Elderstreet VCT plc : Half-yearly report

Elderstreet VCT plc

Half-Yearly Report for the six months ended 30 June 2016

FINANCIAL HIGHLIGHTS

	30 Jun 2016		31 Dec 2015		30 Jun 2015
	pence		pence		pence
Net asset value per share	68.9		70.6		67.5
Cumulative distributions paid per share	93.5		91.0		88.5
Total return per share	162.4		161.6		156.0

CHAIRMAN'S STATEMENT
I am pleased to present the Half-Yearly Report for Elderstreet VCT plc for the six month period ended 30 June 2016.

Net asset value, results and dividends

At 30 June 2016, the Company's net asset value ("NAV") per share stood at 68.9p, an increase of 0.8p or 1.1% since 31 December 2015 after adjusting for the total dividends of 2.5p per share paid during the period.

The return on activities after taxation for the period was £316,000 (2015: £1.4 million), comprising a revenue return of £333,000 and a capital loss of £17,000.

An interim dividend of 2.5p per share will be paid on 16 December 2016 to Shareholders on the register at 4 November 2016.

Venture capital investments

The Company invested £1.5 million in the period in one new and two follow-on investments.

In March 2016, the Company invested £499,000 in a new venture, Ridee Limited, which trades as Jinn, a fast growing digital solution for last mile deliveries from restaurants and stores.

A further investment of £750,000 was made into Concorde Solutions Limited to grow the company. In addition, £253,000 was invested in AngloINFO Limited to provide working capital for the further development of the business.

There was one small part disposal in the period. Proceeds of £99,000 were received from the investment Uvenco UK plc (formerly Snacktime plc) where part of the holding was sold to ensure the Company maintains compliance with the new VCT rules.  A further retention payment was received in respect of Wessex Advanced Switching Products ("WASP"), the investment that was sold in 2014, of £440,000. Total realised gains for the period were £539,000.

At the period end, the Board reviewed the unquoted investment valuations and made a small number of adjustments. The value of AngloINFO was adjusted downwards by £405,000, reflecting the fact that the company requires further funding to develop its product. The Manager does, however, continue to believe that the company has potential. Concorde Solutions was also decreased by £142,000 as sales are growing more slowly than planned.

Within the AIM-quoted investments there were some significant moves over the period, with Fulcrum Utility Services increasing by £479,000, Access Intelligence increasing by £128,000 and Proxama decreasing by £277,000. Overall, the full portfolio showed net unrealised losses of £373,000 over the six months.

At the period end, the Company held a portfolio of 22 venture capital investments, valued at £19.8 million.

Fixed income securities

The Company continues to hold a small portfolio of fixed income investments that is managed by Smith & Williamson. The portfolio, valued at £1.6 million at the period end, recognised unrealised capital gains of £14,000 and produced income of £9,000 in the period.

Fundraising and share issues

During the period, the Company issued 2.6 million new shares at an average price of 70.96p per share under a further Top-up Offer for Subscription that launched in December 2015. The offers closed being fully subscribed and having raised a total of £1.8 million.

Share buybacks

The Company has a policy of buying in shares that become available in the market at approximately a 7.5% discount to the latest published net asset value (subject to applicable regulations and liquidity considerations).

In line with this policy during the period the Company purchased 145,500 shares for cancellation for an aggregate consideration of £93,000 at an average price of 63.6p per share.

Any Shareholders who are considering selling their shares will need to use a stockbroker. Such Shareholders should ask their stockbroker to register their interest in selling their shares with Shore Capital, who act as the Company's corporate broker.

Future strategy and developments

The UK's decision to leave the European Union has clearly been a major event that will have some impact, one way or another, on the UK economy over the coming years. In light of this the Board has reviewed the portfolio and concluded that there is unlikely to be any significant negative effect on the Company's investments in the short term and, indeed, the weaker pound may be favourable to some investments.  The Board will, of course, continue to monitor developments.

The Board has had some discussions with the Manager about future fundraising and general strategy. As a result it is expected that the Company will launch a new Offer for Subscription later in the year.  Full details of the new offer will be available in due course.

Outlook

The portfolio has continued to perform satisfactorily and the Board believes that it continues to include investments which can ultimately deliver good rewards for Shareholders.

