RNS Number:2841A
Strathdon Investments PLC
16 July 2007
STRATHDON INVESTMENTS PLC
Preliminary results for the year ended 31 March 2007
Strathdon Investments plc ("Strathdon" or the "Company"), the technology
investment firm, today announces its financial results for the year ended 31
March 2007.
Enquiries:
Strathdon Investments plc 01962 870 492
Andrew Firth, Chairman
Attached: Chairman's Statement
Consolidated Profit and Loss Account
Statement of Total Recognised Gains and Losses
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Notes to the Accounts
Chairman's Statement
The 2006/07 year has been a challenging period for Strathdon, with the need for
the Board to stabilise the business after a period of very disappointing
results. I reported in my interim statement the departure of the CEO, Hugh
Stewart, and the decisions by the board to significantly reduce the cost base
with the departure of a number of investment managers. I also reported in my
interim statement the decision to stop making new investments, and to
concentrate our efforts on the earliest possible return of cash to shareholders.
I am pleased today to be able to announce the next stage of this stabilisation
process, with the agreement of heads of terms to appoint a new manager, YFM
Venture Finance Limited, a wholly owned FSA authorised subsidiary of YFM Group
Limited ("YFM"), to manage the portfolio from the end of July.
New Investment Manager
The Board held conversations with a number of potential parties and conducted a
thorough strategic review and selection process before choosing YFM. YFM is a
leading active venture capital investor in the SME market operating in the
technology and non-technology sectors, and their fit with the Strathdon
portfolio is extremely good. YFM has #275m of venture funds under management in
over 200 companies with a strong track record over 20 years. We are very pleased
to be bringing them on board to assist the company in achieving its objectives.
Under the proposed terms of the agreement David Hudson, Strathdon's Chief
Investment Officer, will become an employee of YFM. At the same time Strathdon's
Winchester office will close and the administration staff will be leaving the
business, with YFM taking on the administration and company secretarial duties
of the company. Taken together this means that the overall projected TER on the
current level of net assets will settle at approximately 3.5%, compared with
6.2% in the year ended 31 March 2006, and 5.1% (4% excluding redundancy costs)
in the year ended 31 March 2007.
The Board appointed Intelli Corporate Finance to advise the company on the terms
of the agreement with YFM, and they have confirmed that the arrangements are
appropriate and in keeping with those typically found in the market. YFM will be
entitled to carried interest on a sliding scale on the value of gross
realisations above #10m. This carried interest is set at 7.5% from #10m to
#12.5m of gross realisations, 15% from #12.5m to #15m, rising to 25% for gross
realisations above #15m.
Strategy
In the course of the strategic review process, the Board has had to balance the
desire of some shareholders for rapid cash realisation from the portfolio with
the potential value erosion for shareholders that would result from a
predominance of secondary transactions rather than true 'exits'. Equally the
Board has been keeping one eye firmly on liquidity and the company's borrowing
facility. The one-off costs of the redundancies from Strathdon, together with
the necessary one-off costs required to restructure Stagebeach described below,
took the company's overall bank borrowing to #1.2m as at 31 March 2007. While
this has reduced to #1.0m at 30 June 2007, cash will need to continue to be
managed carefully until a material realisation is achieved.
The strategy of the business remains an orderly realisation of the portfolio.
Following feedback from a number of leading shareholders the Board has taken the
decision to speed up realisations where practical. Balancing the trade-offs
between value and speed, together with the need to manage liquidity carefully in
the short term, requires sound judgement and the benefit of experience. YFM's
experience will be invaluable to the Board in managing liquidity through this
transition period and in refining the exit programme of targeted asset
disposals.
Results for the year
It is disappointing to report further erosion in net asset value. At 31 March
2007, net asset value was 27.0p per share, compared to 29.3p at 30 September
2006 and 31.4p at 31 March 2006. Subsequent to the year end, the Board has taken
the decision to make additional provisions totalling #1.6m (3.1p per share)
which are described more fully below. Accounting standards require that these
additional provisions should not be reflected in the 31 March 2007 accounts, as
they relate to events subsequent to the balance sheet date. Adjusted for these
additional provisions, proforma unaudited Net Asset Value per share at 31 March
2007 is therefore 23.9 pence per share.
