Interim Results
Brainspark PLC
30 September 2004
FOR IMMEDIATE RELEASE 30 SEPTEMBER 2004
BRAINSPARK PLC
INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2004
Chairman's statement
_____________________________________________________________
In my statement issued with Brainspark's financial statement for the year ended
31 December 2003, I explained how the Company is currently operating cautiously,
cutting costs and protecting its current portfolio companies and assisting them
to create value whenever possible - awaiting the upturn of the economy.
Cost cutting measures begun in 2002, which have further reduced the cash burn
rate to £30k per month in the first half of 2004 from £41k per month in 2003,
net of rent and charges made to the investee companies.
In line with the approach envisaged by the Board, Brainspark is concentrating on
the needs of its existing portfolio companies, covering a geographic area
ranging from UK, to Italy and Israel.
The actions taken are to help them in improving revenue, cutting costs and
finding adequate resources to develop their businesses.
Brainspark also had to support directly some of its portfolio investments with
cash injections through capital increases, day to day credit and new loans.
Financial Summary
In the six months ended 30 June 2004, the Company incurred a loss before
taxation of £561k, compared to a loss for the comparative period last year of
£1,582k. Of the loss of £561k, £199k principally represents operating costs and
£362k is mainly attributable to the amortisation of goodwill on acquisitions.
Operating costs for the period ended 30 June 2004 of £194k represent a decrease
of £314k from the comparative period last year.
The consolidated net asset value at 30 June 2004 was £3.3 million - down from
£3.8 million at 31 December 2003.
Investments Review
Brainspark has holdings in eleven companies: seven in the UK, two in Italy, one
in Israel and one in USA. Its stakes range from nearly 2 per cent to nearly 52
per cent of the relevant portfolio companies. The portfolio covers a wide range
of business sectors including Web services , application service providers and
advanced technology solutions.
Many of the portfolio companies have not made progress as originally envisaged;
but, in spite of that, the Directors' believe that our portfolio companies are
concentrating on improving their businesses over a longer time-frame.
Among many of the portfolio companies, positive signs are emerging especially at
GeoSim, Kerb, MetaPack and The Usability Company.
Outlook
At 30 June 2004, Brainspark's mid-market price per share of 0.63p valued the
Company's issued capital at £1.2 million against a consolidated net asset value
of £3.3 million. The Board believes that this is a conservative valuation of the
Company's future potential based upon the companies in Brainspark's portfolio.
We face the future with guarded optimism. We still have to consider certain
issues going forward - the impact of external market conditions and internally,
further rationalising the portfolio taking into consideration the opportunities
that are presented by these companies.
At present there is some evidence of a return of confidence from investor and
financial institution for start up companies that have navigated through the
hostile economic environment, we are cautiously optimistic for the future
because we think that the Board has taken the necessary steps to enable the
financial performance of Brainspark to improve.
On 29 December 2003, the Board agreed to issue up to £500,000 convertible loan
notes. An allotment of £50,000 Notes had been issued at 31 December 2003.
The Company's current strategy is to raise further capital from existing key
shareholders, and sell some of the non-strategic portfolio companies, with the
objective of using the proceeds for general working capital purposes and to
support the most promising of the portfolio companies.
