Last checked at 
7 Oct 2008 17:37
Crown Place VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency Rule 4.1, Crown Place VCT PLC today issues the full text of the Annual Report and Financial Statements for the year ended 30 June 2008.
This announcement was approved by the Board of Directors on 7 October 2008.
Please click on the following link to view the full Annual Report and Financial Statements (which have been audited) for the year to 30 June 2008. The information contained in this link includes information as required by the Disclosure and Transparency Rules, including Rule 4.1.
http://www.rns-pdf.londonstockexchange.com/rns/3173F_-2008-10-7.pdf
Alternatively you may view the Annual Report and Financial Statements at: www.closeventures.co.uk by clicking on the 'Our Funds' section.
Financial highlights
| Shareholder returns and shareholder value | Proforma (i) Murray VCT PLC | Proforma (i) Murray VCT 2 PLC | Crown Place VCT PLC * |
| Shareholder return from launch to April 2005 (date that Close Ventures was appointed investment manager): Total dividends paid to 6 April 2005 (ii) | 30.36 | 30.91 | 24.93 |
| Decrease in net asset value | (69.90) | (64.50) | (56.60) |
| ______ | ______ | ______ | |
| Total shareholder return to 6 April 2005 | (39.54) | (33.59) | (31.67) |
| ______ | ______ | ______ | |
| Shareholder return from April 2005 to 30 June 2008: | |||
| Total dividends paid | 5.13 | 5.94 | 6.80 |
| Decrease in net asset value | (0.84) | (0.52) | (2.29) |
| Total shareholder return to 30 June 2008 | ______ 4.29 | ______ 5.42 | ______ 4.51 |
| Shareholder value since launch: | ______ | ______ | ______ |
| Total dividends paid to 30 June 2008 (ii) | 35.49 | 36.85 | 31.73 |
| Net asset value as at 30 June 2008 | 29.26 | 34.98 | 41.11 |
| ______ | ______ | ______ | |
| Total shareholder value as at 30 June 2008 | 64.75 | 71.83 | 72.84 |
| ______ | ______ | ______ | |
| Current dividend objective: | |||
| Pence per share | 1.78 ______ | 2.13 ______ | 2.50 ______ |
| Percentage yield on net asset value | 6.0% | 6.0% | 6.0% |
| ______ | ______ | ______ | |
Notes
The pro forma shareholder returns presented above are based on the dividends paid to shareholders before the merger and the pro-rata net asset value per share and pro-rata dividends per share paid to 30 June 2008 since the merger. This pro forma is based upon the proportion of shares received by Murray VCT PLC (now renamed CP1 VCT PLC) and Murray VCT 2 PLC (now renamed CP2 VCT PLC) shareholders at the time of the merger with Crown Place VCT PLC on 13 January 2006.Prior to 6 April 1999, venture capital trusts were able to add 20 per cent. to dividends, and figures for the period up until 6 April 1999 are included at the gross equivalent rate actually paid to shareholders.
* Formerly Murray VCT 3 PLC
In addition to the dividends paid above, a first dividend was declared and announced on the London Stock Exchange RNS Service on 27 June 2008 for the year ending 30 June 2009, of 1.25 pence per Crown Place VCT PLC share (0.9 pence paid out of revenue profits and 0.35 pence out of realised capital gains). This dividend was paid on 8 August 2008 to shareholders on the register on 11 July 2008.
Investment Objectives
The investment objective and policy of the Company is to achieve long term capital and income growth principally through investment in smaller unquoted companies in the United Kingdom.
Financial Calendar
| Annual General Meeting | 7 November 2008 |
| Record date for first dividend | 11 July 2008 |
| Payment of first dividend | 8 August 2008 |
| Announcement of interim results for the six months ended 31 December 2008 | February 2009 |
| Payment of second dividend | April 2009 |
Chairman's Statement
Investment objective
The VCT aims to provide shareholders with a regular and predictable dividend income together with protection of capital and the prospect of longer term capital growth.
Profit and loss
In the year to 30 June 2008, the VCT made a revenue profit after tax of £957,000 but this was offset by a reduction in the value of the investment portfolio of £1.8 million resulting in a net loss after tax of £1,059,000.
While it is disappointing to report a negative return, the performance of the VCT has been resilient against the background of the economic slowdown and the decline in quoted company valuations.
Capital
The net asset value per share declined from 44.8 pence to 41.1 pence after paying dividends of 2.5 pence per share. After adding back the dividend, the decline in total return of 2.7 per cent. compares to an equivalent decline of 12.7 per cent. in the FTSE All-Share Index for this period, again after adding back the average dividend yield on the Index.
