Final Results

14th Aug 2008 07:00

AVARAE GLOBAL COINS PLC

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2008

London (AIM: AVR): 14 August 2008 - Avarae Global Coins plc ("Avarae" or the "Company"), the UK's only publicly traded specialist investment company dedicated to investing in rare and high quality coins, is pleased to announce its preliminary results for the year ended 31 March 2008.

Highlights for the year:

"We have been pleased with the exceptional quality of the portfolio of coins and collections that Avarae has been able to build in its second year of trading. The return achieved, after only a short period, on a small number of opportunistic disposals supports the high quality of the recommendations from the Advisory Panel and the team at Noble who continue to source some of the most important coin collections in the numismatic world. The Directors took an extremely prudent approach to the revaluation exercise that was conducted at year end and consider the uplift in value to be particularly conservative.

We would expect coins from the portfolio to achieve appreciably higher returns if sold at auction, as has been proved by opportunistic sales made to date. With such growing interest in numismatic investments among investors globally and the significant hedge that high quality and rare coins achieve against inflation, we anticipate the Company to be very well placed in the next few years."

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AVARAE GLOBAL COINS plc (“Avarae” or the “Company”)

AVARAE GLOBAL COINS PLC

PRELIMINARY results FOR THE YEAR ENDED 31 March 2008

Directors' Report

Introduction

We are delighted to present the preliminary results of Avarae for the year ended 31 March 2008 to our shareholders.  The following pages show the financial position of the Company for the year ended 31 March 2008, together with some additional unaudited information since the year end.  During the year under review, the Company increased both its portfolio of rare and high quality coins as well as its funds available for further investment, via a placing in August 2007 raising £6.0 million (before expenses).

Avarae provides access for institutions and individuals wanting to diversify their investment portfolios away from the traditional asset classes such as equities, property and bonds without the need to be an expert in the coin-collecting sector. The Board's strategy, as set out in its AIM Admission Document, is to invest actively in the rare and highest quality segment of the coin-collecting sector in various countries around the world.  We are currently building up an impressive portfolio of extremely high quality, rare coins which we intend to hold both for the long-term (i.e. 2 to 5 years), in order to achieve long-term capital growth for our shareholders, and also the short-term, in order to take advantage of short-term trading opportunities, as the market for rare coins continues to grow.

Financing

Avarae is registered and incorporated in the Isle of Man.  Since its incorporation, it has raised more than £12.0 million in three financing rounds, having raised £5.0 million (before expenses), at its AIM admission on 24 May 2006, raising a further £1.1 million (before expenses) through a subscription by a single major London institution in June 2006 and then a further £6.0 million through a placing to institutional investors in August 2007.

For a publicly traded Company, Avarae maintains a low operational cost base of around 3 per cent. of net assets per annum, which includes the costs associated with all of the Company's numismatic advisers and ongoing plc costs.

The coin-dealing sector

The market for trading coins is international in nature and significant in size. For a number of years now, there has been an increasing interest in the coin sector and its prominence as an alternative investment class is illustrated by continued increases in activity around the world, where record prices have been paid for certain rare pieces, especially in the US and the Far East. The number of interested parties in coins and coin collections appears to be continuing to grow strongly, with auction houses regularly reporting significant growth in the numbers of interested bidders compared to the corresponding auctions in previous years.

Against a backdrop of worsening global economic conditions and increasing concerns over inflation, the coin market proved to be extremely resilient over recent months. Important coin collections have frequently come up for sale worldwide (including in the world's largest market, the US) with auction houses achieving record prices, particularly for the highest quality, rare pieces. Investment in coins has also traditionally been a very good hedge against inflation and even better than gold. 

English, Islamic, Chinese, Indian, Russian and Polish coins remain the strong sectors within the industry although record prices continue to be paid for rare high quality pieces from all over the world. Recent examples of the strong interest in the rare coin market include a 1621 Polish 100 Ducats setting a record price for a world coin when it was sold for nearly $1.4 million (including buyers premium) in February 2008, a single auction in May 2008 realised more than $23 million and a rare 1703 Queen Anne Five Guinea recently sold for $414,000, more than double its estimate.

English coins fared well last year, with market leading commentators stating that on average, the value of top quoted grade of hammered English coins rose by 15% last year and extremely fine examples of early milled English coins rose by 11%. These statistics bode well for the future of the Company as its portfolio has a large concentration of fine and extremely fine English coins. 

Historically, if purchased correctly, investments in coins can not only reduce the risk of overall investment portfolios, but can also produce significantly better returns than investments in equities, bonds or property.  Coins and coin collections of the highest quality can produce annual compound returns in excess of 10%.

Avarae's investments

In the year to March 2008, the Company acquired more than £3.36 million worth of coins, taking the value at cost (before year-end independent revaluation) of the coin portfolio to £7.32 million (2007: £4.07 million). As in previous years, the Company focused on the purchase of extremely high quality English coins, but also this year we have increased the Company's holding of Islamic, Indian and Chinese coins. A feature of last year was the concentration on building up collections of particular sectors of rare coins that our Advisory Panel believes will be of significant value in the months and years to come. Furthermore, a focus was also made on picking up extremely rare coins, where there are only a few examples known to exist worldwide. Examples of rare coins and collections acquired during the year and since the year end include: 

James VI of Scotland, a 1576 Gold Twenty Pound, of which only a few are known;

Charles I, Oxford Mint, Rawlins' Crown, a coin of the highest rarity;

An important collection of five Elizabeth I Portcullis Money;

A set of 1703 Queen Anne VIGO Five Guinea, Guinea and half Guinea pieces;

Bombay 1770 Gold 15 Rupee;

An Umayyad temp Hisham Gold Dinar 122h Ifriqiyya, one of only two known; and

A 1915 USA Panama Double Set, thought to be one of only a handful of "double" sets. 

