LEI: 2138009FVDWULSIOX404
Half-Yearly Report for the six months ended
Recent performance summary
30 April 2020 | 30 April 2019 | 31 October 2019 | |
Pence | Pence | Pence | |
Net asset value per share | 57.00 | 70.80 | 67.00 |
Cumulative dividends paid per share | 93.95 | 86.70 | 90.70 |
Total Return (net asset value per Share plus cumulative dividends) | 150.95 | 157.50 | 157.70 |
CHAIRMAN’S STATEMENT
Introduction
Like businesses everywhere, the Board and Manager have had to react to the impact of the coronavirus pandemic in order to seek to protect shareholder value as much as possible. In addition, as Shareholders will know from my previous Chairman’s Statements, the Board has been seeking to identify the optimal plan for the future for the Company.
Net asset value and results
At
The Total Return (NAV plus cumulative dividends) to Shareholders who invested at the launch of the Company in 2000 is now 150.95p, compared to the original cost (net of income tax relief) of 80.0p per Share.
The loss on activities after taxation for the period was £1.9 million, comprising a revenue profit of nil and a capital loss of £1.9 million.
Venture capital portfolio
Valuations
In reviewing the investment valuations at
The main negative movements have been to the three restaurant and catering businesses. Locale
Life’s
Despite these negative developments, there was some positive news in the case of
Portfolio activity
During the period £100,000 of loan stock in
There were no other disposals from or additions to the venture capital portfolio during the period.
Cash and listed investments
The Company held £2.2 million in cash and other listed investments as at
Future Strategy
For some time, two things have been clear: the Company’s investment manager has been and remains unenthusiastic about the investment opportunities available to it under the current VCT rules; and, as previous realisation proceeds have been paid out to Shareholders in special dividends on top of the regular 5p annual dividends, the size of the company has reduced to a level that is becoming increasingly difficult to justify as an independent publicly quoted entity.
A number of options were explored by the Board. In the end, the Board has concluded that it is in the best interests of Shareholders generally to undertake an orderly wind up of the Company using the VCT winding up regulations. These relax the usual restrictions on VCT investing; this relaxation which may assist in recovering value from the investments. The Board will now draw up proposals and make a recommendation to Shareholders to that effect. The process involves putting the Company into members’ voluntary liquidation with cash proceeds from realisations being distributed to Shareholders as they occur. In this way, as distributions are made, each Shareholder will be able to decide where and how to invest the proceeds to suit their own interests, whether in the VCT universe or outside it. The Board anticipates that the winding up process will take some time to complete to ensure that optimal value is extracted for Shareholders.
The Board are now working on formal proposals for Shareholders to consider and approve, if they see fit. A Shareholder Circular will be prepared setting out the full details of the proposals which will be sent to all Shareholders in due course and a vote taken at a General Meeting.
The main resolution will require 75% of those voting to vote in favour of the proposals. If Shareholders approve this step, then a liquidator will be appointed and the business will cease to be a listed entity on the
Share buybacks
In view of the above, the Board has reviewed the operation of the Company’s buyback policy, which has necessarily been in abeyance so far this financial year.
Following this announcement, the Board has agreed to operate an arrangement whereby the Company will buy back shares that become available in the market at a discount of approximately 25% to the latest published NAV (equivalent to 42.7p per share based on the NAV of 57.0p announced today) . The Board will closely monitor demand and may adjust or suspend the policy if they see fit. In any event, share buybacks will be suspended when the Company publishes full proposals to go into members’ voluntary liquidation.
Any Shareholders wishing to either acquire more shares, or to sell existing holdings in the Company, are recommended to contact the Company’s broker,
Dividend
The Board intends to continue to pay the usual level of interim dividend. A dividend of 1.75p per share will be paid on
Outlook
The coronavirus pandemic has presented significant challenges to several of the portfolio companies and will continue to do so for some time. The investment manager is providing support to these businesses to the extent it can, seeking to preserve value for Shareholders.
Some of the Company’s larger investments have been less exposed to the direct impact of the pandemic and have reasonable prospects of delivering successful outcomes in an orderly realisation of the portfolio.
I look forward to presenting full proposals to Shareholders, along with the details of the Board’s recommendation, in the coming months.
