TIDMDESC
RNS Number : 9207V
Designcapital PLC
18 January 2013
18 January 2013
designcapital plc
("designcapital" or the "Group")
Interim Results for the six months ended 30 June 2012
designcapital plc, the AIM listed investment company dedicated
to high end contemporary furniture design, announces its unaudited
consolidated results for the six months ended 30 June 2012.
CURRENT FINANCIAL POSITION
Following the changes and restructuring detailed below, the
Company is now organised as an investing Company, with minority
interests in invested companies.
This restructuring has not only allowed it to reduce overhead
and administration costs, but also to implement better risk
management of the invested companies.
As an investing company, designcapital plc will derive revenues
through a mix of interest received on shareholders loans and
funding facilities provided to portfolio companies and also through
fees generated by allowing the portfolio companies the use the
intellectual property rights on internet sites, design models and
designers contracts that are owned by designcapital plc. Additional
fees are expected to be generated from the provision of strategic
and financial advisory services to be provided to
designcapital*finance, in parallel with the commercial development
of this new business unit.
These revenues are expected to allow the Company to cover its
running costs and generate positive cash flows.
The Company will also retain the option of funding itself
further by establishing loans backed by assets and other related
debt financing products, which may complement, as appropriate, the
Company's ability to issue equity at the level of both the invested
portfolio companies and also the Company.
On 20th December 2012, the Company secured a GBP25,000
subscription for new ordinary shares which are being issued at 10p
per share. This private investor has also joined the Board of
Artelano International Ltd. Notwithstanding this cash subscription,
the Company's financial position remains weak, and it is currently
unable to pay its creditors on time.
Discussions with Luxury Investments S.A., a significant
shareholder, have resulted in renegotiated terms for the two loans
made available to the Company on 26 June 2009 and 11 June 2010
respectively whereby the repayment of the loans will not be
required before 31 December 2013. Further discussions are ongoing
and the Directors have a reasonable expectation that they will
reach an agreement with Luxury Investments S.A. whereby both
parties agree to ensure that the working capital requirements of
the Group are not threatened.
On 27th December 2012, Frédéric Bobo, a Director of the Company,
provided the Company with an extension of a working capital support
of up to GBP150,000, to be drawn down by the Company should the
Company need additional funds. The Company has already drawn on
this support over 2012 and it is likely that it will continue to
draw down on this working capital support unless further cash
subscriptions for new ordinary shares in the Company or revenues
from operations are received.
Trading in the Company's shares is currently suspended and the
suspension will remain pending implementation of its investing
policy. If the Company has not implemented its investing policy by
25 February 2013, the Company's listing on AIM will be cancelled
pursuant to AIM Rule 15. A further announcement will be made in due
course.
Designcapital plc EXECUTIVE CHAIRMAN'S STATEMENT
I am pleased to present the Company's Interim Results for the
six months ended 30 June 2012
designcapital plc (the Company) was incorporated in June 2007,
and was admitted to AIM on 21 January 2008, with the strategic
objective of becoming a major pan-European design-focused
investment company.
We were admitted to the AIM market during one of the most
difficult periods in living memory, with great uncertainty as to
the impact of the "credit crunch", the banking crisis, as well as
energy prices and raw material costs, on economic activity.
There were also significant uncertainties as to whether these
pressures could be managed by the world's monetary authorities
without triggering a deeper recession or a sharp rise in
inflation.
The most immediate consequences of the economic crisis that has
dominated since 2008, and continues to the present day, has been a
sharp contraction in credit, a downturn in economic activity and a
worldwide slowdown in most of the industry sectors, including the
high-end furniture design industry.
Amidst this very difficult economic background, which affects
most of the major markets in which the Company's investment targets
operate, the Company has moved quickly to restructure its trading
activities and to adopt a strategy appropriate for the adverse
market conditions that it expects to continue for the foreseeable
future.
In June 2010, after 24 months of restructuring within the
intricate and cumbersome framework of French labour regulations,
both our Paris based subsidiaries, Artelano, involved in the
edition of high-end contemporary design furniture, and Forum
Diffusion, a multi-brand retailer of high-end design furniture to
the contract and office markets, were allowed to exit their
restructuring status and to operate again within the normal
commercial markets.
As highlighted in the interim results for the Group at June
2010, the obligation placed on our subsidiaries by the French
courts to remain under the restructuring status for the maximum
period of "Redressement Judiciaire" allowed by the French law, had
seriously compromised the Company's ability to bid for business in
their strategic market segments such as banks, public institutions
and large multinational companies.
In June 2010 the operating cost base of both companies was
running significantly below 2009 levels, and like for like figures
demonstrated the overall progress that we had made in the first
half of the year as we continued to restructure the businesses,
reduce costs and improve operational efficiencies within the
logistics side of the business.
