Braveheart Inv Regulatory News (BRH)

Braveheart Investment Group plc

 ("Braveheart" or the "Company")

Results for the year ended 31 March 2016

Notice of AGM

Braveheart Investment Group plc today announces its audited annual results for the financial year ended 31 March 2016., highlights of which are set out below.

Highlights

· Operating costs reduced by approximately £570,000 over a full year;

· Cash at bank of £1.3m as at 31 March 2016;

· Operating loss of £370,000;

· Successful disposal of interest in WhiteRock Capital Partners;

· Purchase of remaining interest in Ridings Holdings Ltd;

· Viking awarded a contract extension to invest a further £5.1m to top up the £40m Finance Yorkshire Equity Fund, and a further £3.8m made available in January 2016;

· Completion of reorganisation and restructuring efforts, with remaining exceptional charges now accounted for; and

· Board now focused on Group's future with an emphasis on ensuring positive earnings are achieved in the current year.

Further information:

Braveheart Investment Group plc

Trevor Brown, CEO Tel: +44 1738 587555

Allenby Capital Limited (Nominated Adviser and Broker to Braveheart)

David Worlidge/James Thomas Tel: +44 20 3328 5656

Chief Executive Officer's Report

I am pleased to report to shareholders for the 12 months ended 31 March 2016.

Overview

Throughout the course of the year, we continued to review all operations with the objective of identifying which activities we can best concentrate our resources upon, to the most productive effect for our shareholders. As a result of that review and related actions taken by your board, we have succeeded in reducing operating costs of the Group by approximately £570,000 per annum.

The target that the board has set itself for the current year is to ensure that the operating costs of the Group will be less than operating income, allowing us to budget for a surplus for the full year.

A key part of the operational review we have undertaken has been to take the difficult decision to scale back, sell or close those parts of the Group that the review has identified as unlikely to become profitable in the near future and/or having a requirement for significant capital expenditure.

To this end we have taken the following actions:

1. Sold our 33% participation in WhiteRock to the management team for the sum of £100,000 (as announced on 8 January 2016)

2. Exited from the investment partner participation with SEEDRS

3. Closed our Strathtay private client business

Braveheart Group continues to own and manage a small private equity portfolio on its own account. At the end of the period under review the number of directly held investments totalled 18 (2015: 18).

We are pleased to have been able to announce, during the year under review, the successful exit for both our own directly held investment and for the many clients that we have historically advised, of the investments in Bloxx Ltd and Biopta Ltd.

An important part of the focus on achieving these exits has been to undertake a detailed review of the exit opportunities for each investment and the likely value that such an exit would generate for Braveheart. This review has led us to conclude that some of the valuations of the directly held portfolio needed to be adjusted, with the aggregate adjustment for the whole portfolio being a reduction in value of £1,026,000 (excluding Bloxx Ltd and Biopta Ltd) to £468,000 (2015: £2,478,000). The reduction in valuation has been taken through the profit and loss account but is, of course, a non-cash adjustment and so has not impacted the cash held on our balance sheet.

As at the end of the financial year the cash held on our balance sheet stood at £1,263,000 (2015: £503,000). The significant increase in the cash position of Braveheart is due to a combination of the sale of participations and investments during the year under review, together with the determination of your board to reduce the operational costs of the Group.

The most important operational activity of the Group is our fund management business, Viking Fund Managers ('Viking'). Viking had another successful year, working throughout the Yorkshire and Humber region. It manages the Finance Yorkshire Equity Fund ('FYEF') which invests both debt and equity instruments in development capital situations and unit sizes range from £50,000 to £2 million.

During 2015, Viking was awarded a contract extension to invest a further £5.1 million to top up the £40 million FYEF, with a further £3.8 million being made available in January this year. In the period, the Viking team invested £16.4 million, bringing the total invested at 31 March 2016 to £46.3 million (2015: £29.9 million) into a total of 53 SMEs (2015: 44). Viking anticipates investing the remaining £2.64 million during the first quarter of 2016/17 so that fund will be fully invested by 30 June 2016.

Thereafter, Viking is contracted to continue into the portfolio management phase until December 2019. Throughout last year the team were responsible for securing several exits for the fund. The portfolio continues to look promising as it moves into growth and realisation phase, with several investments having significant potential value to be returned.

A new, £400 million Northern Powerhouse Investment Fund ('NPIF') is being planned by the British Business Bank as a successor to the JEREMIE funds in Teeside, Yorkshire and Humber and the North West, with anticipated launch dates in autumn 2016. Viking looks forward to bidding to win a place on the framework for fund management services and its experienced team is keen to win a mandate for running an NPIF fund with a similar remit and duration to FYEF.

In December 2015, Viking bought out the remaining shareholders of Ridings Holdings Limited ('RHL'), which has a portfolio of remaining investments from previous funds to be realised.

Financial Review

During the year we continued the comprehensive review of our cost base, and implemented a restructuring of head office operations. This exercise has continued post year-end and we expect to further reduce our annual central costs during the course of the financial year ending 31 March 2017.

