RNS Number:8438T
Optimisa PLC
28 March 2007
Optimisa plc
Preliminary announcement
For the year ended 31 December 2006
Chairman's statement
Highlights
* Revenues rose from #2,263,000 in 2005 to #5,894,000 for the full year
2006.
* Operating profits of #763,000 were achieved for the year, a 119%
increase on the results for 2005.
* Shareholders' funds rose from #2,851,000 to #4,458,000 and included
net cash of #1,596,000 (at end December 2006).
* Two acquisitions were completed in the year:
On 3 March 2006, USA based nxtMOVE was acquired for $1,567,000
(#895,000 - based on the exchange rate at date of acquisition of
$1.75=#1.00) plus acquisition costs paid in cash.
On 2 October 2006, Andrew Irving Associates was acquired for a
mixture of cash and shares.
* A placing of 105,000 shares in May 2006 raised #937,000 net of
expenses.
* Fully diluted earnings per share of 80.7p were reported for the year
to end December 2006 an increase of 31%.
* A final dividend of 15p is recommended making a total of 22.5p for the
year.
I am very pleased to report that the year under review has exceeded even our
high expectations. The excellent results reflect strong underlying growth from
KAE throughout the year and a significant contribution from nxtMOVE and Andrew
Irving Associates (AIA) in the second half. We have an exceptionally strong
balance sheet with significant net cash at end December 2006.
In a recent survey of 803 AIM listed companies, which have been the subject of a
reverse takeover or have IPOed only 49% are now trading at or above their
initial share price. In the light of this survey, I would like to review our
performance since the reverse takeover of KAE in May 2005. At that time our
share price on completion was 405p. On the basis of our results for 2006 and
the recommended final dividend, shareholders who have retained their shares
would now receive a dividend payout of over 5% on the initial 405p, have net
asset backing of over #5 per share including 180p of cash and the fully diluted
EPS has increased from 61.8p to 80.7p. Our performance was reflected in a rise
in the share price of 172% to #11 from May 2005 to end December 2006. We raised
over #1,000,000 in new equity in 2006 and I am convinced our AIM listing will be
a major contributor to the future success of our buy and build strategy as AIM
investors become more discriminating.
The current year has started very well and the operating pipelines for all three
business units are well ahead of the previous year at this stage. We have
increased our professional staff numbers substantially to maintain our ability
to grow our core KAE business organically. We are budgeting excellent returns
on our investment in nxtMOVE and AIA in their first full year in the Company and
expect to make further add-on acquisitions in 2007. Optimisa has net cash
resources of #1.6m and generates strong surplus cash flow, which enables us to
pursue a substantial acquisition, which could transform the size and scale of
the group in 2007.
Optimisa is a 'people business' and the key determinate of our success is our
ability to retain and attract high quality staff. It is thanks to our highly
motivated employees hard work and ability that we have produced another
excellent set of results and look forward to an exciting and challenging year
with confidence.
R F Littleboy
Chairman
Chief executive's review
I am pleased to report that 2006 was a year of solid growth and strong
performance in all areas of our business. The core business of KAE exceeded
expectations and we are very pleased with the progress made with the two
acquisitions completed during the year - nxtMOVE helping to develop our
operations in North America and Andrew Irving Associates adding strength to our
business in the UK.
The results for the year to end December 2006 include a 10-month contribution
from nxtMOVE and a 3-month contribution from Andrew Irving Associates. The
integration of nxtMOVE has largely been completed and several significant new
client wins in both the UK and the US came as a direct consequence of our
presence in both markets. Integration of Andrew Irving Associates is also going
well and they are now handling a considerable amount of business previously
outsourced to other companies.
KAE continued its strong organic expansion, once again beating high growth
targets and expanding both the depth of its relationship with existing clients
and the overall client breadth. All large clients were retained through the
year and several key target clients were added as part of the business
development programme.
The deferred consideration for the acquisition of KAE was dependent on KAE
achieving certain targets. All targets were achieved for 2005 and 2006 and the
final 60,000 deferred shares were issued in June 2006 as per the prospectus
released in 2005.
