TIDMCYS
CHRYSALIS VCT PLC
HALF-YEARLY REPORT FOR THE SIX MONTHS ENDED 30 APRIL 2013
RECENT PERFORMANCE SUMMARY
30 April 31 October 30 April
2013 2012 2012
pence pence pence
Net asset value per share 82.5 84.5 81.9
Cumulative dividends paid per share 39.0 35.7 34.0
Total Return
(Net asset value per share plus cumulative dividends) 121.5 120.2 115.9
CHAIRMAN'S STATEMENT
Introduction
Your Fund has had a busy and successful six months and, as a result I am
delighted to announce that we are able to pay an interim dividend of
1.75p per share, matching the payment we made last year.
We were pleased with the response from Shareholders to the share
reinvestment programme which produced acceptances covering more than a
quarter of our total shares in issue. A modest amount of additional
capital was raised at the same time.
At the annual general meeting, I referred to an expected in-flow of
funds from exits which we had hoped would materialise in the last
financial year but which had been delayed by extended negotiations.
Happily that exit, of the majority of our debt interest in British
International Helicopters, has now been repaid.
We have also exited our investment in Knowledge Pool, at a good uplift.
Both of these transactions took place after the half-year date and will
be fully reported in the annual accounts.
Share Realisation and Reinvestment Programme ("SRRP")
In January 2013, the Company launched a Share Realisation and
Reinvestment Programme offer providing Shareholders the option to sell
their shares back to the Company via a tender offer and reinvest the
proceeds in new shares. The programme allowed the Company to provide
Shareholders with an incentive for remaining invested in the Company for
a further five years by offering further income tax relief on their new
investment.
With many of the Company's Shareholders having originally invested many
years ago, the opportunity for further income tax relief was well
received, with approximately 26% of shares participating. 8,246,579
shares were purchased for cancellation at a price of 84.5p per share and
7,998,908 new shares were allotted in respect of the tender proceeds at
a price of approximately 87.1p per share.
Fundraising activities
The Company launched a top-up offer in conjunction with the SRRP. I am
pleased to report that GBP326,000 was raised under the offer, with
374,275 shares being issued at 87.1p per share.
Net asset value, results and dividends
At 30 April 2013, the net asset value per share ("NAV") stood at 82.5p,
an increase of 1.2p (1.5%) since the previous year end of 31 October
2012 (after adjusting for the 3.25p dividend paid on 29 April 2013).
The total return to Shareholders who invested at the launch of the
Company in 2000 (NAV plus cumulative dividends) is now 121.5p compared
to the original cost (net of income tax relief) of 80p per share.
The return on activities after taxation for the Company for the period
was GBP272,000, comprising a revenue return of GBP380,000 and a capital
loss of GBP108,000.
The Company will pay an interim dividend of 1.75p per share on 31 July
2013 to Shareholders on the register at 5 July 2013 in respect of the
year to 31 October 2013. This will bring the total distributions paid to
Shareholders since inception to 40.7p per share.
Venture capital investments
Over the past six months, the overall performance of the portfolio has
been satisfactory, with the portfolio rising in value by GBP36,000.
During the period, the Company undertook two follow-on investments in
British International Holdings Limited and Rhino Sport and Leisure
Limited, totalling GBP264,000. Life's Kitchen and Triaster have each
repaid a proportion of the loan stock held and, since the period end,
further repayments have been received from both companies.
As I mentioned, we exited from Knowledge Pool following a trade sale to
Capita. Compared to a number of the investments within the portfolio,
Knowledge Pool has been held for a relatively short amount of time and
we are pleased to report a profit of just under GBP800,000 on the sale.
British International Holdings repaid loan notes totalling GBP1 million
at the end of May following the sale of its helicopter contracts. We
expect the remaining equity and loan note to be sold in due course.
The Manager is now seeking opportunities to invest these additional
funds.
