Acquisition
May 26 2004 - 3:01AM
UK Regulatory
RNS Number:0824Z
White Young Green PLC
26 May 2004
For Immediate Release 26 May 2004
White Young Green Plc ("WYG")
Proposed acquisition of IMC Consulting and IMC Europe
First significant move outside the UK for WYG
White Young Green Plc ("White Young Green" or "WYG"), consultant to the built
and natural environment announces the acquisition of IMC Consulting and IMC
Europe from IMC Group Holdings Limited, a subsidiary of Rio Tinto, a world
leader in mineral extraction and processing, for an aggregate consideration of
#10 million, payable in cash on Completion.
The acquisition of IMC Consulting represents a significant step forward in the
evolutionary development of WYG and will achieve a step change in the size,
skills balance, geographical coverage, critical mass and earnings potential of
WYG. It is the first significant move outside the UK for WYG. IMC Consulting is
a leading project management and consultancy business working primarily with
governments and regional organisations on large scale, long term aid-funded
social and economic regeneration projects designed to build capacity in
countries in transition.
The acquisition of IMC Europe further strengthens WYG's existing environmental
and engineering business streams in the UK, particularly in urban regeneration,
environmental and infrastructure markets.
The Acquisition is expected to increase earnings per share for the Enlarged
Group.
The Acquisition is conditional upon shareholder approval. This approval will be
sought at an extraordinary general meeting to be held at 10.00am on 11 June
2004.
Key highlights:
IMC Consulting
* Leading project management and consultancy business with headquarters
based in Nottinghamshire;
* Work is primarily with overseas governments and regional organisations;
* Projects are large scale, long term aid-funded social and economic
regeneration projects;
* Projects are designed to build capacity in countries in transition
including Poland, Turkey, Romania and the CIS;
Almost all projects funded by international financial institutions
including the European Commission, the Department for International
Development and the World Bank.
IMC Europe
* Primarily a UK engineering and environmental business;
* Provides multi-disciplinary services to UK government departments and
agencies, local government, public utilities and to commercial and
industrial private sector clients;
* Previously focused on the Midlands and South Yorkshire, but planning to
expand to other parts of the UK.
For the nine months ended 31 December 2003, combined operating profit for IMC
Consulting and IMC Europe was #1.5 million on net turnover of #14 million.
Key benefits
* The international services provided by IMC Consulting are profitable,
sustainable and growing;
* IMC Consulting provides an international network and framework to enable
WYG to take its complementary skills to the international market;
* IMC Consulting and IMC Europe provide complementary customers and
geographical markets to WYG;
* Opportunity to create synergies and cross-selling opportunities;
* Access to major EU and World Bank funding programmes;
Current trading and prospects
WYG's Interim Results announcement on 2 March 2004 referred to a further
strengthening of the Group's position in all key areas of activity with record
levels of new business. Since 1997, WYG has enjoyed uninterrupted annual growth
in profits, turnover and adjusted earnings per share. Over the last five years
earnings per share has grown at an annual compound rate of approximately 12 per
cent.
Turnover for the half year ended 31 December 2003, was #40.1m up from #35.8m
(2002) and profit increased to #2.9m from #2.6m. Since 31 December 2003, WYG has
continued to trade satisfactorily and in line with Directors' expectations.
Against this background and taking into consideration the Acquisition, the Board
is confident as to the future prospects of the Enlarged Group.
WYG Chief Executive, John Purvis, said:
"This acquisition represents a significant step forward in the development of
WYG. IMC Consulting provides an international management services business
stream which is profitable and growing. It is entirely complementary to our
existing skill sets and geographic markets. In addition, IMC Europe's
engineering and environmental teams will work closely with WYG's existing
operations in the UK, creating synergies and increased cross-selling
opportunities.
Through this acquisition the enlarged company should benefit from improved
quality of earnings, increased margins and a more balanced portfolio of business
across the planning, creating and operating stages of the asset life cycle."
