RNS Number:0873Y
Cobra Capital Limited
11 June 2007
Cobra Capital Limited
Annual Results
AUDITED ANNUAL RESULTS
FOR THE TWELVE MONTHS ENDED 31 December 2006
Cobra Capital Limited ("Cobra" or "the Company"), the AIM-traded strategic
investment company, is pleased to announce its audited results for the twelve
months ended 31 December 2006. Some additional information is also provided for
the period up to 31 May 2007.
Highlights:
* Unaudited net asset value at 31 May 2007 46.57 pence per share
* Audited net asset value at 31 December 2006 of 50.97 pence per share
(42.16 pence as at 31 December 2005)
* Cobra NAV up approximately 20.9% for 2006 compared with AIM All Share rise of
just 0.8%
* Cobra has now reported an absolute increase in NAV for all three years of
operation and an increase of approximately 79.6% since it began investing just
over 3 years ago.
* Investment philosophy remains consistent with a focus on short term small cap
quoted investments where an exit can be achieved within six months of an
investment.
Peter Griffin, Director of Cobra, commented:
"We believe that we have now successfully proved our business model. Our NAV has
increased by approximately 21% during 2006 and has now risen by approximately
79% since we began investing in April 2004.
We continue to actively manage our portfolio of investments and expect to be
able to significantly increase our activities during 2007."
For further information:
Peter Griffin, 01481 751 000
Director, Cobra Capital Limited
Clive Carver, 020 7600 1658
J.M. Finn & Co. Limited
Net Asset Value
We have set out in the table below the progression of our Net Asset Value
("NAV") per share since the Company began investing after its admission to AIM
on 27 February 2004.
Date 31 March 30 June 30 September 31 December 2004
2004 2004 2004
NAV (unaudited) (unaudited) (unaudited) (audited)
26.30p 35.26p 35.35p 39.43p
Date 31 March 30 June 30 September 2005 31 December 2005
2005 2005
NAV (unaudited) (unaudited) (unaudited) (audited)
42.74p 41.04p 45.33p 42.16p
Date 31 March 30 June 30 September 2006 31 December 2006
2006 2006
NAV (unaudited) (unaudited) (unaudited) (audited)
44.55p 40.46p 41.62p 50.97p
Date 31 March 31 May
2007 2007
NAV (unaudited) (unaudited)
48.08p 46.57p
We began the year with the NAV at 42.16 pence per share. We have experienced
quite a volatile year in terms of changes in the NAV but are pleased to report
that we ended the year with the NAV being up approximately 20.9% at 50.97 pence
per share. This compares very favourably with the AIM All Share Index which was
up 0.8% for the year and continues our record of positive growth in our NAV for
all three financial periods that Cobra has been operational. The NAV of the
Company has increased by approximately 79.6% since it began investing just over
3 years ago.
It should also be noted that the reduction in the NAV from the 31 March 2006
level of 44.55 pence per share to the 30 June 2006 level of 40.46 pence per
share was due to (i) a change in valuation accounting policy from mid market
prices to bid market prices which reduced our stated assets by an equivalent of
0.69 pence per share and (ii) the complete loss of our investment in Homebuy
Group PLC ("Homebuy") (which was placed into administration) and which resulted
in the reduction of our assets by the equivalent of 3.4 pence per share. Both of
these matters were announced in our interim accounts for the 6 months to 30 June
2006. We regard both these events as one off and highly unusual and hopefully
therefore we will not suffer similar events going forward.
Setting apart the complete loss of our investment in Homebuy we have been
pleased with the progress made during the course of 2006. We have actively
invested and exited from investments throughout the year with the breadth of
proposals increasing as we become more widely known by brokers. We intend to
continue to increase the number of brokers that we actively work with so that
our sources of potential investments will also increase. We also intend to
increase our activities in the Netherlands during the course of 2007. We have
historically enjoyed success in our investments in companies based in this
country since the incorporation of Cobra but they have represented a minority in
terms of number and value of our investments. We believe that we are now
sufficiently experienced and have the necessary systems and controls in place to
allow a successful and profitable increase in the number and value of
investments into Dutch companies.
