Conduit Hldg Regulatory News (CRE)

9 Feb 2005 07:01

Creston PLC09 February 2005 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN OR INTO THEUNITED STATES, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF IRELAND OR SOUTH AFRICA Creston Plc • Proposed Acquisition of Face Communications Limited and certain sharesin DLKW Holdings Limited for a maximum consideration of £38.3 million • Proposed Placing and Open Offer by Charles Stanley & Co. Limited of7,048,164 New Ordinary Shares at 145 pence per share to raise approximately£10.2 million SUMMARY This should be read in conjunction with the full text of this announcement. Creston Plc ("Creston" or the "Company"), the diversified marketing servicesgroup, today announces that the Company has agreed, subject inter alia toShareholder approval, the proposed acquisition of Face Communications, theultimate parent company of the DLKW Group, and 26 per cent. of the issued sharecapital of DLKW Holdings (the other 74 per cent. being already owned by FaceCommunications) and a Placing and Open Offer by Charles Stanley & Co. Limited toraise approximately £10.2 million before expenses. • To date, Creston's areas of focus have centred on market research,direct marketing, public relations and channel marketing. However, it is theBoard's view that the acquisition of an advertising agency is a key part ofCreston's growth strategy, both in terms of filling an important gap in itsdiversified marketing services portfolio and in bringing further opportunitiesfor synergy across the Group; • The DLKW Group is an advertising and communications group based inCovent Garden in London, which employs 157 people on a full time basis. DLKWHoldings was established in 2000 by Greg Delaney and Mark Lund and Partnersthrough a management buy-out of Delaney Fletcher Bozell Limited, the Londonoffice of Bozell Worldwide; • The DLKW Group has a diverse range of clients and has a number oflarge blue chip clients, which include HBOS, Vauxhall, Burger King, Exxon, eBay,Batchelors, Capital Radio, The Financial Times, Premier Foods and COICommunications, the communications agency of HM Government, one of the largestspenders on marketing communications in the UK; • The DLKW Group is the only agency to feature in Campaign magazine'sBusiness Growth Top 5 in each of the past three years. DLKW's ratio ofconversion from short list to win is, in the opinion of its directors, very highat 58 per cent. for 2004 and it has won seven of its last twelve pitches. Asfeatured in Campaign magazine's rankings, the DLKW Group is one of the largestindependent UK advertising and communications agencies; • The maximum consideration payable is up to £38.3 million to besatisfied by: (a) Initial Consideration of £19.0 million payable to the Principal Vendors andthe Senior Managers on Completion, to be satisfied as to: £15.0 million in cash;and £4.0 million by the issue of the Consideration Shares. (b) Deferred Consideration of up to £19.3 million payable to the Vendors subjectto the average annualised profit before interest and tax of Face Communicationsfrom the date of Completion to 31 March 2008 reaching agreed levels; • Subject inter alia to Shareholder approval, it proposes to raiseapproximately £9.5 million (net of expenses) by the issue of 7,048,164 newOrdinary Shares at 145 pence each by way of a Placing and Open Offer; • The net proceeds of the Placing and Open Offer and £5.5 million ofexisting cash resources and new bank facilities will be used to fund the InitialConsideration; • Qualifying Shareholders are invited to apply to subscribe for OpenOffer Shares at the Issue Price of 145 pence per share, free of all expenses,payable in full on application, on the following basis: 1 New Ordinary Share forevery 8 existing Ordinary Shares registered in their name at the close ofbusiness on the Record Date and so in proportion for any greater or lessernumber of existing Ordinary Shares then held; • An Extraordinary General Meeting has been convened for 11.00 a.m. on 4March 2005, at which Shareholders will be asked to consider the Resolutionsnecessary to approve and implement the Proposals; • Creston has continued to make good progress in the second half of theGroup's financial year to 31 March 2005 and the Group's trading in the period to31 December 2004 has been ahead of the comparable prior year period. The Group'smain operating subsidiaries continue to demonstrate resilient tradingperformances and, combined with the increasing level of synergies and crossselling opportunities within the Group, the Board anticipates further organicgrowth. Commenting on the proposed acquisition, Don Elgie, Chief Executive of Creston,said: "Creston is very proud to have attracted an agency of DLKW's standing to theGroup. Their philosophy of 'creative, collaborative and commercial' fits verywell with Creston's philosophy. This acquisition will enable us now to pitch forand provide full service Marketing Communications business and as a result theenlarged group will benefit from increased operating and synergy opportunities. "Fifty per cent of the marketing pound is spent on advertising - all statisticalforecasts on the advertising industry show it is an upward curve and we areconfident of the financial and trading prospects of the Group." Greg Delaney, Chairman of Delaney Lund Knox Warren & Partners, said: "In Creston, we are joining a dynamic and growing Group of like-minded marketingservices companies which are all highly respected in their fields. We believethere are still plenty of growth opportunities across the sector and that we arewell placed to take full advantage of that in the future. "Creston shares our ambitions for DLKW. This new partnership will keep all theelements of our success in place, as well as providing us with additionalresources. We see a very bright future for ourselves within the Creston Group,which is why we are happy to be major Creston shareholders." Enquiries Creston Plc 020 7930 9757Don Elgie, Chief ExecutiveBarrie Brien, CFO and COO Delaney Lund Knox Warren & Partners Limited 020 783 63474Greg Delaney / Mark Lund Charles Stanley & Co. Limited 020 7953 2000Mark Taylor Redleaf Communications 020 7955 