TIDMCYS
Chrysalis VCT plc
LEI: 2138009FVDWULSIOX404
21 August 2020
Half-Yearly Report for the six months ended 30 April 2020
Recent performance summary
30 April 30 April 31 October
2020 2019 2019
Pence Pence Pence
Net asset value per share 57.00 70.80 67.00
Cumulative dividends paid per share 93.95 86.70 90.70
Total Return
(net asset value per Share plus cumulative dividends) 150.95 157.50 157.70
CHAIRMAN'S STATEMENT
Introduction
Like businesses everywhere, the Board and Manager have had to react to
the impact of the coronavirus pandemic in order to seek to protect
shareholder value as much as possible. In addition, as Shareholders will
know from my previous Chairman's Statements, the Board has been seeking
to identify the optimal plan for the future for the Company.
Net asset value and results
At 30 April 2020, the net asset value per share ("NAV") stood at 57.0p,
a decrease of 6.75p (10.1%) since the previous year end of 31 October
2019, after adding back the 3.25p dividend paid on 21 February 2020.
The Total Return (NAV plus cumulative dividends) to Shareholders who
invested at the launch of the Company in 2000 is now 150.95p, compared
to the original cost (net of income tax relief) of 80.0p per Share.
The loss on activities after taxation for the period was GBP1.9 million,
comprising a revenue profit of nil and a capital loss of GBP1.9 million.
Venture capital portfolio
Valuations
In reviewing the investment valuations at 30 April 2020, the Board has
given full consideration to impact that the coronavirus pandemic is
likely to have on the portfolio companies. Overall the adjustments
resulted in a decrease in value of GBP1.8 million.
The main negative movements have been to the three restaurant and
catering businesses. Locale Enterprises Limited, the operator of a chain
of Italian restaurants in London, was reduced in value by GBP791,000.
The business generates a significant proportion of its income from
tourists and so, even when both its restaurants are open again, the
business is likely to continue to face significant challenges.
Life's Kitchen Limited, a provider of event management and catering
services in the City of London, has been reduced in value by GBP200,000.
None of its sites are currently operational.
K10 (London) Limited, the operator of a chain of Japanese restaurants
also in the City of London, has been fully provided against from a
previous valuation of GBP1,144,000. The company's sites remain closed
and the future for the business is uncertain.
Despite these negative developments, there was some positive news in
the case of Enthuse Holdings Limited. The company made a successful
acquisition last year, which has been the basis for an uplift in
valuation of GBP711,000.
Portfolio activity
During the period GBP100,000 of loan stock in Green Star Media Limited
was redeemed at par and Fusion Catering Solutions Limited was dissolved.
There were no other disposals from or additions to the venture capital
portfolio during the period.
Cash and listed investments
The Company held GBP2.2 million in cash and other listed investments as
at 30 April 2020.
Future Strategy
For some time, two things have been clear: the Company's investment
manager has been and remains unenthusiastic about the investment
opportunities available to it under the current VCT rules; and, as
previous realisation proceeds have been paid out to Shareholders in
special dividends on top of the regular 5p annual dividends, the size of
the company has reduced to a level that is becoming increasingly
difficult to justify as an independent publicly quoted entity.
A number of options were explored by the Board. In the end, the Board
has concluded that it is in the best interests of Shareholders generally
to undertake an orderly wind up of the Company using the VCT winding up
regulations. These relax the usual restrictions on VCT investing; this
relaxation which may assist in recovering value from the investments.
The Board will now draw up proposals and make a recommendation to
Shareholders to that effect. The process involves putting the Company
into members' voluntary liquidation with cash proceeds from realisations
being distributed to Shareholders as they occur. In this way, as
distributions are made, each Shareholder will be able to decide where
and how to invest the proceeds to suit their own interests, whether in
the VCT universe or outside it. The Board anticipates that the winding
up process will take some time to complete to ensure that optimal value
is extracted for Shareholders.
The Board are now working on formal proposals for Shareholders to
consider and approve, if they see fit. A Shareholder Circular will be
prepared setting out the full details of the proposals which will be
sent to all Shareholders in due course and a vote taken at a General
Meeting.
