For release: 07.00, 25 June 2008
Braveheart Investment Group plc
('Braveheart' or the 'Group')
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2008 (UNAUDITED)
Braveheart (AIM: BRH), the technology commercialisation and investment management company, announces its preliminary results for the year ended 31 March 2008.
Commenting on the results, Geoffrey Thomson, Chief Executive, said: 'This is the first time I am reporting to shareholders on a full year as a listed company. Last year I said we had not been idle since we listed our shares on AIM in March 2007, and once again, I am delighted to be able to report we have had a successful year and our prospects for growth are good.'
Our portfolio has grown in strength and depth during the year and there is considerable 'un-priced' potential within it - I would like to draw your attention to our Chairman's remarks on this point.
I am delighted to be able to announce our partnership with the University of Aberdeen. We now have formal relationships with three universities (the other two being Edinburgh and Strathclyde) and informal arrangements with a number of others.
We are continuing to invest in our own business. This includes expenditure on high calibre people at our Perth base, and the establishment of a presence in London by March 2009. We are also looking at a number of opportunities to expand our business by way of acquisition.'
Highlights
12 investments totalling £3 million made by the Group and on behalf of clients
Portfolio increased in value by £1.7 million during the year
Revenue increased 22% to £659,000
Profit before tax of £106,000 (2007: loss of £164,000)
Announcement of £25 million University of Edinburgh Fund
Acquisition of W L Ventures Ltd
Listing of The Capital Pub Company plc shares on AIM resulting in initial market capitalisation of £32 million
Post Year End
15 year partnership with the University of Aberdeen announced
New investment made in Im-Sense Ltd, a spin-out from the University of East Anglia
Follow-on investments in Cascade Technologies Ltd and Spiral Gateway Ltd
Portfolio now comprises 33 companies
For further information please visit www.braveheart-ventures.co.uk or contact:
Geoffrey Thomson, Chief Executive |
Clemmie Carr / Simon Hudson |
Braveheart Investment Group |
Tavistock Communications (for Braveheart) |
Tel: 01738 587555 |
Tel: 020 7920 3150 |
gthomson@braveheart-ventures.co.uk |
carr@tavistock.co.uk |
Jeremy Garrett-Cox |
|
Seymour Pierce |
|
Tel: 020 7107 8000 |
|
jgc@seymourpierce.com |
|
Chairman's Statement
I have pleasure in presenting the results of Braveheart Investment Group for the year ended 31 March 2008, the first complete year since the admission of the Company's shares to trading on AIM in March 2007.
Results
I am pleased to report that the profit for the year before taxation was £106,000 compared to a pre-tax loss of £164,000 last year. This equates to earnings per share of 0.74p compared to a loss per share of 1.6p last year.
Income from investment management operations, excluding bank interest, increased by 22.4% to £659,000 while bank interest amounted to £331,000; (2007 - £49,000). Gains and losses arising from fair value adjustments to balance sheet investments at the year end resulted in a net profit of £458,000 that has been recognised in the Group Income Statement.
The Group's investment portfolio contains investments with preferential subscription terms. On exit, these terms usually entitle the Group to receive a multiple of its subscription monies before the remaining proceeds of sale are divided amongst all shareholders on a pro-rata basis. These preferential exit returns typically equate to a premium of 50% of the monies invested. In the year under review £541,000 was invested in eight companies through contracts employing such terms. Potential future value arising from these terms has not yet been recognised in the financial statements because their realisation is not sufficiently certain at this time. The directors believe that these arrangements represent an important source of potential future value that they expect will be realised over time. These arrangements are separate from any returns achieved by virtue of changes in value of the underlying entity.
The Group ended the year with a strong balance sheet, having cash balances in excess of £4.8 million and no debt.
Delivering on our plans
Last year I spoke about our plans for growing our business with the aid of the additional capital raised through our IPO. I am pleased to report that we have made good progress during the year under review in implementing said plans.
In April 2007 we completed the acquisition of W L Ventures Ltd, now renamed Caledonia Portfolio Realisations Ltd, a portfolio of some ten technology investments. Following a review of these underlying businesses, and an assessment of how we could best realise shareholder value, we are confident that this portfolio will show us a good return on our investment.
There are now 33 companies in the Braveheart portfolio. During the year, the Group made six new investments to add to the portfolio and six follow-on investments in existing portfolio companies.
The first closing of the Strathclyde Innovation Fund is expected to complete shortly. A draft prospectus for our fund for the University of Edinburgh is in preparation and we anticipate that that fund will have a first closing around the turn of the calendar year.
