30 Jun 2009 16:58
Energiser Investments Plc
Final results for the year ended 31 December 2008
Chairman's statement
INTRODUCTION
I last wrote to shareholders with the circular which described the various measures the Board were taking to convert part of the Company's loan from Stephen Wicks, Energiser Investments' principal shareholder and a substantial part of the remuneration due to the Directors and an employee of the Company into ordinary shares. Since then the world has been gripped by a financial meltdown which brought the banking system to the point of collapse.
I am reporting to you on the Group's results for the year ended 31 December, 2008, the year in which investors fled the equity markets in search of safer havens. The last quarter of 2008 saw an unprecedented demand for cash and bonds, which saw the yield on 3 month US Treasury bills, considered by investors to be a safe haven, become negative. In other words, investors were so worried about the prospects for the global economy that they put their money in places where they believed that the money would be returned to them, rather than demanding a return on the capital that they had invested.
As a consequence of this, the world's equity markets were severely impacted. The US S&P 500 index suffered its biggest decline since the great depression of the 1930s and Japan's Nikkei index had its biggest annual fall ever. The UK and other European markets were similarly affected. The response from the world's Governments was to slash interest rates to all time lows and to throw billions of dollars at the banking system in a desperate bid to avert the financial meltdown and global recession.
As we stand today there are a multitude of conflicting economic indicators which would indicate that we are either at the start of the next bull market or alternatively on the verge of worldwide recession. To my mind, the green shoots that are being referred to are just that. There is some considerable way to go but I am swayed by the view that the worst is behind us but that the pace of recovery will be slow and that almost inevitably there will be some painful bumps along the way.
PERFORMANCE DURING THE YEAR
In light of my comments above, it will come as no surprise to shareholders that the Board announce that the loss before taxation has increased to £1.25 million (2007: loss £0.84 million) despite having further reduced the administrative costs incurred in running the Group to £132,000 (2007: £361,000). We are disappointed to note that Energiser Investments' net liabilities, notwithstanding the actions taken by the Board to reduce the Group's liabilities, have now fallen to a deficit of £0.40 million (2007: assets of £0.70 million). The Directors do not intend to recommend the payment of a dividend. The loss is due to the further reduction in the value of the Company's investment portfolio, further details of which are set out below. Whilst this is unsatisfactory we do not have any control over the share price performance of our investee companies and shareholders should bear in mind that the performance of smaller company shares in the last 12 months, particularly on London's Alternative Investment Market ("AIM") has generally been very poor.
Having written off one investment during the year where we were not confident of recovering any further monies, another of our investee companies, EiRx Therapeutics PLC had its shares suspended on AIM and its listing subsequently cancelled. We were therefore left with three quoted investments, Physiomics plc, Cybit Holdings PLC and Inland PLC (which was acquired during the year) at the year end. I would like to draw your attention to the achievements of these three companies, as follows:-
AIM LISTED INVESTMENTS
Cybit Holdings PLC
Cybit Holdings PLC ("Cybit") is one of Europe's leading telematics products and service providers, which principally provide organisations with a comprehensive suite of solutions to monitor and position their mobile assets. Cybit operates within three distinct sectors, namely: internet based vehicle telematics solutions; maritime solutions and private mobile radio based asset tracking and precise positioning management. Cybit now support 50,000 mobile assets and approaching 2,000 customers.
In Cybit's latest interim results, for the 6 months ended 30 September 2008, Cybit announced some good results with turnover up 37 per cent at £12.3 million (2007: turnover £9 million), operating profits of £1.74 million (2007: operating profit £1.23 million) and profits before taxation up to £855,000 compared to £616,000 for the comparative period. With these results the company announced contract wins from amongst others Greene King brewers, Powys County Council and the Highways Agency.
Recently the company has announced a further contract win with Kwik Fit Mobile's tyre fitting vehicles.
Since the year end we have disposed of our total shareholding in Cybit, realising sales proceeds of £118,000.
