CYS.L Regulatory News (CYS)

10 Jan 2006 16:36

Chrysalis VCT PLC10 January 2006 CHRYSALIS VCT PLC PRELIMINARY ANNOUNCEMENT OF RESULTSFOR THE YEAR ENDED 31 OCTOBER 2005 FINANCIAL HIGHLIGHTS 2005 2004 pence pence Net asset value per share 74.20 66.50 Cumulative distributions since launch 10.45 5.45 Total return 84.65 71.95(Net asset value per share plus cumulative dividends) The statement to shareholders by the Chairman, Robert Drummond, includes thefollowing comments: I am pleased to present the Annual Report for Chrysalis VCT plc for the yearended 31 October 2005, a year in which your Company has achieved much and has, Ibelieve, turned around its fortunes. MergerIn January 2005, the Company made offers to acquire Chrysalis A VCT plc andChrysalis B VCT plc and Chrysalis C VCT plc. The offers were accepted by therespective Shareholders, with the resulting merged Company being substantiallylarger and a more economic size for a VCT. Net Asset ValueAt 31 October 2005, the Company's Net Asset Value per share ("NAV") had risen to74.2p. Total Return to Shareholders (NAV plus cumulative dividends) rose from71.95p to 84.65p over the year, an increase of 17.7%. The Board is extremely pleased with the progress made over the year,particularly by the fact that a good proportion of the uplift in Total Returnhas been as a result of realised gains rather than just increases in unrealisedvaluations. Board and ManagementOn 1 April 2005, Peter Harkness joined the Board as an independent non-executivedirector, following the resignation of Chris Kay and Nicholas Lewis, whostepped down prior to the announcement of the merger proposals. The Board nowcomprises three non-executive directors, which we consider to be appropriate fora venture capital trust of this size. On 1 January 2005, Chrysalis VCT Management Limited was established as theCompany's wholly owned investment management subsidiary, and is headed up byChris Kay. The Board is very satisfied with the current investment managementarrangements and feels they are working well in driving the improved performanceof the Company. Venture Capital Investments.The Company achieved two very successful exits during the year. Since 2000, theChrysalis VCTs had invested £1.2 million in sit-up Limited, an operator of TVchannels which included price-drop tv and bid-up tv. The company was sold toTelewest in May 2005 generating proceeds for Chrysalis VCT of £5.6 million and again of £4.4 million. A second successful exit was from Henry J Beans Limited, a small restaurant/barchain. After good early progress following the initial investment by ChrysalisA VCT in 1999, the company's expansion programme went badly wrong. With someintensive management, the business was able to resolve its key difficulties and,in September 2005, the company was acquired by a larger group, generatingproceeds of £921,000 against a cost of £587,000. The unrealised valuation movement on the venture capital portfolio in the yearwas an increase in valuation of £2.2 million, with Babel Media Limited, ProtxGroup Limited, Strainstall Group Limited and Wessex Advanced Switching ProductsLimited all making good progress which have led to substantially highervaluations of these investments. The Board has decided value the quoted investments (including those traded onthe AIM) at bid-price rather than at mid-market price, as was previously thepolicy. The effect on the financial statements has been to reduce the valuationof investments by £59,000. Listed fixed income securitiesAt 31 October 2005, this portfolio was valued at £4.4 million. During the yearthe portfolio achieved realised gains of £64,000 and unrealised losses of£51,000. Results and dividendGross revenue for the year was £725,000 (2004: £475,000) and the net revenueprofit after taxation was £298,000 (2004: £118,000). The Board is proposing topay a final revenue dividend of 0.75 p per share. In addition, the Board is proposing to distribute further realised gains by wayof another capital dividend of 1.25p per share. Subject to Shareholderapproval at the AGM, the total final dividend of 2p per share will be paid on 4April 2006, to Shareholders on the register at 24 February 2006. This bringstotal dividends for the year to 5p per share. Share repurchaseAs part of the merger of the Chrysalis VCTs, the Board indicated that, subjectto stock market and other applicable restrictions, the Company would buy inshares for cancellation at a 10% discount to NAV. During the year the Companypurchased 1,106,238 shares for cancellation at an average price of 61.6p pershare being approximately a 10% discount to the prevailing NAV. The Board isaware that liquidity of the Company's shares is important for many Shareholdersand therefore, subject to the same restrictions, intends to continue to buy inshares for cancellation at a 10% discount to NAV. Annual General MeetingThe next Annual General Meeting of the Company will be held at 69 EcclestonSquare, London SW1V 1PJ at 10:00am on 23 March 2006. Future Strategy and OutlookFollowing the success of the merger and on the back of this year's excellentperformance your Board has considered carefully the future strategy for yourCompany, particularly as, with £26.7m of funds now under management, such areview can be made from a position of strength. We have concluded that we have