Final Results
Matrix Venture Fund VCT PLC
08 July 2005
Matrix Venture Fund VCT plc
Preliminary Results for the year ended 30 April 2005
Objective
The objective of Matrix Venture Fund VCT plc ("Matrix Venture Fund") is to
provide private investors with an attractive return from a portfolio of
investments in companies whose products or services depend, to a significant
extent, on the application of technology, including:
• internet and e-business;
• information technology; and
• telecommunications and media.
Venture Capital Trust Status
Matrix Venture Fund has satisfied the requirements as a Venture Capital Trust
under section 842AA of the Income and Corporation Taxes Act 1988, and the
Directors intend to conduct the business of the Company so as to continue to
comply with that section.
Performance Summary
30 April 2005 30 April 2004
Net asset value per Ordinary Share 92.10p 94.09p
Net assets £11,808,068 £12,260,703
Revenue and dividend
Loss per Ordinary Share (0.76)p (0.47)p
Dividend per Ordinary Share - -
Chairman's Statement
It is a pleasure to present the preliminary results of Matrix Venture Fund for
the year ended 30 April 2005.
Results for the year ended 30 April 2005
The total return (after tax) attributable to the Ordinary Shareholders was a
loss of £(298,352) (2004: gain of £3,866,431) and the net asset value per
Ordinary Share as at 30 April 2005 was 92.10 pence compared with 94.09 pence as
at 30 April 2004. The after tax revenue loss before net capital losses was
(0.76) pence per Ordinary Share for the year ended 30 April 2005 (2004: (0.47)
pence).
Investment Company Status
The Company revoked its investment company status on 7 July 2005 and this change
will enable the Fund to make distributions out of the capital gains that have
started to be realised as the portfolio matures.
Dividend
The Board will not be recommending a final dividend for the year ended 30 April
2005 as the revenue account had a negative balance at the year-end. Following
the realisation of sit-up Limited, the Directors propose to pay an interim
dividend of in the order of 6p per Ordinary Share (the payment and the timing of
such payment are subject to certain regulatory and accounting issues that need
to be resolved).
Overview
There have been significant changes to the investment and fundraising
environment since the initial fundraising five years ago. The Fund's performance
compares favourably with the TechMARK All-Share index over the same period and
should be seen in the context of a very challenging environment for technology
companies generally. The Board believes that Shareholders would benefit from a
broadening of the investment strategy beyond the historical focus exclusively on
the technology and media sectors. Considering investment propositions across all
sectors should lead to an increase in investment activity and, by focusing on
profitable and established businesses, enable the Fund to benefit from a greater
proportion of income generating investments. This in turn should enable the Fund
to deliver a more steady stream of dividend payments to Shareholders.
It is pleasing to note further exits from the Fund as it continues to mature. We
have now fully realised our investment in sit-up Limited which was sold, just
after the year-end, to Telewest Global Inc. in a transaction that returned £2.8m
in cash to the Fund. In total, the exit generated a money multiple of just over
3.3x on the amount invested. In July 2004, Espotting Media (UK) Limited was
acquired by FindWhat.com for shares (the combined entity has now been renamed
Miva Inc.). The Fund has partially realised its holding, recouping 94% of the
original cost and still holds a large proportion of the shares received in Miva.
The share price of Miva has declined substantially in value since the
acquisition was completed and the Manager is monitoring the position closely. We
have also made a partial realisation from our investment in Clearspeed
Technology plc, selling 38% of our holding for 2.8x the original cost.
The portfolio continues to show encouraging signs and a number of companies have
the potential to benefit from increased levels of merger and acquisition
activity. Details of the current venture capital portfolio as at 30 April 2005
are given in the Venture Capital Fund Adviser's Report below.
As at 30 April 2005, £9,375,139 had been invested in 17 companies. Two new
investments were completed in the financial year. Together, these 17 investments
represent an aggregate investment of 75.7% of the net funds raised under the
original public offer. As at 30 April 2005, Shareholders' funds were £11,808,068
after deducting net capital losses of £173,631. The investments held by the
Company have been valued in accordance with the British Venture Capital
Association guidelines. The investments that are quoted on AIM and the money
market securities are carried at market value.
