MXCP.L Regulatory News (MXCP)

MXC Capital plc

 ('MXC', 'the Company' or 'the Group')

Results for the year ended 31 August 2014 and Notice of AGM

MXC Capital plc (AIM:MXCP), the specialist merchant bank, today announces its full year audited results for the year ended 31 August 2014. Copies of the annual report and accounts have today been posted to shareholders along with the notice of annual general meeting to be held at 11.30am on 29 January 2015 at the offices of DAC Beachcroft, 100 Fetter Lane, London, EC4A 1BN. A copy of the annual report and accounts can also be found on the Company's website www.mxccapital.com.

Highlights

· Transitional year, establishing specialist merchant bank investing and growing value in companies in the Technology, Media and Telecommunications sector.

· Disposal of legacy operating business to facilitate new strategy, raising £4.5 million proceeds.

· Oversubscribed equity placing raising £8.5 million to provide initial investment pool.

· Post year end acquisition of MXC Capital Advisory LLP ('MXCCA') to provide regulatory advisory capability.

· Following acquisition of MXCCA, two advisory mandates successfully concluded, highlighting M&A and Debt Advisory credentials.

· Two investments completed post year end and healthy pipeline of opportunities building.

Marc Young, CEO of MXC commented:

"We are now fully up and running as a specialist investor and advisor in the tech sector. Our first investments have been completed and we have a number of new opportunities in the pipeline. The new year looks promising for MXC".

MXC Capital plc

Marc Young

+44(0)20 7965 8149

Zeus Capital Limited (Nominated adviser and broker)

John Depasquale/John Treacy

+44 (0)20 7533 7727

About MXC Capital

MXC is a specialist merchant bank with a track record of investing in and advising companies in the TMT sector. We bring together a deep knowledge of technology, first-hand experience of managing companies in the sector, an ability to make meaningful investments and a highly experienced corporate advisory team in support, all of which we combine to grow shareholder value.

Strategic report

Overview

2014 has been a year of significant change for MXC Capital plc ('MXC' or the 'Company' and, together with its subsidiaries, the 'Group'), laying the foundations for the MXC of today - a specialist merchant bank that invests and grows value in companies in the Technology, Media and Telecommunications ('TMT') sector.

In April 2014, the Group completed the disposal of its operating business, 2ergo Limited, to Eagle Eye Solutions Group plc ('Eagle Eye') for £4.5 million. The Board is pleased with the success of this sale; key staff and customers continue to be retained by Eagle Eye, demonstrating MXC's ability to deliver value and stability to both its investee companies and its partners. Following this disposal the Company changed its name to Broca plc, ahead of its subsequent name change to MXC Capital plc in August 2014.

In August 2014, the Group raised £8.5 million (before fees) through an equity placing and in October 2014 completed the acquisition of MXC Capital Advisory LLP, ('MXCCA') a specialist corporate finance firm with significant experience in the TMT sector.

The placing, the acquisition, and a consultancy agreement entered into with experienced technology investors Ian Smith and Tony Weaver have laid the foundations for MXC Capital plc, a specialist merchant banking group that invests in and advises companies in the TMT sector. MXC brings together a particularly powerful set of skills to the benefit of both the companies it invests in and for its own shareholders. 

The MXC team has considerable experience in the sector, with a deep understanding of the technology involved. They are experienced hands on managers of businesses, with a track record of growing value. They have a wide network of contacts in the TMT sector that originates a significant flow of opportunity both for MXC and the companies it works with.

The Group has access to a significant pool of funding. A distinguishing feature of the MXC model is that it invests as a principal, sharing in the risk and the reward.

MXC focuses on delivering:

· A deep knowledge of the technology industry with proven management skills in the sector;

· Investment, allowing the team to identify and provide support to growth companies; and


· An experienced advisory capability to manage transactions and financings.

