Final Results
To be embargoed: not to be released until 7.00 a.m.
on 27 September 2006
EUROVESTECH PLC ("Eurovestech" or "the Company")
Preliminary Results
for the year ended 31 March 2006
Chairman's Statement
I am delighted to report on a year of good progress made by Eurovestech and its
investee companies.
It is now more than six years since we listed on AIM raising £9.8 million at 5p
per share. We spent much of the first three years surviving an extremely
adverse environment - one that proved too severe for many of our peers. In
contrast, the last three years have seen us focus on our key investments and
ensure that they flourish. Most notably, ToLuna plc (`ToLuna') listed on AIM in
May 2005, valuing our shareholding at £18 million, against a cost of investment
of £2 million. As at 31 March 2006, this value had risen to £28.4 million. The
current (September 2006) value of our cash and shareholdings in quoted
companies is £38 million. This excludes the value of our unquoted portfolio.
In the year to 31 March 2006, the value of our net assets increased
significantly - from £13.3 million to £37.9 million. The directors consider
that this increase is a key indicator of Eurovestech's performance. As I have
previously reported to you, your directors believe that Knowledge Support
Systems Limited ("KSS") is in a stage of exceptionally rapid development as a
result of which it is impractical reliably to benchmark its market value.
Accordingly Eurovestech's year end net asset value of £37.9 million reflects
the carrying cost of our 100 per cent. holding in KSS at its September 2003
valuation of £4.2 million.
Eurovestech's operating results do not reflect these increases in investment
value, as unrealised gains are shown as a movement in the revaluation reserve.
The result is that even though Eurovestech's recognised gains for the year were
£24.5 million, we operate at a loss. This year, our loss after tax for the year
was £1.87 million. This compares with an operating loss for last year of £0.66
million. The loss this year was increased by several non-recurring factors: a
one-off cost of £0.5 million in lieu of a three-year option package to
Jean-Michel Petit, Eurovestech's Director of Investments, a £0.3 million charge
for amending the incentive package to a senior executive at a portfolio
company, and a £0.2 million increase in professional fees. Last year's figure
also included the benefit of a £0.3 million gain from short-term investments.
Portfolio Review
ToLuna
ToLuna is a leading European provider of online panels and technology services
to the market research industry. In May 2005, ToLuna was listed on AIM, raising
£5 million gross from institutional investors. At that time the business was
operating from one office in Paris and its panel - a critical element of the
service it provides - comprised 350,000 members. Since then, ToLuna has opened
an office in London and in December 2005 it acquired Speedfacts Gesellschaft
for £2.1 million, providing a strong presence in Germany, and concluded an
important strategic co-operation agreement with freenet.de AG, one of Germany's
biggest internet service providers. At 31 March 2006, ToLuna had 875,000
panellists in 13 European countries.
Demand for ToLuna's services grew strongly throughout the year as market
research companies and others switched an increasing proportion of their market
research online, drawn by the very significant advantages in cost and speed of
processing.
In June 2006, Cenkos Securities, Eurovestech's joint broker, placed 2,245,000
of our ToLuna shares with institutional clients realising £2.9 million after
costs. The disposal proceeds represent a significant return over the book cost
of £2 million, being Eurovestech's total cost of investment in ToLuna.
Following this transaction, Eurovestech holds 20,475,300 shares, equivalent to
57 per cent. of ToLuna's issued share capital. Eurovestech's residual holding,
which was valued at £28.4 million at the end of the period under review had a
value, on 26 September, of £35.6 million, based on the mid-market price of a
ToLuna share on that date.
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.
When we acquired the business in June 2003, annual revenues were approximately
£1 million and losses were approximately £6 million per annum. In the year to
June 2005, KSS increased sales more than four-fold to over £5 million and
produced a post-tax profit of £958,000. Following this, KSS decided, with our
support, to invest heavily to increase the rate of growth and to broaden its
product offering. This involved a 40 per cent. increase in staffing levels,
with key appointments in the retail business unit and more generally in the
important US market. In addition, substantial investment has been made in
product research and development both for new and existing product lines.
In July 2006, we reported that KSS had secured several important customer wins
including Safeway US, Circle K (a leading North American convenience store
chain with more than 2,000 stores across the USA), GetGo, part of Giant Eagle
Inc. (a US food retailer with annual revenues of more than $5 billion) and Q8
Italy. We also reported that as a result of delays in closing some contracts,
KSS's revenue for the year to June 2006 was below its management's
expectations. Partly as a result of this, but mainly as the consequence of
writing off the investment to upscale the business and full expensing of
research and development costs, KSS produced after-tax losses of £2.1 million.
