Interim Results
14 December 2006
Eurovestech Plc ("Eurovestech" or "the Company")
Interim Results for the six months ended 30 September 2006
Chairman's Statement
I am pleased to report on the results for the six months to 30 September 2006
and to provide an update on our exciting prospects.
Our trading result and the performance of our portfolio have both exceeded our
expectations. Most notably, the value of our shareholding in ToLuna plc
(`ToLuna'), the AIM listed provider of online panel and technology services to
the market research industry increased from £28.4 million at the start of the
period to £35.7 million as at 30 September 2006. This uplift was after we sold
in June 2006 a portion of our holding for £2.9 million in cash. This
realisation resulted in the company achieving its first interim profit.
As I describe these results, I must call your attention to the different way in
which they have been prepared. Following discussions with the Financial
Reporting Review Panel and with their approval, the directors have decided to
consolidate subsidiary undertakings from 1 April 2006, the effect of which is
to include or consolidate the trading activities and asset positions of ToLuna
and Knowledge Support Systems Limited (`KSS') within the Eurovestech group
accounts. Comparative figures have been restated accordingly.
On a consolidated basis, group turnover for the six months to 30 September 2006
was £8.1 million against £3.7 million for the comparable period. The group
generated a pre-tax profit for the period of £3.7 million against a loss of £
0.5 million for the corresponding period. The profit for the period after
taxation and minority interests was £3.1 million against a loss of £0.5 million
for the corresponding period.
Previously, venture capital investments that 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 on AIM, a recognised investment exchange. This treatment was
on the basis that all investments within the company's portfolio 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.
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 £25.9 million at 30 September 2005 to £47.3 million at 30 September
2006. The balance sheet for the Company reflects the market values of listed
investments. I have previously reported to you that your directors believe that
KSS is in a stage of exceptionally rapid development as a result of which it is
impractical to benchmark its market value reliably. The £47.3 million net asset
value at 30 September 2006 reflects the carrying cost of our 100 per cent.
holding in KSS at its September 2003 valuation of £4.2 million.
Portfolio Review
ToLuna
ToLuna has delivered another excellent performance. For the six months to 30
June 2006, its revenue of £3.6 million exceeded the full year 2005 pro-forma
figure by 20 per cent. Its first half pre-tax profit of £0.9 million exceeded
its full year 2005 pro-forma result by 19 per cent. ToLuna also declared its
maiden interim dividend of 0.25p per share.
ToLuna serves a market research industry that is growing strongly as it moves
an increasing proportion of its services online. In September 2006, ToLuna
reported that its panel membership, which was 350,000 when it floated in May
2005, had increased to more than 1.1 million.
In June 2006, Cenkos Securities Limited, Eurovestech's joint broker, placed
2,245,000 of our ToLuna shares realising £2.9 million after costs. The disposal
proceeds represent a significant return over the book cost of £2 million, being
Eurovestech's entire cost of our total investment in ToLuna. At 30 September
2006 Eurovestech held 57 per cent. of ToLuna's issued share capital.
In September 2006, ToLuna reported that it continued to trade strongly and that
it was focusing on developing further initiatives to capitalise on its strong
position in a fast growing market place.
KSS
In the six months to 30 September 2006, KSS, which develops pricing and revenue
management systems for retailers and fuel stations, secured several new
contracts. These include a licence contract valued at more than £1 million with
PKN Orlen, Poland's largest fuel retailer, as well as customer wins in the
important US market.
PriceStrat, KSS's pricing and promotions solution to the grocery, drug chain
and speciality retail markets made excellent progress during the period, with a
considerable increase in customer prospects. While the nature of KSS's business
means that the precise timing of client wins is not easy to predict, we are
very encouraged by the scale of the opportunities in this significant segment
of the price optimisation market.
Eurovestech owns 100 per cent. of KSS's issued share capital.
Magenta
Magenta is a provider of intelligent software agent technology that allows its
customers better to allocate resources through the automation of their
scheduling. During the period under review, Magenta secured its largest single
order to date, of £0.75 million, with a leading UK transportation group. During
the period, Magenta delivered new solutions for road and marine applications,
pattern recognition and semantic search capabilities. Universities in Russia
and the UK have adopted Magenta technology for their research.
Eurovestech is the joint largest shareholder in Magenta, owning 43.7 per cent
of the fully diluted share capital.
Other
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 this shareholding was £0.4
million.
The remainder of the portfolio, which includes holdings in Tevet Process
Control Technologies Limited, ARKeX Limited (`ARKeX'), Lynx Photonic Networks
Inc, and D-Pharm Limited collectively accounts 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 share capital.
Post Balance Sheet Event
Last month. Eurovestech sold 2.44 million ToLuna shares at 185p, realising £4.5
million after costs, resulting in a remaining holding of 18,035,300 shares,
equivalent to 50.2 per cent of ToLuna's issued share capital. Eurovestech has
now realised a total of £7.4 million from its investment in ToLuna. This
compares with the £2 million total cost of our investment. As at 13 December,
based on ToLuna's share price of 205p, Eurovestech's residual holding is valued
at £37.0 million.
