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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Ortus Vct | LSE:ORT | London | Ordinary Share | GB0003945101 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 25.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMORT
RNS Number : 9577H
Ortus VCT PLC
06 June 2011
Ortus VCT PLC
Annual Financial Report for the year ended 28 February 2011
Chairman's Statement
The Board's decision to change the investment strategy and appoint a new investment manager in December 2006 was a watershed for the Company and it is worthwhile reviewing progress against our strategy from that point.
In December 2006, the Company was fully invested in a portfolio with an over-concentration in a small number of companies and had no cash available for further investment and diversification. There was a clear need to:
-- achieve a better balance between revenue and expenditure
-- eliminate borrowings and generate cash for new investment
-- diversify the asset base into a new, more broadly based portfolio of better quality investments
-- dispose of several investments from the old portfolio in order to raise cash for investment in new income producing assets.
Since that time, costs have been controlled and revenue generation improved; all borrowings have been paid off; the Manager has built a new private equity portfolio of 17 revenue-generating growth investments; and the legacy assets have been managed to prepare them for sale at best value, some of them having already been sold in order to generate cash for new investment. In 2009, the Company merged with Gateway, which was too small to be run economically, and created scale while providing further cash to continue the new investment strategy.
The table below shows how the balance sheet has been improved and re-balanced towards the new private equity (PE) portfolio.
28 February 2007 28 February 2011 ------------------ ----------------- ----------------- GBP'000 GBP'000 ------------------ ----------------- ----------------- NAV 13,440 14,502 ------------------ ----------------- ----------------- Old PE portfolio 14,642 9,482 ------------------ ----------------- ----------------- Ex-Gateway - 692 ------------------ ----------------- ----------------- AIM 213 886 ------------------ ----------------- ----------------- Cash 303 628 ------------------ ----------------- ----------------- Borrowings 874 - ------------------ ----------------- ----------------- New PE portfolio - 2,913 ------------------ ----------------- -----------------
The year under review saw a continuation of the strategy set out in 2007. The most significant event during the year was the disposal of LG & DE Limited, a substantial holding in the old private equity portfolio. LG & DE had been acquired in 2000 and had underperformed over many years, despite strong market fundamentals. After consultation with the Board, the Manager took the opportunity to sell this investment at a discount to carrying value in order to release cash to enable Ortus to continue to build the new private equity portfolio, which continues to increase in value.
The key points to note for the year under review are:
-- NAV of 40.2p per share compared with 42.7p at 28 February 2010
-- disposal of LG & DE Limited, one of the largest old portfolio holdings, resulting in a 3.0p per share reduction of NAV
-- uplift in NAV 0.7p across the new private company investments made by the Manager
-- five new investments completed in private company assets capable of generating an immediate paid yield, with a further substantial investment completed post year end
-- continued improvement in the level of revenues generated by the Company.
Performance
The overall reduction in net asset value (NAV) of the Company to 40.2p per share at 28 February 2011 from 42.7p (at 28 February 2010) was due largely to the above-mentioned impact of the valuation change in LG & DE Limited prior to its disposal, which concluded following the year end in March 2011.
This loss was partially offset by the uplift in the NAV across the new investments that have been added to the portfolio in recent years, and the overall effect has been to reduce the portfolio concentration in a
small number of large non-yielding legacy holdings.
There is also an improving trend in underlying revenues for the Company and it is encouraging to note that for the first time income before bad debt charges now covers the operating expenses of the fund.
Portfolio Developments
The board is pleased to note that five investments in mature, income-generating private companies were added to the new private equity portfolio during the year, and a further new investment was completed shortly after the year end. Your Company has participated in all private equity transactions completed by the Manager during the financial year under review and now has 17 new investments, in line with the strategy of re-structuring the portfolio. Each of these businesses has little or no third party debt and is expected to generate high levels of income throughout the holding period of investment.
The new private equity portfolio is generally performing well, with most companies trading at or above plan. The Manager also reports encouraging levels of interest from potential trade and private equity buyers for several portfolio companies, which may in due course lead to profitable realisations and improve the liquidity available to the Company for further investments and possible future distributions in due course. However, there can be no guarantee that these transactions will ultimately complete and they are not reflected in the valuations of the investments in the new private equity portfolio at present. A more detailed review of these developments and of the performance of the portfolio is given in the Investment Manager's Review.
Details of all investments and divestments during the course of the year are shown in the tables on pages 9 and 10.
Valuation Process
Investments in unquoted companies are valued in accordance with the International Private Equity and Venture Capital Association Guidelines. In contrast with most of the investments in the new private equity portfolio, the three largest investments in the old portfolio are valued at several times their original cost, reflecting multiples in the relevant market sectors. Investments quoted or traded on a recognised stock exchange, including the Alternative Investment Market (AIM), are valued at their bid price.
VCT Qualifying Status
The VCT qualifying status of your Company is monitored on a continuous basis and I am pleased to confirm that all of the criteria required to maintain VCT status are being met.
Dividends
Whilst the Board is pleased to report an overall increase in the level of investment income, it does not recommend the payment of a dividend until such time as the deficit on the revenue account is reduced and significant surplus cash is available for distribution.
The Company continues to focus on restructuring its portfolio and preserving its limited cash resources so as to be able to participate in all the new investments executed by the Manager.
Principal Risks and Uncertainties
The Board has reviewed the principal risks and uncertainties facing the Company for the financial year. In order to minimise exposure to investment risk, the Company has invested in a broadly-based portfolio of investments in private and AIM/PLUS quoted companies in the United Kingdom.
