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Quester VCT PLC (KAY)

  Print      Mail a friend       Annual reports

Friday 15 October, 2004

Quester VCT PLC

Interim Results

                                Quester VCT plc                                

            Interim statement for the six months ended 31 July 2004            

Financial highlights

Per ordinary share (pence)              6 months to    Year to 31   6 months to
                                       31 July 2004  January 2004  31 July 2003
Capital values                                                                 
Net asset value                               49.0p         50.1p         59.3p
Share price                                   44.0p         45.0p         44.0p
Return and dividends                                                           
Dividend                                          -             -             -
Cumulative dividend                           41.5p         41.5p         41.5p
Total return*                                 90.5p         91.6p        100.8p
Total return* inclusive of the               110.5p        111.6p        120.8p
initial 20% income tax relief                                                  

*Net asset value plus cumulative dividend per share

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

  * The Company's net asset value per share has reduced by 1.1pence per share
    to 49.0pence
  * The Statement of Total Return shows an aggregate loss for the period of £
  * The directors have decided that Quester VCT should commit a limited amount
    of its surplus liquid assets for investment in new venture capital
    opportunities. One such new investment was made in Allergy Therapeutics
    plc, an AIM traded investment
  * A gain of £109,000, being 39% over carrying value, was achieved following
    the disposal of the remaining investment in Chelsea Stores


During the six months to 31 July 2004, the Company's net asset value per share
has reduced by 1.1pence per share to 49.0pence, a fall of 2.2%. After taking
account of share buy-backs of £190,000, the net asset value of the Company fell
from £17.1million at 31 January 2004 to £16.5million over the same period. The
change in net asset value is summarised as follows:

                                          £'000  Pence per
Net asset value at 1 February 2004       17,058       50.1
Net profit on realisation of                120        0.4
Income                                      161        0.5
Expenses                                  (365)      (1.1)
Net unrealised loss on revaluation        (302)      (0.9)
of investments                                            
Share buy-ins*                            (190)          -
Net asset value at 31 July 2004          16,482       49.0

*Share buy-ins have served to enhance net asset value per share by 0.04p per


The profit and loss account shows a net loss for the period of £84,000. This is
comprised of investment income and net gains on realisation of investments of £
281,000 less expenses of £365,000.

The Statement of Total Return, which includes net unrealised losses on
investments of £302,000 as well as the loss reported in the Profit and Loss
account, shows an aggregate loss for the period of £386,000.

Against the background of the results now reported, your directors have
resolved not to pay an interim dividend.


Although the portfolio has demonstrated a reasonable degree of stability over
the period, some further provisioning amounting to £338,000 has been made
against three unquoted investments. This has been partially offset by net
unrealised gains of £33,000 accruing against the quoted venture capital
portfolio and unrealised gains of £3,000 from the listed equity and fixed
interest portfolios.

During the six months, a further £592,000 has been invested in five existing
investments as part of the planned follow-on investment programme. No new
investments were made. However, as demand for follow on investment has reduced
across the existing portfolio, the directors have decided that Quester VCT
should commit a limited amount of its surplus liquid assets for investment in
new venture capital opportunities. We believe that this is a positive move for
our shareholders, thereby adding a fresh dimension to the portfolio. One such
new investment was made in October in Allergy Therapeutics plc, an AIM traded

A more in depth analysis of portfolio performance is provided in the Investment
Manger's Report.


It remains disappointing that we have not yet been able to report an uplift in
net asset value on the back of gains from venture capital investments. However,
we still hold the view that the overall portfolio contains the potential to
deliver returns in the future. Given the nature and composition of the
Company's investments, such gains of any materiality can only be expected to
accrue over the medium term.

Tom Scruby


15 October 2004



Over the six months to 31 July 2004, the underlying progress made by the
venture capital portfolio was largely positive and the liquid reserves retained
for future venture capital investment maintained a steady rate of return.
Nonetheless a net capital loss of £196,000 (including realised and unrealised
items) arose from the Company's venture capital investments.


Further investment from the Company's retained liquid reserves has been made in
the following portfolio companies to support the continued development of their

Company                   Industry Sector                  £'000
Advanced Valve            Industrial products and            271
Technologies Limited      services                              
Anadigm Limited           Semiconductors                      80
Casella Group Limited     Industrial products and            141
Nomad Software Limited    Software                            95
Other                                                          5

Over the recent difficult years for small companies we have maintained a
cautious reserving policy, which has enabled Quester VCT to continue to support
promising investments. In some cases, in the short term, the terms of the
investment transactions have resulted in a need to reduce previous carrying
values in accordance with BVCA valuation guidelines. However, if the projects
continue to develop in line with their medium term potential, these provisions
may be reversed.


