TIDMAIT
RNS Number : 1330N
Active Capital Trust PLC
25 September 2012
To: RNS
From: Active Capital Trust plc
Date: 25 September 2012
Audited results for the year ended 31 May 2012
The Board of Active Capital Trust plc announces the audited
results of the Company for the year ended 31 May 2012.
Chairman's Statement
The past year has been a difficult time for the small quoted
companies sector. Over the year to 31 May 2012, the FTSE Small Cap
Index fell by 12.2% and the FTSE AIM Index fell by a more dramatic
22.4%. The fall in the FTSE AIM Index reversed all but 0.6% of the
29.7% gain posted during the year to 31 May 2011 making the
performance of this sector of the market flat over a two year
period.
Your Company's portfolio has performed well by comparison and
the Net Asset Value ('NAV') per share, as adjusted for capital
repayments, posted an 11% gain over the year.
In the Annual General Meeting in August 2009, shareholders
approved a new Investment Objective and Policy to have the
portfolio of Active Capital managed to realise the investments in
an orderly manner, with a view to balancing the return of cash to
shareholders and maximising value. The realisation process was
started when the NAV per share amounted to some 51 pence and at the
time the Company retained GBP10.4 million of bank debt. From the
start of the realisation period, total returns by way of cash
distributions to shareholders now amounts to 55 pence per share, 8%
more than the NAV at the start of our process. Over this same
period the FTSE AIM Index has increased by around 27%. In addition,
the remaining portfolio has added a further 16.4 pence to
shareholder returns, bringing the total return after all running
costs of the Company to 40% over the course of the realisation
process.
Realisations
The Managers have been working to an agreed strategy of
maximising the value of the portfolio by seeking to achieve
identified targets for each holding rather than short term
realisations that could have resulted in discounts to prevailing
valuations.
A number of strategies have been identified for each holding and
it is pleasing that during the year, further progress has been made
in achieving the objectives. The Managers took advantage of Netcall
reaching the targeted share price and this holding was sold in the
market. In addition, the Managers agreed to a sale of AI Claims to
Quindell Portfolio during the year. This transaction allowed 50% of
the holding to be realised for cash at a premium to the prevailing
share price at the time and the balance of the holding was
converted into shares in Quindell. The Quindell shares are more
liquid than the AI shares were and a strategy is in place to
achieve further cash flow from realisations as Quindell achieves
set targets.
These two realisations allowed the most recent capital
distribution of 6 pence per share to be made to shareholders.
Remaining Portfolio
Over 99% of the value of the Company's investments is made up by
5 holdings. These are AorTech International, Cambridge Sensors, IS
Solutions, Quindell Portfolio and Transense Technologies.
Some of the recent developments in these remaining holdings are
summarised below (valuation and percentage of investment figures
are as at 31 May 2012):-
AorTech International Value GBP3,050,000 34.8% of
Investments
AorTech has recently announced the outcome of a strategic review
carried out by its board which is now chaired by Bill Brown of
Bluehone, our Fund Managers. This review has concluded that
AorTech's technology in bio-stable polymers adds significant value
to medical devices that incorporate the technology into their
devices as evidenced by the statements made by St Jude Medical
which licenses Elasteon to coat all of their pacing leads and how
that has resolved historic abrasion problems. AorTech is the sole
supplier of Elasteon to St Jude which St Jude brands as Optim. The
business model previously adopted, whilst demonstrating the value
of the polymer in device applications, has not yet generated the
levels of income required to sustain the business on a long term
basis. The board of AorTech believes that shareholder value can
best be delivered by the technologies individually or the company
in its entirety becoming part of a larger medical company. With
this in mind they have announced a formal sale process and to that
end they have appointed Piper Jaffray to conduct this sale
process.
Cambridge Sensors Value GBP2,150,000 24.5% of Investments
Cambridge Sensors continues to trade profitably and generate
cash. The company has recently paid its maiden dividend to
shareholders demonstrating the Board's confidence in its ability to
continue to generate cash. The major development over the past year
has been to open its own distribution business in North America
which has been executed efficiently and the company has
successfully converted the vast majority of contracts that had
previously been under the control of a third party distributor. In
addition, the UK business continues to grow with good penetration
being made into the Primary Care Trusts and the placement of meters
for testing diabetics is at record levels.
