RNS Number:6281G
Guinness Flight Venture Cap Tst PLC
30 October 2007
Guinness Flight Venture Capital Trust PLC
Investment Manager's Review
For the six months ended 31 August 2007
Performance
The NAV at 31 August 2007 has increased to 50.42p per share compared to 49.52p
at 28 February 2007, an increase of 1.8% over the period. Overall, the
performance of the portfolio companies has been satisfactory. Whilst there has
been a write down in the value of one significant investment, there are material
valuation increases in two others which more than offset that write down.
Details of the changes in valuation of the major investments are shown in the
table below.
Unlisted investments held by Guinness Flight Venture Capital Trust are valued in
accordance with the International Private Equity and Venture Capital Valuation
Guidelines. Investments which are traded on the Alternative Investment Market
(AIM) or a recognised stock exchange are valued at their bid price.
Dividends
The Company has not realised any major investments during the six month period
and continues to utilise the borrowing facility provided by Bank of Scotland.
The Board does not intend to declare a dividend while this situation persists.
Investment Strategy
The Manager's strategy is to build a diversified portfolio of unlisted and AIM
investments that offer excellent growth prospects and therefore the opportunity
for capital gains in the medium and longer term while maintaining VCT qualifying
status. The value of the portfolio is concentrated in a relatively small number
of investments and the Manager expects over time to sell most of these holdings
and re-invest in a larger number of smaller investments. This will result in a
more diversified base to spread the risk which is associated with investing in
smaller companies. This process will take some time to allow the existing
holdings to be divested at the optimum time in each investee company's business
cycle.
Regulatory changes
The overall VCT fundraising market declined by approximately two thirds in the
year to April 2007 which reflects the changes to the VCT regulations announced
in the last two Budgets. For funds raised after April 2006, new restrictions on
the size of company in which VCTs can invest where those investments are to be
treated as qualifying were introduced. The regulations introduced in the 2007
Budget are particularly onerous in this regard focussing on the maximum number
that can be employed in addition to placing a limit on the amount which can be
raised under venture capital schemes by the investee company. However, those new
2007 regulations do not affect the money raised by the Company which can
continue to invest in the scale and type of company which the Manager intends to
target and has achieved success with in the past.
Investment activity
The Company is constrained from making substantial new investments at present
but has invested #300,000 in two new investments alongside other VCT clients of
the Manager. At 31 August 2007, the investment portfolio consisted of
twenty-three active unlisted and AIM investments having a total cost of #19.2
million.
The following new investments were made during the reporting period.
Investment Date Activity Cost
#'000 #'000
Countcar May 2007 Provider of tool, plant hire and hydraulic 100
products and services to the oil and gas
industry
Funeral Services Partnership May 2007 Operator of funeral director businesses 200
Total unlisted investment 300
Portfolio developments
Unlisted investments
The following provide an update on progress at the major investments:
Espresso Broadband
The six month period saw significant progress made at Espresso Broadband with
the acquisition of the Channel 4 Learning business which has enhanced the value
of the company significantly. This has been recognised in an increased valuation
amounting to #750,000.
LG & DE
Good progress has also been made at LG & DE following the acquisition by that
company of the Far Eastern interests in the Linguaphone brand. This has
increased the value of the company which is again reflected in an increased
valuation.
Mawdsley's GNS
In contrast, one of the legal processes in which Mawdsley's GNS had engaged was
unsuccessful. A date for mediation has been agreed on the main remaining legal
action and it is anticipated that progress towards settlement will be made as a
result. The valuation of the investment has been reduced to reflect the
unsuccessful court case earlier in the year and to reflect the uncertainty
inherent in any legal action
Higher Nature
Mawdsley's GNS was set up to realise certain assets from Mawdsley's. The
remaining assets are now the proceeds of a court case against a former supplier
to the business. A date for mediation has been agreed on this action and it is
anticipated that progress towards settlement will be made as a result. However,
as there is uncertainty inherent in any legal action and as it is unlikely that
the company will recover the full amount of certain other debts, the valuation
has been reduced.
