RNS Number:5917G
Chrysalis VCT PLC
21 July 2006
Chrysalis VCT plc
Interim Statement for the six months ended 30 April 2006
CHAIRMAN'S STATEMENT
Introduction
The period to 30 April 2006 was another busy one for your Company. There was a
continued good performance by the investment portfolio, with the fourth
six-monthly period in a row where the Total Return of the Company has risen,
demonstrating the success our Investment Management Team has had in extracting
value from the investment portfolio and making attractive new investments.
Net Asset Value
At 30 April 2006, the Net Asset Value per Ordinary Share ("NAV") had risen to
77.8p, an increase of 3.6p (4.7%) since the previous year end of 31 October 2005
(after adjusting for the 2p per Ordinary Share dividend paid in the period).
Total Return to original Ordinary Shareholders (NAV plus cumulative dividends
paid since launch) now stands at 88.25p per share, compared to an original net
of income tax cost of 80p per share.
'D' and 'E' Share Issue
As you will be aware, earlier this year and following Shareholder approval, the
Company launched a 'D' Share and 'E' Share fundraising with the objective of
increasing the size of the Company while tax relief on VCT investments was still
at 40%.
With the good performance that the Company has experienced since the current
investment management team took over and some innovative ideas in terms of
investment sector, the Board felt there was a good chance of raising further
funds to give the Company a greater asset base across which to spread its
running costs.
In the event, the 'D Share offer (generalist) raised net proceeds of #507,000
and the 'E' Share offer (art fund) #568,000. The Directors are very
disappointed with this outcome. I feel that the Company was badly let down by
poor organisation of key elements of the marketing campaign which appeared to
alienate key commentators in the VCT market. The Directors are considering what
action may be appropriate against the third parties concerned, but the fact
remains that the opportunity to raise funds under such favourable tax relief
conditions has now passed. As a result of the low level of funds raised and the
fact that the Company is a self-managed fund with no external fund manager, the
costs of the fundraising have been born by the Ordinary Shareholders.
At 30 April 2006, with the funds only recently having been raised, the NAV for
both the 'D' and 'E' Shares was 94.5p at 30 April 2006, being the issue price
less the attributable fundraising costs of 5.5%.
'E' Share Investment Strategy
In the Company's prospectus dated 2 February 2006, the Directors stated their
intention that the 'E' Share pool be invested in fine art and antique dealers.
In view of the low level of funds raised, the Directors have reviewed this
strategy. Although the Company is able to invest the 'E' share pool in the art
and antiques sectors, the size of the investments to allow a portfolio with a
reasonable number of investments would be prohibitively small.
The Directors have therefore decided that 'E' Shareholders will be better served
by the funds being invested in a generalist portfolio where these funds can be
invested alongside those from the Ordinary and 'D' Share pools. The Directors
will seek to invest the 'E' Share pool in low risk opportunities and, should
suitable opportunities arise, investments in the art/antique sector will be
made to give the 'E' Shareholders some exposure to that sector.
Format of Accounts
For this accounting period, your Company is required to adopt FRS 21, under
which dividends have to be accounted for in the period in which they are liable
to be paid rather than the period in respect of which they are declared.
As a result comparative figures presented in this statement have been restated
and the 2005 NAV per Ordinary share has increased from 74.2p as previously
reported to 76.2p.
The Company has also adopted the new Statement of Recommended Practice for
Investment Trusts ("SORP"), which came into effect in December 2005. The main
noticeable change arising is that the "Statement of Total Return" has been
renamed as the "Income Statement".
Venture Capital Investments
During the period the Company made two new investments and two follow on
investments at a total cost of #798,000. These investments were all made by the
Ordinary share pool.
The Ordinary Share pool made one disposal in the period, taking the opportunity
to dispose of part of its holding in Computer Software Group plc, realising a
gain of #65,000 against previous carrying value or #186,000 against an original
cost of #61,000. The Company also recovered a small amount of funds from an
investment that went into liquidation several years ago and some other minor
gains totalling #22,000.
Of the existing investments in the Ordinary Share pool, there was positive news
from the a number of investee companies. In particular, trading at i-Level
Group Limited has been very strong and Babel Media Limited has continued to grow
strongly.
Ma Potter's Limited is the one significant investment that has been valued
downwards over the period. Previous valuations of this company were pegged
against trade offers for the business, but it seems unlikely now that the
business will be sold in the short term. The investment, however, continues to
be valued significantly ahead of cost.
Overall the venture capital portfolio gave rise to unrealised gains of #1.57
million over the period.
As at 30 April 2006, the 'D' an 'E' Share pools had not made any investments.
Results and dividend
The revenue return after taxation for the period amounted to a loss of #270,000,
representing 0.8p per share.
