Interim Results - Replacement
QUESTER VCT PLC
17 September 1999
The issuer has made the following amendment to the Quester VCT Plc - Interim
Results announcement, released on 17 September 1999 at 07:30, under RNS No
6194d.
QUESTER VCT plc
INTERIM STATEMENT
FOR THE SIX MONTHS ENDED 31st JULY 1999
AMENDMENT
Further to the Interim announcement earlier today, the Company
announces that in the profit and loss account, the loss on ordinary
activities after taxation for the current period should be a loss
of £774,000 and not a loss of £744,000 as previously reported.
INTERIM STATEMENT
FOR THE SIX MONTHS ENDED 31st JULY 1999
FINANCIAL SUMMARY 6 months 6 months Year to
to 31 to 31 31
July July January
1999 1999 1999
Earnings per share as restated (pence) (2.5) 0.9 7.0
Dividend per share (pence) 5.75 1.00 2.36
Cumulative dividend per share (pence) 13.5 6.4 7.7
Net assets before dividends (£000) 33,817 33,215 34,761
Net assets after dividends (£000) 32,039 32,972 34,181
NAV* per share before dividend (pence) 109.4 109.2 111.9
NAV* per share after dividend (pence) 103.6 108.4 110.1
Mid-market price per share (pence) 90.0 90.0 89.0
* Net Asset Value
CHAIRMAN'S STATEMENT
This statement, which should be read in conjunction with the
Investment Manager's Report, covers the six months ended 31st July
1999 and is the fourth interim report since Quester VCT commenced
trading in April 1996.
Introduction
In the 1999 Annual Report, which was sent to shareholders in April,
we explained that whilst Quester VCT remained an investment company
we could only distribute income as opposed to capital profits. We
also referred to the fact that capital profits of approximately £2
million had been realised and that these profits could be available
for distribution if the Company adopted trading company, rather
than investment company, status. The original prospectus state that
it was the intention to dispense with investment company status at
such time as sufficient capital profits were realised for
distribution in the form of dividends.
Change to trading company status
The Directors believe it is now appropriate to change the status of
the Company and on 15th September 1999 resolved to revoke the
existing investment company status and become a trading company.
It is important to emphasise that a change to trading company
status makes no difference to the position of Quester VCT under the
relevant tax rules which apply to a venture capital trust nor to
the various tax reliefs and benefits which both investors and the
Company receive.
Consequences of a change to trading company status
The decision to change the legal status of Quester VCT is an
important one and was taken after taking professional advice and
careful consideration of the issues. The change of status has an
immediate short term benefit for shareholders as it enables the
Company to pay a special interim dividend out of capital profits.
However, as a consequence of this change in status, different
accounting policies apply which may lead to a pattern of uneven and
less predictable dividend payments in the future.
As an investment company, Quester VCT was able to pay dividends out
of the revenue return only. The revenue return was enhanced by
charging fifty per cent of the management fee to capital and was
unaffected by capital profits or losses. As envisaged in the
original prospectus, this status initially assisted the payment of
higher dividends, but as an increasing level of the funds raised
have been committed to venture capital investments, this is no
longer the case. Consequently the status has been reviewed and
changed, in the knowledge that this decision will result in a
dividend stream influenced largely by future capital realisations
including both gains and losses. The Directors consider that this
policy meets the original objectives of Quester VCT and will
enhance overall investment returns for investors who will receive a
return of capital profit tax free.
The effect on the accounts of the change in status
The new trading company status is reflected in the revised form of
the financial statements. The principal changes to which are
described in note 3 to the accounts.
In summary, the result of the change in status has been to increase
distributable reserves to £1,852,000, prior to payment of the
interim dividend. This increase reflects the cumulative net capital
profits realised by the Company net of provisions of £1,152,000, as
shown in note 1 to the accounts.
Investment progress and performance
In the six months ended 31st July 1999, Quester VCT completed
twelve venture capital investments at a total cost of £4,756,000,
including six in companies where we were already existing
investors. In June 1999 we successfully completed the sale of C-
Dilla, our fourth venture capital investment realisation since
Quester VCT was founded. The investment in this company which
develops and supplies encryption software and was made in October
1996 realised a gain of 3.3 times its original cost as referred to
in the Investment Manager's Report.
