Annual Report and Accounts
30 Juni 2008 - 7:01PM
UK Regulatory
RNS Number : 9545X
Arc Growth Company VCT plc
30 June 2008
FOR IMMEDIATE RELEASE 30 June 2008
Arc Growth Company VCT plc
Audited Results Announcement
For the year ended 29 February 2008 and Notice of AGM
Chairman's Statement
During the past year, the VCT has continued to make progress towards its objective of maximising capital returns for shareholders
despite trying times in turbulent worldwide equity markets. However, the performance of its investments has been affected by increasingly
difficult economic conditions.
Background
The VCT was listed in June 2005 and has received total subscriptions of �1.77m until the end of the financial year under review.
Net Asset Value ('NAV')
At 29 February 2008, the VCT had made seventeen investments, and had realised two in their entirety and a further three partially.
The NAV per share of 102.4p continues to be an acceptable performance for a VCT at this stage of its development, and when compared to
its initial NAV of 94.5p after fund raising costs. Our performance has however, lost its gloss due to the failure of one investment and
provisions against three others.
Portfolio Progress
A main focus of the Board during the past year has been to achieve the level of at least 70% of its assets being invested in qualifying
investments by 29 February 2008 to satisfy VAT regulations. This target has been comfortably achieved. It should be noted that this
calculation is done according to HMRC rules which are not the same as the accounting rules used to value assets in the balance sheet.
Now that the 70% qualifying hurdle has been achieved, the directors will continue to monitor the investment carefully, seek to achieve
realisations wherever possible and take up new investment opportunities when they arise whilst ensuring that the VCT continues to remain
within the required qualifying parameters.
The downturn in worldwide stock markets has been reflected in the performance of AIM and, as a result, the VCT's three such listed
holdings held throughout the year have reduced in value. A further holding made in an AIM-listed stock, Snacktime, has also seen a price
reduction since investment.
The VCT has continued to make partial realisations in non-qualifying holdings, such as Arc Fund Management Holdings plc during the
year.
Regrettably, we have seen the failure of an investee company since the year end. Famous Retail Limited has experienced the difficulty of
retailing discretionary spend products during difficult economic conditions and the directors decided to appoint an administrator despite
being offered further funds by its shareholders because of uncertainty about future trading. We have made a 100% provision against our
investment in Smart Implant Holdings plc because of the intransigence of one director who refused to agree to certain conditions imposed by
our managers who were prepared to invest further from sources other than the VCT. We have also made a 50% provision against our investment
in Sarah Arnett Ltd which like Famous Retail retails discretionary products. This reflects our nervousness about the retail market.
Dividends
The VCT's policy is to maximise dividends to its shareholders. One of the benefits of the VCT structure is that these dividends are paid
tax-free whether they arise from income or capital gains.
The income loss of 2.4p per share precludes the payment of an income dividend this year. Although there was a small capital profit made
during the year, the directors believe that these monies should be retained to meet likely cash calls from investee companies during the
coming months in the light of the present short-term economic prospects.
I apologise for the delay in the payment of the capital element of the 2007 dividend of 6.6p per share. This is because of the
technicality of being required to obtain Court sanction to reduce the Share Premium Account and create a distributable reserve. The hearing
has been delayed by the extended Closing Date of the C Issue Offer, which will now close on 30 June 2008. A Court hearing date has now been
set and we hope to be in a position to pay the balance of the dividend by the end of September 2008.
VCT qualifying status
As I mentioned earlier, the VCT was required to be 70% invested in qualifying companies by 29 February 2008. This target was met and,
being conscious of all the Regulations applying to VCTs, the Board has appointed James Cowper, Accountants and Business Advisers, to monitor
the VCT's progress against this requirement.
Share price and buy-back facility
The VCT's mid-market share price currently stands at 55p, which is an unacceptable discount to NAV. To better serve shareholders who
might wish to sell shares, we shall be asking shareholders to renew the power granted previously to the Board to purchase shares in the
market for cancellation. This would allow us to buy-back shares at a minimum 10% discount to the prevailing NAV and thus avoid the large
discount which the market makers have chosen to apply.
