Final Results
29 January 2005 - 2:28AM
UK Regulatory
RNS Number:9479H
Pennine Downing Ethical VCT PLC
28 January 2005
PENNINE DOWNING ETHICAL VCT PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2004
FINANCIAL HIGHLIGHTS
2004 2003
pence pence
Net asset value per share 46.70 46.7
Total capital dividends per ordinary share for year 2.00 -
Total revenue dividends per ordinary share for year - -
Total dividends for the year 2.00 -
Cumulative dividends since launch 3.25 1.25
Total return 49.95 47.95
(Net asset value per share plus cumulative dividends)
Net assets #5.1 million #5.1 million
The statement to Shareholders by the Chairman, Andrew Davison, includes the
following comments:
Introduction
The year to 30 September 2004 has seen a number of changes take place within
your Company. When the Company launched in 1999, the key feature of the
Company's investment strategy was to build two ethically screened investment
portfolios. A portfolio of unquoted investments was managed by Classic Fund
Management Limited and AIM-quoted portfolio, by Rathbone Investment Management
Limited.
As Shareholders are painfully aware, the performance of the Company to date has
been extremely disappointing. The most significant contribution to the fall in
the Company's net asset value has been the unquoted portfolio. In April 2004,
the Board negotiated an early termination of the investment management agreement
with Classic Fund Management Limited ("Classic"), for a payment of #10,000,
being approximately 50% of the estimated fees due to be paid during the full
notice period.
As a result of the failure of a large number of unquoted investments, the
unquoted portfolio now comprises a relatively small number of investments.
Following the termination of the agreement with Classic, Chris Kay joined the
Board as a non-executive director with special responsibility for overseeing the
monitoring of the unquoted investments. I am pleased to say that this
arrangement has worked satisfactorily and some progress has been made in
extracting value from the remaining unquoted investments.
In addition to the Board change described above, both Dennis Hallahane and Giles
Chitty decided to step down from the Board in April 2004. The Company now has
four non-executive directors, which the Board feels is an appropriate size for a
VCT at this stage of its life.
Net Asset Value
At the year end, the Company's Net Asset Value ("NAV") stood at 46.7p per share.
This is an increase of 2p per share or 4.3% compared to the NAV per share at
the previous year end, before taking into account the proposed dividend detailed
below.
Venture capital investments
During the year, the Company invested in eight new and five follow-on
investments totalling #725,000.
The unquoted portfolio has seen some positive news during the year. SPC
International Limited (an unquoted investment not introduced by Classic Fund
Management Limited) has continued to make excellent progress. At the year end
the investment in this hardware support company was valued on an earnings
multiple basis at #795,000, an uplift of #495,000 over the year. Infoshare
Limited also showed improved performance over the year supporting an increased
valuation of #45,000. Since the year end the Company was able to dispose of its
investment in Infoshare at above book value.
The Company made two partial realisations and seven full realisations during the
year. The most significant was an investment on Floors 2 Go plc. The Company
invested #75,000 shortly before its flotation on AIM. The investment was sold
for #150,000 several weeks later, giving rise to a profit of #75,000.
Overall the venture capital investments gave rise to unrealised gains of
#149,000 and realised gains of #99,000 during the year.
Ethical Committee
Following Giles Chitty's resignation from the Board, the Ethical Committee now
comprises Elizabeth Haigh and Mark Mansley. In view of the lower level of new
investments now being undertaken by the Company, the Board agreed not to seek to
appoint a replacement committee member.
The Committee has continued to monitor investee companies and new investments
for compliance with the Company's Ethical Policy and are pleased to report that
no breaches of the policy were identified during the period.
Listed fixed income securities
At the year end, the Company held a portfolio of listed fixed income securities
with valuation of #1.8 million. During the year the portfolio gave rise to
unrealised losses of #16,000 and realised losses of #8,000.
Results and dividend
Gross revenue for the year was #151,000 (2003: #181,000) and net revenue after
taxation was #16,000 (2003: #25,000).
The Company has now accumulated a modest level of realised gains, predominantly
from the disposal of AIM investments. The Board has, therefore, decided to
propose that some of these be distributed to Shareholders by way of a capital
dividend. Subject to Shareholder approval at the Annual General Meeting, it is
proposed to pay a dividend of 2p per share on 8 March 2005 to shareholders on
the register at 11 February 2005.
Share repurchase
The Board is conscious that the Company's share price is affected by the
illiquidity of its shares in the market, arising from the fact that investments
in "second hand" VCT shares do not obtain up-front income tax relief. In line
with accepted practice with VCTs, the Company has authorisation to purchase its
own shares. The Company purchased 112,000 shares during the year for
cancellation at an average price of 35.0p per share.
