RNS Number : 8984W
Guinness Flight Venture Cap Tst PLC
17 June 2008
Chairman's Statement
Following a difficult year in 2006, I am pleased to report on a more stable year for the Company, during which Aberdeen Asset Managers,
who were appointed as Manager in December 2006, have made significant progress in improving the liquidity of the Company and in preparing
many of the portfolio companies for ultimate exit. The performance of the Company is still largely dependant on the portfolio taken on by
Aberdeen Asset Managers and is constrained by its cash position from making new investments sourced by the Manager. Overall, the valuation
of these investments has increased marginally over the year leading to a modest rise in Net Asset Value. Following the year end, further
realisations have been achieved, resulting in a substantial reduction in bank borrowings to �805,000.
Performance
The new Manager, Aberdeen Asset Managers, has continued to work closely with the portfolio of investee companies to ensure that the
Company maximises its return from each investment. Interest and dividend income has materially increased as a result and a number of smaller
capital realisations have been achieved or are in progress. Significant progress has been made in dealing with the various issues which have
existed in some of the companies, although in several cases this has resulted in further reductions in carrying value. However, these have
been offset by positive developments at other companies and the NAV at the year end was little changed from that of the previous year. The
net asset value of the Company at 29 February 2008 was 50.08p per share compared with 49.52p at 28 February 2007. The increase in NAV of
1.1% compares with a decrease in the FTSE All Share Index, which fell by 5.8% over the period, and a decrease of 7.5% in the FTSE AIM
All-share Index.
There was a net gain of �2,000 on the revenue account for the year compared to the loss of �281,000 for the previous year which reflects
both the increase in investment income and a reduction in operating costs in line with the stated intention of the Manager as set out in the
2007 Annual Report. There was an overall gain of �148,000 on the capital account.
A more detailed review of these developments and of the performance of the portfolio is given in the Investment Manager's Report.
Dividends
As intimated in the Interim Report, the Board will not be recommending the payment of a dividend until there has been a further
significant reduction in the utilisation of the borrowing facility with Bank of Scotland.
Investment strategy
The Manager's strategy is to build a diversified portfolio of unlisted and AIM investments that offer excellent growth prospects and
therefore the opportunity for capital gains in the medium and longer term while maintaining VCT qualifying status. The value in the
portfolio remains concentrated in a small number of relatively mature investments. The Manager expects, over time, to realise the value from
the current portfolio and reinvest the proceeds in a larger number of smaller investments to give the fund a more diversified base which
will spread the risk of investing in small companies. The Company has the benefit of being able to co-invest alongside other investment
funds managed by Aberdeen Asset Managers. During the year, two such investments were made and further investments are anticipated in 2008.
Valuation process
Investments in unquoted companies are valued in accordance with the International Private Equity and Venture Capital Association
Guidelines.
Investments quoted or traded on a recognised stock exchange, including the Alternative Investment Market (AIM), are valued at their bid
price.
Portfolio developments
A detailed review of the state of the portfolio companies is given in the Investment Manager's Report. During the course of the year,
the legal action in which Mawdsley's (GNS) had been engaged was resolved in the company's favour realising approximately �730,000 for the
Company. Although less than originally hoped, the outcome of legal processes is difficult to gauge and the Board considers the result of
this longstanding commercial dispute to be satisfactory. The proceeds were received in two instalments before and after the period end.
The report also covers very positive developments at Espresso which completed an acquisition (without recourse to shareholders) which has
enhanced the value of the holding significantly. Vyre has continued to perform well and its prospects look increasingly attractive. That
company has also started to service its indebtedness to the Company with receipts totalling �456,000 in the year, including loan stock of
�301,000 repaid at par. Overall there has been a modest increase in the value of the portfolio over the course of the year.
During the year, the Company made its first new investments for several years, with modest investments in Funeral Services Partnership
Limited and Countcar Limited alongside other funds managed by Aberdeen Asset Managers. I am pleased to report that both investments are
performing well. It is intended that the rate of investment will increase as cash is generated from the sale of more mature investments.
New Articles of Association
We are asking shareholders to approve a number of amendments to our articles of association, primarily to reflect the provisions of the
Companies Act 2006. An explanation of the main changes is included in the Annual Report and a special resolution will be proposed at the
Annual General Meeting.
Co-investment scheme of the Manager
A Co-Investment scheme which allows executive members of the Manager to invest alongside the Company continued to operate during the
year. The scheme operates through a nominee company which invests alongside the Company in each and every transaction made by the Company,
including any follow-on investments.
