Avarae Global Coins PLC Final results for year ended 31 March 2013 (6762J)

TIDMAVR

RNS Number : 6762J

Avarae Global Coins PLC

19 July 2013

News Release 19 July 2013

AVARAE GLOBAL COINS PLC

FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2013

Avarae Global Coins plc ("Avarae" or the "Company"), the UK's only publicly traded specialist company dedicated to purchasing, holding and selling rare and high quality coins, is pleased to announce its final audited results for the year ended 31 March 2013.

Highlights for the year:

   --     NAV per share increased for the 7(th) year in succession to 14.4 pence (2012: 14.1 pence); 

-- Record carrying value of portfolio of rare and high quality coins of GBP10.9 million (2012: GBP10.1 million);

   --     Sales of GBP1.1 million (2012: GBP1.7 million); 
   --     Profit on ordinary activities of GBP0.4 million (2012: GBP0.5 million); 
   --     Recommended full year dividend of 0.18 pence per share (2012: 0.185 pence); 
   --     Net cash of GBP0.4 million at year end (2012: GBP1.3 million). 

Commenting on the results, Diane Clarke, Director of Avarae, said:

"With worldwide economies only now starting to believe that they are over the worst of the deep recession of the last 5 years, Avarae finds itself well positioned. Where other alternative asset plays have suffered as a result of the downturn and the reduction in available investment capital, Avarae has continued upwards, posting ever-increasing net asset values, commenced regular dividend payments and posted record valuations for its coin portfolio. As the world economies recover, the Company is well placed to capitalise. The Company has a strong balance sheet with a healthy cash position and no debt. The Directors, therefore, remain optimistic about the Company's future prospects."

The Company's audited report and accounts, together with the notice of the AGM, will today be posted to shareholders. An electronic copy of the audited report and accounts will also shortly be available on the Company's website: www.avarae.com.

For further information on Avarae Global Coins plc, please contact:

 
 Diane Clarke/Matt Wood                [phone] 
 Avarae Global Coins plc 
 
 Tom Griffiths/Paul Gillam             [phone] 
 Westhouse Securities Limited 
 
                                 [phone] / +44 
 Toby Hall                                  (0)7713 341072 
 GTH Communications Limited 
 

Directors' Report

Introduction

We are pleased to present the audited results for the year ended 31 March 2013 for Avarae Global Coins plc ("Avarae"). During the year under review, the Company continued to manage its portfolio of rare and high quality coins.

Avarae provides access for institutional investors and individuals wanting to diversify their investment portfolios away from the traditional asset classes such as equities, property and bonds without the need to be an expert in the coin-collecting sector. The principal objective of the Company, which hasn't changed since its admission to AIM ("Admission") in 2006, is to achieve capital growth for its shareholders through the purchase, holding and sale of the rarest and highest quality segment of the coin-collecting sector in various countries around the world.

Investing policy

Since Admission, we have built up an impressive portfolio of extremely high quality, rare coins which we intend to hold both for the long-term, i.e. 3 to 5 years, in order to achieve capital growth for our shareholders, and also the short-term, in order to take advantage of short-term trading opportunities, as the market for rare coins continues to grow. The value of each investment ranges from a few hundred pounds up to many hundreds of thousands of pounds. The most expensive coin acquired by Avarae to date is the Edward III Double Florin which was acquired for GBP0.4 million in 2006. The Double Florin is on display at the Fitzwilliam Museum in Cambridge.

The Board's decision on whether to acquire or dispose of a coin or coin collection is made on the recommendation of its industry expert independent Advisory Panel ("Panel") that assesses and approves all coin trading related activities. The Panel members are Sir John Wheeler and Clement Chambers, both of whom have significant expertise in the field of numismatics.

A principal objective of the Company is to achieve long-term capital growth through the appreciation in the value of the coins acquired. Compound annual returns potentially achievable over the medium to long-term for the highest quality and rarest coins are expected to be around 10 per cent., in line with historical averages. As at the date of this report, and since its formation in 2006, the Company has no borrowings and has no present intention of securing any borrowings.

The coin-dealing sector

The market for trading coins is international in nature and significant in size. For at least the last 10 years, there has been an increasing interest in the coin sector and its prominence as an alternative investment class is illustrated by continued increases in activity around the world, where record prices have been paid for certain rare pieces. The number of interested parties in coins and coin collections appears to be continuing to grow, with auction houses reporting significant growth in the numbers of interested bidders compared to the corresponding auctions in previous years.

