Interim Results for the six months ended 30 Jun...
Matrix Income & Growth VCT plc ("the Company")
Investment Objective
Matrix Income & Growth VCT plc is a Venture Capital Trust ("VCT")
managed by Matrix Private Equity Partners investing primarily in established,
profitable, unquoted companies.
The Company's objective is to provide investors with a regular and
growing 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
Interim Results for the six months ended 30 June 2007
30 June 2007 30 June 2006 31 December
2006
Net assets £23,715,873 £20,844,852 £22,244,902
Net asset value per share 107.29p 94.13p 100.64p
Total return per share* 110.49p 95.13p 102.45p
Share price (mid-market 91.50p 99.00p 88.50p
price)
Net cumulative dividends 3.20p 1.00p 1.80p
paid**
* Net asset value per share plus cumulative dividends per share.
This compares with an original investment cost of 100 pence per share, which
after allowing for income tax relief of 40 pence per share equates to 60 pence
per share.
** For a breakdown of recent dividends paid, please see `Dividends
paid' in the Income Statement below.
In addition, an interim dividend of 1.00 pence per share has been declared and
is payable on 20 September 2007 to Shareholders on the Register on 24 August
2007, thereby increasing net cumulative dividends to 4.20 pence per share.
Chairman's Statement
I am pleased to present the interim results of the Company covering
the six month period ended 30 June 2007.
Results and dividend
The revenue account generated a net return (after tax) for the
period of £306,813 (2006: £231,302). The Board has declared an interim
dividend of 1.00 pence per share (2006: 0.80 pence per share) which will be
paid on 20 September 2007 to Shareholders on the Register on 24 August 2007.
Net Asset Value
The net asset value (NAV) at 30 June 2007 was 107.29 pence per
share (30 June 2006: 94.13 pence per share) compared with an NAV of 100.64
pence per share at the beginning of the period, an increase of 6.6%.
Investment portfolio
No new investments were completed during the period. This, in part,
reflected an extremely competitive environment for private equity deals
leading to inflated price expectations on the part of many vendors. Against
this background your Investment Manager, supported by the Board, continued to
pursue a measured and selective approach towards new investment proposals.
Since the end of the period the Company has invested £1.0 million
in the management buy out of Digico Europe Limited and the Investment Manager
is currently progressing a number of other attractive investment
opportunities.
Meanwhile, the current portfolio exhibited encouraging progress
over the period with a number of upward valuation movements. For further
information on these investments please see the Investment Manager's Review
below.
Income
Income was derived from two main sources. First, income from OEIC
money market funds generated an average annualised yield of approximately 5.3%
over the period; secondly, the investments made by your Investment Manager
usually include a substantial component of interest-bearing loan stocks. These
loan stocks are now beginning to make a significant contribution and at 30
June 2007 were generating an annualised yield of 7.8%. As at the end of the
period, the annualised running yield on the qualifying investment portfolio as
a whole was 4.1%, while upon all investments it was 4.9%.
Investment in qualifying holdings
The key date by which the Investment Manager is required to meet
the target set by HM Revenue & Customs of investing 70% of the funds raised in
qualifying unquoted and AIM quoted companies is 31 December 2007. Following
the investment in Digico the Company was 48.6% invested in qualifying
companies, based on VCT cost as defined in tax legislation, and, as outlined
in the accompanying Review, the Investment Manager remains confident of
achieving this investment target by the end of the year. The balance of the
portfolio is invested in a selection of OEIC money market funds.
Communicating with shareholders
The Company maintains a programme of regular communication with
Shareholders, with newsletters and a dedicated website: www.migvct.co.uk,
supplementing the interim and annual reports. The Board welcomes the
opportunity to meet Shareholders at the Company's Annual 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
2008.
Extraordinary General Meeting 30 October 2007 - Electronic
Communications
Subject to Shareholder approval, the Companies Act 2006 allows
companies to send or supply documents and information to Shareholders in
electronic form and by a website in place of hard copies. The Directors are of
the opinion that this could be beneficial for both the Company and its
Shareholders, in particular as it may help reduce administration costs and
will ensure that Shareholders receive documents in a more timely manner.
To implement this the Directors are convening an Extraordinary
General Meeting to be held on 30 October 2007 at which Shareholders will be
asked to approve a single resolution authorising the Company to send
communications electronically to Shareholders and make documents and
information available to Shareholders on a website. The Notice of this meeting
and a personalised Proxy Form for use in relation to this meeting will be
included with Shareholders' copies of the Interim Report.
