RNS Number:9354R
Optimisa PLC
09 April 2008
Embargoed for release at 7.00 a.m.
9 April 2008
OPTIMISA PLC
UNAUDITED PRELIMINARY RESULTS 2007
Optimisa plc ("Optimisa" or the "Group") announces its unaudited preliminary
results for the year ended 31 December 2007.
Highlights
* Revenue up from �5.89m in 2006 to �11.42m in 2007, an increase of 94%
* Gross profit growth from �4.62m in 2006 to �8.09m in 2007, an
increase of 75%
* Adjusted profit before tax up from �0.75m in 2006 to �1.36m in
2007, an increase of 81% (see note 1)
* Profit before tax in 2007 increased to �1.26m from �0.73m in 2006
* nxtMOVE Corporation (nxtMOVE) and Andrew Irving Associates
Limited (AIA) strongly earnings per share enhancing in 2007
* Adjusted earnings per share up 34% to 18.37p (2006: 13.69p) (see note 1)
* Basic earnings per share up 27% to 16.65p (2006: 13.15p)
* On 19 October 2007, eq group plc (EQ) was acquired for a total
consideration �13.13m (including debt of �6.16m)
* A placing of 600,000 shares in October 2007 raising �7.45m net
of expenses
* A 6 for 1 scrip issue in October 2007
* Total equity (shareholders' funds) rose to �12.65m at 31
December 2007 (2006: �4.43m)
* Net debt of �3.72m at 31 December 2007 (2006: nil)
* 2007 final dividend 3.0p; total 2007 dividend 4.67p, an increase
of 25% (2006: 3.75p)
* Excluding acquisitions, headcount increased by 27% to 71 in the year ended
31 December 2007. Including acquisitions, headcount increased to 200
(115 at EQ and 14 at Report International Limited (RIL))
* Integration of EQ financial and IT back office systems including
the launch of a group wide intranet for knowledge management
* We have strengthened the executive management team with the recruitment of
a group business development director in 2007 and new CEOs for Quaestor
Research & Marketing Strategists Limited (Quaestor), Buckingham
Research Associates Limited (Buckingham) and KAE: Marketing Intelligence
Limited (KAE) in 2008
Note 1
Reconciliation: reported profit before tax to adjusted profit after tax
2007 2006
�'000 �'000
Reported PBT 1,257 728
Amortisation of customer contracts and 104 26
relationships
Adjusted PBT 1,361 754
Taxation (253) (97)
Adjusted PAT 1,108 657
Adjusted EPS pence 18.37 13.69
Basic EPS pence 16.65 13.15
Ron Littleboy, Chairman of Optimisa, commented: "2007 has been a year of
significant achievement for the Company with strong organic growth from KAE and
the successful integration of nxtMOVE and AIA. We are already seeing significant
group benefits from the acquisition of EQ and the Board looks forward to 2008
with confidence."
Enquiries:
Optimisa plc +44 20 7960 3300
Ron Littleboy, Chairman
Simon Dannatt, Chief Executive
Jonathan Waters, Director
Noble & Company Limited +44 20 7763 2200
Nick Naylor
Brian Stockbridge
CHAIRMAN'S STATEMENT
I am pleased to report that the 2007 results exceeded even our high expectations
with adjusted earnings per share (EPS), up 34% to 18.37p. In addition, we more
than doubled the size of your company with the acquisition of eq group plc (EQ)
in October 2007, for a total cost of �13.13m including debt of �6.16m.
EQ transforms Optimisa's service offering, client base and capacity and thereby
underpins the long term growth prospects of the Group. We are confident that it
will meet our demanding investment criteria in 2008 and beyond.
The excellent results for the year ended 31 December 2007 reflect the continuing
success of our growth strategy. We invest in our people and infrastructure with
the objective of maintaining organic growth in all our business units of over
10% per annum over the long term. This target was well exceeded in 2007.
