Interim Results
Crown Place VCT PLC
28 February 2008
28 February 2008
CROWN PLACE VCT PLC
Preliminary announcement of interim results for the six months ended 31 December
2007.
Crown Place VCT PLC ('the Company'), managed by Close Ventures Limited, today
announces the half-yearly results for the six months ended 31 December 2007. The
announcement has been approved by the Board of Directors on 28 February 2008.
FINANCIAL HIGHLIGHTS
Shareholder value since launch
Proforma (i) Proforma (i)
Murray VCT Murray VCT 2 Crown Place
PLC PLC VCT PLC*
Previous holders of shares in:
Dividends per share paid to 31 December 2007 (pence per share) 34.60 35.78 30.48
(ii)
Net asset value (pence per share) as at 31 December 2007 (i) 31.01 37.07 43.56
65.61 72.85 74.04
(i) The proforma shareholder value is based on the dividends per share
paid to 31 December 2007, with a pro-rata net asset value per share based upon
the proportion of shares received by Murray VCT PLC (now renamed CP1 VCT PLC)
and Murray VCT 2 PLC (now renamed CP2 VCT PLC) shareholders at the time of the
merger.
(ii) Prior to 6 April 1999, venture capital trusts were able to add 20% to
dividends, and figures for the period up until 6 April 1999 are included at the
gross equivalent rate actually paid to shareholders.
* formerly Murray VCT 3 PLC
The first dividend for the current financial year of 1.25 pence per share was
paid to shareholders on 28 December 2007. The Directors have also declared a
second dividend of 1.25 pence per Crown Place VCT PLC share (of which 0.25 pence
is to be paid from revenue and 1.0 pence out of realised capital gains), subject
to approval from HM Revenue & Customs. The record date and payment date for this
dividend will be announced on the London Stock Exchange RNS Service.
Summary of returns since Close Ventures Limited was appointed investment manager
(pence per share)
Net asset value as at 6 April 2005 (date that Close Ventures Limited was appointed
investment manager) 43.4
Total dividends paid for the period from 6 April 2005 to 31 December 2007 5.55
Increase in net asset value from 6 April 2005 to 31 December 2007 0.16
Total return to shareholders since Close Ventures Limited was appointed investment 5.71
manager
Annualised shareholder return percentage since 6 April 2005 4.9%
Annualised tax free* yield on share price of 40.5 pence as at 31 December 2007 (on
the basis of the current dividend run rate of 2.5 pence per annum) 6.2%
* VCT dividends are not subject to income tax
INTERIM MANAGEMENT REPORT
Overview
The Group aims to provide shareholders with a regular and predictable dividend
income together with protection of capital and the prospects of longer term
capital growth. In the last annual report I indicated that, subject to the
performance of the investment portfolio, the Board would aim to maintain an
annualised dividend distribution of 2.5 pence per share. During the six month
period to 31 December 2007, the Group paid a first dividend of 1.25 pence per
share to shareholders and expects to pay a second dividend of 1.25 pence per
share in May 2008, subject to HM Revenue & Customs approval.
At the end of the six month period and following the payment of the first
dividend of 1.25 pence per share on 28 December 2007, the net asset value per
share was 43.6 pence, compared to 44.8 pence as at 30 June 2007. The reduction
in net asset value is as a result of the Board's cautious view of valuations in
the light of the current economic environment. The total shareholder value
created, representing the combined dividends paid and change in net asset value,
was 0.05 pence per share. Since Close Ventures took over the management of the
Group in April 2005, the total return to shareholders has been 5.7 pence per
share or 5% per annum on the opening net asset value.
Results
In the six months to 31 December 2007, the Group made a revenue profit after tax
of £563,000 and a total loss after tax of £88,000 after allowing for provisions
on certain investments. Investment income and deposit interest continued to
grow as compared to the previous six months to just under £1 million, while
total expenses were in line with budget and with the indications given at the
time of the merger in January 2006.
