Unicorn Asset Management Regulatory News (UAV)

23 Nov 2005 14:06

Unicorn AIM VCT PLC23 November 2005 Unicorn AIM VCT plc 23 November 2005 Preliminary results for the year ended 30 September 2005 Chairman's Statement The Company continued to make encouraging progress during the year and itsperformance compares favourably with that of most other VCTs. The Net AssetValue (NAV) of the Ordinary Share Fund as at 30 September 2005 was 103.5 penceper share and 109.2 pence per share for the Series 2 ('S2') Share Fund. TheBoard is pleased to recommend a final dividend of 5 pence per share for theOrdinary Fund Shareholders, totalling 10 pence per share for the full year (10pence per share in 2004), and an increased dividend of 1 penny per share for S2Shareholders (0.75 pence per share in 2004). The Board's policy is to maximise the stream of dividend distributions toShareholders from the income and capital gains generated by the portfolio.Whilst the latter objective is likely to take some time for the S2 Share Fund,the goal is to return realised gains to Shareholders whilst maintaining the NAVat around 100 pence per share. Your Company continued to comply with the VCT legislative requirements in theperiod. The Ordinary Share Fund is now four years old and has exceeded theminimum required level of 70% of funds being invested in qualifying investments.Other HM Revenue & Customs tests have been complied with and your Board has beenadvised that the Ordinary Share Fund has maintained its venture capital truststatus. The 70% qualifying target for the S2 Share Fund has to be met bySeptember 2006. In the year to 30 September 2005 the Ordinary Share Fund made thirteen newqualifying investments and four follow-on investments at a total cost of £6.6million. Three of the new qualifying investments were in existing AlternativeInvestment Market (AIM) quoted companies, eight were new admissions to the AIMand two were unquoted investments. The S2 Share Fund participated alongside theOrdinary Share Fund increasing the total invested by that Fund in qualifyinginvestments to £6.0 million. At the year-end the Ordinary Share Fund had 36qualifying investments and the S2 Share Fund had 20 qualifying investments.These figures include two qualifying investments, Belgravium Technologies andDatong Electronics, which began trading shortly after the financial year-end. Ordinary Fund Shareholders who have held their investment for the minimumthree-year term under the VCT regulations, are now able to sell their holdingwithout losing the income tax relief received at the time of investment.Shareholders considering selling shares should be aware that a disposal couldcrystallise the capital gain that may have been deferred when making thisinvestment. Shareholders are therefore advised to consult their financialadviser before making a decision. During the period under review 1,425,000 Ordinary Shares and 20,000 S2 Shareswere bought back for cancellation at a total cost of £1.4 million while 10,225new S2 Shares were issued at 100 pence per share. The Company continues to holdsubstantial reserves and to date has distributed £9.3 million to Shareholdersthrough a regular programme of share buy-backs and dividend distributions. TheBoard will continue to monitor the market in the Company's shares and makefurther market purchases as appropriate. Shareholders may be aware that there have been some recent changes to UKaccounting rules. These will apply to the Company for the first time in thecurrent financial year and further details will be set out in the 2006 InterimReport. One change which will have a direct impact on the NAV of the Company isthe requirement to value quoted investments at the bid price as opposed to usingthe mid-market price. Had bid prices been used for the year-end valuation, theNAV at 30 September 2005 would have reduced from 103.5 pence to 99.9 pence forthe Ordinary Share Fund and from 109.2 pence to 108.0 pence for the S2 ShareFund. The Board is pleased with the progress achieved to date and is confident thatyour Investment Manager's focus on proven, profitable, established businesseswill deliver attractive returns for Shareholders. Peter Dicks Chairman For further information please contact:Sean O'Flanagan, Unicorn Asset Management Limited, Tel: 020 7253 0889 Investment Manager's Review Investment policy It is the aim of the Investment Manager to identify and invest in a diversifiedportfolio of companies that display a majority of the following characteristics: - experienced and well-motivated management;- products and services supplying growing markets;- sound operational and financial controls; and- good cash generation to finance ongoing development allied with a progressive dividend policy. Performance The NAV of the Ordinary Share Fund as at 30 September 2005 was 103.5 pence pershare, representing an increase of 9.6% over the previous year after adding backdividends paid. Since the first allotment on 5 November 2001 the initial NAV ofthe Ordinary Share Fund has increased by 32.2% on a total return basis. The NAV of the S2 Share Fund at 30 September 2005 was 109.2 pence per share,representing an increase of 16.7% over the previous year after adding backdividends paid. Since the first allotment on 5 February 2004 the initial NAV ofthe S2 Fund has increased by 17.4% on a total return basis. The AIM has grown significantly during recent years in the number of companies,the size of companies and the diversity of sectors they serve. The stringentcriteria for AIM qualifying investments means that many constituent companiesare not available for investment and therefore, comparison of performance versusthe AIM indices has become less relevant. Investment strategy The adopted investment policy has avoided over-ambitious start-ups in newmarkets, which require a leap of faith and have been priced as though they havealready succeeded. Instead, the Investment Manager has focused on the strengthof companies' balance sheets and the inherent ability to pay progressivedividends, thereby safeguarding capital and maximising the tax-free incomestream available to Shareholders. AIM market review Despite our concerns at certain sectors of the AIM, specifically the resourcesector (which now represents over 30% of the AIM Index), we believe that thenumber and quality of companies that satisfy our investment criteria isincreasing. Qualifying investments The performance of the qualifying investments made in previous years continuesto be encouraging and the overall quality of the Ordinary Share Fund wasenhanced following the sale of Cobra Bio-Manufacturing, Eckoh Technologies,Ingenta and Screen. Inevitably we have experienced some disappointments duringthe year in particular Centurion Electronics, Invox and LongbridgeInternational. On a more positive note the Ordinary Share Fund received two cashoffers and witnessed excellent results from Glisten, Printing.com and TRLElectronics. In recognition of AttentiV's established market position in the creditmanagement software market the group received a cash offer from a Nordic ITservices company during the year providing a 55% return in just over 12 months.Nectar Taverns successfully created a chain of 29 freehold public houses and a111% return was realised upon exit shortly before the year-end reflecting anuplift in property valuations and resilient trading. Following this success asimilar unquoted vehicle, Amber Taverns, was created using the same structureand management team. In addition, Tellings Golden Miller returned 60 pence pershare via a special dividend following the sale of the London bus division. Thiscompares favourably with the 70 pence per share initially subscribed andreflects the increased focus upon the regional coach business. Your Manager has sought to identify growth businesses that are easy tounderstand but which have significant barriers to entry. Two such examples areeg solutions and Sanastro. eg solutions provides proprietary workflow management software designed toimprove operational efficiencies to large back offices with a focus uponfinancial services. The group is currently operating in one of the fastestgrowing sub-sectors of the IT industry and the new money will provide theambitious management team with additional sales and marketing resource to expandinto the public sector and new geographic regions. Sanastro is an unquoted publishing group with a number of established titlesfocusing upon financial services. Rather than seeking to maximise short-termprofits the group has invested in increased editorial and marketing costs inorder to increase brand recognition and contractual income. Although yourManager remains optimistic about the long-term prospects for the company theBoard has prudently reduced the value of the Company's holding in Sanastro toreflect the impact of increased investment on the forecast results. Buy and build models have proved very popular on the AIM. The new money raisedfor Access Intelligence, Avingtrans, Careforce