RNS Number:9449P
Electra Kingsway VCT PLC
22 January 2007
Electra Kingsway VCT Plc
Unaudited Preliminary Results for the Year ended 30 September 2006
Financial Highlights
Year ended 30 September 2006 2005
Restated
Net assets #21.3m #22.7m
Net asset value per share 101.97p 105.05p
Dividend paid per share 2.50p 6.50p
Cumulative return to shareholders since launch
Dividends paid per share 10.65p 8.15p
Net asset value plus dividends paid per share 112.62p 113.20p
A copy of the Chairman's Statement, Investment Manager's Report and Unaudited
Preliminary Announcement is attached.
This unaudited preliminary announcement for the year ended 30 September 2006
does not constitute the statutory financial statements of the Company for the
year ended 30 September 2006 within the meaning of Section 240 of the Companies
Act 1985. Those financial statements have not yet been delivered to the
Registrar, nor have they been reported upon yet by the auditors.
The Report and Accounts will be sent to shareholders shortly and will thereafter
be available from the Company's registered office at Paternoster House, 65 St
Paul's Churchyard, London EC4M 8AB. The Annual General Meeting will be held on
26 March 2007 at 1.00pm at 65 St Paul's Churchyard, London EC4M 8AB.
For further information:
Nick Ross:
Electra Kingsway VCT Plc - telephone 020 7214 4200
Chairman's Statement
Results
At 30 September 2006 the Net Asset Value was 101.97p per share. Including
dividends, the Fund's total return per share was 112.62p, an increase of 18.5%
from the starting NAV of 95p. The most recent dividend paid to shareholders was
2.5p, in August 2006. The investment portfolio comprises holdings in 20
qualifying companies and two non-qualifying funds. Together they offer good
portfolio diversification and upside potential. Smaller unquoted investments
often take time to mature, with the returns typically increasing from year four
onwards. As these investments are sold, the Company will be able to increase
dividends to shareholders.
Portfolio
The performance of the portfolio reflected a good year for our unquoted
investments, but a difficult one for the AIM investments. This is partly a
reflection of the underlying volatility in the AIM market, brought about by the
sheer number of flotations and, in most cases, thin trading volumes. Despite
the strength of the main equity markets, the FT AIM index fell by 7.41% in the
period. However, taken as a whole, the AIM portfolio now offers some good
potential. During the year, two new investments were added to the portfolio:
Conquest Business Media and Hill Station. The two major disposals in the period
were Nectar Taverns and James & James which were sold for respective uplifts
over cost of 116% and 68%.
C share issue
In November 2006 the Board approved, subject to shareholder consent, the launch
of a #20m C share issue. This will be in the interests of shareholders, as the
Fund is already fully invested so an additional fund raising will lower the
existing costs of running the Fund and lead to greater portfolio diversification
when the two pools of capital are merged. An EGM will be held on 5 February 2007
for shareholders to consider the issue.
Dividend and Dividend Reinvestment Scheme
The Board aims to balance the twin objectives of the Fund: to provide both
capital growth and tax free dividends. The flow of dividends is dictated by the
rate of disposals, so it is often hard to predict; but once the Fund has
matured, we aim to pay a sustainable level of annual dividends. To date,
dividends of 10.65p have been paid to shareholders.
Owing to changes in the VCT legislation contained in the 2006/2007 Budget, the
Board has withdrawn the Company's Dividend Reinvestment Scheme.
Share price and discount management
The Company operates a share buy back policy at a 10% discount to the last
published net asset value, thus offering shareholders the opportunity to sell
their shares if required. During the year the Company bought back 813,536 shares
for cancellation, at an average price of 93.45p.
VCT status
The six standard VCT industry tests were met during the period. The most
significant of these is the requirement for qualifying investments to be 70% of
total funds available for investment. At the year end, the Company had 76% of
its investment funds in qualifying investments, based on the tax valuation rules
for qualifying assets.
Budget changes
The March 2006 Budget introduced a number of changes to VCT legislation. The
main one was a reduction in the gross asset test for qualifying companies. This
and most of the other changes relate only to funds raised after 5 April 2006, so
will have no impact on current shareholders in the Fund. However, funds from the
proposed #20m C share issue will be subject to the new legislation. The Manager
has analysed historical and proposed investments and has concluded that the
majority of these would pass the current gross asset test.
