Final Results
Baronsmead VCT 3 PLC
28 January 2008
To: RNS
From: Baronsmead VCT 3 plc
Date: 28 January 2008
Investment Objective
To achieve long-term capital growth and generate tax-free dividends for private
investors.
Audited Preliminary Results - Year Ended 31 December 2007
+ 0.9% NAV per ordinary share increased to 127.94p before deduction of
dividends. After payment of dividends totalling 7.5p per ordinary share in the
year to 31 December 2007, the NAV was 120.44p
+ 8.3% NAV per C share increased to 107.15p before deduction of dividends.
After dividends totalling 4p in the year, the NAV was 103.15p
+ 71% NAV total return since launch in 2001
6.7% Dividend yield, tax-free to qualifying ordinary shareholders
(gross equivalent yield for a higher rate taxpayer is 10%) based on 7.5p
dividends paid divided by the mid ordinary share price of 111.5p at the year end
The Chairman, Mark Cannon Brookes said:
'Baronsmead VCT 3 remained steady during 2007 with value growth from the
unquoted portfolio offset by the fall in the AiM portion of the portfolio,
particularly exacerbated by the sharp fall in UK economic confidence in the
second half of 2007. Five profitable unquoted company exits demonstrated the
ability of the private equity disciplines to generate significant uplifts in
value.
With ordinary share dividends paid of 7.5p, the dividend yield grew to 6.7 per
cent, which is tax-free to most ordinary shareholders. The hope is to sustain
this across the enlarged ordinary share capital following the issue of
approximately 22 million new ordinary shares in January 2008 on conversion of
the C shares.
RESULTS
In the year to 31 December 2007, the Net Asset Value (NAV) per ordinary share
increased by 0.9 per cent from 126.77p to 127.94p before deduction of dividends.
Two interim dividends were paid in September (3p) and December 2007 (4.5p) per
ordinary share.
The C share capital raised in the five month period to 3 January 2006 was
converted into ordinary shares on 28 January 2008 at a NAV of 103.15p which
resulted in 8,564 new ordinary shares being issued for every 10,000 shares held.
Two interim dividends of 2p each were paid in September and December 2007.
Since their launch, the NAV total return for the C shares to 31 December 2007 is
16 per cent.
At 31 December 2007, the respective share pools held different portfolios of
companies hence the difference in the performance of the NAVs. Over the last
two years, as a result of the ordinary share pool being fully invested most of
the unquoted investments were allocated to the C share pool and many of these
have subsequently increased in value such as Fisher Outdoor Leisure and Empire
World Trade. Additionally, the newer AiM investments allocated to the C share
pool have been less affected by the market down turn. This has impacted the
respective returns during the course of the year.
LONG TERM PERFORMANCE
The two standard measurements for monitoring investment performance are based
either on the NAV plus dividends paid (known as 'NAV total return') or the
movement in share price plus dividends paid (known as 'share price total
return'). The latter is particularly relevant to investors who buy in the
secondary market. Other measures include dividend yield and cash returned to
shareholders. These different measures of performance are described below and
most are stated before the inclusion of VCT tax reliefs. These reliefs were
designed to redress both the VCT constraints as well as the higher risks that
relate to smaller unquoted and AiM-traded companies.
NAV total return to ordinary shareholders since launch in January 2001 amounts
to 71 per cent which represents an annual compound growth rate of 8.0 per cent
and is stated net of all running costs.
Share price total return in the last five years has been 75 per cent, which
represents an annualised tax-free return of 12 per cent. This ranks Baronsmead
VCT 3 as seventh out of 63 VCTs (source Trustnet - 25 January 2008) over this
period.
The results set out above compare favourably with other VCTs and fuller
comparisons have recently been facilitated by the Association of Investment
Companies (AIC) who publish monthly data on their website, www.theaic.co.uk.
Dividends and yield. By 31 December 2007 dividends totalling 33.3p had been paid
to founder shareholders over the last seven years. Based on the mid share price
of 111.5p at the period end, the dividend yield is currently 6.7 per cent
tax-free for UK private investors. The Board's intention is to sustain this
record in the medium term but its continuance will depend on the level of
profitable realisations and it cannot be guaranteed.
