Interim Results
AIM Distribution Trust PLC (The)
09 December 2005
The AIM Distribution Trust plc
Interim Statement for the six months ended 30 September 2005
RECENT PERFORMANCE SUMMARY
30 Sept 31 Mar 30 Sept
2005 2005 2004
pence pence pence
(Restated)
Net asset value per Ordinary share 70.2 68.0 66.0
Cumulative distributions per Ordinary share 49.8 49.8 47.8
Total return per Ordinary share 120.0 117.8 113.8
CHAIRMAN'S STATEMENT
I present the interim statement for the six months ended 30 September 2005. The
AIM market has experienced mixed fortunes over the period under review, with the
FTSE AIM All-Share Index falling sharply in the early part of the period but
recovering in the later part. Against this background, it is satisfying to be
able to report an increase in the Company's Net Asset Value per Ordinary share
('NAV') over the six months.
Net Asset Value
At 30 September 2005, the Company's NAV stood at 70.2p, an increase of 2.2p or
3.2% compared to the NAV at 31 March 2005.
As a result of the introduction of FRS 26, the Company now has to value quoted
investments at bid prices. If mid-market prices had continued to be used at 30
September 2005, the valuation of the Company's investments would have been
£230,000 higher (equivalent to 1.5p per share) and the increase in NAV over the
period would have been 3.7p per share or 5.4%.
VCT investments
The Company made five new investments and one follow-on investment during the
period, totalling £978,000. These are summarised as follows:
£'000
New investments
Cadbury House (Unquoted) 225
A country club with health club, banqueting and conference
facilities, which has raised funds for a major
redevelopment of its premises.
Waterline Group (AIM) 200
The largest independent supplier of third party and own
brand kitchen furniture and related products in the UK.
Cellcast (AIM) 194
Interactive television and mobile programming provider.
Neurahealth (AIM) 173
Developer and distributor of natural healthcare products.
Dipford Group (AIM) 136
Business broker for small business transfers.
Follow-on investment
Keycom (Ofex) 50
978
There were also two part disposals during the period realising a profit against
carrying value of £54,000.
Overall, the VCT investment portfolio gave rise to an unrealised gain of
£384,000 for the six months.
Format of accounts
Since the Company revoked investment company status in 2000 in order to be able
to pay a capital dividend, it has presented its accounts in a standard Companies
Act format, including a profit and loss account. In recent years, it has become
common for VCTs to report their results in accordance with Investment Trust
Statement of Recommended Practice ('SORP') even though they have revoked
investment company status. The Board considers that the SORP format is much
clearer to Shareholders and other users of the Company's accounts and has
therefore decided to revert to the SORP format. Further details are given in
the accounting policies note set out below.
Results and Dividend
The Company incurred a revenue loss of £9,000 (2004: £Nil) for the period. No
interim dividend will be paid. It remains the Board's target to pay dividends
of at least 2p per share per year.
Repurchase of shares
The Directors are conscious that the Company's share price is affected by the
illiquidity of its shares in the market resulting from the fact that investors
purchasing 'second-hand' shares do not benefit from income tax relief on their
investment.
The Directors continue to monitor the market in the Company's shares to ensure
there is liquidity for Shareholders wishing to dispose of their holding. In line
with the general trend in the VCT market, in future, the Board intends to buy in
shares at approximately a 10% discount to the latest published NAV. This will,
however, be subject to regulatory and other restrictions, such as close periods
where the Company is generally prohibited from buying its own shares.
Outlook
Since the period end there has been mixed news for the Company's investments.
During October, the AIM market experienced a general fall in value and, in
particular, CRC Group plc's share price fell significantly following a profits
warning. In November, there was positive news when New Star Asset Management
plc floated on AIM at a healthy premium to its previous carrying value. At 30
November 2005, the Company's NAV stood at 67.7p. Despite this overall fall
since the period end, the Investment Manager and Board believe that the Company
now has a well-balanced portfolio with good long-term prospects.
With a fair level of cash and liquid funds available, the Investment Manager is
continuing to seek suitable new investment opportunities. Although deal flow
continues to be strong, careful selection of the best quality opportunities
remains the key to success.
