed of its shareholding in Ryan EMO Advertising
Limited ("Ryan"), a Southampton based Human Resources company. On 14 October EMO
acquired the business and assets, with a net value of #1,000, of a company now
called Riot Communications Limited for #1. This business is not included in the
financial information below. The disposal of Ryan's net assets of #62,000 and
the acquisition of Riot's net assets of #1,000 above do not materially affect
the Net Assets of the EMO Group. The values stated below are for the EMO Group
including Ryan. EMO's profit track record for the continuing businesses may be
summarized as follows:

Year ended 31 December

1999 2000 2001

#'000 #'000 #'000
Turnover (continuing) 7,618 6,096 7,021
Gross profit (continuing) 1,414 1,382 1,242
Operating profit (continuing) 199 223 263
Pre tax profit (continuing) 198 226 268

Net assets (including Ryan of #62,000 at 31 December 2001) 953 960 1,002

The profit of EMO before interest and tax for the year ended 31 December 2001 is
#582,000 after adding back staff and management bonuses and other expenses which
will not be incurred after acquisition.

Principal terms of the Acquisition

The terms of the Acquisition have been structured to include an earn-out element
in order to align as far as possible the interests of the Principal Vendors, the
Senior Managers and the employees of EMO with those of the Enlarged Group. The
Company has conditionally agreed to acquire the entire issued share capital of
EMO for:

(a) an Initial Consideration of up to #3,725,000 payable to the Principal
Vendors on Completion, satisfied as to:

(i) #2,560,375 in cash; and

(ii) #1,164,625 by the issue of Convertible Loan Notes 2006;

(b) a Deferred Consideration of up to #2 million payable to the Vendors (except
Simon McLaven) (in the proportions set out below) subject to the average
annualised profits before tax and interest achieved by EMO from 1 April 2002 to
31 March 2006 reaching agreed levels, to be satisfied as to:

(i) 30 per cent. in Guaranteed Loan Notes 2007; and

(ii) 70 per cent. in either Unsecured Loan Notes 2007 or new Ordinary
Shares (or a mixture of both) at the option of the Company.

The Initial Consideration is #3,025,000 plus the amount by which EMO's net asset
value at Completion exceeds #500,000, currently estimated as #700,000.

On production of EMO's audited accounts for the period from 1 January 2002 to 31
March 2003, the Principal Vendors will pay to the Company the greater of the
amount (if any) by which (a) EMO's net asset value as at Completion is less than
#1,200,000 or (b) the amount by which the cash at bank of EMO as at the close of
business on the date of Completion is less than #950,000. Payment of any such
shortfall will be satisfied by payment in cash by the Principal Vendors.

88 per cent. of the Deferred Consideration will be divided between the Principal
Vendors (except Simon McLaven) and the Senior Managers and 12 per cent. (less
1.36 per cent. representing Employer's National Insurance Contributions) will be
payable to the trustees of the EMO Group Limited Employee Benefit Trust for the
benefit of the employees of EMO. If any Deferred Consideration becomes payable
it will be paid following completion of the audit of EMO for the year to 31
March 2006. Under the terms of the Acquisition Agreement the Company shall not
issue any new Ordinary Shares to the Vendors as Deferred Consideration if the
issue of such Ordinary Shares would lead to any or all of the Vendors becoming a
controlling shareholder within the meaning of Paragraph 3.13 of the Listing
Rules or would require any or all of the Vendors to make a mandatory offer for
the issued shares of the Company pursuant to Rule 9 of the City Code on
Takeovers and Mergers.

Completion of the Acquisition Agreement is conditional upon the passing of the
Resolution at the EGM to be held on 2 December 2002. Further details of the
Acquisition Agreement and the terms on which the Initial Consideration and the
Deferred Consideration (if any) are to be paid are set out in the Circular to
shareholders dated 14 November 2002.

This information is provided by RNS
The company news service from the London Stock Exchange
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