Last checked at 
11 May 2009 16:54
NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC
UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2009
FINANCIAL HIGHLIGHTS
| 2009 unaudited | % change | 2008 audited | |||
| Revenue |
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| Gross income (£'000) | 4,285 | (17.7) | 5,208 | ||
| Net revenue after tax attributable to Shareholders of the Parent (£'000) | 538 | (57.7) | 1,272 | ||
| Basic return per Ordinary Share - revenue (pence) | 3.64 | (58.9) | 8.86 | ||
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| − capital (pence) | (372.41) | (1,669.2) | (21.05) | |
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| Assets |
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| Total assets less current liabilities (£'000) | 178,120 | (25.2) | 238,166 | ||
| Net asset value per 5p Ordinary Share: |
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| Basic (pence) | 1,204 | (25.3) | 1,611 | |
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| Diluted (pence) | 944 | (21.9) | 1,209 | |
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| Mid-market price of the 5p Ordinary Shares at 31 January (pence) | 618.5 | (39.7) | 1,025.0 | ||
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| Discount to diluted net asset value | 34.5% | 19.3 | 15.20% | ||
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| Indices and exchange rates at 31 January |
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| Standard & Poor's 500 Composite Index | 825.9 | (40.1) | 1,378.6 | ||
| Russell 2000 | 443.5 | (37.8) | 713.3 | ||
| US Dollar/Sterling exchange rate | 1.4417 | (27.5) | 1.9880 | ||
| Standard & Poor's 500 Composite Index - Sterling adjusted | 568.0 | (18.1) | 693.4 | ||
| Russell 2000 - Sterling adjusted | 305.1 | (15.0) | 358.8 | ||
| FTSE All-Share Index | 2,078.9 | (30.7) | 3,000.1 | ||
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North Atlantic Smaller Companies Investment Trust PLC
Chairman's statement
The year ended 31 January 2009 saw a decline in the diluted net asset value of 21.9% as compared to a fall in the FTSE Small Cap Index of 40.9% and a fall in the Standard & Poor's Composite Index of 18.1%. The fall in the Standard & Poor's Composite Index would have been 40.1% but for the weakness in Sterling.
The revenue account showed a profit after taxation of £538,000 (2008: £1,121,000). Consistent with the Company's long-term policy, the Directors are not recommending the payment of a dividend (2008: nil).
During the year, the Company redeemed 630,000 units of Convertible Unsecured Loan Stock 2013 for cancellation at a discount to net asset value.
A commentary on the quoted and unquoted portfolios can be found in the investment managers' report below.
board changes
More than ten years have passed since I became Chairman of the Company. I have decided that the Annual General Meeting in June will be my last as Chairman. However, I will remain a Non-Executive Director for the balance of my term - and beyond, if shareholders so choose. We are fortunate that the Hon. Peregrine Moncreiffe, who rejoined the Board in November 2008, has agreed to become Chairman following the Annual General Meeting. Peregrine was first appointed as a Director of the Company in 1993 but resigned in 2006 for personal reasons. We are delighted to welcome him back and announce his re-appointment. Unfortunately Philip Swinstead tendered his resignation as a Director of the Company on 15 January 2009 due to the pressure of his other business commitments. The Board thanks Philip for his valuable contribution and services to the Company.
outlook
It gives me little pleasure to reflect on my comments of last year when I reported in my Statement that "the subprime crisis is the first of a series of problems which will hit the banking industry, with excessive debt on leverage buyouts and reckless loans to value on commercial real estate, becoming significant issues…"
These problems have now surfaced with a vengeance with all major economies facing a sharp period of recession with a real risk that it will be both prolonged and deep. The banking system has effectively frozen, consumers are desperately trying to reduce expenditure either to reduce debt or preserve their savings as interest rates fall effectively to zero. A collapse in world trade, which is already evident, will only compound problems and it is most unlikely that equity markets will perform in the current environment.
Fortunately, the Company has substantial cash and other liquid assets amounting to circa £25.5 million and little debt, so appears well placed to benefit from the inevitable opportunities that will arise over the coming twelve months.
Enrique Foster Gittes
Chairman
11 May 2009
North Atlantic Smaller Companies Investment Trust PLC
Investment managers' report
quoted portfolio
The United States portfolio performed extremely well during the year ended 31 January 2009 as a direct result of the takeover of its largest holding, WH Energy Services. The other large holding, Sterling Construction, also performed well, significantly outperforming the indices as investors focused on companies which will benefit from continued infrastructure spending.
Sadly, the United Kingdom portfolio could not avoid the carnage of the UK Small Cap sector despite in many cases, such as Castle Support Services, Communisis and Nationwide Accident, results significantly exceeding market expectations.
As to our major holdings, Ashtead Group was sold before the share price fell a further 50% and Whatman was taken over.