1410Emma Kane 07876 338339 Introduction Creston is pleased to announce that the Company has agreed, subject inter aliato Shareholder approval, the proposed acquisition of Face Communications, theultimate parent company of the DLKW Group, and 26 per cent. of the issued sharecapital of DLKW Holdings (the other 74 per cent. being already owned by FaceCommunications). The DLKW Group is a leading independent UK based advertisingand communications agency. Due to the size of the DLKW Group in relation to the Group, the Acquisitionconstitutes a Class 1 transaction under the Listing Rules and accordingly theCompany is required to obtain the prior approval of Shareholders for theAcquisition. The Company is also pleased to announce that, subject inter alia to Shareholderapproval, it proposes to raise approximately £9.5 million (net of expenses) bythe issue of 7,048,164 new Ordinary Shares at 145 pence each by way of a Placingand Open Offer. 4,889,498 Ordinary Shares have been placed firm, irrevocableundertakings to take up all or part of their entitlements under the Open Offerin respect of 510,012 Open Offer Shares have been received from certainQualifying Shareholders by the Company and 1,648,654 Open Offer Shares have beenconditionally placed, subject only to clawback by Qualifying Shareholders, withinstitutional and other investors by Charles Stanley. The net proceeds of the Placing and Open Offer and £5.5 million of existing cashresources and new bank facilities will be used to fund the InitialConsideration. Qualifying Shareholders have the right to subscribe for the OpenOffer Shares in accordance with the terms of the Open Offer. An Extraordinary General Meeting has been convened for 11.00 a.m. on 4 March2005, at which Shareholders will be asked to consider the Resolutions necessaryto approve and implement the Proposals. Background to and the reasons for the Acquisition Creston's strategy is to build a diversified international marketing servicesgroup through organic growth and through selective acquisitions. The Boardbelieves that there is potential to identify synergistic benefits betweencurrently independent marketing services companies offering premium servicessuch as market research, direct marketing, PR, customer relationship marketingand other areas of marketing communications. In evaluating potential acquisition opportunities, Creston looks for companieswith strong growth history and potential in its chosen marketing discipline, andemploys a particularly stringent set of selection criteria which requirepotential acquisitions to be able to demonstrate: • high quality businesses; • a proven history of resilience; • consistent growth and good growth prospects; • a committed management; • established blue chip clients; and • a low level of client attrition. Following its repositioning in January 2001 as a marketing services group,Creston has made five significant acquisitions: • the acquisition in January 2001 of Marketing Sciences Limited, aninternational quantitative and qualitative market research company, based inWinchester; • the acquisition in November 2001 of The Real Adventure MarketingCommunications Limited, a national marketing communications company, based inBath; • the acquisition in November 2002 of EMO Group Limited, a nationalchannel marketing communications company based in Swindon and Bristol; • the acquisition in September 2003 of Nelson Bostock CommunicationsLimited, a public relations agency based in London; and • the acquisition in September 2004 of CML Research Limited, aqualitative market research company based in London. The companies have benefited from established relationships with an existingblue-chip client base, inter-subsidiary cross-selling opportunities and agreater profile achieved through being part of a quoted company. To date, Creston's areas of focus have centred on market research, directmarketing, public relations and channel marketing. However, it is the Board'sview that the acquisition of an advertising agency is a key part of Creston'sgrowth strategy, both in terms of filling an important gap in its diversifiedmarketing services portfolio and in bringing further opportunities for synergyacross the Group. The Board believes that the Acquisition represents animportant step towards the strategy of building a broadly based group andavoiding over-concentration in any one sector. Furthermore they believe that theadvertising market offers potential for future growth. The World AdvertisingResearch Centre's European Advertising Media Forecasts estimate that advertisingexpenditure for main media in the UK would increase by 4.3 per cent. in 2004over 2003 and by 5.0 per cent. in 2005 over 2004 (constant prices). TheAdvertising Association estimated that the UK advertising market was worth £17.2billion in 2003. The World Advertising Research Centre's European AdvertisingMedia Forecasts estimate that the market is expected to grow by up to 29 percent. in the period from 2004 to 2012 (constant prices). Building further on the Board's identified acquisition strategy, Creston hasconditionally agreed, subject to Shareholder approval at the EGM, to acquireFace Communications, the ultimate parent company of the DLKW Group. TheDirectors believe that the DLKW Group will complement Creston's existingoperations and is in a similar line of business as EMO Group and TRA, subsidiarycompanies of Creston, which provide advertising and marketing communicationservices to certain of their clients. The DLKW Group also fits Creston'sacquisition criteria of having strong growth potential in their chosen nichemarkets. Furthermore, the acquisition of the DLKW Group underlines the Company'scommitment to exploit existing market opportunities through acquisition andthrough leveraging cross-selling opportunities that exist within the Group. TheDirectors believe that an additional advantage of the Acquisition is that theEnlarged Group will have the credibility and capability to pitch for and fulfilfull service Marketing Communications business. Information on the DLKW Group Face Communications owns 74 per cent. of the issued share capital of DLKWHoldings. As part of the Acquisition, Creston will acquire