RNS No 7589a
SPORTSWORLD MEDIA GROUP PLC
16 April 1999
SPORTSWORLD MEDIA GROUP PLC - ACQUISITION OF 51 PER CENT. INTEREST IN STUART
SAWYER (MARKETING) LIMITED AND ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX
MONTHS ENDED 31 OCTOBER 1998
Sportsworld Expands into Freesports Management and Television Interests
- Acquisition of 51% interest in SSM for an initial consideration of #1.32m
- Deferred consideration based on profit performance of SSM over four years
- Options to acquire remaining 49%
- Cash and vendor placings, both at 88p per share to raise approximately
#2.4m underwritten by Investec Henderson Crosthwaite
- SSM specialises in the marketing, management and televising of freesports
such as windsurfing, mountain biking, snowboarding, surfing and in-line
skating - highly complementary to Sportsworld's existing sports activities
- Exclusive marketing agency rights with the Professional Windsurfers
Association and the British Cycling Federation
- SSM has a library of 1,500 hours of freesports footage
- SSM's key sponsorship clients include Toyota, Swatch, Pepsi-co and Gallaher
and it has sold programming to Canal+, Channel 4 and Fox Sports
- First acquisition by Sportsworld since listing in December
- Significant commercial opportunities for freesports
Commenting on the acquisition, Sportsworld's Chief Executive Geoff Brown said:
"One of the reasons we sought a listing was to allow us to expand at a time
when there is a dramatic growth in the number of television channels and when
sponsorship in sports is growing."
"SSM is highly complementary to our current activities. Both companies are
involved in sports management, marketing and television and both hold valuable
television sports programme libraries. We anticipate considerable
cross-referencing of customers and products between Sportsworld and SSM."
"Freesports have significant marketing opportunities for sponsors and make for
exceptional television viewing - neither of which have reached anything like
their full potential."
Enquiries:
Geoff Brown / Andy Fletcher
Sportsworld Media Group plc
0171 240 9626 / 07887 847 505
Jagjit Mundi
Investec Henderson Crosthwaite
0171 597 5970
Tim Spratt
Financial Dynamics
0171 831 3113
Sportsworld announces that it has entered into a conditional agreement to
acquire 51 per cent. of the issued share capital of Stuart Sawyer (Marketing)
Limited ("SSM") with options to acquire the remaining 49 per cent.
The consideration for the Acquisition comprises an initial consideration of
#1.32 million payable on Completion, with deferred consideration payable
annually depending on the annualised average net profits of SSM in each of the
four years from 30 June 1999 to 30 June 2003. The initial consideration is to
be satisfied by the issue of 1,498,107 new Ordinary Shares. 982,955 new
Ordinary Shares will be placed under the Vendor Placing (with persons other
than the Vendors) at 88p per share to raise #865,000 which will be paid to the
Vendors at Completion with the balance comprising 515,152 new Ordinary Shares
to be issued to the Vendors.
Sportsworld will have call options and the Vendors will have put options over
the remaining 49 per cent. of SSM's issued share capital exercisable in two
tranches of 19 per cent. and 30 per cent. after June 2003. The exercise price
will be calculated by reference to the net profits of SSM.
In view of the size of the Acquisition in relation to the Company, the
Acquisition is conditional, inter alia, upon the approval of Shareholders
which is to be sought at an Extraordinary General Meeting of the Company to be
held on 4 May 1999.
In addition to the Vendor Placing, Sportsworld also announces that it proposes
to raise approximately #1.5 million (gross) in order to provide the Enlarged
Group with additional working capital and funding for acquisition
opportunities which may arise, by way of a placing of 1,704,683 new Ordinary
Shares (representing approximately 5 per cent. of the currently issued
ordinary share capital of the Company). The Placings are fully underwritten by
Investec Henderson Crosthwaite.
Information on SSM
Background
SSM is a sports marketing and management company specialising in freesports or
extreme sports, a group of non-mainstream sports which includes windsurfing,
mountain biking, snowboarding, surfing and in-line skating. In addition to
sports marketing and management, SSM has programme production capabilities for
television and video and has invested in its own digital editing suites and
archiving equipment.
SSM also has a library of approximately 1,500 hours of freesports video
footage and contracts with certain sports' governing bodies - the Professional
Windsurfers Association ("PWA") and the British Cycling Federation ("BCF")
with whom SSM has strong relations.
SSM has three principal business units: marketing, sports management and media
services. In addition, the company has central public relations ("PR") and
design capabilities for both internal and client use. The operations of each
of SSM's three business units are described below.
