Sigma Capital Group plc
Annual Report & Financial Statements
for the year ended 31 December 2012
City Wharf, Aberdeen
Edinburgh, head office
Winchburgh Development
Higher Broughton Regeneration
Manchester office
Liverpool Regeneration
Birmingham office
North Solihull Regeneration
Finance, Property and
Urban Regeneration Specialists
Contents
Key Points
Chairman’s Statement
Business Review
Directors
Advisers
Directors’ Report
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report
Consolidated Comprehensive Income Statement
Consolidated Balance Sheet
Company Balance Sheet
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated and Company Cash Flow Statements
Accounting Policies
Notes to the Financial Statements
Five Year Record
Proxy Form
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Company number 3942129
Sigma Capital Group plc
Annual Report & Financial Statements 2012
1
KEY POINTS
> Good progress in developing revenues from new
property services – significant growth opportunity
> Increased activity across local authority regeneration
partnerships – esp. in Liverpool and Salford
> JV established with property developer – with second
JV established in 2013 - will accelerate the delivery of
regeneration programmes
> Winchburgh Development (350 hectare site), near
Edinburgh, planning permission in principle granted
and construction programme started
> Board and management teams strengthened
> Revenue from ongoing services up 40% to £2.33m
(2011: £1.67m*)
- Property Division revenue more than doubled to
£1.48m (2011: £0.61m)
- Venture Capital Division revenue reduced 20% to
£0.85m (2011: £1.06m*)
> Trading loss of £0.25m (2011: trading profit of £0.06m)
> Operating loss of £1.08m (2011: loss of £0.12m)
> Loss before tax reduced to £1.17m (2011: £1.42m)
> Loss per share reduced to 2.57p (2011: 3.17p)
> Cash balances at year end of £1.0m (2011: £1.3m)
> Board confident of further progress – and work to
develop funding model has the potential to accelerate
growth significantly
*excluding a £0.8m one-off compensation receipt
2
Sigma Capital Group plc
Annual Report & Financial Statements 2012
“ The Group has been wholly refocused on building its Property
Division and this is now the Group’s key growth driver. Our
three local authority partnerships have been established to
assist with large-scale residential and commercial urban
developments to revive local economies and we estimate
the gross development value across all three partnerships
is c. £2bn over the next 10 to 15 years. The Winchburgh
Development is one of the UK’s single largest residential
and mixed use developments, with a gross development
value of c. £1 billion. In total across our contracted
relationships, we control the delivery of in excess of
10,000 units of new housing stock revenues.
Our business model drives two sources of revenue for the
Group, fees from the provision of property services as we
deliver large development projects to our private and public-
sector clients but also an equity share in the value we create
for our partners.
We see strong growth opportunities and our work on
developing a funding model has the potential to significantly
accelerate the Group’s rate of growth.”
David Sigsworth
Chairman
Sigma Capital Group plc
Annual Report & Financial Statements 2012
3
Chairman’s Statement
Overview
During the year, we made very encouraging
progress in developing the Group’s core
property activities, and revenues in the
Property Division in the second half were
57% ahead of the first half and up by
143% year-on-year. As we have previously
reported, while these revenues are still
maturing, our three local authority
partnerships and close involvement
with the major residential development
at Winchburgh in Scotland provide a
substantial opportunity for very significant
revenue and earnings growth, especially
as we develop our funding model. We have
made important steps forward over the year
in developing these opportunities with the
benefits to be more evident in 2013 and
beyond. Operationally, we have also
strengthened our teams with some key
appointments at both Board and
management level. Financial results for
the year to 31 December 2012 are in line
with management expectations. As well as
reflecting the development of our Property
Division, they reflect our historic venture
capital fund management activity.
As previously reported, the acquisition of
Inpartnership Ltd (now named Sigma
Inpartnership) in August 2011, which added
three major local authority partnerships,
in Liverpool, Salford and North Solihull, was
the catalyst for the Group’s transformation
and we have substantially reshaped Sigma
over the last 18 months. Our property
activities now make up the Group’s key
growth driver, with our activities focused
on property finance, residential and
commercial development, and urban
regeneration. We see strong growth
opportunities and our work on developing
a funding model has the potential to
significantly accelerate the Group’s rate
of growth.
Over 2012, we moved forward across
all property-related activities and I am
especially pleased to highlight the
increased activity within our local authority
partnerships, where we are helping to
deliver the regeneration goals of our local
council partners. In particular, in Salford, we
agreed terms for the delivery of further new
homes in Higher Broughton and obtained
detailed planning consent for a major new
healthcare and retail scheme, triggering the
completion of an associated development
contract. We also established a joint venture
with commercial property developer,
Neptune Developments in May 2012 to help
accelerate the regeneration of commercial
sites in Liverpool. Another milestone in the
year was the grant of planning permission in
principle for the Winchburgh Development,
near Edinburgh. This marks the start of a 15
to 20 year construction programme as the
350 hectare site is developed and we have
signed an initial five-year contract to provide
development management services.
We continued to work on the disposal of our
residual venture capital interests, agreeing
the sale of portfolio company, Extramed Ltd
in the period and i-design group plc
following the end of the period. We expect
further realisations by the end of 2013,
which should generate good cash flows
and which will be reinvested in the Property
Division. The total £0.8m provision against
the carrying values of Sigma’s holdings in
the equity funds we manage has impacted
our results for the year but the carrying
value now stands below Sigma’s share
of the net asset value of the equity funds.
The new financial year to 31 December
2013 has started well. A major focus
remains the development of our funding
model for the roll out of a large-scale,
rented, residential portfolio of properties
and we are devoting significant time and
resource to this initiative. This exciting
opportunity flows from our existing
partnership arrangements, which gives us
the control over the delivery of significant
housing stock. The total housing stock is in
excess of 10,000 units with the housing at
various stages in the delivery process. We
have now commenced a process which we
aim to bring to fruition by the time of the
publication of our half year results in
September.
In addition, we are seeing continuing
momentum across our property activities,
including a flagship regeneration project in
Liverpool City centre in the area around
Lime Street and the creation of a second
joint venture, with Countryside Properties
(UK) Ltd, to assist with the delivery of
residential regeneration projects in
Liverpool. We are also well advanced
with the delivery of a new retail and office
scheme in North Solihull, having secured
a buyer (in a forward sale of the completed
development) as well as planning
permission, and construction finance.
The third phase of a major new housing
scheme in Norris Green also started in the
first quarter of 2013.
On behalf of all shareholders I would like
to thank all our staff for the significant effort
they have expended in the last year.
Results
Revenue from services for the year to 31
December 2012 increased by 40% to
£2.33m (2011: £1.67m excluding a one-off
compensation payment of £0.8m). This
reflects a full year’s contribution from Sigma
Inpartnership, which helped revenue from the
Property Division to more than double to
£1.48m (2011: £0.61m). Revenues from our
historic Venture Capital Division decreased
by 20% to £0.85m (2011: £1.06m excluding
4
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Chairman’s Statement
continued
the £0.8m one-off compensation payment).
Total revenue reduced by £0.9m to £1.49m
(2011: £2.41m) due primarily to unrealised
losses on the revaluation of investments.
This is also the main factor in the increased
operating loss before tax of £1.08m (2011:
£0.12m). The trading loss from the Property
Division reduced significantly to £0.04m
(2011: trading loss of £0.66m) and the
Venture Capital Division posted a small
trading profit of £0.06m (2011: £1.06m).
The loss before tax for the year reduced to
£1.17m (2011: loss of £1.42m) due to smaller
losses relating to the associate holding in
Frontier IP Group Plc (“Frontier IP”).
Excluding a write-back in 2012 of costs
relating to the North Solihull development,
administrative costs increased by 14% to
£2.7m reflecting a full year of Sigma
Inpartnership.
Net assets per share at the year-end stood
at 5.7p (2011: 8.2p) and cash balances at
the year end were £1.0m (2011: £1.3m).
Owing to the lead time for producing cash
from the various developments we have
completed in the last twelve months we
expect the cash position to fall in the first
half of the new financial year and then start
to recover in the second half as our cash
flows come on stream. However, this
excludes any cash flow impact from
our major work on our residential
funding model.
The Directors do not recommend the
payment of a dividend for the year.
Board Changes
In 2012 and during the first quarter of the
current financial year, we made a number
of Board appointments which have
significantly strengthened the senior team.
In the first half of 2012, we appointed
Graeme Hogg to the Board as Partnership
Director. Graeme, who was a founding
director of Sigma Inpartnership Ltd, is
responsible for managing two of the
Group’s three local authority partnerships,
in Liverpool and Salford, having originally
helped to establish and structure all
three partnerships. He has over 20
years’ experience in the property sector,
encompassing project management,
development and corporate finance roles.
Subsequently, in 2013, we appointed him
to the newly created role of Chief
Operating Officer.
We also appointed two new Executive
Directors in 2013, Duncan Sutherland
and William (“Bill”) MacLeod. Duncan
Sutherland, co-founder of Sigma
Inpartnership Ltd, has been appointed
Regeneration Director. He has substantial
experience in major regeneration and
infrastructure projects in the private and
public sectors. He was appointed recently
as a Non-executive Director of High Speed
Two (HS2) Ltd which is delivering the new
high speed railway network between
London and the North of England. Bill
MacLeod has over 25 years’ experience of
property investment, providing specialist
property fund management advice and
launching and managing property funds.
He is assisting in the development of our
funding model.
Outlook
The Group has been wholly refocused on
building its Property Division and there is
considerable scope to grow revenues.
Our three local authority partnerships
have been established to assist with large-
scale residential and commercial urban
developments to revive local economies
and we estimate the gross development
value across all three partnerships is
c. £2bn over the next 10 to 15 years. The
Winchburgh Development is one of the UK’s
single largest residential and mixed use
developments, with a gross development
value of c. £1 billion. In total across our
contracted relationships, we control the
delivery of in excess of 10,000 units of new
housing stock. Over the year, we have done
much to drive projects within our local
authority partnerships forward as well as
agreeing the next phase of Sigma’s
involvement with the Winchburgh
Development. This has resulted in greater
visibility on revenue and profit into 2013
and beyond.
Our business model drives two sources
of revenue for the Group, fees from the
provision of property services as we deliver
large development projects to our private
and public sector clients but also an
equity share in the value we create for our
partners. The two joint ventures we have
established in 2012 and 2013 for residential
and commercial property development are
important in quickening the pace of our
delivery of projects and will also help to
increase the breadth and scale of the
projects we deliver. Even more significantly,
our current work to develop our funding
model has the potential to benefit
significantly the Group’s rate of growth
over the foreseeable future.
Sigma has now positioned itself as a
major player in the delivery of residential
development and urban regeneration and
the Board view growth prospects for the
business with confidence.
David Sigsworth
Chairman
24 April 2013
Sigma Capital Group plc
Annual Report & Financial Statements 2012
5
Business Review
property. Frontier IP has a separate
quotation on AIM and following a placing
of its shares in December 2012, Sigma’s
holding decreased to 26.9% from 46.9%.
The activity in Sigma’s Property Division
and Venture Capital Division and the
Group’s strategy for the coming year is
detailed below.
Overview of the business
Sigma, together with its subsidiaries, is
focused on property finance, property
development, urban regeneration and
property asset management.
The Group’s property regeneration activities
are largely undertaken by its subsidiary,
Sigma Inpartnership Ltd (“Sigma
Inpartnership”), which undertakes large
scale property-related regeneration projects,
working as a bridge between public and
private sector organisations. Founded in
2001 and operating from offices in
Manchester and Birmingham, Sigma
Inpartnership has three long-term
partnerships, with Liverpool City Council,
Salford City Council and Solihull
Metropolitan Borough Council, each
ranging from 10 to 20 years’ duration.
The partnerships hold long term option
arrangements with each local authority
partner for the delivery of a mix of
residential, commercial, education
and health schemes.
Most of the Group’s property management
activities outside its local authority
relationships are undertaken by Sigma
Capital Property Ltd (“SCP”). In particular,
SCP has the contract to manage the
development at Winchburgh, near
Edinburgh. The Group also acts as property
manager for its remaining historic property
limited partnership, SI Property Limited
Partnership No 7. This partnership holds
the investment in the City Wharf
development in Aberdeen. The Group
has a 19.3% holding in SI Property Limited
Partnership No 7, although this investment
was written down to nil in 2009.
The Group continues to manage its four
venture funds, the Sigma Technology
Venture Fund (“the Venture Fund”), the
Sigma Innovation Fund (East of Scotland)
(“the Innovation Fund”), the Sigma
Sustainable Energies Fund (“the
Sustainable Energies Fund”) and the
Sigma Sustainable Energy Fund II (“the
Sustainable Energy Fund II”) and is also an
investor in these funds. In addition, Sigma
holds some equity investments on its own
balance sheet. The Group also manages
two university funds on behalf of Frontier IP
Group Plc (“Frontier IP”), an associate
company, which assists in the
commercialisation of university intellectual
6
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Property Division
The Winchburgh Development
The Winchburgh Development is situated
eight miles from Edinburgh between the
M9 and M8 motorways and encompasses
approximately 350 hectares of land,
making it one of the UK’s single largest
residential and mixed use developments,
worth an estimated £1bn in total. Sigma
has been actively involved in the
Winchburgh Development since 2010
and has led the planning and commercial
negotiations with West Lothian Council
on behalf of Regenco (Winchburgh) Ltd.
These negotiations resulted in the granting
of planning permission in principle in April
2012 for a masterplan, which includes the
construction of 3,500 new homes as well
as associated mixed use infrastructure, of
schools, a town centre, retail facilities and
a commercial park.
The release of the master plan consent
has enabled the commencement of a
development period expected to be phased
over the next 15 to 20 years and Sigma has
been retained as Development Manager
on behalf of Regenco Trading Ltd for the
project implementation stages. This will
generate fees of £1.8m over the five years
from 2012 to 2016 with the potential to
generate additional carried interest
incentive fees based on profit targets.
In 2012, Sigma also procured the enabling
works required for the construction of an
initial 182 units of housing across the first
two development plots. The construction is
being undertaken by Barratt Homes and
Miller Homes and started in the last quarter
of 2012, with the first completed housing
units forecast for occupation from May 2013.
We are now concluding final land sale terms
with a further two national house builders
and a major affordable housing provider.
