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Venteco PLC (VTO)

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Friday 30 May, 2008

Venteco PLC

Final Results

RNS Number : 5695V
Venteco PLC
30 May 2008
 



30 May 2008                


Venteco plc


Preliminary Results for the year ended 31 December 2007



Venteco plc ('Venteco' or 'the Company'), the UK-based non-toxic pest control provider, announces its financial results for the year ended 31 December 2007, which have been prepared in accordance with International Financial Reporting Standards.


Financial Summary


  • Revenues rose to £4.45m (£0.24m in 2006), benefiting from consolidation of two acquisitions during 2007


  • Operating losses rose to £1.72m for the period (2006: £0.45m) including a goodwill write down of £0.87m, reflecting a revision of future trading expectations


  • Losses before tax amounted to £1.78m (2006: £0.37m)


  • Cash and cash equivalents at end December 2007 were £0.94m (£2.2m at end December 2006). No dividend was declared for the period 


Operational Summary


  • Venteco will be a 'complete solution supplier' to the international non-toxic pest control market thereby laying the foundations for long-term growth 


  • Successfully integrated the two acquisitions, Silvandersson AB, a leading manufacturer of insect glue traps, and SIK Valiguard AB, the Swedish-based specialist in food industry hygiene and safety certification


  • Significant and improved international customer interest in Cryonite as CTS Technologies assumes Cryonite product marketing responsibilities. CTS launches a direct sales campaign and appoints several new international distribution agents


  • A wide-ranging cost-cutting programme was initiated in the second half to improve operational efficiency, enhance product reliability and cut Company working capital requirements. This programme is scheduled to conclude during the summer of 2008 


Commenting on the results, Stefan Hansson, Chief Executive of the Company, said: '2007 was a transformational year for the Company as it laid the foundations for its long-term growth. Having overcome the challenges of distribution and franchising as well as product reliability, the Company is better placed to drive growth. I look forward to 2008 as a year of increased turnover and improved performance.'  


Enquiries:


Venteco plc


Stefan Hansson, Barry Gibb

+44 (0) 207 977 0020

Libertas Capital


Aamir Quraishi, Sandy Jamieson

+44 (0) 207 569 9650

Corfin Communications


William Cullum, Clare Perks

+44 (0) 207 977 0020



Overview


2007 was a transformational year for Venteco. Revenues increased by £4.21m to £4.45m (£0.24m in 2006) reflecting Venteco's increasing penetration, through the two acquisitions, of the non-toxic pest control market globally. 


The first half of the year to 30th June was a busy and successful time. Having recognised its market opportunity in international pest control, Venteco successfully incorporated two acquisitions whilst reviewing several new prospects and producing its first ever net profit. 


Interest in Cryonite remains high. However, in the second half, the Company experienced distribution and marketing problems, resulting in a much slower than anticipated deployment of the Company's Cryonite technology, and poor weather conditions impacted on the demand for Silvandersson's products. This resulted in a net loss position for Venteco for the full year. 


The Board acted quickly, initially by thoroughly reviewing Venteco's business plan and then by addressing all outstanding eventualities that might limit scope to fulfill its true potential. As announced on 20 December 2007, Mats Andersson stepped down as Chairman of the Board and Haresh Kanabar stepped up from non-executive director to become the new Chairman.


Pest control remains a long-term growth market. Indeed, the pace of expansion of the industrialised world suggests that the underlying rate must now be well in excess of the 5% to 10% range generally quoted by industry specialists. Operating in a sector that is widely recognised for its lack of innovation, this opens important and significant opportunities for Venteco. 


Operational Review


CTS Technologies


Public and professional interest in Cryonite technology remains very high. However in order to achieve 2007's targeted deployment, the Company needed (i) distribution and franchise arrangements to work in harmony; and (ii) an exceptional level of product reliability. As the year progressed, problems in both of these areas became apparent and unit deployment fell well short of target. 


The latter was relatively easy to resolve and newly outsourced manufacturing and assembly arrangements have had the desired effect. In 2008, CTS will be able to accelerate opportunities to engineer out cost while investigating production of other and complementary derivatives.


Resolving the former has been an altogether more complicated exercise. As a result, Venteco's partner, Linde AG, whose projected sales into Europe had fallen significantly short of target, agreed to hand back its marketing responsibilities to CTS, while confirming its surrender of inventories and retained lease portfolio. As a result, costs, and thus the break-even point, will be substantially lowered for CTS, even if based on a highly conservative sales projection for 2008. In the short term, this is balanced by a negative impact on cash flow. 


