RNS Number:0735N
Incepta Group PLC
02 July 2003
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO
THE UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF IRELAND, JAPAN OR SOUTH AFRICA.
2 July 2003
Incepta raises #25.7 million new equity capital
Incepta Group plc ("Incepta", "the Group" or "the Company"), today announces it is raising a net #25.7
million of new equity capital through a fully underwritten Rights Issue and an Issue for Cash of new
shares at 13.0 pence per share, representing a discount of 14.7 per. cent. to the mid-market price of
Incepta's shares as at close of trading yesterday. This capital raising is subject to shareholder
approval, which will be sought at an Extraordinary General Meeting to be held on 28 July 2003.
The Rights Issue of 1 new Ordinary Share for every 5 Existing Ordinary Shares has been fully
underwritten by Collins Stewart; and Collins Stewart has procured subscribers for the Issue for Cash of
76.9 million new Ordinary Shares, each at 13.0 pence per new Ordinary Share.
The Group is undertaking this capital raising to put Incepta's financial position on a more prudent
basis, and to protect its financial position in the event that economic recovery is further delayed.
The capital raising will also maintain Incepta's financial flexibility which the Board believes will
enable its leading market positions to deliver medium term growth.
Commenting, David Wright, Non-Executive Chairman of Incepta said:
"We maintain our view of current trading conditions and prospects as previously reported, with
underlying gross revenues in the first quarter broadly in line with the quarterly average of the second
half of last year. We are conscious however, that the timing and speed of recovery in our sector
generally remain hard to predict. We therefore wish to reinforce our financial position,
differentiating Incepta in this respect, and placing the Group in a stronger position to take advantage
of the market recovery we believe will come. The approach we have taken delivers certainty of increased
funding with decreased leverage and demonstrates the confidence of institutional shareholders in the
Group's potential."
For further information please contact:
Richard Nichols, Chief Executive, Incepta Group plc Tel: 020 7282 2865
Mike Butterworth, Finance Director, Incepta Group plc
Patrick Toyne Sewell/Fiona Bradshaw, Citigate Dewe Rogerson Tel: 020 7638 9571
Michael Higgins, Partner, KPMG Corporate Finance Tel: 020 7311 4214
Stephen Roberts, Collins Stewart Corporate Finance Tel: 020 7523 8313
Further details
Incepta announces today that it proposes to raise approximately #27.7 million, being #25.7 million net
of expenses, by the issue of 1 new Ordinary Share for every 5 Existing Ordinary Shares at a price of
13.0 pence and the issue of 76.9 million new Ordinary Shares at a price of 13.0 pence to four
institutional investors.
Due to the significant employee ownership within the shareholder base of the Company, the Board does
not believe that the Company could obtain a sufficient level of irrevocable undertakings from existing
Shareholders not to take up their entitlements under the Rights Issue, such that those institutional
investors wishing to make a firm investment in the Company could be assured of the opportunity to
subscribe.
Structuring the fundraising by way of a Rights Issue and Issue for Cash is intended to strengthen the
shareholder base by allowing, subject to Shareholder approval, a limited number of new institutional
investors to subscribe for new Ordinary Shares on a conditional firm basis through the Issue for Cash,
whilst at the same time providing existing Shareholders with the opportunity to participate in the
fundraising through the Rights Issue pro rata to their existing shareholdings, at the same discount to
current share price. Accordingly, the Board has, subject to Shareholder approval, agreed with four
institutions to issue 76.9 million new Ordinary Shares for cash, in conjunction with the Rights Issue.
The proposed capital raising is to be made by way of a Rights Issue of approximately 136.0 million new
Ordinary Shares to Qualifying Shareholders on the basis of 1 new Ordinary Share for every 5 Existing
Ordinary Shares held at the close of business on 23 July 2003 and an Issue for Cash of approximately
76.9 million new Ordinary Shares to four institutional investors. The Rights Issue has been fully
underwritten by Collins Stewart and Collins Stewart has procured subscribers for New Ordinary Shares to
be issued pursuant to the Issue for Cash. KPMG Corporate Finance is acting as sponsor and financial
adviser, Collins Stewart and HSBC are acting as joint brokers. The Issue Price in each case of 13.0
pence represents a discount of 14.7 per cent. to the middle market closing price of 15.25 pence per
Ordinary Share on 1 July 2003, the last dealing day prior to the announcement of the Issues.
