Interim Results for the six months ended 30 June 2007
Investment Objective
Core VCT I plc ("Core VCT I" or "the Company" ) is a tax efficient listed
company which aims to achieve long-term capital and income growth, and to
distribute tax free dividends of realised gains and investors' capital.
Investment Approach
* The Company invests management buyout and development capital, typically in
established, private companies, which show:
* Sufficient operating critical mass and an established economic model; and
* Quality management teams with the key skills in place to deliver a
well-defined business model.
* The Company is managed by Core Capital LLP ("Core Capital" or "the
Manager") who invest amounts generally in the range of �2 - �5 million
across the three Core VCTs in companies valued at �5 - �25 million.
Fund Structure
Core VCT I is structured as follows:
* No annual management fees
Only when Shareholders have received the first 60 pence of distributions, which
together with an assumed 40 pence of initial tax relief will have realised them
100 pence per share, will the Manager be entitled to 30% of distributions from
the Company.
* Maximise distributions of income and capital
Core VCT I has a policy to distribute all proceeds from realised investments.
The Company has no fixed life, but intends to naturally liquidate and
distribute its assets over time. The Manager's incentives are structured to
align its interests in delivering this liquidity for Shareholders as well as
maximising overall investment performance.
Performance Summary
Ordinary Shares 30 June 2007 30 June 2006 31 December
2006
Net asset value per share 98.32 pence 95.33 pence 97.02 pence
Net asset value total return to date 101.42 pence 96.33 pence 98.02 pence
per share
Share price (mid-market) 90 pence 100 pence 100 pence
Earnings per share 3.39 pence 0.86 pence 2.55 pence
Dividends per share 3.10 pence 1.00 pence 1.00 pence
B shares 30 June 2007 30 June 2006 31 December
2006
Net asset value per share 1.00 pence 1.00 pence 1.00 pence
Net asset value total return to date 1.00 pence 1.00 pence 1.00 pence
per share
Share price (mid-market) 4.50 pence 4.50 pence 4.50 pence
Earnings per share 0.00 pence 0.00 pence 0.00 pence
Dividends per share 0.00 pence 0.00 pence 0.00 pence
Chairman's Statement
Results
The Net Asset Value (NAV) total return per Ordinary Share was 101.42p as at 30
June 2007, comprising a NAV per Ordinary Share of 98.32p and cumulative
dividends paid of 3.10p per Ordinary Share. This is an increase over the Total
Return to 31 December 2006 of 3.47%. A surplus of �389,269 was earned during
the six month period.
Dividends
Core VCT I is structured to maximise distributions of both capital and income
to Shareholders over the life of the Company. Following the completion of the
initial investment programme of the Fund a final dividend is planned to be
declared after the end of the full financial year to 31 December 2007
comprising a substantial proportion of the cash assets at that time.
Future dividends will be derived primarily from investment realisations as they
arise. In the meantime, the Company earns income from its managed cash assets,
and over time should start to earn income from the unquoted investments made.
This has produced a revenue return surplus of 1.19p per Ordinary Share in this
period, which it is intended will be distributed after the end of the full
financial year.
VCT Qualifying Status
At 30 June 2007, 63.41% of its total investments at that date were represented
by VCT qualifying investments, and after the period-end a further new
investment was completed which has now taken the Fund to 76.87% in respect of
the required 70% threshold for VCT purposes.
Investments
The Manager's Review refers in more detail to the prospects of the investment
portfolio, and in particular to a recent investment, Baxters, where we have
chosen to make a provision. Good progress elsewhere and the completion of a
number of acquisitions by portfolio companies underline our confidence in the
valuation gains we anticipate in future. The net increase in the valuation of
the Portfolio was �233,000, or some 3.65%.
Change in Directors
Due to increasing demands on her time outside of the Company, Helen Bagan is
retiring from the Board today. We are very grateful for Helen's contribution
to the development of the Company to date and wish her well for the future.
