CYS.L Regulatory News (CYS)

21 Jul 2006 17:03

Chrysalis VCT PLC21 July 2006 Chrysalis VCT plc Interim Statement for the six months ended 30 April 2006 CHAIRMAN'S STATEMENT Introduction The period to 30 April 2006 was another busy one for your Company. There was acontinued good performance by the investment portfolio, with the fourthsix-monthly period in a row where the Total Return of the Company has risen,demonstrating the success our Investment Management Team has had in extractingvalue from the investment portfolio and making attractive new investments. Net Asset Value At 30 April 2006, the Net Asset Value per Ordinary Share ("NAV") had risen to77.8p, an increase of 3.6p (4.7%) since the previous year end of 31 October 2005(after adjusting for the 2p per Ordinary Share dividend paid in the period). Total Return to original Ordinary Shareholders (NAV plus cumulative dividendspaid since launch) now stands at 88.25p per share, compared to an original netof income tax cost of 80p per share. 'D' and 'E' Share Issue As you will be aware, earlier this year and following Shareholder approval, theCompany launched a 'D' Share and 'E' Share fundraising with the objective ofincreasing the size of the Company while tax relief on VCT investments was stillat 40%. With the good performance that the Company has experienced since the currentinvestment management team took over and some innovative ideas in terms ofinvestment sector, the Board felt there was a good chance of raising furtherfunds to give the Company a greater asset base across which to spread itsrunning costs. In the event, the 'D Share offer (generalist) raised net proceeds of £507,000and the 'E' Share offer (art fund) £568,000. The Directors are verydisappointed with this outcome. I feel that the Company was badly let down bypoor organisation of key elements of the marketing campaign which appeared toalienate key commentators in the VCT market. The Directors are considering whataction may be appropriate against the third parties concerned, but the factremains that the opportunity to raise funds under such favourable tax reliefconditions has now passed. As a result of the low level of funds raised and thefact that the Company is a self-managed fund with no external fund manager, thecosts of the fundraising have been born by the Ordinary Shareholders. At 30 April 2006, with the funds only recently having been raised, the NAV forboth the 'D' and 'E' Shares was 94.5p at 30 April 2006, being the issue priceless the attributable fundraising costs of 5.5%. 'E' Share Investment Strategy In the Company's prospectus dated 2 February 2006, the Directors stated theirintention that the 'E' Share pool be invested in fine art and antique dealers.In view of the low level of funds raised, the Directors have reviewed thisstrategy. Although the Company is able to invest the 'E' share pool in the artand antiques sectors, the size of the investments to allow a portfolio with areasonable number of investments would be prohibitively small. The Directors have therefore decided that 'E' Shareholders will be better servedby the funds being invested in a generalist portfolio where these funds can beinvested alongside those from the Ordinary and 'D' Share pools. The Directorswill seek to invest the 'E' Share pool in low risk opportunities and, shouldsuitable opportunities arise, investments in the art/antique sector will bemade to give the 'E' Shareholders some exposure to that sector. Format of Accounts For this accounting period, your Company is required to adopt FRS 21, underwhich dividends have to be accounted for in the period in which they are liableto be paid rather than the period in respect of which they are declared. As a result comparative figures presented in this statement have been restatedand the 2005 NAV per Ordinary share has increased from 74.2p as previouslyreported to 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". Venture Capital Investments During the period the Company made two new investments and two follow oninvestments at a total cost of £798,000. These investments were all made by theOrdinary share pool. The Ordinary Share pool made one disposal in the period, taking the opportunityto dispose of part of its holding in Computer Software Group plc, realising again of £65,000 against previous carrying value or £186,000 against an originalcost of £61,000. The Company also recovered a small amount of funds from aninvestment that went into liquidation several years ago and some other minorgains totalling £22,000. Of the existing investments in the Ordinary Share pool, there was positive newsfrom the a number of investee companies. In particular, trading at i-LevelGroup Limited has been very strong and Babel Media Limited has continued to growstrongly. Ma