Charitable Donations
During the period, Eurovestech issued 800,000 shares to six charitable
organisations bringing the total number of new shares created and issued to
6,400,000. We are delighted that the current stock market value of these shares
is £1.2 million. We hope these policies and actions will encourage other
companies to support charities in this way.
The Company has today issued a total of 300,000 new ordinary shares divided
equally between the following three charitable organisations: The British Heart
Foundation, Crossroads Association and The Shooting Star 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 22 December 2006.
Richard Bernstein, Chief Executive of the company, has paid the £3,000 nominal
value to facilitate their issue.
Prospects
We continue to focus on building the significant value within our portfolio.
Our strong cash position allows us to capitalise on targeted new opportunities.
I am very optimistic about Eurovestech's prospects. I look forward to reporting
exciting developments in the coming months.
Richard Grogan
Chairman
14 December 2006
Unaudited Profit and Loss Account
For the six months ended 30 September 2006
Note Six months Six months Year ended
ended ended 31 March
2006
30 September 30 September (audited)
2006 2005
(unaudited) (unaudited)
£'000 £'000 £'000
£ £ £
Turnover 8,119 3,745 7,834
Operating expenses (6,548) (4,368) (10,566)
Operating profit/(loss) 1,571 (623) (2,732)
Net interest 3 76 111 174
Investment income 18 30 21
Amounts written off to - - (69)
investments
Gains/(losses) on investments 2,001 (50) (10)
Profit/(loss) on ordinary 3,666 (532) (2,616)
activities before taxation
Taxation (318) 67 (159)
Profit/(loss) on ordinary 3,348 (465) (2,775)
activities before minority
interests
Minority interests (254) (76) (145)
Profit/(loss) for the period 3,094 (541) (2,920)
Earnings/(loss) per ordinary 4 0.99p (0.17)p (0.93)p
share
Unaudited Company Balance Sheet
As at 30 September 2006
At 30 At 30 At 31
September September
2006 2005 March
(unaudited) (unaudited)
2006
(audited)
£'000 £'000 £'000
Fixed assets
Tangible assets 15 4 16
Investments 43,617 23,062 36,433
43,632 23,066 36,449
Current assets
Debtors 1,231 123 167
Investments 2,067 4,506 3,529
Cash at bank and in hand 656 172 917
3,954 4,801 4,613
Creditors: amounts falling due within (278) (2,011) (3,153)
one year
Net current assets 3,676 2,790 1,460
Net assets 47,308 25,856 37,909
Capital and reserves
Called up share capital 3,143 3,126 3,135
Share premium account 13,854 13,849 13,854
Revaluation reserve 37,009 16,510 29,585
Profit and loss account (6,698) (7,629) (8,667)
Shareholders' funds 47,308 25,856 37,909
Unaudited Consolidated Balance Sheet
As at 30 September 2006
At 30 At 30 At 31
September September
2006 2005 March
(unaudited) (unaudited)
2006
(audited)
£'000 £'000 £'000
Fixed assets
Negative goodwill (1,536) (2,414) (1,975)
Goodwill 2,127 341 2,114
Other tangible assets 891 16 655
Tangible assets 536 294 485
Investments 3,654 3,475 3,767
5,672 1,712 5,046
Current assets
Debtors 6,420 3,042 3,488
Investments 2,067 4,506 3,529
Cash at bank and in hand 3,751 5,500 4,079
12,238 13,048 11,096
Creditors: amounts falling due within (3,315) (2,345) (5,950)
one year
Net current assets 8,923 10,703 5,146
Net assets 14,595 12,415 10,192
Capital and reserves
Called up share capital 3,143 3,126 3,135
Share premium account 13,854 13,849 13,854
Profit and loss account (5,440) (6,678) (9,136)
Shareholders' funds 11,557 10,297 7,853
Minority interests 3,038 2,118 2,339
14,595 12,415 10,192
Unaudited Cash Flow Statement
For the six months ended 30 September 2006
Note Six months Six months Year ended
ended ended 31 March
2006
30 September 30 September (audited)
2006 20054
(unaudited) (unaudited)
£'000 £'000 £'000
Net cash (outflow) from 5 (3,374) (540) (295)
operating activities
Returns on investments and
servicing of finance
Interest received and similar 85 152 254
income
Interest paid (9) (41) (80)
Dividends received 18 30 21
Net cash inflow from returns on 94 141 195
investments and servicing of
finance
Taxation (380) 287 287
Capital expenditure and
financial investment
Purchase of tangible fixed (177) (249) (503)
assets
Purchase of intangible assets (509) - (783)
Purchase of fixed asset (472) (810) (2,539)
investments
Receipts from sale of fixed 3,428 - 165
asset investments
Net cash inflow/(outflow) from 2,270 (1,059) (3,660)
capital expenditure and
financial investment
Management of liquid resources
Purchase of current asset (6,337) (34,599) (48,137)
investments
Sale of current asset 7,391 33,167 47,536
investments
Net cash inflow/(outflow) from 1,054 (1,432) (601)
management of liquid resources
Net cash outflow before (336) (2,603) (4,074)
financing
Financing
Repayment of borrowings - (340) -
Issue of shares 8 4,449 4,459
Net cash inflow from financing 8 4,109 4,459
(Decrease)/increase in cash 6 (328) 1,506 385
1. Basis of Preparation
The results for the six months ended 30 September 2006 which are unaudited,
have been prepared in accordance with United Kingdom Generally Accepted
Accounting Principles except as noted below in relation to associates and under
the historical cost convention except for the revaluation of investments. This
interim report is providing consolidated financial information for the first
time. Otherwise, the accounting policies are consistent.