We commented in our interim report for the six months to 30 June 2006 that there
was a tendency for flotations on to the AIM market to be non-UK and/or
financials and real estate. In our view this tendency continued for the
majority of the year which led us to concentrate much more on existing quoted
companies rather than flotations. We hope that the more traditional flotations
of UK companies will become the norm again during 2007.
Fund Raising
We have not raised any new funds during the course of 2006 and, therefore, the
total equity funds raised by Cobra remains at GBP3,590,500 (before costs) since
its incorporation on 27 February 2004. The total net assets of the company are,
as of 31 December 2006, GBP4,482,169 which represents an increase of
approximately 24.8%. This increase in assets owned by the Company is despite the
proportionately large costs of the fund raisings and AIM admission and also the
relatively high running costs of the Company as a percentage of assets under
management. These issues have been highlighted by the Directors many times and
our efforts to address this issue by increasing assets under management have, to
date, not succeeded.
We continue to operate Cobra with a relatively small amount of assets which
means that the costs of running the Company are proportionately high. For
example, our costs for 2006 totalled GBP367,028 which means we have had to
generate a return of almost 10% of the assets held at the beginning of the year
just to break even. We therefore believe that it would be in the Company's and
shareholders' best interests if we are able to increase our funds under
management. We do not believe, however, that it is in our shareholders' best
interests to raise further equity capital as this would be very dilutive at the
current share price. However, we have for some time been making use of
relatively limited debt facilities which are secured against the assets of the
Company. We now believe that it would be appropriate to increase the use of debt
within the Company and are currently holding detailed discussions about this
with an EU bank. We very much hope that we will be able to report further
progress on these discussions in the near future and expect that this facility,
if it is created in the way that is currently envisaged, will substantially
increase the activities of Cobra without any dilution being suffered by our
shareholders.
Investment Strategy
We have continued our existing investment and divestment strategy. We look for
seismic event companies or facilitator transactions where we are confident that
we can achieve good returns within a six month time period.
'Seismic Event Companies'
Seismic Event Companies is the term we use for those companies that we have
researched where, in our opinion, there is likely to be a material event in the
development of that company. This may be in terms of an individual corporate
event or a wider industry sector event. Events that we have concluded are likely
to occur have included mergers, acquisitions, takeovers, fund raisings,
significant company product developments, management change and material change
in the actual or forecast financial results of the company.
In our view it is often the case that relatively small companies that are quoted
on a stock market can often give a clear indication of an event that has either
occurred or is due to occur via a regulatory announcement but the market in
general fails to understand the significance of the announcement in the short
term. This has allowed Cobra to purchase shares in companies that do not
reflect the investee company's true value. It is usually the case that after a
period of time the market in general gains a greater understanding of the
company's changed value and so the price moves to reflect this.
'Facilitator Transactions'
Facilitator Transactions are those financings in which Cobra is involved, which
are providing new funds for the investee company and where Cobra is a key party
in the creation and completion of the transaction. These transactions take some
time to complete (and, because of the nature of these transactions, often do not
complete at all). In addition they are usually transactions that raise more
funds than could be provided by Cobra alone so will often mean that we will
bring in other sources of funds in order to reduce the commitment size required
by Cobra. These transactions are often in relation to the flotation of a
company or a material corporate re-structuring and turn around.
During the year the number of investments held has varied between 10 and 16
companies. Our investments as of 31 December 2006, can be split into three
investment sizes as follows:
Investment Size Number of Investments
Up to GBP250,000 5
Between GBP250,001 and GBP500,000 5*
Over GBP500,000 1
* excluding Homebuy Group PLC which is now valued at GBP0 but remains within the
portfolio as a holding.
It is usually our strategy not to own holdings in companies that represent 3% or
more of the investee company's issued share capital. Occasionally we do purchase
more than 3% with examples of this being the investment we held in Global Marine
Energy plc and which we discussed in our interim accounts for the six month
period to 30 June 2006 (we have now fully exited from this investment) and our
existing investment in approximately 5.35% of the issued share capital in
Landround plc, which was notified to the market on 8 January 2007.