When launching the fundraising, the Company announced that it would pay a
dividend to Ordinary Shareholders conditional upon a successful outcome. With
the disappointing level of funds raised, this conditional dividend was not paid.
In view of the fact that the Company did not make a significant level of
realisations in the period under review, the Directors have decided not to pay
an interim dividend at this stage. However, the Company has made realisations
since the period end and the Board is aware of a number of other realisation
opportunities under discussion and expects to make a further capital
distribution in the second half.
Share buybacks
The Company continues to operate a share buyback policy in order to provide
liquidity in the market for its Shares. Any Shareholders wishing to sell their
holding should consult their financial adviser to ensure they understand the
potential tax implications of such a disposal. Shares cannot be sold directly
back to the Company but must be sold through a stockbroker.
During the period the Company repurchased 1,084,489 Ordinary Shares, at an
average price of 67.2p per share (approximately equivalent to a 10% discount to
NAV), for cancellation.
Outlook
With the additional workload of the fundraising now behind us, the focus of the
Board and the Investment Management team is now wholly on the core investment
management activities at which the Company has proved so successful over the
last two years.
Since the period end, the Company has made further disposals from the holding in
Computer Software Groups plc generating additional gains of #506,000. There are
a number of other excellent prospects in the existing portfolio with profitable
exits a possibility in the short or medium term. It is likely that a
significant proportion of the Investment Management team's time over the coming
month will be spent pursuing these possibilities.
The Investment Management team will also be seeking new investment opportunities
for the available funds in the Ordinary Share pool and the new 'D' Share and 'E'
Share pools. Since the period end the Company has been very active in this area
having invested a total of #2.25 million in 4 companies.
I look forward reporting progress in both activities in my statement with the
next Annual Report for the year ended 31 October 2006.
Robert Drummond
Chairman
21 July 2006
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 April 2006
30 Apr 2006 30 Apr 2005 31 Oct 2005
(as restated) (as restated)
#'000 #'000 #'000
Investments 23,900 26,565 21,721
Net current assets 4,280 66 5,680
Net assets 28,180 26,631 27,401
Capital and reserves
Called up share capital 360 371 360
Capital redemption reserve 27 5 16
Share premium 1,064 - -
Merger reserve 8,694 8,694 8,694
Special reserve 10,404 15,941 11,791
Capital reserve - realised 3,657 135 3,880
Capital reserve - unrealised 4,166 1,360 2,266
Revenue reserve (192) 125 394
Total equity 28,180 26,631 27,401
Net asset value per Ordinary share 77.8p 71.9p 76.2p
Net asset value per 'D' share 94.5p N/A N/A
Net asset value per 'E' share 94.5p N/A N/A
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS FUNDS
30 Apr 2006 30 Apr 2005 31 Oct 2005
(as restated) (as restated)
#'000 #'000 #'000
Opening shareholder's funds 27,401 14,220 14,220
Shares issued 1,075 8,851 8,851
Repurchase of own shares (733) - (687)
Total recognised gains for the period 1,148 3,560 6,105
Distributions paid in period (711) - (1,088)
Closing shareholder's funds 28,180 26,631 27,401
INCOME STATEMENT
for the six months ended 30 April 2006
Six months ended
30 April 2006
Revenue Capital Total
#'000 #'000 #'000
Income 446 - 446
Gains on investments - Realised - 87 87
- Unrealised - 1,523 1,523
446 1,610 2,056
Investment management fees (58) (175) (233)
Other expenses (165) - (165)
Return on ordinary activities 223 1,435 1,658
Share issue costs (note 3) (507) - (507)
Return on ordinary activities before taxation (284) 1,435 1,151
Taxation (36) 33 (3)
Return attributable to equity shareholders (320) 1,468 1,148
Return per Ordinary share (0.9p) 4.1p 3.2p
Return per 'D' share - - -
Return per 'E' share - - -
Six months ended Year ended
30 April 2005 31 October 2005
(as restated)
Revenue Capital Total Total
#'000 #'000 #'000 #'000
Income 200 - 200 725
Gains on investments - Realised - 3,594 3,594 1,971
- Unrealised 9 9 4,077
200 3,603 3,803 6,773
Investment management fees (24) (71) (95) (314)
Other expenses (148) - (148) (356)
Return on ordinary activities 28 3,532 3,560 6,103
Share issue costs (note 3) - - - -
Return on ordinary activities before taxation 28 3,532 3,560 6,103
Taxation - - - 2
Return attributable to equity shareholders 28 3,532 3,560 6,105
Return per Ordinary share 0.1p 16.4p 16.5p 20.1p
Return per 'D' share N/A N/A N/A N/A
Return per 'E' share N/A N/A N/A N/A
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 30 April 2006