On 6 March 2006, we announced the acquisition of nxtMOVE from Huntsworth plc for
$1,567,000 (#895,000) paid in cash. Huntsworth had acquired nxtMOVE with its
purchase of Incepta plc in May 2005 but decided it was non-core and subsequently
sold it to Optimisa. We knew the company well and had worked with them in the
past.
On 2 October 2006, we announced the acquisition of Andrew Irving Associates
(AIA). AIA is a long established UK based qualitative research agency with an
impressive track record in the private and public sector. We, and the team led
by Andrew Irving, are confident that this business will achieve exceptional
growth in the next few years and will also considerably strengthen both the
capabilities and product offering of KAE.
As part of the integration and development process for our business units we
have implemented consistent group wide performance management and resource
planning tools and instigated a process of staff rotation. These have already
had very positive results - providing internal developmental opportunities for
members of the core team as well as improving management efficiency and
knowledge sharing.
At the beginning of 2006 KAE had 27 employees. By virtue of both the
acquisitions and strategic recruitment the Group expanded to 56 employees at the
start of 2007. As part of the overall business development plan we expect to
increase this further to 66 by the end of the current year excluding further
acquisitions. Recruitment is currently focused on high calibre senior level
individuals who can reinforce and further expand our consulting offer in both
the UK and the US.
Market conditions for our type of consulting offer have been very good over the
last year and we have taken full advantage of the opportunities this has
presented. Moving forward we are focused on expanding both the breadth and the
depth of our offer to further build on the client relationships we already have
and to leverage these in adjacent sectors.
We have set very demanding targets for each of our business units in the current
year, but are confident that the results will confirm our status as a genuine
growth company. Our strategy is to produce well above average organic growth
from each of our business units and to accelerate this growth with earnings
enhancing acquisitions.
The overall Optimisa business focus remains on delivering high value,
commercially based market and marketing advice to help our clients grow their
businesses profitably.
KAE continues to concentrate on growing its business in the strategic marketing
consulting arena, providing consulting services around new product development,
market opportunity identification and assessment and commercial marketing advice
to blue chip clients in Europe and the US. Business is extremely good in the
core telecommunications and financial services sectors and we have had
considerable success in expanding our business in hospitality and transport over
the last year.
nxtMOVE is building on its success in providing strategic decision support
services to US corporates both domestically and internationally and will
continue its focus on clients in the aerospace, financial services and private
equity markets providing high value market and corporate analysis.
Andrew Irving Associates is expected to grow significantly in the coming year.
Organic expansion of its qualitative market research services for existing and
targeted new clients is already being augmented by cross selling by both KAE and
nxtMOVE and this is expected to further develop as our experience of multi team
/ office delivery grows.
S J Dannatt
Chief Executive
Group profit and loss account
Note Continuing Acquisitions 2006 2005
operations
#'000 #'000 #'000 #'000
Turnover 1 4,188 1,706 5,894 2,263
Cost of sales (1,048) (227) (1,275) (542)
Gross profit 3,140 1,479 4,619 1,721
Administrative expenses (2,474) (1,400) (3,874) (1,409)
Other operating income 2 2 16 18 37
Operating profit 3 668 95 763 349
Net interest receivable 4 1 5 17
Amounts written off
investments - - - (109)
Profit on ordinary activities
before taxation 672 96 768 257
Tax on profit on ordinary
activities
(105) 114
Profit on ordinary activities
after taxation 663 371
Earnings per share (pence) 4
- Basic 82.9 65.8
- Diluted 80.7 61.8
Group and company balance sheets
Group Company
Note 2006 2005 2006 2005
#'000 #'000 #'000 #'000
Fixed assets
Intangible assets 2,062 1,304 - -
Tangible assets 144 47 11 4
Investments - 411 3,219 2,428
2,206 1,762 3,230 2,432
Current assets
Debtors 1,733 766 1,264 423
Cash at bank 1,596 757 356 358
3,329 1,523 1,620 781
Creditors: amounts falling (976) (434) (50)
due within one year
(74)
Net current assets 2,353 1,089 1,570 707
