SGM.L Regulatory News (SGM)

24 Apr 2007 07:01

Sigma Capital Group PLC24 April 2007 For Immediate Release 24 April 2007 Sigma Capital Group plc ("Sigma" or "the Company") Adoption of International Financial Reporting Standards (IFRS) 2006 Income statement and balance sheet Sigma Capital Group plc is a specialist asset management and advisory focused onventure capital, university IP and property. Sigma is today presenting information to show the effect of adopting IFRS forthe year ended 31 December 2006 in preparation for the adoption of IFRS for itsaccounting period commencing 1 January 2007. Financial effect on 2006 results £'000 UK GAAP IFRS Revenue 8,279 8,129 Profit before tax 1,867 1,719 Retained profit for the year 548 400 Shareholders' funds 4,106 4,121 The most notable change to Sigma's financial statements is that its investmentsare carried at fair value and are classified in the balance sheet as either"available for sale" under non-current assets or as "held for sale" undercurrent assets. The fair value of quoted investments is taken as the bid price.Movements in fair value are taken through the income statement. As shown above,Sigma's total revenue in 2006 is less under IFRS than under UK GAAP. This is dueto the effect of revaluing one of its direct quoted investments at bid price at31 December 2005, which was higher than cost, and moving the unrealised gaininto 2005. This investment was sold during 2006 at a similar price to the fairvalue at 31 December 2005 and so the effect on revenue in 2006 under IFRS wasminimal. The adjustments that have been made to the balance sheet at 1 January 2006, theincome statement for 2006 and the balance sheet at 31 December 2006 to convertfrom UK GAAP to IFRS are attached together with Sigma's accounting policies thatwill be adopted under IFRS. Contact Sigma Capital Group plcGraham Barnet, Chief Executive Officer 0131 220 9444Marilyn Cole, Finance Director 0131 220 9444 Buchanan CommunicationsDiane Stewart/Isabel Podda/Karen Morrison 0207 466 5000 Sigma Capital Group plcIFRS ConversionAs at 1 January 2006 UK GAAP Reclassifications Adjustments IFRS Note 01.01.06 01.01.06 £'000 £'000 £'000 £'000ASSETS Non-current assetsIntangible assets - Goodwill 60 60Property and equipment 69 69Available for sale investments 1,913 50 1,963 1Deferred tax asset 298 298 2 2,042 298 50 2,390Current assetsTrade receivables 332 332Other current assets 387 387Deferred tax asset 298 -298 2Trading investments 374 112 486 3Cash and cash equivalents 1,995 -207 1,788 4Deposits 0 207 207 4 3,386 -298 112 3,200Total assets 5,428 162 5,590 LIABILITIESCurrent liabilitiesMinority interests - non-equity 1,255 1,255Trade and other payables 496 496Current tax payable 179 179 1,930 0 0 1,930Non-current liabilitiesPreference share capital 750 750Total liabilities 2,680 0 0 2,680 Net assets 2,748 0 162 2,910 EQUITYEquity attributable toequity holders of theparentCalled up share capital 381 381Share premium account 14,043 14,043Merger reserve -249 -249Share based payment reserve 27 27Capital reserve -7 -7Retained earnings -11,399 162 -11,237 1, 3 2,796 162 2,958Minority interest - equity interest -48 -48 Total equity 2,748 0 162 2,910 NOTES 1. Under IFRS, unquoted investment assets are valued at fair value, under UK GAAP these had been valued at the lower of fair value and cost less any impairments.2. Under IFRS, deferred tax is classified as a non-current asset.3. Under IFRS, quoted investment assets are valued at bid price, under UK GAAP these had been valued at the lower of cost and mid market price.4. Under IFRS, any longer term cash deposit balances are included in 'Deposits'. Sigma Capital Group plcIFRS ConversionFor the year ended 31 December 2006 UK GAAP Reclassifications Adjustments IFRS Note 31.12.06 31.12.06 £'000 £'000 £'000 £'000 RevenueRevenue from services 7,979 7,979Other operating revenueRealised profits on disposal of equityinvestments 143 -141 2 2Unrealised losses on the revaluation on investments 1 -10 -9 1,2, 3Dividend income 7 7Rental income 150 150Total revenue 8,279 1 -151 8,129Cost of sales -4,214 -4,214Gross profit 4,065 1 -151 3,915Administrative expenses -2,174 -1 3 -2,172 3,4Profit from operations 1,891 0 -148 1,743Finance income 97 97Finance costs -121 -121Profit before tax 1,867 0 -148 1,719Income tax expense -590 -590 5Profit after tax and profit for the year 1,277 0 -148 1,129 Attributable to:Equity holders of the parent 548 0 -148 400Minority interest 729 0 0 729 1,277 0 -148 1,129NOTES 1. Under IFRS, unquoted investment assets are valued at fair value, under UK GAAP these had been valued at the lower of fair value and cost less any impairments.2. Under IFRS, quoted investment assets are valued at bid price, under UK GAAP these had been valued at the lower of cost and mid market price.3. Under IFRS, unrealised losses on the revaluation of investments are shown under Other operating revenue. Under UK GAAP, unrealised losses were included in Administrative expenses.4. Under IFRS, goodwill is reviewed for impairment annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed. The value of goodwill was not found to be impaired at 1 January 2006 