Interim Results
Close Brothers Aim Vct PLC
16 October 2003
CLOSE BROTHERS AIM VCT PLC ('the Company')
Interim results for the six months ended 31 August 2003
16 October 2003
Financial Highlights
Ordinary Shares 'C' Shares
Six months to Six months to
31 August 2003 31 August 2003
Total return per share 26.3p 14.7p
Net dividends per share - -
Net asset value per share 83.1p 85.1p
Net assets £8.28m £16.98m
Shareholder value since launch
Ordinary Shares 'C' Shares
Gross dividends for the period to 28 February
1999 3.75p -
Net dividends for the year to 29 February 2000 12.25p -
Net dividends for the year to 28 February 2001 32.25p 1.25p
Net dividends for the year to 28 February 2002 4.00p 2.00p
Net dividends for the year to 28 February 2003 0.50p 1.00p
Net interim dividend to 31 August 2003 - -
------ ------
Total Dividends 52.75p 4.25p
Net asset value at 31 August 2003 83.12p 85.14p
------ ------
Total shareholder value 135.87p 89.39p
======== =======
i) Dividends paid before 5 April 1999 were paid inclusive of the tax credit
ii) The above table excludes the tax benefits investors received upon
subscription.
Michael Reeve, Chairman, commented: 'Happily, the six month period I am now
reporting on has seen a dramatic shift in market sentiment to the extent that it
is now focusing on good rather than bad economic news, buoyed by an increase in
liquidity as equities have returned to favour. Against this background many
share prices have recovered, and this has been reflected in the movement in both
the 'Ordinary' and 'C' share asset values as well as in the AIM Index.'
For further information, please contact:
Andrew Buchanan Justin Griffiths
Close Investment Limited Tavistock Communications
Tel: 020 7426 4000 Tel: 020 7920 3150
Notes to Editors:
1) The Close AIM VCT is managed by Close Investment Limited and administered
by Close Venture Management.
2) Close Investment Limited and Close Venture Management are subsidiaries of
Close Brothers Group plc and are regulated by the FSA.
3) The financial information set out in the announcement does not constitute
the Company's statutory accounts for the six months ended 31 August
2003 or 2002. The financial information for the year ended 31 December
2002 is derived from the statutory accounts delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was
unqualified and did not contain a statement under s237 (2) or (3) of the
Companies Act 1985.
Chairman's Statement
In my statement accompanying last year's Report and Accounts I said that many of
the companies in the portfolio had made good progress although this was not
reflected in share prices at the end of February, when attention was on war in
Iraq and the market was driven by fear. Happily, the six month period I am now
reporting on has seen a dramatic shift in market sentiment to the extent that it
is now focusing on good rather than bad economic news, buoyed by an increase in
liquidity as equities have returned to favour. Against this background many
share prices have recovered, and this has been reflected in the movement in both
the 'Ordinary' and 'C' share asset values as well as in the AIM Index. It is
worth noting that the 'C' share portfolio fell less than the AIM Index on the
way down, and so had a more muted rise in this period due mainly to the higher
percentage of cash that it holds. In the six month period the net asset value of
the Ordinary and 'C' share portfolios increased by 46.5% and 20.7% respectively
(35% if an adjustment is made for the cash element in the portfolio), whereas
the AIM Index increased by 28%. These increases in net asset value go most of
the way to make up for the decline of 34.8% for the Ordinary share portfolio and
18.5% of the 'C' share portfolio in the whole of the year ended 28th February
2003.
The recovery in share prices started with the more established and profitable
companies, especially those with substantial yields, which is another reason why
the ordinary portfolio with its more mature investments fared particularly well.
Although all classes of smaller companies outperformed the FTSE 100 Index in the
period, AIM still lagged the Mid 250 and the FTSE Smaller Company Indices. The
reason for this is that it takes longer for interest to filter down to the very
small companies which tend to populate AIM. The 'C' share portfolio will only
really benefit from the new environment as its investments mature and reach
profitability, the market is still some way off the heady environment of three
years ago when it was prepared to price in success very early in the evolution
of an unprofitable company.
