26th Sep 2005 07:03
Huntsworth PLC26 September 2005 EMBARGOED UNTIL 7:00 a.m. on 26 September 2005 26 September 2005 Huntsworth PLC ("Huntsworth" or the "Company") Completion of strategic review and proposed sale of Huntsworth's marketing services and specialist advertising businesses (the "Marketing Services & Advertising Group") to Media Square PLC ("Media Square") (the "Sale") INTRODUCTION In the announcement of the merger of Huntsworth and Incepta on 3 March 2005, theBoard announced a strategic review to decide the appropriate focus and structurefor the enlarged group. That review is now complete and Huntsworth isannouncing today a number of measures that radically refocus the Company on itscore PR and healthcare communications activities, implement key management andfinancial changes and position the group for future growth. Huntsworth's strategy is unchanged - to build an international public relationsbusiness specialising in consumer PR, investor/financial PR, public affairs,technology PR and a broad communications offering for clients in healthcare.Huntsworth will continue to expand within these key areas, both organically andby acquisition. KEY POINTS • Huntsworth has conditionally agreed to sell its marketing servicesand specialist advertising businesses to Media Square for £63 million in cash.The net proceeds of the Sale will be used to reduce Huntsworth's borrowings andto increase financial flexibility • The Huntsworth Board is to be restructured, with Lord Chadlingtonbecoming Chief Executive and Tracey Reid joining from GCap Media plc withresponsibility for group human resources strategy • The Board indicated on 1 August 2005 that results for the six monthsto 30 June 2005 are expected to be comfortably ahead of market forecasts, andthat the annual cost savings target of £2.5 million would be exceeded. Progresscontinues to be good, and an analysis of cost savings will be included in the2005 interim results • Reporting lines across the group are to be simplified by a newdivisional structure which will, after a period of discussion with groupmanagement, be introduced by the end of the year SALE OF MARKETING SERVICES AND SPECIALIST ADVERTISING DIVISIONS Huntsworth has conditionally agreed to sell its marketing services andspecialist advertising divisions to Media Square for £63 million in cash payableimmediately upon completion. The net proceeds of the Sale will be used toreduce Huntsworth's borrowings and to increase financial flexibility. Huntsworth is selling a total of 16 businesses including its sales promotion,design, direct marketing, sponsorship consultancy, publishing and specialist andregional advertising businesses. Huntsworth will now have a focussed, international public relations andhealthcare communications business operating through a wholly owned network of90 offices in 23 countries, serving 3,000 clients and generating annual feeincome of over £130 million. The Sale remains subject to a number of conditions including shareholderapprovals and Media Square raising the necessary funds to complete thetransaction. In this transaction the Board of Huntsworth has been advised by BridgewellSecurities Limited ("Bridgewell"). THE BOARD AND SENIOR MANAGEMENT Richard Nichols, who has been on the Board of Incepta since 1998 and ChiefExecutive Officer since 2001, will leave the Board on 18 October 2005 whenHuntsworth announces its interim results. He will continue to act as aconsultant to the Board until 31 December 2005. Lord Chadlington has been appointed Chief Executive Officer. The Group is immediately to start the search for a new non-executive Chairman.In the meantime, Jon Foulds, the Senior Independent Director, will becomenon-executive Chairman until a replacement is found. Jon Foulds and FrancisMaude, the Deputy Chairman, will retire from the Board on the appointment of thenew Chairman. As indicated in the circular relating to the merger of Huntsworth and Incepta,Roger Selman, the Group Finance Director, will be retiring from the Board. Thesearch for his successor has already started. Tracey Reid joins the Board from GCap Media plc and will be responsible forgroup human resources strategy. Anthony Brooke, independent director, has been appointed Chairman of theRemuneration Committee and Robert Alcock, also an independent director,continues as Chairman of the Audit Committee. Gene Beard and Charles Good will both retire from the Board at the 2006 annualgeneral meeting. As a key appointment in Huntsworth's senior management, Sally Withey, currentlya Group Financial Manager, has been appointed Chief Operating Officer. CONCLUSION Commenting on today's announcement, Lord Chadlington, Chief Executive ofHuntsworth, said: "The completion of the strategic review marks a new beginning for Huntsworth.Creating a single focus, substantially removing the debt burden and streamliningour operations will enable us to concentrate on the quality of our service toclients, the incentivisation of our people and rewarding our shareholders. Itis a major stride forward for all the stakeholders in the business. "I am particularly pleased that the businesses we are selling will now becomeowned by Media Square, a successful and progressive marketing services group." Commenting on the departure of Richard