Proven Vct Regulatory News (PVN)

17 Oct 2006 07:01

Proven VCT PLC17 October 2006 ProVen VCT plc Interim 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 133.9 111.3 109.3Cumulative distributions per Ordinary share 22.2 18.7 15.7Total return per Ordinary share 156.1 130.0 125.0 CHAIRMAN'S STATEMENT Introduction It is very pleasing to report to you the results of ProVen VCT plc for the sixmonths ended 31 August 2006. The sale of Mergermarket Limited, which was agreedin August and completed in September, has given rise to a substantial increasein the Company's net asset value and now places it comfortably in the top tenbest performing VCTs (based on total return since launch). Net Asset Value As at 31 August 2006, the Company's net asset value per share ("NAV") stood at133.9p and the total return (NAV plus cumulative dividends) stood at 156.1p, anincrease of 26.1p (23.5%) since the last year end of 28 February 2006 (afteradding back the 3.5p per share dividend paid in the period). Venture Capital Investments Following the agreement with Pearson Plc, owner of the Financial Times Group, toacquire Mergermarket Limited, the Company's investment was revalued upwards from£4.7 million to £10.7 million, equivalent to an increase of 25.2p in the NAV.This is a very satisfactory result for an initial investment of £780,000 and theBoard congratulates the Investment Manager on the active role it has played indelivering this excellent outcome. The transaction completed in September andmost of the cash proceeds were received at the same time. Further details areincluded 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 £6.3million. Liquidity Fund Investments The Company holds a proportion of its surplus funds in AAA rated liquidityfunds. At the period end the Company held £4.7 million in three such funds.The Board expects to continue to hold these investments until funds are neededfor venture capital investments. Results The return on ordinary activities after taxation for the period was £6.2 million(£110,000 revenue return and £6.1 million capital return). Dividend As a result of the successful completion of the Mergermarket sale, the Board ispleased to announce the payment of a special dividend of 31p per share. Thisdividend will be paid on 7 December 2006 to shareholders on the Register at 3November 2006. This will bring total dividends paid since launch to 53.2p. Thetotal return, on the basis of the 31 August 2006 results but after payment ofthe dividend and accruing for the related performance incentive fee, will be150.1p. Repurchase of Shares The Directors are conscious that the market in the Company's shares isrelatively illiquid as a result of there being no upfront income tax relief forinvestors purchasing second-hand shares in the market. The Company, therefore,has a policy of purchasing its own shares to help provide liquidity to thoseshareholders that need it. During the period the Company purchased 283,957 shares at an average price of104.2p per share. These shares were subsequently cancelled. Outlook A review of the portfolio following the sale of Mergermarket reveals that anumber of the other investments are developing well. In particular, EspressoBroadband continues to grow rapidly and is currently valued at approximately 2.5times the cost. ILG Digital, a company operating in the high-growth on-lineadvertising sector, has already doubled in value less than one year from thedate of our investment. Given the proven expertise of the Investment Manager inextracting value form the portfolio, the Board continues to have confidenceregarding the Company's future performance. Andrew DavisonChairman INVESTMENT MANAGER'S REPORT Introduction This review covers the Company's six month period ended 31 August 2006. It isvery pleasing to be able to report a 20.1% increase in the total return,following the agreement to dispose of the Company's investment in Mergermarketfor more than twice the previous valuation. The rest of the portfolio continuedto make satisfactory overall progress and the Company continued to comply withthe VCT regulations throughout the period. Portfolio Activity 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 £10.7 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 completed on 29 September 2006. This outstanding result is theculmination of several