Half-yearly report
Elderstreet VCT plc
Interim Statement for the six months ended 30 June 2007
Recent Performance Summary
30 Jun 2007 31 Dec 2006 30 Jun 2006
pence pence pence
Net asset value per Ordinary share 81.9 76.1 67.2
Cumulative distributions per 35.0 31.5 31.5
Ordinary share
Total return per Ordinary share 116.9 107.6 98.7
Net asset value per 'C' share 102.5 98.6 89.0
Cumulative dividends per 'C' share 4.5 1.0 1.0
Total return per 'C' share 107.0 99.6 90.0
CHAIRMAN'S STATEMENT
I am pleased to present the interim report for Elderstreet VCT plc
for the six-month period ended 30 June 2007. These are the first
results that the Company has published following the merger with
Elderstreet Millennium Venture Capital Trust plc ("EMVCT").
Net Asset Value
At 30 June 2007, the Company's Net Asset Value per Ordinary Share
stood at 81.9p, an increase of 9.3p or 12.8% since 31 December 2006
(after adjusting for the dividend of 3.5p per share paid during the
period).
The Net Asset Value per 'C' Share at the same date stood at 102.5p,
an increase of 7.4p per 'C' Share (7.8%) over the six-month period,
also after adjusting for the dividend paid.
Venture capital investments
During the period, the Company made three new investments and two
follow-on investments totalling £769,000 and split between the
Ordinary and 'C' Share pools as follows:
Ordinary 'C' Total
Shares Shares
New investments £'000 £'000 £'000
Infoserve Group plc* 90 60 150
Servoca plc* 90 60 150
The Engine Group Ltd 250 - 250
Follow-on investments
Smart Education Ltd 79 9 88
Snacktime Ltd - 125 125
Sundry Investments 6 - 6
515 254 769
* Listed on AIM
The Ordinary Share pool made one major realisation in the period.
Computer Software Group plc was subject to a takeover offer which
produced cash proceeds of £3 million on a holding which originally
cost £0.7 million and a profit against cost of £2.3 million or
against market value at the previous year end of £0.6 million.
Careforce Group plc was also the subject of a takeover offer, which
resulted in the Ordinary Share pool receiving consideration shares in
Mears Group plc and has shown an increase in value on the investment
£108,000 over the period.
The Ordinary Share pool also made smaller realisations totalling
£69,000 during the period.
Overall the investment portfolio gave rise to unrealised gains of
£1.0 million over the period in respect of the Ordinary Share pool
and £106,000 in respect of the 'C' Share pool.
Listed fixed income securities
The listed fixed income securities portfolio (held by the Ordinary
Share pool) was valued at £3.1 million at the period end. These funds
continue to be managed by Smith and Williamson Investment Management
Limited.
Results and Dividend
The return on ordinary activities for the period was as follows:
Revenue Capital Total
£'000 £'000 £'000
Ordinary Shares 172 2,648 2,820
'C'Shares 18 95 113
190 2,743 2,933
The Board is proposing to distribute some of the gains realised on
the disposal of Computer Software Group plc by the Ordinary Share
pool. An interim capital distribution to of 1.5p per share will be
paid to Ordinary Shareholders on 5 October 2007 to Shareholders on
the register at 14 September 2007.
No interim dividend will be paid in respect of the 'C' Share pool at
this time.
Issue of shares
The Company issued 6,149,782 Ordinary shares at a price 61.5p per
share to shareholders in EMVCT as part of the Company's merger with
EMVCT.
Repurchase of shares
The Company continues to operate a policy of buying in for
cancellation any shares that become available to ensure that there is
liquidity in the market for any Shareholders wishing to dispose of
their holding.
During the period the Company purchased 447,857 Ordinary Shares for
cancellation at an average price of 73.9p per share. No 'C' Shares
were purchased during the period.
Outlook
Following the merger with EMVCT, your Company now has a larger and
broader portfolio which has seen some positive developments from a
number of the more mature investments. Although this has resulted in
the disposal of some of the better performing investments, the
Company continues to hold a well-balanced portfolio which may be able
to provide further successful realisations in the medium term.
