Venteco Plc

('Venteco' or 'the Group')

Interim report and financial statements

for the six months ended 30 June 2008

Chairman's Statement

In the first half of the current financial year, Venteco has continued to reduce costs as previously reported in our annual report for 2007, while at the same time utilising synergies within the Group where appropriate. Venteco's two acquisitions completed during 2007, Silvandersson and Valiguard, have had a divergent development in 2008. 

In the first half of the current year, Valiguard has continued to show good growth, with sales up by 29% on the same period last year and improved its results relative to last year. Silvandersson on the contrary has been faced with a negative impact from the declining value of the UK pound and weaker demand, in especially Germany and Switzerland. Albeit still being profitable in the first half, a programme for improving results has been implemented which will lower the fixed cost base by about 15% when the full effect has been realised. The full effect of these measures is not expected to be achieved until 2009, given that these measures were realised gradually in 2008. In addition, price increases have also been implemented during the summer 2008. Silvandersson is also actively looking at lowering the cost through purchasing from other suppliers.

The Cryonite operations have now been fully integrated into Silvandersson's professional segment in order to utilise more efficiently the marketing resources within the Group. This has enabled a significant cost reduction which will be fully realised in the first half of 2009. The co-operation with Linde has been reviewed and finally terminated in May 2008, resulting in Venteco taking over the leasing portfolio into its own balance sheet. During the year, larger orders have been received by companies such as Terminix (US), ISS (Italy), Desinfecta (Switzerland), while the first units also were deployed in Singapore and the Philipines. In addition, a leading tobacco company in the Asian region has also deployed Cryonite units. After successful introduction in the US market by Terminix, Cryonite is receiving significant attention from pest control companies in the US, especially as a method of controlling bed bugs, which is increasing rapidly in the US. Hence, we expect Croynite to have positive profit contribution in 2009.

At the parent company level, cost reductions have also been implemented.

Financial results

Group sales have declined by 11% with a mixed development in core markets, where Venteco Group companies operate. Group operating loss for the period was GBP £21,000, representing a £508,000 decrease relative to first half of last year, which benefited from a one off gain of £471,000. 

Cash generated from operations was a negative £324,000 and £35,000 was spent on plant and equipment. In Silvandersson, a working capital reduction programme is underway, which should reduce net working capital considerably towards the end of 2008. 

Financing, Acquisitions and Divestitures

In the first half of 2008, focus have been on improving the operating performance and expanding the Cryonite operations, while at the same time try to preserve the cash position. The turbulent financial markets also mean that it is more difficult to pursue the acquisition led business model, as acquisitions are harder to finance. Given the continued deterioration of financial markets and the fact that the Group has been cash-flow negative in the first half, we are also at this moment reviewing proposals from other players to acquire parts of Venteco Group companies. Venteco is also in discussions with third parties with a view to raising additional funds for the Company.

Earnings per share, and dividends

The loss per share in the first half was 0.50 p compared to a profit of 2.28p in the same period 2007. The Directors are not recommending the payment of dividend.  

Employees

In the first half of 2008, the number of employees in the Group has been reduced by about 10% and we expect an additional decline in our headcount by the end of 2008. We are grateful that our dedicated workforce continues to work hard given the difficult circumstances.

Outlook

The installed base of Cryonite equipment is up by approximately 40% in the year to date compared to the end of last year. With the ongoing efforts to expand our geographical presence, especially in the US and Germany, we believe that the growth rate in deployment is likely to continue going forward. However, the overall economic climate is tough and trading is likely to be challenging in the next financial year.

Haresh Kanabar

Chairman

Enquiries:

Venteco plc
Stefan Hansson	+44 (0) 207 977 0020
Libertas Capital
Sandy Jamieson	+44 (0) 207 569 9650
Corfin Communications
William Cullum, Alexis Gore	+44 (0) 207 977 0020

Consolidated Income Statement for the six months ended June 2008

		6 months to 30 June  2008 Unaudited		6 months to 30 June  2007 Unaudited		12 months to 31 December 2007 Audited
	Notes	£'000		£'000		£'000
Revenue		2,774		3,106		4,454
Cost of sales		(1,330)		(1,522)		(2,269)
Gross profit		1,444		1,584		2,185
Administrative expenses		(1,504)		(1,526)		(4,393)
Other gains and losses		40		471		486
Profit/(Loss) from operations	3	20		529		(1,722)
Finance income		11		34		26
Finance costs		(84)		(55)		(79)
Profit/(Loss) before taxation		(93)		508		(1,775)
Taxation		-		(89)		45
Profit/(Loss) attributable to equity shareholders		(93)		419		(1,730)
Earnings per share
Basic and fully diluted profit (loss) per share	4	(0.50p)		2.28p		(9.34p)

