RNS Number:6572T
EQ Group PLC
26 March 2007
26 March 2007
eq Group plc ("eq" or "the company")
Preliminary Results for the year ended 31 December 2006
eq group plc, the AIM quoted marketing services group, announces its preliminary
results for the year ended 31 December 2006.
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
2006 was a difficult year. As reported in our trading statement on 2 June,
there was an unanticipated reduction in activity by a number of our key market
research clients in the first half of the year. We are pleased to report that
these clients have now returned to previous historic levels of spend. As a
result, the group's performance was heavily biased towards the second half of
the year. Turnover decreased by 8% to #10,505,000 (2005: #11,391,000) and
adjusted operating profit, before the amortisation of goodwill and exceptional
items, decreased by 21% to #1,302,000 (2005: #1,647,000). The adjusted operating
profit in the six months to 31 December represented 61% (2005: 49%) of the full
year figure.
In 2006, Broadnet Limited, the group's subsidiary that provides services to
commercial radio stations, contributed 5% of the group's revenues. The
consolidation of the industry and increased competitive activity has led the
Board to review the carrying value of the group's investment in Broadnet and
consequently the goodwill carried in the group accounts has been written down by
#1,723,000.
The goodwill write down contributed to an operating loss of #1,029,000 (2005:
#990,000 operating profit) and a loss before tax of #1,473,000 (2005: profit
before tax of #616,000). Adjusted basic earnings per share before the
amortisation of goodwill and exceptional items decreased by 40% to 7.27 pence
(2005: 12.03 pence). A basic loss per share of 19.74p was recorded (2005: basic
earnings per share of 3.65 pence).
In view of the financial result, the board considers it inappropriate to pay a
final dividend (2005: final dividend proposed 0.55 pence).
The group generated a net cash inflow from operations, after interest, tax
payments and capital expenditure, of #184,000 although net debt increased, in
line with our expectations, by #995,000 due principally to the payment in May of
#953,000 in cash to the vendors of Quaestor Research & Marketing Strategists.
Net debt decreased in the second half of the year by #289,000 to #6,092,000
(second half of 2005: decrease of #377,000 to #5,097,000).
Review of Activities
During the period, the group generated #9,967,000 (2005: #10,799,000) or 95%
(2005: 95%) of its revenue from market research and #538,000 (2005: #592,000) or
5% (2005: 5%) of its revenue from software development.
Our market research businesses worked with 166 companies. Of these, the Top 20
clients accounted for 58% of group revenues (2005: 57%) with the largest
accounting for 8% (2005: 10%). Of these, 35% were FTSE-100 constituents, 10%
were FTSE-250 constituents, 30% were quoted on major overseas exchanges and the
remaining 25% were privately held businesses. By customer sector, our most
significant markets were Financial Services (27%), Fast Moving Consumer Goods
(22%) and Media (17%). New customers during the period included Microsoft,
Cadbury and Ladbrokes.
Outlook
We have had a positive start to the year. The clients that reduced activity in
the first half of 2006 are now very active and at this early stage the outlook
for the remainder of the year remains positive.
Quaestor has created specialist teams to work with the Financial Services and
Media industries. We expect the increased expertise that we are building in
these teams to begin producing positive results during the course of the year.
The core Quaestor business is enhancing its research capability to encompass new
techniques and approaches such as semiotics, blog tracking and ethnography with
the aim of addressing the challenges that major businesses face in understanding
today's increasingly complex consumer.
Buckingham Research has worked actively with its major clients including Tesco,
Vodafone and Hilton to enhance both its positioning and the quantitative
research expertise that it offers to its clients.
To extend the breadth of research services that the group can offer we acquired
Summit Studios Limited in February 2007 for #340,000 in cash. Summit provides
viewing facilities and related services to the research industry and a number of
global businesses. In the year ended 30 April 2006 it generated an operating
profit of #121,000 from revenues of #331,000. We intend to promote the use of
these facilities through our own research businesses as well as continuing to
provide full service research to Summit's existing direct clients.