Avarae's current intention is to hold the vast majority of its current portfolio for the foreseeable future and only make disposals of coins or collections when the Board believes it to be in the best interests of the Company and its shareholders.

Financial Results

During the year under review, the Company made a number of opportunistic disposals of coins from within the portfolio, totalling £119,000, achieving an average gross return of more than 15%. The majority of the coins sold were examples of duplicates within the Company which had only been recently acquired for a number of weeks or months. This sizeable return, after only a short period, supports the high quality of the recommendations that the board receives from its numismatic advisers.

As at 31 March 2008, in line with the strategy outlined in our AIM admission document and in previous reports, for the first time in the history of the Company, the Directors instructed third party experts to undertake a detailed revaluation of its coin portfolio. As has been well documented, there are numerous examples of rare, high quality coins and collections being sold which result in a more than 10% annual compound return and therefore the Directors believed that a revaluation of the coin portfolio was necessary, particularly of those coins which had been purchased soon after the Company's flotation,.

The Directors took an extremely prudent approach to the revaluation exercise, instructing renowned experts in the various sectors in which the Company held coins. These experts considered the open market resale value of only those coins that had been held within the portfolio for more than 12 months, i.e. only those coins acquired and held by Avarae on or before 31 March 2007, representing approximately 55% of the total cost of the coin portfolio as at 31 March 2008.  Furthermore, the directors took the additional prudent step by not revaluing the most expensive coins within the portfolio, such as the Edward III Double Florin, one of only three known specimens and the only one in private ownership, as this could have skewed the revaluation exercise, even though the directors are very confident that these coins will have appreciated in value.

The result of the extensive revaluation exercise, carried out on items as described in the accounting policies, was that the overall carrying value of the portfolio as at 31 March 2008 has increased by £0.4 million (5.5%) from £7.3 million (at cost) to £7.7 million. The directors consider this uplift in value to be particularly conservative and would expect coins from the portfolio to achieve appreciably higher returns if sold at auction, as has been proved by the opportunistic sales made to date.

The effect of the revaluation, together with the profits from the limited coin sales, resulted in the Company achieving a gross profit of £0.42 million (2007: £0.09 million). Administrative expenses during the year were £0.35 million (2007: £0.22 million), the increase primarily reflecting higher numismatic charges as a consequence of higher levels of investible funds following the £6.0 million fundraising in August 2007. The administrative costs are now less than 3% of the Company's net assets (2007: 3.5%). Interest receivable of £0.22 million was higher than last year (2007:£0.14 million) and is directly attributable to the higher levels of cash balances held following the August fundraising.

Net profit for the year was £0.29 million (2007: loss £0.7 million), resulting in earnings per share (basic and diluted) of 0.31 pence (2007: loss 0.13 pence). In line with our stated strategy as set out in our AIM Admission document and as the Company remains in its investment phase, no dividend has been recommended in respect of the year ended 31 March 2008.

The Company ended the year with £4.2 million of net cash (equivalent to 3.83 pence per share), up from £2.02 million at the end of March 2007. During the year, investments of more than £3.2 million were made in coins and coin collections. At the year end, the Company had net assets of £11.78 million (2007:£5.88 million). The Company had no borrowings during the year. Net asset value per share stood at 10.7p at the year end, up from 9.5 pence at the corresponding point last year, an increase of 13%.

Change of Director

Rob Eijkelhof, one of our non-executive directors is today leaving the Company to pursue other interests. We are grateful to Rob for his input into the Company and particularly for his assistance at the time of our admission to AIM. I'm pleased to report that Rob will be replaced by August "Guus" Johannes Francisca Maria Berting who will be joining the board as a non-executive with immediate effect. Guus, (30), has extensive knowledge of the collectables market, having previously worked at Sotheby's, and we look forward to gaining from his input over the coming months and years. Guus has no shareholding in the Company. There is no further information required to be disclosed under Schedule 2, Paragraph (g) of the AIM Rules, pursuant to Guus's appointment.

Outlook

The Directors consider that, in spite of the well documented difficulties throughout the wider financial market, with particular downward pressures on equities and property, Avarae is well positioned as an alternative asset play in the current environment. The international nature of the coin market allows the Company to continue to take advantage of rising prices across a number of sectors and importantly take advantage of sectors which may be starting to show some weakness. It appears that lower value and more common coins appear to be static in value, whereas values for the rarest and highest quality coins, the only type in which Avarae is interested, continue to rise, drawing strong international interest.

Since the year end, the Company has acquired coins for a value of almost £1.0 million and has made disposals for a total of almost £0.1 million, returning a gain of more than 20%. Whilst the Company is still primarily in its investment phase, the directors anticipate that selective sizeable realisations could be made over the next 12 months, delivering some significant gains for the Company over the coming periods.

BRIAN HATTON

Executive Director

14 August 2008

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