Annual Financial Report

RNS Number : 8783Z

Dunedin Enterprise Inv Trust PLC

20 March 2017

 

20 March 2017

For release 20 March 2017

Dunedin Enterprise Investment Trust PLC ("the Company")

Year ended 31 December 2016

Dunedin Enterprise Investment Trust PLC, the private equity investment trust, announces its results for the year ended 31 December 2016.

Financial Highlights:

·     Net asset value total return 2.7% in the year to 31 December 2016

·     Realisations of £31.7m in the year

·     New investment of £31.2m in the year

·     Exit of Steeper post year end

·     Interim dividend of 16p paid in May 2016

·     Final dividend of 17.5p per share proposed for the year ended 31 December 2016

Comparative Total Return Performance

Year to 31 December 2016	Net Asset value*1	Share price	FTSE Small Cap (ex Inv Cos) Index
One year	2.7%	0.0%	12.5%
Three years	2.1%	-22.1%	23.7%
Five years	5.0%	16.4%	142.6%
Ten years	24.9%	0.3%	60.9%

^*1 - taken from 31 October for ten years

For further information please contact:

Graeme Murray Dunedin LLP   0131 225 6699 0131 718 2310            07813 138367

Corinna Osborne / Emily Weston Equity Dynamics 07825 326 440 / 07825326442 [e-mail] [e-mail]

Chairman's Statement

In the year to 31 December 2016 your Company's net asset value per share decreased from 505.8p to 503.3p. After allowing for an interim dividend of 16p paid in May 2016, the total return to shareholders was 2.7% (in terms of net asset value).

On 2 February 2017 we announced the successful realisation of Steeper, a leading supplier of prosthetic devices. The proceeds received to date on this investment represent a return of 1.9 times our original investment and an uplift of £5m on the valuation at 30 September 2016. The uplift on this transaction is reflected in the net asset value at 31 December 2016.  In view of the outstanding undrawn commitments, the Board has decided to retain the majority of the proceeds of this realisation. Further details of this transaction appear below.

The share price at 17 March 2017 of 322p stood at a discount of 36% to the net asset value of 503.3p per share.

Wind-down

In May last year shareholders gave their approval for the Company to be placed into wind-down. At that time the Board stated that it had concluded that the best way to maximise value for shareholders would be to implement a plan that allows the Company's investments to be realised in an orderly manner over a period of time and cash to be returned to shareholders progressively.

The majority of the Company's assets, or some 80%, are managed by Dunedin LLP ("Dunedin"). These investments are by way of limited partnership interests in Dunedin's funds, one of which is still actively investing. Consequently, the Company is obliged, as are other investors in those funds, to follow its commitment by funding future capital calls made by that fund.

The other 20% of the Company's assets are invested in private equity funds managed by external parties. The majority of these comprise the holdings in Innova/5 and Realza, which invest in Eastern Europe and Spain respectively.

One of the Board's main duties, on behalf of shareholders, is to decide whether shareholders are likely to gain from an early realisation of these fund interests by a sale on the secondary market, together with any uncalled commitments to invest further. This will, of course, depend on the prospects for the underlying investments. Invariably the Board will have better visibility on the investments in the Dunedin managed funds than in those managed by external parties. The Board is keeping this position under constant review, with the help of Dunedin.

One of the Board's other main responsibilities is to ensure that the Company has adequate resources to honour its commitment to these funds for further draw-downs to finance new investments. In order to achieve this, the Board needs to retain enough capital from realisations. A case in point is the recent successful realisation of Steeper

Following approval by shareholders of the wind-down, the Manager has reduced the ongoing costs of the Company where possible. These cost savings will become apparent over time.

Due to the Company now being in wind-down the financial statements for the year ending 31 December 2016 have not been prepared on a going concern basis.