The main resolution will require 75% of those voting to vote in favour
of the proposals. If Shareholders approve this step, then a liquidator
will be appointed and the business will cease to be a listed entity on
the London Stock Exchange. All proceeds of future realisations will be
distributed in a timely and practical manner to Shareholders.
Share buybacks
In view of the above, the Board has reviewed the operation of the
Company's buyback policy, which has necessarily been in abeyance so far
this financial year.
Following this announcement, the Board has agreed to operate an
arrangement whereby the Company will buy back shares that become
available in the market at a discount of approximately 25% to the latest
published NAV (equivalent to 42.7p per share based on the NAV of 57.0p
announced today) . The Board will closely monitor demand and may adjust
or suspend the policy if they see fit. In any event, share buybacks will
be suspended when the Company publishes full proposals to go into
members' voluntary liquidation.
Any Shareholders wishing to either acquire more shares, or to sell
existing holdings in the Company, are recommended to contact the
Company's broker, Nplus1 Singer Capital Markets.
Dividend
The Board intends to continue to pay the usual level of interim
dividend. A dividend of 1.75p per share will be paid on 30 September
2020 to Shareholders on the register at 11 September 2020.
Outlook
The coronavirus pandemic has presented significant challenges to several
of the portfolio companies and will continue to do so for some time. The
investment manager is providing support to these businesses to the
extent it can, seeking to preserve value for Shareholders.
Some of the Company's larger investments have been less exposed to the
direct impact of the pandemic and have reasonable prospects of
delivering successful outcomes in an orderly realisation of the
portfolio.
I look forward to presenting full proposals to Shareholders, along with
the details of the Board's recommendation, in the coming months.
Martin Knight
Chairman
SUMMARY OF INVESTMENT PORTFOLIO
as at 30 April 2020
Valuation
movement % of
in portfolio
Cost Valuation the period by value
GBP'000 GBP'000 GBP'000
Top ten venture capital
investments
Coolabi Group Limited 3,456 5,144 - 31.6%
Enthuse Holdings Limited 56 2,625 711 16.1%
Zappar Limited 300 1,627 - 10.0%
Cambridge Mechatronics Limited 366 1,172 - 7.2%
Driver Require Limited 520 927 (278) 5.7%
Locale Enterprises Limited 2,513 920 (791) 5.7%
Green Star Media Limited 550 697 67 4.3%
IX Group Limited 250 524 (1) 3.2%
Life's Kitchen Limited 500 200 (200) 1.2%
Triaster limited 71 155 - 01.0%
------- --------- ----------- ----------
8,582 13,991 (492) 86.0%
------- --------- ----------- ----------
Other venture capital investments 2,403 70 (1,171) 0.5%
Other investments
Impact Healthcare REIT Plc* 750 695 (108) 4.3%
11,735 14,756 (1,771) 90.8%
======= ===========
Cash at bank and in hand 1,500 9.2%
--------- ----------
Total investments 16,256 100.0%
========= ==========
All venture capital investments are unquoted unless otherwise stated.
*Listed and traded on the Main Market of the London Stock Exchange.
SUMMARY OF INVESTMENT MOVEMENTS
for the six months ended 30 April 2020
Disposals
Gain/
(loss) Total
Value at Disposal against realised
Cost 1 Nov 2019 proceeds cost gains
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Venture capital
investments
Green Star Media Limited 100 100 100 - -
Dissolution/liquidation
Fusion Catering
Solutions Limited 75 - - (75) -
175 100 100 (75) -
======= =========== ========= ======== =========
UNAUDITED INCOME STATEMENT
for the six months ended 30 April 2020
Year
ended
Six months ended Six months ended 31 Oct
30 Apr 2020 30 Apr 2019 2019
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 167 - 167 248 - 248 446
Net gains/(losses)
on investments
- realised - - - - 1 1 (13)
- unrealised - (1,771) (1,771) - 231 231 375
167 (1,771) (1,604) 248 232 480 808
Investment management
fees (39) (118) (157) (44) (132) (176) (345)
Performance incentive
fees - - - - - - -
Other expenses (135) (23) (158) (138) - (138) (280)
Return on ordinary
activities before
taxation (7) (1,911) (1,918) 66 100 166 183
Tax on total comprehensive
income and ordinary
activities 7 (7) - (2) 2 - -
Return attributable
to equity shareholders - (1,918) (1,918) 64 102 166 183
Return per Share - (6.7p) (6.7p) 0.2p 0.4p 0.6p 0.6p
The total column within the Income Statement represents the profit and
loss account of the Company. No operations were acquired or discontinued
during the period.
