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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Puma Vct 12 Plc | LSE:PU12 | London | Ordinary Share | GB00BYSJJR68 | ORD GBP0.0005 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 24.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMPU12
RNS Number : 5048S
Puma VCT 12 PLC
25 June 2018
HIGHLIGHTS
-- Funds invested in a diverse range of high quality businesses and projects -- Profit of GBP297,000 before tax for the year, a post-tax gain of 0.96p per share
-- Qualifying investments completed in eight new SMEs during the year, representing just under 60% of the fund
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present to you as Chairman the annual report for Puma VCT 12 plc for the year to 28 February 2018, the Company's first full year of investment.
The Company began investing in the summer of 2016, having completed its fund-raising, and has made good progress in 2017/18: it has now deployed a large proportion of its funds in medium-term investments, both qualifying and non-qualifying.
The Investment Manager, Puma Investments, has a well-established, experienced VCT team to manage the Company's deal flow and now has over GBP113 million of VCT money under management in this and other Puma VCTs.
Results
The Company reported a profit before tax of GBP297,000 for the year (2017: GBP370,000 loss) and a post-tax gain of 0.96p per ordinary share (calculated on the weighted average number of shares) (2017: 1.84p loss). The Net Asset Value per ordinary share ("NAV") at 28 February 2018 was 96.34p (2017: 95.38p).
Dividend
In line with the Company's dividend policy as stated in the Prospectus, the Board will propose at the Annual General Meeting a resolution to pay a first dividend of 2p per share. The Company hopes to achieve (although there is no guarantee) an average dividend payment equivalent to 5p per annum (including the 2p 2018 dividend) over the rest of the life of the Fund.
Investments
During the year, the Company completed a series of investments for a total of just over GBP20 million. At the end of the year, the Company had a total of GBP27.97 million invested in a mixture of qualifying and non-qualifying investments. Details of these investments can be found in the Investment Manager's report on pages 3 to 7.
VCT qualifying status
PricewaterhouseCoopers LLP ("PwC") provides the board and the Investment Manager with advice on the ongoing compliance with HMRC rules and regulations concerning VCTs and has reported no issues in this regard for the Company to date. PwC will continue to assist the Investment Manager in establishing the status of potential investments as qualifying holdings, monitoring rule compliance and maintaining the qualifying status of the Company's holdings in the future.
Patient Capital Review and Finance Act 2018
We are pleased that, in its response to the Financing Growth in Innovative Firms Consultation published with the Autumn Budget on 22 November 2017 ("the Patient Capital Review"), the Government has recognised the continuing importance of VCTs in providing much needed investment in SMEs. We note that recently enacted Finance Act 2018 increases VCTs' minimum qualifying investment percentage threshold from 70% to 80% with effect from 6 April 2019. As reported above, the Company has already made substantial advance toward meeting its minimum qualifying investment percentage and we therefore believe that it is on track to meet this revised target in due course.
Outlook
The Company has made good progress. At the time of writing and ahead of the Company's second anniversary of operations, we are pleased that we have deployed a large proportion of the Company's net assets in a mixture of qualifying and non-qualifying investments. These investments have been made in a diverse range of high quality businesses and projects which should offer the prospect of further growth in net assets per share. Moreover, there is a good flow of qualifying opportunities which should lead to further suitable investments. We will continue to update you in due course as investments are completed.
There are many suitable companies which are well-managed, in good market positions and which need our investment. We therefore believe the Company is strongly positioned to continue to assemble a portfolio to deliver attractive returns to shareholders.
Ray Pierce
Chairman
25 June 2018
INVESTMENT MANAGER'S REPORT
Introduction
As set out in the Chairman's Statement, availability of finance continues to be restricted for small and medium sized businesses (SMEs). As a consequence, the Company has been able to make a number of attractive investments, both qualifying and non-qualifying, to smaller companies. We have also continued to see a strong pipeline of potential investments, particularly opportunities to make further qualifying investments to ensure the Company meets its HMRC qualifying target.