Portfolio review
During the six month period the Group continued to make progress in realising
its older unquoted investments and reinvesting the proceeds in investments that
are more suited to the overall portfolio investment policy. Full or partial
realisations were made from six unquoted investments, the proceeds of which were
at or above book value. The total consideration received was £3.9 million.
This included the sale of the Bold Pub Company Limited, a more recent
asset-backed investment, realising a 38% profit on cost. Following the period
end the Group realised a further £1.7 million from the sale of its investment in
TLC (Tender Loving Childcare) Limited.
The majority of the portfolio continued to trade in line with expectations: PSCA
International Limited, Chichester (Holdings) Limited and Xceleron Limited
continued to trade particularly well, and this is reflected in the valuation of
our investments in these companies. Against this, we have prudently reduced the
valuations of our investments in ELE Advanced Technologies Limited, which is in
the process of reorganising its business through a partial move of its
manufacturing capabilities to Slovakia. Trading at Sanastro PLC and RFI Global
Solutions Limited was behind plan due to increased competition and therefore
their respective valuations were reduced.
Overall, the unquoted portfolio now has 45 investments, which should ensure a
broad diversification of risk. Some 57% of the portfolio, by value, is invested
in asset backed businesses with no external debt, 30% in development capital
investments and 13% in earlier stage, higher growth businesses. The high
percentage of asset backed investments should position the portfolio well in the
current climate of economic uncertainty and is expected to continue to provide
the Group with an attractive level of income.
Consistent with the policy of the Board, the AIM portfolio was reduced
significantly as a result of successful realisations during the six month
period, so that it represented only 3.8% of the total net assets of the Group as
at 31 December 2007. Full realisations were made from the investments in Zetar
PLC, Dobbies Garden Centres PLC and Synexus Clinical Research PLC and a partial
realisation was made in Cello Group PLC. The total proceeds of these sales were
£2.7 million and each one resulted in a realised profit for the Group. The FTSE
AIM All Share index has declined by more than 20% since 30 June 2007 and it is
the view of the Board that the AIM market will continue to underperform in the
near term. Against this background, we are pleased to have made profitable
realisations and scaled down the overall exposure to AIM quoted companies.
New investments
The Group made five new investments in the period for a total cost of £1.5
million. These include the £1 million investment in Sky Hotel (Heathrow)
Limited, which owns and operates a hotel near Heathrow's new Terminal 5, a
property with significant development potential. In addition, the Group made
five follow-on investments for a total cost of £1 million.
The Group is one of a small number of venture capital trusts that are able to
invest in hotels and care home companies, an area where the investment manager
has developed significant expertise over the past 12 years. These two sectors,
which provide a good fit with the portfolio investment strategy, are not
permitted investments for venture capital trusts raised after 1997, thus
differentiating the Group from other VCTs.
Cash and cash equivalents
Following the successful realisations listed above, the Group had cash and cash
equivalents of £8.6 million as at 31 December 2007. In addition, the Group held
Nationwide Building Society floating rate notes of £2.7 million. Combined,
these represent 34% of the net asset value of the Group as at that date and will
provide sufficient liquidity to allow the Group to capitalise on investment
opportunities in the short to medium term.
Dividends
The Group's policy is to pay regular and predictable dividends to investors out
of revenue income and realised capital gains. In the last annual report I
indicated that, subject to the performance of the investment portfolio, the
Board will aim to maintain an annualised dividend distribution of 2.5 pence per
share. The first dividend for the current financial year of 1.25 pence per
share was paid to shareholders on 28 December 2007. The Board has declared a
second dividend of 1.25 pence per share (of which 0.25 pence is to be paid from
revenue and 1.0 pence out of realised capital gains) which is expected to be
paid in May 2008, subject to HM Revenue & Customs approval. These dividends are
free of tax to shareholders.
Discount management and share buy backs
It is the Group's policy to continue to buy back shares in the market, subject
to the overall constraint that such purchases are in the Group's interest,
including the maintenance of sufficient resources for investment in existing and
new investee companies. The Group bought back 1,456,436 shares for cancellation
in the six month period under review at prices ranging from 39.0 pence per share
to 40.5 pence per share. As at 31 December 2007, the Company held 7,260,410
Ordinary Shares in Treasury, representing 8.8% of the issued share capital.
