RNS Number:4283Y
Limelight VCT plc
15 June 2007
Press Release
For immediate release on Friday 15 June 2007
Limelight VCT PLC
Preliminary results for the period ended 31st March, 2007
In this press release the Company is Limelight VCT PLC and the Group includes
the Company and its investment management subsidiary, Limelight Investment
Management Limited.
CHAIRMAN'S STATEMENT
I am very pleased to present the Company's first annual report and accounts
covering the period from the Company's incorporation on 17 October 2005 to 31
March 2007.
Investment Progress
Limelight VCT was listed on the London Stock Exchange in April 2006 in order to
invest in film production companies. The investment strategy adopted takes into
account the benefits receivable by these companies from the film tax credit
scheme announced by the Chancellor, Gordon Brown, in July 2005.
As reported in the interim accounts to 30 September 2006 the legislation
enacting the film tax credit scheme did not come into force until January 2007
as the original legislation, as proposed, was not approved by the European
Commission. The European Commission required amendments to the cultural test
determining what makes a film "British" before it would approve the legislation
enacting the film tax credit scheme. The revised film tax legislation,
containing these amendments, is significantly different from previous film tax
legislation and there were initially a number of areas of uncertainty which
meant that film projects were delayed until the industry became familiar with
the legislation. As a result it was not until the end of February this year that
there was any sign of a pick up in film production activity in the UK.
On 2 March 2007 the Treasury announced, without any obvious consultation with
the film industry, that the sideways loss relief generated by what were called
UK GAAP schemes would be restricted as from that date. A large percentage of UK
films have, in the past, relied on UK GAAP schemes for their finance and a
number of film projects that the Company was considering investing in were
relying on UK GAAP schemes for part of their finance. Following the Treasury
announcement the resumption in UK film production activity again ground to a
halt as film producers revised their financing plans and looked for alternative
sources of finance. Further tax changes in the budget, announced on 21 March
2007, restricting the total investment in companies from EIS investors and VCTs
to #2 million, again affected the film production companies.
This series of changes in legislation has brought enormous disruption to UK film
producers and reduced confidence of overseas film companies in the UK film
industry. Film production activity in the United Kingdom during the first
quarter of 2007 has been at one of its lowest levels for many years. As a result
the Company was unable to identify any suitable investments in the period. We
are, however, very pleased to report that the Investment Manager has reached
agreement in principle on the terms of investment in a number of companies and
is in the process of finalising the terms of these investments.
While we wait to be invested in film production companies, surplus funds have
been placed in liquid money market funds.
Financial results
The Company was incorporated on 17 October 2005 was listed on the London Stock
Exchange on 5 April 2006. The result for the period was a profit of #54,000
equivalent to 0.96 pence per share. The net asset value per share at 31 March
2007 was 93.15 pence.
Dividend
The Board of Directors is recommending to shareholders a final dividend for the
period of 0.60 pence per share which if approved at the Annual General Meeting
on 6 September 2007, will be paid on 21 September 2007. The payment of this
dividend is recommended by the Directors so that the Company can meet the
requirements of the Taxes Act in respect of the amount of income that can be
retained by venture capital trusts.
Business Review
Companies listed on the London Stock Exchange are required to produce a Business
Review within the Annual Report. The purpose of this review is to provide a fair
review of the business and a description of its principle risks and
uncertainties, an analysis of its development and performance and those key
performance indicators that give guidance as to its performance. The Business
Review is set out on pages 3 to 4 of this Press Release.
Outlook
While the continuing delays in investing are very disappointing we are pleased
that UK film production activity is now picking up. We anticipate your Company
will be substantially invested within the next few months and will meet the
necessary investment levels well within the required time limits to maintain its
status as an approved VCT.
Annual General Meeting
The AGM will be held at Thursday 6 September at the offices of EPIC Specialist
Investments, 7th Floor, 22 Billiter Street, London EC3M 2RY. We do urge all
shareholders who are able to attend to join us for the occasion.
