Parkmead Regulatory News (PMG)

24 Feb 2005 07:30

Interregnum PLC24 February 2005 Thursday 24 February 2005 PRESS RELEASE INTERREGNUM PLC Financial results for the 6 months ended 31 December 2004 Financial highlights • Group turnover up 385% at £3.35m (2003: £0.7m) reflecting increased revenues from Interregnum's advisory business and the consolidation of revenues from its subsidiaries Cellular Design Services Ltd ("CDS") and Yospace Technologies Ltd ("Yospace"). • Like for like Group revenues (excluding CDS acquisition) up 43% at £1.0m (2003: £0.7m) • Interregnum advisory revenues grew by 56% to £453,000 (2003: £290,000) • Group operating loss further reduced by 10% to £719,000 (2003: £799,000) despite an increase in overheads resulting from the addition of seven new corporate finance hires • There were no significant realisations from the portfolio (1H 2003: £181,000), which contributed to a retained loss for the period of £468,000 or £0.51 per share (2003: £191,000, £0.29p per share) • Adjusted portfolio value(1) increased by 15% to £5.3m on 31 December 2004 (June 2004: £4.62m) • Cash at bank on 31 December 2004 £1.92m (2003: £1.10m) • Cash receipts from investee companies post period end include £400,000 dividend and £400,000 interest payments. Corporate Progress • Yospace, which is 47% owned by Interregnum, grew revenues by 60% to £659,000 (2003: £412,000), and secured a global contract with a leading mobile operator • CDS, which is 100% owned by Interregnum, achieved profits of £87,000 (2003: loss £23,000) • Following the recruitment of four new MDs, the advisory fee pipeline is greater than at any time in Interregnum's history • Audio Visual Machines Ltd. ("AVM"), an audio visual solutions provider, was acquired post period end, supporting Interregnum's strategy of taking principal investment positions; AVM is expected to be earnings enhancing in second half of 2004-5. (1) Adjusted to include the carrying value of Cellular Design Services, Yospace Technologies and Interregnum Investment Partners Commenting on the results, Ken Olisa, Chairman and Chief Executive ofInterregnum, said: "The technology market's continuing improvement helped us to achieve recordgroup revenues. The combination of shrewd acquisitions, an advisory team withsignificant experience and increased firepower, position us well to takeadvantage of our growing pipeline. Our operating subsidiaries, CDS and Yospace,performed well during the period and, along with the recent acquisition of AVMfollowing the period-end, enhanced our capability in two of our four focussectors - Wireless and News & Entertainment. Our role as lead investor andfundraiser in the recently completed £2.3m investment round in Future Route addsfurther evidence of our work in the third of our chosen sectors - Security. Froman assets perspective, our portfolio grew in value again and post period endyielded dividends and interest totalling £800,000. "We are confident that the world's technology markets are set for a period ofcontinuing improvement. This positive environment plays to Interregnum'smerchant banking strengths. Creative people, a powerful global network ofcontacts and access to capital are in ever greater demand as technologyentrepreneurs seek to exploit the improved environment. "The hard work and careful execution of strategy which have sustained us throughthe last two difficult years are beginning to pay off, and we expect the currentpattern of growth to continue. As an expert technology merchant bank which buys,sells, advises invests in and operates winning businesses, we believeInterregnum offers investors unique access to today's technology market. - Ends - For further information, please contact: Interregnum 020 7494 3080Ken Olisa, Chairman & CEOMartin Cooper, Finance Director Merlin 020 7653 6620Vanessa Maydon 07802 961 902Rebecca Penney 07795 108 178 Attached: Chairman's Statement Profit & Loss Account Balance Sheet Cashflow Statement Notes to the Interim financial statement CHAIRMAN'S STATEMENT Q1: In your last results statement you predicted that the technology marketwould continue to recover. Were you correct? The early signs of life continued throughout 2004 and I am delighted to see thatthe trend has continued into 2005. Although in no way comparable to the excessexuberance of the late 1990s, the markets in the USA and Europe continue toimprove both in the older consolidating technology sectors and in the growingwireless/mobile world. You can see the evidence of increasing strength in theconsolidating sector from the major players' increased revenues and theheightened levels of M&A transactions. Meanwhile the energy and