Ekay plc
Interim Results for the six months to 31 December 2006
Ekay plc ("Ekay" or the "Company") announces its interim results for the six
months ended 31 December 2006. Ekay is an advertising and marketing agency
based in the UK and the Channel Islands 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.
KEY POINTS
* Revenue up 8.5% to �17.8 million (H1 2005: �16.4m)
* Gross profit up 1.5% to �1.052m (H1 2004: �1.037m)
* Profit before tax of �332k (H1 2005: �474k) before exceptional items of �
233,000
* Increasing investment in infrastructure and staff to support new client
wins in H2
* Acquisition
+ Wallace Barnaby & Associates Ltd acquisition completed in November 2006
for consideration of �1.75m
+ Impact of Wallace Barnaby acquisition has little impact on trading
results for the period following acquisition on 24 November 2006
* Significant growth in client base with competitive position strengthened
+ Diversity and quality of mandates
Eddie Powell, Chief Executive, commented:
"Ekay prides itself on being a provider of high value, no-nonsense services
which, coupled with an aggressive approach to new business, has proven to be a
winning formula and competitive differentiator.
"We anticipate the complete integration of Wallace Barnaby during the remainder
of this year, leveraging the skills and knowledge base across the combined
group."
"We have a keen eye on growth organically and through additional acquisitions
and have identified a number of suitable targets which would yield synergies
and build earnings. We hope to announce further news in the coming months as
matters conclude."
30 March 2007
Enquiries:
Ekay plc
Eddie Powell, Chief Executive Tel: 01474 334343
Shore Capital & Corporate Ltd
Guy Peters/Dru Danford Tel: 020 7408 4090
Nexus Financial Tel: 020 7451 7050
Nicholas Nelson/Kathy Boate
CHAIRMAN'S STATEMENT
The results for the last year were extremely pleasing and the progress of the
Group has continued into the first half of the current year, albeit in
difficult circumstances relating to the UK sub-prime mortgage broking market
place.
Over the past two years the Group's strategy has been to diversify successfully
the client base, moving into new industry sectors such as debt management,
travel, holiday destinations, telecommunications and motor dealerships to name
a few. This is now starting to show through in the current trading performance
of the Group. Additionally, following the successful completion of the purchase
of Wallace Barnaby & Associates Ltd ("Wallace Barnaby"), the leading Channel
Islands advertising agency, the Group continues to diversify its client base
into new industries, geographic locations and market sectors.
The recent acquisition of Wallace Barnaby highlights the Group's strategy of
diversification and its ability to leverage core skills and services across an
enlarged client base. It is anticipated that the strategy we have adopted of
making more acquisitions will further strengthen the commercial and financial
prospects of the Group.
Following this acquisition, the Company is delighted to welcome Bruce Wallace
to the Board, who brings a wealth of experience in advertising and marketing.
Additionally, the Group is now elevated into the top 20 advertising agencies
within the UK, a major achievement and milestone for the Company.
The recent solvency issue with one of our long standing client mortgage brokers
has resulted in a potential bad debt of up to �1.65m. No provision has been
made in these interim results as it is extremely difficult to determine at this
early stage in proceedings the likely level of recovery. However, it is
expected that a provision will be made in the full year's financial statements.
The board has indicated that it will pursue vigorously the outstanding amounts
owed to the Company using all available means and has already begun to do so.
The board will keep shareholders apprised of all developments as they occur.
I should like to thank all our staff for their committed drive over the past
six months in reinforcing Ekay's position of strength in the advertising and
marketing industry.
Tony Sullivan
Chairman
30 March 2007
CHIEF EXECUTIVE'S REPORT
The first half of the year has been one of further activity and development for
the Group, culminating in the acquisition for a consideration of �1.75m of
Wallace Barnaby & Associates Limited, the leading Channel Islands advertising
and marketing agency.
Following the acquisition, the Group has further strengthened the Board through
the appointment of Bruce Wallace, who is responsible for developing the Channel
Islands business.
The core client base has increased considerably during the period as the
Company continues to increase the quality and diversity of mandates being won,
notably in the area of direct response. Moreover the trend towards online
marketing and advertising projects, which reflect greater use of the internet
in business and commerce, continues at an increasing rate and remains the
fastest growing part of the Group.
Financial Summary
The revenue for the first half of the year for the Group has grown by 8.5% to �
17.8m (H1 2005: �16.4m) which produced an adjusted pre-tax profit of �406,000
(H1 2005: �474,000). Gross profit increased only slightly to �1,053,000 and
with a maintained gross margin of 6%. The second half of the year should see an
improvement of gross margin percentage due to the higher margin work undertaken
by Wallace Barnaby.
The business continues to operate from a low cost base, although costs for the
period increased slightly before taking into account the charge for bad debts
of �233,000, relating to First Class Mortgages and First Class Debt Solutions
which went into liquidation in January 2007, and the charge for share based
payments of �74,000.
