Avarae Global Coins PLC Final Results (1359K)

TIDMAVR

RNS Number : 1359K

Avarae Global Coins PLC

19 September 2016

News Release 19 September 2016

AVARAE GLOBAL COINS PLC

FINAL RESULTS FOR THE YEARED 31 MARCH 2016

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 2016.

Highlights for the year:

   --     Sales of GBP0.77 million (2015: GBP0.63 million); 
   --     Loss on ordinary activities GBP0.07 million (2015: profit of GBP0.38 million); 
   --     Recommended full year dividend of Nil pence per share (2015: 0.15 pence); 

-- Carrying value of portfolio of rare and high quality coins decreased 0.5% to GBP11.20 million (2015: GBP11.14 million);

   --     Cash balance at period end of GBP0.57 million (2015: GBP0.88 million); and 
   --     NAV per share decreased to 14.6 pence (2015: 14.9 pence). 

Commenting on the results, Nigel Gautrey, Director of Avarae, said:

"Avarae has continued to trade in line with management's expectation since the end of the financial year under review, having generated sales of approximately GBP1.78 million, including having sold the Edward III Double Florin for GBP0.83 million, an increase of GBP0.34 million on its cost price in 2006.

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 
 
 Paul Shackleton/ Nick 
  Prowting                     [phone] 
 WH Ireland Limited 
 
   Toby Hall 
 GTH Communications Limited     [phone] 
 

Directors' Report

Introduction

We are pleased to present the annual report for the year ended 31 March 2016. During the year under review, the Company continued to manage its portfolio of rare and high quality coins.

Avarae Global Coins plc ("Avarae" or the "Company") 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 has not 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 several hundreds of thousands of pounds.

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 value of the coins acquired. Compound annual returns achieved over the medium to long-term for the highest quality and rarest coins can reach as high as 10 per cent. 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 a steady increase in interest in the coin sector, however the last 12 months has witnessed a slight cooling in this interest across the industry. Interest at the very top end of the market, appears to be stable, whereas mid-lower value coins have not been achieving the higher values of prior years.

The numismatic industry continues to witness an influx of new buyers looking for tangible assets and fresh areas to place their money as traditional asset classes, such as commodities and currencies, fail to deliver robust financial gains and exhibit high volatility. The majority of the funds coming into the numismatic market however are targeting the higher quality coin rarities and this is adding considerable pressure on availability which has, in some cases, priced Avarae out of the market.

Avarae's investments

Purchases

In the year to 31 March 2016, the Company acquired an additional thirteen coins for an aggregate GBP0.58 million (2015: GBP0.32 million) which, together with the year-end revaluation exercise, resulted in a value of the coin portfolio as at 31 March 2016 of GBP11.1 million (2015: GBP11.14 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 British coins.

Examples of coins acquired during the year include:

   --     An extremely rare Edward IV, Gold Ryal struck at the Norwich mint; 
   --     One of the finest known Charles II, Five Guinea pieces; 
   --     A mint state James I, gold Spur Ryal; and 
   --     A mint state US Continental Dollar dated 1776 struck in pewter. 

Sales

During the year, the Company also continued its efforts to rebalance its portfolio, liquidating a significant number of the lower value items and less high quality duplicates previously acquired as part of important collections. During the year, the Company sold almost 200 coins to end the period under review with a little over 800 coins. As flagged in last year's report, it should be noted that the both quantum of gross profit and the gross profit margin achieved on the sale of these lower value coins was and is be expected to be smaller than that expected to be achieved on the higher value and rarer coins sold.

Accordingly, sales during the year were GBP0.77 million, up from GBP0.63 million in the previous year, which generated a gross profit of GBP0.03 million (2015: GBP0.2 million). Unlike last year, however, sales in the period under review were of a higher number of lower value European, Indian and English coins whereas the prior year benefited from the sale of GBP0.5 million of individually higher value rare English gold coins which alone generated a gross profit margin of 39 per cent.

Breakdown of our Portfolio

English milled and hammered coins represent the largest segment of the Company's portfolio, with holdings of Islamic coins also representing significant proportions of the stock. Other sectors where Avarae holds coins of notable value includes USA and South American coins. In total, Avarae holds coins from more than 40 different regions and nationalities, demonstrating its genuine global exposure.

