FOR RELEASE 

7.00 AM

27 OCTOBER 2009

BAQUS GROUP PLC

("Baqus" or "Group")

(National Construction Consultancy and Quantity Surveying Group)

Preliminary Results for the year ended 30 June 2008

CONSOLIDATED INCOME STATEMENT

For the 12 months ended 30 June 2009

Key points:

• Profit before tax of £739,000

• Cash balances of £1.158 million at 30 June 2009

• 2% increase in turnover to £7,853,000

• Acquisition of Nigel Rose Group on 30 June 2009

• Board recommending a final dividend of 0.06p on top of an interim dividend of 0.05p

• Pressure on margins

• Focus on generating cost efficiencies through the integration of acquired businesses

• Increased investment in training and retention of skilled staff

• Strong position to expand through further acquisitions

• Given continued economic volatility, the Group is cautious about the outlook for the current year

** As the Group was only formed on 14 December 2007 the board has included unaudited proforma numbers for the year to 30 June 2008 to assist the reader in understanding the underlying trading of the Group  Contact:

Baqus Group plc

Clive Sayer (Chief Executive)                                                              07967 132 221

Patrick Lineen (Finance Director)                                                      07818 034 452

Seymour Pierce (Nominated Adviser and Broker)

Mark Percy                                                                                             020 7107 8000

Cubitt Consulting (Financial Public Relations Advisers)

Brian Coleman-Smith / James Verstringhe                                      020 7367 5100

Background Note:

Baqus was admitted to trading on AIM on the 14 December 2007, having raised £1.75 million through a placing of 17,500,000 Ordinary Shares.

Baqus is a national building consultancy and quantity surveying group offering construction cost consultancy, project management and building surveying services to clients in the UK. The Group works across a number of business sectors including: health, education, leisure, hospitality, affordable housing, residential, commercial and conservation. Clients include local authorities, central government, NHS, residential Housing Associations, commercial companies and developers.

The Quantity Surveying Market in the UK, estimated to be worth in excess of £1 billion, is highly fragmented and dominated by a small number of major players, which the Baqus Group Directors believe make it ripe for consolidation. Since the Group's admission to AIM, they have been pursuing a strategy of acquiring small to medium sized Quantity Surveying practices across the country, the most recent of which is Nigel Rose Group. Previous activity includes the acquisition of Sworn King and Partners in 2008. Once acquired, the practices are incorporated into the wider Group with a particular emphasis on exploiting opportunities for operational synergies with existing business units.

PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2009

Statement by Chief Executive Officer, Clive Sayer

I am pleased to introduce my Review for the Annual Report for the year ended 30 June 2009. As can be seen in the Financial Director's Report, profits and earnings per share are close to market expectations and the Group has a healthy balance sheet with net cash of £1.158 million.

In last year's Annual Report, I set out the opportunities and challenges that we faced in a rapidly changing market.

We knew that we were already into a recessionary situation and 'credit crunch' and that the years ahead were likely to be difficult. As a Group, we prepared for the challenges and faced up to them. Whilst sometimes short term actions have to be taken, it is essential to keep a focus on the medium term so as to have the business trim, fit and ready to accelerate forward as the business environment improves.

As a result, the Group concentrated on trimming unnecessary costs and improving efficiencies whilst keeping the team motivated and continuing to invest in training for up and coming staff. We have managed to avoid the wholesale redundancies imposed by some of our rivals which have led to demotivated staff, unhappy clients and heavy redundancy costs at those firms.

We are making a significant investment in training staff for environmental, sustainability and health and safety matters as these areas continue to be an important focus for the wider construction industry and will provide opportunities for future growth..

The integration of the three founding firms and recent acquisitions continues apace, enabling a reduction in overall costs and driving efficiency across the Group. One of the major benefits of increasing the national reach of the Group has been the ability to service clients on a national scale.

The acquisition of Nigel Rose Group on 30th June 2009 brings another set of opportunities for rationalisation savings as well as opportunities to work in sectors in which we have not previously been represented.

I remain convinced that the difficult business climate will present a number of opportunities for Baqus to acquire other quality firms at competitive cost, many of which would not have been available in easier times.

Results

The profit before taxation was £739,000 (2008: Pro forma £1,062,000) for the year to 30 June 2009 on turnover of £7.853 million (2008: Proforma £7.7 million). Earnings per share were 0.46p (2008: Proforma earnings per share were 0.56p).

