RNS Number:5121M
Electra Kingsway VCT 2 PLC
24 January 2008
Electra Kingsway VCT 2 Plc ("the Company" or "the Fund")
Unaudited Preliminary Results for the year ended 30 September 2007
Financial Highlights
Year ended 30 September 2007 2006
Net assets �34.2m �36.9m
Net asset value per ordinary share 100.8p 108.0p
Dividend paid per ordinary share 1.5p 1.0p
Cumulative Return to Shareholders since Launch
Dividends paid per ordinary share 2.5p 1.0p
Net asset value plus dividends paid per ordinary share 103.3p 109.0p
The Board has declared an interim dividend of 1.0p per ordinary share, in
respect of the year to 30 September 2008, which will be paid on 14 March 2008 to
ordinary shareholders on the Register of Members at the close of business on 1
February 2008.
A copy of the Chairman's Statement, Investment Manager's Report and Unaudited
Preliminary Announcement are attached.
This unaudited preliminary announcement for the year ended 30 September 2007
does not constitute the statutory financial statements of the Company for the
year ended 30 September 2007 within the meaning of Section 240 of the Companies
Act 1985. Those financial statements have not yet been delivered to the
Registrar, nor have they been reported upon yet by the auditors.
The Report and Accounts will be sent to shareholders in January 2008 and will
thereafter be available from the Company's registered office at Paternoster
House, 65 St Paul's Churchyard, London EC4M 8AB. The Annual General Meeting
will be held on 27 February 2008 at 10.30pm, or, if later, immediately following
the conclusion of the Annual General Meeting of Electra Kingsway VCT Plc, to be
held at 10.00am on the same day, at the registered office address as stated
above.
For further information:
Nick Ross, Electra Kingsway VCT 2 Plc: 0207 214 4200
Investment Objective
The Company's objective is to achieve long term capital gains and tax free
dividends to its shareholders. This will be achieved by investing the majority
of the Company's funds in a portfolio of qualifying investments. Venture Capital
Trusts allow investors significant tax benefits provided that the Fund complies
with the VCT investment rules. These rules are designed to encourage venture
capital investment in smaller companies.
Investment Strategy
The strategy is to invest in a portfolio of qualifying unquoted and AIM listed
companies which are well diversified by sector focus. As these investments
mature the Investment Manager will seek to sell them at a capital profit and
distribute the uplift as a dividend. The original capital will be reinvested
into new qualifying companies. This strategy should ensure long term capital
growth and a regular flow of dividends to shareholders.
The Fund will co-invest alongside the other Electra Kingsway VCTs which will
enable shareholders to participate in larger unquoted transactions, which tend
to have a lower risk profile than smaller venture capital investments. The
majority of unquoted investments are structured in such a way as to give the
Fund downside protection with significant voting rights.
The Fund will also invest up to 30% of its assets in a combination of two
managed funds: Electra Private Equity and Electra Active Management. These funds
enable further portfolio diversification.
Qualifying Investments
Qualifying companies tend to be small companies that have higher risk profiles
than larger well established companies. The Investment Manager seeks to reduce
the risk of investing in these by selecting companies that are well managed and
have a proven and sustainable business plan. Investments are also selected on
the basis of their potential to deliver long term capital growth. This often
entails building companies through organic growth and bolt on acquisitions. The
holding period for investment is typically five years after which time it would
be hoped to achieve a profitable exit.
Chairman's Statement
Overview
As at 30 September 2007 the net asset value was 100.8p per ordinary share.
Including dividends paid to date, this represents an overall uplift of 9.3%
since your Fund began in 2004. However, in the 12 months to end-September 2007
there was a fall of 5.2%, mainly due to a decline in the AIM portfolio and two
write-downs of unquoted companies. The portfolio now has a broad range of
investments, the majority of which are unquoted.
By 30 September 2007, the Company had met the VCT qualification requirements.
Portfolio Activity
A number of new investments were made during the year, mostly in unquoted
companies where the Investment Manager has identified good growth potential
underpinned by a strong management team. The Fund has benefited from the
co-investment arrangements with Electra Kingsway VCT Plc and Electra Kingsway
VCT 3 Plc, which have allowed it to invest in larger, more profitable companies
with good underlying controls. A good recent example was the investment in Fin
Machine Company, a manufacturer of capital equipment to the motor industry,
where the three Electra Kingsway VCTs committed a total of �5.5 million.