During the course of 2006 the expected flotation of one of our unquoted
companies did not occur, with the investee company opting to raise additional
funds via a private placement rather than a flotation. Cobra did not participate
in this additional private placing. The placing raised approximately GBP12.2
million for the investee company and we have revalued our holding in the
investee company to the level that the new funds were raised at (in accordance
with the valuation principals of the European Venture Capital Association). This
has resulted in our one unquoted investment now being valued at GBP1,300,000. It
should be noted that the fact that this investment remains unquoted means that
there is little opportunity to realise this investment at this stage. In
addition there can be no assurance that the current valuation will be that which
is achieved if any exit opportunity occurs in the future.
Share Price
Our share price began 2006 at 40 pence. Unfortunately the price then slipped
back to 27 pence and then recovered slightly to close the year at 28.5 pence.
The share price performance and the liquidity of the shares has been a continual
disappointment to us. We hope that over time liquidity in the shares will
increase and that the share price will become more closely related to the NAV.
We are determined to continue to apply the investment strategy that we have set
out as it has proved over the last three years that it is a profitable one. We
have been advised that one way to increase liquidity of shares is to undertake
an equity fund raising and so widen the shareholder base. However we are
convinced that the dilutive effect that this would have, means that it would not
be in the best interests of our existing shareholders and so will not pursue
this option for the foreseeable future.
Outlook
The Directors believe that Cobra has made good progress in the operational
development of the Company and in the increase of its NAV. We are working to
materially increase the amount of debt funding available to the Company which
will allow us to take a fuller advantage of the strong pipeline of potential new
investments and will mean that our operational costs, as a percentage of gross
funds under management will reduce to more appropriate levels. We therefore
believe that we will be able to substantially increase the investment activity
of the Company over the course of 2007. We therefore remain confident about the
future.
Board of Directors
Peter Griffin BA (Hons), FCA, TEP
Executive Director (aged 48)
An Economics graduate from Leeds University, Peter qualified as a Chartered
Accountant with Coopers and Lybrand, Manchester in 1982. Since 1984 he has
worked in the offshore financial services sector in a number of jurisdictions
and is presently a Director of Fortis Fund Services and Fortis Trustees
Guernsey. Peter is Director of a number of other investment companies which are
quoted on AIM.
Michael Cahill ACIS
Executive Director (aged 48)
Michael is an associate member of the Institute of Chartered Secretaries and
Administrators. He was educated at St Bede's College, Manchester and at
Bournemouth University. Michael has worked for Fortis (formerly MeesPierson
Reads) since 1987 where he has specialised in the provision of offshore
fiduciary services including management of offshore investment funds. Michael
is presently Managing Director of Fortis Trustees Guernsey.
Jonathan Freeman BA (Hons), MBA
Non-Executive Director (aged 42)
Jonathan graduated with a degree in Business Studies from Stirling University in
1988 and gained an MBA from Warwick University in 1993. From 1988 to 1993 he was
a contract manager of a property refurbishment company, becoming a director in
1991. He worked within corporate finance and was involved in the creation and
launch of the pan-European stock market EASDAQ which was subsequently taken over
by NASDAQ. He joined the corporate finance department of Beeson Gregory Limited
in 1997 and was appointed as a director in 1998. He joined Gambit Corporate
Finance as a partner in 2002 and left in October 2003. Jonathan is currently
also a director of Equity Pre-IPO Investments Limited, Creon Corporation plc,
Futura Medical plc and Syndicate Asset Management plc, all of which are quoted
on AIM. He is also a director of a number of private companies.
Directors and their Interests
The Directors of the Company during the year were:
Peter Griffin BA (Hons), FCA, TEP
Michael Cahill ACIS
Jonathan David Freeman BA (Hons), MBA
The Directors who held office at the end of the financial year had the following
interests in the shares of the Company:
Ordinary Shares of 1 pence each
Number % of issued shares Options
P Griffin - - -
M Cahill - - -
JD Freeman 200,000 2.3% -
Substantial Shareholdings
At 31 December 2006 and 15 May 2007, the issued share capital of the Company was
8,793,200 ordinary shares of 1 pence each.
