22nd Mar 2005 07:02
Evolution Group PLC22 March 2005 22 March 2005 The Evolution Group Plc ("Evolution Group", the "Group") Preliminary results for the year ended 31 December 2004 Evolution Group, the listed investment bank and retail fund management group,today announces its preliminary results for the year ended 31 December 2004. Financial highlights •Total Group operating income increased by 61% to £65,533,000 (2003: £40,796,000) •Profit before tax of £47,967,000 (2003: £17,899,000) •Basic earnings per share of 18.5p (2003: 6.7p) •Strong cash generation across the Group with cash balances at £115 million (2003: £54 million) •Payment of final dividend of 0.58p (2003: 0.25p) following the interim dividend of 0.17p paid in November 2004 (2003: Nil) Operational highlights •The Board is pleased to announce that we will be performing a significant on-market share buyback programme during the remainder of 2005. •We raised £633m for our clients in 2004 (2003: £271m), a 134% increase on the previous year as we advised on 60 (2003: 60) transactions. €34% increase in funds under management for Christows to £640 million (2003: £477 million) £€40.5 million of cash raised from part disposal of holding in IP2IPO in May 2004 Commenting on the results and the Group's outlook, Richard Griffiths, EvolutionGroup's Chairman, said: "It is now four years since we created Evolution, and during 2004 the Groupcontinued to develop strongly, despite sometimes testing markets, with bothrevenues and operating profits growing significantly. These results are a creditto the commitment and skill of our team. As we approach the end of the first quarter of 2005 we have successfully placedthe rest of our stock in IP2IPO, raising nearly £52.8m of additional cash, and Iam pleased to announce that all our businesses continue to progress well. Your Board is confident of further success in 2005." -Ends- For further information, please contact: The Evolution Group Plc 020 7071 4300Alex Snow, Chief Executive OfficerGraeme Dell, Finance Director Bell Pottinger 020 7861 3232Charles CookSarah Landgrebe Notes to Editors:The Evolution Group Plc Evolution Group is the holding company of Evolution Securities Limited,Christows Limited and Evolution Securities China Limited. Founded in April 2001and originally listed on the AIM, Evolution joined the Official List in 2003,became a member of the FTSE 250 Index in 2004, and now has a marketcapitalisation of over £420 million. Evolution Securities Limited aims to be the leading investment bank advisingsmall and mid-cap UK public companies. It has over 100 retained corporateclients, to whom it provides equity research, institutional sales and trading,market making and corporate finance advice. Its principal operating subsidiary,Evolution Securities Limited, is authorised and regulated by the FinancialServices Authority. In addition, it operates a US broker/dealer, EvolutionSecurities (US), Inc., which is regulated by the National Association ofSecurities Dealers, through which it brings US institutional investors access toits UK based corporate clients. Christows Limited is a leading private client stockbroker and fund manager, withoffices in London, Bournemouth, Exeter and Bath. Christows is authorised andregulated by the Financial Services Authority. Evolution Securities China Limited is a specialist Chinese investment bankingbusiness with offices in London and Shanghai. It offers UK based institutionalclients research and trading in Chinese listed stocks. CHAIRMAN'S STATEMENT During 2004, the Group has continued to develop strongly and has grownsignificantly its revenues and operating profitability. Additionally, the Grouprealised significant further value from the partial sale of its stake in IP2IPOGroup Plc. Overall, I am pleased to report overall operating income up 61% to£65.5m from £40.8m in the prior year and a profit before tax up 168% to £48.0mfrom £17.9m in 2003. Total Shareholder Return, (defined as the growth in thevalue of a hypothetical £100 holding in over five years including dividendre-investment) rose 54% during 2004, 33% ahead of the FTSE Mid-cap Index(excluding Investment Trusts). The Group's investment banking business, Evolution Securities Limited (formerlyEvolution Beeson Gregory Limited) ("Evolution Securities" or "ESL") hascontributed strongly to the Group's ongoing progress. The financial performanceof this business has been the key driver of the Group's overall operationalprofitability. Progress is also reflected by the rebranding that we undertook inSeptember, recognising that the business had, in the two years sinceacquisition, developed a strong, well recognised and respected brand