Earnings Release • Aug 31, 2017
Earnings Release
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RNS Number : 3335P
Dunedin Enterprise Inv Trust PLC
31 August 2017
For release 31 August 2017
Dunedin Enterprise Investment Trust PLC
Half year ended 30 June 2017
Dunedin Enterprise Investment Trust PLC, the private equity investment trust which specialises in investing in UK mid-market buyouts, announces its results for the half year ended 30 June 2017.
Financial Highlights:
· Net asset value per share at 30 June 2017: 515.0p (503.3p at 31/12/16), after 17.5p dividend
· Share price at 30 June 2017: 350.5p (306p at 31/12/16)
· Net asset value total return: 5.9% in the six months to 30 June 2017
· Realisations: £12.5m in the half year
· Realisation of Blackrock in August 2017
· New investments of £8.5m in the half year
· Dividend of 17.5p per share paid on 18 May 2017
Comparative Total Return Performance (%)
| Periods to 30 June 2017 | Net asset value (per share)* | Share price | FTSE Small Cap (ex Inv Cos) Index |
|
| Six months | 5.9 | 20.1 | 8.8 | |
| One year | 12.0 | 18.6 | 28.4 | |
| Three years | 9.9 | -7.3 | 34.1 | |
| Five years | 2.4 | 27.9 | 132.9 | |
| Ten years | 23.1 | 3.9 | 71.6 |
* - taken from 30 April for ten years
For further information please contact:
| Graeme Murray Dunedin LLP 0131 225 6699 0131 718 2310 07813 138367 |
In the half year to 30 June 2017 your Company's net asset value per share increased from 503.3p to 515.0p. After allowing for a final dividend of 17.5p paid in May 2017, the total return to shareholders was 5.9% (in terms of net asset value).
Following the half year end, on 4 August 2017 we announced the successful realisation of Blackrock, the provider of independent expert witnesses to dispute and litigation resolution in the construction sector. Total proceeds from the sale amounted to £12.8m which, including distributions received in the half year, represents an uplift of £2.9m over the valuation of £10.0m at 31 December 2016. The original cost of the investment was £4.9m and, over its life, a total of £13.9m has been received by Dunedin Enterprise, representing a 2.8 times return and an IRR of 60%.
The share price of 350.5p at 30 June 2017 represents a discount of 31.9% to the net asset value of 515.0p per share.
Portfolio
In the half year there were three realisations and one new investment.
An investment of £7.3m was made in Forensic Risk Alliance, an international consultancy business which provides forensic accounting, data analytics and e-discovery expertise to help businesses manage risk in an increasingly regulated global environment.
We successfully realised our investment in Steeper, a world leading manufacturer and supplier of prosthetic limbs, in February 2017. Total proceeds received over the life of the investment amounted to £10.4m. The overall return to Dunedin Enterprise from the investment was 1.9 times the original investment of £5.6m.
There were two realisations achieved from within the European funds. Realza realised GTT, the provider of tax management services to local public entities in Spain, generating £3.6m and a return of 3.2 times original cost. A further £0.8m was received from Innova/5 being the balance of proceeds from the sale of Wirtualna Polska, the internet portal business. Overall this business generated a return of 2.7 times original cost.
The trading performance of our portfolio companies has generally improved in the half year. Unrealised value increases of £9.0m were partially offset by value decreases of £2.1m. Valuation uplifts were achieved at Blackrock, Alpha, Kee Safety and Kingsbridge. In the case of Blackrock the valuation at 30 June 2017 reflects the proceeds received in August. The valuation of the other businesses has benefitted from a combination of good organic growth and additional earnings delivered from acquisitions.
The most significant valuation reductions in the half year to 30 June 2017 were at Formaplex and CitySprint. Further details are provided in the Manager's Review.
Commitments & Liquidity
The Company had outstanding commitments to limited partnership funds of £28.5m at 30 June 2017. This consisted of £26.3m to Dunedin managed funds and £2.2m to the European funds. However, assuming these funds are held to maturity, it is estimated that only some £13m of this total outstanding commitment will be drawn over the remaining life of the funds.
During the half year the limited partners of Dunedin Buyout Fund III voted to extend its investment period by six months to May 2018. The outstanding commitment to that fund at 30 June 2016 was £19.3m.
The majority of the Company's assets are held by way of limited partnership interests in Dunedin's funds, one of which is still actively investing. Consequently, while it remains a limited partner, the Company is obliged, as are other investors in those funds, to follow its commitment by funding future capital calls made by that fund.
