Last checked at 
31 Aug 2016 14:15
For release 31 August 2016
Dunedin Enterprise Investment Trust PLC
Half year ended 30 June 2016
Dunedin Enterprise Investment Trust PLC, the private equity investment trust which specialises in investing in UK mid-market buyouts, announces its results for the half year ended 30 June 2016.
Financial Highlights:
· Net asset value per share at 30 June 2016 of 475.7p (505.8p at 31/12/15), after 16p dividend
· Share price at 30 June 2016 of 310p (321.5p at 31/12/15)
· Net asset value total return of -2.9% in the six months to 30 June 2016
· In May 2016 shareholders approved a managed wind-down of the Company
· Realisations of £25.7m in the half year
· New investments of £22.6m in the half year
· Interim dividend of 16p per share paid on 18 May 2016
Comparative Total Return Performance (%)
Periods to 30 June 2016 | Net asset value (per share)* | Share price | FTSE Small Cap (ex Inv Cos) Index | |
Six months | -2.9 |
| 1.3 | -4.6 |
One year | -2.9 |
| 3.1 | -3.7 |
Three years | -4.5 |
| -17.7 | 30.9 |
Five years | 2.2 |
| 1.9 | 69.8 |
Ten years | 22.2 |
| 4.9 | 60.7 |
* - taken from 30 April for ten years
For further information please contact:
Graeme Murray Dunedin LLP 0131 225 6699 0131 718 2310 07813 138367 | Corinna Osbourne Equity Dynamics Limited 07825 326 440 corinna@equitydynamics.co.uk
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Chairman's Statement
The net asset value per share at 30 June 2016 was 475.7p, compared with 505.8p at 31 December 2015. This reduction is partly attributable to the payment of a dividend of 16p on 18 May 2016. Taking account of this, in the half year to 30 June 2016, the Company's net asset value total return was -2.9%, compared with -4.6% for the FTSE Small Cap index.
During the six months to 30 June 2016 the share price decreased by 3.6% from 321.5p to 310p. After allowing for the 16p dividend paid in May, this equates to a total return in the half year of +1.3%. The share price discount to net asset value at 30 June 2016 was 34.8% compared with 36.4% at 31 December 2015.
A total of £25.7m was realised in the half year with £22.6m being invested.
Wind-down
In May 2016 shareholders approved a managed wind-down of the Company to take place over a period of time. The circular sent to shareholders in April set out the rationale for this course of action and the recommendation of the Directors in favour of this route. This followed a review of the Company's investment strategy and consultations with its major shareholders.
The underlying aim of the wind-down is to maximise value for shareholders. The Company's new investment objective is to conduct an orderly realisation of its relatively illiquid assets, to be effected in a manner that seeks to achieve a balance between maximising the value of its assets and progressively returning cash to shareholders.
The majority (or some 73%) of the Company's investments comprise its commitments as a limited partner to funds managed by Dunedin LLP, the manager of our portfolio. The timing of realisations from these funds, as well as further drawdowns, is controlled by Dunedin LLP. In addition, there are some investments in other funds managed by parties other than Dunedin LLP, which make up about 20% of the portfolio.
In the circular sent to shareholders we stated that the Board may seek to sell all or part of the Company's interests in a fund, together with any uncalled commitment, prior to the end of the fund's life, if it believes that this will maximise value for shareholders and is in the best interests of shareholders as a whole. In order to make this judgement the Board will review closely and regularly with Dunedin LLP and the managers of the other fund investments the prospects for, and the valuations of, the underlying investments.
Commitments & Liquidity
The Company had outstanding commitments to limited partnership funds of £37.6m at 30 June 2016. This consists of £34.1m to Dunedin managed funds and £3.5m to European funds. Assuming these funds are held to maturity, it is expected that approximately £20m of this total commitment will be drawn over the remaining life of the funds.
As at 30 June 2016 the Company held cash of £0.6m. The Company has a revolving credit facility with Lloyds of £20m of which £1m was drawn at 30 June 2016. This facility is available to 31 May 2018. The net cash position of the Company at 30 June 2016 is therefore overdrawn by £0.4m.
The Board and the Manager remain satisfied with the balance between cash resources and outstanding commitments given the expected rate of new investment and potential realisations of existing investments.
The current forecast timing for realisations and new investments suggests it is unlikely that there will be further distributions of capital to shareholders in the short term.
Brexit
The UK's vote to leave the European Union has created a considerable amount of uncertainty in both the public and private markets.
In the short term, there may be a reduced level of M&A activity in the UK, resulting in a slower pace of investment and fewer realisations.
