Final Results
Unicorn AIM VCT PLC
09 December 2002
UNICORN AIM VCT PLC
Preliminary Results Announcement
Chairman's Statement
This is my first annual report to shareholders and covers the period since
incorporation on 7 August 2001 to 30 September 2002. This period has been
disappointing for investors in most markets around the globe. In the UK, for
example, the FTSE All Share Index fell by 26% and the FTSE AIM Index by 21.3% in
the twelve months to 30 September 2002. By contrast the Company's Net Asset
Value before deduction of dividends declined by 11.3% from the initial value of
94.5 pence per share to 83.86 pence per share. In line with the guidelines set
out in the Company's prospectus, approximately half of the its total assets at
30 September 2002 were held in qualifying investments and a portfolio of listed
UK smaller companies with the remainder in cash or near cash instruments.
The Manager has taken a prudent and highly selective approach with regard to
building up the qualifying investment portfolio. Six investments were made in
the period comprising four AIM companies and two unlisted investments. These
are all described in the Managers report. The Board and the Manager remain
confident that the 70% qualifying target required by the Inland Revenue by
September 2004 will be reached. In the non-qualifying portfolio, a recommended
offer was received for FCX International realising a £131,785 gain on cost of
£400,783. Overall, the non-qualifying portfolio has performed reasonably well
in disappointing market conditions.
The Company's income account shows a profit over expenses of £190,472 and I am
pleased to recommend a dividend for the period of 0.5 pence per share. The
level of future dividends will clearly depend on the income received from the
underlying investments.
Due to an uncertain economic outlook stock markets have been particularly
unsettled. This has resulted in some very weak share prices which, in a number
of cases, may fail to reflect the medium term outlook. In this environment your
Manager is concentrating on finding well managed, cash generative businesses.
With its strong cash position the Company is well placed to take advantage of
opportunities as they arise and the Directors look forward to the future with
confidence.
The Unicorn AIM VCT was the most successful VCT launched in 2002 in terms of
monies raised and I would like to thank all shareholders for their contribution
and support.
Manager's Review
Introduction
Since the launch of the Unicorn AIM VCT the net asset value per share has fallen
to 83.86 pence at 30 September 2002 (before providing for the recommended
dividend of 0.5 pence), a reduction of 11.3% from the initial value of 94.5
pence. In contrast the FTSE All Share and the FTSE AIM indices have fallen by
21.3% and 26.0% respectively as investors have realised that corporate earnings
are cyclical and ultimately cannot grow faster than the underlying economy.
Investment Strategy
The adopted investment policy has avoided over-ambitious start-ups in new
markets, which require a leap of faith and have often been priced as though
they have already succeeded. Instead, we have focussed on the strength of
companies' balance sheets and the ability to pay progressive dividends, thereby
safeguarding capital and maximising the tax-free income stream available to
shareholders.
AIM Market Review
On the back of generous tax breaks the Alternative Investment Market (AIM) has
been exceptionally successful at attracting new issues with the number of AIM
listings doubling over the past three years to over 680. Unfortunately this has
all too often been to the detriment of quality and, following a peak of 2925 on
3 March 2000, the FTSE AIM index was trading at an all time low of 605 at 30
September 2002. Moreover, it is likely that over the coming months the number of
delistings will outnumber new admissions as investors become unwilling to
refinance early stage, unprofitable business concepts, which were initially
fuelled by unrealistic expectations.
Regrettably, many AIM investors have lost the majority and in some cases all of
the value of their investment whilst a number of directors have cashed in their
chips but continued to enjoy generous pay packages. Salaries now need to be
recalibrated to a realistic level to realign managers interests with those of
shareholders. In addition, the City, which has grown fat over the past decade,
must realign its cost base so that the benefits of funding are not outweighed by
unjustifiably high fees.
Qualifying Investments
Encouragingly, companies currently raising money are of a higher calibre than
those which came to the market during the dot-com frenzy. This has enabled the
Fund to invest in traditional and often long established businesses, such as
Glisten and Lloyds British Testing. Both companies have trading histories
spanning over 70 years and were acquired on low single figure price earnings
ratios offering the prospect of significant capital and income growth.
Glisten is a niche manufacturer of chocolate confectionery, sugar based sweets
and edible decorations which has delivered impressive growth over recent years.
Furthermore, as only one or two product lines are currently sold to the major
multiple stores there is considerable scope going forward to cross sell the
product range.
Lloyds British Testing is a well-established engineering services company
providing testing and certification, maintenance and repair and training
services. The group has a strong market position and a high level of recurring
revenue providing the free cash flow to fund the consolidation of a legislative
driven market.
Our network of relationships with corporate advisors, listed companies and
entrepreneurs generated qualifying investments in Aludel and Nectar Taverns,
both of which are unlisted investments.
Aludel was established to take advantage of opportunities within the leisure
industry and in January 2002 acquired a number of Lady in Leisure sites from the
receiver, creating the UK's only national branded chain of ladies-only fitness
clubs with over 20,000 members.
Nectar Taverns has been established as a new venture to create a chain of
unbranded, managed, freehold public houses in the North West of England. This
heavily asset backed enterprise will leverage the buying power and
infrastructure of Honeycombe Leisure plc, an AIM listed pub operator, with a
proven track record of delivering above average returns.
