Half Yearly Report

RNS Number : 4142N
Amati VCT 2 plc
28 September 2012
 

Amati VCT 2 plc

HALF-YEARLY REPORT

For the six months ended 31 July 2012

 

The Half-yearly report will also be available in electronic format for download on Amati Global Investors website www.amatiglobal.com.   

 

 

OVERVIEW

 

Corporate Objective

The objective of Amati VCT 2 plc (the "Company") is to provide shareholders with an attractive and competitive investment return from a portfolio of companies whose shares are primarily traded on the Alternative Investment Market ("AIM").   The Manager's continuing objective is to manage the current portfolio so as to maximise returns for investors for the qualifying period and beyond.

 

Key data

for the six months to 31 July 2012

 

 

31/07/12

31/07/11

31/01/12

 

(unaudited)

(unaudited)#

(audited)

Total Net Asset Value ("NAV")

£28.4m

£18.5m

£28.7m

Shares in issue

27,736,452

39,642,549

27,643,668

NAV per share

102.4p

46.7p

103.8p

Share price

103.0p

39.0p

102.0p

Market capitalisation

£28.6m

£15.5m

£28.2m

Share price premium/(discount) to NAV

0.6%

-16.5%

-1.7%

NAV Total return (assuming re-invested dividends)

2.7%

2.6%

-1.8%

FTSE AIM All-Share total return index

-11.8%

-7.7%

-18.5%

Total expense ratio*

2.7%

3.3%

2.8%

Ongoing charges**

2.7%

3.2%

2.8%

Dividends declared during the period adjusted for the share consolidation#

2.5p

2.4p

5.5p

* Total expense ratio for the six months ended 31 July 2012 and year ended 31 January 2012 are based on average monthly net assets (31 July 2011: based on net assets at period end only).

** Ongoing charges calculated in accordance with the Association of Investment Companies' ("AIC's") guidance.

# A share consolidation took place on 8 November 2011 when the net asset value per share was rebased to approximately 100p.

 

 

Table of investor returns to 31 July 2012

 

 

 

 

Date

 

NAV total return with dividends re-invested

FTSE AIM All-Share total

return

index

Re-launch as Amati VCT 2 following merger

8 November 2011*

5.80%

-7.99%

ViCTory VCT change of Manager to Amati

25 March 2010

11.00%

-4.29%

*date of the share consolidation when the NAV was re-based to approximately 100p per share

 

 

Table of historic returns to 31 July 2012 attributable to shares issued by the original VCTs which have merged to create Amati VCT 2



NAV total

FTSE AIM



NAV total

return with

All-Share



return with

dividends

total



dividends

not

return


Launch date

re-invested

re-invested

index

Singer & Friedlander AIM 3 VCT ('C' shares)

4 April 2005

-38.59%

-35.36%

-33.54%

Invesco Perpetual AiM VCT

30 July 2004

-45.66%

-39.27%

-16.39%

Singer & Friedlander AIM 3 VCT

29 January 2001

-44.00%

-39.71%

-48.44%

Singer & Friedlander AIM VCT

28 September 1998

-70.70%

-42.02%

-11.56%

Singer & Friedlander AIM 2 VCT

29 February 2000

-57.09%

-52.49%

-72.70%

 

CHAIRMAN'S STATEMENT

 

Overview

 

This is the first full set of half-year results since the merger last November, and I am pleased to report that the Company has continued to show positive progress, in spite of nervous market conditions.  The AIM market has been particularly volatile during the period. This volatility reflects the steep fall in commodity prices seen from April onwards, as well as the ongoing fluctuations of sentiment which stem from the uncertainties surrounding the future of the Euro.  It has been re-assuring to note that the volatility of the Company's portfolio has been relatively low.

 

The Fund Manager's principal work on the portfolio has been focused on the qualifying holdings.  Despite the difficult market conditions and relative dearth of companies floating on AIM, the Company has invested £2.7m in new qualifying holdings, and this has enabled a considerable repositioning of the qualifying portfolio. At the same time the Company has remained well above the required 70% level for qualifying investments.  As a result of this activity, the number of holdings in the portfolio as a whole, which increased at the time of the merger, has been falling, and now stands at 69 compared to 86 at the beginning of the period. 

 

Performance and Dividend 

 

During the six month period to 31 July 2012 the net asset value total return of the Company was 2.7%.  This compares to a fall in the FTSE AIM All-Share Total Return Index of 11.8%.  It has been encouraging to see good performances from some of the largest holdings, Lo-Q and IDOX in particular, which both rose by over 40% during the period, reflecting strong progress in these businesses. 

 

The dividend policy of the Company is to pay interim and final dividends totalling between five and six percent of year-end net asset value, subject to the availability of sufficient distributable reserves.  In line with this policy the Board is declaring an interim dividend of 2.5p per share, to be paid on 26 October 2012 to shareholders on the register on 5 October 2012. 