It is too early to assess the impact of the EU referendum on the performance of the underlying portfolio companies. The internationalisation of portfolio companies has been a key focus for the Manager in recent years. Portfolio companies which export to the US and Europe are currently experiencing the benefits of the recent exchange rate movement which make their products more competitive in these markets.
Portfolio
The portfolio has again had a period of mixed, and in some cases disappointing, performance during the half year. Strong trading at Kee Safety, Blackrock and U-POL has been offset by continued underperformance at Pyroguard, EV, RED and Formaplex.
The valuations of the two European funds have benefited from exchange rate movements and also good trading performance from portfolio companies.
Dividend
An interim dividend of 16p per share was paid to shareholders on 18 May 2016 amounting to £3.3m. This followed the partial realisation of CitySprint in February 2016 and the receipt of £3.3m of loan interest.
Accounting Policy
It is no longer appropriate to prepare the financial statements on a going concern basis, as the new corporate strategy is expected to lead ultimately to the liquidation of the Company. No adjustments were necessary to the investment valuations or other assets and liabilities included in the financial statements as a consequence of the change in the basis of preparation.
Shareholders
There has been a significant change in the shareholder base of the Company since the last year end. Legal & General has been a substantial shareholder since 1986. In 2013 it announced its intention to wind down its private equity operations and subsequently sold its shareholding during the half year.
Their shares have been acquired by a number of existing as well as new shareholders, who we welcome to the register.
Duncan Budge
31 August 2016
Manager's Review
Results for the six months to 30 June 2016
In the six months to 30 June 2016, Dunedin Enterprise's net asset value per share total return was -2.9%, after taking account of dividends paid. This compares with a decrease in the FTSE Small Cap Index (ex Inv. Cos) over the same period of 4.6%.
In the six months to 30 June 2016 Dunedin Enterprise invested a total of £22.6m and realised £25.7m from investments.
Net asset and cash movements in the half year to 30 June 2016
The movement in net asset value is summarised in the table below:-
£'m
Net asset value at 31 December 2015 104.4
Unrealised value increases 8.8
Unrealised value decreases (10.1)
Realised loss over opening valuation *1 (4.4)
Dividends paid to shareholders (3.3)
Other movements 2.8
Net asset value at 30 June 2016 98.2
*1 - includes management fees paid to Dunedin managed funds of £1.1m and excludes £3.3m loan interest received on the partial realisation of CitySprint which was included in the 31 December 2015 valuation
Cash movements in the half year to 30 June 2016 can be summarised as follows:-
£'m
Cash & near cash balances at 31 December 2015 (4.1)
Investments made (22.6)
Investments realised 25.7
Dividends paid to shareholders (3.3)
Operating activities 3.9
Cash & near cash balances at 30 June 2016 (0.4)
Portfolio composition and movements
Dunedin Enterprise holds investments in unquoted companies through:-
• Dunedin managed funds (including direct investments), and
• Third party managed funds.
The portfolio movements can be analysed as shown in the table below:-
Valuation | Additions | Disposals | Realised | Unrealised | Valuation | |
at 31-12-15 | in half year | in half year | movement | movement | at 30-6-16 | |
£'m | £'m | £'m | £'m | £'m | £'m | |
Dunedin managed | 93.1 | 19.6 | (23.4) | (4.4)*2 | (4.9) | 80.0 |
Third party managed | 16.3 | 3.0 | (2.3) | - | 3.6 | 20.6 |
109.4 | 22.6 | (25.7) | (4.4) | (1.3) | 100.6 |
*2 - includes management fees paid to Dunedin managed funds of £1.1m and excludes £3.3m loan interest received on the partial realisation of CitySprint which was included in the 31 December 2015 valuation
New investment activity
In February 2016 an investment of £7.0m was made in Alpha Financial Markets ("Alpha"). Alpha is a global market leader in providing specialist consultancy services to blue chip asset and wealth managers and their third party administrators. Alpha has over 200 consultants deployed across six major financial centres working on behalf of more than 130 top asset and wealth management clients. Alpha currently advises three quarters of the top 50 global asset managers.
In May 2016 an investment of £4.2m was made in Kingsbridge Risk Solutions ("Kingsbridge"). Kingsbridge is the UK's market leading provider of insurance services that are tailored to meet the needs of contractors, freelancers and independent professionals. Kingsbridge covers the broadest range of industry sectors in its market, including aerospace, banking and finance, rail, automotive, nuclear, oil and gas and information technology.
An investment of £7.3m was made in CitySprint Newco as discussed below.