Following the realisation of Blackrock, the Company holds cash and cash equivalents of £16.4m. In light of the remaining outstanding commitments to limited partnership funds noted above it is not the current intention of the Board to make a capital distribution to shareholders until there are further realisations from the portfolio.
The Company has a revolving credit facility with Lloyds Bank of £20m which was undrawn at 30 June 2017 and is available until 31 May 2018. The Board will keep under review the requirement to retain a credit facility depending upon the timing of further realisations from the portfolio.
Dividends
A final dividend of 17.5p per share was paid to shareholders in May 2017 amounting to £3.6m.
Outlook
The Board remains committed to maximising shareholder value through an orderly wind-down process. We shall continue to pursue this either by judicious and timely sales of our fund interests on the secondary market or by continuing to hold these interests if this is likely to provide better returns to shareholders.
We are encouraged that the pricing of realisations of quality businesses and fund interests remains buoyant, and by the general improvement in the trading performance of a number of our portfolio companies.
Duncan Budge
30 August 2017
In the six months to 30 June 2017, Dunedin Enterprise's net asset value per share total return was 5.9%, after taking account of dividends paid. This compares with an increase in the FTSE Small Cap Index (ex Inv. Cos) over the same period of 8.8%.
In the six months to 30 June 2017 Dunedin Enterprise invested a total of £8.5m and realised £12.5m from investments.
The movement in net asset value is summarised in the table below: -
£'m
Net asset value at 31 December 2016 103.9
Unrealised value increases 9.0
Unrealised value decreases (2.1)
Realised loss over opening valuation * (3.1)
Dividends paid to shareholders (3.6)
Other movements 2.2
Net asset value at 30 June 2017 106.3
* - excludes income receipts from the sale of Steeper amounting to £2.7m and includes drawdowns totalling £0.8m made in the half year by Dunedin managed funds for management fees and operating expenses
Cash movements in the half year to 30 June 2017 can be summarised as follows:-
£'m
Cash & near cash balances at 31 December 2016 1.1
Investments made (19.1)
Investments realised 24.1
Dividends paid to shareholders (3.6)
Operating activities 1.4
Cash & near cash balances at 30 June 2017 3.9
Dunedin Enterprise holds investments in unquoted companies through:-
• Dunedin managed funds (including direct investments), and
• Third party managed funds.
The portfolio movements can be analysed as shown in the table below:-
| Valuation | Additions | Disposals | Realised | Unrealised | Valuation | |
| at 31-12-16 | in half year | in half year | movement | movement | at 30-6-17 | |
| £'m | £'m | £'m | £'m | £'m | £'m | |
| Dunedin managed | 81.5 | 8.2 | (7.9) | (3.4)* | 6.1 | 84.5 |
| Third party managed | 22.3 | 0.3 | (4.6) | 0.3 | 0.8 | 19.1 |
| Investment portfolio | 103.8 | 8.5 | (12.5) | (3.1) | 6.9 | 103.6 |
| AAA rated money market funds | 1.0 | 10.6 | (11.6) | - | - | - |
| Total | 104.8 | 19.1 | (24.1) | (3.1) | 6.9 | 103.6 |
* - excludes income receipts from the sale of Steeper amounting to £2.7m and includes drawdowns totalling £0.8m made in the half year by Dunedin managed funds for management fees and operating expenses
In March 2017, the Company made an investment of £7.3m through Dunedin Buyout Fund III in Forensic Risk Alliance ("FRA"). FRA is an international consultancy business that provides forensic accounting, data analytics and e-discovery expertise to help businesses manage risk in an increasingly regulated global environment. FRA works on some of the largest and most complex regulatory investigations globally. Its clients are typically blue-chip multi-national corporates seeking advice to help navigate regulatory scrutiny, effect compliant cross border data transfer and manage risk.
A further £1.2m was drawn down by Dunedin and third party managed funds to meet management fees and ongoing expenses.
In February 2017, Steeper, the leading supplier of rehabilitation services including prosthetic, orthotic and electronic assistive devices and services, was realised. Total proceeds from the investment amounted to capital of £7.7m and income of £2.7m. The overall return to Dunedin Enterprise was 1.9 times the original investment of £5.6m.
One of the two European funds, Realza, realised £3.6m during the half year from the sale of GTT, the provider of tax management services to local public entities in Spain. Overall this investment has generated a return of 3.2 times original cost. A further £0.8m was received from Innova/5 being the balance of proceeds from the sale of Wirtualna Polska, the internet portal business. Overall this investment has generated a return of 2.7 times original cost.
