Interim Results
Matrix Income & Growth VCT plc ("the Company")
Interim Results for the six months ended 30 June 2006
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 - six months ended 30 June 2006
30 June 30 June 31 December
2006 2005 2005
(restated) (restated)
Net assets £20,844,852 £20,878,793 £20,883,209
Net asset value per share 94.1p 94.3p 94.3p
Total return* 95.1p 94.3p 94.6p
Share price (mid-market price) 99.0 p 99.0 p 100.0p
Net cumulative dividends paid* 1.0p 0.0p 0.3p
*
* Net asset value per share plus cumulative dividends per share. This compares
to 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 the dividends paid please see the Income Statement -
Dividends paid
In addition, an interim dividend of 0.8 of a penny per Ordinary Share has been
declared and will be paid on 14 September 2006 to Shareholders on the Register
on 18 August 2006 thereby increasing net cumulative dividends to 1.8 pence per
share.
Chairman's Statement
Overview
I am pleased to present the Interim Results of the Company covering the six
months to 30 June 2006.
The net asset value at 30 June 2006 was 94.1 pence per share (2005: 94.3 pence
per share).
In line with the Company's strategy, the Investment Manager has continued to
make good progress in constructing a portfolio of investments concentrated in
established, profitable, unquoted companies.
Investment portfolio
The Investment Manager's strong dealflow has resulted in an active investment
programme over the past six months. Seven new investments totalling £4.6m have
been completed and one further investment is currently in the process of being
completed.
For further information on these investments please see the Investment
Manager's Review below.
Results and dividend
The revenue account generated a net return (after tax) for the period of £
231,302 (2005: £73,213). Your Directors have declared an interim dividend of
0.8 of a penny per share which will be paid on 14 September 2006 to
Shareholders on the Register on 18 August 2006. This is in line with the
Company's policy to provide investors with a regular and growing stream of
income.
Income
Income for the period came from two main sources; first income from OEIC money
market funds, yielding an average of approximately 4.4% over the period, and
secondly, a rising level of loan stock interest as further qualifying
investments have been made. The average annual yield on the loan stock
investments made to date was 8.3% as at 30 June 2006. This yield will vary as
further qualifying investments are made, or if some investee companies become
unable to service their loans.
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 companies is 31 December 2007. As at 30 June 2006, the Company
was 33% invested in qualifying companies, which is in line with expectations.
The balance of the portfolio has been invested in a selection of OEIC money
market funds which are readily realisable for cash in order to meet the
Investment Manager's qualifying investment programme as it continues to
develop.
Cancellation of share premium account
The Company has authority, obtained at the Extraordinary General Meeting held
on 30 June 2004, to apply to the Court to cancel the share premium account. The
Directors are proceeding with the cancellation and it is anticipated that Court
approval will be obtained within the next few months.
The cancellation of the share premium account will create a special reserve
that can be used, amongst other things, to fund buy-backs of the Company's
shares when the Directors consider that it is in the best interests of
Shareholders so to do.
Communicating with Shareholders
The Company intends to communicate regularly with Shareholders. Annual General
Meetings provide a useful platform to meet Shareholders and share views. Your
Board welcomes active attendance at these meetings to give Shareholders the
opportunity to meet your Directors and representatives of the Investment
Manager. The next AGM of the Company will be held in April 2007. In addition to
the Interim Accounts and the Annual Accounts, Shareholders will receive two
newsletters a year providing further information on the progress of the
Company. The next newsletter is due to be circulated to Shareholders in
December.
Outlook
The Investment Manager has been experiencing a healthy flow of interesting
investment opportunities and the Board is confident that the recent steady
progress towards constructing a well-balanced portfolio will be maintained.
Finally, I would particularly like to thank all of our Shareholders for their
positive feedback and continuing support.
Keith Niven
Chairman
Investment Manager's Review
In the last six months significant progress has been made towards creating a
well-balanced portfolio of qualifying investments. The focus remains on
investing in profitable, established unquoted companies, primarily by way of
management buy outs ("MBOs") operating in a wide range of sectors.
Since December a total of £4.6 million has been invested in seven companies,
bringing total investment to £6.9 million invested in eleven companies, of
which nine are MBOs and two are AIM quoted investments.
In addition to the previously reported investments in the MBOs of Campden Media
and Vectair Holdings, in April two further MBOs were completed: £618,053 was
invested in VSI, a Sheffield-based developer of software for computer-aided
design and manufacturing vendors, and £573,750 was committed to Blaze Signs
Holdings, a manufacturer and installer of signage based in Broadstairs, Kent.
These were followed in May by an investment of £381,863 in BBI Holdings, an AIM
quoted manufacturer and supplier of gold conjugate and other products to the
medical diagnostics industry based in Cardiff.
