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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Principle Cap. | LSE:PCX | London | Ordinary Share | LU0203938583 | ORD �1 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 15.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:4930E
Principle Capital Holdings S.A.
26 September 2007
PRINCIPLE CAPITAL HOLDINGS S.A.
("Principle Capital", the "Company" or the "Group")
Consolidated Interim Statements for the six month period
ended 30 June 2007
Highlights:
Financial:
* Management/advisory fees of #3.24 million (2006: #0.56 million).
#2.02 million performance related
* Operating profit of #515,722 (2006: #(250,780) loss)
* Profit after taxation of #527,820 (2006: #(225,738) loss)
* Earnings per Share (after minority interests) of 5.01p (2006: loss
per share of (1.95)p)
* Net assets of #15.04 million (equivalent to 167p per share) (31
December 2006: #14.81 million (equivalent to 165p per share))
* As at 31 August 2007, fee earning assets under management were
generating annualised management/advisory fees for the Group of #2.94 million
(after allowing for our joint venture partners' share and excluding any
performance related revenues)
Operational:
* Fee earning assets under management up 48% between 1 January 2007
and 30 June 2007 to #204 million ($409 million) (31 December 2006: #138
million), allowing for cross holdings between the funds
* Adjusting for the interests of our joint venture partners, assets in
the same period up by 41% to #180 million ($361 million) (31 December
2006: #127 million)
* Fee earning assets under management as at 31 August 2007, on the
same bases as above, up, 119% year to date to #302 million ($615 million) and
up 71% to #217 million ($442 million) adjusting for the interests of our joint
venture partners in the PME group as well the Proteus group
* As at 31 August 2007, the Activist Investment Funds had #154 million
($313 million) in net assets, allowing for cross holdings between the
funds, up 30% year to date
* Net composite IRR of all Activist Investment Funds was 14% in the
year to 31 August 2007
* As at 31 August 2007, Alternative Investment Funds had #148 million
($302 million) in net assets, allowing for cross holdings between the
funds, up 405% year to date
* Memorandum of understanding entered into for the proposed acquisition of the
30% of Principle Capital Partners Limited not already owned by the Company and
100% of the Silex group
* Two additional fund projects are in active consideration for 2007, with
further projects in the pipeline for 2008
* Strengthened team with the appointment of three new analysts, head of investor
relations and corporate and legal associate; two new investment professionals
at Proteus and new PME infrastructure team
Commenting on the results, Brian Myerson, Chief Executive of Principle Capital,
said:
"We have had a strong first half with all funds, in both our Activist and
Alternative Funds divisions, performing well. We are committed to maintaining
our focus on outperformance and value creation. It continues to be an exciting
period for the Group with a number of new funds being launched in the period and
additional ones in the pipeline for 2007 and 2008."
For more information, please contact:
Bell Pottinger Dan de Belder/Ben Woodford +44 20 78613232
Principle Capital James Peggie +44 20 7240 3222
Landsbanki Securities (UK)
Limited Sindre Ottesen / Tom Hulme +44 20 7426 9000
CHIEF EXECUTIVE'S STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2007
1. Introduction
In total, as at 30 June 2007, Principle Capital had fee earning assets under
management, allowing for cross holdings between the funds, of #204m ($409m).
This represented an increase of funds under management of #66m or 48% over the
course of the first six months of this year (31 December 2006: #138m). Adjusting
for the interests of our joint venture partners in the Proteus and PME groups,
they increased by 41% to #180 million ($361m). Further progress has been made,
however, since the period end with fee earning assets under management as at 31
August 2007, on the same bases, up 119% year to date to #302 million ($615
million) and 71% to #217 million ($442 million) (adjusting for the interests of
our joint venture partners in the PME group as well the Proteus group).
We have two major business activities: our Activist Investment Funds business
and our Alternative Investment Funds business. The Activist Investment Funds
include our flagship fund, Principle Capital Investment Trust plc ("PCIT")
(Ticker: PCIT), our open-ended fund, Principle Capital, L.P. (formally launched
May 2007) and our co-investment vehicle, Bulldog Financial Limited. Our
Alternative Investment Funds business was launched in October 2006 with the
raising of our AIM traded South African real estate fund, South African Property
Opportunities plc and in July 2007 we launched PME African Infrastructure
Opportunities plc, also on AIM.
