Information  X 
Enter a valid email address

Quester VCT PLC (KAY)

  Print      Mail a friend       Annual reports

Wednesday 02 October, 2002

Quester VCT PLC

Interim Results


Quester VCT plc

Interim statement for the six months ended 31 July 2002

Financial highlights

Per ordinary share    6 months to 6 months to Year to 31 Year to 31 Year to 31
                          31 July     31 July    January    January    January
                             2002        2001       2002       2001       2000
                                                                              
Capital values                                                                
                                                                              
Net asset value             67.4p      104.6p      78.3p     159.3p     136.5p
                                                                              
Share price                 58.5p      115.0p      87.5p     163.0p     150.0p
                                                                              
Return and dividends                                                          
                                                                              
Dividend                        -           -          -      28.0p       5.8p
                                                                              
Cumulative dividend         41.5p       41.5p      41.5p      41.5p      13.5p
                                                                              
Total return*              108.9p      146.1p     119.8p     200.8p     150.0p
                                                                              

* Net asset value plus cumulative dividend per share

Highlights from the Chairman's statement and Investment Manager's report

  * The continuing stock market turbulence and general economic downturn
    combined to make this a difficult period for the Company's investment
    portfolio.
   
  * Despite the difficult conditions generally, the Company achieved some
    profitable realisations during the period, with the sale of two venture
    capital investments including HMV Media Group plc.
   
  * The Manager continues to work closely with many of the investee companies
    to build back value and improve the prospects for growth.
   
  * The portfolio holds a number of attractive investments with good potential
    and it is the intention that Quester VCT will continue to contribute to the
    funding of these investments.
   
CHAIRMAN'S STATEMENT

OVERVIEW

The half-year to 31 July 2002 has seen a continuation of the difficult
conditions on which we commented in the last Annual Report. Stock market
sentiment generally has continued to be adverse with valuations in the
technology sector, in which the Company holds a number of quoted investments,
continuing to be hard hit. In addition, the business conditions faced by small
companies, particularly in the technology-related sector, and the financing
environment for such companies have continued to be very difficult. These
factors have had an adverse effect on a number of the companies in the venture
capital portfolio, requiring increases in the provisions held against a number
of the unquoted investments.

Nevertheless the Company has achieved the realisation of two significant
unquoted investments during the period, resulting in a useful profit in each
case. Earnings per share for the half-year, including the capital gains on the
investments realised, amounted to 3.8 pence.

After taking account of the valuation reductions and provisions, there has been
a reduction in the net asset value per share from 78.3 pence at 31 January 2002
to 67.4 pence at 31 July 2002. Overall, the net asset value of the Company has
been reduced from £27.6 million at 31 January 2002 to £23.6 million at 31 July
2002.


PORTFOLIO PERFORMANCE

Apart from the two realisations of unquoted investments, the performance of the
venture capital portfolio generally has reflected the difficult stock market
and business conditions.

Stock market movements resulted in a decline of £0.9 million in the valuation
of the quoted venture capital investments (equivalent to 2.6 pence per share in
terms of the weighted average number of shares in issue during the year).


The Company's portfolio of unquoted investments, which contains a relatively
high proportion of early stage businesses operating in a number of technology
areas, continued to suffer from the harsh economic environment. As a result, it
has been necessary to make further provisions in respect of certain businesses
that have fallen behind plan. Provisions made during the half year in respect
of unquoted venture capital investments totalled £4.0 million (equivalent to
11.3 pence per share).

On a more positive note, although there are no instances in which it has been
prudent to make upwards revaluations of investments at this stage, a number of
the portfolio companies have achieved developments in their businesses or in
their financing arrangements that provide grounds for optimism for the future.

A further £1.3 million has been committed during the half-year as additional
investment in existing portfolio companies.

INCOME STATEMENT AND DIVIDENDS

The profit and loss account for the six months to 31 July 2002 shows a profit
before tax of £1,323,000, no tax being payable. This includes net capital gains
on realisation of investments of £1,672,000, less a deficiency of income
against expenses of £349,000.

The net capital gains principally relate to HMV Media Group plc, in which the
Company's entire holding was sold upon HMV's flotation in May 2002, realising
net proceeds of £2,291,000 and a profit of £1,451,000 against the previous
carrying value. One other unquoted investment was sold, realising proceeds of £
600,000 and a profit of £228,000 against the previous carrying value.

