Final Results
To be embargoed until 7.00 am on
23 September, 2004
EUROVESTECH PLC ('Eurovestech' or 'the Company')
Preliminary Results
for the year ended 31 March, 2004
Chairman's Statement
I am pleased to report on a year that has been both eventful and successful. As
I said in previous statements, our objective has been to build a portfolio of
quality investments in very high growth markets, combining our ability to
identify targeted investment opportunities with that of helping them execute on
their operational success. We have made progress and demonstrated strengths on
both counts. Several of our investee companies achieved profitability and
attained important milestones. In June 2003, we completed our first public to
private transaction with the acquisition of Knowledge Support Systems Limited
(`KSS').
In October 2003, we raised £1.7 million in an institutional placing. This
represented an objective endorsement of our approach as well as our prospects:
the placing price was above the IPO price of March 2000 - testimony to our
progress and our endurance.
At 31 March 2004, shareholders' funds were £8.66 million, against £4.76 million
in 2003. Net asset value per share increased by 59 per cent to 3.3p per share.
This increase is after taking account of a loss for the year of £1.15 million,
which was impacted by a £0.41 million decline over the period in the value of
our 9.1 per cent shareholding in Knowledge Support Systems Group plc. I regard
this as something of a 'pyrrhic loss', given that although it reduced our gain
on the share trade to £0.1 million, it resulted in us acquiring 100 per cent of
KSS, the main operating subsidiary of Knowledge Support Systems Group plc.
Our investments are valued in accordance with the British Venture Capital
Association (BVCA) guidelines, which state that investments should be reported
at fair values unless fair values cannot be reliably measured. Our investments
do not allow fair values to be reliably measured. We would like all valuations
to be on the basis of appropriate comparatives; unfortunately the nature of our
key investments at their current stage of exceptionally rapid development,
makes `fair values' impractical to benchmark reliably. This means that our
holdings in Cjudge Limited (`Cjudge') and Magenta Corporation Limited
(`Magenta') are carried at cost, whilst (as we announced when we published our
interim results in December 2003), we have increased the carrying value of KSS
to its net cash at 30 September 2003 of £4.2 million.
We are concerned that these carrying values therefore do not reflect the `fair
values' of these businesses and that the methods of valuation employed convey
neither `fair' value nor a sense of actual value. For example, last December,
we reported that the management of KSS believed that the company would be
strongly cash generative in 2004. Our current carrying value therefore does not
reflect any enterprise value (value of the business excluding its cash) for
KSS.
The directors are also mindful of the latest international accounting
developments relating to discussions about consolidating the results of
investment subsidiary companies. Eurovestech owns 100 per cent of KSS and 77
per cent of the fully diluted share capital of Cjudge. These investments are
currently accounted for as fixed asset investments in accordance with the
Companies Act, but over-riding the requirements of Financial Reporting Standard
No 2 'Accounting for Subsidiary Undertakings'. If these businesses were to be
consolidated for the coming year, their turnover and operating results would be
included within Eurovestech's financial statements. Based on forecasts for KSS
and Cjudge, this would lead to the inclusion of several million pounds of
turnover and profitability on a group basis albeit not properly reflecting the
directors' views of how the business should be portrayed. We will watch the
debate and emergent market practice in this area with interest.
On a separate but related issue, I am pleased to report that the stock market
value of shares in Eurovestech gifted to worthy causes during the year exceeded
£1 million. I am proud that so many great causes have been able to benefit from
the progress we have made and we are committed to continue our support for
others whom we can help. The company announces that it has today issued 600,000
new ordinary shares divided equally between the following six charitable
organisations: Guy's Hospital, Trinity Hospice, Nordoff-Robbins Music Therapy,
Tommy's Baby Charity, Alzheimer's Society and The Variety Club of Great
Britain. Application has been made for these 600,000 new ordinary shares to be
admitted to AIM and it is expected that dealings in these shares will commence
on 30 September 2004. Richard Bernstein, Chief Executive of the Company, has
paid the £6,000 nominal value to facilitate their issue.
PORTFOLIO REVIEW
KSS
During the year under review, we acquired KSS: Eurovestech's first public to
private transaction. KSS provides pricing and revenue management solutions for
the retail and petroleum industries.
