SGM.L Regulatory News (SGM)

19 March 2014

Sigma Capital Group plc

("Sigma" or "the Group" or "the Company")

Sigma is a finance, property and urban regeneration specialist

Key Points

· 2013 represented a turning point in the Group's development

· Sigma's objective to develop a funding model for the creation of a large-scale portfolio of new privately rented homes in the UK moved forward significantly with:

- formation in November 2013 of a Joint Venture with Gatehouse Bank plc for a proposed roll-out of up to c. 6,600 new rental homes across the UK (with estimated development value of £700m)

- commencement of the first phase of the roll-out is subject to bank financing

- venture is supported by Sigma's local authority partnerships

· Proposed share placing to raise £8.0m gross (see separate statement)

- to support Sigma's growth ambitions

· Property activities made encouraging progress

- existing local authority partnerships continued to generate good income

- North Arran Way development, in North Solihull, close to completion

- discussions with additional local authorities

- Winchburgh development, near Edinburgh, progressing well

· Exit from historic venture capital activities substantially completed

· Growth prospects remain very positive

David Sigsworth, Chairman, said,

"I am delighted to report on the substantial progress Sigma has made during the course of 2013. Although the full financial benefits are not yet evident in Sigma's financial performance, we believe that the year represents a turning point in the Group's development and in its potential to accelerate growth and earnings.

The point we have reached today with our PRS model has been in development over the last three years and our Joint Venture with Gatehouse marks a significant milestone. Our strong relationships with our local authority partners and track record in urban regeneration have been key to the development of our model and the Gatehouse agreement. Once bank financing is in place, the roll-out of the first phase of the joint venture, the construction of c. 2,000 new rental homes, can commence.

We are now focused on broadening our local authority relationships to widen the geographic exposure of our PRS model. We also believe that our PRS model is extendable into the social housing market.

With both local and central government support for our PRS initiative and with the backing of Gatehouse, we believe that 2014 will be another significant year for the Group. The Board views the year ahead with confidence."

Enquiries:

CHAIRMAN'S STATEMENT

I am delighted to report on the substantial progress Sigma has made during the course of 2013. Although the financial benefits are not yet fully evident in Sigma's financial performance, we believe that the year represents a turning point in the Group's development and in its potential to accelerate growth and earnings.

As previously reported, management has been focused on the delivery of a substantial funding model for the roll-out of a large-scale portfolio of new rental homes in the UK. A key moment in the delivery of this Private Rented Sector ("PRS") portfolio was reached in November 2013 when we announced we had agreed a £700m joint venture with Gatehouse Bank plc ("Gatehouse") for the phased roll-out of up to c. 6,600 new rental homes to create one of the largest single new build residential housing portfolios in the UK, with the first phase comprising c. 2,000 new homes ("the PRS Fund").

Given the UK's critical shortage of homes, our plans have attracted the attention of both national and local government. Our announcement in November had the backing of both the Prime Minister and the UK Secretary of State for Business, Innovation and Skills, and we are delighted to have their support as we deliver our innovative model. Underpinning the model are our local authority partnerships and the first phase of the planned roll-out has been strongly supported by Liverpool and Salford City Councils, with 22 sites totalling over 90 acres across the North West already identified. We are currently in advanced discussions with leading banks for the bank financing to deliver this first phase. Once this financing is secured, development can begin, with our house building and lettings partners already in place. Sigma will generate revenue through the construction and investment phases of the project as well as participating in the eventual capital upside. We provide indications of the levels of fees which could be expected within the Strategic Report.

We have continued to make good progress with our PRS portfolio in the new financial year and in February 2014 announced that we have agreed outline terms and an exclusivity period to acquire our first London site. The site is earmarked for 318 new homes and is situated within the Barking Riverside development in east London, which is a 443 acre site with outline planning permission for one of the largest residential regeneration schemes in the UK.

As we have previously reported, we expect to agree terms to acquire further sites in Greater London, the South East and elsewhere in the UK including Scotland for our PRS portfolio. Our target is to create a portfolio of in excess of 10,000 residential units across the key cities in England, which would have an estimated potential development cost of in excess of £1 billion. We are in discussions with other major local authorities on how we can assist their new homes and regeneration objectives.

