Interim Results
Proven VCT PLC
29 October 2004
ProVen VCT plc
INTERIM REPORT
For the six months ended
31 August 2004
FINANCIAL SUMMARY
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2004 2003 2004
Revenue return per share 0.6p 0.1p 0.2p
Total return per share 5.4p 13.2p 30.8p
Dividend per share 3.0p - 3.5p
Cumulative dividends per share 12.2p 5.7p 9.2p
Net asset value per share 100.8p 84.6p 98.7p
Net asset value plus cumulative dividends 113.0p 90.3p 107.9p
per share
Mid-market price per share 88.0p 65.0p 70.0p
Shareholders' funds (£000) 22,908 18,488 21,521
CHAIRMAN'S STATEMENT
Introduction
I have pleasure in presenting the interim report for the six months ended 31
August 2004. The period has seen continued geopolitical uncertainty in the
Middle East which has undoubtedly affected world and UK stock markets. In the
UK, there are signs that the economy is starting to experience a relative
slowdown after rapid growth in the first half of 2004.
Investment Portfolio
During the period, your company made one new investment of £200,000 and a
further £243,000 was invested in two existing portfolio companies. In addition,
your company made a number of realisations. Further details are provided in the
accompanying Investment Manager's Review.
At the balance sheet date, your company's unquoted and listed portfolio
comprised 24 investments at a total cost of £17.0 million and a valuation of
£20.5 million. In addition, the company had net current assets of £2.4 million.
In total, your company's unquoted and listed portfolio increased in value by 7%
over the six months to 31 August 2004, compared to falls of 1% and 7% in the
FTSE All-Share and FTSE AIM indices respectively over the same period. The
outperformance of the portfolio relative to the indices is due largely to
increased valuations of a number of the unquoted companies reflecting their
continued strong or improving performance.
Your company continued to comply with the VCT legislative requirements in the
period.
The merger of portfolio company Espotting Media UK with US NASDAQ listed
FindWhat.com was finally concluded on 1 July 2004. The total valuation of the
cash and FindWhat shares received at the date of the merger was over £1.4
million, a return of 3.6 times the original investment. The transaction was also
shortlisted for 'Exit of the Year' at the recent Investor Allstars awards in
London. At the date of this report, your company had realised approximately 40%
of its FindWhat shareholding.
Net Asset Value & Dividends
The net asset value per share at 31 August 2004 before taking into account the
proposed dividend was 103.8p. This represents an increase of 5% over the net
asset value at 29 February 2004 and an increase of 9% over the initial net asset
value at launch of 95p per share. In addition, your company had paid cumulative
dividends, since inception and prior to the proposed dividend, of 9.2p per
share.
In line with your company's objective of maximising tax free returns to its
shareholders, your company will be paying an interim dividend of 3p per share
for the period. This will be paid on 30 November 2004 to shareholders on the
register at 19 November 2004.
Share Capital Issues & Buy Backs
During the period your company issued a further 1,110,732 shares representing
the net proceeds of the offer for subscription earlier in the year.
Your company also purchased 169,580 shares in the market at a total cost of
£149,000, representing a discount of 10% to the net asset value at 29 February
2004. Shareholders are reminded that if they wish to sell their shares in the
company they should contact Downing Corporate Finance.
Prospects
The investment portfolio of your company continues to perform well, reflecting
the underlying quality of the portfolio companies' products and services, their
management teams and the contribution made to the companies by the investment
manager. The aim over the coming months will be to continue to identify and
develop exit opportunities so as to provide further tax-free dividends to
shareholders. The success of this activity depends to a large extent on a
favourable economic environment but overall, your board has reason to be
confident of the future prospects for your company.
Andrew Davison
29 October 2004
INVESTMENT MANAGER'S REVIEW
Introduction
This review covers the six month period ended 31 August 2004, during which the
general economic climate was favourable for smaller UK companies. Having
reached a level of VCT qualifying investments comfortably above the 70% target
required by the VCT regulations, the emphasis has been primarily on maximising
value from the existing portfolio. We have also taken opportunities to realise
capital gains where these have arisen.
Portfolio Activity
One new investment of £200,000 was completed during the period and a further
£243,000 was invested in two existing portfolio companies. These investments
are discussed below.
JVTV
Operator of plasma screen network in student union bars
In May 2004, ProVen VCT invested £200,000 alongside ProVen Media VCT to support
the roll out of this company's plasma screen network. JVTV provides a
point-of-sale advertising solution for brands and organisations seeking to
target the student market.
Espresso Broadband
Provision of multi-media educational resources to schools
ProVen VCT invested a further £127,000 in March 2004 to support the continued
development of Espresso. The company has made substantial progress over the
period under review, which has resulted in a significant uplift in valuation.
Baby Innovations S.A. (t/a Steribottle)
Design and development of pre-sterilised baby feeding bottles
The company raised £3m in 2004 to finance the capital investment required to
produce the Mark 3 Steribottle of which ProVen VCT invested £116,000. During
the period the company also repaid£37,000 of our prior investment.
