Active Cap Trust Plc - Half Yearly Report

To: RNS

From: Active Capital Trust plc

Date: 20 January 2012

Active Capital Trust plc

Half-Yearly Financial Report for the six months ended 30 November (Stuttgart: A0Z24E - news) 2011

Chairman's Statement

I am pleased to report on the progress made by the Company over the six month period to 30 November 2011. This period was not good for UK equity markets and the small companies sector in particular. The FTSE AIM index fell by 21.8% over this period and the FTSE Small Cap Index (Ex Investment Companies) fell by almost as much with a 19.3% loss. Against this background, it is pleasing to note that the portfolio performed well with Net Asset Value per share posting a positive result by increasing from 20.23 pence to 22.02 pence, an increase of 8.9% over the period representing outperformance of the AIM Index of over 30%.

Portfolio Update

The Company is undertaking an orderly realisation of assets with a view of maximising the value of realisations on behalf of shareholders. The progress of the largest investments are discussed in some detail below, together with their values at the period end:

AI Claims Solutions (LSE: ACS.L - news)

Value £3,815,000 33.6% of portfolio

The year to 30 June 2011 saw AI increase revenues by 28% to £118 million and achieved record adjusted profits of £3.8 million. The current economic environment is having an impact on AI with motor accident frequencies being below historic levels and average vehicle hire periods being down. This has resulted in market expectations for the profits for the current year being reduced to £3 million. AI has positioned itself as an ethical supplier of services to the motor claims market and the strategy of seeking to keep claim costs to a minimum has resulted in the company being able to achieve significantly better payment terms than the sector average and has recently announced a further block settlement from a group of insurers which amounted to £5 million with no diminution in the carrying value of this debtor book.

The sector in which the Company operates is coming under increased scrutiny from Government as a result of the high costs of motor insurance and commissions paid to insurers for personal injury claims and other motor related claims. The Company's Investment Manager believe that the basis on which AI operates places them in an interesting and strategically valuable position within this sector as AI is delivering a service that keeps the costs of claims to a minimum.

AorTech International

Value £ 2,566,000 22.8% of portfolio

This holding has performed very well over the period, more than doubling in value to now be the second largest holding in the portfolio. The increase in value has been driven by the company relocating its operations from Australia to the Rogers (Berlin: RG6.BE - news) / Minneapolis area of North America. This move has brought the company close to its existing and potential customer base and should improve the commercial opportunities for the company.

Another important development has been in reaching agreement to re-acquire the Intellectual Property ("IP") rights to the company's polymer heart valve. The interim results recorded a profit for the company and an improved cash position. The benefits of AorTech's technology was recognised by a broker's research note upgrading St Jude, a major US medical devices company, as a result of the significant improvement in heart pacemaker leads insulated with AorTech's material. The potential realisation value of AorTech will be based on the value of its IP portfolio rather than traditional discounted cash flow or price earnings ratio valuation bases and the Board of AorTech recognises that this IP will be of increasing interest to other medical companies.

Cambridge Sensors

Value £2,150,000 19.0% of portfolio

Trading at Cambridge Sensors, the largest unquoted holding, is in line with budget for the current year. A number of positive developments are currently under way including the company taking over control of their US distribution from the previous distributor.

This company has now recruited a direct sales force which will sell direct to the customer base and enable the supply of not only the glucose sensors but also related consumables such as lancets and disinfection wipes. This is a major step forward and will improve margins and add to shareholder value in moving the US business from being a pure sensor company into a broader diabetes company.

In the UK, further primary care trusts have been added and the penetration has increased. The business is built on the number of patients using the CSL (Other OTC: CMXHF.PK - news) meters and strips and from a standing start only a year or so ago, the monthly distribution of meters is increasing positively. At the start of the current financial year, some 400 meters were being issued and this has now broken through the 1,000 mark, meter issuance is forecast to increase to 5,000 per month by the end of 2012. As meter issue increases this acts as a drag on profits as meters are issued free of charge however payback is fairly fast and strip sales are generating attractive margins.

The strategy of moving all production into non-coded strips is continuing and the technical problems would appear to have been resolved and the next generation of meter is now with the manufacturer for development.

Cash remains strong and the company has sufficient internal resources to pursue the current development plans.

In the report to shareholders the company stated that it was open to offers for a trade sale and opportunities in this area will become an increasing area of focus of the Board as the business continues to meet its targets.

IS Solutions (LSE: ISL.L - news)

Value £1,300,000 11.5% of portfolio

The interim results for IS Solutions were positive with a significant growth in recurring revenues and operating profits up by some 44%.

The strategic move into web analytics is showing ongoing strength given the relationship with SAS (Xetra: A1C0DX - news) and the investment in Celebrus (formerly Speed-Trap), this and strong order book suggests that market expectations for the current full year should be achieved.

Directors have been ongoing buyers of the company's shares over the past few months indicating their belief in the prospects for the company.

Netcall (LSE: NET.L - news)

Value £1,300,000 6.9% of portfolio

Results for the year to June 2011 met with market expectations with EBITDA increased by 156% to £2.75m. Importantly, the cost savings from the acquisition which were anticipated to amount to £1.5m have been exceeded and cash generation was strong at £2.2m resulting in a net cash position at the year end of just under £6 million representing just over one quarter of the current market capitalisation of the company.

