Interim Results
North Atlantic Smlr Co Inv Tst PLC
25 September 2007
NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC
UNAUDITED PRELIMINARY RESULTS FOR THE SIX MONTHS ENDED 31 JULY 2007
FINANCIAL HIGHLIGHTS
31 July 31 January
2007 2007
(unaudited) (audited) % Change
Net asset value per 5p Ordinary Share:*
Basic (pence) 1,766 1,755 0.6
Diluted (pence) 1,322 1,217 8.6
Mid-market price of the 5p Ordinary Shares (pence) 1,170.0 1,153.0 1.5
Discount to diluted net asset value* 11.5% 5.3%
Standard & Poor's Composite Index** 716.2 734.8 (2.5)
Russell 2000 ** 382.0 408.9 (6.6)
FTSE All-Share Index 3,289.1 3,211.8 2.4
US Dollar/ Sterling exchange rate 2.03205 1.95740 (3.8)
* Including retained revenue for the period.
** Sterling adjusted.
NORTH ATLANTIC SMALLER COMPANIES INVESTMENT TRUST PLC
CHIEF EXECUTIVE'S REVIEW
FOR THE SIX MONTHS ENDED 31 JULY 2007
During the six month period to 31 July 2007, the fully diluted net asset value
of the Group rose by 8.6% as compared to a fall in the Sterling adjusted
Standard & Poor's Composite Index of 2.5%. Net income for the period amounted to
£972,000 (2006: £961,000). Consistent with policy, no dividend will be paid.
Listed equities
The quoted portfolio in the United States benefited from further strength in W-H
Energy Services Inc. but this was to some extent offset by weakness in Sterling
Construction Inc. The Trust also holds approximately £23 million in US Treasury
Bills which suffered from the weakness of the United States Dollar relative to
Sterling falling by 3.8%.
In the United Kingdom, AssetCo performed well following its IPO and Inspired
Gaming rose following favourable operating results, as did Cardpoint. Oryx
International Growth Fund Limited continued to perform well, rising by 2% in the
period.
This performance was to some extent offset by weakness in Nationwide Accident,
BBA and Georgica.
Unlisted equities
The unquoted portfolio benefited considerably from the reverse flotation of DM
Technical Services into Castle Support Services which occurred in June. In the
United States, Mister Car Wash was sold at a good profit to cost and AllianceOne
at a small loss.
The unquoted portfolio has also benefited from uplifts in the fair value of
Hampton Trust to reflect underlying property values and of Motherwell Bridge
following the completion of the sale and leaseback relating to the aerospace
division.
No new investments were made during the period under review but we would hope to
close at least three further transactions over the next few months.
Outlook
The weakness and volatility in equity markets has started to provide attractive
buying opportunities which we are reviewing. Fortunately the Trust entered the
current turbulence with substantial cash deposits and is therefore well placed
to take advantage of the current uncertain conditions.
C H B Mills
Chief Executive
25 September 2007
INTERIM MANAGEMENT REPORT
Investment Objective
The objective of North Atlantic Smaller Companies Investment Trust PLC ('the
Company') is to provide capital appreciation through investment in a portfolio
of smaller companies principally based in countries bordering the North Atlantic
Ocean.
Material Events
There were no material events to report during the period under review.
Material Transactions
The Board consider the following transactions that occurred during the half year
ended 31 July 2007 to be material:
On 23 February 2007, one of the Company's subsidiaries, 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. All of the assets and liabilities of AOT have been transferred into
Oryx. North Atlantic Value LLP, the Company's Joint Manager, also acts as
manager to Oryx and Christopher Mills, the Company's Chief Executive, sits on
the Board of Oryx.
In March 2007, AssetCo Group Limited announced a reverse takeover by AIM quoted
Asfare Group Plc, to be renamed AssetCo plc, and a concurrent placing of new
shares. The Acquisition and Placing were completed on 30 March 2007. The Placing
was at a 25% premium to our holding cost and the shares have performed well in
the after market.
There were no other material transactions during the period ended 31 July 2007.
Risk Profile
The two main risks arising from the Group's financial instruments are market
price risk and foreign currency risk. The Directors review and agree policies
with the Joint Manager, North Atlantic Value LLP, for managing these risks. The
policies have remained substantially unchanged in the six months since the year
end.
The Group does not have any significant exposure to credit risk arising from any
one individual party. Credit risk is spread across a number of companies, each
having an immaterial effect on the Group's cash flows, should a default happen.
To support its investment in unquoted companies, the Group may periodically
agree to guarantee all or part of the borrowings of investee companies.
