Half-yearly Report
Matrix Income & Growth VCT plc ("the Company")
Half-yearly results for the six months ended 30 June 2011
Investment Objective
Matrix Income & Growth VCT plc is a Venture Capital Trust ("VCT")
listed on the London Stock Exchange. Its investment portfolio, which invests
primarily in established and profitable unquoted companies, is managed by
Matrix Private Equity Partners LLP ("MPEP" or "the Manager").
The Company's objective is to provide investors with a regular
income stream, by way of tax free dividends, and to generate capital growth
through portfolio realisations, which can be distributed by way of additional
tax free dividends.
Financial Highlights
Dividends
A dividend of 5 pence per share (comprising 0.5 pence from income
and 4.5 pence from capital) was paid during the period on 27 May 2011.
An interim income dividend of 0.5 pence (2010: nil pence) per share
will be paid on 15 September 2011 to Shareholders on the Register on 26 August
2011. Following this payment, cumulative dividends paid per share will be 26.8
pence.
Performance Summary
The net asset value (NAV) per share at 30 June 2011 was 90.8 pence
To help Shareholders who originally invested in
the Company and in Matrix Income & Growth 3 VCT plc ("MIG 3 VCT") understand
the recent past performance of their investment, comparative data for each
company is shown below. Total return comprises either the NAV per share or
mid-market share price plus cumulative dividends paid per share:-
Net assets NAV per Net Share price Total return per share to
Share cumulative shareholders since launch
dividends (mid-market
paid per price)1 (NAV (Share price
share basis)
(£m) (p) (p) p) (p) (p)
Matrix Income & Growth VCT (Funds raised 2004/05)
As at 30 June 2011 39.5 90.8 26.3 82.5 117.1 108.8
As at 31 December 38.5 96.7 21.3 84.0 118.0 105.3
2010
As at 30 June 2010 35.2 86.3 21.3 63.0 107.6 84.3
Matrix Income & Growth VCT 3 VCT (Funds raised 2005/06)
As at 30 June 2011 - 96.8 14.9 - 111.7 102.8
As at 31 December - 103.0 9.6 - 112.6 99.1
2010
As at 30 June 2010 - 91.9 9.6 - 101.5 76.7
1 Source: London Stock Exchange.
Note - Merger with MIG 3 VCT
The Company merged with MIG 3 VCT on 20 May 2010.
Following the Merger, MIG 3 VCT shareholders were issued with approximately
1.0655 ordinary shares in the Company for each former MIG 3 VCT share. By way
of illustration, a shareholder who previously held 10,000 MIG 3 VCT shares now
holds 10,655 shares in the Company. The data for MIG 3 VCT above reflects this
revised holding.
Chairman's Statement
This Half-Yearly Report covers the six month period ended 30 June
2011.
Net asset value (NAV) and total return to shareholders
The net asset value per share as at 30 June 2011 was 90.8 pence,
compared with an adjusted NAV of 91.7 pence per share at the beginning of the
period after allowing for the final dividend of 5.0 pence paid to shareholders
on 27 May 2011 in respect of the year ended 31 December 2010. This represents
a fall of 1.0%. The NAV total return per share (being the closing net asset
value plus total dividends paid to date) declined by 0.8% during the six month
period from 118.0 pence to 117.1 pence. This reduction in total return is due
to a slight fall in the value of the portfolio over the six month period.
To assist shareholders who originally invested in MIG 3 VCT to monitor the
performance of their investment on a consistent basis, a table showing the
returns to a former MIG 3 VCT shareholder, based on an original subscription
of £1 for 1 share, has been included in the Financial Highlights above.
Investment portfolio
Although there is continued uncertainty around the UK economy, the
overall performance of the majority of the companies in the portfolio remains
relatively strong. Several companies, such as DiGiCo, Iglu.com Holidays and
ATG Media, are continuing to generate record profits, whilst others, such as
Blaze Signs and Youngman, which were affected by the recession, have seen
their profits recover.
However, overall the portfolio has seen a small fall of £709,124
(2.3%) in its value since the beginning of the year. The write-down in the
Company's investment in Monsal from £1,173,974 to nil was greater than the
aggregate rise in value of the remaining companies in the portfolio. Monsal, a
waste to energy company, has experienced some contract delays which have given
rise to additional costs and the Board has agreed to provide further funding.
Following the period under review £117,226 of this further investment
commitment was drawn down in July and August 2011. The terms of this
commitment caused the year-end value of the existing investment in this
company to be reduced to nil. The Investment Manager's Review provides an
explanation of the background and rationale for both the reduction in value of
the existing investment and for making this follow-on investment.
The increase in deal activity in the smaller companies market
reported in the Annual Report has been sustained over this six month period.
This increase has caused the Manager's deal flow of prospective opportunities
to rise significantly over the past year. However, many of these opportunities
have been over-priced in the Manager's view, and some have fallen away
following due diligence. Others remain in the pipeline. On the sale side, the
Manager is seeing greater interest from larger private equity groups in a
number of investee companies.
During the period a further investment was made into ASL, a printer
and copier services business, to support the acquisition of the assets of a
similar company, Transcribe Copier Systems Limited, as part of ASL's objective
to become a larger business in its sector. Following the end of the period in
July 2011, one new investment was made, into Motorclean Group, the UK's
leading provider of vehicle cleaning and valet services to the car dealership
market.
Further details of these investments and the period's other
transactions can be found in the Investment Manager's Review below.
Revenue account and dividend
It is encouraging to see the rise in income from the Company's
investment portfolio, although income from the money market fund holdings has
continued to be low which is a direct consequence of the UK base rate being
held at 0.5%. The revenue account has generated a net positive return (after
tax) for the period of £552,289 (2010: £117,082). A number of companies have
paid relatively large dividends and the levels of loan stock interest received
have been boosted by the combination of acquiring MIG 3 VCT's loan stock
investments, making new loan stock investments and a resumption of servicing
of loans by some of the investee companies.