In general, progress in the portfolio has been satisfactory, despite the
weakness of the AIM holdings. A number of investee companies have reported good
underlying trading, and this has been reflected in higher valuations for some of
the unquoted companies. More details of these and new investments made in the
year are in the Investment Manager's Review.
Dividends
During the year an interim dividend of 1.5p per ordinary share was paid to
shareholders on 7 August 2007, bringing the total dividend since inception to
2.5p per ordinary share.
The Board has declared an interim dividend of 1.0p per ordinary share, in
respect of the year to 30 September 2008. It will be paid on 14 March 2008 to
ordinary shareholders on the Register of Members at the close of business on 1
February 2008.
Share Buybacks
The Company has an arrangement to buy back shares at a 10% discount to the last
published net asset value per share, subject to a limit approved by
shareholders. If an investor wants to sell shares back to the Company, he or she
should contact the Investment Manager. During the year the Company bought
226,125 of its own ordinary shares for cancellation.
C share Issue
A �25 million C share issue was approved by shareholders at an Extraordinary
General Meeting held on 18 October 2007. This will increase the diversity of the
portfolio, allow the Investment Manager to continue to invest in larger unquoted
companies, and spread the Fund's running costs borne by shareholders. The
Investment Manager will be marketing this issue until April 2008. Interested
shareholders should contact the Investment Manager.
March 2007 Budget
The 2007 Budget made further changes to VCT rules, which will have some impact
on the industry's future funding. Although none of the changes affect your
existing Fund, the legislation's two main changes limit future VCTs to investing
in companies with gross assets of less than �7 million and fewer than 50
employees.
The Investment Manager
In 2007, the investment management team established a limited liability
partnership ("LLP") called Acuity Capital LLP ("Acuity Capital"), which is owned
by members of the management team. The team is in negotiations to acquire from
the Electra Partners Group a majority interest in Electra Quoted Management, the
Investment Manager of the Company. The Board believes that this will be
beneficial to shareholders as it will assist the Investment Manager to
incentivise existing employees and recruit high calibre individuals to the team.
Acuity Capital will maintain close ties with the Electra Partners Group, which
will have a minority shareholding in Acuity Capital.
In order to reflect the formation of Acuity Capital LLP, the Board recommends to
shareholders that the name of your Fund be changed to Acuity VCT 2 Plc. A
special resolution proposing this name change will be put to shareholders at the
forthcoming AGM.
Outlook
Markets are now much more volatile than they were earlier in the year, and
economic prospects more uncertain. This makes the Investment Manager's job
harder, and will test the quality of the Fund's portfolio.
Rupert Pennant-Rea
Chairman
Investment Manager's Review
During the period under review a further �14.6 million was invested in
qualifying companies which ensured that the Company met its 70% investment
qualification target. By value, over 75% of the qualifying investments are in
unquoted companies where the Investment Manager has identified growth
opportunities. In particular, a number of companies have been acquired on the
basis of buy and build opportunities within fragmented market sectors. An
example of this is Munro Global which, since our original investment, has
acquired and integrated two further companies. Whilst the majority of the Fund's
investments are unquoted, two AIM investments were made in the year in
profitable companies trading on low valuation multiples. With the current global
financial uncertainty the AIM market has become increasingly volatile as
investors have sought safer and more liquid blue chip stocks.
Performance
During the year the main portfolio uplifts were in two unquoted companies that
were increased in value in line with improving fundamentals. These were Gyro and
Munro Global. Gyro International is a specialist brand and marketing agency with
a strong business-to-business focus. The company is trading strongly and is now
rated as the leading B to B agency in the UK. Munro Global, a market research
company, completed the acquisition and integration of two companies and
continues to consolidate in a fragmented sector. The main decreases in the
unquoted portfolio were Conquest Business Media and Defaqto. Conquest Business
Media was written off despite a new management team trying to turn the business
around. Trading remained difficult and in a tightening credit market, the
company lost the support of its bank. The decrease in Defaqto's valuation was
made to reflect a change in its strategy which we have fully supported, as we
believe it will result in a better positioned and ultimately more valuable
company.