Forum Diffusion's business has been refocused on the more
profitable contracts market. The show-room of the company,
structurally loss-making, was sold in June 2010 for EUR1.1m after
costs. This strategy began to produce results as, in September
2010, the Company had identified and targeted more than EUR7.5m
worth of projects; bids worth EUR3.2m were being assessed by
clients, and EUR1.2m worth of orders had already been contracted
for delivery before the end of the year.
In September 2010, we had also re-orientated our Artelano
business around its show-room and contract activities and our
strategy was to present new higher-end products to clients, and to
work on the opening of the first international show-room of
Artelano in Mayfair, London.
Notwithstanding the progress brought about through the
restructuring, the opportunities that were being identified, most
notably at Forum Diffusion, which supported a reasonable
anticipation of growth in our French subsidiaries during 2011,
subsequently suffered from delays and were ultimately contracted
with very thin margins.
The worsening economic conditions that we had started to
identify in the latter part of 2010, and the near term business
focus that resulted from these extra-ordinary market conditions,
prompted us to re-consider the business model and markets that we
were active in.
Following the transfer of the Artelano brand and contracts with
designers to designcapital plc in London, it had become
increasingly apparent to us that maintaining the operations of
Artelano S.A. in Paris, which had undergone an 18 month
restructuring under the French "Redressement Judiciaire" process,
had neither operational or strategic value to the Group.
Following careful consideration, it was decided to cease the
trading activities of Artelano S.A. as soon as was practicable and
on 17 May 2011 the liquidation commenced.
Responsibility for the international development of the Artelano
brand had previously been re-located to London to be driven and
managed through Artelano International Ltd ("Artelano
International"), designcapital's UK subsidiary with its head office
in London.
The liquidation of the business resulted in a termination of the
restructuring plan agreed as part of the "Redressement Judiciaire"
process, which included the obligation to repay historical "frozen"
trade liabilities amounting to approximately GBP1.9 million. Given
the losses reported during the year ended 31 December 2010,
together with the expected level of future losses, this resulted in
a non-cash provision being made against designcapital's investment
in Artelano S.A. of GBP1.8 million plus intra group receivables of
GBP0.9 million in the Company's financial statements for the year
ended 31 December 2010. The goodwill impairment in the Group
Financial Statements in 2010 regarding Artelano S.A. was GBP1.2
million.
During the early part of 2011, and despite the fact that Forum
Diffusion had gained a number of significant orders, the market
started to deteriorate further and more quickly.
In the light of this deterioration the Forum Diffusion
restructuring plan was reviewed. As part of the "Redressement
Judiciaire" process, Forum Diffusion S.A. was obliged to repay
historical "frozen" trade liabilities amounting to approximately
EUR4.5 million over a ten year period, however the Company
concluded that in the current global economic environment, the
restructuring plan was not reasonably achievable.
Following careful consideration, it was decided to cease the
trading activities of Forum Diffusion s.a.s. and of Forum
Developpement s.a.s. as soon as practicable. The liquidation of
Forum Diffusion commenced on 25 August 2011.
The winding up of the Forum Diffusion business resulted in a
termination of the restructuring plan agreed as part of the
"Redressement Judiciaire" process, including the obligation on
Forum Diffusion s.a.s. to repay the residual historical "frozen"
trade liabilities amounting to approximately EUR4.5 million.
This resulted in a non-cash provision being made against
designcapital's investments in Forum Diffusion s.a.s and Forum
Developpement s.a.s of GBP1.7 million plus intra group receivables
of GBP0.2 million in the Company's Financial Statements for the
year ended 31 December 2010. The goodwill impairment in the Group
Financial Statements relating to Forum Diffusion s.a.s. and Forum
Developpement s.a.s. was GBP1.4 million.
Financial Performance
Consolidated revenues for the six months to 30 June 2012 were
GBPnil (2011- GBP40,666).
After taking account of finance income, finance costs and
taxation, the retained loss attributable to shareholders was
GBP185,121 (2011 - GBP876,358).
Outlook
designcapital was established to act as a consolidator within
the European design space.
The recession, lack of credit for smaller businesses and the
fact that the entrepreneurs behind many businesses which started in
the late 1960's and 1970's are now reaching retirement age without
natural successors, together with the impact of e-commerce and of
the internet on high-street furniture show-room businesses, means
that in a fragmented and difficult market there are numerous
opportunities.
Whilst 2009 and 2010 were years in which designcapital worked to
establish the foundations for creating a profitable growth business
and secure acquisition opportunities within a reasonably steady
market environment, the economic crisis that continued to develop
and expand throughout 2011 is likely to have negative implications
for the foreseeable future has prompted us to reconsider our
strategy and to adapt to the new and medium term market
conditions.
That said, the Board of designcapital maintains its vision and
despite the current market environment and overall economic
outlook, believes that within the medium term, the Group can begin
generating an attractive margin on solid revenues, from a business
model based upon a combination of the procurement of high-end
design furniture for business to business (B2B) and contract
clients; classic e-commerce distribution of high-end design
furniture brands such as Artelano to consumers (B2C); and the
provision of financial and other services serving clients and
brands of the high-end design furniture industry.