A Statement of Total Recognised Gains and Losses has not been prepared
as all gains and losses are recognised in the Income Statement as noted
above.
UNAUDITED BALANCE SHEET
as at 30 April 2020
30 Apr 30 Apr 31 Oct
2020 2019 2019
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 14,756 17,123 16,627
Current assets
Debtors 34 129 46
Cash at bank and in hand 1,500 3,253 2,477
1,544 3,382 2,523
Creditors: amounts falling
due within one year (54) (65) (69)
Net current assets 1,481 3,317 2,454
Net assets 16,237 20,440 19,081
Capital and reserves
Called up share capital 284 288 284
Capital redemption reserve 104 100 104
Share premium 1,478 1,478 1,478
Merger reserve 529 529 529
Special reserve - 127 -
Capital reserve - realised 9,107 11,283 10,113
Capital reserve - unrealised 4,186 6,049 6,024
Revenue reserve 549 586 549
Equity shareholders' funds 16,237 20,440 19,081
Net asset value per share 57.0p 70.8p 67.0p
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 April 2020
Capital Capital Capital
Share Redemption Share Merger Special reserve reserve Revenue
Capital reserve premium reserve reserve -realised -unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 November
2018 290 98 1,478 529 406 12,222 5,782 522 21,327
Total comprehensive
income - - - - - (277) 375 85 183
Transfers between
reserves - - - - (70) 203 (133) - -
Transactions
with owners
Purchase of own
shares (6) 6 - - (336) - - - (336)
Dividends paid - - - - - (2,035) - (58) (2,093)
At 31 October
2019 284 104 1,478 529 - 10,113 6,024 549 19,081
Total comprehensive
income - - - - - (147) (1,771) - (1,918)
Transfers between
reserves - - - - - 67 (67) - -
Transactions
with owners - - -
Purchase of own
shares - - - - - - - -
Dividends paid - - - - - (926) - - (926)
At 30 April 2020 284 104 1,478 529 - 9,107 4,186 549 16,237
UNAUDITED CASH FLOW STATEMENT
for the six months ended 30 April 2020
Six months Six months Year
ended ended ended
30 Apr 30 Apr 31 Oct
2020 2019 2019
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Return on ordinary activities
before taxation (1,918) 166 183
Losses/(gains) on investments 1,771 (232) (362)
(Increase)/decrease in other
debtors 11 (27) 55
(Decrease)/increase in other
creditors (15) (53) 9
Net cash outflow from operating
activities (151) (146) (115)
Cash flows from investing
activities
Proceeds from disposal of
investments 100 689 1,415
Purchase of investments - - (100)
Net cash inflow from investing
activities 100 689 1,315
Net cash inflow before financing
activities (52) 543 1,200
Cash flows from financing
activities
Equity dividends paid (926) (940) (2,092)
Purchase of own shares - (113) (394)
Net cash outflow from financing
activities (926) (1,053) (2,486)
Decrease in cash (977) (510) (1,286)
Net movement in cash
Beginning of the period 2,477 3,763 3,763
Net cash outflow (977) (510) (1,286)
End of the period 1,500 3,253 2,477
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1.General information
Chrysalis VCT plc ("the Company") is a Venture Capital Trust established
under the legislation introduced in the Finance Act 1995 and is
domiciled in the United Kingdom and incorporated in England and Wales.
2.Accounting policies
Basis of accounting
The unaudited half-yearly results cover the six months to 30 April 2020
and have been prepared in accordance with the accounting policies set
out in the annual accounts for the year ended 31 October 2019 and in
accordance with the Financial Reporting Standard 102 ("FRS 102") and in
accordance with the Statement of Recommended Practice "Financial
Statements of Investment Trust Companies" revised November 2014
("SORP").
