Quester VCT 4 plc
Interim statement for the six months ended 30 April 2005
Financial highlights
Per ordinary share (pence) 30 April 31 October 30 April
2004
2005 2004
Capital values
Net asset value 64.4 67.7 72.4
Share price 60.0 62.0 82.5
Return and dividends
Dividend 1.0 - -
Cumulative dividend 3.9 2.9 2.9
Total return* 68.3 70.6 75.3
*Net asset value plus cumulative
dividend per share
Highlights from the Chairman's statement and Investment Manager's report
* Most of the companies in Quester VCT 4's portfolio are still at a
relatively early stage of development. The underlying scientific and
business development of those companies involved in technology-related
opportunities has been generally positive.
* While the initial investment phase is regarded as essentially complete, the
total number of venture capital investments will be kept under review and
further investments will be made if appropriate.
* Overall, we consider that the portfolio is capable of recovering the loss
of value so far suffered and then delivering attractive returns to
shareholders in the longer term.
* A dividend of 1p per share was paid on 1 April 2005.
CHAIRMAN'S STATEMENT
INTRODUCTION
Following completion of the Company's initial investment phase, the main focus
of activity has been on the development of long-term value in the venture
capital portfolio.
Members of the Quester investment team have been much engaged during the period
with the key companies in the portfolio, helping in the development of business
strategy and in the building of management teams, considering plans for the
raising of further rounds of finance, where this is justified by business
progress, and in a number of cases looking ahead at the planning of an initial
public offering (IPO) or merger and acquisition (M&A) activity.
PROGRESS OF THE PORTFOLIO
Midway through the fifth year of Quester VCT 4, the portfolio still contains a
relatively high proportion of early stage businesses. The portfolio suffered
one business failure during the period, which contributed largely to the amount
recorded for the write-off of investments. Generally, however, for those
companies involved in technology-related opportunities, the underlying
scientific and business development has been positive.
The Board believes that, across the portfolio as a whole, progress is
satisfactory at this stage in Quester VCT 4's development.
NET ASSETS, REVENUE AND DIVIDENDS
�'000 Pence per
share
Net asset value at 31 October 2004 35,240 67.7
Income 211 0.4
Investment management fee and other expenses (620) (1.2)
Realised net gains on disposal of investments 125 0.2
Write-off of investments (net of amounts (580) (1.1)
recovered
in respect of investment previously
written-off)
Net unrealised loss on revaluation of (356) (0.7)
investments
Share buy-backs (463) 0.1
Issue of shares under the dividend reinvestment 67 -
scheme
Dividends paid (520) (1.0)
Net asset value at 30 April 2005 33,104 64.4
As foreshadowed in the Annual Report for the year ended 31 October 2004, the
Company has revoked its investment company status to enable a dividend to be
paid in respect of the realised gains achieved on venture capital investments
in that year. This has been paid as an interim dividend of 1.0p per share in
respect of the current year ending 31 October 2005.
After payment of the interim dividend the net asset value per share was reduced
from 67.7p at 31 October 2004 to 64.4p per share at 30 April 2005.
In consequence of the revocation of investment company status, Quester VCT 4's
results are now presented in the form of a profit and loss account and
statement of total recognised gains and losses rather than in a three-column
statement of total return.
The profit and loss account for the half-year shows a net loss after tax of �
864,000 (with no tax being payable), equivalent to 1.7p per share. This
includes, in addition to income and expenses, the realised net gains on
disposal of investments and the write-off of investments. The net unrealised
loss on revaluation of investments, amounting to �356,000, is included in the
statement of total recognised gains and losses.
OUTLOOK
As has previously been stated, Quester VCT 4's venture capital investments are,
in most cases, still at an early stage and will take time to mature.
The Board considers that, given the underlying progress made to date, the
portfolio is capable of recovering the loss of value so far suffered and then
delivering attractive returns to shareholders in the longer term.
Robert Wright
Chairman
12 July 2005
INVESTMENT MANAGER'S REPORT
PROGRESS WITH VENTURE CAPITAL INVESTMENT
We indicated in the last Annual Report that Quester VCT 4's initial investment
phase was essentially complete at 31 October 2004. Accordingly, no new venture
capital investments were made during the six months to 30 April 2005, the focus
of attention during this period being on the building of value in the existing
portfolio companies.
