Final Results
For release on 28 September 2007
Eurovestech Plc
("Eurovestech" or "the Company")
Preliminary Results for the year ended 31 March 2007
Highlights
* Consolidated net profit of £5.6 million
* Excellent progress in portfolio companies
* Earnings per share 1.77p
* Rapid growth in sales and profits at ToLuna; sale of ToLuna shares raised £
7.4m
* Significant progress at KSS; demerger of retail and fuels operations
* Exciting new investments in LogNet (e-billing systems) and MIST
(groundbreaking sound separation technology)
Chairman's Statement
This was a further year of strong progress made by Eurovestech and its investee
companies.
Our financial results reflect this success with the company achieving its first
substantial realisation and the Group producing a profit after tax and minority
interests of £5.6 million in comparison to a loss of £0.3 million for the
previous year. Earnings per share were 1.77p compared to a loss of 0.10p in the
previous year.
As I described when I wrote to you last December to present our results for the
first six months of the year, the results are now prepared in a different way,
and I must again draw your attention to this. Following discussions with the
Financial Reporting Review Panel, the directors decided to consolidate
subsidiary undertakings from 1 April 2005, the effect of which is to include or
consolidate the trading activities and asset positions of ToLuna plc (`ToLuna')
and Knowledge Support Systems Limited (`KSS') within the Eurovestech Group
accounts. Comparative figures have been restated accordingly. This accounting
treatment reflects our ability to exercise control over ToLuna and KSS.
Previously, venture capital investments which were subsidiary undertakings,
including ToLuna and KSS, had not been consolidated. Rather, such investments
were treated as fixed asset investments and recorded at fair value, where it
could be reliably measured. For example, the carrying value of ToLuna was based
on its share price. This treatment was on the basis that all investments were
held exclusively for resale and that the valuation of investments was the most
relevant information for the users of the financial statements.
The directors continue to consider ToLuna and KSS to be held for resale at the
most appropriate time - as are all investments in the company's portfolio.
Their inclusion in Eurovestech's profit statements may cause some volatility in
the reported consolidated results. Our focus remains on running the Group in
order to build the asset value for investors.
On a consolidated basis, turnover for the year was £15.9 million against £8.0
million for the comparable period. This represents combined revenue growth from
ToLuna and KSS of 99 per cent. The gain on disposals of fixed asset investments
was £6.9 million compared to £2.8 million in the previous year. This gain was
generated by the sale of 4,685 million shares in ToLuna, which realised sale
proceeds of £7.4 million, whereas in the corresponding period, the gain was a
result of the increase in Eurovestech's share of ToLuna's net assets arising as
a result of funds raised by ToLuna on its admission to trading on AIM in May
2005. The Group generated a pre-tax profit for the period of £6.9 million
against £0.01 million for the corresponding period.
These financial statements include the balance sheet for the company (as well
as the Group), which on a comparable basis shows an increase in shareholders'
funds from £37.9 million at 31 March 2006 to £54.0 million at 31 March 2007.
The listed investment in ToLuna is held at market value in the balance sheet
for the company. I have previously reported to you that your directors believe
that KSS is in a period of exceptionally rapid development. Following the
demerger of the retail division, it is expected that the directors will, by 31
March 2008, have much better visibility on the performance and prospects of KSS
and this may result in a change to its valuation. The £54.0 million net asset
value at 31 March 2007 includes the carrying value of our 100 per cent. holding
in KSS at an amount of £4.2 million.
Portfolio Review
ToLuna
ToLuna, the leading European independent provider of online panels and
technology services to the market research industry, delivered an exceptional
result. For the year to 31 December 2006, revenues almost trebled to £8.4
million and pre-tax profits were £2.2 million as against £0.7 million in the
previous year.
ToLuna serves a market research industry that continues to grow strongly as it
moves an increasing proportion of its services online. At 31 March 2007, ToLuna
reported that its panel membership had grown to 1.4 million compared with
875,000 as at 31 March 2006.
