Final Results
January 16 2007 - 8:35AM
UK Regulatory
RNS Number:6030P
Pennine AIM VCT 5 PLC
16 January 2007
PENNINE AIM VCT 5 PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2006
Performance summary 30 September 2006 30 September 2005
pence (restated)
pence
Net asset value per share 94.4 96.1
Cumulative dividends 1.0 -
Total return 95.4 96.1
The statement to shareholders by the Chairman, Andrew Davison, includes the
following comments:
I present the Company's report and accounts for the year to 30 September
2006, a year which is notable for a stark contrast in performance between the
first and the second half of the period. Good progress made by the portfolio
early in the year has, unfortunately, been cancelled out by poor results from a
small number of investments in the later part of the year
Net Asset Value
At 30 September 2006, the Company's Net Asset Value per share ("NAV&
rdquo;) stood at 94.4p, a decrease of 0.7p (0.7%) from the restated NAV at 30
September 2005 (after adjusting for dividends paid in the period) and a fall of
7.5p (7.4%) since the interim date of 31 March 2006.
Venture capital investments
During the year, the Company purchased 18 new investments and two follow-on
investments at a total cost of #6.3 million. The Company remains on target to
have 70% of the Company's funds invested in VCT qualifying investments
before the deadline of 30 September 2007.
The portfolio experienced some good performances over the year from such
investments as Jelf Group, MyHome International and Cadbury House which in total
account for unrealised gains of #818,000. Unfortunately there have also been a
number of poor performers. The investments in Cellcast plc, Chariot (UK) plc
and NetServices plc fell in value by a total of #1.5 million in the second half
of the year, although their fall over the whole year was only #1.2 million.
The Investment Manager took the opportunity to take some profits with partial
disposals of the holdings in MyHome International and Daniel Stewart Securities,
generating realised gains of #81,000 and #55,000 respectively.
Overall the venture capital portfolio showed realised gains of #135,000 and
unrealised losses of #269,000 for the year.
Further details of the Company's investments are set out within the
Investment Manager's report and Review of Investments.
Listed fixed income securities
During the year the Company invested #13.5 million in treasury stocks and
disposed of #3.1 million, realising losses thereon of #34,000. These investments
were valued at #10.3 million at the year end, with unrealised losses thereon of
#172,000.
Results and dividend
The loss on activities after taxation for the year was #172,000, (2005: return
#362,000), comprising a revenue profit of #381,000 and a capital loss of
#553,000.
The Board is proposing to pay a dividend of 1.5p per share on 26 February 2007
to shareholders on the register at the close of business on 26 January 2007.
Format of Accounts
For this accounting period, your Company is required to adopt FRS 21 (Events
after the balance sheet date), under which dividends have to be accounted for in
the period in which they are liable to be paid rather than the period in respect
of which they are declared.
The comparative figures presented in these financial statements have been
restated to bring them in line with the new standard. This has resulted in the
NAV at 30 September 2005 being increased from 95.1p per share to 96.1p.
The Company has also adopted the new Statement of Recommended Practice for
Investment Trusts ("SORP"), which came into effect in December 2005.
The main noticeable change arising is that the "Statement of Total Return&
rdquo; has been renamed as the "Income Statement".
Share repurchase
Your Board is conscious that the Company's share price is affected by the
illiquidity of its shares in the market. This results principally from the
requirement that most shareholders must retain their shares for at least three
years in order to retain their tax benefits and that investors do not receive
tax benefits on VCT shares acquired in the market.
The Company therefore operates a policy of purchasing shares in the market at a
price equivalent to a 10% discount to the Company's most recently
published Net Asset Value (subject to close periods and other regulatory
restrictions). During the year the Company purchased 46,690 shares for
cancellation at a price of 85.5p per share.
