Final Results
Unicorn AIM VCT plc
26 November 2007
Preliminary results for the year ended 30 September 2007
Chairman's Statement
The Company has had a busy and largely successful twelve months
despite encountering particularly difficult market conditions in the final
quarter of the financial year. The Offer for Subscription for Series 3
Ordinary Shares closed on 31 May 2007 raising £4.7m net of expenses. The
existing portfolios continued their positive development with a number of new
investments made to replace successful realisations. In addition the flow of
tax free dividend distributions remained healthy and the regular programme of
share buybacks was maintained.
As at 30 September 2007 the Net Asset Values (NAV) for the Ordinary
Share Fund, the Series 2 (S2) Share Fund and the Series 3 (S3) Share Fund were
89.55 pence per share, 113.84 pence per share and 92.28 pence per share
respectively.
It gives me pleasure to report that during the course of the
financial year under review interim dividends totalling 12.55 pence per share
were paid to Ordinary Fund Shareholders and an interim dividend of 5 pence per
share was paid to S2 Fund Shareholders (in addition to the final dividend of 5
pence per share declared and paid in respect of the year ended 30 September
2006). In both cases, dividends were paid from net realised capital profits.
In respect of the year ended 30 September 2007 a final dividend of 5 pence per
share is proposed for holders of S2 Shares. Given the stated aim of
maintaining NAV at around 100 pence per share, the Board does not intend
proposing a final dividend for Ordinary Shareholders or S3 Shareholders.
During the period 1,389,015 Ordinary Shares and 886,724 S2 Shares
were bought back for cancellation at an average price of 93 pence per share
and 113 pence per share respectively. The Company continues to hold cash
reserves in order to finance further dividend payments and a continuing share
buyback programme. To date, shareholders in the Company have received a total
of £14.7m in dividends and £5.3m through share buy-backs.
It has been a relatively active period for the established
portfolios with three realisations and six new VCT qualifying investments made
for both the Ordinary Share Fund and the S2 Share Fund. In addition, Careforce
which was held in both portfolios was acquired by Mears Group. The
consideration for the acquisition was received in new Mears Group ordinary
shares which have been retained in each portfolio and which continue to
qualify under current VCT legislation for a period of up to three years. Total
proceeds from realisations amounted to just under £7.5m in the Ordinary Share
Fund whilst the total cost of purchases was £3.4m. In the S2 Share Fund,
proceeds from the disposal of VCT qualifying investments totalled £4m of which
£2m was re-invested in new qualifying investments. At the financial year end
the portfolio of the Ordinary Share Fund consisted of thirty-eight VCT
qualifying investments whilst the S2 Share Fund portfolio comprised thirty
qualifying investments. The S3 Share Fund had yet to make any VCT qualifying
investments by the year-end. Approximately 52% of the total assets of the S3
Fund have been invested equally in the five sub-funds of the Unicorn Open
Ended Investment Company (OEIC), with the balance held in cash or near cash
instruments.
The performance of the AIM over the past twelve months highlights
the greater volatility and risk associated with investment in this area of the
market. For the first nine months of the Company's financial year the FTSE AIM
All-Share Index rose steadily only for much of the gain to reverse in the
final quarter, with the Index ending the period up by 11.0%. Frustratingly,
both the Ordinary Share Fund and the S2 Share Fund were unable to keep pace
with the overall market gain. There are number of factors behind this relative
under-performance:-
Firstly, the mining sector, which currently accounts for 32% of the
FTSE AIM All-Share Index, recorded very strong gains, posting a rise of 26% in
the first six months of 2007.
Secondly, international companies now account for 19% of AIM
constituents and have also delivered strong returns in the past 12 months.
Your Company does not invest in businesses operating in either of these areas
of the market since they tend to be early stage and unprofitable. In addition,
under existing HMRC legislation they typically fail to achieve VCT qualifying
status.
Finally, a small number of our investee companies experienced
trading setbacks. The ability to successfully manage the transition from
private to public ownership represents a significant challenge and is one that
can often result in temporary setbacks. Despite positive contributions from
the majority of holdings in the Ordinary Share Fund, a number of companies did
not achieve expected levels of profitability and their share prices fell as a
result. In the S2 Share Fund, exposure to the debt management sector proved
costly and overall performance was particularly impacted by the collapse of
The Debt Advisor Group Plc. Unfortunately, this investment has had to be
written down to nil value and is currently in administrative receivership. On
a positive note, a significant majority of the investee companies within the
S2 Share Fund generated share price gains, with particularly strong
performances from some of the larger holdings in the portfolio. A detailed
report on the performance of the portfolios within each Fund is contained in
the Investment Manager's Review below.