The conclusion of these agreements will
bring the contracted development capacity
at Winchburgh to a cumulative total of 502
residential units within 12 months of the
grant of planning permission in principle.
Detailed master planning work has also
progressed to the proposed town centre
area and programme dates have been
agreed with West Lothian Council for the
transfer of further serviced development
plots to the Council for 41 social rent
housing units and a 16,000 sq ft
community partnership/health centre.
Liverpool Partnership (also referred to
as Regeneration Liverpool)
Our Liverpool Partnership is a limited liability
partnership with Liverpool City Council
formed in 2007 with Sigma Inpartnership.
The partnership was given an initial ten
year option over a 60 acre residential
development site, known as Norris Green,
which has outline planning consent for
around 800 new homes, with a total
development value of c. £120m. The
partnership has been established with the
flexibility to develop additional sites at the
discretion of the Liverpool City Council.
In 2012, we formed a joint venture company
with a major local commercial property
development company, Neptune
Developments Limited, to accelerate the
delivery of the commercial regeneration
projects in Liverpool and in the first quarter
of the new financial year, we established a
second joint venture company, with house
building specialist, Countryside Properties
(UK) Ltd, to assist us in the delivery of
residential regeneration projects in the City.
Over the last 18 months, Liverpool City
Council has increased the number of sites
under option (subject to the conclusion of
formal option agreements) to the Liverpool
Partnership. Sites added are Gateacre,
Stonebridge Cross, Lime Street/Knowledge
Quarter, Lodge Lane and Edge Hill
District Centre.
The regeneration of the Norris Green site
is progressing well with 115 units
constructed. The third phase, of 63 homes,
moved onto site in March 2013 and a
detailed planning application was submitted
in January 2013 for a fourth phase, of a
further 167 units.
Land in the Liverpool Partnership can be
developed using any one of the following
three ways: by the Liverpool Partnership
(with Sigma Inpartnership earning a
management fee and participating in a
profit share); by Sigma Inpartnership (with
Sigma Inpartnership earning a fee and an
agreed priority profit); or by the Liverpool
Partnership selling a site on the open
market, with Sigma Inpartnership earning
a percentage of the sales price achieved.
At least 20% of the land must be disposed
of by sale on the open market. The majority
of the land will be developed by Sigma
Inpartnership through our new joint venture
companies with Countryside Properties (UK)
Ltd and Neptune Developments Limited.
The third phase of housing noted above will
be developed using our new residential joint
venture company.
After the year end, we commenced site
investigations at Gateacre, a 15 acre former
school site, which has the capacity to be
developed to accommodate around 200
new family homes. In addition, our
proposals for the 70 acre Stonebridge
Cross site are progressing well and we
envisage the development of a major mixed
use scheme, with a development value of
c. £120m including a new secondary
school, anchored by a 74,000 sq ft food
store and 68,000 sq ft of ancillary non-food
retailing and leisure. We have submitted a
detailed planning application for the new
secondary school and works are expected
to start on site in autumn 2013. A planning
application for the food store is also
currently under submission. Sigma will
benefit from a series of development
Sigma Capital Group plc
Annual Report & Financial Statements 2012
7
management fees and profit sharing in
relation to the commercial elements.
sale basis, providing income through 2013
and beyond.
The Liverpool partnership secured a land
option agreement to develop the Lime
Street /Knowledge Quarter site in March
2013 – a major flagship mixed-use
opportunity to the south and east of Lime
Street railway station in the centre of
Liverpool, with a development value for the
initial three to five year phase of c. £140m.
Together with our commercial joint venture
company, we are initially bringing forward
a development scheme for Lime Street
Eastern Terrace, which will be followed by
the redevelopment of the Mount Pleasant
Car Park as part of the development
strategy for the wider area.
Salford Partnership (also known as
Higher Broughton Partnership)
The Salford Partnership is our partnership
with Salford City Council and Royal Bank
of Scotland and we made further good
progress here over 2012. Planning consent
for a major new 30,000 sq ft healthcare and
retail scheme, worth approximately £9
million at Newbury Place, Higher Broughton
was achieved in June 2012. The scheme
includes a GP surgery, dental practice and
associated retail space including a
pharmacy, optician as well as a 4,000 sq ft
food store pre-let to Tesco, and planning
consent triggered the completion of the
sale contract and a land payment and
value point for Sigma generating in excess
of £0.3m revenue in the year.
The Salford Partnership also completed
the sale of six acres of land to housing
developer, Countryside Properties Ltd, who
started construction of 80 new family homes
in late November 2012. This will realise a
base fee over the next three years for Sigma
of £350,000 and the potential for a further
£150,000 of value as units are sold on a plot
Detailed negotiations are now underway on
the development of the remaining frontage
site at Higher Broughton, which will see the
development of around 90 new apartments
with a head lease to a local housing
association. If successful, Sigma will
undertake the financing and development
management function and will generate fees
from both activities. We have also opened
up further discussions with Salford City
Council on other sites in the City.
North Solihull Partnership
The partners of the North Solihull Partnership
are Solihull Metropolitan Borough Council,
Bellway Homes, West Mercia Housing
Association and Sigma Inpartnership. The
North Solihull Partnership’s remit is to
coordinate and deliver the regeneration
of an area in North Solihull. This project
commenced in 2007 and has an anticipated
20 year life cycle to deliver new and
replacement housing stock, ten new primary
schools and five new village centres
incorporating neighbourhood retail facilities
with new medical and council facilities.
Our key role is the provision of development
management services, including strategic
development planning, coordination and
procurement of development works and
general development management in
return for agreed fees for these services.
Thereafter there are specific sites which
we have the right to develop directly on
a commercial basis.
Of the ten new primary schools, four have
been delivered and we are progressing
with the design and procurement of two
new primary schools with a combined
value of circa £15m.
We are presently working on two village
centres budgeted to generate development
management fees and development profit
in excess of £0.3m in 2013. For the first
we are coordinating the procurement and
delivery of a £6m contract to deliver new
infrastructure and an enterprise centre.
Sigma Inpartnership is the developer for the
second village centre, North Arran Way, and
we are now on site delivering a new 30,000
sq ft neighbourhood retail and office
scheme with the office pre-let to Solihull
Metropolitan Borough Council and the eight
retail units pre-let to a mix of local and
national retailers. Post the year-end, we
secured a forward commitment from a
buyer for the completed development. The
construction phase will be funded by way
of a loan from the Growing Places Fund.
We are also working on plans for a new
medical centre with two local GP practices
and with the local care trust for the delivery
of a circa 19,000 sq ft facility to deliver
medical services to the community. Looking
forward we will be undertaking some initial
strategic planning of a third new village
centre within the area.
City Wharf, Aberdeen
On the back of the good progress made
in 2011 and 2012 in securing lettings for the
development, which resulted in the scheme
producing 85% of its full rental potential, the
lender continues to be supportive of our
asset management strategy to seek further
tenants for the remaining vacant space in
order to maximise the long term value of
the asset.
In early 2013, we secured funding from
the lender to carry out a refurbishment
of the two vacant floors and the common
areas of Exchequer House, the original
office building on the site constructed in
the 1970s. This refurbishment will bring the
building up to the standard demanded by
the large oil companies which are currently
very active in acquiring new office
8
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Business Review
continued
Venture Capital Division
Financial Review of 2012
accommodation in Aberdeen. These works
should be completed during the latter
half of 2013.
The four remaining leisure units have proved
more difficult to let as demand from this
sector of the market is aligned to the wider
national economy which remains difficult
for the retail and leisure sectors. Further
marketing initiatives are being undertaken
to promote the available space including
other potential uses for the units.
Property finance
Initiatives on property finance solutions and
opportunities, both within individual local
authority partnerships and associated
projects, continues to be a focus for the
Sigma team. The majority of these projects
are for residential development for the
private rental market and we are looking
to source institutional and private equity
finance in this developing and active
marketplace. Funding structures vary but
predominantly focus on a capital recovery
model taking advantage of current strong
rental market performance and prospective
uplifts in capital values from base values
enhanced by low entry costs. Discussions
are also ongoing around an income model
for long-term income secured against
housing association covenants.
The potential scale of these funding
opportunities is considerable with progress,
particularly on the capital recovery model,
having been very encouraging to date and
we would hope to see traction by the time
of our results in September.
In addition, Sigma is involved in a number
of financing opportunities in the commercial
and infrastructure sectors, with the aim of
unlocking new sources of institutional and
private equity funding. One project is a
development for student accommodation
in Edinburgh, which requires £7m of
construction finance.
The Group manages six funds, four venture
capital funds and two university funds. It has
a limited partner interest in each of the four
venture capital funds: 11.8% in the Venture
Fund; 10.8% in the Innovation Fund; 6.7%
in the Sustainable Energies Fund; and 5.1%
in the Sustainable Energy Fund II.
As the four venture funds we currently
manage come to the end of their lives
during the period to June 2015, the
investment team continues to focus on
managing the process of realising value
from the 16 remaining investments held in
these funds. The resulting cash will be
delivered back to the limited partners of
each of the funds, which in each case
includes Sigma.
The investment team is continuing to work
with the management teams of the investee
companies and our co-investors to ensure
that there is an active focus on exit activity
where appropriate. During the year one
investee company, Extramed, was sold
resulting in a small payment to Sigma and
we engaged advisors in connection with the
potential sale of two others. Following the
year end, one investee company, i-design
group plc, was acquired by Cardtronics, Inc,
returning approximately £0.2m to Sigma
and another is actively in discussions with
multiple potential acquirers. In addition,
early discussions have taken place with
respect to the potential sale of two other
investee companies.
The venture capital fund management
business is expected to generate strong
cash flows for Sigma during 2013 from a
mix of management fees, retainers from
investee companies and investment
realisations.
Overall, the Group made a small trading
loss in the year of £249,000 (2011: trading
profit £61,000) due primarily to costs
incurred by the holding company on Group
matters. The Property Division made a small
trading loss and showed a much improved
position from 2011, benefitting from the
opportunities provided by Sigma
Inpartnership and other management
contracts. The Venture Capital Division
made a small trading profit. The Group
made an operating loss of £1,082,000
(2011: operating loss £123,000) due to
unrealised losses on the revaluation of its
investments of £826,000 (2011: unrealised
profits £3,000). Losses arising from the
holding in Frontier IP of £111,000 (2011:
loss and provision £1,307,000) resulted in
a loss for the year of £1,171,000 (2011: loss
£1,415,000). Administrative costs include a
write back of costs of £159,000 incurred on
the development in North Solihull. Excluding
this write back, administrative costs for the
year totaled £2,734,000 (2011: £2,407,000),
an increase of 14% due to the inclusion of
a full year’s cost for Sigma Inpartnership.
During the year, Sigma Inpartnership did
not generate any development profit and
so no amounts were payable to West Coast
Capital Trading Limited (“WCC Trading”)
as deferred consideration. We expect
that Sigma Inpartnership will generate
development profit from 2013 onwards
which will trigger payments to WCC Trading
as detailed in note 10 of these financial
statements.
Net assets of the Group decreased to
£2,597,000 at 31 December 2012 (31
December 2011: £3,753,000), equivalent to
5.7p per share (31 December 2011: 8.2p).
Balance sheet
The principal items in the balance sheet at
31 December 2012 are the investments in
Sigma Capital Group plc
Annual Report & Financial Statements 2012
9
the venture capital funds of £691,000 (2011:
£1,473,000) and cash of £1,024,000 (2011:
£1,265,000). The investments in the venture
capital funds are spread across the four
funds managed by Sigma which hold
investments in 16 companies (2011: 17
companies). The spread of the underlying
investments across the four funds is given
in this Business Review on page 10. The
Group’s current assets exceed its current
liabilities by £952,000 (2011: £1,502,000).
The Group has no long term liabilities.
The Venture Capital Division met this
performance indicator in 2012 but, as
expected, the Property Division missed this
target although the ratio of total income to
operational costs improved to 0.9 times
(2011: 0.5 times). With the Group’s focus
now firmly on property activities, the ratio
is expected to show improvement in 2013.
The Venture Capital Division was not cash
flow positive due to the payment of the
commitment to the limited partners referred
to above. The Property Division was cash
flow positive.
Cash flow
The Group’s cash balances reduced by
£241,000 to £1,024,000 in 2012 (2011:
reduction of £556,000 to £1,265,000). Cash
outflows included the payment of £282,000
to the limited partners of the Venture Fund,
satisfying that commitment in full. Other
changes in working capital accounted for
a cash inflow of £169,000 (2011: outflow
£571,000) and the purchase of investments
in the year net of disposals resulted in a
cash inflow of £55,000 (2011: £122,000).
Key performance indicators
The key performance indicators used by
management to assess the success of
the business are:
(cid:129)
Ratio of recurring income to
operational costs: target to be
a minimum of one
(cid:129)
Cash flow: to be positive
2012
2011
Ratio of recurring income
to operational costs
Venture Capital Division
Property Division
1.0
0.5
1.0
0.3
Principal risks and uncertainties
The specific financial risks of price risk,
interest rate risk and credit risk are
discussed in the notes to the financial
statements. The broader risks – financial,
operational, cash flow and personnel -
are considered below.
The principal financial risks of the business
are a reduction in value of the Group’s
investment in its venture capital funds and
a reduction in the value of its holding in
Frontier IP. As far as the investments in the
funds are concerned, the risk is mitigated
to a certain extent with the funds being
invested in 16 underlying companies.
The focus for the investment team in 2013
is to continue to work with the portfolio
companies on their exit strategies and to
assist in identifying potential acquirers for
these businesses, thereby realising value for
the Group. At the same time, the investment
team continues to work with the portfolio
companies to ensure that the companies
remain properly funded.
Frontier IP has a separate quote on AIM
and its value is therefore linked in part to its
share price. Although the share price may
be affected by general market conditions,
it will primarily be affected by the market’s
view of the growth potential of the company.
There are inherent risks for Frontier IP as it
is a small company in the early stages of its
development. At the end of 2011, Sigma
made a provision against its investment
in Frontier IP to reflect these risks and the
illiquid nature of the stock. At 31 December
2012, the bid price of Frontier IP’s shares
was 12p per share whereas Sigma held its
shares in Frontier IP at a value equivalent
to 9p per share.