identitywith its corporate clients and institutional customers. This has been created bythe development of a very strong corporate culture and work ethos. We havecontinued to gain market share in the sectors in which we specialise and werenamed "AIM Broker of the Year 2004" by Growth Company Investor in a period whenthe development of the AIM market was acknowledged by market commentators tohave been one of the outstanding contributors to the success of the Londonequity markets. Christows Limited ("Christows"), the Group's private client stockbroking andfund management business, had a third consecutive profitable year with operatingprofit up 626% from the previous year. It continues to increase its funds undermanagement, reaching £640m as at 31 December 2004 (2003: £477m), an increase of34%. This growth has been driven by the further development of its corediscretionary portfolio management services where it has been successful inwinning new clients and attracting new account executives. The Group's specialist Chinese investment banking business, Evolution SecuritiesChina Limited ("Evolution Securities China"), has also made good progress duringthis its first full year of operation. We believe that there is a realopportunity to become London's leading China specialist broker, introducinginstitutional investors to the rapidly growing sector of listed Chinesebusinesses in the future. Board development In 2004, I have been delighted to welcome two very experienced Non-executivedirectors to the Board. The appointment of Lord Maclaurin of Knebworth, DL assenior independent Non-executive director and Nicholas Irens as Chairman of theAudit Committee have contributed significantly to the Board's effectiveness inmanaging a growing business against the background of significant externalchange in the area of corporate governance. I am confident that the Board is nowstronger than ever before in meeting these challenges and would expect todevelop the Board further in the future to ensure that it continues to achievethese goals. Dividend The Board recommends the payment of a final dividend of 0.58p per share (2003:0.25p). This follows the inaugural interim dividend payment of 0.17p announcedin September and paid in November, giving an overall dividend for the year of0.75p per share. This trebling of the overall dividend for the year is anacknowledgement of our growth in confidence of the Group's operating businessand is exactly in line with our stated progressive dividend policy. Share buyback At the time of our pre-close statement in January we highlighted that the Boardwas actively considering the most effective way to reward shareholders in lightof the balance sheet strength. At the year end, the Group's cash balance hadrisen to £115m (2003: £54m) and we recognise that this, together with theproceeds from our recent disposal of our remaining investment in IP2IPO,represent a significant proportion of the Group's market capitalisation. As aresult of our detailed analysis, in conjunction with our legal and financialadvisors, the Board is pleased to announce that we will be performing asignificant on-market share buyback programme during the remainder of 2005. Webelieve that this is the most efficient way of providing shareholders with theoption of capital return which will result in long term EPS enhancement forremaining shareholders. To facilitate this process we shall of course be seekingshareholder approval through the extension of the existing permission topurchase shares provided at last year's AGM Share purchases by the trust The Group has used the approval granted at the AGM in 2004 to carry outpurchases in the year. We have purchased 2,559,000 shares through the Group'sshare incentive trust in respect of meeting share incentive awards made to staffand we will be continuing this process in 2005 alongside the share buybackprogram. The Group's employees I would like to reiterate that the results of our operating businesses aredetermined largely by the efforts and commitment of our staff, who are one ofthe principal assets of the Group. I would like to thank everyone for theirefforts last year, which contributed to a very successful 2004 for the EvolutionGroup. These individuals' interests are aligned well with shareholders throughthe significant performance related elements of reward and various shareincentive programs that the Group has put in place to motivate and retain itskey employees and I am confident of their ability and desire to repeat thesuccesses of 2004 this year. Outlook As the first quarter of 2005 comes towards a conclusion, I am pleased toannounce that our businesses are all continuing to progress well and your