In March 2007, ToLuna acquired dPolls.com for £0.1 million. dPolls.com operates
an online community website and has launched a community research lab,
consisting of a first class technology team, with the objectives of not only
growing revenues but adding significant value to the community aspects of
ToLuna's panel operations.
During the year under review, Eurovestech realised £7.4 million after costs
from disposing of 4.685 million shares in ToLuna. This compares with the £2.0
million entire cost of our total investment. At 31 March 2007, the residual
value of our shareholding in ToLuna was £39.1 million. Eurovestech now holds
50.5 per cent of ToLuna's issued share capital.
Knowledge Support Systems ("KSS")
KSS is a provider of pricing and revenue management systems for the retail and
petroleum sectors.
Eurovestech owns 100 per cent. of the issued share capital of KSS.
During the year, KSS secured several customer wins. The Fuels Division has
broadened its product offering with the release of a new wholesale pricing
solution (Rackprice). Investment in the Retail division also yielded strong
growth in revenues combined with a considerable increase in customer prospects.
In July 2007, we reported that KSS's Fuels and Retail Divisions had achieved
sufficient momentum in their operational performance to allow them to operate
independently, and that the Retail Division would be demerged from the Fuels
Division into a new company that would also be a wholly-owned subsidiary of
Eurovestech. This would allow both divisions to pursue independent strategies,
more highly tailored to the needs of their respective market sectors, customers
and potential channel partners. I am pleased to report that earlier this month,
the demerger was completed. We believe that the demerger will demonstrate the
value of the respective divisions better by improving transparency and, more
importantly, creating additional commercial opportunities to generate
additional shareholder value.
Magenta Corporation Limited ("Magenta")
Magenta is a provider of intelligent software agent technology and advanced
application development services. Eurovestech is the joint largest shareholder
in Magenta, owning 43.7 per cent of the fully diluted share capital.
Magenta reached an important milestone; total revenues in excess of £1 million
from a single customer. In July 2006 a leading UK transportation group awarded
Magenta a contract for £0.75 million; in June 2007, the contract was extended
resulting in additional revenues of £0.3 million.
As a result of several customer wins, in June 2007 Magenta advised us that it
was forecasting an operational profit in the coming year.
Other portfolio companies
In July 2006, we sold our entire shareholding in Mykindaplace Limited for £0.5
million in cash to Sky New Media Ventures Limited, a wholly owned subsidiary of
British Sky Broadcasting Group plc. The book cost of our shareholding was £0.4
million. During the year, we provided in full against the carrying cost of £0.1
million of our investment in Lynx Photonic Networks Inc.
The remainder of the portfolio at 31 March 2007 includes holdings in ARKeX
Limited ("ARKeX"), Tevet Process Control Technologies Limited, D-Pharm Limited
and an initial investment in January 2007 of £0.3 million in Mist Technologies
SA ("MIST"). Although these investments collectively account for less than
three per cent of the company's investments by carrying value, we are
particularly encouraged by recent progress at ARKeX, whose technology enables
oil, gas and mineral explorers to pinpoint drilling opportunities from the air.
Eurovestech holds 4.3 per cent of ARKeX's fully diluted share capital.
MIST has developed proprietary sound separation technology that enables mono
and stereo film and music files to be re-mastered into high definition, home
cinema quality surround sound files. We are greatly encouraged by recent
customer discussions at MIST and believe its technology has considerable
potential.
Key performance indicators
The Group considers that it has achieved a good performance against its
measures of performance. Against the TechMark 100 Index, over the last five
years, Eurovestech's share price has increased by more than 1,100 per cent
against an increase in the TechMark 100 Index of less than 160 per cent.
New investments
In July 2007, we invested £2.0 million in Lognet Information Systems plc
("Lognet"). Lognet is a specialist in e-billing solutions enabling end
customers to manage their accounts online, order products and services, review
and analyse bills, execute payments and resolve issues online from a single
starting point at a company's web site. Customers include Cellcom and Orange.
