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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| EQ Grp | LSE:EQI | London | Ordinary Share | GB0004740030 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 70.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:6785C
EQ Group PLC
23 August 2007
EQ Group PLC
23 August 2007
eq group plc
Interim results for the six months ended 30 June 2007
eq group plc ('eq' or 'the group'), the AIM listed marketing services group,
announces its interim results for the six months ended 30 June 2007.
For further information, please contact:
Bob Bond, Chief Executive, eq group plc - 07747 032478
Joanne Lake, Evolution Securities Limited - 0113 243 1619
Angus Gladish, Evolution Securities Limited - 0113 243 1619
Chairman & Chief Executive's Statement
As reported in the trading statement on 14 May 2007, your group's performance in
the first half of 2007 showed a good recovery from the first half of 2006 with
revenues up by 18% to #5,894,000. This improvement reflected the return to
normal activity levels of a number of key market research clients and also some
success in our strategy of widening our client base.
Operating profit rose by 65% to #831,000 (2006: #504,000) enhanced by a profit
of #166,000 resulting from the sale of Broadnet and offset partly by #50,000 of
reorganisation costs and #5,000 amortisation of intangible assets. Adjusted
operating profit before exceptional items and amortisation of intangible assets
rose by 43% to #720,000 (2006: #504,000) reflecting the higher sales volumes and
a good control of administration expenses.
The profit before tax rose by 95% to #598,000 (2006: #307,000) and profit after
tax rose by 119% to #468,000 (2006: #214,000).
Earnings per share were 5.3p (2006: 2.6p), an increase of 104% and adjusted
basic earnings per share before exceptional items and amortisation of intangible
assets rose 50% to 3.9p (2006: 2.6p).
Net debt reduced by #327,000 to #5,765,000. Given the continuing relatively
high level of debt, your board considers it inappropriate to pay an interim
dividend.
Review of Activities
During the period, the group focused its activities on the market research
sector by acquiring, in February, Summit Studios Limited, for a net cash
consideration of #343,000 before costs. Summit, which is based in London,
provides viewing facilities and related services to the research industry and
will provide a base for the expansion of the group's market research activities
in the London area. In the year to 30 April 2006, Summit made an operating
profit of #121,000. Secondly, eq disposed of its software development company,
Broadnet, in June for a gross cash consideration of #280,000 resulting in a
profit on disposal of #166,000.
Market research generated #5,657,000 of group revenues in the first half, an
increase of 20% on 2006 (#4,702,000) with operating profits increasing by 28% as
fee earning employment costs fell to 40% of cost of sales (2006: 43%).
During the period 23 (2006: 27) new clients were won, including The Post Office,
Lloyds TSB plc, Age Concern, Zurich and Nikon.
Outlook
After a strong recovery in the first half, activity levels have reduced in the
first few months of the second half of the year as a number of clients have
deferred the commissioning of work until the fourth quarter which is looking
strong.
Steve Jones Bob Bond
Chairman Chief Executive
Unaudited Consolidated Income Statement
For the six months ended 30 June 2007
Six months Six months Year ended 31
ended ended December
30 June 2007 30 June 2006*
Notes 2006*
#'000 #'000 #'000
Revenue 5,894 4,974 10,505
Cost of sales (3,962) (3,369) (6,914)
---------- ---------- ----------
Gross profit 1,932 1,605 3,591
Administrative expenses (1,101) (1,101) (4,182)
Adjusted operating profit before exceptional 720 504 1,302
items, impairment of goodwill and amortisation
of intangibles
Exceptional items 5 116 - (52)
Amortisation of intangible assets (5) - -
Impairment of goodwill - - (1,841)
Operating profit/(loss) 831 504 (591)
Finance costs (233) (197) (454)
---------- ---------- ----------
Profit before tax 598 307 (1,045)
Tax 2 (130) (93) (216)
---------- ---------- ----------
Profit for the period 468 214 (1,261)
===== ===== =====
Earnings/(loss) per share
Basic 3 5.3p 2.6p (14.7)p
Diluted 3 5.3p 2.4p (14.7)p
---------- ---------- ----------
Adjusted earnings per share
Basic 3 3.9p 2.6p 7.2p
Diluted 3 3.9p 2.4p 7.2p
===== ===== =====
The group has no income or expense other than the profit for the period reported
above.