To support our plans and to enable us to capitalise on our early-mover advantage, we are proposing a placing of new shares to raise £8m gross. A circular, containing full details of the proposed placing and the notice of a general meeting of the Company to approve resolutions in connection with the proposed placing, is being sent to shareholders on 19 March.

While the significant progress we have achieved with our PRS model represents the most important development of 2013, our team continued to make good progress with our regeneration activities with our local authority partnerships. In addition, our asset management services, which are principally focused on the management of the Winchburgh development in Edinburgh and the City Wharf development in Aberdeen, also delivered good results. More details are provided in the Strategic Report.

Our objective to exit from our historic venture capital activities was substantially completed by the end of 2013. The disposal of our remaining holding in Frontier IP Group Plc prior to the year end also helps to achieve our goal of focusing the Group entirely on its residential development and management models and the expansion of our regeneration activities. 

Results

Revenue from services for the year to 31 December 2013 increased by 150% to £5.81m (2012: £2.33m). This reflected an increase in the revenue generated from property activities of 261% to £5.34m (2012: £1.48m). As expected, revenue generated by the venture capital activities reduced, decreasing to £0.47m (2012: £0.85m).

The loss from operations reduced by 67% to £0.36m (2012: £1.08m). The reduction was helped by a realised profit on disposal of equity investments in the year plus a much smaller unrealised loss on the revaluation of investments than in the prior year. Administrative expenses increased slightly by 3.5%.

The loss before tax for the year decreased by 26% to £0.86m (2012: £1.17m) reflecting the factors discussed above, a profit arising on the sale of part of the holding in Frontier IP Group Plc in August 2013 but also an adverse exceptional item of £0.53m. This exceptional charge arose from the purchase of the deferred share in Sigma Inpartnership Ltd in December 2013. During the year ended 31 December 2012, we assessed the fair value of the deferred consideration arising from the deferred share as £0.32m. In order to comply with accounting standards, this was based on an appraisal of only those projects which existed at the date of acquisition of Sigma Inpartnership Ltd in August 2011. The actual price paid for the deferred share was £0.85m and the difference between the two figures has been expensed in the year under accounting rules. The acquisition was funded by a placing of 2,278,582 ordinary shares of 1p each at a price of 39p per share.

We are acting as developer on a development project in North Solihull at North Arran Way ("NAW") Accounting rules require that we recognise the full development revenue and cost of the project rather than just fees receivable. As a result, the Comprehensive Income Statement includes turnover of £3.69m and cost of sales of £3.55m relating to NAW. The balance sheet also includes accrued income of £3.69m and a short term loan of £3.17m which was taken out during the year to fund the development and is secured on the development. The development has been forward sold and the loan is expected to be repaid in full following practical completion of NAW.

Net assets per share at the year-end stood at 5.5p (2012: 5.7p) and cash balances at the year end increased by 5% to £1.07m (2012: £1.02m).

The Directors do not recommend the payment of a dividend for the year.

Board changes

Reflecting our substantially completed exit from historic venture capital activities, Mark Hogarth, Investment Director, has today stepped down from the Board. Mark joined Sigma in 2002 and was appointed to the Board in 2007. Over this time Mark has made a substantial contribution to the Group and the Board would like to thank him for his hard work and commitment. We wish him well for the future.

Staff

The success we have achieved this year has been delivered by the efforts of our highly experienced and talented team and, on behalf of the Board, I would like to thank all staff for their enthusiasm and dedication in helping to bring the Group to the exciting position it is in today.

Outlook

The point we have reached today with our PRS model has been in development over the last three years and our Joint Venture with Gatehouse marks a significant milestone. Our strong relationships with our local authority partners and track record in urban regeneration have been key to the development of our model and the Gatehouse agreement. Once bank financing is in place, the roll-out of the first phase of the joint venture, the construction of c. 2,000 new rental homes, can commence.

We are now focused on broadening our local authority partnerships to widen the geographic exposure of our PRS model. We also believe that our PRS model is extendable into the social housing market. With both local and central government support for our PRS initiative and with the backing of Gatehouse, we believe that 2014 will be another significant year for the Group. The Board views the year ahead with confidence.