enthusiasm whichsurround the Apple iPod and the RIM Blackberry devices serve as pointers to theemerging Age of Ubiquity - a period in which some of the previously over-hypedareas such as 3G, home broadband, and on-line commerce achieve maturity. Q2: Can you quantify this apparent up-tick in the technology market? Yes; on the demand side, research carried out by IDC pegs worldwide IT spendingin 2004 at US$965 billion and forecasts that it will continue to grow by 6% perannum up to 2008. It is a little harder to measure supply side activity, but twostatistics serve to provide an indicator of the willingness of technologycompanies to engage in transactions which enhance their value. The volume of Initial Public Offerings (IPOs) provides a good indicator of stockmarket sentiment and in 2004, Regent Associates reported that technology IPOs inEurope numbered 88 up from 20 the year before and back to the pre-boom levels of1996 and 1997. Regent also reported that the Mergers & Acquisitions (M&A)environment is equally vibrant with over 2400 transactions involving Europeantechnology companies last year - a number as high as that achieved at themarket's peak year of 2000. Q3: What does this mean for Interregnum? Two things. Firstly, as the results show, we can translate an up-tick inspending from the demand side of the market - i.e. customers - into growth inour operating subsidiaries. Secondly, as things pick up, our traditional clientson the supply side find themselves in greater need of advice, which in turn,flows through to the growth in our advisory revenues. Q4: And how are you positioned to profit from this renewed energy? Increasingly well. There is no doubt that the last few years have been tough forInterregnum as they have for anyone involved in the technology world. Ourdecision to embrace the role of merchant bank has enabled us to adopt a moreflexible approach to the many opportunities that exist than would have beenpossible had we remained a traditional venture capitalist. Over recent monthsour work has been applied throughout the business lifecycle. We have helpedbuild plans for a variety of start-ups; we have raised seed capital for growingbusinesses and debt for established ones. We have brokered the sale ofestablished companies and undertaken acquisition target projects for ourclients. More directly we have invested in some of our clients, and we havebought and operated going concerns. All of these activities become moreimportant as the market pace increases and we feel that we have the people,services, track record and reputation to win more than our fair share of theopportunities that will emerge. Q5: I still don't really understand what you mean by "merchant bank" can youexplain? It is a slightly confusing term I admit, but it is the best description of whatwe do. In essence, the merchant banks of old carried out the kind of workdescribed in the last answer. But I have noticed that when I describe the detailof our work, the audience begins to lose the thread of my message - they get thefeeling that we are doing too many things. We're not. In many ways Interregnumis like a property developer. We find high potential assets and, using ourexpertise, we try either to derive a continuing income from them or we buy them,improve them and then sell them on at a profit. The shorthand way of describingus is as a creative group of expert professionals combined with a powerfulnetwork and access to capital - all targeted at buying, selling, advising,investing in and operating technology businesses, i.e. we are an intellectualproperty developer or, rather, a technology merchant bank! Q6: Back to your results - can you dig below the surface and give me a betterpicture of what is really happening? It's perhaps best to view Interregnum as consisting of three elements -advisory, investment and operating. Our advisory business, which grew by 56% in the first half, works with clientsat every stage from start-up to established. In that role we help them todevelop and execute their corporate strategy. This might mean helping them todefine the need for acquisitions, then finding the target companies and finally,negotiating the purchase; or it might mean helping to define their investmentneeds and then securing the necessary funds. Equally, it might mean, as we areat present, helping a large US real estate developer work out how to exploit thecomputer systems that are being specially designed to support their latestproperty development. Our investment activities are reflected in our portfolio which contains all ofthe equity which we have acquired. Here, we work with the investee companies'managers and