CLP.L Regulatory News (CLP)

28 Sep 2007 08:08

Brainspark PLC28 September 2007 FOR IMMEDIATE RELEASE 28 SEPTEMBER 2007 BRAINSPARK Plc ("Brainspark" or "the Company") UNAUDITED INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2007 CHAIRMAN'S STATEMENT In the six months ended 30 June 2007, the Company incurred a profit beforetaxation of £4k, compared to a loss of the comparative period last year of £72k.Brainspark has finally entered the expansion cycle and launched its first newproject with the incorporation of China IPO Group Limited, an investment companyfocusing on opportunities in China. Meanwhile Brainspark management continue torealise value from existing assets. Financial Summary The consolidated net asset value at 30 June 2007 was £3,515k up from £3,511k at31 December 2006..At 30 June 2007, Brainspark's mid-market share price of 0.65pvalued the at £2,149k against a consolidated net asset value of £3,515k. First Half 2007 Events. On 12 March Brainspark incorporated China IPO Group Limited., a Jersey company,managed in Jersey that will make investments in China, both on 6-12 monthsreturns, in pre-IPO situations, and in 3-5 year return with high growth small-to medium- sized technology companies. China IPO Group Limited, has entered intofirst refusal relationships with some of the most significant Chinese ScienceParks and Incubators in China. The Directors of China IPO Group Limited are theRt. Hon. Earl of Cromer, Non-Executive Chairman, Professor F. Gardin, ExecutiveCEO Director, Mr. E. Burman, Executive Director, and as Non-Executive Directors:Mr. Dennis Bryan Bailey, Professor Liu Man Hong and Mr. Patrick Go. Bedell Trustin Jersey act as company secretary. Allen & Overy in Beijing has been retainedas the law firm. Successful private placement of China IPO shares couldultimately secure Brainspark approximately a 25% share in a company. On 2 April 2007 China IPO Group made its first pre-IPO investment in ET-ChinaHoldings Ltd ("ET-China"), a travel company with its main operations inGuangzhou (Guangdong Province). China IPO Group has invested $200k (£100k) aspart of a $7,000k (£3,500k) unsecured convertible loan note for pre-IPO funding. On 26 June the Company has agreed with Professor. F. Gardin to extend the termsof the interest-free convertible loan of £213,000 for a period of two years suchthat it is now repayable on 31 December 2009, with the right on either party todemand conversion into Ordinary Shares at the price of 0.46 p per share at anytime. The Loan Stock will remain interest free. Portfolio Review At of 30 June 2007 Brainspark had holdings in 8 companies, 3 in the UK, 1 inJersey, 2 in Italy, 1 in Israel and 1 in the United States. Its stakes rangefrom nearly 2% to 100% in these companies. The portfolio covers a wide range ofbusiness sectors, including web services, application service providers,advanced IT solutions and an investment company. On 22 February, Cotterford, a UK investment company subscribed £400k for anissue of new Metapack (www.metapack.co.uk) shares representing 17.78 % of theenlarged issued share capital. Following the dilution Brainspark holds 8.23% ofthe enlarged capital (10.58% pre-investment). On 2 May Geosim (www.geosim.co.il), the 3D city technology and modellingproducer, in which Brainspark (www.brainspark.com) holds 44.11%, raisedadditional finance for working capital and development. Private investors in theUnited States have subscribed US$980k (£490k)to complete the second round offinancing at a pre-money valuation of $20,000k (£10,000k)The first round offinancing was undertaken at pre-money valuation of US$10,000k (£5,000k)wasclosed in September 2006. After these additional subscriptions Brainspark has a39.53% interest in Geosim Further progress for the second half of 2007 During the second half of 2007 Brainspark continued the positive trend of thefirst six months, here are some of the main events. In July 2007 China IPO Group Limited entered in two further exclusive contractswith Tianjin TEDA International Business Incubator (which has more than 180companies currently being incubated) and the Tianjin TIDI Technology IncubationCentre (which has more than 100 companies being incubated). TEDA is part of theTianjin Economic Development Zone. Tianjin is one of China's largest ports, anda key centre for Electronics, Bio-chemicals, Automobiles, Manufacturing andLogistics. On 3 August 2007 Et-China.com International Holdings ("ET-China") went public onAIM and China IPO Group Limited converted the option awarded to holders ofunsecured convertible loan notes in ET-China China IPO Group has converted its$200k (£9100k) loan notes into 153,639 ET-China shares, which at listing rice of127p a share were worth £200k. On listing China IPO realized approximately £15kfrom sale of part of the shares at 127p a share. As from 17 August Brainspark website (www.brainspark.com) contains all theinformation required to be disclosed pursuant to AIM Rule 26. On 24 September Brainspark announced that Geosim (www.geosim.co.il), had enteredinto a new agreement with CRASH Ventures LLC, under which Crash LLC will act asan exclusive consultant. Under this new agreement the exclusivity period hasbeen extended from 31 May 2008 to 31 May 2010. Crash LLC will assist Geosim inraising a total of US$3,000k (£1,500k) of which private investors in the UnitedStates have already subscribed US$200k (£100k), at a pre-money