The cash balances at 30 June 2009 were strong at £1.158 million following paying £600,000 on 14 December 2008 for partial redemption of the outstanding loan notes. Some cash has been used for the acquisition of Nigel Rose LLP and Nigel Rose Management Limited but this has been largely offset by cash generated from trading activities.

Dividend

An interim dividend of 0.05p was paid on 27 April 2009 and the Board is now recommending that a final dividend of 0.06468p is paid on 18 December 2009 to those on the share register on 6 November 2009.

Board

Roger Knowles stood down from the Board of the Group on 31 August 2009 for personal reasons having served as Chairman since the Group was admitted to trading on AIM in December 2007. It was his vision that laid the foundations for Baqus to become one of the first publicly quoted quantity surveying companies in the UK and we are delighted that he has agreed to continue to act as a consultant to the Group.

The Board now operates under the firm guidance of Norman Cave, the senior Non-Executive Director, and I would like to thank him for his contribution over the past year.

Staff

Baqus has an excellent team of people who have continued to work enthusiastically despite the lack of pay reviews and an atmosphere of depression in the construction industry generally. I would like to pay tribute to them and send my thanks for a job well done.

Future Outlook

I am pleased to report that, despite the economic climate, we are continuing to win new work in the public sector, albeit often at reduced margins. We acknowledge that the largest projects are facing cutbacks and delays - a situation which may get worse after the General Election. However, we have secured appointments on long term framework contracts, which have already led to a series of new acute and mental health commissions. We have expanded our team working on NHS Procure 21, succeeded in winning term contracts for hard facilities management consultancy services on Private Finance Initiative (PFI) projects and received a number of commissions as a result of our specialist expertise acting as Technical Advisor to funders on PFI projects.

There has been a reduced level of activity from many private sector clients over the past year but we are actively maintaining our strong relationships for when activity picks up. Nevertheless, we benefit from having a diverse client base and workload across both private and public sectors and we continue to work hard with existing clients to remain the consultant of choice whilst also endeavouring to win new clients.

Some ongoing schemes include:

A number of appointments in the affordable housing sector, including a £14 million high profile gateway project at the Mayflower Theatre, Southampton, working collaboratively with the Theatre Trust, Local Authority and Atlantic Housing Group to provide a major upgrade of the Theatre and 115 apartments 

A series of ongoing projects for a number of Local Authorities to expand and refurbish primary schools. The increase in birth rate is set to drive demand in this sector and we expect further commissions to follow.

All London theatres are now charging a 'restoration levy' on each seat sold and we have been appointed to work on the first major refurbishment under this initiative at the Palace Theatre, Shaftesbury Avenue, commissioned by the Really Useful Theatre Company.

Building on our reputation for involvement in sustainability issues, we have been appointed to work on the new build Portsmouth Continental Ferry building, due to be operational by Spring 2011. This project will incorporate advanced sustainable features and ground breaking environmental technology.

We continue to work on a number of hotel projects across the country for leading operators and specialist developers such as Travelodge and Whitbread (Premier Inn), an example of which is the £7.5million 141 room new build Travelodge Hotel for Patten Properties on the historic world heritage site, The Strand, Liverpool.

We are already working on a number of HM Government projects on Grade 1 buildings of national importance. Members of the same team have been commissioned for the refurbishment of The Royal Academy, London.

In the current financial year, we believe that the construction industry will continue with a subdued level of activity and we have therefore budgeted for another challenging period. However, our cash position is strong, the acquisitions have been successfully integrated and we have excellent people throughout the Group, which gives me confidence in the long-term future of Baqus.

Clive Sayer

Chief Executive Officer

27 October 2009

FINANCIAL DIRECTOR'S REPORT 

The profit before taxation for the year ended 30 June 2009 was £739,000 (2008: Pro forma £1,062,000) which is broadly in line with market expectations on turnover that increased by 2% from £7,702,000 to £7,853,000.  Earnings per share fell 21% to 0.46p (2008: Pro-forma earnings per share of 0.56p).

Our operating profit margin of 9.61% (2008: 12.33%) dropped from the previous period reflecting the increased competitive pressures that we faced in the very difficult market conditions that persisted throughout the year under review.  