Expenditure has reduced in the period as a result of savings
achieved from the merger with MIG 3 VCT ("the Merger") (see below). The
Company is now benefiting from lower running costs across a number of expense
categories.
A dividend of 5 pence per share (comprising 0.5 pence from income
and 4.5 pence from capital) was paid during the period on 27 May 2011.
It is the Board's intention to pay regular dividends and the
Directors have declared an interim income dividend of 0.5 pence per share
which will be paid on 15 September 2011 to Shareholders on the Register on 26
August 2011. This will bring cumulative dividends paid per share to 26.8
pence.
Matrix VCTs linked fundraising
The Company participated with Matrix Income & Growth 4 VCT plc and
The Income & Growth VCT plc in a Matrix VCT linked fundraising that closed on
30 June 2011. A total of £16.2 million across the three VCTs was subscribed
for under the Offer of which £5.4 million was raised by the Company. These new
funds will mean that the Company's fixed running costs are spread over a
larger asset base and will improve the Company's cash position so that it is
better placed to make new investments when attractive opportunities arise. The
additional funds will also support the Company's share buy-back policy that
helps to provide liquidity in the Company's shares in what is normally an
extremely illiquid market.
It is intended to launch a similar offer later this year and
details of the Offer will be posted to shareholders nearer the time.
Merger with Matrix Income & Growth 3 VCT plc
The Merger has started to produce the expected cost savings and
simpler administration. The Prospectus for the Merger envisaged costs savings
of 0.43% of the net assets of the enlarged company immediately following the
Merger and that the costs of the Merger would be recovered within two years.
In the year since the Merger £161k of costs previously incurred by both
separate VCTs have now been saved, representing 0.46% of net assets at the
date of the Merger. The Company therefore anticipates that the full costs of
the Merger will be recovered within two years.
Liquidity
The Company held £10.9 million in cash and money market fund balances as at 30
June 2011. In addition, the £3 million invested in the Operating Partner
acquisition vehicles was also held in liquid assets (reduced to £2 million
following the use of Fullfield to support the MBO of Motorclean following the
period-end). The Company is therefore well-positioned both to take advantage
of favourable investment opportunities as they arise and, if required, to make
investments to support the existing portfolio.
Investment in qualifying holdings
The Company is required to meet the target set by HM Revenue &
Customs ("HMRC") of investing 70% of the funds raised in qualifying, unquoted
and AiM quoted companies, which it has achieved throughout the period. The
Company was 78.9% invested in qualifying companies (based on VCT cost as
defined in tax legislation which differs from actual cost given in the
Investment Portfolio Summary below) at the period-end, with the balance of the
portfolio invested in a selection of readily realisable, money market funds
with AAA credit ratings.
Share buy-backs
During the six months ended 30 June 2011, the Company bought back
1,640,545 of its own shares, representing 4.1% of the issued share capital at
the beginning of the period, at an average price, excluding costs, of 84.9
pence per share. These shares were purchased at an average discount of 10% to
NAV per share, adjusted for the dividend paid on 27 May 2011.
All of the shares bought back in the period were subsequently
cancelled by the Company. Continuing Shareholders, of course, benefit from the
difference between the NAV and the value at which the Shares are bought back
and cancelled.
The discount to NAV at which the Company has bought-back shares has been
maintained at around 10% throughout the six month period under review
narrowing from about 30% during the comparative period last year.
Discount management policy
In light of the recent turbulence in financial markets the Board
has reviewed its discount policy on share buy-backs. The Board remains
committed to buying-in shares at a discount of around 10% to the latest,
announced NAV, subject to protecting the interests of continuing Shareholders.
Accordingly, if the Board, in consultation with the Manager, considers that
there has been a material movement in the Company's NAV from the latest,
announced figure, the Board will apply this discount to its best estimate of
the current NAV.
As ever, in circumstances where there are abnormally high levels of
selling pressure the Board may, at its discretion, increase the level of the
discount at which it is prepared to buy-back shares and/or limit the scale of
any such buy-backs in order to protect the interests of continuing
Shareholders.
Communicating with shareholders
The Company maintains a programme of regular communication with
Shareholders through newsletters and a dedicated website www.migvct.co.uk,
supplementing the Half-Yearly and Annual Reports. The Board welcomes the
opportunity to meet Shareholders at the Company's General Meetings during
which representatives of the Investment Manager are present to discuss the
progress of the portfolio. The next AGM of the Company will be held in May
2012.
Following a successful Matrix VCT shareholder
workshop held last December the Manager will be holding a second workshop on
Wednesday, 14 December 2011 in central London. The workshop will include a
presentation on the VCTs' investment activity and performance. All
shareholders will receive an invitation to this event nearer to the date.
Outlook
There has been a sharp correction in global equity markets since
the end of June. This has been due, inter alia, to continued concerns over
European sovereign debt and the deteriorating prospects for economic growth in
many countries within the developed world. The UK is not immune from these
fears. The outlook for the domestic economy remains highly uncertain.
Government debt remains at relatively high levels and public expenditure is
subject to tighter constraint. However, the Manager believes many of the
portfolio companies can continue to trade profitably at the operating level
and that the portfolio can continue to demonstrate its recent relative
resilience.
Having held back on investment during the downturn, the Company
retains a significant cash position, bolstered by the recent successful
fund-raising. The Manager is seeing a greater number of attractive new
investment opportunities and the Company should be well-placed to take
advantage of these in order to enhance its performance.
Finally, I would like to thank all of our Shareholders for their
continuing support.
