RNS Number:4581J
Equity Pre-IPO Investments Ltd
26 September 2006
EQUITY PRE-IPO INVESTMENTS LIMITED
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006
Equity Pre-IPO Investments Limited ("Pre IPO" or "the Company"), the AIM-traded
strategic investment company, is pleased to announce its unaudited results for
the six months ended 30 June 2006. Some additional information is also provided
for the period up to 20 September 2006.
Highlights:
* Net asset value at 30 June 2006 of 42.27 pence per share (42.73 pence as
at 20 September 2006)
* Seven investments held at 30 June 2006 (six investments held as at 20
September 2006, all of which are unquoted)
* Successful exit from all quoted investments held at the beginning of the
year
* Investment philosophy remains consistent with a focus on pre IPO
financings
Martin Shires, Director of Pre IPO, commented:
"Our overall aim with Pre IPO is to invest in companies that we believe will be
floated within a short period of time and, once public, to ensure a managed exit
from those investments in order to reinvest the proceeds in new companies
nearing their own IPO. We believe that this business model is now proven,
having now completed the first 12 - 15 month investment cycle of a number of
companies.
At the beginning of the year we set a target to exit completely from at least
two of our quoted investments and we are pleased to announce that we have
exceeded our expectations, having recently completed the exit from all three of
the quoted investments that we held at the beginning of the year. We look
forward to the rest of the year with confidence".
For further information:
Martin Shires, 01481 751 000
Director, Equity Pre-IPO Investments Limited
EQUITY PRE-IPO INVESTMENTS LIMITED
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006
Directors Review
We are delighted to present our second set of interim results to shareholders.
It shows the financial performance of the Company from 1 January 2006 to 30 June
2006. In addition we have included some further information for the period up
to 20 September 2006.
Net Asset Value
The Company's Net Asset Value ("NAV") at the start of the period, 1 January
2006, was 44.19 pence per share and as at 30 June 2006 stood at 42.27 pence per
share. Whilst there has been little change in the NAV to 20 September 2006
(42.73 pence per share), this represents an increase in NAV of some 51.8 per
cent. since the Company floated with a NAV of 28.14 pence per share on 24
February 2005 and a significantly better performance than that of the AIM
All-Share Index which has fallen around 10 per cent. over the same period. The
investment strategy of Pre IPO is such that the NAV will often experience
periods of minimal movement followed by one off events that trigger material
changes.
The Company's NAV currently comprises investments in six unquoted companies and
a cash balance and other current assets of #100,649.
Investments
As at 30 June 2006 we held investments in a total of seven companies and as of
20 September 2006 we held investments in a total of six companies. At the
beginning of the year we held a portfolio of nine investments, six of which were
unquoted and three were quoted. At that time, we stated that our target for the
end of 2006 was to exit completely from at least two of the quoted investments
and for at least three of the unquoted companies to have floated.
I am pleased to report that we have now successfully exited from all of our
quoted investments, the investment in the remaining quoted investment having
been sold as recently as last month.
The six current unquoted investments are in companies operating in the financial
services, technology and property sectors. Three of these investments are valued
at cost and the other three have been re-valued to the value of their last
material third party funding round. All three of these re-valuations are at a
premium to the valuation at which Pre IPO invested.
The slowdown in the IPO market that was experienced over the last few months has
delayed the expected flotation of some of our portfolio companies. As a result,
we recently participated in follow-on investment rounds in two companies within
the portfolio, totalling approximately #1.0 million. Notwithstanding this, two
of the companies in the portfolio have appointed brokers in preparation for
their flotation either later this year or early next year. We do not therefore
believe that it will be possible to achieve three floats from the portfolio
before the end of the year, but are hopeful that this will be achieved shortly
thereafter.
Funding
We believe that the Company should have access to additional funds in order that
the number of companies within the investment portfolio can be increased. We
have however concluded that it is unwise, and probably not practical, to raise
debt finance for Pre IPO as the security available is unquoted. We believe
therefore that we will continue to rely on a combination of organic growth and
additional equity finance to expand the business further. We have explored the
possibility of raising further equity finance with our advisors and will
continue to do so.