Physiomics plc
Physiomics plc ("Physiomics") is a European computational systems biology services company which applies simulations of cell behaviour to drug development companies aimed at reducing the high attrition rates of clinical trials. The commercial rationale for Physiomics services is that it is estimated that the cost of bringing a new drug to market is $800 million and that 80 to 90 per cent of all clinical drug candidates fail. There is increasing evidence that the major pharmaceutical companies are using more sophisticated technology to shorten the discovery process thereby reducing the overall cost associated with it.
In February, 2009 Physiomics announced its interim results for the 6 months ended 31 December, 2008 which showed a maiden albeit modest profit before taxation of £3,000 (2007: loss before taxation of £194,000) on a near fourfold increase in revenue of £210,000 (2007: revenue of £55,000). Physiomics reported that the company had been successful in raising approximately £250,000 through a combination of a debt for equity subscription and a placing of new ordinary shares. The debt for equity included the conversion of £86,500 of a £100,000 loan from EiRx Pharma Limited, in which Energiser Investments has a near 40 per cent shareholding.
In April, 2009 Physiomics announced the signing of a further licence agreement with the global pharmaceutical company Eli Lilly. The licence will allow Eli Lilly to use the version of the company's simulation platform for in-house modelling of anti cancer drugs. This is the first time that Physiomics has licensed its technology to a third party.
Inland plc
Inland plc ("Inland") are developers of urban regeneration projects around Southern England and predominantly specialise in brownfield developments. Inland's strategy is to acquire large scale development opportunities, substantially funded by third parties, where the company's expertise in securing good planning consents can be fully utilised and to hold its landbank for a future sale when conditions in the housing market improve. Stephen Wicks, Energiser Investment's principal shareholder is the Chief Executive of Inland and Nish Malde, a director of Energiser Investments, is the Finance Director. I am on the board of directors at Inland as a non executive director. In addition, Stephen Wicks and Nish Malde own respectively 21,050,009 and 8,524,000 Inland ordinary shares equivalent to 12.98% and 5.26% of the issued share capital. I own 50,000 Inland ordinary shares, equivalent to 0.03% of the issued share capital. Energiser Investments currently owns 300,000 Inland ordinary shares, equivalent to 0.19% of the issued share capital, which were acquired at a cost of approximately £27,000.
In March 2009, Inland announced its interim results for the six months ended 31 December, 2008 which showed turnover of £0.35 million (2007: £0.17 million) and a loss before taxation of £4.95 million, including a write down in the value of the company's land portfolio of £3.04 million (2007: loss of £1.53 million). At 31 December, 2008 it was reported that the net assets of the company were £47.4 million (2007: £59.4 million) and had net borrowings of £6.79 million (2007: net cash of £11.7 million).
In addition, it was announced that Inland had acquired by way of a joint venture a site in West Drayton, Middlesex which has development potential for over 800 homes. In aggregate, the company's then land bank consisted of approximately 2,100 residential plots and 255,000 square feet of commercial space. It was reported at that time that the focus was on securing planning permissions on the company's land portfolio and that 533 of Inland's residential plots had planning consent.
Whilst the board of Inland reported that they were cautious about the prospects for the housebuilding market, in May 2009 the company announced that it had sold 10 detached building plots on two sites, a site for 5 apartments and had received planning permission for 152 apartments on its site in Ashford, Middlesex.
EIRX PHARMA LIMITED
Energiser Investments owns its shareholding in Physiomics through EiRx Pharma Limited, in which the Company has a shareholding of 39.2 per cent. Following a vote of the shareholders of EiRx Pharma Limited to effect a distribution of the assets of that company in specie, by way of a members' voluntary winding up, on 12 August, 2008 Leonard Curtis were appointed liquidators to EiRx Pharma Limited.
Whilst the process of winding the company up has taken longer than originally anticipated I can report that there was a surplus available to shareholders after paying all the company's debts in full. In addition, the assets of EiRx Pharma Limited, which principally are the holding in Physiomics, will shortly be distributed to shareholders.
