9th Aug 2007 17:01
Matrix Income & Growth VCT plc ("the Company")
Investment Objective
Matrix Income & Growth VCT plc is a Venture Capital Trust ("VCT") managed by Matrix Private Equity Partners investing primarily in established, profitable, unquoted companies.
The Company's objective is to provide investors with a regular and growing income stream, by way of tax free dividends, and to generate capital growth through portfolio realisations, which can be distributed by way of additional tax free dividends.
Financial highlights
Interim Results for the six months ended 30 June 2007
30 June 2007 30 June 2006 31 December 2006 Net assets ‚£23,715,873 ‚£20,844,852 ‚£22,244,902Net asset value per share 107.29p 94.13p 100.64pTotal return per share* 110.49p 95.13p 102.45pShare price (mid-market 91.50p 99.00p 88.50pprice)Net cumulative dividends 3.20p 1.00p 1.80ppaid*** Net asset value per share plus cumulative dividends per share.This compares with an original investment cost of 100 pence per share, whichafter allowing for income tax relief of 40 pence per share equates to 60 penceper share.
** For a breakdown of recent dividends paid, please see `Dividends paid' in the Income Statement below.
In addition, an interim dividend of 1.00 pence per share has been declared andis payable on 20 September 2007 to Shareholders on the Register on 24 August2007, thereby increasing net cumulative dividends to 4.20 pence per share.
Chairman's Statement
I am pleased to present the interim results of the Company covering the six month period ended 30 June 2007.
Results and dividend
The revenue account generated a net return (after tax) for the period of ‚£306,813 (2006: ‚£231,302). The Board has declared an interim dividend of 1.00 pence per share (2006: 0.80 pence per share) which will be paid on 20 September 2007 to Shareholders on the Register on 24 August 2007.
Net Asset Value
The net asset value (NAV) at 30 June 2007 was 107.29 pence per share (30 June 2006: 94.13 pence per share) compared with an NAV of 100.64 pence per share at the beginning of the period, an increase of 6.6%.
Investment portfolio
No new investments were completed during the period. This, in part, reflected an extremely competitive environment for private equity deals leading to inflated price expectations on the part of many vendors. Against this background your Investment Manager, supported by the Board, continued to pursue a measured and selective approach towards new investment proposals.
Since the end of the period the Company has invested ‚£1.0 million in the management buy out of Digico Europe Limited and the Investment Manager is currently progressing a number of other attractive investment opportunities.
Meanwhile, the current portfolio exhibited encouraging progress over the period with a number of upward valuation movements. For further information on these investments please see the Investment Manager's Review below.
Income
Income was derived from two main sources. First, income from OEICmoney market funds generated an average annualised yield of approximately 5.3%over the period; secondly, the investments made by your Investment Managerusually include a substantial component of interest-bearing loan stocks. Theseloan stocks are now beginning to make a significant contribution and at 30June 2007 were generating an annualised yield of 7.8%. As at the end of theperiod, the annualised running yield on the qualifying investment portfolio asa whole was 4.1%, while upon all investments it was 4.9%.
Investment in qualifying holdings
The key date by which the Investment Manager is required to meetthe target set by HM Revenue & Customs of investing 70% of the funds raised inqualifying unquoted and AIM quoted companies is 31 December 2007. Followingthe investment in Digico the Company was 48.6% invested in qualifyingcompanies, based on VCT cost as defined in tax legislation, and, as outlinedin the accompanying Review, the Investment Manager remains confident ofachieving this investment target by the end of the year. The balance of theportfolio is invested in a selection of OEIC money market funds.
Communicating with shareholders
The Company maintains a programme of regular communication withShareholders, with newsletters and a dedicated website: www.migvct.co.uk,supplementing the interim and annual reports. The Board welcomes theopportunity to meet Shareholders at the Company's Annual General Meetingsduring which representatives of the Investment Manager are present to discussthe progress of the portfolio. The next AGM of the Company will be held in May2008.
Extraordinary General Meeting 30 October 2007 - Electronic Communications
Subject to Shareholder approval, the Companies Act 2006 allows companies to send or supply documents and information to Shareholders in electronic form and by a website in place of hard copies. The Directors are of the opinion that this could be beneficial for both the Company and its Shareholders, in particular as it may help reduce administration costs and will ensure that Shareholders receive documents in a more timely manner.
To implement this the Directors are convening an Extraordinary General Meeting to be held on 30 October 2007 at which Shareholders will be asked to approve a single resolution authorising the Company to send communications electronically to Shareholders and make documents and information available to Shareholders on a website. The Notice of this meeting and a personalised Proxy Form for use in relation to this meeting will be included with Shareholders' copies of the Interim Report.
