Acquisition and Trading Update

RNS Number : 4064N

St. Ives PLC

29 January 2016

 

29 January 2016

St Ives plc

Acquisition and Trading Update

Acquisition of The App Business

St Ives plc ("St Ives" or the "Group"), the international marketing services group, announces that it has agreed to acquire 82.16% of The App Business Limited ("TAB"), www.theappbusiness.com, a mobile-led consultancy specialising in strategy, product development and business transformation. St Ives intends to acquire the remaining 17.84% pursuant to an option arrangement as described below.

Established in 2009, the business employs over 100 staff and is headquartered in London. The company has a strong blue chip client base with particular strength in the consumer goods, automotive, travel, retail and publishing sectors.

The acquisition represents a continuation of St Ives' strategy to further enhance its wider digital expertise and, following the recent acquisition of Solstice Mobile, provides the Group with additional scale and deeper strategy and development capabilities within the fast growing mobile technology sector.

In the financial year ended 30 April 2014, TAB generated EBITDA of £1.5 million and revenue of £5.1 million, with gross assets of £2.7 million. For the financial year ended 30 April 2015 TAB generated EBITDA of £3.7 million and revenue of £11.3 million (as per unaudited management accounts).

St Ives has agreed to acquire TAB on a cash and debt free basis and has acquired 82.16% of the issued share capital of TAB, for an initial consideration of £22.3 million to be satisfied by approximately £16.7 million in cash and the issue of approximately 2.6 million St Ives shares to the vendors.  The Company intends to acquire the remaining 17.84% of the issued share capital pursuant to a call option, exercisable by St Ives with the consent of the relevant TAB seller, between 11 February 2016 and 18 February 2016. Alternatively, the Company may acquire the remaining shares pursuant to a put option exercisable by the relevant TAB seller between 4 February 2016 and 11 February 2016.  The exercise of the put or call option will be satisfied by approximately £3.7 million in cash and the issue of approximately 0.6 million St Ives shares.

Further deferred consideration of up to £27.8 million may be payable (to be satisfied not less than 75% in cash and up to 25% in shares) dependent on incremental profit performance for the financial years ending 30 April 2016, 2017 and 2018. The cash component of the consideration will be funded through existing cash reserves, the proceeds of a placing (the "Placing") and the Group's debt facilities. In this regard, additional bank financing of £10 million has also been secured from the Group's existing debt providers, with pro forma leverage expected to be approximately 1.5 times EBITDA at 29 January 2016.

The Acquisition (including the impact of the Placing) is expected to be earnings enhancing, on an underlying basis, in the current financial year.

TAB will operate as a subsidiary of St Ives and will continue to be managed from its current location by its existing management team, which includes Daniel Joseph and Rob Evans, the principal vendors.

Trading update

Trading for the half year ending 29 January 2016 is expected to be in line with management expectations, with Group revenue expected to be running 5% ahead of the equivalent period in the prior year.

As detailed in our December update, trading across our Strategic Marketing segment continues to be strong and significantly ahead of the equivalent period last year, with expected organic growth for the half year of approximately 15% driven by a combination of international expansion and greater collaboration across our businesses, combined with expected acquisition-driven growth of approximately 20%.

Trading conditions within our Marketing Activation segment continue to be challenging due to the ongoing pressures within the grocery retail market. Some revenue has been lost and it is expected that within the segment, revenue for the half year is expected to be approximately 10% lower than the prior year. However, margin percentage is expected to be in line with the prior year as new business wins, cost reductions and efficiency improvements helped to mitigate this pressure. Diversification of the client base to reduce this segment's dependency on the grocery sector remains a priority.

Within our Books business we expect revenue for the half year to be broadly in line with the equivalent period in the prior year. The previously announced Penguin Random House contract win is now generating additional volumes for the Group, further increasing its market share of the UK book printing industry, albeit the costs associated with the transition of this work have resulted in a moderate reduction in margin.

Our balance sheet remains in a strong position, giving us the capacity to invest further in our existing businesses and, where appropriate, to acquire further Strategic Marketing businesses that meet our stringent financial and cultural criteria and enhance our client offering. However, in order to further strengthen our ability to invest in growth opportunities, we have today undertaken a Placing.

Commenting on the acquisition Matt Armitage, Chief Executive of St Ives, said: "This acquisition further strengthens St Ives' digital credentials, and, coupled with the recent acquisition of US based Solstice Mobile in 2015, significantly increases the Group's mobile strategy and product development engineering capabilities."

Daniel Joseph and Rob Evans, co-founders of TAB said: "St Ives track record of accelerating the growth of autonomous businesses will enable TAB and its team to achieve its goals faster and serve our clients' emerging needs even better. We couldn't be more excited about the journey ahead."

- Ends -

For further information please contact:

St Ives plc                                                        020 7928 8844

Matt Armitage, Chief Executive

Brad Gray, Chief Financial Officer

Numis Securities Ltd                                        020 7260 1000

Chris Wilkinson / Nick Westlake / Lorna Tilbian

MHP Communications                                     020 3128 8100

John Olsen / Giles Robinson / Gina Bell

About St Ives Group

St Ives is an international marketing services group, made up of a number of successful and dynamic businesses serving leading brands internationally, with offices in the UK, North America, China and Singapore.

We operate not as a single entity but as a group of businesses, each with its own value proposition, offering complementary services and collaborating closely with each other wherever this adds value to clients. We work with a large number of leading, international consumer-facing brands across all major sectors - including retail & FMCG, healthcare & pharma, financial services, media, technology, automotive and charity - helping them determine strategic direction, and designing and delivering solutions to match their specific requirements.

Our Strategic Marketing businesses have strong capabilities across three specialist high growth areas: data, digital and insight.

Our Marketing Activation businesses, which deliver marketing communications through a combination of print and in-store marketing services, complement our Strategic Marketing offering and collaborate with them where this adds value to clients.

The Group's strategy for further growth is centred around three key priorities:

o  organic growth through collaboration and investment in our existing brands;

o  internationalisation, often client-led, into large and high growth markets; combined with

o  further acquisitions of complementary, ambitious and growing Strategic Marketing businesses that share our common attributes and ethos.

Our longstanding Books business represents another valuable source of profit and cash generation as the Group continues to expand.

Important information

This Announcement is for information only and does not constitute an offer or invitation to underwrite, subscribe for or otherwise acquire or dispose of any securities or investment advice in any jurisdiction, including without limitation, the United Kingdom, the United States, Australia, Canada, Japan, South Africa or any other jurisdiction in which release, publication or distribution of this announcement would be unlawful. Persons needing advice should consult an independent financial adviser.

The distribution of this Announcement in certain jurisdictions may be restricted by law.  No action has been taken by the Company that would permit an offering of shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required.  Persons into whose possession this Announcement comes are required by the Company and Numis Securities Limited to inform themselves about, and to observe, such restrictions.

This Announcement includes statements, estimates, opinions and projections with respect to anticipated future performance of the Group ("forward-looking statements") which reflect various assumptions concerning anticipated results taken from the Group'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.

 

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