TIDMDESC
RNS Number : 4217V
Designcapital PLC
11 January 2012
11 January 2012
DESIGNCAPITAL PLC ("designcapital" or the "Company")
Final results for the year to 31 December 2010
designcapital plc, the AIM listed investment company dedicated
to high end contemporary furniture design, announces its audited
consolidated results for the year to 31 December 2010.
Highlights
-- Turnover GBP4,636,440 (2009 - GBP8,136,307)
-- Retained loss attributable to shareholders was GBP5,075,411 (2009 - GBP4,228,178).
-- Basic net loss per share 8.12p (2009: 7.48p)
-- Trading in the French Subsidiaries, Artelano and Forum
Diffusion has ceased and applications have been made to have the
Companies wound up reducing the Company's exposure to continuing
losses and historic liabilities of EUR6.1 million.
-- New Distribution strategy adopted for UK, France, North
America and Middle East and North Africa
Frederic Bobo, Executive Chairman said:
"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 have been 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, the Group's obligation to pay trade
liabilities frozen under the "Redressement Judiciaire" process
totalling approximately EUR6.1 million have been terminated.
As a result of the actions taken, the Group now has a cost base
considerably lower than in 2010 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."
Contacts:-
designcapital
plc
Frederic
Bobo, Executive
Chairman
Mike Hosie,
Chief Financial +44 20 7554
Officer 8555
designcapital plc EXECUTIVE CHAIRMAN'S STATEMENT
I am pleased to present the Company's Report and Financial
Statements for the year to 31 December 2010.
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.
designcapital plc EXECUTIVE CHAIRMAN'S STATEMENT
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 winding up of the business on 17 May 2011 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 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 year ended 31 December 2010 were
GBP4,636,440 (2009 - GBP8,136,307) and cost of sales were
GBP3,106,413 (2009 - GBP5,238,144), producing a gross profit of
GBP1,530,027 (2009 - GBP2,898,163) at a combined margin of 33%
(2009 - 36%).
Before adjustments for intragroup transactions, Artelano and
Artelano International contributed revenues of GBP526,932 (2009 -
GBP1,922,920), on which they made a loss before tax of GBP1,111,779
(2009 - loss of GBP728,469).
Before adjustments for intragroup transactions, Forum Diffusion
and Forum Developpement contributed revenues of GBP4,721,139 (2009
- GBP7,230,480), on which they made a loss before tax of GBP592,949
(2009 - loss of GBP1,829,067).
The Group benefited from exceptional income of GBP794,995 (2009
- GBPNil) and incurred total administrative and other operating
expenses of GBP4,429,184 (2009 - GBP6,813,782). The goodwill
impairment charge was GBP2,612,673.
After taking account of finance income, finance costs and
taxation, the retained loss attributable to shareholders was
GBP5,075,411 (2009 - GBP4,228,178).
designcapital plc EXECUTIVE CHAIRMAN'S STATEMENT
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 and that 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 be
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 adapted
our strategy as follows:-
Artelano:
The manufacture of Artelano products has stopped for six months
in 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.
In the future the Group will continue to manage the overall
strategy of the brand; the selection of designers and products;
marketing and communication. 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 in late
January 2012, 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;
-- Two distribution joint-venture and licence agreements have
been established with local partners to cover the Middle East
market, and also the US and Canada regions;
-- 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.
designcapital plc EXECUTIVE CHAIRMAN'S STATEMENT
E-Procurement:
The Group has accelerated the development of of DEEZPLAY.com,
something the Directors believe will be the first B2B e-procurement
platform for the high-end design market. This B2B e-procurement
platform is expected to go live in Spring 2012 and aims to:
-- become the standard for presenting furniture products to the
professional market. Such a market standard does not exist
currently;
-- offer initially 150 brands and 35,000 selected products that
were previously distributed by Forum Diffusion, presented in 3D,
with a wealth of technical information;
-- offer functionality that brings together a mix of
space-planning, drag and drop 3D planning, financing, asset and
facilities management services, that has no equivalent on the
market;
-- offer products to professionals at a price 15% to 25% below
the price at which they currently buy from their traditional retail
suppliers;
-- target a market of architects, interior designers or
decorators, space-planners, and purchase directors for major
corporations and central buyers.
This platform will not be a mass market e-procurement tool; it
is dedicated to a very specific, well identified population of
users. On the basis that there are 27,000 active architects in
France it is anticipated that 4,000 to 5,000 users could become
clients of DEEZPLAY.com within 24 months from launch.
Thereafter, it will be rolled out in all European markets where
the Group is able to partner with local internet distribution
partners, on a subcontracted or licensed basis.
Whilst not contributing greatly to 2012 numbers, this platform
should accelerate growth from 2013 onwards.
designcapital*Finance:
Recent experience at Forum Diffusion made us appreciate that the
office and contract furniture industry lacks financial solutions to
fund or re-finance sizeable furniture assets, which are in essence
non-strategic assets.
We intend to create a new company, "designcapital*finance",
which it is expected to adapt financing methods common in IT and
automobile management to the procurement of furniture. Initial
financial "sale and rent back" proposals have been developed for
large and medium sized companies, hotels chains and related sector
companies.
The relevant services are centred around the concept of sale and
rent back (operational leasing) of non-strategic assets such as
high-end furniture which, although necessary for the functioning of
a company, add little to valuation and therefore should be
"externalised" in order not to consume shareholder's equity or
debt.
The financing proposition can be offered to our corporate
clients as well as being made available to our industry partners
where we can provide made to measure rental products in support of
their sales efforts.
The market for high-end furniture for the office and contract
segments is estimated to be around EUR2bn per year in Europe, of
which EUR450m is found in each of France and the UK.
We estimate the installed asset base of high-end furniture in
large corporations, not currently debt or lease financed,
representing an inadequate allocation of cash for such companies,
amounts to at least EUR2bn in France, and similar in the UK.
designcapital plc EXECUTIVE CHAIRMAN'S STATEMENT
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.
S Tikhomerof and F Michel-Verdier resigned on 29 June 2010 and
26 August 2011 respectively.
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 have been 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, the Group's obligation to pay trade
liabilities frozen under the "Redressement Judiciaire" process
totalling approximately EUR6.1 million have been terminated.
As a result of the actions taken, the Group now has a cost base
considerably lower than in 2010 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.
