RNS Number:5661T
August Equity Trust PLC
22 March 2007
AUGUST EQUITY TRUST plc (the "Company")
Summary of the Year
* Shareholders' funds at 31 December 2006 were #89.5 million
* Net assets per Ordinary Share rose by 13.7% to 330.4p
* Share price per Ordinary Share rose by 23.2%
* Total return per Ordinary Share rose by 25.8%
* 5 new investments totalling #25.6 million
* 7 follow on investments totalling #3.8 million
* 10 full unquoted realisations generating proceeds of #35.7 million
* 3 partial realisations generating proceeds of #4.5 million
* The strategic review has been completed and a separate announcement has
been made by the Board
Chairman's Statement
I am very pleased to report that the total return for the year as set out in the
Income Statement was a gain of 48.7p per Ordinary 5p Share ("Ordinary Share").
The net asset value as at 31 December 2006 was 330.4p per Ordinary Share
compared to 290.6p at 31 December 2005, a rise of 14%. This rise is due in the
main to the increased valuations of the investments in Healthcare Homes Group
and InterMed Holdings and a surplus in realisation proceeds over the 31 December
2005 valuation from the sale of Discovery Group.
For the year ended 31 December 2006, the revenue earnings after taxation were
6.5p per Ordinary Share (2005 - 4.1p). Your Board of Directors is recommending a
final dividend of 5.25p per Ordinary Share, payable on 18 May 2007 to
shareholders on the register at the close of business on 30 March 2007. This,
together with the interim dividend of 0.75p (2005 - 0.5p) paid on 15 September
2006, gives total dividends for the year of 6.0p (2005 - 9.0p including a
special dividend paid of 5.0p).
Over a ten year period your Company's share price has outperformed the benchmark
of the FTSE All-Share Index. During the ten year period to 31 December 2006, the
share price has risen from 115.2p to 286.5p, an increase of 149% compared with a
rise of 60% in the FTSE All-Share Index over the same period. Since 31 July
1997, the net asset value per Ordinary Share has risen from 153.4p to 330.4p, an
increase of 115%. The return to an investor, reinvesting dividends since
flotation in July 1986, is in excess of 15% per annum.
Your Company bought back 310,000 of its own Ordinary Shares for cancellation
during the year under review which resulted in a reduction in the issued share
capital from 27,389,500 to 27,079,500. These shares were repurchased in two
tranches at an average price of 282.6p per Ordinary Share, a discount of 9.1% to
the latest published net asset value, thereby reducing shareholders' funds by
#0.9 million. This has had the effect of marginally enhancing the net asset
value per Ordinary Share. Your Company is proposing a resolution to renew this
share buy-back authority at the forthcoming Annual General Meeting, as it has
done in previous years, and also to seek approval to place some of these shares
into treasury.
During the last year your Investment Manager achieved thirteen exits with total
proceeds of #40 million. This has led to increased cash balances on the Balance
Sheet but this is to be expected during a period of realisations. Cash awaiting
investment has been invested in UK Treasury stocks. During 2006 your Company
invested #17 million in four new portfolio companies via August Equity Partners
I ("AEP I"), (formerly August Equity Partners IV), a further #4 million in
several smaller existing portfolio companies and #8 million in Parallel Ventures
2006 Limited Partnership ("the Fund"). The Fund had by 31 December 2006 invested
in nineteen underlying companies in both the United Kingdom and Continental
Europe. Following the year end a further three investments were completed by the
Fund which had been approved at the year end.
During the year under review, there have been a number of changes to the
composition of your Board. On 11 May 2006, Mr Siddons retired after thirteen
years as a Director of the Company. I was appointed as Chairman of your Company
following the departure of Mr Hollidge on 11 August 2006. Mr Connor has
subsequently been appointed Senior Independent Director with effect from 2
November 2006. There have been no further changes to the Board of Directors.
On 11 August 2006 your Board announced the result of its strategic review
together with its interim results for the half year ended 30 June 2006. In
reaching its conclusions the Board had considered carefully a number of options
including an initial approach from a listed private equity fund of funds to "
merge" with it. The Board, with the support of the Investment Manager, concluded
that the long term interests of the Company and its shareholders were best
served by remaining independent while conscious of the need to generate greater
scale, increasing its level of investment, implementing a #15 million share
buy-back programme and making a number of other changes. However, following
further constructive discussion with some major shareholders, the Board
understood that a significant number of them would prefer the Board to seek
short term value for shareholders and therefore re-examine the strategic options
for the Company. Accordingly, on 3 November 2006 your Board announced that it
was re-opening the strategic review. Since that date the Board has received a
number of approaches and considered these and other options carefully. The Board
has today announced proposals for a merger of the Company and Rutland Trust PLC.
