TIDMCYS
Chrysalis VCT plc
HALF-YEARLY REPORT FOR THE SIX MONTHSED 30 APRIL 2016
Recent performance summary
30 April 30 April 31 October
2016 2015 2015
pence pence pence
Net asset value per share 83.50 85.10 81.30
Cumulative dividends paid per share 63.70 56.50 60.45
Total return
(net asset value per share plus cumulative dividends) 147.20 141.60 141.75
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present my report for the six months ended 30 April
2016. The period has seen a steady performance from the investment
portfolio and a relatively low level of investment activity, partly
attributable to the uncertainty created by the new VCT rules.
Net asset value and results
At 30 April 2016, the net asset value per share ("NAV") stood at 83.5p,
an increase of 5.45p (6.7%) since the previous year end of 31 October
2015 (after adding back the 3.25p dividend paid on 26 February 2016).
The Total Return to Shareholders who invested at the launch of the
Company in 2000 (NAV plus cumulative dividends) is now 147.2p compared
to the original cost (net of income tax relief) of 80.0p per share.
The return on activities after taxation for the Company for the period
was GBP1.6 million, comprising a revenue return of GBP141,000 and a
capital return of GBP1.5 million.
Dividends
The Board is proposing to pay an interim dividend at the same level as
last year of 1.75p per share. In addition, as a result of the deferred
consideration received, as highlighted below, we will also pay a further
special dividend of 2.0p per share. The total dividend of 3.75p will be
paid on 29 July 2016 to Shareholders on the register at 1 July 2016.
Following the payment of the dividend on 29 July 2016, Shareholders who
invested at launch will have received distributions totalling 67.45p per
share.
Venture capital portfolio
The Company invested GBP605,000 in the period in one new and two follow
on investments. At the end of the period, the Company held a portfolio
comprising 25 investments with a total value of GBP17.6 million.
The largest addition was a further investment of GBP500,000 in Coolabi
plc, the children's and family entertainment brand management group. The
company owns brands such as The Clangers and Bagpuss and the new funds
will support the production of new TV series.
In March 2016 the Company invested GBP75,000 in a new venture, Fusion
Catering Solutions Limited, a wedding and event caterer. The management
team are known to the Company from an existing portfolio company, Life's
Kitchen Limited.
Finally, an additional GBP30,000 was also invested in Cambridge
Mechatronics as part of a rights issue undertaken by the company to fund
its continuing growth.
In terms of realisations, a further GBP440,000 of deferred consideration
was received in the period in respect of the sale of Wessex Advanced
Switching Products Limited ("WASP"), which took place in 2015.
GBP125,000 of deferred consideration was also received in respect of
Autocue Group Limited which was also sold in 2015.
There were also five full or partial redemptions of loan stock from
various investee companies totalling GBP983,000 and one liquidation
receipt of GBP14,000. Total proceeds received in the period were GBP1.6
million giving rise to a gain of GBP579,000.
The Board has reviewed the valuations of all the unquoted portfolio and
there have a number of relatively minor adjustments both up and down.
The two most significant movements were both valuation increases. We
have now been invested in Driver Require for over a year and so are no
longer valuing it at cost and, due to its strong trading performance,
there has been an upward valuation of GBP413,000. Cambridge Mechatronics
raised a significant amount of money at a higher price than we
originally paid and valuing our investment at that price resulted in an
increase of GBP343,000.
Overall, there was a net unrealised gain of GBP1.1 million across the
portfolio.
Fixed income securities
The Company continues to hold a portfolio of fixed income bonds, which
was valued at GBP2.1 million at the period end. The unrealised losses
on the portfolio over the period was GBP50,000.
Shares
The Board continues to monitor the market in the Company's shares and
remains of the view that the Company's liquid resources are best
reserved to ensure that the Company is able to maintain a strong
dividend stream. The Board believes that this make the shares attractive
to potential buyers in the secondary market.
As a result of this strategy, the Company will not usually buy in its
own shares for cancellation.
The Company retains Nplus1 Singer Capital Markets to act as its
corporate broker. Nplus1 is usually aware of parties who are looking to
trade and should be able to assist investors looking to buy or sell
Chrysalis VCT shares.
VCT rules
As Shareholders will be aware from previous reports, there have been
some major changes to the VCT rules over the last year. In May, HMRC
published the long awaited guidance on the new rules, however the full
impact of the changes is probably still unknown.
