Interim Results
Evolution Group PLC
07 September 2004
7 September 2004
The Evolution Group Plc
("Evolution Group" or the "Group")
Interim results for the six months ended 30 June 2004
Evolution Group, a leading mid-market integrated investment bank, today
announces its results for the six months ended 30 June 2004.
Financial highlights
• Group operating income increased by 126% to £31.4m (2003: £13.9m)
• Gross profit increased by 126% to £29.6m (2003: £13.1m)
• Profit before tax of £37.1m (2003: Loss £1.6m)
• Basic earnings per share increased to 13.6p (2003: Loss of 0.6p)
• Interim dividend declared of 0.17p per share (2003: Nil)
Operational highlights
• First half demonstrates considerable growth in revenues
• Investment banking division has made a strong start to 2004 with revenue
growth in all areas
• Christows' FUM have increased by £232m, or 65%, since 30 June 2003 to
£588m
• Cash realisation of £40.5m on partial sale of holding in IP2IPO resulting
in net profit of £22.3m
Richard Griffiths, Evolution Group's Chairman, commented:
"Following an excellent start to the year, the Board remains confident of the
future prospects for the Group."
-Ends-
For further information please contact:
The Evolution Group Plc 020 7071 4300
Alex Snow, Chief Executive Officer
Graeme Dell, Finance Director
Hogarth Partnership Limited 020 7357 9477
Andrew Jaques / Georgina Briscoe
Notes to Editors:
The Evolution Group Plc
The Evolution Group is the holding company of Evolution Beeson Gregory Limited
and Christows Limited. The Evolution Group is fully listed and is a constituent
of the FTSE 250 with a current market capitalisation of approximately £370
million.
Evolution Beeson Gregory Limited aims to be the "leading investment bank to
small and mid cap companies". This is based upon the belief that it has the
strategy and capabilities to achieve this goal, coupled with the fact that the
market opportunity exists for this strategy to be a successful and profitable
one.
The company's capabilities are strong across the primary and secondary equity
market and central to this is the presence of a leading, retained corporate
client base in the small and mid cap sector. We service these clients by
providing the full range of corporate finance, equity research, market making
and sales activities and delivering all of these with a strong client service
culture.
Christows Limited is a leading independent firm of stockbrokers and portfolio
managers which, from its foundation in 1991 in Exeter, has always set out to
provide a traditional stockbroking service whilst developing an innovative
product offering. Christows now also operates from London, Bournemouth and Bath
and has 68 staff across account executive, research, sales and administration
functions.
As at 30 June 2004, Christows had a total of £588m (2003: £356m) client funds
under management, on over three quarters of which it receives a recurring fee
based commission. Christows' strategy for 2004 is one of controlled growth of
the funds under management by organic means through the sales and account
executive teams and by the recruitment of likeminded account executives who can
attract new clients to the company.
IP2IPO is held as an investment by the Group following the partial disposal of
shares in May 2004.
IP2IPO's business is the formation of long-term university partnerships in which
it receives a significant interest in the intellectual property created by its
university partners. IP2IPO successfully listed on AIM in October 2003.
CHAIRMAN'S STATEMENT
Review of the half year ended 30 June 2004
During the first half of 2004, The Evolution Group Plc ("Evolution"or the
"Group") has traded strongly and I am pleased to report operating income has
increased 126% to £31.4m (2003: £13.9m) and profit before tax has increased by
£38.7m to £37.1m giving the Group a basic earnings per share figure of 13.6p
(2003: Loss 0.6p).
Investment Banking
Within Evolution Beeson Gregory, the Group's investment banking business, there
has been continued growth from the corporate broking, equity research and
distribution and trading divisions.
Corporate broking
Our corporate broking track record for the first half of 2004 has continued to
progress strongly. During the period we advised on 19 fundraising transactions
raising £239m for our clients. In July and August 2004 we have raised a further
£131m from 10 transactions. The total of £370m raised in the eight months to
August already significantly exceeds the total funds raised in the 12 months to
31 December 2003 of £271m.
Equity research and distribution
The primary fundraisings outlined above from our corporate activities have been
successfully placed with institutional investors demonstrating the strength of
our team and their placing power in a difficult and highly competitive market.
In addition, our secondary sales commission growth has continued in 2004.
Equity research has made further progress, increasing coverage from 191 stocks
at 31 December 2003 to 208 stocks by 30 June 2004. The breadth and quality of
the coverage in this area has been recognised through improved institutional
rankings for our research analysts.
Trading
Market making and trading activities have had a very profitable first half as we
have continued to build this business. Our voice and electronic trading volumes
have increased as we cover more stocks and gain connectivity to a greater range
of intermediaries.
Private Client Stockbroking & Fund Management
Christows, the Group's private client fund management business, has seen results
that build on the progress reported at the year end with a further increase in
funds under management and resulting revenue growth.
Total income has increased in line with our growth plans and the operating
profit of this business in the first half of 2004 is in excess of the full year
in 2003. Our sales team continues to attract more funds under management and
this has been a record half year. At 30 June 2004, total funds under management
were £588m, up from £356m at the same time last year, an increase of 65%.