Investments
Qualifying Investments
As reported in the Company's previous annual report, the Company had made a GBP294,000 qualifying investment (as part of a GBP2.8 million investment alongside other Puma VCTs) in Growing Fingers Limited, and a further GBP126,000 was invested during the year. The investment is funding the construction and launch of a new purpose-built 108 place nursery school in Wendover, Buckinghamshire, an affluent commuter town with direct links to London. Growing Fingers is a new venture headed by a management team with many years' operational experience in nurseries and healthcare facilities. The Company benefits from first charge security over the Wendover site and the Growing Fingers business.
In September 2017, the Company invested GBP200,000 (as part of a total investment round of GBP2 million) into Signal Building Services Limited, a recently established business specialising in delivering turnkey solutions to construction projects led by a management team with over 40 years' of combined experience in the construction sector. Shortly after the year end, Signal Building Services commenced its first project, working with property developer Enabling Homes on a 22 unit supported living scheme in Wigan.
In November 2017, the Company invested GBP3.35 million (as part of a total investment round of GBP3.75 million) into Sweat Union Limited, an innovative fitness business in the budget gym space. The high calibre management team includes Frank Reed, a co-founder of Virgin Active, as CEO and has already opened five gyms under the Sweat! brand. Sweat! is pitched at a slight price premium to budget rivals, has dedicated spinning and aerobics studios and recently unveiled a partnership with Debenhams to launch in-store gyms. The Company's investment will facilitate the roll-out of the brand across the United Kingdom.
In October 2017, the Company invested GBP1.1 million in Applebarn Nurseries Limited (as part of a GBP2.2 million qualifying investment alongside another Puma VCT) which is developing and will operate a new 120 place children's day nursery in Altrincham, South Manchester. The management team behind Applebarn include Stewart Pickering (the founder of Kidsunlimited which he built up to 50 nurseries before a successful exit) and experienced developer and contractor, the McGoff Group. The nursery is expected to open in the third quarter of 2018.
During the year the Company invested GBP2.4 million (as part of a GBP4.8 million qualifying investment alongside another Puma VCT) in Knott End Limited which has entered into a franchise agreement with Brewhouse & Kitchen Limited to roll out a portfolio of pubs offering on-site craft micro-brewing activities and good quality food. The management team at Knott End have already identified their first site in the newly-developed theatre district of Milton Keynes which opened in April 2018.
The Company made a GBP1.7 million qualifying investment in Kid and Play Limited, alongside funds invested by another Puma VCT totalling GBP3.4 million, in October 2017. Kid and Play is seeking to develop, own and operate a new children's day nursery and has identified a first site in Bromley, South London.
In November 2017, the Company made a GBP2.35 million qualifying investment (as part of a GBP4.7 million investment alongside other Puma VCTs) in Sunlight Education Nucleus Limited, a company seeking to develop, own and operate a series of special education needs schools across the United Kingdom.
In October 2017, the Company invested GBP2.1 million (as part of a GBP4.2 million qualifying investment alongside another Puma VCT) in South West Cliffe Limited, supporting an experienced management team to roll out a portfolio of purpose built day nurseries.
In November 2017, the Company invested GBP3 million in Pure Cremation Holdings Limited (as part of a GBP5 million qualifying investment alongside another Puma VCT). Pure Cremation is a leading provider of so-called direct cremations, meeting the needs of a growing number of people in the United Kingdom who want a respectful direct cremation arranged without any funeral, leaving them free to say farewell how, where and when is right for them. The Pure Cremation team have many years' experience in the funeral services sector and have recently acquired a site near Andover on which they are developing a new crematorium and central facility having obtained full planning permission following the year-end.
Shortly after the year end, the Company invested GBP1.4 million (as part of a total investment round of GBP5 million) into S A Fitness Limited, a budget gym business operating under the "NRG Gym" brand. The business currently operates from two sites, in Gravesend and in Watford, and specialises in providing an affordable gym experience with an exceptional large selection of high-end gym equipment. The investment will provide funds to roll the brand out further.
Non-Qualifying Investments
As previously reported, the Company had initially invested just over GBP20 million in a series of lending businesses offering an appropriate risk adjusted return in the short to medium term. It was intended that these positions would be liquidated in due course as the Company makes qualifying investments. Details of the loans that these lending businesses have made, many of which were repaid in full during the year to facilitate the qualifying investments referred to above, are set out below.