On 4 August 2017, Blackrock, the provider of independent expert witnesses for large construction projects, was realised. Total proceeds from the sale amounted to £12.8m and, when taken together with capital and income received in the half year of £0.1m, the total of £12.9m represents an uplift of £2.9m when compared to the valuation of £10.0m at 31 December 2016. The original cost of the investment was £4.9m and over the life of the investment a total of £13.9m was received by Dunedin Enterprise representing a 2.8 times return and an IRR of 60%.
Unrealised movements in portfolio company valuations in the half year amounted to an increase of £9.0m. There were valuation uplifts at Blackrock (£2.9m), Alpha (£1.9m), Kee Safety (£1.8m), and Kingsbridge (£1.1m).
Blackrock has been valued at the proceeds received in August 2017 as noted above. This has generated an uplift of £2.9m when compared to the valuation at 31 December 2016.
Alpha, the provider of specialist consultancy services to asset and wealth managers and their third party adminstrators, has shown strong organic growth with several blue-chip client wins in the half year. This has led to an 18% increase in maintainable EBITDA and enabled Alpha to be valued above cost. The pipeline of opportunities in all key business locations has strengthened significantly during the half year.
Kee Safety, the provider of collective fall protection systems, has grown during the half year both through organic growth and an ongoing programme of acquisitions leading to an 18% increase in maintainable EBITDA. There have now been twelve acquisitions made by Kee Safety since the buyout in November 2013 with a recent large acquisition bedding in well within the group. The order book at Kee Safety is strong.
Kingsbridge, the provider of insurance services to contractors, freelancers and independent professionals, has also performed strongly in the half year with an increase in maintainable EBITDA of 24%. New business and renewals targets have both been met during the half year.
There were also increases in the valuation of the two European funds of £0.8m stated after operating costs of £0.2m.
There were reductions in value at Formaplex (£1.1m) and CitySprint (£0.7m).
The maintainable EBITDA of Formaplex, the designer and manufacturer of injection-moulded tooling, composite tooling and lightweight components for the automotive industry, has reduced by 14% in the half year. Formaplex has been impacted by higher costs related to the move to the new Voyager Park facility, higher than budgeted sub-contract costs and a delay to contracts with a major customer.
CitySprint, the same-day courier which was largely realised in 2016, has experienced a softening in the market with a negative economic outlook being driven by uncertainty around Britain's exit from the European Union and increased competition from other providers. The maintainable EBITDA of CitySprint has decreased by 4% in the half year.
The average earnings multiple applied to the valuation of the Dunedin managed portfolio was 8.5x EBITDA (31 December 2016: 8.6x) or 10.0x EBITA (31 December 2016: 10.2x). These multiples are applied to the maintainable earnings of portfolio companies. Within the Dunedin managed portfolio, the weighted average gearing of the companies was 3.3x EBITDA (31 December 2016: 3.3x) or 3.9x EBITA (31 December 2016: 3.8x).
The portfolio continues to be valued in accordance with the International Private Equity Venture Capital valuation guidelines (www.privateequityvaluation.com).
Dunedin LLP
30 August 2017
Ten Largest Investments
(both held directly and via Dunedin managed funds) by value at 30 June 2017
| Approx. | Percentage | |||
| percentage | Cost of | Directors | of net | |
| of equity | investment | valuation | assets | |
| Company name | % | £'000 | £'000 | % |
| Blackrock | 7.8 | 4,087 | 12,672 | 11.9 |
| Kee Safety | 7.2 | 5,151 | 11,628 | 10.9 |
| Hawksford | 17.8 | 5,637 | 10,502 | 9.9 |
| Weldex | 15.1 | 9,505 | 9,611 | 9.0 |
| Innova /5 * | 3.9 | 9,595 | 9,364 | 8.8 |
| Realza * | 8.9 | 8,740 | 9,319 | 8.8 |
| Alpha | 11.5 | 8,066 | 9,007 | 8.5 |
| FRA | 6.5 | 7,309 | 7,309 | 6.9 |
| CitySprint | 5.2 | 7,308 | 7,308 | 6.9 |
| Kingsbridge | 12.7 | 4,114 | 5,471 | 5.1 |
| 69,512 | 92,191 | 86.7 |
* - European fund investments
| Percentage of equity held 7.8% Cost of Investment £4.1m Directors' valuation £12.7m Percentage of net assets 11.9% |
## Blackrock Blackrock is a professional services firm that provides independent expert witness and construction consulting services for large, international construction and engineering projects. Blackrock serves a growing global construction market and cases of litigation are increasing within the sector. Blackrock has significant sales in Europe, the Middle East, Asia, South America and Africa. In recognition of its outstanding growth in overseas sales, Blackrock PM received The Queen's Award for Enterprise in the "International Trade Category" in 2017 and was also ranked at No 36 in the eighth annual Sunday Times HSBC International Track 200 this year. Since Dunedin's investment in March 2015, Blackrock has grown by almost 300%. Blackrock was realised on 4 August 2017. |
| Percentage of equity held 7.2% Cost of Investment £5.2m Directors' valuation £11.6m Percentage of net assets 10.9% |
