VSA CAPITAL GROUP PLC 
By ("VSA CAPITAL GROUP" or "THE COMPANY") (AIM: VSA.L)
Following the change in its accounting reference date to 31 March, the Board of VSA Capital Group plc, the AIM listed natural resources focused specialist corporate finance business (formerly Formjet Plc and Third Quad Capital Plc), is pleased to announce today its final results for the fifteen month period ended 31 March 2011.
HIGHLIGHTSGroup management & structural changes
In the financial period ending 31 March 2011 the shape and structure of the group changed considerably.- Peter Joy was appointed as Finance Director on 1 February 2010, replacing Tony Lee who retired on the same date
- Lyndon Chapman stepped down as long serving Executive Chairman to become Non-Executive Chairman at the Company’s AGM held on 4 March 2010
- John McCartney joined the Board as Director responsible for the Group’s Technology Division with the acquisition of Softline Ltd on 20 August 2010 and resigned on 14 February 2011 when the Group disposed of its Technology Division
- Relocation of all group activities to 14 Austin Friars, London EC2N 2HE. The Company’s original HQ premises in Crawley, West Sussex are now let out on a 3 year lease and will be sold when the commercial property market improves
Trading
- Overall trading results for the period do not provide a clear view of the Company’s current or future prospects as the purchase and subsequent sale of Softline together with all of the Group’s other software companies and a significant restructuring of the plc’s cost base have resulted in a significantly smaller business based around the VSA Capital Limited acquisition, with correspondingly lower ongoing running costs
- Sales from continuing operations £253,636 (principally VSA Capital Limited, 7½ months from 12 August 2010 to 31 March 2011)
- Operating loss from continuing operations £1,955,838 includes loss on disposal of Technology Division and other non-recurring Plc costs incurred whilst re-organising the activities of the group
- Ongoing operating costs of the Plc reduced to £250,000 per annum for 2011/12, including £36,000 share based payments charge and £73,000 total interest payments on Vendor Loan and Convertible Loan Notes
- Growing interest in VSA Capital’s corporate finance, broking and investor relations services from major natural resources corporations and institutional investors
Acquisition and disposal activity
- Successful acquisition of VSA Capital Limited on 12 August 2010
- Four companies purchased in the period together with the subsequent disposal of seven companies comprising the Group’s Technology Division plus the dissolving of two dormant subsidiaries, resulting in a Group comprising the AIM quoted plc, its operating subsidiary, VSA Capital Limited, and a dormant subsidiary, Third Quad Securities Limited
- Acquisition of Softline Ltd group of companies on 20 August 2010 for £1,300,000 payable in cash and ordinary shares
- Disposal of the Group’s entire Technology Division comprising its Softline and Formjet/Ability software businesses on 14 February 2011 for a consideration of £1,300,000 receivable in cash instalments, less the crystallisation of a total of £225,000 comprising a performance payment and compensation for loss of office to John McCartney, original vendor of Softline
- On-going examination of further potential acquisition opportunities in the financial services arena which the board believes will lead to further activity in the current financial year. Whilst the group has an ongoing strategy adding scale through the expansion of VSA, it will continue to pursue further acquisitions where opportunities present themselves.
- Six placings of new ordinary shares were undertaken in the period raising an additional £1.08m of capital
- £300,000 in Convertible Loan Notes were issued to fund the Group’s acquisition of VSA Capital Limited, with a further £50,000 raised when associated warrants were subsequently exercised by one holder
- The purchase, and subsequent sale, of Softline was partially funded by a £600,000 vendor loan and the issue of £400,000 worth of new ordinary shares
- The Company secured a three year Equity Financing Facility of up to £5 million with Darwin Strategic Limited which, if drawn, would be used to finance the continued development of VSA and its subsidiaries
Holdings on completion of the placing
Set out below are the interests of Coach House Holdings which is participating in the Placing:
Shareholder | Aggregate interests prior to completion of the Placing | Number of new Ordinary Shares being issued | Aggregate interests following completion of the Placing | Percentage of the enlarged issued share capital |
Coach
HouseHoldings - 31,666,667 31,666,667 5.19%
Set out below are the interests of the Directors in the Company's issued share capital following completion of the Placing:
Director | Aggregate interests prior to completion of the Placing | Aggregate interests following completion of the Placing | Percentage of the enlarged issued share capital |
Lyndon Chapman (Non Executive Chairman) | 5,000,000 | 5,000,000 | 0.72% |
Andrew Monk (CEO) | 83,000,000 | 83,000,000 | 11.91% |
Peter Joy (Finance Director) | 10,000,000 | 10,000,000 | 1.44% |
Total voting rights
Following the Placing, the issued share capital of the Company will increase by 7.01 per cent. to 696,819,812 Ordinary Shares of 0.01p each. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Disclosure and Transparency Rules (as applied to the Company by AIM Rule 17). PROPOSED CAPITAL REORGANISATIONThe Company proposes to undertake, subject to Shareholder approval, a 1 for 20 consolidation of its issued Ordinary Shares (the "Share Consolidation") whereby every 20 existing Ordinary Shares of 0.01p each are consolidated into 1 new Ordinary Share of 0.2p each. In addition the Company proposes that the Share Premium Account of the Company be reduced from £5,644,003 to £61,723 and that the amount of this reduction be applied to eliminate the deficit on the Profit and Loss Account of the Company.