Outlook
The Board is encouraged by the evidence of value creation within the current portfolio and with it the potential for profitable exit opportunities as the portfolio matures. Based on the Investment Manager's planned investment programme for the second half of the year, the Board is confident, also, that the Company should achieve the 70% test by 31 December 2007 and at least maintain this level of investment in qualifying companies going forward.
Finally, I would like to thank all of our Shareholders for their continuing support.
Keith NivenChairman
Investment Manager's Review
Over the last six months the portfolio has begun to demonstrate the benefits of our approach of investing in established, profitable companies, principally by way of Management Buy Outs ("MBOs").
The rate at which we have made new investments has slowedconsiderably, particularly compared to the rate seen in the first half of2006. Competition for transactions has increased markedly. This has in partbeen driven by the amount of debt and equity funding available to companies,which has led to inflation in purchase prices. We have also been offered agreater number of lower quality transactions. We have therefore been adoptinga highly selective and cautious approach towards new investment in the currentenvironment.Since the period end an investment of ‚£1 million has been completedas part of the MBO of Digico Europe Limited, the global market leadingmanufacturer of digital sound mixing consoles for the live performancetheatre, post-production and broadcast markets. Several other opportunitieshave also been agreed and are proceeding through diligence and contractnegotiations. They include investments in three new companies that are beingestablished with experienced operating partners in the support services,healthcare and food and beverage sectors. In the light of these opportunities,we remain fully confident of meeting the 70% qualifying investment target bythe 31 December 2007 deadline.At 30 June 2007 a total of ‚£8.8 million at cost had been investedin thirteen companies, and these have been valued at that date, in accordancewith International Private Equity & Venture Capital Valuation ("IPEVCV")guidelines, at ‚£11.9 million, an uplift of 35%. Six companies have moved fromcost to a discounted earnings valuation since the beginning of the year, andall have shown an increase, generally reflecting performance in line with ourexpectations at the time we made our investment.Of particular note has been the strong trading experienced by bothBlaze Signs and PastaKing, the former seeing growth from its major retailcustomers and the latter benefiting from the increasing trend towards healthyeating in schools and colleges. Of the other four companies which have seen anuplift in value; Campden Media is expanding its US conferencing business andestablishing an online offering for its healthcare publications; BritishInternational has recently been successful in gaining offshore work for itshelicopter fleet and is entering its busy summer period; Vectair is showingimpressive revenue and profit growth in Europe for its range of air freshenersand toiletry products, and is also expanding into the USA, and VSI hasperformed fully in line with expectations and is considering expansionopportunities.Whilst unquoted companies are not immune from the wider economicenvironment and the recent increases in interest rates, we remain encouragedby the overall performance of the portfolio and have recently seen potentialfor some early realisations.Investment Portfolio Summaryas at 30 June 2007 Date of Total Valuation % value initial book of net investment cost assetsQualifying investments ‚£'000 ‚£'000AIM quoted investmentsBBI Holdings plc May-06 382 621 2.62%Developer and manufacturerof rapid test diagnostic productsSectorGuard plc Aug-05 150 150 0.63%Provider of manned guarding,mobile patrolling, and alarmresponse services ---------- ---------- ---------- 532 771 3.25%Unquoted investmentsYoungman Group Limited Oct-05 1,000 2,716 11.45%Manufacturer of ladders andaccess towersBritish International Holdings Jun-06 1,000 1,170 4.93%LimitedSupplier of helicopter servicesVSI Limited Apr-06 618 1,092 4.60%Developer and marketerof 3D softwareMinistry of Cake Limited Sep-05 1,000 1,075 4.53%Manufacturer of frozen cakesand desserts for the food serviceindustryCampden Media Limited Jan-06 975 1,001 4.22%Magazine publisher andconference organiserPXP Holdings Limited Dec-06 1,000 1,000 4.22%(Pinewood Structures)Designer, manufacturer,supplier and installer of timber-frames for buildingsBlaze Signs Holdings Apr-06 574 885 3.73%LimitedSignwriterRacoon International Dec-06 874 874 3.69%Holdings LimitedSupplier of hair extensions,hair care products and trainingPastaKing Holdings Limited Jun-06 464 749 3.16%Supplier to the educationaland food service marketVectair Holdings Limited Jan-06 560 604 2.55%Designer and distributor ofwashroom productsFH Ingredients Limited Feb-05 213 - 0.00%Processor and distributor offrozen herbs to the foodprocessing industry ---------- ---------- ---------- 8,278 11,166 47.08% ---------- ---------- ----------Total qualifying investments 8,810 11,937 50.33% ---------- ---------- ----------Non-qualifying investmentsGlobal Treasury Funds 2,918 2,918 12.30%plc (Royal Bank of Scotland)**Fidelity Institutional Cash 2,039 2,039
8.60%
Fund plc**SWIP Global Liquidity 1,933 1,933
8.15%
Fund plc (Scottish Widows)**Barclays Global Investors 1,801 1,801 7.59%Cash Selection Funds plc**Insight Liquidity Funds 1,132 1,132 4.77%plc (HBOS)**GS Funds plc (Goldman 1,031 1,031 4.35%Sachs)**Institutional Cash Series plc 943 943 3.98%(BlackRock)** ---------- ---------- ----------Total non-qualifying 11,797 11,797 49.74%investments ---------- ---------- ----------Total investments 20,607 23,734 100.07% ====== ====== ======Other assets 246 246 1.04 %Current liabilities (264) (264) (1.11)% ---------- ---------- ----------Net assets 20,589 23,716 100.00% ====== ====== ======