To implement the Issues, there will be an Extraordinary General Meeting to seek authority from
Shareholders to issue and allot the New Ordinary Shares.
Background
Over the last two years, the media industry has faced some of the most challenging conditions that have
been seen for some considerable time. Incepta's results have reflected this challenging trading
environment. However, given the leading market positions enjoyed by the Group's businesses and careful
management of its cost base, Incepta has delivered double-digit operating margins and strong operating
cash flows throughout this period.
Incepta entered the new financial year with its businesses well positioned to exploit any upturn in the
market as and when it occurs. In the Annual Review for the year ended 28 February 2003 Incepta stated
that it was yet to see any signs of a sustained recovery. That position largely remains although the
Group is seeing patches of encouraging performance alongside improving sentiment and has witnessed some
significant new business wins in a number of areas of the Group.
Notwithstanding the strong operating cash flows of the Group throughout this period, the combination of
the payment of a significant number of earn-outs and the challenging trading conditions over the last
two years leaves the Group with net debt of around #90 million. Whilst Incepta continues to operate
within the facility limits and financial covenants contained within its current committed medium term
bank facilities, the lack of certainty as to the timing and speed of recovery in the sector means that
the Board believes that an increased margin of comfort within Incepta's financing arrangements is
appropriate, is financially prudent and will maintain the Company's financial flexibility.
The entire proceeds of the Issues will be used to reduce borrowing and put Incepta in a stronger
financial position in the event that the economic recovery is further delayed. It will also maintain
Incepta's financial flexibility which the Board believes will enable the market leading positions of
its businesses to deliver medium term growth.
Current trading and prospects
Trading for the first quarter of the new financial year has been tough, but following the resolution of
the Iraq conflict, the Group has seen somewhat stronger trading in May. Gross revenues now appear to
be stabilising, with underlying gross revenues in the first quarter broadly in line with the quarterly
average of the second half of last year. Underlying operating margins remain broadly consistent with
those generated in the second half of last year. As expected, gross revenues are likely to be down on
the comparable first half of last year reflecting the changed economic environment. Whilst some
commentators are forecasting an improvement in the economic environment going forward with a gradual
improvement in the level of investor confidence and corporate activity, this has not been reflected in
the Group's trading results This, combined with limited visibility, means that Incepta will maintain
its cautious outlook until there is clearer evidence of a sustained recovery. Meanwhile the Group
continues to compete successfully for new clients with notable wins in many of its businesses.
Incepta's Marketing Services businesses continue to show their strength and resilience, with
particularly strong performances during the first quarter from Finex, Dynamo and RED. Client wins
include work for Marks & Spencer and the DVLA (RED); BAA and Sainsbury's Bank (Dynamo); Philips and
Orange (Sponsorship); and Barclaycard and Aventis (Marketing Intelligence). Citigate Broad Street,
Incepta's New York based specialist communications business, has been operating in weak markets in the
first quarter, exacerbated by the impact of the Iraq conflict.
Incepta's Public Relations businesses are underpinned by their significant retained client base and
have won a notable number of new clients, including Telewest, Freeserve, Kwik-Fit, and Halfords.
Incepta also retains its strong market positions and continues to be successful in winning a
significant proportion of the high profile transactions that have taken place. Recent transaction work
has included advising HSH Nordbank, Martha Stewart, Airborne on its merger with DHL, Iberdrola on its
successful hostile bid defence and Telefonica on its tender offer for Terra Networks. Nevertheless, the
overall level of corporate activity in mergers, acquisitions and public offerings remains low, although
the Group expects to benefit strongly when these levels increase.
Incepta's Specialist Advertising businesses, both financial and corporate, continue to operate in weak
markets.
