RNS Number : 2238X
Cobra Capital Limited
20 June 2008
COBRA CAPITAL LIMITED
Preliminary results
For the year ended 31 December 2007
DIRECTORS' REPORT
We are pleased to present this annual report to shareholders for the year ended 31 December 2007 for Cobra Capital Limited ("Cobra" or
the "Company").
Net Asset Value
We have set out in the table below the half yearly progression of our net asset value per share ("NAV") since the Company began
investing after its admission to the AIM market of the London Stock Exchange plc ("AIM") on 27 February 2004.
Date 30 June 31 December 2004 30 June 31 December 2005
2004 2005
NAV (unaudited) (audited) (unaudited) (audited)
35.26p 39.43p 41.04p 42.16p
Date 30 June 31 December 2006 30 June 31 December 2007
2006 2007
NAV (unaudited) (audited) (unaudited) (audited)
40.46p 50.97p 46.02p 34.71p
Overall, 2007 was mixed year for the Company, containing a number of positive elements around the mid-year, but unfortunately ending the
year on a disappointing note as we had to make significant provisions against both of Cobra's unquoted investments due to events that have
come to light post year end but affected the year end values.
We began the year with the NAV at 50.97 pence, which had been bolstered at that time by the upward revaluation (c.8 pence of NAV) of one
of Cobra's unquoted investments. At the mid-point of 2007, as we previously reported in our interim results, we were disappointed that the
NAV had fallen by almost 5 pence to 46.02 pence. However, we were pleased to have made up all of that loss with a strong third quarter
performance, which by mid-September had returned the NAV to above 50 pence.
Cobra's performance over the year contrasted with that of the AIM All Share Index ("the Index") which was also decidedly mixed. The
Index ended broadly flat year on year, although that statistic masks significant movements within the year. The Index rose steadily to a
2007 high in July, but subsequently fell by more than 15% by the year end. Unfortunately, as has been well publicised, the significant
deterioration in the liquidity levels in the small cap market in the fourth quarter of 2007 materially affected Cobra's ability to exit from
some of its investments without exerting extreme downward price pressure on their respective share prices.
The net effect of the revaluations of the unquoted investments, together with the difficult trading conditions in the second half of the
year, meant that unfortunately, for the first time since the Company floated more than 4 years ago, Cobra's year-end NAV was lower than that
of the previous year.
Investment strategy
The Company's investment strategy remains as outlined in its AIM admission document. This strategy was executed regularly during the
first three quarters of 2007, where we continued to identify seismic event companies (companies in which there is likely to be a material
event or transaction) or facilitator transactions (transactions in which Cobra participates providing more than just financial resources)
where we are confident that we can achieve good returns within a six month time frame. However, due to the reduction in the number of
capital raisings and IPOs for small companies towards the end of the year, we took the view at that time to try to exit (where possible)
from our quoted investments. This decision, which we believe was justified given the downward trend in share prices in that period,
regrettably meant that the additional investment capabilities that we obtained as a result of securing our leveraged trading facility in
July 2007 remained largely unused during the latter part of the year. Accordingly, whilst our strategy of investment remains unchanged, we have scaled down the number of new investments until the markets return
to normal.
During the year the number of investments held at any one time varied between 10 and 18 companies. Our 11 quoted investments as of 31
December 2007, can be split into three investment sizes as follows:
Investment Size Number of Investments
Up to �250,000 9
Between �250,001 and �500,000 1
Over �500,000 1
During the course of the year we actively increased Cobra's profile amongst the small cap broking community, both in the UK and in The
Netherlands. This in part enabled us to continue to invest and exit from investments in the early part of the year as we were seeing an
increase in the breadth of proposals from a higher number of sources.
During the course of 2007, the expected flotations of both of our unquoted companies did not occur. The IPO of one was aborted in late
November 2007 whilst on its fundraising roadshow due to the poor stock market conditions and the other due to trading below expectations,
coupled with an aborted trade sale, which had adversely impacted on its management's time.
