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Elderstreet VCT Plc (DEVC)

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Thursday 28 September, 2017

Elderstreet VCT Plc

Elderstreet VCT plc : Half-yearly report

Elderstreet VCT plc : Half-yearly report

Elderstreet VCT plc

Half-Yearly Report for the six months ended 30 June 2017


 30 Jun 2017 31 Dec 2016 30 Jun 2016
 Pence Pence pence
Net asset value per share 61.6   62.8   68.9
Cumulative distributions paid per share 97.5   96.0   93.5
Total return per share 159.1   158.8   162.4


I am pleased to present the Half-Yearly Report for Elderstreet VCT plc for the six months ended 30 June 2017. During the period the Company undertook a successful new fundraising and has now started to benefit from the enhanced resources as part of the co-investment agreement between the Investment Manager and Draper Esprit.

Net asset value, results and dividends

At 30 June 2017, the Company's net asset value ("NAV") per share stood at 61.6p, an increase of 0.3p or 0.5% since 31 December 2016, after adjusting for the total dividends of 1.5p per share paid during the period.

The return on activities after taxation for the period was £75,000 (2016: £316,000), comprising a revenue return of £271,000 (2016: £333,000) and a capital loss of £196,000 (2016: £17,000).

In view of a number of realisations that have taken place, the Board has decided to pay the interim dividend at an earlier date than usual this year. A dividend of 1.5p per share will therefore be paid on 29 September 2017 to Shareholders on the register at 8 September 2017. The Board expects the interim dividend to revert to being paid in December in future.


The Company launched an offer for subscription in December 2016, which has to date raised £17.0 million.  The offer has now been extended to 30 November 2017.

The offer has resulted in the Company now having a significant level of funds available for investment. A number of potential investments are now starting to flow through from the new arrangements with Draper Esprit and we believe this should allow these new funds to be employed in attractive opportunities in a reasonably short period of time.

In view of the positive response by investors to the fundraising and the indications that there is strong deal flow, the Company is planning to launch a further £20 million offer for subscription in the coming months. Full details will be available in due course.

Venture capital investments

During the period, actual investment activity was at a relatively low level.

The Company made one full and one partial disposal and received further deferred consideration from a previous disposal. These transactions generated total proceeds of £4.3m and gains over carrying value of £740,000.

The partial disposal was in respect of £450,000 of the loan notes issued to Fords Packaging Top Co Limited, which were redeemed at par value. The Company continues to hold a small loan note holding of £8,332, alongside the equity interest.

The full disposal was the realisation of the Company's investment in Concorde Solutions Limited. Total proceeds were £1.6m, resulting in a gain in the period of £224,000.

Also, Wessex Advanced Switching Products Limited ("WASP"), a successful realisation from 2015, paid further deferred consideration of £525,000 to the Company. This is the now final proceeds from an investment that has produced an excellent outcome for Shareholders.

There were also two additions during the period which totalled £475,000. Macranet Limited was restructured such that loan notes of £776,250 were converted at par along with accrued interest of £175,000, as part of a funding round by new third party investors, into equity. There were also two follow on investments totalling £300,000 in AngloINFO. This business is making some headway but the Manager is taking a cautious approach in funding the company.

At the period end, the Company held a portfolio of 22 venture capital investments, valued at £16.9 million.

During the period the Manager has presented a number of new investment opportunities to the Board which have been approved and have subsequently completed or are expected to complete over the coming months. The Board has committed to four of these new deals, totalling £5 million, alongside Draper Esprit funds, and completion is subject to receiving HMRC approval. Two of these opportunities are in the healthtech sector, one in fintech and the other in the digital marketing space. We therefore expect to see increased new investment activity over the second half of the year.


At the period end the Board reviewed the valuation of the unquoted investments and made some adjustments. The largest adjustment was an uplift in the value of Fords Packaging Top Co Limited by £505,000. The business has continued to perform strongly and is starting to successfully explore new markets.