Frederic Bobo
Executive Chairman
23 December 2011
designcapital plc CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
For the year ended 31 December 2010
Year Year
ended ended
31 December 31 December
Note 2010 2009
Continuing operations GBP GBP
Revenue 3 4,636,440 8,136,307
Cost of sales (3,106,413) (5,238,144)
------------- -------------
Gross Profit 1,530,027 2,898,163
Other income - 160,211
Administrative and other
operating expenses 4 (4,389,184) (6,813,782)
Impairment of goodwill 13 (2,612,673) -
Exceptional costs 4 (150,724) (351,363)
Exceptional income 4 794,995 -
-------------
Operating Loss (4,827,559) (4,106,771)
Finance income 7 1,085 2,319
Finance costs 7 (223,248) (107,882)
------------- -------------
Loss before Tax (5,049,722) (4,212,334)
Income tax expense 8 (25,689) (15,844)
------------- -------------
Loss for the Year (5,075,411) (4,228,178)
------------- -------------
Other Comprehensive Income
Currency translation differences 61,418 130,364
------------- -------------
Other Comprehensive Income
for the Year, Net of Tax 61,418 130,364
------------- -------------
Total Comprehensive Income
for the Year (5,013,993) (4,097,814)
============= =============
Year Year
ended ended
31 December 31 December
Note 2010 2009
Basic and Diluted Loss
per Share
(pence per share) attributable
to the Equity Holders
of the Company during
the Year 9 (8.12) (7.48)
============= =============
The currency translation differences within other comprehensive
income have no income tax effect.
designcapital plc CONSOLIDATED BALANCE SHEET
Company number: 06290400 As at 31 December 2010
As at
31 December
Note As at 2009
31 December
2010
ASSETS GBP GBP
Non-Current Assets
Property, plant and equipment 10 190,015 770,634
Intangible assets 11 1,969 91,033
Goodwill arising on acquisition
of subsidiaries 13 - 2,695,846
Other receivables 15 162,973 286,360
Deferred income tax assets 23 47,273 75,328
------------
Total Non-Current Assets 402,230 3,919,201
------------- ------------
Current Assets
Inventories 14 479,181 974,985
Trade and other receivables 15 1,118,225 2,000,248
Cash and cash equivalents 16 356,890 284,178
------------
Total Current Assets 1,954,296 3,259,411
------------- ------------
TOTAL ASSETS 2,356,526 7,178,612
============= ============
EQUITY AND LIABILITIES
Equity Attributable to Owners
of the Parent
Ordinary shares 18 6,530,085 5,822,533
Share premium 18 196,816 30,071
Shares to be issued 19 100,000 -
Translation reserve 6,211 (55,207)
Retained losses (13,138,968) (8,063,557)
------------- ------------
Total Equity (6,305,856) (2,266,160)
------------- ------------
Non-Current Liabilities
Trade and other payables 22 3,407,160 -
Borrowings 21 278,940 -
Provisions for other liabilities
and charges 23 477,243 329,909
------------- ------------
Total Non-Current Liabilities 4,163,343 329,909
------------- ------------
designcapital plc CONSOLIDATED BALANCE SHEET
Company number: 06290400 As at 31 December 2010
Current Liabilities
Trade and other payables 22 2,884,869 7,893,795
Borrowings 21 1,528,134 983,468
Provisions for other liabilities
and charges 23 86,036 237,600
---------- ----------
Total Current Liabilities 4,499,039 9,114,863
---------- ----------
Total Liabilities 8,662,382 9,444,772
---------- ----------
TOTAL EQUITY AND LIABILITIES 2,356,526 7,178,612
========== ==========
The Accounting Policies and Notes on pages 23 to 64 form an
integral part of these Financial Statements.
The Financial Statements were approved and authorised for issue
by the Board of Directors on 23 December 2011.
designcapital plc COMPANY BALANCE SHEET
Company number: 06290400 As at 31 December 2010
As at As at
31 December 31 December
Note 2010 2009
GBP GBP
ASSETS
Non-Current Assets
Property, plant and equipment 10 4,697 5,725
Investment in subsidiary
undertakings 12 10 1,503,055
Receivables from related
parties 15 - 2,194,095
Total Non-Current Assets 4,707 3,702,875
------------ ------------
Current Assets
Trade and other receivables 15 610,738 960,918
Cash and cash equivalents 18,405 19,981
------------ ------------
Total Current Assets 629,143 980,899
------------ ------------
TOTAL ASSETS 633,850 4,683,774
============ ============
EQUITY AND LIABILITIES
Equity attributable to
Owners of the Parent
Ordinary shares 18 6,530,085 5,822,533
Share premium 196,816 30,071
Shares to be issued 100,000 -
Retained losses (8,142,919) (2,066,012)
Total Equity (1,316,018) 3,786,592
------------ ------------
Current Liabilities
Borrowings 21 1,434,599 644,534
Trade and other payables 22 512,269 252,648
Total Current Liabilities 1,949,868 897,182
------------ ------------
TOTAL EQUITY AND LIABILITIES 633,850 4,683,774
============ ============
designcapital plc CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
For the year ended 31 December 2010
Shares
Share Share to be Translation Retained
Capital Premium Issued Reserve Losses Total
GBP GBP GBP GBP GBP GBP
Balance as at
1 January 2009 5,570,405 - - (185,571) (3,835,379) 1,549,455
---------- --------- -------- ------------ ------------- ------------
Comprehensive
Income
Loss for the
year - - - - (4,228,178) (4,228,178)
Other comprehensive -
income
Currency translation
differences - - - 130,364 - 130,364
---------- --------- -------- ------------ ------------- ------------
Total Comprehensive
Income - - - 130,364 (4,228,178) (4,097,814)
---------- --------- -------- ------------ ------------- ------------
Transactions
with Owners
Issue of ordinary
share capital 252,128 30,071 - - - 282,199
Total Transactions
with Owners 252,128 30,071 - - - 282,199
Balance as at
1 January 2010 5,822,533 30,071 - (55,207) (8,063,557) (2,266,160)
---------- --------- -------- ------------ ------------- ------------
Comprehensive
Income
Loss for the
year - - - - (5,075,411) (5,075,411)
Other comprehensive
income
Currency translation
differences - - - 61,418 - 61,418
---------- --------- -------- ------------ ------------- ------------
Total Comprehensive
Income - - - 61,418 (5,075,411) (5,013,993)
---------- --------- -------- ------------ ------------- ------------
Transactions
with Owners
Issue of ordinary
share capital 707,552 166,745 - - - 874,297
Shares to be
issued - - 100,000 - - 100,000
Total Transactions
with Owners 707,552 166,745 100,000 - - 974,297
---------- --------- -------- ------------ ------------- ------------
Balance as at
31 December 2010 6,530,085 196,816 100,000 6,211 (13,138,968) (6,305,856)
========== ========= ======== ============ ============= ============
All amounts are attributable to the owners of the Parent.
