Final Results
22 August 2003 - 6:00PM
UK Regulatory
RNS Number:9430O
Inflexion PLC
22 August 2003
22 August 2003
Inflexion plc
Preliminary Results for the year ended 31 March 2003
Inflexion is a private equity investment company. Quoted on AIM, Inflexion
invests its capital in unquoted companies that offer the potential for
substantial capital gains. The particular emphasis of Inflexion is on buyouts
of profitable businesses in the UK mid-market.
Business and financial highlights:
* Loss for the year to 31 March 2003 of #4.4 million, and loss per share of
7.18p. This is inclusive of an increase in amounts written off direct
investments and investments in third-party managed funds of #2.8 million;
* Cash reserves of #11.4 million;
* Net asset value currently 25.4p per share, of which cash represents 18.8p
per share;
* First closing of Inflexion Fund 2, a UK mid-market buy-out fund, in June
2003 and acquisition of Guinness Flight VCT advisory contract in July
2003 bring private equity funds under management to in excess of #60
million;
* Appointment of Andrew Shaw as Non Executive Director;
* New additions to Inflexion Advisory Panel.
Inflexion chairman, Michael Freeman, commented:
"Since the year end, Inflexion has achieved a number of key milestones in the
strategy of growing funds under management leaving it well placed to exploit a
range of UK mid-market opportunities".
Inflexion plc 020 7487 9888
Simon Turner/John Hartz
Citigate Dewe Rogerson 020 7638 9571
Simon Rigby/Freida Davidson/Rupert Steveney
Further information can be obtained from the Company's website,
www.inflexion.com
Joint Chief Executive Officers' Statement
Strategy
In the 2002-03 financial year we embarked upon a strategy of raising third party
funds to contribute to the overheads required to manage private equity
investments. We have recently been able to announce two significant
developments to this plan, which brings our aggregate private equity funds under
management to over #60 million.
In June 2003 we were pleased to reach the first closing of Inflexion Private
Equity Fund 2, an institutional private equity fund. Alongside Inflexion, the
initial large institutional investors include Martin Currie, London Merchant
Securities and Nordea Pension. The fund has the capacity to admit further
investors until the year end, and we are hopeful that this will be achieved on
the back of the fund's early investments.
In addition, in July 2003 we acquired the advisory contract for Guinness Flight
VCT plc, a #20m 'evergreen' listed private equity fund. This development also
sees Gordon Power join Inflexion on a consultancy arrangement for an initial two
year period to continue managing this fund. Gordon is a private equity
professional with 25 years experience, latterly as Chairman of ProVen Private
Equity Limited. We are delighted with this appointment, with Gordon bringing to
the team a wealth of private equity experience.
We are very pleased with the significant steps that have been taken to build our
private equity management business. Through Inflexion plc's commitment to
Inflexion Private Equity Fund 2, Inflexion's capital will be invested into
institutional buy-outs of profitable companies in the smaller mid-market sector.
This is a sector that has consistently delivered strong investment returns.
Investment review
From an investment perspective we are currently seeing an increasing number of
attractive opportunities, in no small measure as a consequence of Inflexion
being a more recognised brand amongst the intermediary community.
Of our existing investee companies, ANT Limited secured a new #0.7 million round
of funding in February 2003 and as part of this funding round, Inflexion
invested a further #0.3 million.
In May 2002, Inflexion acquired a controlling interest in Brainstorm in order to
effect a change in Brainstorm's strategy. Overheads were reduced significantly,
and the repositioned company secured good sales contracts with both AOL and
Vodafone, the latter placing Brainstorm's technology at the forefront of the
emerging MMS market. Despite the upturn in revenue, the business lacked the
scale to reach profitability in the near term, and a decision was made to seek a
trade partner. In July 2003 we merged Brainstorm with Opera Telecom in a share
for share exchange.
We have made substantial provisions against our remaining direct investments and
our investments in third-party managed funds. Whilst each of these has made
reasonable progress in achieving operational milestones, they are operating in
difficult markets.
Operational review
Over the past year we have undertaken a thorough review of our cost base, and
the costs required to run a private equity management operation with #60 million
of funds under management. Following this review, we acted upon Chris Blake's
wish to reduce his fulltime commitment to Inflexion, and Chris has now moved to
a consultancy arrangement with us. As a result of this development, Chris
resigned as a director of Inflexion plc in March 2003, although he remains part
of the Inflexion team, actively working with our portfolio companies.
We are delighted to announce that Andrew Shaw has agreed to join the Board as a
non-executive director. Andrew is currently a Director of British Linen
Advisers a corporate finance boutique. Prior to joining British Linen, Andrew
was Group Finance Director of Arjo Wiggens Appleton and prior to that a Director
of Corporate Finance at J. Henry Schroder Wagg & Co.
