3 Jun 2008 10:11
VENTUS VCT PLC
3 June 2008
Annual Results
for the year ended 29 February 2008
The Directors of Ventus VCT plc (the "Company") announce the results for the year ended 29 February 2008. A copy of the full Annual Report and Financial Statements, which includes the Investment Manager's Report, will be posted on the Company's website www.ventusvct.com
These accounts cover the third full year of investment activity for the Company. This announcement was approved by the Board of Directors on 2 June 2008.
Chairman's Statement
Net Asset Value and Results
Revenue attributable to shareholders for the year was £464,934 or 3.10 pence per share. The capital loss attributable to shareholders for the year was £212,400 or 1.42 pence per share, resulting in a total return to shareholders for the year of £252,534 or 1.68 pence per share.
The main sources of revenue were interest earned on mezzanine loan stock investments and UK treasury bills. Running costs of the Company (before irrecoverable VAT) remained within 3.6% of Net Asset Value ("NAV") in accordance with the investment management agreement.
At 29 February 2008, the Company's NAV stood at £13,942,867 or 93.0 pence per share.
Dividend
The Company declared a dividend for the first half-year of 1.50 pence per share and proposes to declare a further dividend of 2.00 pence per share for the second half of the year, resulting in a total annual dividend of 3.50 pence per share. The dividend will be paid on 14 July 2008 to all shareholders on the register as at the close of business on 13 June 2008.
Venture Capital Trust ("VCT") Qualifying Status
The Company continues to retain the services of PricewaterhouseCoopers LLP to review its ongoing compliance with VCT regulations. PricewaterhouseCoopers LLP has confirmed that the Company has been in compliance with the required conditions throughout the year.
Investments
The Company's Investment Manager, Climate Change Capital Limited, continues to be actively engaged in identifying and negotiating potential investment opportunities and managing the portfolio. Since the last Half-yearly Report the Investment Manager has succeeded in completing a number of investments which has ensured that the Company has satisfied the requirement to have at least 70% of its investments in qualifying holdings by 1 March 2008, in accordance with HM Revenue & Customs VCT regulations.
As at the date of this report, the Company has made investments and/or contractually committed to invest in a total of sixteen companies representing total funds invested and committed of £12.7 million. The Company has therefore invested and committed 85% of the total funds that it raised.
Investment pipeline
The Company has now substantially invested the initial funds raised and the Investment Manager is focussed on consolidating the portfolio by ensuring that investee companies complete construction on schedule and operate in a way which will optimise returns on the investments.
It is expected that new investment opportunities will continue to arise which will be evaluated and incorporated into the portfolio where appropriate. The early stage investments made in wind farm development companies, as outlined in the Investment Manager's Report, are anticipated to yield future investment opportunities as sites are awarded planning consent. These investments in wind farm development companies have been made with a view to the longer term and may create a requirement for the Company to raise further capital in the future. Alternatively, these sites may be sold once planning permission has been obtained creating the opportunity to earn a development profit on the investment made.
The portfolio currently has a broad mix of operational assets and others under construction which will become operational in 2009. As the first wave of investments have commenced trading the investee companies will make payments of mezzanine interest to the Company and will start to make dividend distributions in the forthcoming year. Whilst it is relatively early in the operational life of the portfolio, the Investment Manager is satisfied that the dividend objective of the Company to pay an average annual dividend of 8 pence per ordinary share, once all of its portfolio companies are fully operational, is achievable based on the structure and status of the investments that have been made to date.
Principal risks
Other than the inherent risk associated with investment activities, the risks described below are those which the Directors consider to be material:
Failure to meet and maintain the investment requirements for compliance with HM Revenue & Customs VCT regulations
The Board mitigates this risk by regularly reviewing investment management activity and by obtaining pre-approval from HM Revenue & Customs for each investment.
Inadequate control environment at service providers
The Board mitigates this risk by only appointing service providers of a high standing under agreements that set out their responsibilities and by obtaining assurances from them that all exceptions have been reported to the Board.
Non-compliance with the Listing Rules of the Financial Services Authority, Companies Act legislation, HM Revenue & Customs VCT regulations and other applicable regulations.
The Board mitigates this risk by employing external advisers fully conversant with applicable statutory and regulatory requirements who report regularly to the Board on the Company's compliance.
Proposed changes to the Company's Articles of Association
It will be proposed, by resolution, at the next Annual General Meeting, to adopt new Articles of Association, primarily to take account of changes in English company law brought about by certain provisions of the Companies Act 2006 which are already in force. A further resolution will propose revisions to the new Articles with effect on and from 1 October 2008 (or such later date as Section 175 of the Companies Act 2006 shall be brought into force) to cater for changes being introduced by the Companies Act 2006 relating to directors' conflicts of interest. These resolutions will be explained in detail in the notes to the Notice of the Annual General Meeting, which is issued with the Annual Report and Financial Statements.
