RNS Number:7694K
Ingenious Music VCT PLC
20 October 2006
INGENIOUS MUSIC VCT PLC
20 October 2006
Interim results for the period 1 February 2006 to 31 July 2006
Ingenious Music VCT plc today announces its interim results for the period 1
February 2006 to 31 July 2006
CHAIRMAN'S STATEMENT
Overview of activities
The period to 31 July 2006 has been an active period for the Company with two
additional investments completed and further deals now in the advanced stages of
negotiation, as detailed below.
The Company has cemented its relationship with Independiente, one of the UK's
most prolific and successful independent record labels, after completing its
investments in Martina Topley-Bird and Travis in June and July respectively. The
Company made an investment of #1,000,000 in each and has made a further
#1,000,000 commitment in respect of Travis' fifth album, which is due for
release in early 2007. This deal marked the Company's first co-investment with
Ingenious Music VCT 2 plc.
Deal flow remains strong and the Manager, Ingenious Ventures Limited, is in the
final stages of negotiation on a number of deals, including a multi-artist deal
with one of the Majors. These deals, which amount to over #7.25 million in total
of investment by the Company, relate to both new bands that are looking to
launch their debut albums and "named" artists.
Investment objective
The investment objective of the Company is to provide shareholders with an
attractive return from investments in a portfolio of music companies that will
be engaged in the creation, development and exploitation of intellectual
property rights. This will be achieved by maximising the opportunities for
making tax-free dividends to shareholders from both income received and capital
profits on a sale of the investee companies or their assets.
Following implementation of the Company's amended investment policy (approved at
the Extraordinary General Meeting held on 6 April 2006), the Company will be
making its next investments alongside its sister fund, Ingenious Music VCT 2
plc, which enables the Company to participate in investments of up to #2 million
per year per qualifying investment (rather than #1million if each company acted
alone) thereby enabling the Company to invest in more established artists and a
wider range of music-related intellectual property rights. This amended
investment policy will allow us to target larger, more established acts such as
Travis whose previous albums have enjoyed significant commercial success and
critical acclaim.
VCT Qualifying Status
The Company is managed as a venture capital trust, enabling shareholders to
benefit from both the income and capital gains tax reliefs available.
Shareholders will be aware that in order to qualify for these tax reliefs 70% of
net funds raised must be invested in VCT qualifying companies by January 2008.
The Company retains PricewaterhouseCoopers LLP as advisers on all matters
relating to the Company's VCT status and it continues to satisfy HM Revenue &
Customs' requirements for the maintenance of formal approval as a VCT.
Results
The Company has now invested and committed a total of #3.23 million in
qualifying investments, which equates to approximately 22% of the Company's
total funds. Whilst the Company's net asset value has remained relatively
constant during the period at 95.3 pence per share, there have been no
realisations in the reporting period and the Board can not therefore recommend
the payment of an interim dividend as there are insufficient distributable
reserves.
Outlook
The outlook for the Company remains positive and the Manager continues to
actively source and review investment propositions and in so doing continues to
develop its relationships with the Majors, leading independent record labels,
prominent artist managers and individual artists.
I look forward to reporting to you on our transactions in the coming months.
Patrick McKenna
Chairman
19 October 2006
MANAGER'S REVIEW
Investment Strategy
The current outlook in the global music market offers attractive investment
opportunities for the Company with the UK continuing to play a key role in the
market both in terms of new acts and consumer spending.
We continue to see a large number of opportunities and have to date focused our
efforts on identifying projects that we believe achieve the inherent objectives
of the fund, namely to support the development of exciting acts, whilst ensuring
the optimum returns for our investors. We believe that this is best accomplished
by developing a roster of diverse artists, both emerging and established, across
the musical genres.
Investments
The Company made two further investments in the reporting period totalling #2
million. The Manager has invested and committed 22% of the fund in qualifying
investments and the outlook for prospective deals remains positive.