Portfolio

There were two new investments during the year. An investment of £7.0m was made in Alpha Financial Markets which provides specialist consultancy services to leading asset and wealth managers and their third party administrators. An investment of £4.2m was also made in Kingsbridge Risk Solutions. Kingsbridge is the UK's leading provider of insurance services to contractors and independent professionals. Follow-on investments were also made into Premier Hytemp and EV.

The trading performance of the portfolio continues to be mixed and in some cases disappointing. Unrealised value increases of £18.7m were offset by value decreases of £17.3m. Valuation uplifts were achieved by Blackrock, Kee Safety and U-POL. Each of these businesses is trading well as a result of growth, achieved both organically and by acquisition. There was also a valuation uplift at Steeper as noted below. The two European funds, Realza and Innova/5, each generated valuation uplifts as a result of the performance of their underlying portfolios and beneficial exchange rate movements.

The most significant valuation reductions in the year to 31 December 2016 were at Formaplex, EV, Hawksford, Pyroguard and Red. Trading at Formaplex was impacted by the move to a new factory and costs associated with developing new product lines. The low oil price has continued to affect adversely trading at EV despite a significant cost reduction programme undertaken by the company. An aborted sale process at Hawksford affected the winning of new business during the year. A new CEO has been appointed to re-focus the business.  Pyroguard suffered production problems at its French factory which have now been resolved. Finally, the sales mix at Red negatively impacted maintainable profits. The Manager is fully involved with each of these portfolio companies, implementing changes to their management and operating strategy in order to return value to these investments.

Since the year end the Company achieved a significant realisation with the sale of Steeper to Ottobock, a world-leading manufacturer and supplier of prosthetic limbs. On completion Dunedin Enterprise received proceeds totalling £8.9m of which £6.7m is capital and £2.2m is income. This represents an uplift of £5.0m from the previous valuation at 30 September 2016. The overall return to Dunedin Enterprise at 2 February 2017 was 1.9 times the original investment of £5.6m.  In addition, proceeds amounting to 10% of the total, being £1.0m, have been deferred for 18 months. Given the contingent nature of these deferred proceeds, no value has been placed on them as at 31 December 2016. 

Given the level of undrawn commitments still outstanding, the Board is prudently not proposing to return any of the £6.7m capital proceeds from the sale of Steeper to shareholders. However, the Board's intention is that the £2.2m of the total proceeds which are classified as income will be distributed to shareholders by way of future dividends in due course.

In March 2017 the Company made an investment of £5.9m in Forensic Risk Alliance through the Dunedin Buyout Fund III LP.  FRA is an international consultancy business that provides forensic accounting, data analytics and e-discovery expertise to help businesses manage risk in an increasingly regulated global environment

Commitments & Liquidity

The Company had outstanding commitments to limited partnership funds of £36.9m at 31 December 2016. This consisted of £33.5m to Dunedin managed funds and £3.4m to the European funds. However, assuming these funds are held to maturity, it is estimated that approximately £20m of this total commitment will be drawn over the remaining life of the funds.

The investment period of Dunedin Buyout Fund III which accounts for £26.2m of the total Dunedin managed undrawn commitment, closes in November 2017, although funds may be drawn down for new investments after this date in circumstances where a proposed investment is at an advanced stage at that date. Although the investment periods of all other Dunedin managed funds have expired, funds can still be drawn down for follow-on investments and operating expenses of the fund.

Innova/5 accounts for £2.6m of the European funds' undrawn commitments. Although the investment period of this fund closed in December 2016, the manager was in an advanced stage on three potential transactions at that time and it is anticipated that there will be a drawdown to fund at least one of these investments in early 2017. As Realza's investment period has expired it can only draw down for follow-on investments and operating expenses.

As at 31 December 2016 the Company held cash and near cash balances of £2.6m (the majority of which is held in AAA rated money market funds or by its wholly owned subsidiary, Dunedin Funds of Funds LP). The Company has a revolving credit facility with Lloyds of £20m which was undrawn at 31 December 2016 and is available until 31 May 2018. The Board and the Manager remain satisfied with the balance between cash resources and outstanding commitments given the expected rate of new investment and potential realisations of existing investments.

