Tadpole Technology reports wider loss in tough '06 but grows in confidence
2006 was a tough year for Cambridge-based data streaming and GIS specialists Tadpole Technology plc (TAD.L). The group has reported that turnover increased by 10% in the year to end September to reach £9.99m but that once off costs from senior staff changes and the on--off sale of a division widened the operating loss to £0.75m from £0.7m in 2005.
The newly constructed Board has updated the Group’s three-year business plans and short-term cash flow forecasts, which indicate the need for extra cash by the end of March "to sustain the operations of (its) Streaming Division at current levels" and "the need for supplementary funding by October 2007 to finance the investments required to develop the business".
The Directors said there was a "reasonable prospect of securing" additional funds in the short term and that they were looking at options for securing by October 2007 the funding required to support the planned future development.
In a long statement to the stock market refreshingly open and free of management-speak Chairman David Lee (pictured) said: "We have come through a year in which a combination of Board disputes, setbacks with key customer contracts, the uncertainty surrounding the proposed transaction with DivestCap (now terminated) and a difficult funding position have seriously challenged our business.
"Despite all these problems, due to the sustained profitability of the Geospatial Division and reduced costs in the Streaming Division, the Group generated a positive pre-tax cash flow from operations of £202,000 during the year and ended the year with cash of £1.7m, including £842,000 received from the DivestCap convertible loan note, which will be repaid on 27 January 2007.
"Our decision in January 2006 to sell 80% of the Streaming Division to DivestCap had been influenced by the immature state of the market for streaming technologies at the time and our concern at bearing all the investment risk of the additional funding required.
Strategic review
"As we have previously announced, following the change in management of the Streaming Division, your new Board has been conducting a strategic review of its options," Mr Lee said.
"Perhaps the most significant outcome of this review to date is the change in confidence around the Streaming Division. Our key findings in respect of the Streaming Division include new data points and evidence that suggests a serious market for application streaming is now developing; that our products and technologies are robust and competitive and that our patent portfolio has the potential to create value in itself.
"We concluded that significant business opportunities exist and that, under new leadership, we could develop sales and marketing strategies that will enable the Division to compete successfully. Your Board’s agreed strategic objective is therefore to retain full ownership of the Streaming business to maximise long-term shareholder value.
"The Geospatial Solutions Division faces a difficult challenge, following the announcement in November 2006 that its major customer, Ordnance Survey GB, had decided to suspend substantial work streams within the Phoenix programme, adversely impacting the Division’s monthly billings by around 50%.
"I have been pleased and impressed by the speed with which management reacted to down-size the Division’s cost structure and sustain the profitability of the business. As a result, the short-term prospects for the Division have been protected, although the challenge to diversify the business and reduce its dependence on a single customer is now even more important than before. I am heartened by the progress being made in this respect, as evidenced by the Division’s entry into the process industry sector with its iPlan product suite.
"Although there are still a number of significant risks and uncertainties facing the business, …I am pleased to say that we now have a united board that is developing a clearer strategic direction and believes there is potential for the Group."
Share price up
The share market took some comfort from the statement, marking the company's share price up by almost 4% to 2p, valuing the group at about £7.95m.
Throughout the year, the smooth running and effectiveness of the Board was hampered by the attempts of Steig Westerberg, former director and CEO of the Streaming Division, acting in his capacity as a shareholder, to change the Board composition and gain control of the Group.
Following the resignation of Mr Westerberg and that of John Dilts, Peter Bondar joined the Board in September and Iain Cockburn in October. Mr Lee said they had brought a fresh approach and new insight to the Board’s deliberations that augur well for the future.
29th January 2007
