Final Results
North Atlantic Smlr Co Inv Tst PLC
23 April 2002
NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC
PRELIMINARY RESULTS FOR YEAR ENDED 31 JANUARY 2002
Chairman's Statement
The financial year ended 31 January 2002 was a difficult one for your Company.
In the early part of the year the portfolio suffered from the extreme weakness
of the Company's modest exposure to the technology, media and telecom sectors
following the end of the 'dot com' boom. The tragic events of 11 September
further adversely affected stock market valuations, although confidence had
improved somewhat by the Company's year end.
The fully diluted net asset value of the Company declined by 13.1% over the year
to 696p per Ordinary Share. This compares to a decline (Sterling adjusted) in
the Standard & Poor's Composite Index of 14.5%.
The revenue account showed a loss for the year after taxation of £519,000 (2001:
profit £221,000). As in previous years and in line with the Company's long-term
policy, your directors are not recommending a dividend.
As previously reported, good profits were obtained in the first half of the year
on disposals of the Company's investments in European Motors, Premier Asset
Management, Hardy Underwriting and Wellington. Alexander Russell was taken over
at a useful premium to our original cost. In line with other companies in the
sector, the performance of PNC Telecom was disappointing.
In the USA, Gentek was sold at a price below cost, whilst poor performances from
Worldport, Change Technologies and, in particular, Lesco reduced the value of
the portfolio. These declines were offset to some extent by the relatively good
performance of our investments in the banking industry.
The underlying operating results of the companies in the unquoted section of the
portfolio were generally good, although the investment in Enterworks was written
off and the valuation of Messagelink substantially reduced. In the light of
price weaknesses of comparable listed companies the valuations of AllianceOne
and LKQ were reduced. Operating problems at Isle of Wight Cable necessitated a
write down in carrying value.
More positively, Sterling Construction was sold at an uplift over the January
2001 valuation whilst the recent round of financing of GEI allowed us to
significantly increase its carrying value.
I mentioned in my interim report the Company's involvement in investment grade
high yield bonds. The market for this type of investment has changed
significantly since we commenced this activity, with prices declining
significantly. We have therefore sold the majority of these investments in the
portfolio at a small loss, although reinvestment may occur once we feel the
market has stabilised.
The derivative portfolio continues to run off and now amounts to only £5.7m of
exposure.
Stock markets have recovered from the post 11 September collapse, aided by cuts
in US and UK interest rates. However corporate earnings growth remains under
pressure and events such as Enron and the bankruptcy or near collapse of telecom
and media companies has adversely affected market sentiment. Against this
somewhat negative background, we have substantial cash reserves and a portfolio,
being heavily concentrated on event-driven situations, which we believe is well
positioned to flourish in the present market environment.
Finally, as stated in my interim report, we are saddened to report the death
during the year of Douglas Nation. At the time of his death Douglas was the
longest serving non-executive director on the Board. We miss his friendship and
wise counsel.
Enrique Foster Gittes
Chairman
23 April 2002
CONSOLIDATED STATEMENT OF TOTAL RETURN
(*incorporating the revenue account) for the year ended 31 January
Revenue Capital Total Revenue Capital Total
2002 2002 2002 2001 2001 2001
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (21,375) (21,375) - 42,922 42,922
Exchange differences on capital items - (644) (644) - 317 317
Dividends and interest 5,452 - 5,452 4,337 - 4,337
Other income (413) - (413) (285) - (285)
Investment management fee (2,880) - (2,880) (2,336) - (2,336)
Other expenses (538) - (538) (522) - (522)
Net return before
finance costs and taxation 1,621 (22,019) (20,398) 1,194 43,239 44,433
Interest payable and similar charges (2,065) - (2,065) (885) - (885)
Return on ordinary activities
before taxation (444) (22,019) (22,463) 309 43,239 43,548
Taxation on ordinary activities (75) - (75) (88) - (88)
Return on ordinary activities
after taxation (519) (22,019) (22,538) 221 43,239 43,460
Dividend in respect of equity shares - - - - - -
Transfer (from)/to reserves (519) (22,019) (22,538) 221 43,239 43,460
Return per Ordinary share: pence pence pence pence pence pence
Basic (4.54) (192.64) (197.18) 2.01 393.07 395.08
Diluted** (2.26) (105.14) (107.40) 1.28 206.71 207.99
* The revenue column of this statement is the consolidated profit and loss
account of the Group.