Thus, our main preoccupation remains the individual progress being made by the
companies in the portfolios. This has been another good six months, with several
companies either nearing or already demonstrating profitability. Pilat Media, a
holding in both portfolios, has seen its shares more than double on expectations
of profits for the year as a whole and the news of several significant orders
for broadcasting software from international television stations. Transport
Systems, a holding in the ordinary portfolio has responded well to new
management and has successfully raised money to develop its traffic light
business. The share price has responded to news that it is now trading
profitably. Landround, also held in the ordinary portfolio, has revived its
travel voucher business successfully and is now expected to produce next years
profits a year ahead of previous broker's forecasts. A recent trading statement
from AIT has vindicated a further investment in the shares in both portfolios in
the form of a loan stock convertible at 25p. The shares are now more than double
that level on the news that the company is now trading profitably despite the
poor environment for large licence orders. Stagecoach Theatre Arts paid a maiden
dividend, as expected.
There are still a significant number of companies in the fund which have yet to
reach profitability, with more of these to be found in the less mature 'C'
portfolio. Each one that achieves this should enjoy a significant appreciation
in its share price and have a positive impact on the asset value. Oasis and 1st
Dental both need to reach a critical mass which will enable them profitably to
take advantage of the growing demand for private dental care. Deltex, which we
supported in a fundraising earlier this year is expected to show a breakthrough
in sales of its heart output monitoring equipment to operating theatres in the
NHS. Also in the medical arena, Tepnel, AMS and Maelor all have to demonstrate
they can achieve profitability through increased sales. Of the companies which
have problems, Adval and Avionics have both raised money and introduced new
management. They should both be capable of becoming growing and profitable
businesses in time. There are two shares in the portfolio which are currently
suspended, Hearing Enhancement and Comeleon. The former has been through a
Creditors Voluntary Arrangement but now trades profitably and the latter
announced some time ago that it was in takeover talks.
The mature holdings in the fund are still demonstrating their ability to grow at
above the average rate for the market. The main exception is Metnor, which is
struggling to make up for the shortfall in its telephony business despite
buoyant demand for the galvanizing operation. We expect growth to resume in
2004. Inter Link Foods had an encouraging AGM statement and Mears had sparkling
figures, which have pushed the shares to new highs. Honeycombe, Conder, Protec,
Inventive Leisure and Maclellan have all seen their shares recover from the lows
of February and March.
Portfolio Activity
Ordinary Share Portfolio
In the first six months of the current financial year the managers made four
investments at a total cost of £352,000, all additions to an existing holding.
AIT needed more money to reduce the involvement of the bank in the light of a
poor market for software sales. The company's new management have reduced costs
in line with current levels of recurring income, limiting the downside from
here. We still consider the upside to be as good as before. The other investment
committed was a further £100,000 into Deltex, where once again the upside should
be significant. In addition, further investments were made in Hearing
Enhancement (as part of the restructuring arrangements) and Transport Systems. A
part disposal of Mears has been made into rising prices, realising a net profit
of £115,000. The pace of disposals was once again slow as we considered that the
mature holdings would benefit most from rising markets, making them a potential
useful source of future capital dividends. The pace of recovery of the fund over
the past six months has been helped by the fact that more than 50% of the
portfolio by value will be dividend paying in the current year. At the end of
the period, the Inland Revenue cover of 92% was comfortably in excess of the 70%
limit.
