Alpha Strategic Regulatory News Announcement
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Alpha Strategic PLC - Final Results
RNS Number : 1477X
Alpha Strategic PLC
20 June 2008
Alpha Strategic plc ('Alpha Strategic' or the 'Company')
Audited Preliminary Results for the year ended 31st March 2008
Financial Highlights
* Revenue up 350% to £669k (2007 - £191k)
* Total revenue increases to £784k (2007 - £301k)
* Pre tax profit of £40k (2007 - (loss) £144k) despite significant non-
recurring aborted transaction costs
* Excellent investment performance with funds under management at $37.8
million
* Healthy cash and debtor balance at £2.4 million (2007 - £2.3 million)
* Global Futures Fund marketing territory extended to Germany and Austria
Enquiries:
Colin Barrow, Chairman
Kit Malthouse, Chief Executive Officer
Tel: 020 7222 2223
Rory Murphy, Strand Partners Limited
Tel: 020 7409 3494
Chairman's Statement
The second full year of operation of the Company has been very active, although
sadly frustrating. Our financial performance has been very satisfactory with
operating revenue up 350% and good cost control, marred only by abortive
acquisition costs,
much of which we hope to recover.
As you will see from the accounts within this report, the performance on the
Global Futures Fund (the 'GFF') has been outstanding. During a period of
fluctuating fortunes for many in the hedge fund industry, our partners, Winton
Capital proved their
quality and turned in an excellent year, returning over 30% on the GFF Class D
units. This has resulted in a rise in revenue for Alpha, up over 300%
undoubtedly adding to the future marketability of the GFF.
During the year the GFF achieved regulatory approval under proviso from the
Swiss authorities, and at the date of this report work is still ongoing to
address one remaining technical issue between the Swiss and Luxembourg
regulatory authorities. The
lawyers concerned are optimistic that this work will soon be completed and full
marketing can then commence. In the meantime it has been agreed with Winton
Capital that the marketing territory for the fund will be extended from
Switzerland to include
Germany and Austria, and we anticipate that this will increase the growth in
funds under management significantly. At the date of this report funds under
management stand at approximately $37.8 million
The year began with the prospect of a very large transaction undertaken in
partnership with a major investment bank. Following extensive discussions
between us a joint project was agreed whereby we would attempt to bring together
three to five revenue
streams from a group of larger hedge fund managers and acquire them
simultaneously. After many weeks of work we were successful in attracting two
such managers to the project but neither would proceed without at least a third.
At that point there was a
downturn in perceptions of market valuation, and as the summer progressed, the
increased volatility in the stock market meant that it became impossible for us
to continue with the proposal.
In July of 2007 we were introduced to a medium sized Scandinavian hedge fund
manager. One of the principals had indicated that he wished to exit the company
and dispose of his holding. Following a number of meetings and visits to
Scandinavia, we
satisfied ourselves that the firm would be a good fit with the Alpha model and
successfully negotiated a transaction over the course of the summer. Heads of
terms were agreed, and we proceeded to initiate formal due diligence and prepare
legal work.
However as we approached completion of the transaction in late November it
became apparent that relations between the three principals were deteriorating
badly. Shortly before we were due to announce the transaction to our
Shareholders we were informed
that our acquisition would be viewed by the remaining hedge fund principals as
'hostile'.
We considered that taking an hostile position in an overseas company would not
be in the best interests of our Shareholders or indeed commensurate with the
Alpha philosophy and hence we reluctantly decided to withdraw from the
transaction.
At such an advanced point in the process, we had obviously incurred significant
professional fees, and we obtained an undertaking that, given their sudden
change of heart, and in consideration of our withdrawal, the hedge fund manager
concerned would
settle those fees.
Sadly, a couple of months later the hedge fund manager decided to withdraw from
this promise. Following legal advice we decided to initiate legal proceedings
for the recovery of our fees and that litigation is now ongoing.
Finally as the New Year began we revived a transaction that we have been working
on for over two years and agreed outline terms for the acquisition of a
significant revenue share from a seeding platform that wished to effect a
disposal. However the
underlying manager experienced a performance dip in the first quarter of 2008
and hence the transaction was called off for the time being.