## Kee Safety Kee Safety is a global market leading provider of collective fall protection safety systems and solutions. Its operations are spread across the UK, USA, Canada, Europe, Middle East and Far East and it has sales in more than 60 countries. Since Dunedin's investment the business has made eleven acquisitions, all of which have been successfully integrated and which have helped to build out Kee Safety's international footprint. Its core patent protected product range includes modular barrier systems, guardrails, access platforms, safety gates and specialist fixings. The business has multiple routes to market through an international direct sales force, direct to OEM, online and through the distributor channel. Kee Safety's customers range from multi-national corporations to major contractors, distributors and installers. |
| Percentage of equity held 17.8% Cost of Investment £5.6m Directors' valuation £10.5m Percentage of net assets 9.9% |
## Hawksford Hawksford is a leading international provider of corporate, private client and funds services. The business offers a comprehensive range of services to, and solutions for trusts, companies, foundations, partnerships, family offices and investment funds. To date Hawksford has completed five major acquisitions in Jersey, the Middle East and the Far East and further extended the company's global reach in the Far East by opening an office in Hong Kong in 2015. These acquisitions have further enhanced Hawksford's market leading-position through additional high quality people and clients. The focus of the business remains on providing excellent service and increasing client choice by growing the international footprint. |
| Percentage of equity held 15.1% Cost of Investment £9.5m Directors' valuation £9.6m Percentage of net assets 9.0% |
## Weldex Weldex was established in 1979 and has grown into the UK's largest crawler crane hire company. The company employs over 100 staff and operates nationwide and overseas from its headquarters in Inverness and its depot at Alfreton. The company provides its customers with an established team of fully accredited operators, site managers and service engineers and also supplies associated lifting equipment including wheeled cranes, forklifts, lorry loaders and trailers. Weldex serves the offshore wind, oil & gas, commercial construction and infrastructure markets. Its cranes, including two of the largest in the UK, have been used in a number of significant construction projects including Heathrow Terminal 5, the iconic arch at the new Wembley Stadium, the 2012 Olympic site and Crossrail. More recent projects include erecting a Mitsubishi wind turbine at the offshore test facility at Hunterston, North Ayrshire and refurbishing the blast furnace at the Tata steel works in Scunthorpe. |
| Percentage of equity held 3.9% Cost of Investment £9.6m Directors' valuation £9.4m Percentage of net assets 8.8% |
## Innova/5 Innova/5 is €380.8m private equity fund based in Warsaw which makes investments in Central Eastern Europe. Dunedin Enterprise's investment is held via Dunedin Fund of Funds LP. The fund invests in mid-market buyouts in businesses with an enterprise value of between €50m and €125m. Its investment focus is Financial Services; Technology, Media, & Telecommunications (TMT); Business Services; Construction; Energy; and Industrial & Automotive. |
| Percentage of equity held 8.9% Cost of Investment £8.7m Directors' valuation £9.3m Percentage of net assets 8.8% |
## Realza Capital Realza Capital is a Spanish private equity fund making investments in Spain and Portugal. The fund is limited to investing 15% of commitments in Portugal. Dunedin Enterprise's investment is held via Dunedin Fund of Funds LP. The fund invests in companies with leading market positions and attractive growth prospects either through organic growth or through merger & acquisition activity. Realza seeks to invest in companies with an enterprise value normally ranging from €20m to €100m. The fund's typical equity investment ranges from €10m to €25m. |
| Percentage of equity held 11.5% Cost of Investment £8.1m Directors' valuation £9.0m Percentage of net assets 8.5% |
## Alpha Alpha is a market leading provider of specialist consultancy services to blue chip asset managers and their third-party administrators internationally. It has a strong niche with a breadth of high quality consultants regarded as subject matter experts by their clients. Consultants undertake projects that either provide subject matter expertise, process expertise or team capacity for complex projects or initiatives. Alpha serves an increasingly complex asset management industry that is facing the combined challenge of regulatory, cost and operational pressures. Alpha has over 200 consultants deployed across seven major financial centres (London, Paris, New York, Boston, Singapore, The Hague & Luxembourg), working on behalf of more than 130 top asset and wealth management clients. Alpha currently advises three quarters of the top 50 global asset managers. |
| Percentage of equity held 6.5% Cost of Investment £7.3m Directors' valuation £7.3m Percentage of net assets 6.9% |
