Centaur Regulatory News (CAU)

7th July 2017

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO, OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION

Centaur Media Plc

Proposed Disposal of Home Interest Business for £32 million

 and Proposed Acquisition of MarketMakers for initial consideration of £13.4 million

Transactions will accelerate Group's transformation to B2B focus

Introduction

Centaur Media Plc (LSE: CAU) ("Centaur" or the "Group"), the business to business information, insight and events group is pleased to announce that it has entered into conditional agreements for both the disposal (the "Disposal") of its business-to-consumer ("B2C") division, Home Interest for an enterprise value of £32 million to Future plc (the "Home Interest Business") and the acquisition (the "Acquisition") of MarketMakers Incorporated Limited ("MarketMakers"), one of the UK's leading integrated marketing services businesses for an initial consideration of £13.4 million with a deferred earnout amount based on EBITDA performance, further details of which are set out later in this announcement (together the "Transactions").

The net proceeds from the Disposal will be used in part to provide all of the consideration for the Acquisition. As a result, completion of the Acquisition is conditional, inter alia, upon completion of the Disposal.

The Disposal and the Acquisition are each of sufficient size to constitute Class 1 transactions under the Listing Rules and are both therefore conditional on, inter alia, the approval of the Group's shareholders at a general meeting of the Company. The shareholder circular convening the general meeting and setting out further details on and the rational for the Transactions is expected to be published and posted to shareholders later today. The Company will make a further announcement once the circular has been published which will include details of where the circular will be available from.

The Company has received irrevocable undertakings from certain shareholders to vote in favour of the Transactions in respect of 49,555,987 ordinary shares, representing approximately 34.29 per cent of Centaur's issued share capital and non-binding letters of intent to vote in favour of the Transactions in respect of 21,360,630 ordinary shares, representing approximately 14.78 per cent of Centaur's issued share capital.

Highlights

· Transactions accelerate Centaur's transformation to B2B focus

· Disposal of Home Interest Business for enterprise value of £32.0 million (£30.24 million in cash) to Future plc following previously announced sale process

· Disposal will allow the Group to further focus itself as a B2B digital, business intelligence and events media group offering additional products and services to its professional customer base

· Net proceeds from the Disposal of £28.6 million will be used in part to provide all of the consideration for the acquisition of MarketMakers

· MarketMakers had revenues of £11.4m and adjusted EBITDA of £1.7m for year ended 31 December 2016

· On MarketMakers:

o ranked as the No.1 telemarketing agency in the UK by B2B Marketing and has achieved growth in revenues of 27% over the last three years

o will bring sophisticated B2B telemarketing, data analytics, database enrichment and automated lead generation to the Centaur portfolio

o capabilities are entirely complementary to the Centaur's existing marketing capabilities

· The Board believes the Transactions will allow the Group to become fully focused on accelerating the execution of its B2B strategy whilst reducing its reliance on print and advertising

Andria Vidler, Chief Executive, commented:

"These transactions are a major step forward in the continuing transformation of Centaur into a B2B focussed business, providing our increasingly professional customer base with a range of higher value-added products and services.

"It is the right time for our Home Interest business to fulfil its potential under new ownership and we wish the management team every success.

"MarketMakers is the premier business of its kind, led by a talented team, with a blue-chip international customer base. We believe that the business is a natural fit: an entrepreneurial, ambitious company which puts the needs of customers front and centre. It brings a rich array of products and technology to Centaur which we will be offering to our customers, while at the same time exposing MarketMakers' extensive customer base to Centaur's products and services.

"The process of taking Centaur up the B2B value chain continues, and these transactions are a very significant step forward in our ambitions."

Conference call

There will be a conference call hosted by management for analysts and investors at 0830hrs this morning. If you would like to participate, please contact Tulchan Communications at centaurmedia@tulchangroup.com 

Enquiries

Centaur Media Plc Andria Vidler, Chief Executive 0207 940 4000

Swag Mukerji, Chief Financial Officer

Tulchan Communications James Macey White 0207 353 4200

Will Smith

Centaur strategy

Over the last three years, Centaur has successfully evolved from its controlled circulation advertising reliant legacy to a focussed, digitally aligned Group. It now offers a range of products and services that enable professionals to optimise their business performance including market insight, data, consultancy and events.

This transformation is being driven by leveraging content skills and expert sector knowledge from Centaur's publishing heritage and combining these with data and digital development expertise. At the same time, the Group is creating "must-attend" events and valued digital business intelligence subscription products. Centaur's brands are being repurposed, making them relevant to both current and future customers.