Marketing
The marketing business unit is involved in the following:
- assisting brand owners in the promotion of their brands through sponsorship
by them of freesports events and programmes and the supply of ancillary design
and PR services; and
- acting as agent for athletes in organising and managing their arrangements
with their sponsors.
Sports management
The sports management business unit provides advice and assistance to the
governing bodies of certain sports on the development and marketing of their
sports. Currently, SSM provides this service to the PWA, the international
governing body of professional windsurfing and the BCF. More specifically,
this includes:
- managing relationships between the governing bodies, event organisers and
sponsors;
- providing technical and management services to event organisers, including
the structuring of competitions; and
- advising sports' governing bodies on the commercial exploitation of their
intellectual property rights.
Media
The media business unit is responsible for:
- developing and distributing finished programming. The majority of
programming is produced in-house and current programming includes a 26 part TV
series, "World Windsurfing", which is distributed internationally, a six part
series "Mountain Bike Britain" and titles under the "Chilli" video label.
Chilli's principal sales channels are trade distributors and specialist
retailers and magazines in Europe, Japan and Australia. SSM owns the rights to
exploit commercially the programmes it creates (other than those commissioned
by third parties). SSM also licenses some music, footage and finished titles
from third party providers; and
- providing sports news and highlights to news agencies, broadcasters and
magazines including video, stills and text news services. This activity
currently relates to windsurfing and mountain biking, but it is also intended
to develop this activity for other freesports.
Key contracts and relationships
SSM's largest single source of revenue derives directly or indirectly from a
contract with the PWA. Under that contract, SSM undertakes the organisation
and management of the PWA's commercial and financial affairs and is granted
the rights to use the name and titles, and to own the media rights, of the
PWA. SSM derives revenue in relation to the fulfilment of its management
services on behalf of the PWA, from the management of events and by the
receipt of commission on new sponsorship obtained by SSM. This contract is
terminable on 12 months notice at any time after 31 December 1999, although
the Directors have no reason to believe that termination will occur.
SSM has a further key contract with the BCF. Under this contract, SSM acts as
the BCF's exclusive marketing and media agent, in order to generate income,
publicity and brand value for the BCF. SSM derives revenue from commission
paid to it by the BCF on contracts secured by SSM in respect of licensing,
sponsorship, endorsement, advertising, merchandising, broadcasting and
publishing of BCF properties. This contract is terminable upon 12 months
notice.
In addition to the key contracts referred to above, SSM has built up strong
relationships with a number of well known companies, including Gallaher,
Toyota, Swatch and Pepsi-co. Additionally, SSM has sold programmes to a number
of high profile television channels, including Canal+, Channel 4 and Fox
Sports.
Summary financial Information for SSM is set out below:
12 months 13 months 12 months
ended ended ended
30 November 31 December 31 December
1996 1997 1998
#'000 #'000 #'000
Turnover 2,104 2,425 2,824
Operating profit/(loss) 74 19 (44)
Interest payable and similar
charges (6) (11) (19)
Profit/(loss) on ordinary
activities before taxation 68 8 (63)
====== ====== ======
Net assets 98 108 38
====== ====== ======
Reasons for the Acquisition
As set out in the listing particulars issued by the Company and dated 16
November 1998, it is the Directors' strategy to broaden Sportsworld's existing
business to create a global sports media and entertainment group both through
organic growth and, where appropriate, by acquiring businesses whose
profitability can be enhanced by the Company. The Directors believe that the
Acquisition represents an excellent opportunity to advance this strategy and
that SSM is highly complementary to its current activities in sports
television management and sponsorship.
In particular, the Directors believe that Sportsworld will benefit from:
- the Vendors' expertise and contacts in freesports, which the Directors
believe is a market with substantial potential for growth and increasing
attractions to sponsors;
- access to SSM's library of freesports footage which the Directors believe
is increasingly in demand, primarily reflecting the proliferation of
television sports channels; and
- a broadening of its customer base and the opportunity to market its own
products to existing SSM contacts.
The Directors believe that there are excellent opportunities to grow the SSM
business through:
- selling SSM's products in territories where Sportsworld has distribution
capabilities;
- expanding the current business into other freesports either through a
relationship with a governing body or through the creation of tailor-made
events;
- increasing the revenues derived from existing relationships with the PWA
and the BCF via the securing of new sponsorship and an increase in the
distribution of television programming in respect of these sports; and
- increasing the range of programmes created for the broadcast market and
released under the Chilli label.
Terms of the Acquisition
The consideration for the Acquisition comprises (i) initial consideration of
#1.32 million which will be satisfied on completion by the issue of 1,498,107
new Ordinary Shares and (ii) deferred consideration payable depending on the
annualised average net profits of SSM in each of the four years from 30 June
1999 to 30 June 2003 ("the earn-out period"). The annualised average net
profits are to be calculated in accordance with the Acquisition Agreement.
