28 September 06
CHAIRMAN’S STATEMENT
I am pleased to report that during the period under review we made good progress in delivering our strategy of providing clients with corporate advisory services while frequently taking a stake in their future through shareholdings and warrants.
Although sales reported for the period under review are lower than for the same period last year, this does not reflect the present level of activity of our Corporate Finance subsidiary, Merchant Capital Plc, which continues to act successfully for a growing client base. Corporate finance projects necessarily have a lengthy and sometimes variable gestation period and there are currently a number of significant projects in the pipeline. Based on the present position, we would expect there to be a significant uplift in fees billed in the second half year of 2006, compared to the first half.
We have continued to invest in people and have doubled the size of our corporate finance team; the increase in operating expenses reflects that expansion. We are confident this will result in increased revenues in the future.
Our objective is to provide clients with as wide as possible a range of funding alternatives and this capacity will shortly be enhanced by the addition of an in-house asset finance option, while we continue to develop our equity fund-raising capacity.
During the period, in line with the Company’s policy of progressively crystalising profits from its strategic investments, we took profits on part of one such investment, realising £248,292 against an investment cost of £30,492.
In line with our investment strategy, we made a number of new investments in client companies. Meanwhile, the overall value of our investment portfolio has continued to rise during the period under review. As a result, while at 30 June 2006 the book value, after provisions, of our investments stood at £133,720, their market value had risen to £492,346, an increase substantially in advance of that of the AIM market as a whole. Subsequent increases have pushed the market value higher still to £568,832, even after the realisation of further profits of £33,543.
Two of our client/investee companies made particular progress during the period. Weatherly International plc has returned to market following a successful reverse acquisition which has transformed it into a copper producer with significant growth potential; at the date of this report, their shares had risen to 21.25p against our average investment price of 4.8p. Weatherly was a shell company client where we were active in bringing in the management team responsible for its transformation and we have assisted them through a series of transactions and fund-raisings at progressively higher prices over the past year
Meanwhile, Byotrol plc has announced a number of important developments and its share price now stands at 65p against a 2005 IPO price of 23p. We advised Byotrol prior to and through its AIM IPO and we have continued since then to act as an adviser on its strategy and development. We hold warrants in Byotrol which have a significant value at the present share price and are not included in the value of investments quoted above.
With net current assets of some £650,000, the Group is well funded for the execution of its strategy and the Board looks forward with confidence to reporting good progress in the second half.
Martin Eberhardt
Chairman
28 September 2006