Proven Vct Regulatory News (PVN)

25 May 2006 13:33

Proven VCT PLC25 May 2006 ProVen VCT plc Unaudited Preliminary Announcement of Results for the Year Ended 28 February 2006 FINANCIAL HIGHLIGHTS 2006 2005 pence pence (restated) Net asset value (per share) 111.3 110.2 Cumulative gross distributions paid (from launch to 28 Feb 2006) 18.7 12.2 Total return (net asset value plus paid cumulative distributions paid and declared) 130.0 122.4 First Interim distribution (per share) - paid 4 November 2005 3.0 3.0Second Interim distribution (per share) - to be paid 14 July 2006 3.5 3.5 6.5 6.5 The Statement to Shareholders by the Chairman, Andrew Davison, includes thefollowing: Introduction I have pleasure in presenting the Annual Report for Proven VCT plc for the yearended 28 February 2006, a year in which your Company has produced another solidperformance. Net Asset Value At the year end the Company's net asset value per share ("NAV") stood at 111.3p,an increase of 7.6p per share (6.9%) over the year after adjusting for thedividends of 6.5p per share paid during the year. Total return (NAV pluscumulative dividends paid) to shareholders who invested at the outset of theCompany now stands at 130.0p per share, compared to an original investment netof income tax relief of 80p per share. Share issue During the year the Company took the opportunity of the 40% income tax reliefthat was available on new VCT investments to undertake a small fundraising.Between 1 March 2005 and 30 June 2005, the Company issued 2,863,080 shares,generating net proceeds (after fundraising costs) of £2,960,539. The proceedshave given the Company extra funds available for new investments and furtherspread the burden of the running costs over a larger asset base. Format of Accounts For this accounting period, your Company is required to adopt FRS 21, underwhich dividends have to be accounted for in the period in which they are liableto be paid rather than the period in respect of which they are declared. As aresult comparative figures presented in this statement have been restated. Itshould be noted that this change does not alter the current or historic valuesfor Total Return. Under FRS 26, the Company is now also required to valuequoted investments at bid prices instead of mid-market prices that were usedpreviously. This has resulted in a small reduction in the level of thesevaluations. The Company has also adopted the new Statement of Recommended Practice forInvestment Trusts ("SORP"), which came into effect in December 2005 and other UKFinancial Reporting Standards which have been introduced as part of theconvergence programme of the UK towards International Accounting Standards. Themain noticeable change arising is that the "Statement of Total Return" has beenrenamed as the "Income Statement" and our investments are now categorised as "Fair value through profit or loss" assets. Venture Capital Investments During the year the Company invested £2 million in qualifying investments and£226,000 in non-qualifying investments. The Company also achieved a number of profitable exits producing proceeds of£7.9 million and realised gains in the year of £810,000 against 28 February 2005valuation or £3.1 million against original cost. In reviewing the investment valuations at the year end the Board has agreed anumber of valuation increases and decreases. Overall the unrealised valuationmovement on the portfolio has been an increase of £884,000 over the year. Results and dividend Gross revenue for the year was £1,030,000 (2005: £866,000) and the revenuereturn after taxation was £548,000 (2005: £434,000). On 4 November 2005 an interim capital distribution of realised gains of 3.0p pershare (2005: 3.0p per share) was paid to shareholders. The Board is pleased toannounce the payment of a further capital distribution of 1.5p per sharetogether with a revenue dividend of 2.0p per share for the year ended 28February 2006, on 14 July 2006 to Shareholders on the register at 16 June 2006.These payments will be made as a second interim dividend rather than a finaldividend for the year to 28 February 2006 in order that their payment does notneed to be delayed until after the Company's next AGM. This will bring totaldividends paid since launch to 22.2p per share. Directorate Ernest Sharp has been a director of the Company since its launch in 2000. Now,albeit still very active, he is 75 and has decided to retire as at the next AGMin September. On behalf of the Board, I would like to thank Ernest for hiscontinuing and very positive valuable contribution and wish him a very happyretirement, which he richly deserves. The Board has agreed that it is appropriate to find a replacement for Ernest andis delighted to report that Barry Dean has now accepted an invitation to jointhe Board. Barry has a vast amount of experience in the venture capitalindustry and, we believe, will be an excellent recruitment. Repurchase of Shares The Directors are conscious that the Company's share price is affected by theilliquidity of its shares in the market resulting from the fact that investorspurchasing "second-hand" shares do not benefit from income tax relief on theirinvestment. The Directors continue to monitor the market in the Company's shares and willmake share purchases when appropriate. During the period the Companyrepurchased 1,324,117 Ordinary Shares of 5p each, at an average price of 95.9pper share, for cancellation. Generally share buybacks are undertaken at a 10%discount to the latest NAV published by the Company. A Special Resolution toallow the Board to continue to purchase shares for cancellation will be proposedat the forthcoming AGM. Proposed amendment to Articles of Association When the Company launched in 2000, it was planned that a resolution would be putto