In the Chairman's statement in the last annual report, we explained that, for
the current year and in future, dividends would be dependent on the realisation
of capital profits. It is encouraging that, despite the difficult conditions
generally, it has been possible to achieve some progress in this respect in
this first half of the year. However, at 31 July 2002 the accumulated balance
on profit and loss account remains negative. Unless capital profits are
realised in the second half of the current year - and currently it is not
possible to anticipate any such realisations - the Company will incur a loss in
the second half. In these circumstances it is inappropriate for the Company to
pay an interim dividend. The amount and timing of future dividends is also
uncertain.

The cash proceeds of the realisations, while not distributable as dividend,
strengthen the Company's ability to take advantage of opportunities for
generation of future value by continuing to invest in the existing portfolio.

CONCLUSION

We remain cautious but positive about the outlook for the Company and its
investments. Present indications are that difficult stock market and business
conditions will continue for some time yet. The portfolio of the Company
includes a range of investments that we believe have significant potential for
the future. However, in the current environment, it seems likely that the
realisation of value from many of the investments will require more time than
might previously have been anticipated. As we have said before, an investment
in a VCT should be considered as an investment held for the medium to long
term.

Tom Scruby

Chairman

2 October 2002

INVESTMENT MANAGER'S REPORT

OVERVIEW

The continuing stock market turbulence and general economic downturn has
combined to make this a difficult period for the Company's investment
portfolios. There has been an approximate 14% fall in the Company's net asset
value per share over the period, compared with a fall of some 19% in the FTSE
All-Share index.

PERFORMANCE OF THE VENTURE CAPITAL PORTFOLIO

Generally the portfolio is feeling the pressure of the on-going economic
downturn. Some companies are clearly making encouraging progress but others
fall behind previous expectations. We have made, therefore, provisions of £4.0
million against a number of the unquoted investments, generally as a result of
underperformance against plan. In some cases provisions have been made to
reflect funding risks or the lower values of broadly comparative companies in
the quoted sectors.

The valuation of the quoted venture capital portfolio, which is determined by
the stock market prices at the period end, has fallen by £0.9 million since the
start of the Company's financial year.

However, on the positive side, the Company was able to effect some good
profitable realisations during the half year. Realised profits of £1.7 million
were generated from the venture capital portfolio during the six months to 31
July 2002. These were derived from the sale of two unquoted investments, HMV
Media Group plc and Pipeline Engineering and Supply Co. Limited. The exit from
HMV was achieved following its IPO when we took the opportunity to sell our
entire holding, generating an accounting profit of £1.45 million on cash
proceeds of £2.3 million. The Pipeline exit resulted in a realised profit for
the period of £228,000 on cash proceeds of £600,000.

VENTURE CAPITAL INVESTMENTS MADE DURING THE PERIOD

During the six months, Quester VCT has made follow-on investments in six
companies as detailed in the table below:-

Company                                 Industry sector              £'000
                                                                          
Advanced Valve Technologies Limited     Industrial products &          222
                                        services                          
                                                                          
Bowman Power Limited                    Energy                         500
                                                                          
Communication & Control Electronics     Electronics                    113
Limited                                                                   
                                                                          
HTC Healthcare Group plc                Other services                 200
                                                                          
Linguaphone Group plc                   Consumer products               90
                                                                          
Opsys Limited                           Electronics                    165
                                                                          
                                                                     1,290

FURTHER VENTURE CAPITAL INVESTMENT

As previously reported, the only investments likely to be made in the near term
will be further investments in companies in the existing portfolio,
particularly given the current economic conditions. The portfolio holds a
number of attractive investments with good potential and it is the intention
that Quester VCT will continue to contribute to the funding of these
investments.

FTSE 350 EQUITY AND FIXED INTEREST PORTFOLIOS

The FTSE 350 equity portfolio has suffered as a result of continuing stock
market turbulence. Over the six months to 31 July 2002, the FTSE 350 index fell
by just under 20%. The FTSE 350 equity portfolio managed on the Company's
behalf by Laing & Cruickshank Investment Management Limited fell by
approximately 16% (£0.3 million) during the same period. There have been
further falls since the period end.

There has been continued solid performance from the residual fixed interest
portfolio. This has generated an effective yield of approximately 4% over the
period and is currently valued marginally above cost. It is likely that some of
this portfolio will be switched into venture capital investment over the coming
18 months.