What is clear is that your Company is now not ordinarily able to support
all existing portfolio companies with a further investment should they
need it, despite the fact these businesses were within the VCT rules at
the time of the original investment. This is understandably frustrating
for the Board, the Manager and the relevant investee companies. We are
however hopeful that we will be able to continue to provide support in
one way or another to all portfolio companies to help further drive
their growth and deliver rewards for our Shareholders.
Outlook
Your Board remains satisfied with the progress made by your Company. As
with any investment activity of this nature, there will always be
challenges, however I believe that your Company is as well placed as it
can be to address issues that arise and we continue to hold a portfolio
that can deliver further good results to Shareholders in future.
I look forward to updating Shareholders in my Statement in the Annual
Report to 31 October 2016.
Peter Harkness
Chairman
3 June 2016
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 April 2016
Valuation % of
movement portfolio
Cost Valuation in the period by value
GBP'000 GBP'000 GBP'000
Top ten venture capital
investments
Coolabi Group Limited 3,456 3,830 (154) 15.4%
Locale Enterprises Limited 2,513 2,663 286 10.7%
Internet Fusion Limited 800 1,485 167 6.0%
Precision Dental Laboratories
Limited 1,110 1,482 192 5.9%
K10 (London) Limited 950 1,117 36 4.5%
Driver Require Limited 520 933 413 3.7%
MyTime Media Holdings Limited 351 926 32 3.7%
Electrobase RP Holdings
Limited 1,001 900 (100) 3.6%
Cambridge Mechatronics Limited 366 843 343 3.4%
Zappar Limited 25 775 - 3.1%
11,092 14,954 1,215 60.0%
Other venture capital
investments 4,516 2,619 (80) 10.5%
Fixed income securities 2,210 2,137 (50) 8.6%
17,818 19,710 1,085 79.1%
Cash at bank and in hand 5,214 20.9%
Total investments 24,924 100.0%
All venture capital investments are unquoted unless otherwise stated
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 30 April 2016
Additions
GBP'000
New investments
Fusion Catering Solutions Limited 75
Follow-on investments
Coolabi Group Limited 500
Cambridge Mechatronics Limited 30
605
Disposals
Gain
Value at Disposal against Total
Cost 1 Nov 2015* proceeds cost realised gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Venture capital
investments
Loan stock
redemptions
My Time Media
Holdings
Limited 400 400 400 - -
Internet Fusion
Limited 200 244 244 44
Precision Dental
Laboratories
Limited 200 200 200 - -
Livvakt Limited 129 129 129 - -
Locale
Enterprises
Limited 10 10 10 - -
Dissolution,
liquidation and
retention
Autocue Group
Limited 125 125 125
Newquay
Helicopter
Limited - 14 14 14
Wessex Advanced
Switching
Products
Limited - - 440 440 440
939 983 1,562 623 579
*Adjusted for purchases in the period where applicable
UNAUDITED INCOME STATEMENT
for the six months ended 30 April 2016
Year
ended
Six months ended Six months ended 31 Oct
30 Apr 2016 30 Apr 2015 2015
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 365 - 365 350 - 350 733
Net gains/(losses) on
investments 1,971
- realised - 579 579 - 431 431
- unrealised - 1,085 1,085 - 1,512 1,512
365 1,664 2,029 350 1,943 2,293 2,704
Investment
management
fees (50) (151) (201) (50) (152) (202) (412)
Performance
incentive
fees - (46) (46) - (24) (24) (35)
Other
expenses (139) - (139) (132) - (132) (263)
Return on
ordinary
activities
before
taxation 176 1,467 1,643 168 1,767 1,935 1,994
Taxation (35) 35 - (32) 32 - -
Return
attributable
to equity
shareholders 141 1,502 1,643 136 1,799 1,935 1,994
Return per 0.5p 5.0p 5.5p 0.5p 6.0p 6.5p 6.7p
share
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 April 2016
As at As at As at
30 Apr 2016 30 Apr 2015 31 Oct 2015
Note GBP'000 GBP'000 GBP'000
Fixed assets
Investments 19,710 19,051 19,003
Current assets
Debtors 161 3,597 153
Cash at bank and in hand 5,214 3,053 5,223
5,375 6,650 5,376
Creditors: amounts falling
due within one year (102) (251) (67)
Net current assets 5,273 6,399 5,309
Net assets 24,983 25,450 24,312
Capital and reserves
Called up share capital 9 299 299 299
Capital redemption reserve 89 89 89
Share premium 1,478 1,478 1,478
Merger reserve 10 1,357 1,357 1,357
Special reserve 10 2,383 3,252 1,926
Capital reserve - realised 10 14,367 15,243 15,022
Capital reserve - unrealised 10 4,391 3,189 3,439
Revenue reserve 10 619 543 702
Equity shareholders' funds 8 24,983 25,450 24,312
Net asset value per share 8 83.5p 85.1p 81.3p
STATEMENT OF CHANGE IN EQUITY
for the six months ended 30 April 2016
Capital
Share Redemption Share Merger Special Capital reserve Capital reserve Revenue
Capital reserve premium reserve reserve -realised -unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 November
2015 299 89 1,478 1,357 1,926 15,022 3,439 702 24,312
Expenses
capitalised - - - - - (197) - - (197)
Tax on
capital
