THE AIM DISTRIBUTION TRUST PLC UNAUDITED PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 MARCH 2007 FINANCIAL SUMMARY
Unaudited Audited Year Year ended ended 31 March 31 March 2007 2006 Pence pence
Net asset value (per share) 64.1 70.0 Cumulative distributions paid since launch 53.8 51.8 Total return (net asset value plus cumulative 117.9 121.8 distributions paid) Interim distribution paid (per share) 2.0 2.0
The statement to shareholders by the Chairman, Sir Aubrey Brocklebank, includes the following comments:
Performance of your Company over the year ended 31 March 2007 has been a little disappointing, although the second half of the year has seen an increase in NAV after the fall that was experienced in the first half.
Net Asset Value At 31 March 2007, the Net Asset Value per share ("NAV") stood at 64.1p. This represents a decrease of 3.9p or 5.5% since the previous year-end after adjusting for the 2p dividend paid in March 2007, although is an increase of 0.6p (0.9%) per share since the half year date also after adjusting for the dividend paid.
VCT investments The Company has been effectively fully invested throughout the year, so investment activity has been relatively low. There were however two follow-on investments made at a total cost of £175,000.
A number of realisations occurred during the year, which produced cash proceeds of £2.3 million. The most significant was that of Neutec Pharma, which was the subject of a cash offer and produced a realised gain of £512,000 in the year from an investment with an original cost of £210,000.
As I highlighted in my statement with the interim results, the Company's performance has been held back by the poor performance of a small number of investments. Cellcast, Chariot (UK), Hill Station and PM Group were the most notable poor performers. The holding in PM Group has now been sold and Chariot (UK) has effectively failed, however Hill Station and Cellcast have reacted to the difficulties they faced earlier in the year and there are now prospects for at least a partial recovery for both businesses.
Overall the investment portfolio showed net realised gains of £546,000 and net unrealised losses of £1.2 million.
Results and Dividend The loss on ordinary activities after taxation was £786,000 (2006 profit: £862,000), comprising a revenue profit of £18,000 and a capital loss of £804,000.
An interim dividend of 2p per share (2006: 2p per share) was paid on 29 March 2007. The Directors are not proposing to declare any further dividends in respect of the year to 31 March 2007.
Fixed interest securities During the year, the Company's fixed interest securities realised a small loss of £6,000 against cost. At the year end, the Company continued to hold one fixed interest security, which had a value of £661,000.
Share buybacks The Board is conscious that the Company's share price is affected by the illiquidity of its shares in the market. In line with widespread practice amongst VCTs, the Company has a policy of purchasing its own shares.
During the year, the Company acquired 2,378,417 shares at an average price of 59.4p per share. This unusually high level of buybacks resulted from a sizeable disposal by a group of institutional investors. Although this transaction absorbed a significant amount of the Company's liquid funds, the fact that it was undertaken at approximately a 10% discount to NAV meant that the transaction resulted in a small uplift in NAV for remaining shareholders.
The Board intends to continue with the policy of buying in shares at approximately a 10% discount to the latest published NAV (subject to regulatory and other restrictions) and a special resolution to that end is proposed for the forthcoming AGM.
Future of the Company It is now five years since Shareholders voted for the Company to continue as a VCT. In accordance with Article 26 of the Company's Articles of Association, a resolution will again be put to Shareholders as to whether the Company should continue for another 5 years.
The Board have given consideration to options available, paying particular attention to the situations of many Shareholders. As winding up the Company is likely to crystallise a capital gains tax liability for many Shareholders, the Board is firmly of the opinion that the Company should continue as a VCT, and recommend that Shareholders vote in favour of resolution 6 at the forthcoming Annual General Meeting.
Annual General Meeting The Annual General Meeting of the Company will be held at Port of Liverpool Building, Pier Head, Liverpool, L3 1NW at 12 noon on 10 September 2007.
Outlook The number of investments showing significant falls in the first half of the year was a concern for the Board, however the slightly improved performance in the second half provides evidence that the Company's diversified portfolio includes some investments with good growth prospects that can deliver improved performance as they mature.