At the half year, I am pleased to report continued strength in management/
advisory fees of #3.24 million (2006: #0.56 million), of which #2.02 million was
performance related. At 31 August 2007, annualised management/advisory fees for
the Group reached #2.94m (after allowing for our joint venture partners' share),
excluding any performance related revenues. Particularly gratifying is that over
#1m of these fees will be contributed by the Alternative Investment Funds
division, which highlights the diversification benefits of our strategy.
2. Investment Management
As mentioned above, the core Group operations address two distinct activities:
our Activist Investment Funds and our Alternative Investment Funds.
Activist Investment Funds
The period to 30 June 2007 saw us consolidate a number of positions through our
flagship fund, PCIT. Thanks to the good performance in 2006, we were able to
raise #23.4m of new money for the fund in May (with fund of funds investor EIM
S.A.) and again we completed a small placing raising a further #13.2 million in
July after the period end. We have now substantially fully invested Principle
Capital, L.P., which invests alongside PCIT. Furthermore, Bulldog Financial
Limited, our co-investment vehicle investing specifically in the shares of Nord
Anglia Education plc continues to make excellent progress.
Net assets of PCIT stood at #114 million at 30 June 2007 (31 December 2006: #99
million) following both organic growth and further fund raisings. Open-ended
fund Principle Capital, L.P. launched with first formal closing of #18 million
in May 2007. Bulldog Financial Limited, which is invested solely in Nord Anglia
Education plc, showed net assets of #17 million (30 June 2007) against a book
cost of #8 million (launched in April 2005). As at 31 August 2007, these three
funds had assets under management, allowing for cross holdings between the
funds, of #154 million.
Investment Performance
Following a strong performance by PCIT in 2006 (up 20.5%), PCIT got off to a
solid start and was up 7% by the half year. Recent turmoil in the markets has
impacted some of the fund's stocks, in particular those that had already shown
very positive returns. Some investors took profits where they could to cover
margin calls and redemptions; but PCIT's net asset value (net income reinvested)
remained up 16% year-on-year to 31 August 2007 and the companies in which we
have invested should largely be immune to the problems in the credit market. On
a composite basis the Activist Investment Funds returned an IRR of 14% in the
year to 31 August 2007.
We have continued to generate alpha in the investments we have made, one stock
excepting, being Photo-Me, which has performed badly. We have taken very strong
steps to reverse Photo-Me's decline, requisitioning two EGMs and corralling the
company's other shareholders to bring about a wholesale restructuring of the
board. We are pleased that Photo-Me has conceded to our requisitions to bring
about changes to the board, which should lead to stronger leadership and a
revival of what is in our view a very strong business proposition.
Nord Anglia Education plc, in which Bulldog Financial Limited invests, has
continued to make good progress. It has won a further school licence in Shanghai
and sold its underperforming nurseries business and, accordingly, its share
price has increased a further 17% in the first eight months of this year.
Performance Fees
At the half year, performance fees due from PCIT to Principle Capital Fund
Managers were approximately #1.34 million. In respect of Bulldog Financial
Limited, Principle Capital Partners has also been able to accrue a further
#677,026 on top of the #1.66 million accrued at 31 December 2006. These
performance fees, however, should only be regarded as indicative as the
calculation date for any fees payable on PCIT is 31 December and, for Bulldog,
the date the investments are sold.
Alternative Investment Funds
South African Real Estate
South African Property Opportunities plc ("SAPRO") (Ticker: SAPO), of which our
60% owned subsidiary Proteus Property Managers Limited ("Proteus") is the
investment manager, continues to make very good progress in investing the
capital it raised in October 2006 and May of this year. SAPRO is a closed-end
fund admitted to trading on AIM and listed on the Channel Islands Stock
Exchange. It is focused on funding and managing real estate development projects
in South Africa. It has made investments in ten development projects to date in
a wide range of sectors, including industrial, residential and retail, and has
committed #33.7 million to these projects, representing over half of the
company's #63 million of net assets. Once fully invested and geared, SAPRO
should have a portfolio of over #200 million (Rand 3 billion), making it a
significant player in its local market.
