Interim Results
Interregnum PLC
11 March 2003
Tuesday 11th March 2003
PRESS RELEASE
INTERREGNUM PLC
Financial results for the 6 months ended 31 December 2002
Increase in non-investment advisory fees
Financial highlights
* Overall turnover of £449,000 (2001: £603,000) reflecting reduced arrangement fees for investment activity
* Turnover for non-investment advisory business increased by 55% to £342,000 (2001: £220,000)
* Cash outflow reduced to £641,000 (2001: £2,836,000)
* Pre-tax loss on ordinary activities reduced to £577,000 (2001: £648,000)
* Total recognised loss £468,000 (2001: £1,685,000)
* Costs reduced to £1,271,000 (2001: £1,656,000) principally through a reduction in headcount and overheads
* Portfolio value increased to £2.63 million (June 2002: £2.24 million) as a result of value of quoted portfolio
companies uDate.com Inc ('uDate') and Open Text Corporation ('Open Text')
* Net cash of £1,113,000 (June 2002: £1,754,000)
* Loss per share of 0.88p basic (2001: 1.00p)
Corporate progress
* uDate sold, subject to final completion. A material fee and equity in new parent company USA Interactive expected
in current financial year.
* Sale of Computerwire generated a transaction fee of £517,000 with an additional consideration of up to £700,000
* New advisory offerings established, in particular, focused on larger technology companies
* Advisory Board Chairman, Dr. John Forrest, CBE, appointed. Progress made to appoint further Advisory Board members
to support new advisory business origination.
Commenting on the results, Ken Olisa, Chairman of Interregnum plc, said:
'Although the context in which we work has been unfavourable in the extreme in the period under review, given the
on-going market uncertainty and further downward pressure on the IT sector, Interregnum has continued to adapt to the
changing market by transitioning from a venture capital model to a balanced investment and advisory business.
'Our advisory-only revenues grew significantly in the period, reflecting our ability to productise our advisory
service offerings attuned to the current environment, in particular, establishing new advisory offerings focused on
larger technology companies. We are delighted that Dr. John Forrest, is joining Interregnum as Chairman of our new
Advisory Board and look forward to working with him in generating exciting new business opportunities for the firm.
We intend to announce further appointments to the Advisory Board in due course.
'There can be no doubt that information technology will continue to be a core industry and one that will stage a
recovery in step with the next economic cycle. It remains Interregnum's strategy to ensure that we are best
positioned to take advantage of that recovery when it comes. With over two hundred years of international operational
expertise in the IT industry gained over the last three economic cycles, we are one of the very few businesses able
to advise clients on strategies to survive the downturn.'
- Ends -
For further information, please contact:
Interregnum 020 7494 3080
Ken Olisa, Chairman & CEO
Martin Cooper, Finance Director
Merlin Financial 020 7606 1244
Vanessa Maydon
Clare Maciocia
Attached: Chairman's Statement
Profit & Loss Account
Balance Sheet
Cashflow Statement
Notes to the Interim financial statement
CHAIRMAN'S STATEMENT
Introduction
As is well recorded elsewhere, the second half of 2002 saw market uncertainty increase as the global economy
continued to founder and the threat of war added to the generally conservative procurement and investment climates.
These effects added further downward pressure across the already depressed IT sector as major customers postponed
purchasing decisions and venture capitalists postponed investment.
The combination of these factors and the consensus that they are unlikely to improve in the medium term, further
reduced the number of serious players in the UK's IT investment and advisory sector.
Although the context in which we work has been unfavourable in the extreme, Interregnum has continued to adapt to the
changing market by transitioning from a venture capital model to a balanced investment and advisory company.
Results
Our operating loss was reduced over the six months to 31 December 2002 to £788,000 (2001: £1,041,000) reflecting
action take by the Board to reduce expenses in line with our revenue stream. Expenses in the period totalled
£1,271,000 (2001: £1,656,000) with total revenue of £449,000 (2001: £603,000).
The total recognised loss after interest, exits and revaluation was substantially reduced to £468,000 (2001:
£1,685,000).
The value of the portfolio rose marginally over the period to £2,633,000 (June 2002: £2,243,000) following the small
increase in value of the quoted companies uDate and Open Text in our portfolio.
Our cash balance was reduced over the period to £1,113,000 (June 2002: £1,754,000)
As a consequence of the above, the loss per share was reduced to £0.0088p (2001: £0.01).