The principal operational risks of the
business reside around management’s
ability to secure new contracted income
streams and to minimise the risks arising
from property development. The acquisition
of Sigma Inpartnership has increased the
Property Division’s recurring income stream
and its pipeline of work for recurring fee
opportunities and one-off fee transactions.
The current economic environment
increases development risk, both execution
risk and time to completion. Development
risk is managed by maintaining close
control of pre-contract costs and by limiting
the number of early stage developments
financed by the Group at any one time.
The main cash flow uncertainties of the
business centre around the timing of
property project development fees, the
receipt of profits arising out of the
partnerships with the councils and the
timing of investment realisations by the
venture funds.
The Group is dependent on its Executive
Directors and senior management for its
success. There can be no assurance that
the Group will be able to retain the
services of these key personnel although
historically the turnover of senior staff has
been low. Incentives for senior staff include
share options and carried interest in
managed funds.
10
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Business Review
continued
At 31 December 2012, the four venture funds held investments in the following companies.
Venture Innovation Sustainable Sustainable
Fund Fund Energies Fund Energy Fund II
Ampair Energy Ltd
Designer and producer of renewable energy power systems l
Aquamarine Power Ltd
Design and production of wave energy devices l
AviIT Ltd
Designs and develops software for the aviation sector l
Brookwell Ltd
Closed-ended investment company l l
DataPA Ltd
Marketing of a data rationalisation tool l
DEM Solutions Ltd
Developer of simulation technology l
Energyflo Construction Technologies Ltd
Developer of dynamic insulation technology for low carbon, energy-efficient buildings l l
Exterity Ltd
Design, manufacture and delivery of IPTV solutions l l l
Factonomy Ltd
Develops business continuity management software l
i-design group plc
Provider of ATM advertising solutions l l
IRT Surveys Ltd
Infrared thermography for testing buildings and flat roofs l
Logicalware Ltd
Developer of a hosted inbound email management solution l
Nandi Proteins Ltd
Looks to improve the functional properties of common proteins l l
Onzo Ltd
Customer intelligent solutions for utility companies l
Pelamis Wave Power Ltd
Offshore wave energy company l l
SFX Technologies Ltd
Speaker technology that transfers sound l l
In addition, the RGU Fund held an investment in Counterweight Ltd, a developer of low cost, nurse-led weight management programmes.
Sigma Capital Group plc
Annual Report & Financial Statements 2012
11
Directors
David Sigsworth
Non-executive Chairman (Age 66)
David spent over ten years as a main board
director of FTSE 100 utility companies and
most recently on the board of Scottish and
Southern Energy plc. David is actively
involved in the sustainable energy sector
and holds several associated non-executive
directorships. David is also the Chairman of
the Sigma Sustainable Energy Fund II.
Graham Barnet
Chief Executive Officer (Age 49)
Graham Barnet co-founded Sigma
Technology Management Limited in 1997.
A qualified lawyer, Graham worked for
Noble Grossart Limited, Edinburgh Financial
Trust Limited and Shepherd & Wedderburn,
specialising in corporate finance and
corporate law, prior to forming his own
company in 1994. This company, Merchant
Investments Limited, was a specialist
consultancy involved in the management
of businesses both in the traditional and
technology sectors.
Graeme Hogg
Chief Operating Officer Appointed 11 June
2012 (Age 47)
Graeme Hogg has worked in the
property and property finance sector
since graduating in 1988. He has worked
on major commercial and residential
development projects and has seven
years of international experience in the
development and fund management areas.
Graeme co-founded Sigma Inpartnership
with Duncan Sutherland in late 2000 and
was instrumental in the creation of its three
regeneration partnerships.
Marilyn Cole, FCA
Finance Director and Company Secretary
(Age 58)
Marilyn Cole joined Sigma in January 2000.
She spent the early part of her career with
Deloitte Haskins & Sells and Pannell Kerr
Forster where she specialised in corporate
finance work. Prior to joining Sigma, Marilyn
was Finance Director of Northamber plc.
Mark Hogarth
Investment Director (Age 39)
Mark Hogarth joined Sigma in February
2002 and was appointed to the Board in
March 2007. As Investment Director,
Mark is involved in sourcing and reviewing
investment and disposal proposals for
Sigma’s funds. Mark was previously with
Andersen Business Consulting where he
worked with blue chip clients on a range
of technical, strategic and business issues.
John Hamilton
Property Development Director (Age 54)
John is a chartered surveyor with over 30
years’ industry experience. In his career
he has worked in private practice and with
a number of the country’s leading house
builders. Most recently before joining
Sigma, John was Technical Director at
Miller Homes. John is responsible for
Sigma’s interests in the residential
development market.
12
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Advisers
Gwynn Thomson, RICS
Property Investment Director (Age 45)
Gwynn has over 18 years’ experience in
the property markets with his particular
specialism being in commercial property
investment. Prior to joining Sigma, Gwynn
was a director of investment and valuation
at DTZ.
Duncan Sutherland
Regeneration Director Appointed 7 February
2013 (Age 61)
Duncan Sutherland co-founded Sigma
Inpartnership with Graeme Hogg in 2000
and has been key in developing the
partnership model with local government
partners. Duncan works closely with
government promoting this innovative
approach to achieving regeneration.
Duncan is also a Non-Executive Director
of Scottish Canals and has recently
been appointed a Non-Executive Director
of High Speed Two (HS2) Limited by the
Secretary of State for transport.
Bill MacLeod
Executive Director Appointed 12 February
2013 (Age 47)
Bill MacLeod has over 25 years’ experience
of property investment, including real estate
investment management. Previous positions
include Managing Director at Cushman &
Wakefield Investors and Director at ING
Real Estate Investment Management.
Based in London, Bill is currently Managing
Director of Torrin Asset Management,
his own management business.
James McMahon
Non-executive Director (Age 64)
Jim is a former senior partner in
PricewaterhouseCoopers and was a
founder partner of West Coast Capital with
Sir Tom Hunter in 2001. He has many years’
experience in private equity, retail and public
companies including Office Shoes, Booker
plc, Flying Brands plc and Prestbury Group.
The two non-executive Directors are the
members of the Audit Committee and the
Remuneration Committee. James McMahon
is chairman of the Audit Committee and David
Sigsworth is chairman of the Remuneration
Committee.
Secretary and registered office
Marilyn Cole FCA
North West Wing
Bush House
Aldwych
London WC2B 4EZ
Auditor
Chantrey Vellacott DFK LLP
Russell Square House
10-12 Russell Square
London WC1B 5LF
Nominated Adviser and Broker
Nplus1 Singer Capital Markets Limited
One Bartholomew Lane
London EC2N 2AX
Financial PR
Biddicks
No. 1 Cornhill
London EC3V 3ND
Registrars
Capita IRG plc
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Trading address
41 Charlotte Square
Edinburgh EH2 4HQ
Sigma Capital Group plc
Annual Report & Financial Statements 2012
13
Directors’ Report
The Directors present their annual report
on the affairs of the Group, together with
the audited financial statements and
auditor’s report, for the year ended 31
December 2012.
its subsidiaries undertake university IP
commercialisation activities. Further
information on the business activities
of the subsidiary companies is given in
the Business Review on pages 5 to 10.
Principal activities
Results and dividends
Sigma Capital Group plc (“Sigma” or
“the Company”) is a public limited liability
company incorporated in England. It acts
as a holding company and at 31 December
2012 had five principal wholly owned
subsidiaries, Sigma Inpartnership, Sigma
Capital Property Ltd (“SCP”), Strategic
Property Asset Management Ltd (“SPAM”),
Sigma Technology Management Ltd
(“STM”) and Sigma Technology Investments
Ltd (“STI”). It also had one associate
company, Frontier IP Group Plc (“Frontier
IP”), in which it has a 26.86% holding.
Frontier IP was a 65.5% owned subsidiary
until 31 January 2011 when the holding was
diluted to 46.7% following a share placing
by Frontier IP in which Sigma did not
participate. The holding was further diluted
in December 2012 to 26.9% by a further
share placing in which Sigma did participate
but did not take up its pro rata share.
The whole of the issued ordinary share
capital of Sigma Inpartnership was acquired
by Sigma on 12 August 2011. Sigma
Inpartnership and its subsidiary companies
undertake property development and
regeneration activities. SCP is the property
management arm of the Group except for
the management of City Wharf, Aberdeen
which is undertaken by SPAM. STM
operates as a fund manager and
corporate finance advisor and is authorised
and regulated by the Financial Services
Authority. STI is the investment vehicle of
the venture capital division of the Group,
investing in the funds managed by STM
and in some clients of STM. Frontier IP and
The Group made a loss for the year of
£1,171,000 (2011: £1,415,000). The
directors do not recommend the payment
of a dividend (2011: nil). The directors are
confident of the prospects of the Group
for the current year.
Review of the business and future
developments
The Directors are required to present an
extended business review reporting on the
development and performance of the Group
and the Company during the year and
their positions at the end of the year.
This requirement is met by the Chairman’s
Statement and the Business Review on
pages 3 to 10.
Directors
The current Directors of the Company
are listed on pages 11 and 12, all of whom
held office during the year except where
indicated otherwise. Details of Directors’
shareholdings are given in the Directors’
Remuneration Report on page 17.
Supplier payment policy
The Company’s policy, which is also applied
by the Group, is to settle terms of payment
with suppliers when agreeing the terms
of each transaction and to ensure that
suppliers are made aware of the terms of
payment. Creditors of the Company at 31
December 2012 were equivalent to 17 days’
purchases (2011: 114 days), based on the
average daily amount invoiced by suppliers
during the year.
Disabled employees
Applications for employment by disabled
persons are always fully considered,
bearing in mind the aptitudes of the
applicant concerned. In the event of
members of staff becoming disabled every
effort will be made to ensure that their
employment with the Group continues and
that appropriate training is arranged. It is the
policy of the Group that the training, career
development and promotion of disabled
persons should, as far as possible, be
identical to that of other employees.
Employees
The Group places considerable value
on the involvement of its employees and
has continued to keep them informed on
matters affecting them as employees
and on the various factors affecting the
performance of the Group. As the number
of employees is small, this can be achieved
effectively through regular informal
meetings. There is an employee share
scheme which is open to all employees.
In addition, employees participate in the
performance of the funds managed by STM.
Further details of this are included in the
Directors’ Remuneration Report.
Charitable and political donations
No political contributions were made
during the year (2011: £nil). Charitable
contributions made during the year
totalled £nil (2011: £2,000).
14
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Directors’ Report
continued
Risk factors
Information on the Group’s financial risk
management objectives and policies
relating to market risk, credit risk and
liquidity risk is provided in note 1 to the
financial statements.
Treasury activities and financial
instruments
The Group’s financial instruments comprise
cash, equity investments plus other items
such as trade debtors and trade creditors
that arise directly from its operations. The
Group has no borrowings. At 31 December
2012, the Group had positive cash balances
of £1,024,000 (2011: £1,265,000). The
Group’s policy is to keep surplus funds on
short term and instant access deposit to
earn the prevailing market rate of interest.
It is the Group’s policy not to speculate
in derivative financial instruments. The
Company is not exposed to significant
foreign exchange risks as transactions
in foreign currency are minimal.
Directors’ indemnity insurance
The Company had a Directors and
Officers insurance policy in place
throughout the year.
Going concern
The Group has considerable financial
resources for the size of its business and
has no borrowings. The income generated
by the Group’s regeneration partnerships
and other property activities comprises
both contracted revenue and one-off
income streams. Although the Group’s
venture capital fund management contracts
are nearing the end of their lives, they
will still provide contracted revenue for at
least twelve months plus the Group has
contracted retainers with some of the fund
portfolio companies. As a consequence,
the Directors believe that the Group is
well placed to manage its business risks
successfully despite the testing economic
environment. After making enquiries, the
Directors have a reasonable expectation
that the Company and the Group have
adequate resources to continue in
operational existence for the foreseeable
future. Accordingly, they continue to adopt
the going concern basis in preparing the
annual report and accounts.
Corporate governance
Although not required to do so, the
Company seeks within the practical
confines of being a small company to act
in compliance with the principles of good
governance and the code of best practice
as contained in the UK Corporate
Governance Code.
The Board meets regularly to determine the
policy and business strategy of the Group
and has adopted a schedule of matters
that are reserved as the responsibility of
the Board. The Chief Executive Officer leads
the development of business strategies
within the Group’s operations. The Board
consists of eight executive Directors and
two non-executive Directors. The Board
considers that there is an appropriate
balance between the executives and non-
executives and that no individual or small
group dominates the Board decision
making. The Board’s members have a
wide range of expertise and experience
and it is felt that concerns may be
addressed to the non-executive Chairman.
The Board has delegated certain authorities
to committees, each with formal terms of
reference. The whole Board acts as a
Nomination Committee.
The non-executive Directors are the
members of the Audit Committee. It meets
at least twice a year to consider the
scope of the annual audit, interim financial
statements and to assess the effectiveness
of the Group’s system of internal controls.
Given the size of the Group, the Audit
Committee considers an internal audit
function is not currently justified. The Audit
Committee is chaired by James McMahon.
The non-executive Directors are the
members of the Remuneration Committee.
It meets at least once a year to determine
Company policy on senior executive
remuneration, to make detailed
recommendations to the Board regarding
the remuneration packages of the executive
Directors and to consider awards under
the Group’s option schemes and carried
interest arrangements. The Chief Executive
Officer is consulted on remuneration
packages and policy but does not attend
discussions regarding his own package.
The remuneration and terms and conditions
of the appointment of non-executive
Directors are determined by the Board.
The Remuneration Committee is chaired
by David Sigsworth.
The Board has considered mechanisms
by which the business and the financial risks
facing the Group are managed and reported
to the Board. The principal business and
financial risks have been identified and the
control procedures that are in place to
manage those risks have been documented.
This document is subject to review by the
Board and is updated on a regular basis.
The Board acknowledges its responsibility
Sigma Capital Group plc
Annual Report & Financial Statements 2012
15
for reviewing the effectiveness of the
systems that are in place to manage risk
and to provide reasonable but not absolute
assurance with regard to the safeguarding
of the Group’s assets against misstatement
or loss. The key elements of the system of
internal control are:
-
-
-
Clear definition of delegated
authorities and preparation of annual
budgets for Board approval.
Close involvement of senior
management in the day to day
business of the Group.