We have also conducted a limited investigation into the underlying holders of 3%
or more of our share capital. It is not presently a requirement of the
Company's Articles of Association that shareholders must notify the Company if
they own shares representing 3% or more of the issued share capital, (a
resolution to amend the Articles of Association to include such a provision will
be proposed at the next Annual General Meeting). Furthermore, there is no
authority for the Company to issue an equivalent to a 212 Notice. Therefore the
combination of the use of nominee accounts (which the CREST settlement system
encourages) and no 212 Notice equivalent means that it can be difficult to track
the ownership of the Company's shares. As far as we are aware, as of 31 March
2007, the following shareholders held 3% or more of our share capital:
Number of Percentage of issued
ordinary share
ordinary shares capital
Equity Special Situations Limited 2,129,389 24.22%
Newton Nominees Limited 1,177,500 11.39%
Jan PD Geertman 994,668 11.31%
UBS Global Wealth Management & Business Banking 415,500 4.73%
WT Lamb Investments Limited 400,000 4.55%
Britannic Investment Managers Limited 335,000 3.81%
Ferlim Nominees Limited 286,000 3.25%
Corporate Governance
Cobra was admitted to trading on AIM on 24th March 2004. As such it is not
governed by the Combined Code on Corporate Governance. However, the Board is
committed to complying with best practice where appropriate. This includes
evaluating Directors' performance, the management of the Company and ensuring
that it maintains full and effective control over appropriate strategic,
financial, operational and compliance issues.
There is no separate Audit Committee, Remuneration Committee or Nominations
Committee as the Board considers that, given its current size, all members of
the Board should participate in those roles and responsibilities normally
reserved for such committees. Therefore the full Board of Directors will
provide a forum for reporting by the Company's external auditors.
The Company continues to give careful consideration to the principles of
corporate governance to ensure that it complies with current UK corporate
governance requirements to the extent to which the Directors consider these to
be appropriate for a company of its size and taking into account its wish to
conserve cash for investments.
The Board meets regularly and has ultimate responsibility for the management of
the Company. It also meets to review the remuneration of directors, the
Investment Advisory Panel and consultants.
Relationship with Shareholders
The Directors seek to build a mutual understanding of objectives between the
Company and its shareholders. The Company reports formally to shareholders in
its interim and annual reports setting out details of its activities. In
addition, the Company keeps shareholders informed of events and progress during
the year through the issue of press releases. The Directors meet with
institutional shareholders following interim and final results, as required.
The Company also maintains company information on its website -
www.cobracapital.net. Shareholders have the opportunity to meet the Board at
the AGM. The Board is also happy to respond to any written queries made by
shareholders during the course of the year.
Internal Control
The Directors of the Company have overall responsibility for the Company's
system of internal control. Internal control systems are designed to meet the
particular needs of the Company and the risks to which it is exposed. By their
nature these controls can provide reasonable but not absolute assurance against
material misstatement or loss.
The Board's appointment of Fortis Fund Services (Guernsey) Limited for financial
administration and Cosign Limited as Company Secretary has delegated much of the
administration of the Company to Fortis Fund Services (Guernsey) Limited which
has an established system of control, including internal financial controls, to
enable it to ensure that proper accounting records are maintained and that
financial information for use within the business and for reporting to
shareholders is accurate and reliable and that the Company's assets are
safeguarded. This delegation of administration by the Board, and the use of
Fortis Fund Services (Guernsey) Limited and Cosign, is monitored by the Board
with regards to its appropriateness and with regard to the performance of these
companies in carrying out their work on behalf of Cobra.
Portfolio Risk
The Company's assets comprise mainly investments in smaller businesses which, by
their nature, tend to be more fragile than larger, longer established
businesses. In addition these investee companies are sometimes under-going
significant change and therefore they are usually exposed to greater risks than
more stable businesses. The Company's investments may therefore change in nature
quickly with such changes not being immediately reflected in the Company's
valuation of the investment. In addition investments may be difficult to realise
and there is therefore a risk that the Company may not be able to exit fully
from an investment at the current valuation.
Results and Dividends
The results of the Company for the year are set out in this announcement. No
dividends have been paid or are proposed.