The company that subsequently aborted its float in November 2007 had undertaken a sizeable private round equity fundraising in late 2006
which placed a value on the shares held by Cobra at �1,300,000 (in accordance with the valuation principals of the European Venture Capital
Association). Unfortunately, following the aborted float, this company has recently undertaken a deeply discounted, but significant, equity
fundraising (raising �5.3 million), the effect of which is to reduce the carrying value of Cobra*s holding in that company by �900,000 (c.10
pence of NAV) to �400,000 at the year end.
The second unquoted investment, a company in which Cobra invested in January 2007, suffered an unexpected poor period of trading
mid-year yet, whilst trading is expected to remain challenging during 2008, the company's management are confident about its future
prospects. However, in consultation with our advisers, we have taken the decision to make a provision of approximately �100,000 (approx 1
pence of NAV) against this investment.
Accordingly, an aggregate reduction of more than 11 pence in Cobra's NAV was caused by the reduction in the carrying values attributed
to its unquoted investments.
Funds available for investment
We have not raised any new funds during the course of 2007 and, therefore, the total equity funds raised by Cobra remains at �3,590,500
(before costs) since its incorporation on 27 February 2004. The total net assets of the company, as of 31 December 2007, stood at
�3,051,898.
In previous reports, we had been concerned about the dilutive effects of raising further funds for investment purposes from the equity
markets whilst Cobra's share price was languishing behind its NAV. To this end, we initiated discussions with a number of EU banks with a
view to securing appropriate debt facilities for Cobra. These discussions culminated in the Company signing a trading and leverage facility
agreement, as announced in July, which could provide Cobra with up to �20 million of available funds to invest.
Given our strategy of divestment rather than investment in the latter part of the year, the net borrowing levels of the Company stood at
�727,550 at the year end.
Share Price
Our share price began 2007 at 28.5 pence. Pleasingly, following some extensive investor relations activities undertaken during May and
June in conjunction with our new financial PR company, the share price climbed to an all time high of 64.5 pence in early August, shortly
after we announced the new leveraged trading facility. The fact that Cobra's shares are relatively illiquid, something that we've
continually commented on in previous reports was, we believe, the principal reason for the higher than expected share price rise during the
middle of the year. Unsurprisingly, the price then slipped back during the second half of the year to close at 55.5 pence at 31 December
2007 and has since fallen (in line with the market) to 41.5 pence as of 31 May 2008. Whilst we are extremely pleased to have finally
achieved some material uplifts in share value for shareholders during 2007, we remain very cautious about achieving similar price increases
in the near future as a result of the capital markets remaining closed for smaller companies.
Outlook
The Directors are ultimately disappointed with Cobra*s recent NAV performance, despite the Company*s operational progress achieved
during the year. The public markets remain relatively closed for small company fundraisings, although we do anticipate activity to pick up
in the second half of the current financial year. We also expect to exit from one of our unquoted companies in the second half of the year.
We therefore remain cautious over the future.
Going Concern
After due consideration, the Directors believe that the Company has adequate resources for the period of at least 12 months from the
date of approval of the financial statements, and consequently that it is appropriate to apply the going concern principle in preparing the
financial statements.
Activities
The Company was incorporated on 27 February 2004 and was admitted to trading on AIM on 24 March 2004.
The principal activity of the Company is the investment, holding and sale of equity investments in companies which are located in
Europe.
Creditors Payment Policy and Practice
It is the Company's payment policy and actual practice to ensure settlement of suppliers' invoices in accordance with the stated terms
of the invoices.
