SGM.L Regulatory News (SGM)

27 Sep 2007 07:01

Sigma Capital Group PLC27 September 2007 SGM.L27 September 2007 SIGMA CAPITAL GROUP PLC ("Sigma" or "the Group") Unaudited interim results for the six months to 30 June 2007 HIGHLIGHTS •Total revenue increased by 41% to £4.9m (2006: £3.5m) •Profit before tax rose by 76% to £1.6m (2006: £0.9m) •Earnings per share up 122% to 1.40p (2006: 0.63p) •Cash balances increased to £4.0m (2006: £2.2m) •Placings in July raised in aggregate an additional £3.4m gross •Launch of high profile sustainable energy fund - Sigma Sustainable Energy Fund II • second sustainable energy fund • attracted an initial £45m of funds • remit to invest in UK and Europe • high profile partners involved include: - Scottish and Southern Energy plc (£10m); - Bank of Scotland Corporate (£12.5m); - Sir Tom Hunter's West Coast Capital (via subsidiary TBH Investments Limited) (£10m) - Elsina Limited (a vehicle advised by Vincent Tchenguiz's Consensus Business Group) (£10m) • Venture capital funds under management now stand at £74m, up 155% since year end •one investee company, i-design group plc, admitted to AIM in July 2007 •Sixth property partnership established - to acquire 5-star hotel in Glasgow operated by Radisson; capitalised at £68m •Board significantly strengthened •Prospects remain very positive Brian Hadfield, Chairman, commented, "Sigma continues to make very strong progress and trading results reflect this,with earnings more than doubling over the first half of the year. I am particularly pleased to highlight the calibre of investors we haveattracted in the launch of our second sustainable energy venture capital fund,the Sigma Sustainable Energy Fund II. This fund, which will invest insustainable energy technologies in the UK and Europe, is Sigma's fourth venturecapital fund and brings total venture capital funds under management to £74m, anincrease of 155% since the year-end. Looking ahead, we continue to view prospects for the Group very positively, withsignificant opportunities for growth across all three of our businessactivities." Enquiries Sigma Capital Group plc Graham Barnet, Chief Executive Today: 020 7448 1000 Marilyn Cole, Finance Director T: 0131 220 9444 Biddicks Katie Tzouliadis/ Sophie Lane T: 020 7448 1000 Arbuthnot Securities Tom Griffiths/ Neil Kirton T: 020 7012 2000 Company website: www.sigmacapital.co.uk CHAIRMAN'S STATEMENT Overview 2006 was a landmark year for Sigma and I am pleased to report that, as expected,the Group continues to make very strong progress. Most especially, towards theend of the first half year, in June, we launched a new venture capital fund, theSigma Sustainable Energy Fund II, which, to date, has attracted a total of £45mof investment. This fund is Sigma's second sustainable energy fund and itsfourth venture capital fund. It has been established to invest in sustainableenergy technologies throughout the UK and Europe. We are particularly pleasedthat Scottish and Southern Energy plc, Bank of Scotland, and the investmentvehicles of Sir Tom Hunter and Vincent Tchenguiz are participating as strategicpartners and have invested in this fund. After the first half year, in July, Sir Tom Hunter and Vincent Tchenguiz choseto make direct investments in Sigma and we completed placings with Sir Tom'sinvestment partnership, West Coast Capital, and Elsina Limited, a vehicleadvised by Vincent Tchenguiz's Consensus Business Group, raising in aggregate£3.4m. We are delighted with this development and view it as a real endorsementof the business. I am also very pleased to highlight the changes we have made to the compositionand structure of the Board, which I outline in more detail below. These changes,including the appointment of three new directors, reflect the progress thebusiness has made and provide additional robustness to the Board as we continueto grow. Results Total revenue for the first half year increased by 41% to £4.9m (2006: £3.5m)and resulted in profit from operations increasing by 64% to £1.5m (2006: £0.9m).Profit before tax rose by 76% to £1.6m from £0.9m last year and profit after taxrose by 87% to £1.1m (2006: £0.6m). Earnings per share grew by 122% to 1.40pfrom 0.63p in the first six months of last year and exceed the earnings pershare for the whole of 2006 (1.05p). The improved cash balances, together with the repayment of the interest bearingpreference shares in the property subsidiary, resulted in net finance income inthe half year compared with a net finance cost in the prior period. The Group'scash balances improved to £4.0m as at 30 June 2007 (2006: £2.2m) and theplacings of new shares in July, which raised £3.4m, has additionallystrengthened the Group's net cash position and improved our ability toco-invest. Operational Review The Group's activities fall into three areas, venture capital fund management,university IP commercialisation and property investment. Venture Capital Fund Management Sigma now manages and is an investor in four funds, the Sigma Technology VentureFund, ("the Venture