Sigma Capital Group plc
Annual Report & Financial Statements
for the year ended 31 December 2013
City Wharf, Aberdeen
Winchburgh Development
Edinburgh, Head Office
Higher Broughton Regeneration
Liverpool Regeneration
Manchester Office
North Solihull Regeneration
London Office
Specialists
Contents
Key Points
Chairman’s Statement
Strategic Report
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 2013
1
KEY POINTS
Revenue from services
- revenue from property activities
Loss from operations
Loss before tax
Loss per share
Net assets per share
Cash balances
2013
£5.81m
£5.34m
£(0.36m)
£(0.86m)
2012
£2.33m
£1.48m
£(1.08m)
£(1.17m)
(1.87)p
5.5p
(2.57)p
5.7p
% change
150% improvement
261% improvement
67% improvement
26% improvement
27% improvement
(4%) reduction
£1.07m
£1.02m
5% improvement
> 2013 represented a turning point in the
Group’s development
> Proposed share placing to raise £8.0m gross
to support Sigma’s growth ambitions
-
> Sigma’s objective to develop a funding
model for the creation of a large-scale
portfolio of new privately rented homes in
the UK moved forward significantly with:
formation in November 2013 of a Joint
-
Venture with Gatehouse Bank plc for a
proposed roll-out of up to c. 6,600 new
rental homes across the UK (with
estimated development value of £700m)
- commencement of the first phase of
the roll-out is subject to bank financing
- venture is supported by Sigma’s
local authority partnerships
> Property activities made encouraging
progress
- existing local authority partnerships
continued to generate good income
- North Arran Way development in North
Solihull close to completion
- discussions with additional local
authorities
- Winchburgh development, near
Edinburgh, progressing well
> Exit from historic venture capital activities
substantially completed
> Growth prospects remain very positive
2
Sigma Capital Group plc
Annual Report & Financial Statements 2013
“ I am delighted to report on the substantial progress Sigma has
made during the course of 2013. Although the full financial
benefits are not yet evident in Sigma’s financial performance,
we believe that the year represents a turning point in the
Group’s development and in its potential to accelerate growth
and earnings.
The point we have reached today with our PRS model has
been in development over the last three years and our joint
venture with Gatehouse marks a significant milestone. Our
strong relationships with our local authority partners and track
record in urban regeneration have been key to the
development of our model and the Gatehouse agreement.
Once bank financing is in place, the roll-out of the first phase of
the joint venture, the construction of c. 2,000 new rental homes,
can commence.
We are now focused on broadening our local authority
relationships to widen the geographic exposure of our PRS
model. We also believe that our PRS model is extendable into
the social housing market.
With both local and central government support for our PRS
initiative and with the backing of Gatehouse, we believe that
2014 will be another significant year for the Group. The Board
views the year ahead with confidence.”
David Sigsworth
Chairman
Sigma Capital Group plc
Annual Report & Financial Statements 2013
3
Chairman’s Statement
I am delighted to report on the substantial
progress Sigma Capital Group plc (“Sigma”
or “the Group” or “the Company”) has
made during the course of 2013. Although
the financial benefits are not yet fully evident
in Sigma’s financial performance, we
believe that the year represents a turning
point in the Group’s development and in its
potential to accelerate growth and earnings.
As previously reported, management has
been focused on the delivery of a
substantial funding model for the roll-out of
a large-scale portfolio of new rental homes
in the UK. A key moment in the delivery of
this Private Rented Sector (“PRS”) portfolio
was reached in November 2013 when we
announced we had agreed a £700m joint
venture with Gatehouse Bank plc
(“Gatehouse”) for the phased roll-out of up
to c. 6,600 new rental homes to create one
of the largest single new build residential
housing portfolios in the UK, with the first
phase comprising c. 2,000 new homes
(“the PRS Fund”).
Given the UK’s critical shortage of homes,
our plans have attracted the attention
of both national and local government.
Our announcement in November had the
backing of both the Prime Minister and
the UK Secretary of State for Business,
Innovation and Skills, and we are delighted
to have their support as we deliver our
innovative model. Underpinning the model
are our local authority partnerships and the
first phase of the planned roll-out has been
strongly supported by Liverpool and Salford
City Councils, with 22 sites totalling over
90 acres across the North West already
identified. We are currently in advanced
discussions with leading banks for the bank
financing to deliver this first phase. Once
this financing is secured, development can
begin, with our house building and lettings
partners already in place. Sigma will
generate revenue through the construction
and investment phases of the project as
well as participating in the eventual capital
upside. We provide indications of the levels
of fees which could be expected within the
Strategic Report.
We have continued to make good progress
with our PRS portfolio in the new financial
year and in February 2014 announced that
we have agreed outline terms and an
exclusivity period to acquire our first London
site. The site is earmarked for 318 new
homes and is situated within the Barking
Riverside development in east London,
which is a 443 acre site with outline planning
permission for one of the largest residential
regeneration schemes in the UK.
As we have previously reported, we expect
to agree terms to acquire further sites in
Greater London, the South East and
elsewhere in the UK including Scotland
for our PRS portfolio. Our target is to create
a portfolio of in excess of 10,000 residential
units across the key cities in England,
which would have an estimated potential
development cost of in excess of £1 billion.
We are in discussions with other major local
authorities on how we can assist their new
homes and regeneration objectives.
To support our plans and to enable us to
capitalise on our early-mover advantage,
we are proposing a placing of new shares
to raise £8m gross. A circular, containing
full details of the proposed placing and the
notice of a general meeting of the Company
to approve resolutions in connection with
the proposed placing, is being sent to
shareholders on 19 March.
While the significant progress we have
achieved with our PRS model represents
the most important development of 2013,
our team continued to make good progress
with our regeneration activities with our local
authority partnerships. In addition, our asset
management services, which are principally
focused on the management of the
Winchburgh development in Edinburgh and
the City Wharf development in Aberdeen,
also delivered good results. More details
are provided in the Strategic Report.
Our objective to exit from our historic
venture capital activities was substantially
completed by the end of 2013. The disposal
of our remaining holding in Frontier IP
Group Plc prior to the year end also helps
to achieve our goal of focusing the Group
entirely on its residential development and
management models and the expansion
of our regeneration activities.
Results
Revenue from services for the year to 31
December 2013 increased by 150% to
£5.81m (2012: £2.33m). This reflected an
increase in the revenue generated from
property activities of 261% to £5.34m (2012:
£1.48m). As expected, revenue generated
by the venture capital activities reduced,
decreasing to £0.47m (2012: £0.85m).
The loss from operations reduced by 67%
to £0.36m (2012: £1.08m). The reduction
was helped by a realised profit on disposal
of equity investments in the year plus a
much smaller unrealised loss on the
revaluation of investments than in the prior
year. Administrative expenses increased
slightly by 3.5%.
The loss before tax for the year decreased
by 26% to £0.86m (2012: £1.17m) reflecting
the factors discussed above, a profit arising
on the sale of part of the holding in Frontier
IP Group Plc in August 2013 but also an
adverse exceptional item of £0.53m. This
exceptional charge arose from the purchase
of the deferred share in Sigma Inpartnership
4
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Chairman’s Statement
continued
Board changes
Outlook
Reflecting our substantially completed exit
from historic venture capital activities, Mark
Hogarth, Investment Director, has today
stepped down from the Board. Mark joined
Sigma in 2002 and was appointed to the
Board in 2007. Over this time Mark has
made a substantial contribution to the
Group and the Board would like to thank
him for his hard work and commitment.
We wish him well for the future.
Staff
The success we have achieved this year
has been delivered by the efforts of our
highly experienced and talented team and,
on behalf of the Board, I would like to thank
all staff for their enthusiasm and dedication
in helping to bring the Group to the exciting
position it is in today.
The point we have reached today with our
PRS model has been in development over
the last three years and our joint venture
with Gatehouse marks a significant
milestone. Our strong relationships with
our local authority partners and track record
in urban regeneration have been key to
the development of our model and the
Gatehouse agreement. Once bank financing
is in place, the roll-out of the first phase
of the joint venture, the construction of
c.2,000 new rental homes, can commence.
We are now focused on broadening our
local authority partnerships to widen the
geographic exposure of our PRS model.
We also believe that our PRS model is
extendable into the social housing market.
With both local and central government
support for our PRS initiative and with the
backing of Gatehouse, we believe that
2014 will be another significant year for
the Group. The Board views the year ahead
with confidence.
David Sigsworth
Chairman
18 March 2014
Ltd in December 2013. During the year
ended 31 December 2012, we assessed
the fair value of the deferred consideration
arising from the deferred share as £0.32m.
In order to comply with accounting
standards, this was based on an appraisal
of only those projects which existed at the
date of acquisition of Sigma Inpartnership
Ltd in August 2011. The actual price paid
for the deferred share was £0.85m and the
difference between the two figures has been
expensed in the year under accounting
rules. The acquisition was funded by a
placing of 2,278,582 ordinary shares of
1p each at a price of 39p per share.
We are acting as developer on a
development project in North Solihull at
North Arran Way (“NAW”). Accounting
rules require that we recognise the full
development revenue and cost of the
project rather than just fees receivable.
As a result, the Comprehensive Income
Statement includes turnover of £3.69m
and cost of sales of £3.55m relating to NAW.
