Final Results
25 September 2008
Eurovestech plc
("Eurovestech" or the "Company")
Final results for the year ended 31 March 2008
Eurovestech, the pan-European development capital fund, is pleased to announce
its final results for the year ended 31 March 2008.
HIGHLIGHTS
* Substantial progress across the portfolio
* Net assets of Eurovestech plc (company) increase by £6.6 million to £60.6
million
* ToLuna delivers further rapid growth in sales and profits
* Both KSS companies make progress following demerger
* Magenta's dynamic scheduling technology achieves growing recognition
UPDATE SINCE YEAR END
* ToLuna wins award as France's fastest growing company
* Acquisition of Common Knowledge Inc gives ToLuna a greatly strengthened US
foothold
* KSS Ltd reports record revenues and operating profits
* KSS Retail wins its largest ever order from Sonae Distribuicao of Portugal
* ARKeX raises the largest venture financing for a UK oil services company
since 2003 to expand its airborne imaging service
* LogNet makes strategic acquisition of MaxBill, enabling it to accelerate
its growth
CHAIRMAN'S STATEMENT
It has been a difficult and testing year for investors and markets. Tightening
credit conditions, slowing economic growth and inflationary pressures affected
the economies and markets in which Eurovestech's investee companies operate.
Yet I am pleased to report further material progress at Eurovestech and its
portfolio of investee companies.
We have been here before. In March, we celebrated our eighth birthday as a
quoted company. We recall those early years of our brief history: during the
bear market of 2001 to 2003, our benchmark technology index, the TechMark 100,
fell by more than 80 per cent. from its peak. We were forced to focus on the
nurturing of our investments. We did so with success. We were able to take
advantage of the opportunities offered by market weakness. We emerged from that
experience stronger and wiser.
This year, an already strong balance sheet was reinforced by a share placing in
March 2008 which added almost £5 million to our financial resources.
We have been confident, therefore, in our ability to withstand the global
economic storms which raged in 2007 and 2008, and which show no sign of
abating. Our companies face their challenges, of course. But they benefit from
management teams which are built to weather the times and are closely focused
on operational excellence.
We remain committed to delivering the best possible outcome for all
shareholders. When one takes the elements above into consideration, I am able
to report that your Company, Eurovestech, remains in good shape to deal with
current and impending conditions.
The Year in Detail
Let me review the year in greater detail. In managing the group, your board is
firmly focused on building asset value for investors. In this regard, as
previously indicated, we consider the balance sheet of the Company an important
measure, as it includes our listed investment in ToLuna - by far our biggest
single asset - at market value.
The Company balance sheet shows shareholders' funds of £60.6 million as at 31
March 2008, compared to £54 million at 31 March 2007. The increase reflects the
overall growth in the fair value of our investments and the successful share
placing in March.
The demerger of KSS Retail from KSS Ltd in September 2007 was an important step
toward realising and making more transparent the value of both KSS companies,
which were previously reported in our balance sheet at their carrying value of
£4.2 million. I am pleased to inform you that, after studying industry
comparatives, the board has assessed the fair value of KSS Ltd. (the fuels
business) at £9.5 million and the fair value of KSS Retail at £2.5 million. The
board's view is that these valuations are appropriate in the current volatile
markets. They represent a welcome and substantial uplift for our shareholders
on a total investment cost in KSS in June 2003 of £1 million.
Our statutory accounts are reported on a consolidated basis, which means that
the trading activities and asset positions of our subsidiaries ToLuna, KSS and
KSS Retail are consolidated in the Eurovestech group accounts. This accounting
treatment reflects our ability to exercise control over these companies.
In our 2007 annual report, I indicated that future results might include some
volatility. This has occurred.
For the year to 31 March 2008, the pretax loss was £1.1 million, compared to a
profit of £5.7 million in the year to 31 March 2007. The reported loss per
share was 0.46p per share, compared to earnings per share of 1.64p in the year
to March 2007.
The reported loss reflects the trading outcome and demerger costs at the KSS
companies, our share of profits at ToLuna, and the operating costs of the
Company. It does not include any disposal gains, whereas the previous year
included disposal gains of £6.9 million.
The consolidated loss for 2008 does not reflect the very real progress in our
portfolio. In particular, it does not reflect the uplift in the valuation of
our interests in KSS and KSS Retail. Accounting rules require us to include the
gain on this revaluation in the accounts of the Eurovestech parent company, but
to eliminate it from the group's consolidated results.