Following the AGM, Brian Heather will retire as Chairman but remain as a
non-executive director. He will be replaced as Chairman by Steve Jones.
During the year our teams worked extremely hard under difficult circumstances.
We would like to thank them for their efforts and continued enthusiasm.
Brian Heather Bob Bond
Chairman Chief Executive
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2006
2006 2005(restated)
Unaudited Unaudited
Before Before
exceptional Exceptional Exceptional Exceptional
items and items and items and items and
amortisation amortisation amortisation amortisation
of goodwill of goodwill Total of goodwill of goodwill Total
Notes #'000 #'000 #'000 #'000 #'000 #'000
Turnover 10,505 - 10,505 11,391 - 11,391
Cost of sales (6,914) - (6,914) (7,366) - (7,366)
----------- ----------- ----------- ----------- ----------- -----------
Gross profit 3,591 - 3,591 4,025 - 4,025
Administrative expenses 3 (2,289) (2,331) (4,620) (2,378) (657) (3,035)
----------- ----------- ----------- ----------- ----------- -----------
Operating profit/(loss) 1,302 (2,331) (1,029) 1,647 (657) 990
Net interest payable (444) - (444) (374) - (374)
----------- ----------- ----------- ----------- ----------- -----------
Profit/(loss) on ordinary 858 (2,331) (1,473) 1,273 (657) 616
activities before taxation
Taxation (235) 16 (219) (346) 12 (334)
----------- ----------- ----------- ----------- ----------- -----------
Profit/(loss) for the 623 (2,315) (1,692) 927 (645) 282
financial year -----------
----------- ----------- ----------- ----------- -----------
Basic (loss)/earnings per
share
(Loss)/earnings per share 2 (19.74)p 3.65p
Adjusted earnings per 2 7.27p 12.03p
share
Diluted (loss)/earnings
per share
(Loss)/earnings per share 2 (19.74)p 3.29p
Adjusted earnings per 2 7.27p 10.80p
share
Dividends per share
Paid during the period 0.55p 1.05p
Impact on shareholders' funds 44 80
(#'000)
Proposed - 0.55p
Impact on shareholders' funds - 44
(#'000)
The Group has no recognised gains and losses other than the (loss)/profit above
and therefore no separate statement of total recognised gains and losses has
been presented.
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 2006
2006 2005
Unaudited Unaudited
Notes Group Company Group Company
#'000 #'000 #'000 #'000
FIXED ASSETS
Intangible assets 6,745 - 9,006 -
Tangible assets 660 2 681 3
Investments - 9,645 - 12,015
----------- ----------- ----------- -----------
7,405 9,647 9,687 12,018
----------- ----------- ----------- -----------
CURRENT ASSETS
Stock 229 - 284 -
Debtors 2,595 157 1,738 144
Cash - - 101 101
----------- ----------- ----------- -----------
2,824 157 2,123 245
CREDITORS: amounts falling due within one year (8,662) (6,766) (4,402) (3,566)
----------- ----------- ----------- -----------
Net current liabilities (5,838) (6,609) (2,280) (3,321)
----------- ----------- ----------- -----------
Total assets less current liabilities 1,567 3,038 7,407 8,697
CREDITORS: amounts falling due after more than one year (112) - (3,262) (3,178)
PROVISIONS FOR LIABILITIES (9) (9) (1,915) (1,915)
----------- ----------- ----------- -----------
Net assets 1,446 3,029 2,230 3,604
----------- ----------- ----------- -----------
CAPITAL AND RESERVES
Called up equity share capital 887 887 799 799
Share premium account 1,704 1,704 839 839
Profit and loss account (1,145) 438 592 1,966
----------- ----------- ----------- -----------
Equity shareholders' funds 1,446 3,029 2,230 3,604
----------- ----------- ----------- -----------
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2006
2006 2005
Unaudited Unaudited
#'000 #'000
Net cash inflow from operating activities (see below) 812 1,644
Returns on investment and servicing of finance (337) (406)
Deferred consideration paid relating to acquisitions (971) (4)
Taxation paid (286) (343)
Capital expenditure (5) (66)
Equity dividends paid (44) (80)
----------- -----------
Net cash (outflow)/inflow before financing (831) 745
