Noble Income & Growth VCT PLC
21 December 2007
Noble Income & Growth VCT plc
Preliminary results for the six months ended 31 October 2007
Interim Chairman's Statement
I am pleased to present the unaudited interim statement for the six months ended
31st October 2007.
During this difficult six months the net asset value per share of your Company
fell by 4.0% compared with a decrease of 2.6% in the FTSE AIM All-Share index.
Much of the performance of this index is however attributable to the Basic
Resource and Oil and Gas sectors of the AIM market which mostly represent
companies engaged in non-qualifying trades under the VCT rules.
New investments were made during this period in 10 companies and 9 realisations
were also made. An overall profit from these disposals of 20.4% over original
cost was achieved. The write-off of our holding in Aquilo, which went into
administration, was a materially adverse influence on these results. In spite of
this the investment portfolio has performed reasonably well in extremely
turbulent market conditions. For example our investment in Vyke has shown
significant gains with a modest initial investment of £45,000 quadrupling in
value. Most of this gain has been realised for cash after the period end. The
portfolio now comfortably exceeds the minimum qualifying investment threshold of
70% and continues to improve in quality and liquidity.
I have reported before on the sub-scale nature of your Company and the
disproportionately high burden of operating costs this places on a relatively
small investment portfolio. Your board has sought and continues to seek an
agreeable and cost effective resolution to this difficulty. I am not able to
report specific progress at this time but remain confident that an emerging
trend towards consolidation of smaller VCTs such as yours will help produce the
cost rationalisation necessary in the near to medium term.
Bert Wiegman
Chairman
21 December 2007
Investment Manager's Report
for the six months ended 31 October 2007
UK Economy
The Monetary Policy Committee (MPC) signalled that interest rate cuts were on
their way in its latest Inflation Report. The inflation forecast in MPC's
quarterly report suggested that two or three 25 basis point cuts could be
implemented in order to maintain the 2% target. The first quarter point
reduction was announced on 6 December. This is in marked contrast to the August
inflation report which implied that at least one further rise to 6% or more
would be necessary to keep inflation in check. Sterling is weakening as a
consequence of this and whilst this is good news for exporters, it will
exacerbate inflationary pressures as import prices begin to rise.
The recent dilemma of the MPC has been how to manage the current credit crisis
whilst keeping inflation in check. The rise in petrol price duty and food prices
caused CPI inflation to rise from 1.8% to 2.1% in October. Retail sales
unsurprisingly slowed, falling 0.1% in the month, and thereby registering the
first decline since the turn of the year. Despite this, growth in retail sales
in the latest quarter remained up 5.5% year on year. Retail sales are likely to
continue to slow down and continue to ebb away into 2008, albeit from a position
of strength, as consumer credit availability reduces, house price growth slows
(or stagnates) and sentiment deteriorates.
The mean UK growth forecast for 2008 was 2.0% in October, down from 3.3% in
2007. The slowdown will in part be attributable to the fact that credit is not
as cheaply and readily available to households and businesses as it has been in
recent years. On the corporate side, higher costs of borrowing will increase
interest payments, squeezing net profits. This is likely to stem investment but,
for those companies sitting on deposit balances, increase returns. Overall,
corporate Britain looks reasonably well placed to cope with the increased costs
of credit. On the consumer side, increases in borrowing have been offset by
increases in house prices. Growth is expected to tail off in 2008, and fall in
some areas, however, the correlation between house price inflation and overall
growth in consumer spending is very low, dispelling the perception that the
economy is reliant on housing wealth.
Global Economy
Much like the UK, the US Federal Reserve has paved the way for a reduction in
interest rates in the US. When the Fed cut rates in October it attempted to
downplay hopes of further rate cuts. Since then, Frederic Mishkin, one of the
Governors, has argued for more aggressive rate cutting to contain weaker US
spending and growth.
Recent economic data has proved very downbeat. Both industrial production and
retail sales statistics were soft and, although the US economy grew at
approximately 5% in the third quarter (quarter on quarter), a significant growth
slowdown in the fourth quarter is likely. The performance of the US is very
important for the UK outlook. Whilst the US only accounts for 14% of UK exports,
against 50% from Eurozone (source: RBS), and other areas, notably Asia, are
increasingly important to UK trade, the US remains a key driver of UK growth. US
companies are also a significant contributor to foreign affiliated earnings for
the UK economy. The Eurozone saw strong GDP growth in the third quarter
following a weak second quarter. Whilst Italian growth was 0.4% down quarter on
quarter, France, Germany and Spain all grew by 0.7%. A slowdown in the fourth
quarter, in line with the UK and US, is likely.