During the half year Innova/5 invested a total of £3.0m. In February £1.2m was invested in Trimo a leading Central and Eastern European provider of high quality building products. In addition, £0.8m was invested in PeP a leading Polish payment services provider and £0.4m in Netsprint an internet advertising business.
Realisations
In February 2016 the investment in CitySprint was partially realised in a sale to LDC. On completion Dunedin Enterprise received proceeds totalling £26.1m of which £22.8m was capital and £3.3m was loan interest. A total of £7.3m has been rolled into a CitySprint Newco alongside LDC, resulting in net cash proceeds received of £18.8m by Dunedin Enterprise. Dunedin Enterprise retains a 5% interest in the Newco. The overall return to Dunedin Enterprise was 2.75 times the original investment of £9.8m over five years.
During the half year there were redemptions of loan stock at Blackrock (£0.3m) and RED (£0.3m).
One of the two European funds, Innova/5, realised £2.2m. This included £0.9m from the sale of Provus, the Romanian credit card processing and financial services company, generating a multiple of 2.2 times original cost. Marmite, the manufacturer of sanitary ware was also realised, generating proceeds of £0.7m and a multiple of 1.6 times original cost.
Unrealised movements in valuations
Unrealised movements in portfolio company valuations in the half year amounted to a decrease of £1.3m. There were valuation uplifts at two of the more recent Dunedin managed investments, Kee Safety (£1.8m) and Blackrock (£1.5m) as well as at U-POL (£1.3m). There were reductions in value at Formaplex (£3.6m), Pyroguard (£2.1m), EV (£1.7m) and RED (£1.7m).
There was a strong performance within the two European funds with increased valuations at both Realza (£2.1m) and Innova/5 (£1.2m).
Kee Safety, the provider of collective fall protection systems, has continued to show strong international growth particularly in the Middle East and the US. The company has also continued its strategy of acquisitions in the UK which has contributed significantly to growth. Blackrock, the provider of independent expert witnesses for large construction projects, has experienced a strong demand for its services. This has led to the company increasing the number of fee earning staff and achieving higher utilisation rates. Around 80% of Blackrock's revenue is non-UK with the Middle East contributing strongly. Trading continues to improve at U-POL, the manufacturer of automotive refinish products, where beneficial exchange rate movements, re-branding and product rationalisation are leading to an improved trading performance. The multiple applied to the valuation of U-POL has been increased from 7.8 to 8.3 times, reflecting the improved performance.
The maintainable earnings of Formaplex, the provider of tooling and lightweight component solutions to the automotive industry, have been impacted by delays and a reduced level of contract wins in the Tooling division. The valuation of Pyroguard, the manufacturer of fire resistant glass, has been impacted by production difficulties experienced at its French factory last year combined with increased competition and margin pressure across its product range, leading to a reduction in its maintainable earnings. EV, the provider of video technology to the oil and gas industry, has continued to experience difficult trading conditions following the dramatic fall in the price of oil in 2015. EV along with the Company's other oil & gas related investment, Premier, may require additional funding in the future. The maintainable earnings of RED, the provider of SAP software experts, have been impacted by the continued underperformance of its permanent staff division.
Exchange rate movements have benefitted the valuation of the European funds. Realza and Innova/5, by £1.4m and £0.9m respectively. Within the Realza portfolio there has been a strong contribution from GTT, the Spanish tax services provider, and Dolz, the manufacturer of automotive pumps. The contribution from Innova/5 has been spread across its portfolio of investments.
The average earnings multiple applied to the valuation of the Dunedin managed portfolio was 8.5x EBITDA (31 December 2015: 8.4x) or 9.8x EBITA (31 December 2015: 9.8x). These multiples are applied to the maintainable earnings of portfolio companies. Within the Dunedin managed portfolio, the weighted average gearing of the companies was 2.3x EBITDA (31 December 2015: 2.3x) or 2.6x EBITA (31 December 2015: 2.6x).
The portfolio continues to be valued in accordance with the International Private Equity Venture Capital valuation guidelines (www.privateequityvaluation.com).