The realised and unrealised valuation changes impacting the venture capital
portfolio during the period were as follows:

Realised                                                  £'000
Chelsea Stores Limited                                      109
Unrealised - Quoted investments                                
Crown Sports plc                                            102
Sirius Financial Solutions plc                                7
Sopheon Plc                                                 (3)
Surfcontrol plc                                              11
XKO Group plc                                              (84)
Unrealised - unquoted investments                              
Advanced Valve Technologies Limited                        (16)
Communication & Control Electronics Limited               (141)
Nomad Software Limited                                    (181)
Net loss                                                  (196)

The disposal of the remaining investment in Chelsea Stores produced a gain of £
109,000, being 39% over carrying value. The cumulative gain over cost on this
investment, combined with the earlier realisation of the associated investment
in HMV Media Group, was £183,000, equivalent to a 5.8% gain over cost of the
two investments.

The provisions made against Advanced Valve Technologies and Nomad Software
result from the refinancing terms of new investment rounds, although in both
cases the companies have made some positive progress during the period.
However, the fact that further financing is required indicates slower progress
than planned towards achieving cash flow breakeven and the subsequent move
onwards into building a profitable business. The markets in which these two
companies operate offer clear potential for these goals to be achieved over the
medium term. The disappointing write down of the investment in Communication &
Control Electronics has been made to reflect the anticipated value, which will
be recovered from a process of administration and a sale of the business.


A majority of the other companies in the portfolio have performed well over the
last six months and in line with their budgets for the period, which is
encouraging. There are a few weak spots, however, and companies seeking to
introduce innovative technology to new markets continue to find the markets
tough: they are progressing, but more slowly than either we, or the management
teams concerned, would like.

The positive underlying progress being made by a majority of companies cannot
yet be reflected in any current improvement in the net asset value of Quester
VCT. However, provided that the core of the portfolio continues to move forward
in the way it has done over the last six months, we see some optimism about a
recovery of investment values as justified.


The listed equity reserve has continued to provide a steady total return, which
cumulatively equates to an internal rate of return of 8.3% per annum since the
launch of Quester VCT. This reserve comprised 26 investments, valued at £
2.0million at the end of the period. Gains of £14,000 and a yield of
approximately 4.3% were achieved during the period. The listed fixed interest
holdings were valued at close to cost at £3.5million and generated a yield of
3.4% over the period.

The listed equity and fixed interest portfolios continue to be retained as a
reserve to support potential capital requirements from the venture capital
investment portfolio. The directors have decided that it is now appropriate for
the Company to make a limited number of new venture capital investments, as the
likely demands for further investment from the existing portfolio have reduced.
The first of these new investments has been made since the end of the period in
Allergy Therapeutics plc, an established company developing new 'allergy
vaccines' to treat a range of respiratory allergies. This investment was made
at the time of the company's listing on AIM.


In broad terms, the underlying performance of the majority of companies in the
portfolio has been positive. Those companies in the portfolio seeking to sell
innovative technology into the market continue to find the market tough and
tend to be performing behind plan but they have broadly continued to grow their
businesses and strengthen their market position. We believe that the management
teams we are working with are highly motivated to deliver growth in investment
values and we share their optimism that this can be achieved over the medium

Quester Capital Management Limited

15 October 2004


As at 31 July 2004

                                   Cost     Valuation   % equity  % of fund
                                  £'000         £'000       held   by value 
Quoted venture capital investments                                             
Crown Sports plc                    475           340       1.4%      2.1%     
Sirius Financial Solutions plc      144           65        0.5%      0.4%     
Sopheon plc                         150           25        0.3%      0.2%     
Surfcontrol plc                     91            219       0.3%      1.3%     
XKO Group plc                       505           316       2.2%      1.9%     
Total quoted venture capital        1,365         965                 5.9%     
Unquoted venture capital                                                       
Advanced Valve Technologies Limited 2,448         638       15.0%     3.9%     
Anadigm Limited                     1,588         476       4.1%      2.9%     
Artisan Software Tools Limited      1,377         450       9.3%      2.7%     
Casella Group Limited               1,206         716       6.7%      4.3%     
Communication & Control Electronics 562           140       8.3%      0.8%     
Community Internet Europe Limited   507           127       3.5%      0.8%     
Dycem Limited                       345           345       37.5%     2.1%     
Elateral Holdings Limited           1,942         61        6.2%      0.4%     
HTC Healthcare Group plc            1,000         1,000     16.5%     6.1%     
International Diagnostics Group plc 930           444       14.4%     2.7%     
International Resources Group       32            150       4.0%      0.9%     
Linguaphone Group Limited           840           420       5.3%      2.5%     
Methuen Publishing Limited          751           751       26.2%     4.6%     
Nomad Software Limited              1,206         276       8.1%      1.7%     
Opsys Limited                       1,392         392       4.3%      2.4%     
Sibelius Software Limited           700           700       6.0%      4.2%     
Sift Group Limited                  875           729       5.0%      4.4%     
Total unquoted venture capital      17,701        7,815               47.4%    
Total venture capital investments   19,066        8,780               53.3%    
Listed fixed interest investments   3,507         3,497               21.2%    
Listed equity investments           2,205         2,042               12.4%    
Total investments                   24,778        14,319              86.9%    
Cash and other net assets           2,163         2,163               13.1%    
Net assets                          26,941        16,482              100.0%   



