Interim Results
TriVest VCT PLC
23 May 2003
TRIVEST VCT PLC
Chairman's Statement
I am pleased to present the Company's Interim Report for the six months ended 31
March, 2003.
Portfolio
This has been an active half-year for TriVest VCT plc. New holdings in four
companies have been acquired and additions have been made to several existing
holdings. The portfolio has achieved considerable diversity, a characteristic
which should serve it well in current uneven economic circumstances.
GLE Development Capital Limited (GLE) has made two new investments in HWA
Limited (trading as Holloway White Allom) and Brookerpaks Limited. A further
investment of £500,000 was made in Letraset Limited whilst the increase in T J
Brent Limited's valuation reflects its relatively strong trading position.
Nova Capital Management Limited (Nova) continues to apply its remedial skills to
the portfolio originally assembled by LICA Development Capital Limited. In
particular, a re-assessment was made of the three companies engaged in the
publishing sector. The decision was taken not to make any further investment in
The Good Book Guide Limited or in Trident Publishing Limited (Trident). Trident
has been put into Administration and Nova will seek to maximise recoveries on
behalf of TriVest. In contrast, Watkins Books Limited is seen as having
potential, although on a prudent basis a full provision is being made against
the ordinary shares. Zynergy Group Limited (Zynergy) is now effectively dormant
as a trading company and recoveries from it will be generated by its receipt of
licence fees. A minor investment of £50,000 has been made in Biomer Technology
Limited, a new company which has acquired certain assets of a Zynergy
subsidiary. The Board are now hopeful that some recoveries will be received in
the near future arising from the liquidation of MAST although it is not yet
possible to quantify these.
VCF LLP (VCF) made one new investment in Broadreach Networks Limited.
Significant additional investments were made to Oxonica Limited and Sarantel
Limited while smaller additions were made to Alaric Systems Limited, ANT Limited
and Monactive Limited. A further, partial provision was made in respect of
Heritage Image Partnership Limited which is in the process of merging into
Sarantel Limited.
Board of Directors
Following Gordon Howe's retirement earlier this year, Helen Sinclair joined the
Board on 29 January 2003. Helen is an experienced venture capital practitioner
and I have pleasure in welcoming her to the Board of Directors.
Graeme MacLennan is resigning as a Director with effect from 31 May this year.
He recently indicated to me that he intends to spend more time in Australia from
the middle of this year and would not, therefore, be in a position to fulfil his
responsibilities as a Director in the UK. Graeme has been Chairman of the
Investment Committee since the Company's inception and his contribution to the
Company has been immense. Together with my fellow Directors, I would like to
pay tribute to this very substantial contribution and to thank him personally
for his support and loyalty during my period of tenure as Chairman.
Revenue Account
At 31 March 2003, revenue reserves available for distribution to shareholders
were £354,838 (£492,025 for the six months ended 31 March 2003). As in previous
years, the Board does not propose to declare an interim dividend but expects to
be able to propose a final dividend for the year ended 30 September 2003. The
net asset value per share as at 31 March 2003 was 76.10 pence (81.28 pence as at
31 March 2002) and the total return per share was (0.97) pence ((10.76) pence as
at 31 March 2002).
