3 Apr 2012 07:00
AIM: SGM
Sigma Capital Group plc
("Sigma" or "the Group" or "the Company")
Final Results for the year ended 31 December 2011
Sigma Capital Group plc, the finance, property and urban regeneration specialist, is pleased to announce its audited final results for the year ended 31 December 2011.
Key Points
·; Transformational year - Group now repositioned to focus on property related activities - financial results do not yet reflect the material transformation of Sigma's business activities and prospects
·; Revenue from services increased by 34% to £2.47m (2010: £1.84m)
·; Trading profit of £0.06m (2010: trading loss £0.56m)
·; Operating loss reduced to £0.01m (2010: loss of £0.98m*)
·; Loss before tax reduced to £1.42m (2010: £3.57m)
·; Loss per share reduced to 3.17p (2010: 7.59p)
·; Cash balances at year end of £1.3m (2010: £1.8m)
·; Net assets per share at year end of 8.2p (2010: 11.1p)
·; Property Division
- acquisition of Inpartnership Ltd in August 2011 accelerated repositioning
- work underway on significant development and regeneration projects, worth £3bn in total
·; Venture capital fund management - four historic funds in realisation phase
- will generate fees and cash inflows over next two years
·; Board confident of further progress
* 2010 loss is before two exceptional charges totalling £2.62m
David Sigsworth, Chairman, said:
"Financial results for the year are in line with management expectations however they do not yet reflect the material transformation of Sigma's business activities and prospects.
We substantially reshaped Sigma in 2011, aided by the acquisition of Inpartnership Ltd in August , and the Group's activities are now focused on two areas, property and venture capital fund management. Our property activities comprise our core activity and we see some very exciting growth opportunities here.
Our three Council partnerships, which hold potential development opportunities worth over £2 billion in total, together with our involvement with the Winchburgh Development, one of the UK's single largest residential and mixed use developments with planning, worth an approximate £1 billion, provide us with a significant opportunity to build revenues and profit.
We are making good progress with unlocking the value contained within our partnerships and we expect to see continuing momentum over the year.
A combination of the scale of opportunity within our control and the momentum we are seeing across our projects give the Board confidence that we can grow the business significantly in the year ahead and beyond. We are not opportunity constrained and we are making good progress with the significant opportunities we have captured. The Board views the year ahead positively."
Enquiries:
Sigma Capital Group plc www.sigmacapital.co.uk | Graham Barnet, Chief Executive | T: 020 3178 6378 (today) |
Marilyn Cole, Finance Director | T: 020 3178 6378 (today) | |
Biddicks | Katie Tzouliadis Sophie McNulty | T: 020 3178 6378 |
Singer Capital Markets Limited | James Maxwell Nick Donovan | T: 020 3205 7500 |
CHAIRMAN'S STATEMENT
INTRODUCTION
Financial results for the year are in line with management expectations however they do not yet reflect the material transformation of Sigma's business activities and prospects.
As previously reported, we substantially reshaped Sigma in 2011, aided by the acquisition of Inpartnership Ltd in August, and the Group's activities are now focused on two areas, property and venture capital fund management. Our property activities comprise our core activity and we see some very exciting growth opportunities here that we are now unlocking. Within our Property Division, our services are structured around property finance, residential and commercial development and urban regeneration.
Inpartnership Ltd (now renamed Sigma Inpartnership Ltd ("Sigma Inpartnership")) was a transformational acquisition. Focused on large scale property-related regeneration projects and working as a bridge between public and private sector organisations, it has brought us three long term partnerships with three UK local authorities. The partnerships, which are geared around major urban regeneration projects in Liverpool, Salford and North Solihull, hold significant inherent value, given the scale of the planned new build development.
In total, through our three local authority partnership agreements and our management contract for the major residential development at Winchburgh, near Edinburgh, we are currently involved with the delivery of over 15,000 residential units as well as commercial development worth in excess of £500 million.
We have greater visibility on prospective revenue growth and capital uplift as a result of management fees and development profit arrangements within the projects we are involved with and we are already seeing our first successes coming through from our reshaped activities.
RESULTS
Revenue from services for the year to 31 December 2011 increased by 34% to £2.47m (2010: £1.84m). This includes a partial revenue contribution from Sigma Inpartnership of £0.23m and compensation payments from certain limited partners of the Sigma Sustainable Energy Fund II totalling £0.8m (following the restructuring of that fund). Total revenue increased by 70% to £2.41m (2010: £1.42m) and is stated after taking into account both realised and unrealised profits and losses on the disposal and revaluation of investments and of discontinued operations. The operating loss before tax reduced to £0.1m (2010: loss of £0.98m before exceptional items totalling £2.62m) whilst the trading profit was £0.06m (2010: trading loss of £0.56m). The loss before tax for the year reduced to £1.42m (2010: loss of £3.57m) and is stated after losses and provisions relating to Frontier IP Group Plc ("Frontier IP") of £1.31m. These losses arose in part from Frontier IP now being accounted for as an associate rather than a subsidiary following the dilution of Sigma's holding to 46.7% in January 2011 and also from a provision to reflect the fall in Frontier IP's share price over the year and the illiquid nature of the stock.