Keith Niven
Chairman
Responsibility Statement
In accordance with Disclosure and Transparency Rule (DTR) 4.2.10
the Directors confirm that to the best of their knowledge:
(a) the condensed set of financial statements, which has been prepared in
accordance with the statement, "Half-Yearly Reports", issued by the Accounting
Standards Board, gives a true and fair view of the assets, liabilities,
financial position and (loss)/profit of the Company, as required by DTR 4.2.4;
(b) the interim management report, included within the Chairman's Statement,
Investment Policy, Investment Portfolio Summary and the Investment Manager's
Review includes a fair review of the information required by DTR 4.2.7 being an
indication of the important events that have occurred during the first six
months of the financial year and their impact on the condensed set of financial
statements;
(c) a description of the principal risks and uncertainties facing the Company for
the remaining six months is set out below, in accordance with DTR 4.2.7; and
(d) the financial statements include a description of the related party
transactions in the first six months of the current financial year that have
materially affected the financial position or performance of the Company during
the period, and any material changes to the related party transactions since
the last Annual Report, in accordance with DTR 4.2.8.
Principal risks and uncertainties
In accordance with DTR 4.2.7, the Board confirms that the principal
risks and uncertainties facing the Company have not materially changed since
the publication of the Annual Report and Accounts for the year ended 31
December 2010. The Board acknowledges that there is regulatory risk and
continues to manage the Company's affairs in such a manner as to comply with
section 274 Income Tax Act 2007. The principal risks faced by the Company are:
- economic risk;
- investment and strategic risk;
- regulatory risk (including loss of approval as a Venture Capital Trust);
- financial and operating risk;
- market risk;
- asset liquidity risk;
- market liquidity risk;
- credit/counterparty risk.
A more detailed explanation of these can be found in the Directors'
Report on pages 17 - 18 and in Note 20 on pages 45 - 51 of the Annual Report
and Accounts for the year ended 31 December 2010 copies of which are available
on the Company's website, www.migvct.co.uk.
Related Party Transactions
Details of related party transactions in accordance with DTR 4.2.8
can be found in Note 12 to the Half-Yearly Report below.
Cautionary Statement
This report may contain forward looking statements with regards to
the financial condition and results of the Company, which are made in the
light of current economic and business circumstances. Nothing in this report
should be construed as a profit forecast.
On behalf of the Board
Keith Niven
Chairman
Investment Policy
The Company's policy is to invest primarily in a diversified
portfolio of UK unquoted companies. Investments are usually structured as part
loan and part equity in order to generate regular income and to generate
capital gains from realisations.
Investments are made selectively across a number of sectors,
primarily in management buyout transactions ("MBOs") i.e. to support incumbent
management teams in acquiring the business they manage but do not own.
Investments are primarily made in companies that are established and
profitable.
Uninvested funds are held in cash and low risk money market funds.
UK companies
The funds raised by the Company after 6 April 2006 are subject to
the £7 million gross assets test for an investment to be VCT qualifying. Pre 6
April 2006 any company in which investments were made must have had no more
than £15 million of gross assets at the time of investment to be classed as a
VCT qualifying holding
VCT regulation
The investment policy is designed to ensure that the Company
continues to qualify and is approved as a VCT by HMRC. Amongst other
conditions the Company may not invest more than 15% of its investments in a
single company and must have at least 70% by value of its investments
throughout the period in shares or securities comprised in VCT qualifying
holdings, of which a minimum overall of 30% by value must be in ordinary
shares which carry no preferential rights (save as may be permitted under VCT
rules). In addition, although the Company can invest less than 30% of an
investment in a specific company in ordinary shares it must have at least 10%
by value of its total investments in each VCT qualifying company in ordinary
shares which carry no preferential rights (save as may be permitted under VCT
rules).
The VCT regulations in respect of funds raised after 6 April 2011
will change, such that 70% of such funds must be invested in equity.
Asset mix
The Company holds its liquid funds in a portfolio of readily
realisable interest-bearing investments and deposits. The investment portfolio
of qualifying investments has been built up over time with the aim of
investing and maintaining 80% of net funds raised in qualifying investments.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses
across different industry sectors. To reduce the risk of high exposure to
equities, each qualifying investment is structured to maximise the amount
which may be invested in loan stock. Initial investments in VCT qualifying
companies are, subject to formal approval from the Board, generally made in
amounts ranging from £200,000 to £1 million at cost. No holding in any one
company will represent more than 10% of the value of the Company's investments
at the time of investment. Ongoing monitoring of each investment is carried
out by the Manager generally through taking a seat on the board of each VCT
qualifying company.
Co-investment
The Company aims to invest in larger, more mature unquoted
companies through investing alongside three other VCTs advised by MPEP with a
similar investment policy. This enables the Company to participate in combined
investments by the Manager of up to £5 million.
Borrowing
The Company's articles permit borrowings of amounts up to 10% of
the sum equal to the aggregate of the amount paid up on the allotted or issued
share capital of the Company and the amount standing to the credit of the
capital and revenue reserves of the Company (whether or not distributable)
after adding thereto or deducting therefrom any balance standing to the credit
or debit of the profit and loss account. However, the Company has no current
plans to undertake any borrowing.
Management
The Board has overall responsibility for the Company's affairs
including the determination of its investment policy. Investment and
divestment proposals are originated, negotiated and recommended by the Manager
and are then subject to formal approval by the Directors.
Investment Manager's Review
Overview
We have been encouraged by positive signs of improvement in our
marketplace during the six month period to 30 June 2011. The number of quality
potential new investments that we have seen has increased considerably and
more company boards are confident about making decisions to market their
businesses for sale or raise new capital for expansion. Over these six months
we have continued our measured approach in assessing the opportunities that
are emerging. We remain aware that we are yet to see the full effect of the UK
Government's cuts in public spending on the companies in which we invest and
are therefore particularly mindful of the risks of deteriorating economic
conditions on new investments. We have rejected a number of prospective deals
either on the grounds that they would not deliver forecast growth or because
the required sale price was too high, but there are still a number of
opportunities that we are progressing and expect to complete in the second
half of the year.
Investment portfolio
Overall, the valuation of the portfolio has remained relatively
steady over the last six months. However, a number of companies including
Blaze Signs, ATG Media (which has paid a dividend) and Iglu.com Holidays have
traded particularly strongly and returned good results. This has contributed
to an uplift in the valuations of Blaze Signs and ATG Media in the period.