In addition, we acquired businesses which are expected to be earnings enhancing
in their first full year with a similar objective of providing longer term
organic growth of at least 10% pa. I am happy to report that both nxtMOVE
Corporation (nxtMOVE) and Andrew Irving Associates Limited (AIA), bought in
2006, were strongly earnings enhancing in 2007. EQ and Report International
Limited (RIL), both acquired in 2007, had little overall impact on earnings last
year. However, we are confident that they will both be earnings per share
enhancing in 2008 and make a significant contribution to the overall results.
The acquisition of EQ in October 2007 was funded from a combination of �7.45m
raised from an equity placing, our cash resources (including overdraft) of
�1.93m and �3.75m of bank loans. Our strong cash flow enabled us to bring net
debt down to �3.72m by 31 December 2007.
Our balance sheet remains strong and should benefit from sustained strong cash
generation during 2008. With borrowing facilities of �5.50m we are well placed
to continue our buy and build strategy if the opportunities arise. Nevertheless,
the opportunity to raise margins at EQ nearer to the KAE: Marketing Intelligence
Limited (KAE) levels will alone provide a major engine for growth as will the
benefits of our continuing investment in our people throughout the enlarged
Group.
2007 has been an exciting and challenging year and we are extremely pleased with
the outcome. The current year poses different challenges, which we believe will
be as exciting and successful. We have already strengthened the top management
team and more senior hires are expected. We are looking at potential
opportunities to expand geographically into both North America and the Far East
at minimal cost or risk.
To date there has been little impact on our businesses from the current
financial turmoil or the slow down in the US economy. Although we are prepared
for some impact we are confident that we are well placed to continue to show
well above average growth even against a markedly less benign overall economic
background. It should be appreciated that our high value added marketing
consultancy services are generally a very tiny proportion of our blue chip
clients overall marketing spend, and tend to be far more resilient to any cut
backs as a result of a slow down in the major economies.
Your board and management team remain highly focused on shareholder value. Our
excellent record of growth in sales, profit and earnings per share over the last
two years and our prospects in 2008 and beyond has, however, not made our share
price immune from the recent stock market declines. Consequently, we will
continue to monitor the attractions of purchasing our own shares for
cancellation and have shown our confidence in the future by raising the 2007
dividend by 25% to 4.67p.
R F Littleboy
Chairman
CHIEF EXECUTIVE'S REVIEW
I am very pleased to report that 2007 was another year of outstanding
performance. The business has virtually doubled in size in the year with
revenue rising from �5.89m in 2006 to �11.42m in 2007 an increase of 94%. Gross
profit also increased substantially, from �4.62m in 2006 to �8.09m in 2007 an
increase of 75%. As a consequence of both further organic growth and the full
impact of the acquisition of EQ we expect the business to double in size in the
coming year.
Adjusted profit before tax was above target, increasing by 81% from �0.75m in
2006 to �1.36m in 2007.
We started the year with an exceptionally strong core business in the form of
KAE, our marketing strategy and market analysis consulting operation supported
by the highly talented qualitative research agency, AIA in the UK and nxtMOVE,
specialists in market analysis and strategic decision support, in the US.
These businesses once again exceeded our high expectations, expanding both the
depth of their relationships with long-standing clients and the breadth of
clients served. In addition, consistent with our operational integration
strategy, we made significant advances in developing Group wide best practice
business operations. This had a positive impact internally, but more
importantly in improving the range and quality of services offered to our
clients and helping the performance of the Group overall.
As an example, organic growth in revenue for KAE alone was over 33%. Operating
margins at KAE before central costs were well in excess of 20%.
The results for the year to 31 December 2007 include an 8 month contribution
from RIL, which was acquired on 2 May 2007, and slightly over two months of
contribution from the companies within EQ, which was acquired on 19 October
2007.
RIL is a long established media analysis company with an impressive client base
in the UK, Europe and North America and a network of analysts in over 40
countries around the world. We had known the management for some time and saw an
opportunity to expand the business into digital, blog and new media analysis
alongside the more traditional services. It has taken longer than planned to
restructure the business and a small loss was made in the 8 month period ended
31 December 2007. However, RIL is now profitable and making steady positive
progress and we expect an earnings-enhancing performance in the full year 2008.