David Sigsworth

Chairman

18 March 2014

STRATEGIC REPORT

Principal activity

Sigma, together with its subsidiaries, is focused on urban regeneration, property asset management, property finance and property development.

Sigma is a public limited liability company incorporated in England. It acts as a holding company and at 31 December 2013 had five principal wholly owned subsidiaries:

Sigma Inpartnership Ltd ("Sigma Inpartnership")

Sigma Capital Property Ltd ("SCP")

Strategic Property Asset Management Ltd ("SPAM")

Sigma Technology Management Ltd ("STM")

Sigma Technology Investments Ltd ("STI")

During 2013, Sigma had one associate company, Frontier IP Group Plc ("Frontier IP"), in which it held a 26.86% holding until 13 August 2013 when it sold a significant part of its holding. As a result, Frontier IP ceased to be an associate company. Sigma sold its remaining holding in Frontier IP in December 2013.

The Group's property regeneration activities are largely carried out by its subsidiary, Sigma Inpartnership, which undertakes large scale property-related regeneration projects, working as a bridge between public and private sector organisations. Founded in 2000 and operating from offices in Manchester, Sigma Inpartnership has three long-term 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 local authority partner for the delivery of a mix of residential, commercial, education and health schemes.

Most of the Group's property management activities outside its local authority relationships are undertaken by SCP. In particular, SCP has the contract to manage the development at Winchburgh, near Edinburgh. Through SPAM, the Group also acts as property manager for its remaining historic property limited partnership, SI Property Limited Partnership No 7. This partnership holds the investment in the City Wharf development in Aberdeen. The Group has a 19.3% holding in SI Property Limited Partnership No 7, although this investment was written down to nil in 2009.

As anticipated, the Group's focus is now entirely on its property activities and Sigma's exit from its venture capital activities is almost complete.

Key strategy

Our core strategy is to achieve income growth and move into profitability by building on our established partnerships with local authority councils and by increasing our property asset management activities. Another key part of our strategy is to generate income and profit from the land that is under our control by accessing funding to accelerate the delivery of residential regeneration developments. We plan to achieve this by utilising both our property and capital raising expertise. In addition to growing income and profit, this strategy will increase the proportion of the Group's business that is contracted, which provides for a more stable and predictable income stream.

The PRS model is therefore a key component in our strategy for 2014. The joint venture with Gatehouse Bank plc announced in November provides the platform to build an initial c. 2,000 new rental homes and up to c. 6,600 new rental homes in the UK, subject to securing the requisite bank finance. Sigma will manage the process from the construction phase through the lettings phase until the assets are sold. Looking further ahead, Sigma's strategy is to extend its geographic coverage for its PRS model beyond its existing local authority partnerships to other cities in the UK and to extend it to other tenures such as social housing.

Overview of the business

Urban regeneration

Liverpool Partnership (also referred to as Regeneration 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, with a total development value of c. £120 million. The partnership was established with the flexibility to develop additional sites at the discretion of Liverpool City Council and over the last two years, Liverpool City Council has increased the number of sites under option (some of which are subject to the conclusion of formal option agreements). Sites added are Gateacre, Lime Street/Knowledge Quarter, Stonebridge Cross, Lodge Lane and Edge Hill District Centre.

In 2012, we formed a joint venture company with a major local commercial property development company, Neptune Developments Limited, to accelerate the delivery of the commercial regeneration projects in Liverpool. In 2013, we established a second joint venture company with house building specialist, Countryside Properties (UK) Ltd, to assist us in the delivery of residential regeneration projects in the City.

Land in the Liverpool Partnership can be developed using any one 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 through our venture companies with Countryside Properties (UK) Ltd and Neptune Developments Limited.

Residential Projects

The regeneration of the site at Norris Green continues to progress well. The first three phases have seen the construction of 178 mixed tenure units with the final five or so units on phase three expected to conclude during the next eight weeks.

Our joint venture company with Countryside Properties (UK) Ltd is currently on site with phase four. This phase comprises a further 167 units, with a gross development cost of c. £17 million, with the immediate focus on the delivery of the first 44 affordable houses, pre-sold to Liverpool Mutual Homes. These units are currently being handed over with focus then moving to the next stage of private for sale homes, likely to start in April/May following the conclusion of the final sales on phase three.