IS Solutions Value GBP1,581,000 18.0% of Investments
IS Solutions is a well managed systems integrator focused on the
internet with key skills in content, document management and
analytics. The company has been successfully growing its
profitability over the last few years despite many IT budgets being
constrained by ever shorter payback requirements. This has been
achieved by deploying the latest technologies and increasing the
level of recurring revenues from a developing and expanding process
of turning customers into partners. The key skills of an in depth
knowledge of both internet and analytics places the company in a
strategically important position compared to its larger
competitors.
Quindell Portfolio Value GBP1,493,000 17.0% of Investments
This holding was acquired during the year as a result of
Quindell's takeover of AI Claims. Quindell is a rapidly growing and
acquisitive business providing consultancy and cloud based software
that enables leading brands to optimise supply chain management and
increase sales. A number of deals have been in the insurance sector
and new contracts have been announced. Recent broker notes have
indicated that share price targets are in excess of double the
valuation of the share consideration issued on the acquisition of
AI Claims.
Transense Technologies Value GBP425,000 4.9% of Investments
Significant progress has been made over the past year in
developing the company from a dependence on future royalty revenue
to a company selling products incorporating its technology. The new
strategy has been able to start generating revenues in the short-
term whilst maintaining the potential from the longer term
projects.
Proposals for a Members' Voluntary Liquidation
In the circular issued to shareholders in August 2009 the
Directors indicated that a general meeting of the Company would be
convened to vote on a voluntary winding up or reconstruction of the
Company once substantially, all of the Company's portfolio had been
realised.
The portfolio is now in the final stages of realisation and
given the running costs and the reduced size of the Company the
Directors believe that a Members' Voluntary Liquidation should be
recommended to shareholders. The Directors will liaise with the
liquidator in respect of the realisation of the remaining
investment portfolio with a view to achieving the best possible
outcome for shareholders through a continuation of the realisation
strategies already identified for each holding.
It is the intention that proposals will be sent to shareholders
within the next few weeks seeking their approval to place the
Company into Members' Voluntary Liquidation at a General Meeting of
the Company to be held on or about the same date as the Annual
General Meeting to be held in November.
Jon Pither
Chairman
For further information contact:
Bill Brown, Investment Manager
Bluehone Investors LLP 020 3206 7335
Derek Osborne, Company Secretary
F&C Asset Management plc 0207 628 8000
Income Statement
For the year ended 31 May 2012
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
Gains on investments - 1,402 1,402
Income 3 197 - 197
Investment management fee 6 (161) - (161)
Other expenses (330) - (330)
Return on ordinary activities
before tax (294) 1,402 1,108
Tax on ordinary activities - - -
Return attributable to
Ordinary Shareholders (294) 1,402 1,108
Transfer (from)/to reserves (294) 1,402 1,108
Return per share:
Ordinary (0.57)p 2.73p 2.16p
The total column of the Income Statement is the profit and loss
account of the Company. The supplementary revenue and capital
columns are both prepared under guidance published by the
Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required
as all gains and losses of the Company have been reflected in the
above Income Statement.
