Final Results
Elderstreet VCT PLC
05 April 2007
ELDERSTREET VCT PLC
PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006
FINANCIAL HIGHLIGHTS
2006 2005
pence pence
Ordinary Shares
Net asset value (per share) 76.1 65.1
Cumulative paid distributions from launch to 31 December 2006 (per share) 31.5 29.5
Total return (net asset value plus cumulative distributions paid per share) 107.6 94.6
Final proposed distribution (per share) to be paid on 15 June 2007 3.5 2.0
'C' Shares
Net asset value (per share) 98.6 94.1
Cumulative paid dividends from launch to 31 December 2006 (per share) 1.0 -
Total return (net asset value plus cumulative distributions paid per share) 99.6 94.1
Final proposed dividend (per share) to be paid on 15 June 2007 3.5 1.0
The Statement by the Chairman, David Brock, contains the following:
Introduction
I am pleased to present the Annual Report for Elderstreet VCT plc for the year
ended 31 December 2006 and also to welcome former shareholders of Elderstreet
Millennium Venture Capital Trust plc ('EMVCT') who have become members of the
Company following the merger with EMVCT.
Merger
On 21 December 2006, your Company made an offer for the entire share capital of
EMVCT. The offer was well received by EMVCT shareholders, and was declared
unconditional on 22 January 2006. By 15 March 2007, over 90% of EMVCT
shareholders had formally accepted the offer. The Company is now in the process
of compulsorily acquiring the remaining EMVCT shares.
The merger has provided your Company with greater diversity within its
investment portfolio and an increased asset base over which the Company's fixed
running costs can be borne.
Directorate
As part of the merger arrangements, Hugh Aldous, who was a non-executive
director of EMVCT, joined the board with effect from 1 March 2007. Hugh is a
partner of RSM Robson Rhodes LLP and also chairman of The Eastern European Trust
plc and a director of Henderson TR Pacific Investment Trust plc, Innospec Inc.
and a number of other companies, including Smart Education Limited. Hugh's
extensive experience in the Investment Trust and VCT sector will be a valuable
addition to the Board.
Ordinary Share issue
During the year, the Company undertook a small fundraising to allow investors to
take advantage of the 40% income tax relief that was available on investments
into VCTs during the 2006/07 tax year. 1,401,471 Ordinary Shares were issued at
68.89p per share. The net proceeds, after taking into account share issue costs
of £53,000, were £913,000.
Net Asset Value
At 31 December 2006, the Company's Net Asset Value ('NAV') per Ordinary Share
stood at 76.1p, an increase of 13.0p or 20.0% since 31 December 2005 (after
adjusting for the dividend of 2p per share paid during the year). The Total
Return to original shareholders (NAV plus dividends paid to date) now stands at
107.9p compared to the original net of income tax relief cost of 80p per share.
The NAV of the Company's 'C' shares at 31 December 2006 stood at 98.6p, an
increase of 5.5p or 5.9% since 31 December 2005 (after adjusting for the
dividend of 1p paid during the year). The Total Return to original 'C'
shareholders (NAV plus dividends paid to date) stands at 99.6p compared to the
original net of income tax relief cost of 60p per share.
Venture Capital Investments
The Company's investment portfolio made good progress over the year, with some
profitable realisations and strong increases in valuations of a number of
investments. The Company made two new investments and four follow-on
investments during the year at a total cost of £837,000.
Two full investment disposals and one part disposal were made, generating
realised gains of £498,000. Good performances by a number of the Company's
investments, in particular the AIM-quoted investments, gave rise to unrealised
gains of £1.5 million.
Results and Dividends
The total return on ordinary activities for the year was as follows:
Revenue Capital Total
£'000 £'000 £'000
Ordinary Share 109 1,818 1,927
'C' Share 26 58 84
135 1,876 2,011
Your Board is proposing to pay the following final dividends for the year:
Ordinary Shares 3.5p per share
'C' Shares 3.5p per share
Subject to shareholder approval at the AGM, both dividends will be paid on 15
June 2007 to Shareholders on the register at 27 April 2007.
