Final Results
27 September 2011
Eurovestech plc
("Eurovestech" or the "Company")
Final results for the year ended 30 June 2011
Eurovestech, the pan-European development capital fund, is pleased to announce
its final results for the year ended 30 June 2011.
HIGHLIGHTS
* Proposed return of 4 pence per share cash (£13.3 million) to shareholders
* Company net asset value of 19.8 pence per share (2010: 18.5 pence)
* Profit from continuing operations of £4.7 million compared with a loss of £
3.8 million a year ago
* ToLuna acquired by ITWP Acquisitions at value of £161 million
* Eurovestech's ToLuna investment, which cost £2 million, valued at £48
million, excluding £14.5 million prior share sales
* Company realised £25 million cash on ToLuna takeover, with 9.8 per cent
stake retained in ITWP
* KSS Fuels completes strategic acquisition
* Growing success for Maxifier
* Audionamix wins film and TV business
Richard Bernstein, Chief Executive of Eurovestech, commented:
"Eurovestech continues to perform strongly. We are pleased to announce
proposals for our second cash return to shareholders. This takes the total
returned to more than 6 pence per share, which is more than the 5 pence at
which the shares were floated on AIM in March 2000. Since the onset of the
financial crisis in 2008, we have profitably realised £36 million from our core
investments. Our investment in ToLuna, which cost £2 million, has realised £
39.5 million to date and our retained stake is valued at £22.7 million. "
FURTHER ENQUIRIES
Eurovestech plc
Richard Bernstein Tel: 020 7478 9070
Chief Executive www.eurovestech.com
Merchant Securities Limited
David Worlidge/Simon Clements Tel: 020 7628 2200
CHAIRMAN'S STATEMENT
I am pleased to report another year of progress for Eurovestech and its
portfolio. The highlight: a significant realisation of value from ToLuna, which
enables us to make a further return of cash to our shareholders.
The excellence of our companies' technologies and the quality of their
leadership has determined their strength and driven this progress - against an
international economic background that remained challenging, with weak recovery
in the leading Western countries, and in some of the markets in which our
companies compete.
Eurovestech reported profits after tax of £4.7 million for the year, compared
to profits after tax of £40.4 million for the year ended 30 June 2010, which
included a change in the way our investment in ToLuna was valued under
accounting rules.
The Company balance sheet (see note 11) shows shareholders' funds of £65.6
million, compared with £61.1 million at 30 June 2010. Net assets at 30 June
2011 were 19.8 pence per share, compared with 18.5 pence per share at 30 June
2010. These figures were arrived at after the cash return of 2.18 pence per
share in April 2010.
ITWP (TOLUNA GROUP)
Nothing exemplifies the strength of our companies better than the developments
at ToLuna. On 14 February 2011, Eurovestech reported the proposed sale of
ToLuna to ITWP Acquisitions Limited in a deal that valued ToLuna at £161
million. Eurovestech co-founded ToLuna in 2000. From an investment that cost £2
million in total, we have realised £14.5 million net from share sales, and a
further £25 million from ITWP, while retaining a 9.8 per cent equity stake and
loan notes in a company with considerable potential for further growth. The
value of the retained equity stake and loan notes is £22.7 million.
The terms of the acquisition, implemented by a scheme of arrangement, were
complex and are set out in detail in note 4. In essence Eurovestech received £
25 million cash and a 9.8 per cent stake in ITWP, plus loan notes of £12.2
million. Since ITWP intends to develop ToLuna further and accelerate its long
term growth, this gives us the opportunity to participate in building further
value. ITWP and its founder, Verlinvest, have begun intensive work with
ToLuna's management to ensure that it maximises its future returns, to help it
to address the enterprise market and to extend its technology footprint and
sales.
KSS FUELS
Further progress has also been made at KSS Fuels, a company wholly owned by
Eurovestech.
