EKAY PLC
Preliminary Announcement of Annual Results for the year ended 30 June 2008
Ekay PLC ("Ekay" or the "Company"), a leading regional advertising and
marketing services agency, today announces its results for the year ended 30
June 2008.
Highlights
* Successful integration following strategic acquisition of WFCA Integrated
Limited ("WFCA"), a full service marketing communications company, bringing
with it a track record of growth and a client list featuring many household
names.
* Enlarged Group now the largest "London agency outside London".
* Reorganisation of Board including appointment of Bob Morton as Chairman and
Michael Richards, Chief Executive of WFCA. as Chief Executive.
* Reduced turnover, but increased gross profit from �2.2 million to just
under �3.5 million, moves operating pre tax result before exceptional items
from a loss of �215,000 into a profit of �91,000.
* Prudent provision for exceptional items to reflect current value.
* Significant cost savings help protect ongoing profitability of the enlarged
Group.
* Court approved reduction of capital will soon allow Share Premium Account
to form part of distributable reserves.
Michael Richards, Chief Executive, commented:-
"The financial year was one of great change for Ekay, culminating in an
acquisition that has more than doubled its size, significantly enhanced its
market profile and bolstered its management structure.
The Board is confident that the continuing development of the enlarged team and
the range of services offered by it will lead to a robust and strongly
performing Group in future years"
Enquiries:-
Ekay PLC
Tel: 01892 511085
Michael Richards, CEO
Steve Latter, Finance Director
Daniel Stewart & Company Plc
Tel: 020 7776 6550
Simon Leathers
Chairman's and Chief Executive's Statement
Business Overview and Summary
The financial year was one of great change for Ekay culminating in an
acquisition that has more than doubled its size, significantly enhanced its
market profile and bolstered its management structure, making the newly
constructed Group unrecognisable to that trading prior to 4th April 2008. When
reviewing the overall performance of Ekay plc over the twelve month period
therefore, it is essential to separate the annual financial performance in the
year from the underlying strength of the Group moving forward.
In April 2008 Ekay successfully completed by far its most ambitious strategic
move to date with the acquisition of WFCA Integrated Limited, a full service
agency based in Tunbridge Wells, for an initial consideration of �8.5 million
plus additional consideration in respect of the excess of net assets acquired
over �500,000. WFCA brings with it a track record of growth in both volume and
profit delivery together with a client list featuring household names including
Carpetright, Bathstore, Multiyork, BUPA and Western Union.
The merger was a step change for both businesses, providing a potent "brand
leader" positioning as the largest "London agency outside London". The enlarged
group is able to provide a full service marketing offering at competitive cost
levels and the acquisition allows the Ekay Group to move outside its
traditional dependence on the financial sector and into retailing, medical,
food and other sectors. While Ekay has established its reputation as a media
specialist and within the on-line sector, WFCA brings an expertise in creative
services, account handling and design as well as its own highly regarded media
division.
To more appropriately reflect the relative contributions to gross profit and to
continue to capitalise on the increasingly public profile of the WFCA name, the
Board has decided to propose, at the next Annual General Meeting of the
Company, that the name of the Company be changed from EKAY PLC to WFCA PLC.
More information on this development will be sent to Shareholders at a later
date.
Finally and of equal importance, WFCA brought with it a new senior management
team who have been incorporated into the PLC board. Bob Morton and Michael
Richards the principal vendor of WFCA, have taken over the reins as non
executive Chairman and Chief Executive respectively. Steve Latter joined us
from Aegis Group in July 2008, as Finance Director. In addition, Rodger
Braidwood, formerly the Finance Director of WFCA and John Foley joined the
board as non executive directors. Eddie Powell, EKAY's founder completes the
board. The reconstructed board would like to thank the retiring directors for
their contribution to the earlier development of the Group and their assistance
in bringing the WFCA acquisition to fruition.