'C' shares
Eight qualifying investments in the period at a cost of £1,749,000 were made
bringing the total cost of investments to £11,946,000. The 'C' share portfolio
is now 66% invested, with the first tranche already past 70%. We do not
anticipate any problems reaching the 70% threshold for the second tranche before
the March 2004 deadline. Of the eight new investments, four are completely new
holdings for the fund although none are new flotations. Huveaux is a profitable
and dividend paying specialist publisher which has been growing rapidly by
acquisition, and Cardpoint is an owner and manager of fee charging cashpoint
machines. It now has the critical mass to turn profitable in 2004. Cobra is a
profitable bio-manufacturing business well positioned to capitalize on its
expertise in manufacturing genetic drugs, and Focus Solutions sells software to
reduce the cost of capturing clients to the insurance industry. All are
profitable or due to achieve profitability in the next twelve months. We added
to existing holdings in AIT, discussed in the section on the Ordinary portfolio
above, Avionics, Maelor, Clipper Ventures. All of the latter had funding issues,
but we considered the risk reward balance very carefully before committing
further funds. There were no sales in the period.
Dividend
Now that the high cash balances on the 'C' portfolio are reducing, there is less
scope to pay interim income dividends. However, if markets continue to improve
the possibility of capital dividends in respect of both classes and share
capital should become more realistic than has been the case over the past 18
months.
Outlook
The stockmarket seems to have recovered a large measure of the confidence which
it had lost in the preceding six months. Although the economic picture is still
uncertain, with European growth stalled and concerns about terrorism and Iraq as
real as ever, the market is much more sanguine about potential bad news. This
has had the effect of increasing trading volumes and improving confidence that
the recovery in share prices from lows in March can be sustained. Against a
background of low growth it will be difficult for larger companies to grow
profits in a meaningful way, making it hard for the FTSE 100 to make progress at
the same rate. There should, however, still be opportunities for small niche
companies with access to capital to grow.
The big threat to the performance of the portfolio six months ago was that those
holdings with insufficient capital would fail to raise further capital as a
result of market conditions. This threat seems to have subsided for all but very
early stage companies. Although the new issue market has been slow, prices more
realistic and there are signs that companies are beginning to consider a public
listing again. There are also companies seeking to raise money to consolidate
businesses and remove cost. Blooms of Bressingham was recently on the receiving
end of several approaches, and this kind of activity will probably increase. In
summary, we see the opportunities to make new investments improving, and as a
consequence of this, we expect to be able to take some profits on existing
holdings as they make the progress that we are expecting.
M A F Reeve
Chairman 16 October 2003
INVESTMENT PORTFOLIOS
as at 31 August 2003
The ten largest holdings in each portfolio are listed below:
Ordinary Share Portfolio
Company Activity Value % of
£'000 portfolio
Inter Link Foods Food producer, mainly cakes. 620 7.5
Mears Building maintenance contractor. 594 7.2
MacLellan Contract cleaning. 517 6.3
Metnor Group Steel galvanising and engineering. 418 5.0
Honeycombe Owner and operator of pubs. 391 4.7
Pilat Media Group Software for global multi-channel 375 4.5
broadcasting market
Transport Systems Installation and hire of 349 4.2
traffic signals.
Inventive Leisure Owner and operator of bars 337 4.1
and nightclubs.
Ideal Shopping Selling through television, 334 4.0
home shopping and catalogues.
Deltex Medical Developer of non-invasive heart 328 4.0
monitoring devices. ----- -----
Total 4,263 51.5
Other holdings in 3,296 39.8
companies ===== =====
Total equity portfolio 7,559 91.3
Other investments (floating rate notes) - -
----- -----
7,559 91.3
Net current assets 724 8.7
----- -----
Total fund value 8,283 100.0
===== =====
'C' Share Portfolio
Company Activity Value % of
£'000 portfolio
Pilat Media Group Software for global 750 4.4
multi-channel
broadcasting market
GX Networks Supply of telecommunications 638 3.8
services.
Inter Link Foods Food producer, mainly cakes. 597 3.5
PM Group Systems and software for the 595 3.5
haulage and waste industry.
AIT Provider of IT solutions. 543 3.2
Huveaux Media and publishing group. 522 3.1
Maelor Development of healthcare 475 2.8
products and related activities
Stagecoach Theatre Arts Performing arts schools 446 2.6
for youngsters.