Sir Aubrey Brocklebank
Chairman
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 September 2005
30 Sept 30 Sept 31 March
2005 2004 2005
(Restated)
£'000 £'000 £'000
Fixed assets
Investments 11,357 9,716 9,142
Net current assets 527 1,125 1,904
Net assets 11,884 10,841 11,046
Capital and reserves
Called up share capital 4,232 4,105 4,063
Capital redemption reserve 179 96 138
Share premium 348 - -
Special reserve 1,457 2,387 1,607
Capital reserve - unrealised (577) (1,726) (901)
Revenue Account 6,245 5,979 6,139
11,884 10,841 11,046
Net asset value per share 70.2p 66.0p 68.0p
UNAUDITED STATEMENT OF TOTAL RETURN
(incorporating the revenue account)
for the six months ended 30 September 2005
Six months ended
30 September 2005
Revenue Capital Total
£'000 £'000 £'000
Income 92 - 92
Gains/(losses) on investments:
- Realised - 54 54
- Unrealised - 384 384
92 438 530
Investment management fees (17) (50) (67)
Other expenses (84) - (84)
Return on ordinary activities before taxation (9) 388 (379)
Tax on ordinary activities - - -
Return attributable to equity shareholders (9) 388 (379)
Distributions - - -
Transfer to/(from) reserves (9) 388 (379)
Return per Ordinary share (0.1p) 2.3p 2.2p
Six months ended Year ended
30 September 2004 31 March 2005
(Restated)
Revenue Capital Total Total
£'000 £'000 £'000 £'000
Income 108 - 108 209
Gains/(losses) on investments:
- Realised - 42 42 156
- Unrealised - (199) (199) 360
108 (157) (49) 725
Investment management fees (14) (41) (55) (109)
Other expenses (94) (2) (96) (183)
Return on ordinary activities before - (200) (200) 433
taxation
Tax on ordinary activities - - - -
Return attributable to equity - (200) (200) 433
shareholders
Distributions - - - (328)
Transfer to/(from) reserves - (200) (200) 105
Return per Ordinary share - (1.2p) (1.2p) 2.6p
The revenue column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
The Company has only one class of business and derives its income from
investments made in shares, securities and bank deposits.
The comparative figures are in respect of the six months ended 30 September 2004
and the year ended 31 March 2005 respectively.
UNAUDITED CASHFLOW STATEMENT
for the six months ended 30 September 2005
Six
months Six
ended months ended Year ended
30 Sept 30 Sept 31 March
2005 2004 2005
Note £'000 £'000 £'000
Cash outflow from operating activities and returns on (44) (65) (107)
investments 1
Capital expenditure
Purchase of investments (1,982) (2,249) (3,070)
Proceeds on disposal of VCT investments 205 1,902 3,970
Net cash (outflow)/inflow from capital expenditure (1,777) (347) 900
Equity distributions paid - - (328)
Net cash (outflow)/inflow before financing (1,821) (412) 465
Financing
Application for share issues 271 - 340
Share issue costs (22) - (31)
Purchase of own shares (121) (77) (155)
Net cash inflow/(outflow) from financing 128 (77) 154
(Decrease)/increase in cash 2 (1,693) (489) 619
Notes to the cashflow statement:
1 Cash outflow from operating activities and returns
on investments
Net revenue before taxation (9) - 1
Expenses charged to capital (50) (43) (84)
Decrease in other debtors 11 6 13
Increase/(decrease) in other creditors 4 (28) (37)
Net cash outflow from operating activities (44) (65) (107)
2 Analysis of net funds
Beginning of period 2,237 1,618 1,618
Net cash (outflow)/inflow (1,693) (489) 619
End of period 544 1,129 2,237
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 September 2005
Bid % of
Cost Valuation portfolio
£'000 £'000 by value
Top ten VCT investments
Connaught plc 150 936 8.3%
CRC Group plc 170 512 4.5%
Supporta plc 250 506 4.5%
Printing.com plc 199 496 4.4%
Neutec Pharma plc 208 480 4.2%
XKO Group plc 492 459 4.0%
Huveaux plx 299 441 3.9%
Aero Inventory plc 196 412 3.6%
Associated Network Solutions plc * 250 390 3.4%
Cardpoint plc 341 272 2.4%
2,555 4,904 43.2%
Other VCT investments 7,817 4,769 42.0%
Listed fixed income securities 1,562 1,684 14.8%
Total Investments 11,934 11,357 100.0%
All VCT investments are quoted on AIM unless otherwise stated.
* Quoted on OFEX
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The above financial information has been prepared on the basis of the
accounting policies set out below.
2. Adoption of FRS 21
These accounts have been prepared in accordance with FRS 21, which requires the
Company to account for dividends in the period they are liable to be paid rather
than in respect of the period in respect for which they are declared.
Comparative figures have been restated accordingly. The effect of the above
change on the reported net assets and net asset per share is as follows:
30 September 30 September 31 March
2005 2004 2005
Net Net Net
asset asset asset
Net Net Net
assets value assets value assets value
per per per
share share share
£'000 p £'000 p £'000 p
As reported (pre FRS 21) 10,153 70.2 10,512 64.0 11,046 68.0
Add: proposed dividends not accounted for until
declared and paid
- - 329 2.0 - -
As reported under FRS 21 10,562 70.2 10,841 66.0 11,046 68.0
3. As a result of the introduction of FRS 26, the Company is now required
to value quoted investments at bid prices, where previously it valued them at
mid-market prices. The change to bid prices has reduced the Company's Net Asset
Value by £230,000 as at 30 September 2005, equivalent to 1.4p per share.