Stagebeach
Stagebeach remains the largest company in the portfolio accounting for some 38%
of Net Asset Value as at 31 March 2007. At the half year, we took a provision of
#0.8m against Stagebeach, as the company was performing behind expectations.
Since that time Strathdon has helped effect far-reaching changes which have
included various Board and senior management departures. It has been necessary
for Strathdon to fund a reorganisation of the business during this transition.
The new Managing Director, who has significant experience of the training
business, was appointed early in 2007 and he has put in place a plan to deliver
the undoubted potential of Stagebeach's blended learning offering. The current
financial year is a period of transition for Stagebeach and we expect that the
results of the agreed changes will begin to generate positive results in early
2008. The restructuring programme initiated by the new Managing Director is well
underway, but has taken longer to implement than originally envisaged. Having
reviewed the position of Stagebeach relative to its business plan during the
quarter ended 30 June 2007, the Board considers it appropriate to make a further
provision of #1.0m against its holding value.
Meta Vision Systems
Meta Vision Systems experienced operational difficulties in its Meta-Scout
subsidiary in late 2006 and early 2007, and as at 31 March 2007 a provision of
#0.5m was taken against its holding value. Revenues, profitability and cash-flow
since 31 March 2007 have been below plan and, while the trading outlook for the
second half promises to return the company to its growth path, the Board
considers it appropriate to take a provision of a further #0.6m against its
holding value as at 30 June 2007.
Other Portfolio Companies
During the year under review, we made further provisions against AmGas (#0.3m)
and eeParts (#0.2m). AmGas was sold in April 2007. eeParts failed to hit its
financial targets during 2006/7 and as a result a provision of #0.2m was taken
against its holding value. We revalued our holding in AMG Systems upwards by
#0.5m in the first half of the financial year to reflect its very strong trading
performance, which I am pleased to say has continued in the year to date.
During the year we have disposed of our holding in the Esprit Capital 1 Fund at
net asset value of #1.0m, and subsequent to the year end we disposed of half our
holding in Episys, also at net asset value. We have a number of active
discussions ongoing regarding the sale of various holdings in the portfolio.
Board Changes
As a result of the decision to outsource accounting and other back office
functions to YFM, Michael Roller is standing down as Finance Director at the end
of July and leaving Strathdon after an orderly transition to YFM. I would like
to thank Michael for his outstanding contribution to the business, particularly
in helping to stabilise the company through a very difficult year. We wish him
great success with his future career.
Conclusion
2006/07 has been a challenging year for Strathdon, with the company facing
disappointing news from portfolio companies at the same time as reorganising
itself to better address the future. I would like to thank David Hudson and
Michael Roller, as the two remaining executives after the restructure, for their
steadfast loyalty and hard work through the year. I would also like to thank the
Board, not only for their significant time commitment through the many extra
meetings that have been required through the year, but also for their wise
counsel and good judgement throughout. I am extremely pleased to be appointing
YFM as our new Investment Managers, and I hope that 2007/08 will be a more
satisfactory year for shareholders.
