Core VCT I plc
Preliminary results for the year ended 31 December 2007
Chairman's Statement
Results
The Total Return per Ordinary Share was 104.59p as at 31 December 2007,
comprising a Net Asset Value (NAV) per Ordinary Share of 101.49p and cumulative
dividends paid of 3.10p per Ordinary Share. This is an increase over the Total
Return to 31 December 2006 of 6.70%, and an increase of 3.13% since 30 June
2007. A surplus of �718,441 was earned during the twelve 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 of 4.00p per share is
being recommended by the Directors. This comprises 1.50p of income earned in
the year, plus 2.50p of assets. This distribution brings the cumulative
distributions to shareholders since inception to 7.10p per share, which is in
addition to the 40p per share tax relief shareholders may have received
following their initial subscription.
The Directors fully intend to make further distributions of cash assets in
order to achieve the targeted distribution of at least 30p per share after year
3 (ie after 31 December 2007), as was set out in the prospectus. Core VCT I had
24p of liquidity at the year end and from this we propose to fund the 4p
dividend. The balance is intended to be held back while the Directors evaluate
further the position of the portfolio and assess the capacity of your Company
to make further distributions later in the year. The key factors affecting this
decision are market factors in general, including banking conditions, and the
specific performance of some stocks, where it is likely that additional
investment in the next six months will be prudent with a view to strengthening
the potential for commercial success in these businesses over the longer term.
In addition provision needs to be made for financing the operating costs of the
VCT. Market conditions have inclined your Managers to recommend and procure
investment in positions with more of a bias to capital growth rather than
current yield than might have been anticipated on formation of the Company,
such that a prudent holding back of liquidity to underpin operational costs
makes business sense. As the portfolio of income yielding assets managed by
Credit Suisse has been progressively liquidated, as planned, to finance
qualifying private equity stakes this factor has become apparent.
Future dividends will be derived from the distribution of the remaining cash
assets when prudent to do so, and from income received from the unquoted
investments and investment realisations as they arise.
VCT Qualifying Status
At 31 December 2007, 77.13% of the Fund's total investments were represented by
VCT qualifying investments in respect of the required 70% threshold for VCT
purposes. This means that the Fund has comfortably achieved the investment
level required to maintain its status as a VCT, and with a sufficient margin of
contingency. Following the proposed distribution referred to above, the
relevant VCT qualifying proportion will increase to 80.26%.
Investments
The Manager's Review refers in more detail to the prospects of the investment
portfolio and reflects the greater emphasis placed by the Manager on portfolio
management rather than the completion of new investments. Whilst there are
reductions as well as increases in the valuations of individual companies, the
net increase in the value of the Portfolio was �656,000, or some 8.4% over
total initial cost. We look forward to realising this value as the portfolio
matures and exits become attractive.
Change in Directors
As referred to in the Interim Report, Helen Bagan retired from the Board in
August due to increasing demands on her time outside of the Company and we
welcomed John Brimacombe as a non-executive director.
Information for Shareholders
The Board supports open communication with investors and welcomes any comments
or questions you may have. Company contact information is provided at the back
of this Report.
Share Price and Secondary Market
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. Shares can be bought and sold
using a stockbroker, as with shares in other listed companies. For shareholders
considering selling their shares, however, we recommend that you contact the
Company Secretary, Matrix-Securities Limited, in the first instance and
consider using the Company's share buy-back policy of acquiring shares at a
discount to NAV of up to 10% as this is likely to be more attractive than sales
of shares in the secondary market. This policy remains, however, at the
discretion of the Board and buy backs must comply with further restrictions
which may apply as a result of the Listing Rules. Shareholders are reminded
that they should take advice before acquiring or disposing of shares and that
their holding of B Shares forms an integral part of their investment along with
their holding of Ordinary Shares.
Outlook
With the Fund having completed its initial three year investment programme and
exceeded one of the key tests to achieve VCT qualifying status, the Company has
passed a significant milestone in its life. We now move towards a period of
managing the existing investments, and over time planning and executing
realisations which we anticipate will enable the Company to make attractive
distributions of proceeds to shareholders.
Peter Smaill
Chairman
Manager's Review
Investment Highlights
* VCT qualifying investment level of 70% exceeded, being 77.13% as at 31
December 2007, and 80.26% after the payment of the proposed dividend;
* Proposed dividend of 4.00p per share, bringing cumulative dividends since
inception to 7.10p per share;
* Investment Portfolio comprises 8 investments with a cost of �7.9 million
and a value of �8.5 million, an increase of 8.4% over cost.
New Investments
We completed two new investments and one further investment in the full year
ended 31 December 2007, as follows :-
Pureleaf Limited (Baxters International)
Cost Valuation
�1,088,000 �694,000
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.