Potter's Limited is the one significant investment that has been valueddownwards over the period. Previous valuations of this company were peggedagainst trade offers for the business, but it seems unlikely now that thebusiness will be sold in the short term. The investment, however, continues tobe valued significantly ahead of cost. Overall the venture capital portfolio gave rise to unrealised gains of £1.57million over the period. As at 30 April 2006, the 'D' an 'E' Share pools had not made any investments. Results and dividend The revenue return after taxation for the period amounted to a loss of £270,000,representing 0.8p per share. When launching the fundraising, the Company announced that it would pay adividend to Ordinary Shareholders conditional upon a successful outcome. Withthe disappointing level of funds raised, this conditional dividend was not paid. In view of the fact that the Company did not make a significant level ofrealisations in the period under review, the Directors have decided not to payan interim dividend at this stage. However, the Company has made realisationssince the period end and the Board is aware of a number of other realisationopportunities under discussion and expects to make a further capitaldistribution in the second half. Share buybacks The Company continues to operate a share buyback policy in order to provideliquidity in the market for its Shares. Any Shareholders wishing to sell theirholding should consult their financial adviser to ensure they understand thepotential tax implications of such a disposal. Shares cannot be sold directlyback to the Company but must be sold through a stockbroker. During the period the Company repurchased 1,084,489 Ordinary Shares, at anaverage price of 67.2p per share (approximately equivalent to a 10% discount toNAV), for cancellation. Outlook With the additional workload of the fundraising now behind us, the focus of theBoard and the Investment Management team is now wholly on the core investmentmanagement activities at which the Company has proved so successful over thelast two years. Since the period end, the Company has made further disposals from the holding inComputer Software Groups plc generating additional gains of £506,000. There area number of other excellent prospects in the existing portfolio with profitableexits a possibility in the short or medium term. It is likely that asignificant proportion of the Investment Management team's time over the comingmonth will be spent pursuing these possibilities. The Investment Management team will also be seeking new investment opportunitiesfor the available funds in the Ordinary Share pool and the new 'D' Share and 'E'Share pools. Since the period end the Company has been very active in this areahaving invested a total of £2.25 million in 4 companies. I look forward reporting progress in both activities in my statement with thenext Annual Report for the year ended 31 October 2006. Robert Drummond Chairman 21 July 2006 UNAUDITED SUMMARISED BALANCE SHEET as at 30 April 2006 30 Apr 2006 30 Apr 2005 31 Oct 2005 (as restated) (as restated) £'000 £'000 £'000 Investments 23,900 26,565 21,721 Net current assets 4,280 66 5,680 Net assets 28,180 26,631 27,401 Capital and reservesCalled up share capital 360 371 360Capital redemption reserve 27 5 16Share premium 1,064 - -Merger reserve 8,694 8,694 8,694Special reserve 10,404 15,941 11,791Capital reserve - realised 3,657 135 3,880Capital reserve - unrealised 4,166 1,360 2,266Revenue reserve (192) 125 394 Total equity 28,180 26,631 27,401 Net asset value per Ordinary share 77.8p 71.9p 76.2p Net asset value per 'D' share 94.5p N/A N/A Net asset value per 'E' share 94.5p N/A N/A RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS FUNDS 30 Apr 2006 30 Apr 2005 31 Oct 2005 (as restated) (as restated) £'000 £'000 £'000 Opening shareholder's funds 27,401 14,220 14,220Shares issued 1,075 8,851 8,851Repurchase of own shares (733) - (687)Total recognised gains for the period 1,148 3,560 6,105Distributions paid in period (711) - (1,088) Closing shareholder's funds 28,180 26,631 27,401 INCOME STATEMENT for the six months ended 30 April 2006 Six months ended 30 April 2006 Revenue Capital Total £'000 £'000 £'000 Income 446 - 446 Gains on investments - Realised - 87 87 - Unrealised - 1,523 1,523 446 1,610 2,056 Investment management fees (58) (175) (233)Other expenses (165) - (165) Return on ordinary activities 223 1,435 1,658 Share issue costs (note 3) (507) - (507) Return on ordinary activities before taxation (284) 1,435 1,151 Taxation (36) 33 (3) Return attributable to equity shareholders (320) 1,468 1,148 Return per Ordinary share (0.9p) 4.1p 3.2p Return per 'D' share - - - Return per 'E' share - - - Six months ended Year ended 30 April 2005 31 October 2005 (as