Quester VCT 5 plc
Interim Statement for the six months ended 30 June 2007
Financial highlights
Per ordinary share (pence) 30 June 31 December 30 June
2007 2006 2006
Capital values
Net asset value 77.8 84.9 85.9
Share price 65.0 77.0 77.0
Return and dividends
Dividend * 1.0 1.0 1.0
Cumulative dividend (tax 3.5 2.5 2.5
free)
Total return ** 81.3 87.4 88.4
*A final dividend in respect of the year ended 31 December 2006 of 1p per share
was paid on 28 March 2007, increasing cumulative dividends to 3.5p per share
**Net asset value plus cumulative dividend per share
Interim report
Overview
In May 2007 we announced that Quester Capital Management Limited, the company
that manages Quester VCT 5 plc, had been acquired by NewMedia SPARK plc
(`SPARK'). SPARK is a venture capital investment company traded on the
Alternative Investment Market (AIM) of the London Stock Exchange, focused on
early stage investment in the ICT and media sectors and is one of the few
specialist and successful companies with expertise similar to Quester.
SPARK's current market capitalisation is �56 million. Its net assets at 31
March 2007 were �72 million and it had 21 investments at that date. It
specialises in digital media, software applications, technology and
communications, which complements Quester's own activities in these areas.
Quester's strong healthcare business will be developed alongside SPARK's new
focus in this area.
The combined group is responsible for managing funds of over �275 million:
SPARK, the three Quester-managed VCTs - the Company, Quester VCT plc and
Quester VCT 4 plc - the Quester Venture Partnership, an institutional fund, and
University linked funds.
The Board believes that the acquisition of Quester by SPARK and subsequent
combination of resources has the potential to deliver enhanced long-term
returns to investors in Quester VCT5. Over the past year there have been
several successful investment realisations by SPARK: their experience brings a
fresh focus on building value from Quester VCT 5 investments and planning for
exits. For example, the SPARK investment in Mergermarket generated expected
proceeds of �27.8 million against an initial cost of �1.2 million. The combined
team continues to invest in first class early stage businesses as well as
start-up companies.
Net assets and dividends
The movement in net assets is summarised in the table below:
�'000 Pence per
share
Net asset value at 31 December 2006 20,153 84.9
Income 165 0.7
Operating expenses (441) (1.9)
Net realised gain on investments 113 0.5
Net unrealised loss on investments (1,313) (5.6)
Net assets before dividends and share 18,677 78.6
buy-backs
Dividends paid net of amounts (225) (1.0)
reinvested
Share buy-backs (291) 0.2
Net asset value at 30 June 2007 18,161 77.8
The reduction in net assets since 31 December 2006 reflects mixed and slower
progress than planned by some investments over the last six months. The
majority of the portfolio investments have just passed the mid-point in their
maturity cycle and provisioning has been made against weaker investments
without the benefit of profit from revaluations or realisations of the more
successful companies.
The return (IRR - % pa) to date from Quester VCT 5 of -3.7% (+0.3% inclusive of
20% income tax relief), whilst disappointing nonetheless has a similar profile
to venture capital funds of the same vintage. For example, the five year return
from technology funds was -4.8% pa IRR (BVCA Private Equity and Venture Capital
Performance Measurement Survey 2006).
A final dividend in respect of the last financial year of 1p per share was paid
on 28 March 2007. The Board do not propose an interim dividend at this stage
and will consider whether a small final dividend is appropriate when the
accounts for the full year are available.
Venture capital portfolio: investment activity
New investment
The Company has completed three new venture capital investments during the
first six months of the year:
�'000
Symetrica Limited Diagnostics & devices 44
UniServity Limited Software 700
We7 Limited Software 102
846
Symetrica: Symetrica is a spin out company from the Department of Physics and
Astronomy at the University of Southampton set up to commercialise proprietary,
high performance gamma-ray spectroscopy, imaging hardware and software for use
in nuclear, medical and process control industries. The investment was part of
an overall financing to assist Symetrica in fulfilling a teaming agreement with
Smiths Group to deliver a US Department of Defense contract with the balance
provided by other Quester funds along with syndicate partners.
