26th Apr 2005 07:01
Sigma Technology Group PLC26 April 2005 For Immediate Release 26 April 2005 Sigma Technology Group plc Preliminary Results for the year ended 31 December 2004 Sigma Technology Group plc is an investment management and advisory group thatinvests principally in venture capital in the technology sector. It managesthird party funds and also invests as a principal alongside those third partyinvestors. Highlights • Turnover increased to £2. 23 million (2003: £1.15 million) • Improvement of £0.73 million at net profit level beforewrite down of investments - 2004: profit £0.17 million (2003: loss £0.56million) • Investment write downs of £1 million (2003: £0.14 million) • High level of investment activity: 14 investments in theyear - ten new; four follow on • Successful flotation of three investee companies on AIM -two in 2004 and one to date in 2005 all currently trading at a premium to theirfloat price • Strategic Investment Management Limited acquired £34million property in Cheltenham let to Eagle Star via a limited partnershipvehicle • Strategic relationship announced in March 2005 with IP2IPOtogether with share placing raising £0.4 million Brian Hadfield, Chairman, said: "2004 has been a year of significant progress and we believe that 2005 willfurther crystallise the progress that we have already made. The investmentenvironment remains attractive and we have seen a high level of investmentactivity. Excluding write downs, we have moved into profitability and have seena number of our investments come to the market, all of which are currentlytrading at a premium to their issue price." ENQUIRIES:Sigma Technology Group plcNeil Crabb, Joint Managing Director Tel: 020 7653 3200Graham Barnet, Joint Managing Director Tel: 0131 220 9444 Buchanan CommunicationsDiane Stewart/Isabel Podda/Charlie Howard Tel: 020 7466 5000 Sigma Technology Group plc Preliminary Results for the year ended 31 December 2004 Chairman's Statement The improved performance reported in the first half of 2004 was furtherconsolidated in the second half. The Group was in profit by £167,000 (2003:loss £561,000) at the net profit level before taking into account the write downof investments of £996,000 (2003: £140,000). This increase in the underlyingprofitability is due to Sigma generating more income whilst maintaining a tightcontrol over expenditure plus its subsidiary, Si Management, contributing profitof £110,000 in 2004 compared with a loss of £211,000 in 2003. This is againstthe backdrop of an investment environment that continues to be attractive.Private valuations remain significantly behind those of their publiccounterparts and acquisition and flotation activity has shown strong recoveryduring 2004. The value of the Group's investments is discussed below. Sigma has two funds under management which made 14 investments in the year, tennew investments and four follow on investments, investing £7.3 million in total.At the beginning of December, one of these new investments, MicroEmissiveDisplays plc ("MED"), floated on AIM raising £15.7 million before expenses. MEDdesigns, produces and sells microdisplays that utilise light emitting polymer onsilicon technology. On 31 March 2005, an investment made in 2003, Vividas Groupplc ("Vividas") also floated on AIM raising £5.5 million before expenses.Vividas has developed technologies for producing high quality interactivecontent on video that is readily accessible to the vast majority of computerusers without installation of any software. As previously reported, Adventis Group plc, one of the Group's advisory clientsin which Sigma received a shareholding for work undertaken, floated on AIM inJuly 2004 and its shares continue to trade at a significant premium to theflotation price. The Group's involvement with another of its clients, Reversusplc, has resulted in that company acquiring a health care service provider inApril 2005. Sigma took part of its advisory fees in shares and following thetransaction Sigma holds 2.5% of the enlarged company, to be renamed CompanyHealth Group plc. Sigma continues to acquire direct equity holdings foradvisory services such as its option over 350,000 shares in Vividas. Thisoption has an exercise price of 23p per share against a current market price of87.5p resulting in an unrealised profit of £226,000. In March 2005, the Board was pleased to announce that, to assist Sigma in thedevelopment of strategic relationships with Scottish Universities, it hadentered into an agreement with IP2IPO Ltd ("IP2IPO") whereby IP2IPO agreed tosupport Sigma on an exclusive basis