An additional �1.6 million was invested in 10 of the existing portfolio
companies, either as further tranches of originally agreed commitment or as
follow-on investment. The follow-on investments included additional commitments
to Advanced Valve Technologies Limited (�146,000), Antenova Limited (�255,000),
Avidex Limited (�211,000), Azea Networks, Inc. (�432,000) and Oxford Immunotec
Limited (�188,000).
VENTURE CAPITAL PORTFOLIO DEVELOPMENTS
During the six months to 30 April 2005, the Company realised proceeds of �
324,000 from the sale of part of the holding in the NASDAQ-quoted company
Loudeye Corp., generating a gain of �145,000 over the comparable valuation at
31 October 2004. Further sales have been made since that date, but given the
timing of release to Quester VCT 4 of certain of its entitlements under the
sale agreement, it will be some time before full realisation is achieved.
It is disappointing to report one company failure during the year. The Quester
team had been closely monitoring the progress of Digital Union UK Limited, with
a modest amount of additional capital being advanced to give management time to
achieve certain business objectives: in the event, these were not achieved and
the decision was taken not to provide further funding (write-off of �679,000).
Two further investments, previously carried at only modest residual valuations,
have also been treated as realised. These transactions have resulted in a net
write-off of �580,000 (after offsetting amounts recovered in respect of certain
previous write-offs): there are now 32 active venture capital investments in
the portfolio.
While most of the companies are still at a relatively early stage of
development, for those involved in technology-related opportunities the
underlying scientific and business development has been generally positive. A
number of companies are progressing towards the raising of new rounds of
finance, with new participants expected to join the syndicate, and in a number
of cases an uplift in valuation may be expected on successful completion of the
new round. It is too soon to predict the achievement of an early exit from any
of the existing investments, but in a number of cases business progress has
resulted in increased focus on exit strategy including consideration of the
opportunities for IPO in due course.
VALUATION OF THE VENTURE CAPITAL PORTFOLIO
The portfolio of quoted venture capital investments showed a net appreciation
of �12,000 (significant movements within this total being an appreciation in
value of Allergy Therapeutics plc and a decline in Polaron plc).
Among the unquoted venture capital investments, valuations generally have shown
greater stability than in previous periods. As a result of slower than expected
development of the respective businesses, further provisions have been made
against the investments in Advanced Valve Technologies Limited (�365,000) and
HTC Healthcare Group plc (�289,000). On the positive side, encouraging recent
business progress has justified the revaluation of the holdings in Nexagent
Limited (upvaluation of �272,000) and Workshare Limited (upvaluation of �
100,000). Including other minor adjustments, there is a net reduction in
valuation of unquoted investments (excluding Opsys Management Limited) of �
357,000.
In consequence of the share price performance of the underlying holding in the
NASDAQ-quoted company Cambridge Display Technologies, Inc., a downward
valuation adjustment has been made in respect of Opsys Management Limited (�
216,000) and, for the sake of prudence, a provision of �122,000 has been made
against the valuation of the residual entitlement under the agreement for the
trade sale of CDC Solutions Limited.
LISTED EQUITY AND BOND PORTFOLIOS AND CASH
At 30 April 2005 the Company held a portfolio of listed equities valued at �6.4
million. The portfolio produced a return over the six months of �309,000
(losses taken �19,000; unrealised portfolio appreciation �327,000).
The remaining holdings in the Company's bond portfolio were realised during the
period: reserves for ongoing investment in the venture capital portfolio are
represented in part by a �3.7 million holding in a global treasury fund. Cash
balances included �3.1 million held in non interest-bearing cash accounts, in
order to comply with the "70% qualifying investment test" under VCT legislation
while enabling the Company to maintain an appropriate level of reserves for
follow-on investment in existing portfolio companies. We expect that the non
interest-bearing cash balance will be significantly reduced by the end of the
current year.
CONCLUSION
While Quester VCT 4's initial investment phase is regarded as essentially
complete, the total number of venture capital investments will be kept under
review, particularly as realisations are achieved, and further investments will
be made if appropriate.
Although a number of companies in which Quester VCT 4 has invested have not met
their objectives during the period, more generally the progress of the
portfolio has been satisfactory. Overall, we believe that the portfolio offers
attractive upside potential from its current value.
