RNS Number:0515F
Capital Ideas PLC
23 June 2006
CAPITAL IDEAS PLC
Preliminary results for the 12 months ended 30 April 2006
Capital Ideas PLC ("Capital Ideas") is an investment company which invests in
private companies with sound business models, which are experiencing temporary
distress due either to financial or management issues.
Highlights
* Profits before tax of #301,000 (2005: Pre tax loss of #15,000)
* Deal flow remains strong
* Low overhead base maintained with management incentives based on
realised cash profits
* The portfolio operates in a number of high growth sectors including
debt, Eastern European property, SMS mobile marketing and high volume
vending
* Encouraging start to the new year with the acquisition of shares in a
hybrid low emission engine business in exchange for arranging the
refinancing and restructuring
* Europol, the company's debt management investment is moving into the IVA
(Individual Voluntary Arrangement) sector and is intending to float in due
course
* Arranging and financing the launch of a quoted turnaround vehicle in
which Capital Ideas will hold an equity interest
Commenting on the results, Renwick Haddow, chairman of Capital Ideas said
"I am delighted to report that our new strategy is beginning to bear fruit for
our shareholders. We have been able to identify a number of investment
opportunities in our first year. As a result we have not only realised some
strong gains but we hold investments in some exciting growth companies. We
believe that the "distressed company" niche in which we operate will continue to
offer good profit opportunities for us and have today announced new investments
including a specialised turnaround vehicle."
For further information
Renwick Haddow Tel: +44 (0) 207 623 3345
Zoe Biddick, Biddicks Tel: +44 (0) 207 448 1000
Chairman's statement
Introduction
I am pleased to be able to report on the Company's results for the twelve months
to 30 April 2006. Capital Ideas Plc ("Capital Ideas") achieved a profit before
tax for the period of #301,000 (2005: pre-tax loss of #15,000).
The board is pleased with the Company's progress since its change of strategy in
April 2005. Capital Ideas seeks to make investments into businesses that are
experiencing difficulties, whether they be management or finance related, but
which are otherwise sound. In order to maximise returns from these investments
Capital Ideas looks to add value to these companies through directly influencing
how these companies are managed and by the implementation of turnaround or
change strategies. This includes bolstering or replacing management, raising new
development or working capital, arranging debt or factoring finance,
implementing new marketing and sales strategies or instigating general
administration and accounting disciplines. Once turnaround is achieved, Capital
Ideas seeks to divest either prior to an Initial Public Offering ("Pre-IPO") or
upon admission of the investee company's equity to a market such as Ofex or AIM.
The current portfolio comprises seven investments. We have made successful
partial exits from three investments, twice more than recouping our initial
investment in full while retaining valuable equity. Total cash returns already
received exceed the total sum invested. In addition, we continue to receive
income from five of our investments.
The performance of our investment portfolio has been satisfactory and I have set
out the progress of each company's performance below. In addition we are very
pleased with the speed in which we have been able to partially exit three of our
investments.
The Company has had an encouraging start to the current financial year with the
acquisition of shares in a company called Traction Technology plc in exchange
for advising on the company's restructuring and refinancing. In addition,
Capital Ideas is assisting in the setting up and launch of a quoted turnaround
vehicle which will result in the Company receiving equity and management fees
for its endeavours.
The table below shows a summary of the investments Capital Ideas has made. The
net asset value at the year end was #394,000 or 0.17p per share at the year end.
