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ADC Zeros 2010 plc (ADC2)

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Friday 29 January, 2010

ADC Zeros 2010 plc

Half Yearly Report

RNS Number : 3697G
ADC Zeros 2010 plc
29 January 2010
 

ADC ZEROS 2010 PLC

HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30 NOVEMBER 2009


The following is the unaudited Interim Board Report for the six months ended 30 November 2009.


Interim Board Report


The investment objective of ADC Zeros 2010 PLC is to maintain a level of assets to cover the entitlement of the 2010 ZDP Shares at all times. Subject to there being sufficient assets after deductions are made, any shortfall in assets will be covered under the subscription agreement with the Company's parent undertaking, Aberdeen Development Capital PLC ("ADC") to the extent that ADC has assets to meet its obligations under the subscription agreement.


The following is the unaudited Interim Board Report for the six months ended 30 November 2009.


A third return of capital to 2010 ZDP Shareholders of 2.6 pence per share was made on 16 June 2009, bringing the total returned to date to Shareholders to 68.6 pence per share. 


As Shareholders will be aware, the target date to redeem the ZDP entitlement is 30 April 2010, and given the absence of exit opportunities over the last eighteen months due to the financial crisis and recession the Company has been unable to secure sufficient realisations to generate the cash required to fulfil this obligation. After consultation with major Shareholders, it has been decided that the best course of action to enhance the opportunity to meet this entitlement in full would be to extend the life of 2010 ZDP Shares until 30 April 2012, which coincides with the target date for the 2012 ZDP shares. It is hoped that a recovery in the economy over the next two years will allow underlying portfolio companies to become more attractive for potential purchasers. The Board is of the opinion that should a sale of the portfolio be effected in the current financial and economic climate then 2010 ZDP Shareholders would not receive their entitlement in full. Accordingly, the Board will be issuing, along with the Interim Report, a circular to Shareholders convening the necessary Shareholder meetings on 25 March 2010 required to approve an extension of the repayment date for the 2010 ZDP Shares to 30 April 2012 and is recommending Shareholders to vote in favour. 


In the event that Shareholders approve the extension of the 2010 ZDP Shares repayment date, the Group will continue to make capital returns to ZDP Shareholders on a pro rata basis as and when the Group has sufficient surplus cash to fund such returns. However, no further capital returns will be made to Ordinary Shareholders whilst any part of the ZDP Shareholders' entitlements remains outstanding.


In the event Shareholder approval is not received, the Group's portfolio of investments will require to be sold with immediate effect in order to meet the obligations of the 2010 ZDP Shareholders which will mean in all likelihood that the full entitlement of the ZDP Shares would not be achieved given current market conditions. The alternative would be to make arrangements to appoint a liquidator to realise the assets of the Group, which would again risk ZDP Shareholders failing to receive their full entitlement.



30 November 2009


£m

Total assets less current liabilities (Group)

10.90

Less prior ranking liabilities:


ZDP 2010 shares

(4.16)

ZDP 2012 shares

(4.16)

Cover

2.58


Principal Risks and Uncertainties


Investment and Market Risks: Investments in smaller unlisted companies carry substantially greater risk, in terms of price and liquidity, than investments in larger companies or companies listed on the Official List.


Shares: The market value of the ZDP Shares, as well as being affected by the net asset value, also takes into account their supply and demand. The market value of a ZDP Share can fluctuate and may not always reflect its accrued capital entitlement. There can be no guarantee that appreciation in the value of the Group's investments will occur and investors may not get back the full value of their original investment.


Investment Objective: There is no guarantee that the investment policy adopted by the Company will provide the returns sought by the Company.


Gearing: The Company currently utilises gearing in the form of ZDP Shares. Gearing has the effect of exacerbating market falls and market gains.


Discount: While the Board intends to implement an active discount management policy, the ability to implement such a policy is dependent on a number if factors including the ability to buy back shares in the market, the ability to fund share buybacks, the authority to buy back shares being renewed annually and the Board's discretion over the making and timing of any buybacks. Even when an active discount management policy is implemented, there can be guarantee that this will result in the discount narrowing.


