Interim Results
Close Enterprise VCT PLC
16 November 2007
16 November 2007
CLOSE ENTERPRISE VCT PLC
Announcement of initial results for the period from 7 November 2006 to 30
September 2007.
Close Enterprise VCT PLC ('the Company'), managed by Close Ventures Limited,
today announces the results for the period from 7 November 2006 to 30 September
2007. The announcement has been approved by the Board of Directors on 16
November 2007.
Financial Highlights
30 September 2007
Net asset value per share (pence)(i)
95.2
Notes
(i) Compares to the net asset value per share of 94.5 pence (after costs)
immediately following the closing of the 2006/2007 Offer.
The Directors have declared a revenue dividend of 0.7 pence per Share to be
paid on 28 December 2007 to shareholders on the register as at 30 November
2007.
For further information, please contact:
Patrick Reeve/ Will Fraser-Allen Roddi Vaughan-Thomas
Close Ventures Limited Peregrine Communications Group
Tel: 020 7422 7830 Tel: 020 7223 1552
www.closeventures.co.uk
CHAIRMAN'S STATEMENT
Introduction
Close Enterprise VCT PLC (the 'Company') raised £19.8 million under the Offer
for Subscription which closed at the beginning of April 2007. This was a
pleasing result in a tighter VCT fundraising market.
The Company aims to provide investors with a regular and predictable source of
income, combined with the prospect of longer term capital growth. The Company
intends to achieve this by investing broadly 50 per cent. of the net funds
raised under the Offer in lower risk, asset-based businesses, principally
operating in the leisure sector and related areas. The balance of the net funds
raised will be invested in higher growth businesses across a variety of sectors
of the UK economy. These will range from lower risk, income producing businesses
to higher risk, technology companies.
This document covers the initial accounts of the Company for the period from 7
November 2006, being the date of the Company's formation, to 30 September 2007.
The accounts need to be audited and filed with the Registrar since the Company
will be paying out its first dividend.
Investment progress
I am pleased to report that investment progress is proceeding according to plan.
By 30 September 2007, a total of £2.4 million had been invested in seven
businesses, while by 31 October 2007, the figure had grown to £2.8 million in
eight businesses. At this early stage the portfolio is broadly split 40:60
between asset-based businesses in the leisure sector and higher growth
companies. Over time it is expected that the split will be broadly equal.
Investments in asset-based businesses in the leisure sector comprise Churchill
Taverns VCT Limited and Bravo Inns Limited, two operators of freehold pubs and
CS (Norwich) Limited, an operator of a cinema based in Norwich. Investments in
the higher growth portfolio comprise Point 35 Microsystems Limited, a
semiconductor equipment company, Oxsensis Limited, a high temperature sensor
developer, Process Systems Enterprise Limited, a process modeling business and
Resort Hoppa, a travel business providing resort transfers. In addition, after
the period end, an investment was made in MiPay Limited, a developer of software
and systems for mobile phone payments and top ups.
Future prospects and further fundraising
The build up of the investment portfolio is encouraging and the company is now
14.6% invested for the purposes of reaching the 70% investment level which the
Company must reach by 31 March 2010 to comply with the HMRC VCT qualification
rules.
The Company is now launching a Further Offer of Ordinary shares to raise up to
an additional £20 million. The new shares will rank pari passu with the
existing shares, except for no entitlement to the first dividend for the year to
31 March 2009. This will enable further growth and diversification of the
Company's investment portfolio, as well as creating greater economies of scale,
due to the spreading of fixed and semi-fixed overheads.
Risks and Uncertainties
As required under the new Listing Rules under which your Company operates, we
are required to comment on the potential risks and uncertainties which could
have a material impact over the VCTs performance over the remaining six months
of the financial period. The key risk is the outlook for the UK economy which,
while currently still growing, could be affected by the current unease in the
wholesale financial and housing markets. While this could give rise to
additional investment opportunities for a cash rich fund like ourselves, a
downturn could affect existing investee companies and make it harder for the
Manager to assess the prospects of new investment opportunities.
Results and dividend
As at 30 September 2007 the net asset value of the Company was £18.85 million,
equivalent to 95.2 pence per share. Net revenue income attributable to
shareholders was £285,000 for the period enabling the Board to declare a first
dividend of 0.7 pence per share. The dividend will be paid on 28 December 2007
to those shareholders on the register as at 30 November 2007.