Iglu.com Holidays made a robust start since we invested in December 2009 and
has outperformed its business plan and remains valued at significantly above
cost. DiGiCo and CB Imports also continue to return encouraging results, the
former well in excess of budgeted expectations; DiGiCo has paid another
substantial dividend, while CB Imports has paid its first dividend to the
Company since investment. Focus Pharma continues to perform well and also paid
a dividend, although its full year results were slightly behind a stretching
budget. It is planning to progress further with several new product launches
due during 2011.
Monsal has continued to experience completion delays on an existing
contract and in the commissioning of new contracts. These delays have led to a
requirement for additional funding and following careful consideration, your
Company approved a further loan stock investment of £293k as part of a £1.75
million fundraising alongside other Matrix VCTs and other shareholders. The
terms of this new investment provide that it will rank ahead of the existing
rounds of investment. As a result of this and our assessment of Monsal's
current enterprise value, we have reduced the valuation of the Company's
existing rounds of investment at 31 December 2010 (comprising 66% loan stock
and 34% equity) from cost of £1.2 million to nil. With this additional
funding, Monsal now has the ability to pursue a number of major contracts in
the waste and water sectors. Assuming contract awards, the potential for
recovery of value in the original investment will become a more realistic
prospect. £117,226 of this new funding round was drawn down after the
period-end in July and August 2011 and this investment is held at cost.
Following on from its original investment into ASL in December
2010, the Company made a further investment totalling £622,466 in March 2011
to support the acquisition of the assets of Transcribe Copier Systems Limited.
ASL is a Cambridge-based printer and copier services business with a broad
customer base of schools and small and medium sized enterprises. This
acquisition is part of ASL's strategy to acquire similar businesses, thereby
consolidating a highly fragmented market and become of interest to larger
companies in this sector.
Overall, initial trading of the new investments completed in the
second half of 2010, namely RDL Corporation, Faversham House, Omega
Diagnostics (traded on AiM) and ASL Technology, is satisfactory.
After the period-end in July 2011, the Company completed an
investment of £1,840,384 to support the MBO of Motorclean Group, the UK's
leading provider of vehicle cleaning and valet services to the car dealership
market.
The Company held £3 million in cash in three acquisition companies
within the Operating Partner Programme at 30 June 2011. £1 million of this
amount has been deployed by Fullfield since the period end to support the new
investment into Motorclean. The remaining two companies are actively seeking
to acquire investments in the construction, food manufacturing and healthcare
and wellbeing sectors but so far have not found sufficiently attractive
investment transactions at the right price
VSI completed the demerger of its two operating subsidiary
companies in March 2011, creating two separate investee companies for the
Company, MachineWorks Software Limited (MachineWorks) and LightWorks Software
Limited. It also paid a dividend of £56,282. The original VSI loan of
£444,501, which was transferred to MachineWorks on the demerger, was repaid in
April 2011, together with a premium of £111,222. The Company now has separate
investments in each of these companies with a cost of £222,584 each. The
boards of these companies believe that the demerger will enhance the prospects
of both companies.
The Company has continued to benefit from the profitability and
strong cash position of a number of investee companies and has received full
loan stock repayments in the six months covered by this report from Iglu.com
Holidays, Vectair and, as reported above, MachineWorks. Iglu.com Holidays
prepaid its loan in February 2011 realising £1,418,443 (including a premium of
£213,263) and Vectair repaid £506,074 (including a premium of £84,346) in
March 2011. All of these repayments were reflected in the valuations of these
companies at 31 December 2011.
Blaze and Youngman have resumed current interest payments, although
they still owe the Company unpaid interest from prior periods.
In January 2011, the Company realised its entire investment in
Campden Media for a cash consideration of £836,294, representing 85.8% of the
total investment cost of £975,000. Together with interest received over the
life the investment, the total cash return was £1,016,150, representing 104.2%
of cost.
Outlook
The prospects for increased investment activity over the coming
months have improved now that the UK economy appears to have recovered from
the worst of the recession. We are also well-positioned to offer an attractive
combination of equity and debt to companies as the availability of external
debt from the major banks is harder to access. The positive performance of
some of our investee companies has enabled the value of our portfolio to be
resilient overall. We expect to be able to release this value over time
through realisations and we are seeing interest in a number of our investee
companies from larger private equity firms.
However much uncertainty remains concerning the quality of the
economic recovery and we remain vigilant about the potential impact on the
portfolio and cautious when evaluating new opportunities.