David Pinckney
Chairman
2 June 2008
Income statement
for the year ended 29 February 2008
| 2008 | 2007 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Income | 926 | - | 926 | 782 | - | 782 |
| Net gains on investments | - | - | - | - | 104 | 104 |
| 926 | - | 926 | 782 | 104 | 886 | |
| Expenditure | ||||||
| Investment management fees | 102 | 303 | 405 | 104 | 311 | 415 |
| Other expenses | 170 | - | 170 | 156 | - | 156 |
| 272 | 303 | 575 | 260 | 311 | 571 | |
| Profit/(loss) before taxation | 654 | (303) | 351 | 522 | (207) | 315 |
| Tax | (189) | 91 | (98) | (95) | 59 | (36) |
| Profit/(loss) for the year attributable to equity shareholders | 465 | (212) | 253 | 427 | (148) | 279 |
| Earnings per share: | ||||||
| Basic and diluted return per ordinary share (p) | 3.10 | (1.42) | 1.68 | 2.85 | (0.99) | 1.86 |
All revenue and capital items in the above statement derive from continuing operations.
The Company has only one class of business and derives its income from investments made.
The total column of this statement represents the Company's Income Statement, prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The supplementary revenue and capital reserve columns are prepared under guidance published by the Association of Investment Companies.
There were no recognised gains and losses for the year other than those shown above.
Balance sheet
as at 29 February 2008
| 2008 | 2007 | |
| £000 | £000 | |
| Non-current assets | ||
| Investments | 12,800 | 4,273 |
| Trade and other receivables | 375 | 129 |
| 13,175 | 4,402 | |
| Current assets | ||
| Trade and other receivables | 469 | 153 |
| Cash and cash equivalents | 435 | 9,643 |
| 904 | 9,796 | |
| Total assets | 14,079 | 14,198 |
| Current liabilities | ||
| Trade and other payables | (136) | (73) |
| Net current assets | 768 | 9,723 |
| Net assets | 13,943 | 14,125 |
| Equity attributable to equity holders | ||
| Ordinary share capital | 3,750 | 3,750 |
| Special reserve | 10,437 | 10,437 |
| Capital reserve - realised | (579) | (471) |
| Capital reserve - unrealised | - | 104 |
| Revenue reserve | 335 | 305 |
| Total equity | 13,943 | 14,125 |
| Basic and diluted net asset value per ordinary share (p) | 93.0 | 94.2 |
Cash flow statement
for the year ended 29 February 2008
| 2008 | 2007 | |
| £000 | £000 | |
| Cash flows from operating activities | ||
| Investment income received | 69 | - |
| Deposit interest received | 307 | 521 |
| Investment management fees paid | (414) | (400) |
| Other cash payments | (174) | (172) |
| Net cash used in operating activities before taxes | (212) | (51) |
| Taxes paid | (34) | (10) |
| Net cash used in operating activities | (246) | (61) |
| Cash flows from investing activities | ||
| Purchases of investments | (10,199) | (3,310) |
| Proceeds from sale of investments | 1,672 | - |
| Net cash used in investing activities | (8,527) | (3,310) |
| Cash flows from financing activities | ||
| Dividends paid | (435) | (262) |
| Net cash used in financing activities | (435) | (262) |
| Net decrease in cash and cash equivalents | (9,208) | (3,633) |
| Cash and cash equivalents at the beginning of the year | 9,643 | 13,276 |
| Cash and cash equivalents at the end of the year | 435 | 9,643 |
Statement of changes in equity
for the year ended 29 February 2008
| Ordinary share capital | Special reserve | Capital reserve realised | Capital reserve unrealised | Revenue reserve | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 March 2007 | 3,750 | 10,437 | (471) | 104 | 305 | 14,125 |
| (Loss)/profit for the year after tax | - | - | (212) | - | 465 | 253 |
| Transfer of realised gains | - | - | 104 | (104) | - | - |
| Total recognised income and expense | - | - | (108) | (104) | 465 | 253 |
| Dividends paid in the year | - | - | - | - | (435) | (435) |
| At 29 February 2008 | 3,750 | 10,437 | (579) | - | 335 | 13,943 |
| At 1 March 2006 | 3,750 | 10,437 | (219) | - | 140 | 14,108 |
| (Loss)/profit for the year after tax | - | - | (252) | 104 | 427 | 279 |
| Total recognised income and expense | - | - | (252) | 104 | 427 | 279 |
| Dividends paid in the year | - | - | - | - | (262) | (262) |
| At 28 February 2007 | 3,750 | 10,437 | (471) | 104 | 305 | 14,125 |
1. Accounting Policies
Accounting convention
The Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union.