Buying in shares for cancellation has a negative effect on the Company's
ability to pay revenue dividends. Therefore, in line with usual practice for
VCTs, the Company has cancelled its Share Premium account and created a
distributable Special Reserve, which can be utilised to buy back shares without
affecting the Company's ability to pay dividends. Court confirmation for
the cancellation was received on 6 December 2006.
Annual General Meeting
The Company's second Annual General Meeting will be held at 69 Eccleston
Square, London, SW1V 1PJ at 2.30 pm on 21 February 2007.
Notice of the meeting is at the end of this document. One item of Special
Business is proposed:
* to authorise the Directors to purchase up to 3,366,221 ordinary shares in
the market, representing approximately 14.9% of the current issued shares.
Outlook
With the changes to the VCT regulations that were implemented in the 2006
Finance Act, VCT funds raised in the future have a significantly reduced scope
in terms of the size of business into which VCT qualifying investments can be
made. However, your Company is not subject to these new rules and therefore
should have a wider range of potential investments than new VCTs. The Board
remains confident that the Investment Manager can continue to build a strong,
well-balanced portfolio over the next year.
INCOME STATEMENT
For the year ended 30 September 2006
Year ended 30 September 2006 Period ended 30 September 2005
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Income 811 - 811 499 - 499
(Losses)/gains on - (340) (340) - 240 240
investments
811 (340) 471 499 240 739
Investment management fees (100) (301) (401) (51) (152) (203)
Other expenses (204) - (204) (139) - (139)
Return on ordinary
activities 507 (641) (134) 309 88 397
before tax
Tax on ordinary activities (126) 88 (38) (64) 29 (35)
Return attributable to
equity shareholders 381 (553) (172) 245 117 362
Return per share 1.7p (2.4p) (0.7p) 1.5p 0.7p 2.2p
All Revenue and Capital items in the above statement derive from continuing
operations.
A Statement of Total Recognised Gains and Losses has not been prepared as all
gains and losses are recognised in the Income Statement noted above.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year ended Period ended
30 September 2006 30 September 2005
(as restated)
#'000 #'000
Opening shareholders' funds 21,756 -
Issue of shares - 22,653
Share issue costs - (1,246)
Purchase of own shares (40) (13)
Total recognised (losses)/gains for the year (172) 362
Dividends paid (226) -
Closing shareholders' funds 21,318 21,756
BALANCE SHEET
as at 30 September 2006
2006 2005
(as restated)
#'000 #'000 #'000 #'000
Fixed asset
Investments at fair value through profit or loss 20,395 4,260
Current assets
Debtors 695 29
Cash at bank and in hand 325 17,561
1,020 17,590
Creditors: amounts falling due within one year (97) (94)
Net current assets 923 17,496
Net assets 21,318 21,756
Capital and reserves
Called up share capital 2,259 2,264
Capital redemption reserve 6 1
Share premium account 19,142 19,142
Capital reserve – realised (233) (123)
Capital reserve – unrealised (203) 240
Revenue reserve 347 232
Total equity shareholders' funds 21,318 21,756
Net asset value per share 94.4p 96.1p
CASH FLOW STATEMENT
for the year ended 30 September 2006
Year Period
ended ended
30 Sept 2006 30 Sept 2005
#'000 #'000
Net cash inflow from operating activities 41 186
Taxation (35) -
Capital expenditure
Purchase of investments (19,794) (4,020)
Sale of investments 2,818 -
Net cash outflow from capital expenditure (16,976) (4,020)
Equity dividends paid (226) -
Net cash outflow before financing (17,196) (3,834)
Financing
Proceeds from share issue - 22,654
Share issue costs - (1,246)
Purchase of own shares (40) (13)
Net cash (outflow)/inflow from financing (40) 21,395
(Decrease)/increase in cash (17,236) 17,561
Reconciliation of net cash flow to movement in net funds
(Decrease)/increase in cash during the year (17,236) 17,561
Net funds at 30 September 2005 17,561 -
Net funds at 30 September 2006 325 17,561
NOTES TO THE ACCOUNTS
for the year ended 30 September 2006
1. Accounting policies
Basis of accounting
The Company has prepared its financial statements under UK Generally Accepted
Accounting Practice ("UK GAAP") and in accordance with the Statement
of Recommended Practice "Financial Statements of Investment Trust
Companies" revised December 2005 ("SORP"). Except as stated in
note 2, consistent accounting policies have been applied to both this year end
and the prior year's accounts.
