Preliminary Results

RNS Number : 7969M

Braveheart Investment Group plc

21 July 2014

 



21 July 2014

Braveheart Investment Group plc

("Braveheart" or "the Group")

Preliminary Results for the year ended 31 March 2014

Key Points

Operational:

·      First realisation from Finance Yorkshire Equity Fund;

·      Northern Ireland Growth Loan Fund performing in line with expectations;

·      Establishment of the Crowdcube Venture Fund (CCVF) and partnership with Crowdcube Ventures;

·      Divestment of corporate finance subsidiary Envestors Ltd; and

·      Non-executive director Edward Cunningham retired.

Financial:

·      Profit from continuing and discontinued operations was £38,000 in H2 (H1: loss of £845,000); 

·      Impairment to intangibles for Envestors Ltd was £610,000 in H1 and £95,000 in H2;

·      Profit from continuing operations was £38,000 in H2 (H1: loss of £23,000);

·      Investment management income remained stable at £2,044,000 (2013: £2,046,000);

·      Net unrealised gain on revaluation of portfolio investments of £111,000 (2013: gain of £254,000), giving  total portfolio fair value of £3,725,000 (2013: £3,560,000);

·      Earnings per share loss of 3.45 pence (2013: profit of 0.30 pence)

·      Placed a total of 2,283,855 shares raising £250,000;

·      Cash balances of £159,000 (2013: £39,000) with no material borrowings; and

·      Net assets per share of 15.51 pence (2013: 19.43 pence).

Events since the year end:

·      First realisation from the Lachesis fund; and

·      Non-executive director Trevor Brown appointed.

Geoffrey C B Thomson Chief Executive said:

"This year has seen good performance and output from our fund management business, the launch of an exciting new fund (Crowdcube Venture Fund) and the divestment of our loss making corporate finance business (Envestors).  We have made steady progress with our directly held portfolio and market sentiment for realisations is improving with some weighty valuations for early stage technology company acquisitions being seen in the public markets. 

"The financials show a disappointing first half, due in the main to the disposal noted above, but we returned to profitability in the second half.  The business is now less volatile and current year's trading is more consistent with what we saw in the second half of last year."    

Further information:

Braveheart Investment Group plc

Geoffrey Thomson, Chief Executive                                                                       Tel: [phone]

[e-mail]

Sanlam Securities UK Limited (Nominated Adviser and Broker to Braveheart)

Lindsay Mair                                                                                                                      Tel: [phone]

Media Enquiries (Braveheart):

Allerton Communications

Peter Curtain                                                                                                                     Tel: [phone]

[e-mail]

CHAIRMAN'S STATEMENT

I am pleased to provide shareholders with my statement which accompanies our financial results for the year ended 31 March 2014.

I would like to begin by thanking all the staff for their diligence and hard work and also recognise the effort and time expended by the non-executive directors. I also extend a warm welcome to Trevor Brown who joined the board as a non-executive director in April 2014.

Envestors Ltd was sold to a management buy-out team on 13 December 2013 and is presented in the financial statements as a discontinued activity.  Excluding unrealised portfolio movements, the profit before tax for continuing operations was £1,000 (2013: loss of £120,000). The total profit after tax and amounts attributable to non-controlling interests for continuing operations decreased to £15,000 (2013: £186,000).

Discontinued operations net loss for the year was £823,000 (2013: loss of £119,000).

The profit from continuing and discontinued operations was £38,000 in H2 (H1: loss of £845,000), the improvement in H2 being largely due to the disposal of Envestors Ltd.

The Group will continue to focus on growing the funds under management and achieving realisations from the portfolio to enhance earnings per share.

The economic climate has improved and smaller companies are being encouraged by the Chancellor although I think that further action by the Government should be devoted to research and development, which is always the backbone and future for success.

Jeremy Delmar-Morgan, Chairman

CHIEF EXECUTIVE OFFICER'S REPORT

I am pleased to report to shareholders for the 12 months ended 31 March 2014.

