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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Designcapital | LSE:DESC | London | Ordinary Share | GB00B28RCR73 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.875 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMDESC
RNS Number : 9207V
Designcapital PLC
18 January 2013
18 January 2013
designcapital plc
("designcapital" or the "Group")
Interim Results for the six months ended 30 June 2012
designcapital plc, the AIM listed investment company dedicated to high end contemporary furniture design, announces its unaudited consolidated results for the six months ended 30 June 2012.
CURRENT FINANCIAL POSITION
Following the changes and restructuring detailed below, the Company is now organised as an investing Company, with minority interests in invested companies.
This restructuring has not only allowed it to reduce overhead and administration costs, but also to implement better risk management of the invested companies.
As an investing company, designcapital plc will derive revenues through a mix of interest received on shareholders loans and funding facilities provided to portfolio companies and also through fees generated by allowing the portfolio companies the use the intellectual property rights on internet sites, design models and designers contracts that are owned by designcapital plc. Additional fees are expected to be generated from the provision of strategic and financial advisory services to be provided to designcapital*finance, in parallel with the commercial development of this new business unit.
These revenues are expected to allow the Company to cover its running costs and generate positive cash flows.
The Company will also retain the option of funding itself further by establishing loans backed by assets and other related debt financing products, which may complement, as appropriate, the Company's ability to issue equity at the level of both the invested portfolio companies and also the Company.
On 20th December 2012, the Company secured a GBP25,000 subscription for new ordinary shares which are being issued at 10p per share. This private investor has also joined the Board of Artelano International Ltd. Notwithstanding this cash subscription, the Company's financial position remains weak, and it is currently unable to pay its creditors on time.
Discussions with Luxury Investments S.A., a significant shareholder, have resulted in renegotiated terms for 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 2013. Further discussions are ongoing and the Directors have a reasonable expectation that they will reach an agreement with Luxury Investments S.A. whereby both parties agree to ensure that the working capital requirements of the Group are not threatened.
On 27th December 2012, Frédéric Bobo, a Director of the Company, provided the Company with an extension of a working capital support of up to GBP150,000, to be drawn down by the Company should the Company need additional funds. The Company has already drawn on this support over 2012 and it is likely that it will continue to draw down on this working capital support unless further cash subscriptions for new ordinary shares in the Company or revenues from operations are received.
Trading in the Company's shares is currently suspended and the suspension will remain pending implementation of its investing policy. If the Company has not implemented its investing policy by 25 February 2013, the Company's listing on AIM will be cancelled pursuant to AIM Rule 15. A further announcement will be made in due course.
Designcapital plc EXECUTIVE CHAIRMAN'S STATEMENT
I am pleased to present the Company's Interim Results for the six months ended 30 June 2012
designcapital plc (the Company) was incorporated in June 2007, and was admitted to AIM on 21 January 2008, with the strategic objective of becoming a major pan-European design-focused investment company.
We were admitted to the AIM market during one of the most difficult periods in living memory, with great uncertainty as to the impact of the "credit crunch", the banking crisis, as well as energy prices and raw material costs, on economic activity.
There were also significant uncertainties as to whether these pressures could be managed by the world's monetary authorities without triggering a deeper recession or a sharp rise in inflation.
The most immediate consequences of the economic crisis that has dominated since 2008, and continues to the present day, has been a sharp contraction in credit, a downturn in economic activity and a worldwide slowdown in most of the industry sectors, including the high-end furniture design industry.
Amidst this very difficult economic background, which affects most of the major markets in which the Company's investment targets operate, the Company has moved quickly to restructure its trading activities and to adopt a strategy appropriate for the adverse market conditions that it expects to continue for the foreseeable future.
In June 2010, after 24 months of restructuring within the intricate and cumbersome framework of French labour regulations, both our Paris based subsidiaries, Artelano, involved in the edition of high-end contemporary design furniture, and Forum Diffusion, a multi-brand retailer of high-end design furniture to the contract and office markets, were allowed to exit their restructuring status and to operate again within the normal commercial markets.
As highlighted in the interim results for the Group at June 2010, the obligation placed on our subsidiaries by the French courts to remain under the restructuring status for the maximum period of "Redressement Judiciaire" allowed by the French law, had seriously compromised the Company's ability to bid for business in their strategic market segments such as banks, public institutions and large multinational companies.