C Issue Offer
The response to the Offer has been disappointing with under �300,000 being raised. This reflects the significant drop in the appetite
for VCTs in the last tax year.
Outlook
The current economic climate and the impact of the credit crunch is still being felt across the whole business spectrum and will
continue to be a major influence over the coming months. We believe that will lead to difficult trading for some of our companies, which are
generally characterised by being at an early stage in their development.
Thus, your Board will continue to monitor its investment carefully, assisting where possible through these tricky conditions. Prudent
use of our limited cash resources will be applied to ensure that satisfactory investment performance can be maintained over the coming
months. The Board remains fully committed to its objective of maximising capital returns for its shareholders over the longer term.
Richard Hargreaves
Chairman
30 June 2008
Arc Growth Company VCT plc
Investment Manager's Report
for the year ended 29 February 2008
Introduction
Arc Fund Management Limited is pleased to present the Investment Manager's Report for the year ended 29 February 2008 on Arc Growth
Company VCT plc.
During the year we have been able to diversify the portfolio by the addition of nine new investments ClickNow Holdings plc, Dateline
Holdings plc, Famous Retail Limited, Global e-Network Holdings plc, Laser Broadcasting Limited, M2FX plc, Snacktime plc, SPDG Technologies
plc and Smart Implant Holdings plc. The Company invested further in Sarah Arnett Limited and Rainbow Rewards Limited.
During this period, the Company has also partially disposed of holdings in Arc Fund Management Holdings plc and Vicorp Group plc and
completely disposed of the remaining shares in Traction Technology plc.
The Company has now reached the 70% qualifying target required under the VCT regulations although we remain aware of the non-qualifying
holdings. Over the course of the next year, it is our intention to continue to increase the proportion of qualifying investments in the
Company's portfolio through selective investment and disposals.
Activity
The main concern for the year under review was meeting the requirements of the VCT regulations, in particular the 70% rule. The
performance of the portfolio has suffered heavily in the last quarter and this is reflected in an NAV of 102.42p. Given the current
financial situation a number of investments have been written down which we believe is a prudent step to take.
Outlook
The current global "credit crunch" rumbles on and regrettably the performance of the portfolio has suffered in this time, in particular
with regards to Famous Retail which since the year end has gone into administration. We believe that although some of the investments may
have a more difficult time overall financially, we remain confident that, there is enough diversity in the portfolio to continue the
Company's above-average performance in its sector. We are in regular contact with the investments to ensure that there is a prompt response
to any problems.
The 'C' share issue is set to close on 30 June. Given the current financial environment we will be looking to invest in more established
businesses which have substantial asset backing although we also foresee and indeed are seeing an increase in distressed companies that may
provide suitable investment opportunities.
Since the year end, the Company has secured its position in Rainbow Rewards Holdings Limited ("RR") by subscribing for part-paid shares
to raise further development capital. We are confident that Rainbow Rewards is pursuing a sensible strategy and is progressing well.
Christopher Rowe
Arc Fund Management Limited
30 June 2008
Arc Growth Company VCT plc
Income Statement
for the year ended 29 February 2008
2008 2007
Note Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Bank and other interest 35 - 35 57 - 57
Investment management (fee) / 28 - 28 24 - 24
clawback
Other expenses (106) - (106) (73) - (73)
Realised gains on investment - 197 197 - 119 119
disposals
Unrealised appreciation in - (520) (520) - 387 387
investment values
Return on ordinary activities (43) (323) (366) 8 506 514
before tax
Tax charge on ordinary - - - (1) - (1)
activities
Return on ordinary activities (43) (323) (366) 7 506 513
after tax
Return per share 1 (2.41p) (18.29p) (20.69p) 0.37p 30.63p 31.00p
The total column of this Income Statement represents the profit and loss account of the Company. The supplementary revenue and capital
columns have been prepared in accordance with the Association of Investment Trust Companies' Statement of Recommended Practice.
There were no other recognised gains or losses other than the results for the year as disclosed above. Accordingly a statement of total
recognised gains and losses is not required.