Overview

This year has seen good performance and output from our fund management business, the launch of an exciting new fund and the divestment of our loss making corporate finance business.  We have made steady progress with our directly held portfolio and market sentiment for realisations is improving with some weighty valuations for early stage technology company acquisitions being seen in the public markets.  

Growth Loan Fund (GLF)

The GLF is aimed at SMEs in Northern Ireland and typically comprises unsecured term loans of £50k to £1m, usually repayable over three to five years.  In 2012, in association with NEL Fund Managers and Clarendon Fund Managers, we established WhiteRock Capital Partners LLP (WhiteRock) to manage the £50m GLF.  WhiteRock received its FCA accreditation late in 2013 and took over the management of the GLF as from 1 April 2014.  In the interim period, the GLF was run by our subsidiary company, Strathtay Ventures Ltd (see below).

Eighteen months into the investment period, the GLF is now well established in Northern Ireland and we have a good working relationship with local banks, professional advisers and trade organisations.  During the year under review, the investment committee approved 43 loans of which 32 were drawn totalling a little of over £10m.  In total, 46 loans have been made and we have a good mix of industries in the portfolio.  

I am pleased to report that the nine person strong team, led by Paul Miller (CIO), won an industry award at the Insider Northern Ireland Dealmakers Awards on 27 March.  This is the third award the team have won and I congratulate them. 

Viking Fund Managers

Andrew Burton's team in the Yorkshire and Humber region had a good year:  They achieved the first exit for the £43m Finance Yorkshire Equity Fund (FYEF) selling Rotherham-based S3 ID to Singapore-listed CSE Global.  S3 ID was the first investment made by the FYEF and the sale made an aggregate return of £3.4million from an original investment of £1.6million, generating a money multiple of 2.2 on the transaction. 

In the final quarter of the year the team invested a little over £4m in 12 companies and this level of investment is expected to be maintained over the coming months.  The portfolio comprised 38 live investments and includes some good businesses which should do well for the region and provide significant returns for shareholders. 

FYEF invests both debt and equity instruments in development capital situations and unit sizes range from £50k to £2m.

Strathtay Ventures

Strathtay, based in Perth, builds and manages the bespoke unquoted portfolios of high net worth individuals with most investments being in maturing technology businesses.  These investment typically mirror our own directly-held portfolio (see hereafter).  

Strathtay also manages the Lachesis Fund, a £10m seed fund for universities in the East Midlands.  This fund is now in wind-up mode and we are in the process of securing two realisations whilst looking at long term disposal options. 

During the period under review, we established a partnership with Crowdcube Ventures Ltd and established the Crowdcube Venture Fund (CCVF).  Crowdfunding is now a well established fundraising route for SMEs and we are delighted to be working with one of the UK's most established operators.  The CCVF, which is believed to be the first of its kind, enables passive investors to build a portfolio of investments by co-investing in crowd-funded ventures which have been carefully screened by a professional fund manager.  We achieved a first close of the fund in April 2014 and we expect to announce a series of investments over the coming months.  

Portfolio

A key balance sheet asset of the Group is our investment portfolio.  Carolyn Smith, our CIO, is in charge of this portfolio that comprises mainly technology companies which are becoming increasingly mature.  We are encouraged by the level of valuations being achieved in the technology sector at present and we continue to work towards optimal realisations which we expect to provide a good return on capital and significant cash resources. 

Envestors

On 13 December 2013 we announced that the Group had completed the sale of Envestors.  The sale followed the decision by our Board to sell the business due to the financial performance of the subsidiary.  Following aborted offers from trade buyers, we sold the business back to management with the principal element of the consideration being the cancellation of the final Braveheart shares issue due to the three management buy-out participants, as agreed at the time of the Envestors acquisition and detailed in our 2013 Annual Report.

The financial impact of the eight and a half months trading of Envestors is discussed below.

Financial Review

Envestors Ltd was sold to a management buy-out team on 13 December 2013 and is presented in the financial statements as a discontinued activity. 

