Ekay plc
Preliminary Announcement of Results for the year to 30 June 2006
Ekay plc ("Ekay" or the "Company") is an advertising and marketing agency which
specialises in advising clients on the use of television, national and local
press, magazines, the internet, direct mail and posters, for business
development purposes. Ekay has particular expertise in direct marketing.
HIGHLIGHTS
* Strong results:
+ Turnover up 81.1% to £36.4 million (2005: £20.1m)
+ Gross margin up 24.6% to £2.28 million (2005: £1.83m)
+ Headline pre-tax profit up 18.0% to £1.18 million (2005: £1.00m)
+ Reported pre-tax profit of £0.97m (2005: £1.00m)
* Dividend:
+ Final dividend of 0.3 pence per share making a total post AIM admission
dividend of £111,566 for the year
* Announced today: Acquisition of Wallace Barnaby & Associates Limited
+ Consideration: £1.75m
+ Leading Channel Islands based marketing/advertising company
+ Earnings enhancing and synergistic
Eddie Powell, Chief Executive, Commented:
"The Group has continued its progress and profitability since June 2006.
"With the completion of further complementary acquisitions and the continued
organic growth of the business in a dynamic and evolving market place, we view
the outlook for the Group to be extremely exciting and I look forward to the
challenges over the next 12 months and the further development of the enlarged
Group."
24 November 2006
Enquiries:
Ekay plc Tel: 01474 334343
Eddie Powell, Chief Executive
Shore Capital & Corporate Ltd Tel: 020 7408 4090
Guy Peters
Dru Danford
Nexus Financial Ltd Tel: 020 7451 7068
Nicholas Nelson Nicholas.nelson@nexusgroup.co.uk
CHIEF EXECUTIVE'S REPORT
We are pleased to report excellent results following a year of considerable
activity in our first year as an AIM quoted Group. The AIM admission took place
on 5 January 2006, which served to strengthen the Group's marketing position.
At the time of the flotation, management had taken the view that the Group's
hand would be strengthened, in terms of its acquisition and new business
strategies, as a quoted Group. Accordingly sufficient funds were raised to
cover the costs of the admission process with our plan intact to raise
additional funds on the back of acquisitions.
The move to AIM has provided the Group with greater presence in the market
place, augmenting our reputation of punching above its weight in terms of
client size and quality.
Growth in financial performance
The year is again a record year in all the key measures:
2006 2005 Change%
Revenues £36.4m £20.1m 81.1
Gross margin £2.28m £1.83m 24.6
Headline profit before tax 1 £1.18m £1.00m 18.0
Reported profit before tax - before share option £1.08m £1.00m 7.6
expense
Reported profit before tax - after share option £0.97m £1.00m (3.0)
expense
Ordinary share price at year end / AIM admission 34.5p 21.5p 60.4
Market capitalisation at year end / AIM admission £12.8m £7.9m 60.4
The Statements have been prepared under International Financial Reporting
Standards (IFRS) following the Board's strategic decision in 2006 to
voluntarily adopt IFRS. All companies admitted to trading on AIM will be
required to report under IFRS for accounting periods commencing on or after 1
January 2007, hence the Group's early adoption ahead of this requirement. The
Board believes this will facilitate consistent presentation of the results in
the future.
Significant revenue growth
Revenue growth was up a significant 81.1% year-on-year, which reflects the
current mix of work and the bias toward media buying and planning which has a
lower gross margin. Despite the fall in margin, because of higher overall
activity, we are delighted with the increase in profitability, which is a good
reflection of profitable growth of the business.
Such has been the success of our organic growth programme that the Group has
secured additional floor space within its premises in Gravesend which will be
populated with additional staff in the form of designers, marketing
professionals and sales people. All areas of the business continue to grow,
with a trend towards online marketing and advertising projects, which reflects
greater use of the internet in business and commerce. Indeed this has been one
of the fastest growing elements of our business with online marketing up over
300% over the last 12 months, albeit from a low starting position. This has led
to the development and implementation of "Ekay Bid Check" which has been
designed to enable pay per click campaigns to be effectively controlled and
managed. Additionally, we have successfully taken over digital marketing
campaigns for a number of our existing clients and continue to promote the
latest developments of internet marketing to current and new clients of the
Group.