As explained above, the capital proceeds of £6.7m from the sale of Steeper will be retained in the Company to fund the expected drawdowns from the Dunedin managed and European funds, thus minimising the use of the Company's revolving credit facility.

Board Appointment

Following consultation with a number of the largest shareholders in the Company, the Board is recommending the appointment of Michael Meyer Jensen to the Board at the Annual General Meeting of the Company on 11 May 2017. Michael is employed by Lind Invest as an investment manager. Lind Invest is an independent Danish investment group which currently holds an interest of 12.6% in the Company. Michael has experience of investing in private equity funds, including in listed private equity companies and the secondary market. The Board believes that Michael's skills will be of benefit to the Company during the wind-down process. Michael has waived his right to be paid a director's fee.

Dividends

In the year to 31 December 2016 income received by the Company was boosted by the partial sale of CitySprint and re-financings undertaken at both Kee Safety and U-POL. In May 2016 an interim dividend of 16p per share was paid to shareholders as a result of the income received from CitySprint. It is now proposed to pay a final dividend of 17.5p per share on 18 May 2017 to distribute the remainder of the income received during the year.

The Board will propose a dividend in respect of the income received from Steeper in due course.

B Share Scheme

Proposals for the adoption of a B Share Scheme will be posted to shareholders with the Annual Report and will be available on the Company's website.  Shareholders will be asked to vote on these proposals at a General Meeting which will follow immediately after the Annual General Meeting.

After consulting with its advisers, the Board believes that this Scheme offers a fair and efficient way of returning capital to shareholders.  While this route offers certain cost and other advantages over a tender offer, the Board will keep under review its relative advantages over time.  Unlike a tender offer, shareholders would not be given a choice as to whether or not to participate in a return of capital.

Once in place, the Scheme can be used from time to time to return capital to shareholders.  While the Board believes that it is prudent and cost-effective to put the Scheme in place as soon as possible, shareholders should not conclude from this that returns of capital are likely in the near term.

Shareholders will be advised when returns of capital take place.  Notwithstanding the introduction of the B Share Scheme, shareholders should continue to expect a proportion of value to be returned by way of dividends.

Outlook

The Board is committed to the aim of maximising shareholder value through the orderly wind-down process. This could be addressed partly by judicious and timely sales of its fund interests on the secondary market or by continuing to hold these interests if this is likely to provide better returns to shareholders.

The Board and Manager have reviewed the potential impact of Brexit on each investee Company.  The portfolio has some degree of protection arising from the international reach of many of the investee companies.  Despite the political uncertainty, economic conditions have so far been relatively benign and pricing for realisations of quality businesses remains buoyant.

Duncan Budge

Chairman

20 March 2017

Manager's Review

In the year to 31 December 2016 the net asset value per share has decreased from 505.8p to 503.3p. After taking account of an interim dividend for 2016 of 16p (paid in May 2016), the movement in the year equates to a total return of 2.7%.

The Company's net asset value decreased from £104.4m to £103.9m over the year. This movement is stated following a dividend payment of 16p and amounting to £3.3m.

This movement in net assets can be explained as follows:

	£m
Net asset value at 1 January 2016	104.4
Unrealised value increases*1	18.7
Unrealised value decreases	(17.3)
Realised loss over opening valuation*2	(5.5)
Dividends paid to shareholders	(3.3)
Net income and capital movements *3	6.9
Net asset value at 31 December 2016	103.9

*¹ - excludes £4.4m of income received from Kee Safety and U-POL in the year that was transferred to the Income Account.

*² - includes drawdowns totalling £2.1m made during the year by Dunedin managed funds for management fees and operating expenses.  Excludes £3.3m of income received from the partial realisation of CitySprint that was transferred to the Income Account. 

*³ - the £4.4m and £3.3m noted above are included in Net income. 

Portfolio Composition

The investment portfolio can be analysed as shown in the table below.