We have a wealth of experience and an excellent practical
understanding of the marketaided in part through the
restructuringof our French operations.
As a result we have decided to adapt our investing strategy, and
while the Directors intend that the Company will continue to make
investments in target businesses at all development stages save for
start-up businesses, the investment strategy shall not prevent the
Company from investing in businesses, projects or activities, that
are an adjunct to or a logical extension of existing businesses
projects or activities of the Company's portfolio investments, and
as such have the potential to create value for Shareholders.
To that extent a significant proportion of the Company's assets
will continue to be invested and managed, both directly by the
Company, but also through the creation of investment vehicles in
respect of which the Company will delegate the management.
While the Directors will continue to actively monitor any
investments or acquisitions made by the Company, neither they nor
the Company shall take part in the day to day management of the
underlying investments, unless required by law or by special
situations. Notwithstanding this, the Directors of the Company, or
the Company itself represented byone or several Director(s), are
permitted to participate in the Boards, or equivalent corporate
governance bodies, of any investments or acquisitions made by the
Company.
There are no restrictions in the type of investment that the
Company might make nor on the type of opportunity that may be
considered other than set out above.
Business Strategy
The term "Group" has been used in describing the business
ofdesigncapital plc, whose strategic objective is to create a
portfolio of integrated companies that are managed accordingly.
This description is not intended to infer any management
responsibility between the Directors of designcapital and the
investments, although in accounting terms they have been accounted
for as subsidiaries.
Artelano (International) Ltd
The Artelano trade-mark was re-registered in the name of
designcapital in 2010 and Artelano(International) Ltd, a company
headquartered in London and then 100% owned by the Company, was
given responsibility for the overall strategy of the brand and for
the selection of designers and products, as well as for global
brand marketing and communications.
The manufacture of Artelano products stopped in the middle of
2011 to allow for the implementation of the new business model.
Taking account of the market conditions, we believe that this
temporary suspension of the business has allowed us to reduce costs
and preserve cash, without damaging the brand.
A new general manager was recruited for Artelano International
Limited in the first months of 2012 and, with an equity interest in
Artelano International Ltd, will continue to manage the overall
strategy of the brand.
All other non-core activities will be sub-contracted or licensed
to strategic partners, through long-term contracts:
-- The brand will not be distributed through wholesale networks,
but rather through direct distribution channels, contract or B2B
channels and a show-room located in London;
-- The distribution strategy for the B2C segment is focussed on
a new e-commerce enabled internet site that will go live as soon as
possible, first in France and subsequently in the UK, to allow fast
entry into the main European markets;
-- The management of the internet site will be licensed to an
existing internet venture that manages brand sites;
-- This distribution strategy allows the Group to better
position and manage the brand's pricing strategy and to decrease
the retail price to clients by 25% on average, compared to retail
prices of the same or similar Artelano product previously sold
through classic show-rooms;
-- The new distribution strategy also facilitates a strong
affiliation programme internationally and in other markets where
the brand will have market presence;
-- The production of our products, instead of being spread
between a variety of small artisan manufacturers located mostly in
Italy will, in the future, be managed in partnership with another
editor of high-end furniture. This partnership will allow the Group
to generate immediate economies of scale and to mutualise
transportation, warehousing and ancillary costs;
-- The product range of Artelano, which was previously
considered to be niche, too "designer" and unrealistically
expensive, has gained breadth and depth by the addition of new
designers and products which adds a more contemporary, classic
style "twist" to the brand;
-- A range of products exclusively aimed at the contract market
is also being developed to better answer the needs of this market
segment.
Exclusive licencing agreements have already been established for
North America, the Middle East and North Africa (MENA) with
companies whose managers will take responsibility for the local
marketing and promotion, distribution and other logistics. These
agreements may transfer into capital partnership once appropriate
performance results have been achieved.
To facilitate the re-establishment of Artelano International in
the market, the brand owned by designcapital was sold subsequent to
the year end and the Company's interest in Artelano International
reduced to 30% in favour of MAK Designs, an existing commercial
partner of Artelano International with a vested interest in
developing the business.
designcapital now has a strategic investment in Artelano
International and also retains ownership of the designers'
contracts and the related Intellectual Property.
HOMECREA sarl
The e-commerce business of the Artelano brand(www.artelano.co)is
to be managed by local partners, through the establishment of
long-term licence contracts for the distribution of designcapital's
products. The first such licence agreement was signed with Homecrea
s.a.r.l. for the French market in January 2012 and negotiations are
advancing with another internationalpartner for a number of
additional countries.In order to establish the relationship with
Homecrea s.a.r.l., a 20% shareholding was acquired by designcapital
in September 2012, a Paris based company that, until recently, had
been operating various e-commerce sites offering decoration
products and design furniture.
This participation was acquired from M. Théodore d'Alberti, a
minority investor of Homecréa who will not hold further interests
into Homecréa pursuant to the transaction. This participation was
acquired for a 35 000 EUR consideration, paid by way of an
allotment of 273 000 ordinary shares of the Company, issued at a
price of 10p per share.
