Interim Results for the six months ended 30 June 2006
Investment Objective
Core VCT I plc ("Core VCT I" or "the Company") is a tax efficient listed
company which aims to achieve long-term capital and income growth, and to
distribute tax free dividends of realised gains and investors' capital.
Investment Approach
* The Company invests management buyout and development capital, typically in
established, private companies, which show:
* Sufficient operating critical mass and an established economic model; and
* Quality management teams with the key skills in place to deliver a well
defined business model
* The Company is managed by Core Growth Capital LLP ("Core Growth Capital" or
"the Manager) which invests amounts generally in the range of �2 - �5
million across the three Core VCTs in companies valued at �5 - �25 million
Fund Structure
Core VCT I is structured as follows:
* No annual management fees
Only when Shareholders have received the first 60 pence of distributions, which
together with an assumed 40 pence of initial tax relief will have realised them
100 pence per share, will the Manager be entitled to 30% of distributions from
the Company.
* Maximise distributions of income and capital
Core VCT I has a policy to distribute all proceeds from realised investments.
The Company has no fixed life, but intends to naturally liquidate and
distribute its assets over time. The Manager's incentives are structured to
align its interests in delivering this liquidity for Shareholders as well as
maximising overall investment performance.
Performance Summary
Ordinary Shares 30 June 2006 30 June 2005
Net asset value per share 95.33 pence 94.40 pence
Net asset value total return in period 96.33 pence 94.40 pence
Share price (mid-market) 100 pence 100 pence
Earnings per share 0.86 pence (0.12) pence
Dividends per share 1.00 pence 0.00 pence
B shares 30 June 2006 30 June 2005
Net asset value per share 1.00 pence 1.00 pence
Net asset value total return in period 1.00 pence 1.00 pence
Share price (mid-market) 4.50 pence 3.00 pence
Earnings per share 0.00 pence 0.00 pence
Dividends per share 0.00 pence 0.0 pence
Chairman's Statement
I am pleased to present the interim results for the six months ended 30 June
2006.
Results
The Net Asset Value (NAV) Total Return per Ordinary Share was 96.3p as at 30
June 2006, comprising an NAV per Ordinary Share of 95.3p and cumulative
dividends paid of 1.0p per Ordinary Share. This is an increase over the initial
NAV per Ordinary Share of 94.5p. A surplus of �94,220 was earned during the six
month period.
Dividends
Core VCT I is structured to maximise distributions of both capital and income
to Shareholders over the life of the Company. These will be derived primarily
from investment realisations which are clearly some years away. In the
meantime, the Company earns income from its managed cash assets, and over time
should start to earn income from the unquoted investments made. This has
produced a revenue return surplus of 1.20p per Ordinary Share. No interim
dividend is proposed for the period. A final dividend, if any, would be payable
after the end of the full financial year to 31 December 2006.
Investments
At 30 June 2006, the Company was approximately half way through the 3 year
investment period permitted under current VCT legislation and 28.8% of its
total investments at that date were represented by VCT qualifying investments.
This compares with the required target amount of over 70% which is to be
achieved by 31 December 2007.
You will recall that the Manager delayed the investment programme of the
Company so as to enable it to invest alongside new VCTs being promoted by the
Manager. Core VCT II plc and Core VCT III plc, which closed in March 2006,
successfully raised a total of �33 million. This investment approach now gives
Core VCT I access to larger transactions more readily than if it were investing
in isolation.
Accordingly, the investment pace of Core VCT I has increased, with three new
investments completed in this six month period, in each case investing
alongside Core VCT II plc and Core VCT III plc. The Manager's dealflow is
strong, enabling the selection and negotiation of larger investments in
accordance with the Company's overall investment objective.
Cancellation of share premium account
In accordance with the Company's prospectus, the Company has authority,
obtained at an Extraordinary General Meeting held on 19 October 2004, to apply
to the Court to cancel 50% of the amount standing to the credit of the share
premium account. The Directors are proceeding with the application for
cancellation and it is anticipated that Court approval will be obtained within
the next few months.
