Interim Results
Brainspark PLC
29 September 2006
For immediate release 29 September 2006
Brainspark Plc
Interim Results 2006
For the six month period ended 30 June 2006
Chairman's statement
In the six months ended 30 June 2006, the Company incurred a loss before
taxation of £550k, compared to a loss for the comparative period last year of
£551k. Of the loss, £79k principally represents operating costs and £478k is
mainly attributable to the amortisation of goodwill on associates and our share
of their losses.
Operating costs for the period ended 30 June 2005 of £79k represent a decrease
of £51k from the comparative period last year.
We targeted to reduce monthly operating costs below £20k. This has been achieved
Brainspark now runs its operations for £13k per month.
The Company has entered into a new expansion cycle, by starting to make new
investments and exploring innovative projects. In order to maximise shareholder
value, we are exploring various business projects including taking a Partner or
making an acquisition. Shareholders will be kept informed of any progress. At
the same time we are trying to realise value from the existing assets and recent
sales of portfolio assets ought to be viewed as a way to finance the new
Brainspark development phase; after the completion of restructuring and £850k
cash injection in December 2005 issue of a convertible loan.
Financial Summary
The consolidated net asset value at 30 June 2006 was £1,924k - down from £2,474k
at 31 December 2005. This is a result of six months amortisation and our share
of losses of £478k on Geosim. At the end of 2007 Geosim goodwill will be fully
amortised resulting in a final charge of £70k in that year.
At 30 June 2006 the Group's cash reserves stood at £257k compared with £446k at
31 December 2005. During the first six months Brainspark made two investments
for a total cash consideration of £92k. As of 29th September 2006, after the
sale of our equity stake in Kerb Ltd on 6th July, for a cash consideration of
£205k cash reserves stood at £405k.
At 30 June 2006, Brainspark's mid-market price per share of 0.65p valued the
Company's issued capital of 330,697,003 shares at £2,149k against a consolidated
net asset value of £1,924k.
First Half 2006 Events.
On 11 January 2006 Mr.Bailey was appointed a Director of Brainspark with
immediate effect. Mr. Bailey became a member of the London Stock Exchange in
1968, and was a Partner in Hichens Harrison & Co, one of the oldest firms of
stockbrokers which was established in 1803.
On 8th March 2006 Prof. Francesco Gardin, Company Chairman, indicated that he
would like to convert further amounts of his outstanding £208k worth of Loan
Stock into shares and raise his personal shareholding to 29.99%. However, the
Panel on Takeovers & Mergers ('the Panel') has indicated that, because Mr.
Fogliani is a relative of Professor Gardin by marriage, they should be treated
as acting in concert and therefore if either acquires shares so that they
jointly hold in excess of 30%, they would be required to make a cash bid under
Rule 9 of the Takeover Code (a 'Rule 9 Offer').The Loan Stock was convertible at
Professor Gardin's option at any time prior to its repayment and at any time
prior to 31 March 2006 at the Company's option.
As announced on 8 March 2006, the Company and Professor Gardin have agreed that
neither will exercise its right to demand conversion on or before 31 March 2006
(which could result in a mandatory offer obligation arising under Rule 9 at
substantially less than the prevailing market price), that the repayment date for
the Loan Stock will be postponed to 31 December 2007 and that the rights of
either party to demand conversion will be extended to the same date. The Loan
Stock will remain interest free.
On 24th March 2006 Brainspark's lease for the two floors on the Lightwell
premises expired; releasing the Company from an annual commitment of
approximately £240k. Dilapidation costs were less than £10k since the liability
for the dilapidation costs was transferred to two new tenents: Metapack and
Fortune Cookies, both Brainspark porfolio companies, in exchange for some
Company assets (telephone, furniture, networks, cabling, etc.) which they were
already using in their premises. While in the case of the other former tenant,
Foviance, Brainspark had previously agreed to transfer to them dilapidation in
exchange for the right to make modifications to the office layout. Brainspark
under a new service agreement with Metapack will retain an office at the
Lightwell for an annual cost of less than £4k.