The balance sheet also includes accrued
income of £3.69m and a short term loan of
£3.17m which was taken out during the year
to fund the development and is secured on
the development. The development has
been forward sold and the loan is expected
to be repaid in full following practical
completion of NAW.
Net assets per share at the year-end stood
at 5.5p (2012: 5.7p) and cash balances at
the year end increased by 5% to £1.07m
(2012: £1.02m).
The Directors do not recommend the
payment of a dividend for the year.
Sigma Capital Group plc
Annual Report & Financial Statements 2013
5
Strategic Report
The Directors have pleasure in presenting
their Strategic Report for the year ended
31 December 2013.
Principal activity
Sigma, together with its subsidiaries, is
focused on urban regeneration, property
asset management, property finance and
property development.
Sigma is a public limited liability company
incorporated in England. It acts as a holding
company and at 31 December 2013 had
five principal wholly owned subsidiaries:
> Sigma Inpartnership Ltd (“Sigma
Inpartnership”)
> Sigma Capital Property Ltd (“SCP”)
> Strategic Property Asset Management
Ltd (“SPAM”)
> Sigma Technology Management Ltd
(“STM”)
> Sigma Technology Investments Ltd
(“STI”)
During 2013, Sigma had one associate
company, Frontier IP Group Plc (“Frontier
IP”), in which it held a 26.86% holding until
13 August 2013 when it sold a significant
part of its holding. As a result, Frontier IP
ceased to be an associate company. Sigma
sold its remaining holding in Frontier IP in
December 2013.
The Group’s property regeneration activities
are largely carried out by its subsidiary,
Sigma Inpartnership, which undertakes
large scale property-related regeneration
projects, working as a bridge between
public and private sector organisations.
Founded in 2000 and operating from offices
in Manchester, 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 SCP. In
particular, SCP has the contract to manage
the development at Winchburgh, near
Edinburgh. Through SPAM, 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.
As anticipated, the Group’s focus is now
entirely on its property activities and
Sigma’s exit from its venture capital
activities is almost complete.
Key strategy
Our core strategy is to achieve income
growth and move into profitability by
building on our established partnerships
with local authority councils and by
increasing our property asset management
activities. Another key part of our strategy is
to generate income and profit from the land
that is under our control by accessing
funding to accelerate the delivery of
residential regeneration developments.
We plan to achieve this by utilising both
our property and capital raising expertise.
In addition to growing income and profit,
this strategy will increase the proportion
of the Group’s business that is contracted,
which provides for a more stable and
predictable income stream.
The PRS model is therefore a key
component in our strategy for 2014. The
joint venture with Gatehouse Bank plc
announced in November provides the
platform to build an initial c. 2,000 new
rental homes and up to c. 6,600 new rental
homes in the UK, subject to securing the
requisite bank finance. Sigma will manage
the process from the construction phase
through the lettings phase until the assets
are sold. Looking further ahead, Sigma’s
strategy is to extend its geographic
coverage for its PRS model beyond its
existing local authority partnerships to other
cities in the UK and to extend it to other
tenures such as social housing.
6
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Strategic Report
continued
Overview of the business
Urban regeneration
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. £120
million. The partnership was established
with the flexibility to develop additional
sites at the discretion of Liverpool City
Council and over the last two years,
Liverpool City Council has increased the
number of sites under option (some of
which are subject to the conclusion of
formal option agreements). Sites added
are Gateacre, Lime Street/Knowledge
Quarter, Stonebridge Cross, Lodge Lane
and Edge Hill District Centre.
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. In
2013, 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.
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 venture
companies with Countryside Properties (UK)
Ltd and Neptune Developments Limited.
Residential Projects
The regeneration of the site at Norris Green
continues to progress well. The first three
phases have seen the construction of 178
mixed tenure units with the final five or so
units on phase three expected to conclude
during the next eight weeks.
Our joint venture company with Countryside
Properties (UK) Ltd is currently on site with
phase four. This phase comprises a further
167 units, with a gross development cost of
c. £17 million, with the immediate focus on
the delivery of the first 44 affordable houses,
pre-sold to Liverpool Mutual Homes. These
units are currently being handed over with
focus then moving to the next stage of
private for sale homes, likely to start in
April/May following the conclusion of the
final sales on phase three.
Construction of 24 affordable units around
the existing primary school in Norris Green
commenced on site in December 2013 and
is due to complete in March 2014.
Planning approval was obtained in February
2014 for the construction of around 200
units at the former Queen Mary School site,
which is approximately one mile from Norris
Green in the northern sector of the city. We
anticipate that 50% of those homes will be in
the PRS Fund, with the balance developed
for open market sale. We expect to start on
site late Spring 2014.
We have recently concluded site
investigations at Gateacre, a 19 acre former
secondary school site, which has the
capacity to be developed to accommodate
around 200 new family homes. We have
commenced pre-planning discussions with
the Council via our residential joint venture
company. We hope that a start on site could
be achieved later this year.
Commercial Projects
The Liverpool Partnership secured a land
option agreement to develop three key sites
within the Knowledge Quarter in March
2013. This is 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. £140
million. Together with our commercial joint
venture company, we are initially bringing
forward a development scheme for Lime
Street Eastern Terrace and the former ABC
cinema to be followed by the redevelopment
of the Mount Pleasant Car Park as part of
the redevelopment strategy for the wider
area.
In addition, our proposals for the
Stonebridge Cross area are progressing
well and we envisage the development
of a major mixed use scheme, with a
development value of c. £120 million. The
initial phases of development currently
being progressed include the new St John
Bosco secondary school, construction of
which commenced in Spring 2013, and
a 105,000 sq ft retail led development
incorporating leisure, food and non food
retail uses with a gross development value
of c. £24 million.
Salford Partnership (also known as
Higher Broughton Partnership)
The Salford Partnership is our partnership
with Salford City Council and Royal Bank of
Scotland.
Housing developer, Countryside Properties
Ltd, started construction of 80 new family
Sigma Capital Group plc
Annual Report & Financial Statements 2013
7
Property management
homes on a six acre site in late 2012 and,
by the end of 2013, 58 units had been built.
This development has realised a base fee
of £400,000 for Sigma spread over 2012
and 2013 and has the potential to generate
a profit share of at least £150,000 in 2014
as the remaining units are sold.
Detailed discussions are now underway
on the development of the last remaining
frontage site at Higher Broughton, which
will see the development of around 100
new apartments. The scheme is under
consideration for incorporation into the
PRS Fund.
Salford City Council is actively working with
us to bring additional land for delivery. We
have agreed heads of terms already for the
delivery of a further 86 units in the city which
we are intending to put into the PRS Fund.
We expect the number of units to grow in
the coming months.
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 of circa
1,000 acres 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 have almost
completed our work to enable the
construction of two further schools to
commence on site in Spring 2014.
We are presently working on two village
centres. Our role for the first village centre
has been to provide development
management services, coordinating the
procurement and delivery of a £6 million
contract to deliver new infrastructure to
open up the site for further phases of
development and an Enterprise Centre.
Our work under this contract is well
advanced and due to complete in April
2014. We are currently assessing the
viability of further commercial development
opportunities within this Village Centre.
At the second village centre at NAW, Sigma
Inpartnership is developing a new 30,000 sq
ft neighbourhood retail and office scheme
which is due to complete by the end of
March 2014. The office is pre-let to Solihull
Metropolitan Borough Council and the eight
retail units are pre-let to a mix of local and
national retailers. We secured a forward
commitment from a buyer for the completed
development with the construction phase
funded by way of a loan from the Growing
Places Fund. The NAW development is
expected to generate development profit
of £160,000 in addition to development
management fees of £144,000, most of
which has been recognised in 2013.
Completion of the development will result
in a cash inflow to Sigma of c. £500,000.
The new GP facility that we are seeking to
develop at NAW has been delayed as NHS
England put on hold funding for any new
facilities whilst they absorbed many of the
recent changes going on in the NHS. We
now anticipate development commencing
in late 2014 or early 2015.
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 £1 billion in total. Sigma has
been actively involved in the Winchburgh
Development since 2010 and has led the
planning and commercial negotiations on
behalf of Regenco (Winchburgh) Ltd on the
Planning Gain Agreement (Section 75) with
West Lothian Council. These negotiations
resulted in the granting of planning
permission in principle in April 2012 for a
masterplan comprising the construction of
3,500 new homes as well as associated
infrastructure, primary and secondary
schools, recreation, a new town centre,
retail facilities and employment land.
Land sale agreements have been
concluded with five national housebuilders
for 478 residential development plots.
Following the release of the Help to Buy
Scheme in October 2013, Miller Homes and
Barratt are achieving good sales volumes
and collectively expect around 100 houses
to be purchased and occupied by the end
of 2014. Taylor Wimpey took formal
possession of their development plot,
comprising 153 homes, in November 2013
and Bellway commenced Plot M (111
homes) in January this year. Enabling works
are now being programmed with West
Lothian Council and the Wheatley Group
for the 96 affordable housing units to be
located in the first phase of the new Town
Centre which is planned to start by the end
of this year. Phase 1 of the Town Centre will
also include c. 9,000 sq ft of retail space.
Good progress is being made with
Transport Scotland on the business case for
the construction of the proposed rail station
in parallel with upgrade works programmed
in 2016/2017 on the main Edinburgh to
8
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Strategic Report
continued
Glasgow Rail line. The business case is
required to be approved by Transport
Scotland before the new train station can
be constructed. Scheme design has already
been agreed with Transport Scotland for
the new motorway junction on the M9
which is required to be in place before
the occupation of the 1,001st home.
