9th Nov 2009 07:00
Avanti Capital plc
Annual Report and Accounts for the year ended 30 June 2009
Company statement
Results of the group
As the primary purpose of the company is to act as an investment management business, references are made to the net assets and results of the company excluding the effects of consolidating the investment in Eclectic Bars Limited in which the company has a controlling interest.
As at 30 June 2009 the group had net assets (excluding the accounting affects of the consolidation of Eclectic Bars Limited) of £12.7 million (2008: £14.2 million) or 158 pence per ordinary share (2008: 177 pence per share).
As at 30 June 2009, the group had net assets on a consolidated basis of £10.4 million (2008: £11.4 million) or 130 pence per ordinary share (2008: 142 pence per share).
In the period to 30 June 2009, the loss before exceptional items, excluding the consolidation of Eclectic Bars Limited was £1.5 million (2008: £2.4 million). The loss on a consolidated basis was £1.0 million (2008: £2.6 million).
All the above figures have been arrived at after making a provision for the carried interest of £1,639,000 (or 20p per share). The payment of such carried interest is dependent upon the realisation of the individual assets being at values which are, at least, equal to the values stated in the accounts as at 30 June 2009.
In order to reflect the underlying commercial value of the group's net assets we have provided on pages 40 and 41, by way of additional information to our shareholders, supplementary information comprising un-audited pro-forma accounts which reflect the separate activities of the group.
Portfolio investments
Eclectic Bars
Eclectic Bars is an owner and operator of a portfolio of late night venues and night clubs.
Eclectic continues to trade well ahead of the sector and last year, despite unprecedented trading conditions brought about by the global financial crisis during this year.
The development of new and existing businesses has made a significant contribution to the trading results. Eclectic opened a Sakura in Lincoln in October 2007 which is now well into its second year of trading; it has delivered EBITDA some 67% ahead of management expectation for the financial year under review. The latest Sakura, which opened in Reading in May 2008, has now passed the one year mark and has delivered EBITDA some 63% ahead of management expectation for the financial year.
Total sales for the 12 months to the end of June 2009 were up 19% on last year and up 11% on a like for like basis. This has resulted in a 39% improvement in site EBITDA from £2.1 million in 2008 to £2.9 million in the current year.
Total sales for the 16 weeks to 18 October 2009 continue to be strong despite trading against a strong performance last year, up 14.3% overall on the same period last year and up 2.9% on a like for like basis.
These trading results are underpinned by the strength of the business in the student market. Strong midweek sessions ensure that the business is much more resilient in these recessionary times. In addition where competitors are now resorting to discounting as a tactic to drive business, Eclectic continues to focus on delivering added value for its customers. Improved product ranges, excellent DJ's and live entertainment, together with quality service and standards are the bedrock of this success and put Eclectic's business firmly at the premium end of the market.
In the final weeks of this financial year, Eclectic refurbished its Chelsea club, Embargo, and it has re-emerged as Embargo 59. Even though this club has always been popular with locals and celebrities, the aim is to take this very successful venue and give it more style, better facilities, and add some class and sophistication to keep pace with the expectations of a demanding market place. Amongst some of the more interesting elements to this design is the walk-in cigar humidor adjacent to the 60-seat VIP area, where customers can buy from a hand-picked selection of fine Havana cigars then enjoy them on the significantly expanded open air terrace. Eclectic's management expertise continues to be their ability to take businesses and radically improve their profitability and customer appeal. It is testament to the confidence placed in the team that Eclectic's bankers provided a senior debt facility to fund the refurbishment works. Since re-opening, Embargo 59 has been trading significantly ahead of forecast and last year.
Eclectic's strategy continues to be to assemble, grow and improve a large portfolio of bars. The current brands within the Eclectic estate have over the years proven themselves to be strong and resilient cash contributors and so provide an excellent template to develop many of the venues and businesses coming on the market today from failed operators. Depressed market conditions continue to present opportunities for acquiring venues and businesses at sensible prices and enable Eclectic to continue its roll up play in this sector.
As at 30 June 2009, the company's investment in Eclectic was £7.7 million equating to 97p per share.
Espresso
Espresso is the UK's leading educational digital content company.
Since our last update, Espresso has gone through a strategic review that included investigating the possibility of selling the business in its entirety. The business is at a crossroads where there are long-term opportunities for Espresso's services outside the UK that require investment and time to enhance the profits and value of the business. The board of Espresso needed to consider whether it was an appropriate time to exit the business or commit to a 3-5 year business plan that would invest into these multi-year opportunities to enhance the value of the business.
Despite the numerous initial indications of interest and value, the depressed merger and acquisition market conditions resulted in the board deciding that it was not the correct time to sell the business in its entirety. Instead Espresso sold the Netmedia subsidiary of the Espresso Group in April 2009 to a Norwegian company called It's Learning who produces products similar to the Netmedia business.
With the proceeds from the transaction, Espresso has a significant cash reserve that will be used to address some of the international opportunities, invest into systems that will enhance its UK and international opportunities such as the company's Espresso Sweden partnership with Liber, a Swedish educational publisher, and to restructure some of its businesses.
Meanwhile, the UK primary school customer base for Espresso remains stable despite increasing cost pressures within the UK education market and the newly launched secondary schools service is consistently increasing its market penetration. While the outlook for government spending in the education sector will come under scrutiny Espresso's management believes that any depression of new customer acquisition results can be offset by associated expense savings. The company's financial year ends on 31 July each year and the preliminary results for financial year 2009 indicate that the company continues to trade in line with the expectations of the board.
Other investors include ProVen VCT, ProVen Growth and Income VCT, Guinness Flight VCT, MeCom Group, Channel 4 Ventures, ITN and Babcock & Brown.
The group's investment is carried at a value of £0.4 million. This implies an equity value for Espresso of £20 million. During the year, Espresso re-financed A loan notes which resulted in the repayment of the notes held by the group. As part of this re-financing, ProVen subscribed for new equity shares at an equity value of £25 million.
As at 30 June 2009, the company's investment in Espresso was £0.4 million equating to 4p per share.
mBlox
During the year, mBlox recruited a new CEO, Andrew Dark who started at mBlox in March 2009. With this change at the most senior level and given the significant proportion of Avanti's net assets which are represented by the investment in mBlox, it was felt that it would be an appropriate time for our shareholders to have the opportunity to review a statement directly from Andrew Dark.
Andrew was asked to give his view of the current position of mBlox and its opportunities and challenges:
"mBlox operates the world's largest mobile transaction network for application to person messaging. Today the company delivers two primary services.
Mobile terminated messaging (MT)
MT provides Enterprise organisations with a simple, single interface to allow these companies to send standard text based messaging to their customers. While appearing simple, this service uses mBlox's considerable carrier network connections to ensure that the messages, no matter how great in quantity, are delivered to the appropriate subscriber.
Enterprises, both in EMEA and increasingly in the US, are increasingly understanding the direct marketing and customer service value of a direct message to a consumer's mobile phone and moving activities in this direction and away from more costly communication tools such as mail, direct calling and even email. During the first half of 2009 mBlox released its Mobile Number Portability capability into its production systems. This software determines the ultimate billing entity for the end consumer's handset, regardless of what the prefix of that phone number might suggest, and routes the message along the optimum and most cost effective route. This internal release will allow mBlox to maintain and potentially grow its gross margins in this line of business in the months to come.
Premium SMS
mBlox also provides a range of premium messaging services which enable a content or service provider to exchange messages with a consumer that ultimately result in the consumer purchasing goods or subscribing to services, the costs for which are charged directly on to their mobile phone account. In this instance mBlox acts as the clearing house for the funds albeit it takes no risk in the transaction.
Research has shown that consumers find the unknown cost of downloading data content can be a barrier to purchasing content in this way, particularly larger applications and media content which can be expensive on some consumer's mobile contracts. mBlox has worked with a number of carriers to be the first company to provide a "Sender Pays Data Service" whereby the application or media provider pays for the data download leaving the consumer to only pay the purchase price for the item in question.
New products
Given the experience of exchanging huge volumes of messaging, payments and the ever expanding reach of the global carrier network, mBlox is now developing its global systems to provide a more ubiquitous range of payment options. These future payment options will include credit and debit cards, Paypal, electronic wallets and other non-carrier based payment options. The demand for these payment options comes from Enterprises who are constrained in mobile commerce by the relatively small maximum spend limits that carriers attach to transactions (typically less than £20) and the high service charges that accompany them (carriers take 15 to 40% of the gross selling price). To accompany these broader options, the company is developing location based services for use in fraud prevention and customer service applications and is also developing its analytical services to make best use of the over 7 billion transaction history that it stores and grows each day.
Financial results
Having developed a business of considerable scale and reach, the half year to 30 June 2009 saw mBlox deliver a trading profit at adjusted EBITDA level for the first time in its history and this positive position will be grown through the second half of the year. The company has undertaken a range of other measures that will see the company increasingly cash positive on a month by month basis in the second half of 2009 and the prospect of acquiring other companies within the sector to increase global scale is an increasing possibility."
Other investors in mBlox include various Silicon Valley venture funds including Norwest Venture Partners, Scale Venture Partners, Novus Ventures, Duff Ackerman Goodrich and Trident Capital.
As reported in the company's interim statement for the period ended 31 December 2008, a provision has been made in respect to the investment in mBlox. The total amount of the provision in the current financial year ended 30 June 2009 is £1.95m.
As a result of the provisions to date and, after accounting for the effect of foreign exchange differences, the carrying value of the company's investment in mBlox as at 30 June 2009 was £5.1 million equating to 64p per share (2008 - 72p per share).
Medcenter
Medcenter's management is of the view that the company should deliver another year of growth in its core business of providing medical education and marketing services to the pharmaceutical industry in Latin America and Iberia. To date, Medcenter has grown its database to over 440,000 physicians and healthcare professionals while simultaneously aligning with over 280 medical associations throughout Latin America, building the largest scientific network of affiliated members in the region. Medcenter has achieved top-line revenue growth of about 50% per annum for the past 5 years. Although the trajectory of the business was affected by the global financial crisis and unforeseen occurrences such as the swine flu breakout, Medcenter is on track to deliver another year of strong growth. Through both increased top line revenues and diligent cost controls the company expects to be breakeven from an operational cash flow perspective by the second quarter of 2010.
In its first year of operation, the Medcenter Medscape portal exceeded the joint venture partner's (WebMD) expectations by reaching in excess of 100,000 registered Spanish and Portuguese speaking physicians and other healthcare professionals. Medcenter Medscape is on track to meet budget for 2009. Medcenter is employing a strategy to align itself with the global pharmaceutical industry by aiming to create a greater geographical reach than any other online company. Currently, the company is in advanced negotiations to further expand into Latin America and Western Europe.