 

Amati Global Investors, the Company's Fund Manager, has written a detailed report on the half-year period and the market outlook, which I commend to your attention.

 

Corporate Developments

 

The Company's share offer put in place at the time of the merger has been well received, raising £6.16m in total, of which £1.08m has been raised under the offer and £5.08m has been invested under the enhanced share buy back and reinvestment facility.  The Board has been pleased that the Company received good support from existing shareholders who chose to make a further investment in the Company via the enhanced share buy back and reinvestment facility.  This has served to underpin the longer term future of the Company, and its ability to make significant new investments.

 

Outlook

 

The last two years have seen a change of investment manager, a merger and a share offer. Your Board believes that the Company has been significantly strengthened as a result of these moves and is now well positioned to perform relatively well in what are expected to be continuing difficult markets. I am grateful to shareholders for their continuing support.

 

Julian Avery

Chairman

 

27 September 2012

 

If you have any questions relating to your investment please contact the Company Secretary on 0131 2437215, or send queries to a dedicated email enquiry service at vct-enquiries@amatiglobal.com.  Amati maintains a website for the Company - www.amatiglobal.com - on which monthly investment updates, performance information, and past company reports can be found. 

 

 

FUND MANAGER'S REVIEW

Market Review

The Eurozone sovereign debt crisis dominated the news during the six month period from February to July 2012.  Equity markets started the period strongly on expectations of further ECB liquidity injections and an orderly resolution to the Greek crisis.  Momentum continued into March, aided by improved sentiment in the US and China, however, by April the market was pausing for breath.  An inconclusive Greek election and the re-surfacing of a banking crisis in Spain sent equity markets sharply lower in May, with particular pain felt by investors in natural resources stocks.  By June a way out seemed plausible as Eurozone leaders agreed to recapitalise struggling banks directly.  This action created a recognition that the sell-off in May had created buying opportunities, which sent equities higher in June and July, albeit on small volumes.  However, the Eurozone crisis is still very much ongoing, and remains a continuing source of uncertainty.  Asset allocation decisions in this environment are extremely difficult.

 

Performance

 

The portfolio ended the period up 2.7%, outperforming the FTSE AIM All-Share Total Return Index, which fell 11.8%.  This outperformance of the portfolio can be attributed in part to the underweight position in basic resources and oil and gas stocks, which are largely excluded as qualifying investments under the VCT legislation. 

 

The biggest positive contributor to performance in the period was Lo-Q.  Lo-Q, which develops technologies used by theme park visitors to avoid standing in queues, continues to produce positive revenue and earnings growth, driven by contract wins and implementations.  Lo-Q's sustained success demonstrates that its proposition to enhance the customer's experience continues to be in demand despite the low-growth consumer environment.  An extension of the company's core contract with Six Flags provides a base for further expansion internationally and into new products, such as a waterproof wrist band device that has opened up the water park market.  The share price appreciation has put the company on the radar of a larger investment audience, which created a virtuous cycle of liquidity and share price momentum.   The other standout performer was IDOX.  The company reported a steady stream of contract wins as well as two bolt-on acquisitions.  IDOX's acquisition of McLaren Software in 2010 has proved particularly judicious as it has diversified the business away from its previous reliance on the public sector, and opened up the lucrative North American market for engineering enterprise management software.  Other significant contributors to performance were GB Group, a qualifying holding added towards the end of 2011 through a placing to acquire a customer registration and address management software business; Fulcrum Utility Services, the gas connection services business; and Sabien Technology Group, the designer and manufacturer of M2G, a boiler energy efficiency technology. 

 

The most significant detractor from performance over the period was Futura Medical, which gave back most of the gains made since it was added to the portfolio in a placing in March 2011.  The market was frustrated by an apparent lack of urgency by Reckitt Benckiser, Futura's major licensee, in taking CSD500, one of its lead products, to market.  Since the period end Futura has announced that the licensing arrangement with Reckitt Benckiser has been terminated, and they are in discussion with other partners.  Software Radio Technology (SRT) also performed poorly following year end results that were significantly below expectations.  Whilst the company appears to have the leading maritime identification and tracking technology, and its markets are gradually making such systems mandatory, the sales visibility is poor, which makes forecasting difficult and revenues lumpy.  Despite this setback, we remain convinced that SRT is well placed to capitalise as its markets continue to regulate.  Hargreaves Services, the coal mining and services business, was surprised by a geological issue encountered at one of its mines.  The issue had never been encountered in the 100 year history of the mine but will have a material impact on current year earnings.  Despite this major setback at Maltby, we think that the other businesses in Hargreaves remain in good shape, and continue to view this as a high quality, undervalued holding.  Other notable detractors over the period were Green Compliance, which missed forecasts and saw its balance sheet come under pressure; and Anglo Pacific Group, which suffered from the negative sentiment in the second quarter towards resources. 