**Disclosed as Investments at fair value within Current assets in the Balance Sheet.
Unaudited Income Statement(incorporating the Revenue Account of the Company for the six months ended 30June 2007 Six months ended 30 June 2007 Six
months ended 30 June 2006
Revenue Capital Total Revenue Capital Total ‚£ ‚£ ‚£ ‚£ ‚£ ‚£Unrealised gains oninvestments held atfair value - 1,607,124 1,607,124 - 15,180 15,180Realised losses oninvestments held atfair value - - - - - -Costs of investmenttransactions - (148) (148) - (61) (61)Income 625,023 - 625,023 517,317 - 517,317Investmentmanagement fees (65,423) (196,271) (261,694) (61,340) (184,021) (245,361)Other expenses (160,711) - (160,711) (154,791)
- (154,791)
---------- ---------- --------- ----------
---------- ----------
Return on ordinaryactivities beforetaxation 398,889 1,410,705 1,809,594 301,186 (168,902) 132,284Tax on ordinaryactivities (92,076) 62,904 (29,172) (69,884) 54,248 (15,636) ---------- ---------- --------- ---------- ---------- ---------- Return attributableto equityshareholders 306,813 1,473,609 1,780,422 231,302 (114,654) 116,648 ====== ====== ====== ====== ====== ======
Return per share 1.39p 6.66p 8.05p 1.04p (0.51)p 0.53pDividends paid Interim dividend paidfor the six monthsended 30 June 2006of 0.80 pence pershare - - - - - -Final dividend paidfor the year ended31 December 2006of 1.40 pence pershare (period ended31 December 2005:0.70 of a penny pershare) 309,451 - 309,451 155,005 - 155,005 ---------- ---------- ---------- ---------- ---------- 309,451 - 309,451 155,005 - 155,005 ---------- ----------- ---------- ---------- ---------- Year ended 31 December 2006 (audited) Revenue Capital Total ‚£ ‚£ ‚£Unrealised gains oninvestments held atfair value - 1,731,906 1,731,906Realised losses oninvestments held atfair value - (212,893) (212,893)Costs of investmenttransactions - (82) (82)Income 1,071,415 - 1,071,415Investmentmanagement fees (123,960) (371,881) (495,841)Other expenses (317,372) - (317,372) ---------- ---------- ----------Return on ordinaryactivities beforetaxation 630,083 1,147,050 1,777,133Tax on ordinaryactivities (161,126) 113,421 (47,705) ---------- ---------- ----------Return attributableto equityshareholders 468,957 1,260,471 1,729,428 ====== ====== ======Return per share 2.12p 5.69p 7.81p Dividends paid Interim dividend paidfor the six monthsended 30 June 2006of 0.80 pence pershare 177,149 - 177,149Final dividend paidfor the year ended31 December 2006of 1.40 pence pershare (period ended31 December 2005:0.70 of a penny pershare) 155,005 - 155,005 ---------- ---------- ---------- 332,154 - 332,154 Unaudited Balance Sheetas at 30 June 2007 As at As at As at 30 June 30 June 31 December 2007 2006 2006 (audited) ‚£ ‚£ ‚£Non-current assetsInvestments at fairvalue 11,936,670 6,951,307 10,329,528 Current assetsDebtors and prepayments 124,753 83,998 142,515Investments at fair value 11,797,408 14,052,947 11,906,321Cash at bank 121,289 63,384 58,250 ---------- ---------- ---------- 12,043,450 14,200,329 12,107,086Creditors: amounts falling due within one year ( 264,247) ( 306,784) ( 191,712) ---------- ---------- ----------Net current assets 11,779,203 13,893,545 11,915,374 ---------- ---------- ----------Net assets 23,715,873 20,844,852 22,244,902 ---------- ---------- ----------Capital and reservesCalled up share capital 221,038 221,438 221,038Capital redemption reserve 400 - 400Share premium account - 20,711,686 -Capital reserve - unrealised 3,339,030 15,180 1,731,906Capital reserve - realised ( 874,143) ( 399,027) ( 740,628)Special distributablereserve 20,676,105 - 20,676,105Revenue reserves 353,443 295,575 356,081 ---------- ---------- ----------Equity shareholders'funds 23,715,873 20,844,852 22,244,902 ---------- ---------- ----------Net asset value perOrdinary Share 107.29p 94.13p 100.64p
