Interim Results
AIM Distribution Trust PLC (The)
18 December 2006
The AIM Distribution Trust plc
Interim Statement for the six months ended 30 September 2006
Recent performance summary
30 Sept 31 Mar 30 Sept
2006 2006 2005
pence pence pence
Net asset value per share 65.1 70.0 70.2
Cumulative distributions per share 51.8 51.8 49.8
Total return per share 116.9 121.8 120.0
CHAIRMAN'S STATEMENT
The six month period ended 30 September 2006 has been a disappointing one for
your Company. Although many of the investments in the portfolio performed
satisfactorily over the period, a small number performed poorly which has
impacted on the Company's Net Asset Value per share ('NAV').
Net Asset Value
At 30 September 2006, the Company's Net Asset Value ('NAV') stood at 65.1p, a
decrease of 4.9p or 7% compared to the NAV at 31 March 2006.
VCT Investment Portfolio
As the Company is well above the VCT qualifying target of having 70% of its
funds in VCT qualifying investments, new investment activity has been limited,
with one follow-on investment of £25,000 being made during the period.
There was one major disposal during the period. Neutec Pharma was the subject
of an offer which produced a realised gain for your Company of £512,000 against
the valuation at the previous year end and £828,000 against original cost.
Within the remaining VCT Investment Portfolio, there were a number of poor
performers. Cellcast plc, Chariot (UK) plc, Hill Station plc, PM Group plc and
Printing.com plc all experienced significant falls in their share prices as a
result of a specific difficulties faced by each of those companies. Those
investments together accounted for unrealised losses of £916,000 over the
period.
Overall, the VCT Investment Portfolio gave rise to an unrealised loss of
£1,290,000 and a realised gain £519,000 for the six months.
Results and Dividend
The loss on ordinary activities after taxation for the period was £846,000
comprising a revenue loss of £10,000 and a capital loss of £836,000.
As the Company has made some further realised gains in the period, the Board has
decided to pay an interim dividend of 2p per share. This will be paid on 29
March 2007 to Shareholders on the register at 2 March 2007.
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.
During the period the Company repurchased 1,982,944 ordinary shares at an
average price of 59.6p per share. This level of share purchases is unusually
high and mostly resulted from a group of institutional shareholders who disposed
of their holdings in the Company. The Board do not expect share repurchases to
occur at this level in the future. As the share buybacks were carried out at a
10% discount to NAV, the effect has been an uplift of approximately £130,000 for
the Company's remaining shareholders.
Outlook
Although the performance has been disappointing over the last six months, the
Company continues to hold a large and diverse portfolio of mainly AIM-quoted
investments. In most cases, the Investment Manager and Directors believe these
companies have strong management teams who should be able to develop their
businesses and deliver rewards to investors in the medium term. I hope to be
able to report on more evidence of this in the second half of the year.
Sir Aubrey Brocklebank
Chairman
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 September 2006
30 Sept 2006 30 Sept 2005 31 Mar 2006
£'000 £'000 £'000
Fixed assets
Investments 9,496 11,357 11,638
Net current assets/(liabilities) 71 527 (36)
Net assets 9,567 11,884 11,602
Capital and reserves
Called up share capital 3,650 4,232 4,145
Capital redemption reserve 761 179 266
Share premium 348 348 348
Special reserve - 1,457 1,176
Capital reserve - realised 7,269 6,206 6,467
Capital reserve - unrealised (2,463) (577) (812)
Revenue reserve 2 39 12
Total equity 9,567 11,884 11,602
Net asset value per share 65.5p 70.2p 70.0p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
30 Sept 2006 30 Sept 2005 31 Mar 2006
£'000 £'000 £'000
Opening shareholders' funds 11,602 10,831 10,831
Issue of shares - 611 611
Share issue costs - (53) (53)
Repurchase of own shares (1,189) (99) (313)