Solid profit performance
The increase of 24.6% in gross profit reflects the successful further
diversification of the historic client base into new industry sectors such as
retailing, motor trade, debt management organisations, cosmetic surgery and
mobile technology, such as ring tones.
Growth in resources
The Group also invested significantly in overall infrastructure to provide a
platform for future organic growth and also to enable strategic acquisitions to
be managed and controlled. Staff numbers have increased 22% and staff costs by
42.3% in the current year reflecting this investment. However, the business
continues to be run efficiently and an average headline profit before tax per
employee of £54k compares favourably with comparable companies. Additionally,
operating profit as a percentage of gross profit has been maintained at 50%,
which again compares extremely favourably with our peers.
In the first half of the year the Board was strengthened by the appointment of
Tony Sullivan as non-executive Chairman. Tony brings considerable contacts and
experience through his 30 years in the media and advertising industry.
Additionally, the appointment of Julian Paul as our second non-executive brings
strong financial and business credentials to the Group through his long
experience with a number of publicly quoted media companies.
This year also saw the retirement of John McCormack from the Board and the
Board expresses its gratitude to John for his contribution to the Group for a
number of years, and wishes him well in his retirement. He has continued to add
value to the Group's day-to-day operations through his role as consultant
looking after specific client requirements.
Growth in shareholder value
The Board is extremely please by the market reaction to the Group's AIM
admission. The continued strategy of organic growth and strategic acquisitions
should enable the current shareholder base to expand further and increase the
share liquidity levels.
Dividends
As stated in the AIM admission document, the Board intends to make regular
dividend payments to its shareholders, and has therefore proposed to make a
post-admission, maiden dividend of 0.3p per share.
It is the Board's intention to adopt a progressive dividend policy where market
conditions permit.
Acquisition of Wallace Barnaby & Associates ("Wallace Barnaby")
Announced separately today, Ekay acquired the entire share capital of Wallace
Barnaby and Associates Limited for a total consideration of £1,750,000
satisfied by the issue of 1,942,105 ordinary shares and the payment £1,012,000
in cash on completion.
This is a significant step for Ekay and an opportunity for both companies to
expand their respective services and more fully target the demand for tailor
made advertising and marketing opportunities.
Although the synergies arising from the acquisition have yet to be quantified,
the Board believes they will have a positive impact on profitability almost
immediately.
The Group's positioning
As an advertising and marketing agency which specialises in advising clients on
the use of television, national and local press, magazines, the internet,
direct mail and posters, for business development purposes, the Group has a
particular expertise in direct marketing. Direct marketing uses select media to
target a specific audience, with the aim of encouraging a response from the
consumer, typically an enquiry for a product or service. An advantage of this
type of media is that it facilitates the clients' ability to measure the level
of response generated by their advertising spend, allowing them to calculate a
more accurate return on investment, a feature which the Board believes
differentiates the Group's product offering relative to other marketing forms.
The Group offers a complete direct marketing solution to its clients, utilising
a range of advertising methods and direct mail solutions. In addition to
advising on strategy, the Group also provides a complete design and media
buying service. Ekay has a digital marketing and on-line analysis and marketing
consultancy enabling it to provide clients with comprehensive on-line
solutions.
The Group's largest media activity at present is in television, where the Board
believes that the Group is a recognised expert and a market leader in its niche
direct marketing sphere. The Board believes that new media marketing campaigns,
including activities such as SMS text messaging, web advertising and the
effective use of web site design are increasingly being adopted by corporate
users. The Directors anticipate that new media will be the Group's fastest
growing area of activity over the next few years.
Current business overview
The Group has continued its progress and profitability since June 2006.
With the completion of further complementary acquisitions and the continued
organic growth of the business in a dynamic and evolving market place, we view
the outlook for the Group to be extremely exciting and I look forward to the
challenges over the next 12 months and the further development of the enlarged
Group.
