Sigma Capital Group plc
Annual Report & Financial Statements
for the year ended 31 December 2014
City Wharf, Aberdeen
Edinburgh, Head Office
PRS Developments
Higher Broughton Regeneration
Liverpool Regeneration
Manchester Office
North Solihull Regeneration
London Office
PRS & Urban
Regeneration
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 2014
1
KEY POINTS
Operational:
Financial:
> Significant progress made in the
> Results for 2014 in line with market
delivery of Sigma’s Private Rented Sector
(“PRS”) strategy
> Two milestone events:
> commencement of first phase of PRS
Joint Venture with Gatehouse Bank plc
– 927 new rental homes, with total
development cost of £100m
expectations
> Revenues of £3.87m, including £0.61m
from North Arran Way development
(“NAW”) (2013: £5.81m, including £3.69m
from this development)
> Profit from operations of £0.19m (2013: loss
of £0.36m) – represents £0.55m turnaround
> strategic partnership signed with
> Profit before tax of £0.21m (2013: loss of
Grainger plc to create a large scale
PRS portfolio focused on key English
cities outside Greater London
> Share placing completed to raise £8.0m
gross to support Sigma’s next stage of
development
> Sigma’s non-PRS regeneration activities
made encouraging progress
> Exit from historic venture capital
activities completed
£0.86m) - represents a £1.07m turnaround
> Basic earnings per share of 0.38p
(2013: loss per share of 1.87p)
> Net assets per share increased to
17.4p (2013: 5.5p)
> Cash balances increased to £5.22m
(2013: £1.07m)
> Board remains confident about growth
prospects supported by long term
macro drivers
2
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Chairman’s Statement
“ Sigma made significant progress over 2014 as we focused on
the delivery of our Private Rented Sector strategy. Most
importantly, we achieved two milestone events both in
November 2014 - the launch of construction of PRS homes
under our Joint Venture with Gatehouse Bank and the signing
of a major PRS partnership agreement with Grainger plc.
We believe that the scale of venture with Gatehouse, which is
targeting a PRS portfolio of 6,600 new homes and our new
relationship with Grainger firmly establishes Sigma as a leading
participant in unlocking the PRS opportunity in the UK.
The new homes under both agreements will be built on land
procured and developed by Sigma, through our local authority
partnerships and house building partners. Looking ahead, we
have set ourselves the target of delivering in excess of 10,000
new homes in the next five years, with these new homes
comprising a mix of PRS, market for sale and social housing.
We also expect to participate in these opportunities using the
Group’s own capital.
With our PRS Joint Venture with Gatehouse gaining momentum
and our relationship with Grainger now underway, we are
confident of further progress to come over 2015.”
David Sigsworth
Chairman
Sigma Capital Group plc
Annual Report & Financial Statements 2014
3
We described 2013 as a turning point in
Sigma Capital Group plc’s (“Sigma” or “the
Group” or “the Company”) development as
we focused on the delivery of our Private
Rented Sector strategy. 2014 has been an
equally important year for the Group, with
the end of the year culminating in both the
launch of construction of PRS homes under
our Joint Venture with Gatehouse Bank plc
(“Gatehouse”) and the signing of a major
PRS partnership agreement with Grainger
plc (“Grainger”), the UK’s largest listed
residential property owner and manager.
This agreement is for the creation of a large
scale PRS portfolio outside Greater London
and complements our Joint Venture with
Gatehouse.
The first phase of PRS homes, with total
development cost of approximately £100m
was launched in November 2014, and will
deliver new rental homes in the North West
over a period of two years creating one of
the first large scale PRS schemes in the UK.
Some four months after the start of
construction, the first tenants have already
moved in with rental demand very strong,
and construction currently remains ahead of
schedule.
We are now actively engaged with
Gatehouse in the preparation for the second
phase of investment and delivery. We have
also been working with Gatehouse to
simplify and accelerate the delivery process
as we further increase the number of
houses and sites that we aim to deliver. We
are currently targeting a PRS portfolio with
Gatehouse of around 6,600 new rental
homes, with a total development cost of
£700m. We believe that the scale of this
venture and our new relationship with
Grainger firmly establishes Sigma as a
leading participant in unlocking the PRS
opportunity in the UK.
Under both the Gatehouse and Grainger
partnerships, the new homes will be built on
land procured and developed by Sigma,
through our local authority partnerships and
house building partners. We have set
ourselves the target of delivering in excess
of 10,000 new homes in the next five years,
with these new homes comprising a mix of
PRS, market for sale and social housing.
We also expect to participate in these
opportunities using the Group’s own capital.
Whilst our core focus is centered on our
PRS activities, our regeneration activities,
which support the objectives of our local
authority partners, continue to produce
good results. These activities are focused
on the delivery of a mix of residential
homes, including social housing, retail,
commercial and community facilities,
including medical centres and schools. Our
financial results for the year largely reflect
this activity, with the benefits of our PRS
activities to come through more fully in 2015
and beyond.
The shortage of housing and urgent
requirement for new housing stock in the UK
is well known and particularly acute set
against a rising UK population, forecast to
grow by 16% to 73m by 2035. The UK is
also increasingly moving towards a rental
market with the percentage of owner-
occupied homes falling to 65%, its lowest
level since 1988. This trend is expected to
continue, underpinned by rising house
prices and tighter mortgage regulation.
These macro developments support
Sigma’s growth objectives and with our two
major funding relationships and growing
pipeline of opportunities, we are
increasingly well positioned to deliver
professionally managed and large scale
PRS housing stock.
Placing
In April 2014, we completed a placing of
ordinary shares to raise £8.0m before
expenses in order to support our early
mover advantage in the rented residential
sector and to assist in the execution of large
scale development opportunities. The
placing at 70p per share comprised
11,428,571 new ordinary shares of 1p each
and was supported by both existing and
new institutional shareholders.
Results
The Group generated revenues of £3.87m
for the financial year to 31 December 2014
(2013: £5.81m). These results include
significant revenues from the NAW
Development, completed in April 2014,
which added £3.69m of income to results in
2013 and £0.61m of income to results in
2014. Excluding this development and
discontinued venture capital activities,
Group revenues increased by 96% to
£3.24m (2013: £1.65m).
The Group moved into profitability with profit
from operations of £0.19m (2013: loss
£0.36m). This comprised a profit on
operations of £0.58m from the Group’s
property activities (2013: loss of £0.02m)
and a loss on operations of £0.39m (2013:
loss of £0.34m) from venture capital and
other holding company activities. As
previously announced we completed
Sigma’s exit from its historic venture capital
activities in the first half, leaving the Group
wholly focused on its property-related
operations.
4
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Chairman’s Statement
continued
Administrative expenses increased by 20%
during the year, reflecting increased
professional costs and one-off bonus
payments resulting from the joint venture
arrangements agreed during the year.
The profit before tax for the year was
£0.21m (2013: loss before tax of £0.86m,
which includes an exceptional cost of
£0.53m arising from the purchase of the
deferred share in Sigma Inpartnership).
Basic earnings per share were 0.38p (2013:
loss per share of 1.87p)
Net assets per share at the year-end
increased to 17.4p (2013: 5.5p) and cash
balances increased by 488% to £5.22m
(2013: £1.07m). This largely reflects the
placing completed in April 2014.
At this stage of Sigma’s development, the
Directors are not recommending the
payment of a dividend for the year.
Operational Overview
In November 2014 we launched the first
phase of our PRS Joint Venture with
Gatehouse (“PRS Fund”), comprising 927
new rental homes across 14 sites in Greater
Manchester and Liverpool, and the first
tenants have already moved in. We are
creating a mix of high quality 2, 3 and 4
bedroom houses and construction is
currently underway on a total of six of the 14
sites, with the development of further sites
scheduled to begin during spring and
summer 2015. Construction is ahead of
schedule and tenant demand is strong and
generating higher than originally expected
rents.
In February 2015, together with Gatehouse
and our lettings partner Direct Lettings Ltd,
we also launched a dedicated bespoke
lettings brand “DIFRENT” which will be used
for all rental units constructed under the
PRS Fund.
This first phase of the PRS Fund is being
built on land procured and developed by
Sigma through its existing local authority
partnerships with Liverpool City Council and
Salford City Council, and its house building
partner, Countryside Properties (UK) Ltd
(“Countryside”). The second and further
phases are now under discussion with
Gatehouse. Each phase will deliver an initial
transaction fee to Sigma as well as
development management fees. On
completion of the new homes, Sigma earns
recurring asset management fees and will
retain a share of the net disposal profits on
the assets, subject to a minimum return to
investors.
In November 2014, we also announced a
strategic partnership with Grainger for
delivery of larger PRS sites in excess of 100
homes, in the regions of England. Under the
terms of the agreement, Sigma has granted
Grainger the exclusive option for an initial
four year term to acquire development
opportunities of 100 units or more sourced
by Sigma. In addition to sourcing
development opportunities, Sigma expects
to act as development manager on the
majority of projects. Sigma will earn a profit
share on each housing development, split
into a sourcing fee and a development
management fee. We are now actively
engaged in the delivery of the first site and
expect this relationship to grow during 2015.
