Final Results
North Atlantic Smlr Co Inv Tst PLC
17 April 2008
NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC
UNAUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2008
FINANCIAL HIGHLIGHTS
2008 2007
unaudited % change audited
Revenue
Gross income (£'000) 5,208 31.8 3,951
Net revenue after tax attributable to Shareholders of the 1,272 467.9 224
Parent (£'000)
Basic return per Ordinary Share - revenue (pence) 8.86 437.0 1.65
- capital (pence) (21.05) (109.2) 229.52
Assets
Total assets less current liabilities (£'000) 238,166 (4.9) 250,549
Net asset value per 5p Ordinary Share:
Basic (pence) 1,611 (8.2) 1,755
Diluted (pence) 1,209 (0.7) 1,217
Mid-market price of the 5p Ordinary Shares at 31 January
(pence) 1,025.0 (11.1) 1,153.0
Discount to diluted net asset value 15.2% 9.9% 5.3%
Indices and exchange rates at 31 January
Standard & Poor's 500 Composite Index 1,378.6 (4.1) 1,438.2
Russell 2000 713.3 (10.9) 800.3
US Dollar/Sterling exchange rate 1.9880 1.6 1.9574
Standard & Poor's 500 Composite Index - Sterling adjusted 693.4 (5.6) 734.8
Russell 2000 - Sterling adjusted 358.8 (12.3) 408.9
FTSE All-Share Index 3,000.1 (6.6) 3,211.8
North Atlantic Smaller Companies Investment Trust PLC
Chairman's statement
It is somewhat frustrating to report that in the year to 31 January 2008 the
fully diluted net asset value of the Company fell by 0.7% although this compares
favourably with the fall in the (Sterling adjusted) Standard & Poor's Composite
Index of 5.6%.
The revenue account showed a profit after taxation of £1,121,000 (2007:
£171,000). Consistent with the Company's long term policy the Directors are not
recommending a dividend for the current year.
During the year the Company redeemed for cancellation 200,000 CULS. The price
paid was at a discount to net asset value and therefore benefited all
Shareholders.
The Company has supported the Association of Investment Companies' law suit
against HM Revenue & Customs for VAT charges for a number of years. I am pleased
to say that this was successful and the Company is expected to receive a rebate
of VAT on management fees since 2001.
A commentary on the quoted and unquoted portfolios can be found in the
investment managers' report below.
outlook
The outlook for the Anglo Saxon economies is probably as challenging as at any
time since the early 1990s. The subprime crisis, is in my opinion, the first of
a series of problems which will hit the banking industry, with excessive debt on
leveraged buyouts and reckless loans to value on commercial real estate,
becoming significant issues over the coming twenty four months. In any event
there is now a liquidity crisis in the banking sector, which will constrain
lending to both the consumer and corporate sectors alike and will inevitably be
a major factor in curtailing economic activity. The limited ability of central
banks to reduce interest rates and maintain a stable currency, while commodity
and food prices are soaring, means it will be hard to counteract recessionary
forces. There is, in my opinion, a real risk of stagnation. The market weakness
in equity prices has to some extent anticipated financial and economic
uncertainty. It is however unlikely that stock markets in general will perform
well. Despite this difficult background, I would hope that the Company has a
year of further progress as your Chief Executive, Christopher Mills, continues
to maximise the value of both the quoted and unquoted investment portfolio.
Finally, I would like to congratulate Christopher on attaining the twenty fifth
anniversary of the Company. Over the period from 31 December 1983 to 31 January
2008, the unadjusted net asset value has risen by 2,364.3%. This compares with a
rise in the Standard & Poor's Composite Index over the same period of 510.53%.
This is an extraordinary achievement and I am sure you would all join me in
thanking him and encouraging him to continue to achieve outstanding returns for
our Shareholders.
Enrique Foster Gittes
Chairman
17 April 2008
North Atlantic Smaller Companies Investment Trust PLC
Investment managers' report
quoted portfolio
In last year's Annual Report the Chairman stated that it was hard to find
attractive opportunities due to excess liquidity and that the stock market was
overlooking some real problems in major world economies. In a few short months
the housing bubble has burst, major banks have been brought to their knees and
there is little doubt that both the United States and the United Kingdom
economies are flirting with recession. Against this background the FTSE Small
Cap Index since the end of July 2007 to 31 January 2008 fell by 20.29%.
Inevitably this had a substantial impact on the Company, with a number of the
major holdings in the UK such as Georgica, Ashstead, Gleeson and Nationwide
Accident doing poorly over the year. This was only partially mitigated by the
takeover approach and subsequent takeover of Whatman and the highly successful
IPOs of Castle & AssetCo.