Colin Hook
Chairman
23 May 2003
Investment Portfolio Summary
as at 31 March 2003
Valuation
at 30 Valuation
Total cost September Additional at 31 March % of % of
at 31 March 2002 investments 2003 equity portfolio
2003 audited in the period unaudited held by value
£ £ £ £
GLE Development Capital Limited
T J Brent Limited 900,000 1,030,111 - 1,402,872 8.45% 4.48%
Specialist contractor to the
water utility
sector
B G Consulting Group Limited 1,000,000 1,000,000 - 1,000,000 21.67% 3.19%
Technical training business and
outplacement careers
consultancy
HWA Limited* 1,000,000 N/A 1,000,000 1,000,000 16.75% 3.19%
Specialist contractor in the
high-value
residential and heritage
property
refurbishment market
Letraset Limited 1,000,000 500,000 500,000 1,000,000 17.35% 3.19%
Manufacturer and distributor of
graphic art products
Special Mail Services Limited 1,000,000 1,000,000 - 1,000,000 8.00% 3.19%
Specialist, secure credit card
delivery
business
Brookerpaks Limited
(formerly Newington Foods
Limited)* 500,000 N/A 500,000 500,000 17.24% 1.60%
Importer and distributor of
garlic and
vacuum-packed vegetables
Inca Interiors Limited 350,000 350,000 - 350,000 9.25% 1.12%
Supplier of quality kitchens to
house
developers
---------------- ---------------- ---------------- ---------------- --------- ----------
5,750,000 3,880,111 2,000,000 6,252,872 19.96%
Nova Capital Management Limited
i-documentsystems group plc 517,625 510,417 - 468,750 2.96% 1.50%
Developer of products for
document,
content and information
management
Watkins Books Limited 500,000 500,000 - 450,000 12.50% 1.43%
Supplier of books on
alternative
sciences, health, philosophy
and related subjects
DriveTec(UK) Limited 500,000 500,000 - 366,429 32.20% 1.17%
Developer of patented
transmission technology
Tikit Group plc 517,624 417,391 - 358,695 3.56% 1.14%
Provider of consultancy,
services and
software solutions for law
firms
The Good Book Guide Limited 800,000 310,000 - 310,000 41.90% 0.99%
Editorial review and
multi-channel book retailer
Biomer Technology Limited * 50,000 N/A 50,000 50,000 8.60% 0.16%
Developer of biomaterials for
medical devices
Stortext Group Limited 380,435 18,089 - 18,079 0.70% 0.06%
Integrated outsourced digital
document storage business
Trident Publishing Limited 698,999 314,500 - 0 33.65% 0.00%
Military and historical
publisher
Other investments in the 4,289,530 0 - 0.00%
portfolio
---------------- ---------------- ---------------- ---------------- --------- ----------
8,254,213 2,570,397 50,000 2,021,953 6.45%
VCF LLP
Sarantel Limited 1,175,405 590,621 584,784 1,175,405 19.20% 3.75%
Antennae for mobile phones and
other wireless devices
ANT Limited 1,090,000 950,000 99,000 982,090 5.30% 3.13%
Provider of embedded browser/
email software for consumer
electronics and
Internet appliances
Oxonica Limited 900,033 428,522 471,511 900,033 9.00% 2.87%
Specialist in the design,
manipulation
and engineering of properties
of materials at the nano-scale
Alaric Systems Limited 557,413 400,000 157,413 557,413 7.48% 1.78%
Software development,
implementation
and support in the credit/debit
card authorisation and payments
market
Aquasium Technology Limited 500,000 500,000 - 500,000 16.60% 1.60%
Design, manufacture and
marketing of
bespoke electron beam welding
and vacuum furnace equipment
Blue Curve Limited 500,000 500,000 - 500,000 11.80% 1.60%
Software for automating the
production
and distribution of research
information by banks and fund
managers
SmartFOCUS Holdings Limited 500,000 500,000 - 500,000 10.00% 1.60%
Provider of analytic software
to support targeting and execution
of marketing campaigns
Wire-e Limited 500,000 500,000 - 500,000 9.21% 1.60%
Provider of mobile data
communication services
Monactive Limited 339,285 250,000 89,285 339,285 5.87% 1.08%
Provider of software asset
management tools
Broadreach Networks Limited* 250,000 N/A 250,000 250,000 10.50% 0.79%
Public access WLAN and fixed line
Internet Service Provider
Heritage Image Partnership Limited 300,000 150,000 - 95,000 8.90% 0.30%
Online Image Library
Other investments in the 250,000 0 - 0 0.00%
portfolio
---------------- ---------------- ---------------- ---------------- --------- ----------
6,862,136 4,769,143 1,651,993 6,299,226 20.10%
---------------- ---------------- ---------------- ---------------- --------- ----------
Investment Managers' Totals 20,866,349 11,219,651 3,701,993 14,574,051 46.51%
---------------- ---------------- ---------------- ---------------- --------- ----------
Fixed Interest Securities 17,109,030 18,767,073 11,642,097 16,759,513 53.49%
---------------- ---------------- ---------------- ---------------- --------- ----------
TOTAL 37,975,379 29,986,724 15,344,090 31,333,564 100.00%
========= ========= ========= ========= =======
* New investment made in the six month period ended 31 March 2003
Investment Managers' Review
TriVest has adopted a multi-manager approach. The portfolio comprises a number
of diverse investments over a wide range of different business sectors, thus
spreading risk by avoiding over-concentration in any one sector.