Unaudited Reconciliation of Movements in Shareholders' Funds for the six months ended 30 June 2007
Six months ended Six months ended Year ended 30 June 2007 30 June 2006 31 December 2006 (audited) ‚£ ‚£ ‚£Opening Shareholders' funds 22,244,902 20,883,209 20,883,209Ordinary Shares boughtback - - (35,581)Return for the periodbefore dividends 1,780,422 116,648 1,729,428Dividends paid in period (309,451) (155,005) (332,154) ---------- ---------- ----------Closing Shareholders'funds 23,715,873 20,844,852 22,244,902Unaudited Summarised Cash Flow Statementfor the six months to 30 June 2007 Six months Six months ended ended Year ended 30 June 30 June 31 December 2007 2006 2006 (audited) ‚£ ‚£ ‚£Operating activitiesInvestment incomereceived 644,916 527,331 1,023,128Investment managementfees paid (261,694) (246,172) (619,414)Other cash payments (119,627) (125,006) (312,203) ---------- ---------- ----------Net cash inflow fromoperating activities 263,595 156,153 91,511 Investing activitiesAcquisitions of investments (18) (4,573,234) (6,447,622) DividendsEquity dividends paid (309,451) (155,005) (332,154) ---------- ---------- ----------Cash outflow beforefinancing and liquidresource management (45,874) (4,572,086) (6,688,265) FinancingShare capitalraised/(bought back) - - ( 35,581) Management of liquidresourcesDecrease in currentinvestments 108,913 4,616,380 6,763,006 ---------- ---------- ----------Increase in cash for theperiod 63,039 44,294 39,160 ---------- ---------- ----------NOTES
1. The accounts have been prepared under UK Generally Accepted Accounting Practice (GAAP and, to the extent that it does not conflict with the fair value rules of the Companies Act 1985, the 2003 Statement of Recommended Practice, `Financial Statements of Investment Trust Companies', revised December 2005.
2. In accordance with the policy statement published under "Management and Administration" in the Company's Prospectus dated 9 July 2004, the Directors have charged 75% of the investment management expenses to the capital reserve.
3. The revenue return per Ordinary Share is based on the net revenue on ordinary activities after taxation of ‚£306,813 and is based on 22,103,821 Ordinary Shares, being the weighted average number of Ordinary Shares in issue during this period. The capital gain per Ordinary Share is based on ordinary activities after taxation of ‚£1,473,609 and is based on 22,103,821 Ordinary Shares, being the weighted average number of Ordinary Shares in issue during the period.
4. Net asset value per Ordinary Share is based on net assets at 30June 2007, and on 22,103,821 (at 30 June 2006: 22,143,821 at 31 December 2006:22,103,821) Ordinary Shares, being the number of Ordinary Shares in issue onthat date.
5. The financial information for the six months ended 30 June 2007 has neither been audited nor reviewed.
6. Copies of the Interim Report for the six months ended 30 June 2007 are being sent to all Shareholders. Further copies are available free of charge from the Company's registered office, One Jermyn Street, London SW1Y 4UH or can be downloaded via the Company's web site at www.migvct.co.uk
Contact details for further enquiries:
Sarah Penfold of Matrix-Securities Limited (the Company Secretary) on 020 7925 3300 or by e-mail on [email protected]
Matrix Private Equity Partners LLP (the Investment Manager), on 020 7925 3300 or by e-mail on [email protected]
MATRIX INCOME & GROWTH VCT PLCRelated Shares:
Mobeus I&g