Albion En. Vct Regulatory News (AAEV)

16 Nov 2007 16:56

Close Enterprise VCT PLC16 November 2007 16 November 2007 CLOSE ENTERPRISE VCT PLC Announcement of initial results for the period from 7 November 2006 to 30September 2007. Close Enterprise VCT PLC ("the Company"), managed by Close Ventures Limited,today announces the results for the period from 7 November 2006 to 30 September2007. The announcement has been approved by the Board of Directors on 16November 2007. Financial Highlights 30 September 2007Net asset value per share (pence)(i) 95.2 Notes (i) Compares to the net asset value per share of 94.5 pence (after costs) immediately following the closing of the 2006/2007 Offer. The Directors have declared a revenue dividend of 0.7 pence per Share to be paid on 28 December 2007 to shareholders on the register as at 30 November 2007. For further information, please contact: Patrick Reeve/ Will Fraser-Allen Roddi Vaughan-ThomasClose Ventures Limited Peregrine Communications GroupTel: 020 7422 7830 Tel: 020 7223 1552 www.closeventures.co.uk CHAIRMAN'S STATEMENT Introduction Close Enterprise VCT PLC (the "Company") raised £19.8 million under the Offerfor Subscription which closed at the beginning of April 2007. This was apleasing result in a tighter VCT fundraising market. The Company aims to provide investors with a regular and predictable source ofincome, combined with the prospect of longer term capital growth. The Companyintends to achieve this by investing broadly 50 per cent. of the net fundsraised under the Offer in lower risk, asset-based businesses, principallyoperating in the leisure sector and related areas. The balance of the net fundsraised will be invested in higher growth businesses across a variety of sectorsof the UK economy. These will range from lower risk, income producing businessesto higher risk, technology companies. This document covers the initial accounts of the Company for the period from 7November 2006, being the date of the Company's formation, to 30 September 2007.The accounts need to be audited and filed with the Registrar since the Companywill be paying out its first dividend. Investment progress I am pleased to report that investment progress is proceeding according to plan.By 30 September 2007, a total of £2.4 million had been invested in sevenbusinesses, while by 31 October 2007, the figure had grown to £2.8 million ineight businesses. At this early stage the portfolio is broadly split 40:60between asset-based businesses in the leisure sector and higher growthcompanies. Over time it is expected that the split will be broadly equal. Investments in asset-based businesses in the leisure sector comprise ChurchillTaverns VCT Limited and Bravo Inns Limited, two operators of freehold pubs andCS (Norwich) Limited, an operator of a cinema based in Norwich. Investments inthe higher growth portfolio comprise Point 35 Microsystems Limited, asemiconductor equipment company, Oxsensis Limited, a high temperature sensordeveloper, Process Systems Enterprise Limited, a process modeling business andResort Hoppa, a travel business providing resort transfers. In addition, afterthe period end, an investment was made in MiPay Limited, a developer of softwareand systems for mobile phone payments and top ups. Future prospects and further fundraising The build up of the investment portfolio is encouraging and the company is now14.6% invested for the purposes of reaching the 70% investment level which theCompany must reach by 31 March 2010 to comply with the HMRC VCT qualificationrules. The Company is now launching a Further Offer of Ordinary shares to raise up toan additional £20 million. The new shares will rank pari passu with theexisting shares, except for no entitlement to the first dividend for the year to31 March 2009. This will enable further growth and diversification of theCompany's investment portfolio, as well as creating greater economies of scale,due to the spreading of fixed and semi-fixed overheads. Risks and Uncertainties As required under the new Listing Rules under which your Company operates, weare required to comment on the potential risks and uncertainties which couldhave a material impact over the VCTs performance over the remaining six monthsof the financial period. The key risk is the outlook for the UK economy which,while currently still growing, could be affected by the current unease in thewholesale financial and housing markets. While this could give rise toadditional investment opportunities for a cash rich fund like ourselves, adownturn could affect existing investee companies and make it harder for theManager to assess the prospects of new investment opportunities. Results and dividend As at 30 September 2007 the net asset value of the Company was £18.85 million,equivalent to 95.2 pence per share. Net revenue income attributable toshareholders was £285,000 for the period enabling the Board to declare a firstdividend of 0.7 pence per share. The dividend will be paid on 28 December 2007to those shareholders on the register as at 30 November 2007. P ReeveDirector 16 November 2007 INCOME STATEMENT for the period from 7 November 2006 to 30 September 2007 Revenue Capital Total Notes £'000 £'000 £'000 Gains on investments 3 - 2 2 Investment income 4 547 - 547 Investment management fees 5 (60) (179) (239) Other expenses 6 (92) - (92) Return/(loss) on ordinary 395 (177) 218activities before tax Tax (charge)/credit on ordinary 7 (110) 58 (52)activities Return/(loss) attributable to 285 (119) 166equity holders Basic and diluted return/(loss) 9 1.4 (0.6) 0.8per share (pence) All of the Company's activities derive from continuing operations. There are no comparative year figures, since this is the first period of tradingof the Company. The Company was incorporated on 7 November 2006 and commencedtrading activities on 5 April 2007. The total column of this Income Statement represents the profit and loss accountof the Company. The supplementary revenue and capital columns have been preparedin accordance with the Association of Investment Companies' Statement ofRecommended Practice. The Company has no recognised gains or losses other than those disclosed above.Accordingly a statement of total recognised gains and losses is not required. BALANCE SHEETas at 30 September 2007 Notes £'000 Fixed asset investmentsQualifying 2,409Non-qualifying 1,497 Total fixed asset investments 10 3,906 Current AssetsDebtors 11 482Cash at bank 14,688 15,170 Creditors: amounts falling due 12 (226)within one year Net current assets 14,944 Net assets 18,850 Capital and reservesCalled up share capital 13 9,897Special reserve 14 8,787Realised capital reserve (121)Unrealised capital reserve 2Revenue reserve 285 Total shareholders' funds 18,850Net asset value per share (pence) 15 95.2 The interim information was approved by the Board of Directors and authorisedfor issue on 16 November 2007. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the period from 7 November 2006 to 30 September 2007 Called up Realised Unrealised share Share Special capital capital Revenue capital premium reserve reserve reserve reserve Total £'000 £'000 £'001 £'000 £'000 £'000 £'000 As at 7 November 2006 - - - - - - - Issue of share capital 9,897 9,897 - - - - 19,794 Issue costs - (1,089) - - - - (1,089) Cost of cancellation of share premiumaccount - (21) - - - - (21) Cancellation of share premium account - (8,787) 8,787 - - - - Capitalised investment managementand performance fees - - - (179) - (179) Tax relief on costs charged to capital - - - 58 - 58 Unrealised gains on investments - - - - 2 - 2 Revenue return attributable to shareholders - - - - - 285 285 As at 30 September 2007 9,897 - 8,787 (121) 2 285 18,850 CASH FLOW STATEMENTfor the period from 7 November 2006 to 30 September 2007 Note £'000Operating activitiesInvestment income received 33Deposit interest received 330Investment management fees paid (131)Other cash payments (40) Net cash inflow from operating activities 16 192 Capital expenditure and financialinvestmentsMonies held with solicitors (300)Purchase of investments (3,888) Net cash outflow from investing (4,188)activities Net cash outflow before financing (3,996) FinancingIssue of ordinary share capital 19,794Expenses of issue of ordinary sharecapital (1,110)Net cash inflow from financing 18,684 Cash inflow in the year 14,688 Notes to the announcement 1. Accounting convention The initial accounts have been prepared in accordance with the historical costconvention, modified to include the revaluation of investments, in accordancewith applicable United Kingdom law and accounting standards, and with theStatement of Recommended Practice "Financial Statements of Investment TrustCompanies" ("SORP") issued by the Association of Investment Trust Companies ("AITC") in January 2003 and revised in December 2005. The particular accountingpolicies adopted are described below. 2. Accounting policies Investments In accordance with FRS 26 "Financial Instruments Measurement", equityinvestments are designated as fair value through profit or loss ("FVTPL"). Thetotal column of the Income Statement represents the Company's profit and lossaccount. Unquoted investments' fair value is determined by the Directors inaccordance with the International Private Equity and Venture Capital ValuationGuidelines. Fair value movements on equity investments and gains and lossesarising on the disposal of investments are reflected in the capital column ofthe Income Statement in accordance with the AITC SORP. Unquoted loan stock is classified as loans and receivables in accordance withFRS 26 and carried at amortised cost using the Effective Interest Rate method ("EIR"). Movements in the amortised cost relating to interest income arereflected in the revenue column of the Income Statement and movements in respectof capital provisions are reflected in the capital column of the IncomeStatement. Loan stock accrued interest is recognised in the Balance Sheet aspart of the carrying value of the loans and receivables at the end of eachreporting period. Investments are recognised as financial assets on legal completion of theinvestment contract and are de-recognised on legal completion of the sale of aninvestment. It is not the Company's policy to exercise control or significant influence overinvestee companies. Therefore in accordance with the exemptions under FRS 9 "Associates and joint ventures", those undertakings in which the Company holdsmore than 20% of the equity are not regarded as associated undertakings. Investment income Dividends receivable on equity investments are taken to revenue on anex-dividend basis. Fixed returns on debt securities are recognised on a timeapportionment