RNS Number:6104Y
EQ Group PLC
20 February 2006
20 February 2006
eq Group plc ("eq" or "the company")
Preliminary Results for the year ended 31 December 2005
eq group plc, the AIM quoted marketing services group, announces its preliminary
results for the year ended 31 December 2005.
Financial Highlights
* Revenues up by 10% to #11,391,000 (2004: #10,402,000)
* Adjusted Operating profit, before amortisation of goodwill and
exceptional items up by 18% to #1,669,000 (2004: #1,413,000)
* Operating profit down by 6% to #1,012,000 (2004: #1,078,000)
* Adjusted fully diluted earnings per share before amortisation of
goodwill and exceptional items up by 14%, to 11.05 pence (2004: 9.67 pence)
* Fully diluted earnings per share down by 23% to 3.54 pence (2004: 4.61
pence)
* Amortisation of goodwill up by 44% to #481,000 (2004: #335,000) as a
result of additional consideration paid to the vendors of Buckingham
Research and the increased contingent consideration due to the vendors of
Quaestor in the first quarter of 2006
* Exceptional costs of #176,000 (2004: #Nil), principally incurred on an
aborted acquisition
* Interim paid and proposed final dividends increased by 10% to 1.1p in
total (2004: 1.0p)
Operational Highlights
* Like-for-like operating profits within the market research businesses up
by 26%
* Continued collaboration between Buckingham and Quaestor resulted in 21
projects being won (2004: 11 projects) with a total project value of
#862,000 (2004: #313,000)
* Key wins during the period included: News International, Abbey plc,
Yorkshire Water, John Lewis Partnership, Royal Caribbean, Ginsters and
Taylor Woodrow
For further information
Bob Bond, Chief Executive, eq group plc - 07747 032478
Stephen Towne, Group Finance Director, eq group plc - 07989 497329
Letter to Shareholders
Your group performed well in 2005. Revenue, adjusted operating profits before
amortisation of goodwill and exceptional items and adjusted earnings per share
increased for a fourth consecutive year.
Group turnover increased by 10% to #11,391,000 (2004: #10,402,000). Adjusted
operating profit, before amortisation of goodwill and exceptional items,
increased by 18% to #1,669,000 (2004: #1,413,000) giving an adjusted operating
margin of 14.7% (2004: 13.6%). Operating profit fell by 6% to #1,012,000 (2004:
#1,078,000) as result of an increase in amortisation of goodwill to #481,000
(2004: #335,000) and exceptional costs of #176,000 (2004: #Nil) which were
principally incurred on an aborted acquisition. The amortisation of goodwill
increased as a result of the additional consideration paid to the vendors of
Buckingham Research and the increased contingent consideration we expect to pay
to the vendors of Quaestor in the first quarter of 2006. Having made this final
payment, all contingent consideration relating to acquired businesses in the
group will have been paid.
Adjusted basic earnings per share before amortisation of goodwill and
exceptional items increased by 9%, to 12.31 pence (2004: 11.26 pence), its
highest level since the group was formed in March 2000. Basic earnings per share
decreased by 27% to 3.94 pence from 5.37 pence. Basic earnings per share takes
into account the increase in amortisation of goodwill and the exceptional items
noted above.
Adjusted fully diluted earnings per share before amortisation of goodwill and
exceptional items increased by 14%, to 11.05 pence (2004: 9.67 pence). Fully
diluted earnings per share decreased by 23% to 3.54 pence (2004: 4.61 pence).
These figures take into account the additional shares that we expect to issue to
the vendors of Quaestor as part of their deferred consideration due in the first
quarter of 2006.
The reported profit before tax increased by 2% to #638,000 (2004: #627,000). The
tax charge for the year represented 30% (2004: 25%) of the profit before
taxation and before amortisation of goodwill, which is not allowable for tax
purposes, resulting in a decrease in the profit after tax of 21% to #304,000
(2004: #385,000).
A final dividend of 0.55p per share will be paid on 28 April 2006 to
shareholders on the register at the close of business on 24 March 2006, giving
total dividends declared during the year of 1.1 pence per share (2004: 1.0
pence).
