TRI Capital Ltd - Chairman’s Report - March 2008
2007 was for Tricap more a year of consolidation than of rapid progress. However the marginal lack of completed deals entirely masks the huge amount of activity which continued almost non stop throughout the year in relation to the investigation of and negotiation on potential investments as well as the monitoring of existing investee companies.
In deal terms the first quarter of the year was relatively quiet apart from providing important support for the Ectopharma Rights issue and Open Offer to which 13 members subscribed a total of £280K out of the £1.1M overall total. We also had lengthy discussions with Native Woodlands, a company involved in natural burial facilities and with local connections, but these ultimately failed to produce a satisfactory deal. June however saw the conclusion of a deal with Bellshill based Lammellar whereby 23 members subscribed £260K out of a total funding for this drug development business of £850K in association with Barwell and SCIF. We are grateful to Sam Taylor for introducing this business, shepherding the deal to fruition and taking on the NXC role. July was then a busy month with the launching under John Burgon’s guidance of Berwickshire based Eden Brand, formerly Peelwalls, and producers of sparkling cider from Border apples in which 21 members subscribed £90K in association with SCIF to complete a total funding of £120K. A week later 9 members subscribed £65K in association with Archangels and SCIF towards a total funding of £900K for Livingstone based Touchbionics, a company involved in the manufacture and marketing of prosthetic limbs. Still in July 10 members subscribed £47K towards a total funding of £320K for Antoxis a drug development business based in Aberdeen. Our next concluded deal was in November when 8 members subscribed £68K in association with Archangels to achieve a total funding of £450K for Powerphotonics, a business now based in Dalgetty Bay involved in developing lenses for the enhancement of lasers in the medical, military and manufacturing fields. November also saw 18 members support a GSS Rights Issue to a total of £80K alongside a similar subscription from SCIF. By the year end therefore Tricap and its members have since inception provided £2.14M out of a total funding of in excess of £5.5M for 12 different companies.
Whatever the potential upside of these concluded deals, we are learning that angel investing is not always straight forward, and in December a deal to provide up to £750K of funding for Dalkeith based business fell through at the last minute when the company (to their credit) managed to raise sufficient funds elsewhere to launch the business without Tricap’s assistance. During much of the year we were also involved in negotiating to fund a management buy out in association with new manager Peter Murphy and 18 employees of Hawick based Turnbull and Scott, a traditional manufacturer of heat exchange equipment, but the ultimate complexity of the deal disappointly led to this not being finalised until after the year end. The problems involved in the negotiation of both these deals, and others, led us to review our procedures and cost structures in order to improve the efficiency of deal handling and to reduce the risk of Tricap incurring aborted deal fees.
Since its inception we have benefitted from the advice of Stuart Hendry and his colleagues at MBM Commercial and we are delighted to have Stuart attending our meetings today when we will have an opportunity to pay tribute to the quality of his advice and commitment over the past few years – and also to hear his words of wisdom on how we might improve our approach to and handling of our deals.
Our investee companies all continued to make progress in varying degrees during the year and we are grateful to Tricap members who act as NXDs and as advisors – they fulfil an important role in assisting and monitoring this progress and in identifying problems so that they are (hopefully) dealt with before they get out of hand. Nevertheless we are also actively looking at ways of improving the process of internal monitoring of all investee company monthly accounts and quarterly reports, which are administered so efficiently by Maxine.
During the year we were delighted to welcome a number of new members to bring the year end membership up to almost 60 members, of which more than one third regularly attends our busy monthly meetings in Melrose Rugby Club. All members are encouraged to become involved, if they wish, in various aspects of Tricap activities, and we are especially grateful to those who give of their time and often valuable experience for the benefit of the organisation and of other members. In this respect apart from the Board and others already mentioned, Pat Campbell Fraser, Jamie Andrew, Julian Livingston, Richard Aird and Iver Salvesen deserve our particular thanks for their commitment and enthusiasm.
I would also like to record our thanks for the continued and important financial and practical support provided by David Grahame and his colleagues at LINC Scotland – as also to local staff from SE Borders with whom we are anxious to improve the quality of interaction between our organisations.
Aside from their angel business, members also had occasions for relaxation!
In April there was Tricap support for the Princess Royal’s Trust for Carers at the Kelso Race Day organised by Joe Scott Plummer. Then we had a good turn out of members and guests for the gathering held in the beautiful Harmony House in Melrose in support of Francis Hamilton and the Border Book Festival, an event we hope to repeat and expand in the current year as part of a low key campaign to gain improved local recognition of Tricap’s activities. In the early autumn sunshine we had another enjoyable, although less well supported, Golf Day at the Roxburghe from which most participants seemed to come away with a well earned prize!
Finally after our December meeting we had an opportunity over dinner at Burts Hotel to both entertain and thank Andy Purves, Gillian, Maxine and their colleagues involved in the increasingly taxing role of administering Tricap’s activities – a task which they perform with considerable skill and commitment at all levels and for which we have every reason to be most grateful.
I would draw members’ attention to the increasing importance of our website in recording and informing on our various investments and other activities, and we are grateful to Stuart Richardson who has piloted the website and other marketing developments and to Eileen Prior for her guidance on this and other PR issues.
As the year ended the Board was preparing a review of our organisational procedures in the light of the increasing burden carried by Andy Purves himself in relation to Tricap potentially to the detriment of his other business interests. The Board is also conscious of the importance of maintaining the confidence of members, and other interested parties in the way that Tricap conducts its affairs. During 2008 whilst we expect to conclude a similar number of deals and fundings we also hope to bring forward proposals for strengthening our organisational structures to cater for continued expansion and keep the business on a sound footing for the future.
Robert Dick - Chairman