As with our Activist Investment Funds, Proteus is entitled to management and
performance fees from SAPRO. As SAPRO is also a closed-end permanent capital
vehicle, this fee structure will give long term visibility on revenues for the
Group. The fund raising in May combined with SAPRO's attractive return profile
means that Proteus is expected to make a significant contribution to Group
profit in the future.
African Infrastructure
In July we were pleased to announce the launch of our second closed-end
permanent capital Alternative Investment Fund on AIM. PME African Infrastructure
Opportunities plc ("PMEAIO") (Ticker: PMEA), raised gross placing proceeds of
$180 million and, like SAPRO, trades on the AIM market. PMEAIO's strategy is to
invest in infrastructure opportunities across sub-Saharan Africa, covering a
wide range of sectors such as transportation, telecommunications, energy, water
and sanitation and infrastructure-related real estate sectors as well as
participating in public-private partnerships investing in these sectors.
Historical under-investment in Africa's infrastructure base has been a limiting
factor in unlocking the continent's resource potential. We believe that
investment in infrastructure projects will present significant opportunities for
capital growth and revenue generation - we have estimated that in excess of
US$120 billion of infrastructure investment opportunities will be created in the
next 10 years as a result of infrastructure demands in Africa.
Principle Capital owns 32% of PME Infrastructure Managers Limited ("PMEIM"), the
investment manager of PMEAIO, alongside Unicos Partners LLP, the Masazane
Capital group (Principle Capital's partner in Proteus, the investment manager of
South African Property Opportunities plc) and the interests of Richard Bouma, ex
head of investment banking sub-Saharan Africa for HSBC and Chief Executive of
PMEIM. PMEIM will receive annual management fees and performance fees on a
project-by-project basis from PMEAIO and, given the capacity for infrastructure
investment, may develop into a very significant business in its own right.
New opportunities
As we have been developing the Principle Capital offering, new opportunities are
increasingly being referred to us from management teams and fund managers. In
this regard, we are working with a very experienced fund manager regarding the
potential launch of a new listed fund with a socially responsible investment
theme, subject to market conditions.
In the Alternative Investment Funds division, we are focusing our efforts for
the rest of this year on offering a third product alongside SAPRO and PMEAIO.
However, looking forward to 2008, the pipeline of opportunity, particularly in
the African market where we are building a strong reputation, remains
encouraging.
3. Company Investments
In July the Company disposed of its investment in Liberty plc for a
marked-to-market consideration of #4.06 million (realising a profit of #1.33
million on its book value) and, as a result, its sole investments are now in the
shares of its fund products, in line with the strategy outlined in our 2006
annual report and accounts. Investing in our products demonstrates to potential
investors our confidence in those strategies and also helps to avoid any
conflicts of interest arising. At 30 June 2007, the Company's investment in the
shares of PCIT was valued at #5.24 million and the Company's investment in SAPRO
was valued at #555,000.
4. Staffing
We have continued to invest heavily in attracting new staff as well as retaining
our existing team. Following the launch of PMEAIO and assuming the acquisition
of the Silex group is approved by shareholders (see below) we will now have over
32 investment professionals and a support staff of 9 based in London, Geneva,
Johannesburg and Cape Town, as well as a number of consultants and retained
advisers in relation to our continued fund raising efforts.
5. Proposed Acquisitions
On 12 July 2007, the Company entered into separate memoranda of understanding in
relation to the acquisition of: (i) the 30% of Principle Capital Partners
Limited, its main operating subsidiary, that it does not already own from the
original founding partners of the Group, including four directors of the Company
; and (ii) Silex Holdings Limited ("Silex"), the holding company of a successful
fund and trust administration business owned by two of the same founding
partners who are also directors of the Company.
The Company was not permitted by the AIM rules to enter into these transactions
whilst in a close period prior to the publication of these interim results.
However, it expects to do so today and a separate announcement will be made
setting out the terms of these transactions, which will be subject to
shareholder approval.