Stuart Stradling
15 June 2007
INVESTMENT MANAGER'S REPORT
The Investment Manager is more confident about the British film Industry now
that the film tax credit legislation has been approved by the European
Commission and the shock of the withdrawal of UK GAAP schemes previously used to
finance films has been absorbed by film producers. The Chairman has covered
these two items in his statement.
We have reached agreement in principle on the terms of investment in a number of
film production companies, some of whose film projects are very commercial.
These projects have been sourced through the Investment Manager's existing
contacts. We have also been directly approached by several producers and agents
as a result of the Limelight press launch at the beginning of May 2007 and
meetings held during the Cannes Film Festival this year.
Whilst we are not in a position to announce closed deals at the moment we look
forward to doing so in the near future as activity builds up going into the
summer months, traditionally the busiest time for film production.
Christopher Figg
15 June 2007
BUSINESS REVIEW
The purpose of this review is to provide shareholders with a summary setting out
the business objectives of the Company, the Board's strategy to achieve those
objectives, the risks faced, the regulatory environment and the key performance
indicators used to measure performance.
Business Objectives
The business objectives of the Company are to achieve long term capital growth
for its investors through investment in a diversified portfolio of film
production or film sales companies which produce or sell British Qualifying
Films.
Strategy for Achieving Objectives
The Board's strategy for achieving long term capital growth for investors is a
profitable investment policy combined with compliance with the UK tax
authorities requirements for venture capital trusts.
The Company has considered carefully the risks which are inherent in film
production and distribution and formulated an investment policy which it is
believed should insulate investors in the Company from some of the principal
sector risks.
Investments will only be made in film companies where, in the view of the
Investment Manager and the Company:
- there is a significant chance that the Company's investment will be repaid out
of income generated out of the production, sale, or other exploitation of the
relevant film or films;
- the completion of the film is guaranteed by a reputable completion guarantor;
- film sales companies can demonstrate satisfactory title to the films they are
selling;
- production insurances are in place;
- errors and omissions insurance will be available for films being produced;
- all other film financing agreements in relation to the relevant film and film
production company have unconditionally completed.
The Company will not invest in any film production company if in the opinion of
the Investment Manager and the Company:
- the ability of the relevant film to qualify as British is doubtful;
- the project appears to have an unacceptable level of risk;
- the project depends on financial support from a financier whose credit rating
is doubtful, or whose ability to proceed within the required timescale is not
certain.
All distribution arrangements in relation to any film project in which the
Company invests must be approved by the Investment Manager and the Company.
The Board of the Company will also require appropriate security arrangements to
be entered into by any company in which the Company invests, including mortgages
or charges and will require a reputable company to be appointed to manage the
collection of all sums due under agreements exploiting rights in any relevant
film.
The Company and the Investment Manager will be free to depart from the
investment policy in individual cases only where in the opinion of the Company
and the Investment Manager such departure is not material.
Limelight VCT PLC is a venture capital trust listed on the London Stock Exchange
and investors who subscribed for new shares in the Company prior to 6 April 2006
are entitled to income tax relief of 40% of the amount subscribed provided the
shares are held for at least three years. Capital gains made by investors on a
disposal of shares in a VCT are exempt from capital gains tax and dividends
would, if paid, be free from income tax. In order to secure these tax benefits
for investors the Board is required to ensure that the Company complies with the
rules and regulations for venture capital trusts as set out by the UK tax
authorities.
Principal Risks
The Board believes that the principal risks facing the Company are:
* A lack of sufficient suitable investment opportunities to enable the
Company to achieve its intended level of capital growth.
* The return on individual investments take longer to realise than
forecast reducing the Company's ability to re-invest profits and increasing
the overall capital growth of the portfolio.
* The Company is unable to maintain its status as a venture capital trust
and therefore investors will lose significant tax benefits.
Insufficient investment opportunities
The film industry in the UK is dependent on a clear framework for the funding
subsidy it receives from the UK government either directly through the tax
credit scheme or indirectly through tax efficient film financing schemes. This
environment has not been in place since April 2006 and as a result the volume of
film production in the UK has dropped to its lowest level for many years. This
has had a corresponding impact on the ability of the Company and its Investment
Manager to source suitable investment transactions. It is not possible for the
Company to mitigate this type of external risk.