The investment portfolio is performing reasonably and, following a number of profitable exits during the year, as at 30 June 2008 the VCT held cash and liquid assets of £11.9 million representing 40 per cent. of net assets. This high level of liquid assets positions the VCT well to capitalise on the attractive investment opportunities that I believe will present themselves over the medium term. It also allows the VCT to maintain its annual dividend of 2.5 pence per share, which is tax free to investors.
Risks and uncertainties
The key risk continues to be the outlook for the UK economy, which is being affected by the concern in the wholesale financial and housing markets. While this has had an overall adverse effect on asset values, which may well continue, we believe that the resulting shortage of available bank finance will give rise to additional investment opportunities for a cash rich fund like ourselves. The Board believes that the Manager's policy of providing finance to investee companies without the use of external borrowings, not only reduces the risk to the existing portfolio, but also makes our form of investment more attractive at a time when banks are reducing their lending activities. A detailed analysis of the other risks and uncertainties facing the business are shown in the Directors' Report and business review within the full Annual Report and Financial Statements.
Dividends
The VCT's policy is to pay regular and predictable dividends to investors out of revenue income and realised capital gains. During the year to 30 June 2008, the VCT maintained its dividend distribution of 2.5 pence per share. The first dividend for the current financial year of 1.25 pence per share was paid to shareholders on 8 August 2008. Subject to the performance of the investment portfolio, the Board aims to maintain the current annualised dividend distribution of 2.5 pence per share going forward.
The Board anticipates paying a second dividend in the second half of the financial year, subject to HM Revenue & Customs approval. Dividends are paid free of tax to shareholders and qualifying shareholders will be able, in respect of further dividends, to receive their dividends in the form of new shares rather than cash, which will entitle them to income tax relief at the rate of 30 per cent. (the new shares will need to be held for at least five years).
A circular explaining this Dividend Reinvestment Scheme in more detail will be posted to shareholders with the Half Yearly Financial Report in March 2009.
Discount management and share buy-backs
It is the Board's policy to buy back shares in the market, subject to the overall constraint that such purchases are in the VCT's interest, including the maintenance of sufficient resources for investment in existing and new investee companies. The VCT bought back 3,256,044 shares for cancellation during the year at prices ranging from 37 to 40.5 pence per share.
Outlook
Since I last reported, economic conditions have continued to deteriorate and the outlook remains negative. The Manager's investment policy, of building a portfolio with a high degree of asset backing and not using external gearing in investee companies is fully endorsed by the Board. This policy is serving the VCT well in the current economic climate and will provide a degree of protection if economic conditions continue to deteriorate.
The VCT has substantial cash balances which will protect its capital base in the short term while allowing it to take advantage of attractive investment opportunities. The Board views VCTs as a long term savings product and in this context, despite the undoubted near-term pressure caused by the severe deterioration in the economy, the Directors consider that the VCT remains well positioned to deliver shareholder value.
Manager's Report
Portfolio realisations
During the year, the VCT made considerable progress in realising the older investments in the portfolio. Total realisation proceeds from the unquoted portfolio were £6.4 million and from the AIM portfolio £2.7 million. The VCT sold its entire holdings in The Bold Pub Company Limited, Grosvenor Health Limited, PSCA International Limited and RMS Europe VCT Limited at an aggregate profit of £1.6 million, while the older and underperforming investments in J&S Marine Limited and TLC (Tender Loving Childcare) Limited were sold at an aggregate loss of £532,000. Inhoco 3426 Limited and Palgrave Brown (Holdings) Limited repaid all of their outstanding loan stock. In the AIM portfolio, the VCT sold its remaining holdings in Dobbies Garden Centres plc, Synexus Clinical Research plc and Zetar Plc and reduced its holding in Cello VCT plc at a total profit of £856,000. As a result, the VCT's exposure to AIM quoted companies is now considerably reduced. As at 30 June 2008, the carrying value of the remaining AIM portfolio was £1.1 million or 3.7 per cent. of net assets.
New investments
The VCT invested £3.5 million during the year in new and follow-on qualifying investments. A further investment of £750,000 was made in Kensington Health Clubs Limited, a health and fitness club in West London. £1.4m was invested in The Sky Hotel Heathrow Limited, which owns and operates a hotel near Heathrow's new Terminal 5, a property with a significant development potential. Other new investments include £60,000 in CS (Norwich) Limited, a company operating a cinema in Norwich, £140,000 in Mi-Pay Limited, a provider of mobile payment services, £145,000 in Oxsensis Limited, a company developing high performance industrial sensors, £125,000 in Resorthoppa Limited, a provider of airport transfer services, £150,000 in Opta Sports Data Limited, a compiler of sports performance data and £180,000 in Vibrant Energy Surveys Limited, a surveyor of energy performance in buildings. A further £550,000 was invested in existing qualifying investments.