Serrastone
After a series of technical issues which have delayed the start of full scale
production, the Serrastone plant is expected to begin production in the coming
months. Further funding is being raised by the company to take it through to
positive cash flow from trading.
Vyre
Vyre continues to show good growth and has exceeded its previous year turnover
after eight months of its current financial year. Its customer base and sales
pipeline are both extremely strong.
AIM investments
During the period, the balance of the holding in UBC Media Group was sold
realising #131,573 resulting in a loss of #266,938 against the cost of the
investment and a reduction compared to the February 2007 valuation of #67,491.
Risk and uncertainties
The Board has reviewed the principal risks and uncertainties facing the Company
in the second half of its financial year; these are unchanged from those it
faced at the start of the year. They are continuing to comply with the venture
capital trust regulations and mitigating the risk associated with investment in
smaller unlisted and AIM quoted companies. The Manager closely monitors the
position of the Company to ensure that it complies with the various tests at all
times. In order to minimise the exposure to investment risk, the Company has
invested in a portfolio of investments in unlisted and AIM quoted companies
across a range of industrial sectors in the United Kingdom and the Manager
intends to increase the number and diversity of sectors in due course.
Outlook
Aberdeen Asset Managers has become more directly involved with the portfolio
companies during the first half of the financial year following its appointment
as Manager late in 2006. Whilst two new investments have been made, current cash
constraints mean that the strategy of rebuilding the portfolio into a highly
diversified selection of good quality smaller company assets can only really
begin after the realisation of one or more of the existing investments. Progress
towards the first of these realisations has been made but will take some time
yet to result in a sale. Both of the new investments made during the last six
months are performing in line with expectations at this early stage. The
Manager has strong deal flow and it is expected that the Company will co-invest
alongside other VCTs managed by the Manager when realisations are achieved.
Guinness Flight Venture Capital Trust PLC
Income Statement
For the six months ended 31 August 2007
Six months to 31 August 2007 Six months to 31 August 2006 Year ended 28 February 2007
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Investment income and 58 - 58 20 - 20 152 - 152
deposit interest
Investment management
fees (59) (86) (145) (60) (181) (241) (111) (332) (443)
Finance costs (11) (34) (45) (1) (1) (2) (14) (40) (54)
Other expenses (82) - (82) (136) - (136) (308) - (308)
Gains/(losses) on
investments - 456 456 - (503) (503) - (5,641) (5,641)
Profit on ordinary
activities
before taxation (94) 336 242 (177) (685) (862) (281) (6,013) (6,294)
Tax on ordinary
activities - - - - - - - - -
Profit on ordinary
activities
after taxation (94) 336 242 (177) (685) (862) (281) (6,013) (6,294)
Earnings per share
(pence) (0.35) 1.24 0.89 (0.64) (2.49) (3.13) (1.03) (21.99) (23.02)
A Statement of Total Recognised Gains and Losses has not been prepared, as all
gains and losses are recognised in the Income Statement.
All items in the above statement are derived from continuing operations. The
Company has only one class of business and derives its income from investments
made in shares, securities and bank deposits.
The total column of this Statement is the Profit and Loss Account of the
Company.