Consolidated Balance Sheet at 30 June 2008

		30 June  2008 Unaudited		30 June 2007 Unaudited		31 December 2007 Audited
Assets	Notes	£'000		£'000		£'000
Non-current assets
Goodwill		710		1,596		710
Other intangible assets		319		432		245
Furniture, fittings and equipment		1,484		1,689		1,477
Deferred tax asset		-		-		-
		2,513		3,717		2,432
Current assets
Inventories		1,236		1,075		1,288
Trade and other receivables		1,843		1,974		1,051
Cash and cash equivalents		401		1,348		944
		3,480		4,397		3,283
Total assets		5,993		8,114		5,715
Equity and liabilities
Equity attributable to equity holders of the company
Called up share capital		1,852		1,852		1,852
Share premium account		2,634		2,634		2,634
Reverse acquisition reserve		306		306		306
Currency translation reserve		207		2		154
Accumulated losses		(2,366)		(99)		(2,273)
Total equity		2,633		4,695		2,673
Current liabilities
Trade payables		635		657		429
Tax liabilities		232		3		191
Bank loans and overdrafts		989		-		837
Other liabilities		88		99		5
Accrued expenses and deferred income		480		338		479
		2,424		1,097		1,941
Non-current liabilities
Bank loans		775		1,649		941
Deferred tax liability		161		354		160
Creditors greater than one year		-		319		-
		936		2,322		1,101
Total liabilities		3,360		3,419		3,042
Total equity and liabilities		5,993		8,114		5,715

        

Consolidated Statement of Changes in Equity for the six months ended 30 June 2008

        

		Share Capital		Share Premium Account		Reverse Acquisition Reserve		Currency Translation Reserve		Accumulated Losses		Total
Balance at 1 January 2007		1,744		2,366		306		9		(543)		3,882
Profit for the period										419		419
Share based payments										25		25
Exchange rate translation								(7)				(7)
Share issue-acquisition of Silvandersson		108		268								376
Balance at 30 June  2007 (Unaudited)		1,852		2,634		306		2		(99)		4,695
Loss for the period										(2,174)		(2,174)
Exchange rate translation								152				152
Balance at 31 December 2007 (Audited)		1,852		2,634		306		154		(2,273)		2,673
Profit for the period										(93)		(93)
Exchange rate translation								53				53
Balance at 30 June 2008 (Unaudited)		1,852		2,634		306		207		(2,366)		2,633

Consolidated Cash Flow Statement for the 6 months ended 30 June 2008

		6 months to 30 June 2008 Unaudited		6 months to 30 June 2007 Unaudited		12 months to 31 December 2007 Audited
	Notes	£'000		£'000		£'000
Net cash from operating activities		(324)		(588)		(1,058)
Investing activities
Purchase of furniture, fittings & equipment		(35)		(45)		-
Purchase of patents and trademarks		-		(7)		-
Acquisition of subsidiary		-		(1,657)		(1,624)
Deferred consideration paid into Escrow account		-		(18)		-
Interest received		11		34		26
Net cash used in investment activities		(24)		(1,693)		(1,598)
Financing activities
Net proceeds of share issues		-		-		-
Net cash inflow arising on acquisition		-		133		133
New bank loan received		-		1,320		1,331
Repayment of borrowings		(85)		-		(76)
Interest paid		(44)		(55)		(79)
Net cash from financing activities		(129)		1,398		1,309
Cash flow for the year
Net (decrease)/ increase in cash and cash equivalents		(477)		(883)		(1,347)
Effect of foreign exchange rate changes		(66)		-		60
Cash and cash equivalents at beginning of period		944		2,231		2,231
Cash and cash equivalents at end of period		401		1,348		944

Notes to the financial statements for the six months ended 30 June 2008

 

1.    Basis of preparation and accounting policies

These consolidated interim financial statements were approved by the Board of Directors on 23rd of September 2008.

Basis of preparation

The consolidated interim financial statements for the six months ended 30 June 2008 have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards and Interpretations issued by the International Accounting Standards Board as adopted by the European Union ('IFRS').

These consolidated interim financial statements have been prepared under the historical cost convention.

The financial information for the year ended 31 December 2007 does not constitute statutory information. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified and did not contain a statement under section 15(4) or (6) of the Companies Act 1982.

Accounting policies

The accounting policies applied in the preparation of these interim financial statements are consistent with those used in the preparation of the audited annual accounts for the year ended 31 December 2007.