**Although Financial Reporting Standard No.14: Earnings Per Share states that
Returns per share which are not diluted are not disclosed, they have been shown
here for information for the year ended 31 January 2002.
All revenue and capital items in the above statement derive from continuing
operations.
CONSOLIDATED BALANCE SHEET
as at 31 January
2002 2001
£'000 £'000
Fixed Assets
Investments 167,677 189,009
Current assets
Investments held in subsidiary undertakings 183 303
Debtors 2,738 5,029
Cash at bank 8,416 11,896
11,337 17,228
Creditors: amounts falling due within one year
Bank loans and overdrafts 3,600 2,837
Other creditors and accruals 4,020 9,039
7,620 11,876
Net current assets 3,717 5,352
Total assets less current liabilities 171,394 194,361
Creditors: amounts falling due after
more than one year
Bank loans 25,429 25,847
Debenture loan - Convertible Unsecured
Loan Stock 2013 444 468
145,521 168,046
Capital and reserves
Called up share capital 581 557
Share premium account 629 629
Capital reserve - realised 134,725 134,527
Capital reserve - unrealised 9,490 31,707
Revenue reserve 96 615
Equity shareholders' funds 145,521 168,035
Minority interests - 11
145,521 168,046
Net asset value per Ordinary share: pence pence
Basic 1,253 1,509
Fully diluted 696 801
CONSOLIDATED STATEMENT OF CASHFLOWS
for the year ended 31 January
2002 2001
£'000 £'000
Net cash inflow from operating activities 1,036 734
Servicing of finance
Interest paid (2,037) (884)
Expenses of bank loan (6) (36)
Net cash outflow from servicing of finance (2,043) (920)
Taxation
Income tax paid (9) (9)
Tax recovered 5 7
Tax paid (4) (2)
Investing activities
Purchases of fixed asset investments (218,250) (148,199)
Proceeds from sale of fixed asset investments
(including option premiums) 216,159 141,378
Net cash outflow from investing activities (2,091) (6,821)
Net cash outflow before financing (3,102) (7,009)
Financing
Repayment of fixed term borrowings (6,000) (4,043)
Drawdown of fixed term borrowings 6,000 20,989
Net cash inflow from financing - 16,946
(Decrease)/increase in cash (3,102) 9,937
Notes:
The above results for the year to 31 January 2002 are audited.
The Directors do not recommend the payment of a final dividend for the year
(2001: nil).
The statutory accounts for the year ended 31 January 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. Copies will be posted to
shareholders and those individuals on the Company's mailing list as soon as
practicable after printing and will also be available on request from the
Company Secretary, J O Hambro Capital Management Limited, Ground Floor, Ryder
Court, 14 Ryder Street, London SW1Y 6QB. The Annual General Meeting will be
held on Monday 17 June 2002 at 3pm at the offices of the Manager and Company
Secretary, J O Hambro Capital Management Limited, Ground Floor, Ryder Court, 14
Ryder Street, London SW1Y 6QB.
The financial information set out above does not constitute the Company's
statutory financial statements for the year ended 31 January 2002.
The above results for the year ended 31 January 2001 are an abridged version of
the Company's full accounts which received an audit report that was unqualified
and did not contain any statements under section 237(2) or (3) Companies Act
1985. The accounts for the year ended 31 January 2001 have been filed with the
Registrar of Companies.
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