Conclusion
In March last year, Matrix Private Equity, the Venture Capital Fund Adviser,
became a much larger VCT business following the merger with GLE Development
Capital (now Matrix Private Equity Partners Limited) and the addition of its
experienced VCT fund management team.
One of Matrix Private Equity's investment directors, Helen Sinclair, has decided
to leave the company. Helen has assisted in the management of the Company's
investments from its inception and I would like to take the opportunity to thank
her for her valuable contribution.
The Board has considered carefully how to maximise the benefit of this
significant additional resource, how to position the Fund in order to deliver a
steady flow of high quality and income generating investments and in particular,
how to provide the right platform to raise further funds via a C Share issue as
previously approved by Shareholders. The Board believes these objectives will be
best achieved by broadening the investment strategy beyond the technology sector
to encompass a more generalist investment approach with an increased ability to
invest in established and profitable businesses.
A Circular describing the changes recommended by the Board and setting out the
proposals in detail, together with a notice of an EGM, is being sent to
Shareholders in conjunction with this report and Shareholders are advised to
consider these proposals carefully.
I would like to take this opportunity to thank all Shareholders for their
continuing support of the Company and I very much hope to have the pleasure of
welcoming you to the Annual and Extraordinary General Meetings to be held on 11
August 2005.
Michael Cumming
Chairman
8 July 2005
Venture Capital Fund Adviser's Report
The Venture Capital Fund
Matrix Private Equity Limited advises the Company in respect of investments made
within the Venture Capital Fund. During the year ended 30 April 2005, the team
received and evaluated over 360 investment proposals, from which Matrix Venture
Fund made two new investments in Clearspeed Technology plc and Gyro
International Limited, at a total cost of £951,600.
We are pleased that there have been a number of successful exits from the
portfolio. In July 2004, Espotting Media (UK) Limited was acquired, primarily
for shares, by Nasdaq listed FindWhat.com (now renamed Miva Inc.). The Fund has
realised just over 16% of its holding in Miva to date for £581,382 (against an
investment cost of £612,323). The remaining holding in Miva therefore largely
represents the profit from the original investment although the share price has
declined significantly since the deal completed. We are monitoring the company
and the share price closely. The Fund also took advantage of a strong market
post float to sell 38% of the Clearspeed holding to recover the original cost of
the investment. Again, cash receipts of £215,135 against an original investment
cost of £201,600 means that our remaining holding largely represents the profit
from the original investment. The third exit was sit-up Limited following its
acquisition by Telewest Global Inc. for cash just after the year-end. This has
been a very successful investment for the Fund generating an overall internal
rate of return of 37% and £3.09m in cash was realised from an investment that
cost £925,104.
During the year we have revalued our investment in FootFall upwards following
continued strong trading and early indications of interest from potential trade
purchasers. We have also written down our investment in Monactive Limited due
to the company trading below forecast.
The current investment portfolio of the Company as at 30 April 2005 is detailed
below.
Award International Holdings plc
Award provides its client base with promotional goods and services designed to
increase brand awareness among consumers and to support their marketing
campaigns. The company floated on AIM in March 2004 raising £2.25m to provide
working capital to facilitate growth. The performance of the business has been
below expectations and this is reflected in the share price performance post
float.
Results from the latest audited accounts for the 16 months ended 30 September
2004: turnover £4,208,931; profit before tax £6,573; net assets £1,709,875.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
March 2004 £250,000 £56,250 7.69% 0.47%
Callserve Communications Limited
The company provides internet telephony services or Voice over Internet Protocol
("VolP") from PCs to telephones. The Fund invested as part of a syndicate
raising £7.3m to finance the roll-out of the service. The company has reduced
its cost base and continues to generate significant revenues but has not yet
achieved sustained profitability.
