VEN2.L Regulatory News (VEN2)

30 Oct 2007 07:01

Ventus 2 VCT PLC30 October 2007 Ventus 2 VCT plc Half-yearly Financial Report For the six month period ended 31 August 2007 Registered No: 5667210 Ventus 2 VCT plc (the "Company") presents its half yearly financial report forthe period ended 31st August 2007 as required by the UK Listing Authority'sDisclosure and Transparency Rule 4.2. A full version of the report will be available on the Company's website atwww.ventusvct.com. A copy of the above document is to be submitted to the UK Listing Authority, andwill shortly be available for inspection at the UK Listing Authority's DocumentViewing Facility, which is situated at: Financial Services Authority25 The North ColonnadeCanary WharfLondon E14 5HS Directors and advisersDirectorsD Pinckney (Chairman)A MooreP ThomasC Wood Secretary and registered officeCapita Company Secretarial Services LimitedThe Registry34 Beckenham RoadBeckenhamKentBR3 4TU AuditorBaker Tilly UK Audit LLPChartered Accountants2 Bloomsbury StreetLondonWC1B 3ST BankersHSBC Bank Plc27-32 PoultryLondonEC2P 2BX Investment ManagerClimate Change Capital Limited3 More London RiversideLondonSE1 2AQ RegistrarsCapita RegistrarsThe Registry34 Beckenham RoadBeckenhamKentBR3 4TU BrokerBrewin Dolphin Securities Limited34 Lisbon StreetLeedsLS1 4LX VCT status advisersPricewaterhouseCoopers LLP1 Embankment PlaceLondonWC2N 6RH SolicitorsBerwin Leighton Paisner LLPAdelaide HouseLondon BridgeLondonEC4R 9HA Chairman's Statement I am pleased to present the half-yearly financial report and accounts of Ventus2 VCT plc (the "Company") for the six month period ended 31 August 2007. Net asset value and results At the period end, the net asset value per share of the company stood at 94.3pence. Revenue attributable to shareholders for the period was £157,122 or 1.41pence per share. The capital loss attributable to shareholders for the periodwas £93,338 or 0.84 pence per share, resulting in a total return to shareholdersfor the period of £63,784 or 0.57 pence per share. The main source of revenuewas interest earned on mezzanine loan stock, UK Government Treasury Bills andcash deposits. The Company declared and paid an annual dividend of 1.50 pence per share for theyear to 28 February 2007. This was paid as an interim dividend of 0.75 pence pershare on 15 February 2007 and a final dividend of 0.75 pence per share on 6August 2007. Dividends to shareholders are accounted for in the period in whichthe Company is liable to pay them, rather than in the period in respect of whichthey are declared. The Company has declared a further dividend for the half year to 31 August 2007of 1.00 pence per share which will be paid to shareholders on 16 January 2008. Principal risks Under the UK Listing Authority's Disclosure and Transparency Rules, theDirectors are required to identify those material risks to which the Company isexposed and take appropriate steps to mitigate those risks. Described below arethose risks which the Directors consider to be material and the steps that theDirectors have taken to identify and mitigate those risks: • Failure to meet the investment requirements for compliance with HMRevenue and Customs VCT regulations The Board mitigates this risk by regularly reviewing investment managementactivity and by obtaining pre-approval from HM Revenue and Customs for eachinvestment. • Inadequate control environment at service providers The Board mitigates this risk by only appointing service providers of a highstanding under agreements that set out their responsibilities and by obtainingassurances from them that all exceptions have been reported to the Board. • Non-compliance with UK Listing Authority Rules, Companies Act Legislation, HM Revenue and Customs VCT regulations and other applicable regulations The Board mitigates this risk by employing external advisers fully conversantwith applicable statutory and regulatory requirements who report regularly tothe Board on the Company's compliance. VCT qualifying status The Company retains PricewaterhouseCoopers LLP to review its compliance with HMRevenue and Customs VCT regulations. The most recent review was undertaken priorto the publication of the last Annual Report. The Directors are satisfied thatthe Company has continued to fulfil the conditions for maintaining VCT status. Responsibility statement The Directors confirm that to the best of their knowledge: (a) the half-yearly financial statements have been prepared in accordancewith the Statement "Half-yearly Financial