Eddie Powell
Chief Executive Officer
24 November 2006
Ekay Plc
Audited consolidated profit and loss account for the Year to 30 June 2006
Group
Year ended Year ended
30 June 2006 30 June 2005
£ £
Revenue 36,388,709 20,106,815
Direct Costs (34,109,644) (18,279,959)
Gross profit 2,279,065 1,826,856
Other operating income 61,239 8,425
Operating costs before share option charge (1,342,258) (915,022)
Share option charge (110,000) -
Total operating costs (1,452,258) (915,022)
Operating profits before share option charge 998,046 920,259
Share option charge (110,000) -
Total operating profits 888,046 920,259
Interest income 78,171 82,186
Profit before taxation 966,217 1,002,445
Income tax expense (327,303) (250,895)
Profit for the year attributable to equity
holders of the parent 638,914 751,550
Earnings per share
Basic earnings per ordinary share 1.77p 2.15p
Diluted earnings per ordinary share 1.69p 2.15p
Ekay Plc
Audited consolidated balance sheet as at 30 June 2006
Group Company
As at As at As at As at
30 June 30 June 30 June 30 June
2006 2005 2006 2005
£ £ £ £
Assets
Non-current assets
Property, plant and 313,180 315,478 313,180 315,478
equipment
Investment in - - 64,675 -
quasi-subsidiary
313,180 315,478 377,855 315,478
Current Assets
Trade and other 5,396,531 2,394,253 5,377,115 2,394,253
receivables
Cash and short term 921,104 1,747,511 904,267 1,747,511
deposits
6,317,635 4,141,764 6,281,382 4,141,764
Total assets 6,630,815 4,457,242 6,659,237 4,457,242
Equity and liabilities
Equity attributable to
equity holders of the
parent
Share capital 371,888 100,000 371,888 100,000
Share premium - - - -
Retained earnings 804,725 1,198,882 833,147 1,198,882
1,176,613 1,298,882 1,205,035 1,298,882
Current liabilities
Trade and other payables 5,123,995 2,907,465 5,123,995 2,907,465
Corporate income tax 330,207 250,895 330,207 250,895
payable
Total liabilities 5,454,202 3,158,360 5,454,202 3,158,360
Total equity and 6,630,815 4,457,242 6,659,237 4,457,242
liabilities
Ekay Plc
Audited statement of changes in equity for the year ended 30 June 2006
Group and Company Share Share Retained Total
Capital Premium Earnings
£ £ £ £
Balance as at 1 July 2005 100,000 642,832 742,832
Profit for the year 751,550 751,550
Total recognised income and 1,394,382 1,494,382
expense for the year
Dividend paid (495,500) (495,500)
Balance as at 30 June 2006 100,000 898,882 998,882
Group only
Changes in equity for the year to
30 June 2006
Credit on issue of share options 110,000 1,100,000
Profit for the year 638,914 638,914
Total recognised income and 1,647,796 1,747,796
expense for the year
Dividend paid (611,566) (611,566)
Bonus issue on 14 November 2005 251,567 (251,567) -
Issue of share capital 20,321 276,679 297,000
Issue costs (276,679) (91,504) (368,183)
Balance as at 30 June 2006 371,888 - 693,159 1,065,047
Company only Share Share Retained Total
Capital Premium Earnings
£ £ £ £
Balance as at 1 July 2005 as above 100,000 898,882 998,882
Changes in equity for the year to
30 June 2006
Credit on issue of share options 110,000 110,000
Profit for the year 667,336 667,336
Total recognised income and 100,000 1,676,218 1,776,218
expense for the year
Dividend paid (611,566) (611,566)
Bonus issue on 14 November 2005 251,567 (251,567)
Issue of share capital 20,321 276,679 297,000
Issue costs (276,679) (91,504) (368,183)
Balance as at 30 June 2006 371,888 - 721,581 1,093,469
Ekay Plc
Audited consolidated cash flow statement for the year ended 30 June 2006
Group
Year ended Year ended
30 June 2006 30 June 2005
£ £
Cash flows from operating activities
Profit from operations 888,046 920,259
Share option charge for the year 110,000 -
Depreciation of property, plant and 67,417 48,098
equipment
Loss on disposal of property, plant and - 2,364
equipment
Operating cash flows before movement in 1,065,463 970,721
working capital
Increase in receivables (2,956,604) (411,243)
Increase in payables 1,985,531 1,430,353
Cash generated from operations 94,390 1,989,831
Income taxes paid (247,991) (290,987)
Net cash (used in)/ from operating (153,601) 1,698,844
activities
Cash flows from investing activities
Interest received 78,171 82,186
Investment in quasi-subsidiary (64,675) -
Disposal of property - 148,000
Acquisition of property, plant and (65,119) (442,227)
equipment
Net cash used in investment activities (51,623) (212,041)
Cash flows from financing activities
Net (decrease)/increase in borrowings - -
Proceeds on issues of shares 297,000 -
Cost of share issue (368,183) -
Dividends paid (550,000) (195,500)
Net Cash (used in)/from financing (621,183) (195,500)
activities
Net (decrease)/increase in cash and cash (826,407) 1,291,303
equivalents
Cash and cash equivalents at 1 July 1,747,511 456,208
Cash and cash equivalents at 31 June 921,104 1,747,511
Ekay Plc
Notes to the Consolidated Financial Statements for the year ended 30 June 2006
A. Significant accounting policies
Ekay PLC (the Company) is a company domiciled in the United Kingdom. The
consolidated financial statements of the Company for the year ended 30 June
2006 comprise the Company and its subsidiaries (together referred to as the
Group).