Income Statement

Fee-based revenue is generated by both Strathtay Ventures Ltd ('SVL') and Viking Fund Managers Ltd ('VFM'). The principal revenue from the Group's operations comprises investment management fees, with total revenue during the year being £1,133,000 (2015: £1,864,000).

Finance income was £7,000 (2015: £13,000), this being interest on outstanding loan notes within the directly held portfolio.

As at 31 March 2015, the fair value of the Group's directly held portfolio of 18 companies was £2,478,000. During the year the Group made investments of £16,500 into two existing portfolio companies and £45,000 to purchase the remaining shareholding in Ridings Holdings Ltd. As previously noted, investments in Bloxx and Biopta were realised showing a return of £1,074,000. As at 31 March 2016 the fair value of the investment portfolio of the remaining 18 companies was £468,000, resulting in an aggregate unrealised revaluation loss of £1,026,000 (2015: unrealised revaluation loss of £1,080,000).

The Group's directly held portfolios are held either by the Company, Strathclyde Innovation Fund LP, Caledonia Portfolio Realisations Ltd ('CPR') or Ridings Holdings Ltd. There is an increase in contingent consideration of £57,000 (2015: decrease in contingent consideration of £136,000) payable on future exit values of CPR portfolio companies which has now been agreed and partly paid.

Total income for the year ended 31 March 2016, including realised gains and unrealised revaluation gains and losses, was £196,000, a decrease from £1,143,000 in 2015.

The average number of employees decreased by 5 during the period under review. Employee benefits expense was £1,001,000 (2015: £1,394,000), including redundancy and loss of office costs of £178,000. Other operating and finance costs were broadly the same at £516,000 (2015: £518,000). A goodwill impairment loss of £372,000 (2015: £nil) was recorded against Viking Fund Managers.

Excluding unrealised portfolio movements and contingent consideration, the loss before tax was £610,000 (2015: profit of £177,000). The total loss after tax and amounts attributable to non-controlling interests for continuing operations increased to £1,693,000 (2015: loss of £768,000), equivalent to a loss per share of 6.23 pence (2015: loss per share of 2.78 pence).

Financial Position

Net assets at 31 March 2016 were £1,705,000 (2015: £3,388,000), equivalent to 6.30 pence per share (2015: 12.52 pence) the decrease reflecting trading results.

The Group's net assets include goodwill of £380,000 (2015: £752,000). The carrying value of goodwill was reviewed during the year and in light of current projections of future performance the Directors have impaired goodwill by £372,000.

At the year end the Group had cash balances of £1,263,000 (2015: £503,000). There were no material borrowings.

A summary analysis of the Group's performance is as follows:

Outlook and Strategy

We will continue to tightly control the operational cost base of the Group, whilst at the same time trying to increase the activities and revenues of VFM. We also hope to identify new private equity investments with good growth potential where our investment will produce good returns for Braveheart shareholders.

Our expectation is that the completion of the restructuring and operational review will result in an improved outlook for the Group becoming profitable over the full year. I look forward to updating shareholders on progress as the year unfolds.

Key Performance Indicators (KPIs) for Continuing Operations

The KPIs we use to monitor business performance, which given the nature of our business are primarily financial measures, are:

Principal Risks and Uncertainties

Through its operations the Group is exposed to a number of risks. The Group's risk management objectives and policies are described in the Corporate Governance Statement on page 11 of the financial statements.

Our current Chairman, Jeremy Delmar-Morgan, has concluded that it is now an appropriate time for him to retire from the Board of the Company, with his leaving taking effect on the 31st July 2016. Jeremy has been Chairman of Braveheart since 2008 and has steered the Group through some difficult times as we adjusted and re-focused the operations of the Group. I would like to take this opportunity to thank him for the considerable effort that he has put into Braveheart over the last 8 years and wish him well in his retirement.

Trevor E Brown

Chief Executive Officer

22 June 2016

Consolidated Statement of comprehensive INCOME for the year ended 31 March 2016

Company Statement of Financial Position as at 31 March 2016

Consolidated Statement of Cash Flows for the year ended 31 March 2016

Company Statement of CAsh flows for the year ended 31 March 2016

Consolidated and company Statement of ChAnges in Equity for the year ended 31 March 2016

Notes to the financial statements for the year ended 31 March 2016

1 Accounting policies

Basis of preparation

The consolidated financial information contained within this announcement has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial information in this report has been prepared under the historical cost convention as modified by the revaluation of certain financial assets and liabilities at fair value through profit and loss. The financial information included in this announcement does not include all the disclosures required by IFRS or the Companies Act 2006 and accordingly does not itself comply with IFRS or The Companies Act 2006.

The financial information set out in the announcement does not constitute the group's statutory accounts for the years ended 31 March 2016 or 2015 within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2015 is derived from the statutory accounts for that year which has been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.

The statutory financial statements for the year ended 31 March 2016 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors reported on those accounts; their report was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. 