The Investment Manager's focus on profitable, cash generative
companies combined with the diversified nature of the portfolios acts as an
effective counterbalance to stock specific risk. Given the risk associated
with investing in smaller, growth orientated companies it is almost inevitable
that individual holdings will occasionally disappoint. However, your Board is
confident that the Investment Manager's proven approach offers good prospects
for delivering positive and sustainable returns over the medium to long term.
For this reason the Board is of the opinion that the continued appointment of
the Investment Manager remains in the interests of shareholders.
Peter Dicks
Chairman
Investment Manager's Review
Investment Policy
It is the aim of the Investment Manager to identify and invest in a
diversified portfolio of companies that display a majority of the following
characteristics:
- experienced and well-motivated management;
- products and services supplying growing markets;
- sound operational and financial controls; and
- good cash generation to finance ongoing development allied with a
progressive dividend policy.
Performance
The NAV of the Ordinary Share Fund as at 30 September 2007 was
89.55 pence per share, representing an increase of 2.3% over the previous year
after adding back dividends paid. Since shares were first allotted in November
2001, the initial NAV of the Ordinary Share Fund has increased by 36.0% on a
total return basis.
The NAV of the S2 Share Fund was 113.84 pence per share, which
represents an increase in total return for the year of 2.9% after adding back
dividends paid. The total return on initial NAV is 32.9%.
The NAV of the S3 Share Fund was 92.28 pence per share.
Approximately 50% of the net proceeds of the share issue have been invested
equally in the five sub-funds of the Unicorn Investment Funds OEIC. The
remaining assets are being held in cash or near cash instruments awaiting
investment in VCT qualifying companies.
Investment strategy
The policy of investing in companies which have a demonstrable record of
profitability and positive cash generation remains unchanged. The Ordinary
Fund and the S2 Fund portfolios are now well diversified both by sector and by
number of investments held. These Funds remain comfortably above the threshold
required to retain VCT qualifying status (whereby a minimum of 70% of combined
assets must be invested in VCT qualifying holdings). The Investment Manager
will continue to adopt a highly selective approach to new investment
opportunities for all three Funds.
Alternative Investment Market (AIM) review
In the twelve month period to 30 September 2007, the AIM performed
well despite experiencing a sell-off in the final quarter. One of the more
immediate consequences of the recent crisis in the US sub-prime mortgage
market has been a `flight to quality', whereby equity investors seem to have
sought safety in larger capitalized companies. Liquidity at the `junior' end
of the market has temporarily deteriorated and as a result many otherwise
robust businesses have experienced a de-rating in recent times. In positive
contrast, the new issue market has remained healthy and the quality of UK
businesses seeking an initial listing on AIM appears to have improved.
The FTSE AIM All-Share Index remains dominated by mining and
resource stocks which accounted for 32% of the Index by value as at 30
September 2007. With a `light touch' approach to regulation, the attractions
of an AIM listing are also becoming more widely recognised by entrepreneurs
running international companies. In the three months to the end of June 2007
over 30% of all new issues were non-UK and international companies now account
for 19% of all AIM quoted companies. International companies, including mining
and resource businesses, contributed strongly to an overall rise in the Index
of 11% during the past 12 months. However, very few of these companies qualify
for investment by Venture Capital Trusts under existing HMRC legislation and
as a result Unicorn AIM VCT Funds have no exposure to this area of the AIM.
Qualifying investments
The majority of the holdings in both the Ordinary Share Fund and
the S2 Share Fund performed well. The net positive contribution produced by
each of the qualifying portfolios was £1,440,000 and £177,000 respectively.
However, overall performance in both portfolios was held back by a higher than
average incidence of stock specific issues. At the smaller end of the quoted
market, companies which fail to meet profit expectations invariably get hit
hard.
The Ordinary Share Fund made new investments in six VCT qualifying
companies during the year under review.
Cantono recently raised £10m via a placing of new shares in order
to finance the development of state of the art data centre facilities. The
supply of operational data centre sites in the UK has declined significantly
over the past five years whilst demand for facilities with appropriate
availability of power and cooling continues to grow sharply. Current trading
in Cantono's core IT managed services operations is in line with management
expectations.
Clerkenwell Ventures is a cash shell headed by David Page of Pizza
Express fame. The intention is to use funds raised to acquire established,
successful but privately owned restaurant brands. Possible targets have been
identified and the due diligence process is underway, but to date no
announcement has been released regarding specific acquisitions. The shares had
risen to a 10% premium by the end of September 2007.