years' exceptional performance by the Mergermarketmanagement team and staff, with board level support from our investmentmanagement team. In March, we arranged a further investment of £681,000 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 c. 45% of the total market. We areworking actively with the company to help it maximise other opportunities toincrease shareholder value. In the quoted portfolio, we took the opportunity to rationalise the portfolio byrealising the remaining holdings in VI Group and Miva, both at losses to theoriginal purchase cost. Portfolio Valuation At 31 August 2006, the Company's unquoted and quoted portfolio comprised 18investments with a cost of £14.7 million and a valuation of £24.5 million.Further details are shown on page 9. 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 valuation has beenincreased from £1 million to £2.1 million. A number of other investments in theportfolio are also making good progress. We are, however, disappointed to report that both Linguaphone and Zenith Groupare in administration despite the best efforts of both the management teams andourselves to generate value for the businesses. We do not expect any return fromeither of these investments. This does not have any effect on the net assetvalue in the current period as both investments were fully provided against inFebruary 2006. Additionally, we have prudently written down the investments in JVTV (to £nil)and Steribottle (to £114,000) given our concern over the development of thebusinesses. We nevertheless remain committed to maximising value from theseinvestments. Outlook The sale of Mergermarket demonstrates the scale of the returns that canpotentially be generated from venture capital investing. In this case anexceptionally talented and focussed management team, backed by supportiveinvestors, executed a well thought out business plan. Supported by favourablemarket conditions, the company has delivered excellent returns for itsshareholders. Clearly not all companies will be as successful as Mergermarketand, in some cases, businesses will fail despite the best efforts of thoseinvolved. However, by taking a portfolio approach, opportunities exist forexperienced and skilful venture capital investment managers to generateattractive overall returns. We continue to work closely with the other companies in the Company's investmentportfolio and given favourable economic conditions we remain optimistic aboutthe future performance of the Company and the ability to deliver strong returnsto its 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 24,472 18,955 17,653 Net current assets 7,323 7,743 9,080 Net assets 31,795 26,698 26,733 Capital and reservesCalled up share capital 1,187 1,221 1,201Capital redemption reserve 110 76 96Special reserve 13,780 15,846 15,468Share premium account 3,759 3,759 3,759Capital reserve - realised 2,918 1,689 2,287Capital reserve - unrealised 9,806 3,970 3,319Revenue reserve 235 137 603 Equity shareholders' funds 31,795 26,698 26,733 Net asset value per Ordinary share 133.9p 109.3p 111.3p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 31 Aug 2006 31 Aug 2005 28 Feb 2006 £'000 £'000 £'000 Opening shareholders' funds 26,733 24,785 24,785Issue of shares - 2,961 2,961Repurchase of own shares (297) (899) (1,276)Total recognised gains for the period 6,196 638 1,782Distributions paid in period (837) (787) (1,519) Closing shareholders' funds 31,795 26,698 26,733 INCOME STATEMENTfor the six months ended 31 August 2006 Six months ended 31 Aug 2006 Revenue Capital Total £'000 £'000 £'000 Income 303 - 303 Gains on investments - 6,282 6,282 303 6,282 6,585 Investment management fees (74) (221) (295)Other expenses (94) - (94) Return on ordinary activities 135 6,061 6,196 Taxation (26) 26 - Return attributable to equity shareholders 109 6,087 6,196 Return per Ordinary share 0.5p 25.1p 25.6p Six months ended Year ended 31 Aug 2005 28 Feb 2006 (restated) Revenue Capital Total Total £'000 £'000 £'000 £'000 Income 286 - 286 1,030 Gains on investments - 827 827 1,694 286 827 1,113 2,724 Investment management fees (95) (286) (381) (765)Other expenses (94) - (94) (177) Return on ordinary activities 97 541 638 1,782 Taxation (14) 14 - - Return attributable to equity shareholders 83 555 638 1,782 Return per Ordinary share 0.3p 2.3p 2.6p 7.4p 