RNS Number : 5695V
Venteco PLC
30 May 2008
30 May 2008
Venteco plc
Preliminary Results for the year ended 31 December 2007
Venteco plc ('Venteco' or 'the Company'), the UK-based non-toxic pest control provider, announces its financial results for the year
ended 31 December 2007, which have been prepared in accordance with International Financial Reporting Standards.
Financial Summary
* Revenues rose to �4.45m (�0.24m in 2006), benefiting from consolidation of two acquisitions during 2007
* Operating losses rose to �1.72m for the period (2006: �0.45m) including a goodwill write down of �0.87m, reflecting a revision of
future trading expectations
* Losses before tax amounted to �1.78m (2006: �0.37m)
* Cash and cash equivalents at end December 2007 were �0.94m (�2.2m at end December 2006). No dividend was declared for the period
Operational Summary
* Venteco will be a 'complete solution supplier' to the international non-toxic pest control market thereby laying the foundations
for long-term growth
* Successfully integrated the two acquisitions, Silvandersson AB, a leading manufacturer of insect glue traps, and SIK Valiguard AB,
the Swedish-based specialist in food industry hygiene and safety certification
* Significant and improved international customer interest in Cryonite as CTS Technologies assumes Cryonite product marketing
responsibilities. CTS launches a direct sales campaign and appoints several new international distribution agents
* A wide-ranging cost-cutting programme was initiated in the second half to improve operational efficiency, enhance product
reliability and cut Company working capital requirements. This programme is scheduled to conclude during the summer of 2008
Commenting on the results, Stefan Hansson, Chief Executive of the Company, said: "2007 was a transformational year for the Company as it
laid the foundations for its long-term growth. Having overcome the challenges of distribution and franchising as well as product
reliability, the Company is better placed to drive growth. I look forward to 2008 as a year of increased turnover and improved performance."
Enquiries:
Venteco plc
Stefan Hansson, Barry Gibb +44 (0) 207 977 0020
Libertas Capital
Aamir Quraishi, Sandy Jamieson +44 (0) 207 569 9650
Corfin Communications
William Cullum, Clare Perks +44 (0) 207 977 0020
Overview
2007 was a transformational year for Venteco. Revenues increased by �4.21m to �4.45m (�0.24m in 2006) reflecting Venteco's increasing
penetration, through the two acquisitions, of the non-toxic pest control market globally.
The first half of the year to 30th June was a busy and successful time. Having recognised its market opportunity in international pest
control, Venteco successfully incorporated two acquisitions whilst reviewing several new prospects and producing its first ever net profit.
Interest in Cryonite remains high. However, in the second half, the Company experienced distribution and marketing problems, resulting
in a much slower than anticipated deployment of the Company's Cryonite technology, and poor weather conditions impacted on the demand for
Silvandersson's products. This resulted in a net loss position for Venteco for the full year.
The Board acted quickly, initially by thoroughly reviewing Venteco's business plan and then by addressing all outstanding eventualities
that might limit scope to fulfill its true potential. As announced on 20 December 2007, Mats Andersson stepped down as Chairman of the Board
and Haresh Kanabar stepped up from non-executive director to become the new Chairman.
Pest control remains a long-term growth market. Indeed, the pace of expansion of the industrialised world suggests that the underlying
rate must now be well in excess of the 5% to 10% range generally quoted by industry specialists. Operating in a sector that is widely
recognised for its lack of innovation, this opens important and significant opportunities for Venteco.
Operational Review
CTS Technologies
Public and professional interest in Cryonite technology remains very high. However in order to achieve 2007's targeted deployment, the
Company needed (i) distribution and franchise arrangements to work in harmony; and (ii) an exceptional level of product reliability. As the
year progressed, problems in both of these areas became apparent and unit deployment fell well short of target.
The latter was relatively easy to resolve and newly outsourced manufacturing and assembly arrangements have had the desired effect. In
2008, CTS will be able to accelerate opportunities to engineer out cost while investigating production of other and complementary
derivatives.
Resolving the former has been an altogether more complicated exercise. As a result, Venteco's partner, Linde AG, whose projected sales
into Europe had fallen significantly short of target, agreed to hand back its marketing responsibilities to CTS, while confirming its
surrender of inventories and retained lease portfolio. As a result, costs, and thus the break-even point, will be substantially lowered for
CTS, even if based on a highly conservative sales projection for 2008. In the short term, this is balanced by a negative impact on cash
flow.