The acquisition of MPSI, completed in May 2011, extends the company's reach
into some of the world's most important emerging markets - among them India,
China, Korea and Latin America - and into the important areas of network
planning and data collection. Just as price optimisation helps companies to
make the most of their petrol stations, network planning helps them to put
their outlets in the most rewarding locations. Thus, the MPSI acquisition helps
to diversify KSS Fuels both geographically and in product offerings and is a
very important strategic development.
KSS Fuels also continued to win contracts for its core business in North
America and Europe. Revenue for the year, including one month's contribution
from MPSI, reached a record high of £7.7 million and was an increase of 16 per
cent on the prior year. Substantial investment in developing new territories,
together with some delays in closing contracts prior to its year end, caused
earnings before interest, depreciation, amortisation and exceptional items to
fall from £1 million to £640,000, but KSS Fuels' management believes the
benefits of this investment, together with the integration of the recent
acquisition, will provide tangible results in the coming year and thereafter.
AUDIONAMIX
Audionamix, too, has made significant progress. The company won strong interest
from customers in its music "disassociation" offering, which allows customers
to release TV series in new markets where the licensing cost would otherwise
have been prohibitive. Repeat orders from CBS, one of the leading global film
and TV studios, have been won and this has attracted interest from other major
studio groups.
Importantly, partnership agreements for this service have been signed with
leading music licensing companies and post-production facilities, which greatly
reinforces the company's sales capacity in this market. This technological
breakthrough also enables the development of further markets with global
potential such as "Foreign Dialogue Extraction" where Audionamix is able to
remove the entire voice dialogue from a film to enable re-release in an
alternative language, such as Chinese.
In the sound separation market, Audionamix is winning increasing recognition.
In July 2011, the 50th anniversary of the all-time bestselling musical, West
Side Story, was celebrated with live performances at the Hollywood Bowl by the
Los Angeles Philharmonic Orchestra, after Audionamix had separated the original
musical score from the soundtrack while keeping the dialogue, sound effects and
singing voices intact.
From a financial perspective, Audionamix revenues are now generating a growing
contribution to its overheads, which is particularly encouraging. At 30 June
2011, Eurovestech owned 45.5 per cent of Audionamix.
MAXIFIER
Maxifier is making encouraging progress. Tangible proof of this is a series of
contracts received from leading global media groups. It has recently won a two
year contract from Monster.com, one of the largest employment websites in the
world. It also won contracts from the Financial Times, Forbes and from leading
telecoms groups including Telecom Italia.
Maxifier is on course to deliver profitability in 2012. Its
Software-as-a-Service model should deliver regular revenues and it expects
growth to accelerate during 2012. As at 30 June 2011, Eurovestech owned 49.9
per cent of Maxifier.
LOGNET SYSTEMS
LogNet has expanded into new territories and new vertical markets. Asia is
considered to be the fastest growing market for its products and services;
accordingly, sales offices were established in Thailand, Vietnam and the
Philippines to support its penetration into the region.
In December 2010, it signed its first deal in Asia when VoizPlus, an IPTV
provider based in Thailand, chose LogNet's billing system to replace an
existing system. In February 2011, it signed a further contract in Asia with a
new Internet Service Provider. The management of LogNet considers these two
deals as evidence of its ability to capture a share of this high growth market.
An increasing feature of LogNet's operations is its attractiveness to
utilities. In February 2011 it was chosen by First Utility, a leading
independent UK energy and telecoms company, to provide multiple play customer
management and billing solutions. This followed its strategic deal in May 2010
with CTT MailTech, the Post Office of Portugal.
LogNet's management believes the company will continue to expand into
additional markets. Nevertheless, despite more favourable recent developments,
the financial results in LogNet's year to December 2010 were below expectations
and, as a result, Eurovestech has reduced the carrying value of this investment
by £1.0 million to £1.3 million.
At 30 June 2011, Eurovestech owned 26.5 per cent of LogNet.
MAGENTA CORPORATION
New contracts and a successful programme to reduce costs should deliver
profitability for Magenta this year. It has won several new contracts in Russia
and in May 2011 was selected by Medical Couriers, the UK's only specialist
medical courier service, to implement an advanced operational platform to
support business growth, streamline back office operations and enhance customer
service.