Financial results

Revenue from the sale of coins or coin collections for the year ended 31 March 2016 was GBP0.77 million, up on the previous year's total of GBP0.63 million. While the overall revenue has increased, the margin was materially lower at GBP0.03 million (2015: GBP0.2 million), reflecting the Board's policy to continue to dispose of the lower value coins within the portfolio for which the Directors do not believe there will be any material future value appreciation..

As at 31 March 2016, in line with its long-term policy, 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 2015 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 and which the Directors continue to believe to be conservative, was that the overall carrying value of the portfolio as at 31 March 2016 remained broadly flat at GBP11.20 million (2015: GBP11.14 million), despite recording sales of GBP0.77 million and purchases of only GBP0.58 million during the year. At the period end, the coin portfolio was comprising coins purchased with an aggregate cost of GBP8.31 million (2015: GBP8.29 million) and a revaluation amount of GBP2.8 million (net of VAT payable on sale) (2015: GBP2.85 million). The Directors continue to expect many coins from the portfolio to achieve appreciably higher returns than their revalued carrying value should they be sold at auction.

The effect of the revaluation, together with the profits from the coin sales, resulted in the Company recording a gross profit of GBP0.25 million (2015: GBP0.82 million). Administrative expenses during the year were down 25 per cent. at GBP0.32 million (2015: GBP0.44 million), due to cost reduction measures carried out during the year, in particular the termination of the numismatic advisory agreement with AH Baldwin & Sons in November 2015. Administrative costs for the year ended 31 March 2016 represented 2.7 per cent. of the Company's year-end net assets (2015: 3.7 per cent.). Administrative costs for the current financial year are expected to be reduced further.

Net loss for the year of GBP0.07 million (2015: GBP0.38 million (profit)), delivered a loss /earnings per share of (0.09p) (2015: 0.47p (profit)).

The Company ended the year with a net cash balance of approximately GBP0.57 million compared to GBP0.88 million reported at the end of March 2015. The Company's cash is prudently managed across a spread of accounts, thereby reducing the risks of the creditworthiness of any one financial institution. At the date of this report, the Company's cash balances stood at approximately GBP2.13 million.

At year end, the Company had net assets of GBP11.8 million (2015: GBP12.0 million) and no borrowings. The Company's net asset value per share ("NAV") as at 31 March 2016 was 14.6 pence (2015: 14.9 pence).

Dividend

Due to the Company's announcement today that it is seeking to return cash to shareholders by way of a tender offer, the Board does not recommend the payment of a dividend in respect of the year under review. The dividend policy adopted by the Board will be reviewed again at the end of the current financial year.

Tender offer and delisting

Avarae has been well positioned as an alternative asset investment for more than a decade, against a backdrop of volatile international markets and fluctuating commodity prices. Over the last 10 years, Avarae has performed relatively well in its objective of delivering capital appreciation with its net asset value per share having increased by more than 50 per cent. from 9.5 pence to 14.6 pence, as well as having distributed more than GBP0.5 million in dividends, as compared to the AIM All Share Index, which has fallen by approximately 36 per cent. over the same period.

However, Avarae has, over recent times, been finding it more and more challenging to acquire the highest quality and rarest coins which are being priced at ever higher prices. Furthermore, Avarae's share price has consistently traded at a discount to its net asset value, making it extremely difficult to raise additional funds for investment purposes in order to compete in today's numismatic market. This, coupled with the relatively high costs associated with having the Company's shares traded on AIM and the prohibitively high costs of returning cash to shareholders as an AIM company whose shares are thinly traded, has led the Board to its decision to seek to delist the Company's shares from AIM, with the intention to liquidate the coin portfolio in a controlled manner over a number of years in order to return as much cash to shareholders in the most cost effective ways possible.

Accordingly, your Board has today announced its intention to undertake a tender offer to acquire and cancel up to 16,156 667 existing ordinary shares at 11.5p each, representing a 3 per cent. premium to the volume weighted average closing mid-price per ordinary share since 1 January 2016. This will provide shareholders with nil-cost dealing facility and an opportunity to divest some or all of their shareholding in the Company, should they so wish. The Directors are then proposing to delist the Company's shares from trading on AIM, subject to obtaining the approval of shareholders to be sought at an extraordinary general meeting to be held on 13 October 2016 ("EGM").