The benefits to the Group from the acquisition of Sworn King on 1 August 2009 for a maximum consideration of £377,000 has been offset by the impact of the recession in reducing fee income. Cost of sales rose by 9% from £5,116,000 to £5,588,000, mainly as a result of the acquisition of Sworn King staff. In contrast, overheads have only risen by 1.75% from a pro forma figure of £1,485,000 in 2008, to £1,511,000, which reflects the Sworn King acquisition less cost savings achieved. 

As a result of the review of goodwill arising from the acquisitions, we have concluded that the goodwill is unimpaired. The integration of our businesses, including the new acquisitions, is ongoing with cost savings of circa £100,000 per annum being achieved through this process.

We are continuing to look at ways of reducing our working capital and improve cash generation. Following the first repayment of £600,000 plus interest (at base rate plus 2.5%) of loan notes owed to former shareholders of subsidiaries on 14 December 2008, net cash at the year end was £1,158,000. Further repayments of £600,000 plus interest are due on 14 December 2009 and £351,000 plus interest on 14 December 2010. We have also used, in aggregate, £340,000 of our cash balances in acquiring Sworn King and Nigel Rose during the year.

The Group is well advanced with the introduction of a time recording and management system ,which is due to be completed in the current financial year. This will give senior management better visibility of staff productivity, job profitability and work-in-progress and enable us to manage the business more effectively.

The Group is continuing to evaluate potential acquisitions. Our approach in the current climate is to offer competitive prices with, normally, a significant element of deferred, performance-related consideration. 

Although trading in the markets in which we operate remains highly competitive, we are fortunate in having a strong balance sheet, which should sustain us through this difficult period.

Patrick Lineen

Financial Director

27 October 2009

Consolidated Income Statement

For the year ended 30 June 2009

  Consolidated Balance Sheet

As at 30 June 2009

Consolidated Cash Flow Statement

for the year ended 30 June 2009

  Consolidated Statement of Changes in Equity

For the year ended 30 June 2009

(Unaudited)

  Notes to the Consolidated Financial Statements

for the year ended 30 June 2009

1. General information

Baqus Group plc ("the Company") is incorporated in the United Kingdom under the Companies Act 2006.

The address of the registered office is 2/3 North Mews, London, WC1 2JP. The principal activities of the Group are set out in the Director's Report.

2. Accounting Policies

The principal accounting policies adopted in the financial statements are set out below.

Basis of preparation

The Financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The Financial statements have also been prepared in accordance with IFRS adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation. 

Basis of Consolidation

The Group's financial statements consolidate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the company has the power to govern the financial and operating polices of an investee entity so as to obtain benefits from its activities. 

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations

The acquisitions of subsidiaries are accounted for using the purchase method.

The cost of the acquisition is measured at the aggregate of the fair values, at the date of the exchange, of assets given, liabilities incurred or assumed and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS3 are recognised at their fair values at the acquisition date.

Goodwill arising on acquisitions is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.

If, after reassessment, the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination the excess is immediately recognised in profit and loss.

Revenue

Revenue represents the invoiced value of services provided net of value added tax. It comprises the amounts billed to clients in respect of the provision of quantity surveying services together with the movement in revenue recognised but not invoiced.

Revenue Recognition

Revenue is recognised as contract activity progresses to reflect the Group's performance of its contractual obligations. The right to consideration, by reference to the value of the work performed, is included in the accounts as accrued income under receivables. Where the amount which the client will accept or be able to pay is uncertain, provision has been made to reduce the accrued income to its net realisable value. Where the substance of a contract is that a right to consideration does not arise until the occurrence of a critical event, revenue is not recognised until that event occurs.

Retirement benefit costs

Retirement benefits to employees are provided by defined contribution schemes that are funded by the Group and employees. Payments are made to pension trusts that are financially separate from the Group. 

Intangible assets

Goodwill arising from the purchase of subsidiary undertakings, represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable asset, liabilities and contingent liabilities of the subsidiary acquired, and is capitalised as an intangible asset in accordance with the requirements of IFRS 3. 

Goodwill is measured at cost less any accumulated impairment losses and will be reviewed annually for any impairment losses. Any impairment losses are recognised through the income statement.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value of each asset evenly over its expected useful economic life, as follows:

Motor vehicles                                       25%-33.33% per annum

Fixtures, fittings and equipment        10-20% per annum

Computer                                                 33-50% per annum

Financial Instruments

Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. Issue costs are offset against the proceeds of such instruments. 