our co-investors to develop and execute winning strategies. Thiscan involve a wide range of tasks from forging an alliance with a much biggercorporate partner, or introducing a company to a large potential customer, toseeking further funds for growth. Operating our subsidiaries is the third leg of the Interregnum stool. Currentlywe have three subsidiaries in sub sectors of the technology market which draw onour knowledge and contact network. Q7: These sound like three very different lines of business. Not really, they have a great deal in common. Success in each requires a deepknowledge of the technology market and of the financial ecosystem which supportsit. But equally, the knowledge, skills and abilities needed to support anadvisory client's sales strategy are identical to those which we would deploy tobuild revenues for one of our own subsidiaries. Working out the competitiveforces in a sector requires the same skill set whether we own all of thecompany, a minority of the company or merely advise it. Q8: Clearly one of your biggest assets is your portfolio - how is it valued? In keeping with most technology investors we value our portfolio in the accountsaccording to the guidelines issued by the British Venture Capital Association(BVCA). This means that we value our share of any company either at the lastfinancial event involving the company (investment, acquisition, etc) or, ifthere has been a significant change to the company's fortunes, a judgement hasto be made (and agreed with our auditors) which will result in marking theholding up or down. Q9: This sounds very conservative - if your intention is to sell your assets,you are unlikely to do so at the book value - what is the best way ofquantifying this potential value? We use the BVCA guidelines so that our portfolio can be compared to those ofother institutional investors using something approaching an equal footing.However, application of these guidelines does not always give a full picture ofthe value - or potential value - of these holdings. For example, the table belowcompares the current BVCA valuation with that obtained by applying to ourlargest holdings the range of revenue multiples used widely to value publiccompanies. Principal elements of the portfolio: Company Current 1x multiple 2x multiple 3x multiple valuation £000s CDS 1,558 5,100 10,200 15,300Respond 1,177 823 1,646 2,469Yospace 635 1,034 2,068 3,102Metapraxis 600 495 990 1,485Adaptive Inc 522 357 714 1,071AVM 530 2,270 4,540 6,810Total 5,022 10,079 20,158 30,238 NB: AVM was acquired post period end Q10: Looking at your balance sheet, you don't have a particularly large cashbalance - how will you fund operations and future investment? From three sources: cash generated from our own operations, realisation ofinvestment assets, and capital from our contact network. The power of thatnetwork was demonstrated by our success in raising £2m capital for Screen plc(now Petards Group: PEG) and Future Route. Q11: So the market is moving and you have a revitalised team to attack it - whatare your projections for the next twelve months? The technology sector will continue to recover as predicted by the spendingfigures I quoted at the beginning. Secondly, the consolidation of existingcompanies will continue as the larger players seek to create scale as a defencefrom the even bigger companies in our market - the mergers of PeopleSoft andOracle; and Symantec and Veritas are the beginning of a trend which will playout well beyond 2005. Meanwhile, as customers increasingly come to seetechnology as a way to achieve competitive advantage, they will demand access toinnovative solutions which naturally tend to come from smaller, nimblerentities. There is a large role for Interregnum to play as companies across thesize spectrum seek to makes sense of and then profit from the increasing marketmomentum. It has been a long time since we have seen such a positive environmentin which to buy, sell, advise, invest in and operate technology businesses. Thank you Ken OlisaChairman and CEO Portfolio Client % holding Carrying value before provisionsAdaptive, Inc 15% £522,000Blue Arc -* £18,000CDS 100% £1,558,000**Elite Strategies - £20,000Interregnum InvestmentPartners 100% £150,000Future Route 3% £250,000Kecrypt 8% £40,000Knowledge=Power - £0Metapraxis 15% £600,000Monactive - £0NanoMagnetics 7% £50,000Oilcats 2% £150,000Open Text - £36,000Plasmon - £0Respond 26% £1,177,000Speed-trap - £38,000Webscreen 6% £58,000Yospace 47% £635,000 £5,302,000 * - indicates a holding of less than 1%** Since CDS has been owned for less than 12 months, it has been valued at costin accordance with BVCA guidelines