Half Yearly Report

David Sigsworth, Chairman, commented: 

"While the first half of the year has been challenging, I am encouraged by the Group's robust performance and that the balance sheet remains healthy with substantial cash balances.  Our focus over the six months under review has been on managing the cost base tightly while continuing to explore growth opportunities.

Looking ahead, we remain cautious about trading conditions.  However, the Company is in good shape; the Company's portfolio holdings are held at highly conservative valuations and we have potentially significant initiatives underway in all areas of the business.  The timing of fulfilment of these initiatives is difficult to predict as many factors are not within our control but we remain confident that we can continue to increase the value of our business, underpinned by a stable financial position."

Enquiries

Company website: www.sigmacapital.co.uk

  CHAIRMAN'S STATEMENT

Results

The Group generated a profit before tax of £1.6m (2008: £0.5m) for the six months ended 30 June 2009.  This reflects a gain of £3.6m on the sale of Frontier IP Limited ("Frontier IP") less unrealised losses of £1.9m (2008: unrealised losses of £0.3m) arising from the write-down of the Group's investments, the main component of which was the provision of £1.8m against the investment in SI Limited Partnership No 7.  The profit generated in the first six months of the year has resulted in a significant increase in earnings per share to 4.87p (2008: 0.21p) and the net asset value per share at 30 June 2009 rose by 23% to 20.8p (2008: 16.9p).

Total revenue for the first half of the year was £3.0m (2008: £3.0m) with revenue from services being £1.3m (2008: £3.3m). The fall in revenue from services is principally due to reduced activity in the property subsidiary as no new property limited partnership was established in the period.

Group overheads decreased to £1.3m (2008: £1.6m) and reflect the full impact of the cost reductions put in place during 2008. We continue to monitor costs and cash very carefully but will need to invest in more resource as we move into 2010 if we are to deliver the plans we have for the growth of the business.  Any increase in overheads should, however, be matched by corresponding visibility on value.

Cash balances of £4.5m at 30 June 2009 were higher than at the same date last year (2008: £3.6m) and included £0.7m held within the Group's subsidiary, Frontier IP Group Plc. At 31 December 2008, cash balances stood at £3.8m.  This excludes fees generated from SI Limited Partnership No 7, which were converted into an investment in the Partnership.

On 21 January 2009, the Court approved the proposed reduction of the Company's share premium account which enabled the Company to eliminate the deficit on its profit and loss account. The reduction was registered at Companies House on 2 February 2009. This has accelerated the Company's ability to pay dividends going forward. The Board does not declare a dividend for the six months ended 30 June 2009.

Operational Review

The Group's activities fall into three areas, venture capital fund management, property investment and university IP commercialisation.

Venture Capital Fund Management

Sigma's venture capital portfolio, in which the Group also has a direct investment interest of £1.7m, continues to perform well.  During the six months ended 30 June 2009, the ventures team completed six transactions, managing £6m of total investment in portfolio companies, of which Sigma's funds contributed £0.6m. We take a very proactive approach to our investment management and the combination of the efforts of our team and the strength of our investment partners has enabled us to continue the overall progress of the portfolio despite a very challenging backdrop.  Our fund management activities in the cleantech arena are supported by our strategic relationships with Scottish and Southern Energy plc in the UK and EDP S.A. in Continental Europe. These relationships are especially valuable both to the team and our portfolio companies in the current difficult environment.  We are currently reviewing other initiatives to expand our investment profile in the cleantech arena to capitalise further on the expertise we have both in-house and through our partnerships.

At 30 June 2009, Sigma had undrawn future commitments of a maximum of £1.1m in respect of its venture funds. We see significant value for the Group in its venture fund holdings going forward.

Property Investment

The trading backdrop for the property subsidiary remained extremely difficult. During the first half, the focus was on the completion of the 7th limited partnership and the launch of a new limited partnership. At 30 June 2009, the property subsidiary had accrued fees of approximately £2.1m due from this 7th partnership, of which at least £1.8m will be satisfied by taking an investment in this partnership. This will result in the successful full capitalisation of this partnership and the acquisition of a significant asset for the Group, in addition to the investment of £0.5m in this partnership already held in the balance sheet. In the light of commercial property values at this time, we have taken a cautious view of the current value of the total asset and have made a provision of £1.8m as at 30 June 2009.  Notwithstanding this, the directors believe there will be significant realisable future value in this asset, in excess of the current carrying value. 