Eurovestech holds 25.4 per cent. of Lognet's fully diluted issued share
capital.
At the time of our initial investment in MIST, we secured an option to invest
an additional £0.5 million in order to increase our shareholding to 41 per cent
of MIST's fully diluted share capital. As a result of the very rapid progress
in the business, in July 2007, we were delighted to exercise this option.
Charitable donations
During the year, Eurovestech issued 2,100,000 new ordinary shares to a total of
18 different charitable organisations, with a total market value at date of
issue of £0.4 million. Since 2001, the total number of new shares created and
issued to worthy causes is 7,700,000, with a current stock market value in
excess of £1.3 million. We hope these actions will encourage other companies to
support charities in this way.
Share buybacks
The board of Eurovestech notes the level of the share price relative to both
its assets and the prospects of its investee companies. Following discussions
with its advisers, the company intends to seek shareholder approval, to effect
market purchases of its own shares, subject to the Company having sufficient
distributable reserves at the time. A resolution seeking shareholder approval
will be proposed at the forthcoming Annual General Meeting.
Prospects
Recent developments are both exciting and encouraging. Earlier this month,
ToLuna reported record interim results with historic revenues of more than £1
million a month, a 53 per cent. increase in pre-tax profits to £1.4 million and
a 48 per cent increase in its interim dividend. We are particularly looking
forward to the forthcoming release of ToLuna's new web community initiatives.
Our recent investments in Lognet and MIST are progressing well. In view of the
significant developments at MIST, we are today announcing that next month, MIST
will be holding an investor presentation so that our shareholders will be able
to gain a greater understanding of the near term potential of this investment.
We have a first class executive management team and are now proposing to
implement an appropriate industry standard scheme to incentivise and reward
them for their excellent work.
Our companies share common characteristics in that they operate in very high
growth markets and possess strong proprietary technology and products. These
companies seek to fulfil very specific business needs whether in the field of
online market research, pricing and revenue management systems, real-time
business solutions, targeting exploration opportunities or seeking to
revolutionise sound quality and systems. With such a combination, we foresee
strong growth in the revenues and profits of our portfolio companies and
increasing broader interest in the achievements of our group enterprises.
Richard Grogan
Chairman
28 September 2007
Consolidated Profit and Loss Account
For the year ended 31 March 2007
Year ended Year ended
31 March
31 March
2006
2007
£'000 £'000
Turnover 15,868 7,981
Operating expenses (15,628) (10,875)
Operating profit/(loss) 240 (2,894)
Investment income 74 21
Amounts written off investments (139) (69)
Loss on current asset investments (389) (10)
(214) (2,952)
Gain on sale of fixed asset investments 6,900 2,787
6,686 (165)
Net interest 254 176
Profit on ordinary activities before taxation 6,940 11
Taxation (715) (78)
Profit/(loss) on ordinary activities after taxation 6,225 (67)
Equity minority interests (656) (231)
Profit/(loss) for the financial year retained 5,569 (298)
Basic earnings (pence per share) 1.77 (0.10)
Diluted earnings (pence per share) 1.75 (0.10)
All operations are continuing.
Consolidated Balance Sheet
At 31 March 2007
At At
31 March 31 March
2007 2006
£'000 £'000
Fixed assets
Positive goodwill 1,837 2,090
Negative goodwill (1,097) (1,975)
740 115
Other intangible assets 1,317 655
2,057 770
Tangible assets 605 485
Fixed asset investments 4,104 3,767
6,766 5,022
Current assets
Debtors 5,243 3,484
Current asset investments 9,701 3,529
Cash at bank and in hand 5,117 4,079
20,061 11,092
Creditors: amounts falling due within one year (9,240) (5,820)
Net current assets 10,821 5,272
Net assets 17,587 10,294
Capital and reserves
Called up share capital 3,156 3,135
Share premium account 13,855 13,855
Other reserve 407 155
Profit and loss account (3,241) (9,185)
Equity shareholders' funds 14,177 7,960
Equity minority interests 3,410 2,334
Equity shareholders' funds after minority interests 17,587 10,294
The financial statements were approved by the Board of Directors on 28
September 2007.