the remaining 26 percent. of the issued share capital of DLKW Holdings from the Principal Vendors. DLKW Holdings was established in 2000 by Greg Delaney and Mark Lund and Partnersthrough a management buy-out of Delaney Fletcher Bozell Limited, the Londonoffice of Bozell Worldwide. The DLKW Group is an advertising and communicationsgroup based in Covent Garden in London, which employs 157 people on a full timebasis and consists of the following operating companies: DLKW Holdings - intermediate holding company; DLKW and Partners - an advertising agency; DLKW Dialogue - a digital, direct and promotional marketing company; and The Composing Room - a pre-press print production company. In addition, the DLKW Group has a 15 per cent. holding in BJK&E Holdings, whichowns 100 per cent. of BJK&E, a media planning and buying company. In 2000, the DLKW Group's business was principally above the line advertising,principally focussed on television and the press. As the number of DLKW &Partners' clients increased, the Principal Vendors recognised the growingpotential for communications through the internet and in 2001 they founded DLKWDialogue to specialise in digital and direct communications. Subsequently,digital advertising has become the fastest growing of all advertising areas. In2004, a sales promotion capability was added to DLKW Dialogue. In October 2003, DLKW Holdings acquired 90 per cent. of The Composing Room, anartwork, retouching and reproduction company, to capitalise on the potential forsynergies and efficiencies within the print production process as a result ofthe increase in the volume of press business being undertaken by the group. The DLKW Group's business is based on the philosophy of being creative,collaborative and commercial and is committed to delivering high levels ofclient service. As a result the DLKW Group has enjoyed strong levels of clientretention. Furthermore, the DLKW Group now works with eight of its top tenclients on two or more disciplines within the marketing and communications mix,which strengthens the DLKW Group's relationships to its clients' business. The DLKW Group has a diverse range of clients and has a number of large bluechip clients, which include HBOS, Vauxhall, Burger King, Exxon, eBay,Batchelors, Capital Radio and COI Communications, the communications agency ofHM Government, one of the largest spenders on marketing communications in theUK. Since inception, DLKW's business has continued to grow, and despite a period ofindustry downturn in 2001 to 2002, has remained profitable with gross profitincreasing by over 46 per cent. between 2001 and 2003. DLKW Group's financialperformance has also substantially outperformed the growth in the advertisingmarket since 2000, as provided by The Advertising Association. In the ninemonths to 30 September 2004, DLKW & Partners, the advertising agency accountedfor 79 per cent. of group income, DLKW Dialogue accounted for 11 per cent. ofgroup income and The Composing Room accounted for 10 per cent. of group income.Such has been the consistency of this organic growth that the DLKW Group is theonly agency to feature in Campaign magazine's Business Growth Top 5 in each ofthe past three years. DLKW Group's ratio of conversion from short list to winis, in the opinion of its directors, very high at 58 per cent. for 2004 and ithas won seven of its last twelve pitches. As featured in Campaign magazine'srankings the DLKW Group is one of the largest independent UK advertising andcommunications agencies. Financial information The following financial information, has been extracted without adjustment fromthe Accountants' Report on the DLKW Group, and should be read in conjunctionwith the full text of this document. Nine months ended Year ended Year ended Year ended 30 September 2004 31 December 2003 31 December 2002 31 December 2001 £'000 £'000 £'000 £'000Turnover 24,913 25,921 17,254 16,718Gross Profit 11,451 11,041 8,162 7,528Profit on ordinaryactivities before taxation 2,109 1,077 914 1,336 At 30 September 2004, DLKW had net assets of approximately £3.8 million.Turnover has increased by 55 per cent. and gross profit by 47 per cent. in theperiod from 2001 to 2003. Principal terms of the DLKW Acquisition Agreement The Company has today conditionally agreed to acquire the entire issued sharecapital of Face Communications and 26 per cent. of the issued share capital ofDLKW Holdings for: (a) Initial Consideration of £18,972,000 payable to the Principal Vendorsand the Senior Managers on Completion, to be satisfied as to: (i) £14,969,000 in cash; and (ii) £4,003,000 by the issue of 2,697,439 Consideration Shares. (b) Deferred Consideration of up to £19.26 million payable to the Vendors(in the proportions set out below) subject to the average annualised profitbefore interest and tax of Face Communications from the date of Completion to 31March 2008 reaching agreed levels, to be satisfied as to: (i) 50 per cent. by the issue of Guaranteed Loan Notes 2009; and (ii) 50 per cent. by the issue of either Unsecured Loan Notes 2009 or newOrdinary Shares (or a mixture of both) at the Company's option. The terms of the Acquisition have been structured to include an earn-out elementin order to align as far as possible the interests of the Principal Vendors, theSenior Managers and the employees of the DLKW Group with those of the EnlargedGroup. On production of the audited accounts of Face Communications for theperiod from 1 January 2005 to Completion, the Principal Vendors and SeniorManagers will pay to the Company a cash sum equal to the amount (if any) bywhich Face Communications' net asset value at Completion is less than £3,200,000and a cash sum equal to the amount (if any) by which Face Communications' cashat bank at Completion is less than £700,000. Interim Consideration of up to £5,750,000 will be paid to the Vendors on accountof the Deferred Consideration following completion of the audit of FaceCommunications for the year ending 31 March 2006. The Interim Consideration willbe paid subject to the annualised profits before interest and tax of FaceCommunications for the period from 1 January 2005 to 31 March 2006 exceedingthose for the year ended 31 December 