Segments of the coin market have proved relatively buoyant over the last 12 months, with certain sectors continuing to show healthy demand, such as English, Roman and Indian coins. Other sectors, such as Chinese coins, have stayed flat at best and, in the case of the European examples (excluding British coins), some have marginally contracted. The financial difficulties across the EU have dampened demand for German, Italian and French coins, especially those in only very fine condition or below. Those coins which are of extremely fine grade and above, and then only those which are rare, continue to achieve ever higher prices, as evidenced by a number of auction houses that have achieved record prices for certain rarities.

Avarae's investments

Purchases

In the year to 31 March 2013, the Company acquired GBP1.2 million worth of coins (2012: GBP0.81 million), resulting in the value of the coin portfolio as at 31 March 2013 reaching its all time high of GBP10.93 million (2012: GBP10.11 million). In line with its investment strategy, the Company has focused on the purchase of only the highest quality and rarest coins. In particular, during the year, the Company increased its exposure to Roman gold, English and Islamic coins.

Examples of coins acquired during the year include:

-- a very rare James I Half Crown, mintmark Thistle (1603-04), with excellent pedigree and believed to be one of the finest known;

-- an excessively rare Abd al-Malik b. Marwin (c72-73h) dechristianised copy of a Byzantine Gold Solidus of the Emperor Heraclius and his two sons. It is the earliest gold coin to contain the Kalima, the Islamic statement of faith, in its legends;

-- a Roman Republic, Gold Aureus, struck by Lucius Cestius and Caius Norbanus, 43 BC, featuring the head of Africa, wearing elephant's skin on the face, with a reverse showing a curule chair with two snakes;

-- an 'Abd al-'Aziz al-Sa'ud, (1344-1373h) Gold Pattern Guinea or One Riyal, Makka al Mukarrima, 1370h. This is one of the world's rarest proof pattern coinages. There were probably only two struck, one of which was sent by the Royal Mint in London to Saudi Arabia for royal approval;

-- an extremely rare George V Pattern 1910 Silver Crown. It is as struck and we believe there are less than 10 known;

-- An 1852 Adelaide gold Pound, struck in 22 carat gold alloyed with copper. Extremely fine and a very rare example; and

-- A 1679 Charles II Gold Two-Guineas. Very attractively toned with plenty of copper red colour. As struck and extremely rare.

In addition to the impressive purchases set out above, we continued to add selectively to our impressive collection of Triple Unites and other high value collections, which we have been working on for a number of years. Once completed, we would anticipate these unique collections to be worth considerably more than their individual carrying value. During the year, we also acquired a small collection of Durrani coins.

Sales

Unlike the previous year, when the undoubted highlight was the sale of GBP1.5 million of Chinese coins sold at auction in Hong Kong in August 2011 which generated a gross margin in excess of 40%, 2012/13 was a more traditional year of trade for the Company.

Total sales of GBP1.1 million were made up in a large part from sales of our holding of European coins, which we felt had reached maturity, for the next few years, at least, and the balance of our Chinese holdings. As previously mentioned, the market for high-end Chinese coins tailed off at the end of 2011/12 and we were extremely pleased to have sold the majority of our Chinese portfolio when we did. That said, we would now seriously consider re-entering that market over the coming year, but again only for the very highest quality pieces.

During the year, the Company also continued its efforts to rebalance the portfolio, liquidating some of the lower value items and inferior duplicates previously acquired as part of important collections. This process is ongoing and we expect to generate several hundred thousand pounds of sales during the current financial year as a result of this exercise. We ended the period under review with less than 1,200 coins, a reduction from almost 1,300 at the beginning of the period.

English milled and hammered coins represent the largest segment of the Company's portfolio, with holdings of Ancient Roman, Islamic and Indian coins also representing significant proportions of the stock. Other sectors where Avarae holds coins of notable value includes USA and South American coins.

Avarae's current intention is to hold the vast majority of its current portfolio for the foreseeable future and only make disposals of coins or collections when the Board believes it to be in the best interests of the Company and its shareholders.

Financial results

Revenue from the sale of coins or coin collections for the year ended 31 March 2013 was GBP1.1 million, down on the previous year's record high of GBP1.7 million.

