Proven Growth Regulatory News (PGOO)

17 Oct 2006 07:01

Proven Growth & Income VCT PLC17 October 2006 ProVen Growth and Income VCT plcInterim Statement for the six months ended 31 August 2006 RECENT PERFORMANCE SUMMARY 31 Aug 28 Feb 31 Aug 2006 2006 2005 pence pence pence Net asset value per Ordinary share 171.0 134.3 123.2Cumulative distributions per Ordinary share 18.9 15.4 12.4Total return per Ordinary share 189.9 149.7 135.6 Net asset value per 'C' share 95.1 94.9 n/aCumulative distributions per 'C' share - - n/aNet asset value per 'C' share 95.1 94.9 n/a CHAIRMAN'S STATEMENT Introduction I am very pleased to present the results for the Company for the six monthsended 31 August 2006 and, in particular, to bring news of a significant increasein the net asset value of the Company's Ordinary Shares. Net Asset Values As at 31 August 2006, the Company's net asset value ("NAV") per Ordinary Sharestood at 171.0p and the total return per Ordinary Share (NAV plus cumulativedividends) stood at 189.9p, an increase of 40.2p (29.9%) since the last year endof 28 February 2006 (after adding back the 3.5p per share dividend paid in theperiod). The NAV per 'C' Share at 31 August 2006 stood at 95.1p, an increase of 0.6p pershare over the initial NAV, net of fundraising costs, of 94.5p. Venture Capital Investments Ordinary Share Pool Following an agreement with Pearson Plc, owner of the Financial Times Group, toacquire Mergermarket Limited, the Company's investment was revalued upwards from£1.9 million to £4.3 million, equivalent to an increase of 38.7p in the OrdinaryShare NAV. This is a very satisfactory result for an initial investment of£317,000 and the Board congratulates the Investment Manager on the active roleit has played in delivering this excellent outcome. The transaction completedin September and most of the cash proceeds were received at the same time.Further details are included in the Investment Manager's Report. In addition to the above, there has been other positive news from the portfolio,including gains by some of the Company's AIM investments and encouragingdevelopments from some of the unquoted companies. As is to be expected with aventure capital portfolio of this type, some investments have underperformed andprovisions against their valuations have been necessary. However, over theperiod, the investment portfolio showed total net unrealised gains of £2.6million. Liquidity Fund Investments Much of the Company's uninvested funds are held in AAA rated liquidity funds.At the period end the Company held £24.0 million in six such funds. Themajority of these funds are in respect of the 'C' Share pool. The Board expectsto continue to hold these investments until funds are needed for venture capitalinvestments. Results The return on ordinary activities after taxation for the period was £2.7 million(£287,000 revenue return and £2.4 million capital return). Details of how thisis analysed between the share pools is shown in note 6. Dividend As a result of the successful completion of the Mergermarket sale, the Board ispleased to be able to announce a special dividend to ordinary shareholders of50p per share. This dividend will be paid on 7 December 2006 to OrdinaryShareholders on the Register at 3 November 2006. This will bring total dividendspaid to Ordinary Shareholders since launch to 68.9p. The total return, on thebasis of the 31 August 2006 results but after payment of the dividend andaccruing for the related performance incentive, will be 180.3p per OrdinaryShare. The Board will not be making a dividend payment to 'C' Shareholders given thesmall amount of net revenue and there being no realisations attributable to the'C' Share pool. Repurchase of Shares The Directors are conscious that the market in the Company's shares isrelatively illiquid as a result of the fact that there is no upfront income taxrelief for investors purchasing second-hand shares in the market. The Company,therefore, has a policy of purchasing its own shares to help provide liquidityto those Shareholders that need it. During the period the Company purchased 56,615 Ordinary Shares at an averageprice of 123.6p per share. These shares were subsequently cancelled. No 'C'Shares were purchased. Outlook Following this set of results, your Company's Ordinary Shares now have the thirdhighest total return of all VCTs. This is an excellent performance by theInvestment Manager and has been achieved through a series of profitableinvestments and, importantly, by minimising investment failures. Even with the disposal of Mergermarket, the Ordinary Share portfolio includes anumber of investments with encouraging prospects and opportunities forextracting further value for Ordinary Shareholders. The greater focus for the Investment Manager over the second half of the yearwill be in starting to build the 'C' Share investment portfolio. The InvestmentManager reports a satisfactory level of deal flow and the Board looks forward toa series of