SGM.L Regulatory News (SGM)

24 Apr 2007 07:01

Sigma Capital Group PLC24 April 2007 For Immediate Release 24 April 2007 Sigma Capital Group plc ("Sigma" or the "Company") Preliminary Results for the year ended 31 December 2006 Sigma Capital Group plc is a specialist asset management and advisory groupfocused on venture capital, university IP and property. Financial highlights • Turnover increased to £7.98 million (2005: £3.33 million) - up 140% • Net profit before tax of £1.87 million (2005: loss £0.39 million) - improvement of £2.26 million • Retained profit of £0.55 million (2005: retained loss £0.78 million) - improvement of £1.33 million • EPS 1.43p (2005: loss per share 2.09p) • Net cash at £2.39 million (2005: £2.00 million) Operational highlights • Renewable energy - Launch of Sigma Sustainable Energies Fund in January 2006 - Closed at £6 million - Scottish and Southern Energy plc a trade investor - Three investments made during the year • High level of investment activity - 12 venture capital transactions completed in 2006 • University IP: - Signed 25 year agreement with the Robert Gordon University - Signed 10 year agreement with Dundee University with option to extend - Lead investor in B1 Medical Ltd, founded by Aberdeen University, the Robert Gordon University and NHS Grampian • Property: - Completed Si Limited Partnership No 4 which acquired a pre-let development property in Liverpool - total capitalisation £46.5 million - Completed Si Limited Partnership No 5 which acquired three Ramada Jarvis hotels - total capitalisation £73.0 million - Disposed of £39.1 million of assets from third property limited partnership - In 2007 launched Si Limited Partnership No 6 which has acquired the Glasgow Radisson Hotel - expected total capitalisation £68 million Brian Hadfield, Chairman, said: "2006 has been a landmark year for Sigma with substantial growth in revenue anda move into considerable profitability. The Company now has three firmlyestablished and growing sectors of asset management: venture capital, UniversityIP and property. The business model across all these three sectors is verysimilar and all three have substantial opportunities for growth. 2007 hasstarted very strongly and the Group is progressing a number of significantopportunities which will further enhance the business. We look forward to therest of the year with confidence and to updating the market on further progressat the AGM." ENQUIRIES:Sigma Capital Group plcGraham Barnet, Chief Executive Officer Tel: 0131 220 9444Neil Crabb, Chief Investment Officer Tel: 020 7653 3200Marilyn Cole, Finance Director Tel: 020 7653 3200 Buchanan CommunicationsDiane Stewart/Isabel Podda/Karen Morrison Tel: 020 7466 5000 Chairman's Statement The higher level of turnover in the first half of the year continued in thesecond half resulting in total turnover for the year of £7.98 million (2005:£3.33 million), an increase of 140% compared with the previous year. The mainfocus of the venture capital and advisory arm of the Group during the year wason investing its funds under management and building relationships with ScottishUniversities. Its contracted turnover from fund management fees, directors' feesand retainers increased as a percentage of total turnover to 83% (2005: 65%).There was a reduction in one-off revenue, however, and as a result total venturecapital and advisory turnover remained at a similar level to the prior year. Theproperty arm saw turnover increase to £6.79 million (2005: £2.14 million)generated from the establishment of two new property limited partnerships andthe sale of a property from an existing limited partnership. The Group saw an improvement of £2.26 million in its net profit before tax to£1.87 million (2005: loss £0.39 million). A good overall performance from theGroup's investments in the year resulted in a small net write back of provisionsof £1,000 (2005: write down £1.01 million). This, together with overheadsremaining at a similar level to the prior year, has resulted in an increase of£1.33 million in net retained profit for the year of £0.55 million (2005: loss£0.78 million). The Group's cash balances increased to £2.39 million (2005: £2.00 million). Fund management As previously reported, venture funds under management grew by £6 million to £29million with the first close in January 2006 of the Sigma Sustainable EnergiesFund. This is a ten year fund with a mandate to provide funding for companiesdeveloping sustainable energy technologies. The largest participators in thisfund with commitments of £2.40 million each are Scottish and Southern Energyplc, the FTSE 100 utility company and trade investor, and the European RegionalDevelopment Fund. Sigma committed £0.40 million. The Sustainable Energies Fund made three investments in the year. The VentureFund made six investments in the year - three new investments and three inexisting investee companies. The Venture Fund is now closed to new investment.The