basis using an effective interest rate over the life of thefinancial instrument. Investment management fees and other expenses All expenses have been accounted for on an accruals basis. Expenses are chargedthrough the revenue account except the following which are charged through therealised capital reserve: • 75% of Management fees and performance fees, net of corporation tax is allocated to the capital account, to the extent that these relate to an enhancement in the value of the investments and in line with the Board's expectation that over the long term 75% of the Company's investment returns will be in the form of capital gains; and • expenses which are incidental to the purchase or disposal of an investment are charged through the realised capital reserve. Debtors and creditors • Debtors are non-interest bearing and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. The Directors consider that the carrying amount of debtors approximates their fair value. • Creditors are non-interest bearing and are stated at their nominal value. The Directors consider that the carrying amount of creditors approximates their fair value. Taxation Taxation is applied on a current basis in accordance with FRS 16 "Current tax".Taxation associated with capital expenses is applied in accordance with theSORP. In accordance with FRS 19 "Deferred tax", deferred taxation is providedin full on timing differences that result in an obligation at the balance sheetdate to pay more tax or a right to pay less tax, at a future date, at ratesexpected to apply when they crystallise based on current tax rates and law.Timing differences arise from the inclusion of items of income and expenditurein taxation computations in periods different from those in which they areincluded in the financial statements. Deferred tax assets are recognised to theextent that it is regarded as more likely than not that they will be recovered.The specific nature of taxation of venture capital trusts mean that it isunlikely that any deferred tax will arise. The Directors have considered therequirements of FRS 19 and do not believe that any provision should be made. Reserves Realised capital reserves The following are disclosed in this reserve: (i) gains and losses on the realisation of investments; (ii) expenses, together with the related taxation effect, charged in accordance with the above policies; and Unrealised capital reserves Increases and decreases in the valuation of investments held at the period endare accounted for in this reserve. Special reserve This reserve is distributable. Dividends In accordance with FRS 21 "Events after the balance sheet date", interimdividends are not accounted for until paid, and final dividends are accountedfor when approved by shareholders at an annual general meeting. 3. Gains on investments Gains on investments 7 November 2006 to 30 September 2007 £'000 Unrealised gains on investments 2 4. Investment income 7 November 2006 to 30 September 2007 £'000 Loan stock interest 37FRN interest 9Interest receivable and similar income 501 547 5. Investment management fees 7 November 2006 to 30 September 2007 Revenue Capital Total £'000 £'000 £'000 Investment management fee 60 179 239Total 60 179 239 6. Other expenses 7 November 2006 to 30 September 2007 £'000 Directors' fees 37Auditors' remuneration - audit fees 18Other administrative expenses 37 92 7. Tax (charge)/credit on ordinary activities 7 November 2006 to 30 September 2007 Revenue Capital Total £'000 £'000 £'000 UK Corportion tax (110) 58 (52) The tax assessed for the period is lower than the standard rate of corporationtax of 30%. The difference is explained below: 7 November 2006 to 30 September 2007 Revenue Capital Total £'000 £'000 £'000 Return on ordinary activities 395 (177) 218before tax Tax on profit at 30% (118) 53 (65)Factors affecting the tax charge:Marginal relief 8 5 13 (110) 58 (52) 8. Dividends The Board has declared a first revenue dividend of 0.7 pence per share, whichwill be paid on 28 December 2007 to members on the register as at 30 November2007. 9. Basic and diluted return/(loss) per share 7 November 2007 to 30 September 2007 Revenue Capital Total £'000 £'000 £'000 Return attributable to equity 285 (119) 166shares Return attributable per Ordinary share(pence)(Basic and diluted) 1.4 (0.6) 0.8 Return per share has been calculated on 19,793,147 shares, being the weightednumber of shares in issue for the period since the allotment of shares under the2006/2007 Offer on 4th April 2007. There are no convertible instruments, derivatives or contingent share agreementsin issue for Close Enterprise VCT PLC hence there are no dilution effects to thereturn per share. The basic return per share is therefore the same as thediluted return per share. 10. Fixed asset investments Qualifying Non-qualifying Total investments investments £'000 £'000 £'000 Opening cost - - -Acquisitions 2,399 1,497 3,896Closing cost 2,399 1,497 3,896 Unrealised gains 2 - 2Movement in loans and receivables 8 - 8Closing valuation 2,409 1,497 3,906 Investments held at fair value through profit or loss account total £2,905,000.Investments held at amortised cost total £1,001,000. 