CYS.L Regulatory News (CYS)

5 Feb 2007 15:23

Chrysalis VCT PLC05 February 2007 Chrysalis VCT plc Preliminary Announcement of Results for the year ended 31 October 2006 FINANCIAL HIGHLIGHTS 2006 2005 pence pence (restated)Ordinary SharesNet asset value per share 84.70 76.20 Cumulative distributions paid since launch 10.45 8.45 Total return 95.15 84.65(Net asset value per share plus cumulative dividends) Net asset value and total return per 'D' Ordinary share 96.50p N/A Net asset value and total return per 'E' Ordinary share 95.40p N/A The statement to shareholders by the Chairman, Robert Drummond, includes thefollowing comments: The year to 31 October 2006 has been another busy one for your Company with someexcellent developments within the investment portfolio. Net Asset Value At 31 October 2006, the Net Asset Value ("NAV") of the Ordinary Shares hadincreased to 84.7p, a rise of 10.5p or 14.1% over the year after adjusting forthe dividend of 2p per share paid during the year. Total Return (NAV plus cumulative dividends paid since launch) to OrdinaryShareholders that invested at the Company's outset (when it was known at DowningClassic VCT 3 plc) now stands at 95.15p per Ordinary Share compared to anoriginal investment (net of income tax relief) of 80p per Share. Although thenumbers are different for those that became Shareholders in the Company throughthe various mergers with the other Chrysalis VCTs, it represents a very strongrecovery since the Company became self-managed in April 2004. At the year end, the NAV of the 'D' Shares and 'E' Shares stood at 96.5p and95.4p respectively compared to the original NAV immediately after thefundraising of 94.5p. Venture capital investments Within the Ordinary Share pool, a strong focus of the investment manager's rolethroughout the year has continued to be working towards exits on some of theCompany's more mature investments. The Company achieved a successful exit from Strainstall Group Limited in Octoberof this year, generating proceeds of £2.9 million, equivalent to a gain of £1.2million against original cost or £700,000 against the valuation at the previousyear end. The sale is also likely to generate further proceeds as a result ofearn-out arrangements. We have valued these likely additional proceeds at£347,000. The Company also disposed of part of its holding in AIM-quoted Computer SoftwareGroup plc, producing gains of £513,000 against cost or £352,000 against previousvaluation. The Company was also active throughout the year in adding to its portfolio, withthe Ordinary Share pool investing a total of £3.2 million in seven new and fourfollow-on investments. Of the investments held throughout the period, a number justified significantincreases in their valuations. In particular, Protx Limited accounted for anincrease of £1.2 million and was sold shortly after the year end and ILG DigitalLimited (formerly i-Level Group) justified an increase of £634,000 as thebusiness continues to show very strong growth. The reduction in the valuation of the investment in Ma Potters reflects, inpart, an offer to buy the company at 31 October 2005 which subsequently did notmaterialise. Its prospects, however, remain good. The 'D' Share pool made four investments totalling £200,000 during the year, oneof which was subsequently realised. The 'E' Share pool had not yet made anyinvestments as at 31 October 2006. Listed fixed income securities The Company continues to hold a portfolio of fixed income securities. At 31October 2006, this portfolio was valued at £4.6 million. During the year thisportfolio produced a small unrealised loss of £89,000. Results and dividend The return after tax for the Company was £3,512,000 (2005: £6,105,000)comprising a revenue loss of £5,000 and a capital surplus of £3,517,000. In view of the profitable realisations made during the year by the OrdinaryShare pool and the further profitable realisation of the investment in ProtXLimited made since the year end, the Board does not intend to declare a finaldividend in respect of the year ended 31 October 2006 but instead will pay aninterim capital dividend of 3p per share on 2 March 2007 to Shareholders on theregister at 16 February 2007. In practice, this means the dividend can be paidto Shareholders before the Company's Annual General Meeting ("AGM"), which willnot take place until 22 March 2007. In respect of the 'D' Shares and 'E' Shares, the Board is proposing to pay afinal revenue dividend of 1.25p for each 'D' and 'E' Share. Subject toShareholder approval at the AGM, these dividends will be paid on 27 March 2007,to Shareholders on the register at 16 February 2007. 