Preliminary Results

RNS Number : 4575X

Braveheart Investment Group plc

25 June 2008

 



For release: 07.00, 25 June 2008

Braveheart Investment Group plc

('Braveheart' or the 'Group')

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2008 (UNAUDITED)

Braveheart (AIM: BRH), the technology commercialisation and investment management company, announces its preliminary results for the year ended 31 March 2008. 

Commenting on the results, Geoffrey Thomson, Chief Executive, said: 'This is the first time I am reporting to shareholders on a full year as a listed company. Last year I said we had not been idle since we listed our shares on AIM in March 2007, and once again, I am delighted to be able to report we have had a successful year and our prospects for growth are good.' 

Our portfolio has grown in strength and depth during the year and there is considerable 'un-priced' potential within it - I would like to draw your attention to our Chairman's remarks on this point.   

I am delighted to be able to announce our partnership with the University of Aberdeen. We now have formal relationships with three universities (the other two being Edinburgh and Strathclyde) and informal arrangements with a number of others.

We are continuing to invest in our own business. This includes expenditure on high calibre people at our Perth base, and the establishment of a presence in London by March 2009. We are also looking at a number of opportunities to expand our business by way of acquisition.'

Highlights

• 12 investments totalling £3 million made by the Group and on behalf of clients

• Portfolio increased in value by £1.7 million during the year 

• Revenue increased 22% to £659,000

• Profit before tax of £106,000 (2007: loss of £164,000)

• Announcement of £25 million University of Edinburgh Fund

• Acquisition of W L Ventures Ltd

• Listing of The Capital Pub Company plc shares on AIM resulting in initial market capitalisation of £32 million

Post Year End 

• 15 year partnership with the University of Aberdeen announced 

• New investment made in Im-Sense Ltd, a spin-out from the University of East Anglia 

• Follow-on investments in Cascade Technologies Ltd and Spiral Gateway Ltd

• Portfolio now comprises 33 companies

For further information please visit www.braveheart-ventures.co.uk or contact:

Geoffrey Thomson, Chief Executive	Clemmie Carr / Simon Hudson
Braveheart Investment Group	Tavistock Communications (for Braveheart)
Tel: [phone]	Tel: [phone]
[e-mail]	[e-mail]
Jeremy Garrett-Cox
Seymour Pierce
Tel: [phone]
[e-mail]

  Chairman's Statement

I have pleasure in presenting the results of Braveheart Investment Group for the year ended 31 March 2008, the first complete year since the admission of the Company's shares to trading on AIM in March 2007.

Results

I am pleased to report that the profit for the year before taxation was £106,000 compared to a pre-tax loss of £164,000 last year. This equates to earnings per share of 0.74p compared to a loss per share of 1.6p last year.

Income from investment management operations, excluding bank interest, increased by 22.4% to £659,000 while bank interest amounted to £331,000; (2007 - £49,000). Gains and losses arising from fair value adjustments to balance sheet investments at the year end resulted in a net profit of £458,000 that has been recognised in the Group Income Statement.

The Group's investment portfolio contains investments with preferential subscription terms. On exit, these terms usually entitle the Group to receive a multiple of its subscription monies before the remaining proceeds of sale are divided amongst all shareholders on a pro-rata basis. These preferential exit returns typically equate to a premium of 50% of the monies invested. In the year under review £541,000 was invested in eight companies through contracts employing such terms. Potential future value arising from these terms has not yet been recognised in the financial statements because their realisation is not sufficiently certain at this time. The directors believe that these arrangements represent an important source of potential future value that they expect will be realised over time. These arrangements are separate from any returns achieved by virtue of changes in value of the underlying entity.  

The Group ended the year with a strong balance sheet, having cash balances in excess of £4.8 million and no debt.

Delivering on our plans

Last year I spoke about our plans for growing our business with the aid of the additional capital raised through our IPO. I am pleased to report that we have made good progress during the year under review in implementing said plans. 

