Venteco PLC
17 September 2007
17 September 2007
Venteco plc
('Venteco' of 'the Group')
Interim results for the period ended 30 June 2007
Venteco plc, the UK-based non-toxic pest control provider, announces its
financial results for the half year ended 30 June 2007 which have been prepared
in accordance with IFRS.
Operational Highlights
•Venteco plc achieved its first net profit for the six months to June 2007
•A strong balance sheet, holding over £1.3m in cash, offers sound platform
for further growth
•Global market awareness of the Group's core Cryonite technology is
increasing significantly
•Two important acquisitions were completed early in the first half and
made a positive contribution to earnings during the period. Further
opportunities within the Group for cost elimination and increased
efficiencies are anticipated
•Cryonite's launch in the US will be kick-started at the NPMA pest control
expo this October
•Venteco is delivering on its strategy by establishing itself in the
international chemical-free pest control industry. Opportunities for further
expansion by both geography and product will build required critical mass
and profitability. Management expects such opportunities to be secured
during the next year
Financial Highlights
• A Net Profit was achieved for the first time at £508,000 before tax (1H
2006 loss: £68,000), including a goodwill accounting credit of £484,000
• Revenue rose to £3,106,000 (1H 2006: £195,000)
• Gross Profit increased to £1,584,000 (1H 2006: £119,000)
• Basic and fully diluted earnings per share were 2.278p (1H 2006 loss:
0.597p)
• Cash and cash equivalents at end June 2007 were £1.35m (1H 2006: £3.06m)
• No dividend was declared for the period
Commenting on the results, Stefan Hansson, Chief Executive of the Company, said:
'We have made great progress in the first half of 2007. Our two acquisitions,
Silvandersson, a leading manufacturer of insect glue traps, in January and
Valiguard, the food industry certification and services body, in February, have
strengthened and expanded Venteco's portfolio of products. We can now offer a
range of technologies and related services that will help us to capitalise on
the increased regulation of hygiene and safety in the food manufacturing and
logistics sectors. Distribution of Venteco's Cryonite technology and sales
presence has been further extended in a number of new areas, which now include
South Africa, Nigeria, Greece and Slovenia.
'As a result the Group is expanding geographically and Venteco's key objective
is to increase its critical mass in the non-toxic pest control area, while
securing a global customer base for its innovative and expanding product
offering.'
Venteco was incorporated on 1 March 2006 and completed the legal acquisition of
CTS Technologies AG on 11 August 2006. For accounting purposes this acquisition
has been treated as a reverse acquisition and accordingly comparative financial
information and that relating to the pre-acquisition period relates entirely to
CTS. Post the date of acquisition the financial information is presented on a
consolidated basis applying reverse acquisition accounting.
Enquiries:
Venteco plc
Stefan Hansson, CEO +44 (0)20 7977 0020
Barry Gibb, Investor Relations
Corfin Communications
Ben Hunt, Clare Perks +44 (0)20 7977 0020
Libertas Capital
Aamir Quraishi, Brad Cheng +44 (0)20 7569 9650
Chairman's Statement
A very busy first half of 2007 resulted in Venteco generating its first net
profit. Having demonstrated good progress across all of its operations, the
Group is delivering on its stated strategy of establishing itself in the
international market for chemical-free pest control products.
The international pest control market remains buoyant, with a valuation in
excess of £5bn and underlying growth between 5% and 10%, while the non-toxic
segment is expanding faster still. Venteco's key objective is to strengthen its
brand and competitive edge in this sector, while securing a global customer base
for its innovative and expanding product offering.
At the end of June 2007, Venteco retained a net cash position on its balance
sheet and management continues to review a number of acquisition opportunities
designed to build upon our product range and expand geographical exposure.
Having set a rapid pace during the first half, Venteco is optimistic of
concluding further significant transactions before the year-end.