Boardis confident of further success in 2005. As announced on 11 March 2005, the Group disposed of its remaining investment inIP2IPO for gross proceeds, before expenses of £52.8m. This representssignificant value for shareholders and increases the cash available to the Groupfor its future development. Richard GriffithsChairman22 March 2005 CHIEF EXECUTIVE'S REPORT The Group continued during 2004 to build upon the platform established withinits operating businesses and overall this resulted in a significant increase inrevenues and profitability. Market conditions for UK equities continued to bechallenging during much of the year and it is therefore a testament to thestrength of the business models that we have built to produce results showingvery clear progress from the previous period. Our two key operating businesses,Evolution Securities and Christows, both performed extremely well at the revenueand profitability levels and in the achievement of key operating objectives.This, together with further significant asset realisations in the periodresulted in the Group ending 2004 extremely well positioned to achieve furthersuccess in the coming period. Performance Breakdown 2004 2003Operating Income £'000 % £'000 % ESL 54,145 83 32,171 79Christows 10,724 16 8,327 20Other income 664 1 298 1 ----------- ----------- ----------- ---------- 65,533 100 40,796 100 ----------- ----------- ----------- ---------- Corporate finance 34,088 52 17,317 42Sales commissions 14,939 23 9,067 22Trading 11,575 18 10,994 27Management fees 3,907 6 2,851 7Other income 1,024 1 567 2 ----------- ----------- ----------- ---------- 65,533 100 40,796 100 ----------- ----------- ----------- ---------- Evolution Securities The investment banking business continues to represent the major part of theGroup's operating activities. Two years after the business was created by thecombination of Evolution Capital and Beeson Gregory it operates in a verydifferent manner from the businesses of its founding constituents by manymeasures. The majority of its current staff have joined the organisation sincethis time, similarly the majority of our retained corporate clients have beenwon in that time, and institutional customers and market counterparties haveperformed significantly higher transaction volumes leading to increased marketshare. This was recognised in September 2004 by the rebranding of the businessto Evolution Securities Limited and this has paved the way for further successas the year concluded. Overall, Evolution Securities' results for the year arean increase of 68% in operating income to £54.1m (2003: £32.2m). The companyoperates in the space which has now become defined as middle-market equities,representing not simply a measure of market capitalisations but more a functionof the uniqueness of the relationships, knowledge, ethos and commitment requiredto be successful in servicing companies in this area. Corporate broking The corporate broking track record in 2004 has been the key driver of oursuccess, overall income increased by 98% to £33.7m (2003: £17.0m). We raised£633m for our clients in 2004 (2003: £271m), a 134% increase on the previousyear as we advised on 60 (2003: 60) transactions. To provide this servicesuccessfully requires a team able to source, research, structure and pricetransactions in a manner attractive to investors and our results are clear proofof this. At the end of the year we have 105 retained corporate clients to whomwe believe ESL continues to be best placed to provide innovative advisory,investor relations and equity finance solutions. In this vein Growth CompanyInvestor voted Evolution Securities AIM Broker of the year in 2004 recognisingthe company's performance in advising companies on AIM, Europe's most activemarket for new issues in 2004 Equity distribution In this area of business, success is achieved by the depth of the relationshipwith our institutional customer base and the ability to offer them access to,and advice on, research ideas, corporate broking transactions and tradingprices. In 2004, the equity sales team has made a significant step up in revenueterms from its historic levels with secondary commissions up 110% to £8.6m.Driving this has been agency business market share gains in the small-cap,mid-cap and AIM sectors. Coupled with the distribution responsibility for therecord level of fundraisings from our corporate broking activities this is atremendous performance. New members of the team within all functions of theequity distribution process have contributed to this success and theestablishment of a genuine Evolution Securities equity sales franchise. Equity research ESL has continued to broaden and