Core VCT II plc
Preliminary results for the year ended 31 December 2007
Chairman's Statement
Results
The Total Return per Ordinary Share was 104.05p as at 31 December 2007,
comprising a Net Asset Value (NAV) per Ordinary Share of 102.55p and cumulative
dividends paid of 1.50p per Ordinary Share. This is an increase over the Total
Return to 31 December 2006 of 6.89%, and an increase of 3.07% since 30 June
2007. A surplus of �1,125,762 was earned during the twelve month period.
Dividends
Core VCT II is structured to maximise distributions of both capital and income
to Shareholders over the life of the Company. A final dividend of 2p per share
is being recommended by the Directors, comprising a substantial proportion of
the income earned in the year. This distribution brings the cumulative
distributions to shareholders since inception to 3.5p per share, which is in
addition to the 40p per share tax relief shareholders may have received
following their initial subscription.
Future dividends will be derived from the distribution of the remaining cash
assets after the end of the financial year ending 31 December 2008, 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, 45.04% 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 will need to invest approximately �4.3m in
further investments by 31 December 2008.
Investments
The Manager's Review refers in more detail to the prospects of the investment
portfolio. Whilst there are reductions as well as increases in the valuations
of individual companies, the net increase in the value of the Qualifying
Portfolio was �1.1m, or some 16.3% over total initial cost.
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 (CR2) and the B Shares (CR2B) 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. Shareholders are
reminded that they must hold their shares for at least 3 years in order to
retain tax reliefs obtained. Shareholders 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.
For shareholders considering selling their shares, however, we recommend that
you contact the Company Secretary, Matrix-Securities Limited, in the first
instance.
Outlook
We are well on the way to building an investment portfolio of established
private companies of the required quantum and scale, from which we anticipate
realising attractive returns over the medium term. The economic outlook has
become more uncertain over the last few months, and we anticipate this
continuing. Your Manager will be looking to benefit from new opportunities
during the year, which may be negotiated at more attractive prices.
We look towards 2008 to complete our new investment programme, and then move
towards the planning and executing realisations which would enable the Company
to make attractive distributions of proceeds to shareholders.
Peter Smaill
Chairman
Manager's Review
Investment Highlights
* Investment Portfolio comprises 7 investments with a cost of �6.8 million
and a value of �7.9 million, an increase of 16.3% over cost;
* Completed two new investments totalling over �3 million at cost.
New Investments
We completed two new investments in the full year ended 31 December 2007, as
follows :-
Pureleaf Limited (Baxters International)
Cost Valuation
�1,631,000 �1,041,000
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 II invested �1.631 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 �1,124,000 Valuation �1,124,000
Undrawn Commitment �375,000
SPL Services is a specialist logistics provider, focussed 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.
Existing Portfolio
Kelway Holdings Limited Cost �1,875,000, Valuation �2,917,000
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.
Adapt Group Limited (formerly Highpitch Limited) Cost �124,000 Valuation �
164,000
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.
The valuation increase reflects the adoption of a market based multiple of
turnover.
Augentius Fund Administration LLP Cost �35,000, Valuation �35,000
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 II is required to invest some �4.3 million, consistent with completing
four new investments, during 2008. Following the deterioration in credit
markets in the second half of 2007, we chose to slow our investment rate in the
expectation that we would see more attractive opportunities during 2008, and be
able to take advantage of any downward pressure on the pricing of new
opportunities. We believe this approach has placed the Fund in a strong
position as it completes its investment programme throughout this year.