4. The calculation of the revenue and capital return per share for the
period is based upon the net revenue loss and capital gain after tax of £9,000
and £388,000 respectively, divided by the weighted average number of shares in
issue during the period of 16,924,454.
5. The unaudited financial statements set out herein do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985
and have not been delivered to the Registrar of Companies. The figures for the
year ended 31 March 2005 have been extracted from the financial statements for
that year, which have been delivered to the Registrar of Companies; the
auditors' report on those financial statements was unqualified.
6. Copies of the unaudited interim results will be sent to shareholders
shortly. Further copies can be obtained from the Company's Registered Office.
PRINCIPAL ACCOUNTING POLICIES
The financial statements are prepared in accordance with applicable United
Kingdom accounting standards and with the Statement of Recommended Practice ('
SORP') 'Financial Statements of Investment Trust Companies' in all material
respects. The particular accounting policies are set out below:
Accounting convention
The financial statements have been prepared under the historical cost convention
as modified by the revaluation of investments.
True and fair override
The Company is no longer an investment company within the meaning of Section
266, Companies Act 1985, having revoked investment company status on 24 February
2000 in order to pay a capital dividend. However, the Company continues to
conduct its affairs as a venture capital trust for taxation purposes under
s842AA of the Income and Corporation Taxes Act 1988.
The financial statements are prepared in accordance with applicable Accounting
Standards and with the Statement of Recommended Practice 'Financial Statements
of Investment Trust Companies' ('SORP'). Ordinarily, the absence of Section 266
status would require the Company to adopt a different presentation of the
accounts than that recommended by the Association of Investment Trust Companies.
However, the Directors consider it appropriate to present the accounts in
accordance with the SORP. Under the SORP, the financial performance of the
Company is presented in a Statement of Total Return in which the revenue column
is the profit and loss account of the Company. The revenue column excludes
certain capital items, which in the absence of investment company status, the
Companies Act 1985, would ordinarily require to be included in the profit and
loss account: net profits on disposal of investments, calculated by reference to
their previous carrying amount, permanent diminution in value of investments,
management expenses charged to capital less tax relief thereon and the
distribution of capital profits.
The presentation adopted enables the Company to report in a manner consistent
with the sector within which it operates. The Directors therefore consider that
these departures from the specific provisions of Schedule 4 of the Companies Act
relating to the form and content of accounts for companies other than investment
companies and these departures from accounting standards are necessary to give a
true and fair view. The departures have no effect on the total return or
balance sheet. The particular accounting policies adopted are described below.
Investments
Listed fixed income securities and investments quoted on the Alternative
Investment Market ('AIM') and OFEX are stated at bid prices at the end of the
accounting period.
The Board has taken the decision to adopt BVCA guidelines in respect of valuing
quoted investments. This means that the quoted investments, including those
traded on the Alternative Investment Market ('AIM') and OFEX, are now valued at
bid-price rather than at mid-market price as at the Balance Sheet date. The
effect on the financial statement is that the investments are valued at £230,000
less than if they had been valued using mid-prices.
The Directors are conscious of the fact that because shares are traded on AIM
and OFEX this does not guarantee their liquidity. The nature of AIM and OFEX
investments is such that the prices can be volatile and realisation may not
achieve current book value, especially when such a sale represents a significant
proportion of that company's market capital.
In determining the valuation of unquoted investments the Directors adopt the bid
price where a dealing facility exists and apply a discount if considered
appropriate. Where no dealing facility exists the factors which the Directors
have regard to include, inter alia, the earnings record and growth prospects of
the security, the rating of comparable quoted companies, the yield of the
security where appropriate and any recent transactions.
Revenue
Dividends due on quoted equity shares and undated non-equity shares are brought
into account on the ex-dividend date. Fixed returns on non-equity shares are
recognised on a time apportionment basis so as to reflect the effective yield on
the shares. The return on fixed interest securities is recognised on a time
apportionment basis from the date of purchase so as to reflect the effective
yield on the securities.
Expenses
All expenses are accounted for on an accruals basis. Expenses are recognised in
the profit and loss account except as follows:
- Expenses which are incidental to the acquisition of an investment are
included within the cost of the investment;
- Expenses which are incidental to the disposal of an investment are
deducted from the disposal proceeds of the investment.
Deferred Taxation
Deferred taxation is provided on all timing differences that have originated but
not reversed at the balance sheet date other than those differences recorded as
permanent differences. Deferred tax is provided at the average rate of tax
expected to apply. Deferred tax assets and liabilities are not discounted to
reflect the time value of money. Deferred tax assets are only recognised to the
extent that they are regarded as recoverable.
Foreign currency assets and liabilities
Assets and liabilities denominated in foreign currencies are translated at the
rate of exchange ruling at the balance sheet date. Transactions in foreign
currencies are recorded at the rate ruling at the date of the transaction. All
differences are taken to the profit and loss account.
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