deepen coverage in 2004, with 216 companiesunder coverage at the year end (2003: 190). These cover sectors includinghealth, pharmaceutical and biotech, household and general retail, consumer,leisure and hotels, media and entertainment, support services, electronics,software, mining, oil and gas, construction/building and industrials, whichbroadly represent the middle market waterfront. The research remains as one ofthe cornerstone outputs in serving a corporate client through its lifecycle frompathfinder research pre-IPO into the regular coverage and updates once listed.ESL's research continues to be well received by institutional investors and webelieve this has significantly contributed to our secondary market share gains. Market-making and Trading Market making and trading continued the process that we had commenced in theprevious year of growing their footprint profitably. During 2004, we increasedthe number of stocks in which we make prices to 778, an increase of over 30% onthe prior year. In addition, we doubled the number of Retail Service Provider("RSP") hub connections and this gave us direct connection overall via our 4 RSPhubs at the year end to 62 retail stockbrokers. This resulted in a growth involumes of 118% from the previous year. In November 2004, we saw a conclusion ofthe Financial Services Authority's investigation into Room Service short sellingthat occurred a year earlier and this resulted in a fine of £500,000. Followingthis we have made significant organisational changes in this area, which webelieve will provide us with a more robust framework with a strengthenedcompliance culture that will facilitate further profitable development of thebusiness. US Broker/Dealer In December 2004 we completed the acquisition and regulatory approval process ofEvolution Securities US Inc. This US broker dealer is registered by the NationalAssociation of Securities Dealers ("NASD"). In order to facilitate this, anumber of our existing UK based staff have completed the training andexaminations necessary to become registered with the NASD and we have rented anoffice in New York. This will enable us to represent our corporate clients to USinstitutional customers, providing US roadshows where appropriate for them, andperform the effective distribution of secondary UK equities to these USinstitutional investors, which we believe to be a significant marketopportunity. In summary, 2004 has seen Evolution Securities' businesses develop further andwe are confident of continuing income and profitability growth in 2005. Christows In 2004, we established a plan for Christows of continuing its growth in scaleand attaining a greater profitability. I am pleased to report that both of theseachievements were met. Total operating income increased by 29% to £10.7m which,coupled with continued tight management of costs, produced a third consecutiveprofitable year with a growth in operating profitability of 626% over 2003. Our strategy of growing funds under management, particularly those strategicfunds upon which recurring management fees are received, also proved successful.Strategic funds under management increased by 39% over the prior year to £552m(2003: £398m) making up 86% (2003: 83%) of total funds under management at theyear end. This growth in funds under management was underpinned by record sales,for the third consecutive year, by our professional intermediary sales team,leading to Christows winning new mandates across all its product range butparticularly in the Private Portfolio Account where Christows saw new fundsintroduced by this team of £70m (2003: £56m) and these have been won atincreased average portfolio sizes. Overall funds under management stood at £640m(2003: £477m) at year end, an increase of 34% over last year. As a result of this growth in funds under management the recurring managementfees received increased to £3.9m from £2.9m in 2003, and transaction basedincome increased by 24% over the same period to £6.1m with good performanceacross all offices and product areas. During the year we have continued tosuccessfully integrate the new account executives and develop the Bath office inorder to maximise the contribution in these areas that we highlighted last year. The private client fund management market environment in which Christowsoperates has seen considerable consolidation during the last 18 months. Ibelieve that Christows will continue to be able to grow successfully as itdemonstrates a commitment to continued high standards of truly bespoke clientservice across its core discretionary portfolio management products. In summary, in 2004 Christows has achieved its objectives and we look forward