Matrix Private Equity Partners LLP
Investment Portfolio Summary
as at 30 June 2010
Date of Total Valuation % value
initial book of net
investment cost 1 assets
£'000 £'000
QUALIFYING INVESTMENTS
AiM quoted investments
Omega Diagnostics Dec-10 305 330 0.8%
In-vitro diagnostics for food intolerance, autoimmune diseases and
infectious diseases
-------- --------- ---------
305 330 0.8%
-------- --------- ---------
Unquoted investments
DiGiCo Europe Limited Jul-07 1,985 3,483 8.8%
Designer and manufacturer of audio mixing desks
British International Holdings Limited May-06 1,708 2,574 6.5%
Supplier of helicopter services
CB Imports Group Limited (Country Baskets) Dec-07 2,000 2,482 6.3%
Importer and distributor of artificial flowers and floral sundries
ATG Media Holdings Limited Oct-08 1,486 2,163 5.5%
Publisher and on-line auction platform operator
Focus Pharma Holdings Limited Oct-07 1,370 2,003 5.1%
Licensor and distributor of generic pharmaceuticals
ASL Technology Holdings Limited Mar-08 1,913 1,913 4.8%
Supplier of printer and photocopier services
Blaze Signs Holdings Limited Apr-06 1,700 1,766 4.5%
Manufacturer and installer of signs
RDL Corporation Limited Oct-07 1,558 1,558 3.9%
(formerly Aust Recruitment Group Limited) Recruitment consultants
for the pharmaceutical, business intelligence and IT industries
Iglu.com Holidays Limited Oct-07 216 1,280 3.2%
On-line ski and cruise travel agent
Bladon Castle Management Limited Dec-08 1,000 1,000 2.5%
Company seeking to acquire businesses in the retailing, health or
brand management sectors
Fullfield Limited Dec-08 1,000 1,000 2.5%
Acquisition vehicle which acquired Motorclean Group after the
period-end
Vanir Consultants Limited Oct-08 1,000 1,000 2.5%
Company seeking to invest in data management, data mapping and
management services
Westway Services Holdings (2010) Limited Jun-09 603 992 2.5%
Installation, maintenance and servicing of air-conditioning systems
Machineworks Software Limited 2 Apr-06 223 965 2.4%
Software for CAM and machine tool vendors
Racoon International Holdings Limited Dec-06 1,213 742 1.9%
Supplier of hair extensions, hair care products and training
Youngman Group Limited Oct-05 1,000 701 1.8%
Manufacturer of ladders and access towers
Vectair Holdings Limited Jan-06 139 536 1.4%
Designer and distributor of washroom products
Faversham House Holdings Limited Dec-10 527 527 1.3%
Publisher, exhibition organiser and operator of websites
Plastic Surgeon Holdings Limited (The) Apr-08 478 187 0.5%
Supplier of snagging and finishing services to the domestic and
commercial property markets
Lightworks Software Limited 2 Apr-06 223 119 0.3%
Software for CAD vendors
Monsal Holdings Limited Dec-07 1,182 - 0.0%
Supplier of engineering services to the water and waste sectors
PXP Holdings Limited (Pinewood Structures) Dec-06 1,164 - 0.0%
Designer, manufacturer, supplier and installer of timber-frames for
buildings
Legion Group plc - in administration Aug-05 150 - 0.0%
Provider of manned guarding, mobile patrolling, and alarm response
services
-------- --------- ---------
23,838 26,991 68.20%
-------- --------- ---------
Total qualifying investments 24,143 27,321 69.00%
-------- --------- ---------
NON QUALIFYING INVESTMENTS
SWIP Global Liquidity Fund plc (Scottish Widows) 3 3,455 3,455 8.7%
Fidelity Institutional Cash Fund plc3 1,474 1,474 3.7%
Insight Liquidity Funds plc (HBOS) 3 1,271 1,271 3.2%
Global Treasury Funds plc (Royal Bank of Scotland) 3 1,037 1,037 2.6%
Institutional Cash Series plc (BlackRock) 3 849 849 2.1%
GS Funds plc (Goldman Sachs) 3 429 429 1.1%
Sterling Liquidity First Institutional plc(Blackrock) 3 333 333 0.9%
British International Holdings Limited 318 318 0.9%
-------- --------- ---------
Total non-qualifying investments 9,166 9,166 23.2%
-------- --------- ---------
Total investments 33,309 36,487 92.2%
-------- --------- ---------
Other assets 3,326 3,326 8.5 %
Current liabilities (319) (319) (0.7)%
-------- --------- ---------
Net assets 36,316 39,494 100.0 %
-------- --------- ---------
1 Book cost includes the fair value of the qualifying investments acquired from
Matrix Income & Growth 3 VCT plc on 20 May 2010, still held at 30 June 2011, of
£9,770,646.
2 On 31 March 2011, VSI Limited (VSI) undertook a demerger, such that the Company
now holds separate investments in Machineworks Software Limited (Machineworks)
and Lightworks Software Limited (Lightworks). On the demerger date, the cost of
the ordinary shares and the cost and valuation of the preference share
investments were split equally between Machineworks and Lightworks. However the
valuation of the ordinary share investments at the merger date were split 75:25
between Machineworks and Lightworks respectively. The former loan investment in
VSI of £462,826 was wholly transferred to Machineworks at the date of the
Merger. It was repaid in full on 4 April 2011.
3 Disclosed as Current Investments within Current Assets in the Balance Sheet.
Unaudited Income Statement
for the six months ended 30 June 2011
Six months ended Six months ended
30 June 2011 30 June 2010
(unaudited) (unaudited)
Notes Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Unrealised (losses)/gains
on investments held at fair
value 9 - (709,124) (709,124) - 2,291,988 2,291,988
Realised gains/(losses) on
investments held at fair
value 9 - 2,953 2,953 - - -
Income 3 864,903 - 864,903 437,524 - 437,524
Recoverable VAT - - - - - -
Investment management expense 4 (116,410) (349,229) (465,639) (54,589) (163,766) (218,355)
Other expenses (145,841) - (145,841) (177,021) - (177,021)
Merger costs - - - (88,670) - (88,670)
--------- --------- --------- --------- --------- ---------
Profit/(loss) on ordinary
activities before taxation 602,652 (1,055,400) (452,748) 117,244 2,128,222 2,245,466
Tax on profit/(loss) on
ordinary activities 5 (52,464) 52,464 - (162) - (162)
--------- --------- --------- --------- --------- ---------
Profit/(loss) attributable
to equity shareholders 550,188 (1,002,936) (452,748) 117,082 2,128,222 2,245,304
--------- --------- --------- --------- --------- ---------
Basic and diluted
earnings per share 6 1.30p (2.37)p (1.07)p 0.47p 8.47p 8.94p
Year ended
31 December 2010
(audited)
Notes Revenue Capital Total
£ £ £
Unrealised (losses)/gains
on investments held at fair
value 9 - 6,527,412 6,527,412
Realised gains/(losses) on
investments held at fair
value 9 - (75,045) (75,045)
Income 3 934,890 - 934,890
Recoverable VAT - - -
Investment management expense 4 (164,619) (493,859) (658,478)
Other expenses (338,661) - (338,661)
Merger costs (69,089) - (69,089)
--------- --------- ---------
Profit/(loss) on ordinary
activities before taxation 362,521 5,958,508 6,321,029
Tax on profit/(loss) on
ordinary activities 5 (49,224) 49,851 627
--------- --------- ---------
Profit/(loss) attributable
to equity shareholders 313,297 6,008,359 6,321,656
--------- --------- ---------
Basic and diluted
earnings per share 6 0.95p 18.30p 19.25p
The total column of this statement is the Profit and Loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
There were no other recognised gains or losses in the period.