Reports" issued by the UK AccountingStandards Board and give a true and fair view of the assets, liabilities,financial position and profit of the Company as required by the Disclosure andTransparency Rules ('DTR') 4.2.4R; (b) the report includes a fair review of the information required by DTR4.2.7R; and (c) the report includes a fair review of the information required by DTR4.2.8R. Investments The Company's Investment Manager, Climate Change Capital Limited, continues toidentify and negotiate potential investment opportunities. The investments madeand the dividends paid constitute the important events of the period. As at the date of this report, the Company has made investments in two companiestotalling £408,822. The Company has also contractually committed to invest and/or holds exclusivity agreements with three companies representing potentialfurther investments of £1.16 million. The Investment Manager's report on page 4 provides details of the investmentsmade as at 31 August 2007 and the amounts committed or under exclusivityagreements as at the date of this report. All investments will be structured soas to be treated as qualifying holdings for the purposes of VCT regulationsunless stated otherwise. David PinckneyChairman30 October 2007 Investment Manager's Report Summary of investments As at the date of this report, the Company has made investments in two companiestotalling £408,822. The Company also holds exclusivity agreements with twocompanies representing potential further investments of £1.16 million. The following table shows the investments made as at 31 August 2007, theinvestments made since the end of the period and the total amount committed orunder exclusivity agreements as at the date of this report. All investments todate have been structured so as to be treated as qualifying holdings for thepurposes of VCT regulations unless stated otherwise. Invested, Committed and/or Under Investment Investment Exclusivity as at as at as atCompany Name Details 31 August 2007 30 October 2007 30 October 2007 £ £ £ Craig Wind 10 megawatt 348,822 348,822 348,822Farm Limited wind farmA7 Lochhead Limited 6 megawatt - - 600,000 wind farmAchairn Energy 6 megawatt 60,000 60,000 600,000Limited wind farmOlgrinmore Limited 4 megawatt wind farm - - 24,000* (pre-consent) ______________ ______________ ______________Total 408,822 408,822 1,572,822 -------------- -------------- -------------- * see commentary below Craig Wind Farm Limited The Company has completed its investment in Craig Wind Farm Limited, a companyoperating a 10 megawatt wind farm in the Scottish Borders. The Company hasinvested a total of £348,822 in Craig Wind Farm Limited by way of a £169,000mezzanine loan facility and £179,822 invested in ordinary shares. The Companyowns 6.25% of the issued ordinary shares in Craig Wind Farm Limited. The wind farm became operational in October 2007 after a period of delay causedby the grid operating company. The first payment of mezzanine loan interest byCraig Wind Farm Limited is expected in March 2008, subject to satisfactoryoperational performance. Craig Wind Farm Limited is expected to commence payingdividends to shareholders in September 2009. Achairn Energy Limited The Company is finalising contract negotiations to invest up to £600,000 inAchairn Energy Limited, a company developing a 6 megawatt wind farm inCaithness, Scotland. This site has full planning consent and has been providedwith an offer for a grid connection. The Company has already invested £60,000 inordinary shares to facilitate the payment of preliminary site development costs.We are continuing to work with the developer and its consultants to secure thecontracts necessary to commence construction. The wind farm is expected tobecome operational in the second half of 2008. A7 Energy Lochhead The Company has entered into a long term exclusivity agreement with A7 EnergyLimited in respect of the 6 megawatt Lochhead wind farm development inLanarkshire, Scotland. A7 Energy Limited has secured planning consent for thiswind farm, as well as an offer for connection to the grid. We are continuing towork with the developer and its consultants to secure the contracts necessary tocommence construction. The wind farm is expected to start generating early in2009. This project is expected to require an investment of approximately£600,000 from the Company. Olgrinmore Limited The Company has committed to make an initial investment of £24,000 in OlgrinmoreLimited, a company developing a 4 megawatt