These shares may be re-issued at a future date.
Outlook
The Board and the Manager continue to take a cautious view on the outlook for
the wider UK economy and our approach to valuations is in line with this view.
Against this background, the Manager's conservative investment policy, fully
endorsed by the Board, of building up a portfolio with a high proportion in
asset backed businesses without external gearing, should provide a comforting
degree of capital protection if economic conditions deteriorate. In addition,
the Group has a very low exposure to the AIM market and holds approximately 34%
of its net assets in cash and similar instruments. This will help protect the
capital base of the Group in the short term, while in the medium term it will
allow the Group to take advantage of attractive investment opportunities
presented to it as a result of tighter credit conditions. Overall, the Board
believes that VCTs should be seen as a long term savings product and in this
context the directors consider that the Group is well positioned to deliver
shareholder value.
Patrick Crosthwaite
Chairman
28 February 2008
RESPONSIBILITY STATEMENT
The Directors have chosen to prepare this Half-yearly Financial Report for the
Group in accordance with International Financial Reporting Standards ('IFRS').
In preparing these summarised financial statements for the six month period to
31 December 2007, the Directors, confirm that to the best of their knowledge:
(a) the summarised set of financial statements has been prepared in accordance
with International Accounting Standard (IAS) 34 'Interim Financial Reporting'
issued by the International Accounting Standards Board;
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
six months of the year);
(c) the summarised set of financial statements give a true and fair view in
accordance with IFRS of the assets, liabilities, financial position and profit
and loss of the Group for the period and comply with IFRS and Companies Act 1985
and 2006 and;
(d) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and changes
therein).
This Half-yearly Financial Report has not been audited or reviewed by the
auditors.
By order of the Board
Patrick Crosthwaite
Chairman
28 February 2008
SUMMARY CONSOLIDATED INCOME STATEMENT
Unaudited Audited Unaudited
Six months to 31 Sixteen months to 30 June Ten months to 31
December 2007 2007 December 2006
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment income and 3 986 - 986 2,519 - 2,519 1,644 - 1,644
deposit interest
Investment management (87) (260) (347) (291) (872) (1,163) (150) (450) (600)
fees
Other expenses (160) - (160) (509) 23 (486) (355) 23 (332)
Non-recurring operating - - - (4) - (4) (4) - (4)
expenses
Operating profit/(loss) 739 (260) 479 1,715 (849) 866 1,135 (427) 708
(Losses)/gains on 2 - (476) (476) - 2,932 2,932 - 1,158 1,158
investments
Profit/(loss) before 739 (736) 3 1,715 2,083 3,798 1,135 731 1,866
taxation
Taxation 4 (176) 85 (91) (294) 273 (21) (135) 135 -
Profit/(loss) for the 563 (651) (88) 1,421 2,356 3,777 1,000 866 1,866
period
Basic and diluted return 6 (0.12) 4.76 2.32
per Ordinary share
(pence) (excluding
treasury shares)
The accompanying notes are an integral part of this Half-yearly Financial
Report.
The total column of this statement represents the Group's income statement,
prepared in accordance with International Financial Reporting Standards ('
IFRS'). The supplementary revenue and capital reserve columns are prepared under
guidance published by the Association of Investment Trust Companies.
The consolidated income statements include the results of the subsidiaries CP1
VCT PLC and CP2 VCT PLC.
Comparative figures have been extracted from the interim accounts for the ten
month period ended 31 December 2006 and the statutory accounts for the sixteen
month period ended 30 June 2007.