Unaudited Consolidated Balance Sheet
As at 30 June 2007
As at As at As at 31
30 June 2007 30 June December
2006* 2006*
#'000 #'000 #'000
Non-current assets
Goodwill 7,542 9,025 7,183
Other intangible assets 36 - -
Property, plant and equipment 652 657 660
---------- ---------- ----------
8,230 9,682 7,843
===== ===== =====
Current assets
Inventories 202 208 229
Trade and other receivables 2,162 1,741 2,595
Derivative financial instruments 3 - -
---------- ---------- ----------
2,367 1,949 2,824
---------- ---------- ----------
Current liabilities
Trade and other payables (2,312) (1,747) (2,388)
Current tax liabilities (182) (137) (293)
Obligations under finance leases (105) (107) (117)
Bank overdraft and loans (5,546) (1,332) (5,863)
Derivative financial instruments - (4) (10)
---------- ---------- ----------
(8,145) (3,327) (8,671)
---------- ---------- ----------
Net current liabilities (5,778) (1,378) (5,847)
===== ===== =====
Non-current liabilities
Bank loans - (4,861) -
Deferred tax liabilities (12) (9) (6)
Obligations under finance leases (114) (80) (112)
---------- ---------- ----------
(126) (4,950) (118)
---------- ---------- ----------
Net assets 2,326 3,354 1,878
===== ===== =====
Shareholders' equity
Share capital 887 887 887
Share premium account 1,704 1,704 1,704
Retained earnings (265) 763 (713)
---------- ---------- ----------
Total shareholders' equity 2,326 3,354 1,878
===== ===== =====
*restated under IFRS (see notes 1, 6 and 7)
Unaudited Cash Flow Statement
For the six months ended 30 June 2007
Six months Six months
ended ended
30 June 30 June 2006*
2007
#'000 #'000
Cash flows from operating activities
Cash generated from operations 780 179
Interest paid (53) (196)
Tax paid (106) (186)
---------- ----------
Net cash inflow/(outflow) from operating activities 621 (203)
---------- ----------
Cash flows from investing activities
Purchase of property, plant and equipment (94) (65)
Sale of subsidiary undertaking 280 -
Purchase of subsidiary undertaking (723) -
Deferred consideration paid - (972)
Cash balance sold with subsidiary undertaking (79) -
Cash balance acquired with subsidiary undertaking 322 -
---------- ----------
Net cash used in investing activities (294) (1,037)
---------- ----------
Cash flows from financing activities
Equity dividends paid - (44)
Increase in bank loan 40 654
Net movements in obligations under finance leases (10) 1
---------- ----------
Net cash from financing activities 30 611
---------- ----------
Net increase/(decrease) in cash and cash equivalents 357 (629)
---------- ----------
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash and cash equivalents 357 (629)
Cash inflow from increase in debt (30) (655)
---------- ----------
327 (1,284)
---------- ----------
Opening net debt (6,092) (5,097)
---------- ----------
Closing net debt (5,765) (6,381)
===== =====
*restated under IFRS (see notes 1, 6 and 7)
Notes to the Unaudited Interim Results
For the six months ended 30 June 2007
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
The interim financial information has been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European
Union. They are covered by IFRS 1, First-time Adoption of IFRS, because they
are part of the period covered by the group's first IFRS financial statements
for the year ending 31 December 2007. The adoption of International Financial
Reporting Standards has resulted in adjustments to goodwill and derivative
financial instruments as well as prescribed presentation adjustments.
These consolidated financial statements have been prepared under the historical
cost convention, as modified by the accounting for derivative financial
instruments at fair value through profit or loss.
The accounting policies used outlined below and used in the interim financial
information are consistent with those the Directors intend to use in the annual
financial statements.
The financial information included in this interim financial report for the six
months ended 30 June 2007 does not constitute statutory accounts as defined in
section 240 of the Companies Act 1985 and is unaudited. The comparative figures
for the six months ended 30 June 2006 have been extracted from the 2006 interim
report and adjusted for the transition to IFRS. 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 IFRS. The 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. This interim financial report will be
published on the company's website. The maintenance and integrity of the eq
group plc website is the responsibility of the directors. Legislation in the UK
governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Basis of Consolidation
The group financial statements consolidate the financial statements of eq group
plc and its subsidiaries drawn up to 30 June 2007. The results of subsidiaries
acquired or disposed of during the period are included in the consolidated
income statement from the effective date of acquisition, or up to the effective
date of disposal, as appropriate.