Financial Review
Revenue for the six months ended 30 June 2007, benefiting from acquisitions
completed by the Group during the period, increased to £3,106,000 from £195,000
in H1 2006. Gross Profit increased in to £1.584m (H1 2006: £119,000). Basic and
fully diluted earnings per share amounted to 2.278p per share (Basic and fully
diluted loss per share H1 2006: 0.597p).
Operating profit amounted to £58,000 compared to an operating loss of £68,000 in
H1 2006 reflecting the substantial growth in the business.
Profit before tax amounted to £508,000 compared to a loss of £68,000 in H1 2006
Cash and cash equivalents as at 30 June 2007 were £1.35m.
Opportunities in Non-Toxic Pest Control
The first six months of 2007 saw Venteco seize important opportunities to expand
its activity in international non-toxic pest control products and services.
In recent years the market for such products has moved sharply towards
environmentally-friendly solutions. Against an increasingly regulated landscape
this is expected to accelerate still further; attitudes within government and
industry now tend toward policies of greater social responsibility, while an
ever more 'ecologically-aware' public recognises the damaging effect of
excessive use of toxins.
Within an industry generally known for its lack of innovation, Venteco's
Cryonite technology provides a new and unique solution for control of crawling
pests and infestation. The global market opportunity for Cryonite technology is
potentially vast, ranging from professional applications within 'clean'
commercial and industrial environs such as hospitals, food producers,
pharmaceutical companies, hotels and restaurants, through to more general
kitchen locations and the retail market. Ongoing product development continues,
with a view to making available a complete offering that satisfies users ranging
from professional pest control operators (PCO) through to domestic users.
Venteco sees a very significant market opportunity for such a range of
patent-protected Cryonite products and seeks to satisfy this demand.
Although Cryonite is the Group's core technology, Venteco's business plan is
based on the concept of becoming a 'complete solution supplier' to the
international non-toxic pest control market. Operating in an exceptionally
fragmented business landscape, the Group is able to identify a number of
potential 'bolt-on' acquisitions that are complementary in terms of geography,
product offering, client base and technology. Synergies subsequently gained
include cross marketing and local warehousing/distribution, together with the
elimination of duplicated administration costs etc. In seeking to complete such
acquisitions at relatively low EBITDA multiples, Management aims to secure
earnings enhancement. Concerted efforts are also made to retain senior
operational management during the period of integration. Two such acquisitions,
Silvandersson and Valiguard, were completed during the first six months of 2007.
Silvandersson
Swedish-based Silvandersson is a leading provider of non-toxic fly control
products. The first half ended strongly for Silvandersson and this continued
into July, with sales and orders for the period up by 26% and 10% respectively.
Management has decided on the Group's geographical sales and product strategy,
with a committed strengthening of the professional segment within the next six
months. Prospects for the full year remain good.
Valiguard
First half sales for this food industry certification and services body ended
almost 10% ahead of budget. Responding to customer demand, Valiguard, will
expand its offering to include other certification standards, while also
extending its offering into consultancy and educational products. This, combined
with the strengthening of its business development department, is expected to
result in further market share gains while winning higher revenue per
assignment. The addition of a senior marketing resource is also expected to
boost sales going forward.
CTS Technologies
The process of raising market awareness of Cryonite technology is now underway.
As a highly innovative, patented, non-toxic solution for the elimination of
crawling pest and infestation problems, Cryonite has been met with exceptional
professional interest. Cryonite, which is based only on carbon dioxide freezing
technology and leaves no residue, is unique in its field as it totally
eliminates any need to evacuate a local environment, offering customers an
economic solution as well as an effective one. Trials with a number of global
food manufacturers and major hotel chains have drawn an excellent response.
Distribution and sales presence has been further extended in a number of new
areas, which now include South Africa, Nigeria, Greece and Slovenia.
Negotiations for Cryonite's important North American franchise are expected to
conclude over the next few months. The product will also be launched at the NPMA
exhibition in North America in October, which will be the starting point for a
launch in the huge US market, corresponding to some 50% of the global pest
control market.