Against the background of a negative economic climate, the Manager is targeting investments in sectors which are perceived to be less exposed to the downturn, such as healthcare and environmental services. Following the year end, the VCT invested an initial £250,000 in Prime Care Holdings Limited, a provider of domiciliary care services to local authorities and private individuals.
Portfolio review
The investment portfolio declined in value by £1.8 million during the year. Of this amount, £0.9 million relates to a single investment - ELE Advanced Technologies Limited, a manufacturer of precision engineering components for the industrial gas turbine, aerospace and automotive markets. £0.6 million of the revaluation of ELE Advanced Technologies Limited was recognised in the interim accounts to 31 December 2007 and a further £0.3 million has been recognised in the final accounts for the year. The decline in valuation reflects a prudent view on short term issues arising from setting up a new operation in Slovakia. The valuation of Sanastro PLC, the financial publishing company, has been reduced by £0.2m as the company is being reorganised. The investments in the pub sector have been revalued down by £0.1 million in aggregate and now stand at a valuation of £1.4 million, or 4.6 per cent. of net assets. The VCT's other leisure investments are performing in line with expectations though their valuations have shown a small decline. The values attributed to all asset backed investments are supported by recent third party valuation reports, and the remainder of the unquoted portfolio has been holding up in the current economic climate.
The following is the sector split of the portfolio by valuation as at 30 June 2008:
http://www.rns-pdf.londonstockexchange.com/rns/3173F_1-2008-10-7.pdf
Consolidated income statement
| Year ended 30 June 2008 | Sixteen months ended 30 June 2007 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| (Losses)/gains on investments | - | (1,818) | (1,818) | - | 2,932 | 2,932 |
| Investment income and deposit interest | 1,714 | - | 1,714 | 2,519 | - | 2,519 |
| Investment management fees | (167) | (502) | (669) | (291) | (872) | (1,163) |
| Other expenses Non-recurring operating expenses | (307) - _____ | - - _____ | (307) - _____ | (509) (4) _____ | 23 - _____ | (486) (4) _____ |
| Profit/(loss) before taxation | 1,240 | (2,320) | (1,080) | 1,715 | 2,083 | 3,798 |
| Taxation | (283) _____ | 304 _____ | 21 _____ | (294) _____ | 273 _____ | (21) _____ |
| Profit/(loss) for the period | 957 _____ | (2,016) _____ | (1,059) _____ | 1,421 _____ | 2,356 _____ | 3,777 _____ |
| Basic and diluted return per Ordinary share (pence)(excluding Treasury shares) | 1.27 _____ | (2.67) _____ | (1.40) _____ | 1.79 _____ | 2.97 _____ | 4.76 _____ |
This consolidated income statement has been reclassified to show (losses)/gains on investments at the top of the income statement as noted in the accounting policies note in the full Annual Report and Financial Statements.
The total column of this statement represents the Group's income statement, prepared in accordance with International Financial Reporting Standards ('IFRS'). The supplementary revenue and capital columns are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
Consolidated balance sheet
| 30 June 2008 | 30 June 2007 | |
| £'000 | £'000 | |
| Non-current assets | ||
| Investments | 18,211 | 26,237 |
| Current assets | ||
| Trade and other receivables | 308 | 322 |
| Current asset investments Current tax asset Cash and cash equivalents | 2,686 53 9,237 ______ | - - 8,367 ______ |
| 12,284 | 8,689 | |
| Total assets | 30,495 | 34,926 |
| Current liabilities Trade and other payables | (321) ______ | (552) ______ |
| Net assets | 30,174 ______ | 34,374 ______ |
| Equity attributable to equityholders | ||
| Ordinary share capital | 8,066 | 8,392 |
| Share premium | 14,422 | 14,422 |
| Capital redemption reserve | 793 | 468 |
| Own shares held | (2,849) | (2,849) |
| Realised capital reserve Unrealised capital reserve | (17,206) (6,645) | (11,193) (9,558) |
| Special reserve | 32,421 | 33,686 |
| Revenue reserve | 1,172 ______ | 1,006 ______ |
| Total equity shareholders' funds | 30,174 ______ | 34,374 ______ |
| Net asset value per share (pence) (excluding Treasury shares) | 41.1 ______ | 44.8 ______ |
The reserves section of this balance sheet has been reclassified as described in the accounting policies note in the full Annual Report and Financial Statements.