Creditors: amounts falling (101) - (101) -
due after more than one year
Net assets 4,458 2,851 4,699 3,139
Capital and reserves
Called-up equity share 7 1,323 1,036 1,323 1,036
capital
Share premium account 8 1,334 502 1,334 502
Merger reserve 8 914 612 914 612
Shares to be issued - 243 - 243
Profit and loss account 8 887 458 1,128 746
Shareholders' funds 9 4,458 2,851 4,699 3,139
Group cash flow statement
Note 2006 2005
#'000 #'000 #'000 #'000
Net cash inflow / (outflow) from operating 975 (192)
activities
Return on investments and servicing of
finance
Interest received 26 17
Interest paid (21) -
Net cash inflow from returns on investments 5 17
and servicing of finance
Taxation (66) (76)
Capital expenditure and financial investment
Payments to acquire tangible assets (56) (34)
Proceeds on sale of tangible fixed assets - 177
Acquisition of investments - (82)
Proceeds on sale of investments 103 -
Net cash inflow from capital expenditure and 47 61
financial investment
Acquisitions
Purchase of subsidiary undertakings 6 (1,003) (802)
Net cash acquired with subsidiary 13 1,060
Net cash (outflow) / inflow from (990) 258
acquisitions
Equity dividend paid (135) (35)
Net cash inflow from financial investment
Management of liquid resources
Disposal of investments - 80
Net cash inflow from management of liquid - 80
resources
Cash (outflow) / inflow before financing (164) 113
Financing
Cash inflow from issuing shares 1,011 345
Share issue costs (8) -
Net cash inflow from financing 1,003 345
Increase in cash in the period 839 458
Group statement of total recognised gains and losses
2006 2005
#'000 #'000
Profit for the year 663 371
Currency translation differences (99) -
Total recognised gains for the year 564 371
Principal accounting policies
Basis of preparation
The preliminary announcement has been prepared under the historical cost
convention, in accordance with applicable accounting standards in the United
Kingdom.
The principal accounting policies of the Group are set out below and remain
unchanged from the prior year.
Basis of consolidation
The Group preliminary announcement consolidates those of the Company and its
subsidiary undertakings to 31 December 2006.
As permitted by Section 230 of the Companies Act 1985, the Company has not
presented its own profit and loss account. The profit for the financial year
relating to the parent Company amounted to #517,000.
The results of the subsidiaries acquired during the period are included in the
consolidated preliminary announcement from the date of acquisition. On
acquisition of a business, all of the assets and liabilities of that business at
the date of acquisition are recorded at fair value. All changes to those assets
and liabilities, and the resulting gains and losses that arise after the date of
acquisition, are charged to the post acquisition profit and loss account or
statement of total recognised gains and losses as appropriate.
Acquisitions of subsidiaries are dealt with by the acquisition method of
accounting.
True and fair override
The Group has concluded that goodwill arising on acquisitions of kae: marketing
intelligence limited, nxtMOVE Corporation and Andrew Irving Associates Limited
should not be amortised given that these companies have demonstrated historical
ability to sustain profitability, their respective market positions and the
Group's commitment to invest in the long term development of the brands.
The Group has not amortised this goodwill, a departure from the Companies Act
1985 Paragraph 21 of Schedule 4, for the over-riding purpose of giving a true
and fair view of the Group's results for the reasons outlined above. If the
goodwill arising on the acquisition of kae: marketing intelligence limited,
nxtMOVE Corporation and Andrew Irving Associates Limited had been amortised over
a period of 20 years, goodwill would have decreased by #135,000, with a decrease
in operating profits and opening retained earnings of #92,000 and #43,000
respectively.
Turnover
Turnover comprises the gross amounts billed to clients in respect of the
provision during the year of marketing services to include fees and
disbursements for market research and other services performed, subject to
specific contract. Revenue is recognised when the service is performed, in
accordance with the terms of the contractual agreement and the stage of
completion of the work. Turnover is stated after deduction of trade discounts
and excluding Value Added Tax or similar sales taxes outside the United Kingdom.
Goodwill and intangible assets
Goodwill on acquisitions, representing the purchase consideration and the costs
of acquisition less the fair value of net assets acquired, is capitalised.