On the negative side, a reduction in value of £490,000 for Baldwin and Francis was required. The business has faced some major challenges but a refinancing has been completed and there are some prospects that the business can now make some recovery. The other major adjustment has been a write down of £351,000 against the investment in Ridee. The Company operates in the same space as Deliveroo, UberEATS and others and has found competition to be fierce.

In terms of the quoted investments, the holding in Access Intelligence plc fell by £513,000.  The Manager is, however, satisfied that the business is continuing to make progress and the investment remains a long term hold.

In total the portfolio produced unrealised losses of £817,000 for the period. Despite the movement in this period, the Board remains generally satisfied with the investment portfolio.


Fixed income securities

The Company disposed of its remaining fixed income investments during the period. New fixed interest investments cannot be made under the current VCT regulations and so the decision was taken to hold these funds as cash while awaiting qualifying investment opportunities.

The realisation of the fixed income portfolio generated proceeds of £1.5m and resulted in total gains over cost of £26,000.

Share buybacks

The Company has a policy of buying in shares that become available in the market at approximately a 7.5% discount to the latest published net asset value (subject to applicable regulations and liquidity considerations).

In line with this policy, during the period the Company purchased 194,000 shares for cancellation for an aggregate consideration of £112,000, equating to an average price of 57.4p per share.

Any Shareholders who are considering selling their shares will need to use a stockbroker. Such Shareholders should ask their stockbroker to register their interest in selling their shares with Shore Capital, who act as the Company's corporate broker.

Year end and Company name

As the company starts to work more closely with Draper Esprit, it will be helpful to align the reporting periods of the Company with that of Draper Esprit. The Board has therefore decided to change the Company's year end from 31 December to 31 March. The next Annual Report will cover the 15 month period to 31 March 2018 and will be published in June or July 2018.

The Board has also given consideration to whether it is now appropriate to make a change to the Company's name. In view of the fact that Draper Esprit is now providing a significant level of resources to the Company through Elderstreet, the Board is planning to rename the Company Elderstreet Draper Esprit VCT plc. The Board believes that this change will help avoid confusion in the marketplace, especially for new investors, and expects the change of name to coincide with the fundraising launch mentioned above.


As I indicated in my statement in the last Annual Report, this is a time of transition for your Company. Draper Esprit is now working closely with the Company's Manager, Elderstreet Investments, in sourcing new investments, focussed on the technology sector. As we have noted previously, this approach will, over time, increase the risk profile of the portfolio, however the rewards in this area can be great.

The UK Government is currently undertaking a "Patient Capital Review" which seeks to strengthen the UK as a place for growing innovative businesses. The VCT scheme is being reviewed as part of this exercise and is possible that there are further changes to the VCT regulations as a result. The Board believes that VCTs have a valuable role to play in this area, which has been demonstrated by some of the Company's past successes. With the changes to VCT regulations that have already taken place over the last two years, the Board believes that the support that VCTs provide for growing businesses is now well focussed. We expect to see a number of new businesses join the portfolio over the remainder of the year and look forward to supporting them in their development, while providing the prospect of good returns for our Shareholders.

I look forward to updating Shareholders in the next Annual Report for the 15 month period to 31 March 2018.

David Brock


in period
% of
by value
Top ten venture capital investments        
Lyalvale Express Limited 1,915 3,903 - 10.5%
Fords Packaging Topco Limited 2,433 3,850 505 10.3%
Access Intelligence plc* 2,333 2,476 (513) 6.6%
Fulcrum Utility Services Limited* 500 2,271 124 6.1%
AngloINFO Limited 2,577 1,869 - 5.0%
Macranet Limited 1,037 876 (161) 2.4%
Baldwin & Francis Limited 1,534 422 (490) 1.1%
Cashfac PLC 260 394 66 1.1%
Servoca PLC 333 300 72 0.8%
Interquest Group PLC 226 172 16 0.5%
  13,148 16,533 (381) 44.4%
Other venture capital investments 5,081 368 (436) 0.9%
  18,229 16,901 (817) 45.3%
Cash at bank and in hand   20,357   54.7%
Total investments   37,258   100.0%

All venture capital investments are unquoted unless otherwise stated.

