Interim Results
Farsight PLC
28 February 2005
Farsight PLC
Interim Results
For the six months ended 30 November 2004
Farsight PLC, a provider of surveillance software and monitoring services,
announces its interim results for the six months ended 30 November 2004.
Highlights:
• Turnover for the six months up 31.6 % to £567,000 (2003: £431,000)
• Loss before taxation reduced to £189,000 (2003: loss £501,000)
• New business wins
• E-surveillance software receives Microsoft accreditation
Enquiries:
Chris Thomas, Chief Executive 01733 352435
Chairman's Statement
Introduction
I am pleased to present my report for the six month period ended 30th November
2004, a period in which the company continued to achieve sales growth through
increasing sales of monitoring services utilising Farsight's e-surveillance
software, and a new monitoring service product called 'Build Secure' aimed at
providing 24 hour per day surveillance of construction sites across the UK.
In the annual report for the year ended 31 May 2004 I disclosed that Farsight
would be launching a shrink wrapped e-surveillance software product which will
create a new revenue stream for the company. I can confirm that the
e-surveillance software was successfully launched at the IIPSEC show in the NEC
in January 2005. The challenge is to develop this revenue opportunity quickly
and to deliver fast growth to the business. We have exciting levels of interest
from both UK and US users.
Results and Dividends
Turnover on continuing activities increased by 31.6% over the comparative period
to £567,000 (2003: £431,000).
The operating loss on all operations was £188,000 (2003: loss of £475,000).
No dividend is recommended.
Trading Review
Again, during the six month period to 30th November 2004, sales revenues from
remote video monitoring operations continued to increase, with annualised income
from monitoring contracts approaching £750,000. This represents growth of
around 200% in the past three years.
The principal driver of this growth continues to be the substantial cost
benefits for customers delivered through monitored CCTV technology compared to
the increased cost of manned guarding. Farsight's business in delivering remote
video monitoring services now has an increasingly strong and reliable sales
pipeline that is expected to produce continued sales growth at an average rate
of £20,000 per month.
The British Standard 8418 Code of Practice for CCTV monitoring operations came
into effect in early 2005, and I am pleased to confirm that Farsight's '
Observatory' monitoring centre in Peterborough passed the compliance audit in
February 2005. The increasingly demanding development of standards compliance
is to be welcomed as it forces less professional, secondary suppliers to leave
the supply chain.
The compulsory licensing of security professionals, an initiative which is
driven by the Security Industry Authority will also strengthen the stock of
first-class, monitoring suppliers and improve the professionalism of the
industry. Farsight Plc is therefore well placed to take advantage of these
evolving entry barriers to the CCTV monitoring market.
The goal of delivering the highest level of service quality to our customers has
been supported by the launch of our customer web based portal that enables
customers to integrate their property security operations into the Farsight
service. The benefits delivered by this web based portal have been particularly
attractive to larger corporate customers seeking greater management information
and control over their integrated security systems.
Farsight has continued to invest in e-surveillance. A shrink wrapped version of
our e-surveillance software is now available for sale, and was successfully
launched at the security industry IIPSEC trade show in January 2005. We
received a high level of interest from equipment manufacturers seeking to
integrate support for their equipment into the platform. This confirmed our
belief of a need in the marketplace for a robust, open and saleable software
product for use by CCTV monitoring stations.
E-surveillance has also attained Microsoft certification and further
confirmation of demand in this market place has been supported by two confirmed
orders in recent weeks from Powergen and Leicester City Council.
Funding
In the period the group received the remaining balance of £300,000 of the
£750,000 secured convertible loan facility made available by the 'concert party'
investors (John Dalton, Robert Davies and Michael James).
In addition, the 'concert party' investors have agreed to provide guarantees to
secure a bank borrowing facility of £300,000.This facility is in the process of
being finalised. The directors consider that the new banking facility will
provide adequate resources for the group to enable it to continue its operations
and meet its obligations.