This acquisition will allow the other investee companies of
designcapital to access, on a remunerated basis, the database of
700 000 client e-mail addresses today actively managed by Homecréa,
and to establish the bases of the e-commerce business of the
Artelano brand.
B2B e-procurement platform (Deezplay.com)
With the initial scoping and design work having been completed
in conjunction with Forum Diffusion, the next development stages of
the B2B platform are currently being negotiated with an operator
active in the internet and e-commerce market. Once the agreement is
finalised, the deezplay.com e-procurement platform will be run
under a joint venture arrangement.
Deezplay.com is expected to become the first B2B platform for
the distribution of high-end designer furniture and is an extension
of the work previously undertaken by the Forum businesses in
Paris.
Designcapital*finance
Designcapital*finance is an initiative developed through the
trading experiences of Forum Diffusion. The Directors believe it
will provide a complementary business set up as an adjunct to
designcapital's distribution businesses, the purpose of which is to
firstly provide a solution to the problem of funding non-strategic
assets and secondly to secure long term relationships with clients
for the on-going sale of furniture and provision of related support
services. The financing element will be sub-contracted to experts
in the field of asset finance and sales and will be managed out of
the Company's established distribution businesses.
Designcapital*finance is expected to be incorporated in France
in early 2013 with designcapital plc owning 20% of the share
capital. A Managing Director with appropriate experience has been
recruited for the business and a number of opportunities have
already been identified.
2010 and 2011 to date have been periods of significant change
during which actions were taken to refocus designcapital's business
and to ensure the long term future and success for its
shareholders. New distribution channels are being established
through which the Groups products can be sold and on terms that
reduce the risk and costs of distribution. Manufacturing and
logistics have been outsourced further reducing the fixed costs of
the Group.
As a result of the restructuring and liquidation of the French
subsidiaries during 2011, the Group's obligation to pay trade
liabilities frozen under the "Redressement Judiciaire" process
totalling approximately EUR6.1 million have been terminated.
Finally, as a result of the actions taken, the Group now has a
cost base considerably lower than during the years 2010 and 2011,
and, with the significant proportion of cost being incurred on a
variable basis, the level of sales required to achieve a profit and
to generate cash is a fraction of that required in previous
years.
Board of Directors
As the business moves towards delivering its new strategy, a
number of complimentary appointments will be made to strengthen the
Board.
In particular, expertise will be required in support of the
development of the North American and Middle East markets, as well
as in the key area of brand and product development.
Allotment of shares
The Company announces that a total of 273,000 new ordinary
shares of designcapital have been allotted to M. Théodore
d'Alberti.
Application will be made to the London Stock Exchange for these
273,000 new shares, ranking pari passu in all respects with the
existing shares in issue, to be admitted to trading on AIM once the
current suspension of the Company's shares has been lifted.
Following this allotment the Company will have 71 733 401 shares
in issue.
Frederic Bobo
Executive Chairman
18 January 2013
For further information:
Contacts:-
designcapital plc
Frederic Bobo, Executive Chairman
Mike Hosie,
Chief Financial Officer +44 20 7554 8555
Libertas Capital Corporate
Finance Limited
Sandy Jamieson
Tim Cofman +44 20 7569 9650
designcapital plc CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
For the six monthsended 30 June 2012
Six months Six months
ended ended
30 June 30 June
2012 2011
Note (unaudited) (unaudited)
GBP GBP
Revenue - 40,666
Cost of sales - (18,318)
------------- -------------
Gross Profit - 22,348
Other income 9,710 -
Administrative and other operating
expenses (120,856) (557,455)
Exceptional Costs - (257,979)
------------- -------------
Operating Loss (111,146) (793,086)
Finance income - -
Finance costs (73,975) (83,272)
------------- -------------
Loss before Tax (185,121) (876,358)
Taxation 3 - -
------------- -------------
Retained Loss for the Half Year
attributable to Equity Shareholders (185,121) (876,358)
============= =============
Other Comprehensive Income
Exchange differences on translating
foreign operations - -
------------- -------------
Other Comprehensive Income for
the Half Year, Net of Tax (185,121) (876,358)
------------- -------------
Total Comprehensive Loss for
the Half Year attributable to
Equity Shareholders (185,121) (876,358)
============= =============
Basic Loss per Share
(pence per share) attributable
to Equity Shareholders of the
Company 4 (0.26) (1.28)
============= =============
designcapital plc CONSOLIDATED BALANCE SHEET
Company Number: 06290400 As at 30 June 2012
As at As at As at
30 June 30 June 31 December
2012 2011 2011
(unaudited) (unaudited) (audited)
GBP GBP GBP
ASSETS
Non-Current Assets
Property, plant and equipment 1,416 168,003 2,376
Intangible assets - 1,969 -
Goodwill - - -
Other receivables 189,444 162,973 -
Deferred income tax assets - 47,273 -
----------------- ---------------- ------------
Total Non-Current Assets 190,860 380,218 2,376
----------------- ---------------- ------------
Current Assets
Inventories - 461,148 -
Trade and other receivables 19,980 936,138 269,509
Cash and cash equivalents (16,202) 338,072 774
----------------- ---------------- ------------
Total Current Assets 3,778 1,735,358 270,283
----------------- ---------------- ------------
