RNS Number:9537X
Electra Kingsway VCT 3 Plc
07 June 2007
Electra Kingsway VCT 3 Plc ("the Company" or "the Fund")
Interim Results for the six months ended 31 March 2007
Financial Highlights (Unaudited)
Six months ended 31 March 2007 2006
Net Assets #39.7m #23.3m
Net Asset Value per share 113.03p 94.19p
Percentage uplift since inception 19.6% (0.3)%
An interim dividend of 1.5p per share will be paid on 7 August 2007, to
shareholders on the Company's Register of Members at close of business on 6 July
2007.
A copy of the Chairman's Statement, Investment Manager's Report and Preliminary
Announcement are attached.
These unaudited interim results for the period ended 31 March 2007 do not
constitute the Statutory Financial Statements of the Company for the period
ended 31 March 2007 within the Meaning of Section 240 of the Companies Act 1985.
The figures and financial information in respect of the period ended 30
September 2006 have been delivered to the Registrar of Companies and included
the Auditors' Report which was unqualified and did not contain a statement under
either Section 237(2) or Section 237(3) of the Companies Act 1985.
Copies of the Interim Accounts to 31 March 2007 will be sent to shareholders
shortly and will thereafter be available from the Company's registered office.
For further information:
Nick Ross, Electra Kingsway VCT 3 Plc: 0207 214 4200
Chairman's Statement
Results
I am pleased to be able to report that the Fund has enjoyed a strong period of
performance with the Net Asset Value per share rising to 113.0p. This is an
increase of 13.9% from the last published figure of 99.2p as at 30 September
2006. The Fund has made a very encouraging start, especially in view of the fact
that it is only in its second year of operation and is only partly invested.
Typically, in funds that specialise in unquoted investments, it takes up to
three years to become invested. It also takes a further period for the
investments themselves to mature, therefore the returns profile for Venture
Capital Trusts tends to be longer than for conventional quoted funds.
A key focus of the Investment Manager is to ensure that the Fund is invested in
a broadly diversified portfolio of unquoted and AIM listed companies. Progress
to date is encouraging, with the Fund having made five unquoted investments and
three AIM investments.
The majority of qualifying investments tend to be in profitable unquoted
companies, which tend to be sourced on lower earnings multiples than AIM listed
companies. In addition, the Investment Manager uses loan stock instruments to
provide further downside protection.
As at 31 March 2007, the Fund had invested #7.1m in qualifying companies and
#5.7m in non-qualifying funds as set out in the Prospectus. The balance of the
investment monies were held in two liquidity funds which are currently paying
income primarily at a very small discount to base rates.
Dividend
The Board has approved the payment of an interim dividend of 1.5p per ordinary
share, which will be paid on 7 August 2007 to shareholders on the Register of
Members at the close of business on 6 July 2007. This will be the Fund's first
dividend payment and I would like to remind shareholders of the tax free status
of dividend distributions from VCTs.
VCT Qualifying Status
The Fund is on track to meet the key test, which is to have 70% of its assets
invested in qualifying companies by 30 September 2008. The current pipeline of
potential transactions is good and the Investment Manager remains confident of
meeting this target.
Share Buyback policy
The Company operates a share buyback policy at a 10% discount to the last
published Net Asset Value, thus offering shareholders the opportunity to sell
their shares if required. During the period to 31 March 2007, the Company bought
back 5,137 ordinary shares for cancellation at an average price of 89.5p per
share.
March 2007 Budget
The 2007 Budget contained further changes to the VCT regulations, which will
have some impact on funding in the industry. The two principal changes were the
introduction of two new conditions for investment in qualifying companies.
Firstly, an investee company may receive no more than #2 million from VCTs in a
12 month period. Secondly, investee companies or groups may have no more than
50 full-time employees at the date of investment. These changes were implemented
to bring the industry into alignment with EEC legislation on state aid. The
important thing to note is that they only affect new monies raised after 6 April
2007 and will have no impact on the Fund as it stands.
Outlook
The Fund has got off to a good start with the Net Asset Value per share rising
strongly, albeit that only a small percentage of the assets are invested in
qualifying companies. Given the Investment Manager's healthy deal pipeline, the
Fund is on track to meet its objectives.
Stuart Stradling, Chairman
7 June 2007
Investment Manager's Review
Performance
The Net Asset Value per share rose strongly in the period from 99.2p to 113.0p,
representing an uplift of 13.9%. The main drivers behind this performance were
the AIM stocks, Gyro International and Electra Private Equity. The largest
contributor was Worthington Nicholls, which specialises in the installation of
air conditioning. As at 31 March 2007, the company's shares had risen by 344%
since flotation. Given the strength of the shares, we took some profits during
the period. Jelf Group also continued to perform strongly, rising by a further
44.5%. The company recently reported encouraging results and the shares have
further upside potential. The Fund's holding in Electra Private Equity rose by
18.6% after the company reported good results and a positive outlook.
Investment Activity
Four new investments were added in the period, three of which were unquoted and
one was AIM listed. Gyro International is a brand management company in which
Electra Kingsway VCT Plc also has an investment. The company was seeking finance
for an acquisition and the investment was revalued to take into account peer
group valuations. Factory Media specialises in action sports magazines and is
seeking to bolt-on further titles and enhance its digital platform. Emote is a
publisher of games content and is working closely with Sony to establish a broad
gaming platform. Zamano operates a text messaging platform over which it seeks
to sell content for mobile phones. It floated on AIM in 2006 and recently
reported encouraging results.
Deal Flow
The key focus of our investment activity is to find profitable unquoted and AIM
listed companies which either have good growth potential and/or offer
opportunities for corporate development. A good example of the latter would be
Munro Global, a market research company, where a bolt-on acquisition has just
been completed with a further acquisition targeted. These acquisitions are
significantly value enhancing as they create scale in a fragmented market and
generate significant cost synergies. Given the long gestation period of unquoted
transactions, it is important to maintain an active deal pipeline of potential
transactions.