In June 2010 the operating cost base of both companies was running significantly below 2009 levels, and like for like figures demonstrated the overall progress that we had made in the first half of the year as we continued to restructure the businesses, reduce costs and improve operational efficiencies within the logistics side of the business.
Forum Diffusion's business has been refocused on the more profitable contracts market. The show-room of the company, structurally loss-making, was sold in June 2010 for EUR1.1m after costs. This strategy began to produce results as, in September 2010, the Company had identified and targeted more than EUR7.5m worth of projects; bids worth EUR3.2m were being assessed by clients, and EUR1.2m worth of orders had already been contracted for delivery before the end of the year.
In September 2010, we had also re-orientated our Artelano business around its show-room and contract activities and our strategy was to present new higher-end products to clients, and to work on the opening of the first international show-room of Artelano in Mayfair, London.
Notwithstanding the progress brought about through the restructuring, the opportunities that were being identified, most notably at Forum Diffusion, which supported a reasonable anticipation of growth in our French subsidiaries during 2011, subsequently suffered from delays and were ultimately contracted with very thin margins.
The worsening economic conditions that we had started to identify in the latter part of 2010, and the near term business focus that resulted from these extra-ordinary market conditions, prompted us to re-consider the business model and markets that we were active in.
Following the transfer of the Artelano brand and contracts with designers to designcapital plc in London, it had become increasingly apparent to us that maintaining the operations of Artelano S.A. in Paris, which had undergone an 18 month restructuring under the French "Redressement Judiciaire" process, had neither operational or strategic value to the Group.
Following careful consideration, it was decided to cease the trading activities of Artelano S.A. as soon as was practicable and on 17 May 2011 the liquidation commenced.
Responsibility for the international development of the Artelano brand had previously been re-located to London to be driven and managed through Artelano International Ltd ("Artelano International"), designcapital's UK subsidiary with its head office in London.
The liquidation of the business resulted in a termination of the restructuring plan agreed as part of the "Redressement Judiciaire" process, which included the obligation to repay historical "frozen" trade liabilities amounting to approximately GBP1.9 million. Given the losses reported during the year ended 31 December 2010, together with the expected level of future losses, this resulted in a non-cash provision being made against designcapital's investment in Artelano S.A. of GBP1.8 million plus intra group receivables of GBP0.9 million in the Company's financial statements for the year ended 31 December 2010. The goodwill impairment in the Group Financial Statements in 2010 regarding Artelano S.A. was GBP1.2 million.
During the early part of 2011, and despite the fact that Forum Diffusion had gained a number of significant orders, the market started to deteriorate further and more quickly.
In the light of this deterioration the Forum Diffusion restructuring plan was reviewed. As part of the "Redressement Judiciaire" process, Forum Diffusion S.A. was obliged to repay historical "frozen" trade liabilities amounting to approximately EUR4.5 million over a ten year period, however the Company concluded that in the current global economic environment, the restructuring plan was not reasonably achievable.
Following careful consideration, it was decided to cease the trading activities of Forum Diffusion s.a.s. and of Forum Developpement s.a.s. as soon as practicable. The liquidation of Forum Diffusion commenced on 25 August 2011.
The winding up of the Forum Diffusion business resulted in a termination of the restructuring plan agreed as part of the "Redressement Judiciaire" process, including the obligation on Forum Diffusion s.a.s. to repay the residual historical "frozen" trade liabilities amounting to approximately EUR4.5 million.
This resulted in a non-cash provision being made against designcapital's investments in Forum Diffusion s.a.s and Forum Developpement s.a.s of GBP1.7 million plus intra group receivables of GBP0.2 million in the Company's Financial Statements for the year ended 31 December 2010. The goodwill impairment in the Group Financial Statements relating to Forum Diffusion s.a.s. and Forum Developpement s.a.s. was GBP1.4 million.
Financial Performance
Consolidated revenues for the six months to 30 June 2012 were GBPnil (2011- GBP40,666).
After taking account of finance income, finance costs and taxation, the retained loss attributable to shareholders was GBP185,121 (2011 - GBP876,358).
Outlook
designcapital was established to act as a consolidator within the European design space.