Results from the latest audited accounts for the 9 months ended 31 December
2003: turnover £6,347,166; loss before tax £510,453; net liabilities £4,321,490.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
October 2000 £300,000 £150,000 0.76% 1.27%
Clarity Commerce Solutions plc
The company provides Electronic Point of Sale ("EPOS") solutions, Customer
Relationship Management ("CRM") products and services to the UK hospitality and
leisure markets. It floated on AIM in July 2000, raising £2.5m primarily to
increase its marketing activities and acquire two small complementary
businesses. The company has continued to be acquisitive and has raised £2.6m
via rights issues in the last few years to finance acquisitions. The business
continues to grow and is now profitable.
Results from the latest audited accounts for the year ended 31 March 2004:
turnover £13,325,000; profit before tax £511,000; net assets £9,021,000.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
July 2000/ £510,552 £472,055 4.00% 4.00%
August 2003
Clearspeed Technology plc
Clearspeed is an innovative parallel-processing semiconductor business which
floated on AIM in July 2004 raising £10.2m to finance further product
development. The Fund invested £201,600 on the float and, following a strong
share price performance, sold 39% of its holding for £215,135 in February 2005.
Results from the latest audited accounts for the year ended 31 December 2004:
turnover £247,000; loss before tax £4,028,000; net assets £9,015,000.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
July 2004 £124,954 £275,056 0.40% 2.33%
Flightstore Group plc
Flightstore raised £3m in March 2002 to develop an interactive shopping
experience on aircraft using existing seatback entertainment systems, with the
Fund investing £750,000. The Company floated on AIM in December 2003 at which
point the Fund realised approximately two thirds of its holding for £594,920.
The balance of the holding was subject to a lock-in period. The share price has
fallen significantly since the float, in an illiquid market, as the core
business has failed to perform.
Results from the latest audited accounts for the year ended 31 December 2003:
turnover £274,112; loss before tax £1,020,176; net assets £819,802.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
March 2001 £254,586 £24,711 3.16% 0.21%
FootFall Limited
FootFall provides business performance information that is derived from the
monitoring and analysis of pedestrian traffic flow in shopping centres and
retail outlets. The company raised £2.65m from a syndicate of investors in June
2002. The company has traded strongly post investment and has started to
attract significant interest from potential trade purchasers.
Results from the latest audited accounts for the year ended 31 March 2004:
turnover £5,168,660; profit before tax £410,219; net assets £3,209,845.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
June 2002 £750,000 £1,211,250 5.76% 10.26%
Gyro International Limited
Gyro is an established brand communications agency that provides
business-to-business direct marketing services to technology and financial
services companies. The company raised £3m in February 2005 to buy out one of
the founders and to provide growth capital.
Results from the latest audited accounts for Gyrogroup plc for the year ended 31
October 2004 (excluding the US operations): turnover £9,021,288; profit before
tax £707,152; net assets £21,419.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
February 2005 £750,000 £750,000 6.75% 6.36%
Magicalia Limited
Magicalia has established a network of eight community websites focussed on
enthusiast-based activities. It also has a growing online contract publishing
business whereby the company licenses its technology platform to existing online
publications. The company raised £1.1m from a syndicate of investors in March
2001. The business continues to trade well with strong growth in revenues.
Results from the latest audited accounts for the year ended 31 December 2003:
turnover £652,699; loss before tax £173,459; net assets £366,664.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
March 2001 £400,000 £400,000 12.73% 3.39%
Miva Inc. (formerly FindWhat.com)
FindWhat.com has now renamed itself Miva Inc. as it fully integrates a single
brand around the businesses it has acquired. In July 2004, Miva acquired
Espotting Media, in which the Fund originally invested, primarily for shares.
Miva is a Nasdaq listed company that develops and provides performance-based
marketing solutions for online businesses. The share price of Miva has been
volatile and has declined significantly from £10.92 when the merger was
announced to £4.41 at 30 April 2005. The Fund took advantage of a temporarily
strong market to sell just over 18% of its available holding in October 2004.
In conjunction with the cash consideration received on the merger, cash received
by the Fund to date is £581,382 against an original investment cost of £612,323.