Financial Summary
While progress from a financial perspective was unspectacular the Group did
move into operational profitability during a period of difficult trading in the
marketing services sector generally. The Admission Document issued in March
2008 in connection with the acquisition of WFCA also contained EKAY's interim
results for the six months to December 2007. Pre tax profit before exceptional
items amounted to �139,000 and the document commented that EKAY had experienced
difficult trading conditions during the first quarter of 2008 but that the
pipeline of work was suggesting an improved second quarter. In the event,
however, this proved not to be the case and the underlying reason for the
profit improvement was the incorporation of three months of WFCA trading which
contributed �372,000 to Group pre tax profit.
Whilst gross revenues fell �4.8 million to �44.5 million, gross profit
increased from �2.2 million to just under �3.5 million and the 2007 operating
loss before exceptional items of �215,000 was turned into a profit of �91,000.
WFCA, through the nature of its value added activities, brings a considerably
higher gross margin percentage, in excess of 20%, lifting the Group result from
4.5% to 7.8%, This will show further growth in the forthcoming financial year
with a full year's consolidated contribution from WFCA. Within the expanded
Group it is envisaged that WFCA will provide approximately two thirds of the
gross profit and a comparable percentage of the Group's EBIT. If a full years
trading for WFCA had been consolidated in the reported year a Group pre tax
profit in excess of �1.3 million would have been achieved.
As well as adding `top line' growth, the WFCA acquisition has provided the
opportunity to rationalise the Group's operating structure. Moving forward the
Group will benefit from the closure of the group's Gravesend office and the
consolidation of all Ekay domestic operations into a single head office in
Tunbridge Wells.
The WFCA acquisition was funded by the issue of new Ekay shares to the WFCA
vendors of �4.5 million, a new investor share placing of �2.5 million and the
issue of �1 million loan notes to the WFCA vendors. Accordingly, the
acquisition, including costs of �0.5 million, only consumed approximately �1
million of working capital. Payments of additional consideration, which have
been provided for within the accounts, are to be funded by corresponding
reductions in corporation tax payable.
Regrettably it has again been necessary to provide for a series of exceptional
items. By far the most noteworthy of these is the decision to fully impair the
investment in Wallace Barnaby Associates. Since its acquisition two years ago
along with the later acquisition of Campaign Management Associates, for a
combined consideration of �2.3 million plus costs, our Channel Islands division
has experienced a reversal in its fortunes following the loss of clients and
expenditure cut backs by others. Even following a major restructuring exercise
that included significant reductions in overheads the division is unlikely to
reach profitability in the forthcoming financial year. The board therefore
decided that the most prudent course of action was to fully write off the
investment although it continues to support the division moving forward. The
impairment has no effect on the Group's working capital.
Other exceptional costs relate to the cost of restructuring the management and
operational base of the Group following the WFCA acquisition (�349,000) and
providing for further bad debts (�365,000). It is hoped that some of this
additional bad debt provision will be partially recovered in the fullness of
time.
The Board does intend, subject to results, financial condition, cash
requirements, future prospects and profits available for distribution, to
recommence the payment of dividends to Shareholders in the future. In
furtherance of this aim, the Company successfully achieved a Reduction of
Capital in June 2008, allowing the Share Premium account to form part of
distributable reserves once all creditors as at 26th June have been paid. We
are happy to report that as at the date of this statement, the overwhelming
proportion of such creditors have indeed been paid and so the Special Reserve,
included in the Balance Sheet in the sum of �6.5 million, will shortly be
regarded as distributable.
Outlook
Looking ahead the Group has never been better placed in strategic terms,
because in a deteriorating trading environment clients inevitably look to
maximise the impact of their advertising for the minimum cost. With its `out of
town' cost structure the Ekay Group is able to provide a unique offering in
this very sensitive area and additionally the Group is expanding the range of
services offered to its clients, and by implication expanding its fee base, by
cross selling the new services of the enlarged Group.
The Directors continue to believe that there is scope for the Group to make
further acquisitions in the future and to consolidate its position as a major
competitor to London based marketing and advertising agencies.