Sigma is retained as Development Manager
on behalf of Regenco Trading Ltd for the
first five years of the project implementation
stages of the Winchburgh Development.
This will generate fees of £1.8m from 2012
to 2016 with the potential to generate
additional carried interest incentive fees
based on profit targets.
City Wharf, Aberdeen
We continue to provide ongoing asset
management services to the SI Limited
Partnership No 7 and its lender, Bank of
Ireland. During 2013, we concluded a
new lease with NCP for the car park in the
development. Also, following discussions
with Bank of Ireland, the bank agreed
in principle to provide funding for a
refurbishment of the two vacant floors and
the common areas of Exchequer House, the
original office building on the site which was
constructed in the 1970s. This refurbishment
will bring the building up to the modern
standard demanded by the large oil
companies which remain active in acquiring
new office accommodation in Aberdeen.
Following the tender process and approval
from the Bank of Ireland, the refurbishment
works commenced in February 2014 and
are expected to complete in May 2014.
Property finance
Private Rented Sector (“PRS”)
residential portfolio
During the year we finalised our PRS model
which has been designed to address the
need for new homes in the UK. The model
allows us to move residential land assets
with planning from our local authority
partnerships to our fund structure at a
substantial discount to current values. The
advantage of this for the Councils is that
they can deliver large scale housing quickly
which more than compensates for the lower
land receipts. The PRS model delivers
houses at five to six times the rate of those
built for sale which means five to six times
more council tax payers and five to six times
more Government’s new homes bonus as
well as accelerating the regeneration
activities of the Councils and meeting an
urgent social need.
We have agreed a fixed price Design and
Build contract with our house building
partner, Countryside Properties (UK) Limited
and have developed a lettings strategy with
Shepherd Direct, a large multi discipline
property services group. Sigma will act
as manager of the fund once the funding
structure is completed.
Joint Venture with Gatehouse Bank plc
(“Gatehouse”) (“the PRS Fund”)
In November 2013, Sigma announced
that it had agreed a major joint venture
with Gatehouse to support the roll-out
of an initial c. 2,000 new privately rented
residential properties in the UK, with the
potential to grow the portfolio to c. 6,600
new rental homes once fully developed. The
initial c. 2,000 new rental homes have a total
development cost of c. £200 million and the
development cost of the entire proposed
portfolio is estimated at c. £700 million.
Gatehouse is a leading London-based
Shariah compliant investment bank with
a real estate portfolio worth in excess of
£1 billion across the UK and US. The new
homes will be built on land procured and
developed by Sigma and the model is
underpinned by Sigma’s existing three local
authority partnerships, with Sigma currently
in discussions with other potential local
authority partners.
Under the terms of the joint venture,
Gatehouse will deliver the equity element
of the venture and both parties are in
negotiations with leading banks to secure
bank financing to complete the initial c.
£200 million development phase. Once
bank finance is in place, construction is
expected to take place over 24 months, with
the new homes being delivered in phases.
The initial c. 2,000 units are being supported
in particular by Sigma’s local authority
partnerships with Liverpool and Salford City
Councils, and 22 sites, totalling over 90
acres, have already been identified across
the North West. The joint venture will deliver
significant high quality housing stock and
assist with the regeneration objectives of
local authority partners in a cost efficient
and timely way. The joint venture also
provides for the creation of a portfolio of a
further c. 4,600 new privately rented homes,
with Gatehouse retaining an option to
commit to the equity element of the
estimated c. £500 million of financing
required. We believe that the c. 2,000 new
rental homes would comprise one of the
largest single new build residential housing
portfolios in the UK. Sigma will act as
manager of the PRS Fund once the funding
structure is completed.
Sigma Capital Group plc
Annual Report & Financial Statements 2013
9
Venture Capital activities
STM operates as a fund manager and
corporate finance advisor and is authorised
and regulated by the Financial Conduct
Authority. In December 2013, STM
transferred the management of three of its
venture funds to Shackleton Ventures
Limited together with the business advisory
contracts of certain of the investee
companies. The Group is currently working
on the transfer of the management
contracts of its remaining funds. Sigma
continues to be a limited partner in the
venture funds which have been transferred
and so retains its investment in those funds.
The revenue generated by the venture
activities during the year was £466,000
which turned in a trading loss of £75,000.
The revenue from these activities in 2014 is
expected to be minimal. There will be costs
associated with the closure of this division
but these are not expected to be material in
a Group context.
The Heads of Terms sets out the obligations
of the respective parties in relation to
infrastructure delivery by the seller, site
layout and site design, all of which will be
incorporated in a detailed acquisition
agreement with Sigma and its funders in
due course.
We expect site construction to commence in
late 2014 subject to completion of detailed
site acquisition agreements and funding
arrangements. The construction delivery
timeframe is likely to be approximately 24
months.
The Barking Riverside development is a
major new neighbourhood being created
alongside two kilometres of Thames river
frontage in the heart of the Thames Gateway
at Barking Riverside, near Barking town
centre and close to the City of London,
Canary Wharf and the Lower Lea Valley.
It has planning permission for 10,800 new
mixed tenure homes, with a high proportion
of larger homes for families. The
development will feature new schools,
healthcare, shopping, community and
leisure facilities, all supported by new public
transport links.
We expect the PRS Fund to generate fees
for the Group through each stage of its life.
Current indications of the fees we might
expect are a 0.5% - 1% transaction fee,
a 1.5% - 2% deployment fee during the
construction phase, a 0.5% fee post
construction during the asset management
phase and a carry of c. 15% when the
assets are sold.
London site for PRS residential portfolio
After the year end, in February 2014, we
announced that we had agreed terms to
acquire our first London site for our PRS
portfolio. The site is earmarked for 318 new
homes and is located within the Barking
Riverside development in east London,
which is a 443 acre site with outline planning
permission for one of the largest residential
regeneration schemes in the UK.
Sigma has signed Heads of Terms, with an
exclusivity period which runs until 31 March
2015 and which allows Sigma or its funding
partners to acquire the site and develop four
new apartment blocks comprising a total
of 318 apartment homes, including a high
percentage of three bedroom family units.
The overall delivery cost of the site,
construction costs and associated costs
are estimated to be in excess of £50 million.
The agreement has been signed with
Barking Riverside Ltd (“BRL”), a joint venture
company between Greater London Authority
and Bellway Homes plc, with BRL and
Sigma undertaking to enter into a
conditional contract by 31 May 2014.
10
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Strategic Report
continued
The Placing
The placing of new shares to raise £8m
gross subject to shareholder approval
at a General Meeting will give the Group
enhanced financial strength to execute the
large-scale projects in which it is currently
involved. In particular, this financial strength
will enable the Group to: fund pre-
development spend and thereby accelerate
the development of existing projects; make
equity investment in current and future
projects so providing Sigma with greater
participation in returns; and demonstrate
intent to our Partners. All pre-development
expenditure is recoverable through the
funding process when the development
proceeds. In addition, the placing will
enable Sigma to strengthen its team
as and when required.
Financial Review of 2013
The Group’s revenue increased by 150% to
£5,808,000 (2012: £2,326,000). Much of this
increase is due to NAW which contributed
revenue of £3,690,000 (2012: £nil).
Excluding NAW revenue, the revenue from
other property activities increased by 12% to
£1,652,000 (2012: £1,479,000) whilst the
revenue from venture capital activities fell by
45% to £466,000 (2012: £847,000). All of the
cost of sales arises from NAW.
The Group made a trading loss in the year
of £409,000 (2012: loss £249,000). The
increased loss arises from the venture
capital activities making a trading loss of
£75,000 as a result of these activities being
wound down compared with a small trading
profit of £59,000 in 2012. The loss from the
property activities fell in the year to £18,000
from a loss of £36,000 posted in 2012. The
balance of the trading loss in the year is due
to costs incurred by the holding company
on Group matters. Full detail of the results
for the year by business segment is given in
note 3 to the financial statements.
Administrative costs increased by 3.5% to
£2,666,000 (2012: £2,575,000), principally
due to increased legal and professional
costs. The Group made a significantly
reduced loss on operations of £355,000
(2012: £1,082,000), benefitting from both
a realised profit on disposal of equity
investments of £82,000 (2012: loss £7,000)
and a significantly reduced unrealised loss
on investments of £28,000 compared with
an unrealised loss in the prior year of
£826,000. Overall the Group made a small
profit on its holding in Frontier IP (net of its
share of Frontier IP’s losses) of £20,000
(2012: loss £111,000). The results for the
year were adversely affected by an
exceptional item of £531,000 being the
excess of the price paid for the deferred
share in Sigma Inpartnership over the
deferred consideration provided for in the
prior year. Even after the exceptional item,
the loss for year at £856,000 was 27%
lower than the loss incurred in 2012 of
£1,171,000.
Net assets of the Group increased to
£2,636,000 at 31 December 2013 (31
December 2012: £2,597,000) due to a share
placing of 5% of the Company’s issued
share capital. Net assets at 31 December
2013 were equivalent to 5.5p per share
(31 December 2012: 5.7p per share).
