RNS Number : 3581E
Strathdon Investments PLC
25 September 2008
STRATHDON INVESTMENTS PLC
UNAUDITED PRELIMINARY RESULTS
FOR THE YEAR ENDED
31 MARCH 2008
Strathdon Investments plc ("the Group") today announces its unaudited preliminary results for the year ended 31 March 2008.
Chairman's Statement
My first Chairman's Statement covers what has been an extremely challenging year for Strathdon. Overall the Group's strategy has been to
continue the policy of realising its investment portfolio, reducing both its costs and bank debt and where possible selectively supporting
the residual portfolio. All this is being targeted within the constraints of limited liquidity.
Some progress has been made in the year, although this is very much tempered by two significant failures of the investments in
Stagebeach Limited and Capital Consulting Limited. As a result, whilst during the year bank debt has been reduced from �1.28 million to
�0.66 million, with a further reduction to �0.3 million achieved after the year end, and running costs (excluding provisions for credit
losses) have been reduced by 42% to �0.77 million with further reductions planned, the net asset value has fallen to �4.97 million
equivalent to 9.6 pence per share (2007: �14.0 million and 27.0 pence per share respectively).
The board's key objective in the short term is to restore liquidity and extinguish the bank debt. In this regard we are seeking to
accelerate the realisation of the portfolio through a formal process which has commenced. At the same time the board is continuing to review
its strategic options to deliver shareholder value.
We have taken steps to lower the cost base further by reaching an agreement with the Fund Manager to reduce their fees from 1 January
2009.
Since the end of the financial year we have reduced the size of the board from 4 to 3 directors. Whilst the accelerated disposal of the
portfolio continues it is intended to maintain the size of the board. Depending on the outcome of the exercise the board will keep this
under review.
Portfolio Company Performance
In aggregate �2.48 million was realised from 8 investments over the course of the year (of which �2.03 million has been received with
the balance to be paid over time). Whilst these realisations generated a loss of �0.29 million, compared with original cost, they
represented an increase of �0.24 million compared with the last reported carrying value. The bulk of these net proceeds have been used to
reduce the debt of the Group.
The Fund Management activity during the year has been focused on the existing portfolio with no new investments completed. Investments
in 4 existing portfolio companies amounted to �0.96 million. This comprised �0.44 million in Stagebeach Limited, �0.40 million in Newnova
Group Limited, �0.11 million in Meta Vision Systems Limited and a small �7k investment in Oxagen Limited. The investment in Newnova
represents �0.40 million of loan stock issued by the Newnova Group at the time of the disposal of Newnova Limited and represents a partial
rollover of realisation proceeds. These are due to be paid in two instalments on the first and second anniversary of the transaction. In
total proceeds of �0.77 million have been realised in respect of Newnova. The investment in Meta has taken the business into profitability
with new contract wins seeing turnover increase significantly. This has attracted further investment from a trade investor subsequent to the
year end.
The investments in Stagebeach were completed as part of a final effort to support the company through to profitability. Despite this,
the improvement in Stagebeach's performance was not delivered and after a further review it was determined that further support was not
warranted. As a consequence the two main trading subsidiaries of Stagebeach were placed in to administration in January 2008.
The year also saw Capital Consulting Limited sold under the guidance of the loan stock holder. The sale was effected quickly and did not
produce a return to the equity investors of which Strathdon was one.
There is no doubt that overall this year has been disappointing with the reductions in value arising from Stagebeach and Capital
Consulting outweighing the increase in value from the realisations.
The residual portfolio comprises 11 investments with an aggregate value of �5.6 million with 7 of these investments comprising in excess
of 96% of the residual value.
Financial Results
With Reporting Standards committed to international convergence, Strathdon is now required to prepare its financial statements in
accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. Consequently, comparatives have been
restated to reflect this change as set out in Strathdon's IFRS Restatement Announcement released on 24 December 2007. The most significant
impact reflected in these accounts of adoption of IFRS on Strathdon's previously reported financial information is with regard to the
treatment of gains and losses on the revaluation of investments.
The loss for the year was �9.0 million compared to �2.28 million in the prior year. This is after taking account of a write down on
unrealised investment valuations of �7.8 million (2007: �0.99 million) and an associated trade receivables provision of �0.7 million. The
largest single impact was the write down on Stagebeach, resulting in an adverse valuation movement of �5.26 million.
Total net assets at 31 March 2008 were �4.97 million (2007: �13.99 million) equivalent to a net asset value per share of 9.59 pence
(2007: 27.00 pence). At 31 March 2008, bank borrowings totalled �0.66 million. The facility agreement has been varied and extended and at
the current date borrowings have been further reduced to �0.3 million. Planned realisation negotiations of certain investments are ongoing,
the intention being that borrowings will be eliminated as soon as possible.