Notes to the financial statements for the six months ended 30 June 2008

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:

	Six months ended 30 June 2008 Unaudited		Six months ended 30 June 2007 Unaudited		Year ended 31 December 2007 Audited
	Pest control products and services	Total	Pest control products and services	Total	Pest control products and services	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Revenue External sales	2,744	2,744	3,106	3,106	4,454	4,454
Total sales	2,744	2,744	3,106	3,106	4,454	4,454
Result
Segment result	46	46	236	236	(301)	(301)
Unallocated corporate expenses		(106)		(178)		(1,907)
Loss from operations		(60)		58	(301)	(2,208)
Other gains and losses		40		471		486
Finance costs		(84)		(55)		(79)
Finance income		11		34		26
Loss before tax		(93)		508		(1,775)
Taxation		-		(89)		45
Loss after tax		(93)		419		(1,730)
Other Information
Tangible asset additions		35		-		2,978
Intangible asset additions		95		7		341
Depreciation and Amortisation		103		86		1,609
Balance Sheet
Assets
Segment assets	4,100	4,100	5,427	5,427	3,625	3,625
Unallocated corporate assets		1,893		2,717		2,090
Consolidated total assets	4,100	5,993	5.427	8,144	3,625	5,715
Liabilities
Segment liabilities	1,809	1,809	1,501	1,501	1,506	1,506
Unallocated corporate liabilities		1,551		1,918		1,536
Consolidated total liabilities	1,809	3,360	1,501	3,419	1,506	3,042

Notes to the financial statements for the six months ended 30 June 2008

    Geographical

    The Group's operations are carried out in Western Europe. The entire turnover and all the Group's assets and liabilities are generated and based in Western Europe. The Group's main line of business is the provision of environmentally friendly pest control technology services. All the transactions and business activities occur in Western Europe.

The following table provides an analysis of the Group's sales by geographical market.

For the Group	Six months ended 30 June 2008 Unaudited		Six months ended 30 June 2007 Unaudited		Year ended 31 December 2007 Audited
	£'000		£'000		£'000
Sweden	447		417		417
Rest of Europe	1,762		2,232		3,388
Rest of the World	565		457		649
	2,774		3,106		4,454

Product

The Group's turnover consists of sales of Cryonite units, the development and manufacturing of pest control devises and consultancy services.

The following table provides an analysis of the Group's sales by product.

For the Group	Six months ended 30 June 2008 Unaudited		Six months ended 30 June 2007 Unaudited		Year ended 31 December 2007 Audited
	£'000		£'000		£'000
Cryonite units	35		45		170
Consultancy services	264		204		369
Pest control products	2,475		2,736		3,915
Other Income	-		121		-
	2,774		3,106		4,454

Notes to the financial statements for the six months ended 30 June 2008

3.    Loss from operations

    Loss from operations has been arrived at after charging/(crediting).

For the Group	Six months ended 30 June 2008 Unaudited		Six months ended 30 June 2007 Unaudited		Year ended 31 December 2007 Audited
	£'000		£'000		£'000
Staff costs	781		689		1,517
Cost of inventories recognised as an expense	-		-		-
Operating lease rentals	8		7		15
Research and development	73		95		894
Depreciation	101		76		1,508
Amortisation of patents and trademarks	5		22		101
Write down of investment in CTS Technologies AG	-		-		871
Write up of negative goodwill	-		484		(498)
Foreign exchange gains and losses	(40)		(13)		12

4.    Earnings per share

	Six months ended 30 June 2008 Unaudited		Six months ended 30 June 2007 Unaudited		Year ended 31 December 2007 Audited
	£'000		£'000		£'000
Profit / (Loss)
Loss for the purpose of basic and diluted loss per share	(93)		419		(1,730)
Number of shares
Weighted average number of ordinary shares in issue during the period	18,515,244		18,391,517		18,515,244
Basic and fully diluted profit (loss) per share	(0.50p)		2.28p		(9.34p)

Notes to the financial statements for the six months ended 30 June 2008

5.    Cash flow statement

Net cash from operating activities

		Six months ended 30 June 2008 Unaudited		Six months ended 30 June 2007 Unaudited		Year ended 31 December 2007 Audited
Loss after tax		(93)		419		(1,730)
Tax		-		89		(45)
Write up of negative goodwill		-		(484)		(498)
Interest received		(11)		(34)		(26)
Interest paid		84		55		79
Share based payments		-		25		-
Investment write down		-		-		871
Adjustment for depreciation and amortisation		106		97		448
Operating cash flows before movements in working capital		86		167		(901)
(Increase)/decrease in inventories		52		(52)		(265)
Increase in receivables		(793)		(1,008)		(77)
Increase in payables		331		305		185
Cash used by operations		(324)		(588)		(1,058)

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