or at 31 December 2006. Under UK GAAP, goodwill is amortised over its useful economic life. The adjustment is the write back of amortisation charged under UK GAAP during the year ended 31 December 2006.5. There was no impact on the tax charge arising from the IFRS adjustments. Sigma Capital Group plcIFRS ConversionAs at 31 December 2006 UK GAAP Reclassifications Adjustments IFRS Note 31.12.06 31.12.06 £'000 £'000 £'000 £'000ASSETSNon-current assetsGoodwill 57 3 60 1Property and equipment 63 63Available for sale investments 2,293 19 2,312 2Deferred tax asset 10 10 3 2,413 10 22 2,445Current assetsTrade receivables 698 698Other current assets 852 852Deferred tax asset 10 -10 3Trading investments 80 -7 73 4Cash and cash equivalents 2,388 2,388 4,028 -10 -7 4,011Total assets 6,441 0 15 6,456 LIABILITIESCurrent liabilitiesMinority interests - non-equity 502 502Trade and other payables 778 778Current tax payable 305 305 1,585 1,585Non-current liabilitiesPreference share capital 750 750Total liabilities 2,335 2,335 Net assets 4,106 0 15 4,121 EQUITYEquity attributable to equityholders of the parentCalled up share capital 384 384Share premium account 14,104 14,104Merger reserve -249 -249Share based payment reserve 43 43Capital reserve -7 -7Retained earnings -10,851 15 -10,836 1, 2,4 3,424 15 3,439Minority interest - equity 682 682 Total equity 4,106 0 15 4,121 NOTES 1. Under IFRS, goodwill is reviewed for impairment annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed. The value of goodwill was not found to be impaired at 1 January 2006 or at 31 December 2006. Under UK GAAP, goodwill is amortised over its useful economic life. The adjustment is the write back of amortisation charged under UK GAAP during the year ended 31 December 2006.2. Under IFRS, unquoted investment assets are valued at fair value, under UK GAAP these had been valued at the lower of fair value and cost less any impairments.3. Under IFRS, deferred tax is classified as a non-current asset.4. Under IFRS, quoted investment assets are valued at bid price, under UK GAAP these had been valued at the lower of cost and mid market price. Sigma's accounting policies under IFRS The following is a list of Sigma's accounting policies that will be adopted onthe implementation of IFRS. Basis of accounting The financial statements of the Group and the Company have been prepared inaccordance with International Financial Reporting Standards (IFRS) as adoptedfor use in the European Union. The financial statements have been prepared on the historical cost basis, exceptwhere IFRS requires an alternative treatment. The principal variations fromhistorical cost relate to financial instruments (IAS 39). Basis of consolidation The Group financial statements consolidate the financial statements of Sigma andits subsidiary undertakings. Sigma Technology Management Ltd ("STM") isconsolidated using merger accounting and all other subsidiary undertakings areconsolidated from the date of acquisition. The Group has taken advantage of theexemption under IFRS 1 First-time Adoption of International Financial ReportingStandards not to adopt IFRS 3 retrospectively and hence has used mergeraccounting for STM which was first consolidated into the Group in 2000. Sigma, together with one of its directors, Graham Barnet, controls more than 50%of the voting rights of Strategic Investment Management Ltd ("Si Management").Sigma's interest in Si Management is therefore accounted for as a subsidiary. Three Group companies each manage as general partner the three limitedpartnerships, the Sigma Technology Venture Fund ("Venture Fund"), the SigmaInnovation Fund (East of Scotland) ("Innovation Fund") and the Sigma SustainableEnergies Fund ("Sustainable Energies Fund) (together "the Funds"). The Group hasan equity interest of 11.76% in the Venture Fund, 10.83% in the Innovation Fundand 6.67% in the Sustainable Energies Fund. The directors consider that theGroup neither exercises control nor has the potential to control these Funds andacts in a fiduciary capacity as fund manager on behalf of third party investors.Therefore, having regard to IAS 27 Consolidated and separate financialstatements, these Funds are excluded from the Group consolidation. The interestsin the Funds are accounted for as available for sale investments withinnon-current assets, in accordance with the accounting policy for investments setout below. In the opinion of the directors, this is the fairest method toreflect the Group's interest in the Funds. Goodwill Goodwill arising on consolidation represents the excess of the cost ofacquisition over the Group's interest in the fair value of the identifiableassets and liabilities of a subsidiary at the date of acquisition. Goodwill is recognised as an asset and reviewed for impairment annually. Anyimpairment is recognised immediately in the income statement and is notsubsequently reversed. Goodwill arising on acquisitions before the date of transition to IFRS has beenretained at the previous UK GAAP amounts subject to being tested for impairmentat that date. Property and equipment Property and equipment are stated at cost less depreciation and any