The Company also still has funds available for investment in both the
Ordinary and 'C' Share pools. Since the period end, a new investment
of £600,000 has been made in WeComm Limited, a mobile data services
developer and a further £100,000 invested in Mediasurface plc. The
Investment Manager reports continuing reasonable deal flow which
should provide further good opportunities for investment.
David Brock
Chairman
UNAUDITED INCOME STATEMENT
for the six months ended 30 June 2007
Six months ended
30 June 2007
Revenue Capital Total
Company Total £'000 £'000 £'000
Income 328 - 328
Gains on investments - 2,858 2,858
328 2,858 3,186
Investment management fees (39) (118) (157)
Other expenses (96) - (96)
Return on ordinary activities before 193 2,740 2,933
taxation
Taxation (3) 3 -
Return attributable to equity shareholders 190 2,743 2,933
Return per Ordinary Share 0.9p 14.0p 14.9p
Return per 'C' Share 1.2p 6.2p 7.4p
Six months ended Year ended
30 June 2006 31 December 2006
Revenue Capital Total Total
Company Total £'000 £'000 £'000 £'000
Income 186 - 186 373
Gains on investments - 529 529 2,015
186 529 715 2,388
Investment management (22) (68) (90) (191)
fees
Other expenses (91) - (91) (186)
Return on ordinary 73 461 534 2,011
activities before
taxation
Taxation (5) 5 - -
Return attributable to 68 466 534 2,011
equity shareholders
Return per Ordinary Share 0.4p 3.7p 4.1p 12.8p
Return per 'C' Share 0.9p (5.1p) (4.2p) 5.5p
Six months ended
30 June 2007
Ordinary Shares
Income 291 - 291
Gains on investments - 2,752 2,752
291 2,752 3,043
Investment management fees (34) (104) (138)
Other expenses (85) - (85)
Return on ordinary activities before taxation 172 2,648 2,820
Taxation - - -
Return attributable to equity shareholders 172 2,648 2,820
'C' Shares
Income 37 - 37
Gains on investments - 106 106
37 106 143
Investment management fees (5) (14) (19)
Other expenses (11) - (11)
Return on ordinary activities before taxation 21 92 113
Taxation (3) 3 -
Return attributable to equity shareholders 18 95 113
Six months ended Year ended
30 June 2006 31 December 2006
Ordinary Shares
Income 152 - 152 311
Gains on investments - 601 601 1,942
152 601 753 2,253
Investment management fees (19) (57) (76) (166)
Other expenses (78) - (78) (160)
Return on ordinary activities 55 544 599 1,927
before taxation
Taxation (1) 1 - -
Return attributable to equity 54 545 599 1,927
shareholders
'C' Shares
Income 34 - 34 62
Gains on investments - (72) (72) 73
34 (72) (38) 135
Investment management fees (3) (11) (14) (25)
Other expenses (13) - (13) (26)
Return on ordinary activities 18 (83) (65) 84
before taxation
Taxation (4) 4 - -
Return attributable to equity 14 (79) (65) 84
shareholders
UNAUDITED SUMMARISED BALANCE SHEET
as at 30 June 2007
As at As at
As at 30 Jun 2007 30 Jun 2006 31 Dec
2006
Ordinary 'C'
shares Shares Total Total Total
£'000 £'000 £'000 £'000 £'000
Investments 15,591 829 16,420 9,309 10,454
Net current assets 1,350 751 2,101 2,286 2,468
Net assets 16,941 1,580 18,521 11,595 12,922
Capital and reserves
Called up share capital 1,034 77 1,111 838 826
Capital redemption 101 - 101 67 79
reserve
Share premium 842 1,388 2,230 2,230 2,230
Merger reserve 3,475 - 3,475 - -
Special reserve 5,097 - 5,097 6,209 5,967
Capital reserve - 3,968 (1) 3,967 1,652 1,973
realised
Capital reserve - 2,212 114 2,326 433 1,613
unrealised
Revenue reserve 212 2 214 166 234
Equity shareholder's 16,941 1,580 18,521 11,595 12,922
funds
Net asset value per:
Ordinary Share 81.9p 67.2p 76.1p