6. Financial Results and Outlook
As we approach our third anniversary in November, it is a pleasure to look at
the business we have built up. In November 2004 when we floated on AIM we had no
funds under management, no income and only the six founding partners. Assuming
the Silex acquisition referred to above proceeds, we will have a staff of over
40 people in four offices and expect to have a market capitalisation, based on
the current share price, three times the size when we launched. We are fast
approaching the target that we originally set ourselves of $1 billion of assets
under management and this now covers two distinct fund divisions both with a
strong pipeline of new funds. We are very close to our goal of covering our
overheads with our regular income sources and have the opportunity to generate
significant annual performance based fees in all our fund operations. Further,
as we grow as a business, we are attracting and able to develop a strong
pipeline of new fund ideas as well as enjoying the many cost synergies that come
with a larger organisation.
As indicated previously, as the business continues to grow, we have chosen to
invest heavily in staff and new projects so that, whilst we expect to continue
to grow funds under management significantly, shareholders should expect some
short-term reduction in profits. We invested significantly in the period in new
projects, new staff and new and improved office space and equipment but still
made a profit after taxation of #527,820 (2006: #225,738 loss). However, the
returns on the money invested should far outweigh any short-term reduction in
profitability and the decision to diversify our fund offering gives us a much
stronger platform from which to raise further funds than we had ever envisaged
three years ago. It is also pleasing to note that, despite these investments,
the balance sheet remains strong. In fact it remains close to the level at which
the company was launched in November 2004 and that in spite of our having since
established a substantial business operation. As at 30 June 2007, the
consolidated net assets of the Group were #15.04 million (equivalent to 167p per
share) (31 December 2006: #14.81 million).
The credit markets (and consequently the equity markets) have clearly been very
difficult of late, but I have great confidence in our activist portfolio which
has historically shown little market correlation and the returns from which will
be driven by improving the business performance of the specific companies in the
portfolio. Nonetheless, it is also pleasing to have begun the development of a
significant diversified fund offering and particularly to be at the forefront of
investment in Africa, one of the world's fastest growing continents. I remain
optimistic about the prospects for the Group.
Brian Myerson
Chief Executive Officer
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
FOR THE PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Group Group
June 2007 June 2006
(6 months) (6 months)
# #
REVENUE
Management and advisory fees 1,222,222 255,192
Performance fees 2,021,980 305,094
--------- ---------
3,244,202 560,286
OTHER INCOME
Unrealised gain / (loss) on investments 595,894 (45,007)
Realised gain / (loss) on investments - 240,049
Other operating income 28,006 -
--------- ---------
623,900 195,042
OPERATING EXPENSES
Staff costs 463,206 113,080
Directors' remuneration and bonuses 1,464,250 253,605
Retrocession of performance fees 177,719 -
Introduction fees 184,632 -
Administrative expenses 1,062,573 639,423
--------- ---------
3,352,380 1,006,108
OPERATING PROFIT/(LOSS) 515,722 (250,780)
Interest income 38,356 33,023
PROFT/(LOSS) ON ORDINARY ACTIVITIES BEFORE
TAXATION 554,078 (217,757)
Taxation on ordinary activities (26,258) (7,981)
PROFIT/(LOSS) FOR FINANCIAL PERIOD 527,820 (225,738)
Attributable to shareholders 451,302 (175,292)
Attributable to minority interests 76,518 (50,446)
Basic earnings /(loss) per share 5.0 p (1.9) p
Diluted earnings /(loss) per share 4.7 p (1.8) p
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
AS AT 30 JUNE 2007
Group Group
June 2007 December 2006
# #
NON CURRENT ASSETS
Tangible assets 109,358 34,645
Investments 9,260,889 8,118,536
---------- ----------
9,370,247 8,153,181
CURRENT ASSETS
Debtors 4,398,761 5,002,238
Transferable securities 920,168 900,000
Cash and cash equivalents 1,206,421 2,148,710
---------- ----------
6,525,350 8,050,948
CURRENT LIABILITIES
Creditors (858,444) (1,394,375)
---------- ----------
NET CURRENT ASSETS 5,666,906 6,656,573
---------- ----------
NET ASSETS 15,037,153 14,809,754