Innovation Fund made three investments in the year - two new investments andone in an existing investee company. Investment performance The three funds have performed well during the year with both the Venture Fundand the Innovation Fund seeing an uplift in their value at the end of the yearcompared with the prior year resulting in a write back of provisions of £0.09million (2005: write off £0.41 million). There has been further improvement postthe year end, particularly in one investment, Vividas Group plc. Vividas is anAIM-listed company whose share bid price has risen from 25p at 31 December 2006to 67p at 23 April 2007. As a result, the value of the Venture Fund's investmentin Vividas has increased to £1.62 million at 23 April 2007 from £0.63 million at31 December 2006 with Sigma's share of this increase being £0.20 million. During the year, Sigma sold its direct investment in Adventis Group plc at aprofit of £0.14 million. This leaves just two direct quoted investments with atotal value of £0.08 million at the end of the year. The improvement in thevalue of the funds was offset by a further fall in the value of theseinvestments of £0.09 million (2005: £0.60 million). University IP Sigma signed agreements with two Scottish Universities during the year - a 25year partnership with the Robert Gordon University (the "RGU") in August and a10 year partnership agreement (with the option to extend) with the University ofDundee ("Dundee") in November. Under these agreements, Sigma will work with theRGU and Dundee to help maximise the commercial value of technologies developedby each of the Universities. In return, Sigma will receive equity in new spinout companies from each of these universities and, in the case of the RGU, ashare of income from licencing. It is Sigma's intention to establish a fund tobe managed by Sigma which will invest in University spin-out companies. The RGU has generated over £42 million from commercial sales and consultancyfrom its business activities over a five-year period. It has a strong researchbase in renewable energy technologies. Dundee is one of the UK's leadinguniversities, internationally recognised for its expertise across a range ofdisciplines including science, medicine and engineering. It is extremelyresearch active and has a research income of over £55 million per annum. One of the Venture Fund investments in the year, B1 Medical Ltd, was as a resultof Sigma's close ties with Scottish Universities. Sigma worked closely with thethree founding institutions: NHS Grampian (represented by Scottish HealthInnovations Ltd), the University of Aberdeen and the RGU ("the Institutions") onthe creation of B1 Medical Ltd which will focus on the commercialisation oftechnology in medical devices for orthopaedics emerging from the Institutions. Property The Group's property arm, in which Sigma has a 47.8% interest, completed threetransactions in the year; it established two property limited partnerships andsold the property held in Si Limited Partnership No 3. In the first half of 2006, Si Limited Partnership No 4 was set up to acquire andprovide development funding for a new, pre-let office development in St Pauls'Square, in Liverpool's commercial district. The partnership was capitalised at£46.5 million and generated total fees for the Group of £2.23 million. In the second half of 2006, Si Limited Partnership No 5 was set up to acquirethree Ramada Jarvis regional hotels. This partnership was capitalised at £73million and generated total fees for the Group of £3.96 million. The property team also sold the property held in Si Limited Partnership No 3 -Eagle Star's head office in Cheltenham. The sale generated fees for the Group ofover £0.55 million and delivered a return to investors in this partnership ofover 30% over a 19 month period. This level of property activity has continued in 2007 with the establishment ofSi Limited Partnership No 6. This partnership has purchased the five starRadisson Hotel in Glasgow and is expected to be capitalised at £68 million andto generate fees for the Group of £3.99 million. Restructure of Board and appointment of director In March 2007 the Sigma Board was restructured to reflect the development andgrowth of the business and the responsibilities of the respective members. Underthe new structure Graham Barnet, previously Joint Managing Director, wasappointed Chief Executive Officer and Neil Crabb, previously Joint ManagingDirector, was appointed Chief Investment Officer. At the same time, Mark Hogarth was appointed to the Board as InvestmentDirector. Mark has been with Sigma on the investment team for five years and hasserved as a director of the operating company Sigma Technology ManagementLimited since January 2005. We are currently reviewing the possibility of appointing further non-executivedirectors to the Board and expect to announce an appointment later this year. Outlook 2006 has been a landmark year for Sigma with substantial growth in revenue and amove into considerable profitability. The Company now has three firmlyestablished and growing sectors of asset management: venture capital, UniversityIP and property. The business model across all these three sectors is verysimilar and all three have substantial opportunities for growth. 