Fund"), the Sigma Innovation Fund (East of Scotland) ("theInnovation Fund"), the Sigma Sustainable Energies Fund and the Sigma SustainableEnergy Fund II. Sigma's fourth fund, the Sigma Sustainable Energy Fund II, was launched in Juneand its success in attracting very high calibre partners has been tremendous. Asecond closing in July saw the total investment in this fund rise to £45m and wesecured limited partner contributions from: Scottish and Southern Energy plc("SSE") at £10m, Bank of Scotland Corporate at £12.5m, Sir Tom Hunter's WestCoast Capital at £10m, Elsina Limited (a vehicle advised by Vincent Tchenguiz'sConsensus Business Group) at £10m and Sigma Technology Investments Limited, at£2.5m. This takes the total venture capital funds under management to £74m, an increaseof 155% from the end of the last financial year. This fund will remain open tofurther investors until June 2008 and has a target of £100m. All fees for anyadditional investment in the fund are backdated to the first closing date (14June 2007), with a corresponding positive impact in this year. As with Sigma'sother funds, this is a 10-year fund on which Sigma earns gross fees of 2% ofcommitted funds. I am pleased to report that in addition to SSE's capital commitment, the companyis supporting the Sigma Sustainable Energy Fund II by committing resource andexpertise. This extends the excellent working relationship we have developedwith SSE through collaboration on Sigma's first energy fund, the SigmaSustainable Energies Fund. Both our Venture Fund and Innovation Fund made follow on investments in theperiod and a summary of these investments is included in the notes accompanyingthis statement. A total of £7.8m was invested in these follow on rounds by thirdparty investors alongside the £0.5m invested by the Sigma funds. In addition,the Venture Fund chose to exit its investment in Tenison Technology EDA Limitedgenerating a small profit in the period. Two of our funds have an investment in i-design group plc ("i-design"), themedia business which has developed and sells an ATM advertising solution calledATM:ad which enables banks and building societies to run their own and thirdparty advertising across their ATMs. i-design successfully floated on AIM inJuly 2007 raising £3.5m (gross) with a market capitalisation on admission of£9.5m. In addition, the Group has a direct investment in i-design arising fromthe exercise of an option granted to the Group in 2004. In October, in support of its sustainable energy funds, Sigma is launching theSigma Capital Cleantech Index. The Sigma Capital Cleantech Index will comprisecompanies quoted on AIM that, in Sigma's opinion, have a material involvement inthe development or deployment of technologies relating to renewable energy,energy efficiency, emission reduction or conservation of natural resources. University IP Commercialisation We have two preferential, long-term university partnerships in place, with theRobert Gordon University ("RGU") and the University of Dundee ("Dundee") to helpboth universities identify and progress commercialisation opportunities. We arebeginning to see the first benefits of our activities in this sector, with thefirst equity stake expected shortly and with further spinout opportunities inthe pipeline. We are making good progress in raising support for venture capitalfunds for this activity and, if successful, these will add further to ourcontracted funds under management. Property Investment The Group's investment management activity within the property sector is throughits subsidiary, Strategic Investment Management Limited ("Si Management"), inwhich we have a 47.8% interest. Si Management completed one transaction in thefirst half of 2007, establishing its sixth limited partnership to acquire a5-star hotel in Glasgow operated by Radisson, the global hotel company. Thepartnership was capitalised at £68m and the transaction generated total fees of£4.0m. Sigma's property team is currently working on its seventh and eighthlimited partnerships. While the timing of completion of these deals is notentirely within our control, it represents continuing significant progress inthis area of our business. Board appointments During the first half we restructured the Board with the aim of establishing astronger operating framework and adding further experience and depth ofresource. Joint Managing Directors, Graham Barnet and Neil Crabb, respectivelyassumed the positions of Chief Executive Officer and Chief Investment Officer.We appointed an additional executive Director, Mark Hogarth, who joined theBoard in March as Investment Director. Mark has been with Sigma for five yearsand has served on the board of one of its operating subsidiaries for two years. We also appointed two non-executive directors, David Sigsworth and JamesWallace, respectively in June and July. David spent over ten years as a mainboard director of FTSE 100 utility companies, most recently on the board of SSE.David is actively involved in the sustainable energy sector and