in the development of those relationships.Sigma already has a strong franchise in Scotland and this relationship providesan excellent opportunity to leverage that further. As part of the agreement, 5% of the Company's shares were placed with IP2IPO at20p per share ("the Placing"), raising £360,000. In addition to the Placing,Sigma has granted IP2IPO an option to subscribe for an additional 5,414,030 newordinary shares at a price of 40p per share subject to approval by Sigmashareholders at the AGM and by the Financial Services Authority. If exercised,this will raise a further £2,166,000 for Sigma. The option can be exerciseduntil 30th June 2006. In addition to managing funds in the technology sector, the Group manages fundsin another specialist sector, commercial property, through Si Management. Sigmaobtained control of Si Management's board on 1 October 2004, and from that dateit has been accounted for as a subsidiary rather than as an associate company.This change in accounting treatment impacts on the Group's reported turnover andoperating loss but does not affect the net loss for the year. The effect ofaccounting for Si Management as a subsidiary for the last three months of 2004has been to increase turnover by £845,000 to £2,230,000 (2003: £1,150,000) andto reduce the operating loss by £147,000 to £846,000 (2003: £607,000). Sincethe year end, Sigma has agreed to purchase certain minority interests that willtake its holding in Si Management to 45%. Towards the end of the year, Si Management commenced raising funds for its thirdlimited partnership vehicle in order to acquire an office property for £36.2million (inclusive of costs) let to Eagle Star Insurance Company Ltd. Theacquisition was funded by bank debt together with £8.6 million of third partyequity raised by Si Management. This transaction is expected to make asignificant contribution in the first half of 2005. Si Management has alsorecently completed the successful disposal of an office building inBuckinghamshire. This was acquired for £16.2 million in October 2002 via SiManagement's first limited partnership and has yielded a return to investors of9% per annum, after costs. The positive progress made by investee companies does not have an immediateimpact on Sigma's results because profit is only recognised on realisation ofthe investment whereas underperformance is recognised immediately. As a result,Sigma has written off almost £1 million of its investments in the year. Thisrelated principally to three investments: Micap plc, SecuriVox Ltd and EvolveHoldings Ltd ("Evolve"). Micap plcis quoted on AIM and its share price fellfrom 52.5p per ordinary share and 6p per convertible share at the beginning ofthe year to 29.5p per ordinary share and 5.25p per convertible share at the endof the year resulting in a write down of £430,000 to a cost of £731,000. InNovember 2004, SecuriVox Ltd was placed into Liquidation and the cost ofinvestment and loan of £331,000 was written off. Evolve continues to trade buthas not performed to expectations and the cost of this investment of £160,000has been written off in full. At the end of the year, the Group's directinvestment in unquoted companies was £125,000 and its investment in its managedfunds was £1,878,000. The Board is encouraged by the overall performance ofSigma's portfolio. At 31 December 2004, the Group had cash balances of £858,000 (2003: £1,780,000).The Directors expect the Group to be cash flow positive in the first half ofthe year. In December, Simon Miller advised of his intention to resign at the end of theyear. Subsequently, at the beginning of April, Hamish Grossart decided todevote more of his time to his other business interests and will not be offeringhimself for re-election at the forthcoming Annual General Meeting. Both haveserved as directors of Sigma since its flotation in 2000 and the Board wishes toextend it thanks to them for their contribution over the last five years. Wehope to make an announcement regarding the appointment of a new non-executivedirector in due course. Whilst the need to write down certain investments during 2004 was disappointingand lead to the Group reporting a loss, the underlying business improvedsignificantly. We have had a number of recent successful flotations, maintaineda high rate of investment and have enjoyed the benefit for the first time of apositive contribution from Si Management as a subsidiary. Our conservativeapproach, in particular to the valuation of our investments, and the currentstate of the market provide Sigma with a good platform for a stronger