Outlook
The market for Venteco's products continues to expand with greater global
investment in non-toxic pest control.
The Company has entered the second half of 2007 with an order volume and backlog
that is substantially higher at this stage than at the corresponding time last
year. This gives the Company confidence of achieving good growth across the
business in the second half of 2007 as compared to the same period last year.
As a result, the Company expects to report a significant increase in revenues
for the full year.
Mats Andersson
Chairman of the Board
17th September 2007
Venteco plc
Consolidated Interim Income Statement
for the six months ended 30 June 2007
Notes 6 months to 30 6 months to 30 12 months to 31
June 2007 June 2006 December 2006
£'000 £'000 £'000
Revenue 3 3,106 195 244
Cost of sales ( 1,522) ( 76) ( 98)
-------- -------- ---------
Gross profit 1,584 119 146
Administrative
expenses 5 ( 1,526) ( 187) ( 600)
-------- -------- ---------
Profit/(loss)
from
operations 58 ( 68) ( 454)
Investment
income 34 - 86
Finance costs ( 55) - ( 1)
Difference
arising on
currency
translation ( 13) - 4
Credit in
respect of
negative
goodwill 4 484 - -
-------- -------- ---------
Profit/(loss)
before
taxation 508 ( 68) ( 365)
Income tax
expense 6 ( 89) - -
-------- -------- ---------
Profit/(loss)
attributable
to equity
shareholders 419 ( 68) ( 365)
======== ======== =========
Earnings per share
Basic and
fully diluted
earnings/(loss)
per share 7 2.278p ( 0.597p) ( 2.624p)
Venteco plc
Consolidated Interim Balance Sheet
At 30 June 2007
Notes 30 June 2007 30 June 2006 31 December
2006
Assets £'000 £'000 £'000
Non-current assets
Goodwill 1,596 1,382 1,382
Other intangible
assets 432 174 200
Property, plant and
equipment 1,689 8 7
Deferred tax asset - 25 25
-------- -------- ---------
3,717 1,589 1,614
-------- -------- ---------
Current assets
Inventories 1,075 23 2
Trade and other
receivables 1,974 50 136
Cash and cash
equivalents 1,348 3,056 2,231
-------- -------- ---------
4,397 3,129 2,369
-------- -------- ---------
Total assets 8,114 4,718 3,983
======== ======== =========
Equity and liabilities
Equity attributable to equity
holders of the company
Called up share
capital 9 1,851 1,744 1,744
Share premium account 2,634 2,366 2,366
Reverse acquisition
reserve 306 306 306
Share-based payments
reserve 68 43 43
Currency translation
reserve 2 9 9
Accumulated losses ( 167) ( 289) ( 586)
-------- -------- ---------
Total equity 4,694 4,179 3,882
-------- -------- ---------
Current liabilities
Trade payables 658 67 53
Tax liabilities 3 2 -
Other liabilities 99 9 1
Accrued expenses and
deferred income 338 461 47
-------- -------- ---------
Total current
liabilities 1,098 539 101
-------- -------- ---------
Non-current liabilities
Bank loans 1,649 - -
Deferred tax
liabilities 354 - -
Creditors greater
than one year 319 - -
-------- -------- ---------
2,322 - -
-------- -------- ---------
-------- -------- ---------
Total equity and
liabilities 8,114 4,718 3,983
======== ======== =========
Venteco plc
Consolidated Interim Statement of changes in equity
for the six months ended 30 June 2007
Share Share Reverse Share
capital premium acquisition based
account reserve payments
£'000 £'000 £'000 £'000
Balance at 31 December 2005 596 - ( 149) -
Loss for the period - - - -
Exchange rate translation - - - -
CTS Technologies AG - Share issue 10 - 82 -
Acquisition of CTS 1,138 2,366 373 43
------- ------- ------- -------
Balance at 30 June 2006 1,744 2,366 306 43