We have recently announced that we have entered into a partnership agreement with the University of Aberdeen. This agreement will enable Braveheart and the university to work together to stimulate the commercialisation of intellectual property emanating from the university. In return, Braveheart will have first refusal on commercial investment opportunities which flow from within the university. In the longer term it is anticipated that a dedicated fund will be established to fund these opportunities. The University of Aberdeen has strong commercialisation expertise in the areas of life science, medicine, engineering and geosciences and we are excited about developing this partnership's potential.
Our business model is designed to deliver a surplus from our investment management operations, although there will be periods during which income lags behind expenditure as we invest in our management infrastructure. This has been the case in the year under review and will continue to be the case until income from the management of our dedicated university funds builds up.
Embedded value
One of the most satisfactory developments of the year under review has been the value added to existing holdings within the portfolio. Strong advances were made by a number of companies, warranting further capital, and the opportunity was taken to increase the Group's investment at prices representing good value.
Throughout our Annual Report there will be found descriptions of such companies, demonstrating the breadth of the services that they provide or are seeking to provide, and all linked by their origins in intellectual property developed within academia or industrial research centres.
This is where our strategy starts to reap rewards; having funded start-up companies with a mixture of private and public sector money, our negotiated pre-emption rights enable us to increase the level of private client and balance sheet investment as they hit their pre-determined milestones and demonstrate their capacity to succeed in their respective marketplaces.
This store of value is nurtured by a combination of advice and experience from our entrepreneurial client base, and capital where warranted, to maximise exit results.
Plans for growth
Braveheart needs to grow to realise its full potential. Your Board has always been alert to this need and saw the move to AIM as the first step in that process. Intermittent turmoil in the financial market place over the past two years has hastened this objective as both institutional investors and private client brokers have raised their sights on the level of capitalisation required to attract investment.
In April we announced that we had approached the board of ANGLE plc, a company whose shares are traded on AIM, with a view to making a recommended share offer. ANGLE has a portfolio of investments in technology companies together with a management services division that has contracts in this country and overseas. No assurances can be given that this transaction will proceed, but it is an example of where your Board has identified a business that would extend the Company's range of technology investments and add a new income stream. Other expansion opportunities are continuously under review.
Braveheart has established a well recognised and reputable business in Scotland and has a growing client base in the South. We intend to expand that southern client base and, with it, the group of successful entrepreneurs who are willing to work with the management of companies in which we invest.
The success of our university relationships in Scotland and the features of the dedicated funds that are being established with them have attracted interest from universities in England. We have opened discussions with a number of institutions and, in the fullness of time, we look forward to establishing relationships that are tailored to the research outputs and requirements of individual establishments.
I anticipate that these initiatives will lead to Braveheart having an operational base in or around London, before the end of our current financial year.
Board, management and staff
I am delighted that Jeremy Delmar-Morgan has recently accepted an invitation to join the Board. Jeremy has had a distinguished City career, having been CEO and chairman of Teather & Greenwood and subsequently, from 2006, chairman of brokers, Hichens Harrison & Co. I am very pleased to welcome Jeremy, and I am confident that he will make a valuable contribution to our Board debate.
The Board has now established a Nominations Committee. The Committee will review the composition of the Board, provide for the right balance of experience and skills, and ensure that there is continuity with regard to anticipated retirements.
We are fortunate in having experienced and dedicated members of staff who have worked as a well-knit team to deliver these results. I want to thank all of them for their individual contributions. Our management team, at a senior level, has been strengthened and further appointments can be expected in the near future.
Shareholders will be pleased to hear that at the Ernst & Young Entrepreneur of the Year awards ceremony in June, Geoffrey Thomson, our CEO, was given a special award by an independent judging panel, for the support given to Scotland's emerging technology companies over the last decade.
Braveheart clients
Many of Braveheart's clients are successful entrepreneurs whose contributions to portfolio companies, as chairmen and non-executive directors, are all-important. Their skills and experience add value in the early stages as a company emerges from academia, through the development of a demonstrable product, and into periods of revenue growth when the structure of management teams and the selection of executives can be critical. I am grateful to them for their hard work that can often represent the difference between failure and success. The Board attaches particular importance to supporting these appointments and will continue to provide workshops, mentoring and networking opportunities.
Dividends
It remains the Board's intention that, in future, and subject to the availability of distributable reserves, regular dividends should be paid out of investment management profits and special dividends should be paid where there are meaningful capital profits realised from the disposal of portfolio investments.
Prospects
The current year has started with questionable economic prospects and with the financial markets unsympathetic towards small cap companies. However, these are the conditions in which a well regarded business such as Braveheart can secure good investment value.