P Reeve
Director 16 November 2007
INCOME STATEMENT
for the period from 7 November 2006 to 30 September 2007
Revenue Capital Total
Notes £'000 £'000 £'000
Gains on investments 3 - 2 2
Investment income 4 547 - 547
Investment management fees 5 (60) (179) (239)
Other expenses 6 (92) - (92)
Return/(loss) on ordinary 395 (177) 218
activities before tax
Tax (charge)/credit on ordinary 7 (110) 58 (52)
activities
Return/(loss) attributable to 285 (119) 166
equity holders
Basic and diluted return/(loss) 9 1.4 (0.6) 0.8
per share (pence)
All of the Company's activities derive from continuing operations.
There are no comparative year figures, since this is the first period of trading
of the Company. The Company was incorporated on 7 November 2006 and commenced
trading activities on 5 April 2007.
The total column of this Income Statement represents the profit and loss account
of the Company. The supplementary revenue and capital columns have been prepared
in accordance with the Association of Investment Companies' Statement of
Recommended Practice.
The Company has no recognised gains or losses other than those disclosed above.
Accordingly a statement of total recognised gains and losses is not required.
BALANCE SHEET
as at 30 September 2007
Notes £'000
Fixed asset investments
Qualifying 2,409
Non-qualifying 1,497
Total fixed asset investments 10 3,906
Current Assets
Debtors 11 482
Cash at bank 14,688
15,170
Creditors: amounts falling due 12 (226)
within one year
Net current assets 14,944
Net assets 18,850
Capital and reserves
Called up share capital 13 9,897
Special reserve 14 8,787
Realised capital reserve (121)
Unrealised capital reserve 2
Revenue reserve 285
Total shareholders' funds 18,850
Net asset value per share (pence) 15 95.2
The interim information was approved by the Board of Directors and authorised
for issue on 16 November 2007.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the period from 7 November 2006 to 30 September 2007
Called up Realised Unrealised
share Share Special capital capital Revenue
capital premium reserve reserve reserve reserve Total
£'000 £'000 £'001 £'000 £'000 £'000 £'000
As at 7 November 2006 - - - - - - -
Issue of share capital 9,897 9,897 - - - - 19,794
Issue costs - (1,089) - - - - (1,089)
Cost of cancellation of share premium
account - (21) - - - - (21)
Cancellation of share premium account - (8,787) 8,787 - - - -
Capitalised investment management
and performance fees - - - (179) - (179)
Tax relief on costs charged to capital - - - 58 - 58
Unrealised gains on investments - - - - 2 - 2
Revenue return attributable to
shareholders - - - - - 285 285
As at 30 September 2007 9,897 - 8,787 (121) 2 285 18,850
CASH FLOW STATEMENT
for the period from 7 November 2006 to 30 September 2007
Note £'000
Operating activities
Investment income received 33
Deposit interest received 330
Investment management fees paid (131)
Other cash payments (40)
Net cash inflow from operating activities 16 192
Capital expenditure and financial
investments
Monies held with solicitors (300)
Purchase of investments (3,888)
Net cash outflow from investing (4,188)
activities
Net cash outflow before financing (3,996)
Financing
Issue of ordinary share capital
19,794
Expenses of issue of ordinary share
capital (1,110)
Net cash inflow from financing 18,684
Cash inflow in the year 14,688
Notes to the announcement
1. Accounting convention
The initial accounts have been prepared in accordance with the historical cost
convention, modified to include the revaluation of investments, in accordance
with applicable United Kingdom law and accounting standards, and with the
Statement of Recommended Practice 'Financial Statements of Investment Trust
Companies' ('SORP') issued by the Association of Investment Trust Companies
('AITC') in January 2003 and revised in December 2005. The particular accounting
policies adopted are described below.
2. Accounting policies
Investments
In accordance with FRS 26 'Financial Instruments Measurement', equity
investments are designated as fair value through profit or loss ('FVTPL'). The
total column of the Income Statement represents the Company's profit and loss
account. Unquoted investments' fair value is determined by the Directors in
accordance with the International Private Equity and Venture Capital Valuation
Guidelines. Fair value movements on equity investments and gains and losses
arising on the disposal of investments are reflected in the capital column of
the Income Statement in accordance with the AITC SORP.
Unquoted loan stock is classified as loans and receivables in accordance with
FRS 26 and carried at amortised cost using the Effective Interest Rate method
('EIR'). Movements in the amortised cost relating to interest income are
reflected in the revenue column of the Income Statement and movements in respect
of capital provisions are reflected in the capital column of the Income
Statement. Loan stock accrued interest is recognised in the Balance Sheet as
part of the carrying value of the loans and receivables at the end of each
reporting period.
Investments are recognised as financial assets on legal completion of the
investment contract and are de-recognised on legal completion of the sale of an
investment.