2007 hasstarted very strongly and the Group is progressing a number of significantopportunities which will further advance the business. We look forward to therest of the year with confidence and to updating the market on further progressat the AGM. Brian Hadfield Chairman 24 April 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 31 December 2006 Audited Audited Notes 2006 2005 £'000 £'000 Turnover 7,979 3,332 Other income 300 290 8,279 3,622 Cost of sales (4,214) (868) Gross profit 4,065 2,754 Operating expenses (net)Operating expenses (net) before write up/(write down) of investments (2,175) (2,202)Write up/(write down) of investments 1 (1,005) (2,174) (3,207) Operating profit/(loss) 1,891 (453) Net interest (payable)/receivable (24) 68 Profit/(loss) on ordinary activities before taxation 1,867 (385) Taxation 4 (590) 114 Profit/(loss) for the financial year after tax 1,277 (271) Minority interests (729) (513) Retained profit/(loss) for the year 548 (784) Basic profit/(loss) per share 5 1.43p (2.09)pDiluted profit/(loss) per share 5 1.41p (2.09)p None of the Group's activities was discontinued during the year and there wereno recognised gains and losses in either year other than those included in theprofit and loss account. CONSOLIDATED BALANCE SHEETAt 31 December 2006 Audited Audited Notes 2006 2005 £'000 £'000Fixed assetsIntangible assets 57 60Tangible assets 63 69Unquoted investments 6 2,293 1,913 2,413 2,042 Current assetsDebtors 1,560 1,017Investments 80 374Cash at bank and in hand 2,388 1,995 4,028 3,386Creditors: amounts falling due within one year Minority interests - non-equity (502) (1,255)Other creditors (1,083) (675) (1,585) (1,930) Net current assets 2,443 1,456 Total assets less current liabilities 4,856 3,498 Creditors: amounts falling due after more thanone yearPreference share capital (750) (750) Net assets 4,106 2,748 Capital and reservesCalled up share capital 384 381Share premium account 14,104 14,043Merger reserve (249) (249)Capital reserve (7) (7)Share-based payment reserve 43 27Profit and loss account (10,851) (11,399) Shareholders' funds 3,424 2,796 Minority interest - equity interests 682 (48) 4,106 2,748 CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2006 Audited Audited 2006 2005 £'000 £'000 Net cash inflow from operating activities 1,212 962 Returns on investments and servicing of finance 51 68 Taxation - corporation tax paid (178) (6) Capital expenditure and financial investment (319) (354) Cash inflow before financing and managementof liquid resources 766 670 Management of liquid resources 345 96 Financing - issue of equity 35 371 Financing - redemption of preference shares (753) - Increase in cash in the year 393 1,137 Reconciliation of net cash flow to movement in net funds 2006 2005 £'000 £'000Increase in cash in the year 393 1,137 Cash (inflow)/outflow from (decrease)/increase in liquid resources (200) 30Changes in net debt resulting from cash flow 193 1,167Reclassification of investments from fixed assets to current assets - 20Current asset investments written down (94) (599)Movement in net funds in the year 99 588Net funds at 1 January 2006 2,369 1,781Net funds at 31 December 2006 2,468 2,369 Reconciliation of operating profit/(loss) to net cash inflow from operatingactivities 2006 2005 £'000 £'000Operating profit/(loss) 1,891 (453)Share-based payments 16 19Depreciation charge 40 52Amortisation charge 3 2(Increase)/decrease in debtors (803) 925Increase/(decrease) in creditors 209 (462)Profit on disposal of current asset investments (143) (126)Write off of investments and loans (1) 1,005Net cash inflow from operating activities 1,212 962 Analysis of cash flows Audited Audited 2006 2005 £'000 £'000Returns on investments and servicing of financeInterest received 97 68Interest paid (46) - 51 68Capital expenditure and financial investmentPurchase of tangible fixed assets (34) (18)Purchase of fixed asset investments (285) (358)Disposal of fixed asset investments - 22 (319) (354) Management of liquid resources 2006 2005 £'000 £'000Purchase of current asset investments - (50)Disposal of current asset investments 345 146 345 96 Analysis of changes in net funds 1 January Cash Non-cash 31 December 2006 movement movement 2006 £'000 £'000 £'000 £'000Cash at bank and in hand 1,995 393 - 2,388Current asset investments 374 (200) (94) 80Total 2,369 193 (94) 2,468 The non-cash movement in 2006 is the write-down of the two current assetinvestments. The non-cash movement in 2005 is the reclassification of an investment fromfixed asset investments to current asset investments (£20,000) and the writedown of investments (£599,000). NOTES 1. This preliminary announcement was approved by the Board of Directors on 23 April 2007. 