Excluding unrealised portfolio movements, the profit before tax for continuing operations was £1,000 (2013: loss of £120,000). The total profit after tax and amounts attributable to non-controlling interests for continuing operations decreased to £15,000 (2013: £186,000).

Discontinued operations net loss for the year was £823,000 (2013: loss of £119,000).

The profit from continuing and discontinued operations was £38,000 in H2 (H1: loss of £845,000), the improvement in H2 being largely due to the disposal of Envestors Ltd.

On 25 March 2014 we announced the raising of £250,000 by way of the issue of 2,283,855 ordinary shares at a price of 10.946p per share, being the volume weighted average price over the preceding 60 days (from when the investment was agreed).  The cash was raised for working capital purposes.   

Board and Personnel

Jeremy Delmar-Morgan took on the role of Non-executive Chairman in April last year and Edward Cunningham stood down as one of our non-executive directors at the AGM in September. 

We are pleased to welcome Trevor Brown to the Board as a non-executive director with the appointment being announced in March 2014.      

Strategy

89% of the Group's revenue (excluding portfolio realisations) is now based on contracted fund management services and with this comes good visibility of operational revenue and associated cashflow.  From this base the Board is continuing with the strategy of building the investment and fund management areas of the business and we are looking at a number of opportunities involving both additional SME focused funds and funds of a more specialist nature. 

Alongside the building of our fund management business we are concentrating on realising value in our directly-held portfolio in addition to portfolios where we have an ongoing management role. It should be noted that the former of these has a direct impact on our cash position as these investments sit on our balance sheet whereas the latter typically result in a performance fee which is paid in the fullness of time via our fund management contractual arrangements.          

Outlook

Over the last year the financial climate has markedly improved and SMEs are now finding it easier to attract funding.  This bodes well for our portfolios and with more funding in the SME space we are set to grow our business as the economy continues to improve.   

In closing, I would like to thank our staff for all of their hard work, professionalism and commitment over the year. 

Geoffrey Thomson, Chief Executive Officer

CHIEF FINANCIAL OFFICER'S REPORT

Income statement

Envestors Ltd was sold to a management buy-out team on 13 December 2013 and is presented in the financial statements as a discontinued activity. 

Fee based revenue for continuing operations is generated by Strathtay Ventures Ltd (SVL) and Viking Fund Managers Ltd (VFM).

The revenue for continuing operations principally comprises investment management fees which remained stable during the year at £2.044 million (2013: £2.046 million).

Finance income was £4,000 (2013: £13,000), the reduction being due to reducing overall balances for outstanding loan notes within the investment portfolio.

As at 31 March 2013, the Group's own investment portfolio of 20 companies was valued at £3.560 million. During the year the Group made an investment of £3,000 (2013: £46,000) into one existing portfolio company by conversion of an existing loan note to equity with the balance of £68,000 (2013: £32,000) being invested in the Northern Ireland Growth Loan Fund (GLF). One portfolio company Convivial London Pubs plc made the decision to sell the assets and an interim distribution of £4,000 was received from the liquidator (2013: no realisations). One existing portfolio company, EctoPharma Ltd, created a new spin-out business, Ryboquin Company Ltd and shares were gifted to the Group as existing shareholders of EctoPharma Ltd.  One company repaid loan notes totalling £6,000 (2013: £15,000). At 31 March 2014 the fair value of the investment portfolio of 20 companies was £3.725 million, resulting in an aggregate unrealised revaluation gain of £111,000 (2013: unrealised revaluation gain of £254,000).

The Group's investments are held either by the Company, Strathclyde Innovation Fund LP (SIF), or Caledonia Portfolio Realisations Ltd (CPR). There is an increase in contingent consideration of £97,000 (2013: decrease in contingent consideration of £41,000) payable on future exit values of CPR portfolio companies. 

Total income for continuing operations for the year ended 31 March 2014 including realised gains and unrealised revaluation gains was £2.062 million, a decrease from £2.364 million in 2013.

Employee numbers increased by 1 on average in the year. Employee benefits expense for continuing operations was £1.381 million (2013: £1.432 million). Other operating and finance costs decreased to £0.666 million (2013: £0.746 million). 

