Final results for the year ended 30 September 2014

27 February 2015

 

 

Blue Star Capital plc

 

Final Results for the year ended 30 September 2014

 

Blue Star Capital plc (AIM: BLU), an investing company in technology and gaming, is pleased to announce its final results for the year ended 30 September 2014.

 

Highlights:

§   Profit for the period of £263,833 (2013: loss of £703,345)

§   Net assets increased by 238% to £1,758,640 (2013: £519,241)

§   Raised £500,000 (pre expenses) through share subscriptions

§   Invested £100,000 in OAK Media Limited which has subsequently signed deals with Nektan PLC, RHF Productions Ltd, Playboy TV Europe and The Anfield Wrap

 

Post period highlights:             

 

§   Raised £225,000 (pre expenses) through share subscriptions

§   IPO of Nektan plc, an investment of Disruptive Tech Limited

§   Vigilant Applications secured major new public sector contract

 

Graham Parr, Chairman of Blue Star Capital plc, commented:

"I am very pleased with the progress that has been made this year, culminating in a move into profitability. A lot of work has been undertaken to develop what we believe is now a clear investment strategy and, as a result, we have established a portfolio which the Directors believe has a great deal of potential. I am confident that, with the improvements that have been made, the Company is now well  positioned to  support  its investee companies going forward and drive real value for shareholders whilst also monitoring opportunities for further investments as appropriate."

 

For further information:
Blue Star Capital plc Tony Fabrizi Graham Parr	Via Redleaf PR
Cairn Financial Advisers LLP (Nominated Adviser & Broker) Jo Turner Emma Earl	020 7148 7900
Redleaf PR Rebecca Sanders-Hewett           David Ison	[email protected] 020 7382 4730

 

 

Notes to Editors:

 

§   Blue Star Capital plc aninvestment company with a focus on technology businesses, whether pure technology or technology led gaming and media businesses.

 

Investments include:

·      OAK Media Limited: OAK aims to become an aggregator of the best gaming technologies, providing the best available gaming solutions, so it can enter the lucrative gaming market with modest investment and make rapid returns.

 

·      Disruptive Tech Limited: A Gibraltar based investing company that has recently completed an investment round that allowed it to add holdings in Freeformers, a digital training business, and Deep Ventures, an accelerator of early stage tech businesses, to sit in DTL's portfolio alongside the holdings previously owned by eSeekers. Both Freeformers and Deep Ventures are registered in England and Wales and co-located in London.

 

·      Vigilant Applications Limited: A software development company specialising in security solutions for monitoring and shaping user behaviour at a PC or 'end point'.

·      Blue Star listed on AIM in 2004 under ticker BLU

Chairman's Statement

 

It's now just over a year since I became Chairman and I am pleased to report that the last financial year has been one of solid progress for Blue Star Capital. The Company now has a clear strategy for investment into technology businesses, whether pure technology or technology-led gaming and media businesses.  The Board sees this as a clear opportunity for growth and is now focused on supporting its investee companies at a level that is appropriate in each case, creating value though their continued development and ultimately through their realisation.

 

Financials

 

The Company reported a profit for the year of £263,833, which is a significant improvement on the loss of £703,345 in the corresponding period.

 

Net assets have also shown a strong increase rising to £1,758,640 at 30 September 2014, a  238% increase from £519,241 at 30 September 2013. This increase has arisen from a combination of new equity raised during the year, repayment and conversion of the remaining historic shareholder loan and an upward revaluation in the Company's shareholding in Disruptive Tech Limited.

 

Blue Star's cash position at 30 September 2014 was £4,868 compared to balance of £34,005 at 30 September 2013. This position has been enhanced post period end following a £225,0000 share subscription, further details of which are set out below.

 

Portfolio Review

 

I am pleased to report that the businesses in the portfolio now reflect the changes made to the Company's investment policy in October 2013 and are each making good progress.

 

OAK Media Limited ('OAK')

 

Company description

OAK was formed in order to take advantage of the global growth in the gaming for entertainment industry amid a rapidly-evolving regulatory environment.

 

OAK intends to become an aggregator of the best gaming technologies and provider of the best available gaming solutions. The gaming market is a lucrative and fast-moving one where we believe rapid returns can be achieved through modest investment.