Administrative costs of the continuing business increased by just over 3% year-on-year due to increased staff costs reflecting the strengthening of our property team.
Net assets per share at the year end stood at 8.2p (2010: 11.1p) and cash balances at the year end were £1.3m (2010: £1.8m).
The Directors do not recommend the payment of a dividend for the year.
OPERATIONAL REVIEW
PROPERTY DIVISION
Property - residential and urban regeneration
Over the last year we have been working on some major opportunities in the residential and regeneration development space. These have principally been focused around the major development at Winchburgh, near Edinburgh, and the opportunities brought by the acquisition of Sigma Inpartnership, the urban regeneration specialist.
The Winchburgh development, some eight miles west of Edinburgh, involves the delivery of a minimum of 3,450 houses, a new town centre, five schools and associated infrastructure. The acquisition of Sigma Inpartnership brought the Group three unique long term partnerships, with Liverpool City Council ("the Liverpool Partnership"), Salford City Council ("the Salford Partnership", also known as the "Higher Broughton Partnership") and Solihull Metropolitan Borough Council (the North Solihull Partnership ("NS Partnership")). Each Council has injected land assets into the respective partnership vehicle and Sigma Inpartnership fulfils the development management role in the delivery of the regeneration of these sites.
Property asset management
During 2011, we made good progress with the Winchburgh Development, managing the planning permission and commercial negotiations with West Lothian Council on behalf of Regenco Winchburgh Ltd. With Planning Permission in Principle expected to be granted by the West Lothian Council in April 2012, Sigma has already secured contracts with Barratt Homes and Miller Homes for the delivery of the first phase of the development, which comprises 177 new homes.
As we announced on 30 March 2012, we have now also signed a new management contract for the first stages of the implementation phase and this will generate annual management fees of £1.8m in total over the initial five year term of the contract. Sigma also has the potential to earn incentive profit-based fees on specific elements of the development to be paid by December 2015.
In our three partnerships with Liverpool City, Salford City and Solihull Metropolitan Borough Councils, our returns are derived from development management fees, which typically comprise 2% of the gross development cost of any residential or commercial development on land in the partnerships, or 2% of the value of land sales and a share of development profit on any profit derived from the land within the partnerships. The Councils we work with have injected the land assets held within each partnership on the basis of preferential fixed land values thereby enhancing potential returns and incentivising redevelopment of these sites.
On 9 November 2011, we announced the expansion of our partnership with Liverpool City Council, with four major new sites being injected into the partnership by the Council in addition to the existing substantial residential site at Norris Green. This move has significantly increased the scale of opportunity open to us. We commenced work on a school procurement project within one of the new sites for the Liverpool Partnership and will earn project management fees on this.
To date within the three Council partnerships we have procured and project managed the delivery of four schools and a further primary school is about to go on site in North Solihull.
We have today separately announced the completion of the first phase of residential units in our Salford Partnership and the launch of the next phase of a further commercial and residential development. We expect the development to generate approximately £500,000 in fees and profit share over the next three years. We are also making progress with other developments in the Salford Partnership.
Within our NS Partnership we are working on the redevelopment of two large commercial centres situated within residential estates and this will generate development management fees and the opportunity for development profit.
Property finance
The scale of potential property development that exists within the Council partnerships and within the Winchburgh Development is significant and in order to accelerate the opportunities, we have focused on identifying sources of funding for the underlying projects. We are making headway with the Councils and global institutions in matching the funding needs of the residential development projects with the returns required from the institutions.
Any funding we secure will generate financing fees for us as well as realising more of the inherent value in the partnerships through increased activity. We hope to be able to report further on these funding initiatives during the course of this year.
VENTURE CAPITAL FUND MANAGEMENT DIVISION
Our Investment Team continues to manage the portfolio of investments held in the venture and university funds. We expect to announce further disposals of these investments during this year which will generate cash for the Group.
Following a placing by Frontier IP in January 2011, our holding in the company has reduced to 46.7% and we now account for our interest in Frontier IP as an associate company. In its recent half yearly report, Frontier IP noted that it was directly exploring a number of specific opportunities to help its partner universities fully exploit their substantial research and asset bases as there is continuing pressure for universities to bring in additional revenue streams and sources of funding. Frontier IP is currently evaluating financing options in order to fully resource these opportunities as well as providing for the ongoing working capital needs of the business.
OUTLOOK
Sigma is now repositioned to focus primarily on property finance, residential development and urban regeneration. Our three Council partnerships, which hold potential development opportunities worth over £2 billion in total, together with our involvement with the Winchburgh Development, one of the UK's single largest residential and mixed use developments with planning, worth an approximate £1 billion, provide us with a significant opportunity to build revenues and profit.