Cash returned to shareholders arises from dividends paid and the initial income
tax relief that qualifying shareholders can retain beyond the initial holding
period. For subscribers in 2001, they will have received 33.3p plus up to 20p
initial income tax relief while subscribers for C shares have received 7p
dividends and up to 40p income tax relief (as long as these shares are retained
for more than three years). The bid price for the ordinary and C shares prior
to conversion at 31 December 2007 were 110p and 90p respectively.
THE PORTFOLIO
The portfolio increased to 72 investments with fifteen new investments made and
eleven investments fully realised during the period. New investments totalled
£7.6 million across three new unquoted and twelve AiM-traded investees, much of
which was invested from the C share pool as the ordinary share capital was
relatively fully invested. The split by value of the portfolio is approximately
63: 37 between unquoted and AiM/full list investments and the largest
investments in each category are 3.5 per cent and 2.3 per cent of NAV.
Six VCT tests relating to the running of Baronsmead VCT 3 have to be, and were,
met throughout the period to 31 December 2007. The most significant of these
tests is the need to ensure at least 70 per cent by value of its investments is
invested in VCT qualifying investments. At the period end, over 75 per cent of
the share capital raised (net of launch costs) prior to 31 December 2005 was
invested in such investments.
The 'direction of travel' or relative health of portfolio companies is measured
quarterly in terms of profitability as well as other non-financial benchmarks.
At the period end 83 per cent of the portfolio companies were reporting higher
or steady profits and few at this stage appear to be affected by the credit
crunch.
Investment sales totalled £12.6 million realising significant net profits of
£7.3million, which represents a creditable multiple on cost of 2.4 times.
MAKING FURTHER INVESTMENTS IN BARONSMEAD VCT 3
The record of share price total returns and the availability of ISA-style tax
reliefs illustrate some of the merits for UK private investors of acquiring
existing shares in Baronsmead VCT 3. The Manager sent a guide to all
shareholders in September 2007 titled 'How to acquire additional shares in the
generalist Baronsmead VCTs', which provides more information about how to
purchase or subscribe for more shares and how the different VCT tax reliefs
apply.
Following revisions to VCT legislation in the Finance Acts 2006 and 2007 the
detailed way in which new share capital can be deployed has become clearer and
as a consequence the Board is able to increase the financial planning
opportunities available to ordinary shareholders by offering them the ability to
subscribe for new 'top up' shares.
In August 2007 top-up offers of up to €2.5m (approximately £1.7 million) were
sent to ordinary and C shareholders. The offers closed on 28 September 2007.
The C share offer was over-subscribed by 4.2 per cent and the ordinary share
offer raised approximately £0.7 million leaving the capacity to raise an
additional €1.5 million. As a result, a 'top-up' offer to raise up to €1.5
million has been sent to the enlarged group of ordinary shareholders.
In the year to 31 December 2007, the Dividend Reinvestment Plan (DRIP) acquired
a total of 655,715 ordinary shares for 391 ordinary shareholders (some 22.5 per
cent). This scheme is now available to shareholders who previously held C
shares and allows shareholders to re-invest their dividends in existing ordinary
shares via in the market. Shares acquired through the DRIP count towards an
individual's annual limit for VCT investment and qualifying investors benefit
from tax free dividends and capital gains. However, no upfront income tax
relief is available on shares acquired through the DRIP. The C shareholders
were sent the DRIP brochure and application form following conversion of their C
shares and these are generally available if shareholders contact the Registrar.
NEW LISTING REGULATION
Listed companies are now required to state their investment policies in full and
this is set out in the Annual Report. In this way existing and prospective
shareholders can understand the investment opportunity which the Company offers
and identify how risk spreading is achieved. The Board reviews the investment
policy on a regular basis to ensure that it remains appropriate in the
prevailing market conditions.
New Disclosure and Transparency rules were introduced earlier in 2007 and as a
result interim management statements will now be produced following the 31 March
and 30 September quarter ends. The two statutory reports and two quarterly fact
sheets will continue to be published by Baronsmead VCT 3 and sent direct to
shareholders either electronically or by post, or published on the Company's
website, www.baronsmeadvct3.co.uk .
ANNUAL GENERAL MEETING
The Company now has approximately 3,000 ordinary shareholders and the Board's
task is to ensure that it meets and understands their requirements. The AGM
will be held on 19 March 2008 at 11 a.m.