Dunedin LLP
31 August 2016
Ten Largest Investments
(both held directly and via Dunedin managed funds) by value at 30 June 2016
Approx. | Percentage | |||
percentage | Cost of | Directors | of net | |
of equity | investment | valuation | assets | |
Company name | % | £'000 | £'000 | % |
Hawksford | 17.8 | 5,637 | 12,986 | 13.2 |
Realza * | 8.9 | 8,832 | 11,827 | 12.0 |
Kee Safety | 7.2 | 6,275 | 11,302 | 11.5 |
Weldex | 15.1 | 9,505 | 9,611 | 9.8 |
Innova /5 * | 3.9 | 7,669 | 8,245 | 8.4 |
CitySprint | 5.2 | 7,308 | 7,635 | 7.8 |
Blackrock | 7.8 | 4,558 | 7,004 | 7.1 |
Alpha | 10.0 | 6,988 | 6,988 | 7.1 |
U-POL | 5.0 | 5,657 | 6,543 | 6.7 |
CGI (Pyroguard) | 41.7 | 9,450 | 4,405 | 4.5 |
71,879 | 86,546 | 88.1 |
* - European fund investments
Top ten investments (held via funds and direct investments)
Percentage of equity held 17.8% Cost of Investment £5.6m Directors' valuation £13.0m Percentage of net assets 13.2%
| Hawksford Hawksford is a leading international provider of corporate, private client and funds services. The business offers a comprehensive range of services to, and solutions for trusts, companies, foundations, partnerships, family offices and investment funds.
In the last four years the company has completed the acquisitions of Key Trust Company Limited, Trustcorp Jersey Limited, the funds business of Standard Bank Dubai and Janus Corporate Solutions. These acquisitions have further enhanced Hawksford's market leading-position through additional high quality people and clients. The focus of the business remains on providing excellent service and increasing client choice by growing the international footprint.
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Percentage of equity held 8.9% Cost of Investment £8.8m Directors' valuation £11.8m Percentage of net assets 12.0%
| Realza Capital Realza Capital is a Spanish private equity fund making investments in Spain and Portugal. The fund is limited to investing 15% of commitments in Portugal. Dunedin Enterprise's investment is held via Dunedin Fund of Funds LP.
The fund invests in companies with leading market positions and attractive growth prospects either through organic growth or through merger & acquisition activity. Realza seeks to invest in companies with an enterprise value normally ranging from €20m to €100m. The fund's typical equity investment ranges from €10m to €25m.
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Percentage of equity held 7.2% Cost of Investment £6.3m Directors' valuation £11.3m Percentage of net assets 11.5%
| Kee Safety Kee Safety is a UK-headquartered, global market-leading provider of collective fall protection, safety systems and solutions. The business has 271 employees spread across the UK, USA, Canada, Germany, France, Poland, Dubai, China and India and sells its products in more than 50 countries.
Its core patent protected product range includes modular barrier systems, guardrails, access platforms, safety gates and specialist fixings. The business has multiple routes to market through an international direct sales force, direct to OEM, online and through the distributor channel. Kee Safety's customers range from multi-national corporations to major contractors, distributors and installers.
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Percentage of equity held 15.1% Cost of Investment £9.5m Directors' valuation £9.6m Percentage of net assets 9.8%
| Weldex Weldex was established in 1979 and has grown into the UK's largest crawler crane hire company. The company employs over 100 staff and operates nationwide and overseas from its headquarters in Inverness and its depot at Alfreton. The company provides its customers with an established team of fully accredited operators, site managers and service engineers and also supplies associated lifting equipment including wheeled cranes, forklifts, lorry loaders and trailers.
Weldex serves the offshore wind, oil and gas and commercial construction markets. Its cranes, including two of the largest in the UK, have been used in a number of significant construction projects including Heathrow Terminal 5, the iconic arch at the new Wembley Stadium, the 2012 Olympic site and Crossrail. More recent projects include erecting a Mitsubishi wind turbine at the offshore test facility at Hunterston, North Ayrshire and refurbishing the blast furnace at the Tata steel works in Scunthorpe. |
Percentage of equity held 3.9% Cost of Investment £7.7m Directors' valuation £8.2m Percentage of net assets 8.4%
| Innova/5 Innova/5 is €380.8m private equity fund based in Warsaw which makes investments in Central Eastern Europe. Dunedin Enterprise's investment is held via Dunedin Fund of Funds LP.
The fund invests in mid-market buyouts in businesses with an enterprise value of between €50m and €125m. Its investment focus is Financial Services; Technology, Media, & Telecommunications (TMT); Business Services; Construction; Energy; and Industrial & Automotive.
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Percentage of equity held 5.2% Cost of Investment £7.3m Directors' valuation £7.6m Percentage of net assets 7.8%
| CitySprint CitySprint is the UK's largest national time-critical and same day distribution network. It benefits from an asset-light business model with over 3,000 self-employed couriers, making the business both highly flexible and scalable. It operates from 40 service centres in the UK and can deliver to over 87% of mainland UK population within 60 minutes. It handles over ten million critical same day deliveries a year.