It is not the Company's policy to exercise control or significant influence over
investee companies. Therefore in accordance with the exemptions under FRS 9 '
Associates and joint ventures', those undertakings in which the Company holds
more than 20% of the equity are not regarded as associated undertakings.
Investment income
Dividends receivable on equity investments are taken to revenue on an
ex-dividend basis. Fixed returns on debt securities are recognised on a time
apportionment basis using an effective interest rate over the life of the
financial instrument.
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged
through the revenue account except the following which are charged through the
realised capital reserve:
• 75% of Management fees and performance fees, net of corporation tax is
allocated to the capital account, to the extent that these relate to an
enhancement in the value of the investments and in line with the Board's
expectation that over the long term 75% of the Company's investment returns
will be in the form of capital gains; and
• expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Debtors and creditors
• Debtors are non-interest bearing and are stated at their nominal value as
reduced by appropriate allowances for estimated irrecoverable amounts.
The Directors consider that the carrying amount of debtors approximates
their fair value.
• Creditors are non-interest bearing and are stated at their nominal value.
The Directors consider that the carrying amount of creditors approximates
their fair value.
Taxation
Taxation is applied on a current basis in accordance with FRS 16 'Current tax'.
Taxation associated with capital expenses is applied in accordance with the
SORP. In accordance with FRS 19 'Deferred tax', 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 the financial statements. Deferred tax assets are recognised to the
extent that it is regarded as more likely than not that they will be recovered.
The specific nature of taxation of venture capital trusts mean that it is
unlikely that any deferred tax will arise. The Directors have considered the
requirements of FRS 19 and do not believe that any provision should be made.
Reserves
Realised capital reserves
The following are disclosed in this reserve:
(i) gains and losses on the realisation of investments;
(ii) expenses, together with the related taxation effect, charged in accordance
with the above policies; and
Unrealised capital reserves
Increases and decreases in the valuation of investments held at the period end
are accounted for in this reserve.
Special reserve
This reserve is distributable.
Dividends
In accordance with FRS 21 'Events after the balance sheet date', interim
dividends are not accounted for until paid, and final dividends are accounted
for when approved by shareholders at an annual general meeting.
3. Gains on investments
Gains on investments
7 November 2006 to
30 September 2007
£'000
Unrealised gains on investments 2
4. Investment income
7 November 2006 to
30 September 2007
£'000
Loan stock interest 37
FRN interest 9
Interest receivable and similar income 501
547
5. Investment management fees
7 November 2006 to 30 September 2007
Revenue Capital Total
£'000 £'000 £'000
Investment management fee 60 179 239
Total 60 179 239
6. Other expenses
7 November 2006 to
30 September 2007
£'000
Directors' fees 37
Auditors' remuneration - audit fees 18
Other administrative expenses 37
92
7. Tax (charge)/credit on ordinary activities
7 November 2006 to 30 September 2007
Revenue Capital Total
£'000 £'000 £'000
UK Corportion tax (110) 58 (52)
The tax assessed for the period is lower than the standard rate of corporation
tax of 30%. The difference is explained below:
7 November 2006 to 30 September 2007
Revenue Capital Total
£'000 £'000 £'000
Return on ordinary activities 395 (177) 218
before tax
Tax on profit at 30% (118) 53 (65)
Factors affecting the tax charge:
Marginal relief 8 5 13
(110) 58 (52)
8. Dividends
The Board has declared a first revenue dividend of 0.7 pence per share, which
will be paid on 28 December 2007 to members on the register as at 30 November
2007.
9. Basic and diluted return/(loss) per share
7 November 2007 to 30 September 2007
Revenue Capital Total
£'000 £'000 £'000
Return attributable to equity 285 (119) 166
shares
Return attributable per Ordinary share
(pence)
(Basic and diluted) 1.4 (0.6) 0.8
Return per share has been calculated on 19,793,147 shares, being the weighted
number of shares in issue for the period since the allotment of shares under the
2006/2007 Offer on 4th April 2007.
There are no convertible instruments, derivatives or contingent share agreements
in issue for Close Enterprise VCT PLC hence there are no dilution effects to the
return per share. The basic return per share is therefore the same as the
diluted return per share.
10. Fixed asset investments
Qualifying Non-qualifying Total
investments investments
£'000 £'000 £'000
Opening cost - - -
Acquisitions 2,399 1,497 3,896
Closing cost 2,399 1,497 3,896
Unrealised gains 2 - 2
Movement in loans and receivables 8 - 8
Closing valuation 2,409 1,497 3,906
Investments held at fair value through profit or loss account total £2,905,000.
Investments held at amortised cost total £1,001,000.