SUMMARY CONSOLIDATED BALANCE SHEET
Unaudited Audited
31 December 2007 30 June 2007
Notes £'000 £'000
Non-current assets
Investments 7 24,414 26,237
Current assets
Trade and other receivables 105 322
Cash and cash equivalents 8,629 8,367
8,734 8,689
Total assets 33,148 34,926
Current liabilities
Trade and other payables (387) (552)
Total assets less current 32,761 34,374
liabilities
Equity attributable to
equityholders
Ordinary share capital 8 8,246 8,392
Share premium 14,422 14,422
Capital redemption reserve 614 468
Own shares held (2,849) (2,849)
Retained earnings 12,328 13,941
Total shareholders' funds 32,761 34,374
Net asset value per Ordinary
share (excluding treasury
shares) (pence) 43.6 44.8
The consolidated balance sheets include the balance sheets of the subsidiaries
CP1 VCT PLC and CP2 VCT PLC.
Comparative figures have been extracted from the statutory accounts for the
period ended 30 June 2007.
These financial statements were agreed by the Board of Directors, and authorised
for issue on 28 February 2008 and were signed on its behalf by
Patrick Crosthwaite
Chairman
SUMMARY COMPANY BALANCE SHEET
Unaudited Audited
31 December 2007 30 June 2007
Notes £'000 £'000
Fixed assets
Fixed asset investments 7 24,414 26,237
Investment in subsidiary 18,088 17,978
undertakings
42,502 44,215
Current assets
Debtors 94 313
Cash at bank 3,088 3,900
3,182 4,213
Total assets 45,684 48,428
Creditors: amounts falling due (12,923) (14,054)
within one year
Total assets less current 32,761 34,374
liabilities
Capital and reserves
Ordinary share capital 8 8,246 8,392
Share premium 14,422 14,422
Capital redemption reserve 614 468
Own shares held (2,849) (2,849)
Retained earnings 12,328 13,941
Total shareholders' funds 32,761 34,374
Net asset value per Ordinary
share (excluding treasury
shares) (pence) 43.6 44.8
This Company balance sheet has been prepared in accordance with UK GAAP.
Comparative figures have been extracted from the statutory accounts for the
period ended 30 June 2007.
These financial statements were approved by the Board of Directors, and
authorised for issue on 28 February 2008 and were signed on its behalf by
Patrick Crosthwaite
Chairman
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Ordinary Capital Own
share Share redemption shares Retained
capital premium reserve held earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
As at 30 June 2007 8,392 14,422 468 (2,849) 13,941 34,374
Net profit for the period - - - - (88) (88)
Purchase of own shares for
cancellation
(including costs) (146) - 146 - (581) (581)
Dividends paid in period - - - - (944) (944)
As at 31 December 2007 8,246 14,422 614 (2,849) 12,328 32,761
As at 28 February 2006 8,610 14,422 250 (1,908) 13,581 34,955
Net profit for the period - - - - 3,777 3,777
Purchase of own shares for
cancellation
(including costs) (218) - 218 - (816) (816)
Cost of ordinary shares purchased for
Treasury
(including dealing costs) - - - (941) - (941)
Dividends paid in period - - - - (2,601) (2,601)
As at 30 June 2007 8,392 14,422 468 (2,849) 13,941 34,374
As at 28 February 2006 8,610 14,422 250 (1,908) 13,581 34,955
Net profit for the period - - - - 1,866 1,866
Cost of ordinary shares purchased for
Treasury
(including dealing costs) - - - (940) - (940)
Dividends paid in period - - - - (995) (995)
As at 31 December 2006 8,610 14,422 250 (2,848) 14,452 34,886
SUMMARY CONSOLIDATED CASH FLOW STATEMENT
Unaudited Audited Unaudited
Six months to Sixteen months to Ten months to
31 December 2007 30 June 2007 31 December 2006
Note £'000 £'000 £'000
Cash flows from operating activities
Investment income received 599 2,549 1,472
Deposit interest received 213 347 167
Secretarial fees paid (29) (85) (51)
Investment management fees paid (565) (1,242) (825)
Other cash payments (89) (634) (469)
Cash generated from operations 129 935 294
Tax (paid)/recovered (52) 1,431 1,431
Net cash flows from operating activities 9 77 2,366 1,725
Cash flows from investing activities
Purchases of investments (4,949) (7,773) (2,507)
Disposals of investments 6,690 14,949 7,413
Payment re loan guarantee - (1,662) (1,406)
Net cash flows from investing activities 1,741 5,514 3,500
Cash flows from financing activities
Equity dividends paid (944) (2,601) (995)
Repurchase of Ordinary shares for (612) (817) -
cancellation
Purchase of Ordinary shares for treasury - (941) (974)
Net cash flows used in financing
activities (1,556) (4,359) (1,969)
Increase in cash and cash equivalents 262 3,521 3,256
Cash and cash equivalents at start of 8,367 4,846 4,846
period
Cash and cash equivalents at end of 10 8,629 8,367 8,102
period
The consolidated cash flow statements include the transactions of the
subsidiaries CP1 VCT PLC and CP2 VCT PLC.