MARTINA TOPLEY-BIRD
The Company closed its second qualifying investment in June 2006 by providing
#1,000,000 to Independiente Music Ventures MTB Limited for all recording costs,
artist, video, tour support and marketing expenditure required to launch Martina
Topley-Bird's second album. This deal sees the London-born songwriter and singer
team up with DangerMouse who will produce the album, recording on which is now
underway with a release date currently scheduled for March 2007.
This deal marked the Company's first deal with Independiente and was soon
followed by a second deal with Independiente, an investment to back Travis. This
was the Company's third investment.
About Martina Topley-Bird and DangerMouse
Martina Topley-Bird released her first album, "Quixotic" in 2002, an album which
combined multiple genres of music, from Soul and Gospel to Electro and Rock,
reflecting the 26 year-old artist's own diverse background and influences - a
mix of El Salvadorian, Indian and African American.
Martina began writing the songs for her first album with a small group
consisting of her step brother Nick Bird, Steve Crittal and Alex McGowan.
Recorded at McGowan's studio in Fulham, the album was mixed by Tchad Blake, Jake
Davies and Hugo Nicholson of Primal Scream and produced by Martina, Alex McGowan
and Tricky, who was responsible for Martina's musical break when she was a
teenager.
Martina's second album will be produced by Brian Joseph Burton, better known by
his stage name, DangerMouse, the American producer and DJ who first came to
prominence in 2004. Having earned a Grammy nomination for Producer of the Year
for his work on 'Demon Days', the highly acclaimed and successful second album
from The Gorillaz, he has also teamed up with Cee-Lo as the duo, Gnarls Barkley,
a partnership which has achieved phenomenal success with the single 'Crazy'
which made history when it became the first UK number 1 to achieve poll position
on downloads alone and subsequently stayed at number 1 in the charts for nine
consecutive weeks.
TRAVIS
This deal marked the Company's first co-investment with Ingenious Music VCT 2
plc, following the Company's resolution to adopt the new amended investment
policy.
The Company and Ingenious Music VCT 2 plc equally co-funded the venture with an
initial #2 million followed by a further #1 million investment, to be made in
the latter part of 2007. An additional #1million has also been made available as
a further marketing fund, should the parties see this as commercially beneficial
at a later stage. Ingenious have formed a joint venture company, Independiente
Music Ventures Travis Limited, to release the band's fifth album, which is due
for release in early 2007. Both UK and international distribution for the album
will be handled by SonyBMG.
Since releasing their first album, 'Good Feeling' in 1997, Travis has
experienced considerable success both in the UK and internationally. Having sold
more than 8.5 million albums worldwide, the band's second album, 'The Man Who'
became one of the biggest selling albums by a British band that year. This was
followed by their third album, 'The Invisible Band', which entered the charts at
Number 1 and stayed there for a total of ten weeks. Their fourth album '12
Memories', which was released in 2003, entered the album charts at Number 3 and
was followed in 2004 by a singles retrospective 'Travis: Singles'. The band has
toured extensively and has won several awards including Best Songwriter and Best
Contemporary Song at the Ivor Novellos for 'Why Does It Always Rain On Me?' and
Best Band and Best British Album at the Brits.
The band's forthcoming album will be produced by Nigel Godrich who has worked
with Travis twice before, producing their breakthrough album, 'The Man Who' and
their third album, 'The Invisible Band'. Godrich has worked with a variety of
artists including Paul McCartney, Beck, Natalie Imbruglia, U2 and REM but is
best known for his longstanding collaboration with Radiohead.
THE HEIGHTS
We continue to enjoy a strong working relationship with Channelfly and are
pleased to report that recording on The Heights' new album is nearing
completion, with a release date now scheduled for the early part of 2007. As
reported in our last newsletter, the band has received international interest
and a Japanese licensing deal is currently being negotiated.