During most of 2007, our share price reflected the advances we are making in
our portfolio. Regrettably, as the credit crisis deepened and markets suffered,
so did our share price. This is outside our control. We can only work our
assets and strive to build their value.
However, as we work to build asset value on your behalf, we are aware that
since mid-May 2008, the FTSE AIM All-Share Index has fallen by about 25 per
cent., and, as an AIM quoted company, our own share price has not escaped this
malaise.
Whilst it is for markets to decide the valuation of a company, we believe that
it is now in shareholders' interests for the Company to obtain authority to
make purchases on the stock market. We are therefore today announcing that we
are seeking shareholder approval at the forthcoming annual general meeting to
apply to the High Court to create sufficient distributable reserves to enable
such purchases. We would anticipate that any buyback would increase our net
asset value per share.
Portfolio Review
ToLuna
ToLuna is our investee company in online market research services and is our
largest investment. Its online panels and technology services for the market
research industry now operate in 30 countries.
I am delighted to report that ToLuna has had another year of rapid growth and
expansion. Its achievement as a company was recognised in July 2008 when
l'Entreprise magazine ranked it as the fastest growing company in France from
2004-2007.
Eurovestech helped to create ToLuna in 2000. As the sole provider of
development capital, we had high hopes for the business from the outset. ToLuna
has grown further and faster than we could ever have hoped.
For its year to December 2007, ToLuna's sales rose 48 per cent. to £12.5
million, and pretax profits 42 per cent. to £3.2 million. From 2004 to 2007,
ToLuna has had remarkable revenue growth of 970 per cent.
For the six months to 30 June 2008 ToLuna's sales rose 36 per cent to
£8.2 million, pretax profits were marginally ahead at £1.4 million and dividends
rose 35 per cent to 0.5p.
We acknowledge the achievements of ToLuna's management team.
As at 23 September, ToLuna shares traded at 231.5p, valuing the company at £84
million, and Eurovestech's holding at £43 million.
The KSS companies
KSS Ltd provides pricing and revenue management systems for petrol retailers
and refiners and is 100 per cent. owned by Eurovestech.
The demerger of KSS Retail from the main KSS fuel pricing business was
completed in September 2007. Its objective was to enable each business to
focus, to grow independently and to generate additional shareholder value. The
focus that the demerger has provided has translated into visible improvements
in financial performance.
KSS Ltd
KSS Ltd is 100 per cent. owned by Eurovestech and has delivered strong growth
throughout the year. It ended its own trading year to 30 June 2008 with record
revenues and strong profitability.
It continued to build on the important agreement with SAP, the world's leading
software provider, reached in October 2007, under which KSS is selected by SAP
as exclusive provider of pricing management solutions for petrol retailers and
refiners.
KSS won a series of new contracts from leading companies in the industry
including Gulf Oil, Statoil, Fas mart, Susser, and more recently, from one of
the world's largest retailing groups. This is in addition to follow-on orders
from established customers such as BP and Circle K.
KSS Retail
KSS Retail offers pricing and revenue optimisation services to supermarkets and
other retailers and is 100 per cent. owned by Eurovestech.
Against a retailing and economic background that was exceptionally challenging,
KSS Retail made progress; it had record revenues for its trading year to 30
June 2008, which were up 77 per cent. from the previous year. It won an
important order from Sonae Distribuicao, the Portuguese grocery and retail
chain, which represents the largest contract ever won by KSS Retail. In
September 2008 KSS Retail won another important contract from United
Supermarkets of Texas, USA.
Magenta
Magenta Corporation is a UK based vendor of advanced software solutions with
development centres in Russia.
Magenta has made significant progress this year. Its Dynamic Scheduling system
has enabled users in the transport industry to make significant improvements in
operating efficiency - especially important at this time of greatly increased
fuel costs. The system is now being operated by one of the world's leading car
rental companies.
Magenta is exploring the potential of developing its technology for use in
other industries, including online
advertising, where it recently won its first contract.
Magenta is confident that sales will grow strongly in 2008 and 2009. Following
a recent funding, Eurovestech has raised its stake from 41.9 per cent. to 46.9
per cent. of Magenta's fully diluted share capital.
ARKeX
ARKeX Ltd provides gradiometry imaging for energy and mineral exploration. The
company has made substantial progress in an industry where high energy and
metal prices have boosted demand.
