Embargoed Release: 08:00 hrs Monday 7th June 2004
MKM Group plc
(`MKM' or the `Group')
First Day of Dealings
MKM Group plc, specialists in the creation of travel, leisure and entertainment
campaigns, loyalty programmes, third party sourcing and aspirational
experiences for corporate clients, is pleased to announce the admission of its
ordinary shares to trading on the Alternative Investment Market of the London
Stock Exchange plc (`AIM').
Mark Koch, CEO, commented:
""We are delighted to have successfully completed the flotation of the Group on
to the Alternative Investment Market. Over the years we have built MKM into one
of the country's foremost providers of travel, leisure and lifestyle
promotions. We work closely with many blue chip companies such as HSBC, Sony
and Sainsbury's and, following our flotation I have every confidence that we
can exploit our commercial relationships to grow our core business, our luxury
tour operator, our aspirational experiences brand and our loyalty programme
through the many cross-selling opportunities we have."
Clive Garston, Chairman, commented:
"MKM has a long and proven track record of achieving great success within its
industry and I am delighted that the Group is joining AIM as we strive to
become the number one player in our market space. Above and beyond the Group's
impressive financial history I am extremely encouraged by the maturity and
depth of the commercial relationships built up with a number of the UK's
leading blue chip companies. The Group's present client list, which includes
HSBC Group, Texaco, Sainsbury's, Tesco, Arcadia, Nestle, the AA, the FT, the
Express Newspaper Group and Sony, is truly impressive and is testament to the
quality and experience of the people at MKM. Furthermore, I fully support
Mark's confidence in the Group's ability to exploit its commercial
relationships and penetrate the aspirational experiences market through
cross-selling. We have all been very pleased with the level of institutional
support that has been received in the Group's flotation and I look forward to
delivering enhanced value to our shareholders as we begin to leverage our
public company status to drive the growth rate of the business"
For Further Information:
Mark Koch MKM Group 0161 877 1112
CEO
David W. Youngman W.H. Ireland 0161 832 6644
Andrew Tan Hansard Communications plc 020 7245 1100
KEY STATISTICS
Number of Existing Ordinary Shares 10,000,000
Placing Price 44p
Number of Placing Shares 5,454,545
Number of New Ordinary Shares being placed on behalf of the 3,181,818
Company
Number of Sale Shares being placed on behalf of the Selling 2,272,727
Shareholders
Number of Ordinary Shares in issue following the Proposals 13,181,818
New Ordinary Shares as a percentage of the enlarged issued share 24.1%
capital
Gross proceeds of the Placing to the Company �1,400,000
Market capitalisation at the Placing Price �5,800,000
Estimated net proceeds of the Placing receivable by the Company �1,000,000.
(after deduction of the expenses of the Proposals)
INTRODUCTION
The Group specialises in promotional travel, leisure and entertainment
campaigns and third party sourcing. Its client base includes blue chip
financial institutions, retailers, newspaper groups and supermarkets for which
it creates and produces innovative incentive programmes. The Company proposes
to seek admission of its entire issued and to be issued ordinary share capital
to trading on AIM and is raising �1.4 million by way of a placing of 3,181,818
New Ordinary Shares. The Placing Shares consist of 3,181,818 New Ordinary
Shares and 2,272,727 Sale Shares. The monies raised by the Company will be used
to provide working capital for the Group and to develop new products. The
Selling Shareholders are placing the Sale Shares with institutional investors
at the Placing Price.
HISTORY AND BUSINESS
History
Mark Koch set up MKM Marketing & Promotions in 1989, initially with only one
other member of staff. In 1993 MKM Holdings was incorporated to become the
non-trading holding company of MKM Marketing & Promotions. In 1994 MKM Holdings
acquired Travel Design, an ABTA bonded travel agency. In 1995, Mark's brother,
Victor, joined the group as a director by which time the number of staff had
risen to 20. By 1999 the group had achieved an annual turnover of �2.5 million
with pre-tax profits of approximately �400,000 and a staff of 40. In 1999 MKM
Holdings was acquired by Air Miles, a wholly owned subsidiary of British
Airways. In 2002, and following the events of 11 September 2001, Mark and
Victor took the opportunity to buy back MKM Holdings. In 2003 MKM Holdings
acquired the luxury tour operator Hidden Retreats from Mark. The Company was
formed in 2002 as the corporate vehicle which acquired MKM Holdings. The
Company also has two dormant subsidiaries, Free 2 Stay and Yippee Experiences.