Asia remains the only likely source of global growth. In the past five years
approximately half of world economic growth has come from non-Japan Asia
(source: Mervyn King). As a consequence, the US contribution to this growth has
diminished from approximately one-third at the turn of the century to one
quarter today (source: RBS).
Portfolio
The rate of investment introductions to NFM continues to be strong and quoted
deal flow has been consistent when compared to earlier periods. NFM continues to
benefit from the arrival of Dr Paul Jourdan from First State through receiving
opportunities from Paul's networks and interesting new sources which recognise
that NFM now has a larger pool of capital to invest.
Throughout the period under review equity prices have been extremely volatile
including large cap stocks. Initially, equity values of these stocks fell
sharply, losing 13% of their value. Markets then rallied on the back of the
Federal Reserve's rate cut and the anticipation of the Bank of England
following. The FTSE 100 recently hit a seven year high, indicating that
investors' expectations of earnings remain positive.
The Company has recently made an investment of £45,000 in Vyke. By the quarter
end, £35,000 of profit had been realised whilst retaining a holding worth just
under £130,000. Since the quarter end, the fund has crystallised the remaining
profit in Vyke, and has also realised its holding in Smallbone at a profit.
Bid approaches were received for both Synexus and Fountains, the Synexus bid
materialising at a 20% uplift to cost. Although a disappointment, this is a 150%
improvement on its nadir in September. The fund's largest holding, Vicorp, has
stabilised, following intervention by the investment managers at NFM, and the
business is expected to breakeven in the second half of this year before moving
into profit.
The net asset value of Noble Income & Growth at 31 October 2007 was 86.25p. This
represents a decline of 4.0% over the NAV at the end of April 2007 (the end of
the previous reporting period). Over the same period, the FTSE AIM All-Share
index fell 2.6%, however, this would have been far worse had it not been for a
very buoyant basic resources sector up 35.7% and a resilient oil & gas sector
which was flat. The portfolio was badly affected by the failure of Aquilo in
which a total of £196,000 was invested. However, the fund performed relatively
well in spite of this significant setback.
The fund remains well diversified, is fully invested and is under no pressure to
do deals unless NFM believes that they will make a material benefit to
performance. The portfolio is still improving in terms of both quality and
liquidity now that it has reached the qualifying threshold. NFM will seek to
enhance this further.
Charles McMicking
Noble Fund Managers Limited
21 December 2007
Unaudited Income Statement
for the six months ended 31 October 2007
Six months ended Six months ended Year ended
31 October 2007 31 October 2006 30 April 2007
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
-------------------------------------------------------------------------------------------------------
Net loss on
investments - (77) (77) - (560) (560) - (99) (99)
Income 29 - 29 15 - 15 51 - 51
Investment
management fees (12) (35) (47) (5) (16) (21) (17) (53) (70)
Other expenses (69) - (69) (91) - (91) (171) - (171)
---------------------------------------------------------------------------------------------------------
Loss on
ordinary
activities
before tax (52) (112) (164) (81) (576) (657) (137) (152) (289)
Tax on
ordinary
activities 7 - - - - - - - - -
---------------------------------------------------------------------------------------------------------
Loss on
ordinary
activities
after tax (52) (112) (164) (81) (576) (657) (137) (152) (289)
---------------------------------------------------------------------------------------------------------
Return per
share 4 (1.14)p (2.44)p (3.58)p (1.77)p (12.57)p (14.34)p (2.99)p (3.32)p (6.31)p
---------------------------------------------------------------------------------------------------------
There have been no other recognised gains or losses in the period.
The total column is the profit & loss account of the Company.
All revenue and capital items derive from continuing operations.
No operations were acquired or discontinued during the period.
