19th Oct 2007 14:37
THE ZERO PREFERENCE GROWTH TRUST PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
The Chairman commented:
I am pleased to report that for the twelve-month period to the end of July 2007, the Company's equity assets increased by 5.96% (net of all expenses). This compares favourably with the FD/AIC Investment Trust Zero Dividend Preference Share Index, which rose 5.15%. The net asset value (`NAV') of the Zero Dividend Preference shares increased from 59.02p to 66.43p and the NAV of the units increased from 66.63p to 72.65p. I have previously mentioned the effect of the high accrual rate of the Zero Dividend Preference shares which this year acted negatively on the NAV of the Growth shares, resulting in a decline from 7.61p to 6.22p. The mid-market share prices of the Zero Dividend Preference shares, units and Growth shares rose by 8.73%, 10.57% and 5.88% respectively.
The Zero Dividend Preference shares' premium to NAV fell from 6.74% to 3.12% over the year. At the year end, the full entitlement of the Zero Dividend Preference shares is now marginally covered by equity assets. At the same date, the Ordinary units stood at 0.83% premium to their NAV compared with a discount of 0.57% at the beginning of the year. The discount level on the Growth shares has declined over the period to 27.65% having narrowed from 44.15% at the beginning of the year.
The Company remained fully compliant with its banking covenants during the year. At the year end, the Company had ‚£3,120,000 drawn down. The facility provided by the Bank of Scotland allowed the amount drawn down to be varied as market conditions changed and investment opportunities arose. The Company's cost of borrowing is linked to the LIBOR rate which increased considerably over the period. Although attractive opportunities exist within the Company's investment universe, generally expected returns have not similarly increased. Therefore, in order to avoid increasing the risk within the portfolio, the Company decreased borrowing by a net amount of ‚£2,200,000.
Subsequent to the Company's year end, money markets experienced acute distress. Three month sterling LIBOR increased from 6.04% at the end of July to over 6.90% by 11 September 2007. Accordingly, the drawdown by the Company was reduced further without penalty and continues to be actively managed. Additionally, the outstanding balance was fixed for very short terms, capturing comparatively lower borrowing rates and maintaining maximum flexibility.
The Company has a termination date of 9 August 2008 and, as such, the foreseeable future of the Company is limited to a period of less than one year from the date of this report. The Board is investigating various restructuring possibilities which it feels will have a reasonable expectation of being successful and might be put to the shareholders prior to this date so as to extend the Company's life. The Board shall convene an EGM of the Company to be held on 9 August 2008, requiring the Company to be wound-up voluntarily unless the Board shall have previously been released from its obligation to do so by a special resolution of the Company. The Company will be wound-up if a continuation vote is not met. The Directors do not believe that in the event of the Company being wound-up that this would have any material impact on the stated assets and liabilities of the Company.
In these circumstances the accounts have been prepared on a going concern basis, which the Directors believe to be appropriate. However, the Directors emphasise that there is a material uncertainty regarding the ability of the Company to continue trading in the event that no restructuring proposals are practicable.
................... Robert Ottley Chairman 18 October 2007
THE ZERO PREFERENCE GROWTH TRUST PLC
PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS
The Directors announce the audited statement of results for the year ended 31 July 2007 as follows:
CONSOLIDATED INCOME STATEMENTfor the year ended 31 July 2007 2007 2006 Revenue Capital Total Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000Gains oninvestmentsGains oninvestments at fairvalue - 1,176 1,176 - 1,662 1,662 Net investment - 1,176 1,176 - 1,662 1,662result Dividends and 50 - 50 55 - 55interest ExpensesInvestment (37) - (37) (38) (23) (61)management feeTerminal payment - (88) (88) - - -provisionOther expenses (192) - (192) (212) - (212) (229) (88) (317) (250) (23) (273)(Loss)/profitbefore financecosts and taxation (179) 1,088 909 (195) 1,639 1,444 Finance costsBank interest (273) - (273) (299) - (299)payable (Loss)/profitbefore taxation andfinance(costs)/gainsallocated in (452) 1,088 636 (494) 1,639 1,145respect ofshareholders Taxation - - - - - - (Loss)/profit aftertaxation for theyear but beforefinance(costs)/gainsallocated inrespect of (452) 1,088 636 (494) 1,639 1,145shareholders Finance(costs)/gains inrespect of:Zero DividendPreference shares - (1,052) (1,052) - (936) (936) Growth shares 452 (36) 416 494 (703) (209) - - - - - - Return per share pence pence pence pence pence pence (IAS 33 andArticles ofAssociation basis): Zero Dividend Preference share - 7.41 7.41 - 6.59 6.59Growth share (1.51) 0.12 (1.39) (1.65) 2.34 0.69Ordinary unit (1.51) 7.53 6.02 (1.65) 8.93 7.28
The total column of this statement represents the Group's income statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies (`AIC').
