VSA Capital Group plc

Interim / Quarterly Report • Jun 26, 2023

National Storage Mechanism | Additional information

RNS Number : 8074D

VSA Capital Group PLC

26 June 2023

DATE: 26 June 2023

VSA Capital Group plc

("VSA", the "Company" or together with its subsidiaries the "Group")

Audited results for the year ended 31 March 2023

VSA Capital Group plc (Aquis: VSA), the international investment banking and broking firm is pleased to announce its audited results for the year ended 31 March 2023.

Highlights

·      Turnover of £4.36m (previous year £3.61m), underlying profit of £0.61m (previous year £0.40m)

·      Cash at year end £1.27m (previous year £2.01m)

·      NAV £4.372m (previous year £4.162m)

·      Retained Corporate Clients of VSA Capital Limited 24 (2022: 24)

Another busy year of progress despite difficult market conditions.      

We have continued to build on our core sectors of Natural Resources and Transitional Energy and made solid progress into the Leisure and Consumer Brands sectors and into Technology and Software, eMobility and eCommerce.

Andrew Monk, CEO of VSA Capital Group plc said:

"This is a solid result in difficult markets.  We continue to advise and raise funds for companies listed on AIM and the Main Market of the London Stock Exchange and have established a strong position as an adviser and broker to companies on the Aquis Stock Exchange.  Our expanding activities into M&A and strategic advisory work positions us well for the future.  We are cautiously optimistic about the prospects for VSA Capital in the current year."

For more information, please contact:

VSA Capital Group plc	+44(0)20 3005 5000
Andrew Monk, CEO Andrew Raca, Head of Corporate Finance Marcia Manarin, Finance Director
Alfred Henry - AQSE Corporate Adviser	+44 (0)20 3772 0021
Nick Michaels Maya K. Wassink	www.alfredhenry.com

Chairman's Statement

I am pleased to present the audited Annual Report and Accounts for VSA Capital Group plc, which is the holding company of the regulated investment banking and broking firm, VSA Capital Limited.

As last year, the results include another tranche of amortisation of £330,770 resulting from a simple restructuring that we undertook on 31 March 2021 and this is expected to repeat for another three years. Once the intangible assets are fully amortised, which we currently anticipate will be in March 2026, our profits will no longer be affected by the amortisation charge on this asset. 

In his report our CEO Andrew Monk describes certain very challenging aspects of the market, of which we should all take note. Nevertheless, and especially in such difficult circumstances, the board is pleased with the outcome for the year which reflects further growth and progress for the Group.

Whilst our optimism for the current year remains cautious, reflecting challenging conditions, we are confident as a board that the Group's strategy is robust to continue to build shareholder value.

I pay tribute to my fellow Directors and staff within the Group and also to our clients who trust us as their advisers, as they themselves work to build value for their shareholders in such difficult global conditions.

Mark Steeves

Chairman

CEO'S Report

Principal Activity

The principal activities of the Group are the provision of corporate finance advisory, stockbroking, fundraising and research services to both private and public companies.

Review of the Business

On 31 March 2021, in preparation for the IPO of the Company on the Aquis Growth Market, VSA Capital Group plc acquired VSA Capital Limited in a reverse takeover and its results are therefore consolidated into these Group accounts for the second time in the financial statements for the year ended 31 March 2023.

Review of the Year

I am pleased to report a good underlying performance for our year ended 31 March 2023 as the last 12 months have been exceptionally difficult for all players in the equity markets.  We achieved a turnover of £4.36m (2022: £3.61m) and an underlying profit of £0.61m (2022: £0.40m).

As explained previously, we regard our underlying profit (profit before tax adding back amortisation) as most pertinent as it is considered by many as a better reflection of how much money is being generated.  As the amortisation of intangible assets is a non-cash item, we exclude this when calculating our underlying profit. Cash has decreased this year to £1.273m (March 2022: £2.010m) as the substantial fee for the 'Silverwood Transaction' has been received in equity.  We will look to monetise that position at the appropriate time.  Because it is a listed company, we have to reflect it by marking to market, regardless of how we think it may perform. Like many of our peer group, we own equity positions in many of our clients, and in this past turbulent year they gave a substantial negative return, which we have to reflect in our Group Statement of Comprehensive Income. However, we hope will regain ground in the current year.  Even so our NAV increased by 5% to £4.372m (from £4.162m in March 2022), even after the material amortisation charge.