The recession, lack of credit for smaller businesses and the fact that the entrepreneurs behind many businesses which started in the late 1960's and 1970's are now reaching retirement age without natural successors, together with the impact of e-commerce and of the internet on high-street furniture show-room businesses, means that in a fragmented and difficult market there are numerous opportunities.
Whilst 2009 and 2010 were years in which designcapital worked to establish the foundations for creating a profitable growth business and secure acquisition opportunities within a reasonably steady market environment, the economic crisis that continued to develop and expand throughout 2011 is likely to have negative implications for the foreseeable future has prompted us to reconsider our strategy and to adapt to the new and medium term market conditions.
That said, the Board of designcapital maintains its vision and despite the current market environment and overall economic outlook, believes that within the medium term, the Group can begin generating an attractive margin on solid revenues, from a business model based upon a combination of the procurement of high-end design furniture for business to business (B2B) and contract clients; classic e-commerce distribution of high-end design furniture brands such as Artelano to consumers (B2C); and the provision of financial and other services serving clients and brands of the high-end design furniture industry.
We have a wealth of experience and an excellent practical understanding of the marketaided in part through the restructuringof our French operations.
As a result we have decided to adapt our investing strategy, and 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 shall 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.
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.
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 byone 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
The term "Group" has been used in describing the business ofdesigncapital plc, whose 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
The Artelano trade-mark was re-registered in the name of designcapital in 2010 and Artelano(International) Ltd, a company headquartered in London and then 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.
The manufacture of Artelano products stopped in the middle of 2011 to allow for the implementation of the new business model.
Taking account of the market conditions, we believe that this temporary suspension of the business has allowed us to reduce costs and preserve cash, without damaging the brand.
A new general manager was recruited for Artelano International Limited in the first months of 2012 and, with an equity interest in Artelano International Ltd, will continue to manage the overall strategy of the brand.
All other non-core activities will be sub-contracted or licensed to strategic partners, through long-term contracts:
-- The brand will not be distributed through wholesale networks, but rather through direct distribution channels, contract or B2B channels and a show-room located in London;
-- The distribution strategy for the B2C segment is focussed on a new e-commerce enabled internet site that will go live as soon as possible, first in France and subsequently in the UK, to allow fast entry into the main European markets;
-- The management of the internet site will be licensed to an existing internet venture that manages brand sites;
-- This distribution strategy allows the Group to better position and manage the brand's pricing strategy and to decrease the retail price to clients by 25% on average, compared to retail prices of the same or similar Artelano product previously sold through classic show-rooms;
-- The new distribution strategy also facilitates a strong affiliation programme internationally and in other markets where the brand will have market presence;
-- The production of our products, instead of being spread between a variety of small artisan manufacturers located mostly in Italy will, in the future, be managed in partnership with another editor of high-end furniture. This partnership will allow the Group to generate immediate economies of scale and to mutualise transportation, warehousing and ancillary costs;
-- The product range of Artelano, which was previously considered to be niche, too "designer" and unrealistically expensive, has gained breadth and depth by the addition of new designers and products which adds a more contemporary, classic style "twist" to the brand;
-- A range of products exclusively aimed at the contract market is also being developed to better answer the needs of this market segment.
Exclusive licencing agreements have already been established for North America, the 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.
To facilitate the re-establishment of Artelano International in the market, the brand owned by designcapital was sold subsequent to the year end and the Company's interest in Artelano International reduced to 30% in favour of MAK Designs, an existing commercial partner of Artelano International with a vested interest in developing the business.
designcapital now has a strategic investment in Artelano International and also retains ownership of the designers' contracts and the related Intellectual Property.
HOMECREA sarl
The e-commerce business of the Artelano brand(www.artelano.co)is to be managed by local partners, through the establishment of long-term licence contracts for the distribution of designcapital's products. The first such licence agreement was signed with Homecrea s.a.r.l. for the French market in January 2012 and negotiations are advancing with another internationalpartner for a number of additional countries.In order to establish the relationship with Homecrea s.a.r.l., a 20% shareholding was acquired by designcapital in September 2012, a Paris based company that, until recently, had been operating various e-commerce sites offering decoration products and design furniture.
This participation was acquired from M. Théodore d'Alberti, a minority investor of Homecréa who will not hold further interests into Homecréa pursuant to the transaction. This participation was acquired for a 35 000 EUR consideration, paid by way of an allotment of 273 000 ordinary shares of the Company, issued at a price of 10p per share.