Provision is made for any costs that may be incurred when the Directors consider
it likely that the guarantee will crystallise.
The Group's exposure to market price risk comprises mainly movements in the
value of the Group's investments. It should be noted that the prices of options
tend to be more volatile than the prices of the underlying securities.
The functional and presentational currency of the Group is Sterling, and
therefore, the Group's principal exposure to foreign currency risk comprises
investments priced in other currencies, principally US Dollars.
The Group invests in equities and other investments that are readily realisable.
Related Party Transactions
These are listed in note 7 to the accounts.
CULS
The Convertible Loan Stock 2013 ('CULS') were issued in units of 5p each. The
units are redeemable at par on 31 May 2013, unless previously redeemed,
purchased by the Company, or converted at the option of the holder.
During the period ended 30 June 2007, 994,263 (2006: 467,518) units of CULS were
converted into Ordinary Shares of 5p each at the rate of one 5p Ordinary Share
for every unit of 5p. Also during the period ended 31 July 2007, the Company
purchased 200,000 (2006: Nil) units of CULS for cancellation at a total cost of
£2,480,000 (2006: £Nil).
The CULS units are convertible into Ordinary Shares of 5p each at a rate of one
Ordinary Share for every 5p unit, one month after despatch of the audited
accounts in each of the years 2007 to 2013 inclusive.
Interest is payable to holders of the CULS at a rate pf 0.5p gross per 5p unit
per annum on 31 January each year.
The amount included above is the fair value of the financial liability element
of the CULS as of its date of issue, as adjusted for the effective rate of
interest, less interest paid to the unit holders, and less the amount of CULS
that has been purchased for cancellation or converted into Ordinary Shares.
C H B Mills
Chief Executive
25 September 2007
RESPONSIBILITY STATEMENT
The Directors confirm to the best of their knowledge that:
• the condensed set of financial statements contained within the half yearly
financial report have been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting'; and
• the half yearly financial report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency
Rules.
The half yearly financial report was approved by the Board on 25 September 2007
and the above responsibility statement was signed on its behalf by
C H B Mills
Chief Executive
CONSOLIDATED INCOME STATEMENT
for the six months ended 31 July
Six months ended Six months ended
31 July 2007 31 July 2006
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investments
Gains on investments - 21,671 21,671 - 7,248 7,248
Exchange differences - (442) (442) - (226) (226)
Net investment result - 21,229 21,229 - 7,022 7,022
Income 3,091 - 3,091 2,861 - 2,861
Expenses
Investment management fee (1,265) (663) (1,928) (1,220) (575) (1,795)
Interest payable and (83) - (83) (80) - (80)
similar charges
Share based remuneration (127) - (127) (161) - (161)
Other expenses (644) - (644) (415) - (415)
Total expenses (2,119) (663) (2,782) (1,876) (575) (2,451)
Profit before taxation 972 20,566 21,538 985 6,447 7,432
Taxation - - - (24) - (24)
Transfer to reserves 972 20,566 21,538 961 6,447 7,408
Attributable to:
Equity holders of the 1,123 20,245 21,368 977 6,928 7,905
parent
Minority interest (151) 321 170 (16) (481) (497)
972 20,566 21,538 961 6,447 7,408
Return per Ordinary Share (note 3): Pence pence
Basic 153.52 59.09
Diluted 107.85 39.70
The total column of this statement is 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.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 July
Share Share Capital
Share CULS options premium reserve
capital reserve reserve account - realised
£'000 £'000 £'000 £'000 £'000
Six months ended 31 July 2007
(unaudited)
31 January 2007 689 43 1,086 629 183,887
Total recognised income and expenses - - 127 - (2,741)
for the period
Arising on deconsolidation of AOT - - - - (6,181)
Arising on conversion of CULS 50 (9) - - -
Premium paid on repurchase of CULS - - - - (2,475)
31 July 2007 739 34 1,213 629 172,490
Year ended 31 January 2007 (audited)
31 January 2006 666 48 764 629 168,946
Total recognised income and expenses - - 322 - 17,419
for the year
Arising on conversion of CULS 23 (3) - - -
Premium paid on repurchase of CULS - (2) - - (2,359)
Loss on deemed disposal of AOT - - - - (119)
31 January 2007 689 43 1,086 629 183,887
Six months ended 31 July 2006
(unaudited)
31 January 2006 666 48 764 629 168,946