Our retained clients remained static at 24, although the outlook for the sectors we are involved in looks very promising. Whilst we would have liked to have won a few more clients and will look to do so going forward, I am happy that we have good quality clients which is more important than just the overall number.

Sector Focus

We remain focussed on our core sector expertise of Natural Resources, Transitional Energy, Technology and Consumer/Leisure as we believe these are good sectors for long term growth, although in 2022/23 they proved very challenging. We seek to add value to our corporate clients and provide them with innovative solutions to their corporate, strategic and financing needs.

Mining as a sector has seen a lack of investment now for about 15 to 20 years.  Production across the industry is slowing as demand picks up and so this will result in many commodities facing a 'squeeze' at some stage in the future. Pretty much all experts agree on this, but stock markets are not responding - although inevitably, they must.  We are big supporters of Cornish mining but the development of the Southwest region has been slowed by the issues surrounding Tungsten West's Hemerdon mine getting back into production. The Ukraine war and rising costs had a huge impact but as the war continues, the demand for Tungsten (a key part of military ammunition) will increase, and there is a very limited supply outside of China.  We have seen good progress made in our Transitional Energy activities, with a particular emphasis on energy storage, and electric mobility. In Technology and Software, we have recruited new members of the team to strengthen our offering and indications are that this will prove to be an important area of growth for us.  In Consumer Brands we completed the acquisition of approximately 20% of Lush Cosmetics for Silverwood Brands plc for approximately £216m. This was a complex transaction, and also novel in that it was not technically an RTO under the Aquis Growth Market Rules.  As far as we and Silverwood are concerned, the transaction is completed, although we note that as there is an acrimonious relationship between Lush and Silverwood which we hope will abate with the passage of time. There may be speculation as to any further activity. We have recruited an additional research analyst to help our coverage of the Consumer/Brands sector in general.

Transitional Energy as an industry is becoming very strong. The stock market, however, has become impatient with the pace of change.  This trend is very similar to the Technology sector back in 2000, when we had the Dot Com crash, but at that time the good companies made good progress, and some became hugely successful. We expect to see a similar pattern developing in Transitional Energy.

Equity Capital Markets

Pension funds have been reducing their exposure to equities now for 20 years but in the last 12 months the 'de-equitisation' of the UK has become extreme and now exposure to equities by pension funds has fallen from about 40% to probably less than 4%.  This is untenable for our industry and also untenable for the UK Economy as it deprives UK companies of capital to grow. We are approaching the stage where either the UK gives up on quoted equities or there is a change of stance by the Government to make equities more attractive and the accounting less penal for pension funds. If the latter does occur, then one can be very optimistic, but it certainly cannot be taken for granted and this is why at VSA we continue to tread carefully and keep a tight cost base. 

The Aquis Stock Exchange is an important part of our growth strategy as we believe it will be an important and successful challenger stock exchange in the UK. It was not an easy year for Aquis, as many retail platforms are still very slow at offering an electronic service to their customers, but we believe that as demand continues to grow, that they will realise that if they do put in electronic dealing their customers will leave them. We dual listed two companies on the Aquis Growth Market; Guanajuato Silver (from Canada) and Cooks Coffee (from New Zealand). The support for Aquis stocks was further clearly seen by our incredibly successful Aquis Showcase day and the running of the "Britain's Got Aquis" competition. We will be hosting this again this year at the end of November and expect it to be bigger, better and even more exciting. 

We continue to support our corporate clients on AIM and the Main Market of the London Stock Exchange in terms of financial advice, the provision of equity research and fundraisings.  We look forward with great interest as to what opportunities will arise as the review of the Main Market takes shape.

International Reach

We have always had a very international approach at VSA, although as we reported last year, we have been unable to really do much with our Shanghai office. Our strategy has always been to support western companies develop their China strategy, whilst also advising on transactions involving Chinese investment or expertise. Despite the difficult geopolitical situation, currently I am hopeful that this year we will be back in China and able to complete transactions as one cannot ignore that it is the second largest economy in the World, and vital to the mining industry. At the same time though, we have been developing more links into the USA and continue to build our relationships in Africa and other parts of the World. In Africa we are working well with our partners in Kenya, Faida Investment Bank, and we have very recently entered into a strategic alliance with Bravura Holdings in South Africa.  We have always been proud of the fact that we are not just reliant on London as many of our competitors are. This has also proven useful as we develop our M&A activities.