The group generated a net cash inflow from operations, after interest, tax
payments and capital expenditure, of #829,000. However, during the year, loan
notes of #942,000 were issued to the vendors of Buckingham Research contributing
to an increase in net debt of 6% to #5,097,000 (2004: #4,818,000). Despite this
increase in net debt, the group's debt/adjusted EBIT ratio improved to 3.05
times (2004: 3.41 times). Your board remains comfortable that this level of debt
is appropriate for a business of our size.
Review of Activities
During the period, the group generated #10,799,000 (2004: #9,720,000) or 95%
(2004: 93%) of its revenue from market research and #592,000 (2004: #585,000) or
5% (2004: 7%) of its revenue from software development.
The market research businesses (Buckingham Research and Quaestor) increased
operating profits by 26% and revenues by 11% against the same period in 2004.
This compares very favourably to growth in the market research industry as a
whole where revenues amongst the Top 65 UK agencies increased by 5.4% in 2004
(Source: BMRA). During the period, 50 (2004: 56) new clients were won as we took
a more selective approach to new business and focused on higher margin
activities.
Broadnet, the group's software business, performed steadily during 2005. Seven
new radio stations were contracted against two losses. However, the impact of
station losses in 2004 resulted in a 4.8% decrease in contracted licence
revenue. This was offset by an increase in non-radio revenue of #25,000 (2004:
Nil) which meant that total revenue from Broadnet increased by 1.2% to #592,000.
Summary of Activities
During 2005 we worked with 256 companies, down from 266 in 2004 reflecting our
more selective approach to new business and our focus on higher margin
activities. The group's Top 20 clients accounted for 57% of group revenues
(2004: 55%) with the largest accounting for 10% (2004: 10%). Of these, 40% were
FTSE-100 constituents, 5% were FTSE-250 constituents, 25% were quoted on major
overseas exchanges and the remaining 30% were privately held businesses. By
customer sector, our most significant markets were Financial Services (25%),
Fast Moving Consumer Goods (20%) and Media (18%). Key wins during the period
were News International, Abbey plc, Yorkshire Water, John Lewis Partnership,
Royal Caribbean, Ginsters and Taylor Woodrow.
During 2005, headcount increased from 109 to 112. Revenue per head during the
period increased to #101,700 (2004: #98,100 on continuing operations) and
adjusted operating profit per head increased to #13,400 (2004: #13,400 on
continuing operations).
Collaboration between the businesses in the group resulted in 21 projects being
won (2004: 11 projects) with a total project value of #862,000 (2004: #313,000).
Whilst this represents less than 10% of group revenue we are delighted with the
progress that Buckingham and Quaestor have made in working together.
Outlook
We expect macro-economic conditions to remain stable for the coming period and
growth within the market research industry to continue in excess of 5%. Against
this backdrop we believe the outlook for the group remains positive.
During the first half of 2006 we will continue the programme of recruitment that
began in the fourth quarter of 2005 to provide us with the capacity and
expertise to deliver further organic growth in the second half of 2006 and into
2007. This investment in people, allied with a re-phasing of work from some of
our key customers, will result in a bias in our profitability towards the second
half compared with 2005.
We will continue to actively seek complementary acquisitions in the fields of
Market Research, Data Analysis and Strategic Consulting. We currently have a
healthy pipeline of earnings enhancing acquisition targets.
The Remuneration Committee is proposing to implement a Long-Term Incentive Plan
(LTIP) for senior executives. This will be aligned directly with shareholders'
interests and is designed to ensure the business benefits from senior management
continuity in the long term.
Finally, we would like to thank all of our employees for producing another
strong performance and actively contributing to the development of the group.
