Interim Results
Interregnum PLC
17 February 2004
Tuesday 17th February 2004
PRESS RELEASE
INTERREGNUM PLC
Financial results for the 6 months ended 31 December 2003
Financial highlights
• Pre-tax loss on ordinary activities reduced to £191,000 (2002: £491,000)
• Profit after unrealised gains of £357,000 (loss 2002: £382,000)
reflecting improving performance in portfolio
• Adjusted portfolio value* increased to £3.0m (June 2003: £2.6m)
• Growth in adjusted portfolio value, including exits increased by 43%
• Overall turnover of £702,000 (2002: £723,000) reflecting continued
difficult trading conditions
• Loss per share of 0.29p basic (2002: 0.75p)
* Adjusted to include the carrying value of Yospace Technologies (£0.6m) and
exclude Interregnum Venture Marketing ((£0.1m).
Corporate progress
• Ordinary shares issued at 7p New funds raised totalling £2.73m through a
private placing this month of ordinary shares and an issue of unsecured
convertible loan stock - convertalbie at £0.15p
• Acquisition of Cellular Design Services Limited ('CDS') for £1.5m
reinforcing strategy of taking principal investment positions in
technology companies
• uDate.com founder, Mel Morris appointed Non Executive Director with
immediate effect.
Commenting on the results, Ken Olisa, Chairman of Interregnum plc, said:
'Success for Interregnum depends on four factors - our ability to be innovative
in the market, our access to capital, the strength of our team and network of
contacts and, of course, our operational expertise . We believe we have
demonstrated progress on all four of these in the period.
'The successful fund raising has significantly increased our access to capital
and will enable us to continue to implemente our strategy of acquiring principal
stakes in growth technology businesses. In particualr it will enable us to build
on the current subsidiaries - Yospace Technologies and CDS.
'As a testament to our innovative and more hands-on approach to asset
management, the portfolio performed well during this period. Disposals generated
£735,000 in cash and, at the same time, the overall portfolio value increased.
'The strength of the Interregnum team has been significantly enhanced with the
appointment of Mel Morris as a Non-Executive Director with immediate effect. Mel
was the founder and Chief Executive of uDate.com, a client which was sold to
Interactive Corp for US $150m in 2003.
'Finally, our results demonstrate our ability to run the business in the most
difficult of conditions. At a time when most of our competitors have retreated
from the market, our focus on our corporate priorities - managing the cost base,
enhancing the portfolio and focusing on growing our advisory revenues - has
stood us in good stead. As one of the UK's few technology investment and
advisory houses, I am confident that the improving signs now appearing in the
market will favour our approach and I consider the successful placing and
increase in portfolio value endorse this confidence.'
- Ends -
For further information, please contact:
Interregnum 020 7494 3080
Ken Olisa, Chairman & CEO
Martin Cooper, Finance Director
Merlin Financial 020 7653 6620
Vanessa Maydon
Charlie Jack
Attached: Chairman's Statement
Profit & Loss Account
Balance Sheet
Cashflow Statement
Notes to the Interim financial statement
CHAIRMAN'S STATEMENT
Introduction
The last six months of 2003 witnessed a welcome improvement in the climate for
technology companies including predictions that technology spend will continue
to increase as public and private sectors on both side of the Atlantic loosen
their budgetary constraints. This optimisim is reflected in a double digit
growth of both the NASDAQ and Techmark indices.
This environmental improvement has had a positive affect on Interregnum's
progress towards becoming a balanced investment and advisory house. During the
period, we have seen positive progress from the majority of our portfolio
companies in the more effective implementation of their strategies. Equally we
have seen growing interest from larger companies in our advisory services,
particularly those targeted at exploiting their under-utilised IPR (Intellectual
Property Rights).
One of the critical components of our success has been the ability to call on
the advice and efforts of a wide ranging network of contacts. I am therefore
delighted to be able to welcome Mel Morris to our Board. Mel has been a serial
client of Interregnum since 1993 and his last venture - uDate.com - was sold for
$150m to Interactive Corporation of America, less than five years after Mel
founded it, generating an advisory fee for Interregnum of £600,000 in the last
financial year.
Finally, we have moved to effect the plans outlined in our last statement to
concentrate our investing activities on entities which give us greater control
of strategy and implementation by taking principal majority stakes in technology
companies.
Although it is too early to declare the end the dot.com boom's negative effects,
there continue to be encouraging signs that the thaw in the market's attitude to
technology stocks is sustainable and it remains our intention to profit from
them.
Results
Following unrealised gains in the portfolio of £548,000 (2002: £109,000) the
total recognised profit during the period was £357,000 (2002: loss £382,000).