After a summer tour launching their new single, 'Jamaica Beer Eyes', the band
has also set further dates for their second leg at venues throughout the UK.
Outlook
The growing digital market and rising DVD sales have together contributed to
another strong year in music sales for the UK, which generated 10% of world
music sales in 2005. The UK also continues to be one of the principal sources of
music repertoire with international appeal, this being English-speaking popular
music which is purchased by consumers both domestically and internationally.
The UK continues to maintain a commanding position in online sales accounting
for the largest number of digital downloads across Europe. The phenomenal rise
in social networking sites such as My Space and YouTube has contributed to the
discovery of new home grown talent, allowing previously unsigned artists to
reach larger international audiences within a much shorter timeframe - recent
online discoveries include acts like Arctic Monkeys who have now been signed by
independent record label, Domino Records and more recently Lily Allen who has
been signed by EMI. This area of the market is still in its relative infancy
with more download sites emerging including those which challenge the existing
download model, such as Spiral Frog.
The Company is well positioned to take advantage of these new market
developments and to capitalise on the full range of intellectual property rights
that attach to an artist, which includes their recording, digital and synch
rights as well as their touring, merchandising and publishing rights.
Contact
If you have any questions on this review or you would like to speak to a member
of the management team, please do not hesitate to call us on 020 7024 3600.
INVESTMENT PORTFOLIO SUMMARY
as at 31 July 2006
The Heights Recording Limited
Date of investment Jan-06
Initial investment #200,000
Valuation #200,000
Valuation basis Fair value - Price of Recent Investment
Percentage of equity held 49.9%
Independiente Music Ventures - MTB Limited
Date of investment Jun-06
Initial investment #1,000,000
Valuation #1,000,000
Valuation basis Fair value - Price of Recent Investment
Percentage of equity held 49.9%
Independiente Music Ventures - Travis Limited
Date of investment Jul-06
Initial investment #1,000,000
Valuation #1,000,000
Valuation basis Fair value - Price of Recent Investment
Percentage of equity held 24.95%
Income Statement (unaudited)
for the six months ended 31 July 2006
Six months ended 31 July 2006
Revenue Capital Total
Note #'000 #'000 #'000
-------------------------------- ----- ------- ------- -------
Gains on investments -
unrealised - 113 113
Investment income 123 19 142
Arrangement fees - - -
Investment management fees (63) (63) (126)
Other expenses (122) - (122)
-------------------------------- ----- ------- ------- -------
Profit (loss) on ordinary
activities before taxation (62) 69 7
Tax on ordinary activities - - -
-------------------------------- ----- ------- ------- -------
Profit (loss) attributable to
equity shareholders (62) 69 7
-------------------------------- ----- ------- ------- -------
Basic and diluted return per
share (pence) 2 (0.41) 0.46 0.05
-------------------------------- ----- ------- ------- -------
Income Statement (unaudited)
for the six months ended 31 July 2005
Six months ended 31 July 2005
Revenue Capital Total
Note #'000 #'000 #'000
-------------------------------- ----- ------- ------- -------
Gains on investments -
unrealised - 2 2
Investment income 29 - 29
Arrangement fees (151) - (151)
Investment management fees (36) (36) (72)
Other expenses (67) - (67)
-------------------------------- ----- ------- ------- -------
Profit (loss) on ordinary
activities before taxation (225) (34) (259)
Tax on ordinary activities - - -
-------------------------------- ----- ------- ------- -------
Profit (loss) attributable to
equity shareholders (225) (34) (259)
-------------------------------- ----- ------- ------- -------
Basic and diluted return per
share (pence) 2 (6.03) (0.91) (6.94)
-------------------------------- ----- ------- ------- -------
Income Statement (unaudited)
for the year ended 31 January 2006
Year ended 31 January 2006
Revenue Capital Total
Note #'000 #'000 #'000
-------------------------------- ----- ------- ------- -------
Gains on investments -
unrealised - 32 32
Investment income 354 - 354
Arrangement fees (151) - (151)
Investment management fees (63) (63) (126)
Other expenses (204) (24) (228)
-------------------------------- ----- ------- ------- -------
Profit (loss) on ordinary
activities before taxation (64) (55) (119)
Tax on ordinary activities - - -
-------------------------------- ----- ------- ------- -------
Profit (loss) attributable to
equity shareholders (64) (55) (119)
-------------------------------- ----- ------- ------- -------
Basic and diluted return per
share (pence) 2 0.76 0.64 1.40
-------------------------------- ----- ------- ------- -------
The Company has no recognised gains and losses other than those disclosed above.