Against this backdrop, Incepta has continued proactively to manage its cost base without compromising
its competitive position. Incepta anticipates generating additional annualised savings of approximately
#3 million, principally through a recent reduction in staff numbers, which will result in an
exceptional charge of around #1.5 million in the first half of the current financial year.
In the Annual Review for the year ended 28 February 2003 the Group reported that economic conditions
remained difficult and that it had yet to see any signs of sustained recovery in its markets. The
overall performance for the first half will be affected accordingly. However, the Board remains
determined to meet its current expectations for the current financial year; the ability to do so will
be dependent upon a sustainable recovery in the second half of the year. The Board remains confident in
the Group's medium term prospects.
Expected Timetable
Record date for the Rights Issue close of business on 23 July 2003
Extraordinary General Meeting 10:00 a.m. on 28 July 2003
Despatch of Provisional Allotment letters ("PALs") 28 July 2003
Admission and dealings in Nil Paid Rights commence 29 July 2003
Latest time and date for splitting PALs 3:00 p.m. on 14 August 2003
Latest time and date for acceptance, payment in full and
registration of renunciation 10:30 a.m. on 18 August 2003
Date for crediting CREST stock accounts 19 August 2003
Date of despatch of definitive share certificates in respect
of Rights Shares 26 August 2003
Principal terms of the Rights Issue
The Board proposes to offer approximately 136.0 million Rights Shares by way of a Rights Issue to
Qualifying Shareholders at 13.0 pence per Rights Share. The Rights Issue will be on the basis of 1 new
Ordinary Share for every 5 Existing Ordinary Shares held by Qualifying Shareholders on the Record Date.
The Issue Price of 13.0 pence per new Ordinary Share represents a 14.7 per cent. discount to the
closing middle market price of 15.25 pence per share on 1 July 2003, the last dealing day before the
announcement of the Issues.
The Rights Issue is conditional upon (i) the passing of Resolution No.1 at the Extraordinary General
Meeting, (ii) Admission of the Nil Paid Rights and the Issue for Cash Shares becoming effective on or
before 8:00 a.m. on 29 July 2003 (or such later time and/or date as Collins Stewart, KPMG Corporate
Finance and Incepta may agree in writing, being not later than 12 August 2003), and (iii) the
Underwriting Agreement becoming unconditional in all respects and not having been terminated in
accordance with its terms on or before Admission.
The Rights Shares will, when issued and fully paid, rank equally with the Existing Ordinary Shares and
the Issue for Cash Shares.
It is expected that Admission will become effective and dealings in the Nil Paid Rights will commence
on 29 July 2003.
Principal terms of the Issue for Cash
The Board proposes to allot approximately 76.9 million Issue for Cash Shares at 13.0 pence per Issue
for Cash Share to the institutions who have irrevocably committed to subscribe for Issue for Cash
Shares in the amounts indicated below:
Name of institution Number of Issue for Cash Gross proceeds
Shares allotted #'000s
Merrill Lynch Investment Managers 38,461,537 #5,000
Deutsche Asset Management 15,384,616 #2,000
Legal & General Investment Management 11,538,462 #1,500
Henderson Global Investors 11,538,462 #1,500
Collins Stewart has procured the institutions listed above to subscribe for the Issue for Cash Shares
or itself to subscribe for those shares only if such subscribers are in breach of their contractual
obligations.
The Issue for Cash is conditional upon (i) the passing of Resolution No.1 at the Extraordinary General
Meeting, (ii) Admission of the Issue for Cash Shares and Nil Paid Rights becoming effective on or
before 8:00 a.m. on 29 July 2003 (or such later time and/or date as Collins Stewart, KPMG Corporate
Finance and Incepta may agree in writing, being not later than 12 August 2003), and (iii) the
Underwriting Agreement becoming unconditional in all respects and not having been terminated in
accordance with its terms on or before Admission.
The Issue for Cash Shares will, when issued and fully paid, rank equally with the Existing Ordinary
Shares and the Rights Shares.