To support our plans for the delivery of PRS
homes in the UK, we are actively looking to
source new opportunities in new cities and
regions for our model.
The Group’s regeneration activities, which
support our local authority partners,
continued to make progress. We completed
the delivery of a major new retail and office
development at NAW in North Solihull in
early 2014. The financial benefit of this
substantial development was principally felt
in 2013. The development has helped to
fulfill Solihull Metropolitan Borough Council’s
regeneration plans for a 1,000 acre area in
North Solihull. Our role included securing
planning permission, five key pre-lettings
and the forward sale of the development.
We also procured the construction contract
and finance for the build phase. Over the
year, we completed the delivery of 80 new
homes on a six acre site in the Higher
Broughton area of Salford with our partner
Countryside as part of our Salford
Partnership. All the homes were pre-sold
prior to finalisation of construction.
Together with our house building partner,
Countryside, we are currently delivering in
excess of 350 new market for sale homes
on two sites in Liverpool with more to come
in 2015. These support Liverpool City
Council’s ambitious plans for new housing
stock across the City. In March 2015, with
Countryside we have also commenced the
delivery of a phase of 56 units for social
housing on behalf of Liverpool Mutual
Homes. Sigma’s remuneration from these
developments is governed by the terms of
the relevant partnership agreements and is
in addition to the income now being
generated from our growing PRS model.
Sigma Capital Group plc
Annual Report & Financial Statements 2014
5
Board changes
Outlook
We believe we have created a robust PRS
model, capable of significant growth and
have been first to market with a viable
model of scale in PRS delivery in the UK.
Macro trends underpin our confidence with
unparalleled demand for the underlying
product, ever growing shortage of housing
delivery in the UK and a growing appetite
amongst investors to participate in this
sector.
In particular, reflecting the acute under-
supply of new housing since 2008, local
authorities across England are keen to
discuss new housing investment and
delivery. Our track record of both PRS and
non-PRS housing delivery in the North West
of England, and the key PRS relationships
we have established, position us strongly as
we engage with local authorities for housing
delivery across additional regions in
England.
With our PRS Joint Venture with Gatehouse
progressing well underway and gaining
momentum, and our relationship with
Grainger now underway, we are confident of
further progress to come over 2015.
There have been a number of Board
changes in the year. In March 2014,
following Sigma’s exit from its historic
venture capital activities, Mark Hogarth,
Investment Director, stepped down from the
Board. In September 2014, as we ceased
the Winchburgh development contract, our
Scottish Residential Development Director,
John Hamilton who had prime responsibility
for this contract also stepped down from the
Board.
In January 2015, Malcolm Briselden, who
joined Sigma as Group Financial Controller
in April 2012, was appointed as Finance
Director following the retirement of Marilyn
Cole.
On behalf of the Board, I am delighted to
welcome Malcolm to his new position on the
Board. I also wish Marilyn a very happy
retirement after her 15 years as Sigma’s
Finance Director - her dedication and wise
counsel have been invaluable. I also extend
our thanks to Mark and John for their
contribution to Sigma.
Staff
Particular thanks is due to all Sigma staff
members for the major success that has
been achieved this year. Sigma has
transformed its business to lead the way in
the delivery of PRS homes and this could
not have been achieved without the skill,
hard work and dedication of all our staff.
Everyone should be proud of what they
have achieved and I look forward to the
future with confidence as we continue to
grow and expand the business.
David Sigsworth
Chairman
28 April 2015
6
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Strategic Report
The Directors have pleasure in
presenting their Strategic Report for the
year ended 31 December 2014.
Principal activity
Sigma, together with its subsidiaries, is a
property group principally focused on the
PRS sector but with both residential and
commercial activities within its urban
regeneration and property asset
management sectors.
Sigma is a public limited liability
company incorporated in England. It
acts as a holding company and at 31
December 2014 had four principal wholly
owned subsidiaries:
> Sigma Capital Property Limited
(“SCP”)
> Sigma Inpartnership Limited (“SIP”)
> Strategic Property Asset
Management Limited (“SPAM”)
> Sigma Technology Investments
Limited (“STI”)
The Group’s PRS activities are carried
out by its subsidiary SCP. Its first joint
venture with Gatehouse Bank plc
commenced in November 2014 with the
start of construction of 927 homes for the
private rental market. A strategic
partnership was also agreed with
Grainger plc for PRS development
opportunities of 100 units or more.
The Group’s property regeneration activities
are largely carried out by its subsidiary, SIP,
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, SIP
has three established partnerships, with
Liverpool City Council, Salford City Council
and Solihull Metropolitan Borough Council.
The partnerships hold 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 PRS and its local authority
relationships are undertaken by SPAM.
Through SPAM, the Group 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 completed the
exit from its venture capital management
activities in early 2014. The Group still has
an interest in one venture capital fund and
the investment is held in STI.
Key strategy
Our core strategy is to utilise our property
and capital raising expertise whilst working
with our established local authority
partnerships and house building partners,
along with our funding partners, to build on
our initial PRS activities. Another key part of
our strategy is to progress the land that is
under our control by accessing funding to
accelerate the delivery of residential
regeneration developments and commercial
developments. This strategy allows us to
grow our income and profit and 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 the key component of our
strategy for 2015 and beyond. The initial
joint venture with Gatehouse, which
commenced in November 2014, together
with our new strategic partnership with
Grainger provides us with a strong platform
for growth in this sector. 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.
Sigma Capital Group plc
Annual Report & Financial Statements 2014
7
Overview of the business
Private Rented Sector residential
portfolio
Private Rented Sector residential
portfolio
Our PRS model which has been designed to
address the need for new homes in the UK
allows us to move residential land assets
with planning predominately from local
authority partnerships to our fund structure.
The key advantage of this for local
authorities is that they are able to deliver
large scale high quality housing quickly,
meeting an urgent social need, with the PRS
model delivering houses typically at five to
six times the rate of those built ‘for sale’. In
addition, local authorities also benefit from
council tax receipts on the new homes and
from the Government’s new homes bonus.
Typically, local authorities’ wider
regeneration objectives are also boosted.
The faster timescales are also attractive to
house builders who can work with us on the
delivery of PRS units to reduce their risk on
certain sites. We are now beginning to see
PRS site opportunities from both local
authorities and the house building sector.
The initial focus of our PRS activity with both
Gatehouse and Grainger, is on the regions
of England outside Greater London.
Accordingly, Sigma is not currently seeking
sites in Greater London.
Joint Venture with Gatehouse Bank plc
In November 2014, construction
commenced on the first phase of 927 new
privately rented residential properties
comprising a mix of high quality family
homes and apartments on 14 sites in the
North West of England - ten in Greater
Manchester and four in the Liverpool area.
The new homes are being built by
Countryside and construction is scheduled
to be completed in approximately two years
with a total development cost of c. £100
million. Direct Lettings Limited (part of the
Shepherd Direct Group), with whom Sigma
has a well-established association, are
managing all lettings.
This first phase of homes is built on land
procured by Sigma and is underpinned by
our existing three local authority
partnerships. Gatehouse, a leading London-
based Shariah compliant investment bank
with a real estate portfolio worth in excess of
£1 billion across the UK and US, is
delivering the equity element of the venture
whilst Barclays Bank plc is providing the
debt financing.
The first homes have now been completed
with the first tenants having moved in. On-
going rental demand is strong and the
majority of properties scheduled for release
over the coming months have already been
pre-let or reserved. A new brand,
“DIFRENT”, has also been launched which
will support the PRS Fund platform and be
utilised for the rental of all units across this
and further phases with Gatehouse
therefore creating a national lettings brand.
Sigma is fully engaged with Gatehouse on
the next phase of delivery and is currently
exploring with them more efficient financial
structures for the quicker delivery of the
future phases.
The PRS Fund generates fees for the Group
through each stage of its life. An upfront fee
is paid on commencement of construction,
a management fee is paid quarterly over the
duration of the delivery period and a
quarterly asset management fee is paid
once the properties are completed. Sigma
will also retain a share of the net disposal
profits on the assets subject to a minimum
return to investors. In addition, Sigma has
made a loan to the PRS Fund in respect of
the first phase which may be converted to
equity conditional on the final construction
costs of the initial investments.
Strategic Partnership with Grainger plc
In November 2014, Sigma entered into a
major strategic partnership with Grainger,
the UK’s largest listed residential property
owner and manager, to create a large-scale
PRS portfolio across the key cities of
England outside Greater London. Under the
terms of the agreement, Sigma has granted
Grainger the exclusive option for an initial
four year term to acquire development
opportunities of 100 units or more sourced
by Sigma. This agreement is
complementary to the PRS Fund
established with Gatehouse.