Notice of the Annual General Meeting together with a circular letter to Shareholders from the Chairman of the Company, which provides further details of the proposed capital reorganisation, will be posted to Shareholders later today. If approved by Shareholders, the Record Date for the proposed Capital Reorganisation (being the date that any fractional entitlements will be calculated) will be the close of business on 21 July 2011 and the Share Consolidation is expected to become effective on 22 July 2011.
Commenting on today's results, Andrew Monk, Chief Executive Officer of VSA Capital Group plc, said:
“ The overall results are totally backwards looking and bear little relevance to our current business. Their presentation is also overly complex as a result of the need to adopt similar accounting practices to a FTSE 100 company which, frankly, add little value in exchange for the additional cost incurred by a company of your size. Going forward VSA is now a simpler and more focussed business and I have, in my Chief Executive Officer’s statement, provided an update of how the business is developing. Corporate broking is a competitive industry and the current economic environment is not making life easy for any of the participants. The old model, where businesses relied upon commissions generated by secondary trading operations to cover the firm’s cost base, is becoming increasingly difficult to sustain as commission rates continue to succumb to downward pressure to a point where they are now at or below cost. There is an abundance of small domestic firms fighting for business, which has lowered their ability to create healthy profitability which also lowers the value creation ability of all market participants. At VSA I have changed that business model. We are a focussed resources house but have taken a global approach and although we are looking to enter the secondary market soon, it will be via a small low cost facility.
VSA is about value creation for its shareholders - and operational gearing is required to create that value. The “old broking model” now has little operational gearing but at VSA I will continue to look to develop areas where there is greater operational gearing. Value in a company like ours is created by building a respected team and a quality client list. I have already made significant progress on both of these fronts. Resource stocks may be cyclical in the market, but there will always be the need to have good analysts and placing power for the client companies involved. Resource companies tend to operate globally, including in emerging markets, and so it is important to retain a global outlook. Likewise investors in resource companies are global (both in their domicile and in their outlook) and, although London remains an important source of funds, the Middle East and Far East are becoming increasingly important. By being a global player (despite our size) we can create a truly unique business in London. To achieve this aim of being a global player it is helpful to have strategic investors who we can leverage off and I am delighted today to have announced our first step with a strategic investor who has expertise and connections in the MENA (Middle East North Africa) region. We welcome him in joining us as a shareholder and look forward to working with him. Building this business will not happen overnight, but if we can continue with our plans as we have so far, then VSA will become a very valuable business.”
For further information, please contact:VSA Capital Group plc
Andrew Monk, CEO +44 (0)20 3005 5000Shore Capital and Corporate Limited
Andrew Raca +44 (0)20 7408 4090Rivington Street Corporate Finance
Jon Levinson +44 (0)20 562 3357
CHAIRMAN’S STATEMENT IntroductionI am pleased to comment on the financial period ending 31 March 2011. The fifteen month period commenced against a backdrop of considerable change towards the end of 2009 resulting in our business consisting solely of the smaller elements of our Software Division, following the disposal of our former principal business Panda Software (UK) Limited, and the appointment of new Executive Directors who joined from the Financial Services industry. The strategy of the Board was to add value to the Software Division through expansion and to lead the group into the Financial Services sector either through start up or acquisition.
The Board looked at a number of acquisition opportunities during the first half of 2010, but concluded that these were either too highly priced or unlikely to fit into the Group’s existing structure. However in August 2010 the Group made two acquisitions, one in Software (Softline Ltd) and the other in Financial Services (VSA Capital Limited). It soon became clear that the purchase of Softline was a mistake and swift action was taken to dispose of it together with the other businesses in our Software Division. A sale was concluded in February 2011 for the sum £1,300,000, resulting in a loss on disposal of £115,551 which, whilst unfortunate, has allowed the Board to focus entirely on VSA Capital and bring to it their considerable skill and experience in the Financial Services industry.