DEVELOPMENT FUNDING LIMITED
Conditions in the UK housebuilding industry remain depressed and recovery is still some way off. Following the demise of the building contractor to whom Energiser Investments had provided mezzanine funding at its first development in Wellingborough, Northamptonshire, Development Funding Limited ("DFL") took full control of the site in December 2008 by acquiring the development company, Gramm Partnership Housing Limited for a nominal consideration. The development comprises 29 new freehold houses and I can report that 9 houses have now been sold, with an additional 1 house under offer and 6 houses have been rented. The market remains difficult, although there has been a marked increase in buyer interest recently. The remaining 13 houses in the development are available for sale. I am however, bound to add that we will shortly have to pay council tax on uncompleted units to the Local Authority.
The Board remains cautious of the housebuilding market at present and it is unlikely that, until market conditions improve substantially, DFL will consider making further loans to housebuilders.
The funding for DFL's investment has been provided by Stephen Wicks, Energiser Investments' largest shareholder who owns approximately 57 per cent of the Company's issued share capital. At 31 December, 2008 he had lent Energiser Investments £0.87million (2007: loan of £1.4 million) on commercial terms. Mr Wicks converted £0.36million of his then loan into equity in November, 2008 details of which were contained in the circular to shareholders that was sent to you in October, 2008. The Board has agreed with Mr Wicks that his outstanding loan will not be repayable for a minimum of twelve months unless the Company is able to do so. The Group continues to rely on financial support from Stephen Wicks, which he has continued to provide on a secured basis at 1% above base rates. This support is expected to continue for the foreseeable future and constitutes a related party transaction under the AIM Rules for Companies and accordingly the Directors consider, having consulted with the Company's nominated advisor, that the terms of the facility are fair and reasonable insofar as shareholders are concerned.
OUTLOOK
The Board will continue to look to realise its remaining investments as and when appropriate. Whilst we remain confident of the long term prospects for our development financing business, DFL, we will continue to be cautious until there is more evidence of a substantial and sustained improvement in the housing market.
Simon Bennett
30 June 2009
Directors' Report
Results and dividends
The net loss of the Group for the year after taxation amounted to £1,250,000 (2007: £837,000). The directors do not recommend the payment of a dividend for the year ended 31 December 2008.
The net liabilities of the Group at 31 December 2008 totalled £399,000 (2007: net assets £703,000). The net liabilities per ordinary share as at 31 December 2008 were 1.4p (2007: net assets per share 6.6p).
As referred to above, the Group's principal activity is that of investing in quoted and unquoted companies to achieve capital growth. Accordingly, the main key performance indicators used by the business are:
| | the underlying share price of the investments | |
| - | Cybit (2008: 29.5p, 2007: 47.2p) | |
| - | Physiomics (2008: 0.15p, 2007: 0.47p) | |
| - | Inland (2008: 6.6p, 2007: no investment) | |
| | the returns on project finance (at the year end the only project is under development); and | |
| | the net assets position of the Group including net assets per share (2008: net liabilities per share of 1.4p, 2007: net assets per share of 6.6p). | |
Going concern
The financial statements have been prepared on the going concern basis, the directors having considered the cash forecasts for the next 12 months from the date of the approval of these financial statements. In doing so they have given due regard to the risks and uncertainties affecting the business, the liquidity of investments and the liquidity risk, funding provided by Mr S D Wicks and the repayment of other loans. On this basis the Directors have a reasonable expectation that the funds available to the Group are sufficient to meet the requirements indicated by those forecasts.