2004. It will be based on a multiple of theamount by which the profits before interest and tax of Face Communications forthe year ended 31 December 2004 exceed £2,000,000. The Interim Considerationwill be satisfied as to 50 per cent. by the Issue of Series A Guaranteed LoanNotes 2007 and as to 50 per cent. by the issue of either new Ordinary Shares orSeries B Guaranteed Loan Notes 2007 (or a mixture of both) at the Company'soption. The Deferred Consideration will be divided between the Vendors as follows: (a) if the Deferred Consideration is less than or equal to £13,250,000, 87.5per cent. between the Principal Vendors and the Senior Managers and 12.5 percent. (less 1.42 per cent. representing Employer's national insurancecontributions) will be payable to the trustees of the Face CommunicationsEmployee Benefit Trust for the benefit of the employees of the DLKW Group; and (b) if the Deferred Consideration is greater than £13,250,000, £11,593,750 anda sum equal to 80 per cent. of the amount by which the Deferred Considerationexceeds £13,250,000 between the Principal Vendors and the Senior Managers and£1,656,250and a sum equal to 20 per cent. (less 2.27 per cent. representingEmployer's national insurance contributions) of the amount by which the DeferredConsideration exceeds £13,250,000 will be payable to the trustees of the FaceCommunications Employee Benefit Trust for the benefit of the employees of theDLKW Group. If any Deferred Consideration becomes payable it will be paid followingcompletion of the audit of the DLKW Group for the year ending 31 March 2008.Under the terms of the Acquisition Agreement the Company shall not issue any newOrdinary Shares to the Vendors as Deferred Consideration if the issue of suchOrdinary Shares would lead to any or all of the Vendors becoming controllingshareholders within the meaning of paragraph 3.13 of the Listing Rules or wouldrequire any or all of the Vendors to make a mandatory offer for the issuedshares of the Company pursuant to Rule 9 of the City Code on Takeovers andMergers. Save in exceptional circumstances as set out in the Circular issued toShareholders today: (a) the Principal Vendors and the Senior Managers are not permitted to sellany of (i) the Consideration Shares issued to them; or (ii) any Ordinary Sharesissued to them as part of the Interim Consideration or the DeferredConsideration for a period of twelve months starting on the date of allotment ofsuch Consideration Shares or Ordinary Shares issued as part of the InterimConsideration or the Deferred Consideration; and (b) the Principal Vendors and the Senior Managers are not permitted to sell(i) more than 25 per cent. of the Consideration Shares issued to them, or (ii)more than 33 per cent. of any Ordinary Shares issued to them as part of theInterim Consideration or the Deferred Consideration, in any successive twelvemonth period after the first anniversary of the date of allotment. Completion of the Acquisition Agreement is conditional on the Vendors obtainingcertain tax clearances, the passing of the Resolutions, the Credit Agreement andthe Placing Agreement becoming unconditional in certain respects and Admission.Further details of the Acquisition Agreement and the terms on which the InitialConsideration, the Deferred Consideration (if any) and the Interim Consideration(if any) are to be paid are set out in the Circular issued to Shareholderstoday. Information on Creston Since January 2001, the Board's strategy has been to build an internationalmarketing services group. Following the acquisitions of MSL, TRA, EMO, NBC andCML Research, Creston has the ability to offer its clients a range of marketingand communications services through these subsidiaries as outlined below. Creston Creston's head office is located in Haymarket, London and the Company acts as aholding company for its main operating subsidiaries. The Group currently has 243full time and 16 part time employees. Group operating companies Marketing Sciences Limited MSL is an international market research consultancy. It was founded in 1977 withpremises in Winchester and currently has 41 full-time employees and 2 part-timeemployees and engages a number of casual and interviewer field workers on an adhoc basis. Since 1983, MSL has established itself as a full market researchconsultancy offering a wide range of qualitative and quantitative services. MSLhas a large interviewer field force and extensive on-line interviewingfacilities which enable it to provide its clients with a wide ranging andtailor-made service. MSL has over 30 major blue chip clients operating across a range of businessesand product sectors including the fast moving consumer goods, financial, retail,social and business-to-business markets. Clients include Coca-Cola, Unilever,Kimberly Clark, Tesco, Danone and Nationwide. MSL is also a founding member of The Research Alliance, a worldwide network of20 independent market research companies. As a significant proportion of MSL'sbusiness involves international companies, The Research Alliance network enablesit to conduct market research using its branded services in most of the majormarkets of the world. Packmaster International quantitative pack testing Pricemaster Pricing research techniques Brandmaster Price-branding relationship suite Spacemaster Advanced fixtures/layout modelling for sales effectiveness CADI Interactive design solution development Promomaster Below-the-line activity effectiveness evaluation Strategist Study of market decision-making techniques Countdown Early stage product volume estimation In addition to MSL, the Company has a specialist indirect subsidiary, MobileSensory Testing Services Limited ("MSTS"), which offers its clients a wideranging product development research service combining sensory profiling andconsumer testing. MSTS has developed expertise in the areas of sensory analysisand profiling of products, with a particular emphasis on the food and drinksector. MSTS provides consultancy to large multi-national companies based both in the UKand abroad including Burger King, Heinz, Danone, and Bacardi. MSTS hasestablished over a number of years a panel of over 100 experts, picked on thebasis of