As reported in the interim review we remain confident of benefiting from the
increasing trend for companies to seek secondary funding. The Company
participated in the placing and open offer of Staffing Ventures, an existing AIM
listed company, and Spring Grove Property Maintenance which graduated from OFEX
to AIM. In both cases the price paid was below the original issue price.
Staffing Ventures was established to invest in early stage recruitment companies
across a range of sectors and provide them with back office support services.
Spring Grove Property Maintenance provides day-to-day repair and maintenance
services for registered social landlords and local authorities within the
Greater London and South East region. Using a well-defined model for expansion
Spring Grove raised additional funding to benefit from the increasing trend to
outsource maintenance, bringing significant cost savings, greater
professionalism and a reduction in administrative burden.
Non-Qualifying Portfolio
The non-qualifying smaller company portfolio has been geared towards industrial
recovery whilst largely avoiding stocks exposed to consumer spending. Leverage
in the asset market has risen as central banks have made a concerted effort to
relax monetary policy and increase liquidity by slashing interest rates. The
emergence of cheap money created the technology bubble in 1999 & early 2000 and
more recently a housing bubble. In the face of rising unemployment and slowing
house prices there is now a significant risk that consumers may simply close
their wallets. In contrast inventories are so low that industrial production is
likely to accelerate in the coming months. Examples of companies likely to
benefit from such a recovery include BSS Group, McBride & Wyndeham Press. All
three used the economic slowdown as an opportunity to reduce overheads whilst
maintaining a strong market position in their respective markets. They have a
proven ability to generate cash and significantly each has benefited from a
recent improvement in the book-to-bill ratio.
Prospects
As ever the market is ruled by fear and greed but with a significant cash
holding we hope to benefit from the market's current pessimism to invest in
established, sensibly priced businesses.
STATEMENT OF TOTAL RETURN
(incorporating the revenue account of the company) for the period from 7 August
2001 to 30 September 2002
Revenue Capital Total
£ £ £
Unrealised losses on investments - (3,699,372) (3,699,372)
Realised gains on investments - 131,785 131,785
Income 627,729 - 627,729
Investment management fee (120,162) (360,487) (480,649)
Other expenses (317,095) - (317,095)
RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION 190,472 (3,928,074) (3,737,602)
Tax on ordinary activities - - -
RETURN ON ORDINARY ACTIVITIES AFTER TAXATION 190,472 (3,928,074) (3,737,602)
Dividend (174,999) - (174,999)
15,473 (3,928,074) (3,912,601)
RETURN PER ORDINARY SHARE 0.79p (16.21)p (15.42)p
The revenue column is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations.
BALANCE SHEET
as at 30 September 2002
as at 30 September 2002
£ £
FIXED ASSETS
Investments 16,336,801
CURRENT ASSETS
Debtors and prepayments 61,163
Cash at bank 13,128,991
13,190,154
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (350,899)
NET CURRENT ASSETS 12,839,255
NET ASSETS 29,176,056
CAPITAL AND RESERVES
Called up share capital 349,997
Share premium account -
Special reserve 32,738,660
Capital reserve - realised (228,702)
Capital reserve - unrealised (3,699,372)
Revenue reserve 15,473
TOTAL SHAREHOLDERS' FUNDS 29,176,056
NET ASSET VALUE PER ORDINARY SHARE 83.36p
The above financial statements were approved by the board of directors on
06 December 2002 and were signed on its behalf by:
Peter Dicks
Director
CASH FLOW STATEMENT
for the period from 7 August 2001 to 30 September 2002
£ £
OPERATING ACTIVITIES
Net investment income 293,791
Dividend income 280,215
Investment management fees paid (480,649)
Other cash payments (148,635)
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (55,278)
INVESTING ACTIVITIES
Acquisition of investments (20,436,956)
Disposal of investments 532,568
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (19,904,388)
(19,959,666)
FINANCING
Share capital raised 33,088,657
MANAGEMENT OF LIQUID RESOURCES
Increase in monies held pending investment (13,034,936)
INCREASE IN CASH FOR THE PERIOD 94,055
NOTES :
1. The audited results which cover the period from 7 August 2001 to 30 September
2002 have been prepared under the historical cost convention, modified to
include the revaluation of fixed asset investments. These accounts have been
prepared in accordance with applicable accounting standards and on the
assumption that the Company maintains VCT status.
2. There were 34,999,734 Ordinary Shares issued during the period to 30
September 2002.
3. Returns for the period to 30 September 2002 are based on a weighted average
of 24,243,506 Ordinary Shares in issue during the period.
4. The final dividend of 0.5 pence per Ordinary Share will be paid on 28
January 2003 to shareholders on the register on 6 January 2003.
5. These are not full accounts in terms of Section 240 of the Companies Act
1985.The annual report for the period to 30 September 2002 will be sent to
shareholders shortly and will then be available for inspection at Gossard
House, 7-8 Savile Row, London W1S 3PE, the registered office of the Company.
The audited accounts for the period to 30 September 2002 contain an
unqualified audit report.
6. The Annual General Meeting will be held at 11.00 am on 21 January 2003 at
Gossard House, 7-8 Savile Row, London W1S 3PE.
This information is provided by RNS
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