The Company is not the only source of funds for film production and distribution
companies and is restricted in the maximum amount it can invest in any one
company. Competing film financing entities may therefore, in certain
circumstances, be able to offer better financing terms, may not require the
level of security of return required by the Company or may be able to provide
more of the financing required. The Company and its Investment Manager are
mitigating this risk by ensuring that film producers and distributors are aware
of all the benefits of the Limelight financing offer.
Return on Investments
The investment period on each transaction may be longer than expected which may
be due to the operational circumstances of each film production or distribution
company or due to a delay in the UK tax authorities paying the tax credit back
to film producers. For each investment transaction made by the Company
arrangements will be in place to monitor the progress of each investment. Where
the investment return is dependent on timely payment of the tax credit by the UK
tax authorities the Company will require the investee company to retain a
reputable and experienced tax advisor to submit all appropriate documentation.
Loss of VCT status
Loss of VCT status may occur if the Company breaches any of the requirements set
out in S842AA of the Income and Corporation Taxes Act 1988. Breaches include an
inability to invest in sufficient appropriate investments within the required
timescale or where the Company loses its Stock Exchange listing. The Company
liaises closely with its professional advisors to ensure that no inadvertent
breach occurs.
The Investment Manager is dependent on the services of certain key individuals
for the implementation of the Company's investment policy. While the Investment
Manager has entered into contractual arrangements with such individuals, the
retention of their services is not guaranteed.
Key Performance Indicators
The key performance indicators the Board uses to assess performance are the
change in the net asset value per share and retention of VCT status.
A review of the Company's performance during the period, the position of the
Company at the year end and the outlook for the coming year is contained within
the Chairman's Statement on pages 1 and 2 of this Press Release.
Financial Risk Management
Details of the Company's financial instruments and risk management policies and
objectives are provided in the notes to the financial statements.
GROUP INCOME STATEMENT
For the period from 17 October 2005 to 31 March 2007
Note Revenue Capital * Total
#'000 #'000 #'000
Investment and other income 2 240 - 240
Administrative expenses 3 (173) - (173)
--------- --------- ---------
Profit before taxation 67 - 67
Taxation 4 (13) - (13)
--------- --------- ---------
Return attributable to equity
shareholders 54 - 54
========= ========= =========
Return per ordinary share (basic and
diluted) 6 0.96p 0.00p 0.96p
The Board of Directors is recommending to shareholders a final dividend for the
period of 0.60 pence per share totalling #34,000.
* The total column represents the Income Statement under IFRS.
All revenue and capital items in the above statement derive from continuing
operations.
STATEMENT OF CHANGES IN EQUITY - GROUP
For the period from 17 October 2005 to 31 March 2007
Note Share Share premium Revenue Total
capital account reserve
#'000 #'000 #'000 #'000
Net assets at 17 October 2005 - - - -
Issue of share
capital net of
expenses 11 575 4,619 - 5,194
Redemption of
share capital (13) - - (13)
Profit for the
period - - 54 54
--------- ------- ------- -------
Net assets at
31 March 2007 562 4,619 54 5,235
========= ======= ======= =======
BALANCE SHEETS OF THE GROUP AND COMPANY
As at 31 March 2007
Note Group Company
#'000 #'000
Current Assets
Other receivables 9 35 35
Cash and cash equivalents 10 5,241 5,241
-------- --------
5,276 5,276
-------- --------
Current liabilities
Other payables falling due within one year (28) (28)
Current tax liabilities (13) (13)
-------- --------
(41) (41)
-------- --------
Net current assets 5,235 5,235
-------- --------
Net assets 5,235 5,235
======== ========
Shareholders' funds
Called up share capital 11 562 562
Share premium 12 4,619 4,619
Revenue reserve 12 54 54
-------- --------
Total equity 5,235 5,235
======== ========
Net asset value per share (pence) 93.15p 93.15p
GROUP AND COMPANY CASHFLOW STATEMENTS
For the period from 17 October 2005 to 31 March 2007
Note Group Company
#'000 #'000
Cash flow from operating activities
Profit before finance costs and taxation 67 67
Increase in other receivables (35) (35)
Increase in other payables 28 28
-------- --------
Net cash inflow from operating activities 60 60
Cash flows from financing activities
Issue of redeemable preference shares 13 13
Repurchase of redeemable preference shares (13) (13)
Issue of equity net of expenses 5,181 5,181
-------- --------
Increase in cash and cash equivalents 5,241 5,241
Opening cash and cash equivalents - -
-------- --------
Closing cash and cash equivalents 5,241 5,241
======== ========
NOTES TO THE ACCOUNTS
1 ACCOUNTING POLICIES
The financial statements of the Group and Company have been prepared in
accordance with International Financial Reporting Standards ("IFRS") as adopted
by the EU. These comprise standards and interpretations approved by the
International Accounting Standards Board ("IASB"), together with interpretations
of the International Accounting Standards and Standing Interpretations Committee
approved by the International Accounting Standards Committee ("IASC") that
remain in effect, to the extent that IFRS have been adopted by the European
Union.