Two investments were completed in June. PastaKing Holdings is a producer and
supplier of fresh pasta meals, based in Newton Abbot, Devon, which completed
its MBO with an investment of £464,047 from your Company. At the end of June £
1,000,000 was invested to support the MBO of Penzance-headquartered British
International Holdings, an operator of military and commercial helicopter
services, including the Cornwall-Scilly Isles service.
Our dealflow continues to be strong and your Investment Manager remains
confident of achieving the minimum 70% VCT compliance test by 31 December 2007.
The trading performance of the portfolio during the period has been
encouraging. All valuations are made in accordance with International Private
Equity & Venture Capital Valuation Guidelines (IPEVCV). As set out in these
guidelines, valuations of unquoted investments are usually not changed for at
least twelve months from the date of investment unless the investee company has
performed significantly behind or ahead of plan, in which case the investment
may be written down or up in value accordingly. This has caused a provision to
be taken against the equity in FH Ingredients, but your Investment Manager
believes overall that the portfolio is making good progress and should begin to
demonstrate this over the next 12 months.
Investment Portfolio Summary
as at 30 June 2006
Date of Total Book Valuation % of net
Investment cost assets by
value
£ £ £
Qualifying investments
AIM quoted investments
BBI Holdings plc May 2006 381,863 420,870 2.0%
SectorGuard plc Aug 2005 150,000 171,429 0.8%
------ ------ ------
531,863 592,299 2.8%
Unquoted investments
British International Jun 2006 1,000,000 1,000,000 4.8%
Holdings Limited
Youngman Group Limited Oct 2005 1,000,000 1,000,000 4.8%
Ministry of Cake Limited Sep 2005 1,000,000 1,000,000 4.8%
Campden Media Limited Jan 2006 975,000 975,000 4.7%
VSI Limited Apr 2006 618,053 618,053 3.0%
Blaze Signs Holdings Apr 2006 573,750 573,750 2.8%
Limited
Vectair Holdings Limited Jan 2006 560,302 560,302 2.7%
PastaKing Holdings Limited June 2006 464,047 464,047 2.2%
F H Ingredients Limited Aug 2005 212,893 167,653 0.8%
------ ------ ------
6,404,045 6,358,805 30.6%
------ ------ ------
Total qualifying 6,935,908 6,951,104 33.4%
investments
Non-qualifying investments
Money market funds1 14,052,947 14,052,947 67.4%
AIM quoted investments 219 203 0.0%
------ ----- -----
Total qualifying 14,053,166 14,053,150 67.4%
investments
===== ===== =====
Total investments 20,989,074 21,004,254 100.8%
===== ===== =====
Other assets 147,382 0.7%
Current liabilities (306,784) (1.5%)
------ ------ ------
Net assets 20,844,852 100.0%
===== ===== =====
1 Disclosed within `Investments at fair value' in the Balance Sheet
Unaudited Income Statement
(incorporating the Revenue Account of the Company for the six months ended 30
June 2006
Six months ended 30 June 2006 Nine months ended 30 June 2005
(restated)
Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £
Unrealised - 15,180 15,180 - - -
gains on
investments
held at fair
value
Cost of - (61) (61) - - -
investment
transactions
Income 517,317 - 517,317 356,802 - 356,802
Investment (61,340) (184,021) (245,361) (49,000) (146,999) (195,999)
management
fees
Other expenses (154,791) - (154,791) (211,903) - (211,903)
-------- -------- -------- -------- -------- --------
Return on 301,186 (168,902) 132,284 95,899 (146,999) (51,100)
ordinary
activities
before
taxation
Tax on (69,884) 54,248 (15,636) (22,686) 22,686 -
ordinary
activities
-------- -------- -------- -------- -------- -------
Return 231,302 (114,654) 116,648 73,213 (124,313) (51,100)
attributable
to equity
shareholders
======= ======== ======== ======== ======== ========
Return per 1.04p (0.51)p 0.53p 0.66p (1.13)p (0.47)p
share
Fifteen months ended 31
December 2005
(audited and restated)
Revenue Capital Total
£ £ £
Unrealised gains on - - -
investments at fair
value
Cost of investment - - -
transactions
Income 842,724 - 842,724
Investment (110,779) (332,337) (443,116)
management
fees
Other expenses (375,313) - (375,313)
-------- -------- --------
Return on ordinary 356,632 (332,337) 24,295
activities before
taxation
Tax on ordinary (67,692) 63,144 (4,548)
activities
-------- -------- --------
Return attributable 288,940 (269,193) 19,747
to equity
shareholders
======= ======= ========
Earnings per share 1.86p (1.73)p 0.13p
Unaudited Balance Sheet
as at 30 June 2006
As at As at As at
30 June 2006 30 June 2005 31 December
(restated) 2005
(audited and
restated)
£ £ £
Non current assets
Investments at fair value 6,951,307 212,893 2,362,893
------ ------ ------
6,951,307 212,893 2,362,893
Current assets
Debtors and prepayments 83,998 974,817 1,657,859
Investments at fair value 14,052,947 19,924,470 17,109,025
Cash at bank 63,384 9,429 19,090
-------- -------- --------