Outlook

Avarae has continued to trade in line with management's expectation since the end of the financial year under review, having generated sales of approximately GBP1.78 million, including having sold the Edward III Double Florin for GBP0.83 million, an increase of GBP0.34 million on its cost price in 2016. Dependent upon the outcome of the de-listing resolution to be put to shareholders at the EGM, the Company will continue to trade in line with its existing trading policies.

Statement of Comprehensive Income for the year ended 31 March 2016

 
 
                                    Year ended  Year ended 
                                     31-Mar-16   31-Mar-15 
                             Note      GBP'000     GBP'000 
Revenue 
Sales                        1, 2          768         626 
Cost of Sales                            (739)       (425) 
Coin revaluation              5            220         618 
                                          ----        ---- 
Gross profit                               249         819 
                                          ----        ---- 
Administrative expenses                  (319)       (440) 
                                          ----        ---- 
(Loss)/profit on ordinary 
 activities before:                       (70)         379 
Finance income                               1           1 
                                          ----        ---- 
(Loss)/profit on ordinary 
 activities before tax                    (69)         380 
Tax on (loss)/profit 
 on ordinary activities       3              -           - 
                                          ----        ---- 
(Loss)/profit on ordinary 
 activities after taxation                (69)         380 
                                          ----        ---- 
Earnings per share (basic 
 and diluted)                 4        (0.09)p       0.47p 
 

Statement of Financial Position as at 31 March 2016

 
                                        As at      As at 
                                    31-Mar-16  31-Mar-15 
                              Note    GBP'000    GBP'000 
Assets 
Current Assets 
Coin inventory                 5      11, 200     11,141 
Trade and other receivables    6           55        105 
Cash at bank                              571        882 
                                         ----       ---- 
Total assets                           11,826     12,128 
                                         ----       ---- 
 
Liabilities and equity 
Creditors: amounts falling 
 due within one year           7           15        127 
                                         ----       ---- 
Total Liabilities                          15        127 
                                         ----       ---- 
Equity 
Called up equity share 
 capital                       8          808        808 
Share premium                           8,880      8,880 
Profit and loss account                 2,123      2,313 
                                         ----       ---- 
Total Equity Shareholders' 
 Funds                                 11,811     12,001 
                                         ----       ---- 
Total Liabilities and 
 equity                                11,826     12,128 
                                         ----       ---- 
 

Cash Flow Statement for the year ended 31 March 2016

 
                                Note  Year ended  Year ended 
                                       31-Mar-16   31-Mar-15 
                                         GBP'000     GBP'000 
 
Cash flows from operating 
 activities: 
(Loss)/profit on ordinary 
 activities for the 
 year                                       (69)         380 
 
Adjustments for: 
Decrease in payables                       (113)       (733) 
Increase in receivables                       50       1,705 
Decrease/(increase) 
 in inventory                               (59)       (521) 
                                            ----        ---- 
Net cash flow from 
 operations                                (191)         831 
                                            ----        ---- 
Interest received                              1           1 
                                            ----        ---- 
Net cash from investing 
 activities                                    1           1 
                                            ----        ---- 
Dividends paid                   9         (121)       (121) 
                                            ----        ---- 
Net cash from financing 
 activities                                (121)       (121) 
                                            ----        ---- 
Net (decrease)/increase 
 in cash and cash equivalents              (311)         711 
 
  Opening cash position                      882         171 
                                            ----        ---- 
Cash and cash equivalents 
 at 31 March                                 571         882 
                                            ----        ---- 
 

Statement of Changes in Equity for the year ended 31 March 2016

 
                         Share     Share   Retained 
Company                capital   premium   earnings     Total 
                       GBP'000   GBP'000    GBP'000   GBP'000 
 
 
At 31 March 2014           808     8,880      2,054    11,742 
 
Profit for the year          -         -        380       380 
 
Dividends paid               -         -      (121)     (121) 
                           ---       ---        ---       --- 
 
  At 31 March 2015         808     8,880      2,313    12,001 
 
Profit for year              -         -       (69)      (69) 
 
Dividends paid               -         -      (121)     (121) 
                           ---       ---        ---       --- 
At 31 March 2016           808     8,880      2,123    11,811 
                           ---       ---        ---       --- 
 

Notes to the Financial Statements for the year ended 31 March 2016

   (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. Any sales made at auction are accounted for net of any incidental auction costs incurred.