their sensory abilities. Sophisticated analytical tools and mapping techniques are utilised to add valueto the panel data. MSTS currently has 11 full-time employees. The Real Adventure Marketing Communications Limited TRA is a marketing communications company founded in 1991 by Ben Cook, Chairmanand Strategy Director. It is based in Bath and employs 60 full time and 2 part time employees. The focus of the agency is on customer relationship management ("CRM") anddirect marketing including all strategic planning, creative and branddevelopment and implementation of IT system design and build. TRA alsoundertakes all media advertising, including press, print and TV advertising onbehalf of some of its clients. The agency has a predominantly blue chip national client base across a widerange of markets including fast moving consumer goods, financial services, sportand leisure, pharmaceuticals and the motor industry. Being a planning-ledagency, TRA is structured so that along with the creative side of the businessthere is also a strong data-analysis function. This allows the agency not onlyto offer clients a high level of strategic marketing consultancy and creativedevelopment, but also to offer market and consumer analysis through toadvertising campaign support, websites and campaign evaluation systems. Clientsinclude Lloyds TSB, Cow & Gate, Pfizer and Tropicana. EMO Group Limited EMO is a marketing communications company specialising in channel marketing. Itwas originally founded in 1986 as an advertising and design company based inSwindon. The EMO group of companies includes three companies, Emery McLaven OrrLimited ("EMOL"), John Bowler Associates Limited trading as CTC and Sky RockCommunications Limited ("Sky Rock"). CTC and Sky Rock are based in sharedpremises in Bristol. Clients of the EMO group of companies include BMW(GB),MINI, George Wimpey, Andreas Stihl, Bang & Olufson and Honda. The focus of EMO's business is channel marketing and marketing communications.CTC is a brand positioning advertising agency. Sky Rock is a new media, creativeand technical consultancy working in the area of electronic customercommunication. EMO can provide its clients with a full advertising agencyservice from creative development to campaign implementation and management,including press, print, radio and TV advertising campaigns. There are a total of 72 employees across the four companies, with 39 full timeand 8 part time employees being based in Swindon and a further 25 employedbetween CTC and Sky Rock in Bristol. Nelson Bostock Communications Limited NBC is a public relations agency, founded by Martin Bostock and Roger Nelson in1987. The agency, based in Bayswater, London, employs 50 people on a full timebasis and 3 part time employees. It provides a broad range of public relationsand marketing communications consultancy and services, including: • media relations: generating news coverage, features profiles andcommentaries; • influencer relations: working with industry analysts, industry bodiesand Government; • direct communication with industry targets: organising seminars,briefings, exhibitions and conference opportunities; • marketing communications: delivering a range of corporate, industryand consumer communications materials; and • analysis and reporting: analysing results of campaigns bothquantitatively and qualitatively to demonstrate to clients the return oninvestment achieved for their public relations spend. NBC has a growing network of affiliate agencies, and wide experience of creatingand managing public relations campaigns across all key European markets andbeyond. It handles consumer, business-to-business and corporate briefs forclients in sectors including, but not exclusively consumer and business tobusiness public relations. CML Research Limited CML Research is a qualitative market research company, which was founded in1988. CML Research has a core expertise in product, brand and communicationsdevelopment and undertakes qualitative research for a number of large blue chipclients. CML Research's clients include Vodafone, Audi, Clarks, Thomas Cook, andCOI. CML Research is based in London and employs 12 full time employees and onepart-time employee. Current Trading and Future Prospects In the six months to 30 September 2004, Creston delivered strong growth inturnover, gross profit and profit before taxation, with turnover increasing by24 per cent. and profit before taxation increasing by 95 per cent. compared tothe prior year period. In addition the Group's operating profit to gross profitmargin increased to 21 per cent. The Group has continued to make good progress in the second half of the Group'sfinancial year to 31 March 2005 and the Group's trading in the period to 31December 2004 has been ahead of the comparable prior period. The Group's mainoperating subsidiaries continue to demonstrate resilient trading performancesand combined with the increasing level of synergies and cross sellingopportunities within the Group, the Board anticipates further organic growth. The financial results for the DLKW Group for the nine months to 30 September2004 were ahead of the comparable prior period. The DLKW Group's turnover forthe nine month period ended 30 September 2004 was £24.9 million and profit onordinary activities before taxation increased to £2.1 million. The DLKW Group has experienced an increase in new business wins in the period to30 September 2004 and this trend has continued since this period end with recentnew business wins including Intelligent Finance. Since 30 September 2004, theDLKW Group has been trading in line with management's expectations and ahead ofthe comparable prior year period. The Board recognises that the acquisition of the DLKW Group represents a stepchange to the size of the Group, and as such, it will expand its infrastructureaccordingly in terms of IT systems, Human Resource Management and the Group isanticipating appointing a dedicated group wide new business and synergydirector. The Directors believe that the acquisition of the DLKW Group willenable the Group to have the credibility and credentials to pitch for andprovide full service Marketing Communications business and as a