Income Statement
For the year ended 31 May 2011
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
Gains on investments - 595 595
Liquidation distribution 6 - (8) (8)
Income 3 159 - 159
Investment management fee 6 (503) - (503)
Other expenses (417) - (417)
Return on ordinary activities
before tax (761) 587 (174)
Taxation on ordinary activities 3 - 3
------- ------- -------
Return attributable to
Ordinary Shareholders (758) 587 (171)
Transfer from reserves (758) 587 (171)
Return per share:
Ordinary (1.47)p 1.14p (0.33)p
Balance Sheet
As at As at
31 May 31 May
2012 2011
Notes GBP'000 GBP'000
Current assets
Investments 8,759 10,247
Cash at bank and on deposit 318 763
______ ______
9,077 11,010
Creditors: amounts falling due within
one year
Creditors (647) (602)
______ ______
Net assets 8,430 10,408
Capital and Reserves
Called-up share capital 52 52
Special reserve 5,750 8,836
Capital reserve 19,003 17,601
Capital redemption reserve 39 39
Revenue reserve (16,414) (16,120)
Shareholders' funds 8,430 10,408
Net asset value per share:
Ordinary 5 16.4p 20.2p
Reconciliation of Movements in Shareholders' Funds
For the year ended 31
May 2012
Total
Called Capital Share-holders'
up Share Special Capital Redemption Revenue Funds
Capital Reserve Reserve Reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening shareholders'
funds 52 8,836 17,601 39 (16,120) 10,408
Return of capital to
shareholders - (3,086) - - - (3,086)
Return attributable to
ordinary shareholders - - 1,402 - (294) 1,108
Closing shareholders'
funds 52 5,750 19,003 39 (16,414) 8,430
For the year ended 31
May 2011
Total
Called Capital Share-holders'
up Share Special Capital Redemption Revenue Funds
Capital Reserve Reserve Reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening shareholders'
funds 52 19,638 17,014 39 (15,362) 21,381
Return of capital to
shareholders - (10,802) - - - (10,802)
Return attributable to
Ordinary Shareholders - - 587 - (758) (171)
Closing shareholders'
funds 52 8,836 17,601 39 (16,120) 10,408
Cash Flow Statement
For the year ended 31 May 2012
2012 2011
GBP'000 GBP'000
Operating activities
Investment income received 191 182
Deposit interest received 6 12
Investment management fees paid (120) (349)
Liquidation distribution - 482
Other cash payments (326) (342)
Net cash outflow from operating activities (249) (15)
Taxation - 3
Capital expenditure and financial investment
Disposals of investments 2,890 5,509
Net cash inflow from capital expenditure
and financial investment 2,890 5,509
Net cash inflow before financing 2,641 5,497
Financing
Return of capital to shareholders (3,086) (10,802)
Net cash outflow from financing (3,086) (10,802)
Decrease in cash in the year (445) (5,305)
Reconciliation of net cash flow to
movement in net debt
Decrease in cash (445) (5,305)
Opening net cash 763 6,068
Closing net cash 318 763
Principal Risks and Risk Management
The Company's assets consist mainly of listed and quoted
securities and its principal risks are therefore market-related.
More detailed explanations of these risks and the way in which they
are managed are contained in note 9. Other risks faced by the
Company include the following:
-- External investor risks - any events or developments which
can affect the general level of shares prices including, for
instance, terrorism, disease, protectionism, inflation or
deflation, economic recessions and movements in interest rates.
-- Investment and strategic - inappropriate strategy, asset
allocation, diversification, borrowing policy and stock selection
can all lead to poor returns for shareholders.
-- Regulatory - breach of regulatory rules might lead to a
suspension of the Company's stock exchange listing, financial
penalties or a qualified audit report. Breach of Section 1158 of
the Corporation Taxes Act 2010 rules may lead to the Company being
subject to capital gains tax.
-- Reputational - inadequate or failed controls might result in
breaches of regulations or loss of shareholder trust, thereby
affecting the discount at which the shares trade to their net asset
value.
-- Operational - failure of the accounting systems or disruption
to its business might lead to an inability to provide accurate
reporting and monitoring, again leading to a loss of shareholders'
confidence.
-- Financial - inadequate controls might lead to
misappropriation of assets. Inappropriate accounting policies or
failure to comply with accounting standards might lead to
misreporting or breaches of regulations.
-- Market Risk - investments in AiM-traded companies or PLUS
companies, by their nature, involve a higher degree of risk than
investment in companies traded on the main market. In particular,
smaller companies often have limited product lines, markets or
financial resources and may be dependent for their management on a
smaller number of key individuals. In addition, the market for
stock in smaller companies is often less liquid than that for stock
in larger companies, bringing with it potential difficulties in
acquiring, valuing and disposing such stock.
-- Liquidity Risk - The Company's investments may be difficult
to realise. The fact that a share is traded on AiM does not
guarantee its liquidity. The spread between the buying and selling
price of such shares may be wide and thus the price used for
valuation may not be achievable.
In the mitigation and management of these risks, the Board
regularly monitors the investment environment, the management of
the Company's investment portfolio and applies the principles
detailed in the internal control guidance issued by the Financial
Reporting Council.