Excluding unrealised portfolio movements, the profit before tax for continuing operations was £1,000 (2013: loss of £120,000). The total profit after tax and amounts attributable to non-controlling interests for continuing operations decreased to £15,000 (2013: £186,000), equivalent to a profit per share of 0.08 pence (2013: profit per share of 0.80 pence).

Discontinued operations net loss for the year was £823,000 (2013: loss of £119,000).

The profit from continuing and discontinued operations was £38,000 in H2 (H1: loss of £845,000), the improvement in H2 being largely due to the disposal of Envestors Ltd.

Financial position

Net assets at 31 March 2014 were £4.012 million (2013: £4.520 million), equivalent to 15.51 pence per share (2013: 19.43 pence) the decrease reflecting the new share issue during the financial year.

The Group's net assets include goodwill of £0.752 million (2013: £1.367 million) and intangible assets of £nil (2013: £96,000) the reduction being due to the disposal of Envestors Ltd. The carrying value of goodwill has been reviewed during the year and in light of current projections of future performance the Directors do not believe the assets are impaired.

A new share subscription raised £250,000 from the placing of 2,283,855 shares during the period.

At the year end the Group had cash balances of £159,000 (2013: £39,000). There were no material borrowings.  Cash utilisation for continuing operations decreased to £4,000 (2013: £357,000).

A summary analysis of the Group's performance is:

	2014	2013
	£'000	£'000
Investment management revenue	2,044	2,046
Finance income	4	13
Income before portfolio movements	2,048	2,059
Change in fair value of investments and movement on contingent consideration	14	306
Total income for continuing operations	2,062	2,365
Employee benefits expense (including share based compensation)	(1,381)	(1,432)
Other operating and finance costs	(666)	(746)
Total costs for continuing operations	(2,047)	(2,178)
Profit/(loss) before tax for continuing operations	15	187
Profit/(loss) after tax and amount	15	187
Net results for the year from discontinued operations	(823)	(119)
Total (loss) / profit and total comprehensive (loss)/profit for the year.	(808)	68
Opening cash balance	39	424
Increase in portfolio investments	(71)	(46)
Utilised in other activities	(59)	(339)
New share issue	250	-
Closing cash balance	159	39
Net assets	4,012	4,519
Net assets per share	15.51 pence	19.43 pence

Aileen Brown, Chief Financial Officer

CHIEF INVESTMENT OFFICER'S REPORT

I am pleased to report to shareholders for the year ended 31 March 2014.  My specific responsibility is to manage the Group's directly held portfolio and I report principally on that in addition to the Lachesis Fund where I take a lead role.  Our CEO has reported elsewhere on other portfolios.

Investment Activity

At the end of the year under review the Group's directly held portfolio of interests comprised 20 companies following the sale of the assets of Convivial London Pubs plc in which the Group and some of its clients had a small holding.  Nine of the companies received further funding throughout the year - Traak Systems, Atlas Genetics, Bloxx, mLED, AppShare, EctoPharma, Conjunct, Vascular Flow Technologies and Pyreos.  There were no direct investments save for the conversion of fees to equity in the sum of £3,000.  Syndicated partners and clients invested £12.6m in aggregate in our portfolio during the year, an increase of £3.2m from the previous year.

Where appropriate, we continue to work with our companies preparing for, and delivering a realisation event - good progress is being made on this front.  The timeline to a successful exit is difficult to predict - twelve months ago the M&A market was perceived as largely closed to the size and kind of businesses in our portfolio but we have witnessed some companies being approached as future potential acquisition targets.  There is undoubtedly movement in the market with some interesting valuations for technology businesses being made all indicating an apparent renewed level of confidence.  In tandem we are seeing some of our portfolio companies transition from prototype production to making product commercially available, and various companies are experiencing a burst in growth in sales and profitability, all helping to solidify a platform from which to seek realisations as part of the strategy for growth.  Our portfolio, as can be seen below, is made up of technology-oriented companies most of which are intellectual property asset-rich - this is an important feature in attracting the attention of potential acquirers.   