The cancellation of the share premium account will create a special reserve
that can be used, amongst other things, to fund buy-backs of the Company's
Shares when the Directors consider that it is in the best interests of the
Company to do so.
Outlook
The principal aim of the Company at this stage in its life is to complete
private equity investments of the size, type and quality consistent with its
stated objectives. The unique performance-only rewards for the Manager create
the right incentives for Core Growth Capital to select and negotiate
investments that are structured to deliver attractive cash returns to investors
over the next 3 to 5 years.
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
Both the Ordinary Shares (CR.) and the B Shares (CR.B) are fully listed shares.
Prices are available on www.londonstockexchange.com and the Ordinary Share
price is published daily in the Financial Times. Shareholders are reminded that
disposing of shares within three years will result in loss of tax relief, and
that their holding of B Shares forms an integral part of their investment along
with their holding of Ordinary Shares.
Peter Smaill
Chairman
Manager's Review
Core VCT I is 28.8% invested in qualifying VCT investments and on the basis of
current commitments, dealflow and opportunities being reviewed by the Manager,
it expects to meet the 70% requirement by 31 December 2007.
New Investments
The following three new investments have been completed in the six month period
to 30 June 2006:-
Blanc Brasseries Holdings plc - Cost �1,000,000, April 2006
Core Growth Capital completed this Management Buy Out ("MBO") with total
funding of �10 million in April. It led, managed and arranged this transaction
with the Core VCTs collectively investing �3 million, and raised a further �3
million in EIS funds from private investors and other smaller VCTs.
Blanc Brasseries currently operates five units in the premium casual dining
market and is looking to grow to 20 units within 3 years. The restaurants are
situated in prime locations in Birmingham, Cheltenham, Manchester, Oxford and
Tunbridge Wells. The partners at Core Growth Capital have previously backed the
management team in a number of successful leisure businesses, including Luminar
Leisure and Loch Fyne Restaurants, which won the 2005 Best Exit Award at the
EIS Association Awards.
Colway Limited - Cost �1,000,000, May 2006
(trading as London Graphic Centre)
In our second MBO in as many months, Core Growth Capital led, managed and
arranged this investment with total funding of �12 million. The Core VCTs
collectively invested �3 million in a mix of ordinary shares and loan notes
with an 8% per annum yield. The balance of the total funding was raised through
an innovative senior and mezzanine debt structure.
London Graphic Centre is a long established office and graphic supplies
business with turnover of over �15 million. The management team are well placed
to grow the business organically, but also have the funding in place to grow by
acquisition and to act as a consolidator of smaller suppliers in the industry.
Highpitch Limited - Cost �72,333, June 2006
The Company invested this small amount in a mezzanine debt layer to fund the �
7.5 million MBO of Highpitch. The Core VCTs' secured loan note ranks ahead of a
significant equity investment by the management. It carries an effective yield
of 12.5% per annum and is typical of the terms available in smaller mezzanine
transactions not currently served by other debt or equity providers.
Highpitch comprises two businesses - MNet, a fast growing provider of Internet
Protocol (IP) networks to mid sized UK companies, with turnover of circa �8
million, and MBS, a long established reseller of Canon photocopiers. Both
companies provide services under long term contracts to a similar customer
base.
Occasionally opportunities arise where a corporate transaction in an entity,
representing a typical target business, has characteristics requiring,
initially at any rate, only relatively small amounts of external finance. Core
VCT I is able to adapt its position to such lower risk situations where the
ratio of risk to reward suggests that participation could lead to a
commercially attractive financial relationship.
Existing Portfolio
Ma Hubbards Limited - Cost �1,000,000, June 2005
The business operates freehold pubs offering value for money food in the North
Midlands. Since the date of investment, two new units have been contracted and
although trading performance has been below expectations, the value of the
freehold assets underpins this investment. The Company has a commitment to
invest a further �500,000 which is expected to be drawn down in the next few
months.