	Valuation at 1 January 2016 £'m	Additions in year £'m	Disposals in year £'m	Realised movement*2 £'m	Unrealised Movement *1 £'m	Valuation at 31 December 2016 £'m
Dunedin managed	93.0	22.4	(25.0)	(5.5)	(3.4)	81.5
Third party managed	16.4	2.8	(1.7)	-	4.8	22.3
AAA rated money market funds	-	6.0	(5.0)	-	-	1.0
	109.4	31.2	(31.7)	(5.5)	1.4	104.8

New Investment Activity

In February 2016 an investment of £7.0m was made in Alpha Financial Markets ("Alpha"). Alpha is a global market leader in providing specialist consultancy services to blue chip asset and wealth managers and their third party administrators. Alpha has over 200 consultants deployed across six major financial centres working on behalf of more than 130 top asset and wealth management clients. Alpha currently advises three quarters of the top 50 global asset managers.

In May 2016 an investment of £4.2m was made in Kingsbridge Risk Solutions ("Kingsbridge"). Kingsbridge is one of the UK's market leading providers of insurance services to contractors, freelancers and independent professionals. Kingsbridge covers the broadest range of industry sectors in its market, including aerospace, banking and finance, rail, automotive, nuclear, oil and gas and information technology.

An investment of £7.3m was made in CitySprint Newco as discussed below. There were also follow-on investments of £0.3m in Premier and £0.3m in EV.

During the year Innova/5 invested a total of £3.2m. In February 2016 £1.6m was invested in Trimo a leading Central and Eastern European provider of high quality building products. In addition, £0.8m was invested in PeP a leading Polish payment services provider and £0.4m in Netsprint an internet advertising business. A further £0.2m was drawn for a follow-on investment in Bakalland, a manufacturer of grocery products, and £0.2m was drawn for operating expenses of the fund.

Following the year end in March 2017, the Company made an investment of £5.9m through the Dunedin Buyout Fund III in Forensic Risk Alliance ("FRA").  FRA is an international consultancy business that provides forensic accounting, data analytics and e-discovery expertise to help businesses manage risk in an increasingly regulated global environment.  FRA works on some of the largest and most complex regulatory investigations globally.  Its clients are typically blue-chip multi-national corporates seeking advice to help navigate regulatory scrutiny, effect compliant cross border data transfer and manage risk.  

Realisations

In February 2016 the investment in CitySprint was partially realised in a sale to LDC. On completion Dunedin Enterprise received proceeds totalling £26.1m of which £22.8m was capital and £3.3m was loan interest. A total of £7.3m has been rolled into a CitySprint Newco alongside LDC, resulting in net cash proceeds received of £18.8m by Dunedin Enterprise. Dunedin Enterprise retains a 5% interest in the Newco. The overall return to Dunedin Enterprise was 2.8 times the original investment of £9.8m over five years.

During the year there were also redemptions of loan stock at Kee Safety (£1.1m), Blackrock (£0.7m) and RED (£0.3m).

One of the two European funds, Innova/5, realised £3.8m during the year. In December Innova/5's investment in Wirtualna Polska, the internet portal business, was realised. Proceeds were received in two tranches, the first in December of £1.5m with the balance of £0.7m in January 2017. The investment generated a return of 2.7 times the original cost.

A further £0.9m was generated from the sale of Provus, the Romanian credit card processing and financial services company, generating a multiple of 2.2 times original cost. Marmite, the manufacturer of sanitary ware was also realised, generating proceeds of £0.7m and a multiple of 1.6 times original cost. There was also a return of £0.7m of an unused capital call.

Following the year end in February 2017 the investment in Steeper was realised. Steeper is a leading supplier of rehabilitation services including prosthetic, orthotic and electronic assistive devices and services. Total proceeds from the investment on completion amounted to £8.9m, consisting of capital of £6.7m and income of £2.2m. This compares to a valuation of £3.9m at 30 September 2016, an uplift of £5.0m on exit.

