TIDMHEP
RNS Number : 1064D
Hephaestus Holdings PLC
17 March 2011
Hephaestus Holdings PLC
Preliminary Results for the year to 31 December 2010
Hephaestus Holdings PLC ("Hephaestus", the "Group" or the
"Company"), the engineering and industrial technology investment
company, announces its preliminary results for the year to 31
December 2010.
Highlights:
0 Successful disposal of all of the Group's trading operations
during the year
0 GBP2.1m of cash as at 31 December 2010
0 Doerfer loan note restructured with cash receipts of
approximately GBP350,000 on schedule to date
0 Dispute with former customer of RTS Flexible Systems completed
and settled
0 Realisation of the Group's R&D tax credits completed
0 Investing policy being progressed with two target companies
identified, one in exclusivity
0 Proposal to de-list the Company from AIM to enable a more
financially efficient execution of the Investing policy and the
remaining restructuring programme
Chris Heminway, CEO commented:
"I am pleased with the progress that has been made during the
year, through exiting loss-making and high risk businesses,
simplifying legacy structures and realising value from our
non-trading assets. I recognise nevertheless that the continuing
restructuring process will require further significant time, effort
and cost, and that the costs of continuing as an AIM-listed Company
mean an inefficient use of our limited resources. The Board has
therefore decided that the reconstruction of the Company is best
undertaken off AIM. Accordingly the Board is recommending a
proposal to delist from AIM and has initiated discussions with the
largest shareholder on raising capital in order to finance an exit
opportunity for other shareholders."
The Company's Preliminary Results are available on its website
www.hephaestus-holdings.com
- ends -
Enquiries:
HEPHAESTUS Holdings PLC 078 0230 5579
Chris Heminway, Chief Executive Officer
Shore Capital 020 7408 4090
Andrew Raca / Toby Gibbs
Chairman's and Chief Executive Officer's Statement and Operating
and Financial Review
Business overview
Following the disposal of its trading businesses in November
2010 and a change of name from Robotic Technology Systems plc,
Hephaestus Holdings plc is now an investment company seeking to
acquire businesses with a sustainable competitive advantage in the
industrial technology sector.
On 21 October 2010, the Board announced the proposed disposal of
RTS Life Science Limited which incorporated all of the continuing
trade and selected assets and liabilities of the Group's
businesses, including the trading business and assets of RTS
Flexible Systems Limited and RTS Thurnall (Holdings) PLC (now
Hephaestus (UK) Holdings Subsidiary One PLC ("Sub One")), although
these latter legal entities were retained. Following the demerger
of INS in 2006, the Group's trading activities, consisting largely
of RTS Life Science and RTS Flexible Systems, experienced declining
revenues and uneven trading results. The Group undertook several
reorganisations in order to reduce overheads, the latest of which
was to reduce headcount and transfer the Flexible Systems and
Thurnall (Sub One) businesses into RTS Life Science, with such
transfers taking effect at the end of September 2010. In the first
six months of 2010, these businesses recorded an operating loss
before exceptional items of GBP380,000 on turnover of GBP4.6
million, and the loss making trend continued in the second half of
the financial year. These poor results followed on from an
operating loss before exceptional items in the year ended 31
December 2009 of GBP216,000 on turnover of GBP11.8 million. In
addition, RTS Life Science found it increasingly difficult to
obtain substantial cash deposits when accepting new orders for its
products, resulting in a greater demand on the Group's remaining
cash resources to fund working capital. The Board therefore decided
that the trading businesses would benefit from being part of a
group with greater financial, managerial and other resources.
At a General Meeting of the Company held on 5 November 2010,
shareholders approved the sale of the trading businesses to
Entologi Limited and a new investing policy for the Company.
Following the disposal, Gary Walsh, Managing Director of the Group
resigned from the Board on 5 November 2010 and Jon Sharrock, Group
Financial Director, resigned from the Board on 8 December 2010.
Accordingly, the Company is now an Investing Company as defined
by the Aim Rules and has two active workstreams:
- To realise value from the remaining non-trading assets of the
Group not included within the disposal of RTS Life Science Limited.
This included the settlement of a subsidiary's claim against a
former customer, the receipt of interest and capital of a loan note
(the "Doerfer Loan Note") owned by the Group and receipt of R&D
tax credits of the Group for prior period qualifying expenditure;
and
- To pursue acquisition opportunities of industrial technology
businesses with a lower risk profile than the previous activities
of the Group and from a position of relative financial
strength.
Realisation of value from the remaining non-trading assets of
the Group
Claim against a former customer
On 5 January 2011, a full and final agreement was reached
between RTS Flexible Systems Limited and its former customer that
resulted in a payment of GBP0.3m by the former customer. This value
has been recognised as at 31 December 2010 along with the remaining
substantial associated legal and other costs of the action.
