Interim Results
QUESTER VCT PLC
Interim statement for the six months ended 31 August 2006
INTERIM DIVIDEND
Dividend per share: 1.4p
Payable on: 22 December 2006
Ex-dividend date: 22 November 2006
Record date: 24 November 2006
FINANCIAL HIGHLIGHTS
Per ordinary share (pence) 31 August 28 February 31 August
2006 2006 2005
Capital values
Net asset value 41.8 44.5 42.2
Share price 35.5 37.0 38.0
Return and dividends
Dividend* 3.9 1.25 -
Cumulative dividend (tax free) 46.6 42.7 41.4
Total return* * 88.4 87.2 83.6
*A final dividend of 2.5p per share was paid on 3 July 2006 in respect of the
year ended 28 February 2006. An interim dividend for the current year of 1.4p
is payable on 22 December 2006.
**Net asset value plus cumulative dividend per share
The returns summarised above are applicable only to original shareholders of
Quester VCT plc. They do not represent the historic returns to subsequent
subscribers, including those who have assumed a shareholding in the Company
following the merger with Quester VCT 2 plc and Quester VCT 3 plc.
The above table excludes any tax benefits (20% income tax relief and capital
gains deferral) received on subscription for shares in the Company. Inclusive
of initial income tax relief, the total return to an original investor would be
equivalent to 108.4p per share as at 31 August 2006.
INTERIM REPORT
OVERVIEW
This period continued to be very active. Further sales have been achieved,
generating cash and gains to support a continuing dividend flow to
shareholders. Ten investments were made in new and follow-on investments.
There been a steady increase in the total return to shareholders since the
merger in June 2005:
Per ordinary share (pence) 31 August 28 February
2006 2006
Net asset value 41.81 44.50
Cumulative post merger dividends 5.15 1.25
46.96 45.75
Less merger FAV (43.39) (43.39)
Total return post merger 3.57 2.36
Total return as a percentage of merger FAV 8.2% 5.4%
NET ASSETS AND DIVIDENDS
£'000 Pence per
share
Net asset value at 1 March 2006 53,335 44.5
Income 517 0.4
Operating expenses (834) (0.7)
Net realised gain on investments 897 0.8
Net unrealised gain on investments 776 0.6
Net assets before dividends and 54,691 45.6
buy-backs
Dividends paid and proposed, net of (4,575) (3.9)
amounts reinvested
Share buy-backs (548) 0.1
Net asset value at 31 August 2006 49,568 41.8
Following further good realisations, the directors have resolved to pay an
interim dividend for the year of 1.4p per share, payable on 22 December 2006. A
final dividend of 2.5p per share in respect of the prior year was paid on 3
July 2006.
VENTURE CAPITAL PORTFOLIO: REALISATIONS
There were three sales from the venture capital portfolio during the period
generating proceeds of approximately £4.2million against a combined carrying
value at the time of the merger of £3million. The sale of Methuen Publishing
and Sibelius Software realised gains of £700,000 and £450,000 respectively over
merger FAV. The £488,000 realised this year from the investment in Casella
Group was in line with FAV; the receipt of further deferred proceeds is
anticipated.
Since the merger in June 2005, £14.6million cash has been realised from the
portfolio. We are not expecting this rate of sales from the portfolio to
continue in the second half of the current year.
New investments
Company Industry sector £'000
Keronite plc Industrial products and 947
services
Ovum plc Other services 375
Secerno Limited Software 265
1,587
The investment in Keronite was made as part of a £10.2million pre-IPO funding
round. Keronite has developed a metal-coating process that hardens the surface
of aluminium and magnesium producing outstanding resistance to corrosion and
wear. This offers a cost effective alternative to conventional coating methods
meeting a growing demand from manufacturers. The company has partners operating
its process across Western Europe, the US and Asia and it has formed global
alliances with companies throughout the light metal supply chain. The business
is generating revenues, albeit at modest levels.
Ovum is a leading provider of research, market analysis and advisory services
in the global ICT sector, with an international blue chip client base. The
investment was part of a £6.1million AIM listing in March, which enabled Ovum
to progress its strategy of international growth through new product
development and acquisition. Following the period end, Ovum's board has
recommended a cash offer from Datamonitor plc valuing the company at £
41.8million or 300p per share, equivalent to a 58% uplift over the cost of
Quester VCT's investment made seven months earlier.