As at 31 March 2013, in line with the strategy outlined in our Admission document and in previous reports, the Company instructed industry experts to undertake a detailed revaluation of its coin portfolio. This exercise is intended to apportion changes in the value of coins over the period of their ownership by Avarae rather than allocating profits (or losses) in the year of sale only. The Company's gross profit is calculated as the difference between the sale price of each coin less its carrying value brought forward, which will either be cost or the revalued amount. The industry experts considered the open market resale value of only those coins that had been held within the Company's portfolio for more than 12 months, i.e. only those coins acquired and held by Avarae on or before 31 March 2012 and excluded those purchased during the financial year under review, which were held at cost. In each of the years since the Company's inception, the Company has recorded a gross profit, thereby demonstrating the validity of the revaluation exercise.

The result of the extensive revaluation exercise carried out on the coins as described in the accounting policies, which the Directors believe to have been particularly conservative this year, was that the overall carrying value of the portfolio as at 31 March 2013 has increased to GBP10.93 million (2012: GBP10.11 million). The Directors consider this uplift in value to be particularly conservative and would expect coins from the portfolio to achieve appreciably higher returns if sold at auction. The result of the revaluation exercise at 31 March 2013 is that, as at that date, the Company's coin portfolio comprised of coins purchased at cost for an aggregate GBP8.59 million (2012: GBP8.33 million) and a revaluation amount of GBP2.34 million (net of VAT payable on sale) (2012: GBP1.78 million).

The effect of the revaluation, together with the profits from the coin sales, resulted in the Company recording a gross profit of GBP0.71 million (2012: GBP0.89 million). The Directors continually strive to keep the Company's cost base to a minimum. As a result, administrative expenses during the year were down on those of the previous year at GBP0.36 million (2012: GBP0.39 million), representing less than 3.1 per cent. of the Company's net assets (2012: 3.4 per cent.). Net profit for the year of GBP0.36 million (2012: GBP0.51 million), delivered earnings per share of 0.44p (2012: 0.63p).

The Company ended the year with a net cash balance of approximately GBP0.4 million compared to GBP1.3 million reported at the end of March 2012. This was due to a number of factors, including coin purchases being GBP0.4 million greater than those made in 2012, dividends paid during the year of GBP0.15 million and changes to working capital of GBP0.3 million. The Company's cash is prudently managed across a spread of accounts, thereby reducing the risks of the creditworthiness of any one financial institution. During the year, investments of GBP1.2 million (2012: GBP0.81 million) were made in coins and coin collections. As at the year end, the Company had net assets of GBP11.63 million (2012: GBP11.43 million) and no borrowings. Net asset value per share ("NAV") as at 31 March 2013 again increased on the prior year to 14.4 pence (2012: 14.1 pence).

Annual General Meeting

The notice ("Notice") of annual general meeting ("AGM") to be held at 12:00 p.m. on 3 September 2013 at the Company's registered office has today been sent to shareholders. Copies of the Avarae's report and accounts, Notice and form of proxy for use at the AGM will be available shortly at the Company's registered office and on its website www.avarae.com.

Dividend

Reflecting the Company's continued increase in its NAV year-on-year and the Board's cautiously optimistic outlook, the Board is pleased to recommend a full year dividend of 0.18 pence per share (2012: 0.185 pence per share), subject to shareholder approval to be sought at the Company's annual general meeting to be held on 3 September 2013. The dividend will be paid on 27 September 2013 to shareholders on the register on 6 September 2013.

The dividend policy adopted by the Board is intended to be progressive and a dividend is expected to be declared on an annual basis. The level of the dividend will reflect the Company's reported profits over a three year period, thereby smoothing out any years of one-off profits (or losses). The policy will be to pay out approximately 1/3 of the average net profits reported over the most recent three year period. For the year ended 31 March 2013, the level of the dividend will be approximately GBP0.15 million (2012: GBP0.15 million) or 0.18 pence per share (2012: 0.185 pence per share).

Outlook

With worldwide economies only now starting to believe that they are over the worst of the deep recession of the last 5 years, Avarae finds itself well positioned. Where other alternative asset plays have suffered as a result of the downturn and the reduction in available investment capital, Avarae has continued upwards, posting ever-increasing net asset values, commenced regular dividend payments and posted record valuations for its coin portfolio. As the world economies recover, the Company is well placed to capitalise. The Company has a strong balance sheet with a healthy cash position and no debt. The Directors, therefore, remain optimistic about the Company's future prospects.