Reconciliation of movements in Six months Six months Year
Shareholders' Funds ended ended ended
31 August 2007 31 August 2006 28 February 2007
#'000 #'000 #'000
Opening Shareholders' funds 13,440 20,605 20,605
Total return for period 242 (862) (6,294)
Repurchase and cancellation of shares - (323) (323)
Dividends paid - capital - (276) (548)
Closing Shareholders' funds 13,682 19,144 13,440
Guinness Flight Venture Capital Trust PLC
Balance Sheet
As at 31 August 2007 28
31 August 31 August February
2007 2006 2007
(unaudited) (unaudited) (audited)
Notes #'000 #'000 #'000
Fixed assets
Investments at fair value through profit or 15,472 19,414 14,855
loss
Current assets
Debtors 56 - 20
Cash and overnight deposits 88 122 303
144 122 323
Creditors: amounts falling due within one year 4 (1,934) (392) (1,738)
Net current liabilities (1,790) (270) (1,415)
Total net assets 13,682 19,144 13,440
Capital and reserves
Called up share capital 2,714 2,714 2,714
Special reserve 2 24,022 24,294 24,022
Capital redemption reserve 2 255 255 255
Capital reserve - realised 2 (10,849) (6,650) (10,462)
Capital reserve - unrealised 2 (1,621) (828) (2,344)
Revenue reserve 2 (839) (641) (745)
Net assets attributable to ordinary 13,682 19,144 13,440
shareholders
Net Asset Value per Ordinary share (pence) 50.42 70.54 49.52
The accompanying Notes are an integral part of the Financial Statements.
Guinness Flight Venture Capital Trust PLC
Cash Flow Statement
For the six months ended 31 August 2007
Six months to Six months to Year ended
31 August 2007 31 August 2006 28 February 2007
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Net cash outflow from operating activities (311) (479) (208)
Financial investment
Purchase of investments (666) (1,379) (1,736)
Sale of investments 143 721 749
Net cash outflow from financial investment (523) (658) (987)
Equity dividends paid - (276) (548)
Net cash outflow before financing (834) (1,413) (1,743)
Financing
Bank loan interest paid (45) (2) (54)
Repurchase of Ordinary shares - (323) (323)
Net cash outflow from financing (45) (325) (377)
Decrease in cash (879) (1,738) (2,120)
The accompanying Notes are an integral part of the Financial Statements.
Guinness Flight Venture Capital Trust PLC
Notes to the Financial Statements
1.
Accounting Policies
* The financial information for the six months ended 31 August 2007 and the
six months ended 31 August 2006 comprises non-statutory accounts within the
meaning of section 240 of the Companies Act 1985.
* The financial information contained in this report has been prepared on the
basis of the accounting policies set out in the Annual Report and Financial
Statements for the year ended 28 February 2007.
* The results for the year ended 28 February 2007 are extracted from the full
accounts for that year, which received an unqualified report from the Auditors
and have been filed with the Registrar of Companies.
Capital Capital Capital
Special redemption reserve reserve Revenue
reserve reserve realised unrealised reserve
#'000 #'000 #'000 #'000 #'000
2. Movement in reserves
At 28 February 2007 24,022 255 (10,462) (2,344) (745)
Losses on sales of investments - - (267) - -
Net increase in value of
investments - - - 723 -
Investment management fees - - (86) - -
Finance costs - - (34) - -
Loss on ordinary activities after
taxation - - - - (94)
As at 31 August 2007 24,022 255 (10,849) (1,621) (839)
Six months ended
3. Return per ordinary shares 31 August 2007
The returns per share have been based on the following
figures:
Weighted average number of ordinary shares 27,138,128
Revenue Return #(94,000)
Capital Return #336,000
4. Creditors
Amounts falling due within one year include #1.4 million of a #1.8 million bank
facility, provided by Bank of Scotland, which has recently been renewed.