CONCLUSION

This has been a difficult half year for the Company. We continue to work very
closely with many of our investee companies to build back value and improve the
prospects for growth. We are retaining a level of reserves for further funding
where appropriate. The realisations achieved earlier in the year have provided
a good fillip for the Company and have provided it with additional liquidity
that will be targeted towards further venture capital investment.

Quester Capital Management Limited

2 October 2002

COMPOSITION OF THE FUND

                                                Cost    Valuation    % of fund
                                                                              
                                               £'000        £'000     by value
                                                                              
Venture capital investments that have                                         
achieved a listing                                                            
                                                                              
Crown Sports plc (3,531,150 ords)                475          274         1.2%
                                                                              
SurfControl plc (59,999 ords)                    137          252         1.1%
                                                                              
XKO Group plc (421,000 ords)                     505          196         0.8%
                                                                              
Sirius Group plc (80,298 ords)                   144          110         0.5%
                                                                              
Orchestream Holdings plc (3,472,455              985           95         0.4%
ords)                                                                         
                                                                              
Adva AG Optical Networking (65,374               682           65         0.3%
ords)                                                                         
                                                                              
Deep Sea Leisure plc (125,000 ords)              200           48         0.2%
                                                                              
Sopheon plc (120,000 ords)                       150           10         0.0%
                                                                              
                                               3,278        1,050         4.5%
                                                                              
Ten largest unquoted venture capital                                          
investments                                                                   
                                                                              
Anadigm Limited                                1,263        2,022         8.6%
                                                                              
CDC Solutions Limited                          1,020        1,770         7.5%
                                                                              
Bowman Power Limited                           1,526        1,526         6.5%
                                                                              
Casella Group Limited                            750          750         3.2%
                                                                              
HTC Healthcare Group plc                       1,000        1,000         4.3%
                                                                              
Sift Group Limited                               875          972         4.1%
                                                                              
Nomad Software Limited                         1,112          953         4.0%
                                                                              
Methuen Publishing Limited                       781          781         3.3%
                                                                              
Sibelius Software Limited                        700          700         3.0%
                                                                              
International Diagnostics Group plc            1,050          564         2.4%
                                                                              
                                              10,077       11,038        46.9%
                                                                              
Other unquoted venture capital                12,969        3,801        16.1%
investments                                                                   
                                                                              
Total venture capital investments             26,324       15,889        67.5%
                                                                              
Listed fixed interest investments              4,054        4,071        17.3%
                                                                              
FTSE 350 equity investments                    2,180        1,889         8.0%
                                                                              
Total investments                             32,558       21,849        92.8%
                                                                              
Cash and other net current assets              1,702        1,702         7.2%
                                                                              
Net assets                                    34,260       23,551       100.0%

UNAUDITED FINANCIAL STATEMENTS

Profit and loss account

                                         6 months      6 months      Year ended
                                            ended         ended                
                                                                31 January 2002
                                     31 July 2002  31 July 2001                
                                                                          £'000
                                            £'000         £'000                
                                                                               
Net profit/(loss) on realisation of         1,672         (137)         (2,383)
investments                                                                    
                                                                               
Income                                        161           306             483
                                                                               
Investment management fee                   (343)         (616)           (723)
                                                                               
Other expenses                              (167)         (264)           (453)
                                                                               
Profit/(loss) on ordinary                   1,323         (711)         (3,076)
activities before taxation                                                     
                                                                               
Tax on ordinary activities                      -             -               -
                                                                               
Profit/(loss) on ordinary                   1,323         (711)         (3,076)
activities after taxation                                                      
                                                                               
Dividends                                       -             -               -
                                                                               
Transfer to/(from) reserves                 1,323         (711)         (3,076)
                                                                               
Earnings per share                           3.8p        (2.2)p          (9.4)p

Statement of total recognised gains and losses

                                         6 months      6 months      Year ended
                                            ended         ended                
                                                                31 January 2002
                                     31 July 2002  31 July 2001                
                                                                          £'000
                                            £'000         £'000                
                                                                               
Profit/(loss) for the period                1,323         (711)         (3,076)
                                                                               
Net unrealised loss on revaluation        (5,199)      (15,179)        (21,911)
of investments                                                                 
                                                                               
Total recognised losses relating to       (3,876)      (15,890)        (24,987)
the period                                                                     
                                                                               
Total recognised losses per share         (11.0)p       (50.3)p         (76.3)p

All items in the above statement are derived from continuing operations. The
Company has only one class of business and derives its income from investments
made in shares and securities and from bank deposits.

