North Atl.smlr Regulatory News (NAS)

17 Apr 2008 07:00

North Atlantic Smlr Co Inv Tst PLC17 April 2008 NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2008 FINANCIAL HIGHLIGHTS 2008 2007 unaudited % change auditedRevenueGross income (£'000) 5,208 31.8 3,951Net revenue after tax attributable to Shareholders of the 1,272 467.9 224Parent (£'000)Basic return per Ordinary Share - revenue (pence) 8.86 437.0 1.65 - capital (pence) (21.05) (109.2) 229.52 AssetsTotal assets less current liabilities (£'000) 238,166 (4.9) 250,549Net asset value per 5p Ordinary Share: Basic (pence) 1,611 (8.2) 1,755 Diluted (pence) 1,209 (0.7) 1,217 Mid-market price of the 5p Ordinary Shares at 31 January (pence) 1,025.0 (11.1) 1,153.0 Discount to diluted net asset value 15.2% 9.9% 5.3% Indices and exchange rates at 31 JanuaryStandard & Poor's 500 Composite Index 1,378.6 (4.1) 1,438.2Russell 2000 713.3 (10.9) 800.3US Dollar/Sterling exchange rate 1.9880 1.6 1.9574Standard & Poor's 500 Composite Index - Sterling adjusted 693.4 (5.6) 734.8Russell 2000 - Sterling adjusted 358.8 (12.3) 408.9FTSE All-Share Index 3,000.1 (6.6) 3,211.8 North Atlantic Smaller Companies Investment Trust PLC Chairman's statement It is somewhat frustrating to report that in the year to 31 January 2008 thefully diluted net asset value of the Company fell by 0.7% although this comparesfavourably with the fall in the (Sterling adjusted) Standard & Poor's CompositeIndex of 5.6%. The revenue account showed a profit after taxation of £1,121,000 (2007:£171,000). Consistent with the Company's long term policy the Directors are notrecommending a dividend for the current year. During the year the Company redeemed for cancellation 200,000 CULS. The pricepaid was at a discount to net asset value and therefore benefited allShareholders. The Company has supported the Association of Investment Companies' law suitagainst HM Revenue & Customs for VAT charges for a number of years. I am pleasedto say that this was successful and the Company is expected to receive a rebateof VAT on management fees since 2001. A commentary on the quoted and unquoted portfolios can be found in theinvestment managers' report below. outlook The outlook for the Anglo Saxon economies is probably as challenging as at anytime since the early 1990s. The subprime crisis, is in my opinion, the first ofa series of problems which will hit the banking industry, with excessive debt onleveraged buyouts and reckless loans to value on commercial real estate,becoming significant issues over the coming twenty four months. In any eventthere is now a liquidity crisis in the banking sector, which will constrainlending to both the consumer and corporate sectors alike and will inevitably bea major factor in curtailing economic activity. The limited ability of centralbanks to reduce interest rates and maintain a stable currency, while commodityand food prices are soaring, means it will be hard to counteract recessionaryforces. There is, in my opinion, a real risk of stagnation. The market weaknessin equity prices has to some extent anticipated financial and economicuncertainty. It is however unlikely that stock markets in general will performwell. Despite this difficult background, I would hope that the Company has ayear of further progress as your Chief Executive, Christopher Mills, continuesto maximise the value of both the quoted and unquoted investment portfolio. Finally, I would like to congratulate Christopher on attaining the twenty fifthanniversary of the Company. Over the period from 31 December 1983 to 31 January2008, the unadjusted net asset value has risen by 2,364.3%. This compares with arise in the Standard & Poor's Composite Index over the same period of 510.53%.This is an extraordinary achievement and I am sure you would all join me inthanking him and encouraging him to continue to achieve outstanding returns forour Shareholders. Enrique Foster GittesChairman17 April 2008 North Atlantic Smaller Companies Investment Trust PLC Investment managers' report quoted portfolio In last year's Annual Report the Chairman stated that it was hard to findattractive opportunities due to excess liquidity and that the stock market wasoverlooking some real problems in major world economies. In a few short monthsthe housing bubble has burst, major banks have been brought to their knees andthere is little doubt that both the United States and the United Kingdomeconomies are flirting with recession. Against this background the FTSE SmallCap Index since the end of July 2007 to 31 January 2008 fell by 20.29%.Inevitably this had a substantial impact on the Company, with a number of themajor holdings in the UK such as Georgica, Ashstead, Gleeson