* Quoted on AIM

SUMMARY OF INVESTMENT MOVEMENTS for the six months ended 30 June 2017

Venture capital investments  
AngloINFO Limited 300
Macranet Limited 175


 CostValue at
 £'000 £'000 £'000  £'000  £'000
Fixed income securities          
United Kingdom 1.25% Gilt 22/07/2018 892 925 919 28 (6)
United Kingdom 1.00% Gilt 07/09/2017 614 616 613 (2) (3)
S&W Investment Funds Cash Fund 10 10 10 - -
  1,516 1,551 1,542 26 (9)
Venture capital investments          
Concorde Solutions Limited 1,650 1,525 1,749 99 224
Fords Packaging Top Co Limited 450 450 450 - -
  2,100 1,975 2,199 99 224
Retention proceeds          
Wessex Advanced Switching Products Limited - - 525 525 525
  3,616 3,526 4,266 650 740


  30 Jun 2017 30 Jun 2016 31 Dec
 Note£'000 £'000 £'000
Fixed assets           
Investments   16,901   21,319   20,769
Current assets            
Debtors   358   1,853   342
Cash at bank and in hand   20,357   2,560   2,302
    20,715   4,413   2,644
Creditors: amounts falling due within one year   (192)   (151)   (153)
Net current assets   20,523   4,262   2,491
Net assets   37,424   25,581   23,260
Capital and reserves            
Called up share capital 7 3,035   1,855   1,852
Capital redemption reserve 9 495   481   485
Share premium 9 19,776   5,452   5,452
Merger Reserve 9 1,828   1,828   1,828
Special reserve 9 1,722   2,394   2,058
Capital reserve - unrealised 9 2,432   4,060   3,161
Capital reserve - realised 9 8,115   9,064   8,088
Revenue reserve 9 21   447   336
Equity shareholders' funds6 37,424   25,581   23,260
Basic and diluted net asset value per share661.6p 68.9p 62.8p

UNAUDITED INCOME STATEMENT for the six months ended 30 June 2017




Six months ended
30 Jun 2017

Six months ended
30 Jun 2016
31 Dec
  RevenueCapitalTotal RevenueCapitalTotal Total
Note£'000£'000£'000 £'000£'000£'000 £'000
Income   470 - 470   526 - 526   603
Gains/(losses) on investments:                  
- realised   - 740 740   - 539 539   (1,312)
- unrealised   - (817) (817)   - (373) (373)   445
    470 (77) 393   526 166 692   (264)
Investment management fees (58) (175) (233)   (61) (183) (244)   (500)
Other expenses   (141) 56 (85)   (132) - (132)   (269)
Return on ordinary activities before tax  271 (196) 75   333 (17) 316   (1,033)
Tax on total comprehensive income and ordinary activities   - - -   - - -   -
Return attributable to shareholders4 271 (196) 75   333 (17) 316   (1,033)
Basic/diluted return per share40.7p(0.5p)0.2p 0.9p0.0p0.9p 3.0p

All Revenue and Capital items in the above statement are derived from continuing operations. The total column within the Income Statement represents the profit and loss account of the Company.