Following the disposal the restructured Group consists of one main trading subsidiary, VSA Capital Limited, a stockbroking business specialising in Mining, Oil & Gas and the Natural Resources sector. Given the importance of VSA to the Group, a name change to VSA Capital Group Plc was made in February 2011 at the same time that the Software Division was sold. The natural resources sector has experienced much growth in recent years with mining and oil & gas companies accounting for about one third of the FTSE 100 index and VSA Capital Limited is well placed in providing specific expertise through its corporate finance services, including fund raisings and listings in this important market.
TradingAndrew Monk has commented in detail in his CEO’s statement on trading in the period therefore, because current trading is a reflection of the discontinued elements of the business and effective start up of VSA, my comments are necessarily brief. The coming year will therefore be the first reliable indication of the progress the group is making as a dedicated Financial Services business.
Board Changes and Staff Appointments
The period in question is my first as Non-Executive Chairman, having previously served the group as Executive Chairman for many years. The current structure of the Board reflects, and is proportionate to, the existing size of the Group, however as the planned growth takes place, or as acquisitions are made, the Board will be augmented to reflect its growing responsibilities.
Andrew Monk and Peter Joy have committed considerable energy and resources in preparing the restructured group for success and it is important that they are supported with high quality personnel at all levels given the complexity and regulatory burden of operating in the financial services sector.
I believe that the board has made some excellent staff appointments in recent months and this investment will enable the Group to expand in a controlled and professional manner.
AcquisitionsIn my previous statements I have stressed the importance of a well thought through strategic acquisition programme to enable the Group to justify its public listing and, whilst acknowledging that significant organic growth can also be achieved by the VSA Capital team, I believe that this remains an important goal. To this end the Board considers carefully all acquisition opportunities presented to it and continues to explore a number of creative routes in expanding the business.
Outlook
The outlook for the Group is one of a business totally focused in the Financial Services Industry providing stock broking services to its corporate clients. The management team are able to demonstrate considerable previous success in the industry and I believe this will provide the status and qualification for the company to attract and expand its corporate client base in the year ahead. One should not underestimate, however, the challenging circumstances in which the company operates and I anticipate that the growth of the business will be greatly enhanced through strategic acquisition and investment in an expanded range of services it can offer its clients.
In looking to the future the Board must consider ways of delivering returns to shareholders and as the business moves towards profitability it is seeking to undertake a rationalisation of the shareholders’ funds on its balance sheet, including a consolidation of its shares.
The year ahead will determine the future success of your company, and the directors and staff are confident of providing the basis for a stable and profitable stockbroking business for years to come. The change from a Software company into a Financial Services company has not been without its stresses and setbacks, however the directors and staff have committed to the task throughout and I would like to thank them and our loyal shareholders and advisers for their ongoing support.
Lyndon Chapman
Non-Executive Chairman 28 June 2011 CHIEF EXECUTIVE OFFICER’S STATEMENTThese financial statements record the end of your company’s involvement with its former software businesses and the start of a new business focused purely in the financial services sector via its new subsidiary, VSA Capital Limited. This transformation has been a hard and lengthy process, and not without its hiccups, but I believe that as shareholders you now have a brighter and more secure future than you did 18 months ago when I joined as your new Chief Executive.
SummaryAs I predicted in our second interim report issued at the end of March, the results recorded in these full period financial statements appear worse than would be case if they reflected solely the business you now own. The Group’s acquisition of Softline and the subsequent disposal of its entire software division, combined with the latter’s underperformance in the final quarter of 2010, had a major negative impact on our results for the period, but these will not be recurring. My focus now is to build VSA Capital Limited and already I have recruited a motivated and high calibre team. Together we must now deliver the deal flow that I know we can achieve.
VSA Capital LimitedWe have now owned VSA Capital Limited for ten months and I have made some significant changes in that time. I continue to recruit talented and well respected people who have helped VSA to win an enviable list of retained corporate clients. To have done so in such a short length of time is a positive sign for future revenue growth prospects. The combined market capitalisation of our corporate clients now exceeds $1bn.