Other than revaluation movements arising on investments held at
fair value through profit and loss, there were no differences between the
profit/(loss) as stated above and at historical cost.
Unaudited Balance Sheet
as at 30 June 2011
30 June 2011 30 June 2010 31 December 2010
(unaudited) (unaudited) (audited)
Notes £ £ £
Non-current assets
Investments at fair value 1c, 9 27,639,424 26,727,418 31,043,002
Current assets
Debtors and prepayments 9 1,237,639 322,022 231,222
Current Investments 10 8,847,873 8,219,791 7,466,137
Cash at bank 2,088,907 305,798 114,672
--------- --------- ---------
12,174,419 8,847,611 7,812,031
Creditors: amounts falling
due within one year (319,446) (414,805) (404,126)
--------- --------- ---------
Net current assets 11,854,973 8,432,806 7,407,905
--------- --------- ---------
Net assets 39,494,397 35,160,224 38,450,907
--------- --------- ---------
Capital and reserves 11
Called up share capital 434,762 407,673 397,795
Capital redemption reserve 45,769 19,487 29,364
Share premium account 21,881,504 16,852,849 16,852,849
Revaluation reserve 3,329,024 15,201 4,290,333
Special distributable reserve 14,587,571 17,639,263 16,423,246
Profit and loss account (784,233) 225,751 457,320
--------- --------- ---------
Equity shareholders' funds 39,494,397 35,160,224 38,450,907
--------- --------- ---------
Net asset value per Ordinary Share 8 90.84p 86.25p 96.66p
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2011
Six months ended Six months ended Year ended
30 June 2011 30 June 2010 31 December 2010
(unaudited) (unaudited) (audited)
Notes £ £ £
Opening Shareholders' funds 38,450,907 16,979,370 16,979,370
Purchase of own shares (1,400,202) (104,345) (890,013)
Shares issued arising from
Linked Offer for Subscription 5,082,027 - -
Shares issued upon merger
with
Matrix Income & Growth 3 VCT
plc - 17,111,546 17,111,545
Stamp duty on shares issued - (52,975) (52,975)
(Loss)/profit for the period
before dividends (452,748) 2,245,304 6,321,656
Dividends paid in period 7 (2,185,587) (1,018,676) (1,018,676)
--------- --------- ---------
Closing Shareholders' funds 39,494,397 35,160,224 38,450,907
Unaudited Summarised Cash Flow Statement
for the six months ended 30 June 2011
Six months ended Six months ended Year ended
30 June 2011 30 June 2010 31 December 2010
(unaudited) (unaudited) (audited)
£ £ £
Operating activities
Investment income received 772,342 242,837 827,488
Other income 3,873 - -
Investment management fees paid (449,579) (173,535) (587,816)
Other cash payments (118,729) (244,374) (461,372)
Payments of merger costs
of the Company (2,400) (36,247) (78,636)
--------- --------- ---------
Net cash inflow/(outflow) from
operating activities 205,507 (211,319) (300,336)
Investing activities
Acquisitions of investments (1,541,001) - (1,124,409)
Disposals of investments 3,319,873 154,739 1,123,942
--------- --------- ---------
Net cash inflow/(outflow) from
investing activities 1,778,872 154,739 (467)
Dividends
Equity dividends paid (2,185,587) (1,018,676) (1,018,676)
--------- --------- ---------
Cash outflow before financing
and liquid resource management (201,208) (1,075,256) (1,319,479)
Management of liquid resources
Increase in current investments (1,381,736) (3,042,221) (2,288,567)
Financing
Shares issued as part of Joint f
undraising offer for subscription 5,082,027 - -
Cash received on acquisition of net
assets from
Matrix Income & Growth 3 VCT plc - 4,561,289 4,561,289
Stamp duty on shares issued to
acquire
net assets of
Matrix Income & Growth 3 VCT plc - (52,975) (52,975)
Payments to meet merger costs of
Matrix Income & Growth 3 VCT plc - (90,295) (133,191)
Share capital bought back (1,524,848) (40,997) (698,658)
--------- --------- ---------
Net inflow from financing activities 3,557,179 4,377,022 3,676,465
--------- --------- ---------
Increase in cash for the period 1,974,235 259,545 68,419
--------- --------- ---------
Reconciliation of profit/(loss) on ordinary activities before taxation to net
cash inflow/ (outflow) from operating activities
for the six months ended 30 June 2011
Six months ended Six months ended Year ended
30 June 2011 30 June 2010 31 December 2010
(unaudited) (unaudited) (audited)
£ £ £
(Loss)/profit on ordinary activities
before taxation (452,748) 2,245,466 6,321,029
Net unrealised losses/(gains)
on investments 709,124 (2,291,988) 75,045
Net gains on realisations
of investments (2,953) - (6,527,412)
Increase in debtors (87,882) (131,776) (40,976)
Increase/(Decrease) in creditors 39,966 (33,021) (128,022)
--------- --------- ---------
Net cash inflow/(outflow) from
operating activities 205,507 (211,319) (300,336)
--------- --------- ---------
The notes below form part of these half-yearly financial statements.
Notes to the Unaudited Financial Statements
1. Principal accounting policies
The following accounting policies have been applied consistently throughout
the period. Full details of principal accounting policies will be disclosed in
the Annual Report.
a) Basis of accounting
The unaudited results cover the six months to 30 June 2011 and have been
prepared under UK Generally Accepted Accounting Practice (UK GAAP), consistent
with the accounting policies set out in the statutory accounts for the year
ended 31 December 2010 and the 2009 Statement of Recommended Practice,
`Financial Statements of Investment Trust Companies and Venture Capital
Trusts' ('the SORP') issued by the Association of Investment Companies in
January 2009.
The results for the period to 20 May 2010 reflected the activities of the
Company. On this date the assets and liabilities of Matrix Income & Growth 3
VCT plc were acquired by the Company and therefore the results for the
remaining period to 30 June 2010 and onwards reflected the activities of the
enlarged entity.