3.The comparative figures were in respect of the six months ended 30
April 2019 and the year ended 31 October 2019 respectively.
4.Basic and diluted return per Share
Six months Six months Year
ended ended ended
30 Apr 30 Apr 31 Oct
2020 2019 2019
Return per Share based on:
Net revenue return for the
period (GBP'000) - 64 85
Capital return per Share based
on:
Net capital gain for the period
(GBP'000) (1,918) 102 98
Weighted average number of
Shares 28,472,025 28,970,909 28,824,085
5.Basic and diluted net asset value per share
30 Apr 30 Apr 31 Oct
2020 2019 2019
Net asset value per share based
on:
Net assets (GBP'000) 16,237 20,440 19,081
Number of shares in issue at
the period end 28,472,025 28,860,025 28,472,025
Net asset value per share 57.0p 70.8p 67.0p
6.Called up share capital
Shares
in issue GBP'000
Period ended 30
April 2020 28,472,025 284
Period ended 30
April 2019 28,860,025 288
Year ended 31 October
2019 28,472,025 284
7.Reserves
The special reserve is available to the Company to enable the purchase
of its own shares in the market without affecting its ability to pay
dividends, and also allows the Company to make transfers between
reserves to offset realised capital losses arising on disposals and
impairments.
Distributable reserves are calculated as follows:
Six months Six months Year
ended ended ended
30 Apr 30 Apr 31 Oct
2020 2019 2019
GBP'000 GBP'000 GBP'000
Special reserve - 127 -
Capital reserve - realised 9,107 11,283 10,113
Revenue reserve 549 586 549
Merger reserve -- distributable
element 275 276 275
Unrealised losses -- excluding
unrealised unquoted gains (2,907) (688) (838)
7,024 11,584 10,099
8.Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required
in the Company's half year results to report on principal risks and
uncertainties facing the Company over the remainder of the financial
year.
The Board has concluded that the key risks facing the Company over the
remainder of the financial period are as follows:
-investment risk associated with investing in small and immature
businesses; and
-failure to maintain approval as a VCT.
In both cases, the Board is satisfied with the Company's approach to
these risks.
As a VCT, the Company is forced to have significant exposure to
relatively immature businesses. This risk is mitigated to some extent by
holding a diversified portfolio. The impact of the coronavirus pandemic
has been significant on some portfolio companies and, in many cases, the
VCT regulations restrict the Company from making further investment into
these business so the Manager seeks to provide whatever other support
they can to these businesses, including encouraging them to take
advantage of government support that may be available.
The Company's compliance with the VCT regulations is continually
monitored by the Administration Manager, who regularly reports to the
Board on the current position. The Company also retains Philip Hare and
Associates LLP to provide regular reviews and advice in this area. The
Board considers that this approach reduces the risk of a breach of the
VCT regulations to a minimal level.
9.Going concern
The Company has sufficient financial resources at the period end, and
holds a reasonably diversified portfolio of investments. As a
consequence, the Directors believe that the Company is reasonably well
placed to manage its business risks successfully despite the current
uncertain economic outlook.
The Directors confirm that they are satisfied that the Company has
adequate resources to continue in business for the foreseeable future.
For this reason, they believe that the Company continues to be a going
concern and that it is appropriate to apply the going concern basis in
preparing the financial statements.
10.The Directors confirm that, to the best of their knowledge, the half
yearly financial statements have been prepared in accordance with FRS
104 Interim Financial Reporting and the Half-Yearly Report includes 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.
11.The unaudited financial statements set out herein do not constitute
statutory accounts within the meaning of Section 434 of the Companies
Act 2006 and have not been delivered to the Registrar of Companies. The
figures for the year ended 31 October 2019 have been extracted from the
financial statements for that year, which have been delivered to the
Registrar of Companies; the Independent Auditor's Report on those
financial statements was unqualified.
12.Copies of the unaudited half yearly report will be sent to
Shareholders shortly. Further copies can be obtained from the Company's
registered office and will be available for download from
www.chrysalisvct.co.uk.
(END) Dow Jones Newswires
August 21, 2020 02:00 ET (06:00 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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