UniServity: �700,000 was invested in a �2.4 million first funding round for
UniServity, with the balance provided by other Quester managed funds.
UniServity is a leading provider of web-based learning platforms to the
educational sector. UniServity's learning platforms provide schools with a
customised online suite of tools to support innovative ways of teaching and
learning, thereby extending the classroom to the internet.
We7: the investment was part of a �1.5 million first funding round. We7's
technology inserts targeted adverts on to audio and video content which can
then be legally downloaded for free by the consumer with the advert content
being paid for by the advertiser. The company is at an early stage in
developing advertising supported internet content in the fast growing downloads
market.
Follow-on investments
A feature of the current period is that several portfolio companies have been
raising new rounds of finance to fund their ongoing development. Accordingly,
the number of follow-on investments has continued to be substantial.
�'000
Antenova Limited Communications 41
Arithmatica Limited Semiconductors 31
Azea Networks Inc Communications 71
Celona Technologies Limited Software 164
Cluster Seven Limited Software 193
Genosis plc Diagnostics & devices 113
HTC Healthcare Limited Consumer services 23
Identum Limited Software 71
Level Four Software Limited Software 166
Oxford Immunotec Limited Diagnostics & devices 82
Oxxon Therapeutics Holdings Inc Biotechnology 97
(1)
Pelikon Limited Hardware 115
1,167
(1) Bridging investment realised immediately upon the company's acquisition by
Oxford Biomedica plc.
The most significant of these transactions in the half year were as follows:
Cluster Seven: Cluster Seven provides technology for managing, analysing and
auditing the activity and data generated by Microsoft Excel spreadsheets, its
product being used principally in the investment banking industry. Following
good progress achieved during 2006, the company raised �1.5 million in
additional equity from Quester funds as sole institutional investor. This is
bridge finance and the first step towards raising additional equity finance to
fund further growth.
Level Four: Level Four supplies advanced software products for the testing and
development of ATM services to major banks and financial institutions
worldwide. The company raised �800,000 in February 2007 from Quester funds as
sole institutional investor; the new investment being expected to fund the
expansion of the company.
Celona Technologies: Celona is a developer of data migration software for
communications service providers (CSPs) enabling them to transform the software
platforms which manage their operations without affecting customer service. The
company has recently reached an important milestone with the closing of a �7
million Series B funding round with Caledonia Investments plc. This will enable
Celona to build out its sales and support activities and will fund further
product development.
Venture capital portfolio: realisations and M&A activity
Realisations from the portfolio of quoted venture capital investments generated
�266,000 in proceeds and a net gain of �59,000 over carrying value at 31
December 2006. These transactions included the sale of the entire holding in
Polaron and part of the unquoted holding in Oxxon Therapeutics at the time of
its acquisition by the AIM-traded company, Oxford Biomedica plc in a
paper-for-paper transaction.
Venture capital portfolio: valuation changes
The changes in the valuations of unquoted investments as a result of the
management team review have resulted in a net reduction in valuations of �1,772,000.
Down valuations have been made to Celona Technologies, Identum and Oxford
Immunotech ahead of third party funding rounds. In respect of Oxford
Immunotech, the Company has received notification from its lawyers of the
filing of a s459 claim brought by minority shareholders of Oxford Immunotech.
The suit claims unfairly prejudicial conduct by venture capital investors
including the Company. The Board has been advised that the case is unlikely to
succeed and accordingly it is the Company's intention to defend this action.
Down valuations have also been made to Advanced Valve Technologies,
Arithmatica, Celldex, HTC Healthcare and Mesophotonics where progress over the
past six months has been slower than planned.
Quoted venture capital investments, which comprise 11 stocks, are 26% of the
value of the venture capital portfolio and increased in valuation by �114,000
during the period.
Listed equity portfolio
The listed equity portfolio has performed well over the half year with the
valuation increasing by 11 % and a total of �1.1 million has been realised from
the portfolio to provide liquidity for the new and follow-on venture capital
investments.
Outlook
Investment in new companies has slowed down as the fund approaches full
capacity.
