TIDMBRH
RNS Number : 2729M
Braveheart Investment Group plc
12 October 2016
12 October 2016
Braveheart Investment Group plc
('Braveheart', the 'Company' or the 'Group')
Half-Yearly Report
Braveheart Investment Group plc today announces its interim
results for the six months ending 30 September 2016.
Key points
-- Revenue of GBP562,000 in the six months ended 30 September 2016 (2015: GBP610,000);
-- Profit of GBP475,000 in the six months ended 30 September 2016 (2015: loss of GBP1,039,000);
-- Earnings per share of 1.67p in the six months ended 30
September 2016 (2015: loss per share 3.84p);
-- Cash balances at 30 September of GBP1,334,000 (2015: GBP260,000); and
-- Commencement of new investment strategy.
Further information:
Braveheart Investment Group plc Tel: +44 1738
Trevor Brown, CEO 587555
Allenby Capital Limited (Nominated Tel: +44 20
Adviser and Broker to Braveheart) 3328 5656
David Worlidge / James Thomas
Chief Executive Officer's Statement
We are pleased to report to shareholders for the six months
ended 30 September 2016.
Recent Investments
We reported to you in our last Annual Report on 22 June 2016
that we were looking to identify new private equity investments
with good growth potential and where we had an existing knowledge
of the companies. We are therefore delighted to be able to report
that during the period under review, and as announced on the 4 July
2016, we commenced our new investment strategy with the capital
reorganisation, investment in and appointment of a director
nominated by Braveheart at Paraytec Limited ("Paraytec"), which
resulted in Braveheart now owning 33 per cent. of Paraytec. In
addition, and as announced on the 8 July 2016, we have undertaken a
similar transaction with Kirkstall Limited ("Kirkstall") resulting
in Braveheart now owning 28 per cent. of Kirkstall. We believe that
the reconstruction, provision of a director and further investment
in each of these companies will enable them to accelerate growth
and maximize their potential.
Portfolio theory evolved as a tool to manage negative risk
though diversification, which reduces the overall volatility of
returns for the portfolio. However, your board believes that
generating exceptional returns from the relatively limited
resources available to Braveheart at this time requires a different
strategy, which is to identify a small number of companies with
excellent prospects and where Braveheart already has knowledge.
Although concentrating our resources on a small number of projects
exposes us to the risk of increased volatility of overall results,
which could result in increased positive as well as negative
returns, we firmly believe that our active management approach and
depth of knowledge of the businesses materially skews the risk of
returns towards a positive return outcome.
The investments in both Paraytec and Kirkstall are
representative of this new investment strategy where we are
investing into leading technologies with which we are already
familiar and working closely with their boards. We believe that
this style of strategic investing could result in significant
returns over the next few years. For reporting purposes, we are
going to separate out investments made under the new investment
strategy and group them under the heading "The Strategic
Portfolio".
Paraytec operational update
Paraytec is a scientific instrument company based in York. It
has developed and patented its innovative ActiPix(TM) technology
for optical imaging and absorbance measurements of fluid samples
flowing in capillaries or fluid flow cuvettes. This technology
enables researchers to measure the viscosity of drug formulations
and the effective size of the active ingredients in these
formulations. Paraytec's instruments can also be used to monitor
how tablets, gels and creams, release their active ingredients into
liquids, including biological media, as well as across membranes
such as skin.
The first sales of Paraytec's new ActiPix(TM) D200 system have
recently been delivered and are generating a lot of interest from
analytical laboratories, life science researchers in universities
and the major pharmaceutical and biopharmaceutical companies.
Paraytec also has two license deals: Malvern Instruments has
already incorporated ActiPix(TM) technology into its own branded
instruments and in November 2016, Sirius Analytical is expected to
launch its licensed instrument at the AAPS exhibition in Colorado
USA.
Kirkstall operational update
Kirkstall has developed Quasi Vivo(TM), a system of
interconnected chambers for cell and tissue culture in
laboratories. Its patented technology is used by researchers in
academia and drug development companies to maintain living cells in
a nutrient flow. The technology, often referred to as 'organ on a
plate', provides a way to model the behaviour of multiple human
organs interconnected by a flow system that mimics the flow of
blood in the body. Introducing flow into cell culture has the
benefit that the cells are more active and respond to stimuli (such
as dosing with a drug or chemical) in a way that is more predictive
of what is likely to happen in a clinical environment.