tocontinued progress in the coming year. Evolution Securities China Evolution Securities China completed its first year of activity in August 2004and in that time it had principally focused on developing its research and salesfunctions in line with its stated strategy of providing a specialist Chinesesecurities analysis, sales support and trade execution offering. We believe that the opportunity to be London's leading specialist China brokeris an achievable goal. We have continued to develop this new business, which inthis its first full year of operation had a net loss before tax of £0.7m, sincewe foresee the potential for profitable operation in the near term and for longterm value creation. Investments In 2004 IP2IPO completed the transition to complete independence from the Group,which commenced at its IPO in 2003. In May 2004, the Group sold 9,000,000 sharesin IP2IPO reducing our percentage ownership in the process from 40.6% to 18.5%.At this point, reflecting the change in status from an associated company to afixed asset investment, I stepped down from the board of IP2IPO. This salerealised gross proceeds of £40.5m in cash and generated a net profit of £22.3m.The remaining holding in IP2IPO was subsequently disposed of in March 2005 forgross proceeds of £52.8m, before expenses. As previously reported, the Group has continued to exit from its legacyinvestment portfolio. The Group has not made any provision against the remainingportfolio of investments (2003: £6.1m). The Group continues to seek to extractvalue from this portfolio with profits on sale of investments and release ofprovisions totalling £6.6m in 2004 (2003: £2.5m) Compliance, culture and employees We seek to ensure that our clients' interests are always put first, since webelieve this will deliver our long term success. Throughout the Group we operatein regulated markets and our principal regulator is the Financial ServicesAuthority. With these in mind we endeavour to ensure that our businesses areconducted in a manner that achieves the highest standards of compliance and weadopt a zero tolerance policy for non-compliance. During 2004 we investedresource in the further enhancement of our compliance, risk management andoperations areas. This investment took the form of increasing the number andquality of the headcount in these areas and developing our systems andprocedures. We take these matters very seriously since we believe them to beparamount in ensuring the long-term growth in profitability. Our culture is one where we encourage high individual effort to achieve ourstated corporate performance targets. Our employees, in all subsidiaries, arerewarded on a performance basis with a high element of performance relatedreward in place and this aligns their interests with shareholders. In addition,part of the reward structure is based upon equity participation, which furtherreinforces shareholder alignment, and we ensure this incorporates a framework ofvesting conditions based upon the achievement of challenging individual andcorporate performance targets. The use of such arrangements resulted in a profitand loss impact across the Group during 2004 of £4.3m (2003: £3.0m), principallyin the form of a charge for the cost of options. Alex SnowChief Executive Officer22 March 2005 FINANCIAL REVIEW Adjusted operating profit The statutory operating profit for the overall Group is as shown below. TheBoard believes a truer reflection of the performance of the Group's on-goingoperating businesses is afforded by the measure "adjusted operating profit".This is calculated so as to exclude items from operating profit that are one-offor non-recurring, are not part of the on-going business profitability or, in thecase of the cost of options and amortisation of goodwill, represent non-cashitems. The following table reconciles these two measures and demonstrates thesignificant progress made on a Group basis in moving from an adjusted operatingprofit of £10.6m in 2003 to an adjusted operating profit of £20.1m in 2004. 31 December 31 December 2004 2003 £'000 £'000 £'000 £'000 ------- --------- ------ --------- Operating profit 22,041 1,553 Items not includedwithin "adjustedoperating profit"Profit on sale of (1,225) (2,379)fixed assetinvestmentsProfit on sale of (4,824) (99)current assetinvestments(Release) / charge (525) 6,114of provision ------- ------against fixed assetinvestmentsAdjustment for (6,574) 3,636provisions andprofits oninvestments Non-recurring - 1,113costsIP2IPO subsidiary - 599operating loss ------- ------Non-recurring - 1,712items Amortisation of 505 567goodwillShare of associatedundertaking'soperating (profit)/ loss (184) 186 Cost of options 4,268 2,963 ------- ------Non-cash items 4,589 3,716 --------- ---------Adjusted operating 20,056 10,617profit --------- --------- Looking at the two principal operating businesses individually, it is clear tosee the progress made in both Evolution Securities and Christows in 2004 fromthe previous period. Investment banking Within the investment banking business of Evolution Securities, there has beensignificant growth in the scale and profitability of this business resulting ina near doubling of adjusted operating profit from £10.6m in 2003 to £19.9m in2004. 