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 October 2007
Six months Six months
ended 31 ended 31 Year ended 30
October 2007 October 2006 April 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
--------------------------------------------------------------------------------
Opening
shareholders'
funds 4,116 4,405 4,405
Loss for the
period (164) (657) (289)
--------------------------------------------------------------------------------
Closing
shareholders'
funds 3,952 3,748 4,116
--------------------------------------------------------------------------------
Unaudited Balance Sheet
as at 31 October 2007
As at As at As at
31 October 2007 31 October 2006 30 April 2007
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000 £'000 £'000 £'000
--------------------------------------------------------------------------------
Fixed assets
Investments at
fair value 3,558 3,012 3,079
--------------------------------------------------------------------------------
Current assets
Debtors and
prepayments 50 21 41
Cash at bank 46 80 59
Investments -
liquidity fund 368 701 1,013
--------------------------------------------------------------------------------
464 802 1,113
--------------------------------------------------------------------------------
Creditors:
amounts
falling due (70) (66) (76)
within one year
--------------------------------------------------------------------------------
Net Current
Assets 394 736 1,037
--------------------------------------------------------------------------------
Net Assets 3,952 3,748 4,116
--------------------------------------------------------------------------------
Capital and
Reserves
Called up
equity share
capital 46 46 46
Special
distributable
reserve 4,236 4,236 4,236
Capital
reserve -
realised 655 445 596
Capital
reserve -
unrealised (635) (737) (464)
Revenue account (350) (242) (298)
--------------------------------------------------------------------------------
Total Equity
Shareholders'
Funds 3,952 3,748 4,116
--------------------------------------------------------------------------------
Net Asset
Value per
share 5 86.25p 81.80p 89.83p
--------------------------------------------------------------------------------
The Board confirms that to the best of its knowledge the condensed set of
financial statements which has been prepared in accordance with the applicable
set of accounting standards and in accordance with the Accounting Standard
Board's Statement on Half-yearly Financial Reports (July 2007):
- gives a true and fair view of the assets, liabilities, financial position and
return or loss
- includes an indication of the important events in the six months ended 31
October 2007 and their impact on the condensed set of financial statements
- includes a description of the principal risks and uncertainties for the six
months ending 30 April 2008
- includes related party transactions in the six months ended 31 October 2007
Bert Wiegman
21 December 2007
Unaudited Cash Flow Statement
for the six months ended 31 October 2007
Six months ended Six months ended Year ended
31 October 2007 31 October 2006 30 April 2007
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000 £'000 £'000 £'000
--------------------------------------------------------------------------------
Operating
activities
Investment
income
received 30 4 35
Deposit and
similar
interest
received 1 7 7
Investment
management
fees paid (25) (41) (102)
Other cash
payments (114) (118) (200)
--------------------------------------------------------------------------------
Net cash
outflow from 6 (108) (148) (260)
operating
activities
Taxation
Tax on
ordinary
activities - - (14)
Financial
investment
Sale of
investments 397 831 1,963
Purchase of
investments (947) (812) (1,559)
--------------------------------------------------------------------------------
Net cash
(outflow)/inflow
from financial
investments (550) 19 404
--------------------------------------------------------------------------------
Net cash
(outflow)
/inflow before
financing (658) (129) 130
Financing
Share issue
expenses - (32) -
--------------------------------------------------------------------------------
Net cash
outflow from
financing - (32) -
(Decrease)/inc
rease (658) (161) 130
in cash and cash
equivalents
Opening cash
and cash
equivalents 1,072 942 942
--------------------------------------------------------------------------------
Closing cash
and cash
equivalents 414 781 1,072
--------------------------------------------------------------------------------
Notes to the Accounts (Unaudited)
for the six months ended 31 October 2007
1. The unaudited interim results cover the six months ended 31 October 2007 and
have been drawn up in accordance with the Accounting Standard Board's (ASB)
Statement on Half-yearly Financial Reports (July 2007) adopting the accounting
policies set out in the statutory accounts for the year ended 30 April 2007
which are prepared under UK GAAP and in accordance with the Statement of
Recommended Practice for investment companies issued by the Association of
Investment Companies in January 2003, revised December 2005.
2. The financial information set out in this report has not been audited and
does not comprise full financial statements within the meaning of Section 240,
of the Companies Act 1985. Statutory accounts for the year ended 30 April 2007,
which were unqualified have been lodged with the Registrar of Companies. No
statutory accounts in respect of any period after 30 April 2007 have been
reported on by the Company's auditors or delivered to the Registrar of
Companies.
3. Copies of the Interim Report are being sent to all shareholders. Further
copies are available free of charge from the Company's registered office at 5th
Floor, 120 Old Broad Street, London, EC2N 1AR.
4. The total return per Ordinary share is based on the loss attributable to
Ordinary shareholders for the six months ended 31 October 2007 of £164,000 (31
October 2006: £657,000, 30 April 2007: £289,000) and the weighted average number
of shares in issue during the period of 4,581,852 (31 October 2006: 4,581,852,
30 April 2007: 4,581,852).
5. The net asset value per Ordinary share is calculated on the net assets of
£3,952,000 (31 October 2006: £3,748,000, 30 April 2007: £4,116,000) and the
number of Ordinary shares in issue of 4,581,852 (31 October 2006: 4,581,852, 30
April 2007: 4,581,852).