In June 2008, subsequent to our year end, ARKeX raised £15.4 million, the
largest venture financing round for a service company in the UK oil and gas
exploration sector since 2003. The fundraising was at a significant premium to
Eurovestech's cost of investment.
Subsequent to this funding, Eurovestech owns 2.4 per cent. of ARKeX's fully
diluted share capital.
LogNet Information Systems
LogNet is a specialist in e-billing systems, which allow customers to review
and analyse their bills, and to manage their accounts online. In July 2007
Eurovestech invested £2 million in LogNet, and owns 25.4 per cent. Of LogNet's
fully diluted share capital.
LogNet's client list already includes leading telecom companies such as Telecom
Italia, KPN and Telekom Austria. It is seeking both to increase sales in its
existing markets, and to broaden its sales pipeline. The company has been
shortlisted for several deals with large international telecoms groups.
LogNet formed an emerging markets sales team in the fourth quarter of 2007.
This year, LogNet acquired the assets of MaxBill Ltd, an Israeli billing
software company whose products complement its own product range. MaxBill was
established in 1997, and had invested some $16 million in researching and
developing its product suite. LogNet also recruited key MaxBill employees, is
integrating the product offering, and is confident the acquisition will
accelerate its growth.
The Management of LogNet expects a very significant increase in sales for the
year to 31 December 2008. We will be working closely with them to assist them
in achieving this.
MIST Technologies
MIST's unique and innovative sound separation technology enables music tracks
to be filtered into individual tracks and allows film soundtracks to be
remastered for high definition surround sound.
The markets which MIST is targeting are both dynamic and evolving. The recent
resolution of the HD-DVD/Blu-Ray competition should lead to an increased
adoption rate for the new format. We have worked closely with MIST's management
and have refined its focus on both its business and consumer product offerings.
MIST is at an advanced stage of negotiation of a £2.5 million investment from a
financial institution. It is in simultaneous discussions to secure the services
of an experienced high-tech industry operator as chief executive. The planned
investment is expected to value MIST at a premium to Eurovestech's original
cost of investment.
Eurovestech currently holds 46 per cent. of MIST's fully diluted share capital.
Other portfolio companies
Among the more modest holdings in our portfolio, Tevet Process Control
Technologies ("Tevet") was acquired in May 2008 by Nanometrics Incorporated in
an all-cash asset purchase transaction. Eurovestech held a 1.9 per cent. stake
in Tevet at a carrying value of £0.45 million. The sale resulted in a
write-down of £0.38 million.
D-Pharm Ltd is a developer of innovative lipid-based drugs for cancer and
nervous disorders. Eurovestech owns 0.23 per cent. of D-Pharm with a carrying
value of £0.1 million.
Charitable Donations
During the year, Eurovestech issued 500,000 shares to five charitable
organisations. From its flotation in 2000, and including the three new
donations outlined below, Eurovestech has created and gifted 8.5 million shares
to 76 charitable organisations. These have a current stock market value of over
£1.4 million. We hope this will encourage other companies to support charities
in a similar way.
Eurovestech is now donating 100,000 shares each to Teens Unite Fighting Cancer,
to ShareGift, the share donation charity, and to the Anthony Nolan Bone Marrow
Trust. Application has been made for these shares to be admitted to AIM and it
is expected that dealings will commence on 30 September 2008. Richard
Bernstein, Chief Executive of the Company, has paid the £3,000 nominal value of
the shares to facilitate their issue.
Share Buybacks/Incentive Arrangements
The board remains very conscious of the level of the share price relative to
Eurovestech's assets and the
prospects of its portfolio companies. At our 2007 annual general meeting,
shareholders approved a resolution enabling the Company to buy back shares
through market purchases, subject to its having sufficient distributable
reserves. As I have stated, we now intend to seek High Court approval to cancel
the share premium account, which will create sufficient distributable reserves
to enable buybacks.
Following the initial announcement on 3 March 2008, the Company announced on 5
September 2008 that it has entered into conditional employee incentive
arrangements with Richard Bernstein and Jean-Michel Petit, the Company's two
executive directors. These arrangements are conditional on shareholder
approval, which will be sought at our 2008 annual general meeting. Details of
these arrangements are included in a circular to shareholders being sent with
the Report and Accounts.