CitySprint offers a range of services including SameDay Courier, UK Overnight and International courier services, as well as more complex logistics services. It services a number of different sectors, including healthcare, online retail fulfilment and parts fulfilment such as outsourced supply chain services for engineering and servicing companies. CitySprint now has the UK's largest same day healthcare courier network.
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Percentage of equity held 7.8% Cost of Investment £4.6m Directors' valuation £7.0m Percentage of net assets 7.1%
| Blackrock Blackrock is a professional services firm that provides independent expert witness and construction consulting services for large, international construction projects. The company has developed a growing practice in independently assessing the precise reasons for, and cost involved in, disputes. These skills are in short supply in Europe, the Middle East and Asia.
Blackrock serves a growing global construction market and cases of litigation are increasing within the sector.
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Percentage of equity held 10.0% Cost of Investment £7.0m Directors' valuation £7.0m Percentage of net assets 7.1%
| Alpha Alpha is a market leading provider of specialist consultancy services to blue chip asset managers and their third-party administrators internationally. It has a strong niche with a breadth of high quality consultants regarded as subject matter experts by their clients. Consultants undertake projects that either provide subject matter expertise, process expertise or team capacity for complex projects or initiatives. It is established in the UK and France and is expanding in the US, Netherlands and Luxembourg.
Alpha serves an increasingly complex asset management industry that is facing the combined challenge of regulatory, cost and operational pressures.
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Percentage of equity held 5.0% Cost of Investment £5.7m Directors' valuation £6.5m Percentage of net assets 6.7%
| U-POL U-POL is a leading independent manufacturer of automotive refinish products including body fillers, coatings, aerosols, polishing compounds and consumables. Included in the product range is RAPTOR™, a tough protective coating product which can be used over a multitude of surfaces. Sales of RAPTOR™ continue to grow steadily and the business is exploring opportunities to sell this product into adjacent sectors.
From its UK manufacturing base in Wellingborough, U-POL exports a range of products to 120 countries worldwide. The company has a strong market position in the UK and a growing position in other large markets such as the USA, the Far East, the Middle East, Africa and Russia. Its growth strategy is to continue expanding in both developed and emerging markets.
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Percentage of equity held 41.7% Cost of Investment £9.5m Directors' valuation £4.4m Percentage of net assets 4.5% | C.G.I. (Pyroguard) Since Dunedin Enterprise first invested in CGI the company has been through two refinancings, allowing Dunedin Enterprise to realise a total of £13.2m in capital and income to date. The cost shown here is the accounting valuation at the last re-gearing versus the total cash investment of £3.8m.
CGI, trading under the Pyroguard brand, is a leading designer, manufacturer and supplier of specialist fire resistant glass. The company serves the construction markets in the UK, Ireland, France, Holland, Scandinavia, Eastern Europe and the Middle East. Significant recent projects completed by CGI include the installation of fire resistant glass at Here East (the multipurpose redevelopment of the former 2012 Olympic site), the Biomedicum medical facility in Stockholm, the Paris Expo redevelopment project and Zaanstad Prison in the Netherlands.
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Overview of portfolio
Fund Analysis
30 June 2016 % | ||
Direct | 8 | |
Dunedin Buyout Fund I | - | |
Dunedin Buyout Fund II | 37 | |
Dunedin Buyout Fund III | 31 | |
Equity Harvest Fund (Dunedin managed) | 4 | |
Third party managed | 20 |
Analysed by valuation method
30 June 2016 % | ||
Cost/written down | 15 | |
Earnings - provision | 12 | |
Earnings - uplift | 62 | |
Assets basis | 11 |
Analysed by geographic location
30 June 2016 % | ||
UK | 80 | |
Rest of Europe | 20 | |
Cash | - |
Analysed by sector
30 June 2016 % | ||
Automotive | 4 | |
Construction and building materials | 6 | |
Consumer products & services | 4 | |
Financial services | 21 | |
Healthcare | 5 | |