designcapital plc COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2010
Shares
Share Share to be Retained
Capital Premium issued Losses Total
GBP GBP GBP GBP GBP
Balance as at 1
January 2009 5,570,405 - - (1,105,632) 4,464,773
---------- --------- -------- ------------ ------------
Comprehensive Income
Loss for the year - - - (960,380) (960,380)
---------- --------- -------- ------------ ------------
Total Comprehensive
Income - - - (960,380) (960,380)
---------- --------- -------- ------------ ------------
Transactions with
Owners
Issue of ordinary
share capital 252,128 30,071 - - 282,199
---------- --------- -------- ------------ ------------
Total Transactions
with Owners 252,128 30,071 - - 282,199
---------- --------- -------- ------------ ------------
Balance as at 1
January 2010 5,822,533 30,071 - (2,066,012) 3,786,592
---------- --------- -------- ------------ ------------
Comprehensive Income
Loss for the year - - - (6,076,907) (6,076,907)
---------- --------- -------- ------------ ------------
Total Comprehensive
Income - - (6,076,907) (6,076,907)
---------- --------- -------- ------------ ------------
Transactions with
Owners
Issue of ordinary
share capital 707,552 166,745 - - 874,297
Shares to be issued - - 100,000 - 100,000
Total Transactions
with Owners 707,552 166,745 100,000 - 974,297
---------- --------- -------- ------------ ------------
Balance as at 31
December 2010 6,530,085 196,816 100,000 (8,142,919) (1,316,018)
========== ========= ======== ============ ============
designcapital plc CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2010
Year
ended
31 December
2009
Note Year
ended
31 December
2010
GBP GBP
Operating Activities
Loss before taxation (5,049,722) (4,212,335)
Adjustments for:
Depreciation of property, plant
and equipment 407,582 408,315
(Profit)/loss on disposal of
property, plant and equipment (770,539) 211,798
Amortisation of intangible assets 87,594 58,820
Impairment of goodwill 2,612,673 -
Exceptional income (794,995) -
Foreign exchange 84,667 -
Finance income (1,085) (2,319)
Finance expense 223,248 107,881
Share-based payments 75,440 130,308
Provisions 12,995 (286,552)
Operating Loss before Changes
in Working Capital (3,111,880) (3,584,084)
Decrease in inventories 464,937 599,542
Decrease in trade and other
receivables 902,645 2,805,273
Increase/(decrease) in trade
and other payables 471,409 (1,249,976)
------------- -------------
Net Cash Outflows from Operating
Activities (1,731,303) (1,429,245)
------------- -------------
Investing Activities
Purchase of property, plant
and equipment (43,768) (108,593)
Additions to intangible assets (1,392) (47,210)
Proceeds from sale of property, 945,317 -
plant and equipment
Interest received 1,085 2,319
Net Cash Outflows from Investing
Activities 901,242 (153,486)
------------- -------------
Financing Activities
Increase in bank and other loans 655,783 600,000
Proceeds from issue of share
capital 190,000 2,500
Proceeds from shares to be issued 100,000 -
Interest paid (43,421) (70,172)
Net Cash Inflows from Financing
Activities 902,362 532,328
------------- -------------
Increase/(decrease) in Cash
and Cash Equivalents 72,301 (1,050,403)
Cash and Cash Equivalents at
Beginning of Year (22,061) 1,056,514
Effect of Foreign Exchange Rate
Changes 1,248 (28,172)
Cash and Cash Equivalents at
End of Year 16 51,488 (22,061)
============= =============
designcapital plc COMPANY CASH FLOW STATEMENT
For the year ended 31 December 2010
Year Year
ended ended
Note 31 December 31 December
2010 2009
GBP GBP
Operating Activities
Loss before taxation (6,076,907) (960,380)
Adjustments for:
Depreciation of property, plant
and equipment 2,184 2,032
Foreign exchange 77,056 -
Impairment of investment 3,429,663 -
Bad debt provision 1,590,007 -
Share-based payments 75,440 130,308
Finance income (16,282) (5,895)
Finance expense 118,170 40,126
------------ ------------
Operating Loss before Changes
in Working Capital (800,669) (793,809)
Increase in trade and other
receivables (1,015,417) (718,758)
Increase in trade and other
payables 871,481 262,159
------------ ------------
Net Cash Outflow from Operating
Activities (944,605) (1,250,408)
------------ ------------
Investing Activities
Purchase of property, plant
and equipment (1,156) -
Interest received 16,282 5,895
Net Cash Inflow from Investing
Activities 15,126 5,895
------------ ------------
Financing Activities
Proceeds from issue of share
capital 190,000 2,500
Shares to be issued 100,000 -
Interest paid (5,629) (2,417)
Increase in borrowings 641,697 600,000
Net Cash Inflow from Financing
Activities 926,068 600,083
------------ ------------
Decrease in Cash and Cash Equivalents (3,411) (644,430)
Cash and Cash Equivalents at
Beginning of Year 13,156 657,586
Cash and Cash Equivalents at
End of Year 16 9,745 13,156
============ ============
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
1. General Information
designcapital plc ("the Company") is a public limited company
which is listed on the Alternative Investment Market (AIM) and
incorporated and domiciled in the UK.
The Company is an investment holding company and does not
trade.
The Consolidated Financial Statements of the Company include the
following companies: Artelano S.A., Forum Diffusion s.a.s., Forum
Developpement s.a.s. and Artelano International Limited ("the
Group").
2. Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation of
these Financial Statements are set out below. These policies have
been consistently applied to all years presented, unless otherwise
stated.
(a) Basis of Preparation
The Financial Statements have been prepared on a going concern
basis and in accordance with International Financial Reporting
Standards ("IFRSs") and IFRIC interpretations as adopted by the
European Union, and those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The Financial Statements have been prepared under the historical
cost convention, as modified by the revaluation of certain of the
subsidiaries' land and buildings to fair value for consolidation
purposes.
The preparation of Financial Statements in conformity with IFRSs
requires the use of certain critical accounting estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial information, including the reported
amounts of revenues and expenses during the reporting period.
Although these estimates are based on management's best knowledge
of current events and actions, actual results may ultimately differ
from those estimates. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the Financial Statements, are disclosed in note
2(u).
Going Concern Basis
As described in the 2008 and 2009 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.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
Going Concern Basis (continued)
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.
Court decisions were taken on 17 May 2011 for Artelano S.A., and
on 25 August 2011 for Forum Diffusion s.a.s. A decision to wind-up
Forum Developpement s.a.s as soon as practicable has also has been
taken by the Board with the winding-up process expecting to be
initiated before the end of 2011.
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.
Distribution contracts 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. Additional arrangements are planned for the French and
other European markets. The Group's future is partly dependant on
the success of these distributors.
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, 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 T1ps
Investment 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.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
New and Amended Standards Adopted by the Group
The following new standards and amendments to standards are
mandatory for the first time for the financial year beginning 1
January 2010.
IFRS 3 (revised), 'Business Combinations', and consequential
amendments to IAS 27, 'Consolidated and separate financial
statements', IAS 28 'Investments in associates', and IAS 31
'Interests in joint ventures', are effective prospectively to
business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning on or
after 1 July 2009.
