Chrysalis VCT Plc Chrysalis Vct Plc : Final Results
22 Dezember 2015 - 6:35PM
UK Regulatory
TIDMCYS
Chrysalis VCT plc
Reports & Accounts for the year ended 31 October 2015
FINANCIAL SUMMARY
31 Oct 31 Oct
2015 2014
pence pence
Net asset value per share ("NAV") 81.30 81.90
Cumulative dividends paid per share since launch * 60.45 53.20
Total Return 141.75 135.10
(Net asset value per share plus cumulative dividends)
Dividends in respect of financial year
Interim dividend per share (paid) 1.75 1.75
Special dividend per share (paid) 2.25 7.50
Final proposed dividend per share 3.25 3.25
7.25 12.50
* Excludes final proposed dividend
CHAIRMAN'S STATEMENT
*8.1% increase in net asset value over last year
*Total return on 80p investment now at 141.75p
I am pleased to present the annual results for Chrysalis VCT plc for the
year ended 31 October 2015. It has been another strong year for your
Company, with performance that has allowed tax-free dividends totalling
7.25p per share to be paid to Shareholders while maintaining the net
asset value per share ("NAV") at a steady level.
The overall performance has been driven by generally improving
valuations across the majority of the portfolio companies, along with
the receipt of further deferred consideration from the disposal of
Wessex Advance Switching Products Limited ("WASP") that took place in
2014.
Portfolio
At the year end, the Company held a portfolio of 27 venture capital
investments, valued at GBP16.8 million. There was a fair level of new
investment activity during the year with two new companies joining the
portfolio and five follow-on investments also being completed at a total
of cost of GBP2.5 million.
There were a number of loan stock redemptions which generated proceeds
of GBP955,000, as well as the deferred consideration from WASP mentioned
above which added a further GBP438,000 to the total.
As usual, the Board has reviewed the investment valuations at the year
end and made a number of adjustments. 15 investments increased in value,
five investments fell in value and seven were unchanged. The largest
movers have been Coolabi Group, the IPR brand management company behind
children's TV programme "The Clangers", Zappar (Holding) Limited, a
mobile app business, and Internet Fusion Limited, the online retailer,
which have increased by GBP404,000, GBP590,000 and GBP372,000
respectively. On the negative side, we have had to make a full provision
of GBP500,000 against VEEMEE Limited, another mobile software business,
which has failed to make satisfactory progress. Total unrealised
movements for the year on the venture capital portfolio resulted in a
net gain of GBP1.5 million, equivalent to approximately 5.0p per share.
The Investment Manger's Report gives a detailed overview of the
portfolio activity during the year and of the main valuation movements.
Cash and fixed income securities
The Company held GBP7.4 million in cash and fixed income securities at
the year-end; split between cash of GBP5.2 million and fixed income
securities of GBP2.2 million.
Net asset value, results and dividends
The Company's NAV fell marginally from 81.9p to 81.3p over the year as a
result of a slight excess of dividends paid over net earnings. Adding
back the dividends of 7.25p paid, the total return for the year was
equivalent to 8.1% based on the opening NAV.
The return on activities after taxation for the year was GBP2 million
(2014: GBP3.2 million), comprising a revenue return of GBP296,000 and a
capital return of GBP1.7 million.
The Company paid a final 2014 dividend of 3.25p per share on 6 March
2015. An interim 2015 dividend of 1.75p per share was combined with a
special dividend of 2.25p per share making a total of 4.00p per share
paid on 8 May 2015.
Subject to Shareholder approval at the forthcoming AGM, your Board is
proposing to pay a final 2015 dividend of 3.25p per share on 26 February
2016 to Shareholders on the register at 28 January 2016.
Share buybacks
The Board regularly reviews the Company's share buyback policy and
continues to maintain a strategy of considering ad hoc share buybacks
when shares are offered via its broker, Nplus1 Singer Capital Markets.
The Directors remain of the view that, in general, the Company's
resources are best utilised in paying tax free dividends to Shareholders,
which benefits the full Shareholder base.
There were no share buybacks undertaken during the year.