Six months ended
30 April 2006
Revenue Capital Total
#'000 #'000 #'000
Return attributable to equity shareholders (320) 1,468 1,148
Total recognised gains for the period (320) 1,468 1,148
Six months ended Year ended
30 April 2005 31 Oct 2005
(as restated) (as restated)
Revenue Capital Total Total
#'000 #'000 #'000 #'000
Return attributable to equity shareholders 28 3,532 3,560 6,105
Total recognised gains for the period 28 3,532 3,560 6,105
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 April 2006
Six Six Year ended
months months 31 October
ended ended 2005
30 April 30 April
2006 2005
Note #'000 #'000 #'000
Cash inflow from operating activities and returns on investments 1 72 22 108
Capital expenditure
Purchase of investments (885) (1,556) (5,256)
Proceeds on disposal of investments 34 1,859 11,881
Net cash (outflow)/inflow from capital expenditure (851) 303 6,625
Acquisitions
Purchase of subsidiary undertakings 3 (294) (362)
Net cash transferred from subsidiary undertakings - - 992
3 (294) 630
Equity dividends paid (711) - (1,088)
Net cash (outflow)/inflow before financing (1,487) 31 6,275
Financing
Issue of shares 1,137 - -
Share issue costs (431) - -
Purchase of own shares (681) (11) (696)
Net cash inflow/(outflow) from financing 25 (11) (696)
(Decrease)/increase in cash 2 (1,462) 20 5,579
Notes to the cash flow statement:
1 Cash inflow from operating activities and returns on investments
Net revenue before taxation (284) 28 296
Costs in respect of D and E Share issue 444 - -
Expenses charged to capital (175) (71) (241)
Increase in other debtors 3 71 71
Increase/(decrease) in other creditors 84 (6) (18)
Net cash inflow from operating activities 72 22 108
2 Analysis of net funds
Beginning of period 5,642 63 63
Net cash (outflow)/inflow (1,462) 20 5,579
End of period 4,180 83 5,642
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 April 2006
Cost Valuation % of Movement
portfolio in the
by period
#'000 #'000 value #'000
Ordinary Share pool
Top ten venture capital
investments
Babel Media Limited 1,155 2,386 8.8% 389
Ma Potter's Limited 1,000 1,919 7.1% (419)
Strainstall Group Limited 1,244 1,736 6.4% (4)
Computer Software Group plc * 940 1,630 6.0% 417
Protx Group Limited 438 1,362 5.0% 255
Centre Design Limited 1,350 1,205 4.4% -
Wessex Advanced Switching 694 1,173 4.3% -
Products Limited
Precision Dental Laboratories 1,100 1,167 4.3% -
Group plc
i-Level Group Limited 600 1,013 3.7% 413
Glisten plc * 224 935 3.4% 75
8,745 14,526 53.4% 1,134
Other venture capital 6,339 4,960 18.3% 436
investments
Listed fixed income securities 4,650 4,414 16.3% (47)
1,523
Net current assets (including 3,255 12.0%
cash)
Ordinary Share Pool - Total 19,734 27,155 100.0%
'D' Share pool
Net current assets (including 507 100.0%
cash)
'E' Share pool
Net current assets (including 568 100.0%
cash)
Company Total 19,734 28,230
All venture capital investments are unquoted on the unless otherwise stated.
* quoted on the Alternative Investment Market ("AIM")
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. Adoption of FRS 21
These accounts have been prepared in accordance with FRS 21, which requires the
Company to account for dividends in the period they are liable to be paid rather
than in respect of the period in respect for which they are declared.
Comparative figures have been restated accordingly. The effect of the above
change on the reported net assets and net asset per share is as follows:
30 Apr 2005 31 Oct 2005
Net Net
asset asset
value value
per per
share share
Net Net
assets assets
#'000 p #'000 p
As reported pre FRS21 26,631 71.9 26,683 74.2
Add: proposed dividends in respect of
period not accounted for until declared
and paid - - 718 2.0
As reported under FRS 21 26,631 71.9 27,401 76.2
2. Accounting policies
Basis of accounting
The Company has prepared its financial statements under UK Generally Accepted
Accounting Practice ("UK GAAP"). Where presentation guidance set out in the
Statement of Recommended Practice "Financial Statements of Investment Trust
Companies" revised December 2005 ("SORP") is consistent with the requirements of
UK GAAP, the Directors have sought to prepare the financial statements on a
basis compliant with the recommendations of the SORP.
The financial statements are prepared under the historical cost convention
except for the revaluation of certain financial instruments.
Presentation of Income Statement
In order to better reflect the activities of an investment trust company and in
accordance with guidance issued by the AITC, supplementary information which
analyses the income statement between items of a revenue and capital nature has
been presented alongside the income statement. The net revenue is the measure
the directors believe appropriate in assessing the Company's compliance with
certain requirements set out in Section 842 Income and Corporation Taxes Act
1988.