Duration: There is no fixed life on the Ordinary Shares of the Company although some capital has been returned to ZDP Shareholders under the Capital Return Scheme and Buy Back Programme approved by Shareholders on 3 August 2007. The 2010 ZDP Shares are due to be repaid in full on 30 April 2010 but it is unlikely that the Group will have sufficient cash resources to fund the repayment. Therefore, the Board is seeking an extension to the life of the 2010 ZDP Shares until 30 April 2012, as described earlier in this report. There is no guarantee that the final capital entitlement of the 2010 ZDP Shares and 2012 ZDP Shares will be paid in full (64.68 pence per share) on 30 April 2012.


Responsibility Statement


The Directors are responsible for preparing the half-yearly financial report in accordance with applicable law and regulations. The Directors confirm to the best of their knowledge:


a) the condensed set of financial statements contained within the half-yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half-Yearly Financial Reports';

b) the Interim Board Report (constituting the interim management report) includes a fair review of the information required by DTR 4.2.7R of the UK Listing Authority Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year) and 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period and any changes in the related party transactions described in the last annual report that could so do). 


John Milligan

Chairman

29 January 2010






  Income Statement 


 
Six months ended
Six months ended
Year ended
 
30 November 2009
(unaudited)
30 November 2008
(unaudited)
31 May 2009
(audited)
 
£’000
£’000
£’000
Interest income
-
4
4
Total revenue
-
4
4
Loan interest
131
85
216
 
131
89
220
Expenses
 
 
 
Management fees
-
-
-
Other operating expenses
-
(1)
(1)
Profit before finance costs and taxation
131
88
219
Finance costs
 
 
 
Zero dividend preference shares
(131)
(85)
(216)
Profit before taxation
-
3
3
Taxation
-
(4)
(55)
Loss after taxation
-
(1)
(52)
Earnings per Ordinary share – basic
(pence)
 
-
 
(0.86)
 
(44.57)

 

 


All income is attributable to the equity holders of ADC Zeros 2010 PLC. There are no minority interests.

All items in the above statement derive from continuing operations.


 


Balance Sheet 


 
At
30 November 2009
At
30 November 2008
At
31 May 2009
 
(unaudited)
£’000
 (unaudited)
£’000
(audited)
£’000
 
 
 
 
Non-current assets
 
 
 
Held at fair value investments
-
-
-
 
 
 
 
Current assets
 
 
 
Cash and cash equivalents
205
288
205
Other receivables
4,162
4,095
4,226
 
4,367
4,383
4,431
 
 
 
 
Current liabilities
 
 
 
Other payables
(221)
(253)
(221)
Zero dividend preference shares
(4,162)
-
(4,226)
Total current liabilities
(4,383)
(253)
(4,447)
Net current (liabilities)/assets
(16)
4,130
(16)
Total assets less current liabilities
(16)
4,130
(16)
 
 
 
 
Non-current liabilities
 
 
 
Zero dividend preference shares
-
(4,095)
-
Total net (liabilities)/assets
(16)
35
(16)
 
 
 
 
Equity
 
 
 
Ordinary share capital
117
117
117
Revenue reserve
(133)
(82)
(133)
Total shareholders’ funds
(16)
35
(16)
 
 
 
 
Equity shareholders’ funds
(16)
35
(16)
 
 
 
 
Net asset value per share (pence)
 
 
 
ZDP 2010
55.56
54.66
56.41
Ordinary
(13.71)
30.00
(13.71)

 

 

Statement of Changes in Equity 


 
 
 
 
 
Share
Revenue
 
For the six months ended 30 November 2009
Capital
reserve
Total
(unaudited)
£’000
£’000
£’000
Net liabilities at 31 May 2009
117
(133)
(16)
Net profit/(loss) on ordinary activities after
taxation
 
-
 
-
 
-
Net liabilities at 30 November 2009
117
(133)
(16)
 

 
 
 
 
 
Share
Revenue
 
For the six months ended 30 November 2008
capital
reserve
Total
(unaudited)
£’000
£’000
£’000
Net assets at 31 May 2008
117
(81)
36
Net loss on ordinary activities after taxation
-
(1)
(1)
Net assets at 30 November 2008
117
(82)
35
 

 
 
 
 
 
Share
Revenue
 
For the year ended 31 May 2009
Capital
reserve
Total
(audited)
£’000
£’000
£’000
Net assets at 31 May 2008
117
(81)
36
Net loss on ordinary activities after taxation
-
(52)
(52)
Net liabilities at 31 May 2009
117
(133)
(16)