Outlook
As a result of the progress that has been made with our investment portfolio
since the beginning of the year, we are very excited about the next twelve
months, in particular the prospect of realising some material uplifts in
valuations. We believe that Pre IPO's business model is now a proven one and we
look forward to the next phase in the Company's growth with confidence.
Martin Shires
Paul Schreibke
26 September 2006
EQUITY PRE-IPO INVESTMENTS LIMITED
STATEMENT OF TOTAL RETURN
FOR THE SIX MONTHS ENDED 30 JUNE 2006
For the six month period For the six month period For the year ended
ended 30 June 2006 ended 30 June 2005 31 December 2005
(unaudited) (unaudited) (audited)
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
# # # # # # # # #
GAINS ON
INVESTMENTS
Net realised
gains - 535,241 535,241 - - - - 321,296 321,296
Net (decrease)/
increase in
reserve for
unrealised
gains - (524,863) (524,863) - 89,765 89,765 - 1,590,650 1,590,650
- 10,378 10,378 - 89,765 89,765 - 1,911,946 1,911,946
INCOME 2
Investment
income - - - - - - 3,238 - 3,238
Bank interest 781 - 781 19,425 - 19,425 25,050 - 25,050
781 - 781 19,425 - 19,425 28,288 - 28,288
EXPENDITURE 2
Directors' fees 10,000 - 10,000 6,666 - 6,666 16,666 - 16,666
Administration
fees 30,707 - 30,707 - 24,863 24,863 44,650 - 44,650
Professional
fees - 37,645 37,645 32,566 - 32,566 - 72,932 72,932
AIM admission
expenses - - - 227,823 - 227,823 238,081 - 238,081
Consultancy
fees - 94,672 94,672 - 50,042 50,042 - 117,651 117,651
Audit fee 5,650 - 5,650 2,500 - 2,500 3,000 - 3,000
Bank charges
and interest 3,273 - 3,273 1,214 - 1,214 2,550 - 2,550
Sundry expenses 3,100 - 3,100 3,487 - 3,487 1,430 - 1,430
Regulatory
and
registration
fees 12,705 - 12,705 - - - 13,767 - 13,767
Commission paid 3,288 - 3,288 - - - - - -
68,723 132,317 201,040 274,256 74,905 349,161 320,144 190,583 510,727
NET RETURN ON
ORDINARY
ACTIVITIES FOR
THE FINANCIAL
PERIOD/YEAR (67,942) (121,939) (189,881) (254,831) 14,860 (239,971) (291,856) 1,721,363 1,429,507
Return per
share - basic
and diluted
(pence) (0.51) (0.92) (1.43) (3.06) (0.18) (2.88) (2.85) 16.81 13.96
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the period.
A reconciliation of movements in shareholders' funds is set out in note 12 to the financial statements.
The notes form an integral part of these financial statements.
EQUITY PRE-IPO INVESTMENTS LIMITED
BALANCE SHEET
30 JUNE 2006
Note 30 June 2006 30 June 2005 31 December 2005
(unaudited) (unaudited) (audited)
FIXED ASSETS # # # # # #
Quoted investments 4 1,102,261 597,264 2,054,118
Unquoted investments 5 4,559,876 1,478,107 3,722,050
5,662,137 2,075,371 5,776,168
CURRENT ASSETS
Cash at bank and broker 2,319 688,065 101,668
2,319 688,065 101,668
CREDITORS - AMOUNTS FALLING
DUE WITHIN ONE YEAR
Sundry creditors 8 68,548 11,500 28,178
68,548 11,500 28,178
NET CURRENT ASSETS (66,229) 676,565 73,490
TOTAL ASSETS LESS CURRENT # 5,595,908 # 2,751,936 # 5,849,658
LIABILITES
CAPITAL AND RESERVES
CALLED UP SHARE CAPITAL 10 132,372 97,833 132,372
SHARE PREMIUM ACCOUNT 4,254,872 2,861,167 4,254,872
CAPITAL RESERVE
REALISED 11 533,637 (74,905) 130,713
UNREALISED 11 1,053,418 141,265 1,642,150
REVENUE RESERVE 11 (378,391) (273,424) (310,449)
SHAREHOLDERS' FUNDS 12 # 5,595,908 # 2,751,936 # 5,849,658
Net asset value per share 7 & 15 42.27 p 28.13 p 44.19 p
The notes form an integral part of these financial statements.
