Final Results
29 1월 2004 - 12:18AM
UK Regulatory
RNS Number:7425U
Pennine Downing Ethical VCT PLC
28 January 2004
PENNINE DOWNING ETHICAL VCT PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2003
NAV/ Total
return to
date 2003 2002
pence pence pence
Net asset value per share 46.70 46.70 52.10
Total dividends per ordinary share 1.25 Nil Nil
Total return 47.95
Revenue return / (loss) per ordinary share 0.22 (0.03)
Net assets #5.1 million #5.7 million
The statement to shareholders by the Chairman, Andrew Davison, includes the
following comments:
Introduction
The year to 30 September 2003 has been another disappointing one for your
Company. At the year end the Company's Net Asset Value ("NAV") stood at 46.7p
per share, a fall of 5.4p per share (10.4%) since the previous year end. Over
the same period the FTSE AIM index fell by 19.5%.
Performance
The Board have been very disappointed with the performance of the Company since
launch. In order to comply with VCT regulations, the Company had to invest at
least 70% of its funds in qualifying venture capital investments within the
first three years of its life. Conditions for investing during this period were
particularly poor, with the fallout from the "dotcom boom" having a detrimental
effect on many of the Company investees.
The Board have reviewed the performance of the separate portfolios. The results
are summarised below:
Total Cost Valuation of Profit/ Total Gain / Pence per
current (loss) (loss) share
inv'mnts realised
inv'mnts
"Unquoted portfolio" 4,675 634 (2,553) (3,846) (34.9)
"AIM portfolio" 4,725 2,279 166 (1,218) (11.0)
Fixed Interest 4,619 1,791 (14) (2) (0.1)
14,019 4,704 (2,401) (5,066) (46.0)
Although the "AIM portfolio", managed by Rathbone Investment Management, shows a
significant loss, it should be assessed against the FTSE AIM index, which has
fallen 55.4% since launch. Against this background the Board consider that the
performance of this portfolio has been satisfactory.
The "unquoted portfolio", managed by Classic Fund Management, shows a much
poorer performance and has been the main contributor to the fall in the
Company's NAV. Of the 31 companies in this portfolio in which investments have
been made, 14 have now failed and a remaining six have been written down to nil
value. The portfolio has nine remaining investments that still have valuations
above nil. Of particular concern is that the potential upside for the remaining
investments is probably limited.
As I mentioned in my statement last year, the Board has given every
encouragement to the Investment Managers to improve performance. In particular,
they have been heavily incentivised by way of management fees that can be earned
under their agreements. Unfortunately this has not been sufficient to produce a
satisfactory improvement in the performance of the "unquoted portfolio".
In view of these facts, on 7 November 2003, the Board gave notice to terminate
the Investment Management agreement with Classic Fund Management at the earliest
possible date, being 5 April 2005. The Board has made efforts to negotiate an
earlier termination of the contract, but a satisfactory outcome has yet to be
reached. The Board will report any significant progress in this matter to
Shareholders as it arises.
Venture capital investments
During the year, the Company invested in two new and seven follow-on investments
totalling #522,000.
The Company made two partial realisations and two full realisations during the
year, generating a net profit against market value of #58,000.
Investments listed on AIM are valued at mid-market value. Unquoted investments
have been valued by the Directors, in accordance with the BVCA guidelines. Ten
investee companies failed and went into liquidation during the year. Such
investments have been fully written off and treated as realised losses within
the accounts. The impact of these failures is a net loss against cost of #2.1
million, of which #1.8 million had been provided against in 2002.
Ethical Committee
The Ethical Committee has continued to monitor investee companies to ensure
compliance with the Ethical Policy.
Listed fixed income securities
At the year end, the Company had a portfolio of listed fixed income securities
with a cost of #1.7 million. Four investments were realised during the year,
giving rise to losses of #7,000 against market value. This portfolio is managed
by Rathbone Investment Management Limited.
Results and dividend
Gross revenue for the year was #181,000 (2002: #181,000) and net revenue after
taxation was #25,000 (2002: loss #3,000).
Many investee companies are not mature enough to be in a position to pay
dividends. As a result, the Company's revenue for the year has not been
sufficient to consider paying a final dividend and it is unlikely that revenue
dividends will be paid in the near future. Any future dividends are likely to
arise from profitable disposals of investee companies, which will allow the
Directors to consider distributing these profits to Shareholders.
Share repurchase
The Board is conscious that the Company's share price is affected by the
illiquidity of its shares in the market, which is largely a result of the
requirement that most shareholders must retain their shares for at least five
years in order to retain their tax benefits. In line with accepted practice
with VCTs, the Company has authorisation to purchase its own shares. The Company
purchased 21,667 shares during the year at an average price of 39.5p per share.
