Acquisition of Bray Leino and first day of dealings
13th April 2006
The Mission Marketing Group plc ('themission®') today announces the commencement of dealings in its Ordinary Shares on the AIM market of the London Stock Exchange with symbol TMMG. themission® is a regionally based advertising and marketing business that specialises in providing regional, national and international clients with award winning advertising and below the line marketing.
The Company has raised £14.8 million (before expenses) through a placing by Seymour Pierce Limited, the Company's nominated adviser and broker, of 12.3 million Placing Shares at a Placing Price of 120p per Ordinary Share.
The Placing Shares represent 61.67% of the Enlarged Share Capital of the Company. Based on the Placing Price, the market capitalisation of themission® will be £24.0 million.
themission® has also completed the acquisition of Bray Leino, a leading marketing communications agency. Bray Leino will add significant scale to the existing operations in themission® - Big Communications and Fuse Digital - and upon IPO Bray Leino shareholders will be significant shareholders in themission®. The enlarged group is the third largest regional agency in the UK.
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.
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 Company plans to offer an expanded range of specialist marketing services to a large client base.
Commenting on the listing, Iain Ferguson, Chief Executive said:
"Listing on AIM will allow us to build themission® into the first regional super-agency. The acquisition of Bray Leino is a transforming deal that provides us a strong platform for future growth and establishes us as the third largest regional agency in the UK."
"Economic and industry trends favour creative, effective, cost-efficient agencies with national and international capabilities. 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."
Historical development
Big Communications, based in Leicester, was established in 1996. Its clients include several major national brands which have been retained over extended periods. The agency's disciplines include brand planning and strategic 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 new media 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 and Carlsberg. It employs 12 staff.
The combination of Big and Fuse extended the service offering available to their respective client base. The successful acquisition and integration of these businesses has provided a base for further development. 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.
Acquisition of Bray Leino
Established in 1975, Bray Leino is a leading regional marketing communications agency, retained by a wide roster of major clients including Wrigley's, Shloer, WRAP (the Waste Resources Action Programme) and the global automotive company Federal Mogul. Its healthcare division acts for Bausch & Lomb, Sanofi Pasteur MSD Thornton & Ross and Dermal. Clients of its public relations consultancy include WRAP, Mitel 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.
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.
Management
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 Proctor & Gamble and Britvic. Iain Ferguson, previously CEO of worldwide agency network EuroRSCG Marketing Services, 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
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, one of the UK's largest advertisers, announced a change to its roster of agencies to 'give it greater 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 a higher return on capital,.
themission® expects to capitalise on these changes by expanding both organically and through acquisition.
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