Hasgrove is a pan-European marketing and communication services
group. The strategy is to grow and develop key "best of breed" brands with a
specific focus on public relations, public affairs and digital communication.
Through a series of acquisitions, the group has established the leading market
position in European Union public affairs consultancy together with a growing
presence in the fast emerging digital marketing sector. Recently released
Interim Results confirmed that the integration of acquisitions is progressing
to plan. Turnover rose in the six month period by 115%, with fully diluted
earnings per share growing by more than 25%. As is the case in businesses that
predominantly revolve around investment in human capital, the key risk is that
the group overpays for acquisitions only to see the `talent' walk away at a
later stage. To date, the principal vendors have all stayed with the enlarged
group and are heavily incentivised by long term earn-outs to help ensure
success.
Hexagon Human Capital is a recruitment company specialising in
Senior Interim Management and Executive Search. In a recent trading update,
the Board of Hexagon confirmed that trading conditions in all market sectors,
in which the Group operates, were strong and expressed confidence that trading
performance will be in line with current market expectations for the full year
to March 2008.
Kiotech manufactures and supplies high performance natural feed
additives to global agriculture and aquaculture markets. The Board and
management of the company were changed in June 2006. This change in management
prompted a shift in strategic direction. A fundraising was arranged to finance
the acquisition of an established, profitable and cash generative business in
November 2006. This acquisition stabilized the business and allowed the
required development work to enable commercialisation of the aquaculture
product to continue on a self-funding basis. This product has significant
potential but is still some way from being approved for commercial sale. The
enlarged group was recently able to report maiden profits since becoming a
public company 10 years ago.
Shieldtech is a specialist manufacturer of body armour systems
which it sells to the Armed Forces and Emergency Services in the UK and
internationally. The business has acquired a reputation for delivering high
quality, high technology solutions for safety critical applications. The
business operates in areas that offer high barriers to entry driven by
regulatory requirements, technical expertise and the need for total product
integrity. Shieldtech is profitable, cash generative and has significant
opportunities to develop both organic and acquisitive growth.
A number of existing holdings delivered strong gains during the
period under review.
Abcam has successfully exploited web based technology to build a
business specialising in the distribution of therapeutic antibodies to the
worldwide life science research market. The company has grown rapidly from
humble beginnings in 1998 and now generates annual sales of £25m from an
online catalogue of over 36,000 products. The business is inherently high
margin and cash generative and prospects for continued growth remain
excellent. In the past year, the Board has taken the decision to invest
significantly in expanding their own manufacturing capability. The new
facilities are now largely complete and production of commercial scale
antibodies should commence in early 2008. In time, this initiative should
significantly enhance margins and give Abcam much greater control over the
antibody market as a whole. Abcam is a significant holding in both the
Ordinary Share Fund and the S2 Share Fund.
Maxima Holdings is an IT managed services and systems integration
company, which continues to expand through both organic and acquisitive
growth. Maxima Holdings floated on AIM in November 2004 and has since
completed ten acquisitions. In that time turnover has grown from approximately
£10m to over £30m per annum, whilst profits before tax have risen from £1m to
£4.2m by the year ended 31 May 2007. Importantly, the business has been able
to fund a significant portion of acquisition costs through its inherent,
strong cash generation. Net debt at the year end stood at £6.6m representing a
gearing ratio of 21%. The Ordinary Share Fund and the S2 Share Fund invested
in the business at flotation and at subsequent VCT qualifying fundraising
rounds. The shares have risen in value by over 90% in the past twelve months
delivering £1.4m and £850,000 in positive contribution to each Fund
respectively. Maxima Holdings now constitutes the largest holding in both
portfolios and yet remains modestly rated on most commonly used valuation
measures.
Mattioli Woods is one of the UK's fastest growing pension and
wealth management consultancies. The company specialises in advising and
acting as Trustee of Self Invested Pension Plans and Small Self-Administered
Pension Schemes. Founded in 1991, the company has built long term
relationships with its customers and now acts for over 2,000 pension fund
clients. Revenue generation is predominantly fee-based and the business is
enjoying strong growth partly driven by new government legislation relating to
pension simplification. Mattioli Woods remains one of the largest holdings in
both the Ordinary and the S2 Share Fund and the shares rose in value by 34% in
the year under review.