Kirkstall's products are already being used by researchers in
the development of drugs, nutraceuticals, cosmetics and personal
care products. By enabling the testing of drugs on living tissue,
there is the potential to greatly reduce the need for expensive
animal testing and improve the chances of success in human clinical
trials. In the quarter ended 30 September 2016, sales of Quasi
VivoTM exceeded management forecasts, particularly in the USA,
where Kirkstall is represented by Triangular Research Labs (part of
Lonza Group, one of the world's leading suppliers to the Pharma
& Biotech and Specialty Ingredient markets).
Portfolio
In addition to our new strategic investments we also have
investments in a further 12 companies that were made by Braveheart
from 2002 until the summer of 2015 (the "Portfolio") and we also
have a holding in an AIM listed company which we obtained when we
acquired Ridings Holdings Ltd in January 2016. We commented in our
Annual Report that we undertook a detailed review of the exit
opportunities for each company in the Portfolio, with a view to
ensuring that these investments were appropriately valued and to
also ensure that wherever possible an exit from the investment
would be sought. We were therefore pleased to announce on 16
September 2016, that the sale of our holdings in mLED Limited to a
large US based technology company had completed. This sale
generated GBP399,000 of consideration for the Group, with GBP76,000
held back in escrow, and resulted in a book profit to the Group of
GBP303,000 of which GBP33,000 relates to a non-controlling
interest.
As at 30 September 2016 the Portfolio had a valuation of
GBP238,000 (30 September 2015: GBP362,000). We will continue to
manage the Portfolio with a view to seeking exits wherever possible
and appropriate.
Strathtay Ventures
We reported in our Annual Report for the year ended 31 March
2016 that we had taken the difficult decision to close our
Strathtay Ventures private client business. We do not therefore
intend to comment on this particular company in future reports to
shareholders.
Viking Fund Managers
Viking's main fund management income comes from the Finance
Yorkshire Equity Fund ("FYEF") contract, but it also provides
specialist fund management services to other funds which are in
'run-out' mode. This specialised management work tends to generate
enhanced fees in excess of standard fund management fees due to the
intensive nature of this work. We are pleased to be able to report
that Viking successfully invested the additional sums made
available to the FYEF, and that we have also now successfully
completed the investment phase of this fund on time. The emphasis
for the FYEF is now on portfolio management rather than in seeking
new investments. Viking is seeking to win the management contracts
for further funds and we hope to report further on this in due
course.
Financial Review
Revenue was GBP562,000 in the six months ended 30 September 2016
(2015: GBP610,000).
We have undertaken an interim review of the valuations of the
Group's Investments and have recorded an unrealised gain on the
revaluation of these investments of GBP32,000 (2015: unrealised
loss of GBP724,000). As at 30 September 2016, the fair value of the
Group's investment was GBP722,000 (31 March 2016: GBP468,000),
which includes the fair value of the unquoted investments of the
Portfolio of GBP238,000, the acquired quoted investment of
GBP166,000 and the Strategic Portfolio of GBP318,000.
We commented in the Annual Report for the year ended 31 March
2016 that we had been working to reduce our operating costs so that
they are less than the operating income and thus enable us to
report an operating surplus for the full year. Our operating costs
for the period under review were GBP435,000 (2015: GBP868,000), a
reduction of 50%. We remain confident that our operating costs for
the second half of the current year will be similar to those
reported for the first half of the year and so having achieved an
operating surplus in the first half we remain firmly on course to
achieve an improved operating surplus for the full year thereby
delivering one of our key full year targets.
We are delighted to be able to report that we have achieved a
profit before tax for the period under review of GBP475,000 (2015:
loss of GBP1.039 million). This equates to a profit of 1.67 pence
per share and compares well with the loss of 6.23 pence per share
that we reported for the full year to 31 March 2016.
The key movements in our cash resources over the period under
review are accounted for by the operating profit of GBP129,000 that
we have achieved for the period under review, the one exit achieved
from the Portfolio which resulted in a cash inflow of GBP326,000
and the two new investments in our Strategic Portfolio which
resulted in a cash outflow of GBP318,000. These principal movements
of cash resulted in the Group having cash as at 30 September 2016
GBP1.334 million (31 March 2016: GBP1.263 million).
Outlook
The interim profit of GBP475,000 for the first six months of the
current year represents the largest profit achieved since
Braveheart's floatation in 2008 and marks the commencement of a new
chapter for our shareholders. The Board believes that the Group's
costs are now firmly under control at a much reduced level from
historic levels and with a new entrepreneurial spirit in the Group,
we expect that full year results will reflect our continuing
progress.