Fixed income securities
During the period, the Company has reduced its exposure in UK gilts,
such that at the period end the portfolio was valued at GBP436,000.
Unrealised losses arising in the period were GBP4,000, with a small gain
being recognised upon the sale of one gilt.
Due to the unattractive yield from bank deposits, we are looking to hold
part of the Company's cash in a small portfolio of corporate bonds.
Share buybacks
The Fund maintains a policy of making ad hoc share purchases; however,
during the six month period, all share buybacks occurred via the SRRP
facility previously discussed.
If shares are offered to the Fund via its broker, Nplus1 Singer Capital
Markets, a decision on whether to buy, and at what price, is taken on a
case-by-case basis.
In the past, share purchases by third parties in the market were
negligible but, as the attractions of our dividend policy and the
strength of the portfolio has become more widely known, more and more
shares are being taken up by secondary investors. We welcome these new
shareholders.
Due to the "close period" rules, which apply to Chrysalis as a listed
investment trust, there are limited occasions on which the Fund can
enter the market and buy shares. The Directors feel that, in general,
our resources are better applied to the dividend payments, from which
all Shareholders benefit directly, than to share buy-backs. We will
continue to consider ad hoc purchases when shares are offered, but we
are pleased that the market is also providing liquidity for those who
wish to sell.
Outlook
Shareholders will be aware from the last Annual Report that we have
maintained a tight control of the portfolio and been cautious in our
investment policy.
This has clearly been the right tactic and while we continue to be
circumspect, a degree of optimism is returning to some business sectors
and decent companies, which have held off making an investment in their
business during the last few years, are starting to look for development
capital.
I am grateful, as ever, for the support and commitment of my colleagues
on the Board and in the investment team and would particularly like to
thank our company secretariat and advisers for such an excellent job on
the SRRP scheme.
Peter Harkness
Chairman
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 April 2013
% of
Valuation movement portfolio
Cost Valuation in the period by value
GBP'000 GBP'000 GBP'000
Top ten venture capital
investments
Wessex Advanced Switching
Products Limited 704 3,185 622 13.0%
Precision Dental
Laboratories Limited 1,910 2,191 348 9.0%
Locale Enterprises Limited 1,338 1,847 (230) 7.6%
KnowledgePool Group
Limited 1,000 1,799 185 7.4%
Escape Studios Limited 750 1,553 (52) 6.4%
British International
Holdings Limited 1,034 1,445 (600) 5.9%
MyTime Media Holdings
Limited 750 1,341 (142) 5.5%
Triaster Limited 533 1,201 362 4.9%
Internet Fusion Limited 700 1,034 334 4.2%
VEEMEE Limited 500 950 (69) 3.9%
9,219 16,546 758 67.8%
Other venture capital
investments 5,889 3,268 (718) 13.4%
Fixed income securities 424 436 (4) 1.8%
15,532 20,250 36 83.0%
Cash at bank and in hand 4,147 17.0%
Total investments 24,397 100.0%
All venture capital investments are unquoted unless otherwise stated.
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 30 April 2013
Additions
GBP'000
Follow-on investments
British International Holdings Limited 126
Rhino Sport and Leisure Limited 138
264
Disposals
Market
value at Gain
1 Nov Disposal against Total
Cost 2012* proceeds cost realised gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Venture capital
investments
Life's Kitchen
Limited 25 25 25 - -
Triaster Limited 171 171 171 - -
Fixed income
securities
S&W Investment Funds
Cash Fund 1 1 1 - -
United Kingdom 1%
Gilt 07/09/2017 1,235 1,240 1,242 7 2
1,432 1,437 1,439 7 2
* Adjusted for purchases in the period where applicable
UNAUDITED INCOME STATEMENT
for the six months ended 30 April 2013
Year ended
Six months ended Six months ended 31 Oct
30 Apr 2013 30 Apr 2012 2012
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 586 - 586 345 - 345 765
Net
gains/(losses)
on
investments
- realised - 2 2 - 12 12 16
- unrealised - 36 36 - (227) (227) 898
586 38 624 345 (215) 130 1,679
Investment
management
fees (52) (155) (207) (53) (159) (212) (414)
Performance
incentive
fees - (2) (2) - (1) (1) (1)
Other expenses (118) (20) (138) (133) - (133) (252)
Return on
ordinary
activities
before
taxation 416 (139) 277 159 (375) (216) 1,012
Taxation (36) 31 (5) (26) 26 - -
Return
attributable
to equity
shareholders 380 (108) 272 133 (349) (216) 1,012
Return per
share 1.3p (0.4p) 0.9p 0.4p (1.1p) (0.7p) 3.4p
The total column within the Income Statement represents the profit and
loss account of the Company. No operations were acquired or discontinued
during the period.
