Half Yearly Report

RNS Number : 2860B

Aberdeen Income & Growth VCT PLC

23 October 2009

 



Aberdeen Income and Growth VCT PLC

Interim Announcement for the six months ended 31 August 2009 (unaudited)         

The Directors announce the Interim Results of the above Company for the six months ended 31 August 2009.

Investment Manager's review

The general decline in worldwide financial markets continued until early March 2009, but since then some recovery has been evident and the markets have made steady progress. With almost 75% by value of the NAV invested in unlisted companies which are not subject to the same variations as the quoted markets, the Company has continued to provide comparatively good performance over the reporting period with the NAV total return down by only 0.5% since February 2009. There are some early signs of trade buyers re-emerging in a few sectors together with indications of an improvement in the AIM market. 

Trading conditions for the investee companies have continued to be reasonable during the reporting period; however, the Directors have considered it prudent to reduce the valuations of a small number of holdings in response to lower earnings forecasts. In contrast, the majority of our investments are trading in line with expectations and the Board has been able to increase some valuations, in particular, a 33% uplift in Silkwater Holdings (Cyclotech), a provider of specialist equipment to the oil and gas industry. The amount of new investment has been relatively modest during the period at £1.7 million, the vast majority in two new yielding unlisted investee companies. Going forward, the Board intends that an increased proportion of the portfolio is in unlisted investments each paying a significant level of yield which will support the continuing payment of dividends to Shareholders. The Company has cash resources available to take advantage of new opportunities and for additional investment in the existing portfolio of unlisted companies.

Performance

The net effect of the developments noted above and other, less significant, changes in the portfolio is that NAV total return per Ordinary Share at 31 August 2009 was 94.9p, down from 95.4p at 28 February 2009. 

The Net Asset Value (NAV) per Ordinary Share at 31 August 2009, after payment of the final dividend of 2p in respect of the year ended 28 February 2009, was 60.8p compared with 63.3p at 28 February 2009. 

Dividend policy

The Board believes that a policy of paying regular dividends, combined with continuing sound performance, should stimulate the secondary market in the Company's shares and lead to a reduction in the current discount to NAV. The Board is pleased to declare an interim dividend of 1.0p per Ordinary Share to be paid on 11 December 2009 to Shareholders on the Register at 13 November 2009.

The Company paid dividends totalling 3.0p to Ordinary Shareholders in respect of the year ended 28 February 2009. This represents a yield of 3.75% on the Ordinary Shares based on their net cost after initial tax relief. Based on the mid-market price of 37.5p at 31 August 2009, the equivalent yield is 8.0%. The yields are tax free and are, therefore, equivalent to 10.7% to a higher-rate taxpayer.

Share Buy-backs

The Company's Ordinary Shares continue to trade at a significant discount to NAV, the discount having widened during the recent adverse market conditions. The Board is, therefore, making modest market purchases of shares from time to time with the aim of improving the market in the Company's shares. The share price of the Company is at odds with the underlying quality of the highly diversified private company and AIM/PLUS portfolios, and the Board believes that this buy-back programme should assist in this regard.

Investment activity

During the six-month period ended 31 August 2009, two new unlisted investments were completed and a total of £1,733,000 was invested. At the period end, the portfolio stood at 67 unlisted and AIM/PLUS quoted investments at a total cost of £25.8 million. 

The following investments have been completed during the period:

Investment	Date	Activity	Investment cost £'000	Website
Unlisted
Adler & Allan Holdings	July 2009	Provider of services for the handling and disposal of liquid waste.	124	www.adlerandallan.co.uk
Dalglen (1150) (trading as Walker Technical Resources)	June 2009	Provider of services to the energy sector, specialising in pipeline repairs.	527	www.wtr.uk.com
Lawrence Recycling and Waste Management	March 2009	Operator of material recycling facility.	181	www.lawrenceskiphire.co.uk
Martel Instruments Holdings	March 2009	Manufacturer of compact, hand-held printers and display devices.	12	www.martelinstruments.com
Transys Holdings	August 2009	Provider of engineering services to the rail industry.	292	www.transysprojects.ltd.uk
MC440 (trading as Westway Cooling)	June 2009	Provider of design, installation and maintenance services on air-conditioning and associated building services plant.	597	www.westwaycooling.co.uk
Total investment			1,733

Since 31 August 2009, one further new investment has been made at a cost of £6,000.