The strategy is already starting to be successfully implemented. Since the completion of the acquisition of MXCCA at the end of October, MXC has:

· Invested in and advised Castleton Technology plc on its acquisition of Documotive Limited, leading an oversubscribed £5.5m equity financing. Following its investment, MXC now holds 23% of Castleton;

· Invested in 365 Agile Limited, taking a 25% stake in an exciting mobile work solutions business; and

· Advised Accumuli plc, the independent specialist in IT security and risk management, on its £10m acquisition of Randomstorm, leading the arrangement of a new debt facility to fund the acquisition.

With a strong pipeline of potential investments and several well progressed opportunities, the Board is confident that MXC is well positioned to take advantage of the significant potential afforded by the Group's combination of technology focused merchant banking, investment and advisory services.

Financial review

At 31 August 2014, the Group's former operating business, 2ergo Limited, had been sold, but the acquisition of MXC Capital Advisory LLP ('MXCCA') had not completed. The disclosures in respect of 'continuing operations' within these financial statements therefore represent the cost base of MXC Capital plc as a stand-alone entity, and do not include any of the revenue generating activities of MXCCA which will be included in future consolidated financial statements.

In respect of continuing operations, administrative expenses and the resultant loss for the year were £1.1 million (2013: £1.1 million). These expenses include ongoing costs of £0.6 million (2013: £0.6 million), primarily relating to salary costs and the Group's regulatory and listing expenses. The non-cash share options charge was £0.1 million in the year (2013: £0.5 million) and £0.4 million (2013: nil) was incurred in respect of legal and professional fees for the acquisition of MXCCA and the associated reverse takeover.

After a deferred tax credit of £15,000 (2013: £0.1 million) in respect of the share option charge, the Group's loss from continuing operations was £1.1 million (2013: £1.0 million).

During the year the Group sold 2ergo Limited, its trading subsidiary, to Eagle Eye for £4.5 million. £2.5 million was received in cash, with the balance satisfied by the allotment and issue to the Company of new ordinary shares in the capital of Eagle Eye, an AIM quoted company. The Group generated a profit on the disposal and trade of 2ergo Limited of £0.3 million (2013: loss of £3.6 million), this is shown in the Consolidated statement of profit or loss as 'profit from discontinued operations'.

Overall, the reported loss for the year was £0.8 million (2013: loss of £4.6 million) with a loss per share of 0.18 pence (2013: loss of 4.04 pence).

Net assets at 31 August 2014 were £12.4 million (2013: £4.8 million). These comprised predominantly cash of £11.1 million (2013: £1.5 million), the shares held in Eagle Eye of £1.8 million (2013: £nil) and creditors of £0.7 million (2013: £1.3 million). The increase in the cash balance was a result of the £8.4 million proceeds (net of fees) received from the equity placing in August 2014 and £2.5 million cash received from the sale of 2ergo Limited. The balance of the sale proceeds of £2 million is shown as a current asset investment on the balance sheet. In accordance with IFRS requirements this investment is stated at fair value at 31 August 2014, resulting in the recognition of a non-cash fair value reduction of £0.2 million.

The net assets and cash balance at 31 August 2014 leave the Group well positioned to begin to execute its strategic intentions.

Subsequent to the year end, on 29 October 2014, MXC completed the acquisition of MXCCA for £6 million, settled by the issue of shares in MXC. This acquisition is classified as a reverse takeover and will be accounted for as such in the interim results to 28 February 2015.

Also subsequent to the year end MXC invested £1.2 million in Castleton Technologies plc ('Castleton'), an AIM listed public sector focused IT managed services business. It also issued 104,089,816 ordinary shares of 1p to acquire MXC Holdings Limited's interest in Castleton. Following the investment and share issue MXC now holds 23.2% of the issued share capital of Castleton.

The Company has also recently completed its investment in 365 Agile Limited, a software enabled mobile working solutions business. MXC has acquired 25% of 365 Agile Limited, providing up to £1 million of funding through a combination of debt and equity.