and NationwideAccident doing poorly over the year. This was only partially mitigated by thetakeover approach and subsequent takeover of Whatman and the highly successfulIPOs of Castle & AssetCo. The performance in the United States portfolio despite further weakness in thedollar was somewhat better due to the sale of nearly half the holding in W HEnergy Services at a price significantly above the level at the end of January. unquoted portfolio The unquoted portfolio performed very well during the period. Castle SupportServices (DM Technical Services) went public at a good premium to last year'svaluation. Mister Car Wash was sold at a good profit. Despite the weakness inthe property market, Hampton Trust was written up reflecting the successfulletting of its major property in Talbot Gateway and recoveries from formerDirectors. Motherwell Bridge was also written up significantly, reflecting thesuccessful sale of two of its three businesses. Trident Private Equity benefitedfrom Motherwell Bridge and Castle but was also successful at selling its holdingin Telecity at 3.5x cost following a successful IPO. AssetCo went public androse significantly in the public market and Ramen Holdings was increased invalue. Against this, Primesco had to be written down reflecting a disappointingbid for the company due to weakness in the bond portfolio and Jaffer was alsowritten down reflecting the fact that no satisfactory bid was received andweakness in the housing market in the Southeast of the USA. Neither of thesewrite downs had a significant impact on the portfolio. Alliance One was sold ataround last year's holding cost. Two new private investments were made duringthe period and these, together with the description of the other unquotedinvestments, can be found in the Annual Report. Christopher HB MillsChief Executive & Investment Manager North Atlantic Value LLPJoint Manager 17 April 2008UNAUDITED CONSOLIDATED INCOME STATEMENTfor the year ended 31 January 2008 2007 unaudited audited Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000InvestmentsGains on investments - 3,300 3,300 - 31,469 31,469 Exchange differences - (540) (540) - (43) (43) Net investment results - 2,760 2,760 - 31,426 31,426 Income 5,208 - 5,208 3,951 - 3,951 ExpensesInvestment management fee (2,512) (1,237) (3,749) (2,430) (1,266) (3,696)Other expenses (954) - (954) (849) - (849) Share based remuneration (255) - (255) (322) (109) (431)Interest payable and similar charges (366) - (366) (145) - (145) Total expenses (4,087) (1,237) (5,324) (3,746) (1,375) (5,121) Share of net return of associate - (4,223) (4,223) - - - Profit before taxation 1,121 (2,700) (1,579) 205 30,051 30,256 Taxation - - - (34) - (34) Transfer to reserves 1,121 (2,700) (1,579) 171 30,051 30,222 Attributable to:Equity holders of the parent 1,272 (3,021) (1,749) 224 31,171 31,395Minority interest (151) 321 170 (53) (1,120) (1,173) 1,121 (2,700) (1,579) 171 30,051 30,222 Return per Ordinary Share: pence penceBasic (12.19) 231.17Diluted (8.73) 157.25 The total column of this statement represents the Group's income statement,prepared in accordance with IFRS. The supplementary revenue return and capitalreturn columns are both prepared under guidance published by the Association ofInvestment Companies ("AIC"). All items in the above statement derive from continuing operations. UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 January Share Share Capital Share CULS options premium reserve - capital reserve reserve account realised £'000 £'000 £'000 £'000 £'0002008 - unaudited31 January 2007 689 43 1,086 629 183,887 Income and expenses as shown in the consolidated income statement - - - - 4,802Premium paid on repurchase of CULS - - - - (2,475)Total recognised income and expense for the year - - - - 2,327 Share options expense - - 255 - -Arising on deconsolidation of AOT - - - - (6,181)Arising on conversion of CULS 50 (9) - - - 31 January 2008 739 34 1,341 629 180,033 Share Share Capital Share CULS options premium reserve - capital reserve reserve account realised £'000 £'000 £'000 £'000 £'0002007 - audited31 January 2006 666 48 764 629 168,946 Income and expenses as shown in the consolidated income statement - - - - 17,419Premium paid on repurchase of CULS - (2) - - (2,359)Loss on deemed disposal of AOT - - - - (119)Total recognised income and expense for the year - (2) - 14,941Share options expense - - 322 - -Arising on conversion of CULS 23 (3) - - - 31 January 2007 689 43 1,086 629 183,887 UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 January (continued) Capital reserve - Revenue Minority unrealised reserve Total interest Total £'000 £'000 £'000 £'000 £'0002008 - unaudited31 January 2007 