Change of name
In view of the fact that the Company now has a very limited number of unquoted
investments, the future focus of the Company will now be on AIM -quoted
investments. The majority of any new investments the Company makes are likely to
be AIM-quoted companies recommended by Rathbone Investment Management Limited.
As a result, the Board feels that it is appropriate to change the name of the
Company to emphasize this fact. A resolution to change the Company name to "The
Ethical AIM VCT plc" will therefore be put to Shareholders at the forthcoming
Annual General meeting.
Annual General Meeting
The fifth Annual General Meeting of the Company will be held at 69 Eccleston
Square, London SW1V 1PJ at 12 noon on 3 March 2005.
Four items of Special Business are proposed in the Notice of Meeting:
* to change the Company's name to "The Ethical AIM VCT plc";
* to authorise the Directors to allot shares up to 3 million shares;
* to disapply pre-emption rights (on the above shares) ; and
* to renew the Company's authority to purchase up to 1,635,253 ordinary
shares in the market, representing approximately 14.99% of the current
issued ordinary share capital.
In view of the introduction of 40% income tax relief on new subscriptions into
VCTs, the Board may, in due course, give some consideration to a undertaking a
new fundraising for the Company. A resolution is therefore being proposed to
give the Board the authority to issue up to 3 million shares, being
approximately 27.5% of the shares currently in issue.
Publication of share price
The Company's share price can be found on various financial websites with the
TIDM/EPIC code "PDE". The share price is also quoted on a daily basis in the
Financial Times under "PenD Eth" within the Investment Companies section.
Outlook
Following the changes that have taken place during the year, the Company's
future is now clearer than it has been for some time. The majority of the
Company's investments are now AIM-quoted businesses and are managed by an
Investment Manager in which the Board has full confidence.
The Company has a reasonable level of funds in cash and fixed interest
investments and therefore the Board is encouraging the Investment Manager to
seek good quality new investment opportunities, with a particular preference for
those that are positively ethical.
Andrew Davison
Chairman
STATEMENT OF TOTAL RETURN (incorporating the revenue account)
for the year ended 30 September 2004
Year ended 30 September 2004 Year ended 30 September 2003
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Gains/(losses) on investments
- realised - 91 91 - (327) (327)
- unrealised - 133 133 - (255) (255)
Income 151 - 151 181 - 181
151 224 375 181 (582) (401)
Investment management fees (11) (32) (43) (14) (42) (56)
Other expenses (124) (2) (126) (142) (3) (145)
Return on ordinary activities before tax 16 190 206 25 (627) (602)
Taxation - - - - - -
Return on ordinary activities after tax 16 190 206 25 (627) (602)
Distributions - (218) (218) - - -
Transfer to/(from) reserves 16 (28) (12) 25 (627) (602)
Return per ordinary share 0.2p 1.7p 1.9p 0.2p (5.7p) (5.5p)
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 2004
2004 2003
#'000 #'000 #'000 #'000
Fixed Assets
Listed fixed income securities 1,752 1,791
Venture capital investments 3,376 2,913
5,128 4,704
Current Assets
Debtors 95 182
Cash at bank and in hand 121 279
216 461
Creditors: amounts falling due within one year (250) (20)
Net current (liabilities)/assets (34) 441
Net assets 5,094 5,145
Capital and reserves
Called up share capital 545 551
Capital redemption reserve 8 2
Special reserve 3,757 3,715
Capital reserve - realised 744 853
Revenue reserve 40 24
Total equity shareholders' funds 5,094 5,145
Net asset value per ordinary share 46.7p 46.7p
CASHFLOW STATEMENT
for the year ended 30 September 2004
2004 2003
#'000 #'000
Net cash inflow from operating activities and returns on 11 15
investments
Capital Expenditure
Purchase of listed fixed income securities (737) (1,009)
Purchase of venture capital investments (725) (522)
(1,462) (1,531)
Sale of listed fixed income securities 752 1,249
Sale of venture capital investments 580 270
Net cash outflow from capital expenditure (130) (12)
Net cash (outflow)/inflow before financing (119) 3
Financing
Costs of shares repurchased (39) (9)
Net cash outflow from financing (39) (9)
Decrease in cash (158) (6)
Reconciliation of net cash flow to movement in net funds
Decrease in cash during the year (158) (6)
Net funds at 1 October 2003 279 285
Net funds at 30 September 2004 121 279
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 2004. The
statutory accounts for the year ended 30 September 2004 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 2003 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 year ended 30
September 2004 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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