Aberdeen Income and Growth VCT has co-invested with Aberdeen Growth Opportunities VCT, Aberdeen Growth Opportunities VCT 2, Aberdeen Growth VCT I, Gateway VCT, Ortus VCT (formerly Guinness Flight Venture Capital Trust) and Talisman First Venture Capital Trust, in some or all of the above transactions and is expected to continue to do so with these as well as other clients of the Manager. The advantage is that, together, the funds are able to underwrite a wider range and size of transaction than would be the case on a stand alone basis.

Portfolio developments

There were relatively few realisations during the period, driven to a large extent by the prevailing economic conditions. In particular, there has been limited liquidity in the AIM market which has curtailed active trading of that portfolio, although there have been some signs of liquidity returning in the latter part of the reporting period and limited trading in AIM stocks has been possible more recently. We traded out of two holdings during the period; Optare, where the stock has gone out of favour and losses arose; and Concateno which proved a very successful investment, generating a gain of over 27% for the Company since first purchasing the holding in 2006. During the period, Voxsurf was struck off the Register and the holding is, therefore, shown as realised at a significant loss. However, the investment had previously been fully provided for and the NAV was, therefore, unaffected.

The FTSE AIM All-share index increased by 52.4% over the six months to 31 August 2009, in a reversal of the falls experienced last year. In comparison, the value of the Company's AIM/PLUS portfolio increased by 23.0% over the period. However, this statistic is not representative of the underlying performance of the AIM/PLUS portfolio as a whole. The Company has not invested in the more volatile sectors of AIM and, consequently, did not suffer from the large falls seen in the AIM indices in 2008. The underlying performance of the businesses in the AIM/PLUS portfolio, with few exceptions, remains sound and this is expected to continue. As more liquidity returns to the AIM market, it is expected that share prices will recover further, although the timing of this is uncertain.

Investments realised

The table below gives details of realisations during the reporting period.

	Year first invested	Complete/ partial exit	Cost of shares disposed of £'000	Sales proceeds £'000	Realised gain/ (loss) £'000
Unlisted
Energy Services Investment Company (ESIC)	2007	Complete	745	745	-
House of Dorchester	2002	Partial	76	76	-
Transys Holdings	2007	Partial	242	242	-
Voxsurf1	2000	Complete	750	-	(750)
Total unlisted disposals			1,813	1,063	(750)
AIM
Animalcare Group	2008	Partial	2	3	1
Avanti Communications Group	2007	Partial	210	318	108
Brookwell	2008	Partial	36	15	(21)
Concateno	2006	Complete	332	404	72
Optare	2007	Complete	26	7	(19)
Total AIM disposals			606	747	141
Total disposals			2,419	1,810	(609)

1 The realisation of the previously recognised loss did not affect the movement in Net Asset Value over the six months ended 31 July 2009. 

Principal risks and uncertainties 

The Board has reviewed the principal risks and uncertainties facing the Company in the second half of its financial year; these are unchanged from those it faced at the start of the year, being the risks involved in investment in small and unquoted companies. In order to reduce the exposure to investment risk, the Company has invested in a broadly-based portfolio of holdings in unlisted and AIM/PLUS quoted companies in the United Kingdom. The Company remains compliant with the regulations governing venture capital trusts and the Manager closely monitors the position of the Company to ensure that it complies with the various tests at all times. 

Constitution of the Board

Being mindful of the requirements of the Combined Code in relation to the impact that an extended period of service may have on directors' independence, and of the guidance offered by the AIC in this regard, the Board has conducted a review of its composition and is actively considering succession planning. Advisers will be appointed in due course and, other than for a short-term handover period, it is intended that the total number of Directors will remain at four. Shareholders will be advised of any proposed changes to the constitution of the Board as soon as any formal decisions have been taken.

As required under Company Law, any new Directors to be appointed will stand for re-election at the first Annual General Meeting following their appointment.

Manager and Company Secretary

On 9 June 2009, the senior members of the Private Equity Division at Aberdeen Asset Managers (Aberdeen) formed Maven Capital Partners UK LLP (Maven) and completed a management buy-out. This team was previously wholly responsible for the management of all Aberdeen VCTs and continues in that role with substantially the same staff who operate from a network of offices across the UK. There will be no change in the level of investment management, administrative and company secretarial services which are provided and the Company has, therefore, novated the investment management agreement to Maven.

VAT recovery

Discussions continue with Aberdeen regarding the recovery of VAT paid on investment management fees up to 30 September 2008. Aberdeen is in negotiation with HMRC and the Board and Maven, as Manager, will seek early settlement of the amounts due. 