BALANCE SHEET (UNAUDITED)
as at 31 July 2006
31 July 2006 31 July 2005 31 January 2006
Note #'000 #'000 #'000
---------------------------- ----- ------- ------- -------
Fixed assets
Qualifying investments 2,200 - 200
---------------------------- ----- ------- ------- -------
Current assets
Debtors 8 13 156
Non-Qualifying investments 3 12,158 1,502 1,532
Cash at bank and in hand 22 12,806 12,811
---------------------------- ----- ------- ------- -------
Creditors: amounts falling
due within one year (11) (91) (329)
---------------------------- ----- ------- ------- -------
Net current assets 12,177 14,230 14,170
---------------------------- ----- ------- ------- -------
Net assets 14,377 14,230 14,370
---------------------------- ----- ------- ------- -------
Capital and reserves
Called-up share capital 151 151 151
Share premium account 5 6,867 14,338 6,867
Other reserves 5 7,471 - 7,471
Capital reserves
realised 5 (131) (36) (87)
unrealised 5 145 2 32
Revenue reserve 5 (126) (225) (64)
---------------------------- ----- ------- ------- -------
Equity shareholders' funds 14,377 14,230 14,370
---------------------------- ----- ------- ------- -------
Net asset value (pence per
share) 4 95.3 94.3 95.2
---------------------------- ----- ------- ------- -------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (UNAUDITED)
as at 31 July 2006
31 July 2006 31 July 2005 31 January 2006
#'000 #'000 #'000
------------------------------ ------- ------- --------
Equity shareholders' funds at
1 February 2006 14,370 - -
Capital subscribed - 15,093 15,093
Issue costs - (604) (604)
Profit for the period 7 (259) (119)
------------------------------ ------- ------- --------
Equity shareholders' funds at
31 July 2006 14,377 14,230 14,370
------------------------------ ------- ------- --------
CASH FLOW STATEMENT (UNAUDITED)
for the six months ended 31 July 2006
Six months Six months Year
ended ended ended
31 July 31 July 31 January
2006 2005 2006
#'000 #'000 #'000
-------------------------------- ------- ------- --------
Net cash outflow from operating
activities (76) (183) (178)
-------------------------------- ------- ------- --------
Capital expenditure and financial
investment
Purchase of qualifying
investments (2,200) - -
Purchase of non-qualifying
investments (12,513) (1,500) (1,500)
Disposal of non-qualifying
investments 2,000 - -
-------------------------------- ------- ------- --------
Net cash outflow from capital
expenditure and financial
investment (12,713) (1,500) (1,500)
-------------------------------- ------- ------- --------
Financing
Issue of ordinary shares - 15,093 15,093
Expenses of the issue of
ordinary shares - (604) (604)
-------------------------------- ------- ------- --------
Net cash inflow from financing - 14,489 14,489
-------------------------------- ------- ------- --------
(Decrease)/Increase in cash (12,789) 12,806 12,811
-------------------------------- ------- ------- --------
Reconciliation of Loss Before Taxation to Net Cash Flow from Operating
Activities
#'000 #'000 #'000
--------------------------------------- ------- ------- --------
Loss on ordinary activities before tax 7 (259) (119)
Gains on investments - unrealised (113) (2) (32)
(Increase) /Decrease in receivables 148 (13) (156)
(Decrease)/Increase in payables (118) 91 129
--------------------------------------- ------- ------- --------
Net cash inflow from operating activities (76) (183) (178)
--------------------------------------- ------- ------- --------
Reconciliation of Net Cash Flow to Movement in Net Funds
#'000 #'000 #'000
--------------------------------------- ------- ------- --------
Opening cash balances 12,811 - -
Net cash inflow (12,789) 12,806 12,811
--------------------------------------- ------- ------- --------
Closing cash balances 22 12,806 12,811
--------------------------------------- ------- ------- --------
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
for the six months ending 31 July 2006
1. Accounting Policies
(a) Basis of Accounting
The interim financial statements have been prepared using accounting policies
and presentation consistent with those applied in preparation of the annual
report and accounts for the company for the period ended 31 January 2006. The
unaudited interim financial statements for the six months ended 31 July 2006
have been prepared in compliance with applicable accounting standards, and with
the Statement of Recommended Practice (the SORP) entitled "Financial Statements
of Investment Trust Companies" which was issued in January 2003 and revised in
December 2005.