B. Basis of preparation
The consolidated financial statements of Ekay PLC have been prepared in
accordance with International Financial Reporting Standards incorporating
International Accounting Standards as issued by the International Accounting
Standards Board (IFRS) and with those parts of the Companies Act, 1985
applicable to companies reporting under IFRS.
The disclosure required by IFRS1 (First Time Adoption of International
Financial Reporting) concerning the transition from applicable accounting
standards in the United Kingdom (UK GAAP) to IFRS are shown where relevant.
The financial reports have been prepared under the historical cost convention.
Non-current assets are stated at the lower of carrying amount and fair value
less costs to sell.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results ultimately may differ
from those estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in a period of
the revision and future periods if the revision affects both current and future
periods.
Judgements made by management in the application of IFRSs that have a
significant effect on the financial statements and estimates with a significant
risk of material adjustment in the next year are discussed where appropriate.
The accounting policies have been applied consistently to all periods presented
in these consolidated financial statements and in preparing an opening IFRS
balance sheet at 1 July 2004 for the purposes of the transition to IFRSs.
The accounting policies have been applied consistently by Group entities.
Earnings per share
Group
Earnings Year ended Year ended
30 June 30 June
2006 2005
Basic EPS
Reported earnings (£) 638,914 751,550
Reported EPS 1.77p 2.15p
Diluted EPS
Diluted reported earnings (£) 638,914 751,550
Reported diluted EPS 1.69p 2.15p
Year ended Year ended
30 June 2006 30 June 2005
No. No.
Weighted average number of ordinary
shares:
Issued ordinary shares at 1 July 100,000 100,000
Effect of share division into 1p shares 9,900,000 9,900,000
Effect of bonus issues 25,000,000 25,000,000
Effect of 25 October 2005 share issue 149,106 -
Effect of 5 January 2006 share issue 874,673 -
Effect of 18 June 2006 share option 5,109 -
exercise
Weighted average number of ordinary 36,028,888 35,000,000
shares
A reconciliation between the shares
used in calculating Basic and Diluted
EPS is as follows:
Average shares used in calculating the 36,028,888 35,000,000
Basic EPS calculation
Dilutive Share Options outstanding 1,352,431 -
Dilutive Warrants outstanding 318,711 -
Weighted average number of ordinary 37,700,030 35,000,000
shares
The financial information set out above does not constitute the company's
statutory accounts for the years ended 30 June 2006 or 2005. Statutory accounts
for 2005, which were prepared under UK GAAP, have been delivered to the
registrar of companies. The auditors have reported on the 2005 accounts; their
report was unqualified and did not contain a statement under section 237(2) or
(3) of the Companies Act 1985. The statutory accounts for 2006 which are
prepared under accounting standards adopted by the EU will be finalised on the
basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the company's annual general meeting.
Copies of Report
Further copies of this report are available from Ekay Plc's offices at 26
Devonshire Place, London, W1G 6JE.
END
EKAY PLC: Final Results
© 2006 PR Newswire
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