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. The analysis of the Company's revenue by location of customer is as follows:

 
 
                      Year  Year ended 
                     ended 
                 31-Mar-16   31-Mar-15 
                   GBP'000     GBP'000 
UK                     633         478 
International 
Canada                  18           - 
Switzerland            117           - 
Japan                    -         148 
                      ----        ---- 
Total Sales            768         626 
                      ----        ---- 
 

(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-16   31-Mar-15 
                        GBP'000     GBP'000 
Profit before tax          (69)         380 
                           ----        ---- 
Isle of Man tax               -           - 
 at 0% 
                           ----        ---- 
Tax expense for               -           - 
 the year 
                           ----        ---- 
 
   (4)     Earnings per share 

The loss per share (basic and diluted) for the year ended 31 March 2016 was 0.20p (2015: profit per share of 0.47p). The calculation of earnings per share is based on the loss of GBP161, 000 (2015: GBP380,000) for the year and the weighted average number of shares in issue being 80,783,334 (2015: 80,783,334).

   (5)     Coin inventory 
 
                                 As at 
                             31-Mar-16 
 Coins                         GBP'000 
 
 At Cost 
 At 01 April 2015                8,294 
 Additions                         577 
 Disposal of coins               (562) 
                            ---------- 
 At 31 March 2016                8,309 
                            ---------- 
 
 Revaluation 
 At 01 April 2015                2,847 
 Revaluation for the year          220 
 Disposal of coins               (176) 
 At 31 March 2016                2,891 
                            ---------- 
 
 Net Book Values 
  At 31 March 2016              11,200 
                            ========== 
 At 31 March 2015               11,141 
                            ========== 
 

At the year end, only those coins that had been acquired by the Company before 31 March 2015 were revalued by industry experts to their expected market value as at 31 March 2016 less the VAT payable on sale. Inventory purchased during the year ended 31 March 2016 has been carried at cost. This is considered by the directors to give a fair value for the inventory. Inventory of GBP11,107,614 (2015: GBP11,141,208) is carried as 'Inventory carried at fair value less costs to sell'.

The purchase cost of inventory held at 31 March 2016 was GBP8,309,284 (2015: GBP8,293,780). This cost includes all incidental costs of acquisition (including premiums and irrecoverable VAT).

IFRS 13, Fair Value Measurement, requires disclosure about fair value measurements. The coin inventory revaluation is a fair value adjustment to revalue coins to their expected current market value less VAT payable on sale. It is a level 2 fair value adjustment, as it is a valuation technique where all significant inputs are directly or indirectly observable from market data, as the revaluation is based on sales of similar coins in the market.

   (6)     Trade and other receivables 
 
                         As at      As at 
                     31-Mar-16  31-Mar-15 
                       GBP'000    GBP'000 
Trade debtors               23         83 
Other debtors               13          - 
Prepaid expenses            19         22 
                          ----       ---- 
Total                       55        105 
                          ----       ---- 
 

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-16  31-Mar-15 
                       GBP'000    GBP'000 
Trade creditors              5         23 
Other creditors              -         47 
Accrued expenses            10         57 
                          ----       ---- 
                            15        127 
                          ----       ---- 
 

All creditors are due within one year.

   (8)     Share capital 
 
                                          As at      As at 
                                      31-Mar-16  31-Mar-15 
                                        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 (2015: 80,783,334)         808        808 
                                           ----       ---- 
 

(9) Dividends

Due to the Company's announcement today that it is seeking to return cash to shareholders by way of a tender offer, the Board does not recommend the payment of a dividend in respect of the year under review. The dividend policy adopted by the Board will be reviewed again at the end of the current financial year.

This information is provided by RNS

The company news service from the London Stock Exchange

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September 19, 2016 02:01 ET (06:01 GMT)