Construction of 24 affordable units around the existing primary school in Norris Green commenced on site in December 2013 and is due to complete in March 2014.

Planning approval was obtained in February 2014 for the construction of around 200 units at the former Queen Mary School site, which is approximately one mile from Norris Green in the northern sector of the city. We anticipate that 50% of those homes will be in the PRS Fund, with the balance developed for open market sale. We expect to start on site late Spring 2014.

We have recently concluded site investigations at Gateacre, a 19 acre former secondary school site, which has the capacity to be developed to accommodate around 200 new family homes. We have commenced pre-planning discussions with the Council via our residential joint venture company. We hope that a start on site could be achieved later this year.

Commercial Projects

The Liverpool Partnership secured a land option agreement to develop three key sites within the Knowledge Quarter in March 2013. This is a major flagship mixed-use opportunity to the south and east of Lime Street railway station in the centre of Liverpool, with a development value for the initial three to five year phase of c. £140 million. Together with our commercial joint venture company, we are initially bringing forward a development scheme for Lime Street Eastern Terrace and the former ABC cinema to be followed by the redevelopment of the Mount Pleasant Car Park as part of the redevelopment strategy for the wider area.

In addition, our proposals for the Stonebridge Cross area are progressing well and we envisage the development of a major mixed use scheme, with a development value of c. £120 million. The initial phases of development currently being progressed include the new St John Bosco secondary school, construction of which commenced in Spring 2013, and a 105,000 sq ft retail led development incorporating leisure, food and non food retail uses with a gross development value of c. £24 million.

Salford Partnership (also known as Higher Broughton Partnership)

The Salford Partnership is our partnership with Salford City Council and Royal Bank of Scotland.

Housing developer, Countryside Properties Ltd, started construction of 80 new family homes on a six acre site in late 2012 and, by the end of 2013, 58 units had been built. This development has realised a base fee of £400,000 for Sigma spread over 2012 and 2013 and has the potential to generate a profit share of at least £150,000 in 2014 as the remaining units are sold.

Detailed discussions are now underway on the development of the last remaining frontage site at Higher Broughton, which will see the development of around 100 new apartments. The scheme is under consideration for incorporation into the PRS Fund.

Salford City Council is actively working with us to bring additional land for delivery. We have agreed heads of terms already for the delivery of a further 86 units in the city which we are intending to put into the PRS Fund. We expect the number of units to grow in the coming months.

North Solihull Partnership

The partners of the North Solihull Partnership are Solihull Metropolitan Borough Council, Bellway Homes, West Mercia Housing Association and Sigma Inpartnership. The North Solihull Partnership's remit is to coordinate and deliver the regeneration of an area of circa 1,000 acres in North Solihull. This project commenced in 2007 and has an anticipated 20 year life cycle to deliver new and replacement housing stock, ten new primary schools and five new village centres incorporating neighbourhood retail facilities with new medical and council facilities. Our key role is the provision of development management services, including strategic development planning, coordination and procurement of development works and general development management in return for agreed fees for these services. Thereafter there are specific sites which we have the right to develop directly on a commercial basis.

Of the ten new primary schools, four have been delivered and we have almost completed our work to enable the construction of two further schools to commence on site in Spring 2014.

We are presently working on two village centres. Our role for the first village centre has been to provide development management services, coordinating the procurement and delivery of a £6 million contract to deliver new infrastructure to open up the site for further phases of development and an Enterprise Centre. Our work under this contract is well advanced and due to complete in April 2014. We are currently assessing the viability of further commercial development opportunities within this Village Centre.

At the second village centre at NAW, Sigma Inpartnership is developing a new 30,000 sq ft neighbourhood retail and office scheme which is due to complete by the end of March 2014. The office is pre-let to Solihull Metropolitan Borough Council and the eight retail units are pre-let to a mix of local and national retailers. We secured a forward commitment from a buyer for the completed development with the construction phase funded by way of a loan from the Growing Places Fund. The NAW development is expected to generate development profit of £160,000 in addition to development management fees of £144,000, most of which has been recognised in 2013. Completion of the development will result in a cash inflow to Sigma of c. £500,000.

The new GP facility that we are seeking to develop at NAW has been delayed as NHS England put on hold funding for any new facilities whilst they absorbed many of the recent changes going on in the NHS. We now anticipate development commencing in late 2014 or early 2015.