Recovery of VAT
During the year under review, the Company received and accepted an offer to refund GBP84,881 representing VAT charged on investment management fees paid to Aberdeen Asset Management for the period from December 2006 to 31 August 2008, and this was recognised within the Financial Statements for the year ended 28 February 2010 and allocated to revenue and capital in accordance with the underlying accounting policy. No account has been taken of any interest due on the above amount.
Co-investment Scheme of the Manager
The Manager continued to operate a co-investment scheme during the year, which allows executive members of the Manager to invest alongside the Company. The scheme's nominee company invests in each transaction made by the Company, including follow on investments, and the scheme more closely aligns the interests of the Manager's executives and the Company's shareholders while providing an incentive to enable the Manager to retain the skills and capacity of the investment team in a highly competitive market.
Share Buy-backs
Shareholders will recall that the resolution to approve share buybacks was not approved at the 2010 AGM. The Board is proposing a similar resolution at this year's AGM. A resolution to give the Board the authority to buy back the Company's shares for cancellation in appropriate circumstances is included in the notice of meeting for the AGM. In determining whether it is appropriate to buy back shares for cancellation, the Board has to bear in mind the interests of the Company as a whole and the factors taken into account will include whether the investment portfolio is fully invested and whether it is more useful to use the cash for investment.
The Board is also reviewing the possibility of an "enhanced buyback" which could enable shareholders to sell some of their shares and reinvest the proceeds at a similar price, receiving the 30% initial tax relief on the purchase.
The Board
In line with the Board's policy for development and succession planning, and mindful of the desire to minimise costs, I will be retiring as Chairman following the annual general meeting on 29 June 2011.
I am leaving the board confident in the knowledge that the merger between Guinness Flight and Gateway to create Ortus in 2009 has created a larger company which offers shareholders a platform for recovery in the value of their holdings in the years ahead. The restructuring and expansion of the investment portfolio is now well under way and I believe there is now a clear and credible strategy in place for the future of your Company.
It is proposed that David Potter, who joined the Board in 2005, will succeed me as Chairman. David is an experienced banker and businessman who has held a number of senior executive roles in financial services and in the past twelve years has been an active Chairman and non-executive director of a range of public and private companies. I wish David every success as Chairman. As part of this change in the Board the number of Directors will reduce from five to four, which helps to reduce costs and is more in line with current industry practice.
The Future
Although the year under review saw a slight deterioration in Net Asset Value due to a single large disposal, this masks a continuing improvement in the quality and breadth of the underlying assets. A large and vulnerable asset has been disposed of and cash released to fund future investment needs. Your Board considers, therefore, that the last year has seen further progress towards the recovery of value and that Ortus is now well positioned to continue this positive trend throughout 2011 and beyond.
R F Pierce
Chairman
Investment Manager's Report
Overview
The Manager ('Maven') operates from six UK regional offices in Glasgow, Edinburgh, London, Aberdeen, Manchester and Birmingham and is introduced to a large number of potential transactions every year, mainly from a range of contracts across the corporate finance and business community. In terms of asset selection Maven employs a highly selective process, investing only in private companies which meet strict quality criteria and where access can be gained at attractive entry prices under investment structures which generate income for VCT client funds from the outset. Maven actively avoids businesses that are at an early stage of their development, where the company has significant external borrowings, or where the trading activity is overly reliant on a concentrated customer base or a single product.
Post investment, Maven executives remain closely involved in the strategic direction of each portfolio company, and actively work with the executive management to ensure that the business realises its full potential and ultimately achieves the best possible returns on
exit, normally through a trade sale.
During the year the strength and quality of this approach was recognised by industry professionals. In July 2010 Maven won the BVCA London & Southeast Portfolio Company Management Award for Exit Team of the Year. This award acknowledged the quality of managers in supporting fast growing and innovative companies in the most challenging of economic times.
In November 2010 Maven was named Small Buyout House of the Year 2010 at the unquote British Private Equity Awards, as judged by corporate finance and private equity professionals across the UK and recognising managers who demonstrate strategic vision and consistently high standards across their wider investment activity.
Investment activity
In line with the objective of increasing the size and breadth of the private company portfolio, the Manager has continued to manage the remaining legacy assets with the aim of making disposals for value when appropriate opportunities arise. Notably, in March 2011 Maven negotiated the exit from LG & DE Limited, for consideration of GBP949,000 which represented around 7% of total net assets and was the most vulnerable of the non-yielding legacy investments. This disposal, which followed prolonged discussion with a potential acquirer released funds to allow further investments in yielding later-stage private company investments and importantly results in a
significant reduction in the portfolio concentration in non-yielding assets.
A major factor in the ability of Ortus to participate in new investments is the timing of realisations from the inherited portfolio in order to create liquidity. Although the portfolio holds a number of sizeable legacy investments, which continue to trade profitably, the Manager will maintain its focus on identifying opportunities to realise those assets for value. The realisation of LG & DE Limited illustrates the potential both for achieving significant proceeds for shareholders, and helping with the restructuring of the portfolio such that there is much less concentration in a small range of large assets with no income generating potential.
During the year ended 28 February 2011 the Maven team completed five new private equity investments, alongside six follow-on investments in existing portfolio companies. After the year end Maven completed an investment in a new oil and gas service company.
The following investments have been completed during the year.