Outlook
The Board is encouraged by the evidence of value creation within
the current portfolio and with it the potential for profitable exit
opportunities as the portfolio matures. Based on the Investment Manager's
planned investment programme for the second half of the year, the Board is
confident, also, that the Company should achieve the 70% test by 31 December
2007 and at least maintain this level of investment in qualifying companies
going forward.
Finally, I would like to thank all of our Shareholders for their
continuing support.
Keith Niven
Chairman
Investment Manager's Review
Over the last six months the portfolio has begun to demonstrate the
benefits of our approach of investing in established, profitable companies,
principally by way of Management Buy Outs ("MBOs").
The rate at which we have made new investments has slowed
considerably, particularly compared to the rate seen in the first half of
2006. Competition for transactions has increased markedly. This has in part
been driven by the amount of debt and equity funding available to companies,
which has led to inflation in purchase prices. We have also been offered a
greater number of lower quality transactions. We have therefore been adopting
a highly selective and cautious approach towards new investment in the current
environment.
Since the period end an investment of £1 million has been completed
as part of the MBO of Digico Europe Limited, the global market leading
manufacturer of digital sound mixing consoles for the live performance
theatre, post-production and broadcast markets. Several other opportunities
have also been agreed and are proceeding through diligence and contract
negotiations. They include investments in three new companies that are being
established with experienced operating partners in the support services,
healthcare and food and beverage sectors. In the light of these opportunities,
we remain fully confident of meeting the 70% qualifying investment target by
the 31 December 2007 deadline.
At 30 June 2007 a total of £8.8 million at cost had been invested
in thirteen companies, and these have been valued at that date, in accordance
with International Private Equity & Venture Capital Valuation ("IPEVCV")
guidelines, at £11.9 million, an uplift of 35%. Six companies have moved from
cost to a discounted earnings valuation since the beginning of the year, and
all have shown an increase, generally reflecting performance in line with our
expectations at the time we made our investment.
Of particular note has been the strong trading experienced by both
Blaze Signs and PastaKing, the former seeing growth from its major retail
customers and the latter benefiting from the increasing trend towards healthy
eating in schools and colleges. Of the other four companies which have seen an
uplift in value; Campden Media is expanding its US conferencing business and
establishing an online offering for its healthcare publications; British
International has recently been successful in gaining offshore work for its
helicopter fleet and is entering its busy summer period; Vectair is showing
impressive revenue and profit growth in Europe for its range of air fresheners
and toiletry products, and is also expanding into the USA, and VSI has
performed fully in line with expectations and is considering expansion
opportunities.
Whilst unquoted companies are not immune from the wider economic
environment and the recent increases in interest rates, we remain encouraged
by the overall performance of the portfolio and have recently seen potential
for some early realisations.
Investment Portfolio Summary
as at 30 June 2007
Date of Total Valuation % value
initial book of net
investment cost assets
Qualifying investments £'000 £'000
AIM quoted investments
BBI Holdings plc May-06 382 621 2.62%
Developer and manufacturer
of rapid test diagnostic products
SectorGuard plc Aug-05 150 150 0.63%
Provider of manned guarding,
mobile patrolling, and alarm
response services
---------- ---------- ----------
532 771 3.25%
Unquoted investments
Youngman Group Limited Oct-05 1,000 2,716 11.45%
Manufacturer of ladders and
access towers
British International Holdings Jun-06 1,000 1,170 4.93%
Limited
Supplier of helicopter services
VSI Limited Apr-06 618 1,092 4.60%
Developer and marketer
of 3D software
Ministry of Cake Limited Sep-05 1,000 1,075 4.53%
Manufacturer of frozen cakes
and desserts for the food service
industry