The acquisition of EQ has transformed the Optimisa business. On an annualised
basis, the business had revenue of �10.39m, larger than the annualised revenue
of the Optimisa Group pre the EQ group acquisition. At acquisition it had a
headcount of around 110 people, also larger than the 82 in the Optimisa group at
that point. However, margin performance was significantly below that enjoyed by
Optimisa at less than 10%. The combination of the businesses has provided an
opportunity to enhance the overall performance of Optimisa both by improving the
profitability of the EQ companies and by cross selling and increasing our spread
of overheads. In addition we have diversified both our service range and sector
exposure, which reduces commercial risk.
EQ comprises Quaestor Research and Marketing Strategists Limited (Quaestor)
based in Leeds, a full service market research and marketing strategy business,
Buckingham Research Associates Limited (Buckingham), a specialist quantitative
research and analysis company based near Maidenhead and Summit Studios Limited,
based in Ealing, West London.
Quaestor, which employed 86 people when acquired and had a turnover of �6.70m in
2006, has a strong base of clients in the Financial Services, Consumer and Media
sectors. We believe its integration with the wider Group offer will bring
benefits to its existing client base as well as offering opportunities for
further 'in sourcing' of work already being done by other Group companies.
Buckingham, which employed 22 people when acquired and had a turnover of �3.35m
in 2006, substantially broadens our quantitative analytic capabilities both in
the realm of traditional market research but also in our ability to process
information held in client systems - further building our data analytics
capability.
Both Quaestor and Buckingham were business partners with Optimisa companies
before the acquisition and we have made great strides in expanding working and
business development relationships across the Group. Inter-company networking
and business was a key objective of the acquisition and has far exceeded our
expectations to-date. In the short period EQ was part of the Group before the
year-end, it produced results in line with our expectations and delivered over
�2.09m of revenue and �0.28m of operating profit.
We started the year with 56 employees in the Group. Our total headcount at the
end of the year was 200, with an average number of employees of 102. A key
component of the rationale of making the EQ acquisition was the opportunity it
provides to drive up revenue per employee and consequently margin performance.
For 2007, KAE produced revenue per employee of �176,000 which compares to
�73,000 per employee for Quaestor and �180,000 per employee at Buckingham. We
consider operating income per employee a key indicator of performance and will
be looking to drive this up during 2008.
Investment in high performing individuals continues as a top priority for the
Group and we have been delighted to expand our management team with the addition
of a Group business development director at the end of 2007 and new CEOs at
Quaestor, Buckingham and KAE in 2008.
Group wide training and development programmes are also being implemented to
ensure we both enhance and retain the very high calibre people we are fortunate
to have in the team. Following the successes of previous years we plan to
repeat our staff rotation programme to provide internal development
opportunities as well as improving management efficiencies and knowledge
sharing.
To support best practice business management, knowledge sharing and provision of
the very best services to our clients, we are investing heavily in IT
infrastructure and integration across all business units. Top priorities are on
speed of operation, ease of access to critical business information from all
locations and collaboration tools allowing efficient and effective client
delivery from teams drawn from more than one business unit.
The overall Optimisa business focus remains on delivering high value,
commercially based market and marketing advice to help our clients grow their
businesses profitably. Broadly speaking all of the advisory work conducted by
the Group falls into one of two areas:
* Helping our clients protect and improve their existing businesses by
advising on customer retention, competitive strategy, product
portfolio optimisation and margin improvement;
* Helping our clients build and expand by advising on market opportunity
assessment, new product/service development and launch and market
entry strategy.
As a consequence of our ability to advise on 'defence' as well as 'attack', we
believe we are very well placed to withstand sector or market downturns and are
continuing to win business in sectors already under pressure from the credit
crisis.
All businesses in the Group share one common business philosophy 'Opinion with
Evidence', which encapsulates our ambition to provide the very best consulting
advice supported with evidence drawn from customers (market research), the
business environment (market, competitor intelligence and macro economics) and
information held by our clients themselves (CRM, Sales and channel information).