Total recognised income and expenses - - 161 - 2,075
for the period
Arising on conversion of CULS 23 (3) - - -
31 July 2006 689 45 925 629 171,021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 July (continued)
Capital
reserve Revenue Minority
- unrealised reserve Total interest Total
£'000 £'000 £'000 £'000 £'000
Six months ended 31 July 2007
(unaudited)
31 January 2007 60,476 (4,908) 241,902 7,740 249,642
Total recognised income and 22,986 1,123 21,495 170 21,665
expenses for the period
Arising on deconsolidation of AOT 5,475 706 - (7,910) (7,910)
Arising on conversion of CULS - - 41 - 41
Premium paid on repurchase of CULS - - (2,475) - (2,475)
31 July 2007 88,937 (3,079) 260,963 - 260,963
Year ended 31 January 2007
(audited)
31 January 2006 46,724 (5,132) 212,645 8,205 220,850
Total recognised income and 13,752 224 31,717 (1,173) 30,544
expenses for the year
Arising on conversion of CULS - - 20 - 20
Premium paid on repurchase of CULS - - (2,361) - (2,361)
Loss on deemed disposal of AOT - - (119) 708 589
31 January 2007 60,476 (4,908) 241,902 7,740 249,642
Six months ended 31 July 2006
(unaudited)
31 January 2006 46,724 (5,132) 212,645 8,205 220,850
Total recognised income and 4,853 977 8,066 (497) 7,569
expenses for the period
Arising on conversion of CULS - - 20 - 20
31 July 2006 51,577 (4,155) 220,731 7,708 228,439
CONSOLIDATED BALANCE SHEET
AS AT 31 JULY
31 July 31 January 31 July
2007 2007 2006
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Non current assets
Investments at fair value through profit or loss 251,566 225,644 212,977
Current assets
Investments held for trading in Subsidiary Companies 705 386 1,103
Trade and other receivables 3,823 18,595 2,955
Cash and cash equivalents 13,054 9,497 15,526
17,582 28,478 19,584
Total assets 269,148 254,122 232,561
Current liabilities
Bank loans and overdrafts (6,495) (1,407) (1,540)
Investments held for trading - derivatives (217) (29) (323)
Trade and other payables (1,281) (2,137) (2,007)
(7,993) (3,573) (3,870)
Total current assets less current liabilities 261,155 250,549 228,691
Non current liabilities
Bank loans - (664) -
CULS (192) (243) (252)
(192) (907) (252)
Total liabilities (8,185) (4,480) (4,122)
Net assets 260,963 249,642 228,439
Represented by:
Share capital 739 689 689
Equity component of CULS 34 43 45
Share options reserve 1,213 1,086 925
Share premium account 629 629 629
Capital reserve - realised 172,490 183,887 171,021
Capital reserve - unrealised 88,937 60,476 51,577
Revenue reserve (3,079) (4,908) (4,155)
Equity attributable to equity holders of the parent 260,963 241,902 220,731
Minority interest - 7,740 7,708
Total equity 260,963 249,642 228,439
Net asset value per Ordinary Share (note 4): pence pence pence
Basic 1,766 1,755 1,602
Diluted 1,322 1,217 1,102
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 31 July
Six months to Six months to
31 July 31 July
2007 2006
(unaudited) (unaudited)
£'000 £'000
Cash flows from operating activities
Investment income received 2,438 1,563
Bank deposit interest received 380 216
Other income 18 -
Sale of investments by Subsidiary (249) 31
Investment manager's fees paid (2,501) (2,282)
Other cash payments (305) (562)
Cash expended from operations (219) (1,034)
Bank interest paid (39) (83)
Net cash outflow from operating activities (258) (1,117)
Cash flows from investing activities
Purchases of investments (85,702) (97,167)
Sales of investments 89,036 110,789
Net cash inflow from investing activities 3,334 13,622
Cash flows from financing activities
Repayment of fixed term borrowings (364) (3,459)
Increase in fixed term borrowings 4,713 -
Repurchase of CULS for cancellation (2,485) -
Net cash inflow/(outflow) from financing activities 1,864 (3,459)
Increase in cash and cash equivalents for the period 4,940 9,046
Cash and cash equivalents at the start of the period 9,497 6,429
Arising on deconsolidation of AOT (1,091) -
Revaluation of foreign currency balances (292) 51
Cash and cash equivalents at the end of the period 13,054 15,526
Notes:
1. Basis of preparation
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 figures for the six months ended 31 July 2007 have been prepared on a basis
consistent with the accounting policies adopted in the audited financial
statements for the year ended 31 January 2007.
The Group financial statements consolidate the financial statements of the
Company and its wholly owned Subsidiary Consolidated Venture Finance Limited,
for the six months ended 31 July 2007 and the results of its majority owned
Subsidiary, American Opportunity Trust PLC ('AOT'), up to 22 February 2007.