Consolidated profit and loss accountSix months ended 31 December 2004______________________________ Note Six months to Six months to Year to 31 December 31 December 30 June 2004 2003 2004 (unaudited) (unaudited) (audited) £000 £000 £000 Turnover 2 3,349 702 3,773_____________________________Cost of sales (756) - (746)________________________________________________________________________________Gross profit 2,593 702 3,027_____________________________ Administrative (3,365) (1,539) (4,675)expensesOther operating 53 38 108income________________________________________________________________________________Operating loss (719) (799) (1,540)_____________________________ Profit on sale of 3 181 575investmentProvisions released/(made) 194 266 345against investments in periodAmounts written off - - (95)investmentsNet Interest 7 73 63receivable _____________________________________Loss on ordinary activities (515) (279) (653)before taxation_____________________________ Taxation - - 102 Loss on ordinary activities after (515) (279) (550)taxation_____________________________ Minority interest 47 88 127 Retained loss for the (468) (191) (423)period_____________________________ Loss per share - basic 3 (0.51p) (0.29p) (0.56p)and diluted Consolidated statement of total recognisedgains and losses__________________________________________________ Six months to Six months to Year to 31 December 31 December 30 June 2004 2003 2004 (unaudited) (unaudited) (audited) £000 £000 £000 Profit/(loss) for (468) (191) (423)financial period Unrealised surplus on 27 548 452revaluation of fixed assetinvestments ___________________________________________Total recognised gains/(losses) (441) 357 29for the financial period ============================================ Consolidated balance sheet31 December 2004__________________________________________________ As at As at As at 31 December 31 December 30 June 2004 2003 2004 (unaudited) (unaudited) (audited) £000 £000 £000Fixed assets___________________________Intangible assets 1,628 510 1,651Tangible assets 334 216 386Investments 4 2,957 2,499 2,281________________________________________________________________________________ 4,919 3,225 4,318 Current assets__________________________Debtors 5 2,198 1,011 2,144Cash at bank and in hand 1,915 1,100 2,859 ________________________________________________________________________________ 4,113 2,111 5,003 Creditors: Amounts 6 (1,849) (573) (1,916)falling due in one year ________________________________________________________________________________Net current assets 2,264 1,538 3,087 Total assets less 7,183 4,763 7,405current liabilities__________________________ Creditors: Amounts falling due (1,549) (212) (1,281)after more than one year__________________________________________________________________________________________________________ Net assets 5,634 4,551 6,124================================================================================ Capital and reserves_________________________Called up share 4,620 3,272 4,621capitalShare premium 19,430 18,877 19,431Revaluation reserve 428 544 401Merger reserve (2,407) (2,407) (2,407)Profit and loss account (16,220) (15,565) (15,752)________________________________________________________________________________ Equity shareholders' funds 5,851 4,721 6,294 Minority shareholders'funds (217) (170) (170) 5,634 4,551 6,124================================================================================ Consolidated cash flow statementSix months ended 31 December 2004_____________________________ Note Six months to Six months to Year to 31 December 31 December 30 June 2004 2003 2004 (unaudited) (unaudited) (audited) £000 £000 £000 Net cash flows from 7 (534) (928) (1,493)operating activities Returns on investments and 12 67 103 servicing of finance Taxation 0 24 Capital expenditure and (584) 571 890financial investment Acquisition - - (685)________________________________________________________________________________ Cash outflow before use of (1,106) (290) (1,161)liquid resources andfinancing____________________________ Financing 139 106 2,726_________________________________________________ Decrease in cash (967) (184) 1,566================================================================================ Reconciliation of net cash flow Six months to Six months to Year to to movement in net debt 31 December 31 December 30 June__________________________________ 2004 2003 2004 (unaudited) (unaudited) (audited) £000 £000 £000 (Decrease)/increase in (967) (184) 1,566cash in the periodIncrease in debt financing and (127) (106) (1,371)lease financingLoans and finance leases 0 (19)acquired