Interim Results
Farsight PLC
28 February 2006
Farsight PLC
Interim Results
For the six months ended 30 November 2005
Introduction
I am pleased to present my report for the six month period ended 30th November
2005, a period in which the company continued to achieve sales growth through
increased sales of monitoring services using the e-surveillance software
platform. Construction sites are finding the Build Secure product increasingly
attractive and a number of major developers are using this service to protect
their property during the construction phase.
Our objective continues to be the restoration of profitability and the reported
figures indicate that we are close to achieving this.
Results and Dividends
Turnover on continuing activities increased by 37.04% over the comparative
period to £777,000 (2004 - £567,000).
The operating loss was £40,000 (2004 - loss of £188,000).
After recognising a profit on the disposal of the intellectual property rights
relating to the e surveillance technology, sold in June 2005 and after deducting
interest payable, the profit for the period was £1,000 (2004 - loss of
£189,000).
No dividend is recommended.
Trading Review
Sales revenue from remote video monitoring operations continues to increase with
annualised income from monitoring contracts now approaching £1,000,000.
Customers are able to benefit from substantial cost savings using remotely
monitored cctv when compared with the cost of manned guarding. This makes the
product extremely attractive in certain market sectors such as motor dealers and
construction. We are also trying to increase our market share within the
Facilities Management (FM) sector. The e surveillance product has been written
with FM companies in mind and it provides features and functionality which could
help reduce their costs significantly.
The management information available to us internally is helping drive down
costs and improves service quality which will help us achieve our profitability
targets.
Following the successful BS8418 accreditation last year we have now trained more
than 85% of our staff to the level necessary to achieve the Security Industry
Association license required to operate remote cctv services. We will complete
the training of all staff during March in accordance with the legislation laid
down. We have also registered for the SIA Partnership programme which will
further underpin our relationship with the 'industry watchdog'.
We anticipate that the increasing regulation in our industry will ensure
consolidation occurs within the security industry sector. Some new business has
already been achieved as a result.
Customers are increasingly using our web portal to help manage their security
operations and the management information available to them enables a closer tie
between us and assists us to continually improve our overall performance.
The sales pipeline is strong and our customer portfolio now includes a number of
corporate customers who are anxious to have an effective security solution which
is sustainable over the long term.
Conclusion
We continue to seek to increase the scale of operations via acquisition or
merger whilst growing our customer base organically.
The half year results are encouraging and demonstrate that we are now heading
towards profitability. We believe that the acquisition of monitoring contracts
announced in January will further strengthen the Company's position.
C R C Thomas
Chief Executive
28 February 2006
Consolidated profit and loss account
for the six months ended 30 November 2005
6 months 6 months Year
ended ended ended
30 November 30 November 31 May
2005 2004 2005
(unaudited) (unaudited) (audited)
Notes £000 £000 £000
Turnover 777 567 1,172
Cost of sales (577) (470) (968)
Gross profit 200 97 204
Operating expenses (240) (285) (578)
Exceptional net operating expenses - - (265)
Operating loss for the period (40) (188) (639)
Disposal of intellectual property rights 4 50 - -
Profit/(loss) before interest 10 (188) (639)
Interest payable (9) (1) (16)
Profit/(loss) before taxation 1 (189) (655)
Taxation - - -
Profit/(loss) after taxation 1 (189) (655)
Basic earnings/(loss) per ordinary share 3 .00033p (0.062)p (0.214)p
Fully diluted earnings/(loss) per share 3 .00026p (0.052)p (0.179)p
The results set out above relate to continuing operations.
The group has no gains and losses for the period other than the results set out
above, consequently no statement of recognised gains or losses has been
presented.