11. Debtors 30 September 2007 £'000 Other debtors 300Prepayments and accrued income 182 482 12. Creditors: amounts falling due within one year 30 September 2007 £'000 Other creditors 10Accruals 216 226 13. Called up share capital 30 September 2007 £'000 Authorised:40,000,000 Ordinary Shares of 50p each 20,000 Allotted, called-up and fully-paid:19,793,147 Ordinary Shares of 50p each 9,897 The Company was incorporated on 7 November 2006 , with an authorised sharecapital of £20,000,000 divided into 39,900,000 Ordinary shares of 50p each and50,000 redeemable preference shares of £1 each, of which two ordinary shareswere issued to the subscribers to the Memorandum of Association. By ordinary and special resolutions passed on 23 November 2006: (a) the Directors were generally and unconditionally authorised in accordance with section 80 of the Act to exercise all the powers of the Company to allot relevant securities (as defined in that section) up to an aggregate nominal amount of £19,999,999, such authority to expire on 1 November 2011 (unless previously revoked, extended or varied by the Company in general meeting); (b) the Directors were empowered (pursuant to section 95(1) of the Act) to allot or make offers or agreements to allot equity securities (as defined in section 94(2) of the Act) for cash as if section 89(1) of the Act did not apply to any such allotment, such powers to expire on 1 November 2011 (unless previously revoked, extended or varied by the Company in general meeting). This power was limited to the allotment of equity securities in connection with: (i) the issue of 50,000 Preference Shares to Close Ventures Limited; (ii) the 2006/2007 Offer; (iii) an offer of equity securities by way of rights; (iv) any dividend reinvestment scheme which may be introduced by the Company; (v) the sale of shares out of treasury; and (vi) otherwise an offer of equity securities up to an aggregate nominal amount of 10 per cent. of the issued share capital of the Company immediately following the closing of the 2006/2007 Offer; (c) the Company was authorised to make one or more market purchases (within the meaning of section 163 (3) of the Act) of Shares provided that: (i) the aggregate maximum number of Shares authorised to be purchased is an amount equal to 14.99 per cent. of the Shares in issue following the Offer; (ii) the minimum price which may be paid for a Share is 50 pence; (iii) the maximum price which may be paid for a Share is the higher of (i) an amount equal to the average of 105 per cent. of the middle market prices shown in the quotations for a Share in the Official List for the five business days immediately preceding the day on which that Share is purchased; and (ii) the higher of the price of the last independent trade in Shares and the highest then current independent bid for Shares on the London Stock Exchange; and (iv) the authority expires on 22 May 2008. (d) it was resolved that the amount standing to the credit of the share premium account of the Company as at the date immediately following Admission be cancelled. On 23 November 2006, 50,000 Preference Shares were allotted andissued to Close Ventures Limited pursuant to a letter of undertaking so as toenable the Company to obtain a certificate under section 117 of the Act. ThePreference Shares were redeemed by the Company out of the proceeds of the 2006/2007 Offer. Each Preference Share redeemed was automatically redesignated onredemption as, and sub-divided into, two Shares in the authorised but unissuedcapital of the Company. During the period, 19,793,147 shares of 50 pence each with a total nominal valueof £9,896,574 were allotted in accordance with the terms of the Offer forSubscription dated 23 November 2006. These were issued at a premium of 50 penceeach. These shares were admitted to the Official List of the UK ListingAuthority on allotment on 5th April 2007. 14. Share premium account On 6 July 2007, the Company registered the Court Order dated 4July 2007, which cancelled the whole of the share premium account as at 4 July2007. The purpose of the cancellation was to enable the Company to offset theeffects of unrealised losses on future dividends. For that effect, the Companycreated a special reserve, which is distributable. 15. Net asset value per Ordinary share 30 September 2007 Net asset value per share Net assets pence £'000 Ordinary shares 95.2 18,850 The number of shares used in this calculation is 19,793,147. 16. Reconciliation of net return on ordinary activities before taxationto net cash inflow from operating activities 7 November 2006 to 30 September 2007 £'000 Revenue eturn on ordinary activities before taxation 395Investment management fee charged to capital (179)Movement in accrued amortised loan stock interest (8)Increase in debtors (182)Increase in creditors 166 Net cash inflow from operating activities 192 17. Financial instruments and risk management The Company's financial assets comprise equity and loan stock investments inunquoted companies, cash balances, floating rate notes and short term debtorswhich arise from its operations. The main purpose of these financial assets isto generate revenue and capital appreciation for the Company's operations. TheCompany has no financial liabilities other than short term creditors. TheCompany does not use any derivatives. The principal risks arising from the Company's operations are: • market and investment price risk (which includes fair value interest rate risk and credit risk); • liquidity