Portfolio Review
As of 30 June 2006 Brainspark had holdings in 8 companies, 4 in the UK
(excluding Kerb Limited since we had already agreed on 7th June to dispose of
its entire holding in company) , one in Italy, one in Israel and one in the
United States. Its stakes range from nearly 2% to 50.1% of the relevant
portfolio companies. The portfolio covers a wide range of business sectors,
including web services, application service providers and advanced IT solutions.
On 29th March 2006 Brainspark made a $100k (£55k) investment in Polarizonics a
Delaware company holding a technology with the potential for over 100GB discs.
This innovation is of particular importance for satisfying the future demand for
increased disc capacity of HD video content of movies and video games.Brainspark
holds Series B preferred Polarizonics Stock representing a holding of 22,941
shares or approximately 1.96% of the enlarged issued share capital of the
company. The price is based on a pre-investment valuation of $5 million (£2.85
million or $4.359 (£2.485) per share. This investment is part of a funding round
raising $250k (£142k) for PL in total, with $695k (£396k) having already been
raised with private US investors
On 17th May 2006 Brainspark invested Euro 49k (£34k) in Mediapolis SpA, an
Italian real estate development company which owns the land and the planning
permission for a major development project in Piemonte, between Turin and Milan.
The development includes a major theme park, a specialised commercial centre and
two hotels Brainspark will invest Euro 49k (£34k) in ordinary Mediapolis Stock
representing a holding of 38,000 shares or approximately 0.47% of the enlarged
issued share capital of the company. The price is based on a pre-investment
valuation of Euro 9 million (£6.5 million) This investment is part of a fully
subscribed round of funding raising Euro 1.5 million (£1.05 million) for
Mediapolis in total. Investors in this round include local entrepreneurs.
On 7th June 2006 Brainspark agreed to dispose of its entire holding in Kerb
Limited an internet services for a cash consideration of £205k. The holding was
-purchased by the company;the transaction was completed on 6 July 2006.
On 21st June 2006 Crash LLC has entered into a new agreement with Geosim under
which they will assist Geosim in raising a total of $2 million of which$585k has
already been raised. At the time Brainspark held a 50.1% stake in Geosim; on full
subscription of the $2 million Brainspark's holding will be diluted to
approximately 42%. Geosim designs high-tech 3D city modelling technology.
Applications include urban planning and development, tourism, estate agency, law
enforcement,advertising, entertainment and the security and rescue services.
On 29th June 2006 Fortune Cookie shareholders approved the company results for
the year ended 31st August 2005, which showed a post-tax profit of £184k (An
increase of 247% against the prior year) on turnover of £1,291k, this represents
an increase of 56.78% against the prior year) Brainspark holds a 29.44% equity
stake in the company.
Major events after June 2006
On 6th July 2006 Brainspark completed the disposal of its entire holding of
30,167 1p ordinary shares, which represented 25% of the issued share capital of
Kerb Limited, an internet services for a cash consideration of £205k Kerb
reported revenues for the year ended February 2006 of approximately £600k with
pre-tax profit of around £13k. The holding is being re-purchased by the company;
in the Brainspark accounts, the current book value of Kerb is £64k. A profit of
£151k for the transaction will be recorded in the 2006 Annual Report.
During the second half of July 2006 the Company Chairman, Prof. Francesco Gardin
, and one of the directors, Mr. Edward Burman, who lives in Beijin, met with a
number of potential Chinese partners in several Chinese cities as part of an
ongoing internal project focused on investments in China, through a specific
vehicle to be set up for this purpose.
On 31 July 2006 Brainspark participated in the £250k new round of financing in
Metapack Ltd, the leading UK provider of delivery software for multi-Channel
home delivery. Investors in this round include existing investors and
management, Cross Atlantic Capital Partners and Brainspark. Brainspark has
invested £30k in this round by converting existing debt into equity and
subsequently will hold 10.72% of the company.
MetaPack already provides software solutions to leading retailers such as John
Lewis, B&Q, Boots, Dixons, PCWorld and Comet and will continue to benefit from
internet driven growth in home delivery. In addition, MetaPack sees significant
growth potential in providing 'software as a service' using an ASP
architecture.This will allow MetaPack to target the thousands of medium sized
companies in retail and non-retail who currently use proprietary carrier
management systems. The new investment will support ASP development and
marketing.