Zetar the fast growing confectionery and healthy snacking group of
businesses continued to trade strongly, with healthy cashflow and an equity
fundraising helping to finance three further acquisitions in the past
financial year. Net debt also rose slightly but gearing remains modest at 31%
of net assets. A recent trading update confirmed that the Board remains
confident about the Group's prospects and that operations have continued to
trade in line with expectations. Zetar increased in value by 25% in the year
under review and is held in both the Ordinary Share Fund and the S2 Share
Fund.
The Ordinary Share Fund is now well diversified consisting of
thirty-eight qualifying holdings, the majority of which performed at least in
line with expectations. However, there were five companies which disappointed
and which between them accounted for over 85% of the total negative
contribution produced during the year.
Supporta provides back office support services and domiciliary care
to the public and private sectors and is one of the Ordinary Share Fund's
earliest investments having been introduced to the portfolio in January 2002.
Profits have been realised in this investment at various points during the
past five years such that the current carrying value of the investment is
little over half the original book cost. The market value of this holding was
27% higher than book cost at the balance sheet date and the core activity of
domiciliary care provision remains fundamentally sound. However, the company
has experienced a difficult year operationally. In the financial year to 31
March 2007, Supporta reported a loss before tax of £4.2m after incurring
exceptional charges of £4.8m mainly related to goodwill impairment following
disposal of the payroll services division. In May 2007, the Board initiated a
strategic review in an attempt to ensure that shareholders benefit fully from
the underlying and potential value of the company. This review is currently
ongoing, but a recent trading statement indicated that trading was in line
with expectations. It is reasonable to expect a recovery in the market value
of Supporta in the current financial year.
Huveaux is a business to business media publishing group focused on
political, education, learning and healthcare publishing. The company has
grown rapidly through acquisition in recent years and is now experiencing a
period of slowing earnings. The Learning Division is currently suffering from
UK government cutbacks in training budgets, whilst the Healthcare Division has
been impacted by very weak French pharmaceutical advertising spend. The recent
release of Interim Results revealed a loss before tax of £1.5m and highlighted
plans to increase shareholder value through the implementation of an
operational and profit improvement programme. As a sign of confidence in the
future prospects of the business the executive management team have recently
increased their shareholdings through market purchases.
Avingtrans is an engineering technology group with activities in
the design, manufacture and supply of critical components to the medical,
industrial and aerospace sectors. In the financial year to 31 May 2007, the
business experienced a decline in orders from a major customer in its Medical
Products Division and post tax profits fell by almost 15% as a result. The
share price has suffered disproportionately, falling by almost 50% from its
peak. The indications are that this setback has now been resolved and that a
return to earnings growth can be expected in the current financial year.
Pilat Media specialises in the development and supply of airtime
sales and programme management software to the global media broadcast
industry. As a consequence of rapid growth in recent years, the Company has
found it necessary to invest significantly in its operating resource. This
increase in overhead has coincided with delays to the signing of expected new
contracts. Profit forecasts have been significantly downgraded for the current
financial year and the share price has suffered. The business operates in a
specialist niche, has developed market leading software and has a healthy
pipeline of opportunities. However, management will need to start converting
some of these opportunities into revenue generating contracts in the near term
if they are to meet profit forecasts for financial year 2008 and beyond.
Access Intelligence is a group of companies delivering a range of
business critical support services, such as Compliance and Data Management, to
private and public sector organisations. The group has grown by acquisition
but remains sub-scale in terms of market value and profile. For the six months
to the 31 May 2007, Access Intelligence reported a loss before tax of £323,000
citing contract delays and a drop in storage solutions sales. The product
offering has been strengthened in the past six months, recurring revenues are
growing at a rate of 10% per annum and pipeline activity is reported to be at
high levels. The challenge during the remainder of the current financial year
is for the group's sales teams to convert prospects into strong sales
delivery. Directors have bought stock in the market on several occasions since
the release of Interim Results in July 2007 and there has been a modest
recovery in the share price.
All five of these businesses have realistic prospects of delivering
share price recovery through operational improvements in the current financial
year. In each case we have retained our investment whilst continuing to
closely monitor progress.
It was a relatively active year for realisations in both the
Ordinary and the S2 Share Fund. Talarius the UK's largest high street chain of
coin operated gaming centres was acquired by Tattersalls of Australia
crystallising a gain in excess of £1m for each of the Funds representing a
three fold return on initial investment. Careforce which was also held in both
Funds was acquired by Mears Group at a 37% premium to book cost and
consideration was received in the form of Mears Group shares which are being
retained in the portfolios as they continue to qualify for VCT purposes for a
period of up to three years post completion of the transaction.