The directors assess each acquisition to determine the appropriate treatment of
any related goodwill and select from one of two accounting policies:
Where the directors are of the opinion that the goodwill has an indefinite
economic life given the acquired business' historical ability to sustain long
term profitability, their position within their market sector and the Group's
commitment to continue to invest in the long-term development of that business
then the goodwill is not amortised but is subject to an annual impairment test.
Where the goodwill does not have an indefinite economic life it is amortised on
a straight- line basis over its useful economic life, up to a maximum of 20
years.
Tangible fixed assets and depreciation
Tangible assets are stated at cost less depreciation. Depreciation is
calculated to write down the cost less estimated residual value of all tangible
fixed assets by equal annual instalments over their expected useful lives, as
follows:
Leasehold property - over 5 years
Computer equipment - over 3 years
Fixtures & fittings - over 5 years
The expected useful lives of computer equipment and fixtures and fittings were
reassessed during the year and extended from 2 to 3 years and 3 to 5 years
respectively. The impact on the profit for the year of this change was
immaterial.
Investments
Investments are included at cost less amounts written off. Profits or losses
arising from the disposal of investments are treated as part of the result from
ordinary activities.
Deferred taxation
Deferred tax is recognised on all timing differences where the transactions or
events that give the Company an obligation to pay more tax in the future, or a
right to pay less tax in the future, have occurred by the balance sheet date.
Deferred tax assets are recognised when it is more likely than not that they
will be recovered. Deferred tax is measured using rates of tax that have been
enacted or substantially enacted by the balance sheet date.
Leasing
Rentals payable under operating leases are charged against income on a
straight-line basis over the lease term.
Pensions
The Group operates a money purchase (defined contribution) pension scheme.
Contributions payable to this scheme are charged to the profit and loss account
in the year to which they relate. Those contributions are invested separately
from the Group's assets.
Deferred consideration
The terms of an acquisition may provide that the value of the purchase
consideration, which may be payable in cash or shares at a future date, depends
on uncertain future events such as the future performance of the acquired
company. The amount recognised in the preliminary announcement represents the
maximum amount expected to be paid.
Where the agreement gives rise to an obligation that is settled by the delivery
of a variable number of shares to meet a monetary defined liability, these
amounts are disclosed as debt.
Liquid resources
Liquid resources relate to current asset investments held as readily disposable
stores of value which are traded in an active market where disposal will not
disrupt the business.
Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated
into sterling at the rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. All differences are taken to the profit and loss account.
The exchange differences arising on the retranslation of the opening net
investment in subsidiaries are taken directly to reserves. Where exchange
differences result from the translation of foreign currency borrowing raised to
acquire foreign assets they are taken to reserves and offset against the
differences arising from the translation of those assets.
Share options
Executive and employee share option arrangements for the fair value are assessed
at the date of granting the option and a charge is made to the profit and loss
account only to the extent that it is material.
Dividends
Dividends are recognised as a deduction from equity in the period in which they
are paid. Final dividends are recognised in the period in which they are
approved by the Company in general meeting.
Notes to the preliminary announcement
1 Segmental analysis
Turnover is attributable to one continuing activity and is stated net of Value
Added Tax.
2006 2005
#'000 #'000
Analysed by source of business
Group turnover
- United Kingdom 4,412 2,263
- Rest of World 1,482 -
5,894 2,263
Group operating profit
- United Kingdom 709 349
- Rest of World 54 -
763 349
Net assets
- United Kingdom 4,091 2,851
- Rest of World 367 -
4,458 2,851
2 Other operating income
2006 2005
#'000 #'000
Profit on disposal of - 12
investments
Profit on disposal of leasehold - 21
property
Rental income 18 4
18 37
3 Operating profit
Operating profit is stated after charging:
2006 2005
#'000 #'000
Auditors' remuneration
Audit services 20 15
Non audit services - taxation services 4 3
Depreciation:
Tangible fixed assets owned 42 29
Operating lease rentals 250 142
During the year the auditors also received remuneration of #17,000, for
consulting work relating to the acquisition of nxtMOVE, which has been
capitalised in the cost of investment for this business.