The revised standard continues to apply the acquisition method
to business combinations but with some significant changes compared
to IFRS 3. For example, all payments to purchase a business are
recorded at fair value at the acquisition date, with contingent
payments classified as debt subsequently re-measured through the
statement of comprehensive income. All acquisition costs are
expensed.
The adoption of these standards has no impact on the current
period, as no further business combinations occurred during the
year.
New and amended standards, and interpretations mandatory for the
first time for the financial year beginning 1 January 2010 but not
currently relevant to the Group
The following standards and amendments to existing standards
have been published and are mandatory for the Group's accounting
periods beginning on or after 1 January 2010, but are not relevant
to the Group.
Amendments to IFRS 1 "First-time Adoption of International
Financial Reporting Standards" and IAS 27 "Consolidated and
Separate Financial Statements" addressed concerns that
retrospectively determining the cost of an investment in separate
financial statements and applying the cost method in accordance
with IAS 27 on first-time adoption of IFRSs cannot, in some
circumstances, be achieved without undue cost or effort. These
amendments were effective for periods beginning on or after 1 July
2009.
Further amendments to IFRS 1 addressed the retrospective
application of IFRSs to particular situations (oil and gas assets
and leasing contracts), and are aimed at ensuring that entities
applying IFRSs will not face undue cost or effort in the transition
process. These amendments were effective for periods beginning on
or after 1 January 2010.
Amendments to IFRS 2 "Share-based Payment" clarified the
accounting for group cash-settled share-based payment transactions.
These amendments were effective for periods beginning on or after 1
January 2010.
Amendments to IAS 39 "Financial Instruments: Recognition and
Measurement" provided additional guidance on what can be designated
as a hedged item. These amendments were effective for periods
beginning on or after 1 July 2009.
IFRIC 17 "Distributions of Non-cash Assets to Owners"
standardised practice in the measurement of distributions of
non--cash assets to owners. This interpretation was effective for
periods beginning on or after 1 July 2009.
IFRIC 18 "Transfers of Assets from Customers" clarified the
requirements of IFRSs for agreements in which an entity receives
from a customer an item of property, plant and equipment that the
entity must then use either to connect the customer to a network or
to provide the customer with ongoing access to a supply of goods or
services (such as a supply of electricity, gas or water). This
interpretation was effective for periods beginning on or after 1
July 2009.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
New standards, amendments and interpretations issued but not
effective for the financial year beginning 1 January 2010 and not
early adopted
The Group and Parent Entity's assessment of the impact of these
new standards and interpretations is set out below.
IFRS 9 "Financial Instruments" specifies how an entity should
classify and measure financial instruments, including some hybrid
contracts, with the aim of improving and simplifying the approach
to classification and measurement compared with IAS 39. This
standard is effective for periods beginning on or after 1 January
2013, subject to EU endorsement. The Directors are assessing the
possible impact of this standard on the Group's Financial
Statements.
A revised version of IAS 24 "Related Party Disclosures"
simplifies the disclosure requirements for government-related
entities and clarifies the definition of a related party. This
revision is effective for periods beginning on or after 1 January
2011 and is not expected to have an impact on the Group's financial
statements.
An amendment to IFRS 1 "First-time Adoption of International
Financial Reporting Standards" relieves first-time adopters of
IFRSs from providing the additional disclosures introduced in March
2009 by "Improving Disclosures about Financial Instruments"
(Amendments to IFRS 7). This amendment is effective for periods
beginning on or after 1 July 2010 and is not expected to have an
impact on the Group's Financial Statements.
Further amendments to IFRS 1 replace references to a fixed date
of 1 January 2004 with "the date of transition to IFRSs", thus
eliminating the need for companies adopting IFRSs for the first
time to restate derecognition transactions that occurred before the
date of transition to IFRSs, and provide guidance on how an entity
should resume presenting financial statements in accordance with
IFRSs after a period when the entity was unable to comply with
IFRSs because its functional currency was subject to severe
hyperinflation. This amendment is effective for periods beginning
on or after 1 July 2011, subject to EU endorsement, and is not
expected to have an impact on the Group's Financial Statements.
Amendments to IFRS 7 "Financial Instruments: Disclosures" are
designed to help users of financial statements evaluate the risk
exposures relating to transfers of financial assets and the effect
of those risks on an entity's financial position. These amendments
are effective for periods beginning on or after 1 January 2011,
subject to EU endorsement. The Directors are assessing the possible
impact of these amendments on the Group's Financial Statements.
Amendments to IAS 12 "Income Taxes" introduce a presumption that
recovery of the carrying amount of an asset measured using the fair
value model in IAS 40 "Investment Property" will normally be
through sale. These amendments are effective for periods beginning
on or after 1 January 2012, subject to EU endorsement, and are not
expected to have an impact on the Group's Financial Statements.
Amendments to IAS 32 "Financial Instruments: Presentation"
address the accounting for rights issues that are denominated in a
currency other than the functional currency of the issuer. These
amendments are effective for periods beginning on or after 1
February 2010, and are not expected to have an impact on the
Group's Financial Statements.
"Improvements to IFRSs" are collections of amendments to IFRSs
resulting from the annual improvements project, a method of making
necessary, but non-urgent, amendments to IFRSs that will not be
included as part of another major project. These improvements have
various implementation dates; for May 2010 improvements, the
earliest is effective for periods beginning on or after 1 July
2010. The Directors are assessing the possible impact of these
improvements on the Group's Financial Statements.
IFRIC 19 "Extinguishing Financial Liabilities with Equity
Instruments" clarifies the treatment required when an entity
renegotiates the terms of a financial liability with its creditor,
and the creditor agrees to accept the entity's shares or other
equity instruments to settle the financial liability fully or
partially. This interpretation is effective for periods beginning
on or after 1 July 2010. The Directors are assessing the possible
impact of this interpretation on the Group's Financial
Statements.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
New standards, amendments and interpretations issued but not
effective for the financial year beginning 1 January 2010 and not
early adopted (continued)
An amendment to IFRIC 14 "IAS 19 - The Limit on a Defined
Benefit Asset, Minimum Funding Requirements and their Interaction",
on prepayments of a minimum funding requirement, applies in the
limited circumstances when an entity is subject to minimum funding
requirements and makes an early payment of contributions to cover
those requirements. The amendment permits such an entity to treat
the benefit of such an early payment as an asset. This amendment is
effective for periods beginning on or after 1 January 2011, and is
not expected to have an impact on the Group's Financial
Statements.
IFRS 10 "Consolidated Financial Statements" builds on existing
principles by identifying the concept of control as the determining
factor in whether an entity should be included within the
consolidated financial statements of the parent company. The
standard provides additional guidance to assist in the
determination of control where this is difficult to assess. This
standard is effective for periods beginning on or after 1 January
2013, subject to EU endorsement. The Directors are assessing the
possible impact of this standard on the Group's Financial
Statements.