new investments that will further cement the Company's position asone of the best performing VCTs. Andrew DavisonChairman INVESTMENT MANAGER'S REVIEW Introduction This review covers the Company's six month period ended 31 August 2006. It isvery pleasing to be able to report a 26.9% increase in the total returnattributable to the Ordinary Shareholders of the Company, following the sale ofthe Company's investment in Mergermarket for more than twice the previousvaluation. The rest of the portfolio continued to make satisfactory overallprogress and the Company continued to comply with the VCT regulations during theperiod. Portfolio Activity Ordinary Share Pool On 8 August 2006, the Financial Times Group signed a conditional agreement topurchase Mergermarket for over £110 million. This valued the Company'sinvestment in Mergermarket at £4.3 million, an increase of 130% compared to 28February 2006. The valuation represents a return on investment of almost 14times the cost of the Company's investment, which dates originally from 2001.The sale was subject to regulatory clearance and completed on 29 September 2006.This outstanding result is the culmination of several years' exceptionalperformance by the Mergermarket management team and staff, with board levelsupport from our investment management team. In March we arranged a further investment of £261,000 in Espresso Broadband.This investment was to support the acquisition of Netmedia, a complementarybusiness in the education sector. The number of UK primary schools subscribingto Espresso's video-rich educational content continues to grow rapidly and nowstands at around 8,500 schools, representing approximately 45% of the totalmarket. We are working actively with the company to help it maximise otheropportunities to increase shareholder value. In the quoted portfolio, we took the opportunity to realise the remainder of theCompany's holding in Miva at a small loss to the original purchase cost. 'C' Share Pool The proceeds from the 'C' Share issue have been invested in AAA rated pooledliquidity funds. These liquidity funds provide the benefits of high capitalsecurity in a diversified collection of money market instruments and competitiverates of return compared to traditional bank deposits. These investments will be progressively realised as they are needed for venturecapital investments. No investments have yet been made. Portfolio Valuation Ordinary Share Pool At 31 August 2006, the Company's unquoted and quoted portfolio comprised 16investments with a cost of £5.6 million and a valuation of £10.5 million. Thispart of the portfolio is solely attributable to the Ordinary Shareholders. Espresso Broadband, which, after the sale of Mergermarket, is the largestinvestment by value in the portfolio, continues to perform in line withexpectations and we remain confident about the potential for a successful exit. One of the most recent investments, ILG Digital (formerly i-Level), a digitalmedia agency, has performed exceptionally well and the Board has agreed touplift the valuation from £600,000 to £1.2 million. A number of otherinvestments in the portfolio are also making good progress. We are, however, disappointed to report that Zenith Group was placed intoadministration in August despite the best efforts of both the management teamand ourselves to generate value for the business. We do not expect any returnfrom Zenith as other investors have first call on any proceeds raised from theadministration process. This does not have any current period effect on the netasset value as Zenith was fully provided against in February 2006. Additionally, we have prudently written down the investments in JVTV (to £nil)and Steribottle (to £39,000) given our concern over the development of thesebusinesses. We remain committed, however, to extracting maximum value forordinary shareholders from these investments. 'C' Share Pool The liquidity fund investments and other net current assets of £23.8 million arevalued at cost. Outlook The sale of the Company's investment in Mergermarket demonstrates the scale ofthe returns that can potentially be generated from venture capital investing.In this case an exceptionally talented and focussed management team, backed bysupportive investors, executed a well thought out business plan. Supported byfavourable market conditions, the company has delivered excellent returns forits shareholders. Clearly not all companies will be as successful asMergermarket and, in some cases, businesses will fail despite the best effortsof those involved. However, by taking a portfolio approach, opportunities existfor experienced and skilful venture capital investment managers to generateattractive overall returns. The Company is well placed to benefit from the potential returns from venturecapital given the funds available from the recent 'C' share fundraising. Inaddition, developments in the current portfolio give us grounds for optimismregarding future returns to