Annual Report for the year ended 31 December 2008

Adjusted operating profit
statutory operating profit from continuing operations declined in 2008
to a loss of £17.3m (2007: £0.4m profit). This was primarily due to the
decline in primary & trading revenues from the prior year and in part due
to the singer & Friedlander acquisition and Edinburgh office expansion.
The Board continues to believe a truer reflection of the performance of
the Group's operating businesses is afforded by the measure of ‘Adjusted
operating profit from continuing operations’ that excludes items that
are one-off or non-recurring (including items that fall to be treated as
exceptional), and are not part of the on-going business profitability (including
discontinued operations), the cost of share options granted to employees
or in the case of amortisation of intangible assets represent non-cash
items. This measure is therefore used as the principal performance criteria
against which the vesting of stock awards is determined. in addition, the
Board reviews performance against the measure ‘Adjusted profit before
OPERATING PROFIT
10 THE EvOluTiON GROup plC ANNuAl REpORT & ACCOuNTs 2008
tax from continuing operations’, which represents adjusted operating
profit from continuing operations plus net interest; the measure ‘Adjusted
earnings from continuing operations’, which represents adjusted profit before
tax from continuing operations less tax expense (excluding exceptional tax
expense) and the measure ‘Adjusted basic earnings per share’. The analyst
community also follows these measures as benchmarks for the Group’s
on-going performance.
The following table reconciles these measures and demonstrates a reduction
in adjusted operating profit in 2007 of £19.3m to an adjusted operating
loss from continuing operations of £2.7m in 2008. This reduction is
principally due to continued pressure on corporate finance fee income,
particularly within the final quarter when market conditions deteriorated.
The adjusted profit before tax from continuing operations for 2008 is
£1.9m (2007: £22.1m) and adjusted earnings from continuing operations
are £2.9m (2007: £17.8m).
Restated4 2008 2007
£’000 £’000
group operaTing (loss)/profiT from conTinuing operaTions (17,277) 398
iTems noT included WiThin adjusTed operaTing profiT:
profit on disposal of available-for-sale financial assets (20) (299)
Amortisation of intangibles excluding computer software 551 396
share of post tax results of associates – (29)
income statement charge for share options granted to employees 1 11,729 11,253
Non-recurring and 2007 exceptional operating expenses 2 2,332 7,628
adjusTed group operaTing (loss)/profiT from conTinuing operaTions (2,685) 19,347
Net finance income 4,579 2,784
adjusTed profiT before Tax from conTinuing operaTions 1,894 22,131
Tax credit/(expense) 3 1,008 (4,340)
adjusTed earnings from conTinuing operaTions 2,902 17,791
adjusTed basic earnings per share 1.36p 8.48p
adjusTed diluTed earnings per share 1.17p 7.14p
1 Represents the income statement charge for the fair value of options granted to employees. The Group continues to purchase shares through the Trust to satisfy obligations in respect
of share options and call rights granted to employees.
2 Non-recurring and exceptional operating expenses are detailed on page 12.
3 Excludes the tax effect of non-recurring and 2007 exceptional operating expenses.
4 2007 results have been restated due to EsCl results being treated as discontinuing operations following the Board's decision to partially dispose of the business (see Note 1 accounting
policies for details of restatements).
FINANCIAL REVIEW
THE EVOLUTION GROUP PLC