Our key client sectors now comprise Financial Services, Telecoms, Media and
Consumer and we have made good progress in expanding our work with the public
sector. Operating income grew in all these sectors in 2007 and we have been
particularly pleased with our rapid development in the Media sector, an area in
which we see substantial opportunity moving forward.
Once again we have set demanding growth targets for each of our business units
in the current year. While there is clearly some uncertainty in how the current
financial turbulence will influence the spending patterns of our clients, to
date we have seen little impact in our core business. Perhaps, surprisingly to
some, our financial services practice has been the best performing area of the
business in the first few months of 2008.
Having said this, we are keeping a very watchful eye on business in general and
are keeping tight control on operating expenses to ensure any sector downturn is
spotted and dealt with quickly.
Consolidation and integration of the businesses that we have within the Group is
a top strategic priority for the coming year. We continue to focus on
maximising the business potential and opportunities presented by both expanding
the range of services we provide to our existing client base as well as winning
business from new clients.
We will continue to invest in people development and infrastructure to support
organic business growth and improve operating efficiency and have already had a
good deal of success in sharing expertise across business units and clients,
something we see as a key differentiator from our sector competitors and a
capability from which we derive significant commercial advantage.
We plan to further expand our operations in North America over the medium term.
The current uncertain economic climate in the US may present an investment
opportunity and we believe carefully managed investment and growth will pay
dividends in the long term.
We also plan to develop our own operation in Asia during the year. We already
outsource a considerable volume of work to local companies and see a very large
opportunity to develop business working for European and North American
companies interested in expanding and improving their operations in Asia. We
are aggressively pursuing more work in this area and, based on current workload,
we would expect to have a team of 20 people in place by the end of this year.
The Group adopted International Financial Reporting Standards (IFRS) during the
year. The main impact for the Group of adopting IFRS is the recognition and
subsequent amortisation of intangible assets such as customer lists and customer
order books.
Finally, I would like to take this opportunity to thank our team for their hard
work, commitment and, most importantly, the inspiration, to do more and better,
that they provide to both the senior management team and myself - without them
we would not have achieved the success we currently enjoy.
Simon Dannatt
Chief Executive
UNAUDITED CONSOLIDATED INCOME STATEMENT
Year ended 31 Year ended 31
December 2007 December 2006*
�'000 �'000
Revenue 11,415 5,894
Cost of sales (3,325) (1,275)
Gross profit 8,090 4,619
Administrative expenses excluding depreciation and (6,570) (3,847)
amortisation
Depreciation (94) (30)
Amortisation (125) (37)
Total administrative expenses (6,789) (3,914)
Other operating income - 18
Operating profit 1,301 723
Finance income 51 26
Finance costs (95) (21)
Profit before taxation 1,257 728
Taxation (253) (97)
Profit attributable to equity shareholders 1,004 631
All activities in both the current and previous year relate to continuing
operations.
Earnings per share (pence)
Basic Note 2 16.65 13.15
Diluted Note 2 16.56 12.79
UNAUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
Year ended 31 Year ended 31
December 2007 December 2006*
�'000 �'000
Currency translation differences (16) (99)
Net expense recognised directly in equity (16) (99)
Profit for the year 1,004 631
Total recognised income for the year 988 532
*restated under IFRS (see notes 1 & 5)
UNAUDITED CONSOLIDATED BALANCE SHEET
31 December 2007 31 December 2006*
�'000 �'000
Assets
Non-current assets
Property, plant and equipment 651 105
Goodwill 14,284 2,008
Other intangible assets 599 76
Deferred tax assets 126 86
Total non-current assets 15,660 2,275
Current assets
Inventories 198 -
Current income tax recoverable 114 -
Trade and other receivables 4,555 1,647
Cash and cash equivalents 1,137 1,596
Total current assets 6,004 3,243
Total assets 21,664 5,518
Current liabilities
Trade and other payables (3,257) (938)
Current tax liabilities (487) (38)
Borrowings (1,660) -
Deferred consideration (101) -