Regular reporting of business
performance to the Board and the
review of results against budget.
Awareness of relevant audit information
At the date of this report and insofar as
each of the Directors is aware:
-
-
There is no relevant audit information
of which the auditor is unaware.
The Directors have taken all steps
they ought to have taken to make
themselves aware of any relevant audit
information and to establish that the
auditor is aware of that information.
Auditor
A resolution to re-appoint Chantrey Vellacott
DFK LLP as auditor will be proposed at the
Annual General Meeting.
By order of the Board
Marilyn Cole, FCA
Company Secretary
24 April 2013
16
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Directors’ Remuneration Report
Directors’ remuneration
Directors’ interests – interests in share options
The two non-executive Directors comprise
the members of the Remuneration
Committee. David Sigsworth chairs the
committee. The Remuneration Committee
decides the remuneration policy that applies
to executive Directors.
Salaries and benefits
The Remuneration Committee meets at
least once a year in order to consider and
set the remuneration packages for executive
Directors. The remuneration packages are
benchmarked to ensure comparability with
companies of a similar size and complexity.
Remuneration comprises basic salary,
pension contributions to each Director’s
personal pension scheme and benefits in
kind. In addition, M Hogarth, J Hamilton
and G Hogg are paid a car allowance and
M Cole receives a contribution to her travel
expenses. Remuneration also includes
share options and carried interest as
detailed below. An analysis of remuneration
by Director is given in note 7 of these
financial statements.
Contracts of service
G Barnet and M Cole both have a one-year
rolling service agreement with the Company.
The other executive Directors have service
agreements with a three-month notice period.
Details of options held by Directors who were in office at 31 December 2012 are
set out below.
Director
MD Cole
MD Cole
MS Hogarth
MS Hogarth
J Hamilton
G Thomson
D Sigsworth
G Hogg
Date of
grant
09.06.09
05.05.11
09.06.09
05.05.11
05.05.11
05.05.11
30.04.08
29.07.11
Number
150,000
483,333
200,000
633,333
250,000
250,000
100,000
250,000
Exercise
price
11.25p
8.00p
11.25p
8.00p
8.00p
8.00p
25.0p
7.50p
Exercise date
Expiry date
09.06.12 – 08.06.19
05.05.14 – 04.05.21
09.06.12 – 08.06.19
05.05.14 – 04.05.21
05.05.14 – 04.05.21
05.05.14 – 04.05.21
30.04.08 – 29.04.18
29.07.14 – 28.07.21
08.06.19
04.05.21
08.06.19
04.05.21
04.05.21
04.05.21
29.04.18
28.07.21
No options were granted to Directors during
the year. No options were exercised by
Directors during the year. Details of the
Company’s option schemes are set out
in note 20 to the financial statements.
The market price of the Company’s shares
at 31 December 2012 was 6.125p. The
range of market prices during the year
was 6.00p to 7.39p.
Carried interest arrangements
Sigma has the right to receive a share of
the profits (carried interest) from the Venture
Fund (10.5%), the Innovation Fund (10%),
the Sustainable Energies Fund (10%), the
Sustainable Energy Fund II (16%), the RGU
Fund (17.5%) and the Dundee Fund (20%).
For the first three of these funds, Sigma
assigned 25% of its carried interest to the
employees of Sigma including the executive
Directors. For the Sustainable Energy Fund
II Sigma has assigned 50% of its carried
interest to its employees including the
executive Directors plus the non-executive
Chairman. None of the carried interest in the
RGU Fund and the Dundee Fund has been
so assigned. Unless an employee leaves
the Group by reason of death, ill-health,
permanent disability or wrongful dismissal,
an employee loses all rights to the carried
interest when he or she leaves the Group’s
employment, at which time the interest
reverts back to Sigma. In addition, an
employee’s share of the carried interest
vests over several years. For the Venture
Fund an employee’s share of the carried
interest did not fully vest until 19 March
2007, for the Innovation Fund, the date
was 14 May 2008, for the Sustainable
Energies Fund the date was 26 January
2010 and for the Sustainable Energy Fund II
the date was 31 December 2011.
The Directors have been allocated the
following share of the carried interest
assigned to Sigma, assuming that their
share vests in full.
Sigma Capital Group plc
Annual Report & Financial Statements 2012
17
GF Barnet
MD Cole
MS Hogarth
D Sigsworth
Venture
Fund
%
5.00
2.875
2.50
-
Innovation
Fund
%
Sustainable
Energies Fund
%
Sustainable
Energy Fund II
%
5.00
2.875
2.50
-
5.50
3.25
3.25
-
11.75
10.50
11.75
2.50
Directors’ interests - interests in shares
Directors in office at 31 December 2012 had the following interests in the ordinary shares
of 1p each of the Company:
GF Barnet
MD Cole
J Hamilton
MS Hogarth
GR Hogg
D Sigsworth
G Thomson
2012
Number
2011
Number
7,521,571
7,521,571
589,660
285,714
301,259
71,429
246,971
142,857
489,660
158,402
96,971
All of the above interests are beneficial except for 735,000 shares (2011: 735,000 shares)
held by Graham Barnet as trustee for two of his children. Between 31 December 2012
and 24 April 2013 the following directors have purchased shares of the Company:
MD Cole
MS Hogarth
GR Hogg
D Sigsworth
D Sigsworth
Chairman
24 April 2013
100,000
100,000
326,000
165,000
18
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Statement of Directors’ Responsibilities
The Directors are responsible for preparing
the annual report and the financial
statements in accordance with applicable
law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law, the Directors
have prepared the Group and Parent
Company financial statements in
accordance with International Financial
Reporting Standards as adopted by the
European Union. Under company law, the
Directors must not approve the financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs
of the Company and the Group and of the
profit or loss of the Group for that period.
In preparing those financial statements,
the Directors are required to:
> select suitable accounting policies
and then apply them consistently;
> present information, including
accounting policies, in a manner
that provides relevant, reliable,
comparable, understandable
information;
> provide additional disclosures
when compliance with the specific
requirements in IFRSs are insufficient
to enable users to understand the
impact of particular transactions, other
events and conditions on the entity’s
financial position and financial
performance; and
> prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group will continue in business.
The Directors are responsible for keeping
proper accounting records sufficient to
show and explain company transactions
and which disclose with reasonable
accuracy at any time the financial position
of the Company and the Group and to
enable them to ensure that the financial
statements comply with the Companies
Act 2006. They are also responsible for
safeguarding the assets of the Company
and the Group and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the
United Kingdom governing the preparation
and dissemination of financial statements
may differ from legislation in other
jurisdictions.
Sigma Capital Group plc
Annual Report & Financial Statements 2012
19
Independent Auditor’s Report
to the Shareholders of Sigma Capital Group plc
We have audited the financial statements of
Sigma Capital Group plc for the year ended
31 December 2012 which comprise the
Consolidated Comprehensive Income
Statement, the Consolidated and Parent
Company Balance Sheets, the Consolidated
and Parent Company Statements of
Changes in Equity, the Consolidated and
Parent Company Cash Flow Statements
and the related notes. The financial
reporting framework that has been applied
in their preparation is applicable law and
International Financial Reporting Standards
(IFRSs) as adopted by the European
Union and as regards the parent company
financial statements, as applied in
accordance with the provisions of the
Companies Act 2006.
This report is made solely to the Company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken
so that we might state to the Company’s
members those matters we are required to
state to them in an auditor’s report and for
no other purpose. To the fullest extent
permitted by law, we do not accept or
assume responsibility to anyone other than
the Company and the Company’s members
as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of directors
and auditor
As explained more fully in the Directors’
Responsibilities Statement, the directors
are responsible for the preparation of the
financial statements and for being satisfied
that they give a true and fair view. Our
responsibility is to audit and express an
opinion on the financial statements in
accordance with applicable law and
International Standards on Auditing (UK
and Ireland). Those standards require
us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
Scope of the audit of the financial
statements
Opinion on other matters prescribed
by the Companies Act 2006
An audit involves obtaining evidence about
the amounts and disclosures in the financial
statements sufficient to give reasonable
assurance that the financial statements are
free from material misstatement, whether
caused by fraud or error. This includes an
assessment of: whether the accounting
policies are appropriate to the group’s
and the parent company’s circumstances
and have been consistently applied and
adequately disclosed; the reasonableness
of significant accounting estimates made by
the directors; and the overall presentation
of the financial statements. In addition, we
read all of the financial and non-financial
information in the Annual Report to identify
material inconsistencies with the audited
financial statements. If we become aware
of any apparent material misstatements
or inconsistencies, we consider the
implications for our report.
Opinion on financial statements
In our opinion:
> the financial statements give a true and
fair view of the state of the group’s and
of the parent company’s affairs as at
31 December 2012 and of the group’s
results for the year then ended;
> the group financial statements have
been properly prepared in accordance
with IFRSs as adopted by the
European Union;
> the parent company financial statements
have been properly prepared in
accordance with IFRSs as adopted by
the European Union and as applied in
accordance with the provisions of the
Companies Act 2006; and
In our opinion the information given in the
Directors’ Report for the financial year for
which the financial statements are prepared
is consistent with the financial statements.
Matters on which we are required
to report by exception
We have nothing to report in respect of the
following matters where the Companies
Act 2006 requires us to report to you if, in
our opinion:
> adequate accounting records have
not been kept by the parent company,
or returns adequate for our audit have
not been received from branches not
visited by us; or
> the parent company financial
statements are not in agreement with
the accounting records and returns; or
> certain disclosures of directors’
remuneration specified by law
are not made; or
> we have not received all the
information and explanations we
require for our audit.
Neil Tustian
(Senior Statutory Auditor)
for and on behalf of CHANTREY
VELLACOTT DFK LLP
Chartered Accountants and
Statutory Auditor
Russell Square House
10-12 Russell Square
London
WC1B 5LF
> the financial statements have been
24 April 2013
prepared in accordance with the
requirements of the Companies
Act 2006.
20
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Consolidated Comprehensive Income Statement
for the year ended 31 December 2012
2012 2011
Notes £’000 £’000
Revenue
Revenue from services 3 2,326 2,468
Other operating income
Realised loss on disposal of equity investments (7) (123)
Unrealised (loss)/profit on the revaluation of investments 14 (826) 3
Discontinued operations 4 - 59
Total revenue and income 1,493 2,407
Administrative expenses 5 (2,575) (2,407)
Impairment of goodwill 10 - (123)
Loss from operations (1,082) (123)
Finance income 6 22 15
Loss on disposal of controlling interest in Frontier IP - (79)
Share of loss of Frontier IP 13 (111) (228)
Provision against the holding of shares in Frontier IP - (1,000)
Loss before tax (1,171) (1,415)
Taxation 8 - -
Loss for the year (1,171) (1,415)
Total comprehensive expense attributable to:
Equity holders of the Company (1,171) (1,401)
Non-controlling interests - (14)
(1,171) (1,415)
Basic loss per share 9 (2.57)p (3.17)p
Diluted loss per share 9 (2.57)p (3.17)p
There were no comprehensive gains or losses in either year other than those included in the comprehensive income statement. The
accompanying notes are an integral part of this consolidated comprehensive income statement. The Company has elected to take the
exemption under section 408 of the Companies Act 2006 to not present the Company income statement. The loss for the Company for
the year was £2,878,000 (2011: £1,396,000). The principal reason for the loss in the current year is a provision against amounts due from
subsidiary companies of £2,300,000 and a provision against the carrying value of the investment in Frontier IP. The principal reason for the
loss in the prior year was a provision against the carrying value of the investment in Frontier IP.
Sigma Capital Group plc
Annual Report & Financial Statements 2012
21
Consolidated Balance Sheet
at 31 December 2012
2012 2011
Notes £’000 £’000
Assets
Non-current assets
Goodwill and other intangibles 10 614 322
Property and equipment 11 26 41
Investment in associate company 13 314 400
Financial assets at fair value through profit and loss 14 691 1,478
Long term loan 15 - 10
1,645 2,251
Current assets
Trade receivables 16 688 606
Other current assets 16 76 261
Trading investments 17 45 172
Cash and cash equivalents 1,024 1,265
1,833 2,304
Total assets 3,478 4,555
Liabilities
Current liabilities
Trade and other payables 18 881 802
Total liabilities 881 802
Net assets 2,597 3,753
Equity
Called up share capital 19 456 456
Share premium account 19 4,481 4,481
Capital redemption reserve 34 34
Merger reserve (249) (249)
Capital reserve (7) (7)
Share-based payment reserve 175 160
Retained earnings (2,293) (1,122)
Equity attributable to equity holders of the Company 2,597 3,753
The accompanying notes are an integral part of this consolidated balance sheet.
22
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Company Balance Sheet
at 31 December 2012
2012 2011
Notes £’000 £’000
Assets
Non-current assets
Property and equipment 11 1 1
Investment in subsidiaries 12 2,471 2,471
Investment in associate company 13 421 749
Trade and other receivables 16 495 2,946
3,388 6,167
Current assets
Trade receivables 16 102 51
Other current assets 16 298 31
Trading investments 17 - 84
Cash and cash equivalents 521 111
921 277
Total assets 4,309 6,444
Liabilities
Current liabilities
Trade and other payables 18 1,370 640
Total liabilities 1,370 640
Net assets 2,939 5,804
Equity
Called up share capital 19 456 456
Share premium account 19 4,481 4,481
Capital redemption reserve 34 34
Share-based payment reserve 160 147
Retained earnings (2,192) 686
Total equity 2,939 5,804
The accompanying notes are an integral part of this balance sheet.
