Final Results

Elderstreet Downing VCT PLC 24 March 2003 ELDERSTREET DOWNING VCT PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002 FINANCIAL HIGHLIGHTS 2002 pence Net asset value per share 59.9p Cumulative return since launch per share 24.5p Total return (Net asset value per share plus cumulative dividends) 84.4p The statement to shareholders by the Chairman, David Brock, includes the following comments: The year to 31 December 2002 has seen a continuation of torrid stock market conditions fuelled by the threats of war and terrorism. This has ensured that the climate for your Company's investments, which are typically small and unquoted companies, has remained very difficult. Net Asset Value At 31 December 2002 the Net Asset Value per share ('NAV') was 59.9p, a fall of 12.3p or 16.2% (before taking into account dividends) since the previous year end. It is disappointing to report a significant fall in NAV for the second year running, however the Company's performance is in line with that of many other VCTs and, although not a true benchmark, compares favourably with the FTSE AIM index, which fell by 39.0% over the year and 37.6% over the previous year. Venture capital investments The Company made three new investments and six follow on investments during the year. At the year end, the Venture Capital portfolio comprised investments in 28 companies with a cost of £9.7 million and valuation of £6.7 million. The largest new investment was in Rose Bowl Plc, the owner/operator of a sports and entertainment venue and owner of Hampshire County Cricket club. The company is currently in a turnaround situation. The Company took advantage of the rising share price in InterLink Foods plc by selling a further part of its holding, realising a profit of £59,000 against previous market value or £268,000 against original cost. This investment has now produced a total realised gain of £545,000. Unfortunately the Company experienced several failures within its portfolio during the year. Relevare Limited, BusinessMeetings.com Limited and Helpful Media Limited all went into liquidation or receivership during 2002 and have been written off. These investments had a total value of £404,000 at the previous year end so their failure is equivalent to a reduction of 2.7p per share in the NAV. The realisations, redemptions and failures during the year are summarised as follows: Profit / MV at Cost Proceeds (loss) 31/12/01 £'000 £'000 £'000 £'000 Full Disposals Adval plc 200 60 (140) 66 Partial Disposals Glisten plc 55 64 9 - Hartest Holdings plc 30 30 - 38 InterLink Foods plc 129 397 268 376 Redemptions Fords Packaging Systems Ltd 117 117 - 117 UM (Holdings) Ltd 80 80 - 80 The National Solicitors Network Ltd 50 50 - 50 Liquidations etc. 684 - (684) 404 1,345 798 (547) 1,131 At the previous year end, the Company's two highest valued investments were both AIM listed companies. Software for Sport plc has continued to make progress in developing its business, however, being in the technology sector, its share price has fallen over the year, such that the investment shows an unrealised loss of £251,000 for the period. Topnotch operates in the health clubs sector, which has experienced a period of turmoil over the past 12 months. Many companies within the sector have run into well-publicised difficulties. Like many of its competitors, Topnotch has had to adopt a significantly revised strategy in order to secure its future. Unsurprisingly the company's share price has fallen substantially over the year such that the investment shows an unrealised loss of £570,000 for the period. The falls in value of Topnotch and Software are equivalent to a reduction in NAV of 5.5p per share. Like many other AIM stocks, the market in the Company's share has been very illiquid and there have been no suitable disposal opportunities. The Directors have reviewed the unquoted investments at the year end and made a number of adjustments to the carrying values. Where it is appropriate to value investments on an earnings basis, a P/E ratio of 8 has been applied. The net effect of these adjustments is a reduction in valuations of £461,000 equivalent to 3.1p per share. Results and dividend The loss on ordinary activities after taxation was £776,000 (2001 - Loss - £1,227,000). An interim dividend of 1.5p per share was paid on 27 September 2002. Your Board is proposing to pay a final dividend of 2.0p per share on 6 May 2003 to shareholders on the register at 11 April 2003. VCT qualifying status Qualifying investments now represent 79% of total investments (including cash) thereby exceeding the Venture Capital Trust qualifying criteria of a minimum of 70%. The Board, with the assistance of PricewaterhouseCoopers, continue to monitor the Company's compliance with the VCT legislation. Share repurchase The Board is conscious that the Company's share price is affected by the illiquidity of its shares in the market, resulting from the requirement that 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 a policy of purchasing its own shares. During the year the Directors used this power to acquire 15,000 shares at an average price of 46.3p per share. A Special Resolution to continue with this policy is proposed for the forthcoming AGM. The Board is conscious that, over the coming months, most Shareholders will pass the five year anniversary of the issue of their shares and will be able to dispose of their holding without losing the income tax relief that they received when they invested. Shareholders who deferred a gain by investing in this VCT will crystallise the gain when selling their shares. Any Shareholders considering selling their holding are recommended to take advice from their financial adviser before making any investment decision. Annual General Meeting The