A Statement of Total Recognised Gains and Losses has not been prepared
as all gains and losses are recognised in the Income Statement as noted
above.
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 April 2013
As at As at As at
30 Apr 2013 30 Apr 2012 31 Oct 2012
Note GBP'000 GBP'000 GBP'000
Fixed assets
Investments 20,250 21,139 21,387
Current assets
Debtors 371 123 190
Current investments - 2,000 2,000
Cash at bank and in hand 4,147 1,396 1,690
4,518 3,519 3,880
Creditors: amounts falling due
within one year (84) (110) (99)
Net current assets 4,434 3,409 3,781
Net assets 24,684 24,548 25,168
Capital and reserves
Called up share capital 7 299 299 298
Capital redemption reserve 8 89 88 89
Share premium 8 1,478 1,064 1,064
Merger reserve 8 2,031 2,106 2,104
Special reserve 8 3,384 6,150 3,653
Capital reserve - realised 8 9,395 10,447 10,138
Capital reserve - unrealised 8 7,134 3,702 7,104
Revenue reserve 8 874 692 718
Equity shareholders' funds 6 24,684 24,548 25,168
Net asset value per share 6 82.5p 81.9p 84.5p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 April 2013
As at As at As at
30 Apr 2013 30 Apr 2012 31 Oct 2012
Note GBP'000 GBP'000 GBP'000
Opening Shareholders' funds 25,168 25,640 25,640
Issue of shares 7 326 - -
Issue of shares under Share Realisation and Reinvestment
Programme 7 6,968 - -
Share issue costs 7 (74) - -
Purchase of own shares - (124) (208)
Purchase of own shares under Share Realisation and
Reinvestment Programme 7 (7,003) - -
Total recognised gains/(losses) in the period 272 (216) 1,012
Dividends paid 5 (973) (752) (1,276)
Closing Shareholders' funds 6 24,684 24,548 25,168
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 April 2013
Six months Six months Year
ended ended ended
30 Apr 2013 30 Apr 2012 31 Oct 2012
Note GBP'000 GBP'000 GBP'000
Cash inflow from operating activities and returns
on investments 9 57 66 55
Capital expenditure
Purchase of investments (264) (500) (2,535)
Proceeds on disposal of investments 1,439 1,021 3,938
Net cash inflow from capital expenditure 1,175 521 1,403
Management of liquid resources - - -
Redemption of current investment 2,000 - -
Net cash inflow from liquid resources 2,000 - -
Equity dividends paid (973) (752) (1,276)
Net cash inflow/(outflow) before financing 2,259 (165) 182
Financing
Proceeds from share issue 326 - -
Proceeds from shares issued under Share Realisation
and Reinvestment Programme 6,968 - -
Share issue costs (45) - -
Purchase of own shares (48) (119) (172)
Purchase of own shares under Share Realisation and
Reinvestment Programme (7,003) - -
Net cash inflow/(outflow) from financing 198 (119) (172)
Increase/(decrease) in cash 10 2,457 (284) 10
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half yearly financial results cover the six months to
30 April 2013 and have been prepared in accordance with the accounting
policies set out in the statutory accounts for the year ended 31 October
2012 which were prepared under UK Generally Accepted Accounting Practice
and in accordance with the Statement of Recommended Practice "Financial
Statements of Investment Trust Companies" revised January 2009.