Doerfer Loan Notes
The Group restructured the Doerfer Loan Notes during the year by
agreeing a lower interest rate and capital sum that are conditional
on adherence to a specific repayment schedule from the note issuer.
Interest and capital repayments have been made to schedule since
the date of issue totalling approximately $0.5m and the remaining
capital element at 31 December 2010 is $3.5m. The original notes
had been fully provided for since the end of 2008 but the new note
is reflected in the Statement of Financial Position at a carrying
value of GBP250,000 at 31 December 2010.
R&D tax credits
R&D tax credits totalling approximately GBP121,000 were
received during January 2011 and their full value has been
recognised as at 31 December 2010. In addition, an amount of
GBP143,000, equal to the R&D tax credit received by RTS Life
Science following its disposal by the Group, was received during
February 2011 and has been recognised as deferred acquisition
consideration.
Investing policy
The Board has stated that it considers that the engineering and
industrial technology sector is held in low regard, particularly in
the UK, which the Board believes affords potential for value
creation through a clearly defined, focused investment strategy in
the sector.
The Company is therefore, seeking to acquire industrial
businesses with defensible technologies and sustainable competitive
advantage. Where possible, it will harness operational and
strategic synergies between separate companies. Chris Heminway was
appointed Chief Executive Office for the Group to drive this
process forward.
Financial summary
Financial position
At 31 December 2010 the Group retained GBP2.1m of cash and cash
equivalents (which included GBP1.0m of cash which was restricted as
a result of it being held in Escrow at 31 December 2010 but which
has subsequently been returned to the Group unrestricted) with
other net current assets of approximately GBP248,000.
These net current assets exclude GBP234,000 of net current
liabilities that are recognised within the Group's subsidiary
undertaking, RTS Flexible Systems Limited. Following the sale of
its trade and assets in November 2010 and the settlement with its
former customer in January 2011, RTS Flexible Systems will become
dormant and the Company and its sole director are taking advice on
the implications for its creditors.
Financial performance
The Group reported an operating profit of GBP235,000 that
included GBP194,000 of income from the capital receipts from the
Doerfer Loan Note and the recognition of GBP250,000 as a
re-assessment of the fair value of the new Doerfer Loan Note.
Interest receivable of GBP153,000, principally from the Doerfer
Loan Note, enabled the Group to report a profit before tax and
before the loss from discontinued operations of GBP388,000.
The Group reported a post tax profit for the financial year of
GBP377,000 but incurred a further post tax loss of GBP1.5m from the
combination of the losses of GBP1.6m that the discontinued
operations suffered up to the date of disposal, offset by a small
profit on disposal of the discontinued operations of the Group of
GBP0.1m.
Dividend
The Directors do not recommend the payment of a final dividend
(2009: GBPNil).
Key risks
Although the directors seek to minimise the impact of risk
factors, the Group is subject to a number of risks, which include
but are not limited to the following:
Company's objectives may not be fulfilled - There is no
guarantee that the Company will be able to identify appropriate
companies to invest in and, should it make investments, there is no
guarantee that the investments will perform as expected.
Doerfer Loan Note - The Company has recognised the loan note
with a carrying value of GBP250,000 at 31 December 2010 which is a
significant discount to the face value of the note itself. This
discount represents the Directors' assessment of risk of default by
the issuer. Whilst the Company monitors the position closely and
anticipates future receipts, there is no guarantee that Doerfer
will be able to continue trading and hence there is a possibility
that the outstanding amounts due will not be recovered in full or
at all which would reduce the funds available to the Company for
future investment.
Listing Status - Whilst the Directors are making every effort to
carry out the Investing Policy that was approved at the EGM in
November 2010, there is no certainty that the Company will be able
to make an acquisition or acquisitions which constitute a reverse
takeover under Rule 14 of the AIM Rules or implement its Investing
Policy within twelve months from completion of the disposals, and
hence there is a risk that the trading in the Company's Ordinary
Shares may be suspended or cancelled by the London Stock Exchange.
In addition, the Board is putting forward proposals to delist from
AIM which is discussed further below.
Prospects
After some positive progression of the legacy affairs of the
Group in recent months, the Company continues to streamline the
Group structure, realise assets and minimise or extinguish
liabilities, whether contingent or actual. However, this process of
restructuring is expected to take further significant time, effort
and cost. Following the disposal of the Group's trading businesses
and the ongoing element of restructuring of the remaining parts of
the Group, overhead has been reduced from previous levels. The
overhead nevertheless remains high in relation to the Company's net
cash, cash equivalents and restricted cash of GBP2.1m at the end of
2010 and a significant portion of this is directly or indirectly
related to maintaining the Company's AIM listing.