 

Shortly after the period end, we decided to write-down the value of the VCT's convertible loan to Music Festivals plc.  Unfortunately the management team were too bullish on prospects for attendances this year, and in August, the company reported that ticket sales at its two main festivals were materially below expectations.  Unfortunately the company was unable to absorb the large and unexpected losses which have resulted.  The company was recently put into administration, and we believe we should be able to obtain some value for our loan notes through this process.  In the meantime the loan has been written-down by 75%.

 

Portfolio Activity

 

The merger with the former Invesco Perpetual AiM VCT ("AVCT2"), which concluded in November 2011, created a lengthy list of holdings, despite some commonality between the portfolios in the two original VCTs.  By the end of the period under review the number of investee companies had been reduced from 86 to 69.  As always, selling qualifying holdings can be a lengthy process due to liquidity constraints and the requirement to replace such stocks to maintain the required level of qualifying investments. We also exited holdings in the non-qualifying portfolios as we sought to raise cash, both to position the overall portfolio more defensively, and to fund new qualifying deals we were working on.

 

Qualifying Portfolio

 

The most significant addition to the qualifying portfolio over the period was EcoData Group, a pre-IPO opportunity.  It is unusual for us to add a private company to the portfolio unless we can see credible evidence that the company is suitable for an AIM flotation in a reasonable time frame, and the opportunity offers the possibility of substantial upside potential within this time period.  We believe that EcoData meets both of these criteria.  EcoData is an Italian-based company which has an exclusive agreement to remove all expired prescription drugs from pharmacies, hospitals and wholesalers in Italy.  It is a highly regulated industry with significant barriers to entry and EcoData is the only company in Europe to comply fully with EU directives on the secure disposal of pharmaceutical products. We made an initial equity investment in April and followed this with a larger convertible loan in July.  The company is planning for an AIM flotation to enable it to expand its business into other European countries, including the UK.  We also added to our investment in Deltex Medical Group, makers of oesophageal Doppler monitors (ODM), as it raised further working capital. We are increasingly optimistic that the mechanisms are in place now for a wider-scale adoption of this technology within the NHS, including financial penalties for non-adoption.  We invested in Belvoir Lettings, a residential lettings franchisor, which was one of very few successful new AIM flotations during the period.  The lettings market is very strong due to a difficult housing market for first time buyers, and Belvoir offers an attractive model to franchisees.  We participated in two smaller placings: Judges Scientific, which designs and sells scientific instrumentation; and Universe Group, which provides software and services to petrol forecourts. 

 

The new qualifying additions provided scope to make further sales of existing holdings that do not meet our investment criteria.  We sold the portfolio's position in Green Compliance due to concerns over the sustainability of its debt levels.  We exited EKF Diagnostics Holdings and Omega Diagnostics Group, both specialists in the field of in-vitro diagnostics; and PROACTIS Holdings, a spend control software provider.  We also sold several sub-scale holdings such as GETECH Group and Hasgrove.  We took some profits in Lo-Q for portfolio management reasons rather than any concerns over the business which, as indicated above, continues to impress.

 

 

Non-Qualifying Portfolio

 

Buying in the non-qualifying portfolio was restricted to some small additions to existing holdings, principally Asian Citrus Holdings, which continued to come under pressure as negative sentiment towards China continued.  Against this background, Asian Citrus delivered solid earnings and we view the company as materially undervalued, hence our decision to add to this holding.

 

We raised cash and reduced risk by selling Waterlogic, the drinking water dispenser business; RPC Group, the European packaging specialist; and Skywest Airlines, the Australian Airline operator.  We also reduced Anglo Pacific Group, the mining royalties company; and XP Power, the designer and manufacturer of power solutions.  Our non-qualifying portfolio realisations were driven more by macro uncertainty than concerns over company fundamentals. 

 

Outlook

It seems too optimistic to suppose that Draghi's announcement of interest rate caps for government bonds in the Eurozone will be the end of the battle to save the Euro, but it may well be the beginning of the end, and in this sense there is an increased level of optimism in the air.  There is an excess of liquidity held by savers who have been deferring investment decisions, and this is equally true of the corporate sector.  Meanwhile low risk asset classes have become exceptionally low yielding.  If the investment climate does relax then there is the prospect of a much better period ahead for equities as investors seek out higher returns.  However, as always in distressed economic conditions, it is difficult to know when to feel confident about this happening, and there are still many pitfalls ahead.  