On behalf of the Board,
Peter Griffin Michael Cahill
Director Director
20 June 2008
Statement of total return for the year ended 31 December 2007
For the year ended For the year ended
31 December 2007 31 December 2006
Note Revenue Capital Total Revenue Capital Total
� � � � � �
(LOSS)/GAINS ON INVESTMENTS
Net (loss)/gains on investments at fair
value through profit or loss - (952,162) (952,162) - 1,193,145 1,193,145
- (952,162) (952,162) - 1,193,145 1,193,145
INCOME
Dividend income 12,899 - 12,899 778 - 778
Interest income 13,435 - 13,435 11,012 - 11,012
26,334 - 26,334 11,790 - 11,790
EXPENDITURE
Directors' fees 4,000 - 4,000 4,000 - 4,000
Administration fees 72,266 - 72,266 63,407 - 63,407
Professional fees 49,521 - 49,521 82,114 - 82,114
Consultancy fees - 168,602 168,602 - 154,540 154,540
Audit fee 13,150 - 13,150 8,090 - 8,090
Registrar and regulatory expenses 25,931 - 25,931 16,286 - 16,286
Sundry expenses 1,508 - 1,508 700 - 700
Commissions paid 4,198 - 4,198 - - -
Interest expense 87,044 - 87,044 33,363 - 33,363
Loss on exchange 80,069 - 80,069 4,528 - 4,528
337,687 168,602 506,289 212,488 154,540 367,028
(LOSS)/PROFIT ON ORDINARY ACTIVITIES FOR THE (311,353) (1,120,764) (1,432,117) (200,698) 1,038,605 837,907
FINANCIAL YEAR BEFORE TAXATION
Withholding tax suffered (1,144) - (1,144) (78) - (78)
(LOSS)/PROFIT ON ORDINARY ACTIVITIES FOR THE (312,497) (1,120,764) (1,433,261) (200,776) 1,038,605 837,829
FINANCIAL YEAR AFTER TAXATION
Earnings per share: 1
- basic (pence per share) (3.55) (12.75) (16.30) (2.28) 11.81 9.53
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the year.
BALANCE SHEET
31 DECEMBER 2007
31 December 2007 31 December 2006
FIXED ASSETS
Investments at fair value through profit or 3,967,504 5,045,800
loss
CURRENT ASSETS
Cash and cash equivalents 160,389 20,958
Other debtors and prepayments 26,704 -
187,093 20,958
CREDITORS - AMOUNTS FALLING
DUE WITHIN ONE YEAR
Loans payable and overdrafts 1,069,181 568,716
Other creditors and accruals 33,518 15,873
1,102,699 584,589
NET CURRENT LIABILITIES (915,606) (563,631)
TOTAL ASSETS LESS CURRENT LIABILITIES � 3,051,898 � 4,482,169
CAPITAL AND RESERVES
CALLED UP SHARE CAPITAL 87,932 87,932
SHARE PREMIUM ACCOUNT 3,502,568 3,502,568
CAPITAL RESERVE
REALISED 187,524 567,025
UNREALISED 164,951 906,214
SHARE OPTION RESERVE 62,990 60,000
REVENUE RESERVE (954,067) (641,570)
SHAREHOLDERS' FUNDS � 3,051,898 � 4,482,169
Net asset value per share (pence per share) 34.71 50.97
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER
2007
For the year ended For the year ended
31 December 31 December
2007 2006
Net cash outflow from (390,181) (395,441)
operating activities
Returns on investment and
servicing of finance:
Interest paid on loans payable (74,032) (29,708)
Net cash outflow from investment and servicing of (74,032) (29,708)
finance
Investing activities:
Purchase of listed securities (3,270,498) (4,554,767)
Purchase of unlisted (144,578) -
securities
Proceeds from disposals of 3,518,255 4,471,240
listed securities
Net cash inflow/ (outflow) 103,179 (83,527)
from financial investment
Financing:
Loans payable advanced 500,465 369,541
Net cash inflow from financing 500,465 369,541
Increase/(decrease) in cash � 139,431 � (139,135)
resources for the year
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
Increase/(decrease) in cash 139,431 (139,135)
resources for the year
Cash inflow from increase in (500,465) (369,541)
debt financing
Change in net debt resulting (361,034) (508,676)
from cashflows
Net debt at 1 January 2007 (547,758) (39,082)
Net debt at 31 December 2007 � (908,792) � (547,758)
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2007
1. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the return on ordinary activities after tax for the year and on 8,793,200 shares
being the weighted average number of shares in issue during the year.
FRS 22 "Earnings Per Share" defines dilution as a reduction in earnings per share or as an increase in loss
per share. When calculating the dilutive earnings per share the loss per share decreased. Accordingly dilutive loss per share is not
disclosed. The company has 500,000 share options in issue which could potentially dilute basic earnings per share in the future.
2. NET ASSET VALUE PER SHARE
The calculation of net asset value per share is based on the net assets of �3,051,898 and on the
ordinary shares in issue of 8,793,200 at the balance sheet date.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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