I look forward to updating Shareholders in my statement with the next Annual Report.

David Brock
Chairman

SUMMARY OF INVESTMENT PORTFOLIO as at 30 June 2016

	Cost	Valuation	Valuation movement in period	% of  portfolio by value
	£'000	£'000	£'000
Top ten venture capital investments
Lyalvale Express Limited	1,915	3,332	-	14.0%
Access Intelligence plc*	2,333	3,246	128	13.6%
Fords Packaging Topco Limited	2,883	3,239	-	13.6%
Baldwin & Francis Limited	1,534	2,252	-	9.4%
Fulcrum Utility Services Limited*	500	1,625	479	6.8%
Concorde Solutions Limited	1,650	1,525	(142)	6.4%
AngloINFO Limited	1,887	1,072	(405)	4.5%
Lyalvale Property Limited	300	914	-	3.8%
Macranet Limited	863	863	-	3.6%
Ridee Limited	499	499	-	2.1%
	14,364	18,567	60	77.8%
Other venture capital investments	5,099	1,195	(447)	5.0%
Fixed income securities	1,516	1,557	14	6.5%
	20,979	21,319	(373)	89.3%
Cash at bank and in hand		2,560		10.7%
Total investments		23,879		100.0%

All venture capital investments are unquoted unless otherwise stated.

* Quoted on AIM

SUMMARY OF INVESTMENT MOVEMENTS for the six months ended 30 June 2016
Additions

	£'000
Venture capital investments
Concorde Solutions Limited	750
Ridee Limited	499
AngloINFO Limited	253
	1,502

Disposals

	Cost		Value at 1 January 2016	Proceeds	Profit/ (loss) vs  cost	Realised profit
	£'000		£'000	£'000	£'000	£'000
Part disposal
Uvenco UK plc (formerly Snacktime plc)	-		-	99	99	99
Retention proceeds
Wessex Advanced Switching Products Limited		-	-	440	440	440
	-		-	539	539	539

UNAUDITED BALANCE SHEET  as at 30 June 2016

		30 Jun 2016		30 Jun 2015		31 Dec 2015
	Note	£'000		£'000		£'000
Fixed assets
Investments		21,319		20,667		20,189
Current assets
Debtors		1,853		125		1,757
Cash at bank and in hand		2,560		2,846		3,113
		4,413		2,971		4,870
Creditors: amounts falling due within one year		(151)		(244)		(601)
Net current assets		4,262		2,727		4,269
Net assets		25,581		23,394		24,458
Capital and reserves
Called up share capital	7	1,855		1,733		1,733
Capital redemption reserve	8	481		474		474
Share premium	8	5,452		3,743		3,743
Merger Reserve	8	1,828		1,828		1,828
Special reserve	8	2,394		2,592		2,629
Capital reserve - unrealised	8	4,060		5,671		4,433
Capital reserve - realised	8	9,064		6,792		9,132
Revenue reserve	8	447		561		486
Equity shareholders' funds	6	25,581		23,394		24,458
Basic and diluted net asset value per share	6	68.9p		67.5p		70.6p

UNAUDITED INCOME STATEMENT for the six months ended 30 June 2016

		Six months ended 30 Jun 2016				Six months ended 30 Jun 2015				Year ended 31 Dec 2015
		Revenue	Capital	Total		Revenue	Capital	Total		Total
Note		£'000	£'000	£'000		£'000	£'000	£'000		£'000
Income		526	-	526		529	-	529		688
Gains on investments:
- realised		-	539	539		-	492	492		754
- unrealised		-	(373)	(373)		-	880	880		3,152
		526	166	692		529	1,372	1,901		4,594
Investment management fees		(61)	(183)	(244)		(59)	(178)	(237)		(472)
Performance incentive fees		-	-	-		-	(107)	(107)		(454)
Other expenses		(132)	-	(132)		(133)	-	(133)		(314)
Return on ordinary activities before tax		333	(17)	316		337	1,087	1,424		3,354
Tax on total comprehensive income and ordinary activities		-	-	-		-	-	-		-
Return attributable to equity shareholders	4	333	(17)	316		337	1,087	1,424		3,354
Basic and diluted return per share	4	0.9p	0.0p	0.9p		1.0p	3.2p	4.2p		9.8p

All Revenue and Capital items in the above statement derive from continuing operations. The total column within the Income Statement represents the profit and loss account of the Company.