------- ------- ------- -------
Balance at 31 December 2006 1,744 2,366 306 43
Profit for the period - - - -
Share-based payments - - - 25
Exchange rate translation - - - -
Share issue on acquisition of
Silvandersson AB 107 268 - -
------- ------- ------- -------
Balance at 30 June 2007 1,851 2,634 306 68
------- ------- ------- -------
Currency Accumulated
translation losses Total
reserve
£'000 £'000 £'000
Balance at 31 December 2005 - ( 221) 226
Loss for the period - (68) ( 68)
Exchange rate translation 9 - 9
CTS Technologies AG - Share - - 92
issue
Acquisition of CTS - - 3,920
-------- ------- -------
Balance at 30 June 2006 9 (289) 4,179
-------- ------- -------
Balance at 31 December 2006 9 (586) 3,882
Profit for the period - 419 419
Share-based payments - - 25
Exchange rate translation (7) - (7)
Share issue on acquisition
of Silvandersson - - 375
AB
-------- ------- -------
Balance at 30 June 2007 2 (167) 4,694
-------- ------- -------
Venteco plc
Consolidated Cash Flow Statement
for the six months ended 30 June 2007
6 months to 30 6 months to 30 12 months to 31
June 2007 June 2006 December 2006
£'000 £'000 £'000
Operating activities
Profit/(loss)
from
operations 58 ( 68) ( 454)
Adjustment for
depreciation
and
amortisation 97 10 19
Adjustment for
share-based
payments 25 - -
Difference
arising on
currency
translation ( 13) - 4
(Increase)/
decrease in
inventories ( 52) ( 21) 1
(Increase)/
decrease in
receivables ( 1,008) ( 15) ( 106)
Increase/
(decrease) in
payables 305 67 61
-------- -------- ---------
Net cash used
in operating
activities ( 588) ( 27) ( 475)
Investing activities
Purchase of
furniture,
fittings and
equipment ( 45) - -
Purchase of
patents and
trademarks ( 7) ( 13) ( 47)
Acquisition of
subsidiaries ( 1,657) - ( 428)
Deferred
consideration
paid into
escrow account ( 18) - -
Interest
received 34 - 86
-------- -------- ---------
Net cash used
in investment
activities ( 1,693) ( 13) ( 389)
-------- -------- ---------
Financing activities
Net proceeds
of share
issues - 92 92
Net cash
balances from
acquisitions 133 2,994 2,994
Proceeds of
bank loan 1,320 - -
Finance costs ( 55) - ( 1)
-------- -------- ---------
Net cash from
financing
activities 1,398 3,086 3,085
-------- -------- ---------
Net
(decrease)/inc
rease in cash
and cash
equivalents ( 883) 3,046 2,221
Effect of
foreign
exchange rate
changes - ( 1) ( 1)
Cash and cash
equivalents at
beginning of
period 2,231 11 11
-------- -------- ---------
Cash and cash
equivalents at
30 June 2007 1,348 3,056 2,231
======== ======== =========
Venteco Plc
Notes to the Interim Statement
for the 6 months to 30 June 2007
1. Basis of preparation
The unaudited interim financial information for the half year to 30 June 2007
was approved by the directors on 14 September 2007. The financial information
given does not constitute statutory accounts within the meaning of Section 240
(5) of the Companies Act 1985. The financial information for the year ended 31
December 2006 is extracted from the audited statutory accounts for the year then
ended which have been delivered to the Registrar of companies. The audit report
on these accounts was unqualified and did not contain a statement under Section
237(2) or (3) of the Companies Act 1995.
2. Accounting policies
Except as detailed below, the financial information for the six months has been
prepared on the basis of the accounting policies set out in the full financial
statements of the Group for the year ended 31 December 2006.