At 30 June 2011 Eurovestech owned 49.6 per cent of Magenta.
ARKEX
ARKeX continued to win business from exploration companies. During the first
half of the year, it won contracts from Tower Resources in Uganda and Ophir in
Madagascar, and from Svenska Petroleum Exploration off the shores of Guinea
Bissau.
In March 2011, ARKeX won a contract from Saudi Aramco, the largest oil company
in the world, for a survey in the Red Sea. It has expanded its operations in
the Rift Valley area of East Africa, where its airborne technology appears
particularly suited to the remote and difficult terrain. In the US, the
technology is being used in the search for shale gas, now a major focus for the
global energy industry.
At 30 June 2011, Eurovestech owned 2.5 per cent of ARKeX.
CHARITABLE DONATIONS
From the beginning of its life as a quoted company, Eurovestech set out a
commitment to support charities by issuing and gifting shares.
The Company has today issued 300,000 new ordinary shares of Eurovestech divided
equally between the British Heart Foundation, the Hospice of St. Francis
(Berkhamsted) and UK Sands. Richard Bernstein, Chief Executive of Eurovestech,
has paid £3,000 to facilitate their issue, representing the nominal value of
these shares of one penny per share. Application has been made for the shares
to be admitted to AIM and dealings are expected to commence on 5 October 2011.
Including these shares, since its flotation in 2000, Eurovestech has created
and gifted 10.9 million shares to 97 separate charitable organisations.
Including the cash return to shareholders in March 2010, charities will have
received cash and shares currently valued at in excess of £1.6 million.
We are proud that so many worthy causes have benefited from our success.
CASH RETURN
As reported above, Eurovestech received £25 million in cash from ITWP
Acquisitions in June 2011, following ITWP's acquisition of ToLuna. On 22 June
2011 we announced our intention to return more than half of the £25 million to
shareholders, following consultations with major shareholders on the most
appropriate method of capital distribution.
The Company has today announced that following a detailed assessment of its
cash requirements for investment in its current business and for investment in
future opportunities, it proposes to return approximately £13.3 million (4
pence per share) to Shareholders by way of a Return of Cash. The structure
selected provides Shareholders with some flexibility as to how they receive the
proceeds, similar to the Company's previous cash return. New D shares will be
issued from which Shareholders will have the right to select whether to receive
a D share dividend or to accept a tender offer in respect of some or all of
their D shares. The Circular issued today provides additional details of the
mechanics of this scheme.
PROSPECTS
Since the onset of the financial crisis in the summer of 2008, Eurovestech has
realised £36 million from its core investments.
Recently, risk aversion and distress have returned to global equity markets
and, in particular, to financial stocks. Whilst we continue to remain cautious
regarding the general economic outlook, we believe that our strong cash
balances and the technology strength of our investee companies make Eurovestech
well positioned for the future.