The scheme more closely aligns the interests of the executives and the Company's shareholders while providing an incentive to enable the
Manager to retain the existing skills and capacity of the Manager's investment team in a highly competitive market.
The Board
I took over as Chairman in July 2007 when Mark Hoffman retired as was intimated in last year's Annual Report. I would like to thank Mark
for his tireless efforts over the years that he was in the chair. I would also like to thank all of the Board members for their continuing
hard work and commitment.
VCT Qualifying Status
The VCT qualifying status of your Company is monitored on a continuous basis and I am pleased to confirm that all of the criteria
required to maintain VCT status are being achieved.
The Future
Following the appointment of the Aberdeen Asset Managers, to enable the strategy of investing in a much more broadly diversified
portfolio to be implemented, the Manager has been very actively involved in realising significant cash sums from the existing portfolio and
thereby reducing the Company's indebtedness. This process will continue for some time yet but it is expected that the Company will
participate in the funding of transactions sourced through the Manager's regional network which is one of the largest in the UK among
private equity investment managers. The Board is confident that these new assets will deliver sustained long term performance which will see
growth in the NAV and in due course a return to the payment of dividends.
Investment Manager's Report
The Manager is committed to a strategy of building a diversified portfolio of unlisted and AIM investments that offer excellent growth
prospects and therefore the opportunity to realise capital gains in the medium to longer term. These investments will be made alongside the
Manager's other clients. This will enable the Company to invest in a wider range and size of transactions than would be the case on a stand
alone basis.
The company made the first investment alongside other Aberdeen VCTs in March 2007 with an investment of �100,000 in Funeral Services
Partnership Limited, for which Aberdeen clients provided �2.0 million funding in total. During the year, a further �150,000 was provided to
this company to enable it to complete various acquisitions in pursuit of its buy and build strategy. A second investment was made during the
year in Countcar, which trades as Aberdeen Tool and Rental. �100,000 was invested in that company in a transaction with a total value of �14
million. Both companies are performing at or ahead of plan.
Portfolio developments
Overview
The net asset value per share increased by 1.1% over the year. The value of the portfolio is of course the most significant influence on
the NAV and changes in valuation of portfolio companies are shown in the table below. In addition there was a gain on the revenue account of
for the year amounting to �2,000.
Date first invested Complete/ Partial Cost of shares Sales Proceeds Realised Gain/Loss
Exit disposed of
�'000 �'000 �'000
Unlisted
Ashford Colour Press 2002 Partial 68 68 0
Espresso Broadband 2001 Partial 18 18 0
Mawdsley's GNS 2005 Partial 269 269 0
Sports Holdings 2003 Partial 270 94 (176)
Vyre 2002 Partial 301 301 0
926 750 (176)
AIM
UBC Media 2000 Complete 399 132 (267)
399 132 (267)
Total 1,325 882 (443)
Increased valuations of VYRE, LG & DE and Espresso Broadband have more than offset reductions in Mawdsley's GNS, Higher Nature and
Serrastone.
The Company made two new investments (in Funeral Services Partnership and Countcar) and three follow-on investments during the year
investing a total of �458,000.
Following the sale of UBC Media during the first half of the year, the only remaining AIM investment is in ID Data where the market
value is now significantly less than the qualifying value for VCT purposes.
Realisations during the year included loan stock repayments at par from Vyre, Ashford Colour Press and a relatively modest amount from
Espresso Broadband all being repaid at par. The investment in Sports Holdings was realised during the year for a cash sum of �49,000 plus a
deferred consideration of the same amount constituted by way of a loan on which a modest yield is payable. The total consideration of
�94,000 compares to the cost of the investment of �270,000 although the investment had been fully provided at 28 February 2007.
Unlisted portfolio
A brief description of the reasons for the main valuation changes is given below with further details on the top ten investments given
later in the report.
Espresso Broadband
Espresso Broadband completed the acquisition of the Channel 4 Learning business during the first half of the year. Coupled with the
organic growth of the business, the effect has been to transform the value of the investment due to the increased size of the business and
its earning potential which has been recognised in an increased in valuation amounting to �934,000 compared to the previous year end.
LG & DE
LG & DE acquired the Far Eastern interests in the Linguaphone brand early in 2007 which consolidated the ownership of the brand and the
underlying value of the company. A modest reduction over the value at last year end has been applied to reflect the dilution which will be
suffered following an investment by a new strategic shareholder.