UNAUDITED STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2017

Called up
share capital
Capital redemption reserveShare PremiumMerger reserveSpecial reserveCapital reserve-unrealisedCapital reserve-realisedRevenue reserveTotal
At 1 January 2017 1,852 485 5,452 1,828   2,058 3,161 8,088 336 23,260
Issue of new shares 1,193 - 14,324 - - - - - 15,517
Share Issue costs - - - - - - - (404) (404)
Purchase of own shares (10) 10 - -  (112) - - - (112)
Expenses charged to capital - - - - - - (119) - (119)
(Losses)/gains on investments - - - - - (817) 740 - (77)
Transfer between reserves - - - - (224) 88 136 - -
Dividends paid - - - - - - (730) (182) (912)
Revenue return for the period - - - - - - - 271 271
At 30 June 2017 3,035 495 19,776 1,828 1,722 2,432 8,115 21 37,424

UNAUDITED STATEMENT OF CASH FLOWS for the six months ended 30 June 2017

  Six months
 30 Jun
 Six months
30 Jun

31 Dec

 £'000 £'000 £'000
Cash flow from operating activities     
Return on ordinary activities before tax   75   316   (1,033)
Losses/(gains) on investments   77   (166)   867
(Increase)/decrease in debtors   (15)   (101)   1,415
Increase/(decrease) in creditors   38   (459)   (448)
Return attributable to equity shareholders  175   (410)   801

Cash flow from investing activities

Purchase of investments   (475)   (1,502)   (1,892)
Sale of investments   4,266   544   445


Net cash (outflow)/inflow from investing activities  3,791   (958)   (1,447)



Cash flows from financing activities

Proceeds from share issue   15,517   1,839   1,830
Share issue costs   (404)   -   -
Purchase of own shares   (112)   (93)   (139)
Equity dividends paid   (912)   (931)   (1,856)
Net cash inflow/(outflow) from financing activities  14,089   815   (165)
(Decrease)/increase in cash  18,055   (553)   (811)
Net movement in cash           
Beginning of period   2,302   3,113   3,113
Net cash (outflow)/inflow   18,055   (553)   (811)
End of period   20,357   2,560   2,302


NOTES TO THE UNAUDITED FINANCIAL STATEMENTS for the six months ended 30 June 2017

1. The unaudited half yearly results cover the six months to 30 June 2017 and have been prepared in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" revised January 2009 and in accordance with the accounting policies set out in the statutory accounts for the year ended 31 December 2016, which were prepared in accordance with the United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law), including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic of Ireland.

2. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

3. The comparative figures are in respect of the six months ended 30 June 2016 and the year ended 31 December 2016 respectively.

4. Basic and diluted return per share

 Six months
30 Jun 2017
 Six months
30 Jun 2016
31 Dec 2016
Return per share based on:          
Net revenue gain for the period (£'000) 271   333   222
Capital return per share based on:          
Net capital loss for the period (£'000) (196)   (17)   (1,255)
Weighted average number of shares 41,615,341   35,889,194   35,214,342

5. Dividends


Six months ended
30 Jun 2017
31 Dec 2016


Per share RevenueCapitalTotal Total


pence £'000£'000£'000 £'000
Paid in the period              
2016 Final 1.5p   304 608 912   -
2016 Interim 2.5p   - - -   926
2015 Final 2.5p   - - -   930
      304 608 912   1,856

6. Basic and diluted net asset value per share

 Six months
30 Jun 2017
 Six months
30 Jun 2016
31 Dec 2016
Net asset value per share based on:          
Net assets (£'000) 37,424   25,581   23,260
Number of shares in issue at the period end 60,716,778   37,106,366   37,034,366
Net asset value per share 61.6p   68.9p   62.8p

7. Called up share capital

 Six months
30 Jun 2017
 Six months
30 Jun 2016
31 Dec 2016
Ordinary shares of 5p each          
Number of shares in issue at the period end 60,716,778   37,106,366   37,034,366
Nominal value (£'000) 3,035   1,855   1,852

During the period the Company allotted 23,876,412 Ordinary Shares of 5p each ("Ordinary Shares") under an Offer for Subscription that launched in December 2016, at an average price of 63.3p per share. Gross proceeds received thereon were £15.5 million, with issue costs in respect of the offer amounting to £403,760.