OUTLOOK
The UK stock market is currently anticipating more difficult economic conditions
and further downgrades in the ratings of smaller quoted companies are possible.
Unquoted companies are likely to be less affected but within both categories
this may present more propitious buying opportunities for which Baronsmead VCT 3
has the necessary cash resources.
There appears to be resilience in the trading of many of the AiM investees, but
in weaker markets the ratings of smaller and less liquid companies are bound to
suffer. However the existing portfolio appears healthy enough to sustain
performance from which the hope is to maintain the dividend record.'
Enquiries: David Thorp 0207 506 5631 ISIS EP LLP
Rhonda Nicoll 0131 718 1000 F&C Asset Management plc
Baronsmead VCT 3 plc
Audited Income Statement
Year to 31 December 2007
Ordinary Shares
Revenue Capital Total
£'000 £'000 £'000
Unrealised losses on investments - (400) (400)
Realised gains on investments - 564 564
Income 1,548 - 1,548
Investment management fee (304) (912) (1,216)
Other expenses (234) - (234)
Profit/(loss) on ordinary activities before taxation 1,010 (748) 262
Tax on ordinary activities (197) 237 40
Profit/(loss) on ordinary activities after taxation 813 (511) 302
Return per ordinary share: 2.53p (1.59)p 0.94p
Audited Reconciliation of Movements in Shareholders' Funds
Ordinary Shares 2007
£'000
Opening shareholders' funds 42,321
Profit for the year 302
Increase in share capital in issue 680
Purchase of shares for Treasury or cancellation (759)
Dividends paid (3,698)
Closing shareholders' funds 38,846
Baronsmead VCT 3 plc
Audited Income Statement
Year to 31 December 2007
C Shares
Revenue Capital Total
£'000 £'000 £'000
Unrealised gains on investments - 1,493 1,493
Realised gains on investments - 309 309
Income 1,021 - 1,021
Investment management fee (153) (459) (612)
Other expenses (247) - (247)
Profit on ordinary activities before taxation 621 1,343 1,964
Tax on ordinary activities (174) 134 (40)
Profit on ordinary activities after taxation 447 1,477 1,924
Return per C share: 1.83p 6.05p 7.88p
Audited Reconciliation of Movements in Shareholders' Funds
C Shares 2007
£'000
Opening shareholders' funds 24,227
Profit for the year 1,924
Increase in share capital in issue 1,696
Dividends paid (1,472)
Closing shareholders' funds 26,375
Baronsmead VCT 3 plc
Audited Income Statement
Year to 31 December 2007
Total
Revenue Capital Total
£'000 £'000 £'000
Unrealised gains on investments - 1,093 1,093
Realised gains on investments - 873 873
Income 2,569 - 2,569
Investment management fee (457) (1,371) (1,828)
Other expenses (481) - (481)
Profit on ordinary activities before taxation 1,631 595 2,226
Tax on ordinary activities (371) 371 -
Profit on ordinary activities after taxation 1,260 966 2,226
Audited Reconciliation of Movements in Shareholders' Funds
Total 2007
£'000
Opening shareholders' funds 66,548
Profit for the year 2,226
Increase in share capital in issue 2,376
Purchase of shares for Treasury or cancellation (759)
Dividends paid (5,170)
Closing shareholders' funds 65,221
Baronsmead VCT 3 plc
Audited Income Statement
Year to 31 December 2006
Ordinary Shares
Revenue Capital Total
£'000 £'000 £'000
Unrealised gains on investments - 6,884 6,884
Realised gains on investments - 779 779
Income 1,170 - 1,170
Investment management fee (309) (2,077) (2,386)
Other expenses (230) - (230)
Profit on ordinary activities before taxation 631 5,586 6,217
Tax on ordinary activities (65) 65 -
Profit on ordinary activities after taxation 566 5,651 6,217
Return per ordinary share: 1.73p 17.24p 18.97p
Audited Reconciliation of Movements in Shareholders' Funds
Ordinary Shares 2006
£'000
Opening shareholders' funds 39,226
Profit for the year 6,217
Increase in share capital in issue 365
Purchase of shares for Treasury (1,504)
Dividends paid (1,983)
Closing shareholders' funds 42,321
