THE Braveheart Investment Group run by Geoffrey Thomson fell deep into the red in the first half, when the costs of the unsuccessful acquisition of the Envestors corporate finance business weighed on the bottom line.
Announcing a pre-tax loss of £845,000 in the six months to September, the Perth-based group said £805,000 of the losses were attributable to the Envestors business, which it sold last week.
The costs included a £610,000 provision against the valuation of the goodwill Braveheart acquired through the £2.5 million all-share purchase of Envestors in 2010.
Braveheart said recent trading had been poor at Envestors, which made significant losses due to high fixed costs.
Asked whether the takeover had been a mistake, Mr Thomson said: "Looking back it was not a good acquisition to make."
Mr Thomson said Braveheart had extended its network of contacts and knowledge of overseas markets through Envestors.
He added: "That business was going ok but the wheels really came off in quarter one... Demand for corporate finance advice did not seem to be there."
Mr Thomson said the rise of crowd-funding websites, which allow firms to raise money direct from the public, seemed to have impacted on demand for such advice.
"There's more DIY schemes going on and there are bigger deals happening on crowd-funding sites, up to a couple of million pounds," he said.
Mr Thomson noted some other corporate finance businesses had faced challenges.
Deal activity dropped amid the economic slowdown from 2008.
But Mr Thomson does not believe the emergence of crowd funding raises questions about the need for the kind of business angel investment syndicates that Braveheart has fostered.
"There's always going to be safety in numbers, investors like doing things together," he said.
The sale of Envestors also reflected Braveheart's decision to focus on fund management activities.
Mr Thomson said firms could generate stable long-term earnings from managing funds. Braveheart had £121m under management at 30 September. Activities include managing the £43m Finance Yorkshire Equity Fund.
By contrast, corporate financiers' income can be lumpy and heavily dependent on the success of the teams they advise.
Braveheart said its employee benefit expenses would reduce by around £450,000 annually as a result of the Envestors disposal. Employee benefit costs totalled £1m in the first half.
The Aim-listed company may make further acquisitions.
Braveheart said it was considering a number of opportunities to accelerate growth in its chosen areas. Mr Thomson said it might acquire portfolios of investments made by other fund managers in the expectation it could sell off the holdings at a profit.
The company has stakes in 19 firms, mainly in technology, including 18 in Scotland. The portfolio was developed when Braveheart focused on angel investing.
The book value of the investment portfolio fell to £3.57m at 30 September, after accounting for an unrealised loss of £22,000 in the period.
Braveheart said it was working on some exits which it expected to provide a good return on capital.
The company looks after the portfolios of high net worth angels through its Strathtay Ventures arm.
It recorded £1.32m fee-based revenue in the first half, in line with the same period last year.
It made £67,000 pre-tax profit in the first half last year.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article