Sigma has created a significant pipeline of
opportunity through its local authority
relationships and house building partners,
which can be utilised over the course of the
relationship with Grainger.
Grainger will appraise each development
opportunity individually and we are in the
process of delivering the first site with a
gross development cost in excess of £18m.
A number of further sites have already been
identified which we are looking to progress
with Grainger.
At present, Grainger expects to fully own the
initial developments sourced by Sigma,
although in the future it may also seek to
syndicate its investment to third party
investors, including Sigma. In addition to
sourcing development opportunities, the
Group expects to act as development
manager on the majority of projects. The
Group will earn a profit share on each
housing development, split into a sourcing
fee and a development management fee.
8
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Strategic Report
continued
Urban regeneration
Liverpool Partnership (also referred to
as Regeneration Liverpool)
Our Liverpool Partnership is a limited liability
partnership formed in 2007 between SIP
and Liverpool City Council. The partnership
was given an initial ten year option over a 60
acre residential development site, known as
Norris Green, which had 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. Key sites added are Gateacre, the
former Queen Mary school site and Lime
Street/Knowledge Quarter.
In 2012, we formed a joint venture company
with a major local commercial property
development company, Neptune
Developments Limited, to help accelerate
the delivery of the commercial regeneration
projects in Liverpool. In 2013, we
established a second joint venture company
with house building specialist, Countryside,
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 SIP earning a management fee and
participating in a profit share); by SIP (with
SIP earning a fee and an agreed priority
profit); or by the Liverpool Partnership
selling a site on the open market, with SIP
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 SIP through our venture companies with
Countryside and Neptune Developments
Limited.
Detailed planning consent on our large
private for sale site at Gateacre, a 19 acre
former secondary school site was submitted
in March 2015. The application is for 200
new family homes ranging from two and
three bedroom town houses up to five
bedroom executive detached homes. There
have been extensive pre-planning
discussions with the Liverpool City Council
and several community consultation events.
Development is forecast to commence in
the second half of 2015.
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. £96
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.
Construction of the St John Bosco
secondary school site at Stonebridge, with a
development cost of c. £18 million
completed in August 2014, ready for the
new school year commencing September.
We are pleased to report that this project
won the Royal Institute of British Architects
North West Region award for Building of the
Year 2015.
Residential Projects
The regeneration of the site at Norris Green
has made much progress and the upturn in
the residential market has been helpful in
bringing forward additional phases. The
completion of our PRS Fund with
Gatehouse has also been extremely positive
for the regeneration effort.
We have now completed the first three
phases at Norris Green, delivering 202 units
and have delivered 83 of the 170 units on
the fourth phase. There are 20 PRS units
within the fourth phase, all of which have
now been completed. Lettings demand has
been strong with all 20 units let at the asking
rents. Sales of the new homes are also
progressing well at a rate of four per month.
Phase five, consisting of a further 56
affordable units on behalf of Liverpool
Mutual Homes, commenced in March 2015
and will be built by our joint venture
company Countryside Sigma Limited. The
gross development cost (“GDC”) of this fifth
phase is c. £6.4 million.
Phase six will commence on site in May and
consists entirely of 132 units for the PRS
Fund and has a GDC cost of c. £13.5
million.
By the end of May, we will have built or will be
contracted on 560 of the 828 master planned
units. This is real transformational change
for the scheme over the last 12 months.
Construction on the former Queen Mary
School site, which is approximately one mile
from Norris Green, commenced in January
2015. The detailed consent is for 200 new
homes with 64 designated homes for our
PRS Fund. The balance of 136 homes for
sale are being constructed by our affiliate
Countryside Sigma Limited. Infrastructure
and remediation works are underway and
we expect the first completed units in the
summer of this year. We expect all the PRS
units to be completed by the end of 2015.
Sigma Capital Group plc
Annual Report & Financial Statements 2014
9
Salford Partnership (also known as
Higher Broughton Partnership)
comprehensive refurbishments of existing
facilities.
The Salford Partnership is our partnership
with Salford City Council and Royal Bank of
Scotland.
Housing developer Countryside completed
construction of 80 new family homes on a
six acre site in April 2014. The development
realised a base fee of £400,000 for Sigma
spread over 2012 and 2013 and generated
a profit share of £240,000 in 2014 as all the
units were sold.
Sigma is working closely with Salford City
Council to bring additional land for delivery
for PRS. A total of four sites and 206 units
will be developed as part of the initial phase
of our PRS Fund with Gatehouse and we are
in the process of reviewing more.
North Solihull Partnership
The Partnership was set up in 2007 by
Solihull Metropolitan Borough Council,
Bellway Homes, West Mercia Housing
Association and SIP with the remit to
coordinate and deliver the regeneration of
an area of circa 1,000 acres in North
Solihull. The key objectives of the
Partnership are to deliver new and
replacement housing stock, ten new or
refurbished primary schools and five new
village centres incorporating neighbourhood
council, medical and retail facilities. Our key
role is the provision of development
management services, including strategic
development planning, coordination and
procurement of development works, 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.
The schools programme is well advanced
with four completed and a further two on
site due for completion in mid 2015. The
remaining four schools will be
We have been involved in the
redevelopment of two Village Centres during
the year. Acting as development manager at
Chelmund’s Cross, we completed the
procurement and delivery of a £6 million
contract for new infrastructure which will
enable further phases of development
including the construction of an Enterprise
Centre.
At the second village centre at NAW, SIP
completed the development and sale of a
new 30,000 sq ft neighborhood retail and
office scheme in March 2014. The sale
allowed us to repay the Growing Places
loan secured to fund the construction of the
building. SIP earned fees and development
profit c. £144,000 and £180,000
respectively, most of which was recognised
in 2013.
We continue to work with NHS England,
Solihull Council and the local GPs on the
plans for the development of a new medical
practice building at Smiths Wood, which will
enable the two existing GP practices to
merge and benefit the local community.
After some delays due to the reorganisation
of NHS England, we are now aiming to
commence development in the fourth
quarter of 2015.
We are also working with our partners on
the early strategic planning stages of
Kingshurst, the third village centre to be
redeveloped. We anticipate providing further
development management services on
infrastructure improvements to the village
centre that will in turn provide some direct
development opportunities for SIP to
undertake during 2016 and 2017.
We are also actively in discussions with the
council in relation to land for PRS
development.
City Wharf, Aberdeen
Sigma continues to provide asset
management services to SI Limited
Partnership No. 7 and its lender National
Asset Management Agency (“NAMA”).
During 2014 we completed the
refurbishment of the vacant office
accommodation in Exchequer House,
successfully negotiated an uplift in the rent
for the Grosvenor Casino (in relation to the
rent review that fell due in late 2013), and
secured a further letting of one of the vacant
leisure units to Pure Gym who have
expanded their existing facility within the
development. Principal letting terms on a
further retail unit have also been agreed with
legal completion due in the next few weeks.
NAMA is currently in the process of the
disposal of the loans in respect of this asset
and we await further developments in this
regard.
Historic property management
contracts
The property management contract with
Regenco Trading Limited (“Regenco”) for
the management of Winchburgh
development in Scotland ceased at the end
of September 2014 reflecting the focus of
our efforts on large scale residential and
regeneration activities in England.
The Placing
The placing of new shares to raise £8 million
gross was completed in April 2014 and
gives 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
10
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Strategic Report
continued
The goodwill relates to the acquisition of SIP
and is reviewed each year for impairment.
The investment is in one venture capital
fund which holds investments in 8
companies (2013: 14 companies). The
unquoted security is an investment in Nandi
Proteins Ltd (“Nandi”) which the Group has
held for some years. During the year, certain
third parties invested a substantial amount
into Nandi and the value of the Group’
investment reflects the price paid by those
third parties. The loans to the PRS Fund
comprise two loans of £2,000,000 and
£1,500,000 which were key for the PRS
Fund to commence. The loan of £2,000,000
is expected to be repaid in 2015 and the
loan of £1,500,000 is expected to be repaid
over the period to the end of 2016.
The Group’s current assets exceed its
current liabilities by £8,015,000 (2013:
£1,061,000). The Group has no long term
liabilities.
Cash flow
The Group’s cash balances increased by
£4,150,000 to £5,220,000 (2013: increased
by £46,000 to £1,070,000). The cash
outflow from operating activities of £131,000
(2013: £494,000). The cash inflows from the
issue of shares was £7,747,000 (2013:
£33,000) offset by cash outflow in respect of
other investing activities of £3,466,000
(2013: £507,000).
demonstrate intent to our PRS partners and
local authority partnerships.
Venture Capital activities
During the first half of 2014, the
management of the last of the venture
funds, Sigma Sustainable Energy Fund II,
was transferred to Shackleton Ventures
Limited together with the remaining
business advisory contracts of certain of the
investee companies and also disposed of
its residual interest in the fund assets.