expenses - - - - - 35 - - 35
Gains on
investments - - - - - 579 1,085 - 1,664
Realisation
of
revaluations
from previous
years - - - - - 44 (44) - -
Realisation
of impaired
valuations - - - - - 89 (89) - -
Transfer
between
reserves - - - - 457 (457) - - -
Retained net
revenue for
the period - - - - - - - 141 141
Dividends
paid - - - - - (748) - (224) (972)
At 30 April
2016 299 89 1,478 1,357 2,383 14,367 4,391 619 24,983
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 April 2016
Six months Six months Year
ended ended ended
30 Apr 2016 30 Apr 2015 31 Oct 2015
Note GBP'000 GBP'000 GBP'000
Cash inflow/(outflow) from operating activities and
returns on investments 11 6 62 (146)
Capital expenditure
Purchase of investments (605) (1,907) (2,483)
Proceeds on disposal of investments 1,562 932 5,083
Net cash inflow/(outflow) from capital expenditure 957 (975) 2,600
Equity dividends paid (972) (972) (2,169)
Net cash (outflow)/inflow before financing (9) (1,885) 285
(Decrease)/increase in cash 12 (9) (1,885) 285
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. General information
Chrysalis VCT plc ("The Company") is a venture capital trust established
under the legislation introduced in the Finance Act 1995 and is
domiciled in the United Kingdom and incorporated in England and Wales.
2. Accounting policies
Basis of accounting
The unaudited half-yearly results cover the six months to 30 April 2016
and have been prepared in accordance with the accounting policies set
out in the annual accounts for the year ended 30 September 2015 and in
accordance with the Financial Reporting Standard 102 ("FRS102") and in
accordance with the Statement of Recommended Practice "Financial
Statements of Investment Trust Companies" revised November 2014
("SORP").
This is the first period in which the financial statements have been
prepared under FRS102, however, it has not been necessary to restate
comparatives as the treatment previously applied aligns with the
requirements of FRS102. As a result, there are no reconciling
differences between the previous financial reporting framework and the
current financial reporting framework and the comparative figures
represent the position under both current and previous financial
reporting frameworks.
The Company implements new Financial Reporting Standards issued by the
Financial Reporting Council when required.
Presentation of Income Statement
In order to better reflect the activities of a venture capital trust,
and in accordance with the SORP, 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 Part 6 of
the Income Tax Act 2007.
Fixed asset investments
Investments are designated as "fair value through profit or loss" assets,
upon acquisition, due to investments being managed and performance
evaluated on a fair value basis. A financial asset is designated within
this category if it is both acquired and managed, with a view to selling
after a period of time, in accordance with the Company's documented
investment policy.
Key sources of estimation uncertainty
Of the Company's assets measured at fair value, it is possible to
determine their fair values within a reasonable range of estimates. The
fair value of an investment upon acquisition is deemed to be cost.
Thereafter, investments are measured at fair value in accordance with
the International Private Equity and Venture Capital Valuation
Guidelines ("IPEV") together with FRS102 sections 11 and 12.
Listed fixed income investments and investments quoted on AIM and the
Main Market are measured using bid prices in accordance with the IPEV.
For unquoted instruments, fair value is established using the IPEV. The
valuation methodologies for unquoted entities used by the IPEV to
ascertain the fair value of an investment are as follows:
-Price of recent investment;
-Multiples;
-Net assets;
-Discounted cash flows or earnings (of underlying business);
-Discounted cash flows (from the investment); and
-Industry valuation benchmarks.
The methodology applied takes account of the nature, facts and
circumstances of the individual investment and uses reasonable data,
market inputs, assumptions and estimates in order to ascertain fair
value.
Where an investee company has gone into receivership, liquidation, or
administration (where there is little likelihood of recovery), the loss
on the investment, although not physically disposed of, is treated as
being realised. Permanent impairments in the value of investments are
deemed to be realised losses and held within the Capital Reserve -
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 significant influence over
investee companies. Therefore the results of these companies are not
incorporated into the Income Statement except to the extent of any
income accrued. This is in accordance with the SORP and FRS102 sections
14 and 15 that do not require portfolio investments to be accounted for
using the equity method of accounting.