Silvandersson
Venteco's leading provider of non-toxic fly control products reported a strong first half. The experience was not repeated in the
second, however, due to exceptional damp and unusually cool weather conditions in its principal European sales territory. Sales for the full
year rose by 12% (compared with 26% in the first half) to �4.1m, producing an operating profit of �0.12m.
Although a repeat of such circumstances is not anticipated for 2008, management does recognise that weather patterns are likely to
become less predictable. As a result, demand cycles will be less regular and altogether more volatile. Silvandersson's response has been to
review its working practices in order to allow greater flexibility in production, reduce working capital and dispose of non-core assets.
Silvandersson's geographical sales and product strategy has been revised. Such actions are expected to support good volume growth and
mitigate margin pressure that would otherwise be the inevitable result of slowing economic conditions across Europe.
Valiguard
Valiguard performed in-line with expectations for the whole of 2007. Sales rose by 19% �0.37m.This growth is due to increased demand for
certifications.
Responding to customer demand, Valiguard expanded its offering to include new certification standards while also extending its services
into consultancy and educational products. This, combined with the strengthening of its business development department, is expected to
result in further market share gains while also winning higher revenue per assignment.
Early in the New Year, Valiguard was approved for certification to the KRAV standard for organic food. This can be bundled into the
company's offering of BRC and ISO 22000 products and so widenening Valiguard's customer appeal.
Financial Review
In 2007, the Company increased its revenues by �4.21m to �4.45m (2006: �0.24m), benefiting from the consolidation of two acquisitions
during 2007.
Operating losses rose to �1.72m for the period to December 2007 (2006: �0.45m) including a goodwill write down of � 0.87m, reflecting a
revision of future trading expectations.
Losses before tax amounted to �1.78m (2006: �0.37m)
Cash and cash equivalents fell to �0.94m at the 2007 year end (2006: �2.23m)
Market Opportunity
The two acquisitions of Silvandersson and SIK Valiguard will provide a platform on which the Company will build its innovative approach
to non-toxic and environmentally friendly pest control.
Government and industry attitudes now tend toward policies of greater social responsibility, while an ever more 'ecologically-aware'
public is becoming increasingly reluctant to use toxins where alternative or 'green' solutions already exist. Venteco's products and
technologies provide an alternative treatment and 'green solution' to the problem of pest control. Market opportunities for such a solution
are plentiful and can be found in hospitals, food producers, pharmaceutical companies, hotels and restaurants, through to general kitchen
locations and the retail market.
Although Cryonite is the Company's core technology, Venteco's business plan is based on the concept of becoming a 'complete solution
supplier' to the international non-toxic pest control market. Operating in an exceptionally fragmented business landscape, the Company is
able to identify a number of potential 'bolt on' targets that are complementary in terms of geography, product offering, client base and
technology.
Outlook
Having stepped up its own marketing, CTS concluded over 50 new unit leases by the end of the first quarter of 2008. New distributors
have been appointed in the North America, including an agreement with the national giant, Orkin, together with regional franchises in Canada
and on the East Coast. Exceptional interest in the Far East has resulted in appointments in Singapore and Philippines, while similar
discussions continue in France, Germany, Spain and Israel. Increased activity in these areas are expected to coincide with the creation of a
'user-exchange', through which 'club letters', training manuals, an information hot-line, marketing information, testimonials etc, should be
accessed through a re-vamped web service. CTS will also spearhead a newly focused marketing campaign, whereby its products are trialed by
major hotel chains and global food manufacturers and their particular pest control problems addressed through a bespoke, rather than
general, service.
The Board believes that in 2008 the Company will start to seize the true market opportunity for Cryonite. Initiatives such as flexible
working patterns are underway to insulate the Company from today's less predictable weather patterns which have a direct impact on the pest
population and hence the Company's business. Also, the programme of cost elimination that began last year will continue into the current
period.
In the shorter term, some of the regions into which the Company sells are facing a period of slowing economic growth. This may result in
pricing pressure in more commoditised product areas as well as the need for us to actively hedge exposure to certain international
currencies.
However, Venteco is excellently positioned to capture a greater share of the growing non-toxic pest control market. The problems faced
in the second half of 2007 have now been addressed. 2008 will see the Company regain momentum, incorporate a wider global distribution
network and complete its efficiency programme, resulting in a year of continued growth and improved profitability.