Richard Grogan
Chairman
27 September 2011
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year Year
ended ended
30 June 30 June
2011 2010
Note £000 £000
Revenue 3 7,769 6,806
Investment income 165 330
Net gains on financial assets at fair value 49 26
Profit on disposal of financial assets 4 10,973 -
Operating expenses (13,680) (10,710)
Underlying operating profit/(loss) 3 5,276 (3,548)
Exceptional items and business combination 5 (394) -
amortisation
Operating profit/(loss) 3 4,882 (3,548)
Finance income 5 40
Finance costs (212) (156)
Profit/(loss) before tax 4,675 (3,664)
Income tax credit/(charge) 54 (101)
Profit/(loss) for the year from continuing 4,729 (3,765)
operations
Discontinued operations
Profit for the year from discontinued operations - 44,194
Profit for the year 4,729 40,429
Foreign exchange movements 20 143
Total comprehensive income and expense recognised 4,749 40,572
in the year
Attributable to:
Owners of the Company 4,749 40,572
Earnings per share
Basic earnings per share (pence):
- from continuing operations 1.43 (1.10)
- from discontinued operations - 12.93
6 1.43 11.83
Diluted earnings per share (pence):
- from continuing operations 1.42 (1.09)
- from discontinued operations - 12.83
6 1.42 11.74
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 30 June
2011 2010
Note £000 £000
Assets
Non-current assets
Property, plant and equipment 202 93
Goodwill 1,671 -
Other intangible assets 10 1,690 24
Financial assets at fair value through profit or 8 21,775 47,813
loss
Deferred tax asset 1,317 1,288
Trade and other receivables 77 -
26,732 49,218
Current assets
Trade and other receivables 4,115 2,264
Financial assets at fair value through profit or 7 15,051 5,810
loss
Cash and cash equivalents 2 23,261 4,313
42,427 12,387
Liabilities
Current liabilities
Trade and other payables (8,803) (6,120)
Income tax liabilities - (65)
Borrowings (17) (17)
(8,820) (6,202)
Net current assets 33,607 6,185
Non-current liabilities
Borrowings - (17)
Deferred tax liability (164) -
Provisions for liabilities and charges (3,782) (3,889)
(3,946) (3,906)
Net assets 56,393 51,497
Equity
Capital and reserves attributable to the equity
holders of the Company
Share capital 3,314 3,304
Share premium 135 -
Capital redemption reserve 4,432 4,432
Other reserves (97) (119)
Retained earnings 48,609 43,880
Total equity 56,393 51,497
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Year
ended ended
30 June 30 June
2011 2010
Note £000 £000
Cash flows from operating activities
Profit for the year before taxation 4,675 40,530
Adjustments for:
Net finance cost 207 116
Depreciation of property, plant and equipment 79 125
Amortisation of intangible assets 89 29
Gains on financial assets (49) (30,519)
Profit on disposal of non-current assets (10,973) (13,405)
Movement on provision 107 514
Investment income (165) (330)
Share-based payments 71 145
Increase in trade and other receivables (768) (791)
Increase in trade and other payables 813 3,104
Net cash used in operations (5,914) (482)
Finance costs (212) (156)
Income tax received 120 146
Net cash used in operating activities (6,006) (492)
Cash flows from investing activities
Finance income 5 40
Purchase of subsidiary undertakings (net of cash (1,996) -
acquired)
Disposal of subsidiary undertakings - 16,779
Purchase of property, plant and equipment (85) (56)
Purchase of intangible assets (5) (25)
Dividends received 165 330
Disposal of financial assets 41,274 19,556
Purchase of financial assets (14,389) (27,271)
Net cash generated from investing activities 24,969 9,353
Cash flows from financing activities
Finance lease capital repayments (17) (13)
B share dividend paid - (3,343)
Redemption of C shares - (4,257)
Purchase of own shares - (2,423)
Proceeds from issue of equity shares 10 76
Net cash used in financing activities (7) (9,960)
Net increase/(decrease) in cash and cash 18,956 (1,099)
equivalents
Exchange movements (8) 49
Cash and cash equivalents at the start of the 4,313 5,363
year
Cash and cash equivalents at the end of the year 23,261 4,313
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
Share Share Other exchange Retained Minority Total
capital premium reserves reserve earnings interest equity
£000 £000 £000 £000 £000 £000 £000
At 1 July 2009 3,443 18,771 150 (116) (1,184) 7,400 28,464
Charitable donation 7 102 - - - - 109
of shares
Exercise of share 27 42 - - - - 69
options
Purchase of own (175) - 175 - (2,423) - (2,423)
shares
Issue of B shares 2 - - - - - 2
Issue of C shares 4,257 (4,257) - - - - -
Redemption of C (4,257) - 4,257 - (4,257) - (4,257)
shares
Share premium - (14,658) - - 14,658 - -
cancellation
B share dividend - - - - (3,343) - (3,343)
Share-based payment - - 36 - - - 36
charge
Transactions with (139) (18,771) 4,468 - 4,635 - (9,807)
owners
Profit for the year - - - - 40,429 - 40,429
Foreign exchange - - - 143 - - 143
movements
Disposal of - - - (332) - (7,400) (7,732)
subsidiaries
Total comprehensive - - - (189) 40,429 (7,400) 32,840
income
At 30 June 2010 3,304 - 4,618 (305) 43,880 - 51,497
Charitable donation 10 135 - - - - 145
of shares
Share-based payment - - 2 - - - 2
charge
Transactions with 10 135 2 - - - 147
owners
Profit for the year - - - - 4,729 - 4,729
Foreign exchange - - - 20 - - 20
movements
Total comprehensive - - - 20 4,729 - 4,749
income
At 30 June 2011 3,314 135 4,620 (285) 48,609 - 56,393
Other reserves include the capital redemption reserve of £4,432,000 created
following the Return of Cash scheme in 2010.