Comparative information
With respect to the comparative information for the six months to 30 June 2006
the consolidated income figures relate only to CTS Technologies AG ('CTS'),
whilst the comparative figures in the consolidated balance sheet and cash flow
statement have been drawn up on the basis that the reverse acquisition of CTS by
Venteco had already been completed, although completion took place subsequent to
30 June, on 11 August 2006.
Basis of consolidation
In accordance with the accounting policies set out in the financial statements
for the year to 31 December 2006 the purchase method of accounting has been used
for the acquisition of Silvandersson AB and Valiguard AB.
Intangible assets
Following the acquisition of Silvandersson AB fair value adjustments were made
in respect of intangible assets acquired, comprising research and development
costs, and customer lists. Amortisation has been applied to these assets on a
straight-line basis over their useful lives, which management has assessed to be
ten years
Share-based payments
The cost of share-based employee compensation arrangements, whereby employees
receive remuneration in the form of shares or share options, is recognised as an
employee benefit expense in the income statement.
The total expense to be apportioned over the vesting period of the benefit is
determined by reference to the fair value (excluding the effect of non
market-based vesting conditions) at the date of grant. The assumptions
underlying the number of awards expected to vest are subsequently adjusted for
the effects of non market-based vesting to reflect the conditions prevailing at
the balance sheet date. Fair value is measured by the use of the Black-Scholes
model. The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of the non-transferability, exercise
restrictions and behavioural considerations.
3. Segmental information
Since the acquisition of Valiguard AB in January 2007 the Group has been
organised into two main business segments: the supply of pest control products
and services, and the provision of food hygiene services. Prior to that pest
control products and services was the only business segment.
Segment information about these activities is as follows:
6 months to 6 months to 12 months to
30 June 2007 30 June 2006 31 December 2006
Revenue Profit Revenue Profit Revenue Profit
/(loss) /(loss) /(loss)
£'000 £'000 £'000 £'000 £'000 £'000
Pest control
products and
services 2,902 218 195 ( 68) 244 ( 245)
Food hygiene
services 204 18 - - - -
---------------- --------- --------- --------- ---------
3,106 236 195 ( 68) 244 ( 245)
Unallocated
corporate
expenses ( 142) - ( 209)
Amortisation
of ( 11) - -
intangibles
Share-based
payments ( 25) - -
--------- --------- ---------
Profit/
(loss)
from 58 ( 68) ( 454)
operations
Finance ( 55) - ( 1)
costs
Investment
income 34 - 86
Difference
on
currency ( 13) - 4
translation
Credit resp.
neg. 348 - -
goodwill --------- --------- ---------
Profit/
(loss) 372 ( 68) ( 365)
before tax --------- --------- ---------
4. Negative goodwill credit
The fair value appraisal on the acquisition of Silvandersson AB resulted in an
excess of the value of the net assets acquired over the maximum consideration
payable under the terms of the acquisition agreement. In accordance with IFRS
accounting principles this excess has been credited to the profit and loss
account.
5. Directors share options
In January 2007 Stefan Hansson was awarded options over 555,456 shares
exercisable in equal tranches over the 3 years to 31 December 2009 at prices of
50p, 60p and 70p, and the directors of Silvandersson AB were awarded options
over 370,304 shares exercisable at 50p before 31 December 2010.
A share-based payment of £25,000 has been recognised in the profit and loss
account for the six months in respect of these options.
6. Taxation
Provision for tax has been made at the effective average rate expected to be
used in calculating the provision for the full year.
7. Earnings per share
6 months to 30 6 months to 30 12 months to 31
June 2007 June 2006 December 2006
£'000 £'000 £'000
Profit/(loss)
Profit/(Loss)
for the
purpose of
basic and
diluted
earnings per
share 419 ( 68) ( 365)
Number of shares
Weighted
average number
of ordinary
shares in
issue during
the period 18,391,517 11,384,615 13,908,921
Basic and
fully diluted
earnings/(loss)
per share 2.278p (0.597p) (2.624p)
The weighted average number of shares, for the 6 months to 30 June 2006 and the
12 months to 31 December 2006, excludes those held by Venteco Plc shareholders
prior to the reverse acquisition, but instead includes the shares issued to the
shareholders of CTS in consideration for the ordinary share capital of that
company. The average number of shares in issue for the comparative periods has
been adjusted for the 1 for 20 share consolidation effected on 7 June 2007.