4 Earnings per share
2006 2005
Profit Weighted Pence per Profit Weighted Pence per
for the average share for the average share
financial number of financial number of
year shares year shares
#'000 #'000
Basic earnings per share
Earning attributable to:
Ordinary shareholders 663 799,576 82.9 371 562,406 65.8
Dilutive effect of
securities
Warrants - 22,376 (2.2) - 22,168 (2.5)
Share to be issued - - - - 13,673 (1.5)
Diluted earnings per 663 821,952 80.7 371 598,247 61.8
share
5 Dividends
2006 2005
#'000 #'000
Final 2005 dividend paid 2006 (2005: nil) 70 -
Interim dividend of 7.5p per share (2005: 5.0p per share) 65 35
135 35
6 Acquisitions
The following acquisitions were made during the period:
a) NxtMOVE Corporation
During the year, the group set up a wholly owned subsidiary, NM Acquisition
Corporation in the United States, with the intention of acquiring the business
and net assets of nxtMOVE LLC, a wholly owned subsidiary of Huntsworth Group
Inc.
On 3 March 2006, NM Acquisition Corporation acquired the trade and net assets of
nxtMOVE LLC for a consideration of $1,567,000 (#895,000). Further costs of
$147,000 (#84,000) relating to the acquisition were incurred during the year.
Following the acquisition of these net assets, NM Acquisition Corp changed its
name to nxtMOVE Corporation.
The funding for this acquisition was provided by Optimisa plc in the form of an
interest-bearing loan and by the issue of ordinary shares by nxtMOVE Corporation
to Optimisa plc.
In order to assist with the financing of these transactions, Optimisa plc took
out a Multi Option Facility with the Bank of Scotland that provided an overdraft
facility of #575,000. This facility expired on 28 February 2007, and was not
renewed, as the facility was no longer required.
The assets and liabilities of nxtMOVE Corporation at 3 March 2006 were as
follows (based on the exchange rate at date of acquisition of US$1.75=#1.00):
UK GAAP Accounting Fair value
policy
Book value adjustments
#'000 #'000 #'000
Fixed assets
Tangible assets 62 - 62
Current assets
Debtors 405 - 405
Other debtors 2 - 2
Prepayments and accrued income 88 - 88
495 - 495
Creditors amounts falling due with
within one year (243) - (243)
Current net assets 252 - 252
Total assets less current liabilities 314 - 314
Goodwill 665
979
Satisfied by: #'000
Cash 979
No comparative financial information is available.
b) Andrew Irving Associates Limited
On 2 October 2006, the Group acquired 100% of the issued share capital of Andrew
Irving Associates Limited. The consideration comprised of #10,700 in cash and
the allotment of 17,701 ordinary shares at #9.90 each.
In addition to the initial consideration, a further deferred consideration up to
a maximum of #101,000 is payable dependent upon the gross profit earned by AIA
in the 2007 and 2008 financial years. The deferred consideration will be paid
through a mixture of equity shares and cash in accordance with the associated
sale and purchase agreement.
A provision for the maximum amount payable has been made for the deferred
consideration at 31 December 2006.
The assets and liabilities of Andrew Irving Associates Limited at 2 October 2006
were as follows:
Book value Accounting Fair value
policy
adjustments
#'000 #'000 #'000
Fixed assets
Tangible assets 28 - 28
Current assets
Debtors 164 - 164
Cash at bank and in hand 13 - 13
177 - 177
Creditors amounts falling due with
within one year (68) - (68)
Current net assets 109 - 109
Total assets less current liabilities 137 - 137
Goodwill 163
300
Satisfied by: #'000
Cash 11
Shares issued (note 7) 175
Deferred consideration 101
Acquisition costs 13
300
Pre-acquisition results
The information disclosed below has been prepared on the basis of the company's
accounting policies which remain unchanged following the acquisition.
Period
1 May 2006
to 1 October 2006
#
urnover 309,641
Operating loss (34,070)
Loss before taxation (33,073)
Taxation -
Loss after taxation (33,073)
The profit after taxation for the year ended 30 April 2006 was #30,379.