This acquisition will allow the other investee companies of designcapital to access, on a remunerated basis, the database of 700 000 client e-mail addresses today actively managed by Homecréa, and to establish the bases of the e-commerce business of the Artelano brand.
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.
Designcapital*finance is expected to be incorporated in France in early 2013 with designcapital plc owning 20% of the share capital. A Managing Director with appropriate experience has been recruited for the business and a number of opportunities have already been identified.
2010 and 2011 to date have been periods of significant change during which actions were taken to refocus designcapital's business and to ensure the long term future and success for its shareholders. New distribution channels are being established through which the Groups products can be sold and on terms that reduce the risk and costs of distribution. Manufacturing and logistics have been outsourced further reducing the fixed costs of the Group.
As a result of the restructuring and liquidation of the French subsidiaries during 2011, the Group's obligation to pay trade liabilities frozen under the "Redressement Judiciaire" process totalling approximately EUR6.1 million have been terminated.
Finally, as a result of the actions taken, the Group now has a cost base considerably lower than during the years 2010 and 2011, and, with the significant proportion of cost being incurred on a variable basis, the level of sales required to achieve a profit and to generate cash is a fraction of that required in previous years.
Board of Directors
As the business moves towards delivering its new strategy, a number of complimentary appointments will be made to strengthen the Board.
In particular, expertise will be required in support of the development of the North American and Middle East markets, as well as in the key area of brand and product development.
Allotment of shares
The Company announces that a total of 273,000 new ordinary shares of designcapital have been allotted to M. Théodore d'Alberti.
Application will be made to the London Stock Exchange for these 273,000 new shares, ranking pari passu in all respects with the existing shares in issue, to be admitted to trading on AIM once the current suspension of the Company's shares has been lifted.
Following this allotment the Company will have 71 733 401 shares in issue.
Frederic Bobo
Executive Chairman
18 January 2013
For further information:
Contacts:- designcapital plc Frederic Bobo, Executive Chairman Mike Hosie, Chief Financial Officer +44 20 7554 8555 Libertas Capital Corporate Finance Limited Sandy Jamieson Tim Cofman +44 20 7569 9650
designcapital plc CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six monthsended 30 June 2012
Hot Features
Premium
Six months Six months
ended ended
30 June 30 June
2012 2011
Note (unaudited) (unaudited)
GBP GBP
Revenue - 40,666
Cost of sales - (18,318)
------------- -------------
Gross Profit - 22,348
Other income 9,710 -
Administrative and other operating
expenses (120,856) (557,455)
Exceptional Costs - (257,979)
------------- -------------
Operating Loss (111,146) (793,086)
Finance income - -
Finance costs (73,975) (83,272)
------------- -------------
Loss before Tax (185,121) (876,358)
Taxation 3 - -
------------- -------------
Retained Loss for the Half Year
attributable to Equity Shareholders (185,121) (876,358)
============= =============
Other Comprehensive Income
Exchange differences on translating
foreign operations - -
------------- -------------
Other Comprehensive Income for
the Half Year, Net of Tax (185,121) (876,358)
------------- -------------
Total Comprehensive Loss for
the Half Year attributable to
Equity Shareholders (185,121) (876,358)
============= =============
Basic Loss per Share
(pence per share) attributable
to Equity Shareholders of the
Company 4 (0.26) (1.28)
============= =============
designcapital plc CONSOLIDATED BALANCE SHEET
Company Number: 06290400 As at 30 June 2012
As at As at As at
30 June 30 June 31 December
2012 2011 2011
(unaudited) (unaudited) (audited)
GBP GBP GBP
ASSETS
Non-Current Assets
Property, plant and equipment 1,416 168,003 2,376
Intangible assets - 1,969 -
Goodwill - - -
Other receivables 189,444 162,973 -
Deferred income tax assets - 47,273 -
----------------- ---------------- ------------
Total Non-Current Assets 190,860 380,218 2,376
----------------- ---------------- ------------
Current Assets
Inventories - 461,148 -
Trade and other receivables 19,980 936,138 269,509
Cash and cash equivalents (16,202) 338,072 774
----------------- ---------------- ------------
Total Current Assets 3,778 1,735,358 270,283
----------------- ---------------- ------------
TOTAL ASSETS 194,638 2,115,576 272,659
----------------- ---------------- ------------