Company balance sheet
| 30 June 2008 | 30 June 2007 | |
| £'000 | £'000 | |
| Fixed assets | ||
| Fixed asset investments | 18,211 | 26,237 |
| Investment in subsidiary undertakings | 15,059 ______ | 17,978 ______ |
| 33,270 | 44,215 | |
| Current assets | ||
| Trade and other debtors | 302 | 313 |
| Current asset investments Current tax asset Cash at bank and in hand | 2,686 53 6,548 ______ | - - 3,900 ______ |
| 9,589 | 4,213 | |
| Total assets | 42,859 | 48,428 |
| Current liabilities Trade and other creditors | (12,685) ______ | (14,054) ______ |
| Net assets | 30,174 ______ | 34,374 ______ |
| Equity attributable to equityholders | ||
| Ordinary share capital | 8,066 | 8,392 |
| Share premium | 14,422 | 14,422 |
| Capital redemption reserve | 793 | 468 |
| Own shares held | (2,849) | (2,849) |
| Realised capital reserve | (17,206) | (11,193) |
| Unrealised capital reserve Special reserve | (6,645) 32,421 | (9,558) 33,686 |
| Revenue reserve | 1,172 ______ | 1,006 ______ |
| Total equity shareholders' funds | 30,174 ______ | 34,374 ______ |
| Net asset value per share (pence) (excluding Treasury shares) | 41.1 ______ | 44.8 ______ |
The reserves section of this balance sheet has been reclassified as described in the accounting policies note in the full Annual Report and Financial Statements.
Consolidated statement of changes in equity
| Ordinary share capital | Share premium | Capital redemption reserve | Own shares held | Realised capital reserve* | Unrealised capital reserve | Special reserve* | Revenue reserve* | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| As at 1 July 2007 | 8,392 | 14,422 | 468 | (2,849) | (11,193) | (9,558) | 33,686 | 1,006 | 34,374 |
| Purchase of own shares for cancellation (including costs) | (326) | - | 326 | - | - | - | (1,265) | - | (1,265) |
| Capitalised management and performance fees (net of tax) | - | - | - | - | (197) | - | - | - | (197) |
| Net realised losses on investments during the year | - | - | - | - | (4,731) | - | - | - | (4,731) |
| Movement in unrealised appreciation | - | - | - | - | - | 2,913 | - | - | 2,913 |
| Revenue profit for the year | - | - | - | - | - | - | - | 957 | 957 |
| Dividends paid in year | - | - | - | - | (1,085) | - | - | (791) | (1,876) |
| ______ | ______ | ______ | ______ | ______ | ______ | ______ | ______ | ______ | |
| As at 30 June 2008 | 8,066 ______ | 14,422 ______ | 793 ______ | (2,849) ______ | (17,206) ______ | (6,645) ______ | 32,421 ______ | 1,172 ______ | 30,174 ______ |
| As at 28 February 2006 | 8,610 | 14,422 | 250 | (1,908) | (9,501) | (11,637) | 34,504 | 215 | 34,955 |
| Purchase of own shares for cancellation (including costs) | (218) | - | 218 | - | - | - | (818) | - | (818) |
| Purchase of own shares for Treasury (including costs) | - | - | - | (941) | - | - | - | - | (941) |
| Capitalised management and performance fees (net of tax) | - | - | - | - | (599) | - | - | - | (599) |
| Net realised gains on investments during the period | - | - | - | - | 853 | - | - | - | 853 |
| Other capitalised items of expenditure | - | - | - | - | 25 | - | - | - | 25 |
| Movement in unrealised appreciation | - | - | - | - | - | 2,079 | - | - | 2,079 |
| Revenue profit for the period | - | - | - | - | - | - | - | 1,421 | 1,421 |
| Dividends paid in period | - | - | - | - | (1,971) | - | - | (630) | (2,601) |
| ______ | ______ | ______ | ______ | ______ | ______ | ______ | ______ | _______ | |
| As at 30 June 2007 | 8,392 ______ | 14,422 ______ | 468 ______ | (2,849) ______ | (11,193) ______ | (9,558) ______ | 33,686 ______ | 1,006 ______ | 34,374 _______ |
* Included within these reserves is an amount of £6,893,000 (2007: £11,092,000) which is considered distributable. The special reserve has been treated as distributable in determining the reserves available for distribution.
The reserves have been reclassified as described in the accounting policies note if the full Annual Report and Financial Statements.