Industrials | 23 | |
Support services | 35 | |
Technology, media & telecoms | 2 |
Analysed by age of investment
30 June 2016 % | ||
14 | ||
1-3 years | 28 | |
3-5 years | 9 | |
>5 years | 49 |
Consolidated Income Statement (unaudited)
for the six months ended 30 June 2016
Six months ended | Six months ended | Year ended | ||||||||
30 June 2016 | 30 June 2015 | 31 December 2015 | ||||||||
Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Investment income |
3,655 |
- |
3,655 |
98 |
- |
98 |
196 |
- |
196 | |
Gain / (loss) on investments | - | (5,708) | (5,708) | - | 76 | 76 | - | 853 | 853 | |
Total Income | 3,655 | (5,708) | (2,053) | 98 | 76 | 174 | 196 | 853 | 1,049 | |
Expenses | ||||||||||
Investment management fees | (53) | (158) | (211) | (51) | (153) | (204) | (95) | (285) | (380) | |
Other expenses | (349) | - | (349) | (254) | - | (254) | (599) | - | (599) | |
Profit / (loss) before finance costs and tax | 3,253 | (5,866) | (2,613) | (207) | (77) | (284) | (498) | 568 | 70 | |
Finance costs | (79) | (237) | (316) | (62) | (187) | (249) | (130) | (388) | (518) | |
Profit / (loss) before tax | 3,174 | (6,103) | (2,929) | (269) | (264) | (533) | (628) | 180 | (448) | |
Taxation | (527) | 527 | - | - | - | - | - | - | - | |
Profit / (loss) for the period | 2,647 | (5,576) | (2,929) | (269) | (264) | (533) | (628) | 180 | (448) | |
Earnings per ordinary share (basic & diluted) | 12.8p | (27.0)p | (14.2)p | (1.3)p | (1.3)p | (2.6)p | (3.0)p | 0.8p | (2.2)p | |
The Total column of this statement represents the Income Statement of the Group, prepared in accordance with International Financial Reporting Standards as adopted by the EU. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.
All income is attributable to the equity shareholders of Dunedin Enterprise Investment Trust PLC.
Consolidated Statement of Changes in Equity (unaudited)
for the six months ended 30 June 2016
Six months ended 30 June 2016
Share capital £'000
| Capital redemption reserve £'000 | Capital Reserve realised £'000 | Capital reserve - unrealised £'000 | Special Distributable Reserve £'000 |
Revenue account £'000 | Total retained earnings £'000 |
Total equity £'000 | |
At 31 December 2015 | 5,161 | 2,765 | 38,639 | 4,957 | 47,600 | 5,305 | 96,501 | 104,427 |
Profit/(loss) for the half year | - | - | 12,024 | (17,600) | - | 2,647 | (2,929) | (2,929) |
Dividends paid | - | - | - | - | - | (3,303) | (3,303) | (3,303) |
At 30 June 2016 | 5,161 | 2,765 | 50,663 | (12,643) | 47,600 | 4,649 | 90,269 | 98,195 |
Six months ended 30 June 2015
Share capital £'000
| Capital redemption reserve £'000 | Capital Reserve realised £'000 | Capital reserve - unrealised £'000 | Special Distributable Reserve £'000 |
Revenue account £'000 | Total retained earnings £'000 |
Total equity £'000 | |
At 31 December 2014 | 5,217 | 2,709 | 47,552 | (3,436) | 47,600 | 6,914 | 98,630 | 106,556 |
Profit/(loss) for the half year | - | - | (6,750) | 6,486 | - | (269) | (533) | (533) |
Purchase and cancellation of shares | (56) | 56
| (700) | - | - | - | (700) | (700) |
Dividends paid | - | - | - | - | - | (981) | (981) | (981) |
At 30 June 2015 | 5,161 | 2,765 | 40,102 | 3,050 | 47,600 | 5,664 | 96,416 | 104,342 |
Year ended 31 December 2015
Share capital £'000
| Capital redemption reserve £'000 | Capital Reserve realised £'000 | Capital reserve - unrealised £'000 | Special Distributable Reserve £'000 |
Revenue account £'000 | Total retained earnings £'000 |
Total equity £'000 | |
At 31 December 2014 | 5,217 | 2,709 | 47,552 | (3,436) | 47,600 | 6,914 | 98,630 | 106,556 |
Profit/(loss) for the year | - | - | (8,213) | 8,393 | - | (628) | (448) | (448) |
Purchase and cancellation of shares | (56) | 56 | (700) | - | - | - | (700) | (700) |
Dividends paid | - | - | - | - | - | (981) | (981) | (981) |
At 31 December 2015 | 5,161 | 2,765 | 38,639 | 4,957 | 47,600 | 5,305 | 96,501 | 104,427 |
Consolidated Balance Sheet (unaudited)
As at 30 June 2016
30 June 2016 £'000 | 30 June 2015 £'000 | 31 December 2015 £'000 | |
Non-current assets | |||
Investments held at fair value | 100,551 | 105,061 | 109,374 |
Current assets | |||
Other receivables | 117 | 209 | 167 |
Cash and cash equivalents | 617 | 396 | 573 |
734 | 605 | 740 | |
Total assets | 101,285 | 105,666 | 110,114 |
Current liabilities | |||
Other liabilities | (2,090) | (1,324) | (987) |
Loan facility | (1,000) | - | (4,700) |
Net assets | 98,195 | 104,342 | 104,427 |
Capital and reserves | |||
Share capital | 5,161 | 5,161 | 5,161 |
Capital redemption reserve | 2,765 | 2,765 | 2,765 |
Capital reserve - realised | 50,663 | 40,102 | 38,639 |