The group and company will be required to comply with IFRS 7 'Financial
Instruments: Disclosures. The board has not completed its assessment of the
impact of IFRS 7.
As permitted by Section 230 of the Companies Act 1985, an income statement for
the Company has not been presented in the financial statements.
These are the first financial statements for the Group and Company.
The results for the period to 31 March 2007 have been extracted from the
company's full audited financial statements which have not yet been delivered to
the Registrar of Companies. The audited financial statements contain an
unqualified audit report.
Basis of preparation
These financial statements have been prepared in accordance with the historical
cost convention.
The directors consider that the group has only one business segment and
disclosure of segmental information is not therefore provided.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries) made up to
the balance sheet date. Control is achieved where the Company has the power to
govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
The accounting policies of the subsidiary company are consistent with those of
the group.
Key Estimates and Judgements
In the judgement of the Board the return on investments will primarily be
revenue in nature and therefore expenses have been allocated 100% to income. The
Board intends that expenses directly related to investment transactions will be
allocated 100% to capital.
Investment Trust SORP
Where presentational guidance set out in the Statement of Recommended Practice
(SORP) for investment trusts, issued by the Association of Investment Trusts in
January 2003 (revised December 2005), is consistent with the requirements of
IFRS, the directors have sought to prepare the financial statements on a basis
compliant with the SORP.
Investment income
Income for the current period arises from interest income. Interest income on
financial investments, and cash and cash equivalents, is recognised in the
income statement using the effective interest rate applicable.
The effective interest rate is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial asset to the net
carrying amount of the financial asset.
Expenses
All expenses are accounted for on an accruals basis and are charged through to
the revenue account. Limelight Investment Management Limited, a wholly owned
subsidiary of Limelight VCT PLC is the investment manager of Limelight VCT PLC
and therefore the group income statement does not include the investment
management fee charged by Limelight Investment Management Limited.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with
banks, and money market instruments. Such assets are held-for-trading, with
capital gains, losses and fair value movements accounted for in the income
statement, which will be taken to capital reserves as they arise due to the fact
that such balances are held for future investment in financial investments.
As at 31 March 2007 the cash equivalents are held in a money market fund which
are available on a same day basis with no penalty for redemption.
Deferred taxation
Deferred tax is recognised in full, using the liability method, on all temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred tax is measured using
rates of tax that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax assets are recognised to the extent that it is probable that future
taxable profits will be available against which the temporary differences can be
utilised.
Due to the Company's status as a venture capital trust, and the intention to
continue meeting the conditions required to obtain approval in the foreseeable
future, the Company will not provide for deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments.
2 INVESTMENT AND OTHER INCOME
Revenue
2007
#'000
Interest receivable 240
========
3 ADMINISTRATIVE EXPENSES
Revenue
2007
#'000
Directors fees 47
Auditors remuneration
Fees payable for the company audit 16
Other services pursuance to legislation 2
Taxation services 2
Other 106
--------
173
========
Limelight Investment Management Limited, a wholly owned subsidiary of
Limelight VCT PLC is the investment manager of Limelight VCT PLC and
therefore the group income statement does not include the investment
management fee charged by Limelight Investment Management Limited.
