Interim Results
Elderstreet Downing VCT PLC
28 September 2004
Elderstreet Downing VCT plc
Interim Statement for the six-months ended 30 June 2004
CHAIRMAN'S STATEMENT
The first half of 2004 has been a more stable period in terms of investor
sentiment than we have experienced at other times over the last few years. As a
result of these conditions, we have seen welcome progress being made by some of
the Company's investments.
Net Asset Value
At 30 June 2004, the Company's Net Asset Value per share ('NAV') stood at 62.3p,
an increase of 5.8p or 10.3% compared to the NAV at 31 December 2003.
Venture capital investments
The Company made two follow-on investments in the period. A further investment
of £150,000 was made in The National Solicitors' Network Limited, to fund
expansion, and another £150,000 was invested in Snacktime Limited, being a
drawdown of funds which were earmarked at the time of the original investment.
The Investment Manager has also been actively seeking new investments although
none were completed in the period.
In reviewing the valuations of the unquoted investments, the Board has made a
number of changes since the previous valuations at 31 December 2003. Improved
trading performances have lead to increases in the valuations of Fords Packaging
Systems Limited, The National Solicitors' Network Limited and Wessex Advanced
Switching Products Limited of £450,000, £250,000 and £112,000 respectively.
Berkeley Scott Limited is also now starting to improve after a difficult period
and a provision previously made against the investment has been reduced by
£176,000. Additionally the valuation of AIM-quoted Computer Software Group Plc
has increased by £322,000 as the company has made good progress which has been
reflected in its share price.
Although there have also been some smaller decreases in the valuations of other
investments, overall the venture capital portfolio has increased in value by
£987,000 over the period.
Dividend
An interim dividend of 1p per share will be paid on 29 October 2004 to
Shareholders on the register at 8 October 2004. This will comprise 0.3p per
share revenue dividend and 0.7p per share capital dividend, being the
distribution of gains realised in early periods. This will bring total
dividends paid to Shareholders since launch to 27.5p per share.
Repurchase of shares
The Directors are conscious that the Company's share price is affected by the
illiquidity of its shares in the market resulting from the fact that investors
purchasing 'second-hand' shares do not benefit from income tax relief on their
investment.
The Directors continue to monitor the market in the Company's shares and will
make share purchases when appropriate. During the period the Company
repurchased 110,100 shares, at an average price of 43p per share, for
cancellation.
Directorate
The Board undertook a review of running costs of the Company during the period
and concluded that, as the Company now has a well developed venture capital
portfolio and is less actively investing than in earlier years, some savings
could be achieved by reducing the size of the Board.
In addition to the resignation of Chris Kay, as announced in the last Annual
Report, Gareth Pearce and Richard Hargreaves also agreed to resign as Directors
with effect from 17 June 2004. I would like to thank both of them for their
contribution since the Company's launch in 1998.
The Company now has a Board of four non-executive Directors, of which three are
independent of the Investment Manager. The Board feels that this is an
appropriate number of Directors for a venture capital trust of this size and at
this stage in its life.
Publication of share price
The Company's share price continues to be quoted in the Financial Times on a
daily basis in the 'Investment Companies' sector, under the abbreviation '
EldDnVCT'. The share price can also be found on various financial websites with
the TIDM/EPIC code 'EDV'.
Outlook
Generally, news from investee companies is a little more positive than it has
been for some time. There, however, continues to be a number of investments
which face significant challenges. These companies are demanding close
attention from the Investment Manager.
The Manager also continues to pursue potential new investments and to evaluate
exit opportunities on an ongoing basis. I hope to report developments arising
from these activities in the second half of the year in my statement with the
Annual Report covering the full year to 31 December 2004.
David Brock
Chairman
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2004
30 June 30 June 31 Dec
2004 2003 2003
£'000 £'000 £'000
Fixed assets
Venture capital investments 7,419 5,862 6,203
Net current assets 1,783 2,356 2,205
___________ ___________ ___________
Net assets 9,202 8,218 8,408
=========== =========== ===========
Capital and reserves
Called up share capital 738 746 744
Capital redemption reserve 19 11 13
Revaluation reserve 2,076 (545) 1,227
Special reserve 6,369 8,006 6,424
___________ ___________ ___________
Total equity shareholders' funds 9,202 8,218 8,408
=========== =========== ===========
Net asset value per share 62.3p 55.1p 56.5p
UNAUDITED PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2004
Six Six
months months Year
ended ended ended
30 June 30 June 31 Dec
2004 2003 2003
£'000 £'000 £'000
Investment income 151 194 291
Investment management fees (62) (74) (131)
Other expenses (87) (89) (173)
Operating profit/(loss) 2 31 (13)
___________ ___________ ___________
Net movement on permanent diminution provision 679 (298) (621)
Loss on realisation of investments - - (212)
___________ ___________ ___________
Profit/(loss) on ordinary activities before taxation 681 (267) (846)
Tax on ordinary activities - - -
___________ ___________ ___________
Loss on ordinary activities after taxation 681 (267) (846)
Dividends (147) (149) (297)
___________ ___________ ___________
Retained profit/(loss) for period 534 (416) (1,143)
=========== =========== ===========
Return/(loss) per share 4.6p (1.8p) (5.6p)
All revenue and capital items in the above statement derive from continuing
operations.