Consolidated cashflow statement
| Year to 30 June 2008 | Sixteen months to 30 June 2007 | |
| £'000 | £'000 | |
| Operating activities | ||
| Investment income received | 1,858 | 2,549 |
| Deposit interest received | 396 | 347 |
| Administration fees paid | (59) | (85) |
| Investment management fees paid | (900) | (1,242) |
| Other cash payments | (212) _____ | (634) _____ |
| Cash generated from operations | 1,083 | 935 |
| Taxation | ||
| Tax (paid)/recovered | (52) | 1,431 |
| _____ | _____ | |
| Net cash flows from operating activities | 1,031 | 2,366 |
| Cash flows from investing activities | ||
| Purchase of investments | (3,434) | (7,773) |
| Disposal of investments Payment re loan guarantee | 9,122 - _____ | 14,949 (1,662) _____ |
| Net cash flows from investing activities | 5,688 | 5,514 |
| Management of liquid resources | ||
| Increase in current investments | (2,718) | - |
| Cash flows from financing activities | ||
| Equity dividends paid | (1,876) | (2,601) |
| Purchase of Ordinary shares for cancellation Purchase of Ordinary shares for Treasury | (1,255) - _____ | (817) (941) _____ |
| Net cash flows used in financing activities | (3,131) | (4,359) |
| _____ | _____ | |
| Increase in cash and cash equivalents | 870 _____ | 3,521 _____ |
| Cash and cash equivalents at the start of the period | 8,367 _____ | 4,846 _____ |
| Cash and cash equivalents at the end of the period | 9,237 _____ | 8,367 _____ |
Notes to the financial statements
1. Accounting policies
The following policies refer to the Group and the Company except where noted. References to International Financial Reporting Standards ('IFRS') relate to the Group financial statements and to Financial Reporting Standards ('FRS') relate to the Company financial statements.
Basis of accounting
The financial statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments and in accordance with International Financial Reporting Standards ('IFRS') adopted for use in the European Union (and therefore comply with Article 4 of the EU IAS regulation), in the case of the Group, and in accordance with Financial Reporting Standards ('FRS') in the case of the Company.
Both the Group and the Company financial statements also apply the Statement of Recommended Practice: "Financial Statements of Investment Trust Companies" ('SORP') issued by the Association of Investment Trust Companies ("AITC") in January 2003 and revised in December 2005, in so far as this does not conflict with IFRS or FRS. The financial statements have been prepared in accordance with those parts of the Companies Act 1985 applicable to companies reporting under IFRS and FRS. These financial statements are presented in Sterling to the nearest thousand. Accounting policies have been applied consistently in current and prior periods.
In order to better reflect the activities of a venture capital trust, and in accordance with the SORP, supplementary information which analyses the Income statement between items of a revenue and capital nature has been presented within the Income statement.
The Directors also consider it more useful to shareholders to separate the capital returns to shareholders and the Special reserve from the revenue reserve and have therefore reclassified the comparative reserves on a consistent basis.
Gains or losses on investments have also been reclassified and presented at the top of the Consolidated Income statement. The Directors believe this presentation is more relevant to the Group's activities as a venture capital trust.
The Company has adopted the following new amended IFRS interpretation during the year. Adoption of this revised standard and interpretation did not have any effect on the financial statements of the Company. They did however give rise to additional disclosures:
IAS 1 (amendment) Presentation of Financial Statements. This amendment requires the Company to make new disclosures to enable users of the financial statements to evaluate the Company's objectives, policies and processes for managing capital. These new disclosures are shown in note 18 of the full Annual Report and Financial Statements.
At the date of authorisation of these financial statements, the following International Accounting Standards and interpretations were in issue but not yet effective:
IAS 1 Presentation of Financial Statements (revised) (effective for annual periods beginning on or after 1 January 2009)
IFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January 2009)
IAS 23 (amendment) Borrowing Costs (effective for annual periods beginning on or after 1 January 2009)
IFRIC 12 Service Concession Arrangements (effective for annual periods beginning on or after 1 January 2009)
IFRIC 13 Customer Loyalty Programmes (effective for annual periods beginning on or after 1 July 2008)
IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective for annual periods beginning on or after 1 January 2008)
IAS 27 Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 1 July 2009)
IFRS 2 (amendment) Share-based Payments (effective for annual periods beginning on or after 1 January 2009)
IFRS 3 Revised Business Combinations (effective for annual periods beginning on or after 1 July 2009)
IAS 32 & IAS 1 (amendments) Puttable Financial Instruments and Obligations arising on Liquidation (effective for annual periods beginning on or after 1 January 2009)
IAS 32 (amendment) Financial Instruments: Presentation (effective for annual periods beginning on or after 1 January 2009)
IAS 27 and IFRS 1 (amendment) Cost of Investment in Subsidiary (effective for annual periods beginning on or after 1 January 2009)
IFRIC 16 Hedges of Net Investment in Foreign Operation (effective for annual periods beginning on or after 1 October 2008)
IFRIC 15 Agreements for the Construction of Real Estate (effective for annual periods beginning on or after 1 January 2009)
IAS 39 (amendment) Financial Instruments: Recognition and Measurement (effective for annual periods beginning on or after 1 January 2009)
IFRIC 11 IFRS 2 Group and Treasury share transactions
The Directors currently anticipate that the adoption of these standards and interpretations in future periods will have no material financial impact on the financial statements of the Group. The Group concludes however that certain additional disclosures may be necessary on their application from the effective dates.