Chairman
SUMMARY OF INVESTMENT PORTFOLIO
as at
Cost | Valuation | Valuation movement in the period | % of portfolio by value | |
£’000 | £’000 | £’000 | ||
Top ten venture capital investments | ||||
3,456 | 5,144 | - | 31.6% | |
Enthuse | 56 | 2,625 | 711 | 16.1% |
300 | 1,627 | - | 10.0% | |
366 | 1,172 | - | 7.2% | |
520 | 927 | (278) | 5.7% | |
Locale | 2,513 | 920 | (791) | 5.7% |
550 | 697 | 67 | 4.3% | |
250 | 524 | (1) | 3.2% | |
Life’s | 500 | 200 | (200) | 1.2% |
Triaster limited | 71 | 155 | - | 01.0% |
8,582 | 13,991 | (492) | 86.0% | |
Other venture capital investments | 2,403 | 70 | (1,171) | 0.5% |
Other investments | ||||
Impact Healthcare REIT Plc* | 750 | 695 | (108) | 4.3% |
11,735 | 14,756 | (1,771) | 90.8% | |
Cash at bank and in hand | 1,500 | 9.2% | ||
Total investments | 16,256 | 100.0% |
All venture capital investments are unquoted unless otherwise stated.
*Listed and traded on the Main Market of the
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended
Disposals
Cost | Value at | Disposal proceeds | Gain/ (loss) against cost | Total realised gains | |
£’000 | £’000 | £’000 | £’000 | £’000 | |
Venture capital investments | |||||
100 | 100 | 100 | - | - | |
Dissolution/liquidation | |||||
75 | - | - | (75) | - | |
175 | 100 | 100 | (75) | - |
UNAUDITED INCOME STATEMENT
for the six months ended
Six months ended | Six months ended | Year ended 31 Oct 2019 | |||||||
Revenue | Capital | Total | Revenue | Capital | Total | Total | |||
£’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |||
Income | 167 | - | 167 | 248 | - | 248 | 446 | ||
Net gains/(losses) on investments | |||||||||
- realised | - | - | - | - | 1 | 1 | (13) | ||
- unrealised | - | (1,771) | (1,771) | - | 231 | 231 | 375 | ||
167 | (1,771) | (1,604) | 248 | 232 | 480 | 808 | |||
Investment management fees | (39) | (118) | (157) | (44) | (132) | (176) | (345) | ||
Performance incentive fees | - | - | - | - | - | - | - | ||
Other expenses | (135) | (23) | (158) | (138) | - | (138) | (280) | ||
Return on ordinary activities before taxation | (7) | (1,911) | (1,918) | 66 | 100 | 166 | 183 | ||
Tax on total comprehensive income and ordinary activities | 7 | (7) | - | (2) | 2 | - | - | ||
Return attributable to equity shareholders | - | (1,918) | (1,918) | 64 | 102 | 166 | 183 | ||
Return per Share | - | (6.7p) | (6.7p) | 0.2p | 0.4p | 0.6p | 0.6p |
The total column within the Income Statement represents the profit and loss account of the Company. No operations were acquired or discontinued during the period.
A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement as noted above.
UNAUDITED BALANCE SHEET
as at
30 Apr 2020 | 30 Apr 2019 | 31 Oct 2019 | |||
£’000 | £’000 | £’000 | |||
Fixed assets | |||||
Investments | 14,756 | 17,123 | 16,627 | ||
Current assets | |||||
Debtors | 34 | 129 | 46 | ||
Cash at bank and in hand | 1,500 | 3,253 | 2,477 | ||
1,544 | 3,382 | 2,523 | |||
Creditors: amounts falling due within one year | (54) | (65) | (69) | ||
Net current assets | 1,481 | 3,317 | 2,454 | ||
Net assets | 16,237 | 20,440 | 19,081 | ||
Capital and reserves | |||||
Called up share capital | 284 | 288 | 284 | ||
Capital redemption reserve | 104 | 100 | 104 | ||
Share premium | 1,478 | 1,478 | 1,478 | ||
Merger reserve | 529 | 529 | 529 | ||
Special reserve | - | 127 | - | ||
Capital reserve - realised | 9,107 | 11,283 | 10,113 | ||
Capital reserve - unrealised | 4,186 | 6,049 | 6,024 | ||
Revenue reserve | 549 | 586 | 549 | ||
Equity shareholders’ funds | 16,237 | 20,440 | 19,081 | ||
Net asset value per share | 57.0p | 70.8p | 67.0p |
STATEMENT OF CHANGES IN EQUITY
for the six months ended
Share Capital | Capital Redemption reserve | Share premium | Merger reserve | Special reserve | Capital reserve -realised | Capital reserve -unrealised | Revenue reserve | Total | |
£’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
At | 290 | 98 | 1,478 | 529 | 406 | 12,222 | 5,782 | 522 | 21,327 |
Total comprehensive income | - | - | - | - | - | (277) | 375 | 85 | 183 |
Transfers between reserves | - | - | - | - | (70) | 203 | (133) | - | - |
Transactions with owners | |||||||||
Purchase of own shares | (6) | 6 | - | - | (336) | - | - | - | (336) |
Dividends paid | - | - | - | - | - | (2,035) | - | (58) | (2,093) |
At | 284 | 104 | 1,478 | 529 | - | 10,113 | 6,024 | 549 | 19,081 |
Total comprehensive income | - | - | - | - | - | (147) | (1,771) | - | (1,918) |
Transfers between reserves | - | - | - | - | - | 67 | (67) | - | - |
Transactions with owners | - | - | - | ||||||
Purchase of own shares | - | - | - | - | - | - | - | - | |
Dividends paid | - | - | - | - | - | (926) | - | - | (926) |
At | 284 | 104 | 1,478 | 529 | - | 9,107 | 4,186 | 549 | 16,237 |
UNAUDITED CASH FLOW STATEMENT
for the six months ended
Six months ended | Six months ended | Year ended | |
£’000 | £’000 | £’000 | |