'C' Share 102.5p 89.0p 98.6p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 June 2007
30 Jun 2007 30 Jun 31 Dec
2006 2006
Ordinary 'C'
shares Shares Total Total Total
£'000 £'000 £'000 £'000 £'000
Opening shareholders' funds 11,401 1,521 12,922 10,632 10,632
Issue of shares 3,782 - 3,782 966 966
Share issue costs - - - (53) (53)
Purchase of own shares (333) - (333) (157) (310)
Total recognised gains in 2,820 113 2,933 534 2,011
the period
Distributions (729) (54) (783) (327) (324)
16,941 1,580 18,521 11,595 12,922
UNAUDITED CASHFLOW STATEMENT
for the six months ended 30 June 2007
Six Year
months ended
ended 31 Dec
Six months ended 30 Jun 2006
30 Jun 2007 2006
Ordinary 'C' Total
Shares Share
£'000 £'000 £'000 £'000 £'000
Cash inflow/(outflow) from
operating activities and 9 10 19 (55) (71)
returns on investments
(Note 1)
Capital expenditure
Purchase of investments (2,874) (252) (3,126) (318) (884)
Sale of investments 3,805 95 3,900 100 1,456
Net cash inflow/(outflow) 931 (157) 774 (218) 572
from capital expenditure
Acquisitions
Purchase of subsidiary (202) - (202) - -
undertakings
Net cash transferred from 377 - 377 - -
subsidiary undertakings
175 - 175 - -
Equity dividends paid (729) (54) (783) (327) (324)
Net cash inflow/(outflow) 386 (201) 185 (600) 177
before financing
Financing
Proceeds from share issue - - - 966 966
Share issue costs - - - (62) (50)
Purchase of own shares (395) - (395) (144) (231)
Net cash inflow from (395) - (395) 760 685
financing
(Decrease)/increase in cash (9) (201) (210) 160 862
(Note 2)
Notes to the cashflow
statement:
1 Cash (outflow)/inflow
from operating activities
and returns on investments
Net revenue return before 172 21 193 73 139
taxation
Expenses charged to capital (104) (14) (118) (68) (143)
Increase in other debtors (48) 1 (47) (50) (97)
(Decrease)/increase in (11) 2 (9) (10) 30
other creditors
Net cash inflow/(outflow) 9 10 19 (55) (71)
from operating activities
2 Analysis of net funds
Beginning of period 1,256 958 2,214 1,352 1,352
Net cash (outflow)/inflow (9) (201) (210) 160 862
End of period 1,247 757 2,004 1,512 2,214
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 June 2007
Valuation Unrealised % of
Cost gain/(loss) portfolio
£'000 £'000 in period by value
Ordinary Share pool
Top ten venture capital
investments
Snacktime Limited 1,500 1,996 496 11.9%
Wessex Advanced Switching 55 1,283 - 7.6%
Products Limited
Oldbury Aluminium Alloys 1,275 1,275 - 7.6%
Limited
Mediasurface plc* 628 1,095 336 6.5%
Baldwin & Francis Holdings 690 920 200 5.5%
Limited
Lyalvale Express Limited 915 915 - 5.4%
UM Holdings Limited 54 646 - 3.8%
Smart Education Limited 834 502 (54) 3.0%
Interquest Group plc* 251 478 91 2.8%
Berkeley Scott Group plc* 657 427 196 2.5%
6,859 9,537 1,265 56.6%
Other venture capital 4,529 2,994 (262) 17.8%
investments
Listed fixed income securities 3,071 3,060 (2) 18.2%
Cash at bank and in hand 1,247 1,247 - 7.4%
Ordinary Share Pool - Total 15,706 16,838 1,001 100.0%
'C' Share pool
Venture capital investments
Interquest Group plc* 100 191 36 12.1%
Snacktime Limited 125 125 - 7.9%
Mediasurface plc* 60 125 42 7.9%
Oldbury Aluminium Alloys 100 100 - 6.3%
Limited
Servoca plc 60 96 36 6.1%
AngloInfo Limited 78 78 - 4.9%
Infoserve plc* 60 56 (4) 3.5%
Smart Education Limited 130 56 (4) 3.5%
Lanchon Holdings Limited 2 2 - 0.1%
715 829 106 52.3%
Cash at bank and in hand 757 757 - 47.7%
'C' Share Pool - Total 1,472 1,586 106 100.0%
All venture capital investments are unquoted unless otherwise stated.