Silvandersson


Venteco's leading provider of non-toxic fly control products reported a strong first half. The experience was not repeated in the second, however, due to exceptional damp and unusually cool weather conditions in its principal European sales territory. Sales for the full year rose by 12% (compared with 26% in the first half) to £4.1m, producing an operating profit of £0.12m.  


Although a repeat of such circumstances is not anticipated for 2008, management does recognise that weather patterns are likely to become less predictable. As a result, demand cycles will be less regular and altogether more volatile. Silvandersson's response has been to review its working practices in order to allow greater flexibility in production, reduce working capital and dispose of non-core assets. Silvandersson's geographical sales and product strategy has been revised. Such actions are expected to support good volume growth and mitigate margin pressure that would otherwise be the inevitable result of slowing economic conditions across Europe


Valiguard


Valiguard performed in-line with expectations for the whole of 2007. Sales rose by 19% £0.37m.This growth is due to increased demand for certifications.


Responding to customer demand, Valiguard expanded its offering to include new certification standards while also extending its services 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 also winning higher revenue per assignment.  


Early in the New Year, Valiguard was approved for certification to the KRAV standard for organic food. This can be bundled into the company's offering of BRC and ISO 22000 products and so widenening Valiguard's customer appeal. 


Financial Review  


In 2007, the Company increased its revenues by £4.21m to £4.45m (2006: £0.24m), benefiting from the consolidation of two acquisitions during 2007.


Operating losses rose to £1.72m for the period to December 2007 (2006: £0.45m) including a goodwill write down of £ 0.87m, reflecting a revision of future trading expectations


Losses before tax amounted to £1.78m (2006: £0.37m)


Cash and cash equivalents fell to £0.94m at the 2007 year end (2006: £2.23m)


Market Opportunity


The two acquisitions of Silvandersson and SIK Valiguard will provide a platform on which the Company will build its innovative approach to non-toxic and environmentally friendly pest control.


Government and industry attitudes now tend toward policies of greater social responsibility, while an ever more 'ecologically-aware' public is becoming increasingly reluctant to use toxins where alternative or 'green' solutions already exist. Venteco's products and technologies provide an alternative treatment and 'green solution' to the problem of pest control. Market opportunities for such a solution are plentiful and can be found in hospitals, food producers, pharmaceutical companies, hotels and restaurants, through to general kitchen locations and the retail market. 


Although Cryonite is the Company'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 Company is able to identify a number of potential 'bolt on' targets that are complementary in terms of geography, product offering, client base and technology. 


Outlook


Having stepped up its own marketing, CTS concluded over 50 new unit leases by the end of the first quarter of 2008. New distributors have been appointed in the North America, including an agreement with the national giant, Orkin, together with regional franchises in Canada and on the East Coast. Exceptional interest in the Far East has resulted in appointments in Singapore and Philippines, while similar discussions continue in FranceGermanySpain and Israel. Increased activity in these areas are expected to coincide with the creation of a 'user-exchange', through which 'club letters', training manuals, an information hot-line, marketing information, testimonials etc, should be accessed through a re-vamped web service. CTS will also spearhead a newly focused marketing campaign, whereby its products are trialed by major hotel chains and global food manufacturers and their particular pest control problems addressed through a bespoke, rather than general, service. 


The Board believes that in 2008 the Company will start to seize the true market opportunity for Cryonite. Initiatives such as flexible working patterns are underway to insulate the Company from today's less predictable weather patterns which have a direct impact on the pest population and hence the Company's business. Also, the programme of cost elimination that began last year will continue into the current period.


In the shorter term, some of the regions into which the Company sells are facing a period of slowing economic growth. This may result in pricing pressure in more commoditised product areas as well as the need for us to actively hedge exposure to certain international currencies. 


However, Venteco is excellently positioned to capture a greater share of the growing non-toxic pest control market. The problems faced in the second half of 2007 have now been addressed. 2008 will see the Company regain momentum, incorporate a wider global distribution network and complete its efficiency programme, resulting in a year of continued growth and improved profitability. 