Prof. Francesco Gardin
Chairman
29 September 2004
Financial Statements
_____________________________________________________________
Consolidated profit and loss account
For the period ended 30 June 2004
_____________________________________________________________
Notes Six months to 30 Six months Year ended
June 2004 to
(Unaudited) 30 June 2003 31 December
2003
£'000 (Unaudited) (Audited)
£'000 £'000
--------------------- ------ ---------- ---------- ------------
Turnover 2a - - -
Net operating
expenses -
recurring (194) (508) (680)
Net operating
expenses -
exceptional 2b - - (39)
--------------------- ------ ---------- ---------- ------------
Total net
operating
expenses/Group
operating loss (194) (508) (719)
Share of
operating loss
of associated
undertakings 3 (362) (931) (1,915)
--------------------- ------ ---------- ---------- ------------
Total
operating
loss: Group
and share of
associated
undertakings (556) (1,439) (2,634)
--------------------- ------ ---------- ---------- ------------
Loss on
ordinary
activities
before
interest (556) (1,439) (2,634)
Interest
receivable - 37 39
Interest
payable (5) - -
Amounts
written off
investments - (180) (311)
--------------------- ------ ---------- ---------- ------------
Loss on
ordinary
activities
before
taxation (561) (1,582) (2,906)
Tax on loss on ordinary - - -
activities
--------------------- ------ ---------- ---------- ------------
Loss on
ordinary
activities
after taxation (561) (1,582) (2,906)
--------------------- ------ ---------- ---------- ------------
Retained loss
for the
financial
period (561) (1,582) (2,906)
--------------------- ------ ---------- ---------- ------------
--------------------- ------ ---------- ---------- ------------
Loss per 1p
ordinary share 4 (0.29p) (0.84p) (1.55p)
Basic and diluted
--------------------- ------ ---------- ---------- ------------
The loss for period is derived wholly from continuing activities.
Consolidated statement of total recognised gains and losses
For the period ended 30 June 2004
_____________________________________________________________
Six months to 30 Six months to 30 Year ended
June 2004 June 2003
(Unaudited) (Unaudited) 31 December
2003
£'000 £'000 (Audited)
£'000
Loss for the
financial
period (561) (1,582) (2,906)
Foreign
exchange
translation
difference - 30 -
----------------------- ---------- ---------- ------------
Total
recognised
gains and
losses for the
period (561) (1,552) (2,906)
----------------------- ---------- ---------- ------------
There are no differences between the results disclosed and the historical cost
equivalents.
Consolidated Balance sheet at 30 June 2003
_____________________________________________________________
Notes Six months to 30 Six months to 30 Year ended
June 2004 June 2003
(Unaudited) (Unaudited) 31 December
2003
£'000 £'000 (Audited)
£'000
---------------------- ------ ---------- ---------- ------------
Fixed assets
Tangible
assets 62 170 80
Investments in
associated
undertakings 5 2,277 3,390 2,639
Other
investments 6 1,567 1,661 1,567
---------------------- ------ ---------- ---------- ------------
3,906 5,221 4,286
---------------------- ------ ---------- ---------- ------------
Current assets
Debtors 219 529 295
Cash at bank
and in hand 41 276 68
---------------------- ------ ---------- ---------- ------------
260 805 363
Creditors:
amounts
falling due
within one
year (767) (887) (689)
---------------------- ------ ---------- ---------- ------------
Net current
liabilities (507) (82) (326)
---------------------- ------ ---------- ---------- ------------
Total assets
less current
liabilities 3,399 5,139 3,960
Provisions for
liabilities
and charges (122) - (122)
---------------------- ------ ---------- ---------- ------------
Net assets 3,277 5,139 3,838
---------------------- ------ ---------- ---------- ------------
Capital and reserves
Called up
share capital 1,923 1,874 1,923
Share premium
account 28,562 28,558 28,562
Other reserves 6,813 6,875 6,813
Profit and
loss account
(deficit) (34,021) (32,168) (33,460)
---------------------- ------ ---------- ---------- ------------
Total equity
shareholders'
funds 3,277 5,139 3,838
---------------------- ------ ---------- ---------- ------------
Reconciliation of movements in Group shareholders' funds
For the period ended 30 June 2004
_____________________________________________________________
---------------------- ------ ---------- ---------- ------------
