28th Jun 2005 07:01
Chime Communications PLC28 June 2005 NOT FOR RELEASE OR DISTRIBUTION IN THE US, CANADA, AUSTRALIA, THE REPUBLIC OFIRELAND OR JAPAN Chime Communications plc ("Chime" or "the Company") Proposed acquisition of VCCP Limited and placing to raise approximately £5.3 million Highlights: Acquisition * Proposed acquisition of VCCP Limited * VCCP Limited is an integrated marketing services company located in London * Initial consideration for the Acquisition is £14.5 million to be satisfied as to one half by the issue of new Ordinary Shares and as to one half in cash, with deferred consideration of up to £15.5 million * Acquisition subject to shareholder approval. An Extraordinary General Meeting to approve the acquisition will take place on 19 July 2005 Fundraising * Proposed placing to raise c.£5.3 million at £0.26 per share * WPP North Atlantic Limited has agreed to acquire 11,538,461 new Ordinary Shares in the Placing * The remainder of the Placing has been underwritten by Numis Securities Limited Lord Bell (Chairman) of Chime, commented: "We are very pleased at the successful acquisition of VCCP. It is a fine companyand will make a real difference to our Marketing Services Division. Ourprospects are considerably enhanced by this move." This summary should be read in conjunction with the full text of theannouncement attached to it. Certain terms used in this summary have the samemeanings as in the attached announcement. Enquiries: Chime Communications plc Tel: +44 (0) 207 861 8515Lord Bell (Chairman)Christopher Satterthwaite (Chief Executive) Numis Securities Limited(Financial advisers, sponsor and broker to Chime) Tel: +44 (0) 20 7776 1500Jag MundiChristopher Wilkinson Bell Pottinger Corporate and Financial Tel: +44 (0) 20 7861 3891Robin Tozer This announcement, for which the directors of Chime Communications plc areresponsible, has been issued by Chime Communications plc. This announcement doesnot constitute an offer of securities for sale in the United States. The NewOrdinary Shares may not be offered or sold in the United States, Canada,Australia, The Republic of Ireland or Japan absent registration or an exemptionfrom registration. Numis Securities Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for ChimeCommunications plc and for no one else in connection with this matter. NumisSecurities Limited will not be responsible to anyone other than ChimeCommunications plc for providing the protections afforded to the customers ofNumis Securities Limited, nor for providing advice in relation to the contentsof this announcement or any matter referred to herein. NOT FOR RELEASE OR DISTRIBUTION IN THE US, CANADA, AUSTRALIA, THE REPUBLIC OFIRELAND OR JAPAN Chime Communications plc ("Chime" or "the Company") Proposed acquisition of VCCP Limited and placing to raise approximately £5.3 million 1. Introduction Further to the announcement of 8 June 2005 that Chime was in discussions withVCCP Limited ("VCCP"), the Directors of Chime are pleased to announce that ithas conditionally agreed to acquire the entire issued share capital of VCCP. The initial consideration for the acquisition is £14.5 million and deferredconsideration of up to £15.5 million may be payable subject to certain profittargets being met. The maximum total consideration payable by the Company is £30million. The initial consideration is to be satisfied as to one half by the issue of25,438,596 new Ordinary Shares and as to one half in cash. The vendors haveagreed not to dispose of these new Ordinary Shares for at least 18 months fromAdmission. The cash consideration will be funded by the proceeds of the Placingand by a supplemental bank facility made available to the Company by the RoyalBank of Scotland plc. WPP has agreed to acquire 11,538,461 new Ordinary Sharespursuant to the Placing. The balance of the Placing has been underwritten byNumis. 2. Background to and reasons for the Acquisition Chime is the largest public relations business in the United Kingdom, with 66per cent. of its operating income derived from public relations activities. Inaddition to its Public Relations Division, Chime has both a Research Divisionand a Marketing Services Division. The Directors believe that the ResearchDivision has performed well recently, demonstrating good organic growth. The Marketing Services Division is relatively small and has had a more difficulttrading time. In the opinion of the Directors, the marketplace for marketingservices is currently good and the Directors see this as an opportunity forstrong growth in future years. VCCP is a leading marketing services companywhich has carried out campaigns for major clients and brands. The acquisition of VCCP will enable Chime to increase the size of its MarketingServices Division much more quickly and the management of VCCP will take overthe management of some of Chime's existing marketing services businesses. Thesebusinesses will complement the existing services of VCCP and create theopportunity for introducing clients between the businesses. The Directors expectthe Acquisition to be earnings enhancing for the Group in the first fullfinancial year of ownership(*). Chime will continue to look for both acquisitions and investment opportunitiesin order to improve the growth prospects of the Chime Group. The acquisition ofVCCP is part of this strategy. In the Directors' opinion, the combination ofChime and VCCP will create a very strong force in marketing services in theUnited Kingdom. 