provisionfor impairment. Depreciation Depreciation is provided at rates calculated to write off the cost lessestimated residual value of each asset on a straight-line basis over itsexpected useful life. The rates of depreciation are as follows: Leasehold improvements over the term of the leaseFixtures and office equipment 25% per annumComputer equipment 33%-50% per annum Financial instruments Financial assets and financial liabilities are recognised on the Group's balancesheet when the Group becomes a party to the contractual provisions of theinstrument. Trade receivables Trade receivables do not carry any interest and are stated at their nominalvalue as reduced by appropriate allowances for estimated irrecoverable amounts. Cash Cash and cash equivalents comprise cash at bank and in hand. Investments Investments are recognised and derecognised on the trade date. Investments areclassified as either held for trading or available for sale. Investmentsclassified as held for trading are initially measured at cost. Investmentsclassified as available for sale are initially measured at cost, includingtransaction costs. Investment in subsidiary companies are stated at cost less provision for anyimpairment in value. Subsequent measurement of all investments is at fair value. The fair values oflisted investments are based on bid prices at the balance sheet date. The fair value of unlisted investments is established using British VentureCapital Association (BVCA) guidelines. The valuation methodology used commonlyby the Group is the "price of recent investment" contained in the BVCA valuationguidelines. The following considerations are used when calculating the fairvalue using the "price of most recent investment" guidelines: •Where the investment being valued was itself made recently, its cost will generally be a good indication of fair value; •Where there has been any recent investment by third parties, the price of that investment will provide a basis of the valuation; •If there is no readily ascertainable value from following the "price of recent investment" methodology, the Group considers alternative methodologies in the BVCA guidelines being principally discounted cashflows and price-earnings multiples requiring management to make assumptions over the timing and nature of future earnings and cash flows when calculating fair value; and •Where a fair value cannot be estimated reliably, the investment is reported at the carrying value at the previous reporting date unless there is evidence that the investment has since been impaired. When managing its investments, the Group aims to profit from the receipt ofinterest and dividends and changes in the fair value of equity investments.Accordingly, all quoted and unquoted equity investments are designated as atfair value through profit or loss and are subsequently recorded in the balancesheet at fair value. Any gains and losses arising from changes in fair value areincluded in net gains or losses for the period. Investments classified as "held for sale" are recognised as non-current assets.Investments classified as "available for sale" are recognised as current assets. Financial liability and equity Financial liabilities and equity are classified according to the substance ofthe financial instrument's contractual obligations rather than the financialinstrument's legal form. An equity instrument is any contract that evidences aresidual interest in the assets of the Group after deducting all of itsliabilities. The preference shares of the Company are classified as a liability as these areredeemable for a fixed amount as soon as the Company has distributable reservesto enable it to do so. The non-equity minority interests are classified as aliability as these are redeemable for a fixed amount at a fixed date. Trade payables Trade payables are not interest bearing and are stated at their nominal value. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received,net of direct issue costs. Taxation The charge for current tax is based on the results for the year as adjusted foritems which are non-assessable or disallowed. It is calculated using rates thathave been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method inrespect of temporary differences arising from differences between the carryingamount of assets and liabilities in the financial statements and thecorresponding tax basis used in the computation of taxable profit. In principle,deferred tax liabilities are recognised for all taxable temporary differencesand deferred tax assets are recognised to the extent that it is probable thattaxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in abusiness combination) of other assets and liabilities in a transaction whichaffects neither the tax profit nor the accounting profit. Deferred tax is calculated at the rates that are expected to apply when theasset or liability is settled. Deferred tax is charged or credited in the incomestatement, except when it relates to items credited or charged directly toequity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when they relate to income taxeslevied by the same taxation authority and the