To ensure that Inflexion continues to be at the forefront of sector developments
within industries identified as being of immediate interest, we have made two
further appointments to the Advisory Panel during the year. Stelio Stefanou is
Chief Executive of Accord plc, a leading provider of services to the public,
private and not-for-profit sectors in the UK. In addition Tony Caplin has
recently joined the Panel. Tony has considerable experience of running both
public and private companies, and is currently chairman of Durlacher plc, senior
non-executive director of Easynet plc and deputy chairman of Barts and the
London NHS Trust. Since Tony's involvement, Barts has become one of the leading
and most respected health trusts in the UK, and as such it has become a model
for how the NHS may look in the future. Both Stelio and Tony operate in sectors
where we see increasingly attractive investment opportunities as a result of the
growing collaboration between the private and public sectors.
Financial summary
Inflexion's cash position remains solid with a further #11.4 million available
for further investments and to cover our ongoing operational costs. As outlined
in previous statements, these funds are to be substantially committed to
investment vehicles managed by Inflexion Managers Limited, initially Inflexion
Private Equity Fund 2. Inflexion made a #7.5 million commitment to Fund 2 in
June 2003, these funds will be drawn as required by the manager over the five
year investment period of the fund.
The Group net asset value at 31 March 2003 was #15.5million after an operating
loss of #2.0 million, and portfolio write-downs of #2.8 million.
Outlook
The 2003-04 financial year has started encouragingly with the first closing of
our institutional fund and the acquisition of the GFVCT advisory contract.
Inflexion's capital is now capable of greater diversification into a wider range
of mid-market opportunities.
John Hartz
Simon Turner
22 August 2003
Consolidated profit and loss account
for the year ended 31 March 2003
Unaudited Year Audited
ended Year ended
31 March 31 March
2003 2002
#'000 #'000
Turnover - -
Cost of sales - -
Gross profit - -
Administrative expenses (2,173) (2,155)
Other operating income 133 18
Operating loss (2,040) (2,137)
Profit on disposal of fixed asset investments - 25
Interest receivable and similar income 463 640
Amounts written off investments (2,796) (10,711)
Interest payable and similar charges (1) (1)
Loss on ordinary activities before taxation (4,374) (12,184)
Tax on loss on ordinary activities - -
Loss for the financial year (4,374) (12,184)
Dividends - -
Retained loss for the financial year (4,374) (12,184)
Loss per ordinary share
- basic and fully diluted (7.18)p (20.00)p
All of the Group's activities relate to continuing activities.
The Group has no recognised gains and losses other than the losses above and
therefore no separate statement of total recognised gains and losses has been
presented.
There is no difference between the loss on ordinary activities before taxation
and the loss for the year and their historical cost equivalents.
Consolidated balance sheet as at 31 March 2003
Unaudited Audited
2003 2002
#'000 #'000
Fixed assets
Tangible assets 155 228
Investments - interests in own shares 3 3
Investments 3,910 5,896
4,068 6,127
Current assets
Debtors 258 192
Investments 100 -
Cash at bank and in hand 11,439 13,800
11,797 13,992
Creditors: amounts falling due within one year (365) (245)
Net current assets 11,432 13,747
Total assets less current liabilities 15,500 19,874
Net assets 15,500 19,874
Capital and reserves
Called up share capital 654 654
Share premium account 34,386 34,386
Profit and loss account - deficit (19,540) (15,166)
Total equity shareholders' funds 15,500 19,874
Unaudited consolidated cash flow statement
for the year ended 31 March 2003
Unaudited Audited
Year Year ended
ended 31 March 2002
31 March
2003 #'000
#'000
Net cash outflow from operating activities (1,908) (2,111)
Returns on investment and servicing of finance
Interest received 463 640
Interest paid (1) (1)
Net cash inflow from returns on investment and servicing of finance 462 639
Taxation - -
Capital expenditure and financial investment
Purchase of tangible fixed assets (5) (38)
Purchase of fixed asset investments (910) (505)
Sale of fixed asset investments - 630
Net cash outflow from capital expenditure and financial investment (915) 87
Equity dividends paid - -
Net cash flow before financing and management of liquid resources (2,361) (1,385)
Management of liquid resources
(Decrease)/increase in short term deposits with banks 20 (6)
Financing
Issue of ordinary share capital - -
Expenses of share issue - -
Net cash inflow from financing - -
Decrease in net cash (2,341) (1,391)
Reconciliation of operating loss to net cash outflow from operating activities
Year Year
ended ended
31 March 31 March
2003 2002
Continuing operations #'000 #'000
Operating loss (2,040) (2,137)
Depreciation 76 70
Loss on sale of fixed assets 2 4
(Increase)/decrease in debtors (66) 63
Increase/(decrease) in creditors 120 (111)
Net cash outflow from continuing operations (1,908) (2,111)
Reconciliation of net cash flow to movement in net funds
Year Year ended
ended 31 March
31 March 2002
2003
#'000 #'000
Decrease in net cash (2,341) (1,391)
Movement in deposits (20) 6
Net funds at 1 April 13,800 15,185
Net funds at 31 March 11,439 13,800
Accounting policies
Accounting convention
These financial statements have been prepared under the historical cost
convention (as modified by the revaluation of certain fixed asset investments)
in accordance with applicable accounting standards. A summary of the more
important group accounting policies is set out below.