During the period, the Company purchased 194,000 shares for cancellation for an aggregate consideration of £112,000, at an average price of 57.4p per share (approximately equal to a 7.5% discount to the most recently published NAV at the time of purchase) and representing 0.5% of the share capital in issue as at 1 January 2017.

8. Investment commitments
Since the end of the tax year the VCT has committed to four new investments totalling £5 million as part of the co-investment agreement alongside Draper Esprit funds. Completion of these investments is contingent on receiving VCT clearance from HMRC. Two of these deals are in healthtech, one in fintech, and one in an affiliate marketing software business. Total funds committed in these four investment rounds was over £50 million.  

9. Reserves
The special reserve is available to the Company to enable the purchase of its own shares in the market without affecting its ability to pay dividends, and allows the Company to write back realised capital losses arising on disposals and impairments.

Distributable reserves are calculated as follows:

 Six months
30 Jun 2017
 Six months
30 Jun 2016
31 Dec 2016
 £'000 £'000 £'000
Special reserve 1,722   2,394   2,058
 Capital reserve - realised 8,115   9,064   8,088
 Revenue reserve 21   447   336
 Merger reserve - distributable element 423   423   423
 Unrealised losses
  - excluding unrealised unquoted gains
(1,781)   57   (657)
  8,500   12,385   10,248

The Company has categorised its financial instruments using the fair value hierarchy as follows:

- Level a Reflects financial instruments quoted in an active market (fixed interest investments, and investments in shares quoted on either the Main or AIM Markets);
- Level b Reflects financial instruments that have prices that are observable either directly or indirectly; and
- Level c i) Reflects financial instruments that use valuation techniques that are based on observable market data.
ii) Reflects financial instruments that use valuation techniques that are not based on observable market data (unquoted equity investments and loan note investments).

  Six months ended 30 June 2017 Year ended 31 Dec 2016
  Level aLevel bLevel c(ii)Total Level aLevel bLevel c(ii)Total
  £'000£'000£'000£'000 £'000£'000£'000£'000
Fixed interest securities - - - -   1,551 - - 1,551
AIM quoted shares 4,248 - 87 4,335   4,516 - 204 4,720
Loan notes - - 3,272 3,272   - - 4,839 4,839
Unquoted shares - - 9,294 9,294   - - 9,659 9,659
  4,248 - 12,653 16,901   6,067 - 14,702 20,769

10. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required in the Company's half-yearly results to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

The Board has concluded that the key risks facing the Company over the remainder of the financial period are as follows:

- investment risk associated with investing in small and immature businesses;
- liquidity risk arising from investing mainly in unquoted businesses; and
- failure to maintain approval as a VCT.

In all cases the Board is satisfied with the Company's approach to these risks. As a VCT, the Company is forced to have significant exposure to relatively immature businesses. This risk is mitigated to some extent by holding a well-diversified portfolio.

With a reasonably illiquid venture capital investment portfolio, the Board ensures that it maintains an appropriate proportion of its assets in cash and liquid instruments.

The Company's compliance with the VCT regulations is continually monitored by the Administration Manager, who regularly reports to the Board on the current position. The Company also retains Philip Hare and Associates LLP to provide regular reviews and advice in this area. The Board considers that this approach reduces the risk of a breach of the VCT regulations to a minimal level.

The Company has considerable financial resources at the period end, and holds a diversified portfolio of investments. As a result, the Directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook.

The Directors have concluded that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

11. The Directors confirm that, to the best of their knowledge, the half-yearly financial statements have been prepared in accordance with the "Statement: Half-Yearly Financial Reports" issued by the UK Accounting Standards Board and the half-yearly financial report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the current financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

12. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the year ended 31 December 2016 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor's report on those financial statements was unqualified.

13. Copies of the unaudited half-yearly results will be sent to Shareholders shortly. Further copies can be obtained from the Company's registered office or downloaded from and

This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Elderstreet VCT plc via Globenewswire

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