wind farm in Caithness, Scotland.Olgrinmore Limited is in the process of seeking planning permission for a twoturbine scheme from the local authority and expects to lodge an applicationearly in 2008. The investment will be used to contribute towards the planningapplication costs. Olgrinmore Limited has accepted an offer for connection tothe grid and has secured the land for the development under an option. Ifplanning approval is granted the Company holds an option to make a furtherinvestment to contribute towards the construction costs on pre-agreed terms withthe other shareholders. Initially, the investment would not be a qualifyingholding in accordance with HM Revenue & Customs VCT regulations. If the Companycontributes further capital upon grant of planning it will be possible to makethe existing investment and any future investment qualifying. Investment pipeline & market overview We are actively assessing investment opportunities in over 30 individualcompanies developing in excess of 400 megawatts of generating capacity. Whilstthe main investment strategy to date has been to seek investments in planningapproved onshore wind developments, the Company's investment strategy alsoincludes pursuing opportunities with companies developing non-wind technologiessuch as landfill gas and small scale hydro-electric schemes, companies owningexisting operational assets and companies seeking planning permission for newschemes. As at the date of this report the British Wind Energy Association (''BWEA'')database showed the following information about all UK onshore wind projectswhich are under construction, have planning consent or have been submitted forplanning consent and are awaiting a decision: Consented but not Awaiting planning yet under decisions Under construction construction Total Number of projects 30 103 221 354Total megawatts 822 1,942 7,873 10,637 In September 2007 the BWEA published their report 'Countdown to meeting the 10%UK renewable electricity target by 2010' which showed that renewable energycurrently generates just over 4.5% of the UK's total electricity supplyrequirement. The report states that the rate of installation of new renewablegeneration capacity is behind target and needs to more than double by 2010 tomeet the 10% target. The BWEA also predicts that onshore wind needs to accountfor almost half of this 10% target given limiting factors associated with othertechnologies. For onshore wind this equates to a target of approximately 6,000megawatts of total installed capacity. The UK currently has just over 2,000megawatts of onshore wind capacity installed and operational. Even if all projects under construction in the UK and those that are consentedbut not yet under construction are completed and added to the total existingoperational capacity, there would be a shortfall, in relation to the 2010target, of almost 1,300 megawatts which would need to be met by new projects.The main barrier to the target being achieved is the increasing time taken toacquire planning consents, both locally and through central government planningauthorities. The following table summarises information published by the BWEA about thenumber of onshore wind projects in the planning system across the UK: Northern Ireland England Scotland Wales Total Number of projects 64 98 19 40 221Total megawatts 1,183 5,300 347 1,043 7,873 The rate of new approvals coming out of the planning system over the last twoyears has restricted the number of new investment opportunities for the Companyin the consented onshore wind sector. As a key element of the Company's investment strategy, and alongside continuingto progress investment opportunities in onshore wind, we are working to identifyand negotiate investments in developments using other renewable energytechnologies such as landfill gas, small scale hydro and biomass. We are alsoassessing a number of opportunities in the pre-planning sector, where there isthe potential to make earlier stage investments in companies developing projectsin return for an exclusive option to invest construction funding upon grant ofplanning consent at a later stage. On the basis of an assessment of the potential investments in the pipeline wehave advised the Directors that we are satisfied that sufficient projects areavailable to fully invest the funds in accordance with the investment strategyand the time period required to satisfy HM Revenue and Customs requirements inrespect of maintaining the Company's VCT status. Climate Change Capital