If the merger is implemented, the Company will be renamed New Star Private
Equity Investment Trust PLC and will be managed by New Star Asset Management
Limited. The merger seeks to create a diversified fund of private equity funds
vehicle benefiting from the combined management expertise of New Star, August
Equity Limited and Rutland Partners LLP. The merger is subject to the approval
of shareholders of both the Company and Rutland Trust PLC and formal shareholder
documentation will be despatched as soon as practicable setting out full details
of the proposals.
The Annual General Meeting will be held at 12.30pm on Thursday, 10 May 2007 at
the offices of August Equity Limited, 10 Bedford Street, Covent Garden, London
WC2E 9HE, when the Board looks forward to seeing as many of you possible.
John Mackie CBE
Chairman
22 March 2007
INCOME STATEMENT
For the year ended 31 December 2006
SUMMARY OF UNAUDITED RESULTS
Year ended 31 December 2006
Revenue Capital Total
# # #
Gains from investments held at fair value through - 11,523,995 11,523,995
profit or loss
Income 3,919,520 - 3,919,520
Investment management fee (927,654) - (927,654)
Administrative expenses (468,485) - (468,485)
_________ ____________ ______________
Return on ordinary activities before taxation for 2,523,381 11,523,995 14,047,376
the financial year
Taxation (741,362) - (741,362)
_________ ____________ ______________
Return attributable to Ordinary Shareholders after 1,782,019 11,523,995 13,306,014
taxation for the financial year
_________ ____________ _________
Return per Ordinary Share (based on average number 6.5p 42.2p 48.7p
of shares in issue during the year)
_______ _________ ___________
Number of shares in issue at year end 27,079,500
Average number of shares during the year 27,312,897
The total column of this statement is the profit and loss account of the Company
and the revenue and capital columns represent supplementary information.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
The total column represents all the information that is required to be disclosed
in a Statement of Total Recognised Gains and losses ("STRGL"), and for this
reason a STRGL is not presented.
INCOME STATEMENT
For the year ended 31 December 2005
SUMMARY OF AUDITED RESULTS
Year ended 31 December 2005
Revenue Capital Total
# # #
Gains from investments held at fair value through - 9,666,847 9,666,847
profit or loss
Income 2,735,733 - 2,735,733
Investment management fee (831,980) - (831,980)
Administrative expenses (435,578) - (435,578)
___________ ___________ ______________
Return on ordinary activities before taxation for 1,468,175 9,666,847 11,135,022
the financial year
Taxation (316,128) - (316,128)
___________ ___________ ______________
Return attributable to Ordinary Shareholders after 1,152,047 9,666,847 10,818,894
taxation for the financial year
___________ ___________ ______________
Return per Ordinary Share (based on average number 4.1p 34.6p 38.7p
of shares in issue during the year)
________ ________ ___________
Number of shares in issue at the year end 27,389,500
Average number of shares during the year 27,995,955
The total column of this statement is the profit and loss account of the Company
and the revenue and capital columns represent supplementary information.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
The total column represents all the information that is required to be disclosed
in a Statement of Total Recognised Gains and losses ("STRGL"), and for this
reason a STRGL is not presented.
