Half-yearly report
(Thomson Reuters ONE) - Elderstreet VCT plcHalf-Yearly Report for the six months ended 30 June 2009Recent performance summary 30 Jun 31 Dec 30 Jun 2009 2008 2008 pence pence penceNet asset value per Ordinary Share 70.2 72.8 88.5Cumulative distributions paid per Ordinary Share 44.0 43.0 40.0Total return per Ordinary Share 114.2 115.8 128.5CHAIRMAN'S STATEMENTI am pleased to present the Half-Yearly Report for Elderstreet VCTplc for the six-month period ended 30 June 2009. Despite thedifficult conditions, most companies within the investment portfoliohave held up well.Net Asset ValueAt 30 June 2009, the Company's Net Asset Value ("NAV") per OrdinaryShare stood at 70.2p, a decrease of 1.6p or 2.2% since 31 December2008 (after adjusting for the dividend of 1p per share paid duringthe period).Ordinary Share issueThe Company undertook a small top-up issue for the Ordinary Sharepool during the period. 1,979,406 Ordinary Shares of 5p were issuedat an average price of 74.7p per share. The total funds receivedunder the offer were £1.5 million with issue costs thereon of£81,000.Venture capital investmentsThere was relatively little investment activity during the period.The Company made one follow-on investment in Access Intelligence plc,being a £500,000 purchase of loan stock.Fords Packaging Systems Limited underwent a re-organisation duringthe period whereby a new holding company was put in place. Inaddition to a share-for-share exchange in respect of its existinginvestment, the Company also took the opportunity to invest a further£505,000 following the exit of a member of the management team.The Company undertook a small number of minor disposals, producing asmall realised loss of £26,000 during the period.Of the investments held throughout the period, the largest movementsin value were from those quoted on AIM. The share price of AccessIntelligence plc doubled over the period producing an uplift in valueof £460,000. Conversely, the share price of Snacktime plc fell bymore than 25% over the period. However, since the period end theSnacktime share price has made a sharp recovery.The Board has reviewed the valuations of the unquoted investments atthe period end and made three adjustments from the previous carryingvalues. Fords Packaging Systems has continued to perform welljustifying an uplift of £105,000. Unfortunately Wecomm has struggledto make satisfactory progress and has required a further provision of£272,000 and Sift has performed poorly, requiring a further provisionof £150,000.Total net unrealised losses arising on the investment portfolio forthe period were £208,000.Listed fixed income securitiesThe Company continues to hold a small portfolio of fixed interestinvestments which are managed by Smith & Williamson InvestmentManagement Limited. During the period this portfolio producedunrealised losses of £53,000 and realised losses of £4,000.ResultsThe loss on activities after taxation for the period was £334,000(2008 return: £1,938,000), comprising a revenue return of £53,000 anda capital loss of £387,000.DividendThe Company will pay an interim dividend to of 2.0p per Ordinaryshare (comprising of 0.25p revenue and 1.75p capital). The dividendwill be paid on 9 October 2009 to Shareholders on the register at 18September 2009.Share buybacksHistorically the Company has operated an ongoing share buyback policyto provide liquidity in the market for Shareholders wishing todispose of their share. In my statement in the Annual Report, Ireported that the Board had decided to temporarily suspend the sharebuyback policy, whilst it reviewed the Company's liquidityrequirements.The Board always seeks to balance the interests of continuing anddeparting Shareholders and has decided to introduce a slightlymodified system for share buybacks. In future, the Company willacquire its own shares in the market twice each year; once soon afterthe publication of the Half-Yearly Report and once soon after thepublication of the Annual Report. At these times, the Board willagree the price at which such buybacks are undertaken. The Board willalso agree a level of funds available for buybacks prior to buying inshares.The Board reserves the right to allocate company funds reserved forbuybacks across Shareholders wishing to sell on a pro rata basisrather than a first order basis. This may result in