At 31st July 1999 there were net unrealised profits in respect of
our FTSE 350 and AIM listed stocks of £637,000 and £971,000
respectively, reflecting gains of 11.2 per cent and 24.4 per cent
respectively on their original cost. Twenty one unlisted venture
capital investments remain valued at cost.
The portfolio's performance is detailed more fully in the
Investment Manager's Report.
Profit and Loss Account
Previously, our accounts contained a Statement of Total Return. As
a trading company, this is now replaced with a standard profit and
loss account. This shows that total income from investments and
cash deposits amounted to £455,000. Of this sum £222,000 was in
respect of funds awaiting investment and held either as short dated
gilts or in the form of bank deposits. The balance comprised
£146,000 from FTSE 350 investments and £87,000 from the unlisted
and AIM portfolio of investments.
The profit and loss account for the half year shows a loss
resulting from specific provisions, totalling £827,000, against
three investments, as shown in note 1 to the accounts. This amount
forms part of the £1,152,000 provision referred to above, with the
balance being a transfer from an unrealised loss reserve for an
investment written down in a prior period. Only £180,000 of the
total profit realised on C-Dilla of £1,159,000 is included in the
profit and loss account for the six months ended 31st July 1999, as
the investment had already been revalued in a prior period and the
balance of the profit is reflected in the movement in reserves
shown in note 2 to the accounts.
The payment of the special dividend at this interim stage is based
on the cumulative achievement of Quester VCT, only some of which is
reflected in the profit and loss account for this six month period.
Dividend
As your Board's policy is to facilitate the distribution of capital
profits to shareholders, your Directors have today resolved to pay
a special interim dividend of 5.75 pence per share at a cost of
£1,777,822. The dividend will be paid on 22nd October 1999 to
shareholders on the register at the close of business on 1st
October 1999.
Whilst it is your Board's intention to distribute capital profits
to shareholders from time to time as they accrue, the actual timing
and level of future distributions will necessarily be determined by
the degree of success, or otherwise, achieved by our portfolio of
venture capital investments. It is too early to consider the level
of any final dividend payable in respect of the current year.
However, as any future dividends will be increasingly dependent
upon the level of capital gains realised and no such returns are
predicted for the remaining period to the year end, it is likely
that the amount of the final dividend will be minimal.
Future share buy-ins
In the annual report for the year ended 31st January 1999, we
referred to the Board's consideration of the conversion of the
share premium account so as to allow future share buy-ins. This
matter remains under active review.
Outlook
Your Board's decision to adopt trading company status is a
reflection of their present view of the longer term growth
potential of the venture capital investment portfolio. Whilst it is
inevitable that within a portfolio which contains a substantial
number of relatively young businesses there will be some under
performers, we believe that, overall, we have invested in sectors
and management with potential to continue to achieve good returns.
Tom Scruby
17th September 1999
Chairman
INVESTMENT MANAGER'S REPORT
Summary
New investment activity by Quester VCT during the period has
continued to be strong, with twelve investments completed.
Investments have been made in six companies new to Quester VCT and
in six companies where we already had an investment. We have made
thirty-two qualifying VCT investments to date, sold four and now
hold a portfolio of twenty-eight qualifying and two non-qualifying
investments. We will be adding further companies in the current six
month period, maintaining the spread of risk and opportunity.
Performance of the Portfolio
We have now achieved three significant realisations from the
unquoted portfolio together with one other small realisation. These
have enabled us to make the switch to ''trading company'' status
and as a result propose a £1,777,822 distribution of realised
capital profit to shareholders, as outlined in the Chairman's
Statement.
Overall, we see the portfolio moving forward positively and in line
with our expectations. In assessing the amount of profit available
for distribution, we have written down the value of three
investments, as shown in note 1 to these accounts, reflecting
inevitably uneven performance within the portfolio, including the
disappointing recent failure of Axis Genetics. Additionally,
Shalibane plc, whose shares are traded on AIM, has seen a
significant fall in its share price, which has been reflected in
the current valuation. This loss has been treated as an unrealised
loss on the balance sheet and offsets, in part, the unrealised
profits arising from the other five AIM holdings, which showed a 55
per cent increase in aggregate value at the period end, being
valued at £4,611,566 as against cost of £2,973,200.