Balance sheet
The inclusion of the NAW development in
the balance sheet at 31 December 2013
has impacted several of the balance sheet
categories. Note 20 to the financial
statements sets out those categories which
include balances relating to NAW. The
principal items in the balance sheet are
goodwill of £533,000 (2012: £533,000), the
investments in the venture capital funds of
£520,000 (2012: £691,000), other current
assets (excluding NAW balances) of
£959,000 (2012: £8,000), cash (excluding
NAW balances) of £1,061,000 (2012:
£1,024,000) and amount payable for
deferred share/deferred consideration of
£847,000 (2012: £316,000).
The goodwill relates to the acquisition of
Sigma Inpartnership and is reviewed each
year for impairment. The investments in the
venture capital funds are spread across four
funds which together hold investments in
14 companies (2012: 16 companies). Other
current assets include the gross proceeds
receivable from the placing of the
Company’s shares of £888,000.
The short term loan of £3,171,000 (2012:
£nil) arises from the NAW development and
is due to be repaid ten days following
practical completion which is expected to
occur by the end of March 2014. Following
practical completion, the other balances
relating to NAW will also be satisfied.
Excluding NAW, the Group’s current assets
exceed its current liabilities by £1,061,000
(2012: £952,000). The Group has no long
term liabilities.
Cash flow
Excluding cash balances of £9,000 relating
to NAW, the Group’s cash balances
increased by £37,000 to £1,061,000 (2012:
fell by £241,000 to £1,024,000). The cash
outflow from operating activities of £494,000
(2012: £292,000) was offset by cash inflows
from the sale of investments at fair value
through profit and loss, disposal of shares
in Frontier IP and disposal of trading
investments together totalling £503,000
(2012: £118,000).
Sigma Capital Group plc
Annual Report & Financial Statements 2013
11
Key performance indicators
With the decrease in the venture capital activities over the year, the key performance
indicators have concentrated on the property activities with the review of the venture capital
activities being focused on the performance of the Group’s investments.
The Group’s key performance indicators include:
Turnover – property activities
Operating loss – property activities
Realised profit/(loss) on disposal of equity investments
Unrealised loss on revaluation of investments
Group operating loss
Cash balances
2013
£’000
5,342
(18)
82
(28)
(355)
1,070
2012
£’000
1,479
(36)
(7)
(826)
(1,082)
1,024
Change
%
+261
+50
+67
+4
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 risk in the business
is a reduction in the value of the Group’s
investment in four venture capital funds.
As discussed above, this risk is mitigated
to a certain extent due to the funds being
invested in 14 underlying companies.
In addition, the fund managers are focused
on ensuring that the companies remain
properly funded whilst working with them
on exit strategies.
The principal operational risks of the
business reside around management’s
ability to secure new contracted property
income streams and to minimise the risks
arising from property development, both
execution risk and time to completion.
Once the PRS Fund is underway, this will
significantly increase the proportion of the
Group’s contracted revenue compared with
one-off income streams. 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.
Currently NAW is the only development
project being undertaken by the Group. The
development of NAW has been a significant
project for Sigma in terms of the revenue
and cost of sales in the comprehensive
income statement and in terms of the assets
and liabilities in the balance sheet. An
analysis of the assets and liabilities between
NAW and other activities is given in note 20.
Sigma has sought to minimise the risk
arising from NAW by entering into a forward
sale of the completed development to a
third party with a strong covenant and by
holding the development loan in a wholly
owned subsidiary with no cross guarantees
with any other members of the Group.
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.
Employees
The Directors believe that employees are
fundamental to the Group’s success and
are committed to the involvement and
development of staff at all levels. The Group
continues to keep its employees informed
on matters affecting them as employees
and on the various factors affecting the
performance of the Group. This is achieved
effectively through regular informal
meetings. There is an employee share
scheme which is open to all 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.
Signed by the order of the directors
Graham Barnet
Chief Executive Officer
18 March 2014
12
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Directors
David Sigsworth
Non-executive Chairman (Age 67)
Graham Barnet
Chief Executive Officer (Age 50)
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 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 (Age 48)
Graeme has worked in the property and
property finance sector throughout his
career. He has worked on major commercial
and residential development projects and
has seven years of international experience
in the areas of property development and
fund management. 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 59)
Marilyn 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)
(Resigned 18 March 2014)
Mark joined Sigma in February 2002 and
was appointed to the Board in March 2007.
As Investment Director, Mark has been
involved in sourcing and reviewing
investment and disposal proposals for
Sigma’s venture 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, RICS
Property Development Director (Age 55)
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 UK’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.
Gwynn Thomson, RICS
Property Investment Director (Age 46)
Gwynn has over 22 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.
Sigma Capital Group plc
Annual Report & Financial Statements 2013
13
Advisers
Secretary and registered office
Marilyn Cole FCA
North West Wing
Bush House
Aldwych
London WC2B 4EZ
Trading address
41 Charlotte Square
Edinburgh EH2 4HQ
Registrars
Capita IRG plc
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
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
KTZ Communications
No. 1 Cornhill
London EC3V 3ND
James McMahon
Non-executive Director (Age 65)
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.
Duncan Sutherland
Regeneration Director (Age 62)
(Appointed 7 February 2013)
Duncan 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 a Non-Executive Director of High
Speed Two (HS2) Limited.
William MacLeod
Executive Director (Age 48)
Appointed 12 February 2013
Bill 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 also Managing Director of
Torrin Asset Management, his own
management business.
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.
14
Sigma Capital Group plc
Annual Report & Financial Statements 2013
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 2013.
Results and dividends
The Group made a loss for the year of
£856,000 (2012: £1,171,000). The directors
do not recommend the payment of a
dividend (2012: 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 Strategic Report on
pages 3 to 11.
Directors
The current Directors of the Company are
listed on pages 12 and 13, all of whom
held office during the year except where
indicated otherwise. Details of Directors’
interests in share options and in shares are
given in the Directors’ Remuneration Report
on pages 16 and 17.
Risk factors
Directors’ indemnity insurance
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. The broader risks
of the business are considered in the
Strategic Report.
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. At 31
December 2013, the Group had positive
cash balances of £1,070,000 (2012:
£1,024,000) and had a short term loan
of £3,171,000 (2012: £nil).
The Group’s policy is to keep surplus funds
on short term and instant access deposit to
earn the prevailing market rate of interest.
The Group’s policy is only to borrow funds
if such funds are needed to develop specific
assets in which case the loan is secured
against that asset and is held within the
subsidiary company undertaking the
development. The Group does not give
cross guarantees from other companies
within the Group.
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.
The Group held a Directors and Officers
insurance policy in place throughout the
year in respect of the Company and the
Group’s subsidiaries.
Political donations
No political contributions were made during
the year (2012: £nil).
Going concern
The Group has raised £8,000,000 gross
from a placing of the Company’s shares,
subject to approval at the forthcoming
General Meeting therefore the Group has
considerable financial resources for the
size of its current business activities. At 31
December 2013, the Group had short term
borrowings of £3,171,000 (2012: £nil).
These borrowings are secured on the NAW
development and are held in a wholly
owned subsidiary with no cross guarantees.
The NAW development has been forward
sold facilitating repayment of the loan in
full following practical completion.
The income generated by the Group’s
regeneration partnerships and other
property activities comprises both
contracted revenue and one-off income
streams. As a consequence, the Directors
believe that the Group is well placed to
manage its business risks successfully.
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 financial
statements.
Sigma Capital Group plc
Annual Report & Financial Statements 2013
15
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
18 March 2014
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. Following
the resignation of Mark Hogarth today, the
Board consists of seven 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 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.
16
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Directors’ Remuneration Report
Directors’ remuneration
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 and,
for most directors, pension contributions to
the Director’s personal pension scheme,
and benefits in kind. In addition, certain
directors are paid a car allowance or receive
a contribution to their travel expenses.
Remuneration also includes share options
and carried interest as detailed below. An
analysis of remuneration by Director is given
in note 8 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.
Directors’ interests – interests in share
options
Details of options held by Directors who
were in office at 31 December 2013 are
set out below.
Director
GF Barnet
MD Cole
MD Cole
J Hamilton
J Hamilton
MS Hogarth
MS Hogarth
G Hogg
G Hogg
W MacLeod
D Sigsworth
D Sutherland
D Sutherland
G Thomson
G Thomson
Date of
grant
28.11.13
09.06.09
05.05.11
05.05.11
28.11.13
09.06.09
05.05.11
29.07.11
28.11.13
28.11.13
30.04.08
29.07.11
28.11.13
05.05.11
28.11.13
Number
Exercise price
Exercise date
Expiry date
114,286
150,000
483,333
250,000
38,095
200,000
633,333
250,000
82,857
114,286
100,000
250,000
42,857
250,000
38,095
26.25p
11.25p
8.00p
8.00p
26.25p
11.25p
8.00p
7.50p
26.25p
26.25p
25.0p
7.50p
26.25p
8.00p
26.25p
28.11.16 – 27.11.23
09.06.12 – 08.06.19
05.05.14 – 04.05.21
05.05.14 – 04.05.21
28.11.16 – 27.11.23
09.06.12 – 08.06.19
05.05.14 – 04.05.21
29.07.14 – 28.07.21
28.11.16 – 27.11.23
28.11.16 – 27.11.23
30.04.08 – 29.04.18
29.07.14 – 28.07.21
28.11.16 – 27.11.23
05.05.14 – 04.05.21
28.11.16 – 27.11.23
27.11.23
08.06.19
04.05.21
04.05.21
27.11.23
08.06.19
04.05.21
28.07.21
27.11.23
27.11.23
29.04.18
28.07.21
27.11.23
04.05.21
27.11.23
Options over 430,476 ordinary shares of 1p each 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 23 to the financial statements.