The Funds' holdings in Clarity Commerce were disposed of entirely
through a market sale, generating an 18% capital gain. In the period since
disposal the share price of Clarity Commerce has more than halved. The loan
note relating to the holding in TRL Electronics (acquired by L3 Communications
in June 2006), was redeemed in full in March 2007.
The S2 Share Fund produced a solid if unspectacular outcome for the
year as a whole. In common with the Ordinary Share Fund, the companies held in
the portfolio experienced mixed fortunes. Many of the holdings registered
strong gains, but exposure to the debt management sector exerted a significant
drag on overall performance.
In recent years there has been an explosion in the number of
over-indebted consumers who have sought help in the management of their debt.
The number of people seeking advice on debt issues continues to rise at an
alarming rate. New figures released in September 2007 from the Citizens Advice
Bureaux show that debt enquiries have hit a record high, increasing by 20% in
the last year and bringing the total to 1.7 million in 2006/07. Many consumers
entered into Individual Voluntary Arrangements with the quoted debt management
companies as a means of solving their personal debt problems and for a while
this appeared to be an elegant solution. In theory the lenders were happy to
receive repayment of up to 50% of their otherwise uncertain loans Consumers
entering into IVAs would have their debt written off over a five year period
and the debt management companies would develop into thriving and cash
generative businesses from which investors would also benefit.
Whilst the underlying problem remains larger than ever, the
business model for the sector has now effectively imploded due to
over-aggressive marketing by the IVA providers. Banks and credit card
companies became embarrassed by the growing evidence of their slack lending
criteria and by the increasing success of the IVA companies. The rate at which
lenders were prepared to sign off on new IVAs slowed dramatically and the
terms on which IVAs were accepted worsened significantly. The IVA companies
started to rapidly burn through their cash reserves as advertising costs to
acquire new cases spiraled whilst upfront fees from the lenders dried up.
As a result, investor confidence in the sector collapsed;
liquidity in the shares of the IVA providers evaporated and the value of the
Fund's holdings in Debts.co.uk, Invocas Group and The Debt Adviser Group all
suffered a rapid decline. Unfortunately, in the case of The Debt Advisor
Group, the Fund's investment has had to be written down to nil after the
business was forced into administration. This has clearly been a most
disappointing outcome for the S2 Fund. The losses incurred are all the more
galling because the underlying issue of consumer debt, which made the debt
management sector so attractive in the first place, remains like a lurking
iceberg; huge, still barely visible and potentially extremely damaging if
ignored.
The S2 Fund co-invested in all six of the new VCT qualifying
investments made by the Ordinary Fund during the course of the year. The S2
Fund also made three outright disposals and the portfolio now consists of
thirty qualifying investments. In common with the Ordinary Fund, the strongest
contributors to performance during the year included Maxima Holdings, Mattioli
Woods, Zetar and Abcam. Details relating to new investments, further
description of stock specific performance and information relating to three of
the disposals can be found earlier in this report. The Fund's holding in Ovum
was sold to Datamonitor for cash, realising a gain on disposal of almost
£250,000.
Non-qualifying portfolios
In the established Funds, the contribution to performance from the
investment in sub-funds of the Unicorn Investment Funds OEIC was positive over
the full twelve month period under review. However, in the second half of the
financial year, equity market conditions deteriorated and each of the sub-fund
investments lost ground during this period. As a result, the S3 Fund, which
closed for subscription on 31 May 2007, saw Net Asset Value decline by 3%.
In the Ordinary Share Fund the holding in Lorien was sold and a
loss on disposal of £254,000 was recorded. With the exception of Lorien, all
non-qualifying investments have crystallised capital gains on disposal. The
capital gains on these disposals can be distributed to shareholders in the
form of tax free dividends whilst the initial amount invested will be recycled
into new and exciting growth opportunities in VCT qualifying companies. This
gradual process of distribution and recycling of capital will continue and it
is certain that the contribution from the non-qualifying holdings in both
Funds will be a smaller component of total returns in future.
Prospects
It has been a mixed year for the Funds. The majority of holdings
have performed well whilst a small number of investee companies have
encountered problems. The Investment Manager is confident that most, but not
all, of the companies which suffered setbacks over the past year will recover
in due course and remains convinced of the merits of a policy which focuses on
investing in a diverse range of profitable businesses with good long term
growth potential. The established and selective approach to new investment
will continue and the Manager is confident that this successful strategy will
continue to deliver attractive returns for Shareholders over the longer term.