2. The financial information set out in this announcement does not constitute the Group's statutory financial statements for the years ended 31 December 2006 and 2005. Statutory financial statements for 2005 for Sigma Capital Group plc have been delivered to the Registrar of Companies. The Company's auditors reported on these financial statements and their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. Accounting policies 3. The accounting policies set out in the financial statements for the year ended 31 December 2005 have been adopted in drawing up the financial information set out in this announcement together with the accounting policy on share-based payments. The Group has applied the requirements of FRS 20 Share-based Payment from 1 January 2006. In accordance with the transition provisions, FRS 20 has been applied to all grants made after 7 November 2002 that were unvested as of 1 January 2006. The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares or options that will eventually vest. Fair value is measured using the Black Scholes-Merton pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. Taxation 4. The tax charge/(credit) is arrived at as follows: 2006 2005 £'000 £'000UK corporation tax - current tax on profits of the year 600 184Deferred tax - recognition of losses - (298)Deferred tax - timing differences (10) -Taxation on profit on ordinary activities 590 (114) The charge to taxation arises in the Company's subsidiary, Si Management. Thedeferred tax asset in this subsidiary at 31 December 2006 is due to short termtiming differences. Earnings/(loss) per share 5. The calculation of basic earnings/(loss) per share is based on the profit after taxation of £548,000 (2005: loss £784,000) and on the weighted average number of ordinary shares in issue during the year ended 31 December 2006 of 38,136,458 (2005 37,502,657). Diluted earnings/(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 Group 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. The calculation of diluted earnings/(loss) per share is based on the same earnings/ (loss) figures as above and on the adjusted number of ordinary shares in issue during the year ended 31 December 2006 of 38,600,062 (2005: 37,713,985). Investments 6. In accordance with Sigma's accounting policies, its investment in its managed funds is included in the financial statements at cost less provision for impairment. At 31 December 2006, Sigma's investment in its managed funds is included in the balance sheet at £2,203,000 (2005: £1,828,000) which is £349,000 below cost (2005: £444,000). The investments made by each of the three funds in 2006 are set out below. Total % holding amount (fully invested diluted) £'000 %Sigma Technology Venture FundB1 Medical LtdCommercialisation of technology in the field ofmedical devices for orthopaedics. 800 22.0 Exterity LtdDevelops and supplies a set of products thatdistribute TV and video around business and campusnetworks for corporate, education and hospitalityorganisations. 333 16.4 McLaren Software LtdIts product suite manages key document centricbusiness processes with a focus on high risk areasof cost and compliance within large programmes of work.Follow on investment £82,000 1,806 31.2 Nandi Proteins LtdProvides modified protein technology for use inthe food and drink industry.Initial investment for this fund. The InnovationFund also has a 18.6% holding in this company. 300 19.4 Pentland Systems LtdSupplies application critical sub-systems forradar systems. Follow on investment of £150,000. 895 29.7Total amount invested includes £398,334 £1preference shares. Tenison Technology EDA LtdSoftware tools that enable and facilitate thesystem level design, testing and verification oflarge complex, system on chip integrated circuits.Follow on investment of £152,000 in the form ofloan stock. 1,575 24.7 Sigma Innovation Fund (East of Scotland)AviIT LtdDesigns and implements software solutions for theaviation sector. 250 22.2 Extramed LtdDevelops innovative clinically focused softwareproducts for hospital and patient managementsystems, specialist solutions in expandingclinical areas together with consultancy services. 250 27.7 Logicalware LtdDeveloped an email response management systemcalled MailManager.Follow on investment of £50,000. 300 32.2 Sigma Sustainable Energies FundIRT Surveys LtdSpecialises in infrared thermography andtechnology services for the non-destructivetesting of buildings and flat roofs withparticular emphasis on identifying energy loss. 300 40.0 Ocean Power Delivery LtdDeveloper of the Pelamis wave energy converter concept. 500 1.7 Xi-Power LtdDevelops battery power management systems andmonitoring technologies for use in products andsystems that use rechargeable batteries,super-capacitors and fuel cells. 300 33.2 This information is provided by RNS The company news service from the London Stock Exchange