With our support, management were able to restructure the business quickly and
significantly reduce operating expenses, whilst retaining all key staff. The
successful surrender of its lease on surplus office space was negotiated,
resulting in the release of a previously paid rental deposit of more than £
300,000. In addition, during the year, £180,000 was returned to Eurovestech
from an escrow account, following an amicable settlement with a former director
for loss of office.
During the year, substantial client wins brought the total number of sites
licensed for PriceNet, a KSS product name, to just under 10,000, making KSS a
world leader in the provision of petroleum pricing solutions. KSS also achieved
significant progress in providing pricing solutions to retailers, substantially
increasing business momentum, especially in the key US market.
As a result, KSS traded materially ahead of our expectations. In December 2003,
we were able to announce that the management of KSS believed that the company
would be strongly cash generative in 2004.
Cjudge
Cjudge, the Paris-based online market research company, had an excellent year
securing several material client wins and reaching profitability ahead of
forecast. The business capitalised well on its positioning, being able to
provide online data collection and access panel management systems to many of
Europe's blue chip enterprises. During the year, Cjudge also enjoyed strongly
increasing international demand for its products and services.
In our 2002 results, however, we reduced the carrying value of our initial €2
million investment in Cjudge by 90 per cent to reflect the general decline in
business conditions at that time. This resulted in a write down of £1,084,000.
In view of both the recovery in general business conditions and the outstanding
progress that Cjudge has made, therefore, the Board believes that it would be
misleading to retain the carrying value at the current level and as a result,
we have returned the carrying value of our Cjudge shareholding to cost.
In December 2003, we announced that we were in advanced discussions with
Cjudge's management in order to assess how best to capitalise on Cjudge's
growing success. These discussions were successfully concluded with Eurovestech
agreeing to invest an additional €600,000 to increase its shareholding from 73
per cent to 77 per cent of the fully diluted share capital. €300,000 of this
investment had been made by our year end.
Magenta
Magenta is a leading provider of intelligent software agent technology, which
enables automation of real-time negotiating and scheduling processes. During
the year, Magenta secured a substantial order from Tankers International, one
of the largest oil tanker pools in the world, to enable the client to assess
cargoes, match them against their fleet of 42 supertankers and calculate voyage
profitability. Unlike traditional rules-based systems, Magenta's technology is
designed to respond to real world changes impacting a schedule and being able
to immediately replan the most advantageous schedule at that point in time.
As stated in our trading update announced in March, we are encouraged with
Magenta's recent progress and as a result were in advanced discussions with
Magenta's management as to how best to fully capitalise on its exciting
prospects. These discussions were successfully concluded with Eurovestech
investing £377,500 to increase its shareholding from 33.3 per cent to 37.7 per
cent of the fully diluted share capital. £242,500 of this investment had been
made by our year end.
Boxmind Limited (`Boxmind')
As we reported in our trading update in March, prospects for Boxmind, the
e-learning publisher had become increasingly difficult. We therefore held
detailed discussions with potential purchasers of the business and reported
that the terms of any sale would reflect the difficulties that Boxmind has
encountered and likely to be at a price which represented a very substantial
discount to Eurovestech's £1.25 million cost of investment. These talks failed
to reach agreement and therefore we have reduced the carrying value of our
shareholding in Boxmind to nil.
Mykindaplace (`MKP')
MKP continues to be the UK's leading online magazine for teenage girls. In
August 2003, we announced that MKP had reached profitability. MKP continued to
trade strongly with growing profitability during the year. Eurovestech owns 5.3
per cent of MKP's fully diluted share capital.
In our 2002 results, we reduced the carrying value of MKP by 57 per cent to
reflect the general decline in business conditions at that time. This resulted
in a write down of £223,000. In view of both the recovery in general business
conditions and the specific progress that MKP has made, the Board believes that
it would be misleading to retain the carrying value at the current level and as
a result, again, we have returned the carrying value of our shareholding to
cost.
Tevet Process Control Technologies Limited (`Tevet')
Tevet, the developer of a measurement system for monitoring and controlling
production parameters for the manufacture of silicon wafers, delivered
encouraging progress during the year and began booking multiple units for
production applications. Tevet's customers now include many of the world's
leading semiconductor companies.