Income Statement
for the year ended 31 December 2007
Year ended Period from 23 September 2005 to 31
December 2006
31 December 2007
Revenue Capital Total Revenue Capital Total
� � � � � �
Unrealised gains - 785,618 785,618 - 268,862 268,862
on investments
Net realised - 96,446 96,446 - (37,184) (37,184)
losses on
investments
Income 489,711 - 489,711 545,008 - 545,008
Transaction costs (5,761) (102,884) (108,645) (7,744) (86,131) (93,875)
and investment
management expense
Other expenses (137,162) - (137,162) (190,482) - (190,482)
------------ ------------ ------------ ------------ ------------ ------------
Return on ordinary 346,788 779,180 1,125,968 346,782 145,547 492,329
activities before
taxation
Tax on ordinary (13,223) 13,017 (206) (64,062) 19,330 (44,732)
activities
------------ ------------ ------------ ------------ ------------ ------------
Return 333,565 792,197 1,125,762 282,720 164,877 447,597
attributable to
equity
shareholders
======= ======= ======= ======= ======= =======
Return per 2.02p 4.80p 6.82p 1.89p 1.10p 2.99p
Ordinary Share
There were no other gains or losses in the year ended 31 December 2007. 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 15,357,867 14,229,922
value
Current assets
Debtors and 1,571,266 1,483,908
prepayments
Cash at bank 138,712 519,727
------------ ------------ ------------ ------------
1,709,978 2,003,635
Creditors: amounts
falling due within
one year
Corporation tax 20 44,732
Other creditors 67,789 24,346
Accruals 79,166 108,327
------------ ------------ ------------ ------------
(146,975) (177,405)
------------ ------------ ------------ ------------
Net current assets 1,563,003 1,826,230
------------ ------------
Net assets 16,920,870 16,056,152
======= =======
Capital and
reserves
Called up Ordinary 1,649 1,651
Share capital
Called up B Share 2,474 2,474
capital
Capital redemption 2 -
reserve
Share premium 7,802,214 7,802,214
account
Capital reserve - 41,986 (103,985)
realised
Capital reserve - 915,087 268,862
unrealised
Special 7,788,558 7,802,216
distributable
reserve
Revenue reserve 368,900 282,720
------------ ------------
Total equity 16,920,870 16,056,152
shareholders' funds
======= =======
Net asset value per 102.55p 97.34p
0.01p Ordinary
Share
Net asset value per 0.01p 0.01p
0.01p B Ordinary
Share
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2007
Year ended Period from
31 December 2007 23 September 2005
to 31 December 2006
� �
Opening balance at beginning of year 16,056,152 -
Net share capital (bought back)/ (13,658) 15,608,555
subscribed for in the year
Profit for the year 1,125,762 447,597
Dividends paid in year (247,386) -
-------------- --------------
Closing Shareholders' funds at 31 16,920,870 16,056,152
December 2007
======== ========
Cash Flow Statement
for the year ended 31 December 2007
Year ended Period from 23 September
2005
31 December 2007
to 31 December 2006
� � � �
Operating activities
Investment income 411,460 809,029
received
Investment management (28,954) (85,644)
fees paid
Other cash payments (213,680) (413,969)
------------ ------------ ------------ ------------
Net cash inflow from 168,826 309,416
operating activities
Taxation
UK Corporation tax (44,917) -
paid
Investing activities
Acquisition of (7,372,147) (26,147,977)
investments
Disposal of 7,128,267 12,149,733
investments
------------ ------------ ------------ ------------
(243,880) (13,998,244)
Equity dividends paid (247,386) -
------------ ------------
Cash outflow before (367,357) (13,688,828)
financing
Financing
(Buy back)/issue of (13,658) 15,068,380
ordinary shares
Issue costs - (859,825)
------------ ------------ ------------ ------------
Net cash (outflow)/ (13,658) 14,208,555
inflow from financing
------------ ------------
Net (decrease)/ (381,015) 519,727
increase in cash for
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 �1,125,762 (2006: �447,597).
The basic return per Ordinary Share is based on the net profit from
ordinary activities and on 16,502,833 (2006: 14,963,417) 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 �333,565
(2006: �282,720) and is based on 16,502,833 (2006: 14,963,417) 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 the capital return on ordinary activities after taxation of �792,197
(2006: �164,877) and is based on 16,502,833 (2006: 14,963,417) Ordinary shares,
being the weighted average number of Ordinary Shares in issue during the
period.
3. A final dividend of 2.00 pence per Ordinary Share will be paid to Ordinary
Fund Shareholders on 23 June 2008 to shareholders on the register on 30 May
2008, costing �329,946 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 11.10 am on 4
June 2008 at the offices of Core Capital LLP, 103 Baker Street, London W1U
6LN.
END
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