Realisations
On 1 July 2004, investee company Espotting Media was acquired by NASDAQ listed
FindWhat.com in a cash and shares deal valued at over $170 million. ProVen VCT
received £78,000 in cash and FindWhat shares valued at £1,359,000 at completion.
The total value represented a return, largely unrealised, of 3.6 times ProVen
VCT's original investment.
Between 1 July and the period end, we realised 11% of ProVen VCT's shares in
FindWhat, generating a capital gain of £58,000 based on the original investment
cost of Espotting Media. Since the period end, we have sold a further 29% of
the holding, generating a further capital gain, on the same basis, of £207,000.
We took the opportunity provided by strength in the respective share prices to
realise part of the company's shareholdings in Cardpoint and Pilat Media and to
sell the remainder of the holding in Centurion Electronics. These sales
generated average gains of 103%, 72% and 162% respectively. Losses were
incurred when we reduced the company's position in VI Group and disposed of the
company's shareholding in Transcomm when it was acquired by BT.
Portfolio Valuation
At 31 August 2004 the company's unquoted and listed portfolio comprised 24
investments at a total cost of £17.0 million and a valuation of £20.5 million.
In addition, the company had net current assets of £2.4 million.
In total, the company's unquoted and listed portfolio increased in value by 7%
over the six months to 31 August 2004, compared to falls of 1% and 7% in the
FTSE All-Share and FTSE AIM indices respectively over the same period. This
outperformance is due largely to the increased valuations of several of the
unquoted portfolio companies, notably Espresso Broadband, Chiaros Holdings, SPC
International, Mergermarket and Ma Potters. This follows continued strong or
improving performance from these companies. It is pleasing to see our faith in
companies' products and services and their management teams, and the
contribution of our investment executives, being rewarded by this performance.
We have prudently reduced the valuations of the company's investments in Zenith
Group and LFR but remain cautiously optimistic about the longer term future for
these two companies.
Prospects
The emphasis in the coming months will be on continuing to work closely with the
portfolio companies to ensure their continued growth and development and to
identify suitable exit opportunities. These exits will form the basis of future
distributions to shareholders and, together with funds raised from investors
earlier in the year, the opportunity for further venture capital investment. We
continue to see a reasonable flow of investment opportunities but at increased
prices relative to the earlier investments, reflecting increased confidence in
stock markets generally, and private equity and venture capital investment in
particular.
In summary, the portfolio continues to perform well and gives us grounds to be
optimistic for the prospects of the company and for the returns to its
shareholders.
Beringea Limited
29 October 2004
INVESTMENT PORTFOLIO
At 31 August 2004
Book Cost Valuation % of net
£000 £000 assets
Qualifying holdings
Espresso Broadband Limited 1,365 2,275 9.9
SPC International Limited 950 2,195 9.6
Cardpoint plc * 705 2,128 9.3
Notability Solutions Limited 1,000 2,055 9.0
Mergermarket Limited 780 1,661 7.2
Ashford Colour Press Limited 1,000 1,418 6.2
Nectar Taverns plc 1,000 1,404 6.1
Ma Potter's Limited 700 1,263 5.5
Chiaros Holdings Limited (t/a TMI) 800 835 3.6
UBC Media Group plc * 1,101 802 3.5
LFR plc (t/a Loch Fyne Restaurants) 1,000 711 3.1
Linguaphone plc 605 500 2.2
Pilat Media Global plc * 250 433 1.9
Oasis Healthcare plc * 670 262 1.1
JVTV Limited 200 200 0.9
Sports Holdings Limited 800 131 0.6
VI Group plc * 207 104 0.5
Zenith Group Limited 800 91 0.4
Horncastle Industries Limited 1,001 - 0.0
Bond-iT Limited 500 - 0.0
Total qualifying holdings 15,434 18,468 80.6**
Non-qualifying holdings
Findwhat.com # 332 770 3.4
Baby Innovations S.A. (t/a Steribottle) 673 673 2.9
Copyright Promotions Group Limited 249 561 2.4
I D Data plc * 262 13 0.1
Total non-qualifying holdings 1,516 2,017 8.8
Total investment portfolio 16,950 20,485 89.4
Net current assets 2,423 10.6
Shareholders' funds 22,908 100.0
* Investment traded on the Alternative Investment Market ('AIM')
# Investment traded on the US NASDAQ Market
** Expressed as a percentage of the company's net assets at 31 August 2004 as
distinct from total investments (as defined in the Venture Capital Trust
regulations) which are the basis for the calculation of the qualifying
investment totals referred to in the Chairman's Statement.