As at 30 June 2009, the company's investment in Medcenter was £0.4 million equating to 4p per share.
Legacy Portfolio
The company reiterates its policy of disposing of its investment in the legacy portfolio at the earliest possible time. As at 30 June 2009, the aggregate carrying value of these investments was £51,000.
As reported in the 2008 annual report, the company is expecting to receive up to £175,000 in 2010 in respect of Netfractal, one of its legacy investments, following disposal of its underlying business.
Net asset values (excluding the accounting effects of the consolidation of Eclectic Bars Limited) per Avanti share by category
|
Carrying value as at 30 June 2009 (pence per share) |
Carrying value as at 30 June 2009 £m |
|
|
Investment |
||
|
Eclectic Bars Limited |
97 |
£7.7 |
|
Espresso |
4 |
£0.4 |
|
mBlox |
64 |
£5.1 |
|
Medcenter |
4 |
£0.4 |
|
Others |
1 |
£0.1 |
|
__________ |
__________ |
|
|
Net current assets (including cash) |
179 |
£14.4 |
|
__________ |
__________ |
Note:
The above figures do not take account of any dilutory effect of the LTISS options or the carried interest under the investment advisory agreement (refer to Report of the
Directors).
Purchase of own shares
During the year, there has been no purchase by the company of its own shares.
|
Enquiries: |
|
|
Avanti Capital Plc |
Tel: 020 7299 1459 |
|
Julian Fellerman |
|
|
Richard Kleiner |
|
|
Collins Stewart |
Tel: 020 7523 8350 |
|
Adrian Hadden |
Compliance of corporate governance
Compliance with the 2008 FRC Combined Code
The company is not required to comply with the 2008 FRC Combined Code. Set out below are the corporate procedures that have been adopted.
The Board
The Board of Avanti Capital plc is the body responsible for the group's objectives, its policies and the stewardship of its resources. At the balance sheet date, the board comprised two directors (Julian Fellerman and Richard Kleiner) and two non-executive directors (Philip Crawford and William Crewdson).
The Board has six board meetings during the year. There are two non-executives that sit on both the audit and the remuneration committees, namely Philip Crawford and William Crewdson. Philip Crawford is both the chairman of the audit committee and the remuneration committee. The terms of reference of both these committees have been approved by the Board.
Remuneration committee
The committee's responsibilities include the determination of the remuneration and options of other directors and senior executives of the group and the administration of the company's option schemes and arrangements. The committee takes appropriate advice, where necessary, to fulfil this remit.
Audit committee
The committee meets twice a year including a meeting with the auditors shortly before the signing of the accounts. The terms of reference of the audit committee include: any matters relating to the appointment, resignation or dismissal of the external auditors and their fees; discussion with the auditors on the nature, scope and findings of the audit; consideration of issues of accounting policy and presentation; monitoring the work of the review function carried out to ensure the adequacy of accounting controls and procedures.
Nomination committee
The company does not maintain a nomination committee. Any board appointments are dealt with by the Board itself.
Internal control
The Board is responsible for the group's system of internal control and for reviewing the effectiveness of the system of internal control. Internal control systems are designed to meet the particular needs of a business and manage the risks but not to eliminate the risk of failure to achieve the business objectives. By its nature, any system of internal control can only provide reasonable, and not absolute, assurance against material misstatement or loss.
The 2008 FRC Combined Code introduced a requirement for the board to review the effectiveness of the group's system of internal control, including financial, operational, compliance and risk management. Guidance for directors on the Combined Code: Internal Control: Guidance for Directors on the Combined Code ("The Turnbull Report") was published in September 1999. In view of the relative size of the organisation and the "hands-on" approach of the directors toward systems and risk, the Board does not have the resources to meet the requirements outlined in The Turnbull Report.
Relations with shareholders
Aside from announcements that the company makes periodically to the market, the Board uses the annual general meeting to communicate with private and institutional investors and welcomes their participation.
Going concern
On the basis of the current financial projections, the directors have a reasonable expectation that the company and the group have adequate financial resources to continue in operational existence for the foreseeable future. The directors accordingly have adopted the going concern basis in the preparation of the group's accounts.
Internal audit
Given the size of the group, the Board does not believe it is appropriate to have a separate internal audit function. The group's systems are designed to provide the directors with reasonable assurance that problems are identified on a timely basis and are dealt with appropriately.
Directors' report for the year ended 30 June 2009
The directors present their report with the audited consolidated financial statements for the year ended 30 June 2009.
Results and dividends
The loss for the year before taxation of the group amounted to £1.0 million (2008 - £2.6 million) and the loss for the year after taxation and minority interest of the group amounted to £1.0 million (2008 - £2.6 million) which was equivalent to a loss of 12.91 per share (2008 - loss of 32.83p per share) and the net assets of the group were £10.4 million (2008 - £11.4 million).
The directors do not recommend the payment of a dividend for the year ended 30 June 2009 (2008 - £nil).
Principal activity and review of the business
The company's principal activity during the year continued to be that of a private equity and ancillary services company. The principal activity of Eclectic Bars Limited, one of the group's subsidiary undertakings, was as an operator of bars and night clubs. Further details are set out in the company statement on pages 3 to 6.
The principal risks and uncertainties facing the business are investment risk, interest risk and liquidity risk. With the exception of the investment in mBlox, the group does not have a material exposure to foreign currency risk.
The various categories of risk are proactively managed to ensure exposure to risk is mitigated whenever possible and appropriate. The board has assessed that the Key Performance Indicator that is the most effective measure of progress towards achieving the group's strategies and as such towards fulfilling the group's objectives is the net asset value per share.
Future developments
The company will be pursuing its policy of maximising the value of its investments and, at the appropriate time, to realise such investments.
Directors and their interests
The directors during the year were as follows:
P J Crawford
J M Fellerman R H Kleiner
W A H Crewdson
The interests of the directors and their immediate families and the interests of persons connected with the directors for the purposes of section 252 of the Companies Act 2006 in the issued ordinary share capital of the company as at 30 June 2009 (all of which are beneficial unless otherwise noted) are as follows:
|
Number of ordinary issued shares |
||
|
As at 1 July 2008 |
As at 30 June 2009 |
|
|
P J Crawford |
391,923 |
391,923 |
|
J M Fellerman |
444,182 |
562,307 |
|
R H Kleiner |
444,182 |
562,307 |
|
W A H Crewdson |
- |
- |
The rights of the directors to subscribe for shares in Avanti Capital plc, their immediate families and persons connected with the directors for the purposes of section 246 of the Companies Act 1985 are as follows:
|
At 1 July 2008 |
|||||
|
or date of |
|||||
|
appointment |
At 30 June |
||||
|
Rights to subscribe for shares |
if later |
Granted |
Cancelled |
Exercised |
2009 |
|
J M Fellerman |
- |
- |
- |
- |
- |
|
R H Kleiner |
- |
- |
- |
- |
- |
As at 30 June 2009 there were 1,289,452 options to subscribe for ordinary shares in the capital of the company at 150 pence per share under the company's Long Term Share Scheme ("LTISS"). Following the changes to the management structure, the directors holding the options agreed to cancel the LTISS options granted to them as a result of the implementation of the management agreement in October 2006. Following revisions the company's purchase of its own shares and the consequential changes to the number of options, there remain as at 30 June 2009, 1,289,452 options granted under the LTISS all of which are held by previous directors. The terms of the LTISS are such that the options are exercisable at a price of 150p per share subject to the company's share price or net asset value reaching certain specified targets. The options, which were granted on 10 January 2002 expire on 9 January 2012.
As reported in last year's annual report, the company entered into an investment advisory agreement with Odyssey Partners Limited ("OPL"). The principal terms of the investment advisory agreement are that OPL, a company controlled by Julian Fellerman and Richard Kleiner, provides all of the functions previously carried out by the executive management team in respect of the group's portfolio. OPL bears all of its internal overheads and is paid an annual fee of £264,000 per annum (with effect from 1 December 2008) which is equivalent to 1.8% of the company's asset value as at 30 June 2009. In addition, OPL has a carried interest by reference to the realisations achieved in relation to the assets. The threshold, after which the carried interest becomes payable, is based on realisations of not less than £6.6m or 82.5 pence per share (based on the issued share capital of the company on 30 November 2008). There is a hurdle of 6% per annum to protect the company from the effects of time in relation to the realisation of the portfolio. Once realisations are achieved in excess of £6.6m, provided that the return to the company would be at least that amount together with the hurdle, then in relation to any excess, OPL will be entitled to 25% of such excess up to £9.1m of realisations or 113 pence per share. OPL's share will be increased by 5% for each £2.5m in excess of £9.1m up to a maximum of 40% for realisations in excess of £14.1m or 176 pence per share.
Report on directors' remuneration
The remuneration of the directors for the year ended 30 June 2009 is as follows:
|
Compensation |
||||||
|
Basic salary |
for loss of |
2008 |
||||
|
and fees |
Benefits |
Bonus |
office |
Total |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
|
|
Non-executive directors |
||||||
|
P J Crawford |
25,000 |
1,171 |
- |
- |
26,171 |
25,954 |
|
W A H Crewdson |
15,000 |
- |
- |
- |
15,000 |
15,000 |
|
J M Fellerman |
- |
1,910 |
- |
- |
1,910 |
954 |
|
R H Kleiner |
- |
754 |
- |
- |
754 |
907 |
|
40,000 |
3,835 |
- |
- |
43,835 |
42,815 |
(1) The above figures represent the due proportion of each director's annual salary reflecting the period during the year for which each director was a director of the company.
(2) There were no pension payments in respect of either year.
(3) During the year, as part of the management agreement entered into between the company and Odyssey Partners Limited, Odyssey Partners Limited received fees totalling £344,000 (2008 : £457,000) including the non-executive directors' fees of Julian Fellerman and Richard Kleiner.
The remuneration committee comprises Philip Crawford (chairman) and William Crewdson. Its terms of reference are concerned principally with the remuneration packages offered to directors in that they should be competitive and are designed to attract, retain and motivate directors of the right calibre.
Significant shareholdings
As at 7 July 2009, the company's significant shareholders were Moorfield Group Limited 12.5%, Marlborough Fund Managers Limited 7.4%, Mr. R J R French 9.0% and Aviation Adventures Limited 4.1%.
Employee involvement
The group is aware of the importance of good communication in relationships with its staff. The group follows a policy of encouraging training and regular meetings between management and staff in order to provide common awareness on the part of staff of the financial and economic circumstances affecting the group's performance.
Disabled persons
The group gives full consideration to applications for employment from disabled persons where the candidate's particular aptitudes and abilities are consistent with adequately meeting the requirements of the job. Opportunities are available to disabled employees for training, career development and promotion.