Table of Investments
Original Investment
Company invested in Date of Equity Loan Original % of Proceeds Gross Current
Investment enlarged on part Profit Value of
capital disposal on Book Investments
acquired Value
Europol 16.05.05 5,000 25,000 15.0% 346,000 342,139 26,139
Europol 31.12.05 100,000 100,000
Forknall 21.09.05 6,667 15,000 13.0% 21,667
Miller 10.11.05 25,000 25,000 10.0% 50,000
Bfresh 28.11.05 30,000 3.0% 30,000
EEV 26.09.05 100,000 15.0% 50,000 37,879 87,879
Aerodeon 03.02.06 50,000 5.1% 70,000 57,907 37,907
Public Network 5,875 5,875
192,542 195,000 466,000 437,925 359,467
Europol International plc ("Europol")
Capital Ideas acquired a 15% equity interest in this company, including 5% share
options, in exchange for a total investment of #30,000 of which #25,000 was in
the form of a loan at 10% per annum repayable over 3 years. In addition Capital
Ideas has loaned #100,000 to Europol on similar terms to the original
investment. The business specialises in the repossession of leased assets, which
consists mainly of motor vehicles. The business is one of the leaders in its
field and benefits from a number of blue chip clients. The investment was made
as part of a management buy out and refinancing of a company called DMIPI. DMIPI
had previously lost a major customer and had gone into liquidation. Europol was
formed to acquire the assets of this established business. New management was
installed and a new marketing strategy put into place. The company has taken
time to turn round and has recently won a major customer which should add
significantly to the prospects for the business. The management of this company
is currently engaging advisors to list the company and has secured new working
capital to exploit further opportunities including entering the lucrative
Individual Voluntary Arrangement ("IVA") market. With debt in the UK running at
nearly #1.2bn this in the director's view is a good industry to be involved in
and it is likely that the Company will hold the majority of this investment
until after the company is admitted to a market.
Forknall Limited ("Forknall")
Capital Ideas invested #21,667 in Forknall Limited for an equity interest of
13%. The investment has been structured as a loan for #15,000 with a coupon of
9% per annum and the remaining #6,667 as equity.
Forknall, based in Leicester, is a manufacturer, supplier and installer of
fencing, balconies, internal balustrades and gates made from timber, steel and
concrete. The Company supplies these products and services to the house
building, Local Authority and other sectors, with a number of blue chip clients
including Wimpey and Bovis. The Company was previously known as RK Forknall &
Sons Ltd, had been operating since 1997 and was one of the leading manufacturers
in the Leicester area. Forknall however suffered from the effect of
'overtrading' and was unable to cope with a rapid increase in turnover. The
Company was placed into administration in August 2005 and was subsequently
purchased by a new company Forknall Limited with a funding package of #120,000
provided by the new management team and other external investors.
In the year to 31 March 2005 RK Forknall & Sons had sales of #2,448,797 with a
loss before tax of #68,037.
Since the investment was made, the Company has bolstered its management team and
concentrated on improving its sales and marketing functions. Forknall recently
secured additional funding which it will use to further develop the business. We
are very pleased with the turnaround of this company and the level of equity we
hold, given the small investment we made into this business. We believe that
this investment should produce income and capital growth. In the medium term we
expect to see the company growing by acquisition and exiting through a trade
sale or management buy back.
Eastern European Ventures plc ("EEV")
Capital Ideas acquired 15% of the issued share capital of recently established
company Eastern European Ventures plc ("EEV") for a consideration of #100,000.
EEV was created in order to purchase undervalued properties in Eastern Europe.
EEV subsequently acquired a significant stake, on favourable terms, in a UK
company which owns a portfolio of property investments based in Bulgaria. Prior
to EEV's investment, the business had been experiencing financial difficulties
resulting from certain management issues. With properties located in prime
locations including the Black Sea coast, ski resorts of Bansko and Pamporavo and
the capital, Sofia, the company benefits from a varied property portfolio. EEV
has indicated its intention to float on AIM in due course. Capital Ideas has
already exited part of this investment and will look to exit the remaining
investment close to the planned flotation. EEV's management team is currently
negotiating to increase its equity interest in the UK based Bulgarian property
business which would enhance the asset backing of the Company.
Phoenixchurch Limited t/a Miller Consulting ("Miller")
Capital Ideas has invested #55,000 into Phoenixchurch Limited t/a Miller
Consulting through a combination of loan and equity. The investment has been
made in the form of a #30,000 loan repayable over 2 years with an interest rate
of 5%, of which #5,000 has been repaid in the year, and the purchase of 15% of
the share capital for a consideration of #25,000. Miller Consulting is a leading
player in the mechanical and electrical engineering consultancy industry,
although the absence of proper management constraints and procedures meant the
company experienced financial difficulties in 2004/5 due to over expansion.