Additional Funds
In one of the most successful VCT fund raisings in the 2005/06 tax year, Core
Growth Capital raised �33 million in two new parallel VCTs, Core VCT II plc and
Core VCT III plc, giving the Manager combined funds under management of some �
44 million. This enables Core Growth Capital to complete investments in the
range of �2-�5 million entirely from funds under its management so that it is
able to take more significant stakes in larger companies without the need for
syndication. These funds have identical economic structures to that of Core VCT
I with an identical board of directors, so that they will be invested
effectively in parallel with the Company, facilitating the completion of
investments in larger businesses in accordance with our investment mandate.
The Manager does not plan to raise further `equity' based funds until Core VCTs
I, II and III are more substantially invested. It is, however, planning to
raise a new VCT fund which will target substantial mezzanine debt
opportunities, with a lower risk and return profile. Certain of these
investments may potentially be alongside Core VCTs I, II and III and therefore
complementary to our investment approach.
New Partners appointed at Core Growth Capital
As part of the expansion of the manager resource, aimed at securing additional
skilled talent to aid the investment of the increased capital represented by
the subscription monies raised by Core VCTs II and III, the Manager has
announced the following appointments:
Mark Storey is joining Core Growth Capital as a Partner. He has an impressive
track record of investing in small to medium sized companies over an 18 year
period. He was Managing Director of BancBoston Capital, investing �110 million
in 29 companies and returning �221 million to date, with an IRR of 34% per
annum. In addition, he has substantial experience of mezzanine transactions,
and is a director of Mediterranean Mezzanine.
Core Growth Capital has also secured the services of Ian Henderson-Londo*o, who
worked closely with Mark Storey at BancBoston Capital. He was most recently
working with YFM Group, and has 9 years private equity and mezzanine
experience.
Future Investments
Core Growth Capital is aiming to build a highly selective investment portfolio
where its unique approach and focus on larger investments with the most able
and ambitious management teams will add value and liquidity. Whilst the Manager
rejects a high proportion of the deals offered, it is clearly differentiated
from other VCT managers and is confident that attractive private equity
investments will be made.
Investment Portfolio Summary
as at 30 June 2006
Date of Book cost � Valuation % of net
investment '000 �'000 assets by
value
Qualifying investments
Unquoted investments
Blanc Brasseries Holdings plc April 2006 1,000 1,000 9.5%
Premium casual dining
brasseries
Colway Limited May 2006 1,000 1,000 9.5%
(trading as London Graphic
Centre)
Office and graphic supplies
Ma Hubbards Limited July 2006 1,000 1,000 9.5%
Managed freehold pubs
------ ------ ------
Total qualifying investments 3,000 3,000 28.5% 1
------ ------ ------
Non-qualifying investments
Short dated fixed interest 6,259 6,233 59.3%
securities
Money market funds 2 1,044 1,044 10.0%
Highpitch Limited June 2006 72 72 0.7%
Provider of internet services
and photocopiers
------ ------ ------
Total non-qualifying 7,375 7,349 70.0%
investments
------ ------ ------
Total investments 10,375 10,349 98.5%
Other assets 259 2.5%
Current liabilities (103) (1.0)%
------ ------
Net assets 10,505 100.0%
===== =====
1 Book value of total qualifying investments represents 29.0% of the total book
value of investments. The VCT tests are measured broadly on the original cost
of investments, including cash balances, and this gives a figure of 28.8%
quoted in the Chairman's Statement and Manager's Review above in relation to
progress toward achieving a minimum of 70% of total investments invested in
qualifying investments before 31 December 2007.