We are making good progress with unlocking the value contained within our partnerships and we expect to see continuing momentum over the year. Structural undersupply of housing in the UK together with new Government planning guidelines aimed at supporting urban regeneration and the creation of new housing stock are two trends which clearly play in our favour. In addition, in the current economic climate, the need for more innovative forms of finance and greater involvement by the private sector in the delivery of public sector objectives are also major themes which support our growth.
A combination of the scale of opportunity within our control and the momentum we are seeing across our projects give the Board confidence that we can grow the business significantly in the year ahead and beyond. We are not opportunity constrained and we are making good progress with the significant opportunities we have captured. The Board views the year ahead positively.
David Sigsworth
Chairman
2 April 2012
BUSINESS REVIEW
Overview of the business
Sigma together with its subsidiaries is now focused on property finance, property development and urban regeneration, and property asset management whilst still retaining its venture capital fund management.
The Group's property activities were boosted in the year by the acquisition on 12 August 2011 of Inpartnership Ltd, since renamed Sigma Inpartnership Ltd. Sigma Inpartnership undertakes large scale property-related regeneration projects, working as a bridge between public and private sector organisations. Founded in 2001 and operating from offices in Manchester and Birmingham, Sigma Inpartnership has secured three partnerships, with Liverpool City Council, Salford City Council and Solihull Metropolitan Borough Council, each ranging from 10 to 20 years' duration. The partnerships hold long term option arrangements with each of the local authorities for a mix of residential, commercial, education and healthcare opportunities. The acquisition has accelerated the broadening of Sigma's property activities whilst at the same time giving Sigma Inpartnership access to Sigma's transaction and fund raising expertise.
Sigma Inpartnership was acquired from two parties, URWI (Inpartnership) Limited, an investment vehicle controlled jointly by West Coast Capital ("WCC") and HBOS plc, and West Coast Capital (Trading) Limited ("WCC Trading"), a wholly owned subsidiary of WCC. The consideration payable for the acquisition was £347,000, satisfied by the issue of 2,170,078 new Sigma ordinary shares of 1 pence each at a price of 16 pence per share. Under the terms of the acquisition agreement, in addition to the consideration payable, once Sigma Inpartnership has achieved a minimum overhead recovery in any one year, WCC Trading is entitled to a share of any future development profits from Sigma Inpartnership's existing projects (the "Development Profit"). Out of the first £10 million of Development Profit generated, Sigma will receive a minimum of £6.9 million with WCC Trading entitled to a maximum of £3.1 million. Thereafter, WCC is entitled to a 10% share of any further Development Profit in perpetuity from the existing projects.
During the year, Strategic Investment Management Ltd resigned as the operator of the four property limited partnerships and a third party was appointed in its place. Following this, Strategic Investment Management Ltd was closed down. The Group continues to act as property manager for one of the property limited partnerships, SI Property Limited Partnership No 7. This partnership holds the investment in City Wharf, Aberdeen.
The Group continues to manage its four venture funds, the Sigma Technology Venture Fund ("the Venture Fund"), the Sigma Innovation Fund (East of Scotland) ("the Innovation Fund"), the Sigma Sustainable Energies Fund ("the Sustainable Energies Fund"), the Sigma Sustainable Energy Fund II ("the Sustainable Energy Fund II"), and two university funds on behalf of Frontier IP, the RGU Ventures Investment Fund ("the RGU Fund") and the University of Dundee Venture Fund ("the Dundee Fund").
The Group is an investor in the four venture funds and has a 19.3% holding in SI Property Limited Partnership No 7, although this latter investment was written down to nil in 2009. In addition, it holds some equity investments on its own balance sheet.
The commercialisation of university intellectual property is undertaken by Sigma's associated company, Frontier IP Group Plc, which has a separate quotation on AIM. Throughout 2010, Frontier IP was a majority owned subsidiary of Sigma. However, following a placing of its shares on 31 January 2011, it became an associated company in which Sigma holds 46.7%.
Review of 2011
Overall, the Group made a small trading profit in the year of £61,000 (2010: trading loss £563,000). The Property Division made a trading loss as this division was in a transitional phase, investing in experienced personnel so that it can capitalise on opportunities afforded by Sigma Inpartnership and other strategic alliances. The Venture Capital Division made a trading profit aided by the one-off compensation fee received from certain limited partners in the Sustainable Energy Fund II. The Group made a small operating loss of £123,000 (2010: operating loss £3,596,000) but losses arising from the holding in Frontier IP resulted in a loss for the year of £1,415,000 (2010: £3,575,000). The losses relating to Frontier IP are a combination of the effect of Frontier IP's results no longer being consolidated as a majority owned subsidiary but it being accounted for as an associate company and a provision to reflect the fall in Frontier IP's share price over the year and the illiquid nature of the stock. This has meant that the net assets of the Group fell to £3,753,000 at the end of 2011 (2010: £5,682,000).
Balance sheet
The principal items in the balance sheet at 31 December 2011 are the investment in the venture capital funds (£1,473,000) and cash (£1,265,000). The investment in the venture capital funds is spread across the four venture capital funds managed by Sigma which hold investments in 17 companies. The Group's current assets exceed its current liabilities by £1,502,000. The Group has no long term liabilities.
