Interim Results for six months ended 31 March 2013

RNS Number : 0590I

Blue Star Capital plc

28 June 2013

 



28 June 2013

Blue Star Capital plc

("Blue Star Capital" or "the Company")

Interim Results for the six months ended 31 March 2013

Chairman's Statement

I am pleased to report Blue Star Capital plc's ("Blue Star") interim results for the period ended 31 March 2013.

Financials

Blue Star Capital reported a loss for the period of £253,431 compared with losses of £901,342 for the six months to 31 March 2012.

Net assets were reduced by £158,797 to £996,290 (30 September 2012 £1.155m).

Blue Star's cash position at the end of the six months to 31 March 2013 was in credit by £4,638 compared to a credit balance of £36,936 at the end of September 2012.

Included within other receivables is an amount of £336,050 (2012: £436,050) relating to contingent consideration receivable on the disposal of Zimiti Limited. The level of deferred consideration receivable will be based on the performance of Zimiti to 30 September 2013. The fair value of the contingent consideration is based upon the discounted cash flows of the expected receivable using a post-tax discount rate of 10%.

Shareholder Loan Agreement

The Company entered into a shareholder loan agreement on 28 April 2011 for £400,000 ("the Loan"). The Loan, together with the accrued interest, was repayable in full by the Company on 30 May 2012 and is secured by an all assets debenture granted by the Company.

On 12 October 2012 and 2 January 2013, the Company agreed extensions and amendments to the Loan with payment in full being scheduled for 21 January 2013.

As at 31 March 2013 the amount outstanding under the Loan (including interest and repayment premium) was £576,214 ("Revised Principal"). The Revised Principal is accruing interest at the rate of 2 per cent per month. As a condition subsequent to extending the Loan, the loan note holders requested that an interim repayment of £20,000 be made by 30 April 2013.

Post Balance Sheet Events

On 17 April 2013 the Company announced that it had agreed a further extension to the Loan to 30 June 2013, which as announced earlier today, has now been extended until 31 July 2013.

On 25 April 2013 the Company announced that it had raised £43,750, pre expenses, through a subscription of 17,500,000 new ordinary shares at a price of 0.25p per share. The balance of the proceeds, post the interim loan repayment of £20,000, has been used for working capital purposes.

Board Change

As also announced earlier today, Peter Varnish tendered his resignation as a non-executive director of the Company.

Portfolio Review

We would like to highlight the following companies' progress since the publication of our last Annual Report and Accounts.

1 VISIMETRICS LIMITED

Post the merger of Omniperception Limited and Visimetrics Limited in May 2012, Blue Star's shareholding in the merged entity was valued at £113,368. On 4 January 2013 Visimetrics (UK) Limited ("Visimetrics"), including its subsidiary OmniPerception Limited ("OmniPerception") was acquired by Digital Barriers plc, ("Digital Barriers").

Under the terms of the acquisition, Digital Barriers has acquired the entire issued and to be issued share capital of Visimetrics, including OmniPerception, for an initial cash consideration of £3,300,000 (on a debt free, cash free basis), paid to the vendors of Visimetrics upon completion of the acquisition. Dependent upon the successful satisfaction by Visimetrics of certain financial and operational targets in the period from completion of the acquisition to 31 December 2014, deferred consideration of a further £4,700,000 may be paid by Digital Barriers to the vendors of Visimetrics; the majority of any such deferred consideration will satisfied through the issue of new ordinary shares in Digital Barriers, with the remainder paid in cash, although the Digital Barriers Board can at its discretion elect to pay deferred consideration fully in cash.

Blue Star's fully diluted holding in Visimetrics is valued at £68,092 in its Interim Accounts at 31 March 2013. The initial cash consideration payable to Blue Star Capital following certain retentions by Digital Barriers in relation to working capital adjustments was approximately £47,000. The maximum effective consideration payable to Blue Star Capital including any deferred consideration payable in Digital Barrier shares, will be approximately £137,000.

2 ESEEKERS LIMITED

eSeekers Limited is a private company, registered in England and Wales, in which Blue Star has a minority shareholding. eSeekers is a holding company, with equity holdings in three independent but synergistic internet businesses.