Quester Capital Management Limited
Manager
12 July 2005
FUND SUMMARY AS AT 30 APRIL 2005
Industry Sector Original Valuation Equity % % of
Cost held fund
�'000 �'000 by value
Quoted venture capital
investments
Allergy Therapeutics plc Healthcare & 500 771 1.1% 2.3%
life sciences
Loudeye Corp. Internet 421 493 0.8% 1.5%
Polaron plc Industrial 250 172 1.2% 0.5%
Products &
Services
Portrait Software plc* Software 1,130 811 5.8% 2.5%
Public Recruitment Group plc Industrial 250 245 0.8% 0.7%
Products &
Services
Quadnetics Group plc Electronics 143 135 0.5% 0.4%
Total quoted venture capital 2,694 2,627 7.9%
investments
Unquoted venture capital
investments
Advanced Valve Technologies Industrial 1,208 511 26.4% 1.5%
Limited Products &
Services
Anadigm Limited Semiconductors 1,235 223 2.8% 0.7%
Antenova Limited Communications 1,254 1,005 5.4% 3.0%
Anthropics Technology Communications 1,070 70 7.0% 0.2%
Limited
Argelcom Limited Software 89 89 6.2% 0.3%
Arithmatica Limited Semiconductors 1,486 429 13.7% 1.3%
Avidex Limited Healthcare & 1,013 1,013 2.7% 3.1%
life sciences
Azea Networks, Inc. Communications 1,764 1,764 7.5% 5.3%
Celona Technologies Limited Software 321 321 9.0% 1.0%
Celoxica Holdings Limited Software 1,148 648 2.8% 2.0%
Cyclacel Group plc Healthcare & 1,000 1,000 1.4% 3.0%
life sciences
De Novo Pharmaceuticals Healthcare & 803 176 3.0% 0.5%
Limited life sciences
Elateral Holdings Limited Software 1,155 155 15.5% 0.5%
Footfall Limited Industrial 1,000 1,000 7.7% 3.0%
Products &
Services
HTC Healthcare Group plc Consumer goods & 564 275 8.7% 0.8%
services
Lorantis Holdings Limited Healthcare & 1,400 1,025 2.5% 3.1%
life sciences
Mesophotonics Limited Electronics 893 670 6.0% 2.0%
Nexagent Limited Software 496 417 1.7% 1.3%
Nomad Software Limited Software 1,211 651 7.5% 2.0%
Opsys Management Limited Electronics 1,038 72 - 0.2%
Oxford Immunotec Limited Healthcare & 813 813 9.3% 2.5%
life sciences
Oxxon Therapeutics Holdings, Healthcare & 987 987 3.5% 3.0%
Inc. life sciences
Sift Group Limited Internet 875 656 4.5% 2.0%
TeraView Limited Healthcare & 625 733 4.9% 2.2%
life sciences
Workshare Limited Software 1,000 1,100 6.6% 3.3%
Xention Discovery Limited Healthcare & 500 500 5.8% 1.5%
life sciences
Total unquoted venture 24,948 16,303 49.3%
capital investments
Total venture capital 27,642 18,930 57.2%
investments
Listed equity investments 5,839 6,371 19.2%
Total investments 33,481 25,301 76.4%
Cash and other net assets 7,803 7,803 23.6%
Net assets 41,284 33,104 100.0%
*formerly AIT Group plc
UNAUDITED FINANCIAL STATEMENTS
PROFIT AND LOSS ACCOUNT
Notes 6 months 6 months Year ended
ended 30 ended 30 31 October
April 2005 April 2004 2004
�'000 �'000 �'000
Net losses on investments (455) 478 554
Income 211 145 267
Investment management fee (429) (508) (972)
Other expenses (191) (227) (358)
Loss on ordinary activities (864) (112) (509)
before tax
Tax on ordinary activities - - -
Loss on ordinary activities after (864) (112) (509)
tax
Dividends paid and declared 3 (520) - -
Transfer from reserves (1,384) (112) (509)
Loss per share 6 (1.7)p (0.2)p (1.0)p
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
6 months 6 months Year ended
ended 30 ended 30 31 October
April 2005 April 2004 2004
�'000 �'000 �'000
Loss for the period (864) (112) (509)
Unrealised loss on revaluation of (356) (2,440) (4,500)
investments
Total recognised losses (1,220) (2,552) (5,009)
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 and securities and from bank deposits.