Cash flow
The Group's cash balances fell by £556,000 to £1,265,000 in 2011. Changes in working capital accounted for a cash outflow of £559,000 and the purchase of investments in the year net of disposals totalled £122,000. The purchase of Sigma Inpartnership was financed by the issue of new ordinary shares.
Property Division
Winchburgh Development
Sigma has led the negotiation on behalf of Regenco (Winchburgh) Ltd ("Regenco") of the Planning Agreement with West Lothian Council in relation to the Council's "minded-to-grant" Planning Permission for the implementation of a 3,500 housing unit masterplan. The development land at Winchburgh is located just eight miles west of Edinburgh between the M9 and M8 motorways and Planning Permission in Principle is now expected to be granted by West Lothian Council in April 2012. Contracts have also been exchanged with Barratt Developments and Miller Homes for development of the first residential phase comprising [177] new build homes. Subject to detailed planning permission being released for the first phase the house builders are due to start work on site in August this year following completion of enabling works and site servicing by the Sigma project team.
The release of the masterplan consent will be the culmination of a lengthy planning and design process which began more than ten years ago and will permit the commencement of a development period expected to be programmed over a period of 15 to 20 years. Sigma has been retained as Development Manager on behalf of Regenco Trading Ltd for the project implementation stages and this will generate fees of £1.8m over the next five years with the potential to generate additional carried interest incentive fees based on profit targets.
Liverpool
Our Liverpool Partnership is a limited liability partnership with Liverpool City Council formed in 2007 with Sigma Inpartnership. The partnership was given an initial ten year option over a 60 acre residential development site, known as Norris Green, which has outline planning consent for around 800 new homes. The partnership has been established with the flexibility to develop additional sites at the discretion of the City Council.
Norris Green is progressing well with 115 units currently on-site. We submitted a planning application for a further 63 new homes at the beginning of March 2012 which will ensure development continuity on site, enabling construction of these homes to start in the summer. Land in the Liverpool Partnership can be developed using any combination of the following three ways: by the Liverpool Partnership (with Sigma Inpartnership earning a management fee and participating in a profit share); by Sigma Inpartnership (with Sigma Inpartnership earning a fee and an agreed priority profit); or by the Liverpool Partnership selling a site on the open market, with Sigma Inpartnership earning a percentage of the sales price achieved. At least 20% of the land must be disposed of by sale on the open market. The majority of the land will be developed by Sigma Inpartnership and to this end we have now received Council approval to set up two new affiliate companies with an established house builder and major local commercial developer. Subject to receiving planning consent, it is intended to develop the third phase of housing using our new house builder affiliate company.
The use of these affiliates builds on our current legal arrangements with the Liverpool City Council and will use the core strengths of our respective partners to secure delivery of development at a site level. The structure will secure a long term and reliable source of fee income and profit share for Sigma.
In addition to approval for the creation of the affiliate companies, the Council has also now approved, subject to the conclusion of formal option agreements, the addition of four new and significant development sites to our partnership. The four new areas are Stonebridge Cross, Gateacre (including the Lime Street Corridor/Knowledge Quarter), Edgehill District Centre and Lodge Lane. Subject to planning approval, initial works will focus on the sites in Stonebridge Cross and Gateacre with a view to commencing development in 2012/13.
Stonebridge Cross comprises some 60 acres of land and will provide a new secondary school, a health centre, 600 new homes and a major food store and retail facilities, with a total development value of some £200 million. Gateacre, a 15 acre former school site, will be developed to accommodate around 200 new family homes and the partnership will recycle the land value generated from this directly back into the provision of new educational facilities in Liverpool as well as looking at other City Council priorities. Feasibility work will commence this year on the other sites with a view to bringing forward development next year. Subject to full planning permissions being secured, the addition of these sites and the establishment of the affiliate companies will secure a regular flow of income from the creation of more than 2,000 new homes and the development of up to half a million sq ft of commercial/mixed use development.
Salford Partnership (also known as Higher Broughton Partnership)
Our partnership with Salford City Council and RBS has made significant progress over the last six months. The remaining stock housing units from the initial phases have been sold and the four debt facilities with RBS have been cleared within the agreed banking arrangements. A site sale was concluded at the end of the year to the local primary school situated on the edge of the phase 1 site. The school can now implement its planning consent to demolish part of the existing school and erect a four storey classroom block in its place, with nursery and administration accommodation.
A detailed planning application was lodged with the Council in early February for a GP surgery, a dental practice and associated retail space including a pharmacy, optician and a 4,000 sq ft food store pre-let to Tesco. Planning consent is expected in June and this will trigger the completion of the sale contract and a land payment and value point for the Sigma business.
The partnership also submitted a detailed planning application for the next phase of housing in early January 2012 comprising 80 new family homes ranging from three to six bedroom units. Planning consent has now been granted and consequently housing developer, Countryside Properties Ltd, is proceeding with the purchase and construction of the site. A site start is expected in late summer. As announced separately today, this will realise a base fee over the next three years for Sigma of £350,000 and the potential for a further £150,000 of value as units are sold on a plot sale basis, providing regular income through 2013 and beyond.