VCT qualifying status

The VCT qualifying status of your Company is reviewed regularly by your Board and monitored on a continuous basis by the Manager to ensure that all of the criteria required to maintain VCT status are being achieved. 

Outlook

In general, the performance of the quoted markets has been volatile and, notwithstanding recent increases in market indices generally, we believe conditions will remain fragile for some time. Opportunities to invest in companies seeking to achieve an IPO on AIM continue to be limited and little change is expected in the short term. Over the next twelve months, the Manager intends to take profit opportunities as liquidity permits from the AIM/PLUS portfolio. Realisations from the unlisted portfolio may also arise but these are much less predictable, although also much more significant in terms of the amounts involved. The Board has a medium term objective of increasing the proportion of unlisted assets within the portfolio with an emphasis on a paid yield; the achievement of this will depend in the short term on the timing of realisations from both elements of the portfolio. Private company assets are available at more attractive entry multiples than in the recent past and the Manager continues to utilise its national network to acquire suitable assets with attractive yields. This approach will leave the Company less exposed to fluctuations in the quoted markets and, over time, may improve the revenue available for distribution to Shareholders.

Aberdeen Income and Growth VCT PLC
Summary of Investment Changes
For the six months ended 31 August 2009
	Valuation  28 February 2009		Net investment/ (disinvestment)	Appreciation/ (depreciation)	Valuation  31 August 2009
	£'000	%	£'000	£'000	£'000	£'000
Unlisted investments
Equities	3,910	17.5	36	185	4,131	19.2
Preference shares	1,363	6.1	-	(301)	1,062	4.9
Loan stock	10,619	47.5	634	(719)	10,534	49.0
	15,892	71.1	670	(835)	15,727	73.1
AIM/PLUS investments
Equities	2,019	9.0	(747)	463	1,735	8.1
Listed investments
Fixed income	2,921	13.1	(18)	(40)	2,863	13.3
Total investments	20,832	93.2	(95)	(412)	20,325	94.5
Other net assets	1,539	6.8	(366)	-	1,173	5.5
Net assets	22,371	100.0	(461)	(412)	21,498	100.0

Aberdeen Income and Growth VCT PLC
Investment Portfolio Summary
As at 31 August 2009
	Valuation	Cost	% of net	% of equity	% of equity held by other
Investment	£'000	£'000	assets	held	clients1
Unlisted
House of Dorchester	1,649	834	7.7	44.2	-
Transys Holdings	1,600	2,771	7.4	31.7	40.1
Funeral Services Partnership	1,119	970	5.2	6.9	23.0
Oliver Kay Holdings	895	771	4.2	4.9	15.1
Silkwater Holdings (trading as Cyclotech)	839	348	3.9	4.8	15.3
Homelux Nenplas	838	391	3.9	8.9	36.1
Dalglen 1148 (trading as PSP/AHC)	825	1,075	3.8	17.5	57.5
Martel Instruments Holdings	807	807	3.7	13.1	25.6
Camwatch	786	786	3.6	12.8	24.7
Atlantic Foods Group	664	522	3.1	2.9	5.9
Steminic	656	656	3.1	9.3	28.5
Lawrence Recycling & Waste Management	647	647	3.0	8.2	41.8
Adler & Allan Holdings	623	623	2.9	2.2	4.7
MC440 (trading as Westway Cooling)	597	597	2.8	4.9	17.1
Dalglen (1150) (trading as Walker Technical Resources)	527	527	2.5	11.3	51.7
Training For Travel Group	510	446	2.4	5.1	24.9
Nessco Group Holdings	472	472	2.2	6.2	31.6
ELE Advanced Technologies	471	192	2.2	11.3	-
PLM Dollar Group	402	402	1.9	4.7	25.5
TC Communications Holdings	199	199	0.9	4.1	31.2
PSCA International	154	154	0.7	-	-
Countcar	143	21	0.7	6.9	19.6
Enpure Holdings	137	100	0.6	0.4	4.1
Other unlisted investments	167	6,449	0.7
Total unlisted	15,727	20,760	73.1
AIM/PLUS
System C Healthcare	282	311	1.3	0.5	0.5
Animalcare Group (formerly Ritchey)	212	146	1.0	1.3	3.2
AMZ Holdings (formerly Amazing Holdings)	170	251	0.8	0.8	1.4
Avanti Communications Group	119	73	0.6	0.1	0.2
Melorio	118	98	0.5	0.3	2.5
Cello Group	118	310	0.5	0.8	0.3
Hasgrove	101	168	0.5	0.6	1.1
OPG Power Ventures	95	81	0.4	0.1	0.4
Plastics Capital	70	281	0.3	1.0	2.7
Betbrokers	60	132	0.3	0.4	1.5
Tangent Communications	45	98	0.2	0.4	0.8
Brookwell	45	100	0.2	-	-
Neutrahealth	33	91	0.2	0.6	1.3
Brulines Group	32	37	0.2	0.1	0.3
Leisure & Gaming	29	314	0.1	0.3	0.3
Mount Engineering	26	35	0.1	0.2	2.3
Neuropharm Group	23	100	0.1	0.2	0.5
Formation Group	22	105	0.1	0.3	1.0
Praesepe (formerly Aldgate Capital)	22	49	0.1	0.1	0.9
SDI Group	21	96	0.1	0.2	0.4
Individual Restaurant Company	18	133	0.1	0.2	0.5
Spectrum Interactive	18	209	0.1	0.7	0.9
Essentially Group	17	49	0.1	0.2	2.5
Other AIM/PLUS investments	39	1,790	0.2
Total AIM/PLUS	1,735	5,057	8.1
Listed fixed income
Treasury 5.75% 31/12/09	1,623	1,605	7.5
Treasury 4.75% 7/6/10	1,240	1,214	5.8
Total listed fixed income	2,863	2,819	13.3
Total investments	20,325	28,636	94.5
1Other clients of Maven Capital Partners UK LLP.