Operational Review
This slow but steady progress to become a balanced investment and advisory company can be measured against our four
key operating priorities:
• Protecting and building portfolio value
• Increasing advisory fee income
• Reducing costs and overheads
• Increasing investment firepower
Building portfolio value
Prior to the dot.com boom, returns from IT venture capital investments were not expected to materialise in less than
five to 10 years. The ending of that boom has restored expectations to historical levels - building businesses is
long and painstaking work. Over the period we were able to record a marginal increase in the value of our portfolio
from £2,243,000 to £2,633,000 and a profit of £178,000 on the sale of Computerwire to Datamonitor plc in October
2002. Furthermore, our two public company holdings - uDate and Open Text, both quoted on NASDAQ - showed modest and
counter-cyclical increases in value. uDate, in which we have a small equity position and for whom we act as an
advisor, announced its conditional sale to USA Interactive in December 2002 which we anticipate, if successfully
concluded, will be of material benefit to Interregnum in the current financial year.
Our investment activities have been minimal and have taken the form of secured debt, rather than straight equity, in
keeping with the higher risks involved with investing in the current climate.
Increasing advisory fees
Our overall turnover fell by 25% during the period to £449,000 (2001: £603,000). However, this masked a fundamental
shift in the character of the income which, in previous periods, was dominated by arrangement fees billed to investee
companies rather than from advisory-only clients. In the six months under review advisory-only revenues grew 55% to
£342,000 (2001: £220,000). We have achieved this change by developing productised offerings attuned to the current
environment, an example of which is our Research & Development Tax Credit service which assists IT companies to
reclaim cash from the Inland Revenue. So far we have successfully raised over £1,000,000 in aggregate for 17 clients.
This has been achieved by combining our financial and technology expertise in interpreting and applying the Inland
Revenue rules and we are now aggressively promoting the service more widely.
In December 2002, we acted for uDate as one of the advisors in its sale to USA Interactive. This transaction is in
its final stages of completion and is expected to close within our financial year. If it does conclude as planned,
Interregnum will earn a material fee and convert our holding in uDate into shares in USA Interactive.
We have continued our shift to work for larger technology companies by undertaking research and valuation projects
and to assist us in this initiative we have established an Advisory Board to consist of influential leaders of the
global technology sector. We were delighted, therefore to welcome Dr. John Forrest CBE, (a non-executive director of
3i plc and Chairman of the Government Spectrum Management Advisory Group), as the Advisory Board's inaugural Chairman
and look forward to announcing the first members in the near future.
Reducing costs and overheads
Our vigorous approach to expense reduction continued throughout the period resulting in a fall of £385,000 to
£1,271,000 (2001: £1,656,000). Contributing to this fall were:
• A reduction in headcount to 15 (2001:29) although with the core Director and senior team remaining
• A senior salary reduction programme which produced a per capita salary cost of £59,000 (2001: £65,000)
• Lowering of overheads by £180,000 despite redundancy costs and bad debt write-offs
The cost reductions were loaded towards the end of the period and we anticipate carrying a lower run rate in the
second half.
Increasing investment firepower
Given our own relatively low resources we are not currently investing outside our own portfolio. However, we have
continued to foster relationships with other institutional investors to secure support for our better portfolio
companies. I have written in previous statements of the seed and early-stage capital drought which followed the
dot.com boom deluge. Unfortunately private equity investors remain disinclined to become active in this sector and
our plans to raise a substantial fund therefore remain on tick-over, awaiting the inevitable rekindling of appetite
for technology investing.
Outlook
At a time when the public markets are experiencing considerable downward pressures and the likelihood of deflation
haunts the world's economies, the IT industry is undergoing a fundamental change with Internet computing taking over
from the PC as the engine of growth. In addition, as in the previous technology shifts - from mainframe to
mini-computer and mini-computer to PC - the effects are traumatic and Darwinian in nature as long-established players
fail to adapt sufficiently fast to survive. However increasing demand for the competitive advantages conferred by IT
mean that each seismic shift triggers the birth of a new generation of energetic innovative entrepreneurs.
There can be no doubt, therefore, that although the industry's profile may change, information technology will
continue to be a core industry in which a premium will be paid for effective innovation and that will stage a
recovery in step with the next economic cycle.