Feasibility work has now also commenced on the remaining frontage site, which is likely to include a series of pre-sold apartments with ground floor retailing space.
North Solihill Partnership
Our role in this project is as a Joint Venture partner in the NS Partnership which itself has a remit to coordinate and deliver the regeneration of an area of North Solihull. The regeneration includes the provision of new and replacement housing stock, new school buildings and new village centre facilities incorporating neighbourhood retail, office and local medical facilities. The partnership's agreement with the council is for a further 15 years. In order to facilitate the aims of the NS Partnership and Solihull Metropolitan Borough Council, Sigma Inpartnership provides a range of development management functions including strategic development planning, the coordination and procurement of development works and general project management in return for agreed fees for the various projects. Thereafter, there are specific areas of commercial development typically within the village centres for which we have the right to undertake development on a commercial basis.
At present we are working on two village centres. On one, we are development managing key infrastructure improvement works of circa £9 million and on the other, we are working on plans for the development of various commercial and health facility buildings with an end value of circa £10 million, which are scheduled for construction during 2012 and 2013. The first of these buildings is a commercial office and neighbourhood retail scheme with an end value of £4.75 million for which we have planning permission and have pre-let the office accommodation and key retail units. Construction is due to commence in the next two months.
We are also responsible for procuring ten primary schools, three of which have already been delivered. Looking forward, we are working on a feasibility study for the next three village centres and working with our partners to deliver over 1,000 residential units in the current five year business plan.
City Wharf, Aberdeen
Following the insolvency of Kenmore Property Group, Sigma stepped in to assume the role of developer with the aim of completing the development of the City Wharf site at Ship Row, Aberdeen. After considerable negotiation, we successfully appointed Miller Construction as contractor for this work. We were also successful in ensuring Ibis, part of the Accor hotel group, remained committed to its pre-letting of the hotel and are now very pleased to report that despite encountering further delays to progress on site, practical completion of the scheme was achieved in April 2011.
With this major milestone achieved, we have focused on improving the rental income derived from the development through letting of the remaining vacant space and we have enjoyed considerable success in securing the letting of three floors of the new office building to the global oil services and shipping group, Maersk. We have also secured a letting of a further floor to ship brokers, Stewart Group, and at the beginning of March 2012, we secured the letting of the final floor of the new office building to Gaz De France. Demand for the leisure space within the scheme has been weaker but we have succeeded in letting nearly 50% of this to Pure Gym Ltd.
The overall impact of our work in getting the scheme to completion and in driving the marketing of the vacant space has resulted in the addition of circa £1m rental income per annum derived from the development.
We are now developing a strategy for the top two floors of Exchequer House left vacant by the expiry of the First Group lease and for letting the remaining leisure space. We are hopeful that with our continued efforts and the buoyant Aberdeen economy we will secure tenants for the remaining office and leisure accommodation.
Property finance
Sigma has taken the initiative on a variety of funding solutions both in relation to opportunities within the individual partnerships and associated projects. This has centred on institutional funding, where we have strong contacts, but also includes private equity. The majority of these projects, particularly within the partnerships, are for residential development structured around the private rental market. The funding solutions can be subdivided into an income funding model based on secure long-term income, backed by local authority or housing association covenants, and a capital recovery model looking to take advantage in the short term of the current strong rental market performance and capital recovery in the medium term further aided by low entry costs. The potential scale of these funding initiatives is considerable, with individual lot sizes from £10 million up to larger funding solutions for £50-£100 million. If successful these models can be replicated across the projects and beyond. Considerable progress has been made on both funding models through extensive discussions with our partners and the institutions and 2013 should see this taken into the realisation stage.
In addition to the partnerships, and principally based on the income funding model, Sigma is involved in a variety of financing opportunities in the residential, commercial and infrastructure sectors. The majority of these projects are still at a relatively early stage. However we are well advanced with one project in the healthcare sector and would hope to see a successful outcome in time for site work to commence in early summer.
Venture capital fund management division
The Group manages six funds, four venture capital funds and two university funds. It has a limited partner interest in each of the four venture capital funds: 11.8% in the Venture Fund; 10.8% in the Innovation Fund; 6.7% in the Sustainable Energies Fund; and 5.1% in the Sustainable Energy Fund II.
The venture capital fund management business continued to be profitable at the trading level. As the four venture funds we currently manage come to the end of their lives during the period to December 2015, the Investment Team continues to focus on managing the process of realising value from the 17 remaining investments held in these funds. The resulting cash will be delivered back to the limited partners of each of the funds, which in each case includes Sigma. As regards the university funds, the RGU Fund made one new investment during the year.
The Investment Team is working with the management teams of the investee companies and our co-investors to ensure that there is an active focus on exit activity where appropriate. Following the year end, one investee company has appointed advisors in connection with a sale process and we have entered into exclusivity on the possible sale of another. Discussions are underway in relation to the possible sale of two other investee companies and advisors are being interviewed in connection with two more.