These investments lay the foundation for the Group's stated strategy; providing investment and advisory services to high growth companies in the TMT sector. To further facilitate this MXC has announced its intention to re-domicile to Guernsey. In order to effect the re-domicile all existing shares in MXC Capital plc will be exchanged for shares in MXC Capital Limited, a company that has been incorporated in Guernsey to become the new holding company for the MXC Capital group of companies. In all other aspects the Group's current board, strategy and investment portfolio will remain unchanged as a result of the re-domicile and it will retain its AIM quotation. In addition, as part of the re-domicile process, the Company has applied to the court to permit a capital reduction which will create distributable reserves. The Board believes these changes, which are expected to complete in early 2015, will offer greater flexibility to achieve the Group's investment aims.

Consolidated statement of profit or loss

for the year ended 31 August 2014

Consolidated statement of other comprehensive income

for the year ended 31 August 2014

Consolidated statement of financial position

as at 31 August 2014

Consolidated statement of changes in equity

for the year ended 31 August 2014

(1)The reclassifications are in respect of the Merger and Merger Relief reserve balances which were eliminated on the disposal of 2ergo Limited.

(2)The reclassification is in respect of the revision to the fair value of treasury shares, based on the market value of the shares at 31 August 2014. (3)The reclassification is in respect of the revision to the fair value of EBT shares, based on the market value of the shares at 31 August 2014.

Consolidated statement of cash flows

for the year ended 31 August 2014

Notes to the consolidated financial statements

1 Accounting policies

Basis of preparation

The financial information set out herein does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information for the year ended 31 August 2014 has been extracted from the Group's audited financial statements which were approved by the Board of Directors on 30 December 2014 and which, if adopted by the members at the Annual General Meeting, will be delivered to the Registrar of Companies for England and Wales. The report of the auditors on the financial statements for the year ended 31 August 2014, which was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006. The financial information included in this preliminary announcement has been based on the Group's financial statements which are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the EU. The principal accounting policies are set out in the Group's 2014 statutory accounts.

The comparative figures for the financial year ended 31 August 2013 are based on the statutory accounts for that year, restated to reflect the discontinued activities. The report of the auditors on the financial statements for the year ended 31 August 2013, which were prepared in accordance with IFRS, was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain a statement under section 498 (2) or 498 (3) of the Companies Act 2006. The financial statements for the financial year ended 31 August 2013 have been delivered to Companies House.

The Company is a public limited company incorporated and domiciled in England & Wales and whose shares are quoted on AIM, a market operated by The London Stock Exchange.

2 Discontinued operations

On 16 April 2014, the Group disposed of 2ergo Limited which entailed the sale of the mobile coupon and loyalty business carried on by the Group. In accordance with IFRS 5 the results of this unit are classified as discontinued operations in these financial statements.

The results of the discontinued operations up until the point of disposal, which have been disclosed separately in the consolidated statement of profit or loss, as required by IFRS 5, are as follows:

Cash flows from discontinued operations:

The net assets and liabilities at disposal and the profit on disposal were as follows:

The total proceeds of the disposal of 2ergo Limited were £4,500,000. £2,500,000 was received in cash and £2,000,000 in shares in Eagle Eye Solutions Group plc. The fair value of these shares at 31 August 2014 was £1,829,000.

3 Loss per share

The calculation of basic and diluted loss per share from continuing and discontinued operations is based on the result attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the year. The weighted average number of shares for the purpose of calculating the basic and diluted measures is the same. This is because the outstanding share options would have the effect of reducing the loss per ordinary share and therefore would be anti-dilutive.

Basic and diluted loss per share from continuing operations is calculated as follows:

Basic and diluted loss per share from discontinued operations is calculated as follows:

Basic and diluted loss per share from continuing and discontinued operations is calculated as follows:

4 Share capital

The authorised share capital of the Company is unrestricted (2013: 500,000,000 ordinary shares of 1p each). The share capital allotted, called up and fully paid at 31 August 2014 was 1,248,446,902 (2013: 397,891,130) ordinary shares of 1p each, of which 899,726 (2013: 899,726) were held in treasury.

