Final Results
29 Maggio 2008 - 12:33PM
UK Regulatory
Final Results
PENNINE DOWNING AIM VCT 2 PLC
Final Results for the year ended 29 February 2008
FINANCIAL HIGHLIGHTS
Year Year
Ended Ended
29-Feb-08 28-Feb-07
Net asset value per share 55.0p 83.8p
Total distributions paid per share since 23.5p 13.5p
inception
Total return per share 78.5p 97.3p
(Net asset value plus cumulative distributions)
CHAIRMAN'S STATEMENT
I present the Report and Accounts for the year ended 29 February
2008, which are the Company's first results since I was appointed as
Chairman.
The year has been an active one, with your Company successfully
completing a merger with Pennine Downing AIM VCT plc ("PDA") and The
Ethical AIM VCT plc ("Ethical") resulting in a significantly larger
asset and shareholder base. I welcome new shareholders to the
Company.
The year has also been notable for a sharp deterioration in economic
conditions and it is disappointing to have to report that this has
resulted in a fall in the Company's Net Asset Value.
Acquisition
The merger with PDA and Ethical was undertaken by means of two
Schemes of Reconstruction. The process received approval from the
Company's Shareholders on 8 January 2008 and effectively completed on
16 January 2008.
As consideration for the purchase of the assets, liabilities and
trades of PDA and Ethical, the Company issued 14,471,685 new Ordinary
Shares to the shareholders of PDA and Ethical. Following approval of
the proposals (but prior to their implementation) each of the three
companies involved paid a 10p per share dividend to its respective
shareholders.
One of the main benefits of undertaking the mergers was to reduce
running costs by creating a single larger VCT. Over the coming year
the Company should start to reap these benefits.
Directorate
Following the completion of the merger, James Leek resigned as
Chairman and non-executive Director of the Company. The Directors
would like to thank James for his valuable contribution since joining
the Board at the Company's launch in January 2001 and wish him well
in all his future activities.
Also following the merger, on 16 January 2008, Andrew Davison and
Tony McGing joined the Board as non-executive Directors. Andrew was
the non-executive Chairman of Ethical and Tony was a non-executive
Director of PDA. Both have considerable experience in the Venture
Capital Trusts sector and are welcome additions to the Board.
Net Asset Value ("NAV")
At 29 February 2008, the Company's NAV stood at 55.0p, a decrease of
18.3p (20.7%) per share compared to the previous year-end position
and after adjusting for the special dividend of 10p per share that
was paid in the year. The majority of the fall in NAV (14.4p per
share) occurred in the period before the acquisitions took place.
After the acquisitions, the enlarged Company experienced a fall in
NAV of 3.9p per share.
Venture capital investments
Under the merger schemes, the Company acquired the investments of PDA
and Ethical at their market value at 16 January 2008, which stood at
�8.7 million. Additionally, the Company invested �860,000 in three
new qualifying and three follow-on investments during the year.
In the early part of the year, the Company was able to achieve
several profitable exits, in particular offers were received for
Computer Software Group plc and Oasis Healthcare plc which generated
realised gains of �193,000 and �281,000 respectively. Total realised
gains for the year amounted to �566,000.
Since August 2007, liquidity on the AIM market has been increasingly
limited and shares prices have been in a fairly steady decline. At
the year end the Company's venture capital portfolio comprised 52
investments and was valued at �10.8 million, giving net unrealised
losses for the year of �3.2 million.
Unit trust and other investments
The Company continues to hold a small portfolio of Rathbones Unit
Trusts, which had a value of �887,000 at the year-end with unrealised
losses arising thereon of �113,000.
In order to continue to comply with the "income test" in the Venture
Capital Trust regulations, during the year the Company purchased
gilts totalling �1.8 million (including �779,000 of re-invested
proceeds from maturing investments). The Company also acquired gilts
and listed fixed income investments valued at �2.0 million as part of
the merger. The majority of these investments were sold to fund the
special dividends paid by each of the companies involved in the
merger, producing realised losses of �31,000. The remainder of the
portfolio produced unrealised gains for the year of �23,000.
Results and dividend
The loss on ordinary activities after taxation was �1,355,000 (2007:
�565,000), comprising a revenue return of �77,000 and a capital loss
of �1,432,000. The capital loss has been reduced by a one-off write
back of negative goodwill that arose on the mergers of �1.5 million.
The negative goodwill mainly arose because the consideration shares
issued by the Company, for accounting purposes, are valued at the
mid-market price as at the date of their issue. As the mergers were
constructed on a relative net asset value basis, the discount at
which the Company's shares normally trade has been responsible for
producing this apparent discrepancy.
The Board is proposing to pay a final dividend of 3.5p per share.
This will be paid on 27 June 2008 to shareholders on the register at
13 June 2008.
Share buybacks
In order to provide liquidity in the market in the Company's shares,
the Company has a policy, subject to certain restrictions, of
purchasing its own shares that become available in the market.
A Special Resolution to continue with this policy is proposed for the
forthcoming AGM and therefore the Board recommends Shareholders vote
for resolution 8.
During the year, the Company purchased a total of 1,202,919 Ordinary
shares at an average cost of 52.8p, being approximately a 10%
discount to NAV. These shares were subsequently cancelled.