On 1st May 2008 our Chief Executive, Kit Malthouse, was elected to the London
Assembly and was appointed by the new Mayor of London as Deputy Mayor with
responsibility for Policing in the Capital. This new position will obviously
impact Kit's ability
to continue as chief executive on a full time basis, and following discussions
with the board, it has been agreed that we will search for a new executive to
take on the bulk of the work that Kit has thus far undertaken. Kit has agreed to
continue as chief
executive until we select a suitable candidate and to assist in the search
process. Following a new appointment we envisage that Kit will continue as a
director of the Company, but in a more transactional role, utilizing the
contacts and knowledge he has
accumulated over the last three years.
Throughout the year we have continued to actively market the Alpha offering and
have held a number of promising meetings with a variety of managers at various
stages of evolution and as I write we have a number of nascent conversations
ongoing. What
is apparent to us is that our model of operation is receiving ever increasing
appreciation and credibility within the industry and hence we feel confident in
continuing to pursue our chosen strategy.
We are fortunate that after nearly three years of effort our high level market
contacts in the industry are good, and our networks extensive. We enjoy the
support and assistance of a number of prominent professional firms and prime
brokerage houses
and this undoubtedly adds credibility to our offering. We continue to search
diligently for our next acquisition with, as ever, quality being our major
concern.
We remain grateful to our advisors, shareholders and partners for their
continued support and help as we seek to execute our stated aim of bringing the
very best performers in the hedge fund industry to the public market.
Colin Barrow, Chairman. Consolidated Income Statement
For the year ended 31st March 2008
Year to Year to
31st 31st
Notes March March
2008 2007
£'000 £'000
Revenue 2 669 191
Other administrative expenses (505) (445)
Aborted acquisition costs 3 (239) -
Administrative expenses (744) (445)
Loss from operations 4 (75) (254)
Finance income
Interest receivable and similar income 115 110
Profit/(loss) before tax 40 (144)
Tax expense 5 12 -
Profit/(loss) for the year attributable to 28 (144)
equity holders of the Company
Basic earnings/(loss) per share 6 0.85p (4.41)p
Diluted earnings/(loss) per share 6 0.76p (4.41)p
. Consolidated Balance Sheet
As at 31st March 2008
31st March 2008 31st March 2007
Note £'000 £'000
s
Assets
Non-current assets
Intangible assets 415 415
Property, plant and equipment 8 -
Total non-current assets 423 415
Current assets
Trade and other receivables 348 39
Available-for-sale financial 7 1,891 2,134
assets
Cash and cash equivalents 163 167
Total current assets 2,402 2,340
Total assets 2,825 2,755
Liabilities
Current liabilities
Trade and other payables (83) (53)
Current tax liabilities (12) -
Total liabilities (95) (53)
Total net assets 2,730 2,702
Capital and reserves attributable
to the equity holders of the
Company
Share capital 83 83
Share premium reserve 2,649 2,649
Merger reserve 323 323
Retained earnings (325) (353)
Total capital and reserves 2,730 2,702
Consolidated Cash Flow Statement
for the year to 31st March 2008
Year to Year to
31st March 31st March 2007
2008
£'000
£'000
Cash flows from operating activities
Profit/(loss) after tax for the year 28 (144)
Finance income (115) (110)
Tax expense 12 -
Depreciation 1 -
Cash flows from operating activities (74) (254)
before changes in working capital
Increase in trade and other (309) (31)
receivables
Increase in trade and other payables 30 16
Cash used by operating activities (353) (269)
Cash flows from investing activities
Purchases of plant and equipment (9) -
Acquisition of subsidiary undertaking - (89)
Interest received 115 110
Cash flow from investing activities 106 21
Net decrease in cash and cash (247) (248)
equivalents
Cash and cash equivalents at beginning 2,301 2,549
of the year
Cash and cash equivalents at end of 2,054 2,301
the year
Cash and cash equivalents comprise:
Available-for-sale financial assets 1,891 2,134
Cash 163 167
Cash and cash equivalents at end of 2,054 2,301
the year
Selected notes to the Financial Statements
These financial statements have been prepared in accordance with International
Financial Reporting Standards, International Accounting Standards and
Interpretations (collectively IFRS) issued by the International Accounting
Standards Board (IASB) as
adopted by European Union ('adopted IFRSs'), and are in accordance with IFRS as
issued by the IASB.