Total recognised gains for the period (846) 594 862
Distributions paid in period - - (336)
Closing shareholders' funds 9,567 11,884 11,602
INCOME STATEMENT
for the six months ended 30 September 2006
Six months ended
30 September 2006
Revenue Capital Total
£'000 £'000 £'000
Income 94 - 94
Gains on investments
- Realised - 518 518
- Unrealised - (1,290) (1,290)
94 (772) (678)
Investment management fees (21) (64) (85)
Other expenses (83) - (83)
Return on ordinary activities before taxation (10) (836) (846)
Taxation - - -
Return attributable to equity shareholders (10) (836) (846)
Return per share (0.1p) (5.2p) (5.3p)
Six months ended Year ended
30 September 2005 31 March 2006
(as restated)
Revenue Capital Total Total
£'000 £'000 £'000 £'000
Income 92 - 92 168
Gains on investments
- Realised - 58 58 552
- Unrealised - 595 595 462
92 653 745 1,182
Investment management fees (17) (50) (67) (156)
Other expenses (84) - (84) (164)
Return on ordinary activities before taxation (9) 603 594 862
Taxation - - - -
Return attributable to equity shareholders (9) 603 594 862
Return per share (0.1p) 3.6p 3.5p 5.1p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 30 September 2006
Six months ended
30 September 2006
Revenue Capital Total
£'000 £'000 £'000
Return attributable to equity shareholders (10) (836) (846)
Total recognised gains for the period (10) (836) (846)
Six months ended Year ended
30 September 2005 31 March 2006
(as restated)
Revenue Capital Total Total
£'000 £'000 £'000 £'000
Return attributable to equity shareholders (9) 603 594 862
Total recognised gains for the period (9) 603 594 862
Prior year adjustment - (215) (215) (215)
Total recognised gains and losses since last report (9) 338 379 647
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 September 2006
Six Six
months months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2006 2005 2006
Note £'000 £'000 £'000
Cash outflow from operating activities and
returns on investments 1 (99) (44) (120)
Capital expenditure
Purchase of investments (80) (1,982) (2,807)
Proceeds on disposal of investments 1,399 205 1,159
Net cash inflow/(outflow) from capital
expenditure 1,319 (1,777) (1,648)
Equity dividends paid 1 - (336)
Net cash inflow/(outflow) before financing 1,221 (1,821) (2,104)
Financing
Proceeds of share issue - 271 271
Share issue costs - (22) (22)
Purchase of own shares (1,176) (121) (335)
Net cash (outflow)/inflow from financing (1,176) 128 (86)
Increase/(decrease) in cash 2 45 (1,693) (2,190)
Notes to the cash flow statement:
1 Cash outflow from operating activities and
returns on investments
Net loss before taxation (9) (9) (35)
Expenses charged to capital (64) (50) (117)
(Increase)/decrease in other debtors (14) 11 13
(Decrease)/increase in other creditors (12) 4 19
Net cash inflow/(outflow) from operating
activities (99) (44) (120)
2 Analysis of net funds
Beginning of period 47 2,237 2,237
Net cash inflow/(outflow) 45 (1,693) (2,190)
End of period 92 544 47
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 September 2006
Unrealised
gain/(loss) % of
Cost Valuation in period portfolio
£'000 £'000 £'000 by value
Twenty largest VCT investments (by
value)
Connaught plc* 77 648 87 6.8%
Supporta plc 250 494 (92) 5.2%
Huveaux plc 299 479 38 5.0%
Associated Network Solutions plc** 251 466 65 4.9%
XKO Group plc 493 425 (91) 4.4%
Printing.com plc 200 368 (160) 3.8%
Aero Inventory plc 196 328 (22) 3.4%
Glisten plc 178 294 45 3.1%
Cadbury House Hotel & Country Club
Ltd*** 225 293 67 3.1%
Blooms of Bressingham Holdings plc 590 284 (18) 3.0%
Hill Station Public Limited Company 250 271 (167) 2.8%
Keycom plc** 277 259 (5) 2.7%
Waterline Group plc 244 256 42 2.7%
OMG plc 570 222 40 2.3%
Straight plc 105 219 32 2.3%
Sanastro Limited *** 200 200 - 2.1%
Neutrahealth plc 173 197 8 2.1%
Deltex Medical Group plc 258 196 (15) 2.0%
Gourmet Holdings plc 250 187 (7) 2.0%
AT Communications plc 178 174 (30) 1.8%
5,264 6,260 (183) 65.5%
Other VCT investments 5,335 1,742 (1,115) 18.2%
Listed fixed income securities 1,361 1,494 8 15.6%
Net current assets (including cash
at bank) 71 - 0.7%
11,960 9,567 (1,290) 100.0%
All VCT investments are quoted on AIM unless otherwise stated.