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.
As reported in the Interim accounts, since the completion of the investment we
uncovered a number of areas where we anticipated pursuing claims against the
vendors. We made a provision for the financial effects of what we discovered
(including the anticipated costs of these actions) notwithstanding our
confidence in recovering the sums due.
We are pleased to report that, since the year end, we have successfully settled
our claims without the need for litigation, and we will re-examine the
valuation of this investment before or at the time of the interim accounts.
SPL Services Limited Cost �1,002,000 Valuation �1,002,000
SPL Services is a specialist logistics provider, focused on the pharmaceutical
and particularly clinical trial markets which are growing globally.
Since the date of our investment, short term trading has been adversely
affected by dollar currency movements and some major studies closing earlier
than anticipated. However, we have recruited additional experienced sales
personnel and established a new entity in India to take advantage of the
significant market opportunity available to us. We anticipate making a further
investment into this business to give the company the additional resources to
achieve this growth and to take full advantage of the long term opportunities
available in the market.
Adapt Group Limited (formerly Highpitch Limited) Cost �980,040 Valuation �
1,296,000
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.
The valuation increase reflects the adoption of a market based multiple of
turnover.
Existing Portfolio
Kelway Holdings Limited Cost �1,250,000, Valuation �1,944,000
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 requiring senior debt and utilising only trade finance, so this
business remains relatively ungeared.
The increase in valuation compared to cost reflects the adoption of an earnings
multiple as was used in the interim accounts.
Blanc Brasseries Holdings plc Cost �1,000,000, Valuation �1,172,000
Blanc Brasseries currently operates 7 units in the premium casual dining
market. The business model has been successfully re-worked and whilst finding
new sites on attractive economic terms has taken longer than originally
expected, there is now a strong contracted pipeline of sites in place. The new
sites opened, at Leeds and Milton Keynes, are trading significantly ahead of
expectations, which bodes well for the future trading of the group as a whole.
In addition, Blanc has now secured the �3.5 million of debt funding required to
complete the roll out of the site pipeline identified to date.
The increase in the valuation of this investment reflects the adoption of an
earnings multiple applied to a full year's performance for the sites actually
operated.
Colway Limited Cost �1,000,000, Valuation �1,444,000
(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 completed 3 acquisitions, including the
acquisition of a �5 million turnover business called JPS, which required
additional funding provided by other Core Funds as 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.
Our valuation increase is based upon the adoption of an earnings based
valuation, reflecting the good performance compared to plan and the company's
increase in scale following the completion of the acquisitions.
Ma Hubbards Limited Cost �1,500,000, Valuation �924,000
The business operates freehold pubs offering value for money food in the North
Midlands. We have disposed 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. However,
trading remains challenging and we have reduced our valuation in line with the
third party offers we have received, but rejected, for the business.
The asset values of the freeholds underpin the value of this investment.
This investment is syndicated with Electra VCTs.
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.
Future Investments
Core VCT I has now completed its investment programme and is 77.13% invested in
qualifying investments compared to the minimum requirement of 70% to maintain
VCT qualifying status. This will increase to 80.26% following the payment of
the proposed dividend in respect of the financial year ended 31 December 2007,
giving the Fund significant contingency against the required VCT targets.
Following the achievement of this significant milestone in the Company's
development, we are now moving to a period of managing a maturing portfolio
firstly to build value into our investments, and then to achieve exits over the
next few years at attractive multiples of investment cost. We plan to
distribute the proceeds from these investments to shareholders in the form of
tax free distributions of income and capital.
Income Statement
for the year ended 31 December 2007
Year ended 31 December 2007 Year ended 31 December 2006
Revenue Capital Total Revenue Capital Total
� � � � � �
Unrealised gains on - 611,917 611,917 - 93,617 93,617
investments
Net realised gains/ - 23,713 23,713 - (56,578) (56,578)
(losses) on
investments
Income 323,073 - 323,073 507,398 - 507,398
Investment (2,725) (28,220) (30,945) (4,298) (49,567) (53,865)
management expense
Other expenses (210,585) - (210,585) (153,715) - (153,715)
------------ ------------ ------------ ------------ ------------ ------------
Return on ordinary 109,763 607,410 717,173 349,385 (12,528) 336,857
activities before
taxation
Tax on ordinary (3,012) 4,280 1,268 (66,702) 9,419 (57,283)
activities
------------ ------------ ------------ ------------ ------------ ------------
Return attributable 106,751 611,690 718,441 282,683 (3,109) 279,574
to equity
shareholders
======= ======= ======= ======= ======= =======
Return per Ordinary 0.98p 5.59p 6.57p 2.58p (0.03)p 2.55p
Share
There were no other gains or losses in the year ended 31 December 2007, or the
comparative period. All revenue and capital items in the above statement derive
from continuing operations. No operations were acquired or discontinued in the
period.