## FRA ## FRA is an international consultancy business that provides forensic accounting, data analytics and e-discovery expertise to help businesses respond to major regulatory investigations in an increasingly regulated global environment. FRA works on some of the largest and most complex regulatory investigations globally. Its clients are typically blue-chip multinational corporates seeking advice to help navigate regulatory scrutiny, effect compliant cross border data transfer and manage risk. It has offices in London, Providence (Rhode Island), Paris and Washington DC. It also runs data centres near each office location as well as in Montreal and Zurich. |
| Percentage of equity held 5.2% Cost of Investment £7.3m Directors' valuation £7.3m Percentage of net assets 6.9% |
## CitySprint CitySprint is the UK's largest national time-critical and same day distribution network. It benefits from an asset-light business model with over 3,000 self-employed couriers, making the business both highly flexible and scalable. It operates from 40 service centres in the UK and handles over ten million critical same day deliveries a year. CitySprint offers a range of services including SameDay Courier, UK Overnight and International courier services, as well as more complex logistics services. It services a number of different sectors, including healthcare, online retail fulfilment and parts fulfilment such as outsourced supply chain services for engineering and servicing companies. During the period of Dunedin's investment, CitySprint has completed 29 acquisitions. CitySprint now has the UK's largest same day healthcare courier network. |
| Percentage of equity held 12.7% Cost of Investment £4.1m Directors' valuation £5.5m Percentage of net assets 5.1% |
## Kingsbridge Kingsbridge is a market leading FCA regulated specialist insurance intermediary which operates through two core divisions; a contractor insurance division Kingsbridge Contractor Insurance "KCI" and a corporate brokerage division Kingsbridge Insurance Brokers ("KIB"). Working alongside its strong partner network, Kingsbridge covers the broadest range of industry sectors in its market, including aerospace, banking and finance, rail, automotive, nuclear, oil and gas and information technology. Kingsbridge is forecast to continue to grow the market as insurance becomes more of a standard requirement for both contractors and corporates alike. This growth will come through expansion into new occupations and through the introduction of new products that are tailored for the contractor market. |
Overview of portfolio
Fund Analysis
| 30 June 2017 % |
||
| Direct | 5 | |
| Dunedin Buyout Fund I | - | |
| Dunedin Buyout Fund II | 31 | |
| Dunedin Buyout Fund III | 44 | |
| Equity Harvest Fund (Dunedin managed) | 2 | |
| Third party managed | 18 |
Analysed by valuation method
| 30 June 2017 % |
||
| Cost/written down | 25 | |
| Earnings - provision | 9 | |
| Earnings - uplift | 44 | |
| Assets basis | 10 | |
| Exit value | 12 |
Analysed by geographic location
| 30 June 2017 % |
||
| UK | 82 | |
| Rest of Europe | 18 |
Analysed by sector
| 30 June 2017 % |
||
| Automotive | 4 | |
| Construction and building materials | 6 | |
| Consumer products & services | 4 | |
| Financial services | 15 | |
| Healthcare | 1 | |
| Industrials | 18 | |
| Support services | 49 | |
| Technology, media & telecoms | 3 |
Analysed by age of investment
| 30 June 2017 % |
||
| <1 year | 7 | |
| 1-3 years | 40 | |
| 3-5 years | 16 | |
| >5 years | 37 |
Income Statement (unaudited)
for the six months ended 30 June 2017
| Six months ended | Re-stated Six months ended |
Year ended | ||||||||
| 30 June 2017 | 30 June 2016 | 31 December 2016 | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Investment income | 2,687 | - | 2,687 | 3,647 | - | 3,647 | 8,126 | - | 8,126 | |
| Gain / (loss) on investments | - | 3,858 | 3,858 | - | (5,854) | (5,854) | - | (4,115) | (4,115) | |
| Total Income | 2,687 | 3,858 | 6,545 | 3,647 | (5,854) | (2,207) | 8,126 | (4,115) | 4,011 | |
| Expenses | ||||||||||
| Investment management fees | (15) | (44) | (59) | (17) | (50) | (67) | (30) | (91) | (121) | |
| Other expenses | (230) | (47) | (277) | (338) | - | (338) | (604) | - | (604) | |
| Profit / (loss) before finance costs and tax | 2,442 | 3,767 | 6,209 | 3,292 | (5,904) | (2,612) | 7,492 | (4,206) | 3,286 | |
| Finance costs | (47) | (141) | (188) | (79) | (238) | (317) | (127) | (382) | (509) | |
| Profit / (loss) before tax | 2,395 | 3,626 | 6,021 | 3,213 | (6,142) | (2,929) | 7,365 | (4,588) | 2,777 | |
| Taxation | (167) | 167 | - | (527) | 527 | - | (449) | 449 | - | |
| Profit / (loss) for the period | 2,228 | 3,793 | 6,021 | 2,686 | (5,615) | (2,929) | 6,916 | (4,139) | 2,777 | |
| Earnings per ordinary share (basic & diluted) | 10.8p | 18.4p | 29.2p | 13.0p | (27.2)p | (14.2)p | 33.5p | (20.0)p | 13.5p | |
The Total column of this statement represents the Income Statement of the Company, prepared in accordance with International Financial Reporting Standards as adopted by the EU. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.