All items in the above statement derive from continuing operations.
CONSOLIDATED BALANCE SHEETas at 31 July 2007 2007 2006 ‚£'000 ‚£'000Non current assetsInvestments at fair value 13,952 15,948 Current assetsTrade and other receivables 22 25Cash and cash equivalents 594 92 616 117 Total assets 14,568 16,065 Current liabilitiesTrade and other payables (149) (88)Bank loans (3,113) - (3,262) (88) Total assets less current 11,306 15,977liabilities Non current liabilitiesBank loans - (5,307) Assets attributable to 11,306 10,670shareholders Liabilities due to shareholdersZero Dividend Preference share (9,439) (8,387)entitlementGrowth share entitlement (1,867) (2,283) (11,306) (10,670) - - pence pence
Net asset value per share: Zero Dividend Preference share 66.43 59.02 Growth share
6.22 7.61Ordinary unit 72.65 66.63 CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 July 2007 2007 2006 ‚£'000 ‚£'000 Cash flows from operating activitiesInvestment income received 37 29Bank deposit interest received 15 16Investment Manager's fees paid (61) (58)Secretarial fees paid (49) (52)Other cash payments (143) (154)Cash expended from operations (201) (219) Bank interest paid (269) (299)
Net cash outflow from operating activities (470) (518)
Cash flows from investing activitiesPurchases of investments (6,919) (9,443)Sales of investments 10,091 7,814 Net cash inflow/(outflow) from investing 3,172 (1,629)
activities
Cash flows from financing activitiesAdvances of bank loan 2,150 4,400Repayments of bank loan (4,350) (2,400)
Net cash (outflow)/inflow from financing (2,200) 2,000 activities
Increase/(decrease) in cash and cash equivalents 502 (147) for the year
Cash and cash equivalents at the start of the 92 239 year
Cash and cash equivalents at the end of the year 594 92
NOTES
The audited financial information set out above does not constitute the Company's statutory accounts as defined in section 240 of the Companies Act 1985. The consolidated income statement, the consolidated balance sheet and consolidated statement of cash flows have been prepared on the basis of the accounting policies described below. The audited accounts for the year to 31 July 2006, which contained an unqualified auditors' report, have been lodged with the Registrar of Companies and did not contain a statement required under section 237(2) or (3) of the Companies Act 1985. Statutory accounts for the period ended 31 July 2007 have been approved by the Board and audited and will be filed with the Registrar of Companies following the Company's Annual General Meeting.
The results for the period ended 31 July 2007 will be circulated to shareholders in the form of an Annual Report, copies of which will be available at the Company's registered office and will be filed with the Registrar of Companies.
It is the intention of the Directors to conduct the affairs of the Company so that they satisfy the conditions for approval as an investment trust company set out in Section 842 of the Income and Corporations Taxes Act 1988.
1) ACCOUNTING POLICIES
(i) Basis of preparation
These financial statements have been prepared under the historical cost convention, except for the measurement at fair value of investments classified as fair value through profit or loss. Where presentational guidance set out in the Statement of Recommended Practice regarding the Financial Statements of Investment Trust Companies (`SORP'), issued in 2003 and revised December 2005, is consistent with the requirements of International Financial Reporting Standards (`IFRS'), the Directors have sought to prepare the financial statements on a consistent basis compliant with the recommendations of the SORP. These financial statements consolidate the financial statements of the Company and its wholly owned subsidiary undertaking, ZPGT Trading Limited, drawn up to 31 July 2007.