With our cash resources, and excellent market relationships, we are well placed to nurture and grow our existing portfolio companies as we steer them towards an exit. Braveheart has always been open to exiting investments both through trade sale and IPO. Despite the current quoted market conditions we have no reason to believe that trade buyers will not be available to purchase portfolio assets at the opportune moment.
These expectations, and the implementation of our growth strategy, should ensure that Braveheart continues to build value for shareholders, as has been the case since our business was founded eleven years ago.
Garry S Watson
Chairman
25 June 2008
Group Income Statement
|
Year ended 31 March 2008 (Unaudited) |
Year ended 31 March 2007
|
|
|
£ |
£ |
|
Revenue |
659,449 |
538,686 |
|
Realised profit on the disposal of investments |
- |
78,152 |
|
Unrealised profit / (loss) on the revaluation of investments |
458,142 |
(82,372) |
|
Deferred consideration |
(309,717) |
- |
|
Finance revenue |
330,856 |
48,713 |
|
Total income |
1,138,730 |
583,179 |
|
|
|
|
|
Employee benefits expense |
(558,532) |
(472,400) |
|
Other operating costs |
(474,187) |
(274,430) |
|
Total costs |
(1,032,719) |
(746,830) |
|
|
|
|
|
Profit/(loss) before taxation |
106,011 |
(163,651) |
|
|
|
|
|
Tax (charge) / credit |
(6,828) |
6,755 |
|
|
|
|
|
Profit/(loss) for the period |
99,183 |
(156,896) |
|
|
|
|
|
Earnings / (loss) per share |
Pence |
Pence |
|
- basic and diluted |
0.74 |
(1.6) |
|
|
|
|
|
|
|
|
Group Balance Sheet
|
As at 31 March 2008 (Unaudited) |
As at 31 March 2007 |
|
£ |
£ |
ASSETS |
|
|
Non-current assets |
|
|
Property, plant and equipment |
26,734 |
26,217 |
Investments at fair value through profit or loss |
2,574,595 |
896,156 |
Deferred tax asset |
- |
5,056 |
|
|
|
Current assets |
|
|
Trade and other receivables |
442,879 |
61,602 |
Current tax asset |
24,577 |
24,577 |
Cash and cash equivalents |
4,808,870 |
6,481,751 |
Total assets |
7,877,655 |
7,495,359 |
|
|
|
LIABILITIES |
|
|
Current liabilities |
|
|
Trade and other payables |
(198,712) |
(242,370) |
Deferred consideration |
(309,717) |
- |
Deferred income |
(22,442) |
(38,770) |
|
(530,871) |
(281,140) |
Non-current liabilities |
|
|
Deferred tax liability |
(1,772) |
- |
Total liabilities |
(532,643) |
(281,140) |
|
|
|
Net assets |
7,345,012 |
7,214,219 |
|
|
|
EQUITY |
|
|
Called up share capital |
268,078 |
268,078 |
Share premium account |
7,008,838 |
7,001,588 |
Retained earnings |
68,096 |
(55,447) |
Total equity |
7,345,012 |
7,214,219 |
|
|
|
Group Cash Flow Statement
|
Year ended 31 March 2008 (Unaudited) |
Year ended 31 March 2007 |
||||
Operating activities |
£ |
£ |
||||
Profit/(loss) before tax |
106,011 |
(163,651) |
||||
Adjustments to reconcile profit before tax to net cash flows from operating activities |
|
|
||||
Depreciation of property, plant and equipment |
8,278 |
7,662 |
||||
Share-based payments expense |
24,360 |
- |
||||
(Increase) / decrease on the revaluation of investments |
(456,492) |
82,372 |
||||
(Profit) / loss on disposal of property, plant and equipment |
(19) |
1,344 |
||||
Interest income |
(330,856) |
(48,713) |
||||
Increase in investments |
(1,171,947) |
(667,097) |
||||
(Increase) / decrease in trade and other receivables |
(381,277) |
103,656 |
||||
Increase in trade and other payables |
178,768 |
156,549 |
||||
Tax paid |
- |
(24,577) |
||||
Net cash flows from operating activities |
(2,023,174) |
(552,455) |
||||
|
|
|
||||
Investing activities |
|
|
||||
Acquisition of subsidiaries (net of cash acquired) |
20,963 |
- |
||||
Purchase cost of property, plant and equipment |
(9,448) |
(6,151) |
||||
Proceeds from disposal of property, plant and equipment |
672 |
- |
||||
Interest received |
330,856 |
48,713 |
||||
Net cash flows used in investing activities |
343,043 |
42,562 |
||||
|
|
|
||||
Financing activities |
|
|
||||
Proceeds from issue of shares |
- |
6,968,350 |
||||
Transaction recoveries / (costs) from issue of shares |
7,250 |
(722,969) |
||||
Repayment of capital element of hire purchase contract |
- |
(198) |
||||
Net cash flows used in financing activities |
7,250 |
6,245,183 |
||||
|
|
|
||||
Net (decrease) / increase in cash and cash equivalent |
(1,672,881) |
5,735,290 |
||||
Cash and cash equivalents as at 1 April |
