AVARAE GLOBAL COINS PLC AVARAE GLOBAL COINS PLC
REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2015
Contents Company Information 3 Directors' report 4 Introduction 4 Investing policy 4 The coin-dealing sector 4 Avarae's investments 5 Financial results 6 Dividend 7 Outlook 7 Incorporation 8 Statement of Directors' responsibilities 8 Principal activity 8 Results and dividends 8 Directors' remuneration and interests 9 Substantial shareholdings 9 Corporate Governance 9 Relationship with shareholders 10 Annual General Meeting 10 Statement as to disclosure of information to auditors 11 Auditors 11 Report of the independent auditors 12 Statement of Comprehensive Income 14 Statement of Financial Position 15 Cash Flow Statement 16 Statement of Changes in Equity 17 Notes to the Financial Statements 182
Company informationDirectors Diane Clarke Matthew Wood August Berting Clement Chambers
Kay Cregeen (Alternate)(Resigned 14 Aug 2015) Chris Shimmin (Alternate)
Registered Office Ground Floor West Suite Exchange House
54-58 Athol Street
Douglas
Isle of Man
IM1 1JD
Numismatic Advisory Panel The Rt Honourable Sir John Wheeler J.P. DL Clement Chambers
Nominated Advisor and Broker WH Ireland Limited
24 Martin Lane
London
EC4R 0DR
Auditors Baker Tilly Isle of Man LLC PO Box 95
2a Lord Street
Douglas
Isle of Man
IM99 1HP
Advocates Appleby
33 Athol Street
Douglas
Isle of Man
IM1 1LB
Registrars Neville Registrars Limited
18 Laurel Lane
Halesowen
B63 3DA
3
Directors' Report Introduction
We are pleased to present the annual report for the year ended 31 March 2015. During the year
under review, the Company continued to manage its portfolio of rare and high quality coins.
Avarae Global Coins plc ('Avarae' or the 'Company') provides access for institutional investors and individuals wanting to diversify their investment portfolios away from the traditional asset classes such as equities, property and bonds without the need to be an expert in the coin- collecting sector. The principal objective of the Company, which has not changed since its admission to AIM ('Admission') in 2006, is to achieve capital growth for its shareholders through the purchase, holding and sale of the rarest and highest quality segment of the coin- collecting sector in various countries around the world.
Since Admission, we have built up an impressive portfolio of extremely high quality, rare coins
which we intend to hold both for the long-term, i.e. 3 to 5 years, in order to achieve capital growth for our shareholders, and also the short-term, in order to take advantage of short-term trading opportunities, as the market for rare coins continues to grow. The value of each investment ranges from a few hundred pounds up to many hundreds of thousands of pounds. The most expensive coin acquired by Avarae to date is the Edward III Double Florin which was acquired for £0.4 million in 2006. The Double Florin is on display at the Fitzwilliam Museum in Cambridge.
The Board's decision on whether to acquire or dispose of a coin or coin collection is made on the recommendation of its industry expert independent Advisory Panel ('Panel') that assesses and approves all coin trading related activities. The Panel members are Sir John Wheeler and Clement Chambers, both of whom have significant expertise in the field of numismatics.
A principal objective of the Company is to achieve long-term capital growth through the appreciation in value of the coins acquired. Compound annual returns achieved over the medium to long-term for the highest quality and rarest coins can reach as high as 10 per cent. As at the date of this report, and since its formation in 2006, the Company has no borrowings and has no present intention of securing any borrowings.
The market for trading coins is international in nature and significant in size. For at least the last
10 years, there has been an increasing interest in the coin sector and its prominence as an alternative investment class is illustrated by continued increases in activity around the world,
where record prices have been paid for certain rare pieces. The number of interested parties in
coins and coin collections appears to be continuing to grow, with auction houses reporting significant growth in the numbers of interested bidders compared to the corresponding auctions in
previous years.
As a result, activity in the rare coin market has remained positive in the year to 31 March 2015
However, in-depth knowledge of the market remains key to prosper given the changing dynamics of the market . English, Roman and Indian coins continue to show robust healthy growth, whereas the Chinese sector remains broadly flat. The numismatic industry continues to witness an influx of new buyers looking for tangible assets and fresh areas to place their money as traditional asset classes, such as commodities and currencies, fail to deliver robust financial gains and exhibit high volatility. The majority of the funds coming into the numismatic market are targeting the higher quality coin rarities and this is adding considerable pressure on availability. A number of important coins and coin collections have come up for sale worldwide with auction houses continuing to achieve record prices, particularly for the highest quality rare pieces.