Property management

The Winchburgh Development

The Winchburgh Development is situated eight miles from Edinburgh between the M9 and M8 motorways and encompasses approximately 350 hectares of land, making it one of the UK's single largest residential and mixed use developments, worth an estimated £1 billion in total. Sigma has been actively involved in the Winchburgh Development since 2010 and has led the planning and commercial negotiations on behalf of Regenco (Winchburgh) Ltd on the Planning Gain Agreement (Section 75) with West Lothian Council. These negotiations resulted in the granting of planning permission in principle in April 2012 for a masterplan comprising the construction of 3,500 new homes as well as associated infrastructure, primary and secondary schools, recreation, a new town centre, retail facilities and employment land.

Land sale agreements have been concluded with five national housebuilders for 478 residential development plots. Following the release of the Help to Buy Scheme in October 2013, Miller Homes and Barratt are achieving good sales volumes and collectively expect around 100 houses to be purchased and occupied by the end of 2014. Taylor Wimpey took formal possession of their development plot, comprising 153 homes, in November 2013 and Bellway commenced Plot M (111 homes) in January this year. Enabling works are now being programmed with West Lothian Council and the Wheatley Group for the 96 affordable housing units to be located in the first phase of the new Town Centre which is planned to start by the end of this year. Phase 1 of the Town Centre will also include c. 9,000 sq ft of retail space.

Good progress is being made with Transport Scotland on the business case for the construction of the proposed rail station in parallel with upgrade works programmed in 2016/2017 on the main Edinburgh to Glasgow Rail line. The business case is required to be approved by Transport Scotland before the new train station can be constructed. Scheme design has already been agreed with Transport Scotland for the new motorway junction on the M9 which is required to be in place before the occupation of the 1,001st home.

Sigma is retained as Development Manager on behalf of Regenco Trading Ltd for the first five years of the project implementation stages of the Winchburgh Development. This will generate fees of £1.8m from 2012 to 2016 with the potential to generate additional carried interest incentive fees based on profit targets.

City Wharf, Aberdeen

We continue to provide ongoing asset management services to the SI Limited Partnership No 7 and its lender, Bank of Ireland. During 2013, we concluded a new lease with NCP for the car park in the development. Also, following discussions with Bank of Ireland, the bank agreed in principle to provide funding for a refurbishment of the two vacant floors and the common areas of Exchequer House, the original office building on the site which was constructed in the 1970s. This refurbishment will bring the building up to the modern standard demanded by the large oil companies which remain active in acquiring new office accommodation in Aberdeen. Following the tender process and approval from the Bank of Ireland, the refurbishment works commenced in February 2014 and are expected to complete in May 2014.

Property finance

Private Rented Sector ("PRS") residential portfolio

During the year we finalised our PRS model which has been designed to address the need for new homes in the UK. The model allows us to move residential land assets with planning from our local authority partnerships to our fund structure at a substantial discount to current values. The advantage of this for the Councils is that they can deliver large scale housing quickly which more than compensates for the lower land receipts. The PRS model delivers houses at five to six times the rate of those built for sale which means five to six times more council tax payers and five to six times more Government's new homes bonus as well as accelerating the regeneration activities of the Councils and meeting an urgent social need.

We have agreed a fixed price Design and Build contract with our house building partner, Countryside Properties (UK) Limited and have developed a lettings strategy with Shepherd Direct, a large multi discipline property services group. Sigma will act as manager of the fund once the funding structure is completed.

Joint venture with Gatehouse Bank plc ("Gatehouse") ("the PRS Fund")

In November 2013, Sigma announced that it had agreed a major joint venture with Gatehouse to support the roll-out of an initial c. 2,000 new privately rented residential properties in the UK, with the potential to grow the portfolio to c. 6,600 new rental homes once fully developed. The initial c. 2,000 new rental homes have a total development cost of c. £200 million and the development cost of the entire proposed portfolio is estimated at c. £700 million.

Gatehouse is a leading London-based Shariah compliant investment bank with a real estate portfolio worth in excess of £1 billion across the UK and US. The new homes will be built on land procured and developed by Sigma and the model is underpinned by Sigma's existing three local authority partnerships, with Sigma currently in discussions with other potential local authority partners.

