28th Apr 2006 12:14
Elderstreet VCT PLC28 April 2006 ELDERSTREET VCT PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 FINANCIAL HIGHLIGHTS 2005 2004 pence penceOrdinary SharesNet asset value (per share) 65.1 64.9 Cumulative paid distributions from launch to 31 December 2005 (per share) 29.5 27.5 Total return (net asset value plus cumulative distributions paid per share) 94.6 92.4 Interim distribution (per share) - 1.0Final proposed distribution (per share) 2.0 2.0 2.0 3.0 'C' SharesNet asset value (per share) 94.1 n/a Cumulative paid dividends from launch to 31 December 2005 (per share) - n/a Total return (net asset value plus cumulative distributions paid per share) 94.1 n/a Final proposed dividend (per share) 1.0 n/a The statement to shareholders by the Chairman, David Brock, includes the following comments: Introduction The year to 31 December 2005 has been a period of relative stability for yourCompany with the Investment Manager focussing on securing some investment exitsin the Company's Ordinary Share pool and making a number of new investments inboth the Ordinary Share pool and the new 'C' Share pool. 'C' Share Issue During the year, the Company undertook a 'C' share offer, which closed on 27 May2005, having raised £1.5 million. The level of funds raised by this offer waslower than had been hoped, however this still provides the Company with a largerasset base over which to share its administration costs. Net Asset Value At 31 December 2005, the Company's Net Asset Value ("NAV") per Ordinary Sharestood at 65.1p, an increase of 2.2p or 3.4% compared to the NAV at 31 December2004 (after adjusting for the dividend of 2p per share paid during the year).The Total Return to original shareholders (NAV plus dividends paid to date) nowstands at 94.6p compared to the original net of income tax relief cost of 80.0pper share. The NAV of the Company's 'C' shares at 31 December 2005 stood at 94.1p, adecrease of 0.9p or 0.9% compared to the initial NAV when the 'C' shares wereissue price of 95.0p. Venture Capital Investments The Company's investment portfolio had a fairly active year with three newinvestments and two follow-on investments being completed. The new investmentsare summarised as follows: Ordinary 'C' share Pool Pool Total £'000 £'000 £'000New InvestmentsInterquest Group plc 250 100 350Oldbury Aluminium Alloys 450 100 550Smart Education 390 97 487 1,090 297 1,387 Follow on InvestmentsSnacktime 150 - 150The National Solicitors Network 45 - 45 1,285 297 1,582 New investments are allocated between the Ordinary Share and 'C' Share pools inproportions approved by the Board for each investment to ensure that balancedportfolios are maintained and giving due consideration to the constraints of theVCT regulations. The Ordinary Share pool has also made a number of disposals, which aresummarised below as follows: Cost Market Proceeds Realised Value at 31/12/04 gain/ (loss) AIM Quoted £'000 £'000 £'000 £'000Computer Software Group 276 290 274 (16)Hartest Holdings 39 16 3 (13)Springhealth Leisure 142 20 21 1UnquotedHenry J Beans 587 450 921 471Milkround Online 250 288 298 10UM (Holdings) 90 90 90 - Sundry failed investments 316 5 6 1 1,700 1,159 1,613 454 The disposal of Henry J Beans at a price that gave the Company a realised gainof £471,000 was a pleasing result. The business had got into seriousdifficulties and the Investment Manager played a key role in helping the companyaddress these problems and to ultimately attract a buyer at the target sellingprice. Progress of a number of the remaining portfolio companies has been good over theyear under review. Wessex Advanced Switching Products Limited producedabove-budget results, supporting an increase in its valuation, using a P/Ebasis, of £501,000. UM (Holdings) plc has also performed well and has likewisebeen revalued upwards by £134,000. AIM quoted, Computer Software Group plc hascontinued to make good progress, which has been reflected in its share price.However, in valuing the investment, the Board has applied a liquidity discountto the share price (in accordance with the International Private Equity andVenture Capital Valuation Guidelines), which has, for this year, eliminated theuplift. There has also been some negative news from the portfolio, with Fords PackagingSystems Limited experiencing a number of operational difficulties and AIM quotedBerkeley Scott Group plc seeing a sharp fall in its share price after a profitswarning. These investments fell in value by £333,000 and £368,000 respectively. Overall the Ordinary share pool fell in value by £141,000 and the 'C' share poolby £31,000. Format