Revenue and Recognition of Income
Revenue represents amounts receivable for goods or services provided net of VAT
or other similar taxes. Software income is recognised in the month to which the
licence relates and marketing services when the service or agreed stage of the
work has been performed.
Deferred Revenue
Deferred revenue represents the portion of software income and marketing
services income invoiced in advance, which is recognised in the income statement
over the software licence period or when the services are performed.
Exceptional items
Items classified as exceptional items in the income statement are material items
that due their size or nature require separate disclosure in order for the
financial statements to give a true and fair view.
Share Based Payments
The group issues share options to certain employees which are measured at fair
value and recognised as an expense in the income statement with a corresponding
increase in profit and loss reserve.
The fair values of these options are measured at the dates of grant and are
recognised over the period during which employees become unconditionally
entitled to the awards. At each balance sheet date, the group revises its
estimates of the number of options that are expected to vest.
For the share awards granted before 7 November 2002, no expense has been or is
being recognised in the profit and loss account. Consequently, at the vesting
of the awards, the cost of the shares is recognised directly in retained
earnings.
Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the net identifiable assets of the acquired subsidiary at the date of
acquisition. Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill is not amortised; instead it is tested annually for impairment
and carried at cost less accumulated impairment losses. Any impairment is
recognised in profit and loss and is not subsequently reversed.
(b) Customer Lists
Customer lists acquired through business combinations are capitalised at their
fair value and are amortised over their estimated useful life. They are
included in intangible assets at their initial fair value less accumulated
amortisation.
Property, plant and equipment
Property, plant and equipment is initially recorded at cost. Depreciation is
provided on all property, plant and equipment at rates calculated to write off
the cost less estimated residual value, of each asset over its expected useful
life, as follows.
Fixtures, fittings and office equipment Reducing balance 25%
Motor vehicles Reducing balance 25%
Short leasehold property Over lease term
The assets residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its recoverable amount
if the asset's carrying amount is greater than its estimated recoverable amount.
Inventories
Work in progress represents direct costs plus attributable overheads for work
performed but not yet completed. It is stated at the lower of cost and net
realisable value.
Leased Assets
Leases of property, plant and equipment where the group has substantially all
the risks and rewards of ownership are classified as finance leases. Assets
held under finance leases or hire purchase contracts are capitalised on
inception of the agreement at an amount equal to their fair value or, if lower,
the present value of the minimum lease payments. The interest element of the
lease cost is charged to the income statement, within finance costs, over the
lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. Property, plant and
equipment acquired under finance leases or hire purchase contracts are
depreciated over the shorter of the period of the agreement and the estimated
useful lives of the assets. Leases where the lessor retains substantially all
the risks and rewards of ownership are classified as operating leases. Payments
made under operating leases, net of any incentives received from the lessor, are
charged to the income statement, within administrative expenses, on a straight
line basis over the period of the lease.
Pension Costs
Pension costs for contributions to defined contribution money purchase schemes
or employees' personal pension plans are charged to the income statement in the
year in which they are payable. The group has no further payment obligations
once the contributions have been paid.
Deferred Taxation
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
the deferred income tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction, other than a business
combination, that, at the time of the transaction, affects neither accounting
nor taxable profit and loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the balance sheet
date and are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences
can be utilised.
Financial Instruments
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently re-measured at their fair value at
each balance sheet date. The resulting gain or loss is taken directly through
the income statement.
The group does not apply hedge accounting in respect of its financial
instruments, nor does it trade in any financial instruments.
2. TAX
The tax charge for the six months ended 30 June 2007 has been calculated at 30%
of the profit excluding the profit on the disposal of Broadnet Limited as no tax
charge is expected to arise in relation to this capital transaction.
3. EARNINGS PER SHARE
(a) Basic
Basic earnings per share is calculated by dividing the profit after taxation of
#468,000 (period ended 30 June 2006: profit of #214,000; year ended 31 December
2006: loss of #1,261,000), by the weighted average number of ordinary shares in
issue during the period of 8,870,169 (period ended 30 June 2006: 8,267,628; year
ended 31 December 2006: 8,571,374). An adjusted earnings per share figure has
been presented to show underlying earnings. This is based on the adjusted
profit after taxation of #342,000 which represents the adjusted operating profit
of #720,000 less interest of #233,000 and taxation of #145,000.