Campden Media Limited Jan-06 975 1,001 4.22%
Magazine publisher and
conference organiser
PXP Holdings Limited Dec-06 1,000 1,000 4.22%
(Pinewood Structures)
Designer, manufacturer,
supplier and installer of timber-
frames for buildings
Blaze Signs Holdings Apr-06 574 885 3.73%
Limited
Signwriter
Racoon International Dec-06 874 874 3.69%
Holdings Limited
Supplier of hair extensions,
hair care products and training
PastaKing Holdings Limited Jun-06 464 749 3.16%
Supplier to the educational
and food service market
Vectair Holdings Limited Jan-06 560 604 2.55%
Designer and distributor of
washroom products
FH Ingredients Limited Feb-05 213 - 0.00%
Processor and distributor of
frozen herbs to the food
processing industry
---------- ---------- ----------
8,278 11,166 47.08%
---------- ---------- ----------
Total qualifying investments 8,810 11,937 50.33%
---------- ---------- ----------
Non-qualifying investments
Global Treasury Funds 2,918 2,918 12.30%
plc (Royal Bank of Scotland)**
Fidelity Institutional Cash 2,039 2,039 8.60%
Fund plc**
SWIP Global Liquidity 1,933 1,933 8.15%
Fund plc (Scottish Widows)**
Barclays Global Investors 1,801 1,801 7.59%
Cash Selection Funds plc**
Insight Liquidity Funds 1,132 1,132 4.77%
plc (HBOS)**
GS Funds plc (Goldman 1,031 1,031 4.35%
Sachs)**
Institutional Cash Series plc 943 943 3.98%
(BlackRock)**
---------- ---------- ----------
Total non-qualifying 11,797 11,797 49.74%
investments
---------- ---------- ----------
Total investments 20,607 23,734 100.07%
====== ====== ======
Other assets 246 246 1.04 %
Current liabilities (264) (264) (1.11)%
---------- ---------- ----------
Net assets 20,589 23,716 100.00%
====== ====== ======
**Disclosed as Investments at fair value within Current assets in the Balance
Sheet.
Unaudited Income Statement
(incorporating the Revenue Account of the Company for the six months ended 30
June 2007
Six months ended 30 June 2007 Six months ended 30 June 2006
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Unrealised gains on
investments held at
fair value - 1,607,124 1,607,124 - 15,180 15,180
Realised losses on
investments held at
fair value - - - - - -
Costs of investment
transactions - (148) (148) - (61) (61)
Income 625,023 - 625,023 517,317 - 517,317
Investment
management fees (65,423) (196,271) (261,694) (61,340) (184,021) (245,361)
Other expenses (160,711) - (160,711) (154,791) - (154,791)
---------- ---------- --------- ---------- ---------- ----------
Return on ordinary
activities before
taxation 398,889 1,410,705 1,809,594 301,186 (168,902) 132,284
Tax on ordinary
activities (92,076) 62,904 (29,172) (69,884) 54,248 (15,636)
---------- ---------- --------- ---------- ---------- ----------
Return attributable
to equity
shareholders 306,813 1,473,609 1,780,422 231,302 (114,654) 116,648
====== ====== ====== ====== ====== ======
Return per share 1.39p 6.66p 8.05p 1.04p (0.51)p 0.53p
Dividends paid
Interim dividend paid
for the six months
ended 30 June 2006
of 0.80 pence per
share - - - - - -
Final dividend paid
for the year ended
31 December 2006
of 1.40 pence per
share (period ended
31 December 2005:
0.70 of a penny per
share) 309,451 - 309,451 155,005 - 155,005
---------- ---------- ---------- ---------- ----------
309,451 - 309,451 155,005 - 155,005
---------- ----------- ---------- ---------- ----------
Year ended 31 December 2006
(audited)
Revenue Capital Total
£ £ £
Unrealised gains on
investments held at
fair value - 1,731,906 1,731,906
Realised losses on
investments held at
fair value - (212,893) (212,893)
Costs of investment
transactions - (82) (82)
Income 1,071,415 - 1,071,415
Investment
management fees (123,960) (371,881) (495,841)
Other expenses (317,372) - (317,372)
---------- ---------- ----------
Return on ordinary
activities before
taxation 630,083 1,147,050 1,777,133
Tax on ordinary
activities (161,126) 113,421 (47,705)
---------- ---------- ----------
Return attributable
to equity
shareholders 468,957 1,260,471 1,729,428
====== ====== ======
Return per share 2.12p 5.69p 7.81p
Dividends paid
Interim dividend paid
for the six months
ended 30 June 2006
of 0.80 pence per
share 177,149 - 177,149
Final dividend paid
for the year ended
31 December 2006
of 1.40 pence per
share (period ended
31 December 2005:
0.70 of a penny per
share) 155,005 - 155,005
---------- ---------- ----------
332,154 - 332,154
Unaudited Balance Sheet
as at 30 June 2007
As at As at As at
30 June 30 June 31 December