LimitedInvestment Manager30 October 2007 Income statementFor the six month period ended 31 August 2007 (unaudited) Six months Period ended ended Period ended 31 August 31 August 28 February 2007 2006 2007 (unaudited) (unaudited) (audited) Revenue Capital Total Revenue Capital Total Revenue Capital Total Notes £000 £000 £000 £000 £000 £000 £000 £000 £000 Income 290 - 290 187 - 187 453 - 453 ------ ------ ------ ------ ------ ------ ------ ------ ------ 290 - 290 187 - 187 453 - 453 ------ ------ ------ ------ ------ ------ ------ ------ ------ ExpenditureManagement fees 2 39 117 156 32 96 128 71 214 285Other expenses 54 - 54 53 - 53 106 - 106 ------ ------ ------ ------ ------ ------ ------ ------ ------ 93 117 210 85 96 181 177 214 391 ------ ------ ------ ------ ------ ------ ------ ------ ------ Return on ordinary activities before taxation 197 (117) 80 102 (96) 6 276 (214) 62Tax on ordinary activities 3 (40) 24 (16) (3) - (3) (54) 41 (13) ------ ------ ------ ------ ------ ------ ------ ------ ------Return attributable to equity shareholders 157 (93) 64 99 (96) 3 222 (173) 49 ------ ------ ------ ------ ------ ------ ------ ------ ------ Basic and diluted return per ordinary share (p) 4 1.41 (0.84) 0.57 1.03 (1.00) 0.03 2.13 (1.65) 0.47 All revenue and capital items in the above statement derive from continuingoperations. The Company has only one class of business and derives its income frominvestments made. The total columns of this statement are the profit and loss accounts of theCompany for the respective periods. The supplementary revenue and capitalcolumns have been prepared under guidance published by the Association ofInvestment Companies. There were no recognised gains and losses for the period other than those shownabove. Balance sheetas at 31 August 2007 (unaudited) 31 August 2007 31 August 2006 28 February 2007 (unaudited) (unaudited) (audited) Note £000 £000 £000Fixed assetsInvestments 409 169 169 --------- --------- --------- 409 169 169 --------- --------- ---------Current assetsDebtors 32 10 15Short term investments in UK treasury bills 10,042 10,321 10,149Cash at bank 114 127 267 --------- --------- --------- 10,188 10,458 10,431Creditors: amounts falling due within one year (56) (28) (39) --------- --------- ---------Net current assets 10,132 10,430 10,392 --------- --------- ---------Net assets 10,541 10,599 10,561 --------- --------- --------- Share Capital & ReservesOrdinary share capital 2,793 2,793 2,793Special reserve 7,803 7,803 7,803Capital reserve - realised (290) (96) (173)Revenue reserve 235 99 138 --------- --------- ---------Shareholders' funds 10,541 10,599 10,561 --------- --------- --------- Basic and diluted net asset value per ordinary 5 94.3 94.9 94.5share (p) Cash flow statementfor the six month period ended 31 August 2007 (unaudited) Six months ended Period ended Period ended 31 August 2007 31 August 2006 28 February 2007 (unaudited) (unaudited) (audited) £000 £000 £000 Net cash (outflow)/inflow from operating activitiesand returns on investments (206) 21 39 Capital expenditurePurchase of venture capital investments (240) (169) (169) Equity dividends paid (84) - (84) Management of liquid resourcesProceeds from maturity of UK treasury bills 15,349 - -Purchase of UK treasury bills (14,972) (10,321) (10,115) --------- --------- ---------Net cash outflow before financing (153) (10,469) (10,329) --------- --------- ---------FinancingShares issued - 11,173 11,173Issue costs - (577) (577) --------- --------- ---------Net cash inflow from financing - 10,596 10,596 --------- --------- ---------(Decrease)/increase in cash (153) 127 267 --------- --------- --------- Net cash (outflow)/inflowfrom operating activities and returns on investmentsReturn on ordinary activities before taxation 80 6 62Increase in debtors (17) (10) (15)Increase in creditors 1 25 26Net unrealised gains on short term investment (270) - (34) --------- --------- ---------Net cash (outflow)/inflow from operating activitiesand returns on investments (206) 21 39 --------- --------- ---------Analysis of net fundsAt beginning of period 267 - -Net cash flows for the period (153) 127 267 --------- --------- ---------At end of period 114 127 267 --------- --------- --------- Reconciliation of movements in shareholders' fundsfor the six month period ended 31 August 2007 (unaudited) Six months ended Period ended Period ended 31 August 2007 31 August 2006 28 February 2007 (unaudited) (unaudited) (audited) £000 £000 £000 Equity shareholders' funds at beginning of period 