We are always looking for opportunities at VSA to create shareholder value, which is not easy in an industry which has been in decline. The fact that we have become stronger over the past 5 years, whilst our peer group has weakened, suggests that if the industry does see a recovery, we will be well placed to take advantage of it.  We have historically tried many times to become a Nominated Adviser on AIM, as without this ability it has been harder to grow. Unfortunately, we were unsuccessful.  The London Stock Exchange has historically made it very difficult to acquire a Nomad firm unless you are already a Nomad.  In this last financial year, we saw that potentially being a Nomad is a poison pill due to the fact that you cannot be acquired. We saw with Arden Partners that this caused the value of the business to be effectively zero when Ince acquired it as it was then passed to Zeus Capital for a net zero consideration.  The number of Nomad firms has shrunk to a current level of 26 compared to over 70 firms 10 years ago. We believe there may be change as it does appear there will be a shake-up of the rules and approach to the 3 different markets of AIM, the Standard Listing and the Premium listing. We view this as good news and an opportunity for firms with high quality people and capabilities to be more active on the LSE. We have seen the merger of Finncap and Cenkos, and we would expect more mergers to take place. Numis is not merging with Deutsche Bank, but is being acquired as part of consolidation in the sector, and we believe further acquisitions will take place, as bigger banks that felt London was no longer on their radar after Brexit, reconsider as there has not been the anticipated outflow of business across the Channel.

Most of the UK domestic brokers were formed or grew rapidly around the 2000's as many entrepreneurial brokers in their 40's wanted to get away from the rigid structures of big banks.  These entrepreneurs are now in their 60's, but one issue they face is that the younger generation now in their 40's no longer want to run or own their own broking business, as they are just not nearly as attractive due to weaker economics and vastly increased regulation.  This again is likely to lead to more consolidation or acquisitions. 

Outlook

Last year I said we were cautiously optimistic despite the worsening conditions for global markets that are unlikely to improve for some time.  I was right on both points.  We expect to report a loss at the interim stage.  This is due to our year end being March and as the three quietest months in our industry - April, July and August - all fall in our first half.  Nevertheless this year, I am slightly more cautious but remain optimistic as we head towards 2024 as we have a good client base and are engaged on a broad range of strategic advisory, M&A and fundraising mandates. Our Position in Transitional Energy is also attracting a lot of attention particularly in the USA and Asia and we expect some major developments in the future. 

We can but hope that a clearer global picture emerges which has been clouded in the last three years by Covid, the Ukraine war, global political tension, inflation at record levels, an energy crisis, and interest rates going up substantially.  Let's hope that not much more will be thrown at us!  Whatever happens, we are in good shape with a great team.

Andrew Monk

CEO

Key performance indicators

Reported (accounting) profit           

Year ended 31 March 2023 Underlying Profits

£611,531 comprising £280,761 profit on ordinary activities before taxation plus amortisation of £330,770 (2022: £399,144)

Cash at 31 March 2023

£1.27m (2022: £2.01m)

Retained Corporate Clients at 31 March 2023

24 clients of VSA Capital Limited (2022: 24)

GROUP STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2023

	Notes	2023	2022
		£	£
Turnover	2	4,358,875	3,605,562
Cost of sales		(166,179)	(175,761)
Gross profit		4,192,696	3,429,801
Other operating income		39,000	34,750
Administrative expenses		(3,090,564)	(2,954,406)
Operating Profit		1,141,132	510,145
Finance (expenses)/income	4	(721)	736
Gains/(losses) on investments	4	(859,650)	(442,507)
Profit on ordinary activities before taxation		280,761	68,374
Tax on Profit on ordinary activities	5	(33,218)	(26,482)
Profit for the year		247,543	41,892
Other Comprehensive Income		-	-
Total Comprehensive Income		247,543	41,892

EARNINGS PER SHARE - PROFIT AFTER TAX	Notes	pence	pence
Basic	7	1.3	0.2
Diluted	7	0.8	0.1

The statement of comprehensive income has been prepared on the basis that all operations in the year ended 31 March 2023 are continuing operations.

There were no discontinued operations during the current financial year.