Total current liabilities (5,505) (976)
Non-current liabilities
Borrowings (3,197) -
Deferred consideration (155) (101)
Deferred tax liabilities (154) (15)
Total non-current liabilities (3,506) (116)
Total liabilities (9,011) (1,092)
Net assets 12,653 4,426
Equity
Ordinary shares 2,237 1,323
Share premium 7,880 1,334
Merger reserve 914 914
Foreign currency translation reserve (115) (99)
Retained earnings 1,737 954
Total equity 12,653 4,426
*restated under IFRS (see notes 1 & 5)
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 Year ended 31
December 2007 December 2006*
�'000 �'000
Cash flows from operating activities:
Profit before income tax 1,257 728
Adjustments for:
Depreciation 94 30
Amortisation 125 37
Share options 10 -
Finance income (51) (26)
Finance costs 95 21
Operating cash flow before changes in working capital and 1,530 790
provisions
Decrease in inventories 99 -
Increase in trade and other receivables (787) (74)
Increase in trade and other payables 63 264
905 980
Interest paid (82) (21)
Interest received 51 26
Income tax paid (92) (66)
Net cash generated from operating activities 782 919
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (7,945) (990)
Acquisition of property, plant and equipment (PPE) (103) (27)
Proceeds from sale of PPE 11 -
Payments to acquire intangible assets (12) (12)
Proceeds on sales of investments - 103
Net cash used by investing activities (8,049) (926)
Cash flows from financing activities
Proceeds from the issue of share capital 7,805 1,010
Cost of share issue (355) (8)
Proceeds from borrowings 3,686 -
Repayments of borrowings (5,074) -
Dividends paid to company's shareholders (221) (135)
Net cash generated from financing activities 5,841 867
Net (decrease)/increase in cash and cash equivalents (1,426) 860
Opening cash and cash equivalents 1,596 757
Exchange gain/(loss) on cash and bank overdrafts 2 (21)
Closing cash and cash equivalents** 172 1,596
*restated under IFRS (see notes 1 & 5)
**Cash and cash equivalents at 31 December 2007 comprise cash balances of
�1,137,000 (2006: �1,596,000) and bank overdraft balances of �965,000 (2006:
�nil)
NOTES TO THE UNAUDITED PRELIMINARY RESULTS
1. Basis of preparation
The financial information contained in this document does not constitute
statutory financial statements within the meaning of section 240 Companies Act
1985. The comparative figures for the year ended 31 December 2006 have been
extracted from the Group's 2006 financial statements and adjusted for the
transition to International Financial Reporting Standards (see below). The
Group's previous auditors gave an unqualified opinion on the Group's 2006
financial statements, which have been filed with the Registrar of Companies, and
did not make a statement under section 237 of the Companies Act 1985. The
statutory accounts for the year ended 31 December 2007 will be finalised on the
basis of the financial information presented by the Directors in this unaudited
preliminary announcement and will be delivered to the Registrar of Companies
following the Annual General Meeting.
For all periods up to and including the year ended 31 December 2006, the Group
prepared its financial statements in accordance with United Kingdom generally
accepted accounting practice (UK GAAP). The financial statements, for the year
ended 31 December 2007 will be the first the Group is required to prepare in
accordance with International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU). The Group's date of transition to IFRS is 1 January
2006 and the financial statements will incorporate such changes in accounting
policies and other restatements required by IFRS 1 for the first-time adoption
of IFRS. Details of the Group's accounting policies under IFRS will be disclosed
in the Group's 2007 financial statements.
The financial information included in this preliminary announcement is unaudited
and does not include all the disclosures required by IFRS or the Companies Act
1985 and accordingly it does not itself comply with IFRS or the Companies Act
1985. This announcement has been agreed with the Group's auditors for release.
2. Earnings per share
2007 2006
Basic earnings per ordinary share (pence) 16.65 13.15
Diluted earnings per ordinary share (pence) 16.56 12.79
Adjusted earnings per ordinary share (pence) 18.37 13.69
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares in issue
during the year.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to reflect the assumption of conversion of all dilutive
ordinary shares. The dilutive ordinary shares represent the share options
granted to employees where the exercise price is less than the average market
price of the company's ordinary shares during the year.