Basis of consolidation
The Group consolidated financial statements incorporate the financial statements of the Company for the year ended 30 June 2008 and the entities controlled by the Company (its subsidiaries), for the same period. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.
As permitted by Section 230 of the Companies Act 1985, the Company has not presented its own profit and loss account. The amount of the Company's loss for the period dealt with in the accounts of the Group is £1,076,000 (2007: profit £3,553,000).
Segmental reporting
The Directors are of the opinion that the Group and the Company are engaged in a single segment of business, being investment business. The Group invests in smaller companies principally based in the UK.
Business Combinations
The acquisition of subsidiaries is accounted for using the purchase method in the Group financial statements. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the subsidiaries, plus any costs directly attributable to the business combination. The subsidiary's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 "Business Combinations" are recognised at their fair value at the acquisition date.
Estimates
The preparation of the Group and Company's financial statements requires estimates, assumptions and judgments to be made, which affect the reported results and balances. Actual outcomes may differ from these estimates, with a consequent impact on the results of future periods. These estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are those used to determine the fair value of investments at fair value through the profit or loss.
The valuation of investments at fair value through the profit or loss is determined by using valuation techniques. The Group and the Company use judgments to select a variety of methods and makes assumptions that are mainly based on market conditions at each balance sheet date.
Investments
Quoted and unquoted equity investments
In accordance with IAS 39 'Financial Instruments: Recognition and Measurement', and FRS 26 'Financial Instruments: Recognition and Measurement', quoted and unquoted equity investments are designated as fair value through profit or loss ("FVTPL"). Investments listed on recognised exchanges are valued at the closing bid prices at the end of the accounting period. Unquoted investments' fair value is determined by the Directors in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVCV guidelines).
Fair value movements on equity investments and gains and losses arising on the disposal of investments are reflected in the capital column of the Income Statement in accordance with the AITC SORP. Realised gains or losses on the sale of investments will be reflected in the Realised capital reserve, and unrealised gains or losses arising from the revaluation of investments will be reflected in the Unrealised capital reserve.
Warrants, convertibles and unquoted equity derived instruments
Warrants, convertibles and unquoted equity derived instruments are only valued if their exercise or contractual conversion terms would allow them to be exercised or converted as at the balance sheet date, and if there is additional value to the Company in exercising or converting as at the balance sheet date. Otherwise these instruments are held at nil value. The valuation techniques used are those used for the underlying equity investment.
Unquoted loan stock
Unquoted loan stock is classified as loans and receivables in accordance with IAS 39 and FRS 26 and carried at amortised cost using the Effective Interest Rate method ("EIR") less impairment. Movements in the amortised cost relating to interest income are reflected in the revenue column of the Income statement, and hence are reflected in the Revenue reserve, and movements in respect of capital provisions are reflected in the capital column of the Income statement and are reflected in the Realised capital reserve following sale, or in the Unrealised capital reserve on revaluation.
Loan stocks which are not impaired or past due are considered fully performing in terms of contractual interest and capital repayments and the Board does not consider that there is a current likelihood of a shortfall on security cover for these assets. For unquoted loan stock, the amount of the impairment is the difference between the asset's cost and the present value of estimated future cash flows, discounted at the effective interest rate.
Floating rate notes
In accordance with IAS 39 and FRS 26, floating rate notes are designated as fair value through profit or loss ("FVTPL"). Floating rate notes are valued at market bid price at the balance sheet date.
It is not the Group or the Company's policy to exercise control or significant influence over investee companies. Therefore in accordance with the exemptions under IAS 28 "Investments in associates" and FRS 9 'Associates and joint ventures' those undertakings in which the Group or Company holds more than 20 per cent. of the equity are not regarded as associated undertakings.
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.
Investment income
Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the Revenue reserve when a share becomes ex-dividend.
Fixed returns on debt securities are recognised on a time apportionment basis using an effective interest rate over the life of the financial instrument. Loan stock accrued interest is recognised in the Balance Sheet as part of the carrying value of the loans and receivables at the end of each reporting period.
Returns on cash balances are recognised on an accruals basis using the rate agreed with the bank.
Taxation
Taxation is applied on a current basis in accordance with IAS 12 and FRS 16 "Income taxes". Taxation associated with capital expenses is applied in accordance with the SORP. Deferred taxation is provided in full on temporary differences in accordance with IAS 12 and timing differences in accordance with FRS 16, that result in an obligation at the balance sheet date to pay more tax or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Temporary and timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the financial statements.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which unused tax losses and credits can be utilised.
Dividends
In accordance with IAS 10 and FRS 21 "Events after the balance sheet date", dividends are accounted for in the period in which the dividend has been paid, or approved by shareholders.