The UK quoted portfolio has no direct exposure to the banking industry and its exposure to housebuilding is limited to MJ Gleeson, a company which has no debt.
unquoted portfolio
It was an extremely busy year for the unquoted portfolio. On the positive side, Motherwell Bridge was sold for an £18 million profit and for £4 million above last year's value. Trident Private Equity II performed well, returned capital to the Company and is now fully invested. Worldport was liquidated at above cost and Primesco and Craegmoor were sold.
Against this, it was necessary to write off Crucible and Jaffer at a cost to the Company of approximately £5 million.
It was also necessary to review the value of the Company's property holdings in view of the sharp fall in property values and this cost the Company a further £7.9 million during the year.
The only new unquoted was an investment in AssetCo Abu Dhabi which is described in greater detail in the Annual Report.
Harry Gittes, our Chairman, has decided to step down but has kindly agreed to remain on the Board as a Non-Executive Director. He has been an outstanding Chairman for the past ten years and on behalf of the Board I would like to thank him for all of his hard work.
Christopher HB Mills
Chief Executive & Investment Manager
North Atlantic Value LLP
Joint Manager
11 May 2009
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the year ended 31 January
| 2009 unaudited | 2008 audited | |||||
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| Revenue | Capital | Total | Revenue | Capital | Total |
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| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Investments |
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| (Losses)/gains on investments | - | (54,325) | (54,325) | - | 3,300 | 3,300 |
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| Exchange gains/(losses) | - | 7,042 | 7,042 | - | (540) | (540) |
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| Net investment results | - | (47,283) | (47,283) | - | 2,760 | 2,760 |
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| Income | 4,285 | - | 4,285 | 5,208 | - | 5,208 |
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| Expenses |
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| Investment management fee | (2,475) | (110) | (2,585) | (2,512) | (1,237) | (3,749) |
| Other expenses | (733) | - | (733) | (954) | - | (954) |
| Share based remuneration | (50) | - | (50) | (255) | - | (255) |
| Interest payable and similar charges | (487) | - | (487) | (366) | - | (366) |
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| Total expenses | (3,745) | (110) | (3,855) | (4,087) | (1,237) | (5,324) |
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| Share of net return of associate | - | (7,677) | (7,677) | - | (4,223) | (4,223) |
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| Profit before taxation | 540 | (55,070) | (54,530) | 1,121 | (2,700) | (1,579) |
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| Taxation | (2) | - | (2) | - | - | - |
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| Transfer to reserves | 538 | (55,070) | (54,532) | 1,121 | (2,700) | (1,579) |
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| Attributable to: |
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| Equity holders of the parent | 538 | (55,070) | (54,532) | 1,272 | (3,021) | (1,749) |
| Minority interest | - | - | - | (151) | 321 | 170 |
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| 538 | (55,070) | (54,532) | 1,121 | (2,700) | (1,579) |
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| Return per Ordinary Share: |
| pence |
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| pence | |
| Basic |
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| (368.77) |
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| (12.19) |
| Diluted |
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| (284.47) |
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| (8.73) |
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The total column of this statement represents the Group's income statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies ("AIC").
All items in the above statement derive from continuing operations.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 January
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| Share | Share | Capital | |
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| Share | CULS | options | premium | reserve - |
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| capital | reserve | reserve | account | realised |
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| £'000 | £'000 | £'000 | £'000 | £'000 |
| 2009 - unaudited |
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| 31 January 2008 | 739 | 34 | 1,341 | 629 | 180,033 |
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| Income and expenses as shown in the consolidated income statement | - | - | - | - | 24,924 |
| Total recognised income and expense for the year | - | - | - | - | 24,924 |
| Share options expense | - | - | 90 | - | - |
| Exercise of Management Options | - | - | (83) | - | - |
| Premium paid on repurchase of CULS | - | - | - | - | (5,325) |
| Arising on conversion of CULS | 1 | (5) | - | - | - |
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| 31 January 2009 | 740 | 29 | 1,348 | 629 | 199,632 |
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| Share | Share | Capital |
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| Share | CULS | options | premium | reserve - |
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| capital | reserve | reserve | account | realised |
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| £'000 | £'000 | £'000 | £'000 | £'000 |
| 2008 - audited |
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| 31 January 2007 | 689 | 43 | 1,086 | 629 | 183,887 |
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| Income and expenses as shown in the consolidated income statement | - | - | - | - | 4,802 |
| Total recognised income and expense for the year | - | - | - | - | 4,802 |
| Share options expense | - | - | 255 | - | - |
| Arising on deconsolidation of AOT | - | - | - | - | (6,181) |
| Premium paid on repurchase of CULS | - | - | - | - | (2,475) |
| Arising on conversion of CULS | 50 | (9) | - | - | - |
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| 31 January 2008 | 739 | 34 | 1,341 | 629 | 180,033 |
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UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 January (continued)
| Capital |
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| reserve - | Revenue |
| Minority |
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| unrealised | reserve | Total | interest | Total |
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| £'000 | £'000 | £'000 | £'000 | £'000 |
| 2009 - unaudited |
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| 31 January 2008 | 58,128 | (2,930) | 237,974 | - | 237,974 |