Strategic funds under management, on which we receive recurring fees have
continued to grow and now represent 84% or £493m of this total (2003: 81% or
£288m). This is further evidence of the trend in continued growth in sales from
our sales team over the last three years.
IP2IPO
During the period, the Group announced the disposal of 9,000,000 shares in
IP2IPO Group Plc for gross proceeds of £40.5m in cash, which realised a profit
for the Group, after taking into account related expenses of sale, of £22.3m.
This transaction realised significant value for Evolution's shareholders. In
reducing the Group's interest in IP2IPO from 40.61% to 18.46%, this transaction
has resulted in IP2IPO becoming treated as an investment by Evolution rather
than as an associated undertaking in the Group's consolidated balance sheet.
Other items
As previously reported the Group has continued to exit from its legacy
investment portfolio. The Group has realised £5.1m in profits from the sale of
some of these legacy investments in the 6 months to 30 June 2004.
Board and advisory changes
On 13 July 2004 the Board announced the appointment of Lord MacLaurin of
Knebworth, DL as Non-executive director of the Group. We look forward to working
closely with him as the business grows in the future. At the same time Sir
Malcolm Field and George Loudon announced their resignations from the Board. We
are very grateful for their contributions in the two years since the acquisition
of the Beeson Gregory Group.
Following these Board changes: Nicholas Irens has been appointed Chairman of the
Audit Committee; Oliver Vaughan has been appointed Chairman of the Remuneration
Committee; and Lord MacLaurin the Senior Non-executive director. All
Non-executive directors will serve on all committees and are considered
independent of management for the purposes of the Revised Combined Code on
Corporate Governance.
On 21 June 2004 the Board appointed Credit Suisse First Boston as sole financial
advisor and broker to the Group.
Dividend
The Board declares an interim dividend of 0.17p per share (2003: Nil). This
reflects the Board's continued commitment to a progressive dividend policy as
set out in the 2003 Annual Report. This is payable on 3 November 2004 to
shareholders on the register at 24 September 2004.
Employees
All of our businesses are people businesses, where our most important assets are
our people. I should like to reiterate my thanks to everyone for all of their
efforts as we move towards the achievement of our strategic goals.
Outlook
Following an excellent start to the year, the Board remains confident of the
future prospects for the Group.
Richard Griffiths
Chairman
6 September 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited twelve
six months six months months to
to 30 June to 30 June 31 December
2004 2003 2003
(Restated)
£'000 £'000 £'000
Operating income 31,374 13,875 40,751
Commissions payable (1,727) (754) (2,656)
-------- -------- ----------
Gross profit 29,647 13,121 38,095
Administrative expenses (21,576) (10,352) (32,720)
Profit on sale of fixed asset
investments 452 1,301 2,379
Profit on sale of current asset
investments 4,681 - 99
Provision against fixed asset
investments - (6,163) (6,114)
-------- -------- ----------
Group operating profit/ (loss) 13,204 (2,093) 1,739
Share of associated undertaking's
operating profit/(loss) 184 - (186)
-------- -------- ----------
Total operating profit/(loss) 13,388 (2,093) 1,553
Profit on part sale of subsidiaries 54 - 15,085
Profit on disposal of associate 22,292 - -
Interest receivable and similar income 1,148 542 1,156
Share of associated undertaking's
interest receivable 252 - 126
Interest payable and similar charges (13) (2) (21)
-------- -------- ----------
Profit/(loss) on ordinary
activities before taxation 37,121 (1,553) 17,899
Tax on profit/(loss) on
ordinary activities (3,273) (2) (1,851)
-------- -------- ----------
Profit/(loss) on ordinary
activities after taxation 33,848 (1,555) 16,048
Minority interest - Equity 65 41 146
-------- -------- ----------
Profit/(loss) for the financial
period 33,913 (1,514) 16,194
Dividends paid and declared: Interim -
0.17p per share (2003: Interim- Nil;
Final - 0.25p per share) (422) - (616)
-------- -------- ----------
Retained profit/(loss) for the
financial period 33,491 (1,514) 15,578
-------- -------- ----------
-------- -------- ----------
Basic earnings/(loss) per ordinary
share (pence) 13.6 (0.6) 6.7
Diluted earnings per share (pence) 12.5 - 6.3
CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
30 June 30 June 31 December
2004 2003 2003
(Restated) (Restated)
£'000 £'000 £'000
Fixed assets
Intangible assets 8,748 11,140 8,990
Investment in associated
undertakings - - 25,525
Tangible assets 1,375 719 1,509
Investments 12,640 22,594 851
-------- -------- ---------
22,763 34,453 36,875
Current assets
Debtors 36,695 44,119 28,171
Long trading positions 17,420 7,575 7,207
Investments 136 77 444
Cash at bank and in hand 89,576 31,259 53,705
-------- -------- ---------
143,827 83,030 89,527
Creditors: Amounts falling
due within one year (39,283) (38,723) (34,734)
-------- -------- ---------
Net current assets 104,544 44,307 54,793
-------- -------- ---------
Total assets less current
liabilities 127,307 78,760 91,668
Provisions for liabilities
and charges (529) (196) (227)
-------- -------- ---------