IFRS 11 "Joint Arrangements" provides for a more realistic
reflection of joint arrangements by focusing on the rights and
obligations of the arrangement, rather than its legal form (as is
currently the case). The standard addresses inconsistencies in the
reporting of joint arrangements by requiring a single method to
account for interests in jointly controlled entities. This standard
is effective for periods beginning on or after 1 January 2013,
subject to EU endorsement. The Directors are assessing the possible
impact of this standard on the Group's Financial Statements.
IFRS 12 "Disclosure of Interests in Other Entities" is a new and
comprehensive standard on disclosure requirements for all forms of
interests in other entities, including joint arrangements,
associates, special purpose vehicles and other off balance sheet
vehicles. This standard is effective for periods beginning on or
after 1 January 2013, subject to EU endorsement. The Directors are
assessing the possible impact of this standard on the Group's
Financial Statements.
IFRS 13 "Fair Value Measurement" improves consistency and
reduces complexity by providing, for the first time, a precise
definition of fair value and a single source of fair value
measurement and disclosure requirements for use across IFRSs. It
does not extend the use of fair value accounting, but provides
guidance on how it should be applied where its use is already
required or permitted by other standards. This standard is
effective for periods beginning on or after 1 January 2013, subject
to EU endorsement. The Directors are assessing the possible impact
of this standard on the Group's Financial Statements.
IAS 27 "Separate Financial Statements" replaces the current
version of IAS 27 "Consolidated and Separate Financial Statements"
as a result of the issue of IFRS 10 (see above). This revised
standard is effective for periods beginning on or after 1 January
2013, subject to EU endorsement. The Directors are assessing the
possible impact of this standard on the Group's Financial
Statements.
IAS 28 "Investments in Associates and Joint Ventures" replaces
the current version of IAS 28 "Investments in Associates" as a
result of the issue of IFRS 11 (see above). This revised standard
is effective for periods beginning on or after 1 January 2013,
subject to EU endorsement, and is not expected to have an impact on
the Group's Financial Statements.
Amendments to IAS 1 "Presentation of Financial Statements"
require items that may be reclassified to the profit or loss
section of the Income Statement to be grouped together within other
comprehensive income (OCI). The amendments also reaffirm existing
requirements that items in OCI and profit or loss should be
presented as either a single statement or two consecutive
statements. These amendments are effective for periods beginning on
or after 1 July 2012, subject to EU endorsement. The Directors are
assessing the possible impact of these amendments on the Group's
Financial Statements.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(a) Basis of Preparation (continued)
New standards, amendments and interpretations issued but not
effective for the financial year beginning 1 January 2010 and not
early adopted (continued)
Amendments to IAS 19 "Employment Benefits" eliminate the option
to defer the recognition of gains and losses, known as the
"corridor method"; streamline the presentation of changes in assets
and liabilities arising from defined benefit plans, including
requiring remeasurements to be presented in other comprehensive
income; and enhance the disclosure requirements for defined benefit
plans, providing better information about the characteristics of
defined benefit plans and the risks that entities are exposed to
through participation in those plans. These amendments are
effective for periods beginning on or after 1 January 2013, subject
to EU endorsement, and are not expected to have an impact on the
Group's Financial Statements.
IFRIC 20 "Stripping Costs in the Production Phase of a Surface
Mine" clarifies when stripping costs incurred in the production
phase of a mine's life should lead to the recognition of an asset
and how that asset should be measured, both initially and in
subsequent periods. This interpretation is effective for periods
beginning on or after 1 January 2013, subject to EU endorsement,
and are not expected to have an impact on the Group's Financial
Statements.
(b) Basis of Consolidation
The Consolidated Financial Statements include the results of the
Company and entities controlled by the Company (its subsidiaries),
forming the Group. All entities prepare financial statements made
up to 31 December.
Subsidiaries are all entities where the Company has the power to
govern their financial and operating policies, generally
accompanied by a shareholding equal to more than one half of the
voting rights. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group.
The acquisition of subsidiaries (all of which occurred in
previous accounting periods) is accounted for using the purchase
method. The cost of acquisition is measured as the fair value of
the assets acquired, equity instruments issued and liabilities
incurred or assumed at the date of exchange, plus certain costs
directly attributable to the acquisition. The acquiree's
identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3 Business
Combinations are recognised at their fair value at the acquisition
date. The excess of the cost of acquisition over the fair value of
the Group's share of the identifiable net assets acquired is
recorded as goodwill.
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated.
Where necessary, adjustments are made to the Financial
Statements of subsidiaries to bring the accounting policies into
line with those used by the Group.
(c) Foreign Currency Translation
Functional and Presentation Currency
Items included in the Financial Statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates (its "functional
currency").
The Financial Statements are presented in Pounds Sterling (GBP)
rounded to the nearest pound, which is the Company's functional and
the Group's presentation currency.
Transactions and Balances
Foreign currency transactions are translated into the functional
currency using the exchange rates ruling at the date of the
transaction. Monetary assets and liabilities in foreign currencies
are retranslated at the rates of exchange ruling at the Balance
Sheet date. Foreign exchange differences on retranslation and
settlement are recognised in profit or loss within "administrative
and other operating expenses".
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(c) Foreign Currency Translation
Group Companies
The results and financial position of all the Group's entities
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
i) assets and liabilities for each Balance Sheet presented are
translated at the closing rate at the date of that Balance
Sheet;
ii) income and expenses in profit or loss for each Statement of
Comprehensive Income presented are translated at average exchange
rates for the period; and
iii) all resulting exchange differences are recognised as a
separate component of equity.
On consolidation, exchange differences arising from the
translation of the net investment in foreign operations are taken
to shareholders' equity.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
(d) Property, Plant and Equipment
Property, plant and equipment is recorded at historical cost
(including expenditure that is directly attributable to the
acquisition of the items) less depreciation and impairment
losses.
Property, plant and equipment is depreciated using the straight
line method over the expected useful life of the assets, as
follows:
Asset Useful life
Leasehold improvements Over the remaining term of the lease
Plant and machinery 5 - 10 years
Office and computer equipment 1 - 5 years
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting period.
Gains and losses on disposal, determined by comparing proceeds
with the carrying amount of the respective assets, are included in
operating profit or loss.
An asset's carrying amount is written down immediately to its
recoverable amount if the carrying amount is greater than the
estimated recoverable amount.
(e) Goodwill
Goodwill arising on consolidation represents the excess of the
cost of acquisition over the Group's interest in the fair value of
the identifiable assets and liabilities of a subsidiary at the date
of acquisition. Goodwill is recognised as an asset at cost less
accumulated impairment losses, and reviewed for impairment at least
annually. Any impairment is recognised immediately in profit or
loss and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to
each of the Group's cash-generating units expected to benefit from
the synergies of the combination. Cash-generating units to which
goodwill has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(f) Other Intangible Assets
Intangible assets that are acquired or developed by the Group
are carried at historical cost less accumulated amortisation and
impairment losses.