Directors' Responsibilities
Company law requires the Directors to prepare financial statements for each
financial period which give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that period. In preparing
those financial statements, the Directors are required to:
* Select suitable accounting policies and then apply them consistently;
* Make judgements and estimates that are reasonable and prudent;
* State whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements; and
* Prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements have been
properly prepared in accordance with the Companies (Guernsey) Law, 1994. In
addition the Directors are responsible for ensuring that the annual report
includes information required by the AIM Rules. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
Financial statements are published on the Company's website. The maintenance
and integrity of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity of the
financial statements contained therein.
Auditors
A resolution to reappoint BDO Novus Limited as auditors will be proposed at the
next Annual General Meeting.
Going Concern
After due consideration, the Directors believe that the Company has adequate
resources for the period of at least 12 months from the date of approval of the
financial statements, and consequently that it is appropriate to apply the going
concern principle in preparing the financial statements.
Activities
The Company was incorporated on 27 February 2004 and was admitted to trading on
AIM on 24 March 2004.
The principal activity of the Company is the investment, holding and sale of
equity investments in companies which are located in Europe.
Creditors Payment Policy and Practice
It is the Company's payment policy and actual practice to ensure settlement of
suppliers' invoices in accordance with the stated terms of the invoices.
STATEMENT OF TOTAL RETURN
FOR THE YEAR ENDED 31 DECEMBER 2006
For the year ended For the year ended
31 December 2006 31 December 2005
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
GAINS ON INVESTMENTS
Net realised gains - 435,512 435,512 - 577,323 577,323
Net unrealised gains/losses - 757,633 757,633 - (103,203) (103,203)
- 1,193,145 1,193,145 - 474,120 474,120
INCOME
Investment income 778 - 778 14,268 - 14,268
Bank interest 11,012 - 11,012 8,214 - 8,214
Loan interest received - - - 4,525 - 4,525
11,790 - 11,790 27,007 - 27,007
EXPENDITURE
Directors' fees 4,000 - 4,000 3,000 - 3,000
Administration fees 63,407 - 63,407 50,811 - 50,811
Professional fees 82,114 - 82,114 47,101 - 47,101
Consultancy fees - 134,540 134,540 - 118,359 118,359
Audit fee 8,090 - 8,090 4,300 4,300
IAP expenses - - - 1,483 - 1,483
Registrar and regulatory 16,286 - 16,286 17,621 - 17,621
expenses
Share options granted - 20,000 20,000 - 40,000 40,000
Sundry expenses 700 - 700 - - -
Bank charges and interest 33,363 - 33,363 9,199 - 9,199
Loss on exchange 4,528 - 4,528 19,225 - 19,225
212,488 154,540 367,028 152,740 158,359 311,099
NET RETURN ON ORDINARY (200,698) 1,038,605 837,907 (125,733) 315,761 190,028
ACTIVITIES FOR THE FINANCIAL
YEAR BEFORE TAXATION
Withholding tax suffered (78) - (78) (867) - (867)
NET RETURN ON ORDINARY (200,776) 1,038,605 837,829 (126,600) 315,761 189,161
ACTIVITIES FOR THE FINANCIAL
YEAR AFTER TAXATION
Earnings per share - basic (2.28)p 11.81p 9.53p (1.46)p 3.63p 2.18p
diluted
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the year.