of Accounts When the Company revoked investment company status in 2000 in order to pay acapital dividend, it adopted the standard Companies Act format for its accounts,which included a Profit and Loss account. It has now, however, become common practice for Venture Capital Trusts tocontinue to present their accounts in accordance with the Statement ofRecommended Practice for Investment Trusts ("SORP"), even though they may haverevoked investment company status. The Board feels that the SORP presentationis much more useful to readers of the accounts and therefore these and futureaccounts will be prepared in accordance with the SORP, an updated version ofwhich was published in December 2005. The most noticeable change to the accounts as a result of these changes is thatthe Company is presenting an Income Statement (analysed between Revenue andCapital) rather than a Profit and Loss account and that our investments are nowcategorised as "Fair value through profit or loss" assets. For this accounting period, your Company is required to adopt FRS 21, underwhich dividends have to be accounted for in the period in which they are liableto be paid rather than the period in respect for which they are declared. As aresult, comparative figures presented in this statement have been restated andthe final proposed dividend detailed below is not provided in these accounts.It should be noted that although this change does effect the historic Net AssetValue values for Total Return are not altered. Results and Dividends The return on ordinary activities after taxation for the year for the OrdinaryShare pool was £15,000 (2004: £161,000) and for 'C' shares was £26,000 (2004: n/a). Your Board is proposing to pay a final revenue dividend for the year of 1p per'C' share and final Capital dividend of 2p per Ordinary share on 27 June 2006 toshareholders on the register at 19 May 2006. Repurchase of Shares The Directors are conscious that the Company's share prices are affected by theilliquidity of its shares in the market resulting from the fact that investorspurchasing "second-hand" shares do not benefit from income tax relief on theirinvestment. The Directors continue to monitor the market in the Company's shares and willmake share purchases when appropriate. During the period the Companyrepurchased 535,345 Ordinary Shares of 5p each, at an average price of 50.6p pershare, for cancellation. No 'C' Shares were purchased during the year. ASpecial Resolution to continue with this policy is proposed for the forthcomingAGM. Annual General Meeting The Annual General Meeting of the Company will be held at 32 Bedford Row, LondonWC1R 4HE at 11:00am on Wednesday 21 June 2006. Outlook Since the year end, the Company has undertaken a further fundraising, this timebeing a further issue of Ordinary Shares, which raised net proceeds ofapproximately £900,000 and helps to further dilute the fixed costs of running aVenture Capital Trust. The Company now has a reasonable level of funds from both the 'C' share andOrdinary share top up fundraisings to invest and therefore, the InvestmentManager, will continue to be active in seeking new investment opportunitieswhich meet the Company's investment criteria. The Company's existing portfolio now comprises investments of varying stages ofmaturity which makes the Investment Manager's role a varied one. Although thenewer investments tend to demand more attention, the Board will ensure that,while still building the 'C' Share portfolio, exit opportunities with theOrdinary Share portfolio continue to be identified and pursued which can allowthe payment of further capital dividends to Ordinary Shareholders. UNAUDITED INCOME STATEMENT For the year ended 31 December 2005 Year ended 31 December 2005 Year ended 31 December 2004 (as restated) Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income 269 - 269 363 - 363 Gains on "fair value through profit or loss" assets - 305 305 - 1,299 1,299 269 305 574 363 1,299 1,662 Investment management fees (39) (116) (155) (36) (107) (143) Other expenses (188) - (188) (166) - (166) Return on ordinary activities before tax 42 189 231 161 1,192 1,353 Tax on ordinary activities (1) 1 - - - - Return attributable to equity shareholders 41 190 231 161 1,192 1,353 Return per Ordinary share 0.1p 1.6p 1.7p 1.1p 8.1p 9.2p Return per 'C' share 1.7p (2.6p) 0.9p n/a n/a n/a All Revenue and Capital items in the above statement derive from continuingoperations. Return per share has been calculated using the following values: Ordinary Shares 'C' SharesRevenue return per share based on:Net revenue after taxation (£'000) 15 26 Weighted