Baronsmead VCT 3 plc
Audited Income Statement
Year to 31 December 2006
C Shares
Revenue Capital Total
£'000 £'000 £'000
Unrealised gains on investments - 1,509 1,509
Realised gains on investments - 241 241
Income 950 - 950
Investment management fee (139) (775) (914)
Other expenses (139) - (139)
Profit on ordinary activities before taxation 672 975 1,647
Tax on ordinary activities (199) 199 -
Profit on ordinary activities after taxation 473 1,174 1,647
Return per C share: 1.97p 4.90p 6.87p
Audited Reconciliation of Movements in Shareholders' Funds
C Shares 2006
£'000
Opening shareholders' funds 17,022
Profit for the year 1,647
Increase in share capital in issue 5,804
Cost of share premium conversion (6)
Dividends paid (240)
Closing shareholders' funds 24,227
Baronsmead VCT 3 plc
Audited Income Statement
Year to 31 December 2006
Total
Revenue Capital Total
£'000 £'000 £'000
Unrealised gains on investments - 8,393 8,393
Realised gains on investments - 1,020 1,020
Income 2,120 - 2,120
Investment management fee (448) (2,852) (3,300)
Other expenses (369) - (369)
Profit on ordinary activities before taxation 1,303 6,561 7,864
Tax on ordinary activities (264) 264 -
Profit on ordinary activities after taxation 1,039 6,825 7,864
Audited Reconciliation of Movements in Shareholders' Funds
Total 2006
£'000
Opening shareholders' funds 56,248
Profit for the year 7,864
Increase in share capital in issue 6,169
Cost of share premium conversion (6)
Purchase of shares from Treasury (1,504)
Dividends paid (2,223)
Closing shareholders' funds 66,548
Baronsmead VCT 3 plc
Audited Balance Sheet
As at 31 December 2007
2007 2007 2007
Ordinary C
Shares Shares Total
£'000 £'000 £'000
Fixed assets
Traded on AiM 10,369 4,627 14,996
Quoted on FTSE SmallCap 1,160 - 1,160
Interest bearing securities 5,587 10,750 16,337
Unquoted investments 17,934 9,692 27,626
35,050 25,069 60,119
Net current assets 3,796 1,391 5,187
Total assets less current liabilities 38,846 26,460 65,306
Creditors due after one year - (85) (85)
Net assets 38,846 26,375 65,221
Financed by:
Shareholders' funds 38,846 26,375 65,221
Net asset value per share:
Basic 120.44p 103.15p -
Treasury 119.64p - -
Ordinary shares in issue 32,253,521 25,570,331 -
Listed ordinary shares 35,433,521 25,570,331 -
Treasury shares 3,180,000 -
Baronsmead VCT 3 plc
Audited Balance Sheet
As at 31 December 2006
2006 2006 2006
Ordinary C
Shares Shares Total
£'000 £'000 £'000
Fixed assets
Traded on AiM 15,080 3,352 18,432
Quoted on FTSE SmallCap 600 - 600
Interest bearing securities 3,989 14,882 18,871
Unquoted investments 22,718 5,115 27,833
42,387 23,349 65,736
Net current (liabilities)/assets (66) 878 812
Net assets 42,321 24,227 66,548
Financed by:
Shareholders' funds 42,321 24,227 66,548
Net asset value per share:
Basic 130.77p 100.95p -
Treasury 129.66p - -
Ordinary shares in issue 32,362,392 23,999,772 -
Listed ordinary shares 35,092,392 23,999,772 -
Treasury shares 2,730,000 -
Baronsmead VCT 3 plc
Summarised Audited Statement of Cash Flows
For the year ended 31 December 2007
2007 2007 2007
Ordinary C
Shares Shares Total
£'000 £'000 £'000
Net cash outflow from operating activities (1,308) (144) (1,452)
Capital expenditure and financial investment 7,065 179 7,244
Equity dividends paid (3,698) (1,472) (5,170)
Net cash inflow/(outflow) before financing 2,059 (1,437) 622
Financing (79) 1,696 1,617
Increase in cash 1,980 259 2,239
Reconciliation of net cash flow to movement in net
cash
Increase in cash 1,980 259 2,239
Opening cash position 1,251 1,081 2,332
Closing cash position 3,231 1,340 4,571
Reconciliation of net revenue before taxation to net
cash outflow from operating activities
2007 2007 2007
Ordinary C
Shares Shares Total
£'000 £'000 £'000
Profit on ordinary activities before taxation 262 1,964 2,226
Profit on realisation of investments (564) (309) (873)
Unrealised losses/(gains) on investments 400 (1,493) (1,093)