result, that theEnlarged Group will benefit in the future from increased operating and synergyopportunities. The Board is confident of the financial and trading prospects ofthe Enlarged Group for at least the current financial year. Financial information The following financial information on Creston, which has been extracted withoutadjustment from the Circular issued to Shareholders today. Six months Ended Year ended Year ended Year ended 30 September 2004 31 March 2004 31 March 2003 31 March 2002 £'000 £'000 £'000 £'000Turnover 16,021 29,453 18,636 9,810Gross Profit 7,010 11,127 6,714 3,434Profit on ordinary activities before taxation 1,460 2,088 912 207 At 30 September 2004 Creston had net assets of £31.0 million. Details of the Placing and Open Offer The Company is proposing to raise approximately £9.5 million (net of expenses)by the issue of 7,048,164 new Ordinary Shares at 145 pence each by way of thePlacing and Open Offer. The net proceeds of the Placing and Open Offer and £5.5million of existing cash resources and new bank facilities will be used to fundthe Initial Consideration for the Acquisition. The fundraising has been structured by way of the Placing and Open Offer inorder to strengthen the Group's shareholder base by allowing, subject toShareholder approval, new institutional shareholders to subscribe for newOrdinary Shares on a firm basis through the Placing, whilst at the same timeproviding existing Shareholders with the opportunity to participate in thefundraising through the Open Offer. The disapplication of statutory pre-emption rights which Shareholders will beasked to approve at the EGM will enable the Directors to issue and allot thePlacing and the Open Offer Shares otherwise than in connection with a pro rataissue of new Ordinary Shares to Shareholders. The Firm Placed Shares represent14.0 per cent. of the Enlarged Issued Share Capital. Under the terms of the Placing Agreement, Charles Stanley as agent for theCompany has placed with institutional and other investors the Placing Shares andOpen Offer Shares at the Issue Price, of which 1,648,654 of the Open OfferShares are conditionally placed, being subject to clawback by QualifyingShareholders in order to meet valid acceptances pursuant to the terms of theOpen Offer. The Company has received irrevocable commitments from certain Directors to takeup all or part of their pro rata entitlements under the Open Offer in respect of510,012 Open Offer Shares. In addition the Company has received irrevocableundertakings from certain Directors and other Shareholders not to subscribe forall or part of their pro rata entitlements under the Open Offer in respect of989,498 Open Offer Shares and those shares have been placed firm withinstitutional and other investors. Charles Stanley, acting as agent for the Company, is inviting QualifyingShareholders to apply to subscribe for Open Offer Shares at the Issue Price of145 pence per share, free of all expenses, payable in full on application, onthe following basis: 1 New Ordinary Share for every 8 existing Ordinary Shares registered in theirname at the close of business on the Record Date and so in proportion for anygreater or lesser number of existing Ordinary Shares then held. The number ofNew Ordinary Shares for which Qualifying Shareholders are entitled to apply isset out on the Application Form. Qualifying Shareholders may apply for more orless than their entitlement of New Ordinary Shares if they so wish. Qualifying Shareholders may apply for as many New Ordinary Shares as they wish,up to a maximum of twice their pro rata entitlement. Any New Ordinary Sharesapplied for in excess of their pro rata entitlement will be satisfied, only tothe extent that corresponding applications by other Qualifying Shareholders aremade for less than their entitlements and excess applications may therefore bescaled down in such a manner as the Company and Charles Stanley may determine.Valid applications up to Qualifying Shareholders' pro rata entitlements will besatisfied in full. Entitlements of Qualifying Shareholders will be rounded down to the nearestwhole number of New Ordinary Shares. Any resulting fractional entitlements ofQualifying Shareholders arising under the Open Offer will not be allocatedpursuant to the Open Offer but will be aggregated and sold by Charles Stanleypursuant to the Placing Agreement for the benefit of the Company. Holdings of Ordinary Shares in certificated and uncertificated form will betreated as separate holdings for the purpose of calculating entitlements underthe Open Offer. The New Ordinary Shares issued pursuant to the Placing and Open Offer, whenissued, will be fully paid and will rank pari passu in all respects with theexisting Ordinary Shares, including the right to receive all dividends and otherdistributions declared made or paid on or after, or by reference to a recorddate on or after, the date of their issue and will be free from all liens andencumbrances. Application has been made to the UK Listing Authority for the Open Offer Sharesand the Placing Shares to be admitted to the Official List of the UK ListingAuthority and for the Open Offer Shares and the Placing Shares to be admitted totrading on the London Stock Exchange's market for listed securities. The OpenOffer Shares and the Placing Shares are not being made available in whole or inpart to the public except under the terms of the Open Offer. The Placing and Open Offer is conditional on the Placing Agreement becoming orbeing declared unconditional in all respects by not later than 8.00 a.m. on 9March 2005 (or such later time and date as Charles Stanley and the Company mayagree, being no later than 8.00 a.m. on 23 March 2005) and not being terminatedin accordance with its terms, conditions and provisions. The Placing Agreementis conditional, inter alia, upon: (a) the passing of the Resolutions at the EGM or at any adjournment thereof; (b) the Acquisition Agreement having become unconditional in all respects (savein respect of Admission); and finally (c) Admission having occurred by 8.00 a.m. on 9 March 2005 (or such later timeand/or date as may be agreed by the Company and Charles Stanley, not being laterthan 8.00 