A group's strength is always dependent on the quality of staff that work for
it. We would like to take this opportunity to thank all the staff of the Ekay
Group for their fantastic support and commitment over the last year. The Board
is confident that the continuing development of the enlarged team and the range
of services offered by it will lead to a robust and strongly performing Group
in future years.
Consolidated income statement for the year ended 30th June 2008
Group
Year ended Year ended
30th June 30th June
Before 2008 2007
Exceptional Exceptional
items items Total Total
� � � �
Revenue 44,474,052 - 44,474,052 49,315,319
Direct costs (41,022,308) - (41,022,308) (47,112,392)
Gross profit 3,451,744 - 3,451,744 2,202,927
Other operating income 22,604 - 22,604 111,841
Operating costs before (3,338,285) (3,352,609) (6,690,894) (2,785,966)
share option credit and
release of provision
Release of provision 115,000 115,000 (1,884,796)
Share option credit 17,131 - 17,131 (151,385)
Total operating cost (3,321,154) (3,237,609) (6,558,763) (4,822,147)
Depreciation (116,858) (116,858) (93,497)
Total operating profit / 36,336 (3,237,609) (3,201,273) (2,600,876)
(loss)
Interest income 54,670 54,670 67,699
Profit / (loss) before 91,006 (3,237,609) (3,146,603) (2,533,177)
taxation
Income tax (expense) / 54,456 54,456 752,653
credit
Profit/ (loss) for the year
attributable
to equity holders of the 145,462 (3,237,609) (3,092,147) (1,780,524)
parent
Earnings per share
Basic earnings/loss per -4.62p -4.64p
share
Diluted earnings/loss per -4.62p -4.64p
share
Consolidated balance sheet as at 30th June 2008
Group Company
As at As at As at As at
30th June 30th June 30th June 30th June
2008 2007 2008 2007
� � � �
Assets
Non-current assets
Property, plant and equipment 470,746 443,715 200,046 276,444
Goodwill 8,497,907 2,386,462 - -
Investment in subsidiaries - - 10,100,509 2,051,150
8,968,653 2,830,177 10,300,555 2,327,594
Current Assets
Trade and other receivables 7,636,070 3,378,422 1,854,939 2,255,043
Cash and short term deposits 757,249 1,843,985 1,304 1,085,185
8,393,319 5,222,907 1,856,243 3,340,228
Total assets 17,361,972 8,053,084 12,156,798 5,667,822
Equity and liabilities
Equity attributable to equity 1,568,088 391,309 1,568,088 391,309
holders of the parent
Share capital
Share premium - 718,579 - 718,579
Special reserve 6,499,126 - 6,499,126 -
Retained earnings (4,051,085) (941,807) (3,464,752) (1,021,401)
4,016,129 168,081 4,602,462 88,487
Non current liabilities
Long term borrowings 1,030,983 - 1,000,000 -
Current liabilities
Trade and other payables 12,011,838 7,862,990 6,400,324 5,579,335
Provisions for other liabilities 302,202 154,012
and charges
Corporate income tax payable 820 22,013 - -
Total liabilities 13,345,843 7,885,003 7,554,336 5,579,335
Total equity and liabilities 17,361,972 8,053,084 12,156,798 5,667,822
Statement of changes in equity for the year ended 30th June 2008
Group
Share Share Retained Special
Capital Premium Earnings Reserve Total
� � � � �
Balance as at 1 July 391,309 718,579 (941,807) - 168,081
2007
Credit on charge for - - (17,131) - (17,131)
share options
Loss for the year - - (3,092,147) - (3,092,147)
Total recognised 391,309 718,579 (4,051,085) - (2,941,197)
income and expense for
the year
Issue of share capital 1.166,667 5,833,333 - - 7,000,000
Equity share option 10,112 11,214 - - 21,326
issued
Issue cost - (64,000) - - (64,000)
Transfer to special - (6,499,126) - 6,499,126 -
reserve