The investment in Secerno was made as part of a £2million funding round.
Secerno has developed a unique database and assurance platform, Secerno.SQL,
which enables organisations to detect and prevent fraud, provide regulatory
compliance and assure the integrity and privacy of online data. The platform
addresses the increased threat to security faced by organisations, as
highlighted by a number of recent high profile cases, protecting database
systems without complicated user intervention.
This was also an active period for follow-on investment; £1.7million was
invested in seven
existing companies:
Follow on investments
Company Industry sector £'000
Advanced Valve Technologies Limited Industrial products & services 21
Allergy Therapeutics plc Biotechnology 200
Haemostatix Limited Biotechnology 42
Nomad Software Limited Software 476
Sift Group Limited Internet 135
Teraview Limited Diagnostics & devices 197
Vivacta Limited* Diagnostics & devices 675
1,746
*formerly PanOpSys Limited
Allergy Therapeutics is a listed specialist pharmaceutical company with a
profitable core business and a unique development pipeline with the potential
to transform allergy treatment. There remains a large unmet medical need for
allergy vaccines. Substantial year on year growth is being supported by an
extensive global R&D programme to develop disease-modifying allergy vaccines.
The company has made good progress internationally and the Pollinex Quattro
vaccine platform is entering the final stages of development.
Nomad provides a comprehensive processing service for debit card and prepaid
card based transactions. This service can be provided in-house or out-sourced
through Nomad Processing Services. The company has developed a significant
initial customer base for this service, principally relating to prepaid credit
cards. The further investment will help accelerate the growth of this business.
Vivacta, formerly PanOpSys, is an in vitro diagnostic company with novel
technology designed to enable rapid, reliable and highly sensitive tests to be
performed at the point-of-care. This form of testing allows tests to take place
in a doctor's surgery or at the bedside, removing the need for samples to be
despatched to laboratories for analysis. This is a fast growing market sector
and the company's core technology is applicable to a wide variety of tests,
although initially applied to blood testing. The company raised £3million in
February, through a funding round led by Quester and is at an interesting stage
in the optimisation and commercialisation of its patented piezofilm technology.
VENTURE CAPITAL PORTFOLIO: VALUATION CHANGES
During the period, there was a £0.6million net increase in the value of the
portfolio.
The unquoted portfolio increased in value by £1.8million, the only changes
relating to Teraview and Nomad. Teraview continues to make positive progress
but the valuation of the investment has been reduced by £108,000 to £947,000
following the lower pricing of its latest funding round. The valuation of the
investment in Nomad has been increased by £1.9million back up to original cost,
reflecting the progress made by its card payments processing business.
The quoted venture capital portfolio reduced in value by £1.2million during the
period. The most significant valuation movements were seen in the holdings of
Genosis and Imagesound. The £880,000 fall in value of the investment in
Genosis, the producer of a combined male and female home fertility test, arose
on the announcement of much slower than anticipated market penetration. The
value of the investment in Imagesound recovered by £485,000. Subsequent to the
half year, Quester VCT has invested a further £1million in Imagesound, which
sources and distributes profiled music, targeted messaging and audio-visual
content to retail and leisure outlets.
Concerns about smaller companies generally led to a weak AIM market during the
period, and this affected the valuation of a number of our quoted venture
capital investments. By the end of October, however, there had been some
recovery in the share prices of a number of these companies.
LISTED EQUITY PORTFOLIO
The listed equity portfolio has performed well over the half year despite the
market correction seen in the summer. It achieved a total return of £628,000
during the period, equivalent to an IRR of 15.9% per annum.
The Company holds a bond portfolio valued at £4.6million, generating an
effective yield of 4.8% per annum.
DIVIDEND REINVESTMENT SCHEME
We would like to draw attention to the Dividend Reinvestment Scheme, which
shareholders are eligible to join at any time. Please contact Quester should
you wish to participate in this scheme.
CONCLUSION
While the overall return to shareholders continues to increase, the pace of
realisations has begun to reduce. More time is being spent on reinvestment and
evaluating new opportunities. The Manager is building a portfolio with a
balance of later as well as early stage investments. Overall performance shows
a mixture of successes and disappointments, with good groundwork being laid for
longer term performance.
The level of cash resources and overall progress in the portfolio allow the
payment of incremental dividends. The toughening of the Revenue's VCT rules,
with effect from 6 April 2007, may result in an acceleration of the final
dividend in respect of the year ending 28 February 2007.