a.m. on 23 March 2005). Under the terms of the Placing Agreement, Charles Stanley has the right toterminate its obligations under the Placing Agreement in the event of, interalia, any of the warranties contained therein not being true in any materialrespect or a breach by the Company in any material respect of the PlacingAgreement. If the conditions of the Placing Agreement are not fulfilled on orbefore the relevant date in the Placing Agreement, application monies will bereturned to applicants without interest as soon as possible thereafter. ThePlacing and Open Offer have not been underwritten. Extraordinary General Meeting An Extraordinary General Meeting of the Company will held at 11.00 a.m. on 4March 2005, at which Shareholders will be asked to consider the Resolutionsnecessary to approve and implement the Proposals. Timetable Record Date for the Open Offer Close of business on 7 February 2005 Latest time and date for splitting of Application Forms(to satisfy bona fide market claims only) 3.00 p.m. on 28 February 2005 Latest time and date for receipt of Application Forms andpayment in full under the Open Offer 3.00 p.m. on 2 March 2005 Latest time and date for receipt of Forms of Proxy for useat the EGM 11.00 a.m. 2 March 2005 Extraordinary General Meeting 11.00 a.m. on 4 March 2005 Expected date of Completion and commencement of dealingsin the New Ordinary Shares 8.00 a.m. on 9 March 2005 CREST member accounts expected to be credited 9 March 2005 Expected date for dispatch by post of definitive sharecertificates for New Ordinary Shares 16 March 2005 Enquiries Creston Plc 020 7930 9757Don Elgie, Chief ExecutiveBarrie Brien, CFO and COO Charles Stanley & Co. Limited 020 7953 2000Mark Taylor Delaney Lund Knox Warren & Partners Limited 020 783 63474Greg Delaney / Mark Lund Redleaf Communications 020 7955 1410Emma Kane 07876 338339 For the purposes of this press release Charles Stanley, which is authorised inthe United Kingdom under the Financial Services and Markets Act 2000, is actingas sponsor and stockbroker to the Company in relation to the Placing and OpenOffer, and is not acting for any other person and will not regard any otherperson (whether or not a recipient of this press release) as its customer inrelation to the Placing and Open Offer and will not be responsible for providingthe protections afforded to customers of Charles Stanley to any other person orfor providing advice to any other person in relation to the Placing and OpenOffer. If you require advice in relation to this press release you shouldcontact your stockbroker, bank manager, solicitor, accountant or otherindependent financial adviser authorised under the Financial Services andMarkets Act 2000. This press release does not constitute, or form part of the Placing and OpenOffer or any invitation to sell or issue, or any solicitation of any offer topurchase or subscribe for, any shares in the Company nor shall this pressrelease or any part of it, or the fact of its distribution, form the basis of,or be relied on, in connection with or act as any inducement to enter into anycontract or commitment whatsoever with respect to the Placing and Open Offer orotherwise. The distribution of the press release in certain jurisdictions may be restrictedby law and therefore persons into whose possession this press release comesshould inform themselves about and observe any such restrictions. Any suchdistribution could result in a violation of the law of such jurisdictions.Neither this press release nor any copy of it may be taken or transmitted ordistributed (directly or indirectly) in or into the United States, Australia,Canada, Japan, the Republic of Ireland or South Africa or to any national,citizen or resident thereof or any corporation, partnership or other entitycreated or organised under the laws thereof. The New Ordinary Shares in theCompany have not been and will not be registered under the United StatesSecurities Act 1933, as amended ("U.S. Securities Act") or under the applicablelaws of Australia, Canada, Japan, the Republic of Ireland or South Africa and,subject to certain exemptions, may not be offered for sale or subscription, orsold or subscribed directly or indirectly, within the United States, Australia,Canada, Japan, the Republic of Ireland or South Africa to or by any national,resident or citizen of such countries. DEFINITIONS The following definitions apply throughout the announcement, unless the contextotherwise requires: "Acquisition" the proposed acquisition of the entire issued share capital of Face Communications and the 26 per cent. of the share capital of DLKW Holdings not already owned by Face Communications, by the Company; "Acquisition Agreement" the conditional sale and purchase agreement dated 8 February 2005 relating to the Acquisition; "the Act" the Companies Act 1985, as amended; "Admission" admission of the New Ordinary Shares to the Official List and to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with the Listing Rules of the UK Listing Authority and the admission and disclosure standards published by the London Stock Exchange; "Application Form" the application form on which Qualifying Shareholders may apply for Open Offer Shares under the Open Offer; "Articles" the articles of association of the Company; "Bank" Barclays Bank plc; "BJK&E Holdings" BJK&E Holdings Limited; "BJK&E" BJK&E Media Limited; "Board" the board of directors of the Company; "Broker" or "Charles Stanley" Charles Stanley & Co. Limited, which is regulated by the Financial Services Authority; "Capita Registrars" a trading division of Capita IRG Plc; "Circular" the circular issued to Shareholders dated 9 February 2005, which comprises a prospectus relating to Creston and is prepared in compliance with the Listing Rules; "CML Research" CML Research Limited; "Combined Code" The Combined Code on Corporate Governance appended to the Listing Rules; "Company" or "Creston" Creston plc; "Completion" completion of the Acquisition in accordance with the terms of the Acquisition Agreement; "Consideration Shares" the 2,697,439 new Ordinary Shares to be issued at 148.4 pence per Ordinary Share in part payment of the Initial Consideration; "Credit