Statement of Directors' Responsibilities in Respect of the
Annual Financial Report
In accordance with Chapter 4 of the Disclosure and Transparency
Rules, we confirm that to the best of our knowledge, in respect of
the annual report for the year ended 31 May 2012, of which this
statement of results is an extract:
-- The financial statements have been prepared in accordance
with applicable UK Accounting Standards, on a break-up basis as
having assessed the ability of the Company to continue as a going
concern, management is conducting an orderly realisation of its
investment portfolio, and give a true and fair view of the assets,
liabilities, financial position and loss of the Company;
-- The Manager's Review includes a fair review of the important
events that have occurred during the financial year and their
impact on the financial statements;
-- The principal risks section of the Report of the Directors
and Business Review describes the principal risks and uncertainties
for the forthcoming financial year; and
-- The Annual Report includes details of related party
transactions that have taken place during the financial year.
On behalf of the Board
Jon Pither
Director
Notes
1. The financial statements have been prepared under UK
Generally Accepted Accounting Practice ("UK GAAP") and in
accordance with guidelines set out in the Statement of Recommended
Practice issued in January 2009 for Investment Trusts and Venture
Capital Trusts, issued by the Association of Investment
Companies.
Given that the Company is conducting an orderly realisation of
its investment portfolio, the Directors do not consider the going
concern basis to be appropriate. These financial statements have
therefore been prepared on a break-up basis. In applying this
basis, assets and liabilities continue to be stated at their fair
values which materially equate to their residual values. A
provision has been made for estimated costs to be incurred in
relation to the realisation of the investment portfolio.
2. Basic return per ordinary share is based on a weighted
average of 51,437,364 ordinary shares in issue (2011: same).
3. Income for the year to 31 May 2012 is derived from:
Year to 31 May Year to 31 May
2012 2011
GBP'000 GBP'000
Franked investment income 188 102
Unfranked investment
income 3 47
Deposit interest 6 10
___ ___
197 159
4. No dividend will be paid in respect of the year to 31 May 2012 (2011:nil).
5. The Basic NAV per Ordinary Share is calculated on Ordinary
Shareholders' funds of GBP8,430,000 (2011:GBP10,408,000) and
51,437,364 (2011:same) ordinary shares.
6. Investment Management Fee
Year to 31 Year to 31
May 2012 May 2011
GBP'000 GBP'000
Investment management fee - basic
fee 120 125
- realisation fee - 13
- equity appreciation fee 41 365
161 503
The equity appreciation fee equal to 5 per cent. of any value
returned to shareholders in excess of a hurdle return (and, for
this purpose, the hurdle return will be an amount equal to 52 pence
per share as increased at the rate of 7.5 per cent. per annum with
effect from 1 July 2009, such increase to be compounded daily) has
been accrued and will only become payable when at least the hurdle
return has been returned to shareholders. As at 31 May 2012 the
hurdle return, after allowing for returns of capital already made
to shareholders of 55 pence per share, was 1.37 pence per
share.
The Company merged with The AIM Trust plc in July 2003 and
received a liquidation distribution of GBP400,000 during the year
ended 31 May 2009, in respect of VAT paid on investment management
fees by The AIM Trust plc in respect of the period 1 January 2001
to the date of the merger. The Company expected to receive a
further distribution of GBP490,000 and this was recognised in the
accounts for the year ended 31 May 2010. During the year ended 31
May 2011 the Company received GBP482,000 in respect of this
distribution.
7. Post Balance Sheet Event
As at 24 September 2012 the Company's Net Asset Value was 14.7
pence per share.
8. The Annual General Meeting will be held on 21 November 2012.
9. This announcement is not the Company's statutory accounts.
The statutory accounts for the year ended 31 May 2011 have been
delivered to the Registrar of Companies and have received an audit
report which was unqualified and did not contain any emphasis of
matter.
The Annual Report for the year ended 31 May 2012 will be sent to
shareholders during October 2012 and will be available for
inspection at Exchange House, Primrose Street, London, the
registered office of the Company. The full Annual Report and
Accounts will be available on the Company's website,
www.activecapitaltrust.co.uk.