Statement of Comprehensive Income for the year ended 31 March 2013

 
 
                                             Year ended  Year ended 
                                              31-Mar-13   31-Mar-12 
                                       Note     GBP'000     GBP'000 
Revenue 
Sales                                   1         1,102       1,660 
Cost of Sales                                     (995)       (966) 
Coin revaluation                        5           605         196 
                                                   ----        ---- 
Gross profit                                        712         890 
                                                   ----        ---- 
Administrative expenses                           (359)       (387) 
                                                   ----        ---- 
Profit on ordinary activities 
 before:                                            353         503 
Finance income                                        2           2 
                                                   ----        ---- 
Profit on ordinary activities 
 before tax                                         355         505 
Tax on profit on ordinary activities    5             -           - 
                                                   ----        ---- 
Profit on ordinary activities 
 after taxation                                     355         505 
                                                   ----        ---- 
Dividends                                         (149)           - 
                                                   ----        ---- 
Retained profit for the year                        205         505 
                                                   ----        ---- 
Earnings per share (basic and 
 diluted)                               4         0.44p       0.63p 
 

Statement of Financial Position as at 31 March 2013

 
                                        As at       As at 
                                    31-Mar-13   31-Mar-12 
                              Note    GBP'000     GBP'000 
Assets 
Current Assets 
Coin inventory                 5       10,926      10,112 
Trade and other receivables    6          398         247 
Cash at bank                              368       1,299 
                                         ----        ---- 
Total assets                           11,692      11,658 
                                         ----        ---- 
 
Liabilities and equity 
Creditors: amounts falling 
 due within one year           7           58         230 
                                         ----        ---- 
Total Liabilities                          58         230 
                                         ----        ---- 
Equity 
Called up equity share 
 capital                       8          808         808 
Share premium                           8,880       8,880 
Profit and loss account                 1,946       1,740 
                                         ----        ---- 
Total Equity Shareholders' 
 Funds                                 11,634      11,428 
                                         ----        ---- 
Total Liabilities and 
 equity                                11,692      11,658 
                                         ----        ---- 
 
 

Cash Flow Statement for the year ended 31 March 2013

 
                                     Note  Year ended  Year ended 
                                            31-Mar-13   31-Mar-12 
                                              GBP'000     GBP'000 
 
Cash flows from operating 
 activities: 
Profit on ordinary activities 
 for the year                                     353         503 
 
Adjustments for: 
(Decrease)/increase in payables                 (172)         190 
(Increase)/decrease in receivables              (151)         214 
(Increase)/decrease in inventory                (814)        (45) 
                                                 ----        ---- 
Net cash flow from operations                   (784)         860 
                                                 ----        ---- 
Interest received                                   2           2 
                                                 ----        ---- 
Net cash from investing 
 activities                                         2           2 
                                                 ----        ---- 
Dividends paid                        9         (149)           - 
                                                 ----        ---- 
Net cash from financing 
 activities                                     (149)           - 
                                                 ----        ---- 
Net (decrease)/increase 
 in cash and cash equivalents                   (931)         864 
 
  Opening cash position                         1,299         435 
                                                 ----        ---- 
Cash and cash equivalents 
 at 31 March                                      368       1,299 
                                                 ----        ---- 
 

Statement of Changes in Equity for the year ended 31 March 2013

 
                                                     Retained 
Company               Share capital  Share premium   earnings    Total 
                            GBP'000        GBP'000    GBP'000  GBP'000 
 
 
At 31 March 2011                808          8,880      1,235   10,923 
 
Profit for the year               -              -        505      505 
                                ---            ---        ---      --- 
At 31 March 2012                808          8,880      1,740   11,428 
                                ---            ---        ---      --- 
Profit for year                   -              -        355      355 
 
Dividends paid                    -              -      (149)    (149) 
                                ---            ---        ---      --- 
At 31 March 2013                808          8,880      1,946   11,634 
                                ---            ---        ---      --- 
 

Notes to the audited results for the year ended 31 March 2013

   (1)     Accounting policies 

Revenue recognition

The Company's sales consist of sales of individual coins or collections of coins and are accounted for on an accruals basis.