The performance in the United States portfolio despite further weakness in the
dollar was somewhat better due to the sale of nearly half the holding in W H
Energy Services at a price significantly above the level at the end of January.
unquoted portfolio
The unquoted portfolio performed very well during the period. Castle Support
Services (DM Technical Services) went public at a good premium to last year's
valuation. Mister Car Wash was sold at a good profit. Despite the weakness in
the property market, Hampton Trust was written up reflecting the successful
letting of its major property in Talbot Gateway and recoveries from former
Directors. Motherwell Bridge was also written up significantly, reflecting the
successful sale of two of its three businesses. Trident Private Equity benefited
from Motherwell Bridge and Castle but was also successful at selling its holding
in Telecity at 3.5x cost following a successful IPO. AssetCo went public and
rose significantly in the public market and Ramen Holdings was increased in
value. Against this, Primesco had to be written down reflecting a disappointing
bid for the company due to weakness in the bond portfolio and Jaffer was also
written down reflecting the fact that no satisfactory bid was received and
weakness in the housing market in the Southeast of the USA. Neither of these
write downs had a significant impact on the portfolio. Alliance One was sold at
around last year's holding cost. Two new private investments were made during
the period and these, together with the description of the other unquoted
investments, can be found in the Annual Report.
Christopher HB Mills
Chief Executive & Investment Manager
North Atlantic Value LLP
Joint Manager
17 April 2008
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the year ended 31 January
2008 2007
unaudited audited
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investments
Gains on investments - 3,300 3,300 - 31,469 31,469
Exchange differences - (540) (540) - (43) (43)
Net investment results - 2,760 2,760 - 31,426 31,426
Income 5,208 - 5,208 3,951 - 3,951
Expenses
Investment management fee (2,512) (1,237) (3,749) (2,430) (1,266) (3,696)
Other expenses (954) - (954) (849) - (849)
Share based remuneration (255) - (255) (322) (109) (431)
Interest payable and
similar charges (366) - (366) (145) - (145)
Total expenses (4,087) (1,237) (5,324) (3,746) (1,375) (5,121)
Share of net return of
associate - (4,223) (4,223) - - -
Profit before taxation 1,121 (2,700) (1,579) 205 30,051 30,256
Taxation - - - (34) - (34)
Transfer to reserves 1,121 (2,700) (1,579) 171 30,051 30,222
Attributable to:
Equity holders of the
parent 1,272 (3,021) (1,749) 224 31,171 31,395
Minority interest (151) 321 170 (53) (1,120) (1,173)
1,121 (2,700) (1,579) 171 30,051 30,222
Return per Ordinary Share: pence pence
Basic (12.19) 231.17
Diluted (8.73) 157.25
The total column of this statement represents the Group's income statement,
prepared in accordance with IFRS. The supplementary revenue return and capital
return columns are both prepared under guidance published by the Association of
Investment Companies ('AIC').
All items in the above statement derive from continuing operations.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 January
Share Share Capital
Share CULS options premium reserve -
capital reserve reserve account realised
£'000 £'000 £'000 £'000 £'000
2008 - unaudited
31 January 2007 689 43 1,086 629 183,887
Income and expenses as shown in the
consolidated income statement - - - - 4,802
Premium paid on repurchase of CULS - - - - (2,475)
Total recognised income and expense for
the year - - - - 2,327
Share options expense - - 255 - -
Arising on deconsolidation of AOT - - - - (6,181)
Arising on conversion of CULS 50 (9) - - -
31 January 2008 739 34 1,341 629 180,033
Share Share Capital
Share CULS options premium reserve -
capital reserve reserve account realised
£'000 £'000 £'000 £'000 £'000
2007 - audited
31 January 2006 666 48 764 629 168,946
Income and expenses as shown in the
consolidated income statement - - - - 17,419
Premium paid on repurchase of CULS - (2) - - (2,359)
Loss on deemed disposal of AOT - - - - (119)
Total recognised income and expense for
the year - (2) - 14,941
Share options expense - - 322 - -
Arising on conversion of CULS 23 (3) - - -
31 January 2007 689 43 1,086 629 183,887
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 January (continued)
Capital
reserve - Revenue Minority
unrealised reserve Total interest Total
£'000 £'000 £'000 £'000 £'000
2008 - unaudited