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 109 6,087 6,196 Total recognised gains since last report 109 6,087 6,196 Six months ended Year ended 31 Aug 2005 28 Feb 2006 Revenue Capital Total Total £'000 £'000 £'000 £'000 Return attributable to equity shareholders 83 555 638 1,782 Total recognised gains since last report 83 555 638 1,782 UNAUDITED CASH FLOW STATEMENTfor the six months ended 31 August 2006 Six months Six months ended ended Year ended 31 Aug 2006 31 Aug 2005 28 Feb 2006 Note £'000 £'000 £'000Cash (outflow)/inflow from operating activities and returns on investments 1 (270) (36) 170 Capital expenditurePurchase of investments (681) - (2,483)Sale of investments 114 3,076 8,202 Net cash inflow from capital expenditure (567) 3,076 5,719 Equity distributions paid (841) (787) (1,519) Management of liquid resourcesPurchase of current investments held as - - (3,900)liquidity fundsWithdrawal from liquid funds 950 - 900 Net cash (outflow)/inflow before financing (728) - 1,370 FinancingProceeds from share issue - 3,097 3,097Share issue costs - (136) (136)Purchase of own shares (225) (944) (1,276)Net cash outflow from financing (225) 2,017 1,685 (Decrease)/increase in cash 2 (953) 4,270 3,055 Notes to the cash flow statement: 1 Cash flow from operating activities andreturns on investmentsRevenue return on ordinary activities before 135 97 662taxationExpenses charged to capital (221) (286) (574)(Increase)/decrease in prepayments and accrued (64) 146 72income(Decrease)/increase in accruals and deferred (120) 7 10income Net cash (outflow)/inflow from operating (270) (36) 170activities 2 Analysis of net fundsBeginning of period 3,484 429 429Net cash (outflow)/inflow (953) 4,270 3,055End of period 2,531 4,699 3,484 SUMMARY OF INVESTMENT PORTFOLIOas at 31 August 2006 Cost Valuation % of Movement portfolio in the period £'000 £'000 by £'000 value Top ten venture capitalinvestmentsMergermarket Limited 780 10,711 29.3% 6,048Espresso Broadband Limited 2,048 4,583 12.5% 63ILG Digital Limited (formerly 1,000 2,052 5.6% 1,052i-Level Limited)SPC International Limited 1,146 1,397 3.8% 158Campden Media Limited 975 975 2.7% -Ma Potter's Limited 700 974 2.7% (338)Ashford Colour Press Limited 1,000 867 2.4% (147)UBC Media plc* 1,100 709 1.9% (37)Oasis Healthcare plc* 670 679 1.9% 384Pilot Medial Global plc* 250 672 1.9% 199 9,669 23,619 64.7% 7,382 Other venture capital investments 4,996 853 2.3% (1,073) Total investments 14,665 24,472 67.0% 6,309 Net current assets (including cash and 7,323 33.0%liquidity funds) Total 31,795 100.0% 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 using theInternational 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 acquisitionsor disposals of investments are charged to capital reserves as a deduction fromproceeds or an addition to costs. 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 from continuingoperations. 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. Return per share for the period has been calculated on 24,223,532 shares,being the weighted average number of shares in issue during the period. 6. Dividends 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 478 359 837 - - - -2006 First interim - - - - - - 7322005 Final - - - 281 506 787 787 478 359 837 281 506 787 1,519 Proposed2007 First interim 7,361 7,361 - - - -2006 Second interim - - - - - - 8372006 First interim - - - - 732 732 - - 7,361 7,361 - 732 732 837 7. Reserves Capital Special Share Capital Capital Revenue Total redemption reserve reserve - reserve - reserve reserve premium realised unrealised account £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 March 2006 96 15,468 3,759 2,287 3,319 603 25,532 Shares repurchased 14 (297) - - - - (283)Expenses charged to capital - - - (196) - - (196)Realised losses in year - - - (27) - - (27)Increase in unrealised appreciation - - - - 6,309 - 6,309Realisation of revaluations from previous years - - - (178) 178 - -Distributions paid - - - (359) - (478) (837)Transfer between reserves - (1,391) - 1,391 - - -Retained net revenue - - - - - 110 110At 31 August 2006 110 13,780 3,759 2,918 9,806 235 30,608 The Special Reserve, Capital Reserve - realised and Revenue Reserve are alldistributable reserves. 8. 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. 9. 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