BALANCE SHEET
31 DECEMBER 2006
31 December 2006 31 December 2005
FIXED ASSETS
Quoted investments 3,745,800 3,252,325
Unquoted investments 1,300,000 600,000
5,045,800 3,852,325
CURRENT ASSETS
Cash at bank and broker 20,958 160,093
CREDITORS - AMOUNTS FALLING
DUE WITHIN ONE YEAR
Loans payable and overdraft 568,716 199,175
Sundry creditors 15,873 105,706
584,589 304,881
NET CURRENT LIABILITIES (563,631) (144,788)
TOTAL ASSETS LESS CURRENT LIABILITIES GBP 4,482,169 GBP 3,707,537
CAPITAL AND RESERVES
CALLED UP SHARE CAPITAL 87,932 87,932
SHARE PREMIUM ACCOUNT 3,502,568 3,502,568
CAPITAL RESERVE
REALISED 567,025 497,041
UNREALISED 906,214 20,790
SHARE OPTION RESERVE 60,000 40,000
REVENUE RESERVE (641,570) (440,794)
SHAREHOLDERS' FUNDS GBP 4,482,169 GBP 3,707,537
Net asset value per share 50.97p 42.16p
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006
For the year ended For the year ended
31 December 2006 31 December 2005
Net cash outflow from operating (425,149) (156,275)
activities
Investing activities:
Purchase of listed securities (4,554,767) (2,188,635)
Purchase of unlisted securities (1,550,000)
-
Proceeds from disposals of listed securities 4,471,240 2,847,812
Loans receivable repaid 174,668
-
Net cash outflow from investing (83,527) (716,155)
activities
Financing:
Issue of own shares 205,500
-
Loans payable advanced 369,541 199,175
Net cash inflow from financing 369,541 404,675
Decrease in cash for the year GBP (139,135) GBP (467,755)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
Decrease in cash for the year (139,135) (467,755)
Cash inflow from increase in debt financing (369,541) (199,175)
Change in net debt resulting from cash flows (508,676) (666,930)
Net debt/funds bought forward (39,082) 627,848
Net debt carried forward GBP (547,758) GBP (39,082)
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2006
1. SIGNIFICANT NEW FINANCIAL REPORTING STANDARDS
FRS 26 requires that listed investments are valued at bid price, whereas previously listed
investments were valued at middle market price. The Company has applied the transitional
provisions of FRS 26 and has not restated the comparative figures for this change in accounting
policy. Had the entity restated the comparative figures the investments held at 31 December 2005
would have been valued on a bid basis which would have resulted in the reported total assets at
that date being reduced by GBP83,197.
In accordance with the transitional provisions of FRS 26 the adjustments between the value of
investments at the prior balance sheet date and the opening balance sheet at the start of this
financial period has been treated as an adjustment against the company's opening reserves - see
note 12.
2. ACCOUNTING POLICIES
(a) CONVENTION
The financial statements have been prepared under the historical cost convention, modified to
include the revaluation of investments and in accordance with applicable accounting standards and
with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies"
issued by The Association of Investment Trust Companies in December 2005. The principal
accounting policies which the Directors have adopted within that convention are set out below.
(b) INCOME
Dividends receivable from quoted equity investments are recognised on the ex-dividend date.
Dividends receivable from equity investments where no ex-dividend date is quoted are recognised
when the company's right to receive payment is established. Interest receivable on cash deposits
is accounted for on an accruals basis.
(c) FOREIGN CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies other than sterling have been translated
into sterling at the rates of exchange ruling at the balance sheet date. Transactions during the
period have been translated at the rates of exchange ruling at the date of the transaction.
(d) VALUATION OF INVESTMENTS
Quoted investments are valued at bid price.
Unquoted investments are valued by the Board according to the valuation principles of the European
Private Equity and Venture Capital Association as set out in the International Private Equity and
Venture Capital Valuation Guidelines (published June 2005, amended October 2006) and accordingly
are stated at the value of their latest third party funding. Where no third party funding has
taken place, they are valued at cost, less a provision for impairment when necessary.
Realised gains or losses on the disposal of investments are taken to the capital reserve -
realised. Unrealised gains or losses on revaluation of investments are taken to the capital
reserve - unrealised.
(e) EXPENDITURE
All expenses are accounted for on an accruals basis. Expenses are charged through the Statement of
Total Return.
Expenses that are directly attributable to the management of investments are allocated directly to
capital in the Statement of Total Return. With the Directors' long term target for returns on
investments being entirely from capital gains there is no requirement to apportion these expenses
between revenue and capital.
3. TAXATION
The company has been granted exempt status under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989,
and is therefore subject to the payment of an annual fee which is currently GBP600.
4. QUOTED INVESTMENTS 31 December 2006 31 December 2005
At cost GBP 3,939,587 GBP 3,531,535
At market value GBP 3,745,800 GBP 3,252,325
5. UNQUOTED INVESTMENTS 31 December 2006 31 December 2005
At cost GBP 200,000 GBP 300,000
At market value GBP 1,300,000 GBP 600,000
6. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the return on ordinary activities after tax for
the year and on 8,793,300 (2005: 8,694,233) being the weighted average number of shares in issue during
the year. There is no difference between basic earnings per share and diluted earnings per share as the
100,000 share options in issue were antidilutive for the year.