A number of the investments made good progress in 2011, including DEM Solutions Ltd, which delivered revenue and profits ahead of budget, IRT Surveys Ltd which landed its largest contract to date and i-design group plc, an AIM quoted company, which reported maiden profits and revenue ahead of market expectations. In addition, Ampair Ltd, Onzo Ltd, Aquamarine Power Ltd, Pelamis Wave Power Ltd, AviIT Ltd and Factonomy Ltd all received follow-on investments during 2011. Follow-on investment activity has continued in 2012 with several investee companies actively engaged in fundraising at present.
Unfortunately 2011 also saw two companies being wound up, Xipower Ltd from the Sustainable Energies Fund and B1 Medical Limited from the Venture Fund and the RGU Fund.
In April 2011, we agreed the restructuring of the limited partners' commitments to the Sustainable Energy Fund II. The restructuring caps at £3.5 million future draw downs by the fund, taking total maximum commitments to £12.4 million. Future draw downs will be used for follow-on investment in the fund's existing investments, for Sigma's fund management fees for the next five years as currently contracted and for sundry fund expenses. Importantly, the agreement also included a separate compensation payment to Sigma for £0.8 million, which was received during 2011.
Over the next two years, the venture capital fund management business is expected to generate strong cash flows for Sigma from a mix of management fees, retainers from investee companies and investment realisations. In addition, the Investment Team is working on a number of other new initiatives that are intended to come into play as the current portfolio is realised.
All of the venture capital funds are closed to new investment and all except the Sustainable Energy Fund II are closed to follow-on investment. The two university funds remain open to new investment. In accordance with Sigma's accounting policies, its investments in the venture capital funds are included in the financial statements at fair value which was £1.47 million at 31 December 2011 (2010: £1.48 million).
At 31 December 2010, the Group consolidated an interest in both the RGU Fund and the Dundee Fund through its majority holding in Frontier IP. This is no longer the case at 31 December 2011 following the Group's holding in Frontier IP falling below 50%.
CONSOLIDATED COMPREHENSIVE INCOME STATEMENT
For the year ended 31 December 2011
2011 | 2011 | 2011 | 2010 | ||||
Business acquired | Continuing business |
Total | |||||
Revenue | £'000 | £'000 | £'000 | £'000 | |||
Revenue from services Other operating income Realised loss on disposal of equity investments Unrealised profit/(loss) on the revaluation of investments Discontinued operations |
| 228
- - - | 2,240
(123) 3 59 | 2, 468
(123) 3 59 | 1,836
- (417) - | ||
Total revenue | 228 | 2,179 | 2,407 | 1,419 | |||
Cost of sales | (17) | (20) | (37) | (55) | |||
Gross profit | 211 | 2,159 | 2,370 | 1,364 | |||
Administrative expenses (net) | (328) | (2,042) | (2,370) | (2,344) | |||
Impairment of goodwill | - | (123) | (123) | (1,366) | |||
Provision for property guarantee | - | - | - | (1,250) | |||
| |||||||
Loss from operations | (117) | (6) | (123) | (3,596) | |||
Finance income net of finance costs | 3 | 12 | 15 | 31 | |||
Loss on disposal of controlling interest in Frontier IP | - | (79) | (79) | - | |||
Share of loss of Frontier IP | - | (228) | (228) | - | |||
Provision against the holding of shares in Frontier IP | - | (1,000) | (1,000) | - | |||
Loss before tax | (114) | (1,301) | (1,415) | (3,565) | |||
Taxation | - | - | - | (10) | |||
Loss for the year | (114) | (1,301) | (1,415) | (3,575) | |||
Total comprehensive expense attributable to: | |||||||
Equity holders of the Company | (1,401) | (3,539) | |||||
Minority interests | (14) | (36) | |||||
| (1,415) | (3,575) | |||||
Loss per share attributable to the equity holders of the Company: | |||||||
Basic loss per share | (3.17)p | (7.59)p | |||||
Diluted loss per share | (3.17)p | (7.59)p | |||||
There were no comprehensive gains or losses in either year other than those included in the comprehensive income statement. The accompanying notes are an integral part of this consolidated comprehensive income statement. The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the Company income statement. The loss for the Company for the year was £1,396,000 (2010: £1,248,000). The principal reason for the loss in both years is a provision against the carrying value of the investment in Frontier IP.