Under the terms of the joint venture, Gatehouse will deliver the equity element of the venture and both parties are in negotiations with leading banks to secure bank financing to complete the initial c. £200 million development phase. Once bank finance is in place, construction is expected to take place over 24 months, with the new homes being delivered in phases.

The initial c. 2,000 units are being supported in particular by Sigma's local authority partnerships with Liverpool and Salford City Councils, and 22 sites, totalling over 90 acres, have already been identified across the North West. The joint venture will deliver significant high quality housing stock and assist with the regeneration objectives of local authority partners in a cost efficient and timely way. The joint venture also provides for the creation of a portfolio of a further c. 4,600 new privately rented homes, with Gatehouse retaining an option to commit to the equity element of the estimated c. £500 million of financing required. We believe that the c. 2,000 new rental homes would comprise one of the largest single new build residential housing portfolios in the UK. Sigma will act as manager of the PRS Fund once the funding structure is completed.

We expect the PRS Fund to generate fees for the Group through each stage of its life. Current indications of the fees we might expect are a 0.5% - 1% transaction fee, a 1.5% - 2% deployment fee during the construction phase, a 0.5% fee post construction during the asset management phase and a carry of c. 15% when the assets are sold.

London site for PRS residential portfolio

After the year end, in February 2014, we announced that we had agreed terms to acquire our first London site for our PRS portfolio. The site is earmarked for 318 new homes and is located within the Barking Riverside development in east London, which is a 443 acre site with outline planning permission for one of the largest residential regeneration schemes in the UK.

Sigma has signed Heads of Terms, with an exclusivity period which runs until 31 March 2015 and which allows Sigma or its funding partners to acquire the site and develop four new apartment blocks comprising a total of 318 apartment homes, including a high percentage of three bedroom family units. The overall delivery cost of the site, construction costs and associated costs are estimated to be in excess of £50 million. The agreement has been signed with Barking Riverside Ltd ("BRL"), a joint venture company between Greater London Authority and Bellway Homes plc, with BRL and Sigma undertaking to enter into a conditional contract by 31 May 2014.

The Heads of Terms sets out the obligations of the respective parties in relation to infrastructure delivery by the seller, site layout and site design, all of which will be incorporated in a detailed acquisition agreement with Sigma and its funders in due course.

We expect site construction to commence in late 2014 subject to completion of detailed site acquisition agreements and funding arrangements. The construction delivery timeframe is likely to be approximately 24 months.

The Barking Riverside development is a major new neighbourhood being created alongside two kilometres of Thames river frontage in the heart of the Thames Gateway at Barking Riverside, near Barking town centre and close to the City of London, Canary Wharf and the Lower Lea Valley. It has planning permission for 10,800 new mixed tenure homes, with a high proportion of larger homes for families. The development will feature new schools, healthcare, shopping, community and leisure facilities, all supported by new public transport links.

Venture Capital activities

STM operates as a fund manager and corporate finance advisor and is authorised and regulated by the Financial Conduct Authority. In December 2013, STM transferred the management of three of its venture funds to Shackleton Ventures Limited together with the business advisory contracts of certain of the investee companies. The Group is currently working on the transfer of the management contracts of its remaining funds. Sigma continues to be a limited partner in the venture funds which have been transferred and so retains its investment in those funds. The revenue generated by the venture activities during the year was £466,000 which turned in a trading loss of £75,000. The revenue from these activities in 2014 is expected to be minimal. There will be costs associated with the closure of this division but these are not expected to be material in a Group context.

The Placing

The placing of new shares to raise £8m gross subject to shareholder approval at a General Meeting will give the Group enhanced financial strength to execute the large-scale projects in which it is currently involved. In particular, this financial strength will enable the Group to: fund pre-development spend and thereby accelerate the development of existing projects; make equity investment in current and future projects so providing Sigma with greater participation in returns; and demonstrate intent to our Partners. All pre-development expenditure is recoverable through the funding process when the development proceeds. In addition, the placing will enable Sigma to strengthen its team as and when required.

