Quester VCT plc
Interim statement for the six months ended 31 July 2003
Financial highlights
Per ordinary share (pence) 6 months to 6 months to Year to
31 July 2003 31 July 2002 31 January 2003
Capital values
Net asset value 59.3 67.4 58.4
Share price 44.0 58.5 54.0
Return and dividends
Dividend - - -
Cumulative dividend 41.5 41.5 41.5
Total return* 100.8 108.9 99.9
*Net asset value plus cumulative dividend per share
Highlights from the Chairman's statement and Investment manager's report
* Following the very difficult conditions of the last two years, the six
months ended 31 July 2003 have been a period of greater stability for the
venture capital portfolio as a whole.
* The Company's portfolio of unquoted investments, which contains a
relatively high proportion of early stage businesses operating in a number
of technology areas, has shown some signs of more positive developments in
business activity.
* We remain of the view that the realisation of value from many of the
investments will take time.
* The Manager continues to work very closely with many of the portfolio
companies to rebuild value and improve the prospects for growth. The
Company retains a satisfactory level of cash reserves to contribute to the
further funding of existing portfolio companies.
Chairman's statement
OVERVIEW
The most recent half-year has seen a stabilisation in the value of the venture
capital portfolio and improved stock market conditions. These factors have
combined to produce a modest improvement in the net asset value per share of
the Company from 58.4 pence at 31 January 2003 to 59.3 pence at 31 July 2003.
Overall, after taking account of share buy-backs at a cost of �125,000, the net
asset value of the Company increased from �20.3 million at 31 January 2003 to �
20.4 million at 31 July 2003.
PORTFOLIO PERFORMANCE
Following the very difficult conditions of the last two years, the six months
ended 31 July 2003 have been a period of greater stability for the venture
capital portfolio as a whole.
Movements in stock market prices resulted in an improvement of �0.4 million in
the valuation of quoted venture capital investments. In the case of certain
residual holdings resulting from earlier trade sales or IPOs of portfolio
companies, the opportunity has been taken to realise cash at the improved
market prices which prevailed towards the latter stages of the period under
review.
The Company's portfolio of unquoted investments, which contains a relatively
high proportion of early stage businesses operating in a number of technology
areas, has shown some signs of more positive developments in business activity.
Provisions made during the half year have been limited to a downward adjustment
in valuation of �0.4 million across the unquoted portfolio as a whole.
We continue with our policy of contributing to the further funding of those
portfolio companies which we believe have good potential and have committed a
further �510,000 during the half-year to these companies. Against the
background of the difficult conditions of the last two years, it is encouraging
that a number of our key portfolio companies that are still at early stage have
been able to conclude new financing rounds that will enable them to move
forward with the next phase of development of their businesses.
INCOME STATEMENTS AND DIVIDENDS
The profit and loss account for the six months to 31 July 2003 shows a loss of
�117,000, equivalent to 0.3 pence per share. In these circumstances it is
inappropriate for the Company to pay an interim dividend.
The Statement of Total Recognised Gains and Losses shows a net unrealised gain
on revaluation of �380,000, reflecting the improvement in value of the quoted
venture capital investments and the portfolio of FTSE 350 equities, less the
downward adjustment in respect of the unquoted venture capital investments. In
terms of the total return attributable to shareholders for the half-year, the
result is a net gain of �263,000 or 0.8 pence per share.
CONCLUSION
We remain cautious but rather more positive about the outlook for the Company
and its investments. The portfolio includes investments which we believe have
significant potential for the future. However we remain of the view that the
realisation of value from many of the investments will take time.
As stated in the Annual Report for the year ended 31 January 2003 in connection
with the proposal for the continuation of the Company, it will be the intention
of the Board to continue with a policy which seeks (subject to legal
requirements and the need to retain cash to meet ongoing financial
requirements) to maximise the dividend payable from available distributable
profits including capital gains achieved on investment realisations. However,
at the present time, it is not possible to predict either the timing or level
of the realisation of capital profits, and accordingly the amount and timing of
future dividends remains uncertain.
Tom Scruby
Chairman
30 September 2003
Investment manager's report
OVERVIEW
The half-year to 31 July 2003 has seen a stabilisation in the value of the
venture capital portfolio and improved stock market conditions, which have
combined to produce a modest improvement in the Company's net asset value per
share.
