Brainspark follows Durlacher in refocus

The company has suffered from its exposure to negative market sentiment, with the bulk of its investments being in early-stage technology companies. It wrote down the value of its portfolio by £6m to reflect the malaise in the technology and IPO markets and now recognises that "internet incubation can no longer represent a viable business model".

Accordingly, it will now look to generate "additional" lines of revenue by offering services that include IT portfolio management, private placements, mergers and acquisitions, and fund raising. The move mirrors changes at Durlacher, which last month retreated into similar territory following the failure of its investment strategy. Brainspark and Durlacher were engaged in merger talks towards the end of 2001, but no deal was reached.

Brainspark posted a heavy £12.9m loss, albeit a smaller deficit than the £14.6m reported last year, and said that cash reserves fell by £4.2m to £5.55m as at the end of 2001. The company had worked hard to reduce its cash burn to below £200,000-a-month, but recognised that this is not enough, and will look to make further cuts. Brainspark retained just two employees after significantly paring headcount last year.

Brainspark chairman Francesco Gardin was particularly disappointed with the fall in its net asset value, which is now stated at £7m - with £5.5m in cash - compared with £24m last year. It gave no details on the individual performance of its investee companies and Gardin warned: "There is no evidence at present of an imminent improvement in market sentiment."

However, the company remains optimistic and Gardin noted: "A few companies are already prepared for the public sale of shares when the market conditions are more favourable than now".

Brainspark remains in talks with Italian incubator Infusion with a view to a possible acquisition. Italian software company AISoftware purchased a 65.5% stake in Brainspark in February and restructured its board.

Shares fell 21.4% to 2.75p, valuing the investment group at a discount to cash, at £3.4m.

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