The financial statements on pages 20 to 45 were approved by the Board of Directors and authorised for issue on 24 April 2013 and were
signed on its behalf by:
GF Barnet
Chief Executive Officer
24 April 2013
Registered number 3942129
Sigma Capital Group plc
Annual Report & Financial Statements 2012
23
Consolidated Statement of Changes in Equity
for the year ended 31 December 2012
Share- Total equity
Share Capital based attributable to
Share premium redemption Merger Capital payment Retained equity holders
capital account reserve reserve reserve reserve earnings of Company
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2011 434 4,196 34 (249) (7) 144 279 4,831
Issue of shares 22 325 - - - - - 347
Cost of share issue - (40) - - - - - (40)
Loss for the year - - - - - - (1,401) (1,401)
Share-based payments - - - - - 16 - 16
At 31 December 2011 456 4,481 34 (249) (7) 160 (1,122) 3,753
Loss for the year - - - - - - (1,171) (1,171)
Share-based payments - - - - - 15 - 15
At 31 December 2012 456 4,481 34 (249) (7) 175 (2,293) 2,597
Total equity
attributable to Non-
equity holders controlling Total
of Company interest equity
£’000 £’000 £’000
At 1 January 2011 4,831 851 5,682
Disposal of controlling interest in Frontier IP - (837) (837)
Issue of shares 347 - 347
Cost of share issue (40) - (40)
Loss for the year (1,401) (14) (1,415)
Share-based payments 16 - 16
At 31 December 2011 3,753 - 3,753
Loss for the year (1,171) - (1,171)
Share-based payments 15 - 15
At 31 December 2012 2,597 - 2,597
24
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Company Statement of Changes in Equity
for the year ended 31 December 2012
Share Capital Share-based
Share premium redemption payment Retained Total
capital account reserve reserve earnings equity
£’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2011 434 4,196 34 144 2,082 6,890
Issue of shares 22 325 - - - 347
Costs of share issue - (40) - - - (40)
Loss for the year - - - - (1,396) (1,396)
Share-based payments - - - 3 - 3
At 31 December 2011 456 4,481 34 147 686 5,804
Loss for the year - - - - (2,878) (2,878)
Share-based payments - - - 13 - 13
At 31 December 2012 456 4,481 34 160 (2,192) 2,939
Sigma Capital Group plc
Annual Report & Financial Statements 2012
25
Consolidated and Company Cash Flow Statements
for the year ended 31 December 2012
Group Group Company Company
2012 2011 2012 2011
Notes £’000 £’000 £’000 £’000
Cash flows from operating activities
Cash (used in)/generated from operations 23 (292) (379) 340 90
Net cash (used in)/generated from operating activities (292) (379) 340 90
Cash flows from investing activities
Net cash inflow on acquisition of Sigma Inpartnership - 16 - -
Purchase of shares in Frontier IP (25) - (25) -
Purchase of property and equipment (8) (42) (1) -
Disposal of property and equipment - 6 - 1
Purchase of financial assets at fair value through profit and loss (38) (76) - -
Disposal of financial assets at fair value through profit and loss 19 52 - -
Long term loan (18) (10) - -
Purchase of trading investments - (114) - (100)
Disposal of trading investments 99 16 95 -
Interest received 22 15 1 54
Net cash generated from /(used in) investing activities 51 (137) 70 (45)
Cash flows from financing activities
Cost of share issue - (40) - (40)
Net cash used in financing activities - (40) - (40)
Net (decrease)/increase in cash and cash equivalents (241) (556) 410 5
Cash and cash equivalents at beginning of year 1,265 1,821 111 106
Cash and cash equivalents at end of year 1,024 1,265 521 111
The accompanying notes are an integral part of this cash flow statement.
26
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Accounting policies
for the year ended 31 December 2012
The principal accounting policies are
summarised below. They have all been
applied consistently throughout the year
and the preceding year.
> IFRS 9 Financial Instruments
(effective 1 January 2015)
> IFRS 10 Consolidated Financial
Statements (effective 1 January 2013)
Basis of accounting
The financial statements have been
prepared on a going concern basis. The
business model of the Group together with
the principal risks and uncertainties are set
out in the Business Review and the Group’s
financial risk management is covered in
note 1. The progress of the Group since
the balance sheet date is described in the
Chairman’s Statement. Having reviewed
cash flow projections, the Directors believe
that the Company has adequate resources
to continue in operation for the foreseeable
future and have therefore adopted the going
concern basis in preparing these financial
statements.
The financial statements of the Group
and the Company have been prepared in
accordance with International Financial
Reporting Standards (IFRS) as adopted
for use in the European Union.
The financial statements have been
prepared on the historical cost basis,
except where IFRS requires an alternative
treatment. The principal variations from
historical cost relate to financial
instruments (IAS 39).
The International Accounting Standards
Board and the International Financial
Reporting Interpretations Committee
have issued the following standards and
interpretations with an effective date
after the date of these financial statements
and which have not been early adopted:
> IFRS 1 (Amendment) First-time
Adoption of International Financial
Reporting Standards (effective 1
January 2013)
> IFRS 11 Joint Arrangements
(effective 1 January 2013)
> IFRS 12 Disclosure of Interests
in Other Entities (effective 1
January 2013)
> IFRS 13 Fair Value Measurement
(effective 1 January 2013)
> IFRS 32 (Amendment) Offsetting
financial assets and financial liabilities
(effective 1 January 2014)
> IAS 19 Employee Benefits (Revised
June 2011) (effective 1 January 2013)
> IAS 27 (Revised) Separate Financial
Statements (effective 1 January 2013)
> IAS 28 (Revised) Investments in
Associates and Joint Ventures
(effective 1 January 2013)
The impact of the adoption of these
standards and interpretations on the
Group’s financial statements in the period
of initial application has not been quantified.
Basis of consolidation
The Group financial statements consolidate
the financial statements of Sigma and its
subsidiary undertakings. STM is
consolidated using merger accounting.
All other subsidiary undertakings
are consolidated using acquisition
accounting from the date of acquisition.
Under acquisition accounting, the cost of
an acquisition is measured as the fair value
of the assets given, equity instruments
issued and liabilities incurred or assumed
at the date of exchange. Identifiable assets
acquired and liabilities and contingent
liabilities assumed in a business
combination are measured initially at their
fair values at the acquisition date. The
excess of the cost of acquisition over the fair
value of the Group’s share of the identifiable
net assets acquired is recorded as goodwill.
The direct costs of acquisition are
recognised immediately as an expense.
The results of Sigma Inpartnership and
its subsidiaries have therefore been
consolidated from 12 August 2011.
The Group has taken advantage of the
exemption under IFRS 1 First-time
Adoption of International Financial
Reporting Standards not to adopt IFRS 3
retrospectively and hence has used
merger accounting for STM which was
first consolidated into the Group in 2000.
Sigma equity accounts for its holding in
Frontier IP based on the fair value of its
shares at the time of the initial share placing
less its share of losses subsequently
generated by Frontier IP. The accounting
reference date of Frontier IP is 30 June
which is not coterminous with the
accounting reference date of the rest of
the Group. The results of Frontier IP used
in the Group accounts have been extracted
from the audited results for the year ended
30 June 2012 and its unaudited half year
results for the six months ended 31
December 2012. The accounting reference
date of Frontier IP has not been made
coterminous with the rest of the Group as, in
the opinion of the Directors, it would impose
an undue administrative burden on Sigma.
Six group companies each manage, as
general partner, six limited partnerships,
the Venture Fund, the Innovation Fund, the
Sustainable Energies Fund, the Sustainable
Energy Fund II, the RGU Fund and the
Dundee Fund (together “the Funds”). The
Group has an equity interest of 11.76% in
the Venture Fund, 10.83% in the Innovation
Fund, 6.67% in the Sustainable Energies
Fund and 5.06% in the Sustainable Energy
Sigma Capital Group plc
Annual Report & Financial Statements 2012
27
Fund II. The Frontier IP group, in which the
Group has a 26.86% holding, has an equity
interest of 27.27% in the RGU Fund and
66.67% in the Dundee Fund. The Directors
consider that the Group neither exercises
control nor has the potential to control the
Funds and acts in a fiduciary capacity as
fund manager on behalf of third party
investors. Therefore, having regard to IAS 27
Consolidated and separate financial
statements, the Funds are excluded from
the Group consolidation. The interests in the
Funds are accounted for as financial assets
at fair value through profit and loss within
non-current assets, in accordance with the
accounting policy for investments set out
below. In the opinion of the Directors, this
is the fairest method to reflect the Group’s
interest in the Funds.
Following the acquisition of Sigma
Inpartnership, the Group has an interest in
three limited partnerships which undertake
property regeneration, the North Solihull
Partnership, the Salford Partnership and
the Liverpool Partnership (together “the
Partnerships”). The Group has a 49.805%
share of the profits of the North Solihull
Partnership through its 25% holding in the
General Partner of this partnership and
through a wholly owned subsidiary which
acts as a limited partner. The Group has a
32.99% share of the profits of the Salford
Partnership through its 25% holding in the
General Partner of this partnership, through
a wholly owned subsidiary which acts as a
limited partner and through three other
wholly owned subsidiaries. The Group has
a 0.01% share of the profits of the Liverpool
Partnership through a wholly owned
subsidiary. The Directors consider that the
Group neither exercises control nor has the
potential to control the Partnerships and
acts in a commercial capacity as project
manager, development manager and
developer of the underlying projects
undertaken by the Partnerships.
Segmental reporting
The Directors regard the Group’s reportable
segments of business to be property
(finance, residential development and
regeneration), venture capital fund
management and holding company
activities. The business has no geographical
aspect. Costs are allocated to the
appropriate segment as they arise with
central overheads apportioned on a
reasonable basis.
Intangible assets
Goodwill
Goodwill arising on consolidation represents
the excess of the cost of acquisition over
the Group’s interest in the fair value of
the identifiable assets and liabilities of
a subsidiary at the date of acquisition.
Goodwill is recognised as an asset and
reviewed for impairment annually. For the
purposes of assessing impairment, assets
are grouped in to cash generating units
(CGU) being the lowest levels for which
there are separately identifiable cash flows.
Any impairment is recognised immediately
in the income statement and is not
subsequently reversed. When the Group
disposes of an interest in a subsidiary,
the value of goodwill is reduced by the
proportion that relates to the interest
being disposed of.
intangibles acquired in a business
combination are as follows:
Intangible
asset
Useful
economic life
Valuation
method
Customer
relationships
Remaining
period of contract
Multi-Period
Earnings Method
Property and equipment
Property and equipment are stated at
cost less depreciation and any provision
for impairment.
Depreciation
Depreciation is provided at rates calculated
to write off the cost less estimated residual
value of each asset on a straight-line basis
over its expected useful life. The rates of
depreciation are as follows:
Leasehold improvements
over the term of the lease
Fixtures and office equipment
25% per annum
Computer equipment
33%-50% per annum
Financial instruments
Financial assets and financial liabilities are
recognised on the Group’s balance sheet
when the Group becomes a party to the
contractual provisions of the instrument.
Acquired intangible assets
Intangible assets are recognised on
business combinations if they are separable
from the acquired entity or give rise to other
contractual/legal rights. The amounts
ascribed to such intangibles are arrived at
by using appropriate valuation techniques.
The significant intangibles recognised by
the Group, their useful economic lives and
the methods used to determine the cost of
Trade and other receivables
Trade and other receivables do not carry
any interest and are stated at their nominal
value as reduced by appropriate allowances
for estimated irrecoverable amounts.
Provisions for losses are made when
there is objective evidence that settlement
according to original conditions will not
be received.
28
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Accounting Policies
continued
Cash
Cash and cash equivalents comprise cash
at bank and in hand and short term
deposits.
Investments
Investments are recognised and de-
recognised on the trade date. Investments
are classified as either held for trading or
financial assets at fair value through profit
and loss. Investments classified as held
for trading are initially measured at cost.
Investments classified as financial assets
at fair value through profit and loss are
initially measured at cost.
Subsequent measurement of all
investments is at fair value. The fair values
of listed investments are based on bid
prices at the balance sheet date. The fair
value of unlisted investments is established
using International Private Equity and
Venture Capital Valuation Guidelines
(“IPEV Guidelines”). The fair value of the
investments in the Funds is based on the
Group’s share of the net asset value of the
Funds. In the Funds, the Enterprise Value of
an investee company is determined using
one or more valuation methodologies.
The Enterprise Value is adjusted for any
relevant factors specific to the company
and a deduction then made for any
financial instruments that rank ahead of the
instruments held by the Funds to give an
Attributable Enterprise Value. This is then
apportioned between the relevant financial
instruments and the fair value attributable
to the Funds is determined. The valuation
methodology used commonly by the Funds
to determine the Enterprise Value is the
“price of recent investment” contained
in these valuation guidelines.
The following considerations are used
when calculating the fair value using
these guidelines:
Where the investment being valued was
itself made recently, its cost will generally
be a good indication of fair value.
Where there has been any recent
investment by third parties, the price of
that investment will provide a basis of
the valuation.
If there is no readily ascertainable
value from following the “price of recent
investment” methodology, the Group
considers alternative methodologies as set
out in the IPEV Guidelines being principally
multiples, net assets, discounted cash
flows and industry valuation benchmarks.
When managing its investments, the Group
aims to profit from the receipt of interest and
dividends and changes in the fair value of
equity investments. Accordingly, all quoted
and unquoted equity investments are
designated as at fair value through profit or
loss and are subsequently recorded in the
balance sheet at fair value. Any gains and
losses arising from changes in fair value
are included in net gains or losses for
the period.
Investments classified as “financial
assets at fair value through profit and loss”
are recognised as non-current assets.
Investments classified as “trading
investments” are recognised as
current assets.
Investment in subsidiary companies is
stated at cost less provision for any
impairment in value.
Financial liabilities and equity
Financial liabilities and equity are classified
according to the substance of the financial
instrument’s contractual obligations rather
than the financial instrument’s legal form.
An equity instrument is any contract that
evidences a residual interest in the assets of
the Group after deducting all of its liabilities.
Trade payables
Trade payables are not interest bearing
and are stated at their nominal value.
Equity instruments
Equity instruments issued by the Company
are recorded at the proceeds received, net
of direct issue costs.
Current and deferred tax
The charge for current tax is based on the
results for the year as adjusted for items
which are non-assessable or disallowed.
It is calculated using rates that have been
enacted or substantively enacted by the
balance sheet date.
Deferred tax is accounted for using the
balance sheet liability method in respect
of temporary differences arising from
differences between the carrying amount
of assets and liabilities in the financial
statements and the corresponding tax basis
used in the computation of taxable profit.
In principle, deferred tax liabilities are
recognised for all taxable temporary
differences and deferred tax assets are
recognised to the extent that it is probable
that taxable profits will be available against
which deductible temporary differences can
be recognised. Such assets and liabilities
are not recognised if the temporary
difference arises from goodwill or from the
initial recognition (other than in a business
combination) of other assets and liabilities
in a transaction which affects neither the
tax profit nor the accounting profit.