Among the AIM investments, Jelf continued to move ahead but Hill Station and
Worthington Nicholls both disappointed. Hill Station required additional
funding to ensure it had sufficient working capital and Worthington Nicholls,
despite having performed strongly post flotation, became a casualty of poor
internal controls and overtrading. We took some profits, however the shares have
since fallen sharply as confidence evaporated. Management changes have been
implemented which should enable confidence to be restored.
New Investments
During the year the Fund invested in the following qualifying companies:
Factory Media specialises in action sports magazines in areas that include
surfing, snowboarding and BMX biking. The strategy behind the company is to
build up a portfolio of action sports titles and to enhance the company's
digital platform.
Zamano is a leading provider of mobile services in the UK, Australia and
Ireland. It enables business partners to deliver mobile content and
interactivity via 3G, SMS, MMS, WAP and IVR. It provides a highly scalable and
robust messaging platform, connecting into all UK, Irish and Australian
operators, a range of highly interactive mobile applications and powerful
reporting tools. We had followed the company as a potential unquoted investment
however the board eventually opted to float on AIM.
Emote Games is a specialist cross platform publisher of interactive gaming
content. Founder & CEO Morgan O'Rahilly is one of the gaming industry's most
respected executives, having previously been CEO of Ifone, the UK's most
successful mobile games publisher. The video games industry is entering another
cycle of growth driven by new games hardware releases from Microsoft, Nintendo
and Sony. Within the industry one of the fastest growing segments is networked
gaming, where players have the ability to play against each other remotely using
the internet and mobile networks.
Target is one of the UK's leading television distributors with an established
international infrastructure. The UK independent TV production sector has become
more attractive as recent legislative changes have increased the IP rights
available to independent producers. These changes have acted as a catalyst for
consolidation within the sector as companies have developed more diversified
rights portfolios and sought increased economies of scale.
Mount Engineering floated on AIM in 2007. The company specialises in the
manufacture and supply of thread converting adaptors and reducers that are "Ex
Certified", which means that they have been certified for use in potentially
explosive or hazardous areas. The products provide a method of insulating and
protecting electrical wiring and installations in hazardous areas such as oil
refineries where a stray spark from an electrical installation could have severe
consequences.
Sport Media Group sells digital media content through mobile telephones via the
internet to mobile customers of major UK network operators and users of leading
UK internet key search engines. In 2007 the company acquired Sport Newspapers
which made strong commercial logic as it merged a content provider with a strong
digital distribution platform.
Acrobat Group is an established vehicle set up to acquire and exploit music
master rights. Master rights are created when a composition is recorded and are
usually assigned to the financier of the recording for the life of copyright
(typically 95 years). Owners of master rights, most often record companies, are
entitled to royalties from the sales of their recordings (via CD or digital
download) as well as clearance fees for the use of recordings in audio-visual
productions. They also derive revenues from licensing recordings for
exploitation by third parties.
The Fin Machine Company was a transaction completed after the year end. The
company is a market leading manufacturer and supplier of capital equipment used
to manufacture heat exchangers in the automotive industry. The company has shown
good historic growth rates and has a significant further opportunity in the air
conditioning market. The transaction was structured as a Buy-in Management
Buy-out with the management team having a significant equity holding.
Unaudited Portfolio Summary
Cost at Valuation at Movement Valuation in % of Portfolio
30 September 30 September year ended by Value
2007 2007 30 September 2007
�'000 �'000 �'000
Top Qualifying Investments
Gyro International Limited 1,375 3,508 1,163 10.8
Defaqto Group Limited 2,150 2,926 (1,349) 9.0
Munro Global Limited 1,615 2,083 468 6.4
Factory Media Limited 1,925 1,925 - 5.9
Acrobat Group Limited 1,000 1,000 - 3.1
Target Entertainment Group Limited 1,000 1,000 - 3.1
Kingsway Software Limited 1,000 1,000 - 3.1
Kingsway Retail Limited 1,000 1,000 - 3.1
Kingsway Media Limited 1,000 1,000 - 3.1
Kingsway Generalist Limited 1,000 1,000 - 3.1
Kingsway Business Services Limited 1,000 1,000 - 3.1
Kingsway Publishing Limited 1,000 1,000 - 3.1
Other qualifying investments 7,986 5,679 (2,773) 17.4
23,051 24,121 (2,491) 74.3
Non-Qualifying Investments
Electra Private Equity Plc 3,089 5,628 1,106 17.3
Electra Active Management Plc 3,141 2,718 (168) 8.4
6,230 8,346 938 25.7
29,281 32,467 (1,553) 100.0
Other Assets
Liquidity Funds 345
Cash 1,548
1,893
Total 34,360
Top Qualifying Investments
Gyro International Limited Year ended October 2006
Cost �1,375,000 �'m
Valuation �3,508,000 Sales 24.8
Basis of Valuation Earnings multiple Profit before tax 1.5
Equity held 7.71% Retained profit 1.0
Business Business to business agency Net assets 5.8
Defaqto Group Limited Year ended March 2007
Cost �2,150,000 �'m
Valuation �2,926,000 Sales 47
Basis of Valuation Earnings multiple Loss before tax (6.2)
Equity held 17.28% Retained loss (6.2)
Business Financial product data Net liabilities (6.2)
provider
Munro Global Limited Period from 11 August to 28 2006
February
Cost �1,615,000 �'m
Valuation �2,083,000 Sales 0.0
Basis of Valuation Earnings multiple Loss before tax 0.0
Equity held 24.79% Retained loss 0.0
Business Market research company Net assets 0.0
The company has changed its accounting reference date and the most recent set of
accounts are not yet published.