Blue Star Capital's investment of £300,000 was made in 2007 and its holding is valued at £1.121m, based on a £50m pre-money valuation for eSeekers set at the time of the last external investment.

eSeekers has recently informed Blue Star that it is carrying out a new round of funding at a premium to Blue Star's carrying value. As this funding exercise is ongoing, no adjustment has been made to the carrying value in the Company's accounts.

3 VIGILANT APPLICATIONS LIMITED (FORMERLY: OVERTIS GROUP LIMITED)

Vigilant Applications is a software development company specialising in security solutions for monitoring and shaping user behaviour at a PC or 'end point'. Its VigilancePro agent software is deployed in the enterprise space in both the public and private sector for monitoring professional standards, securing data and compliance. VigilancePro Retail applies the products unique capabilities to the monitoring of all activity at an Electronic Point of Sale - EPOS. Through its patented technology it is able to integrate with existing security infrastructure (CCTV) to provide irrefutable real-time remote reporting of all transaction activity within a retail environment.

Vigilant Applications is performing in line with management's expectations and accordingly the carrying value of the Company's loan receivable from Vigilant Applications has remained unchanged at £116,998.

Outlook

As previously reported, the Directors of the Company are continuing to review various strategic options available to the Company and continue in discussions with a number of parties regarding opportunities to improve the Company's cash position and provide it with sufficient funds in order to repay the Loan; and provide general working capital for the Company. However, the outcome of these discussions is dependent on a number of factors, including the actions of a number of third parties, and are therefore outside of the control of the Company or its Directors and there can be no guarantee as to their success.

The Lord Dear

Chairman

28 June 2013

Blue Star Capital plc	Tony Fabrizi
Daniel Stewart & Company plc (Nominated Adviser & Broker)	David Hart and Martin Lampshire

Statement of Comprehensive Income
for the six months ended 31 March 2013

		Unaudited				Audited
		Six months ended 31 March				Year ended 30 September
		2013		2012		2012
		£		£		£
(Loss)/profit arising from investments held at fair value through profit or loss:
Other investments		36,415		(587,423)		(633,699)
Deferred consideration		(100,000)		-		(444,430)
		(63,585)		(587,423)		(1,078,129)
Other income		-		4,088		3,128
Administrative  expenses		(95,309)		(297,909)		(361,508)
Operating loss		(158,894)		(881,244)		(1,436,509)
Finance income		10		66		80,137
Finance costs		(94,547)		(20,164)		(82,953)
Loss before and after taxation and total comprehensive loss for the period		(253,431)		(901,342)		(1,439,325)
Loss per ordinary share:
Basic and diluted loss per share		(0.15p)		(0.60p)		(0.90p)

The loss for the period was derived from continuing operations and is attributable to equity shareholdings.

Statement of Comprehensive Income
for the six months ended 31 March 2013

		Unaudited				Audited
		Six months ended 31 March				Year ended 30 September
		2013		2012		2012
		£		£		£
Non-current assets
Property, plant and equipment		-		-		-
Other investments		1,188,607		1,234,883		1,188,607
Trade and other receivables		-		540,777		-
		1,188,607		1,775,660		1,188,607
Current assets
Trade and other receivables		460,642		488,991		564,863
Cash and cash equivalents		4,638		89,457		36,936
		465,280		578,448		601,799
Total assets		1,653,887		2,254,108		1,790,406
Current liabilities
Trade and other payables		81,383		207,397		151,590
Borrowings		576,214		433,799		483,729
Total current liabilities		657,597		641,196		635,319
Net assets		996,290		1,712,912		1,155,087
Shareholders' equity
Share capital		175,442		164,091		168,020
Share premium account		6,789,097		6,723,796		6,772,770
Retained earnings		(5,968,249)		(5,174,975)		(5,785,703)
		996,290		1,712,912		1,155,087