Shareholders onlybeing able to sell a proportion of their holding. The Board believesthis to be an equitable policy to those Shareholders who wish toexit. Any implementation of the buyback policy will be at the Board'sdiscretion and subject to the Company's liquidity and to stock marketand other applicable regulations.The Board has agreed to make funds of up to £150,000 available forshare buybacks following the release of these results. The Board willbuy in shares at approximately a 15% discount to the latest publishedNAV and expects the next buyback to take place at the end ofOctober. Shareholders who wish to sell their Shares should contactDowning Management Services Limited.Investment management and administration feesShareholders will probably be aware that there was change to VATregulations last year such that VCTs no longer suffer from VATcharged on investment management fees. This change has had an impacton the ability of the investment manager to recover input VAT on itscosts. As a result, the Board has undertaken a review of bothinvestment management and administration fees.The Board noted that the level of investment management fees chargedto the Company has, in recent years, been lower than the typicalmarket rate for "generalist" VCTs. The Board also recognises that itis important to have a properly resourced investment manager andbelieves it should pay a fair fee for the services the Companyreceives.The Board has agreed to increase the investment management fees toElderstreet Investments Limited to 2% of net assets per annum.Previously these fees had been charged at the rate of 2% plus VATless the administration fee charged by Downing Management ServicesLimited (£60,000 per annum).Following the conversion of the C Shares into Ordinary Shares lastyear, the Company now has just one class of shares. As a result, theBoard has been able to negotiate a reduction to the administrationfee to a level of £50,000 per annum plus VAT.Based on the current net asset value, the increase in the investmentmanagement fees is almost exactly offset by the savings inadministration fees and VAT. This is the first significant change tothe fee structure since the Company's launch in 1998. The Boardconsiders this change to be a satisfactory development forShareholders which ensures that the Company can expect to continue toreceive a high quality level of investment management services.Risks and uncertaintiesUnder the Disclosure and Transparency Directive, the Board isrequired in the Company's half-yearly results, to report on principalrisks and uncertainties facing the Company over the remainder of thefinancial year.The Board has concluded that the key risks facing the Company overthe 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 tothese risks. As a VCT, the Company is forced to have significantexposure to relatively immature businesses. This risk is mitigatedto some extent by holding a well-diversified portfolio.With a reasonably illiquid venture capital investment portfolio, theBoard ensures that it maintains an appropriate proportion of itsassets in cash and liquid instruments.The Company's compliance with the VCT regulations is continuallymonitored by the Administration Manager, who regularly reports to theBoard on the current position. The Company also retainsPricewaterhouseCoopers to provide regular reviews and advice in thisarea. The Board considers that this approach reduces the risk of abreach of the VCT regulations to a minimal level.OutlookThe Company now has a significant proportion of value within areasonably small number of investments, however these investments arewell diversified across industrial sectors. This structure ofportfolio lends itself to the "hands-on" investment management styletypically employed by Elderstreet Investments Limited.The Board expects general economic conditions to remain difficult forsome time, but is satisfied that the larger portfolio companies have,where needed, made appropriate adjustments, and should bewell-positioned to take advantage of improving conditions when theyarrive.David BrockChairmanUNAUDITED INCOME STATEMENTfor the six months ended 30 June 2009 Six months ended 30 June 2009 Revenue Capital Total £'000 £'000 £'000Income 186 - 186(Losses)/gains on investments - - (26) (26)realised- unrealised (261) (261) 186 (287) (101)Investment management