restated) Revenue Capital Total Total £'000 £'000 £'000 £'000 Income 200 - 200 725 Gains on investments - Realised - 3,594 3,594 1,971 - Unrealised 9 9 4,077 200 3,603 3,803 6,773 Investment management fees (24) (71) (95) (314)Other expenses (148) - (148) (356) Return on ordinary activities 28 3,532 3,560 6,103 Share issue costs (note 3) - - - - Return on ordinary activities before taxation 28 3,532 3,560 6,103 Taxation - - - 2 Return attributable to equity shareholders 28 3,532 3,560 6,105 Return per Ordinary share 0.1p 16.4p 16.5p 20.1p Return per 'D' share N/A N/A N/A N/A Return per 'E' share N/A N/A N/A N/A STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the six months ended 30 April 2006 Six months ended 30 April 2006 Revenue Capital Total £'000 £'000 £'000 Return attributable to equity shareholders (320) 1,468 1,148 Total recognised gains for the period (320) 1,468 1,148 Six months ended Year ended 30 April 2005 31 Oct 2005 (as restated) (as restated) Revenue Capital Total Total £'000 £'000 £'000 £'000 Return attributable to equity shareholders 28 3,532 3,560 6,105 Total recognised gains for the period 28 3,532 3,560 6,105 UNAUDITED CASH FLOW STATEMENT for the six months ended 30 April 2006 Six Six Year ended months months 31 October ended ended 2005 30 April 30 April 2006 2005 Note £'000 £'000 £'000 Cash inflow from operating activities and returns on investments 1 72 22 108 Capital expenditure Purchase of investments (885) (1,556) (5,256) Proceeds on disposal of investments 34 1,859 11,881 Net cash (outflow)/inflow from capital expenditure (851) 303 6,625 Acquisitions Purchase of subsidiary undertakings 3 (294) (362) Net cash transferred from subsidiary undertakings - - 992 3 (294) 630 Equity dividends paid (711) - (1,088) Net cash (outflow)/inflow before financing (1,487) 31 6,275 Financing Issue of shares 1,137 - -Share issue costs (431) - -Purchase of own shares (681) (11) (696)Net cash inflow/(outflow) from financing 25 (11) (696) (Decrease)/increase in cash 2 (1,462) 20 5,579 Notes to the cash flow statement: 1 Cash inflow from operating activities and returns on investmentsNet revenue before taxation (284) 28 296Costs in respect of D and E Share issue 444 - -Expenses charged to capital (175) (71) (241)Increase in other debtors 3 71 71Increase/(decrease) in other creditors 84 (6) (18) Net cash inflow from operating activities 72 22 108 2 Analysis of net fundsBeginning of period 5,642 63 63Net cash (outflow)/inflow (1,462) 20 5,579End of period 4,180 83 5,642 SUMMARY OF INVESTMENT PORTFOLIO as at 30 April 2006 Cost Valuation % of Movement portfolio in the by period £'000 £'000 value £'000 Ordinary Share pool Top ten venture capital investments Babel Media Limited 1,155 2,386 8.8% 389 Ma Potter's Limited 1,000 1,919 7.1% (419) Strainstall Group Limited 1,244 1,736 6.4% (4) Computer Software Group plc * 940 1,630 6.0% 417 Protx Group Limited 438 1,362 5.0% 255 Centre Design Limited 1,350 1,205 4.4% - Wessex Advanced Switching 694 1,173 4.3% - Products Limited Precision Dental Laboratories 1,100 1,167 4.3% - Group plc i-Level Group Limited 600 1,013 3.7% 413 Glisten plc * 224 935 3.4% 75 8,745 14,526 53.4% 1,134 Other venture capital 6,339 4,960 18.3% 436 investments Listed fixed income securities 4,650 4,414 16.3% (47) 1,523 Net current assets (including 3,255 12.0% cash) Ordinary Share Pool - Total 19,734 27,155 100.0% 'D' Share pool Net current assets (including 507 100.0% cash) 'E' Share pool Net current assets (including 568 100.0% cash) Company Total 19,734 28,230 All venture capital investments are unquoted on the unless otherwise stated. * quoted on the Alternative Investment Market ("AIM") NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. Adoption of FRS 21 These accounts have been prepared in accordance with FRS 21, which requires theCompany to account for dividends in the period they are liable to be paid ratherthan in respect of the period in respect for which they are declared.Comparative figures have been restated accordingly. The effect of the abovechange on the reported net assets and net asset per share is as follows: 30 Apr 2005 31 Oct 2005 Net Net asset asset value value per per share share Net Net assets assets £'000 p £'000 p As reported pre FRS21 26,631 71.9 26,683 74.2Add: proposed dividends in respect ofperiod not accounted for until declaredand paid - - 718 2.0As reported under FRS 21 26,631 71.9 27,401 76.2 2. Accounting policies Basis of accounting The Company has prepared its financial statements under UK Generally AcceptedAccounting Practice ("UK GAAP"). Where presentation guidance set out in theStatement of Recommended Practice "Financial Statements of Investment TrustCompanies" revised December 2005 ("SORP") is consistent with the requirements ofUK GAAP, the