Notes Six months to 30 Six months to 30 Year ended
June 2004 June 2003
(Unaudited) (Unaudited) 31 December
2003
£'000 £'000 (Audited)
£'000
---------------------- ------ ---------- ---------- ------------
Loss for the
period (561) (1,582) (2,906)
New share
capital issued - - 53
Foreign
exchange
translation
differences - 30 -
---------------------- ------ ---------- ---------- ------------
Net reduction
in
shareholders'
funds (561) (1,552) (2,853)
Opening
shareholders'
funds 3,838 6,691 6,691
---------------------- ------ ---------- ---------- ------------
Closing
shareholders'
funds 3,277 5,139 3,838
---------------------- ------ ---------- ---------- ------------
Consolidated cash flow statement
For the period ended 30 June 2004
_____________________________________________________________
------------------------ ------ ---------- ---------- ------------
Notes Six months Six months to Year ended
to 30 June 2003
30 June 2004 (Unaudited) 31 December
2003
(Unaudited) £'000 (Audited)
£'000 £'000
------------------------ ------ ---------- ---------- ------------
Net cash
inflow from
operating
activities 7 47 (710) (967)
Returns on investments and
servicing of finance
Interest
received - 37 39
------------------------ ------ ---------- ---------- ------------
Net cash
inflow from
returns on
investments
and servicing
of finance - 37 39
------------------------ ------ ---------- ---------- ------------
Capital expenditure and
financial investment
Purchase of
other
investments - 15 (15)
Sale of other
investments - - 77
------------------------ ------ ---------- ---------- ------------
Net cash
inflow from
capital
expenditure
and financial
investment - 15 62
------------------------ ------ ---------- ---------- ------------
Acquisitions and disposals
Purchase of
investments in
associated
undertaking (147) - (165)
Loans to
associated
undertakings - - (15)
------------------------ ------ ---------- ---------- ------------
Net cash
outflow from
acquisitions
and disposals (147) (688) (180)
------------------------ ------ ---------- ---------- ------------
------------------------ ------ ---------- ---------- ------------
Net cash
outflow before
financing (100) (688) (1,046)
------------------------ ------ ---------- ---------- ------------
Financing
------------------------ ------ ---------- ---------- ------------
5% Convertible
bond issue - - 50
------------------------ ------ ---------- ---------- ------------
Loan from
major
shareholder - - 200
------------------------ ------ ---------- ---------- ------------
Partial
repayment of
loan to major
shareholder - - (100)
------------------------ ------ ---------- ---------- ------------
Short term
loans 110 - -
------------------------ ------ ---------- ---------- ------------
Repayment of
short term
loans (37) - -
------------------------ ------ ---------- ---------- ------------
Net cash
inflow from
financing 73 - 150
------------------------ ------ ---------- ---------- ------------
Decrease in
net cash for
the period (27) (688) (896)
------------------------ ------ ---------- ---------- ------------
Reconciliation of cash flow
to movement in net funds
Net cash at
beginning of
period 68 964 964
Decrease in
net cash in
the period (27) (688) (896)
------------------------ ------ ---------- ---------- ------------
Net cash at
end of period 41 276 68
------------------------ ------ ---------- ---------- ------------
Notes to the financial statements
_____________________________________________________________
1. Basis of preparation
Principal accounting policies
The financial statements have been prepared under the historical cost convention
modified to include certain investments at valuation, and in accordance with
applicable accounting standards. Fixed annual charges are appointed to the
interim period on the basis of time elapsed and other expenses are accrued in
accordance with the same principles used in the preparation of the annual
accounts. The financial information contained in this interim statements is
unaudited and does not constitute statutory accounts as defined in Section 240
of the Companies Act 1985.
The comparative information for the year ended 31 December 2003 is an unbridged
version of the statutory accounts for that year and those accounts, upon which
the auditors issued an unqualified opinion, have been filed with the Registrar
of Companies.