The Group's business activities (together with the factors likely to affect its future development, performance and position) and its financial position is set out in the Chief Executive Officer's Report. The Group's risk management objectives and policies are described in the Corporate Governance Statement of the financial statements. 

The directors have reviewed the Group's and the Company's budgets and plans, taking account of reasonably possible changes in trading performance and the level of currently available but undrawn bank facilities, have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to continue to adopt the going concern basis in preparing the financial statements.

2 Revenue

Revenue is attributable to the principal activities of the Group. In 2016 and 2015, all revenue arose within the United Kingdom.

The business is regarded as one segment due to the nature of services provided and the methods used to provide these services. The business is managed and financial performance is reported to the Board on this basis.

3 Loss per share

Basic loss per share has been calculated by dividing the loss attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year.

The calculations of loss per share are based on the following loss and numbers of shares in issue:

4 Investments at fair value through profit or loss

As at 31 March 2016, the group total value of equity investments in companies was £467,609 (2015: £2,317,580). Of this, £71,511 (2015: £698,520) relates to subsidiaries held at fair value. The group total change in fair value during the year was a loss of £1,025,718 (2015: loss £1,080,442) of which £77,283 (2015: £591,783) relates to subsidiaries held at fair value. During the year, Viking Fund Managers Ltd acquired 100% of the issued share capital of Ridings Holdings Ltd which has quoted investments of £165,554.

Investments, which include equity and debt investments, are designated on initial recognition as financial assets at fair value through profit or loss. This measurement basis is consistent with the fact that the Group's performance in respect of its portfolio investments is evaluated on a fair value basis in accordance with an established investment strategy. When investments are recognised initially, they are measured at fair value.

After initial recognition the fair value of listed investments is determined by reference to bid prices at the close of business on the reporting date. Unlisted equity investments are measured at fair value by the directors in compliance with the principles of the International Private Equity and Venture Capital Guidelines, updated and effective December 2015, as recommended by the European Venture Capital Association. The fair value of unlisted equity investments is determined using the most appropriate of the valuation methodologies set out in the guidelines. These include using recent arm's length market transactions; reference to the current market value of another instrument, which is substantially the same; earnings or profit multiples; indicative offers; discounted cash flow analysis and pricing models.

The Group classifies its investments using a fair value hierarchy. Classification within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant investment as follows:

· Level 1 - valued using quoted prices in active markets for identical assets;

· Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1; and

· Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.

The fair values of quoted investments are based on bid prices in an active market at the reporting date. All unquoted investments have been classified as Level 3 within the fair value hierarchy, their respective valuations having been calculated using a number of valuation techniques and assumptions, notwithstanding that the basis of the valuation methodology used most commonly by the Group is 'price of most recent investment'.  The use of reasonably possible alternative assumptions has no material effect on the fair valuation of the related investments. The effect on the consolidated statement of comprehensive income for the period is also not expected to be material. There are no identified unobservable inputs to which the Level 3 fair values would be materially sensitive. The impact on the fair value of investments if the discount rate and provision shift by 1% is £3,269 (2015: £12,435).

5 Goodwill

The acquisition of Viking Fund Managers Ltd has been accounted for under IFRS 3. At initial recognition, contingent consideration settled, or to be settled, in shares was fair valued by reference to the Company's share price at the acquisition date. The acquisition of Neon has been accounted for under IFRS 3 Revised.

At the end of the year, the Group assessed the recoverable amount of the above goodwill associated with each of the Viking and Neon's cash-generating units (both being part of the Group's only operating segment), and determined that goodwill was impaired for Viking but not for Neon. The recoverable amount of Neon was assessed by reference to the cash-generating unit's value in use based on internally prepared and approved 3 year cash flow projections and growth based projections for a further 2 years (a reasonable measurement period in the group's line of business) assuming the following growth rates and applying the following discount factors:

The recoverable amount of Viking was similarly assessed and due to the acquisition of RHL and Regic during the year, management fees previously paid from RHL and Regic to Viking have now ceased leaving the only revenue stream as being Lachesis fund management fees. The future level of fee income generated by Lachesis was deemed insufficient to meet the recoverable amount of goodwill and has therefore resulted in a full impairment of Viking goodwill.

Cashflow projections are mainly based on contracted revenues and associated costs, which can therefore be predicted with reasonable certainty and the directors do not consider there to be significant assumptions included within these cash flows.

These factors are based on past experience and future expectations which the directors consider to be appropriate. Value in use estimates arising from reasonably possible changes to these factors do not indicate further impairment.

6 Posting of audited results for the year ended 31 March 2016 and Notice of AGM

The Company is pleased to announce that it expects to post its audited report and accounts for the year ended 31 March 2016 to shareholders on 27 June 2016. It is also posting notice of its annual general meeting ("Notice of AGM"), to be held at Mazars' office at Tower Bridge House, St Katharine's Way, London E1W 1DD on 19 July 2016 at 11.00am. Copies of the final report and accounts and the Notice of AGM are also available to view on the Company's website at http://www.braveheartgroup.co.uk/