Brian Heather Bob Bond
Chairman Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2005
----------- ----------
2005 2004
restated
----------- ----------
Total Total
#'000 #'000
Turnover 11,391 10,402
Cost of sales (7,366) (6,814)
--------------------------------------------------------------------------------
Gross profit 4,025 3,588
Administrative (3,013) (2,510)
expenses
--------------------------------------------------------------------------------
Adjusted operating profit before exceptional items 1,669 1,413
and amortisation of goodwill
Exceptional items (176) -
Amortisation of goodwill (481) (335)
--------------------------------------------------------------------------------
Operating profit 1,012 1,078
Exceptional items - discontinued operation - (87)
Profit before interest 1,012 991
Net interest payable (374) (364)
--------------------------------------------------------------------------------
Profit on ordinary activities before taxation 638 627
Taxation (334) (242)
--------------------------------------------------------------------------------
Profit for the financial year 304 385
--------------------------------------------------------------------------------
Basic earnings per share 3.94p 5.37p
Diluted earnings per share 3.54p 4.61p
In accordance with FRS 22 adjusted earnings per share before exceptional
items and goodwill amortisation are reported in note 1.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 December 2005
2005 2004
#'000 #'000
Profit for the year 304 385
Currency adjustments - 33
--------------------------------------------------------------------------------
Total recognised gains and losses relating to the year 304 418
--------------------------------------------------------------------------------
There is no difference between the profit on ordinary activities before taxation
and the retained profit for the year stated above and their historical cost
equivalents.
BALANCE SHEETS
as at 31 December 2005
2005 2004
Restated
Group Company Group Company
#'000 #'000 #'000 #'000
FIXED ASSETS
Intangible assets 9,006 - 7,901 -
Tangible assets 681 3 753 4
Investments - 12,015 - 10,430
--------------------------------------------------------------------------------
9,687 12,018 8,654 10,434
--------------------------------------------------------------------------------
CURRENT ASSETS
Stock 284 - 257 -
Debtors 1,738 144 1,823 651
Cash 101 101 101 101
--------------------------------------------------------------------------------
2,123 245 2,181 752
CREDITORS: amounts falling due within
one year (4,403) (3,566) (3,651) (3,064)
--------------------------------------------------------------------------------
Net current liabilities (2,280) (3,321) (1,470) (2,312)
--------------------------------------------------------------------------------
Total assets less current liabilities 7,407 8,697 7,184 8,122
CREDITORS: amounts falling due after
more than one year (3,262) (3,178) (3,912) (3,796)
PROVISIONS FOR LIABILITIES AND CHARGES (1,915) (1,915) (2,179) (2,179)
--------------------------------------------------------------------------------
Net assets 2,230 3,604 1,093 2,147
--------------------------------------------------------------------------------
CAPITAL AND RESERVES
Called up equity share capital 799 799 725 725
Share premium account 839 839 - -
Profit and loss account 592 1,966 368 1,422
--------------------------------------------------------------------------------
Equity shareholders' funds 2,230 3,604 1,093 2,147
--------------------------------------------------------------------------------
The financial statements comprising the consolidated profit and loss account,
the consolidated statement of total recognised gains and losses, the balance
sheets, the consolidated cash flow statement and related notes, were approved by
the Board on 20th February 2006.
Stephen Towne Bob Bond
Director Director
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2005
2005 2004
#'000 #'000
Net cash inflow from operating activities (see below) 1,644 1,715
Returns on investment and servicing of finance (406) (327)
Deferred consideration paid relating to acquisitions (4) (252)
Taxation paid (343) (297)
Capital expenditure (66) (124)
Disposal of businesses - 20
Equity dividends paid (80) (36)
--------------------------------------------------------------------------------
Net cash inflow before financing 745 699
Financing (833) (1,249)
--------------------------------------------------------------------------------
Decrease in cash in the year (88) (550)
--------------------------------------------------------------------------------
Reconciliation of net cashflow to movement in net debt 2005 2004
#'000 #'000
Decrease in cash in the year (88) (550)
Cash outflow from decrease in debt 833 1,249
--------------------------------------------------------------------------------
745 699
Other non-cash items (1,024) (118)
--------------------------------------------------------------------------------
Movement in net debt (279) 581
Opening net debt (4,818) (5,399)
--------------------------------------------------------------------------------
Closing net debt (5,097) (4,818)
--------------------------------------------------------------------------------
Reconciliation of operating profit to net cash inflow from
operating activities 2005 2004
#'000 #'000
Operating profit 1,012 1,078
Depreciation 209 203
Amortisation of goodwill 481 335
Loss on sale of fixed assets 11 16
Decrease/(increase) in stock (27) 169
(Increase)/decrease in debtors 85 (21)
Decrease in deferred revenue (295) (141)
Increase in creditors 168 76
--------------------------------------------------------------------------------
Net cash inflow from operating activities 1,644 1,715
--------------------------------------------------------------------------------
Notes
1. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on a profit after
taxation of #304,000 (2004: #385,000) divided by the weighted average number of
Ordinary shares in issue during the year of 7,707,276 (2004: 7,167,002) basic
and 8,584,416 (2004: 8,349,449) diluted. An adjusted earnings per share figure
before the amortisation of goodwill and exceptional items, to facilitate
comparison of the trading results from year to year, is presented below.