The disclosures required by IFRS 1 First-time Adoption are presented in the Annual Report and Financial Statements. There were no material differences to report between the treatment under UK Generally Accepted Accounting Practice ("UK GAAP") and IFRS.
The Financial Statements have been prepared on the historical cost basis, except for the revaluation of certain financial assets at fair value through profit or loss. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice ("SORP") for investment companies issued in January 2003 and revised in December 2005 is consistent with the requirements of IFRS, the Directors have sought to prepare the Financial Statements on a basis compliant with the recommendations of the SORP.
Presentation of income statement
In order to better reflect the activities of the Company and in accordance with guidance issued by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement.
Income
Income on current asset investments is stated on an accruals basis, by reference to the principal outstanding and at the effective interest rate applicable. Interest receivable on cash and non-equity investments is accrued to the end of the year. No tax was withheld at source on income.
Dividend income from investments is recognised when the shareholders' rights to receive payment has been established, normally the ex-dividend date.
Expenses
All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Income Statement, all expenses have been presented as revenue items except when 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. Accordingly the investment management fee has been allocated 25% to revenue and 75% to capital, in order to reflect the Directors' expected long-term view of the nature of the investment returns of the Company.
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the Income Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
The tax charge for the year is allocated between revenue return and capital return on the "marginal basis" as recommended in the SORP. Under this basis, the benefit of tax relief on allowable expenses is allocated to revenue return unless allowable expenses exceed taxable income in which case the benefit of the relief on the excess is credited to capital return.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets or liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Due to the Company's status as a Venture Capital Trust, no provision for deferred taxation is required in respect of any realised or unrealised appreciation in the Company's investments.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Income Statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Investments
As the Company's business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends or increases in fair values, all investments are designated as fair value through profit or loss on initial recognition. A financial asset is designated within this category if it is acquired, managed and evaluated on a fair value basis in accordance with the Company's documented investment policy. In the year of acquisition, investments are initially measured at cost, which is considered to be their fair value. Thereafter, the investments are measured at subsequent reporting dates on a fair value basis in accordance with IFRS.
Investments in unquoted companies are valued in accordance with International Private Equity and Venture Capital Valuation Guidelines. Under these guidelines, the investments are valued at fair value at the reporting date. A discounted cash flow methodology has been used to value the assets held at the year end. There was no material difference between these valuations and cost. Gains or losses resulting from revaluation of investments are taken to the capital column of the Income Statement.
When an investee company has gone into receivership or liquidation, the investment, although physically not disposed of, is treated as being realised. The Company has taken the exemption permitted by IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures from equity accounting for investments where it has significant influence or common control.
The majority of money held pending investment is invested in financial instruments with same day or two-day access and as such is treated as cash and cash equivalents. UK treasury bills are valued at middle market prices as at the year end. There is no material difference between the valuation at bid prices and the valuation at middle market prices.
Dividends payable
Dividends payable are recognised as distributions in the Financial Statements when the Company's liability to make payment has been established.
2. Income
| 2008 | 2007 | |
| £000 | £000 | |
| Income from investments | ||
| Mezzanine loan stock interest income | 593 | 226 |
| Dividend income | 23 | 35 |
| 616 | 261 | |
| Other income | ||
| UK treasury bill income | 273 | 454 |
| Bank deposit interest | 37 | 67 |
| 926 | 782 |
3. Tax
| 2008 | 2007 | |
| £000 | £000 | |
| (a) Tax charge for the year | ||
| Current UK corporation tax | ||
| Charged to revenue reserve | 189 | 93 |
| Credited to capital reserve | (91) | (59) |
| Adjustments to tax charge in respect of prior periods | - | 2 |
| 98 | 36 | |
| (b) Factors affecting the tax charge for the year | ||
| Revenue return before taxation | 654 | 522 |
| Tax charge calculated on profit before taxation at the applicable rate of 30% (19%) | 196 | 99 |
| Effect of: | ||
| UK dividends not subject to tax | (7) | (6) |
| Adjustments to tax charge in respect of prior periods | - | 2 |
| Capital expenses | (91) | (59) |
| 98 | 36 |
4. Dividends
| 2008 | 2007 | |
| £000 | £000 | |
| Amounts recognised as distributions to equity holders in the year: | ||
| Previous year's final dividend of 1.40p per ordinary share (2007: 0.75p) | 210 | 112 |
| Current year's interim dividend of 1.50p per ordinary share (2007: 1.00p) | 225 | 150 |
| 435 | 262 |
The Directors recommend a final dividend of 2.00 pence per share (2007: 1.40 pence) to be paid on 14 July 2008 to all shareholders on the register as at the close of business on 13 June 2008. The proposed final dividend is subject to approval by the shareholders at the Annual General Meeting and has not been included as a liability in these Financial Statements.