The market price of the Company’s shares at 31 December 2013 was 41p. The range of market prices during the year was 6.125p to 41p.
Sigma Capital Group plc
Annual Report & Financial Statements 2013
17
Carried interest arrangements
Four of the Directors have been allocated
a share of the carried interest assigned to
Sigma arising from the historic four venture
funds. Current estimates are that no value
is attributable to this carried interest.
Directors’ interests - interests in shares
Directors in office at 31 December 2013 had
the following interests in the ordinary shares
of 1p each of the Company:
GF Barnet
MD Cole
J Hamilton
MS Hogarth
GR Hogg
W MacLeod
D Sigsworth
G Thomson
2013
Number
2012
Number
7,548,237
7,521,571
689,660
385,714
401,259
513,429
766,000
411,971
142,857
589,660
285,714
301,259
71,429
-
246,971
142,857
All of the above interests are beneficial
except for 735,000 shares (2012: 735,000
shares) held by Graham Barnet as trustee
for two of his children. On 8 January 2014,
John Hamilton sold 89,500 ordinary shares
of 1p each to his self-invested personal
pension with Standard Life, of which he is
trustee and sole beneficiary. On 17 January
2014, Graeme Hogg sold 95,000 ordinary
shares of 1p each in the Company to his
self-invested personal pension of which he
is trustee and sole beneficiary. Both pension
fund holdings are included in the Directors’
interests shown above. Other than these
two transactions, there were no dealings
in the Company’s shares by any of the
Directors between 31 December 2013
and 18 March 2014.
D Sigsworth
Chairman
18 March 2014
18
Sigma Capital Group plc
Annual Report & Financial Statements 2013
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 2013
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 2013 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
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 and to identify any information that
is apparently materially incorrect based on,
or materially inconsistent with, the knowledge
acquired by us in the course of performing the
audit. 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 2013 and of the group’s loss
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
> the financial statements have been
prepared in accordance with the
requirements of the Companies Act 2006.
Opinion on other matters prescribed by
the Companies Act 2006
In our opinion the information given in the
Strategic Report and 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
18 March 2014
20
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Consolidated Comprehensive Income Statement
for the year ended 31 December 2013
2013 2012
Notes £’000 £’000
Revenue from services 3 5,808 2,326
Cost of sales 4 (3,551) -
Gross profit 2,257 2,326
Realised profit/(loss) on disposal of equity investments 82 (7)
Unrealised loss on the revaluation of investments 15 (28) (826)
Administrative expenses 5 (2,666) (2,575)
Loss from operations (355) (1,082)
Finance income 6 10 22
Profit on disposal of interest in Frontier IP 110 -
Share of loss of Frontier IP 14 (90) (111)
Exceptional items 7 (531) -
Loss before tax (856) (1,171)
Taxation 9 - -
Loss for the year (856) (1,171)
Loss per share attributable to the equity holders of the Company:
Basic and diluted loss per share 10 (1.87)p (2.57)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 £1,299,000 (2012: £2,878,000). The principal reason for the loss in the year was a provision against amounts due from subsidiary
companies of £1,001,000. In the prior year the principle reason for the loss in the year was 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.
Sigma Capital Group plc
Annual Report & Financial Statements 2013
21
Consolidated Balance Sheet
at 31 December 2013
2013 2012
Notes £’000 £’000
Assets
Non-current assets
Goodwill and other intangibles 11 596 614
Property and equipment 12 19 26
Investment in associate company 14 - 314
Financial assets at fair value through profit and loss 15 520 691
1,135 1,645
Current assets
Trade receivables 17 651 688
Other current assets 17 5,000 76
Trading investments 18 2 45
Cash and cash equivalents 1,070 1,024
6,723 1,833
Total assets 7,858 3,478
Liabilities
Current liabilities
Trade and other payables 19 2,051 881
Loan 21 3,171 -
Total liabilities 5,222 881
Net assets 2,636 2,597
Equity
Called up share capital 22 483 456
Share premium account 22 5,334 4,481
Capital redemption reserve 34 34
Merger reserve (249) (249)
Capital reserve (7) (7)
Share-based payment reserve 190 175
Retained earnings (3,149) (2,293)
Equity attributable to equity holders of the Company 2,636 2,597
The accompanying notes are an integral part of this consolidated balance sheet.
22
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Company Balance Sheet
at 31 December 2013
2013 2012
Notes £’000 £’000
Assets
Non-current assets
Property and equipment 12 2 1
Investment in subsidiaries 13 2,921 2,471
Investment in associate company 14 - 421
Trade and other receivables 17 100 495
3,023 3,388
Current assets
Trade receivables 17 389 102
Other current assets 17 1,051 298
Cash and cash equivalents 208 521
1,648 921
Total assets 4,671 4,309
Liabilities
Current liabilities
Trade and other payables 19 2,136 1,370
Total liabilities 2,136 1,370
Net assets 2,535 2,939
Equity
Called up share capital 22 483 456
Share premium account 22 5,334 4,481
Capital redemption reserve 34 34
Share-based payment reserve 175 160
Retained earnings (3,491) (2,192)
Total equity 2,535 2,939
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 18 March 2014 and were
signed on its behalf by:
GF Barnet
Chief Executive Officer
18 March 2014
Registered number 3942129
Sigma Capital Group plc
Annual Report & Financial Statements 2013
23
Consolidated Statement of Changes in Equity
for the year ended 31 December 2013
Share-
Share Capital based
Share premium redemption Merger Capital payment Retained
capital account reserve reserve reserve reserve earnings Total equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2012 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
Issue of shares 27 898 - - - - - 925
Cost of share issue - (45) - - - - - (45)
Loss for the year - - - - - - (856) (856)
Share-based payments - - - - - 15 - 15
At 31 December 2013 483 5,334 34 (249) (7) 190 (3,149) 2,636
24
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Company Statement of Changes in Equity
for the year ended 31 December 2013
Share Capital Share-based
Share premium redemption payment Retained
capital account reserve reserve earnings Total equity
£’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2012 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
Issue of shares 27 898 - - - 925
Cost of share issue - (45) - - - (45)
Loss for the year - - - - (1,299) (1,299)
Share-based payments - - - 15 - 15
At 31 December 2013 483 5,334 34 175 (3,491) 2,535
Sigma Capital Group plc
Annual Report & Financial Statements 2013
25
Consolidated and Company Cash Flow Statements
for the year ended 31 December 2013
Group Group Company Company
2013 2012 2013 2012
Notes £’000 £’000 £’000 £’000
Cash flows from operating activities
Cash (used in)/generated from operations 26 (494) (292) (621) 340
Net cash (used in)/generated from operating activities (494) (292) (621) 340
Cash flows from investing activities
Disposal/(purchase) of shares in Frontier IP 276 (25) 276 (25)
Purchase of property and equipment (14) (8) (2) (1)
Purchase of financial assets at fair value through profit and loss (20) (38) - -
Disposal of financial assets at fair value through profit and loss 127 19 - -
Long term loan 28 (18) - -
Disposal of trading investments 100 99 - 95
Interest received and other financial income 10 22 1 1
Net cash generated from investing activities 507 51 275 70
Cash flows from financing activities
Issue of shares 33 - 33 -
Net cash generated from financing activities 33 - 33 -
Net increase /(decrease) in cash and cash equivalents 46 (241) (313) 410
Cash and cash equivalents at beginning of year 1,024 1,265 521 111
Cash and cash equivalents at end of year 1,070 1,024 208 521
The accompanying notes are an integral part of this cash flow statement.
26
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Accounting policies
for the year ended 31 December 2013
The principal accounting policies are
summarised below. They have all been
applied consistently throughout the year
and the preceding year.
> IFRS 12 Disclosures of interests in
other entities
> IAS 32 (Amendment) Offsetting financial
assets and financial liabilities
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 Strategic Report 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 and Strategic Report.
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:
Effective 1 January 2014:
> IFRS 10 Consolidated financial
statements
> IFRS 11 Joint Arrangements
Effective 1 January 2015:
> IFRS 9 Financial Instruments
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. 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.
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.
Until 13 August 2013, Sigma equity
accounted 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 2013 and from
management accounts for the six week
period to 13 August 2013. The accounting
reference date of Frontier IP was not made
coterminous with the rest of the Group as,
in the opinion of the Directors, it would have
imposed an undue administrative burden
on Sigma. Frontier IP ceased to be an
associate company of the Group on 13
August 2013.
Three group companies each manage, as
general partner, three limited partnerships,
the Sigma Sustainable Energy Fund II, the
RGU Ventures Investment Fund (the “RGU
Fund”) and the University of Dundee
Venture Fund (the “Dundee Fund”). The
Group has an equity interest of 5.06% in
the Sigma Sustainable Energy Fund II. The
Frontier IP group, in which the Group had
a 26.86% holding until 13 August 2013, 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 these three 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, these three
funds are excluded from the Group
consolidation. The interest in the Sigma
Sustainable Energy Fund II is accounted
for as a financial asset 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 this fund.
