TIDMDESC
RNS Number : 4278W
Designcapital PLC
31 January 2012
designcapital plc
("designcapital" or the "Company")
Clarification of Investing Policy, current strategy and
financial position
Further to the announcements published on 12 January 2012,
designcapital, the AIM listed investment company dedicated to
investing in the high end contemporary furniture design sector,
wishes to clarify its financial position and investment policy, and
to update the market on its business strategy.
Financial Position
The independent auditors report included in the annual report
contained an emphasis of matter statement, which referred to the
existence of a material uncertainty which may cast significant
doubt on the Company's and Group's ability to continue as a going
concern.
As set out in note 2 (a) to the financial statements set out in
the annual report, the Directors' plans and strategy for the short
and medium term assume a growth in income and profitability in the
Group's remaining trading subsidiary undertakings. Due to the time
needed to establish the new business model, further finance will be
required by the Company to implement or acquire the currently
planned growth opportunities. The need to raise additional funds
will depend upon the timing of the development of the trading
subsidiaries and joint ventures and the availability of funds to
secure planned growth opportunities.
The ability of the Company to arrange and secure such financing
in the future will depend on capital market conditions and the
business performance of the Group. There can be no assurance that
the Company will successfully arrange additional finance, if
required, nor that it will be on terms which are satisfactory to
the Company.
The Directors have had discussions with Luxadvor S.A., a
significant shareholder, and have renegotiated the terms of the two
loans made available to the Company on 26 June 2009 and 11 June
2010 respectively whereby the repayment of the loans will not be
required before 31 December 2012. Further discussions are ongoing
and the Directors have a reasonable expectation that they will
reach an agreement with Luxadvor S.A. whereby both parties agree to
ensure that the working capital requirements of the Group are not
threatened.
On 23 December 2011 T1ps Investment Management Limited ("T1ps
Investment Management"), a shareholder in the Company, provided a
guarantee to the Company to make available funds of up to
GBP250,000 on an interest free and unsecured basis should the
Company be unable to meet its financial obligations from its own
resources. The guarantee is effective for the period to 31 December
2012, or as otherwise agreed with the Company. The Directors are
confident that T1ps Investment Management has the financial
capability to meet the terms of this facility but have not seen
financial information or confirmations from T1psInvestment
Management to verify this.
On 22 December 2011, Frederic Bobo, a Director of the Company,
provided the Company with an eighteen month working capital
facility of up to GBP150,000, to be drawn down by the Company
should the Company need additional funds.
The Directors have concluded that, notwithstanding the future
financial support described immediately above, the circumstances
set out beforehand represent a material uncertainty that casts
doubt upon the Company's and Group's ability to continue as a going
concern, and therefore the Company may be unable to realise its
assets and discharge its liabilities in the normal course of
business. After considering the uncertainties mentioned above, the
extension of the loans from Luxadvor S.A., the guaranteed
facilities from T1ps Investment Management and Frederic Bobo and
based upon the Board-approved forecasts and projections, the
Directors have a reasonable expectation that the Company will
continue in operational existence for the foreseeable future and at
least until the end of December 2012.
Investing Policy
The updated investing policy represents a clarification of the
investing policy previously announced in the Interim Results for
the six months ended 30 June 2009 and published on 30 September
2009 in accordance with the transitional provisions of AIM Notice
33. The investing policy is as follows with changes to the previous
investing policy highlighted in bold:
designcapital was established with the objective of becoming a
major pan-European design-focused investment company. The Company's
investment strategy is to make investments in luxury, contemporary
design orientated companies with a particular focus on
manufacturers and retailers of luxury furniture and design-enabled
products and appliances, including companies and businesses which
the Directors believe are under-capitalised, such as small or
family run businesses, which are unable to reach their full
potential, and as such have the potential to create value for
Shareholders. In addition to these, the Company may also invest in
companies providing advisory services in the fields of architecture
and design.
The Company focuses primarily on investment and acquisition
opportunities within the European Union and the United States as
well as in selected emerging markets, and it makes investments in
target businesses at all development stages save for start-up
businesses.
While the Directors intend that the Company will continue to
make investments in target businesses at all development stages
save for start-up businesses, the investment strategy does not
prevent the Company from investing in businesses, projects or
activities, that are an adjunct to or a logical extension of
existing businesses projects or activities of the Company's
portfolio investments, and as such have the potential to create
value for Shareholders.
The Directors intend that the Company will continue to make
direct investments in, and directly manage its investments, in
design related companies and projects, as well as making
investments in such companies and projects, through various
investment vehicles.
To that extent a significant proportion of the Company's assets
will continue to be invested and managed, both directly by the
Company, but also through the creation of investment vehicles in
respect of which the Company will delegate the management.
The Directors intend that the Company's interest in a proposed
investment will continue to range from a minority position with
strategic control, up to 100% ownership, with the objective of
creating a portfolio of strategically integrated companies.
