Quester VCT 4 plc
Interim statement for the six months ended 30 April 2006
Financial highlights
Per ordinary share (pence) 30 April 31 October 30 April
2006 2005 2005
Capital values
Net asset value 65.2 61.3 64.4
Share price 54.0 60.0 60.0
Return and dividends
Dividend 1.0* 1.0 1.0
Cumulative dividend 4.9 3.9 3.9
Total return** 70.1 65.2 68.3
*The 2006 interim dividend was paid on 1 March 2006
** Net asset value plus cumulative dividend per share
An investment in Quester VCT 4 plc should be viewed as a high risk, long term
venture capital investment. Shareholders are reminded that a sale of their
shareholding in Quester VCT 4 plc may give rise to a loss of any capital gains
tax deferral granted at the time of their original subscription.
Interim Report
Overview
The Company's net asset value has risen by 3.9p per share to 65.2p over the six
months to 30 April 2006. Total return to shareholders, which takes account of
the interim dividend of 1p per share paid on 1 March 2006, has risen by 4.9p or
7.5% over the same period.
The portfolio has performed much as expected. Net asset value growth achieved
over the period has lagged that seen on the financial markets, which rose
strongly during the period. As the Company's investments are largely unquoted,
net asset value will not generally move in line with quoted markets. However,
during the period increasing business confidence produced a beneficial
environment for many of the companies in which we have invested, which has
helped them develop and grow.
Net assets and dividends
The movement in net assets is summarised in the table below:
�'000 Pence per
share
Net asset value at 31 October 2005 30,992 61.3
Income 194 0.4
Operating expenses (616) (1.2)
Net realised gain on investments 2,083 4.1
Net unrealised gain on investments 753 1.5
Dividend paid, net of amounts reinvested (476) (1.0)
Share buy-backs (496) 0.1
Net asset value at 30 April 2006 32,434 65.2
The most significant event during the period was the cash sale of Footfall
Limited in December 2005, which gave rise to a realised gain of �2million,
equivalent to 4p per share. An interim dividend of 1p per share was declared on
the back of this successful exit. Net assets have also benefited from a net
upwards revaluation of investments of �753,000, or 1.5p per share. Further
information is provided on page 4. The directors do not propose a further
interim dividend.
Venture capital portfolio: realised gains and new investments
During the period, two investments were sold generating proceeds of �3.1million
and �3million was committed to new and follow-on investments.
In addition to the disposal of Footfall Limited, the residual holding of
Loudeye Inc, was sold. The Loudeye investment, which arose from the original
investment in On Demand Distribution Limited, returned an overall profit of �
221,000 on an original cost of �568,000.
This has been an active period in terms of further investment with funds being
committed to five companies new to the portfolio and 11 existing portfolio
investments.
The five new investments are:
�'000
Cluster Seven Limited Software 158
Haemostatix Limited Biotechnology 5
Lectus Therapeutics Limited Biotechnology 53
PanOpSys Limited Diagnostics & devices 56
Perpetuum Limited Electronics 93
365
Other than the investment in Cluster Seven, which is revenue generating, these
investments are all early stage and pre-revenue. The initial investments are
deliberately small and further investment is to be made on an agreed milestone
related basis, the objective being to manage the Company's exposure to these
exciting but early stage, and therefore higher risk, investments.
Cluster Seven develops and sells enterprise spreadsheet management software.
The company's products provide control over spreadsheets being used in mission
critical environments. In the current regulatory environment, the control of
spreadsheets is paramount and there is a substantial potential global market
for Cluster Seven's products. The company has built an impressive client base,
principally in the major financial centres of London and New York.
Haemostatix is a drug discovery company concentrating on the development of an
alternative to blood platelet transfusion. The company's product, HaemoPlax(tm),
represents a new type of treatment that is potentially safer and easier to use
than the current therapy, with a significant saving in ancillary treatments
costs. This was a small initial investment; subsequent to 30 April, Quester VCT
4 together with the investment syndicate provided further planned funding to
Haemostatix, which had successfully achieved its initial scientific milestones.