It is difficult to predict the timing of a significant build up in exit
activity, not least because this will be affected by general market conditions
as well as by the progress of individual portfolio companies. As stated in the
2006 Annual Report, we do not anticipate any significant short term
realisations. We were then anticipating a build up in exit activity in 2008 and
2009. The slower progress made by portfolio companies now suggest that this
timescale is likely to prove too demanding and we anticipate that the majority
of the portfolio should be ready for sale between 2009 and 2012.
We expect net asset value to continue to decline further as a result of normal
running costs and provisioning against weaker investments and then to increase
in the medium term as exits are achieved.
Our focus is now working with the established portfolio to build value towards
exits.
Michael Inwards
Chairman
20 September 2007
Fund summary
As at 30 June 2007
Industry sector Original Valuation % % of
cost equity fund
�'000 �'000 held by value
Quoted venture capital investments
Allergy Therapeutics Biotechnology 700 1,053 1.1% 5.8%
plc
Cyclacel Software 500 137 0.5% 0.8%
Pharmaceuticals Inc
Genosis plc Diagnostics & devices 713 225 4.2% 1.2%
Imagesound plc Industrial products & 500 491 0.5% 2.7%
services
Landround plc Other services 73 54 2.6% 0.3%
MediGene AG Biotechnology 624 360 0.5% 2.0%
Oxford Biomedica plc Biotechnology 428 225 0.0% 1.2%
Phoqus Group plc Biotechnology 145 88 0.4% 0.5%
Portrait Software plc Software 565 275 1.3% 1.5%
Public Recruitment Industrial products & 250 79 0.6% 0.4%
Group plc services
Quadnetics Group plc Electronics 57 79 0.1% 0.4%
Total venture capital 4,555 3,066 16.8%
investments
Unquoted venture
capital investments
Advanced Valve Industrial products & 673 - 11.9% 0.0%
Technologies Limited services
Antenova Limited Communications 443 403 1.8% 2.2%
Arithmatica Limited Semiconductors 318 80 2.5% 0.4%
Azea Networks Limited Communications 802 573 2.5% 3.2%
Celldex Therapeutics Biotechnology 400 360 1.0% 2.0%
Inc
Celona Technologies Software 824 523 5.4% 2.9%
Limited
Cluster Seven Limited Software 510 510 4.7% 2.8%
Global Silicon Limited Semiconductors 333 - 4.2% 0.0%
Haemostatix Limited Biotechnology 61 61 3.1% 0.3%
HTC Healthcare Group Consumer services 308 - 3.5% 0.0%
plc
Identum Limited Software 609 304 2.7% 1.7%
Keronite Limited Chemicals & materials 386 386 2.9% 2.1%
Lectus Therapeutics Biotechnology 364 364 3.0% 2.0%
Limited
Level Four Software Software 580 580 4.1% 3.2%
Limited
Mesophotonics Limited Electronics 357 89 3.0% 0.5%
Nanotecture Group Chemicals & materials 88 88 0.8% 0.5%
Limited
Oxford Immunotec Diagnostics & devices 638 418 3.7% 2.3%
Limited
Pelikon Limited Hardware 487 487 2.9% 2.7%
Perpetuum Limited Electronics 185 185 3.4% 1.0%
Secerno Limited Software 108 108 1.7% 0.6%
Symetrica Limited Diagnostics & devices 44 44 0.9% 0.2%
UniServity Limited Software 700 700 11.6% 3.9%
Vivacta Limited Diagnostics & devices 390 390 5.6% 2.1%
We7 Limited Software 102 102 3.9% 0.6%
Workshare Limited Software 764 1,037 2.9% 5.7%
Xention Discovery Biotechnology 700 738 3.4% 4.1%
Limited
Total unquoted venture capital investments 11,174 8,530 47.0%
Total venture capital 15,729 11,596 63.8%
investments
Listed fixed interest 1,547 1,545 8.5%
investments
Listed equity 2,205 3,449 19.0%
investments
Total investments 19,481 16,590 91.3%
Cash and other net assets 1,571 1,571 8.7%
Net assets
21,052 18,161 100.0%
Unaudited financial statements
Profit and loss account
Note 6 months 6 months Year ended
ended ended 31 December
30 June 2007 30 June 2006 2006
�'000 �'000 �'000
Net losses on investments at fair (1,200) (168) (206)
value through profit or loss
Income 165 145 292
Investment management fee (257) (277) (540)
Other expenses (183) (156) (295)
Loss on operating activities (1,475) (456) (749)
Interest payable on loan notes (1) (1) (2)
Loss on ordinary activities (1,476) (457) (751)
before taxation
Tax on ordinary activities - - -
Loss on ordinary activities after (1,476) (457) (751)
taxation
Basic and diluted loss per share 4 (6.3)p (1.9)p (3.1)p
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.