Outlook
The balance of the Fund closely reflects the investment strategy set out in the
Fund's Prospectus. Overall, good progress has been made, with considerable
potential still to come as economic and market conditions continue to remain
favourable.
Rupert Pennant-Rea, Chairman
Investment Manager's Review
Investment overview
At 30 September 2006, the Net Asset Value per share was 101.97p, which, when
combined with total dividends paid since inception, represented a total return
of 112.62p per share. The Fund is now fully invested with 72% of its investment
in qualifying investments and 28% invested in Electra Private Equity and Electra
Active Management. As some of the qualifying investments in the portfolio are
still quite young the Fund is still maturing, which should ensure further
capital appreciation over the next few years. The qualifying portfolio comprises
investments in 20 companies and is divided in value terms 69% in unquoted
investments and 31% in AIM quoted companies.
Performance
It was a mixed year for performance with the unquoted portfolio performing well.
This was counterbalanced by the AIM stocks, which had a disappointing year. The
main uplifts in the unquoted portfolio were Gyro International and Find Portal.
Gyro International is a specialist brand and marketing agency and Find Portal is
a comparison website specialising in the financial services market. Both
investments were increased in value in line with International Private Equity
and Venture Capital Valuation Guidelines taking into consideration improved
current trading and comparative valuations. Unquoted investments where it was
necessary to make increased provisions against carrying values included ePoint
where the company is in negotiations to be sold.
In the AIM portfolio the best performance was by Advanced Medical Solutions,
which rose 20% after reporting very encouraging progress. The rest of the
portfolio fared poorly with the largest falls registered by Media Square, Brady,
Hill Station and First Dental. All four companies had disappointing results and
were marked down quite heavily by the market. All have good long term potential
and should soon start to see their share prices increasing. It is a particular
problem of AIM that the sheer number of new companies listing has created a very
thin secondary market for shares, the consequence being that any trading
disappointments can often lead to significant share price movements owing to the
lack of liquidity. In the non qualifying portfolio Electra Private Equity
continued to perform well rising by 21% in the period reflecting strong
underlying growth in the net asset value.
New Investments
As the portfolio is close to being fully invested, the scope for adding new
investments is limited. However, two investments were made in the year:
Conquest Business Media and Hill Station.
Conquest Business Media is a leading UK business-to-business publisher
concentrating in the manufacturing and related sectors. The company publishes
The Manufacturer and British Industry in the UK as well as US Manufacturer in
the US. The development of the brand has enabled the company to diversify into
conferences and exhibitions although over 85% of revenues are from publishing.
The transaction was a management buyout and Electra Kingsway VCT and Electra
Kingsway VCT 2 both invested #750,000 for a combined stake of 43%.
Hill Station is a super premium brand dairy ice cream company that merged with
Granelli and Loseley to form a larger ice cream manufacturer serving the own
label and branded markets. The key to the mergers was that four manufacturing
facilities would be consolidated into the existing Loseley operations at Cwmbran
in South Wales. Hill Station was listed on AIM in 2004 and Electra Kingsway VCT
and Electra Kingsway VCT 2 invested a total of #1.5m for a 16% interest in the
company. After the year end, the fund invested a further #375,000 to provide
additional working capital.
Disposals
Disposals in the period included Nectar Taverns which was sold for a multiple of
2.2 times cost. Nectar was a pub investment company established in partnership
with Honeycombe Leisure with the objective of building a portfolio of
underperforming freehold pubs and through new management and better controls
improving the underlying performance. The other main disposal was James & James,
a publisher of environmental magazines, which was sold for an uplift of 1.7
times cost to a trade buyer. In addition, some profits were also realised in
Media Square and Electra Active Management.