During the year, GBP2.8 million loans (as part of an overall facility of GBP16 million) were agreed (through affiliates, Piccadilly Lending Limited and Tottenham Lending Limited) with Ability Hotels (Edinburgh) Limited to fund the development of a new 240-room Hampton by Hilton hotel at Edinburgh Airport. The hotel is scheduled to open in early 2019 at which time it will be the newest and nearest hotel to the airport terminal building. The Ability Group is an experienced developer and operator of hotels and the loan is secured with a first charge over the site.
As previously reported, a GBP3.9 million loan (as part of a total facility of GBP17.97 million, increased from GBP17.5 million) was advanced (through affiliates, Victoria Lending Limited, Tottenham Lending Limited and Marble Lending Limited) to Cudworth Limited to fund the construction of a mixed residential and commercial development in Bloomsbury, London, close to the British Museum and 600m from King's Cross station. The development includes 11 apartments, 2 houses and 11,800 square feet of B1 commercial space. The loan is secured with a first charge over the site and the development is well progressed.
We previously reported that a GBP800,000 million facility (as part of a total facility of GBP5 million) had been advanced (through an affiliate, Tottenham Lending Limited) to an entity within the Ironbridge Group, providing the senior 70% slice of "stretched senior" bridging loans on non-owner-occupied properties in London and the South East with Ironbridge funding the subordinated 30% slice. Ironbridge operate a bridge lending business and have successfully deployed over GBP50m of customer loans to date. Loans are being advanced from 6 to 24 months with the senior slice at a conservative loan-to-value ratio.
A GBP1.8 million facility (together with loans from other vehicles managed and advised by the Investment Manager totalling GBP4.3 million) was provided during the previous year (through an affiliate, Marble Lending Limited) to Empire TBR Limited to fund the construction of a mixed residential and commercial development near Tower Bridge, London. The location is well suited to the target market, with good transport links and local amenities. The project looks set to recommence after little progress being made over the last year with a new development team in place.
As previously reported, a series of loans have been advanced to various entities (through affiliates, Valencia Lending Limited and Tottenham Lending Limited) within the Citrus Group. These loans, together with loans from other vehicles managed and advised by the Investment Manager, form part of a series of revolving credit facilities to provide working capital to the Citrus PX business. Citrus PX operates a property part exchange service facilitating the rapid purchase of properties for developers and homeowners. The facility provides a series of loans to Citrus PX, with the benefit of a first charge over a geographically diversified portfolio of residential properties on conservative terms. At the year end, the loans totalled GBP1 million (as part of a total facility of GBP5 million).
A GBP608,000 loan (as part of an overall facility of GBP7.4 million) had been advanced during the previous year (through an affiliate, Victoria Lending Limited) to New Care (Chester) Limited to fund the development and initial trading of a 77-bed purpose-built care home in Chester. The New Care Group is an experienced developer and operator of care homes and the loan was secured with a first charge over the site. We are pleased to report that, shortly after the year end, the development was completed and the care home was refinanced resulting in the loan being repaid in full.
In June 2016, an GBP2.3 million loan was advanced (through an affiliate, Sloane Lending Limited) and secured against a portfolio of freehold assets and the associated ground rents, as part of a package from other vehicles managed and advised by the Investment Manager totalling GBP4.3 million. We are pleased to report that, during the year, the loan was repaid in full generating a good rate of return.
In July 2016, a loan of GBP1.5 million, together with loans from other vehicles managed and advised by your Investment Manager totalling GBP2.5 million, was advanced (through an affiliate, Sloane Lending Limited) to Pall Mall Investments 2016 Limited. The loan was used to acquire Rovex Business Park, an industrial business park in Birmingham. We are pleased to report that the loan was repaid in full during the year generating a good rate of return.