Capital reserve - unrealised | (12,643) | 3,050 | 4,957 |
Special distributable reserve | 47,600 | 47,600 | 47,600 |
Revenue reserve | 4,649 | 5,664 | 5,305 |
Total equity | 98,195 | 104,342 | 104,427 |
Net asset value per ordinary share (basic and diluted) | 475.7p | 505.4p | 505.8p |
Consolidated Cash Flow Statement (unaudited)
for the six months ended 30 June 2016
30 June 2016 £'000 | 30 June 2015 £'000 | 31 December 2015 £'000 | |
Operating activities | |||
Loss before tax | (2,929) | (533) | (448) |
Adjustments for: | |||
(Gain) / loss on investments | 5,708 | (76) | (853) |
Interest paid | 316 | 249 | 518 |
Decrease in debtors | 50 | 60 | 102 |
Increase / (decrease) in creditors | 1,103 | 514 | 177 |
Net cash inflow from operating activities | 4,248 | 214 | (504) |
Servicing of finance | |||
Interest paid | (316) | (249) | (518) |
Investing activities | |||
Purchase of investments | (22,635) | (10,636) | (14,513) |
Purchase of 'AAA' rated money market funds | (5,002) | (6,707) | (6,707) |
Sale of investments | 25,747 | 3,045 | 3,286 |
Sale of 'AAA' rated money market funds | 5,000 | 7,750 | 7,840 |
Net cash inflow / (outflow) from investing activities | 3,110 | (6,548) | (10,094) |
Taxation | |||
Tax | - | - | - |
Financing activities | |||
Revolving credit facility drawn | 1,000 | - | 4,700 |
Revolving credit facility repaid | (4,700) | - | - |
Purchase of ordinary shares | - | (700) | (700) |
Dividends paid | (3,303) | (981) | (981) |
Net cash (outflow) from financing activities | (7,003) | (1,681) | 3,019 |
Effect of exchange rate fluctuations on cash held | 5 | (66) | (56) |
Net increase / (decrease) in cash and cash equivalents | 44 | (8,330) | (8,153) |
Cash and cash equivalents at the start of the period | 573 | 8,726 | 8,726 |
Net increase / (decrease) in cash and cash equivalents | 44 | (8,330) | (8,153) |
Cash and cash equivalents at the end of the period | 617 | 396 | 573 |
Responsibility statement of the Directorsin respect of the half-yearly financial report
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and gives a true and fair view of the assets, liabilities, financial position and profit of the Company
- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the 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 year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
By Order of the Board
Duncan Budge
Chairman
31 August 2016
Notes to the Accounts
1. Unaudited Interim Report
The comparative financial information contained in this report for the year ended 31 December 2015 does not constitute the Company's statutory accounts but is derived from those accounts. Statutory accounts for the year ended 31 December 2015 have been delivered to the Registrar of Companies. The auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The financial statements for the six months ended 30 June 2015 and 30 June 2016 have not been audited.
2. Basis of Preparation
These condensed consolidated set of financial statements for the six months ended 30 June 2016 have been prepared in accordance with the Disclosure Rules and Transparency Rules of the Financial Conduct Authority (FCA) and IAS 34 Interim Financial Reporting as adopted by the European Union (EU). They do not include all the information required by International Financial Reporting Standards (IFRS) in full annual financial statements and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2015.
The Association of Investment Companies ('AIC') issued a revised Statement of Recommended Practice for the Financial Statements of Investment Trust Companies and Venture Capital Trusts in November 2014 ('SORP') applicable to accounting periods commencing on or after 1 January 2015. Where presentational guidance set out in the SORP is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
In previous years the financial statements have been prepared on a going concern basis. However in May 2016 shareholders approved a change in the investment policy of the Company. The Company's new investment objective is to conduct an orderly realisation of its relatively illiquid assets, to be effected in a manner that seeks to achieve a balance between maximising the value of its assets and progressively returning cash to shareholders. As it is likely this process, which is expected to have a duration of several years, will ultimately lead to the liquidation of the Company, these financial statements have not been prepared on a going concern basis. No adjustments were necessary to the investment valuations or other assets and liabilities included in the financial statement as a consequence of the change in the basis of preparation.