TOTAL ASSETS 194,638 2,115,576 272,659
----------------- ---------------- ------------
EQUITY AND LIABILITIES
Shareholders' Equity
Ordinary shares 5 7,161,040 7,028,222 7,083,222
Share premium 210,471 204,089 204,089
Shares to be issued - - -
Other reserve - 6,211 -
Retained earnings (9,605,683 (14,015,326) (9,420,562)
----------------- ---------------- ------------
Total Equity - Capital and Reserves (2,234,172) (6,776,805) (2,133,251)
----------------- ---------------- ------------
Non-Current Liabilities
Trade and other payables - 3,407,160 -
Borrowings - 278,940 -
Provisions for other liabilities and charges - 477,243 -
----------------- ---------------- ------------
Total Non-Current Liabilities - 4,163,343 -
---------------- ------------
Current Liabilities
Trade and other payables 826,289 3,012,204 825,117
Borrowings 6 1,602,521 1,630,798 1,580,793
Provisions for other liabilities and charges - 86,036 -
---------------- ------------
Total Current Liabilities 2,428,810 4,729,038 2,405,910
----------------- ---------------- ------------
Total Liabilities 2,428,810 8,892,381 2,405,910
---------------- ------------
TOTAL EQUITY AND LIABILITIES 194,638 2,115,576 272,659
----------------- ---------------- ------------
designcapital plc CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
For the six months ended 30 June 2012
Share Share Translation Retained
Capital Premium Reserve Losses Total
GBP GBP GBP GBP GBP
Balance as at 1 January
2012 7,083,222 204,089 - (9,420,562) (2,133,251)
---------- --------- ------------ ------------- ------------
Comprehensive income
Loss for the period - - - (185,121) (185,121)
Other comprehensive income
Currency translation differences - - - - -
---------- --------- ------------ ------------- ------------
Total comprehensive income - - - (185,121) (185,121)
---------- --------- ------------ ------------- ------------
Transactions with owners
---------- --------- ------------ ------------- ------------
Issue of ordinary shares 77,818 6,382 - - 84,200
---------- --------- ------------ ------------- ------------
Balance as at 30 June
2012 7,161,040 210,471 - (9,605,683) (2,234,172)
========== ========= ============ ============= ============
Balance as at 1 January
2011 6,630,085 196,816 6,211 (13,138,968) (6,305,856)
---------- --------- ------------ ------------- ------------
Comprehensive income
Loss for the period - - - (876,358) (876,358)
Other comprehensive income
Currency translation differences - - - - -
---------- --------- ------------ ------------- ------------
Total comprehensive income - - - (876,358) (876,358)
---------- --------- ------------ ------------- ------------
Transactions with owners
---------- --------- ------------ ------------- ------------
Issue of ordinary shares 398,137 7,273 - - 405,410
---------- --------- ------------ ------------- ------------
Balance as at 30 June
2011 7,028,222 204,089 6,211 (14,015,326) (6,776,804)
========== ========= ============ ============= ============
Balance as at 1 July 2011 7,028,222 204,089 6,211 (14,015,326) (6,776,804)
---------- --------- ------------ ------------- ------------
Comprehensive income
Profit for the period - - - 4,594,764 4,594,764
Other comprehensive income
Currency translation differences - - (6,211) - (6,211)
---------- --------- ------------ ------------- ------------
Total comprehensive income - - - 4,594,764 4,588,553
---------- --------- ------------ ------------- ------------
Transactions with owners
---------- --------- ------------ ------------- ------------
Issue of ordinary shares 55,000 - - - 55,000
---------- --------- ------------ ------------- ------------
Balance as at 31 December
2011 7,083,222 204,089 - (9,420,562) (2,133,251)
========== ========= ============ ============= ============
designcapital plc CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2012
Six months Six months
ended ended
30 June 2012 30 June 2011
(unaudited) (unaudited)
GBP GBP
Cash Flows from Operating Activities
Loss before taxation (185,121) (876,358)
Adjustments for:
Depreciation of property, plant and
equipment 959 1,161
Amortisation of intangible assets - -
(Profit)/Loss on disposal of fixed
assets - 20,851
Finance income - (1,777)
Finance expenses 73,975 78,511
Movement in provisions for liabilities - -
and charges
Foreign Exchange movement (26,904) 33,614
------------- -------------
Operating Loss before Changes in Working
Capital (137,091) (743,998)
Decrease in inventories - 18,033
Decrease in trade and other receivables 60,086 182,087
Increase in trade and other payables 1,172 127,335
Net Cash Outflow from Operating Activities 61,258 327,455
------------- -------------
Cash Flows from Investing Activities -- -
Purchase of property, plant and equipment - -
Proceeds from sales of property, plant - -
and equipment
Purchase of intangible assets - -
Interest received - -
------------- -------------
Net Cash Inflow/(Outflow) from Investing - -
Activities
------------- -------------
Cash Flows from Financing Activities
Proceeds from issuance of ordinary
shares 84,200 406,579
Net movement in borrowings - 4,264
Interest paid - -
------------- -------------
Net Cash Inflows from Financing Activities 84,200 410,843
------------- -------------
Increase/(Decrease) in Cash and Cash
Equivalents 8,367 (5,700)
Effect of Foreign Exchange Rate Changes - -
Cash and Cash Equivalents at Beginning
of Period (24,569) (5,828)
------------- -------------
Cash and Cash Equivalents at End of
Period (16,202) (11,528)
============= =============
Cash and Cash Equivalents include
the following:
Cash at bank and in hand 10,106 -
Bank overdrafts included in borrowings (26,308) (11,528)
(16,202) (11,528)
--------- ---------
designcapital plc Notes to the Condensed Interim Financial
Statements
For the six months ended 30 June 2012
1. Basis of Preparation
The condensed consolidated interim financial information for the
6 months ended 30 June 2012 has been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting'.