The Group also has an interest in three
limited partnerships which undertake
Sigma Capital Group plc
Annual Report & Financial Statements 2013
27
property regeneration, the North Solihull
Partnership, the Salford Partnership and
the Liverpool Partnership (together “the
Partnerships”). The Group has a 49.805%
share of any profits that might arise in 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 any
profits that might arise in 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 any profits that might arise
in 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,
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.
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
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.
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.
Cash
Cash and cash equivalents comprise
cash at bank and in hand and short
term deposits.
28
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Accounting Policies
continued
Investments
Current and deferred tax
Investments represent the Group’s interest
in the equity value of four venture capital
funds. During the year, the management
of three of the funds which had been
conducted by the Group, was transferred
to an external manager.
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.
Investments are classified as financial
assets at fair value through profit and
loss and are initially measured at cost.
Subsequent measurement is at fair value.
The fair value of unlisted investments is
established using International Private
Equity and Venture Capital Valuation
Guidelines (“IPEV Guidelines”). In the
venture capital 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 venture capital
funds to give an Attributable Enterprise
Value. This is then apportioned between
the relevant financial instruments and the
fair value attributable to the venture capital
funds is determined.
Investments classified as “financial assets
at fair value through profit and loss” are
recognised as non-current assets.
Investment in subsidiary companies
is stated at cost less provision for any
impairment in value.
Trade payables
Trade payables are not interest bearing
and are stated at their amortised cost.
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.
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.
Equity instruments
Share-based payments
Equity instruments issued by the Company
are recorded at the proceeds received, net
of direct issue costs.
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.
Revenue from property development is
recognised as appropriate in accordance
with IAS 18 or IAS 11, with reference to
IFRIC 15, dependent upon the
circumstances specific to each contract.
Where the substance of a contract meets
the definition of a construction contract,
revenue is accrued and development costs
charged to the income statement in
proportion to the stage of completion of the
project in accordance with IAS 11. Where
the substance of the contract does not meet
Sigma Capital Group plc
Annual Report & Financial Statements 2013
29
the definition of a construction contract,
revenue is recognised as the services are
provided in accordance with IAS 18.
Operating leases
Amounts due under operating leases
are charged to the income statement in
equal annual instalments over the period
of the lease.
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.
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.
Exceptional items
Exceptional items are defined as items
of income and expenditure which, in the
opinion of the Directors, are material and
unusual in nature or of such significance
that, in order to give a full understanding
of the Group’s underlying financial
performance, they require separate
disclosure on the face of the comprehensive
income statement in accordance with IAS 1
‘Presentation of Financial Statements’.
30
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Notes to the Financial Statements
for the year ended 31 December 2013
1.
Financial risk management
Financial risk factors
The Group’s business activities are set out in the Strategic Report on pages 5 to 11. 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. At 31 December 2013 the
Group had short term debt of £3,171,000. This debt was taken out for a specific development and the risk has been mitigated
by a forward sale of the development and by holding the debt in a wholly owned subsidiary with no cross guarantees. 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 2013, 100% (2012: 94%) of the Group’s
investments was investment in four venture funds.
The venture 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 2013, the funds together held 14 investments (2012: 16 investments). A Group company, STM, manages the
Sigma Sustainable Energy Fund II. A third party manages the other three venture funds.
A net movement of 10% in the value of the venture fund holdings would give rise to a movement in the income statement
of £52,000 (2012: £72,000).
(ii)
Interest rate risk
The Group currently has short term, fixed rate borrowings. The borrowings are due for repayment following practical
completion of the NAW development which is expected by the end of March 2014. The Group has no other borrowings
and so 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.
(c) Credit risk
The Group’s credit risk is primarily attributable to its trade receivables and other current assets. During the year ended 31
December 2013, the Group’s cash and cash equivalents were held with 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 fees earned are from the management of the Winchburgh development and from
City Wharf, Aberdeen. The customer for the Winchburgh development is owned by a major Scottish partnership and is
connected to one of Sigma’s Directors, and the credit risk is considered to be low. The funding of the fees on City Wharf is
provided by the Bank of Ireland and the fees for the coming calendar year are agreed in advance with the Bank of Ireland.
Consequently, the credit risk is considered to be low.
The Group is withdrawing from its venture capital activities and is currently working on the transfer of the management
contracts of its remaining funds.
Other exposures of the Group are spread over a number of customers and counterparties with little concentration on any one
entity with the exception of NAW.
Sigma Capital Group plc
Annual Report & Financial Statements 2013
31
The concentration of credit risk arising from trade receivables and other current assets is analysed below.
2013 2012
£’000 £’000
Property management fees due to Sigma Inpartnership 108 55
Other property management fees 91 82
Management fees due from Venture Funds and University Funds 9 177
Other trade receivables 111 7
Other trade receivables - NAW 332 367
Other debtors 291 8
Other debtors – share placing proceeds receivable 888 -
Other accrued income and prepayments 131 68
Other accrued income and prepayments - NAW 3,690 -
5,651 764
The maximum exposure to credit risk for trade receivables and other current assets is represented by their carrying amount.
The funds from the share placing were received in January 2014. The amounts relating to NAW will be received following
practical completion of the development. A forward sale of the NAW development has been agreed which will complete 10
days after practical completion, expected to occur at the end of March 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 regularly available cash to ensure there are sufficient resources
for working capital requirements and to meet the Group’s limited partner commitments to the venture funds.
At 31 December 2013 and 31 December 2012 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, judgments 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 judgments 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.
Critical accounting estimates and judgments
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 judgments 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 judgment:
(i)
Fair value of unlisted investments
The Group believes that the most significant judgment 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 11.
32
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Notes to the Financial Statements
continued
(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 2013 the Group is organised into two business segments: property and venture capital fund management plus
holding company activities.
The Group had no significant customers in the year ended 31 December 2013. In the prior year, the Sigma Sustainable Energy Fund
II was a significant customer of the Group with fund management fees earned in 2012 of £339,000 as was Regenco (Winchburgh)
Limited with asset management fees earned in 2012 of £275,000.
The segment analysis for the year ended 31 December 2013 is as follows:
Venture Holding Intra group
Property Capital Company adjustments Total
£’000 £’000 £’000 £’000 £’000
Revenue from services 5,342 466 - - 5,808
Trading loss (18) (75) (1,276) 960 (409)
Profit on disposal of equity investments - 20 55 7 82
Unrealised (loss)/profit on the revaluation of investments - (29) (79) 80 (28)
(Loss)/profit from operations (18) (84) (1,300) 1,047 (355)
Acquisition of deferred share - - - (847) (847)
Reversal of deferred consideration - - - 316 316
(Loss)/profit from operations after exceptional (18) (84) (1,300) 516 (886)
Finance income - 9 1 - 10
Profit on disposal of interest in Frontier IP - - - 110 110
Share of loss of Frontier IP - - - (90) (90)
Loss before tax (18) (75) (1,299) 536 (856)
Total assets 5,181 3,820 4,671 (5,814) 7,858
Total liabilities (7,781) (1,921) (2,136) 6,616 (5,222)
Net (liabilities)/net assets (2,600) 1,899 2,535 802 2,636
Capital expenditure 3 9 2 - 14
Depreciation 5 15 1 - 21
Note: Property revenue includes a proportion of the total expected sales value of the NAW development. This figure of £3,690,000
has been calculated based on the percentage of completion of the project as at 31 December 2013.
Sigma Capital Group plc
Annual Report & Financial Statements 2013
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)/profit 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
4.
Cost of sales
2013 2012
£’000 £’000
Costs in relation to the development at NAW 3,551 -
34
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Notes to the Financial Statements
continued
5.
Expenses by nature
Expenses included in administrative expenses are analysed below.
2013 2012
£’000 £’000
Administrative expenses
Employee costs (salaries, national insurance and pension) 1,675 1,657
Share based payments 15 15
Other employee related costs 50 112
Consultancy 140 125
Travel and entertainment 201 163
Depreciation 21 23
Amortisation 18 24
Provision for bad debts and bad debts written off (72) 66
Provision for long term loan (28) 28
Operating lease rentals:
- plant and machinery 6 4
- land and buildings (net) 114 114
Other premises costs 97 70
Audit services:
- Fees payable to Company auditor for the audit of the parent company and consolidated accounts 20 25
- the audit of the Company’s subsidiaries pursuant to legislation 27 24
Non-audit services:
- tax services 26 37
Other legal, professional and financial costs 306 178
Other property costs 4 (130)
Administration costs 46 40
2,666 2,575
6.
Finance income
2013 2012
£’000 £’000
Interest income on short-term deposits and loans 5 22
Loan redemption premium 5 -
10 22
7.
Exceptional items
2013 2012
£’000 £’000
Acquisition of deferred share in Sigma Inpartnership 847 -
Reversal of deferred consideration accrued (316) -
531 -
The agreed price for the purchase of the deferred share and therefore the acquisition of the rights to a share of future developments
profits of Sigma Inpartnership was £847,000. Sigma had estimated the value of the deferred consideration arising at the date of
acquisition of Sigma Inpartnership in August 2011 as £316,000. This estimation had to be carried out within 12 months from the date of
acquisition. Accounting standards require the difference between the price payable and the deferred consideration accrued at the date
of acquisition to be expensed through the Comprehensive Income Statement.
Sigma Capital Group plc
Annual Report & Financial Statements 2013
35
8.