* Quoted on AIM
SUMMARY OF INVESTMENT MOVEMENTS
for the period ended 30 June 2007
Additions
Ordinary Share 'C'
Pool Share Pool
£'000 £'000
Engine Group plc Brand/media agency 250 -
Infoserve Group plc Online local search 60
* provider 90
Police outsourcing 60
Servoca plc * solutions 90
Smart Education Teacher recruitment 9
Limited agency 79
Vending machine 125
Snacktime Limited operator -
Sundry purchases 6 -
605 254
Acquired as part of merger with Elderstreet -
Millennium 4,700
5,305 254
Disposals
Cost Proceeds Profit/(loss)
Ordinary Share Pool £'000 £'000 £'000
ATA Group plc * 35 38 3
Computer Software Group plc * 733 3,000 2,267
DC Interact Limited 382 255 (127)
Longmead Group plc * 11 10 (1)
Residential Care Group Limited - 3 3
1,161 3,306 2,145
There were no disposals from the 'C' Share pool in the period.
* - Quoted on AIM
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. Accounting policies
Basis of accounting
The Company has prepared its financial statements under UK Generally
Accepted Accounting Practice ("UK GAAP") and in accordance with the
Statement of Recommended Practice "Financial Statements of Investment
Trust Companies" revised December 2005 ("SORP").
The financial statements are prepared under the historical cost
convention except for the revaluation of certain financial
instruments.
Presentation of Income Statement
In order to better reflect the activities of a Venture Capital Trust
and in accordance with guidance issued by the Association of
Investment Companies ("AIC"), supplementary information which
analyses the income statement between items of a revenue and capital
nature has been presented alongside the income statement. The net
revenue is the measure the Directors believe appropriate in assessing
the Company's compliance with certain requirements set out in Section
842 Income and Corporation Taxes Act 1988.
Investments
All investments are designated as "fair value through profit or loss"
assets and are initially measured at cost. Thereafter the investments
are measured at subsequent reporting dates at fair value.
Listed fixed income investments and investments quoted on AIM are
measured using bid prices in accordance with the International
Private Equity and Venture Capital Valuation Guidelines.
In respect of unquoted instruments, fair value is established by
using International Private Equity and Venture Capital Valuation
Guidelines. Where no reliable fair value can be estimated for such
unquoted equity investments they are carried at cost, subject to any
provision for impairment. Where an investee company has gone into
receivership or liquidation the investment, although not physically
disposed of, is treated as being realised.
Gains and losses arising from changes in fair value are included in
the income statement for the year as a capital item and transaction
costs on acquisition or disposal of the investment expensed.
It is not the Company's policy to exercise either significant or
controlling influence over investee companies. Therefore the results
of these companies are not incorporated into the revenue account
except to the extent of any income accrued.
Income
Dividend income from investments is recognised when the shareholders'
rights to receive payment has been established, normally the ex
dividend date.
Interest income is accrued on a time apportioned basis, by reference
to the principal sum outstanding and at the effective interest rate
applicable and only where there is reasonable certainty of
collection.
Expenses
All expenses are accounted for on an accruals basis. In respect of
the analysis between revenue and capital items presented within the
income statement, all expenses have been presented as revenue items
except as follows:
* Expenses which are incidental to the disposal of an investment
are deducted from the disposal proceeds of the investment.
* Expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of the
investments held can be demonstrated and accordingly the investment
management fee and finance costs have been allocated 25% to revenue
and 75% to capital, in order to reflect the directors expected
long-term view of the nature of the investment returns of the
Company.
Taxation
The tax effects on different items in the Income Statement are
allocated between capital and revenue on the same basis as the
particular item to which they relate using the Company's effective
rate of tax for the accounting period.
Due to the Company's status as a Venture Capital Trust and the
continued intention to meet the conditions required to comply with
Section 842AA of the Income and Corporation Taxes Act (1988), no
provision for taxation is required in respect of any realised or
unrealised appreciation of the Company's investments which arises.
Deferred taxation is provided in full on timing differences that
result in an obligation at the balance sheet date to pay more tax, or
a right to pay less tax, at a future date, at rates expected to apply
when they crystallise based on current tax rates and law. Timing
differences arise from the inclusion of items of income and
expenditure in taxation computations in periods different from those
in which they are included in the accounts.