Repurchase of Shares
The Directors are conscious that the Company's share prices are affected by the
illiquidity of its shares in the market, resulting from the fact that investors
purchasing 'second-hand' shares do not benefit from income tax relief on their
investment.
The Directors continue to monitor the market in the Company's shares and intends
to make share purchases at a 10% discount to the latest published NAV when
appropriate. During the period the Company repurchased 523,607 Ordinary Shares
for cancellation at an average price of 58.9p per share. No 'C' Shares were
purchased during the year. A Special Resolution to continue with this policy is
proposed for the forthcoming AGM.
Annual General Meeting
The next Annual General Meeting of the Company will be held at 32 Bedford Row,
London WC1R 4HE at 11:00 am on 13 June 2007.
One item of Special Business is proposed to authorise the Company to make market
purchases of its shares
Outlook
The successful completion of the merger with Elderstreet Millennium has
increased the level of VCT qualifying investments in the Ordinary Share pool to
in excess of 85% of its funds. This has the benefit that the Company is now
able to consider investment decisions which it might not have been able to take
were the Company, like many VCTs, close to the 70% level required to be
maintained at all times by the VCT regulations.
Since the year end there has been further positive news from the Ordinary Share
investment portfolio, with offers being received for both Computer Software
Group (the Company's largest investment) and Careforce at prices significantly
in excess of those at 31 December 2006. The effect of the increase in
valuations of these investments, in addition to effect of the merger, has
produced a further increase in the Ordinary Share NAV, which, at 31 March 2007,
is estimated to be 83.5p per share. The C Share NAV has also seen an increase
since the year end and is estimated to be 107.6p at 31 March 2007.
If the offer for Computer Software Group plc mentioned above were to proceed,
the Ordinary share pool would receive a significant level of funds which would
then be available for reinvesting, along with the funds held by the C share
pool, which is continuing to build its initial portfolio. The Investment
Manager has, however, reported a recent improvement in deal flow so both share
pools may be in a good position to take advantage of these investment
opportunities.
INCOME STATEMENT
For the year ended 31 December 2006
Company position
Year ended 31 December 2006 Year ended 31 December 2005
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 373 - 373 269 - 269
Gains on investments - 2,015 2,015 - 305 305
373 2,015 2,388
269 305 574
Investment management fees (48) (143) (191) (39) (116) (155)
Other expenses (186) - (186) (188) - (188)
Return on ordinary activities
before tax 139 1,872 2,011 42 189 231
Tax on ordinary activities (4) 4 - (1) 1 -
Return attributable to equity
shareholders
135 1,876 2,011 41 190 231
Return per Ordinary share 0.7p 12.1p 12.8p 0.1p 1.6p 1.7p
Return per 'C' share 1.7p 3.8p 5.5p 1.7p (2.6p) 0.9p
Split as:
Ordinary shares
Year ended 31 December 2006 Year ended 31 December 2005
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 311 - 311 223 - 223
Gains on investments - 1,942 1,942 - 336 336
311 1,942 2,253 223 336 559
Investment management fees (42) (124) (166) (36) (106) (142)
Other expenses (160) - (160) (173) - (173)
Return on ordinary activities
before tax 109 1,818 1,927 14 230 244
Tax on ordinary activities - - - - - -
Return attributable to equity shareholders 109 1,818 1,927 14 230 244
'C' Ordinary shares
Year ended 31 December 2006 Year ended 31 December 2005
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 62 - 62 46 - 46
Gains on investments - 73 73 - (31) (31)
62 73 135 45 (31) 15
Investment management fees (6) (19) (25) (3) (10) (13)
Other expenses (26) - (26) (15) - (15)
Return on ordinary activities
before tax 30 54 84 28 (41) (13)
Tax on ordinary activities (4) 4 - (1) 1 -
(Loss)/return attributable to equity shareholders 26 58 84 27 (40) (13)
The revenue and capital movements in the year for the Ordinary Shares and 'C'
Shares relate to continuing operations.