Reconciliation of Movement of Shareholders' Funds (Unaudited)
For the year ended 31 December 2006
Called up Share Capital Realised Unrealised
share redemption capital capital
capital premium reserve reserve reserve Revenue Shareholders'
reserve
account funds
# # # # # # #
Balance at 1 1,369,475 5,145,492 142,525 62,800,526 6,709,249 3,412,516 79,579,783
January 2006
Net loss on - - - (310,007) - - (310,007)
listed
investments
Net gain on - - - 13,200,202 - - 13,200,202
unlisted
investments
Transfer on - - - (3,927,836) 3,927,836 - -
disposal of
investments
Decrease in - - - - (1,197,408) - (1,197,408)
unrealised
appreciation on
listed
investments
Decrease in - - - - (168,792) - (168,792)
unrealised
appreciation on
unlisted
investments
Dividends paid - - - - - (2,533,528) (2,533,528)
Revenue - - - - - 1,782,019 1,782,019
attributable to
Ordinary
Shareholders
Share buy-backs (15,500) - 15,500 (875,998) - - (875,998)
Balance at 31 1,353,975 5,145,492 158,025 70,886,887 9,270,885 2,661,007 89,476,271
December 2006
Unrealised reserves analysed as follows:
Listed at valuation 45,460,400
At book value (cost less amounts written off) (46,529,776)
__________
(1,069,376)
__________
Unlisted at valuation 38,963,577
At book value (cost less amounts written off) (28,623,316)
__________
10,340,261
__________
Balance at 31 December 2006 9,270,885
__________
Reconciliation of Movement of Shareholders' Funds (Audited)
For the year ended 31 December 2005
Called up Share Capital Realised Unrealised
share redemption capital capital
capital premium reserve reserve reserve Revenue Shareholders'
reserve
account funds
# # # # # # #
Balance at 1 1,419,875 5,145,492 92,125 59,251,117 2,831,687 3,026,661 71,766,957
January 2005
Net gain on
unlisted
investments - - - 520,665 - - 520,665
Transfer on
disposal of
investments - - - 5,268,621 (5,268,621) - -
Decrease in
unrealised
appreciation on
listed
investments - - - - (60,155) - (60,155)
Increase in
unrealised
appreciation on
unlisted
investments - - - - 9,206,338 - 9,206,338
Dividends paid - - - - - (766,192) (766,192)
Revenue
attributable to
Ordinary
Shareholders - - - - - 1,152,047 1,152,047
Share buy-backs (50,400) - 50,400 (2,239,877) - - (2,239,877)
Balance at 31
December 2005 1,369,475 5,145,492 142,525 62,800,526 6,709,249 3,412,516 79,579,783
Unrealised reserves analysed as follows:
Listed at valuation 40,388,522
At book value (cost less amounts written off) (41,095,285)
__________
(706,763)
__________
Unlisted at valuation 36,378,602
At book value (cost less amounts written off) (28,962,590)
__________
7,416,012
__________
Balance at 31 December 2005 6,709,249
__________
BALANCE SHEET
Unaudited Audited
31 December 2006 31 December 2005
# #
Fixed assets
Investments 84,423,977 76,767,124
Current assets
Debtors 1,611,861 701,434
Cash at bank 4,195,454 2,365,320
---------------- ----------------
5,807,315 3,066,754
Creditors
Amounts falling due within one year (755,021) (254,095)
---------------- ----------------
Net current assets 5,052,294 2,812,659
---------------- ----------------
Net assets 89,476,271 79,579,783
========= =========
Capital and reserves
Called up share capital 1,353,975 1,369,475
Share premium account 5,145,492 5,145,492
Capital redemption reserve 158,025 142,525
6,657,492 6,657,492
Capital reserves
- Realised 70,886,887 62,800,526
- Unrealised 9,270,885 6,709,249
80,157,772 69,509,775
Revenue reserve 2,661,007 3,412,516
---------------- ----------------
Shareholders' funds 89,476,271 79,579,783
========= =========
Number of shares in issue at
the period end 27,079,500 27,389,500
Net asset value per Ordinary
Share 330.4p 290.6p
CASH FLOW STATEMENT
Unaudited Audited
Year ended 31 Year ended
December 2006 31 December 2005
# #
Net cash inflow from operating activities 1,175,779 898,615
Tax paid (3,260) (164)
Financial Investment
Purchase of listed fixed asset investments (21,708,093) (24,851,998)
Purchase of unlisted fixed asset investments (29,245,158) (2,430,270)
(50,953,251) (27,282,268)
Disposal of listed fixed asset investments 15,128,800 -
Disposal of unlisted fixed asset investments 39,891,592 29,015,777
55,020,392 29,015,777
Net cash inflow from financial investments 4,067,141 1,733,509
Equity dividends paid (2,533,528) (766,192)
---------------- -----------------
Net cash inflow before financing 2,706,132 1,865,768
Financing
Purchase of Ordinary Shares for cancellation (875,998) (2,239,876)
--------------------- ---------------------
Increase / (decrease) in cash 1,830,134 (374,108)
============ ===========
NOTES TO THE ACCOUNTS
For the year ended 31 December 2006 (unaudited)
1) Return per Ordinary Share of 5p ("Ordinary Share")
The return per Ordinary Share has been calculated using a weighted average
number of shares in issue during the year of 27,312,897 Ordinary Shares (2005:
27,995,955 Ordinary Shares).