Non-Statutory analysis between the Ordinary Share, S2 Share and S3
Share Funds
1. Income Statement for the year ended 30 September 2007
Ordinary Share Fund S2 Share Fund
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net unrealised gains/(losses) on investments - 124 124 - 740 740
Net gains/(losses) on realisation of investments - 1,330 1,330 - 40 40
Income 436 - 436 228 - 228
Investment management fees 3 (171) (512) (683) (83) (248) (331)
Other expenses (317) - (317) (165) - (165)
----------- ----------- ----------- ----------- -----------
(Loss)/profit on ordinary activities before taxation (52) 942 890 (20) 532 512
Tax on ordinary activities - - - - - -
----------- ----------- ----------- ----------- -----------
(Loss)/profit attributable to equity shareholders 4 (52) 942 890 (20) 532 512
======= ======= ======= ======= ======= =======
(Loss)/profit per ordinary share (pence per share) (0.17)p 3.02 p 2.85 p (0.13)p 3.45 p 3.32 p
Average number of shares in issue 31,171,332 15,425,839
S3 Share Fund Total of all Funds
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net unrealised
gains/(losses) on
investments - (116) (116) - 748 748
Net gains/(losses)
on realisation of
investments - (12) (12) - 1,358 1,358
Income 82 - 82 746 - 746
Investment
management fees 3 (9) (28) (37) (263) (788) (1,051)
Other expenses (34) - (34) (516) - (516)
----------- ----------- ----------- ----------- ----------- -----------
(Loss)/profit on
ordinary activities before
taxation 39 (156) (117) (33) 1,318 1,285
Tax on ordinary
activities - - - - - -
----------- ----------- ----------- ----------- ----------- -----------
(Loss)/profit
attributable to
equity shareholders 4 39 (156) (117) (33) 1,318 1,285
======= ======= ======= ======= ======= =======
(Loss)/profit per 1.00 p (4.02)p (3.02)p
ordinary share
(pence per share)
Average number
of shares in issue 3,879,970
2. Balance Sheets as at 30 September 2007
Ordinary Share Fund S2 Share Fund
£'000 £'000 £'000 £'000
Non-current assets
Investments at fair value 26,174 16,112
Current assets
Debtors and prepayments 1,226 35
Current investments 5 726
Cash at bank 36 67
---------- ----------
1,267 828
Creditors: amounts falling due within one year (171) (115)
---------- ----------
Net current assets 1,096 713
---------- ----------
Net assets 27,270 16,825
====== ======
Capital
Called up share capital 304 148
Capital redemption reserve 46 10
Share premium account - 10
Revaluation reserve 6,264 3,687
Special distributable reserve 18,383 11,748
Profit and Loss account 2,273 1,222
---------- ----------
Equity shareholders' funds 27,270 16,825
====== ======
Number of shares in issue: 30,453,157 14,778,800
Net asset value per 1p share: 89.55p 113.84p
S3 Share Fund Adjustments Total of all Funds
(see note (per Statutory Balance
below) Sheet)
£'000 £'000 £'000 £'000 £'000
Non-current assets
Investments at fair value 2,351 44,637
Current assets
Debtors and prepayments 38 (1) 1,298
Current investments 2,208 2,939
Cash at bank 5 108
---------- ---------- ----------
2,251 (1) 4,345
Creditors: amounts falling due within one year (27) 1 (312)
---------- ---------- ----------
Net current assets 2,224 4,033
---------- ----------
Net assets 4,575 - 48,670
====== ======
Capital
Called up share capital 50 502
Capital redemption reserve - 56
Share premium account 4,642 4,652
Revaluation reserve (116) 9,835
Special distributable reserve - 30,131
Profit and Loss account (1) 3,494
---------- ----------
Equity shareholders' funds 4,575 48,670
====== ======
Number of shares in issue: 4,958,036
Net asset value per 1p share: 92.28p
Note: The adjustment above nets off the inter-fund debtor and creditor
balances, so that the "Total of both funds" balance sheet agrees to the
Statutory Balance Sheet below.