Investment -------------------- -------- ------------ ----------- ------------------- cost -------------------- -------- ------------ ----------- ------------------- Investment Date Sector GBP'000 Website -------------------- -------- ------------ ----------- ------------------- Unlisted -------------------- -------- ------------ ----------- ------------------- Atlantic Foods Consumer www.atlanticfoods. Group Limited Oct-10 Goods 167 co.uk -------------------- -------- ------------ ----------- ------------------- Attraction World Basic www.attractionworl Holdings Limited Dec-10 Materials 124 d.com -------------------- -------- ------------ ----------- ------------------- CHS Engineering Basic www.chsservices.co Services Limited Dec-10 Materials 114 m -------------------- -------- ------------ ----------- ------------------- Claven Holdings No website Limited Feb-11 Financials 16 available -------------------- -------- ------------ ----------- ------------------- Countcar Limited (trading as Aberdeen Tool and Rental Holdings Oil and Limited) Oct-10 Gas 19 www.atrgroup.co.uk -------------------- -------- ------------ ----------- ------------------- Flexlife Group Oil and Limited Oct-10 Gas 149 www.flexlife.co.uk -------------------- -------- ------------ ----------- ------------------- Lawrence Recycling & Waste Management Basic www.lawrenceskiphi Limited Dec-10 Materials 36 re.co.uk -------------------- -------- ------------ ----------- ------------------- Lemac No. 1 Limited (trading as John Consumer McGavigan Limited) Dec-10 Goods 40 www.mcgavigan.com -------------------- -------- ------------ ----------- ------------------- TC Communications Basic www.tccommunicatio Holdings Limited May-10 Materials 50 ns.co.uk -------------------- -------- ------------ ----------- ------------------- Venmar Limited (trading as XPD8 Oil and www.xpd8solutions. Solutions Limited) Jun-10 Gas 159 com -------------------- -------- ------------ ----------- ------------------- Basic Vyre Limited Oct-10 Materials 31 -------------------- -------- ------------ ----------- ------------------- Total unlisted investment 905 -------------------------------------------- ----------- -------------------
Ortus co-invested in some or all of the above transactions with other Maven clients, including Maven Income and Growth VCT, Maven Income and Growth 2, Maven Income and Growth VCT 3, Maven Income and Growth VCT 4, Maven Income and Growth 5 (formerly Bluehone AiM VCT2) and Talisman First Venture Capital Trust. The Company is expected to continue to co-invest in new investments, which offers the advantage that in aggregate the VCTs are able to underwrite a wider range and larger size of transaction than would be the case on a stand-alone basis.
In keeping with its proactive approach to portfolio management on behalf of VCT clients, the Manager has continued to work closely with each investee business to ensure that the Company maximises its return from each investment. Interest and dividend income is now being received from a number of new portfolio companies and a number of repayments of loan capital have also been received, helping to drive sustained improved performance for the Company.
Investments in the new private equity portfolio are generally trading well, generating income and increased valuations have been adopted where appropriate.
At the year end, the portfolio stood at 37 unlisted and AIM investments at a total cost of GBP9.3 million.
Portfolio development
The five new yielding private equity investments added to the portfolio during the year were:
-- Venmar, the holding company for XPD8 Solutions, a highly profitable asset integrity business operating in a defensive sub-sector of the energy services industry, providing asset maintenance solutions to a blue-chip international customer base
-- Flexlife Group, an award winning flexible pipe specialist, which employs patented ultrasonic scanning technology to provide subsea asset integrity solutions to energy sector clients as their global market places ever greater emphasis on maintaining critical infrastructure and sustained field production
-- Attraction World Holdings, which offers ticketing solutions to the worldwide travel sector. The business enjoys exclusive trading partnerships with key UK travel organisations and provides travel agents with integrated access into the ticketing systems of major global theme parks
-- CHS Engineering Services, a leading provider of condition monitoring and maintenance services for domestic and international airport terminal operators and major clients in the distribution and materials handling sector
-- John McGavigan, a manufacturer and supplier of decorative assemblies and interior parts to global automotive manufacturers, with a significant share of the Western European market and a strategy to establish a low cost manufacturing operation in China, where it can leverage the overseas experience of its management team to serve the wider Asian markets.
After the year end Maven completed the investment in Glacier Energy Services, a profitable oil and gas service group with two specialist trading subsidiaries, Roberts Pipeline Machining and Wellclad. Roberts designs and manufactures on-site portable cutting machines for blue-chip oil and gas clients, and Wellclad provides weld overlay and cladding services for European offshore and subsea equipment. Glacier will focus on growth within its core UK market as well as promoting its technologies to the international oil and gas market.
Realisations during the financial year
Cost of Value at Gain/(Loss) shares 28 over 28 Date Complete/ disposed February Sales Realised February first partial of 2010 proceeds gain/(loss) 2010 value invested exit GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------- --------- ---------- --------- --------- --------- ------------ ------------ Unlisted ----------- --------- ---------- --------- --------- --------- ------------ ------------ Ashford Colour Press 2002 Partial 56 56 56 - - ----------- --------- ---------- --------- --------- --------- ------------ ------------ Atlantic Foods Group 2010 Partial 48 48 53 5 5 ----------- --------- ---------- --------- --------- --------- ------------ ------------ Jacobs Rimell 2000 Complete 73 160 159 86 (1) ----------- --------- ---------- --------- --------- --------- ------------ ------------ Torridon Capital 2010 Partial 110 110 110 - - ----------- --------- ---------- --------- --------- --------- ------------ ------------ Vyre 2002 Partial 19 19 19 - - ----------- --------- ---------- --------- --------- --------- ------------ ------------ Westway Services 2009 Partial 12 12 12 - - ----------- --------- ---------- --------- --------- --------- ------------ ------------ 318 405 409 91 4 ----------- --------- ---------- --------- --------- --------- ------------ ------------ AIM ----------- --------- ---------- --------- --------- --------- ------------ ------------ Galapagos 2000 Complete 65 100 93 28 (7) ----------- --------- ---------- --------- --------- --------- ------------ ------------ Medigene 2006 Complete 216 177 129 (87) (48) ----------- --------- ---------- --------- --------- --------- ------------ ------------ OPG Power Ventures 2008 Complete 55 46 68 13 22 ----------- --------- ---------- --------- --------- --------- ------------ ------------ Vectura Group 2001 Partial 163 136 122 (41) (14) ----------- --------- ---------- --------- --------- --------- ------------ ------------ 499 459 412 (87) (47) ----------- --------- ---------- --------- --------- --------- ------------ ------------ Total 817 864 821 4 (43) ----------- --------- ---------- --------- --------- --------- ------------ ------------
The realisations table includes repayments of loan stock received from some of the investee companies. A previously unrecognised loss of GBP1,000,000 was realised on the legacy holding Law 2375, which was struck off during the year and is excluded from the figures in the table above.