Consolidated Income Statement
for the year ended 31 December 2007
2007 2006
�'000 �'000
Revenue 2 4,454 244
Cost of sales (2,269) (98)
Gross profit 2,185 146
Administrative expenses (4,393) (600)
Other gains and losses 486 4
Loss from operations (1,722) (450)
Finance income 26 86
Finance costs (79) (1)
Loss before taxation (1,775) ( 365)
Taxation 45 -
Loss attributable to equity shareholders (1,730) ( 365)
Earnings per share 3
Basic and fully diluted loss per share (9.34p) (2.62p)
Consolidated Balance Sheet
At 31 December 2007
2007 2006
Assets �'000 �'000
Non-current assets
Goodwill 710 1,382
Other intangible assets 245 200
Furniture, fittings and equipment 1,477 7
Deferred tax asset - 25
2,432 1,614
Current assets
Inventories 1,288 2
Trade and other receivables 1,051 136
Cash and cash equivalents 944 2,231
3,283 2,369
Total assets 5,715 3,983
Equity and liabilities
Equity attributable to equity holders of the company
Called up share capital 1,852 1,744
Share premium account 2,634 2,366
Reverse acquisition reserve 306 306
Currency translation reserve 154 9
Accumulated losses (2,273) ( 543)
Total equity 2,673 3,882
Current liabilities
Trade payables 429 53
Tax liabilities 191 -
Bank loans and overdrafts 837 -
Other liabilities 5 1
Accrued expenses and deferred income 479 47
1,941 101
Non-current liabilities
Bank loans 941 -
Deferred tax liability 160 -
1,101 -
Total liabilities 3,042 101
Total equity and liabilities 5,715 3,983
Consolidated Statement of Changes in Equity
for the year ended 31 December 2007
ShareCapital SharePremiumAccount ReverseAcquisitionRe CurrencyTranslationR AccumulatedLosses
Total
serve eserve
Balance at 1 January 2006 596 - (149) - (221)
226
Loss for the period - - - - (365)
(365)
Exchange rate translation - - - 9 -
9
CTS Technologies AG- share issue 10 - 82 - -
92
Acquisition of CTS Technologies AG 1,138 2,366 373 - 43
3,920
Balance at 31 December 2006 1,744 2,366 306 9 (543)
3,882
Loss for the period - - - - (1,730)
(1,730)
Exchange rate translation - - - 145 -
145
Share issue-acquisition of Silvanderson 108 268 - - -
376
Balance at 31 December 2007 1,852 2,634 306 154 (2,273)
2,673
Consolidated Cash Flow
for the year ended 31 December 2007
2007 Restated
2006
�'000 �'000
Net cash from operating activities 5 (1,058) ( 475)
Investing activities
Purchase of patents and trademarks - ( 47)
Acquisition of subsidiary (1,624) ( 428)
Interest received 26 86
Net cash used in investment activities (1,598) ( 389)
Financing activities
Net proceeds of share issues - 92
Net cash inflow arising on acquisition 133 2,994
New bank loan received 1,331 -
Repayment of borrowings (76) -
Interest paid (79) ( 1)
Net cash from financing activities 1,309 3,085
Cash flow for the year
Net (decrease)/ increase in cash and cash equivalents (1,347) 2,221
Effect of foreign exchange rate changes 60 ( 1)
Cash and cash equivalents at beginning of year 2,231 11
Cash and cash equivalents at 31 December 2007 944 2,231
* Accounting polices
Basis of preparation
The results have been prepared using accounting policies consistent with those used in the preparation of the statutory accounts. The
financial information is derived from the financial statements for the Year ended 31 December 2007, and does not constitute full accounts
within the meaning of Section 240 of the Companies Act 1985. The financial statements on which the auditors have given an unqualified report
do not contain a statement under Section 237 (2) or (3) of the Companies Act and will be delivered to the Registrar of Companies in due
course.
The financial statements have been prepared under the historical cost convention and in accordance with International Financial
Reporting Standards.
2. Segmental information
For management purposes, the Group is currently organised as one operating division. The principal activity of the division is the
supply of pest control products and services.