Comparative figures have been extracted from the interim accounts for the ten
month period ended 31 December 2006 and the statutory accounts for the sixteen
month period ended 30 June 2007.
NOTES TO THE SUMMARISED SET OF FINANCIAL STATEMENTS
for the six months ended 31 December 2007 (unaudited)
1. Accounting policies
Group accounting policies
Basis of accounting
The Half-yearly Financial Report has been prepared using International
Accounting Standard (IAS) 34 'Interim Financial Reporting' and other accounting
policies consistent with International Financial Reporting Standards ('IFRS')
adopted for use in the European Union and therefore complies with the Articles
of the EU IAS regulation and with the Statement of Recommended Practice: '
Financial Statements of Investment Trust Companies' ('SORP') issued by the
Association of Investment Trust Companies ('AITC') in January 2003 and revised
in December 2005, in so far as this does not conflict with IFRS. The information
in this document does not include all of the disclosures required by IFRS and
SORP in full annual financial statements, and it should be read in conjunction
with the consolidated financial statements of the Group for the six month period
ended 30 June 2007. This interim financial information has been prepared
applying the accounting policies and presentation that were applied in the
preparation of the Group's published consolidated financial statements for the
six month period ended 30 June 2007.
Accounting policies
Basis of consolidation
The summarised financial statements incorporate the financial statements of the
Company and the entities controlled by the Company (its subsidiaries), for the
six month period ended 31 December 2007.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies into line with those used by the
Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
As permitted by Section 230 of the Companies Act 1985, the Company has not
presented its own profit and loss account. The amount of the Company's loss
before taxation for the period to 31 December 2007 dealt with in the accounts of
the Group is £107,000 (sixteen months to 30 June 2007: profit £3,554,000; ten
months to 31 December 2006: profit £1,716,000).
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being investment business. The Group invests in smaller companies
based in the UK.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values, at the
date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the subsidiaries,
plus any costs directly attributable to the business combination. The
subsidiary's identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3 'Business Combinations' are
recognised at their fair value at the acquisition date.
Estimates
The preparation of the Group's Half-yearly Financial Report requires estimates,
assumptions and judgements to be made, which affect the reported results and
balances. Actual outcomes may differ from these estimates, with a consequent
impact on the results of future periods. The significant estimates, assumptions
and judgements made in preparing the Group's Half-yearly Financial Report were
the same as those applied in the preparation of the Group's consolidated
financial statements for the sixteen month period ended 30 June 2007.
Investments
In accordance with IAS 39, equity investments are designated as fair value
through profit or loss ('FVTPL'). Investments listed on recognised exchanges are
valued at the closing bid prices at the end of the accounting period. Unquoted
investments' fair value is determined by the Directors in accordance with the
International Private Equity and Venture Capital Valuation Guidelines. Fair
value movements on equity investments and gains and losses arising on the
disposal of investments are reflected in the capital column of the Income
Statement in accordance with the AITC SORP.
Unquoted loan stock is classified as loans and receivables in accordance with
IAS 39 and carried at amortised cost using the Effective Interest Rate method ('
EIR'). Movements in the amortised cost relating to interest income are
reflected in the revenue column of the Income Statement and movements in respect
of capital provisions are reflected in the capital column of the Income
Statement. Loan stock accrued interest is recognised in the Balance Sheet as
part of the carrying value of the loans and receivables at the end of each
reporting period.