This is the first time the Group has prepared financial information in
accordance with IFRS, having previously prepared its financial statements in
accordance with UK GAAP. Details of the effects of the transition are given in
note 1 below.
The financial information set out above does not constitute the Company's
statutory accounts for the periods ended 31st March 2008 and 2007, but is
derived from those accounts. Statutory accounts for 2007 have been delivered to
the Registrar of
Companies and those for 2008 will be delivered following the Company's Annual
General Meeting. The Auditors have reported on those accounts; their reports
were unqualified and did not contain statements under the Companies Act 1985,
sections 237(2) or (3).
1. Transition to IFRS
The consolidated financial information for the year ended 31st March 2008 has
been prepared in accordance with International Financial Reporting Standards
(IFRS) for the first time.
The Group's transition date to IFRS is 1st April 2006. The rules for first-time
adoption of IFRS are set out in IFRS 1 'First time adoption of International
Financial Reporting Standards'. In preparing the IFRS financial information,
these transition
rules have been applied to the amounts reported previously under generally
accepted accounting principles in the United Kingdom ('UK GAAP'). The date to
which the last UK GAAP financial statements were produced was 31st March 2007.
IFRS 1 generally
requires full retrospective application of the Standards and Interpretations in
force at the first reporting date. However, IFRS 1 allows certain exemptions in
the application of particular Standards to prior periods in order to assist
companies with the
transition process. In preparing these financial statements, neither the Group
nor the Company has taken advantage of the exemptions offered by IFRS 1.
Explanations of differences between UK GAAP and IFRS giving rise to adjustments
in the reconciliations:
In accordance with IAS 38: 'Intangible Assets', previous amortisation of
goodwill has been written back to the income statement. This adjustment had no
effect at the IFRS transition date but increased net assets at 31st March 2007
by £29,000 and
increased the profit for the year ended 31st March 2007 by £29,000.
Adjustments to the cash flow statement
The transition from UK GAAP to IFRS has no effect upon the figures reported in
the cash flows generated by the Company or the Group. The IFRS cash flow
statement is presented in a different format from that required under UK GAAP
with cash flows split
into three categories of activities - operating activities, investing activities
and financing activities.
Reconciliation between UK GAAP and IFRS
Reconciliations and explanatory notes on how the transition to IFRS has affected
profit and net assets previously reported under UK Generally Accepted Accounting
Principles are given below:
Consolidated income statement account reconciliation for the year ended 31st
March 2007:
UK GAAP Adjustment IFRS
£'000 £'000 £'000
Revenue 191 - 191
Administrative expenses (474) 29 (445)
Profit from operations (283) 29 (254)
Finance income
Interest receivable and similar 110 - 110
income
Profit/(loss) before tax (173) 29 (144)
Tax expense - - -
Profit/(loss) for the year (173) 29 (144)
attributable to equity holders of
the Company
There were no IFRS adjustments to the Company income statement account
reconciliation for the year ended 31st March 2007.
Consolidated balance sheet reconciliation at 31st March 2007:
UK GAAP Adjustment IFRS
£'000 £'000 £'000
Assets
Non-current assets
Intangible assets 386 29 415
Total non-current assets 386 29 415
Current assets
Trade and other receivables 39 - 39
Available-for-sale financial assets 2,134 - 2,134
Cash and cash equivalents 167 - 167
Total current assets 2,340 - 2,340
Total assets 2,726 29 2,755
Liabilities
Current liabilities
Trade and other payables (53) - (53)
Total liabilities (53) - (53)
Total net assets 2,673 29 2,702
Capital and reserves attributable
to the equity holders of the
Company
Share capital 83 - 83
Share premium reserve 2,649 - 2,649
Merger reserve 323 - 323
Retained earnings (382) 29 (353)
Total equity 2,673 29 2,702
2. Revenue
The Group's entire revenue is generated in the UK from the one business segment
that of providing services to hedge fund management businesses. The Group has no
other geographical or business segments.
