Interim Results
Matrix Venture Fund VCT PLC
19 January 2004
ANOUNCEMENT OF INTERIM RESULTS FOR THE PERIOD ENDED 31 OCTOBER 2003
MATRIX VENTURE FUND VCT PLC
CHAIRMAN'S STATEMENT
I have pleasure enclosing the Interim Report and Financial Statements of Matrix
Venture Fund VCT plc for the period from 1 May 2003 to 31 October 2003.
The net asset value per Ordinary Share at 31 October 2003 was 82.09 pence
(compared with 64.39 pence as at 30 April 2003 and 69.28 pence as at 31 October
2002) representing an increase of approximately 28% since the year-end.
Overview
The trading environment for technology businesses has been challenging but has
improved in recent months. This progress can be seen in the improved
performance of the majority of our current investee companies which have shown
increased revenue growth year on year and are now profitable. After the period
end the Fund has secured its first successful exits. Details of the current
portfolio are given in the Venture Capital Fund Adviser's Report that follows.
New Investments
In the period under review, the Fund made two new investments and two further
investments to support existing portfolio companies. It invested £1,000,000 in
Recite Limited, a mature, profitable software company. An investment of
£500,000 was made in Centurion Electronics plc, an AIM listed investment, at a
price of 63 pence. The share price moved sharply upwards post investment and
some of the Fund's shares have been sold during the period at a significant
uplift in value. The middle market share price at the close of business on 16
January 2004 was 143.59 compared to the middle market price on 31 October 2003
of 113.5p. A further £260,000 was invested in Clarity, to support a substantial
acquisition as part of a £750,000 funding round and £62,323 was also invested
into a loan note in Espotting as part of a $5m facility.
Exits from the portfolio
It is pleasing to note the first exits from the portfolio. In addition to the
partial disposal of Centurion, mentioned above, the Fund took the opportunity to
dispose of two-thirds of its holding in Flightstore, which the Manager had
backed as a start-up, when it floated on AIM on 12 December 2003 realising
£594,920 and giving a remaining holding valued, at float, at £316,827 from an
initial investment of £750,000. The shares have traded at a premium since float
providing a further uplift in value. Espotting has continued detailed merger
discussions with Nasdaq listed FindWhat.com.
Return to shareholders
The results for this period are set out on the following pages and show a
revenue return (after tax) attributable to Ordinary Shareholders of 0.33 pence
per Ordinary Share (31 October 2002: 0.35 pence). The total return (after tax)
attributable to Ordinary Shareholders was 17.7 pence per Ordinary Share (31
October 2002: Loss 1.07 pence).
Dividend
As last year, the Board is not recommending the payment of an interim dividend.
I would like to take this opportunity to thank all Shareholders for their
continuing support of the Company. I intend to circulate a letter to
Shareholders in February reporting on the quarter to 31 January 2004 and my next
full statement will be in respect of the year to 30 April 2004.
M Cumming
Chairman
19 January 2004
VENTURE CAPITAL FUND ADVISER'S REPORT
As at 31 October 2003, the Fund held ten venture capital investments, summarised
details of which are set out below. In the six months to 31 October 2003 the
team evaluated over 220 business plans. The Fund completed a new investment of
£1,000,000 into Recite Limited, which provides software and services to improve
sales force effectiveness. The Fund also invested £500,000 in Centurion
Electronics plc, an AIM listed provider of in-car entertainment systems. The
fund has made two follow on investments of £260,000 in Clarity and £62,323 in
Espotting.
Sentiment has improved over the last six months. The AIM market has seen an
increased number of new issues, and the market for technology businesses seeking
to float is looking increasingly positive. We have had our first successful
flotation on 12 December 2003, of our start-up investment, Flightstore.
Discussions continue on the merger of our investee company, Espotting, with
Nasdaq listed FindWhat.com.
As outlined below we continue to work closely with our current portfolio, which
comprises: -
COMPANY BUSINESS COST VALUATION
30-Apr-2003 31-Oct-2003
Callserve Voice over Internet Protocol £300,000 £150,000 £150,000
Communications Limited
Callserve provides prepaid Internet Telephony services (or Voice over Internet Protocol, "VoIP") from
PC's to telephones, worldwide. The company continues to generate substantial revenues and has made good
progress on reducing its cost base.
