RNS Number:2244F
Pennine Downing Ethical VCT PLC
17 December 2002
PENNINE DOWNING ETHICAL VCT PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2002
2002 2001
pence pence
Net asset value per share 52.1 71.2
Total dividends per ordinary share Nil 0.5
Revenue return per ordinary share (0.03) 0.6
Net assets #5.7 million #7.9 million
The statement to shareholders by the Chairman, Andrew Davison, includes the
following comments:
Introduction
It is disappointing to have to deliver news of another difficult year for
Pennine Downing Ethical VCT plc. In stark contrast with the optimistic times
when shareholders subscribed, the current poor economic conditions, which have
been fuelled by terrorist activities, political tensions and corporate scandals,
have continued for much longer than many people expected. The impact of this on
young smaller companies and the aftermath of the technology boom have been
particularly harsh.
During the year to 30 September 2002, the Company's Net Asset Value ("NAV") fell
by 19.1p to 52.1p. The unquoted portfolio accounted for #1.4 million or 12.5p
per share of the fall, whilst the AIM portfolio accounted for #681,000
equivalent to 6.2p per share. The remaining fall of 0.4p is attributable to the
fixed interest portfolio and running costs of the Company.
Venture capital investments
The Company is now effectively fully invested. A small sum has been set aside
for follow-on investments and to ensure the company can participate in any
positively ethical opportunities that may arise.
During the year the Company did however invest #400,000 in nine follow on
investments. The Company has now achieved its target of at least 70% of its
investments comprising qualifying holdings, within the three year deadline which
expired on 30 September 2002.
The Company made two partial realisations and two full realisations during the
year, generating a net loss against cost of #199,000.
Investments listed on AIM are valued at mid market value. In general,
valuations of investments within the AIM portfolio have fallen during the year
particularly in respect of technology and internet related businesses.
The Directors have reviewed the valuations of investments within the unquoted
portfolio and made a number of provisions in accordance with BVCA guidelines
where companies have failed to perform to target. Additionally, two investee
companies failed and went into liquidation during the year. Such investments
have been fully written off and treated as realised losses within the accounts.
After the year end, the Company accepted an offer and sold its holding in
Mission Testing plc realising a net loss of #95,000 against cost.
Ethical Committee
The Ethical Committee has continued to monitor investee companies to ensure
compliance with the Ethical Policy.
Listed fixed income securities
At the year end the Company had a portfolio of listed fixed income securities
with a cost of #2.0 million. Three investments were realised during the year,
giving rise to losses of #17,000 against cost. This portfolio is managed by
Rathbone Investment Management Limited.
Results and dividend
Gross revenue for the year was #181,000 (2001: #281,000) and net revenue loss
after taxation was #3,000 (2001: profit #62,000).
Many of the investee companies are at an early stage in their life and
consequently do not pay dividends. As a result, the Company's revenue for the
year has not been sufficient to consider paying a final dividend and it is
unlikely that revenue dividends will be paid in the immediate future. Instead,
the focus is now on generating capital profits from the portfolio with a view to
distributing those profits to shareholders as and when they arise.
Share repurchase
The Board is conscious that the Company's share price is affected by the
illiquidity of its shares in the market, which is largely a result of the
requirement that most shareholders must retain their shares for at least five
years in order to retain their tax benefits. In line with accepted practice
with VCTs, the Company has authorisation to purchase its own shares. The Company
purchased 15,000 shares during the year at a price of 60p per share.
In order to allow the Company to purchase its own shares without affecting its
ability to pay dividends, Court approval is currently being sought for the
cancellation of the Share Premium account and creation of a distributable
Special Reserve. In order that the Company will be able to utilise the Special
Reserve to purchase shares, the Articles of Association of the Company need to
be amended. A Special Resolution to this effect will be proposed at the
forthcoming AGM.
Annual General Meeting
The third Annual General Meeting of the Company will be held at 69 Eccleston
Square, London SW1V 1PJ at 12:00 noon on 29 January 2003.
Four items of Special Business are proposed in the Notice of Meeting; to
authorise the Directors to allot shares, to disapply pre-emption rights, to
alter the Articles of Association as described above and to renew the Company's
authority to purchase up to 1,104,263 ordinary shares in the market,
representing approximately 10% of the current issued ordinary share capital.
Publication of share price
The Company's share price is quoted in the Financial Times on a daily basis in
the "Investment Companies" sector.