'D' and 'E' Share issue During the year, the Company undertook two offers for subscriptions to giveinvestors the opportunity to take advantage of the 40% income tax relief thatwas available for investments in VCTs up until 5 April 2006. Ultimately theoutcome of the offers was a disappointment, with the 'D' Share offer raising netproceeds of £507,000 and the 'E' Share offer raising £568,000 and the excesscosts of the offers of £520,000 being met by the Ordinary Share pool. Format of accounts As a result of changes to accounting standards and the circumstances of theCompany, there have been a number of adjustments to the format of the accountsthis year. For this accounting period, your Company is required to adopt FRS 21 (Eventsafter the balance sheet date), under which dividends are required to beaccounted for in the period in which they are liable to be paid rather than theperiod in respect of which they are declared. The comparative figures presented in these financial statements have beenrestated to bring them in line with the new standards. This has resulted in theNAV at the last year end of 31 October 2005 being increased from 74.2p per shareto 76.2p. The Company has also adopted the new Statement of Recommended Practice forInvestment Trusts ("SORP"), which came into effect in December 2005. The mainnoticeable change arising is that the "Statement of Total Return" has beenrenamed as the "Income Statement". In order to best present the Company's results clearly to each class ofShareholder, the main statements within the accounts (the Income Statement,Reconciliation of Movements in Shareholder's Funds, Balance Sheet and Cash FlowStatement) have been presented to show the position of the Company as a wholeand also analysed by each share pool. Share repurchase The Company operates a policy of buying in shares that become available in themarket for cancellation at approximately a 10% discount to NAV. During the yearthe Company purchased 1,681,757 Ordinary Shares for cancellation at an averageprice of 68.2p per share. Annual General Meeting The next Annual General Meeting of the Company will be held at 69 EcclestonSquare, London SW1V 1PJ at 11:00 am on 22 March 2007. Outlook The progress made by your Company since becoming self-managed in April 2004, hasbeen extremely encouraging. A number of profitable exits, as well as improvedresults from many portfolio companies that continue to be held, has producedvery satisfactory results. The current portfolio still contains a number of exciting prospects which maylead to further successful realisations in the short and medium term. However,over the next year the investment manager's focus will shift more towards newinvestments as suitable opportunities are sought for the 'D' Share and 'E' Sharepools, as well as the additional funds available as a result of the realisationsin the Ordinary Share pool. Robert DrummondChairman INCOME STATEMENTfor the year ended 31 October 2006 Company position Year ended 31 October 2006 Year ended 31 October 2005 (as restated) Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income 1,149 - 1,149 725 - 725 Gains on investments - 3,755 3,755 - 6,048 6,048 1,149 3,755 4,904 725 6,048 6,773 Investment management fees (116) (349) (465) (78) (236) (314)Other expenses (333) - (333) (351) (5) (356) Return on ordinary activities 700 3,406 4,106 296 5,807 6,103 Share issue costs (520) - (520) - - - Return on ordinary activities before tax 180 3,406 3,586 296 5,807 6,103 Tax on ordinary activities (185) 111 (74) 2 - 2 Return attributable to equityshareholders (5) 3,517 3,512 298 5,807 6,105 Return per Ordinary share (0.1p) 10.0p 9.9p 1.0p 19.1p 20.1pReturn per 'D' share 1.5p 0.4p 1.9p N/A N/A N/AReturn per 'E' share 1.4p (0.5p) 0.9p N/A N/A N/A Split as: Ordinary shares Year ended 31 October 2006 Year ended 31 October 2005 (as restated) Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income 1,122 - 1,122 725 - 725 Gains on investments - 3,750 3,750 - 6,048 6,048 1,122 3,750 4,872 725 6,048 6,773 Investment management fees (114) (342) (456) (78) (236) (314)Other expenses (328) - (328) (351) (5) (356) Return on ordinary activities 680 3,408 4,088 296 5,807 6,103 Share issue costs (520) - (520) - - - Return on ordinary activitiesbefore tax 160 3,408 3,568 296 5,807 6,103 Tax on ordinary activities (181) 109 (72) 2 - 2 Return attributable to equityshareholders (21) 3,517 3,496 298 5,807 6,105 'D' Ordinary shares Year ended 31 October 2006 Year ended 31 October 2005 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income 13 - 13 - - - Gains on investments - 5 5 - - - 13 5 18 - - - Investment management fees (1) (4) (5) - - - Other expenses (2) - (2) - - - Return on ordinary activitiesbefore tax 10 1 11 - - - Tax on ordinary activities (2) 1 (1) - - - Return attributable to equityshareholders 8 2 10 - - - 'E' Ordinary shares Year ended 31 October 2006 Year ended 31 October 2005 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Income 14 - 14 - - - Gains on investments - - - - - - 14 - 14 - - - Investment management fees (1) (3) (4) - - - Other expenses (3) - (3) - - - Return on ordinary activities before tax 10 (3) 7 - - - Tax on ordinary activities (2) 1 (1) - - - Return attributable to equityshareholders 8 (2) 6 - - - The revenue and capital movements in the year for the Ordinary Shares, D Sharesand E Shares relate to continuing operations. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSfor the year ended 31 October 2006 Year ended Year ended 31 October 2006 31 October 2005 (as restated) Ordinary D E Ordinary shares shares shares Total Shares and Total £'000 £'000 £'000 £'000 £'000 Opening shareholders' funds 26,683 - - 26,683 14,220(as originally stated)Adjustment for dividends provided 718 - - 718 - Opening shareholders' funds 27,401 - - 27,401 14,220(as restated)Issue of shares - 536 601 1,137 8,851Share issue costs - (29) (33) (62) -Purchase of own shares (1,153) - - (1,153) (685)Total recognised gains for the year 3,496 10 6 3,512 6,105Distributions (711) - - (711) (1,090) Closing shareholders' funds 29,033 517 574 30,124 27,401 BALANCE SHEETat 31 October 2006 Year ended Year ended 31 October 2006 31 October 2005 (as restated) Ordinary Ordinary D E Shares and Total shares shares shares Total £'000 £'000 £'000 £'000 £'000 Fixed assets Investments 24,621 155 - 24,776 21,721 Current assets Debtors 180 3 - 183 156Cash at bank and in hand 4,481 361 576 5,418 5,642 4,661 364 576 5,601 5,798 Creditors: amounts falling due within one year (249) (2) (2) (253) (118) Net current assets 4,412 362 574 5,348 5,680 Net assets 29,033 517 574 30,124 27,401 Capital and reserves Called up share capital 343 5 6 354 360Capital redemption reserve 33 - - 33 16Share premium - 502 562 1,064 -Merger reserve 8,694 - - 8,694 8,694Special reserve 9,436 - - 9,436 11,791Capital reserve -realised 5,787 (3) (2) 5,782 3,880Capital reserve - unrealised 4,634 5 - 4,639 2,266Revenue reserve 106 8 8 122 394 Equity shareholder's funds 29,033 517 574 30,124 27,401 Net asset value per share 84.7p 96.5p 95.4p 76.2p CASH FLOW STATEMENTfor year ended 31 October 2006 Year ended Year ended 31 October 2006 31 October 2005 Ordinary Ordinary D E Shares and Total shares shares shares Total £'000 £'000 £'000 £'000 £'000Net cash inflow fromoperating activities 337 4 8 349 108 Taxation - - - - - Capital expenditure Purchase of investments (3,471) (200) - (3,671) (5,256)Sale of investments 4,287 50 - 4,337 11,881 Net cash inflow/(outflow)from capital expenditure 816 (150) - 666 6,625 Acquisitions Purchase of subsidiary undertakings (18) - - (18) (362)Net cash transferred fromsubsidiary undertakings - - - - 992 (18) - - (18) 630 Equity distributions paid (711) - - (711) (1,088) Net cash inflow/(outflow)before financing 424 (146) 8 286 6,275 Financing Shares issued in period - 536 601 1,137 -Share issue costs (465) (29) (33) (527) -Shares repurchased (1,120) - - (1,120) (696) (1,585) 507 568 (510) (696) (Decrease)/increase in cash (1,161) 361 576 (224) 5,579 NOTES 1. Accounting policies Basis of accounting The Company has prepared its financial statements under UK Generally AcceptedAccounting Practice ("UK GAAP") and in accordance with the Statement ofRecommended Practice "Financial Statements of Investment Trust Companies"revised December 2005 ("SORP"). Except as stated in note 2, consistentaccounting polices have been applied to both this year and the prior years'accounts. The financial statements are prepared under the historical cost convention asmodified by the revaluation of certain financial instruments and on the basisthat it is not appropriate to prepare consolidated accounts. Presentation of Income Statement In order to better reflect the activities of venture capital trust and inaccordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information which analyses the income statement between itemsof a revenue and capital nature has been presented alongside the incomestatement. The net revenue is the measure the directors believe appropriate inassessing the Company's compliance with certain requirements set out in Section842 Income and Corporation Taxes Act 1988. Investments All investments are designated as "fair value through profit or loss" assets andare initially measured at cost, equivalent to their fair value. Thereafter theinvestments are measured at subsequent reporting dates at fair value. Listed fixed income investments and investments quoted on AIM are measured usingbid prices with