We welcome John Brimacombe as a non-executive director who joins the Board
today. John is MD of Jobstream Group plc and an Operating Partner of Sussex
Place Ventures. He was a co-founder of NGame Limited and was also President of
Mforma Group Inc.. John is a non-executive director of Kelway Holdings Limited,
one of the investee companies of the Core VCTs, and we look forward to his
contribution.
Information for Shareholders
The Board supports open communication with investors and welcomes any comments
or questions you may have. Company contact information is provided below.
Share Price
Both the Ordinary Shares (CR.) and the B Shares (CR.B) are fully listed shares.
Prices are available on www.londonstockexchange.com and the Ordinary Share
price is published daily in the Financial Times. Shareholders are reminded that
disposing of shares within three years will result in loss of tax relief, and
that their holding of B Shares forms an integral part of their investment along
with their holding of Ordinary Shares.
Peter Smaill
Chairman
Manager's Review
Investment Highlights
* VCT qualifying investment level of 70% exceeded after the period-end, ahead
of 31 December 2007 deadline;
* Investment Portfolio now comprises 8 investments with a cost of �7.8
million and a value of �8.1 million (7 investments with cost of �6.4
million and value of �6.7 million as at 30 June 2007);
* Three of the companies in the investment portfolio have completed, or
agreed to complete, substantial acquisitions;
VCT Qualifying Status
At 30 June 2007, Core VCT I was 63.41% invested in qualifying VCT investments
which has increased to 76.87% following the completion of investments since the
period-end.
New Investments
We completed one new investment and one further investment in the period to 30
June 2007 as follows :-
Pureleaf Limited (Baxters International)
Cost Valuation
At 30 June 2007 �660,000 �267,000
Drawn-down after period-end �428,000 �428,000
Total �1,088,000 �693,000
We completed the management buy in (MBI) of Baxters in January with total
funding of �8 million, in which the Core funds collectively invested �4.35
million. Core VCT I invested �1.09 million including a further �428,000
drawn-down after the period-end.
Baxters is a long established removals and storage business with substantial
freehold property and a long standing relationship with the Ministry of
Defence, for whom Baxters carries out a significant amount of long term
storage.
Since the completion of the MBI, we have uncovered a number of areas where we
anticipate pursuing claims against the vendors. We have made a provision for
the financial effects of what we have discovered (including the anticipated
costs of these actions) notwithstanding our confidence in recovering the sums
due and the majority of our costs in pursuing these claims, and based on our
assessment of legal opinion of the strength of these claims. Following
extensive legal advice, we anticipate a successful outcome and will keep
shareholders informed of developments as appropriate.
Adapt Group Limited (formerly Highpitch Limited)
Cost �980,040 Valuation �980,040
Adapt is a virtual network operator (VNO) providing telecoms solutions to small
and medium sized businesses.
We first invested in Highpitch (formerly trading as MNet) in June 2006 as a
small participant in the mezzanine debt of the �7.5 million Management Buy out
(MBO) of the business. Since then, the business has grown significantly,
rebranded as Adapt, and in June this year acquired Centric Telecom. We took the
opportunity to increase our investment at this time to fund this acquisition,
structured with an attractive ongoing yield.
SPL Services Limited
Since 30 June 2007, one further new investment of �1 million has been
completed, in SPL Services Limited, a specialist courier company.
Existing Portfolio
Ma Hubbards Limited Cost �1,500,000, Valuation �1,500,000
The business operates freehold pubs offering value for money food in the North
Midlands. The valuations of freehold pubs remains strong, and we have taken
advantage of this by disposing of some underperforming sites at premiums over
our cost to reduce bank debt. We have also appointed a new manager following
the change in control of the previous corporate manager, Honeycombe, whom we
anticipate will improve profitability from the existing sites where revenue
remains on track.
This investment is syndicated with Electra VCTs.
Kelway Holdings Limited Cost �1,250,000, Valuation �1,875,000
Kelway is a fast growing IT reseller targeting organisations with 250 to 1,000
employees. The company has made good progress since our investment last year,
and completed a substantial acquisition in June, acquiring Elcom. This brings
the combined forecast revenues to over �90 million and has been completed
without any senior debt to Kelway's balance sheet. Accordingly, to reflect the
fair value of the investment, the valuation has been increased based on its
current and budgeted turnover and EBIT and in part the values implied by the
Elcom transaction.