All of the subsidiaries are wholly owned. The Group's turnover for 2002, the
year when the business was acquired, was �3.026 million. The Group's turnover
for the 10 months ended 31 January 2004 was �5.329 million.
The Business
The Group's main activity is the creation of a variety of travel, leisure and
entertainment campaigns for corporate clients. Such campaigns can be used by
the Group's clients in order to retain existing customers or to help grow their
businesses by encouraging additional customer spending and attracting new
customers. The campaigns revolve around offers that include flights, hotel
accommodation, holidays, theatre, dining-out, cinema, and days-out.
The Group has three trading companies:
* MKM Marketing & Promotions - the Group's principal trading company, which
creates voucher based programmes and sources a variety of promotional offers
for its clients from its database of third party contacts;
* Travel Design - an ABTA bonded travel agency which provides a facility to
redeem the Group's promotional holiday offers as well as generating commission
from tour operators; and
* Hidden Retreats - a luxury tour operator with ATOL and IATA licences. Rise
Travel, a division of Hidden Retreats, sources flights and accommodation for
the Group's travel based offers. Hidden Retreats also provides travel services
principally to high net worth individuals.
MKM Marketing & Promotions supplies three basic types of promotions to
corporate clients:
Leisure & Entertainment Promotions
Leisure promotions generally take the form of free or two-for-one hotel
accommodation, two-for-one days-out, free child entrance when accompanied by an
adult, or a free day pass to gyms or health clubs.
Holiday Promotions
These promotions take the form of money-off holiday vouchers. The vouchers can
be redeemed against holidays booked through Travel Design and generally include
major tour operators.
Flight Promotions
Flight promotions are a range of flight offers including free flights,
two-for-one flights or discount flight vouchers. The vouchers can be used to
book flights through Rise Travel.
New Areas of Business
Yippee!�
MKM Marketing & Promotions is currently developing Yippee!�, a product which
will provide a range of `aspirational experiences' supplied by third parties.
These experiences are designed to provide recipients with the opportunity to
enjoy an exciting activity. They are also designed to be sold to clients as
incentive programmes for their customers or to the Group's clients for use in
staff incentive programmes. It is also intended that the Yippee!� experiences
will be sold to the public through a new website. To date, and ahead of the
formal launch of Yippee!� that is intended for June 2004, over 200 individual
bookings for aspirational experiences, with a value in excess of �75,000, have
already been made by customers of the Group's high profile clients. There is a
wide range of over 100 Yippee!� aspirational experiences ranging from a motor
sports experience to a birds of prey encounter. The Directors believe that a
proportion of the intended activities are exclusive to the Yippee!� brand.
Loyalty Programme
In response to expressions of interest from some of its corporate clients for a
loyalty scheme similar to those operated by credit cards issuers, the Group
intends to launch a loyalty programme in September 2004.
REVENUE
The Group has three main current sources of income:
* fees from clients for arranging voucher based promotions and revenue from the
sale of individual vouchers and from third party sourcing of offers for its
clients (earned by MKM Marketing & Promotions);
* commission from tour operators (earned by Travel Design); and
* income from sale of travel services including luxury tours, flights, hotels,
car hire and travel insurance (earned by Hidden Retreats and Travel Design).
SALES AND MARKETING
On a day to day basis the Group's marketing is managed by Jonathan Harris, the
marketing director of MKM Marketing and Promotions. Jonathan has more than 28
years experience in the advertising and marketing industry. The Group also has
a successful and experienced sales team of 8 executives. Enquiries are
initially handled by the internal sales team, who can conclude the sale, or
where appropriate, can arrange for the external sales team to visit the
potential client to develop the enquiry into a sale.
MARKET AND COMPETITION
Voucher/Reward Programmes
The Directors believe the UK voucher/reward promotions market as a whole has a
value in excess of �1 billion per annum. The Group's main competitor in this
sector is Landround plc, which specialises in travel promotions.
Aspirational Experiences
The Directors believe that the provision of aspirational experiences is a
growing market which has a number of well known suppliers of corporate
motivation schemes.
Loyalty Programmes
The Directors are aware of loyalty programmes such as the `air miles' programme
and the `nectar card'. The Group's loyalty programme, expected to be launched
in September 2004, will be flexible in that it will be able to be tailored to
each client's specific needs. Clients will be able to choose the incentives
that will be offered to their customers from the Group's wide range of
products. The Directors believe that in both the voucher/reward programmes and
aspirational experiences markets, competitors tend to specialise in specific
types of promotions or are smaller businesses which subcontract fulfilment.