Proposed investments may be made through a direct interest in a
design company or project, an indirect interest through a
partnership, joint venture or through quoted or unquoted companies,
and also through the creation of investment vehicles in respect of
which the Company will delegate the management.
The Directors continued intention is to identify and invest in
investment opportunities which they believe show excellent growth
potential on a stand-alone basis, and which would add value to the
Company, either through the expertise of the Company's personnel or
through ongoing funding.
The Directors collectively have considerable experience in
investing, structuring and, executing deals and in raising funds;
they shall continue to use this experience to identify and
investigate investment opportunities, and to negotiate
acquisitions. Wherever necessary the Company will continue to
engage suitably qualified technical personnel to carry out
specialist due diligence prior to making an acquisition or an
investment.
While the Directors will continue to actively monitor any
investments or acquisitions made by the Company, neither they nor
the Company shall take part in the day to day management of the
underlying investments, unless required by law or by special
situations.
Notwithstanding this the Directors of the Company, or the
Company itself represented by one or several Director(s), are
permitted to participate in the Boards, or equivalent corporate
governance bodies, of any investments or acquisitions made by the
Company.
There are no restrictions in the type of investment that the
Company might make nor on the type of opportunity that may be
considered other than set out above.
Business Strategy update
In previous announcements the term "Group" has been used in
describing the business of designcapital plc, which strategic
objective is to create a portfolio of integrated companies that are
managed accordingly.
This description is not intended to infer any management
responsibility between the Directors of designcapital and the
investments, although in accounting terms they have been accounted
for as subsidiaries.
Artelano (International) Ltd
Ownership of the Artelano brand was transferred to designcapital
in 2010 and Artelano (International) Ltd, a company headquartered
in London and 100% owned by the Company, was given responsibility
for the overall strategy of the brand and for the selection of
designers and products, as well as for global brand marketing and
communications.
All other non-core activities of the Artelano brand will be
sub-contracted or licensed to strategic partners, through long-term
contracts. The first such agreement is being finalised with a well
known French company.
Exclusive distribution agreements have already been established
for North America and Middle East and North Africa (MENA) with
companies whose managers will take responsibility for the local
marketing and promotion, distribution and other logistics. These
agreements may transfer into capital partnership once appropriate
performance results have been achieved.
Artelano.com
In the same way, the e-commerce business of the Artelano brand
is to be managed by local partners, through long-term licence
contracts. The first such licence agreement has been signed with
Homecrea s.a.s. for the French market. Negotiations are advancing
with another international partner for a number of additional
countries.
B2B e-procurement platform (Deezplay.com)
With the initial scoping and design work having been completed
in conjunction with Forum Diffusion, the next development stages of
the B2B platform are currently being negotiated with an operator
active in the internet and e-commerce market. Once the agreement is
finalised, the deezplay.com e-procurement platform will be run
under a joint venture arrangement. Deezplay.com is expected to
become the first B2B platform for the distribution of high-end
designer furniture and is an extension of the work previously
undertaken by the Forum businesses in Paris.
Designcapital*finance
Designcapital*finance is an initiative developed through the
trading experiences of Forum Diffusion. The Directors believe it
will provide a complementary business set up as an adjunct to
designcapital's distribution businesses, the purpose of which is to
firstly provide a solution to the problem of funding non-strategic
assets and secondly to secure long term relationships with clients
for the on-going sale of furniture and provision of related support
services. The financing element will be sub-contracted to experts
in the field of asset finance and sales and will be managed out of
the Company's established distribution businesses.
Potential equity financing
On 18(th) December 2007 Mena Consulting Limited entered into a
commitment to subscribe for 13,000,000 Ordinary Shares at an
aggregate subscription price of 10p per share. This commitment has
been renewed annually and on 19th December 2011 was extended to
26(th) January 2013. Accordingly the Directors believe that the
Company is in a position to raise further funding to pursue its
strategy as appropriate opportunities are identified.
Additionally, Directors may offer new Ordinary Shares by way of
consideration as well as cash, thereby helping to preserve the
Company's cash for working capital and as a reserve against
unforeseen contingencies including by way of example, and without
limit, delays in collecting accounts receivable, unexpected changes
in the economic environment and unforeseen operational problems.
The Company may also, in appropriate circumstances, issue debt
securities which may be convertible into equity.
For further information:
Designcapital plc
==================================== =====================
Mike Hosie
==================================== =====================
Frederic Bobo +44 (0) 20 7554 8555
==================================== =====================
Libertas Capital Corporate Finance
Limited
==================================== =====================
Tim Cofman
==================================== =====================
Sandy Jamieson +44 (0) 20 7569 9650
==================================== =====================
This information is provided by RNS
The company news service from the London Stock Exchange
END
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