Outlook
With the Company now fully invested and little opportunity currently for
successful realisations, the Managers' focus is on trying to extract value from
the existing portfolio. Your Board is giving the Managers every encouragement
to attain this value. Close monitoring, encouragement, advising and, where
appropriate, financial support are the main tools available to the investment
managers in helping investee companies develop and survive in the current tough
conditions.
The Company still holds a widely spread portfolio with investments in more than
35 companies, some of which are showing tenacity and even promise in the current
circumstances. However, there are still no clear signs that sustained economic
recovery is near. Until this arrives, Shareholders are unlikely to see any
significant improvement in the Company's Net Asset Value.
STATEMENT OF TOTAL RETURN (incorporating the revenue account)
for the year ended 30 September 2002
Year ended Year ended
30 Sept 30 Sept
2002 2001
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Losses on investments
-realised - (6) (6) - (27) (27)
-unrealised - (2,028) (2,028) - (2,443) (2,443)
Income 181 - 181 281 - 281
Investment management fees (25) (75) (100) (37) (111) (148)
Other expenses (159) - (159) (166) - (166)
Return on ordinary activities before tax (3) (2,109) (2,112) 78 (2,581) (2,503)
Taxation - - - (16) 16 -
Return on ordinary activities after tax (3) (2,109) (2,112) 62 (2,565) (2,503)
Dividends in respect of equity shareholders - - - (55) - (55)
Transfer (from)/to reserves (3) (2,109) (2,112) 7 (2,565) (2,558)
Return per ordinary share (0.03p) (19.08p) (19.11p) 0.60p (23.80p) (23.20p)
BALANCE SHEET
as at 30 September 2002
2002 2001
#'000 #'000 #'000 #'000
Fixed Assets
Listed fixed income securities 2,054 2,469
Venture capital investments 3,290 4,976
5,344 7,445
Current Assets
Debtors 146 169
Cash at bank and in hand 285 383
431 552
Creditors: amounts falling due within one year (19) (120)
Net current assets 412 432
Net assets 5,756 7,877
Capital and reserves
Called up share capital 552 553
Capital redemption reserve 1 -
Special reserve 9,933 -
Share premium account - 9,933
Capital reserve - realised (552) (260)
Capital reserve - unrealised (4,177) (2,360)
Revenue reserve (1) 11
Total equity shareholders' funds 5,756 7,877
Net asset value per ordinary share 52.1p 71.2p
CASHFLOW STATEMENT
for the year ended 30 September 2002
2002 2001
#'000 #'000
Net cash outflow from operating activities (101) (168)
Taxation - (2)
Capital Expenditure
Purchase of fixed income securities - (3,609)
Purchase of venture capital investments (400) (2,002)
(400) (5,611)
Sale of fixed income securities 444 1,132
Sale of venture capital investments 23 481
Net cash inflow/(outflow) from capital expenditure 67 (3,998)
Equity dividends paid (55) (81)
Net cash outflow before financing (89) (4,249)
Financing
Issue of ordinary shares - 266
Expense of share issue - (13)
Cost of shares repurchased (9) -
Net cash (outflow)/inflow from financing (9) 253
Decrease in cash (98) (3,996)
Reconciliation of net cash flow to movement in net funds
Decrease in cash during the year (98) (3,996)
Net funds at 1 October 2001 383 4,379
Net funds at 30 September 2002 285 383
Reconciliation of net revenue return before taxation to net cash
inflow from operating activities
Net revenue before taxation (3) 78
Management fees charged to capital (75) (111)
Increase in other debtors (32) (10)
Decrease/(increase) in prepayments and accrued income 55 (96)
Decrease in other creditors (46) (29)
Net cash outflow from operating activities (101) (168)
Change in cash
Beginning of year 383 4,379
Net cash outflow (98) (3,996)
End of year 285 383
Notes:
1. 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 2001.
2. The special reserve arose on the cancellation of the share premium
account following court approval on 11 July 2002. A resolution proposing to
change the Articles of Association such that this be a distributable reserve
will be put to shareholders at the AGM. This reserve will allow the Company to
buyback shares in accordance with its policy.
3. The financial information set out in the announcement does not
constitute the Company's statutory accounts for the year ended 30 September
2002. The statutory accounts for the year ended 30 September 2002 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.
4. The financial information for the year ended 30 September 2001 is
derived from the statutory accounts for that year which have been delivered to
the Register 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.
5. A copy of the full annual report and financial statements for the year
ended 30 September 2002 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
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