2) Net Asset Value per Ordinary Share
The net asset value per Ordinary Share is based on 27,079,500 Ordinary Shares in
issue at the year end (2005: 27,389,500 Ordinary Shares).
Net Assets 31 December 2006 31 December 2005
# #
Fixed asset investments 84,423,977 76,767,124
Net current assets 5,052,294 2,812,659
---------------- ----------------
Net assets attributable to Ordinary Shares 89,476,271 79,579,783
========= =========
Net asset value per Ordinary Share 330.4p 290.6p
3) Dividend per Ordinary Share
Dividends declared in respect of the accounting period are set out below. Since
the adoption of FRS 21 this differs from the dividends included in the statement
of total return.
Dividend per
Ordinary Share
31 December 2006 31 December 2006 31 December 2005 31 December 2005
# #
- Interim 0.75p 205,420 0.50p 141,448
- Final 5.25p 1,421,674 3.50p 958,633
- Special - - 5.00p 1,369,475
---------------- ---------------- ---------------- ----------------
6.00p 1,627,094 9.00p 2,469,556
========= ========= ========= =========
4) Accounts for the year ended 31 December 2006
This announcement is prepared on the basis of the accounting policies as stated
in the previous year's financial statements
Accounts for 2005 have been delivered to the Registrar of Companies and included
the report of the auditors which was unqualified and did not include a statement
under either Section 237(2) or Section 237(3) of the Companies Act 1985.
The above financial information for the year ended 31 December 2006 does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985. The statutory accounts for the year ended 31 December 2006 will be
finalised on the basis of information included within this announcement. The
audit report on the full financial statements for the year ended 31 December
2006 has yet to be approved. Statutory accounts for the year ended 31 December
2006 will be delivered to the Registrar of Companies in due course.
The Annual General Meeting will be held on Thursday, 10 May 2007 at 12.30pm at
the offices of August Equity Limited, 10 Bedford Street, Covent Garden, London
WC2E 9HE.
The annual report will be sent to shareholders in March 2007 and will be
available to members of the public from the Company's registered office at 10
Bedford Street, Covent Garden, London WC2E 9HE.
Any other enquiries please contact:
Richard Green
August Equity Limited
Tel: 020 7632 8200
INVESTMENT ACTIVITY
Summary of the Year's Activity
Your Investment Manager sourced four new portfolio company investments via
August Equity Partners I ("AEP I) during the year under review. In early January
2006, your Company invested #2.7 million in Imagine Publishing, through AEP I,
to fund the acquisition of twenty four titles from Highbury House Communications
Limited. In May 2006, your Company invested #4.0 million in Rollfold Holdings,
the holding company of Rixonway Kitchens, a manufacturer of kitchens for the
social housing market. In December 2006, #10.6 million was invested in two
transactions via AEP I. #5.4 million was invested in the public to private
transaction involving Planit Holdings, a software and services supplier of
computer aided manufacture (CAM) systems in the wood, metal and marble segments
and computer aided design (CAD) systems for kitchen and bathroom retailers. In
late December 2006, your Company invested #5.2 million into Boat International
Media, the publisher of Boat International, and other titles in the superyacht
market.
In addition to the portfolio company investments your Company also committed
#15.0 million to Parallel Ventures 2006 Limited Partnership ("the Fund") in
March 2006. The Fund provides funds for private equity organisations in return
for post due diligence deal flow which is made available to the Fund investors
on a yearly commitment basis. At the year end the Fund had invested in nineteen
companies in a pan-European portfolio.
Follow on investments totalling #3.8 million were made in six existing portfolio
companies.The most significant of which was #2.4 million of further investment
in Healthcare Homes Group. These funds were provided to enable the company to
complete further acquisitions as part of its buy and build strategy to create a
care home operator focused in East Anglia. Since the original investment in
August 2005 Healthcare Homes Group has acquired sixteen homes and now operates
over 650 beds. AEP I has committed further funds to the company to enable it to
extend some of its existing homes and acquire further sites. In January 2006
your Company purchased from Dresdner Bank AG its interests in Hale Hamilton and
August Equity Limited at a cost of #0.6 million and #0.4 million respectively.