It must also be noted that some of the companies are still at a
very early stage in seeking to realise the potential in their
business plans and achieve the sort of sales and profit performance
which will deliver future capital profits. The current portfolio
valuation still includes twenty-one out of thirty investments
valued at cost in line with our adopted BVCA valuation principles.
This underlines the, as yet, unproven nature of some of the
investments.
Andrew Holmes 17th September 1999
Managing Director
Quester Capital Management Limited
UNAUDITED FINANCIAL STATEMENTS
Profit and loss account
6 months 6 months Year
ended ended ended
31st July 31st July 31st
1999 1998 January
(as 1999
£000 restated) (as
£000 restated)
£000
Profit on realisation of 169 220 2,016
investments
Income 455 678 1,316
Investment management fee (452) (448) (892)
Other expenses (100) (87) (176)
Investments written off (827) - -
(Loss)/profit on ordinary
activities before taxation (755) 363 2,264
Tax on ordinary activities (19) (91) (133)
(Loss)/profit on ordinary
activities after taxation (774) 272 2,131
Dividend declared (1,778) (243) (580)
Retained (loss)/profit (2,552) 29 1,551
transferred to reserves
Earnings per share (2.50)p 0.90p 6.98p
Statement of total recognised gains and losses
6 months 6 months Year
ended ended ended
31st July 31st July 31st
1999 1998 January
(as 1999
£000 restated) (as
£000 restated)
£000
(Loss)/profit for the period (774) 272 2,131
Unrealised (loss)/gain on
revaluation of investments 538 228 (793)
Total recognised gains and
losses relating to the (236) 500 1,338
period
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, securities and bank deposits.
Balance sheet
Note 31st July 31st July 31st
1999 1998 January
(as 1999
£000 restated) (as
£000 restated
£000
Fixed asset investments 1 29,759 31,354 23,006
Current assets
Debtors 735 1,176 1,415
Cash at bank and in hand 3,630 1,099 10,583
4,365 2,275 11,998
Creditors: amounts falling due
within one year (307) (414) (486)
Other creditors
Declared dividend (1,778) (243) (337)
(2,085) (657) (823)
Net current assets 2,280 1,618 11,175
Net assets 32,039 32,972 34,181
Capital and reserves
Called up share capital 1,546 1,520 1,553
Share premium account 2 28,833 28,279 28,954
Revaluation reserve 2 1,586 3,199 1,682
Profit and loss account 2 74 (26) 1,992
32,039 32,972 34,181
Net asset value per share 103.6p 108.4p 110.1p
Summarised Cashflow Statements
6 months 6 months Year
ended ended ended
31st 31st July 31st
July 1998 January
1999 (as 1999
restated) (as
restated)
£000 £000 £000
Net cash inflow/(outflow) from 516 (64) 332
operating activities
Taxation (110) (92) (26)
Net capital expenditure and (6,895) (1,019) 7,539
financial investment
Equity dividends paid (337) (456) (699)
Financing (127) - 707
(Decrease)/increase in cash for the (6,953) (1,631) 7,853
period
Reconciliation of net cash flow to
movement in net funds
(Decrease)/increase in cash for the (6,953) (1,631) 7,853
period
Net funds at the start of the period 10,583 2,730 2,730
Net funds at the end of the period 3,630 1,099 10,583
Notes to the Unaudited Financial Statements
1. Fixed asset investments
Cost Valuation % of
£000 portfo
£000 lio
by
value
Venture capital investments
Acedes Gear Tools Limited 900 900 3.02
Advanced Valve Technologies 444 444 1.49
Limited
Armagard Limited 750 750 2.52
Artisan Software Tools Limited 1,040 1,040 3.50
Axis Genetics plc 250 - * - *
Cardionetics Limited 300 300 1.01
Communication & Control 375 375 1.26
Electronics Limited
Cotswold Outdoor Limited 944 944 3.17
Daisy & Tom Limited 1,153 576 * 1.94 *
Deep Sea Leisure plc1 * 200 319 1.07
Dragons Health Clubs plc* 950 1,772 5.96
Dycem Limited 650 650 2.19
Elateral Holdings Limited 613 613 2.06
First Fibre Limited 1,000 1,000 3.36
Harleyco Limited 685 685 2.30
HMV Media Group plc 430 430 1.45
HSL Holdings Limited 1,000 1,000 3.36
IMVS.com plc 750 750 2.52
International Diagnostics Group 900 900 3.02
plc
International Resources Group 403 403 1.35
Limited
JSB Software Technologies plc* 1,000 1,526 5.13
Linguaphone Group plc 250 250 0.84