Shareholders at the AGM to take place in 2007 as to whether the Companyshould continue as a VCT. As a result of the small fundraising described above, some Shareholders are nowrequired to hold their shares until June 2008 to ensure they are able to retainthe income tax relief they received on their investment. The Directors aretherefore proposing to amend the Articles of Association such that theresolution for continuation as a VCT is delayed until the AGM in 2008. TheDirectors believe that this minor amendment is clearly in the best interests ofShareholders and therefore recommend that Shareholders vote in favour ofResolution 7 at the forthcoming AGM. Annual General Meeting The Annual General Meeting of the Company will be held at 39 Earlham Street,London WC2H 9LT at 12:15 pm on 21 September 2006. Outlook The Board is very pleased with the performance of the Investment Manager incontinuing to deliver such positive results for your Company to date. Followingthe high number of realisations achieved during the year, your Company now has asignificant level of funds available for new investment. The Board isencouraged by the quality and number of new investment opportunities that theInvestment Manager is able to generate. Market conditions over the forthcoming year might not allow your Company toachieve as many profitable realisations as it has in the last, however a strongfocus will continue on the existing portfolio even though the Manager will bealso more active in making new investments. I look forward to updatingShareholders with the interim results to 31 August 2006. This preliminary announcement was approved by the Board of Directors on 25 May2006. UNAUDITED INCOME STATEMENT for the year ended 28 February 2006 Year ended 28 February 2006 Year ended 28 February 2005 (as restated) Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income 1,030 - 1,030 866 - 866 Gains on "fair value through profit or loss"assets - 1,694 1,694 - 3,248 3,248 1,030 1,694 2,724 866 3,248 4,114 Investment management fees (191) (574) (765) (152) (456) (608) Other expenses (177) - (177) (188) - (188) Return on ordinary activities before tax 662 1,120 1,782 526 2,792 3,318 Tax on ordinary activities (114) 114 - (92) 92 - Return attributable to equity shareholders 548 1,234 1,782 434 2,884 3,318 Return per share 2.3p 5.1p 7.4p 1.9p 12.7p 14.6p All Revenue and Capital items in the above statement derive from continuingoperations. UNAUDITED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year ended 28 February 2006 Year ended 28 February 2005 (as restated) Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Return attributable to equity shareholders 548 1,234 1,782 434 2,884 3,318 Total recognised gains for the year 548 1,234 1,782 434 2,884 3,318 UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 28 February 2006 Year ended Year ended 28 February 2006 28 February 2005 (as restated) £'000 £'000 Opening shareholders' funds 24,785 21,521Adjustment for distribution provided for in 2004 - 762Issue of shares 2,961 997Purchase of own shares (1,276) (374)Total recognised gains for the year 1,782 3,318Distributions paid (1,519) (1,439)Closing shareholders' funds 26,733 24,785 The prior year restatement is described within note 2. UNAUDITED BALANCE SHEET as at 28 February 2006 2006 2005 (as restated) £'000 £'000 £'000 £'000Fixed Assets"Fair value through profit or loss" assets 17,653 21,673 Current assetsDebtors 180 256Current investments 5,700 2,700Cash at bank and in hand 3,484 429 9,364 3,385 Creditors: amounts falling due within one year (284) (273) Net current assets 9,080 3,112 Net assets 26,733 24,785 Capital and reserves Called up share capital 1,201 1,125 Capital redemption reserve 96 29 Special reserve 15,468 16,744 Share premium account 3,759 941 Capital reserve - realised 2,287 858 Capital reserve - unrealised 3,319 4,752 Revenue reserve 603 336 Total equity shareholders' funds 26,733 24,785 Net asset value per Ordinary share 111.3p 110.2p UNAUDITED CASH FLOW STATEMENT for the year ended 28 February 2006 Year ended Year ended 28 February 2006 28 February 2005 £'000 £'000 £'000 £'000 Net cash inflow/(outflow) from operatingactivities 170 (225) Capital expenditurePurchase of investments (2,483) (787)Sale of investments 8,202 2,809Net cash inflow from capital expenditure 5,719 2,022 Equity distributions paid (1,519) (1,439) Management of liquid resourcesPurchase of current investments held asliquidity funds (3,900) (2,700)Withdrawal from liquid funds 900 - (3,000) (2,700) Net cash inflow/(outflow) before financing 1,370 (2,342) FinancingProceeds from share issue 3,097 1,054Share issue costs (136) (58)Purchase of own shares (1,276) (328)Net cash inflow from financing 1,685 668 Increase/(decrease) in cash 3,055 (1,674) NOTES 1. Accounting policies Basis of accounting The Company has prepared its financial statements under UK Generally AcceptedAccounting Practice ("UK GAAP"). Where presentation guidance set out in theStatement of Recommended Practice "Financial Statements of Investment TrustCompanies" revised December 2005 ("SORP") is inconsistent with the requirementsof UK GAAP, the Directors have sought to prepare the financial statements on abasis compliant with the recommendations of the SORP. Except as stated in note2, consistent accounting policies have been applied this year and in the prioryear. The financial statements are prepared under the historical cost conventionexcept for the revaluation of certain financial instruments. Presentation of Income Statement In order to better reflect the activities of an investment trust company and inaccordance with guidance issued by the AITC, supplementary information whichanalyses the income statement between items of a revenue and capital nature hasbeen presented alongside