2. The Company has only one class of business and derives its income
from investments made in shares, securities and bank deposits.
3. The comparative figures were in respect of the six months ended 30
April 2012 and the year ended 31 October 2012 respectively.
4. Basic and diluted return per share
Six months Six months Year
ended ended ended
30 Apr 2013 30 Apr 2012 31 Oct 2012
Return per share based on:
Net revenue return for the period
(GBP'000) 380 133 383
Capital return per share based on:
Net capital (loss)/gain for the
period (GBP'000) (108) (349) 629
Weighted average number of shares 29,810,501 30,576,806 30,023,505
5. Dividends paid
Six months ended Year ended
30 Apr 2013 31 Oct 2012
Pence
per share Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
Paid in period
2012 Final 3.25 224 749 973 -
2012 Interim 1.75 - - - 523
2011 Final 2.50 - - - 753
224 749 973 1,276
6. Basic and diluted net asset value per share
30 Apr 2013 30 Apr 2012 31 Oct 2012
Net asset value per share based on:
Net assets (GBP'000) 24,684 24,548 25,168
Number of shares in issue at the period
end 29,917,625 29,958,849 29,791,021
Net asset value per share 82.5p 81.9p 84.5p
7. Called up share capital
Shares in issue GBP'000
Period ended 30 April 2013 29,917,625 299
Period ended 30 April 2012 29,958,849 299
Year ended 31 October 2012 29,791,021 298
Between 4 April 2013 and 11 April 2013, the following transactions took
place under the Share Realisation and Reinvestment Programme:
-- 8,246,579 shares were purchased for cancellation at a price of 84.5p per
share; and
-- 7,998,908 shares were allotted in respect of the shares tendered for
cancellation at a price of approximately 87.1p per share.
Between 4 April 2013 and 11 April 2013, 374,275 shares were allotted at
a price of 87.1 per share as a result of new subscriptions under an Open
Offer. Issue costs in respect of the offer amounted to GBP74,000.
8. Reserves
Capital
redemption Share Merger Special Capital reserve Capital reserve Revenue
reserve premium reserve reserve -realised -unrealised reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 November
2012 89 1,064 2,104 3,653 10,138 7,104 718
Issue of new
shares - 322 - - - - -
Issue of new
shares under
SRRP - 6,888 - - - - -
Share issue
costs - (74) - - - - -
Purchase of
own shares
under SRRP - (6,722) - (198) - - -
Expenses
capitalised - - - - (177) - -
Tax on
capital
expenses - - - - 31 - -
Gains on
investments - - - - 2 36 -
Realisation
of
revaluations
from
previous
years - - - - 6 (6) -
Realisation
of assets
acquired
through
historic
merger - - (73) - 73 - -
Transfer
between
reserves - - - (71) 71 - -
Retained net
revenue for
the period - - - - - - 380
Dividends
paid - - - - (749) - (224)
At 30 April
2013 89 1,478 2,031 3,384 9,395 7,134 874
The special reserve is available to the Company to enable the purchase
of its own shares in the market without affecting its ability to pay
dividends, and also allows the Company to make transfers between
reserves to offset realised capital losses arising on disposals and
impairments.