Jock Birney
Chairman
15 November 2006
FUND SUMMARY
As at 31 August 2006
Industry sector Merger Valuation % % of
valuation equity fund
* £'000 held by
£'000 value
Quoted venture capital
investments
Allergy Therapeutics Biotechnology 799 841 1.1% 1.7%
plc
Cyclacel Biotechnology 800 207 1.1% 0.4%
Pharmaceuticals, Inc.
Genosis plc Diagnostics & devices 1,140 233 6.5% 0.5%
Imagesound plc Software 1,848 1,027 11.8% 2.1%
Ovum plc Other services 375 324 1.6% 0.6%
Sopheon plc Software 56 43 0.2% 0.1%
Surfcontrol plc Software 551 486 0.4% 1.0%
Vernalis Group plc Biotechnology 900 886 0.5% 1.8%
XKO Group plc Software 527 501 1.4% 1.0%
Total quoted venture 6,996 4,548 9.2%
capital investments
Unquoted venture
capital investments
Advanced Valve Industrial products & 631 631 12.8% 1.3%
Technologies Limited services
Antenova Limited Semiconductors 1,005 1,005 5.4% 2.0%
Anthropics Technology Communications 95 25 7.0% 0.1%
Limited
Arithmatica Limited Semiconductors 338 338 12.5% 0.7%
Artisan Software Tools Software 1,172 1,172 23.4% 2.4%
Limited
Avidex Limited Biotechnology 602 276 1.4% 0.6%
Casella Group Limited Industrial products & 110 110 15.8% 0.2%
services
Cluster Seven Limited Software 743 743 9.3% 1.5%
Community Internet Internet 634 634 17.4% 1.3%
Europe Limited
Elateral Holdings Software 245 245 24.4% 0.5%
Limited
Global Silicon Limited Semiconductors 600 600 7.6% 1.2%
Haemostatix Limited Biotechnology 95 95 5.9% 0.2%
HTC Healthcare Group Consumer services 1,664 1,664 36.7% 3.4%
plc
International Diagnostics & devices 690 690 23.9% 1.4%
Diagnostics Group plc
Keronite plc Industrial products & 947 947 7.1% 1.9%
services
Lectus Therapeutics Biotechnology 248 248 7.0% 0.5%
Limited
Level Four Software Software 518 518 5.1% 1.0%
Limited
Lorantis Holdings Biotechnology 625 625 1.9% 1.3%
Limited
Nanotecture Limited Industrial products & 87 87 0.8% 0.2%
services
Nomad Software Limited Software 1,363 3,224 18.7% 6.5%
Opsys Management Electronics 268 268 - 0.4%
Limited
Pelikon Limited Electronics 708 708 5.5% 1.4%
Perpetuum Limited Electronics 435 435 8.0% 0.9%
Secerno Limited Software 265 265 4.2% 0.5%
Sift Group Limited Internet 2,249 2,249 19.8% 4.5%
Teraview Limited Diagnostics & devices 1,056 947 5.4% 1.9%
Vivacta Limited** Diagnostics & devices 915 915 12.9% 1.8%
Total unquoted venture 18,308 19,664 39.6%
capital investments
Total venture capital 25,304 24,212 48.8%
investments
Listed fixed interest 4,556 9.3%
investments
Listed equity 11,518 23.2%
investments
Total investments 40,286 81.3%
Cash and other net 9,282 18.7%
assets
Net assets 49,568 100.0%
*Fair value at the date of the merger on 29 June 2005, as adjusted for any
subsequent purchases and sales
**formerly PanOpSys Limited
UNAUDITED FINANCIAL STATEMENTS
PROFIT AND LOSS ACCOUNT
Note 6 months 6 months Year ended
ended 31 ended 31 28 February
August 2006 August 2005 2006
Unaudited Unaudited Unaudited £
£'000 £'000 £'000
Net profits/(losses) on fair value 1,673 (1,197) 3,056
through profit or loss on
investments
Income 517 356 1,070
Investment management fee (525) (273) (778)
Other expenses (309) (244) (486)
Profit/(loss) on operating 1,356 (1,358) 2,862
activities before taxation
Tax on ordinary activities - - -
Profit/(loss) on ordinary 1,356 (1,358) 2,862
activities after taxation
Basic and diluted earnings/(loss) 4 1.1p (2.1) 3.3p
per share
All items in the above statement are derived from continuing operations.