Blanc Brasseries Holdings plc Cost �1,000,000, Valuation �1,000,000
Blanc Brasseries currently operates five units in the premium casual dining
market and is looking to grow to 20 units within 3 years. The business model
has been successfully re-worked in preparation for the roll-out of future
sites. Finding sites on attractive economic terms has taken longer than
originally expected, but there is now a strong contracted pipeline of sites in
place. These restaurants will also feature in the forthcoming BBC 2 TV series,
"The Restaurant". We would anticipate increasing the valuation of this
investment once the implementation of the roll-out has been commenced.
Colway Limited Cost �1,000,000, Valuation �1,000,000
(trading as London Graphic Centre and Red Box)
London Graphic Centre is a long established office and graphic supplies
business. Since our original investment, the business has rebranded its core
B2B activities as Red Box, and secured two acquisitions, in the latter of which
other Core funds invested additional mezzanine funding. With further
acquisitions identified, we see this business growing to over �30 million in
turnover compared to the �15.5 million at the date of our original investment
in 2006, placing it firmly as one of the largest independent stationery and
office supplies businesses serving the London market.
Augentius Fund Administration LLP Cost �30,144, Valuation �30,144
Augentius is a leading onshore administrator of private equity funds and was
formerly Ansbacher Fund Services. The business operates from London and
Guernsey and provides out-sourced administration services to many leading
private equity funds.
This small investment has a cash yield of 9.5%. The business is winning new
clients rapidly, but we have made no increase in the valuation given its size
and stage.
Developments at Core Capital
Following the Closing of the Offers of both Core VCTs IV & V, Core now has a
total of some �65 million of VCT funds under management. As a part of Core's
evolution in managing this growth, a number of changes have been made to the
team. These include the retirement of Mark Storey as a partner, and the ending
of Ian Henderson-Londono's consulting arrangement. David Steel, previously at
KPMG, has been appointed as investment executive, and joins the founders,
Stephen Edwards and Walid Fakhry. As mentioned in the Chairman's Statement,
John Brimacombe joins the Boards of each of Core VCTs I, II & III following the
retirement of Helen Bagan.
Future Investments
Following 30 June 2007, Core VCT I has completed its investment programme and
is over 70% invested in qualifying investments as is required by 31 December
2007 to maintain VCT qualifying status. Following this, and as the portfolio
matures, we will look forward to valuation increases as the results of our
initial investment, and subsequent developments which in many cases include
subsequent acquisitions, bring demonstrable value to the portfolio.
Investment Portfolio Summary
as at 30 June 2007
Date of Book cost Valuation % of net
investment assets by
value
�'000 �'000
Qualifying investments
(unquoted)
Kelway Holdings Limited November 2006 1,250 1,875 17.3%
IT Services
Ma Hubbards Limited July 2005 1,500 1,500 13.8%
Managed freehold pubs
Blanc Brasseries Holdings April 2006 1,000 1,000 9.2%
plc
Premium casual dining
brasseries
Colway Limited May 2006 1,000 1,000 9.2%
(trading as London Graphic
Centre and Red Box)
Office and graphics supplies
Adapt Group Limited June 2006 980 980 9.1%
(formerly Highpitch Limited)
Internet connections and
co-location services
Pureleaf Limited (Baxters January 2007 660 267 2.5%
International)**
Removal company
----------- ----------- -----------
Total qualifying investments 6,390 6,622 61.1%*
Non-qualifying investments
Augentius Fund October 2006 30 30 0.3%
Administration LLP
Fund administrator
Unlisted securities 1,508 1,508 13.9%
Funds and Trusts 1,380 1,462 13.6%
Listed securities 1,149 1,270 11.7%
Short-dated variable 500 500 4.6%
securities
----------- ----------- -----------
Total non-qualifying 4,567 4,770 44.1%
investments
----------- ----------- -----------
Total investments 10,956 11,392 105.2%
----------- ----------- -----------
Other assets 554 5.1%
Current liabilities (1,122) (10.3%)
----------- -----------
Net assets 10,824 100.0%
======= =======
* Book value of total qualifying investments represents 58.32% of the total
book value of investments. The VCT investment tests are measured broadly on
original cost of investments, including cash balances, and this gives the
figure of 63.41% quoted in the Chairman's Statement and the Manager's Review
above in relation to progress towards achieving a minimum of 70% of total
investments invested in qualifying investments before 31 December 2007.