Consolidated Cash Flow Statement
For the year ended 31 March 2007
Note Year ended Year ended
31 March 31 March
2007 2006
£'000 £'000
Net cash inflow from operating activities (i) 1,950 333
Returns on investments and servicing of finance
Other investment income 74 21
Interest received and similar income 297 246
Interest paid (43) (70)
Net cash inflow from returns on investments and 328 197
servicing of finance
Taxation received/(paid) 40 (83)
Capital expenditure and financial investment
Purchase of tangible fixed assets (351) (659)
Purchase of intangible fixed assets (1,247) (808)
Cash inflow on issue of shares by subsidiary - 4,447
undertaking
Purchase of fixed asset investments (914) (998)
Receipts from sale of fixed asset investments 7,772 464
Net cash inflow from capital expenditure and 5,260 2,446
financial investment
Acquisitions
Purchase of subsidiary undertakings - (1,910)
Management of liquid resources
Sale of current asset investments 20,515 47,221
Purchase of current asset investments (27,076) (48,136)
(ii) (6,561) (915)
Net cash outflow from management of liquid
resources
Net cash inflow before financing 1,017 68
Financing
Issue of shares 21 17
21 17
Net cash inflow from financing
Increase in cash (iii) 1,038 85
Consolidated statement of total recognised gains and losses
For the year ended 31 March 2007
Year ended Year ended
31 March 31 March
2007 2006
£'000 £'000
Profit/(loss) for the financial year 5,569 (298)
Foreign exchange gain/(loss) arising on translation of 218 (140)
investments in overseas subsidiaries
Total gains and losses recognised for the year 5,787 (438)
(i) Net cash outflow from operating activities
Year ended Year ended
31 March 31 March
2007 2006
£'000 £'000
Operating profit/(loss) 240 (2,894)
Foreign exchange movement 17 -
Depreciation 214 289
Amortisation of intangible fixed assets 585 168
Amortisation of goodwill (639) (622)
Share based payments 409 76
(Increase)/decrease in debtors (1,856) (287)
Increase in creditors 2,980 3,603
Net cash (outflow)/inflow from operating activities 1,950 333
(ii) Reconciliation of net cash flow to movements in net funds
Year ended Year ended
31 March 31 March
2007 2006
£'000 £'000
Increase in cash in the year 1,038 85
Cash outflow from increase in liquid resources 6,561 915
Non cash movement on current asset investments (389) (60)
Change in net funds resulting from cash flows 7,210 940
Net funds at 1 April 7,608 6,668
Net funds at 31 March 14,818 7,608
(iii) Analysis of Changes in net funds
At Cash Non cash At
movements
1April 2006 flow 31 March 2007
£'000 £'000 £'000 £'000
Cash in hand 4,079 1,038 - 5,117
Liquid resources 3,529 6,561 (389) 9,701
Debt - - -
7,608 7,599 (389) 14,818
Notes to the Preliminary Results for the year ending 31 March 2007
1. Basis of Preparation
The financial information set out in this announcement does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985.
The financial information for the year ended 31 March 2007 has been extracted
from the Company's financial statements to that date which have received an
unqualified auditor's report but have not yet been delivered to the Registrar
of Companies.
2. Earnings per Ordinary Share
The calculation of earnings per share (2006: loss per share) is based on the
profit attributable to ordinary shareholders of £5,569,000 (2006: loss of £
298,000) divided by the weighted average number of shares in issue during the
year, being 314,210,198 (2006: 312,883,075) shares. The dilutive impact of
warrants and share options outstanding at the 31 December 2007 amounted to
4,285,826 shares.
3. Dividends
No dividends were paid or proposed in respect of the year ended 31 March 2007.
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 and from the Company's website www.eurovestech.co.uk
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