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| Income and expenses as shown in the consolidated income statement | (79,994) | 538 | (54,532) | - | (54,532) |
| Total recognised income and expense for the year | (79,994) | 538 | (54,532) | - | (54,532) |
| Share options expense | - | - | 90 | - | 90 |
| Exercise of Management Options | - | - | (83) | - | (83) |
| Premium paid on repurchase of CULS | - | - | (5,325) | - | (5,325) |
| Arising on conversion of CULS | - | - | (4) | - | (4) |
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| 31 January 2009 | (21,866) | (2,392) | 178,120 | - | 178,120 |
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| Capital |
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| reserve - | Revenue |
| Minority |
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| unrealised | reserve | Total | interest | Total |
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| £'000 | £'000 | £'000 | £'000 | £'000 |
| 2008 - audited |
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| 31 January 2007 | 60,476 | (4,908) | 241,902 | 7,740 | 249,642 |
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| Income and expenses as shown in the consolidated income statement | (7,823) | 1,272 | (1,749) | 170 | (1,579) |
| Total recognised income and expense for the year | (7,823) | 1,272 | (1,749) | 170 | (1,579) |
| Share options expense | - | - | 255 | - | 255 |
| Arising on deconsolidation of AOT | 5,475 | 706 | - | (7,910) | (7,910) |
| Premium paid on repurchase of CULS | - | - | (2,475) | - | (2,475) |
| Arising on conversion of CULS | - | - | 41 | - | 41 |
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| 31 January 2008 | 58,128 | (2,930) | 237,974 | - | 237,974 |
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UNAUDITED CONSOLIDATED BALANCE SHEET
as at 31 January
| 2009 unaudited | 2008 audited | |
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| £'000 | £'000 |
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| Non current assets |
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| Investments at fair value through profit or loss | 147,505 | 231,820 |
| Investments accounted for using the equity method | 11,228 | 18,928 |
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| 158,733 | 250,748 |
| Current assets |
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| Investments held for trading in Subsidiary Companies | - | 308 |
| Trade and other receivables | 3,989 | 4,169 |
| Cash and cash equivalents | 25,514 | 8,504 |
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| 29,503 | 12,981 |
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| Total assets | 188,236 | 263,729 |
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| Current liabilities |
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| Bank loans and overdrafts | (7,874) | (9,356) |
| Investments held for trading - derivatives | (838) | (612) |
| Trade and other payables | (1,240) | (15,595) |
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| (9,952) | (25,563) |
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| Total assets less current liabilities | 178,284 | 238,166 |
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| Non current liabilities |
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| CULS | (164) | (192) |
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| (164) | (192) |
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| Total liabilities | (10,116) | (25,755) |
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| Net assets | 178,120 | 237,974 |
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| Represented by: |
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| Share capital | 740 | 739 |
| Equity component of CULS | 29 | 34 |
| Share options reserve | 1,348 | 1,341 |
| Share premium account | 629 | 629 |
| Capital reserve - realised | 199,632 | 180,033 |
| Capital reserve - unrealised | (21,866) | 58,128 |
| Revenue reserve | (2,392) | (2,930) |
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| Total equity attributable to equity holders of the parent | 178,120 | 237,974 |
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| Net asset value per Ordinary Share: | pence | pence |
| Basic | 1,204 | 1,611 |
| Diluted | 944 | 1,209 |
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 January
| 2009 unaudited | 2008 audited | |
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| £'000 | £'000 |
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| Cash flows from operating activities |
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| Investment income received | 3,202 | 4,147 |
| Bank deposit interest received | 376 | 690 |
| Other income | 100 | 78 |
| Sale of investments by Subsidiary | - | (220) |
| Investment manager's fees paid | (3,626) | (3,772) |
| Other cash payments | (466) | (705) |
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| Cash (expended)/received from operations | (414) | 218 |
| Bank interest paid | (457) | (282) |
| CULS interest paid | (19) | (23) |
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| Net cash outflow from operating activities | (890) | (87) |
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| Cash flows from investing activities |
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| Purchases of investments | (153,593) | (171,086) |
| Sales of investments | 172,624 | 167,098 |
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| Net cash inflow/(outflow) from investing activities | 19,031 | (3,988) |
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| Cash flows from financing activities |
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| Repayment of fixed term borrowings | (2,777) | (554) |
| Increase in fixed term borrowings | - | 7,113 |
| Repurchase of CULS for cancellation | (5,357) | (2,485) |
| Management options exercised | (83) | - |
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| Net cash (outflow)/inflow from financing activities | (8,217) | 4,074 |
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| Increase/(decrease) in cash and cash equivalents for the year | 9,924 | (1) |
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| Cash and cash equivalents at the start of the year | 8,504 | 9,497 |
| Arising on deconsolidation of AOT | - | (1,091) |
| Revaluation of foreign currency balances | 7,086 | 99 |
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| Cash and cash equivalents at the end of the year | 25,514 | 8,504 |
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Notes:
1. North Atlantic Smaller Companies Investment Trust PLC ("NASCIT") is a Company incorporated and registered in England and Wales under the Companies Acts 1948 to 1967. The consolidated preliminary announcement for the Group for the year ended 31 January 2009 comprises the results of the Company and its Subsidiary - Consolidated Venture Finance Limited (together referred to as the "Group").