As previously reported, a loan of GBP1.03 million was advanced (through an affiliate, Piccadilly Lending Limited) to Zinbake Limited to facilitate the acquisition of the assets of a pharmacy business located on Portobello Road in Notting Hill, London. The borrower is an experienced operator and had carried out an extensive refurbishment program at the new unit which has a good mix of NHS and over-the-counter income. The loan was secured with a first charge on the new pharmacy business and a first charge over the borrower's existing pharmacy located in south west London, both of which had been trading well. We are pleased to report that the loan was repaid in full shortly before the end of the year giving a good rate of return.
To help manage liquidity, the Company had exposure to a floating rate note issued by Royal Bank of Canada a floating rate note issued by Commonwealth Bank of Australia and a floating rate note issued by Sainsburys Plc. These positions were sold during the year as the Company made the qualifying investments referred to above. Further details of this can be found in note 8 of the financial statements.
Investment Strategy
We are pleased to have invested a large proportion of the Company's funds. We remain focused on generating strong returns for the Company in both the qualifying and non-qualifying portfolios, whilst balancing these returns with maintaining an appropriate risk exposure and ensuring there is significant liquidity in the portfolio to free up cash for qualifying investments as they arise.
The Investment Management team continues to meet with companies which are potentially suitable for investment. Over the course of the next year, the Company will build the qualifying portfolio to the required 80 per cent. We have strong deal-flow and are meeting many potential investee companies with several interesting opportunities to make further qualifying investments.
Puma Investment Management Limited
25 June 2018
Investment Portfolio Summary
As at 28 February 2018
Hot Features
Premium
Valuation
as a % of
Valuation Cost Gain/(loss) Net Assets
GBP'000 GBP'000 GBP'000
Qualifying Investments
Growing Fingers Limited 420 420 - 1%
Kid & Play Limited 1,694 1,694 - 6%
South-West Cliffe Limited 2,100 2,100 - 7%
Signal Building Services
Limited 200 200 - 1%
Applebarn Nurseries Limited 1,133 1,133 - 4%
Knott End Pub Company
Limited 2,400 2,400 - 8%
Sunlight Education Nucleus
Limited 2,350 2,350 - 8%
Sweat Union Limited 3,350 3,350 - 11%
Pure Cremations Limited 3,000 3,000 - 10%
Total Qualifying Investments 16,647 16,647 - 56%
---------- -------- ------------ ------------
Non-Qualifying Investments
Piccadilly Lending Limited 2,400 2,400 - 8%
Victoria Lending Limited 2,225 2,225 - 7%
Tottenham Lending Limited 2,900 2,900 - 10%
Marble Lending Limited 3,800 3,800 - 13%
Total Non-Qualifying
investments 11,325 11,325 - 38%
---------- -------- ------------ ------------
Total Investments 27,972 27,972 - 94%
Balance of Portfolio 1,807 1,807 - 6%
Net Assets 29,779 29,779 - 100%
---------- -------- ------------ ------------
Of the investments held at 28 February 2018, all are incorporated in England and Wales.
Income Statement
For the year ended 28 February 2018
Year ended 28 February Period from 1 September
2018 2015 to 28 February 2017
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain on investments 8 (b) - - - - 26 26
Income 2 1,147 - 1,147 477 - 477
1,147 - 1,147 477 26 503
-------- -------- --------- --------- --------
Investment management
fees 3 (149) (447) (596) (144) (432) (576)
Other expenses 4 (254) - (254) (297) - (297)
(403) (447) (850) (441) (432) (873)
-------- -------- --------- --------- --------
Profit/(loss) before
taxation 744 (447) 297 36 (406) (370)
Taxation 5 (142) 142 - (7) 7 -
Profit/(loss) and
total comprehensive
income for the year 602 (305) 297 29 (399) (370)
======== ======== ======== ========= ========= ========
Basic and diluted
Return/(loss) per
Ordinary Share (pence) 6 1.95p (0.99p) 0.96p 0.14p (1.98p) (1.84p)
======== ======== ======== ========= ========= ========
All items in the above statement derive from continuing operations.
There are no gains or losses other than those disclosed in the Income Statement.
The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. The supplementary revenue and capital columns are prepared in accordance with the Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014 by the Association of Investment Companies and updated in January 2017.