In addition to the owned portfolio, Strathtay Ventures, continues to manage the Lachesis Seed Fund.  The limited partners in the Fund are the universities of De Montfort, Leicester, Loughborough, Nottingham, and Nottingham Trent.  This fund has been in operation since 2002 and the focus is now on assessing where realisations might be made from the portfolio of 18 spin-out companies. An offer has been accepted to realise the Lachesis stake in one of the companies with completion expected shortly.

Portfolio Performance

During the year the Group's own portfolio showed an unrealised gain before the movement on contingent consideration of £111,083 (2013: unrealised gain of £254,000).  The valuations of the portfolio inevitably go up and down year-on-year but the key measurement of success for the Group is the ultimate return on these investments when they are realised. 

Our focus continues to be on developing our key Group asset in the drive to optimise the value of our portfolio and to bring about realisations to help increase shareholder value.

Portfolio Company	Description of business
Braveheart Company portfolio
AppShare Ltd¹	Web collaboration software design
Atlas Genetics Ltd	Rapid 'point-of-care' molecular diagnostic equipment
Biopta Ltd	Contract research services for drug and tissue measurement
Cascade Technologies Holdings Ltd	Laser-based equipment to detect presence of gases, explosives, etc
Conjunct Ltd	Optical communications components
Design LED Products Ltd	Lighting display technology based on LEDs
Dimensional Imaging Ltd	3D and 4D facial performance systems
EctoPharma Ltd²	Therapeutic healthcare pesticides
mLED Ltd1	Solid-state optical micro-projection systems
NiTech Solutions Ltd	Designs manufacturing solutions for chemical and process industries
Phase Focus Ltd	Lensless microscope technology
Pufferfish Ltd	360° display solutions  principally for promotional activities
Pyreos Ltd	Infrared sensor arrays and components for commercial applications
Vascular Flow Technologies Ltd	Cardiovascular medical devices
Traak Systems Ltd	Intelligent self-learning RFID identification and sensor network solutions
Ryboquin Company Ltd²	Commercialisation of patented technologies in human cancer medicine
CPR portfolio
Bloxx Ltd	Web filtering and internet filtering software
Leading Software Ltd	IT services
Scalar Technologies Ltd	Thin film measurement
Verbalis Ltd	Language translation software
Ryboquin Company Ltd	Commercialisation of patented technologies in human cancer medicine
EctoPharma Ltd²	Therapeutic healthcare pesticides
¹ Also a Strathclyde Innovation Fund portfolio company ² Also a CPR portfolio company

Carolyn Smith, Chief Investment Officer

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2014

			As restated
		2014	2013
		£	£
Revenue		2,044,260	2,046,066
Change in fair value of investments		111,083	254,063
Movement on contingent consideration		(96,877)	51,459
Finance revenue		4,027	12,598
Total income		2,062,493	2,364,186
Employee benefits expense		(1,380,985)	(1,431,655)
Other operating costs		(643,045)	(731,329)
Total operating costs		(2,024,030)	(2,162,984)
Finance costs		(23,035)	(14,795)
Total costs		(2,047,065)	(2,177,779)
Profit before tax		15,428	186,407
Tax		-	-
Profit for the year from continuing operations		15,428	186,407
Discontinued operations
Net results for the year from discontinued operations		(803,149)	(118,837)
Loss on disposal of discontinued operations		(19,801)	-
Net result for the year from discontinued operations		(822,950)	(118,837)
Total (loss)/profit and total comprehensive income for the year		(807,522)	67,570
(Loss)/profit attributable to:
Equity holders of the parent		(805,028)	66,607
Non-controlling interest		(2,494)	963
		(807,522)	67,570
Basic earnings per share		Pence	Pence
- basic and diluted
From continuing operations		0.08	0.83
From discontinued operations		(3.53)	(0.53)
From total operations		(3.45)	0.30