7. NET ASSET VALUE PER SHARE
The calculation of net asset value is based on the net assets of GBP4,482,169 (2005: GBP3,707,537) and on
the ordinary shares in issue of 8,793,200 (2005: 8,793,200) at the balance sheet date.
8. LOAN PAYABLE
The loan facility provided by Hollandsche Bank-Unie N.V (HBU), with a balance of Euro698,861 (GBP469,145) at
the balance sheet date, is secured on the Company's investment portfolio held in their custody, is
repayable on demand and bears interest at 3% above the Euro base rate of HBU (2.75% at 31 December 2005).
The bank overdraft with Penson Financial Services Limited (Penson), with a balance of GBP99,571 at the
balance sheet date, is unsecured, repayable on demand and bears interest at 6% above the UK base rate.
9. CASH FLOW NOTES
(a) RECONCILIATION OF NET RETURN BEFORE TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
For the year ended For the year ended
31 December 2006 31 December 2005
Net revenue return on ordinary activities for (200,698) (125,733)
the financial year before tax
Expenses charged to capital (154,540) (158,359)
Overseas withholding tax suffered (78) (867)
Decrease in operating debtors - 5,973
(Decrease)/increase in operating (89,833) 82,711
creditors
Share based payments 20,000 40,000
Net cash outflow from operating GBP (425,149) GBP (156,275)
activities
(b) ANALYSIS OF NET DEBT
At 1 January 2006 Cashflow At 31 December 2006
Cash at bank and broker 160,093 (139,135) 20,958
Loans payable (199,175) (369,541) (568,716)
GBP (39,082) GBP (508,676) GBP (547,758)
10. CALLED UP SHARE CAPITAL 31 December 2006 31 December 2005
Authorised
50,000,000 ordinary shares of GBP0.01 each GBP 500,000 GBP 500,000
Allotted and fully paid
8,793,200 ordinary shares of GBP0.01 GBP 87,932 GBP 87,932
each
11. SHARE PREMIUM ACCOUNT
As at 1 January 2006 and 31 December 2006 GBP 3,502,568
12. RESERVES Capital Capital Share Revenue
Reserve Reserve Option Reserve Total
- - Reserve
Unrealised
Realised
Balance at 1 January 2006 497,041 20,790 40,000 (440,794) 117,037
Impact of implementation of FRS 26 (83,197) (83,197)
(note1) - - -
Net return for the financial year 280,972 757,633 (200,776) 837,829
-
Transfer from unrealised reserves to (210,988) 210,988
realised reserves on disposal of - - -
quoted investments
Value of options granted during the 20,000 20,000
year ended 31 December 2006 (see - - -
note 15)
Balance at 31 December 2006 567,025 906,214 60,000 (641,570) 891,669
13. RECONCILIATION OF MOVEMENTS IN For the year ended For the year ended
SHAREHOLDERS' FUNDS 31 December 2006 31 December 2005
Net return for the financial year 837,829 189,161
Impact of implementation of FRS 26 (note1) (83,197)
-
754,632 189,161
New share capital subscribed (net of - 205,500
commissions)
Effect of share based payments in the year 20,000
40,000
Net addition to shareholders' funds 774,632
434,661
Opening shareholders' funds 3,707,537 3,272,876
Closing shareholders' funds GBP 4,482,169 GBP 3,707,537
14. RELATED PARTY TRANSACTIONS
On 9 March 2004 and as disclosed in the AIM Admission Document dated 18 March 2004, Dendemite Limited
entered into a consultancy agreement with the Company under the terms of which Dendemite agreed to provide
the consultancy services of Jonathan Freeman, a Director, as a consultant to the Company to investigate
potential investments and provide reports thereon. During the year the above consultancy agreement was
assigned to Combined Management Services Limited ("CMS"). CMS has charged the Company GBP109,395 for
these services during the year ended 31 December 2006. Jonathan Freeman owns 50% of CMS.