* Listed on the Main Market of the London Stock Exchange
** Quoted on the PLUS Market (formerly known as OFEX)
*** Unquoted
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. Accounting policies
Basis of accounting
The Company has prepared its financial statements under UK Generally Accepted
Accounting Practice ('UK GAAP') and in accordance with the Statement of
Recommended Practice 'Financial Statements of Investment Trust Companies'
revised December 2005 ('SORP').
The financial statements are prepared under the historical cost convention
except for the revaluation of certain financial instruments.
Presentation of Income Statement
In order to better reflect the activities of a venture capital trust and in
accordance with guidance issued by the Association of Investment Companies ('AIC
'), supplementary information which analyses the income statement between items
of a revenue and capital nature has been presented alongside the income
statement. The net revenue is the measure the directors believe appropriate in
assessing the Company's compliance with certain requirements set out in Section
842 Income and Corporation Taxes Act 1988.
Investments
All investments are designated as 'fair value through profit or loss' assets and
are initially measured at cost. Thereafter the investments are measured at
subsequent reporting dates at fair value.
Listed fixed income investments and investments quoted on AIM are valued using
bid prices with illiquidity discounts applied where deemed appropriate.
In respect of unquoted instruments, fair value is established by using
International Private Equity and Venture Capital Valuation Guidelines. Where no
reliable fair value can be estimated for such unquoted equity investments they
are carried at cost, subject to any provision for impairment. Where an investee
company has gone into receivership or liquidation the investment, although not
physically disposed of, is treated as being realised.
Gains and losses arising from changes in fair value are included in the income
statement for the year as a capital item and transaction costs on acquisition or
disposal of the investment expensed.
It is not the Company's policy to exercise either significant or controlling
influence over investee companies. Therefore the results of these companies are
not incorporated into the revenue account except to the extent of any income
accrued.
Income
Dividend income from investments is recognised when the shareholders' rights to
receive payment has been established, normally the ex dividend date.
Interest income is accrued on a timely basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount, and only where there
is reasonable certainty of collection.
Expenses
All expenses are accounted for on an accruals basis. In respect of the analysis
between revenue and capital items presented within the income statement, all
expenses have been presented as revenue items except as follows:
• Expenses which are incidental to the disposal of an investment are deducted
from the disposal proceeds of the investment.
• Expenses are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments held can be
demonstrated and accordingly the investment management fee and finance costs
have been allocated 25% to revenue and 75% to capital, in order to reflect the
directors expected long-term view of the nature of the investment returns of the
Company.
Issue costs
Issue costs have been deducted from the share premium account.
Deferred Taxation
Deferred taxation is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in the accounts.
2. All revenue and capital items in the Income Statement derive from
continuing operations.
3. The Company has only one class of business and derives its income from
investments made in shares, securities and bank deposits.
4. The comparative figures were in respect of the year ended 31 March 2006 and
the period ended 30 September 2005 respectively.
5. Return per share for the period has been calculated on 15,962,536 shares,
being the weighted average number of shares in issue during the period.
6. Dividends
30 Sept 2006 31 Mar 2006
Revenue Capital Total Total
£'000 £'000 £'000 £'000
Paid in period/year
2006 interim 2p - - - 336
- - - 336
7. Reserves
Capital Capital Capital
Share Share redemption reserve reserve Revenue
premium reserve reserve - unrealised - realised reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2006 348 1,176 266 (812) 6,467 12
Repurchase of shares - (1,189) 495 - - -
Expenses capitalised - - - - (64) -
Gains/(losses) on investments - - - (1,290) 518 -
Transfer between reserves - 13 - (361) 348 -
Retained net revenue for the year - - - - - (10)
At 30 September 2006 348 - 761 (2,463) 7,269 2
The Special Reserve, Capital Reserve - realised and Revenue Reserve are
all distributable reserves.
8. 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 30 September 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.
9. Copies of the unaudited interim results will be sent to shareholders
shortly. Further copies can be obtained from the Company's Registered Office and
will be available for download from www.downing.co.uk.
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