Factory Media Limited Period from 15 June to 31 2006
December
Cost �1,925,000 �'m
Valuation �1,925,000 Sales 0.6
Basis of Valuation Recent purchase price Loss before tax (0.1)
Equity held 24.99% Retained loss (0.1)
Business Sports publishing company Net assets 0.5
Acrobat Group Limited Year ended December 2006
Cost �1,000,000 �'m
Valuation �1,000,000 Sales 0.0
Basis of Valuation Recent purchase price Profit before tax 0.0
Equity held 21.20% Retained profit 0.0
Business Games production finance, Net liabilities 0.0
trying to buy master rights
The company was dormant during the period to 31 December 2006 and its most
recent set of accounts have yet to be published.
Target Entertainment Limited Year ended December 2006
Cost �1,000,000 �'m
Valuation �1,000,000 Sales 10.3
Basis of Valuation Recent purchase price Profit before tax (0.3)
Equity held 13.33% Retained profit (0.4)
Business Television company Net assets (1.8)
Target Entertainment Group Limited is the parent company of Target Entertainment
Limited and has not yet produced any annual accounts.
Kingsway Software Limited
Cost �1,000,000 No audited accounts yet
produced
Valuation �1,000,000
Basis of Valuation Recent purchase price
Equity held 33.33%
Business A software company
Kingsway Retail Limited
Cost �1,000,000 No audited accounts yet
produced
Valuation �1,000,000
Basis of Valuation Recent purchase price
Equity held 33.33%
Business A retail company
Kingsway Media Limited
Cost �1,000,000 No audited accounts yet
produced
Valuation �1,000,000
Basis of Valuation Recent purchase price
Equity held 33.33%
Business A media company
Kingsway Generalist Limited
Cost �1,000,000 No audited accounts yet
produced
Valuation �1,000,000
Basis of Valuation Recent purchase price
Equity held 33.33%
Business A manufacturing company
Kingsway Publishing Limited
Cost �1,000,000 No audited accounts yet
produced
Valuation �1,000,000
Basis of Valuation Recent purchase price
Equity held 33.33%
Business A publishing company
Kingsway Business Services
Limited
Cost �1,000,000 No audited accounts yet
produced
Valuation �1,000,000
Basis of Valuation Recent purchase price
Equity held 33.33%
Business A business services company
Note:-
In many cases, a qualifying investment is made substantially in the form of loan
notes which both carry a high interest rate and are treated as debt for
statutory audit purposes. Shareholders should therefore be advised that the
investee companies may report both retained losses and net liabilities as a
result of the structure of the investment. The Kingsway companies were set up
specifically to invest in qualifying investments.
Equity held percentages are calculated on an undiluted basis.
Year ended financial figures of investee companies are derived from the latest
available financial statements of each investee company audited by respective
company auditors except Munro Global Ltd and Acrobat Group Ltd. The financial
figures for these companies which exempt from filing audited accounts are
derived from unaudited accounts filed with Companies House.
