Interim Results
22 Octubre 2003 - 3:01AM
UK Regulatory
Quester VCT 3 plc
Interim statement for the six months ended 31 August 2003
Financial highlights
Per ordinary share (pence) 6 months to 6 months to Year to
31 August 2003 31 August 2002 28 February 2003
Capital values
Net asset value 50.0 63.6 50.8
Share price 41.0 62.5 62.5
Return and dividends
Dividend - - -
Cumulative dividend 1.90 1.90 1.90
Total return* 51.9 65.5 52.7
*Net asset value plus cumulative dividend per share
Highlights from the Chairman's statement and Investment Manager's report
* The most recent half-year has seen some positive signs from companies
within the
venture capital portfolio.
* An increasing proportion of the portfolio's early stage investments have
either achieved
cash flow break even or have improved their prospects of doing so.
* A further �1.4 million was invested from our liquid reserves in ten
existing investments
as part of our planned follow-on investment programme.
Chairman's statement
OVERVIEW
The most recent half-year has seen some positive signs from companies within
the venture
capital portfolio.The improved stock market conditions have resulted in a
recovery of value
in the portfolio of listed equities. However, the lingering effects of the
difficult markets that
prevailed until recently have led us to make further provisions against a
number of
investments.These factors have combined to produce a small reduction in the
Company's net
asset value per share from 50.8 pence at 28 February 2003 to 50.0 pence at 31
August 2003.
As at this date, the Company had net assets of �23.8 million, compared with �
24.2 million
at 28 February 2003.
PORTFOLIO PERFORMANCE
The venture capital portfolio showed a net loss of �1.1 million during the
period reflecting
further provisioning made against ten investments.This was partially offset by
gains of
�903,000 achieved by the listed equity portfolio.
A further �1.4 million was invested from our liquid reserves in ten existing
investments as
part of our planned follow-on investment programme. No new investments are
currently
being sought.
Further details on portfolio performance and valuation are provided in the
Investment
Manager's report.
RESULTS AND DIVIDENDS
The statement of total return for the six months to 31 August 2003 shows a loss
of
�390,000, equivalent to 0.8 pence per share.This loss is almost entirely made
up of capital
items.The Company does not propose to pay an interim dividend.
CONCLUSION
The Investment Manager's report indicates that a large proportion of our
investee companies
have weathered a period of tough general economic conditions and are now more
positive
about their prospects.Whilst the level of continued provisioning remains
disappointing, the
portfolio includes investments that we believe have significant potential for
the future.
David Quysner
Chairman
22 October 2003
Investment manager's report
OVERVIEW
In contrast to the previous two years, when particularly difficult economic
conditions
prevailed, the six months to 31 August 2003 have seen improving stock market
conditions
and some clear signs of improvement in trading and financing conditions for the
majority of
the companies in the portfolio.This has afforded much greater stability for the
portfolio,
although we have had to make some further provisioning. During the period we
have
continued to work closely with the various management teams and provided
further funding
where appropriate.
PERFORMANCE OF THE VENTURE CAPITAL PORTFOLIO
The performance of the unquoted venture capital portfolio is giving some
grounds for
cautious optimism.A number of companies have made positive progress during the
period
and some have closed important further funding rounds or are close to doing so.
Others have
achieved strong sales growth or made sound progress with technological
development.An
increasing proportion of the portfolio's early stage investments have either
achieved cash
flow break even or have improved their prospects of doing so.This reduces their
reliance on
follow-on funding from Quester VCT 3 and the issues of future equity dilution.
However,
several companies still have limited sales revenues and, as such, are often
loss making.
Despite these positive developments, which we believe will lead to improved
values in the
future, we have considered it appropriate to make net additional provisions of
�1.1 million
during the period.
VENTURE CAPITAL INVESTMENTS MADE DURING THE PERIOD
During the six months, Quester VCT 3 has made follow-on investments in ten
companies as
detailed in the table below:
Company Industry sector Investment
�'000
Automatic Parallel Designs Limited Semiconductors 344
REQIO Limited Software 302
Sterix Limited Biotechnology 192
Antenova Limited Communications 125
Elateral Holdings Limited Software 123
Anadigm Limited Semiconductors 121
First Index Group Limited Industrial products and services 81
On Demand Distribution Limited Internet 72
Community Internet Europe Limited Internet 15
Opsys Limited Electronics 9
1,384
LISTED EQUITY AND FIXED INTEREST PORTFOLIOS
The listed equity portfolio has recovered during the half year in line with
equity markets
generally and has recorded unrealised gains of �903,000, equivalent to 18%.This
compares
to an equivalent rise in the FTSE All Share index of 17%. As at 31 August 2003,
the portfolio
was valued at �6.2 million with a cost of �6.6 million. As at 30 September
2003, its
valuation remained unchanged.
There has been continued solid performance from the residual fixed interest
portfolio, which
has been producing an effective yield at an annual rate of approximately 3.8%.
As at
31 August 2003, it was valued at its amortised cost of �1.8 million. It is
probable that this
portfolio will be sold over the next 12 months with the proceeds being utilised
in the
continued funding of existing venture capital investments.
CONCLUSION
We continue to work very closely with many of our portfolio companies to
rebuild value and
improve the prospects for growth.The Company retains a satisfactory level of
liquid assets to
contribute to the further funding of existing portfolio companies.