Portfolio Summary
Performance in
Cost at Valuation at period ended % of Portfolio
31 March 2007 31 March 2007 31 March 2007 by Value
#'000 #'000 #'000 %
Qualifying Investments:
Worthington Nicholls 887 3,053 1,820 16.14
Defaqto (Find Portal) 1,150 2,192 - 11.58
Gyro International 1,000 1,983 983 10.48
Factory Media 1,925 1,925 - 10.17
Munro Global 875 1,225 350 6.47
Zamano 750 898 148 4.75
Jelf Group 250 614 189 3.24
Emote Games 229 229 - 1.21
7,066 12,119 3,490 64.04
Non-Qualifying Investments:
Electra Private Equity 5,151 6,324 991 33.42
Electra Active Management 500 481 12 2.54
5,651 6,805 1,003 35.96
12,717 18,924 4,493 100.00
Other Assets:
Liquidity Funds 20,775
Cash 159
20,934
Total 39,858
Income Statement
For the six months ended For the period 23 August 2005 to For the period 23 August 2005 to
31 March 2007 31 March 2006 30 September 2006
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Realised gains on - 196 196 - - - - - -
investments
Unrealised gains on - 4,493 4,493 - 82 82 - 1,757 1,757
investments
Income 734 - 734 94 - 94 668 - 668
734 4,689 5,423 94 82 176 668 1,757 2,425
Investment management (109) (328) (437) (27) (81) (108) (115) (343) (458)
fees
Other expenses (144) - (144) (144) - (144) (307) - (307)
(253) (328) (581) (171) (81) (252) (422) (343) (765)
Return on Ordinary 481 4,361 4,842 (77) 1 (76) 246 1,414 1,660
Activities before
Taxation
Tax on ordinary - - - - - - - - -
activities
Return on Ordinary 481 4,361 4,842 (77) 1 (76) 246 1,414 1,660
Activities after
Taxation
Return to 1.37p 12.43p 13.80p (2.12)p 0.03p (2.09)p 1.38p 7.94p 9.32p
Shareholders per
Share
The amounts dealt with in the Income Statement are all derived from continuing
activities.
No operations were acquired or discontinued in the period.
Reconciliation of Total Shareholders' Funds
For the six months For the period 23 August For the period 23 August
ended 31 March 2007 2005 to 31 March 2006 2005 to 30 September 2006
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Total Return on ordinary 4,842 (76) 1,660
activities after taxation
Repurchase of ordinary shares (4) - -
Ordinary shares issued - 24,768 35,089
Share issue expenses charged to - (1,362) (1,930)
Share Premium account
Preference shares issued - - 50
Repurchase of preference shares - - (50)
Movements in Total Shareholders' 4,838 23,330 34,819
Funds
Total Shareholders' Funds at 34,819 - -
start of period
Total Shareholders' Funds 23,330 34,819
39,657
Balance Sheet
As at 31 March 2007 As at 31 March 2006 As at 30 September 2006
(unaudited) (unaudited) (audited)
#'000 #'000 #'000 #'000 #'000 #'000
Fixed Assets
Investments held at fair 18,924 5,483 10,683
value
Current Assets
Debtors 176 112 101
Other investments 20,775 9,200 24,275
Cash at bank 159 14,528 144
21,110 23,840 24,520
Current Liabilities
Creditors: amounts falling
due within one year 321 5,868 328
321 5,868 328
Net Current Assets 20,789 17,972 24,192
Total assets less current 39,713 23,455 34,875
liabilities
Creditors: amounts falling
due
after more than one year 56 125 56
Net Assets 39,657 23,330 34,819
Capital and Reserves
Called-up share capital 351 248 351
Share premium 32,808 23,158 32,808
Realised capital reserve (431) (81) (343)
Unrealised capital reserve 6,206 82 1,757
Revenue reserve 723 (77) 246
Total Equity Shareholders'
Funds 39,657 23,330 34,819
Net Asset Value per Share 113.03p 94.19p 99.23p
As at 31 March 2007 As at 31 March 2006 As at 30 September 2006
Number of shares in issue
at end of period 35,083,698 24,768,196 35,088,835
Cash Flow Statement
For the period 23 For the period 23 August
For the six months August 2005 2005
ended 31 March 2007 to 31 March 2006 to 30 September 2006
(unaudited) (unaudited) (audited)
#'000 #'000 #'000 #'000 #'000 #'000
Operating Activities
Investment income received 655 15 512
Bank deposit interest received 4 52 54
Investment management fees paid (407) (5) (254)
Other cash payments (186) (78) (182)
Net Cash Inflow/(Outflow) from Operating 66 (16) 130
Activities
Investing Activities
Purchases of investments (3,904) (4,151) (8,926)
Sales of investments 353 - -
Net Cash Outflow from Investing Activities (3,551) (4,151) (8,926)
Cash Outflow before Financing
and Management of Liquid Resources (3,485) (4,167) (8,796)
Management of Liquid Resources
Purchases of current asset investments - (9,200) (24,275)
Sales of current asset investments 3,500 - -
Net Cash Inflow/(Outflow) from Management
of Liquid Resources 3,500 (9,200) (24,275)
Financing
Issue of shares - 24,768 35,089
Expenses of the issue of shares - (1,362) (1,930)
Issue of loan notes - 26 56
Cash held pending issue of shares - 4,464 -
Net Cash Inflow from Financing - 27,896 33,215
Increase in Cash for the Period 15 14,529 144
This information is provided by RNS
The company news service from the London Stock Exchange
END
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