EQUITY AND LIABILITIES
Shareholders' Equity
Ordinary shares 5 7,161,040 7,028,222 7,083,222
Share premium 210,471 204,089 204,089
Shares to be issued - - -
Other reserve - 6,211 -
Retained earnings (9,605,683 (14,015,326) (9,420,562)
----------------- ---------------- ------------
Total Equity - Capital and Reserves (2,234,172) (6,776,805) (2,133,251)
----------------- ---------------- ------------
Non-Current Liabilities
Trade and other payables - 3,407,160 -
Borrowings - 278,940 -
Provisions for other liabilities and charges - 477,243 -
----------------- ---------------- ------------
Total Non-Current Liabilities - 4,163,343 -
---------------- ------------
Current Liabilities
Trade and other payables 826,289 3,012,204 825,117
Borrowings 6 1,602,521 1,630,798 1,580,793
Provisions for other liabilities and charges - 86,036 -
---------------- ------------
Total Current Liabilities 2,428,810 4,729,038 2,405,910
----------------- ---------------- ------------
Total Liabilities 2,428,810 8,892,381 2,405,910
---------------- ------------
TOTAL EQUITY AND LIABILITIES 194,638 2,115,576 272,659
----------------- ---------------- ------------
designcapital plc CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2012
Share Share Translation Retained
Capital Premium Reserve Losses Total
GBP GBP GBP GBP GBP
Balance as at 1 January
2012 7,083,222 204,089 - (9,420,562) (2,133,251)
---------- --------- ------------ ------------- ------------
Comprehensive income
Loss for the period - - - (185,121) (185,121)
Other comprehensive income
Currency translation differences - - - - -
---------- --------- ------------ ------------- ------------
Total comprehensive income - - - (185,121) (185,121)
---------- --------- ------------ ------------- ------------
Transactions with owners
---------- --------- ------------ ------------- ------------
Issue of ordinary shares 77,818 6,382 - - 84,200
---------- --------- ------------ ------------- ------------
Balance as at 30 June
2012 7,161,040 210,471 - (9,605,683) (2,234,172)
========== ========= ============ ============= ============
Balance as at 1 January
2011 6,630,085 196,816 6,211 (13,138,968) (6,305,856)
---------- --------- ------------ ------------- ------------
Comprehensive income
Loss for the period - - - (876,358) (876,358)
Other comprehensive income
Currency translation differences - - - - -
---------- --------- ------------ ------------- ------------
Total comprehensive income - - - (876,358) (876,358)
---------- --------- ------------ ------------- ------------
Transactions with owners
---------- --------- ------------ ------------- ------------
Issue of ordinary shares 398,137 7,273 - - 405,410
---------- --------- ------------ ------------- ------------
Balance as at 30 June
2011 7,028,222 204,089 6,211 (14,015,326) (6,776,804)
========== ========= ============ ============= ============
Balance as at 1 July 2011 7,028,222 204,089 6,211 (14,015,326) (6,776,804)
---------- --------- ------------ ------------- ------------
Comprehensive income
Profit for the period - - - 4,594,764 4,594,764
Other comprehensive income
Currency translation differences - - (6,211) - (6,211)
---------- --------- ------------ ------------- ------------
Total comprehensive income - - - 4,594,764 4,588,553
---------- --------- ------------ ------------- ------------
Transactions with owners
---------- --------- ------------ ------------- ------------
Issue of ordinary shares 55,000 - - - 55,000
---------- --------- ------------ ------------- ------------
Balance as at 31 December
2011 7,083,222 204,089 - (9,420,562) (2,133,251)
========== ========= ============ ============= ============
designcapital plc CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2012
Six months Six months
ended ended
30 June 2012 30 June 2011
(unaudited) (unaudited)
GBP GBP
Cash Flows from Operating Activities
Loss before taxation (185,121) (876,358)
Adjustments for:
Depreciation of property, plant and
equipment 959 1,161
Amortisation of intangible assets - -
(Profit)/Loss on disposal of fixed
assets - 20,851
Finance income - (1,777)
Finance expenses 73,975 78,511
Movement in provisions for liabilities - -
and charges
Foreign Exchange movement (26,904) 33,614
------------- -------------
Operating Loss before Changes in Working
Capital (137,091) (743,998)
Decrease in inventories - 18,033
Decrease in trade and other receivables 60,086 182,087
Increase in trade and other payables 1,172 127,335
Net Cash Outflow from Operating Activities 61,258 327,455
------------- -------------
Cash Flows from Investing Activities -- -
Purchase of property, plant and equipment - -
Proceeds from sales of property, plant - -
and equipment
Purchase of intangible assets - -
Interest received - -
------------- -------------
Net Cash Inflow/(Outflow) from Investing - -
Activities