Trade receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances with banks.

Trade payables

Trade payables are initially measured at fair value and subsequently at amortised cost.

Borrowings

Interest bearing bank loans and overdrafts are recorded at the proceeds received, net of direct issue costs. After initial recognition borrowings are measured at amortised cost. Borrowing costs are recognised in profit and loss in the period in which they are incurred.

Equity

Equity instruments issued by the Group are recorded at the proceeds received net of direct costs.

Leasing

Rentals paid under operating leases are charged against profits on a straight line basis over the period of the lease.

Taxation expense

The tax expense represents the sum of the tax currently payable and deferred tax.

Current taxation

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. 

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its currents tax assets and liabilities on a net basis.

Financial Liability and Equity

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The Group has only one class of share in existence.

Finance costs

Finance costs are recognised in the income statement in the year in which they are incurred.

Share-based payments

Where equity investments are granted to persons other than employees, the income statement is charged with the fair value of the goods and services received, except to the extent to which such goods or services form part of the cost of the acquisition of an asset. In such cases the fair value of goods and services received is added to the cost of the asset or treated as a cost of issuing the equity instrument.

The Group issues equity-settled share based payments to certain employees. Equity-settled share-based payment is expensed on a straight-line basis over the vesting period, based upon the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

The Board believes that the current quoted market price in the long run is the best estimate of fair value. As the current market price is below the share option price no charge has been made to the income statement.

Critical accounting estimates and judgements

The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the financial statements and concluded that the main areas of judgement are:

• Revenue recognition policies in respect of contracts which straddle the year end;

• Valuation of intangible assets.

These estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable under the circumstances and are discussed, to the extent necessary, in more detail in their respective notes.

3. Adoption of new and revised standards

At the date of authorisation of these financial statements the following standards and interpretations, which have not been applied in these financial statements, were in issue but not yet effective.

IAS23 Borrowing costs

IAS1 (Revised) Presentation of financial statements

IFRS8 Operating segments

IFRS3 Business combinations

IAS27 Consolidated and separate financial statements

Amendments to IFRS2 Share-based payment: Vesting conditions and cancellations

Amendments to IAS32 Financial instruments - Presentations of financial statements; Puttable financial 

Instruments and obligations arising on liquidation.

Amendments to IFRS1 and IAS27 - Cost of an investment in a subsidiary, jointly controlled entity or associate

Amendment IAS39 Financial instruments: Recognition and measurement: Eligible hedged items

IFRIC 12 Service Concession Agreements

IFRIC 13 Customer loyalty programmes

IFRIC 14 IAS 19 The limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

IFRIC 15 Agreements on the construction of real estate

IFRIC 16 Hedges of a net investment in a foreign operation

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group, except for additional segment disclosures when IFRS8 comes into effect for periods commencing on or after 1 January 2009.

4. Revenue

5. Profit from operations

6. Investment revenue and finance costs

7. Taxation

  8. Dividends

9. Earnings per share

10. Intangible assets

The Group tests annually for impairment. The recoverable amounts of the cash-generating unit (CGUs) are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes in selling prices and direct costs. Management estimates discount rates on the basis of current market assessments of the time value of money and the risks specific to the CGUs. Anticipated growth rates, changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. The Group has prepared forecasts over the next five years, which have then been extrapolated for a further eleven years using estimated growth rates for each CGU, which average 5%. These rates do not exceed the long term growth rates for the relevant markets. The rate used to discount the forecast cash flows from all GSUs is 5%.

11. Property, plant and equipment

12. Trade and other receivables

13. Cash and cash equivalents

14. Trade and other payables: current liabilities

  15. Borrowings

  16. Share Capital

17. Share premium account

18. Retained earnings

19. Share based payments

20. Reconciliation of net cash flow to movement in debt

21. Analysis of changes in net debt for the year ended 30 June 2009

  22. Acquisitions

22.1 Acquisition of Sworn King and Partners

  22.2 Acquisition of Nigel Rose LLP

The report and accounts for the year ended 30 June 2009 will be posted to shareholders shortly and will be available on the Company's website, www.baqus.co.uk.

RNS news service provided by Hemscott Group Limited.