Phoenixchurch Limited acquired the assets and goodwill of Miller Consulting from
the Administrator and has restructured and strengthened the administrative side
of the business. The business has continued to win new business and is currently
operating at close to break even, while looking to make acquisitions in order to
gain critical mass before seeking a listing. We are intending to hold this
investment until the company is in a position to float. We are pleased with the
progress being made.
Bfresh Limited ("Bfresh")
Capital Ideas has invested #30,000 by way of a convertible loan at an interest
rate of 10% per annum. An interest payment of #5,000 is also receivable upon
conversion. Bfresh is an operator of vending machines located in health clubs
and hotels. It currently has over 500 machines at various blue chip sites
including national chains such as David Lloyd, Fitness First and JJB Sports. The
company vends miniature toiletries and is growing its business rapidly and
expects to install a further 300 machines by 31 December 2006. The funds are
being used to help fund this expansion. Bfresh has also recently acquired
significant equity interests in two other vending machine businesses and is
close to finalising further expansion capital which will see the company migrate
to Ofex or AIM as a vending consolidator.
Aerodeon Holdings plc ("Aerodeon")
Capital Ideas invested #50,000 to acquire an equity interest of 5.08% or
4,134,644 shares in Aerodeon Holdings plc. With offices in London, Paris, New
York and Istanbul, Aerodeon is the world's leading mobile phone marketing and
advertising agency, specialising in short message service (SMS/Text) marketing
for major blue chip clients. The Company has delivered campaigns for Diageo,
Proctor and Gamble and Nestle and has promoted leading brands including Kit Kat,
Haagen Dazs and L'Oreal Fructis via SMS.
Aerodeon was established in 2000 and has been profitable every year since its
inception. The company is using its new funding to further expand the business,
capitalising upon its good reputation within its industry. Aerodeon operates in
a high growth area of the advertising market and the new investment is expected
to lead to growth of the business. Capital Ideas has already exited #12,093 of
this investment for proceeds of #70,000.
Future Projects
Since the year end Capital Ideas has completed one further transaction and is in
the process of establishing a quoted turnaround vehicle in which the Company
will secure an equity stake and management fees in recognition of its efforts.
Traction Technology plc ("Traction")
Traction is a leading hybrid developer and manufacturer of low emission engines.
The company purchased the assets of the business from Enenco Ltd which went into
administration due to of poor management. Capital Ideas, along with a consortium
of other investors, arranged the re-financing and restructuring of this company
installing new management (the former CEO of Aston Martin and Range Rover as
Chairman) and raising new capital. The company is running trials with Transport
for London where it is at an advanced stage with trials in London buses. This is
a very lucrative business which is being driven both from an ethical perspective
and by EU regulations being implemented in 2007. Capital Ideas has been granted
0.5% of the equity in this business in exchange for assisting in the
restructuring and refinancing of the business.
Turnaround Capital plc
Capital Ideas is a founder investor in a company currently being established to
invest in 'turnaround' situations. It is expected that this company will shortly
be floated and that Capital Ideas will be allocated equity for its role in
establishing this company together with a management fee based on the
performance of the company. This is an exciting opportunity for us as it allows
Capital Ideas to co-invest in future investments, thereby increasing its 'fire
power' and the size of the equity interests it is able to negotiate. Turnaround
Capital plc was previously known as Public Network plc.
Outlook
The future of the company is dependent on sourcing investment opportunities with
good growth potential at attractive valuations where our board is able to
influence both the management of the investment and the exit in order to achieve
a strong uplift in value. In order to maximise returns when investing in small
unquoted companies, it is crucial to be able to manage the exit strategy. To
date, we have experienced success in following this strategy and we will
continue to search for investment opportunities in attractive high growth
sectors which will appeal to investors when we exit our investments. We are
confident that we will continue to find suitable investment opportunities which
meet these criteria.