Ordinary Shareholders. Beringea Limited UNAUDITED SUMMARISED BALANCE SHEETas at 31 August 2006 31 Aug 2006 31 Aug 2005 28 Feb 2006 (restated) £'000 £'000 £'000 Investments 10,475 6,714 7,627 Net current assets 24,108 1,317 3,447 Net assets 34,583 8,031 11,074 Capital and reservesCalled up share capital 1,312 65 195Capital redemption reserve 8 6 7Share premium account 22,384 27 2,381Special reserve 5,189 5,603 5,457Capital reserve - realised 389 424 648Capital reserve - unrealised 4,897 1,832 2,236Revenue reserve 404 74 150 Equity shareholders' fund 34,583 8,031 11,074 Net asset value per Ordinary share 171.0p 123.2p 134.3p Net asset value per 'C' share 95.1p n/a 94.9p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 31 Aug 2006 31 Aug 2005 28 Feb 2006 £'000 £'000 £'000 Opening shareholders' funds 11,074 7,989 7,989Issue of shares 22,351 - 2,630Share issue costs (1,230) - (145)Repurchase of own shares (70) (207) (353)Total recognised gains for the period 2,682 486 1,382Distributions paid in period (223) (237) (429) Closing shareholders' funds 34,583 8,031 11,074 INCOME STATEMENT for the six months ended 31 August 2006 Six months ended 31 Aug 2006 Revenue Capital Total £'000 £'000 £'000 Income 566 - 566 Gains on investments - 2,607 2,607 566 2,607 3,173 Investment management fees (90) (269) (359)Other expenses (132) - (132) Return on ordinary activities 344 2,338 2,682 Taxation (56) 56 - Return attributable to equity shareholders 288 2,394 2,682 Return per Ordinary share 0.2p 39.6p 39.8p Return per 'C' share 1.2p (0.6p) 0.6p Six months ended Year ended 31 Aug 2005 28 Feb 2006 (restated) Revenue Capital Total Total £'000 £'000 £'000 £'000 Income 73 - 73 233 Gains on investments - 566 566 1,430 73 566 639 1,663 Investment management fees (20) (61) (81) (141)Other expenses (72) - (72) (140) Return on ordinary activities (19) 505 486 1,382 Taxation - - - - Return attributable to equity shareholders (19) 505 486 1,382 Return per Ordinary share (0.3p) 7.6p 7.3p 20.9p Return per 'C' share n/a n/a n/a 0.4p STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESfor the six months ended 31 August 2006 Six months ended 31 August 2006 Revenue Capital Total £'000 £'000 £'000 Return attributable to equity shareholders 288 2,394 2,682 Total recognised gains since last report 288 2,394 2,682 Six months ended Year ended 31 Aug 2005 28 Feb 2006 Revenue Capital Total Total £'000 £'000 £'000 £'000 Return attributable to equity shareholders (19) 505 486 1,382 Total recognised gains since last report (19) 505 486 1,382 UNAUDITED CASH FLOW STATEMENTfor the six months ended 31 August 2006 Six Six months months Year ended ended ended 31 Aug 31 Aug 28 Feb 2006 2005 2006 Note £'000 £'000 £'000Cash inflow/(outflow) from operating activities and returns on investments 1 126 (97) (95) Capital expenditurePurchase of investments (261) - (1,293)Sale of investments - 426 1,804 Net cash inflow from capital expenditure (261) 426 511 Equity distributions paid (223) (237) (429) Management of liquid resourcesPurchase of current investments held as liquidity funds (23,600) - -Withdrawal from liquid funds - - 500 (23,600) - 500 Net cash (outflow)/inflow before financing (23,958) 92 487 FinancingProceeds from share issue 18,266 - 6,685Share issue costs (1,254) - (92)Purchase of own shares (59) (252) (353)Net cash inflow/(outflow) from financing 16,953 (252) 6,240 (Decrease)/increase in cash 2 (7,005) (160) 6,727 Notes to the cash flow statement: 1 Cash flow from operating activities and returns oninvestmentsNet revenue/(loss) before taxation 344 (19) 58Expenses charged to capital (269) (61) (106)(Increase)/decrease in other debtors (110) 32 8Increase/(decrease) in accruals and other creditors 161 (49) (55) Net cash inflow/(outflow) from operating activities 126 (97) (95) 2 Analysis of net fundsBeginning of period 7,189 1,362 462Net cash (outflow)/inflow (7,005) (160) 6,727End of period 184 1,202 7,189 SUMMARY OF INVESTMENT PORTFOLIO as at 31 August 2006 Cost Valuation % of Movement portfolio in the period £'000 £'000 by £'000 valueOrdinary Share poolTop ten venture capitalinvestmentsMergermarket Limited 317 4,347 40.2% 2,453Espresso Broadband Limited 784 1,755 16.2% 24ILG Digital Limited (formerly 600 1,226 11.4% 626i-Level Limited)Gyro International Limited 500 888 8.2% 388Campden Media Limited 488 488 4.5% -Ashford Colour Press Limited 550 477 4.4% (80)Ma Potter's Limited 300 417 3.9% (145)UBC Media plc * 400 301 2.8% (3)Pilat Media Global plc * 74 199 1.9% 59Cardpoint plc * 129 157 1.1% (7) 4,142 10,255 94.6% 3,315 Other venture capital 1,436 220 2.1% (676)investments Total investments 5,578 10,475 96.7% 2,639 Net current assets (including 351 3.3%cash) Ordinary Share Pool - Total 10,826 100.0% 'C' Share poolLiquidity Funds 23,600 99.3% Other net current assets 157 0.7% 'C' Share Pool - Total 23,757 100.0% Company Total 34,583 All venture capital investments are unquoted unless otherwise stated. *Quoted on AIM NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 1. 