After our year end, Tevet successfully completed a $4.5 million funding round
in which Eurovestech invested $150,000, after which we own 3.8 per cent of
Tevet's fully diluted share capital. We are particularly impressed by the
calibre of new investors including the participation of a global strategic
investor and believe that these funds will allow Tevet to fully capitalise on
its growth prospects.
New investment
Though we have focussed attention and effort on our portfolio companies during
the past year, we recognise that our future progress is also a function of new
investments.
We are pleased to announce that during the year to 31 March 2004, we invested £
181,250 in ARKeX Limited, a start-up company providing cutting-edge technology
in oil, gas and mineral exploration, enabling the search for deposits to be
carried out from the air. The technology's use is not limited to the oil and
gas industry - significant interest has been shown by other mineral exploration
sectors, such as that of diamond-mining. The defence industry has also
expressed interest: the technology can help detect underground structures and
be used in the navigation systems of ships and submarines.
The funding was co-led by Scottish Equity Partners and RWE Dynamics; each has
invested £1.5 million. RWE Dynamics is part of the German RWE group that
includes oil company RWE-Dea. Other co-investors including Nova Technology
Partners, a fund whose partners include Shell, BP, Hess, Chevron Texaco,
Talisman, Kerr McGee and Total. Eurovestech plc owns 2.29 per cent of the fully
diluted share capital of ARKeX Limited.
PROSPECTS
Looking forward, we are delighted to report many positive developments.
KSS has recently won several sizeable contracts, some in the important US
market. A licensing agreement for KSS's PriceStrat pricing and promotions
solution was signed with Sheetz Inc., a Pennsylvania-based retailer with 300
stores. Texas-based food chain Brookshire Brothers has also signed a licensing
agreement for PriceStrat to be implemented across all of its grocery formats.
Within the petroleum division, new customers include Kuwait Petroleum,
enhancing KSS's reputation as a world-leading supplier of petroleum pricing
solutions. Whilst the precise timing of prospective customer wins is never easy
to predict, in recent months, KSS has seen its sales pipeline strengthen
considerably, giving us increasing confidence in its prospects.
Cjudge has enjoyed record recent trading and in response to client requests,
its panel management systems are now operational in France, the UK, Germany,
Italy, Belgium and Spain. The business is forecasting strong revenue growth
throughout the remainder of the year.
Magenta is now gaining increasing traction with potential customers. The
Tankers International contract represents an important reference point; we
believe Magenta's real-time scheduling processes have the potential to
transform business efficiencies across multiple logistical applications.
We are pleased with the company's continuing progress and we believe that if
our key portfolio companies continue to deliver on their plans, we will be in a
very strong position to capitalise on these successes.
RICHARD GROGAN
Chairman
23 September 2004
Profit and Loss Account
for the year ended 31 March 2004
Note Year ended Year ended
31 March 31 March
2004 2003
£ £
Turnover 34,692 93,466
Gross profit 34,692 93,466
Administrative expenses (1,228,213) (653,631)
Other operating income 1,091 9,360
Operating loss (1,192,430) (550,805)
Net interest (27,131) 11,323
Loss on disposal of fixed asset - (330,251)
investments
Amounts written back to/(off) investments 66,912 (3,751,460)
Loss on ordinary activities after
taxation
transferred to reserves (1,152,649) (4,621,193)
Loss per Ordinary Share 1 (0.475p) (2.055p)
Balance Sheet
as at 31 March 2004
At At
31 March 31 March
2004 2003
£ £
Fixed assets
Tangible assets 3,205 9,565
Investments 8,467,663 2,906,929
8,470,868 2,916,494
Current assets
Debtors 226,124 155,381
Investments 56 1,718,657
Cash at bank and in hand 1,313,728 370,507
1,539,908 2,244,545
Creditors: amounts falling due within one (1,348,003) (397,354)
year
Net current assets 191,905 1,847,191
Total assets less current liabilities 8,662,773 4,763,685