60,476 (4,908) 241,902 7,740 249,642 Income and expenses as shown in the consolidated income statement (7,823) 1,272 (1,749) 170 (1,579)Premium paid on repurchase of CULS - - (2,475) - (2,475)Total recognised income and expense for the year (7,823) 1,272 (4,224) 170 (4,054)Share options expense - - 255 - 255 Arising on deconsolidation of AOT 5,475 706 - (7,910) (7,910)Arising on conversion of CULS - - 41 - 41 31 January 2008 58,128 (2,930) 237,974 - 237,974 Capital reserve - Revenue Minority unrealised reserve Total interest Total £'000 £'000 £'000 £'000 £'0002007 - audited31 January 2006 46,724 (5,132) 212,645 8,205 220,850 Income and expenses as shown in the consolidated income statement 13,752 224 31,395 (1,173) 30,222Premium paid on repurchase of CULS - - (2,361) - (2,361)Loss on deemed disposal of AOT - - (119) 708 589Total recognised income and expense for the year 13,752 224 28,915 (465) 28,450Share options expense - - 322 - 322 Arising on conversion of CULS - - 20 - 20 31 January 2007 60,476 (4,908) 241,902 7,740 249,642 UNAUDITED CONSOLIDATED BALANCE SHEETas at 31 January 2008 2007 unaudited audited £'000 £'000 Non current assetsInvestments at fair value through profit or loss 231,820 225,644Investments accounted for using the equity method 18,928 - 250,748 255,644Current assetsInvestments held for trading in Subsidiary Companies 308 386Trade and other receivables 4,169 18,595Cash and cash equivalents 8,504 9,497 12,981 28,478 Total assets 263,729 254,122 Current liabilitiesBank loans and overdrafts (9,356) (1,407)Investments held for trading - derivatives (612) (29)Trade and other payables (15,595) (2,137) (25,563) (3,573) Total assets less current liabilities 238,166 250,549 Non current liabilitiesBank loans - (664)CULS (192) (243) (192) (907) Total liabilities (25,755) (4,480) Net assets 237,974 249,642 Represented by:Share capital 739 689Equity component of CULS 34 43Share options reserve 1,341 1,086Share premium account 629 629Capital reserve - realised 180,033 183,887Capital reserve - unrealised 58,128 60,476Revenue reserve (2,930) (4,908) Equity attributable to equity holders of the parent 237,974 241,902 Minority interest - 7,740 Total equity 237,974 249,642 Net asset value per Ordinary Share: pence penceBasic 1,611 1,755Diluted 1,209 1,217 UNAUDITED CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 January 2008 2007 unaudited audited £'000 £'000 Cash flows from operating activitiesInvestment income received 4,147 2,628Bank deposit interest received 690 630Other income 78 24Sale of investments by Subsidiary (220) 18Investment manager's fees paid (3,772) (3,569)Other cash payments (705) (998) Cash received/(expended) from operations 218 (1,267)Bank interest paid (282) (117)CULS interest paid (23) (29)Loan renewal expenses - (6) Net cash outflow from operating activities (87) (1,419) Cash flows from investing activitiesPurchases of investments (171,086) (180,307)Sales of investments 167,098 189,613 Net cash (outflow)/inflow from investing activities (3,988) 9,306 Cash flows from financing activitiesRepayment of fixed term borrowings (554) (3,459)Increase in fixed term borrowings 7,113 673Repurchase of CULS for cancellation (2,485) (2,370)Management options exercised and repurchased (AOT) - 480 Net cash inflow/(outflow) from financing activities 4,074 (4,676) (Decrease)/increase in cash and cash equivalents for the year (1) 3,211 Cash and cash equivalents at the start of the year 9,497 6,429Arising on deconsolidation of AOT (1,091) -Revaluation of foreign currency balances 99 (143) Cash and cash equivalents at the end of the year 8,504 9,497 Notes: 1. North Atlantic Smaller Companies Investment Trust PLC ("NASCIT") is a Companyincorporated and registered in England and Wales under the Companies Acts 1948to 1967. The consolidated preliminary announcement for the Group for the yearended 31 January 2008 comprises the results of the Company and its Subsidiary -Consolidated Venture Finance Limited (together referred to as the "Group"). On 23 February 2007, NASCIT's majority owned subsidiary American OpportunityTrust PLC ("AOT") merged with Oryx International Growth Fund Limited ("Oryx") byway of a Scheme of Arrangement under Section 425 of the Companies Act 1985.Under the Scheme of Arrangement, Oryx acquired AOT and is the continuing companyand all of the assets and liabilities of AOT have been transferred to it. Theresults of AOT to 22 February 2007 are consolidated in the consolidatedfinancial statements. North Atlantic Value LLP, the Company's Joint Manager, also acts as Manager toOryx and Christopher Mills is on the board of Oryx. As a result of the mergerthe Company held shares with 21.72% of the total voting rights of Oryx. At 31January 2008, the Company held shares with 28.67% of the total voting rights inOryx. Oryx is recognised in the consolidated accounts as an Associate under theequity method of accounting. It is valued at NASCIT's share in the net assets ofOryx. The consolidated financial statements have been prepared in conformity with IFRSto the extent that they have been adopted by the EU. They have also beenprepared in accordance with the Statement of Recommended Practice ("SORP") forinvestment trust companies, except to any extent where it conflicts with IFRS. 2. The above results for the year to 31 January 2008 are unaudited. 