Consolidated Income Statement

for the year ended 31 December 2007




2007


2006



£'000


£'000






Revenue

2

   4,454


 244






Cost of sales


(2,269)


  (98)






Gross profit


   2,185


  146






Administrative expenses


 (4,393)

   

(600)

Other gains and losses


        486


         4






Loss from operations


  (1,722)


(450)






Finance income


          26


        86

Finance costs


(79)


  (1)






Loss before taxation


(1,775)


( 365)






Taxation


45

  

-






Loss attributable to equity shareholders


(1,730)


( 365)











Earnings per share

3









Basic and fully diluted loss per share


(9.34p)


(2.62p)







Consolidated Balance Sheet

At 31 December 2007




2007


2006

Assets


£'000


£'000






Non-current assets





Goodwill


710


1,382

Other intangible assets


245


  200

Furniture, fittings and equipment


1,477


  7

Deferred tax asset


-


  25



2,432


1,614

Current assets





Inventories


1,288


  2

Trade and other receivables


1,051


  136

Cash and cash equivalents


944


2,231



3,283


2,369






Total assets


5,715


3,983






Equity and liabilities





Equity attributable to equity holders of the company





Called up share capital


1,852


1,744

Share premium account


2,634


2,366

Reverse acquisition reserve


306


  306

Currency translation reserve


154


  9

Accumulated losses


(2,273)


 ( 543)






Total equity


2,673


3,882






Current liabilities





Trade payables


429


  53

Tax liabilities


191


-

Bank loans and overdrafts


837


-

Other liabilities


5


  1

Accrued expenses and deferred income


479


  47



1,941


  101






Non-current liabilities





Bank loans


941


-

Deferred tax liability


160


-



1,101


-






Total liabilities


3,042


101






Total equity and liabilities


5,715


3,983







    

Consolidated Statement of Changes in Equity

for the year ended 31 December 2007

 

 

 
 
Share
Capital
Share
Premium
Account
Reverse
Acquisition
Reserve
Currency
Translation
Reserve
Accumulated
Losses
Total
Balance at 1 January 2006
596
-
(149)
-
(221)
226
Loss for the period
-
-
-
-
(365)
(365)
Exchange rate translation
-
-
-
9
-
9
CTS Technologies AG- share issue
10
-
82
-
-
92
Acquisition of CTS Technologies AG
1,138
2,366
373
-
43
3,920
 
 
 
 
 
 
 
 
Balance at 31 December 2006
1,744
2,366
306
9
(543)
3,882
 
 
 
 
 
 
 
 
Loss for the period
-
-
-
-
(1,730)
(1,730)
 
 
 
 
 
 
 
 
Exchange rate translation
-
-
-
145
-
145
 
 
 
 
 
 
 
 
Share issue-acquisition of Silvanderson
108
268
-
-
-
376
 
 
 
 
 
 
 
 
Balance at 31 December 2007
1,852
2,634
306
154
(2,273)
2,673
 
 
 
 
 
 
 
 


 



Consolidated Cash Flow

for the year ended 31 December 2007




2007


Restated

2006



£'000


£'000






Net cash from operating activities

5

(1,058)


( 475)






Investing activities





Purchase of patents and trademarks


-


 ( 47)

Acquisition of subsidiary


(1,624)


( 428)

Interest received


26


  86

Net cash used in investment activities


(1,598)


 ( 389)






Financing activities





Net proceeds of share issues


-


  92

Net cash inflow arising on acquisition


133


2,994

New bank loan received


1,331


-

Repayment of borrowings


(76)


-

Interest paid


(79)


  ( 1)

Net cash from financing activities


1,309


3,085






Cash flow for the year





Net (decrease)/ increase in cash and cash equivalents


(1,347)


2,221






Effect of foreign exchange rate changes


60


  ( 1)

Cash and cash equivalents at beginning of year


2,231


  11






Cash and cash equivalents at 31 December 2007


944


2,231




 

  • Accounting polices


Basis of preparation

The results have been prepared using accounting policies consistent with those used in the preparation of the statutory accounts. The financial information is derived from the financial statements for the Year ended 31 December 2007, and does not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. The financial statements on which the auditors have given an unqualified report do not contain a statement under Section 237 (2) or (3) of the Companies Act and will be delivered to the Registrar of Companies in due course.


The financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards.

 

2.       Segmental information


 

For management purposes, the Group is currently organised as one operating division. The principal activity of the division is the supply of pest control products and services.