 

Blue Star's holding in OAK 

The Company initially agreed to invest £100,000 in OAK in return for 90 per cent. of the issued share capital. In addition, under the terms of the Company's investment, in order to incentivise OAK's management team, upon OAK achieving various milestones in the development of the business, the Company's shareholding in OAK would reduce to a minimum of 50 per cent. of OAK's issued share capital.   

 

On 31 March 2014, the Company's share in OAK reduced to 75% following the signing of an agreement by OAK with Nektan (Gibraltor) Limited to supply OAK with white label real money gaming services for the UK Market.. 

           

During the second half of the financial year, OAK signed agreements with RHF Productions Ltd, Playboy TV Europe and The Anfield Wrap and as a result the Company's shareholding in OAK has now reduced to 65%.

 

Disruptive Tech Limited ('DTL')

 

Company description

DTL is a Gibraltar based investing company. During the last financial year, DTL completed an investment round that allowed it to add holdings in Freeformers, a digital training business, and Deep Ventures, an accelerator of early stage tech businesses, to sit in DTL's portfolio. Both Freeformers and Deep Ventures are registered in England and Wales and are co-located in London. 

 

Blue Star's holding in DTL

Blue Star's £300,000 investment in DTL was made in 2007. During the last financial year, DTL completed a round of external investment funding at a pre-money valuation of £75m. On the basis of this valuation, Blue Star's holding in DTL is valued at £1.6m as at 30 September 2014. This represents an unrealised gain of approximately £0.5m compared to the value of £1.1m attributed to the investment at 30 September 2013.

 

The Board was delighted to see the admission of one of DTL's investments to trading on AIM in November 2014 when Nektan plc began trading on AIM. The Board is optimistic about the prospects of Nektan and was delighted to see that it recently signed a contract with News UK to create and operate Sun Play, an innovative new gaming product for the Sun newspaper. As announced by Nektan, under the terms of this agreement, Nektan will retain a share of the net revenue generated by Sun Play and this is expected to have a significant impact on Nektan's trading in 2015.

 

Vigilant Applications Limited ('VAL')

 

Company description

VAL is a software development company specialising in security solutions for monitoring and shaping user behaviour at a PC or 'end point'. Its VigilancePro agent software is deployed in the enterprise space in both the public and private sector for monitoring professional standards, securing data and compliance. VigilancePro Retail applies the products capabilities to the monitoring of all activity at an Electronic Point of Sale - EPOS. Through its patented technology it is able to integrate with existing security infrastructure (CCTV) to provide irrefutable real-time remote reporting of all

transaction activity within a retail environment.

 

Blue Star's holding in VAL

The Company's investment in VAL has remained unchanged at £88,000.  Although the Board has decided it prudent to leave the valuation of Vigilant Applications unchanged, we were delighted to see the company's announcement regarding it securing a major new contract to supply its software to NHS Wales. This contract is expected to result in a substantial increase in VAL's revenues during 2015. While this contract is a significant client win its own right, it is expected to open up potentially lucrative opportunities in the wider healthcare sector. In addition, we are delighted that VAL is continuing to develop its software solution for the retail market and expects to announce a number of positive developments during 2015.

Share issues during the year ended 30 September 2014

 

The Company raised £500,000 during the last financial year through the issue of 117,272,727 ordinary shares of 0.1 pence each ("Ordinary Shares").

 

On 1 November 2013, the Company issued 50,000,000 Ordinary Shares as part of a subscription and a further 50,000,000 Ordinary Shares following part conversion of a loan. On 19 November 2013, 40,344,250 Ordinary Shares were issued following a further conversion of a loan. On 24 December 2013, 40,000,000 Ordinary Shares were issued as part of a subscription and a further 12,214,000 Ordinary Shares following part conversion of a loan. On 30 December 2013, a further 5,200,000 Ordinary Shares were issued as consideration in respect of a loan conversion. Finally, on 9 June 2014, the Company raised £150,000 by way of a subscription of 27,272,727 Ordinary Shares.

 

Post Balance Sheet Events

 

On 22 October 2014 the Company raised £225,000 (pre expenses) through the issue of 40,909,091 Ordinary Shares at 0.55p per share. These funds were used to make the final payment of £25,000 to OAK which formed part of the Company's original £100,000 investment and to provide further funds for existing and new investments as well as working capital moving forward.

 

As mentioned earlier, Nektan plc was admitted to AIM on 3 November 2014. This is the first listing from within the DTL portfolio and the Board hopes to see both distributions and realisations of other significant holdings within DTL.  