For adjusted earnings per share, the reported profit after tax is adjusted for
the amortisation charge on customer contracts and customer relationships.
Reconciliations of basic EPS to diluted EPS and adjusted EPS are set out below:
2007 2006
Earnings Weighted Earnings Weighted
Average Average
�'000 number of �'000 number of
shares shares
Basic EPS
Profit and weighted average number of
ordinary shares 1,004 6,031,243 631 4,797,458
Diluted EPS
Adjustment for share options - 32,168 - 134,253
Profit and weighted average number of shares
for diluted earnings per share 1,004 6,063,411 631 4,931,711
Basic EPS
Profit and weighted average number of
ordinary shares 1,004 6,031,243 631 4,797,458
Adjusted EPS
Adjustment for customer contracts and
relationships amortisation 104 - 26 -
Adjusted profit after tax and average
number of ordinary shares 1,108 6,031,243 657 4,797,458
3. Statement of changes in shareholders' equity
Foreign
Currency
Number of Ordinary Share Merger Translation Retained
shares Shares Premium Reserve Reserve Earnings Total
�'000 �'000 �'000 �'000 �'000 �'000
Balance at 31
December 2006 882,151 1,323 1,334 914 (99) 954 4,426
Shares issued for
Warrants 2,864 4 - - - - 4
Share issue 600,000 900 6,546 - - - 7,446
Share option cost - 10 - - - - 10
Dividends - - - - - (221) (221)
6 for 1 share offer 7,425,075 - - - - - -
Profit for the year - - - - - 1,004 1,004
Foreign exchange
translation
differences - - - - (16) - (16)
Balance at 31
December 2007 8,910,090 2,237 7,880 914 (115) 1,737 12,653
4. Business combinations
The following acquisitions were made during the period:
Report International Limited
On 2 May 2007, the Group acquired 100% of the share capital of Report
International Limited (RIL), a company based in the UK. The consideration paid
consisted of an initial cash payment based on a multiple of RIL's management
accounts net asset value as at 30 April 2007. Further consideration will be
payable on the basis of a multiple of RIL's average profit before tax for the
two years ending 31 December 2009, up to a maximum of �2.2 million.
RIL contributed revenues of �996,000 and a net loss of �45,000 for the period
from 2 May 2007 to 31 December 2007. As RIL's previous accounting period was
from 1 May 2006 to 30 April 2007 and monthly accounts were not prepared, it is
not possible to ascertain what the impact on the Group's revenue and profit
would have been if the acquisition had occurred on 1 January 2007.
The total cost of the acquisition, the deferred consideration balance and the
cash outflow on acquisition as at 31 December 2007 was as follows:
�'000
Paid consideration 49
Deferred consideration - non-current 147
Other professional fees 38
Total cost of acquisition 234
Interest on deferred consideration 8
Total deferred consideration at 31 December 2007 155
�'000
Purchase consideration settled in cash in the period 49
Professional fees paid 38
Bank overdraft in subsidiary acquired 57
Cash outflow on acquisition 144
Any adjustments relating to deferred consideration will be made to the
acquisition cost, and as a result the goodwill balance, as and when the
circumstances relating to the deferred consideration payments change.
The amounts recognised for each class of the acquiree's assets and liabilities
at the acquisition date and the resulting goodwill are as follows:
Acquiree's carrying Fair value Fair value
amount adjustments
�'000 �'000 �'000
Non-current assets
Property, plant and equipment 40 - 40
Intangible assets 35 13 48
Deferred income tax asset 23 - 23
Total non-current assets 98 13 111
Current assets
Trade and other receivables 235 - 235
Cash and cash equivalents 28 - 28
Total current assets 263 - 263
Total assets 361 13 374
Current liabilities
Trade and other creditors (349) - (349)
Deferred income tax liability - (4) (4)
Total liabilities (349) (4) (353)
Net Assets 12 9 21
Fair value of consideration 234
Goodwill 213
The goodwill that has arisen on the combination is attributed to the synergies
expected to be derived from the combination and the value of the workforce of
RIL which cannot be recognised as an intangible asset under IAS 38 "Intangible
Assets". Membership of the Optimisa Group will enhance RIL's ability to offer
added value around data analytics, marketing effectiveness modelling and
competitive intelligence.
eq group plc
On 19 October 2007, the Group acquired eq group plc (EQ), a group of companies
based in the UK which includes Quaestor Research & Marketing Strategists
Limited, Buckingham Research Associates Limited and Summit Studios Limited.