Conclusion
The half-year results finally demonstrate the turnaround in Farsight's business
fortunes. The next goal is to achieve break-even and move into profitability.
The company is in its strongest position for many years, and the intention is
now to increase sales quickly through a combination of a strong order book for
monitored CCTV Services, and the launch of the e-surveillance software.
In addition to our organic growth the Board continues to seek to increase the
scale of operations via acquisition or merger.
A T G Wix, Chairman
21st February 2005
Consolidated profit and loss account
for the six months ended 30 November 2004
6 months ended 30 6 months ended 30 Year ended 31
November 2004 November 2003 May
(unaudited) (unaudited) 2004 (audited)
Notes £000 £000 £000
Turnover 567 431 777
Cost of sales (470) (314) (628)
Gross profit 97 117 149
Operating expenses (285) (516) (928)
Exceptional net operating expenses - (76) (596)
Operating loss for the period (188) (475) (1,375)
Net interest payable (1) (26) (53)
Loss before taxation (189) (501) (1,428)
Taxation - - 2
Loss after taxation (189) (501) (1,426)
Basic loss per ordinary share 3
(LPS pence) (0.062)p (0.165)p (0.469)p
Fully diluted loss per share 3
(LPS pence) (0.052)p (0.165)p (0.437)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 2004
30 November 2004 30 November 2003 31 May
(unaudited) (unaudited) 2004 (audited)
Notes £000 £000 £000
Fixed assets
Intangible assets - 741 -
Tangible assets 289 365 325
289 1,106 325
Current assets
Debtors 339 279 231
Cash at bank and in hand 73 2 -
412 281 231
Creditors: due within one year:
Secured convertible loans 4 (750) - -
Other (997) (1,234) (963)
Net current liabilities (1,335) (953) (732)
Total assets less current liabilities (1,046) 153 (407)
Creditors: due after more than one
year:
Secured convertible loans 4 - - (450)
Other - (117) -
Net (liabilities)/assets (1,046) 36 (857)
Called up share capital 5 7,484 7,452 7,484
Share premium account 4,493 4,493 4,493
Capital redemption reserve 20 20 20
Profit and loss account (13,043) (11,929) (12,854)
Equity shareholders' (deficit)/funds 9 (1,046) 36 (857)
Consolidated cash flow statement
for the six months ended 30 November 2004
6 months ended 30 Year ended 31 May
November 2004
(unaudited) 2004 (audited)
Notes £000 £000
Net cash (outflow) from operating 6
activities (185) (262)
Return on investments and servicing of finance:
Interest element of finance lease payment - (41)
Other net interest paid
(1) (12)
Cash (outflow) from returns on
investments and servicing of finance (1) (53)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (2) (50)
Proceeds from sale of tangible fixed assets 13 17
Cash inflow/(outflow) from capital
expenditure 11 (33)
Cash (outflow) before financing (175) (348)
Financing
Issue of new share capital - 32
Issue of convertible loans 300 450
Repayment of capital element of
finance leases (15) (119)
Net cash inflow from financing 285 363
Increase in cash in the period 7 110 15
Notes to the interim report
for the six months ended 30 November 2004
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 2004 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 2004 and the unaudited
management accounts for the six months ended 30 November 2003.
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 2004 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 2004.
3. Loss per ordinary share
6 months ended 30 6 months ended 30 Year ended 31
November 2004 November 2003 May
(unaudited) (unaudited) 2004 (audited)
£000 £000 £000
Loss attributable to ordinary
shareholders (189) (501) (1,426)
'000 '000 '000
Weighted average number of
ordinary shares (Basic LPS) 305,727 302,447 304,102
Weighted average number of
ordinary shares (Fully diluted
LPS) 365,727 302,447 326,602
pence pence pence
Basic LPS (0.062) (0.165) (0.469)
Fully diluted LPS (0.052) (0.165) (0.437)
Basic loss per share (LPS) for the six months period ended 30 November 2004 is
calculated by dividing the loss attributable to ordinary shareholders namely a
loss of £189,000 by the weighted average number of shares (305,727,072 ordinary
shares).
