RNS Number:4357V
EQ Group PLC
16 February 2004
For Release 7:00am 16th February 2004
eq Group plc ("eq" or "the company")
Preliminary Results for the year ended 31December 2003
Strong Organic Growth; First Quarter Revenues up; Positive Outlook
eq group plc, the AIM listed marketing services group, announces preliminary
results for the year ended 31 December 2003, its third full year of trading.
All financial and operational objectives stated in last year's statement were
achieved. eq worked with over 270 clients in 2003 including: Tesco, Hilton,
Vodafone, Barclays Bank, Pfizer Healthcare, Sony, GE Capital and HBOS.
Financial Highlights
* Revenues up 73% to #8.91m (2002:#5.15m).
* Operating profit up 144% to #984,000 (2002: #403,000).
* Adjusted operating profit pre goodwill amortisation up 99% to #1.32m
(2002: #663,000).
* Basic earnings per share up 391% to 4.87p(2002: 0.99p).
* Adjusted earnings per share before goodwill amortisation and
exceptional items up 87% to 10.08p (2002: 5.39p)
* Net cash inflow from operating activities was #1.92m (2002: #75,000).
* Net cash inflow from operating activities, after interest, tax and
capital expenditure of #1.25m (2002: outflow #291,000).
* Net debt decreased by 18% to #5.39m (2002: #6.61m).
* Interest cover before goodwill amortisation and exceptional items of
4.1x (2002: 2.5x).
Operational Highlights
* Strong like-for-like earnings growth at Buckingham and Quaestor
subsidiaries.
* Profitable first full year of trading by The Lead Agency subsidiary.
* Positive collaboration between Buckingham, Quaestor and The Lead
Agency.
* Quaestor and Buckingham won six international projects in
collaboration.
* Market-leading position maintained by Broadnet subsidiary in
commercial radio, 12 new software license contracts won.
* Group worked with 270 companies, up from 221 companies in 2002.
* Top 20 clients accounted for 53% of group revenues.
* 45% are FTSE100 constituents, 5% FTSE250, 10% S&P 500, 15% smaller
quoted, 25% privately-run.
* Significant markets were financial services (25%), Fast Moving
Consumer Goods (20%) and Media (20%).
Regarding Prospects, Chief Executive Bob Bond said: "We remain positive about
our prospects for 2004 and beyond. Like-for-like revenues in January are more
than 50% up on 2003 and our order pipeline for the first quarter is very
healthy. Our customer base continues to expand and diversify with a number of
positive wins in the first few weeks of 2004. At present, our acquisition
pipeline looks positive. We look forward to the current year and we are sure
that the Group will make further significant progress."
Enquiries:
eq group plc
Bob Bond, Chief Executive 07747 032478
Binns & Co. PR Ltd.
Peter Binns/Nathalie Ells/Victoria Stephens Tel: 020 7786 9600
Chairman & Chief Executive's Statement
Our third full year of trading, 2003, was a very positive year for your company.
We achieved all the financial and operational objectives stated in last year's
statement to you, our shareholders. As a result, growth in revenue, headline
profits and earnings per share were well above the relevant market sector
averages.
Group turnover increased by 73% to #8,911,000 (2002: #5,151,000). Revenue from
continuing operations (on a proforma basis) increased by 22% to #8,425,000 as a
result of strong organic growth at Quaestor, Buckingham and The Lead Agency.
Adjusted operating profit before amortisation of goodwill, increased by 99% to
#1,319,000 (2002: #663,000). Amortisation of goodwill, which has no cash impact
but relates to the goodwill associated with previous acquisitions, was #335,000
(2002: #260,000). Operating profit increased by 144% to #984,000 (2002:
#403,000). Exceptional items associated with the disposal of TVI amounted to
#30,000.
Adjusted basic earnings per share before amortisation of goodwill and
exceptional items were up 87%, at 10.08 pence (2002: 5.39 pence), their highest
level since the group was formed in March 2000. Basic earnings per share
increased by 391% to 4.87 pence from 0.99 pence.