========== ==========
EQUITY
Share capital 8,999,806 8,999,806
Share premium 6,250,000 6,250,000
Share based payments 363,113 363,113
Currency translation reserve (662) (242)
Retained earnings (762,963) (1,214,265)
---------- ----------
Equity attributable to shareholders 14,849,294 14,398,412
Equity attributable to minority interest 187,859 411,342
---------- ----------
EQUITY 15,037,153 14,809,754
========== ==========
CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT
FOR THE PERIOD FROM 1 JANUARY 2007 TO 30 JUNE 2007
Group Group
June 2007 June 2006
(6 months) (6 months)
# #
Cash flows from operating activities
Operating profit / (loss) 515,722 (250,780)
Adjustments for:
- Depreciation 13,304 8,481
- Unrealised (gains)/losses on investments (595,894) 45,007
- Realised (gains)/losses on investments - (240,049)
- Equity settled share-based payments expenses - 84,846
Working capital changes 76,529 (322,666)
Tax paid during the period - (13,483)
---------- ----------
Net cash from/(used in) operating activities 9,661 (688,644)
Cash flows from investing activities
Payments to acquire tangible assets (88,016) (546)
Payments to acquire investments (600,240) (525,000)
Receipt from sale of investments - 3,129,806
Interests received 38,356 -
---------- ----------
Net cash from/(used in) investing activities (649,900) 2,604,260
Cash flows from financing activities
Subsidiaries' share capital payments received from
minority shareholders 136 -
Dividends paid to minority shareholders (300,000) -
Loan to third party (1,665) -
Foreign exchange (521) -
---------- ----------
Net cash used in financing activities (302,050) -
---------- ----------
Increase/(decrease) in cash in the period (942,289) 1,915,616
========== ==========
Cash and cash equivalents at the beginning of the
period 2,148,710 1,017,139
Increase/(decrease) in cash in the period (942,289) 1,915,616
---------- ----------
Cash and cash equivalents at the end of the period 1,206,421 2,932,755
========== ==========
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Share based Currency Retained Equity
payments translation earnings attributable Minority
reserve to interests Equity
shareholders
Balance as at
1 January 2006 8,999,806 6,250,000 225,310 - (3,026,401) 12,448,715 (425,652) 12,023,063
======= ======== ======= ======= ======= ======== ======= ========
Net profit for
the period - - - - (175,292) 175,292) (50,446) (225,738)
Share based
payments - - 84,846 - - 84,846 - 84,846
Movements in minority
interests - - - - - - - -
------- -------- ------- ------- -------- -------- ------- --------
Balance as at
30 June 2006 999,806 6,250,000 310,156 - (3,201,693) 12,358,269 (476,098) 11,882,171
======= ======== ======= ======= ======== ======== ======= ========
------- -------- ------- ------- -------- -------- ------- --------
Balance as at
1 January 2007 8,999,806 6,250,000 363,113 (242) (1,214,265) 14,398,412 411,342 14,809,754
======= ======== ======= ======= ======== ======== ======= ========
Net profit for
the period - - - - 451,302 451,302 76,518 527,820
Foreign
exchange - - - (420) - (420) (1) (421)
Dividends paid
to minority
shareholders - - - - - - (300,000) (300,000)
------ -------- ------- ------- -------- -------- ------- --------
Balance as at
30 June 2007 8,999,806 6,250,000 363,113 (662) (762,963) 14,849,294 187,859 15,037,153
======= ======== ======= ======= ======== ======== ======= ========
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
AS AT 30 JUNE 2007
1 SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLE CAPITAL HOLDINGS S.A. (the "Company") is a company domiciled in
Luxembourg. The condensed consolidated interim financial statements of the
Company for the six months ended 30 June 2007 comprise the Company and its
subsidiaries.
The condensed consolidated interim financial statements were authorised for
issuance on O/S.
1.1 STATEMENT OF COMPLIANCE
The condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs) as adopted
by the E.U. for interim financial statements. These are the Group's first IFRS
condensed consolidated interim financial statements for part of the period
covered by the first IFRS annual financial statements and IFRS 1 First-time
Adoption of International Financial Reporting Standards has been applied. The
condensed consolidated interim financial statements do not include all of the
information required for full annual financial statements.
An explanation of how the transition from United Kingdom GAAP (Previous GAAP) to
IFRSs has affected the reported financial position, financial performance and
cash flows of the Group is provided in note 2.