------------- -------------
Cash Flows from Financing Activities
Proceeds from issuance of ordinary
shares 84,200 406,579
Net movement in borrowings - 4,264
Interest paid - -
------------- -------------
Net Cash Inflows from Financing Activities 84,200 410,843
------------- -------------
Increase/(Decrease) in Cash and Cash
Equivalents 8,367 (5,700)
Effect of Foreign Exchange Rate Changes - -
Cash and Cash Equivalents at Beginning
of Period (24,569) (5,828)
------------- -------------
Cash and Cash Equivalents at End of
Period (16,202) (11,528)
============= =============
Cash and Cash Equivalents include
the following:
Cash at bank and in hand 10,106 -
Bank overdrafts included in borrowings (26,308) (11,528)
(16,202) (11,528)
--------- ---------
designcapital plc Notes to the Condensed Interim Financial Statements
For the six months ended 30 June 2012
1. Basis of Preparation
The condensed consolidated interim financial information for the 6 months ended 30 June 2012 has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2011, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.
The financial information contained in this report does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. It has been prepared on a going concern basis in accordance with the recognition and measurement criteria of IFRSs as adopted by the European Union.
The 2012 interim financial report of the Company has not been audited.
This condensed consolidated interim financial information has been approved for issue by the Board of Directors on 21 December 2012.
2. Accounting Policies
The same accounting policies, presentation and methods of computation are followed in this condensed consolidated interim financial information as were applied in the preparation of the Group's annual financial statements for the year ended 31 December 2011. Those financial statements have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified but did contain an Emphasis of Matter with respect to the ability of the Company and the Group to continue as a going concern. The auditors' report did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.
Standards, amendments and interpretations to existing standards effective in 2012 but not relevant to the Group
-- IFRS 3 (revised), 'Business combinations', and consequential amendments to IAS 27, 'Consolidated and separate financial statements' and IAS 28, 'Investments in associates', are effective prospectively to acquisitions and disposals where the acquisition or disposal date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. This is not currently applicable to the Group.
-- IAS 27 (revised), 'Consolidated and separate financial statements' specifies the accounting when control over a subsidiary is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. This is not currently applicable to the Group.
-- IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual periods commencing on or after 1 July 2009. This is not currently applicable to the Group.
-- IFRIC 18, 'Transfers of assets from customers', effective for transfer of assets received on or after 1 July 2009. This is not currently applicable to the Group.
-- IFRS 2 (amendment), 'Group cash settled share based payments', effective for annual periods commencing on or after 1 January 2010. This is currently not applicable to the Group.
Going Concern
As described in the 2008, 2009 and 2010 Executive Chairman's Statements, the French registered subsidiary undertakings Artelano S.A. and Forum Diffusion s.a.s. entered into a "Redressement Judiciaire" arrangement on 30 December 2008. "Redressement Judiciaire" is a court based procedure which is applied for where a company is in a state of "cessation des payments" (cessation of payments) but has not ceased its trading activities and is considered capable of being rehabilitated. The first stage of the process is an observation period during which management remain charged with managing the business and creditors are barred from taking action to obtain payment for liabilities that arose before the court initiated the "Redressement Judiciaire".
During the observation period, which typically lasts for three to six months, although it can be extended to a maximum of 18 months, where the court is confident that the business can be rehabilitated, the business can be restructured under the protection of the court and the procedure. Once the observation period ends a company will continue to manage its old liabilities in accordance with the "Continuation" plan established with the court whereby pre-"Redressement Judiciaire" liabilities are settled over a period that extends to a maximum of ten years.
During 2010 and early 2011 worsening economic conditions prompted the Group's management to re-consider the business model and the markets that the Group was active in.