The retained loss for the period was reduced to £191,000 (2002: £491,000) as a
result of exits and a release of provisions from the portfolio.
The accounts for the period included the fully consolidated results for Yospace
Technologies Limited which was acquired in October 2002. At the consolidated
level, turnover was broadly flat at £702,000 (2002: 723,000) reflecting the
difficult trading conditions in the second half of 2003. Consolidated expenses
for the period were £1,539,000 (2002: £1,447,000) however the underlying
Interregnum cost base was reduced by 26% to £936,000 (2002: £1,271,00).
The loss per share was reduced to £0.0029 (2002: £0.0075)
Operational Review
We continue to make progress on each of our four key operational priorities:
• Increase investment firepower
• Protect and build portfolio value
• Increase advisory fee income
• Reduce costs and overheads
Increase investment firepower
We are pleased to announce the successful raising of £2.73m of new capital this
month through a combination of a private placing of ordinary shares ('Placing')
and an issue of convertible loan stock ('Issue').
The private placing yielded £1,529,450 (prior to expenses) from the issue of
21,849,290 ordinary shares at £0.07 per share.
The Convertible Loan Stock (CLS) will raise a further £1,200,000. The CLS will
be redeemable at any time within 2 years of its issue and will bear a coupon at
a rate of 2 per cent above Barclays Bank plc's base rate. For each £1.00
redeemed under the terms of the CLS, the company will issue 2.35 warrants over
ordinary shares exercisable within three years from their issue at 15 pence per
ordinary share.
The CLS will be convertible by the holder at any time prior to maturity at a
rate of 6.66 new ordinary shares for each £1.00 converted. In the event that the
Company has not redeemed all of the stock at maturity, the stock holder will
have a right to convert at a rate of 20 new ordinary shares for each £1 of
Convertible stock.
The Placing and Issue are conditional upon the passing of the necessary
resolutions at the extraordinary general meeting of the Company which is due to
be held on 8 March 2004 ('EGM') and details of which have been provided in a
notice issued to shareholders.
The proceeds of the Placing and Issue will be used to take further principal
investment positions in companies, as well as traditional venture capital
investments in the existing portfolio.
Protect and build portfolio value
We continued to manage the portfolio tightly during the period, resulting both
in disposals which returned cash to Interregnum and an increase in the value of
several holdings. The net position was a 43% growth in adjusted portfolio value
during the first half of the financial year.
The overall portfolio contains 17 holdings. We have invested capital in eight
companies and the balance represents minority 'sweat equity' historical
positions granted as part of our fees plus risk sharing approach to advisory
work. The health of those eight is represented by their trading status - all
except one is revenue producing, six of the companies achieved profitability or
are at positions of broadly break-even and only one is expected to require
further cash.
Two disposals were made from the portfolio. The sale of our positions in
Interactive Corp and Open Text Corporation, both NASDAQ-listed companies,
generated cash of £735,000.
A total of £125,000 of further investments was made. This consisted of a
follow-on investment in Nanomagnetics as part of a £1m further funding round and
an investment round was completed in KeCrypt.
As announced on 3 February 2004, Interregnum has recently completed the
acquisition of 100% of CDS. CDS specialises in some of the more complex areas of
radio technology - like coverage testing, optimisation and in-building coverage
- and currently generates approximately £5,000,000 of profitable annual
revenues.
This is a further step in executing our stated policy of acquiring principal
stakes in companies. The successful fund raising will allow us to expand CDS'
activities and to acquire other assets in the wireless and broader technology
sector.
Increase advisory fee income
We are beginning to see signs of an uplift in our Advisory activities. While
this area of our business makes a meaningful contribution to overheads we have
some way to go before it achieves our target of covering all central costs.
Towards this aim we will:
• Continue to shift away from a reliance on income from our portfolio companies
and investment activities and towards work with larger technology companies
• Recruit further fee earners
During the six months, the majority of our advisory fee income 83% was earned
from non-portfolio companies. Of this revenue 71% was from companies with
revenue greater than £10 million.
In the short term we expect to increase our fee-earning head count with staff
experienced in relevant professional services practices.
Reducing costs and overheads
The overheads for the year of £1,539,000 (2002: £1,447,000) reflect the impact
of a full six months of the costs of Yospace Technologies Limited (acquired in
October 2002) in which we retain a majority position.
A rigorous programme of cost minimisation has been in place over the last 18
months including a reduction in head count from 30 to 15 and a senior management
salary sacrifice plan. Without the impact of Yospace, the underlying cost base
of Interregnum was reduced by 26% to £936,000 (2002: £1,271,00).