In view of the high documentation costs that would necessarily
be incurred by the Company in respect of acquisitions that it may
undertake when considered along with the costs of maintaining its
listing, the small market capitalisation of the Company and the
lack of liquidity in its shares, the Board has decided that the
period of reconstruction of the Company is best undertaken off AIM.
Accordingly, the Board is recommending a proposal to de-list the
Company from AIM. The Company is also in discussions with its
largest shareholder on raising capital to finance an exit
opportunity for other shareholders. For continuing shareholders,
the Company intends to initiate a matched-bargain trading service
and will continue to publish financial information, news and
updates primarily via its website.
The Board continues to investigate acquisition prospects which
meet the Company's investing policy and is currently in exclusive
negotiations with a potential target, although there is no
certainty a deal will be completed. We believe that the current
economic conditions will allow purchasers with cash to invest with
attractive opportunities to acquire businesses at low points in
their business cycles in anticipation of economic recovery. As a
result, the Board is confident that the Company's prospects are
good.
Chris Brown Chris Heminway
Chairman Chief Executive Officer
15 March 2011
Consolidated Statement of Comprehensive Income for the year
ended 31 December 2010
Restated
2010 2009
Notes GBP000 GBP000
----------------------------------------------- ----- ------- --------
Revenue - 13
Cost of sales - -
Gross profit - 13
Distribution costs - -
Administrative expenses (209) (1,015)
Other operating income 444 134
Operating profit/(loss) 235 (868)
Operating loss before exceptional items (15) (242)
Exceptional items included in administrative
expenses or other operating income
above 3 250 (626)
----------------------------------------------- ----- ------- --------
Operating profit/(loss) 235 (868)
Finance income 153 481
Finance expenses - (8)
----------------------------------------------- ----- ------- --------
Profit/(loss) before taxation 388 (395)
Taxation (11) -
----------------------------------------------- ----- ------- --------
Profit after taxation 377 (395)
(Loss)/profit from discontinued operations (1,483) 405
----------------------------------------------- ----- ------- --------
(Loss)/profit for the year (1,106) 10
----------------------------------------------- ----- ------- --------
Other comprehensive income
Other comprehensive income for the
year - -
----------------------------------------------- ----- ------- --------
Total comprehensive income for the
year, attributable to equity shareholders
of the parent (1,106) 10
----------------------------------------------- ----- ------- --------
(Loss)/earnings per ordinary share
:
Total basic and diluted (loss)/earnings
per share attributable to equity shareholders
of the parent 4 (1.77p) 0.02p
----------------------------------------------- ----- ------- --------
Consolidated Statement of Changes in Equity for the year ended
31 December 2010
Currency
Share Share translation Retained Non-controlling
capital premium reserve earnings interest Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------- ------- ------- ----------- -------- --------------- -------
At 1 January
2009 623 680 (126) 2,634 15 3,826
Share options - - - 27 - 27
Dividends
paid - - - (623) - (623)
------------- ------- ------- ----------- -------- --------------- -------
Transactions
with owners
recognised
directly in
equity - - - (596) - (596)
Result for
the period - - - 10 - 10
------------- ------- ------- ----------- -------- --------------- -------
At 31
December
2009 623 680 (126) 2,048 15 3,240
Dividends
paid - - - - - -
------------- ------- ------- ----------- -------- --------------- -------
Transactions
with owners
recognised
directly in
equity - - - - - -
Result for
the period - - - (1,106) - (1,106)
At 31
December
2010 623 680 (126) 942 15 2,134
------------- ------- ------- ----------- -------- --------------- -------
Consolidated Statement of Financial Position as at 31 December
2010
2010 2009
GBP000 GBP000
-------------------------------------- ------ -------
Non-current assets
Property, plant & equipment - 640
Intangible assets - 1,019
Deferred tax asset - 543
Total non-current assets - 2,202
-------------------------------------- ------ -------
Current assets
Inventories - 111
Current tax receivable 121 -
Loan note 250 -
Trade and other receivables 537 4,864
Cash, cash equivalents and restricted
cash 2,120 2,092
Total current assets 3,028 7,067
-------------------------------------- ------ -------
Total assets 3,028 9,269
-------------------------------------- ------ -------
Current liabilities
Trade and other payables (894) (5,169)
Total current liabilities (894) (5,169)
-------------------------------------- ------ -------
Non-current liabilities
Other liabilities - (494)
Provisions - (366)
Total non-current liabilities - (860)
-------------------------------------- ------ -------
Total liabilities (894) (6,029)
-------------------------------------- ------ -------
Net assets 2,134 3,240
-------------------------------------- ------ -------