Year ended 31 Year ended 31
December 2005 December 2004
Basic earnings per share, adjusted 12.31p 11.26p
Diluted earnings per share, adjusted 11.05p 9.67p
The adjusted earnings per share figures are based on an adjusted profit for the
year of #949,000 (2004: #807,000) calculated as follows:
Year ended 31 Year ended 31
December 2005 December 2004
#'000 #'000
Profit for the year 304 385
add: goodwill amortisation 481 335
add: exceptional items (adjusted for tax) 164 87
--------------------------------------------------------------------------------
Adjusted profit for the year 949 807
--------------------------------------------------------------------------------
The number of shares is calculated as follows:
Year ended 31 Year ended 31
December 2005 December 2004
Number Number
Weighted average number of shares 7,707,276 7,167,002
Potential issue on conversion of
outstanding options/warrants
and in respect of contingent
consideration 877,140 1,182,447
--------------------------------------------------------------------------------
Used in diluted earnings per share
calculation 8,584,416 8,349,449
--------------------------------------------------------------------------------
The potential issue of shares in respect of contingent consideration arises from
the acquisition of Quaestor Market Research and Strategists Limited: (719,321
shares).
2. CHANGES IN ACCOUNTING POLICIES
a. Allocation of direct salary costs
In 2005 the allocation of direct salary costs at the group's market research
businesses was harmonised, with all such costs being presented within cost of
sales. This change in accounting policy does not affect the operating profit.
The impact on the profit and loss account for the year ended 31 December 2004 is
as follows:
As originally As restated
reported
#'000 #'000
Turnover 10,402 10,402
Cost of sales (4,929) (6,814)
--------------------------------------------------------------------------------
Gross profit 5,473 3,588
Administrative expenses (4,060) (2,175)
--------------------------------------------------------------------------------
Operating profit 1,413 1,413
--------------------------------------------------------------------------------
In the year ended 31 December 2005, the impact of the change was to increase
cost of sales and reduce administrative expenses by #2,039,000.
b. Dividend charge
In accordance with FRS 21 - "Events after the balance sheet date" dividends are
recognised when the Company has a current obligation to pay them. Consequently,
the final proposed dividend in each year is charged to profit and loss in the
following accounting period (see note 3).
c. Additional financial reporting standards
During the year ended 31 December 2005, the group adopted FRS 22 - "Earnings per
share" and the presentational requirements of FRS 25 - "Financial instruments -
Disclosure and presentation". There is no impact on either the current or prior
year earnings per share.
3. DIVIDENDS
Year ended 31 Year ended 31
December 2005 December 2004
#'000 Restated
#'000
Ordinary shares - final paid 0.5p per share
(2004:#Nil) 36 -
- interim paid
0.55p per share
(2004: 0.5p) 44 36
--------------------------------------------------------------------------------
80 36
--------------------------------------------------------------------------------
During the year, the Company adopted FRS 21 under which dividends are accounted
for when the Company has a current obligation to pay them. The dividends that
would have been reported for the year ended 31 December 2005 under the old basis
are #88,000. The dividends previously reported on the old basis for the year
ended 31 December 2004 were #72,000.
4. DISCLAIMER
This preliminary announcement does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985.
The information for the year ended 31 December 2004 is an extract from the
statutory accounts to that date, restated as set out in note 2 for the adoption
of new accounting standards. The statutory accounts for the year ended 31
December 2004 have been delivered to the Registrar of Companies and included an
audit report which was unqualified and which did not contain a statement under
Section 237(2) or (3) of the Companies Act 1985. The statutory accounts for the
year ended 31 December 2005, upon which the auditors have issued an unqualified
audit report, will be delivered to the Registrar following the Company's annual
general meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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