 

 

Cash Flow Statement


 
Six months ended
30 November 2009
(unaudited)
Six months ended
30 November 2008
(unaudited)
Year ended
31 May 2009
(audited)
 
£’000
£’000
£’000
Operating activities
 
 
 
Profit before tax
-
3
3
ZDP shares finance cost
131
85
216
Decrease in other receivables
64
1,212
1,081
Increase in other payables
-
-
1
Net cash inflow from operating activities
before interest and tax
 
195
 
1,300
 
1,301
 
 
 
 
Tax paid
-
-
(84)
 
 
 
 
Financing activities
 
 
 
Return of capital to ZDP holders by
parent company
(195)
(1,154)
(1,154)
Repurchase of ZDP shares by parent
company
-
(143)
(143)
Net cash outflow from financing activities
(195)
(1,297)
(1,297)
 
 
 
 
Net increase/(decrease) in cash and cash equivalents
-
3
(80)
Cash and cash equivalents at start of period
205
285
285
Cash and cash equivalents at end of period
205
288
205

 



Notes to the Financial Statements (unaudited)


1.        Accounting policies

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). The Company's financial statements have been prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The principal accounting policies adopted by the Company are set out below.


The financial statements are prepared under the historical cost convention, except for the measurement at fair value of investments.

(a)     Basis of accounting

The financial statements have been prepared on a basis other than that of a going concern which includes, where appropriate, writing down the Company's net assets to a net realisable value. The financial statements do not include any provision for the future costs of terminating the business of the Company except to the extent that such were committed at the Balance Sheet date.


The half yearly financial statements have been prepared using the same accounting policies as the preceding annual accounts.


The financial statements are presented in Sterling, which is the currency of the primary environment in which it operates. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.


(b)     Zero dividend preference shares

Zero dividend preference shares are treated as a liability of the Company, calculated on the effective yield basis. 


2.        Income

The breakdown of income was as follows:-


 
30 November 2009
30 November 2008
31 May 2009
Income from investments
£’000
£’000
£’000
UK unfranked investment income
-
-
-
 
-
-
-
Other income
 
 
 
Deposit income
-
4
4
 
-
4
4

 


3.        The taxation expense reflected in the Income Statement is based on management’s best estimate of the weighted average annual corporation tax rate expected for the full financial year. The estimated annual tax rate used for the year to 31 May 2010 is 28%.

4.    Earnings per Ordinary share and net asset value per share


 
Six months ended
30 November 2009
Six months ended
30 November 2008
Year ended
31 May 2009
Net revenue attributable to Ordinary shareholders
£nil
£(1,000)
£(52,000)
Equity shareholders’ funds
£(16,000)
£35,000
£(16,000)
ZDP shareholders’ entitlement
£4,162,000
£4,095,000
£4,226,000
The weighted number of Ordinary shares in issue at the end of the period on which the earnings were calculated ,was:
 
 
116,667
 
 
116,667
 
 
116,667
The number of Ordinary shares in issue at the end of the period on which the net asset values were calculated, was:
 
 
116,667
 
 
116,667
 
 
116,667
The number of ZDP shares in issue at the end of the period on which net asset value was calculated was:
 
7,491,110
 
7,491,110
 
7,491,110
Revenue earnings per Ordinary share
0.00p
(0.86)p
(44.57)p
Net asset value per Ordinary share
(13.71)p
30.00p
(13.71)p
Net asset value per ZDP share
55.56p
54.66p
56.41p

 


5.        The financial information in this Half-Yearly Financial Report comprises non-statutory accounts as defined in Sections 434-436 of the Companies Act 2006. The financial information for the six months ended 30 November 2009 and 30 November 2008 has not been audited.
 
The information for the year ended 31 May 2009 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 of the Companies Act 2006.
This report has not been reviewed or audited by the Company's auditors.

 

6.       This Half-Yearly Report was approved by the Board on 29 January 2010.


The Half Yearly Report will shortly be available from the Company's website (www.developmentcap.co.uk) 

and will be posted to shareholders in February 2010.


Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested.


For ADC Zeros 2010 PLC

Aberdeen Asset Management PLC, Secretary


END








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