Prospects
We believe that general business conditions in our markets may remain testing
in the year ahead. There are few signs yet that the turbulence caused by the
credit crunch is abating.
In this situation, our executive team will remain focused on delivering the
undoubted potential of our portfolio and realising gains in cases where
companies have reached the appropriate stage. Our companies have strong
proprietary technology and operate in markets that should continue to grow even
when underlying economic conditions are challenging.
We have experience of stormy weather and know that, while sometimes
uncomfortable, it can bring highly
rewarding opportunities. With a strong balance sheet and strong cash resources,
we are well placed to take advantage of such opportunities for the benefit of
our shareholders.
Richard Grogan
Chairman
FURTHER ENQUIRIES
Eurovestech plc
Richard Bernstein Tel: 020 7491 0770
Chief Executive www.eurovestech.com
John East & Partners Limited
Simon Clements Tel: 020 7628 2200
AUDITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2008
Notes Year to Year to
31 March 31 March
2008 2007
£'000 £'000
Continuing operations
Revenue 19,642 15,868
Investment income 160 74
Net (losses) / gains on financial assets (422) 6,372
at fair value
Operating expenses (20,542) (16,867)
Operating (loss) / profit (1,162) 5,447
Finance income 207 297
Finance costs (166) (88)
(Loss) / Profit before tax (1,121) 5,656
Income tax expense 2 (348) (510)
(Loss) / Profit for the year (1,469) 5,146
Attributable to:
Equity holders of the company (2,561) 4,490
Minority interest 1,092 656
(1,469) 5,146
Earnings per share 3
Basic earnings per share (pence per (0.46) 1.64
share)
Diluted earnings per share (pence per (0.46) 1.62
share)
AUDITED CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR
ENDED 31 MARCH 2008
Year to Year to
31 March 31 March
2008 2007
£'000 £'000
(Loss) / Profit for the financial year (1,469) 5,146
Foreign exchange movements 764 218
Total income and expense recognised in the year (705) 5,364
Attributable to:
Equity holders of the company (2,602) 4,502
Minority interest 1,897 862
(705) 5,364
AUDITED CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2008
Notes 31 March 31 March
2008 2007
£'000 £'000
Assets
Non-current assets
Property, plant and equipment 729 536
Goodwill 2,076 2,076
Other intangible assets 3,386 1,386
Financial assets at fair value through 6,991 4,104
profit or loss
Deferred tax asset 1,372 759
14,554 8,861
Current assets
Trade and other receivables 7,946 4,957
Financial assets at fair value through 3,840 9,701
profit or loss
Cash and cash equivalents 4 6,995 5,117
18,781 19,775
Liabilities
Current liabilities
Trade and other payables 7,817 8,995
Income tax liabilities 469 440
Borrowings 260 -
8,546 9,435
Net current assets 10,235 10,340
Non-current liabilities
Borrowings 115 -
Deferred tax liability 309 -
Provisions 1,945 1,201
2,369 1,201
Net assets 22,420 18,000
Equity
Capital and reserves attributable to the
equity holders of the Company
Issued capital 3,436 3,156
Share premium 18,680 13,855
Other reserve 291 407
Retained earnings (5,296) (2,828)
17,111 14,590
Minority interest 5,309 3,410
Total equity 22,420 18,000
AUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2008
Notes Year to Year to
31 March 31 March
2008 2007
£'000 £'000
Cash flows from operating activities
(Loss) / Profit for the period before (1,121) 5,656
taxation
Adjustments for:
Net finance cost (41) (209)
Depreciation of property, plant and 347 170
equipment
Amortisation of intangible assets 1,142 629
Gains on financial assets (94) (6,511)
Impairment of financial assets 516 139
Loss on disposal of property, plant and (51) -
equipment
Movement on provision 648 600
Investment income (160) (74)
Share based payments 224 409
Increase in trade and other receivables (2,989) (1,856)
Decrease / Increase in trade and other (381) 2,980
payables
Net cash (used in) / generated from (1,960) 1,933
operations
Finance costs (70) (43)
Income tax (paid) / refunded (623) 40
Net cash (used in) / generated by (2,653) 1,930
operating activities
Cash flows from investing activities
Finance income 207 297
Purchase of property, plant and (588) (308)
equipment
Purchase of intangible assets (3,143) (1,290)
Dividends received 160 74
Disposal of financial assets 68,339 28,287
Purchase of financial assets (65,843) (27,990)
Net cash used in investing activities (868) (930)
Cash flows from financing activities
Finance lease capital repayments (65) -
Finance lease loan drawn down 305 -
Dividends paid to minority interest (155) -
Proceeds from issue of equity shares 5,011 21
Net cash generated by financing 5,096 21
activities
Net increase in cash and cash 1,575 1,021
equivalents
Exchange movements 168 17
Cash and cash equivalents at the start 5,117 4,079
of the year
Cash and cash equivalents at the end of 4 6,860 5,117
the year
NOTES TO THE PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2008
1. BASIS OF PREPARATION
The consolidated financial statements are for the year ended 31 March 2008.