8. Acquisitions
Silvandersson Sweden AB
On 22 January 2007, Venteco Plc completed the acquisition of Silvandersson
Sweden AB a leading manufacturer of insect glue traps for up to SEK28.1m
(c£2.07m) in cash and shares.
The initial consideration was SEK22.1m (c.£1.63m) of which SEK17m (c.£1.25m) was
paid in cash and the balance was satisfied by the issue of 21,445,906 new
Venteco shares.
The balance of the consideration, being up to a further SEK6.0m (c.£0.44m), will
be payable in cash and is dependent on certain profit targets being met during
2007 and 2008.
The cash element of the consideration is fully debt financed.
In the six months to 30 June 2007 Silvandersson contributed profit before tax of
£430,000
The acquisition had the following effect on the Group's assets and liabilities:
Net assets acquired: Book value Fair value Fair value
adjustments
£'000 £'000 £'000
Property, plant and
equipment 829 885 1,714
Patents and trademarks 35 35
Research and development - 90 90
Customer lists - 131 131
Inventories 1,021 1,021
Trade and other receivables 563 161 724
Cash and cash equivalents 66 66
Long term loan ( 329) ( 329)
Deferred tax ( 178) ( 112) ( 290)
Trade payables and other
current liabilities ( 543) ( 68) ( 611)
-------- -------- ---------
Net assets of Silvandersson 1,464 1,087 2,551
-------- --------
Negative goodwill arising
on acquisition ( 484)
---------
Total consideration
including estimated
acquisition costs 2,067
=========
Satisfied by:
Cash 1,240
Issue of shares 375
Deferred contingent
consideration 301
Directly attributable costs 151
---------
2,067
=========
Net cash outflow arising on acquisition:
Cash consideration 1,240
Directly attributable costs 151
Cash and cash equivalents acquired (66)
---------
1,325
=========
SIK Valiguard AB
On 2 February 2007, Venteco Plc completed the acquisition of SIK Valiguard AB,
the Swedish-based specialist in food industry hygiene and safety certification
from SIK, the Swedish Institute of Food and Biotechnology.
The initial cash consideration was SEK3.25m (c.£0.24m). Further consideration up
to a maximum of SEK0.25m (c.£0.02m) will be payable dependent on certain profit
targets being met for 2007.
In the six months to 30 June 2007 Valiguard contributed profit before tax of
£18,000
The acquisition had the following effect on the Group's assets and liabilities:
Net assets acquired: Book value
£'000
Property, plant and equipment 2
Trade and other receivables 78
Cash at bank 67
Trade payables and other current liabilities ( 104)
--------
Net assets of Valiguard 43
Goodwill arising on acquisition 214
--------
Total consideration including estimated acquisition costs 257
========
Satisfied by:
Cash 233
Deferred contingent consideration 18
Directly attributable costs 6
--------
257
========
Net cash outflow arising on acquisition:
Cash consideration 233
Directly attributable costs 6
Cash and cash equivalents acquired (67)
--------
172
========
There were no material differences between book value and fair value of the
assets and liabilities acquired.
9. Called up share capital
The issued share capital as at 31 December 2006, per the audited accounts, was
348,858,974 shares of £0.005 each. This was increased on 22 January 2007 by the
issue of 21,445,906 shares in respect of the acquisition of Silvandersson AB.
Subsequently by an ordinary resolution passed on 7 June 2007 the shares were
consolidated on a 1 for 20 basis with the result that the shares in issue at 30
June 2007 were 18,515,244 shares of 10p.
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