4
Directors' Report (continued)Avarae's investments
Purchases
In the year to 31 March 2015, the Company acquired an additional £0.32 million worth of coins
(2014: £0.63 million) which, together with the year-end revaluation exercise, resulted in the value of the coin portfolio as at 31 March 2015 increasing by £0.52 million to £11.14 million (2014:
£10.62 million). In line with its investment strategy, the Company has focused on the purchase of only the highest quality and rarest coins. In particular, during the year, the Company increased its exposure to British coins.
Examples of coins acquired during the year include:
Henry VII (1485-1509), Fine Gold Sovereign of Twenty Shillings, Group IV (c.1502-
1504), crowned full robed figure of the King seated facing on ornate throne with high canopy, holding orb and sceptre. Very rare.
Edward VI (1547-1553), Fine Gold Sovereign of Thirty Shillings, Third Period (15
December 1550 to 6 July 1553), Southwark mint, crowned full figure of King seated facing on ornate throne, holding orb and sceptre, portcullis below extending to rim, ornate throne back with large pillars. An extremely rare coin, as fewer than ten known to be held in private hands.
James I (1603-1625), Rose Ryal of Thirty Shillings, third coinage (1619-25), seated facing full figure of robed King with orb and sceptre, on throne with plain throne back and decorated background, portcullis below. Very rare.
Charles I (1625-1649), Unite of Twenty Shillings, Tower Mint under Parliament, group G, seventh crowned bust left, value in field behind. A superb coin, the finest known of this the final mark of the reign and of the highest rarity, as it is thought to be one of less than five available to collectors.
Sales
The highlight for the period under review was the sale of £0.5 million of English gold coins. These sales represented a 39 per cent margin over the carrying value of these coins as at the 31
March 2014.
During the year, the Company also continued its efforts to rebalance its portfolio, liquidating a significant number of the lower value items and less high quality duplicates previously acquired as part of important collections. The Company ended the period under review with approximately
1,000 coins, a reduction from almost 1,100 at the beginning of the period. This process is ongoing and the Company expects to generate several hundred thousand pounds of sales during the
current financial year as a result of this exercise. Indeed, since the year end, the coin portfolio has
been reduced by a further 150 of the lower value coins. It should be noted that the both quantum of gross profit and the gross profit margin achieved on the sale of these lower value coins are expected to be smaller than that expected to be achieved on the higher value and rarer coins sold.
Breakdown of our Portfolio
English milled and hammered coins represent the largest segment of the Company's portfolio, with holdings of Islamic and Indian coins also representing significant proportions of the stock. Other sectors where Avarae holds coins of notable value includes USA and South American coins. In total, Avarae holds coins from more than 50 different regions and nationalities, demonstrating its genuine global exposure.
5
Directors' Report (continued)Breakdown of our Portfolio (continued)
Avarae's current intention is to hold the vast majority of its current portfolio for the foreseeable future and only make disposals of coins or collections when the Board believes it to be in the best
interests of the Company and its shareholders.
Revenue from the sale of coins or coin collections for the year ended 31 March 2015 was £0.6 million, down on the previous year's total of £1.6 million. While the overall revenue has
decreased, the Company continues to demonstrate its conservative valuation policy as 2014/15 witnessed a strong increase in the gross profit margin, with sales in the year generating a 32 per
cent. gross margin as compared with 18 per cent. in the prior year.
As at 31 March 2015, in line with our long-term policy, the Company instructed industry experts to undertake a detailed revaluation of its coin portfolio. This exercise is intended to apportion changes in the value of coins over the period of their ownership by Avarae rather than allocating profits (or losses) in the year of sale only. The Company's gross profit is calculated as the difference between the sale price of each coin less its carrying value brought forward, which will either be cost or the revalued amount. The industry experts considered the open market resale value of only those coins that had been held within the Company's portfolio for more than 12 months, i.e. only those coins acquired and held by Avarae on or before 31 March 2014 and excluded those purchased during the financial year under review, which were held at cost. In each of the years since the Company's inception, the Company has recorded a gross profit, thereby demonstrating the validity of the revaluation exercise.
The result of the extensive revaluation exercise carried out on the coins, as described in the accounting policies and which the Directors continue to believe to be conservative, was that the overall carrying value of the portfolio as at 31 March 2015 increased to £11.14 million (2014:
£10.62 million). The primary causes of this increase of £0.5 million were that £0.3 million of coins were added to the portfolio, the brought forward coin portfolio was revalued upwards by
£0.6 million (6% uplift) and coins with a brought forward carrying value of £0.4 million were
sold. The Directors would expect coins from the portfolio to achieve appreciably higher returns than their revalued carrying value should they be sold at auction, as demonstrated by the 32 per cent. gross profit margin achieved on coins sold in the financial year under review.
The result of the revaluation exercise at 31 March 2015 is that, as at that date, the Company's coin portfolio comprised of coins purchased at cost of an aggregate £8.29 million (2014: £8.21 million) and a revaluation amount of £2.85 million (net of VAT payable on sale) (2014: £2.41 million).