fifth Annual General Meeting of the Company will be held at 32 Bedford Row, London WC1R 4HE at 2:00 pm on 28 April 2003. Publication of share price The Company's share price continues to be quoted in the Financial Times on a daily basis in the 'Investment Companies' sector. Outlook In assessing the performance of the Company to date, Shareholders must take account of the 24.5p in tax free dividends that the Company will have paid (including the proposed dividend) since launch. The total return to shareholders (NAV plus cumulative dividends) is therefore 84.4p per share compared to the original investment net of income tax relief of 80p per share. The Investment Manager's approach to new investments remains cautious. The Company does, however, have in excess of £2m of funds held as cash and fixed interest securities, which are available for investment as and when suitable, realistically priced opportunities become available. The Directors do not expect to see a rapid increase in the NAV in the short term, however with the funds still available for investment and the well-diversified portfolio, the Company has the potential to show an improved performance in the medium term when economic conditions improve. David Brock Chairman UNAUDITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2002 Year ended Year ended 31 December 31 December 2002 2001 £'000 £'000 Investment income 389 437 Investment management fees (195) (244) Other expenses (197) (230) Operating loss (3) (37) Net movement on permanent diminution provision (362) (1,739) (Loss) / profit on realisation of investments (409) 550 Loss on ordinary activities before taxation (774) (1,226) Tax on ordinary activities (2) (1) Loss on ordinary activities after taxation (776) (1,227) Dividends (528) (528) Retained loss for the year (1,304) (1,755) Loss per share (5.1p) (8.1p) Loss per share is based on the loss on ordinary activities after taxation of £776,000 (2001: £1,227,000), but before deduction of dividends of £528,000 (2001 - £528,000), in respect of 15,095,363 million ordinary shares (2001 - 15,104,205 million), being the weighted average number of ordinary shares in issue during the year. UNAUDITED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 DECEMBER 2002 Year ended Year ended 31 December 31 December 2002 2001 £'000 £'000 Loss on ordinary activities after taxation (776) (1,227) Net movement on permanent diminution provision 362 1,739 Total unrealised losses on revaluation of investments (1,449) (3,876) Total recognised losses for the year (1,863) (3,364) Recognised gains brought forward 181 3,545 Recognised (losses) / gains carried forward (1,682) 181 UNAUDITED NOTE OF HISTORICAL COST PROFITS AND LOSSES FOR THE YEAR ENDED 31 DECEMBER 2002 Year ended Year ended 31 December 31 December 2002 2001 £'000 £'000 (Loss) on ordinary activities after taxation (776) (1,227) Net movement on permanent diminution provision 362 1,739 Realisation of revaluation gains from previous years (60) 942 Historical cost (loss) / profit on ordinary activities after (474) 1,454 taxation Dividends (528) (528) Retained historical cost (loss) / profit for the year (1,002) 926 Historical cost profit brought forward 1,749 823 Historical cost profit carried forward 747 1,749 UNAUDITED BALANCE SHEET AT 31 DECEMBER 2002 2002 2001 £'000 £'000 £'000 £'000 Fixed Assets Venture capital investments 6,704 7,994 Listed fixed income securities 805 1,439 7,509 9,433 Current Assets Debtors 167 233 Cash at bank and in hand 1,702 2,112 1,869 2,345 Creditors: amounts falling due within one year (341) (342) Net current assets 1,528 2,003 Net assets 9,037 11,436 Capital and reserves Called up share capital 754 754 Capital redemption reserve 3 3 Revaluation reserve (267) 661 Special reserve 8,547 10,018 Equity shareholders' funds 9,037 11,436 Net asset value per share 59.9p 75.7p Net asset value per ordinary share is based on net assets at the year end, and on 15.10 million ordinary shares (2001 - 15.12 million), being the number of ordinary shares in issue at the year end. The Special Reserve is a distributable reserve that allows the Company to make market purchases of its own shares and to pay dividends. UNAUDITED CASHFLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 Year ended Year ended 31 December 31 2002 December 2001 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 20 223 Corporation tax Income tax received 36 - Capital expenditure Purchase of venture capital investments (1,334) (724) (1,334) (724) Sale of fixed income securities 600 - Sale of venture capital investments 799 2,347 Net cash inflow from capital expenditure 65 1,623 Equity dividends paid (528) (531) Net cash (outflow) / inflow before (407) 1,315 financing Financing Purchase of own shares (3) (17) Net cash outflow from financing (3) (17) (Decrease) / increase in cash (410) 1,298 Reconciliation of net cash flow to movement in net 2002 2001 funds £'000 £'000 (Decrease) / increase in cash during the (410) 1,298 year Net funds at 1 January 2,112 814 Net funds at 31 December 1,702 2,112 Announcement based on draft accounts (unqualified audit report) The financial information set out in the announcement does not constitute the Company's statutory accounts for the year ended 31 December 2002. The statutory accounts for the year ended 31 December 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. The financial information for the year ended 31 December 2001 is derived from the statutory accounts for that year which have been delivered to the Registrar 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. A copy of the full annual report and financial statements for the year ended 31 December 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 END FR NKQKBABKDPNB
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