3. Reconciliation of movements in Shareholders' Funds for the year ended 30
September 2007
Ordinary Total of all Funds
Notes Share Fund S2 Share Fund S3 Share Fund (per Statutory
Balance Sheet)
£'000 £'000 £'000 £'000
As at 1 October 2006 31,581 18,841 - 50,422
Net share capital bought back in the year (1,290) (1,000) - (2,290)
Net share capital issued in the year - - 4,692 4,692
Profit for the year 890 512 (117) 1,285
Dividends paid 5,6 (3,911) (1,528) - (5,439)
---------- ---------- ---------- ----------
Closing shareholders' funds at 30 September 2007 27,270 16,825 4,575 48,670
====== ====== ====== ======
Profit and Loss Account
For the year ended 30 September 2007
30 September 2007 30 September 2006
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net unrealised gains on investments - 748 748 - 1,829 1,829
Net gains on realisation of investments - 1,358 1,358 - 2,319 2,319
Income 746 - 746 502 - 502
Investment management fees 3 (263) (788) (1,051) (245) (735) (980)
Other expenses (516) - (516) (479) - (479)
---------- --------- ---------- ---------- ------
(Loss)/profit on ordinary activities before taxation (33) 1,318 1,285 (222) 3,413 3,191
Tax on ordinary activities - - - - - -
---------- --------- ---------- ---------- ------
(Loss)/profit on ordinary activities after taxation
for the financial year 4 (33) 1,318 1,285 (222) 3,413 3,191
====== ====== ====== ====== ====== ======
Basic and diluted earnings per share:
Ordinary Shares 2.85p 3.91p
S2 Shares 3.32p 12.20p
S3 Shares (3.02)p -
The total column of this statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the
year. There were no other recognised gains or losses in the year.
Note of Historical Cost Profits and Losses
for the year ended 30 September 2007
30 September 2007 30 September 2006
£'000 £'000
Profit on ordinary activities before taxation 1,285 3,191
Less: unrealised gains on investments (748) (1,829)
Realisation of revaluation gains of previous years 1,167 985
---------- ----------
Historical cost profit on ordinary activities before taxation 1,704 2,347
---------- ----------
Historical cost loss for the year after taxation and dividends (3,735) (1,123)
====== ======
Balance Sheet
as at 30 September 2007
30 September 2007 30 September 2006
£'000 £'000 £'000 £'000
Non-current assets
Investments at fair value 44,637 46,025
Current assets
Debtors and prepayments 1,298 101
Current investments 2,939 2,938
Cash at bank 108 1,650
---------- ----------
4,345 4,689
Creditors: amounts falling due within one year (312) (292)
---------- --------- ---------- --------
Net current assets 4,033 4,397
--------- --------
Net assets 48,670 50,422
====== ======
Capital
Called up share capital 502 475
Capital redemption reserve 56 33
Share premium account 4,652 10
Revaluation reserve 9,835 10,254
Special distributable reserve 30,131 35,140
Profit and loss account 3,494 4,510
---------- --------
Equity shareholders' funds 48,670 50,422
====== ======
Net asset value per share of 1 pence each:
Ordinary Shares 89.55p 99.18p
S2 Shares 113.84p 120.27p
S3 Shares 92.28p -
Reconciliation of Movements in Shareholders' Funds
For the year ended 30 September 2007
30 September 2007 30 September 2006
Notes £'000 £'000
As at 1 October 2006 50,422 52,136
Net share capital bought back in the year (2,290) (1,434)
Net share capital subscribed in the year 4,692 -
Profit for the year 1,285 3,191
Dividends paid 5,6 (5,439) (3,471)
---------- ----------
Closing Shareholders' funds at 30 September 2007 48,670 50,422
====== ======
Cash Flow Statement
for the year ended 30 September 2007
30 September 2007 30 September 2006
£'000 £'000 £'000 £'000
Operating activities
Dividends received 764 697
Deposit and similar interest 24 7
Investment management fees paid (1,063) (980)
Other cash payments (599) (513)
---------- ----------
Net cash outflow from operating activities (874) (789)
Investing activities
Purchase of investments (6,797) (6,915)
Sale of investments 9,167 11,410
---------- ----------
2,370 4,495
Equity dividends
Payment of dividends (5,439) (3,492)
---------- ----------
Net cash (outflow)/inflow before financing and
liquid resource management (3,943) 214
Financing
Issue of S3 shares (net of expenses) 4,692 -
Purchase of own shares (2,290) (1,470)
---------- ----------
2,402 (1,470)
Management of liquid resources
(Increase)/decrease in current investments (1) 2,827
---------- ----------
Net (decrease)/increase in cash (1,542) 1,571
====== ======
Reconciliation of profit on ordinary activities before taxation to net cash
outflow from operating activities
2007 2006
£'000 £'000
Profit on ordinary activities before taxation 1,285 3,192
Net gains on realisation of investments (1,379) (2,331)
Net unrealised gains on investments (748) (1,829)
(Increase)/decrease in debtors (94) 201
Increase/(decrease)/ in creditors and accruals 62 (22)
Net cash outflow from operating activities (874) (789)
Analysis of changes in net funds
Liquid
resources
Cash Total
2007 2007 2007
£'000s £'000s £'000s
At 30 September 1,650 2,938 4,588
2006
Cash flows (1,542) 1 (1,541)
At 30 September 108 2,939 3,047
2007
The financial statements from which this preliminary announcement was prepared
were approved and authorised for issue for issue by the Board of Directors on
26th November 2007.