UNAUDITED STATEMENT OF TOTAL RETURN (incorporating the Revenue Account)
For the six months ended 31 August 2004
Six months ended
31 August 2004
Revenue Capital Total
£000 £000 £000
Gains/(losses) on investments
- realised - 254 254
- unrealised - 1,026 1,026
Income 328 - 328
Investment management fee (73) (218) (291)
Other expenses (96) - (96)
Return on ordinary activities before taxation 159 1,062 1,221
Tax (charge)/credit on ordinary activities (28) 28 -
Return on ordinary activities after taxation 131 1,090 1,221
Dividends (227) (455) (682)
Transfers to/(from) reserves (96) 635 539
Return per ordinary share
Basic and fully diluted 0.6p 4.8p 5.4p
Six months Year ended
ended 29
31 August February
2003 2004
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains/(losses) on investments
- realised - (81) (81) - 607 607
- unrealised - 3,078 3,078 - 6,363 6,363
Income 181 - 181 356 - 356
Investment management fee (43) (130) (173) (97) (290) (387)
Other expenses (114) - (114) (213) - (213)
Return on ordinary activities before taxation 24 2,867 2,891 46 6,680 6,726
Tax (charge)/credit on ordinary activities - - - (9) 6 (3)
Return on ordinary activities after taxation 24 2,867 2,891 37 6,686 6,723
Dividends - - - - (763) (763)
Transfers to/(from) reserves 24 2,867 2,891 37 5,923 5,960
Return per ordinary share
Basic and fully diluted 0.1p 13.1p 13.2p 0.2p 30.6p 30.8p
All revenue and capital items in the above statement are from continuing
operations. Other than shown above, the company had no recognised gains and
losses. The company has only one class of business and derives its income from
investments made in shares and securities and from bank deposits.
UNAUDITED BALANCE SHEET
At 31 August 2004
31 August 31 August 29 February
2004 2003 2004
£000 £000 £000
Fixed assets
Investments - unquoted 15,973 11,474 13,918
Investments - AIM quoted 3,742 5,280 5,823
Investments - other listed 770 - -
Fixed interest - 1,431 -
20,485 18,185 19,741
Net current assets 2,423 303 1,780
Net assets 22,908 18,488 21,521
Capital & reserves
Share capital 1,137 1,092 1,090
Reserves 21,771 17,396 20,431
Equity shareholders' funds 22,908 18,488 21,521
Net asset value per share 100.8p 84.6p 98.7p
UNAUDITED CASH FLOW STATEMENT
For the six months ended 31 August 2004
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2004 2003 2004
£000 £000 £000
Net revenue from operating activities
Net revenue from ordinary activities before tax 159 24 46
(Increase)/decrease in debtors (31) 47 82
Increase/(decrease) in creditors 30 (23) 17
Management fees charged to capital (218) (130) (290)
Net cash outflow from operating activities (60) (82) (145)
Financial investment
Purchases of investments (443) (3,662) (5,023)
Sales of investments 1,410 3,479 6,992
Net cash inflow/(outflow) from financial investment 967 (183) 1,969
Corporation tax paid - - (3)
Equity dividends paid (760) - -
Net cash inflow/(outflow) before financing 147 (265) 1,821
Financing
Issue of ordinary shares 1,054 - -
Share issue expenses (58) - -
Purchase of ordinary shares for cancellation (149) (41) (78)
Net cash inflow/(outflow) from financing 847 (41) (78)
Increase/(decrease) in cash in period 994 (306) 1,743
Analysis of cash balance
At start of period 2,103 360 360
Net cash inflow/(outflow) for the period 994 (306) 1,743
At end of period 3,097 54 2,103
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1 The unaudited interim financial statements for the six months ended
31 August 2003 and 31 August 2004 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 results for the year ended 29 February 2004
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 under Section 235 of the Companies Act 1985 was unqualified.
2 True and fair override
The company is no longer an investment company within the meaning of Section 266
of the Companies Act 1985, having revoked investment company status on 15 July
2004 in order to pay a capital dividend. However, the company continues to
conduct its affairs as a venture capital trust for taxation purposes under
s842AA of the Income and Corporation Taxes Act 1988.
The financial statements are prepared in accordance with applicable accounting
standards and with the Statement of Recommended Practice 'Financial Statements
of Investment Trust Companies' (SORP). This is consistent with the presentation
adopted in previous periods. Ordinarily, the absence of Section 266 status would
require the company to adopt a different presentation of the accounts than that
recommended by the SORP. However, the directors consider it appropriate to
continue to present the accounts in accordance with the SORP. The departure has
no effect on the total return or balance sheet.
3 The financial information contained in this interim report has been
prepared on the basis of the accounting policies set out in the Annual Report
2004 except as noted in 2 above. Unquoted investments are valued in accordance
with British Venture Capital Association (BVCA) valuation guidelines. AIM
quoted investments are valued at mid market prices discounted, where necessary,
to reflect any lack of liquidity.
4 Returns per ordinary share are based on 22,676,036 ordinary shares,
being the weighted average number of shares in issue during the period. There
were 22,736,887 ordinary shares in issue at 31 August 2004.
5 Earnings for the period should not be taken as a guide to the results
for the full year.
6 The directors will be paying a dividend of 3p per share for the
period ended 31 August 2004 to be paid on 30 November 2004 to shareholders on
the register at 19 November 2004.
7 Copies of the Interim Report will be mailed to shareholders and are
available from the Registered Office of the company at 17-18 Henrietta Street,
London WC2E 8QH.
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