Adjusted fully diluted earnings per share before amortisation of goodwill and
exceptional items were up 72%, to 9.26 pence (2002: 5.38 pence). Fully diluted
earnings per share increased by 351% to 4.47 pencefrom 0.99 pence.
The reported profit before tax was #634,000 (2002: #132,000) and profit after
tax increased by 475% to #339,000 from #59,000.
We generated a net cash inflow from our operations, after interest, tax payments
and capital expenditure, of #1,248,000, an improvement of #1,539,000 on last
year. This contributed to net debt decreasing by 18.3%, to #5,399,000 (2002:
#6,610,000). Interest cover before amortisation of goodwill and exceptional
items increased to over 4.1 times, up from 2.5 times in 2002. Your board is
comfortable that this level of debt is appropriate for an acquisitive business
that has been advancing under the combined conditions of low interest rates and
weak equity markets.
Review of Activities
Revenues by discipline for 2003 were as follows:
Discipline Revenue as a % Like-for-like
of total continuing Revenue growth % (on
operations a proforma basis)
03 vs 02
Information 89% 20%
Services &
Consulting
Marketing 4% n/a
Communications
Support 7% -6%
Services
Information Services and Consulting
Quaestor performed exceptionally well during its first full year within the
group. Revenue increased by 16% and operating profits increased by 48% on a pro
forma basis. The greatest challenge during the year was delivering the volume of
work that was commissioned without compromising on quality. We would like to
express our thanks to the Quaestor team for rising to this challenge
particularly during the peak workload months in the summer.
Buckingham Research also produced a strong performance largely as a result of
greater focus on business development by the whole team. In last year's Annual
Report to shareholders we stated that a key challenge for 2003 was to broaden
Buckingham's customer base and thereby minimise sectoral and customer
concentration concerns. In 2003 revenues from new clients amountedto #409,667
or 19% of revenue, a like-for-like increase of 234% on 2002.
In combination, Quaestor and Buckingham increased like-for-like operating
profits by 52.8% and revenues by 20.1% against the same period in 2002 on a pro
forma basis. Thiscompares favourably to growth in the market research industry
as a whole where revenues amongst the Top 80 UK agencies increased by 4.2% in
2002. Operating margins were 16.0% across the two businesses, up from 12.8% in
2002 on a pro forma basis. 103credentials presentations were undertaken during
the period and 62 new clients were won. Quaestor and Buckingham won six
international projects by combining their respective skills and industry
knowledge.
Marketing Communications
The Lead Agency contributed #323,852 or 4% of group revenues in its first full
year within the group, which is an excellent achievement given that it was
acquired on 20 December 2002 as a recently established operation. Operating
margins averaged 30.2% in a period of very high growth and headcount increased
to ten by the year end.
During a period of intensive business development The Lead Agency team conducted
92 credentials presentations resulting in 21 new client wins with organisations
including Sony, Sun Microsystems, Crystal Decisions and Information Builders.
The Lead Agency conducted three joint projects with Quaestor and has undertaken
a series of business development projects for Buckingham Research.
Support Services
Like-for-likerevenues at Broadnet were down by 6% during the period. The first
half of the year was tough for commercial radio stations in the UK which
resulted in station closures, the sale of stations to non-Broadnet customers and
price pressure. Trading conditions in the UK improved during the second half of
the year as radio advertising spend picked up and remained buoyant in the Irish
market.
During the course of the year Broadnet won 12 new licence contracts and
significant progress was made on the new version of Broadnet's market-leading
radio traffic management software.
Summary of Activities
eq continues to build a first class customer base. During 2003 we worked with
270 companies, up from 221 in 2002 (on continuing operations). Our Top 20
clients accounted for 53% of group revenues with the largest accounting for 8%.
Of these, 45% were FTSE-100 constituents, 5% were FTSE-250 constituents, 10%
were S&P 500 constituents, 15% were smaller publicly quoted companies and the
remaining 25% were privately held businesses. By sector, our most significant
markets were Financial Services (25%), Fast Moving Consumer Goods (20%) and
Media (20%).