NOTES TO THE PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2011
1. BASIS OF PREPARATION
The financial information set out above does not constitute the Company's
statutory accounts for the period ended 30 June 2010 and the year ended 30 June
2011, but is derived from those accounts. Statutory accounts for 2010 have been
delivered to the Registrar of Companies and those for 2011 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 2006, sections 498(2) or (3).
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union
(IFRSs as adopted by the EU), IFRIC Interpretations and the Companies Act 2006
applicable to companies reporting under IFRS. 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. The Company
balance sheet and related notes have been prepared in accordance with UK
generally accepted accounting standards.
2. CASH AND CASH EQUIVALENTS
30 June 30 June
2011 2010
£000 £000
Cash at bank and in hand 23,261 4,313
Cash and cash equivalents 23,261 4,313
3. SEGMENTAL ANALYSIS
The chief operating decision maker has been identified as the board of
Directors. The board reviews the Group's internal reporting in order to make
strategic decisions. The board considers the business from both an operational
and geographic perspective.
The segment results for the year ended 30 June 2011 are as follows:
Venture Software
capital development Total
£000 £000 £000
Revenue 94 7,675 7,769
Investment income 165 - 165
Net gains on financial assets at fair value 49 - 49
Profit on disposal of financial assets 10,973 - 10,973
Other operating expenses (6,597) (7,083) (13,680)
Underlying operating profit 4,684 592 5,276
Exceptional items and business combination - (394) (394)
amortisation
Operating profit 4,684 198 4,882
Net finance cost (207)
Profit before tax 4,675
Income tax credit 54
Profit for the year 4,729
The segment results for the year ended 30 June 2010 are as follows:
Venture Software
capital development Total
£000 £000 £000
Revenue 208 6,598 6,806
Investment income 330 - 330
Net gains on financial assets at fair value 26 - 26
Other operating expenses (5,077) (5,633) (10,710)
Operating (loss)/profit (4,513) 965 (3,548)
Net finance cost (116)
Loss before tax (3,664)
Income tax charge (101)
Loss for the year (3,765)
Unallocated assets and liabilities comprise certain deferred taxation assets.
The segment assets and liabilities at 30 June 2011 are as follows:
Venture Software Unallocated
capital development items Total
£000 £000 £000 £000
Assets 58,243 9,871 1,045 69,159
Liabilities (5,880) (6,886) - (12,766)
Net assets 52,363 2,985 1,045 56,393
Capital expenditure 5 80 - 85
Depreciation and amortisation 6 162 - 168
The segment assets and liabilities at 30 June 2010 are as follows:
Venture Software Unallocated
capital development items Total
£000 £000 £000 £000
Assets 55,532 5,028 1,045 61,605
Liabilities (7,854) (2,254) - (10,108)
Net assets 47,678 2,774 1,045 51,497
Capital expenditure 14 40 - 54
Depreciation and amortisation 3 84 - 87
The parent company is domiciled in the UK. The Group's main business segments
are based in the following locations:
• Venture capital - UK
• Software development - UK, Europe and North America
The geographical segments are based on an analysis of revenue by the location
of the Group's customers as follows:
Year Year
ended ended
30 June 30 June
2011 2010
£000 £000
UK 500 514
Rest of Europe 2,727 2,622
North America 4,542 3,670
Revenue 7,769 6,806
One customer, based in North America, contributed 16 per cent of the Group's
revenue; no other customer contributed greater than 7 per cent of the Group's
revenue.