Financial Review of 2013

The Group's revenue increased by 150% to £5,808,000 (2012: £2,326,000). Much of this increase is due to NAW which contributed revenue of £3,690,000 (2012: £nil). Excluding NAW revenue, the revenue from other property activities increased by 12% to £1,652,000 (2012: £1,479,000) whilst the revenue from venture capital activities fell by 45% to £466,000 (2012: £847,000). All of the cost of sales arises from NAW.

The Group made a trading loss in the year of £409,000 (2012: loss £249,000). The increased loss arises from the venture capital activities making a trading loss of £75,000 as a result of these activities being wound down compared with a small trading profit of £59,000 in 2012. The loss from the property activities fell in the year to £18,000 from a loss of £36,000 posted in 2012. The balance of the trading loss in the year is due to costs incurred by the holding company on Group matters. Full detail of the results for the year by business segment is given in Note 3 of this final results announcement.

Administrative costs increased by 3.5% to £2,666,000 (2012: £2,575,000), principally due to increased legal and professional costs. The Group made a significantly reduced loss on operations of £355,000 (2012: £1,082,000), benefitting from both a realised profit on disposal of equity investments of £82,000 (2012: loss £7,000) and a significantly reduced unrealised loss on investments of £28,000 compared with an unrealised loss in the prior year of £826,000. Overall the Group made a small profit on its holding in Frontier IP (net of its share of Frontier IP's losses) of £20,000 (2012: loss £111,000). The results for the year were adversely affected by an exceptional item of £531,000 being the excess of the price paid for the deferred share in Sigma Inpartnership over the deferred consideration provided for in the prior year. Even after the exceptional item, the loss for year at £856,000 was 27% lower than the loss incurred in 2012 of £1,171,000.

Net assets of the Group increased to £2,636,000 at 31 December 2013 (31 December 2012: £2,597,000) due to a share placing of 5% of the Company's issued share capital. Net assets at 31 December 2013 were equivalent to 5.5p per share (31 December 2012: 5.7p per share).

Balance sheet

The inclusion of the NAW development in the balance sheet at 31 December 2013 has impacted several of the balance sheet categories. Note 7 of this final results announcement sets out those categories which include balances relating to NAW. The principal items in the balance sheet are goodwill of £533,000 (2012: £533,000), the investments in the venture capital funds of £520,000 (2012: £691,000), other current assets (excluding NAW balances) of £959,000 (2012: £8,000), cash (excluding NAW balances) of £1,061,000 (2012: £1,024,000) and amount payable for deferred share/deferred consideration £847,000 (2012: £316,000).

The goodwill relates to the acquisition of Sigma Inpartnership and is reviewed each year for impairment. The investments in the venture capital funds are spread across four funds which together hold investments in 14 companies (2012: 16 companies). Other current assets include the gross proceeds receivable from the placing of the Company's shares of £888,000.

The short term loan of £3,171,000 (2012: £nil) arises from the NAW development and is due to be repaid ten days following practical completion which is expected to occur by the end of March 2014. Following practical completion, the other balances relating to NAW will also be satisfied. Excluding NAW, the Group's current assets exceed its current liabilities by £1,061,000 (2012: £952,000). The Group has no long term liabilities.

Cash flow

Excluding cash balances of £9,000 relating to NAW, the Group's cash balances increased by £37,000 to £1,061,000 (2012: fell by £241,000 to £1,024,000). The cash outflow from operating activities of £494,000 (2012: £292,000) was offset by cash inflows from the sale of investments at fair value through profit and loss, disposal of shares in Frontier IP and disposal of trading investments together totalling £503,000 (2012: £118,000).

Key performance indicators

With the decrease in the venture capital activities over the year, the key performance indicators have concentrated on the property activities with the review of the venture capital activities being focused on the performance of the Group's investments.

The Group's key performance indicators include:

Principal risks and uncertainties

The specific financial risks of price risk, interest rate risk and credit risk are discussed in the notes to the financial statements. The broader risks - financial, operational, cash flow and personnel - are considered below.

The principal financial risk in the business is a reduction in the value of the Group's investment in four venture capital funds. As discussed above, this risk is mitigated to a certain extent due to the funds being invested in 14 underlying companies. In addition, the fund managers are focused on ensuring that the companies remain properly funded whilst working with them on exit strategies.