They further believe that the Group's strength is its ability to offer a wide
range of products.
STRATEGY
The Directors intend to continue to expand the business of the Group
organically through:
* increasing its client base;
* continuing to grow its core business and develop a range of new products in
travel, leisure and
entertainment;
* developing further medium to long term loyalty programmes; and
* growing the Yippee!� brand through sales to existing and new clients for
business-to-business promotion and employee incentives, and also through sales
direct to customers from a new Yippee!� website. The Directors would also
consider expanding the business through the acquisition of complementary
businesses if and when such opportunities arise.
CURRENT TRADING AND PROSPECTS
Recently MKM Marketing & Promotions has signed promotions contracts with a
major financial institution and a large national newspaper. The Group has also
achieved sales in Eire, which is a new market for the Group, and has already
received early interest in both Yippee!� and the proposed loyalty programme.
MKM Marketing & Promotions has a strong order book moving forward. The Group's
client base includes many blue chip companies. The Directors believe that with
the additional working capital being raised, the Company will be able to
improve and develop new marketing concepts and negotiate improved promotions,
resulting in continued growth in 2005 and thereafter.
DIRECTORS
The Board of the Company as at the date of this document comprises 6 Directors,
as follows:
Clive Richard Garston (Aged 59), Chairman
Clive Garston is a solicitor and has been a partner of Halliwell Landau since
1978, specialising in corporate finance, and mergers and acquisitions. He was
the senior partner of the firm between 1989 and 1995 and is currently the
senior partner of the firm's London office. He is a non-executive director of a
number of quoted and unquoted companies including being the Chairman of
Ultimate Finance Group plc.
Mark Ian Koch (Aged 47), Chief Executive
Mark Koch was one of the innovators of high-perceived value, low cost campaigns
in travel, leisure and entertainment. Mark formed MKM Marketing & Promotions in
1989. The company grew year on year and in 1999 Mark led the management team in
a successful sale to Air Miles. Mark remained as Managing Director of MKM
Marketing & Promotions. Prior to this, Mark was managing director of Free Room
U.K. Limited during which time he presided over its growth from four employees
to over fifty, developed a long-term loyalty programme for its clients, saw
profits increase year upon year and in 1986 led and successfully negotiated its
sale to Norfolk House plc.
Victor Simon Koch (Aged 44), Executive Director
Victor joined MKM Marketing & Promotions as a director in 1995 and has been
responsible for leading the sales team, product and service development,
identifying new markets and managing the PR and marketing of the Group.
Victor's previous experience involved developing new products and penetrating
new markets particularly in Europe for textile and clothing businesses.
Lorraine O'Toole (Aged 32), Finance Director
Lorraine qualified as a chartered accountant with PricewaterhouseCoopers in
1998. She remained in private practice until 2000, when she moved to an
in-house role as financial controller of Knowledge Management Software plc,
giving her wide-ranging experience in both industry and private practice. She
was appointed to her current position in May 2004.
John Charles McGuire (Aged 55), Non-executive Director
John is currently chairman of corporate banking in the North of England and the
Midlands for the Royal Bank of Scotland Group. He joined Williams Deacons Bank
in the 1960s, moving through various customer relationship and credit roles in
the North of England before taking up a senior credit management position in
London with what was then Williams and Glyn's Bank. John opened the Zurich
office for the Royal Bank of Scotland in the mid-80s before being appointed
chief manager of the Manchester office. He was subsequently appointed director
of corporate banking in the North of England. Following the acquisition of
National Westminster Bank in 2000, he was appointed head of corporate
operations for the new group in the North of England and the Midlands. He was
appointed to his current position in October 2003.
Adrian Harvey Berg (Aged 55), Non-executive Director
Adrian qualified as a chartered accountant with Arthur Andersen in 1973. He
formed Alexander & Co. Chartered Accountants in 1976 where he is the senior
partner and specialises in corporate finance including company takeovers and
mergers. Adrian is also a director of RADA Electronic Industries Limited, a
Nasdaq quoted company.
SENIOR MANAGEMENT
In addition to the above, the key members of the senior management team of the
Group are as follows:
James Robert Pink (Aged 58), commercial director (MKM Marketing & Promotions)
Jim joined MKM Marketing & Promotions in 2000. He was a key member of the team
that negotiated the management buyout of MKM Holdings from Air Miles. Jim has
almost forty years of experience in IT systems implementation and the
development and co-ordination of accounting procedures within a wide variety of
industries including a period as financial controller at Zanussi Limited.