Advanced Medical Design, development of novel
Solutions high performance polymers. 441 2.6
Fitzhardinge Real estate consultancy. 428 2.5
----- -----
Total 5,435 32.0
Other holdings in
companies 5,412 31.9
===== =====
Total equity portfolio 10,847 63.9
Other investments (floating
rate notes) 4,504 26.5
----- -----
15,351 90.4
Net current assets 1,633 9.6
----- -----
Total fund value 16,984 100.0
====== ======
Unaudited Statement of Total Return
(incorporating the profit and loss account)
for the six months to 31 August 2003
ORDINARY SHARES
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 2003 31 August 2002 28 February 2003
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses)
on investments - 2,664 2,664 - (1,182) (1,182) - (2,872) (2,872)
Income 71 - 71 66 - 66 110 - 110
Investment
Management
fees (21) (61) (82) (24) (73) (97) (43) (129) (172)
Other
expenses (24) - (24) (25) - (25) (49) - (49)
---------------------------------------------------------------------------------------------------
Return on
ordinary
activities
before tax 26 2,603 2,629 17 (1,255) (1,238) 18 (3,001) (2,983)
Tax on
ordinary
activities - - - - - - - - -
--------------------------------------------------------------------------------------------------
Return
Attributable
to
shareholders 26 2,603 2,629 17 (1,255) (1,238) 18 (3,001) (2,983)
Dividends - - - - - - (51) - (51)
---------------------------------------------------------------------------------------------------
Transfer
to/(from)
reserves 26 2,603 2,629 17 1,255) (1,238) (33) (3,001) (3,034)
===================================================================================================
Return per
ordinary
share 0.2p 26.1p 26.3p 0.2p (12.5)p (12.3)p 0.2p (29.9)p (29.7)p
All revenue and capital items in the above statement derive from continuing
operations.
Unaudited Statement of Total Return
(incorporating the profit and loss account)
for the six months to 31 August 2003
'C' SHARES
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 2003 31 August 2002 28 February 2003
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses)
on investments - 2,992 2,992 - (953) (953) - (2,931) (2,931)
Income 165 - 165 201 - 201 392 - 392
Investment
management
fees (46) (137) (183) (49) (147) (196) (93) (281) (374)
Other expenses (46) - (46) (49) - (49) (95) - (95)
----------------------------------------------------------------------------------------------------
Return on
ordinary
activities
before tax 73 2,855 2,928 103 (1,100) (997) 204 (3,212) (3,008)
Tax on
ordinary
activities - - - - - - - - -
----------------------------------------------------------------------------------------------------
Return
attributable
to
shareholders 73 2,855 2,928 103 (1,100) (997) 204 (3,212) (3,008)
Dividends - - - (100) - (100) (200) - (200)
---------------------------------------------------------------------------------------------------
Transfer
to/(from)
reserves 73 2,855 2,928 3 (1,100) (1,097) 4 (3,212) (3,208)
====================================================================================================
Return per
ordinary share 0.4p 14.3p 14.7p 0.5p (5.5)p (5.0)p 1.0p (16.1)p (15.1)p
All revenue and capital items in the above statement derive from continuing
operations.