Sigma continues to be a limited partner in
one venture fund which was transferred in
the prior year with its investment in the fund
held by STI.
Financial Review of 2014
The Group’s revenue decreased by 33% to
£3,868,000 (2013: £5,808,000) due to the
large impact on revenue in 2013 from NAW
(2014: £604,000, 2013: £3,690,000).
Excluding the revenue both from NAW and
from the discontinued venture capital
activities, other property revenue increased
by 96% to £3,245,000 (2013: £1,652,000).
Gross profit increased by 42% to
£3,208,000 (2013: £2,257,000). Excluding
the NAW and the discontinued venture
capital activities gross profit increased by
90% to £3,147,000 (2013: £1,652,000).
The Group made a trading profit in the year
of £16,000 (2013: trading loss £409,000),
with property activities driving the
turnaround generating a trading profit of
£576,000 (2013: trading loss of £18,000).
The discontinued venture capital activities
generated a trading loss of £179,000 (2013:
trading loss £75,000) and the trading profit
was also adversely impacted by the 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 20% to
£3,192,000 (2013: £2,666,000), with the rise
principally reflecting increased legal and
professional costs. The legal and
professional costs were higher as a result of
the two joint venture arrangements entered
into during the year. There was also an
increase in employment costs of 12%
mainly due to the payment of one-off
bonuses following the signing of the two
joint venture agreements. Excluding these
bonuses, employment costs only rose by
1%.
The Group made a profit from operations of
£186,000 (2013: loss £355,000) benefitting
from an unrealised profit on investments of
£171,000 (2013: loss £28,000) offset by a
small loss on disposal of equity investments
of £1,000 (2013: profit £82,000). Overall the
Group made a net profit in the year of
£214,000 (2013: net loss of £856,000). The
results in the prior year were adversely
affected by an exceptional item of £531,000
being the excess of the price paid for the
deferred share in SIP over the deferred
consideration provided for in 2012.
Net assets of the Group increased to
£10,620,000 at 31 December 2014 (31
December 2013: £2,636,000) benefiting
from the share placing which raised £7.63
million net of expenses. Net assets at 31
December 2014 were equivalent to 17.4p
per share (31 December 2013: 5.5p per
share).
Balance sheet
The principal items in the balance sheet are
goodwill of £533,000 (2013: £533,000), the
investment in the venture capital fund of
£502,000 (2013: £520,000), other unquoted
securities £171,000 (2013: £nil), two loans
to the PRS Fund totalling £3,500,000 (2013:
£nil) and cash of £5,220,000 (2013:
£1,070,000).
Sigma Capital Group plc
Annual Report & Financial Statements 2014
11
Key performance indicators
With the transfer of the remaining fund activities over the year, the key performance
indicators are concentrated on the property activities.
The Group’s key performance indicators include:
2014
£’000
2013
£’000
Change
Revenue - continuing property activities excluding
extraordinary revenue from NAW
Revenue – all property activities
Operating profit/(loss) – property activities
Realised (loss)/profit on disposal of equity investments
Unrealised profit/(loss) on revaluation of investments
Group operating profit/(loss)
Cash balances
3,245
3,849
576
(1)
171
186
5,220
1,652
5,342
(18)
82
(28)
(355)
1,070
+96%
-28%
594
(83)
199
541
+488%
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 relates to the
housing market where a deterioration in the
macro-economic outlook, the cyclical nature
of residential market and a fall in house
prices may affect Sigma’s income and its
ability to raise finance for housing projects.
The Group manages these risks by keeping
abreast of any trends so that any likely down
turn is anticipated, maintaining good
funding relationships, ensuring a reputation
of building a good quality product and
having diversity in its income streams. An
additional financial risk to the business is
the recovery of the two loans in respect of
the PRS Fund. Sigma is the development
manager in respect of the PRS Fund and
has implemented substantial cost control
and monitoring procedures. The loans are
expected to be repaid in full during
2015 and 2016. A further financial risk is a
reduction in the value of the Group’s
investment in the venture capital fund and in
the unquoted security. This risk is mitigated
to a certain extent as the funds are invested
in eight underlying companies. In addition,
the fund manager is also 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
from both residential and commercial
property initiatives. The launch of the PRS
Fund has significantly increased the
proportion of the Group’s contracted revenue
compared with one-off income streams.
Where the Group undertakes property
developments on its own balance sheet,
development risk is managed by maintaining
close control of pre-contract costs and by
limiting the number of early stage
developments financed by the Group at any
one time.
The main cash flow uncertainties of the
business centre around the timing of
property project development fees, the
receipt of profits arising out of the
partnerships and the timing of the
repayment of the loans provided in respect
of the PRS Fund.
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 joint ventures
and 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
GF Barnet
Chief Executive Officer
28 April 2015
12
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Directors
David Sigsworth
Non-executive Chairman (Age 68)
Graham Barnet
Chief Executive Officer (Age 51)
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 49)
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 60) (Resigned 31 December 2014)
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.
Malcolm Briselden, ACMA
Finance Director and Company Secretary
(Age 47) (Appointed 1 January 2015)
Malcolm is a chartered management
accountant who joined the company as
Group Financial Controller in April 2012.
Prior to Sigma, Malcolm spent nine years at
The Premier Property Group Limited, the
commercial property arm of Murray
International Holdings Limited.
John Hamilton, RICS
Property Development Director (Age 56)
(Resigned 29 September 2014)
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.
Sigma Capital Group plc
Annual Report & Financial Statements 2014
13
Advisers
Secretary and registered office
Malcolm Briselden, ACMA
Oxford Place
61 Oxford Street
Manchester
M1 6EQ
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
Gwynn Thomson, RICS
Property Investment Director (Age 47)
William MacLeod
Executive Director (Age 49)
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.
Duncan Sutherland
Regeneration Director (Age 63)
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.
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.
James McMahon
Non-executive Director (Age 66)
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.
Mark Hogarth
Investment Director (Age 41)
(Resigned 19 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 Anderson Business Consulting where
he worked with blue chip clients on a range
of technical, strategic and business issues.
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 2014
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
2014.
Results and dividends
The Group made a profit for the year of
£214,000 (2013: loss £856,000). The
directors do not recommend the payment of
a dividend (2013: 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 2 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 2014, the Group had positive
cash balances of £5,220,000 (2013:
£1,070,000) and had a short term loan of
£nil (2013: £3,171,000).
The Group’s policy is to keep surplus funds
on short term and instant access deposit to
earn the prevailing market rate of interest.
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 (2013: £nil).
Going concern
During the current year the Group raised
£8,000,000 gross from a placing of the
Company’s shares and had a bank balance
of £5,220,000 at the end of the year,
therefore has considerable financial
resources for the size of its current
business activities.
The income generated by the Group’s PRS
activities, 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 2014
15
Corporate governance
Although not required to do so, the
Company seeks within the practical
confines of being a small company to act in
compliance with the principles of good
governance and the code of best practice
as contained in the UK Corporate
Governance Code.
The Board meets regularly to determine the
policy and business strategy of the Group
and has adopted a schedule of matters that
are reserved as the responsibility of the
Board. The Chief Executive Officer leads
the development of business strategies
within the Group’s operations. The Board
consists of six 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.
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
Malcolm Briselden, ACMA
Company Secretary
28 April 2015
16
Sigma Capital Group plc
Annual Report & Financial Statements 2014
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 has 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 2014 are set
out below.
Director
GF Barnet
GF Barnet
G Hogg
G Hogg
G Hogg
W MacLeod
D Sigsworth
D Sutherland
D Sutherland
D Sutherland
G Thomson
G Thomson
G Thomson
Date of
grant
28.11.13
19.11.14
29.07.11
28.11.13
19.11.14
28.11.13
30.04.08
29.07.11
28.11.13
19.11.14
05.05.11
28.11.13
19.11.14
Number
Exercise price
Exercise date
Expiry date
114,286
250,000
250,000
82,857
264,503
114,286
100,000
131,500
42,857
64,503
250,000
38,095
200,000
26.25p
68.00p
7.50p
26.25p
68.00p
26.25p
25.0p
7.50p
26.25p
68.00p
8.00p
26.25p
68.00p
28.11.16 – 27.11.23
19.11.17 – 18.11.24
29.07.14 – 28.07.21
28.11.16 – 27.11.23
19.11.17 – 18.11.24
28.11.16 – 27.11.23
30.04.08 – 29.04.18
29.07.14 – 28.07.21
28.11.16 – 27.11.23
19.11.17 – 18.11.24
05.05.14 – 04.05.21
28.11.16 – 27.11.23
19.11.17 – 18.11.24
27.11.23
18.11.24
28.07.21
27.11.23
18.11.24
27.11.23
29.04.18
28.07.21
27.11.23
18.11.24
04.05.21
27.11.23
18.11.24
Options over 779,006 ordinary shares of 1p each were granted to Directors during the year. During the year D Sutherland exercised an
option over 118,500 shares at 7.50p per share. Details of the Company’s option schemes are set out in note 21 to the financial statements.