Maintaining the operations of Artelano S.A. in Paris, which had undergone an 18 month restructuring under the French "Redressement Judiciaire" process, had neither operational nor strategic value to the Group. As a consequence it was decided to allow the company to be liquidated on 17 May 2011 resulting in the termination of the restructuring plan agreed as part of the "Redressement Judiciaire" process.
Similarly, the Forum Diffusion s.a.s. restructuring plan was reviewed. As part of the "Redressement Judiciaire" process, Forum Diffusion s.a. was obliged to repay historical "frozen" trade liabilities amounting to approximately EUR4.5 million over a ten year period. However, the Company concluded that in the current global economic environment, the restructuring plan was not reasonably achievable. Following careful consideration, it was also decided to cease the trading activities of Forum Diffusion s.a.s. on 25 August 2011.
The ceasing of trading activities and subsequent liquidation of both businesses resulted in an immediate termination of the restructuring plans agreed as part of the "Redressement Judiciaire" process, including the obligation on Artelano S.A. and Forum Diffusion s.a.s. to repay historical "frozen" trade liabilities of approximately EUR1.5 million and EUR4.5 million respectively.
A decision was also taken by the Board to apply for the liquidation of Forum Developpement s.a.s.
Court decisions were taken on 17 May 2011 for Artelano S.A., 25 August 2011 for Forum Diffusion s.a.s. and on 26 July 2012 for Forum Developpement s.a.s.
An alternative business model has subsequently been adopted based on the subcontracting of manufacturing and logistics and the establishment of joint venture distribution agreements which will reduce the cash requirements of the Group. The fixed overhead and running costs of the Company have been reduced and wherever possible are now incurred on a variable basis.
Licencing arrangements have been established with MAK Design for the exploitation of the Middle East and North African market and with Fuaris Consulting Inc. for the United States and Canadian markets. Each company will be licenced to manufacture and distribute products owned by the Group in return for royalty payments.
Additional arrangements are planned for the French and other European markets. The Group's future is partly dependent on the success of these licencees.
The Directors' plans and strategy for the short and medium term assume a growth in income and profitability in the Group's remaining investments. 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 Luxury Investments 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 2013. Further discussions are ongoing and the Directors have a reasonable expectation that they will reach an agreement with Luxury Investments S.A. whereby both parties agree to ensure that the working capital requirements of the Group are not threatened.
On 24 October 2012, Stunning Partners LLC, a company in which Frederic Bobo, a Director in the Company, has a controlling interest and Kerr Douglas Limited, a company in which Michael Hosie, a Director of the Company, has a controlling interest agreed to postpone the sums due to them at that date until 31 December 2013 or to write-off the loans in the event that they had not been converted into equity at that date.
On December 20th 2012, the Company secured a GBP25,000 subscription for new ordinary shares which are being issued at 10p per share. This private investor has also joined the Board of Artelano International Ltd.
On 27th December 2012, Frederic Bobo, a Director of the Company, provided the Company with an extension of a working capital support of up to GBP150,000, to be drawn down by the Company should the Company need additional funds. The Company has already drawn on this support over 2012 and it is likely that it will continue to draw down on this working capital support unless further cash subscriptions for new ordinary shares in the Company or revenues from operations are received.
The Group and Company will be required to raise additional funds over the twelve month period from the date of approval of the Financial Statements. The Directors have a reasonable expectation that they will secure the necessary additional funding when required.
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.
Trading in the Company's shares is currently suspended and the suspension will remain pending implementation of its investing policy. If the Company has not implemented its investing policy by 25 February 2013, the Company's listing on AIM will be cancelled pursuant to AIM Rule 15. A further announcement will be made in due course.
3. Taxation
No current tax arises in the period. The charge for the period consists of the movement in deferred taxation arising from the origination and reversal of temporary differences. Deferred tax assets on unutilised trading losses have not been recognised in the Financial Statements due to uncertainty over the timing of their utilisation.
4. Earnings per Share
Basic loss per share is calculated by dividing the loss after tax attributable to equity holders by the weighted average number of ordinary shares in issue during the period.