In April 2007 we completed the acquisition of W L Ventures Ltd, now renamed Caledonia Portfolio Realisations Ltd, a portfolio of some ten technology investments. Following a review of these underlying businesses, and an assessment of how we could best realise shareholder value, we are confident that this portfolio will show us a good return on our investment.

There are now 33 companies in the Braveheart portfolio. During the year, the Group made six new investments to add to the portfolio and six follow-on investments in existing portfolio companies.  

The first closing of the Strathclyde Innovation Fund is expected to complete shortly. A draft prospectus for our fund for the University of Edinburgh is in preparation and we anticipate that that fund will have a first closing around the turn of the calendar year.

We have recently announced that we have entered into a partnership agreement with the University of Aberdeen. This agreement will enable Braveheart and the university to work together to stimulate the commercialisation of intellectual property emanating from the university. In return, Braveheart will have first refusal on commercial investment opportunities which flow from within the university. In the longer term it is anticipated that a dedicated fund will be established to fund these opportunities. The University of Aberdeen has strong commercialisation expertise in the areas of life science, medicine, engineering and geosciences and we are excited about developing this partnership's potential.

Our business model is designed to deliver a surplus from our investment management operations, although there will be periods during which income lags behind expenditure as we invest in our management infrastructure. This has been the case in the year under review and will continue to be the case until income from the management of our dedicated university funds builds up.

Embedded value

One of the most satisfactory developments of the year under review has been the value added to existing holdings within the portfolio. Strong advances were made by a number of companies, warranting further capital, and the opportunity was taken to increase the Group's investment at prices representing good value.

Throughout our Annual Report there will be found descriptions of such companies, demonstrating the breadth of the services that they provide or are seeking to provide, and all linked by their origins in intellectual property developed within academia or industrial research centres. 

This is where our strategy starts to reap rewards; having funded start-up companies with a mixture of private and public sector money, our negotiated pre-emption rights enable us to increase the level of private client and balance sheet investment as they hit their pre-determined milestones and demonstrate their capacity to succeed in their respective marketplaces. 

This store of value is nurtured by a combination of advice and experience from our entrepreneurial client base, and capital where warranted, to maximise exit results.

Plans for growth

Braveheart needs to grow to realise its full potential. Your Board has always been alert to this need and saw the move to AIM as the first step in that process. Intermittent turmoil in the financial market place over the past two years has hastened this objective as both institutional investors and private client brokers have raised their sights on the level of capitalisation required to attract investment.

In April we announced that we had approached the board of ANGLE plc, a company whose shares are traded on AIM, with a view to making a recommended share offer. ANGLE has a portfolio of investments in technology companies together with a management services division that has contracts in this country and overseas. No assurances can be given that this transaction will proceed, but it is an example of where your Board has identified a business that would extend the Company's range of technology investments and add a new income stream. Other expansion opportunities are continuously under review.

Braveheart has established a well recognised and reputable business in Scotland and has a growing client base in the South. We intend to expand that southern client base and, with it, the group of successful entrepreneurs who are willing to work with the management of companies in which we invest. 

The success of our university relationships in Scotland and the features of the dedicated funds that are being established with them have attracted interest from universities in England. We have opened discussions with a number of institutions and, in the fullness of time, we look forward to establishing relationships that are tailored to the research outputs and requirements of individual establishments. 

I anticipate that these initiatives will lead to Braveheart having an operational base in or around London, before the end of our current financial year.

Board, management and staff 

I am delighted that Jeremy Delmar-Morgan has recently accepted an invitation to join the Board. Jeremy has had a distinguished City career, having been CEO and chairman of Teather & Greenwood and subsequently, from 2006, chairman of brokers, Hichens Harrison & Co. I am very pleased to welcome Jeremy, and I am confident that he will make a valuable contribution to our Board debate.

The Board has now established a Nominations Committee. The Committee will review the composition of the Board, provide for the right balance of experience and skills, and ensure that there is continuity with regard to anticipated retirements.

We are fortunate in having experienced and dedicated members of staff who have worked as a well-knit team to deliver these results. I want to thank all of them for their individual contributions. Our management team, at a senior level, has been strengthened and further appointments can be expected in the near future.