It is expected that Admission will become effective and dealings in the Issue for Cash Shares will
commence on 29 July 2003.
Share Capital Consolidation
The Directors consider it appropriate to consolidate the share capital of the Company and will
therefore be proposing at the Extraordinary General Meeting an ordinary resolution to consolidate the
share capital of the Company on a 5 for 1 basis with effect from 5:00 p.m. on 29 August 2003.
Notes
The Prospectus to Shareholders which contains details of the Rights Issue and Issue for Cash and is
expected to be posted shortly and by no later than 3 July 2003.
This announcement shall not constitute or form any part of any offer or invitation to subscribe for,
underwrite or otherwise acquire, or any solicitation of any offer to purchase or subscribe for, the Nil
Paid Rights, the Fully Paid Rights or the New Ordinary Shares (the "Securities"). Any purchase of, or
application for, Securities in the Issues should only be made on the basis of information in the
Prospectus and any supplement thereto.
None of the Nil Paid Rights, the Fully Paid Rights, the New Ordinary Shares nor the Provisional
Allotment Letters have been or will be registered under the United States Securities Act of 1933, as
amended (the "Securities Act"), or qualified for sale under the securities laws of any state of the
United States or of any province or territory of Australia, Canada, Japan, South Africa or the Republic
of Ireland and, accordingly, unless a relevant exemption from the requirements of those jurisdictions
is available, they may not be offered, sold, taken up, delivered, renounced or transferred directly or
indirectly in or into Australia, the United States, Canada, Japan, South Africa or the Republic of
Ireland. No prospectus in relation to the New Ordinary Shares has been lodged with, nor has the offer
or sale of the New Ordinary Shares been registered by the United States Securities and Exchange
Commission, the Australian Securities & Investment Commission or any securities authority in Canada,
Japan South Africa or the Republic of Ireland. Overseas Shareholders and any person (including, without
limitation, nominees and trustees) who has a contractual or other legal obligation to forward this
document to a jurisdiction outside the UK should seek appropriate advice before taking any action. The
attention of Overseas Shareholders is specifically drawn to the paragraph entitled "Overseas
Shareholders" in paragraph 5 of Part III of the Prospectus.
Prices and values of, and income from, shares may go down as well as up and an investor may not get
back the amount invested. It should be noted that past performance is no guide to future performance.
Persons needing advice should consult an independent adviser.
KPMG Corporate Finance, a division of KPMG LLP which is authorised by the Financial Services Authority
for investment business activities, is acting as sponsor and financial adviser, Collins Stewart, which
is regulated by the Financial Services Authority, is acting as joint broker and underwriter, and HSBC,
which is regulated by the Financial Services Authority, is acting as joint broker for Incepta in
relation to the matters described in this release. KPMG Corporate Finance, Collins Stewart and HSBC
will not be responsible to any person other than Incepta for providing the protections afforded to
their respective clients or for providing advice in relation to the Issues or any matters referred to
herein.
The address of KPMG Corporate Finance is 8 Salisbury Square, London, EC4Y 8BB, the address of Collins
Stewart is 9th Floor, 88 Wood Street, London EC2V 7QR, and the address of HSBC is 8 Canada Square,
London E14 5HQ.
Information on Incepta Group plc
Incepta is an international marketing and communications group with over 2,000 employees operating out
of 78 offices across 19 countries, its principal activities being marketing services, public relations
and specialist advertising. Incepta offers its clients an integrated range of marketing and
communications services from high value advisory to effective implementation in the world's leading
financial and business centres.
The financial and corporate communications divisions, embracing public relations, business
investigations and intelligence, public affairs, market research, specialist advertising and design and
branding, all trade under the Citigate name.
The marketing services companies offer services including promotional marketing, direct marketing,
market intelligence, consumer public relations, sponsorship, face to face communications, branded
launches, event management and on-line communications.
The Group's culture and core set of values is focussed on generating a genuine business environment in
which its companies' cleverness, creativity and passion can thrive.
This information is provided by RNS
The company news service from the London Stock Exchange
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