The financial information set out in this document does not comprise the
statutory accounts of the Company within the meaning of section 240(5) of the
Companies Act 1985.
2. Basis of Consolidation
The group financial statements consolidate those of the company and its
subsidiary undertakings. At 30 September 2006, the undertakings for which the
company consolidates were as follows;
Name of Percentage Nature of
undertaking holding of business
voting rights
ToLuna Plc 57 On-line market research
provider
Knowledge Support Systems 100 Revenue management and pricing
Limited
optimisation software
Atarim Web Consulting BM 50 Web consultancy
ToLuna Plc and Knowledge Support Systems Limited are companies incorporated in
the United Kingdom. Atarim Web Consulting BM is a company incorporated in
Israel. Profits or losses on intra-group transactions are eliminated in full.
On establishment of the subsidiaries, all assets and liabilities, which existed
at the date of acquisition, were recorded at their values reflecting their
consideration at that date.
Eurovestech Israel Limited, a wholly owned subsidiary incorporated in Israel
and Internet Pricing Limited, a wholly owned subsidiary incorporated in the
United Kingdom, have not been consolidated because they are both dormant and
their inclusion would not have been material.
The company owns an investment that the Companies Act 1985 requires to be
treated as an associated undertaking and therefore accounted for using the
equity method of accounting. Financial Reporting Standard 9 `Accounting for
Associates and Joint Ventures', states that investment funds should include all
such investments that are held in their investment portfolio in the same way
(i.e. at cost or market value), even those over which the investor has
significant influence or joint control. As a result, this investment has been
recorded in accordance with the company's normal policy on valuation.
3. Net interest
Six months Six months Year
ended ended
ended
30 September 30 September
2006 2005 31 March
(unaudited)
(unaudited 2006
(audited)
£ £ £
Other interest receivable and 85 152 254
similar income
Interest payable (9) (41) (80)
(76) 111 174
4. Profit/(loss) per ordinary share
The calculation of profit per share is based on the profit attributable to
ordinary shareholders of £3,094,000 (2005: Loss £541,000) divided by the
weighted average number of shares in issue during the year, being 313,868,156
(2005: 312,619,522) shares. Warrants outstanding at the period end had no
dilutive effect.
5. Net cash inflow from operating activities
6 months ended 6 months ended Year
30 September 30 September ended
2006
2005 31 March
2006
(unaudited) (unaudited) (unaudited)
£'000 £'000 £'000
Operating profit/(loss) for the 1,571 (623) (2,732)
period
Movement on foreign exchange reserves 469 (84) (103)
Depreciation of tangible assets 126 57 132
Amortisation of intangible assets 273 34 168
Amortisation of negative goodwill (439) (439) (878)
Amortisation of positive goodwill 72 95 169
Adjustment in respect of share option 36 22 36
grants
Gain on disposal of current asset - (135) -
investments
Increase in debtors (2,932) (57) (902)
(Decrease)/increase in creditors (2,550) 590 3,815
Net cash outflow from operating (3,374) (540) (295)
activities
6. Reconciliation of net cash flow to movement in net funds
Six months Six months Year
ended ended
ended
30 September 30 September
2006 2005 31 March
(unaudited) (unaudited)
2006
(audited)
£'000 £'000 £'000
(Decrease)/increase in cash in the (328) 1,506 385
period
Cash outflow from financing - 340 800
Cash (inflow)/outflow from increase (1,353) 2,508 916
in liquid resources
Other non-cash movements relating to (109) 84 (61)
investment gains
Change in net funds resulting from (1,790) 4,438 2,040
cash flows
Net funds at 1 April 2006 7,608 5,568 5,568
Net funds at 30 September 2006 5,818 10,006 7,608
7. Tax
Six months Six months Year
ended ended
ended
30 September 30 September
2006 2005 31 March
(unaudited) (unaudited)
2006
(audited)
£'000 £'000 £'000
Current tax
Foreign tax 95 - 159
UK tax 115 (150) -
210 (150) 159
Deferred tax 108 83 -
318 (67) 159
Tax has been estimated based on the current rates of tax applicable in each
country of operations.
8. Dividends
No dividend is proposed for the six months ended 30 September 2006.
9. Copies of the Interim Financial Statements
Copies of the interim financial statements are available on request from the
Company's registered office at 29 Curzon Street, London W1J 7TL.
Further Enquiries
Eurovestech plc Telephone
Richard Bernstein, Chief Executive 020 7491 0770
John East & Partners Limited 020 7628 2200
Simon Clements
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