Renwick Haddow
Chairman
Consolidated profit and loss account for the year ended 30 April 2006
Year Year ended
ended 30 April
30 April 2005
2006 #000
#000
Turnover 438 -
Cost of sales (46) -
------- -------
Gross profit 392 -
Administrative expenses (100) (15)
------- -------
Operating profit/(loss) 292 (15)
Loss on disposal of operations (4) -
Interest payable and similar charges - -
Interest receivable and similar income 13 -
------- -------
Profit/(loss) on ordinary activities before taxation 301 (15)
Tax on profit on ordinary activities (34)
------- -------
Retained profit/(loss) for the financial period 267 (15)
======= =======
Earnings per ordinary share
Basic and fully diluted 0.12p (0.01)p
======= =======
None of the Group's operations were acquired or discontinued during the current
and previous years.
Consolidated statement of total recognised gains and losses for the year ended
30 April 2006
There are no recognised gains or losses for the current year or preceding period
other than the loss shown in the profit and loss account above.
Consolidated balance sheet at 30 April 2006
2006 2005
#000 #000
Fixed assets
Investments 164 -
Current assets
Debtors 281 4
Cash at bank and in hand 16 41
------ ------
297 45
Creditors: amounts falling due within one year (67) (47)
------ ------
Net current assets/(liabilities) 230 (2)
------ ------
Total assets less current liabilities 394 (2)
Creditors: amounts falling due after more than one year - -
------ ------
Net assets/(liabilities) 394 (2)
====== ======
Capital and reserves
Called up share capital 1,410 1,360
Share premium account 1,093 1,014
Profit and loss account (2,109) (2,376)
------- -------
Equity shareholders' funds 394 (2)
======= =======
Capital Ideas PLC
Consolidated cash flow statement
for the year ended 30 April 2006
Year ended Year ended
30 April 30 April
2006 2005
#000 #000
Net cash inflow/(outflow) from operating activities 37 (5)
Returns on investments and servicing of finance 13 -
Capital expenditure and financial investments (164) -
Acquisitions and disposals (4) -
-------- --------
Cash outflow before financing (118) (5)
Financing 93 45
-------- --------
(Decrease)/increase in cash in the period (25) 40
======== ========
Reconciliation of net cash flow to movement in net funds for the year ended 30
April 2006
Year ended Year ended
30 April 30 April
2006 2005
#000 #000
(Decrease)/increase in cash in the period (25) 40
Repayment of capital element of finance leases - -
-------- --------
Change in net debt resulting from cash flows (25) 40
Other - -
-------- --------
Movement in net debt in the period (25) 40
Net funds at the start of the period 41 1
Net funds at the end of the period 16 41
======== ========
Notes
1. Loss on disposal of operations
Upon disposal of The International Academy Plc on 22 August 2003, it was agreed
that the company would receive a deferred consideration based on the future
performance of The International Academy Plc. During the year this consideration
was renegotiated to a single sum of #50,000. This income was off-set by a
warranty claim by the purchaser of The International Academy Plc for #48,000 in
respect of taxation, plus #6,000 of professional fees resulted from the claim.
The net effect of these was a #4,000 loss on the disposal of the operation.
2. Earnings per ordinary share
The calculation of basic earnings per share is based on profits of #282,000
(2005: Loss of #15,000) and ordinary shares of 215,297,222 (2005: 135,115,272
shares) being the weighted average number of ordinary shares in issue during the
period. The 0.9p deferred shares issued in the year do not have rights to either
dividends or the assets of the company and have therefore been discounted from
the weighted average calculation.
The profit for the period and the weighted average number of ordinary shares for
the purposes of calculating the fully diluted earnings per share are the same as
for the basic earnings per share calculation. This is because exercise of the
outstanding warrants would have no effect on the calculated earnings per
ordinary share and would therefore not be dilutive under the terms of Financial
Reporting Standard No. 22 (FRS 22).
3. Annual Report
The annual report and accounts will be posted to shareholders on 26 June 2006
and will be available thereafter for a period of one month for members of the
public, free of charge, at the company's registered office, 4 Sovereign Court,
Graham Street, Birmingham B1 3JR.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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