31 January 2007 60,476 (4,908) 241,902 7,740 249,642
Income and expenses as shown in the
consolidated income statement (7,823) 1,272 (1,749) 170 (1,579)
Premium paid on repurchase of CULS - - (2,475) - (2,475)
Total recognised income and expense for
the year (7,823) 1,272 (4,224) 170 (4,054)
Share options expense - - 255 - 255
Arising on deconsolidation of AOT 5,475 706 - (7,910) (7,910)
Arising on conversion of CULS - - 41 - 41
31 January 2008 58,128 (2,930) 237,974 - 237,974
Capital
reserve - Revenue Minority
unrealised reserve Total interest Total
£'000 £'000 £'000 £'000 £'000
2007 - audited
31 January 2006 46,724 (5,132) 212,645 8,205 220,850
Income and expenses as shown in the
consolidated income statement 13,752 224 31,395 (1,173) 30,222
Premium paid on repurchase of CULS - - (2,361) - (2,361)
Loss on deemed disposal of AOT - - (119) 708 589
Total recognised income and expense for
the year 13,752 224 28,915 (465) 28,450
Share options expense - - 322 - 322
Arising on conversion of CULS - - 20 - 20
31 January 2007 60,476 (4,908) 241,902 7,740 249,642
UNAUDITED CONSOLIDATED BALANCE SHEET
as at 31 January
2008 2007
unaudited audited
£'000 £'000
Non current assets
Investments at fair value through profit or loss 231,820 225,644
Investments accounted for using the equity method 18,928 -
250,748 255,644
Current assets
Investments held for trading in Subsidiary Companies 308 386
Trade and other receivables 4,169 18,595
Cash and cash equivalents 8,504 9,497
12,981 28,478
Total assets 263,729 254,122
Current liabilities
Bank loans and overdrafts (9,356) (1,407)
Investments held for trading - derivatives (612) (29)
Trade and other payables (15,595) (2,137)
(25,563) (3,573)
Total assets less current liabilities 238,166 250,549
Non current liabilities
Bank loans - (664)
CULS (192) (243)
(192) (907)
Total liabilities (25,755) (4,480)
Net assets 237,974 249,642
Represented by:
Share capital 739 689
Equity component of CULS 34 43
Share options reserve 1,341 1,086
Share premium account 629 629
Capital reserve - realised 180,033 183,887
Capital reserve - unrealised 58,128 60,476
Revenue reserve (2,930) (4,908)
Equity attributable to equity holders of the parent 237,974 241,902
Minority interest - 7,740
Total equity 237,974 249,642
Net asset value per Ordinary Share: pence pence
Basic 1,611 1,755
Diluted 1,209 1,217
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 January
2008 2007
unaudited audited
£'000 £'000
Cash flows from operating activities
Investment income received 4,147 2,628
Bank deposit interest received 690 630
Other income 78 24
Sale of investments by Subsidiary (220) 18
Investment manager's fees paid (3,772) (3,569)
Other cash payments (705) (998)
Cash received/(expended) from operations 218 (1,267)
Bank interest paid (282) (117)
CULS interest paid (23) (29)
Loan renewal expenses - (6)
Net cash outflow from operating activities (87) (1,419)
Cash flows from investing activities
Purchases of investments (171,086) (180,307)
Sales of investments 167,098 189,613
Net cash (outflow)/inflow from investing activities (3,988) 9,306
Cash flows from financing activities
Repayment of fixed term borrowings (554) (3,459)
Increase in fixed term borrowings 7,113 673
Repurchase of CULS for cancellation (2,485) (2,370)
Management options exercised and repurchased (AOT) - 480
Net cash inflow/(outflow) from financing activities 4,074 (4,676)
(Decrease)/increase in cash and cash equivalents for the year (1) 3,211
Cash and cash equivalents at the start of the year 9,497 6,429
Arising on deconsolidation of AOT (1,091) -
Revaluation of foreign currency balances 99 (143)
Cash and cash equivalents at the end of the year 8,504 9,497
Notes:
1. North Atlantic Smaller Companies Investment Trust PLC ('NASCIT') is a Company
incorporated and registered in England and Wales under the Companies Acts 1948
to 1967. The consolidated preliminary announcement for the Group for the year
ended 31 January 2008 comprises the results of the Company and its Subsidiary -
Consolidated Venture Finance Limited (together referred to as the 'Group').
On 23 February 2007, NASCIT's majority owned subsidiary American Opportunity
Trust PLC ('AOT') merged with Oryx International Growth Fund Limited ('Oryx') by
way of a Scheme of Arrangement under Section 425 of the Companies Act 1985.
Under the Scheme of Arrangement, Oryx acquired AOT and is the continuing company
and all of the assets and liabilities of AOT have been transferred to it. The
results of AOT to 22 February 2007 are consolidated in the consolidated
financial statements.