Subject to approval of the final dividend, the total dividend in respect of the financial year is set out below.
| 2008 | 2007 | |
| £000 | £000 | |
| Interim dividend for the year ended 29 February 2008 of 1.50p per ordinary share (2007: 1.00p) | 225 | 150 |
| Proposed final dividend for the year ended 29 February 2008 of 2.00p per ordinary share (2007: 1.40p) | 300 | 210 |
| 525 | 360 |
5. Return per ordinary share
The total return per ordinary share is based on the net revenue after taxation of £252,534 (2007: £279,467) and the weighted average number of shares in issue during the year of 15,000,183 (2007: 15,000,183).
The basic revenue return per ordinary share is based on the net revenue from ordinary activities after taxation of £464,934 (2007: £427,346) and the weighted average number of shares in issue during the year of 15,000,183 (2007: 15,000,183).
The net capital loss per ordinary share is based on the net loss from ordinary activities after taxation of £212,400 (2007: £147,879) and the weighted average number of shares in issue during the year of 15,000,183 (2007: 15,000,183).
There is no difference between the basic return per ordinary share and the diluted return per ordinary share because no dilutive financial instruments have been issued or granted.
6. Share capital
| 2008 | 2007 | |
| £000 | £000 | |
| Authorised | ||
| 40,000,000 ordinary shares of 25p each | 10,000 | 10,000 |
| 10,000 | 10,000 | |
| Allotted, called up and fully paid | ||
| 15,000,183 ordinary shares of 25p each | 3,750 | 3,750 |
| 3,750 | 3,750 |
The Company has one class of ordinary shares which carry no right to fixed income. The number of allotted, called up and fully paid shares at 1 March 2006 was 15,000,183. There was no movement in share capital in the years ended 28 February 2007 and 29 February 2008.
7. Net asset value per share
The calculation of net asset value per share as at 29 February 2008 is based on net assets of £13,942,867 (2007: £14,125,095) divided by 15,000,183 (2007: 15,000,183) ordinary shares in issue at that date.
8. Post balance sheet events
After the year end the Company has invested a further £40,000 to acquire shares in Spurlens Rig Wind Limited, £8,000 was invested in the ordinary share capital of Stalham Wind Power Limited and £1,000,000 was returned to the Company from Burnside Renewable Power Limited. The Company has committed to invest a further £500,000 in Redimo LFG Limited by the end of 2008 and make follow-on investments of £300,000 in Achairn Energy Limited and £20,000 in Spurlens Rig Wind Limited.
9. Related party transactions
The Company retains as its Investment Manager Climate Change Capital Limited, a subsidiary of Climate Change Holdings Limited, which is a subsidiary of Climate Change Capital Group Limited. During the year, £414,326 (2007: £414,616) was paid to the Investment Manager, inclusive of irrecoverable VAT. At the year end, a balance of £9,575 (2007: £nil) was due from the Investment Manager as a rebate.
The investee companies in which the Company has a shareholding of 20% or more are related parties. The aggregate balances at the balance sheet date and transactions with these companies during the year are summarised below.
| 2008 | 2007 | |
| £000 | £000 | |
| Balances | ||
| Investments - shares | 4,122 | 1,229 |
| Investments - mezzanine loan stock | 7,734 | 3,044 |
| Accrued interest income | 825 | 243 |
| Dividend income receivable | - | 35 |
| Transactions | ||
| Mezzanine loan stock interest income | 593 | 226 |
| Dividend income | 23 | 35 |
Notes:
This announcement is a summary of the Company's statutory accounts.
The Annual Report and Financial Statements for the year ended 29 February 2008 were approved by the Board of Directors on 2 June 2008 and will be filed with the Registrar of Companies further to adoption at the Annual General Meeting. The independent Auditor's Report in respect of the Financial Statements was unqualified and did not contain statements under s237(2) and (3) of the Companies Act 1985.
The statutory accounts for the year ended 28 February 2007 have been delivered to the Registrar of Companies and received an audit report which was unqualified and did not contain statements under s237(2) and (3) of the Companies Act 1985. The statutory accounts for the year ended 29 February 2008 have not yet been approved or filed, however they have been audited.
The Annual Report and Financial Statements will be posted to shareholders shortly and will also be available on the Company's website www.ventusvct.com. Copies may be obtained during normal business hours from the Company's registered office, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU.
By order of the Board
David Pinckney
Chairman
2 June 2008