Group, Lees Foods, MaximaHoldings, Sanderson Group and Urban Dining provides a currency for provenentrepreneurs with a track record of creating significant shareholder value toconsolidate an industry or sector. Access Intelligence provides a range of information and IT services to small andmedium sized businesses and the public sector. The experienced board intends tobuild a business with a high element of recurring revenue through acquisition. Avingtrans was established to create a specialist engineering company focusingon the manufacture of precision engineered components. The group is currentlyachieving record results reflecting the opportunistic nature of the acquisitionscombined with a recovery in the underlying market. Careforce Group provides domiciliary care services, primarily for the elderly intheir own homes. New money was raised to accelerate the rate of growth in amarket with an ageing UK population and the irreversible trend for localauthorities to outsource services to private partners. Lees Foods is a manufacturer of confectionery products which it supplies tomajor UK food retailers. Lees is a well-invested, cash generative, businessseeking to replicate the success of similar vehicles such as Glisten, byexpanding out of the group's core northern heartland, raising brand awarenessand increasing product innovation. Maxima Holdings and Sanderson Group have similar business models developingsoftware modules designed to meet the operational needs of a broad range of UKbased customers. Both businesses benefit from a high element of recurringrevenue due to contracted support and maintenance income and a generalimprovement in business confidence has recently re-invigorated top-line growth.Maxima particularly, has enjoyed a successful debut as a public companyexceeding initial expectations. In order to enable the conservative managementteam to build a high quality business a follow-on investment was made to supportan earnings-enhancing acquisition. Urban Dining was supported as a newly created cash shell to build a substantialquoted restaurant group by acquiring branded concepts. To date the managementteam has successfully completed the acquisition of Tootsies Restaurants, a wellestablished and simple burger bar concept with significant roll-out potential. Your Company has also supported four transactions advised by Marwyn Capital.This relatively new corporate finance boutique has focused upon businessesfacing increased regulation and legislation and has proved effective atexploiting the price differential at which private vendors are willing to selltheir businesses and the multiple the quoted market is willing to pay. Augean acquired two hazardous waste landfill sites in anticipation of newlegislation extending the definition of hazardous waste and restricting themethods of treatment. The group is expected to benefit from upward pressure ongate prices due to a lack of future potential landfill sites combined with anonerous planning and licensing application process. Inspicio was formed as a cash shell to seek opportunities in the inspection andtesting market. Shortly after the year end the group acquired Inspectorate, aglobal verification services business focusing upon the commodities and foodsafety markets. Talarius acquired the Quicksilver high street chain of coin operated gamingcentres. The group has a profitable, highly cash generative core businessproviding the opportunity to consolidate a fragmented industry and develop anonline offering. Zetar acquired Kinnerton, a well-invested niche manufacturer of chocolateconfectionery specialising in childrens' and adult confectionery novelties.Kinnerton provides the experienced management team with the opportunity to builda pan-European food business. The sale of AFA Systems, AttentiV Systems Group, Nectar Taverns and Spring GroveProperty Maintenance to trade buyers reflects the Unicorn investment style andthe increasing maturity of the portfolio. Corporate activity may well be anongoing feature within the portfolio during the next 12 months. The average market capitalisation of the qualifying investments at the financialyear-end increased to over £25 million. In the current financial year 31 of thequalifying investments are forecast to report a profit and 17 are expected topay a dividend. We continue to believe that the pragmatic, and conservativeUnicorn approach of focusing upon proven, established, cash generative businessmodels will serve investors well