The Manager successfully recovered GBP159,000 in respect of the final distribution of Jacobs Rimell, a former Gateway holding, which was recognised in the year ended 28 February 2010.
In respect of AIM/PLUS quoted holdings the Manager has continued its policy of structured exits from this part of the portfolio.
Outlook
The Manager will continue with its strategy of increasing the number and breadth of the private company portfolio, with an emphasis on identifying and investing in later-stage private companies with attractive yield characteristics. There is significant demand for this type of asset by providers of alternative capital, and the market for private equity transactions has become more competitive, notwithstanding the shortage of capital available from more traditional sources. The portfolio has seen a significant diversification and improvement over the past three years, and Maven will leverage its UK network and experience to continue to source high quality and income producing assets, diversified across a range of sectors, on behalf of Ortus investors.
Maven Capital Partners UK LLP
Manager
Principal risks and uncertainties
The principal risks facing the Company relate to its investment activities and include market price, interest rates, liquidity and credit.
An explanation of these risks and how they are managed is contained in Note 18 to the financial statements on pages 43 to 45. Additional risks faced by the Company, and the mitigation approach adopted by the Board, are as follows:
(i) Investment objective: the Board's aim is to maximise absolute returns to shareholders while managing risk by ensuring an appropriate diversification of investments.
(ii) Investment policy: inappropriate stock selection leading to underperformance in absolute and relative terms is a risk which the Board mitigates by operating within investment guidelines and regularly monitoring performance against the peer group.
(iii) Discount volatility: due to lack of liquidity in the secondary market, venture capital trust shares tend to trade at discounts to net asset values. When appropriate the Board makes purchases of shares in the market, which can improve liquidity.
(iv) Regulatory risk: the Company operates in a complex regulatory environment and faces a number of related risks. A breach of section 274 of the Income Tax Act 2007 could result in the Company's being subject to capital gains tax on the sale of its investments. A breach of the VCT Regulations could result in the loss of VCT status and consequent loss of tax reliefs currently available to shareholders. A serious breach of other regulations, such as the UKLA Listing Rules and the Companies Act 2006 could lead to suspension from the Stock Exchange and reputational damage. The Board receives quarterly reports from the Manager in order to monitor compliance with regulations.
The Board considers risks and the measures in place to manage them and monitors their management at each meeting.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report, Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the return of the Company for that period. In preparing these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the Annual Report
We confirm that, to the best of our knowledge, the financial statements, prepared in accordance with the applicable set of accounting standards and set out on pages 33 to 45, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the Director's Report, set out on pages 19 to 27, includes a fair review of the developments and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces.
By order of the Board
Maven Capital Partners UK LLP
Secretary
INCOME STATEMENT For the year ended 28 February 2011 Year Year ended 28 ended 28 February February 2011 2010 Notes Revenue Capital Total Revenue Capital Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Losses on investments 8 - (593) (593) - (67) (67) Investment income and deposit interest 2 276 - 276 213 - 213 Investment management fees 3 (76) (229) (305) 34 102 136 Incentive Fees (29) (39) (68) (29) - (29) Finance Costs - - - (5) (16) (21) Other expenses 4 (220) - (220) (166) - (166) --------------- ------ -------- -------- --------- -------- -------- --------- (Loss)/profit on ordinary activities before taxation (49) (861) (910) 47 19 66 Tax on ordinary activities 5 - - - - - - --------------- ------ -------- -------- --------- -------- -------- --------- (Loss)/profit on ordinary activities after taxation (49) (861) (910) 47 19 66 --------------- ------ -------- -------- --------- -------- -------- --------- Earnings per share (pence) 7 (0.1) (0.3) (0.4) 0.1 0.1 0.2 --------------- ------ -------- -------- --------- -------- -------- --------- A Statement of Total Recognised Gains and Losses has not been prepared, as all gains and losses are recognised in the Income Statement. All items in the above statement are derived from continuing operations. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits. The total column of this Statement is the Profit and Loss Account of the Company. Year ended Year ended RECONCILIATION OF MOVEMENTS 28 February 28 February IN SHAREHOLDERS' FUNDS 2011 2010 For the year ended 28 February 2011 Notes GBP'000 GBP'000 -------------------------------- ------ ------------ ------------ Opening Shareholders' funds 15,431 11,209 Total (loss)/profit for year (910) 66 Issue of new shares 13 - 4,493 Merger costs 13 - (135) Repurchase and cancellation of shares 13 - (202) Dividends paid - revenue 6 - - Dividends paid - capital 6 - - Closing Shareholders' funds 14,521 15,431 -------------------------------- ------ ------------ ------------ BALANCE SHEET As at 28 February 2011 28 February 28 February 2011 2010 Notes GBP'000 GBP'000 GBP'000 GBP'000 Investments at fair value through profit or loss 8 13,973 14,482 Current assets Debtors 10 128 259 Cash and overnight deposits 16 628 849 -------------------- ------ ------------ --------- ------------ --------- 756 1,108 Creditors Amounts falling due within one year 11 (208) (159) -------------------- ------ ------------ --------- ------------ --------- Net current assets 548 949 -------------------- ------ ------------ --------- ------------ --------- Net assets 14,521 15,431 -------------------- ------ ------------ --------- ------------ --------- Capital and reserves Called up share capital 12 3,611 3,611 Special reserve 13 24,022 24,022 Share Premium reserve 13 3,261 3,261 Realised capital reserve 13 (20,446) (19,182) Unrealised capital reserve 13 4,722 4,319 Capital redemption reserve 13 455 455 Profit and loss account 13 (1,104) (1,055) Net assets attributable to ordinary shareholders 14,521 15,431 -------------------- ------ ------------ --------- ------------ --------- Net Asset Value per Ordinary share (pence) 14 40.2 42.7 -------------------- ------ ------------ --------- ------------ --------- CASH FLOW STATEMENT For the year ended 28 February 2011 28 February 28 February 2011 2010 Notes GBP'000 GBP'000 GBP'000 GBP'000 Operating activities Investment income received 249 233 Investment management fees paid (181) (392) VAT received in respect of management fees - 216 Secretarial fees paid (22) (43) Directors expenses paid (94) (52) Other cash payments (121) (59) --------------------------- ------- -------- -------- -------- -------- Net cash outflow from operating activities 15 (169) (97) Taxation Corporation tax paid - - --------------------------- ------- -------- -------- -------- -------- - - Financial investment Purchase of investments (873) (409) Sale of investments 821 2,071 --------------------------- ------- -------- -------- -------- -------- Net cash (outflow)/inflow from financial investment (52) 1,662 Equity dividends paid - - --------------------------- ------- -------- -------- -------- -------- Net cash (outflow)/inflow before financing (221) 1,565 Financing Merger cash received - 158 Merger costs - (167) Bank Loan Interest paid - (27) Repurchase of Ordinary shares - (202) --------------------------- ------- -------- -------- -------- -------- Net cash inflow/(outflow) from financing - (238) --------------------------- ------- -------- -------- -------- -------- (Decrease)/increase in cash 16 (221) 1,327 --------------------------- ------- -------- -------- -------- -------- The accompanying Notes are an integral part of the Financial Statements. Notes to the Financial Statements For the year ended 28 February 2011 1 Accounting Policies - UK Generally Accepted Accounting Practice (a) Basis of preparation The Financial Statements have been prepared under the historical cost convention, modified to include the revaluations, eg investments, and in accordance with the Statement of Recommended Practice' Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the SORP) issued in 2005, amended 2009. The disclosures on Going Concern on page 27 of the Directors' Report form part of these financial statements. (b) Income Dividends receivable on equity shares and unit trusts are treated as revenue for the period on an ex-dividend basis. Where no ex-dividend date is available dividends receivable on or before the year end are treated as revenue for the period. Provision is made for any dividends not expected to be received. The fixed returns on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the effective interest rate on the debt securities and shares. Provision is made for any fixed income not expected to be received. Interest receivable from cash and short term deposits and interest payable are accrued to the end of the year. (c) Expenses All expenses are accounted for on an accruals basis and charged to the income statement. Expenses are charged through the revenue account except as follows: - expenses which are incidental to the acquisition and disposal of an investment are charged to capital; and - expenses are charged to realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fee has been allocated 25% to revenue and 75% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth. (d) Taxation Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods. Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. The tax effect of different items of income/gain and expenditure/loss is allocated between capital reserves and revenue account on the same basis as the particular item to which it relates using the Company's effective rate of tax for the period. (e) Investments In valuing unlisted investments the Directors follow the criteria set out below. These procedures comply with the revised International Private Equity and Venture Capital Valuation Guidelines for the valuation of private equity and venture capital investments. Investments are recognised at their trade date and are designated by the Directors as fair value through profit and loss. At subsequent reporting dates, investments are valued at fair value, which represent the Directors' view of the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. This does not assume that the underlying business is saleable at the reporting date or that its current shareholders have an intention to sell their holding in the near future. A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires. 1. For Investments completed within the 12 months prior to the reporting date and those at an early stage in their development, fair value is determined using the Price of Recent Investment Method, except that adjustments are made when there has been a material change in the trading circumstances of the company or a substantial movement in the relevant sector of the stock market. 2. Whenever practical, recent investments will be valued by reference to a material arm's length transaction or a quoted. price. 3. Mature companies are valued by applying a multiple to their fully taxed prospective earnings to determine the enterprise value of the company. 4. Where there is evidence of impairment, a provision may be taken against the previous valuation of the investment. 5. In the absence of evidence of a deterioration, or strong defensible evidence of an increase in value, the fair value is determined to be that reported at the previous balance sheet date. 6. All unlisted investments are valued individually by Maven's Portfolio Management Team. The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company. 7. In accordance with normal market practice, investments listed on the Alternative Investment Market or a recognised stock exchange are valued at their bid market price. Fair value is defined as the price that the Company would receive upon selling an investment in a timely transaction to an independent buyer in the principal or the most advantageous market of the investment. A three-tier hierarchy has been established to maximise the use of observable market data and minimise the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on best information available in the circumstances. The three-tier hierarchy of inputs is summarised in the three board levels listed below. - Level 1 - quoted prices in active markets for identical investments - Level 2 - other significant observable inputs (included quoted prices for similar investments, interest rates, prepayment speeds, credit risk etc). - Level 3 - significant unobservable inputs (including the Company's own assumptions in determining the fair - value of investments). (f) Gains and losses on investments When the Company revalues its investments during the year, any gains or losses arising are credited/charged to the Income Statement. 