Investec Henderson Crosthwaite has conditionally placed (with persons other
than the Vendors) 982,955 new Ordinary Shares under the Vendor Placing at 88p
per share to raise #865,000 which will be paid to the Vendors at Completion.
The Vendors will also be issued with the Consideration Shares, of which all
but 185,152 such shares will be retained by them for a period of one year
following completion, save in certain circumstances.
The amount of deferred consideration will be the amount (if any) by which 51
per cent. of 6 times the annualised average net profits of SSM during the
earn-out period exceeds the aggregate of the initial consideration and any
deferred consideration paid and therefore has no upper limit. The deferred
consideration will be paid in a mixture of cash, loan notes and new Ordinary
Shares. Up to a maximum of one half of each tranche of the deferred
consideration and no less than one third will be payable in new Ordinary
Shares at the option of the Vendors.
Sportsworld will have a call option and the Vendors will have a put option
over a further 19 per cent. of the issued share capital of SSM, exercisable
after the calculation of the net profits for the year to 30 June 2003. The
consideration for the exercise of these options will be 19 per cent. of 6
times the annualised average net profits over the two years prior to 30 June
2003.
Sportsworld will have a call option and the Vendors will have a put option
over the remaining 30 per cent. of the issued share capital of SSM exercisable
(i) by the Vendors on one of the annual exercise dates to occur after the
first anniversary of the end of the earn-out period and (ii) by Sportsworld on
one of the annual exercise dates to occur after the fifth anniversary of the
expiry of the earn-out period. The consideration for the exercise of these
options will be 30 per cent. of 6 times the annualised average net profits
over the two years prior to the exercise of the option.
The consideration for the exercise of these options will be satisfied by a
mixture of cash and new Ordinary Shares.
The Vendors and Sportsworld will also enter into the Shareholders Agreement at
Completion. The Shareholders Agreement will govern the management, operation
and shareholding structure of SSM. The Vendors will be given day to day
management of the affairs and development of SSM within guidelines established
by the board of SSM, which will comprise two directors appointed by
Sportsworld and the Vendors with a Sportsworld appointed director having the
casting vote. A number of key issues relating to the business of SSM, will,
however be subject to the approval of 76 per cent. of the shareholders of SSM.
Pursuant to the Shareholders Agreement, Sportsworld will provide a working
capital loan of #600,000 to SSM on Completion.
The Placings
Investec Henderson Crosthwaite has agreed to use its reasonable endeavours to
procure subscribers for 1,704,683 New Ordinary Shares the subject of the Cash
Placing in order to raise approximately #1.2 million (net of expenses) for the
Company and also to use its reasonable endeavours to procure subscribers for
the 982,955 new Ordinary Shares, the subject of the Vendor Placing to raise
#865,000 for the Vendors, in each case at the Placing Price. The Placings are
fully underwritten by Investec Henderson Crosthwaite.
The Placings are conditional, inter alia, on:
(i) the passing of the Resolution at the EGM;
(ii) the Placing Agreement becoming unconditional, subject only to
Admission, and not having been terminated in accordance with its terms prior
to Admission; and
(iii) Admission.
The net proceeds of the Cash Placing will be used to provide the Enlarged
Group with additional working capital and funding for acquisition
opportunities which may arise.
The Circular
It is expected that a circular to shareholders (including a notice convening
the EGM) will be posted to shareholders later today.
Interim Results
The results announced today refer to the trading of the Company for the
six-month period ended 31 October 1998, during which period the only operating
subsidiary of the Company was Lightbox Creative Services Limited ("Lightbox").
They contain a balance sheet, profit and loss statement and associated notes.
It is important to note that, since 31 October 1998, the Company has undergone
a significant reorganisation as a result of the reverse takeover of MediaOne
International Holdings Limited ("MediaOne") which was completed on 10 December
1998, and shareholders are referred to the listing particulars dated 16
November 1998, which provide a full explanation of the changes which occurred
at that time.
As a result of the acquisition of MediaOne, an entirely new board of Directors
has been established, the Company has restructured its share capital, changed
its name to Sportsworld Media Group plc and has subsequently changed its
registered office to 6 Henrietta Street, London WC2E 8PS. A placing of shares
was successfully undertaken at the time of the reverse takeover and #2.3
million (gross) was raised to assist the Company in its restructuring and
development.
The overall focus of the Company has also changed as a result of the reverse
takeover and the principal business activities of the Group are now
concentrated upon the production and distribution of sports television
programmes and the management of sporting events and arranging sponsorship for
such programming or events.