Lectus Therapeutics specialises in the discovery and development of novel drugs
(ion channel modulators) for diseases associated with pain management, urinary
incontinence and angina, offering important clinical and economic advantages
over existing therapies in this growing market. The company raised �8.2million
in its first institutional round of venture capital funding (Series A) which
Quester co-led alongside a leading French venture capital firm, Sofinnova, and
the two largest Japanese pharmaceutical firms, Takeda and Astellas.
PanOpSys is a medical diagnostics company focusing on the provision of fast,
simple point-of-care diagnostics. Early diagnosis converts into substantial
savings for healthcare providers and point-of-care testing is the fastest
growing market sector in diagnostics. The company recently raised �3million in
a Series A funding led by Quester and is at an exciting stage in the
optimisation and commercialisation of its patented piezofilm technology.
Perpetuum produces electromechanical vibration energy harvesting
micro-generators to power wireless sensor nodes, eliminating the need for hard
wiring or batteries. This technology addresses the growing and substantial
market for wireless sensor systems, which are used for a wide range of
applications.
The majority of these new investments are shared with Quester's institutional
fund, the Quester Venture Partnership. Several have also been seed funded by
the Quester managed university linked funds, as part of Quester's proactive
deal sourcing strategy.
The Board has decided that no new companies should be added to the venture
capital portfolio for the time being. This reflects the existing diversity of
the venture capital portfolio of 38 investments and the fact that the Company's
remaining liquid assets are currently scheduled to provide further funding to
this portfolio. This situation will be kept under regular review and is likely
to change, particularly when cash proceeds are received on the future disposal
of investments.
�2.6million was invested as part of the planned further funding of 11 existing
companies in the portfolio, as below:
�'000
Advanced Valve Technologies Limited Industrial products & services 258
Identum Limited Software 714
Azea Networks, Inc. Communications 376
Celona Technologies Limited Software 357
Nomad Software Limited Software 190
Teraview Limited Diagnostics & devices 197
Workshare Limited Software 393
Others - 132
2,617
Venture capital portfolio: valuation changes
Overall, the value of the venture capital portfolio has fallen over the period
by �324,000.
The largest individual valuation gain was seen on the now quoted investment in
Cyclacel Pharmaceuticals, Inc.. This company was formed on the merger of
Cyclacel Limited with Xcyte Therapies, Inc. to form a larger international
biopharmaceutical company with a franchise in one of the most exciting fields
of biology and with a development-stage portfolio of targeted oncology drug
candidates affecting the cancer cell cycle. The investment is now valued at its
market price, which has resulted in an uplift in its carrying value of �
149,000.
The quoted investment in Public Recruitment Group plc fell in value by �162,000
in autumn 2005 although recent news flow has, however, been more positive.
Avidex Limited, an Oxford based biotechnology company, secured further funding
via a significant investment from a new trade partner, Syngenta. This funding
will take the company through to the next stage of its development and
demonstrates the progress made with its science, although the fair value of the
investment has been reduced by �290,000 to reflect the pricing of this third
party investment. This valuation change reflects current valuation trends
across the biotechnology sector generally, as opposed to specific performance
issues with the business itself.
The valuation of the investment in Teraview was reduced by �108,000 back to
cost based on the pricing of the last round of equity financing.
Listed equity portfolio
The listed equity portfolio, which was showing an unrealised profit of �
1,877,000 as at 30 April 2006, has performed well and has generated a total
return over the six months of �1,172,000.
Outlook
Progress has been made by the portfolio and we were pleased with the profit
generated from the sale of Footfall, which serves to demonstrate the ability of
companies in the portfolio to deliver good returns. We believe that this
potential value will become increasingly apparent as the portfolio matures.
12 July 2006
Fund summary
as at 30 April 2006
Industry Sector Original Valuation Equity % % of
Cost �'000 held fund
�'000 by
value
Quoted venture capital
investments
Allergy Therapeutics plc Biotechnology 500 784 1.1% 2.4%
Celoxica Holdings plc Software 1,315 716 3.7% 2.2%
Cyclacel Pharmaceuticals, Biotechnology 1,000 399 0.5% 1.2%
Inc.