The financial statements are prepared under the historical cost convention
except for the revaluation of certain financial instruments.
Presentation of Income Statement
In order to better reflect the activities of a Venture Capital Trust and in
accordance with guidance issued by the Association of Investment Companies
("AIC"), supplementary information which analyses the income statement
between items of a revenue and capital nature has been presented alongside the
income statement. The net revenue is the measure the directors believe
appropriate in assessing the Company's compliance with certain
requirements set out in Section 842 Income and Corporation Taxes Act 1988.
Investments
Venture capital investments are designated as "fair value through profit
or loss" assets and are initially measured at cost. Thereafter the
investments are measured at subsequent reporting dates at fair value.
Listed fixed income investments, investments quoted on AIM and those traded on
the PLUS Market (formerly OFEX) are measured using bid prices with marketability
discounts applied where deemed appropriate.
In respect of unquoted instruments, fair value is established by using
International Private Equity and Venture Capital Valuation Guidelines. Where no
reliable fair value can be estimated for such unquoted equity investments they
are carried at cost, subject to any provision for impairment. Where an investee
company has gone into receivership or liquidation the investment, although not
physically disposed of, is treated as being realised.
Gains and losses arising from changes in fair value are included in the income
statement as a capital item and transaction costs on acquisition or disposal of
the investment expensed.
It is not the Company's policy to exercise either significant or
controlling influence over investee companies. Therefore the results of these
companies are not incorporated into the revenue account except to the extent of
any income accrued.
Income
Dividend income from investments is recognised when the shareholders' rights to
receive payment has been established, normally the ex dividend date.
Interest income is accrued on a timely basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount, and only where there
is reasonable certainty of collection.
Expenses
All expenses are accounted for on an accruals basis. In respect of the analysis
between revenue and capital items presented within the income statement, all
expenses have been presented as revenue items except as follows:
* Expenses which are incidental to the disposal of an investment are
deducted from the disposal proceeds of the investment.
* Expenses are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments held
can be demonstrated and accordingly the investment management fee and
finance costs have been allocated 25% to revenue and 75% to capital, in
order to reflect the directors' expected long-term view of the nature
of the investment returns of the Company.
Issue costs
Issue costs have been deducted from the share premium account.
Deferred Taxation
Deferred taxation is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in the accounts.
2. Changes in accounting policies
The Company is required to comply with a number of new UK Financial
Reporting Standards (FRS), which now represents UK Generally Accepted Accounting
Practice (UK GAAP), in preparing its financial statements for the year ended 30
September 2006. These Standards have been introduced as part of the process of
aligning UK accounting principles with International Accounting Standards.
As required by FRS 21 "Events after the Balance Sheet Date",
dividends to shareholders are accounted for in the period in which the Company
is liable to pay them rather than in the period in respect of which they are
declared. The comparative figures for the year ended 30 September 2005 have
been restated accordingly. The effect of the adoption of FRS 21 on the reported
net assets of the Company is as follows:
2005
Net Assets
#'000
As previously reported 21,530
Add: proposed dividends not recognised until paid 226
As restated 21,756
Announcement based on draft accounts (unqualified audit report)
The financial information set out in the announcement does not constitute the
Company's statutory accounts in accordance with section 240 Companies Act 1985
for the year ended 30 September 2006. The statutory accounts for the year ended
30 September 2006 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.
A copy of the full annual report and financial statements for the year ended 30
September 2006 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 and for download from www.downing.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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