1.2 BASIS OF PREPARATION
The financial statements are presented in pound sterling ("#"). They are
prepared on the historical cost basis except that the following assets and
liabilities are stated at their fair value: derivative financial instruments,
financial instruments held for trading, financial instruments classified as
available-for-sale and those designated at fair value through profit or loss.
The preparation of interim statements in conformity with IAS 34 Interim
Financial Reporting requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses, more specifically in relation to
the recognition of performance fees (see note 1.9).
These condensed consolidated interim financial statements have been prepared on
the basis of IFRSs as adopted by the E.U. that are effective at the Group's
first IFRS annual reporting date, 31 December 2007. Based on these IFRSs, the
Board of Directors have made assumptions about accounting policies expected to
be adopted (accounting policies) when the first IFRS annual financial statements
are prepared for the year-ended 31 December 2007.
The preparation of the condensed consolidated interim financial statements in
accordance with IAS 34 resulted in changes to the accounting policies as
compared with the most recent annual financial statements prepared under
previous GAAP. The accounting policies set out below have been applied
consistently to all periods presented in these condensed consolidated interim
financial statements. They also have been applied in preparing an opening IFRS
balance sheet at 1 January 2006 for the purposes of the transition to IFRSs, as
required by IFRS 1. The impact of the transition from previous GAAP to IFRSs is
explained in note 2.
The accounting policies have been applied consistently throughout the Group for
purposes of these condensed consolidated interim financial statements.
1.3 BASIS OF CONSOLIDATION
Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the
Company has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that presently are exercisable or
convertible are taken into account. The financial statements of subsidiaries are
included in the condensed consolidated interim financial statements from the
date that control commences until the date that control ceases.
Transactions eliminated on consolidation
Intragroup balances, and any unrealised gains and losses or income and expenses
arising from intragroup transactions, are eliminated in preparing the condensed
consolidated interim financial statements. Unrealised gains arising from
transactions with associates and jointly controlled entities are eliminated to
the extent of the Group's interest in the entity. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment.
1.4 FOREIGN CURRENCY
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated in #
at the foreign exchange rate ruling at that date. Foreign exchange differences
arising on translation are recognised in profit or loss. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign currency
are translated using the exchange rate at the date of the transaction.
Non-monetary assets and liabilities denominated in foreign currencies that are
stated at fair value are translated to euro at foreign exchange rates ruling at
the dates the fair value was determined.
Financial statements of foreign operations
The assets and liabilities for foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to # at foreign
exchange rates ruling at the balance sheet date. The revenues and expenses of
foreign operations are translated to # at rates approximating the foreign
exchange rate ruling at the dates of the transactions.
1.5 PROPERTY, PLANT AND EQUIPMENT
Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less
accumulated depreciation (see below) and impairment.
Depreciation
Depreciation is charged to profit or loss on a straight-line basis over the
estimated useful lives of each part of an item of property, plant and equipment.
Land is not depreciated. The estimated useful lives are as follows:
Fixture and fittings 6-7 years 15% average depreciation rate
Computer equipments 3 years 33% average depreciation rate
The residual value is reassessed annually.
1.6 INTANGIBLE ASSETS
Goodwill
All business combinations are accounted for by applying the purchase method.
Goodwill is recognised in acquisitions of subsidiaries. Goodwill represents the
difference between the cost of the acquisition and the fair value of the net
identifiable assets acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is
allocated to cash-generating units and is no longer amortised but is tested
annually for impairment.
Negative goodwill arising on an acquisition is recognised directly in profit or
loss.
1.7 INVESTMENTS
Investments in debt and equity
Financial instruments held for trading are classified as current assets and are
stated at fair value, with any resultant gain or loss recognised in profit or
loss. The Group has designated all other financial instrument assets as measured
at fair value through profit or loss.
The fair value of financial instruments classified as held for trading and
designated at fair value through profit or loss is their quoted bid price at the
balance sheet date.
Financial instruments classified as held for trading or designated at fair value
through profit or loss are recognised (derecognised) by the Group on the date it
commits to purchase (sell) the investments (trade date accounting).
Derivatives
Derivative financial instruments are initially recognised and subsequently
measured at fair value. The gain or loss on remeasurement to fair value is
recognised immediately in profit or loss.
1.8 TRADE AND OTHER RECEIVABLES
Trade and other receivables are stated at their cost less impairment losses.