Policy and practice on payment of creditors
It is the group's policy to settle all agreed liabilities within the terms established with suppliers. During the year the average credit period taken was 30 days (2008 - 30 days).
Purchase of own shares
During the year under, the company has not purchase any of its own shares. The Board intends to pursue the purchase by the company of its own shares where it believes will enhance the value per share to the continuing shareholders.
Companies Act 2006
The Companies Act 2006 (the "Act") sets out the director's general duties which largely codify the existing law but with some changes. Under the Act, from 1 October 2006, a director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the company's interests. The requirement is very broad and could apply, for example, if a director becomes a director of another company or a trustee of another organisation. The Act allows directors of public companies to authorise conflicts and potential conflicts, where appropriate, where the articles of association contain a provision to this effect. The Act also allows the articles of association to contain other provisions for dealing with directors' conflicts of interest to avoid a breach of duty.
These are safeguards which will apply when directors decide whether to authorise a conflict or potential conflict. First, only directors who have no interest in the matter being considered will be able to take the relevant decision, and secondly, in taking the decision the directors must act in a way they consider, in good faith, will be most likely to promote the company's success. The directors will be able to impose limits or conditions when giving the authorisation if they think this is appropriate.
Auditors
A resolution to re-appoint Ernst & Young LLP will be put to the members at the forthcoming Annual General Meeting.
Disclosure of information to auditors
The directors who were members of the board at the time of approving the directors' report are listed on Page 2. Having made enquiries of fellow directors and of the company's auditors, each of these directors confirms that:
To the best of each director's knowledge and belief, there is no information relevant to the preparation of their report of which the company's auditors are unaware; and
Each director has taken all the steps a director might reasonably be expected to have taken to be aware of relevant audit information and to establish that the company's auditors are aware of that information.
By order of the board
Julian Fellerman
Secretary
6 November 2009
Statement of directors' responsibilities
The directors are responsible for preparing the Annual Report and the group and parent company financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union.
The directors are required to prepare group and parent company financial statements for each financial year which present fairly the financial position of the group and parent company and the financial performance and cash flows of the group and parent company for that year. In preparing those group and parent company financial statements the directors are required to:
select suitable accounting policies in accordance with IAS8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the group and parent company's financial position and financial performance; and
state that the group and parent company has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the group and parent company and to enable them to ensure that the group and parent company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Report of the independent auditors
to the members of Avanti Capital plc
We have audited the financial statements of Avanti Capital Plc for the year ended 30 June 2009 which comprise the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Company Balance Sheet, the Consolidated Cash Flow Statement, the Company Cash Flow Statement and the related notes 1 to 27. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the company's members, as a body, in accordance with Sections 495 and 496 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors' Responsibilities Statement set out on page 11, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group's and the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group's and the parent company's affairs as at 30 June 2009 and of the group's loss for the year then ended;
the group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Andy Glover (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
6 November 2009
Consolidated profit and loss account
for the year ended 30 June 2009
|
2009 |
2008 |
||
|
Notes |
£000 |
£000 |
|
|
Revenue |
3 |
12,084 |
10,138 |
|
Cost of sales |
(2,041) |
(1,677) |
|
|
Gross profit |
10,043 |
8,461 |
|
|
Administrative expenses - others |
(8,990) |
(7,977) |
|
|
Administrative expenses - exceptional items |
4 |
(54) |
(243) |
|
OPERATING PROFIT |
5 |
999 |
241 |
|
Loss on disposal of tangible assets |
(20) |
(1) |
|
|
Finance revenue |
9 |
53 |
91 |
|
Finance cost |
10 |
(114) |
(60) |
|
Fair valuation of financial assets held at fair value through profit or loss |
16 |
(1,954) |
(2,906) |
|
LOSS BEFORE TAXATION |
(1,036) |
(2,635) |
|
|
Tax expense |
11 |
- |
- |
|
LOSS FOR THE YEAR |
(1,036) |
(2,635) |
|
|
Loss per share - basic and diluted |
13 |
(12.91)p |
(32.83)p |
Consolidated balance sheet
At 30 June 2009
|
2009 |
2008 |
||
|
Notes |
£000 |
£000 |
|
|
ASSETS |
|||
|
Non current assets |
|||
|
Intangible assets |
14 |
4,454 |
4,454 |
|
Property, plant & equipment |
15 |
2,669 |
2,088 |
|
Financial assets held at fair value through profit or loss |
16 |
5,906 |
6,477 |
|
13,029 |
13,019 |
||
|
Current assets |
|||
|
Inventories |
17 |
146 |
129 |
|
Trade and other receivables |
18 |
1,120 |
1,102 |
|
Cash and cash equivalents |
19 |
838 |
1,084 |
|
2,104 |
2,315 |
||
|
TOTAL ASSETS |
15,133 |
15,334 |
|
|
EQUITY AND LIABILITIES |
|||
|
EQUITY |
|||
|
Issued share capital |
22 |
4,815 |
4,815 |
|
Capital redemption reserve |
23 |
1,409 |
1,409 |
|
Other reserves |
23 |
2,045 |
2,045 |
|
Retained earnings |
23 |
2,076 |
3,112 |
|
TOTAL EQUITY |
10,345 |
11,381 |
|
|
LIABILITIES |
|||
|
Current liabilities |
|||
|
Financial liabilities |
24 |
449 |
724 |
|
Trade and other payables |
20 |
1,672 |
1,257 |
|
2,121 |
1,981 |
||
|
Non current liabilities |
|||
|
Financial liabilities |
24 |
1,028 |
977 |
|
Provisions |
21 |
1,639 |
995 |
|
2,667 |
1,972 |
||
|
TOTAL LIABILITIES |
4,788 |
3,953 |
|
|
TOTAL EQUITY AND LIABILITIES |
15,133 |
15,334 |
Julian Fellerman - Director
Richard Kleiner - Director
6 November 2009
Consolidated statement of changes in equity
at 30 June 2009
|
Issued share capital |
Other reserves |
Capital redemption reserve |
Retained earnings |
Total |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
At 1 July 2007 |
4,815 |
2,045 |
1,409 |
5,747 |
14,016 |
|
Loss for the year |
- |
- |
- |
(2,635) |
(2,635) |
|
At 30 June 2008 |
4,815 |
2,045 |
1,409 |
3,112 |
11,381 |
|
Loss for the year |
- |
- |
- |
(1,036) |
(1,036) |
|
At 30 June 2009 |
4,815 |
2,045 |
1,409 |
2,076 |
10,345 |
Company Balance sheet
at 30 June 2009
|
Notes |
2009 £000 |
2008 £000 |
|
|
ASSETS |
|||
|
Non current assets |
|||
|
Property, plant & equipment |
15 |
6 |
10 |
|
Financial assets held at fair value through profit or loss |
16 |
10,989 |
10,972 |
|
10,995 |
10,982 |
||
|
Current assets |
|||
|
Trade and other receivables |
18 |
563 |
679 |
|
Cash and cash equivalents |
19 |
560 |
741 |
|
1,123 |
1,420 |
||
|
TOTAL ASSETS |
12,118 |
12,402 |
|
|
EQUITY AND LIABILITIES |
|||
|
EQUITY |
|||
|
Issued share capital |
22 |
4,815 |
4,815 |
|
Capital redemption reserve |
23 |
1,409 |
1,409 |
|
Other reserves |
23 |
2,045 |
2,045 |
|
Retained earnings |
23 |
2,129 |
3,082 |
|
TOTAL EQUITY |
10,398 |
11,351 |
|
|
LIABILITIES |
|||
|
Current liabilities |
|||
|
Trade and other payables |
20 |
81 |
56 |
|
Non current liabilities |
|||
|
Provisions |
21 |
1,639 |
995 |
|
TOTAL LIABILITIES |
1,720 |
1,051 |
|
|
TOTAL EQUITY AND LIABILITIES |
12,118 |
12,402 |
Julian Fellerman - Director
Richard Kleiner - Director
6 November 2009
|
Notes |
2009 £000 |
2008 £000 |
|
|
Operating activities |
|||
|
Loss before tax from operation |
* |
(1,036) |
(2,635) |
|
Depreciation and impairment of property, plant and equipment |
15 |
401 |
352 |
|
Loss on financial assets at fair value through profit or loss |
10 |
1,954 |
2,906 |
|
Currency movements on financial assets at fair value through profit or loss |
(1,383) |
- |
|
|
Loss on disposal of property, plant and equipment |
20 |
1 |
|
|
Provisions against fixed asset held at fair value through profit or loss |
- |
3 |
|
|
Net interest expense/(income) |
9,10 |
61 |
(31) |
|
Increase in inventories |
17 |
(17) |
(49) |
|
Increase in trade and other receivables |
(26) |
(138) |
|
|
Increase in trade and other payables |
391 |
105 |
|
|
Increase/(decrease) in provisions |
21 |
644 |
(824) |
|
Net cash flow from operating activities |
1,009 |
(310) |
|
|
Investing activities |
|||
|
Interest received |
9 |
53 |
91 |
|
Purchase of property, plant & equipment |
15 |
(934) |
(1,301) |
|
Purchase of investments |
16 |
- |
(128) |
|
Proceeds from disposal of property, plant & equipment |
7 |
4 |
|
|
Receipts from disposal of fixed asset investments |
- |
21 |
|
|
Net cash flows used in investing activities |
(874) |
(1,313) |
|
|
Financing activities |
|||
|
Interest paid |
(73) |
(60) |
|
|
(Decrease)/increase in bank overdraft |
(373) |
256 |
|
|
Proceeds from borrowings |
412 |
1,122 |
|
|
Repayment of borrowings |
(242) |
(60) |
|
|
Capital element on finance lease rental payments |
(105) |
(8) |
|
|
Net cash flows used in financing activities |
(381) |
1,250 |
|
|
Net decrease in cash and cash equivalents |
(246) |
(373) |
|
|
Cash and cash equivalents at 1 July 2008 |
1,084 |
1,457 |
|
|
Cash and cash equivalents at 30 June 2009 |
838 |
1,084 |
*Exceptional Items
Cash flows relating to operating exceptional items
In the current year there were operating cash outflows from exceptional items relating to redundancy and restructuring charges of £16,000 (2008 - £150,000) and cost of abortive projects of £11,000 (2008 - £93,000).