2004 2003 £'000 £'000 --- ---------- ---------Operating income 54,145 32,171Commissions payable (660) (433) ---------- ---------Gross profit 53,485 31,738Administrative expenses (35,288) (22,412)Profit on sale of fixed asset investments 21 -Profit on sale of current asset investments 171 99 ---------- ---------Operating profit 18,389 9,425 Profit on sale of fixed asset investments (21) -Profit on sale of current asset investments (171) (99)Non-recurring and exceptional costs - 713Cost of options 1,707 571 ---------- ---------Adjusted operating profit 19,904 10,610 ========== ========= Non-recurring and exceptional costs in the prior year relate to costs ofredundancy and relocation expenses for new offices. Investment banking revenue analysis The growth in investment banking revenue has been achieved by particular growthfrom the activities of corporate finance fundraising and advice. In addition,sales commissions have performed strongly. Equity trading income was up year onyear but represented a smaller proportion of the overall income. There remains agood balance overall between primary and secondary income. 2004 2003 --------- ---------Corporate finance 62% 53%Sales commissions 16% 13%Trading 21% 34%Other 1% - Investment banking cost analysis The overall cost/income ratio for the investment banking business (excludingcost of options and non-recurring costs) is 62% (2003: 66%). Staff costscontinue to make up the majority of the total cost base, accounting for 59%(2003: 62%) of costs with over 70% (2003: 49%) of this being in the form ofperformance related bonuses. The other administrative expenses have increasedprincipally as a result of the increase in premises costs and provisions. 2004 2003 --- --------- --------- Staff costs - Non performance related 17% 24%Staff costs - Performance related 42% 38%Other costs 36% 33%Cost of options and non-recurring costs 5% 5% Private client stockbroking and fund management Turning to Christows, the Group's private client stockbroking and fund manager,2004 has seen an acceleration of the progress of the last two years with anincrease of 137% in adjusted operating profit from £0.4m in 2003 to £0.9m in2004. 2004 2003 £'000 £'000 ---------- ---------Operating income 10,724 8,327Commissions payable (2,566) (2,201) ---------- ---------Gross profit 8,158 6,126Administrative expenses (7,301) (6,008) ---------- ---------Operating profit 857 118 Non-recurring and exceptional costs - 174Cost of options 5 71 ---------- ---------Adjusted operating profit 862 363 ========== ========= Non-recurring and exceptional costs in the prior year relate to costs ofredundancy and search expenses related to the acquisition of new accountexecutive teams. Private client stockbroking and fund management revenue analysis Christows' mix of income has remained constant across the two periodsdemonstrating the consistency of the business model, as the overall level offunds under management increases, and showing equal growth in its recurringmanagement fees and sales commission income lines. 2004 2003 ------ ------Corporate finance 2% 2%Sales commissions 57% 59%Management fees 36% 34%Other income 5% 5% Private client stockbroking and fund management cost analysis The overall cost/income ratio (excluding cost of options and non-recurringcosts) for Christows has remained stable at 68% (2003: 69%) Further examination of the cost structure within Christows shows itcontinues to be tightly managed and highly predictable. 2004 2003 --------- ---------Staff costs - Non performance related 38% 37%Staff costs - Performance related 14% 9%Other Costs 48% 50%Cost of options and non-recurring costs 0% 4% Other activities The Group's other activities are made up of central group support costs notrecovered from the operating businesses, the profits on, and provisions against,legacy fixed asset investments, and the results of the IP2IPO business whilst itwas an associated undertaking of the Group. In addition, the results ofEvolution Securities China Limited are included in this category as they are notmaterial to disclose separately. 