RNS Number:7335Q
Chrysalis VCT PLC
05 February 2007
Chrysalis VCT plc
Preliminary Announcement of Results for the year ended 31 October 2006
FINANCIAL HIGHLIGHTS
2006 2005
pence pence
(restated)
Ordinary Shares
Net asset value per share 84.70 76.20
Cumulative distributions paid since launch 10.45 8.45
Total return 95.15 84.65
(Net asset value per share plus cumulative dividends)
Net asset value and total return per 'D' Ordinary share 96.50p N/A
Net asset value and total return per 'E' Ordinary share 95.40p N/A
The statement to shareholders by the Chairman, Robert Drummond, includes the
following comments:
The year to 31 October 2006 has been another busy one for your Company with some
excellent developments within the investment portfolio.
Net Asset Value
At 31 October 2006, the Net Asset Value ("NAV") of the Ordinary Shares had
increased to 84.7p, a rise of 10.5p or 14.1% over the year after adjusting for
the dividend of 2p per share paid during the year.
Total Return (NAV plus cumulative dividends paid since launch) to Ordinary
Shareholders that invested at the Company's outset (when it was known at Downing
Classic VCT 3 plc) now stands at 95.15p per Ordinary Share compared to an
original investment (net of income tax relief) of 80p per Share. Although the
numbers are different for those that became Shareholders in the Company through
the various mergers with the other Chrysalis VCTs, it represents a very strong
recovery since the Company became self-managed in April 2004.
At the year end, the NAV of the 'D' Shares and 'E' Shares stood at 96.5p and
95.4p respectively compared to the original NAV immediately after the
fundraising of 94.5p.
Venture capital investments
Within the Ordinary Share pool, a strong focus of the investment manager's role
throughout the year has continued to be working towards exits on some of the
Company's more mature investments.
The Company achieved a successful exit from Strainstall Group Limited in October
of this year, generating proceeds of #2.9 million, equivalent to a gain of #1.2
million against original cost or #700,000 against the valuation at the previous
year end. The sale is also likely to generate further proceeds as a result of
earn-out arrangements. We have valued these likely additional proceeds at
#347,000.
The Company also disposed of part of its holding in AIM-quoted Computer Software
Group plc, producing gains of #513,000 against cost or #352,000 against previous
valuation.
The Company was also active throughout the year in adding to its portfolio, with
the Ordinary Share pool investing a total of #3.2 million in seven new and four
follow-on investments.
Of the investments held throughout the period, a number justified significant
increases in their valuations. In particular, Protx Limited accounted for an
increase of #1.2 million and was sold shortly after the year end and ILG Digital
Limited (formerly i-Level Group) justified an increase of #634,000 as the
business continues to show very strong growth.
The reduction in the valuation of the investment in Ma Potters reflects, in
part, an offer to buy the company at 31 October 2005 which subsequently did not
materialise. Its prospects, however, remain good.
The 'D' Share pool made four investments totalling #200,000 during the year, one
of which was subsequently realised. The 'E' Share pool had not yet made any
investments as at 31 October 2006.
Listed fixed income securities
The Company continues to hold a portfolio of fixed income securities. At 31
October 2006, this portfolio was valued at #4.6 million. During the year this
portfolio produced a small unrealised loss of #89,000.
Results and dividend
The return after tax for the Company was #3,512,000 (2005: #6,105,000)
comprising a revenue loss of #5,000 and a capital surplus of #3,517,000.
In view of the profitable realisations made during the year by the Ordinary
Share pool and the further profitable realisation of the investment in ProtX
Limited made since the year end, the Board does not intend to declare a final
dividend in respect of the year ended 31 October 2006 but instead will pay an
interim capital dividend of 3p per share on 2 March 2007 to Shareholders on the
register at 16 February 2007. In practice, this means the dividend can be paid
to Shareholders before the Company's Annual General Meeting ("AGM"), which will
not take place until 22 March 2007.
In respect of the 'D' Shares and 'E' Shares, the Board is proposing to pay a
final revenue dividend of 1.25p for each 'D' and 'E' Share. Subject to
Shareholder approval at the AGM, these dividends will be paid on 27 March 2007,
to Shareholders on the register at 16 February 2007.
'D' and 'E' Share issue
During the year, the Company undertook two offers for subscriptions to give
investors the opportunity to take advantage of the 40% income tax relief that
was available for investments in VCTs up until 5 April 2006. Ultimately the
outcome of the offers was a disappointment, with the 'D' Share offer raising net
proceeds of #507,000 and the 'E' Share offer raising #568,000 and the excess
costs of the offers of #520,000 being met by the Ordinary Share pool.
Format of accounts
As a result of changes to accounting standards and the circumstances of the
Company, there have been a number of adjustments to the format of the accounts
this year.
For this accounting period, your Company is required to adopt FRS 21 (Events
after the balance sheet date), under which dividends are required 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.
The comparative figures presented in these financial statements have been
restated to bring them in line with the new standards. This has resulted in the
NAV at the last year end of 31 October 2005 being increased from 74.2p per share
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".