Nichols, Jon Foulds, Chairman ofHuntsworth, said: "Richard Nichols, the architect both of the merger of Huntsworth and Incepta andof the strategic review, has decided that, with these integration taskscompleted, now is the time for him to move on to a new opportunity. Richard willcontinue as a director of Huntsworth until the interim results are announced inmid October and he will act as a consultant to the Board until the end of theyear." This summary should be read in conjunction with the full text of the followingannouncement. PRESS ENQUIRIES Huntsworth 020 7408 2232Lord ChadlingtonRoger Selman Bridgewell 020 7003 3000Andrew Tuckey Citigate Dewe Rogerson 020 7638 9571Patrick Toyne Sewell Bridgewell Securities Limited, which is regulated in the United Kingdom by theFinancial Services Authority, is acting for Huntsworth and no one else inconnection with the Sale and will not be responsible to anyone other thanHuntsworth for providing the protections afforded to clients of BridgewellSecurities Limited or for providing advice in relation to the Sale. 26 September 2005 Completion of strategic review and proposed sale of Huntsworth's marketing services and specialist advertising businesses to Media Square 1. Introduction Huntsworth announces that the strategic review which began when the Companymerged with Incepta in May of this year has been completed several weeks earlierthan anticipated. This strategic review has resulted in a number of changes being made to theCompany, including the sale of the marketing services and specialist advertisingbusinesses and the restructuring of the Huntsworth Board. Further details ofthese changes are given below. Reporting lines across the group are to be simplified by a new divisionalstructure which will, after a period of discussion with group management, beintroduced by the end of the year. Your Board has indicated that that results for the six months to 30 June 2005are expected to be comfortably ahead of market forecasts, and that the annualcost savings target of £2.5 million would be exceeded. Progress continues to begood, and an analysis of cost savings is expected to be included as part of theannouncement of the 2005 interim results. 2. Sale of marketing services and specialist advertisingdivisions Following the announcement on 3 March 2005 of a strategic review to beundertaken following the completion of the proposed merger with Incepta, yourBoard is pleased to announce that it has conditionally agreed to sell 16businesses which make up the Marketing Services & Advertising Group to MediaSquare for £63 million in cash. The businesses comprising the MarketingServices & Advertising Group operate in the advertising and marketing servicesand brand design industries. Following the Sale, the Huntsworth will beprimarily focused on its public relations and healthcare communicationsactivities. Your Board intends to use the net cash proceeds of the Sale toreduce Huntsworth's borrowings, enabling it to support growth within its publicrelations and healthcare communications businesses, whilst affording theflexibility to optimise its capital structure in due course. In view of its size relative to the market valuation of Huntsworth, the Sale isconditional, inter alia, on approval by Shareholders. A notice convening anExtraordinary General Meeting to seek Shareholders' approval for the Sale willbe sent to Shareholders in due course. The Sale is also conditional on approvalby the shareholders of Media Square. 3. Background to and reasons for the Sale The announcement of the proposed merger with Incepta on 3 March 2005 stated thatas part of the merger process your Board would undertake a thorough review ofthe combined business. One conclusion of this review was that Huntsworth woulddeliver a focused range of services to its existing and potential clients.Furthermore, it was concluded that Huntsworth would benefit from a reduction inits net debt position, giving it a more appropriate capital structure moresuited to achieving its growth ambitions. Your Board believes that the Salerepresents the solution to these objectives. The Sale will be made for a cash consideration of £63 million. After payment ofcosts and advisors' fees, Huntsworth will receive net proceeds of £60 million,which will be used to reduce the Company's borrowings, increasing the financialflexibility of the Continuing Group. Following the Sale, Huntsworth will focus on the development and expansion ofthe Company's public relations and healthcare businesses. The Directorscontinue to believe that there is opportunity to expand these businesses, whichhave a strong market position in sectors that offer attractive growth prospects. The Sale remains subject to a number of conditions including shareholderapprovals and Media Square raising the necessary funds to complete thetransaction. 