Cash and commitments

As at 31 December 2016 the Company had cash and near cash balances of £2.6m all of which is denominated in Sterling. The Company has a revolving credit facility with Lloyds Bank of £20m which is available until 31 May 2018.

At 31 December 2016 the Company had undrawn commitments totalling £36.9m. These undrawn commitments are split between Dunedin managed funds of £33.5m and a further €4.0m (£3.4m) of undrawn commitments to the two remaining European funds. It is expected that approximately £20m of the total outstanding commitments will ultimately be drawn over the remaining life of the funds.

Unrealised valuation uplifts

In the year to 31 December 2016 there were valuation uplifts generated from the following investments: Blackrock (£4.9m), Kee Safety (£3.3m), Innova (£2.8m), Realza (£2.0m) and U-POL (£1.3m).

Blackrock provides Independent Expert Witnesses to dispute and litigation resolution in the growing global construction market. Large global construction projects are often written under English contract law with disputes resolved through the English courts. Blackrock is appointed by the Court to provide expert testimony on the quantum of cost involved in construction disputes. The company has grown strongly during the year with maintainable earnings increasing by 63%. An increasing demand for the company's services has enabled it to benefit from a higher level of utilisation for its consultants and for the company to increase its number of fee earning consultants. The EBITDA multiple applied in the valuation of Blackrock has increased from 7.5x to 8.0x, reflecting the increasing scale of the business.

Kee Safety provides collective fall protection systems and solutions. The company services a growing worldwide market which is being driven by more rigorous enforcement and awareness of health and safety regulations. The maintainable earnings of Kee Safety increased by 28% during the year. This growth has been driven both organically and through acquisition. Since Dunedin's investment the company has made eleven acquisitions around the world and continues to assess a pipeline of further acquisitions. Kee Safety has also benefitted from a weakening of Sterling as 70% of Kee Safety's revenues are denominated in either US Dollars or Euros.

U-POL is a leading manufacturer of branded automotive refinishing consumables (fillers, polishes and coatings). During the year maintainable earnings at U-POL increased by 8%. A new management team was introduced into the company during the year. This team has driven a process of product rationalisation and re-branding which is beginning to have a positive effect on trading performance at the company. Following the improved trading performance of the business and prospects for its future performance, the EBITDA multiple applied in valuing the business has increased from 7.5x to 8.3x.

The valuation of Steeper has increased by £5.0m during the year. This reflects the realised proceeds which were received in February 2017 as discussed above. In addition, proceeds amounting to 10% of the total, being £1.0m, have been deferred for 18 months. Due to the contingent nature of these deferred proceeds no value has been placed on them as at 31 December 2016.

During the year there has been an increase in the valuation of the Innova/5 portfolio totalling £2.8m. The impact of foreign currency movements accounts for £1.2m of the uplift. Excluding the impact of currency movements the most significant valuation movements in the Innova/5 portfolio were uplifts at Trimo (£0.6m), Bakalland (£0.5m), and WP (£0.2m).

The valuation of the Realza portfolio increased by £2.0m during the year. This valuation movement was primarily due to foreign currency movements (£1.6m) with the balance being attributable to portfolio valuation movements.

Unrealised valuation reductions

The most significant valuation reductions in the year to 31 December 2016 were at Formaplex (£4.4m), EV (£3.0m), Hawksford (£2.7m), Pyroguard (£2.2m) and Red (£1.7m).

Formaplex designs and manufactures injection-moulded tooling, composite tooling and lightweight components for the automotive industry. During 2016 Formaplex opening a new 120,000 sq ft factory to undertake its mould, assembly and paint operations. The transition to this new facility caused disruption to trading at Formaplex, as well as costs associated with the introduction of new product lines and an unfavourable sales mix. This led to a reduction in maintainable EBITDA of 45%. The EBITDA multiple applied in valuing the business has also been reduced from 7.0x to 6.0x to reflect the company's trading performance. During 2016 a new management team has been installed and there are positive signs of a recovery in the business with the new factory fully operational and a strong order book from high end car manufacturers.