On 26th September, Geosim informed Brainspark that they had received an
additional $435k from US private investors, under the current Crash LLC
agreement, of which $135k was received to complete the first $720k financing at
$10 million pre-money valuation of the $2 million which Crash LLC is assisting
the company to raise. And the remaining $300k, of the second $1.28 million has
been raised at a pre-money valuation of $20 million.As a result of dilution
after this initial $1.02 million and prior to conversion by Crash LLC of their
options, current equity held by Brainspark in Geosim is 43.56%. After Crash LLC
conversion it will be 41.03%. At a valuation of $20 million Brainspark's equity
stake in Geosim is valued $8.2 million (£4.36 million). This is equivalent to
1.31 p a share and takes no credit for Brainspark cash and other investment.
Prof. Francesco Gardin
Chairman
29 September 2006
Consolidated profit and loss account
For the period ended 30 June 2006
Financial Statements
+--------------------------------+------+-------------+-------------+----------------+
| |Notes |Six months to|Six months to| Year ended|
| | | 30 June 2006| | |
| | | | 30 June 2005|31 December 2005|
| | | (Unaudited)| | |
| | | | (Unaudited)| (Audited)|
| | | £'000| | |
| | | | £'000| £'000|
+--------------------------------+------+-------------+-------------+----------------+
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
|Turnover | 2 | -| -| -|
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
|Net operating expenses - | | (79)| (130)| (258)|
|recurring | | | | |
+--------------------------------+------+-------------+-------------+----------------+
|Net operating income - | | -| -| 122|
|exceptional | | | | |
+--------------------------------+------+-------------+-------------+----------------+
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
|Total net operating expenses/ | | (79)| (130)| (136)|
|Group operating loss | | | | |
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
|Share of operating loss of | 3 | (478)| (418)| (675)|
|associated undertakings | | | | |
+--------------------------------+------+-------------+-------------+----------------+
| | | | | |
| | | | | |
|Total operating loss: Group and | | | | |
|share of associated undertakings| | | | |
| | | (557)| (548)| (811)|
| | | | | |
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
|Loss on ordinary activities | | (557)| (548)| (811)|
|before interest | | | | |
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
|Interest receivable / (payable) | | 7| (3)| -|
+--------------------------------+------+-------------+-------------+----------------+
|Amounts written off investments | | -| -| (119)|
+--------------------------------+------+-------------+-------------+----------------+
|Loss on ordinary activities | | (550)| (551)| (930)|
|before taxation | | | | |
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
|Tax on loss on ordinary | | -| -| -|
|activities | | | | |
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
|Loss on ordinary activities | | (550)| (551)| (930)|
|after taxation | | | | |
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
| | | | | |
| | | | | |
|Retained loss for the financial | | (550)| (551)| (930)|
|period | | | | |
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
| | | | | |
+--------------------------------+------+-------------+-------------+----------------+
|Loss per 0.01p ordinary share | | | | |
| | | | | |
|Basic and diluted | 4 | (0.17p)| (0.29p)| (0.48p)|
+--------------------------------+------+-------------+-------------+----------------+
The loss for period is derived wholly from continuing activities.
The Company has no recognised gains or losses other than the loss for the
period.