Equity attributable to equity holders
of the Company
Share capital 623 623
Share premium 680 680
Currency translation reserve (126) (126)
Retained earnings 942 2,048
Total equity attributable to equity
shareholders 2,119 3,225
-------------------------------------- ------ -------
Non-controlling interest 15 15
Total equity attributable to equity
shareholders of the Group 2,134 3,240
-------------------------------------- ------ -------
Consolidated Cash Flow Statement for the year ended 31 December
2010
2010 2009
GBP000 GBP000
--------------------------------------------- ------- -------
Operating activities
(Loss)/profit for the year (1,106) 10
Adjusted for
Discontinued operations 1,483 -
Taxation 11 (379)
Depreciation - 182
Amortisation - 79
Impairment of intangible assets - 189
Foreign exchange losses/(gains) - 34
Equity-settled share-based payment
charges - 27
Capital receipt on loan note (144) -
Finance income (153) (481)
Finance expense - 8
--------------------------------------------- ------- -------
Operating cash flow before changes
in working capital 91 (331)
Decrease in inventories - 68
(Increase) in Loan note receivable (250) -
(Increase)/decrease in receivables (124) 854
(Decrease) in payables (65) (1,387)
(Decrease) in provisions - (102)
--------------------------------------------- ------- -------
Cash used in operating activities (348) (898)
Finance income received 153 434
Finance expense paid - -
Taxation received - 489
Net cash generated from operating activities (195) 25
--------------------------------------------- ------- -------
Cash flows from investing activities
Payments to acquire property, plant
and equipment (10) (142)
Payments to acquire intangible non-current
assets - (3)
Receipt in respect of loan notes 144 47
Payments to acquire subsidiaries, net
of cash acquired (192) -
Receipt from disposal of discontinued
operations, net of cash disposed 281 -
Net cash (used in) investing activities 223 (98)
--------------------------------------------- ------- -------
Cash flows from financing activities
Dividend paid - (623)
Net cash used in financing activities - (623)
--------------------------------------------- ------- -------
Net increase/(decrease) in cash and
cash equivalents 28 (696)
Cash and cash equivalents at the beginning
of the year 2,092 2,824
Exchange (losses) on cash and cash
equivalents - (36)
Cash, cash equivalents and restricted
cash at the end of the year 2,120 2,092
--------------------------------------------- ------- -------
Analysed as:
Cash and cash equivalents 1,120 2,092
Restricted cash 1,000 -
Cash, cash equivalents and restricted
cash at the end of the year 2,120 2,092
-------------------------------------- ----- -----
Notes
1. These preliminary results have been prepared on the basis of
the accounting policies which are to be set out in Hephaestus
Holdings PLC's annual report and financial statements for the year
ended 31 December 2010.
The consolidated financial statements of the Group for the year
ended 31 December 2010 be prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted for use in the
EU ("adopted IFRSs") and applicable law.
The financial information set out above does not constitute the
company's statutory financial statements for the years ended 31
December 2010 or 2009 but is derived from those financial
statements. Statutory financial statements for 2009 have been
delivered to the Registrar of Companies and distributed to
shareholders, and those for 2010 will be respectively delivered and
distributed on or before 29 June 2011. The auditors have reported
on those financial statements and their reports were:
(i) unqualified;
(ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report; and
(iii) did not contain a statement under section 498(2) or (3) of
the Companies Act 2006 in respect of the financial statements for
2009 or 2010.
2. Basis of preparation
The Group financial statements have been prepared and approved
by the directors in accordance with adopted IFRSs.
The preparation of financial statements in conformity with IFRSs
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
3. Non-recurring administrative (income)/expenses
2010 2009
GBP000 GBP000
-------------------------------------------- ------ ------
Impairment of intangible non-current assets - 189
Restructuring costs - 236
Legal costs - 201
Recognition of fair value of loan notes (250) -
(250) 626
-------------------------------------------- ------ ------
4. Basic and diluted loss per ordinary share
The calculation of earnings per ordinary share is based on the
profit or loss for the period and the weighted average number of
equity voting shares in issue as follows.
2010 2009
----------------------------------------------- ------- ------
(Loss)/earnings (GBP000) (1,106) 10
----------------------------------------------- ------- ------
Weighted average number of shares (number
'000) 62,335 62,335
----------------------------------------------- ------- ------
Basic and diluted (loss)/earnings per ordinary (1.77p) 0.02p
share (pence)
----------------------------------------------- ------- ------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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