valuation ofUS$22,000k (£11,000k). This alone is equivalent to 1.30p per share. The carryingvalue of Geosim in our books is £1.83million, or 0.55p per share. The newPhiladelphia 3D online website is due for launch before year-end. On 26 September Mediapolis SpA, the amusement park in North of Italy wereBrainsaprk has a small investment, was given the final green light to start theimplementation phase of the project, which is expected to begin in Spring 2008. Brainspark management remains committed to continue the positive trend of theCompany during the final part of the year. Prof. Francesco GardinChairman27 September 2007 FINANCIAL STATEMENTSCONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE PERIOD ENDED 30 JUNE 2007 Note Six months to 30 Six months to 30 Year ended June 2007 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Continuing operations Investment revenue 9 7 9Gain on disposal of investments 75 - 300Share of profits of associates - - 92Finance charges - - (31)Other operating expenses (80) (79) (196)Impairment of available for sale investments - - (156)Profit/(loss) before tax 4 (72) 18 Tax - - -Profit/(loss) for the period from continuing 4 (72) 18operations Attributable to:Equity holders of the parent 4 (72) 18 Earnings per shareBasic and diluted earnings per 0.01p ordinary 3 0.001p (0.02p) 0.005pshare CONSOLIDATED BALANCE SHEETFOR THE PERIOD ENDED 30 JUNE 2007 Notes Six months to Six months to Year Ended 30 June 2007 30 June 2006 31 December (Unaudited) (Unaudited) 2006 (Audited) £'000 £'000 £'000Non-current assetsInvestments in associates 4 2,023 2,010 2,023Available for sale investments 5 818 1,222 718Total non-current assets 2,841 3,232 2,741 Current assetsTrade and other receivables 626 270 626Cash and cash equivalents 305 257 410Total current assets 931 527 1,036 Current liabilitiesTrade and other payables (257) (370) (266)Total current liabilities (257) (370) (266) Net current assets 674 157 770 Net assets 3,515 3,389 3,511 EquityShare capital 1,936 1,936 1,936Share premium account 29,186 29,186 29,186Other reserves 6,813 6,813 6,813Equity component of convertible instrument 32 - 32Retained losses (34,452) (34,546) (34,456)Equity attributable to equity holders of the 3,515 3,389 3,511parent STATEMENT OF CHANGES IN EQUITYFOR THE PERIOD ENDED 30 JUNE 2007 Six months to 30 Six months to 30 Year ended June 2007 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Profit /(Loss) for the period 4 (72) 18 Net addition/(reduction) in equity 4 (72) 18Opening equity attributable to equity holders 3,511 3,461 3,493of the parentClosing equity equity attributable to equity 3,515 3,389 3,511holders of the parent CONSOLIDATED CASHFLOW STATEMENTFOR THE PERIOD ENDED 30 JUNE 2007 Six months to 30 June Six months to 30 Year ended 2007 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Net cash used in operating activities (89) (104) (183) Cash flows from investing activities Interest received 9 7 9Proceeds from sale of investments in associates 75 - 230Purchase of investments (100) (92) (92)Net cash generated from investing activities (16) (85) 147 Decrease in net cash for the period (105) (189) (36) Cash and cash equivalents at beginning of period 410 446 446 Cash and cash equivalents at end of the period 305 257 410 NOTES TO THE FINANCIAL STATEMENTS 1 Accounting policies Basis of preparation The interim financial statements have been prepared using accounting policiesconsistent with International Financial Reporting Standards and in accordancewith International Accounting Standard (IAS) 34 Interim Financial Reporting. The financial information contained in this interim statement is unaudited anddoes not constitute statutory accounts as defined in Section 240 of theCompanies Act 1985. Significant accounting policies The interim financial statements have been prepared under the historical costconvention, except for the revaluation of certain properties and financialinstruments. The same accounting policies, presentation and methods of computation arefollowed in these interim financial statements as were applied in thepreparation of the Group's financial statements for the year ended 31 December2006. 2 Segment reporting The Group carries on its business in five geographical locations, namely the UK,Italy, Israel, United States and China. Its principal activity is the investmentin technology start up businesses. Based on risks and returns, the Directors consider that the Group had only onebusiness segment during the period ended 30 June 2007, that of investing intechnology start up companies. Therefore the disclosure for the primary segmenthas already been given in these financial statements. The secondary reporting would be as shown below. Six month to Six month to Year ended 30 June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) Segment assets Segment assets Segment assets £'000 £'000 £'000 United Kingdom 834 816 938Continental Europe 688 688 688Middle East 1,830 1,830 1,830China 105 - -United States 58 55 55 3,515 3,389 3,511 3 Earnings per share The basic earnings / (loss) per share is calculated by dividing the earningsattributable to ordinary shareholders by the weighted average number of ordinaryshares outstanding during the period. Diluted earnings per share is computedusing the same weighted average number of shares during the period adjusted forthe dilutive effect of share warrants and convertible loans