** A further �428,000 was drawn-down after the period-end in respect of the
total commitment of �1.09 million.
Unaudited Income Statement
(incorporating the Revenue Account of the Company for the six months ended 30
June 2007)
Six months ended 30 June 2007 Six months ended 30 June 2006
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
� � � � � �
Realised - (81,796) (81,796) - 1,250 1,250
(losses)/gains
on investments
Unrealised - 332,066 332,066 - (25,387) (25,387)
gains/(losses)
on investments
Income 224,252 - 224,252 245,184 - 245,184
Transaction (2,100) (10,336) (12,436) - (16,165) (16,165)
costs and
investment
management
expense
Other expenses (72,817) - (72,817) (77,759) - (77,759)
----------- ----------- ----------- ----------- ----------- -----------
Return on 149,335 239,934 389,269 167,425 (40,302) 127,123
ordinary
activities
before taxation
Tax on ordinary (19,124) 1,186 (17,938) (35,716) 2,812.00 (32,904)
activities
----------- ----------- ----------- ----------- ----------- -----------
Return 130,211 241,120 371,331 131,709 (37,490) 94,219
attributable to
equity
shareholders
======= ======= ======= ======= ======= =======
Return per 1p 1.19p 2.20p 3.39p 1.20p (0.34)p 0.86p
Ordinary share
Dividends paid
Final dvidend 229,836 - 229,836 - - -
paid for year
ended 31
December 2006
of 2.10p per
share
Final dividend - - - 109,446 - 109,446
paid for period
from 13 October
2004 to 31
December 2005
of 1p per share
Year ended 31 December 2006 (audited)
Revenue Capital Total
� � �
Realised (losses)/ - (56,578) (56,578)
gains on
investments
Unrealised gains/ - 93,617 93,617
(losses) on
investments
Income 507,398 - 507,398
Transaction costs (4,298) (49,567) (53,865)
and investment
management expense
Other expenses (153,715) - (153,715)
----------- ----------- -----------
Return on ordinary 349,385 (12,528) 336,857
activities before
taxation
Tax on ordinary (66,702) 9,419 (57,283)
activities
----------- ----------- -----------
Return attributable 282,683 (3,109) 279,574
to equity
shareholders
======= ======= =======
Return per 1p 2.58p (0.03)p 2.55p
Ordinary share
Dividends paid
Final dvidend paid - - -
for year ended 31
December 2006 of
2.10p per share
Final dividend paid 109,446 - 109,446
for period from 13
October 2004 to 31
December 2005 of 1p
per share
Unaudited Balance Sheet
as at 30 June 2007
As at As at As at
30 June 2007 30 June 2006 31 December 2006
(unaudited) (unaudited) (audited)
� � �
Non-current assets
Investments at fair 11,391,859 9,305,574.00 10,436,107
value
Current Assets
Debtors and 814,842 215,275 219,551
prepayments
Current investments - 1,044,055 -
Cash at bank (260,548) 44,052 161,093
554,294 1,303,382 380,644
Creditors: amounts (1,122,324) (102,973) (125,413)
falling due within one
year
----------- ----------- -----------
Net current (568,030) 1,200,409 255,231
(liabilities)/assets
----------- ----------- -----------
Net assets 10,823,829 10,505,983 10,691,338
======= ======= =======
Capital and reserves
Called up Ordinary 109,346 109,446 109,446
Share capital
Called up B Share 72,964 72,964 72,964
capital
Capital redemption 100 - -
reserve
Share premium account 5,113,629 10,227,258 5,113,629
Capital reserve - (210,895) (25,829) (110,452)
realised
Capital reserve - 435,180 (25,387) 93,617
unrealised
Special distributable 5,104,625 - 5,113,629
reserve
Revenue reserve 198,880 147,531 298,505
----------- ----------- -----------
Total equity 10,823,829 10,505,983 10,691,338
shareholders' funds
======= ======= =======
Net asset value per
share (attributable
assets basis)
Net asset value per 1p 98.32p 95.33p 97.02p