 

Dr Paul Jourdan and Douglas Lawson

Amati Global Investors

27 September 2012

  

 

INVESTMENT PORTFOLIO

as at 31 July 2012

 

 

 

 

 

Number

of

 

 

 

 

 

Book cost+

 

 

 

 

 

Valuation

 

 

 

 

 

Fund

 

 

 

 

% of

shares

Original AVCT2 book cost at 8 November 2011‡

FTSE Sector

shares

£

£

%

in issue

£








Egdon Resources plc†@

1,650,060

206,410

123,755

0.4

1.3

-

MyCelx Technologies Corporation*@

234,190

511,837

538,637

1.9

1.8

210,399

Oil & Gas


718,247

662,392

2.3


210,399








Altona Energy plc@

646,820

35,575

19,405

0.1

0.1

58,214

Anglo Pacific Group plc@

162,915

464,461

368,595

1.3

0.1

212,937

Oxford Catalysts Group plc*

143,678

71,839

99,138

0.3

0.2

250,000

Basic materials


571,875

487,138

1.7


521,151








Bglobal plc*@

1,134,117

290,664

87,894

0.3

1.1

174,800

Cohort plc*

290,667

247,067

334,267

1.2

0.7

383,298

Corac Group plc†@

1,801,398

244,990

121,594

0.4

0.6

-

EcoData Group plc*#@

1,032,711

309,813

309,813

1.1

1.2

-

EcoData Group plc 8% Convertible Unsecured Loan Note*#@

953,272

953,272

953,272

3.4

23.8**

-

Hargreaves Services plc@

53,973

430,394

386,987

1.4

0.2

175,103

Judges Scientific plc*@

44,069

264,414

328,314

1.3

0.9

-

Manroy plc*@

331,636

302,319

225,513

0.8

1.8

134,423

Microsaic Systems plc†@

863,828

288,486

345,531

1.2

2.0

-

RTC Group plc*

537,500

220,375

32,250

0.1

4.0

-

Sabien Technology Group plc†@

1,670,832

397,965

551,375

1.9

5.3

415,895

SKIL Ports & Logistics Limited@

106,000

252,914

112,360

0.4

0.2

-

Sportsweb.com*#

58,688

352,128

316,915

1.1

11.4

-

Staffline Group plc*

150,500

326,585

337,120

1.2

0.7

120,000

Synectics plc*

136,588

341,381

382,446

1.3

0.8

-

Vianet Group plc*@

256,098

230,488

266,342

0.9

0.9

-

Zytronic plc†

215,226

611,272

634,917

2.2

1.4

-

Industrials


6,064,527

5,726,910

20.2


1,403,519








Asian Citrus Holdings Limited@

2,730,000

1,201,053

805,350

2.8

0.2

489,773

China Food Company plc 10% Convertible Loan Note#@

624

624,000

625,963

2.2

18.4**

-

Devro plc@

95,342

297,830

277,445

1.0

0.1

-

New Britain Palm Oil Limited@

47,600

327,383

398,650

1.4

0.0

188,135

Sorbic International plc@

215,485

23,703

18,855

0.1

0.5

-

Sorbic International plc 10% Convertible Loan Stock#@

276

276,000

273,638

0.9

6.8**

-

Consumer goods


2,749,969

2,399,901

8.4


677,908








Allergy Therapeutics plc*

265,455

28,536

19,909

0.1

0.1

194,097

Anpario plc*@

590,065

519,257

560,562

2.0

3.0

550,005

Deltex Medical Group plc*@

2,300,000

615,500

575,000

2.0

1.5

-

Futura Medical plc*@

775,222

505,775

527,151

1.9

1.1

150,000

Inditherm plc*

2,500,000

68,750

100,000

0.3

4.9

250,000

Sinclair IS Pharma plc†@

1,429,471

425,678

389,531

1.4

0.4

-

Synergy Health plc*@

94,000

142,567

847,880

3.0

0.2

-

Tristel plc*@

1,197,726

598,783

407,227

1.4

3.0

197,992

Health care


2,904,846

3,427,260

12.1


1,342,094








BrainJuicer Group plc*

175,000

516,250

563,500

2.0

1.4

189,000

Cello Group plc*

225,000

257,625

76,500

0.3

0.3

-

Conexion Media Group plc*

1,080,883

183,750

1,081

-

1.4

-

Cupid plc†@

292,167

590,177

576,299

2.0

0.4

176,106

Dods Group plc*

2,000,000

595,868

105,000

0.4

0.9

-

Ebiquity plc*

345,500

729,005

307,495

1.1

0.6

-

Entertainment One Limited@

37,714

25,319

59,211

0.3

0.0

-

Expansys plc*@

775,000

449,500

8,913

-

0.1

-

Fuse8 plc*

20,999

209,990

-

-

0.2

-

Lilestone Holdings Limited*#

1,616,786

1,238,655

-

-

4.2

-

Music Festivals plc*@

59,527

38,693

6,548

-

0.4

-

Music Festivals plc 8% Convertible Loan Note 2016*#@

340,000

340,000

85,000

0.3

11.3**

-

Ovidia Investments#

134,307

518,312

-

-

0.4

-

Prezzo plc†

1,342,500

151,327

912,900

3.2

0.6

-

Tasty plc*

779,688

540,376

491,203

1.7

1.6

-

TLA Worldwide plc†@

2,877,000

575,482

661,710

2.3

4.5

-

UBC Media Group plc*

2,296,384

614,268

41,335

0.1

1.2

-

Consumer services


7,574,597

3,896,695

13.7


365,106








Antenova Limited*#

2,181,435

-

-

-

3.0

525,000

Antenova Limited A Preference*#