2 Disclosed with Current assets as Current investments in the Balance Sheet.
Unaudited Income Statement
(incorporating the Revenue Account of the Company for the six months ended 30
June 2006)
Six months ended Period from 13 October
2004 to 30 June 2005
30 June 2006 (Unaudited)
Revenue Capital Total Revenue Capital Total
� � � � � �
Realised gains on - 1,250 1,250 - - -
investments
Unrealised losses - (25,387) (25,387) - - -
on investments
Costs of investment - (2,198) (2,198) - - -
transactions
Income 245,184 - 245,184 80,641 - 80,641
Transactions costs - (13,967) (13,967) - - -
Other expenses (77,758) - (77,758) (85,346) - (85,346)
------ ------ ------ ------ ------ ------
Return on ordinary 167,426 (40,302) 127,124 (4,705) - (4,705)
activities before
taxation
Tax on ordinary (35,716) 2,812 (32,904) - - -
activities
------ ------ ------ ------ ------ ------
Return attributable 131,710 (37,490) 94,220 (4,705) - (4,705)
to equity
shareholders
===== ===== ===== ===== ===== =====
Return per Ordinary 1.20p (0.34)p 0.86p (0.12)p - (0.12)p
Share
Dividends paid � � � � � �
Final dividend for 109,446 - 109,446 - - -
the period from 13
October 2004 to 31
December 2005 of 1p
per Ordinary Share
Period from 13 October 2004
to 31 December 2005 (audited
and restated)
Revenue Capital Total
� � �
Realised gains on - - -
investments
Unrealised losses on - - -
investments
Costs of investment - - -
transactions
Income 310,337 - 310,337
Transactions costs - (16,946) (16,946)
Other expenses (155,685) - (155,685)
------ ------ ------
Return on ordinary 154,652 (16,946) 137,706
activities before
taxation
Tax on ordinary (29,384) 3,220 (26,164)
activities
------ ------ ------
Return attributable 125,268 (13,726) 111,542
to equity
shareholders
===== ===== =====
Return per Ordinary 1.98p (0.22)p 1.76p
Share
Dividends paid � � �
Final dividend for - - -
the period from 13
October 2004 to 31
December 2005 pf 1p
per Ordinary Share
Unaudited Balance Sheet
as at 30 June 2006
As at As at As at
30 June 2006 30 June 2005 31 December
(Unaudited) 2005
(audited and
restated)
� � �
Fixed assets
Investments 9,305,574 - 1,000,000
Monies held pending investment - 1,000,000 -
------ ------ ------
9,305,574 1,000,000 1,000,000
Current assets
Debtors and prepayments 215,275 764,285 51,734
Current investments 1,044,055 - -
Cash at bank 44,052 8,743,081 9,598,850
------ ------ ------
1,303,382 9,507,366 9,650,584
Creditors amounts falling due (102,973) (102,404) (129,374)
within one year
------ ------ ------
Net current assets 1,200,409 9,404,962 9,521,210
------- ------ ------
Net assets 10,505,983 10,404,962 10,521,210
====== ====== ======
Capital and reserves
Called up Ordinary Share capital 109,446 109,446 109,446
Called up B Share capital 72,964 72,964 72,964
Share premium account 10,227,258 10,227,257 10,227,258
Capital reserve - realised (25,829) - (13,726)
Capital reserve - unrealised (25,387) - -
Revenue reserve 147,532 (4,705) 125,268
------ ------ -------
Total equity Shareholders funds 10,505,984 10,404,962 10,521,210
====== ====== ======
Net asset value per share
(attributable assets basis)
Net asset value per Ordinary 95.33p 94.40p 95.46p
Share
Net asset value per B Share 1.00p 1.00p 1.00p
------ ------ ------
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 30 June 2006
Six months Period from Period from
ended
13 October 13 October 2004
30 June 2006 2004 to to
30 June 2005 31 December
2005
(restated)
� � �
Opening shareholders funds 10,411,764 - -
before restatement
Restated for application of new 109,446 - -
accounting policies
------ ------ ------
At 1 January 2006 (restated) 10,521,210 - -
Net share capital subscribed for - 10,409,667 10,409,668
in the period
Profit/(loss) for the period 94,220 (4,705) 111,542
Dividends paid in the period (109,446) - -
------ ------ ------