Genosis plc Diagnostics & 111 73 0.9% 0.2%
devices
Polaron plc Industrial 250 110 1.2% 0.3%
products &
services
Portrait Software plc Software 1,130 379 5.0% 1.2%
Public Recruitment Group plc Industrial 250 51 0.8% 0.2%
products &
services
Quadnetics Group plc Electronics 143 127 0.5% 0.4%
Total quoted venture capital 4,699 2,639 8.1%
investments
Unquoted venture capital
investments
Advanced Valve Technologies Industrial 1,730 1,032 30.6% 3.2%
Limited Products &
Services
Antenova Limited Communications 1,254 1,005 5.4% 3.1%
Anthropics Technology Communications 95 25 7.0% 0.1%
Limited
Arithmatica Limited Semiconductors 429 429 13.7% 1.3%
Avidex Limited Biotechnology 1,144 525 2.6% 1.6%
Azea Networks, Inc. Communications 2,140 2,140 7.9% 6.6%
Celona Technologies Limited Software 1,023 1,023 13.6% 3.2%
Cluster Seven Limited Software 158 158 2.0% 0.5%
De Novo Pharmaceuticals Diagnostics & 803 176 3.0% 0.5%
Limited devices
Elateral Holdings Limited Software 655 155 13.7% 0.5%
Global Silicon Limited Semiconductors 67 67 0.8% 0.2%
Haemostatix Limited Biotechnology 5 5 0.6% 0.0%
HTC Healthcare Group plc Consumer 714 425 8.7% 1.3%
services
Identum Limited Software 980 980 13.7% 3.0%
Lectus Therapeutics Limited Biotechnology 53 53 1.5% 0.1%
Level Four Software Limited Software 68 68 0.7% 0.2%
Lorantis Holdings Limited Biotechnology 1,400 1,025 2.7% 3.2%
Mesophotonics Limited Electronics 893 670 7.4% 2.1%
Nexagent Limited Software 1,537 1,458 5.8% 4.5%
Nomad Software Limited Software 1,402 832 7.5% 2.6%
Opsys Management Limited Electronics 288 72 3.5% 0.2%
Oxford Immunotec Limited Diagnostics & 1,339 1,556 9.3% 4.8%
devices
Oxxon Therapeutics Holdings, Biotechnology 985 492 3.5% 1.5%
Inc.
PanOpSys Limited Diagnostics & 56 56 2.1% 0.2%
devices
Pelikon Limited Hardware 69 69 0.5% 0.2%
Perpetuum Limited Electronics 93 93 1.7% 0.3%
Sift Group Limited Internet 917 698 6.2% 2.2%
TeraView Limited Diagnostics & 947 947 5.4% 2.9%
devices
Workshare Limited Software 1,532 1,632 6.8% 5.0%
Xention Discovery Limited Biotechnology 750 825 5.1% 2.5%
Total unquoted venture 23,526 18,691 57.6%
capital investments
Total venture capital 28,225 21,330 65.7%
investments
Listed equity investments 5,092 6,969 21.5%
Total investments 33,317 28,299 87.2%
Cash and other net assets 4,135 4,135 12.8%
Net assets 37,452 32,434 100.0%
Unaudited financial statements
Profit and loss account
Note 6 months 6 months Year ended
ended 30 ended 30 31 October
April 2006 April 2005 2005
Total �'000 Total �'000 Total �'000
Net gains/(losses) on fair value 2,836 (811) (2,141)
through profit or loss on
investments
Income 194 211 437
Investment management fee (398) (429) (847)
Other expenses (215) (188) (324)
Profit/(loss) on operating 2,417 (1,217) (2,875)
activities
Interest payable on loan notes (3) (3) (5)
Profit/(loss) on ordinary 2,414 (1,220) (2,880)
activities before taxation
Tax on ordinary activities - - -
Profit/(loss) on ordinary 2,414 (1,220) (2,880)
activities after taxation
Basic and diluted profit/(loss) 3 4.8p (2.4)p (5.6)p
per share
Statement of historical cost profits and losses
6 months 6 months Year ended
ended 30 ended 30 31 October
April 2006 April 2005 2005
�'000 �'000 �'000
Profit/(loss) on ordinary activities 2,414 (1,220) (2,880)
before taxation
Realisation of prior years' net 120 (4,010) (3,722)
unrealised gains/(losses) on investments
Historical cost profit/(loss) on 2,534 (5,230) (6,602)
ordinary activities before taxation
Historical cost profit/(loss) for the 2,534 (5,230) (6,602)
period
All 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.