The condensed consolidated interim financial information should be
read in conjunction with the annual financial statements for the
year ended 31 December 2011, which have been prepared in accordance
with International Financial Reporting Standards as adopted by the
European Union.
The financial information contained in this report does not
constitute statutory accounts within the meaning of Section 435 of
the Companies Act 2006. It has been prepared on a going concern
basis in accordance with the recognition and measurement criteria
of IFRSs as adopted by the European Union.
The 2012 interim financial report of the Company has not been
audited.
This condensed consolidated interim financial information has
been approved for issue by the Board of Directors on 21 December
2012.
2. Accounting Policies
The same accounting policies, presentation and methods of
computation are followed in this condensed consolidated interim
financial information as were applied in the preparation of the
Group's annual financial statements for the year ended 31 December
2011. Those financial statements have been reported on by the
Company's auditors and delivered to the Registrar of Companies. The
report of the auditors was unqualified but did contain an Emphasis
of Matter with respect to the ability of the Company and the Group
to continue as a going concern. The auditors' report did not
contain a statement under section 498(2) or 498(3) of the Companies
Act 2006.
Standards, amendments and interpretations to existing standards
effective in 2012 but not relevant to the Group
-- IFRS 3 (revised), 'Business combinations', and consequential
amendments to IAS 27, 'Consolidated and separate financial
statements' and IAS 28, 'Investments in associates', are effective
prospectively to acquisitions and disposals where the acquisition
or disposal date is on or after the beginning of the first annual
reporting period beginning on or after 1 July 2009. This is not
currently applicable to the Group.
-- IAS 27 (revised), 'Consolidated and separate financial
statements' specifies the accounting when control over a subsidiary
is lost. Any remaining interest in the entity is re-measured to
fair value, and a gain or loss is recognised in profit or loss.
This is not currently applicable to the Group.
-- IFRIC 17, 'Distributions of non-cash assets to owners',
effective for annual periods commencing on or after 1 July 2009.
This is not currently applicable to the Group.
-- IFRIC 18, 'Transfers of assets from customers', effective for
transfer of assets received on or after 1 July 2009. This is not
currently applicable to the Group.
-- IFRS 2 (amendment), 'Group cash settled share based
payments', effective for annual periods commencing on or after 1
January 2010. This is currently not applicable to the Group.
Going Concern
As described in the 2008, 2009 and 2010 Executive Chairman's
Statements, the French registered subsidiary undertakings Artelano
S.A. and Forum Diffusion s.a.s. entered into a "Redressement
Judiciaire" arrangement on 30 December 2008. "Redressement
Judiciaire" is a court based procedure which is applied for where a
company is in a state of "cessation des payments" (cessation of
payments) but has not ceased its trading activities and is
considered capable of being rehabilitated. The first stage of the
process is an observation period during which management remain
charged with managing the business and creditors are barred from
taking action to obtain payment for liabilities that arose before
the court initiated the "Redressement Judiciaire".
During the observation period, which typically lasts for three
to six months, although it can be extended to a maximum of 18
months, where the court is confident that the business can be
rehabilitated, the business can be restructured under the
protection of the court and the procedure. Once the observation
period ends a company will continue to manage its old liabilities
in accordance with the "Continuation" plan established with the
court whereby pre-"Redressement Judiciaire" liabilities are settled
over a period that extends to a maximum of ten years.
During 2010 and early 2011 worsening economic conditions
prompted the Group's management to re-consider the business model
and the markets that the Group was active in.
Maintaining the operations of Artelano S.A. in Paris, which had
undergone an 18 month restructuring under the French "Redressement
Judiciaire" process, had neither operational nor strategic value to
the Group. As a consequence it was decided to allow the company to
be liquidated on 17 May 2011 resulting in the termination of the
restructuring plan agreed as part of the "Redressement Judiciaire"
process.