1.9 CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprises cash balances and call deposits with an
original maturity of three months or less. Bank overdrafts that are repayable on
demand and form an integral part of the Group's cash management are included as
a component of cash and cash equivalents for the purpose of the statements of
cash flows.
1.10 IMPAIRMENT
The carrying of the group's assets are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such indication
exists, the asset's recoverable amount is estimated.
For goodwill, intangible assets that have an indefinite useful life and
intangible assets that are not yet available for use, the recoverable amount is
estimated at each annual balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in profit or loss unless the asset is recorded at a revalued amount
in which case it is treated as a revaluation decrease.
Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to the
cash-generating unit (group of units) and then, to reduce the carrying amount of
the other assets in the unit (group of units) on a pro rata basis.
Calculation of recoverable amount
The recoverable amount of the Group's receivables carried at amortised cost is
calculated at the present value of estimated future cash flows, discounted at
the original effective interest rate (i.e., the effective interest rate computed
at initial recognition of these financial assets). Receivables with a short
duration are not discounted.
The recoverable amount of other assets is the greater of their net selling price
and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to
the asset. For an asset that does not generate largely independent cash inflows,
the recoverable amount is determined for the cash-generating unit to which the
asset belongs.
Reversals of impairment
An impairment loss in respect of a receivable carried at amortised cost is
reversed if the subsequent increase in recoverable amount can be related
objectively to an event occurring after the impairment loss was recognised.
An impairment loss in respect of an investment in an equity instrument
classified as available for-sale is not reversed through profit or loss. If the
fair value of a debt instrument classified as available-for-sale increases and
the increase can be related objectively to an event occurring after the
impairment loss was recognised in profit or loss, then the impairment loss is
reversed, with the amount of the reversal recognised in profit or loss. An
impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed if there has been a
change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had been recognised.
1.11 SHARE-BASED PAYMENT TRANSACTIONS
The share option programme allows Group employees, Senior Managers and
Directors, to acquire shares of the Company. The fair value of options granted
is recognised as an employee expense with a corresponding increase in equity.
The fair value is measured at grant date and spread over the period during which
the employees become unconditionally entitled to the options. The fair value of
the options granted is measured using a binomial lattice model, taking into
account the terms and conditions upon which the options were granted. The amount
recognised as an expense is adjusted to reflect the actual number of share
options that vest except where forfeiture is only due to share prices not
achieving the threshold for vesting.
1.12 TRADE AND OTHER PAYABLES
Trade and other payables are stated cost.
1.13 REVENUE
Revenue relates to investment management services provided by the Company and is
recognised in the income statement on an accrual basis.
Performance fees are also recognised in the income statement on an accrual
basis. They are based on the evolution of the net asset value of the funds under
management.
Certain performance fees which are recorded on an accrual basis only are
recovered upon the partial or full liquidation of the underlying investment. In
the event of a decrease in the net asset value of the fund before the
liquidation, performance fees could be significantly reduced or eliminated.
Income tax
Deferred tax is provided using the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The
following temporary differences are not provided for: goodwill not deductible
for tax purposes, the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit, and differences relating to investments
in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the balance
sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Segment reporting
A segment is a distinguishable component of the Group that is engaged either in
providing products or services (business segment), or in providing products or
services within a particular economic environment (geographical segment), which
is subject to risks and rewards that are different from those of other segments.
2 EXPLANATION OF TRANSITION TO IFRS
As stated in note 1, these are the Group's first condensed consolidated interim
financial statements for part of the period covered by the first IFRS annual
consolidated financial statements prepared in accordance with IFRSs.
The accounting policies in note 1 have been applied in preparing the condensed
consolidated interim financial information for the six months ended 30 June
2007, the comparative information for the six months ended 30 June 2006, the
consolidated balance sheet as at 31 December 2006 and the preparation of the
opening IFRS balance sheet at 1 January 2006 (the Group's date of transition).
In preparing its opening IFRS balance sheet, comparative information for the six
months ended 30 June 2006 and consolidated balance sheet as at 31 December 2006,
the Group has reclassified certain items reported previously in financial
statements prepared in accordance with previous GAAP.