Consolidated Balance sheet at 30 June 2006
+--------------------------------+-------+------------+------------+---------------+
| | Notes | Six months| Six months| Year ended|
| | | to 30 June| to 30 June| |
| | | 2006| 2005| 31 December|
| | | | | 2005|
| | | (Unaudited)| (Unaudited)| |
| | | | | (Audited)|
| | | £'000| £'000| |
| | | | | £'000|
+--------------------------------+-------+------------+------------+---------------+
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Fixed assets | | | | |
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Tangible assets | | -| 26| 9|
+--------------------------------+-------+------------+------------+---------------+
|Investments in associated | 5 | 545| 1,059| 1,023|
|undertakings | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Other investments | 6 | 1,222| 1,549| 1,130|
+--------------------------------+-------+------------+------------+---------------+
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
| | | 1,767| 2,634| 2,162|
+--------------------------------+-------+------------+------------+---------------+
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Current assets | | | | |
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Debtors | | 270| 402| 327|
+--------------------------------+-------+------------+------------+---------------+
|Cash at bank and in hand | | 257| 57| 446|
+--------------------------------+-------+------------+------------+---------------+
| | | 527| 459| 773|
+--------------------------------+-------+------------+------------+---------------+
| | | | | |
| | | | | |
|Creditors: amounts falling due | | (370)| (755)| (461)|
|within one year | | | | |
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Net current assets/ | | 157| (296)| 312|
|(liabilities) | | | | |
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Total assets less current | | 1,924| 2,338| 2,474|
|liabilities | | | | |
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Provisions for liabilities and | | -| (122)| -|
|charges | | | | |
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Net assets | | 1,924| 2,216| 2,474|
+--------------------------------+-------+------------+------------+---------------+
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Capital and reserves | | | | |
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Called up share capital | | 1,936| 1,923| 1,936|
+--------------------------------+-------+------------+------------+---------------+
|Share premium account | | 29,186| 28,562| 29,186|
+--------------------------------+-------+------------+------------+---------------+
|Other reserves | | 6,813| 6,813| 6,813|
+--------------------------------+-------+------------+------------+---------------+
|Profit and loss account | | (36,011)| (35,082)| (35,461)|
|(deficit) | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Total equity shareholders' funds| | 1,924| 2,216| 2,474|
+--------------------------------+-------+------------+------------+---------------+
Reconciliation of movements in Group shareholders' funds
For the period ended 30 June 2006
+--------------------------------+-------+------------+------------+---------------+
| | Notes | Six months| Six months| Year ended|
| | | to 30 June| to 30 June| |
| | | 2006| 2005| 31 December|
| | | | | 2005|
| | | (Unaudited)| (Unaudited)| |
| | | | | (Audited)|
| | | £'000| £'000| |
| | | | | £'000|
+--------------------------------+-------+------------+------------+---------------+
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Loss for the period | | (550)| (551)| (930)|
+--------------------------------+-------+------------+------------+---------------+
|New share capital issued | | -| -| 637|
+--------------------------------+-------+------------+------------+---------------+
| | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Net reduction in shareholders' | | (550)| (551)| (293)|
|funds | | | | |
+--------------------------------+-------+------------+------------+---------------+
|Opening shareholders' funds | | 2,474| 2,767| 2,767|
+--------------------------------+-------+------------+------------+---------------+
|Closing shareholders' funds | | 1,924| 2,216| 2,474|
+--------------------------------+-------+------------+------------+---------------+
Consolidated cash flow statement
For the period ended 30 June 2006
+----------------------------------+-------+------------+-------------+---------------+
| |Notes | Six months|Six months to| Year ended|
| | | to| 30 June 2005| |
| | | | | 31 December|
| | |30 June 2006| (Unaudited)| 2005|
| | | | | |
| | | (Unaudited)| £'000| (Audited)|
| | | | | |
| | | £'000| | £'000|
+----------------------------------+-------+------------+-------------+---------------+
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Net cash flow from operating | 7 | (104)| -| (297)|
|activities | | | | |
+----------------------------------+-------+------------+-------------+---------------+
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Returns on investments and | | | | |
|servicing of finance | | | | |
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Interest paid on shareholder loan | | -| -| (11)|
+----------------------------------+-------+------------+-------------+---------------+
|Interest received | | 7| | |
+----------------------------------+-------+------------+-------------+---------------+
|Net cash outflow from returns on | | | | |
|investments and servicing of | | | | |
|finance | | 7| -| (11)|
+----------------------------------+-------+------------+-------------+---------------+
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Acquisitions and disposals | | | | |
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Sale of investments in associated | | -| 55| 105|
|undertakings | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Purchase of investments | | (92)| -| -|
+----------------------------------+-------+------------+-------------+---------------+
|Loans to associated undertakings | | -| (26)| (56)|
+----------------------------------+-------+------------+-------------+---------------+
|Net cash inflow (outflow) from | | (92)| 29| 49|
|acquisitions and disposals | | | | |
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Net cash inflow (outflow) before | | (189)| 29| (259)|
|financing | | | | |
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Financing | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Receipt from convertible loan | | -| -| 850|
|issue | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Partial repayment of loan to major| | -| -| (173)|
|shareholder and others | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Net cash inflow from financing | | -| -| 677|
+----------------------------------+-------+------------+-------------+---------------+
|(Decrease)/increase in net cash | | (189)| 29| 418|
|for the period | | | | |
+----------------------------------+-------+------------+-------------+---------------+
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Reconciliation of cash flow to | | | | |
|movement in net funds | | | | |
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Net cash at beginning of period | | 446| 28| 28|
+----------------------------------+-------+------------+-------------+---------------+
|Increase (decrease) in net cash in| | (189)| 29| 418|
|the period | | | | |
+----------------------------------+-------+------------+-------------+---------------+
|Net cash at end of period | | 257| 57| 446|
| | | | | |
+----------------------------------+-------+------------+-------------+---------------+
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 2005 is an abridged
version of the statutory accounts for that year and those accounts, upon which
the auditors issued an unqualified opinion.