average number of ordinary shares in issue 14,396,954 1,509,120 Capital return per share based on:Net capital gain/(loss) for the financial year (£'000) 230 (40) Weighted average number of ordinary shares in issue 14,396,954 1,509,120 UNAUDITED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended 31 December 2005 Year ended 31 December 2004 (as restated) Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Return attributable to equity shareholders 41 190 231 161 1,192 1,353 Total recognised gains for the year 41 190 231 161 1,192 1,353 UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Year ended Year ended 31 31 December 2004 December 2005 (as restated) £'000 £'000Opening shareholders' funds 9,498 8,408Adjustment for dividend provided for in 2003 - 150Issue of shares 1,542 -Share issue costs (77) -Purchase of own shares (274) (117)Total recognised gains for the year 231 1,353Distributions paid (288) (296) Closing shareholders' funds 10,632 9,498 The prior year restatement is described in note 2. UNAUDITED BALANCE SHEET at 31 December 2005 2005 2004 (as restated) £'000 £'000 £'000 £'000Fixed Assets"Fair value through profit or loss" assets 9,248 7,967 Current AssetsDebtors 74 48Cash at bank and in hand 1,352 1,514 1,426 1,562 Creditors: amounts falling due within one year (42) (31) Net current assets 1,384 1,531 Net assets 10,632 9,498 Equity attributable to Equity HoldersCalled up share capital 782 732Capital redemption reserve 52 25Share premium 1,388 -Special reserve 6,401 6,833Capital reserve - realised 1,658 -Capital reserve - unrealised 237 1,908Revenue reserve 114 - Total Equity 10,632 9,498 Net asset value per Ordinary share 65.1p 64.9p Net asset value per 'C' share 94.1p n/a Net asset value per ordinary share is based on net assets at the year-end, andon 14,103,955 ordinary shares (2004: 14,885,400) and 1,542,202 'C' Shares beingthe number of shares in issue at the year-end. The Special Reserve is a distributable reserve that allows the Company to makemarket purchases of its own shares and to pay dividends. UNAUDITED CASHFLOW STATEMENT for year ended 31 December 2005 Year ended Year ended 31 December 2005 31 December 2004 £'000 £'000 £'000 £'000 Net cash (outflow)/inflow from operatingactivities (89) 44 Corporation tax - Capital expenditurePurchase of fixed income securities (1,625) -Purchase of venture capital investments (1,582) (933)Sale of fixed income securities 619 -Sale of venture capital investments 1,612 468 Net cash outflow from capital expenditure (976) (465) Equity distributions paid (288) (296) Net cash outflow before financing (1,353) (717) FinancingProceeds from share issue 1,542 -Share issue costs (77) -Purchase of own shares (274) (125)Net cash inflow/(outflow) from financing 1,191 (125) Decrease in cash (162) (842) UNAUDITED NOTES 1. Accounting policies Basis of accounting The Company has prepared its financial statements under UK Generally AcceptedAccounting Practice ("UK GAAP"). Where presentation guidance set out in theStatement of Recommended Practice "Financial Statements of Investment TrustCompanies" revised December 2005 ("SORP") is consistent with the requirements ofUK GAAP, the Directors have sought to prepare the financial statements on abasis compliant with the recommendations of the SORP. The financial statements are prepared under the historical cost conventionexcept for the revaluation of certain financial instruments. Presentation of Income Statement In order to better reflect the activities of an investment trust company and inaccordance with guidance issued by the AITC, supplementary information whichanalyses the income statement between items of a revenue and capital nature hasbeen presented alongside the income statement. The net revenue is the measurethe directors believe appropriate in assessing the Company's compliance withcertain requirements set out in Section 842 Income and Corporation Taxes Act1988. Investments Listed fixed income investments and investments quoted on the AlternativeInvestment Market ("AIM") are designated as "fair value through profit or loss"assets and are initially measured at cost. Thereafter the investments aremeasured at subsequent reporting dates at fair value, which is the bid pricewith illiquidity discounts applied where deemed appropriate. The Companypreviously valued the investments using mid-price. The financial effect of thechange in valuation policy is that the investments are valued at £113,000 lessthan if they were valued at mid-price. In respect of unquoted instruments, fair value is established by using theInternational Private Equity and Venture Capital