The Company has only one class of business and derives its income from
investments made in shares, securities and bank deposits.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 30 June 2004
£'000 £'000 £'000
Profit/(loss) on ordinary activities after taxation 681 (267) (846)
Revaluations - non permanent diminutions 308 (336) 597
___________ ___________ ___________
Total recognised gains/(losses) for the period 989 (603) (249)
=========== =========== ===========
Recognised losses brought forward (1,931) (1,682) (1,682)
=========== =========== ===========
Recognised losses carried forward (942) (2,285) (1,931)
=========== =========== ===========
UNAUDITED CASHFLOW STATEMENT
for the six months ended 30 June 2004
Six Six
months months Year
ended ended ended
30 June 30 June 31 Dec
2004 2003 2003
Note £'000 £'000 £'000
Cash inflow from operating activities and returns on
investments
1 - 66 113
___________ ___________ ___________
Taxation - - -
___________ ___________ ___________
Capital expenditure
Purchase of venture capital investments (300) (418) (846)
Proceeds on disposal of listed fixed income - 800 800
securities
Proceeds on disposal of venture capital investments 72 621 1,116
___________ ___________ ___________
Net cash (outflow)/inflow from capital expenditure (228) 1,003 1,070
___________ ___________ ___________
Equity dividends paid (149) (302) (450)
___________ ___________ ___________
Net cash (outflow)/inflow before financing (377) 767 733
___________ ___________ ___________
Financing
Purchase of own shares (56) (57) (79)
___________ ___________ ___________
Net cash outflow from financing (56) (57) (79)
___________ ___________ ___________
(Decrease)/increase in cash 2 (433) 710 654
=========== =========== ===========
Notes to the cashflow statement:
1 Cash outflow from operating activities and returns
on investments
Operating profit/(loss) 2 31 (13)
Decrease in other debtors 2 44 127
Decrease in other creditors (4) (9) (1)
___________ ___________ ___________
Net cash inflow from operating activities - 66 113
=========== =========== ===========
2 Analysis of net funds
Beginning of period 2,356 1,702 1,702
Net cash (outflow)/inflow (433) 710 654
___________ ___________ ___________
End of period 1,923 2,412 2,356
=========== =========== ===========
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 June 2004 % of
Cost Valuation portfolio
£'000 £'000 by value
Top ten venture capital investments
Computer Software Group plc * 1,462 1,724 23.2%
Ford Packaging Systems Limited 83 1,200 16.2%
Berkeley Scott Group plc 900 683 9.2%
The National Solicitors Network Limited 856 650 8.8%
Wessex Advanced Switching Products Limited 51 573 7.7%
European Telecommunications & Technology plc 450 558 7.5%
Snacktime Limited 550 550 7.4%
U M (Holdings) plc 150 311 4.2%
Milkround Online Limited 250 295 4.0%
Henry J Bean's Group plc 587 250 3.4%
___________ ___________ ___________
5,339 6,794 91.6%
=========== =========== ===========
Other venture capital investments 2,728 625 8.4%
=========== =========== ===========
Total investments 8,067 7,419 100.0%
=========== =========== ===========
All venture capital investments are unquoted unless otherwise stated.
* Quoted on the Alternative Investment Market ('AIM')
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The above financial information has been prepared on the basis of the
accounting policies set out in the Annual Report.
2. The calculation of the earnings per share for the period is based upon the
net profit after tax of £681,000 divided by the weighted average number of
shares in issue during the period of 14,861,469.
3. The unaudited financial statements set out herein do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act
1985 and have not been delivered to the Registrar of Companies. The
figures for the year ended 31 December 2003 have been extracted from the
financial statements for that year, which have been delivered to the
Registrar of Companies; the auditors' report on those financial statements
was unqualified.
4. Copies of the unaudited interim results will be sent to shareholders
shortly. Further copies can be obtained from the Company's Registered
Office.
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