STATEMENT OF CHANGE IN EQUITY for the six months ended 30 June 2016

Called up share capital		Capital redemption reserve	Share Premium	Merger reserve	Special reserve	Capital reserve-unrealised	Capital reserve-realised	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2016	1,733	474	3,743	1,828	2,629	4,433	9,132	486	24,458
Issue of new shares	129	-	1,709		-	-	-	-	1,838
Share Issue costs	-	-	-	-	(9)	-	-	-	(9)
Purchase of own shares	(7)	7	-	-	(93)	-	-	-	(93)
Expenses charged to capital	-	-	-	-	-	-	(183)	-	(183)
Gains on investments	-	-	-	-	-	(373)	539	-	166
Transfer between reserves	-	-	-	-	(133)	-	133	-	-
Dividends paid	-	-	-	-	-	-	(557)	(372)	(929)
Revenue return for the period	-	-	-	-	-	-	-	333	333
At 30 June 2016	1,855	481	5,452	1,828	2,394	4,060	9,064	447	25,581

UNAUDITED CASH FLOW STATEMENT for the six months ended 30 June 2016

		Six months ended 30 Jun 2016		Six months ended 30 Jun 2015		Year ended 31 Dec 2015
		£'000		£'000		£'000
Cash flow from operating activities
Return on ordinary activities before taxation		316		1,424		3,354
Gains on investments		(166)		(1,372)		(3,906)
(Increase)/decrease in other debtors		(101)		3,437		(20)
Decrease in other creditors		(459)		(544)		(185)
Net cash generated from operating activities		(410)		2,945		(757)
Cash flow from investing activities
Purchase of investments		(1,502)		(876)		(2,677)
Sale of investments		544		881		7,509
Net cash (outflow)/inflow from investing activities		(958)		5		4,832
Cash flows from financing activities
Proceeds from share issue		1,839		782		773
Proceeds from shares issued under Dividend Reinvestment Scheme	-			258		-
Share issue costs		-		(9)		-
Purchase of own shares		(93)		(113)		(114)
Equity dividends paid		(931)		(2,584)		(3,183)
Net cash inflow/(outflow) from financing activities		815		(1,666)		(2,524)
Increase in cash		(553)		1,284		1,551
Net increase in cash
Beginning of period		3,113		1,562		1,562
Net cash (outflow)/inflow		(553)		1,284		1,551
End of period		2,560		2,846		3,113

 

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

for the six months ended 30 June 2016

1. The unaudited half yearly results cover the six months to 30 June 2016 and have been prepared in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" revised January 2009 and in accordance with the accounting policies set out in the statutory accounts for the year ended 31 December 2015, which were prepared in accordance with the United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law), including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic of Ireland.

2. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

3. The comparative figures are in respect of the six months ended 30 June 2015 and the year ended 31 December 2015 respectively.

4. Basic and diluted return per share

	Six months ended 30 Jun 2016		Six months ended 30 Jun 2015		Year ended 31 Dec 2015
Return per share based on:
Net revenue gain for the period (£'000)	333		337		262
Capital return per share based on:
Net capital (loss)/gain for the period (£'000)	(17)		1,087		3,092
Weighted average number of shares	35,889,194		34,046,369		34,356,056

5. Dividends

			Six months ended 30 Jun 2016				Year ended  31 Dec 2015
	Per share		Revenue	Capital	Total		Total
	pence		£'000	£'000	£'000		£'000
Paid in the period
2015 Final	2.5p		372	557	929		-
2015 Interim	2.5p		-	-	-		866
2015 Special	5.0p		-	-	-		1,714
2014 2nd interim	2.5p		-	-	-		861
			372	557	929		3,441

6. Basic and diluted net asset value per share

	Six months ended 30 Jun 2016		Six months ended 30 Jun 2015		Year ended 31 Dec 2015
Net asset value per share based on:
Net assets (£'000)	25,581		23,394		24,458
Number of shares in issue at the period end	37,106,366		34,660,694		34,660,694
Net asset value per share	68.9p		67.5p		70.6p