In order to best present the Company's results clearly to each class of
Shareholder, the main statements within the accounts (the Income Statement,
Reconciliation of Movements in Shareholder's Funds, Balance Sheet and Cash Flow
Statement) have been presented to show the position of the Company as a whole
and also analysed by each share pool.
Share repurchase
The Company operates a policy of buying in shares that become available in the
market for cancellation at approximately a 10% discount to NAV. During the year
the Company purchased 1,681,757 Ordinary Shares for cancellation at an average
price of 68.2p per share.
Annual General Meeting
The next Annual General Meeting of the Company will be held at 69 Eccleston
Square, London SW1V 1PJ at 11:00 am on 22 March 2007.
Outlook
The progress made by your Company since becoming self-managed in April 2004, has
been extremely encouraging. A number of profitable exits, as well as improved
results from many portfolio companies that continue to be held, has produced
very satisfactory results.
The current portfolio still contains a number of exciting prospects which may
lead to further successful realisations in the short and medium term. However,
over the next year the investment manager's focus will shift more towards new
investments as suitable opportunities are sought for the 'D' Share and 'E' Share
pools, as well as the additional funds available as a result of the realisations
in the Ordinary Share pool.
Robert Drummond
Chairman
INCOME STATEMENT
for the year ended 31 October 2006
Company position
Year ended 31 October 2006 Year ended 31 October 2005
(as restated)
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Income 1,149 - 1,149 725 - 725
Gains on investments - 3,755 3,755 - 6,048 6,048
1,149 3,755 4,904 725 6,048 6,773
Investment management fees (116) (349) (465) (78) (236) (314)
Other expenses (333) - (333) (351) (5) (356)
Return on ordinary activities 700 3,406 4,106 296 5,807 6,103
Share issue costs (520) - (520) - - -
Return on ordinary activities
before tax 180 3,406 3,586 296 5,807 6,103
Tax on ordinary activities (185) 111 (74) 2 - 2
Return attributable to equity
shareholders (5) 3,517 3,512 298 5,807 6,105
Return per Ordinary share (0.1p) 10.0p 9.9p 1.0p 19.1p 20.1p
Return per 'D' share 1.5p 0.4p 1.9p N/A N/A N/A
Return per 'E' share 1.4p (0.5p) 0.9p N/A N/A N/A
Split as:
Ordinary shares
Year ended 31 October 2006 Year ended 31 October 2005
(as restated)
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Income 1,122 - 1,122 725 - 725
Gains on investments - 3,750 3,750 - 6,048 6,048
1,122 3,750 4,872 725 6,048 6,773
Investment management fees (114) (342) (456) (78) (236) (314)
Other expenses (328) - (328) (351) (5) (356)
Return on ordinary activities 680 3,408 4,088 296 5,807 6,103
Share issue costs (520) - (520) - - -
Return on ordinary activities
before tax 160 3,408 3,568 296 5,807 6,103
Tax on ordinary activities (181) 109 (72) 2 - 2
Return attributable to equity
shareholders (21) 3,517 3,496 298 5,807 6,105
'D' Ordinary shares
Year ended 31 October 2006 Year ended 31 October 2005
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Income 13 - 13 - - -
Gains on investments - 5 5 - - -
13 5 18 - - -
Investment management fees (1) (4) (5) - - -
Other expenses (2) - (2) - - -
Return on ordinary activities
before tax 10 1 11 - - -
Tax on ordinary activities (2) 1 (1) - - -
Return attributable to equity
shareholders 8 2 10 - - -
'E' Ordinary shares
Year ended 31 October 2006 Year ended 31 October 2005
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Income 14 - 14 - - -
Gains on investments - - - - - -
14 - 14 - - -
Investment management fees (1) (3) (4) - - -
Other expenses (3) - (3) - - -
Return on ordinary activities
before tax 10 (3) 7 - - -
Tax on ordinary activities (2) 1 (1) - - -
Return attributable to equity
shareholders 8 (2) 6 - - -
The revenue and capital movements in the year for the Ordinary Shares, D Shares
and E Shares relate to continuing operations.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 October 2006
Year ended Year ended
31 October 2006 31 October 2005
(as restated)
Ordinary D E Ordinary
shares shares shares Total Shares
and Total
#'000 #'000 #'000 #'000 #'000
Opening shareholders' funds 26,683 - - 26,683 14,220
(as originally stated)
Adjustment for dividends
provided 718 - - 718 -
Opening shareholders' funds 27,401 - - 27,401 14,220
(as restated)
Issue of shares - 536 601 1,137 8,851
Share issue costs - (29) (33) (62) -
Purchase of own shares (1,153) - - (1,153) (685)
Total recognised gains for
the year 3,496 10 6 3,512 6,105
Distributions (711) - - (711) (1,090)
Closing shareholders' funds 29,033 517 574 30,124 27,401
BALANCE SHEET
at 31 October 2006
Year ended Year ended
31 October 2006 31 October 2005
(as restated)
Ordinary
Ordinary D E Shares and Total
shares shares shares Total
#'000 #'000 #'000 #'000 #'000
Fixed assets
Investments 24,621 155 - 24,776 21,721
Current assets
Debtors 180 3 - 183 156
Cash at bank and in hand 4,481 361 576 5,418 5,642
4,661 364 576 5,601 5,798
Creditors: amounts falling due within one year (249) (2) (2) (253) (118)
Net current assets 4,412 362 574 5,348 5,680
Net assets 29,033 517 574 30,124 27,401
Capital and reserves
Called up share capital 343 5 6 354 360