All income is attributable to the equity shareholders of Dunedin Enterprise Investment Trust PLC.
Statement of Changes in Equity (unaudited)
for the six months ended 30 June 2017
Six months ended 30 June 2017
| Share capital £'000 |
Capital redemption reserve £'000 |
Capital Reserve realised £'000 |
Capital reserve - unrealised £'000 |
Special Distributable Reserve £'000 |
Revenue account £'000 |
Total retained earnings £'000 |
Total equity £'000 |
|
| At 31 December 2016 | 5,161 | 2,765 | 49,204 | (9,580) | 47,600 | 8,751 | 95,975 | 103,901 |
| Profit/(loss) for the half year | - | - | 4,472 | (679) | - | 2,228 | 6,021 | 6,021 |
| Dividends paid | - | - | - | - | - | (3,613) | (3,613) | (3,613) |
| At 30 June 2017 | 5,161 | 2,765 | 53,676 | (10,259) | 47,600 | 7,366 | 98,363 | 106,309 |
Six months ended 30 June 2016
| Share capital £'000 |
Capital redemption reserve £'000 |
Capital Reserve realised £'000 |
Capital reserve - unrealised £'000 |
Special Distributable Reserve £'000 |
Revenue account £'000 |
Total retained earnings £'000 |
Total equity £'000 |
|
| At 31 December 2015 | 5,161 | 2,765 | 38,492 | 5,271 | 47,600 | 5,138 | 96,501 | 104,427 |
| Profit/(loss) for the half year | - | - | 12,077 | (17,692) | - | 2,686 | (2,929) | (2,929) |
| Dividends paid | - | - | - | - | - | (3,303) | (3,303) | (3,303) |
| At 30 June 2016 | 5,161 | 2,765 | 50,569 | (12,421) | 47,600 | 4,521 | 90,269 | 98,195 |
Year ended 31 December 2016
| Share capital £'000 |
Capital redemption reserve £'000 |
Capital Reserve realised £'000 |
Capital reserve - unrealised £'000 |
Special Distributable Reserve £'000 |
Revenue account £'000 |
Total retained earnings £'000 |
Total equity £'000 |
|
| At 31 December 2015 | 5,161 | 2,765 | 38,492 | 5,271 | 47,600 | 5,138 | 96,501 | 104,427 |
| Profit/(loss) for the year | - | - | 10,712 | (14,851) | - | 6,916 | 2,777 | 2,777 |
| Dividends paid | - | - | - | - | - | (3,303) | (3,303) | (3,303) |
| At 31 December 2016 | 5,161 | 2,765 | 49,204 | (9,580) | 47,600 | 8,751 | 95,975 | 103,901 |
Balance Sheet (unaudited)
As at 30 June 2017
| 30 June 2017 £'000 |
Re-stated 30 June 2016 £'000 |
31 December 2016 £'000 |
|
| Non-current assets | |||
| Investments held at fair value | 103,621 | 100,675 | 104,816 |
| Current assets | |||
| Other receivables | 66 | 117 | 105 |
| Cash and cash equivalents | 3,904 | 494 | 90 |
| 3,970 | 611 | 195 | |
| Total assets | 107,591 | 101,286 | 105,011 |
| Current liabilities | |||
| Other liabilities | (1,282) | (2,091) | (1,110) |
| Loan facility | - | (1,000) | - |
| Net assets | 106,309 | 98,195 | 103,901 |
| Capital and reserves | |||
| Share capital | 5,161 | 5,161 | 5,161 |
| Capital redemption reserve | 2,765 | 2,765 | 2,765 |
| Capital reserve - realised | 53,676 | 50,569 | 49,204 |
| Capital reserve - unrealised | (10,259) | (12,421) | (9,580) |
| Special distributable reserve | 47,600 | 47,600 | 47,600 |
| Revenue reserve | 7,366 | 4,521 | 8,751 |
| Total equity | 106,309 | 98,195 | 103,901 |
| Net asset value per ordinary share (basic and diluted) | 515.0p | 475.7p | 503.3p |
Cash Flow Statement (unaudited)
for the six months ended 30 June 2017
| 30 June 2017 £'000 |
Re-stated 30 June 2016 £'000 |
31 December 2016 £'000 |
|
| Operating activities | |||
| Profit / (loss) before tax | 6,021 | (2,929) | 2,777 |
| Adjustments for: | |||
| (Gain) / loss on investments | (3,858) | 5,854 | 4,115 |
| Interest paid | 188 | 317 | 509 |
| Decrease in debtors | 39 | 50 | 62 |
| Increase in creditors | 171 | 1,107 | 126 |
| Net cash from operating activities | 2,561 | 4,399 | 7,589 |
| Cash flows from investing activities | |||
| Purchase of investments | (8,223) | (19,619) | (22,392) |
| Drawn from subsidiary | (291) | (2,130) | (2,777) |
| Purchase of 'AAA' rated money market funds | (10,604) | (5,002) | (6,003) |
| Sale of investments | 7,960 | 23,459 | 25,165 |
| Distribution from subsidiary | 4,606 | 1,194 | 1,504 |
| Sale of 'AAA' rated money market funds | 11,606 | 5,000 | 5,000 |