I believe VSA Capital Limited is quickly establishing not just a presence in the resources space but also a growing respect for providing an excellent service. As a specialist firm in the resource sector, VSA operates well alongside the more general broking firms and has already worked jointly with Seymour Pierce, Collins Stewart, Winterfloods and Oriel Securities in the UK, as well as numerous firms in Canada and Australia.
Corporate broking remains a very competitive industry and to be successful a firm needs to try and differentiate itself from its competition. One of the key differentiating strategies adopted by VSA is to be completely exchange agnostic - to be as comfortable operating on the TSX, ASX and other overseas markets as it is in London. This might be regarded as a bold strategy for a business in its infancy but VSA has already had success winning mandates from and raising capital for clients listed on the TSX and ASX. I am hopeful that in the coming months VSA will do its first deals on the Oslo Bors (which has huge experience in Oil & Gas and Timber) and the Frankfurt exchange.
As reported previously, we have invested in the first stages of building up the business in terms of both people and also marketing, having attended the Indaba Mining Conference in Cape Town, PDAC in Toronto, the Mines and Money Conference in Hong Kong and The Master Investor Show in London, together with being a regular sponsor of Minesite and Oil Barrel investor conferences.
We have built a very credible team and I am delighted with the quality of people who have chosen to join me at VSA Capital. Building a team from scratch is never easy and when completed creates value in its own right and is opening many new doors for us. Our team is the foundation to the success and future growth of the business.
I am very aware of the importance of staying focussed on the plan we have set ourselves and also that we must walk before trying to run and, although we have some very ambitious plans, we must complete each stage of our build up before moving onto the next. The next step for us, and something that we have been quietly working on recently, is to obtain the regulatory permissions necessary for us to commence secondary trading. Unfortunately we cannot put a time frame on obtaining these permissions but we are hopeful they will be received in the autumn. The physical preparations to start trading are already largely in place. This will not only mean an additional income stream but will also provide us with significantly more exposure in the market place - which will help us with our corporate business.
Once this is in place and we are satisfied it is working well we can look to the next stage of our development.
PropertySadly the property market in the Gatwick area remains weak and disposal of the group’s former headquarters property in the short term looks unlikely. As stated in my second interim report we are continuing to investigate alternative funding options for this property, to replace the vendor loan with borrowings the costs of which would more closely match the rental income we receive from this property
.
Consolidation of Share Capital and ReservesRecognising that VSA is, effectively, a new business I feel it is appropriate that the company conducts a 1:20 share consolidation and uses part of the balance on its share premium to offset the deficit on the company’s retained earnings account, thus providing greater flexibility when developing a dividend payment policy once the group is trading profitably. Further details of these proposals are set out in the documentation providing Notice of the Annual General Meeting which accompanies these Report and Accounts.
Current tradingWe have continued to win new mandated clients at a good rate which is promising for the future. Whilst the first three months of the current financial year have been quieter than expected for fund raisings, as we report we are currently in a very busy period which could more than compensate. VSA is building a good pipeline of business for the second half of our year and, overall, I am very pleased with how we are performing - but I am also always aware that we work in dynamic markets that can change overnight
Andrew Monk
Chief Executive Officer 28 June 2011 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor The Fifteen Month Period Ended 31 March 2011
2011 | 2009 | |||
£ | £ | |||
Continuing operations | ||||
Revenue | 253,636 | 868,733 | ||
Cost of Sales | (15,333) | (334,814) | ||
GROSS PROFIT | 238,303 | 533,919 | ||
Investment income | 5,779 | 813 | ||
Other gains and losses | (205,390) | (344,520) | ||
Administrative expenses | (1,742,065) | (844,444) | ||
Finance costs | (69,462) | (36,016) | ||
Exceptional items | (183,003) | (1,280,000) | ||
Loss for the period from continuing operations | (1,955,838) | (2,010,248) | ||
Discontinued operations | ||||