fees (33) (99) (132)Recoverable VAT - - -Other expenses (100) (1) (101)Return/(loss) on ordinary activities 53 (387) (334)before taxationTaxation - - -Return/(loss) attributable to equity 53 (387) (334)shareholdersBasic and diluted return per Ordinary 0.1p (1.7p) (1.6p)Share Six months ended Year ended 30 June 2008 31 December 2008 Revenue Capital Total Total £'000 £'000 £'000 £'000Income 469 - 469 861(Losses)/gains on investments - 650 650 1,207 - realised- unrealised - 1,101 1,101 (2,445) 469 1,751 2,220 (377)Investment management fees (45) (136) (181) (362)Recoverable VAT - - - 100Other expenses (99) (2) (101) (220)Return/(loss) on ordinary 325 1,613 1,938 (859)activities before taxationTaxation - - - -Return/(loss) attributable to 325 1,613 1,938 (859)equity shareholdersBasic and diluted return per 1.5p 8.4p 9.9p (4.2p)Ordinary ShareRECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSfor the six months ended 30 June 2009 30 Jun 30 Jun 31 Dec 2009 2008 2008 £'000 £'000 £'000Opening shareholders' funds 15,698 17,968 17,968Issue of shares 1,479 884 885Share issue costs (81) (48) (49)Purchase of own shares - (314) (509)Total recognised (losses)/gains in the (334) 1,938 (859)periodDistributions (234) (756) (1,738)Closing shareholders' funds 16,528 19,672 15,698UNAUDITED SUMMARISED BALANCE SHEETas at 30 June 2009 As at As at As at 30 Jun 30 Jun 31 Dec 2009 2008 2008 Total Total Total £'000 £'000 £'000Fixed assetsInvestments 15,302 17,934 15,174Current assetsInvestments 5,110 5,110 5,110Debtors 108 306 392Cash at bank and in hand 1,291 1,635 348 6,509 7,051 5,850Creditors: amounts falling due within (5,283) (5,313) (5,326)one yearNet current assets 1,226 1,738 524Net assets 16,528 19,672 15,698Capital and reservesCalled up share capital 1,178 1,116 1,079Capital redemption reserve 157 144 157Merger reserve 3,475 3,475 3,475Share premium 4,341 3,018 3,042Special reserve 3,652 4,157 3,461Unrealised holding (losses)/gains (558) 2,745 124Capital reserve - realised 4,011 4,690 4,141Revenue reserve 272 327 219Equity shareholders' funds 16,528 19,672 15,698Net Asset Value per Ordinary Share: 70.2p 88.5p 72.8pUNAUDITED CASHFLOW STATEMENTfor the six months ended 30 June 2009 Six Six months months Year ended ended ended 30 Jun 30 Jun 31 Dec 2009 2008 2008 Note £'000 £'000 £'000Net cash inflow from operatingactivities and 1 187 153 211returns on investmentsCapital expenditurePurchase of investments (2,266) (2,610) (3,827)Sale of investments 1,851 3,837 4,877Net cash (outflow)/inflow from capital (415) 1,227 1,050expenditureAcquisitionsCash acquired from subsidiary - 162 162undertakingNet cash flow from acquisitions - 162 162Equity dividends paid (257) (756) (1,738)Net cash (outflow)/inflow before (485) 786 (315)financingFinancingProceeds from share issue 1,479 884 885Share issue costs (51) (103) (94)Purchase of own shares - (313) (509)Net cash inflow from financing 1,428 468 282Increase/(decrease) in cash 2 943 1,254 (33)Notes to the cash flow statement:1. Net cash inflow from operatingactivitiesand returns on investmentsReturn on ordinary activities before (334) 1,938 (859)taxationLosses/(gains) on investments 287 (1,751) 1,238Decrease/(increase) in other debtors 253 (30) (178)(Decrease)/increase in other creditors (19) (4) 10Net cash inflow from operatingactivities and 187 153 211returns on investments2. Analysis of net fundsBeginning of period 348 381 381Net cash inflow/(outflow) 943 1,254 (33)End of period 1,291 1,635 348SUMMARY OF INVESTMENT PORTFOLIOas at 30 June 2009 Unrealised gain/(loss) % of Cost Valuation in period portfolio £'000 £'000 £'000 by valueTop ten venture capitalinvestmentsWessex Advanced Switching 60 2,673 - 16.1%Products LimitedSnacktime plc * 1,725 1,551 (420) 9.3%Access Intelligence plc * 1,133 1,420 460 8.6%Fords Packaging Systems 1,047 1,152 105 6.9%LimitedLyalvale Express Limited 915 1,027 - 6.2%Baldwin & Francis Holdings 690 1,020 - 6.2%LimitedSmart Education Limited 1,403 985 - 5.9%The Engine Group plc 600 726 - 4.4%Wecomm Limited 850 472 (273) 2.8%AngloINFO Limited 328 328 - 2.0% 8,751 11,354 (128) 68.4%Other venture capital 5,922 1,704 (80) 10.3%investmentsListed fixed income 2,236 2,244 (53) 13.5%securitiesSubtotal 16,909 15,302 (261) 92.2%Cash at bank and in hand 1,291 7.8%Total investments 16,593 100.0%All venture capital investments are unquoted unless otherwise stated.