BALANCE SHEET
Note 30 April 30 April 31 October
2005 2004 2004
�'000 �'000 �'000
Fixed assets
Investments 25,301 27,664 25,814
Current assets
Debtors 362 720 578
Cash at bank 7,943 9,954 9,185
8,305 10,674 9,763
Creditors (amounts falling due within one (402) (256) (237)
year)
Net current assets 7,903 10,418 9,526
Creditors (amounts falling due in over one (100) (100) (100)
year)
Net assets 33,104 37,982 35,240
Capital and reserves
Called-up equity share capital 514 525 520
Share premium account 1 284 218 218
Special reserve 1 35,820 44,099 41,975
Revaluation reserve 1 (3,983) (5,933) (7,637)
Profit and loss account 1 469 (927) 164
Total equity shareholders' funds 33,104 37,982 35,240
Net asset value per share 64.4p 72.4p 67.7p
SUMMARISED CASH FLOW STATEMENT
6 months ended 6 months Year ended
30 April 2005 ended 30 31 October
April 2004 2004
�'000 �'000 �'000
Net cash outflow from operating (147) (695) (1,030)
activities
Net capital expenditure and financial (179) (2,956) (3,104)
investment
Equity dividends paid (520) - -
Buy-back of ordinary shares (463) (204) (490)
Issue of shares under the dividend 67 - -
reinvest scheme
Decrease in cash for the period (1,242) (3,855) (4,624)
Reconciliation of net cash flow to movement in net funds
Decrease in cash for the period (1,242) (3,855) (4,624)
Net cash at the start of the period 9,185 13,809 13,809
Net cash at the end of the period 7,943 9,954 9,185
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. Movement in Reserves
Share Special Revaluation Profit
premium reserve and
account reserve
�'000 loss
�'000 �'000 account
�'000
At 1 November 2004 218 41,975 (7,637) 164
Share buy-back and cancellation - (456) - -
Shares issued under the terms of 66 - - -
the dividend reinvestment scheme
Net unrealised depreciation of - - (356) -
investments
Transfer from unrealised reserve - - 4,010 (4,010)
Transfer from special reserve - (5,699) - 5,699
Dividends paid - - - (520)
Net loss for the period - - - (864)
At 30 April 2005 284 35,820 (3,983) 469
2. The financial information contained in this report has been prepared on the
basis of the accounting policies set out in the 2004 Annual Report.
3. On 21 January 2005 the directors resolved to pay an interim dividend of 1p
per share payable on 1 April 2005.
As a result of the Directors' decision to enable dividends from capital profits
to be paid to shareholders the Company applied for its investment company
status, as defined under Section 266 of the Companies Act 1985, to be revoked
on 21 January 2005.
Consequently, the financial statements have been prepared to include a
statutory profit and loss account and a statement of total recognised gains and
losses in accordance with Schedule 4 of Companies Act 1985 and Financial
Reporting Standard 3 (Reporting Financial Performance). These statements differ
from the Statement of Total Return presented in prior periods as follows:
a. Profit/loss on realisation of investments and permanent diminutions in
value of investments are now included in the profit and loss account.
b. Unrealised gains and losses on investments are included in the statement of
total recognised gains and losses.
c. The full amount of the investment management fee is charged to the profit
and loss account.
The effect of the restatement has been to decrease the profit on ordinary
activities after taxation, equivalent to the revenue return on ordinary
activities after taxation under the previous presentation, by �670,000 in
respect of the current period and by �2,216,000 in respect of the comparative
period to 30 April 2004 reflecting the impact of the realisation of investments
and investment management fees charged to the profit and loss accounts.
4. In the balance sheet, the opening revenue reserve, which was showing a loss
of �455,000, and the opening realised capital reserve of �619,000 have been
combined into the profit and loss account resulting in an opening balance
of �164,000. The revaluation reserve records revaluation amounts previously
included in the unrealised capital reserve, except for any permanent
diminutions in value which have been passed through the profit and loss
account.
5. A transfer of �5,699,000 has been made from the Special Reserve to the
Profit and Loss account. This transfer was made to offset realised losses
on investments arising during the six months to 30 April 2005.
6. The calculation of the loss per share for the period is based on the net
loss after tax of �864,000 divided by the weighted average number of shares
in issue during the period of 51,851,842.
7. The net asset value per share as at 30 April 2005 is based on net assets of
�33,104,000 divided by the 51,385,419 ordinary shares in issue at that
date.
8. The unaudited financial statements set out above do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act
1985.
9. Copies of the unaudited interim results are expected to be sent to
shareholders on 14 July 2005. Further copies can be obtained from the Company's
registered office.
A copy of the above document is to be submitted to the UK Listing Authority,
and will shortly be available for inspection at the UK Listing Authority's
Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
END
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