risk; and • cash flow interest rate risk. The Board regularly reviews and agrees policies for managing each of these risksand they are summarised below: Market price risk As a venture capital trust, it is the Company's specific nature to evaluate andcontrol the investment risk of its portfolio in unquoted and in quotedinvestments. The Manager monitors this risk on an ongoing basis, and the Boardreviews these risks on a formal basis when investments are made and at Boardmeetings. Investment price risk As a venture capital trust, it is the Company's specific business to price,evaluate and control the investment risk in its portfolio of investments, theresults of which are detailed in the Chairman's statement. To mitigateinvestment risk, the investment strategy of the Company is to invest in a broadspread of industries with a large proportion of the investment comprising debtsecurities, which, owing to the structure of their yield, have a lower level ofprice volatility than equity. Fair value interest rate risk The majority of investments are unquoted and hence not subject to marketmovements as a result of interest rate movements. The floating rate note held bythe Company is subject to this risk. Credit risk The Manager evaluates credit risk on loan stock instruments prior to investment,and as part of its ongoing monitoring of investments. Typically loan stockinstruments have a first charge over the assets of the investee company. In thisway, the Manager seeks to limit credit risk to the Company. The Group's creditrisk is limited to the total carrying value of loan stock instruments and thefair value of floating rate notes of £2,498,000. Liquidity risk The Company had no committed borrowing facilities as at 30 September 2007 andhad cash balances of £14,688,000. The main cash outflows are for investments,which are within the control of the Company. In view of this, the Company issubject to low liquidity risk. Cash flow interest rate risk It is the Company's policy to accept a degree of interest rate risk on itsfinancial assets through the effect of interest rate changes. On the basis of the Company's analysis, it is estimated that a fall of onepercentage point in all interest rates would have reduced profits before tax forthe period by approximately 28.45%. The weighted average interest rate applied to the Company's unlisted fixed rateassets during the year was approximately 12.79%. The weighted average period tomaturity for the unlisted fixed rate assets is approximately 4.71 years. Fair values of financial assets and financial liabilities All the Company's financial assets and liabilities as at 30 September 2007 arestated at fair value as determined by the Directors, with the exceptions ofloans and receivables, which are carried at amortised cost, in accordance withFRS 26. In the opinion of the Directors, the amortised cost of loan stockapproximates to the fair value of the loan stock. See note 2 for accountingpolicies. The Company's financial assets as at 30 September 2007, all denominated inpounds sterling, consist of the following: 30 September 2007 Total Fixed Floating Non-interest interest rate bearing £'000 £'000 £'000 £'000 SterlingListed 1,497 - 1,497 -Unlisted 2,409 1,001 - 1,408Cash and other 15,170 10,000 4,988 182assets 19,076 11,001 6,485 1,590 The maturity value of loan stock investments held at amortisedcost is as follows: £'000 Less than one year -1-2 years -2-3 years -3-5 years 1,001More than 5 years -Total 1,001 The Company's financial liabilities are all non-interest bearing. It is theDirectors' opinion that the fair value of the financial liabilities approximatestheir book value. 18. Contingencies, guarantees and financial commitments The Company has no contingencies or guarantees as at 30 September 2007. 19. Post balance sheet events • Invested £340,000 in MiPay Limited • Invested £40,000 in Churchill Taverns VCT Limited 20. Related party transactions The Manager, Close Ventures Limited, is considered to be a related party byvirtue of the fact that it is a party to a management contract from the Company. During the period, services of a total value of £239,000 (including VAT) werepurchased by the Company from Close Ventures Limited. At the financial year end,the amount due to Close Ventures Limited disclosed as accruals and deferredincome was £107,000. 21. Publication The interim report is being sent to shareholders and copies will be madeavailable to the public at the registered office of the Company, CompaniesHouse, via the FSA viewing facility, and at www.closeventures.co.uk. 22. Statutory accounts The financial information set out in the announcement does not constitute theCompany's statutory accounts for the period ended 30 September 2007, as definedin Section 240 of the Companies Act 1985. The Auditors have reported on thoseaccounts; their report was unqualified and did not contain statements undersection 237(2) or (3) of the Companies Act 1985. Whilst the financial information included in this announcement has been computedin accordance with Financial Reporting Standards (FRSs), this announcement doesnot itself contain sufficient information to comply with FRSs. The Companyexpects to publish its full Initial Report and Accounts within the next twoweeks. This information is provided by RNS The company news service from the London Stock Exchange