1,275,166

100,117

100,117

0.5

3.1

100,117

Telecommunications


100,117

100,117

0.5


625,117








OPG Power Ventures plc@

199,749

185,767

80,898

0.3

0.1

-

Utilities


185,767

80,898

0.3


-








Belvoir Lettings plc*@

576,000

432,000

460,800

1.6

2.8

-

Brooks Macdonald Group plc†@

90,100

1,153,280

1,112,735

3.9

0.8

127,382

Brookwell Limited Redeemable Preference

331,591

254,154

139,268

0.5

3.8

258,122

Fulcrum Utility Services Limited†@

5,167,557

620,193

981,836

3.5

3.3

-

London Capital Group Holdings plc@

654,836

565,445

392,902

1.4

1.2

200,849

Paragon Entertainment Limited†@

6,851,000

274,091

530,952

1.8

4.2

-

Financials


3,299,163

3,618,493

12.7


586,353








Camaxys#

1,592,656

254,825

-

-

8.8

-

Celoxica Holdings plc*#

771,250

-

-

-

0.3

198,125

FFastFill plc*@

2,600,000

260,000

351,000

1.2

0.5

182,000

GB Group plc*@

538,323

221,925

452,191

1.6

0.5

87,945

IDOX plc†@

3,610,951

271,560

1,408,271

5.0

1.0

-

Lo-Q plc*

499,400

499,400

1,623,050

5.7

2.9

-

Netcall plc*

961,562

173,081

240,391

0.8

0.8

267,857

Software Radio Technology plc*@

1,900,000

579,500

389,500

1.4

1.6

712,568

Tikit Group plc*

218,000

250,700

697,600

2.5

1.5

-

Ubisense Group plc*@

325,577

563,203

660,921

2.3

1.5

150,385

Universe Group plc*@

12,495,970

287,407

287,407

1.0

 6.7 

-

Technology


3,361,601

6,110,331

21.5


1,598,880








Total investments


27,530,709

26,510,135

93.4


7,330,527

Net current assets



1,880,355

6.6



Net assets


27,530,709

28,390,490

100.0



* Qualifying holdings.

† Part qualifying holdings.

# Unquoted holdings.

@ These investments are also held by other funds managed by Amati.

**These figures represent percentage of loan stock held.

+This column shows the book cost to the Company, either as a result of market trades and events, or asset acquisition.

‡This column shows the book cost of the AVCT2 investments which formed part of the asset acquisition.  These investments were transferred into the Company at fair value on the date of the asset acquisition.  The total book cost at 8 November 2011 per the table above does not agree to the total book cost of AVCT2 investments at 8 November 2011 due to sales since this date.

All holdings are in ordinary shares unless otherwise stated.

As at the period end, the percentage of the Company's portfolio held in qualifying holdings for the purposes of Section 274 of the Income and Corporation Taxes Act 2007 is 88.1%.

 

TEN LARGEST HOLDINGS

as at 31 July 2012

 

       


Valuation

Fund

Company

Sector

£

%

Lo-Q plc

Technology

1,623,050

5.7

IDOX plc

Technology

1,408,271

5.0

EcoData Group plc

Industrials

1,263,085

4.5

Brooks Macdonald Group plc

Financials

1,112,735

3.9

Fulcrum Utility Services Limited

Financials

981,836

3.5

Prezzo plc

Consumer Services

912,900

3.2

Synergy Health plc

Health care

847,880

3.0

Asian Citrus Holdings Limited

Consumer Goods

805,350

2.8

Tikit Group plc

Technology

697,600

2.5

TLA Worldwide plc

Consumer Services

661,710

2.3

Representing approximately 36.4% of shareholders' funds.


 

 

SECTOR ALLOCATION

as at 31 July 2012

 

FTSE Sector                 

Fund %

Technology

21.5

Industrials

20.2

Consumer services

13.7

Financials

12.7

Health care

12.1

Consumer goods

8.4

Oil & Gas

2.3

Basic materials

1.7

Telecommunications

0.5

Utilities

0.3

Net current assets

6.6


100.0

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The Company's assets consist of equity and fixed interest investments and cash.  Its principal risks include market risk, interest rate risk, credit risk and liquidity risk.  Other risks faced by the Company include economic, investment and strategic, regulatory, reputational, operational and financial risks as well as the potential for loss of approval as a VCT.  These risks, and the way in which they are managed, are described in more detail in Notes 24 to 27 to the Financial Statements in the Company's Report and Financial Statements for the year ended 31 January 2012.  The Company's principal risks and uncertainties have not changed materially since the date of that report.