Nonetheless, we are confident that our investment will deliver good returns.
One of the delayed contracts was closed immediately following KSS's year-end.
The management of KSS is forecasting strong first half sales and we believe
that the business is well placed to exploit a very significant market
opportunity, particularly in the retail sector, where its PriceStrat product is
making a significant impact on the market.
Magenta Corporation Limited ("Magenta")
Magenta is a provider of intelligent software agent technology and advanced
application development services with particular strength in real-time resource
allocation and scheduling. Magenta builds innovative systems to enable its
customers to differentiate themselves and gain a competitive edge.
In June 2006, Eurovestech completed a £1 million investment in Magenta,
increasing our shareholding from 37.7 per cent. to 43.7 per cent. of Magenta's
fully diluted issued share capital, after allowing for the anticipated exercise
of employee stock options. Following this investment, Eurovestech's total cost
of investment in Magenta has increased to £2.4 million.
I am pleased that in July 2006, Magenta secured a £0.75 million outsourcing
contract with a leading UK transportation group. This contract represents
Magenta's largest single order to date.
Other portfolio companies
In July 2006, we reported that we had 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 this shareholding was £0.4 million.
The remainder of the portfolio has a carrying value of £1.1 million and
includes a £0.4 million investment in ARKeX Limited ("ARKeX") and a £0.4m
investment in Tevet Process Control Technologies Limited ("Tevet").
ARKeX provides technology which enables searches for oil, gas and mineral
companies to pinpoint appropriate drilling sites from the air. We are extremely
pleased with the scale and extent of customer wins at ARKeX and, in December
2005, we agreed to increase our total investment in ARKeX to £0.6 million, as
part of a £5.5 million funding round, after which Eurovestech holds 4.3 per
cent. of ARKeX's share capital.
Tevet, which serves the semiconductor industry with integrated metrology
services, achieved revenues 25 per cent. ahead of budget for the first half of
its year to December 2006. Eurovestech owns 3.8 per cent. of Tevet's fully
diluted share capital.
Charitable donations
During the year, the Company issued 400,000 shares to four charitable
organisations, with a total market value at date of issue of £53,000. In April
2006, Eurovestech issued a further 400,000 shares to four charitable
organisations, bringing the total number of new shares created and issued since
2001 to 6,000,000. We are delighted that the current stock market value of
these shares is in excess of £1 million. We hope these policies and actions
will encourage other companies to support charities in this way.
The Company has today issued 200,000 new ordinary shares to The Shooting Star
Children's Hospice and 200,000 new ordinary shares to The Haven House
Children's Hospice. Application has been made for these shares to be admitted
to AIM and it is expected that dealings in these shares will commence on 5
October 2006. Richard Bernstein, Chief Executive of the Company, has paid the £
4,000 nominal value to facilitate their issue.
Prospects
The current year is progressing well. ToLuna has reported first half revenues
of £3.6 million, which exceeded proforma full year 2005 revenue by 20 per cent.
Its first half profits were £0.9 million - results well ahead of management
expectations. The size of its panel has grown to more than 1.1 million members,
and we are pleased to see the increased adoption of its technology offering and
expanded scale of customer wins.
KSS is generating increasing interest in the price optimisation market: over
17,000 retail sites in 12 countries are now powered by KSS solutions. We
believe the range and quantity of current customer trials is set to translate
into strong revenue growth. We are delighted to report that earlier this week,
KSS secured a licence contract valued at more than £1 million, with PKN Orlen,
Poland's largest fuels retailer.
Magenta's recent outsourcing contract represents an important milestone for the
business, at a time when its core technology offering for real-time solutions
is gaining increasing customer acceptance.
Our sale of shares in ToLuna in June 2006 has generated a realised profit of £
2.7 million and I anticipate that it will contribute to a strong first half
result. The current value of our cash and quoted portfolio is £38 million.
One cannot be anything but extremely optimistic about our prospects.