The Half-Yearly Report has not been audited, nor has it been reviewed by the
auditors pursuant to the Auditing Practices Board (APB)'s guidance on Review
of Interim Financial Information.
b) Presentation of the Income Statement
In order to better reflect the activities of a VCT and in accordance with the
SORP, supplementary information which analyses the Income Statement between
items of a revenue and capital nature has been presented alongside the Income
Statement. The revenue column of profit attributable to equity shareholders is
the measure the Directors believe appropriate in assessing the Company's
compliance with certain requirements set out in Section 274 Income Tax Act
2007.
c) Investments
All investments held by the Company are classified as "fair value through
profit and loss", in accordance with the International Private Equity and
Venture Capital Valuation ("IPEVCV") guidelines, as updated in September 2009,
which have not materially changed the results reported last year. This
classification is followed as the Company's business is to invest in financial
assets with a view to profiting from their total return in the form of capital
growth and income.
For investments actively traded in organised financial markets, fair value is
generally determined by reference to Stock Exchange market quoted bid prices
at the close of business on the balance sheet date. Purchases and sales of
quoted investments are recognised on the trade date where a contract of sale
exists whose terms require delivery within a time frame determined by the
relevant market. Purchases and sales of unlisted investments are recognised
when the contract for acquisition or sale becomes unconditional.
Unquoted investments are stated at fair value by the Directors in accordance
with the following rules, which are consistent with the IPEVCV guidelines:
All investments are held at the price of a recent investment for an
appropriate period where there is considered to have been no change in fair
value. Where such a basis is no longer considered appropriate, the following
factors will be considered:
(i) Where a value is indicated by a material arms-length transaction by an
independent third party in the shares of a company, this value will be used.
(ii) In the absence of i), and depending upon both the subsequent trading
performance and investment structure of an investee company, the valuation
basis will usually move to either:-
a) an earnings multiple basis. The shares may be valued by applying a suitable
price-earnings ratio to that company's historic, current or forecast post-tax
earnings before interest and amortisation (the ratio used being based on a
comparable sector but the resulting value being adjusted to reflect points of
difference identified by the Manager compared to the sector including, inter
alia, a lack of marketability).
or:-
b) where a company's underperformance against plan indicates a diminution in
the value of the investment, provision against cost is made, as appropriate.
Where the value of an investment has fallen permanently below cost, the loss
is treated as a permanent impairment and as a realised loss, even though the
investment is still held. The Board assesses the portfolio for such
investments and, after agreement with the Manager, will agree the values that
represent the extent to which an investment has become realised. This is based
upon an assessment of objective evidence of that investment's future
prospects, to determine whether there is potential for the investment to
recover in value.
(iii) Premiums on loan stock investments are accrued at fair value when the
Company receives the right to the premium and when considered recoverable.
(iv) Where an earnings multiple or cost less impairment basis is not
appropriate and overriding factors apply, discounted cash flow or net asset
valuation bases may be applied.
2. Capital gains and losses on investments, whether realised or unrealised,
are dealt with in the profit and loss and revaluation reserves and movements
in the period are shown in the Income Statement.
3. Income
Six months ended Six months ended Year ended
30 June 2011 30 June 2010 31 December 2010
(unaudited) (unaudited) (audited)
£ £ £
Dividends 352,826 161,067 194,226
Money-market funds 31,896 12,684 35,779
Loan stock interest 479,770 263,613 700,647
Bank deposits 411 160 367
Other Income - - 3,871
--------- --------- ---------
Total Income 864,903 437,524 934,890
--------- --------- ---------
4. Investment management expense
In accordance with the policy statement published under "Management and
Administration" in the Company's prospectus dated 9 July 2004, the Directors
have charged 75% of the investment management expense to the capital reserve.
5. Taxation
Other than a small charge for deferred tax, there is no tax charge for the
period as the Company has incurred taxable losses.
6. Basic and diluted earnings and return per share
The basic and diluted earnings, revenue return and capital return per share
shown below for each period are respectively based on numerators i)-iii), each
divided by the weighted average number of shares in issue in the period - see
iv) below.
Six months ended Six months ended Year ended
30 June 2011 30 June 2010 31 December 2010
(unaudited) (unaudited) (audited)
£ £ £
i) Total earnings after
taxation (452,748) 2,245,304 6,321,656
Basic and diluted
(loss)/profit per ordinary
share (pence) (1.07)p 8.94p 19.25p
ii) Net revenue from
ordinary activities after
taxation 550,188 117,082 313,297
Basic and diluted
revenue per ordinary
share (pence) 1.30p 0.47p 0.95p
iii) Net unrealised
(losses)/gains (709,124) 2,291,988 6,527,412
Net realised capital
gains/(losses). 2,953 - (75,045)
Capital expenses (net of
taxation) (296,765) (163,766) (444,008)
--------- --------- ---------
Total capital return (1,002,936) 2,128,222 6,008,359
Capital (loss)/profit per
ordinary share (pence) (2.37)p 8.47p 18.30p
iv) Weighted average
number of shares in issue
in the period 42,451,988 25,118,886 32,833,601
7. Dividends paid
Six months ended Six months ended Year ended
30 June 2011 30 June 2010 31 December 2010
(unaudited) (unaudited) (audited)
£ £ £
Final income dividend
paid for year ended 31
December 2010 of 0.5p per
share 218,559 - -
Final capital dividend paid
for year ended 31
December 2010 of 4.5p per