Product Development
The cost of product development is charged to profit or loss on
a straight line basis over its estimated useful life of 3 years.
Both the period and method of amortisation are reviewed
annually.
Trademarks and Licences
Separately acquired trademarks and licences are shown at
historical cost. Trademarks and licences acquired in a business
combination are recognised at fair value at the acquisition date.
Trademarks and licences have a finite useful life and are carried
at cost less accumulated amortisation. Amortisation is calculated
using the straight line method to allocate the cost of trademarks
and licences over their estimated useful economic lives which
extends to a maximum of 5 years.
Computer Software
Acquired computer software licences are capitalised on the basis
of the costs incurred to acquire and bring to use the specific
software. These costs are amortised on a straight line basis over
their estimated useful economic lives of 3 to 5 years.
(g) Impairment of Non-Current Assets
Internal and external sources of information are reviewed at
each balance sheet date to identify indications that the following
assets may be impaired or, except in the case of goodwill, an
impairment loss previously recognised no longer exists or may have
decreased:
-- property, plant and equipment;
-- intangible assets;
-- other receivables;
-- investments in subsidiaries; and
-- goodwill.
If any such indication exists, the asset's recoverable amount is
estimated. In addition, for goodwill, the recoverable amount is
estimated annually whether or not there is any indication of
impairment.
Calculation of Recoverable Amount
The recoverable amount of an asset is the greater of its fair
value less costs to sell and value in use. In assessing value in
use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of time value of money and the risks specific to
the asset. Where an asset does not generate cash inflows largely
independent of those from other assets, the recoverable amount is
determined for the smallest group of assets that generates cash
inflows independently (ie a cash-generating unit).
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(g) Impairment of Non-Current Assets (continued)
Recognition of Impairment Losses
An impairment loss is recognised in profit or loss whenever the
carrying amount of an asset, or the cash-generating unit to which
it belongs, exceeds its recoverable amount. Impairment losses
recognised in respect of cash-generating units are allocated first
to reduce the carrying amount of any goodwill allocated to the
cash-generating unit (or group of units), and then to reduce the
carrying amount of the other assets in the unit (or group of units)
on a pro rata basis, except that the carrying value of an asset
will not be reduced below its individual fair value less costs to
sell, or value in use, if determinable.
Reversals of Impairment Losses
In respect of assets other than goodwill, an impairment loss is
reversed if there has been a favourable change in the estimates
used to determine the recoverable amount. An impairment loss in
respect of goodwill is not reversed.
A reversal of an impairment loss is limited to the asset's
carrying amount that would have been determined had no impairment
loss been recognised in prior years. Reversals of impairment losses
are credited to profit or loss in the year in which the reversals
are recognised.
(h) Inventories
Inventories are stated at the lower of cost and net realisable
value. Net realisable value is the estimated re-sale value of the
inventories in the ordinary course of business, reduced by the cost
of disposal. The cost of inventories is quantified on a first in,
first out basis and is inclusive of the costs associated with their
acquisition or production (in the case of internally produced
goods) and the costs incurred in bringing them to their present
location and condition.
(i) Leases
An operating lease is one in which a significant portion of the
risks and rewards of ownership are retained by the lessor. Rentals
payable under operating leases are charged to profit or loss on a
straight-line basis over the term of the lease.
(j) Trade and Other Receivables
Trade and other receivables are recognised initially at fair
value, being the original invoice amount, and subsequently carried
at this amount less impairment losses, based on a review of all
outstanding amounts at the year-end. An impairment loss is
recognised in respect of doubtful trade receivables when there is
objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables.
The criteria that the Group uses to determine that there is such
objective evidence include:
-- significant financial difficulty of the customer or other counterparty;
-- a breach of contract, such as a default or delinquency in repayment;
-- it becomes probable that the customer or other counterparty
will enter bankruptcy or other financial reorganisation.
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 credit losses that have not been
incurred), discounted at the financial asset's original effective
interest rate. The asset's carrying amount is reduced, and the loss
is recognised in profit or loss.
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 (such as an
improvement in the debtor's credit rating), the reversal of the
previously recognised impairment loss is recognised in profit or
loss.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(k) Cash and Cash Equivalents
For the purposes of the Cash Flow Statement, cash and cash
equivalents comprise cash in hand, call deposits held with banks
and bank overdrafts included in Borrowings on the Balance
Sheet.
(l) Share Capital
Ordinary Shares and shares to be issued are classified as
equity. Shares to be issued are recognised when there is a
contractual obligation for the Company to issue shares.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from the proceeds provided there is sufficient premium available.
Should sufficient premium not be available placing costs are
recognised through profit or loss.
(m) Share-based payments
The Company has issued equity-settled, share-based payments as
consideration for equity instruments (warrants) of the Company.
Where material, the fair value of the share based payments issued
to ordinary share subscribers is recognised as a cost of the shares
issued. The cost is charged to equity to the extent that there is
premium available to offset the cost, any additional expense is
recognised in profit or loss. The total amount to be expensed or
charged is determined by reference to the fair value of the
warrants granted:
-- including any market performance conditions;
-- excluding the impact of any service and non-market
performance vesting conditions (for example, profitability or sales
growth targets, or remaining an employee of the entity over a
specified time period); and
-- including the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about
the number of warrants that are expected to vest. The total expense
or charge is recognised over the vesting period, which is the
period over which all of the specified vesting conditions are to be
satisfied.
When the warrants are exercised, the Company issues new shares.
The proceeds received, net of any directly attributable transaction
costs, are credited to share capital (nominal value) and share
premium when the warrants are exercised.
Shares issued for services to settle liabilities are valued
using the direct method with reference to the fair value of the
service provided or liability extinguished where determinable.
Where the fair value of the service or liability is not
determinable the services are valued with reference to the fair
value of the equity instruments issued. The fair value of goods or
services received in exchange for shares is recognised as an
expense.
(n) Trade and Other Payables
Trade and other payables are initially recognised at fair value,
being the original invoice amount, and thereafter stated at
amortised cost using the effective interest method unless the
effect of discounting would be immaterial, in which case they
continue to be held at their original invoice amount. As explained
in note 2(a), certain liabilities under the "Redressement
Judiciaire" procedure are, following agreement of the payment plans
with individual creditors prior to the completion of the
observation period, repayable over a period that extends to a
maximum of ten years as from 24 June 2010. On the basis that the
repayment periods had not been agreed and were not known by the
Directors as at 31 December 2009, all pre-"Redressement Judiciaire"
creditors were categorised as current liabilities and stated at
cost. The effect of discounting has been calculated and adjusted
now the repayment plans have been agreed following the French court
formally granting "Continuation" on 24 June 2010.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(o) Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in profit
or loss over the period of the borrowings, using the effective
interest method.