over the coming years. Non-qualifying portfolio The performance record of the Unicorn Free Spirit Fund and Unicorn MastertrustFund remains excellent and both are amongst the top performing funds withintheir respective sectors from launch. Whilst the relative performance of theUnicorn UK Smaller Companies Fund has been disappointing, the Fund hasnevertheless provided a positive absolute return. Moreover it is believed thatthe contrarian decisions taken by the Fund are likely to be rewarded with aboveaverage returns over the longer term as consumer spending slows and news fromthe industrial and business service sectors of the economy continues to improve. Prospects The Investment Manager is pleased with the progress achieved to date and isconfident that the focus on identifying well-managed, entrepreneurial drivenbusinesses will deliver attractive returns for Shareholders over the longerterm. Non-Statutory analysis between the Ordinary Share and S2 Share Funds Statement of Total Return for the year ended 30 September 2005 Ordinary Share Fund S2 Share Fund Revenue Capital Total Revenue Capital Total £ £ £ £ £ £Gains and losses on - 2,916,084 2,916,084 - 2,581,729 2,581,729investmentsIncome 643,894 858,103 1,501,997 287,897 - 287,897Investment (194,143) (582,428) (776,571) (53,966) (161,899) (215,865)management feesOther expenses (352,913) - (352,913) (164,900) - (164,900) Return on ordinary 96,838 3,191,759 3,288,597 69,031 2,419,830 2,488,861activities beforetaxationTax on ordinary - - - (6,396) 6,396 -activitiesReturn attributable 96,838 3,191,759 3,288,597 62,635 2,426,226 2,488,861to equityshareholdersDividends in respect (166,721) (3,228,953) (3,395,674) (55,179) (102,331) (157,510)of equity shares Transfer (from)/to (69,883) (37,194) (107,077) 7,456 2,323,895 2,331,351reserves Return per ordinaryshare 0.28p 9.34p 9.62p 0.40p 15.39p 15.79p Average number ofshares in issue 34,190,165 15,761,353 Adjustments Total of both Funds (per Statutory Profit and Loss account) Ordinary S2 Shares Shares Fund Fund Capital Capital Revenue Capital Total £ £ £ £ £ Gains and losses on investments (1,128,894) (2,488,232) - 1,880,687 1,880,687 Income 931,791 858,103 1,789,894Investment management fees (248,109) (744,327) (992,436)Other expenses (517,813) (517,813) - Return on ordinary (1,128,894) (2,488,232) 165,869 1,994,463 2,160,332activities before taxationTax on ordinary activities (6,396) 6,396 - Return attributable to (1,128,894) (2,448,232) 159,473 2,000,859 2,160,332equity shareholdersDividends in respect of (221,900) (3,331,284) (3,553,184)equity shares Transfer (from)/to reserves (1,128,894) (2,488,232) (62,427) (1,330,425) (1,392,852) Note: The adjustment columns represent unrealised gains in the year, which arepart of the capital component of the total shareholder return for the year.However, they are not reported in the Profit and Loss account, to which the"Total of both funds" columns reconcile to. These unrealised gains (total being£3,617,126) are however reported as part of the Statement of Total RecognisedGains and Losses. Balance Sheetas at 30 September 2005 Ordinary Share Fund S2 Share Fund £ £Fixed assets Investments 31,956,779 14,767,779 Current assetsDebtors and prepayments 2,254,446 41,956Current investments 2,603,792 3,160,792Cash at bank 49,897 29,131 ----------- ------------ 4,908,135 3,231,879 Creditors: amounts (2,364,386) (803,312)falling due within oneyear ----------- ------------Net current assets 2,543,749 2,428,567 =========== ============Net assets 34,500,528 17,196,346 =========== ============ Capital and reservesCalled up share capital 333,442 157,433Share premium account - 10,148Revaluation reserve 8,252,144 2,529,528Capital redemption 16,555 302reserveSpecial distributable 23,944,613 14,458,547reserveProfit and Loss account 1,953,774 40,388 =========== ============Equity shareholders' 34,500,528 17,196,346funds =========== ============Number of shares in 33,344,234 15,743,314issueNet asset value per 1p 103.47p 109.23pShare Adjustment Total of both funds (see note below) (per Statutory Balance Sheet) £ £ £Fixed assetsInvestments 46,724,558 Current assetsDebtors and (93,280) 2,203,122prepaymentsCurrent investments 5,764,584Cash at bank 79,028 (93,280) 8,046,734Creditors: amounts 93,280 (3,074,418)falling due within oneyear Net current assets 4,972,316 Net Assets - 51,696,874 Capital and reservesCalled up share 490,875capitalShare premium account 10,148Revaluation reserve 10,781,672Capital redemption 16,857reserveSpecial