Valuation Guidelines. Where noreliable fair value can be estimated for such unquoted equity investments theyare carried at cost, subject to any provision for impairment. Where an investeecompany has gone into receivership or liquidation the investment, although notphysically disposed of, is treated as being realised. Gains and losses arising from changes in fair value are included in the incomestatement for the year as a capital item and transaction costs on acquisition ordisposal of the investment expensed. It is not the Company's policy to exercise either significant or controllinginfluence over investee companies. Therefore the results of these companies arenot incorporated into the revenue account except to the extent of any incomeaccrued. Income Dividend income from investments is recognised when the shareholders' rights toreceive payment has been established, normally the ex dividend date. Interest income is accrued on a timely basis, by reference to the principaloutstanding and at the effective interest rate applicable, which is the ratethat exactly discounts estimated future cash receipts through the expected lifeof the financial asset to that asset's net carrying amount, and only where thereis reasonable certainty of collection. Expenses All expenses are accounted for on an accruals basis. In respect of the analysisbetween revenue and capital items presented within the income statement, allexpenses have been presented as revenue items except as follows: • Expenses which are incidental to the disposal of an investment arededucted from the disposal proceeds of the investment. • Expenses are split and presented partly as capital items where aconnection with the maintenance or enhancement of the value of the investmentsheld can be demonstrated and accordingly the investment management fee andfinance costs have been allocated 25% to revenue and 75% to capital, in order toreflect the directors expected long-term view of the nature of the investmentreturns of the Company. Deferred taxation Deferred taxation is provided in full on timing differences that result in anobligation at the balance sheet date to pay more tax, or a right to pay lesstax, at a future date, at rates expected to apply when they crystallise based oncurrent tax rates and law. Timing differences arise from the inclusion of itemsof income and expenditure in taxation computations in periods different fromthose in which they are included in financial statements. 2. Changes in accounting policies The Company is required to comply with a number of new UK Financial ReportingStandards (FRS), which now represent UK Generally Accepted Accounting Practice(UK GAAP), in preparing its financial statements for the year ended 31 December2005. These Standards have been introduced as part of the process of aligning UKaccounting principles with International Accounting Standards. As required by FRS 21 "Events after the Balance Sheet Date", dividends toshareholders are accounted for in the period in which the Company is liable topay them rather than in the period in respect of which they are declared. Thecomparative figures for the year ended 31 December 2004 have been re-statedaccordingly. The effect of the adoption of FRS 21 on the reported net assets ofthe company is as follows: 2004 Net assets £'000 As previously reported 9,205Add: proposed dividends not accounted for until paid 293As restated 9,498 Announcement based on draft accounts (unqualified audit report) The financial information set out in the announcement does not constitute theCompany's statutory accounts for the year ended 31 December 2005 or 31 December2004. The statutory accounts for the year ended 31 December 2005 (not yetsigned by the auditors) will be finalised on the basis of the financialinformation presented by the directors in this preliminary announcement and willbe delivered to the Registrar of Companies following the Company's AnnualGeneral Meeting. The financial information for the year ended 31 December 2004 is derived fromthe statutory accounts for that year which have been delivered to the Registrarof Companies. The auditors reported on those accounts; this report wasunqualified and did not contain a statement under section 237(2) or (3) of theCompanies Act 1985. A copy of the full annual report and financial statements for the year ended 31December 2005 will be printed and posted to shareholders. Copies will also beavailable to the public at the registered office of the Company at 69 EcclestonSquare, London SW1V 1PJ. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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