Distributable reserves are calculated as follows:
Six months Six months Year
ended ended ended
30 Apr 2013 30 Apr 2012 31 Oct 2012
GBP'000 GBP'000 GBP'000
Special reserve 3,384 6,150 3,653
Capital reserve - realised 9,395 10,447 10,138
Revenue reserve 874 692 718
Merger reserve - distributable element 275 275 275
Unrealised losses
(excluding unrealised unquoted gains) (1,151) (3,126) (996)
12,777 14,438 13,788
9. Reconciliation of return on ordinary activities before taxation to
net cash flow from operating activities
Six months Six months Year
ended ended ended
30 Apr 2013 30 Apr 2012 31 Oct 2012
GBP'000 GBP'000 GBP'000
Return/(loss) on ordinary activities
before taxation 277 (216) 1,012
(Gains)/losses on investments (38) 215 (914)
(Increase)/decrease in other debtors (181) 98 31
Decrease in other creditors (1) (31) (74)
Net cash inflow from operating
activities 57 66 55
10. Reconciliation of net cash flow to movement in net funds
Net funds at Net funds at
1 Nov 2012 Cash flows 30 Apr 2013
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 1,690 2,457 4,147
Liquidity fund 2,000 (2,000) -
3,690 457 4,147
11. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required
in the Company's half year results to report on principal risks and
uncertainties facing the Company over the remainder of the financial
year.
The Board has concluded that the key risks facing the Company over the
remainder of the financial period are as follows:
1. investment risk associated with investing in small and immature
businesses; and
2. failure to maintain approval as a VCT.
In both cases, the Board is satisfied with the Company's approach to
these risks. As a VCT, the Company is forced to have significant
exposure to relatively immature businesses. This risk is mitigated to
some extent by holding a well-diversified portfolio.
The Company's compliance with the VCT regulations is continually
monitored by the Administration Manager, who regularly reports to the
Board on the current position. The Company also retains
PricewaterhouseCoopers to provide regular reviews and advice in this
area. The Board considers that this approach reduces the risk of a
breach of the VCT regulations to a minimal level.
Under the Disclosure and Transparency Directive, the Board is required
in the Company's half year results to report on principal risks and
uncertainties facing the Company over the remainder of the financial
year.
The Board has concluded that the key risks facing the Company over the
remainder of the financial period are as follows:
1. investment risk associated with investing in small and immature
businesses; and
2. failure to maintain approval as a VCT.
In both cases, the Board is satisfied with the Company's approach to
these risks. As a VCT, the Company is forced to have significant
exposure to relatively immature businesses. This risk is mitigated to
some extent by holding a well-diversified portfolio.
The Company's compliance with the VCT regulations is continually
monitored by the Administration Manager, who regularly reports to the
Board on the current position. The Company also retains
PricewaterhouseCoopers to provide regular reviews and advice in this
area. The Board considers that this approach reduces the risk of a
breach of the VCT regulations to a minimal level.
12. Going concern
The Company has sufficient financial resources at the period end, and
holds a diversified portfolio of investments. As a consequence, the
Directors believe that the Company is well placed to manage its business
risks successfully despite the current uncertain economic outlook.
The Directors confirm that they are satisfied that the Company has
adequate resources to continue in business for the foreseeable future.
For this reason, they believe that the Company continues to be a going
concern and that it is appropriate to apply the going concern basis in
preparing the financial statements.
13. The Directors confirm that, to the best of their knowledge, the half
yearly financial statements have been prepared in accordance with the
"Statement: Half Yearly Financial Reports" issued by the UK Accounting
Standards Board and the half yearly financial report includes a fair
review of the information required by:
1. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties
for the remaining six months of the year; and
1. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position
or performance of the entity during that period, and any changes in the
related party transactions described in the last annual report that could
do so.
14. The unaudited financial statements set out herein do not constitute
statutory accounts within the meaning of Section 434 of the Companies
Act 2006 and have not been delivered to the Registrar of Companies. The
figures for the year ended 31 October 2012 have been extracted from the
financial statements for that year, which have been delivered to the
Registrar of Companies; the Independent Auditor's Report on those
financial statements was unqualified.
15. Copies of the unaudited half yearly report will be sent to
Shareholders shortly. Further copies can be obtained from the Company's
registered office and will be available for download from
www.downing.co.uk.
This announcement is distributed by Thomson Reuters on behalf of Thomson
Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other
applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the
information contained therein.
Source: Chrysalis VCT PLC via Thomson Reuters ONE
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