4. Information on the Marketing Services & Advertising Group The Marketing Services & Advertising Group consists of 16 businesses in theadvertising and marketing services and brand design industries. Of thesebusinesses, 15 were acquired by Huntsworth through its merger with Incepta(together with their subsidiaries, the "Incepta Marketing Services & AdvertisingCompanies") while the remaining business, Holmes & Marchant, was owned byHuntsworth. The businesses subject to the Sale are: Citigate Publishing Citigate Publishing was established in 1988 to conceive, launch and produce corporate publications within corporate communication programmes for a variety of audiences including employees, customers, shareholders and opinion formers. Citigate SEA Established in 1970, Citigate SEA is a top 20 advertising agency providing integrated corporate communications, primarily specialising in financial and corporate advertising in Germany from offices in Dusseldorf, Berlin and Bonn. Citigate SMARTS Citigate SMARTS is a UK regional network providing corporate and consumer public relations, creative advertising, branding and design, direct marketing, digital marketing, planning and research and promotional marketing. It has offices in Manchester, Birmingham, Glasgow, Edinburgh, Belfast and Dublin. Citigate South Africa Citigate South Africa provides through-the-line communication solutions: design, branding and packaging, annual reports, promotional marketing and public relations. It has offices in Johannesburg, Durban and Cape Town and is 25.1% owned by a local company. Dynamo A start up in 1990, Dynamo was acquired by Incepta on 1 October 2000 as a strategic move to create a UK marketing services offering to take advantage of the shift in global marketing spend below the line. It has a focus on retail implementation, and encompasses expertise in promotional marketing, experiential marketing, media buying, premium sourcing and print buying. Finex Finex was established in 1991 to offer response driven marketing communications to high growth sectors of the economy. It was acquired by Incepta from management on 1 April 2000. HS Advertising HS Advertising is primarily a business to business advertising agency based in Frankfurt, Germany. Holmes & Marchant Holmes & Marchant was established in 1967 focusing on integrated structural and graphic packaging design and corporate identity to a European client base. IMI Incepta Marketing Intelligence ("IMI") was created by the merger of Citigate DVL Smith and Hauck Research Services on 1 March 2004. It offers strategic and tactical advice for business success based on consumer and market understanding. Services provided by IMI include brand strategy, web and new media expertise, communications, retail and point of purchase and integrated marketing intelligence. Incepta Online Incepta Online includes Tangozebra, DMD Limited, JKD Communications, Citigate Hudson and Citigate MarchCom. Together, the Incepta Online group of companies provides customers with online advertising and digital marketing solutions, database solutions and assistance in applying technology to investor relations, corporate, financial and media communications. Karen Earl Sponsorship Established in 1984, Karen Earl advises major brands on regional, national and international sponsorships, and is also involved in community, arts, broadcast and entertainment work. It was acquired by Incepta in September 2001. Lloyd Northover Lloyd Northover was founded in 1975 as a company devoted to creating vivid brands and clear communications for companies, organisation and public services. The company has offices in London and Hong Kong. Redmandarin Redmandarin is a consultancy specialising in advising on sponsorship strategy, from developing a strategy to evaluating and measuring the return on investment. The business was created to give strategic advice on sponsorship matters to blue chip clients looking to improve the efficiency and effectiveness of their sponsorship programmes. It was acquired by Incepta on 14 September 2003. Silver Bullet Silver Bullet was established on 1 March 2004 in order to provide Incepta with a second leading direct marketing business. This allowed Incepta to maintain Finex's client base while recruiting further talent to build the franchise. Management own 49% of Silver Bullet. Su Yeang Su Yeang Design is based in Singapore and was founded in 1983. It specialises in creating, developing and implementing effective corporate, product and retail brand identities in the Asia Pacific region. The Gate Worldwide Formerly known as Citigate Albert Frank, The Gate Worldwide is an international full service brand communications and advertising agency that has developed a broad client base in financial services, business to business and consumer lifestyle. It offers brand strategy, advertising, media planning and buying, design, new media and 24 hour inhouse studio and production services. The Gate Worldwide has offices in London, New York and Hong Kong. 5. Information on the Purchaser Media Square is the holding company for a group of businesses engaged inmarketing communications and retail marketing services. It has 680 employeesand offices, creative studios and production centres in Leeds, London,Manchester, Newmarket and Oxford. It is listed on the AIM market of the LondonStock Exchange and had a market capitalisation of approximately £46 million on23 September 2005, the last trading day before the publication of thisannouncement. In Media Square's annual report for the year ended 31 October2004, it reported an operating profit before exceptional items of £1.4 millionon turnover of £19.5 million. 