with subsidiaryLoan stock issued on 0 (400)acquisition of subsidiary __________________________________________Change in net debt (1,094) (290) (225) Net funds at 1 July 2004 953 1,178 1,177________________________________________________________________________________Net funds at 31 (141) 888 953December 2004 Notes to the Interim financial statementsFor the six months to 31 December 2004 ________________________________________________________________________________ 1 Basis of preparation _________________________________ The interim financial statements have been prepared on the basis of the accounting policies set out in the Group's statutory accounts for the year ended 30 June 2004, and are unaudited. The interim financial statements do not constitute statutory financial statements within the meaning of section 240 of the Companies Act 1985. Comparative figures for the year ended 30 June 2004 are an abridged version of the Group's full accounts which carry an unqualified audit report. 2 Turnover _______________________________ By geographical market Six months to Six months to Year to 31 December 31 December 30 June 2004 2003 2004 (unaudited) (unaudited) (audited) £000 £000 £000 United Kingdom 3,063 321 3,289 Other European 53 308 440 countries USA and Canada 135 65 28 Other 98 8 16 ___________________________________________________________________________ 3,349 702 3,773 =========================================================================== 3 Loss per share ______________________________ The calculation of basic earnings per share is calculated on a Group loss of £468,000 (6 months to 31 December 2003 loss of £191,000 and year to 30 June 2004 loss of £423,000) and a weighted average ordinary 5p shares in issue during the period of 92,425,254 (6 months to 31 December 2003 65,433,107 and year to 30 June 2004 75,461,656). Due to the loss of £468,000 (6 months to 31 December 2003 loss of £191,000 and 30 year to June 2004 loss of £423,000) there is no further dilution of the earnings or the number of shares 92,425,254 (6 months to 31 December 2002 65,433,107 and year to 30 June 2003 75,461,656) 4 Investments _____________________________ Cost 1st July 2004 2,281 Additions 458 Disposals (3) Release of provisions 194 Revaluation 27 ___________________________________________________________________________ 2,957 =========================================================================== 5 Debtors ______________________________ Six months to Six months to Year to 31 December 31 December 30 June 2004 2003 2004 (unaudited) (unaudited) (audited) £000 £000 £000 Trade debtors 1,353 454 1,073 Others debtors 595 321 715 Prepayments & accrued 250 136 304 income ___________________________________________________________________________ 2,198 911 2,092 Due in more than one 0 100 52 year ___________________________________________________________________________ 2,198 1,011 2,144 =========================================================================== 6 Creditors: Amounts falling due within one year _______________________________ Six months to Six months to Year to 31 December 31 December 30 June 2004 2003 2004 (unaudited) (unaudited) audited) £000 £000 £000 Short-term loans 400 0 614 Obligations under finance 0 0 11 leases and hire purchase contracts Trade creditors 648 267 522 Amounts fall due to 0 132 0 Group undertakings Corporation tax 0 0 12 Other taxes and social 305 62 262 security cost Other creditors 305 27 146 Accruals and deferred 191 85 349 income ___________________________________________________________________________ 1,849 573 1,916 =========================================================================== 7 Cash flows _____________________________ Six months to Six months to Year to 31 December 31 December 30 June 2004 2003 2004 (unaudited) (unaudited) (audited) £000 £000 Reconciliation of operating loss to net cash flow from operating activities Operating loss (719) (799) (1,540) Depreciation 129 52 176 Amortisation of 23 27 112 intangible fixed assets Movement in debtors 68 (2) (317) Movement in creditors (35) (206) 72 Loss on sale of 0 0 4 tangible fixed assets ____________________________________________________________________________ Net cash flow from (534) (928) (1,493) operating activities =========================================================================== Interim Statement _____________________________ Copies of the Interim statement will be available to the public free of charge from the Company's registered office: 22/23 Old Burlington St, London W1S 2JJ This information is provided by RNS The company news service from the London Stock Exchange