EV is a global leader in the provision of high performance, ruggedised video cameras and engineers to analyse problems in oil and gas wells. Trading at the business continues to be impacted by the low price of oil. Several key initiatives are being undertaken by the management to the company to stabilise the financial position of the business. The company is also changing its business model towards a higher proportion of contracted work compared to one-off assignments.

The maintainable earnings at Hawksford, the leading independent international provider of corporate private client and specialist fund services, fell by 24% during the year. A significant factor in this reduction was the disruption caused by an aborted sales process during 2016. Uncertainty over the outcome of this process impacted the pipeline of new business with intermediaries being reluctant to introduce new clients to Hawksford. A new Chief Executive Officer has been appointed alongside other management changes in order to re-energise the business.

During 2016 Pyroguard, the UK's leading manufacturer of fire resistant glass, suffered from production issues at its French factory creating delays in the delivery of products to customers. This led to maintainable profit reducing by 33% during the year. Management changes have been made at the business during the year and significant production improvements at the French factory have followed these changes.

Red provides SAP software experts on both a contract and permanent basis. The maintainable earnings of the business have continued to be negatively impacted by an unfavourable product mix. There has been a strong performance from the lower margin contract side of the business during 2016 which has been offset by under performance in the higher margin permanent side of the business.

Valuations and Gearing

The average earnings multiple applied in the valuation of the Dunedin managed portfolio was 8.6x EBITDA (2015: 8.4x), or 10.2x EBITA (2015: 9.8x). These multiples continue to be applied to maintainable profits.

Within the Dunedin managed portfolio, the weighted average gearing of the companies was 3.3x EBITDA (2015: 2.3x) or 3.8x EBITA (2015: 2.6x). A significant portion of this increase is due to the re-gearing undertaken during the year at U-POL and Kee Safety.

Analysing the portfolio gearing in more detail, the percentage of investment value represented by different gearing levels was as follows:

Less than 1 x EBITDA	24%
Between 1 and 2 x EBITDA	7%
Between 2 and 3 x EBITDA	17%
More than 3 x EBITDA	52%

Of the total acquisition debt in the Dunedin managed portfolio companies the scheduled repayments are spread as follows:

Less than one year	6%
Between one and two years	4%
Between two and three years	7%
More than three years	83%

Fund Analysis

The chart below analyses the investment portfolio by investment fund vehicle.

Direct	11%
Dunedin Buyout Fund I	1%
Dunedin Buyout Fund II	32%
Dunedin Buyout Fund III	31%
Equity Harvest Fund	5%
Third Party managed	20%

Portfolio Analysis

Detailed below is an analysis of the investment portfolio by geographic location as at 31 December 2016.

UK	80%
Rest of Europe	20%

Sector Analysis

The investment portfolio of the Company is broadly diversified. At 31 December 2016 the largest sector exposure of 39% remains to the diverse Support Services sector.

Automotive	4%
Construction and building materials	6%
Consumer products & services	3%
Financial services	18%
Healthcare	10%
Industrials	18%
Support services	39%
Technology	2%

Valuation Method

Cost	8%
Earnings - provision	8%
Earnings - uplift	64%
Assets basis	11%
Exit value	9%

Year of Investment

In the vintage year chart below, current value is allocated to the year in which either Dunedin Enterprise or the third party manager first invested in each portfolio company.