Deferred tax is calculated at the rates that
are expected to apply when the asset or
liability is settled. Deferred tax is charged
or credited in the income statement, except
when it relates to items credited or charged
directly to equity, in which case the deferred
tax is also dealt with in equity.
Sigma Capital Group plc
Annual Report & Financial Statements 2012
29
Goodwill arising on acquisition is allocated
to cash-generating units. The recoverable
amount of the cash-generating unit to which
goodwill has been allocated is tested for
impairment annually, or on such other
occasions that events or changes in
circumstances indicate that it might be
impaired. If the recoverable amount of an
asset (or cash-generating unit) is estimated
to be less than its carrying amount, the
carrying amount of the asset (cash-
generating unit) is reduced to its
recoverable amount. Impairment losses
are recognised as an expense immediately.
Where an impairment loss subsequently
reverses, the carrying amount of the asset
(cash-generating unit) is increased to the
revised estimate of its recoverable amount,
but so that the increased carrying amount
does not exceed the carrying amount that
would have been determined had no
impairment loss been recognised for the
asset (cash-generating unit) in prior years.
Impairment losses relating to goodwill are
not reversed.
Deferred tax assets and liabilities are offset
when they relate to income taxes levied by
the same taxation authority and the Group
intends to settle its current tax assets and
liabilities on a net basis.
Operating leases
Amounts due under operating leases
are charged to the income statement in
equal annual instalments over the period
of the lease.
Share-based payments
The Group issues equity-settled share-
based payments to certain employees.
Equity-settled share-based payments are
measured at fair value (excluding the effect
of non-market based vesting conditions) at
the date of grant. The fair value determined
at the grant date of the equity-settled share-
based payments is expensed on a straight-
line basis over the vesting period, based on
the Group’s estimate of shares or options
that will eventually vest.
Fair value is measured using the Black
Scholes-Merton pricing model. The
expected life used in the model has
been adjusted, based on management’s
best estimate, for the effects of non-
transferability, exercise restrictions,
and behavioural considerations.
Revenue recognition
Fees for services provided by the Group
are measured at the fair value of the
consideration received or receivable,
net of value added tax.
Property project management fees are
recognised when the service is provided.
Income arising from profit share
arrangements is recognised when the
amount of profit is known with certainty.
Fund management fees, directors’ fees and
retainers are recognised when the service
is provided. Fees for corporate finance work
are recognised when the service is provided
subject to completion of the respective
transaction being certain.
Finance leases
Tangible fixed assets acquired under
finance leases and hire purchase
agreements are recognised and disclosed
under tangible fixed assets at their fair
value or the present value of minimum lease
payments if lower. The capital element of
the future payments is treated as a liability
and the interest is charged to the income
statement on a straight line basis.
Retirement benefit costs
The Group operates a defined contribution
retirement benefit scheme. The amount
charged to the income statement in
respect of retirement benefit costs are
the contributions payable in the year.
Differences between contributions payable
in the year and contributions actually paid
are shown as either prepayments or
accruals in the balance sheet.
Impairment
At each balance sheet date, the Group
reviews the carrying amounts of its property
and equipment and intangible assets with
finite lives to determine whether there is any
indication that those assets have suffered
an impairment loss. If any such indication
exists, the recoverable amount of the asset
is estimated in order to determine the
extent of the impairment loss. Where it is not
possible to estimate the recoverable amount
of an individual asset, the Group estimates
the recoverable amount of the cash-
generating unit to which the asset belongs.
30
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Notes to the Financial Statements
for the year ended 31 December 2012
1.
Financial risk management
Financial risk factors
The Group’s business activities are set out in the Business Review on pages 5 to 10. These activities expose the Group to a number
of financial risks. The following describes the Group’s objectives, policies and processes for managing these risks and the methods
used to measure them. The Group only operates in the UK and transacts in sterling. It is therefore not exposed to any foreign
currency exchange risk.
(a) Capital risk management
The Group’s objectives for managing capital are to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an efficient capital structure to manage
the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend paid to
shareholders, return capital to shareholders and issue new shares or buy back existing shares. The Group currently has no
debt. There were no changes in the Group’s approach to capital management during the year.
(b) Market risk
(i)
Price risk
The Group is exposed to equity securities price risk because of equity investments held by the Group and classified
on the consolidated balance sheet either as financial assets at fair value through profit and loss or trading investments
which are also held at fair value through profit or loss. At 31 December 2012, 94% (2011: 89%) of the Group’s
investments were investments in the four venture capital funds.
The venture capital funds invest in early stage companies which are by their nature of a higher risk than more mature
trading companies. Risk is mitigated to a certain extent by the fact that each fund holds investments in several
companies – at 31 December 2012, the funds together held 16 investments (2011: 17 investments). A Group company,
STM, is the Manager of the funds in which the investments are made. STM has established investment appraisal
processes which include sign-off by an investment committee, comprising senior executives of Sigma, before an
investment is made and ongoing monitoring and review processes following investment. Progress of the underlying
investments is reviewed regularly by the Board. Each fund has a finite life of 10 years, at the end of which all of the
underlying investments are expected to have been realised and proceeds returned to investors.
The investments comprising the balance of 7% (2011: 11%) are 3 (2011: 4) direct interests in quoted and unquoted equity.
The table below summarises the impact of a 1% increase/decrease in the price of both quoted and unquoted
investments on the Group’s post tax results for the year and on the carrying value of investments.
2012 2011
£’000 £’000
Plus or minus 1% -
Quoted equity investments - 1
Investments in venture capital funds and university funds 7 14
Other direct equity interests - 1
7 16
(ii)
Interest rate risk
As the Group has no borrowings it only has limited interest rate risk. The impact is on income and operating cash flow
and arises from changes in market interest rates. From time to time, certain of the Group’s cash resources are placed on
short term fixed deposit of up to one year to take advantage of preferential rates. Otherwise, cash resources are held in
current, floating rate accounts.
Sigma Capital Group plc
Annual Report & Financial Statements 2012
31
(c) Credit risk
The Group’s credit risk is primarily attributable to its trade receivables and other current assets. The Group’s cash and cash
equivalents are held across various UK financial institutions. During the year ended 31 December 2012, these comprised the
Bank of Scotland and Royal Bank of Scotland plc.
The concentration of credit risk from trade receivables and other current assets varies throughout the year depending on the
timing of transactions and invoicing of fees.
The property project management fees earned by Sigma Inpartnership arise from the work undertaken on the three
regeneration partnerships with Liverpool City Council, Salford City Council and Solihull Metropolitan Borough Council. The
basis of these fees for the coming year and beyond is agreed in advance with each partnership and each month the invoices
are approved by the partnership for payment. Consequently, the amounts outstanding at any one time generally represent only
one or two months’ fees and the credit risk of the customers is deemed to be low.
The other principal property management fee earned is from the management of the Winchburgh development. The customer
is connected to a major shareholder of Sigma and to one of Sigma’s Directors, and the credit risk is considered to be low.
For the Venture Capital activities, management fees are invoiced on a quarterly basis as set out in the Limited Partnership
Agreements and the respective amount drawn down from each limited partner. The majority of the limited partners are large
corporate entities, partnerships or governmental bodies with good credit ratings thereby minimising the risk of non-payment.
Other exposures of the Group are spread over a number of customers and counterparties with little concentration on any one entity.
The concentration of credit risk arising from trade receivables and other current assets is analysed below.
2012 2011
£’000 £’000
Property management fees due to Sigma Inpartnership 55 29
Other property management fees 82 125
Management fees due from Venture Funds and University Funds 177 185
Other trade receivables 374 267
Other debtors 8 34
Other accrued income and prepayments 68 227
764 867
The maximum exposure to credit risk for trade receivables and other current assets is represented by their carrying amount.
Other trade receivables includes £367,000 (2011: £168,000) of recoverable costs incurred in respect of a development in North
Solihull where Sigma Inpartnership is the development manager. Under the terms of the contract the costs will be recoverable
at the end of the project which is forecast to complete in early 2014.
(d)
Liquidity risk
The Group seeks to manage liquidity risk to ensure sufficient liquidity is available to meet the requirements of the business
and to invest cash assets safely and profitably. The Board reviews available cash to ensure there are sufficient resources for
working capital requirements and to meet the Group’s limited partner commitments to the Funds.
At 31 December 2012 and 31 December 2011 all amounts shown in the consolidated balance sheet under current assets and
current liabilities mature for payment within one year.
2.
Significant accounting estimates and judgements
Sources of estimation uncertainty
The preparation of the financial statements requires the Group to make estimates, judgements and assumptions that affect the
reported amount of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. The
Directors base their estimates on historical experience and various other assumptions that they believe are reasonable under the
circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
32
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Notes to the Financial Statements
continued
Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually made and are based on historic experience and other factors, including expectations
of future events that are believed to be reasonable in the circumstances.
As the use of estimates is inherent in financial reporting, actual results could differ from these estimates. The Directors believe the
following to be the key areas of estimation and judgement:
(i)
Fair value of unlisted investments
The Group believes that the most significant judgement area in the application of its accounting policies is establishing the
fair value of its unlisted investments. The matters taken into account when assessing the fair value of the unlisted investments
are detailed in the accounting policy on investments.
(ii)
Goodwill and impairment
The recoverable amount of goodwill is determined based on value in use calculations of the cash-generating units to which
it relates. Further detail on key assumptions, including growth rates, discount rates and the time period of these value in use
calculations is given in note 10.
(iii)
Fair value of identifiable net assets acquired
Upon acquisition of a business, its identifiable assets and liabilities are assessed to determine their fair value. The values
attributed to assets and liabilities as part of this process are, where appropriate, based on market values identified for
equivalent assets, together with management’s experience and assessments including comparison to the carrying value
of assets of a similar condition and age in the existing business.
(iv) Useful economic lives of intangible and tangible assets
In relation to the Group’s finite life intangible assets and property, plant and equipment, useful economic lives and residual
values of assets have been established using historical experience and an assessment of the nature of the assets involved.
Assets are assessed on an ongoing basis to determine whether circumstances exist that could lead to potential impairment
of the carrying value of such assets.
3.
Segmental information – business segments
At 31 December 2012 the Group is organised into two business segments: property (finance, residential development and
regeneration) and venture capital fund management plus holding company activities. The segment analysis for the year ended
31 December 2011 has been adjusted to include holding company activities.
The SSEF II was a significant customer of the Group with fund management fees earned in the year of £339,000 (2011: £550,000).
During the prior year the Group received one-off compensation payments totalling £800,000 from certain limited partners in the
Sustainable Energy Fund II as a result of the restructuring of that fund.
Regenco (Winchburgh) Limited was a significant customer of the Group with development management fees earned in the year
of £275,000 (2011: £137,000)
Sigma Capital Group plc
Annual Report & Financial Statements 2012
33
The segment analysis for the year ended 31 December 2012 is as follows:
Venture Holding Intra group
Property Capital Company adjustments Total
£’000 £’000 £’000 £’000 £’000
Revenue from services 1,479 847 - - 2,326
Trading (loss)/profit (36) 59 (2,572) 2,300 (249)
Loss on disposal of equity investments - (2) (5) - (7)
Unrealised loss on the revaluation of investments - (841) (338) 353 (826)
(Loss) / profit from operations (36) (784) (2,915) 2,653 (1,082)
Finance income 1 20 37 (36) 22
Finance costs (36) - - 36 -
Share of loss of Frontier IP - - - (111) (111)
(Loss) / profit before tax (71) (764) (2,878) 2,542 (1,171)
Total assets 1,625 4,107 4,309 (6,563) 3,478
Total liabilities (4,204) (2,140) (1,370) 6,833 (881)
Net (liabilities) / net assets (2,579) 1,967 2,939 270 2,597
Capital expenditure 1 6 1 - 8
Depreciation 6 16 1 - 23
The segment analysis for the year ended 31 December 2011 is as follows:
Venture Holding Intra group
Property Capital Company adjustments Total
£’000 £’000 £’000 £’000 £’000
Revenue from services 606 1,857 - 5 2,468
Trading (loss)/profit (663) 1,058 (293) (41) 61
Loss on disposal of equity investments - (123) - - (123)
Unrealised profit/(loss) on the revaluation of investments - 19 (1,139) 1,123 3
Discontinued operations 59 - - - 59
(Loss)/profit from operations (604) 954 (1,432) 1,082 -
Impairment of goodwill - - - (123) (123)
(Loss)/profit from operations after exceptional items (604) 954 (1,432) 959 (123)
Finance income 4 11 36 (36) 15
Finance costs (36) - - 36 -
Loss on disposal of controlling interest in Frontier IP - - - (79) (79)
Share of loss of Frontier IP - - - (228) (228)
Provision against holding in Frontier IP - - - (1,000) (1,000)
(Loss) / profit before tax (636) 965 (1,396) (348) (1,415)
Total assets 757 4,923 6,439 (7,564) 4,555
Total liabilities (3,271) (2,189) (635) 5,293 (802)
Net (liabilities) / net assets (2,514) 2,734 5,804 (2,271) 3,753
Capital expenditure - 42 - - 42
Depreciation 3 13 3 - 19
34
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Notes to the Financial Statements
continued
4.
Discontinued operations
The profit arising on the operations discontinued in the prior year of £59,000 relates to Strategic Investment Management Limited,
which was placed into liquidation in October 2011. The financial results for Strategic Investment Management Limited for the period
to liquidation are as follows:
2012 2011
£’000 £’000
Revenue - 114
Cost of sales - (13)
Administrative expenditure - (920)
Interest receivable - 1
Loss before tax - (818)
Revenue includes intercompany sales of £45,000. The loss before tax includes an intercompany bad debt provision of £515,000.
Much of the administrative expenditure will continue to be borne by other parts of the Group. The profit arising on the liquidation of
Strategic Investment Management Limited is after accruing for a tax refund due of £80,000. The basic and diluted loss per share
attributable to the profit arising on discontinued operations is 0.13p in each case.
5.
Expenses by nature
Expenses included in administrative expenses are analysed below.