A separate income statement is not presented for the Parent Company as provided by Section 230 of the Companies Act 1985.
(ii) Accounting policies
The consolidated financial statements of the Group, and those of the Parent Company, have been prepared in conformity with IFRS, which comprise standards and interpretations approved by the International Accounting Standards Board and International Financial Reporting Interpretations Committee interpretations approved by the International Accounting Standards Committee that remain in effect and to the extent they have been adopted by the European Union. They have also been prepared in accordance with applicable requirements of England and Wales company law, and reflect the policies below which have been adopted and applied consistently.
Going Concern
The Company has a termination date of 9 August 2008 and, as such, the foreseeable future of the Company is limited to a period of less than one year from the date of this report. The Board is investigating various restructuring proposals which it feels will have a reasonable expectation of being successful and might be put to the shareholders prior to this date so as to extend the Company's life. The Board shall convene an EGM of the Company to be held on 9 August 2008, at which a special resolution will be proposed, requiring the Company to be wound-up voluntarily unless the Board shall have previously been released from its obligation to do so by a special resolution of the Company. The Company will be wound-up if a continuation vote is not met. The Directors do not believe that in the event of the Company being wound-up that this would have any material impact on the stated assets and liabilities of the Company.
In these circumstances the accounts have been prepared on a going concern basis, which the Directors believe to be appropriate. However, the Directors emphasise that there is a material uncertainty regarding the ability of the Company to continue trading in the event that no restructuring proposals are practicable.
Investments
All investments held by the Group are designated as `fair value through profit or loss'. Investments are initially recognised at cost, being the fair value of the consideration given.
After initial recognition, investments are recognised at fair value, which is generally determined by reference to stock exchange quoted market bid prices at the close of business on the balance sheet date.
Trade date accounting
All `regular way' purchases and sales of financial assets are recognised on the `trade date' i.e. the day that the entity commits to purchase or sell the asset. Regular way purchases, or sales, are purchases or sales of financial assets that require delivery of the asset within a time frame generally established by regulation or convention in the market place.
Income recognition
Dividends receivable on quoted equity shares are brought into account on the ex-dividend date net of the associated tax credit. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Returns on Zero Dividend Preference shares arising through the movement of the market value over time towards the redemption value are recognised as a capital return and are shown in the capital column of the income statement. Interest receivable is included on an accruals basis. Income arising on fixed interest securities is recognised on a time apportionment basis so as to reflect the effective interest rate on that security.
Expenses
All expenses are accounted for on an accruals basis. All expenses, including investment management fees and finance costs, are charged in full to the revenue column of the income statement except as follows:
- expenses which are incidental to the acquisition of an investment are included within the cost of the investment;
- expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment; and
- the investment management performance fee and terminal payment provision (if due) are charged to the capital column of the income statement as the fees are payable by reference to the capital performance of the Company.
Cash and cash equivalents
Cash in hand and in banks are carried at cost. Cash and cash equivalents are defined as cash in hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Bank overdrafts that are repayable on demand are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Bank loans and borrowings
All bank loans and borrowings are initially recognised at cost, being the fair value of the consideration received, less directly attributable issue costs where applicable. After initial recognition, all interest bearing loans and borrowings are subsequently measured at amortised cost. Any difference between cost and redemption value is recognised in the income statement over the period of the borrowings on an effective interest basis.
Zero Dividend Preference shares and Growth shares
Under IAS 32: Financial Instruments: Disclosure and Presentation, the Zero Dividend Preference and Growth shares are classed as liabilities, falling due on 9 August 2008, in order that the rights and obligations attributable to the Zero Dividend Preference and Growth shareholders reflect the Company's Articles of Association where there is no unconditional right for the Company to avoid repaying both share classes their entitlement, if required to do so, on that date. This means that in effect the Zero Dividend Preference and Growth shares can be redeemed at the option of the shareholders on that date. As a result share capital and reserves are not shown on the balance sheet. This disclosure is presentational and has no impact on the Company's net assets per share or returns per share, which are calculated using assets attributable to shareholders and finance (costs)/gains allocated in respect of Zero Dividend Preference and Growth shares respectively.