illiquidity discounts applied where deemed appropriate. In respect of unquoted instruments, fair value is established by usingInternational Private Equity and Venture Capital Valuation Guidelines. Where noreliable fair value can be estimated for such unquoted equity investments theyare carried at cost, subject to any provision for impairment. Where an investeecompany has gone into receivership or liquidation the investment, although notphysically disposed of, is treated as being realised. Gains and losses arising from changes in fair value are included in the incomestatement for the year as a capital item and transaction costs on acquisition ordisposal of the investment expensed. It is not the Company's policy to exercise either significant or controllinginfluence over investee companies. Therefore the results of these companies arenot incorporated into the revenue account except to the extent of any incomeaccrued. Income Dividend income from investments is recognised when the shareholders' rights toreceive payment has been established, normally the ex dividend date. Interest income is accrued on a timely basis, by reference to the principaloutstanding and at the effective interest rate applicable, which is the ratethat exactly discounts estimated future cash receipts through the expected lifeof the financial asset to that asset's net carrying amount, and only where thereis reasonable certainty of collection. Expenses All expenses are accounted for on an accruals basis. In respect of the analysisbetween revenue and capital items presented within the income statement, allexpenses have been presented as revenue items except as follows: • Expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment. • Expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. The Company has adopted the policy of allocating investment managers fees, 75% to the capital reserve and 25% to the revenue account as permitted by the SORP. The allocation is in line with the Board's expectation of long term returns from the Company's investments in the form of capital gains and income respectively. • Performance incentive fees arising from the disposal of investments are deducted from the capital account. Issue costs Issue costs have been deducted from the share premium account. Deferred taxation Deferred taxation is provided in full on timing differences that result in anobligation at the balance sheet date to pay more tax, or a right to pay lesstax, at a future date, at rates expected to apply when they crystallise based oncurrent tax rates and law. Timing differences arise from the inclusion of itemsof income and expenditure in taxation computations in periods different fromthose in which they are included in financial statements. 2. Changes in accounting policies The Company is required to comply with a number of new UK FinancialReporting Standards (FRS), which now represents UK Generally Accepted AccountingPractice (UK GAAP), in preparing its financial statements for the year ended 31October 2006. These Standards have been introduced as part of the process ofaligning UK accounting principles with International Accounting Standards. As required by FRS 21 "Events after the Balance Sheet Date",dividends to shareholders are accounted for in the period in which the Companyis liable to pay them rather than in the period in respect of which they aredeclared. The results for the year ended 31 October 2006 are not affected by theadoption of FRS 21 but the comparative figures for the year ended 31 October2005 have been restated accordingly. The effect of the adoption of FRS 21 on thereported net assets of the Company at 31 October 2005 is as follows: 2005 Net Assets £'000 As previously reported 26,683Add: proposed dividends not accounted for until paid 718 As restated 27,401 FRS 25 and 26 were also adopted during the year but these had no effect on the Company's accounting policies. Announcement based on draft accounts (unqualified audit report) The financial information set out in the announcement does not constitute theCompany's statutory accounts in accordance with section 240 Companies Act 1985for the year ended 31 October 2006. The statutory accounts for the year ended31 October 2006 will be finalised on the basis of the financial informationpresented by the directors in this preliminary announcement and will bedelivered to the Registrar of Companies following the Company's Annual GeneralMeeting. A copy of the full annual report and financial statements for the year ended 31October 2006 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 and for download from www.downing.co.uk. This information is provided by RNS The company news service from the London Stock Exchange