Centurion Electronics plc Automotive electronics £279,936 - £504,111
(AIM listed)
Centurion is a leading provider of multimedia electronics for in-car entertainment. The company sells
through dealer networks, large retailing groups and also has contracts to supply equipment directly to
leading automotive manufacturers. Sales growth has been strong and the company is profitable. The
Fund has sold shares which cost £220,500 for net proceeds of just over £395,000 representing an uplift
of 79%.
Clarity Commerce Solutions Customer Relationship Management £510,000 £117,000 £515,296
plc software for hospitality/leisure
venues
(AIM listed)
Clarity, which is listed on AIM, provides EPOS solutions to hospitality and leisure companies. Clarity
has been highly acquisitive, acquiring other synergistic software companies. The Fund invested a
further £260,000 in a £750,000 institutional fundraising to finance Clarity's acquisition of
PacerCATS, an international software company, in July 2003.
Espotting Media (UK) Limited Performance based internet search £612,323 £732,471 £1,701,135
engine
Espotting is the European market leader in performance-based advertising through Internet search
engines. The company has achieved very high revenue growth throughout the period. As mentioned in the
Annual Report, Espotting is continuing discussions with FindWhat.com after acceptance of a bid that
gives the Fund a significant uplift in value. The valuation has therefore been increased to take
account of this third party offer for Espotting although it has been discounted to reflect the fact
that the deal has not yet been completed.
Flightstore Group plc Inflight retail services £750,000 £375,000 £911,747
(now AIM listed)
Flightstore uses the existing seat back entertainment system to create an airline branded, electronic
and interactive magazine experience on long haul flights. The service has been installed on 6
airlines to date, including Continental, Northwest and Swiss. The business was floated on AIM on 12
December 2003 and has been valued at the flotation price, although the share price has traded at a
consistent premium since that date giving a potential further uplift to the valuation shown above.
After the period end the Fund realised approximately two thirds of its holding for cash on float.
FootFall Limited People counting services £750,000 £750,000 £750,000
FootFall provides business performance information derived from monitoring and analysing pedestrian
traffic in shopping centres and retail outlets. It has significant operations in France, Spain,
Portugal and Italy as well as being the UK market leader. It is growing well and has developed a
strong repeat revenue stream.
Magicalia Limited Community websites £400,000 £400,000 £400,000
Magicalia has a network of six community websites supporting enthusiast-based participation sports
such as cycling, golf, fishing and sailing. It also has a growing online contract publishing
business.
Monactive Limited Software asset management £642,857 £642,857 £405,000
tools & services
Monactive provides a range of software asset management tools. The Fund has been instrumental in the
appointment of a new Chairman in the business, and the company has successfully reduced its monthly
cash burn. The last quarters' performance has been encouraging. This business has been revalued
downwards on the basis of 'impairment', due to underperformance to budget.
Recite Limited Sales support software £1,000,000 - £1,478,322
Recite provides a managed service combining content, methodology, tools and technology that improve
the effectiveness of large sales forces. The company has a strong track record of profitability and
has a blue chip customer base. The business has been valued on a multiple of earnings basis.
Sit-up.com Limited Interactive auction TV £677,881 £459,188 £677,881
Sit-up.com operates two interactive TV shopping channels. The first service is Bid-up.TV, the UK's
first TV-based, interactive auction channel, the second is Price-drop.TV, the first 'falling price'
auction channel. Initial performance of the price-drop channel has been very encouraging. Turnover
across the group continues to grow strongly. The business has been valued upwards on the basis of
improved trading leading to an increase in fair value.
Further details of each company's activities are included in the Annual Report
and Accounts for the Company published in July 2003 or can be viewed through the
Matrix Private Equity website at www.matrixpe.com.