share 1,967,028 - -
Interim income dividend
for the year ended 31
December 2009 of 0.5p per
share - 101,868 101,868
Interim capital dividend
for the year ended 31
December 2009 of 4.5p per
share - 916,808 916,808
--------- --------- ---------
2,185,587 1,018,676 1,018,676
8. Net asset value per ordinary share
As at As at As at
30 June 2011 30 June 2010 31 December 2010
(unaudited) (unaudited) (audited)
£ £ £
Net assets 39,494,397 35,160,224 38,450,907
Number of shares in issue 43,476,236 40,767,266 39,779,546
Net asset value per share (pence) 90.84p 86.25p 96.66p
9. Summary of non-current investments at fair value during the period
Traded Unquoted Unquoted
on equity preference Loan
AiM shares shares stock Total
£ £ £ £ £
Valuation at 1 January 2011 381,248 12,207,592 16,322 18,437,840 31,043,002
Purchases at cost - - - 622,466 622,466
Sales - proceeds - (61,684) - (3,258,189) (3,319,873)
- realised gains - 2,953 - - 2,953
Reclassification at valuation - 4,447 (4,447) - -
Unrealised (losses)/gains (50,833) (296,708) 19,759 (381,342) (709,124)
--------- --------- --------- --------- ---------
Valuation at 30 June 2011 330,415 11,856,600 31,634 15,420,775 27,639,424
--------- --------- --------- --------- ---------
Book cost at
30 June 2011 305,000 8,107,641 48,356 15,999,508 24,460,505
Unrealised gains/(losses)
at 30 June 2011 25,415 3,748,959 (16,722) (578,733) 3,178,919
--------- --------- --------- --------- ---------
Valuation at 30 June 2011 330,415 11,856,600 31,634 15,420,775 27,639,424
--------- --------- --------- --------- ---------
Losses on investments
Realised (losses)/gains
based on historical cost - (135,753) - 390,891 255,138
Less amounts recognised as
unrealised (losses)/gains in
previous years - (138,706) - 390,891 252,185
--------- --------- --------- --------- ---------
Realised gains based on
carrying value at
31 December 2010 - 2,953 - - 2,953
Net movement in unrealised
(losses)/gains in the period (50,833) (296,708) 19,759 (381,342) (709,124)
--------- --------- --------- --------- ---------
(Losses)/gains on
investments at 30 June 2011 (50,833) (293,755) 19,759 (381,342) (706,171)
--------- --------- --------- --------- ---------
Reconciliation to Cash Flow Statement
Purchases at cost above of £622,466 differs from the Cash Flow
Statement figure of £1,541,001 by £918,535. This difference is due to amounts
held at solicitors awaiting investment of £840,384 in relation to Fullfield
Limited and £78,151 in relation to Monsal Holdings Limited at 30 June 2011.
These sums are part of debtors of £1,237,639 shown on the Balance Sheet.
10. Current Investments at fair value
These comprise investments in seven Dublin based OEIC money market funds
managed by Royal Bank of Scotland, Blackrock Investment Management (2 funds),
Goldman Sachs, Insight Investment Management, Scottish Widows Investment
Management and Fidelity Investment Management. All of these sums are subject
to same day access.
11. Capital and reserves
Called Capital Share Special Profit and
up share redemption premium Revaluation distributable loss
capital reserve reserve reserve reserve account Total
£ £ £ £ £ £ £
At
1 January 2011 397,795 29,364 16,852,849 4,290,333 16,423,246 457,320 38,450,907
Shares issued under Linked
Offer for Subscription 53,372 - 5,028,655 - - - 5,082,027
Shares bought back (16,405) 16,405 - - (1,400,202) - (1,400,202)
Written off to special
reserve - - - - (435,473) 435,473 -
Realisation of
previously unrealised
appreciation - - - (252,185) - 252,185 -
Dividend - final for
year ended 31 December 2010 - - - - (1,967,028) (218,559) (2,185,587)
(Loss)/ profit for the period - - - (709,124) - 256,376 (452,748)
---------- ---------- ---------- ---------- ---------- ---------- ----------
At 30 June 2011 434,762 45,769 21,881,504 3,329,024 12,620,545 1,182,793 39,494,397
---------- ---------- ---------- ---------- ---------- ---------- ----------
12. Related party transactions
Bridget Guérin is a shareholder (0.9%) and, until 22 December 2009 was a
director of Matrix Group Limited, which owns 100% of the equity of MPE
Partners Limited and Matrix Securities Limited. MPE Partners Limited has a 50%
interest in Matrix Private Equity Partners LLP ('MPEP'), the Company's
Manager. Following a re-organisation of the Matrix group of companies, MPEP
now provides investment management and administration services under the terms
of an Investment Management Agreement dated 20 May 2010. The revised annual
fee is 2% of net assets plus £120,000 per annum, the latter inclusive of VAT
and subject to increase in RPI.
Matrix CC Limited, a subsidiary of Matrix Group Limited, has a 97% interest in
Matrix Corporate Capital LLP ("MCC"), the Company's Corporate Broker. Five
(2010: three) share buy-backs at an average discount of 10% to NAV per share
were undertaken by MCC on the Company's instruction, costing £1,400,202 (2010:
£104,345). Retainer Fees of £7,200 (2010: £8,813) were paid to MCC during the
year and £66,709 (2010: £63,232) was due to MCC at the period-end to settle
share buy-back transactions.
13. Post Balance Sheet Events
On 4 July and 9 August 2011, a further £117,226 of loan stock was acquired in
Monsal Holdings Limited, as part of a further commitment to invest £293,065 in
Monsal Holdings Limited.
On 8 July 2011, £840,384 was invested in Fullfield Limited. This amount, in
addition to £1,000,000 already held in Fullfield Limited, was used to part
fund the management buy-out of Motorclean Holdings Limited.
14. The information for the period ended 30 June 2011 does not comprise full
financial statements within the meaning of Section 435 of the Companies Act
2006. The financial statements for the year ended 31 December 2010 have been
filed with the Registrar of Companies. The auditors have reported on these
financial statements and that report was unqualified and did not contain a
statement under section 498(2) of the Companies Act 2006.
15. This Half-Yearly Report will shortly be made available on our website:
www.migvct.co.uk and will be circulated by post to those shareholders who have
requested copies of the Report. Further copies are available free of charge
from the Company's registered office, One Vine Street, London W1J 0AH or can
be downloaded via the website.
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