2012 2011
£’000 £’000
Administrative expenses
Employee costs 1,894 1,625
Share based payments 15 16
Travel and entertainment 163 91
Depreciation 23 19
Amortisation 24 -
Provision for bad debts and bad debts written off 66 91
Provision for long term loan 28 -
Operating lease rentals:
- plant and machinery 4 2
- land and buildings (net) 114 83
Other premises costs 70 67
Audit services:
- Fees payable to Company auditor for the audit of the parent company and consolidated accounts 25 32
- the audit of the Company’s subsidiaries pursuant to legislation 24 39
Non-audit services:
- tax services 37 17
Other legal, professional and financial costs 178 225
Other property costs (130) 37
Administration costs 40 63
2,575 2,407
6.
Finance income
2012 2011
£’000 £’000
Interest income on short-term deposits and loans 22 15
Sigma Capital Group plc
Annual Report & Financial Statements 2012
35
7.
Directors and employees
The average monthly number of employees, including executive Directors, employed by the Group during the year was:
2012 2011
Number Number
Property 13 9
Venture capital 2 2
Administration 5 5
20 16
The aggregate remuneration was as follows:
2012 2011
£’000 £’000
Wages and salaries 1,392 1,268
Social security 178 158
Pension costs – defined contribution plans 87 78
Share options granted to Directors and employees 15 16
1,672 1,520
Remuneration comprises basic salary and pension contributions and some employees also receive a car allowance or contribution
to travel expenses. In addition other payments are made which are benefits in kind, being private health insurance and life assurance.
The type of remuneration is constant from year to year. Ad hoc bonuses may be paid to reward exceptional performance. Such
bonuses are decided by the Remuneration Committee on the recommendation of the Chief Executive Officer. Share options are
also awarded to employees from time to time. In the past the share options awarded had performance criteria attached which
related to the stock market performance of the Company. More recently the Remuneration Committee has decided that this type of
performance condition was not appropriate to individual employees given the volatility of smaller company stocks including those
of the Company. The granting of share options to individual employees is determined taking into account seniority, commitment to
the business and recent performance.
The key management of the Group comprises the Sigma Capital Group plc Board Directors. The total remuneration for each director
is shown below.
2012 2011 2012 2011 2012 2011 2012 2011
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Salary
Other benefits
Total
Pension
Executive
GF Barnet 240 240 2 2 242 242 5 5
MD Cole 112 112 8 9 120 121 12 12
MS Hogarth 140 140 6 10 146 150 12 12
J Hamilton 90 35 5 1 95 36 9 4
G Thomson 90 35 1 2 91 37 9 4
G Hogg * 50 - 3 - 53 - 3 -
Non-executive
D Sigsworth 24 20 - - 24 20 - -
J McMahon ** 28 9 - - 28 9 - -
774 591 25 24 799 615 50 37
*
From date of appointment of 11 June 2012 to 31 December 2012
** J McMahon’s director’s remuneration is payable to West Coast Capital
36
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Notes to the Financial Statements
continued
8.
Taxation
2012 2011
£’000 £’000
UK corporation tax on profits of the year - -
Deferred tax - -
Tax on loss on ordinary activities - -
The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The differences are explained below.
2012 2011
£’000 £’000
Loss before tax (1,171) (1,415)
Loss before tax at the effective rate of corporation tax in the UK of 24.5% (2011: 26.5%) (287) (375)
Effects of:
Expenses not deductible for tax purposes 160 257
Capital allowances in excess of depreciation (2) (12)
Unrelieved losses arising in the year 219 132
Non taxable income (90) (2)
Tax charge for the year - -
The Group’s deferred tax assets, other than those relating to short term timing differences, are not recognised in accordance with
Group policy. The amounts set out below will be available for offset against future taxable profits. These are stated using a
corporation tax rate of 23% (2011: 25%).
2012 2011
£’000 £’000
Unrelieved management expenses and other losses 4,593 4,930
Unrelieved capital losses 931 1,012
Excess of depreciation over capital allowances 10 24
5,534 5,966
9.
Loss per share
The calculation of the basic loss per share for the year ended 31 December 2012 and 31 December 2011 is based on the losses
attributable to the shareholders of Sigma Capital Group plc divided by the weighted average number of shares in issue during the
year.
Loss Weighted
attributable average Basic loss
to shareholders number of per share
£’000 shares pence
Year ended 31 December 2012 (1,171) 45,571,656 (2.57)
Year ended 31 December 2011 (1,401) 44,245,828 (3.17)
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of
conversion of all potential dilutive ordinary shares. The Company has only one category of potentially dilutive ordinary shares, those
share options granted where the exercise price is less than the average price of the Company’s shares during the year. Diluted loss
per share is calculated by dividing the same loss attributable to equity holders of the Company as above by the adjusted number of
ordinary shares in issue during the year ended 31 December 2012 of 45,571,656 (2011: 44,404,212). For both the year ended 31
December 2012 and the year ended 31 December 2011, as the calculation for dilutive loss per share reduces the net loss per share,
the diluted loss per share shown is the same as the basic loss per share.
Sigma Capital Group plc
Annual Report & Financial Statements 2012
37
10. Goodwill and other intangible assets
Other
Goodwill intangibles Total
£’000 £’000 £’000
Cost
At 1 January 2011 3,575 - 3,575
Disposal arising from de-consolidation of Frontier IP (3,452) - (3,452)
Arising on accounting for Frontier IP as an associate 131 - 131
Acquisition of Sigma Inpartnership 322 - 322
At 31 December 2011 576 - 576
Acquisition of Sigma Inpartnership 211 105 316
At 31 December 2012 787 105 892
Amortisation and impairment
At 1 January 2012 1,366 - 1,366
Disposal arising from de-consolidation of Frontier IP (1,366) - (1,366)
Impairment relating to Frontier IP 131 - 131
Impairment relating to Strategic Investment Management Holdings 123 - 123
At 31 December 2011 254 - 254
Amortisation charge - 24 24
At 31 December 2012 254 24 278
Carrying value
At 31 December 2012 533 81 614
At 31 December 2011 322 - 322
Acquisition of Sigma Inpartnership
In the prior year Sigma acquired the whole of the issued ordinary share capital of Sigma Inpartnership on 12 August 2011 by the
issue of 2,170,078 ordinary shares.
Under the terms of the acquisition agreement, in addition to the consideration payable on the date of acquisition, once Sigma
Inpartnership has achieved a minimum overhead recovery in any one year, one of the vendors, West Coast Capital Trading Limited
(“WCC Trading”) is entitled to a share of any future development profits from Sigma Inpartnership’s existing projects at the date of
acquisition (the “Development Profit”). This entitlement arises from the rights attached to a deferred share held by WCC Trading in
Sigma Inpartnership. Out of the first £10 million of Development Profit due to Sigma Inpartnership, Sigma Inpartnership will retain a
minimum of £6.9 million and will pay WCC Trading a maximum dividend of £3.1 million.
The assets and liabilities arising from the acquisition are set out below.
£’000
Goodwill 165
Tangible fixed assets 9
Net working capital (47)
Cash 63
190
During the current year, management have assessed the fair value of the deferred consideration and separable intangible assets as
follows:
Measurement
2011 period 2012
£’000 £’000 £’000
Fair value of shares issued 347 - 347
Fair value of deferred consideration - 316 316
Less:
Fair value of net assets acquired (190) - (190)
Fair value of contractual relationships - (105) (105)
Goodwill arising on acquisition 157 211 368
38
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Notes to the Financial Statements
continued
Impairment
Goodwill and other intangibles arising on consolidation represent the excess of cost of an acquisition over the fair value of the
Group’s share of the net assets of the acquired subsidiary at the date of acquisition. The carrying amount of intangible assets is
allocated to the cash generation units (CGUs) as follows:
Sigma Inpartnership
2012 2011
£’000 £’000
Goodwill 533 322
Intangible assets 81 -
The major assumption used in value in use calculations is as follows:
Pre-tax discount rate 9%
The directors estimate discount rates using pre-tax rates that reflect current market assessment of the time value of money and the
risk specific to the CGU. The pre-tax discount rate is based on a number of factors including the risk free rate in the UK and the
inherent risk of the forecast income streams included in the Group’s cash flow projections.
The value in use cashflows are based upon management approved budgets for a period of one year and on specific assumptions
and projections on a project by project basis for a further four years, using management’s detailed knowledge and expectations of
the outcome of each project. Thereafter a conservative estimate of continuing cash flows is included assuming nil growth.
The results of the value in use calculations for the CGU shows that Sigma Inpartnership exceeds its carrying amount by £723,000.
If the pre-tax discount rate was to increase from 9% to 15.4% then the carrying amount and the recoverable amount would be equal.
11. Property and equipment
Leasehold Fixtures and Computer
improvements office equipment equipment Total
Group £’000 £’000 £’000 £’000
Cost
At 1 January 2011 43 77 97 217
Acquisition of Sigma Inpartnership - 24 51 75
Additions - 2 40 42
Disposals - (48) (36) (84)
At 31 December 2011 43 55 152 250
Additions - 3 5 8
At 31 December 2012 43 58 157 258
Depreciation
At 1 January 2011 41 67 94 202
Acquisition of Sigma Inpartnership - 17 49 66
Charge for the year 1 4 14 19
Disposals - (42) (36) (78)
At 31 December 2011 42 46 121 209
Charge for the year 1 8 14 23
At 31 December 2012 43 54 135 232
Net book value
At 31 December 2012 - 4 22 26
At 31 December 2011 1 9 31 41
Sigma Capital Group plc
Annual Report & Financial Statements 2012
39
Leasehold Fixtures and
improvements office equipment Total
Company £’000 £’000 £’000
Cost
At 1 January 2011 7 19 26
Disposals - (7) (7)
At 31 December 2011 7 12 19
Additions - 1 1
At 31 December 2012 7 13 20
Depreciation
At 1 January 2011 5 16 21
Charge for the year 1 3 4
Accumulated depreciation on disposals - (7) (7)
At 31 December 2011 6 12 18
Charge for the year 1 - 1
At 31 December 2012 7 12 19
Net book value
At 31 December 2012 - 1 1
At 31 December 2011 1 - 1
Group assets which are held under finance leases have been capitalised with a net book value of £nil (2011: £2,000) on which
depreciation of £2,000 has been charged in the year (2011: £1,000). At 31 December 2012 total future lease payments amounted to
£nil (2011: £2,000). There are no assets held under finance leases by the Company in the current or preceding year.
12.
Investment in subsidiaries
Company Company
2012 2011
£’000 £’000
At 1 January 2012 2,471 2,471
At 31 December 2012 2,471 2,471
Investments in group undertakings are stated at cost.
Principal Group investments
The Company has investments in the following principal subsidiary undertakings.
Country of Class of
incorporation capital %
Sigma Inpartnership Limited
- principal activity of this group is property management and regeneration Scotland Ordinary 100.0
Sigma Capital Property Limited
- principal activity is property management Scotland Ordinary 100.0
Strategic Property Asset Management Limited
- principal activity is property management Scotland Ordinary 100.0
Sigma Technology Management Limited
- principal activity is fund management and business advice England Ordinary 100.0
Sigma Technology Investments Limited
- principal activity is investing in the funds managed by STM England Ordinary 100.0
40
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Notes to the Financial Statements
continued
13.
Investment in associate company
Group Group Company Company
2012 2011 2012 2011
£’000 £’000
At 1 January 400 - 749 -
Transfer from investment in subsidiary - - - 1,872
Additions 25 - 25 -
Group’s share of net assets (369) 1,497 - -
Share of losses (111) (228) - -
Movement in provision 369 (869) (353) (1,123)
At 31 December 314 400 421 749
Group share of net assets 814 1,269 - -
Provision (500) (869) - -
At 31 December 314 400 - -
Frontier IP undertook a share placing on 31 January 2011, following which Sigma’s holding was reduced from 65.47% to 46.69%.
On the 3 December 2012, Frontier IP undertook a further share placing which further reduced Sigma’s holding to 26.86%.
At the end of the year the bid price for Frontier IP was 12p (2011: 23p)
14.
Financial assets at fair value through profit and loss
Group Group Company Company
2012 2011 2012 2011
£’000 £’000 £’000 £’000
At 1 January 2012 1,478 2,057 - -
Unquoted securities held by Frontier IP - (461) - -
Additions 38 76 - -
Disposals (19) (52) - -
Amounts written off - (111) - -
Fair value write down (806) (31) - -
At 31 December 2012 691 1,478 - -
Financial assets at fair value through profit and loss comprise the following:
Group Group Company Company
2012 2011 2012 2011
£’000 £’000 £’000 £’000
Venture Capital funds 691 1,473 - -
Options in unquoted securities - 5 - -
691 1,478 - -
The total fair value adjustments made during the year relating to investments, both financial assets at fair value through profit and loss
and trading investments are set out below.
Group Group Company Company
2012 2011 2012 2011
£’000 £’000 £’000 £’000
Financial assets at fair value through profit and loss:
- the Funds (801) (31) - -
- Unquoted securities (5) - - -
Trading investments (see note 17) (20) 34 - -
(826) 3 - -
Sigma Capital Group plc
Annual Report & Financial Statements 2012
41
15.
Long term loan
Group Group Company Company
2012 2011 2012 2011
£’000 £’000 £’000 £’000
Long term loan - 10 - -
The long term loan is a 5-year loan to SFX Technologies Ltd, an investee company of the Venture Fund and of the Innovation Fund.
STM has provided a loan facility to SFX Technologies along with other shareholders of the company under which STM’s total
commitment is £35,000. The loan is secured and attracts interest of 10% per annum plus there is a 20% redemption premium.
The loan expires on 28 November 2016. At the end of the year, due to the uncertainty of recovery of the loan, the amount
outstanding was provided for in full.
16.