On 23 February 2007 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 will be the
continuing company. All of the assets and liabilities of AOT have been
transferred to it. 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 above merger, NASCIT holds 39.19% of the ordinary shares of
Oryx. This company is not a subsidiary of NASCIT, so the holding is included in
investments at fair value through profit or loss.
2. Performance fees
A Performance Fee is only payable if the investment portfolio has outperformed
the Sterling adjusted Standard & Poor's Composite Index at the end of each
financial year, and is limited to a maximum payment of 0.5% of Shareholders'
Funds.
In accordance with the Statement of Recommended Practice (''SORP'') for
investment trust companies, an amount is included in these financial statements
for the Performance Fee that could be payable based on investment performance to
31 July 2007.
At that date, a Performance Fee of £663,000, including irrecoverable VAT, has
been accrued for in the accounts (31 July 2006: £575,000 including irrecoverable
VAT), and is allocated 100% to capital.
3. Return per Ordinary Share
Revenue Capital
*Net Per *Net Per
return Ordinary Share return Ordinary Share Total
£'000 Shares (pence) £'000 Shares (pence) (pence)
Six months to 31 July 2007
(unaudited)
Basic return per 1,123 13,918,275 8.07 20,245 13,918,275 145.46 153.52
Share
Option conversion** - 390,770 - 390,770
CULS *** 27 5,529,579 - 5,529,579
1,150 19,838,624 5.80 20,245 19,838,624 102.05 107.85
Six months to 31 July 2006
(unaudited)
Basic return per 977 13,378,001 7.30 6,928 13,378,001 51.79 59.09
Share
Option conversion** - 284,594 - 284,594
CULS *** 32 6,329,051 - 6,329,051
1,009 19,991,646 5.05 6,928 19,991,646 34.65 39.70
Basic return per Ordinary Share has been calculated using the weighted average
number of Ordinary Shares in issue during the period.
* 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 have been issued at average market price as calculated in
accordance with IAS 33: Earnings per Share.
*** CULS assumed converted as average share price during the period was greater
than the conversion price.
4. Net asset value per Ordinary Share
The basic net asset value per Ordinary Share is based on net assets of
£260,963,000 (31 January 2007: £241,902,000; 31 July 2006: £220,731,000) and on
14,775,208 Ordinary Shares (31 January 2007: 13,780,945; 31 July 2006:
13,780,945) being the number of Ordinary Shares in issue at the period 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
(31 January 2007: 1,030,000; 31 July 2006: 1,030,000) Share Options were
exercised at the prevailing exercise prices, giving a total of 20,322,052 issued
Ordinary Shares (31 January 2007: 20,522,052; 31 July 2006: 20,737,052).
5. Debenture loan - convertible unsecured loan stock ('CULS') 2013
On 18 June 2007 200,000 CULS units were purchased for cancellation at a rate of
1,240p per unit. On 6 July 2007 994,263 CULS units were converted into 994,263
Ordinary Shares of 5p each at a rate of one 5p Ordinary Share for every unit of
5p.
At 31 July 2007 4,516,884 CULS units were remaining.
6. Reconciliation of total return from ordinary activities before finance costs
and taxation to cash expended from operations
Six months Six months
Ended Ended
31 July 31 July
2007 2006
(unaudited) (unaudited)
£'000 £'000
Total return from ordinary activities before finance costs and taxation 21,621 7,512
Gains on investments (21,229) (7,022)
Share based remuneration 127 161
Dividends and interest reinvested (338) (979)
Decrease/(increase) in debtors and accrued income 118 (210)
Changes relating to investments of dealing Subsidiaries (303) 168
(Decrease) in creditors and accruals (215) (640)
Tax on investment income - (24)
Cash expended from operations (219) (1,034)
7. Related Party Transactions
The Joint Manager, North Atlantic Value LLP, is regarded as a related party of
the Company. The amounts payable to the Joint Manager in respect of investment
management for the six months to 31 July 2007 are as follows:
Six months Six months
Ended Ended
31 July 31 July
2007 2006
(unaudited) (unaudited)
£'000 £'000
Annual fee 1,233 1,163
Performance fee 646 546
Irrecoverable VAT thereon 49 86
1,928 1,795
In addition to the management fees disclosed above, North Atlantic Value LLP is
also paid:
• An activity fee of £225 per transaction as reimbursement of custodian and
related transaction costs incurred on the Company's behalf.
• An investment management related fee of £100,000 per annum.
8. Financial information
The financial information contained in this preliminary announcement is not the
Group's statutory accounts. The financial information for the six months ended
31 July 2007 and 31 July 2006 is not a financial year and has not been audited.
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.
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