Statement of changes in equity

at 31 March 2013

	Share capital		Share premium		Retained earnings		Total
	£		£		£		£
Six months ended 31 March 2013
At 1 October 2012	168,020		6,772,770		(5,785,703)		1,155,087
Loss for the period and total comprehensive income and expense	-		-		(253,431)		(253,431)
On shares issued in period	7,422		16,327		-		23,749
Share based payment	-		-		70,885		70,885
At 31 March 2013	175,442		6,789,097		(5,968,249)		996,290
Six months ended 31 March 2012
At 1 October 2011	150,261		6,464,876		(4,361,977)		2,253,160
Loss for the period and total comprehensive income and expense	-		-		(901,342)		(901,342)
On shares issued in period	13,830		258,920		-		272,750
Share based payment	-		-		88,344		88,344
At 31 March 2012	164,091		6,723,796		(5,174,975)		1,712,912
Year ended 30 September 2012
At 1 October 2011	150,261		6,464,876		(4,361,977)		2,253,160
Loss for the period and total comprehensive income and expense	-		-		(1,439,325)		(1,439,325)
Shares issued in year	17,759		320,144		-		337,903
Share issue costs	-		(12,250)		-		(12,250)
Share based payment	-		-		15,599		15,599
At 30 September 2012	168,020		6,772,770		(5,785,703)		1,155,087

Statement of cash flows

at 31 March 2013

		Unaudited				Audited
		Six months ended 31 March				Year ended 30 September
		2013		2012		2012
		£		£		£
Cash flow from operating activities
Loss for the period		(253,431)		(901,342)		(1,439,325)
Adjustments for:
Finance income		(10)		(66)		(80,137)
Finance costs		94,548		20,164		82,953
Fair value (gains)/losses		-		587,423		633,699
Shares issued in lieu of salary		23,749		52,500		92,904
Share based payments		70,885		88,344		15,599
Operating cash flows before movement in working capital		(64,259)		(152,977)		(694,307)
Increase/(Decrease) in trade and other receivables		104,221		(143,385)		401,563
Decrease/(Increase) in trade and other payables		(72,270)		(123,761)		(179,927)
Net cash used in operating activities		(32,308)		(420,123)		(472,671)
Financing activities
Proceeds from issue of equity shares		-		245,000		245,000
Payment for share issue costs		-		(12,250)		(12,250)
		-		232,750		232,750
Investing activities
Interest received		10		66		93
Net decrease in cash and cash equivalents		(32,298)		(187,307)		(239,828)
Cash and cash equivalents at beginning of the period		36,936		276,764		276,764
Cash and cash equivalents at end of the period		4,638		89,457		36,936

Notes to the Interim Financial Statements

for the six months ended 31 March 2013

1.       Basis of preparation

The principal accounting policies used for preparing the Interim Accounts are those the Company expects to apply in its financial statements for the year ending 30 September 2013 and are unchanged from those disclosed in the Company's Report and Financial Statements for the year ended 30 September 2012.

The financial information for the six months ended 31 March 2013 and for the six months ended 31 March 2012 has neither been audited nor reviewed pursuant to guidance issued by the Auditing Practices Board. The financial statements for the full year ended September 2012 included an emphasis of matter in the Audit Report in relation to the going concern of the Company.

The Company entered into a shareholder loan agreement on 28 April 2011 for £400,000 ("the Loan"). The Loan, together with the accrued interest, was repayable in full by the Company on 30 May 2012 and is secured by an all assets debenture granted by the Company.

As at 31 March 2013 the amount outstanding under the Loan (including interest and repayment premium) was £576,214 ("Revised Principal"). The Revised Principal is accruing interest at the rate of 2 per cent per month. As a condition subsequent to extending the Loan, the loan note holders requested that an interim repayment of £20,000 be made by 30 April 2013.

On 17 April 2013 the Company announced that it had agreed a further extension to the Loan to 30 June 2013.

On 25 April 2013 the Company announced that it had raised £43,750, pre expenses, through a subscription of 17,500,000 new ordinary shares at a price of 0.25p per share. The balance of the proceeds, once the repayment of £20,000 had been made, has been used for working capital purposes.

On 29 June 2013, the Loan was further extended to 31 July 2013.

The Company is seeking to progress the sale of certain investments. However, this is not certain and the amount realised may or may not provide sufficient funds to cover the repayment of the above shareholder loan on 31 July 2013 and the on-going working capital needs of the Company. Should these expected transactions not take place, the Company would need to obtain alternative finance. There can be no certainty that further financing will be available.

These conditions constitute a material uncertainty that may cast doubt about the Company's ability to continue as a going concern. The interim financial statements do not contain the adjustments that would result if the Company were unable to continue as a going concern.