A statement of total recognised gains and losses has not been presented because
all gains and losses are included in the statement above.
Balance sheet
30 June 31 December 30 June
2007 2006 2006
�'000 �'000 �'000
Fixed assets
Investments 16,590 17,212 15,597
Current assets
Debtors 336 278 101
Cash at bank 1,481 2,847 5,365
1,817 3,125 5,466
Creditors: amounts (200) (138) (264)
falling due within one
year
Other creditors
Net current assets 1,617 2,987 5,202
Creditors: amounts (46) (46) (46)
falling due in over one
year
Net assets 18,161 20,153 20,753
Capital and reserves
Called-up equity share 233 237 242
capital
Capital redemption 19 15 10
reserve
Share premium account 5,996 5,982 5,982
Special reserve 14,590 14,986 15,323
Fair value reserve (2,893) (1,468) (1,303)
Profit and loss account 216 401 499
Total equity 18,161 20,153 20,753
shareholders' funds
Net asset value per share 77.8p 84.9p 85.9p
Summarised cash flow statement
30 June 30 June 31 December
2007 2006 2006
�'000 �'000 �'000
Net cash outflow from operating (37) (91) (623)
activities
Net capital expenditure and (813) (770) (2,450)
financial investment
Dividends paid net of amounts (225) (230) (232)
reinvested
Buy-back of ordinary shares (291) (320) (626)
Issue of shares pursuant to - - 2
offers for subscription made
during 2004
Decrease in cash for the period (1,366) (1,411) (3,929)
Reconciliation of net cash flow to movement in net funds
Decrease in cash for the period (1,366) (1,411) (3,929)
Net funds at the start of the 2,847 6,776 6,776
period
Net funds at the end of the 1,481 5,365 2,847
period
Reconciliation of movement in shareholders' funds
Share Capital Share Special Fair Profit Total
capital redemption premium reserve value and loss
reserve account reserve account
�'000 �'000 �'000 �'000 �'000 �'000 �'000
At 1 January 237 15 5,982 14,986 (1,468) 401 20,153
2007
Shares issued - - 14 - - - 14
under the
Dividend
Reinvestment
Scheme
Shares bought (4) 4 - (291) - - (291)
back
Realisation - - - - (112) 112 -
of prior
years' net
unrealised
profits on
investments
Transfer from - - - (105) - 105 -
special
reserve to
profit and
loss account
Transfer of - - - - (1,313) 1,313 -
net
unrealised
loss on
revaluation
of
investments
to fair value
reserve
Loss on - - - - - (1,476) (1,476)
ordinary
activities
after
taxation
Dividend paid - - - - - (239) (239)
At 30 June 233 19 5,996 14,590 (2,893) 216 18,161
2007
Notes
1. The financial information contained in this report has been prepared on the
basis of the accounting policies set out in the Annual Report for the year
ended 31 December 2006.
2. A final dividend in respect of the prior year of 1p per share totalling �
239,000 was paid on 28 March 2007.
3. The number of ordinary shares in issue as at 30 June 2007 was 23,341,324
(30 June 2006: 24,145,351).
4. The calculation of earnings per share for the period is based on the loss
after tax of �1,476,000 (2006: loss of �457,000) divided by the weighted
average number of shares in issue during the period being 23,544,305 (2006:
24,443,013) ordinary shares of 1p 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. The statutory accounts for the period ended 31 December 2006 have
been delivered to the Registrar of Companies and received an audit report
which was unqualified and did not contain any statements under Section 237
(2) and (3) of the Companies Act 1985.
6. Copies of the unaudited interim results are expected to be sent to
shareholders on 20 September 2007. Further copies can be obtained from the
Company's registered office.
A copy of the above document is to be 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
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