Income
Dividend income from investments is recognised when the Shareholders'
rights to receive payment have been established, normally the
ex-dividend date.
Interest income is accrued on a timely basis, by reference to the
principal 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 acquisition of an investment are
deducted as a capital item.
-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. The Company has adopted the policy
of allocating investment manager's fees, 75% to capital and 25% to
revenue as permitted by the SORP. The allocation is in line with the
Board's expectation of long term returns from the Company's investments
in the form of capital gains and income respectively.
-Performance incentive fees arising are treated as a capital item.
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 Part 6 of the
Income Tax Act 2007, no provision for taxation is required in respect of
any realised or unrealised appreciation of the Company's investments
which arise.
Deferred taxation is not discounted and 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.
Other debtors and other creditors
Other debtors (including accrued income) and other creditors are
included within the accounts at amortised cost.
Issue costs
Issue costs in relation to the shares issued are deducted from the share
premium account.
3. The financial statements are presented in Sterling (GBP).
4. The Company has only one class of business and derives its income
from investments made in shares, securities and bank deposits.
5. The comparative figures were in respect of the six months ended 30
April 2015 and the year ended 31 October 2015 respectively.
6. Basic and diluted return per share
Six months Six months Year
ended ended ended
30 Apr 2016 30 Apr 2015 31 Oct 2015
Return per share based on:
Net revenue return for the
period (GBP'000) 141 136 296
Capital return per share based
on:
Net capital gain for the period
(GBP'000) 1,502 1,799 1,698
Weighted average number of
shares 29,917,025 29,917,025 29,917,025
7. Dividends paid
Year
Six months ended ended
30 Apr 2016 31 Oct 2015
Pence Revenue Capital Total Total
per share GBP'000 GBP'000 GBP'000 GBP'000
Paid in period
2015 Final 3.25p 224 748 972 -
2015 Interim 1.75p - - - 524
2015 Special 2.25p - - - 673
2014 Final 3.25p - - - 972
224 748 972 2,169
8. Basic and diluted net asset value per share
Six months Six months Year
ended ended ended
30 Apr 2016 30 Apr 2015 30 Oct 2015
Net asset value per share based
on:
Net assets (GBP'000) 24,983 25,450 24,312
Number of shares in issue at the
period end 29,917,025 29,917,025 29,917,025
Net asset value per share 83.5p 85.1p 81.3p
9. Called up share capital
Shares in issue GBP'000
Period ended 30 April 2016 29,917,025 299
Period ended 30 April 2015 29,917,025 299
Year ended 31 October 2015 29,917,025 299
10. 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 Six months Year
ended ended ended
30 Apr 2016 30 Apr 2015 31 Oct 2015
GBP'000 GBP'000 GBP'000
Special reserve 2,383 3,252 1,926
Capital reserve - realised 14,367 15,243 15,022
Revenue reserve 619 543 702
Merger reserve - distributable element 275 275 275
Unrealised losses - excluding unrealised unquoted
gains (306) (850) (283)
17,338 18,463 17,642
11. Reconciliation of return on ordinary activities before taxation to
net cash flow from operating activities
Six months Six months Year
ended ended ended
30 Apr 2016 30 Apr 2015 31 Oct 2015
GBP'000 GBP'000 GBP'000
Return on ordinary activities
before taxation 1,643 1,935 1,994
Gains on investments (1,664) (1,943) (1,971)
(Increase)/decrease in other
debtors (7) 88 33
Increase/(decrease) in other
creditors 34 (18) (202)
Net cash inflow/(outflow) from
operating activities 6 62 (146)
12. Reconciliation of net cash flow to movement in net funds
Net funds at Net funds at
1 Nov 2015 Cash flows 30 Apr 2016
GBP'000 GBP'000 GBP'000
Cash at bank and in hand 5,223 (9) 5,214
13. 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:
i. investment risk associated with investing in small and immature
businesses; and
ii. 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 well-diversified portfolio.
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.
14. Going concern
The Company has sufficient financial resources at the period end, and
holds a diversified portfolio of investments. As a consequence, the
Directors believe that the Company is 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.
15. 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 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.
16. 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 October 2015 have been extracted from the
financial statements for that year, which have been delivered to the
Registrar of Companies; the Independent Auditor's Report on those
financial statements was unqualified.
17. 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.downing.co.uk.
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX 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: Chrysalis VCT PLC via Globenewswire
HUG#2017692
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