Richard Grogan
Chairman
26 September 2006
Profit and Loss Account
for the year ended 31 March 2006
Year ended Year ended
31 March 31 March
2006 2005
£ £
Other operating income 16,668 -
Administrative expenses (1,843,288) (918,385)
Operating loss (1,826,620) (918,385)
Net interest (34,185) (16,979)
Investment income 20,845 -
Amounts written off investments (69,376) (53,315)
(Loss)/gains on revaluation of current (9,901) 326,635
asset investments
Loss on ordinary activities before (1,919,237) (662,044)
taxation
Taxation 48,400 -
Loss on ordinary activities after (1,870,837) (662,044)
taxation
Loss per ordinary Share (0.598)p (0.236)p
All operations are continuing
Balance Sheet
as at 31 March 2006
At At
31 March 31 March
2006 2005
£ £
Fixed assets
Tangible assets 16,056 1,737
Investments 36,432,808 9,200,930
36,448,864 9,202,667
Current assets
Debtors 166,815 169,299
Investments 3,529,058 2,674,107
Cash at bank and in hand 917,222 2,557,906
4,613,095 5,401,312
Creditors: amounts falling due within one (3,153,279) (156,379)
year
Net current assets 1,459,816 5,244,933
Total assets less current liabilities 37,908,680 14,447,600
Creditors: amounts falling due in more than - (1,100,000)
one year
Net assets 37,908,680 13,347,600
Capital and reserves
Called up share capital 3,135,228 3,124,228
Share premium account 13,854,442 13,849,192
Revaluation reserve 29,585,983 3,170,316
Profit and loss account (8,666,973) (6,796,136)
Shareholders' funds 37,908,680 13,347,600
Cash Flow Statement
for the year ended 31 March 2006
Note Year ended Year ended
31 March 31 March
2006 2005
£ £
Net cash inflow/(outflow) from operating (i) 124,414 (951,406)
activities
Returns on investments and servicing of
finance
Dividends received 20,845 -
Interest received and similar income 33,500 78,374
Interest paid (67,685) (95,353)
Net cash outflow from returns on
investments and
servicing of finance (13,340) (16,979)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (17,569) (310)
Purchase of fixed asset investments (998,881) (978,582)
Receipts from sale of fixed asset 164,586 192,000
investments
-
Net cash outflow from capital expenditure
and
and financial investment (851,864) (786,892)
Management of liquid resources
Sale of current asset investments 47,220,509 14,547,605
Purchase of current asset investments (48,136,653) (16,895,021)
Net cash (inflow)/outflow from management (ii) (916,144) (2,347,416)
of liquid resources
Net cash flow before financing (1,656,934) (4,102,693)
Financing
Issue of shares 16,250 5,360,500
Expenses paid in connection with share - (13,629)
issues
Net cash inflow from financing 16,250 5,346,871
(Decrease)/increase in cash (ii) (1,640,684) 1,244,178
Statement of Total Recognised Gains and Losses
for the year ended 31 March 2006
Year ended Year ended
31 March 31 March
2006 2005
£ £
Loss for the financial year (1,870,837) (662,044)
Revaluation of fixed asset investments 26,415,667 -
Total gains and losses recognised for the 24,544,830 (662,044)
year
Notes to the Cash Flow Statement
i. NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Year ended Year ended
31 March 31 March
2006 2005
£ £
Operating loss (1,826,620) (918,385)
Depreciation 3,250 1,778
Decrease in debtors 50,884 56,825
Increase/(decrease) in creditors 1,896,900 (91,624)
Net cash inflow/(outflow) from operating 124,414 (951,406)
activities
ii. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Year ended Year ended
31 March 31 March
2006 2005
£ £
(Decrease)/increase in cash in the year (1,640,684) 1,244,178
Cash outflow from financing 800,000 -
Cash outflow from increase in liquid 916,144 2,347,416
resources
Other non-cash movements relating to (61,193) 326,635
investment gains
Change in net funds resulting from cash 14,267 3,918,229
flows
Net funds at 1 April 2005 4,132,013 213,784
Net funds at 31 March 2006 4,146,280 4,132,013
iii. ANALYSIS OF CHANGE IN NET FUNDS
At Cash flow At
1 April 31 March
2005 2006
£ £ £
Cash in hand 2,557,906 (1,640,684) 917,222
Liquid resources 2,674,107 854,951 3,529,058
Debt (1,100,000) 800,000 (300,00)
4,132,013 14,267 4,146,280
Notes to the financial statements
1. Basis of Preparation
The results for the year ended 31 March 2006 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 2006 will be filed with the Registrar
of Companies following the Annual General Meeting. The financial information
for the year ended 31 March 2006 has been prepared on the basis of the
accounting policies set out in the accounts for the year ended 31 March 2006.
The comparative figures for the year ended 31 March 2005 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.
2. Loss per share
The calculation of loss per share is based on the loss attributable to ordinary
shareholders of £1,870,837 (2005: £662,044) divided by the weighted average
number of shares in issue during the year, being 312,883,075 (2005:
280,419,963) shares. Warrants outstanding at the year end were anti-dilutive.
3. Dividends
No dividends were paid or proposed in respect of the years ended 31 March 2006
or 2005.
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.
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