Capital redemption reserve 33 - - 33 16
Share premium - 502 562 1,064 -
Merger reserve 8,694 - - 8,694 8,694
Special reserve 9,436 - - 9,436 11,791
Capital reserve -realised 5,787 (3) (2) 5,782 3,880
Capital reserve - unrealised 4,634 5 - 4,639 2,266
Revenue reserve 106 8 8 122 394
Equity shareholder's funds 29,033 517 574 30,124 27,401
Net asset value per share 84.7p 96.5p 95.4p 76.2p
CASH FLOW STATEMENT
for year ended 31 October 2006
Year ended Year ended
31 October 2006 31 October 2005
Ordinary
Ordinary D E Shares and Total
shares shares shares Total
#'000 #'000 #'000 #'000 #'000
Net cash inflow from
operating activities 337 4 8 349 108
Taxation - - - - -
Capital expenditure
Purchase of investments (3,471) (200) - (3,671) (5,256)
Sale of investments 4,287 50 - 4,337 11,881
Net cash inflow/(outflow)
from capital expenditure 816 (150) - 666 6,625
Acquisitions
Purchase of subsidiary
undertakings (18) - - (18) (362)
Net cash transferred from
subsidiary undertakings - - - - 992
(18) - - (18) 630
Equity distributions paid (711) - - (711) (1,088)
Net cash inflow/(outflow)
before financing 424 (146) 8 286 6,275
Financing
Shares issued in period - 536 601 1,137 -
Share issue costs (465) (29) (33) (527) -
Shares repurchased (1,120) - - (1,120) (696)
(1,585) 507 568 (510) (696)
(Decrease)/increase in
cash (1,161) 361 576 (224) 5,579
NOTES
1. Accounting policies
Basis of accounting
The Company has prepared its financial statements under UK Generally Accepted
Accounting Practice ("UK GAAP") and in accordance with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies"
revised December 2005 ("SORP"). Except as stated in note 2, consistent
accounting polices have been applied to both this year and the prior years'
accounts.
The financial statements are prepared under the historical cost convention as
modified by the revaluation of certain financial instruments and on the basis
that it is not appropriate to prepare consolidated accounts.
Presentation of Income Statement
In order to better reflect the activities of venture capital trust and in
accordance with guidance issued by the Association of Investment Companies ("AIC
"), 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, equivalent to their fair value. Thereafter the
investments are measured at subsequent reporting dates at fair value.
Listed fixed income investments and investments quoted on AIM are 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 an 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 as follows:
* Expenses which are incidental to the disposal of an investment are
deducted from the disposal proceeds of the investment.
* Expenses are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments held
can be demonstrated. The Company has adopted the policy of allocating
investment managers fees, 75% to the capital reserve and 25% to the revenue
account as permitted by the SORP. The allocation is in line with the
Board's expectation of long term returns from the Company's investments in
the form of capital gains and income respectively.
* Performance incentive fees arising from the disposal of investments are
deducted from the capital account.
Issue costs
Issue costs have been deducted from the share premium account.
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.
2. Changes in accounting policies
The Company is required to comply with a number of new UK Financial
Reporting Standards (FRS), which now represents UK Generally Accepted Accounting
Practice (UK GAAP), in preparing its financial statements for the year ended 31
October 2006. These Standards have been introduced as part of the process of
aligning UK accounting principles with International Accounting Standards.
As required by FRS 21 "Events after the Balance Sheet Date",
dividends to shareholders are accounted for in the period in which the Company
is liable to pay them rather than in the period in respect of which they are
declared. The results for the year ended 31 October 2006 are not affected by the
adoption of FRS 21 but the comparative figures for the year ended 31 October
2005 have been restated accordingly. The effect of the adoption of FRS 21 on the
reported net assets of the Company at 31 October 2005 is as follows:
2005
Net Assets
#'000
As previously reported 26,683
Add: proposed dividends not accounted for until paid 718
As restated 27,401
FRS 25 and 26 were also adopted during the year but these had no effect on
the Company's accounting policies.
Announcement based on draft accounts (unqualified audit report)
The financial information set out in the announcement does not constitute the
Company's statutory accounts in accordance with section 240 Companies Act 1985
for the year ended 31 October 2006. The statutory accounts for the year ended
31 October 2006 will be finalised on the basis of the financial information
presented by the directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting.
A copy of the full annual report and financial statements for the year ended 31
October 2006 will be printed and posted to shareholders. Copies will also be
available to the public at the registered office of the Company at 69 Eccleston
Square, London SW1V 1PJ and for download from www.downing.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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