2004 2003 £'000 £'000 ------ -------Operating income 664 298Commissions payable (77) (22) ------ -------Gross profit 587 276Administrative expenses (4,358) (4,345)Profit on fixed asset investments 1,204 2,379Release / (charge) of provision on fixed asset 525 (6,114)investmentsProfit on current asset investments 4,653 -Share of associated undertaking operating profit / 184 (186)(loss) ------ -------Operating profit / (loss) 2,795 (7,990) Profit on sale of fixed asset investments (1,204) (2,379)(Release) / charge of provision against fixed asset (525) 6,114investmentsProfit on current asset investments (4,653) -IP2IPO subsidiary operating loss - 599Non-recurring costs - 226Amortisation of goodwill 505 567Share of associated undertaking operating (profit) / (184) 186lossCost of options 2,556 2,321 ------ -------Adjusted operating loss (710) (356) ====== ======= Non-recurring costs in the prior year represent costs for loss of office and thecosts in relation to taking the Group to the Official List. IP2IPO As at 31 December 2004, the Group retained 18.2% of IP2IPO Group Plc followingthe part disposal of the Group's interest in May 2004. The Group has recognisedits share of operating profit, interest and tax in the profit and loss accountto May 2004 in accordance with FRS 9. From this date and as at the year end thisinvestment was then treated as an investment within the Group and Companyaccounts and stated at historical cost less provision for impairment value. The overall impact of the partial disposal in 2004 is a total gross profit of£26.4 million from which transaction costs and incentive awards are deductedresulting in a net profit of £22.3m. Under FRS 3, Reporting FinancialPerformance, this profit falls within the definition of "exceptional items" andis thus disclosed separately after operating profit. On 11 March 2005, the Group disposed of its remaining holding in IP2IPO of7,502,170 shares for total gross proceeds, before expenses of £52.8m. Due tothis disposal, this investment has been reclassified as current assetinvestments as at 31 December 2004. Investment portfolio As previously reported the Group has continued to exit from its legacyinvestment portfolio. The Group has not made any provision against the remaininglegacy portfolio of investments (2003: £6.1m). The Group continues to seek toextract value from this portfolio with profits on sale of investments andrelease of provisions totalling £6.6m in 2004 (2003: £2.5m). At the year end,the remaining fixed asset investment portfolio has a carrying value of £0.6m(2003: £0.9 million) and current asset investments held at a carrying value of£12.1m (2003: £0.4m), including £11.8m for IP2IPO. Balance sheet strength The Group remains focused on maintaining a strong balance sheet. At the year endit had net assets of £136.5m (2003: £91.4m) including cash of £115.2m (2003:£53.7m). Cashflow The Group generated positive cash inflow of £61.5m in the year (2003: £21.7m).This has been achieved principally by operating profitability and the partialdisposal of IP2IPO in May 2004. Dividend The Board is proposing a final dividend per share for 2004 of 0.58p (2003 of0.25p). This dividend is payable on 2 June 2005 to shareholders on the registeron 6 May 2004. This follows the Interim dividend paid in November 2004 of 0.17pper share. (2003: Nil) Graeme DellFinance Director22 March 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2004 2003 (Restated) £'000 £'000 Operating income 65,533 40,796Commissions payable (3,303) (2,656) ------- -------Gross profit 62,230 38,140 Administrative expenses (46,947) (32,765) Profit on sale of fixed asset investments 1,225 2,379Profit on sale of current asset investments 4,824 99Release / (charge) of provision against fixed 525 (6,114)asset investments ------- ------Group operating profit 21,857 1,739Share of associated undertaking's operating 184 (186)profit / (loss) ------- -------Total operating profit 22,041 1,553 Profit on part sale of subsidiary 66 15,085Profit on part sale of associate 22,286 -Interest receivable and similar income 3,329 1,156Share of associated undertaking's interest 252 126receivableInterest payable and similar charges (7) (21) ------- ------- Profit on ordinary activities before taxation 47,967 17,899 Tax on profit on ordinary activities (2,564) (1,851) ------- -------Profit on ordinary activities after taxation 45,403 16,048Minority interest - equity 175 146 ------- -------Profit for the financial year 45,578 16,194 Dividends (1,849) (616) ------- -------Retained profit for the financial year 43,729 15,578 ------- ------- ------- ------- Basic earnings per ordinary share 18.5p 6.7pDiluted earnings per share 17.0p 6.3p All recognised gains and losses are included