Issue Costs
Issue costs in relation to the shares issued are deducted from the
respective share premium account.
2. All revenue and capital items in the Income Statement derive
from continuing operations.
3. The Company has only one class of business and derives its
income from investments made in shares, securities and bank deposits.
4. The comparative figures were in respect of the six months
ended 30 June 2006 and the year ended 31 December 2006 respectively.
5. Net Asset Value per share calculations are based on the
following:
Ordinary Shares 'C' Shares
Revenue return per share based on:
Net Assets (£'000) 16,941 1,580
Number of shares in issue at period end 20,683,744 1,542,202
6. Return per share calculations are based on the following:
Ordinary Shares 'C'
Shares
Revenue return per share based on:
Net revenue return after taxation (£'000) 172 18
Weighted average number of shares in 18,960,562 1,542,202
issue
Capital return per share based on:
Net capital return/(loss) for the 2,648 95
financial year (£'000)
Weighted average number of shares in 18,960,562 1,542,202
issue
7. Distributions
30 Jun 2007 31 Dec 2006
Per Share Revenue Capital Total Total
Pence £'000 £'000 £'000 £'000
Paid in the period
2006 Final Ordinary 3.5 156 573 729 -
dividend
2006 Final 'C' share 3.5 54 - 54 -
dividend
2005 Final Ordinary 2.0 - - - 309
dividend
2005 Final 'C' share 1.0 - - - 15
dividend
210 573 783 324
8. Capital and Reserves
Capital Share Special Capital Capital Revenue Merger
Redemption Premium Reserve Reserve Reserve Reserve Reserve
Reserve -unrealised -
realised
Company £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 79 2,230 5,967 1,613 1,973 234 -
January
2007
Issue of - - - - - - 3,475
new shares
Shares 22 - (333) - - - -
repurchased
Expenses - - - - (118) - -
capitalised
Tax on - - - - 3 - -
capital
expenses
Gains on - - - 2,188 670 - -
investments
Transfer - - (537) (1,475) 2,012 - -
between
reserves
Retained - - - - - 190 -
net revenue
for the
period
Dividends - - - - (573) (210) -
paid in
period
At 30 June 101 2,230 5,097 2,326 3,967 214 3,475
2007
Capital Capital Capital
Redemption Share Special Reserve Reserve Revenue Merger
Reserve Premium Reserve -unrealised - Reserve Reserve
realised
Analysed
as:
Ordinary £'000 £'000 £'000 £'000 £'000 £'000 £'000
Shares
At 1 79 842 5,967 1,605 1,963 196 -
January
2007
Issue of - - - - - - 3,475
new shares
Shares 22 - (333) - - - -
repurchased
Expenses - - - - (104) - -
capitalised
Tax on - - - - - - -
capital
expenses
Gains on - - - 2,082 670 - -
investments
Transfer - - (537) (1,475) 2,012 - -
between
reserves
Retained - - - - - 172 -
net revenue
for the
period
Dividends - - - - (573) (156) -
paid in
period
At 30 June 101 842 5,097 2,212 3,968 212 3,475
2007
'C' Shares £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 - 1,388 - 8 10 38 -
January
2007
Expenses - - - - (14) - -
capitalised
Tax on - - - - 3 - -
capital
expenses
Gains on - - - 106 - - -
investments
Retained
net revenue - - - - - 18 -
for the
period
Dividends - - - - - (54) -
paid in
period
At 30 June - 1,388 - 114 (1) 2 -
2007
The Special Reserve is a distributable reserve that allows the
Company to make market purchases of its own shares and to pay
distributions. The Ordinary Capital reserve - realised and Revenue
Reserves are also distributable reserves.
9. The unaudited financial statements set out herein do not
constitute statutory accounts within the meaning of Section 240 of
the Companies Act 1985 and have not been delivered to the Registrar
of Companies. The figures for the year ended 31 December 2006 have
been extracted from the financial statements for that year, which
have been delivered to the Registrar of Companies; the auditors'
report on those financial statements was unqualified.
10. Copies of the unaudited interim results will be sent to
shareholders shortly. Further copies can be obtained from the
Company's Registered Office or will be available for download from
www.downing.co.uk.
---END OF MESSAGE---
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