UNAUDITED INCOME STATEMENT for the year ended 31 March 2007
Unaudited Audited Year ended 31 March 2007 Year ended 31 March 2006 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000
Income 220 - 220 168 - 168
(Losses)/gains on - (686) (686) - 1,014 1,014 investments 220 (686) (466) 168 1,014 1,182
Investment (39) (118) (157) (39) (117) (156) management fees
Other expenses (163) - (163) (164) - (164)
Return on ordinary 18 (804) (786) (35) 897 862 activities before tax
Tax on ordinary - - - - - - activities
Return attributable to 18 (804) (786) (35) 897 862 equity shareholders
Return per share 0.1p (5.3p) (5.2p) (0.2p) 5.3p 5.1p
The revenue and capital movements in the year relate to continuing operations. The total column within the Income Statement represents 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 within the Income Statement as noted above.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 31 March 2007
Unaudited Audited Year ended Year ended 31 March 2007 31 March 2006 £'000 £'000
Opening shareholders' funds 11,602 10,831 Issue of shares - 611 Share issue costs - (53) Purchase of own shares (1,421) (313) Total recognised (losses)/gains for the (786) 862 year Distributions paid (287) (336)
Closing shareholders' funds 9,108 11,602
BALANCE SHEET Unaudited Audited at 31 March 2007 2007 2006 £'000 £'000 £'000 £'000
Fixed assets Investments 7,848 11,638
Current assets Debtors 276 51 Cash at bank and in hand 1,153 47 1,429 98
Creditors: amounts falling due within (169) (134) one year
Net current assets/(liabilities) 1,260 (36)
Net assets 9,108 11,602
Capital and reserves Called up share capital 3,551 4,145 Capital redemption reserve 860 266 Share premium 348 348 Special reserve - 1,176 Capital reserve - unrealised (1,730) (812) Capital reserve - realised 6,049 6,467 Revenue reserve 30 12
Equity shareholders' funds 9,108 11,602
Net asset value per share 64.1p 70.0p
CASH FLOW STATEMENT for the year ended 31 March 2007 Unaudited Audited Year ended Year 31 March ended 2007 31 March 2006 £'000 £'000 £'000 £'000
Net cash outflow from operating (150) (120) activities
Capital expenditure Purchase of investments (231) (2,807) Sale of investments 3,106 1,159
Net cash inflow/(outflow) from 2,875 (1,648) capital expenditure
Equity distributions paid (287) (336)
Net cash inflow/(outflow) 2,438 (2,104) before financing
Financing Applications for share issue - 271 Share issue costs - (22) Purchase of own shares (1,332) (335) Net cash outflow from financing (1,332) (86)
Increase/(decrease) in cash in 1,106 (2,190) the year
NOTES TO THE UNAUDITED PRELIMINARY ANNOUNCEMENT for the year ended 31 March 2007
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 Venture capital 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, investments quoted on AIM and those traded on the PLUS Market (formerly OFEX) are measured using bid prices with marketability discounts applied where deemed appropriate, in accordance with the International Private Equity and Venture Capital Valuation Guidelines.
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 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.
Taxation The tax effects on different items in the Income Statement are allocated between capital and revenue on the same basis as the particular item to which they relate using the Company's effective rate of tax for the accounting period.
Due to the Company's status as a Venture Capital Trust and the continued intention to meet the conditions required to comply with Section 842AA of the Income and Corporation Taxes Act (1988), no provision for taxation is required in respect of any realised or unrealised appreciation of the Company's investments which arises.
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. Return per share
Revenue return per ordinary share is based on the net revenue return after taxation of £18,000 (2006: loss £35,000) in respect of 15,229,480 ordinary shares (2006: 16,881,512), being the weighted average number of ordinary shares in issue during the year.
Capital return per ordinary share is based on the net capital loss for the financial year of £804,000 (2006: profit £897,000) in respect of 15,229,480 ordinary shares (2006: 16,881,512), being the weighted average number of ordinary shares in issue during the year.
As the Company has not issued any convertible securities or share options, there is no dilutive effect on return per ordinary share. The return per share disclosed therefore represents both basic and diluted return per ordinary share.
3. Net asset value per ordinary share
2007 2006 Net asset Net asset value value per share Net asset per share Net asset value value pence £'000 pence £'000
Ordinary 64.1 9,108 70.0 11,602 shares
Net asset value per ordinary share is based on net assets at the year-end, and on 14,203,875 ordinary shares (2006: 16,582,292), being the number of ordinary shares in issue at the year-end.
As the Company has not issued any convertible securities or share options, there is no dilutive effect on net asset value per ordinary share. The net asset value per share disclosed therefore represents both basic and diluted net asset value per ordinary share.
4. Reconciliation of net revenue return before taxation to net cash flow from operating activities
2007 2006 £'000 £'000
Revenue/(loss) return on ordinary activities before tax 18 (35) Expenses charged to capital (118) (117) (Increase)/decrease in prepayments and accrued income (45) 13 (Decrease)/increase in accruals and deferred income (5) 19 Net cash outflow from operating activities (150) (120)
5. Analysis of changes in cash during the period
2007 2006 £'000 £000
Beginning of year 47 2,237 Net cash inflow/(outflow) 1,106 (2,190) End of year 1,153 47
Announcement based on unaudited accounts The financial information set out in the announcement does not constitute the Company's statutory accounts in accordance with section 240 Companies Act 1985 for the year ended 31 March 2007. The statutory accounts for the year ended 31 March 2007 will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The statutory accounts for the year ended 31 March 2006 have been delivered to the Register of Companies and received an Auditor's Report which was unqualified and did not contain statements under s237 (2) and (3) of the Companies Act 1985.
A copy of the full annual report and financial statements for the year ended 31 March 2007 will be printed and posted to shareholders. Copies will also be available to the public at the registered office of the Company at Kings Scholars House, 230 Vauxhall Bridge Road, London, SW1V 1AU.
The financial information contained within this Preliminary Announcement was approved by the Board on 23 July 2007.
---END OF MESSAGE---