Portfolio Summary
Qualifying Investments Cost at 30 September Valuation at 30 Performance in % of Portfolio by
2006 September 2006 year ended 30 Value
September 2006
# # # %
Find Portal 1,100,000 2,273,694 1,173,695 11.24
Media Square 1,577,673 1,527,678 (880,357) 7.56
Gyro International 375,000 1,344,979 969,979 6.65
Hallmarq 1,049,996 1,104,195 (67,895) 5.46
Sanastro 1,000,000 1,000,000 - 4.95
Happy Times 999,375 999,375 - 4.94
Hill Station 758,085 821,259 63,174 4.06
Keycom 1,704,963 751,313 (359,688) 3.72
Amber Taverns 750,000 750,000 - 3.71
Ma Hubbards 750,000 750,000 - 3.71
Conquest Business Media 750,000 750,000 - 3.71
Advanced Medical Solutions 500,000 647,059 117,647 3.20
First Dental 750,000 400,000 (475,000) 1.98
Quadnetics 399,999 377,358 22,641 1.87
Signature Brands Group 750,000 375,000 - 1.86
Centurion Electronics 1,197,275 353,254 (286,572) 1.75
Brady 750,000 222,222 (129,630) 1.10
Music Copyright Solutions 500,004 161,766 (250,002) 0.80
Immedia Broadcasting 275,000 42,500 (20,000) 0.21
ePoint 550,000 - (550,000) -
16,487,370 14,651,652 (672,008) 72.48
Non Qualifying Investments
Electra Private Equity 1,862,149 3,732,386 655,242 18.46
Electra Active Management 1,550,147 1,831,493 (253,273) 9.06
3,412,296 5,563,879 401,969 27.52
19,899,666 20,215,531 (270,039) 100.00
Other Assets
Liquidity Fund 351,000
Cash 128,633
479,633
Total 20,695,164
Ten Largest Qualifying Investments
(Information on the following investments is extracted from their latest audited
accounts)
Find Portal Year ended May 2006
#'m
Cost #1,100,000
Valuation #2,273,694 Sales 3.0
Basis of Valuation Fair Value Loss before tax (1.4)
Equity held 9.48% Retained loss (1.4)
Business An internet financial Net liabilities (0.7)
directory
Media Square 16 Months ended February 2006
#'m
Cost #1,577,673
Valuation #1,527,678 Sales 126.4
Basis of Valuation Bid market price (AIM) Profit before tax 2.3
Equity held 3.49% Retained profit 1.4
Business An advertising and retail Net assets 58.6
marketing company
Gyro International Year ended October 2005
#'m
Cost #375,000
Valuation #1,344,979 Sales 13.3
Basis of Valuation Fair Value Profit before tax 0.2
Equity held 4.00% Retained loss (0.1)
Business B2B creative agency Net assets 3.8
Hallmarq Year ended August 2006
#'m
Cost #1,049,996
Valuation #1,104,195 Sales 1.4
Basis of Valuation Fair Value Loss before tax (0.3)
Equity held 10.38% Retained loss (0.3)
Business The design, manufacture and Net assets 1.2
sale of MRI equipment to the
equine market
Sanastro Year ended November 2005
#'m
Cost #1,000,000
Valuation #1,000,000 Sales 5.0
Basis of Valuation Fair Value Profit before tax 0.3
Equity held 12.60% Retained profit 0.2
Business Publisher of financial Net assets 7.4
newsletters
Happy Times Year ended March 2005
#'m
Cost #999,375
Valuation #999,375 Sales 2.7
Basis of Valuation Fair Value Loss before tax (0.6)
Equity held 12.20% Retained loss (0.6)
Business Owner/operator of children's Net assets 1.4
nursery schools
Hill Station 15 Months ended October 2005 2005
#'m
Cost #758,085
Valuation #821,259 Sales 1.2
Basis of Valuation Bid Price Loss before tax (0.8)
Equity held 8.00% Retained loss (0.7)
Business Manufacturer of Ice Cream Net assets 0.8
Keycom Year ended October 2005
#'m
Cost #1,704,963
Valuation #751,313 Sales 1.3
Basis of Valuation Fair Value Loss before tax (1.4)
Equity held 16.30% Retained loss (1.5)
Business Provision of broadband Net liabilties (1.6)
telephone services to students
Ma Hubbards Period ended April 2006
#'m
Cost #750,000
Valuation #750,000 Sales 2.3
Basis of Valuation Fair Value Loss before tax (0.3)
Equity held 25.00% Retained loss (0.3)
Business Acquisition of portfolio of Net assets 0.5
managed pubs in the Midlands
Conquest Business Media Year ended December 2005
#'m
Cost #750,000
Valuation #750,000 Sales 6.0
Basis of Valuation Price of recent investment Loss before tax (0.2)
Equity held 21.70% Retained loss (0.2)
Business B2B publishing Net liabilities (1.0)
Unaudited Profit and Loss Account
For the year ended 30 September 2006
2006 2005
Restated
# #
Profit/(loss) on realisation of investments 75,458 (70,536)
Unrealised (losses)/gains on revaluation of
investments (270,039) 556,852
Income 756,650 229,279
562,069 715,595
Investment management fee (469,696) (503,710)
Other expenses (296,651) (321,322)
(766,347) (825,032)
Loss on ordinary activities before tax (204,278) (109,437)
Tax on ordinary activities - -
Loss for the financial year (204,278) (109,437)
Dividends per share 2.5p (2005: 6.5p) (527,174) (1,410,096)
Retained Loss (731,452) (1,519,533)
Basic and diluted earnings per share (0.97)p (0.50)p
The amounts dealt with in the Profit and Loss Account are all derived from
continuing activities.
