Generics losses grow as it boosts consulting revenue; hires advisers to update 'positioning'
Technology consultants and new venture entrepreneurs Generics Group (GEN.L) reported a 20% increase in revenue to £13.0m for the six months to 30 June 2006.
But the Group's overall pre-tax loss from continuing activities was £0.4m, wider than the loss of £0.2m recorded in the first half of 2005. Its venture capital portfolio returned an operating profit of £0.2m, down from £0.3m, in the first half in 2005.
Managing Director Martin Frost (pictured) said that "Over the course of the last two to three years we have restored Scientific Generics, our technology development consulting business, as the key asset within the business.
"While revenues will continue to be dominated by fees for service revenues, we also anticipate that we will start to see manufacturing royalties building in SGAI, our Hong Kong based activity from the end of 2006.
"The value of the venture portfolio is focussed in a reduced number of key businesses. CMR Fuel Cells has achieved key technical milestones six months ahead of plan; Sphere Medical raised £6.2m in a significant financing in April; and AtraNova, our water treatment business, is now installing equipment in Israel.
"During H2 2006, I look forward to announcing the accelerated development of Intrasonics, our new interactive media business resulting from the expected closure of the current funding round.
"Our strategy is to seek to create one or two new businesses a year from Scientific Generics …and, underpinned by sufficient financial resources, to ensure that Generics retains an equity stake of at least 20% until trade sale or IPO."
The company said operating losses in the period have been hit by the cost of options charge, "a non-cash cost resulting from the options granted in H2 2005 of £0.1m; together with the reduction in the fair value adjustments of £0.8m from £0.9m in H1 2005 to £0.1m".
The share price was unchanged on the news. At 9.5p per share, the company is valued at about £10.2m.
During H1 2006, the consulting and IP grew fee income by 9% to £9.7m (H1 2005: £8.8m) and revenues by 18% to £11.9m (H1 2005: £10.0m). Top-line growth was driven by a robust sales performance in industrial and especially the public sector markets.
The company said it had engaged advisers to assist in updating its brand and to review its market positioning. This cost £0.2m in the first half and will cost a further £0.3m in H2 2006.
Venture subsidiaries
The company's venture subsidiaries are majority owned spin-out created to exploit a particular technology, intellectual property or business opportunity. Generics' goal with its venture portfolio is to realise value through IPO or trade sale. Under IFRS accounting rules, controlled investments are consolidated as subsidiaries. The net costs of venture subsidiaries in H1 were £0.4m, unchanged from H1 2005.
Sensopad
The automotive applications of Sensopad Technologies were sold to a subsidiary of TT electronics plc in March 2004 for £1.2m with anticipated future royalties capped at £10m. Discounted net royalties of £1.7m have been recognised so far. TT has said it has taken £100m of orders for its Autopad sensor.
AtraNova
Hived out of Generics' portfolio company, Atraverda Ltd, AtraNova is seeking to commercialise Ebonex outside the battery markets being exploited by Atraverda. During H1 2006 AtraNova supplied initial water treatment sub-systems against a £0.4m contract in Israel. Generics owns 91% of the equity.
Intrasonics
Intrasonics is Generics' new venture in interactive media services. It develops and markets mobile-media interactivity to broadcasters, media companies and content owners, based on its communications technology. It's unique 'Sound Link and Sync' system creates a new data channel for mobile devices, opening up a range of sophisticated, easy to use 'one touch' media applications that drives new revenues for content and media owners, advertisers and broadcasters, mobile operators and service providers.
Change in fair value of investments
The change in fair value of investments of £0.2m mainly relates to increases in fair value of Sensor Technologies LLC, Atraverda and Sphere Medical, offset by falls in CMR Fuel Cells, Nanoscience and British Titanium. CMR listed at a value of £35.7m on 22nd December 2005. Generics owns 11% of CMR.
5th September 2005
