Preliminary Results - 27 Apr 2007
RNS Number:3795V
Sigma Capital Group PLC
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 group
focused 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 and
a move into considerable profitability. The Company now has three firmly
established and growing sectors of asset management: venture capital, University
IP and property. The business model across all these three sectors is very
similar and all three have substantial opportunities for growth. 2007 has
started very strongly and the Group is progressing a number of significant
opportunities which will further enhance the business. We look forward to the
rest of the year with confidence and to updating the market on further progress
at the AGM."
ENQUIRIES:
Sigma Capital Group plc
Graham Barnet, Chief Executive Officer Tel: 0131 220 9444
Neil Crabb, Chief Investment Officer Tel: 020 7653 3200
Marilyn Cole, Finance Director Tel: 020 7653 3200
Buchanan Communications
Diane 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 the
second 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 main
focus of the venture capital and advisory arm of the Group during the year was
on investing its funds under management and building relationships with Scottish
Universities. Its contracted turnover from fund management fees, directors' fees
and 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 venture
capital and advisory turnover remained at a similar level to the prior year. The
property arm saw turnover increase to £6.79 million (2005: #2.14 million)
generated from the establishment of two new property limited partnerships and
the 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 the
Group's investments in the year resulted in a small net write back of provisions
of £1,000 (2005: write down £1.01 million). This, together with overheads
remaining 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 £29
million with the first close in January 2006 of the Sigma Sustainable Energies
Fund. This is a ten year fund with a mandate to provide funding for companies
developing sustainable energy technologies. The largest participators in this
fund with commitments of £2.40 million each are Scottish and Southern Energy
plc, the FTSE 100 utility company and trade investor, and the European Regional
Development Fund. Sigma committed £0.40 million.
The Sustainable Energies Fund made three investments in the year. The Venture
Fund made six investments in the year - three new investments and three in
existing investee companies. The Venture Fund is now closed to new investment.
The Innovation Fund made three investments in the year - two new investments and
one in an existing investee company.
Investment performance
The three funds have performed well during the year with both the Venture Fund
and the Innovation Fund seeing an uplift in their value at the end of the year
compared with the prior year resulting in a write back of provisions of £0.09
million (2005: write off £0.41 million). There has been further improvement post
the year end, particularly in one investment, Vividas Group plc. Vividas is an
AIM-listed company whose share bid price has risen from 25p at 31 December 2006
to 67p at 23 April 2007. As a result, the value of the Venture Fund's investment
in Vividas has increased to £1.62 million at 23 April 2007 from £0.63 million at
31 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 a
profit of £0.14 million. This leaves just two direct quoted investments with a
total value of £0.08 million at the end of the year. The improvement in the
value of the funds was offset by a further fall in the value of these
investments of £0.09 million (2005: £0.60 million).
University IP
Sigma signed agreements with two Scottish Universities during the year - a 25
year partnership with the Robert Gordon University (the "RGU") in August and a
10 year partnership agreement (with the option to extend) with the University of
Dundee ("Dundee") in November. Under these agreements, Sigma will work with the
RGU and Dundee to help maximise the commercial value of technologies developed
by each of the Universities. In return, Sigma will receive equity in new spin
out companies from each of these universities and, in the case of the RGU, a
share of income from licencing. It is Sigma's intention to establish a fund to
be managed by Sigma which will invest in University spin-out companies.
The RGU has generated over £42 million from commercial sales and consultancy
from its business activities over a five-year period. It has a strong research
base in renewable energy technologies. Dundee is one of the UK's leading
universities, internationally recognised for its expertise across a range of
disciplines including science, medicine and engineering. It is extremely
research 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 result
of Sigma's close ties with Scottish Universities. Sigma worked closely with the
three founding institutions: NHS Grampian (represented by Scottish Health
Innovations Ltd), the University of Aberdeen and the RGU ("the Institutions") on
the creation of B1 Medical Ltd which will focus on the commercialisation of
technology in medical devices for orthopaedics emerging from the Institutions.
Property
The Group's property arm, in which Sigma has a 47.8% interest, completed three
transactions in the year; it established two property limited partnerships and
sold 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 and
provide 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 acquire
three Ramada Jarvis regional hotels. This partnership was capitalised at £73
million 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 of
over £0.55 million and delivered a return to investors in this partnership of
over 30% over a 19 month period.
This level of property activity has continued in 2007 with the establishment of
Si Limited Partnership No 6. This partnership has purchased the five star
Radisson Hotel in Glasgow and is expected to be capitalised at £68 million and
to 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 and
growth of the business and the responsibilities of the respective members. Under
the new structure Graham Barnet, previously Joint Managing Director, was
appointed Chief Executive Officer and Neil Crabb, previously Joint Managing
Director, was appointed Chief Investment Officer.
At the same time, Mark Hogarth was appointed to the Board as Investment
Director. Mark has been with Sigma on the investment team for five years and has
served as a director of the operating company Sigma Technology Management
Limited since January 2005.