6,481,751 |
746,461 |
||||
Cash and cash equivalents as at 31 March |
4,808,870 |
6,481,751 |
||||
|
|
|
Statement of Changes in Equity for the year ended 31 March 2007
Group |
Share Capital |
Share Premium |
Retained Earnings |
Total |
|
£ |
£ |
£ |
£ |
Balance at 1 April |
127,692 |
896,593 |
104,098 |
1,128,383 |
Exercise of options |
60,566 |
522,153 |
- |
582,719 |
Issue of new share capital |
79,820 |
6,305,811 |
- |
6,385,631 |
Expenses paid in connection with share issue |
- |
(722,969) |
- |
(722,969) |
(Loss) for the year |
- |
- |
(156,896) |
(156,896) |
Share-based payments - current tax |
- |
- |
7,750 |
7,750 |
Share-based payments - deferred tax |
- |
- |
(10,399) |
(10,399) |
Balance as at 31 March |
268,078 |
7,001,588 |
(55,447) |
7,214,219 |
Statement of Changes in Equity for the year ended 31 March 2008 (Unaudited)
Group |
Share Capital |
Share Premium |
Retained Earnings |
Total |
|
£ |
£ |
£ |
£ |
Balance at 1 April |
268,078 |
7,001,588 |
(55,447) |
7,214,219 |
Expenses recovered in connection with share issue |
- |
7,250 |
- |
7,250 |
Profit for the year |
- |
- |
99,183 |
99,183 |
Share-based payments |
- |
- |
24,360 |
24,360 |
Balance as at 31 March |
268,078 |
7,008,838 |
68,096 |
7,345,012 |
NOTES (Unaudited)
1 Basis of preparation
The Group's and Company's results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as they apply to financial statements for the year ended 31 March 2008 and as applied in accordance with the provisions of the Companies Act 1985.
The Company has taken advantage of the provision of s230 of the Companies Act 1985 not to publish its own Income Statement.
The results are presented in sterling and all values are rounded to the nearest pound (£) except when otherwise indicated.
2 Revenue
Revenue is attributable to the principal activities of the Group. All revenue arose within the United Kingdom and the Channel Islands.
|
Group |
Group |
|
2008 |
2007 |
|
£ |
£ |
Deal fees |
488,504 |
460,448 |
Client subscriptions |
114,970 |
78,238 |
Monitoring fees |
55,975 |
- |
|
659,449 |
538,686 |
3 Profit / (loss) for the year
|
Group |
Group |
Profit/(loss) for the year has been arrived at after charging: |
2008 |
2007 |
|
£ |
£ |
Depreciation of property, plant and equipment |
8,278 |
7,662 |
Lease payments recognised as an operating lease (office rent) |
31,861 |
45,000 |
(Profit) / Loss on the disposal of plant, property and equipment |
(19) |
1,344 |
Auditors remuneration: - audit - parent |
35,000 |
9,300 |
- audit - subsidiaries |
12,750 |
18,950 |
- audit related regulatory reporting |
5,500 |
3,000 |
- taxation compliance |
4,500 |
6,540 |
- corporate finance services |
- |
32,770 |
4 Taxation on profit on ordinary activities
|
2008 |
2007 |
|
£ |
£ |
UK corporation tax |
- |
(17,138) |
Deferred tax |
6,828 |
10,383 |
Tax charge/(credit) in the income statement |
6,828 |
(6,755) |
|
|
|
Tax relating to items charged or credited to equity |
|
|
|
|
|
Deferred tax: share-based payments |
- |
10,399 |
Current tax: share-based payments |
- |
(7,750) |
Tax charge/(credit) in equity |
- |
2,649 |
Reconciliation of total tax charge |
|
|
Profit /(loss) before tax |
106,011 |
(163,651) |
|
|
|
Tax charge / (credit) on profit on ordinary activities at the rate of 20% (2007 - 19%) |
21,202 |
(31,094) |
Disallowed expenses |
113,876 |
12,645 |
Unrealised (profit) / loss on revaluation of investments |
(133,364) |
13,493 |
Increase in unutilised tax losses |
8,218 |
- |
Change in prior year estimate |
- |
(311) |
Other |
(3,104) |
(1,488) |
Total tax reported in the income statement |
6,828 |
(6,755) |
Deferred tax |
|
|
The deferred tax included in the balance sheet is as follows: |
2008 |
2007 |
|
£ |
£ |
Deferred tax liability |
|
|
Accelerated capital allowances |
1,772 |
1,747 |
Revaluation of investments |
- |
- |
Total deferred tax liability |
1,772 |
1,747 |
|
|
|
Deferred tax asset |
|
|
Short term timing differences |
- |
(6,803) |
Share-based payments |
- |
- |
Total deferred tax asset |
- |
(6,803) |
|
|
|
Total deferred tax as reported in the balance sheet |
1,772 |
(5,056) |
5 Earnings/(loss) per share
Basic earnings/(loss) per share have been calculated by dividing the earnings attributable to shareholders by the weighted average number of ordinary shares in issue during the period.