Balance Sheet
As at 28 February 2018
Note 2018 2017
GBP'000 GBP'000
Fixed Assets
Investments 8 27,972 27,129
-------- --------
Current Assets
Debtors 9 1,501 458
Cash 473 2,060
-------- --------
1,974 2,518
Creditors - amounts falling
due within one year 10 (167) (165)
Net Current Assets 1,807 2,353
-------- --------
Net Assets 29,779 29,482
======== ========
Capital and Reserves
Called up share capital 12 19 19
Share premium account 29,833 29,833
Capital reserve - realised (704) (425)
Capital reserve - unrealised - 26
Revenue reserve 631 29
Total Equity 29,779 29,482
======== ========
Net Asset Value per Ordinary
Share 13 96.34p 95.38p
======== ========
The financial statements on pages 33 to 48 were approved and authorised for issue by the Board of Directors on 25 June 2018 and were signed on their behalf by:
Ray Pierce
Chairman
Statement of Cash Flows
For the year ended 28 February 2018
Period from
Year ended 1 September
28 February 2015 to 28
2018 February 2017
GBP'000 GBP'000
Profit/(loss) after tax 297 (370)
Gain on investments - (26)
Increase in debtors (1,043) (458)
Increase in creditors 2 165
Net cash used in operating activities (744) (689)
------------- ---------------
Cash flow from investing activities
Purchase of investments (16,957) (27,103)
Proceeds from disposal of investments 16,114 -
Net cash used in investing activities (843) (27,103)
------------- ---------------
Proceeds received from issue of ordinary
share capital - 30,909
Expense paid for issue of share capital - (1,057)
Proceeds received from issue of redeemable
preference shares - 13
Redemption of redeemable preference
shares - (13)
Net cash generated from financing
activities - 29,852
------------- ---------------
Net (Decrease)/Increase in cash and
cash equivalents (1,587) 2,060
Cash and cash equivalents at the beginning
of the year 2,060 -
Cash and cash equivalents at the end
of the year 473 2,060
============= ===============
Statement of Changes in Equity
For the year ended 28 February 2018
Called Share Capital Capital
up share premium reserve reserve Revenue
capital account - realised - unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 September
2015 - - - - - -
Shares issues in the
period 19 30,890 30,909
Expenses of share
issues - (1,057) - - - (1,057)
Total comprehensive
income for the period - - (425) 26 29 (370)
Balance as at 28 February
2017 19 29,833 (425) 26 29 29,482
Realised gain from
prior period - - 26 (26) - -
Total comprehensive
income for the year - - (305) - 602 297
Balance as at 28 February
2018 19 29,833 (704) - 631 29,779
========== ========= ============ ============== ========= ========
Distributable reserves comprise: Capital reserve-realised, Capital reserve-unrealised (excluding gains on unquoted investments) and the Revenue reserve. At the year end, distributable revenue reserves were GBP631,000 (2017: GBP29,000).
The Capital reserve-realised includes gains/losses that have been realised in the year due to the sale of investments, net of related costs. The Capital reserve-unrealised represents the investment holding gains/losses and shows the gains/losses on investments still held by the Company not yet realised by an asset sale.
Share premium represents premium on shares issued less issue costs.
The revenue reserve represents the cumulative revenue earned less cumulative distributions.
1. Accounting Policies
Accounting convention
Puma VCT 12 plc ("the Company") was incorporated in England on 2 September 2015 and is registered and domiciled in England and Wales. The Company's registered number is 09758309. The registered office is Bond Street House, 14 Clifford Street, London W1S 4JU. The Company is a public limited company (limited by shares) whose shares are listed on LSE with a premium listing. The company's principal activities and a description of the nature of the Company's operations are disclosed in the Strategic Report.
The financial statements have been prepared under the historical cost convention, modified to include investments at fair value, and in accordance with the requirements of the Companies Act 2006, including the provisions of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' ("FRS 102") and the Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014 by the Association of Investment Companies and updated in January 2017 ("the SORP").
Monetary amounts in these financial statements are rounded to the nearest whole GBP1,000, except where otherwise indicated.