The market price of the Company’s shares at 31 December 2014 was 56.5p. The range of market prices during the year was 41p to 91p.
Sigma Capital Group plc
Annual Report & Financial Statements 2014
17
Carried interest arrangements
Two of the Directors have been allocated a
share of the carried interest assigned to
Sigma arising from the historic venture
funds. Current estimates are that no value
is attributable to this carried interest.
Five of the Directors have been allocated a
share of the carried interest assigned to
Sigma arising from investment in the PRS
joint venture with Gatehouse. As the project
only commenced in November 2014 the
value attributable to this carried interest is
currently unknown.
Directors’ interests - interests in shares
Directors in office at 31 December 2014 had
the following interests in the ordinary shares
of 1p each of the Company:
GF Barnet
GR Hogg
W MacLeod
D Sigsworth
G Thomson
D Sutherland
2014
Number
2013
Number
7,548,237
7,548,237
536,496
766,000
411,971
142,857
133,299
513,429
766,000
411,971
142,857
–
All of the above interests are beneficial
except for 735,000 shares (2013: 735,000
shares) held by Graham Barnet as trustee
for two of his children. On 8 January 2014,
John Hamilton, a former director, 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. On the 18th
November 2014, Duncan Sutherland
exercised options over 118,500 ordinary
shares of 1p each. On the 26 November
2014 he sold 117,649 ordinary shares of 1p
each with 117,559 shares sold 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. There were no
dealings in the Company’s shares by any of
the Directors between 31 December 2014
and 28 April 2015.
D Sigsworth
Chairman
28 April 2015
18
Sigma Capital Group plc
Annual Report & Financial Statements 2014
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 2014
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 2014 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 2014 and of the group’s profit
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
28 April 2015
20
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Consolidated Comprehensive Income Statement
for the year ended 31 December 2014
2014 2013
Notes £’000 £’000
Revenue from services 3 3,868 5,808
Cost of sales 4 (660) (3,551)
Gross profit 3,208 2,257
Realised (loss)/profit on disposal of equity investments
(1) 82
Unrealised profit/(loss) on the revaluation of investments 15 171 (28)
Administrative expenses 5 (3,192) (2,666)
Profit/(loss) from operations 186 (355)
Finance income 6 28 10
Profit on disposal of interest in Frontier IP
- 110
Share of loss of Frontier IP 14
- (90)
Exceptional items 7 - (531)
Profit/(loss) before tax 214 (856)
Taxation 9
- -
Profit/(loss) for the year 214 (856)
Profit/(loss) per share attributable to the equity holders of the Company:
Basic profit/(loss) per share 10 0.38p (1.87)p
Diluted profit/(loss) per share 10 0.37p (1.87)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 £338,000 (2013: £1,299,000). In the prior year the principal reason for the loss in the year was a provision against amounts due
from subsidiary companies of £1,100,000.
Sigma Capital Group plc
Annual Report & Financial Statements 2014
21
Consolidated Balance Sheet
at 31 December 2014
2014 2013
Notes £’000 £’000
Assets
Non-current assets
Goodwill and other intangibles 11 579 596
Property and equipment 12 18 19
Financial assets at fair value through profit and loss 15 673 520
Trade and other receivables 16 1,335 -
2,605 1,135
Current assets
Trade receivables 16 178 651
Other current assets 16 3,549 5,000
Trading investments 17 - 2
Cash and cash equivalents 5,220 1,070
8,947 6,723
Total assets 11,552 7,858
Liabilities
Current liabilities
Trade and other payables 18 932 2,051
Loan 19 - 3,171
Total liabilities 932 5,222
Net assets 10,620 2,636
Equity
Called up share capital 20 612 483
Share premium account 20 12,952 5,334
Capital redemption reserve 34 34
Merger reserve (249) (249)
Capital reserve (7) (7)
Retained earnings (2,722) (2,959)
Equity attributable to equity holders of the Company 10,620 2,636
The accompanying notes are an integral part of this consolidated balance sheet.
22
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Company Balance Sheet
at 31 December 2014
2014 2013
Notes £’000 £’000
Assets
Non-current assets
Property and equipment 12 1 2
Investment in subsidiaries 13 2,921 2,921
Trade and other receivables 16 154 100
3,076 3,023
Current assets
Trade receivables 16 5,157 389
Other current assets 16 56 1,051
Cash and cash equivalents 3,018 208
8,231 1,648
Total assets 11,307 4,671
Liabilities
Current liabilities
Trade and other payables 18 1,340 2,136
Total liabilities 1,340 2,136
Net assets 9,967 2,535
Equity
Called up share capital 20 612 483
Share premium account 20 12,952 5,334
Capital redemption reserve 34 34
Retained earnings (3,631) (3,316)
Total equity 9,967 2,535
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 28 April 2015 and were
signed on its behalf by:
GF Barnet
Chief Executive Officer
28 April 2015
Registered number 3942129
Sigma Capital Group plc
Annual Report & Financial Statements 2014
23
Consolidated Statement of Changes in Equity
for the year ended 31 December 2014
Share Capital
Share premium redemption Merger Capital Retained
capital account reserve reserve reserve earnings Total equity
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2013 456 4,481 34 (249) (7) (2,118) 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) (2,959) 2,636
Issue of shares 129 7995 - - - - 8,124
Cost of share issue - (377) - - - - (377)
Profit for the year - - - - - 214 214
Share-based payments - - - - - 23 23
At 31 December 2014 612 12,952 34 (249) (7) (2,722) 10,620
24
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Company Statement of Changes in Equity
for the year ended 31 December 2014
Share Capital
Share premium redemption Retained
capital account reserve earnings Total equity
£’000 £’000 £’000 £’000 £’000
At 1 January 2013 456 4,481 34 (2,032) 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 (3,316) 2,535
Issue of Shares 129 7,995 - - 8,124
Cost of share issue - (377) - - (377)
Loss for the year - - - (338) (338)
Share-based payments - - - 23 23
At 31 December 2014 612 12,952 34 (3,631) 9,967
Sigma Capital Group plc
Annual Report & Financial Statements 2014
25
Consolidated and Company Cash Flow Statements
for the year ended 31 December 2014
Group Group Company Company
2014 2013 2014 2013
Notes £’000 £’000 £’000 £’000
Cash flows from operating activities
Cash used in operations 24 (131) (494) (4,955) (621)
Net cash used in operating activities (131) (494) (4,955) (621)
Cash flows from investing activities
Disposal of shares in Frontier IP - 276 - 276
Purchase of property and equipment (12) (14) - (2)
Purchase of financial assets at fair value through profit and loss (1) (20) - -
Disposal of financial assets at fair value through profit and loss 19 127 - -
Loans to PRS Fund (3,500) - - -
Long term loan - 28 - -
Disposal of trading investments - 100 - -
Interest received and other financial income 28 10 18 1
Net cash (invested in)/generated from investing activities (3,466) 507 18 275
Cash flows from financing activities
Issue of shares 7,747 33 7,747 33
Net cash generated from financing activities 7,747 33 7,747 33
Net increase in cash and cash equivalents 4,150 46 2,810 (313)
Cash and cash equivalents at beginning of year 1,070 1,024 208 521
Cash and cash equivalents at end of year 5,220 1,070 3,018 208
The accompanying notes are an integral part of this cash flow statement.
26
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Accounting policies
for the year ended 31 December 2014
The principal accounting policies are
summarised below. They have all been
applied consistently throughout the year
and the preceding year.
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.
During the year the Group raised
£8,000,000 gross from a placing of the
Company’s shares and had a bank balance
of £5,220,000 at the end of the year,
therefore has considerable financial
resources for the size of its current business
activities.
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 2015:
> IFRS 9 Financial Instruments
> IFRS 14 Regulatory Deferral Accounts
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,
but is not expected to be material.
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.
The Group has an interest in three limited
partnerships which undertake property
regeneration, the North Solihull Partnership,
the Salford Partnership and the Liverpool
Partnership (together “the Partnerships”).
The Group has a 49.805% share of 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.
The Group has a 25.1% interest in
Countryside Sigma Limited (“CSL”) a
residential housing developer also engaged
in the sourcing and provision of affordable
housing for housing associations and other
registered social landlords. The Group
earns profits on residential developments
depending on the size of each
development. The Directors consider that
the Group neither exercises control nor has
the potential to control CSL. As at the 31
December 2014, the net assets of CSL were
immaterial and have therefore not been
recognised in these financial statements.
Sigma Capital Group plc
Annual Report & Financial Statements 2014
27
The Group also has a 20.1% interest in
Thistle Limited Partnership (“TLP”), its PRS
joint venture with Gatehouse. The Group will
retain a share of the net disposal profits on
the assets, subject to a minimum return to
investors. The Group has also made a loan
of £2 million to TLP which may be converted
to equity conditional on final construction
costs of the initial investments The Directors
consider that the Group neither exercises
control nor has the potential to control TLP
and acts in a commercial capacity as
development and asset manager.