in the profit and loss account. There is no difference between the result disclosed in the profit and lossaccount and the result on a historical cost basis. CONSOLIDATED BALANCE SHEETAs at 31 December 2004 2003 (Restated) £'000 £'000Fixed assetsIntangible assets 8,565 8,990Investment in associated undertakings - 25,525Tangible assets 1,512 1,509Investments 583 851 --------- ---------- 10,660 36,875Current assetsDebtors 39,614 28,171Long trading positions 9,679 7,207Investments 12,139 444Cash at bank and in hand 115,170 53,705 --------- ---------- 176,602 89,527 Creditors: Amounts falling due within one (50,679) (34,734)year --------- ----------Net current assets 125,923 54,793 --------- ----------Total assets less current liabilities 136,583 91,668 Provisions for liabilities and charges (114) (227) --------- ----------Net assets 136,469 91,441 --------- ---------- --------- ---------- Capital and reservesCalled up share capital 2,495 2,478Share premium account 26,223 25,739Merger reserve 51,230 57,261Profit and loss account 56,586 5,996 --------- ----------Total shareholders' funds 136,534 91,474 --------- ---------- Shareholders' funds - Equity 136,534 91,474 Minority interests - Equity (65) (33) --------- ----------Minority interests & shareholders' funds 136,469 91,441 --------- ---------- --------- ---------- CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2004 2003 £'000 £'000 £'000 £'000 Net cash inflow from operating 20,134 11,832activities Returns on investments andservicing of financeInterest received 3,283 1,159Interest paid (7) (13)Income from fixed asset 85 8investments -------- -------- Net cash inflow from returns on 3,361 1,154investments and servicing offinance TaxationCorporation tax paid (4,136) (979) Capital expenditure andfinancial investmentsPurchase of investments (321) (2,649)Sale of investments 7,260 2,611Purchase of tangible fixed (796) (1,353)assets -------- -------- Net cash outflow from capital 6,143 (1,391)expenditure and financialinvestments Equity dividends paid toshareholders Dividends paid (1,037) - Acquisitions and disposalsPart disposal of subsidiary - 15,015Disposal of associated 40,500 -undertakingCosts of disposal (826) (1,616)Purchase of subsidiaries (59) -Net cash (disposed) with - (8,738)subsidiaries -------- -------- Net cash inflow fromacquisitions and disposals 39,615 4,661 -------- -------- Cash inflow before financing 64,183 15,277 Financing Issue of ordinary share 501 1,413capitalIssue of shares to minorities 219 5,252Purchase of own shares (3,335) -Expenses of share issue - (225) -------- -------- Net cash (outflow) / inflow from (2,615) 6,440financing -------- --------Increase in cash in the year 61,465 21,717 -------- --------Other information The financial information in this statement has been prepared on the historicalcost basis, modified by the revaluation of certain assets held for tradingpurposes. A change in accounting policy arose from the adoption in 2004 of theUrgent Issues Task Force Abstract 38, 'Accounting for ESOP Trusts' ("UITF 38").UITF 38 requires The Evolution Group Plc's equity shares held in the ShareIncentive Trust to be accounted for as a deduction in arriving at shareholders'funds, rather than as assets. The balance sheet for 31 December 2003 has beenrestated accordingly, and own shares and shareholders' funds have both beenreduced by £492,000. The impact of UITF 38 on the 31 December 2003 profit andloss account was immaterial, and the comparatives have not been restated. Provisions for bad and doubtful debts are charged to other administrativeexpenses. Amounts of £45,000 previously charged against operating income havebeen reclassified to conform with current year presentation. The financial information in this statement does not constitute the Group'sstatutory accounts for the year ended 31 December 2004 within the meaning ofSection 240 of the Companies Act 1985. The statutory accounts for 2004 will befinalised on the basis of the financial information presented by the Directorsin this preliminary announcement and will be delivered to the Registrar ofCompanies following the Company's Annual General Meeting. The Group will be circulating the full annual report and accounts toshareholders and copies will be available from the Registered Office of theCompany, 9th Floor, 100 Wood Street, London EC2V 7AN from the date of despatchto shareholders for one month. Annual General Meeting The arrangements for, and notification of business to be transacted at, theCompany's Annual General Meeting will be provided in the annual report andaccounts to be circulated to shareholders in due course. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
EVG.L