GUINNESS FLIGHT VENTURE CAPITAL TRUST PLC
Summary of Investment Changes
Increase/ Profit/
Valuation New (decrease Proceeds (Loss) Valuation
28 February 2007 Investment in valuation) on sale on sale 31 August 2007
#'000 #'000 #'000 #'000 #'000 #'000
Espresso Broadband 2,483 750 3,233
Vyre Limited 3,091 3,091
LG & DE Limited 2,493 307 2,800
Higher Nature 2,060 2,060
Serrastone 1,360 1,360
Mawdsley's GNS Limited 1,258 214 (722) 750
Fine Art Logistics 511 511
Ashford Colour Press Limited 338 52 11 11 390
Bridgefilms 324 (30) 294
IDG 292 292
Others (Less than #250,000 431 452 (202) - - 681
at 31 August 2007)
Total unlisted 14,641 666 155 11 11 15,462
Total AIM (All less than 213 - (5) 132 (67) 10
#250,000)
Total Portfolio 14,855 666 150 143 (56) 15,472
GUINNESS FLIGHT VENTURE CAPITAL TRUST PLC
Investment Portfolio Summary
As at 31 August 2007
Investment Bookcost aluation % of
investment
portfolio
Unlisted
Ashford Colour Press Limited Printer specialising in educational text books 439 390 2.5
Baby Innovations Marketing Design and marketing of disposable sterilised 200 200 1.3
Internationais LDA babies bottles
Bridgefilms Commercialisation of property rights to 1,397 294 1.9
children's TV characters
Churchyard Limited Consultancy promoting tourism and inward 50 25 0.2
investment
Countcar Limited Provider of tool, plant hire and hydraulic 100 100 0.6
products and services to the oil and gas
industry
Espresso Broadband Development and supply of educational resources 751 3,233 20.9
to primary schools
Fine Art Logistics Packing and shipping services for the fine art 613 511 3.3
market
Funeral Services Partnership Operator of funeral directors 200 200 1.3
Limited
Higher Nature Mail order supplier of natural health foods and 500 2,060 13.3
homeopathic medicines
IDG Laboratory testing services for the food and 1,000 292 1.9
pharmaceutical industries
LG & DE Limited Supplier of language training courses under the 405 2,800 18.1
Linguaphone brand
Mawdsley's GNS Limited Asset recovery from disposal of the trade and 1,197 750 4.8
assets of engineering business, Mawdsley's
Limited
New Concept Publishing of trade magazines for the property, 750 133 0.9
security and fire prevention sectors
Serrastone Development of innovative gypsum-based building 694 1,360 8.8
products
Vyre Limited Software developer specialising in web-based 615 3,091 20.0
technology
Others valued at less than 9,399 23 0.1
#25,000
18,310 15,462 99.9
AIM
ID Data Group plc Supplier of secure transaction systems and 894 10 0.1
related services for the international
telephone, banking and retail industries
894 10 0.1
Total investments 19,204 15,472 100%
Other information
The Net Asset Value per Ordinary Share has been calculated using the number of
Ordinary Shares in issue at 31 August 2007 of 27,138,128.
A summary of investment changes for the six months under review and an
investment portfolio summary as at 31 August 2007 are attached above.
A full copy of the Interim Report and Financial Statements will be printed and
issued to Shareholders.
Copies of this announcement will be available to the public at the office of
Aberdeen Asset Management PLC, 149 St Vincent Street, Glasgow and at the
registered office of the Company, One Bow Churchyard, Cheapside, London.
Directors' responsibility statement
The implementation of the EU Transparency Obligations Directive and the
associated amendments to the rules laid down by the UK Listing Authority require
the Directors to confirm their responsibilities in relation to the preparation
and publication of the interim report and financial statements.
The Directors confirm that, to the best of their knowledge:
the financial statements for the six months ended 31 August 2007 have been
prepared in accordance with applicable accounting standards and with the
Statement of Recommended Practice 'Financial Statements of Investment Trust
Companies' (the SORP) issued in December 2005 the interim report includes a
fair review of the information required by DTR 4.2.7R in relation to the
indication of important events during the first six months, and of the principal
risks and uncertainties facing the Company during the second six months, of the
year ending 28 February 2008 the interim report includes adequate disclosure
of the information required by DTR 4.2.8R in relation to related party
transactions and any changes therein.
On behalf of the Board
ABERDEEN ASSET MANAGEMENT PLC
SECRETARY
30 October 2007
This information is provided by RNS
The company news service from the London Stock Exchange
END
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