Capital and reserves
Called up share capital 2,598,109 2,266,225
Share premium account 9,028,440 7,643,324
Revaluation reserve 3,170,316 -
Profit and loss account (6,134,092) (5,145,864)
Shareholders' funds 8,662,773 4,763,685
Cash Flow Statement
for the year ended 31 March 2004
Note Year ended Year ended
31 March 31 March
2004 2003
£ £
Net cash outflow from operating (i) (1,147,029) (285,262)
activities
Returns on investments and servicing of
finance
Interest received and similar income 21,176 35,216
Interest paid (48,307) (23,893)
Net cash (outflow)/inflow from returns on
investments and
servicing of finance (27,131) 11,323
Capital expenditure and financial
investment
Purchase of tangible fixed assets (988) (3,912)
Purchase of fixed asset investments (2,323,506) (1,119,366)
Receipts from sale of fixed asset - 663,915
investments
Net cash outflow from capital expenditure
and
and financial investment (2,324,494) (459,363)
Management of liquid resources
Sale of current asset investments 9,027,163 11,587,966
Purchase of current asset investments (7,402,288) (12,796,625)
Net cash inflow/(outflow) from management (ii) 1,624,875 (1,208,659)
of liquid resources
Net cash flow before financing (1,873,779) (1,941,961)
Financing
Receipt of borrowings 1,100,000 -
Issue of shares 1,717,000 -
Net cash inflow from financing 2,817,000 -
Increase/(Decrease) in cash (ii) 943,221 (1,941,961)
i. NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Year ended Year ended
31 March 31 March
2004 2003
£ £
Operating loss (1,192,430) (550,805)
Depreciation 7,348 20,810
Loss/(Gain) on disposal of fixed asset 93,726 (174,717)
investments
(Increase)/Decrease in debtors (70,743) 425,333
Decrease in creditors (149,351) (25,274)
Charges for shares issued at under fair 164,421 19,391
value
Net cash outflow from operating activities (1,147,029) (285,262)
ii. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Year ended Year ended
31 March 31 March
2004 2003
£ £
Increase/(Decrease) in cash in the year 943,221 (1,941,961)
Cash inflow from financing (1,100,000) -
Cash (inflow)/outflow from increase/decrease in (1,624,875) 1,234,518
liquid resources
Other non-cash movements (93,726) 174,717
Change in net (debt)/funds resulting from cash (1,875,380) (532,726)
flows
Net funds at 1 April 2003 2,089,164 2,621,890
Net funds at 31 March 2004 213,784 2,089,164
iii. ANALYSIS OF CHANGE IN NET FUNDS
At At
1 April Other non 31 March
2003 Cash flow cash items 2004
£ £ £ £
Cash in hand 370,507 943,221 - 1,313,728
Liquid resources 1,718,657 (1,624,875) (93,726) 56
2,089,164 (681,654) - 1,313,784
Debt - (1,100,000) - (1,100,000)
2,089,164 (1,781,654) (93,726) 213,784
Notes to the financial statements
1. Loss per share
The calculation of loss per share is based on the loss attributable to ordinary
shareholders of £1,152,649 (2003:£4,621,193) divided by the weighted average
number of shares in issue during the year, being 242,595,053 (2003:
224,915,248) shares. Warrants outstanding at the year end were anti-dilutive.
2. Dividends
No dividends were paid or proposed in respect of the years ended 31 March 2004
or 2003.
3. The results for the year ended 31 March, 2004 and the balance sheet at that
date have been extracted from the statutory accounts of the Company for that
year, upon which the Company's auditors, Grant Thornton, have confirmed they
will issue an unqualified audit report under Section 235 of the Companies Act
1985. The accounts for the year ended 31 March, 2004 will be filed with the
Registrar of Companies following the Annual General Meeting. The financial
information for the year ended 31 March, 2004 has been prepared on the basis of
the accounting policies set out in the accounts for the year ended 31 March,
2004.
The comparative figures for the period ended 31 March, 2003 have been extracted
from the statutory accounts for the Company for the period, filed with the
Registrar of Companies, which carried an unqualified audit report.
4. A copy of the Annual Report and Accounts will be sent to all shareholders
shortly and will be available from the Company's registered office, 29 Curzon
Street, London W1J 7TL.
Thursday, 11th December 2025
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