Diluted earnings/(loss) per share is adjusted for share options granted where the exercise price is less than the average price of the ordinary shares during the period.
The calculations of earnings/(loss) per share are based on the following profit/(loss) and numbers of shares in issue:
|
2008 |
2007 |
|
£ |
£ |
Profit/(loss) for the year |
99,183 |
(156,896) |
|
|
|
Weighted average number of ordinary shares in issue: |
|
|
For basic earnings per ordinary share |
13,403,895 |
9,412,875 |
Dilutive effect of exercisable options |
0 |
0 |
|
13,403,895 |
9,412,875 |
The exercise price of the share options is £1.645 and the average price of ordinary shares during the period was £1.362. Diluted earnings per share adjustment is therefore not required.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of the financial statements.
6 Investments at fair value through profit or loss
|
Unlisted £ |
AIM Listed £ |
Total £ |
Group |
|
|
|
Valuation at 1 April 2006 |
306,525 |
4,906 |
311,431 |
Revaluation of assets |
(15,314) |
3,955 |
(11,359) |
Cost at 1 April 2006 |
291,211 |
8,861 |
300,072 |
Additions at cost |
519,722 |
205,433 |
725,155 |
Transfers |
(70,141) |
70,141 |
- |
Disposals - Proceeds |
- |
(136,210) |
(136,210) |
- Gain on disposal |
- |
78,152 |
78,152 |
Cost at 31 March 2007 |
740,792 |
226,377 |
967,169 |
Unrealised loss on the revaluation of assets |
(20,481) |
(50,532) |
(71,013) |
Valuation at 1 April 2007 |
720,311 |
175,845 |
896,156 |
Additions at cost |
1,123,308 |
98,639 |
1,221,947 |
Transfers |
(58,695) |
58,695 |
- |
Disposals - Proceeds |
(1,650) |
- |
(1,650) |
Cost at 31 March 2008 |
1,783,274 |
333,179 |
2,116,453 |
Unrealised gain/(loss) on the revaluation of assets |
644,600 |
(186,458) |
458,142 |
Valuation at 31 March 2008 |
2,427,874 |
146,721 |
2,574,595 |
7 Investment in subsidiaries
Company |
2008 |
2007 |
Cost |
£ |
£ |
At 1 April |
224,190 |
224,190 |
Additions |
50,004 |
- |
At 31 March |
274,194 |
224,190 |
The principal subsidiaries, all of which are 100% owned by Braveheart Investment Group plc are Braveheart Ventures Ltd and Caledonia Portfolio Realisations Ltd. The Company holds 100% of the issued 10p ordinary share capital and 100% of the issued redeemable preference shares of Braveheart Ventures Ltd and 100% of the issued £1 ordinary shares of Caledonia Portfolio Realisations Ltd. Both companies are registered in Scotland.
8 Share Capital
|
2008 |
2007 |
Authorised |
£ |
£ |
33,645,000 ordinary shares of 2p each |
672,900 |
672,900 |
|
|
|
Allotted, called up and fully paid |
|
|
13,403,895 ordinary shares of 2p each |
268,078 |
268,078 |
|
|
|
9 General
These are not the Company's full statutory accounts. The last statutory accounts filed were for the year ended 31 March 2007 with an unqualified audit opinion.
The results have been prepared using accounting policies consistent with the 2007 financial statements.
The contents of this announcement are unaudited pending audit clearance on the statutory accounts.