The full impact of the acquisition of Wallace Barnaby will not be seen until
the second half of the year, which will significantly increase the trading
levels of the Group for the full year.
As announced on 5th March, the Company was made aware of a solvency issue in
respect of a client which owes approximately �1.65m inclusive of interest
charges for late payment. The potential bad debt arose when the client was
unable to pay third party advertising expenses incurred by Ekay on the client's
behalf.
The directors of Ekay intend that they should pursue vigorously the outstanding
amounts due to the Company using all available means.
A provision with regard to the outstanding amounts may be required in the
financial results for Ekay for the 12 months ended 30 June 2007 and the Company
will keep shareholders notified of developments as they arise.
Since July 2005 procedures have been implemented to ensure that credit is only
extended to clients where the sums due are adequately covered by credit
insurance except with a small number of historic customer accounts. Ekay does
not currently trade with any other account on credit terms not adequately
covered by insurance.
Dividend
The Company maintains a policy of dividend payments and paid an interim
dividend of 0.3p on 16 February 2007. The events outlined above however, and
announced on the 5 March concerning a potential bad debt, prevent the Company
from making further dividend payments for the time being. The Directors will
keep the matter under review.
Outlook
Ekay prides itself on being a provider of high value, no-nonsense services
which, coupled with an aggressive approach to new business, has proven to be a
winning formula and competitive differentiator.
We anticipate the complete integration of Wallace Barnaby during the remainder
of this year, leveraging the skills and knowledge base across the combined
group
We have a keen eye on growth organically and through additional acquisitions
and have identified a number of suitable targets which would yield synergies
and build earnings. We hope to announce further news in the coming months as
matters conclude.
Eddie Powell
Chief Executive Officer
30 March 2007
Ekay plc
Unaudited consolidated income statement for the
6 months ended 31 December 2006
6 months to Exceptional 6 months to 6 months to 12 months to
31 Dec 2006 Items 31 Dec 2006 31 Dec 2005 30 June
Unaudited � Unaudited Unaudited 2006
Before After � Audited
Exceptional Exceptional �
Items Items
� �
Revenue 17,751,312 17,751,312 16,431,383 36,388,709
Direct costs (16,698,431) (16,698,431) (15,394,024) (34,109,644)
Gross profit 1,052,881 1,052,881 1,037,359 2,279,065
Operating (898,300) (233,000) (1,131,300) (615,814) (1,452,258)
costs
154,581 (233,000) (78,419) 421,545 826,807
Other 4,350 4,350 4,350 61,239
operating
income
Total (233,000)
operating 158,931 (74,069) 425,895 888,046
profit -
continuing
operations
Interest 173,292 173,292 48,325 78,171
income
Profit on (233,000)
ordinary 332,223 99,223 474,220 966,217
activities
before
taxation
(327,303)
Income tax (29,457) (29,457) (131,000)
expense
Profit for the (233,000) 638,914
year 302,766 69,766 343 ,220
attributable
to equity
holders
of the parent
Earnings per 3 0.19p 0.97p 1.77p
share - basic
diluted 3 0.18p 0.92p 1.69p
Ekay plc
Unaudited consolidated balance sheet as at 31 December 2006
Notes As at As at As at
31 December 31 December 30 June
2006 2005 2006
Unaudited Unaudited Audited
� � �
Fixed assets
Goodwill 2,249,692 - -
Property, plant and 465,321 308,469 313,180
equipment
2,715,013 308,469 313,180
Current assets
Trade and other 4,311,429 3,747,820 5,396,531
receivables
Cash at bank and short
term deposits 1,393,781 862,559 921,104
5,705,210 4,610,379 6,317,635
Total assets 8,420,223 4,918,848 6,630,815
Equity and liabilities
Equity attributable to
equity holders of the
parent
Share capital 391,309 100,627 371,888
Share premium 718,579 41,511 -
Retained earnings 874,491 719,628 804,725
6 1,984,379 861,766 1,176,613
Current liabilities:
Trade creditors and other 6,024,067 3,675,187 5,123,995
payables 330,207
388,407 381,895
Corporate income tax
payable
Total current liabilities 6,412,474 4,057,082 5,454,202
Other payables over one 23,370 - -
year
Total equity and 8,420,223 4,918,848 6,630,815
liabilities
There were no changes in equity other than the profit for the period
attributable to equity holders of the parent as shown in the above Income
Statement.