Investments
All investments are measured at fair value. They are all held as part of the Company's investment portfolio and are managed in accordance with the investment policy set out on page 17.
Listed investments are stated at bid price at the reporting date.
Unquoted investments are stated at fair value by the Directors with reference to the International Private Equity and Venture Capital Valuation Guidelines ("IPEV") as follows:
-- Investments which have been made within the last twelve months or where the investee company is in the early stage of development will usually be valued at the price of recent investment except where the company's performance against plan is significantly different from expectations on which the investment was made in which case a different valuation methodology will be adopted.
-- Investments in debt instruments will usually be valued by applying a discounted cash flow methodology based on expected future returns of the investment.
-- Alternative methods of valuation such as net asset value may be applied in specific circumstances if considered more appropriate.
Realised surpluses or deficits on the disposal of investments are taken to realised capital reserves, and unrealised surpluses and deficits on the revaluation of investment are taken to unrealised capital reserves.
1. Accounting Policies (continued)
Income
Dividends receivable on listed equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company's right to receive payment is established and there is no reasonable doubt that payment will be received. Interest receivable is recognised wholly as a revenue item on an accruals basis.
Performance fees
Upon its inception, the Company agreed performance fees payable to the Investment Manager, Puma Investment Management Limited, and members of the investment management team at 20% of the aggregate excess of the amounts realised over GBP1 per Ordinary Share returned to Ordinary Shareholders. This incentive will only be effective once the other holders of Ordinary Shares have received distributions of GBP1 per share.
The performance incentive has been satisfied through the issue of 7,727,297 Ordinary Shares (as set out in note 11 of the financial statements) to the Investment Manager and members of the investment management team being 20% of the total issued Ordinary Share capital of 38,636,487. Under the terms of the incentive arrangement, all rights to dividends will be waived until the GBP1 per Ordinary Share performance target has been met. The performance fee is accounted for as an equity-settled share-based payment.
Section 26 of FRS 102 "Share-Based Payment" requires the recognition of an expense in respect of share-based payments in exchange for goods or services. Entities are required to measure the goods or services received at their fair value, unless that fair value cannot be estimated reliably in which case that fair value should be estimated by reference to the fair value of the equity instruments granted.
At each balance sheet date, the Company estimates that fair value by reference to any excess of the net asset value, adjusted for dividends paid, over GBP1 per share in issue at the balance sheet date. Any change in fair value is recognised in the Income Statement with a corresponding adjustment to equity.
Expenses
All expenses (inclusive of VAT) are accounted for on an accruals basis. Expenses are charged wholly to revenue, with the exception of:
-- expenses incidental to the acquisition or disposal of an investment charged to capital; and
-- the investment management fee, 75% of which has been charged to capital to reflect an element which is, in the directors' opinion, attributable to the maintenance or enhancement of the value of the Company's investments in accordance with the Board's expected long-term split of return; and
-- the performance fee which is allocated proportionally to revenue and capital based on the respective contributions to the Net Asset Value.
Taxation
Corporation tax is applied to profits chargeable to corporation tax, if any, at the applicable rate for the year. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the marginal basis as recommended by the SORP.
Deferred tax 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, 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 taxable 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.
1. Accounting Policies (continued)
Reserves
Realised losses and gains on investments, transaction costs, the capital element of the investment management fee and taxation are taken through the Income Statement and recognised in the Capital Reserve - Realised on the Balance sheet. Unrealised losses and gains on investments and the capital element of the performance fee are also taken through the Income Statement and are recognised in the Capital Reserve - Unrealised.
Debtors
Debtors include accrued income which is recognised at amortised cost, equivalent to the fair value of the expected balance receivable.
Creditors
Creditors are initially measured at the transaction price and subsequently measured at amortised cost, being the transaction price less any amounts settled.
Dividends
Final dividends payable are recognised as distributions in the financial statements when the Company's liability to make payment has been established. The liability is established when the dividends proposed by the Board are approved by the Shareholders. Interim dividends are recognised when paid.
Key accounting estimates and assumptions
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year relate to the fair value of unquoted investments. Further details of the unquoted investments are disclosed in the Investment Manager's Report on pages 3 to 7 and notes 8 and 14 of the financial statements.