Consolidated cash flow statement
For the year ended 30 June 2009
|
Notes |
2009 £000 |
2008 £000 |
|
|
Operating activities |
|||
|
(Loss)/profit before tax from operation |
(1,207) |
124 |
|
|
Depreciation and impairment of property, plant and equipment |
15 |
4 |
3 |
|
Increase/(decrease) in loans to subsidiary held as fixed asset investments |
16 |
46 |
(239) |
|
Currency movements on financial assets at fair value through profit or loss |
(63) |
(5) |
|
|
Decrease in trade and other receivables |
116 |
132 |
|
|
Increase/(decrease) in trade and other payables |
25 |
(156) |
|
|
Increase/(decrease) in provisions |
21 |
644 |
(824) |
|
Net cash flow from operating activities |
(435) |
(965) |
|
|
Investing activities |
|||
|
Interest received |
254 |
329 |
|
|
Purchase of property, plant & equipment |
15 |
- |
(10) |
|
Net cash flows used in investing activities |
254 |
319 |
|
|
Net decrease in cash and cash equivalents |
(181) |
(646) |
|
|
Cash and cash equivalents at 1 July 2008 |
741 |
1,387 |
|
|
Cash and cash equivalents at 30 June 2009 |
560 |
741 |
Notes to the consolidated financial statements
at 30 June 2009
1. Authorisation of financial statements and statement of compliance with IFRSs
The financial statements of Avanti Capital Plc and its subsidiaries (the group) for the year ended 30 June 2009 were authorised for issue by the board of directors on 5 November 2009 and the balance sheet was signed on the board's behalf by Julian Fellerman and Richard Kleiner. Avanti Capital Plc is a public limited company incorporated and domiciled in England and Wales. The company's ordinary shares are traded on the Alternative Investment Market.
The group and parent company's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to financial statements of the group and parent company for the year ended 30 June 2009.
The principal accounting policies adopted by the group and parent company are set out in note 2. No profit or loss account is presented for the company as permitted by Section 408 of the Companies Act 2006.
2. Accounting policies
Basis of preparation
The group and parent company's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union as they apply to financial statements of the group and parent company for the year ended 30 June 2009 and applied in accordance with the Companies Act 2006. The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 30 June 2009.
The group and parent company's financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£000) except when otherwise indicated.
The group and parent company financial statements have been prepared under the historical cost convention as modified for certain financial instruments, which are stated at fair value.
Changes in presentation
The following changes to the presentation of the financial statements have been made in 2009, resulting in the restatement of certain comparative items in the cash flow statement and income statement. These adjustments have no impact on the loss for the year, net liabilities or net cash flow as previously stated.
In 2008, the cash flow impact of new borrowings and new finance leases by a subsidiary undertaking, together with the net interest charge for the year, were included incorrectly in the cash flow statement, resulting in the following adjustments:
An increase of £31,000 in the cash outflow from operating activities;
A reduction of £365,000 in the cash outflow from investing activities; and
A reduction of £334,000 in the net cash inflow from financing activities.
The board of the company believes that these changes reflect a better presentation of the information contained within the cash flow statement.
In 2008, fair valuation of financial assets held at fair value through profit or loss were incorrectly included as part of finance cost. These financial statements have shown the item on the face of the consolidated income statement and the comparatives have been duly adjusted.
The board of the company believes that the inclusion of the adjustment in the carrying value of the fair valuation of financial assets is more appropriately included as a separate item on the face of the income statement.
Judgements and key sources of estimation and uncertainty
The preparation of the group and parent company's financial statements requires management to make judgements, estimates and assumptions that affect the reported amount of assets and liabilities at the balance sheet date, amounts reported for revenues and expenses during the year, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the assets or liability affected in the future.
In the process of applying the group and parent company's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below:
Financial assets held at fair value through profit or loss
The financial assets held at fair value through profit or loss are valued in accordance with the accounting policy set out later in this note on page 21. In certain cases, the group is required to make estimates about expected future cash flows and discount rates, and hence they are subject to uncertainty. Further details are given in note 16.
Operating lease commitments
The group has entered commercial property leases as lessor on its investment property portfolio and as a lessee it obtains the use of property, plant and equipment. The classification of such leases as operating or finance lease requires the group to determine, based on an evaluation of the terms and conditions of the arrangements, whether it retains or acquires the significant risk and rewards of ownership of these assets and accordingly whether the lease requires an asset and liability to be recognised in the balance sheet.
Impairment of non-financial assets
The group assess whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and other indefinite life intangibles are tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts are not recoverable.
When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset to cash generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.
Deferred tax assets
Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
Basis of consolidation
The Consolidated financial statements include the financial statements of Avanti Capital plc and the entities it controls (its subsidiaries) for the periods reported.
For the purposes of preparing these consolidated accounts, subsidiaries are those entities controlled by the group. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities and is achieved through direct or indirect ownership of voting rights, by way of contractual agreement. The financial statements of subsidiaries, which are prepared for the same reporting period, are included in the consolidated financial statements from the date that control commences until the date control ceases. All intra-group balances, income and expenses and unrealised gains and losses resulting from the intra-group transactions are eliminated in full. Accounting policies of subsidiary entities are consistent with the group accounting policies disclosed here.
Minority interests represent the portion of profit or loss and net assets in subsidiaries that is not held by the group and is presented separately within equity in the consolidated balance sheet, separate from parent shareholders' equity.
Foreign currency translation
The consolidated financial statements are presented in Sterling pounds, which is also the parent company's functional and presentation currency. Each entity in the group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange at the balance sheet date. All differences are taken to the income statement. Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as the dates of the initial transactions. Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment. Such cost includes the cost of replacing part of the property, plant and equipment when the cost is incurred, if the recognition criteria are met, in which case the carrying value of the replaced part is written off. All major repairs and maintenance costs are recognised in the income statement as incurred.
Depreciation is calculated on a straight line basis over the useful life of the asset as follows:
|
Leasehold improvements |
- 4 years |
|
Furniture and fittings |
- 4 years |
|
IT equipment |
- 3 years |
|
Motor vehicles |
- 3 to 5 years |
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is de-recognised.
The asset's residual values, useful lives and methods of depreciation are reviewed, and adjusted if appropriate, at each financial year end. The assets are reviewed for impairment if events or circumstances indicate the carrying value may not be recoverable, and are written down immediately to their recoverable amount.
Borrowing costs
Borrowing costs are recognised as an expense when incurred.
Business combinations and goodwill
Business combinations are accounted for using the purchase method.
Goodwill is initially measured at cost being the excess of the cost of the business combination over the group's share in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the group's cash generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree assigned to those units.
Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash generating unit retained.The group assesses whether there are any indicators that goodwill is impaired at each reporting date. Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of the cash generating units, to which goodwill relates. Where the recoverable amount of the cash generating units is less than the carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill is not reversed in future periods. The group performs its annual impairment test of goodwill as at 30 June.
Investments and other financial assets
Financial assets within the scope of IAS 39 are classified as financial assets held at fair value through profit or loss, loans and receivables, held-tomaturity investments or available-for-sale financial assets, as appropriate. The group currently holds no held-to-maturity or available for sale financial assets. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit and loss, directly attributable transaction costs.
The group determines the classifications of its financial assets on initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year end.
All regular way purchases and sales of financial assets are recognised on the trade date, which is the date the group commits to purchase or sell the asset. Regular way purchases or sales of financial assets that require delivery of assets within the period are generally established by regulation or convention in the market place.
Financial assets held at fair value through profit or loss
Financial assets held at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss.
Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains and losses on investments held for trading are recognised in the income statement.
Financial assets, comprising equity shares and share options, are valued in accordance with the "Guidelines for the valuation and disclosure of venture capital portfolios" published by the British Venture Capital Association on the following basis:
(a) Early stage investments: these are investments in immature companies, including seed, start-up and early stage investments. Such investments are valued at a cost less any provision considered necessary, until no longer viewed as early stage or unless a significant transaction involving an independent third party at arm's length, values the investment at a materially different value; (b) Development stage investments: such investments are in mature companies having a maintainable trend of sustainable revenue and from which an exit, by way of flotation or trade sale, can be reasonably foreseen. An investment of this stage is periodically re-valued by reference to open market value. Valuation will usually be by one of four methods as indicated below: i. At cost for at least one period unless such a basis is unsustainable; ii. On a third party basis based on the price at which a subsequent significant investment is made involving a new investor; iii. On an earnings basis, but not until at least a period since the investment was made, by applying a discounted price/earnings ratio to profit after taxation, either before or after interest; or iv. On a net asset basis, again applying a discount to reflect the illiquidity of the investment. (c) Quoted investments: such investments are valued using the quoted market price, discounted if the shares are subject to any particular restrictions or are significant in relation to the issued share capital of a small quoted company.
A review of impairment in value is undertaken by reference to funding, investment or offers in progress after the balance sheet date and provision is made accordingly where the impairment in value is recognised.
Loans and receivables
Loans and receivables are non-derivative financial assets with a fixed or determinable payment that are not quoted in an active market. After initial recognition loans and receivables are carried at amortised cost using the effective interest rate method less any allowance for impairment. Gains and loses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
Impairment of financial assets
The group assess at each balance sheet date whether a financial asset or group of financial assets is impaired.
Assets carried at amortised cost
If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset's original effective interest rate (ie the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through use of allowance account. The amount of the loss is recognised in the income statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in the income statement.
In relation to trade receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the group will not be able to collect all the amounts due under the original terms of the invoice. The carrying amount of the receivables is reduced through use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectable.
Fair value
The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm's length market transactions; reference to current market value of another instrument which is substantially the same; discounted cash flow analysis or other valuation models.
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is determined on a first-in, first-out basis and includes all cost incurred in bringing each product to its present location and condition.
Cash and cash equivalents
Cash and short term deposits in the balance sheet comprise cash at bank and short term deposits with a maturity of 3 months or less.
For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
Financial liabilities
Interest bearing loan and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method.
Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.
De-recognition of financial assets and liabilities
Financial assets
A financial asset (or, where applicable a part of financial asset or part of a group of similar financial assets) is derecognised when:
The rights to receive cash flows from the asset have expired;
The group retains the right to receive cash flows from the assets, but has assumed an obligation to pay them in full without material delay to a third party under a 'pass through' arrangement; or
The group has transferred its rights to receive cash flows from the asset and neither (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the group's continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the group could be required to repay.
When continuing involvement takes the form of a written and/or purchase option (including a cash settled option or similar provision) on the transferred asset that the group may repurchase, except that in the case of a written put option (including a cash settled option or similar provision) on an asset measured at fair value, the extent of the group's continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.
Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modifications is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.
Provisions
Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.
The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.
Finance leases, which transfer to the group substantially all the risk and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the leased liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are reflected in the income statement.
Capitalised lease assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the group will obtain ownership by the end of the lease term.
Operating lease rentals are charged to the income statement on an accrual basis over the term of the lease.
Operating exceptional items
Operational exceptional items are treated as such if the matters are material and fall within one of the categories below:
(a) Restructuring costs of an activity of the group;
(b) Disposals of property and investments; and
(c) Abortive deals.