Similarly, the Forum Diffusion s.a.s. restructuring plan was
reviewed. As part of the "Redressement Judiciaire" process, Forum
Diffusion s.a. was obliged to repay historical "frozen" trade
liabilities amounting to approximately EUR4.5 million over a ten
year period. However, the Company concluded that in the current
global economic environment, the restructuring plan was not
reasonably achievable. Following careful consideration, it was also
decided to cease the trading activities of Forum Diffusion s.a.s.
on 25 August 2011.
The ceasing of trading activities and subsequent liquidation of
both businesses resulted in an immediate termination of the
restructuring plans agreed as part of the "Redressement Judiciaire"
process, including the obligation on Artelano S.A. and Forum
Diffusion s.a.s. to repay historical "frozen" trade liabilities of
approximately EUR1.5 million and EUR4.5 million respectively.
A decision was also taken by the Board to apply for the
liquidation of Forum Developpement s.a.s.
Court decisions were taken on 17 May 2011 for Artelano S.A., 25
August 2011 for Forum Diffusion s.a.s. and on 26 July 2012 for
Forum Developpement s.a.s.
An alternative business model has subsequently been adopted
based on the subcontracting of manufacturing and logistics and the
establishment of joint venture distribution agreements which will
reduce the cash requirements of the Group. The fixed overhead and
running costs of the Company have been reduced and wherever
possible are now incurred on a variable basis.
Licencing arrangements have been established with MAK Design for
the exploitation of the Middle East and North African market and
with Fuaris Consulting Inc. for the United States and Canadian
markets. Each company will be licenced to manufacture and
distribute products owned by the Group in return for royalty
payments.
Additional arrangements are planned for the French and other
European markets. The Group's future is partly dependent on the
success of these licencees.
The Directors' plans and strategy for the short and medium term
assume a growth in income and profitability in the Group's
remaining investments. Due to the time needed to establish the new
business model, further finance will be required by the Company to
implement or acquire the currently planned growth opportunities.
The need to raise additional funds will depend upon the timing of
the development of the trading subsidiaries and joint ventures and
the availability of funds to secure planned growth
opportunities.
The ability of the Company to arrange and secure such financing
in the future will depend on capital market conditions and the
business performance of the Group. There can be no assurance that
the Company will successfully arrange additional finance, if
required, nor that it will be on terms which are satisfactory to
the Company.
The Directors have had discussions with Luxury Investments S.A.,
a significant shareholder, and have renegotiated the terms of the
two loans made available to the Company on 26 June 2009 and 11 June
2010 respectively whereby the repayment of the loans will not be
required before 31 December 2013. Further discussions are ongoing
and the Directors have a reasonable expectation that they will
reach an agreement with Luxury Investments S.A. whereby both
parties agree to ensure that the working capital requirements of
the Group are not threatened.
On 24 October 2012, Stunning Partners LLC, a company in which
Frederic Bobo, a Director in the Company, has a controlling
interest and Kerr Douglas Limited, a company in which Michael
Hosie, a Director of the Company, has a controlling interest agreed
to postpone the sums due to them at that date until 31 December
2013 or to write-off the loans in the event that they had not been
converted into equity at that date.
On December 20th 2012, the Company secured a GBP25,000
subscription for new ordinary shares which are being issued at 10p
per share. This private investor has also joined the Board of
Artelano International Ltd.
On 27th December 2012, Frederic Bobo, a Director of the Company,
provided the Company with an extension of a working capital support
of up to GBP150,000, to be drawn down by the Company should the
Company need additional funds. The Company has already drawn on
this support over 2012 and it is likely that it will continue to
draw down on this working capital support unless further cash
subscriptions for new ordinary shares in the Company or revenues
from operations are received.
The Group and Company will be required to raise additional funds
over the twelve month period from the date of approval of the
Financial Statements. The Directors have a reasonable expectation
that they will secure the necessary additional funding when
required.
The Directors have concluded that, notwithstanding the future
financial support described immediately above, the circumstances
set out beforehand represent a material uncertainty that casts
doubt upon the Company's and Group's ability to continue as a going
concern, and therefore the Company may be unable to realise its
assets and discharge its liabilities in the normal course of
business.
Trading in the Company's shares is currently suspended and the
suspension will remain pending implementation of its investing
policy. If the Company has not implemented its investing policy by
25 February 2013, the Company's listing on AIM will be cancelled
pursuant to AIM Rule 15. A further announcement will be made in due
course.
3. Taxation
No current tax arises in the period. The charge for the period
consists of the movement in deferred taxation arising from the
origination and reversal of temporary differences. Deferred tax
assets on unutilised trading losses have not been recognised in the
Financial Statements due to uncertainty over the timing of their
utilisation.
4. Earnings per Share
Basic loss per share is calculated by dividing the loss after
tax attributable to equity holders by the weighted average number
of ordinary shares in issue during the period.