Matrix Private Equity Limited
Venture Capital Fund Adviser
19 January 2004
STATEMENT OF TOTAL RETURN
6 months ended Year ended
31 October 2003 30 April 2003
Notes Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Unrealised gains and
losses on investments - 2,261,875 2,261,875 - (634,932) (634,932)
Realised gains and
losses on investments - 174,511 174,511 - (45,590) (45,590)
Income 78,262 - 78,262 349,189 - 349,189
Management fees 3 (22,617) (67,850) (90,467) (39,785) (119,353) (159,138)
Other expenses (98,928) - (98,928) (227,921) - (227,921)
------------ ------------ ------------ ------------ ------------ ------------
Return on ordinary
activities before
taxation (43,283) 2,368,536 2,325,253 81,483 (799,875) (718,392)
Tax on ordinary
activities - - - (14,396) 15,110 714
------------ ------------ ------------ ------------ ------------ ------------
Return attributable to
equity shareholders (43,283) 2,368,536 2,325,253 67,087 (784,765) (717,678)
Dividend in respect of
equity shares - - - (66,994) - (66,994)
------------ ------------ ------------ ------------ ------------ ------------
Transfer to/(from)
reserves (43,283) 2,368,536 2,325,253 93 (784,765) (784,672)
------------ ------------ ------------ ------------ ------------ ------------
Return per ordinary
share 4 (0.33)p 18.03p 17.70p 0.51p (5.96)p (5.45)p
6 months ended
31 October 2002
Notes Revenue Capital Total
£ £ £
Unrealised gains and
losses on investments - (97,932) (97,932)
Realised gains and
losses on investments - (21,940) (21,940)
Income 205,456 - 205,456
Management fees 3 (25,865) (77,596) (103,461)
Other expenses (122,561) - (122,561)
------------ ------------ ------------
Return on ordinary
activities before
taxation 57,030 (197,468) (140,438)
Tax on ordinary
activities (10,719) 10,719 -
------------ ------------ ------------
Return attributable to
equity shareholders 46,311 (186,749) (140,438)
Dividend in respect of
equity shares - - -
------------ ------------ ------------
Transfer to/(from)
reserves 46,311 (186,749) (140,438)
------------ ------------ ------------
Return per ordinary
share 4 0.35p (1.42)p (1.07)p
BALANCE SHEET
31 October 3 0 April 31 October
Notes 2003 2003 2002
£ £ £
Fixed Assets
Venture capital
investments 1(b) 7,493,591 3,626,615 4,287,610
Fixed interest securities - - 3,526,236
Monies held pending
investment 2,075,078 1,643,385 1,272,692
------------ ------------ ------------
9,568,669 5,270,000 9,086,538
Current Assets
Debtors and
prepayments 120,295 77,363 139,330
Cash at bank 1,262,013 3,259,824 11,552
------------ ------------ ------------
1,382,308 3,337,187 150,882
Creditors: amounts
falling due within
one year
Corporation tax - - 4,662
Other creditors 72,454 73,530 32,081
Accruals 95,426 75,943 69,458
------------ ------------ ------------
(167,880) (149,473) (106,201)
------------ ------------ ------------
Net current assets/
(liabilities) 1,214,428 3,187,714 44,681
------------ ------------ ------------
Net assets 10,783,097 8,457,714 9,131,219
------------ ------------ ------------
Capital and reserves
Called up share capital 131,360 131,360 131,806
Capital redemption
reserve 446 446 -
Cancelled share
premium account 12,227,290 12,227,160 12,256,431
Capital reserve -
realised (853,154) (959,815) (509,049)
Capital reserve -
unrealised (680,054) (2,941,929) (2,794,679)
Revenue reserves (42,791) 492 46,710
------------ ------------ ------------
10,783,097 8,457,714 9,131,219
------------ ------------ ------------
Net asset value per
Ordinary Share 82.09p 64.39p 69.28p
CASHFLOW STATEMENT
6 months Year 6 months
ended ended ended
31 October 30 April 31 October
2003 2003 2002
£ £ £
Operating activities
Net investment interest -
non-qualifying 40,271 444,878 221,675
Investment management
fees paid (37,652) (159,161) (52,465)
Other cash payments (73,443) (230,561) (139,657)
------------ ------------ ------------
Net cash inflow/(outflow)
from operating activities (70,824) 55,156 29,553
Taxation
UK Corporation tax paid - (3,948) -
Investing activities
Acquisition of investments (1,823,407) (3,632,134) (2,368,029)
Disposal of investments 395,107 7,865,686 2,975,000
------------ ------------ ------------
Net cash inflow/(outflow)
from operating activities (1,428,300) 4,233,552 606,971
------------ ------------ ------------
Dividends
Dividend (66,994) (177,938) (177,938)
------------ ------------ ------------
Net cash inflow/(outflow)
before liquid resource
management (1,566,118) 4,106,822 458,586
Management of liquid
resources
Movement in money market
and other deposits (431,693) (832,406) (461,713)
Financing
Purchase of own shares - (29,271) -
------------ ------------ ------------
(Decrease)/increase in
cash (1,997,811) 3,245,145 (3,127)
------------ ------------ ------------
NOTES TO THE UNAUDITED 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 Financial Report.