No operations were acquired or discontinued in the year.
Unaudited Statement of Total Recognised Gains and Losses
For the year ended 30 September 2006
2006 2005
# Restated
#
Loss on ordinary activities after tax (204,278) (109,437)
Total recognised losses for the year (204,278) (109,437)
Prior year adjustment (212,114) -
Total recognised losses since last annual report (416,392) (109,437)
Unaudited Note of Historical Profits and Losses
For the year ended 30 September 2006
2006 2005
Restated
# #
Loss on ordinary activities before taxation (204,278) (109,437)
Realisation of investment revaluation gains
recognised in previous years 1,462,777 1,487,160
Historical cost profit for the year before
taxation and dividends 1,258,499 1,377,723
Unaudited Balance Sheet
As at 30 September 2006
2006 2005
Restated
# # # #
Fixed Assets
Investments held at fair value 20,215,531 22,153,592
Current Assets
Debtors 686,012 173,935
Investments 351,000 401,000
Cash at bank 128,633 48,857
1,165,645 623,792
Creditors: amounts falling due
within one year
Creditors 113,041 90,639
113,041 90,639
Net Current Assets 1,052,604 533,153
Net Assets 21,268,135 22,686,745
Capital and Reserves
Called-up share capital 208,566 215,970
Share premium account 14,024,282 13,951,929
Capital redemption reserve 12,085 3,950
Special reserve 5,957,338 6,717,580
Profit and Loss reserve 1,065,864 1,797,316
Total Equity Shareholders' Funds 21,268,135 22,686,745
Net Asset Value per Ordinary Share 101.97p 105.05p
Number of ordinary shares in issue
at end of year 20,856,651 21,597,056
Unaudited Cash Flow Statement
For the year ended 30 September 2006
2006 2005
Restated
# # # #
Operating Activities
Investment income received 150,709 324,536
Bank interest received 6,796 25,044
Investment management fees paid (382,629) (534,174)
Other cash payments (296,315) (325,666)
Net Cash Outflow from Operating
Activities (521,439) (510,260)
Taxation - -
Capital Expenditure and Financial
Investment
Sale of investments 4,165,415 6,064,781
Purchase of investments (2,421,935) (6,314,212)
Net Cash Inflow/(Outflow) from Capital
Expenditure and Financial Investment 1,743,480 (249,431)
Equity Dividends Paid (454,208) (1,230,475)
Cash Inflow/(Outflow) before Financing
and Management of Liquid Resources 767,833 (1,990,166)
Sale/(Purchase) of current asset
investments 50,000 (401,000)
Net cash Inflow/(Outflow) from Management
of Liquid Resources 50,000 (401,000)
Financing
Repurchase of ordinary shares (738,057) (303,660)
Net Cash Outflow from Financing (738,057) (303,660)
Increase/(Decrease) in Cash for the Year 79,776 (2,694,826)
Unaudited Reconciliation of Total Shareholders' Funds
For the Year ended 30 September 2006
2006 2005
Restated
# #
Total gains and losses for the year (204,278) (109,437)
Ordinary shares issued 73,084 179,395
Repurchase of ordinary shares (760,242) (292,423)
Dividend on ordinary shares (527,174) (1,410,096)
Movements in Total Shareholders' Funds (1,418,610) (1,632,561)
Total Shareholders' Funds at start of year
(previously #22,898,859 before deducting prior year
adjustment of #212,114) 22,686,745 24,319,306
Total Shareholders' Funds at end of year 21,268,135 22,686,745
This information is provided by RNS
The company news service from the London Stock Exchange
END
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