(Loss)/profit for the period from discontinued operations | (76,072) | 518,786 | ||
Loss for the period | (2,031,910) | (1,491,462) | ||
Other comprehensive income, net of income tax | - | - | ||
Total Comprehensive income for the period | (2,031,910) | (1,491,462) | ||
Earnings per share | ||||
Basic earnings per share from continuing operations Diluted earnings per share from continuing operations | (0.41p) (0.32p) | (0.50p) (0.50p) | ||
Basic and diluted earnings per share from discontinued operations | (0.01p) | (0.04p) |
As at 31 March 2011
31 March 2011 | 31 December 2009 | |
£ | £ | |
ASSETS | ||
Non-current assets | ||
Goodwill | - | 50,000 |
Property, plant and equipment Trade and other receivables | 679,700 73,310 ________ | 870,342 - ________ |
Total non-current assets | 753,010 ________ | 920,342 ________ |
Current assets | ||
Inventories Investments | - 31,797 | 27,285 - |
Trade and other receivables | 1,169,621 | 875,881 |
Cash and cash equivalents | 133,904 | 23,950 |
_________ | ________ | |
Total current assets | 1,335,322 | 927,116 |
_________ | ________ | |
Total assets | 2,088,332 _________ | 1,847,458 ________ |
EQUITY AND LIABILITIES | ||
Capital and reserves attributable to equity holders | ||
Share capital | 540,406 | 510,306 |
Share premium account Share based payments reserve | 5,644,003 56,510 | 4,135,623 - |
Retained earnings | (5,473,375) | (3,441,465) |
_________ | ________ | |
Total equity | 767,544 | 1,204,464 |
Non-current liabilities | ||
Borrowings | 770,000 | 253,081 |
Current liabilities | ||
Trade and other payables | 430,788 | 258,097 |
Borrowings | 120,000 | 131,816 |
________ | ________ | |
550,788 | 389,913 | |
________ | ________ | |
Total liabilities | 1,320,788 | 642,994 |
________ | ________ | |
Total equity and liabilities | 2,088,332 ________ | 1,847,458 ________ |
For The Fifteen Month Period Ended 31 March 2011
2011 | 2009 | |
£ | £ | |
Cash flows from operating activities | ||
Operating loss | (1,822,706) | (1,986,259) |
Depreciation of property, plant and equipment Impairment of property, plant and equipment | 35,257 175,000 | 38,622 - |
Amortisation of intangible fixed assets | - | 70,550 |
Impairment of goodwill and other intangible assets | 183,003 | 375,758 |
Goodwill impairment charge | - | 164,254 |
Impairment of assets held to maturity Share based payment expense Profits on disposal of property, plant and equipment | - 56,510 (3,000) | 397,405 - - |
Changes in working capital: | ||
Inventories | 61,546 | 213,082 |
Trade and other receivables | (692,156) | (7,615) |
Trade and other payables | 392,740 _________ | (596,653) _________ |
Cash flows used in operating activities | (1,613,806) _________ | (1,330,856) _________ |
Cash flows from investing activities | ||
Interest received Investments held to maturity Purchases of available-for-sale investments | 389 - (23,125) | 813 (189,320) - |
Proceeds from disposal of subsidiaries, net of cash transferred | 1,081,020 | 1,011,947 |
Purchases of property, plant and equipment | - | (10,114) |
Purchases of subsidiary undertakings | (1,281,065) ________ | - ________ |
Net cash flows used in investing activities | (222,781) _______ | 813,326 _______ |
Cash flows from financing activities | ||
Interest paid Proceeds from issue of ordinary shares | (97,042) 1,557,480 | (36,016) 250,000 |
Costs of issuing shares | (19,000) | (6,350) |
Proceeds from issue of convertible loan notes Costs of issuing convertible loan notes (Decrease) / increase in borrowings | 300,000 (10,000) (296,341) | - - (53,055) |
Proceeds from vendor loan | 600,000 _______ | - _______ |
Net cash flows from financing activities | 2,035,097 ______ | 154,579 ______ |
Net increase/(decrease) in cash and cash equivalents | 198,510 | (362,951) |
Cash and cash equivalents at beginning of year | (64,606) ________ | 298,345 ________ |
Cash and cash equivalents at end of year | 133,904 _______ | (64,606) _______ |
The basic earnings per share is calculated by dividing the loss after taxation by the weighted average number of shares in issue.
2011 number | 2009 number | |
The weighted average number of shares were: Basic weighted average number of shares | 482,172,925 | 298,636,296 |
Details of potential dilutive ordinary shares are set out below.
2011 number | 2009 number | |
Employee share options (note 26) Contractual termination payment to Director Convertible Loan Note (note 22) Warrants attached to Convertible Loan Note (note 22) Warrants attached to £5m Equity Financing Facility | 75,312,308 10,000,000 54,545,455 5,000,000 5,000,000 | 38,662,993 - - - - |
The Company will post the Report and Accounts for the period ended 31 March 2011 to shareholders on 29 June 2011. The Accounts are also available on the Company's website www.vsacapitalgroup.com. Copies of the Report and Accounts will be available for collection from the Company's Trading Office at 14 Austin Friars, London EC2N 2HE.