Unaudited Statement of Total Return
(incorporating the profit and loss account)
for the six months to 31 August 2003
TOTAL
Unaudited Unaudited Audited
Six months to Six months to Year to
31 August 2003 31 August 2002 28 February 2003
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses)
on investments - 5,656 5,656 - (2,135) (2,135) - (5,803) (5,803)
Income 236 - 236 267 - 267 502 - 502
Investment
management
fees (67) (198) (265) (73) (220) (293) (136) (410) (546)
Other expenses (70) - (70) (74) - (74) (144) - (144)
----------------------------------------------------------------------------------------------------
Return on
ordinary
activities
before tax 99 5,458 5,557 120 (2,355) (2,235) 222 (6,213) (5,991)
Tax on
ordinary
activities - - - - - - - - -
--------------------------------------------------------------------------------------------------
Return
attributable
to
shareholders 99 5,458 5,557 120 (2,355) (2,235) 222 (6,213) (5,991)
Dividends - - - (100) - (100) (251) - (251)
----------------------------------------------------------------------------------------------------
Transfer
to/(from)
reserves 99 5,458 5,557 20 (2,355) (2,335) (29) (6,213) (6,242)
====================================================================================================
Return per
ordinary share 0.3p 18.2p 18.5p 0.4p (7.8)p (7.4)p 0.7p (20.7)p (20.0)p
Unaudited Balance Sheet
At 31 August 2003
ORDINARY SHARES
Unaudited Unaudited Audited
31 August 31 August 28 February
2003 2002 2003
£'000 £'000 £'000
Fixed asset investments
Qualifying investments 7,559 6,078 4,673
Non-qualifying investments - 996 997
----- ----- -----
7,559 7,074 5,670
Current assets
Debtors 55 25 43
Cash 693 408 40
----- ----- -----
748 433 83
Creditors: due within one year (24) (13) (76)
----- ----- -----
Net current assets 724 420 7
----- ----- -----
Net assets 8,283 7,494 5,677
====== ====== ======
Represented by:
Called up share capital 4,983 5,020 5,004
Special reserve 4,437 4,480 4,460
Capital redemption reserve 67 30 46
Capital reserves:
Realised (154) 70 (206)
Unrealised (1,107) (2,187) (3,658)
Revenue reserve 57 81 31
----- ----- -----
Total equity shareholders' 8,283 7,494 5,677
funds
====== ====== ======
Net asset value per
ordinary share 83.1 pence 74.6 pence 56.7 pence
Unaudited Balance Sheet
At 31 August 2003
'C' SHARES
Unaudited Unaudited Audited
31 August 31 August 28 February
2003 2002 2003
£'000 £'000 £'000
Fixed asset investments
Qualifying investments 10,847 7,688 6,111
Non-qualifying investments 4,504 6,001 6,000
----- ----- -----
15,351 13,689 12,111
Current assets
Debtors 43 43 441
Cash 1,660 2,695 1,700
----- ----- -----
1,703 2,738 2,141
Creditors: due within one year (70) (242) (186)
----- ----- -----
Net current assets 1,633 2,496 1,955
----- ----- -----
Net assets 16,984 16,185 14,066
====== ====== ======
Represented by:
Called up share capital 9,973 9,988 9,981
Special reserve 8,943 8,962 8,953
Capital redemption reserve 32 17 24
Capital reserves:
realised (997) (723) (864)
unrealised (1,087) (2,105) (4,075)
Revenue reserve 120 46 47
----- ----- -----
Total equity shareholders' funds 16,984 16,185 14,066
====== ====== ======
Net asset value per ordinary share 85.1 pence 81.0 pence 70.5 pence
Unaudited Balance Sheet
At 31 August 2003
TOTAL
Unaudited Unaudited Audited
31 August 31 August 28 February
2003 2002 2003
£'000 £'000 £'000
Fixed asset investments
Qualifying investments 18,406 13,766 10,784
Non-qualifying investments 4,504 6,997 6,997
----- ----- -----
22,910 20,763 17,781
Current assets
Debtors 98 68 484
Cash 2,353 3,103 1,740
----- ----- -----
2,451 3,171 2,224
Creditors: due within one year (94) (255) (262)
----- ----- -----
Net current assets 2,357 2,916 1,962
----- ----- -----
Net assets 25,267 23,679 19,743
====== ====== ======
Represented by:
Called up share capital 14,956 15,008 14,985
Special reserve 13,380 13,442 13,413
Capital redemption reserve 99 47 70
Capital reserves:
realised (1,151) (653) (1,070)
unrealised (2,194) (4,292) (7,733)
Revenue reserve 177 127 78
----- ----- -----
Total equity shareholders' funds 25,267 23,679 19,743