The residual valuation of the Fund's holding is based on the share price at 30
April 2005.
Results from the latest audited accounts for the 12 months ended 31 December
2004: turnover $169,470,000; profit before tax $27,718,000; net assets
$287,679,000.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
December 2001/ August £487,833 £681,882 2.40% 5.78%
2002/ September 2003
Monactive Limited
Monactive is a leading provider of software asset management tools. The company
raised £1.75m from a syndicate of investors in March 2001, and a further
£500,000 in January 2003. The investment has been revalued downwards on the
basis of impairment due to underperformance against budget.
Results from the latest audited accounts for the year ended 31 July 2004:
turnover £966,442; loss before tax £350,914; net liabilities £1,911,422.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
March 2001/ £642,857 £256,000 13.60% 2.17%
January 2003
Recite Limited
The company provides a managed service combining content, software platform and
training that improves the effectiveness of sales forces of IT and telecoms
vendors. The Fund invested as part of a £1.6m transaction. The company
continues to trade profitably.
Results from the latest audited accounts for the year ended 30 April 2004:
turnover £2,387,825; profit before tax £107,258; net assets £102,093.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
September 2003 £1,000,000 £1,478,322 25.20% 12.52%
sit-up.com Limited
The company is one of the UK's leading TV retail groups. sit-up's live tv
channels, bid tv and price-drop tv, provide innovative and interactive auction
shopping formats. The Fund initially invested £500,000 as part of a £2.2m
syndicate. A further £150,000 was provided when the business raised over £5m of
expansion capital in March 2001 and £250,000 was invested in March 2002 as part
of a £1.65m loan syndicate. The loan was subsequently repaid. The business
raised approximately £5m of development capital in July 2002 and the Fund
invested £24,443 as part of that round. At the time of the original investment,
the company was pre-revenue but since then it has grown its revenues to in
excess of £200m in 2004 and is substantially profitable. In May 2005, Telewest
Global Inc. acquired sit-up in an all cash deal for approximately £194m. The
Fund has realised just over £2.8m in cash as a result, representing a very
positive internal rate of return of 37%, representing a money multiple of 3.3x.
Results from the latest audited accounts for the year ended 31 December 2004:
turnover £206,123,000; profit before tax £11,245,000; net assets £16,579,000.
% of Fund's
Date of investment Amount invested Valuation % of equity held net assets
October 2000/ £679,338 £2,803,404 1.59% 23.74%
February 2001/
July 2002
Statement of Total Return
Year ended 30 April 2005
Year ended 30 April 2005
Revenue Capital Total
£ £ £
Gains and losses on investments - (14,968) (14,968)
Income 187,898 - 187,898
Investment management fees (61,546) (184,639) (246,185)
Other expenses (225,097) - (225,097)
------------ ----------- ------------
Return on ordinary activities
before taxation (98,745) (199,607) (298,352)
Tax on ordinary activities - - -
---------- --------- ---------
Return attributable to equity
Shareholders (98,745) (199,607) (298,352)
Dividends in respect of equity shares - - -
------------ ------------ ------------
Transfer (from)/to reserves (98,745) (199,607) (298,352)
------------ ------------ ------------
Return to Shareholders per Ordinary
Share: (0.76)p (1.54)p (2.30)p
Year ended 30 April 2004
Revenue Capital Total
£ £ £
Gains and losses on investments - 4,082,514 4,082,514
Income 190,764 - 190,764
Investment management fees (51,598) (154,794) (206,392)
Other expenses (200,455) - (200,455)
------------ ----------- ------------
Return on ordinary activities
before taxation (61,289) 3,927,720 3,866,431
Tax on ordinary activities - - -
---------- --------- ---------
Return attributable to equity
Shareholders (61,289) 3,927,720 3,866,431
Dividends in respect of equity shares - - -
------------ ------------ ------------
Transfer (from)/to reserves (61,289) 3,927,720 3,866,431
------------ ------------ ------------
Return to Shareholders per Ordinary
Share: (0.47)p 29.94p 29.47p
The Statement of Total Return incorporates the profit and loss account of the
Company.