holds severalassociated non-executive directorships and has been appointed Chairman of theScottish Environmental Agency. He is also Chairman of our Sigma SustainableEnergy Fund II. James Wallace is Chairman of Bodycote International plc, theworld's leading supplier of specialist testing and thermal processing servicesand also is a non-executive director of a number of other listed companies. I am also announcing that I am stepping down as non-executive Chairman of Sigmawith effect from today but will remain on the Board as a non-executive directorand chairman of the audit committee. I am pleased to advise that James Wallacesucceeds me as non-executive Chairman and I have every confidence that he willbuild on the strong foundations we have laid which underpin the Group's nextphase of development. Outlook We continue to make progress across all our areas of activity, venture capital,university IP commercialisation and property investment, but we are particularlypleased with the significant increase in contracted venture capital funds undermanagement. We expect our contracted revenue from venture capital and advisoryactivities for 2007 to increase to 89% of revenue generated by these activitiesfrom 83% as at the end of last year primarily due to the second closing of theSigma Sustainable Energy Fund II. There are clear opportunities for us toincrease funds under management further and we have a target of £100m for ourSigma Sustainable Energy Fund II, with fees for any additional investment in thefund back-dated to the first closing date of 14 June 2007. This, combined withhigh activity and a greater range of opportunities arising from our newstrategic relationships, gives us confidence as we look ahead at growthprospects for the Group. We continue to remain very positive over the outcomefor the current financial year and while the timing of certain transactions willdetermine the final outcome for the year, we continue to grow and, mostimportantly, strengthen our business model. Brian HadfieldChairman 27 September 2007 CONSOLIDATED INCOME STATEMENTFor the six months ended 30 June 2007 Six months Six months Year ended ended ended 31 30 June 30 June December 2007 2006 2006 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 RevenueRevenue from services 4,716 3,407 7,979Other operating incomeRealised (losses)/profits on disposal ofequity investments - (1) 3Unrealised profits/(losses) on therevaluation of investments 165 9 (8)Dividend income - 5 7 Rental income 55 74 150 -----------------------------------Total revenue 4,936 3,494 8,131Cost of sales (2,145) (1,513) (4,214) -----------------------------------Gross profit 2,791 1,981 3,917Administrative expenses (1,293) (1,067) (2,172) -----------------------------------Profit from operations 1,498 914 1,745Finance income 91 41 97Finance costs (17) (63) (121) -----------------------------------Profit before tax 1,572 892 1,721Corporation tax 3 (466) (300) (590) -----------------------------------Profit after tax and profit for the period 1,106 592 1,131 ===================================Attributable to:Equity holders of the company 536 242 402Minority interests 570 350 729 ----------------------------------- 1,106 592 1,131 =================================== Basic earnings per share 4 1.40 0.63 1.05Diluted earnings per share 4 1.38 0.63 1.04 =================================== All of the operations of the Group are continuing. CONSOLIDATED BALANCE SHEETAt 30 June 2007 As at As at As at 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000ASSETSNon-current assetsGoodwill 44 60 60Property and equipment 59 52 63Available for sale investments 5 2,555 2,105 2,312Deferred tax asset 10 148 10 ------------------------------------- 2,668 2,365 2,445 -------------------------------------Current assetsTrade receivables 252 499 698Other current assets 757 908 852Trading investments 65 525 73Cash and cash equivalents 3,963 1,961 2,388Deposits - 207 - ------------------------------------- 5,037 4,100 4,011 -------------------------------------Total assets 7,705 6,465 6,456 ------------------------------------- LIABILITIESCurrent liabilitiesMinority interests - non-equity - 1,255 502Trade and other payable 980 586 783Current tax payable 765 329 300 ------------------------------------- 1,745 2,170 1,585 -------------------------------------Non-current liabilitiesPreference share capital 750 750 750 -------------------------------------Total liabilities 2,495 2,920 2,335 -------------------------------------Net assets 5,210 3,545 4,121 ===================================== EQUITYEquity attributable to equity holders ofthe parentCalled-up share capital 385 383 384Share premium account 14,114 14,076 14,104Merger reserve (249) (249) (249)Share based payment reserve 61 35 43Capital reserve (7) (7) (7)Retained earnings (10,300) (10,995) (10,836) ------------------------------------- 4,004 3,243 3,439Minority interest - equity 1,206 302 682 ------------------------------------- Total equity 6 5,210 3,545 4,121 ===================================== CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 30 June 2007 Six months Six months Year ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited)(unaudited) (audited) £'000 £'000 £'000 Net cash inflow from profit from operations 2,081 273 1,212Return on investments and servicing of 74 41 51finance Corporation tax paid - - (178)Capital expenditure and financial investment (89) (190) (319) ---------------------------------Cash inflow before financing and management of liquid resources 2,066 124 766Management of liquid resources - 14 345Financing - issue of equity 11 35 35Financing - redemption of preference shares in subsidiary (502) - (753) ---------------------------------Increase in cash in the period 1,575 173 393 ================================= Reconciliation of profit from operations to operating cash flows Profit from operations 1,498 914 1,745Share based payments 18 8 16Depreciation charges 22 19 40Decrease/(increase) in debtors 511 (688) (803)Increase in creditors 197 28 209Loss/(profit) on disposal of trading - 1 (3)investments Write (back)/write off of investments (165) (9) 8 --------------------------------Net cash inflow from operating activities 2,081 273 1,212 ================================ NOTES 1. Basis of presentation The interim report has been prepared using accounting policies consistent withInternational Accounting Standard 34, 'Interim Financial Reporting' for thefirst time. The accounting policies adopted, reconciliation of net assets as attransition date of 1 January 2006, the income statement for the year ended 31December 2006 and the net assets at that date have been provided in theannouncement on 24 April 2007. The reconciliation of the six-month period ended30 June 2006 and net assets at that date are provided in note 2. These unaudited financial statements were approved and authorised for issue by a duly appointed and authorised committee of the Board of Directors on 26 September 2007. The interim financial statements do not comprise statutory accounts for thepurpose of s240 of the Companies Act 1985. The comparatives for the full yearended 31 December 2006 are not the Company's full statutory accounts for thatyear. A copy of the statutory accounts for the year, which were prepared underUK GAAP, has been delivered to the Registrar of Companies. The auditor's reporton these accounts was unqualified and did not contain a statement under section237(2) or 237(3) of the Companies Act 1985. The interim financial statements have not been audited or reviewed by theCompany's auditor. 2. Financial effect of transition to IFRS on 2006 interim results As at 30 June 2006 UK GAAP Reclassifications Adjustments IFRS Note 30.06.06 30.06.06 £'000 £'000 £'000 £'000ASSETSNon-current assetsIntangible assets - goodwill 59 1 60 1Property and equipment 52 52Available for sale 2,057 48 2,105 2investmentsDeferred tax asset 148 148 3 ----------------------------------------------------- 2,168 148 49 2,365 -----------------------------------------------------Current assetsTrade receivables 499 499Other current assets 908 908Deferred tax asset 148 (148) 3Trading investments 304 221 525 4Cash and cash equivalents 2,168 (207) 1,961 5Deposits 207 207 5 ----------------------------------------------------- 4,027 (148) 221 4,100 -----------------------------------------------------Total assets 6,195 270 6,465 ----------------------------------------------------- LIABILITIESCurrent liabilitiesMinority interests - non-equity 1,255 1,255Trade and other payables 586 586Current tax payable 329 329 ----------------------------------------------------- 2,170 2,170 -----------------------------------------------------Non-current liabilitiesPreference share capital 750 750 -----------------------------------------------------Total liabilities 2,920 2,920 -----------------------------------------------------Net assets 3,275 270 3,545 ----------------------------------------------------- As at 30 June 2006 UK GAAP Reclassifications Adjustments IFRS Note 30.06.06 30,06.06 £'000 £'000 £'000 £'000EQUITYEquity attributable toequity holders of theparentCalled up share capital 383 383Share premium account 14,076 14,076Merger reserve (249) (249)Share based payment 35 35reserveCapital reserve (7) (7)Retained earnings (11,265) 270 (10,995) 1,2,4 --------------------------------------------------- 2,973 270 3,243Minority interest -equity interest 302 302 ---------------------------------------------------Total equity 3,275 270 3,545 =================================================== For the six months ended 30 June 2006 UK GAAP Reclassifications Adjustments IFRS Note 30.06.06 30,06.06 £'000 £'000 £'000 £'000RevenueRevenue from services 3,407 3,407Other operating incomeRealised loss ondisposal of equityinvestments (1) (1)Unrealised (losses)/profits on therevaluation of (97) 106 9 2,4investmentsDividend income 5 5Rental income 74 74 ----------------------------------------------------Total revenue 3,485 3,494Cost of sales (1,513) (1,513) ----------------------------------------------------Gross