Finance income is accounted for on a received basis.

   (2)     Segmental information 

The Company has one class of business, that of the sale of antiquarian and collectable coins. All sales have been through dealers based in the single geographic segment of the United Kingdom. Accordingly no further segmental information is presented.

(3) Taxation

The Company is resident for tax purposes in the Isle of Man.

The Company is chargeable to Isle of Man corporate income tax at the standard rate of 0%, which took effect from 6 April 2006.

 
                        Year ended  Year ended 
                         31-Mar-13   31-Mar-12 
                           GBP'000     GBP'000 
Profit before tax              355         505 
                              ----        ---- 
Isle of Man tax at 0%            -           - 
                              ----        ---- 
Tax expense for the              -           - 
 year 
                              ----        ---- 
 
   (4)     Earnings per share 

The retained earnings per share (basic and diluted) for the year ended 31 March 2013 was 0.44p (2012: 0.63p). The calculation of earnings per share is based on the profit of GBP355,000 (2012: GBP505,000) for the year and the weighted average number of shares in issue being 80,783,334 (2012: 80,783,334).

   (5)     Coin inventory 
 
                                 As at 
                             31-Mar-13 
 Coins                         GBP'000 
 
 At Cost 
 At 01 April 2012                8,333 
 Additions                       1,204 
 Disposal of coins               (951) 
                            ---------- 
 At 31 March 2013                8,586 
                            ---------- 
 
 Revaluation 
 At 01 April 2012                1,779 
 Revaluation for the year          605 
 Disposal of coins                (44) 
 At 31 March 2013                2,340 
                            ---------- 
 
 Net Book Values 
  At 31 March 2013              10,926 
                            ========== 
 At 31 March 2012               10,112 
                            ========== 
 

At the year end, only those coins that had been acquired by the Company before 31 March 2012 were revalued by industry experts to their expected current market value less the VAT payable on sale. Inventory purchased during the year ended 31 March 2013 has been carried at cost. This is considered by the directors to give a fair value for the inventory. Inventory of GBP10,926,000 (2012: GBP10,112,000) is carried as 'Inventory carried at fair value less costs to sell'. The purchase cost of inventory held at 31 March 2013 was GBP8,586,152 (2012: GBP8,332,905).

   (6)     Trade and other receivables 
 
                       As at      As at 
                   31-Mar-13  31-Mar-12 
                     GBP'000    GBP'000 
Trade debtors            368        202 
Other debtors             21         29 
Prepaid expenses           9         16 
                        ----       ---- 
Total                    398        247 
                        ----       ---- 
 

Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

   (7)     Payables 
 
                       As at      As at 
                   31-Mar-13  31-Mar-12 
                     GBP'000    GBP'000 
Trade creditors            -        172 
Accrued expenses          58         58 
                        ----       ---- 
                          58        230 
                        ----       ---- 
 

All creditors are due within one year.

   (8)     Share capital 
 
                                             As at      As at 
                                         31-Mar-13  31-Mar-12 
                                           GBP'000    GBP'000 
Authorised 
200,000,000 ordinary shares of GBP0.01 
 each                                        2,000      2,000 
                                              ----       ---- 
Allotted, called up and fully paid 
80,783,334 ordinary shares of GBP0.01 
 each (2012: 80,783,334)                       808        808 
                                              ----       ---- 
 

(9) Dividends

Reflecting the Company's continued increase in its NAV year-on-year and the Board's cautiously optimistic outlook, the Board is pleased to recommend a full year dividend of 0.18 pence per share (2012: 0.185 pence per share), subject to shareholder approval to be sought at the Company's annual general meeting to be held on 3 September 2013. The dividend will be paid on or around 27 September 2013 to shareholders on the register on 6 September 2013.

The dividend policy adopted by the Board is intended to be progressive and a dividend is expected to be declared on an annual basis. The level of the dividend will reflect the Company's reported profits over a three year period, thereby smoothing out any years of one-off profits (or losses). The policy will be to pay out approximately 1/3 of the average net profits reported over the most recent three year period. For the year ended 31 March 2013, the level of the dividend will be approximately GBP0.15 million (2012: GBP0.15 million) or 0.18 pence per share (2012: 0.185 pence per share).

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