All revenue and capital items in the Statement of Total Return derive from
continuing operations.
The Company has only one class of business and derives its income from
investments in shares, securities, loans and bank deposits.
Balance Sheet
As at 30 April 2005
30 April 2005 30 April 2004
£ £
Fixed Assets
Venture capital investments 8,558,929 8,296,473
Money market investments 1,858,823 1,861,794
------------ ------------
10,417,752 10,158,267
Current Assets
Debtors and prepayments 61,491 111,559
Cash at bank 1,474,386 2,133,539
------------- -----------
1,535,877 2,245,098
Creditors: amounts falling due within
one year (145,561) (142,662)
----------- -----------
Net current assets 1,390,316 2,102,436
------------- -------------
Net assets 11,808,068 12,260,703
------------- -------------
Capital and reserves
Called up share capital 128,209 130,310
Capital redemption reserve 3,597 1,496
Cancelled share premium account 12,009,435 12,163,718
Capital reserve - realised (1,099,543) (621,505)
Capital reserve - unrealised 925,912 647,481
Revenue reserves (159,542) (60,797)
------------ --------------
11,808,068 12,260,703
------------ -------------
Net asset value per Ordinary Share 92.10p 94.09p
Cash Flow Statement
Year ended 30 April 2005
Year ended Year ended
30 April 30 April
2005 2004
£ £
Net cash outflow from operating activities (230,608) (193,083)
Taxation
UK corporation tax paid - -
----------- -----------
Net cash outflow (230,608) (193,083)
----------- -----------
Capital expenditure and financial
investment
Purchase of investments - equities and loan stock (952,574) (2,073,407)
Disposals of equities and loan stock 675,341 1,489,050
------------- -------------
Net cash outflow from investing activities (277,233) (584,357)
Dividends
Equity dividends paid - (66,994)
------------ -----------
Net cash outflow before financing
and liquid resource Management (507,841) (844,434)
Management of liquid resources
Movement in money market and investments 2,971 (218,409)
Financing
Purchase of own shares (154,283) (63,442)
----------- -----------
Net cash outflow from financing (154,283) (63,442)
----------- -----------
Net cash outflow for the year (659,153) (1,126,285)
------------ -----------
Notes to the financial statements for the year ended 30 April 2005
1 Return per Ordinary Share
The revenue return per Ordinary Share is based on the net loss from ordinary
activities after taxation of £98,745 (2004: loss of £61,289) and on 12,963,176
(2004: 13,118,408) Ordinary Shares, being the weighted average number of
Ordinary Shares in issue during the year.
The capital return per Ordinary Share is based on net realised capital gains of
£19,254 (2004: gain of £586,017), net unrealised capital losses of £218,861
(2004: gain of £3,341,703) and 12,963,176 (2004: 13,118,408) Ordinary Shares,
being the weighted average number of Ordinary Shares in issue during the year.
2. Net asset value per Ordinary Share
Net asset value per Ordinary Share is based on net assets at the end of the
year, and on 12,820,098 Ordinary Shares (2004: 13,031,004), being the number of
Ordinary Shares in issue on that date.
3. The financial information set out in these statements does not
constitute the Company's statutory accounts for the years ended 30 April 2005
and 30 April 2004 but is derived from those accounts. Statutory accounts for the
year ended 30 April 2004 have been delivered to the Registrar of Companies and
those for year ended 30 April 2005 will be delivered following the Company's
Annual General Meeting. The auditors have reported on those accounts: their
reports were unqualified and did not contain statements under Section 237 (2) or
(3) of the Companies Act 1985.
4. The Annual Report will be circulated by post to all Shareholders
shortly and copies will be available thereafter to members of the public from
the Company's registered office.
5. The Annual General Meeting will be held at 10.00 am on Thursday 11
August 2005 at the offices of Matrix Group Limited, One Jermyn Street, London
SW1Y 4UH.
END
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