CONSOLIDATED BALANCE SHEET
At 31 December 2011
2011 | 2010 | |||
£'000 | £'000 | |||
Assets | ||||
Non-current assets | ||||
Goodwill | 322 | 2,209 | ||
Property and equipment | 41 | 15 | ||
Investment in associate company | 400 | - | ||
Financial assets at fair value through profit and loss | 1,478 | 2,057 | ||
Long term loan | 10 | - | ||
2,251 | 4,281 | |||
Current assets | ||||
Work in progress | 168 | - | ||
Trade receivables | 438 | 389 | ||
Other current assets | 261 | 145 | ||
Trading investments | 172 | 53 | ||
Cash and cash equivalents | 1,265 | 1,821 | ||
2,304 | 2,408 | |||
Total assets | 4,555 | 6,689 | ||
Liabilities | ||||
Current liabilities | ||||
Trade and other payables | 802 | 1,007 | ||
Total liabilities | 802 | 1,007 | ||
Net assets | 3,753 | 5,682 | ||
Equity | ||||
Called up share capital | 456 | 434 | ||
Share premium account | 4,481 | 4,196 | ||
Capital redemption reserve | 34 | 34 | ||
Merger reserve | (249) | (249) | ||
Capital reserve | (7) | (7) | ||
Share-based payment reserve | 160 | 144 | ||
Retained earnings | (1,122) | 279 | ||
Equity attributable to equity holders of the Company | 3,753 | 4,831 | ||
Minority equity interest | - | 851 | ||
Total equity |
3,753 |
5,682 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2011
|
Share capital |
Share premium account |
Capital redemption reserve |
Merger reserve |
Capital reserve |
Share- based payment reserve |
Retained earnings | Total equity attributable to equity holders of Company |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 1 January 2010 | 468 | 4,196 | - | (249) | (7) | 137 | 4,487 | 9,032 |
Purchase of own shares | (34) | 34 | - | - | - | (327) | (327) | |
Loss on disposal of shares in Frontier IP |
- |
- |
- |
- |
- |
- |
(269) |
(269) |
Loss for the year | - | - | - | - | - | - | (3,539) | (3,539) |
Dividend paid | - | - | - | - | - | - | (94) | (94) |
Share-based payments | - | - | - | - | - | 7 | 21 | 28 |
At 31 December 2010 | 434 | 4,196 | 34 | (249) | (7) | 144 | 279 | 4,831 |
Issue of shares | 22 | 325 | - | - | - | - | - | 347 |
Cost of share issue | - | (40) | - | - | - | - | - | (40) |
Loss for the year | - | - | - | - | - | - | (1,401) | (1,401) |
Share-based payments | - | - | - | - | - | 16 | - | 16 |
At 31 December 2011 | 456 | 4,481 | 34 | (249) | (7) | 160 | (1,122) | 3,753 |
Total equity attributable to equity holders of Company |
Minority interest |
Total equity | ||
£'000 | £'000 | £'000 | ||
At 1 January 2010 | 9,032 | 579 | 9,611 | |
Purchase of own shares | (327) | - | (327) | |
Loss on disposal of shares in Frontier IP | (269) | - | (269) | |
Loss for the year | (3,539) | (36) | (3,575) | |
Dividend paid | (94) | - | (94) | |
Share-based payments | 28 | 13 | 41 | |
Increase in minority interest | - | 295 | 295 | |
At 31 December 2010 | 4,831 | 851 | 5,682 | |
Disposal of controlling interest in Frontier IP | - | (837) | (837) | |
Issue of shares | 347 | - | 347 | |
Cost of share issue | (40) | - | (40) | |
Loss for the year | (1,401) | (14) | (1,415) | |
Share-based payments | 16 | - | 16 | |
At 31 December 2011 | 3,753 | - | 3,753 | |
CONSOLIDATED CASH FLOW STATEMENTS
For the year ended 31 December 2011
Group | Group | ||
2011 | 2010 | ||
£'000 | £'000 | ||
Cash flows from operating activities | |||
Cash used in operations | (379) | (1,622) | |
Interest paid | - | - | |
Taxation paid | - | - | |
Net cash used in operating activities | (379) | (1,622) | |
Cash flows from investing activities | |||
Net cash inflow on acquisition of Sigma Inpartnership | 16 | - | |
Disposal of shares in Frontier IP | - | 297 | |
Purchase of property and equipment | (42) | (8) | |
Disposal of property and equipment | 6 | - | |
Purchase of financial assets at fair value through profit and loss | (76) | (331) | |
Disposal of financial assets at fair value through profit and loss | 52 | 92 | |
Long term loan | (10) | 44 | |
Short term loan | - | 125 | |
Purchase of trading investments | (114) | - | |
Disposal of trading investments | 16 | - | |
Interest received | 15 | 33 | |
| Net cash (used in)/generated from investing activities |
(137) |
252 | |
| Cash flows from financing activities | |||
| Cost of share issue | (40) | - | |
| Purchase of own shares | - | (327) | |
| Dividend paid | - | (94) | |
| Net cash used in financing activities | (40) | (421) | |
| Net decrease in cash and cash equivalents |
(556) |
(1,791) | |
| Cash and cash equivalents at beginning of year | 1,821 | 3,612 | |
| Cash and cash equivalents at end of year | 1,265 | 1,821 |
Sigma Capital Group plc
Results for the year ended 31 December 2011
NOTES
1. This preliminary announcement was approved for issue by a duly appointed and authorised committee of the Board of Directors on 2 April 2012.