a) Basis of Accounting
The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of fixed asset investments and
in accordance with the applicable Accounting Standards in the United Kingdom.
b) Investments
Listed investments and investments traded on AIM are stated at middle market
prices as at 31 October 2003. Unlisted investments are stated at Directors'
valuation, in accordance with the new British Venture Capital Association ("BVCA
") guidelines published in July 2003. Comparative figures are stated in
accordance with the BVCA guidelines that existed before 1 August 2003.
Unquoted investments are valued by the Directors in accordance with the
following rules, which are consistent with the BVCA guidelines:
(i) Investments which have been made in the last 12 months are
valued at cost in the absence of overriding factors.
(ii) Investments in companies at an early stage of their
development are also valued at cost in the absence of overriding factors.
(iii) Where investments have gone beyond the stage in their
development in (ii) above, the shares may be valued by applying a suitable
price-earnings ratio to that company's historic/current or forecast post-tax
earnings (the ratio used being based on a comparable listed company or sector
but the resulting value being discounted to reflect lack of marketability);
(iv) Where a value is indicated by a material arms-length
transaction by a third party in the shares of a company, this value will be
used.
(v) For early stage investments where a company's underperformance
against plan indicates a diminution in the value of the investment, provision
against cost is made, as appropriate.
Capital gains and losses on investments, whether realised or unrealised,
are dealt with in the capital reserve.
2. Basic revenue and capital items in the Statement of Total Return derive
from continuing operations.
3. In accordance with the Company's prospectus dated 10 May 2000, the
Directors have charged 75% of the investment management expenses to the capital
reserve.
4. Basic revenue return per Ordinary Share is based on the net revenue on
ordinary activities after taxation, and on 13,136,004 Ordinary Shares, being the
weighted average number of Ordinary Shares in issue during the period (Year
ended 30 April 2003: 13,168,879 Ordinary Shares; Period ended 31 October 2002:
13,180,612 Ordinary Shares).
5. The cancelled share premium account provides the Company with a special
reserve out of which it can fund buy-backs of Ordinary Shares as and when it is
considered by the Board to be in the interests of the shareholders. Under
Resolution 8 of the Annual General Meeting held on 10 September 2003, the
shareholders authorised the Company to purchase its own shares pursuant to
section 166 of the Companies Act 1985. The authority is limited to a maximum of
14.99 per cent of the issued Ordinary Share Capital of the Company and will
unless previously revoked or renewed expire on the conclusion of the Annual
General Meeting of the Company to be held in 2004. The maximum price that may be
paid for an Ordinary Share will be an amount equal to 105 per cent of the
average of the middle market quotation for Ordinary Shares taken from the London
Stock Exchange daily official list for the five business days immediately
preceding the day on which the Ordinary Shares are purchased. The minimum price
that may be paid for Ordinary Shares is 1 pence per share. The authority
provides that the Company may make a contract to purchase Ordinary Shares under
the authority conferred by this resolution prior to the expiry of such authority
which will or may be executed wholly or partly after the expiration of such
authority and may make a purchase of Ordinary Shares pursuant to such contract.
6. The financial information set out in this report has not been audited
and does not comprise full financial statements within the meaning of section
240 of the Companies Act 1985. The audited accounts for the Company for the year
ended 30 April 2003, on which the auditors gave an unqualified report, have been
delivered to the Registrar of Companies.
7. Copies of this statement are being sent to all shareholders. Further
copies are available free of charge from the Company's registered office,
Gossard House, 7-8 Savile Row, London, W1S 3PE.
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