Financing 231 (833)
----------- -----------
Decrease in cash in the year (600) (88)
----------- -----------
Reconciliation of net cashflow to movement in net debt 2006 2005
Unaudited Unaudited
#'000 #'000
Decrease in cash in the year (600) (88)
Cash inflow from increase in debt 231 833
----------- -----------
(831) 745
Other non-cash items (164) (1,024)
----------- -----------
Movement in net debt (995) (279)
Opening net debt (5,097) (4,818)
----------- -----------
Closing net debt (6,092) (5,097)
----------- -----------
Reconciliation of operating (loss)/profit to net cash inflow from operating activities 2006 2005
Unaudited Unaudited
#'000 #'000
Operating (loss)/profit (1,029) 1,012
Depreciation 185 209
Amortisation of goodwill 556 481
Impairment of goodwill 1,723 -
Loss on sale of fixed assets 7 11
Decrease/(increase) in stock 54 (27)
(Increase)/decrease in debtors (581) 85
Increase/(decrease) in deferred revenue 63 (295)
(Decrease)/increase in creditors (166) 168
----------- -----------
Net cash inflow from operating activities 812 1,644
----------- -----------
NOTES TO THE PRELIMINARY ANNOUNCEMENT
for the year ended 31 December 2006
1 Basis of preparation
The preliminary announcement for the year ended 31 December 2006 has been
prepared in accordance with applicable UK accounting standards and the
accounting policies disclosed in the Group's accounts for the year ended 31
December 2005 except for the adoption of a new accounting standard as detailed
below. The prior year financial information included in this announcement has
been extracted from the audited financial statements for the year ended 31
December 2005. As this information has been restated for the adoption of a new
accounting standard it is unaudited.
Financial Reporting Standard (FRS) 20 'Share-based Payments' has been adopted
with effect from 1 January 2006. FRS 20 requires the fair value of employee
share options granted to be charged in the profit and loss account over the
vesting period of the option. Accordingly prior year results have been
restated. The impact of this restatement on the current and prior year is not
material.
This preliminary announcement does not constitute the Group's statutory accounts
within the meaning of Section 240 of the Companies Act 1985. The statutory
accounts for the year ended 31 December 2006 will be finalised on the basis of
the information presented by the directors in this preliminary announcement and
will be delivered to the Registrar of Companies following the Group's annual
general meeting. The Group's 2005 statutory accounts, which contain an
unqualified audit report, have been filed with the Registrar of Companies.
Copies of the Group's 2006 statutory accounts will be posted to all shareholders
during April 2007.
2 Earnings per share
The calculation of the basic earnings per share is based on the loss after
taxation of #1,692,000 (2005: profit of #282,000) divided by the weighted
average number of ordinary shares in issue during the period of 8,571,374 (2005:
7,707,276) (basic) and 8,575,164 (2005: 8,584,416) (diluted). An adjusted
earnings per share figure of 7.27p (2005: 12.03p) (basic) and 7.27p (2005:
10.80p) (diluted) has been calculated to show underlying earnings. This is based
on the profit after taxation of #623,000 (2005: #927,000) which represents the
operating profit before exceptional items and amortisation of goodwill of
#1,302,000 (2005: #1,647,000), less interest of #444,000 (2005: #374,000) and
taxation of #235,000 (2005: #346,000).
3 Exceptionals items and amortisation of goodwill
Exceptional items and amortisation of goodwill comprises #52,000 in respect of
re-structuring costs (2005: #51,000) and amortisation of goodwill of #2,279,000
(2005: #481,000). The amortisation of goodwill includes a write down of
#1,723,000 of goodwill in respect of Broadnet Limited.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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