Revenue recognition
Revenue is recognised to the extent that it probable that the economic benefits will flow to the group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and Value Added Taxes.
Revenue from sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods.
Interest income is recognised as interest accrues (using the effective interest rate method).
Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.
Deferred income tax
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences, except:
where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary difference associated with an investments in subsidiaries, associates and interest in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductable temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductable temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:
where the deferred income tax asset relating to the deductable temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductable temporary differences associated with investments in subsidiaries, associates and interest in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that the future taxable profit will allow the deferred tax asset to be recovered.
New standards and interpretations not applied
A number of standards and interpretations (and amendments thereto) have been issued by the International Accounting Standards Board and its International Financial Reporting Interpretations Committee which are not yet effective and have not been adopted, many of which are either not relevant to the company or have no impact on the financial statements of the company. Set out below are those standards and interpretations (including revisions and amendments thereto that may have an impact on the financial statements of the company.
|
International Accounting Standards (IAS/IFRS) |
Effective for periods commencing |
|
|
IFRS 2 |
Amendments to IFRS 2 - Vesting Conditions and Cancellations |
1 January 2009 |
|
IFRS 3 |
Business Combinations (revised ) |
1 July 2009 |
|
IFRS 8 |
Operating Segments |
1 January 2009 |
|
IAS 1 |
Presentation of Financial Statements (revised ) |
1 January 2009 |
|
IAS 23 |
Borrowing Costs (revised) |
1 January 2009 |
|
IAS 27 |
Consolidated and Separate Financial Statements (amendment) |
1 July 2009 |
|
IAS 32/IAS1 |
Puttable financial instruments (revised February 2008) |
1 January 2009 |
|
International Financial Reporting Interpretations Committee (IFRIC) |
||
|
IFRIC 16 |
Hedges of a Net Investments in a Foreign Operation |
1 October 2008 |
|
IFRIC 17 |
Distributions of Non Cash Assets to Owners |
1 July 2009 |
IAS 23 has been revised to require capitalisation of borrowing cost when such costs relate to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. In accordance with the transitional provisions in the Standard, the group will adopt this as a prospective change. Accordingly, borrowing costs will be capitalised on qualifying assets with a commencement date of 1 January 2009. No changes will be made for borrowing costs incurred prior to this date that have been expensed.
IFRS 8 requires disclosure based on information presented to the board. Whilst this is not expected to change the business segments about which information is given, the secondary segment information will be replaced by group-wide analysis of revenues and non-current assets by major geographic area. The group does not expect to have customers that individually account for more than 10% of total revenue.
The amendment to IFRS 2 restricts the definition of vesting conditions to include only service conditions (requiring a specified period of service to be completed) and performance conditions (requiring the other party to achieve a personal goal or contribute to achieving a corporate target).
The group does not anticipate early adoption of the revised IFRS 3 and so will apply it prospectively to all business combinations on or after 1 July 2009. Whilst it is not possible to estimate the outcome of adoption, the key features of the revised IFRS 3 include a requirement for acquisition-related costs to be expensed and not included in the purchase price; and for contingent consideration to be recognised at fair value on the acquisition date (with subsequent changes recognised in the income statement and not as a change to goodwill). The standard also changes the treatment of non-controlling interests (formerly minority interest) with an option to recognise these at full fair value as at the acquisition date and a requirement for previously held non-controlling interest to be fair valued as at the date control is obtained, with gains and losses recognised in the income statement.
IAS 27 revised is effective for annual periods beginning on or after 1 July 2009, with early application only permitted when the revised IFRS 3 is applied. The revised standard applies retrospectively with some exceptions. IAS 27 revised no longer restricts the allocations to minority interest of losses incurred by a subsidiary to the amount of the non-controlling equity investment in the subsidiary. A partial disposal of equity interest in a subsidiary that does not result in a loss of control will be accounted for as an equity transaction and will have no impact on goodwill nor will it give rise to any gain or loss. Where there is a loss of control of a subsidiary, any retained interest will have to be re-measured to fair value, which will impact the gain or loss recognised on disposal. The group is currently assessing the impact on its financial statements from adopting IAS 27 revised.
The Directors do not anticipate that the adoption of the remaining standards and interpretations will have a material impact on the group's financial statements in the period of initial application.
3. Segmental information
The primary reporting format is determined to be business segments as the group's risks and rates of return are affected predominantly by differences in the business segments. Secondary segment information is reported Geographically. For management purposes, the group organised into business units based on their products and services, and has 2 reportable business segments as follows:
Investment and ancillary services provides management services in respect of the investment market. Bar and night clubs segment relates to the UK late-nights, entertainment-led venues and restaurants.
Primary reporting format - business segments
The following tables present revenue and loss and certain asset and liability information regarding the group's business segments for the years ended 30 June 2009 and 2008.
|
Investments& ancillaryservices£000 |
Bars & Night clubs £000 |
Eliminations £000 |
Total £000 |
|
|
Revenue |
||||
|
Sales to external customers |
25 |
12,059 |
- |
12,084 |
|
Inter segment sales |
105 |
- |
(105) |
- |
|
Segment revenue |
130 |
12,059 |
(105) |
12,084 |
|
Results |
||||
|
Segment results |
226 |
773 |
- |
999 |
|
Operating profit |
226 |
773 |
- |
999 |
|
Loss on disposal of tangible assets |
- |
(20) |
- |
(20) |
|
Net finance revenue |
257 |
(318) |
- |
(61) |
|
Fair valuation of financial assets held at fair value through profit or loss |
(1,954) |
- |
- |
(1,954) |
|
Loss before taxation |
(1,471) |
435 |
- |
(1,036) |
|
Tax expense |
- |
- |
- |
- |
|
Loss for the year |
(1,471) |
435 |
- |
(1,036) |
|
Assets and liabilities |
||||
|
Other segment assets |
760 |
8,467 |
- |
9,227 |
|
Financial assets held at fair value through profit or loss |
5,906 |
- |
- |
5,906 |
|
Total assets |
6,666 |
8,467 |
- |
15,133 |
|
Segment liabilities |
1,725 |
3,063 |
- |
4,788 |
|
Total liabilities |
1,725 |
3,063 |
- |
4,788 |
|
Other segment disclosures |
||||
|
Capital expenditure: |
||||
|
Property, plant and equipment - additions |
- |
1,009 |
- |
1,009 |
|
Depreciation |
4 |
397 |
- |
401 |
Year ended 30 June 2008
|
Investments& ancillaryservices£000 |
Bars & Night clubs £000 |
Eliminations £000 |
Total £000 |
|
|
Revenue |
||||
|
Sales to external customers |
2 |
10,136 |
- |
10,138 |
|
Inter segment sales |
105 |
- |
(105) |
- |
|
Segment revenue |
107 |
10,136 |
(105) |
10,138 |
|
Results |
||||
|
Segment results |
177 |
64 |
- |
241 |
|
Operating profit |
177 |
64 |
- |
241 |
|
Loss on disposal of tangible assets |
(1) |
- |
- |
(1) |
|
Net finance revenue |
329 |
(298) |
- |
31 |
|
Fair valuation of financial assets held at fair value through profit or loss |
(2,906) |
- |
- |
(2,906) |
|
Loss before taxation |
(2,401) |
(234) |
- |
(2,635) |
|
Tax expense |
- |
- |
- |
- |
|
Loss for the year |
(2,401) |
(234) |
- |
(2,635) |
|
Assets and liabilities |
||||
|
Other segment assets |
945 |
7,912 |
- |
8,857 |
|
Financial assets held at fair value through profit or loss |
6,477 |
- |
- |
6,477 |
|
Total assets |
7,422 |
7,912 |
- |
15,334 |
|
Segment liabilities |
995 |
2,958 |
- |
3,953 |
|
Total liabilities |
995 |
2,958 |
- |
3,953 |
|
Other segment disclosures |
||||
|
Capital expenditure: |
||||
|
Property, plant and equipment - additions |
10 |
1,565 |
- |
1,575 |
|
Financial assets held at fair value through profit or loss - additions |
128 |
- |
- |
128 |
|
Depreciation |
3 |
349 |
- |
352 |
Secondary reporting format - Geographical segments
The following tables present revenue certain asset and capital expenditure information regarding the group's geographical segments for the years ended 30 June 2009 and 2008.
Year ended 30 June 2009
|
UK £000 |
USA £000 |
Total £000 |
|
|
Revenue |
|||
|
Sales to external customers |
12,084 |
- |
12,084 |
|
Revenue from continuing operations |
12,084 |
- |
12,084 |
|
Other segment information |
|||
|
Segment assets |
9,227 |
- |
9,227 |
|
Financial assets held at fair value through profit or loss |
351 |
5,555 |
5,906 |
|
Total assets |
9,578 |
5,555 |
15,133 |
|
Capital expenditure: |
|||
|
Property, plant and equipment |
1,009 |
- |
1,009 |
|
Year ended 30 June 2008 |
UK £000 |
USA £000 |
Total £000 |
|
Revenue |
|||
|
Sales to external customers |
10,138 |
- |
10,138 |
|
Revenue from continuing operations |
10,138 |
- |
10,138 |
|
Other segment information |
|||
|
Segment assets |
8,857 |
- |
8,857 |
|
Financial assets held at fair value through profit or loss |
348 |
6,129 |
6,477 |
|
Total assets |
9,205 |
6,129 |
15,334 |
|
Capital expenditure: |
|||
|
Property, plant and equipment |
1,575 |
- |
1,575 |
|
Intangible assets |
- |
128 |
128 |
|
4. Administrative expenses - exceptional items |
2009 £000 |
2008 £000 |
|
|
Provision for impairment of financial assets held at fair value through profit or loss |
- |
2 |
|
|
Deal and merger costs: |
|||
|
- Redundancy costs |
16 |
10 |
|
|
- Cost on abortive projects |
12 |
93 |
|
|
Restructuring charges |
26 |
138 |
|
|
54 |
243 |
The proportion of exceptional items that relate to minority interests is £10,000 (2008 - £55,000). Any charges or expenses in respect of minority interests are not considered recoverable and accordingly are not treated as such in the financial statements.