The principal operational risks of the business reside around management's ability to secure new contracted property income streams and to minimise the risks arising from property development, both execution risk and time to completion. Once the PRS Fund is underway, this will significantly increase the proportion of the Group's contracted revenue compared with one-off income streams. Development risk is managed by maintaining close control of pre-contract costs and by limiting the number of early stage developments financed by the Group at any one time. Currently NAW is the only development project being undertaken by the Group. The development of NAW has been a significant project for Sigma in terms of the revenue and cost of sales in the comprehensive income statement and in terms of the assets and liabilities in the balance sheet. An analysis of the assets and liabilities between NAW and other activities is given in Note 7. Sigma has sought to minimise the risk arising from NAW by entering into a forward sale of the completed development to a third party with a strong covenant and by holding the development loan in a wholly owned subsidiary with no cross guarantees with any other members of the Group.

The main cash flow uncertainties of the business centre around the timing of property project development fees, the receipt of profits arising out of the partnerships with the councils and the timing of investment realisations by the venture funds.

The Group is dependent on its Executive Directors and senior management for its success. There can be no assurance that the Group will be able to retain the services of these key personnel although historically the turnover of senior staff has been low. Incentives for senior staff include share options and carried interest in managed funds.

CONSOLIDATED COMPREHENSIVE INCOME STATEMENT

For the year ended 31 December 2013

There were no comprehensive gains or losses in either year other than those included in the comprehensive income statement.

CONSOLIDATED BALANCE SHEET

At 31 December 2013

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2013

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2013

Sigma Capital Group plc

Results for the year ended 31 December 2013

NOTES

1. This final results announcement was approved for issue by a duly appointed and authorised committee of the Board of Directors on 18 March 2014.

2. Basis of preparation

The financial information set out in this announcement does not constitute statutory financial statements for the year ended 31 December 2013 or 31 December 2012. The report of the auditor on the statutory financial statements for each of the years ended 31 December 2013 and 31 December 2012 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 2012 have been delivered to the Registrar of Companies. The statutory financial statements for the year ended 31 December 2013 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

While the financial information included in this final results announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as endorsed for the use in the European Union, this announcement does not itself contain sufficient information to comply with IFRS.

3. Segmental information - business segments

At 31 December 2013 the Group is organised into two main business segments: property and venture capital fund management plus holding company activities.

The segment analysis for the year ended 31 December 2013 is as follows:

Note: Property revenue includes a proportion of the total expected sales value of the NAW development. This figure of £3,690,000 has been calculated based on the percentage of completion of the project as at 31 December 2013.

Sigma Capital Group plc

Results for the year ended 31 December 2013

The segment analysis for the year ended 31 December 2012 is as follows:

4. Unrealised losses on the revaluation of investments

The total fair value adjustments made during the year relating to investments, both financial assets at fair value through profit and loss and trading investments are set out below.

5. Taxation

There is no charge to taxation as the Group did not generate taxable profits.

The Group's deferred tax assets, other than those relating to short term timing differences, are not recognised in accordance with Group policy.

Sigma Capital Group plc

Results for the year ended 31 December 2013

6. Loss per share

The calculation of the basic loss per share for the year ended 31 December 2013 and 31 December 2012 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.

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 2013 of 47,918,521,(2012: 45,571,656).  For both the year ended 31 December 2013 and the year ended 31 December 2012, 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.

7. NAW development

Trade receivables, other current assets, bank, and trade payables include balances that relate to the NAW development as follows:

The costs incurred on the NAW project are funded through a loan provided by Birmingham City Council, being the accountable body for the Local Enterprise Partnership in connection with funding under the Growing Places Fund. The income arising from the NAW project, which is shown in prepayments and accrued income, is first used to settle the loan. The total amount available under the terms of the loan is £4.045 million with interest charged at a commercial rate. The loan is held in Solihull Inpartnership Limited, a wholly owned subsidiary of the Group and is secured on the development. There are no cross guarantees in respect of the loan with any group company. The loan is repayable 10 days after practical completion. A forward sale of the NAW development has been agreed, also completing 10 days after practical completion.

Sigma Capital Group plc

Results for the year ended 31 December 2013

8. Cash used in operations

9. 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 11 April 2014 and are available on its website at www.sigmacapital.co.uk.