2 Investment income and deposit Year ended 28 February Year ended 28 February interest 2011 2010 GBP'000 GBP'000 --------------- -------- -------- --------- -------- -------- ---------- Income from investments: UK franked investment income 51 35 UK unfranked investment income 225 176 --------------- -------- -------- --------- -------- -------- ---------- 276 211 Interest receivable and similar income: Other income - 2 --------------- -------- -------- --------- -------- -------- ---------- - 2 Total income 276 213 --------------- -------- -------- --------- -------- -------- ---------- Year Year 3 Investment ended 28 ended 28 management February February fees 2011 2010 Revenue Capital Total Revenue Capital Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------------- -------- -------- --------- -------- -------- ---------- Investment management fees 76 229 305 66 198 264 VAT reimbursement - - - (85) (255) (340) Contribution by manager - - - (15) (45) (60) -------- -------- --------- -------- -------- ---------- 76 229 305 (34) (102) (136) --------------- -------- -------- --------- -------- -------- ---------- Incentive Fees 29 39 68 29 - 29 Total fees 105 268 373 (5) (102) (107) --------------- -------- -------- --------- -------- -------- ----------
Details of the fee basis are contained in the Directors' Report.
As a result of the 2007 European Court of Justice ruling the Company received a VAT refund, including interest, totalling GBP255,000 during the year ended 28 February 2010. On 15 April 2010 the Board received an offer of GBP84,881 from Aberdeen Asset Managers to refund the full VAT charged on management fees for the period from December 2006 to 1 October 2008 and the Directors accepted the offer, subject to reserving the Company's rights in respect of sums unpaid. This has been recognised in the financial statements and is allocated between revenue and capital in the same proportion as irrecoverable VAT was originally charged. Year ended 28 February Year ended 28 February 4 Other expenses 2011 2010 Revenue Capital Total Revenue Capital Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------ -------- -------- -------- -------- -------- -------- Secretarial fees 29 - 29 29 - 29 Directors' remuneration 66 - 66 60 - 60 Fees to auditor - audit services 16 - 16 13 - 13 Fees to auditor - tax services 4 - 4 4 - 4 Professional Fees - - - 11 - 11 Miscellaneous expenses 105 - 105 49 - 49 220 - 220 166 - 166 ------------------ -------- -------- -------- -------- -------- -------- Year Year 5 Tax on ended 28 ended 28 ordinary February February activities 2011 2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Revenue Capital Total Revenue Capital Total Corporation Tax - - - - - - ------------- -------- -------- --------- -------- -------- --------- Factors affecting the tax charge for the year The tax charge for the year shown in the Profit and Loss Account is lower than the standard rate of corporation tax in the UK of 28%. (2010: 28%). The differences are explained below: Year ended 28 February Year ended 28 February 2011 2010 Revenue Capital Total Revenue Capital Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Return on ordinary activities before tax (49) (861) (910) 47 19 66 ------------- -------- -------- --------- -------- -------- --------- Revenue return on ordinary activities multiplied by standard rate of corporation tax (14) (241) (255) 13 5 18 Non taxable UK dividend income (14) - (14) (3) - (3) Losses on investments - 166 166 - 19 19 Movement in excess management expenses 28 75 103 (10) (24) (34) - - - - - - ------------- -------- -------- --------- -------- -------- --------- The Company has not recognised a deferred tax asset of GBP1,300,000 (2010 : GBP1,197,000) arising as a result of having unutilised management expenses. 6 Dividends The Directors have not proposed a dividend for the year ended 28 February 2011 (2010 : GBPnil). Year ended 28 7 Earnings per share February 2010 ------------------------- ------------- --------------- The returns per share have been based on the following figures: Weighted average number of ordinary shares 36,110,992 32,459,216 Revenue return (GBP49,000) GBP47,000 Capital return (GBP861,000) GBP19,000 Total return (GBP910,000) GBP66,000 ------------------------- ------------- --------------- 8 Investments Year ended 28 February 2011 AIM AIM (Quoted (Unobservable Prices) Inputs) Unlisted Total GBP'000 GBP'000 GBP'000 GBP'000 Valuation at 1 March 2010 1,166 - 13,316 14,482 Unrealised loss/(gain) 982 - (5,300) (4,318) ---------------------------- -------- -------------- --------- -------- Cost at 1 March 2010 2,148 - 8,016 10,164 Purchases - - 905 905 Sales (412) - (409) (821) Realised (loss) (87) - (909) (996) ---------------------------- -------- -------------- --------- -------- Cost at 28 February 2011 1,649 - 7,603 9,252 Unrealised (loss)/gain (763) - 5,484 4,721 -------- Valuation at 28 February 2011 886 - 13,087 13,973 ---------------------------- -------- -------------- --------- -------- 28 February 2010 GBP'000 GBP'000 ---------------------------- -------- -------------- ------------------- Realised losses on historical basis (996) (745) Net movement in unrealised loss 403 678 Losses on investments (593) (67) ---------------------------- -------- -------------- --------- -------- During the year GBP32,596 of Vyre interest was capitalised. Note 9 Participating Interests The principal activity of the Company is to select and hold a portfolio of investments in unlisted securities. Although the Company will, in some cases, be represented on the board of the investee company, it will not take a controlling interest or become involved in the management. The size and structure of the companies with unlisted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement. At 28 February 2011 the Company held shares amounting to 20% or more of the equity capital of LG & DE Limited, New Concept, Dalglen (1148) Limited (trading as PSP/AHC) and Vyre Limited. The Company also holds shares amounting to more than 3% or more of the nominal value of the allotted shares or units of any class of certain investee companies. Details of equity percentages held are shown in the Investment Portfolio Summary on page 13. Year ended 28 February 2011 10 Debtors GBP'000 --------------------------- ----------- --------------- ------------ Prepayments and accrued income 128 128 --------------------------- ----------- --------------- ------------ Year ended 28 February 2011 11 Creditors GBP'000 --------------------------- ----------- --------------- ------------ Amounts falling due within one year: Accruals 208 Sundry creditors - 208 --------------------------- ----------- --------------- ------------ Year ended 28 February 2011 12 Share capital Number GBP'000 Number At end February the authorised share capital comprised: allotted, issued and fully paid: Ordinary shares of 10p each Balance brought forward 36,110,992 3,611 27,138,128 Issued during year - - 10,972,864 Repurchased and cancelled in year - - (2,000,000) --------------------------- ----------- --------------- ------------ Balance carried forward 36,110,992 3,611 36,110,992 --------------------------- ----------- --------------- ------------ 13 Movement in reserves Year ended 28 February 2011 Special Share Realised Unrealised Capital Profit Reserve Premium capital capital redemption and loss account Account reserve reserve reserve account GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------- -------- -------- --------- ----------- ----------- ------------- At 1 March 2010 24,022 3,261 (19,182) 4,319 455 (1,055) Loss on sales of investments - - (996) - - - Incentive Fee - - (39) - - - Investment management fees - - (229) - - - Net increase in value of investments - - - 403 - - Dividends paid - - - - - - Loss on ordinary activities after taxation - - - - - (49) At 28 February 2011 24,022 3,261 (20,446) 4,722 455 (1,104) ------------- -------- -------- --------- ----------- ----------- ------------- The special reserve was established on cancellation of the share premium account on 11th June 2001. 14 Net asset value per Ordinary share The net asset value per Ordinary share and the Net Asset Value attributable to the Ordinary shares at the year end calculated in accordance with the Articles of Association were as follows: 28 February 28 February 2011 2010 Net Net asset Net asset asset Net asset value value per value per value share attributable share attributable p GBP'000 p GBP'000 Ordinary shares 40.2 14,521 42.7 15,431 ------------- -------- -------- ---------------------- ----------- ------------- The number of Ordinary shares used in this calculation is set out in note 12. 15 Reconciliation of net return before taxation Year ended Year ended to net cash inflow from operating 28 February 28 February activities 2011 2010 GBP'000 GBP'000 ---------------------- ----------- -------- ------------ ------------ (Loss)/gain on ordinary activities before taxation (910) 66 Loss on investments 593 67 Decrease/(increase) in debtors and prepayments 99 (172) Increase/(decrease) in creditors and accruals 49 (79) Finance costs - 21 Net cash outflow from operating activities (169) (97) ---------------------- ----------- -------- ------------ ------------ 16 Analysis of changes in net funds At At 1 March Cash 28 February 2010 flows 2011 GBP'000 GBP'000 GBP'000 ---------------------- ----------- -------- ------------ ------------ Cash and overnight deposits 849 (221) 628 Net funds 849 (221) 628 ---------------------- ----------- -------- ------------ ------------ At At 1 March Cash 28 February 2009 flows 2010 GBP'000 GBP'000 GBP'000 Cash and overnight deposits 206 643 849 Bank Overdraft (684) 684 - Net funds (478) 1,327 849 ---------------------- ----------- -------- ------------ ------------ 17. Capital commitments, contingencies and financial guarantees There were no capital commitments, contingencies or financial guarantees at 28 February 2011 or at the previous year end. 18 Derivatives and other financial instruments The Company's financial instruments comprise equity and fixed interest investments, cash balances, overnight deposits and debtors and creditors that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company holds financial assets in accordance with its investment policy of investing mainly in a portfolio of VCT-qualifying unquoted and AIM quoted securities. The Company may not enter into derivative transactions in the form of forward foreign currency contracts, futures and options without the written permission of the Directors. It is not the Company's policy to enter into derivative transactions. The purpose of these financial instruments is efficient portfolio management. The main risks the Company faces from its financial instruments are (i) market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency movement, (ii) interest rate risk and (iii) liquidity risk. In line with the Company's investment objective, the portfolio comprises UK securities and therefore has no exposure to foreign currency risk. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures below exclude short-term debtors and creditors which are included in the balance sheet at fair value. (i) Market price risk The Company's investment portfolio is exposed to market price fluctuations, which are monitored by the Manager in pursuance of the investment objective as set out on page 19. Adherence to investment guidelines and to investment and borrowing powers set out in the Management Agreement mitigates the risk of excessive exposure to any particular type of security or issuer and, in particular, no purchase can be made in any one company where this would result in a holding that would exceed 7.5% of the Company's investments at the time the investment is made. These powers and guidelines include the requirement to invest in a number of companies across a range of industrial and service sectors at varying stages of development but with the emphasis on well established businesses. The Company complied with the stated investment guidelines and borrowing powers throughout the year ended 28 February 2011. Further information on the investment portfolio (including sector analysis, concentration and deal type analysis) is set out in the Analysis of Unlisted and AIM/PLUS Portfolio, the Investment Manager's Review, the Summary of Investment Changes, the Investment Portfolio Summary and the Ten