In March 2006 your Company bought Dresdner Bank AG's holding in Be Modern for
#0.2 million.
Your Investment Manager anticipates fully investing AEP I in 2007 and at the
year end #11.7 million of commitments remained outstanding in respect of this
partnership commitment.
In 2006 market conditions were favourable for realisations, partly because of an
increased appetite on behalf of banks to lend. Your Investment Manager took
advantage of these conditions to fully realise ten unquoted investments for
proceeds of #36 million.
The investment in Securistyle Holdings, an architectural hardware manufacturer,
was realised during December 2006 for #7.1 million, two times the original cost
and generating an IRR of 28% per annum. InterMed Holdings was refinanced during
the year which led to the return of the loan stock investment made by your
Company of #3.4 million in October 2006. A nominal cost remains against this
investment. Additional proceeds of #1.5 million were received in respect of
smaller investments.
Three investments, held both directly and through KB Fund III (formerly August
Equity Partners III) and KB Fund III B (formerly August Equity Partners III B),
(together "KB III"), were fully realised during 2006. The investment in
Discovery Group was realised in March 2006 through a secondary buy-out
generating proceeds of six times the original investment cost and giving an IRR
of 35% per annum. The investment in ETT was sold to a US acquirer in December
2006 giving a return of cost. The investment in Kangol Holdings was also
realised in December 2006 through a trade sale. The return on the Kangol
Holdings investment was less than cost but greater than the carrying value at
the time of disposal and indeed, the investment had at one point been fully
provided for. Soon after the year end the investment in RedSky IT was realised
for proceeds close to the year end valuation.
One directly held investment was also realised in the year under review. Hale
Hamilton had been held since March 1987 and further investments had been made
during that period, the most recent being in January 2006. A partial realisation
had already been made in 1991 and a full realisation completed in February 2006
giving an IRR of 32% over the life of the investment. The Company's share of the
disposal proceeds was #2.9 million, an uplift over the valuation at time of sale
of #1.2 million. During December 2006 proceeds from the partial liquidation of
Rayner Food Group were received and were in excess of the previous valuation.
Final liquidation proceeds of the investment in Rayner Food Group are expected
to be received in the first quarter of 2007.
Since the year end the holding in Be Modern has been sold for proceeds close to
the year end valuation. This investment was originally made in July 1973 and has
returned an IRR of 22% over the life of the investment.
Changes in net asset value:
# million
Net asset value at 1 January 2006 79.6
Realised gains over valuations 12.9
Quoted portfolio valuation changes (1.2)
Unquoted portfolio valuation changes (0.2)
Undistributed revenue 1.8
Dividends paid in the year (2.5)
Cost of share buy-backs (0.9)
Net asset value at 31 December 2006 89.5
In the announcement of the financial results for the half year ended 30 June
2006, the Investment Manager undertook to appoint specialist managers to manage
the significant cash holdings on the Company's Balance Sheet. A number of
possible alternatives were reviewed but in light of the re-opening of the
strategic review none have been pursued. The Investment Manager has continued to
invest cash awaiting investment in UK Government bonds.
Investments
During the year under review the Company made five new investments and several
follow on investments. Four new investments, in Boat international Media,
Imagine Publishing, Planit Holdings and Rollfold Holdings, were made through AEP
I totalling #17.3 million.
Your Company invested #2.7 million in Imagine Publishing to fund the acquisition
of 24 titles from Highbury House Communications Limited from the administrative
receiver. Imagine Publishing publishes niche consumer magazines in the video
games, computing and digital photography sectors. The management team of Imagine
Publishing was well known to the Investment Manager. This acquisition creates
the second largest video games publisher in the UK and is the leading publisher
of unofficial titles.
In May 2006 your Company invested #4.1 million in Rollfold Holdings, the holding
company of Rixonway Kitchens. Rixonway Kitchens is a UK kitchen manufacturing
business based in Dewsbury, Leeds with a focus on the social housing market. The
company is well placed to benefit from the significant investment planned in
social housing that arises from the Government's Decent Homes Initiative.
An investment in Planit Holdings was made for #5.4 million in December 2006.
Planit Holdings develops and supports software and services for computer aided
manufacturing ("CAM") for the woodworking, cabinet making, engineering and stone
industries. It also specialises in Computer Aided Design ("CAD") solutions for
retail design for kitchen and bathroom retailers and business management. The
company is the fourth largest player globally for CAM software and has over
50,000 customers.