For further information, please contact:
John Purvis, Chief Executive Tel: 0113 278 7111
Bob Hartley, Finance Director
Denis Connery, Commercial Director
White Young Green Plc
David Forbes / Stephen Moore Tel: 0113 200 1900
N M Rothschild & Sons Limited
Tim Anderson / Lisa Baderoon/ Rebecca Skye Dietrich Tel: 020 7466 5000
Buchanan Communications
N M Rothschild & Sons Limited, which is regulated in the United Kingdom by the
Financial Services Authority, is acting solely for WYG in relation to the
Acquisition and no one else and will not be responsible to anyone other than WYG
for providing the protections afforded to clients of N M Rothschild & Sons
Limited nor for providing advice in relation to the Acquisition.
Proposed acquisition of IMC Consulting and IMC Europe
Introduction
WYG announces that it has conditionally agreed to acquire IMC Consulting and IMC
Europe from IMC Group Holdings Limited, a subsidiary of Rio Tinto for an
aggregate consideration of #10.0 million, comprising the payment of #8.9 million
for the shares in such companies, together with the repayment of an
inter-company debt in the sum of #1.1 million, both sums to be paid in cash on
Completion.
The acquisition of IMC represents a significant step forward in the evolutionary
development of WYG and will achieve a step change in the size, skills balance,
geographical coverage, critical mass and earnings potential of the business of
WYG.
As a consequence of its size, the Acquisition is conditional upon, inter alia,
Shareholder approval. This approval will be sought at an extraordinary general
meeting ("EGM"). A circular containing details of the proposed Acquisition and
notice of the EGM will be posted to Shareholders shortly.
Information on IMC
IMC Consulting
IMC Consulting is a leading project management and consultancy business working
primarily with governments and regional organisations on large scale, long term
aid-funded social and economic regeneration projects designed to build capacity
in countries in transition. IMC Consulting's activities include project
management in the fields of industrial and economic development, corporate
restructuring and SME support, vocational training and outplacement, economic
policy, public sector reform and social support programmes. The majority of
these activities are performed from primary offices in the UK, Poland, Turkey,
Romania and Russia. The services provided by IMC Consulting are therefore
strategic in nature, fit at the beginning of the asset life cycle and generally
act as a stimulus for the development and improvement of the built and natural
environment. IMC Consulting has its headquarters in Nottinghamshire and as at 31
December 2003 had 156 permanent staff plus 313 associates located in the UK and
overseas.
IMC Consulting has historically advised overseas governments and regional
organisations on a diverse and varied range of international assignments.
Examples of previous projects include consultancy in relation to labour
redeployment and also addressing the imbalance between rural and urban economies
in Poland, advising on the industrial modernisation programme for Egypt (one of
the largest EU assistance programmes outside the EU), advising on sustainable
development of war affected areas in Croatia and leading a major new initiative
to inform people and change behaviour via a healthcare education programme in
the CIS.
For the nine months ended 31 December 2003, approximately 98 per cent. of IMC
Consulting's projects were funded by international financial institutions
including the European Commission, the Department for International Development
and the World Bank. In addition, a small amount of work was also undertaken for
the private sector.
The table below sets out the gross turnover, net turnover and operating profit
of IMC Consulting for the two years ended 31 March 2003 and the nine months
ended 31 December 2003. Annual turnover and profitability has increased when
comparing the year ended 31 March 2003 to the nine months ended 31 December 2003
due to IMC Consulting successfully securing six major long term projects in
Poland, a large economic development contract in Turkey and further contracts in
the Ukraine. IMC Consulting is also benefiting from expansion into new and
growing territories, including new contracts secured in Bosnia, Russia and
Egypt. Business secured by IMC Consulting is long term in nature and therefore
provides significant future visibility of earnings. The overall order book at
the end of September 2003 stood at #46 million with over #25 million of work
already secured for the year ending 31 March 2005. In addition, IMC Consulting
is currently short listed for a further 23 projects with a combined projected
fee value in excess of #30 million.