Notes
1. The audited results for the year ended 30 September 2007 have
been prepared under UK Generally Accepted Accounting Practice (UK GAAP) on a
basis consistent with the accounting policies followed for the year ended 30
September 2006 and, to the extent that it does not conflict with the Companies
Act 1985, the 2003 Statement of Recommended Practice, `Financial Statements of
Investment Trust Companies', revised December 2005.
2. These are not full accounts in terms of section 240 of the
Companies Act 1985. The Annual Report for the year to 30 September 2007 will
be sent to shareholders shortly and will then be available for inspection at
One Jermyn Street, London SW1Y 4UH, the registered office of the Company.
Statutory accounts will be delivered to the Registrar of Companies after the
Annual General Meeting. The audited accounts for the year ended 30 September
2007 contain an unqualified audit report.
3. In accordance with the policy statement published under
"Management, Fees and Administration" in the Company's prospectus dated 2
October 2001, the Directors have charged 75% of the investment management
expenses to the capital reserve.
4. Total earnings after taxation for the year were £1,285,000
(2006: £3,191,000), comprising a profit on the Ordinary Shares Fund after
taxation of £890,000 (2006: £1,273,000), a profit after taxation on the S2
Shares Fund of £512,000 (2006: £1,918,000) and a loss after taxation on the S3
Shares Fund of £(117,000). The basic earnings per Ordinary Share is based on
the net profit from ordinary activities and on 31,171,332 (2006: 32,643,425)
Ordinary Shares, being the weighted average number of Ordinary Shares in issue
during the year. The basic earnings per S2 Share is based on the net profit
from ordinary activities and on 15,425,839 (2006: 15,715,395) S2 Shares, being
the weighted average number of S2 Shares in issue during the year. The basic
earnings per S3 Share is based on the net loss from ordinary activities and on
3,879,970 S3 Shares, being the weighted average number of S3 Shares in issue
during the year.
The revenue return per Ordinary Share is based on the net loss
from ordinary activities after taxation of £52,000 (2006: £113,000) and on
31,171,332 (2006: 32,643,425) Ordinary Shares, being the weighted average
number of Ordinary Shares in issue during the year. The revenue return per S2
Share is based on the net loss from ordinary activities after taxation of
£20,000 (2006: £109,000) and on 15,425,839 (2006: 15,715,395) S2 Shares, being
the weighted average number of S2 Shares in issue during the year. The revenue
return per S3 Share is based on the net profit from ordinary activities after
taxation of £39,000 and on 3,879,970 S3 Shares, being the weighted average
number of S3 Shares in issue during the year.
The capital return per Ordinary Share is based on net realised
capital gains of £1,330,000 (2006: £1,970,000), on net unrealised capital
gains of £124,000 (2006: losses £38,000), capital expenses of £512,000 (2006:
£545,000) and on 31,171,332 (2006: 32,643,425) Ordinary Shares, being the
weighted average number of Ordinary Shares in issue during the year. The
capital return per S2 Share is based on net realised capital gains of £40,000
(2006: £349,000), on net unrealised capital gains of £740,000 (2006:
£1,868,000), capital expenses of £248,000 (2006: £190,000) and on 15,425,839
(2006: 15,715,395) S2 Shares, being the weighted average number of S2 Shares
in issue during the year. The capital return per S3 Share is based on net
realised capital losses of £12,000, on net unrealised capital losses of
£116,000, capital expenses of £28,000 and on 3,879,970 S3 Shares, being the
weighted average number of S3 Shares in issue during the year.
5. The Ordinary Share Fund has paid two dividends of 7.5 and 5.05
pence per Ordinary Share each during the year, totalling £3,911,000.
6. The S2 Share Fund has paid two dividends of 5 pence per S2 Share
each during the year, totalling £1,528,000.
7. A final dividend for the year ended 30 September 2007 of 5 pence
per S2 Share will be paid from capital to S2 Shareholders on 31 January 2008
to Shareholders on the register on 11 January 2008.
8. The Annual General Meeting of the Company will be held at 11.00
am on 25 January 2008 at One Jermyn Street, London SW1Y 4UH.
For further information please contact:
Chris Hutchinson, Unicorn Asset Management Limited, Tel: 020 7253 0889
Robert Brittain, Matrix-Securities Limited, Tel: 020 7925 3300
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