distributable 38,403,160reserveProfit and Loss 1,994,162account Equity shareholders' 51,696,874funds Note: The adjustment above nets off the inter-fund debtor and creditor balances,so that the "Total of both funds" balance sheet agrees to the Statutory balancesheet. Profit and Loss Account For the year ended 30 September 2005 30 September 2005 30 September 2004 Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Gains/(losses) on - 1,880,687 1,880,687 - 941,964 941,964realisation ofinvestmentsIncome 931,791 858,103 1,789,894 854,348 - 854,348Investment (248,109) (744,327) (992,436) (231,936) (695,808) (927,744)management feesOther expenses (517,813) - (517,813) (442,889) - (442,889) ------------- --------------- -------------- -------------- ------------- --------------Profit on ordinary 165,869 1,994,463 2,160,332 179,523 246,156 425,679activities beforetaxationTax on ordinary (6,396) 6,396 - - - -activities ------------- -------------- ------------- ------------- ------------- -------------Profit on ordinary 159,473 2,000,859 2,160,332 179,523 246,156 425,679activities aftertaxation for thefinancial yearDividends in (221,900) (3,331,284) (3,553,184) (118,148) (3,476,923) (3,595,071)respect of equityshares ------------- --------------- -------------- ------------- -------------- -------------Retained profit/ (62,427) (1,330,425) (1,392,852) 61,375 (3,230,767) (3,169,392)(loss) for the yeartransferred to/(from) reserves ======== ========= ========= ======== ======== ========Earnings per shareOrdinary Shares 6.32p 1.15pS2 Shares 0.00p 0.20p All the items in the above statement derive from continuing operations. Statement of Total Recognised Gains and Lossesfor the year ended 30 September 2005 30 September 2005 30 September 2004 Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Profit for the 159,473 2,000,859 2,160,332 179,523 246,156 425,679yearUnrealised gains 3,617,126 3,617,126 1,763,696 1,763,696on revaluation of - -investmentsTotal recognised 159,473 5,617,985 5,777,458 179,523 2,009,852 2,189,375gains during theyear Return per share:Ordinary Shares 0.28p 9.34p 9.62p 0.20p 5.80p 6.00pS2 Shares 0.40p 15.39p 15.79p 0.96p (0.11)p 0.85p Note of Historical Cost Profits and Lossesfor the year ended 30 September 2005 30 September 2005 30 September 2004Profit on ordinary 2,160,332 425,679activities beforetaxation Realisation of 885,981 1,639,713revaluation gainsof previous years Historical cost 3,046,313 2,065,392profit on ordinaryactivities beforetaxation Historical cost (506,871) (1,529,679)profit/(loss) forthe year aftertaxation anddividends Balance Sheet as at 30 September 2005 30 September 2005 30 September 2004 £ £Fixed assets Investments 46,724,558 40,629,972 Current assetsDebtors and prepayments 2,203,122 126,077Current investments 5,764,584 7,606,909Cash at bank 79,028 2,861,302 ----------- ------------ 8,046,734 10,594,288 Creditors: amounts falling due (3,074,418) (365,844)within one year ----------- ------------Net current assets 4,972,316 10,228,444 =========== ============Net assets 51,696,874 50,858,416 =========== ============Capital and reservesCalled up share capital 490,875 505,223Share premium account 10,148 -Revaluation reserve 10,781,672 8,050,527Capital redemption reserve 16,857 2,407Special distributable reserve 38,403,160 42,147,756Profit and loss account 1,994,162 152,503 =========== ============Equity shareholders' funds 51,696,874 50,858,416 =========== ============Net asset value per share of 1 Basic Basicpence eachOrdinary Shares 103.47p 103.49pS2 Shares 109.23p 94.43p Cash Flow Statement for year ended 30 September 2005 Year ended Year ended 30 September 2005 30 September 2004Operating activities £ £Dividends received 1,575,700 477,923Deposit and similar interest 11,245 378,865Investment management fees paid (992,436) (927,744)Other cash payments (487,777) (397,951) ----------- -----------Net cash inflow/(outflow) from 106,732 (468,907)operating activities Investing activitiesPurchase of investments (10,765,279) (19,522,977)Sale of investments 9,196,261 12,709,837 ----------- ----------- (1,569,018) (6,813,140) Equity dividendsPayment of dividends (1,846,688) (3,634,240) ----------- -----------Net cash outflow before financing (3,308,974) (10,916,287)and liquid resource management FinancingIssue of S2 shares (net of expenses) 10,250 14,903,715Purchase of own shares (1,325,875) (188,408) ----------- ----------- (1,315,625) 14,715,307Management of liquid resourcesIncrease/(decrease) in