Net assets 126,778 78,564 91,441
-------- -------- ---------
-------- -------- ---------
Capital and Reserves
Called up share capital 2,485 2,454 2,478
Shares to be issued - 254 -
Share premium account 26,002 24,831 25,739
Merger reserve 51,230 57,261 57,261
Profit and loss account 47,145 (13,957) 5,996
-------- -------- ---------
Total shareholders' funds 126,862 70,843 91,474
-------- -------- ---------
Shareholders' funds - Equity 126,862 70,843 91,474
Minority interests - Equity (84) 7,721 (33)
-------- -------- ---------
Minority interests &
shareholders' funds 126,778 78,564 91,441
-------- -------- ---------
-------- -------- ---------
Graeme Dell Alex Snow
Finance Director Chief Executive Officer
CONSOLIDATED CASH FLOW STATEMENT
£'000 Unaudited six £'000 Unaudited six
months to 30 months to 30
June 2004 June 2003
£'000 £'000
Net cash outflow from
operating activities (9,023) (5,658)
Returns on investments and
servicing of finance
Interest received 1,148 712
Interest paid (13) (2)
Income from fixed asset
investments 20 -
-------- -------
Net cash inflow from
returns on investments
and servicing of finance 1,155 710
Taxation
Corporation tax (paid) /
received (870) 276
Capital expenditure and
financial investments
Purchase of tangible
fixed assets (253) (126)
Purchase of investments - (1,483)
Sale of investments 5,445 199
-------- -------
Net cash inflow/(outflow)
from capital expenditure
and financial investments 5,192 (1,410)
Acquisitions and disposals
Disposal of associate 39,690 -
Equity dividends paid (618) -
---------- ----------
Cash inflow/(outflow)
before financing 35,526 (6,082)
Financing
Issues of ordinary share
capital 270 5,578
Issue of shares to
minorities 75 -
Expenses of share issue - (225)
-------- -------
Net cash inflow from
financing 345 5,353
---------- ----------
Increase/(decrease) in
cash in the period 35,871 (729)
---------- ----------
---------- ----------
Adjusted operating profit
The statutory operating profit for the overall Group is as shown below. In line
with our previous reports, the Board believes a truer reflection of the
performance of the Group's on-going operating businesses is afforded by the
measure "adjusted operating profit". This is calculated so as to exclude items
from operating profit that are one-off or non-recurring, are not part of the
on-going business profitability or, in the case of the cost of options and
amortisation, represent non-cash items.
6 months to 6 months to
30 June 30 June
2004 2003
£'000 £'000 £'000 £'000
Operating profit / (loss) 13,388 (2,093)
Items not included within adjusted operating
profit / (loss)
Profit on sale of fixed asset investments (452) (1,301)
Profit on sale of current asset investments (4,681) -
Provision against fixed asset investments - 6,163
------- ------- ------- -------
Adjustment for provisions and profits on
investments (5,133) 4,862
Non-recurring costs - 323
------- ------- ------- -------
Non-recurring items - 323
Amortisation 262 301
Share of associated undertaking's profit (184) -
Cost of options 1,725 102
------- ------- ------- -------
Non-cash items 1,803 403
------- ------- ------- -------
Adjusted Group operating profit 10,058 3,495
======= ======= ======= =======
Notes to the Financial Statements
1. The interim accounts, which are unaudited, have been prepared on the basis of
the accounting policies set out in the Annual Report and Accounts for the
year ended 31 December 2003, except with regard to accounting for The
Evolution Group Plc equity shares held by the Share Incentive Trust.
2. A change in accounting policy arose from the adoption in 2004 of the Urgent
Issues Task Force Abstract 38, 'Accounting for ESOP Trusts' ("UITF 38").
UITF 38 requires The Evolution Group Plc equity shares held in the Share
Incentive Trust to be accounted for as a deduction in arriving at
shareholders' funds, rather than as assets. The balance sheets for 30 June
2003 and 31 December 2003 have both been restated accordingly, and own
shares and shareholders' funds have both been reduced by £492,000. The
impact of UITF 38 on the 30 June 2003 and 31 December 2003 profit and loss
account was immaterial , and the comparatives have not been restated.
The profit and loss account for the period ended 30 June 2003 has been restated
to conform with the 31 December 2003 year end presentation.
3. The interim report was approved by the directors on 6 September 2004.
4. The financial information contained in this interim report does not
constitute the Group's statutory accounts within the meaning of Section 240
of the Companies Act 1985 ("the Act"). The figures shown for the full year
ended 31 December 2003 represent an abridged version of the audited
financial statements of The Evolution Group Plc for that year, which
contained an unqualified report under Section 235 of the Act and did not
make any statements under Section 237 of the Act, have been delivered to the
Registrar of Companies in accordance with Section 242 of the Act.
5. The interim report for the six months to 30 June 2004, including the
independent review report by the auditors, will be mailed to the
shareholders of the Group. Copies of this interim report will be available
for a period of one month from today's date at the registered office
address: 9th Floor, 100 Wood Street, London, EC2V 7AN.
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