As at 31 March 2007 the Group and Company had no employees. In addition to
the director of the Company who is also a director of the investment
management subsidiary the Group retained one director of the investment
management subsidiary. Fees payable to this director for the period to 31
March 2007 totalled #10,750.
4 TAXATION CHARGE ON ORDINARY ACTIVITIES
Revenue
2007
#'000
UK corporation tax 13
========
The tax charge for the period is lower than the standard rate of corporation tax
in the UK of 30%. The differences are explained below:
2007
#'000
Profit before taxation 67
Taxation charge at 30% 20
Effects of:
Small companies rate of tax (7)
--------
Current tax charge 13
========
There is no requirement to make a provision for deferred taxation in the current
accounting period.
5 DIVIDENDS
The Company proposes a final dividend of 0.60 pence per share. As this
dividend is subject to approval by Shareholders at the Annual General
Meeting it has not been included as a liability in these financial
statements.
The proposed final dividend for the period (which is the only dividend in
respect of the period) of 0.60 pence per share totals #34,000 and this is
the basis on which the requirements of Section 842 of the Income and
Corporation Taxes Act 1988 are considered. The Company's revenue
available for distribution by way of dividend for the year is #54,000.
6 RETURNS ON ORDINARY SHARES
17 October 2005 to
31 March 2007
Revenue Capital Total
#'000 #'000 #'000
Return attributable to equity shareholders 54 - 54
------ ------ ------
Return attributable per share (basic and diluted) 0.96p 0.00p 0.96p
The return per share is based on 5,620,002 shares, being the weighted average number of shares in
issue during the period.
7 PROFIT OF THE COMPANY ATTRIBUTABLE TO SHAREHOLDERS
The profit for the period after taxation dealt with in the accounts of the
Company is #54,000. As permitted by Section 230 of the Companies Act 1985,
no separate income statement for the Company has been included in these
accounts.
8 SHARES IN GROUP UNDERTAKINGS
The Company owns 100% of the Ordinary share capital and voting rights of
Limelight Investment Management Limited, the group's investment management
company, which is registered and operates in England. The Company also
owns 100% of the Ordinary share capital and voting rights of Limelight
Film Sales Limited, a dormant company which is registered in England.
9 OTHER RECEIVABLES
Group Company
2007 2007
#'000 #'000
Sundry debtors 8 8
Prepayments and accrued income 27 27
------- --------
35 35
======= ========
10 CASH AND CASH EQUIVALENTS
Group Company
2007 2007
#'000 #'000
Money market funds 5,229 5,229
Cash at bank 12 12
------- --------
5,241 5,241
======= ========
11 SHARE CAPITAL
2007
#'000
Authorised
25,000,000 Ordinary shares of 10p each 2,500
Allotted, called up and fully paid
5,620,002 Ordinary shares of 10p each 562
========
5,620,000 ordinary shares were issued and allotted in accordance with the terms of the
Prospectus. The two original subscriber shares were created on incorporation and issued at
par. Share issue costs amounting to #439,000 have been set off against the share premium.
The entire issued ordinary share capital of the Company has been admitted to the Official
List maintained by the Financial Services Authority and to trading on the London Stock
Exchange.
Number of shares allotted Aggregate Aggregate
nominal value consideration
allotted received net of
issue costs
#'000 #'000
Equity Shares
Date of issue and allotment
17 October 2005 2 - -
4 April 2006 5,620,000 5,620 4,619
--------- ------- --------
5,620,002 5,620 4,619
========= ======= ========
Redeemable Preference Shares
Date of issue and allotment
11 January 2006 50,000 50 13
Date of redemption
4 April 2006 (50,000) (50) (13)
--------- ------- --------
--------- ------- --------
- - -
========= ======= ========
The Company was incorporated with an authorised share capital of #2,450,000 divided into
24,500,000 Ordinary Shares of 10p each of which two Ordinary Shares were taken by the
subscribers to the Memorandum of Association.
On 11 January 2006 the Company increased its authorised share capital to #2,500,000 by the
creation of 50,000 Redeemable Shares of #1 each. On the same day the Company issued and
allotted the 50,000 Redeemable Shares of #1 each to the Promoter (paid up as at one
quarter of their nominal value) in order to enable the Company to obtain a certificate
under section 117 of the Companies Act.