Investments
All investments are designated as "fair value through profit or loss" assets and
are initially measured at cost. Thereafter the investments are measured at
subsequent reporting dates at fair value.
Listed fixed income investments and investments quoted on the Alternative
Investment Market ("AIM") are designated measured using bid prices with
illiquidity discounts applied where deemed appropriate.
In respect of unquoted instruments, fair value is established by using
International Private Equity and Venture Capital Valuation Guidelines. Where no
reliable fair value can be estimated for such unquoted equity investments they
are carried at cost, subject to any provision for impairment. Where an investee
company has gone into receivership or liquidation the investment, although not
physically disposed of, is treated as being realised.
Gains and losses arising from changes in fair value are included in the income
statement for the year as a capital item and transaction costs on acquisition or
disposal of the investment expensed.
It is not the Company's policy to exercise either significant or controlling
influence over investee companies. Therefore the results of these companies are
not incorporated into the revenue account except to the extent of any income
accrued.
Income
Dividend income from investments is recognised when the shareholders' rights to
receive payment has been established, normally the ex dividend date.
Interest income is accrued on a timely basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset's net carrying amount, and only where there
is reasonable certainty of collection.
Expenses
All expenses are accounted for on accruals basis. In respect of the analysis
between revenue and capital items presented within the income statement, all
expenses have been presented as revenue items except that expenses which are
incidental to the disposal of an investment are deducted from the disposal
proceeds of the investment.
Deferred taxation
Deferred taxation is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in financial statements.
3. Share issue costs
Share issue costs in relation to the 'D' and 'E' shares have been accounted in
accordance with the 'D' and 'E' share offer for subscription as follows:
#'000
Total costs in respect of 'D' and 'E' share issue 569
Allocated as:
Set off against Share Premium (representing 5.5% of share issue 62
proceeds)
Set off against Ordinary Shareholders' Revenue Reserve 507
569
4. All revenue and capital items in the Income Statement derive from
continuing operations.
5. The Company has only one class of business and derives its income from
investments made in shares, securities and bank deposits.
6. The comparative figures were in respect of the period ended 30 April 2005
and the year ended 31 October 2005 respectively.
7. Net Asset Value per share calculations are based on the following:
Ordinary 'D' 'E'
Shares Shares Shares
Net Assets (#'000) 27,105 507 568
Number of shares in issue at period end 34,863,027 536,072 601,376
8. Return per share calculations are based on the following:
Ordinary 'D' 'E'
Shares Shares Shares
Revenue return per share based on:
Net revenue loss after taxation (#'000) (320) - -
Weighted average number of shares in 35,217,630 444,612 441,682
issue
Capital return per share based on:
Net capital gain after taxation (#'000) 1,468 - -
Weighted average number of shares in 35,217,630 444,612 441,682
issue
9. Dividends
30 April 2006 30 April 2005 31 Oct
2005
(as restated) (as restated)
Revenue Capital Total Revenue Capital Total Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Paid in year
2005 Final 266 445 711 - - - -
2005 Interim - - - - - - 1,088
266 445 711 - - - 1,088
Proposed
2005 Final - - - - - - 718
2005 Interim - - - - - - -
- - - - - - 718
10.Reserves
Share Capital Merger Special Capital Capital Revenue
redemption reserve reserve reserve reserve
premium reserve reserve unrealised realised
#'000 #'000 #'000 #'000 #'000 #'000 #'000
At 1 November 2005 - 16 8,694 11,791 2,266 3,431 125
Restatement of unpaid dividends in
line with FRS 21 - - - - - 449 269
At 1 November 2005 (as restated) - 16 8,694 11,791 2,266 3,880 394
Share issues( net of costs) 1,064 - - - - - -
Shares repurchased - 11 - (733) - - -
Expenses capitalised - - - - - (175) -
Tax on capital expenses - - - - - 33 -
Realised gains - - - - - 87 -
Unrealised gains - - - - 1,523 - -
Transfer between reserves - - - (654) 377 277 -
Retained net revenue for the year - - - - - - (320)
Distributions paid in year - - - - - (445) (266)
At 30 April 2006 1,064 27 8,694 10,404 4,166 3,657 (192)
The Special Reserve, Capital Reserve - Realised and Revenue Reserve are
all distributable reserves.
11. The unaudited financial statements set out herein do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985
and have not been delivered to the Registrar of Companies. The figures for the
year ended 31 October 2005 have been extracted from the financial statements for
that year, which have been delivered to the Registrar of Companies; the
auditors' report on those financial statements was unqualified.
12. Copies of the unaudited interim results will be sent to shareholders
shortly. Further copies can be obtained from the Company's Registered Office.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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