Consolidated balance sheet
at 30 November 2005
30 November 30 November 31 May
2005 2004 2005
(unaudited) (unaudited) (audited)
Notes £000 £000 £000
Fixed assets
Tangible assets 5 289 -
Current assets
Debtors 455 339 340
Cash at bank and in hand - 73 -
Creditors: due within one year:
Secured convertible loans 5 - (750) -
Other (1,074) (997) (913)
Net current liabilities (619) (1,335) (573)
Current liabilities less total assets (614) (1,046) (573)
Creditors: due after more than one year:
Secured convertible loans 5 (750) - (750)
Other (147) - (189)
Net liabilities (1,511) (1,046) (1,512)
Called up share capital 6 7,484 7,484 7,484
Share premium account 4,493 4,493 4,493
Capital redemption reserve 20 20 20
Profit and loss account (13,508) (13,043) (13,509)
Equity shareholders' deficit 10 (1,511) (1,046) (1,512)
Consolidated cash flow statement
for the six months ended 30 November 2005
6 months 6 months 6 months
ended ended ended
30 November 30 November 31 May
2005 2004 2005
(unaudited) (unaudited) (audited)
Notes £000 £000 £000
Net cash (outflow) from operating
activities 7 (299) (185) (304)
Returns on investments and servicing
of finance:
Interest paid (9) (1) (11)
Cash (outflow) from returns on
investments and servicing of finance (9) (1) (11)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (5) (2) (10)
Proceeds from sale of tangible fixed assets - 13 13
Proceeds from sale of intellectual
property rights 50 - -
Cash inflow from capital expenditure
and financial investments 45 11 3
Cash (outflow) before financing (263) (175) (312)
Financing
Issue of convertible loans - 300 300
Repayment of capital element of
finance leases - (15) (15)
Net cash inflow from financing - 285 285
(Decrease)/increase in cash in the
period 8 (263) 110 (27)
Notes to the interim report
for the six months ended 30 November 2005
1. Basis of preparation
The interim report has been prepared using accounting policies that have been
consistently applied and are those used in the preparation of the financial
statements for the year ended 31 May 2005 of Farsight plc.
The group accounts comprise the consolidation of the accounts of the company and
its subsidiary undertakings after eliminating inter company balances and
transactions.
The comparative data in these interim financial statements are the audited
financial statements for the year ended 31 May 2005 and the unaudited management
accounts for the six months ended 30 November 2004.
The financial information contained in this interim announcement does not
constitute statutory accounts within the meaning S240 of the Companies Act 1985.
The interim results, which have not been audited, have been prepared on the
basis of the accounting policies adopted by Farsight plc for the year ended 31
May 2005 as set out in the Annual Report and Accounts. Those accounts (on which
the auditors gave an unqualified report) have been delivered to the Registrar of
Companies.
2. Dividends
No dividend has been declared or proposed for the six months ended 30 November
2005.
3. Earnings/(loss) per ordinary share
6 months 6 months Year
ended ended ended
30 30 31 May
November November 2005
2005 2004 (audited)
(unaudited) (unaudited)
£000 £000 £000
Profit/(loss) attributable to ordinary shareholders 1 (189) (655)
'000 '000 '000
Weighted average number of ordinary shares
(Basic EPS) 305,727 305,727 305,727
Weighted average number of ordinary shares
(Fully diluted EPS) 380,727 365,727 365,727
pence pence pence
Basic earnings/(loss) per share .00033 (0.062) (0.214)
Fully diluted earnings/(loss) per share .00026 (0.052) (0.179)
Basic earnings per share (EPS) for the six months period ended 30 November 2005
is calculated by dividing the profit attributable to ordinary shareholders
namely a profit of £1,000 by the weighted average number of shares (305,727,072
ordinary shares).
Fully diluted earnings per share (EPS) for the six months period ended 30
November 2005 is calculated by dividing the profit attributable to ordinary
shareholders by 380,727,072 potential ordinary shares. This includes a weighted
average of 75 million potential ordinary shares which would be issued under the
convertible loan agreement.
For the calculation of fully diluted loss per share for the comparative period
of the year ended 31 May 2005 the weighted average number of shares includes 60
million potential ordinary shares which would be issued under the convertible
loan agreement (6 months ended 30 November 2004: 60 million).
4. Disposal of intellectual property rights
On 8 June 2005 Farsight plc disposed of two dormant subsidiary undertakings,
e-surveillance Limited and e-surveillance Software Limited. On 15 June 2005 the
group's intellectual property rights relating to its e-surveillance technology
were disposed of to e-surveillance Limited, for a consideration of £50,000.
