Kingswood H. Regulatory News (KWG)

26 Sep 2006 07:03

Equity Pre-IPO Investments Ltd26 September 2006 EQUITY PRE-IPO INVESTMENTS LIMITED UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 Equity Pre-IPO Investments Limited ("Pre IPO" or "the Company"), the AIM-tradedstrategic investment company, is pleased to announce its unaudited results forthe six months ended 30 June 2006. Some additional information is also providedfor the period up to 20 September 2006. Highlights: • Net asset value at 30 June 2006 of 42.27 pence per share (42.73 pence as at 20 September 2006) • Seven investments held at 30 June 2006 (six investments held as at 20 September 2006, all of which are unquoted) • Successful exit from all quoted investments held at the beginning of the year • Investment philosophy remains consistent with a focus on pre IPO financings Martin Shires, Director of Pre IPO, commented: "Our overall aim with Pre IPO is to invest in companies that we believe will befloated within a short period of time and, once public, to ensure a managed exitfrom those investments in order to reinvest the proceeds in new companiesnearing their own IPO. We believe that this business model is now proven,having now completed the first 12 - 15 month investment cycle of a number ofcompanies. At the beginning of the year we set a target to exit completely from at leasttwo of our quoted investments and we are pleased to announce that we haveexceeded our expectations, having recently completed the exit from all three ofthe quoted investments that we held at the beginning of the year. We lookforward to the rest of the year with confidence". For further information: Martin Shires, 01481 751 000Director, Equity Pre-IPO Investments Limited EQUITY PRE-IPO INVESTMENTS LIMITED UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006 Directors Review We are delighted to present our second set of interim results to shareholders.It shows the financial performance of the Company from 1 January 2006 to 30 June2006. In addition we have included some further information for the period upto 20 September 2006. Net Asset Value The Company's Net Asset Value ("NAV") at the start of the period, 1 January2006, was 44.19 pence per share and as at 30 June 2006 stood at 42.27 pence pershare. Whilst there has been little change in the NAV to 20 September 2006(42.73 pence per share), this represents an increase in NAV of some 51.8 percent. since the Company floated with a NAV of 28.14 pence per share on 24February 2005 and a significantly better performance than that of the AIMAll-Share Index which has fallen around 10 per cent. over the same period. Theinvestment strategy of Pre IPO is such that the NAV will often experienceperiods of minimal movement followed by one off events that trigger materialchanges. The Company's NAV currently comprises investments in six unquoted companies anda cash balance and other current assets of £100,649. Investments As at 30 June 2006 we held investments in a total of seven companies and as of20 September 2006 we held investments in a total of six companies. At thebeginning of the year we held a portfolio of nine investments, six of which wereunquoted and three were quoted. At that time, we stated that our target for theend of 2006 was to exit completely from at least two of the quoted investmentsand for at least three of the unquoted companies to have floated. I am pleased to report that we have now successfully exited from all of ourquoted investments, the investment in the remaining quoted investment havingbeen sold as recently as last month. The six current unquoted investments are in companies operating in the financialservices, technology and property sectors. Three of these investments are valuedat cost and the other three have been re-valued to the value of their lastmaterial third party funding round. All three of these re-valuations are at apremium to the valuation at which Pre IPO invested. The slowdown in the IPO market that was experienced over the last few months hasdelayed the expected flotation of some of our portfolio companies. As a result,we recently participated in follow-on investment rounds in two companies withinthe portfolio, totalling approximately £1.0 million. Notwithstanding this, twoof the companies in the portfolio have appointed brokers in preparation fortheir flotation either later this year or early next year. We do not thereforebelieve that it will be possible to achieve three floats from the portfoliobefore the end of the year, but are hopeful that this will be achieved shortlythereafter. Funding We believe that the Company should have access to additional funds in order thatthe number of companies within the investment portfolio can be increased. Wehave however concluded that it is unwise, and probably not practical, to raisedebt finance for Pre IPO as the security available is unquoted. We believetherefore that we will continue to rely on a combination of organic growth andadditional equity finance to expand the business further. We have explored thepossibility of raising further equity finance