Issue costs
Issue costs associated with the allotment of share capital have been deducted from the share premium account.
Investment management fees, performance incentive fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged through the Revenue column of the Income statement, except for management fees and performance incentive fees which are allocated in part to the capital column of the Income statement, to the extent that these relate to an enhancement in the value of the investments and in line with the Board's expectation that over the long term 75 per cent. of the Group's investment returns will be in the form of capital gains.
Receivables and payables/debtors and creditors
Unrealised capital reserves
Increases and decreases in the valuation of investments held at the period end are disclosed in this reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase of the Company's own shares.
Own shares held reserve
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase of the Company's own shares.
Special reserve
The cancellation of the share premium account has created a special reserve that can be used to fund market purchases and subsequent cancellation of own shares, to cover gross realised losses and for other distributable purposes.
2. (Losses)/gains on investments
|
Year to 30 June 2008 | Sixteen months to 30 June 2007 | |
| £'000 | £'000 | |
| Unrealised losses on non-current asset investments held at fair value through profit and loss account | (3,716) | (3,054) |
| Net unrealised losses transferred to realised losses in the year Unrealised gains on non-current asset investments held at amortised cost | 5,515 1,145 | 3,373 1,760 |
| ______ | ______ | |
| Unrealised gains on non-current asset investments sub total | 2,944 | 2,079 |
| Unrealised losses on current asset investments | (31) | - |
| ______ | ______ | |
| Unrealised gains sub total | 2,913 | 2,079 |
| Realised gains on investments held at fair value through profit and loss account | 784 | 4,226 |
| Net realised losses transferred from unrealised losses in the year | (5,515) | (3,373) |
| ______ | ______ | |
| Realised (losses)/gains sub total | (4,731) | 853 |
| ______ | ______ | |
| Total | (1,818) ______ | 2,932 ______ |
Investments valued on amortised cost basis are unquoted loan stock investments.
| Year to 30 June 2008 | Sixteen months to 30 June 2007 | |
| £'000 | £'000 | |
| Income recognised on investments held at fair value through the profit and loss | ||
| UK dividend income | 69 | 148 |
| Management fees received from equity investments | 3 | 16 |
| Floating rate note interest | 144 | - |
| Treasury gilt interest | - | 199 |
| Bank deposit interest | 441 ______ | 317 ______ |
| 657 | 680 | |
| Income recognised on investments held at amortised cost | ||
| Return on loan stock investments | 1,057 ______ | 1,839 ______ |
| 1,714 ______ | 2,519 ______ | |
Interest income earned on impaired investments at 30 June 2008 amounted to £4,000 (2007: £4,000).
| Year to 30 June 2008 | Sixteen months to 30 June 2007 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| UK corporation tax | (283) | 304 | 21 | (294) | 273 | (21) |
| _____ | _____ | _____ | _____ | _____ | _____ | |
The UK government enacted a change in the UK corporation tax rate from 30 per cent. to 28 per cent. with effect from 1 April 2008. The effective rate of tax for the year to 30 June 2008 is 29.5 per cent. (275 days at 30 per cent. and 91 days at 28 per cent.). The tax charge for the period shown in the Income statement is lower than the standard rate of corporation tax in the UK of 29.5 per cent. (2007: 30 per cent.). The differences are explained below.
| Year to 30 June 2008 £'000 | Sixteen months to 30 June 2007 £'000 | |
| (Loss)/profit on ordinary activities before taxation (Loss)/profit on ordinary activities multiplied by the standard rate of corporation tax (29.5 per cent.) Effect of (gains)/losses on capital assets not subject to taxation Effect of income not subject to taxation Effect of disallowed expenditure Utilisation of tax losses Release of over accrual in prior year | (1,080) ______ (319) 536 (20) - (197) (21) ______ (21) ______ | 3,798 ______ 1,139 (880) (51) 8 (195) - ______ 21 ______ |
No provision for deferred tax has been made in the current or prior accounting period. The Company has not recognised a deferred tax asset of £1,120,000 in respect of unutilised management expenses as it is not considered sufficiently probable that there will be taxable profits against which to utilise these expenses in the foreseeable future. The Group has not recognised a further deferred tax asset of £4,120,000 in respect of unutilised management expenses and deficits arising from non-trading relationships which would only be used if its subsidiaries made significant profits.