3. Information on VCCP VCCP is an integrated marketing services agency located in London. It wasestablished in 2002 by Charles Vallance, Rooney Carruthers, Adrian Coleman andIan Priest and currently employs approximately 90 people. VCCP provides advertising, digital, direct marketing, sales promotion and brandconsultancy services to clients. VCCP has a joint venture business, SFW Limited,which is a specialised direct marketing services business. VCCP's clients include O2, Coca-Cola, ING Direct, Dyson, Hyundai, GNER, Dunhilland Jordans, some of which it works with on an international basis. The financial information set out below has been extracted, without materialadjustment, from the audited accounts of VCCP for the three years ended 31January 2005. Year to 31 January 2003 2004 2005 £'000s £'000s £'000sTurnover 6,806 12,759 19,307Gross profit 2,160 4,898 8,267Operating profit 261 462 839Profit before tax 277 484 913 As at 31 January 2005, the net assets of VCCP were approximately £1.2 million. 4. Current trading and prospects for the Chime Group post-acquisition As Chime announced at the time of its 2004 preliminary results, its publicrelations and research divisions continued to grow strongly in 2005 and as aconsequence Chime had a strong first quarter in line with its growthprojections. The second quarter has not, however, been as strong as expected. First, thegeneral election in the United Kingdom in May 2005 had more impact thananticipated on Chime's public affairs and research businesses. Chime's specialelection public affairs products partly compensated for this impact, but therewas generally a lack of activity during the general election campaign withclients delaying decisions. Second, there has been a slowdown in consumer spending evidenced, for example,by the decline in retail sales and mortgage applications. In common with otherbusinesses in the sector, this has affected Chime's businesses that operate inthe consumer market place. As a result, Chime has undertaken certain mitigatingaction and expects to record some exceptional costs in the first half of 2005. Due to the agreement of a prior year tax liability, a reduction, similar to theexceptional costs referred to above, will be shown in the tax charges for thehalf year ending 30 June 2005. Profits after tax and earnings per share shouldtherefore be in line with expectation. Looking at the new business pipeline and the forecasts from Chime's businesses,the Directors' expectation is that revenue growth in the second half-year willbe stronger than the first. Chime's strategy is to take advantage of the fast-growing marketing servicesarea and the acquisition of VCCP marks a major step forward in this strategy.The Board expects the acquisition to increase Chime's performance in theMarketing Services sector. 5. Financial information on Chime The selected historical financial information on Chime set out below as at andfor the financial years ended 31 December 2002, 2003 and 2004 has been extractedfrom the audited consolidated financial statements of Chime. Year ended 31 December 2002 (restated) 2003 2004 £'000s £'000s £'000sTurnover 119,973 93,817 95,701Gross profit/operating income 70,406 53,902 53,934Exceptional items and loss on disposal ofdiscontinued operation (net of tax) (10,585) (10,893) -Goodwill amortization and impairment (29,360) (4,860) (42)Net interest charge (1,318) (1,602) (956)Profit/(loss) before taxation (36,352) (11,159) 7,033Taxation 1,081 (887) (2,193)Profit/(loss) attributable to shareholders (35,271) (12,046) 4,840Earnings/(loss) per ordinary share (24.2p) (8.0p) 2.5pEarnings per ordinary share before goodwillamortization, impairment and exceptional items 3.2p 2.4p 2.5pTotal assets 82,134 70,314 74,273Net current liabilities (38,764) (12,239) (2,557)Net current debt 32,363 29,263 6,324Shareholders' funds 11,044 12,212 34,582 6. Details of the placing Numis has conditionally agreed to use its reasonable endeavours to place thePlacing Shares with institutional and other investors at the Issue Price inaccordance with the terms of the Placing Agreement. WPP has agreed to acquire11,538,461 of the Placing Shares at the Issue Price and Numis has agreed tosubscribe for the remainder of the Placing Shares to the extent that it fails toplace such shares with institutional and other investors. The Placing isconditional on, inter alia, the admission of the newly issued shares to theOfficial List and to trading on the market for listed securities of the LondonStock Exchange ("Admission"), the passing of the resolutions to be proposed atthe extraordinary general meeting of the Company (which will give Chimeshareholders an opportunity to vote on the acquisition of VCCP and thesubscription by WPP for Placing Shares) and the agreement for the sale andpurchase of the entire issued share capital of VCCP becoming unconditional inall respects (except to the extent of any condition relating to Admissionbecoming