with our advisors and willcontinue to do so. Outlook As a result of the progress that has been made with our investment portfoliosince the beginning of the year, we are very excited about the next twelvemonths, in particular the prospect of realising some material uplifts invaluations. We believe that Pre IPO's business model is now a proven one and welook forward to the next phase in the Company's growth with confidence. Martin ShiresPaul Schreibke 26 September 2006 EQUITY PRE-IPO INVESTMENTS LIMITEDSTATEMENT OF TOTAL RETURNFOR THE SIX MONTHS ENDED 30 JUNE 2006 For the six month period For the six month period For the year ended ended 30 June 2006 ended 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited) Note Revenue Capital Total Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ £ £ £GAINS ONINVESTMENTSNet realisedgains - 535,241 535,241 - - - - 321,296 321,296Net (decrease)/increase inreserve forunrealisedgains - (524,863) (524,863) - 89,765 89,765 - 1,590,650 1,590,650 - 10,378 10,378 - 89,765 89,765 - 1,911,946 1,911,946 INCOME 2Investmentincome - - - - - - 3,238 - 3,238Bank interest 781 - 781 19,425 - 19,425 25,050 - 25,050 781 - 781 19,425 - 19,425 28,288 - 28,288 EXPENDITURE 2Directors' fees 10,000 - 10,000 6,666 - 6,666 16,666 - 16,666Administrationfees 30,707 - 30,707 - 24,863 24,863 44,650 - 44,650Professionalfees - 37,645 37,645 32,566 - 32,566 - 72,932 72,932AIM admissionexpenses - - - 227,823 - 227,823 238,081 - 238,081Consultancyfees - 94,672 94,672 - 50,042 50,042 - 117,651 117,651Audit fee 5,650 - 5,650 2,500 - 2,500 3,000 - 3,000Bank chargesand interest 3,273 - 3,273 1,214 - 1,214 2,550 - 2,550Sundry expenses 3,100 - 3,100 3,487 - 3,487 1,430 - 1,430Regulatoryandregistrationfees 12,705 - 12,705 - - - 13,767 - 13,767Commission paid 3,288 - 3,288 - - - - - - 68,723 132,317 201,040 274,256 74,905 349,161 320,144 190,583 510,727 NET RETURN ONORDINARYACTIVITIES FORTHE FINANCIAL PERIOD/YEAR (67,942) (121,939) (189,881) (254,831) 14,860 (239,971) (291,856) 1,721,363 1,429,507Return pershare - basicand diluted(pence) (0.51) (0.92) (1.43) (3.06) (0.18) (2.88) (2.85) 16.81 13.96 All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. A reconciliation of movements in shareholders' funds is set out in note 12 to the financial statements. The notes form an integral part of these financial statements. EQUITY PRE-IPO INVESTMENTS LIMITEDBALANCE SHEET30 JUNE 2006 Note 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited)FIXED ASSETS £ £ £ £ £ £Quoted investments 4 1,102,261 597,264 2,054,118Unquoted investments 5 4,559,876 1,478,107 3,722,050 5,662,137 2,075,371 5,776,168CURRENT ASSETSCash at bank and broker 2,319 688,065 101,668 2,319 688,065 101,668CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEARSundry creditors 8 68,548 11,500 28,178 68,548 11,500 28,178 NET CURRENT ASSETS (66,229) 676,565 73,490 TOTAL ASSETS LESS CURRENT £ 5,595,908 £ 2,751,936 £ 5,849,658LIABILITES CAPITAL AND RESERVES CALLED UP SHARE CAPITAL 10 132,372 97,833 132,372SHARE PREMIUM ACCOUNT 4,254,872 2,861,167 4,254,872CAPITAL RESERVE REALISED 11 533,637 (74,905) 130,713 UNREALISED 11 1,053,418 141,265 1,642,150REVENUE RESERVE 11 (378,391) (273,424) (310,449) SHAREHOLDERS' FUNDS 12 £ 5,595,908 £ 2,751,936 £ 5,849,658 Net asset value per share 7 & 15 42.27 p 28.13 p 44.19 p The notes form an integral part of these financial statements. EQUITY PRE-IPO INVESTMENTS LIMITEDCASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2006 Six month Six month Year ended period ended period ended 31 December 30 June 2006 30 June 2005 2005 (unaudited) (unaudited) (audited) NotesNet cash outflow from operating 9 (159,889) (323,486) (459,511)activities Investing activities:Purchase of quoted investments (451,999) (451,999) -Purchase of unquoted investments (837,825) (848,107) (2,796,893)Proceeds from disposals of quoted 898,365investments - 960,948 Net cash inflow/(outflow) from financial 60,540 (1,300,106) (2,287,944)investment Financing:Issue of own shares - 2,300,000 2,859,860Commission on new share issues - - (22,394) Net cash inflow from financing - 2,300,000 2,837,466 (Decrease)/increase in cash resources £ (99,349) £ 676,408 £ 90,011for the period/year RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET FUNDS (Decrease)/increase in cash resources (99,349) 676,408 90,011for the period/year Opening net funds 101,668 11,657 11,657 Closing net funds £ 2,319 £ 688,065 £ 101,668 The notes form an integral part of thesefinancial statements. EQUITY PRE-IPO INVESTMENTS LIMITEDNOTES TO THE FINANCIAL STATEMENTS30 JUNE 2006 1. SIGNIFICANT NEW FINANCIAL REPORTING STANDARDS FRS 26 requires that listed investments are valued at bid price, whereas previously, listed investments were valued at middle market price. The Company has applied the transitional provisions of FRS 26 and has not restated the comparative figures for this change in accounting policy. Had the entity restated the comparative figures the investments held at 31 December 2005 would have been valued on a bid basis which would have resulted in the reported total assets at that date being reduced by £63,869. In accordance with the transitional provisions of FRS 26 the adjustments between the value of investments at the prior balance sheet date and the opening balance sheet at the start of this financial period has been treated as an adjustment against the company's opening reserves - see note 12. 