| Net cash used in investing activities | 5,054 | 2,902 | 497 |
| Cash flows from financing activities | |||
| Dividends paid | (3,613) | (3,303) | (3,303) |
| Interest paid | (188) | (317) | (509) |
| Repayment of loan facility | - | (3,700) | (4,700) |
| Net cash used in financing activities | (3,801) | (7,320) | (8,512) |
| Net increase / (decrease) in cash and cash equivalents | 3,814 | (19) | (426) |
| Cash and cash equivalents at the start of the period | 90 | 511 | 511 |
| Effect of exchange rate fluctuations on cash held | - | 2 | 5 |
| Cash and cash equivalents at the end of the period | 3,904 | 494 | 90 |
in respect of the half-yearly financial report
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU
- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
By Order of the Board
Duncan Budge
Chairman
30 August 2017
The comparative financial information contained in this report for the year ended 31 December 2016 does not constitute the Company's statutory accounts but is derived from those accounts. Statutory accounts for the year ended 31 December 2016 have been delivered to the Registrar of Companies. The auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The financial statements for the six months ended 30 June 2016 and 30 June 2017 have not been audited.
These condensed set of financial statements for the six months ended 30 June 2017 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA) and IAS 34 Interim Financial Reporting as adopted by the European Union (EU). They do not include all the information required by International Financial Reporting Standards (IFRS) in full annual financial statements and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2016.
The Association of Investment Companies ('AIC') issued a revised Statement of Recommended Practice for the Financial Statements of Investment Trust Companies and Venture Capital Trusts in November 2014 ('SORP') applicable to accounting periods commencing on or after 1 January 2015. Where presentational guidance set out in the SORP is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
In May 2016 shareholders approved a change in the investment policy of the Company. The Company's new investment objective is to conduct an orderly realisation of its relatively illiquid assets, to be effected in a manner that seeks to achieve a balance between maximising the value of its assets and progressively returning cash to shareholders. As it is likely this process, which is expected to have a duration of several years, will ultimately lead to the liquidation of the Company, these financial statements have not been prepared on a going concern basis. No adjustments were necessary to the investment valuations or other assets and liabilities included in the financial statement as a consequence of the change in the basis of preparation.
Items have been "Re-stated" in this Interim Report to reflect that the financial statements are no longer prepared on a consolidated basis but instead with subsidiaries carried at fair value.
| Six months to 30 June 2017 £'000 |
Six months to 30 June 2016 £'000 |
Year to 31 December 2016 £'000 |
|
| Dividends paid in the period | 3,613 | 3,303 | 3,303 |
The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
• Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
• Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
• Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
The table below analyses financial instruments, measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised:
| At 30 June 2017 £'000 |
At 30 June 2016 £'000 |
At 31 December 2016 £'000 |
|
| Level 1 'AAA' rated money market funds OEICs |
6 | 7 | 1 |
| Level 2 | - | - | - |
| Level 3 | |||
| Unlisted investments | 103,615 | 100,668 | 103,808 |
| 103,621 | 100,675 | 103,809 | |
The Company recognises transfers between the levels of the fair value hierarchy as of the end of the reporting period during which the transfer occurred. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended 30 June 2017.