In late December 2006, your Company invested #5.2 million into Boat
International Media ("Boat"). Boat is an international publisher of market
leading magazines, websites and events targeted at the superyacht and ultra high
net worth individual communities. Boat's magazines are published in the UK,
Europe, Russia and USA and the titles include Boat International, Boat
International USA, Dockwalk, Sailing Today, Mer & Bateaux and Meer & Yachten.
Follow on investments were made in a number of the portfolio companies as well
as to the limited partnerships to which your Company has made significant
commitments. Healthcare Homes Group is a regionally focused group providing
elderly residential and nursing care with a high EMI (elderly mentally infirm)
content. From an initial base of four care homes with 160 beds the group has
expanded to sixteen homes and over 650 beds and is seeking further acquisitions
in East Anglia which will continue to be funded by further investments by AEP I
and bank debt. Your Company increased its holdings in Hale Hamilton and Be
Modern in January 2006 when it acquired the shares held by Dresdner Bank AG for
#0.6 million and #0.2 million respectively. The company also purchased from
Dresdner Bank AG its interest, including loan stock, in the Investment Manager
for #0.4 million. The Company subsequently realised its interest when it sold
its shareholding to the then executive directors of the Investment Manager for
total proceeds of #1.5 million including the redemption of loan stock at par.
Your Company invested #0.1 million in InterMed Holdings, via AEP I, being funds
required for the purchase of shares and loan notes in the company held by a
departed executive. A further #0.1 million was invested in Discovery Group,
being the reinvestment of rolled up loan stock interest. A total of #0.1 million
was invested in AEP I to meet operating expenses of the partnership including
the advance share of net income payable to the general partner.
In March 2006, your Company made a commitment of #15 million to the Fund, which
provides finance. for private equity organisations, including 3i and Barclays
Private Equity, in return for post due diligence deal flow which is made
available to the Fund investors on a yearly commitment basis. The Fund targets a
net IRR of 20% and has co-investment agreements with a number of investment
managers, both in the UK and in Continental Europe. At the year end #8.3 million
had been drawn down. Further investments of #4.4 million have completed in 2007
in respect of deals approved in 2006 but in the due diligence process and a
rebalancing of the Fund, which saw the Company's investment in the Fund increase
to a total of #12.7 million invested.
Direct* Indirect# Total
cost cost cost
#'000 #'000 #'000
New investments
Boat International Media - 5,149 5,149
Imagine Publishing - 2,690 2,690
Parallel Ventures 2006 Limited Partnership 8,317 - 8,317
Planit Holdings - 5,449 5,449
Rollfold Holdings - 4,034 4,034
8,317 17,322 25,639
Follow on investments
Healthcare Homes - 2,396 2,396
Hale Hamilton 552 - 552
August Equity Limited 400 - 400
Be Modern 224 - 224
Discovery Group 55 27 82
InterMed Holdings - 73 73
AEP I 78 - 78
Other follow on investments 1 - 1
1,310 2,496 3,806
Total 9,627 19,818 29,445
* The direct cost is the amount invested directly by AET in the above companies.
# The indirect cost is the amount invested indirectly by AET through the Limited
Partnerships that AET has committed to.
Realisations
Ten unquoted investments were fully realised for proceeds of #35.7 million.
Discovery Group, an investment held both directly and indirectly via KB III, was
fully realised during March 2006 generating proceeds of six times the original
cost and an IRR of 35% per annum. Whilst some of the gain was already included
in the 31 December 2005 valuation there was a further uplift of #7.3 million
over the carrying value. Securistyle Holdings, an investment held through AEP I,
was fully realised during December 2006 generating proceeds of two times the
original cost and an IRR of 28% per annum. Although the valuation as at 31
December 2005 took account of some of the anticipated gain there was a further
gain during 2006 of #1.9 million. Your Company's investment in Hale Hamilton was
also realised in February 2006 for #0.4 million in excess of the carrying value
as at 31 December 2005. Kangol Holdings was fully realised in October 2006. This
investment was held both directly and indirectly through KB III. Kangol Holdings
was sold to a trade buyer with proceeds in excess of the previous carrying
valuation. ETT, an investment also held both directly and indirectly in KB III,
was fully realised in October 2006 with a sale of the assets to Mercator, a US
company, with proceeds in excess of the carrying valuation as at 31 December
2005. Four older investments, ELS, Primat, Thorn Microwave Devices and Oxford
Lasers were fully realised for combined proceeds of #0.3 million over their 31
December 2005 valuations.