The Results
The Directors are pleased to report an improvement in Lightbox's trading over
the six months to 31 October 1998 compared to the previous 12 month period due
to the restructuring and cost reductions undertaken within the business, which
have resulted in the business breaking even compared to a previous loss of
#800,000. Lightbox continues to trade in line with the Directors'
expectations.
Current trading and prospects
The Directors are of the opinion that, overall, trading has been satisfactory.
The first half of the year, to 31 December 1998, was slow due to the weakness
of the Asian market and the fact that programme sales expected in the first
half were not received until the second half of the year. The second half of
the year has begun strongly with signs of recovery of the Asian market and the
signing of a number of significant new contracts, including a three year
contract to advise the United Arab Emirates Football Association on television
rights, sponsorship and public relations; and a management, sponsorship and
television rights distribution contract for the Middle East car rally. The
Directors believe that they have placed the Company on a firm footing to
facilitate growth in the future with the reorganisation of the Company's
management and sales force. In particular, the Directors believe that the
recent appointment of a number of key personnel in Australia, Asia and UK will
strengthen the Company's sales force and should provide further opportunities
for organic growth.
The Directors believe that there are significant opportunities for the Company
as a result of: (i) the proliferation of new television channels following the
launch of digital television, including dedicated sports channels and the need
to fill an estimated 45,000 hours of additional television schedules; and (ii)
a new attitude towards sponsorship as, due to increasing audience
fragmentation, advertisers seek new ways of building brand recognition. The
Directors believe that niche sports events and programmes offer advertisers
the ability to reach desirable target audiences. The Directors believe that
the acquisition of SSM, also announced today, offers the Enlarged Group an
excellent opportunity to secure a significant position in the hitherto
underdeveloped, niche, freesports market. The Directors believe that
freesports are attractive to sponsors and programmers due to their profile
within the youth market.
The Company's next published set of financial figures will be for the fourteen
month period ending on 30 June 1999. The trading of MediaOne will be
incorporated from 10 December 1998.
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 31 October 1998
Continuing Discontinued
Operations Operations Total
Six months six months six months six months
to 31 to 31 to 31 to 31
October October October October
1998 1997 1997 1997
#'000 #'000 #'000 #'000
Turnover 1,302 1,378 82 1,460
Cost of Sales (671) (648) (36) (684)
----- ----- --- -----
631 730 46 776
Net operating expenses
- normal (643) (842) (43) (885)
---- ---- --- ----
Operating profit/(loss) (12) (112) 3 (109)
==== ==== === ====
Exceptional items
Losses on disposal of
discontinued operations (5,916)
Provision made 30 April 1997 5,916
------
Profit/(loss) on ordinary
activities before
interest (12) (109)
Net interest receivable 17 17
--- ---
Profit/(loss) on ordinary
activities before taxation 5 (92)
Taxation - -
--- ---
Retained profit/(loss)
for the period 5 (92)
====== ======
Earnings/(losses)
per share 0.002p (0.03)p
====== ======
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 31 October 1998
Continuing Discontinued
Operations Operations Total
12 months 12 months 12 months
to 30 April to 30 April to 30 April
1998 1998 1998
#'000 #'000 #'000
Turnover 2,634 82 2,716
Cost of Sales (1,395) (36) (1,431)
------ --- ------
1,239 46 1,285
Net operating expenses
- normal (2,040) (43) (2,083)
------ --- ------
Operating profit/(loss) (801) 3 (798)
====== === ======
Exceptional items
Losses on disposal of discontinued
operations (5,916)
Provision made 30 April 1997 5,916
------
Profit/(loss) on ordinary activities
before interest (798)
Net interest receivable 37
----
Profit/(loss) on ordinary activities
before taxation (761)
Taxation -
----
Retained profit/(loss) for the period (761)
======
Earnings/(losses) per share (0.24)p
======
UNAUDITED CONSOLIDATED BALANCE SHEET
at 31 October 1998
31 October 1998 31 October 1997
#'000 #'000 #'000 #'000
Fixed assets
Tangible assets 94 294
Investments 154 156
--- ---
248 450
Current assets
Stocks 11 12
Debtors 959 1,042
Cash at bank and in hand 1,000 1,120
----- -----
1,970 2,174
Creditors: amounts falling
due within one year
Bank overdraft 208 -
Other 635 741
--- ---
Net current assets/(liabilities) 1,127 1,433
----- -----
Total assets less current
liabilities 1,375 1,883
Creditors: amounts falling due
after more than one year 56 160
Provisions for liabilities and
charges 750 490
----- -----
569 1,233
===== =====
Capital and reserves
Called up share capital
equity 3,082 3,082
Other reserves 3 3
Profit and loss account (2,516) (1,852)
------ ------
Shareholders funds 569 1,233
====== ======
Shareholders funds are
attributable to:
Equity shareholders 569 1,233
Non equity shareholders - -
UNAUDITED CONSOLIDATED BALANCE SHEET
at 31 October 1998
30 April 1998
#'000 #'000
Fixed assets
Tangible assets 169
Investments 155
---
324
Current assets
Stocks 11
Debtors 1,033
Cash at bank and in hand 1,146
-----
2,190
Creditors: amounts falling due within one year
Bank overdraft 289
Other 831
---
Net current assets/(liabilities) 1,070
-----
Total assets less current liabilities 1,394
Creditors: amounts falling due after more
than one year 80
Provisions for liabilities and charges 750
----
564
====
Capital and reserves
Called up share capital equity 3,082
Other reserves 3
Profit and loss account (2,521)
------
Shareholders funds 564
======
Shareholders funds are attributable to:
Equity shareholders 564
Non equity shareholders -
Notes:
1. Earnings/(losses) per share
Earnings per share are calculated on profits of #5,000 (October 1997: losses
of #92,000) using the weighted average number of ordinary shares in issue in
the period of 308,195,407 (October 1997: 308,195,407).