Segment information about this activity is as follows:
2007 2006
Pest control Total Pest control products and services Restated
products and Total
services
�'000 �'000 �'000 �'000
Revenue 4,454 4,454
External sales 244 244
Total sales 4,454 4,454 244 244
Result
Segment result (301) (301) ( 245) ( 245)
Unallocated corporate expenses (1,907) ( 209)
Loss from operations (301) (2,208) ( 245) (454)
Other gains and losses 486
4
Finance costs
(79) (
1)
Finance income 26
86
Loss before tax (1,775)
( 365)
Taxation 45
-
Loss after tax (1,730)
( 365)
Other Information
Tangible asset additions 2,978
-
Intangible asset additions 341 47
Depreciation and Amortisation 1,609
19
Balance Sheet
Assets
Segment assets 3,625 3,625 394 394
Unallocated corporate assets 2,090
3,589
Consolidated total assets 3,625 5,715 394 3,983
Liabilities
Segment liabilities 1,506 1,506 31 31
Unallocated corporate 1,536 70
liabilities
Consolidated total liabilities 1,506 3,042 31 101
3. Earnings per share
2007 2006
�'000 �'000
Loss
Loss for the purpose of basic and diluted loss per (1,730) ( 365)
share
Number of shares
Weighted average number of ordinary shares in issue 18,515,244 13,908,921
during
the period
Basic and fully diluted loss per share (9.34p) (2.62p)
The denominators for the purposes of calculating both basic and diluted earnings per share in 2006 have been adjusted for the share
division that took place in 2007.
4. Acquisition of a subsidiary
Acquisition of Silvandersson
On 22 January 2007, Venteco Plc acquired all of the issued and outstanding share capital of Silvandersson Sweden AB a leading
manufacturer of insect glue traps.
Under the terms of the agreement, Venteco paid an initial consideration, at completion, of �1.61m of which �1.23m was paid in cash and
the balance was satisfied by the issue of 21,445,906 new Venteco shares.
The balance of the consideration, being up to a further �81,000 will be payable in cash and is dependent on certain profit targets being
met during 2008. Profit targets were not met in 2007.
The cash element of the consideration is fully debt financed.
Acquisition of Silvandersson
The net assets of Silvandersson at the date of acquisition are estimated to be �2.3m as set out below.
Fair value of net assets of Book Value Fair value Fair value
Silvandersson at date of �'000 adjustments
acquisition: �'000
�'000
Property, plant and equipment 829 655 1,484
Patent and trade marks 35 - 35
Research and development - 93 93
Customer lists - 135 135
Inventories 1,021 - 1,021
Trade and other receivables 563 197 760
Cash & cash equivalents 66 - 66
Long term loan (329) - (329)
Deferred tax (178) (37) (215)
Trade payables and other (543) (171) (714)
current liabilities
Net assets of Silvandersson 1,464 872 2,336
Goodwill and intangibles (498)
Total consideration including 1,838
estimated acquisition costs
Satisfied by:
Cash 1,231
Shares 375
Deferred contingent 81
consideration
Acquisition costs 151
1,838
The carrying amount of the assets acquired is the same as their fair value.
Acquisition of SIK Valiguard
On 2 February 2007, Venteco Plc acquired the entire share capital of SIK Valiguard AB, the Swedish-based specialist in food industry
hygiene and safety certification from SIK, the Swedish Institute of Food and Biotechnology.
Venteco paid an initial consideration �0.26m. Further consideration up to a maximum of �0.18m was payable dependent on certain profit
targets being met for 2007. These profit targets were not met.
The net assets of Valiguard at the date of acquisition are estimated to be �43,000 as set out below.
Fair value of net assets of SIK Valiguard at date of acquisition: �'000
Property, plant and equipment 2
Trade and other receivables 78
Cash at bank 67
Trade payables and other current liabilities (104)
Net assets of Valiguard 43
Goodwill 199
Total consideration including estimated acquisition costs 242
Satisfied by:
Cash 236
Acquisition costs 6
242
The carrying amount of the assets acquired is the same as their fair value.
5. Cash flow statement
Net cash from operating activities
Group
Restated*
2007 2006
�'000 �'000
Loss after tax (1,730) ( 365)
Tax (45)
Write up of negative goodwill (498)
Interest received (26)
Interest paid 79 (85)
Investment write down 871
Adjustment for depreciation and amortisation 448 19
Operating cash flows before movements in working (901) ( 431)
capital
(Increase)/decrease in inventories (265) 1
Increase in receivables (77) ( 106)
Increase in payables 185 61
Cash used by operations (1,058) ( 475)
*Restated from Loss after tax (prior year Loss from operations)
The Annual Report will be posted shortly to all shareholders. Additional copies are available from
2nd Floor, 50 Gresham Street, London EC2V 7AY.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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