4. PROFIT ON DISPOSAL OF FINANCIAL ASSETS
On 14 February 2011, ToLuna plc ("ToLuna"), Eurovestech's largest investee
company, announced the terms of an acquisition of ToLuna by ITWP Acquisitions
Limited ("ITWP") by way of a scheme of arrangement under Part 26 of the
Companies Act 2006 ("Scheme"). This Scheme became effective on 18 April 2011.
The acquisition valued ToLuna at 320p per share and Eurovestech's 14,907,917
shares in Toluna at £47.7 million. A profit on disposal of £11.0 million, after
disposal costs, was recorded as the uplift on the 13 February 2011 closing
price of 245p per share. The Company received its £47.7 million consideration
in the form of:
£000
£25 million bank guaranteed repayment of B loan notes in June 2011 25,000
Discounted 30 June 2012 £10 million B loan notes and £2.2 million C 11,124
loan notes
1.1 billion ordinary shares of £0.01 each in the capital of ITWP 11,581
("ITWP Shares") equivalent to 9.8% of ITWP's share capital
47,705
£25 million of the £35 million B loan notes were repaid in June 2011. The
outstanding £12.2 million B and C loan notes are due for repayment by 30 June
2012. Should these not be repaid, any loan notes which remain outstanding will
be automatically converted into ITWP Shares, subject to certain conditions, at
a rate of one ITWP Share for each one penny in nominal value of loan notes.
Neither the B or C loan notes bear any interest. The outstanding loan notes
were initially recognised at a fair value of £11.1 million (see note 7). The
new ITWP shares were therefore recorded at £11.6 million being the remaining
balance allocated from the £47.7 million consideration (see note 8).
5. EXCEPTIONAL ITEMS AND BUSINESS COMBINATION AMORTISATION
Year Year
ended ended
30 June 30 June
2011 2010
£000 £000
Exceptional items 327 -
Business combination amortisation 67 -
394 -
Exceptional items include £0.2 million of acquisition related costs expensed
through the income statement in accordance with IFRS 3 and £0.1 million for a
one-off catch up from undercharged utility costs from prior years. Business
combination amortisation arises from the intangible assets recognised (other
than goodwill) from the acquisition of MPSI.
6. EARNINGS PER SHARE
Year Year
ended ended
30 June 30 June
2011 2010
£000 £000
Profit/(loss) for the year attributable to continuing 4,729 (3,765)
operations
Profit for the year attributable to discontinued - 44,194
operations
Profit for the year attributable to equity shareholders 4,729 40,429
Basic earnings per share (pence):
- from continuing operations 1.43 (1.10)
- from discontinued operations - 12.93
1.43 11.83
Diluted earnings per share (pence):
- from continuing operations 1.42 (1.09)
- from discontinued operations - 12.83
1.42 11.74
Shares Shares
Issued ordinary shares at start of the year 330,250,000 344,322,801
Net movement in ordinary shares during the year 1,000,000 (14,072,801)
Issued ordinary shares at end of the year 331,250,000 330,250,000
Weighted average number of shares in issue for the year 330,700,000 341,668,818
Dilutive effect of options 2,570,209 2,792,407
Weighted average shares for diluted earnings per share 333,270,209 344,461,225
7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS: CURRENT
30 June 30 June
2011 2010
£000 £000
Financial asset loan notes 11,286 -
Financial assets held for trading 3,765 5,810
15,051 5,810
Financial asset loan notes arose as part of the consideration payable to
Eurovestech following the successful completion of the Scheme of Arrangement
whereby by ToLuna plc was taken private by ITWP (see note 4). These loan notes
are non-interest bearing and would be automatically converted into equity in
ITWP should the Company not receive £12.2 million in cash from ITWP prior to 30
June 2012.