Trevor E Brown
Chief Executive Officer
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2016
Six months ended Six months ended Year ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ----- ------------------ ------------------ ------------
Revenue 562 610 1,133
Change in fair value of investments 4 32 (724) (1,026)
Movement on contingent consideration/liability - (57) (57)
Gain on disposal of investment 303 - 138
Finance revenue 13 - 7
--------------------------------------------------------- ----- ------------------ ------------------ ------------
Total income 910 (171) 195
--------------------------------------------------------- ----- ------------------ ------------------ ------------
Employee benefits expense (275) (457) (1,001)
Impairment of intangible assets - - (372)
Other operating costs (158) (400) (502)
Finance costs (2) (11) (14)
--------------------------------------------------------- ----- ------------------ ------------------ ------------
Total costs (435) (868) (1,889)
--------------------------------------------------------- ----- ------------------ ------------------ ------------
Profit/(Loss) before tax 475 (1,039) (1,694)
Tax - - -
Profit/(Loss) for the period and total comprehensive
income for the period 475 (1,039) (1,694)
Profit/(Loss) attributable to:
Equity holders of the parent 451 (1,039) (1,686)
Non-controlling interest 24 - (8)
475 (1,039) (1,694)
--------------------------------------------------------- ----- ------------------ ------------------ ------------
Basic earnings per share Pence Pence Pence
- basic and diluted 1.67 (3.84) (6.23)
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2016
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
-------------------------------------------------- ----- ------------- ------------- ----------
ASSETS
Non-current assets
Goodwill 3 380 580 380
Investments at fair value through profit or loss 4 722 1,762 468
Investment in limited liability partnership - 5 -
Other receivables 366 91 293
-------------------------------------------------- ----- ------------- ------------- ----------
1,468 2,438 1,141
-------------------------------------------------- ----- ------------- ------------- ----------
Current assets
Trade and other receivables 186 274 211
Cash and cash equivalents 1,334 260 1,263
-------------------------------------------------- ----- ------------- ------------- ----------
1,520 534 1,474
-------------------------------------------------- ----- ------------- ------------- ----------
Total assets 2,988 2,972 2,615
-------------------------------------------------- ----- ------------- ------------- ----------
LIABILITIES
Current liabilities
Trade and other payables (422) (273) (544)
Contingent consideration/liability (217) (262) (217)
Deferred income (66) (37) (47)
(705) (572) (808)
-------------------------------------------------- ----- ------------- ------------- ----------
Non-current liabilities
Borrowings (43) (43) (43)
Other payables (59) - (59)
-------------------------------------------------- ----- ------------- ------------- ----------
(102) (43) (102)
-------------------------------------------------- ----- ------------- ------------- ----------
Total liabilities (807) (615) (910)
-------------------------------------------------- ----- ------------- ------------- ----------
Net assets 2,181 2,357 1,705
-------------------------------------------------- ----- ------------- ------------- ----------
EQUITY
Called up share capital 541 541 541
Share premium 1,564 1,564 1,564
Merger reserve 524 524 524
Retained earnings (436) (244) (888)
-------------------------------------------------- ----- ------------- ------------- ----------
Equity attributable to owners of the parent 2,193 2,385 1,741
Non-controlling interest (12) (28) (36)
-------------------------------------------------- ----- ------------- ------------- ----------
Total equity 2,181 2,357 1,705
-------------------------------------------------- ----- ------------- ------------- ----------
Condensed consolidated statement of cASH FLOWS
for the six months ended 30 September 2016
Six months ended Six months ended Year ended
30 September 30 September 31 March
2016 2015 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------------------------------------------- ------------------ ------------------ ------------
Operating activities
Profit/(Loss) before tax 475 (1,039) (1,694)
Adjustments to reconcile profit/(loss) before tax to net cash
flows from operating activities
Share-based payments expense 1 8 11
Impairment losses - 172 372
(Increase)/Decrease in the fair value movements of investments (32) 724 1,026
Gain on disposal of equity investments (303) - (55)
Gain on disposal of LLP - - (83)
Interest income (13) - (7)
Increase in trade and other receivables (48) (26) (107)
(Decrease)/Increase in trade and other payables (103) (73) 1
---------------------------------------------------------------- ------------------ ------------------ ------------
Net cash flow from operating activities (23) (234) (536)
---------------------------------------------------------------- ------------------ ------------------ ------------
Investing activities
Proceeds from sale of equity investments 399 - 1,075
Proceeds from sale of LLP - - 89
Increase in investments (318) (17) (17)
Repayment of loan notes - 9 147
Acquisition of subsidiary, net of cash acquired - - (4)
Interest received 13 - 7
---------------------------------------------------------------- ------------------ ------------------ ------------
Net cash flow from investing activities 94 (8) 1,297
---------------------------------------------------------------- ------------------ ------------------ ------------
Net increase/(decrease) in cash and cash equivalents 71 (242) 761
Cash and cash equivalents at the start of the period 1,263 502 502