Mawdsley's GNS
The company was set up to realise certain assets from Mawdsley following the appointment of administrators. The 2007 Annual Report
reported the decision not to pursue a legal action against the purchaser of the major operating asset and the reduction in value which then
followed. The company's then remaining major asset was the case against its former supplier about which legal advice had been obtained which
indicated that a strong case existed. Mediation was started late in 2007 and a settlement was agreed early in 2008 but at a lower level than
the claim resulting in a reduced valuation. The proceeds to the company of approximately �730,000 were received in two tranches before and
after the year end.
Higher Nature
Higher Nature has launched a new range of products under the Premium Naturals brand which was well received by the trade. However,
market multiples have fallen in recent months in recognition of the expected reduced earnings caused by the credit crisis and reduced
economic activity being forecast. In the light of these factors, a reduced valuation has been adopted for the investment.
Serrastone
Further technical problems have been encountered in developing full scale production of the portfolio company's gypsum-based building
materials and these have inevitably resulted in an additional cash requirement. Given the Company's cash position, the terms of the new
funding round, the Manager decided not to participate in the funding round and will accept the resulting dilution which has resulted in a
reduced valuation of the existing holding.
Vyre
The company continues to grow strongly and is expected to continue to do so during the coming year and beyond. The company has repaid a
significant proportion of its loan stock during the reporting period. A further increase in valuation has been made based on these positive
indications.
These investments represent the bulk of the value in the existing portfolio.
Investment management strategy
Aberdeen employs an active management strategy to its portfolios and this will continue to be applied to the investments as they
develop. The task of stabilising each of the portfolio companies has been largely accomplished and considerable progress has been made in
preparing several of the investments for a future exit.
The Company had drawn �1,143,000 of its loan facility with Bank of Scotland at 29 February 2008. The balance is being reduced as the
portfolio companies repay their debt obligations to the Company and pay interest arrears on those debt instruments. Receipts post year end
have reduced the balance drawn substantially. At 10 June 2008, the Company's net bank indebtedness stood at �805,000 compared with
�1,025,000 at the year end. This reduction to a more sustainable level, should permit the Company to participate in new investments
alongside the Manager's other VCT clients. The target investments will typically be relatively mature businesses which are capable of
generating cash from which to pay a yield to the investors while growing their sales and profitability. The Manager believes that such
businesses offer better prospects for achieving capital gains in the medium term, which can be realised and distributed as a tax free
dividend or re-invested in new opportunities from which further capital gains can be generated while at all times meeting the qualifying requirements of a VCT.
Aberdeen is firmly committed to ensuring shareholders receive regular updates on performance and relevant news. In addition to the
Annual and Interim Reports, which cover the year to 29 February and the six months to 31 August respectively, the Company is required to
issue to the Stock Exchange Interim Management Statements covering developments in the quarters ending May and November each year. The
Manager will also issue its twice-yearly VCT Newsletter, highlighting new investments and sales, providing an insight into the management of
the VCT portfolios, and keeping shareholders up-to-date with issues affecting VCT shareholders. In addition, the Manager's website
(www.aberdeen-asset.com/privateequity) provides a regular update on activities.
guinness flight venture capital trust PLC
INCOME Statement*
For the year ended 29 February 2008
Year ended Year ended
29 February 2008 28 February 2007
(audited) (audited)
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Gains/(losses) on investments - 477 477 - (5,641) (5,641)
Income from investments 309 - 309 143 - 143
Other income 4 - 4 9 - 9
Investment management fees (61) (182) (243) (111) (332) (443)
Incentive fees (80) (52) (132) - - -
Finance costs (32) (95) (127) (14) (40) (54)
Other expenses (138) - (138) (308) - (308)
Return on ordinary activities 2 148 150 (281) (6,013) (6,294)
before taxation
Tax on ordinary activities - - - - - -
Return on ordinary activities 2 148 150 (281) (6,013) (6,294)
after taxation
Earnings per share (pence) 0.01 0.54 0.55 (1.03) (21.99) (23.02)
* The total column of this statement is the Profit and Loss Account of the Company.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.