On 4 April 2006 these Redeemable Shares were redeemed at par by the Company. Under the
Articles of the Company each of these #1 Redeemable Shares has since been re-designated as
10 Ordinary Shares of 10 pence each.
11 SHARE CAPITAL (continued)
The Redeemable Shares in the capital of the Company confer no right to
dividends and no right to vote except as otherwise agreed by the holders of a
majority of the Ordinary Shares of the Company. On a winding-up the Redeemable
Shares confer the right to be paid out of the assets of the Company available
for distribution amongst the members of the capital paid up on such shares of
the Company pari passu with and in proportion to any amounts of capital paid to
the holders of the Ordinary Shares but shall not confer any right to
participate in any surplus remaining following payment of the amount of capital
paid up thereon.
On 4 April 2006 in accordance with the terms of the Prospectus the Company
issued and allotted 5,620,000 Ordinary shares.
All shares in issue at 31 March 2007 meet the definition of equity.
12 RESERVES
Share premium Revenue Total
reserve
#'000 #'000 #'000
Group
At 17 October 2005 - - -
Issue of equity 5,071 - 5,071
Redemption of share capital (13) - (13)
Expenses of share issue (439) - (439)
Profit for the year - 54 54
------ ------ ------
At 31 March 2007 4,619 54 4,673
====== ====== ======
Share premium Revenue Total
reserve
#'000 #'000 #'000
Company
At 17 October 2005 - - -
Issue of equity 5,071 - 5,071
Redemption of share capital (13) - (13)
Expenses of share issue (439) - (439)
Profit for the year - 54 54
------ ------ ------
At 31 March 2007 4,619 54 4,673
====== ====== ======
The share premium reserve is the excess of the consideration received for the share
capital over the nominal value of the share capital issued.
The revenue reserve is the accumulated retained earnings.
13 NET ASSET VALUE PER SHARE
2007
Net assets attributable to shareholders (#'000) 5,235
Shares in issue (number) 5,620,002
Net asset value per share (pence) 93.15p
14 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Group's financial instruments comprise cash balances, cash equivalents,
receivables and payables that arise directly from its operations. Once the
Group commences its film financing investment activity it will also be
invested in equity and debt investments in unquoted companies.
The Group's investing activities will expose it to various types of risk
associated with the financial instruments and markets in which it invests.
During the period covered by these financial statements the most important
types of financial risk faced by the Company were:
Market risk: Interest rate risk
The Company's surplus funds awaiting investment are held in the BGI Sterling
Liquidity First Fund which is an interest bearing money market open ended
investment company. As a result the Company is subject to exposure to interest
rate risk due to fluctuations in the prevailing levels of market interest
rates.
The weighted average interest rate as at 31 March 2007 on the Company's cash
and cash equivalents was 5.3%. Cash equivalents are valued based on prevailing
market prices.
Credit Risk
The Company has one significant concentration of credit risk which is its
holding of cash equivalents which are held in the BGI Sterling Liquidity First
Fund which has a credit rating of AA- or above. At year end the Company held
#5,241,000 of cash equivalents in the BGI Sterling Liquidity First Fund.
15 RELATED PARTY TRANSACTIONS
The Company has appointed Park Place Financial Strategy LLP, a limited liability
partnership in which a director of the Company is a member, to be its promoter.
The Company has appointed Thurloe and Lyndhurst LLP, a limited liability
partnership in which a director is a member, to be its solicitor and legal advisor
in respect of film investments.
During the period the Company has carried out a number of transactions with the
above related parties in the normal course of business and on an arms length basis:
Expenditure paid Amounts due
#'000 #'000
Park Place Financial Strategy LLP
Share issue expenses 437 -
Annual promoters fees 18 -
====== ======
Enquiries to:
Michael Henry
Limelight VCT PLC
+44 (0)20 7898 9044
Roland Cornish
Beaumont Cornish Limited
+44 (0)20 7628 3396
This information is provided by RNS
The company news service from the London Stock Exchange
END
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