---------------------------------------------------------------- ------------------ ------------------ ------------
Cash and cash equivalents at the end of the period 1,334 260 1,263
---------------------------------------------------------------- ------------------ ------------------ ------------
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2016
Attributable to owners of
the Parent
-----------------------------------------------------
Share Share Merger Retained Non-controlling Total
Capital Premium Reserve Earnings Total Interest Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
At 1 April
2015 (audited) 541 1,564 524 787 3,416 (28) 3,388
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
Share-based
payments - - - 8 8 - 8
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
Transactions
with owners - - - 8 8 - 8
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
Loss and total
comprehensive
income for
the period - - - (1,039) (1,039) - (1,039)
At 30 September
2015 (unaudited) 541 1,564 524 (244) 2,385 (28) 2,357
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
Share-based
payments - - - 3 3 - 3
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
Transactions
with owners - - - 3 3 - 3
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
Loss and total
comprehensive
income for
the period - - - (647) (647) (8) (655)
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
At 1 April
2016 (audited) 541 1,564 524 (888) 1,741 (36) 1,705
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
Share-based
payments - - - 1 1 - 1
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
Transactions
with owners - - - 1 1 - 1
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
Profit and
total comprehensive
income for
the period - - - 451 451 24 475
At 30 September
2016 (unaudited) 541 1,564 524 (436) 2,193 (12) 2,181
---------------------- --------- --------- --------- ---------- -------- ---------------- --------
Notes to the interim financial statements
1 Basis of preparation
The financial information presented in this half-yearly report
constitutes the condensed consolidated financial statements (the
interim financial statements) of Braveheart Investment Group plc
("Braveheart" or "the Company"), a company incorporated in the
United Kingdom and registered in Scotland, and its subsidiaries
(together, "the Group") for the six months ended 30 September 2016.
The interim financial statements have been prepared in accordance
with IAS 34 Interim Financial Reporting and should be read in
conjunction with the Annual Report and Accounts for the year ended
31 March 2016 which have been prepared in accordance with
International Financial Reporting Standards as adopted for use in
the EU. The financial information in this half-yearly report, which
was approved by the Board and authorised for issue on 12 October
2016 is unaudited.
The interim financial statements do not constitute statutory
accounts for the purpose of sections 434 and 435 of the Companies
Act 2006. The comparative financial information presented herein
for the year ended 31 March 2016 has been extracted from the
Group's Annual Report and Accounts for the year ended 31 March 2016
which have been delivered to the Registrar of Companies. The
Group's independent auditor's report on those accounts was
unqualified, did not include references to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report and did not contain a statement under section 498(2) or
498(3) of the Companies Act 2006.
The preparation of the half-yearly report requires management to
make judgements, estimates and assumptions that affect the policies
and the reported amounts of assets and liabilities, income and
expenses. The estimates and associated assumptions are based on
historical experience and other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. In preparing this
half-yearly report, the significant judgements made by management
in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applied to the
audited consolidated financial statements for the year ended 31
March 2016.
The interim financial statements have been prepared using the
same accounting policies as those applied by the Group in its
audited consolidated financial statements for the year ended 31
March 2016 and which will form the basis of the 2017 Annual Report.
The interim financial statements have been prepared on the same
basis as the financial statements for year ended 31 March 2016
which is on the assumption that the company is a going concern.
2 Earnings per share
The basic earnings per share has been calculated by dividing the
profit/(loss) for the period attributable to equity holders of the
parent by the weighted average number of ordinary shares in issue
during the period.
The calculation of earnings per share is based on the following
profit/(loss) and number of shares in issue:
Six months ended Six months ended Year ended
30 Sept 2016 30 Sept 2015 31 Mar 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------------------------------- ----------------- ----------------- ------------
Profit/(loss) for the period attributable to equity holders
of the parent 451 (1,039) (1,686)
-------------------------------------------------------------- ----------------- ----------------- ------------
Weighted average number of ordinary shares in issue:
* For basic loss per ordinary share 27,055,491 27,055,491 27,055,491
* For diluted loss per ordinary share 27,055,491 27,055,491 27,055,491
-------------------------------------------------------------- ----------------- ----------------- ------------
There were no potentially dilutive ordinary shares at the period
end as the average share price of the ordinary shares was less than
the average exercise price of the share options.