5. Operating profit
This is stated after charging:
|
2009 £000 |
2008 £000 |
|
|
Depreciation of property, plant and equipment |
401 |
352 |
|
Net foreign currency differences |
1,427 |
19 |
|
Cost of inventories recognised as an expense (included in cost of sales) |
2,041 |
1,677 |
|
Operating lease payments - land and buildings |
1,028 |
1,276 |
|
Net gains/(losses) on: |
||
|
Provision for carried interest |
(644) |
824 |
|
6. Auditors' remuneration |
2009 £000 |
2008 £000 |
|
Audit of the group's financial statements |
57 |
50 |
|
Other fees to auditors: |
||
|
- auditing the accounts of subsidiaries |
34 |
25 |
|
91 |
75 |
|
|
7. Staff costs |
2009 £000 |
2008 £000 |
|
Wages and salaries |
2,980 |
2,323 |
|
Social security costs |
197 |
182 |
|
3,177 |
2,505 |
|
|
There were no pension contributions during the year. The average monthly number of employees during the year was as follows: |
2009 No. No. |
2008 No. |
|
Investment holdings |
4 |
4 |
|
Bar and night clubs |
||
|
- Bar staff |
371 |
415 |
|
- Head office |
16 |
14 |
|
391 |
433 |
|
|
8. Directors' remuneration |
2009 £000 |
2008 £000 |
|
Emoluments |
44 |
43 |
An analysis of directors' remuneration is set out in the directors' report. There were no pension payments in respect of either year. Included in the report on directors' remuneration are details of fees payable to Odyssey Partners Limited, a company controlled by Julian Fellerman and Richard Kleiner, in respect of the management agreement between the company and Odyssey Partners Limited.
|
9. Finance revenue |
2009 £000 |
2008 £000 |
|
On deposits and liquid funds |
53 |
91 |
|
10. Finance cost |
2009 £000 |
2008 £000 |
|
Bank loans and overdrafts |
91 |
60 |
|
Finance lease interest |
23 |
- |
|
114 |
60 |
|
|
11. Taxation The major components of income tax for the years ended 30 June 2009 and 2008 are: (a) Analysis of charge in year: |
2009 £000 |
2008 £000 |
|
Current tax |
||
|
UK corporation tax on the profit for the year |
- |
- |
|
Deferred tax |
||
|
Excess capital allowance over depreciation (note 11(c)) |
- |
- |
|
Total tax charge for year |
- |
- |
|
(b) Factors affecting current tax charge for the year: The tax assessed for the year differs from the standard rate of corporation tax in the UK (28%). The differences are explained below: |
2009 £000 |
2008 £000 |
|
Loss on ordinary activities before tax |
(1,036) |
(2,635) |
|
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 28% (2008 - 30%) |
(290) |
(791) |
|
Effects of: |
||
|
Disallowable expenses and non-taxable income |
545 |
35 |
|
Losses arising in the current year not relievable against current tax |
144 |
909 |
|
Losses brought forward utilised |
(399) |
(153) |
|
Current tax for the year (note 11a) |
- |
- |
(c) Deferred tax
The group has tax losses arising in the UK of approximately £23.1 million (2008 - £24.2 million) that are available indefinitely for offset against future taxable profits of those companies in which the losses arose. Deferred tax assets of £6.5 million (2008 - £6.8 million) have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the group.
In addition, deferred tax assets of £0.1 million (2008 - £0.1 million) arising on decelerated capital allowances of £0.3 million (2008 - £0.2 million) and deferred tax assets of £0.5 million (2008 - £0.3 million) arising on the carried interest provision of £1.6 million (2008 - £1.0 million) have also not been recognised as there is insufficient certainty of future profits against which the temporary difference will unwind.
12. Dividends
No dividend will be declared for the year ended 30 June 2009 (2008 - £nil).
13. Loss per share
The basic (loss) per share calculation is based on the group's retained loss for the year of £1.04 million (2008 - £2.64 million) and the weighted average number of shares in issue for the year of 8,025,752 (2008 - 8,025,752).
The loss attributed to ordinary shareholders and the weighted average number of shares for the purposes of calculating the diluted earnings per share is identical to those used for basic earnings per share.
|
14. Intangible assets |
PositiveGoodwill £000 |
NegativeGoodwill £000 |
|
Cost: |
||
|
At 1 July 2008 and 30 June 2009 |
4,454 |
(1,749) |
|
Amortisation and impairment |
||
|
At 1 July 2008 and 30 June 2009 |
- |
(1,749) |
|
Net book value as at 30 June 2009 |
4,454 |
- |
|
Net book value as at 30 June 2008 |
4,454 |
- |
Goodwill arose through the acquisition of Eclectic Bars Limited, and so has been allocated to this single cash generating unit for the purpose of impairment testing.
The calculation of fair value less costs to sell has indicated no impairment in the goodwill arising on the acquisition. The key assumptions in calculating the fair value less costs to sell are:
Site EBITDA being the EBITDA at site level before deduction of central infra structure and head office costs.
EBITDA multiples being the relevant multiple applied to the site EBITDA in arriving at an appropriate enterprise value (including goodwill) for the business.
The board believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of goodwill to exceed its recoverable amount.
|
15. Property, plant and equipment Group |
Leaseholdimprovements£000 |
IT equipment £000 |
Furnitureand fittings £000 |
Motor vehicles £000 |
Total £000 |
|
Cost: |
|||||
|
At 30 June 2007 |
499 |
264 |
547 |
69 |
1,379 |
|
Additions |
1,256 |
24 |
295 |
- |
1,575 |
|
Disposals |
- |
(10) |
- |
- |
(10) |
|
At 30 June 2008 |
1,755 |
278 |
842 |
69 |
2,944 |
|
Additions |
865 |
25 |
45 |
74 |
1,009 |
|
Disposals |
(21) |
- |
(33) |
(10) |
(64) |
|
At 30 June 2009 |
2,599 |
303 |
854 |
133 |
3,889 |
|
Depreciation: |
|||||
|
At 30 June 2007 |
35 |
245 |
204 |
24 |
508 |
|
Charge for the year |
118 |
11 |
210 |
13 |
352 |
|
Disposals |
- |
- |
- |
(4) |
(4) |
|
At 30 June 2008 |
153 |
256 |
414 |
33 |
856 |
|
Charge for the year |
158 |
16 |
208 |
19 |
401 |
|
Disposals |
(21) |
- |
(10) |
(6) |
(37) |
|
At 30 June 2009 |
290 |
272 |
612 |
46 |
1,220 |
|
Net book value: |
|||||
|
At 30 June 2009 |
2,309 |
31 |
242 |
87 |
2,669 |
|
At 30 June 2008 |
1,602 |
22 |
428 |
36 |
2,088 |
|
At 30 June 2007 |
464 |
19 |
343 |
45 |
871 |
|
The carrying value of plant and equipment held under finance leases and hire purchase contracts at 30 June 2009 was £239,000 (2008: £220,000). Leased assets and assets under hire purchase contracts are pledged as security for the related finance leases and hire purchase liabilities. Company |
|||
|
IT |
Furniture |
||
|
equipment |
and fittings |
||
|
£000 |
£000 |
£000 |
|
|
Cost: |
|||
|
At 30 June 2007 |
195 |
39 |
234 |
|
Additions/adjustments |
- |
10 |
10 |
|
At 30 June 2008 |
195 |
49 |
244 |
|
Additions/adjustments |
8 |
(8) |
- |
|
At 30 June 2009 |
203 |
41 |
244 |
|
Depreciation: |
|||
|
At 30 June 2008 |
194 |
37 |
231 |
|
Depreciation charge for the year |
1 |
2 |
3 |
|
At 30 June 2008 |
195 |
39 |
234 |
|
Depreciation charge for the year |
4 |
- |
4 |
|
At 30 June 2009 |
199 |
39 |
238 |
|
Net book value: |
|||
|
At 30 June 2009 |
4 |
2 |
6 |
|
At 30 June 2008 |
- |
10 |
10 |
|
At 30 June 2007 |
1 |
2 |
3 |
|
16. Financial assets held at fair value through profit or loss |
Group 2009 £000 |
Company 2009 £000 |
Group2008 £000 |
Company2008 £000 |
|
Unlisted investments |
5,906 |
3,221 |
6,477 |
3,158 |
|
Investment in subsidiary undertakings |
- |
7,768 |
- |
7,814 |
|
5,906 |
10,989 |
6,477 |
10,972 |
|
|
Group - Unlisted investments |
Cost £000 |
Provision £000 |
Revaluation £000 |
Book value £000 |
|
At 30 June 2007 |
13,554 |
(9,762) |
5,484 |
9,276 |
|
Additions |
128 |
- |
- |
128 |
|
Disposal |
(125) |
107 |
- |
(18) |
|
Provisions |
- |
(2) |
- |
(2) |
|
Exchange differences |
- |
(1) |
- |
(1) |
|
Transfers |
71 |
(71) |
- |
- |
|
Revaluation |
- |
- |
(2,906) |
(2,906) |
|
At 30 June 2008 |
13,628 |
(9,729) |
2,578 |
6,477 |
|
Exchange differences |
- |
1,383 |
- |
1,383 |
|
Revaluation |
- |
- |
(1,954) |
(1,954) |
|
At 30 June 2009 |
13,628 |
(8,346) |
624 |
5,906 |
|
Company - Unlisted investments |
Cost £000 |
Provisions £000 |
Revaluation £000 |
Book value £000 |
|
At 30 June 2007 |
12,476 |
(1,748) |
- |
10,728 |
|
Additions |
238 |
- |
- |
238 |
|
Exchange differences |
- |
6 |
- |
6 |
|
At 30 June 2008 |
12,714 |
(1,742) |
- |
10,972 |
|
Additions |
204 |
- |
- |
204 |
|
Repayments |
(250) |
- |
- |
- |
|
Exchange differences |
- |
63 |
- |
63 |
|
At 30 June 2009 |
12,668 |
(1,679) |
- |
10,989 |
Details of the investments in which the company holds, directly or indirectly, 20% or more of the nominal value of any class of share capital are as follows:
|
Name of Company |
Holding |
Proportion of voting rights and shares held |
Nature of business |
|
Subsidiary undertakings: Avanti Holdings plc |
Ordinary shares |
100% |
Private equity |
|
Avanti Partners (UK) Limited |
Ordinary shares |
100% |
Management services |
|
Avanti Partners NV * |
Ordinary shares |
100% |
Private equity |
|
Eclectic Bars Limited (formerly Barclub Limited) |
Ordinary shares |
60% |
Operation of late night bars and night clubs |
Avanti Partners (UK) Limited and Avanti Partners NV are directly owned by Avanti Holdings plc and the rest of the subsidiaries are directly owned by Avanti Capital plc.
* Incorporated in Belgium. All other subsidiaries are domiciled and incorporated in England & Wales.
The fair values of financial assets are determined in accordance with the valuation guidelines issued by the British Venture Capital Association as set out in accounting policy note 2.
Management has estimated the potential effect of using reasonably possible alternatives for price-earnings ratios would result in the range of difference in fair value from a reduction of approximately £1.2 million (2008: £1.4 million) using less favourable assumptions to an increase of approximately £1.4 million (2008: £600,000) using more favourable assumptions. Management has used, for the purposes of the above figures, price-earnings ratios that they believe are comparable to the group's investments.