Investments are recognised as financial assets on legal completion of the
investment contract and are de-recognised on legal completion of the sale of an
investment.
It is not the Group's policy to exercise control or significant influence over
investee companies. Therefore in accordance with the exemptions under IAS 27 '
Consolidated and separate financial statements', those undertakings in which the
Group holds more than 20% of the equity are not regarded as associated
undertakings.
Issue costs
Issue costs associated with the allotment of share capital have been deducted
from the share premium account in accordance with IAS 32.
Taxation
Taxation is applied on a current basis in accordance with IAS 12 'Income taxes'.
Taxation associated with capital expenses is applied in accordance with the
SORP. In accordance with IAS 12, 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 financial statements. Deferred tax assets are recognised to the extent
that it is regarded as more likely than not that they will be recovered. The
specific nature of taxation of venture capital trusts means that it is unlikely
that any deferred tax will arise. The Directors have considered the requirements
of IAS 12 and do not believe that any provision should be made.
Dividends
In accordance with IAS 10 'Events after the balance sheet date', dividends are
accounted for by the Group in the period in which the dividend has been paid, or
approved by shareholders.
Company accounting policies
Accounting convention
The Half-yearly Financial Report has been prepared using accounting policies
consistent with Financial Reporting Standards ('FRS'). The information in this
document does not include all of the disclosures required by FRS and SORP in
full annual financial statements, and it should be read in conjunction with the
consolidated financial statements of the Company for the sixteen month period
ended 30 June 2007. This interim financial information has been prepared
applying the accounting policies and presentation that were applied in the
preparation of the Company's published consolidated financial statements for the
sixteen month period ended 30 June 2007 and with the Statement of Recommended
Practice: 'Financial Statements of Investment Trust Companies' ('SORP') issued
by the Association of Investment Trust Companies ('AITC') in January 2003 and
revised in December 2005.
True and fair override
The Company is no longer an investment company within the meaning of s266, of
the Companies Act 1985. However, it conducts its affairs as a venture capital
trust for taxation purposes under s842AA of the Income and Corporation Taxes Act
1988.
The absence of Section 266 status does not preclude the Company from presenting
its accounts in accordance with the AITC SORP and furthermore the Directors
consider it appropriate to continue to present the accounts in accordance with
the SORP.
In the opinion of the Directors the presentation adopted enables the Company to
report in a manner consistent with the sector within which it operates. The
Directors therefore consider that these departures from the specific provisions
of Schedule 4 of the Companies Act relating to the form and content of accounts
for companies other than investment companies and these departures from
accounting standards are necessary to give a true and fair view. The departures
have no effect on the return or balance sheet.
Investments in subsidiaries
The acquisition of subsidiaries is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values, at the
date of exchange of assets given, liabilities incurred or assumed plus any costs
directly attributable to the business combination. The assets and liabilities of
the subsidiaries have subsequently been measured at their fair value as at the
balance sheet date. The investments in subsidiaries are carried at fair value
determined by Directors based on the net assets method.
Investments
In accordance with FRS 26, equity investments are designated as FVTPL. Unquoted
investments' fair value is determined by the Directors in accordance with the
International Private Equity and Venture Capital Valuation Guidelines. Fair
value movements on equity investments and gains and losses arising on the
disposal of investments are reflected in the capital column of the Income
Statement in accordance with the AITC SORP.
Unquoted loan stock is classified as loans and receivables in accordance with
FRS 26 and carried at amortised cost using the EIR method. Loan stock accrued
interest is recognised in the Balance Sheet as part of the carrying value of the
loans and receivables at the end of each reporting period.
Investments listed on recognised exchanges are valued at the closing bid prices
at the end of the accounting period.
Investments are recognised as financial assets on legal completion of the
investment contract and are de-recognised on legal completion of the sale of an
investment.
It is not the Company's policy to exercise control or significant influence over
investee companies. Therefore in accordance with the exemptions under FRS 9 '
Associates and joint ventures', those undertakings in which the Company holds
more than 20% of the equity are not regarded as associated undertakings.