During the prior year, 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 results of Frontier IP used in
the Group accounts in the prior year 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. Frontier IP
ceased to be an associate company of the
Group on 13 August 2013.
Segmental reporting
The Directors regard the Group’s reportable
segments of business to be property,
venture capital fund investment 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 receivables are recognised initially at
fair value and subsequently measured at
amortised cost using the effective interest
method, less provision for impairment. A
provision for impairment is established
when there is objective evidence that the
Group will not be able to collect all amounts
due. The amount of the provision is the
difference between the asset’s carrying
amount and the present value of estimated
future cash flows, discounted at the
effective interest rate. The movement in the
provision is recognised in the income
statement.
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 2014
Accounting Policies
continued
Investments
Current and deferred tax
Share-based payments
Investments represent the Group’s interest
in the equity value of one unquoted stock
and one venture capital fund managed by a
third party.
Investments are classified as financial
assets at fair value through profit or loss and
are initially measured at cost. Subsequent
measurement is at fair value. The fair value
of the unquoted stock is established using
International Private Equity and Venture
Capital Valuation Guidelines. The fair value
of the investments in the venture capital
fund is based on the net asset value of the
fund at the Company’s year end as reported
by the independent fund manager where the
Board believes that this is materially
equivalent to fair value. The fund manager
undertakes a full fair value assessment of
the investments held by the venture capital
funds using valuation methodologies in line
with British Venture Capital Association
guidelines.
Investments classified as “financial assets at
fair value through profit or 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.
Equity instruments
Equity instruments issued by the Company
are recorded at the proceeds received, net
of direct issue costs.
The charge for current tax is based on the
results for the year as adjusted for items
which are non-assessable or disallowed. It
is calculated using rates that have been
enacted or substantively enacted by the
balance sheet date.
Deferred tax is accounted for using the
balance sheet liability method in respect of
temporary differences arising from
differences between the carrying amount of
assets and liabilities in the financial
statements and the corresponding tax basis
used in the computation of taxable profit. In
principle, deferred tax liabilities are
recognised for all taxable temporary
differences and deferred tax assets are
recognised to the extent that it is probable
that taxable profits will be available against
which deductible temporary differences can
be recognised. Such assets and liabilities
are not recognised if the temporary
difference arises from goodwill or from the
initial recognition (other than in a business
combination) of other assets and liabilities in
a transaction which affects neither the tax
profit nor the accounting profit.
Deferred tax is calculated at the rates that
are expected to apply when the asset or
liability is settled. Deferred tax is charged or
credited in the income statement, except
when it relates to items credited or charged
directly to equity, in which case the deferred
tax is also dealt with in equity.
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.
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 can be reliably estimated
but discounted to reflect when the amount
will actually be received. The profit share
estimate is reviewed on a quarterly basis.
Development management fees are
recognised on a pro-rata basis over the
development period. Transaction fees and
other fees for corporate finance work are
recognised when the service is provided
subject to completion of the respective
transaction being virtually certain. Fund
management fees, directors’ fees and
retainers are recognised when the service is
provided.
Sigma Capital Group plc
Annual Report & Financial Statements 2014
29
Revenue recognised in advance of invoicing
is shown as accrued income within debtors.
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
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.
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
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’.
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.
30
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Notes to the Financial Statements
for the year ended 31 December 2014
1.
Financial risk management
Financial risk factors
The Group’s business activities are set out in the Strategic Report on pages 6 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 2014 the
Group had no short term debt (2013: £3,171,000). The debt was taken out for a specific development and the risk was
mitigated by a forward sale of the development and by holding the debt in a wholly owned subsidiary with no cross guarantees.
During the current year, the short term debt was repaid in full on completion and sale of the development. 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 2014, 75% (2013: 100%) of the Group’s
investments was investment in one venture fund(2013: two venture funds).
The venture fund invests 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 the fund holds investments in several companies. At 31
December 2014, the fund held 8 investments (2013: 14 investments). A third party manages the venture fund.
A net movement of 10% in the value of the venture fund holdings would give rise to a movement in the income statement
of £50,000 (2013: £52,000).
The Group earns profit share in respect of property projects that it is involved in which is partly based on development
values and is therefore exposed to price risk.
(ii)
Interest rate risk
As the Group has no borrowings it only has limited interest rate risk. The impact is on income and operating cash flow
and arises from changes in market interest rates. From time to time, certain of the Group’s cash resources are placed
on short term fixed deposit of up to one year to take advantage of preferential rates. Otherwise, cash resources are held
in current, floating rate accounts.
(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 2014, the Group’s cash and cash equivalents were held with the Bank of Scotland, Royal
Bank of Scotland plc and Investec Bank 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.
Property project management fees arise from Sigma Inpartnership’s joint venture, CSL. The fees are agreed in advance and
are recognised as per the accounting policy on revenue recognition. Fees are payable on a monthly basis over the
development period.
The profit share arising from Sigma Inpartnership’s joint venture, CSL, is recognised as per the accounting policy on revenue
recognition. The profit share is payable once the project is complete and once other criteria has been fulfilled.
Revenue recognised in advance of the contracted right to invoice or receive payment is shown in accrued income. The
amounts recognised will be paid during the development period, usually between one month and up to four years, but the
underlying fundamentals of the projects are such that the credit risk represented by these amounts is deemed to be low.
Property project management fees are also earned by Sigma Inpartnership that 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
Sigma Capital Group plc
Annual Report & Financial Statements 2014
31
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.
Development management fees earned in respect of the PRS Fund were agreed in advance of the project commencing, are
based on the expected development costs and are payable quarterly in arrears.
The other principal property management fees earned are from the management of City Wharf, Aberdeen. The funding of the
fees for the first six months of the calendar year are agreed in advance and consequently the credit risk is considered to be low.
During the current year, the company earned fees in relation to the management of the Winchburgh development however the
contract was terminated at the end of September 2014.
The Group withdrew from its venture capital activities during the year.
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 in the prior year.
The concentration of credit risk arising from trade receivables and other current assets is analysed below.
2014 2013
£’000 £’000
Property management fees due to Sigma Inpartnership 100 108
Other property management fees 78 91
Management fees due from Venture Funds and University Funds - 9
Other trade receivables - 111
Other trade receivables - NAW - 332
Other debtors 205 291
Other debtors - loan to PRS Fund 1,500 -
Other debtors - loan to PRS Fund 2,000 -
Other debtors – share placing proceeds receivable - 888
Other prepayments 65 17
Other accrued income 1,114 104
Other accrued income and prepayments - NAW - 3,690
5,062 5,651
The maximum exposure to credit risk for trade receivables and other current assets is represented by their carrying amount.
The loan of £1,500,000 (2013: £nil) in respect of the PRS Fund is expected to be repaid during 2015 and 2016. The loan of
£2,000,000 (2013: £nil) in respect of the PRS Fund is expected to be repaid in full during 2015. The credit risk associated with
these loans relates to the possibility that they will not be able to be repaid from the cash flows of the related projects. The
Board assesses this risk as low.
(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.
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.
32
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Notes to the Financial Statements
continued
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)
Revenue recognition
The Group believes that the most significant judgment area in the application of its accounting policies is in respect of revenue
recognition. The matters taken into account when assessing the amount of revenue to recognised are detailed in the
accounting policy on revenue recognition.
(ii)
Fair value of unlisted investments
The matters taken into account when assessing the fair value of the unlisted investments are detailed in the accounting policy
on investments.
(iii) 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.
3.
Segmental information – business segments
At 31 December 2014 the Group is organised into three business segments: property and venture capital fund management plus
holding company activities.
The Group had two significant customers in the year. Thistle Limited Partnership was a significant customers with fees and profit
share earned of £985,000 as was Countryside Sigma Limited with development management fees and profit share earned of
£960,000. The Group had no significant customers in the prior year.
The segment analysis for the year ended 31 December 2014 is as follows:
Venture Holding Intra group
Property Capital Company adjustments Total
£’000 £’000 £’000 £’000 £’000
Revenue from services 3,849 19 - - 3,868
Trading profit/(loss) 576 (179) (364) (17) 16
Loss on disposal of equity investments - (1) - - (1)
Unrealised profit on the revaluation of investments - 171 - - 171
Profit/(loss) from operations 576 (9) (364) (17) 186
Finance income 1 1 26 - 28
Profit/(loss) before tax 577 (8) (338) (17) 214
Total assets 7,096 3,601 11,307 (10,452) 11,552
Total liabilities (9,119) (1,718) (1,340) 11,245 (932)
Net (liabilities)/net assets (2,023) 1,883 9,967 793 10,620
Capital expenditure 12 - - - 12
Depreciation 4 8 1 - 13
Sigma Capital Group plc
Annual Report & Financial Statements 2014
33
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
4.