<1 year	14%
1-3 years	21%
3-5 years	17%
>5 years	48%

Dunedin LLP

20 March 2017

Ten Largest Investments   

(both held directly and via Dunedin managed funds) by value at 31 December 2016

	Approx.			Percentage
	percentage	Cost of	Directors'	of net
	of equity	investment	valuation	assets
Company name	%	£'000	£'000	%
Realza	8.9	9,020	11,834	11.4
Hawksford	17.8	5,637	10,305	9.9
Blackrock	7.0	4,215	10,007	9.6
Kee Safety	7.2	5,151	9,833	9.5
Weldex	15.1	9,505	9,611	9.3
Steeper	37.4	5,317	8,941	8.6
Innova/5	3.9	8,456	8,716	8.4
CitySprint	5.1	7,308	8,003	7.7
Alpha	11.5	8,066	7,123	6.9
Pyroguard	41.7	9,450	4,337	4.2
		72,125	88,710	85.5

 Income Statement

				2016						2015
							Re-stated		Re-stated		Re-stated
	Revenue		Capital		Total		Revenue		Capital		Total
	£'000		£'000		£'000		£'000		£'000		£'000
Investment income	8,126		-		8,126		211		-		211
Gains/(losses) on investments	-		(4,115)		(4,115)		-		576		576
Total income	8,126		(4,115)		4,011		211		576		787
Expenses
Investment management fee	(30)		(91)		(121)		(32)		(97)		(129)
Other expenses	(604)		-		(604)		(588)		-		(588)
Profit/(loss) before finance costs and tax	7,492		(4,206)		3,286		(409)		479		70
Finance costs	(127)		(382)		(509)		(130)		(388)		(518)
Profit/(loss) before tax	7,365		(4,588)		2,777		(539)		91		(448)
Taxation	(449)		449		-		-		-		-
Profit for the year	6,916		(4,139)		2,777		(539)		91		(448)
Basic return per ordinary share
(basic & diluted)	33.5p		(20.0)p		13.5p		(2.6)p		0.4p		(2.2)p

The total column of this statement represents the Income Statement of the Group, prepared in accordance with International Financial Reporting Standards as adopted by the EU. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.

All income is attributable to the equity shareholders of Dunedin Enterprise Investment Trust PLC.

Statement of Changes in Equity

for the year ended 31 December 2016

Year ended 31 December 2016

	Share capital £'000	Capital redemption reserve £'000	Capital Reserve realised £'000	Capital reserve - unrealised £'000	Special Distributable Reserve £'000	Revenue account £'000	Total retained earnings £'000	Total equity £'000
At 31 December 2015	5,161	2,765	38,492	5,271	47,600	5,138	96,501	104,427
Profit/(loss) for the year	-	-	10,712	(14,851)	-	6,916	2,777	2,777
Dividends paid	-	-	-	-	-	(3,303)	(3,303)	(3,303)
At 31 December 2016	5,161	2,765	49,204	(9,580)	47,600	8,751	95,975	103,901

Year ended 31 December 2015 (re-stated)

	Share  capital £'000	Capital redemption reserve £'000	Capital Reserve realised £'000	Capital reserve - unrealised £'000	Special Distributable Reserve £'000	Revenue account £'000	Total retained earnings £'000	Total equity £'000
At 31 December 2014	5,217	2,709	47,177	(2,805)	47,600	6,658	98,630	106,556
Profit/(loss) for the year	-	-	(7,985)	8,076	-	(539)	(448)	(448)
Purchase and cancellation of shares	(56)	56	(700)	-	-	-	(700)	(700)
Dividends paid	-	-	-	-	-	(981)	(981)	(981)
At 31 December 2015	5,161	2,765	38,492	5,271	47,600	5,138	96,501	104,427

Balance Sheet

As at 31 December 2016

                                                                                                                                    Restated                

	31 December 2016 £'000	31 December 2015 £'000
Non-current assets
Investments held at fair value	104,816	109,433
Current assets
Other receivables	105	167
Cash and cash equivalents	90	511
	195	678
Current liabilities
Other liabilities	(1,110)	(984)
Loan facility	-	(4,700)
Net assets	103,901	104,427
Capital and reserves
Share capital	5,161	5,161
Capital redemption reserve	2,765	2,765
Capital reserve - realised	49,204	38,492
Capital reserve - unrealised	(9,580)	5,271
Special distributable reserve	47,600	47,600
Revenue reserve	8,751	5,138
Total equity	103,901	104,427
Net asset value per ordinary share (basic and diluted)	503.3p	505.8p