5. Dividends
| Year to 30 June 2008 | Sixteen months to 30 June 2007 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| First dividend paid on 22 September 2006 (1.25 pence per share) | - | - | - | - | 997 | 997 |
| Second dividend paid on 19 January 2007 (1.25 pence per share) | - | - | - | 630 | 355 | 985 |
| Third dividend paid on 15 June 2007 (0.8 pence per share) | - | - | - | - | 619 | 619 |
| First dividend paid on 28 December 2007 (1.25 pence per share) | 604 | 340 | 944 | - | - | - |
| Second dividend paid on 25 April 2008 (1.25 pence per share) | 187 | 745 | 932 | - | - | - |
| ______ | ______ | ______ | ______ | ______ | ______ | |
| 791 ______ | 1,085 ______ | 1,876 ______ | 630 ______ | 1,971 ______ | 2,601 ______ | |
In addition, the Board has declared and paid a first dividend of 1.25 pence per share (0.9 pence was paid out of revenue profits and 0.35 pence out of realised capital gains). This dividend was announced on the London Stock Exchange RNS Service on 27 June 2008. This dividend was paid on 8 August 2008 to shareholders on the register on 11 July 2008. The total cost of this dividend is £917,000.
6. Basic and diluted return per share
| Year to 30 June 2008 | Sixteen months to 30 June 2007 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| The return per share has been based on the following figures: | ||||||
| Return attributable to equity shares (£'000) | 957 | (2,016) | (1,059 | 1,421 | 2,356 | 3,777 |
| Weighted average shares in issue (excluding Treasury shares) | 75,364,144 | 75,364,144 | 75,364,144 | 79,277,922 | 79,277,922 | 79,277,922 |
| Return attributable per equity share (pence) | 1.27 | (2.67) | (1.40) | 1.79 | 2.97 | 4.76 |
There are no convertible instruments, derivatives or contingent share agreements in issue, and therefore no dilution affecting the return per share.
7. Net asset value per Ordinary share
The Group and Company net asset value attributable to the Ordinary shares at the year end was as follows:
| 30 June 2008 | 30 June 2007 | |
| Net asset value per share attributable (pence) | 41.1 _____ | 44.8 _____ |
The number of shares used in this calculation is 73,403,980 (excluding Treasury shares) (2007: 76,660,024).
8. Reconciliation of revenue return on ordinary activities before taxation to net cash inflow from operating activities
| Year to 30 June 2008 | Sixteen months to 30 June 2007 | |
| £'000 | £'000 | |
| Revenue return before tax | 1,240 | 1,715 |
| Capitalised expenses | (502) | (849) |
| (Increase)/decrease in accrued amortised loan stock interest | 648 | (405) |
| (Increase)/decrease in receivables | (114) | 2,047 |
| (Decrease) in payables | (241) | (142) |
| _____ | _____ | |
| Net cash inflow from operating activities | 1,031 _____ | 2,366 _____ |
9. Post balance sheet events
Since 30 June 2008 the Company has completed the following investments:
| ·; July 2008: Investment in Dexela Limited of £185,000. |
| ·; July 2008: Investment in GB Pub Company VCT Limited of £38,000. |
| ·; July 2008: Investment in Red-M Group Limited of £84,000. |
| ·; August 2008: Investment in Bravo Inns Limited of £160,000. ·; September 2008: Investment in Prime Care Holdings Limited of £250,000. ·; September 2008: Investment in Rostima Limited of £14,000. ·; September 2008: Investment in Clear Pub Company VCT Limited of £13,000. ·; September 2008: Investment in Clear Pub Company VCT (Hotels) Limited of £9,000. HMRC issued a Business Briefing on 24 July 2008, which permitted the recovery of historic VAT that had been charged on management fees.There was no right to historic VAT recovery at the balance sheet date, however, the Company is currently working to quantify and recover the applicable back VAT from HMRC. There should certainly be some benefit to the Company. |
10. Related party transactions
The Manager, Close Ventures Limited, is considered to be a related party by virtue of the fact that it is party to a management agreement from the Company. During the year, services of a total value of £728,000 (2007: £1,230,000) were purchased by the Company from Close Ventures Limited. At the financial year end, the amount due to Close Ventures Limited disclosed as accruals and deferred income was £169,000 (2007: £397,000).
In addition, Crown Place VCT PLC transferred its investment in Carmichael International Limited, which was held at nil value, to Close Ventures Limited during the period, for £1.
Close Ventures Limited also holds 1,256 Ordinary shares of the Company, as a result of the merger in January 2006 where these shares resulted from fractional holdings arising on the merger.
Buy-backs of shares during the year were transacted through Winterflood Securities Limited, a subsidiary of Close Brothers Group plc. A total of 3,256,044 shares were purchased for cancellation at an average price of 38.7 pence per share. As at 30 June 2008, the settlement amount due to Winterflood Securities Limited disclosed within creditors was £42,000 (2007: £31,000).
7 October 2008
For further information, please contact:
Patrick Reeve of Close Ventures Limited
Tel: 020 7422 7830