10. Financial instruments
The Company's financial instruments comprise its investment
portfolio, cash balances, debtors and creditors that arise directly
from its operations. As an investment trust the Company holds a
portfolio of financial assets in pursuit of its investment
objective.
Listed and quoted investments held are valued at fair value. For
listed and quoted securities this is the bid price. The unquoted
holdings are valued by the Directors at their fair valuation on the
basis of all the information available to them at the time of the
valuation which is accordance with International Private Equity and
Venture Capital valuation guidelines. The fair value of all other
financial assets and liabilities is represented by their carrying
value in the Balance Sheet. The fair value of the loans is not
materially different from the carrying value in the Balance Sheet.
Cash which is held in variable rate bank accounts, can be withdrawn
on demand with no penalty.
The main risks that the Company faces arising from its financial
instruments are:
1. market price risk, being the risk that the value of
investment holdings will fluctuate as a result of changes in market
prices caused by factors other than interest rate or currency rate
movements;
2. interest rate risk, being the risk that the future cash flows
of a financial instrument will fluctuate because of changes in
market interest rates;
3. credit risk, being the risk that a counterparty to a
financial instrument will fail to discharge an obligation or
commitment that it has entered into with the Company; and
4. liquidity risk, being the risk that the Company may not be
able to liquidate quickly its investments to meet its financial
obligations.
The Company's financial instruments are predominantly
denominated in sterling, therefore, currency risk arising from
exchange rate fluctuations has no material affect on profit or
loss, or Shareholders' funds.
Market price risk
The management of market price risk is part of the fund
management process and is typical of equity investment. The
portfolio is managed with an awareness of the effects of adverse
price movements through detailed and continuing analysis with an
objective of maximising overall returns to shareholders. The
Managers do not use derivatives to manage portfolio risk.
Interest rate risk - floating rate
When the Company decides to hold cash balances, all balances are
held on variable rate bank accounts yielding rates of interest
linked to bank base rate which at 31 May 2012 was 0.5 per cent
(2010:0.5 per cent). The Company's policy is to hold cash in
variable rate bank accounts.
Credit risk
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Company.
The Company's principal financial assets are bank balances and
cash and other receivables which represent the Company's maximum
exposure to credit risk in relation to financial assets. The
Company did not have any exposure to any financial assets which
were past due or impaired at the period end.
The Company is exposed to potential failure by counterparties to
deliver securities for which the Company has paid, or to pay for
securities which the Company has delivered. A list or pre-approved
counterparties used in such transactions is maintained and
regularly reviewed by the Manager, and transactions must be settled
on a basis of delivery against payment. Broker counterparties are
selected based on a combination of criteria, including credit
rating, balance sheet strength and membership of a relevant
regulatory body. Risk relating to unsettled transactions is
considered to be small due to the short settlement period involved
and the high credit quality of the brokers used. The rate of
default in the past has been insignificant.
All of the assets of the Company, other than cash deposits, are
held by JP Morgan Chase Bank, the Company's custodian. Bankruptcy
or insolvency of the custodian may cause the Company's rights with
respect to the securities held by the custodian to be delayed or
limited. The Board monitors the Company's risk by reviewing the
custodian's internal control reports.
The credit risk on liquid funds and derivative financial
instruments is limited because the counterparties are banks with
high credit ratings, rated normally AA or higher, assigned by
international credit rating agencies. Bankruptcy or insolvency of
such financial institutions may cause the Company's ability to
access cash placed on deposit to be delayed or limited. The Company
has no significant concentration of credit risk with exposure
spread over a number of counterparties.
Liquidity risk
The Company's financial instruments include investments in
AiM-traded companies and companies quoted on the PLUS market, which
by their nature, involve a higher degree of risk than investments
in the main market. As a result, the Company may not be able to
liquidate quickly some of these investments at an amount close to
their fair value in order to meet its liquidity requirements.
The Company's listed securities are considered to be readily
realisable as they are traded on the London Stock Exchange.
The Company's liquidity risk is managed on an ongoing basis by
the Investment Manager. The Company's overall liquidity risks are
monitored on a quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued
expenses.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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