2. Income
Period from 1 September
Year ended 28 February 2015 to 28 February
2018 2017
GBP'000 GBP'000
Income from investments
Loan stock interest 1,111 387
Bond yields 35 81
1,146 468
Other income
Bank deposit income 1 9
1,147 477
======================= ========================
3. Investment Management Fees
Period from 1 September
Year ended 28 February 2015 to 28 February
2018 2017
GBP'000 GBP'000
Puma Investments fees 596 576
596 576
======================= ========================
Puma Investment Management Limited ("Puma Investments") has been appointed as the Investment Manager of the Company for an initial period of five years, which can be terminated by not less than twelve months' notice, given at any time by either party, on or after the fifth anniversary. The Board is satisfied with the performance of the Investment Manager. Under the terms of this agreement Puma Investments will be paid an annual fee of 2% of the Net Asset Value payable quarterly in arrears calculated on the relevant quarter end NAV of the Company. These fees are capped, the Investment Manager having agreed to reduce its fee (if necessary to nothing) to contain total annual costs (excluding performance fee and trail commission) to within 3.5% of funds raised. Total costs this year were 2.8% (2017: 2.9%) of the funds raised. Graham Shore, a director, holds a Directorship of the parent of the Investment Manager.
In addition to the investment manager fees disclosed above, during the period ended 28 February 2017 two payments were made to Puma Investment Management Limited, totalling GBP1,056,000, in relation to share issue costs. The fees were to cover the costs of launching the funds.
4. Other expenses
Period from 1 September
Year ended 28 February 2015 to 28 February
2018 2017
GBP'000 GBP'000
PI Administration Services
Limited 104 101
Directors' Remuneration 56 58
Social security costs 1 2
Auditor's remuneration
for statutory audit 24 23
Legal and professional
fees 32 80
Other expenses 38 33
254 297
======================= ========================
PI Administration Services Limited provides administrative services to the Company for an aggregate annual fee of 0.35% of the Net Asset Value of the Fund, payable quarterly in arrears.
Remuneration for each Director for the year is disclosed in the Directors' Remuneration Report on page 23. Director's remuneration disclosed above has been grossed up, where applicable, to be inclusive of VAT. The Company had no employees (other than Directors) during the year (2017: none). The average number of non-executive Directors during the year was 3 (2017: 3). The non-executive Directors are considered to be the Key Management Personnel of the Company with total remuneration for the year of GBP57,000 (2017: GBP60,000) including social security costs.
The Auditor's remuneration of GBP20,000 (2017: GBP19,500) has been grossed up in the table above to be inclusive of VAT.
5. Taxation
Period from 1 September
Year ended 28 2015 to 28 February
February 2018 2017
GBP'000 GBP'000
UK corporation tax charged
to revenue reserve 142 7
UK corporation tax credited
to capital reserve (142) (7)
UK corporation tax charge
for the year - -
=============== ========================
Factors affecting tax charge for the year
Profit/(loss) before taxation 297 (370)
=============== ========================
Tax charge calculated on
profit/(loss) before taxation
at 19% (2017: 20%) 56 (74)
Tax on capital items not
taxable - (5)
Tax losses (utilised)/carried
forward (56) 79
- -
=============== ========================
Capital returns are not taxable as the Company is exempt from tax on realised capital gains whilst it continues to comply with the VCT regulations, so no corporation tax or deferred tax is recognised on capital gains or losses.
No provision for deferred tax has been made in the current accounting year. Due to the Company's status as a Venture Capital Trust and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.