Fees paid on the establishment of loan facilities are recognised
as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. To the extent
that there is no evidence that it is probable that some or all of
the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services, and amortised over the period of
the facility to which it relates.
Borrowings are classified as current liabilities, unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the end of the reporting
period.
(p) Post Retirement Benefits
The Group's obligation in respect of retirement benefits is
calculated by estimating the value of benefits that employees have
earned in return for their service in the current and prior
periods, based on the level of employee earnings and length of
service in accordance with French law.
The Group has established a provision for staff retirement
benefits based on an actuarial study which is performed every year
by an independently qualified firm.
(q) Current and Deferred Income Taxes
The income tax expense for the period comprises current tax and
movements in deferred tax assets and liabilities. Current tax and
movements in deferred tax assets and liabilities are recognised in
profit or loss, except to the extent that they relate to items
recognised directly in equity, in which case they are recognised in
equity.
The current income tax charge is the expected tax payable on the
taxable income for the period, using tax rates enacted or
substantively enacted at the balance sheet date in the countries
where the Company's subsidiaries operate and generate taxable
income, and any adjustment to tax payable in respect of previous
periods.
Deferred tax assets and liabilities arise from deductible and
taxable temporary differences respectively, being the differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases. Deferred tax
assets also arise from unused tax losses and unused tax
credits.
Apart from certain limited exceptions, all deferred tax
liabilities, and all deferred tax assets to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised, are recognised. Future taxable
profits that may support the recognition of deferred tax assets
arising from deductible temporary differences include those that
will arise from the reversal of existing taxable temporary
differences, provided that those differences relate to the same
taxation authority and the same taxable entity, and are expected to
reverse either in the same period as the expected reversal of the
deductible temporary difference or in periods into which a tax loss
arising from the deferred tax asset can be carried back or forward.
The same criteria are adopted when determining whether existing
taxable temporary differences support the recognition of deferred
tax assets arising from unused tax losses and credits, that is,
those differences are taken into account if they relate to the same
taxation authority and the same taxable entity, and are expected to
reverse in a period, or periods, in which the tax loss or credit
can be utilised.
The amount of deferred tax recognised is measured based on the
expected manner of realisation or settlement of the carrying amount
of the assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date. Deferred tax
assets and liabilities are not discounted.
The carrying amount of a deferred tax asset is reviewed at each
balance sheet date and is reduced to the extent that it is no
longer probable that sufficient taxable profits will be available
to allow the related tax benefit to be utilised. Any such reduction
is reversed to the extent that it becomes probable that sufficient
taxable profits will be available.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities, and when the deferred income tax assets
and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(r) Provisions
Provisions for restructuring costs are only recognised when the
Group has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be
required to settle the obligation, and a reliable estimate of the
amount of the obligation can be made. Restructuring provisions
principally comprise employee termination payments.
Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation, using a pre-tax
rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the
provision due to the passage of time is recognised as a finance
cost where material.
(s) Revenue Recognition
Revenue comprises the fair value of the consideration received
or receivable for the sale of goods and incidental services in the
ordinary course of the Group's activities. Revenue is shown net of
Value-Added Tax, returns, rebates and discounts, and after
eliminating sales within the Group.
Provided it is probable that the economic benefits associated
with the transaction will flow to the Group and the revenue and
costs, if applicable, can be measured reliably, revenue is
recognised as follows:
-- revenue from sales of goods is recognised when goods are delivered and title has passed;
-- interest income is recognised as it accrues using the effective interest method.
(t) Exceptional items
Exceptional items are those significant items which are
separately disclosed by virtue of their size or incidence to assist
in a full understanding of the Group's financial performance.
(u) Financial Instruments and Financial Risk Management
The Group's major financial instruments include cash and cash
equivalents, borrowings, trade receivables and trade payables. The
particular recognition methods adopted are disclosed in the
individual policy statements associated with each item. The risks
associated with these financial instruments include credit risk,
liquidity risk, currency risk and interest rate risk. The policies
on how to mitigate these risks are set out below. Management
manages and monitors these exposures to ensure appropriate measures
are implemented in a timely and effective manner.
The Directors of the Company have built an appropriate liquidity
risk management framework for the management of the Group's short,
medium and long-term funding and liquidity management requirements.
The Company monitors and maintains a level of cash and cash
equivalents deemed adequate by the management to finance the
Group's operations and mitigate the effects of fluctuations in cash
flows.
Foreign Currency Risk
Foreign currency risk is the risk that the value of a financial
instrument will fluctuate because of changes in foreign exchange
rates.
Currently, as a result of its business operations in France, the
Group's revenue and expenses are mainly denominated in Euros, and
the majority of the financial assets and liabilities are
denominated in Euros. The effect of the fluctuation in the exchange
rate of the Euro against other currencies on the Group's results of
operations gives rise to exchange differences. The Group has not
entered into any hedging transactions in order to reduce the
Group's exposure to foreign currency risk in this regard.
If the UK Pound had weakened/strengthened by 5% against the
Euro, with all other variables held constant, the effect on
post-tax loss for the year would have been immaterial at 31
December 2010 and 2009.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(u) Financial Instruments and Financial Risk Management (continued)
Cash Flow and Fair Value Interest Rate Risk
The Group is exposed to cash flow interest rate risk in relation
to variable rate bank borrowings. It is the Group's policy to keep
its borrowings at floating rates of interest so as to minimise the
fair value interest rate risk.
The Group's exposures to interest rates on financial assets and
financial liabilities are detailed in the liquidity risk management
section of this note. The Group cash flow interest rate risk is
mainly concentrated on the fluctuation of EURIBOR arising from the
Group's Euro borrowings.
The impact on post-tax loss of a 0.1% shift in rates would have
been immaterial at 31 December 2010 and 2009.
Credit Risk
As at 31 December 2010, the maximum exposure to credit risk is
represented by the carrying amount of each financial asset in the
consolidated balance sheet after deducting any impairment
allowance.
In respect of cash and cash equivalents, balances are maintained
with reputable financial institutions.
In respect of trade and other receivables, in order to minimise
risk, the management has a credit policy in place and the exposures
to these credit risks are monitored on an ongoing basis. Credit
evaluations of the financial position and condition of the
customers of the Group are performed on all customers requiring
credit over a certain amount. Debtors with overdue balances, which
will be reviewed on a case-by-case basis, are requested to settle
all outstanding balances before any further credit is granted.
Normally, the Group does not obtain collateral from customers but
does require deposits to be paid on order.
Liquidity Risk
Individual operating entities within the Group are responsible
for their own cash management, including the raising of loans to
cover expected cash demands, subject to approval by the Board of
Directors. The Group's policy is to regularly monitor current and
expected liquidity requirements to ensure that it maintains
sufficient reserves of cash.