The transition from previous GAAP to IFRSs has affected the Group's financial
position, financial performance and cash flows only in terms of presentation and
disclosures.
The transition from previous GAAP to IFRS had no impact on the equity or on the
operating profit/(loss) of the Group.
3 EARNINGS/(LOSS) PER ORDINARY SHARE
Basic
The calculation of basic earnings per ordinary share is based on earnings of
#451,302 (30 June 2006: loss of #175,292), being the profit/(loss) for the
period attributable to the parent, divided by the weighted average number of
ordinary shares in issue during the period of 8,999,806 (30 June 2006:
8,999,806).
Diluted
The calculation of diluted earnings per ordinary share is based on earnings of
#451,302 (30 June 2006: loss of #175,292), divided by the weighted average
number of ordinary shares in issue during the period of 9,489,397 (30 June 2006:
9,485,796) after taking account of the diluted potential effect of share options
issued under the Company's share option plans (see note 4.2).
4 RELATED PARTIES
4.1 REMUNERATION OF DIRECTORS
Group Group
June 2007 June 2006
6 months # 6 months #
Directors' remuneration 1,464,250 253,605
========== =========
There were no pension contributions paid to directors during the period.
Share options to acquire PRINCIPLE CAPITAL HOLDINGS S.A. shares have been
granted to Directors of Group companies as follows:
Group Group
June 2007 June 2006
# #
Company of beneficiaries
PRINCIPLE CAPITAL HOLDINGS S.A. 179,996 179,996
PRINCIPLE CAPITAL ADVISORS LIMITED 179,996 179,996
---------- ---------
Total options granted at the period end 359,992 359,992
========== =========
Share options became exercisable at #2 on 3 November 2006 and will lapse to the
extent not exercised on 2 November 2014.
4.2 SHARE INCENTIVES AND BONUS PLAN
The Company has established the PRINCIPLE CAPITAL HOLDINGS S.A. Discretionary
Share Option Plan ("DSOP") and the PRINCIPLE CAPITAL HOLDINGS S.A. Discretionary
Bonus Plan.
Under the DSOP, the Company may grant options to eligible employees, Directors
and Senior Management of the Group to acquire PRINCIPLE CAPITAL HOLDINGS S.A.
shares. The maximum number of the Company shares which may be put under option
under the DSOP is 3 per cent of the issued share capital of the Company from
time to time. The exercise price of the Company share under each option granted
after admission will be the market value of the Company share determined by the
Board of Directors.
Under separate agreement, the Company may grant options to non-employee
Directors up to 2 per cent of the issued share capital. The exercise price for
each Company share under these options will be the placing price and the other
terms of these options will be as similar as practicable to the terms of the
options granted under the DSOP. In addition, an option was granted on 18 October
2004 to a former adviser to the Company over 1% of the then issued share
capital.
As at 30 June 2007, stock options outstanding amounted to 539,998 (30 June 2006:
485,990), with the following exercise prices and maturity dates:
* 89,998 became exercisable on 18 October 2004 and will lapse to extent
not exercised on 1 November 2009. The exercise price on these options is
#2.
* 359,992 became exercisable on 3 November 2006 and will lapse to the
extent not exercised on 2 November 2014. The exercise price on these
options is #2.
* 36,000 became exercisable on 8 April 2007 and will lapse to the extent
not exercised on 7 April 2015. The exercise price on these options #2.225.
* 53,998 become exercisable on 18 June 2009 and will lapse to the extent
not exercised on 17 June 2017. The exercise price on these options is #3.25
Under the Bonus Plan and under separate arrangements in the case of Directors
and Senior Management who are employees of the Group, 5 per cent of the profit
(if any) of the Company before tax, depreciation, amortisation, exceptional
items and bonuses will be allocated at the end of each financial year to a bonus
pool.
4.3 FEES PAID TO SILEX MANAGEMENT LIMITED
During the financial period, the Group paid #184,632 to SILEX MANAGEMENT
LIMITED, a company external to the Group but having common directors with
PRINCIPLE CAPITAL HOLDINGS S.A., as remuneration of the introduction of
investors to one of the funds managed by the Group.
Management fees paid to the Silex Group to 30 June 2007 totalled #112,500 (30
June 2006: #50,000).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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