The company is utilising the excess cash by commencing dividend payments and has started a fairly aggressive share buyback programme with just over one per cent of the company's shares having been purchased in the quarter to December. We have recently seen a response to both the positive trading and share buyback activity with the share price progressing towards our target for this company. The Investment Manager has taken advantage of this and has started selling the holding after the period end.

Taken together, these holdings represent some 94% of the portfolio.

Realisation Progress and Plans

The change in strategy for Active Capital to become a realisation vehicle for shareholders was undertaken in August 2009. At that date, the net asset value per share was 51 pence and to date, 49 pence per share has been distributed which together with the current portfolio value of 22 pence represents growth of some 40%. Over the same period, the AIM index has increased by around 17% despite the significant drop experienced over the last six months. This indicates the value added by the strategy of exiting our investments at target values based on fundamental analysis of the value of each underlying company. The Company's Investment Manager believe that there remains significant potential for further asset value growth from the portfolio and this is based on specific exit planning strategies based on deep knowledge of the underlying business plans of each portfolio company. The Investment Manager continues to work towards achieving these realisations within the anticipated timetables agreed with shareholders.

Jon Pither

Chairman

For further information contact:

Bill Brown/Robert Mitchell

Investment Manager

Bluehone Investors LLP 020 7831 5088

Derek Osborne

Company Secretary

F∓C Asset Management plc 0207 628 8000

Unaudited Income Statement

The total column of this statement is the Profit and Loss Account of the Company. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies

Unaudited Income Statement

Audited Income Statement

Unaudited Balance Sheets

Unaudited Reconciliation of Movements of Shareholders' Funds

Summarised Unaudited Statement of Cash Flows

Principal Risks and Uncertainties

The Company's assets consist mainly of listed and quoted securities and its principal risks are therefore market related. The portfolio also includes unquoted securities representing 25% of assets at 30 November 2011. Other risks faced by the Company include liquidity, external, investment and strategic, regulatory, operational, and financial risks.

These risks, and the way in which they are managed, are described in more detail under the heading Principal Risks and Risk Management within the Business Review in the Company's Annual Report for the year ended 31 May 2011. The Company's principal risks and uncertainties have not changed since the date of that report.

Statement of Directors' Responsibilities in Respect of the Interim Report

We confirm that to the best of our knowledge:

· the financial statements have been prepared in accordance with the Statement 'Half-Yearly Financial Reports' issued by the UK Accounting Standards Board and give a true and fair view of the assets, liabilities, financial position and return of the Company;

· the Chairman's Statement (constituting the Interim Management Report) together with the Statement of Principal Risks and Uncertainties above include a fair review of the information required by the Disclosure and Transparency Rules ("DTR (SNP: ^DTRY - news) ") 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

· the financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board,

Jon Pither

Director

Notes

1.

The unaudited interim results cover the period for the six months ended 30 November 2011 and have been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year ended 31 May 2011 and have been prepared on a break-up basis.

The annual financial statements of the Company are prepared in accordance with United Kingdom Generally Accepted Accounting Practice. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the Accounting Standards Board Statement "Half-Yearly Financial Reports" and in accordance with guidelines set out in the Statement of Recommended Practice issued in January 2009 for Investment Trusts and Venture Capital Trusts, issued by the Association of Investment Companies.

2.

Earnings for the six months to 30 November 2011 should not be taken as a guide to the results for the full year.

3.

Return per ordinary share is based on a weighted average of 51,437,364 ordinary shares in issue (31 May 2011 and 30 November 2010 - same).

4.

Net asset value per share is based on 51,437,364 (31 May 2011 and 30 November 2010 - same) ordinary shares in issue.

5.

Investment Management Fee

The realisation fee is at the rate of 1.0 per cent. In respect of the net proceeds realised on the sale of investments during the 12 month period ended 30 June 2010, of which 40 per cent. of such fee will be payable on receipt by the Company of the net proceeds and 60 per cent. will be accrued and will only become payable if and when at least 47 pence each per share has been returned to shareholders. The realisation fee has now been paid in full as a total of 49 pence per share has been returned to shareholders.

An accrual has been made for the equity appreciation fee. The equity appreciation fee is equal to 5 per cent. of any value returned to shareholders in excess of a hurdle return (and, for this purpose, the hurdle return will be an amount equal to 52p per share as increased at the rate of 7.5 per cent. per annum with effect from 1 July 2009, such increase to be compounded daily) which will only become payable when at least the hurdle return has been returned to shareholders. As at 30 November 2011 the hurdle return, after allowing for returns of capital already made to shareholders of 49 pence per share, was 7.15 pence per share.

6. The results for the half-year ended 30 November 2011 and 30 November 2010, which have not been audited or reviewed by auditors, constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 May 2011, which received an unqualified audit report, have been lodged with the Registrar of Companies. The Half-Yearly Financial Report is available at the Company's website address, www.activecapitaltrust.co.uk.