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

in respect of the half-yearly financial report

 

We confirm that to the best of our knowledge:

·     the condensed set of financial statements has been prepared in accordance with the Statement "Half-yearly financial reports" issued by the UK Accounting Standards Board;

·     the Chairman's Statement and Fund Manager's Review (constituting the interim management report) includes a true and fair review of the information required by DTR4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;

·     the Statement of Principal Risks and Uncertainties on page • is a fair review of the information required by DTR4.2.7R, being a description of the principal risks and uncertainties for the remaining six months of the year; and

·     the financial statements include a fair review of the information required by DTR4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

For and on behalf of the Board

 

Julian Avery

Chairman

27 September 2012

 

 


INCOME STATEMENT

for the six months ended 31 July 2012


Six months ended

Six months ended

Year ended



31 July 2012

31 July 2011

31 January 2012



(unaudited)

(unaudited)

(audited)



Revenue

Capital

 Total

Revenue

Capital

 Total

Revenue

Capital

Total


Note

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Return/(loss) on investments


-

513

513

-

156

156

-

(34)

(34)

Income

6

222

-

222

124

-

124

305

-

305

Investment management fee


(64)

(196)

(260)

(42)

(125)

(167)

(90)

(271)

(361)

Other expenses


(141)

-

(141)

(138)

-

(138)

(225)

-

(225)

Merger costs


-

-

-

-

-

-

(88)

-

(88)

Profit/(loss) on ordinary activities before taxation


17

317

334

(56)

31

(25)

(98)

(305)

(403)

Taxation on ordinary activities

8

(1)

-

(1)

-

-

-

-

-

-

Profit/(loss) on ordinary activities after taxation


16

317

333

(56)

31

(25)

(98)

(305)

(403)

Basic and diluted return/(loss) per Ordinary share

4

0.06p

1.14p

1.20p

(0.13)p

0.07p

(0.06)p

(0.26)p

(0.80)p

(1.06)p

The total column is the profit and loss account of the Company, with the revenue and capital columns representing supplementary information under the Statement of Recommended Practice, "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") revised in January 2009.

All the items above derive from continuing operations of the Company.  This includes the return on the assets acquired from AVCT2 (formerly Invesco Perpetual AiM VCT plc).  There were no other recognised gains or losses in the period.

The only difference between the reported return on ordinary activities before tax and the historical profit is due to the fair value movement on investments. As a result a note on historical cost profit and losses has not been prepared.

The accompanying notes are an integral part of the statement.

 

 

 


RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

for the six months ended 31 July 2012

 

 


Six months

Six months

Year

 


ended

ended

ended

 


31 July 2012

31 July 2011

31 January 2012

 


(unaudited)

(unaudited)

(audited)

 

Note

£'000

£'000

£'000

Opening shareholders' funds


28,680

20,692

20,692

Profit/(loss) for the period


333

(25)

(403)

Increase in share capital in issue


2,256

-

3,869

Shares issued in connection with merger


-

-

11,423

Share buy backs


(1,933)

(1,359)

(5,434)

Other costs charged to capital


(76)

-

(278)

Dividends paid

7

(870)

(795)

(1,189)

Closing shareholders' funds


28,390

18,513

28,680

The accompanying notes are an integral part of the statement.              

               

CONDENSED BALANCE SHEET

as at 31 July 2012


31 July

31 July

31 January



2012

2011

2012



(unaudited)

(unaudited)

(audited)


Note

£'000

£'000

 £'000

Fixed assets





Investments held at fair value


26,510

17,818

27,601






Current assets





Debtors


143

310

111

Cash at bank


2,293

719

1,332

Total current assets


2,436

1,029

1,443






Current liabilities





Creditors: amounts falling due within one year


(556)

(334)

(364)

Net current assets


1,880

695

1,079

Total assets less current liabilities          


28,390

18,513

28,680






Capital and reserves





Called up share capital

9

1,386

1,982

1,382

Share premium account

9

2,533

2,955

452

Reserves

9

24,471

13,576

26,846

Equity shareholders' funds


28,390

18,513

28,680

Net asset value per share

5

102.36p

46.70p

103.75p

The accompanying notes are an integral part of the balance sheet.