Directors have sought to prepare the financial statements on abasis compliant with the recommendations of the SORP. The financial statements are prepared under the historical cost conventionexcept for the revaluation of certain financial instruments. Presentation of Income Statement In order to better reflect the activities of an investment trust company and inaccordance with guidance issued by the AITC, supplementary information whichanalyses the income statement between items of a revenue and capital nature hasbeen presented alongside the income statement. The net revenue is the measurethe directors believe appropriate in assessing the Company's compliance withcertain requirements set out in Section 842 Income and Corporation Taxes Act1988. Investments All investments are designated as "fair value through profit or loss" assets andare initially measured at cost. Thereafter the investments are measured atsubsequent reporting dates at fair value. Listed fixed income investments and investments quoted on the AlternativeInvestment Market ("AIM") are designated measured using bid prices withilliquidity 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 accruals basis. In respect of the analysisbetween revenue and capital items presented within the income statement, allexpenses have been presented as revenue items except that expenses which areincidental to the disposal of an investment are deducted from the disposalproceeds of the investment. 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. 3. Share issue costs Share issue costs in relation to the 'D' and 'E' shares have been accounted inaccordance with the 'D' and 'E' share offer for subscription as follows: £'000 Total costs in respect of 'D' and 'E' share issue 569 Allocated as:Set off against Share Premium (representing 5.5% of share issue 62proceeds)Set off against Ordinary Shareholders' Revenue Reserve 507 569 4. All revenue and capital items in the Income Statement derive fromcontinuing operations. 5. The Company has only one class of business and derives its income frominvestments made in shares, securities and bank deposits. 6. The comparative figures were in respect of the period ended 30 April 2005and the year ended 31 October 2005 respectively. 7. Net Asset Value per share calculations are based on the following: Ordinary 'D' 'E' Shares Shares Shares Net Assets (£'000) 27,105 507 568 Number of shares in issue at period end 34,863,027 536,072 601,376 8. Return per share calculations are based on the following: Ordinary 'D' 'E' Shares Shares Shares Revenue return per share based on:Net revenue loss after taxation (£'000) (320) - - Weighted average number of shares in 35,217,630 444,612 441,682issue Capital return per share based on:Net capital gain after taxation (£'000) 1,468 - - Weighted average number of shares in 35,217,630 444,612 441,682issue 9. Dividends 30 April 2006 30 April 2005 31 Oct 2005 (as restated) (as restated) Revenue Capital Total Revenue Capital Total Total £'000 £'000 £'000 £'000 £'000 £'000 £'000Paid in year2005 Final 266 445 711 - - - -2005 Interim - - - - - - 1,088 266 445 711 - - - 1,088 Proposed2005 Final - - - - - - 7182005 Interim - - - - - - - - - - - - - 718 10.Reserves Share Capital Merger Special Capital Capital Revenue redemption reserve reserve reserve reserve premium reserve reserve unrealised realised £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 November 2005 - 16 8,694 11,791 2,266 3,431 125Restatement of unpaid dividends inline with FRS 21 - - - - - 449 269 At 1 November 2005 (as restated) - 16 8,694 11,791 2,266 3,880 394Share issues( net of costs) 1,064 - - - - - -Shares repurchased - 11 - (733) - - -Expenses capitalised - - - - - (175) -Tax on capital expenses - - - - - 33 -Realised gains - - - - - 87 -Unrealised gains - - - - 1,523 - -Transfer between reserves - - - (654) 377 277 -Retained net revenue for the year - - - - - - (320)Distributions paid in year - - - - - (445) (266)At 30 April 2006 1,064 27 8,694 10,404 4,166 3,657 (192) The Special Reserve, Capital Reserve - Realised and Revenue Reserve areall distributable reserves. 11. The unaudited financial statements set out herein do not constitutestatutory accounts within the meaning of Section 240 of the Companies Act 1985and have not been delivered to the Registrar of Companies. The figures for theyear ended 31 October 2005 have been extracted from the financial statements forthat year, which have been delivered to the Registrar of Companies; theauditors' report on those financial statements was unqualified. 12. Copies of the unaudited interim results will be sent to shareholdersshortly. Further copies can be obtained from the Company's Registered Office. This information is provided by RNS The company news service from the London Stock Exchange