TIDMEDV
Elderstreet VCT plc
Half-Yearly Report for the six months ended 30 June 2017
FINANCIAL HIGHLIGHTS
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
CHAIRMAN'S STATEMENT
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 GBP75,000
(2016: GBP316,000), comprising a revenue return of GBP271,000 (2016:
GBP333,000) and a capital loss of GBP196,000 (2016: GBP17,000).
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.
Fundraising
The Company launched an offer for subscription in December 2016, which
has to date raised GBP17.0 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 GBP20 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 GBP4.3m and gains over carrying value of
GBP740,000.
The partial disposal was in respect of GBP450,000 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
GBP8,332, alongside the equity interest.
The full disposal was the realisation of the Company's investment in
Concorde Solutions Limited. Total proceeds were GBP1.6m, resulting in a
gain in the period of GBP224,000.
Also, Wessex Advanced Switching Products Limited ("WASP"), a successful
realisation from 2015, paid further deferred consideration of GBP525,000
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
GBP475,000. Macranet Limited was restructured such that loan notes of
GBP776,250 were converted at par along with accrued interest of
GBP175,000, as part of a funding round by new third party investors,
into equity. There were also two follow on investments totalling
GBP300,000 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 GBP16.9 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
GBP5 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 GBP505,000. The
business has continued to perform strongly and is starting to
successfully explore new markets.
On the negative side, a reduction in value of GBP490,000 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 GBP351,000 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 GBP513,000. 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 GBP817,000 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
GBP1.5m and resulted in total gains over cost of GBP26,000.
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
GBP112,000, 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.
Outlook
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
Chairman
SUMMARY OF INVESTMENT PORTFOLIO as at 30 June 2017
Valuation % of
movement portfolio
Cost Valuation in period by value
GBP'000 GBP'000 GBP'000
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
Additions
GBP'000
Venture capital investments
AngloINFO Limited 300
Macranet Limited 175
475
Disposals
Value at Profit Realised
1 January vs (loss)/
Cost 2017 Proceeds cost gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
UNAUDITED BALANCE SHEET as at 30 June 2017
31 Dec
30 Jun 2017 30 Jun 2016 2016
Note GBP'000 GBP'000 GBP'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' funds 6 37,424 25,581 23,260
Basic and diluted net asset value 6 61.6p 68.9p 62.8p
per share
UNAUDITED INCOME STATEMENT for the six months ended 30 June 2017
Year
ended
Six months ended Six months ended 31 Dec
30 Jun 2017 30 Jun 2016 2016
Revenue Capital Total Revenue Capital Total Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
shareholders 4 271 (196) 75 333 (17) 316 (1,033)
Basic/diluted
return per
share 4 0.7p (0.5p) 0.2p 0.9p 0.0p 0.9p 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
Capital
Called up redemption Share Merger Special Capital Capital Revenue
share capital reserve Premium reserve reserve reserve-unrealised reserve-realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
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 Six months Year
ended ended ended
30 Jun 30 Jun 31 Dec
2017 2016 2016
GBP'000 GBP'000 GBP'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 Six months Year
ended ended ended
30 Jun 2017 30 Jun 2016 31 Dec 2016
Return per share based on:
Net revenue gain for the period
(GBP'000) 271 333 222
Capital return per share based
on:
Net capital loss for the period
(GBP'000) (196) (17) (1,255)
Weighted average number of
shares 41,615,341 35,889,194 35,214,342
5. Dividends
Year
Six months ended ended
30 Jun 2017 31 Dec 2016
Per share Revenue Capital Total Total
pence GBP'000 GBP'000 GBP'000 GBP'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 Six months Year
ended ended ended
30 Jun 2017 30 Jun 2016 31 Dec 2016
Net asset value per share based
on:
Net assets (GBP'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 Six months Year
ended ended ended
30 Jun 2017 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 (GBP'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 GBP15.5 million, with issue costs in respect of
the offer amounting to GBP403,760.
During the period, the Company purchased 194,000 shares for cancellation
for an aggregate consideration of GBP112,000, 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 GBP5 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 GBP50 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 Six months Year
ended ended ended
30 Jun 2017 30 Jun 2016 31 Dec 2016
GBP'000 GBP'000 GBP'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 Level
Level a Level b c(ii) Total Level a Level b c(ii) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 www.elderstreet.com and
www.downing.co.uk.
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
(END) Dow Jones Newswires
September 28, 2017 11:39 ET (15:39 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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