During its ongoing transformation, Centaur has either acquired or developed additional capabilities that are non-advertising reliant that include training, market reports, marketing procurement audits, bespoke consultancy, research and e-learning. All these additional capabilities are being applied to an increasingly professional customer base. The Acquisition is a further step in this strategy to provide the Group's clients with a widening range of value added services. In the future, further skills may be added to the Group's capabilities. These may include data analytics, research services, ecommerce skills, procurement analytics and services, amongst others.

The Disposal

On 29 March 2017, the Board announced that it had commenced a process to explore the sale of the business to consumer ("B2C") division, the Home Interest Business. Centaur is now pleased to announce the conditional disposal of the business to Future PLC.

Under the terms of the Disposal agreement, Future Publishing Limited, a wholly owned subsidiary of Future PLC, will acquire the entire issued share capitals of Ascent Publishing and Centaur Consumer Exhibitions (the Home Interest Business) for an enterprise value of £32m less £1.76m (representing the net amount of cash-backed deferred income and associated costs and other identified debt like items), resulting in a net cash consideration of £30.24 million, subject to customary post-Completion adjustments.

For the year ended 31 December 2016, the Home Interest Business made a material contribution to the Group's revenues and profits. Revenues attributable to the Home Interest Business were £12.9 million out of the total revenues for the Group of £72.5 million. During the same period, EBITDA attributable to the Home Interest Business was £3.3 million out of adjusted EBITDA for the Group of £12.4 million and the Home Interest Business had profit before tax of £1.3m. As at 31 December 2016, the gross assets attributable to the Home Interest Business were £4.3m out of the total gross assets for the Group of £113 million. Completion of the Disposal only (without the Acquisition) will materially reduce the Group's earnings but in turn, would significantly strengthen the cash position of the Group.

The Home Interest Business consists of three key brands: Homebuilding & Renovating; Period Living and Real Homes, providing seven market leading exhibitions in addition to print and digital assets. In 2016, the exhibitions attracted approximately 94,000 visitors and 1,734 exhibitors providing the Home Interest Business with multiple opportunities throughout the year to successfully engage with its audience.

The Home Interest Business is the only part of Centaur that has a B2C proposition. As such, it is considered non-core. The disposal of the Home Interest Business will allow Centaur to further focus itself as a B2B business intelligence and events media group offering a growing number of higher value-added products and services to its increasingly professional customer base.

Over the last three years considerable resource has been invested into the Home Interest Business to improve its performance with the intention of growing it to a scale that will maximise shareholder value on disposal. The Board believes that this standalone business is now of sufficient scale and performance for its divestment to increase shareholder value by generating significant proceeds for appropriate reinvestment, as the Group continues the process of realigning its business to better serve its customers.

The Home Interest Business has been run on a stand-alone basis by a highly experienced team. They will be leaving Centaur with the business they are managing on completion of its sale and the Centaur management wish them very well. There will be no departures from the Group by key individuals as a result of the Disposal. 

The leadership team of the Home Interest Business comprises Steve Newbold, Divisional Managing Director (who will remain part of the Centaur Group), Nick Noble, Deputy Managing Director, Michael Holmes, Director of Content & New Product Development and Jason Orme Editorial Director.

The net proceeds from the Disposal will be used in part to provide all of the consideration for the Acquisition. The balance of the proceeds from the Disposal will be used to strengthen the Group's balance sheet and may be used to explore other acquisitions which support its strategy. The Group will also consider the buyback of Shares at such times and on such basis as may be appropriate.

The Acquisition

Under the terms of the acquisition agreement, Centaur will acquire the entire issued share capital of MarketMakers for an initial fixed cash consideration of £13.4 million plus the surplus cash and working capital in MarketMakers (valued at £3.1 million, of which £2.8 million is represented by surplus cash held within MarketMakers) and a deferred earnout amount based on EBITDA performance to the period ending 31 December 2017. The Sellers of MarketMakfers are Paul Thomas, Henry Braithwaite, Kirsty Dawe and Tom James.

The maximum cash consideration payable when aggregated with the EBITDA earnout is: (i) £17.0 million - conditional on MarketMakers achieving EBITDA growth of 47% for FY17 of £2.5m; plus (ii) the additional amount representing certain tax adjustments and surplus cash and working capital in MarketMakers as at 31 December 2016 valued at £3.1 million, of which £2.8 million is represented by surplus cash held within MarketMakers. Therefore, assuming earnings targets are met, the maximum consideration payable for the Acquisition will be £20.1 million.