* Quoted on AIMSUMMARY OF INVESTMENT MOVEMENTSfor the six months ended 30 June 2009Additions £'000Venture capital investmentsAccess Intelligence plc 500Ford Packaging Systems Limited 1,047 1,547Listed fixed income securitiesTreasury 3¼ % Stock 7/12/2011 719 2,266Disposals Market Gain/ Total value at (loss) realised 1 January Disposal against gain/ Cost 2009 proceeds cost (loss) £'000 £'000 £'000 £'000 £'000Full disposalsAlterian plc 125 57 49 (76) (8)Ford Packaging Systems1998 Limited 83 542 542 459 -Partial disposalsMears Group plc 66 73 59 (7) (14)Fixed interest securitiesNucleus Cash Trust 246 243 244 (2) 1Treasury 4% Stock 2009 936 962 957 21 (5) 1,456 1,877 1,851 395 (26)NOTES TO THE UNAUDITED FINANCIAL STATEMENTS1. The unaudited half yearly financial results cover the six monthsto 30 June 2009 and have been prepared in accordance with theaccounting policies set out in the statutory accounts for the yearended 31 December 2008 which were prepared under UK GenerallyAccepted Accounting Practice ("UK GAAP") and in accordance with theStatement of Recommended Practice "Financial Statements of InvestmentTrust Companies and Venture Capital Trusts" revised January 2009("SORP").2. All revenue and capital items in the Income Statement derive fromcontinuing operations.3. The Company has only one class of business and derives its incomefrom investments made in shares, securities and bank deposits.4. The comparative figures are in respect of the six months ended 30June 2008 and the year ended 31 December 2008 respectively.5. Basic and diluted NAV per share for the period has been calculatedon 23,549,887 shares, being the number of shares in issue at theperiod end.6. Basic and diluted return per share for the period has beencalculated on 23,037,846 shares, being the weighted average number ofshares in issue during the period.7. Distributions 30 Jun 2009 31 Dec 2008 Per share Revenue Capital Total Total pence £'000 £'000 £'000 £'000Paid in the period2007 Final Ordinary Share 3.5 - - - 734dividend2007 Final 'C' Share dividend 1.0 - - - 232008 Interim Ordinary Share 3.0 - - - 624dividend2008 Interim 'C' Share 24.0 - - - 357dividend2008 Final Ordinary Share 1.0 - 234 234 -dividend - 234 234 1,7388. Capital and Reserves Capital Investment Capital Redemption Merger Share Special Holding Reserve Revenue Reserve Reserve Premium Reserve Gains/ - Reserve (Losses) Realised £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 January 157 3,475 3,042 3,461 124 4,141 2192009Issue of new - - 1,380 - - - -sharesShare issue - - (81) - - - -costsExpenses - - - - - (100) -capitalisedLosses on - - - - (261) (26) -investmentsTransfer - - - 191 (421) 230 -betweenreservesRetained netrevenue - - - - - - 53for theperiodDistributions - - - - (234) -paid inperiodAt 30 June 157 3,475 4,341 3,652 (558) 4,011 2722009Distributable reserves comprise the Special Reserve, Capital Reserve- Realised and the Revenue Reserve. Additionally £987,000 of theMerger Reserve is considered to be distributable together with netlosses within the Investment Holding Gains Reserve of £4,891,000.Reserves available for distribution at the period end thereforeamounted to £4,031,000.9. The Directors confirm that, to the best of their knowledge, thehalf-yearly financial statements have been prepared in accordancewith the "Statement: Half-Yearly Financial Reports" issued by the UKAccounting Standards Board and the half-yearly financial reportincludes a fair review of the information required by:* 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* 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.10. The unaudited financial statements set out herein do notconstitute statutory accounts within the meaning of Section 240 ofthe Companies Act 1985 and have not been delivered to the Registrarof Companies. The figures for the year ended 31 December 2008 havebeen extracted from the financial statements for that year, whichhave been delivered to the Registrar of Companies; the auditors'report on those financial statements was unqualified.11. Copies of the unaudited half-yearly results will be sent toShareholders shortly. Further copies can be obtained from theCompany's Registered Office.---END OF MESSAGE---This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 24.08.2009 - 09:16 Uhr
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