2. ACCOUNTING POLICIES (a) CONVENTION The financial statements have been prepared under the historical cost convention, modified to include the revaluation of investments and in accordance with applicable accounting standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" issued by The Association of Investment Trust Companies in January 2005. The principal accounting policies which the directors have adopted within that convention are set out below. (b) INCOME Dividends receivable from quoted equity investments are recognised on the ex-dividend date. Dividends receivable from equity investments where no ex-dividend date is quoted are recognised when the company's right to receive payment is established. Interest receivable on cash deposits is accounted for on an accruals basis. (c) FOREIGN CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies other than sterling have been translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions during the period have been translated at the rates of exchange ruling at the date of the transaction. (d) VALUATION OF INVESTMENTS Quoted investments are valued at bid price. Unquoted investments are valued by the Board according to the valuation principles of the British Venture Capital Association and accordingly are stated at the value of their latest third party funding. Where no third party funding has taken place, they are valued at cost. Realised gains or losses on the disposal of investments are taken to the capital reserve - realised. Unrealised gains or losses on revaluation of investments are taken to the capital reserve - unrealised. (e) EXPENDITURE All expenses are accounted for on an accruals basis. Expenses are charged through the Statement of total return except where the expense is incidental to the acquisition or disposal of an investment in which case the expense is added to the cost of the investment or deducted from the sale proceeds. Expenses that are directly attributable to the management of investments are allocated directly to capital in the Statement of Total Return. With the Directors' long term target for returns on investments being entirely capital gain there is no requirement to apportion these expenses between revenue and capital. 3. TAXATION The company has been granted exempt status under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989, and is therefore subject to the payment of an annual fee which is currently £600. 4. QUOTED INVESTMENTS 30 June 2006 30 June 2005 31 December 2005 At cost £ 1,140,270 £ 455,999 £ 1,503,395 At market value £ 1,102,261 £ 597,264 £ 2,054,118 5. UNQUOTED INVESTMENTS At cost £ 3,468,449 £ 1,478,107 £ 2,630,623 At Directors' £ 4,559,876 £ 1,478,107 £ 3,722,050 valuation 6. EARNINGS PER SHARE The calculation of basic earnings per share is based on the net return on ordinary activities after tax for the year and on 13,237,235 (six month period ended 30 June 2005: 8,326,981, year ended 31 December 2005: 10,238,759) shares being the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the net return on ordinary activities after tax for the year and on 13,237,235 (six month period ended 30 June 2005: 8,326,981, year ended 31 December 2005: 10,238,759) shares being the weighted average number of shares in issue during the year adjusted for any dilutive effect of the share options. 7. NET ASSET VALUE The calculation of net asset value is based on the net assets of £5,595,908 (30 June 2005: £2,751,936, 31 December 2005: £5,849,658) and on the ordinary shares in issue of 13,237,235 (30 June 2005: 9,783,335, 31 December 2005: 13,237,235) at the balance sheet date. 8. SUNDRY CREDITORS 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited) Audit fees 2,500 3,000 1,000 Consultancy / directors fees 14,717 45,546 - Professional fees 1,520 12,945 - Administration fees 9,057 9,000 8,941 £ 68,548 £ 11,500 £ 28,178 9. RECONCILIATION OF REVENUE RETURN TO OPERATING CASH FLOW 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited) Net return on ordinary (67,942) (254,831) (291,856) activities for the financial period before taxation Expenses charged to (132,317) (74,905) (190,583) capital Increase in creditors 40,370 6,250 22,928 Net cash outflow from £ (159,889) £ (323,486) £ (459,511) operating activities 10. CALLED UP SHARE CAPITAL 30 June 2006 30 June 2005 31 December 2005 (unaudited) (unaudited) (audited) Authorised 50,000,000 ordinary shares £ 500,000 £ 500,000 £ 500,000 of £0.01 each Allotted and fully paid 13,237,235 ordinary shares (30 £ 132,372 £ 97,833 £ 132,372 June 200: 9,783,335, 31 December 2005: 13,237,235) of £0.01 each 11. RESERVES Capital Capital Revenue Reserve Reserve Reserve Total - Realised - Unrealised Balance at 1 January 130,713 1,642,150 (310,449) 1,462,414 2006 Impact of implementation of FRS 26 - (63,869) - (63,869) (note 1) Revised reserves at 1 January 130,713 1,578,281 (310,449) 1,398,545 2006 Net Return for the financial (132,317) - (67,942) (200,259) period Net realised gains/ 535,241 - - 535,241 (losses) Net unrealised gains/(losses) - (524,863) - (524,863) Balance at 30 June £ 533,637 1,053,418 (378,391) 1,208,664 2006 12. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 30 June 30 June 2005 31 December 2005 2006 (unaudited) (unaudited) (audited) Net return for the financial (189,881) (239,971) 1,429,507 period/year Dividends paid (net) - - - (189,881) (239,971) 1,429,507 Net proceeds of new share capital - 2,300,000 3,728,244 subscriptions Net (reduction in)/addition to (189,881) 2,060,029 5,157,751 shareholders' funds Balance brought 5,849,658 691,907 691,907 forward Impact of implementation of FRS (63,869) - - 26 (note 1) Closing £ 5,595,908 £ 2,751,936 £ 5,849,658 shareholders' funds 13. RELATED PARTY TRANSACTIONS On 9 February 2005 and as disclosed in the AIM Admission Document dated 18 February 2005, Combined Management Services Limited ("CMS") entered into a services agreement with the Company under the terms of which CMS agreed to provide research, consultancy, office management and administration services to the Investment Advisory Panel. A total of £44,747 has been paid to CMS for the period to 30 June 2006 (£81,183 for the year to 31 December 2005). Jonathan Freeman owns 50% of CMS. 14. FINANCIAL INSTRUMENTS (i) Management of risk The Company's financial instruments comprise: - Equity shares that are held in accordance with the Company's investment objective as set out in the Director's Statement - Cash and short term debtors and creditors that arise directly from the Company's operations. The main risks arising from the Company's financial instruments are due to fluctuations in market prices, foreign exchange rates and interest rates. The Board regularly reviews and agrees policies for managing each of these risks and they are summarised below. These policies have remained constant throughout the period under review. Market price risk Market price risk arises mainly from uncertainty about the future prices of financial instruments used in the Company's operations. It represents the potential loss the Company might suffer through holding market positions in the face of price movements and movements in exchange rates. It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and stock selection are other factors which act to reduce market price risk. The Investment Advisory Panel monitor market prices throughout the year and report to the Board, which meets regularly to consider investment strategy. Foreign currency risk The Company's total return and net assets can be significantly affected by fluctuations in foreign currency exchange rates because a portion of the Company's assets and revenue are denominated in currencies other than sterling. Liquidity risk The Company's assets comprise mainly readily realisable securities which can be sold to meet funding commitments of necessary. Credit risk The Company places funds with authorised deposit takers from time to time and is therefore potentially at risk from the failure of any such institution of which it is a creditor. The company expects to place any deposits on a short term basis and where possible with more than one institution to reduce its credit risk. (ii) Interest rate risk of financial assets The majority of the Company's financial assets are equity shares and other investments which neither pay interest nor have a stated maturity date. (iii) Currency exposure A portion of the financial assets of the of the company are denominated in currencies other than sterling with the effect that the net assets and total return can be significantly affected by currency movements. Currency Investments Cash at bank Total Euro £ 359,803 £ - £ 359,803 US Dollar £ - £ 944 £ 944 (iv) Fair values of financial assets All of the financial assets of the Company are held at fair value, as shown in notes 3 and 4. 15. REPORTED NET ASSET VALUE (NAV) The NAV reported to the market shortly after 30 June 2006 was 43.08p. These financial statements are based on the Company's unaudited records, and reflect all known debtors and creditors as accrued at the balance sheet date. Net assets at the balance sheet date have also been valued at bid price, in accordance with FRS 26, whereas the NAV reported to the market shortly after 30 June 2006 reflected mid market values. Accordingly, these accruals and the difference in accounting procedures are the reason for the difference in the estimated NAV reported, and these unaudited financial statements. Copies of the unaudited interim results for the six months ended 30 June 2006 are being sent to shareholders. Further copies will be available, free of charge for the period of one month, from the Company Secretary's office: Cosign Limited, Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3HB. This information is provided by RNS The company news service from the London Stock Exchange