For the year ended 31 December 2016, revenues of MarketMakers were £11.4 million, and during the same period adjusted EBITDA was £1.7 million and profit before tax was £1.4 million. Unadjusted EBITDA, which includes charges for share options, was £1.5 million. As at 31 December 2016, MarketMakers' gross assets were £6.5 million.

MarketMakers has a proven track record of growth and innovation, offering B2B clients customer insight through data analytics, database management and lead generation; customer engagement and lead generation through digital communication; and sales performance tracking and customer acquisition through customer sales and retention.

MarketMakers is the premier business in its industry, offering its blue chip, international B2B customer base a highly focussed suite of marketing support services.

Founded in 2004 and based in Portsmouth, MarketMakers employs approximately 300 people and is ranked the No.1 telemarketing agency in the UK by B2B Marketing. MarketMakers has a proven track record of consistent growth with a strong balance sheet and has achieved 13% revenue CAGR over the last 3 years.

MarketMakers' capabilities are entirely complementary to Centaur's existing marketing services capabilities. The Acquisition has the potential to accelerate the growth of Centaur's digital subscription products with the introduction of automated marketing services combined with an integrated data analytics environment. The Acquisition also has the potential to cross-sell MarketMakers' services to Centaur's customer base together with the introduction of new customers to Centaur.

The management of MarketMakers will remain with the business and is expected to play a role in introducing its company's capabilities across Centaur's customer base. In the medium term the Acquisition may also offer potential cost synergies through MarketMakers' out-of-London location.

The management team of MarketMakers currently includes Henry Braithwaite and Kirsty Dawe (Managing Directors), Alan Yonge (Finance Director) and Tom James (Sales Director). Following the Acquisition, it is proposed that Henry Braithwaite, Tom James and Kirsty Dawe will remain with MarketMakers. Henry Braithwaite will continue to manage day-to-day operations of MarketMakers, supported by Kristy Dawe and Tom James. As part of the transaction, Henry will remain with MarketMakers for a minimum of twelve months and will report into - and be accountable to - the Executive Committee of Centaur Media.

Current trading and prospects

On 9 May 2017, Centaur published a trading statement for the 13 weeks ended 31 March 2017. "The Group traded in line with management expectations in the first three months of the new financial year. As expected, headwinds seen across the print and digital advertising markets during 2016 have continued. Cash flow continued to improve and the Group further reduced its net debt." There has been no significant change to the current trading and prospects of the Group

Following the Disposal and the Acquisition, the Group intends to continue to pursue its stated strategy to deliver improved performance by concentrating on B2B assets. The Directors of Centaur believe that the combined effect of the Disposal and Acquisition (assuming both complete) will be to initially reduce the Group's earnings whilst generating sufficient cash to strengthen its balance sheet and help enable the Group to continue to pursue its B2B strategy.

The Group is expected to receive net cash proceeds of approximately £28.6 million (after deductions, fees and other transaction costs) from the Disposal. Completion of the Disposal only (without the Acquisition) will materially reduce the Group's earnings but will significantly strengthen the cash position of the Group with which to pursue further opportunities to grow the business.

This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation which came into effect on 3 July 2016.

This Announcement includes statements, estimates, opinions and projections with respect to anticipated future performance of the Company ("forward-looking statements") which reflect various assumptions concerning anticipated results taken from the Company's current business plan or from public sources which may or may not prove to be correct. These forward looking statements can be identified by the use of forward looking terminology, including the terms "anticipates", "target", "believes", "estimates", "expects", "intends", "may", "plans", "projects", "should" or "will", or, in each case, their negative or other variations or comparable terminology or by discussions of strategy, plans, objectives, goals, future events or intentions. Such forward-looking statements reflect current expectations based on the current business plan and various other assumptions and involve significant risks and uncertainties and should not be read as guarantees of future performance or results and will not necessarily be accurate indications of whether or not such results will be achieved. As a result, prospective investors should not rely on such forward-looking statements due to the inherent uncertainty therein. No representation or warranty is given as to the completeness or accuracy of the forward-looking statements contained in this announcement. Forward-looking statements speak only as of the date of such statements and, except as required by the FCA, the London Stock Exchange or applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. No statement in this Announcement is intended to be a profit forecast and no statement in this Announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.