Methuen Publishing Limited 781 781 2.62
Orchestream Limited 1,000 1,000 3.36
Pipeline Engineering & Supply 499 499 1.68
Co Limited
Policy Master Group plc* 198 286 0.96
Purple Technologies Limited 200 200 0.67
Shalibane plc* 1,005 337 1.13
The Wentworth Wooden Jigsaw Co 325 - * - *
Limited
XKO Group plc* 625 709 2.38
19,620 19,439 65.32
Listed fixed interest 4,222 4,200 14.11
investments
Listed equity investments 5,483 6,120 20.57
Total investments 29,325 29,759 100.00
Net current assets 2,280
Shareholders funds as at 31st 32,039
July 1999
The above table of fixed asset investments does not include the
four disposals to date. In total, realised proceeds of £5,956,000
compared to an original cost of £2,572,000 have resulted in profits
of £3,384,000 being realised by the Company. Additional profits of
£504,000 have been realised on the disposal of listed investments,
bringing the total realised capital profits to £3,888,000.
* Investments traded on AIM
** Provisions made against diminution in value
Notes to the Unaudited Financial Statements (continued)
2. Movement in reserves
Share Profit
premium Revaluati and
account on loss
£000 reserve account
£000 £000
At 1st February 1999 28,954 1,682 1,992
Share bought in (121) - -
Transfer of realised profits to - (959) 959
profit and loss account
Transfer of investment write - 325 (325)
off
Net increase in value of - 538 -
investments
Retained loss for the period - - (2,552)
At 31st July 1999 28,833 1,586 74
3. Changes in the presentation of financial statements
As a result of the Directors' decision to enable dividends
derived from capital profits to be paid to shareholders the
Company applied for its investment company status, as defined
under Section 266 of the Companies Act 1985, to be revoked on
15th September 1999.
Consequently, the financial statements have been drawn up to
include a statutory profit and loss account and a statement of
total recognised gains and losses in accordance with Schedule
4 of the Companies Act 1985 and Financial Reporting Standard 3
(Reporting Financial Performance). These statements differ
from the Statement of Total Return presented in prior periods
as follows:
(a) profit/loss on realisation of investments and permanent
diminutions in value of investments are now included in the
profit and loss account,
(b) unrealised gains and losses on investments are included in
the statement of total recognised gains and losses and may not
be distributed,
(c) all investment management fees are charged to the profit
and loss account.
The effect of the restatement has been to reduce the profit on
ordinary activities after taxation, equivalent to the revenue
return on ordinary activities after taxation under the
previous presentation, by £880,166 in respect of the current
period and £41,563 in respect of the comparative period to
31st July 1998 reflecting the net loss on realisation of
investments and investment management fees charged to the
profit and loss account.
In the balance sheet, the revenue reserve and realised capital
reserve presented in prior periods have been combined into the
profit and loss account. The revaluation reserve records
revaluation amounts previously included in the unrealised
capital reserve, except for any permanent diminutions in value
which have been passed through the profit and loss account.
Notes to the Unaudited Financial Statements (continued)
4. The financial information contained in this report has been
prepared on the basis of the accounting policies set out in the
Annual Report, as revised by note 3 above.
5. The calculation of earnings per share for the period is based
on loss after tax of £774,410 divided by the weighted average
number of shares in issue during the period of 30,990,643.
6. The unaudited financial statements set out above do not
constitute statutory accounts within the meaning of Section 240 of
the Companies Act 1985.
7. Copies of the unaudited interim results are being sent to
shareholders on 17th September 1999. Further copies can be obtained
from the Company's Registered Office.
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