Shareholders will be pleased to hear that at the Ernst & Young Entrepreneur of the Year awards ceremony in June, Geoffrey Thomson, our CEO, was given a special award by an independent judging panel, for the support given to Scotland's emerging technology companies over the last decade.

Braveheart clients

Many of Braveheart's clients are successful entrepreneurs whose contributions to portfolio companies, as chairmen and non-executive directors, are all-important. Their skills and experience add value in the early stages as a company emerges from academia, through the development of a demonstrable product, and into periods of revenue growth when the structure of management teams and the selection of executives can be critical. I am grateful to them for their hard work that can often represent the difference between failure and success. The Board attaches particular importance to supporting these appointments and will continue to provide workshops, mentoring and networking opportunities.

Dividends

It remains the Board's intention that, in future, and subject to the availability of distributable reserves, regular dividends should be paid out of investment management profits and special dividends should be paid where there are meaningful capital profits realised from the disposal of portfolio investments.

Prospects 

The current year has started with questionable economic prospects and with the financial markets unsympathetic towards small cap companies. However, these are the conditions in which a well regarded business such as Braveheart can secure good investment value.  

With our cash resources, and excellent market relationships, we are well placed to nurture and grow our existing portfolio companies as we steer them towards an exit. Braveheart has always been open to exiting investments both through trade sale and IPO. Despite the current quoted market conditions we have no reason to believe that trade buyers will not be available to purchase portfolio assets at the opportune moment.

These expectations, and the implementation of our growth strategy, should ensure that Braveheart continues to build value for shareholders, as has been the case since our business was founded eleven years ago. 

Garry S Watson

Chairman

25 June 2008

Group Income Statement

	Year ended 31 March 2008 (Unaudited)		Year ended 31 March 2007
	£		£
Revenue	659,449		538,686
Realised profit on the disposal of investments	-	78,152
Unrealised profit / (loss) on the revaluation of investments	458,142	(82,372)
Deferred consideration	(309,717)	-
Finance revenue	330,856	48,713
Total income	1,138,730	583,179
Employee benefits expense	(558,532)	(472,400)
Other operating costs	(474,187)	(274,430)
Total costs	(1,032,719)	(746,830)
Profit/(loss) before taxation	106,011	(163,651)
Tax (charge) / credit	(6,828)	6,755
Profit/(loss) for the period	99,183	(156,896)
Earnings / (loss) per share	Pence	Pence
- basic and diluted	0.74	(1.6)

Group Balance Sheet

	As at 31 March 2008 (Unaudited)	As at 31 March 2007
	£	£
ASSETS
Non-current assets
Property, plant and equipment	26,734	26,217
Investments at fair value through profit or loss	2,574,595	896,156
Deferred tax asset	-	5,056
Current assets
Trade and other receivables	442,879	61,602
Current tax asset	24,577	24,577
Cash and cash equivalents	4,808,870	6,481,751
Total assets	7,877,655	7,495,359
LIABILITIES
Current liabilities
Trade and other payables	(198,712)	(242,370)
Deferred consideration	(309,717)	-
Deferred income	(22,442)	(38,770)
	(530,871)	(281,140)
Non-current liabilities
Deferred tax liability	(1,772)	-
Total liabilities	(532,643)	(281,140)
Net assets	7,345,012	7,214,219
EQUITY
Called up share capital	268,078	268,078
Share premium account	7,008,838	7,001,588
Retained earnings	68,096	(55,447)
Total equity	7,345,012	7,214,219