Largest Unlisted and AIM Investments. (ii) Interest rate risk 28 February 2011 Sterling ---------------------------- ------------ ------- ------------- Listed - - 886 Unlisted and AIM/PLUS 2,511 - 10,544 Cash - 628 - 2,511 628 11,430 ---------------------------- ------------ ------- ------------- 28 February 2010 Sterling ---------------------------- ------------ ------- ------------- Listed - - 1,166 Unlisted and AIM/PLUS 2,098 - 11,218 Cash - 829 - 2,098 829 12,384 ---------------------------- ------------ ------- ------------- The floating rate assets consist of cash deposits. These assets are earning interest at prevailing money market rates. The unlisted assets have a weighted average life of 2.7 years (2010 - 2.9 years) and a weighted average interest rate of 10.0% (2010 - 9.8%). The non-interest bearing assets represent the equity element of the portfolio. All assets and liabilities of the company are included in the balance sheet at fair value. Maturity profile The maturity profile of the Company's financial assets at the Balance Sheet date was as follows: More Within Within Within Within Within than 1-2 2-3 3-4 4-5 1 year years years years years 5 years Total At 28 February 2011 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------- -------- -------- -------- -------- -------- --------- --------- Fixed Interest Listed - - - - - - - Unlisted 391 239 845 547 448 41 2,511 391 239 845 547 448 41 2,511 ----------- -------- -------- -------- -------- -------- --------- --------- Within "more than 5 years" there is a figure of GBP1,000 (2010: GBP1,000) in respect of preference shares which have no redemption date. It is the Directors' opinion that the carrying amounts of these financial assets represent the maximum credit risk exposure at the balance sheet date. More Within Within Within Within Within than 1-2 2-3 3-4 4-5 1 year years years years years 5 years Total At 28 February 2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------- -------- -------- -------- -------- -------- --------- --------- Fixed Interest Listed - - - - - - - Unlisted 533 - 98 885 581 1 2,098 533 - 98 885 581 1 2,098 ----------- -------- -------- -------- -------- -------- --------- --------- It is the Directors opinion that the carrying amounts of these financial assets represent the maximum credit risk exposure at the balance sheet date. (iii) Liquidity risk Due to their nature, unlisted investments may not be readily realisable and therefore a portfolio of listed assets and cash is held to offset this liquidity risk. Note 8 details the three-tier hierarchy of inputs used as at 28 February 2011 cash is held to offset this liquidity risk in valuing the Company's investments carried at fair value. Credit risk and interest rate risk are minimised by acquiring high quality government treasury stocks or other bonds which have a relatively short time to maturity (see Investment Portfolio Summary) have a relatively short time to maturity (see Investment Portfolio Summary) have a relatively short time to maturity (see Investment Portfolio Summary) have a relatively short time to maturity (see Investment Portfolio Summary). The company, generally, does not hold significant cash balances and any cash held is with reputable banks with high quality external credit ratings. (iv) Credit risk This is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the company. The Company's financial assets exposed to credit risk amounted to the following : 28 28 February February 2011 2010 Total Total GBP'000 GBP'000 Investments in unlisted debt securities 2,511 2,098 Cash and cash equivalents 628 829 3,139 2,927 --------- --------- All fixed interest assets which are traded on a recognised exchange and all the Company's cash balances are held by JP Morgan Chase (JPM), the Company's custodian. Should the credit quality or the financial position of JPM deteriorate significantly the Manager will move these assets to another financial institution. The manager evaluates credit risk on unlisted debt securities and financial commitments and guarantees prior to investment, and as part of the ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. Typically, unlisted debt securities have a fixed charge over the assets of the investee company in order to mitigate the gross credit risk. The manager receives management accounts from investee companies, and members of the investment management team sit on the boards of investee companies; this enables the close identification, monitoring and management of investment specific credit risk. There were no significant concentrations of credit risk to counterparties at 28 February 2011 or 28 February 2010. (v) Price risk sensitivity The following details the Company's sensitivity to a 10% increase or decrease in the market prices of AIM/PLUS quoted securities, with 10% being the Manager's assessment of a reasonable possible change in market prices. At 28 February 2011, if market prices of listed or AIM/PLUS quoted securities had been 10% higher or lower and with all other variables held constant, the increase or decrease in net assets attributable to Ordinary Shareholders for the year would have been GBP89,000 (2010: GBP117,000) due to the change on valuation of financial assets at fair value through profit.
Other information
The financial information contained within this Announcement does not constitute the Company's statutory financial statements for the year ended 28 February 2011 and has not been delivered to the Registrar of Companies. The Annual Report for the year ended 28 February 2011 will be issued to Shareholders and will shortly be available on the Company's website at www.mavencp.com/ortus. This Announcement has been prepared on the same basis as the Annual Report for the year ended 28 February 2010 and the financial information for the year ended 28 February 2010 is derived from the statutory accounts for that period, which have been delivered to the Registrar of Companies and which contained an unqualified audit report.
The Annual General Meeting will be held on 29 June 2010, commencing at 10.00 a.m., at the Company's registered office.
MAVEN CAPITAL PARTNERS UK LLP
SECRETARY
ENDS
Neither the content of the Company's website nor the contents of any website accessible from hyperlinks on the company's website (or any other website) is incorporated into, or forms part of, this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
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