6. Principal terms and conditions of the Sale The consideration is £63 million on a cash free debt free basis and is payableimmediately upon Completion. The Sale is conditional, inter alia, upon theapproval of the shareholders of both Huntsworth and Media Square and MediaSquare raising the necessary funds to complete the transaction. 7. Financial information on the Marketing Services &Advertising Group In the year to 28 February 2005 the Incepta Marketing Services & AdvertisingCompanies generated revenues and profit before tax of £71.5 million and £6.0million respectively. As at 28 February 2005 the gross assets (includingintangibles) of the Incepta Marketing Services & Advertising Companies were£71.9 million and net assets (including intangibles) were £35.0 million. In the year to 31 December 2004, Holmes & Marchant generated revenues and profitbefore tax of £1.6 million and £0.2 million respectively. As at 31 December2004 the gross assets of Holmes & Marchant were £1.2 million and the net assetswere £0.0 million. At 31 December 2004 Holmes & Marchant had no intangibleassets on its balance sheet. 8. The Board and senior management Richard Nichols, who has been on the Board of Incepta since 1998 and ChiefExecutive Officer since 2001, will leave the Board on 18 October 2005 whenHuntsworth announces its interim results. He will continue to act as aconsultant to the Board until 31 December 2005. Lord Chadlington has been appointed Chief Executive Officer. The Group is immediately to start the search for a new non-executive Chairman.In the meantime, Jon Foulds, the Senior Independent Director, has been appointedinterim non-executive Chairman. Jon Foulds and Francis Maude, the DeputyChairman, will retire from the Board on the appointment of the new Chairman. As indicated in the circular relating to the merger of Huntsworth and Incepta,Roger Selman, the Group Finance Director, will be retiring from the Board. Thesearch for his successor has already started. Tracey Reid joins the Board from GCap Media plc and will be responsible forgroup human resources strategy. Anthony Brooke, independent director, has been appointed Chairman of theRemuneration Committee and Robert Alcock, also an independent director,continues as Chairman of the Audit Committee. Gene Beard and Charles Good will both retire from the Board at the 2006 annualgeneral meeting. As a key appointment in Huntsworth's senior management, Sally Withey, currentlya Group Financial Manager, has been appointed Chief Operating Officer. DEFINITIONS "AIM" the Alternative Investment Market of the London Stock Exchange "Board" the Board of Directors of Huntsworth "Bridgewell" Bridgewell Securities Limited "Completion" completion of the Sale pursuant to the Sale Agreement "Continuing Group" Huntsworth and its subsidiary undertakings following the Sale "Directors" the current board of directors of Huntsworth, being: Lord Chadlington Richard Nichols Roger Selman Jon Foulds Rt. Hon Francis Maude MP Anthony Brooke Robert Alcock Eugene Beard Charles Good "Sale" the proposed sale of the Marketing Services & Advertising Group to Media Square "Sale Agreement" the agreement dated 25 September 2005 made between Huntsworth and Media Square for the purchase by Media Square of the Marketing Services & Advertising Group "Marketing Services & Advertising Group" Huntsworth's entire holding of shares (direct or indirect) in the Incepta Marketing Services & Advertising Companies together with all subsidiaries of the Incepta Marketing Services & Advertising Companies, and Holmes & Marchant together with all subsidiaries of Holmes & Marchant; "Holmes & Marchant" Holmes & Marchant International Limited "Huntsworth" or the "Company" Huntsworth PLC and/or its subsidiary undertakings as the context may require "Incepta" Incepta Group PLC "Incepta Marketing Services & Advertising Companies" means: Catalyst Marketing Limited Dynamo Marketing Limited Theatre Cast & Crew Limited Generator Marketing Services Limited Theatre Brand Experience Limited Tactical Marketing Group Limited Karen Earl Sponsorship Limited Citigate Publishing Limited Redmandarin Limited Redmandarin (PTE) Ltd The Sponsorship Research Company Limited Finex Communications Group PLC The Gate Worldwide (S) Pte Ltd Silver Bullet Group Limited Digital Advertising and Marketing Limited DMD Digital Marketing Direct Limited Citigate Hudson Inc. CAROL Limited Incepta Online Limited Citigate Smarts Limited Citigate Smarts (Birmingham) Limited Citigate Smarts Ireland Ltd Citigate Northern Ireland Limited Smart Advertising & Design Limited The Gate Worldwide Limited The Gate Worldwide (HK) Limited Citigate LLC Incepta Marketing Intelligence Limited Incepta Marketing Intelligence NA LLC Citigate DVL Smith Limited Hauck Research Services Limited Citigate SEA GmbH & Co KG Citigate GmbH Citigate Group Holdings GmbH Citigate Lloyd Northover Limited Citigate Su Yeang Design Pte Ltd Orange Design Pte Ltd Citigate Consulting Services (Shanghai) Co. Limited Hoffman Schalt Werbeagentur GmbH Citigate South Africa (Pty) Limited "Media Square" or the "Purchaser" Media Square plc "Shareholder" or "Shareholders" a holder of Shares "Shares" ordinary shares of 50 pence each in the share capital of Huntsworth This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
HNT.L