Interim Results
Matrix Venture Fund VCT PLC
07 December 2004
ANNOUNCEMENT OF INTERIM RESULTS FOR THE PERIOD ENDED 31 OCTOBER 2004
MATRIX VENTURE FUND VCT PLC
CHAIRMAN'S STATEMENT
I have pleasure presenting the Interim Results of Matrix Venture Fund VCT plc
for the period from 1 May 2004 to 31 October 2004.
The net asset value per Ordinary Share at 31 October 2004 was 92.1 pence
(compared with 94.1 pence as at 30 April 2004 and 82.1 pence as at 31 October
2003) representing a decrease of approximately 2% since the year-end, primarily
as a result of variations in the Fund's quoted holdings, and in particular a
slightly lower share price for FindWhat.com at the end of this period.
Notwithstanding the closing price of approximately US $20 at the period end, the
Fund sold a small number of FindWhat.com shares at an average price of over US
$21 during October.
Overview
The economic environment for technology businesses continues to improve and I am
pleased to report improved trading in many of our investee companies. It is
encouraging that the period has seen increased levels of merger and acquisition
activity and more opportunities for IPOs on AIM.
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 one new investment of £201,600 in
Clearspeed Technology plc, an AIM listed company, at a price of 96 pence. The
share price has moved sharply upwards post investment at IPO and is currently
trading at 216.5p. Clearspeed has developed exciting new technology in the
field of high speed parallel processing semi-conductor chips.
Exits from the portfolio
It is pleasing to note the continued exits from the portfolio. In July
Espotting completed its merger with Nasdaq listed FindWhat.com. FindWhat shares
are currently trading at $19.60. Since July the Fund has sold 30,000 shares at
an average price of $21.16. The Fund continues to hold 154,440 shares (a small
proportion of which are held in escrow) and will continue to realise its
holding.
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 (0.29) pence
per Ordinary Share (31 October 2003: (0.33) pence). The total return (after
tax) attributable to Ordinary Shareholders was (2.18) pence per Ordinary Share
(31 October 2003: 17.7 pence).
Dividend
As last year, the Board is not recommending the payment of an interim dividend.
Further Fundraising
Following the Extraordinary General Meeting last year to authorise the creation
of a C share issue, it is currently the Board's intention to take advantage of
the favourable VCT tax regime and the Fund's performance by launching a further
fundraising as soon as practicable.
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 2005 and my next
full statement will be in respect of the year to 30 April 2005.
M Cumming
Chairman
7 December 2004
VENTURE CAPITAL FUND ADVISER'S REPORT
As at 31 October 2004, the Fund held 11 venture capital investments, summarised
details of which are set out below. In the six months to 31 October 2004 the
team evaluated over 190 business plans. The Fund invested £201,600 in Clearspeed
Technology plc, an AIM listed semi-conductor chip business, on its IPO.
Sentiment has continued to improve. It is pleasing to note continued
improvements in performance in the majority of our investee companies.
The merger of our investee company, Espotting, with Nasdaq listed FindWhat.com
completed and we have begun to realise value.
As outlined below we continue to work closely with our current portfolio, which
comprises: -
COMPANY BUSINESS COST VALUATION
30-Apr-2004 31-Oct-2004
Award International Sales promotion activities £250,000 £231,500 £262,500
Holdings plc
(AIM listed)
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.
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, has
successfully realigned its cost base and is trading close to breakeven levels.
Clarity Commerce Solutions Customer Relationship Management £510,552 £504,486 £464,848
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.
ClearSpeed Technology plc Semi-conductor chips £201,600 n/a £400,050
(AIM listed)
Clearspeed is an innovative parallel-processing semi-conductor business which floated in AIM in July
2004. The Company is well capitalised and its first commercial chip was announced in October.
FindWhat.com Inc Performance based internet £512,720 £1,980,323 £1,686,559
search engine
(Nasdaq listed)
FindWhat.com acquired Espotting Media in July 2004. FindWhat is a leading provider of
performance-based marketing services. FindWhat was recently rated 21 on the 2004 Deloitte Technology
Fast 500, a ranking of the 500 fastest growing technology companies in North America.
Flightstore Group plc Inflight retail services £254,586 £372,259 £102,965
(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 business was floated on AIM on 12
December 2003. The Fund realised approximately two thirds of its holding for £594,920 in cash on
float. The original cost of this proportion of the investment was £495,414 and so a profit of £99,506
was realised on the float. The balance of the holding is referred to above and this proportion of the
investment was subject to a lock-in period after the float. A disappointing performance in the core
business has resulted in a share price decline over the period. The Company is currently focussed on
making strategic acquisitions in the digital media sector to augment its activities.
FootFall Limited People counting services £750,000 £1,000,000 £1,000,000
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 continues to grow well, and is now
trading profitability and with significant cash resources. The business has been valued on a multiple
of turnover basis.
Magicalia Limited Community websites £400,000 £400,000 £400,000
Magicalia has a network of eight community websites supporting enthusiast-based activities. It also
has a growing online contract publishing business. The company has continued to grow well, has been
trading profitably on a monthly basis and should be close to breakeven for the current financial year.
Monactive Limited Software asset management £642,857 £405,000 £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. 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 £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 £679,338 £1,390,128 £1,529,000
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. Performance of the price-drop channel has been very encouraging. Group turnover
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 2004 or can be viewed through the
Matrix Private Equity website at www.matrixpe.com.