As reported at the interim, at 31 March 2007 Strathdon was deemed to hold a controlling interest in Stagebeach Limited. The capital
structure that gave rise to Strathdon having a controlling interest had always been intended to be temporary in nature and, following a
re-organisation in May 2007, Strathdon's interest fell below 50%. At all times operational control vested with the management. As a
consequence the results of Stagebeach have not been consolidated in accordance with IAS 27 'Consolidated and Separate Financial Statements'
as the directors feel that it would not assist shareholders in their understanding of these financial statements and would also be
inconsistent with the nature of the business of Strathdon, which is that of an investment company. This treatment was previously permitted
under UK GAAP.
Board
Further to the announcement made on 24 December 2007, Andrew Firth stepped down as Chairman on 2 July 2008. The board would like to
thank Andrew for his substantial contributions to the Company during his time as Chairman as we now continue to implement plans to work
through what has been a very challenging period for Strathdon.
The number and composition of the board is kept under constant review. Should the realisation of the portfolio be further accelerated
further changes will be considered. Until that time the board feels that the current composition is appropriate for the needs of the
Company.
Outlook
2007/08 has been another challenging year for Strathdon with disappointing results from some of the portfolio companies. Strathdon's
operations have been substantially restructured, culminating in the appointment of YFM Venture Finance Limited as the Group's Fund Manager.
This has reduced administration costs and provided direct access to a depth of venture capital industry experience. It has been agreed with
the Fund Manager that costs will be further reduced and this is to be implemented from 1 January 2009. The board remains committed to
realising value from the portfolio whilst at the same time reviewing its strategic options to enhance shareholder value.
Simon Hunt
Chairman
25 September 2008
Unaudited Consolidated Income Statement
For the year ended 31 March 2008
Year ended Year ended
31 March 31 March
2008 2007
Notes �000 �000
Income 365 729
Administrative expenses (1,682) (1,316)
Operating loss (1,317) (587)
Realised gains / (losses) on financial assets
designated at fair value though profit or loss 241 (597)
(net)
Unrealised losses on financial assets
designated at fair value through profit or (7,834) (988)
loss (net)
Net movement on investments (7,593) (1,585)
Loss on ordinary activities before finance (8,910) (2,172)
costs and taxation
Finance costs (108) (109)
Loss from continuing operations before (9,018) (2,281)
taxation
Taxation - -
Loss for the period from continuing operations (9,018) (2,281)
Basic and diluted loss per share 3 (17.40)p (4.40)p
Unaudited Consolidated Balance Sheet
As at 31 March 2008
31 March 31 March
2008 2007
Notes �000 �000
Assets
Non-current assets
Plant and equipment - 5
Financial assets designated at fair value through 5,557 14,674
profit or loss
5,557 14,679
Current assets
Trade and other receivables 555 1,027
Cash and cash equivalents 201 67
756 1,094
Liabilities
Current liabilities
Financial liabilities (656) (1,280)
Trade and other payables (546) (364)
(1,202) (1,644)
Net current liabilities (446) (550)
Total assets less current liabilities 5,111 14,129
Non-current liabilities
Financial liabilities (141) (141)
Net assets 4,970 13,988
Shareholders' equity
Share capital 2,591 2,591
Share premium account 6,392 6,392
Special reserve 36,290 36,290
Warrant reserve 928 928
Retained earnings (41,231) (32,213)
Total Shareholders' equity 4,970 13,988
Net asset value per Ordinary share 4 9.59p 27.00p
Unaudited Company Balance Sheet
As at 31 March 2008
31 March 31 March
2008 2007
Notes �000 �000
Assets
Non-current assets
Financial assets designated at fair value through 39 46
profit or loss
Investments in subsidiaries - 3,872
39 3,918
Current assets
Trade and other receivables 5,113 10,103
Cash and cash equivalents - 2
5,113 10,105
Liabilities
Current liabilities
Trade and other payables (182) (36)
Net current assets 4,931 10,069
Net assets 4,970 13,987
Shareholders' equity
Share capital 2,591 2,591
Share premium account 6,392 6,392
Special reserve 36,290 36,290
Warrant reserve 928 928
Retained earnings (41,231) (32,214)
Total Shareholders' equity 4,970 13,987
Unaudited Statements of Changes in Shareholders' Equity
For the year ended 31 March 2008
Share Share premium Special reserve* Warrant Retained earnings Total
Group Capit account reserve equity
al
�000
�000 �000
�000 �000
�000
Balance at 31 March 2006 2,591 6,392 36,290 928 (29,932) 16,269
Loss for the period - - - - (2,281) (2,281)
Balance at 31 March 2007 2,591 6,392 36,290 928 (32,213) 13,988
Loss for the period - - - - (9,018) (9,018)
Balance at 31 March 2008 2,591 6,392 36,290 928 (41,231) 4,970
Share Share premium Special reserve* Warrant Retained earnings Total
Company Capita account reserve equity
l
�000
�000 �000
�000 �000
�000
Balance at 31 March 2006 2,591 6,392 36,290 928 (27,156) 19,045
Loss for the period - - - - (5,058) (5,058)
Balance at 31 March 2007 2,591 6,392 36,290 928 (32,214) 13,987
Loss for the period - - - - (9,017) (9,017)
Balance at 31 March 2008 2,591 6,392 36,290 928 (41,231) 4,970
*The special reserve is a distributable reserve.