Although an immediate recovery in the Company's net asset value per share will
not be
achieved, the performance of several companies within the venture capital
portfolio gives
cause for optimism. Our diversified portfolio of young companies has seen a
significant fall
in value over the last few tough years, but, whilst still cautious, we are now
looking ahead to
a recovery in values with much more confidence.
Quester Capital Management Limited
22 October 2003
FUND SUMMARY
AS AT 31 AUGUST 2003
Cost Valuation % of fund
�'000 �'000 by value
Venture capital investments
On Demand Distribution Limited 1,582 1,582 6.6%
Footfall Limited 1,450 1,450 6.1%
Automatic Parallel Designs 1,347 1,347 5.7%
Limited
Anadigm Limited 1,121 1,121 4.7%
First Index Group Limited 1,372 1,029 4.3%
CDC Solutions Limited 1,000 1,000 4.2%
Imagesound Limited 1,000 1,000 4.2%
Sift Group Limited 875 875 3.7%
Reqio Limited 1,865 690 2.9%
Antenova Limited 874 625 2.6%
12,486 10,719 45.0%
Other venture capital 18,396 4,786 20.2%
investments
Total venture capital 30,882 15,505 65.2%
investments
Listed fixed interest 1,849 1,849 7.7%
investments
Listed equity investments 6,626 6,165 25.9%
Total investments 39,357 23,519 98.8%
Cash and other net assets 275 275 1.2%
Net assets 39,632 23,794 100.0%
* AIT Group plc is quoted on the Alternative Investment Market (AIM).
UNAUDITED FINANCIAL STATEMENTS
STATEMENT OF TOTAL RETURN
Incorporating the revenue account of the Company
6 months ended 31 6 months ended 31 Year
August 2003 August 2002 ended 28
February
2003
Revenue Capital Total Revenue Capital Total Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000
Losses on - (234) (234) - (3,924) (3,924) (10,195)
investments
Income 360 - 360 297 - 297 502
Investment (153) (153) (306) (222) (222) (444) (882)
management fee
Other expenses (210) - (210) (214) - (214) (360)
Return on ordinary (3) (387) (390) (139) (4,146) (4,285) (10,935)
activities before
taxation
Tax on ordinary - - - - - - -
activities
Return on ordinary (3) (387) (390) (139) (4,146) (4,285) (10,935)
activities after
taxation
Proposed dividend - - - - - - -
Transfer from (3) (387) (390) (139) (4,146) (4,285) (10,935)
reserves
Return per share - (0.8)p (0.8)p (0.3)p (8.7)p (9.0)p (23.4)p
The revenue column of this statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive 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.
UNAUDITED FINANCIAL STATEMENTS
(continued)
BALANCE SHEET
Note 31 August 31 August 28 February
2003 2002 2003
�'000 �'000 �'000
Fixed assets
Investments 23,519 28,534 22,088
Current assets
Debtors 151 257 152
Cash at bank 230 1,741 2,096
381 1,998 2,248
Creditors: amounts falling due (106) (137) (130)
within one year
Other creditors
Net current assets 275 1,861 2,118
Net assets 23,794 30,395 24,206
Capital and reserves
Called up equity share capital 476 478 476
Share premium 1 2 2 2
Special reserve 1 44,856 44,953 44,878
Capital reserve - realised 1 (12,667) (4,603) (12,267)
- unrealised 1 (8,769) (10,494) (8,782)
Revenue reserve 1 (104) 59 (101)
Total equity shareholders' funds 23,794 30,395 24,206
Net asset value per share 50.0p 63.6p 50.8p
SUMMARISED CASH FLOW STATEMENT
6 months 6 months Year ended
ended ended
28 February
31 August 31 August 2003
2003 2002
�'000 �'000 �'000
Net cash outflow from operating (179) (338) (582)
activities
Net capital expenditure and financial (1,665) (103) 573
investment
Equity dividends paid - (72) (72)
Financing (22) (31) (108)
Decrease in cash for the period (1,866) (544) (189)
Reconciliation of net cashflow to
movement in net funds
Decrease in cash for the period (1,866) (544) (189)
Net funds at the start of the period 2,096 2,285 2,285
Net funds at the end of the period 230 1,741 2,096
Notes to the unaudited financial statements
1. MOVEMENT IN RESERVES
Share Special Capital Capital Revenue
premium � reserve � reserve reserve reserve
'000 '000 realised unrealised
�'000
�'000 �'000
At 1 March 2003 2 44,878 (12,267) (8,782) (101)
Share buy-ins (22) - - -
Transfer to realised - - (277) 277 -
capital reserve
Net loss on realisation of - - 30 - -
investments
Net unrealised loss on - - - (264) -
revaluation of investments
Expenses charged to capital - - (153) - -
reserve
Net loss for the period - - - - (3)
At 31 August 2003 2 44,856 (12,667) (8,769) (104)
2. The financial information contained in this report has been prepared on the
basis of the
accounting policies set out in the Annual Report.
3. The number of shares in issue as at 31 August 2003 was 47,578,825 (31
August
2002: 47,789,943).
4. The calculation of the revenue return per share for the period is based on
the net loss
after tax of �3,000 divided by the weighted average number of shares in issue
during the
period of trading of 47,606,051 ordinary shares of 1p each.
5. The unaudited financial statements set out above do not constitute
statutory accounts
within the meaning of Section 240 of the Companies Act 1985.
6. Copies of the unaudited interim results are expected to be sent to
shareholders on
22 October 2003. Further copies can be obtained from the Company's registered
office.
END