The effect of the revaluation, together with the profits from the coin sales, resulted in the Company recording a gross profit of £0.82 million (2014: £0.66 million), an uplift of 25 per cent. Administrative expenses during the year were £0.44 million (2014: £0.41 million), the increase due entirely to a £0.4 million increase in unrecoverable VAT suffered in the year when compared to the prior year. Unrecovered VAT arises when the Company's revenue includes sales of exempt gold coins - coins specifically identified by HMRC which are exempt from VAT. Accordingly, each year the Company is unable to recover the proportion of input VAT suffered on its annual expenses equal to the proportion that exempt gold coins represents of its annual revenues. Unfortunately, within the year under review exempt gold coin sales represented a larger than historically normal proportion of overall revenue. Excluding unrecovered VAT, other administrative expenses reduced when compared to the prior year.
Net profit for the year of £0.38 million (2014: £0.25 million), delivered earnings per share of
0.47p (2014: 0.31p).
6
AVARAE GLOBAL COINS PLC
REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2015
Directors' Report (continued) Financial results (continued)
The Company ended the year with a net cash balance of approximately £0.88 million compared to £0.17 million reported at the end of March 2014. This was largely due to the realisation of
receivables held at the beginning of the reporting period.
The Company's cash is prudently managed across a spread of accounts, thereby reducing the risks of the creditworthiness of any one financial institution. At the date of this report, the Company's cash balances stood at approximately £0.83million.
During the year, investments of £0.32 million (2014: £0.63 million) were made in coins and coin collections. At year end, the Company had net assets of £12.0 million (2014: £11.7 million) and no borrowings. The Directors are pleased to report that the Company's net asset value per share ('NAV') as at 31 March 2015 again increased on the prior year to 14.9 pence (2014: 14.5 pence).
Reflecting the Company's continued NAV growth and the Board's cautiously optimistic outlook,
the Board is pleased to recommend a full year dividend of 0.15 pence per share, in line with the prior year (2014: 0.15 pence per share), subject to shareholder approval which is to be sought at
the Company's annual general meeting to be held on 23 September 2015. The dividend will be
paid on or around 29 September 2015 to shareholders on the register as at 25 September 2015.
The dividend policy adopted by the Board is intended to be progressive and a dividend is expected to be declared on an annual basis. The level of the dividend will reflect the Company's reported profits over a three year period, thereby smoothing out any years of one-off profits (or losses). The policy will be to pay out approximately 1/3 of the average net profits reported over the most recent three year period. For the year ended 31 March 2015, the level of the dividend will be approximately £0.12 million (2014: £0.12 million).
Avarae remains well positioned as an alternative asset investment. Where other alternative asset players have suffered as a result of volatile international markets and fluctuating commodity prices, Avarae has continued to be successful, posting ever-increasing net asset values and paying
regular dividends. The Company has a strong balance sheet with a healthy cash position and no debt. Trading since the year end has been active, with the Company selling more than 150 coins
and recording revenues of approximately £0.51 million. Since 1 April 2015, the Company has also acquired coins with a value of approximately £0.16 million. The Directors remain optimistic about the Company's future prospects both for the current year and longer term.
The company has not implemented the guidelines set out in the IFRS Practice Statement
Management Commentary in preparing the above report.
Diane Clarke Matt Wood Guus Berting
Clement Chambers
21 August 2015
7
Directors' Report (continued) Incorporation
These are the ninth financial statements of the Company, which was incorporated on 6 February
2006 and commenced operations on that date.
Statement of Directors' responsibilities
The directors are responsible for keeping proper accounting records, which disclose with
reasonable accuracy at any time the financial position of the Company and to enable them to ensure that financial statements prepared comply with the Companies Act 2006, for safeguarding the assets of the Company, for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are also required to prepare financial statements for the Company in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRSs') and the rules of the London Stock Exchange for companies admitted to trading on AIM.
International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's 'Framework for the preparation and presentation of financial statements'. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. A fair presentation also requires the Directors to:
consistently select and apply appropriate accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and
provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.
Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the group's website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
The principal activity of the Company is that of achieving capital growth for its Shareholders
through the purchase, holding and sale of rare and antique coins.
The profit for the year ended 31 March 2015 of £380,000 (31 March 2014: £253,000) has been transferred to reserves.
8
Directors' Report (continued) Directors' remuneration and interests
The Directors of the Company who served during the year and since the year end were:
Diane Clarke Matthew Wood August Berting Clement Chambers
Kay Cregeen (Alternate) (Resigned 14 August 2015) Chris Schimmin (Alternate)
The remuneration of the Directors of the Company is set out in Notes 4 and 14 to the accounts. Other than Clement Chambers, who holds 30,000 Ordinary Shares, representing approximately
0.04% of the Company's issued share capital, none of the other Directors held any Ordinary
Shares in the Company during the year.