Cash flows from operating activities | |||
Return on ordinary activities before taxation | (1,918) | 166 | 183 |
Losses/(gains) on investments | 1,771 | (232) | (362) |
(Increase)/decrease in other debtors | 11 | (27) | 55 |
(Decrease)/increase in other creditors | (15) | (53) | 9 |
Net cash outflow from operating activities | (151) | (146) | (115) |
Cash flows from investing activities | |||
Proceeds from disposal of investments | 100 | 689 | 1,415 |
Purchase of investments | - | - | (100) |
Net cash inflow from investing activities | 100 | 689 | 1,315 |
Net cash inflow before financing activities | (52) | 543 | 1,200 |
Cash flows from financing activities | |||
Equity dividends paid | (926) | (940) | (2,092) |
Purchase of own shares | - | (113) | (394) |
Net cash outflow from financing activities | (926) | (1,053) | (2,486) |
Decrease in cash | (977) | (510) | (1,286) |
Net movement in cash | |||
Beginning of the period | 2,477 | 3,763 | 3,763 |
Net cash outflow | (977) | (510) | (1,286) |
End of the period | 1,500 | 3,253 | 2,477 |
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1.General information
2.Accounting policies
Basis of accounting
The unaudited half-yearly results cover the six months to
3.The comparative figures were in respect of the six months ended
4.Basic and diluted return per Share
Six months ended 30 Apr 2020 | Six months ended 30 Apr 2019 | Year ended 31 Oct 2019 | |
Return per Share based on: | |||
Net revenue return for the period (£’000) | - | 64 | 85 |
Capital return per Share based on: | |||
Net capital gain for the period (£’000) | (1,918) | 102 | 98 |
Weighted average number of Shares | 28,472,025 | 28,970,909 | 28,824,085 |
5.Basic and diluted net asset value per share
30 Apr 2020 | 30 Apr 2019 | 31 Oct 2019 | |
Net asset value per share based on: | |||
Net assets (£’000) | 16,237 | 20,440 | 19,081 |
Number of shares in issue at the period end | 28,472,025 | 28,860,025 | 28,472,025 |
Net asset value per share | 57.0p | 70.8p | 67.0p |
6.Called up share capital
Shares in issue | £’000 | ||
Period ended | 28,472,025 | 284 | |
Period ended | 28,860,025 | 288 | |
Year ended | 28,472,025 | 284 |
7.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 also allows the Company to make transfers between reserves to offset realised capital losses arising on disposals and impairments.
Distributable reserves are calculated as follows:
| Six months ended | Six months ended | Year ended |
£’000 | £’000 | £’000 | |
Special reserve | - | 127 | - |
Capital reserve - realised | 9,107 | 11,283 | 10,113 |
Revenue reserve | 549 | 586 | 549 |
Merger reserve – distributable element | 275 | 276 | 275 |
Unrealised losses – excluding unrealised unquoted gains | (2,907) | (688) | (838) |
7,024 | 11,584 | 10,099 |
8.Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required in the Company’s half year 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; and
-failure to maintain approval as a VCT.
In both 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 diversified portfolio. The impact of the coronavirus pandemic has been significant on some portfolio companies and, in many cases, the VCT regulations restrict the Company from making further investment into these business so the Manager seeks to provide whatever other support they can to these businesses, including encouraging them to take advantage of government support that may be available.
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
9.Going concern
The Company has sufficient financial resources at the period end, and holds a reasonably diversified portfolio of investments. As a consequence, the Directors believe that the Company is reasonably well placed to manage its business risks successfully despite the current uncertain economic outlook.
The Directors confirm that they are satisfied that the Company has adequate resources to continue in business for the foreseeable future. For this reason, they believe that the Company continues to be a going concern and that it is appropriate to apply the going concern basis in preparing the financial statements.
10.The Directors confirm that, to the best of their knowledge, the half yearly financial statements have been prepared in accordance with FRS 104 Interim Financial Reporting and the Half-Yearly Report includes a fair review of the information required by:
-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 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
-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.
11.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
12.Copies of the unaudited half yearly report will be sent to Shareholders shortly. Further copies can be obtained from the Company’s registered office and will be available for download from www.chrysalisvct.co.uk.
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