outstanding duringthe period. The profit/ (loss) and weighted average number of shares used in the calculationare set out below: Six months to 30 Six months to Year ended June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Profit/(loss) attributable to ordinary 4 (72) 18shareholdersAdjusted loss 4 (72) 18Weighted average number of ordinary shares 330,697 330,697 330,697Adjusted weighted average number of ordinary 330,697 330,697 330,697sharesBasic profit/ (loss) per share 0.001p (0.02p) 0.005pDiluted profit /(loss) per share 0.001p (0.02p) 0.005p IAS 33 requires presentation of diluted earnings per share when a company couldbe called upon to issue shares that would decrease earnings per share orincrease net loss per share. For a loss making company with outstanding shareoptions and warrants, net loss per share would only be increased by the exerciseof out-of-the money options and warrants. Since it seems inappropriate thatoption holders would act irrationally, no adjustment has been made to dilutedearnings per share for out-of-the money options and warrants in thecomparatives. There are no other diluting share issues, in either financialperiod, consequently diluted earnings per share equals basic earnings per share. 4 Investments in associates Six months to Six months to Year ended 30 June 2007 30 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Share of assetsAt beginning of period 145 15 132Share of profit for the period - - 92Disposal - (79)At period end 145 15 145 GoodwillAt beginning of period 1,878 1,638 1,521Capitalisation of loans - - 357At period end 1,878 1,638 1,878 LoansAt beginning of period - 357 357Capitalisation of loans - - (357)At period end - 357 -Carrying value at period end 2,023 2,010 2,023 5 Available for sale investments Six months to 30 Six months to 30 Year ended June 2007 June 2006 31 December 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 At beginning of period 718 1,130 1,130Additions 100 92 122Disposal - - (378)Impairment charge - - (156)At period end 818 1,222 718 6 Transition to IFRS Brainspark Plc reported under IFRS in its previously published financialstatements for the year ended 31 December 2006. The analysis below shows areconciliation of net assets and profit reported under UK GAAP as at 30 June2006 to the revised net assets and profit under IFRS as reported in thesefinancial statements. Reconciliation of equity at 30 June 2006 Previous GAAP Effect of IFRS transition to 2006 IFRS £'000 £'000 £'000 Non-current assetsInvestments in associates 545 1,465 2,010Available for sale investments 1,222 - 1,222Total non-current assets 1,767 1,465 3,232 Current assetsTrade and other receivables 270 - 270Cash and cash equivalents 257 - 257Total current assets 527 - 527 Current LiabilitiesTrade and other payables (370) - (370)Total current liabilities (370) - (370) Net current assets 157 - 157Net assets 1,924 1,465 3,389 EquityShare capital 1,936 - 1936Share premium account 29,186 - 29,186Other reserves 6,813 - 6,813Retained losses (36,011) 1,465 (34,546)Equity attributable to equity holders of the parent 1,924 1,465 3,389 Reconciliation of equity for the six months ended 30 June 2006 There has been a net improvement in equity of £1,465,000. IFRS do not permitgoodwill amortisation. Goodwill amortisation of £1,004,000 has been reversed andthe carrying value of goodwill has been reviewed for impairment in accordancewith IAS 36. Furthermore under IAS 28 any losses incurred by the associate areonly recognised to the point the investor's interest is reduced to nil. This hasresulted in a reversal of £461,000. Reconciliation of loss for the six months ended 30 June 2006 Previous GAAP Effect of transition IFRS to IFRS £'000 £'000 £'000Continuing operationsInvestment revenue 7 - 7Other operating expenses (79) - (79)Share of profits /(losses) of associates (478) 478 -Loss before tax (550) 478 (72) Tax - - -Loss for the year from continuing operations (550) 478 (72) Attributable to:Equity holders of the parent (550) 478 (72) IFRS do not permit goodwill amortisation, as a consequence goodwill amortisationhas been reversed and the carrying value of goodwill has been reviewed forimpairment. In addition, GeoSim's losses for the six moths to 30 June 2006 of£136,000 have been written back in order to adjust the carrying amount of theinvestment to nil. Explanation of material adjustments to the cash flow statement for the six mothsended 30 June 2006 There are no other material differences between the cash flow statementpresented under IFRSs and the cash flow statement presented under previous UKGAAP. 7 Related party transactions Prof. Francesco Gardin and "S.I.C.I. sas di F. Gardin" are paid£80,000 per annum for the provision of services. Financial Fun Limited, of whichMr. Bailey is Chairman, is paid £20,000 per annum for the provision of Mr.Bailey's services. 8 Board Approval The Interim Statement was approved by the Board on 27 September 2007. 9 Availability of Interim Results Copies of the Interim Results will be available from the offices of the Company,Lightwell, 12-16 Laystall Street, London, EC1R 4PF and from the Company'swebsite www.brainspark.com. For further information, please contact: Francesco Gardin, Brainspark plc, telephone: 00 39 335 296573 Roland Cornish, Beaumont Cornish Limited, telephone: 020 7628 3396 This information is provided by RNS The company news service from the London Stock Exchange