Cost of sales
2014 2013
£’000 £’000
Costs in relation to the development at NAW 562 3,551
Other 98 -
660 3,551
34
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Notes to the Financial Statements
continued
5.
Expenses by nature
Expenses included in administrative expenses are analysed below.
2014 2013
£’000 £’000
Administrative expenses
Employee costs (salaries, national insurance and pension) 1,899 1,675
Share based payments 23 15
Other employee related costs 34 50
Consultancy 80 140
Travel and entertainment 259 201
Depreciation 13 21
Amortisation 17 18
Provision for bad debts and bad debts written off (3) (72)
Provision for long term loan - (28)
Operating lease rentals:
- plant and machinery 3 6
- land and buildings (net) 114 114
Other premises costs 145 97
Audit services:
- Fees payable to Company auditor for the audit of the parent company and consolidated accounts 32 20
- the audit of the Company’s subsidiaries pursuant to legislation 21 27
Non-audit services:
- tax services 19 26
- other accountancy services 5 -
Other legal, professional and financial costs 481 306
Other property costs 4 4
Administration costs 46 46
3,192 2,666
6.
Finance income
2014 2013
£’000 £’000
Interest income on short-term deposits and loans 28 5
Loan redemption premium - 5
28 10
7.
Exceptional items
2014 2013
£’000 £’000
Acquisition of deferred share in Sigma Inpartnership - 847
Reversal of deferred consideration accrued - (316)
- 531
In the prior year 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 2014
35
8.
Directors and employees
The average monthly number of employees, including executive Directors, employed by the Group during the year was:
2014 2013
Number Number
Property 15 13
Venture capital - 2
Administration 5 5
20 20
The aggregate remuneration was as follows:
2013 2012
£’000 £’000
Wages and salaries 1,604 1,421
Social security 240 177
Pension costs – defined contribution plans 55 77
Share based payment charge - equity settled 23 15
1,922 1,690
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.
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Salary
Annual incentives
Other benefits
Total
Pension
Executive
GF Barnet 250 250 40 - 2 2 292 252 - -
MD Cole 88 81 15 - 6 7 109 88 - 12
MS Hogarth * 30 140 0 - 1 6 31 146 3 12
J Hamilton ** 71 90 0 - 5 5 76 95 7 9
G Thomson 94 90 20 - 1 1 115 91 9 9
G Hogg 109 99 41 - 6 6 156 105 8 5
D Sutherland 83 74 22 - 5 4 110 78 5 4
W MacLeod 90 7 - - - - 90 7 - -
Non-executive
D Sigsworth 26 24 10 - - - 36 24 - -
J McMahon 10 35 - - - - 10 35 - -
851 890 148 - 26 31 1,025 921 32 51
* From 1 January 2014 to 19 March 2014
** From 1 January 2014 to 29 September 2014
36
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Notes to the Financial Statements
continued
9.
Taxation
2014 2013
£’000 £’000
UK corporation tax on profit/(loss) for the year - -
Deferred tax - -
Tax on profit/(loss) on ordinary activities - -
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The differences are explained below.
2014 2013
£’000 £’000
Profit/(loss) before tax 214 (856)
Profit/(loss) before tax at the effective rate of corporation tax in the UK of 21.49 % (2013: 23.25%) 46 (199)
Effects of:
Expenses not deductible for tax purposes 24 156
Capital allowances in excess of depreciation (3) (3)
Unrelieved losses arising in the year 184 73
Non taxable income (37) (13)
Other adjustments (214) (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% (2013: 20%).
2014 2013
£’000 £’000
Unrelieved management expenses and other losses 2,961 3,786
Unrelieved capital losses 811 811
Excess of depreciation over capital allowances 7 7
3,779 4,604
10. Profit(/loss) per share
The calculation of the basic profit/(loss) per share for the year ended 31 December 2014 and 31 December 2013 is based on the
profits/losses attributable to the shareholders of Sigma Capital Group plc divided by the weighted average number of shares in issue
during the year.
Profit/(loss) Weighted Basic
attributable average profit/(loss)
to shareholders number of per share
£’000 shares pence
Year ended 31 December 2014 214 56,837,607 0.38
Year ended 31 December 2013 (856) 45,679,985 (1.87)
Diluted profit/(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
profit/(loss) per share is calculated by dividing the same profit/(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 2014 of 58,348,727 (2013: 47,918,521). For the year
ended 31 December 2014, the diluted earnings per share is 0.37 pence. For year ended 31 December 2013, 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 2014
37
11. Goodwill and other intangible assets
Other
Goodwill intangibles Total
£’000 £’000 £’000
Cost
At 1 January 2013 787 105 892
Disposal of Frontier IP (131) - (131)
At 31 December 2013 656 105 761
At 31 December 2013 and 31 December 2014 656 105 761
Amortisation and impairment
At 1 January 2013 254 24 278
Disposal of Frontier IP (131) - (131)
Amortisation charge - 18 18
At 31 December 2013 123 42 165
Amortisation charge - 17 17
At 31 December 2014 123 59 182
Carrying value
At 31 December 2014 533 46 579
At 31 December 2013 533
63 596
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
2014 2013
£’000 £’000
Goodwill 533 533
Intangible assets 46 63
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 2014
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 2013 43 58 157 258
Additions - 2 12 14
At 31 December 2013 43 60 169 272
Additions - - 12 12
At 31 December 2014 43 60 181 284
Depreciation
At 1 January 2013 43 54 135 232
Charge for the year - 3 18 21
At 31 December 2013 43 57 153 253
Charge for the year - 1 12 13
At 31 December 2014 43 58 165 266
Net book value
At 31 December 2014 - 2 16 18
At 31 December 2013 - 3 16 19
Leasehold Fixtures and
improvements office equipment Total
Company £’000 £’000 £’000
Cost
At 1 January 2013 7 13 20
Additions -
2 2
At 31 December 2013 7 15 22
Additions - - -
At 31 December 2014 7 15 22
Depreciation
At 1 January 2013 7 12 19
Charge for the year - 1 1
At 31 December 2013 7 13 20
Charge for the year - 1 -
At 31 December 2014 7 14 21
Net book value
At 31 December 2014 - 1 1
At 31 December 2013 - 2 2
Sigma Capital Group plc
Annual Report & Financial Statements 2014
39
13.
Investment in subsidiaries
Company Company
2014 2013
£’000 £’000
At 1 January 2014 2,921 2,471
Investment in Sigma Inpartnership Limited - 847
Provision against investment in subsidiary - (397)
At 31 December 2014 2,921 2,921
During the prior 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. During the prior year the Company provided in full against the amount due from a
subsidiary in respect of loan stock.
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 Investments Limited
- principal activity is investing in venture capital funds England Ordinary 100.0
14.
Investment in associate company
Group Group Company Company
2014 2013 2014 2013
£’000 £’000 £’000 £’000
At 1 January 2014 - 314 - 421
Additions - - - -
Disposals - - - (341)
Group’s share of net assets - (724) - -
Share of losses - (90) - -
Movement in provision - 500 - (80)
At 31 December 2014 - - - -
Group share of net assets - - - -
Provision - - - -
At 31 December 2013 - - - -
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 2014
Notes to the Financial Statements
continued
15. Financial assets at fair value through profit and loss
Group Group Company Company
2014 2013 2014 2013
£’000 £’000 £’000 £’000
At 1 January 2014 520 691 - -
Additions 1 20 - -
Disposals (19) (127) - -
Fair value write up/(down) 171 (64) - -
At 31 December 2014 673 520 - -
The financial assets at fair value through profit and loss are the Group’s holdings in venture capital funds and an unquoted security.
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
2014 2013 2014 2013
£’000 £’000 £’000 £’000
Financial assets at fair value through profit and loss:
- the venture capital funds - (64) - -
- Unquoted securities 169 - - -
Trading investments (see note 17) 2 36 - -
171 (28) - -
During the year, the management of the last fund held by the Group, Sigma Sustainable Energy Fund II, was transferred to new
managers and the group disposed of its residual interest in the fund assets. This had been fully provided against in the prior year.
Sigma Capital Group plc
Annual Report & Financial Statements 2014
41
16. Trade receivables and other current assets
Group Group Company Company
2014 2013 2014 2013
£’000 £’000 £’000 £’000
Trade receivables 178 651 - 1
Receivables from Group undertakings – current - - 5,157 388
Receivables from Group undertakings – non current - - 154 100
Social security and other taxes - 78 10 13
Other debtors 2,370 1,101
8 1,007
Other debtors - non current 1,335 - - -
Prepayments and accrued income 1,179 3,821
38 31
5,062 5,651 5,367 1,540
Less receivables from Group undertakings - non current - - (154) (100)
Less other debtors - non current (1,335) - - -
Current portion 3,727 5,651 5,213 1,440
Trade receivables
Group Group Company Company
2014 2013 2014 2013
£’000 £’000 £’000 £’000
Trade receivables not due 97 249 4,849 127
Trade receivables past due 1-30 days 9 18 - -
Trade receivables past due 31-60 days 8 3 - -
Trade receivables past due 61-90 days 8 2 87 53
Trade receivables past due over 90 days 56 487 221 209
Gross trade receivables at 31 December 2014 178 759 5,157 389
Provision for bad debt at 1 January 2014 108 179 - 12
Debt provisions reversed in the year
(108) (71) - (12)
Provision for bad debt at 31 December 2014 - 108 - -
Net trade receivables at 31 December 2014
178 651 - 389
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 £56,000 (2013: £332,000) expected to be received in the first half of 2015. 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.