7. Called up share capital

	Six months ended 30 Jun 2016		Six months ended 30 Jun 2015		Year ended 31 Dec 2015
Ordinary shares of 5p each
Number of shares in issue at the period end	37,106,366		34,660,694		34,660,694
Nominal value (£'000)	1,855		1,733		1,733

In April 2016 the Company allotted 2,591,172 Ordinary Shares of 5p each ("Ordinary Shares") under the Top-up Offer for Subscription and a further Top-up Offer for Subscription that launched in December 2016, at an average price of 70.96p per share. Gross proceeds received thereon were £1.8 million with issue costs in respect of the offer amounting to £9,000.

During the period, the Company purchased 145,500 shares for cancellation for an aggregate consideration of £93,000 at an average price of 63.6p per share (approximately equal to a 9.9% discount to the most recently published NAV at the time of purchase) and representing 0.4% of the issued share capital in issue at 1 January 2016.

8. Reserves
The special reserve is available to the Company to enable the purchase of its own shares in the market without affecting its ability to pay dividends, and also allows the Company to write back realised capital losses arising on disposals and impairments.

Distributable reserves are calculated as follows:

Six months  ended 30 Jun 2016		Six months ended 30 Jun 2015		Year ended 31 Dec 2015
	£'000		£'000		£'000
Special reserve	2,394		2,592		2,629
Capital reserve - realised	9,064		6,792		9,132
Revenue reserve	447		561		486
Merger reserve - distributable element	423		477		423
Unrealised losses - excluding unrealised unquoted gains	57		(678)		414
	12,385		9,744		13,084

The Company has categorised its financial instruments using the fair value hierarchy as follows:

Level a Reflects financial instruments quoted in an active market (fixed interest investments, and investments in shares quoted on either the Main or AIM Markets);
Level b Reflects financial instruments that have prices that are observable either directly or indirectly; and
Level c i) Reflects financial instruments that use valuation techniques that are based on observable market data.
ii) Reflects financial instruments that use valuation techniques that are not based on observable market data (unquoted equity investments and loan note investments).

	Six months ended 30 June 2016					Year ended 30 Dec 2015
	Level a	Level b	Level c(ii)	Total		Level a	Level b	Level c(ii)	Total
	£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000
Fixed interest securities	1,557	-	-	1,557		1,542	-	-	1,542
AIM quoted shares	4,330	-	262	4,592		4,199	-	233	4,432
Loan notes	-	-	4,916	4,916		-	-	4,820	4,820
Unquoted shares	-	-	10,254	10,254		-	-	9,395	9,395
	5,887	-	15,432	21,319		5,741	-	14,448	20,189

9. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required in the Company's half-yearly results to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

The Board has concluded that the key risks facing the Company over the remainder of the financial period are as follows:

* investment risk associated with investing in small and immature businesses;
* liquidity risk arising from investing mainly in unquoted businesses; and
* failure to maintain approval as a VCT.

In all cases the Board is satisfied with the Company's approach to these risks. As a VCT, the Company is forced to have significant exposure to relatively immature businesses. This risk is mitigated to some extent by holding a well-diversified portfolio.

With a reasonably illiquid venture capital investment portfolio, the Board ensures that it maintains an appropriate proportion of its assets in cash and liquid instruments.

The Company's compliance with the VCT regulations is continually monitored by the Administration Manager, who regularly reports to the Board on the current position. The Company also retains Philip Hare and Associates LLP to provide regular reviews and advice in this area. The Board considers that this approach reduces the risk of a breach of the VCT regulations to a minimal level.

10. Going concern
The Company has considerable financial resources at the period end, and holds a diversified portfolio of investments. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook.

The Directors have concluded that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

11. The Directors confirm that, to the best of their knowledge, the half-yearly financial statements have been prepared in accordance with the "Statement: Half-Yearly Financial Reports" issued by the UK Accounting Standards Board and the half-yearly financial report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the current financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

12. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 December 2015 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor's report on those financial statements was unqualified.

13. Copies of the unaudited half-yearly results will be sent to Shareholders shortly. Further copies can be obtained from the Company's registered office or downloaded from www.elderstreet.com and www.downing.co.uk.

---

This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Elderstreet VCT plc via Globenewswire