2007 2006 2006
(audited)
£ £ £
Non-current assets
Investments at fair
value 11,936,670 6,951,307 10,329,528
Current assets
Debtors and prepayments 124,753 83,998 142,515
Investments at fair value 11,797,408 14,052,947 11,906,321
Cash at bank 121,289 63,384 58,250
---------- ---------- ----------
12,043,450 14,200,329 12,107,086
Creditors: amounts falling due within one year ( 264,247) ( 306,784) ( 191,712)
---------- ---------- ----------
Net current assets 11,779,203 13,893,545 11,915,374
---------- ---------- ----------
Net assets 23,715,873 20,844,852 22,244,902
---------- ---------- ----------
Capital and reserves
Called up share capital 221,038 221,438 221,038
Capital redemption reserve 400 - 400
Share premium account - 20,711,686 -
Capital reserve - unrealised 3,339,030 15,180 1,731,906
Capital reserve - realised ( 874,143) ( 399,027) ( 740,628)
Special distributable
reserve 20,676,105 - 20,676,105
Revenue reserves 353,443 295,575 356,081
---------- ---------- ----------
Equity shareholders'
funds 23,715,873 20,844,852 22,244,902
---------- ---------- ----------
Net asset value per
Ordinary Share 107.29p 94.13p 100.64p
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2007
Six months ended Six months ended Year ended
30 June 2007 30 June 2006 31 December 2006
(audited)
£ £ £
Opening Shareholders' funds 22,244,902 20,883,209 20,883,209
Ordinary Shares bought
back - - (35,581)
Return for the period
before dividends 1,780,422 116,648 1,729,428
Dividends paid in period (309,451) (155,005) (332,154)
---------- ---------- ----------
Closing Shareholders'
funds 23,715,873 20,844,852 22,244,902
Unaudited Summarised Cash Flow Statement
for the six months to 30 June 2007
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2007 2006 2006
(audited)
£ £ £
Operating activities
Investment income
received 644,916 527,331 1,023,128
Investment management
fees paid (261,694) (246,172) (619,414)
Other cash payments (119,627) (125,006) (312,203)
---------- ---------- ----------
Net cash inflow from
operating activities 263,595 156,153 91,511
Investing activities
Acquisitions of investments (18) (4,573,234) (6,447,622)
Dividends
Equity dividends paid (309,451) (155,005) (332,154)
---------- ---------- ----------
Cash outflow before
financing and liquid
resource management (45,874) (4,572,086) (6,688,265)
Financing
Share capital
raised/(bought back) - - ( 35,581)
Management of liquid
resources
Decrease in current
investments 108,913 4,616,380 6,763,006
---------- ---------- ----------
Increase in cash for the
period 63,039 44,294 39,160
---------- ---------- ----------
NOTES
1. The accounts have been prepared under UK Generally Accepted
Accounting Practice (GAAP and, to the extent that it does not conflict with
the fair value rules of the Companies Act 1985, the 2003 Statement of
Recommended Practice, `Financial Statements of Investment Trust Companies',
revised December 2005.
2. 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 expenses to the
capital reserve.
3. The revenue return per Ordinary Share is based on the net
revenue on ordinary activities after taxation of £306,813 and is based on
22,103,821 Ordinary Shares, being the weighted average number of Ordinary
Shares in issue during this period. The capital gain per Ordinary Share is
based on ordinary activities after taxation of £1,473,609 and is based on
22,103,821 Ordinary Shares, being the weighted average number of Ordinary
Shares in issue during the period.
4. Net asset value per Ordinary Share is based on net assets at 30
June 2007, and on 22,103,821 (at 30 June 2006: 22,143,821 at 31 December 2006:
22,103,821) Ordinary Shares, being the number of Ordinary Shares in issue on
that date.
5. The financial information for the six months ended 30 June 2007
has neither been audited nor reviewed.
6. Copies of the Interim Report for the six months ended 30 June
2007 are being sent to all Shareholders. Further copies are available free of
charge from the Company's registered office, One Jermyn Street, London SW1Y
4UH or can be downloaded via the Company's web site at www.migvct.co.uk
Contact details for further enquiries:
Sarah Penfold of Matrix-Securities Limited (the Company Secretary)
on 020 7925 3300 or by e-mail on MIG@matrixgroup.co.uk
Matrix Private Equity Partners LLP (the Investment Manager), on 020
7925 3300 or by e-mail on info@matrixpep.co.uk
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