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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