GROUP AND COMPANY BALANCE SHEET

FOR THE YEAR ENDED 31 MARCH 2023

		2023	2022	2023	2022
	Notes	Group	Group	Company	Company
ASSETS		£	£	£	£
Non-current assets
Property, plant & equipment - owned		77,515	107,764	-	-
Property, plant & equipment - right of use		468,900	645,253	-	-
Intangible assets		992,311	1,323,081	-	-
Investment in subsidiaries		-	-	3,873,996	3,873,996
Total non-current assets		1,538,726	2,076,098	3,873,996	3,873,996
Current assets
Investments		2,141,416	691,769	6,322	12,716
Trade and other receivables		381,464	536,932	49,041	1,532
Cash and cash equivalents	6	1,273,122	2,010,003	267,292	339,625
Total current assets		3,796,002	3,238,704	322,655	353,873
TOTAL ASSETS		5,334,728	5,314,802	4,196,651	4,227,869
EQUITY AND LIABILITIES
Share capital		3,523,547	3,523,547	3,523,547	3,523,547
Share premium		418,057	418,057	418,057	418,057
Share-based payments reserve		13,892	51,585	13,892	51,585
Accumulated profits/(losses)		416,637	169,094	214,159	218,990
Total equity		4,372,133	4,162,283	4,169,655	4,212,179
LIABILITIES
Current liabilities
Trade and other payables		529,199	557,408	26,996	15,690
Finance liabilities - borrowings		216,566	107,623	-	-
Total current liabilities		745,765	665,031	26,996	15,690
Non-current liabilities
Finance liabilities - borrowings		216,830	487,488	-	-
TOTAL EQUITY AND LIABILITIES		5,334,728	5,314,802	4,196,651	4,227,869

The financial statements were approved by the Board of Directors on 26 June 2023 and were signed on its behalf by:

Andrew Monk                                      Andrew Raca

Director                                                 Director

GROUP STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2023

	Share Capital	Share Premium	Share based payments reserve	Retained Earnings	Total
	£	£	£	£	£
At 1 April 2022	3,645,260	177,524	25,786	127,202	3,975,772
Total comprehensive income	-	-	-	41,892	41,892
Share issue	12,027	240,533	-	-	252,560
Company purchase of own shares into Treasury	(133,740)	-	-	-	(133,740)
Movement in share based premium reserve	-	-	25,799	-	25,799
At 1 April 2023	3,523,547	418,057	51,585	169,094	4,162,283
Total Comprehensive Income	-	-	-	247,543	247,543
Movement in share based premium reserve	-	-	(37,692)	-	(37,693)
At 31 March 2023	3,523,547	418,057	13,892	416,637	4,372,133

GROUP AND COMPANY CASHFLOW STATEMENT

FOR THE YEAR ENDED 31 MARCH 2023

		2023	2022	2023	2022
		Group	Group	Company	Company
	Notes	£	£	£	£
Net cash generated/(used) in operating activities
Profit / (loss) before income tax		280,761	68,374	(4,831)	(158,212)
Tax paid		-	(19,740)	-	-
Depreciation and amortisation		540,043	521,947	-	-
Loss / (gain) on current asset investments		859,650	438,628	6,394	9,403
Sales settled by shares		(2,277,074)	-	-	-
(Increase)/decrease in trade / other receivables		107,468	(301,565)	(47,509)	112
Increase / (decrease) in trade / other payables		(13,427)	(504,770)	11,306	15,252
Change in share based payments reserve		(37,693)	25,799	(37,693)	25,799
NET CASH (GENERATED)/USED IN OPERATING ACTIVITIES		(540,272)	228,673	(72,333)	(107,646)
Net cash generated from/(used in) investing activities
Proceeds from disposal of plant, property and equipment		-	212,808	-	-
Purchases of plant, property and equipment		(2,671)	(252,540)	-	-
Proceeds from other investing activities		280,215	210,262	-	57,015
Other investments - additions		(312,437)	(177,167)	-	(3,377)
Dividends received		-	-	-	250,000
NET CASH (GENERATED)/USED IN INVESTING ACTIVITIES		(34,893)	(6,637)	-	303,638
Cash flows from financing activities
Share capital issue		-	252,560	-	252,560
Purchase of shares into treasury		-	(133,740)	-	(133,740)
Finance lease repayments		(161,716)	(194,638)	-	-
NET CASH GENERATED/(USED) FROM FINANCING ACTIVITIES		(161,716)	(75,818)	-	118,820
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		(736,881)	146,218	(72,333)	314,812
Cash and cash equivalents at beginning of period		2,010,003	1,863,785	339,625	24,813
CASH AND CASH EQUIVALENTS AT END OF PERIOD	6	1,273,122	2,010,003	267,292	339,625