Articles of Association
At the forthcoming AGM, the Board will seek Shareholder approval to
update the Company's articles of association. Resolution 9, which is
a Special Resolution, proposes the adoption of new articles of
association which incorporate a number of changes which are required
as a result of the implementation of the Companies Act 2006. An
explanation of the proposed changes is provided within the Report of
the Directors.
The Board recommends Shareholders vote for resolution 9 as, in the
Board's opinion, the proposed changes are in the best interests of
Shareholders.
Annual General Meeting
The next Annual General Meeting of the Company will be held at 159
New Bond Street, London, W1Y 9PA at 2:30 pm on 25 June 2008.
Two items of Special Business are proposed, to authorise the Company
to make market purchases of the Company's shares and amend the
articles of association as described above.
Outlook
In the current climate and being close to fully invested in a
portfolio with a high proportion of small AIM-quoted companies, the
Company is limited in the strategies it can employ in the short term
to enhance performance. However, with the balanced and diversified
portfolio that it holds, the Company is reasonably well positioned to
weather a period of challenging market conditions and reap the
rewards when investor sentiment improves.
INCOME STATEMENT
for the year ended 29 February 2008
Year ended 29 February Year ended 28 February
2008 2007
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Income - Continuing 228 - 228 162 - 162
operations
- 82 - 82 - - -
Acquisitions
Net losses on
investments
- Continuing - (1,958) (1,958) - (398) (398)
operations
- - (832) (832) - - -
Acquisitions
Negative goodwill - 1,487 1,487 - - -
310 (1,303) (993) 162 (398) (236)
Investment (42) (126) (168) (36) (110) (146)
management fees
Other expenses (191) (3) (194) (183) - (183)
Return on ordinary
activities 77 (1,432) (1,355) (57) (508) (565)
before tax
Tax on ordinary - - - - - -
activities
Return attributable
to equity 77 (1,432) (1,355) (57) (508) (565)
Shareholders
Basic and diluted
return 0.6p (11.3p) (10.7p) (0.5p) (4.5p) (5.0p)
per Ordinary Share
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 29 February 2008
Year ended Year ended
29 February 2008 28 February 2007
�'000 �'000
Opening Shareholders' funds 9,182 10,585
Issue of share capital on 7,381 -
acquisition
Share issue costs (151) -
Purchase of own shares (638) (387)
Total recognised losses for the (1,355) (565)
year
Distributions paid in year (1,095) (451)
Closing Shareholders' funds 13,324 9,182
BALANCE SHEET
as at 29 February 2008
2008 2007
�'000 �'000 �'000 �'000
Fixed Assets
Investments 12,000 8,838
Current assets
Debtors 116 90
Cash at bank and in hand 1,326 340
1,442 430
Creditors: amounts falling due within one (118) (86)
year
Net current assets 1,324 344
Net assets 13,324 9,182
Capital and reserves
Called up share capital 1,211 547
Capital redemption reserve 139 79
Share premium 6,506 -
Special reserve 7,473 7,397
Capital reserve - realised 962 1,083
Capital reserve - unrealised (2,792) 273
Revenue reserve (175) (197)
Total equity Shareholders' funds 13,324 9,182
Basic and diluted net asset value
per Ordinary Share 55.0p 83.8p
CASH FLOW STATEMENT
for the year ended 29 February 2008
Year Year
ended ended
29 Feb 28 Feb
2008 2007
�'000 �'000
Net cash outflow from operating activities (15) (199)
Capital expenditure and financial investment
Purchase of investments (2,624) (496)
Disposal of investments 5,412 1,027
Net cash inflow from capital expenditure 2,788 531
Acquisitions
Cash acquired 2,124 -
Payment of acquisition cost creditor (225) -
acquired as a result of merger
Payment of dividend creditor acquired (1,831) -
as a result of merger
68 -
Equity distributions paid (1,095) (451)
Net cash inflow/(outflow) before financing 1,746 (119)
Financing
Share issue costs (98) -
Shares repurchased (662) (358)
Net cash outflow from financing (760) (358)
Increase/(decrease) in cash 986 (477)
NOTES
1. Return per Ordinary Share
Revenue return per Ordinary Share is based on the net revenue profit
after taxation of �77,000 (2007 loss: �57,000) in respect of
12,636,443 (2007: 11,270,873) Ordinary Shares, 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 �1,432,000 (2007: �508,000) in respect of
12,636,443 (2007: 11,270,873) Ordinary Shares, 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.
2. Net asset value per Ordinary Share
2008 2007
Net asset Net asset
value value
per share Net asset per share Net asset
value value
pence �'000 pence �'000
Ordinary 55.0 13,324 83.8 9,182
Shares
Announcement based on audited accounts
The financial information set out in this announcement does not
constitute the Company's statutory financial statements in accordance
with section 434 Companies Act 2006 for the year ended 29 February
2008, but has been extracted from the statutory financial statements
for the year ended 29 February 2008, which were approved by the Board
of Directors on 28 May 2008 and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. The
Independent Auditor's Report on those financial statements was
unqualified and did not contain any emphasis of matter nor statements
under s 498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 28 February 2007 have been
delivered to the Registrar of Companies and received an Independent
Auditors report which was unqualified and did not contain any
emphasis of matter nor statements under S237(2) or (3) of the
Companies Act 1985.
A copy of the full annual report and financial statements for the
year ended 29 February 2008will be printed and posted to shareholders
shortly. 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 and will be available for
download from www.downing.co.uk.
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