The Zero Dividend Preference shares are measured at amortised cost and it is therefore deemed that the Growth shares are also measured at amortised cost. The Zero Dividend Preference shareholders are entitled to payment of an amount equal to 46.72p per share as increased each day from 8 August 2004 up to and including 9 August 2008 at a daily compound rate of 0.03238% so as to give an entitlement equal to 75p per share on 9 August 2008, assuming sufficient assets exist. This payment is in priority to any capital repayment due to the Growth shareholders.
Taxation
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are only recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to capital, in which case the deferred tax is also dealt with in capital.
2) RETURN PER SHARE
IAS 33 and the Articles of Association basis.
Returns per share have been calculated based on the following returns attributable to each class of share;
2007 2006 Weighted average no. of shares Revenue Capital Total Revenue Capital Total 2007 2006 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 No. No. ZeroDividendPreferenceshare - 1,052 1,052 - 936 936 14,209,498 14,209,498 Growthshare (452) 36 (416) (494) 703 209 30,000,000 30,000,000 (452) 1,088 636 (494) 1,639 1,145
There are no dilutive elements within the Group and hence no diluted return per share calculations are presented.
3) NET ASSET VALUE
The net asset value per Zero Dividend Preference share is calculated using assets attributable of ‚£9,439,000 (2006: ‚£8,387,000) and 14,209,498 Zero Dividend Preference shares in issue at the end of the year.
The net asset value per Growth share is calculated using assets attributable of ‚£1,867,000 (2006: ‚£2,283,000) and 30,000,000 Growth shares in issue at the end of the year.
The net asset values stated include current period revenue.
A reconciliation of movements in assets attributable during the year is shownbelow: Zero Dividend Preference Growth shares shares Total ‚£'000 ‚£'000 ‚£'000 Assets attributableAt 31 July 2005 7,451 2,258 9,709Restatement of investments to `bid' - (184) (184)
valuations under IFRS
At 31 July 2005 (restated) 7,451 2,074 9,525 Profit after taxation for the year but beforefinance(costs)/gains allocated in respect of - 1,145 1,145
shareholders
Zero Dividend Preference share appropriation 936 (936) -
At 31 July 2006 8,387 2,283 10,670 Profit after taxation for the year but beforefinance(costs)/gains allocated in respect of - 636 636
shareholders
Zero Dividend Preference share appropriation 1,052 (1,052) -
At 31 July 2007 9,439 1,867 11,306 In accordance with IFRS, the Zero Dividend Preference and Growth shares areclassed as liabilities rather than equity, however, these shares are theCompany's capital. Therefore, the table below shows, for information only, howthe assets attributable to them are comprised in terms of share capital andreserves. 2007 2006 ‚£'000 ‚£'000Assets attributableShare capital 4,421 4,421Capital redemption reserve 1,579 1,579Capital reserve (4,016) (4,052)Zero Dividend Preference reserve 2,800 1,748Special reserve 15,791 15,791Revenue reserve (9,269) (8,817) Assets attributable 11,306 10,670
4) INVESTMENT MANAGEMENT FEE, PERFORMANCE FEE AND TERMINAL PAYMENT
Under the terms of the investment management agreement, the Investment Manager is entitled to an annual fee, payable quarterly in arrears, at the rate of 0.25% per annum of the total assets less current liabilities (other than borrowing incurred for investment purposes) of the Group before deducting any prior charge on the last business day of that quarter, plus a performance fee, payable annually in arrears, at the rate of 0.15% of total assets less current liabilities if total assets have increased by more than 5.5% during the year. In the year ended 31 July 2007, no performance fee is due as the assets have not increased sufficiently (2006: ‚£23,000).
In addition, the Investment Manager is entitled to a terminal payment calculated as 12% of the assets available for distribution to Growth shareholders, after repayment of the bank debt and full satisfaction of the final capital entitlement of the Zero Dividend Preference shares on 9 August 2008. At 31 July 2007, such assets available were ‚£730,000 and, therefore, a provision of ‚£88,000 (2006: nil) has been included in the consolidated income statement. However, because the terminal payment is only payable on 9 August 2008, the actual fee payable (if any) can only be determined at that time.
ZERO PREFERENCE GROWTH TRUST PLCRelated Shares:
ZPG PLC