====== ====== ======
This interim report was approved by the Board of Directors on 16 October 2003
Signed on behalf of the Board of Directors by
M A F Reeve
Chairman
Unaudited Cash flow Statement
for the six months to 31 August 2003
ORDINARY SHARES
Unaudited Unaudited Audited
Six months Six months Year
to to to
31 August 31 August 28 February
2003 2002 2003
£'000 £'000 £'000
Operating activities
Dividend income received 43 25 57
Investment income received 10 33 54
Deposit interest received 11 6 10
Other income received - - -
Investment management fees paid (77) (103) (222)
Other cash payments (35) (26) (34)
----- ----- -----
Net cash outflow from operating
activities (48) (65) (135)
Taxation
UK corporation tax paid - - -
Investing activities
Purchase of qualifying investments (352) (50) (340)
Purchase of non-qualifying investments - - -
Disposals of qualifying investments 131 309 315
Disposals of non-qualifying investments 996 - -
----- ----- -----
Net cash inflow/(outflow)from investing
activities 775 259 (25)
Equity dividends paid
Revenue dividends paid on ordinary
shares (51) - -
Capital dividends paid on ordinary
shares - (351) (351)
----- ----- -----
Net cash inflow/(outflow) before
financing 676 (157) (511)
Financing
Redemption of shares net of expenses (23) - (14)
----- ----- -----
Net cash outflow from financing (23) - (14)
----- ----- -----
Increase/(decrease) in cash 653 (157) (525)
===== ===== =====
Unaudited Cash flow Statement
for the six months to 31 August 2003
'C' SHARES
Unaudited Unaudited Audited
Six months Six months Year
to to to
31 August 31 August 28 February
2003 2002 2003
£'000 £'000 £'000
Operating activities
Dividend income received 35 10 28
Investment income received 102 191 316
Deposit interest received 33 18 66
Other income received 5 - -
Investment management fees paid (178) (203) (469)
Other cash payments (77) (46) (62)
----- ----- -----
Net cash outflow from operating
activities (80) (30) (121)
Taxation
UK corporation tax paid - - -
Investing activities
Purchase of qualifying investments (1,360) (2,176) (2,965)
Purchase of non-qualifying investments - - -
Disposals of qualifying investments - 132 132
Disposals of non-qualifying investments 1,500 3,001 3,001
------ ------ ------
Net cash inflow from investing
activities 140 957 168
Equity dividends paid
Revenue dividends paid on ordinary
shares (100) (200) (100)
Capital dividends paid on ordinary
shares - - (200)
----- ----- -----
Net cash (outflow)/inflow before
financing (40) 727 (253)
Financing
Redemption of shares net of expenses - (16) (31)
----- ----- -----
Net cash outflow from financing - (16) (31)
----- ----- -----
(Decrease)/increase in cash (40) 711 (284)
===== ===== =====
Unaudited Cash flow Statement
for the six months to 31 August 2003
TOTAL
Unaudited Unaudited Audited
Six months Six months Year
to to to
31 August 31 August 28 February
2003 2002 2003
£'000 £'000 £'000
Operating activities
Dividend income received 78 35 85
Investment income received 112 224 370
Deposit interest received 44 24 76
Other income received 5 - -
Investment management fees paid (255) (306) (691)
Other cash payments (112) (72) (96)
----- ----- -----
Net cash outflow from operating
activities (128) (95) (256)
Taxation
UK corporation tax paid - - -
Investing activities
Purchase of qualifying investments (1,712) (2,226) (3,305)
Purchase of non-qualifying investments - - -
Disposals of qualifying investments 131 441 447
Disposals of non-qualifying investments 2,496 3,001 3,001
------ ------ ------
Net cash inflow from investing
activities 915 1,216 143
Equity dividends paid
Revenue dividends paid on ordinary
shares (151) (200) (100)
Capital dividends paid on ordinary
shares - (351) (551)
----- ----- -----
Net cash inflow/(outflow) before
financing 636 570 (764)
Financing
Redemption of shares net of expenses (23) (16) (45)
----- ----- -----
Net cash outflow from financing (23) (16) (45)
----- ----- -----
Increase/(decrease) in cash 613 554 (809)
===== ===== =====
This information is provided by RNS
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