Increase in debtors (325) (67) (392)
Decrease in creditors (1,081) (239) (1,320)
Net cash outflow from operating activities (1,308) (144) (1,452)
Baronsmead VCT 3 plc
Summarised Audited Statement of Cash Flows
For the year ended 31 December 2006
2006 2006 2006
Ordinary C
Shares Shares Total
£'000 £'000 £'000
Net cash (outflow)/inflow from operating activities (466) 150 (316)
Capital expenditure and financial investment 2,906 (11,848) (8,942)
Equity dividends paid (1,983) (240) (2,223)
Net cash inflow/(outflow) before financing 457 (11,938) (11,481)
Financing (1,139) 7,204 6,065
Decrease in cash (682) (4,734) (5,416)
Reconciliation of net cash flow to movement in net
cash
Decrease in cash (682) (4,734) (5,416)
Opening cash position 1,933 5,815 7,748
Closing cash position 1,251 1,081 2,332
Reconciliation of net revenue before taxation to net
cash (outflow)/ inflow from operating activities
2006 2006 2006
Ordinary C
Shares Shares Total
£'000 £'000 £'000
Profit on ordinary activities before taxation 6,217 1,647 7,864
Profit on realisation of investments (779) (241) (1,020)
Unrealised gains on investments (6,884) (1,509) (8,393)
Decrease/(increase) in debtors 97 (208) (111)
Increase in creditors 883 461 1,344
Net cash (outflow)/inflow from operating activities (466) 150 (316)
Notes
1. The audited results which cover the year to 31 December 2007 have been
prepared under UK Generally Accepted Accounting Practice (UK GAAP).
Where presentational guidance set out in the Statement of Recommended Practice
('SORP'), revised December 2005, for investment trusts issued by the Association
of Investment Companies ('AIC') in January 2003 is consistent with the
requirements of UK GAAP, the Directors have sought to prepare the financial
statements on a basis compliant with the recommendations of the SORP.
In order to better reflect the activities of a VCT and in accordance with the
SORP, 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
274 of the Income Tax Act 2007.
2. There were 32,253,521 ordinary shares in issue at 31 December 2007 (31
December 2006: 32,362,392). During the year the Company issued 541,129 ordinary
shares raising net proceeds of £680,000. The Company bought back 450,000
ordinary shares during the year at a cost of £526,000 to be held in Treasury,
with a further 200,000 ordinary shares bought back for cancellation at a cost of
£233,000. The total number of ordinary shares listed at 31 December 2007 was
35,433,521 (31 December 2006: 35,092,392).
There were 25,570,331 C shares in issue at 31 December 2007 (31
December 2006: 23,999,772). During the year the Company issued 1,570,559 C
shares raising net proceeds of £1,696,000.
3. Revenue and capital returns for the ordinary shares for the year to 31
December 2007 are based on a weighted average of 32,133,709 (2006: 32,776,271)
ordinary shares in issue during the year.
Revenue and capital returns for the C shares for the year to 31
December 2007 are based on a weighted average of 24,421,456 (2006: 23,966,316) C
shares in issue during the year.
4. Income for the year is derived from:
2007 2006
Total Total
£'000 £'000
Dividend Income 402 417
Fixed interest investment 1,973 1,466
Deposit interest 194 237
2,569 2,120
5. These are not full accounts in terms of Section 240 of the Companies
Act 1985. Full audited accounts for the year to 31 December 2006 have been
lodged with the Registrar of Companies. The annual report for the year to 31
December 2007 will be sent to shareholders shortly and will then be available
for inspection at the offices of ISIS EP LLP, 100 Wood Street, London, the
registered office of the Company. Both the audited accounts for the year to 31
December 2007 and the year to 31 December 2006 contain unqualified audit
reports.
6. The Annual General Meeting will be held on 19 March 2008 at 11am.
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