Agreement" the credit agreement dated 8 February 2005 between the Company and the Bank; "CREST" the computerised settlement system to facilitate the transfer of title of shares in uncertificated form, operated by CRESTCo; "CRESTCo" CrestCo Limited, the operator (as defined in the Uncertificated Securities Regulations 2001) of CREST; "DLKW & Partners" Delaney Lund Knox Warren & Partners Limited; "DLKW Group" or "DLKW" together Face Communications, DLKW Holdings, DLKW & Partners, DLKW Dialogue, The Composing Room and either BJK&E Holdings or (where the context requires) the minority interest in BJK&E Holdings held by Face Communications; "DLKW Holdings" DLKW Holdings Limited; "Deferred Consideration" the deferred consideration payable pursuant to the Acquisition Agreement; "Dialogue DLKW" Dialogue DLKW Limited (formerly DLKW Dialogue Limited); "Directors" the directors of the Company; "EGM" or "Extraordinary The Extraordinary General Meeting of the Company to be held at 11.00 am on 4 March 2005 or any adjournment thereof, notice of which is set out in theGeneral Meeting" Circular issued to Shareholders today; "EMO" EMO Group Limited; "Enlarged Group" the Group as enlarged by the Acquisition; "Enlarged Issued Share Capital" the issued share capital of the Company immediately following completion of the Proposals; "Firm Placed Shares" the Placing Shares and 510,012 new Ordinary Shares which certain of the Directors and other Shareholders have irrevocably undertaken not to take up under the Open Offer and which have been placed firm by Charles Stanley; "Face Communications" Face Communications Limited; "Form of Proxy" the form of proxy for use by Shareholders in connection with the EGM; "FSA" the Financial Services Authority; "FSMA" the Financial Services and Markets Act 2000, as amended from time to time; "Group" Creston and its subsidiaries as at the date of this document; "Series A Guaranteed Loan Notes The guaranteed loan notes which may be issued in part payment of the2007, Series B Guaranteed Loan Deferred Consideration;Notes 2007 and Guaranteed Loan Notes 2009" "Initial Consideration" the initial consideration to be paid to the Principal Vendors and the Senior Managers pursuant to the Acquisition Agreement; "Interim Consideration" the interim consideration payable on account of the Deferred Consideration pursuant to the Acquisition Agreement; "Issue Price" 145 pence per New Ordinary Share; "London Stock Exchange" the London Stock Exchange plc; "Listing Rules" the listing rules provided for by section 74 of The Financial Services and Markets Act 2000; "Marketing Sciences" or "MSL" Marketing Sciences Limited; "NBC" Nelson Bostock Communications Limited; "New Ordinary Shares" 9,645,603 new Ordinary Shares proposed to be issued and allotted pursuant to the Acquisition, the Placing and the Open Offer; "Official List" the Official List of the UK Listing Authority; "Open Offer" the conditional invitation by Charles Stanley acting as agent and on behalf of the Company to Qualifying Shareholders to apply for the Open Offer Shares; "Open Offer Shares" the 3,148,164 new Ordinary Shares offered for subscription at the Issue Price pursuant to the Open Offer; "Ordinary Shares" ordinary shares of 10 pence each in the capital of the Company; "Overseas Shareholders" Shareholders with registered addresses outside the UK or who are citizens or residents of countries other than the UK; "Placing" the placing of the Placing Shares and the Open Offer Shares by Charles Stanley on behalf of the Company at the Issue Price pursuant to the Placing Agreement; "Placing Agreement" the conditional agreement dated 9 February 2005 between the Company and the Broker relating to the Placing and Open Offer; "Placing Shares" the 3,900,000 new Ordinary Shares which are proposed to be issued by the Company pursuant to the Placing; "Principal Vendors" together Greg Delaney, Mark Lund, Tom Knox, Richard Warren, Gary Betts, Malcolm Green and Matthew Griffiths; "Proposals" the Acquisition, the Placing, the Open Offer and the disapplication of pre-emption rights to allot securities; "Qualifying Shareholders" holders of existing Ordinary Shares on the register of members of the Company at the close of business on the Record Date (and others with bona fide market claims) other than certain Overseas Shareholders; "Record Date" the record date for the Open Offer, being the close of business on 7 February 2005; "Registrars" Capita Registrars; "Regulations" the Public Offers of Securities Regulations 1995, as amended; "Resolutions" the resolutions set out in the notice of Extraordinary General Meeting in the Circular issued to Shareholders today; "Senior Managers" together Simon Andrews, Tara Howell, James Pool, Andy Ravan, Charlie Snow, Richard J. Warren, Mel Bagg, David Adamson, Richard Prentice, Ronnie Brown, Jon Elsom, Ken Sara, Tony Dell, Sam O'Grady, Kimberley Eyre-Varnier, Carmen Dixon, Tristyn Knight, Noreen Lovelock, Richard Allanson, Sandya Piyasena, Janet Gray, Sally Macguire, Gavin Whatrup, Martin Ansell, Natasha Tinklin and Robert Berezowski; "Shareholders" holders of issued Ordinary Shares on the date hereof; "Share Option Schemes" the Creston unapproved share option scheme, the Creston Sharesave Scheme and the Creston EMI Share Option Scheme ; "The Composing Room" The Composing Room Limited; "The Real Adventure" or "TRA" The Real Adventure Marketing Communications Limited; "UK Listing Authority" or "UKLA" the FSA acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000; "Unsecured Loan The loan notes which may be issued in part payment of the DeferredNotes 2009" Consideration; "US" or "United States" the United States of America, its territories and possessions, any state of the United States and the District of Columbia; "VAT" value added tax of the United Kingdom; "Vendors" together the Principal Vendors, the Senior Managers and the trustees of the Face Communications Employee Benefit Trust being Mark Lund and Matthew Griffiths; "Warrants" the warrants to subscribe for 1,908,869 Ordinary Shares pursuant to a deed poll dated 3 January 2001. This information is provided by RNS The company news service from the London Stock Exchange