Consolidated Statement of Financial Position

As at 31 March 2014

			2014	2013
			£	£
ASSETS
Non-current assets
Goodwill			751,944	1,367,105
Other intangibles			-	96,278
Property, plant and equipment			-	10,332
Investments at fair value through profit or loss			3,725,132	3,560,417
Investment in limited liability partnership			5,000	5,000
Other receivables			-	154,000
			4,482,076	5,193,132
Current assets
Trade and other receivables			511,392	461,814
Cash and cash equivalents			159,434	39,084
			670,826	500,898
Total assets			5,152,902	5,694,030
LIABILITIES
Current liabilities
Trade and other payables			(699,621)	(636,302)
Contingent consideration			(340,721)	(373,694)
Deferred income			(56,761)	(121,263)
			(1,097,103)	(1,131,259)
Non-current liabilities
Borrowings			(43,392)	(43,392)
			(43,392)	(43,392)
Total liabilities			(1,140,495)	(1,174,651)
Net assets			4,012,407	4,519,379
EQUITY
Called up share capital			517,409	465,233
Share premium reserve			1,457,208	1,252,885
Merger reserve			523,367	494,936
Retained earnings			1,514,153	2,303,561
Equity attributable to owners of the Parent			4,012,137	4,516,615
Non-controlling interest			270	2,764
Total equity			4,012,407	4,519,379

Consolidated Statement of Cash Flows

For the year ended 31 March 2014

				As restated
			2014	2013
			£	£
Operating activities
Profit before tax			15,428	186,407
Adjustments to reconcile profit before tax to net cash flows from operating activities
Depreciation of property, plant and equipment			5,338	4,490
Share-based payments expense			15,620	17,300
Increase in the fair value movements of investments			(111,083)	(254,063)
Acquisition of subsidiaries			-	(294,244)
Loss on disposal of property, plant and equipment			-	6,973
Interest income			(4,027)	(12,598)
Increase in trade and other receivables			(122,076)	(203,929)
Increase in trade and other payables			196,888	192,845
Cash flow from operating activities			(3,912)	(356,819)
Cash generated from discontinued operations			(171,052)	(168,970)
Net cash flow from operating activities			(174,964)	(525,789)
Investing activities
Proceeds from sale of subsidiary			94,919	-
Increase in investments			(70,725)	(45,689)
Repayment			17,093	14,990
Investment in limited liability partnership			-	(5,000)
Interest received			4,027	12,598
Net cash flow from investing activities			45,314	(23,101)
Financing activities
Proceeds from issue of new shares			250,000	164,000
Net cash flow from financing activities			250,000	164,000
Net increase/(decrease) in cash and cash equivalents			120,350	(384,890)
Cash and cash equivalents at the beginning of the year			39,084	423,974
Cash and cash equivalents at the end of the year			159,434	39,084

Consolidated Statement of Changes in Equity

For the year ended 31 March 2014

	Attributable to owners of the Parent
	Share Capital	Shares to be issued	Share Premium	Merger Reserve	Retained Earnings	Total	Non-controlling interest	Total Equity
	£	£	£	£	£	£	£	£
Group
At 1 April 2012	385,620	336,000	819,551	431,821	2,214,934	4,187,926	1,801	4,189,727
Issue of new share capital	79,613	(336,000)	433,334	63,115	-	240,062	-	240,062
Share-based payments	-	-	-	-	22,020	22,020	-	22,020
Transactions with owners	79,613	(336,000)	433,334	63,115	22,020	262,082	-	262,082
Profit and total comprehensive income for the year	-	-	-	-	66,607	66,607	963	67,570
At 1 April 2013	465,233	-	1,252,885	494,936	2,303,561	4,516,615	2,764	4,519,379
Issue of new share capital	52,176	-	204,323	28,431	-	284,930	-	284,930
Share-based payments	-	-	-	-	15,620	15,620	-	15,620
Transactions with owners	52,176	-	204,323	28,431	15,620	300,550	-	300,550
Loss and total comprehensive income for the year	-	-	-	-	(805,028)	(805,028)	(2,494)	(807,522)
At 31 March 2014	517,409	-	1,457,208	523,367	1,514,153	4,012,137	270	4,012,407

NOTES

1.      This preliminary announcement was approved for issue by the Board of Directors on 18 July 2014.

2.      Basis of preparation

The financial information set out in this announcement does not constitute statutory financial statements for the years ended 31 March 2014 or 31 March 2013. Statutory accounts for the years ended 31 March 2014 and 31 March 2013 have been reported on by the Independent Auditors.