The highlights within each section of the portfolio during the six months under
review are as set out below.
GLE Development Capital Limited (GLE)
The portfolio comprises seven investments with a total book cost of £5.75
million and a current valuation of £6.3 million, the investment in T J Brent
being valued at in excess of cost in accordance with BVCA guidelines. All of
these transactions are management buy-outs ('MBOs') of mature businesses with
annual revenues ranging from £4 million to over £60 million. All have been
structured to enable a running yield on TriVest's investment if the company
concerned performs broadly in line with plan.
During the period three investments were made, one being a further investment of
£500,000 in Letraset to enable it to acquire its freehold premises, bringing
TriVest's total exposure to £1,000,000.
In October 2002 an amount of £500,000 was invested to support the MBO of
Brookerpaks, an importer and distributor of garlic and vacuum-packed vegetables
to supermarkets and wholesalers. In November 2002, £1,000,000 was invested in
the MBO of Holloway White Allom (HWA), which refurbishes, restores and
constructs historic and high-value residential buildings in London and the South
East of England. Both of these have contributed towards the continuing
encouraging progress of the GLE portfolio as a whole.
Nova Capital Management Limited (Nova)
Nova Capital Management acquired LICA Development Capital Limited (LICA) in
October 2002 and none of the previous LICA team has had an ongoing role in the
management of the portfolio since this date. It was clear at that point that a
considerable amount of value within the portfolio had already been lost and that
many of the remaining investments faced significant issues.
The only new investment made in the period was a small £50,000 investment in
Biomer Technology a new company formed to acquire certain of the assets and
intellectual property of a subsidiary of Zynergy Group (an earlier TriVest
investment) which is now being wound up. This investment allows TriVest to
participate in the potential that was always believed to exist in Zynergy's
technology, but without the baggage of prior liabilities.
A follow on investment in DriveTec, the automotive technology development
company, is under consideration. Nova believes this company has considerable
potential.
Nova has spent a considerable amount of time working to restore value in the
various publishing related investments. Unfortunately it has not been possible
to save Trident Publishing, which has recently gone into administration. Nova
is seeking buyers for TriVest's stake in The Good Book Guide and restructuring
Watkins to focus purely on its retail operation, which has growth potential.
Provisions for unrealised losses in the unquoted portfolio managed by Nova have
been increased by £498,081 in the period under review.
The two AIM listed investments, Tikit and i-documentsystems, have traded
reasonably within the period, although there is very limited market liquidity in
the shares. The combined value of these two quoted shares has declined by 10.8%
in the period under review
VCF LLP (VCF)
Twelve technology investments have been made by VCF including its recent
investment in Broadreach Networks. Broadreach provides broadband internet
access via both fixed-terminals and wireless local area networks ('WiFi
hotspots') in public locations operated throughout the UK under the
ReadytoSurfTM brand name. VCF led the investment round that also included Intel,
BT and Virgin.