14,200,329 20,908,716 18,785,974
Creditors: amounts falling (306,784) (242,816) (265,658)
due
within one year
------ ------ ------
Net current assets 13,893,545 20,665,900 18,520,316
-------- -------- --------
Net assets 20,844,852 20,878,793 20,883,209
====== ====== ======
Capital and reserves
Called up share capital 221,438 221,438 221,438
Share premium account 20,711,686 20,711,686 20,711,686
Capital reserve - realised (399,027) (124,313) (269,193)
Capital reserve - 15,180 - -
unrealised
Revenue reserve 295,575 69,982 219,278
======== ======== ========
Shareholders' funds 20,844,852 20,878,793 20,883,209
======== ======== ========
Net asset value per share 94.1p 94.3p 94.3p
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2006
Six months Nine months Fifteen
ended ended months ended
30 June 2006
(unaudited) 30 June 2005 31 December
(restated) 2005
(audited)
£ £ £
Opening shareholders' 20,883,209 46,771 46,771
funds as restated for FRS
21
Issue of Ordinary Shares - 22,093,621 22,093,621
Expenses of issue - (1,210,499) (1,210,499)
Total recognised gains 116,648 (51,100) 19,747
and losses before
dividends
Dividends paid in period (155,005) - (66,431)
======== ======== ========
Closing Shareholders' 20,844,852 20,878,793 20,883,209
funds
Unaudited Summarised Cash Flow Statement
for the six months to 30 June 2006
Six months Nine months Fifteen
ended ended months ended
30 June 2006
(unaudited) 30 June 2005 31 December
(unaudited) 2005
(audited)
£ £ £
Operating activities
Operating activities
Investment income received 527,331 297,930 758,659
Investment management fees (246,172) (36,607) (319,543)
paid
Other cash payments (125,006) (140,417) (254,499)
-------- -------- --------
Net cash inflow from 156,153 120,906 184,617
operating activities
Investing activities
Acquisitions of investments (4,573,234) (212,893) (2,362,893)
Dividends
Interim equity dividends (155,005) - (66,431)
paid
------- ------ ------
Cash outflow before (4,572,086) (91,987) (2,244,707)
financing and liquid
resource management
Financing
Share capital raised - 21,171,454 22,131,121
Issue costs of Ordinary - (1,158,068) (1,210,497)
Shares
------ ------ ------
Financing - 20,013,386 20,920,624
Management of liquid
resources
Decrease/(increase) in 4,616,380 (19,924,470) (18,669,327)
current investments
======== ======== ========
Increase/(decrease) in cash 44,294 (3,071) 6,590
for the period
======== ======== ========
NOTES
1. The accounts have been prepared under the fair value rules of the Companies
Act 1985 and in accordance with applicable accounting standards and, to the
extent that it does not conflict with 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. With effect from 1 January 2006, the Company has adopted the following
Financial Reporting Standards (FRS):
FRS 21 (Events after the Balance Sheet Date) - Dividends paid by the Company
are accounted for in the period in which the Company is liable to pay them.
Previously, the Company accrued dividends in the period in which the net
revenue, to which those dividends related, was accounted for.
FRS 25 (Financial Instruments: Disclosure and Presentation) and FRS 26
(Financial Instruments: Measurement) - The Company has designated its
investment assets as being measured at "fair value through profit and loss".
The fair value of quoted investments is deemed to be the bid value of these
investments at the close of business on the relevant date.
Non current investments which are not quoted are stated at Directors' best
estimate of fair value, in accordance with the IPEVCV guidelines.
The corresponding amounts in the financial statements have been restated in
accordance with these new policies.
4. The revenue return per Ordinary Share is based on the net revenue on
ordinary activities after taxation of £231,302 and is based on 22,143,821
Ordinary Shares, being the weighted average number of Ordinary Shares in
issue during this period. The capital loss per Ordinary Share is based on
ordinary activities after taxation of £(114,654) and is based on 22,143,821
Ordinary Shares, being the weighted average number of Ordinary Shares in
issue during the period.
5. Net asset value per Ordinary Share is based on net assets at 30 June 2006,
and on 22,143,821 (at 30 June 2005: 22,143,821 at 31 December 2005:
22,143,821) Ordinary Shares, being the number of Ordinary Shares in issue
on that date.
6. The financial information for the six months ended 30 June 2006 has neither
been audited nor reviewed.
7. Copies of the Interim Report for the six months ended 30 June 2006 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 Secretary's web site at
www.matrixgroup.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 Limited (the Investment Manager), on 020 7925
3300 or by e-mail on info@matrixpep.co.uk
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