Interim Results
November 04 2005 - 10:51AM
UK Regulatory
Chairman's statement
Results and Dividend
Our current programme of realisations has progressed well, with major
investment realisations being concluded at substantial profit. As foreshadowed
in my last Statement, the Board is pleased to confirm the resumption of
dividend payments by declaration of an interim dividend of 1p, payable on 30
November 2005 to shareholders on the register as at 18 November 2005.
Following the regular review of the valuation of the portfolio, the Board has
taken a more cautious approach in relation to three investments in particular,
as more specifically detailed below. Net asset value per share at 31 August
2005 was 74.07p, a decrease of 7.5% over the most recent six month period.
This compares with a rise in the FTSE All Share index of 5.8% and a fall in the
FTSE AIM index of 4.2% for the six months. The net deficit for the period was �
89,000.
Background and Performance
The interim report a year ago stated that the Manager would focus on achieving
liquidity within the portfolio. We are pleased to report that a partial
realisation of our investment in Mawdsley's GNS Ltd was completed, where the
Company will receive �1.5m over two years and will still retain the residual
repairs and maintenance business, BER. During September, a full realisation of
our investment was achieved in Henry J Beans Ltd, the Company receiving �
1.4m. In addition, since the end of the period, much publicity was given to
the sale of Loch Fyne, and on 17 October its Board recommended a cash offer of
�10 per share. The Company will as a result receive �1.8m cash during
November. Details of these profitable exits are provided under portfolio
highlights below.
Following is an analysis of the net asset value performance for the six months
to 31 August 2005:
Performance Weighted Contribution
Unquoted portfolio -5.5% -5.3%
AIM listed -18.5% -0.8%
Share buybacks 0.1%
Costs charged to capital -0.9%
Net revenue -0.6%
TOTAL -7.5%
Portfolio Highlights
The key features of realisations and operational performance of the investment
portfolio are highlighted below:
The sale of the Waterwells Division of Mawdsley's Ltd was completed in July.
This was a complex transaction which will result in the Company receiving �1.5m
over a two year period. The continuing repairs business of Mawdsley's, now
called BER, is performing to plan after its separation from the larger
Waterwells Division. This business will itself become the subject of a
separate subsequent exit.
During September, Henry J. Beans Ltd was sold to the Hartford Group plc
resulting in the Company receiving �1.4m. This represents a doubling of
GFVCT'soriginal investment and 1.8x the February 2005 valuation of �0.8m.
During October, it was announced that Loch Fyne Restaurants plc was being sold,
which will realise �1.78m for the Company against the carrying value of �1.3m
and a total investment of �742,000.
Higher Nature Ltd continues to show excellent year-on -year growth of 19%. The
recent sale of a comparable company at a valuation multiple below those more
generally applied to the sector, however, has caused the board to lower its own
valuation of Higher Nature from �2.6m to �2.1m as a matter of prudence.
Difficulties in the High Street have resulted in a mild trading slowdown but
more uncertain outlook at Pearl Products Limited. Coupled with reduced
comparable multiples, the valuation has been reduced substantially.
The integration of Fine Art Logistics Ltd and the former Packing Shop Limited
under Fine Art's 80% majority shareholder Cadagon Tate Ltd has not been
successful to date. As a result we have chosen to reduce the valuation and our
own managers aim to work with the company to construct a suitable recovery
plan.
The AiM traded part of the portfolio, which is now relatively small, performed
disappointingly, falling by 18.5% over the period, but impacting negatively on
NAV by only 0.8%
Directors
As anticipated in the Annual Report and Accounts, we welcomed the appointments
of Ray Pierce and David Potter to the board at our meeting of 20 July,
following the retirement after the annual meeting of Ernest Sharp.
Ray is Chairman of Crown Sports PLC, Elevation Events PLC and Engage Mutual
Assurance. He also chairs the trustee boards of two charities. He is a former
Chief Executive of Robson Rhodes, Managing Director of both Guardian Direct and
Guardian Insurance, and was a Main Board Director of Guardian Royal Exchange
PLC.
David is Chairman of Solar Integrated Technologies and Deltron Electronics PLC
and a non-executive Director of New Media Spark, Noble Group and other
companies. He was formerly chief executive of Guinness Mahon & Co.
Share buy backs
Following the year-end, the share price discount to net asset value remained
for several months at a level of around 27.5%, but has most recently slipped to
32.5%. As realisations continue to come through, either matching or in excess
of the Company valuations, we anticipate that the discount should again begin
to narrow. During the period, the Company bought back a total of 115,000 shares
at 56p and 57p for a total of �64,900, enhancing net asset value per share by
0.1%.
Outlook
We are expecting both successful further realisations and attractive new
investment opportunities over the next six to twelve months. Supported by such
realisations, we have recommenced the payment of dividends and anticipate a
sustainable programme of future payments. In addition, bank debt has been
fully paid off and our managers are looking closely now at new investment
possibilities.