We are currently reviewing the possibility of appointing further non-executive
directors 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 a
move into considerable profitability. The Company now has three firmly
established and growing sectors of asset management: venture capital, University
IP and property. The business model across all these three sectors is very
similar and all three have substantial opportunities for growth. 2007 has
started very strongly and the Group is progressing a number of significant
opportunities which will further advance the business. We look forward to the
rest of the year with confidence and to updating the market on further progress
at the AGM.
Brian Hadfield
Chairman
24 April 2007
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For 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)p
Diluted profit/(loss) per share 5 1.41p (2.09)p
None of the Group's activities was discontinued during the year and there were
no recognised gains and losses in either year other than those included in the
profit and loss account.
CONSOLIDATED BALANCE SHEET
At 31 December 2006
Audited Audited
Notes 2006 2005
£'000 £'000
Fixed assets
Intangible assets 57 60
Tangible assets 63 69
Unquoted investments 6 2,293 1,913
2,413 2,042
Current assets
Debtors 1,560 1,017
Investments 80 374
Cash at bank and in hand 2,388 1,995
4,028 3,386
Creditors: 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 than
one year
Preference share capital (750) (750)
Net assets 4,106 2,748
Capital and reserves
Called up share capital 384 381
Share premium account 14,104 14,043
Merger reserve (249) (249)
Capital reserve (7) (7)
Share-based payment reserve 43 27
Profit 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 STATEMENT
For 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 management
of 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 £'000
Increase in cash in the year 393 1,137
Cash (inflow)/outflow from (decrease)/increase in liquid
resources (200) 30
Changes in net debt resulting from cash flow 193 1,167
Reclassification of investments from fixed assets to current
assets - 20
Current asset investments written down (94) (599)
Movement in net funds in the year 99 588
Net funds at 1 January 2006 2,369 1,781
Net funds at 31 December 2006 2,468 2,369
Reconciliation of operating profit/(loss) to net cash inflow from operating
activities
2006 2005
£'000 £'000
Operating profit/(loss) 1,891 (453)
Share-based payments 16 19
Depreciation charge 40 52
Amortisation charge 3 2
(Increase)/decrease in debtors (803) 925
Increase/(decrease) in creditors 209 (462)
Profit on disposal of current asset investments (143) (126)
Write off of investments and loans (1) 1,005
Net cash inflow from operating activities 1,212 962
Analysis of cash flows
Audited Audited
2006 2005
£'000 £'000
Returns on investments and servicing of finance
Interest received 97 68
Interest paid (46) -
51 68
Capital expenditure and financial investment
Purchase 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 £'000
Purchase 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 £'000
Cash at bank and in hand 1,995 393 - 2,388
Current asset investments 374 (200) (94) 80
Total 2,369 193 (94) 2,468
The non-cash movement in 2006 is the write-down of the two current asset
investments.
The non-cash movement in 2005 is the reclassification of an investment from
fixed asset investments to current asset investments (£20,000) and the write
down 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 £'000
UK corporation tax - current tax on profits of the year 600 184
Deferred 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. The
deferred tax asset in this subsidiary at 31 December 2006 is due to short term
timing 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 Fund
B1 Medical Ltd
Commercialisation of technology in the field of
medical devices for orthopaedics. 800 22.0
Exterity Ltd
Develops and supplies a set of products that
distribute TV and video around business and campus
networks for corporate, education and hospitality
organisations. 333 16.4
McLaren Software Ltd
Its product suite manages key document centric
business processes with a focus on high risk areas
of cost and compliance within large programmes of work.
Follow on investment #82,000 1,806 31.2
Nandi Proteins Ltd
Provides modified protein technology for use in
the food and drink industry.
Initial investment for this fund. The Innovation
Fund also has a 18.6% holding in this company. 300 19.4
Pentland Systems Ltd
Supplies application critical sub-systems for
radar systems.
Follow on investment of £150,000. 895 29.7
Total amount invested includes £398,334 £1
preference shares.
Tenison Technology EDA Ltd
Software tools that enable and facilitate the
system level design, testing and verification of
large complex, system on chip integrated circuits.
Follow on investment of £152,000 in the form of
loan stock. 1,575 24.7
Sigma Innovation Fund (East of Scotland)
AviIT Ltd
Designs and implements software solutions for the
aviation sector. 250 22.2
Extramed Ltd
Develops innovative clinically focused software
products for hospital and patient management
systems, specialist solutions in expanding
clinical areas together with consultancy services. 250 27.7
Logicalware Ltd
Developed an email response management system
called MailManager.
Follow on investment of £50,000. 300 32.2
Sigma Sustainable Energies Fund
IRT Surveys Ltd
Specialises in infrared thermography and
technology services for the non-destructive
testing of buildings and flat roofs with
particular emphasis on identifying energy loss. 300 40.0
Ocean Power Delivery Ltd
Developer of the Pelamis wave energy converter concept. 500 1.7
Xi-Power Ltd
Develops battery power management systems and
monitoring technologies for use in products and
systems 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
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