2.      Significant accounting policies

Basis of accounting

The significant accounting policies that the Company has applied to its interim accounts for the six months ended 31 March 2013 and which it expects to apply in its full financial statements for the year ending 30 September 2013 are set out below:

Derivatives

Embedded derivatives are separated from the host contract and recognised at fair value using                      generally accepted valuation techniques. If there is an active market for the derivatives, they are recognised at the quoted market price.  

Where a contract contains one or more embedded derivatives, Blue Star Capital may choose to designate the entire hybrid contract as a financial asset at fair value through profit or loss.

Financial assets

Blue Star Capital classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired.

Blue Star Capital's accounting policy for each category is as follows;

Fair value through profit or loss 

Financial assets at fair value through profit or loss are either financial assets held for trading or other investments that have been designated at fair value through profit or loss on initial recognition.

Financial assets at fair value through profit or loss are initially recognised at fair value and any gains or losses from subsequent changes in fair value are presented in the statement of comprehensive income in the period in which they arise. 

The fair value of unlisted securities is established using International Private Equity and Venture Capital ("IPEVC") guidelines. The valuation methodology used most commonly by the Company is the 'price of recent investment' contained in the IPEVC valuation guidelines. The following considerations are used when calculating the fair value using the 'price of recent investment' guidelines:

·      Where the investment being valued was itself made recently, its cost will generally provide a good indication of fair value;

·      Where there has been any recent investment by third parties, the price of that investment will provide a basis of the valuation;

·      If there is no readily ascertainable value from following the 'price of recent investment' methodology, the Company considers alternative methodologies in the IPEVC guidelines, being principally discounted cash flows and price earnings multiples requiring management to make assumptions over the timing and nature of future earnings and cash flows when calculating fair value;

·      Where a fair value cannot be readily estimated the investment is reported at the carrying value at the previous reporting date unless there is evidence that the investment has been impaired.

Loans and receivables

Blue Star Capital's loans and receivables comprise cash and cash investment in the balance sheet and loans receivable from third parties.

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less.

For the purpose of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. 

Loans receivable from third parties are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.  

Foreign currency

The functional and presentational currency of the Company is Sterling, which is the currency of the primary economic environment in which the entity operates.

Foreign currency transactions are translated into sterling at the rate of exchange at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of foreign currency monetary assets and liabilities at the yearend rate are recognised in profit or loss.

Foreign currency gains or losses arising on financial assets at fair value through profit or loss are included in the statement of comprehensive income in fair value gains or losses.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/ (assets) are settled/ (recovered).

3       Critical accounting estimates and judgements

Blue Star Capital makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

Fair value of financial instruments:

Blue Star Capital holds other investments that have been designated at fair value through profit or loss on initial recognition. Blue Star Capital determines the fair value of these financial instruments that are not quoted, using valuation techniques such as Black Scholes option pricing. These techniques are significantly affected by certain key assumptions, such as discount rates.  Other valuation methodologies such as discounted cash flow analysis assess estimates of future cash flows and it is important to recognize that in that regard, the derived fair value estimates cannot always be substantiated by comparison with independent markets and, in many cases, may not be capable of being realised immediately. 

In certain circumstances, where fair value cannot be readily established, Blue Star is required to make judgements over carrying value impairment, and evaluate the size of any impairment required.

4       Loss per ordinary share

The calculation of a basic loss per share is based on the loss for the period attributable to equity holders of Blue Star Capital and on the weighted average number of shares in issue during the period.

5       Investments - held for trading 

The held for trading investments relate to investments in companies listed on the AIM market of the London Stock Exchange plc. The investments are classified as current assets and are measured at their fair value at each reporting date. Changes in fair value are recorded in profit or loss.

6       Post Balance Sheet Events

On 17 April 2013 the Company announced that it had agreed a further extension to the Loan to 30 June 2013. As at 31 March 2013 the amount outstanding under the Loan (including interest and repayment premium) was £576,214 ("Revised Principal"). The Revised Principal is accruing interest at the rate of 2 per cent per month. As a condition subsequent to extending the Loan, the loan note holders requested that an interim repayment of £20,000 be made by 30 April 2013.

On 25 April 2013 the Company announced that it had raised £43,750, pre expenses, through a subscription of 17,500,000 new ordinary shares at a price of 0.25p per share. The balance of the proceeds has been used for working capital purposes.

On 28 June 2013, the Loan was further extended to 31 July 2013.

 

END

 

 

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