Directors and employees
The average monthly number of employees, including executive Directors, employed by the Group during the year was:
2013 2012
Number Number
Property 13 13
Venture capital 2 2
Administration 5 5
20 20
The aggregate remuneration was as follows:
2013 2012
£’000 £’000
Wages and salaries 1,421 1,392
Social security 177 178
Pension costs – defined contribution plans 77 87
Share based payment charge - equity settled 15 15
1,690 1,672
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 consistent 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.
Details of share options granted to and exercised by Directors in the year are contained in the Directors’ Remuneration Report.
The key management of the Group comprises the Sigma Capital Group plc Board Directors. The total remuneration for each director
is shown below.
2013 2012 2013 2012 2013 2012 2013 2012
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Salary
Other benefits
Total
Pension
Executive
GF Barnet 250 240 2 2 252 242 - 5
MD Cole 81 112 7 8 88 120 12 12
MS Hogarth 140 140 6 6 146 146 12 12
J Hamilton 90 90 5 5 95 95 9 9
G Thomson 90 90 1 1 91 91 9 9
G Hogg 99 50 6 3 105 53 5 3
D Sutherland * 74 - 4 - 78 - 4 -
W MacLeod ** 7 - - - 7 - - -
Non-executive
D Sigsworth 24 24 - - 24 24 - -
J McMahon *** 35 28 - - 35 28 - -
890 774 31 25 921 799 51 50
*
**
From date of appointment of 7 February 2013 to 31 December 2013
From 28 November 2013 to 31 December 2013. During the year Sigma paid consultancy fees of £29,000 (2012: £nil) to a company controlled by W
MacLeod.
*** J McMahon’s director’s remuneration is payable to West Coast Capital
36
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Notes to the Financial Statements
continued
9.
Taxation
2013 2012
£’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.
2013 2012
£’000 £’000
Loss before tax (856) (1,171)
Loss before tax at the effective rate of corporation tax in the UK of 23.25% (2012: 24.5%) (199) (287)
Effects of:
Expenses not deductible for tax purposes 156 160
Capital allowances in excess of depreciation (3) (2)
Unrelieved losses arising in the year 73 219
Non taxable income (13) (90)
Other adjustments (14) -
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 20% (2012: 23%).
2013 2012
£’000 £’000
Unrelieved management expenses and other losses 3,786 4,593
Unrelieved capital losses 811 931
Excess of depreciation over capital allowances 7 10
4,604 5,534
10.
Loss per share
The calculation of the basic loss per share for the year ended 31 December 2013 and 31 December 2012 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 2013 (856) 45,679,985 (1.87)
Year ended 31 December 2012 (1,171) 45,571,656 (2.57)
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 2013 of 47,918,521 (2012: 45,571,656). For both the year ended 31
December 2013 and the year ended 31 December 2012, 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 2013
37
11. Goodwill and other intangible assets
Other
Goodwill intangibles Total
£’000 £’000 £’000
Cost
At 1 January 2012 576 - 576
Acquisition of Sigma Inpartnership 211 105 316
At 31 December 2012 787 105 892
Disposal of Frontier IP (131) - (131)
At 31 December 2013 656 105 761
Amortisation and impairment
At 1 January 2012 254 - 254
Amortisation charge - 24 24
At 31 December 2012 254 24 278
Disposal of Frontier IP (131) - (131)
Amortisation charge - 18 18
At 31 December 2013 123 42 165
Carrying value
At 31 December 2013 533 63 596
At 31 December 2012 533 81 614
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, being
the fair value of the contractual relationships, is allocated to the cash generation units (CGUs) as follows:
Sigma Inpartnership
2013 2012
£’000 £’000
Goodwill 533 533
Intangible assets 63 81
The major assumption used in value in use calculations is as follows:
Pre-tax discount rate 9% 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 cash flows 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 in both the current
and prior year.
38
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Notes to the Financial Statements
continued
12. Property and equipment
Leasehold Fixtures and Computer
improvements office equipment equipment Total
Group £’000 £’000 £’000 £’000
Cost
At 1 January 2012 43 55 152 250
Additions - 3 5 8
At 31 December 2012 43 58 157 258
Additions - 2 12 14
At 31 December 2013 43 60 169 272
Depreciation
At 1 January 2012 42 46 121 209
Charge for the year 1 8 14 23
At 31 December 2012 43 54 135 232
Charge for the year - 3 18 21
At 31 December 2013 43 57 153 253
Net book value
At 31 December 2013 - 3 16 19
At 31 December 2012 - 4 22 26
Leasehold Fixtures and
improvements office equipment Total
Company £’000 £’000 £’000
Cost
At 1 January 2012 7 12 19
Additions - 1 1
At 31 December 2012 7 13 20
Additions - 2 2
At 31 December 2013 7 15 22
Depreciation
At 1 January 2012 6 12 18
Charge for the year 1 - 1
At 31 December 2012 7 12 19
Charge for the year - 1 1
At 31 December 2013 7 13 20
Net book value
At 31 December 2013 - 2 2
At 31 December 2012 - 1 1
Sigma Capital Group plc
Annual Report & Financial Statements 2013
39
13.
Investment in subsidiaries
Company Company
2013 2012
£’000 £’000
At 1 January 2013 2,471 2,471
Investment in Sigma Inpartnership Limited 847 -
Provision against investment in subsidiary (397) -
At 31 December 2013 2,921 2,471
During the year the Company purchased the deferred share in Sigma Inpartnership for £847,000 in cash. The purchase was financed by
a placing of the Company’s shares as detailed in note 22. During the year the Company provided in full against the amount due from a
subsidiary in respect of loan stock (2012: £nil).
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 venture capital funds England Ordinary 100.0
14.
Investment in associate company
Group Group Company Company
2013 2012 2013 2012
£’000 £’000 £’000 £’000
At 1 January 2013 314 400 421 749
Additions - 25 - 25
Disposals - - (341) -
Group’s share of net assets (724) (369) - -
Share of losses (90) (111) - -
Movement in provision 500 369 (80) (353)
At 31 December 2013 - 314 - 421
Group share of net assets - 814 - -
Provision - (500) - -
At 31 December 2013 - 314 - -
In December 2012, Frontier IP undertook a share placing which reduced Sigma’s holding to 26.86%. In August 2013 the Company
disposed of 2,905,212 shares resulting in the Company’s interest in Frontier IP falling from 26.86% to 3.19% and therefore Frontier IP
ceased to be an associate company of Sigma. Sigma accounted for its remaining holding of 600,000 shares as an investment until the
shares were sold in December 2013.
40
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Notes to the Financial Statements
continued
15. Financial assets at fair value through profit and loss
Group Group Company Company
2013 2012 2013 2012
£’000 £’000 £’000 £’000
At 1 January 2013 691 1,478 - -
Additions 20 38 - -
Disposals (127) (19) - -
Fair value write down (64) (806) - -
At 31 December 2013 520 691 - -
The financial assets at fair value through profit and loss are the Group’s holdings in venture capital funds.
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
2013 2012 2013 2012
£’000 £’000 £’000 £’000
Financial assets at fair value through profit and loss:
- the four venture capital funds (64) (801) - -
- Unquoted securities - (5) - -
Trading investments (see note 18) 36 (20) - -
(28) (826) - -
16. Long term loan
The long term loan was a 5-year loan to SFX Technologies Ltd, an investee company of the Sigma Technology Venture Fund and of
the Sigma Innovation Fund (East of Scotland). STM provided a loan facility to SFX Technologies Ltd along with other shareholders of
the company under which STM’s total commitment was £35,000. The loan was secured and attracted interest of 10% per annum plus
there was a 20% redemption premium. The loan had an expiry date of 28 November 2016. At the end of 2012, due to the uncertainty
of recovery of the loan, the amount outstanding was provided for in full. During the year, the outstanding loan of £27,500 was repaid
along with a redemption premium of £5,500.
17. Trade receivables and other current assets
Group Group Company Company
2013 2012 2013 2012
£’000 £’000 £’000 £’000
Trade receivables 651 688 1 2
Receivables from Group undertakings – current - - 388 100
Receivables from Group undertakings – non current - - 100 495
Social security and other taxes 78 - 13 7
Other debtors 1,101 8 1,007 -
Prepayments and accrued income 3,821 68 31 291
5,651 764 1,540 895
Less receivables from Group undertakings - non current - - (100) (495)
Current portion 5,651 764 1,440 400
Sigma Capital Group plc
Annual Report & Financial Statements 2013
41
Trade receivables
Group Group Company Company
2013 2012 2013 2012
£’000 £’000 £’000 £’000
Trade receivables not due 249 257 127 55
Trade receivables past due 1-30 days 18 19 - 44
Trade receivables past due 31-60 days 3 22 - 8
Trade receivables past due 61-90 days 2 14 53 -
Trade receivables past due over 90 days 487 555 209 7
Gross trade receivables at 31 December 2013 759 867 389 114
Provision for bad debt at 1 January 2013 179 148 12 -
Debt provisions (reversed)/provided for in the year (71) 31 (12) 12
Provision for bad debt at 31 December 2013 108 179 - 12
Net trade receivables at 31 December 2013 651 688 389 102
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 £332,000 (2012: £367,000) expected to be received in the first quarter of 2014. 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.
18. Trading investments
Group Group Company Company
2013 2012 2013 2012
£’000 £’000 £’000 £’000
Quoted equity investments – UK 2 45 - -
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.