Segment information about this activity is as follows:


2007

2006


Pest control products and services

Total

Pest control products and services

Restated

Total


£'000

£'000

£'000

£'000

Revenue

External sales

4,454

4,454


  244


  244

Total sales

4,454

4,454

  244

  244






Result





Segment result

(301)

(301)

( 245)

( 245)

Unallocated corporate expenses


(1,907)


( 209)

Loss from operations

(301)

(2,208)

( 245)

(454)

Other gains and losses


  486


  

                4

Finance costs


                 (79)


 

              ( 1)

Finance income


                  26


 

             

             86

Loss before tax


            (1,775)


 

          ( 365)

Taxation


                 45


 

            -

Loss after tax


            (1,730)


 

         ( 365)






Other Information





Tangible asset additions


            2,978


 

           -

Intangible asset additions


              341


47

Depreciation and Amortisation


           1,609


 

            19






Balance Sheet





Assets





Segment assets

       3,625

3,625

  394

  394

Unallocated corporate assets


2,090


 

            3,589

Consolidated total assets

3,625

5,715

  394

3,983

Liabilities





Segment liabilities

1,506

1,506

  31

  31

Unallocated corporate liabilities


1,536


  70

Consolidated total liabilities

1,506

3,042

  31

  101

 

 

3.       Earnings per share

 


2007


2006


£'000


£'000

Loss




Loss for the purpose of basic and diluted loss per share

(1,730)


( 365)





Number of shares




Weighted average number of ordinary shares in issue during

the period

18,515,244


13,908,921





Basic and fully diluted loss per share

(9.34p)


(2.62p)


The denominators for the purposes of calculating both basic and diluted earnings per share in 2006 have been adjusted for the share division that took place in 2007.


  

4.       Acquisition of a subsidiary

  


Acquisition of Silvandersson


On 22 January 2007, Venteco Plc acquired all of the issued and outstanding share capital of Silvandersson Sweden AB a leading manufacturer of insect glue traps. 


Under the terms of the agreement, Venteco paid an initial consideration, at completion, of £1.61m of which £1.23m 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 £81,000 will be payable in cash and is dependent on certain profit targets being met during 2008. Profit targets were not met in 2007. 


The cash element of the consideration is fully debt financed.


Acquisition of Silvandersson

The net assets of Silvandersson at the date of acquisition are estimated to be £2.3m as set out below.

Fair value of net assets of Silvandersson at date of acquisition:

Book Value

£'000

Fair value adjustments

£'000

Fair value


£'000

Property, plant and equipment

829

655

1,484

Patent and trade marks

35

-

35

Research and development

-

93

93

Customer lists

-

135

135

Inventories

1,021

-

1,021

Trade and other receivables

563

197

760

Cash & cash equivalents 

66

-

66

Long term loan

(329)

-

(329)

Deferred tax 

(178)

(37)

(215)

Trade payables and other current liabilities

(543)

(171)

(714)

Net assets of Silvandersson

1,464

872

2,336

Goodwill and intangibles



(498)

Total consideration including estimated acquisition costs



1,838





Satisfied by:




Cash



1,231

Shares



375

Deferred contingent consideration



81

Acquisition costs



151




1,838

The carrying amount of the assets acquired is the same as their fair value.



Acquisition of SIK Valiguard

On 2 February 2007, Venteco Plc acquired the entire share capital of SIK Valiguard AB, the Swedish-based specialist in food industry hygiene and safety certification from SIK, the Swedish Institute of Food and Biotechnology.


Venteco paid an initial consideration £0.26m. Further consideration up to a maximum of £0.18m was payable dependent on certain profit targets being met for 2007. These profit targets were not met.


The net assets of Valiguard at the date of acquisition are estimated to be £43,000 as set out below.


Fair value of net assets of SIK Valiguard at date of acquisition:

£'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

199

Total consideration including estimated acquisition costs

242



Satisfied by:


Cash

236

Acquisition costs

6


242

The carrying amount of the assets acquired is the same as their fair value.

 


5.   Cash flow statement

 


Net cash from operating activities



      Group  




2007


Restated*

2006



£'000


£'000







Loss after tax

(1,730)


( 365)


Tax

(45)




Write up of negative goodwill

(498)




Interest received

(26)




Interest paid    

79


(85)


Investment write down

871




Adjustment for depreciation and amortisation

448  


  19


Operating cash flows before movements in working capital

(901)


( 431)


(Increase)/decrease in inventories

(265)


  1


Increase in receivables

(77)


( 106)


Increase in payables

185


  61


Cash used by operations

(1,058)


( 475)



*Restated from Loss after tax (prior year Loss from operations)



The Annual Report will be posted shortly to all shareholders. Additional copies are available from 

2nd Floor, 50 Gresham StreetLondon EC2V 7AY.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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