Closing Shareholders' funds at 10,505,984 10,404,962 10,521,210
30 June 2006
===== ===== =====
Unaudited Summarised Cash Flow Statement
for the six months ended 30 June 2006
Six months Period from Period from 13
ended 30 June 13 October October 2004 to
2006 2004 to 30 31 December
June 2005 2005 (audited)
(Unaudited)
� � �
Operating activities
Income received 215,046 80,641 262,339
Transaction costs paid (23,578) - -
Other cash payments (263,054) (31,570) (73,156)
------ ------ ------
Net cash (outflow)/inflow from (71,586) 49,071 189,183
operating activities
Equity dividends (109,446) - -
Investing activities
Acquisitions of investments (12,856,572) (1,000,000) (1,000,000)
Disposals of investments 4,526,861 - -
------ ------ ------
Net cash outflow from investing (8,329,711) (1,000,000) (1,000,000)
activities
------ ------ ------
Cash outflow before financing (8,510,743) (950,929) (810,817)
and liquid resource management
Financing
Share capital raised - 10,244,571 10,999,295
Issue costs of ordinary shares - (550,561) (589,628)
------ ------ ------
Net cash inflow from financing - 9,694,010 10,409,667
Management of liquid resources
Increase in monies held pending (1,044,055) - -
investment
------- ------ ------
(Decrease)/increase in cash for (9,554,798) 8,743,081 9,598,850
the period
===== ===== =====
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, the 2003
Statement of Recommended Practice, `Financial Statements of Investment
Trust Companies', revised December 2005.
2. 75% of the investment management expense is charged against capital. This is
in line with the Board's expected long-term split of returns from the
investment portfolio of the Company.
3. With effect from 1 January 2006, the Company has adopted the following
Financial Reporting Standards (FRS):
FRS 21 (Events after the Balance Sheet Date) - Dividends paid by the Company
are accounted for when irrevocably payable. Previously, the Company accrued
dividends in the period in which the net revenue, to which those dividends
related, was accounted for.
FRS 25 (Financial Instruments: Disclosure and Presentation) and FRS 26
(Financial Instruments: Measurement) - The Company has designated its
investment assets as being
measured at "fair value through profit and loss". The fair value of quoted
investments is deemed to be the bid value of these investments at the close of
business on the relevant date.
The corresponding amounts in these financial statements are restated in
accordance with these new policies.
4. The revenue return per Ordinary Share is based on the net revenue on
ordinary activities after taxation of �131,710 and is based on 10,944,571
Ordinary Shares, being the weighted average number of Ordinary Shares in issue
during this period. The capital loss per Ordinary Share is based on ordinary
activities after taxation of �37,490 and is based on 10,944,571 Ordinary
Shares, being the weighted average number of Ordinary Shares in issue during
the period.
5. Net asset value per Ordinary Share is based on net assets at 30 June 2006,
and on 10,944,571 (at 30 June 2005: 3,768,706 and at 31 December 2005:
6,320,824) Ordinary Shares, being the number of Ordinary Shares in issue on
that date.
6. The financial information for the period ended 30 June 2006 has neither been
audited nor reviewed.
7. Copies of the Interim Report for the six months ended 30 June 2006 are being
sent to all Shareholders. Further copies are available free of charge from the
Company's registered office, One Jermyn Street, London SW1Y 4UH.
Contact details for further enquiries:
Sarah Penfold of Matrix-Securities Limited (the Company Secretary) on 020 7925
3300 or by e-mail on CoSec@matrixgroup.co.uk
Core Growth Capital LLP (the Investment Manager), on 020 7317 0155 or by e-mail
on info@Core-Cap.com
END
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