Andrew Firth
Chairman
Consolidated Profit and Loss Account for the year ended 31 March 2007
Unaudited Audited
Year
to 31March 2007 to 31March 2006
#'000 #'000
Turnover 600 458
Administration expenses (1,316) (1,466)
----------- -----------
Operating loss (716) (1,008)
Loss on disposal of fixed asset
investments (965) (1,209)
----------- -----------
Loss on ordinary activities before provision (1,681) (2,217)
against carrying value of investments
and interest
Change in provision against carrying
value of investments (328) (3,125)
Interest payable (109) (212)
Interest receivable 129 206
----------- -----------
Loss on ordinary activities before taxation (1,989) (5,348)
Taxation - -
----------- -----------
Retained loss for the financial year (1,989) (5,348)
----------- -----------
Loss per Ordinary Share Pence Pence
-basic & diluted (3.84) (10.76)
Consolidated Statement of Total Recognised Gains and Losses for the Year ended
31 March 2007
Unaudited Audited
Year Year
to 31March 2007 to 31 March 2006
#'000 #'000
Loss for the financial year (1,989) (5,348)
Change in unrealised (loss) / gain
on investments (660) 1,306
----------- -----------
Total losses relating to the year (2,649) (4,042)
----------- -----------
Consolidated Balance Sheet at 31 March 2007 Unaudited Audited
31 March 2007 31 March 2006
#'000 #'000
Fixed assets
Tangible Fixed Assets 5 13
Investments 14,674 18,497
----------- -----------
14,679 18,510
----------- -----------
Current assets
Debtors 1,027 786
Cash at bank 67 288
----------- -----------
1,094 1,074
Creditors: amounts falling due within one year (1,644) (669)
----------- -----------
Net current (liabilities) / assets (550) 405
----------- -----------
Total assets less current liabilities 14,129 18,915
----------- -----------
Creditors: amounts falling due in more than
one year (141) (2,646)
----------- -----------
Total net assets 13,988 16,269
----------- -----------
Capital and reserves
Called up share capital 2,591 2,591
Share premium account 6,392 6,392
Special reserve 36,290 36,290
Revaluation reserve 1,973 2,633
Warrant reserve 928 928
Profit and loss account (34,186) (32,565)
----------- -----------
Total shareholders' funds 13,988 16,269
----------- -----------
Net Asset Value per Ordinary Share Pence Pence
- basic & diluted 27.00 31.40
Consolidated Cash Flow Statement for the year ended 31 March 2007
Unaudited Audited
year year
to 31 March to 31 March
2007 2006
#'000 #'000
Operating activities
Investment income received 227 37
Portfolio management fees 299 220
Investment management fee paid - (37)
Salaries (874) (777)
Other cash payments (684) (693)
----------- -----------
Net cash outflow from operating
activities (1,032) (1,250)
----------- -----------
Returns on investment and servicing of finance
Interest received 40 61
Interest paid (101) (193)
----------- -----------
Net cash outflow from returns on investment (61) (132)
and servicing of finance ----------- -----------
Capital expenditure and financial investment
Purchases of investments (2,832) (3,040)
Sales of investments 5,115 4,607
Purchases of tangible fixed assets - (8)
Repayment of borrowings (1,366) (334)
----------- -----------
Net cash inflow from capital expenditure
and financial investment 917 1,225
----------- -----------
Acquisitions and disposals
Bank balances disposed of with subsidiary (45) -
----------- -----------
Net cash outflow from acquisitions and
disposals (45) (-)
----------- -----------
Net cash outflow before and after financing (221) (157)
----------- -----------
Decrease in cash (221) (157)
----------- -----------
Notes:
The calculation of basic earnings per ordinary share is based on a loss after
taxation for the period of #1,989,000 (2006 loss - #5,348,000) and on 51,817,057
(2006 - 49,701,989) shares being the weighted average number of Ordinary Shares
in issue during the period. The diluted earnings per share is equal to the basic
earnings per share because the share options within the Employee Share Option
Scheme are considered to be non-dilutive potential ordinary shares. No dilution
is caused by the existence of the 5,902,843 warrants in issue because the
average share price over the period has been below the 36p exercise price of
these warrants
The basic net asset value calculation at 31 March 2007 is based on net assets of
#13,988,000 (31 March 2006 - #16,269,000) and 51,817,057 (31 March 2006:
51,817,057) Ordinary shares in issue at that date.
The foregoing financial information does not constitute statutory financial
statements as defined in section 240 Companies Act 1985. The statutory accounts
for the year ended 31 March 2006, which contained an unqualified auditors'
report, have been lodged with the Registrar of Companies and did not contain a
statement required under Section 237(2) or (3) of the Companies Act 1985.
The Annual Report will be posted to shareholders by 7th August and copies will
be available from the Company Secretary at Canister House, Jewry Street,
Winchester, Hants SO23 8RY, telephone number 01962 870492, or e-mail
investorrelations@strathdon.com
This information is provided by RNS
The company news service from the London Stock Exchange
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