As at 31 March 2015 and at the date of this report, the issued share capital of the Company was
80,783,334 ordinary shares of one pence each ('Ordinary Shares') and, as far as the Directors are aware, as at the date of this report, the following shareholders held 3% or more of the Company's
issued share capital:
The Board is responsible for establishing the strategic direction of the Company, monitoring the
Company's trading performance and approving the purchase and disposal of coins to and from its portfolio. The recommendations for such purchases and disposals are made by independent experts comprising the Numismatic Advisory Panel.
Details of the Directors' beneficial interests in Ordinary Shares are set out in the Directors' Report. The Directors intend to comply with Rule 21 of the AIM Rules for Companies relating to Directors' dealings and will take all reasonable steps to ensure compliance by any employees of the Company to whom Rule 21 applies. The Company has, in addition, adopted a Share Dealing Code for dealings in its Ordinary Shares by Directors and senior employees.
The Directors recognise the importance of sound corporate governance. The Company intends to comply with the QCA Corporate Governance Code for Small and Mid-Size Quoted Companies so far as is practicable and appropriate for a public company of its size and nature.
The Board comprises four directors, one based in the Isle of Man, Diane Clarke, one based in the UK, Matthew Wood, one based in The Netherlands, August Berting, and one based in Monaco, Clement Chambers. Mrs Clarke is an executive director and Messrs Wood, Berting and Chambers are all non-executive directors. The board considers each of the non-executive directors to be independent. The Company does not have a designated Chairman or Chief Executive Officer. Directors' remuneration is reported annually in the Company's annual report and accounts.
9
Directors' Report (continued) Corporate governance (continued)
Matthew Wood and August Berting make up the audit and remuneration committees, and the
whole Board comprises the Risk Management Committee ('RMC'). The RMC reviews the risks
applicable to the business and the actions required to reduce those risks.
The terms of reference for the Audit Committee provide that it will receive and review reports from the Company's management and the Company's auditors relating to the annual and interim accounts and the accounting and internal control systems in use throughout the Company.
The terms of reference for the Remuneration Committee provide that it will review the scale and structure of the Executive Directors' remuneration and the terms of their service contracts. The remuneration and terms and conditions of appointment of the Non-Executive Directors will be set by the Board. No Director may participate in any meeting at which discussion or decision regarding his own remuneration takes place.
The major risk to the Company lies in the overall market pricing of its main asset - the portfolio of collectable coins. It is intended that this risk and attendant opportunity is passed straight to the Company's investors, who should hold its shares in a balanced portfolio of their own. During the year ended 31 March 2015, the Board did not accentuate this risk by any form of leveraged financing. The remaining risk to the Company comprises the need to maintain adequate liquidity to meet the Company's trading obligations and maximise opportunistic purchasing offers. The Board monitor this risk thorough its monthly financial reporting system.
The Directors do not consider that, given the size of the Board, it is appropriate at this stage to have a Nomination Committee.
The Company's administrator, Hillberry Trust Company Limited ('Hillberry'), is responsible for maintaining the Company's registers, other than the register of members which is maintained by the registrar, and for the Company complying with its filing requirements at the Companies Registry.
The Directors seek to build a mutual understanding of objectives between the Company and its
Shareholders. The Company reports formally to Shareholders in its interim and annual reports setting out details of its activities. In addition, the Company keeps Shareholders informed of
events and progress during the year through the issue of press releases.
The Annual Report is sent to Shareholders at least 23 clear days before the Annual General Meeting. Directors are required to attend Annual General Meetings of the Company unless unable to do so for personal reasons or due to pressing commercial commitments. Shareholders are given the opportunity to vote on each separate issue. The Company counts all proxy votes and will indicate the level of proxies lodged on each resolution, after it has been dealt with by a show of hands.
The notice ('Notice') of annual general meeting ('AGM') to be held at 12:00 p.m. on 23
September 2015 at the Company's registered office has today been sent to shareholders. Copies
of this document, Notice and form of Proxy for use at the AGM are available at the Company's registered office and on the Company's website www.avarae.com.
10
Directors Report (continued) Statement as to disclosure of information to auditors
The Directors who were in office on the date of approval of these financial statements have confirmed, as far as they are aware, that there is no relevant audit information of which the auditors are unaware. Each of us has confirmed that we have taken all the steps that we ought to
have taken as directors in order to make ourselves aware of any relevant audit information and to establish that this information has been communicated to the auditors.
The Company's auditors, Baker Tilly Isle of Man LLC have indicated their willingness to
continue to act. A resolution to re-appoint Baker Tilly Isle of Man LLC as auditors will be proposed at the Annual General Meeting of the Company on 23 September 2015.
APPROVED BY THE BOARD OF DIRECTORS
21 August 2015
Matthew Wood
11
|
distributed by
|