PERFORMANCE OF THE VENTURE CAPITAL PORTFOLIO
Following the very difficult conditions of the last two years, the six months
ended 31 July 2003 have been a period of greater stability for the venture
capital portfolio as a whole, although business conditions have varied in the
different industry sectors in which the Company holds investments.
As has been emphasised in previous reports, a number of the companies in which
Quester VCT has invested are still at a relatively early stage of development.
Some of those involved in technology-related opportunities, for example, may
still have only limited sales revenues and may still be loss-making.
It has, however, been encouraging that a number of our key portfolio companies
that are still at early stage have been able to conclude new financing rounds
(including contributions from Quester VCT) which will enable them to move
forward with the next phase of development of their businesses.
While in a number of sectors our portfolio companies are beginning to see
prospects of improving sales, other companies have continued to suffer from
slower than expected market development. Additional provisions have been made
against cost of investments where necessary to reflect such conditions. Across
the portfolio as a whole, changes in provisions against unquoted venture
capital investments have resulted in a valuation reduction of �0.4 million,
while in the quoted venture capital investments stock market price movements
have produced valuation increases of a similar amount.
The opportunity was taken during the half year to sell the remaining holding in
ADVA A.G. Optical Networking and, since 31 July, part of the remaining holding
in SurfControl plc, these transactions together realising proceeds of some �0.3
million.
VENTURE CAPITAL INVESTMENTS MADE DURING THE PERIOD
Follow-on investments were made during the half year as shown below:
Investment Industry sector �'000
Advanced Valve Technologies Limited Industrial products & 207
services
Anadigm Limited Semiconductors 122
Elateral Holdings Limited Software 61
Other investments (4) 120
510
FURTHER VENTURE CAPITAL INVESTMENT
As previously reported, the only investments likely to be made in the near term
will be further investments in companies in the existing portfolio. The
portfolio holds a number of attractive investments with good potential and it
is the intention that Quester VCT will continue to contribute to the funding of
these investments.
Once a number of the existing unquoted investments have been realised, the
potential will be created for reinvestment of the original cost in fresh
venture capital opportunities.
FTSE 350 EQUITY AND FIXED INTEREST PORTFOLIOS
The portfolio of FTSE 350 equities and fixed interest securities is retained as
a reserve for potential future venture capital investment and is managed on
behalf of the Company by Laing & Cruickshank Investment Management Limited.
The FTSE 350 holdings, covering 20 investments, stood at a valuation of some �
2.0 million at 31 July 2003 (against cost of �2.1 million), reflecting a
recovery in value of some �0.4 million over the half-year. The fixed interest
holdings with an amortized cost of �3.8 million were at break-even.
CONCLUSION
While it is too soon to predict any immediate recovery in the net asset value
per share of the Company, and business conditions vary in the different sectors
in which the Company holds investments, the performance and prospects of a
number of companies in the portfolio give cause for optimism.
We continue to work very closely with many of our portfolio companies to
rebuild value and improve the prospects for growth. The Company retains a
satisfactory level of cash reserves to contribute to the further funding of
existing portfolio companies.