 

Outlook

 

Having successfully raised sufficient equity to fully repay and convert the historic shareholder loan which stood at £601,832 at 30 September 2013, brought in new management and developed a solid investment strategy, the Board believes that significant progress has been made in the year.  The additional funding which the Company raised post year end places the Company in a much stronger position to drive value in the current portfolio whilst appraising further investments as appropriate. The Board is also continuing to monitor corporate opportunities to enhance shareholder value.

 

The Board believes the work undertaken over the past year has established the foundations for driving shareholder value and, with a clear strategy in place, we look forward to the coming year with optimism.

 

 

Review of Business and Analysis Using Key Performance Indicators

 

The full year's pre-tax profit was £276,333 compared to a pre-tax loss of £703,345 for the year ended 30 September 2013. The cash position at the end of the year fell to £4,868 from £34,005 as at 30 September 2013.

 

Since the year end the Company has raised further funds, details of which are provided in the Chairman's Statement.

 

Key Performance Indicators

 

The Board monitors the activities and performance of the Company on a regular basis.

 

The indicators set out below have been used by the Board to assess performance over the year to 30 September 2014. The main KPIs for the Company are listed as follows:

 

 

	2014	2013
Valuation of investments	£1,800,349	£1,208,694
Cash and cash equivalents	£4,868	£34,005
Net current liabilities	£29,209	£689,453
Profit/(loss) before tax	£276,333	£(703,345)

 

 

 

 

Investing Policy

 

Assets or Companies in which the Company can invest

 

The company can invest in assets or companies in the following sectors:

·      Gaming;

·      Media;

·      Technology.

The Company's geographical range is mainly UK companies but considers opportunities in the mainland EU and will actively co-invest in larger deals.

 

The Company can take positions in investee companies by way of equity, debt or convertible or hybrid securities.

 

Whether investments will be active or passive investments

 

The Company's investments are passive in nature, but may be actively managed. The Company may be represented on, or observe, the boards of its investee companies.

 

Holding period for investments

 

The Company's investments are likely to be illiquid and consequently are to be held for the medium to long term.

 

Spread of investments and maximum exposure limits, Policy in relation to crossholdings and Investing Restrictions

 

The Company does not have any maximum exposure limits, limits on cross-holdings or other investing restrictions. Under normal circumstances, it is the Directors intention not to invest more than 10% of the Company's gross assets in any individual company (calculated at the time of investment).

 

Policy in relation to gearing

 

The Directors may exercise the powers of the Company to borrow money and to give security over its assets. The Company may also be indirectly exposed to the effects of gearing to the extent that investee companies have outstanding borrowings.

 

Returns and Distribution Policy

 

It is anticipated that returns from the Company's investment portfolio will arise upon realisation or sale of its investee companies, rather than from dividends received. Whilst it is not possible to determine the timing of exits, the Board will seek to return capital to shareholders when appropriate.

 

Life of the Company

 

The Company has an indefinite life dependent on obtaining sufficient funding.

 

Future Developments

 

The Company is continuing to develop an investment portfolio with the capacity for substantial growth and increases in value. Since the year end, the Company has raised £225,000 to provide for working capital and support the current portfolio of the investments. Additional details of future development are explained in the Chairman's Statement.

 

Principal risks and uncertainties

 

The Company seeks investments in late stage venture capital and early stage private equity opportunities, which by their very nature allow a diverse portfolio of investments within different

sectors and geographic locations. The risk is loss or impairment of investments.

 

This is mitigated by careful management of the investment and in particular, only continuing to support those investments which demonstrate potential to achieve a positive exit and decisively determining those which do not. Portfolio and capital management techniques are fully applied according to industry standard practice.

 

It will be necessary to raise additional funds in the future by a further issue of new Ordinary Shares or by other means. However the ability to fund future investments and overheads in Blue Star Capital Plc as well as the ability of investments to return suitable profit cannot be guaranteed, particularly in the current economic climate.

 

The Company may not be able to identify suitable investment opportunities and there is no guarantee that investment opportunities will be available and the Company may incur costs in conducting due diligence into potential investment opportunities that may not result in an investment being made.

 

The value of companies similar to those in Blue Star Capital's portfolio and in particular those at an early stage of development, can be highly volatile. The price at which investments are made, and the price which the Company may realise for its investment, will be influenced by a large number of factors, some specific to the company and its operations and some which may affect the sector.