Balance sheet
Note 30 April 31 October 30 April
2006 2005 2005
�'000 �'000 �'000
Fixed assets
Investments 28,299 25,474 25,301
Current assets
Debtors 183 337 362
Cash at bank 4,382 5,641 7,943
4,565 5,978 8,305
Creditors (amounts falling due within one (330) (360) (402)
year)
Net current assets 4,235 5,618 7,903
Creditors (amounts falling due in over one (100) (100) (100)
year)
Net assets 32,434 30,992 33,104
Share capital and reserves
Called-up equity share capital 497 506 514
Capital redemption reserve 35 26 -
Share premium account 310 285 284
Special reserve 34,437 34,969 35,820
Fair value reserve (5,019) (5,652) (3,983)
Profit and loss account 2,174 858 469
Total equity shareholders' funds 32,434 30,992 33,104
Net asset value per share 65.2p 61.3p 64.4p
Summarised cash flow statement
6 months 6 months Year ended
ended 30 ended 30 31 October
April 2006 April 2005 2005
�'000 �'000 �'000
Cash outflow from operating (260) (147) (494)
activities
Net capital expenditure and financial (27) (179) (1,682)
investment
Equity dividends paid (501) (521) (521)
Buy-back of ordinary shares (496) (463) (915)
Issue of shares under the dividend 25 68 68
reinvestment scheme
Decrease in cash for the period (1,259) (1,242) (3,544)
Reconciliation of net cash flow to
movement in net funds
Decrease in cash for the period (1,259) (1,242) (3,544)
Net cash at the start of the period 5,641 9,185 9,185
Net cash at the end of the period 4,382 7,943 5,641
Reconciliation of movement in shareholders' funds
Share Capital Share Special Fair Profit
capital redemption premium reserve value and loss
reserve account reserve account
�'000 �'000 �'000 �'000 �'000 �'000
At 1 November 2005 506 26 285 34,969 (5,652) 858
Shares purchased for (9) 9 - (496) - -
cancellation
Shares issued under the terms - - 25 - - -
of the dividend reinvestment
scheme
Transfer of net unrealised - - - - 753 (753)
gain on revaluation of
investments to fair value
reserve
Realisation of prior years' - - - - (120) 120
net unrealised gains on
investments
Transfer from special reserve - - - (36) - 36
to profit and loss account
Dividends paid (note 2) - - - - - (501)
Profit on ordinary activities - - - - - 2,414
after taxation
At 30 April 2006 497 35 310 34,437 (5,019) 2,174
Notes to the unaudited financial statements
1. This Interim Report has been prepared using new accounting standards, which
have been issued to begin the process of converging UK standards with
International Financial Reporting Standards ("IFRS"). The relevant standards
are FRS 25 Financial Instruments: Disclosure and Presentation and FRS 26
Financial instruments: Measurement. These standards have been adopted by the
Company with effect from 1 November 2005.
Listed investments actively traded in organised financial markets are valued at
fair value which is generally determined by reference to Stock Exchange quoted
market bid prices at the close of business on the balance sheet date.
Previously all listed investments were valued with reference to closing
mid-market prices at the balance sheet date. The effect of this change in
accounting policy on the net asset value of the Company as at 30 April 2006 has
been to reduce it by �51,000. The comparative figures have not been restated as
the impact is immaterial.
In addition, transaction costs incurred on the purchase and sale of investments
are now charged through the Profit and Loss Account in the period in which they
are incurred instead of being included within the cost of the investment or
deducted from the proceeds of a sale. The effect of this change in accounting
policy has been to decrease profit on ordinary activities after tax by �6,900
although the overall impact is net asset value neutral. The comparative figures
have not been restated as the impact is immaterial.
2. On 10 January 2006 the directors resolved to pay an interim dividend of 1p
per share. This was paid on 1 March 2006.
3. The calculation of the profit per share for the period is based on the net
profit after taxation of �2,414,000 divided by the weighted average number of
shares in issue during the period of 50,341,560.
4. The unaudited financial statements set out above do not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985.
5. Copies of the unaudited interim results are expected to be sent to
shareholders on 13 July 2006. 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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