A further advance of funds was made to Oxonica in the period based on milestone
criteria agreed at the time of the original investment in June 2002. Excellent
progress has been made at Oxonica resulting in the generation of commercial
revenue from its fuel additive product. The Company is one of the first UK
nanotechnology companies to generate commercial revenue.
Follow-on investments were made during the period, alongside other investors, in
Sarantel, ANT, Monactive and Alaric Systems. The four companies are winning new
business but at a slower rate than anticipated in a difficult trading climate.
The trading climate also led to a further provision to the cost of investment in
Heritage Image Partnership.
Unaudited Statement of Total Return
(incorporating the Revenue Account of the Company for the six months ended 31 March 2003)
Six months to 31 March 2003
(unaudited)
Notes Revenue Capital Total
£ £ £
Realised gains and losses on investments - (30,099) (30,099)
Unrealised gains and losses on investments - (499,118) (499,118)
Income 771,282 - 771,282
Investment management fees 4 (99,918) (299,755) (399,673)
Other expenses (206,198) - (206,198)
----------------- ----------------- -----------------
Return on ordinary activities before taxation 465,166 (828,972) (363,806)
Tax on ordinary activities (110,328) 69,706 (40,622)
----------------- ----------------- -----------------
Return attributable to equity shareholders 354,838 (759,266) (404,428)
Dividends in respect of equity shares - - -
----------------- ----------------- -----------------
Transfer to/(from) reserves 354,838 (759,266) (404,428)
========== ========== ==========
Return per share 6 0.85p (1.82)p (0.97)p
Six months to 31 March 2002
(unaudited)
Notes Revenue Capital Total
£ £ £
Realised gains and losses on investments - (118,664) (118,664)
Unrealised gains and losses on investments - (4,617,484) (4,617,484)
Income 1,083,884 - 1,083,884
Investment management fees 4 (117,476) (352,427) (469,903)
Other expenses (252,427) - (252,427)
----------------- ----------------- -----------------
Return on ordinary activities before taxation 713,981 (5,088,575) (4,374,594)
Tax on ordinary activities (221,956) 99,397 (122,559)
----------------- ----------------- -----------------
Return attributable to equity shareholders 492,025 (4,989,178) (4,497,153)
Dividends in respect of equity shares - - -
----------------- ----------------- -----------------
Transfer to/(from) reserves 492,025 (4,989,178) (4,497,153)
========== ========== ==========
Return per share 6 1.18p (11.94)p (10.76)p
Year to 30 September 2002
(audited)
Notes Revenue Capital Total
£ £ £
Realised gains and losses on investments - (393,904) (393,904)
Unrealised gains and losses on investments - (5,655,183) (5,655,183)
Income 2,151,739 - 2,151,739
Investment management fees 4 (203,825) (611,473) (815,298)
Other expenses (575,017) - (575,017)
----------------- ----------------- -----------------
Return on ordinary activities before taxation 1,372,897 (6,660,560) (5,287,663)
Tax on ordinary activities (424,405) 173,260 (251,145)
----------------- ----------------- -----------------
Return attributable to equity shareholders 948,492 (6,487,300) (5,538,808)
Dividends in respect of equity shares (731,009) - (731,009)
----------------- ----------------- -----------------
Transfer to/(from) reserves 217,483 (6,487,300) (6,269,817)
========== ========== ==========
Return per share 6 2.27p (15.52)p (13.25)p
Unaudited Balance Sheet
as at 31 March 2003
31 March 2003 31 March 2002 30 September 2002
(unaudited) (unaudited) (audited)
Notes £ £ £ £ £ £
Fixed Assets
Investments 7 31,333,564 33,542,113 29,986,724
------------- ------------- -------------
31,333,564 33,542,113 29,986,724
Current Assets
Debtors and prepayments 495,328 695,170 669,423
Other assets 323,051 - 2,651,158
Cash at bank 25,197 134,129 18,025
------------- ------------- -------------
843,576 829,299 3,338,606
Creditors: amounts falling
due within one year (408,005) (393,462) (1,137,947)
------------- ------------- -------------
Net current assets 435,571 435,837 2,200,659
------------- ------------- -------------
Net assets 31,769,135 33,977,950 32,187,383