9 months ended Year ended Year ended
31.12.03 31.03.03 31.03.02
#'000 #'000 #'000
Gross turnover 21,691 15,219 12,723
Net turnover 11,260 8,723 6,670
Operating profit 1,460 414 649
The net assets of IMC Consulting as at 31 December 2003 were #1,461,000.
Net turnover relates solely to in-house services and excludes subcontracting to
third parties and direct project expenses on which it does not make any margin.
IMC Europe
Historically, the business now owned by IMC Europe was owned by IMC Group
Consulting. IMC Group Consulting consisted of engineering, environmental and
mining divisions. On 11 May 2004 the business, assets and liabilities of IMC
Group Consulting (excluding the mining division) were transferred to IMC Europe,
a dormant subsidiary of the Vendor. The entire issued share capital of IMC
Europe will be acquired by WYG under the terms of the Acquisition Agreement. The
mining division will not be acquired by WYG and will remain with the Rio Tinto
group.
IMC Europe, primarily a UK engineering and environmental business, will work
closely alongside WYG's existing operations. It operates from an office in
Nottinghamshire and provides multi-disciplinary services to UK government
departments and agencies, local government and regional development authorities,
public utilities and the European Commission, as well as to a range of
contractors and other commercial and industrial private sector clients. In
particular, the engineering division works closely with the environmental
division and other consultants to deliver a complete capability in respect of
brown field site remediation and development. These divisions previously focused
on activity in the Midlands and South Yorkshire but are planning to expand
through a process of regionalisation into other parts of the UK.
The table below sets out the gross turnover, net turnover and operating profit
of the engineering and environmental divisions of IMC Group Consulting (which
are now owned by IMC Europe) for the two years ended 31 March 2003 and the nine
months ended 31 December 2003.
9 months ended Year ended Year ended
31.12.03 31.03.03 31.03.02
#'000 #'000 #'000
Gross turnover 3,265 4,380 3,991
Net turnover 2,817 3,821 3,700
Operating profit/(loss) 69 270 (124)
The net assets of the engineering and environmental divisions of IMC Group
Consulting as at 31 December 2003 were #1,093,000.
Net turnover relates solely to in-house services and excludes subcontracting to
third parties and direct project expenses on which it does not make any margin.
Background to and reasons for the Acquisition
Since the merger between Ernest Green and Partners Holdings plc and White Young
Consulting Group Limited in July 1997, WYG has delivered uninterrupted annual
growth in profits, turnover and adjusted earnings per share. Specifically, over
the last five years, the Company's adjusted earnings per share has grown at a
compound rate of approximately 12 per cent. per annum. During that time, WYG has
evolved significantly from the original concept of a regional consulting
engineering business engaged principally in the design of one-off capital
investment projects, to a national and international multi-skilled consultancy
offering clients a complementary portfolio of skills around the full life cycle
of their key assets.
The acquisition of IMC by WYG represents a significant step forward in this
evolutionary process and will achieve a step change in the size, skills balance,
geographical coverage, critical mass and earnings potential of the business of
WYG.
WYG has previously always bought businesses from management and has paid
consideration largely in shares in order to motivate key management. The vendor
in this case is part of the Rio Tinto group and accordingly WYG has
exceptionally agreed to satisfy the consideration in cash.
Approximately 15 per cent. of WYG's turnover currently relates to management
services. This will change to 35 per cent. as a consequence of the Acquisition
based on IMC's results for the nine months ended 31 December 2003. IMC's
exposure to management service revenues should improve the quality of the
Enlarged Group's earnings and margins as IMC's current level of profitability on
net turnover is approximately 13 per cent.
IMC has a strong overseas presence and a range of different but complementary
services at the beginning of the asset life cycle which, when combined with WYG,
will create an international consultancy group capable of offering a much
broader range of services to an enlarged client base.