They have been prepared in compliance with International Financial Reporting
Standards (IFRSs) and International Financial Reporting Interpretations
Committee (IFRIC) interpretations as adopted by the European Union as at 31
March 2008. The consolidated financial statements have been prepared under the
historical cost convention as modified by the revaluation of certain financial
instruments and share based payments. The Group has also elected to designate
all associate sized investments as at fair value through profit or loss,
thereby adopting the exemption in IAS 28 `Investments in associates' for
venture capital organisations.
In the current year the Group has adopted International Financial Reporting
Standards for the first time and has applied IFRS 1 `First time adoption of
IFRS' from the transition date of 1 April 2006.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 March 2007 and 2008, but is derived
from those accounts. Statutory accounts for 2007 have been delivered to the
Registrar of Companies and those for 2008 will be delivered following the
Company's Annual General Meeting. The Auditors have reported on those accounts;
their reports were unqualified and did not contain statements under the
Companies Act 1985, sections 237(2) or (3).
2. INCOME TAX EXPENSE
2008 2007
£000 £000
Current Tax:
UK corporation tax on profits for the year 578 405
Overseas tax 74 99
Total current taxation 652 504
Deferred tax (304) 6
Taxation 348 510
The tax assessed for the year is different from the standard rate of
corporation tax as applied in the respective trading domains where the Group
operates. The differences are explained below:
2008 2007
£000 £000
(Loss) / Profit before tax (1,121) 5,656
(Loss) / Profit before tax multiplied by the (336) 1,697
respective standard rate of corporation tax
applicable in the UK (30%) (2007: 30%)
Effects of:
Non-deductible expenses 222 238
Other temporary differences 550 1,002
R & D tax credits (88) (370)
Partial sale of investment in subsidiary covered - (2,057)
by substantial shareholder exemption
Tax charge for the year 348 510
3. EARNINGS PER SHARE
2008 2007
£000 £000
(Loss) / Profit for the year attributable to (1,469) 5,146
equity shareholders
Earnings per share
Basic earnings per share (pence) (0.46) 1.64
Diluted earnings per share (pence) (0.46) 1.62
Shares Shares
Issued ordinary shares at start of the year 315,622,801 313,522,801
Ordinary shares issued in the year 28,000,000 2,100,000
Issued ordinary shares at end of the year 343,622,801 315,622,801
Weighted average number of shares in issue for 318,952,036 314,210,198
the year.
Dilutive effect of options - 4,285,826
Weighted average shares for diluted earnings per 318,952,036 318,496,024
share
The diluted loss per share does not differ from the basic loss per share as the
exercise of share options would have the effect of reducing the loss per share
and is therefore not dilutive under the terms of IAS 33.
4. CASH AND CASH EQUIVALENTS
2008 2007
£000 £000
Cash at bank and in hand 1,576 3,720
Money market deposit 5,229 1,000
Short term bank deposits 190 397
Cash and cash equivalents 6,995 5,117
Overdrafts (135) -
Cash and cash equivalents per cashflow 6,860 5,117
5. DIVIDEND
No dividends were paid or proposed in respect of the year ended 31 March 2008.
6. NOTICE OF MEETING
Notice of the Annual General Meeting of the Company, to be held at the offices
of the Company at 29 Curzon Street, London W1J 7TL on 28 October 2008 at 11
a.m., will be posted to shareholders accompanying copies of the Report and
Accounts and will shortly be available on the Company's website at
www.eurovestech.co.uk
7. COPIES OF THE REPORT & ACCOUNTS
Copies of the Report and Accounts will be posted to shareholders shortly, will
be available from the Company's registered office 29 Curzon Street, London W1J
7TL and will be available from the Company's website www.eurovestech.co.uk.
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