1,568,088 - (4,051,085) 6,499,126 4,016,129
Company
Share Share Retained Special
Capital Premium Earnings Reserve Total
� � � � �
Balance as at 1 July 391,309 718,579 (1,021,401) 88,487
2007
Credit on charge for - - (17,131) 17,131
share options
Loss for the year - - (2,426,220) (2,460,482)
Total recognised income 391,309 718,579 (3,464,752) (2,354,864)
and expense for the
year
Issue of share capital 1,166,667 5,833,333 - - 7,000,000
Equity share option 10,112 11,214 - - 21,236
issued
Issue cost - (64,000) - - (64,000)
Transfer to special - (6,499,126) - 6,499,126 -
reserve
1,568,088 - (3,464,752) 6,499,126 4,602,462
Consolidated cash flow statement for the year ended 30th June 2008
Group Company
12 months 12 months 12 months 12 months
ended ended ended ended
30-Jun-08 30 Jun 2007 30-Jun-08 30 Jun 2007
� � � �
Cash inflow/(outflow) from
operating activities
Profit/(loss) from (3,201,273) (2,600,876) (2,503,405) (2,707,670)
operations
Share option charge / (17,131) 151,385 (17,131) 151,385
(credit)
Impairment of WBA 2,386,462 - 2,051,150
Investment
Impairment of property, plant 41,205 - 41,205 -
& equipment
Depreciation of property, 116,857 93,497 42,393 52,622
plant and equipment
Operating cashflows before (673,880) (2,355,994) (385,788) (2,503,663)
movement in working capital
Loss on sale of property, 60,989 1,323
plant & equipment
Decrease/(increase) in 772,621 1,875,551 475,103 1,725,108
receivables
Increase/(decrease) in (2,554,241) 2,079,898 (628,043) 2,552,127
payables
Cash generated from (2,394,511) 1,599,455 (537,404) 1,773,572
operations
Income tax (paid) / 33,263 (200) -
received
Net cash from operating (2,361,248) 1,599,255 (537,404) 1,773,572
activities
Cash inflow/(outflow) from
investing activities
Interest received 54,670 65,036 12,492 39,100
Acquisition of subsidiary net (2,417,593) (1,510,860) (3,505,706) (1,986,475)
of cash acquired
Proceeds from sale of 29,887 - 1,000 -
property, plant & equipment
Purchase of of property, plant (115,016) (28,770) (9,524) (15,886)
& equipment
Net cash used in investment (2,448,052) (1,474,594) (3,501,738) (1,963,261)
activities
Cash inflow/(outflow) from
financing activities
Net increase/(decrease) in - -
borrowings
Proceeds on issues of 2,521,326 738,000 2,521,326 738,000
shares
Cost of share issue (64,000) - (64,000) -
Dividends paid - (117,393) - (367,393)
Proceeds on issue of Loan - - - -
Notes
Net cash from financing 2,457,326 620,607 2,457,326 370,607
activities
Net increase/(decrease) in (2,351,974) 745,268 (1,581,816) 180,918
cash and cash equivalents
Cash and cash equivalents at 1 1,666,372 921,104 1,085,185 904,267
July 2007
Cash and cash equivalents at (685,602) 1,666,372 (496,631) 1,085,185
30 June 2008
Cash & short term deposits 757,249 1,843,985 1,304 1,085,185
Bank overdraft (1,442,851) (177,613) (497,935) 0
Total cash and cash (685,602) 1,666,372 (496,631) 1,085,185
equivalents
The financial information set out in this announcement does not constitute the
Group's annual accounts (as defined by s471 of the Companies Act 2006) for the
year ended 30 June 2008. The financial information for the year ended year
ended 30 June 2008 has been extracted from the Annual Report of Ekay plc. The
Annual Report will be posted to shareholders on or before 30 November 2008 and
copies will be available from the Daniel Stewart & Company, 36 Becket House,
Old Jewry, London EC2R 8DD and on the Company's website (www.ekay.co.uk).
END
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