Ordinary Share
Net asset value per 1p 1.00 p 1.00p 1.00p
B Share
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2007
Six months Six months ended Year ended
ended
30 June 2006 31 December 2006
30 June 2007
� � �
Opening shareholders 10,691,338 10,521,210 10,521,210
funds
Net share capital (9,004) - -
bought back in the
period
Profit for the period 371,331 94,219 279,574
Dividends paid in (229,836) (109,446) (109,446)
period
----------- ----------- -----------
Closing shareholders' 10,823,829 10,505,983 10,691,338
funds
======= ======= =======
Unaudited Summarised Cash Flow Statement
for the six months ended 30 June 2007
Six months Six months Year to
ended ended
31 December 2006
30 June 2007 30 June 2006
(unaudited) (unaudited) (audited)
� � �
Operating activities
Income received 210,809 215,046 561,280
Transaction costs paid (9,810) (23,578) (38,552)
Other cash payments (121,399) (263,054) (425,807)
----------- ----------- -----------
Net cash inflow/ 79,600 (71,586) 96,921
(outflow) from operating
activities
UK Corporation Tax paid - - (26,164)
Investing acitivities
Acquisitions of (2,771,239) (12,856,572) (22,189,371)
investments
Disposals of investments 2,508,838 4,526,861 12,790,303
----------- ----------- -----------
Net cash outflow from (262,401) (8,329,711) (9,399,068)
investing activities
Equity Dividends paid (229,836) (109,446) (109,446)
----------- ----------- -----------
Cash outflow before (412,637) (8,510,743) (9,437,757)
financing and liquid
resource management
Financing
Share Capital bought (9,004) - -
back
Management of liquid
resources
Increase in monies held - (1,044,055) -
pending investment
----------- ----------- -----------
Decrease in cash for the (421,641) (9,554,798) (9,437,757)
period
======= ======= =======
Notes:
1. The accounts have been prepared under the fair value rules of the Companies
Act 1985, and in accordance with United Kingdom Generally Accepted
Accounting Practice and, to the extent that it does not conflict with the
Companies Act 1985 and UK accounting standards, the 2003 Statement of
Recommended Practice, `Financial Statements of Investment Trust Companies',
revised December 2005, amended October 2006.
2. 75% of the investment management expense is charged against capital. This is
in line with the Board's expected long-term split of returns from the
investment portfolio of the Company.
3. The revenue return per Ordinary Share is based on the net revenue on
ordinary activities after taxation of �130,211 and is based on 10,941,588
Ordinary Shares (30 June 2006: revenue return of �131,709 and 10,944,556
Ordinary Shares, 31 December 2006: revenue return of �282,683 and 10,944,556
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 �241,120 and is based on 10,941,588 Ordinary
Shares (30 June 2006: capital loss of �37,490 and 10,944,556 Ordinary Shares,
31 December 2006: capital loss of �3,109 and 10,944,556 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 attributed net assets at 30
June 2007, and on 10,934,571 (at 30 June 2006: 10,944,571 and at 31 December
2006: 10,944,571) Ordinary Shares, being the number of Ordinary Shares in issue
on that date.
5. The financial information for the period 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.
Contact details for further enquiries:
Sarah Penfold of Matrix-Securities Limited (the Company Secretary) on 020 7925
3300 or by e-mail on CoSec@matrixgroup.co.uk
Core Capital LLP (the Investment Manager), on 020 7317 0155 or by e-mail on
info@Core-Cap.com
END
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