The Group’s other debtors include a loan of £2,000,000 (2013: £nil) in respect of the PRS Fund and is expected to be repaid in full
during 2015 and a loan of £1,500,000 (2013: £nil) also in respect of the PRS Fund which is expected to be repaid during 2015 and
2016.
42
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Notes to the Financial Statements
continued
17. Trading investments
Group Group Company Company
2014 2013 2014 2013
£’000 £’000 £’000 £’000
Quoted equity investments – UK - 2 - -
The fair value of quoted equity investments is based on their current bid prices in an active market. Changes in fair value of trading
investments are recorded in unrealised profits/(losses) on the revaluation of investments in the comprehensive income statement.
18. Trade and other payables
Group Group Company Company
2014 2013 2014 2013
£’000 £’000 £’000 £’000
Trade payables 211 149 24 86
Payables to Group undertakings - - 1,140 1,031
Amount payable for deferred share / deferred consideration - 847 - 847
Other creditors 3 11 - -
Social security and other taxes 62 70 - -
Accruals and deferred income
656 974 176 172
932 2,051 1,340 2,136
The Directors consider that the carrying amount of trade payables approximates to their fair value.
19. Loan
The costs incurred on the NAW project were 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 total amount available
under the terms of the loan was £4.045 million with interest charged at a commercial rate. The loan was held in Solihull Inpartnership
Limited, a wholly owned subsidiary of the Group and was secured on the development. There were no cross guarantees in respect of
the loan with any group company. The total loan amount utilised including interest was £3,597,000 and repayment was satisfied from
income arising on the completion of the sale of the NAW development as per the terms of the loan agreement.
20. Share capital and share premium
Group and Company
Number of Ordinary Share
shares shares premium Total
£’000 £’000 £’000
At 31 December 2013 48,246,071 483 5,334 5,817
Issue of shares at 70p per share 11,428,571 114 7,886 8,000
Expenses of share issue - - (378) (378)
Exercise of share options 1,476,833 15 110 125
At 31 December 2014 61,151,475 612 12,952 13,564
The total authorised number of ordinary shares is 130,000,000 (2013: 130,000,000) with a par value of 1p per share (2013: 1p). All
issued shares are fully paid.
21. 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 and have a vesting period of three 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 1,334,441 ordinary shares (2013: 713,571) were granted during the year.
No performance conditions or market conditions are attached to these options.
Sigma Capital Group plc
Annual Report & Financial Statements 2014
43
Movements in the number of share options outstanding and their related weighted average exercise prices were as follows:
2014 2013
Weighted Weighted
average exercise average exercise
price in pence Options price in pence Options
per share (‘000s) per share (‘000s)
At 1 January 2014 12.4 3,555 9 3,237
Granted 68.0 1,335 26.3 714
Exercised 8.4 (1,477) 9.2 (396)
Expired / lapsed 26.3 (163) -
At 31 December 2014 36.3 3,250 12.4 3,555
Of the 3,250,000 outstanding options (2013: 3,555,000), 1,365,000 had vested at 31 December 2014 (2013: 465,000).
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Exercise price 2014 2013
Expiry date pence per share Number Number
2018 25.0 100,000 100,000
2019 11.25 150,000 365,000
2021 8.0 733,333 1,876,666
2021 7.5 381,500 500,000
2023 26.25 550,476 713,571
2024 68.0 1,334,441 -
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 17.4p per option (2013: 6.7p). 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 1.46% (2013: 1.6%).
Future volatility has been estimated based on comparable information rather than historical data.
22. 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 Sigma Technology
Management Limited (“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 2014 and 2013 is set out in the Consolidated and Company Statements of Changes in Equity.
23. 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:
2014 2013
Plant and Land and Plant and Land and
machinery buildings machinery buildings
£’000 £’000 £’000 £’000
The Group
Within 1 year 3 114 3 114
From 2-5 years 5 100 8 214
After 5 years
- - - -
8 214 11 328
The Company
Within 1 year - 95 - 95
From 2-5 years -
95 - 190
After 5 years - - - -
- 190 - 285
44
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Notes to the Financial Statements
continued
24. Cash flows from operating activities
Group Group Company Company
2014 2013 2014 2013
£’000 £’000 £’000 £’000
Profit/(loss) before tax 214 (856) (338) (1,299)
Adjustments for:
Share-based payments 23 15 23 15
Depreciation 13 21 1 1
Amortisation 17 18 - -
Finance income (28) (10) (18) (1)
Loss relating to associate company - 90 - 80
Provision against investment in subsidiary - - - 397
Provision against long term loan - (28) - -
Fair value (profit)/loss on financial assets at fair value through profit or loss (171) 64 - -
(Profit)/loss on disposal of interest in associate - (110) - 7
Loss/(profit) on disposal of trading investments at fair value
through profit or loss 1 (82) - (62)
Exceptional item - 531 - -
Changes in working capital:
Trade and other receivables 4,089 (4,767) (3,827) (525)
Other financial assets at fair value through profit or loss - (36) - -
Trade and other payables (4,289) 4,656 (796) 766
Cash flows from operating activities (131) (494) (4,955) (621)
25. Related party transactions
During the year the Group received consultancy and other fees from companies in which STM or a Director of a Group company was
also a director. The companies and the fees invoiced in the period while STM or a Group company Director was also a director of
that company, are detailed below together with the amount outstanding at 31 December 2014.
Fees invoiced Amount
in the period outstanding
less amounts at 31 December
written off 2014
Period £’000 £’000
Onzo Ltd 1 Jan – 31 Dec 2 -
Total year ended 31 December 2014 2 -
Total year ended 31 December 2013 40 5
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 2014
45
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. Sigma charged Regenco property management fees of £288,000 (2013:
£275,000). At 31 December 2014, Sigma was owed £75,000 (2013: £nil).
Sigma holds a 25.1% shareholding in Countryside Sigma Limited. Fees invoiced in relation to development management services for
the year were £87,000 (2013: £111,000). At 31 December 2014, Sigma was owed £7,000 (2013: £37,000).
The Group also has a 20.1% capital interest in Thistle Limited Partnership, its joint venture with Gatehouse. Fees earned and paid
during the year were £965,000 (2013: £nil).
46
Sigma Capital Group plc
Annual Report & Financial Statements 2014
Five Year Record
2014 2013 2012 2011 2010
£’000 £’000 £’000 £’000 £’000
Revenue 3,868 5,808 2,326 2,468 1,836
Cost of sales (660) (3,555) - - (55)
Gross profit 3,208 2,253 2,326 2,468 1,781
Other operating income 170 54 (833) (61) (417)
Administrative and other expenses (3,192) (2,662) (2,575) (2,530) (4,960)
Profit/(loss) from operations 186 (355) (1,082) (123) (3,596)
Net finance income 28 10 22 15 31
Profit/(loss) arising from associate company (net) - 20 (111) (1,307) -
Exceptional item - (531) - - -
Profit/(loss) before tax 214 (856) (1,171) (1,415) (3,565)
Taxation - - - - (10)
Profit/(loss) for the year 214 (856) (1,171) (1,415) (3,575)
Attributable to:
Equity holders of the Company 214 (856) (1,171) (1, 401) (3,539)
Minority interests - - - (14) (36)
214 (856) (1,171) (1,415) (3,575)
Net assets employed 10,620 2,636 2,597 3,753 5,682
Basic earnings/(loss) per ordinary share (pence) 0.38 (1.87) (2.57) (3.17) (7.59)
Sigma Capital Group plc
Annual Report & Financial Statements 2014
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 9.30am on 18 June 2015 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.
Ordinary Resolutions
1.
Receipt of the financial statements for the year ended 31 December 2014 together with the
reports of the Directors and the auditor
2. Re-appointment of Gwynn Thomson a director
3. Re-appointment of Duncan Sutherland a director
4. Re-appointment of Malcolm Briselden as a director
5. Approval of the report on Directors’ remuneration for the year ended 31 December 2014
6. Re-appointment of the auditor
7.
8.
Remuneration of the auditor
General authority to allot securities
Special Resolution
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
9.30am on 16 June 2015.
#
48
Sigma Capital Group plc
Annual Report & Financial Statements 2014
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