All items in the above statement are derived from continuing operations. The Company has only one class of business and derives its
income from investments made in shares, securities and bank deposits.
guinness flight venture capital trust PLC
REconciliation of movements in shareholders' funds
For the year ended 29 February 2008
Year ended Year ended
29 February 28 February
2008 2007
(audited) (audited)
�'000 �'000
Opening Shareholders' funds 13,440 20,605
Total gain/(loss) for year 150 (6,294)
Dividends paid - (548)
Repurchase and cancellation of shares - (323)
Closing Shareholders' funds 13,590 13,440
guinness flight venture capital trust PLC
BALANCE SHEET
As at 29 February 2008
29 February 2008 28 February 2007
(audited) (audited)
�'000 �'000 �'000 �'000
Investments at fair value 14,908 14,855
through profit or loss
Current assets
Debtors 166 20
Cash and overnight deposits 118 303
284 323
Creditors: amounts falling due (1,602) (1,738)
within one year
Net current (1,318) (1,415)
(liabilities)/assets
Total net assets 13,590 13,440
Called up share capital
Special reserve 2,714 2,714
Capital redemption reserve 24,022 24,022
Capital reserves - realised 255 255
Capital reserves - unrealised (11,234) (10,462)
Revenue reserve (1,424) (2,344)
Net assets attributable to (743) (745)
Ordinary Shareholders
13,590 13,440
Net asset value per ordinary
share (pence)
Called up share capital 50.08p 49.52p
guinness flight venture capital trust PLC
CASH FLOW STATEMENT
For the year ended 29 February 2008
Year ended Year ended
29 February 2008 28 February 2007
(audited) (audited)
�'000 �'000 �'000 �'000
Net cash outflow from operating (403) (208)
activities
Taxation
Corporation tax - -
Financial investment
Purchase of investments (820) (1,736)
Sale of investments 857 749
Net cash inflow/(outflow) from 37 (987)
financial investment
Equity dividends paid - (548)
Net cash outflow before financing (366) (1,743)
Financing
Bank loan interest paid (88) (54)
Repurchase of shares - (323)
Net cash outflow from financing (88) (377)
Decrease in cash (454) (2,120)
Movement in reserves
Special reserve* Capital redemption Capital reserves Capital reserves Revenue reserve
reserve realised unrealised
�'000 �'000 �'000 �'000 �000
At 1 March 2007 24,022 255 (10,462) (2,344) (745)
Losses on sales of investments - - (443) - -
Decrease in unrealised - - - 920 -
depreciation
Investment management fees - - (182) - -
Incentive fees - - (52) - -
Finance costs - - (95) - -
Retained net revenue for - - - - 2
period
At 29 February 2008 24,022 255 (11,234) (1,424) (743)
*The special reserve was established on cancellation of the share premium account on 11 June 2001.
Returns per Ordinary Share
The returns per Ordinary Share are based on the following figures:
Year ended Year ended
29 February 2008 28 February 2007
�'000 �'000
Weighted average number of ordinary 27,138,128 27,340,868
shares in issue
Revenue return � 2,000 (�281,000)
Capital return � 148,000 (�6,013,000)
Total return � 150,000 (�6,294,000)
Net Asset Value per Ordinary Share
Net Asset Value per Ordinary Share as at 29 February 2008 has been calculated using the number of ordinary shares in issue at that date
of 27,138,128(2007: 27,138,128).
Principal risks and uncertainties
The principal risks and uncertainties facing the Company have not changed during the year ended 29 February 2008. A detailed explanation
of the principal risks and uncertainties, and how they are managed, can be found in the Directors' Report and Notes to the Financial
Statements in the Annual Report.
Directors' responsibility statement
The Directors confirm that, to the best of their knowledge:
* the Financial Statements have been prepared in accordance with the applicable accounting standards and give a true and fair view
of the assets, liabilities and financial position of the Company as at 29 January 2008 and for the year to that date; and
* the Directors' Report includes a fair review of the development and performance of the Company, together with a description of the
principal risks and uncertainties that it faces.
Other information
This Announcement has been prepared on the same basis as the Annual Report for the year ended 28 February 2007. The Annual Report for
the year ended 29 February 2008 will be filed with the Registrar of Companies and issued to Shareholders.
The financial information contained within this Announcement does not constitute the Company's statutory Financial Statements/accounts
for the year ended 29 February 2008. The statutory Financial Statements for the year ended 28 February 2007 have been delivered to the
Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under Sections 237(2) or (3) of
the Companies Act 1985. The Annual General Meeting will be held on 9 July 2008, commencing at 11.00 a.m. Copies of this announcement will be
available to the public at the office of Aberdeen Asset Managers Limited, 149 St Vincent Street, Glasgow; at the registered office of the
Company, One Bow Churchyard, Cheapside, London, and on the Company's website at www.guinnessflight.co.uk.
By Order of the Board
ABERDEEN ASSET MANAGEMENT PLC
SECRETARIES
This information is provided by RNS
The company news service from the London Stock Exchange
END
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