Annual General Meeting
The fourth Annual General Meeting of the Company will be held at 69 Eccleston
Square, London SW1V 1PJ at 11am on 4 March 2004.
Three items of Special Business are proposed in the Notice of Meeting:
* to authorise the Directors to allot shares;
* to disapply pre-emption rights; and
* to renew the Company's authority to purchase up to 1,102,906
ordinary shares in the market, representing approximately 10% of
the current issued ordinary share capital.
Publication of share price
The Company's share price is quoted in the Financial Times on a daily basis in
the "Investment Companies" sector.
Outlook
Since April 2003, stock markets have started to show a steady increase in
prices. The FTSE AIM Index, in particular, continues to move higher and has
given the Board confidence that the "AIM portfolio" has good potential to
provide a satisfactory outcome for Shareholders. The potential of the remaining
investments in the "unquoted portfolio" is probably limited, although this now
represents a small proportion of the Company's assets.
The Board's main focus is in working with Rathbone Investment Management to
ensure that the "AIM portfolio" takes full advantage of the improved investment
conditions. The Board is, however, also keen to find a satisfactory solution to
the situation with Classic Fund Management, that, under the circumstances, is in
the best interests of Shareholders. I hope to be able to report positive news
in due course.
Andrew Davison
Chairman
STATEMENT OF TOTAL RETURN (incorporating the revenue account)
for the year ended 30 September 2003
Year ended 30 September 2003 Year ended 30 September 2002
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Losses on investments
- realised - (327) (327) - (6) (6)
-unrealised - (255) (255) - (2,028) (2,028)
Income 181 - 181 181 - 181
Investment management fees (14) (42) (56) (25) (75) (100)
Other expenses (142) (3) (145) (159) - (159)
Return on ordinary
activities before tax 25 (627) (602) (3) (2,109) (2,112)
Taxation - - - - - -
Return on ordinary
activities after tax 25 (627) (602) (3) (2,109) (2,112)
Dividends in respect of
equity shareholders - - - - - -
Transfer to/(from) reserves 25 (627) (602) (3) (2,109) (2,112)
Return per ordinary share 0.23p (5.68p) (5.45p) (0.03p) (19.08p) (19.11p)
The revenue column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
BALANCE SHEET
as at 30 September 2003
2003 2002
#'000 #'000 #'000 #'000
Fixed Assets
Listed fixed income securities 1,791 2,054
Venture capital investments 2,913 3,290
4,704 5,344
Current Assets
Debtors 182 146
Cash at bank and in hand 279 285
461 431
Creditors: amounts falling due within one year (20) (19)
Net current assets 441 412
Net assets 5,145 5,756
Capital and reserves
Called up share capital 551 552
Capital redemption reserve 2 1
Special reserve 3,715 9,933
Capital reserve - realised 853 (552)
Capital reserve - unrealised - (4,177)
Revenue reserve 24 (1)
Total equity shareholders' funds 5,145 5,756
Net asset value per ordinary share 46.7p 52.1p
CASHFLOW STATEMENT
for the year ended 30 September 2003
2003 2002
#'000 #'000
Net cash inflow/(outflow) from operating activities
and returns on investments 15 (101)
Taxation - -
Capital Expenditure
Purchase of listed fixed income securities (1,009) -
Purchase of venture capital investments (522) (400)
(1,531) (400)
Sale of listed fixed income securities 1,249 444
Sale of venture capital investments 270 23
Net cash (outflow)/inflow from capital expenditure (12) 67
Equity dividends paid - (55)
Net cash inflow/(outflow) before financing 3 (89)
Financing
Costs of shares repurchased (9) (9)
Net cash outflow from financing (9) (9)
Decrease in cash (6) (98)
Reconciliation of net cash flow to movement in net
funds
Decrease in cash during the year (6) (98)
Net funds at 1 October 2002 285 383
Net funds at 30 September 2003 279 285
Announcement based on draft accounts (unqualified audit report)
The financial information has been prepared on the basis of the accounting
policies set out in the Company's financial statements for the year ended 30
September 2003.
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the year ended 30 September 2003. The
statutory accounts for the year ended 30 September 2003 will be finalised on the
basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting.
The financial information for the year ended 30 September 2002 is derived from
the statutory accounts for that year which have been delivered to the Registrar
of Companies. The auditors reported on those accounts; this report was
unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985.
A copy of the full annual report and financial statements for the period ended
30 September 2003 will be printed and posted to shareholders. Copies will also
be available to the public at the registered office of the Company at 69
Eccleston Square, London SW1V 1PJ.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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