2. Profit and Loss
Six months to 30 June Six months Year ended
2004 to 30
(Unaudited) June 2003 31 December 2003
£'000 (Unaudited) (Audited)
£'000 £'000
a) Turnover
Group turnover
including share of
associated 206 184 884
undertakings
Less: share of
associated (206) (184) (884)
undertakings ----------- ----------- ------------
----------------------
- - -
---------------------- ----------- ----------- ------------
Six months Six months Year ended
to
30 June 2004 to 30 June 31 December
2003 2003
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
b) Net operating expenses -
exceptional
Profit on disposal of
other investments - - (77)
Impairment charge - - 116
----------------------- ------------ ----------- ------------
Total operating expenses -
exceptional - - 39
----------------------- ------------ ----------- ------------
Notes to the financial statements
_____________________________________________________________
3. Share of operating loss of associated undertakings
Six months to 30 June Six months Year ended
2004 to 31
(Unaudited) 30 June 2003 December 2003
£'000 (Unaudited) (Audited)
£'000 £'000
Share of operating
loss of associated
Undertakings (39) (392) (523)
Amortisation of
goodwill on
acquisition (323) (539) (836)
Impairment of
goodwill - - (556)
----------------------- ---------- ------------ ------------
(362) (931) (1,915)
----------------------- ---------- ------------ ------------
4. Basic and diluted loss per 1p ordinary share
Six months to 30 June Six months Year ended
2004 to 31
(Unaudited) 30 June 2003 December 2003
£'000 (Unaudited) (Audited)
£'000 £'000
Loss attributable to
ordinary
shareholders (561) (1,582) (2,906)
----------------------- ---------- ------------ ------------
Adjusted loss (561) (1,582) (2,906)
----------------------- ---------- ------------ ------------
Weighted average
number of ordinary
shares 192,273 187,405 187,487
Adjusted weighted
average number of
ordinary shares 192,273 187,405 187,487
Basic loss per share (0.29p) (0.84p) (1.55p)
Diluted loss per
share (0.29p) (0.84p) (1.55p)
----------------------- ---------- ------------ ------------
Notes to the financial statements
_____________________________________________________________
5. Investments in associated undertakings
Six months Six months Year ended
to to
30 June 2004 30 June 2003 31 December 2003
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Share of net assets
At beginning of period 61 621 621
Transfer: Change in ownership
from associate to investment - - (37)
Exchange translation
difference - 30 -
Share of loss for the period (39) (392) (523)
----------------------- ---------- ------------ ------------
At period end 22 259 61
----------------------- ---------- ------------ ------------
Goodwill
At beginning of period 2,578 3,670 3,670
Arising on further
acquisition in associates - - 300
Amortisation of goodwill (323) (539) (1,392)
----------------------- ---------- ------------ ------------
At period end 2,255 3,131 2,578
----------------------- ---------- ------------ ------------
Loans to associated
undertakings
At beginning of period 300 - 300
Provisions against loans and
disposal (300) - (300)
----------------------- ---------- ------------ ------------
At period end - - -
----------------------- ---------- ------------ ------------
Net book amount at period end 2,277 3,390 2,639
----------------------- ---------- ------------ ------------
Notes to the financial statements
_____________________________________________________________
6. Other investments
Six months to 30 Six months to 30 Year ended
June 2004 June 2003
(Unaudited) (Unaudited) 31 December
2003
£'000 £'000 (Audited)
£'000
At beginning
of period 1,567 1,826 1,826
Additions - 15 15
Transfer from
associate to
investment as
a result of
dilution in
holding - - 37
Amounts
written off in
the year - - (311)
Revaluation - (180) -
-------------------------- ---------- ----------- ------------
At period end 1,567 1,661 1,567
-------------------------- ---------- ----------- ------------
7. Reconciliation of operating loss to net cash inflow from operating activities
Six months to 30 Six months to 30 Year ended
June 2004 June 2003
(Unaudited) (Unaudited) 31 December
2003
£'000 £'000 (Audited)
£'000
Operating loss (194) (508) (719)
Depreciation
charge 18 135 226
Rental income
converted into
shares in
investments - - (75)
Fair value of
shares issued
to directors'
in lieu of
salary - - 53
-
Profit on sale
of investments - - (77)
Decrease in
debtors 76 393 641
Increase in
creditors 147 362 (46)
(Decrease)/increase in
provisions - (1,092) (970)
--------------------------- ---------- ---------- ------------
Net cash
inflow from
operating
activities 47 (710) (967)
--------------------------- ---------- ---------- ------------
8. Ultimate controlling party
The group has no ultimate controlling party.
9. Availability of Interim Results
Copies of the interim results will be available from The Lightwell, 12-16
Laystall Street, London EC1R 4PF.
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