3. The Directors do not recommend the payment of a dividend for the year (2007:nil). 4. Consolidated return per Ordinary Share: Revenue Capital Total Per Per Per *Net Ordinary Share *Net Ordinary Share *Net Ordinary Share return Shares pence return Shares pence return Shares pence £'000 £'000 £'0002008 -unauditedBasic return per Share 1,272 14,350,263 8.86 (3,021) 14,350,263 (21.05) (1,749) 14,350,263 (12.19)Options conversion** - 377,878 - 377,878 - 377,878CULS*** 25 5,019,049 - 5,019,049 25 5,019,049 Diluted return perShare 1,297 19,747,190 6.57 (3,021) 19,747,190 (15.30) (1,724) 19,747,190 (8.73) 2007 -auditedBasic return per Share 224 13,581,129 1.65 31,171 13,581,129 229.52 31,395 13,581,129 231.17Options conversion** - 310,700 - 310,700 - 310,700CULS*** 30 6,092,348 - 6,092,348 30 6,092,348 Diluted return perShare2007 254 19,984,177 1.27 31,171 19,984,177 155.98 31,425 19,984,177 157.25 Basic return per Ordinary Share has been calculated using the weighted averagenumber of Ordinary Shares in issue during the year. * Net return on ordinary activities attributable to Ordinary Shareholders. ** Excess of the total number of potential Shares on option conversion over the number that could be issued at average market price, as calculated in accordance with IAS 33: Earnings per Share. *** CULS assumed converted as the share price during the year was greater than the conversion price. 5. Consolidated net asset value per Ordinary Share: The basic net asset value per Ordinary Share is based on net assets of£237,974,000 (2007: £241,902,000) and on 14,775,208 Ordinary Shares (2007:13,780,945) being the number of Ordinary Shares in issue at the year end. The diluted net asset value per Ordinary Share is calculated on the assumptionthat the outstanding 2013 CULS are fully converted at par and that all 1,030,000(2007: 1,030,000) Share Options were exercised at the prevailing exerciseprices, giving a total of 20,322,052 issued Ordinary Shares (2007: 20,522,052). 6. In 2004 the Association of Investment Companies ("AIC") and JP MorganClaverhouse Investment Trust plc launched a case against HM Revenue and Customs("HMRC") in which they claimed that the management fees charges to UK investmenttrusts should be exempt from VAT. ON 28 June 2007, the European Court of Justicefound in favour of the AIC/Claverhouse case in respect of the specific questionsreferred to it by the UK VAT Tribunal. HMRC accepted this judgement in November2007. Your Company is taking appropriate steps to reclaim the relevant VAT thathas been paid on management fees since 2001. The timing and quantum of thisrepayment, together with the status of pre-2001 VAT payments, are beingdiscussed with the Manager and are still to be determined. On the basis of this,no contingent asset has been disclosed. 7. This preliminary statement is not the company's statutory accounts. Thestatutory accounts for the financial year ended 31 January 2007 have beendelivered to the Registrar of Companies and received an audit report which wasunqualified, did not include a reference to any matters to which the auditorsdrew attention by way of emphasis without qualifying the report, and did notcontain statements under section 237(2) and (3) of the Companies Act 1985. Thestatutory accounts for the financial year ended 31 January 2008 have not yetbeen approved, audited or filed. 8. The statutory financial statements for the year ended 31 January 2008 will bedelivered to the Registrar of Companies following the Company's Annual GeneralMeeting. The Annual General Meeting will be held on 26 June 2008 at 12 noon inthe Board Room, Ground Floor, Ryder Court, 14 Ryder Street, London, SW1Y 6QB.The Annual Report will be posted to Shareholders and those individuals on theCompany's mailing list as soon as practicable after printing and will also beavailable on request from the Company Secretary, J O Hambro Capital ManagementLimited, Ground Floor, Ryder Court, 14 Ryder Street, London, SW1Y 6QB. This information is provided by RNS The company news service from the London Stock Exchange