The Directors believe that the Acquisition represents a significant step forward
for WYG and will create sustainable value for Shareholders because:
* the international services provided by IMC are profitable,
sustainable and growing as a result of which the Acquisition is expected to
increase earnings per share for the Enlarged Group;
* IMC Consulting provides an international office network, local knowledge
and contacts, reputation and business framework to enable WYG to take
its complementary skills to the international market. It is particularly
well represented in the accession states of the enlarged European Union.
This should provide opportunities to improve business penetration in
growing economies and at earlier stages in the asset life cycle;
* IMC Consulting provides access to major EU and World Bank funding
programmes with a track record of successful delivery and a detailed
knowledge of priorities and processes associated with such programmes;
* the IMC business streams provide complementary customers and
geographical markets to those of WYG and represent an excellent strategic
fit;
* there is an opportunity to create synergies through the expansion of IMC's
services to WYG's customer base in the UK and Ireland and through the
cross-selling of WYG's higher value technical services to IMC's customer
base; and
* IMC Consulting will provide pre-investment front end skills and will
provide a more balanced portfolio between the planning, creating and
operating stages of the asset life cycle on behalf of clients.
The Directors believe that the acquisition of IMC represents low risk expansion
into international markets for the following reasons:
* the vast majority of project funding is from international aid agencies
such as the European Commission, the World Bank, the Department for
International Development and other UK Government institutions. This client
base accounted for approximately 98 per cent. of total IMC Consulting
Limited turnover in the nine months to 31 December 2003;
* aid programmes are transparent and long term and approximately 60 per cent.
of annual project value on EU contracts is paid each year to IMC in
the UK by advance payments secured through advance payment bonds. This
helps to facilitate accurate forecasting and should significantly reduce
overseas cashflow risk;
* the majority of staff working on overseas projects are associates and as
such can be engaged on an ad hoc basis resulting in flexible staffing
arrangements and close control of staffing costs;
* IMC has only four primary overseas office locations. Resources can
therefore be transferred quickly to new regions and projects and in a cost
efficient manner; and
* the directors and senior management of IMC have extensive sector
and international experience which will be a valuable resource within the
Enlarged Group. All senior members of IMC Management have agreed to enter
into employment contracts with the Enlarged Group. In addition, WYG will
incentivise senior management post Acquisition to encourage commitment to
continue to grow IMC within the Enlarged Group.
Funding of the Acquisition
The Group is funding the Acquisition through bank facilities. In January 2004
the Group successfully raised approximately #9 million (net of expenses) by a
placing and open offer. The net proceeds of the placing and open offer were used
to reduce gearing in the short term and as previously stated, are being utilised
to support the acquisition strategy of WYG.
Definitions
The following definitions apply throughout this announcement unless the context
requires otherwise:
"Acquisition" the proposed acquisition of the entire issued share capital of
each of IMC Consulting Limited and IMC Europe Limited on the terms
of the Acquisition Agreement
"Acquisition Agreement" the conditional agreement dated 25 May 2004 between IMC Group
Holdings Limited, White Young Green Plc and Rio Tinto plc
"Board" or "Directors" the directors of WYG
"CIS" the Commonwealth of Independent States
"Completion" completion of the Acquisition
"Enlarged Group" the WYG Group following completion of the Acquisition
"FSA" the Financial Services Authority Limited
"IMC" together IMC Consulting Limited and IMC Europe Limited
"IMC Consulting" IMC Consulting Limited
"IMC Europe" IMC Europe Limited, a company into which the business, assets and
liabilities of IMC Group Consulting (excluding the mining
division) were transferred on 11 May 2004
"IMC Group Consulting" IMC Group Consulting Limited
"Rothschild" N M Rothschild & Sons Limited, which is authorised and regulated
by the FSA
"Rio Tinto" Rio Tinto plc
"Shareholders" holders of ordinary shares in White Young Green Plc
"SME" small and medium sized enterprises
"UK" United Kingdom
"Vendor" IMC Group Holdings Limited
"WYG Group" or the "Group" the Company and its subsidiary undertakings
"WYG" or the "Company" White Young Green Plc
This information is provided by RNS
The company news service from the London Stock Exchange
END
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