Fair valuation for the carrying value of financial assets held at fair value through profit or loss has been considered and, except for the provison in the group's investment in mBlox, no other provision was considered necessary.
|
17. Inventories |
2009 £000 |
2008 £000 |
||
|
Goods for re-sale |
146 |
129 |
||
|
18. Trade and other receivables |
Group 2009 £000 |
Company 2009 £000 |
Group 2008 £000 |
Company 2008 £000 |
|
Trade receivables |
99 |
30 |
73 |
2 |
|
Other taxes |
13 |
- |
33 |
- |
|
Amounts due from subsidiary company |
- |
434 |
- |
571 |
|
Other debtors |
1,008 |
99 |
996 |
106 |
|
1,120 |
563 |
1,102 |
679 |
Trade receivables are non-interest bearing and are generally on a 30-90 days' terms. Fair valuation for the provision of impairment has been considered and no provision was considered necessary.
At both 30 June 2009 and 30 June 2008 none of the trade receivables were past due or impaired.
The credit quality of trade receivables that are neither past due nor impaired is assessed by reference to external credit ratings where available, otherwise historical information relating to counterparty default rates is used.
Of the balance in respect of counterparties with internal ratings, 100% of existing customers are with no history of defaults.
|
19. Cash and cash equivalents |
Group2009 £000 |
Company2009 £000 |
Group2008 £000 |
Company2008£000 |
|
Cash at bank and on hand |
282 |
4 |
347 |
4 |
|
Short-term deposits |
556 |
556 |
737 |
737 |
|
838 |
560 |
1,084 |
741 |
The carrying value of the group's cash and cash equivalent assets was considered and no provision was considered necessary.
20. Trade and other payables
|
Group2009 £000 |
Company2009 £000 |
Group2008 £000 |
Company2008£000 |
|
|
Trade payables |
664 |
4 |
603 |
8 |
|
Other taxes and social security costs |
216 |
- |
236 |
- |
|
Accruals |
792 |
77 |
418 |
48 |
|
1,672 |
81 |
1,257 |
56 |
21. Provisions
|
Group and Company |
|
|
Carried Interest |
|
|
At 30 June 2007 |
1,819 |
|
Released in the year |
(824) |
|
At 30 June 2008 |
995 |
|
Provided in the year |
644 |
|
At 30 June 2009 |
1,639 |
In November 2008, the company entered into a new arrangement with Odyssey Partners Limited in relation to the management of the group's portfolio. The new terms have the impact of reducing the management fees payable by 45% and similarly reducing the hurdle over which the carried interest has a positive value, from 150p per share to 82.5 p per share (a 23% premium to the share price as at 4 November 2008, the date the new arrangement was effected). Under the new arrangements, the value of carried interest is dependent on both the net asset values and the dates of realisation. On the basis of net asset values as at 30 June 2009, the value of carried interest would be as follows:
|
Date of realisation |
£ |
|
From 1 June 2009 to 31 August 2009 |
1.64m |
|
From 1 September 2009 to 30 November 2009 |
1.99m |
|
From 1 December 2009 |
2.34m |
The carried interest has been provided on the basis of terms of agreement between the company and Odyssey Partners Limited. The amount has been calculated by reference to the net assets as at 30 June 2009 which assumes that the amounts attributable to each asset will be realised at the amounts so stated. The timing of each asset's realisation event is uncertain.
22. Share capital
|
Allotted, called up |
||||
|
Authorised |
and fully paid |
|||
|
2009 |
2008 |
2009 |
2008 |
|
|
No. |
No. |
No. |
No. |
|
|
Ordinary shares of £0.60 each |
20,833,333 |
20,833,333 |
8,025,752 |
8,025,752 |
|
£000 |
£000 |
£000 |
£000 |
|
|
Ordinary shares of £0.60 each |
12,500 |
12,500 |
£4,815 |
£4,815 |
As at 30 June 2009 there were 8,025,752 ordinary shares of 60 pence each in the capital of the company. There has been no purchase by the company of its own shares during the year.
23. Reserves Group
|
Capitalredemptionreserve£000 |
Otherreserves£000 |
Retainedearnings £000 |
Total £000 |
|
|
At 30 June 2008 |
1,409 |
2,045 |
3,112 |
6,566 |
|
Loss retained for the financial year |
- |
- |
(1,036) |
(1,013) |
|
At 30 June 2009 |
1,409 |
2,045 |
2,076 |
5,530 |
|
Company |
Capitalredemptionreserve£000 |
Otherreserves£000 |
Retainedearnings £000 |
Total £000 |
|
At 30 June 2008 |
1,409 |
2,045 |
3,082 |
6,536 |
|
Loss retained for the financial year |
- |
- |
(953) |
(953) |
|
At 30 June 2009 |
1,409 |
2,045 |
2,129 |
5,583 |
|
24. Financial liabilities |
Effective Interest rates % |
Maturity |
2009 £000 |
2008 £000 |
|
Current: |
||||
|
Obligations under finance leases and hire purchase contracts |
Dec 2011 |
114 |
109 |
|
|
Bank overdrafts |
On demand |
- |
373 |
|
|
Other loans: |
||||
|
£1.232m bank loans (2008: £1.209m) |
2% above base |
Apr 2013 |
335 |
242 |
|
449 |
724 |
|||
|
Non-current: |
||||
|
Obligations under finance leases and |
||||
|
hire purchase contracts |
Dec 2011 |
131 |
157 |
|
|
Other loans: |
||||
|
£1.232m bank loans (2008: £1.209m) |
2% above base |
Apr 2013 |
897 |
820 |
|
1,028 |
977 |
The bank loans and overdrafts are secured by a floating charge over certain of the assets of Eclectic Bars Limited and its subsidiaries. The bank overdraft has a facility limit of £600,000. As part of the arrangements with its bankers, Eclectic Bars and its subsidiaries are required to report on a quarterly basis regarding certain covenants including leverage (EBITDA/Net debt), interest cover and fixed charge cover.
The bank loan is repayable in quarterly instalments of £60,450 and is repayable by April 2013.
25. Transaction with directors
In the period under review, Odyssey Partners Limited, a company in which Julian Fellerman and Richard Kleiner has a material interest, provided investment advisory services amounting to £344,000 (2008- £457,000).
Included in provisions is an amount of £1.639 million (2008: £995,000) which relates to carried interest that would be payable to Odyssey Partners Limited if the net assets were to be realised at their carrying value at the balance sheet date.
26. Commitments and contingencies
Operating lease commitments
At 30 June 2009, the group had total minimum commitments under non-cancellable operating leases as set out below:
|
2009 £000 |
2008 £000 |
|
|
Land and Buildings |
||
|
Operating leases which expire: |
||
|
- in less than one year |
10 |
10 |
|
- within two to five years |
- |
- |
|
- in over five years |
12,643 |
13,034 |
|
12,653 |
13,044 |
|
|
The company had no commitments under non-cancellable operating leases. Finance lease and hire purchase contracts At 30 June 2009, the group had total minimum commitments under finance leases and hire purchase contracts as set out below: |
||
|
2009 £000 |
2008 £000 |
|
|
Within one year |
130 |
131 |
|
After one year but no more than five years |
136 |
170 |
|
Total minimum lease payments |
266 |
301 |
|
Less amounts representing finance charges |
(21) |
(35) |
|
Present value of minimum lease payments |
245 |
266 |
The company has no commitments under finance leases or hire purchase contracts.
Finance assets held at fair value through profit or loss
The company has a cash commitment in respect of one its investments, namely XDL Intervest (USA) Limited Partnership. The company was originally committed to pay a total of CAN$1 million (£712,000) to XDL Intervest (USA) Limited Partnership but the commitment has now been capped at CAN$800,000 (£388,000). As at 30 June 2009, CAN$668,038 (£324,000) had been paid leaving an outstanding commitment of CAN$131,962 (£64,000).
27. Financial risk management objectives and policies
The group's financial instruments comprise investments, cash and liquid resources, and various items, such as trade receivables and trade payables that arise directly from its operations. The vast majority of the group's financial investments are denominated in sterling.
The group does not enter into derivatives or hedging transactions.
It is, and has been throughout the period under review, the group's policy that no trading in financial instruments shall be undertaken.
The main risks arising from the group's financial instruments are investment risk, interest rate risk and liquidity risk. With the exception of the investment in mBlox, the group does not have a material exposure to foreign currency risk. The board reviews policies for managing each of these risks, and they are summarised as follows:
Investment risk
Investment risk includes investing in companies that may not perform as expected. The group's investment criteria focus on the quality of the business and the management team of the target company, market potential and the ability of the investment to attain the returns required within the time horizon set for the investment. Due diligence is undertaken on each investment. The group regularly reviews the investments in order to monitor the level of risk and mitigate exposure where appropriate.
Interest rate risk
The group borrows in currencies to match the denomination at fixed and floating rates of interest to generate the desired interest profile and to manage the group's exposure to interest fluctuations.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the group's loss before tax (through the impact on floating rate borrowings)
|
Increase/decrease |
Effect on profit |
|
|
In basis points |
before tax 2009 |
|
|
2009 |
||
|
Sterling |
+ 100 |
(7) |
|
Sterling |
- 100 |
7 |
|
2008 |
||
|
Sterling |
+ 100 |
(12) |
|
Sterling |
- 100 |
12 |
Liquidity risk
The group's policy is to finance its operations and expansion through working capital and, in the case of investing in target companies, to raise an appropriate level of acquisition finance.
The table below summarises the maturity profile of the group's financial liabilities at 30 June 2009 and 2008 based on contractual undiscounted payments.
|
Year ended 30 June 2009 |
Total £000 |
On demand £000 |
Up to 1 year £000 |
1-2 Years £000 |
2-5 years £000 |
|
Interest bearing loans and borrowings |
1,232 |
- |
335 |
335 |
562 |
|
Trade and other payables |
664 |
- |
664 |
- |
- |
|
Year ended 30 June 2008 |
Total £000 |
On demand £000 |
Up to 1 year £000 |
1-2 Years £000 |
2-5 years £000 |
|
Interest bearing loans and borrowings |
1,435 |
373 |
242 |
242 |
578 |
|
Trade and other payables |
603 |
- |
603 |
- |
- |
The group aims to mitigate liquidity risk by managing cash generation by its operations, and applying cash collection targets throughout the group. Investment is carefully controlled, with authorisation limits operating up to board level and cash payback periods applied as part of the investment appraisal process.
Credit risk
There are no significant concentrations of credit risk within the group. The maximum credit risk exposure relating to financial assets is represented by the carrying value as at the balance sheet date.