Unaudited Consolidated Cash Flow Statement
For the year ended 31 March 2008
Year ended Year ended
31 March 31 March
2008 2007
Notes
Net cash outflow from operating activities 5 (215) (992)
Cash flows from (used in) investing activities
Bank balances disposed of with subsidiary - (45)
Proceeds from sale of subsidiary 11 26
Purchase of financial assets (557) (2,832)
Proceeds from sale of financial assets 1,626 5,089
Net cash from investing activities 1,080 2,238
Cash flows (used in) from financing activities
Repayment of borrowings (959) (1,366)
Interest paid (107) (101)
Loan funds drawndown 335 -
Net cash used in financing activities (731) (1,467)
Net increase (decrease) in cash and cash 134 (221)
equivalents
Cash and cash equivalents at beginning of the 67 288
year
Cash and cash equivalents at end of the year 201 67
Notes to Financial Statements
for the year ended 31 March 2008
1. Accounting Policies
This preliminary announcement does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The consolidated financial statements have been prepared on a going concern basis and, with the exception of the treatment of the
investment in Stagebeach Limited as described in note 6, in accordance with the International Financial Reporting Standards (IFRS), as
adopted by the European Union and those parts of the Companies Act 1985 applicable to companies reporting under IFRS.
In arriving at their decision to prepare the financial statements on a going concern basis, the Directors have reviewed the anticipated
income and expenditure of the Group until 30 September 2009 and compared this with the Group's expected cash resources. The directors
believe that it remains appropriate to prepare these accounts on a going concern basis but that the ability of the Group to remain a going
concern is ultimately dependent on the realisation of an illiquid portfolio of securities in extremely difficult market conditions, or a
refinancing. Furthermore, there is considerable uncertainty over the timing and quantum of the proceeds from the realisation of the
portfolio and over the ability of the Group to refinance itself. Until funds become available from such sources, the Group remains dependent
on its short term financing arrangements, in particular its bank overdraft and the continuing agreement of YFM Venture Finance Limited and
the Directors to delay payment of their fees. As such, the financial statements do not include any adjustments that might arise from the inability to realise an illiquid portfolio of securities or
refinance itself, which would result in the Group ceasing to be a going concern. Such adjustments would include having to reduce the value
of assets to their realisable amount, providing for any further liabilities which might arise, and reclassifying long-term liabilities as
current.
This is the Group's first annual first set of results prepared in accordance with IFRS. Previous financial statements were prepared in
accordance with UK Generally Accepted Accounting Principles (UK GAAP) including the requirements of Schedule 4 of the Companies Act 1985.
The statutory accounts for the year to 31 March 2007, which were prepared under UK GAAP, have been delivered to the Registrar of Companies.
Those accounts included an audit report which was unqualified and which did not contain a statement under Section 237(2) or (3) of the
Companies Act 1985. The Group is required to determine its IFRS accounting policies and apply them retrospectively to establish its opening
balance sheet under IFRS. The effective date of transition for the Group is 1 April 2006.
The information for the year ended 31 March 2007 is an extract from the 'Strathdon Investments plc Restatement of Financial Information
under International Financial Reporting Standards', which was released on 24 December 2007. That statement included a special purpose audit
report which was adverse in its opinion, due to the non-consolidation of Stagebeach Limited. This is detailed in note 6 below.
In preparing these financial statements certain accounting and valuation methods previously applied under UK GAAP have been amended to
comply with IFRS.
As required by IFRS 1, 'First-time Adoption of International Financial Reporting Standards' reconciliations showing the effects of the
changes were set out in 'Strathdon Investments plc Restatement of Financial Information under International Financial Reporting Standards'
and will be included in the statutory accounts for the year ended 31 March 2008. The Group has adopted IFRS 7 'Financial Instruments:
Disclosures' and the amendments to IAS 1 'Presentation of Financial Statements' which are mandatory for this financial year.