As stated in our recent trading update, after considerable work, our 8th limited partnership was aborted.  However, the team is working on other prospective deals and a more stable, albeit still difficult, environment is beginning to emerge.  We are also engaged in discussions with the lenders to our existing property partnerships to re-negotiate the banking terms and are hopeful these will be brought to a successful conclusion prior to the year end. 

On 2 August 2009, Sigma acquired full ownership of the property subsidiary and management is engaged in a number of initiatives to enhance this business.

University IP Commercialisation

In May 2009, Sigma completed the demerger and listing on the PLUS Markets of its wholly-owned university IP commercialisation subsidiary, Frontier IP. The listing on PLUS was effected by way of a sale of the entire issued share capital of Frontier IP to ARH Leisure Investments PLC ("ARH"), a PLUS-quoted investment company, for £3.5m satisfied in ARH shares. ARH was subsequently re-named Frontier IP Group Plc ("Frontier IP Group"). Sigma also participated in a share placing which took its shareholding in Frontier IP Group to 77.4% of the issued share capital.  

Neil Crabb and Alister Minty, of Frontier IP, were appointed Chairman and Managing Director respectively, with Marilyn Cole, Sigma's Finance Director serving as part-time Finance Director. Graham Barnet, Sigma's Chief Executive, and Tim Cockroft were also appointed Non-executive Directors. Sigma will be providing ongoing support to Frontier IP Group, including strategic advice and financial and regulatory services. This reflects Sigma's continuing commitment to Frontier IP Group as well as its significant shareholding in the business. 

Frontier IP Group has made a good start to its life as a PLUS-quoted company, having recently announced the establishment and First Close of two dedicated private equity funds for its university partners, Robert Gordon University and Dundee University, as well as an investment in its first portfolio client.  Frontier IP Group has committed up to £0.8m of funds across the two funds. 

We believe there are a number of interesting consolidation opportunities in the sector and Frontier IP Group is committed to being proactive in this process. Its independent quoted status leaves it well placed to participate where such opportunities arise.

Board Change

The Board announces today that Brian Hadfield, who has served as a Non-executive Director of Sigma since its flotation in 2000, will be resigning from the Board with effect from today.  Brian wishes to devote more time to his other business commitments. On behalf of all the Directors, I would like to extend our thanks to him for his contribution and support over the last nine years. It is our intention to find a suitable Non-executive Director to replace Brian in due course. 

Outlook

Despite a number of commentators and statistics indicating that the worst of the recession is over, operating conditions in the financial markets remain very unpredictable. Over the last 12 months, we have taken steps to mitigate the downturn while continuing to explore opportunities for growth. We have a strong balance sheet and have potentially significant initiatives underway in all areas of the business. The timing of fulfilment of these initiatives is difficult to predict as many factors are not within our control but as we look ahead, we remain confident that we can continue to increase the value of our business, underpinned by a stable financial position.

David Sigsworth

Chairman

28 September 2009

  CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2009

All of the operations of the Group are continuing.

CONSOLIDATED BALANCE SHEET

At 30 June 2009

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2009

  CONSOLIDATED CASH FLOW STATEMENT

For the six months ended 30 June 2009

  NOTES

1. General information

The Company is a limited liability company incorporated in England and with its registered office at NorthWest Wing, Bush House, Aldwych, London WC2B 4EZ. The Company's trading office is situated at 41 Charlotte Square, Edinburgh EH2 4HQ.

The Company is quoted on AIM.

This condensed consolidated interim financial information was approved and authorised for issue by a duly appointed and authorised committee of the Board of Directors on 28 September 2009.

This condensed consolidated interim financial information has not been audited or reviewed by the Company's auditor.

2. Basis of presentation

This condensed consolidated interim financial information for the six months ended 30 June 2009 has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting". The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2008, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

This condensed consolidated interim financial information does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. The comparatives for the full year ended 31 December 2008 are not the Company's full statutory accounts for that year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a statement under sections 237(2) or 237(3) of the Companies Act 1985.

3. Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2008 as described in Group's Annual Report for that year and as available on our website www.sigmacapital.co.uk.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2009.

IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income and expenses in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in the performance statement. The interim financial statements have been prepared under the revised disclosure requirements.

IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. It requires a 'management approach' under which segmental information is presented on the same basis as that used for internal reporting purposes.

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009 but are not currently relevant for the Group.

IAS 23 (amendment), 'Borrowing costs'.

IFRS 2 (amendment), 'Share-based payment'.

IAS 32 (amendment), 'Financial instruments: Presentation'.

IFRIC 13, 'Customer loyalty programmes'.

IFRIC 15, 'Agreements for the construction of real estate'.

IFRIC 16, 'Hedges of a net investment in a foreign operation'.

IAS 39 (amendment), 'Financial instruments: Recognition and measurement'.

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2009 and have not been early adopted:

IFRS 3 (revised), 'Business combinations', effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The Group will apply IFRS 3 (revised) to all business combinations from 1 January 2010.

IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual periods beginning on or after 1 July 2009. This is not currently applicable to the Group, as it has not made any non-cash distributions.

IFRIC 18, 'Transfers of assets from customers', effective for transfers of assets received on or after 1 July 2009. This is not relevant to the Group, as it has not received any assets from customers.

4. Segmental information

The chief operating decision-maker has been identified as the Group board of directors. The board reviews the Group's internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. All of the Group's activities are carried out in the UK.

The board of directors assesses the performance of the operating segments based on turnover and operating profit. With the acquisition of the majority holding in Frontier IP Group Plc in May 2009, the number of operating segments increased from two to three in the financial period ended 30 June 2009.

5. Profit/(loss) on the disposal of equity investments

The profit on the disposal of equity investments in the six months ended 30 June 2009 arises from the disposal of Frontier IP Limited to Frontier IP Group Plc. At the date of sale, Frontier IP Limited had net liabilities of £75,000 for which Sigma received 350 million shares in Frontier IP Group Plc at a price of 1p per share.

6. Unrealised losses on the revaluation of investments

The total fair value adjustments made against investments during the period, both financial assets at fair value through profit and loss and trading investments, is set out below.

7. Taxation

The taxation expense is recognised based on management's best estimate of the weighted average annual tax rate expected for the full financial year. Management expects that there will be a tax credit arising in the year due to the loss arising in the property division (the estimated tax rate for the six months ended 30 June 2008 was 34.8%). In the prior period the tax charge arose from the profit generated in the property division.

No provision has been made for deferred tax arising from the sale of Frontier IP Limited and the resulting acquisition of a majority stake in Frontier IP Group Plc as current tax losses should shelter any tax that might arise in the future if the deferred tax gain were to crystallise.

8. Earnings per share

The calculation of earnings per share is based on the profit attributable to owners of the parent, Sigma Capital Group plc, for the six months ended 30 June 2009 of £2,280,000 (2008: six months £95,000; full year loss £637,000) and on the weighted average number of ordinary shares in issue during the six months ended 30 June 2009 of 46,772,435 (2008: six months 45,326,608; full year 46,053,912). The calculation of diluted earnings per share is based on the same profit figures and on the weighted average diluted number of ordinary shares in issue during the six months ended 30 June 2009 of 46,774,936 (2008: six months 45,383,683; full year 46,059,922).

9. Business combinations

On 13 May 2009, the Group disposed of its 100% holding in Frontier IP Limited to Frontier IP Group Plc ('Frontier') in exchange for 350 million shares in Frontier at a price of 1p per share. At the same time, the Group participated in a placing of shares by Frontier, acquiring 35 million shares for cash at a price of 1p per share. As a result of the share for share exchange and acquisition of shares for cash, the Group acquired 77.4% of the share capital of Frontier.

The acquired business contributed revenues of £8,000 and a net loss of £13,000 to the Group for the period from acquisition to 30 June 2009.

Details of the net assets acquired and goodwill are as follows: 

10. Cash used in operations

11. Copies of the interim financial statements

Copies of the interim financial statements will be sent to shareholders and copies will be available on request from the Company's office at 41 Charlotte Square, Edinburgh EH2 4HQ no later than 30 October 2009 and on the Company's website, www.sigmacapital.co.uk.