Our greatest asset and point of difference continues to be our people. During
the course of the year we hired some exceptional talent to meet both the
increased workload and expected growth levels. Our ongoing challenge is to
ensure that we develop and stimulate our team of talented individuals, whilst
also expanding it to supportfurther growth. During 2003 our team grew by 53 to
101 people, largely as a result of the acquisitions of Quaestor and The Lead
Agency.
Collaboration between the businesses in the group resulted in nine projects
being won with a total inter-company value of #136,808 and a total project value
of #272,826. Quaestor and Buckingham Research worked together on a number of
international projects where Quaestor would ordinarily have sub-contracted
fieldwork to third parties. The Lead Agency worked with Buckingham Research on a
series of demand creation campaigns and Quaestor provided telephone interviewing
services to The Lead Agency to meet peaks in demand.
In a year when we consolidated our position and achieved strong organic growth,
we also reviewed 87 potential acquisition targets. This number is lower than we
have reported in previous years because we took the decision to exclude US
businesses from our search and we maintained our stringent acquisition criteria.
The fourth quarter saw dealflow improve significantly and as a result we have
entered 2004 with a healthy pipeline of high quality acquisition targets.
Outlook
We remain positive about our prospects for 2004 and beyond. Like for like
revenues in January are more than 50% up on 2003 and our pipeline for the first
quarter is very healthy. Account reviews of our major customers suggest that
demand for our expertise remains buoyant and that budgets are at least
consistent with 2003. Our customer base continues to expand and diversify with a
number of positive wins in the first few weeks of 2004.
From an economic perspective, unemployment and inflation remain low and whilst
interest rates may not remain at current levels we believe consumer confidence
will continue to hold firm. This should, in turn, have a positive impact on the
key sectors that we operate in.
The much discussed impact of the combined US Presidential election and the
European Football Championships is more likely to impact those involved in
advertising, however it is possible that we may see a temporary increase in
demand as companies seek to launch products in advance of the championships or
evaluate sponsorship during the course of the competition.
At present our acquisition pipeline looks very positive with a number of well
qualified prospects under review or in negotiation, however there is no
guarantee that any of these opportunities will progress to completion. As we
look forward to 2004, we will pursue these and new opportunities with gusto
whilst continuing to take our sensible and now familiar approach to new
acquisitions.
Finally, we would like to thank all of our employees who have worked tirelessly
during this highly successful but nonetheless challenging year. With this level
of commitment and the exciting opportunities that lie ahead, we are sure that
the Group will make further significant progress during the current year.
Phillip Bennett Bob Bond
Chairman Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2003
2003 2002
Pre Amortisation Pre Amortisation of
amortisation of of goodwill amortisation goodwill
goodwill Total of goodwill Total
#'000 #'000 #'000 #'000 #'000 #'000
---------------- -------- -------- ------ -------- -------- -------
Turnover
Continuing 8,425 - 8,425 2,243 - 2,243
operations
Discontinued 486 - 486 2,908 - 2,908
operations
---------------- -------- -------- ------ -------- -------- -------
8,911 - 8,911 5,151 - 5,151
---------------- -------- -------- ------ -------- -------- -------
Cost of sales (3,844) - (3,844) (2,535) - (2,535)
---------------- -------- -------- ------ -------- -------- -------
Gross profit 5,067 - 5,067 2,616 - 2,616
Administrative (3,748) (335) (4,083) (1,953) (260) (2,213)
expenses -------- -------- ------ -------- -------- -------
----------------
---------------- -------- -------- ------ -------- -------- -------
Operating profit
before
amortisation of
goodwill
- continuing 1,319 (335) 984 440 (260) 180
- discontinued - - - 223 - 223
---------------- -------- -------- ------ -------- -------- -------
Operating 1,319 (335) 984 663 (260) 403
profit
Loss on sale of (30) - (30) - - -
discontinued
operation
---------------- -------- -------- ------ -------- -------- -------