Quester Capital Management Limited
Manager
30 September 2003
COMPOSITION OF THE FUND
AS AT 31 JULY 2003
Cost Valuation % of fund
�'000 �'000 by value
Ten largest venture capital
investments
CDC Solutions Limited 1,020 1,770 8.7%
Anadigm Limited 1,385 1,385 6.8%
Bowman Power Systems Limited 1,526 1,030 5.0%
HTC Healthcare Group plc 1,000 1,000 4.9%
Advanced Valve Technologies Limited 2,237 996 4.8%
Sift Group Limited 875 972 4.8%
Methuen Publishing Limited 751 751 3.7%
Sibelius Software Limited 700 700 3.4%
Communication & Control Electronics 563 563 2.8%
Limited
SurfControl plc 137 520 2.5%
10,194 9,687 47.4%
Other venture capital investments 12,000 4,084 20.0%
Total venture capital investments 22,194 13,771 67.4%
Listed fixed interest securities 3,816 3,805 18.6%
Listed FTSE 350 equities 2,097 2,010 9.8%
Total investments 28,107 19,586 95.8%
Cash and other net current assets 847 847 4.2%
Net assets 28,954 20,433 100.0%
UNAUDITED FINANCIAL STATEMENTS
PROFIT AND LOSS ACCOUNT
6 months 6 months Year ended
ended ended
31 January
31 July 2003 31 July 2002 2003
�'000 �'000 �'000
Net profit/(loss) on realisation 62 1,672 (2,373)
of investments
Income 231 161 412
Investment management fee (243) (343) (494)
Other expenses (167) (167) (263)
(Loss)/profit on ordinary (117) 1,323 (2,718)
activities
before taxation
Tax on ordinary activities - - -
(Loss)/profit on ordinary (117) 1,323 (2,718)
activities
after taxation
Dividends - - -
Transfer (from)/to reserves (117) 1,323 (2,718)
(Loss)/earnings per share (0.3)p 3.8p (7.8)p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
6 months 6 months Year ended
ended ended
31 January
31 July 2003 31 July 2002 2003
�'000 �'000 �'000
(Loss)/profit for the period (117) 1,323 (2,718)
Net unrealised gain / (loss) on 380 (5,199) (4,308)
revaluation of investments
Total recognised gains/(losses) 263 (3,876) (7,026)
relating to the period
Total recognised gains/(losses) 0.8p (11.0)p (20.1)p
per share
All items in the above statement are derived from continuing operations. The
Company has only one class of business and derives its income from investments
made in shares and securities and from bank deposits.
UNAUDITED FINANCIAL STATEMENTS
(continued)
BALANCE SHEET
Note 30 July 30 July 31 January
2003 2002 2003
�'000 �'000 �'000
Fixed assets
Investments 19,586 21,849 18,866
Current assets
Debtors 1,058 676 847
Cash at bank 87 1,601 944
1,145 2,277 1,791
Creditors: amounts falling due (298) (575) (362)
within one year
Other creditors
Net current assets 847 1,702 1,429
Net assets 20,433 23,551 20,295
Capital and reserves
Called up equity share capital 1,722 1,747 1,736
Share premium account 1 2,787 2,780 2,787
Special reserve 1 17,448 29,139 17,559
Revaluation reserve 1 (3,631) (9,939) (4,691)
Profit and loss account 1 2,107 (176) 2,904
Total equity shareholders' funds 20,433 23,551 20,295
Net asset value per share 59.3p 67.4p 58.4p
SUMMARISED CASH FLOW STATEMENT
6 months 6 months Year ended
ended ended
31 January
31 July 2003 31 July 2002 2003
�'000 �'000 �'000
Net cash outflow from operating (406) (388) (670)
activities
Net capital expenditure and financial (326) 776 507
investment
Financing (125) (187) (293)
(Decrease)/increase in cash for the (857) 201 (456)
period
Reconciliation of net cash flow to
movement in net funds
(Decrease)/increase in cash for the (857) 201 (456)
period
Net funds at the start of the period 944 1,400 1,400
Net funds at the end of the period 87 1,601 944
Notes to the unaudited financial statements
1. MOVEMENT IN RESERVES
Share Special Revaluation Profit
premium reserve reserve and loss
account � account
'000 �'000 �'000
�'000
At 1 February 2003 2,787 17,559 (4,691) 2,904
Shares bought back - (111) - -
Net unrealised gain on - - 380 -
revaluation of investments
Transfer of net realised loss to - - 680 (680)
profit and loss account
Retained loss for the period - - - (117)
At 31 July 2003 2,787 17,448 (3,631) 2,107
2. The financial information contained in this report has been prepared on the
basis of the accounting policies set out in the Annual Report.
3. The number of ordinary shares in issue as at 31 July 2003 was 34,441,775 (31
July 2002: 34,933,085).
4. The calculation of earnings per share for the period is based on the loss
after tax of �117,000 divided by the weighted average number of shares in issue
during the period being 34,639,976 ordinary shares of 5p each.
5. The unaudited financial statements set out above do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985.
6. Copies of the unaudited interim results are expected to be sent to
shareholders on 30 September 2003. Further copies can be obtained from the
Company's registered office.
A copy of the above document has been submitted to the UK Listing Authority,
and will shortly be available for inspection at the UK Listing Authority's
Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS
END