11. Debtors
30 September 2007
£'000
Other debtors 300
Prepayments and accrued income 182
482
12. Creditors: amounts falling due within one year
30 September 2007
£'000
Other creditors 10
Accruals 216
226
13. Called up share capital
30 September 2007
£'000
Authorised:
40,000,000 Ordinary Shares of 50p each 20,000
Allotted, called-up and fully-paid:
19,793,147 Ordinary Shares of 50p each 9,897
The Company was incorporated on 7 November 2006 , with an authorised share
capital of £20,000,000 divided into 39,900,000 Ordinary shares of 50p each and
50,000 redeemable preference shares of £1 each, of which two ordinary shares
were issued to the subscribers to the Memorandum of Association.
By ordinary and special resolutions passed on 23 November 2006:
(a) the Directors were generally and unconditionally authorised in accordance
with section 80 of the Act to exercise all the powers of the Company to
allot relevant securities (as defined in that section) up to an aggregate
nominal amount of £19,999,999, such authority to expire on 1 November 2011
(unless previously revoked, extended or varied by the Company in general
meeting);
(b) the Directors were empowered (pursuant to section 95(1) of the Act) to
allot or make offers or agreements to allot equity securities (as defined
in section 94(2) of the Act) for cash as if section 89(1) of the Act did
not apply to any such allotment, such powers to expire on 1 November 2011
(unless previously revoked, extended or varied by the Company in general
meeting). This power was limited to the allotment of equity securities in
connection with:
(i) the issue of 50,000 Preference Shares to Close Ventures Limited;
(ii) the 2006/2007 Offer;
(iii) an offer of equity securities by way of rights;
(iv) any dividend reinvestment scheme which may be introduced by the
Company;
(v) the sale of shares out of treasury; and
(vi) otherwise an offer of equity securities up to an aggregate nominal
amount of 10 per cent. of the issued share capital of the Company
immediately following the closing of the 2006/2007 Offer;
(c) the Company was authorised to make one or more market purchases (within the
meaning of section 163 (3) of the Act) of Shares provided that:
(i) the aggregate maximum number of Shares authorised to be purchased is
an amount equal to 14.99 per cent. of the Shares in issue following
the Offer;
(ii) the minimum price which may be paid for a Share is 50 pence;
(iii) the maximum price which may be paid for a Share is the higher of (i)
an amount equal to the average of 105 per cent. of the middle market
prices shown in the quotations for a Share in the Official List for
the five business days immediately preceding the day on which that
Share is purchased; and (ii) the higher of the price of the last
independent trade in Shares and the highest then current independent
bid for Shares on the London Stock Exchange; and
(iv) the authority expires on 22 May 2008.
(d) it was resolved that the amount standing to the credit of the share premium
account of the Company as at the date immediately following Admission be
cancelled.
On 23 November 2006, 50,000 Preference Shares were allotted and
issued to Close Ventures Limited pursuant to a letter of undertaking so as to
enable the Company to obtain a certificate under section 117 of the Act. The
Preference Shares were redeemed by the Company out of the proceeds of the 2006/
2007 Offer. Each Preference Share redeemed was automatically redesignated on
redemption as, and sub-divided into, two Shares in the authorised but unissued
capital of the Company.
During the period, 19,793,147 shares of 50 pence each with a total nominal value
of £9,896,574 were allotted in accordance with the terms of the Offer for
Subscription dated 23 November 2006. These were issued at a premium of 50 pence
each. These shares were admitted to the Official List of the UK Listing
Authority on allotment on 5th April 2007.
14. Share premium account
On 6 July 2007, the Company registered the Court Order dated 4
July 2007, which cancelled the whole of the share premium account as at 4 July
2007. The purpose of the cancellation was to enable the Company to offset the
effects of unrealised losses on future dividends. For that effect, the Company
created a special reserve, which is distributable.
15. Net asset value per Ordinary share
30 September 2007
Net asset value
per share Net assets
pence £'000
Ordinary shares 95.2 18,850
The number of shares used in this calculation is 19,793,147.
16. Reconciliation of net return on ordinary activities before taxation
to net cash inflow from operating activities
7 November 2006 to
30 September 2007
£'000
Revenue eturn on ordinary activities before taxation 395
Investment management fee charged to capital (179)
Movement in accrued amortised loan stock interest (8)
Increase in debtors (182)
Increase in creditors 166
Net cash inflow from operating activities 192
17. Financial instruments and risk management
The Company's financial assets comprise equity and loan stock investments in
unquoted companies, cash balances, floating rate notes and short term debtors
which arise from its operations. The main purpose of these financial assets is
to generate revenue and capital appreciation for the Company's operations. The
Company has no financial liabilities other than short term creditors. The
Company does not use any derivatives.