InterMed Holdings redeemed the outstanding loan stock at par during October
2006. This now leaves a nominal cost of investment but a substantial value
attached to the remaining equity holding. Rayner Food Group was partially
realised in December 2006 following an initial liquidation payment from the
liquidator with the final part of the liquidation process expected to be
completed by the end of March 2007.
Valuation* Cost* Proceeds Profit/
31 Dec 05 (loss)
#'000 #'000 #'000 #'000
Full Realisations
Discovery Group 10,038 3,425 17,354 13,929
Securistyle Holdings 5,195 4,110 8,289 4,179
Hale Hamilton 2,468 1,692 2,876 1,184
Kangol Holdings 1,304 3,050 2,834 (216)
ETT 1,987 1,980 2,089 109
August Equity Limited 1,500 1,567 1,500 (67)
ELS 416 411 325 (86)
Primat - 67 199 132
Thorn Microwave Devices - 190 154 (36)
Oxford Lasers - 1,313 45 (1,268)
22,908 17,805 35,665 17,860
Partial Realisations
InteMed Holdings 3,348 3,404 3,404 -
Rayner Food Group 544 673 877 204
Parallel Ventures 2006 Limited
Partnership 222 222 222 -
4,114 4,299 4,503 204
Total 27,022 22,104 40,168 18,064
* Purchases during 2006 have been added to both the 2005 valuation and the cost.
The profits reported for investments held indirectly through limited
partnerships are the Company's share of the gross profits before deductions for
fees or carried interest attributable to the general partner or founder
partners.
Portfolio
Your Investment Manager has made significant progress in realising older
investments. At the year end the unquoted portfolio comprised sixteen
investments, compared to nineteen investments a year ago.
At the year end 66% of the unquoted portfolio by value was less than twelve
months old and was therefore valued at the price of recent investment plus
accrued income. Only 21% of the portfolio was greater than three years old at 31
December 2006. A number of these investments were realised shortly after the
year end and these investments were valued at the subsequent proceeds. Four
investments at the year end were valued using the earnings methodology.
The application of the fair value approach gives rise to a number of valuation
changes, the significant ones during the year ended 31 December 2006 being:
Valuation Portfolio Valuation
31 Dec 05 movements 31 Dec 06 Change
#'000 #'000 #'000 #'000
Healthcare Homes 1,383 2,396 5,112 1,333
InterMed Holdings 3,348 (3,348) 2,071 2,071
Hat Trick Holdings 4,044 - 2,453 (1,591)
RedSky IT 4,559 - 2,643 (1,916)
Imagine Publishing - 2,690 3,052 362
PORTFOLIO
Breakdown of net assets as at 31 December 2006
31 Dec 06 31 Dec 05
Valuation # Valuation #
Unquoted Holdings #39.0 m #36.4 m
Listed Holdings #45.5 m #40.4 m
Net current assets #5.0 m #2.8 m
Total Net Assets #89.5 m #79.6 m
Outstanding Commitments #22.7 m #33.0 m
Ten largest unquoted equity investments at 31 December 2006
Investment Valuation % of net assets Cost
#'000s #'000s
Parallel Ventures 2006 Limited 8,095 9.1 8,095
Partnership
Planit Holdings 5,475 6.1 5,439
Boat International Media 5,170 5.8 5,148
Healthcare Homes Group 5,112 5.7 3,779
Rollfold Holdings 4,270 4.8 4,034
Imagine Publishing 3,052 3.4 2,690
RedSky IT 2,643 3.0 4,126
Hat Trick Holdings 2,453 2.7 3,458
InterMed Holdings 2,071 2.3 25
Be Modern 566 0.6 245
Total 38,907 43.5 37,039
Unquoted portfolio age analysis as at 31 December 2006
Less than 1 year 66%
1 - 3 years 13%
3 - 4 years 6%
4 - 5 years 5%
Over 6 years 10%
100%
Unquoted portfolio stage analysis as at 31 December 2006
Management buy-out 49%
Management buy-in 13%
Expansion 10%
Replacement 6%
Fund investments 22%
100%
22 MARCH 2007
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKBKDFBKDQNB
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