Six months Six months
ended ended
30 June 30 June
2012 2011
Loss attributable to equity
holders of the Company (GBP) (185,121) (876,358)
----------- -----------
Weighted average number of
ordinary shares in issue 71,170,707 68,280,852
----------- -----------
Basic loss per share (pence
per share) (0.26) (1.28)
----------- -----------
5. Share Capital
Ordinary shares of 10 pence
each Number of shares Ordinary shares
GBP
At 1 January 2012 70,832,220 7,083,222
Issue of shares 778,180 77,818
------------------ ----------------
At 30 June 20112 71,610,400 7,161,040
At 1 January 2011 65,300,847 6,530,085
Issue of shares 4,981,374 498,137
------------------ ----------------
At 30 June 2011 70,282,221 7,028,222
Issue of shares 549,999 54,999
------------------ ----------------
At 31 December 2011 70,832,220 7,083,222
================== ================
6. Borrowings
On 26 June 2009, the Company entered into a loan agreement with
Luxadvor S.A., a substantial shareholder of the Company, for up to
GBP600,000 at an annual rate of interest of 12 per cent per annum.
The repayment date of the loan has been re-negotiated and the new
date for repayment is not before 31 December 2013.
On 11 June 2010, the Company entered into a short term loan
agreement with Luxadvor S.A. of up to EUR785,000 for the purpose of
satisfying the French court's working capital requirements of the
subsidiary undertakings in the "Redressement Judiciaire"
arrangement. The repayment date of the loan facility has been
renegotiated and is not repayable before 31 December 2013. Interest
accrues at a rate of 12 per cent per annum. The loan is secured
against the shares of certain subsidiary undertakings and F J Bobo
has also provided a personal guarantee to Luxadvor S.A. in relation
to the loan.
As explained in Note 2, the Directors are currently in
discussions with Luxadvor S.A. with a view to further renegotiating
the repayment terms of the two loans.
7. Related Party Transactions
The Group entered into the following related party transactions
during the period:
designcapital plc incurred costs of GBP119,983 (6 months ended
30 June 2011: GBP292,697) in respect of management and advisory
fees payable to Stunning Partners LLC, a limited liability company
incorporated in the State of New York controlled by Frederic Bobo.
Included within trade and other payables is a balance of GBP94,231
(31 December 2011: GBP215,662) relating to management advisory fees
and success fees from Stunning Partners LLC.
designcapital plc also incurred costs of GBP54,000 (6 months
ended 30 June 2011: GBP46,000) in respect of fees payable to Kerr
Douglas Ltd, a limited liability company incorporated in England
controlled by Michael Hosie. Included within trade and other
liabilities is a balance of GBP355,078 (31 December 2011:
GBP298,278).
The Group owed Luxadvor S.A., a substantial shareholder of the
Company, GBP1,180,506 plus accrued interest of GBP369,608 as at 30
June 2012 (31 December 2011: GBP1,275,650 plus accrued interest of
GBP279,800).
8. Segmental Analysis
Management has determined the operating segments based on the
reports reviewed by the Executive Chairman, as the Group's chief
operating decision-maker, that are used to make strategic
decisions. The Executive Chairman considers the business from both
a class of business and a geographical perspective: the design and
distribution of high-end luxury furniture in France and the UK, and
the provision of support services in the UK.
The Executive Chairman assesses the performance of the operating
segments based on operating profit or loss as disclosed in the
Consolidated Statement of Comprehensive Income.
Sales between segments are carried out at arm's length.
Design Support Total
and distribution services
(France (UK)
and the
UK)
GBP GBP GBP
Six months ended 30 June
2012
Total segment revenue - - -
Inter-segment revenue - - -
------------------ ------------ ------------
Revenue from external - - -
customers
------------------ ------------ ------------
Operating loss (111,146)
Finance income -
Finance costs (73,975)
------------
Loss before tax (185,121)
Taxation -
------------
Loss for the period (185,121)
------------
Reportable segment assets - 194,638 194,638
------------------ ------------ ------------
Reportable segment liabilities - (2,428,810) (2,428,810)
------------------ ------------ ------------
Design Support Total
and distribution services
(France) (UK)
GBP GBP GBP
Six months ended 30 June
2011
Total segment revenue 40,666 - 40,666
Inter-segment revenue - - -
------------------ ------------ ------------
Revenue from external
customers 40,666 - 40,666
------------------ ------------ ------------
Operating loss (793,086)
Finance income -
Finance costs (83,272)
------------
Loss before tax (876,358)
Taxation -
------------
Loss for the period (876,358)
------------
Reportable segment assets 103,046 429,077 573,551
------------------ ------------ ------------
Reportable segment liabilities (23,790) (2,060,121) (2,083,911)
------------------ ------------ ------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR NKFDDQBKDCDD
Designcapital (LSE:DESC)
Historical Stock Chart
From Apr 2024 to May 2024
Designcapital (LSE:DESC)
Historical Stock Chart
From May 2023 to May 2024