EQUITY PRE-IPO INVESTMENTS LIMITED
CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2006
Six month Six month Year ended
period ended period ended 31 December
30 June 2006 30 June 2005 2005
(unaudited) (unaudited) (audited)
Notes
Net cash outflow from operating 9 (159,889) (323,486) (459,511)
activities
Investing activities:
Purchase of quoted investments (451,999) (451,999)
-
Purchase of unquoted investments (837,825) (848,107) (2,796,893)
Proceeds from disposals of quoted 898,365
investments - 960,948
Net cash inflow/(outflow) from financial 60,540 (1,300,106) (2,287,944)
investment
Financing:
Issue of own shares - 2,300,000 2,859,860
Commission on new share issues - - (22,394)
Net cash inflow from financing - 2,300,000 2,837,466
(Decrease)/increase in cash resources # (99,349) # 676,408 # 90,011
for the period/year
RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET FUNDS
(Decrease)/increase in cash resources (99,349) 676,408 90,011
for the period/year
Opening net funds 101,668 11,657 11,657
Closing net funds # 2,319 # 688,065 # 101,668
The notes form an integral part of these
financial statements.
EQUITY PRE-IPO INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
30 JUNE 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 #63,869.
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 January 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 British Venture Capital
Association 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.
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 except where the expense is incidental to the
acquisition or disposal of an investment in which case the expense is added to the
cost of the investment or deducted from the sale proceeds.
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 capital gain 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
#600.
4. QUOTED INVESTMENTS 30 June 2006 30 June 2005 31 December 2005
At cost # 1,140,270 # 455,999 # 1,503,395
At market value # 1,102,261 # 597,264 # 2,054,118
5. UNQUOTED INVESTMENTS
At cost # 3,468,449 # 1,478,107 # 2,630,623
At Directors' # 4,559,876 # 1,478,107 # 3,722,050
valuation
6. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the net return on ordinary activities
after tax for the year and on 13,237,235 (six month period ended 30 June 2005: 8,326,981, year
ended 31 December 2005: 10,238,759) shares being the weighted average number of shares in
issue during the year.
The calculation of diluted earnings per share is based on the net return on ordinary
activities after tax for the year and on 13,237,235 (six month period ended 30 June 2005:
8,326,981, year ended 31 December 2005: 10,238,759) shares being the weighted average number
of shares in issue during the year adjusted for any dilutive effect of the share options.
7. NET ASSET VALUE
The calculation of net asset value is based on the net assets of #5,595,908 (30 June 2005:
#2,751,936, 31 December 2005: #5,849,658) and on the ordinary shares in issue of 13,237,235
(30 June 2005: 9,783,335, 31 December 2005: 13,237,235) at the balance sheet date.