effective) and having been completed in escrow (subject only toAdmission occurring)). Under the Acquisition Agreement, the Company has undertaken, as part of theconsideration for the Acquisition, to issue certain of the Placing Shares tosubscribers as directed by certain of the vendors of VCCP. Those vendors havedirected that such Placing Shares should be allotted to the placees procured byNumis or to WPP or to Numis itself (to the extent that Numis fails to procuresubscribers for such Placing Shares as WPP has not agreed to subscribe for).The New Ordinary Shares will, when issued, rank in full for all dividends anddistributions thereafter declared, made or paid and otherwise pari passu in allrespects with, and carry the same voting and dividend rights as, the existingissued ordinary shares. Application will be made to the UK Listing Authority forthe New Ordinary Shares to be admitted to the Official List. Application willalso be made to the London Stock Exchange for the New Ordinary Shares to beadmitted to trading on its market for listed securities. 7. EGM An extraordinary general meeting of Chime will be convened to enable Chime'sshareholders to approve the Acquisition and the issue of Placing Shares to WPP.The notice of the EGM will be contained in the circular to Chime's shareholderswhich will contain further details on the Acquisition and the Placing which isexpected to be posted to Chime Shareholders on Friday, 1st July 2005. 8. Expected timetable of principal events Posting of Circular to Chime shareholders 1 July 2005 Latest time and date for receipt of completed Forms of Proxy 11.00a.m. on 17 July 2005 EGM 11.00a.m. on 19 July 2005 Completion of the Acquisition (subject only to Admission) 19 July 2005 Admission and commencement of dealings in New Ordinary Shares 20 July 2005 Expected date for crediting of CREST accounts 20 July 2005 Dispatch of share certificates (where applicable) by 27 July 2005 Each of the times and dates in the above timetable is subjectto change. Certain terms used in this announcement have the meaningsgiven to them in the attached appendix. Enquiries: Chime Communications plc Tel: +44 (0) 207 861 8515Lord Bell (Chairman)Christopher Satterthwaite (Chief Executive) Numis Securities Limited(Financial advisers and broker to Chime) Tel: +44 (0) 20 7776 1500Jag MundiChristopher Wilkinson Bell Pottinger Corporate and Financial Tel: +44 (0) 20 7861 3891Robin Tozer This announcement, for which the directors of Chime Communications plc areresponsible, has been issued by Chime Communications plc. This announcement doesnot constitute an offer of securities for sale in the United States. The NewOrdinary Shares may not be offered or sold in the United States, Canada,Australia, The Republic of Ireland or Japan absent registration or an exemptionfrom registration. Numis Securities Limited, which is authorized and regulated in the UnitedKingdom by the Financial Services Authority, is acting exclusively for ChimeCommunications plc and for no one else in connection with this matter. NumisSecurities Limited will not be responsible to anyone other than ChimeCommunications plc for providing the protections afforded to the customers ofNumis Securities Limited, nor providing advice in relation to the contents ofthis announcement or any matter referred to herein. APPENDIX The following principal definitions apply throughout the foregoing announcementunless the context requires otherwise: "Acquisition" the proposed acquisition of VCCP by the Company "Acquisition the conditional agreement entered into on 28 June 2005Agreement" between the Company and the shareholders of VCCP in respect of the Acquisition "Admission" the admission of the new Ordinary Shares to the Official List and to trading on the market for listed securities of the London Stock Exchange "Board" the board of Directors of the Company "Chime", "Chime Chime Communications plcCommunications" or the"Company" "Directors" the directors of Chime "EGM" or the extraordinary general meeting of the Company which is"Extraordinary General expected to be convened for 11:00 a.m. on 19 July 2005 atMeeting" 14 Curzon Street, London, W1J 5HN "Group" or "Chime Chime and its subsidiary undertakingsGroup" "Issue Price" 26 pence per new Ordinary Share "London Stock London Stock Exchange plcExchange" "New Ordinary the new Ordinary Shares to be issued by the Company underShares" the Placing and the Acquisition Agreement "Ordinary Shares" ordinary shares of 5 pence each in the capital of the Company "Placing" the placing of the Placing Shares by Numis in accordance with the terms of the Placing Agreement "Placing Agreement" the placing agreement dated 28 June 2005 between the Company and Numis in relation to the Placing "Placing Shares" 20,388,181 new Ordinary Shares to be issued by the Company pursuant to the Placing "WPP" WPP North Atlantic Limited --------------------------(*) Note: This statement does not constitute a profit forecast nor should it beinterpreted to mean that future earnings per Ordinary Share following completionof the Acquisition will necessarily match or exceed historical earnings perOrdinary Share. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CHW.L