3 Goodwill
VFM Neon Total
GBP'000 GBP'000 GBP'000
---------------------------------- --------- -------- --------
At 1 April 2015 (audited) 372 380 752
Impairment (172) - (172)
At 30 September 2015 (unaudited) 200 380 580
Impairment (200) - (200)
At 1 April 2016 (audited) - 380 380
At 30 September 2016 (unaudited) - 380 380
----------------------------------- -------- -------- --------
The Group assessed the recoverable amount of the above goodwill
with Neon's cash generating units and determined that goodwill was
not impaired.
4 Investments at fair value through profit or loss
Level 1 Level 2 Level 3
---------------------- -------------- ------------------------------- ------------------------------- --------
Equity Equity Debt Equity Debt
investments investments investments in investments investments in
in quoted in unquoted unquoted in unquoted unquoted
companies companies companies companies companies Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------------- -------------- --------------- -------------- --------------- --------
At 1 April 2015
(audited) - - - 2,318 160 2,478
Repayments - - - - (9) (9)
Additions at cost - - - - 17 17
Change in Fair Value - - - (714) (10) (724)
---------------------- -------------- -------------- --------------- -------------- --------------- --------
At 30 September 2015
(unaudited) - - - 1,604 158 1,762
Disposals/Repayments (1,015) (143) (1,158)
Acquired 166 - - - - 166
Change in Fair Value - - - (287) (15) (302)
---------------------- -------------- -------------- --------------- -------------- --------------- --------
At 1 April 2016
(audited) 166 - - 302 - 468
Disposals - - - (96) - (96)
Additions at cost - - - 288 30 318
Change in Fair Value - - - 32 - 32
---------------------- -------------- -------------- --------------- -------------- --------------- --------
At 30 September 2016
(unaudited) 166 - - 526 30 722
---------------------- -------------- -------------- --------------- -------------- --------------- --------
The accounting policies in regards to valuations in these
half-yearly results are the same as those applied by the Group in
its audited consolidated financial statements for the year ended 31
March 2016 and which will form the basis of the 2017 Annual Report
and Accounts. Investments are designated as fair value through
profit or loss and are initially recognised at fair value and any
gains or losses arising from subsequent changes in fair value are
presented in profit or loss in the statement of comprehensive
income in the period in which they arise.
The Group classifies its investments using a fair value
hierarchy. Classification within the hierarchy has been determined
on the basis of the lowest level input that is significant to the
fair value measurement of the relevant investment as follows:
-- Level 1 - valued using quoted prices in active markets for identical assets;
-- Level 2 - valued by reference to valuation techniques using
observable inputs other than quoted prices included within Level 1;
and
-- Level 3 - valued by reference to valuation techniques using
inputs that are not based on observable market data.
Investments at fair value through profit or loss (continued)
The fair values of quoted investments are based on bid prices in
an active market at the reporting date. All unquoted investments
have been classified as Level 3 within the fair value hierarchy,
their respective valuations having been calculated using a number
of valuation techniques and assumptions, notwithstanding that the
basis of the valuation methodology used most commonly by the Group
is 'price of most recent investment'. The use of reasonably
possible alternative assumptions has no material effect on the fair
valuation of the related investments. The impact on the fair value
of investments if the discount rate and provision shift by 1% is
GBP1,789 (2015: GBP11,508).
5 Share capital
30 Sept 30 Sept 31 Mar
2016 2015 2016
(unaudited) (unaudited) (audited)
Authorised GBP GBP GBP
33,645,000 ordinary shares of
2 pence each
(30 September 2015: 33,645,000,
31 March 2016: 33,645,000) 672,900 672,900 672,900
---------------------------------- ------------ ------------ ----------
Allotted, called up and fully
paid
27,055,491 ordinary shares of
2 pence each
(30 September 2015: 27,055,491,
31 March 2016: 27,055,491) 541,109 541,109 541,109
---------------------------------- ------------ ------------ ----------
The Company has one class of ordinary shares. All shares carry
equal voting rights, equal rights to income and distribution of
assets on liquidation or otherwise, and no right to fixed
income.
6 Availability of Interim Results
Shareholder communications
A copy of this report is available on request from the Company's
registered office: 2 Dundee Road, Perth, PH2 7DW. A copy has also
been posted on the Company's website:
www.braveheartinvestmentgroup.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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