Following the making of a formal offer of �0.72 per share on 14 September 2007,
the Group received valid acceptances of 8,775,961 eq shares representing 98.94%
of the issued share capital. This offer went unconditional on 19 October 2007.
At 31 December 2007, the purchase of 8,813,035 shares had been completed. The
remaining 57,134 shares will be purchased in 2008 under the "squeeze out". A
liability has been recognised in the accounts for the cost of acquiring these
shares.
The total cost of the acquisition and the cash outflow on acquisition as at 31
December 2007 was as follows:
�'000
Paid consideration 6,346
Accrued consideration 41
Acquisition costs 580
Total cost of acquisition 6,967
�'000
Purchase consideration settled in cash in the period 6,346
Acquisition costs paid 547
Bank overdraft in subsidiary acquired 905
Cash outflow on acquisition 7,798
EQ contributed revenues of �2,092,000 and net profit of �151,000, excluding
inter-group amounts, for the period from 19 October 2007 to 31 December 2007.
If the acquisition of EQ had occurred on 1 January 2007 EQ would have
contributed revenues of �10,392,000 and an estimated net profit of �708,000
which includes the profit on the sale of a subsidiary of �84,000 and dividend
income from the sold subsidiary of �173,000. The net profit has been estimated
from the net profit achieved by EQ in the period adjusted for items that would
not have been incurred had the acquisition by Optimisa occurred at the beginning
of the period. The after tax adjustments made to arrive at the estimated net
profit are as follows:
�'000
Net profit of EQ for the year ended 31 December 2007 380
Costs adjusted:
Fair value adjustments made following acquisition 80
Costs incurred as a result of the acquisition 248
Estimated net profit 708
The amounts recognised for each class of the acquiree's assets and liabilities
at the acquisition date and the resulting goodwill are as follows:
Acquiree's carrying Fair value Fair value
amount adjustments
�'000 �'000 �'000
Non-current assets
Property, plant and equipment 617 (105) 512
Intangible assets - 569 569
Deferred income tax assets 10 (7) 3
Total non-current assets 627 457 1,084
Current assets
Inventories 297 - 297
Trade and other receivables 1,895 (9) 1,886
Total current assets 2,192 (9) 2,183
Total assets 2,819 448 3,267
Current liabilities
Trade and other creditors (1,860) (53) (1,913)
Current borrowings (6,034) - (6,034)
Current income tax liabilities (192) 59 (133)
Total current liabilities (8,086) 6 (8,080)
Non current liabilities
Non-current borrowings (130) - (130)
Deferred income tax liabilities (2) (160) (162)
Total non current liabilities (132) (160) (292)
Total liabilities (8,218) (154) (8,372)
Net liabilities (5,399) 294 (5,105)
Fair value of consideration 6,967
Goodwill 12,072
The goodwill that has arisen on the combination is partly attributed to the
synergies expected to be derived from the combination, including cost savings
associated with only having one listed holding company going forward.
Additionally, there is significant value in the workforce of EQ, which at
acquisition comprised 110 people, which cannot be recognised as an intangible
asset under IAS 38, "Intangible Assets".
There are expected to be significant improvements resulting from membership in
Optimisa Group for the eq companies as a result of their diversification of both
service range and sector exposure.
5. Transition to IFRS
The impact of the transition from UK GAAP to IFRS on net assets and income was
as follows:
* There was no impact on net assets at 1 January 2006.
* Net assets decreased by �32,000 from �4,458,000 to �4,426,000 at 31
December 2006.
* Profit for the year for the year ended 31 December 2006 decreased by
�32,000 from �663,000 to �631,000.
Further details of the adjustments made as a result of the transition will be
provided in the Financial Statements for the year ended 31 December 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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