Group Cash Flow Statement

	Year ended 31 March 2008 (Unaudited)		Year ended 31 March 2007
Operating activities	£		£
Profit/(loss) before tax	106,011		(163,651)
Adjustments to reconcile profit before tax to net cash flows from operating activities
Depreciation of property, plant and equipment	8,278		7,662
Share-based payments expense	24,360		-
(Increase) / decrease on the revaluation of investments	(456,492)				82,372
(Profit) / loss on disposal of property, plant and equipment	(19)				1,344
Interest income		(330,856)			(48,713)
Increase in investments		(1,171,947)			(667,097)
(Increase) / decrease in trade and other receivables		(381,277)			103,656
Increase in trade and other payables		178,768			156,549
Tax paid		-			(24,577)
Net cash flows from operating activities		(2,023,174)			(552,455)
Investing activities
Acquisition of subsidiaries (net of cash acquired)		20,963			-
Purchase cost of property, plant and equipment		(9,448)			(6,151)
Proceeds from disposal of property, plant and equipment	672				-
Interest received		330,856		48,713
Net cash flows used in investing activities		343,043		42,562
Financing activities
Proceeds from issue of shares		-		6,968,350
Transaction recoveries / (costs) from issue of shares		7,250		(722,969)
Repayment of capital element of hire purchase contract	-				(198)
Net cash flows used in financing activities		7,250		6,245,183
Net (decrease) / increase in cash and cash equivalent		(1,672,881)		5,735,290
Cash and cash equivalents as at 1 April		6,481,751		746,461
Cash and cash equivalents as at 31 March		4,808,870		6,481,751

Statement of Changes in Equity for the year ended 31 March 2007

Group	Share Capital	Share Premium	Retained Earnings	Total
	£	£	£	£
Balance at 1 April	127,692	896,593	104,098	1,128,383
Exercise of options	60,566	522,153	-	582,719
Issue of new share capital	79,820	6,305,811	-	6,385,631
Expenses paid in connection with share issue	-	(722,969)	-	(722,969)
(Loss) for the year	-	-	(156,896)	(156,896)
Share-based payments - current tax	-	-	7,750	7,750
Share-based payments - deferred tax	-	-	(10,399)	(10,399)
Balance as at 31 March	268,078	7,001,588	(55,447)	7,214,219

  Statement of Changes in Equity for the year ended 31 March 2008 (Unaudited)

Group	Share Capital	Share Premium	Retained Earnings	Total
	£	£	£	£
Balance at 1 April	268,078	7,001,588	(55,447)	7,214,219
Expenses recovered in connection with share issue	-	7,250	-	7,250
Profit for the year	-	-	99,183	99,183
Share-based payments	-	-	24,360	24,360
Balance as at 31 March	268,078	7,008,838	68,096	7,345,012

  NOTES (Unaudited)

1 Basis of preparation

The Group's and Company's results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as they apply to financial statements for the year ended 31 March 2008 and as applied in accordance with the provisions of the Companies Act 1985. 

The Company has taken advantage of the provision of s230 of the Companies Act 1985 not to publish its own Income Statement. 

The results are presented in sterling and all values are rounded to the nearest pound (£) except when otherwise indicated.

2 Revenue

Revenue is attributable to the principal activities of the Group. All revenue arose within the United Kingdom and the Channel Islands.

	Group	Group
	2008	2007
	£	£
Deal fees	488,504	460,448
Client subscriptions	114,970	78,238
Monitoring fees	55,975	-
	659,449	538,686

3 Profit / (loss) for the year

	Group	Group
Profit/(loss) for the year has been arrived at after charging:	2008	2007
	£	£
Depreciation of property, plant and equipment	8,278	7,662
Lease payments recognised as an operating lease (office rent)	31,861	45,000
(Profit) / Loss on the disposal of plant, property and equipment	(19)	1,344
Auditors remuneration:   - audit - parent	35,000	9,300
- audit - subsidiaries	12,750	18,950
- audit related regulatory reporting	5,500	3,000
- taxation compliance	4,500	6,540
- corporate finance services	-	32,770