ON BEHALF OF THE BOARD
Nishith Malde Company Secretary30 June 2009
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008
| 2008 | 2007 Restated | ||
| £'000 | £'000 | ||
| Continuing operations | |||
| Net losses on investments | (936) | (543) | |
| Other income Cost of sales | 55 (382) | 98 - | |
| Gross loss | (1,263) | (445) | |
| Administrative costs | (132) | (361) | |
| Operating loss | (1,395) | (806) | |
| Finance costs | (166) | (115) | |
| Finance income | 311 | 84 | |
| Loss before taxation | (1,250) | (837) | |
| Taxation | - | - | |
| Loss for the year attributable to shareholders | (1,250) | (837) | |
| Loss per share: | |||
| Basic and diluted loss per share from total and continuing operations | (10.24)p | (7.89)p | |
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2008
| 2008 | 2007 | |||
| £'000 | £'000 | |||
| ASSETS | ||||
| Non-current assets | ||||
| Financial assets at fair value through profit and loss | 266 | 1,651 | ||
| Current assets | ||||
| Inventories | 2,126 | - | ||
| Loans and receivables | - | 1,026 | ||
| Trade and other receivables | 245 | 208 | ||
| Cash and cash equivalents | 43 | 5 | ||
| 2,414 | 1,239 | |||
| Total assets | 2,680 | 2,890 | ||
| LIABILITIES | ||||
| Current liabilities | ||||
| Trade and other payables | 405 | 466 | ||
| Short-term borrowings | 2,338 | 1,422 | ||
| 2,743 | 1,888 | |||
| Non-current liabilities | ||||
| Other payables | 20 | - | ||
| Long-term borrowings | 316 | 299 | ||
| 336 | 299 | |||
| Total liabilities | 3,079 | 2,187 | ||
| Net (liabilities)/ assets | (399) | 703 | ||
| EQUITY | ||||
| Share capital | 2,296 | 2,279 | ||
| Share premium account | 5,538 | 5,423 | ||
| Convertible loan | 88 | 88 | ||
| Merger reserve | 1,012 | 1,012 | ||
| Retained earnings | (9,333) | (8,099) | ||
| Total equity | (399) | 703 | ||
consolidated CASH FLOW STATEMENT fOR THE YEAR ENDED 31 DECEMBER 2008
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Cash flows from operating activities | |||
| Loss before and after taxation | (1,250) | (837) | |
| Adjustments for: | |||
| Fair value adjustments | 781 | 580 | |
| Loss/(profit) on sale of investments | 155 | (37) | |
| Interest expense | 166 | 115 | |
| Increase in loans, trade and other receivables | (310) | (920) | |
| Decrease in trade payables | (69) | (104) | |
| Interest received | (311) | (84) | |
| Share option charge | 16 | 9 | |
| Write down of inventories to net realisable value | 381 | - | |
| Net cash from operating activities | (441) | (1,278) | |
| Cash flows from investing activities | |||
| Purchase of investments | (155) | (13) | |
| Proceeds from sale of investment | 604 | 265 | |
| Acquisition of subsidiary, net of cash acquired | - | - | |
| Net cash used in investing activities | 449 | 252 | |
| Cash flows from financing activities | |||
| Proceeds from short-term borrowings | 374 | 1,134 | |
| Re-payment of short-term borrowings | (335) | (82) | |
| Net cash generated from financing activities | 39 | 1,052 | |
| Net increase in cash and cash equivalents | 47 | 26 | |
| Cash and cash equivalents at beginning of period | (4) | (30) | |
| Cash and cash equivalents at end of period | 43 | (4) | |
Note:
Energiser has posted its Annual Report and Accounts for the year ended 31 December 2008, along with Notice of the AGM to shareholders. The AGM will be held at 2 Anglo Office Park, 67 White Lion Road, Amersham, Buckinghamshire. HP7 9FB at 11:00 am on 4 September 2009.
The Company's Annual Report and Accounts are available to view and download on the Company's website at www.billamplc.co.uk
For further information contact:
| Energiser Investments plc | ||||
| Nish Malde | +44 (0) 1494 762 450 | |||
| FinnCap | ||||
| Marc Young | +44 (0) 20 7600 1658 | |||