The overheads have now been reduced to a minimum level so whilst strong costs
controls will remain in place there is no expectation that they will reduce
further. Any increases, including the recruitment mentioned above, will be
self-financing.
Board Appointment
I am delighted to announce the appointment of Mel Morris to the board of
Interregnum with immediate effect. Mel has founded, developed and sold five
profitable technology businesses and is a highly experienced senior executive
and technologist. Most recently he founded and was CEO of uDate.com Inc, the
world's second largest internet dating business, with revenues of US $40m, which
was sold to USA Interactive in April 2003 for US$150m. From 1993 to 1997, he was
founder and CEO of Prometrics the author of a powerful software tool for
managing and measuring the use of PC technology, which he sold to Platinum
Technology Inc in 1997.
I am confident that Mel's 20 years in the IT sector as a technologist and
entrepreneur on both sides of the Atlantic will further strengthen our Board at
this critical juncture in our growth strategy.
The Board continues to gain benefit from the advice and networks of the Advisory
Board chaired by John Forrest, who has also become Executive Chairman of CDS.
Outlook
Interregnum is well placed to take advantage of an environment in which the
public technology market mood is positive for the first time since 2000.
As the activity levels of technology suppliers, customers and investors begin to
increase, the demand for Interregnum's services rises in step. We are confident
that the same rising tide should be good news for our investments as the larger
companies in our sector seek to outsource innovation by acquiring younger,
nimbler players.
Our strategy has stood us in good stead through our market's most difficult
period in living memory. As the prospects for the technology sector improve we
are in a strong position to build on our robust foundations in order to grow
shareholder value in the months and years ahead.
Thank you for your support.
Ken Olisa
Chairman and CEO
Portfolio
Carrying value
Client % holding before provisions
Adaptive, Inc 13.0% 656,400
Blue Arc - * 25,713
ItsWine 3.4% 11,043
Kecrypt 8.0% 25,000
Knowledge=Power - * 64
Mediasurface - * 11,897
Metapraxis 14.0% 450,000
Monactive - * 0
NanoMagnetics 3.0% 600,000
NetInfo 7.5% 120,000
Open Text - * 157,000
Raidtec - * 307
Respond 23.8% 2,329,965
Sapphire 3.8% 50,000
Speed-trap - * 15,000
Udate - * 120,000
Yospace 49% 635,000
5,207,119
Provision** -2,215,217
2,991,842
* - indicates a holding of less than 0.1%
** 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 2003 31 December 2002 30 June 2003
PORTFOLIO
Portfolio value (£m) 2.9 2.6 2.6
Portfolio base cost (£m) 5.2 5.0 5.1
Investment (£m) 0.13 0.3 0.8
Investments made 2 5 7
Portfolio holdings 19 22 19
Investments written off 0 1 4
BALANCE SHEET
Cash balance(£m) 1.1 1.1 1.3
Net assets/share (issued)(£) 0.70 0.068 0.065
DSO (Days sales outstanding) 62 82 52
PROFIT & LOSS ACCOUNT
Revenue (£m) 0.70 0.72 2.06
Advisory (£m) 0.25 0.34 1.10
Investment (£m) 0.05 0.10 0.14
Software development support
and marketing 0.40 0.28 0.82
Costs - Salary(£m) 0.94 0.86 1.8
Costs - admin(£m) 0.60 0.59 1.5
Interest and other income(£m) 0.11 0.07 0.20
Revaluation realised and
unrealised (£m) 1.00 0.29 0.6
Profit /(Loss) (£m) (0.19) (0.49) (0.9)
Headcount average 34 26 31
Consolidated Profit and Loss Account
Six months ended 31 December 2003
Note Six months to Six months to Year to
31 December 31 December 30 June
2003 2002 2003
(unaudited) (unaudited) (audited)
£000 £000 £000
Turnover 2 702 723 2,065
Administrative expenses (1,539) (1,447) (3,298)
Other operating income 38 34 79
Operating loss (799) (690) (1,154)
Profit on sale of investment 181 178 251
Interest receivable 79 39 118
Provisions released/(made) against
investments in period 266 - (163)
Interest payable (6) (6) (12)
Loss on ordinary activities
before taxation (279) (479) (960)
Taxation - - -
Loss on ordinary activities
after taxation (279) (479) (960)
Minority interest (88) 12 (51)
Retained loss for period (191) (491) (909)
Loss per share - basic and
diluted 3 (0.29p) (0.75p) (1.39p)
Statement of total recognised gains and losses
Loss for financial period (191) (491) (909)
Unrealised surplus/(deficit) on
revaluation of fixed asset investments 548 109 355
Total recognised losses for the
financial period 357 (382) (554)
Consolidated balance sheet