the income statement. The net revenue is the measurethe directors believe appropriate in assessing the Company's compliance withcertain requirements set out in Section 842 Income and Corporation Taxes Act1988. Investments Listed fixed income investments and investments quoted on the AlternativeInvestment Market ("AIM") are designated as "fair value through profit or loss"assets and are initially measured at cost, in accordance with FinancialReporting Standard 26 "Financial Instruments: Measurement". Thereafter theinvestments are measured at subsequent reporting dates at fair value, which isthe bid price with illiquidity discounts applied where deemed appropriate. TheCompany previously valued the investments using middle market price. Thefinancial effect of the change in valuation policy is that the investments arevalued at £380,000 less that if they were valued at mid-price. In respect of unquoted instruments, fair value is established by using theInternational Private Equity and Venture Capital Valuation Guidelines. Where noreliable fair value can be estimated for such unquoted equity investments theyare carried at cost, subject to any provision for impairment. Where an investeecompany has gone into receivership or liquidation the investment, although notphysically disposed of, is treated as being realised. Gains and losses arising from changes in fair value are included in the incomestatement for the year as a capital item and transaction costs on acquisitionsor disposals of investments are charged to capital reserves as a deduction fromproceeds or an addition to costs. It is not the Company's policy to exercise either significant or controllinginfluence over investee companies. Therefore the results of these companies arenot incorporated into the revenue account except to the extent of any incomeaccrued. Income Dividend income from investments is recognised when the shareholders' rights toreceive payment has been established, normally the ex dividend date. Interest income is accrued on a timely basis, by reference to the principaloutstanding and at the effective interest rate applicable, which is the ratethat exactly discounts estimated future cash receipts through the expected lifeof the financial asset to that asset's net carrying amount, and only where thereis reasonable certainty of collection. Expenses All expenses are accounted for on accruals basis. In respect of the analysisbetween revenue and capital items presented within the income statement, allexpenses have been presented as revenue items except as follows: • Expenses which are incidental to the disposal of an investment arededucted from the disposal proceeds of the investment. • Expenses are split and presented partly as capital items where aconnection with the maintenance or enhancement of the value of the investmentsheld can be demonstrated and accordingly the investment management fee andfinance costs have been allocated 25% to revenue and 75% to capital, in order toreflect the directors expected long-term view of the nature of the investmentreturns of the Company. Deferred taxation Deferred taxation is provided in full on timing differences that result in anobligation at the balance sheet date to pay more tax, or a right to pay lesstax, at a future date, at rates expected to apply when they crystallise based oncurrent tax rates and law. Timing differences arise from the inclusion of itemsof income and expenditure in taxation computations in periods different fromthose in which they are included in the financial statements. 2. Changes in accounting policies The Company is required to comply with a number of new UK Financial ReportingStandards (FRS), which now represent UK Generally Accepted Accounting Practice(UK GAAP), in preparing its financial statements for the year ended 28 February2006. These Standards have been introduced as part of the process of aligning UKaccounting principles with International Accounting Standards. As required by FRS 21 "Events after the Balance Sheet Date", dividends toshareholders are accounted for in the period in which the Company is liable topay them rather than in the period in respect of which they are declared. Thecomparative figures for the year have been re-stated accordingly. The effect ofthe adoption of FRS 21 on the reported net assets of the company is as follows: 2005Net assets £'000 As previously reported 23,998Add: proposed dividends not accounted for until paid 787As restated 24,785 FRS 26 "Financial Instruments: Measurement" has also been adopted and theeffects of this are disclosed in note 1. Announcement based on draft accounts (unqualified audit report) The financial information set out in this announcement does not constitute theCompany's statutory accounts for the year ended 28 February 2006 or 28 February2005. The statutory accounts for the year ended 28 February 2006 (not yetsigned by the auditors) will be finalised on the basis of the financialinformation presented by the directors in this preliminary announcement and willbe delivered to the Registrar of Companies following the Company's AnnualGeneral Meeting. The financial information for the year ended 28 February 2005 is derived fromthe statutory accounts for that year which have been delivered to the Registrarof Companies. The auditors reported on those accounts; this report wasunqualified and did not contain a statement under section 237(2) or (3) of theCompanies Act 1985. A copy of the full annual report and financial statements for the year ended 28February 2006 will be printed and posted to shareholders. Copies will also beavailable to the public at the registered office of the Company at 39 EarlhamStreet, London WC2H 9LT. This information is provided by RNS The company news service from the London Stock Exchange