(b) Valuation of Investments
Unquoted investments are stated at fair value in accordance with the
International Private Equity and Venture Capital Valuation Guidelines. The
unrealised appreciation or depreciation on the valuation of investments is dealt
with in the unrealised reserve and gains or losses arising from the disposal of
investments are dealt with in the realised capital reserve.
(c) Investment income
Interest income is included on an accruals basis.
(d) Expenses
All expenses have been accounted for on an accrual basis. All expenses are
charged through revenue except where they relate to the raising and maintenance
of capital.
2. Basic and Diluted Return per Share
The calculation of basic return per share is based on the return on ordinary
activities after tax for the six months ended 31 July 2006 and on 15,093,283
(2005 - 3,729,915) ordinary shares, being the weighted average number of shares
in issue during the period.
There are no dilutive elements and hence the basic return per share is the same
as the diluted return per share.
3. Non-qualifying investments
In order to safeguard the capital available for investment in Qualifying
Investments and balance this with the need to provide good returns to investors,
available funds from the net proceeds are invested in appropriate securities
(money market securities and cash funds) until required for Qualifying
Investment purposes.
Included within the total amount of Non-qualifying investments, #2m has been
invested in the Ingenious Enhanced Cash Fund, which is a quoted cash fund
managed by Ingenious Asset Management Limited.
4. Net Asset Value per Share
The calculation of net asset value per share is based on the net assets at 31
July 2006 divided by the 15,093,283 (2005 - 15,093,283) ordinary shares in issue
at that date.
5. Reserves
Share Other Capital Capital Revenue Total
premium reserve realised unrealised reserve reserves
#'000 #'000 #'000 #'000 #'000 #'000
-------------- ------ ------ ------ ------- ------ -------
At 1 February
2006 6,867 7,471 (87) 32 (64) 14,219
Movement in
valuations - - - 113 - 113
Investment
income - - 19 - 123 142
Investment
management
fees - - (63) - (63) (126)
Other expenses - - - - (122) (122)
-------------- ------ ------ ------ ------- ------ -------
At 31 July 2006 6,867 7,471 (131) 145 (126) 14,226
-------------- ------ ------ ------ ------- ------ -------
6. The unaudited interim financial statements for the six months ended 31
July 2006 do not constitute statutory accounts within the meaning of Section 240
of the Companies Act 1985 and have not been delivered to the Registrar of
Companies. The financial statements for the period ended 31 January 2006 have
been delivered to the Registrar and included the auditors' report which was
unqualified and did not contain a statement under either Section 237(2) or 237
(3) of the Companies Act 1985.
7. Copies of the unaudited interim report are being sent to all
shareholders. Further copies can be obtained from the Company's Registered
Office.
This information is provided by RNS
The company news service from the London Stock Exchange
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