Cash Flow Statement

for the year ended 31 December 2016

                                                                                                                                     Restated             

	31 December 2016 £'000	31 December 2015 £'000
Cash flows from operating activities
Profit / (loss) Adjustments for:	2,777	(448)
Gains / (losses) on investments	4,115	(576)
Interest paid	509	518
Increase /decrease in debtors	62	100
Increase/ decrease in creditors	126	180
Net cash from operating activities	7,589	(226)
Cash flows from investing activities
Purchase of investments	(22,392)	(10,328)
Drawdown from subsidiary	(2,777)	(3,232)
Purchase of 'AAA' rated money market funds	(6,003)	(6,707)
Sale of investments	25,165	1,798
Distribution from subsidiary	1,504	850
Sale of 'AAA' rated money market funds	5,000	7,840
Net cash used in investing activities	497	(9,779)
Cash flows from financing activities
Purchase of ordinary shares	-	(700)
Dividends paid	(3,303)	(981)
Interest paid	(509)	(518)
Repayment of loan facility	(4,700)	-
Drawdown of loan facility	-	4,700
	(8,512)	2,501
Net (decrease) in cash and cash equivalents	(426)	(7,504)
Cash and cash equivalents at 1 January	511	8,031
Effect of exchange rate fluctuations on cash held	5	(16)
Cash and cash equivalents at 31 December	90	511

Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements

The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with IFRSs as adopted by the EU and applicable law.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of their profit or loss for that period. In preparing these financial statements, the Directors are required to:

  select suitable accounting policies and then apply them consistently;

  make judgments and estimates that are reasonable and prudent;

  state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

  prepare the financial statements on the going concern basis unless it is inappropriate to presume
 that the Company will continue in business. As explained in note 1 the directors do not believe that
 it is appropriate to prepare these financial statements on a going concern basis.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

  the financial statements, prepared in accordance with the applicable accounting standards, give a
 true and fair view of the assets, liabilities, financial position and profit or loss of the company taken
 as a whole; and

  the Strategic Report and Directors' Report includes a fair review of the development and
 performance of the business and the position of the issuer, together with a description of the
 principal risks and uncertainties that they face.

We consider the annual report and accounts taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model an strategy.

Duncan Budge

Chairman

20 March 2017

Notes to the Accounts

1. Preliminary Results

The financial information contained in this report does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015. The financial information for 2015 is derived from the statutory accounts for 2015 which have been delivered to the Registrar of Companies. The auditor has reported on those accounts. Their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The audit of the statutory accounts for the year ended 31 December 2016 is not yet complete. These accounts 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.

2.       Dividends

		Year to 31  December 2016 £'000		Year to 31  December 2015 £'000
Dividends paid in the year		3,303		981

A final dividend of 17.5p per share for the year ended 31 December 2016 will be paid on 18 May 2017 to shareholders on the register at close of business on 28 April 2017.  The ex-dividend date is 27 April 2017.

3.         Earnings per share

	Year to 31 December 2016	Year to 31 December 2015
Revenue return per ordinary share (p)	33.5	(2.6)
Capital return per ordinary share (p)	(20.0)	0.4
Earnings per ordinary share (p)	13.5	(2.2)
Weighted average number of shares	20,644,062	20,750,515

The earnings per share figures are based on the weighted average numbers of shares set out above.  Earnings per share is based on the revenue profit in the period as shown in the consolidated income statement.

4.       Contingent assets

At 31 December 2016, contingent assets not recognised in the financial statements in respect of potential deferred proceeds from the sale of portfolio companies amounted to £1.0m (2015: £nil). The extent to which these amounts will become receivable in due course is dependent on future events.

In addition, discussions are ongoing with HMRC regarding the payment of interest on a compound basis relating to the reclaim of VAT on management fees. The amount and timing of any recovery remains uncertain and accordingly no amount has been provided for in the financial statements.

ENDS

 

END

 

 

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