6. Reconciliation of loss on ordinary activities before tax to net cash outflow
from operating activities
Six months Six months Year ended 30
ended 31 ended 31 April 2007
October 2007 October 2006 (audited)
(unaudited) (unaudited)
£'000 £'000 £'000
--------- --------- ----------
Loss on
ordinary
activities
before tax (164) (657) (289)
Less loss on
investments 77 560 99
Less loan
stock interest
reinvested (2) - -
Increase in
debtors (13) (4) (9)
Decrease in
creditors (6) (47) (61)
--------- --------- ----------
Net cash
outflow from
operating
activities (108) (148) (260)
--------- --------- ----------
7. The effective rate of tax for the six months ended 31 October
2007 is nil due to the utilisation of losses brought forward from previous
years.
8. Related Party Transactions
There were no related party transactions during the period.
Summary of Investments
as at 31 October 2007
------------------------------------------- ------- -------- ----------
Cost Valuation % of Total
Investments
held by % of
portfolio
£ £
------------------------------------------- ------- -------- ----------
Qualifying investments
Adventis Group plc* 57,098 55,411 1.6
ADVFN plc* 61,000 57,421 1.6
ALL IPO plc* 95,154 25,280 0.7
Appian Technology plc* 40,335 33,416 0.9
Aquilo plc* 196,682 - -
Brady plc+ 200,000 96,914 2.7
BrainJuicer Group plc 37,800 61,162 1.7
Brulines Holdings plc* 14,601 16,056 0.5
Business Control Solutions Group plc* 37,700 17,273 0.5
Business Direct Group plc* 5,185 4,103 0.1
Cantono plc (formerly Hamsard Group plc)* 55,000 38,637 1.1
Capcon Holdings plc 196,115 20,384 0.6
Corero plc* 47,075 47,230 1.3
Craneware plc* 33,664 40,568 1.1
Croma Group plc* 250,000 174,960 4.9
The Debt Advisor Group plc* 75,000 - -
Deltex Medical Group plc* 54,500 56,278 1.6
DM plc* 36,032 36,462 1.0
Dowlis Corporate Solutions plc* 50,000 43,402 1.2
Earthport plc* 62,355 139,844 3.9
eXpansys plc* 71,920 73,470 2.1
Fountains plc* 80,000 82,080 2.3
Greatfleet plc* 27,435 16,900 0.5
ID Data Group plc* 25,000 15,600 0.4
IDOX plc* 58,956 81,688 2.3
Immedia Broadcasting plc 71,940 8,012 0.2
Invocas Group plc* 108,780 87,955 2.5
Jelf Group plc* 115,125 308,137 8.7
Maelor plc* 54,219 70,485 2.0
Mattioli Woods plc* 23,716 53,048 1.5
MICAP plc 241,900 96,881 2.7
Mount Engineering plc* 70,000 67,750 1.9
Northern Bear plc* 111,880 135,977 3.8
Optimisa plc* 99,110 125,058 3.5
Pressure Technologies plc* 32,048 47,377 1.3
Shieldtech plc (formerly Base Group plc)* 60,000 58,800 1.7
Smallbone plc 55,750 109,374 3.1
Smart Approach Group plc 180,000 - -
Sprue Aegis plc 200,000 136,000 3.8
St Helens Capital plc 49,248 82,079 2.3
Synexus Clinical Research plc* 50,000 49,808 1.4
Vicorp Group plc* 432,042 315,670 8.9
Vyke Communications plc* 29,445 137,244 3.9
Western & Oriental plc* 202,424 171,751 4.8
Wyatt Group plc 100,000 68,750 1.9
Zenith Hygiene Group plc* 60,000 27,150 0.8
Zoo Digital Group plc* 70,000 69,595 2.0
------------------------- ------- -------- ----------
Total qualifying investments 4,286,234 3,461,440 97.3
------------------------- ------- -------- ----------
Non-qualifying investments
Brady plc+ 4,818 3,925 0.1
Murgitroyd Group plc* 22,783 23,917 0.7
SQS Software Quality Systems AG* 39,445 39,828 1.1
STM Group plc* 20,000 29,100 0.8
------------------------ -------- -------- ----------
Total non qualifying
investments 87,046 96,770 2.7
------------------------ -------- -------- ----------
Total Investments 4,373,280 3,558,210 100.0
------------------------ -------- -------- ----------
* These investments are also held by other Noble clients
+ Part qualifying holding
This information is provided by RNS
The company news service from the London Stock Exchange