19. Trade and other payables
Group Group Company Company
2013 2012 2013 2012
£’000 £’000 £’000 £’000
Trade payables 149 135 86 11
Payables to Group undertakings - - 1,031 1,252
Amount payable for deferred share / deferred consideration 847 316 847 -
Other creditors 11 - - -
Social security and other taxes 70 190 - -
Accruals and deferred income 974 240 172 107
2,051 881 2,136 1,370
The Directors consider that the carrying amount of trade payables approximates to their fair value.
42
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Notes to the Financial Statements
continued
20. NAW Development
Trade receivables, other current assets, bank and trade payables include balances that relate to the NAW development as follows:
NAW Other Total
£’000 £’000 £’000
Trade receivables 332 319 651
Prepayments and accrued income 3,690 131 3,821
Other current assets 220 959 1,179
Trading investments - 2 2
Bank 9 1,061 1,070
Total current assets 4,251 2,472 6,723
Trade and other payables 640 1,411 2,051
Loan 3,171 - 3,171
Total current liabilities 3,811 1,411 5,222
21. Loan
The costs incurred on the NAW project are funded through a loan provided by Birmingham City Council, being the accountable body
for the Local Enterprise Partnership in connection with funding under the Growing Places Fund. The income arising from the NAW
project, which is shown in prepayments and accrued income in note 20, is first used to settle the loan. The total amount available
under the terms of the loan is £4.045 million with interest charged at a commercial rate. The loan is held in Solihull Inpartnership
Limited, a wholly owned subsidiary of the Group and is secured on the development. There are no cross guarantees in respect of the
loan with any group company. The loan is repayable 10 days after practical completion. A forward sale of the NAW development has
been agreed, also completing 10 days after practical completion. At 31 December 2013 the amount drawn down was £3,171,000
(2012: £nil).
22. Share capital and share premium
Group and Company
Number of Ordinary Share
shares shares premium Total
£’000 £’000 £’000
At 31 December 2012 45,571,656 456 4,481 4,937
Issue of shares at 39p per share for acquisition of deferred share in
Sigma Inpartnership 2,278,582 23 865 888
Expenses of share issue - - (45) (45)
Exercise of share options 395,833 4 33 37
At 31 December 2013 48,246,071 483 5,334 5,817
The total authorised number of ordinary shares is 130,000,000 (2012: 130,000,000) with a par value of 1p per share (2012: 1p). All issued
shares are fully paid.
23. 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.
Options over 713,571 ordinary shares (2012: nil) were granted during the year. No performance conditions or market conditions are
attached to these options.
Sigma Capital Group plc
Annual Report & Financial Statements 2013
43
Movements in the number of share options outstanding and their related weighted average exercise prices were as follows:
2013 2012
Weighted Weighted
average exercise average exercise
price in pence Options price in pence Options
per share (‘000s) per share (‘000s)
At 1 January 2013 9 3,237 9 4,106
Granted 26.3 714 - -
Exercised 9.2 (396) - -
Expired - 9 (869)
At 31 December 2013 12.4 3,555 9 3,237
Of the 3,555,000 outstanding options (2012: 3,237,000), 465,000 had vested at 31 December 2013 (2012: 615,000).
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Exercise price 2013 2012
Expiry date pence per share Number Number
2018 25.0 100,000 100,000
2019 11.25 365,000 515,000
2021 8.0 1,876,666 2,122,499
2021 7.5 500,000 500,000
2023 26.25 713,571 -
The weighted average fair value of options granted to executive Directors and employees during the year determined using the Black-
Scholes-Merton valuation model was 6.7p 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 1.6%. Future volatility has been
estimated based on comparable information rather than historical data. No options were granted in the prior year.
24. 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 credited to the share-based payment reserve. The movement in reserves for the years ended 31 December
2013 and 2012 is set out in the Consolidated and Company Statements of Changes in Equity.
25. 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. 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:
2013 2012
Plant and Land and Plant and Land and
machinery buildings machinery buildings
£’000 £’000 £’000 £’000
The Group
Within 1 year 3 114 5 110
From 2-5 years 8 214 12 285
After 5 years - - - -
The Company
Within 1 year - 95 - 95
From 2-5 years - 190 - 285
After 5 years - - - -
44
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Notes to the Financial Statements
continued
26. Cash flows from operating activities
Group Group Company Company
2013 2012 2013 2012
£’000 £’000 £’000 £’000
Loss before tax (856) (1,171) (1,299) (2,878)
Adjustments for:
Share-based payments 15 15 15 13
Depreciation 21 23 1 1
Amortisation 18 24 - -
Finance income (10) (22) (1) (37)
Loss relating to associate company 90 111 80 353
Provision against investment in subsidiary - - 397 -
Provision against long term loan (28) 28 - -
Fair value loss on financial assets at fair value through profit or loss 64 806 - -
(Profit)/loss on disposal of interest in associate (110) - 7 -
(Profit)/loss on disposal of trading investments at fair value
through profit or loss (82) 7 (62) 5
Exceptional item 531 - - -
Changes in working capital:
Trade and other receivables (4,767) 103 (525) 2,169
Other financial assets at fair value through profit or loss (36) 21 - (16)
Trade and other payables 4,656 (237) 766 730
Cash flows from operating activities (494) (292) (621) 340
27. Revenues from the Funds and contingent liabilities
At 31 December 2013, Group companies were the general partners of the Sigma Sustainable Energy Fund II, the RGU Fund and the
Dundee Fund (together “the Funds”) and as such were entitled to a guaranteed revenue stream from the Funds but otherwise did 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.
28. 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 2013.
Fees invoiced Amount
in the period outstanding
less amounts at 31 December
written off 2013
Period £’000 £’000
DEM Solutions Ltd 1 Jan – 31 Dec 20 -
i-design Group plc 1 Jan – 8 Jul 10 -
Onzo Ltd 1 Jan – 31 Dec 10 5
Total year ended 31 December 2013 40 5
Total year ended 31 December 2012 60 12
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 Capital Group plc
Annual Report & Financial Statements 2013
45
Until 13 August 2013, Frontier IP was an associate company of Sigma. During the period from 1 January 2013 to 13 August 2013
Sigma charged Frontier IP a fee for directors’ services of £18,000 (2012: £48,000), recharged administrative and Frontier IP employee
expenses of £11,000 (2012: £11,000) and charged for rent of £6,000 (2012: £9,000). Frontier IP charged Sigma for employee services
of £23,000 (2012: £37,000). At 31 December 2012, Sigma was owed £5,000 and owed Frontier IP £11,000.
Sigma had transactions during the year with Regenco (Winchburgh) Ltd (“Regenco”), a related party due to James McMahon,
a Director of Sigma, also being a director of Regenco and due to Regenco being owned by a major shareholder of Sigma. 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). Until 17 October
2013, West Coast Capital Investments Ltd, was a major shareholder of Sigma, holding over 20% of the issued share capital. Sigma
charged Regenco property management fees of £275,000 (2012: £275,000).
On the 22 February 2013 Sigma acquired a 25.1% shareholding in Countryside Sigma Limited. Fees invoiced in relation to
development management services for the period from the date of investment to the end of the year were £111,000. At 31 December
2013 Sigma was owed £37,000.
46
Sigma Capital Group plc
Annual Report & Financial Statements 2013
Five Year Record
2013 2012 2011 2010 2009
£’000 £’000 £’000 £’000 £’000
Revenue 5,808 2,326 2,468 1,836 2,414
Cost of sales (3,555) - - (55) (367)
Gross profit 2,253 2,326 2,468 1,781 2,047
Other operating income 54 (833) (61) (417) 1,126
Administrative and other expenses (2,662) (2,575) (2,530) (4,960) (2,283)
(Loss)/profit from operations (355) (1,082) (123) (3,596) 890
Net finance income 10 22 15 31 14
Profit/(loss) arising from associate company (net) 20 (111) (1,307) - -
Exceptional item (531) - - - -
(Loss)/profit before tax (856) (1,171) (1,415) (3,565) 904
Taxation - - - (10) 69
(Loss)/profit for the year (856) (1,171) (1,415) (3,575) 973
Attributable to:
Equity holders of the Company (856) (1,171) (1, 401) (3,539) 1,719
Minority interests - - (14) (36) (746)
(856) (1,171) (1,415) (3,575) 973
Net assets employed 2,636 2,597 3,753 5,682 9,611
Basic (loss)/earnings per ordinary share (pence) (1.87) (2.57) (3.17) (7.59) 3.68
Sigma Capital Group plc
Annual Report & Financial Statements 2013
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 10am on 16 May 2014 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.
Receipt of the financial statements for the year ended 31 December 2013 together with
the reports of the Directors and the auditor
Re-appointment of James Cairns McMahon as a director
Re-appointment of Graham Fleming Barnet as a director
Re-appointment of Marilyn Dawn Cole as a director
Approval of the report on Directors’ remuneration for the year ended 31 December 2013
Re-appointment of the auditor
Remuneration of the auditor
General authority to allot securities
Special Resolutions
9.
General disapplication of pre-emption rights
For
Against
Withheld
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
nn
Signature(s) or Common Seal
Date
FULL NAME (BLOCK CAPITALS)
Notes
1.
2.
3.
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.
4.
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 10am
on 14 May 2014.
#
48
Sigma Capital Group plc
Annual Report & Financial Statements 2013
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
Regis House
45 King William Street
London
EC4R 9AN
edinburgh@sigmacapital.co.uk
www.sigmacapital.co.uk