Mark Hoffman
4 November 2005
Statement of Total Return (unaudited)
(incorporating the Revenue Account)
for the six months ended 31 August 2005
Six months ended 31 Six months ended 31 Year ended 28
August 2005 August 2004 February 2005
(unaudited) (unaudited) (audited)
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Gains on 2 - (1,420) (1,420) - 181 181 - 1,452 1,452
investments
Income 3 87 - 87 117 - 117 187 - 187
Investment 4 (67) (201) (268) (64) (191) (255) (127) (382) (509)
management
fee
Finance cost (4) (13) (17) - - - - - -
Other (105) - (105) (98) - (98) (197) - (197)
expenses
Return on (89) (1,634) (1,723) (45) (10) (55) (137) 1,070 933
ordinary
activities
before
taxation
Tax on - - - - - - - - -
ordinary
activities
Return (89) (1,634) (1,723) (45) (10) (55) (137) 1,070 933
attributable
to equity
shareholders
Ordinary - - - - - - - - -
dividends
Transfer (89) (1,634) (1,723) (45) (10) (55) (137) 1,070 933
(from )/to
reserves
Return per 5 (0.32) (5.79) (6.11) (0.16) (0.04) (0.20) (0.48) 3.78 3.30
share
(pence)
Balance Sheet
asat 31 August 2005 (unaudited)
31 August 2005 31 August 28 February
(unaudited) 2004 2005
(unaudited) (audited)
�'000 �'000 �'000
Fixed assets
AIM traded/Listed equity 746 1,257 1,125
investments
Unlisted investments 20,563 19,548 21,500
21,309 20,805 22,625
Current assets
Debtors - - 3
Cash at bank 295 1,055 739
295 1,055 742
Creditors: amounts falling (744) (200) (719)
due within one year
Net current assets (449) 855 23
Net assets 20,860 21,660 22,648
Capital and reserves
Share capital 2,816 2,828 2,828
Capital redemption reserve 153 141 141
Special reserve 25,460 25,525 25,525
Capital reserve - realised (6,800) (5,657) (5,649)
Capital reserve - unrealised (427) (1,016) 56
Revenue reserves (342) (161) (253)
Total shareholders' funds 20,860 21,660 22,648
Net asset value per Ordinary 74.07 76.60 80.09
share (pence)
Cash Flow Statement
for the six months ended 31 August 2005 (unaudited)
31 August 31 August 28 February
2005 2004 2005
(unaudited) (unaudited) (audited)
�'000 �'000 �'000
Net cash outflow from operating activities (312) (149) (416)
Investing activities
Purchases of investments (865) (446) (1,607)
Sales of investments 761 1,517 2,129
Net cash inflow from investment activities (104) 1,071 522
Total cash (outflow)/inflow before financing (416) 922 106
activities
Financing activities
Bank loan drawn down 350 - 500
Bank loan repaid (300) - -
Loan interest paid (13) - -
Gross payments on cancellation of shares (65) (53) (53)
Net cash (outflow)/inflow from financing (28) (53) 447
activities
(Decrease)/Increase in cash (444) 869 553
Reconciliation of net cash flow to movement in
net funds
(Decrease)/Increase in cash (444) 869 553
Increase in loans (50) - (500)
Net funds at 1 March 239 186 186
Net (borrowings)/funds at 31 August (255) 1,055 239
Notes to the accounts
1. Principal activity
The principal activity of the Company is that of a venture capital trust.
2. Gains on investments
31 August 31 August 28 February
2005 2004 2005
�'000 �'000 �'000
Realised (loss)/gains (937) 242 441
Unrealised (loss)/gains (483) (61) 1,011
(1,420) 181 1,452
3. Income
31 August 31 August 28 February
2005 2004 2005
�'000 �'000 �'000
UK dividends net of tax credits - 4 4
Income from UK fixed interest securities 78 109 158
Other interest income 9 4 25
87 117 187
4. Management fee
One quarter of the management fee is charged to the revenue account and the
remaining three quarters is charged to capital reserves, net of corporation tax
relief, and inclusive of any related irrecoverable value added tax.
5. Return per share
Return per share has been calculated on 28,210,220 Ordinary shares, being the
weighted average number of shares in issue throughout the period.
6. VCT Status
As at 31 August 2005 the Company is advised that it continues to comply with
the VCT legislative requirements.
7. Comparative figures
The information for the year ended 28 February 2005 does not constitute
statutory accounts but has been extracted from the latest published audited
accounts which have been filed with the Registrar of Companies. The report of
the auditors on those accounts contained no qualification or statement under
section 237(2) or (3) of the Companies Act 1985.
The unaudited interim financial statements have been prepared on a consistent
basis with the statutory financial statements for the year ended 28 February
2005.
8. Publication
This unaudited interim report is being sent to shareholders and copies will be
made available to the public at the registered office of the Company.
For further information, please contact:
Gordon Power Inflexion Managers Limited 020 7487 9888
END
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