Jonathan Harris (Aged 49), group marketing director (MKM Marketing &
Promotions) Jonathan was previously the creative director of leading
advertising and marketing agencies in both Manchester and Chester, and has run
his own successful marketing agency working with clients such as Woolworths and
Iceland before joining MKM in 2001. The team Jonathan heads includes an in
house design agency, known as JHA, which enables the Group to also offer design
services to its clients.
Jodi Ann Mitchell (Aged 31), group sales director (MKM Marketing & Promotions)
Jodi rejoined MKM Marketing & Promotions as sales director in 2002 from TLC
Marketing Plc. She was previously employed by the Group as senior account
manager. Her previous experience also includes management positions in retail
organisations.
Lesley Hardman (Aged 36), group promotions director (MKM Marketing &
Promotions) Lesley joined MKM Marketing & Promotions in 1999. She is
responsible for new product development and key client negotiation. Lesley's
previous experience includes tenure as Marketing Manager for the Manchester
Training and Enterprise Council where she was responsible for marketing and
promotion.
Peter Pantelides (Aged 29), travel director (MKM Marketing & Promotions)
Peter joined Hidden Retreats in 2002. Peter has 15 years experience in the
travel industry.
Keith Hugo Herman (Aged 37), director (Hidden Retreats) Keith set up Hidden
Retreats in 2001 prior to the company joining the Group in 2003. Keith has 20
years of experience in the travel and leisure industry including owning 3
travel agency businesses.
James Entwistle (Aged 33), sales director (MKM Marketing & Promotions) James
has 15 years experience in sales, including six years in media sales across
national press (Express Newspapers) and radio (Chrysalis Group plc). James
served as an account director for 3 years in MKM Marketing and Promotions, and
has recently been promoted to sales director.
REASONS FOR THE PLACING
The total funds raised from the placing of the New Ordinary Shares will be
utilised by the Company to provide working capital for the Group to grow its
existing business and to develop its new areas of business. The Directors
believe that Admission will raise the profile of the Group and enhance its
reputation with both clients and suppliers.
FINANCIAL INFORMATION
The following financial information has been extracted from the Accountants'
Report on MKM and its Subsidiaries contained in Part III of this document and
should be read in conjunction with the full text of the Accountants' Report.
Investors should not rely solely on the key summarised information.
Year Ended 31 March 10 months
ended 31st
January
2001 2002 2003 2004
�000 �000 �000 �000
Turnover 2,558 3,026 3,202 5,329
Profit on ordinary activities before 402 506 757 633
taxation
DETAILS OF THE PLACING AND ADMISSION
The Company is proposing to raise �1.4 million before expenses, by way of the
placing of 3,181,818 New Ordinary Shares at the Placing Price. The Placing
Shares consist of 3,181,818 New Ordinary Shares and 2,272,727 Sale Shares. The
New Ordinary Shares will represent approximately 24 per cent. of the Company's
issued share capital following Admission. The New Ordinary Shares will be
issued credited as fully paid and will rank pari passu in all respects with the
Existing Ordinary Shares. The Selling Shareholders are placing the Sale Shares
with institutional investors at the Placing Price.
Application will be made to the London Stock Exchange for the issued and to be
issued Ordinary Shares to be admitted to trading on AIM. It is expected that
trading in the Ordinary Shares will commence on 7 June 2004. W.H. Ireland has
agreed to use all reasonable endeavours to procure subscribers and purchasers
for the Placing Shares. The Placing is not being underwritten and it is
conditional inter alia on the Existing Ordinary Shares and the New Ordinary
Shares being admitted to trading on AIM.
LOCK IN ARRANGEMENTS
The Shareholders have agreed that they will not (save in certain specific
circumstances) dispose of any Ordinary Shares for a period of one year
following Admission and only to dispose of Ordinary Shares through W.H. Ireland
for a period of one year thereafter. The Placing Shares are not subject to any
lock-in agreement.
DIVIDEND POLICY
The Directors are committed to a progressive dividend policy that rewards
shareholders adequately, whilst at the same time demonstrating prudent
management of the Group's cash resources. The Directors are also committed to a
strong growth strategy for the Group, and intend to maintain a balance between
retained profit and profit available for distribution to shareholders.
END
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