The Independent Auditors' Reports on the Annual Report and Financial Statements for 2014 and 2013 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under s.498(2) or s.498(3) of the Companies Act 2006. The directors have reviewed the Group's and the Company's budgets and plans, taking account of reasonably possible changes in trading performance and the level of currently available but undrawn bank facilities, have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to continue to adopt the going concern basis in preparing the financial statements. The accounting policies adopted in this announcement have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 March 2013. The statutory financial statements for the year ended 31 March 2013 have been delivered to the Registrar of Companies. The statutory financial statements for the year ended 31 March 2014 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

3.      Tax

No liability to UK corporation tax arose on ordinary activities for the year ended 31 March 2014 or for the year ended 31 March 2013.

		Continuing operations	Continuing operations
		Group	Group
		2014	2013
Reconciliation of total tax:		£	£
Profit before tax		15,428	186,407
Tax at the statutory rate of 20%  (2013 : 20%)		3,085	37,281
Disallowed expenses		(203,437)	(4,678)
Unrealised gain on the fair value movement of investments		(22,217)	(50,813)
Increase in unutilised tax losses		225,989	17,312
Other adjustments		(3,420)	898
Total tax reported in the statement of comprehensive income		-	-

		Discontinued operations	Discontinued operations
		Group	Group
		2014	2013
Reconciliation of total tax:		£	£
Loss before tax		(822,950)	(118,837)
Tax at the statutory rate of 20% (2013 : 20%)		(164,590)	(23,767)
Disallowed expenses		-	944
Increase in unutilised tax losses		160,102	22,585
Other adjustments		4,488	238
Total tax reported in the statement of comprehensive income		-	-

4.      Earnings per share

Basic profit/(loss) per share has been calculated by dividing the loss attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year.

The calculations of loss per share are based on the following loss and numbers of shares in issue:

	2014	2013
	£	£
Profit for the year from continuing operations	17,922	185,444
Loss for the year from discontinued operations	(822,950)	(118,837)
Weighted average number of ordinary shares in issue:	No.	No.
For basic profit/(loss) per ordinary share	23,347,249	22,463,876
Potentially dilutive ordinary shares	-	-
For diluted profit/(loss) per ordinary share	23,347,249	22,463,876

5.      Goodwill

	VFM	Envestors	Neon	Total
	£	£	£	£
At 1 April 2012	371,944	615,161	365,810	1,352,915
Movement	-	-	14,190	14,190
At 1 April 2013	371,944	615,161	380,000	1,367,105
Movement	-	(615,161)	-	(615,161)
At 31 March 2014	371,944	-	380,000	751,944

The acquisition of Viking Fund Managers (VFM) has been accounted for under IFRS 3. At initial recognition, contingent consideration settled, or to be settled, in shares was fair valued by reference to the Company's share price at the acquisition date.

The acquisition of Envestors has been accounted for under IFRS 3 Revised. At initial recognition, consideration settled, or to be settled, in shares was fair valued by reference to the Company's share price at the acquisition date. Envestors Ltd was sold on 13 December 2013.

The acquisition of Neon has been accounted for under IFRS 3 Revised. During the year ended 2013, the consideration was settled in full. Changes which arose within the measurement period resulted in a revised net asset value for Neon.