Group intends to settle itscurrent tax assets and liabilities on a net basis. Share-based payment The Group has applied the requirements of IFRS 2 Share-based Payment from 1January 2006. In accordance with the transition provisions, IFRS 2 has beenapplied to all grants made after 7 November 2002 that were unvested as of 1January 2006. The Group issues equity-settled share-based payments to certain employees.Equity-settled share-based payments are measured at fair value (excluding theeffect of non-market based vesting conditions) at the date of grant. The fairvalue determined at the grant date of the equity-settled share-based payments isexpensed on a straight-line basis over the vesting period, based on the Group'sestimate of shares or options that will eventually vest. Fair value is measured using the Black Scholes-Merton pricing model. Theexpected life used in the model has been adjusted, based on management's bestestimate, for the effects of non-transferability, exercise restrictions, andbehavioural considerations. Revenue recognition Fees for services provided by the Group are measured at the fair value of theconsideration received or receivable, net of value added tax. Fund management fees, directors' fees, retainers, operator fees and propertymanagement fees are recognised when the service is provided. Fees for corporatefinance work are recognised when the service is provided subject to completionof the respective transaction being certain. Fees earned from the establishmentof limited partnerships are recognised based on the proportion of servicesrendered during the year. Fees earned on the sale of property held by a limitedpartnership are recognised once the sale is contractually binding. Revenuegenerated under technology licensing agreements with third parties is recognisedwhen the Group becomes entitled to a receipt under the licensing agreement. Foreign currencies Transactions denominated in currencies other than sterling are initiallyrecorded at the rates of exchange prevailing on the dates of the transactions.Monetary assets and liabilities in foreign currencies are retranslated at therates prevailing on the balance sheet date. Gains and losses arising on exchangeare included in the income statement for the period. Operating leases Amounts due under operating leases are charged to the income statement in equalannual instalments over the period of the lease. Retirement benefit costs The Group operates a defined contribution retirement benefit scheme. The amountcharged to the income statement in respect of retirement benefit costs are thecontributions payable in the year. Differences between contributions payable inthe year and contributions actually paid are shown as either prepayments oraccruals in the balance sheet. Impairment At each balance sheet date, the Group reviews the carrying amounts of itsproperty and equipment and intangible assets with finite lives to determinewhether there is any indication that those assets have suffered an impairmentloss. If any such indication exists, the recoverable amount of the asset isestimated in order to determine the extent of the impairment loss. Where it isnot possible to estimate the recoverable amount of an individual asset, theGroup estimates the recoverable amount of the cash-generating unit to which theasset belongs. Goodwill arising on acquisition is allocated to cash-generating units. Therecoverable amount of the cash-generating unit to which goodwill has beenallocated is tested for impairment annually, or on such other occasions thatevents or changes in circumstances indicate that it might be impaired. If the recoverable amount of an asset (or cash-generating unit) is estimated tobe less than its carrying amount, the carrying amount of the asset(cash-generating unit) is reduced to its recoverable amount. Impairment lossesare recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverableamount, but so that the increased carrying amount does not exceed the carryingamount that would have been determined had no impairment loss been recognisedfor the asset (cash-generating unit) in prior years. However, impairment lossesrelating to goodwill may not be reversed. Sources of estimation uncertainty The preparation of the financial statements requires the Group to makeestimates, judgments and assumptions that affect the reported amount of assets,liabilities, revenues and expenses and related disclosure of contingent assetsand liabilities. The directors base their estimates on historical experience andvarious other assumptions that they believe are reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying value of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates under differentassumptions or conditions. Significant judgments The Group believes that the most significant judgment area in the application ofits accounting policies is establishing the fair value of its unlistedinvestments. The matters taken into account when assessing the fair value of theunlisted investments are detailed in the accounting policy on Investments above. This information is provided by RNS The company news service from the London Stock Exchange