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares to assume conversion of all dilutive potential
ordinary shares. For the period ended 30 June 2007, the exercise price of all
share options is greater than the average market price of shares during the
period. Therefore there is no dilution and the diluted earnings per share is
the same as the basic earnings per share and the adjusted diluted earnings per
share is the same as the adjusted earnings per share. The weighted average
number of ordinary shares for diluted earnings per share is 8,978,168 for the
period ending 30 June 2006 and 8,575,164 for the year ending 31 December 2006.
4. ACQUISITIONS AND DISPOSALS
On 9 February 2007, eq group plc acquired Summit Studios Limited for a gross
cash consideration of #665,000 which, after deducting Summit's cash, resulted in
a net cash consideration of #343,000. In addition, costs of #59,000 were
incurred on the acquisition. The fair value of identifiable net assets acquired
were #365,000 resulting in a goodwill balance of #359,000. Summit Studios
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.
On 18 June 2007, eq group plc sold Broadnet Limited for a gross cash
consideration of #280,000 subject to a net asset adjustment yet to be agreed.
At the date of disposal Broadnet had net assets of #31,000. After disposal
costs of #7,000 the profit on the disposal was #166,000.
5. EXCEPTIONAL ITEMS
Exceptional items for the period ended 30 June 2007 comprise the profit on the
disposal of Broadnet Limited of #166,000 and reorganisation costs comprising an
ex-gratia payment made to a former director of #50,000. Exceptional items in
the year ended 31 December 2006 comprise reorganisation costs of #52,000.
6. EXPLANATION OF TRANSITION TO IFRS
The group's financial statements for the year ending 31 December 2007 will be
the first annual financial statements prepared under IFRS and the date of
transition to IFRS was therefore 1 January 2006. The following disclosures are
required in the year of transition. The last financial statements under UK GAAP
were for the year ended 31 December 2006.
Reconciliation of equity and net assets as at 1 January 2006 (date of transition
to IFRS)
There were no adjustments as at 1 January 2006.
Reconciliation of equity and net assets as at 30 June 2006
As As restated
reported under IFRS
under UK Goodwill Financial
GAAP amortisation instruments
#'000 #'000 #'000 #'000
Unaudited Unaudited Unaudited
Non-current assets
Goodwill 8,747 278 - 9,025
Property, plant and equipment 657 - - 657
---------- ---------- ---------- ----------
9,404 278 - 9,682
===== ===== ===== =====
Current assets
Inventory 208 - - 208
Trade and other receivables 1,741 - - 1,741
---------- ---------- ---------- ----------
1,949 - - 1,949
===== ===== ===== =====
Current liabilities
Trade and other payables (1,747) - - (1,747)
Tax liabilities (137) - - (137)
Obligations under finance leases (107) - - (107)
Bank overdraft and loans (1,332) - - (1,332)
Derivative financial instruments - - (4) (4)
---------- ---------- ---------- ----------
(3,323) (4) (3,327)
---------- ---------- ---------- ----------
Net current liabilities (1,374) - (4) (1,378)
===== ===== ===== =====
Non-current liabilities
Bank loans (4,861) - - (4,861)
Deferred tax liabilities (9) - - (9)
Obligations under finance leases (80) - - (80)
---------- ---------- ---------- ----------
(4,950) - - (4,950)
---------- ---------- ---------- ----------
Net assets 3,080 278 (4) 3,354
===== ===== ===== =====
Shareholders' equity
Share capital 887 - - 887
Share premium account 1,704 - - 1,704
Retained earnings 489 278 (4) 763
---------- ---------- ---------- ----------
Total shareholders' equity 3,080 278 (4) 3,354
===== ===== ===== =====
Reconciliation of equity and net assets as at 31 December 2006
As As restated
reported under IFRS
under UK Goodwill Financial
GAAP amortisation instruments
#'000 #'000 #'000 #'000
Unaudited Unaudited Unaudited
Non-current assets
Goodwill 6,745 438 - 7,183
Property, plant and equipment 660 - - 660
---------- ---------- ---------- ----------
7,405 438 - 7,843
===== ===== ===== =====
Current assets
Inventory 229 - - 229
Trade and other receivables 2,595 - - 2,595
---------- ---------- ---------- ----------