North Atlantic Value LLP, the Company's Joint Manager, also acts as Manager to
Oryx and Christopher Mills is on the board of Oryx. As a result of the merger
the Company held shares with 21.72% of the total voting rights of Oryx. At 31
January 2008, the Company held shares with 28.67% of the total voting rights in
Oryx. Oryx is recognised in the consolidated accounts as an Associate under the
equity method of accounting. It is valued at NASCIT's share in the net assets of
Oryx.
The consolidated financial statements have been prepared in conformity with IFRS
to the extent that they have been adopted by the EU. They have also been
prepared in accordance with the Statement of Recommended Practice ('SORP') for
investment trust companies, except to any extent where it conflicts with IFRS.
2. The above results for the year to 31 January 2008 are unaudited.
3. The Directors do not recommend the payment of a dividend for the year (2007:
nil).
4. Consolidated return per Ordinary Share:
Revenue Capital Total
Per Per Per
*Net Ordinary Share *Net Ordinary Share *Net Ordinary Share
return Shares pence return Shares pence return Shares pence
£'000 £'000 £'000
2008 -
unaudited
Basic return
per Share 1,272 14,350,263 8.86 (3,021) 14,350,263 (21.05) (1,749) 14,350,263 (12.19)
Options
conversion** - 377,878 - 377,878 - 377,878
CULS*** 25 5,019,049 - 5,019,049 25 5,019,049
Diluted
return per
Share 1,297 19,747,190 6.57 (3,021) 19,747,190 (15.30) (1,724) 19,747,190 (8.73)
2007 -
audited
Basic return
per Share 224 13,581,129 1.65 31,171 13,581,129 229.52 31,395 13,581,129 231.17
Options
conversion** - 310,700 - 310,700 - 310,700
CULS*** 30 6,092,348 - 6,092,348 30 6,092,348
Diluted
return per
Share
2007 254 19,984,177 1.27 31,171 19,984,177 155.98 31,425 19,984,177 157.25
Basic return per Ordinary Share has been calculated using the weighted average
number of Ordinary Shares in issue during the year.
* Net return on ordinary activities attributable to Ordinary Shareholders.
** Excess of the total number of potential Shares on option conversion over the
number that could be issued at average market price, as calculated in
accordance with IAS 33: Earnings per Share.
*** CULS assumed converted as the share price during the year was greater than
the conversion price.
5. Consolidated net asset value per Ordinary Share:
The basic net asset value per Ordinary Share is based on net assets of
£237,974,000 (2007: £241,902,000) and on 14,775,208 Ordinary Shares (2007:
13,780,945) being the number of Ordinary Shares in issue at the year end.
The diluted net asset value per Ordinary Share is calculated on the assumption
that the outstanding 2013 CULS are fully converted at par and that all 1,030,000
(2007: 1,030,000) Share Options were exercised at the prevailing exercise
prices, giving a total of 20,322,052 issued Ordinary Shares (2007: 20,522,052).
6. In 2004 the Association of Investment Companies ('AIC') and JP Morgan
Claverhouse Investment Trust plc launched a case against HM Revenue and Customs
('HMRC') in which they claimed that the management fees charges to UK investment
trusts should be exempt from VAT. ON 28 June 2007, the European Court of Justice
found in favour of the AIC/Claverhouse case in respect of the specific questions
referred to it by the UK VAT Tribunal. HMRC accepted this judgement in November
2007. Your Company is taking appropriate steps to reclaim the relevant VAT that
has been paid on management fees since 2001. The timing and quantum of this
repayment, together with the status of pre-2001 VAT payments, are being
discussed with the Manager and are still to be determined. On the basis of this,
no contingent asset has been disclosed.
7. This preliminary statement is not the company's statutory accounts. The
statutory accounts for the financial year ended 31 January 2007 have been
delivered to the Registrar of Companies and received an audit report which was
unqualified, did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying the report, and did not
contain statements under section 237(2) and (3) of the Companies Act 1985. The
statutory accounts for the financial year ended 31 January 2008 have not yet
been approved, audited or filed.
8. The statutory financial statements for the year ended 31 January 2008 will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting. The Annual General Meeting will be held on 26 June 2008 at 12 noon in
the Board Room, Ground Floor, Ryder Court, 14 Ryder Street, London, SW1Y 6QB.
The Annual Report will be posted to Shareholders and those individuals on the
Company's mailing list as soon as practicable after printing and will also be
available on request from the Company Secretary, J O Hambro Capital Management
Limited, Ground Floor, Ryder Court, 14 Ryder Street, London, SW1Y 6QB.
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