10,561 - -Return on ordinary activities after tax 64 3 49Dividends paid in the period (84) - (84)Net proceeds of share issues - 10,596 10,596 -------- -------- --------Equity shareholders' funds at end of period 10,541 10,599 10,561 -------- -------- -------- Notes to the financial statementsfor the six month period ended 31 August 2007 (unaudited) 1. The unaudited half-yearly financial statements for the six months ended 31 August 2007 do not constitute statutory accounts within the meaning of Section 240 of the Companies Act and such statements have not been delivered to the Registrar of Companies. The half-yearly financial statements, which have not been audited, have been prepared in accordance with UK Generally Accepted Accounting Practice (UKGAAP) and under the same accounting policies as the financial statements for the period ended 28 February 2007. The half-yearly financials statements have been prepared using the presentational guidance set out in the Statement of Recommended Practice (SORP) "Financial Statements of Investment Trust Companies" (revised in December 2005), to the extent that the guidance is consistent with UKGAAP. The financial statements for the period ended 28 February 2007 have been filed with the Registrar of Companies and received an unqualified audit report. The half-yearly results are for the six month period from 1 March 2007 to 31August 2007 and the comparative results are for the period from 5 January 2006(incorporation date) to 31 August 2006 and 28 February 2007 respectively. 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. Investments in unquoted companies are valued in accordance withInternational Private Equity and Venture Capital Valuation Guidelines. Underthese guidelines, the investments are valued at fair value at the reportingdate, except in situations where fair value cannot be measured reliably. In suchsituations, the investments are reported at the carrying value at the previousreporting date, unless there is evidence that an investment has since then beenimpaired. When an investee company has gone into receivership or liquidation, theinvestment, although physically not disposed of, is treated as being realised.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. The majority of monies held pending investment are invested in financialinstruments with same day or two-day access and as such are treated as currentinvestments. These are valued at middle market prices as at 31 August 2007.Under FRS 26 investments should be valued at bid market prices. There is nomaterial difference between the valuation at bid prices and the valuation atmiddle market prices. 2. The Company pays the Investment Manager an annual management fee equalto 2.5% of the Company's net assets. The fee is exclusive of VAT and is payablequarterly in advance. The annual management fee is allocated 75% to capital and25% to revenue. 3. The half-yearly tax charge of £16,313 is based on the likely effectivetax rate for the year. This has been estimated at 20% and applied to the returnon ordinary activities for the half-year. 4. The basic and diluted return per share of 0.57 pence (period ended 31August 2006: 0.03 pence; period ended 28 February 2007: 0.47 pence) is based onthe profit for the period to 31 August 2007 of £63,784 (period ended 31 August2006: £3,026; period ended 28 February 2007: £49,482) and the weighted averagenumber of shares in issue during the period of 11,173,337 (period ended 31August 2006: 9,686,557; period ended 28 February 2007: 10,444,605). 5. The basic and diluted net asset value per share of 94.3 pence (31August 2006: 94.9 pence; 28 February 2007: 94.5 pence) is based on net assets of£10,542,018 (31 August 2006: £10,599,378; 28 February 2007: £10,562,034) and thenumber of shares in issue as at 31 August 2007 of 11,173,337 (31 August 2006:11,173,337; 28 February 2007: 11,173,337). 6. The half-yearly financial statements were approved by the Directors on30 October 2007. 7. An interim dividend of 1.00 pence per share has been declared for theperiod ending 31 August 2007 which will be paid to shareholders on 16 January2008. A final dividend for the period ended 28 February 2007 of 0.75 pence pershare was paid in the period ended 31 August 2007. 8. Copies of this half-yearly report have been sent to shareholders andare available from the Company Secretary, c/o Capita Company SecretarialServices Limited, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU. 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