A prior year adjustment has been made to the cash flow statement to reflect the fact that the tangible fixed asset purchases were not all in cash. The adjustment was to reduce the purchase of tangible fixed assets by £595,111 to £252,540 and the finance lease liability reducing by the same amount to £194,638.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2023

1           Statutory Information

VSA Capital Group plc is a public limited company limited by shares, is listed on the Aquis Stock Exchange, is incorporated in the UK and registered in England and Wales (Company Number 04918684). The Company's registered and head office is at Park House, 16-18 Finsbury Circus, London, United Kingdom, EC2M 7EB.

2           Revenue

Segmental reporting                                             

Group Revenue of £4,358,875 (2022: £3,605,562) comprises:

Corporate Finance fees of £3,455,272 (2022: £2,797,340);

Broking fees of £711,950 (2022: £578,069);

Bond trading of £85,212 (2022: £85,462),

Research fees of £102,083 (2022: £138,750); and,

Other income of £4,358 (2022: £5,941).

3           Employees and Directors (Group)

	31/3/23	31/3/22
	£	£
Wages and salaries	1,738,138	1,763,882
Social security costs	223,792	217,903
Other pension costs	32,526	33,926
	1,994,456	2,015,711

The average number of employees during the year was as follows:

	31/3/23	31/3/22
Directors	5	5
Corporate finance	6	6
Research and sales	7	9
Account and administration	3	2
	21	22

4           Net finance costs

Finance income: deposit account interest	2023: £1,936	2022: £736
Financial Income	2023: £1,936	2022: £736
Finance costs: finance lease interest	2023: (£1,035)	2022: (£13,282)
Finance costs: other interest	2023: (1,622)	2022: £NIL
Financial Expenses	2023: (2,657)	2022: (13,282)
Total	2023: (£721)	2022: (£12,546)

5           Taxation

Analysis of the tax charge

Corporation tax is payable on investment income.

Factors affecting the tax charge

The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained below:

	2023	2022
	£	£
Profit on ordinary activities before tax	280,761	68,374
Profit on ordinary activities multiplied by the
standard rate of corporation tax in the UK of 19% (2022: 19%)	53,345	12,991
Effects of:
Tax losses utilised	(75,768)	(12,991)
Tax paid on Investment Income	8,338	26,482
Other adjustments	47,303	-
Tax Charge	33,218	26,482

Due to the uncertainty of the timing of taxable profits for the Company in the future, a deferred tax asset in respect of the tax losses has not been included in the accounts. Tax losses of £2.7m (2022: £2.9m) have been carried forward as at 31 March 2023.  The rate of corporation tax is set to rise to 25% in 2023. 

6           Cash

	Group       2023	Group 2022	Company 2023	Company 2022
	£	£	£	£
Cash at bank	1,273,122	2,010,003	267,292	339,625

7           Profit & Loss Per Share

	As at 31 March 2022	As at 31 March 2022
	Audited	Audited
Basic
Profit/ (Loss) for the period attributable to owners of the Company (£)	247,543	41,892
Weighted average number of shares:	19,428,966	19,428,966
Basic earnings/(loss) per share (pence):	1.3	0.2
Diluted
Profit/ (Loss) for the period attributable to owners of the Company (£)	247,543	41,892
Weighted average number of shares:	30,944,566	30,279,466
Diluted earnings/(loss) per share (pence):	0.8	0.1

The basic and diluted earnings per share were determined by dividing the profit or loss attributable to the equity

holders of the Company by the weighted average number of shares outstanding during the periods.

8           Annual Report and Accounts

Copies of the 2023 Report and Accounts will be posted to shareholders shortly.  Copies will also be available from the Company's registered office and from the Company's website  www.vsacapital.com

The statutory accounts for the year ended 31 March 2023 will be delivered to the Registrar of Companies in due course.

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