 


CASH FLOW STATEMENT

for the six months ended 31 July 2012


Six months

Six months

Year


ended

ended

ended


31 July

31 July

31 January


2012

2011

2012


(unaudited)

(unaudited)

(audited)


Note

£'000

£'000

£'000






189

116

267


5

-

-


(257)

(172)

(325)


(120)

(153)

(294)


(5)

-

(83)

10

(188)

(209)

(435)





 

 

 

 

 

(1)

-

-










(3,067)

(2,140)

(3,953)


4,965

3,857

7,114


1,898

1,717

3,161










(870)

(795)

(1,189)


839

713

1,537










-

-

245


(6)

-

(113)


2,192

-

3,755


(10)

-

(121)


(2,054)

(243)

(4,210)


-

-

(10)


122

(243)

(454)

Increase in cash


961

470

1,083










1,332

249

249


2,293

719

1,332

Increase in cash during the period


961

470

1,083

The accompanying notes are an integral part of the statement.

 


NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 31 July 2012

 

1.         The unaudited half-yearly financial results cover the six months ended 31 July 2012 and have been prepared in accordance with applicable accounting standards and adopting the accounting policies set out in the statutory accounts for the year ended 31 January 2012 and in accordance with the SORP.

 

2.         The financial information set out in this report has not been audited and does not comprise full financial statements within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 January 2012, which were unqualified, have been lodged with the Registrar of Companies.  No statutory accounts in respect of any period after 31 January 2012 have been reported on by the Company's auditors or delivered to the Registrar of Companies.

 

3.         Copies of the half-yearly report are being sent to all shareholders.  Further copies are available free of charge from The City Partnership (UK) Limited, secretary to the Company by telephoning 0131 243 7215 or email vct-enquiries@amatiglobal.com.

 

4.         The return/(loss) per share is based on the profit attributable to shareholders for the six months ended 31 July 2012 of £333,000 (six months ended 31 July 2011: loss of £25,000, year ended 31 January 2012: loss of £403,000) and the weighted average number of shares in issue during the period of 27,733,278 (31 July 2011: 41,736,513, 31 January 2012: 37,951,414).  There is no dilutive effect on the return per share for the outstanding convertible securities (as explained in note 11) and there is therefore considered to be no difference between basic and diluted return per share. 

 

5.         The net asset value per share at 31 July 2012 is based on net assets of £28,390,000 (31 July 2011: £18,513,000, 31 January 2012: £28,680,000) and the number of shares in issue of 27,736,452 (31 July 2011: 39,642,549, 31 January 2012: 27,643,668).  There is no dilutive effect on the net asset value per share for the outstanding convertible securities (as explained in note 11) and there is therefore considered to be no difference between basic and diluted net asset value per share. 

 

 

6.         Income

Six months ended

Six months ended

Year ended


31 July 2012

31 July 2011

31 January 2012


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000

Income:




Dividends from UK companies

147

82

172

Dividends from overseas companies

21

2

35

UK loan stock interest

54

40

93

Other interest

-

-

5


222

124

305

 

7.         Dividends paid

 

 

Six months

Six months

Year

 

ended

ended

ended

 

31 July 2012

31 July 2011

31 January 2012

 

(unaudited)

(unaudited)

(audited)

 

£'000

£'000

£'000





Final dividend for the year ended 31 January 2012 of 3.13p per ordinary share paid on 17 July 2012

870

-

-

Interim dividend for the year ended 31 January 2012 of 1.0p per ordinary share paid on 18 October 2011

-

-

394

Final dividend for the year ended 31 January 2011 of 2.0p per ordinary share paid on 26 July 2011

-

795

795


870

795

1,189

 

8.         The effective rate of tax for the six months ended 31 July 2012 is 0% (31 July 2011: 0%, 31 January 2012: 0%).


 

9.         Unaudited reserves





Capital



Total


Share

Share

Merger

Special

redemption

Capital

Revenue

capital &


capital*

premium*

reserve*

reserve

reserve*

reserve

reserve

reserves


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Opening balance as at 1 February 2012

1,382

452

2,439

30,558

31

(6,084)

(98)

28,680

Shares issued

99

2,157

-

-

-

-

-

2,256

Share issue expenses

-

(76)

-

-

-

-

-

(76)

Transfer of merger investment disposals

-

-

(63)

-

-

63

-

-

Profit for the period

-

-

-

-

-

317

16

333

Share buybacks during the period

(95)

-

-

(1,933)

95

-

-

(1,933)

Dividends paid

-

-

-

(870)

-

-

-

(870)

Closing balance as at 31 July 2012

1,386

2,533

2,376

27,755

126

(5,704)

(82)

28,390

 

*These reserves are not distributable.

 

The realised and unrealised capital reserve have been amalgamated under the revised SORP, as there is no requirement to show realised and unrealised separately. 

 

At 31 July 2012, the capital reserve constitutes realised losses of £4,683,000 (31 July 2011: £4,738,000, 31 January 2012: £7,325,000) and investment holding losses of £1,021,000 (31 July 2011: £1,589,000, 31 January 2012: gains of £1,241,000). 