8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS: NON-CURRENT
% interest
in
ordinary
Subsidiary companies Country of shares at
consolidated in
these accounts incorporation 30 June Principal activity
2011
Knowledge Support Systems UK 100 Price optimisation
Limited software
Knowledge Support Systems US 100 Price optimisation
Inc. software
Market Planning Solutions US 100 Network planning solutions
Inc.
MPSI K.K. Japan 100 Network planning solutions
MPSI Systems Limited UK 100 Network planning solutions
Equity
investments
Non-current £000
At 1 July 2009 9,913
Additions 36,593
Net gain on investments at fair value 1,338
Disposals (31)
At 30 June 2010 47,813
Additions 12,294
Net loss on investments at fair value (1,808)
Disposals (36,524)
At 30 June 2011 21,775
The additions primarily relate to recognition of the new investment in ITWP
Acquisitions Limited following the Scheme of Arrangement relating to ToLuna
plc, and equity investment in Maxifier Limited following its demerger from
Magenta Corporation Limited.
The loss arises from the decrease in share price of ToLuna plc between the
start of the year and up to the company's acquisition by ITWP Acquisitions
Limited together with a reduction in value of LogNet Information Systems
following weaker than expected performance.
Included within non-current financial assets are the following companies:
% interest in Fair value
ordinary at 30 June
shares
Country of at 30 June 2011
Portfolio company name incorporation 2011 £000
ITWP Acquisitions Limited (previously UK 9.8% 11,581
ToLuna plc)
Magenta Corporation Limited UK 49.6% 1,209
Maxifier Limited UK 49.9% 2,300
Audionamix SA France 45.5% 4,213
LogNet Information Systems plc UK 26.5% 1,325
ARKeX Limited UK 2.5% 1,147
Group investments carrying value 21,775
9. BUSINESS COMBINATION
On 31 May 2011, Knowledge Support Systems Inc., a wholly-owned Eurovestech
subsidiary, completed the acquisition of the entire share capital of Market
Planning Solutions Inc. (MPSI) for a cash consideration of £3.6 million. The
acquisition will expand the product range at KSS Fuels with retail network
planning solutions, enhance the price optimisation offering and enable more
effective expansion into emerging markets where MPSI already operate. £0.2
million of expenses relating to the acquisition were charged to the Statement
of Comprehensive Income in accordance with IFRS 3.
The provisional fair values of the assets and liabilities acquired are
summarised below:
Book Fair value Fair
value adjustment value
£000 £000 £000
Non-current assets
Other intangible assets 433 1,271 1,704
Property, plant and equipment 102 - 102
Deferred tax asset - 29 29
Trade and other receivables 231 (154) 77
766 1,146 1,912
Current assets
Trade and other receivables 1,246 (218) 1,028
Cash 1,641 - 1,641
2,887 (218) 2,669
Current liabilities
Trade and other payables (2,669) 260 (2,409)
Net current assets 218 42 260
Non-current liabilities
Deferred tax liability - (164) (164)
Net assets 984 1,024 2,008
Goodwill 1,629
Total 3,637
Cash consideration 3,637
Management performed a full valuation of the acquired intangible assets. The
intangible assets recognised reflect recognition of acquired customer
relationships, the value of the acquired future committed order book,
internally generated software and the trademarks. Other fair value adjustments
were recorded to the acquired net assets, primarily reflected in adjustment to
work in progress at the date of acquisition, recognition of specific receivable
provisions and accruals. Additionally, the acquired entity capitalised the
total value of non-cancellable revenue contracts within receivables and
deferred income prior to invoicing. These balances were written off to ensure
adherence with Group policy.
A significant amount of the value of the acquired business is attributable to
its workforce and sales knowhow. The Group anticipates achieving significant
operational and cross-selling sales synergies from the integration of the
existing and acquired businesses. As no assets can be recognised in respect of
these factors, they contribute to the goodwill recognised on acquisition.