Aberdeen Income and Growth VCT PLC
Income Statement
	Six months ended 31 August 2009 (unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Investment income and deposit interest	586	-	586
Investment management fees	(32)	(127)	(159)
Other expenses	(85)	-	(85)
Losses on investments	-	(412)	(412)
Profit/(loss) on ordinary activities before taxation	469	(539)	(70)
Tax on ordinary activities	(127)	35	(92)
Profit/(loss) on ordinary activities after taxation	342	(504)	(162)
Earnings per share (pence)	0.97	(1.43)	(0.46)

Aberdeen Income and Growth VCT PLC
Income Statement
	Six months ended 31 August 2008 (unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Investment income and deposit interest	870	-	870
Investment management fees	(31)	(122)	(153)
Other expenses	(86)	-	(86)
Losses on investments	-	(719)	(719)
Profit/(loss) on ordinary activities before taxation	753	(841)	(88)
Tax on ordinary activities	(205)	37	(168)
Profit/(loss) on ordinary activities after taxation	548	(804)	(256)
Earnings per share (pence)	1.5	(2.2)	(0.7)

Aberdeen Income and Growth VCT PLC
Income Statement
	Year ended 28 February 2009 (audited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Investment income and deposit interest	1,509	-	1,509
Investment management fees	(62)	(250)	(312)
Other expenses	(204)	-	(204)
Losses on investments	-	(3,000)	(3,000)
Profit/(loss) on ordinary activities before taxation	1,243	(3,250)	(2,007)
Tax on ordinary activities	(176)	(46)	(222)
Profit/(loss) on ordinary activities after taxation	1,067	(3,296)	(2,229)
Earnings per share (pence)	3.0	(9.3)	(6.3)
A Statement of Total Recognised Gains and Losses has not been prepared, as all gains and losses are recognised in the Income Statement.
All items in the above statement are derived from continuing operations. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.
The total column of this statement is the Profit and Loss Account of the Company.
The accompanying Notes are an integral part of the Financial Statements.

Aberdeen Income and Growth VCT PLC
Reconciliation of movements in Shareholders' funds
	Six months ended 31 August 2009	Six months ended  31 August 2008	Year ended 28 February 2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Opening Shareholders' funds	22,371	25,802	25,802
Total loss for the year	(162)	(256)	(2,229)
Repurchase and cancellation of shares	(4)	-	(32)
Dividends paid - revenue	(707)	(816)	(1,170)
Closing Shareholders' funds	21,498	24,730	22,371
The accompanying Notes are an integral part of the Financial Statements.