------------- ------------- -------------
Capital and reserves 8
Called up share capital 417,470 418,015 417,720
Capital redemption reserve 545 - 295
Special reserve 39,059,851 - -
Share premium account - 39,091,574 39,073,671
Capital reserve - realised (1,679,210) (663,256) (1,198,879)
Capital reserve - (6,641,815) (5,400,381) (6,362,880)
unrealised
Revenue reserves 612,294 531,998 257,456
------------- ------------- -------------
Equity shareholders' funds 31,769,135 33,977,950 32,187,383
------------- ------------- -------------
Net asset value per share 76.10p 81.28p 77.05p
Summarised Cash flow Statement
Six months to Six months to Year to
31 March 31 March 30 September
2003 2002 2002
(unaudited) (unaudited) (audited)
Revenue Capital Total
£ £ £
Operating activities
Net revenue on activities before taxation 465,166 713,981 1,372,897
Taxation deducted at source on investment income - (10,274) (10,274)
Capitalised fees (326,574) (352,427) (611,473)
Decrease/(Increase) in debtors 174,095 (179,975) (154,228)
Decrease in creditors (39,555) (338,577) (433,736)
-------------- -------------- --------------
Net cash inflow/(outflow) from operating activities 273,132 (167,272) 163,186
Equity dividends paid (731,009) (501,618) (501,618)
Taxation paid - - (19,951)
Acquisitions of investments (15,979,053) (33,102,230) (42,092,881)
Disposals of investments 14,129,815 10,858,896 22,091,997
Management of liquid resources 2,328,107 1,730,436 (920,722)
Financing (13,820) - (17,903)
-------------- -------------- --------------
Increase/(decrease) in cash for the period 7,172 (21,181,788) (21,297,892)
-------------- -------------- --------------
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash for the period 7,172 (21,181,788) (21,297,892)
Net funds at the start of the period 18,025 21,315,917 21,315,917
-------------- -------------- --------------
Net funds at the end of the period 25,197 134,129 18,025
-------------- -------------- --------------
Unaudited Notes to the Financial Statements
1. Principal accounting policies
The following accounting policies have been applied consistently throughout the
period. Full details of principal accounting policies will be disclosed in the
Annual Report.
a) Basis of accounting
The accounts have been prepared under the historical cost convention, modified
to include the revaluation of investments, and in accordance with applicable
accounting standards and with the Statement of Recommended Practice, 'Financial
Statements of Investment Trust Companies'.
b) Investments
Listed investments and investments traded on AIM are stated at middle market
prices as at 31 March 2003. Unlisted investments are stated at Directors'
valuation, in accordance with the British Venture Capital Association ('BVCA')
guidelines. The Directors' policy in valuing unlisted investments is to carry
them at cost except in the following circumstances:
- where a company's under performance against plan indicates a diminution in the
value of the investment, provision against cost is made as appropriate in bands
of 25%;
- where a company is well-established and profitable, the shares may be valued
by applying a suitable price-earnings ratio to that company's historic post-tax
earnings (the ratio used being based on a comparable listed company or sector
but discounted to reflect lack of marketability);
- where a value is indicated by a material arms-length transaction by a third
party in the shares of a company.
Unquoted investments will not normally be re-valued upwards for a period of at
least twelve months from the date of acquisition.
Capital gains and losses on investments, whether realised or unrealised, are
dealt with in the capital reserve.
2. The revenue column of the statement of total return is the profit and loss
account of the Company.
3. All revenue and capital items in the above statement of total return derive
from continuing operations.
4. In accordance with the policy statement published under 'Management and
Administration' in the Company's prospectus dated 13 October 2000, the Directors
have charged 75% of the investment management expenses to the capital reserve.