  4 Taxation on profit on ordinary activities

	2008	2007
	£	£
UK corporation tax	-	(17,138)
Deferred tax	6,828	10,383
Tax charge/(credit) in the income statement	6,828	(6,755)
Tax relating to items charged or credited to equity
Deferred tax: share-based payments	-	10,399
Current tax: share-based payments	-	(7,750)
Tax charge/(credit) in equity	-	2,649
Reconciliation of total tax charge
Profit /(loss) before tax	106,011	(163,651)
Tax charge / (credit) on profit on ordinary activities at the rate of 20% (2007 - 19%)	21,202	(31,094)
Disallowed expenses	113,876	12,645
Unrealised (profit) / loss on revaluation of investments	(133,364)	13,493
Increase in unutilised tax losses	8,218	-
Change in prior year estimate	-	(311)
Other	(3,104)	(1,488)
Total tax reported in the income statement	6,828	(6,755)

Deferred tax
The deferred tax included in the balance sheet is as follows:	2008	2007
	£	£
Deferred tax liability
Accelerated capital allowances	1,772	1,747
Revaluation of investments	-	-
Total deferred tax liability	1,772	1,747
Deferred tax asset
Short term timing differences	-	(6,803)
Share-based payments	-	-
Total deferred tax asset	-	(6,803)
Total deferred tax as reported in the balance sheet	1,772	(5,056)

  5 Earnings/(loss) per share

Basic earnings/(loss) per share have been calculated by dividing the earnings attributable to shareholders by the weighted average number of ordinary shares in issue during the period.

Diluted earnings/(loss) per share is adjusted for share options granted where the exercise price is less than the average price of the ordinary shares during the period.

The calculations of earnings/(loss) per share are based on the following profit/(loss) and numbers of shares in issue:

	2008	2007
	£	£
Profit/(loss) for the year	99,183	(156,896)
Weighted average number of ordinary shares in issue:
For basic earnings per ordinary share	13,403,895	9,412,875
Dilutive effect of exercisable options	0	0
	13,403,895	9,412,875

The exercise price of the share options is £1.645 and the average price of ordinary shares during the period was £1.362. Diluted earnings per share adjustment is therefore not required.

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of the financial statements.

6 Investments at fair value through profit or loss

	Unlisted £	AIM Listed £	Total £
Group
Valuation at 1 April 2006	306,525	4,906	311,431
Revaluation of assets	(15,314)	3,955	(11,359)
Cost at 1 April 2006	291,211	8,861	300,072
Additions at cost	519,722	205,433	725,155
Transfers	(70,141)	70,141	-
Disposals - Proceeds	-	(136,210)	(136,210)
- Gain on disposal	-	78,152	78,152
Cost at 31 March 2007	740,792	226,377	967,169
Unrealised loss on the revaluation of assets	(20,481)	(50,532)	(71,013)
Valuation at 1 April 2007	720,311	175,845	896,156
Additions at cost	1,123,308	98,639	1,221,947
Transfers	(58,695)	58,695	-
Disposals - Proceeds	(1,650)	-	(1,650)
Cost at 31 March 2008	1,783,274	333,179	2,116,453
Unrealised gain/(loss) on the revaluation of assets	644,600	(186,458)	458,142
Valuation at 31 March 2008	2,427,874	146,721	2,574,595

  7 Investment in subsidiaries

Company	2008	2007
Cost	£	£
At 1 April	224,190	224,190
Additions	50,004	-
At 31 March	274,194	224,190

The principal subsidiaries, all of which are 100% owned by Braveheart Investment Group plc are Braveheart Ventures Ltd and Caledonia Portfolio Realisations Ltd. The Company holds 100% of the issued 10p ordinary share capital and 100% of the issued redeemable preference shares of Braveheart Ventures Ltd and 100% of the issued £1 ordinary shares of Caledonia Portfolio Realisations Ltd. Both companies are registered in Scotland.

8 Share Capital

	2008	2007
Authorised	£	£
33,645,000 ordinary shares of 2p each	672,900	672,900
Allotted, called up and fully paid
13,403,895 ordinary shares of 2p each	268,078	268,078

9 General

These are not the Company's full statutory accounts. The last statutory accounts filed were for the year ended 31 March 2007 with an unqualified audit opinion.

The results have been prepared using accounting policies consistent with the 2007 financial statements.

The contents of this announcement are unaudited pending audit clearance on the statutory accounts.

 

END

 

 

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