North Atlantic Value LLP, the Company's Joint Manager, also acts as Manager to Oryx and Christopher Mills is on the board of Oryx. At 31 January 2009, the Company held shares with 29.45% of the total voting rights in Oryx. Oryx is recognised in the consolidated accounts as an Associate under the equity method of accounting. It is valued at NASCIT's share in the net assets of Oryx.
The consolidated financial statements have been prepared in conformity with IFRS to the extent that they have been adopted by the EU. They have also been prepared in accordance with the Statement of Recommended Practice ("SORP") for investment trust companies, except to any extent where it conflicts with IFRS.
2. The above results for the year to 31 January 2009 are unaudited.
3. The Directors do not recommend the payment of a dividend for the year (2008: nil).
4. Consolidated return per Ordinary Share:
| | Revenue | Capital | Total | ||||||
| | *Net return £’000 | Ordinary Shares | Per Share pence | *Net return £’000 | Ordinary Shares | Per Share pence | *Net return £’000 | Ordinary Shares | Per Share pence |
| 2009 - unaudited | | | | | | | | | |
| Basic return per Share | 538 | 14,787,546 | 3.64 | (55,070) | 14,787,546 | (372.41) | (54,532) | 14,787,546 | (368.77) |
| Options conversion** | - | 201,023 | | - | 201,023 | | - | 201,023 | |
| CULS*** | 21 | 4,173,720 | | - | 4,173,720 | | 21 | 4,173,720 | |
| | | | | | | | | | |
| Diluted return per Share | 559 | 19,162,289 | 2.92 | (55,070) | 19,162,289 | (287.39) | (54,511) | 19,162,289 | (284.47) |
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| 2008 - audited | | | | | | | | | |
| Basic 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 | | - | 377,878 | |
| CULS*** | 25 | 5,019,049 | | - | 5,019,049 | | 25 | 5,019,049 | |
| | | | | | | | | | |
| Diluted return per Share | 1,297 | 19,747,190 | 6.57 | (3,021) | 19,747,190 | (15.30) | (1,724) | 19,747,190 | (8.73) |
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Basic return per Ordinary Share has been calculated using the weighted average number 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. CULS are anti-dilutive whenever its interest saved (net of tax and other changes in income or expense) per Ordinary share obtainable on conversion, exceeds basic return per share.
5. Consolidated net asset value per Ordinary Share:
The basic net asset value per Ordinary Share is based on net assets of £178,120,000 (2008: £237,974,000) and on 14,795,548 Ordinary Shares (2008: 14,775,208) being the number of Ordinary Shares in issue at the year end.
The diluted net asset value per Ordinary Share is calculated on the assumption that the outstanding 2013 CULS are fully converted at par and that all 1,017,500 (2008: 1,030,000) Share Options were exercised at the prevailing exercise prices, giving a total of 19,679,552 issued Ordinary Shares (2008: 20,322,052).
6. A Circular will be sent to the holders of the Convertible Unsecured Loan Stock 2013 along with the Annual Financial Report convening a meeting of the loan stock holders on 30 June 2009 after the Annual General Meeting. The purpose of the meeting is to seek approval from the loan stock holders for the Company to purchase its own shares.
7. This preliminary statement is not the Company's statutory accounts. The statutory accounts for the financial year ended 31 January 2008 have been delivered to the Registrar of Companies and received an audit report which was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain statements under section 237(2) and (3) of the Companies Act 1985. The statutory accounts for the financial year ended 31 January 2009 have not yet been approved, audited or filed.
8. The statutory financial statements for the year ended 31 January 2009 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Annual General Meeting will be held on 30 June 2009 at 12 noon in the Board Room, Ground Floor, Ryder Court, 14 Ryder Street, London, SW1Y 6QB. The Annual Report will be posted to Shareholders and those individuals on the Company's mailing list as soon as practicable after printing and will also be available on request from the Company Secretary, J O Hambro Capital Management Limited, Ground Floor, Ryder Court, 14 Ryder Street, London, SW1Y 6QB.