to focus on getting even stronger as thealternative is we fall below the critical mass needed to operate effectively inthe venture capital industry. If this were to happen, and we could not find asuitable merger partner, the fund would have to be wound up causing thoseshareholders who availed themselves of CGT deferral relief to crystallise aconsiderable tax bill. There are two ways in which we can get stronger. Firstly, we employ and retainan excellent investment management team who trade above their weight in themarket. I think your Company's performance over the last 18 months shows we havebeen successful in this respect. I take this opportunity to thank them for alltheir hard work this year. The second way in which we can get stronger is by raising new money. This taxyear provides a unique opportunity for VCTs because of the exceptional taxbreaks on offer. It is for this reason we called an Extraordinary GeneralMeeting ("EGM") earlier this month to give your Company and your directors theopportunity to raise additional money in the market if the conditions wereright. Your Board is delighted that Shareholders overwhelmingly supported theseresolutions. Your Board is continuing to investigate the opportunity of fund raising and weare hopeful of making an announcement shortly. Any fund raising will enableinvestors to take advantage of the 40% income tax relief that is currentlyavailable on new VCT investment. As referred to in my letter giving notice ofthe EGM, your board will ensure that existing shareholders benefit by enjoyingpreferential terms on any fund raising and through a share of the profits madefrom any new money raised. It also means we will be able to consider payinghigher dividends in future. STATEMENT OF TOTAL RETURN (incorporating the Revenue Account)for the year ended 31 October 2005 Year ended 31 October 2005 Year ended 31 October 2004 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Gains/(losses) on investments- Realised - 1,970 1,970 - 218 218- Unrealised - 4,078 4,078 - 1,097 1,097 Income 725 - 725 475 - 475 725 6,048 6,773 475 1,315 1,790 Investment management fees (78) (236) (314) (45) (136) (181) Other expenses (351) (5) (356) (314) (11) (325) Return on ordinary activities before 296 5,807 6,103 116 1,168 1,284tax Tax on ordinary activities 2 - 2 2 - 2 Return on ordinary activities after 298 5,807 6,105 118 1,168 1,286tax Distributions (270) (1,538) (1,808) (54) (270) (324) Transfer to reserves 28 4,269 4,297 64 898 962 Return per ordinary share 1.0p 19.1p 20.1p 0.5p 5.4p 5.9p BALANCE SHEET at 31 October 2005 31 October 2005 31 October 2004 £'000 £'000 £'000 £'000 Fixed Assets Venture capital investments 17,312 9,262Listed fixed income securities 4,409 4,910 21,721 14,172 Current AssetsDebtors 156 172Cash at bank and in hand 5,642 63 5,798 235 Creditors: amounts falling due within one (836) (187)year Net current assets 4,962 48 Net assets 26,683 14,220 Capital and reservesCalled up share capital 360 214Capital redemption reserve 16 5Merger reserve 8,694 -Special reserve 11,791 13,864Capital reserve - realised 3,431 40Capital reserve - unrealised 2,266 -Revenue reserve 125 97 Equity shareholders' funds 26,683 14,220 Net asset value per share 74.2p 66.5p Reconciliation of movements in shareholders' funds 2005 2004 £'000 £'000 Opening shareholders funds 14,220 13,441Shares issued 8,851 -Shares repurchased (685) (183)Total return to shareholders before dividends 6,105 1,286Distributions (1,808) (324) Closing shareholders' funds 26,683 14,220 CASHFLOW STATEMENT for the year ended 31 October 2005 Year ended Year ended 31 October 2005 31 October 2004 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 108 32 TaxationCorporation tax received - 2 Capital ExpenditurePurchase of listed fixed income securities (3,716) -Purchase of venture capital investments (1,500) (454)Purchase of other investments (40) (208) (5,256) (662) Sale of listed fixed income securities 4,483 -Sale of venture capital investments 7,398 742Net cash inflow from capital expenditure 6,625 80 AcquisitionsPurchase of subsidiary undertakings (362) -Net cash transferred from subsidiary undertakings 992 - 630 - Equity distributions paid (1,088) (541) Net cash inflow/(outflow) before financing 6,275 (427) FinancingShares repurchased (696) (173)Net cash outflow from financing (696) (173) Increase/(decrease) in cash 5,579 (600) Reconciliation of net cash flow to movement in net fundsIncrease/(decrease) in cash during the year 5,579 (600)Net funds at 1 November 2004 63 663 Net funds at 31 October 2005 5,642 63 Announcement based on draft accountsThe financial information set out in the announcement does not constitute theCompany's statutory accounts for the period ended 31 October 2005. Thestatutory accounts for the period ended 31 October 2005 will be finalised on thebasis of the financial information presented by the directors in thispreliminary announcement and will be delivered to the Registrar of Companies. A copy of the full annual report and financial statements for the period ended31 October 2005 will be printed and posted to shareholders. Copies will also beavailable to the public at the registered office of the Company at 69 EcclestonSquare, London SW1V 1PJ. This information is provided by RNS The company news service from the London Stock Exchange