The principal risks arising from the Company's operations are:
• market and investment price risk (which includes fair value interest
rate risk and credit risk);
• liquidity risk; and
• cash flow interest rate risk.
The Board regularly reviews and agrees policies for managing each of these risks
and they are summarised below:
Market price risk
As a venture capital trust, it is the Company's specific nature to evaluate and
control the investment risk of its portfolio in unquoted and in quoted
investments. The Manager monitors this risk on an ongoing basis, and the Board
reviews these risks on a formal basis when investments are made and at Board
meetings.
Investment price risk
As a venture capital trust, it is the Company's specific business to price,
evaluate and control the investment risk in its portfolio of investments, the
results of which are detailed in the Chairman's statement. To mitigate
investment risk, the investment strategy of the Company is to invest in a broad
spread of industries with a large proportion of the investment comprising debt
securities, which, owing to the structure of their yield, have a lower level of
price volatility than equity.
Fair value interest rate risk
The majority of investments are unquoted and hence not subject to market
movements as a result of interest rate movements. The floating rate note held by
the Company is subject to this risk.
Credit risk
The Manager evaluates credit risk on loan stock instruments prior to investment,
and as part of its ongoing monitoring of investments. Typically loan stock
instruments have a first charge over the assets of the investee company. In this
way, the Manager seeks to limit credit risk to the Company. The Group's credit
risk is limited to the total carrying value of loan stock instruments and the
fair value of floating rate notes of £2,498,000.
Liquidity risk
The Company had no committed borrowing facilities as at 30 September 2007 and
had cash balances of £14,688,000. The main cash outflows are for investments,
which are within the control of the Company. In view of this, the Company is
subject to low liquidity risk.
Cash flow interest rate risk
It is the Company's policy to accept a degree of interest rate risk on its
financial assets through the effect of interest rate changes.
On the basis of the Company's analysis, it is estimated that a fall of one
percentage point in all interest rates would have reduced profits before tax for
the period by approximately 28.45%.
The weighted average interest rate applied to the Company's unlisted fixed rate
assets during the year was approximately 12.79%. The weighted average period to
maturity for the unlisted fixed rate assets is approximately 4.71 years.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 30 September 2007 are
stated at fair value as determined by the Directors, with the exceptions of
loans and receivables, which are carried at amortised cost, in accordance with
FRS 26. In the opinion of the Directors, the amortised cost of loan stock
approximates to the fair value of the loan stock. See note 2 for accounting
policies.
The Company's financial assets as at 30 September 2007, all denominated in
pounds sterling, consist of the following:
30 September 2007
Total Fixed Floating Non-interest
interest rate bearing
£'000 £'000 £'000 £'000
Sterling
Listed 1,497 - 1,497 -
Unlisted 2,409 1,001 - 1,408
Cash and other 15,170 10,000 4,988 182
assets
19,076 11,001 6,485 1,590
The maturity value of loan stock investments held at amortised
cost is as follows:
£'000
Less than one year -
1-2 years -
2-3 years -
3-5 years 1,001
More than 5 years -
Total 1,001
The Company's financial liabilities are all non-interest bearing. It is the
Directors' opinion that the fair value of the financial liabilities approximates
their book value.
18. Contingencies, guarantees and financial commitments
The Company has no contingencies or guarantees as at 30 September 2007.
19. Post balance sheet events
• Invested £340,000 in MiPay Limited
• Invested £40,000 in Churchill Taverns VCT Limited
20. Related party transactions
The Manager, Close Ventures Limited, is considered to be a related party by
virtue of the fact that it is a party to a management contract from the Company.
During the period, services of a total value of £239,000 (including VAT) were
purchased by the Company from Close Ventures Limited. At the financial year end,
the amount due to Close Ventures Limited disclosed as accruals and deferred
income was £107,000.
21. Publication
The interim report is being sent to shareholders and copies will be made
available to the public at the registered office of the Company, Companies
House, via the FSA viewing facility, and at www.closeventures.co.uk.
22. Statutory accounts
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the period ended 30 September 2007, as defined
in Section 240 of the Companies Act 1985. The Auditors have reported on those
accounts; their report was unqualified and did not contain statements under
section 237(2) or (3) of the Companies Act 1985.
Whilst the financial information included in this announcement has been computed
in accordance with Financial Reporting Standards (FRSs), this announcement does
not itself contain sufficient information to comply with FRSs. The Company
expects to publish its full Initial Report and Accounts within the next two
weeks.
This information is provided by RNS
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