A Statement of Total Recognised Gains and Losses relating to each class of share
has not been prepared as all gains and losses are recognised in the relevant
Income Statements as shown above.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 December 2006
Year ended Year ended
31 December 2006 31 December 2005
Ordinary 'C' Ordinary 'C'
shares shares Total shares shares Total
£'000 £'000 £'000 £'000 £'000 £'000
Opening shareholders' funds 9,180 1,452 10,632 9,498 - 9,498
Issue of shares 966 - 966 - 1,542 1,542
Share issue costs (53) - (53) - (77) (77)
Purchase of own shares (310) - (310) (274) - (274)
Total recognised gains for the year 1,927 84 2,011 244 (13) 231
Distributions (309) (15) (324) (288) - (288)
Closing shareholders' funds 11,401 1,521 12,922 9,180 1,452 10,632
BALANCE SHEET
at 31 December 2006
Year ended Year ended
31 December 2006 31 December 2005
Ordinary 'C' Ordinary 'C'
shares shares Total shares shares Total
£'000 £'000 £'000 £'000 £'000 £'000
Fixed assets
Investments 9,984 470 10,454 8,982 266 9,248
Current assets
Debtors 307 98 405 69 5 74
Cash at bank and in 1,256 958 2,214 166 1,186 1,352
hand
1,563 1,056 2,619 235 1,191 1,426
Creditors: amounts
falling due within one
year (146) (5) (151) (37) (5) (42)
Net current assets 1,417 1,051 2,468 198 1,186 1,384
Net assets 11,401 1,521 12,922 9,180 1,452 10,632
Capital and reserves
Called up share 749 77 826 705 77 782
capital
Capital redemption 79 - 79 52 - 52
reserve
Share premium 842 1,388 2,230 - 1,388 1,388
Special reserve 5,967 - 5,967 6,401 - 6,401
Capital reserve - 1,963 10 1,973 1,667 (9) 1,658
realised
Capital reserve - 1,605 8 1,613 268 (31) 237
unrealised
Revenue reserve 196 38 234 87 27 114
Equity shareholder's 11,401 1,521 12,922 9,180 1,452 10,632
funds
Net asset value per 76.1p 98.6p 65.1p 94.1p
share
CASH FLOW STATEMENT
for year ended 31 December 2006
Year ended Year ended
31 December 2006 31 December 2005
Ordinary 'C' Ordinary 'C'
shares Shares Total shares Shares Total
£'000 £'000 £'000 £'000 £'000 £'000
Net cash (outflow)/inflow from operating activities (82) 11 (71) (107) 18 (89)
Taxation - - - - - -
Capital expenditure
Purchase of investments (660) (224) (884) (2,910) (297) (3,207)
Sale of investments 1,456 - 1,456 2,231 - 2,231
Net cash inflow/(outflow) from capital expenditure 796 (224) 572 (679) (297) (976)
Equity dividends paid (309) (15) (324) (288) - (288)
Net cash inflow/(outflow) before financing 405 (228) 177 (1,074) (279) (1,353)
Financing
Proceeds from share issue 966 - 966 - 1,542 1,542
Share issue costs (50) - (50) - (77) (77)
Purchase of own shares (231) - (231) (274) - (274)
Net cash inflow/(outflow) from financing 685 - 685 (274) 1,465 1,191
Increase/(decrease) in cash 1,090 (228) 862 (1,348) 1,186 (162)
Announcement based on draft accounts
The financial information set out in the announcement does not constitute the
Company's statutory accounts in accordance with s240 CA85 for the year ended 31
December 2006. The statutory accounts for the year ended 31 December 2006 will
be finalised on the basis of the financial information presented by the
Directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
The financial information for the year ended 31 December 2005 is derived from
the statutory accounts for that year which have been delivered to the Registrar
of Companies. The auditors reported on those accounts; this report was
unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985. The financial information has been prepared on the basis of
the accounting policies set out in the Company's financial statements for the
year ended 31 December 2005.
A copy of the full Annual Report and financial statements for the year ended 31
December 2006 will be printed and posted to Shareholders. Copies of the full
Annual Report will be available to the public from the registered office of the
Company at 69 Eccleston Square, London SW1V 1PJ and will also be available for
download from www.downing.co.uk.
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