Profit before 1,289 (335) 954 663 (260) 403
interest -------- -------- ------ -------- -------- -------
----------------
Net interest (320) - (320) (271) - (271)
payable
---------------- -------- -------- ------ -------- -------- -------
Profit before 969 (335) 634 392 (260) 132
taxation
Taxation (295) - (295) (73) - (73)
---------------- -------- -------- ------ -------- -------- -------
Profit for the 674 (335) 339 319 (260) 59
year -------- -------- ------ -------- -------- -------
----------------
Basic earnings
per share
Earnings per 4.87p 0.99p
share
Adjusted earnings 10.08p 5.39p
per share *
Diluted earnings
per share
Earnings per 4.47p 0.99p
share
Adjusted earnings 9.26p 5.38p
per share *
* before exceptional items and goodwill
amortisation
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31
December 2003
2003 2002
#'000 #'000
Profit for the 339 59
year
Currency 20 188 249
adjustments
---------------- ------ -------- -------- ------ --- ---- ------------
Total recognised 527 308
gains and losses
---------------- ------ ---------------- ------ --- ---- ------------
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 2003
2003 2002
Group Company Group Company
#'000 #'000 #'000#'000
FIXED ASSETS
Intangible assets 6,072 - 6,407 -
Tangible assets 741 6 849 2
Investments - 8,266 - 8,266
--------------------------- ------- -------- -------- --------
6,813 8,272 7,256 8,268
--------------------------- ------- -------- -------- --------
CURRENT ASSETS
Stock 426 - 145 -
Debtors 1,827 783 2,009 592
Cash 535 - 338 -
--------------------------- ------- -------- -------- --------
2,788 783 2,492 592
CREDITORS: amounts falling due within (4,188) (3,168) (3,747) (2,429)
one year
--------------------------- ------- -------- -------- --------
Net current liabilities (1,400) (2,385) (1,255) (1,837)
--------------------------- ------- -------- -------- --------
Total assets less current liabilities 5,413 5,887 6,001 6,431
CREDITORS: amounts falling due after (4,932) (3,366) (6,047) (4,157)
more than one year
PROVISIONS FOR LIABILITIES AND (18) - (18) -
CHARGES
--------------------------- ------- -------- -------- --------
Net assets/(liabilities) 463 2,521 (64) 2,274
--------------------------- ------- -------- -------- --------
CAPITAL AND RESERVES
Called up equity share capital 698 698 698 698
Share premium account 7,335 7,335 7,335 7,335
Profit and loss account deficit (7,570) (5,512) (8,097) (5,759)
--------------------------- ------- -------- -------- --------
Equity shareholders' funds/(deficit) 463 2,521 (64) 2,274
--------------------------- ------- -------- -------- --------
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 12th February 2004.
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2003
2003 2002
#'000 #'000
Net cash inflow from operating activities (see below) 1,921 75
Returns on investment and servicing of finance (351) (261)
Taxation (262) (76)
Capital expenditure (60) (29)
Acquisitions/Disposals (38) (1,000)
------------------------------------- ------- --------
Net cash inflow/(outflow) before financing 1,210 (1,291)
Financing (498) 1,250
------------------------------------- ------- --------
Increase/(decrease) in cash in the year 712 (41)
------------------------------------- ------- --------
Reconciliation of net cashflow to movement in net debt 2003 2002
#'000 #'000
Increase/(decrease) in cash in the year 712 (41)
Cash outflow /(inflow) from (increase)/decrease in debt 498 (1,250)
------------------------------------- ------- --------
1,210 (1,291)
Finance leases acquired with subsidiary undertakings - (143)
Other non-cash changes (182) (145)
Currency adjustments 183 184
------------------------------------- ------- --------
Movement in net debt 1,211 (1,395)
Opening net debt (6,610) (5,215)
------------------------------------- ------- --------
Closing net debt (5,399) (6,610)
------------------------------------- ------- --------
Reconciliation of operating profit to net cash inflow from2003 2002
operating activities #'000 #'000
Operating profit 984 403
Depreciation 236 76
Amortisation of goodwill 335 260
Loss on sale of fixed assets 15 -
(Increase)/Decrease in stock (285) 33
(Increase)/Decrease in debtors (176) (24)
Increase/(Decrease) in deferred revenue 525 (361)
Increase/(Decrease) in creditors 287 (312)
------------------------------------- ------- --------
Net cash inflow from operating activities 1,921 75
------------------------------------- ------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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