The agreement reached with the buyer of the subsidiaries was that further
consideration may become payable to Farsight plc should the shares or the
business of the subsidiaries acquired be sold within a three year period from 8
June 2005. This further consideration would be 20% of the consideration
receivable for any disposal, less costs expended in developing the business,
including the software acquired, together with reasonable professional costs and
disbursements incurred by the buyer of the subsidiaries and or the subsidiaries
in connection with any such disposal.
5 Secured convertible loans
On 28 November 2003 the company negotiated a conditional secured convertible
loan facility of up to £750,000 with a 'concert party' of investors in the
company (John Dalton, Robert Davies and Michael James). Prior to 31 May 2005
the full balance of the facility had been drawn down by the company.
When the facility was negotiated the 'concert party' investors were given an
option to convert the outstanding balance of the secured loans into ordinary
shares at a conversion price of 1p per share at any time prior to the second
anniversary of the date of the agreement (ie prior to 28 November 2005). Any
ordinary shares of 1p each issued pursuant to a conversion of the loans would
rank pari passu with the existing issued ordinary share capital of the company.
If that option was not exercised then the secured loans fell due to be repaid on
the second anniversary of the date of the agreement (ie on 28 November 2005).
Prior to 28 November 2005 the 'concert party' investors notified the company
that they were prepared to extend the period for which the facility is granted
for an additional two year period (ie up to 28 November 2007). On 28 November
2005 the lenders and the borrower agreed to vary the principal deed of the loan
agreement entered into on 28 November 2003. The lenders and borrower agreed a
deed of variation to extend the final repayment date of the loan agreement to 28
November 2007. The deed of variation also inserts a new clause into the
principal deed stating that the lenders conversion rights shall be exercised
subject to the lenders complying with the rule of the City Code on Takeovers and
Mergers.
The loans outstanding at 30 November 2005 are secured by debentures giving fixed
and floating charges over the assets of Farsight plc, and its subsidiary
undertaking Farsight Security Limited and by cross company guarantees in respect
of those companies.
6. Called up share capital
30 November 30 November 31 May
2005 2004 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
Allotted, called up and fully paid
305,727,072 ordinary shares of 1p each 3,057 3,057 3,057
Deferred shares of 1p each 4,427 4,427 4,427
7,484 7,484 7,484
The deferred shares carry no voting rights, no rights to dividends or other
distributions and on a winding up holders of deferred shares will only be paid
out once the holders of ordinary shares have been paid all the capital on their
shares together with an aggregate premium of £100,000,000.
7. Reconciliation of operating loss to net cash flow from operating
activities
6 months 6 months Year
ended ended ended
30 November 30 November 31 May
2005 2004 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
Operating loss (40) (188) (639)
Depreciation charge in respect of
tangible fixed assets - 38 70
Impairment of tangible fixed assets - - 265
Profit on disposal of tangible fixed assets - (13) (13)
(Increase) in debtors (115) (108) (109)
(Decease)/increase in creditors (144) 86 122
Net cash (outflow) from operating activities (299) (185) (304)
8. Analysis of net debt
At Cash flow for At
31 the 6 months 30
May ended November
2005 30 November 2005
(audited) 2005 (unaudited)
(unaudited)
£000 £000 £000
Bank overdrafts (64) (263) (327)
Secured convertible loans (750) - (750)
Net debt (814) (263) (1,077)
9. Reconciliation of net cash flow to movement in net debt
6 months 6 months Year
ended ended ended
30 November 30 November 31 May
2005 2004 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
Movement in cash in the period (263) 110 (27)
Cash inflow from change in debt - (285) (285)
Change in net debt resulting from
cash flows (263) (175) (312)
Net debt at beginning of period (814) (502) (502)
Net debt at end of period (1,077) (677) (814)
10. Movement in equity shareholders' (deficit)/funds
6 months 6 months Year
ended ended ended
30 November 30 November 31 May
2005 2004 2005
(unaudited) (unaudited) (audited)
£000 £000 £000
At the beginning of the period (1,512) (857) (857)
Profit/(loss) for the period 1 (189) (655)
At the end of the period (deficit) (1,511) (1,046) (1,512)
11. Circulation
A copy of this announcement is available from the Company Secretary, The
Observatory, Leofric Square, Vicarage Farm Road, Peterborough, Cambridgeshire,
PE1 5TP. A copy of the announcement is also posted on the company's website
www.farsight.co.uk
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