The following table details the Group's remaining contractual
maturity for its non-derivative financial liabilities. The table
has been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group can be
required to pay. The table includes principal cash flows.
Within
90 91-360 Over 360 Less future Carrying
days days days interest amount
GBP GBP GBP GBP GBP
At 31 December
2009
Trade and other
payables 5,500,507 - - - 5,500,507
Borrowings 1,019,468 - - (36,000) 983,468
Provisions 237,600 - 329,909 - 567,509
---------- ------- ---------- ------------ ----------
6,757,575 - 329,909 (36,000) 7,051,484
========== ======= ========== ============ ==========
At 31 December
2010
Trade and other
payables 1,260,241 - 3,400,464 - 4,660,705
Borrowings 1,676,675 - 278,940 (148,541) 1,807,074
Provisions 86,036 - 477,243 - 563,279
3,022,952 - 4,156,647 (148,541) 7,031,058
========== ======= ========== ============ ==========
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(u) Financial Instruments and Financial Risk Management (continued)
Capital Management
The Group's objectives when managing capital, which are
unchanged from the previous year, are to ensure that entities in
the Group will be able to continue as a going concern while
maximising the return to shareholders through the optimisation of
the debt and equity balance. The management reviews the capital
structure by considering the cost of capital and the risks
associated with each class of capital. In view of this, the Group
will balance its overall capital structure through new share issues
as well as the issue of new debt or the redemption of existing debt
as it sees fit.
Fair Value Estimation
All financial instruments are carried at amounts not materially
different from their fair values as at 31 December 2010.
Carrying amount of financial assets and financial liabilities by
category
Group As at
31 December
As at 2009
Financial assets - loans and 31 December
receivables 2010
GBP GBP
Non-current
Deposits 162,973 258,828
Other receivables - 27,532
------------- -------------
162,973 286,360
------------- -------------
Current
Trade receivables net of provision
for impairment 176,804 579,535
Other receivables 808,590 799,437
Cash and cash equivalents 356,890 284,178
1,342,284 1,663,150
------------- -------------
Total financial assets - loans
and receivables 1,505,257 1,949,510
============= =============
As at
31 December
As at 2009
Financial liabilities - held 31 December
at amortised cost 2010
GBP GBP
Non-current liabilities
Borrowings 278,940 -
Trade payables 2,782,812 -
Other payables 15,394 -
------------- -------------
3,077,146 -
------------- -------------
Current liabilities
Borrowings 1,528,134 983,468
Trade payables 1,259,238 5,470,641
Other payables 1,003 29,866
------------- -------------
2,788,375 6,483,975
------------- -------------
Non-current provisions
Pension obligations 111,527 123,015
Other provisions 365,716 206,894
------------- -------------
477,243 329,909
------------- -------------
Current provisions
Other provisions 86,036 237,600
------------- -------------
Total financial liabilities
- held at amortised cost 6,428,800 7,051,484
============= =============
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(u) Financial Instruments and Financial Risk Management (continued)
Carrying amount of financial assets and financial liabilities by
category (continued)
Company As at As at
31 December 31 December
2010 2009
Financial assets - Loans and receivables GBP GBP
Non-current
Amounts due from Group undertakings - 2,194,095
------------- -------------
Current
Other receivables 498,923 554,521
Cash and cash equivalents 18,405 19,981
------------- -------------
517,328 574,502
------------- -------------
Total financial assets - loans and
receivables 517,328 2,768,597
------------- -------------
Investments in subsidiary undertakings 10 1,503,055
10 1,503,055
Total financial assets 517,338 4,271,652
============= =============
As at As at
31 December 31 December
Financial liabilities - held 2010 2009
at amortised cost
GBP GBP
Current liabilities
Borrowings 1,434,599 644,534
Trade payables 377,763 168,853
Total financial liabilities
- held at amortised cost 1,812,362 813,387
============= =============
(v) Segment Reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the Group's chief operating
decision-maker. The chief operating decision-maker, who is
responsible for allocating resources and assessing the performance
of the operating segments, has been identified as the Executive
Chairman.
designcapital plc NOTES TO THE FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies (continued)
(w) Critical Accounting Estimates and Judgements
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. Estimates and judgments are
continually evaluated, and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Provision for Impairment of Trade and Other Receivables
The Group makes provision for doubtful debts based on an
assessment of the recoverability of trade and other receivables.
Provisions are applied to trade and other receivables where events
or changes in circumstances indicate that the balances may not be
collectible. The carrying value of trade and other receivables at
31 December 2010, excluding prepayments, was GBP1,011,425 (2009 -
GBP1,391,485), net of a provision for impairment of GBP215,838
(2009 - GBP229,659).
The identification of doubtful debts requires the use of
judgement and estimates. Where the expectation is different from
the original estimate, such differences will impact on the carrying
value of receivables and doubtful debt expenses in the period in
which such estimate has been changed.
Net Realisable Value of Inventories
The Group makes provision for slow-moving or obsolete
inventories based on an assessment of the net realisable value of
the inventories. Provisions are applied to inventories where events
or changes in circumstances indicate that the net realisable value
is less than cost. The carrying value of inventories at 31 December
2010 was GBP479,181 (2009 - GBP974,985).
The determination of net realisable value requires the use of
judgement and estimates. Where the expectation is different from
the original estimate, such difference will impact on the carrying
value of the inventories and the provision for inventory expenses
in the period in which such estimates have been changed. The
calculations have been tested for sensitivity to changes in key
assumptions and the Board does not believe that the key assumptions
will change to such an extent so as to cause the carrying values to
exceed the recoverable amounts.
3. Loss per Share
Basic loss per share is calculated by dividing the loss after
tax attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
Year Year
ended ended
31 December 31 December
2010 2009
Loss attributable to equity
holders of the Company (GBP) 5,075,411 4,228,178
------------- -------------
Weighted average number of
ordinary shares in issue 62,473,665 56,537,675
------------- -------------
Basic loss per share (pence
per share) (8.12) (7.48)
============= =============
The basic and diluted loss per share is the same, as the effect
of the exercise of the share warrants would be to decrease the loss
per share.
Details of share warrants that could potentially dilute earnings
per share in future periods are set out in note 20.
Subsequent to the reporting period the Company has issued
ordinary shares. These shares will have a dilutive effect on
earnings per share in future periods. Details of the shares issued
since the Balance Sheet date are set out in note 29.
Other
The report and accounts for the year ended 31 December 2010 will
be posted to shareholders shortly and will be laid before the next
Annual General Meeting.
Copies will also be available via the website
(www.designcapitalplc.com) in accordance with AIM Rule 26.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BBMBTMBIBTJT
Designcapital (LSE:DESC)
Graphique Historique de l'Action
De Avr 2024 à Mai 2024
Designcapital (LSE:DESC)
Graphique Historique de l'Action
De Mai 2023 à Mai 2024