 

 

Results and dividends

 

The Directors present their report together with the audited financial statements for the year ended 30 September 2014.

 

The trading results for the year ended 30 September 2014 and the Company's financial position at that date are shown in the attached financial statements.

 

The Directors do not recommend the payment of a dividend for the year (2013: £nil).

 

Principal activities and review of the business

 

The principal activity of the Company is to invest in the media, technology and gaming sectors. A review of the business is included within the Chairman's Statement and Strategic Report.

Directors serving during the year

 

Anthony Fabrizi

Graham Parr                  Appointed 19 November 2013

Lord Dear                      Resigned 19 November 2013

William Henbrey            Appointed 1 July 2014

 

 

Directors' Interests

 

The Directors at the date of these financial statements who served and their interest in the ordinary shares of the Company are as follows:

 

	Number of Ordinary Shares
Graham Parr	3,636,363
Anthony Fabrizi	13,091,293
William Henbrey	3,636,364

Significant shareholders

 

As at 24 February 2015 so far as the directors are aware, the parties (other than the interests held by Directors) who are directly or indirectly interested in 3% or more of the nominal value of the Company's share capital is as follows:

 

	Number of Ordinary Shares	Percentage of issued share capital
Highland Fund Management Ltd	64,088,634	13.59%
Blue Square Equity Investments Limited	49,700,409	10.54%
AA Management Ltd	34,459,602	7.31%
Nigel Robertson	23,350,000	4.95%

General

 

The Company has third party Directors and Officers indemnity insurance in place.

 

Related party transactions

 

The Company has entered into certain related party transactions and these are disclosed in note 20.

 

Events after the reporting date

 

Events subsequent to the balance sheet date are detailed in note 18 to the financial statements.

 

Political Donations

 

There were no political donations during the current or prior year.

 

Auditors

 

In so far as each of the Directors are aware:

·      there is no relevant audit information of which the Company's auditor is unaware;  and

·      the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

 

A resolution to re appoint Adler Shine LLP will be proposed at the Annual General Meeting.

On behalf of the board of Directors

 

Graham Parr

Director

26 February 2015

 

 

 

Directors' responsibilities

 

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare financial statements in accordance with IFRS as adopted by the European Union and applicable law.

 

Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the year. In preparing the Company financial statements, the Directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable and prudent;

·      state whether the financial statements have been prepared in accordance with IFRSs as

·      adopted by the EU;

·      prepare the financial statements on a going concern basis unless it is inappropriate to assume the Company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

 

Website publication

 

Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

 

 

 

Auditor's Report

 

We have audited the financial statements of Blue Star Capital Plc for the year ended 30 September 2014, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International

Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditor's report and for no other purpose.

 

To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other

than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

 

Respective responsibilities of directors and auditors

 

As explained more fully in the statement of directors' responsibilities set out on page 10, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

 

 

Scope of the audit of the financial statements

 

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and nonfinancial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

 

 

Opinion on financial statements

 

In our opinion the financial statements:

·      give a true and fair view of the state of the Company's affairs as at 30 September 2014 and of the Company's profit for the year then ended;

·      have been properly prepared in accordance with IFRSs as adopted by the European Union; and

·      have been prepared in accordance with the requirements of the Companies Act 2006.

 

 

Emphasis of matter - Going concern

 

In forming our opinion, which is not qualified, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the Company's ability to continue as a going concern. The going concern assumption is predicated on one of two scenarios, either the receipt of funds from the sale of certain investments in order to fund working capital or an equity fundraising to provide working capital. The receipt of these funds is not yet certain. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.

 

 

Opinion on other matters prescribed by the Companies Act 2006

 

In our opinion the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

 

 

Matters on which we are required to report by exception

 

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

 

1          adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

 

2          the Company financial statements are not in agreement with the accounting records and returns; or

 

3          certain disclosures of directors' remuneration specified by law are not made; or

 

4          we have not received all the information and explanations we require for our audit.

 

 

Christopher Taylor (Senior Statutory Auditor)

 

For and on behalf of Adler Shine LLP, Statutory Auditor Aston House Cornwall Avenue London N3 1LF

 

26 February 2015

 

Adler Shine LLP is a limited liability partnership registered in England and Wales (with registered number OC301724).