Trade receivables and other current assets
Group Group Company Company
2012 2011 2012 2011
£’000 £’000 £’000 £’000
Trade receivables 688 606 2 -
Receivables from Group undertakings – current - - 100 51
Receivables from Group undertakings – non current - - 495 2,946
Social security and other taxes - - 7 -
Other debtors 8 34 - 11
Prepayments and accrued income 68 227 291 20
764 867 895 3,028
Less receivables from Group undertakings - non current - - (495) (2,946)
Current portion 764 867 400 82
Trade receivables
Group Group Company Company
2012 2011 2012 2011
£’000 £’000 £’000 £’000
Trade receivables not due 257 244 55 49
Trade receivables past due 1-30 days 19 76 44 2
Trade receivables past due 31-60 days 22 10 8 -
Trade receivables past due 61-90 days 14 12 - -
Trade receivables past due over 90 days 555 412 7 -
Gross trade receivables at 31 December 2012 867 754 114 51
Provision for bad debt at 1 January 2012 148 112 - -
Debts provided for in the year 59 71 12 -
Debts written off (28) - - -
Provision for Frontier IP debtors - (35) - -
Provision for bad debt at 31 December 2012 179 148 12 -
Net trade receivables at 31 December 2012 688 606 102 51
The Directors consider that the carrying amount of trade receivables approximates to their fair value. Debts provided for and written
off are determined on an individual basis and included in Administrative expenses in the financial statements. Trade receivables past
due over 90 days includes £367,000 (2011: £168,000) expected to be received in the first quarter of 2014. In the prior year the figures
in Note 5, Expenses by nature, include bad debts charged by Frontier IP and Strategic Investment Management Ltd, both of which
were not consolidated in the Group’s net assets as at 31 December 2011. The Group’s maximum exposure on credit risk is fair value
on trade receivables as presented above. The Group has no pledge as security on trade receivables.
42
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Notes to the Financial Statements
continued
17.
Trading investments
Group Group Company Company
2012 2011 2012 2011
£’000 £’000 £’000 £’000
Unquoted fund – Europe - 84 - 84
Quoted equity investments – UK 45 88 - -
45 172 - 84
The fair value of quoted equity investments is based on their current bid prices in an active market. Changes in fair value of trading
investments are recorded in unrealised profits/(losses) on the revaluation of investments in the comprehensive income statement.
18.
Trade and other payables
Group Group Company Company
2012 2011 2012 2011
£’000 £’000 £’000 £’000
Trade payables 135 166 11 31
Payables to Group undertakings - - 1,252 554
Other creditors 316 7 - -
Provisions - 282 - -
Social security and other taxes 190 94 - -
Accruals and deferred income 240 253 107 55
881 802 1,370 640
The Directors consider that the carrying amount of trade payables approximates to their fair value.
19. Share capital and premium
Group and Company
Number of Ordinary Share
shares shares premium Total
£’000 £’000 £’000
At 1 January 2011 43,401,578 434 4,196 4,630
Issue of shares for acquisition of Sigma Inpartnership at 16p per share 2,170,078 22 325 347
Expenses of share issue - - (40) (40)
At 31 December 2011 45,571,656 456 4,481 4,937
At 31 December 2012 45,571,656 456 4,481 4,937
The total authorised number of ordinary shares is 130,000,000 (2011: 130,000,000) with a par value of 1p per share (2011: 1p).
All issued shares are fully paid.
20. Share options
The Company has two option schemes for executive Directors and employees, the Sigma Capital Group plc Company Share Option
Scheme 2010, which has received Inland Revenue approval, and the Sigma Capital Group plc Unapproved Share Option Scheme
2010. All options are granted at the market value of the shares at the date of grant. Both share option schemes run for a period of ten
years. All employees are eligible to participate in the schemes. No payment is required from option holders on the grant of an option.
No options over ordinary shares (2011: 3,230,832) were granted during the year. No performance conditions or market conditions are
attached to these options.
Sigma Capital Group plc
Annual Report & Financial Statements 2012
43
Movements in the number of share options outstanding and their related weighted average exercise prices were as follows:
2012 2011
Weighted Weighted
average exercise average exercise
price in pence Options price in pence Options
per share (‘000s) per share (‘000s)
At 1 January 9 4,106 12.7 960
Granted - - 7.9 3,231
Surrendered - - - -
Expired 9 (869) 11.3 (85)
At 31 December 11.2 3,237 9 4,106
Of the 3,237,000 outstanding options (2011: 4,106,000), 615,000 had vested at 31 December 2012 (2011: 100,000).
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Exercise price
pence per share 2012 2011
2018 25.0 100,000 100,000
2019 11.25 515,000 775,000
2021 8.0 2,122,499 2,730,832
2021 7.5 500,000 500,000
No options were granted in the current year. The weighted average fair value of options granted to executive Directors and employees
during the prior year determined using the Black-Scholes-Merton valuation model was 2p per option. The significant inputs into the
model were exercise price shown above, volatility of 30%, dividend yield of 0%, expected option life of 4 years and annual risk free
interest rate of 2.6% for options granted in May 2011 and 2.0% for options granted in July 2011. Future volatility has been estimated
based on comparable information rather than historical data.
21. Other reserves
The capital redemption reserve was created on the buy-back of shares in the Company and their subsequent cancellation, being the
nominal value of the shares cancelled. The merger reserve and capital reserve were created on the merger of STM with the Company.
The fair value of equity-settled share-based payments is expensed on a straight line basis over the vesting period and the amount
expensed in each year is transferred to the share-based payment reserve. The movement in reserves for the years ended 31
December 2012 and 2011 is set out in the Consolidated and Company Statements of Changes in Equity.
22. Operating lease commitments
The Company leases the Group’s offices in Edinburgh under a non-cancellable operating lease which expires in 2016. Sigma
Inpartnership leases the Group’s offices in Manchester under a non-cancellable operating lease which expires in 2016 but which
has a lessee break in 2013. Other Group companies lease various plant and machinery under non-cancellable lease agreements.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
2012 2011
Plant and Land and Plant and Land and
machinery buildings machinery buildings
£’000 £’000 £’000 £’000
The Group
Within 1 year 5 110 - 114
From 2-5 years 12 285 2 395
After 5 years - - - -
The Company
Within 1 year - 95 - 95
From 2-5 years - 285 - 380
After 5 years - - - -
Part of the Edinburgh premises was sub-let to a third party. This third party was placed into Administration in February 2012.
Subsequently, the space has been sub-let to a third party under licence. The future minimum licence payments to be received from
two to five years as at 31 December 2012 were £12,000 (2011: sub-lease payments £105,000).
44
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Notes to the Financial Statements
continued
23. Cash flows from operating activities
Group Group Company Company
2012 2011 2012 2011
£’000 £’000 £’000 £’000
Loss before tax (1,171) (1,415) (2,878) (1,396)
Adjustments for:
Share-based payments 15 16 13 3
Depreciation 23 19 1 3
Amortisation 24 - - -
Finance income (22) (15) (37) (36)
Impairment of goodwill - 123 - -
Loss relating to associate company 111 1,310 353 1,123
Provision against long term loan 28 - - -
Fair value loss on financial assets at fair value through profit or loss 806 31 - -
Loss on disposal of financial assets at fair value through profit or loss - 111 - -
Loss on disposal of trading investments at fair value through profit or loss 7 12 5 -
Changes in working capital:
Trade and other receivables 103 (333) 2,169 37
Other financial assets at fair value through profit or loss 21 (33) (16) 16
Trade and other payables (237) (205) 730 340
Cash flows from operating activities (292) (379) 340 90
24. Revenues from the Funds and contingent liabilities
Group companies are the general partners of the Venture Fund, the Innovation Fund, the Sustainable Energies Fund, the Sustainable
Energy Fund II, the RGU Fund and the Dundee Fund and as such are entitled to a guaranteed revenue stream from the Funds but
otherwise do not participate in the Funds’ assets. If, upon the winding up of the Funds, the liabilities of the Funds exceed the limited
partners’ capital and loans, the general partners are liable for the shortfall of assets. The Directors are of the opinion that no liability is
likely to arise in this respect. Details of the Funds are given in the Business Review.
25. Related party transactions
During the year the Group received consultancy and other fees from companies in which STM or a Director of a Group company was
also a director. The companies and the fees invoiced in the period while STM or a Group company Director was also a director of that
company, are detailed below together with the amount outstanding at 31 December 2012
Fees invoiced Amount
in the period outstanding
less amounts at 31 December
written off 2012
Period £’000 £’000
DEM Solutions Ltd 1 Jan – 31 Dec 20 4
i-design Group plc 1 Jan – 31 Dec 20 2
Onzo Ltd 1 Jan – 31 Dec 20 6
Total year ended 31 December 2012 60 12
Total year ended 31 December 2011 63 20
Individual Directors of Group companies also have personal investments in certain of these companies. These investments were
acquired at the same time or subsequent to the company becoming a client of Sigma. Directors and staff of the Group are entitled
to participate in the funding rounds of client companies, the level of such investment being restricted to 5 per cent of the total funds
invested by the Group at the time of the relevant subscription where the investment opportunity is not being offered to third parties
and to 20 per cent in other cases.
Sigma charged Frontier IP a fee for directors’ services of £48,000 (2011: £50,000), recharged administrative and Frontier IP employee
expenses of £11,000 (2011: £25,000) and charged for rent of £9,000 (2011: £27,000). Frontier IP charged Sigma for employee
services of £37,000 (2011: £37,000). At 31 December 2012, Sigma was owed £5,000 (2011: £6,000) and owed Frontier IP £nil (2011:
£11,000). Sigma subscribed fees of £25,000 due from Frontier IP for shares of Frontier IP in that company’s share placing.
Sigma Capital Group plc
Annual Report & Financial Statements 2012
45
Sigma had transactions in the year with Regenco (Winchburgh) Ltd (“Regenco”), a related party due to James McMahon, a Director
of Sigma, also being a director of Regenco. Sigma charged Regenco property management fees of £275,000 (2011: £137,000).
At 31 December 2012, Regenco owed Sigma £nil (2011: £120,000).
Regenco is owned by Regenco Properties LLP. The LLPs of this partnership are Regenco General Partner Ltd (which is owned by
Regenco Properties LLP) and West Coast Capital (Retail Parks) Ltd (which is owned by West Coast Capital Investments Ltd).
West Coast Capital Investments Ltd, is a major shareholder of Sigma, holding over 20% of the issued share capital.
Sigma had transactions in the prior year with WCC Trading, a related party due to James McMahon, a Director of Sigma, also being
a director of WCC Trading. On 12 August 2011, Sigma acquired Sigma Inpartnership in which WCC Trading was a shareholder. Full
details of the terms of the acquisition are set out note 10 including the right of WCC Trading to a share of any future development
profits generated by Sigma Inpartnership from existing projects at the date of acquisition. There were no other transactions with
WCC Trading during the year or prior year.
46
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Five Year Record
2012 2011 2010 2009 2008
Restated
£’000 £’000 £’000 £’000 £’000
Revenue 2,326 2,468 1,836 2,414 4,729
Other operating income (833) (61) (417) 1,126 (1,019)
Total revenue 1,493 2,407 1,419 3,540 3,710
(Loss)/profit from operations (1,082) (123) (3,596) 890 (780)
Net finance income 22 15 31 14 232
Losses arising from associate company (111) (1,307) - - -
(Loss)/profit before tax (1,171) (1,415) (3,565) 904 (548)
Taxation - - (10) 69 (69)
(Loss)/profit for the year (1,171) (1,415) (3,575) 973 (617)
Attributable to:
Equity holders of the Company (1,171) (1, 401) (3,539) 1,719 (695)
Minority interests - (14) (36) (746) 78
(1,171) (1,415) (3,575) 973 (617)
Net assets employed 2,597 3,753 5,682 9,611 8,108
Basic (loss)/earnings per ordinary share (pence) (2.57) (3.17) (7.59) 3.68 (1.51)
Sigma Capital Group plc
Annual Report & Financial Statements 2012
47
Proxy Form
I/we
FULL NAME(S) IN BLOCK CAPITALS
of
ADDRESS IN BLOCK CAPITALS
being a member/members of Sigma Capital Group plc hereby appoint as my/our proxy, to vote for me/us on my/our behalf at the Annual
General Meeting of the Company to be held at 10:00am on 19 June 2013 at 41 Charlotte Square, Edinburgh EH2 4HQ and at any
adjournment thereof, the duly appointed Chairman of the meeting or (see Note 1)
My/Our proxy is to vote as indicated by ‘X’ below in respect of the resolutions set out in the notice of the meeting.
Resolutions
Ordinary Resolutions
1.
2.
3.
4.
5.
6.
7.
8.
9.
Receipt and adoption of the 2012 Financial Statements of the Company, together with
the Reports of the Directors and the auditor thereon
Re-appointment of Graeme Hogg as a director
Re-appointment of Duncan Sutherland as a director
Re-appointment of William MacLeod as a director
Re-appointment of David Sigsworth as a director
Re-appointment of Mark Hogarth as a director
Approval of the report on Directors’ remuneration for the year ended 31 December 2012
Re-appointment and remuneration of the auditor
General authority to allot securities
Special Resolutions
10. General disapplication of pre-emption rights
11.
Purchase of own shares
For
Against
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
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nn
nn
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Signature(s) or Common Seal
Date
FULL NAME (BLOCK CAPITALS)
Notes
1.
2.
3.
4.
A member may appoint a proxy of his or her choice. If a proxy
other than the Chairman is preferred, delete the words “the
duly appointed Chairman of the meeting or” and enter the
name of your proxy in the space provided. A proxy need
not be a member of the Company, but must attend the
meeting to represent you.
5.
6.
In the case of a corporation, the form of proxy must be either
given under its common seal or signed by a duly authorised
officer or attorney.
In the case of joint holders, the first-named holder of
the shares must sign the form of proxy.
Only members or their proxies may attend the meeting.
#
Completion and return of the form of proxy will not prevent
a member from attending and voting in person at the meeting
if the member so wishes.
Please indicate with ‘X’ in the boxes in the form of proxy how
you wish your proxy to vote on each of the resolutions. If no
indication is given your proxy will have discretion to vote or
to abstain (including on any other matter which may properly
come before the meeting) as he/she thinks fit. To be valid the
form of proxy must be received by the Company Secretary
at 41 Charlotte Square, Edinburgh EH2 4HQ no later than
10:00am on 17 June 2013.
48
Sigma Capital Group plc
Annual Report & Financial Statements 2012
Design and production
Smith Brands Ltd
www.smithbrands.com
Sigma Capital Group plc
41 Charlotte Square
Edinburgh EH2 4HQ
Tel +44 (0)131 220 9444
Fax +44 (0)131 220 9445
Oxford Place
61 Oxford Street
Manchester M1 6EQ
Tel +44 (0)161 200 5300
Fax + 44 (0)161 236 7838
Cornwall Building
45-51 Newhall Street
Birmingham
B3 3QR
Tel +44 (0)121 213 4755
Fax +44 (0)121 222 4101
edinburgh@sigmacapital.co.uk
www.sigmacapital.co.uk