The Group owns certain investments that the Companies Act 1985 requires to be
treated as associated undertakings and therefore accounted for using the equity
method of accounting. The directors believe that equity accounting for such
investments that fall within the definition of associated undertakings would not
give a true and fair view of the value generated from the investment activities
of the company, since this is better measured by the inclusion of profits or
losses on disposal of such investments in the profit and loss account.
Accordingly all investments have been recorded at cost (less any provision for
impairment in value) irrespective of whether they fall within the definition of
an associated undertaking. This treatment which requires a true and fair view
override of the Companies Act 1985 is permitted by paragraph 49 of FRS 9 -
Associates and Joint Ventures.
Basis of consolidation
The group accounts consolidate the accounts of the Company and all of its
subsidiary undertakings.
In accordance with the requirements of FRS2 "Accounting for subsidiary
undertakings" it is not appropriate to consolidate the results of Micronics
Telesystems Limited (trading as Brainstorm) in the group accounts for the period
on the grounds that that it was held for resale throughout the period and was
disposed of in July 2003. Consequently the net assets are included on the
balance sheet at the estimated net sales proceeds of #100k as a current asset
investment held for disposal.
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated
into sterling at the period end exchange rate. Transactions in foreign
currencies are translated into sterling at the exchange rate ruling at the day
of the transaction, or a contracted rate where a forward exchange contract has
been entered into by the Company. The resulting exchange differences are
included in the profit and loss account.
Leases
Operating lease rentals are charged against profit on a straight line basis over
the period of the lease.
Tangible fixed assets and depreciation
Depreciation is calculated on a straight line basis so as to write down the
assets to their residual value over their expected useful lives:
Leasehold improvements: Over the term of the lease or ten years, whichever is
the shorter.
Office equipment and motor vehicles: three years.
Fixtures and fittings: five years.
Fixed asset investments
The cost of fixed asset investments represent the original purchase cost of the
investments together with the associated costs of acquisition.
In accordance with the guidelines issued by the British Venture Capital
Association ("BVCA"), the Group's unquoted investments, limited partnership
interests and listed investments that are subject to a lock-up period (or are
otherwise not readily realisable), are valued by the directors at the cost of
the investment subject to any impairment in value. Future revaluations will be
considered by the directors where a significant arm's length transaction
involving an independent third party has taken place, and when in the opinion of
the directors, this revaluation is readily realisable.
Current asset investments
Current asset investments are valued at the lower of cost and net realisable
value.
Employee Benefit Trust
Shares held by the Employee Benefit Trust are shown in the balance sheet as
fixed assets investments in own shares. The investment is held at cost less any
provision for impairment. The assets, liabilities, income and costs of the
Employee Benefit Trust are incorporated into the accounts.
Pensions
The Company contributes to the personal pension plans of certain of its
employees. Pension costs are charged to the profit and loss account in the
period incurred and any outstanding contributions at the period end are included
within creditors.
Deferred tax
Provision is made for deferred taxation, in respect of all timing differences
that have originated but not reversed by the balance sheet date. Deferred tax
assets are recognised to the extent that it is considered more likely than not
there will be suitable taxable profits from which the future reversal of the
underlying timing differences can be deducted. Deferred tax assets and
liabilities are not subject to discounting.
Notes
Loss per share
The calculation of basic and fully diluted loss per ordinary share is based on
the loss after taxation for the period and the weighted average number of
ordinary shares in issue during the year. The weighted average number of
ordinary shares excludes any shares held by the employee benefit trust, which do
not vest unconditionally with the employees. None of the contingently issuable
share options or warrants give rise to a dilution in the loss per share due to
the losses made in the year.
The loss and weighted average number of shares used in the calculations are set
out below:
Loss on ordinary Weighted average Per-share amount
Basic and fully diluted loss per share activities after no. of shares pence
tax
#'000
Year ended 31 March 2003 (4,374) 60,933,360 (7.18)
Year ended 31 March 2002 (12,184) 60,933,360 (20.00)
Preliminary results
The preliminary results for the year ended 31 March 2003 are unaudited. The
financial information set out in the announcement does not constitute the
Group's statutory accounts for the year ended 31 March 2003.
The financial information for the year ended 31 March 2002 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was
unqualified and did not contains a statement under either Section 237(2) or
Section 237(3) of the Companies Act 1985.
The statutory accounts for the year to 31 March 2003 will be finalised on the
basis of the financial information presented by the Directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
Further copies of this announcement are available from the Company Secretary,
Inflexion plc, 40 George Street, London W1U 7DW.
This information is provided by RNS
The company news service from the London Stock Exchange
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