5. Earnings for the six months to 31 March 2003 should not be taken as a guide
to the results for the full year.
6. Basic return per Ordinary Share is based on the net revenue on ordinary
activities after taxation and is based on a weighted average of 41,761,519
Ordinary Shares (31 March 2002: 41,801,516).
7. The financial information for the six months ended 31 March 2003 and the six
months ended 31 March 2002 has not been audited. The information for the year
ended 30 September 2002 does not comprise full financial statements within the
meaning of Section 240 of the Companies Act 1985. The financial statements for
the year ended 30 September 2002 have been filed with the registrar of
Companies. The auditors have reported on these financial statements and that
report was unqualified and did not contain a statement under Section 237(2) of
the Companies Act 1985.
8. Summary of investments during the period
Fixed Unlisted
interest Traded or traded Preference Qualifying
securities on AIM on OFEX Shares loans Total
£ £ £ £ £ £
Cost/Valuation at 30 18,767,073 927,808 2,696,369 208,333 7,387,141 29,986,724
September 2002
Purchases at cost 11,642,097 - 1,515,262 905,000 1,916,694 15,979,053
Sales - proceeds (13,485,852) - - - (643,963) (14,129,815)
- realised gains/losses (3,280) - - - - (3,280)
Increase/(decrease) in
unrealised gains/(losses) (160,525) (100,363) 76,270 - (314,500) (499,118)
--------------- --------------- ------------- --------------- ------------- ---------------
Cost/Valuation at
31 March 2003 16,759,513 827,445 4,287,901 1,113,333 8,345,372 31,333,564
--------------- --------------- ------------- --------------- ------------- ---------------
Book cost at 31 March 2003 17,109,030 1,035,249 7,033,396 1,113,333 11,684,371 37,975,379
Unrealised gains/(losses) at
31 March 2003 (349,517) (207,804) (2,745,495) - (3,338,999) (6,641,815)
--------------- --------------- ------------- --------------- ------------- ---------------
16,759,513 827,445 4,287,901 1,113,333 8,345,372 31,333,564
--------------- --------------- ------------- --------------- ------------- ---------------
Gains on investments
Unrealised gains(losses) at
30 September 2002 (409,175) (107,441) (2,821,765) - (3,024,499) (6,362,880)
Realised loss in period 220,183 - - - - 220,183
Net movement in unrealised
appreciation/(depreciation)
in the period (160,525) (100,363) 76,270 - (314,500) (499,118)
--------------- --------------- ------------- --------------- ------------- ---------------
Gains/(Losses) on
investments at
31 March 2003 (349,517) (207,804) (2,745,495) - (3,338,999) (6,641,815)
--------------- --------------- ------------- --------------- ------------- ---------------
9. Capital & reserves
Called up Capital Realised Unrealised
share redemption Special capital capital Revenue
capital reserve reserve reserve reserve reserve Total
£ £ £ £ £ £ £
At 1 October 2002 417,720 295 39,073,671 (1,198,879) (6,362,880) 257,456 32,187,383
Profit/(loss) on
disposal of
investments - - - (3,280) - - (3,280)
Increase in
unrealised
appreciation - - - - (499,118) - (499,118)
Realisation of
previously
unrealised
appreciation - - - (220,183) 220,183 - -
Capitalised
management fees
less tax charge - - - (230,049) - - (230,049)
Professional fees
charged to - - - (26,819) - - (26,819)
capital
Own shares
purchased in the
period (250) 250 (13,820) (13,820)
Retained net
revenue
for the period - - - - - 354,838 354,838
-------------- -------------- -------------- -------------- -------------- -------------- ------------
At 31 March 2003 417,470 545 39,059,851 (1,679,210) (6,641,815) 612,294 31,769,135
-------------- -------------- -------------- -------------- -------------- -------------- ------------
END
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