15. SHARE OPTIONS
Outstanding at 31 December 2005 80,000
Granted during the year 20,000
Forfeited during the
year -
Exercised during the
year -
Expired during the year
-
Outstanding at 31 December 2006 100,000
Share options are held by former members of the Investment Advisory Panel who did not receive any fees for
their services. The options were granted every six months to subscribe for such number of ordinary shares
as considered appropriate by the Board, typically being approximately equal to GBP10,000 in value per
annum at the market value of Ordinary Shares at the exercise price.
In accordance with FRS 20, options granted during the year have been valued at GBP20,000 in total, based
upon the Directors' estimate of the market value of the services provided by the former members of the
Investment Advisory Panel. This amount has been charged to the Statement of Total Return and an
equivalent amount has been credited to the Share Option Reserve (see note 12).
As of 31 December 2006 the share options that have been issued by the Company are as follows:
J.P.D.Geertman, former Chairman of the IAP
Options over 10,000 shares exercisable at 50 pence per share from 18 September 2004 to 10 September 2014
Options over 10,000 shares exercisable at 52.5 pence per share from 18 March 2005 to 27 September 2014
Options over 20,000 shares exercisable at 39 pence per share from 26 March 2006 to 26 September 2016
Options over 10,000 shares exercisable at 30.17 pence per share from 26 November 2006 to 26 May 2016
Gambit Corporate Finance (on behalf of G.H.H.Ainsworth, former Member of the IAP)
Options over 10,000 shares exercisable at 50 pence per share from 18 September 2004 to 10 September 2014
Options over 10,000 shares exercisable at 52.5 pence per share from 18 March 2005 to 27 September 2014
Options over 20,000 shares exercisable at 39 pence per share from 26 March 2006 to 26 September 2016
Options over 10,000 shares exercisable at 30.17 pence per share from 26 November 2006 to 26 May 2016
16. FINANCIAL INSTRUMENTS
(i) Management of risk
The Company's financial assets and liabilities comprise:
- Equity shares that are held in accordance with the Company's investment objective as set out in
the Directors' Report
- Cash and short term debtors and creditors that arise directly from the Company's operations.
The main risks arising from the Company's financial instruments are due to fluctuations in market prices,
foreign exchange rates and interest rates. The Board regularly reviews and agrees policies for managing
each of these risks and they are summarised below. These policies have remained constant throughout the
period under review.
Market price risk
Market price risk arises mainly from uncertainty about the future prices of financial instruments used in
the Company's operations. It represents the potential loss the Company might suffer through holding market
positions in the face of price movements and movements in exchange rates. It is the Board's policy to hold
an appropriate spread of investments in the portfolio in order to reduce risk arising from factors
specific to a particular country or sector. The allocation of assets to international markets and stock
selection are other factors which act to reduce market price risk. The Investment Advisory Panel monitors
market prices throughout the year and reports to the Board, which meets regularly to consider investment
strategy.
Foreign currency risk
The Company's total return and net assets can be significantly affected by fluctuations in foreign
currency exchange rates because a portion of the Company's assets and revenue are denominated in
currencies other than sterling. The Board carefully monitors the Company's exposure to exchange risk and
if it feels it necessary will utilise appropriate hedging strategies.
Liquidity risk
The Company's assets comprise mainly readily realisable securities which can be sold to meet funding
commitments as necessary.
Credit risk
The Company places funds with authorised deposit takers from time to time and is therefore potentially at
risk from the failure of any such institution of which it is a creditor. The company expects to place any
deposits on a short term basis and where possible with more than one institution to reduce its credit
risk.
(ii) Interest rate risk of financial assets and
liabilities
The majority of the Company's financial assets are equity shares and other investments which neither pay
interest nor have a stated maturity date.
The level of the Company's borrowings from HBU and Penson at 31 December 2006 is GBP568,716 and, as
disclosed in note 8, the HBU loan bears interest at 3% above the Euro base rate of HBU (2.75% at 31
December 2005). The overdraft with Penson bears interest at 6% above the base rate of the Bank of England.
(iii) Currency exposure
A portion of the financial assets of the company are denominated in currencies other than sterling with
the effect that the net assets and total return can be significantly affected by currency movements.
Currency Quoted Loan
investments payable Total
Euro GBP 139,834 (469,145) GBP (329,311)
(iv) Fair values of financial assets
All of the financial assets of the Company are held at fair value, as shown in notes 4 and 5.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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