3. Dividends
Six months to 30 June 2016 £'000 | Six months to 30 June 2015 £'000 | Year to 31 December 2015 £'000 | |
Dividends paid in the period | 3,303
| 981
| 981
|
4. Investments
All investments are designated fair value through profit or loss at initial recognition, therefore all gains and losses that arise on investments are designated at fair value through profit or loss. Given the nature of the Company's investments the fair value gains recognised in these financial statements are not considered to be readily convertible to cash in full at the balance sheet date and therefore the movement in these fair values are treated as unrealised.
Fair value hierarchy
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
• Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
• Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
• Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
The table below analyses financial instruments, measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised:
At 30 June 2016 £'000 | |||
Level 1 | |||
'AAA' rated money market funds OEICS | 7 | ||
Level 2 | - | ||
Level 3 | |||
Unlisted investments | 100,544
| ||
100,551
| |||
| |||
The Group recognises transfers between the levels of the fair value hierarchy as of the end of the reporting period during which the transfer occurred. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended 30 June 2016.
Level 3 fair values
Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the six months ended 30 June 2016 are set out below:-
Level 3 £'000
| |
Book cost at 31 December 2015 | 104,412 |
Unrealised appreciation | 4,957 |
Valuation at 31 December 2015 | 109,369 |
Purchases at cost | 22,635 |
Sales - proceeds | (25,747) |
Sales - realised (losses) against cost | 11,887 |
Increase in unrealised appreciation | (17,600) |
Valuation at 30 June 2016 | 100,544 |
Book cost at 30 June 2016 | 113,187 |
Closing unrealised (depreciation) | (12,643) |
Valuation of investments
Unquoted investments are fair valued by the Directors in accordance with the following rules, which are consistent with the International Private Equity and Venture Capital Valuation Guidelines:
· Investments are only valued at cost for a limited period after the date of acquisition, otherwise investments are valued on one of the other basis detailed below. Generally the earnings multiple basis of valuation will be used.
· When valuing on an earnings basis, the maintainable earnings of a company are multiplied by an appropriate multiple.
· An investment may be valued by reference to the value of its net assets. This is appropriate for businesses whose value derives mainly from the underlying value of its assets rather than its earnings.
· When investments have obtained an exit (either by listing or trade sale) after the valuation date but before finalisation of the relevant accounts (interim or final), the valuation is based on the exit valuation.
· Accrued interest on loans to portfolio companies is included in valuations where there is an expectation that the interest will be received.
IFRS 13 requires disclosure, by class of financial instrument, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen with reference to the specific underlying circumstances and position of the investee company. On that basis the Board believe that the impact of changing one or more of the inputs to reasonably possible alternative assumptions would not change the fair value significantly.
The Directors consider the carrying value of financial instruments in the financial statements to represent their fair value.
5. Statement of Principal Risks and Uncertainties
The Directors believe that the principal risks and uncertainties faced by the Company include investment and strategic, liquidity, cash drag, people and loss of investment trust status risks. These risks and other risks, and the way in which they are managed, are described in more detail under the heading "Principal Risks, Risk Management and Regulatory Environment" in the Strategic Report Review in the Company's Annual Report and Accounts for the year ended 31 December 2015. The Company's principal risks and uncertainties have not changed materially since the date of that report other than in relation to Brexit as discussed in the Chairman's Statement. These principal risks and uncertainties are not expected to change materially for the remaining six months of the Company's financial year.
6. Earnings per share
Six months to 30 June 2016 £'000
| Six months to 30 June 2015 £'000
| Year to 31 December 2015 £'000
| |
Revenue return per ordinary share (p) | 12.8 | (1.3) | (3.0) |
Capital return per ordinary share (p) | (27.0) | (1.3) | 0.8 |
Earnings per ordinary share (p) | (14.2) | (2.6) | (2.2) |
Weighted average number of shares | 20,644,062 | 20,858,639 | 20,750,515 |
The earnings per share figures are based on the weighted average numbers of shares set out above. Earnings per share is based on the revenue profit in the period as shown in the consolidated income statement.
7. Contingent assets
Discussions are ongoing with HMRC regarding the payment of interest on a compound basis relating to the reclaim of VAT on management fees. The amount and timing of any recovery remains uncertain and accordingly no amount has been provided for in the financial statements.
8. Related party transactions
There have been no material changes to the related party transactions described in the last annual report.
ENDS