The Company had income of £36,000 (2007 - £23,000) arising from management
services rendered to its subsidiary.
3. Aborted acquisition costs
Costs of £239,000 were incurred in the year in respect of the proposed
acquisition of a minority equity stake a Scandinavian hedge fund management
company. The Company negotiated terms to acquire this stake and, following board
approval by both
Alpha and the target, initiated formal due diligence and the legal work required
to effect a reverse acquisition. As the transaction neared completion we were
notified that the target management wished us not to proceed with the
transaction and in return
for our withdrawal undertook to cover our significant professional costs. In
January of 2008 the management of the target company withdrew from this
undertaking and following legal advice, the Company is seeking to recover its
costs through the courts.
The litigation is at an early stage and no amounts have been included within
these financial statements in respect of any potential recovery of costs.
4. Loss from operations - Group
Loss from operations is stated after charging:
Year to Year to
31st March 31st March
2008 2007
£'000 £'000
Staff costs 227 242
Auditors' remuneration:
audit services
Company 19 10
Subsidiary 4 2
review interim statement 4 -
tax services 10 2
other services - corporate finance 118 -
Depreciation 1 -
Operating lease rentals:
buildings 43 40
5. Taxation
The tax assessed for the year varies from the standard rate of corporation tax
in the UK. The differences are explained below:
Year to Year to
31st March 31st March
2008 2007
£'000 £'000
Profit/(loss) on ordinary activities 40 (144)
before taxation
Profit/(loss) on ordinary activities at 12 (43)
the standard rate of corporation tax in
the UK of 30%
Effect of
Expenses not deductible for tax 1 -
purposes
Capital allowances in excess of (1) -
depreciation
Losses carried forward - 52
Current tax charge 12 -
At 31st March 2008 the Company had a deferred tax asset of £114,000 (2007 -
£114,000) relating to tax losses carried forward which have not been recognised
in the financial statements.
6. Earnings/(loss) per share
Basic
The calculation of the basic earnings per share is based upon the net profit
after tax attributable to ordinary shareholders of £28,000 (2007: a loss of
£144,000) and a weighted average number of shares in issue for the year of
3,308,500
(2007: 3,264,549).
Year to Year to
31st 31st March
March 2007
2008
Group Group
Basic earnings/(loss) per share (pence) 0.85 (4.41)
Profit attributable to equity holders £28,000 £(144,000)
Number Number
Weighted average number of shares 3,308,500 3,264,549
Diluted
The diluted earnings per share for 2008 is based upon the net profit after tax
attributable to ordinary shareholders of £28,000 and a weighted average number
of shares in issue for the year, as adjusted for the maximum shares that could
be in
issue following conversion of the A Shares and allotments under the warrants, of
3,692,408. The diluted loss per share in 2007 is the same as the basic loss per
share as the loss for the year has an anti-dilutive effect.
Year to
31st
March
2008
Group
Diluted earnings per share (pence) 0.76
Profit attributable to equity holders £28,000
Number
Weighted average number of shares 3,692,408
7. Available-for-sale financial assets
31st March 31st March
2008 2007
£'000 £'000
Trade debtors 1,891 2,134
The Company holds the bulk of its cash as an investment in a sterling currency
fund in order to maximise earnings. During the year shares in the fund were sold
to provide working capital. At 31st March 2008 the cost and value of this
holding was
£1,890,920 (2007 - £2,134,289). There is no material difference between the
book-value and the fair-value of these investments at 31st March 2007 and 31st
March 2008. No interest is received on these financial instruments but
additional shares
in the fund are allocated in lieu of interest. There are no fixed rate financial
assets.
8. Copies of the financial statements
Copies of the financial statements will available on the company website,
www.alphastrategic.co.uk in due course or can be obtained by contacting the
Company secretary at 66 Buckingham Gate, London SW1E 6AU.
This information is provided by RNS
The company news service from the London Stock Exchange
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