Ekay plc
Unaudited consolidated cash flow statement for the 6 months
ended 31 December 2006
Notes 6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2006 2005
2006
Unaudited Unaudited
Audited
� �
�
(Loss)/ profit from (74,069) 425,895 888,046
operations
74,000 - 110,000
Share option charge for the
year 42,056 37,371 67,417
Depreciation of property,
plant and equipment
Operating cash flows before 41,987 463,266 1,065,463
movement in working capital
Decrease/ (increase) in 2,046,256 - -
receivables
(905,050) (1,936,365) (2,956,604)
(Decrease)/ Increase in
payables 567,468 1,985,531
Cash generated from (used 1,183,193 (905,631) 94,390
in) operations
Income taxes paid - - (247,991)
Net cash from/ (used in) 1,183,193 (905,631) (153,601)
operating activities
Cash flows from investing
activities
Interest received 73,857 48,325 78,171
Investment in - (22,473) (64,675)
quasi-subsidiary
(1,522,181) - -
Acquisition of subsidiary
undertaking (net of cash (192) (30,361) (65,119)
acquired)
Acquisition of property,
plant and equipment
Net cash used in investing (1,448,516) (4,509) (51,623)
activities
Cash flows from financing
activities
Proceeds on issue of shares 738,000 42,138 297,000
Cost of share issue - - (368,183)
Dividend paid - (250,000) (550,000)
Net cash from/ (used in) 738,000 (207,862) (621,183)
financing activities
Net increase/ (decrease) in 472,677 (1,118,002) (826,407)
cash and cash equivalents
Cash and cash equivalents 921,104 1,747,511 1,747,511
at the beginning of the
period
Cash and cash equivalents 1,393,781 629,509 921,104
at the end of the period
Ekay plc
Notes to the Interim Statement
For the six months ended 31 December 2006
1. Basis of Preparation
This interim report is unaudited and does not constitute statutory financial
statements within the meaning of Section 240 of the Companies Act 1985. The
financial statements for the year to 30 June 2006, which were prepared in
accordance with International Financial Reporting Standards (`IFRS') and upon
which the auditors have issued an unqualified report, have been delivered to
the Registrar of Companies.
The financial statements for the half year to 31 December 2006 have been
prepared in accordance with IAS 34 `Interim Financial Reporting'. The
accounting policies applied in these interim financial statements are
consistent with those set out and applied in the Group's Annual Report for the
year to 30 June 2006.
2. Earnings Per Share
The calculation of the basic and diluted earnings per share is based on the
profit on ordinary activities after tax and on the weighted average number of
ordinary shares in issue during the period.
The profit and weighted average number of shares used in the calculations are
set out below:
Basic earnings per Profit Weighted Profit per
share average share pence
� number of
shares
6 months ended 31 69,765 37,385,674 0.19p
December 2006
6 months ended 31 343,220 35,219,450 0.97p
December 2005
Year ended 30 June 2006 638,914 36,028,888 1.77p
Diluted earnings per Profit Weighted Profit per
share average share pence
� number of
shares
6 months ended 31 69,765 39,629,088 0.18p
December 2006
6 months ended 31 343,220 37,377,900 0.92p
December 2005
Year ended 30 June 2006 638,914 37,700,030 1.69p
3. Acquisition of Wallace Barnaby & Associates Limited
On 24 November 2006, Ekay completed the acquisition of the Guernsey based
Wallace Barnaby & Associates Limited and its subsidiaries ("Wallace Barnaby"),
one of Britain's largest offshore marketing and advertising agencies, from
Wallace Barnaby Holdings Limited (the "Vendor").
The consideration of �1.75 million has been satisfied by the issue at
completion of 1,942,105 new ordinary shares in Ekay (the "Consideration
Shares") and a payment at completion of �1,012,000 in cash ("Cash Portion"). At
completion �350,505 was paid to Wallace Barnaby out of the Cash Portion by way
of settlement of a debt owed by the Vendor to Wallace Barnaby. In addition, at
completion �95,000 was repaid to Wallace Barnaby by a senior employee.
4. Related Party Transactions
54 Bath Street, which is also occupied by the Company, is owned by Mr Edward
Powell's Self Invested Pension Plan. The total rent paid during the period
ended 31 December 2006 was �7,000.
During the period the Company engaged Olivine Capital Partners Limited, of
which Stuart Cumberland is a Director, to undertake corporate finance and tax
advisory work. Fees payable totalled �12,900 from 1 July 2006 to 31 December
2006. The amounting owing to Olivine Capital Partners Limited at the end of the
period was �40,411.
During the period the company provided services to AIM quoted Debts.co.uk plc,
of which Stuart Cumberland is a Director. The total amount of services provided
in the period was �186,189. The amount due from Debts.co.uk plc at the end of
the period was �64,514. Stuart Cumberland does not have an interest in
Debts.co.uk plc.
Copies of this interim statement are available on request from Ekay plc, The
Maltings, 53/54 Bath Street, Gravesend, Kent. DA11 0DF and can be viewed on the
Company's website at www.ekay.co.uk.
END
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