profit 1,972 (97) 106 1,981Administrative expenses (1,164) 97 (1,067) 6 ----------------------------------------------------Profit from operations 808 106 914Finance income 41 41Finance costs (63) (63) ----------------------------------------------------Profit before tax 786 106 892Corporation tax (300) (300) ----------------------------------------------------Profit after tax andprofit for the period 486 106 592 ==================================================== Attributable to:Equity holders of the parent 136 - 106 242Minority interest 350 350 ---------------------------------------------------- 486 - 106 592 ==================================================== Notes1. Under IFRS, goodwill is reviewed for impairment annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed. The value of goodwill was not found to be impaired at 30 June 2006. Under UK GAAP, goodwill is amortised over its useful economic life. The adjustment is the write back of amortisation charged under UK GAAP during the six months ended 30 June 2006. 2. Under IFRS, unquoted investment assets are valued at fair value. Under UK GAAP these had been valued at the lower of fair value and cost less any impairment. 3. Under IFRS, deferred tax is classified as a non-current asset. 4. Under IFRS, quoted investment assets are valued at bid price. Under UK GAAP these had been valued at the lower of cost and mid-market price. 5. Under IFRS, any longer term cash deposit balances are included in 'Deposits'. 6. Under IFRS, unrealised losses on the revaluation of investments are shown under Other operating revenue. Under UK GAAP, unrealised losses were included in Administrative expenses. 3. Corporation tax Six months Six months Year ended ended 30 ended 30 31 December June 2007 June 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Current tax 466 150 600Deferred tax - 150 (10) ------------------------------------- 466 300 590 ------------------------------------- The taxation charge has been based on the estimated effective tax rate for thefull year. 4. Earnings per share The calculation of earnings per share is based on the profit attributable toequity holders of Sigma Capital Group plc for the six months ended 30 June 2007of £536,000 (2006: £242,000) and on the weighted average number of ordinaryshares outstanding during the six months ended 30 June 2007 of 38,412,886 (2006:38,140,216). The calculation of diluted earnings per share is based on the sameprofit figures and on the weighted average diluted number of ordinary sharesoutstanding during the six months ended 30 June 2007 of 38,978,504 (2006:38,351,842). 5. Investments The investments made by two of the venture funds, the Sigma Technology VentureFund and the Sigma Innovation Fund (East of Scotland), in the six months ended30 June 2007 are set out below. The Sigma Sustainable Energies Fund did not makeany investments in the period. Total amount % holding invested (fully diluted) £'000 %Sigma Technology Venture Fund DEM Solutions LimitedDeveloped a particle mechanics simulation tool tosimulate and analyse the behaviour of particulatematter. Follow on investment £250,000 792 20.7 Managed Information Group LimitedInstallation, maintenance, configuration andproject management for IT hardware, in particularATMs and EPOS machines. Follow on investment £51,000. 1,237 56.2 Tenison Technology EDA LimitedSoftware tools to enable and facilitate the 1,635 Soldsystem level design, testing and verification oflarge, complex system on chip integratedcircuits. Follow on investment of £60,000 was made toprovide working capital for the company whilstnegotiations for the sale of the entire sharecapital of the company were being concluded. Sigma Innovation Fund (East of Scotland)Pelamis Wave Power Limited (previously OceanPower Delivery Limited)Wave energy conversion. First investment by this fund of £156,000. Sigma 156 0.4% *Sustainable Energies Fund previously invested£500,000. * the investment round in Pelamis Wave Power Ltd is not expected toclose until October 2007. Latest available information from the companygives a fully diluted holding of 0.4%. This may reduce if furtherinvestors participate in this round. 6. Statement of changes in equity Six months Six months Year ended ended 30 ended 30 31 December June 2007 June 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Total equity at the beginning of the period 4,121 2,910 2,910Issue of equity 11 35 64Share based payments 18 8 16Retained profit for the period 1,106 592 1,131Increased holding in subsidiary -reduction in minority interest (46) - - -----------------------------------Total equity at the end of the period 5,210 3,545 4,121 ----------------------------------- 7. Copies of the interim financial statements Copies of the interim financial statements will be sent to shareholders andcopies are available on request from the Company's office at 41 CharlotteSquare, Edinburgh EH2 4HQ. This information is provided by RNS The company news service from the London Stock Exchange