At the end of the year, the Group assessed the recoverable amount of the above goodwill associated with each of the VFM and Neon's cash-generating units (both being part of the Group's only operating segment), and determined that goodwill was not impaired. The recoverable amount was assessed by reference to the cash-generating unit's value in use based on internally prepared and approved 3 year cash flow projections and growth based projections for a further 2 years (a reasonable measurement period in the group's line of business) assuming the following growth rates and applying the following discount factors:

Cashflow projections are mainly based on contracted revenues and associated costs, which can therefore be predicted with reasonable certainty and the directors do not consider there to be significant assumptions included within these cash flows. 

Cash-generating unit	Neon		VFM
	2014	2013	2014	2013
Growth rate (average p.a.)	2.5%	-	2.5%	3 - 5%
Discount factor (p.a.)	9-12.5%	9-12.5%	9-12.5%	9-12.5%

These factors are based on past experience and future expectations which the directors consider to be appropriate. Value in use estimates arising from reasonably possible changes to these factors do not indicate impairment.

6.      Intangible Assets

	Brand	Database	Total
Group	£	£	£
Cost
At 1 April 2013 and 31 March 2014	66,869	61,500	128,369

Accumulated amortisation                             

At 1 April 2013	16,716	15,375	32,091
Amortisation and impairment	50,153	46,125	96,278
At 31 March 2014	66,869	61,500	128,369

Net Book Value

At 31 March 2014	-	-	-
At 31 March 2013	50,153	46,125	96,278

Intangible assets acquired on acquisition first arose on the acquisition by Envestors of the business of Envestors LLP, and comprised Envestors' brand and database of high-net-worth investor contacts. The impairment charge relates to the discontinued operations of the Group.

7.      Investments at Fair Value through Profit or Loss

	Level 1	Level 2		Level 3
	Equity investments in quoted companies	Equity investments in unquoted companies	Debt investments in unquoted companies	Equity investments in unquoted companies	Debt investments in unquoted companies	Total
Group	£	£	£	£	£	£
At 1 April 2012	-	-	-	3,224,402	51,253	3,275,655
Additions at Cost	-	-	-	13,831	31,858	45,689
Repayments	-	-	-	-	(14,990)	(14,990)
Change in Fair Value	-	-	-	254,063	-	254,063
At 1 April 2013	-	-	-	3,492,296	68,121	3,560,417
Additions at Cost	-	-	-	2,725	68,000	70,725
Repayments	-	-	-	(4,604)	(12,489)	(17,093)
Change in Fair Value	-	-	-	111,083	-	111,083
At 31 March 2014				3,601,500	123,632	3,725,132

The Group classifies its investments using a fair value hierarchy. Classification within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant investment as follows:

·               Level 1 - valued using quoted prices in active markets for identical assets;

·               Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1; and

·               Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.          

All unquoted investments have been classified as Level 3 within the fair value hierarchy, their respective valuations having been calculated using a number of valuation techniques and assumptions, notwithstanding that the basis of the valuation methodology used most commonly by the Group is 'price of most recent investment'.

8.      Deferred and Contingent Consideration

Short term contingent consideration of £340,721 is the sum due on future exit values of the Caledonia Portfolio Realisation portfolio. All consideration due to Envestors has been settled in the year.

At the year ended 31 March 2013 short term contingent consideration of £373,694 comprised (i) £129,849 being the fair value of the short term contingent consideration due to Envestors which was due to be satisfied by the issue of 1,207,903 ordinary shares of 2 pence each in the Company, however this was superseded by the disposal of Envestors Ltd, and (ii) £243,845 being the sum due on future exit values of the Caledonia Portfolio Realisation portfolio.

9.      Post-reporting date events

Trevor Brown was appointed to the Board as a Non-executive Director on 1 April 2014.

10.   Availability of financial statements

Copies of the full statutory financial statements will be mailed to shareholders no later than 1 September 2014 from which date they will also be available from the Company's offices at Merlin House, Necessity Brae, Perth PH2 0PF and on its website at www. braveheartinvestmentgroup.co.uk

Disclaimer

This Preliminary Announcement contains certain forward-looking statements, which reflect the knowledge of, and information available to, the directors at the date of preparation of this announcement. By their nature, these statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future and there are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements.

 

END

 

 

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