Taxation
Taxation is applied on a current basis in accordance with FRS 16 'Current tax'.
Taxation associated with capital expenses is applied in accordance with the
SORP. In accordance with FRS 19, 'Deferred tax', 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 financial statements. Deferred tax assets are recognised to the
extent that it is regarded as more likely than not that they will be recovered.
The specific nature of taxation of venture capital trusts mean that it is
unlikely that any deferred tax will arise. The Directors have considered the
requirements of FRS 19 and do not believe that any provision should be made.
Dividends
In accordance with FRS 21 'Events after the balance sheet date', dividends are
accounted for in the period in which the dividend has been paid, or approved by
shareholders.
Issue costs
Issue costs associated with the allotment of share capital have been deducted
from the share premium account in accordance with FRS 25.
Group and Company accounting policies
Investment income
Dividends receivable on equity investments are taken to revenue on an
ex-dividend basis. Fixed returns on debt securities are recognised on a time
apportionment basis using an effective interest rate over the life of the
financial instrument.
Investment management fees, performance incentive fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged
through the revenue account of the Income Statement, except for management fees
and performance incentive fees. These are allocated in part to the capital
account, to the extent that these relate to an enhancement in the value of the
investments and in line with the Board's expectation that over the long term 75%
of the Company's investment returns will be in the form of capital gains.
Debtors and creditors
• Debtors are non-interest bearing, are short term in nature and are
accordingly stated at their nominal value, as reduced by appropriate allowances
for estimated irrecoverable amounts. The Directors consider that the carrying
amount of debtors approximates their fair value.
• Current liabilities are non-interest bearing and are stated at
their nominal value. The Directors consider that the carrying amount of current
liabilities approximates their fair value.
Reserves
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is
diminished through the repurchase and cancellation of the Company's own shares.
Own shares held reserve
This reserve accounts for amounts paid on buying Treasury shares.
2. (Losses)/gains on investments
Six months Sixteen months Ten months
to 31 December to 30 June to 31 December
2007 2007 2006
£'000 £'000 £'000
Net realised gains/(losses) 258 853 (1,234)
Unrealised (losses)/gains (734) 2,079 2,392
(476) 2,932 1,158
3. Investment income and deposit interest
Six months Sixteen months Ten months
to 31 December to 30 June to 31 December
2007 2007 2006
£'000 £'000 £'000
Loan stock interest income 653 1,839 1,172
Dividend income 60 148 140
Floating rate note income 63 199 185
Other income - 48 32
Bank deposit income 210 285 115
986 2,519 1,644
4. Taxation
The tax charge for the sixteen months to 31 December 2007 is £91,158 (sixteen
months to 30 June 2007: £21,009; ten months to 31 December 2006: £nil). The tax
charge is calculated on return on ordinary activities excluding any (losses)/
gains on investments. The tax charge is based on a tax rate of 30% less marginal
relief. Additionally, the tax charges of the subsidiaries are reduced to £nil
as a result of trading losses.
5. Amounts recognised as distributions to equity shareholders in the
period
Six months to 31 December 2007 Sixteen months to 30 June 2007 Ten months to 31 December 2006
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
First dividend paid
on 28
December 2007 -
1.25p
per share 604 340 944 - - - - - -
First dividend paid
on 22
September 2006 -
1.25p
per share - - - - 997 997 - 997 997
Second dividend
paid on 19
January 2007 -
1.25p
per share - - - 443 542 985 - - -
Third dividend paid
on 15
June 2007 - 0.8p
per share - - - - 619 619 - - -
604 340 944 443 2,158 2,601 - 997 997
The Board has declared a second dividend of 1.25 pence per share (of which 0.25
pence is to be paid from revenue and 1.0 pence out of realised capital gains).,
subject to approval from HM Revenue & Customs. The record date and payment date
of this dividend will be announced on the London Stock Exchange RNS service.
6. Basic and diluted return per share
Return per share has been calculated on 76,215,222 (30 June 2007: 79,277,922; 31
December 2006: 80,268,569) Ordinary Shares being the weighted average number of
shares in issue for the six month period (excluding treasury shares).