The most significant impact of the adoption of IFRS, reflected in the preliminary financial statements, is with regards to the treatment
of the gains and losses on the revaluation of investments which are taken directly to the income statement, rather than to reserves as under
UK GAAP.
The statutory accounts for the year ended 31 March 2008, which have still to be approved by the directors and upon which the auditors
have still to report, will be delivered to the Registrar following the Company's annual general meeting. It is expected that the opinion the
auditors give on these accounts will be adverse due to the non-consolidation of Stagebeach Limited, which has not been consolidated as a
subsidiary as required by IAS 27. This is detailed in note 6. In addition it is expected that the auditors will issue an Emphasis of Matter
in respect of going concern, as there is deemed to be a material uncertainty over the proceeds and timing of the realisation of the Group's
investment portfolio or a refinancing deal.
The Company has not adopted any standards or interpretations in advance of the required implementation dates. It is not expected that
adoption of standards or interpretations which have been issued by the International Accounting Standards Board but have not been adopted
will have a material impact on the financial statements.
2. Dividends
No dividends are proposed in respect of the year ended 31 March 2008 (year ended 31 March 2007: nil).
3. Loss per Share
The loss per share is based on net loss from ordinary activities after tax of �9,018,000 (2007: �2,281,000) and on 51,817,057 (2007:
51,817,057) shares, being the weighted average number of shares in issue during the year.
The share options within the Employee Share Option Scheme and the warrants exercisable at 36p per share are considered to be
non-dilutive potential ordinary shares. The Company has no other securities that would have a dilutive effect in either period and hence the
basic and diluted loss per share are the same.
4. Net Asset Value per Share
The net asset value per share is calculated on attributable assets of �4,970,000 (2007: �13,988,000) and 51,817,057 (2007: 51,817,057)
shares in issue at the year end.
The share options within the Employee Share Option Scheme and the warrants exercisable at 36p per share are considered to be
non-dilutive potential ordinary shares. The Company has no other securities that would have a dilutive effect in either period and hence the
basic and diluted net asset value per share are the same.
5. Reconciliation of Loss on Ordinary Activities before Taxation to Net Cash Outflow from Operating Activities
2008 2007
�000 �000
Loss on ordinary activities before tax (9,018) (2,281)
Depreciation 5 7
Loss on disposal of plant & equipment - 1
(Profit) loss on realisation of investments in the year (241) 597
Revaluation of investments in the year 7,834 988
Finance Costs 108 109
Decrease (increase) in receivables 866 (241)
Increase (decrease) in payables 231 (172)
Net cash outflow from operating activities (215) (992)
6. Non-consolidated subsidiary
The Group controlled 84% of the equity share capital and voting rights of Stagebeach Limited during the year. Stagebeach Limited has not
been consolidated on the basis that the Group's control of it has always been intended to be temporary and, following a capital
restructuring of Stagebeach Limited in May 2007, the Group ceased to control Stagebeach Limited. At all times operational control rested
with the Stagebeach management.
The results of Stagebeach have not been consolidated as the directors feel that it would not assist shareholders in their understanding
of these financial statements and would also be inconsistent with the nature of the business of Strathdon, which is that of an investment
company. This treatment was previously permissible under UK GAAP. Furthermore, the Group has lost control of Stagebeach and does not have
access to the necessary information to enable Stagebeach Limited's financial results to be accounted for under IAS 27. The investment in
Stagebeach Limited has been accounted for as a financial asset at Fair Value through profit or loss as consistent with other investments in
the portfolio. The investment has been fully written down in the year.
Stagebeach came under the control of the group on 7 October 2005 and since that date has produced two sets of financial statements,
which are for the periods ended 31 December 2006 and 2005. These show capital and reserves of �1,230,566 at 31 December 2006 (2005:
�726,172) and a loss before taxation of �284,204 (2005: �353,829).
Stagebeach Limited is a holding company for GBS Corporate Training Limited and for Atrium Group Limited. The principle business of GBS
Corporate Training Limited is the provision of software to enable the distribution of video signals across corporate networks.
The Group provided finance to Stagebeach Limited to enable it to fund acquisitions and to provide it with working capital.
7. Annual Report
Copies of the full financial statements for the year ended 31 March 2008 will be available to the public at the registered office of the
Company at Saint Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ and from its fund manager's web site: www.yfmgroup.co.uk
For further information, please contact:
David Hall YFM Venture Finance Limited Tel:
0161 832 7603
This information is provided by RNS
The company news service from the London Stock Exchange
END
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