Balance Sheet
As at 31 December 2007
31 December 2007 31 December 2006
� � � � � �
Non-current assets
Investments at fair 10,890,734 10,436,107
value
Current assets
Debtors and 195,362 219,551
prepayments
Cash at bank 141,831 161,093
----------- ----------- ----------- -----------
337,193 380,644
Creditors: amounts
falling due within
one year
Corporation tax 23 57,283
Other creditors 21,451 25,858
Accruals 35,515 42,272
----------- ----------- ----------- -----------
(56,988) (125,413)
----------- ----------- ----------- -----------
Net current assets 280,205 255,231
----------- -----------
Net assets 11,170,939 10,691,338
======= =======
Capital and reserves
Called up Ordinary 109,346 109,446
Share capital
Called up B Share 72,964 72,964
capital
Capital redemption 100 -
reserve
Share premium account 5,113,629 5,113,629
Capital reserve - (53,035) (110,452)
realised
Capital reserve - 647,890 93,617
unrealised
Special distributable 5,104,625 5,113,629
reserve
Revenue reserve 175,420 298,505
------------- -------------
Total equity 11,170,939 10,691,338
shareholders' funds
======= =======
Net asset value per 101.49p 97.02p
1p Ordinary Share
Net asset value per 1.00p 1.00p
1p B Ordinary Share
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2007
Year ended Year ended
31 December 2007 31 December 2006
� �
Opening Shareholders' funds before 10,691,338 10,411,764
restatement
Prior year adjustment arising from the - 109,446
introduction of FRS 21
------------- -------------
At 1 January 2007 10,691,338 10,521,210
Net share capital bought back in the (9,004) -
year
Profit for the year 718,441 279,574
Dividends paid (229,836) (109,446)
------------- -------------
Closing Shareholders' funds at 31 11,170,939 10,691,338
December 2007
======== ========
Cash Flow Statement
for the year ended 31 December 2007
Year ended Year ended
31 December 2007 31 December 2006
Operating activities � � � �
Investment income 293,081 561,280
received
Investment management (14,820) (38,552)
expense paid
Other cash payments (194,866) (425,807)
------------ ------------ ------------ ------------
Net cash inflow from 83,395 96,921
operating activities
Taxation
UK Corporation tax paid (55,992) (26,164)
Investing activities
Acquisition of (4,347,071) (22,189,371)
investments
Disposal of investments 4,539,246 12,790,303
------------ ------------ ------------ ------------
192,175 (9,399,068)
Equity Dividends paid (229,836) (109,446)
------------ ------------
Cash outflow before (10,258) (9,437,757)
financing
Financing
Buyback of ordinary (9,004) -
shares
------------ ------------ ------------ ------------
Net cash outflow from (9,004) -
financing
------------ ------------
Net outflow in cash for (19,262) (9,437,757)
the year
======= =======
Notes
1. The accounts have been prepared under the fair value rules of the Companies
Act 1985, and in accordance with applicable accounting standards 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.
2. Total return after taxation for the period was �718,441 (2006: �279,574).
The basic return per Ordinary Share is based on the net profit from
ordinary activities and on 10,938,050 (2006: 10,944,556) Ordinary Shares,
being the weighted average number of Ordinary Shares in issue during the
period.
The revenue return per Ordinary Share for the year ended 31 December 2007 is
based on the revenue return on ordinary activities after taxation of �106,751
(2006: �282,683), and is based on 10,938,050 (2006: 10,944,556) Ordinary
Shares, being the weighted average number of Ordinary Shares in issue during
the period.
The capital return per Ordinary Share for the year ended 31 December 2007 is
based on a capital return on ordinary activities after taxation of �611,690
(2006: capital loss �3,109) and is based on 10,938,050 (2006: 10,944,556)
Ordinary shares, being the weighted average number of Ordinary Shares in issue
during the period.
3. A final dividend of 4 pence per Ordinary Share, comprising 1.50p of income
earned during the year and 2.50p of cash assets, will be paid to Ordinary
Fund Shareholders on 23 June 2008 to shareholders on the register on 30 May
2008, costing �437,383 in total.
4. The statutory accounts for the period to 31 December 2007 prepared by the
Company and have not yet been delivered to the Registrar of Companies. The
auditors' report on the statutory accounts for 31 December 2007 is
unqualified and does not contain any statements under section 237(2) or (3)
of the Companies Act 1985. This announcement does not constitute statutory
accounts within the meaning of s240 of the Companies Act 2005.
5. The Annual General Meeting of the Company will be held at 11.00 am on 4
June 2008 at the offices of Core Capital LLP, 103 Baker Street, London W1U
6LN.
END
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