Aberdeen Income and Growth VCT PLC
Balance Sheet
	31 August	31 August	28 February
	2009	2008	2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Fixed assets
Investments at fair value through profit or loss	20,325	23,761	20,832
Current assets
Debtors	1,000	652	802
Cash and overnight deposits	514	659	1,110
	1,514	1,311	1,912
Creditors
Amounts falling due within one year	341	342	373
Net current assets	1,173	969	1,539
Net assets	21,498	24,730	22,371
Capital and reserves
Called up share capital	3,535	3,546	3,535
Share premium account	17,235	17,235	17,235
Realised capital reserve	(1,269)	2,445	(568)
Unrealised capital reserve	(7,636)	(8,354)	(7,833)
Capital redemption reserve	350	339	350
Profit and loss account	9,283	9,519	9,652
Net assets attributable to Ordinary Shareholders	21,498	24,730	22,371
Net Asset Value per Ordinary Share (pence)	60.8	69.7	63.3
The accompanying Notes are an integral part of the Financial Statements.

Aberdeen Income and Growth VCT PLC
Cash Flow Statement
	Six months	Six months	Year ended
	ended 31 August 2009	ended 31 August 2008	28 February 2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Operating activities
Investment income received	415	850	1,314
Deposit interest received	-	10	23
Investment management fees paid	(239)	(77)	(232)
Secretarial fees paid	(43)	(14)	(44)
Directors' fees and expenses paid	(30)	(30)	(60)
Other cash payments	(65)	(42)	(74)
Net cash inflow from operating activities	38	697	927
Taxation
Corporation tax	-	-	(43)
	-	-	(43)
Financial investment
Purchase of investments	(1,733)	(3,899)	(5,349)
Sale of investments	1,810	4,405	6,505
Net cash inflow from financial investment	77	506	1,156
Equity dividends paid	(707)	(816)	(1,170)
Net cash (outflow)/inflow before financing	(592)	387	870
Financing
Purchase of Ordinary Shares	(4)	-	(32)
Net cash outflow from financing	(4)	-	(32)
(Decrease)/increase in cash	(596)	387	838
The accompanying Notes are an integral part of the Financial Statements.

Aberdeen Income and Growth VCT PLC 

Notes to the Financial Statements

1. Accounting policies

The financial information for the six months ended 31 August 2009 and the six months ended 31 August 2008 comprises non-statutory accounts within the meaning of the Companies Act 2006. The financial information contained in this statement has been prepared on the basis of the accounting policies set out in the Annual Report and Financial Statements for the year ended 28 February 2009.

The results for the year ended 28 February 2009 are extracted from the full accounts for that year, which received an unqualified report from the Auditors and have been filed with the Registrar of Companies.

2. Movement in reserves

	Share premium account	Realised capital reserve	Unrealised capital reserve	Capital redemption reserve	Profit and loss account
	£'000	£'000	£'000	£'000	£'000
At 28 February 2009	17,235	(568)	(7,833)	350	9,652
Losses on sales of investments	-	(609)	-	-	-
Net increase in value of investments	-	-	197	-	-
Investment management fees	-	(127)	-	-	-
Dividends paid	-	-	-	-	(707)
Tax effect of capital items	-	35	-	-	-
Repurchase and cancellation of shares	-	-	-	-	(4)
Profit on ordinary activities after taxation	-	-	-	-	342
As at 31 August 2009	17,235	(1,269)	(7,636)	350	9,283

3. Returns per Ordinary Share

The returns per Ordinary Share are based on the following figures:

	Six months ended
	31 August 2009
	£'000
Weighted average number of Ordinary Shares in issue	35,353,006
Revenue return	£342,000
Capital return	(£504,000)

Other information

The Net Asset Value per Ordinary Share has been calculated using the number of Ordinary Shares in issue at 31 August 2009 of 35,345,071.

A summary of investment changes for the six months under review and an investment portfolio summary as at 31 August 2009 are included above.

A full copy of the Interim Report and Financial Statements will be printed and issued to Shareholders. 

Copies of this announcement will be available to the public at the office of Maven Capital Partners UK LLP, 149 St Vincent Street, Glasgow G2 5NW and at the registered office of the Company, 5th Floor, 9-13 St Andrew Street, London EC4A 3AF.

Directors' responsibility statement 

The Directors confirm that, to the best of their knowledge:

• the Financial Statements for the six months ended 31 August 2009 have been prepared in accordance with applicable accounting standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' ('the SORP') issued in December 2005;

• the Interim Management Report includes a fair review of the information required by DTR 4.2.7R in relation to the indication of important events during the first six months, and of the principal risks and uncertainties facing the Company during the second six months, of the year ending 28 February 2010; and

• the Interim Management Report includes adequate disclosure of the information required by DTR 4.2.8R in relation to related party transactions and any changes therein.

On behalf of the Board

Maven Capital Partners UK LLP

Secretary

23 October 2009

 

END

 

 

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