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 inconsistent with the requirementsof UK 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 a venture capital trust 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 Listed fixed income investments and investments quoted on the AlternativeInvestment Market ("AIM") are designated as "fair value through profit or loss"assets and are initially measured at cost, in accordance with FinancialReporting Standard 26 "Financial Instruments: Measurement". Thereafter theinvestments are measured at subsequent reporting dates at fair value, which isthe bid price 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. 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, 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 as follows: • Expenses which are incidental to the disposal of an investment are deductedfrom the disposal proceeds of the investment. • Expenses are split and presented partly as capital items where a connectionwith the maintenance or enhancement of the value of the investments held can bedemonstrated and accordingly the investment management fee and finance costshave been allocated 25% to revenue and 75% to capital, in order to reflect thedirectors expected long-term view of the nature of the investment returns of theCompany. 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 the financial statements. 2. All revenue and capital items in the Income Statement derive fromcontinuing operations. 3. The Company has only one class of business and derives its income frominvestments made in shares, securities and bank deposits. 4. The comparative figures were in respect of the period ended 31 August 2005and the year ended 28 February 2006 respectively. 5. Net Asset Value per share calculations are based on the following: Ordinary 'C' Shares Shares Net Assets (£'000) 10,826 23,757 Number of shares in issue at period end 6,331,464 24,979,862 6. Return per share calculations are based on the following: Ordinary 'C' Shares Shares Revenue return per share based on:Net revenue profit after taxation (£'000) 16 272 Weighted average number of shares in issue 6,371,761 22,111,636 Capital return per share based on:Net capital gain/(loss) after taxation (£'000) 2,523 (129) Weighted average number of shares in issue 6,371,761 22,111,636 7. Dividends The dividends below all relate to dividends paid to Ordinary shareholders 31 August 2006 31 August 2005 28 Feb 2006 Revenue Capital Total Revenue Capital Total Total £'000 £'000 £'000 £'000 £'000 £'000 £'000Paid in year2006 second interim 32 191 223 - - - -2006 first interim - - - - - - 1922005 final - - - - 237 237 237 32 191 223 - 237 237 429 Proposed2007 first interim - 3,166 3,166 - - - -2006 second interim - - - - - - 2242006 first interim - - - - 192 192 - - 3,166 3,166 - 192 192 224 8. Reserves Capital Capital Capital redemption reserve reserve Share Special reserve Share Revenue premium - - Capital reserve unrealised realised Reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 March 2006 195 5,457 7 2,381 2,236 648 150Issue of new shares 1,118 - - 21,233 - - -Share issue costs - - - (1,230) - - -Shares repurchased (1) (70) 1 - - - -Expenses capitalised - - - - - (213) -Gains/(losses) on investments - - - - 2,639 (31) -Realisation of revaluations from previous years - - - - 22 (22) -Distributions paid - - - - - (191) (32)Transfer between reserves - (198) - - - 198 -Retained net revenue for the period - - - - - - 288At 31 August 2006 1,312 5,189 8 22,384 4,897 389 406 Analysed as:Ordinary Shares £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 March 2006 64 5,457 7 27 2,236 648 141Issue of new shares - - - - - - -Share issue costs - - - - - - -Shares repurchased (1) (70) 1 - - - -Expenses capitalised - - - - - (84) -Gains/(losses) on investments - - - - 2,639 (31) -Realisation of revaluations from previous years - - - - 22 (22) -Distributions paid - - - - - (191) (32)Transfer between reserves - (198) - - - 198 -Retained net revenue for the period - - - - - - 16At 31 August 2006 63 5,189 8 27 4,897 518 125 'C' Shares £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 March 2006 131 - - 2,354 - - 9Issue of new shares 1,118 - - 21,233 - - -Share issue costs - - - (1,230) - - -Expenses capitalised - - - - - (129) -Retained net revenue for the period - - - - - - 272At 31 August 2006 1,249 - - 22,357 - (129) 281 The Special Reserve is a distributable reserve that allows the Company to makemarket purchases of its own shares and to pay distributions. The OrdinaryCapital reserve - realised and Revenue Reserves are also distributable reserves. 9. 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 28 February 2006 have been extracted from the financial statementsfor that year, which have been delivered to the Registrar of Companies; theauditors' report on those financial statements was unqualified. 10. 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