Level 3 fair values
Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the six months ended 30 June 2017 are set out below:-
| Level 3 £'000 |
|
| Book cost at 31 December 2016 | 113,388 |
| Unrealised (depreciation) | (9,580) |
| Valuation at 31 December 2016 | 103,808 |
| Purchases at cost | 8,514 |
| Sales - proceeds | (12,566) |
| Sales - realised (losses) against cost | 4,538 |
| Increase in unrealised appreciation | (679) |
| Valuation at 30 June 2017 | 103,615 |
| Book cost at 30 June 2017 | 113,874 |
| Closing unrealised (depreciation) | (10,259) |
Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the six months ended 30 June 2016 are set out below:-
| Level 3 £'000 |
|
| Book cost at 31 December 2015 | 104,157 |
| Unrealised appreciation | 5,271 |
| Valuation at 31 December 2015 | 109,428 |
| Purchases at cost | 21,749 |
| Sales - proceeds | (24,653) |
| Sales - realised (losses) against cost | 11,836 |
| Increase in unrealised appreciation | (17,692) |
| Valuation at 30 June 2016 | 100,668 |
| Book cost at 30 June 2016 | 113,089 |
| Closing unrealised (depreciation) | (12,421) |
Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the year ended 31 December 2016 are set out below:-
| Level 3 £'000 |
|
| Book cost at 31 December 2015 | 104,157 |
| Unrealised appreciation | 5,271 |
| Valuation at 31 December 2015 | 109,428 |
| Purchases at cost | 25,169 |
| Sales - proceeds | (26,669) |
| Sales - realised (losses) against cost | 10,731 |
| Increase in unrealised appreciation | (14,851) |
| Valuation at 31 December 2016 | 103,808 |
| Book cost at 31 December 2016 | 113,388 |
| Closing unrealised (depreciation) | (9,580) |
Valuation of investments
Unquoted investments are fair valued by the Directors in accordance with the following rules, which are consistent with the International Private Equity and Venture Capital Valuation Guidelines:
· Investments are only valued at cost for a limited period after the date of acquisition, otherwise investments are valued on one of the other basis detailed below. Generally the earnings multiple basis of valuation will be used.
· When valuing on an earnings basis, the maintainable earnings of a company are multiplied by an appropriate multiple.
· An investment may be valued by reference to the value of its net assets. This is appropriate for businesses whose value derives mainly from the underlying value of its assets rather than its earnings.
· When investments have obtained an exit (either by listing or trade sale) after the valuation date but before finalisation of the relevant accounts (interim or final), the valuation is based on the exit valuation.
· Accrued interest on loans to portfolio companies is included in valuations where there is an expectation that the interest will be received.
IFRS 13 requires disclosure, by class of financial instrument, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen with reference to the specific underlying circumstances and position of the investee company. On that basis the Board believe that the impact of changing one or more of the inputs to reasonably possible alternative assumptions would not change the fair value significantly.
The Directors consider the carrying value of financial instruments in the financial statements to represent their fair value.
5. Statement of Principal Risks and Uncertainties
The Directors believe that the principal risks and uncertainties faced by the Company include investment and strategic, liquidity, cash drag, people and loss of investment trust status risks. These risks and other risks, and the way in which they are managed, are described in more detail under the heading "Principal Risks, Risk Management and Regulatory Environment" in the Strategic Report Review in the Company's Annual Report and Accounts for the year ended 31 December 2016. The Company's principal risks and uncertainties have not changed materially since the date of that report other than in relation to Brexit as discussed in the Chairman's Statement. These principal risks and uncertainties are not expected to change materially for the remaining six months of the Company's financial year.
| Six months to 30 June 2017 £'000 |
Six months to 30 June 2016 £'000 |
Year to 31 December 2016 £'000 |
|
| Revenue return per ordinary share (p) | 10.8 | 13.0 | 33.5 |
| Capital return per ordinary share (p) | 18.4 | (27.2) | (20.0) |
| Earnings per ordinary share (p) | 29.2 | (14.2) | 13.5 |
| Weighted average number of shares | 20,644,062 | 20,644,062 | 20,644,062 |
The earnings per share figures are based on the weighted average numbers of shares set out above. Earnings per share is based on the revenue profit in the period as shown in the consolidated income statement.
Discussions are ongoing with HMRC regarding the payment of interest on a compound basis relating to the reclaim of VAT on management fees. The amount and timing of any recovery remains uncertain and accordingly no amount has been provided for in the financial statements.
8. Related party transactions
There have been no material changes to the related party transactions described in the last annual report.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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