7 Share capital
Group and Company
2006 2005
#'000 #'000
Authorised:
1,600,000 Ordinary share of 150p each 2,400 2,400
Called up, allotted and fully paid:
2006 2005
No #'000 No #'000
Ordinary shares of 150p each 882,151 1,323 690,911 1,036
Shares
On 6 April 2006, 7,039 new Ordinary Shares of 150p with a total nominal value of
#10,558 were issued at a value of 900p each for a total consideration of
#63,351.
On 5 May 2006, 1,500 warrants were exercised over an equivalent number of new
Ordinary Shares of 150p each for a total nominal value of #2,250. There was no
premium on these shares.
On 12 May 2006, 105,000 new Ordinary Shares of 150p with a total nominal value
of #157,500 were issued at a value of 900p each for a total consideration of
#945,000. Expenses of #8,000 incurred in issuing these shares have been
deducted from the share premium account.
On 28 June 2006, 60,000 Ordinary Shares of 150p with a total nominal value of
#90,000 were issued to the vendors of KAE at a value of 405p each for a total
consideration of #243,000 as payment of the deferred consideration due under the
purchase agreement.
The premium on the shares issued on acquisition has been taken to the merger
reserve in accordance with section 131 of the Companies Act.
On 2 October 2006, 17,701 Ordinary Shares of 150p with a total nominal value of
#26,552 were issued to the vendors of AIA at a value of 990p each for a total
consideration of #175,240 as part of the consideration for the acquisition.
The premium on the shares issued on acquisition has been taken to the merger
reserve in accordance with section 131 of the Companies Act.
Options and warrants
In prior years the Directors granted a number of share options at prices which
it is no longer realistic for the Company to achieve. These share options
numbered 3,417 and the weighted average exercise price is #690. At 31 December
2006 the Company had the following outstanding warrants over its ordinary shares
of 150 pence each:
Number of share Exercise price Dates exercisable
5,225 150p February 2000 to February 2010
6,500 900p March 2007 to March 2010
6,500 900p March 2008 to March 2011
8 Reserves
Group
Shares to be Merger Share Profit and
issued reserve premium loss account
account
#'000 #'000 #'000 #'000
At 1 January 2006 243 612 502 458
Shares issued for deferred (243) - - -
consideration
Premiums on share issued in the year - 302 832 -
Retained profit for the financial - - - 663
year
Currency translation - - - (99)
differences
Dividends paid - - - (135)
At 31 December 2006 - 914 1,334 887
Company
At 1 January 2006 243 612 502 746
Shares issued for deferred (243) - - -
consideration
Premiums on share issued in the year - 302 832 -
Retained profit for the financial - - - 517
year
Dividends paid - - - (135)
At 31 December 2006 - 914 1,334 1,128
9 Reconciliation of movement in shareholders' funds
Group
2006 2005
#'000 #'000
At 1 January 2,851 955
Profit for the year 663 371
Dividend paid (135) (35)
Currency translation (99) -
differences
Shares issued on acquisition 418 972
Shares to be issued (243) 243
Shares issued for cash consideration 1,001 250
Shares issued on exercise of warrants 2 95
At 31 December 2006 4,458 2,851
Company
2006 2005
#'000 #'000
At 1 January 3,139 955
Profit for the year 517 659
Dividend paid (135) (35)
Shares issued on acquisition 418 972
Shares to be issued (243) 243
Shares issued for cash consideration 1,001 250
Shares issued on exercise of warrants 2 95
At 31 December 2006 4,699 3,139
10 Basis of preparation
The financial information presented in this preliminary announcement is
extracted from, and is consistent with, the Group's audited financial statements
for the year ended 31st December 2006. The information presented does not
constitute the statutory accounts of the Group or of the Company within the
meaning of section 240 of the Companies Act 1985. The financial statements for
the year ended 31st December 2006 will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The auditors' report
on those financial statements is unqualified and does not contain any statement
under section 237 of the Companies Act 1985.
For further information please contact:
Ron Littleboy, Chairman, Optimisa plc 020 7960 3300
Simon Dannatt, Chief Executive, Optimisa plc 020 7960 3300
Jonathan Waters, Director, Optimisa plc 020 7960 3300
Hugh Oram, Nabarro Wells Limited 020 7710 7400
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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