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| Shareholder Update - March 2004 | |
AXIOMLAB GROUP PLC - SHAREHOLDER UPDATE Dear Shareholder, This is the second update since the company de-listed from AIM in the last quarter of 2003. (It can also be found on our website www.axiomlab.com). Frankly, we do not believe there has been any fundamental change in the operations of our business since September. The primary difference has been a perceived change of sentiment towards the optimistic in the marketplace, which makes a welcome change. The impact on our companies is essentially a better belief in achieving sales numbers, the single most important determinant of success, and an expectation that the environment for possible exits has improved. We have sent the update to our shareholders through a mix of mail and email. It would be helpful, if not already done so, to let us know your email address. This will help us enormously in the logistics of sending out updates in the future. In the enclosed, I have outlined the developments to the Axiomlab Group as well as the status of each of our portfolio investments, subject to appropriate commercial confidentiality and sensitivity. Status of Group As was stated in the Return of Capital documentation, the main elements of our business are now managing our portfolio of investments, building our technology transfer capability (Techtran), managing third party funds, and corporate finance. Techtran, although a 100% owned subsidiary, is essentially treated operationally and financially as a separate investment and is discussed in more detail below. We currently have 12 direct investments as well as a number of indirect investments through the North WestSeed Fund (NWSF) and Techtran. The Group has 14 employees and consultants of whom seven are based in Fund Management Since the last update we have made some significant strides in developing our fund management business. This business is conducted through Axiomlab Investment Managers Limited and is a 100% owned subsidiary of Axiomlab Group plc. Funds are managed for third parties in return for a management fee and a participation or carry in the upside. Since winning the mandate from the NWDA for what is in essence a £9 million fund, we have also won a £10 million fund from the London Development Agency (LDA), focusing on early stage creative industries in the capital. The mandate does require us to fundraise £5 million over the next six months to which £5 million is further contributed by the LDA. The NWSF has been very active since its inception in September 2003 and has processed over 100 applications for funding. In the last two months, it has completed its first three deals. The first was Zewa Limited where the NWSF took an 11% stake. Zewa is a designer and supplier of patient lifting and transfer products for the medical industry and has already secured sales in both the Portfolio Techtran Group Limited Since its formal launch on To date, Techtran has been involved in six new spinout companies and the team is working on a number of potential license agreements as well as further spinouts, representing a diverse range of technologies. Techtran has recently recruited an additional two life science professionals, expanding the team to six people. A flavour of three of the initial spinouts is given below: Syntopix Limited was formed in August 2003 and was initially funded by Techtran's own pre-seed funding. The company is based in the world renowned Identi-Tree Limited, was formed in July 2003. The company's founder, Professor Phil Gilmartin, Director of Plant Sciences, has developed a method unequivocally to identify species of trees from their DNA profiles. The company has attracted significant interest from a number of industry sectors, including insurance, construction and the utilities and is about to commence pilot contracts for several clients. Structure Vision is a specialist technology and consultancy business. The company was formed to exploit unique, patented particle simulation software (Digipac) that has been developed by Professor Richard Williams, a world-renowned specialist in particle engineering. The software models complex particulate systems, addressing manufacturing, storage and transportation issues for any company that use powders in its manufacturing process. A very wide range of industries, such as pharmaceuticals, chemicals, food and aggregates manufacturers, can use the application. Revenue generating pilots are underway with several leading blue-chip organisations. Csols Csols has had a modest but overall disappointing year in that its revenues at just short of £1 million were essentially flat from the prior year, despite setting aggressive sales and break-even targets. The company is in the process of reorganising itself and a new CEO, David Boucher, has been appointed, Phil Goddard, the founder of the company, is taking a primarily sales-focused role. Axiomlab, alongside fellow investors, expect to provide further modest funding over the next six months of up to £75,000. Proactis The last six months of 2003 was a difficult period for Proactis with revenues falling short of expectations. However, January and February of 2004 have been very strong with three new resellers being signed up and the company was profitable on a month by month basis in this period. Proactis has a July year-end and we are hopeful that the company will maintain progress. Also, the company has recently been awarded a £150,000 DTI Innovation Award. NetLet New Associate Director, Louise Rodger joined Netlet in November 2003. She was previously a partner in a student marketing agency in NetLet has already set up a number of sites including LSE, Energetix Group In the last few months, the Energetix group has been restructured. Energetix is now the holding company of a group of companies focused on alternative energy markets. The two main subsidiary businesses are Energetix Micro CHP, a company that has developed a product for the European domestic combined heat and power central heating boiler market, and Thermetica, which has developed a platform technology for chilling. Recently, most of the resources of the company have been focused on securing a development partner for the Micro CHP business and this exercise is on-going. In addition, Thermetica has been successful in selling a demo unit in a new market sector and the company is hopeful that subsequent trials will lead to a full commercial licensing agreement. Axiomlab increased its investment during the period by an additional £75,000, although as part of the restructuring its equity stake in the group remains at 36%. Casmir As reported last year, despite significant interest in its technology, Casmir has proved an unsuccessful investment and the company had reached a stage where it seemed prudent to close down operations in an orderly fashion. Axiomlab had invested alongside Yorkshire Fund Mangers and a number of angel investors. As a last resort, however, Axiomlab took on the responsibility of trying to rescue some residual value. Casmir entered into a deal with a company called Azolve Limited, which took on the task and risk of taking the product to market. The task of building a commercial strength product has proved challenging but Azolve has had some success, particularly in the education sector, and we believe that we may obtain some value for shareholders over the next six months. In the interim, Casmir will operate as a shell and the shareholdings changed to reflect the new circumstances. Empiricom Empiricom remains virtually dormant. We have had a number of tentative approaches to acquire the technology, but these have all been for very small sums or where there is a large contingent element. We still believe that the technology is attractive but we have thus far failed to find a market where its application is best commercially suited. Although a lower priority than working with certain of our other portfolio companies, it remains our intention to find a partner to develop the company's technology in order to obtain some value from the investment. BraddaHead The company has performed three or four months behind plan in that the emissions testing for the product whereby regulatory approval is sought for selling the units in the EU and the Tenison Tenison has made strides to increase its penetration of the semi-conductor market and ARM and ST Microelectronics are two of the most recent high profile companies to adopt its technology for System Emulation in Software. To date, sales are essentially on plan but have emanated more from iBase The company continues to maintain its sales and is just about break even, but frankly has struggled to find a breakthrough event, which could turn the business into a much bigger business. We, alongside our fellow investors, are exploring with management ways in which we may be able to favourably restructure the business. --------------------------------- We look forward to hearing your comments and welcome feedback on the provision of information. We again are grateful for your support. Yours sincerely, Fred Mendelsohn Managing Director, Axiomlab Group plc |