On 13 August 2014, the Company issued 850,000,000 1p ordinary shares through a placing and subscription with new and existing shareholders at a price of 1p per ordinary share. The purpose of the placing and subscription was to provide funding to allow the Group to make acquisitions and/or investments within the TMT sector in line with its investment strategy.

On 13 August 2014, the Company issued 555,772 1p ordinary shares pursuant to the final tranche of the contingent consideration due on the acquisition of the entire issued share capital of Activemedia Technologies Limited in 2009.

On 12 August 2014 the Company revoked the restriction on its authorised share capital and therefore now has no limit on the number of authorised ordinary shares.

5 Subsequent events

Acquisition of MXC Capital Advisory LLP

On 29 October 2014, the Company completed the acquisition of MXC Capital Advisory LLP ("MXCCA") and the associated reverse takeover which was announced on 28 July 2014. In consideration for its acquisition of MXCCA, a corporate finance advisory business, the Company issued 600,000,000 ordinary shares of 1p each. The acquisition was completed to provide the Group with sufficient in-house experience to take full advantage of a strengthened balance sheet, and to allow the Group to generate capital gains by increasing the value of future investments whilst generating income and profits from the advisory business.

In MXCCA's audited financial statements for the 14 month period from formation to 31 March 2014 it generated revenues and gross profits of £1,110,000 and profit before members' remuneration and profit share of £925,000. For the six months to 30 September 2014 the comparable figures in the unaudited accounts were £345,000 and £294,000 respectively.

The initial accounting for the business combination has not yet been finalised and as such disclosures in relation the fair value of assets and liabilities acquired have not been presented within these financial statements.

During the year to 31 August 2014 costs of £387,000 were incurred in relation to the acquisition and reverse takeover.

Investments

On 5 November 2014 the Company issued 104,089,816 ordinary shares of 1p to acquire MXC Holdings Limited's interest in Castleton Technologies plc ('Castleton'), an AIM listed public sector focused IT managed services business. On 18 November 2014, the Company invested £1.2 million in Castleton. Following the investment and share issue, the Company holds 23.2% of the issued share capital of Castleton.

On 18 November 2014, the Company completed its investment in 365 Agile Limited, a software enabled mobile working solutions business. The Company has acquired 25% of 365 Agile Limited, providing up to £1 million of funding through a combination of debt and equity.

Equity transactions

On 30 October 2014, the Company cancelled the 899,726 ordinary shares of 1p each held in treasury by the Company. Following the cancellation, the Company holds no shares in treasury. There is no impact on the retained losses or net asset position of the group arising from this transaction.

On 6 November 2014 the Group issued 3,000,000 ordinary shares of 1p each in satisfaction of outstanding consultancy fees. There is no significant impact on the retained losses or net asset position of the group arising from this transaction.

On 24 December the Group issued 5,347,000 ordinary shares of 1p each in satisfaction of a consultancy agreement. A further 5,347,000 ordinary shares of 1p each will be issued on 5 January 2015. These fees relate to costs incurred post year end and will be reflected in the results for year ended 31 August 2015.

At 24 December 2014 and at the date of this report the Company's issued share capital was 1,959,983,992 ordinary shares of 1p each.

 Re-domicile

To further facilitate its investment strategy, on 17 November 2014 the Group announced its intention to re-domicile to Guernsey. In order to effect the re-domicile, all existing shares in MXC Capital plc will be exchanged for shares in MXC Capital Limited, a company that has been incorporated in Guernsey to become the new holding company for the MXC Capital group of companies. In all other aspects, the Group's current board, strategy and investment portfolio will remain unchanged as a result of the re-domicile and it will retain its AIM quotation. In addition, as part of the re-domicile process the Company has applied to the court to permit a capital reduction which will create distributable reserves. The Board believes these changes, which are expected to complete in early 2015, will offer greater flexibility to achieve the Group's investment aims.