31 December 2003
Note As at 31 As at 31 As at 30
December 2003 December 2002 June 2003
(unaudited) (unaudited) (audited)
£000 £000 £000
Fixed assets
Intangible assets 510 570 741
Tangible assets 216 294 243
Investments 4 2,499 2,130 2,104
3,225 2,994 2,888
Current assets
Debtors 5 1,011 950 985
Cash at bank and in hand 1,100 1,160 1,294
2,111 2,110 2,279
Creditors:
Amounts falling due
in one year 6 (573) (541) (771)
Net current assets 1,538 1,569 1,508
Total assets less current
liabilities 4,763 4,563 4,396
Creditors:
Amounts falling due
after more than one year (212) (116) (116)
Net assets 4,551 4,447 4,280
Capital and reserves
Called up share capital 3,272 3,272 3,272
Share premium 18,877 18,877 18,877
Revaluation reserve 544 389 547
Merger reserve (2,407) (2,407) (2,407)
Profit and loss account (15,565) (15,641) (15,926)
Equity shareholders funds 4,721 4,490 4,363
Minority shareholders (170) (43) (83)
4,551 4,447 4,280
Consolidate cash flow statement
Six months ended 31 December 2003
Note Six months to Six months to Year to
31 December 31 December 30 June
2003 2002 2003
(unaudited) (unaudited) (audited)
£000 £000 £000
Net cash flows from operating
activities 7 (928) (749) (906)
Returns on investments
and servicing of finance 67 22 52
Taxation - - -
Capital expenditure and financial
investment 571 820 966
Acquisition - (696) (696)
Cash outflow before use of
liquid resources and financing (290) (603) (585)
Financing 106 125 125
Decrease in cash (184) (478) (460)
Reconciliation of net cash flow
to movement in net debt
Decrease in cash in the period (184) (478) (460)
Decrease in debt and lease financing (106) (116) (116)
Change in net debt (290) (594) (576)
Net funds at 1 July 2003 1,178 1,754 1,754
Net funds at 31 December 2003 888 1,160 1,178
Notes to the Interim financial statements
For the six months to 31 December 2003
1 Basis of preparation
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 2003, 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. The
comparative figures for the six months to December 2002 have been amended to
consolidate the results of Yospace Technologies Limited from the date of
acquisition on 18 October 2002
2 Turnover
By geographical market
Six months to Six months to Year to
31 December 31 December 30 June
2003 2002 2003
(unaudited) (unaudited) (audited)
£000 £000 £000
United Kingdom 321 516 1,032
Rest of Europe 308 198 956
USA and Canada 65 6 64
Other 8 3 13
702 723 2,065
3 Loss per share
The calculation of basic earnings per share is calculated on a Group loss of
£191,000(6 months to 31 December 2002 loss of £491,000, and year to 30 June
2003 loss of £909,000) and a weighted average ordinary 5p shares in issue
during the period of 65,433,107 (6 months to 31 December 2002 65,433,107 and
year to 30 June 2003 65,433,107).
Due to the loss of £191,000 (6 months to 31 December 2002 loss of £491,000,
and year to 30 June 2003 loss of £909,000) there is no further dilution of
the earnings or the number of shares 65,433,107 (6 months to 31 December
2002 65,433,107 and year to 30 June 2003 65,433,107)
4 Investments
Cost
1st July 2002 2,104
Additions 125
Disposals (727)
Release of provisions 266
Revaluation 731
2,499
5 Debtors
Six months to Six months to Year to
31 December 31 December 30 June
2003 2002 2003
(unaudited) (unaudited) (audited)
£000 £000 £000
Trade debtors 454 483 401
Others debtors 321 274 387
Prepayments & accrued income 136 93 97
1,011 850 885
Due in more than one year - 100 100
1,011 950 955
6 Creditors: Amounts falling due within one year
Six months to Six months to Year to
31 December 31 December 30 June
2003 2002 2003
(unaudited) (unaudited) (audited)
£000 £000 £000
Trade creditors 267 302 232
Amounts falling due to group 132 132 132
undertakings
Other taxes and social security 62 65 61
cost
Other creditors 27 6 117
Accruals and deferred income 85 36 229
573 541 771
7 Cash flows
Six months to Six months to Year to
31 December 31 December 30 June
2003 2002 2003
(unaudited) (unaudited) (audited)
£000 £000
Reconciliation of operating loss
to net cash flow from operating
activities
Operating loss (799) (690) (1,154)
Depreciation 52 62 123
Amortisation 27 17 42
Movement in debtors (2) (55) (17)
Movement in creditors (206) (83) 100
Net cash flow from operating (928) (749) (906)
activities
Copies of the Interim statement 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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