UNAUDITED FINANCIAL STATEMENTS - continued

Balance sheet

                                     Note     31 July     31 July    31 January
                                                                               
                                                 2002        2001          2002
                                                                               
                                                £'000       £'000         £'000
                                                                               
Fixed assets                                                                   
                                                                               
Investments                               21,849      32,871      26,152       
                                                                               
Current assets                                                                 
                                                                               
Debtors                                   676         481         831          
                                                                               
Cash at bank                              1,601       1,094       1,400        
                                                                               
                                          2,277       1,575       2,231        
                                                                               
Creditors: amounts falling due            (575)       (467)       (769)        
within one year                                                                
                                                                               
Other creditors                                                                
                                                                               
Net current assets                        1,702       1,108       1,462        
                                                                               
Net assets                                23,551      33,979      27,614       
                                                                               
Capital and reserves                                                           
                                                                               
Called-up equity share capital            1,747       1,624       1,764        
                                                                               
Share premium account                   1 2,780       -           2,787        
                                                                               
Special reserve                         1 29,139      29,497      29,302       
                                                                               
Revaluation reserve                     1 (9,939)     2,278       (4,495)      
                                                                               
Profit and loss account                 1 (176)       580         (1,744)      
                                                                               
Total equity shareholders' funds          23,551      33,979      27,614       
                                                                               
Net asset value per share                 67.4p       104.6p        78.3p

Summarised Cash Flow Statements

                                             6 months     6 months   Year ended
                                                ended        ended             
                                                                     31 January
                                              31 July 31 July 2001             
                                                 2002                      2002
                                                                               
                                                £'000        £'000        £'000
                                                                               
Net cash (outflow)/inflow from operating        (388)          387        (770)
activities                                                                     
                                                                               
Net capital expenditure and financial             776      (2,013)      (3,331)
investment                                                                     
                                                                               
Equity dividends paid                               -        (422)        (422)
                                                                               
Financing                                       (187)           54        2,835
                                                                               
Increase/(decrease) in cash for the               201      (1,994)      (1,688)
period                                                                         
                                                                               
Reconciliation of net cash flow to                                             
movement in net funds                                                          
                                                                               
Increase/(decrease) in cash for the               201      (1,994)      (1,688)
period                                                                         
                                                                               
Net funds at the start of the period            1,400        3,088        3,088
                                                                               
Net funds at the end of the period              1,601        1,094        1,400

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

1. Movement in reserves

                         Share premium        Special    Revaluation     Profit
                               account        reserve        reserve           
                                                                       and loss
                                 £'000          £'000          £'000    account
                                                                               
                                                                          £'000
                                                                               
At 1 February 2002             2,787        29,302        (4,495)     (1,744)  
                                                                               
Expenses of 2001 share           (7)             -              -           -  
issue                                                                          
                                                                               
Shares bought back                 -         (163)              -           -  
                                                                               
Net unrealised loss on             -             -        (5,199)           -  
revaluation of                                                                 
investments                                                                    
                                                                               
Transfer of net realised           -             -          (245)         245  
profit to profit and                                                           
loss account                                                                   
                                                                               
Retained profit for the            -             -              -       1,323  
period                                                                         
                                                                               
At 31 July 2002                2,780        29,139        (9,939)       (176)  

 2. The financial information contained in this report has been prepared on the
    basis of the accounting policies set out in the Annual Report.
   
 3. The number of ordinary shares in issue as at 31 July 2002 was 34,933,085(31
    July 2001: 32,471,971).
   
 4. The calculation of earnings per share for the period is based on the profit
    after tax of £1,323,000 divided by the weighted average number of shares in
    issue during the period being 35,141,696 ordinary shares of 5p each.
   
 5. The unaudited financial statements set out above do not constitute
    statutory accounts within the meaning of Section 240 of the Companies Act
    1985.
   
 6. Copies of the unaudited interim results are expected to be sent to
    shareholders on 11 October 2002. Further copies can be obtained from the
    Company's registered office.