2. Profit and Loss
Six months to Six months Year ended
30 June 2006
to 30 June 2005 31 December 2005
(Unaudited)
(Unaudited) (Audited)
£'000
£'000 £'000
Turnover
Group turnover including share 257 238 570
of associated undertakings
Less: share of associated (257) (238) (570)
undertakings
- - -
3. Share of operating loss of associated undertakings
Six months to Six months to Year ended
30 June 2006
30 June 2005 31 December 2005
(Unaudited)
(Unaudited) (Audited)
£'000
£'000 £'000
Share of operating loss of (136) - (13)
associated Undertakings
Amortisation of goodwill on (342) (418) (662)
acquisition
Impairment of goodwill - - -
(478) (418) (675)
4. Basic and diluted loss per share amount pence ordinary share
Six months to Six months to Year ended
30 June 2006
30 June 2005 31 December 2005
(Unaudited)
(Unaudited) (Audited)
£'000
£'000 £'000
Loss attributable to ordinary (550) (551) (930)
shareholders
Adjusted loss (550) (551) (930)
Weighted average number of 330,697 192,273 193,091
ordinary shares
Adjusted weighted average number 330,697 192,273 193,091
of ordinary shares
Basic loss per share (0.17p) (0.29p) (0.48p)
Diluted loss per share (0.17p) (0.29p) (0.48p)
5. Investments in associated undertakings
Six months to Six months to Year ended
30 June 2006 30 June 2005 31 December 2005
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Share of net (liabilities) /
assets
At beginning of period 15 28 28
Share of loss for the period (136) - (13)
At period end (121) 28 15
Goodwill
At beginning of period 651 1,313 1,313
Amortisation of goodwill (342) (418) (662)
At period end 309 895 651
Loans to associated undertakings
At beginning of period 357 410 410
Further advances in the period - 26 56
Further advance as a result of - - 191
set-off agreement
Provisions against loans and - (300) (300)
disposal
At period end 357 136 357
Net book amount at period end 545 1,059 1,023
6. Other investments
Six months to Six months to Year ended
30 June 2006 30 June 2005
31 December
(Unaudited) (Unaudited) 2005
£'000 £'000 (Audited)
£'000
At beginning of period 1,130 1,549 1,549
Call-option 'initial payment' - - (300)
Provision against investments - - (119)
New investments made in the period 92 - -
At period end 1,222 1,549 1,130
7. Reconciliation of operating loss to net cash inflow from operating activities
Six months to Six months to Year ended
30 June 2006 30 June 2005
31 December
(Unaudited) (Unaudited) 2005
£'000 £'000 (Audited)
£'000
Operating loss (79) (133) (136)
Depreciation charge 9 18 35
Decrease in debtors 57 5 30
(Decrease) /increase in creditors (91) 110 (104)
Reduction in provision for liabilities - - (122)
and charges
Net cash flow from operating activities (104) - (297)
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.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 3 hours ago SSP Group
- 3 hours ago Real Estate Investors
- 4 hours ago WPP
- 4 hours ago Spectris
- 4 hours ago Clarkson