2. Statutory
The interim financial statements have been prepared on a basis consistent with
the accounting policies disclosed in the Annual Report for the year ended 30
April 1998.
The financial information set out above is unaudited and does not form
statutory accounts for the purpose of section 240 of the Companies Act 1985.
The figures for the year ended 30 April 1998 have been extracted from the
Group's accounts for that year which have been filed with the Registrar of
Companies and which contain an unqualified audit report, and which do not
contain any statement under section 237(2) or (3) of the Companies Act 1985.
DEFINITIONS
In this announcement, the following expressions and terms have the following
meanings, unless the context requires otherwise:
"Acquisition"
the acquisition of 51 per cent. of the issued share capital of SSM by
Sportsworld and the entry into of the arrangements relating to the Options
"Acquisition Agreement"
the conditional sale and purchase agreement between Sportsworld and the
Vendors dated 16 April 1999 relating to the Acquisition
"Admission"
admission of the New Ordinary Shares to the Official List
"Board" or "Directors"
the directors of Sportsworld
"Cash Placing"
the placing of 1,704,683 new Ordinary Shares at the Placing Price
"Completion"
completion of the Acquisition
"Consideration Shares"
the 515,152 new Ordinary Shares to be issued to the Vendors pursuant to the
Acquisition
"Enlarged Group"
the Group, as enlarged following the Acquisition
"Extraordinary General Meeting" or "EGM"
the extraordinary general meeting of the Company to be convened for 10.00 am
on 4 May 1999
"Investec Henderson Crosthwaite"
Investec Henderson Crosthwaite, a division of Investec Bank (UK) Limited
"Listing Rules"
the Listing Rules of the London Stock Exchange
"London Stock Exchange"
London Stock Exchange Limited
"MediaOne"
MediaOne International Holdings Limited, a wholly-owned subsidiary of the
Company
"New Ordinary Shares"
the Consideration Shares and the Placing Shares
"Official List"
the Official List of the London Stock Exchange
"Options"
the put and call options over 49 per cent. of the issued share capital of SSM
retained by the Vendors as set out in the Acquisition Agreement
"Ordinary Shares"
the ordinary shares of 1p each of the Company
"Placings"
the Cash Placing and the Vendor Placing
"Placing Agreement"
the conditional agreement relating to the Placings dated 16 April 1999 between
the Company, Investec Henderson Crosthwaite and RP&C
"Placing Price"
88p per Placing Share
"Placing Shares"
the 2,687,638 new Ordinary Shares the subject of the Cash Placing and the
Vendor Placing
"Resolution"
the ordinary resolution to be proposed at the EGM, which, if passed, will
approve the Acquisition
"RP&C"
RP&C International Limited or its parent company, RP&C International Inc.
"Shareholders Agreement"
the agreement between the Vendors and Sportsworld to be entered into at
Completion relating (inter alia) to the management of SSM
"Sportsworld" or the "Company"
Sportsworld Media Group plc and/or, where the context so requires, MediaOne
"Sportsworld Group" or the "Group"
Sportsworld and its subsidiary undertakings
"SSM"
Stuart Sawyer (Marketing) Limited
"Vendors"
the vendors of SSM being Stuart Sawyer and Shaun Whatling
"Vendor Placing"
the placing of 982,955 new Ordinary Shares on behalf of the Vendors
END
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