8. SUNDRY CREDITORS 30 June 2006 30 June 2005 31 December 2005
(unaudited) (unaudited) (audited)
Audit fees 2,500 3,000
1,000
Consultancy / directors fees 14,717
45,546 -
Professional fees 1,520
12,945 -
Administration fees 9,057 9,000 8,941
# 68,548 # 11,500 # 28,178
9. RECONCILIATION OF REVENUE RETURN TO OPERATING CASH FLOW
30 June 2006 30 June 2005 31 December 2005
(unaudited) (unaudited) (audited)
Net return on ordinary (67,942) (254,831) (291,856)
activities for the
financial period before
taxation
Expenses charged to (132,317) (74,905) (190,583)
capital
Increase in creditors 40,370 6,250 22,928
Net cash outflow from # (159,889) # (323,486) # (459,511)
operating activities
10. CALLED UP SHARE CAPITAL 30 June 2006 30 June 2005 31 December 2005
(unaudited) (unaudited) (audited)
Authorised
50,000,000 ordinary shares # 500,000 # 500,000 # 500,000
of #0.01 each
Allotted and fully
paid
13,237,235 ordinary shares (30 # 132,372 # 97,833 # 132,372
June 200: 9,783,335, 31
December 2005: 13,237,235) of
#0.01 each
11. RESERVES Capital Capital Revenue
Reserve Reserve Reserve Total
- Realised - Unrealised
Balance at 1 January 130,713 1,642,150 (310,449) 1,462,414
2006
Impact of implementation of FRS 26 - (63,869) - (63,869)
(note 1)
Revised reserves at 1 January 130,713 1,578,281 (310,449) 1,398,545
2006
Net Return for the financial (132,317) - (67,942) (200,259)
period
Net realised gains/ 535,241 - - 535,241
(losses)
Net unrealised gains/(losses) - (524,863) - (524,863)
Balance at 30 June # 533,637 1,053,418 (378,391) 1,208,664
2006
12. RECONCILIATION OF MOVEMENTS IN
SHAREHOLDERS' FUNDS 30 June 30 June 2005 31 December 2005
2006
(unaudited) (unaudited) (audited)
Net return for the financial (189,881) (239,971) 1,429,507
period/year
Dividends paid (net) - - -
(189,881) (239,971) 1,429,507
Net proceeds of new share capital - 2,300,000 3,728,244
subscriptions
Net (reduction in)/addition to (189,881) 2,060,029 5,157,751
shareholders' funds
Balance brought 5,849,658 691,907 691,907
forward
Impact of implementation of FRS (63,869) - -
26 (note 1)
Closing # 5,595,908 # 2,751,936 # 5,849,658
shareholders' funds
13. RELATED PARTY TRANSACTIONS
On 9 February 2005 and as disclosed in the AIM Admission Document dated 18 February 2005,
Combined Management Services Limited ("CMS") entered into a services agreement with the
Company under the terms of which CMS agreed to provide research, consultancy, office
management and administration services to the Investment Advisory Panel. A total of #44,747
has been paid to CMS for the period to 30 June 2006 (#81,183 for the year to 31 December
2005). Jonathan Freeman owns 50% of CMS.
14. FINANCIAL INSTRUMENTS
(i) Management of risk
The Company's financial instruments comprise:
- Equity shares that are held in accordance with the Company's investment objective as
set out in the Director's Statement
- 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 monitor market
prices throughout the year and report 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.
Liquidity risk
The Company's assets comprise mainly readily realisable securities which can be sold to meet
funding commitments of 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
The majority of the Company's financial assets are equity shares and other investments which
neither pay interest nor have a stated maturity date.
(iii) Currency exposure
A portion of the financial assets of the 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 Investments Cash at bank Total
Euro # 359,803 # - # 359,803
US Dollar # - # 944 # 944
(iv) Fair values of financial assets
All of the financial assets of the Company are held at fair value, as shown in notes 3 and
4.
15. REPORTED NET ASSET VALUE (NAV)
The NAV reported to the market shortly after 30 June 2006 was 43.08p. These financial
statements are based on the Company's unaudited records, and reflect all known debtors and
creditors as accrued at the balance sheet date. Net assets at the balance sheet date have also
been valued at bid price, in accordance with FRS 26, whereas the NAV reported to the market
shortly after 30 June 2006 reflected mid market values. Accordingly, these accruals and the
difference in accounting procedures are the reason for the difference in the estimated NAV
reported, and these unaudited financial statements.
Copies of the unaudited interim results for the six months ended 30 June 2006 are being sent to
shareholders. Further copies will be available, free of charge for the period of one month,
from the Company Secretary's office: Cosign Limited, Martello Court, Admiral Park, St Peter
Port, Guernsey, GY1 3HB.
This information is provided by RNS
The company news service from the London Stock Exchange
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