It remains Interregnum's strategy to ensure that we are best positioned to take advantage of that recovery when it
comes. The unique combination of our corporate finance skills and over 200 years of international operational
experience in the IT industry gained over the last three economic cycles, places us as one of the very few businesses
able to advise clients on strategies to survive the downturn. Over the coming months we intend to continue to promote
our tailored offerings, such as the R&D tax credit scheme, while leveraging our Corporate Venturing capacity and our
Advisory Board in order to advise larger technology companies.
The next few months will be at least as difficult as the past year or so. However, the Board and staff of Interregnum
are determined to ensure that our people, offerings, base and brand are applied to create sustainable shareholder
value.
Thank you for your support.
Ken Olisa
Chairman and CEO
Portfolio
Client % holding Carrying value
before provisions
Altis 4.0% 0
BAI (Adaptive, Inc) 13.0% 656,000
Best International - * 38,902
Blue Arc - 101,906
Chyron - 0
eLink Suite 25.0% 607,839
ItsWine 3.4% 11,043
Knowledge=Power - 64
Mediasurface - 11,897
Metapraxis 14.0% 180,000
Monactive - 0
NanoMagnetics 3.0% 500,000
NetInfo 7.5% 120,000
Open Text - 237,715
Raidtec - 306
Respond 23.8% 2,329,967
Sapphire 3.8% 50,000
Speed-trap - 15,000
Transacsys - 533
Trilogy 1.0% 28,390
uDate - 195,209
Yospace 49% 635,000
5,719,771
Provision** -3,088,995
2,630,776
* - indicates a negligible holding
** The Board reviewed the carrying value of investments in two stages. First, it
applied the approach set out by the BVCA to early-stage, development-stage
and quoted investments. Secondly, given the difficult trading conditions and
the uncertain nature of the economic environment going forward, it was
considered necessary to make a further provision against investments. The
further provision made has not been shown on a line-by-line basis in the table
above due to the commercially sensitive nature of such provisions.
Key Performance Indicators
Six months to Six months to Twelve months to
31 December 31 December 30 June
2002 2001 2002
PORTFOLIO
Portfolio value (£m) 2.6 14.7 2.5
Portfolio base cost (£m) 15.0 12.1 14.7
Investment (£m) 0.3 1.2 3.9
Investments made 5 7 10
Portfolio holdings 22 27 25
Investments written off 1 0 3
BALANCE SHEET
Cash balance (£m) 1.1 5.1 1.8
Net assets/share (issued) (£) 0.068 0.330 0.075
DSO (Days sales outstanding) 98 103 55
PROFIT & LOSS ACCOUNT
Revenue (£m) 0.45 0.60 1.33
Advisory (£m) 0.34 0.22 0.59
Investment (£m) 0.11 0.38 0.74
Costs - Salary(£m) 0.67 0.96 1.92
Costs - admin(£m) 0.60 0.69 2.00
Interest and other income (£m) 0.08 0.42 0.30
Exits (£m) 0.18 0.00 0.00
Profit /(Loss) (£m) (0.58) (0.65) (18.40)
Headcount 15 29 21
Consolidated profit and loss account
Six months ended 31 December 2002
Six months to Six months to Year to
31 December 31 December 30 June
2002 2001 2002
Note (unaudited) (unaudited) (audited)
£000 £000 £000
Turnover 2 449 603 1,327
Administrative expenses (1,271) (1,656) (3,923)
Other operating income 34 39 81
Operating loss (788) (1,014) (2,515)
Profit on sale of investment 178 - -
Interest receivable 33 381 222
Amounts written off investments - - (16,091)
Interest payable - (15) (13)
Loss on ordinary activities (577) (648) (18,397)
before taxation
Taxation - - -
Retained loss for the period (577) (648) (18,397)
Loss per share - basic and 3 (0.88p) (1.00p) (28.12p)
diluted
Statement of total recognised
gains and losses
Six months to Six months to Year to
31 December 31 December 30 June
2002 2001 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Loss for financial period (577) (648) (18,397)
Unrealised surplus/(deficit) on 109 (1,037) 206
revaluation of fixed asset
investments
Total recognised losses for the (468) (1,685) (18,191)
financial period
Consolidated balance sheet
31 December 2002
Note As at As at As at
31 December 2002 31 December 2001 30 June 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Fixed assets
Tangible assets 280 369 315
Investments 4 2,633 14,726 2,243
2,913 15,095 2,558
Current assets
Debtors 5 770 1,613 855
Investments held for resale - - 289
Cash at bank and in hand 1,113 5,160 1,754