2,824 - - 2,824
===== ===== ===== =====
Current liabilities
Trade and other payables (2,388) - - (2,388)
Tax liabilities (293) - - (293)
Obligations under finance leases (117) - - (117)
Bank overdraft and loans (5,863) - - (5,863)
Derivative financial instruments - - (10) (10)
---------- ---------- ---------- ----------
(8,661) - (10) (8,671)
---------- ---------- ---------- ----------
Net current liabilities (5,837) - (10) (5,847)
===== ===== ===== =====
Non-current liabilities
Bank loans - - - -
Deferred tax liabilities (9) - 3 (6)
Obligations under finance leases (112) - - (112)
---------- ---------- ---------- ----------
(121) - 3 (118)
---------- ---------- ---------- ----------
Net assets 1,447 438 (7) 1,878
===== ===== ===== =====
Shareholders' equity
Share capital 887 - - 887
Share premium account 1,704 - - 1,704
Retained earnings (1,144) 438 (7) (713)
---------- ---------- ---------- ----------
Total shareholders' equity 1,447 438 (7) 1,878
===== ===== ===== =====
Reconciliation of reported profits for the six months ended 30 June 2006
As As restated
reported under IFRS
under UK Goodwill Financial
GAAP amortisation instruments
#'000 #'000 #'000 #'000
Unaudited Unaudited Unaudited
Continuing operations
Revenue 4,974 - - 4,974
Cost of sales (3,369) - - (3,369)
---------- ---------- ---------- ----------
Gross profit 1,605 - - 1,605
Administrative expenses (1,379) 278 - (1,101)
---------- ---------- ---------- ----------
Operating profit 226 278 - 504
Finance costs (193) - (4) (197)
---------- ---------- ---------- ----------
Profit before tax 33 278 (4) 307
Tax (93) - - (93)
---------- ---------- ---------- ----------
(Loss)/profit for the year (60) 278 (4) 214
===== ===== ===== =====
Reconciliation of reported profits for the year ended 31 December 2006
As As restated
reported under IFRS
under UK Goodwill Financial
GAAP amortisation instruments
#'000 #'000 #'000 #'000
Unaudited Unaudited Unaudited
Revenue 10,505 - - 10,505
Cost of sales (6,914) - - (6,914)
---------- ---------- ---------- ----------
Gross profit 3,591 - - 3,591
Administrative expenses (4,620) 438 - (4,182)
---------- ---------- ---------- ----------
Operating loss (1,029) 438 - (591)
Finance costs (444) - (10) (454)
---------- ---------- ---------- ----------
Loss before tax (1,473) 438 (10) (1,045)
Tax (219) - 3 (216)
---------- ---------- ---------- ----------
Loss for the year (1,692) 438 (7) (1,261)
===== ===== ===== =====
7. EXPLANATION OF RECONCILING ITEMS BETWEEN UK GAAP AND IFRS
(i) Goodwill amortisation
Under IFRS 3 - "Business Combinations", annual amortisation is no longer
required. Instead goodwill must be allocated to each income generating unit
acquired and an annual impairment review must be performed for each discrete
unit in accordance with IAS 36 - "Impairment of Assets". The group has elected
not to apply IFRS 3 "Business Combinations" retrospectively and restate business
combinations completed prior to the date of transition (1 January 2006). As a
result, in the opening balance sheet, goodwill arising from past business
combinations remains as stated under UK GAAP at 1 January 2006. The goodwill
amortisation in the year ended 31 December 2006 has reduced by #556,000. As a
result of this the impairment charge on the goodwill relating to Broadnet
Limited has increased by #118,000. As both of these items are included within
administrative expenses the net amount of #438,000 has been included in the
reconciliation in note 6.
(ii) Financial instruments
Under IFRS derivative financial instruments that are not classified as hedging
instruments are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently re-measured at their fair value at
each balance sheet date. The resulting gain or loss is taken directly through
the income statement. The adjustments, which increase liabilities and decrease
income, of #4,000 at 30 June 2006 and #10,000 at 31 December 2006 are a result
of derivative financial instruments being re-measured at their fair value.
(iii) Impact of IFRS on the cash flow statement
IFRS has had no material impact on the cash flow statement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KGGZRRZMGNZM
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