                                        6 months to       Year to 31   6 months
                                       31 July 2004     January 2004 to 31 July
                                              £'000            £'000      £'000
Net profit/(loss) on realisation of             120          (1,169)         62
Income                                          161              456        231
Investment fee                                (199)            (387)      (243)
Other expenses                                (166)            (287)      (167)
Loss on ordinary activities before             (84)          (1,387)      (117)
Tax on ordinary activities                        -                -          -
Transfer from reserves                         (84)          (1,387)      (117)
Earnings per share                           (0.2)p           (4.0)p     (0.3)p


                                           6 months to  Year to 31  6 months to
                                          31 July 2004     January 31 July 2003
                                                 £'000       £'000        £'000
Loss for the period                               (84)     (1,387)        (117)
Net unrealised (loss)/gain on revaluation        (302)     (1,550)          380
of investments                                                                 
Total recognised (losses)/gains relating         (386)     (2,937)          263
to the period                                                                  
Total recognised (losses)/gains per share       (1.1)p      (8.5)p         0.8p

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.


                               Note  31 July   31 January       31 July       
                                       2004          2004          2003       
                                      £'000         £'000         £'000        
Fixed assets                                                                   
Investments                           14,319        14,049        19,586       
Current assets                                                                 
Debtors                               1,612         1,721         1,058        
Cash at bank                          1,046         1,716         87           
                                      2,658         3,437         1,145        
Creditors (amounts falling                                                     
due within one year)                                                           
Other creditors                       (495)         (428)         (298)        
Net current assets                    2,163         3,009         847          
Net assets                            16,482        17,058        20,433       
Capital and reserves                                                           
Called-up equity share                1,682         1,704         1,722        
Share premium account           1     2,787         2,787         2,787        
Special reserve                 1     14,871        15,129        17,448       
Revaluation reserve             1     (5,771)       (5,644)       (3,631)      
Profit and loss account         1     2,913         3,082         2,107        
Total equity shareholders'            16,482        17,058        20,433       
Net asset value per share             49.0p         50.1p         59.3p        


                                     6 months   Year ended           6 months 
                                        ended   31 January              ended 
                                 31 July 2004         2004       31 July 2003 
                                        £'000        £'000              £'000 
Net cash outflow from operating         (176)        (936)               (406)
Net capital expenditure and financial   (494)        2,008               (326)
Financing                               -            (300)               (125)
(Decrease)/increase in cash for the     (670)         772                (857)
Reconciliation of net cash flow to                                            
movement in net funds                                                         
(Decrease)/increase in cash for the     (670)        772                 (857)
Net funds at the start of the period    1,716        944                   944
Net funds at the end of the period      1,046        1,716                  87


1. Movement in reserves

                               Share       Special   Revaluation    Profit     
                               premium     reserve     reserve      and loss    
                               account                              account   
                               £'000        £'000       £'000       £'000      
At 1 February 2004             2,787       15,129      (5,644)      3,082      
Share bought back              -           (168)       -            -          
Transfer from Special Reserve              (90)        -            90         
Net unrealised loss on         -           -           (302)        -          
revaluation of investments                                                     
Transfer of net realised loss  -           -           175          (175)      
to profit and loss account                                                     
Retained loss for the period   -           -           -            (84)       
At 31 July 2004                2,787       14,871      (5,771)      2,913      

 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 2004 was 33,646,953
    (31 July 2003: 34,441,775).
 4. The calculation of earnings per share for the period is based on the loss
    after tax of £84,000 divided by the weighted average number of shares in
    issue during the period being 33,981,517 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
 6. Copies of the unaudited interim results are expected to be sent to
    shareholders on 20 October 2004. Further copies can be obtained from the
    Company's registered office.
A copy of the above document is to be submitted to the UK Listing Authority,
and will shortly be available for inspection at the UK Listing Authority's
Document Viewing Facility, which is situated at:

Financial Services Authority

25 The North Colonnade

Canary Wharf

London E14 5HS


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