Six months Six months
ended ended
30 June 30 June
2012 2011
Loss attributable to equity
holders of the Company (GBP) (185,121) (876,358)
----------- -----------
Weighted average number of
ordinary shares in issue 71,170,707 68,280,852
----------- -----------
Basic loss per share (pence
per share) (0.26) (1.28)
----------- -----------
5. Share Capital
Ordinary shares of 10 pence
each Number of shares Ordinary shares
GBP
At 1 January 2012 70,832,220 7,083,222
Issue of shares 778,180 77,818
------------------ ----------------
At 30 June 20112 71,610,400 7,161,040
At 1 January 2011 65,300,847 6,530,085
Issue of shares 4,981,374 498,137
------------------ ----------------
At 30 June 2011 70,282,221 7,028,222
Issue of shares 549,999 54,999
------------------ ----------------
At 31 December 2011 70,832,220 7,083,222
================== ================
6. Borrowings
On 26 June 2009, the Company entered into a loan agreement with Luxadvor S.A., a substantial shareholder of the Company, for up to GBP600,000 at an annual rate of interest of 12 per cent per annum. The repayment date of the loan has been re-negotiated and the new date for repayment is not before 31 December 2013.
On 11 June 2010, the Company entered into a short term loan agreement with Luxadvor S.A. of up to EUR785,000 for the purpose of satisfying the French court's working capital requirements of the subsidiary undertakings in the "Redressement Judiciaire" arrangement. The repayment date of the loan facility has been renegotiated and is not repayable before 31 December 2013. Interest accrues at a rate of 12 per cent per annum. The loan is secured against the shares of certain subsidiary undertakings and F J Bobo has also provided a personal guarantee to Luxadvor S.A. in relation to the loan.
As explained in Note 2, the Directors are currently in discussions with Luxadvor S.A. with a view to further renegotiating the repayment terms of the two loans.
7. Related Party Transactions
The Group entered into the following related party transactions during the period:
designcapital plc incurred costs of GBP119,983 (6 months ended 30 June 2011: GBP292,697) in respect of management and advisory fees payable to Stunning Partners LLC, a limited liability company incorporated in the State of New York controlled by Frederic Bobo. Included within trade and other payables is a balance of GBP94,231 (31 December 2011: GBP215,662) relating to management advisory fees and success fees from Stunning Partners LLC.
designcapital plc also incurred costs of GBP54,000 (6 months ended 30 June 2011: GBP46,000) in respect of fees payable to Kerr Douglas Ltd, a limited liability company incorporated in England controlled by Michael Hosie. Included within trade and other liabilities is a balance of GBP355,078 (31 December 2011: GBP298,278).
The Group owed Luxadvor S.A., a substantial shareholder of the Company, GBP1,180,506 plus accrued interest of GBP369,608 as at 30 June 2012 (31 December 2011: GBP1,275,650 plus accrued interest of GBP279,800).
8. Segmental Analysis
Management has determined the operating segments based on the reports reviewed by the Executive Chairman, as the Group's chief operating decision-maker, that are used to make strategic decisions. The Executive Chairman considers the business from both a class of business and a geographical perspective: the design and distribution of high-end luxury furniture in France and the UK, and the provision of support services in the UK.
The Executive Chairman assesses the performance of the operating segments based on operating profit or loss as disclosed in the Consolidated Statement of Comprehensive Income.
Sales between segments are carried out at arm's length.
Design Support Total
and distribution services
(France (UK)
and the
UK)
GBP GBP GBP
Six months ended 30 June
2012
Total segment revenue - - -
Inter-segment revenue - - -
------------------ ------------ ------------
Revenue from external - - -
customers
------------------ ------------ ------------
Operating loss (111,146)
Finance income -
Finance costs (73,975)
------------
Loss before tax (185,121)
Taxation -
------------
Loss for the period (185,121)
------------
Reportable segment assets - 194,638 194,638
------------------ ------------ ------------
Reportable segment liabilities - (2,428,810) (2,428,810)
------------------ ------------ ------------
Design Support Total
and distribution services
(France) (UK)
GBP GBP GBP
Six months ended 30 June
2011
Total segment revenue 40,666 - 40,666
Inter-segment revenue - - -
------------------ ------------ ------------
Revenue from external
customers 40,666 - 40,666
------------------ ------------ ------------
Operating loss (793,086)
Finance income -
Finance costs (83,272)
------------
Loss before tax (876,358)
Taxation -
------------
Loss for the period (876,358)
------------
Reportable segment assets 103,046 429,077 573,551
------------------ ------------ ------------
Reportable segment liabilities (23,790) (2,060,121) (2,083,911)
------------------ ------------ ------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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