Fully diluted loss per share (LPS) for the six months period ended 30 November
2004 is calculated by dividing the loss attributable to ordinary shareholders by
365,727,072 potential ordinary shares. This includes a weighted average of 60
million potential ordinary shares which would be issued under the convertible
loan agreement.
For the calculation of fully diluted LPS for the comparative period of the year
ended 31 May 2004 the weighted average number of shares includes 22.5 million
potential ordinary shares which would be issued under the convertible loan
agreement (6 months ended 30 November 2003: Nil).
4. 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). Subsequent to the
facility being granted secured convertible loans amounting to £450,000 were
issued to the 'concert party' during the year ended 31 May 2004 and the balance
of £300,000 was issued during the period ended 30 November 2004. The loans are
secured by a debenture dated 28 November 2003 giving fixed and floating charges
over the assets of Farsight plc, and its subsidiary undertakings Farsight
Security Limited and e-surveillance Software Limited, and by cross company
guarantees in respect of each of these companies. The secured convertible loans
are non interest bearing.
The 'concert party' investors have 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). If that option is not exercised then the secured
loans fall due to be repaid on the second anniversary of the date of the
agreement (ie on 28 November 2005). Any ordinary shares of 1p each issued
pursuant to a conversion of the loans will rank pari passu with the existing
issued ordinary share capital of the company.
5. Called up share capital
30 November 2004 30 November 2003 31 May 2004
(unaudited) (unaudited) (audited)
£000 £000 £000
Allotted, called up and fully paid
305,727,072 ordinary shares of
1p each (30 November 2003: 302,477,072, 31 May 2004:
305,727,072) 3,057 3,025 3,057
Deferred shares of 1p each 4,427 4,427 4,427
7,484 7,452 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.
6. Reconciliation of operating loss to net cash flow from operating activities
6 months ended 30 Year ended 31
November 2004 May 2004
(unaudited) (audited)
£000 £000
Operating loss (188) (1,375)
Amortisation of goodwill - 289
Impairment charge in respect
of goodwill - 596
Depreciation charge in respect of
tangible fixed assets 38 133
Profit on disposal of tangible fixed assets (13) (17)
(Increase)/decrease in debtors (108) 17
Increase in creditors 86 95
Net cash (outflow) from operating
activities (185) (262)
7. Analysis of net debt
At Cash flow At 30
31 May 2004 for the 6 November
(audited) months ended 2004
30 November (unaudited)
2004
(unaudited)
£000 £000 £000
Cash at bank and in hand - 73 73
Overdrafts (37) 37 -
(37) 110 73
Secured convertible loans (450) (300) (750)
Finance leases (15) 15 -
(465) (285) (750)
Net debt (502) (175) (677)
8. Reconciliation of net cash flow to movement in net debt
6 months ended Year ended
30 November 31 May
2004
(unaudited) 2004
(audited)
£000 £000
Movement in cash in the period 110 15
Cash inflow from change in debt (285) (331)
Change in net debt resulting from
cash flows (175) (316)
Net debt at beginning of period (502) (186)
Net debt at end of period (677) (502)
9. Movement in equity shareholders' (deficit)/funds
6 months ended 6 months ended Year ended
30 November 30 November 31 May
2004 2003 2004
(unaudited) (unaudited) (audited)
£000 £000 £000
At the beginning of the period (857) 537 537
Issue of new shares - - 32
Loss for the period (189) (501) (1,426)
At the end of the period (deficit)/funds (1,046) 36 (857)
On 29 December 2003, 3,250,000 ordinary shares of 1p each were issued for a
subscription price of 1p per share. The total consideration received was £32,500
before expenses.
10. 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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