All revenue and capital items in the above statement derive from continuing operations.
The Company has only one class of business and derives its income from investments made in shares and securities and from bank and money
market funds.
Reconciliation of movements in shareholders' funds
2008 2007
�'000 �'000
Shareholders' funds at 1 March 2007 2,183 1,072
Total gains and losses recognised in period (366) 513
Net proceeds of share issue - 598
Dividends paid (7) -
Shareholders' funds at 29 February 2008 1,810 2,183
Arc Growth Company VCT plc
Balance Sheet
as at 29 February 2008
2008 2007
�'000 �'000 �'000 �'000
Fixed asset investments 1,714 1,120
Current assets
Debtors 89 186
Cash at bank 165 891
254 1,077
Current Liabilities
Creditors (amounts falling due within 158 14
one year)
Net current assets 96 1,063
Net assets 1,810 2,183
Capital and reserves
Called up equity share capital 177 177
Share premium 1,492 1,492
Revenue reserve (42) 8
Capital Reserve 183 506
Total equity shareholders' funds 1,810 2,183
Net asset value per share 102.42p 123.51p
Arc Growth Company VCT plc
Cash flow statement
for the year ended 29 February 2008
2008 2007
�'000 �'000 �'000 �'000
Net cash inflow from operating activities
Return on ordinary activities before tax (366) 514
Adjusted for:
Realised gains on investment disposals (197) (119)
Changes in fair value of investments 520 (387)
Decrease (increase) in debtors 97 (46)
(Decrease) / increase in creditors 145 (63)
Net cash generated from operating activities 199 (101)
Taxation
Corporation tax paid (1) -
Financial investment
Cash flows from investing activities
Purchases of investments (1,831) (752)
Sales proceeds of investments 914 248
Net cash outflow from financial investment (917) (504)
Equity dividends paid (7) -
Net cash outflow before (726) (605)
financing
Financing
Issue of own shares - 634
Share issue expenses - (36)
Net cash generated from financing activities - 598
Net decrease in cash at bank (726) (7)
Reconciliation of net cash flow to movements in cash
Net decrease in cash at bank (726) (7)
Cash at bank at 1 March 2007 891 898
Cash at bank at 29 February 2008 165 891
Arc Growth Company VCT plc
Notes
1. Return per share
The return per share is based on the loss from ordinary activities after tax of �365,754 (2007: profit �513,104) and on 1,767,557 shares
(2007: 1,655,169 shares), being the weighted average number of shares in issue during the period.
There are no potentially dilutive capital instruments in issue and, therefore, no diluted return per share figures are relevant.
2. Dividends
The directors are not proposing a dividend for the period ended 29 February 2008.
3. Accounts
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of
the Companies Act 1985 ("the Act"). The balance sheet as at 29 February 2008, income statement, cash flow statement and Note 1 for the
period then ended have been extracted from the Company's 2008 statutory financial statements upon which the auditor's opinion is unqualified
and does not include any statement under section 327 of the Act.
The Annual Report & Accounts for the year ended 29 February 2008 will be filed with the Registrar of Companies and will be posted to
shareholders tomorrow morning.
4. Announcement
A copy of this announcement will be available at the offices of the Company for 14 days from the date of this announcement.
Notice of Annual General Meeting
Notice is hereby given that the second annual general meeting of Arc Growth Company VCT plc will be held at 22 Lovat Lane, London EC3R
8EB on Wednesday 13 August 2008 at 11 a.m.
Copies of the documents listed below have been submitted to the UK Listing Authority and will be available for inspection in the UK
Listing Authority's Document Viewing Facility which is situated at:
The Financial Services Authority
25 The North Colonnade,
Canary Wharf
London E14 5HS
Documents:
� Report and Accounts for the year ended 29 February 2008
� Chairman's Explanatory Letter and Notice of Annual General Meeting
� Annual General meeting Proxy Card
Contact: Graham Urquhart, Director, Arc VCT on 0203 216 2000
Roland Cornish and Felicity Geidt, Beaumont Cornish Limited
on 020 7628 3396.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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