current 1,842,325 (994,601)investments =========== ============Net (increase)/decrease in cash (2,782,274) 2,804,419 =========== ============ Reconciliation of net revenue before taxation to net cash outflow from operatingactivities 2005 2004 £ £Profit/(loss) on ordinary activities before taxation 2,160,332 425,679 (Gains)/losses on realisation of investments (1,880,687) (941,964)Decrease/(Increase) in debtors (155,164) 1,896Increase in creditors and accruals 31,440 45,482Dividend receivable converted into an investment (49,189) - Net cash outflow from operating activities 106,732 (468,907) Notes 1. The audited results for the year ended 30 September 2005 have beenprepared under the historical cost convention, modified to include therevaluation of investments, and in accordance with applicable accountingstandards and, to the extent that it does not conflict with the Companies Act1985, the 2003 Statement of Recommended Practice, 'Financial Statements ofInvestment Trust Companies. 2. These are not full accounts in terms of section 240 of theCompanies Act 1985. The Annual Report for the year to 30 September 2005 will besent to shareholders shortly and will then be available for inspection at OneJermyn Street, London SW1Y 4UH, the registered office of the Company.Statutory accounts will be delivered to the Registrar of Companies after theAnnual General Meeting. The audited accounts for the year ended 30 September2005 contain an unqualified audit report. 3. In accordance with the policy statement published under "Management, Fees and Administration" in the Company's prospectus dated 2 October2001, the Directors have charged 75% of the investment management expenses tothe capital reserve. 4. Total earnings after taxation for the year were £2,160,332 (2004:£425,679), comprising a profit on the Ordinary Shares Fund after taxation of£2,159,703 (2004: £402,389), and a profit after taxation on the S2 Shares Fundof £629 (2004: £23,290). The basic earnings per Ordinary Share is based on thenet profit from ordinary activities and on 34,190,165 (2004:34,847,936) OrdinaryShares, being the weighted average number of Ordinary Shares in issue during theyear. The basic earnings per S2 Share is based on the net profit from ordinaryactivities and on 15,761,353 (2004: 11,564,057) S2 Shares, being the weightedaverage number of S2 Shares in issue during the year. The revenue return per Ordinary Share is based on the net revenue fromordinary activities after taxation of £96,838 (2004: £68,377) and on 34,190,165(2004: 34,847,936) Ordinary Shares, being the weighted average number ofOrdinary Shares in issue during the year. The revenue return per S2 Share isbased on the net revenue from ordinary activities after taxation of £62,635(2004: £111,146) and on 15,761,353 (2004: 11,564,057) S2 Shares, being theweighted average number of S2 Shares in issue during the year. The capital return per Ordinary Share is based on net realised capitalgains of £1,787,190 (2004: £941,964), on net unrealised capital gains of£1,128,894 (2004: £1,688,240), capital income of £858,103 (2004:£nil) capitalexpenses of £582,428 (2004: £607,952) and on 34,190,165 (2004: 34,847,936)Ordinary Shares, being the weighted average number of Ordinary Shares in issueduring the year. The capital return per S2 Share is based on net realisedcapital gains of 93,497 (2004: £nil), on net unrealised capital gains of£2,488,232 (2004: £75,456), capital expenses of £155,503 (2004: £87,856) and on15,761,353 (2004: 11,564,057) S2 Shares, being the weighted average number of S2Shares in issue during the year. 5. The Ordinary fund has paid a dividend of 5 pence per Ordinary Shareduring the year, costing £1,728,462. A final dividend of 5 pence per OrdinaryShare will be paid to Ordinary Fund Shareholders on 30 January 2006 toshareholders on the register on 6 January 2006, costing £1,667,212 in total. 0.5pence of this proposed dividend is an income dividend and the remaining 4.5pence represents a capital dividend. 6. A final dividend of 1 penny per S2 Share will be paid to S2Shareholders on 30 January 2006 to shareholders on the register on 6 January2006, costing £157,433 in total. 0.35 pence of this proposed dividend is anincome dividend and the remaining 0.65 pence represents a capital dividend. 7. The Annual General Meeting of the Company will be held at 11.00 amon 20 January 2006 at One Jermyn Street, London SW1Y 4UH. This information is provided by RNS The company news service from the London Stock Exchange