2. Basis of preparation
The financial information set out in this announcement does not constitute statutory financial statements for the year ended 31 December 2011 or 31 December 2010. The report of the auditor on the statutory financial statements for each of the years ended 31 December 2011 and 31 December 2010 were (i) unqualified; (ii) did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain statements under section 498(2) or (3) of the Companies Act 2006. The statutory financial statements for the year ended 31 December 2010 have been delivered to the Registrar of Companies. The statutory financial statements for the year ended 31 December 2011 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
3. Segmental information - business segments
At 31 December 2011 the Group is organised into two main business segments: property finance, residential development and regeneration and venture capital fund management.
The segment analysis for the year ended 31 December 2011 is as follows:
Property |
Venture Capital |
Other |
Intra group adjustments |
Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | |
Revenue from services | 606 | 1,857 | 8 | (3) | 2,468 |
Trading (loss)/profit | (663) | 765 | (41) | - | 61 |
Loss on disposal of equity investments | - | (123) | - | - | (123) |
Unrealised profit on the revaluation of investments | - | 3 | - | - | 3 |
Discontinued operations | 59 | - | - | - | 59 |
(Loss)/profit from operations | (604) | 645 | (41) | - | - |
Impairment of goodwill | - | - | - | (123) | (123) |
(Loss)/profit from operations after exceptional items | (604) | 645 | (41) | (123) | (123) |
Finance income | 4 | 47 | - | (36) | 15 |
Finance costs | (36) | - | - | 36 | - |
Loss on disposal of controlling interest in Frontier IP | (79) | ||||
Share of loss of Frontier IP | (228) | ||||
Provision against holding in Frontier IP | (1,000) | ||||
Loss before tax | (564) | 692 | (41) | (123) | (1,415) |
Total assets | 757 | 5,844 | - | (2,046) | 4,555 |
Total liabilities | (3,271) | (531) | - | 3,000 | (802) |
Net (liabilities) / net assets | (2,514) | 5,313 | - | 954 | 3,753 |
Capital expenditure | - | 42 | - | - | 42 |
Depreciation | 3 | 16 | - | - | 19 |
The segment analysis for the year ended 31 December 2010 is as follows:
Property |
Venture Capital | Commerci-alisation of IP |
Intra group adjustments |
Group | |
£'000 | £'000 | £'000 | £'000 | £'000 | |
Revenue from services | 318 | 1,437 | 131 | (50) | 1,836 |
Trading profit/(loss) | (367) | 137 | (333) | - | (563) |
Unrealised loss/(profit) on the revaluation of investments |
- |
(590) |
173 |
- |
(417) |
Loss from operations | (367) | (453) | (160) | - | (980) |
Impairment of goodwill | - | - | - | (1,366) | (1,366) |
Provision for property guarantee | (1,250) | - | - | - | (1,250) |
Loss from operations after exceptional items | (1,617) | (453) | (160) | (1,366) | (3,596) |
Finance income | 3 | 64 | - | (36) | 31 |
Finance costs | (36) | - | - | 36 | - |
Loss before tax | (1,650) | (389) | (160) | (1,366) | (3,565) |
Total assets | 276 | 5,619 | 2,565 | (1,771) | 6,689 |
Total liabilities | (2,588) | (645) | (101) | 2,327 | (1,007) |
Net (liabilities) / net assets | (2,312) | 4,974 | 2,464 | 556 | 5,682 |
Capital expenditure | 2 | 6 | - | - | 8 |
Depreciation | 8 | 20 | - | - | 28 |
4. Taxation
The charge to taxation is arrived at as follows:
2011 | 2010 | |
£'000 | £'000 | |
UK corporation tax - current tax on profits of the year at 26.5% (2010: 28%) |
- |
- |
Deferred tax - short term timing differences | - | 10 |
Tax charge for the year | - | 10 |
The Group's deferred tax assets, other than those relating to short term timing differences, are not recognised in accordance with Group policy.
5. Loss per share
The calculation of the basic loss per share for the year ended 31 December 2011 and 31 December 2010 is based on the losses attributable to the shareholders of Sigma Capital Group plc divided by the weighted average number of shares in issue during the year.
| Loss attributable to shareholders £'000 | Weighted average number of shares |
Basic loss per share pence |
|
|
|
|
Year ended 31 December 2011 | (1,401) | 44,245,828 | (3.17) |
|
|
|
|
Year ended 31 December 2010 | (3,539) | 46,635,056 | (7.59) |
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all dilutive potential ordinary shares. The Company has only one category of dilutive ordinary shares, those share options granted where the exercise price is less than the average price of the Company's shares during the year. Diluted loss per share is calculated by dividing the same loss attributable to equity holders of the Company as above by the adjusted number of ordinary shares in issue during the year ended 31 December 2011 of 44,404,212 (2010: 46,728,458). For both the year ended 31 December 2011 and the year ended 31 December 2010, as the calculation for dilutive loss per share reduces the net loss per share, the diluted loss per share shown is the same as the basic loss per share.
6. Availability of statutory financial statements
Copies of the full statutory financial statements will be available from the Company's offices at 41 Charlotte Square, Edinburgh EH2 4HQ no later than 30 April 2012 and are available on its website at www.sigmacapital.co.uk.