 

Distributable reserves comprise the special reserve, the revenue reserve and the capital reserve excluding investment holding gains. At 31 July 2012, the amount of reserves deemed distributable is £21,969,000 (31 July 2011: £9,804,000, 31 January 2012: £23,135,000), a net movement in the period of £1,166,000. The net movement is comprised of the profit on ordinary activities in the income statement of £333,000 plus the movement in investment holding gains of £1,241,000 and the transfer of investment losses to the merger reserve of £63,000, less the dividend paid of £870,000 and the share buybacks of £1,933,000. 


10.        Reconciliation of profit/(loss) on ordinary activities before taxation to net cash outflow from operating activities

Six months

Six months

Year


ended

ended

ended


31 July 2012

31 July 2011

31 January 2012


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000

Profit/(loss) on ordinary activities before taxation

334

(25)

(403)

Net (gain)/loss on investments

(513)

(156)

34

(Decrease)/increase in creditors

(12)

(13)

47

Decrease/(increase) in debtors

3

(15)

(80)

Written off expenses from merger

-

-

(33)

Net cash outflow from operating activities

(188)

(209)

(435)

 

11.        Singer & Friedlander's option

In accordance with the arrangements agreed on the merger on 22 February 2006 of the Company with Singer & Friedlander AIM VCT and Singer & Friedlander AIM2 VCT, Singer & Friedlander Investment Management Limited were granted an option which provides that if by the date of payment of the final dividend in respect of the ordinary shares for the Company's accounting year ending 31 January 2013 cumulative dividends declared and paid on each ordinary share (by reference to a record date after the merger) exceed a return of 8% (compounded annually) of the net asset value per ordinary share Singer & Friedlander Investment Management Limited will be entitled to subscribe at par for such number of additional ordinary shares as shall in aggregate be equal to 15% of ordinary shares in the Company as enlarged by such subscriptions.  If the target dividend rate 2013 will have been achieved by the payment of dividends in 2014 and 2015 Singer & Friedlander Investment Management Limited will be entitled to subscribe for such number of additional ordinary shares as shall in aggregate be equal to 12.5% (2014) and 10% (2015) of ordinary shares in the Company as enlarged by such subscriptions.

 

This right is a share based payment under FRS20. 

 

The value of dividends paid since the merger is 25.64p, on an adjusted basis to take into account the share consolidation in November 2011.  In order to exceed the targeted return which triggers Singer & Friedlander Investment Management Limited's entitlement to subscribe for additional shares, a further 65.38p of dividends would require payment by 31 January 2013.  Regardless of performance over this period, the Directors would not sanction this level of dividend within this period and thus do not foresee any circumstances under which the option would crystalise.  The option is therefore valued at nil (31 July 2011: nil, 31 January 2012: nil).

 

12.        Related Parties

The Company holds 90,100 shares in Brooks Macdonald Group plc of which Christopher Macdonald is chief executive.  There shares were acquired as part of the asset acquisition of the company formerly known as AVCT2 and have a cost of £1,153,000 and a valuation of £1,113,000.  Christopher Macdonald holds 808,103 shares in Brooks Macdonald Group plc in his own name.

 

SHAREHOLDER INFORMATION

Share price

The Company's shares are listed on the London Stock Exchange.  The mid-price of the Company's shares is given daily in the Financial Times in the Investment Companies section of the London Share Service.

 

Net asset value per share

The Company's net asset value per share as at 31 July 2012 was 103.2p.  The Company normally announces its net asset value on a weekly basis.

 

Financial calendar

 

September 2012            Half-yearly report for the six months to 31 July 2012 published

 

November 2012             Interim management statement released

 

31 January 2013            Year end

 

May 2013                     Announcement of final results for the year ended 31 January 2013

 

June 2013                     Annual General Meeting

 

 

CORPORATE INFORMATION

 

Directors

Registrar

Julian Ralph Avery

The City Partnership (UK) Limited

Mike Sedley Killingley

c/o Share Registrars

Christopher Anthony James Macdonald

Suite E, First Floor

Christopher John Leon Moorsom

9 Lion and Lamb Yard


Farnham

all of:

Surrey

27/28 Eastcastle Street

GU9 7LL

London


W1W 8DH

Auditor


PKF (UK) LLP

Secretary

Farringdon Place

The City Partnership (UK) Limited

20 Farringdon Road

Thistle House

London

21 Thistle Street

EC1M 3AP

Edinburgh 


EH2 1DF

Solicitors

Telephone: 01312437215

Howard Kennedy

Email: vct-enquiries@amatiglobal.com

19 Cavendish Square


London

Fund Manager

W1A 2AW

Amati Global Investors Limited


18 Charlotte Square

Bankers

Edinburgh

The Bank of New York Mellon SA/NV

EH2 4DF

London Branch


160 Queen Victoria Street

VCT Tax Adviser

London

PricewaterhouseCoopers LLP

EC4V 4LA

1 Embankment Place


London 


WC2N 6RH




 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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