Advertising group to float
themission® plans the first regional 'super-agency'
19th February 2006
The Mission Marketing Group ('themission®'), a regionally based marketing business, announced today its intention to seek an AIM listing. themission® specialises in providing regional, national and international clients with award winning advertising and below the line marketing. On listing, themission® will be the third largest regional agency in the UK, with a wide geographic coverage.
themission® was incorporated in 2002 and through the acquisition of two established agencies, Big Communications and Fuse Digital in early 2005, themission® clients include well known brands such as the vodka drink WKD, financial services group Alliance & Leicester, accountants Grant Thornton, Next, Virgin Cola, Carlsberg, Lucozade, Greenpeace and the British Heart Foundation.
Immediately on admission to AIM, themission® will complete the acquisition of Bray Leino, a leading regional marketing communications agency, Bray Leino is a high quality business working with global clients. Its healthcare business is a leading UK agency in this sector.
The acquisition will give the themission® national scale with presence in Bristol, Filleigh, Leicester, London and in Scotland. Following the transaction, Bray Leino shareholders will be significant shareholders in themission®.
Combined proforma turnover for the enlarged group (including Bray Leino) was £47.5 million and operating profit was £4.1million (before amortisation of goodwill and non-recurring items) for the year ended 31 December 2005.
Historical development
Big Communications, based in Leicester, was established in 1996 and since then has built a loyal client base. The agency's disciplines include brand planning and development; television, poster and press advertising; literature and catalogue design; and direct marketing and retail point-of-sale. Since its creation the company has won scores of industry awards and today employs some 53 staff.
Fuse Digital, also based in Leicester and incorporated in 2000, provides expertise in digital marketing including website development and advertising, SMS messaging and digital video. In recent years, the agency has capitalised on the growth in digital marketing and today has a client base including WKD, Lucozade, Greenpeace, Carlsberg and Quorn. It employs 12 staff.
The combination of Big and Fuse extended the service offering available to their respective client base. The two companies collaborate successfully with resultant benefits of integrated planning and creative strategies and de-duplication of costs. This approach is consistent with themission® strategy of growing the business through a combination of organic growth across the network and selective acquisitions of leading agencies that meet themission®'s criteria.
themission®'s management team combines both big and small agency expertise with experience of building and developing advertising agency networks. The Chairman, The Right Hon. Francis Maude, has broad industry experience having served as a non-executive director of Asda Group, a managing director of Morgan Stanley and was chairman of Incepta prior to its merger with Huntsworth plc. Martin Banbury, deputy Chairman, founded themission® as well as agency group, Communicator. He also has client side experience at P&G and Britvic. Iain Ferguson previously CEO of worldwide agency network EuroRSCG Marketing Services and has been responsible for creating and operating agency networks in the UK and internationally. Tim Alderson, CFO, was the CFO of Creston plc where he played an important role in its successful buy and build strategy. Brian Child is a Non-Executive Director and was formerly the UK Group Chairman and CEO of McCann World Group and is the current Chairman of the Marketeer Association.
Future progress
Market reports published by Willott Kingston Smith indicate that good future growth is expected in the UK marketing services sector. In 2004 the value of the sector exceeded £30 billion; this figure is expected to have grown to £31.2 billion in 2005, and to reach some £32.8 billion in 2006, benefiting from the Winter Olympics and the FIFA World Cup in Germany. In the same report, growth rates of 5-7% per annum for the UK marketing sector are expected over the next 5-7 years.
The Board believes that a growing proportion of marketing budgets will be allocated to regional agencies for several reasons:
- A move by some major companies to seek alternatives to the traditional mass media legacy model. With its established, multi-disciplined agencies, the directors believe that themission® will benefit from this trend;
- In 2005, the Central Office of Information, the UK's largest advertiser, announced a change to its roster of agencies to help 'increase its coverage in the regions'
- Investment and relocation to the regions by national and international corporations is likely to continue;
- Government investment in regenerating regional economies is expected to continue;
- Clients are seeking effective marketing campaigns at competitive pricing, which is expected to benefit agencies located outside the capital where costs are lower. A recent analysis carried out by Willott Kingston Smith confirmed that on average regional agencies have lower operating and staff costs, higher margins and return on capital, and a faster reaction to market conditions than their larger London based peers.
themission® expects to capitalise on these changes by expanding both organically and through acquisition. As part of its flotation, themission® will acquire Bray Leino, a national, multi-discipline agency, for an initial cash consideration of £24.5 million (in cash and shares), with a maximum consideration of £32.5 million subject to Bray Leino achieving challenging growth targets. Established in 1975, Bray Leino is a full service agency, retained by a wide roster of major clients including Wrigley's, Seagate, Shloer, Britax, Spanish Citrus and the global automotive company Federal Mogul. Its healthcare division acts for Bausch & Lomb, Dendron, Lilly, Sanofi Pasteur MSD and Dermal. Clients of its rapidly growing public relations consultancy include BP and Britax. Bray Leino Learning provides high quality learning and development services to both the public and private sectors through its national network of around 160 independent consultants. The events division works for Aquascutum, Bally, Mulberry and Genzyme. Recent wins include Joe Bloggs, Lee Cooper, Camel Active, as well as Corgi Toys.
In the year ending 31 December 2005, Bray Leino produced an adjusted pro-forma operating profit of £3.6 million (before amortisation of goodwill and non-recurring items) on a turnover of £42.4 million.
Based on last year's Campaign magazine regional survey, themission® (including Bray Leino) would have ranked third in the UK.
As part of a larger group, the directors believe that any acquired agencies will benefit from economies of scale, national coverage, wider resources, increased product portfolio and a larger current and potential client base. This scale will also open up new business opportunities that would not have been available to the individual agencies. themission® will provide a range of specialist skills including advertising, design, direct marketing, digital/on-line marketing, sales promotion, public relations, event management, training and media planning to regional, national and international clients.
Reasons for listing
An AIM listing will provide themission® with access to new capital with which to grow its existing businesses and develop rapidly through the acquisition of regionally based marketing agencies. Following the integration of Bray Leino, the Company expects to make a number of further acquisitions creating a significant agency grouping which has a strong national and regional reach, extensive central resources, an efficient cost structure and a management focus on good cash flow. The Group plans to offer an expanded range of specialist marketing services to a large client base.
Commenting, Iain Ferguson, Chief Executive said:
'We aim to build themission® into the first regional super-agency. Economic and industry trends favour creative, effective, cost-efficient agencies with regional and national coverage. themission® can capitalise on a changing market by offering great talent and delivering award winning work in new and traditional media whilst enjoying the benefits of a relatively lower cost base.'
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