1,883 6,773 2,898
Creditors: Amounts falling due in one year 6 (346) (445) (539)
Net current assets 1,537 6,328 2,359
4,450 21,423 4,917
Capital and reserves
Called up share capital 3,272 3,272 3,272
Share premium 18,877 18,877 18,877
Revaluation reserve 389 2,600 280
Merger reserve (2,407) (2,407) (2,407)
Profit and loss account (15,681) (919) (15,105)
4,450 21,423 4,917
Consolidated cash flow statement
Six months ended 31 December 2002
Six months to Six months to Year to
31 December 31 December 30 June
2002 2001 2002
Note (unaudited) (unaudited) (audited)
£000 £000 £000
Net cash flows from operating 7 (848) (1,267) (2,084)
activities
Returns on investments and 22 136 209
servicing of finance
Taxation - - (1)
Capital expenditure and financial 185 (1,284) (3,942)
investment
Cash outflow before use of liquid (641) (2,415) (5,818)
resources and financing
Financing - (421) (423)
Decrease in cash (641) (2,836) (6,241)
Reconciliation of net cash flow
to movement in net debt
Six months to Six months to Year to
31 December 31 December 30 June
2002 2001 2002
(unaudited) (unaudited) (audited)
Decrease in cash in the period £000 £000 £000
Decrease in debt and lease financing
Loan (641) (2,836) (6,241)
Exchange movements - 2 2
- 422 421
Change in net debt - 3 3
Net funds at 1 July 2002 (641) (2,409) (5,815)
Net funds at 31 December 2002
1,754 7,569 7,569
1,113 5,160 1,754
Notes to the Interim financial statements
For the six months to 31 December 2002
1 Basis of perparation
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year
ended 30 June 2002, and are unaudited. The interim financial statements do
not constitute statutory financial statements within the meaning of
section 240 of the Companies Act 1985.
Comparative figures for the year ended 30 June 2002 are an abridged
version of the Group's full accounts which carry an unqualified audit
report.
2 Turnover
By geographical market
Six months to Six months to Year to
31December 31December 30 June
2002 2001 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
United Kingdom 374 458 1,121
Rest of Europe 38 139 168
USA and Canada 37 6 38
449 603 1,327
3 Loss per share
The calculation of basic earnings per share is calculated on a Group loss of £577,000 (6 months to 31
December 2001 loss of £648,000, and year to 30 June 2002 loss of £18,646,373) and a weighted average
ordinary 5p shares in issue during the period of 65,433,107 (6 months to 31 December 2001 65,141,092
and year to 30 June 2002 65,433,107).
Due to the loss of £576,000 (6 months to 31 December 2001 loss of £648,000, and year to 30 June 2002
loss of £18,646,373) there is no further dilution of the earnings or the number of shares 65,433,107 (6
months to 31 December 2001 65,141,092 and year to 30 June 2002 65,433,107)
4 Investments
Cost
1st July 2002 2,243
Additions 281
Revaluation 109
2,633
5 Debtors
Six months to Six months to Year to
31December 31December 30 June
2002 2001 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Trade debtors 328 558 265
Others debtors 249 869 373
Prepayments & accrued income 93 86 117
670 1,513 755
Due in more than one year 100 100 100
770 1,613 855
6 Creditors: Amounts falling due within one year
Six months to Six months to Year to
31December 31December 30 June
2002 2001 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Trade creditors 284 298 284
Corporation tax - 1 -
Other taxes and social security cost 31 59 54
Other creditors 6 6 30
Accruals and deferred income 25 81 171
346 445 539
7 Cash flows
Six months to Six months to Year to
31 December 31 December 30 June
2002 2001 2002
(unaudited) (unaudited) (audited)
£000 £000
Reconciliation of operating loss to net cash flow from
operating activities
Operating loss (788) (1,014) (2,515)
Depreciation 61 68 119
Movement in debtors 71 (74) 461
Movement in creditors (192) (237) (144)
Exchange profit/(loss) - (10) (5)
Net cash flow from operating activities (848) (1,267) (2,085)
Interim Statement
Copies of the Interim statement are being sent to shareholders. Additional copies will be available to the public
free of charge from the Company's registered office: 22/23 Old Burlington St, London W1S 2JJ
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