Matrix Private Equity Limited
Venture Capital Fund Adviser
7 December 2004
STATEMENT OF TOTAL RETURN
6 months ended Year ended
31 October 2004 30 April 2004
Notes Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Unrealised gains and
losses on investments - (225,073) (225,073) - 3,341,703 3,341,703
Realised gains and
losses on investments - 71,276 71,276 - 740,811 740,811
Income 108,819 - 108,819 190,764 - 190,764
Management fees 3 (30,730) (92,191) (122,921) (51,598) (154,794) (206,392)
Other expenses (116,078) - (116,078) (200,455) - (200,455)
------------ ------------ ------------ ------------ ------------ ------------
Return on ordinary
activities before
taxation (37,989) (245,988) (283,977) (61,289) 3,927,720 3,866,431
Tax on ordinary
activities - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Return attributable to
equity shareholders (37,989) (245,988) (283,977) (61,289) 3,927,720 3,866,431
Dividend in respect of
equity shares - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Transfer (from)/to
reserves (37,989) (245,988) (283,977) (61,289) 3,927,720 3,866,431
------------ ------------ ------------ ------------ ------------ ------------
Return per ordinary
share 4 (0.29)p (1.89)p (2.18)p (0.47)p 29.94p 29.47p
6 months ended
31 October 2003
Notes Revenue Capital Total
£ £ £
Unrealised gains and
losses on investments - 2,261,875 2,261,875
Realised gains and
losses on investments - 174,511 174,511
Income 78,262 - 78,262
Management fees 3 (22,617) (67,850) (90,467)
Other expenses (98,928) - (98,928)
------------ ------------ ------------
Return on ordinary
activities before
taxation (43,283) 2,368,536 2,325,253
Tax on ordinary
activities - - -
------------ ------------ ------------
Return attributable to
equity shareholders (43,283) 2,368,536 2,325,253
Dividend in respect of
equity shares - - -
------------ ------------ ------------
Transfer (from)/to
reserves (43,283) 2,368,536 2,325,253
------------ ------------ ------------
Return per ordinary
share 4 (0.33)p 18.03p 17.70p
BALANCE SHEET
31 October 30 April 31 October
Notes 2004 2004 2003
£ £ £
Fixed Assets
Venture capital
investments 1(b) 7,879,244 8,296,473 7,493,591
Monies held pending
investment 2,404,190 1,861,794 2,075,078
--------------- --------------- ---------------
10,283,434 10,158,267 9,568,669
Current Assets
Debtors and
prepayments 449,917 111,559 120,295
Cash at bank 1,383,795 2,133,539 1,262,013
--------------- --------------- ---------------
1,833,712 2,245,098 1,382,308
Creditors: amounts
falling due within
one year
Corporation tax - - -
Trade creditors 85,460 77,143 72,355
Other creditors - - 99
Accruals 122,214 65,519 95,426
--------------- --------------- ---------------
(207,674) (142,662) (167,880)
--------------- --------------- ---------------
Net current assets 1,626,038 2,102,436 1,214,428
--------------- --------------- ---------------
Net assets 11,909,472 12,260,703 10,783,097
--------------- --------------- ---------------
Capital and reserves
Called up share capital 129,387 130,310 131,360
Capital redemption
reserve 2,419 1,496 446
Cancelled share
premium account 12,096,464 12,163,718 12,227,290
Capital reserve -
realised 1,110,285 (621,505) (853,154)
Capital reserve -
unrealised (1,330,297) 647,481 (680,054)
Revenue reserves (98,786) (60,797) (42,791)
--------------- --------------- ---------------
11,909,472 12,260,703 10,783,097
--------------- --------------- ---------------
Net asset value per
share 92.05p 94.09p 82.09p
CASHFLOW STATEMENT
6 months Year 6 months
ended ended ended
31 October 30 April 31 October
2004 2004 2003
£ £ £
Operating activities
Net investment interest -
non-qualifying 176,823 125,765 40,271
Investment management
fees paid (154,191) (145,194) (37,652)
Other cash payments (147,920) (173,654) (73,443)
--------------- --------------- ---------------
Net cash (outflow)
from operating activities (125,288) (193,083) (70,824)
Investing activities
Acquisition of investments (202,362) (2,073,407) (1,823,407)
Disposal of investments 120,302 1,489,050 395,107
--------------- --------------- ---------------
Net cash (outflow)
from operating activities (82,060) (584,357) (1,428,300)
--------------- --------------- ---------------
Dividends
Dividend - (66,994) (66,994)
--------------- --------------- ---------------
Net cash (outflow)
before liquid resource
management (207,348) (844,434) (1,566,118)
Management of liquid
resources
Movement in money market
And other deposits (542,396) (218,409) (431,693)
Financing
Purchase of own shares - (63,442) -
--------------- --------------- ---------------
(Decrease)/increase in
cash (749,744) (1,126,285) (1,997,811)
--------------- --------------- ---------------
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 2004. 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 on a
consistent basis.
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 13,029,499 Ordinary Shares, being
the weighted average number of Ordinary Shares in issue during the period (year
ended 30 April 2004: 13,118,408 Ordinary Shares; period ended 31 October 2003:
13,136,004 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 7 of the Annual General Meeting held on 6 September 2004, 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 2004, 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, One
Jermyn Street, London, SW1Y 4UH.
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