Unaudited Income Statement
For the year ended For the year ended
30 September 2007 30 September 2006
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Realised gains on investments - 325 325 - - -
Unrealised (losses)/gains on - (1,553) (1,553) - 3,936 3,936
investments
Investment income 1,221 - 1,221 1,324 - 1,324
1,221 (1,228) (7) 1,324 3,936 5,260
Investment management fees (243) (730) (973) (209) (626) (835)
Other expenses (350) - (350) (309) - (309)
(593) (730) (1,323) (518) (626) (1,144)
Net Return/(Loss) on Ordinary 628 (1,958) (1,330) 806 3,310 4,116
Activities before Taxation
Tax on ordinary activities (145) 145 - - - -
Net Return/(Loss) on Ordinary 483 (1,813) (1,330) 806 3,310 4,116
Activities after Taxation
Basic and Diluted Return/(Loss) 1.4p (5.3)p (3.9)p 2.3p 9.7p 12.0p
per Ordinary Share
The total column of this statement represents the Company's Income Statement,
prepared in accordance with UK GAAP. The revenue return and capital return
columns are supplementary to this and are 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.
Unaudited Reconciliation of Movements in Total Shareholders' Funds
For the year ended For the year ended
30 September 2007 30 September 2006
�'000 �'000
Total Loss on Ordinary Activities after Taxation (1,330) 4,116
Repurchase of Ordinary Shares (224) (29)
Dividends on Ordinary Shares (510) (342)
Deferred share issue expense (622) -
Movements in Total Shareholders' Funds (2,686) 3,745
Total Shareholders' Funds at start of year 36,891 33,146
Total Shareholders' Funds 34,205 36,891
Unaudited Statement of Total Recognised Gains and Losses
For the year ended For the year ended
30 September 2007 30 September 2006
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Net return on Ordianary Activities
after Taxation 483 (1,813) (1,330) 806 3,310 4,116
Total recognised gains for the
year 483 (1,813) (1,330) 806 3,310 4,116
Prior year adjustment - - - - (83) (83)
Total recognised gains since last
annual report 483 (1,813) (1,330) 806 3,227 4,033
Unaudited Balance Sheet
As at 30 September 2007 As at 30 September 2006
�'000 �'000 �'000 �'000
Fixed Assets
Investments held at fair value 32,467 21,031
Current Assets
Debtors 672 397
Other investments 345 15,695
Cash at bank 1,548 157
2,565 16,249
Current Liabilities
Creditors: amounts falling due within one
year 270 368
Net Current Assets 2,295 15,881
Total assets less current liabilities 34,762 36,912
Creditors: amounts falling due
after more than one year 557 21
Net Assets 34,205 36,891
Capital and Reserves
Called-up share capital 340 342
Special reserve 30,937 31,958
Capital redemption reserve 2 -
Realised capital reserve (997) (925)
Revenue reserve 737 589
Unrealised capital reserve 3,186 4,927
Total Equity Shareholders' Funds 34,205 36,891
Net Asset Value per ordinary share 100.8p 108.0p
As at 30 September 2007 As at 30 September 2006
Number of ordinary shares in issue at end
of year 33,926,696 34,152,821
Unaudited Cash Flow Statement
For the year ended For the year ended
30 September 2007 30 September 2006
�'000 �'000 �'000 �'000
Operating Activities
Investment income received 831 1,001
Bank deposit interest received 34 6
Investment management fees paid (1,079) (790)
Other cash payments (260) (273)
Net Cash Outflow from Operating Activities (474) (56)
Capital Expenditure and Financial Investment
Purchase of investments (14,609) (5,340)
Sale of investments 1,946 -
Net Cash Outflow from Capital Expenditure and
Financial Investment (12,663) (5,340)
Equity Dividends Paid (510) (342)
Cash Outflow before Financing
and Management of Liquid Resources (13,647) (5,738)
Management of Liquid Resources
Sale of current asset investments 15,350 5,605
Net Cash Inflow from Management
of Liquid Resources 15,350 5,605
Financing
Share issue expenses (88) -
Repurchase of ordinary shares (224) (41)
Net Cash Outflow from Financing (312) (41)
Increase/Decrease in Cash for the Year 1,391 (174)
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAKFLASEPEFE
Electra Kingsway Vct (LSE:EKW)
Historical Stock Chart
Von Apr 2024 bis Mai 2024
Electra Kingsway Vct (LSE:EKW)
Historical Stock Chart
Von Mai 2023 bis Mai 2024