overallperformance in 2005. Brian HadfieldChairman 26 April 2005 Sigma Technology Group plc Preliminary Results for the year ended 31 December 2004 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2004 Audited Audited Associate Total reclassified as subsidiary Notes 2004 2004 2004 2003 £'000 £'000 £'000 £'000 Turnover 1, 385 845 2, 230 1,150 Other income 177 - 177 26 1,562 845 2,407 1,176 Cost of sales - (589) (589) - Gross profit 1,562 256 1,818 1,176 Operating expenses (net)Operating expenses (net) before write down ofinvestments and loans and before transfer toinvestments (1,559) (109) (1,668) (1,643) Write down of investments and loans (996) - (996) (140) (2,555) (109) (2,664) (1,783) Operating loss (993) 147 (846) (607) Share of Associates' operating profit/(loss) 47 - 47 (215) Loss on ordinary activities before interest (946) 147 (799) (822) Net interest receivable - Group 58 117Net interest receivable - Associates 4 4 Loss on ordinary activities before taxation (737) (701) Taxation 4 - - Loss for the financial year after tax (737) (701) Minority interests (92) - Retained loss for the year (829) (701) Basic loss per share 5 (2.30)p (1.94)pDiluted loss per share 5 (2.30)p (1.94)p None of the Group's activities were discontinued during the year and there areno recognised gains and losses in either year other than those included in theprofit and loss account. Sigma Technology Group plc Preliminary Results for the year ended 31 December 2004 CONSOLIDATED BALANCE SHEET At 31 December 2004 Audited Audited Notes 2004 2003 £'000 £'000Fixed assetsTangible assets 103 156Unquoted investments 2,003 1,735 2,106 1,891 Current assetsDebtors 1,644 411Investments 6 923 1,198Loans due after more than one year - 50Cash at bank and in hand 858 1,780 3,425 3,439Creditors: amounts falling due within one year (959) (329) Net current assets 2,466 3,110 Total assets less current liabilities 4,572 5,001 Share of Associate's net liabilities - (251) Net assets 4,572 4,750 Capital and reservesCalled-up share capital 1,111 1,111Share premium account 13,673 13,673Merger reserve (249) (249)Capital reserve (7) (7)Profit and loss account (10,607) (9,778) Shareholders' funds 3,921 4,750 Minority interest - equity interests (604) -Minority interest - non-equity interests 1,255 - 4,572 4,750Shareholders' funds may be analysed as:Equity interests 3,171 4,000Non-equity interests 750 750 3,921 4,750 Sigma Technology Group plc Preliminary Results for the year ended 31 December 2004 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2004 Audited Audited 2004 2003 £'000 £'000 Net cash outflow from operating activities (638) (636) Returns on investments and servicing of finance 58 117 Capital expenditure and financial investment (785) (1,122) Acquisitions and disposals - cash acquired with reclassification ofassociate to subsidiary 433 - Cash outflow before financing and management of liquid resources (932) (1,641) Management of liquid resources 10 805 Decrease in cash in the year (922) (836) Reconciliation of net cash flow to movement in net funds 2004 2003 £'000 £'000 Decrease in cash in the year (922) (836) Cash inflow from decrease in liquid resources (10) (798)Changes in net debt resulting from cash flow (932) (1,634)Reclassification of investments from fixed assets to current assets - 1,161Transfer to investments 172 - (487) (38)Movement in net funds in the year (1,247) (511) Net funds at 1 January 2004 3,028 3,539 Net funds at 31 December 2004 1,781 3,028 Reconciliation of operating loss to net cash outflow from operating activities 2004 2003 £'000 £'000 Operating loss (846) (607)Depreciation charge 73 98(Increase)/decrease in debtors (1,157) 256Increase/(decrease) in creditors 468 (509)Profit on disposal of fixed asset investments - (7)Profit on disposal of current asset investments - (7)Transfer to investments (172) -Write off of investments and loans 996 140Net cash outflow from operating activities (638) (636) Sigma Technology Group plc Preliminary Results for the year ended 31 December 2004 Analysis of cash flows Audited Audited 2004 2003 £'000 £'000Returns on investments and servicing of finance Interest received 58 117Interest paid - - 58 117Capital expenditure and financial investmentPurchase of tangible fixed assets (9) (10)Disposal of tangible fixed assets 1 -Purchase of fixed asset investments (814) (1,125)Disposal of fixed asset investments 37 13 (785) (1,122) Management of liquid resources 2004 2003 £'000 £'000Purchase of current asset investments (3) (75)Disposal of current asset investments 13 115Repayment of loans by client companies - 765 10 805 Analysis of changes in net funds 1 January Cash movement Non-cash 31 December movement 2004 2004 £'000 £'000 £'000 £'000Cash at bank and in hand 1,780 (922) - 858Loans due after one year 50 - (50) -Current asset investments 1,198 (10) (265) 923Total 3,028 (932) (315) 1,781 The non-cash movements in 2004 are as follows: a) Loans due after one year - write off of loan; b) Current asset investments - write down of investments (£437,000)less amount transferred to investment in Adventis (£172,000). In 2003 the non-cash movements in net funds was in respect of a loan where therepayment date had been extended from 31 December 2003 to 31 December 2005 andto the reclassification of a fixed asset investment to current asset investmentsless a provision against the cost of quoted investments. Sigma Technology Group plc Preliminary Results for the year ended 31 December 2004 NOTES 1. This preliminary announcement was approved by the Board of Directors on26 April 2005. 2. The financial information set out in this announcement does notconstitute the Group's statutory financial statements for the years ended 31December 2004 and 2003. Statutory financial statements for 2003 for SigmaTechnology Group plc have been delivered to the Registrar of Companies. TheCompany's auditors reported on these financial statements and their report wasunqualified and did not contain a statement under section 237 (2) or (3) of theCompanies Act 1985. Accounting policies 3. The accounting policies set out in the financial statements for theyear ended 31 December 2003 have been adopted in drawing up the financialinformation set out in this announcement together with the accounting policy forwork in progress set out in note 7. The Group financial statements consolidate the financial statements of Sigma andits subsidiary undertakings drawn up to 31 December 2004. Up to 30 September2004, Sigma accounted for its 38.3% holding in Si Management Limited ("SiManagement") as an Associate. On 30 September 2004, one of the executivedirectors of Si Management resigned. This resulted in Sigma controlling theBoard of Si Management. Consequently, from 1 October 2004 Sigma has accountedfor its 38.3% holding in Si Management as a subsidiary. Taxation 4. There is no charge to taxation for the year ended 31 December 2004(2003: Nil) due to the Group utilising brought forward losses to reduce thetaxable profits to nil. Loss per share 5. The calculations of loss per share are based on a loss after taxation of£829,000 (2003: loss £701,000) and on the number of ordinary shares outstandingduring the year ended 31 December 2004 of 36,093,540 (2003: 36,093,540). Diluted loss per share is calculated by adjusting the weighted average number ofordinary shares in issue on the assumption of conversion of all dilutivepotential ordinary shares. The Group has only one category of dilutive ordinaryshares, those share options granted where the exercise price is less than theaverage price of the Company's shares during the year. The calculation ofdiluted loss per share is based on the same loss figures as above and on thenumber of dilutive ordinary shares outstanding during the year ended 31 December2004 of 36,300,022 (2003: 36,169,044). However, as the dilutive effect is notto increase the net loss per share, diluted loss per share is the same as thebasic loss per share. Investments 6. In accordance with Sigma's accounting policies, its investment in itsmanaged funds is included in the financial statements at cost less provision forimpairment. However, within the actual funds, the investments are valued inaccordance with BVCA Guidelines, which for quoted investments is bid price plusa marketability discount where appropriate and for unquoted investments isestimated current value which can be greater than or less than cost. At 31December 2004, Sigma's investment in its managed funds is included in thebalance sheet at £1,878,000. Applying Sigma's respective percentage holdings tothe value of the funds as determined in accordance with BVCA Guidelines, thevalue of Sigma's investment remains at £1,878,000. If the funds' quotedinvestments were valued at mid market price with no marketability discount, thenthe value of Sigma's investment would increase by £50,000 to £1,928,000. Work in progress 7. Work in progress is included at the lower of cost and net realisable value.Cost is based on the hours spent on an assignment together with the respectiveproportion of direct overheads. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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