The Company has only one class of business and derives its income from
investments made in shares and securities and from bank deposits.
A statement of total recognised gains and losses has not been presented because
all gains and losses are included in the statement above.
BALANCE SHEET
31 August 28 February 31 August
2006 2006 2005
Unaudited Unaudited Unaudited
£'000 £'000 £'000
Fixed assets
Investments 40,286 37,105 43,806
Current assets
Debtors 971 1,095 2,041
Cash at bank 10,400 15,693 6,279
11,371 16,788 8,320
Creditors (amounts falling due
within one year)
Other creditors (2,089) (558) (812)
Net current assets 9,282 16,230 7,508
Net assets 49,568 53,335 51,314
Capital and reserves
Called-up equity share capital 5,928 5,992 6,085
Capital redemption reserve 335 260 161
Share premium account - 37,359 37,318
Special reserve 41,239 4,348 7,540
Fair value reserve (2,079) (2,477) (3,020)
Profit and loss account 4,145 7,853 3,230
Total equity shareholders' funds 49,568 53,335 51,314
Net asset value per share 41.8p 44.5p 42.2p
SUMMARISED CASH FLOW STATEMENT
6 months ended Year ended 6 months
ended
31 August 28 February 31 August
2006 2006 2005
£'000 £'000 £'000
Net cash (outflow)/inflow from (317) 96 461
operating activities
Net cash inflow from merger - 5,921 5,881
Net capital expenditure and (1,513) 10,715 (1,221)
financial investment
Dividends paid, net of amounts (2,915) (1,480) -
reinvested under the dividend
reinvestment scheme
Buy-back of ordinary shares (548) (1,077) (360)
(Decrease)/increase in cash for the (5,293) 14,175 4,761
period
Reconciliation of net cash flow to
movement in net funds
(Decrease)/increase in cash for the (5,293) 14,175 4,761
period
Net funds at the start of the period 15,693 1,518 1,518
Net funds at the end of the period 10,400 15,693 6,279
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
Share Capital Share Special Fair Profit
capital redemption premium reserve value and loss
reserve account reserve account
£'000 £'000 £'000 £'000 £'000 £'000
At 1 March 2006 5,992 260 37,359 4,348 (2,477) 7,853
Shares issued under the 11 - 80 - - -
terms of the dividend
reinvestment scheme
Cancellation of share - - (37,439) 37,439 - -
premium account
Shares bought back (75) 75 - (548) - -
Transfer of unrealised - - - - 776 (776)
gain on revaluation of
investments
Transfer of net realised - - - - (378) 378
gain to profit and loss
account
Dividends paid and - - - - - (4,666)
proposed (note 2)
Profit on ordinary - - - - - 1,356
activities after
taxation
At 31 August 2006 5,928 335 - 41,239 (2,079) 4,145
The share premium account was cancelled on 12 July 2006 and its credit balance
was transferred to the special reserve.
The special reserve can fund buy-backs of ordinary shares as and when it is
considered by the Board to be in the best interests of shareholders. It will
also enable dividends to be paid out of capital gains achieved on investment
realisations earlier than would otherwise have been possible.
NOTES
1. The financial information contained in this report has been prepared on the
basis of the accounting policies set out in the Annual Report for the year
ended 28 February 2006.
2. A final dividend in respect of the prior year totalling £3,006,000 was paid
on 3 July 2006. An interim dividend of £1,660,000 is payable on 22 December
2006.
3. The number of ordinary shares in issue as at 31 August 2006 was 118,559,937
(31 August 2005: 121,711,519).
4. The calculation of earnings per share for the period is based on the profit
after tax of £1,356,000 (2005: loss of £1,358,000) divided by the weighted
average number of shares in issue during the period being 119,086,216
(2005: 64,711,854) ordinary shares of 5p each.
5. The unaudited financial statements set out above do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act
1985. The statutory accounts for the period ended 28 February 2006 have
been delivered to the Registrar of Companies and received an audit report
which was unqualified and did not contain any statements under s.237(2) and
(3) of the Companies Act 1985.
6. Copies of the unaudited interim results are expected to be sent to
shareholders on 15 November 2006. Further copies can be obtained from the
Company's registered office.
A copy of the above document is to be submitted to the UK Listing Authority,
and will shortly be available for inspection at the UK Listing Authority's
Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
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