Revenue for the one month period post acquisition was £0.8 million with a
profit of £0.1 million. Were the acquisition to have occurred on 1 July 2010,
the revenue of the enlarged Group for the year would have been £14.8 million
and the profit before tax £6.0 million.
10. OTHER INTANGIBLE ASSETS
Internally
Computer generated Customer Other
software software relationships intangibles Total
£000 £000 £000 £000 £000
Cost or valuation
At 1 July 2009 568 - - - 568
Additions 25 - - - 25
Foreign exchange 9 - - - 9
Disposal of subsidiary (46) - - - (46)
At 30 June 2010 556 - - - 556
Business combination (note 30 687 637 350 1,704
9)
Additions 5 - - - 5
Foreign exchange 6 14 12 7 39
At 30 June 2011 597 701 649 357 2,304
Amortisation
At 1 July 2009 514 - - - 514
Charge for the year 29 - - - 29
Foreign exchange 10 - - - 10
Disposal of subsidiary (21) - - - (21)
At 30 June 2010 532 - - - 532
Charge for the year 16 12 6 55 89
Foreign exchange (7) - - - (7)
At 30 June 2011 541 12 6 55 614
Net book value
At 30 June 2011 56 689 643 302 1,690
At 30 June 2010 24 - - 24
At 30 June 2009 54 - - 54
Other intangibles consist of the committed order backlog and trade names
acquired as part of the acquisition of MPSI (see note 9). The acquired
intangible assets are amortised over the following periods:
Customer relationships 4 years
Internally generated software 4 years
Committed order backlog 1 year
Trade names 3 years
11. COMPANY BALANCE SHEET
30 June 30 June
2011 2010
Note £000 £000
Fixed assets
Tangible assets 12 13
Investments 12 31,275 57,313
31,287 57,326
Current assets
Debtors 2,604 170
Investments 7 15,051 5,810
Cash at bank and in hand 20,683 1,726
38,338 7,706
Creditors: amounts falling due within one year (3,980) (3,965)
Net current assets 34,358 3,741
Net assets 65,645 61,067
Capital and reserves
Called up share capital 3,314 3,304
Share premium account 135 -
Other reserves 4,532 4,532
Profit and loss account 57,664 53,231
Shareholders' funds 65,645 61,067
12. COMPANY FIXED ASSET INVESTMENTS
£000
Valuation
At 1 July 2009 71,842
Additions 1,586
Net gains on revaluation at fair value through 1,338
profit and loss
Disposals (17,453)
At 30 June 2010 57,313
Additions 12,294
Net loss on revaluation at fair value through (1,808)
profit and loss
Disposals (36,524)
At 30 June 2011 31,275
The additions primarily relate to recognition of the new investment in ITWP
Acquisitions Limited following the Scheme of Arrangement relating to ToLuna
plc, and equity investment in Maxifier Limited following its demerger from
Magenta Corporation Limited.
The loss arises from the decrease in share price of ToLuna plc between the
start of the year and up to the company's acquisition by ITWP Acquisitions
Limited together with a reduction in value of LogNet Information Systems
following weaker than expected performance.
Included within fixed asset investments are the following companies:
% interest
in
ordinary Fair
value
shares at at 30
June
Country of 30 June 2011
Portfolio company name incorporation 2011 £000
Principal subsidiary
Knowledge Support Systems Limited (and its UK 100% 9,500
subsidiaries)
Other investments
ITWP Acquisitions Limited (previously ToLuna UK 9.8% 11,581
plc)
Magenta Corporation Limited UK 49.6% 1,209
Maxifier Limited UK 49.9% 2,300
Audionamix SA France 45.5% 4,213
LogNet Information Systems plc UK 26.5% 1,325
ARKeX Limited UK 2.5% 1,147
Investments carrying value 31,275
13. COPIES OF THE REPORT & ACCOUNTS
Copies of the Report and Accounts will be posted to shareholders in due course
and will be available from the Company's registered office 29 Curzon Street,
London W1J 7TL, and on the Company's website www.eurovestech.com.
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