We recommend that any Shareholders wishing to either acquire more shares,
or to sell existing holdings, contact the Company's broker, Nplus1
Singer Capital Markets, who are often aware of other parties looking to
buy or sell.
Management Structure and Board
Shareholders will be aware that Chrysalis VCT plc is unusual in that it
is a self-managed Venture Capital Trust ("VCT"), whose day to day
operations are run by our wholly-owned management subsidiary, Chrysalis
Management VCT Limited, headed by Chris Kay.
The Board remains satisfied that this structure is appropriate for
Chrysalis and that the management company, run by Chris Kay and his team,
can continue to deliver the strong results that we have seen in recent
years into the future. I would like to thank Chris Kay and his team for
their continuing good management of the portfolio during the year.
Chrysalis is also somewhat unusual in having a Board of just three
non-executives; comprising Julie Baddeley, Martin Knight and myself. We
believe that this structure continues to operate effectively and
economically and adds value for Shareholders. I would like to take this
opportunity to thank Julie and Martin for their ongoing valuable
contributions through what has been another successful year.
New VCT Rules
Shareholders may be aware of some significant changes to the VCT rules
that have been introduced as a result of the Summer Budget. These
changes have been introduced by the UK Government, but were inspired by
the EU.
The rules introduce new restrictions on the type of investments which
can be made by VCTs, specifically prohibiting VCT funds being from being
used to finance management buy-outs or for the acquisition of existing
businesses. The rules also impose a maximum lifetime amount a company
can receive from VCTs, as well as imposing a maximum age for companies
which receive VCT funding of seven years (or ten years in the case of
"knowledge-intensive" companies).
It is frustrating to see these new inhibitions as the VCT sector, in my
opinion and the opinion of many others, has been a significant driver of
growth in the UK SME sector. I believe that the new regulations will
inhibit investment activity, rather than encouraging it.
The new restrictions, which apply to non-qualifying holdings as well as
VCT qualifying holdings, took effect for investments made on or after 18
November 2015. The potential penalty for breach of these regulations is
withdrawal of VCT status.
It seems clear that the new rules will have a significant impact on many
VCTs and your Board has reviewed the potential impact on Chrysalis VCT.
We have concluded that, while it is clear that some types of investment
that would otherwise have been considered cannot now be pursued, the
fact that the Company already has in excess of 70% of its funds invested
in VCT qualifying investments means that there is no immediate pressure.
The Board believes that Chrysalis has time to assess the exact manner in
which the new rules will be applied by HMRC and time to generate
suitable dealflow which falls within the new parameters. The new rules
should not present a major worry for Shareholders, but further
developments will naturally be closely monitored and I will keep
Shareholders updated on the effects of this new legislation in future
reports.
Annual General Meeting
The forthcoming AGM will be held at Ergon House, Horseferry Road, London
SW1P 2AL at 2:30 pm on 24 February 2016.
One item of special business is proposed at the AGM in respect of the
authority to buy back shares.
Outlook
The new VCT rules will, no doubt, present some challenges, but the Board
believes that Chrysalis VCT is likely to be better placed than many VCTs
in being able to adapt to these changes and in also having sufficient
time to be able to do so.
The Board remains satisfied with the Company's investment portfolio and
believes that it includes a number of investments which have the
potential to deliver further successful outcomes for Shareholders in due
course.
I believe that the Company is well positioned to continue to produce
solid results for investors into the future, and I look forward to
meeting some Shareholders at the AGM in February and reporting further
developments in the Half Yearly Report which will be published in June
2016.
Peter Harkness
Chairman
INVESTMENT MANAGEMENT REPORT
This year has been another successful one for Chrysalis VCT plc with a
total return of GBP2 million being achieved. This means that
shareholders have benefitted from profits of over GBP24 million in the
11.5 years since we took over the management role.
Last year's return was dominated by exits. This year the majority of the
return has come from increased valuations as most of the portfolio has
seen improved trading. Since over the previous two years some GBP16
million had been realised from our investee companies, it was always
likely that with a less mature portfolio there would be fewer exits this
year.
We did however receive a further GBP440,000 from the previous year's
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