There are no convertible instruments, derivatives or contingent share agreements
in issue for the Company hence there are no dilution effects to the return per
share. The basic return per share is therefore the same as the diluted return
per share.
7. Consolidated fixed asset investments
31 December 30 June
2007 2007
£'000 £'000
Investments held at 'fair value through 11,775 12,587
profit or loss'
Investments held at amortised cost 12,639 13,650
24,414 26,237
8. Ordinary share capital
31 December 30 June
2007 2007
£'000 £'000
Authorised
140,000,000 Ordinary shares of 10p each 14,000 14,000
Allotted
82,463,998 Ordinary shares of 10p each (30 June 2007: 8,246 8,392
83,920,434)
Allotted excluding treasury shares
75,203,588 Ordinary shares of 10p each (30 June 2007: 7,520 7,666
76,660,024)
The Company purchased 1,456,436 Ordinary shares for cancellation during the six
month period to 31 December 2007 (June 2007: 2,179,439) at a cost of £581,000
(30 June 2007: £818,000). This represented approximately 1.7% of the share
capital as at 1 July 2007. The shares purchased for cancellation were funded
from the retained earnings reserve.
Treasury shares
During the six month period to 31 December 2007 the Company purchased none (30
June 2007: 2,504,826) of its own Ordinary Shares to be held in treasury. The
total number of shares held in treasury as at 31 December 2007 was 7,260,410
representing 8.8% of the share capital.
9. Reconciliation of net return on ordinary activities before taxation to
net cash inflow from operating activities
Six months Sixteen months Ten months
to 31 December to 30 June to 31 December
2007 2007 2006
£'000 £'000 £'000
Revenue operating profit 739 1,715 1,135
Capitalised expenses (260) (849) (427)
(Increase)/decrease in debtors (269) 1,642 1,353
(Decrease)/increase in creditors (133) (142) (336)
Net cash inflow from operating 77 2,366 1,725
activities
10. Analysis of changes in cash during the period
Six months Sixteen months Ten months
to 31 December to 30 June to 31 December
2007 2007 2006
£'000 £'000 £'000
Opening cash balances 8,367 4,846 4,846
Net cash inflow 262 3,521 3,256
8,629 8,367 8,102
11. Contingencies, guarantees and financial commitments
The Company did not have any contingencies or guarantees as at 31 December 2007.
12. Post Balance Sheet Events
The following transactions have completed since 31 December 2007:
• Partial redemption from PSCA International Limited for £37,000.
• Divestment of TLC (Tender Loving Childcare) Limited for £1.7 million
• Investment of £150,000 in Opta Limited
13. Related Party Transactions
The Manager, Close Ventures Limited, is considered to be a related party by
virtue of the fact that it is party to a management contract from the Group.
During the period, services of a total value of £347,000 (sixteen months to June
2007: £1,163,000; ten months to December 2006: £600,000) were provided to the
Group. At 31 December 2007, the amount due to Close Ventures Limited, disclosed
as accruals, was £167,000 (30 June 2007: £397,000).
Buy-backs of Ordinary shares during the six month period to 31 December 2007
were transacted through Winterflood Securities Limited, a subsidiary of Close
Brothers Group plc, the ultimate parent company of Close Ventures Limited. A
total of 1,456,436 shares were purchased for cancellation at an average price of
40 pence per share.
14. Other information
The information set out in the Half-yearly Financial Report does not constitute
the Group's statutory accounts for the six month period ended 31 December 2007
or the ten month period ended 31 December 2006. The financial information for
the sixteen month period ended 30 June 2007 does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. A copy of the
statutory accounts for that period has been delivered to the Registrar of
Companies. The auditors' report on those accounts was not qualified and did not
contain statements under s237 (2) or (3) of the Companies Act 1985.
15. Publication
This Half-yearly Financial Report is being sent to shareholders and copies will
be made available to the public at the registered office of the Company and at
Companies House. The Half-yearly Financial Report will also be made available to
the public via the FSA viewing facility.
This information is provided by RNS
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