Short term trade receivables and payables
Amounts dealt with in the numerical disclosures in this note exclude short term debtors and creditors.
There is no material difference between the fair values and book values of any of the group's financial instruments.
Strategies for managing capital
The primary objective of the group's capital management is to ensure it is able to support its business and maximise shareholder value. The group manages its capital structure and makes adjustments to it, in light of economic conditions. No changes were made in the objectives or policies during the years ended 30 June 2009 and 30 June 2008.
Financial assets
The group has financial assets as shown below:
|
Non- |
|||||
|
Floating |
Non-interest |
Floating |
interest |
||
|
rate |
bearing |
rate |
bearing |
||
|
financial |
financial |
financial |
financial |
||
|
assets |
assets |
assets |
assets |
||
|
2009 |
2009 |
2008 |
2008 |
||
|
Currency |
£000 |
£000 |
£000 |
£000 |
|
|
Sterling - cash and short term deposits |
838 |
- |
711 |
- |
|
|
Sterling - unquoted investments |
- |
351 |
- |
348 |
|
|
US Dollar - unquoted investments |
- |
5,555 |
- |
6,129 |
|
|
838 |
5,906 |
711 |
6,477 |
||
The floating rate assets earn interest at rates based upon LIBOR. Non-interest bearing financial assets are available on demand.
Supplementary information (unaudited)
at 30 June 2009
Pro Forma Profit & Loss Account and Balance Sheet
Notes to the Pro Forma Profit & Loss Account and Balance Sheet
The pro forma financial information has not been audited.
The pro forma financial information has been prepared to illustrate the effect of not consolidating the results and net assets of Eclectic Bars Limited and therefore sets out the investment activity of Avanti Capital plc as distinct from the bars and clubs activity operated by Eclectic Bars Limited.
The adjustments shown within the pro forma financial information enables a reconciliation to be made to the audited figures included within this annual report and which comprise the usual consolidation items including fees and interest charged by the group to Eclectic Bars Limited and the inclusion, within the pro forma Profit & Loss Account, of EBITDA for Eclectic Bars Limited in respect of the 52-weeks period from 30 June 2008 to 28 June 2009.
|
Profit & Loss Account |
Avanti £000 |
Eclectic Bars £000 |
Adjustment £000 |
Group Total £000 |
|
Revenue |
||||
|
- continuing operations |
130 |
12,059 |
(105) |
12,084 |
|
130 |
12,059 |
(105) |
12,084 |
|
|
Less: cost of sales |
- |
(2,041) |
- |
(2,041) |
|
Gross profit |
130 |
10,018 |
(105) |
10,043 |
|
Operating expenses |
(1,855) |
(8,793) |
105 |
(10,543) |
|
EBITDA |
(1,725) |
1,225 |
- |
(500) |
|
Depreciation and goodwill |
||||
|
amortisation |
(4) |
(417) |
- |
(421) |
|
Interest payable |
- |
(319) |
204 |
(115) |
|
Interest receivable |
258 |
- |
(204) |
54 |
|
Loss/(profit) on ordinary activities before Taxation and exceptional items |
(1,471) |
489 |
- |
(982) |
|
Exceptional items - other |
- |
(54) |
- |
(54) |
|
(Loss)/profit on ordinary activities before taxation |
(1,471) |
435 |
- |
(1,036) |
|
Taxation |
- |
- |
- |
- |
|
(Loss)/profit for the period After minority interest |
(1,471) |
435 |
- |
(1,036) |
|
Pro Forma Profit & Loss Account and Balance Sheet Net Assets |
Avanti £000 |
Eclectic Bars £000 |
Adjustments £000 |
Group Total £000 |
|
Fixed assets |
||||
|
Goodwill |
- |
6,476 |
(2,022) |
4,454 |
|
Tangible assets |
6 |
2,663 |
- |
2,669 |
|
Investments |
13,674 |
- |
(7,768) |
5,906 |
|
13,680 |
9,139 |
(9,790) |
13,029 |
|
|
Current assets |
||||
|
Stock |
- |
146 |
- |
146 |
|
Debtors |
142 |
978 |
- |
1,120 |
|
Cash at bank & in-hand |
614 |
224 |
- |
838 |
|
756 |
1,348 |
- |
2,104 |
|
|
Creditors: amounts falling due within one year |
(86) |
(2,035) |
- |
(2,121) |
|
Net current assets |
670 |
(687) |
- |
(17) |
|
14,350 |
8,452 |
(9,790) |
13,012 |
|
|
Creditors: amounts falling due after one year |
||||
|
Shareholders' loan |
- |
(7,768) |
7,768 |
- |
|
Other creditors |
- |
(1,028) |
- |
(1,028) |
|
14,350 |
(344) |
(2,022) |
11,984 |
|
|
Provisions |
(1,639) |
- |
- |
(1,639) |
|
Net assets |
12,711 |
(344) |
(2,022) |
10,345 |
|
Represented by: |
||||
|
Share capital |
4,815 |
- |
- |
4,815 |
|
Capital redemption reserve |
1,409 |
- |
- |
1,409 |
|
Other reserves |
2,045 |
- |
- |
2,045 |
|
Profit & loss account |
4,442 |
(344) |
(2,022) |
2,076 |
|
Shareholders' funds |
12,711 |
(344) |
(2,022) |
10,345 |
Notice of Annual General Meeting
Notice is hereby given that the 2009 Annual General Meeting of Avanti Capital plc ("the Company") will be held at the offices of Berwin Leighton Paisner, Adelaide House, London Bridge, London EC4R 9HA on the 8th day of December 2009 at 11.00 a.m. to transact the following business.
Ordinary Business
1. To receive and adopt the directors report, the financial statements and the auditors report for the year ended 30 June 2009.
2. That the Directors' Remuneration Report as set out on pages 8 to 10 of the report and accounts (as referred to in 1 above) be and is hereby approve.
3. To re-elect Richard Kleiner as a director.
4. To confirm the re-appointment of Ernst & Young LLP as auditors of the Company and to authorise the directors to fix their remuneration.
Special Business
As special business, to consider and, if thought fit, pass the following resolutions of which Resolution 5 will be proposed as an ordinary resolution and Resolutions 6 and 7 will be proposed as special resolutions:
Ordinary resolution
5. That the Directors be and they are hereby generally and unconditionally authorised (in substitution for all previous authorities in that regard) to exercise all of the powers of the Company to allot relevant securities (within the meaning of Section 80 of the Companies Act 1985 ("the Act")) up to an aggregate nominal amount of £4,815,451 provided that this authority shall expire on the conclusion of the annual general meeting of the Company held in 2010 or 31 December 2010 (whichever is earlier) unless and to the extent that such authority is renewed or extended prior to such date so that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted in pursuance of such offer or agreement as if the authority conferred hereby had not expired.
Special Resolutions
6. That the Directors be and they are hereby empowered pursuant to Section 95 of the Companies Act 1985 ("the Act") in substitution for all previous powers granted thereunder, to allot equity securities (as defined in Section 94 of the Act) pursuant to the authority granted by Resolution 5 above of this resolution as if Section 89(1) of the Act did not apply to any such allotment provided that this power should be limited to:
(a) the allotment of equity securities on a pro rata basis in favour of shareholders where the equity securities respectively attributable to the interests of all shareholders are proportionate (as nearly as may be) to the respective number of ordinary shares held by them, but subject to such exclusions and other arrangements as the directors may deem necessary or expedient to deal with legal or practical problems in respect of overseas holders, fractional entitlement or otherwise;
(b) the allotment of equity securities (in addition to the allotment of equity securities pursuant to the forgoing paragraph) with an aggregate value of up to £1,605,150 being 33.3 per cent. of the issued share capital of the Company on 31 October 2009.
and the power hereby conferred shall expire on the conclusion of the annual general meeting of the Company held in 2010 or 31 December 2010 (whichever is earlier) unless renewed or extended prior to such time except that the Company may, before the expiry of any power contained in this resolution, make an offer or agreement which would, or might, require equity securities to be allotted, after such expiry and the directors may allot equity securities in pursuance of such offer or agreement as if the power hereby conferred has not expired.
7. That the Company be generally and unconditionally authorised for the purposes of section 166 of the Act to make market purchases (within the meaning of Section 163 of the Act) of ordinary shares of 60p each in the capital of the Company ("Ordinary Shares") provided that:
(a) the maximum aggregate number of Ordinary Shares hereby authorised to be purchased is such number of shares which would fully utilise the whole of the distributable reserves of the Company from time to time;
(b) the minimum price which may be paid for an Ordinary Share is 60p per share;
(c) the maximum price which may be paid for an Ordinary Share is an amount equal to 105 per cent. of the average of the middle market quotations for an Ordinary Share as derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the Ordinary Share is purchased;
(a) the authority hereby conferred expires at the conclusion of the next annual general meeting of the Company to be held in 2010 or, if earlier, twelve months after the date of the passing of this resolution unless such authority is renewed, varied or revoked prior to such time; and
(b) the Company may make a contract or contracts to purchase Ordinary Shares under this authority before the expiry of the authority which will or may be executed wholly or partly after the expiry of the authority; and may make a purchase of Ordinary Shares in pursuance of any such contract or contracts
BY ORDER OF THE BOARD
Julian Fellerman
Secretary
6 November 2009
Registered Office:
25 Harley Street
London
W1G 9BR
Notes:
(1) A member entitled to attend and vote at the above-mentioned Annual General Meeting may appoint one nor more proxies to attend and, on a poll, to vote instead of him. A proxy need not be a member of the Company.
(2) A pre-paid form of proxy is enclosed. To be valid, the form of proxy (together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such authority) must be deposited at the offices of the Company's Registrars, Capita IRG, PO Box 25, Beckenham, Kent BR3 4BR no later than 10.00 a.m. on 4 December 2009. Completion of the form of proxy will not preclude a member from attending and voting in person.
(3) The Company, pursuant to regulation 41 of The Uncertificated Securities Regulations 2001, specifies that only those shareholders registered in the register of members of the Company as at 6.00 p.m. on 4 December 2009 shall be entitled to attend or vote at the Annual General Meeting in respect of the number of shares registered in their name at that time. Changes to entries on the relevant register of securities after that time will be disregarded in determining the rights of any person to attend or vote at the Annual General Meeting.
(4) There will be available for inspection at the registered office of the Company, during usual business hours non any weekday from the date of this notice until the date of the meeting, and at the place of the meeting for 15 minutes prior to and during the meeting, copies of any directors' service agreements with the Company and particulars for the period up to 4 November 2009 of the transactions of each director and, so far as he can reasonably ascertain, of his family in the share capital of the Company.
Related Shares:
AVA.L