6. Basic and diluted return/(loss) per Ordinary Share
Year ended 28 February 2018
Revenue Capital Total
Total comprehensive
income for the year
(GBP'000) 602 (305) 297
Weighted average number
of shares in issue for
the year 38,636,487 38,636,487 38,636,487
Less: management incentive
shares (see note 11) (7,727,297) (7,727,297) (7,727,297)
Weighted average number
of shares for purposes
of return/(loss) per
share calculations 30,909,190 30,909,190 30,909,190
--------------- --------------- --------------
Return/(loss) per share 1.95p (0.99p) 0.96p
Period from 1 September 2015 to 28 February
2017
Revenue Capital Total
Total comprehensive
income for the year
(GBP'000) 29 (399) (370)
Weighted average number
of shares in issue for
the year 27,854,587 27,854,587 27,854,587
Less: management incentive
shares (see note 11) (7,727,297) (7,727,297) (7,727,297)
Weighted average number
of shares for purposes
of return/(loss) per
share calculations 20,127,290 20,127,290 20,127,290
--------------- --------------- --------------
Return/(loss) per share 0.14p (1.98p) (1.84p)
7. Dividends
The Directors will propose a resolution at the Annual General Meeting to pay a final dividend of 2p per share (2017: nil per share), which if approved, will result in a total dividend payment of GBP618,000.
8. Investments
Qualifying Non qualifying
(a) Movements in investments investments investments Total
GBP'000 GBP'000 GBP'000
Purchased at cost 294 26,809 27,103
Net unrealised - 26 26
Valuation at 1 March
2017 294 26,835 27,129
Purchases at cost 16,353 4,001 20,354
Disposal of investments
and repayment of loans
and loan notes
- Proceeds - (19,511) (19,511)
- Realised net gains
on disposals - - -
Valuation at 28 February
2018 16,647 11,325 27,972
============= =============== =============
Book cost at 28 February
2018 16,647 11,325 27,972
Net unrealised gains
at 28 February 2018 - - -
Valuation at 28 February
2018 16,647 11,325 27,972
============= =============== =============
During the year, the Company sold its quoted bonds in Commonwealth
Bank of Australia for GBP1,219,000. These bonds were originally
acquired for GBP1,213,000 and were stated at GBP1,221,000 as
at 28 February 2017. The Company also sold its holding of quoted
bonds in Royal Bank of Canada for GBP2,208,000. These bonds
were originally acquired in the current and previous year for
GBP604,000 and GBP1,610,000 respectively. The amount purchased
in the previous year was stated at GBP1,611,000 as at 28 February
2017. In addition, the Company sold its quoted bonds in Sainsbury's
for GBP2,073,000 during the year. The bonds were originally
purchased for GBP2,045,000 and stated at a value of GBP2,062,000
as at 28 February 2017.
(b) Gains on investments
Year ended Period ended
28 February 28 February
2018 2017
GBP'000 GBP'000
Unrealised gains in
period - 26
- 26
=============== -------------
(c) Quoted and unquoted
investmentssssss
Market value Market value
as at 28 as at 28
February February
2018 2017
GBP'000 GBP'000
Quoted investments - 4,894
Unquoted investments 27,972 22,235
27,972 27,129
=============== =============
Further details of these investments are disclosed in the Investment Portfolio Summary on pages 8 to 15 of the Annual Report.
9. Debtors
As at 28 February As at 28 February
2018 2017
GBP'000 GBP'000
Other debtors - 8
Accrued income 1,501 450
1,501 458
================== ==================
10. Creditors - amounts falling due within one year
As at 28 February As at 28 February
2018 2017
GBP'000 GBP'000
Accruals 167 165
167 165
================== ==================
11. Management Performance Incentive Arrangement
On 3 September 2015, the Company entered into an Agreement with the Investment Manager and members of the investment management team (together "the Management Team") such that the Management Team will be entitled in aggregate to share in 20 per cent of the aggregate excess on any amounts realised by the Company in excess of GBP1 per Ordinary Share, the Performance Target.
This incentive is effective through the issue of ordinary shares in the Company, such that the Management Team hold 7,727,297 ordinary shares being 20% of the issued share capital of 38,636,487.
The Management Team will waive all rights to dividends until a return of GBP1 per share (whether capital or income) has been paid to the other shareholders.
The performance incentive structure provides a strong incentive for the Investment Manager to ensure that the Company performs well, enabling the Board to approve distributions as high and as soon as possible.
12. Called Up Share Capital
As at 28 February
2017 and 28 February
2018
GBP'000
38,636,487 ordinary shares of 0.05p each 19
======================
13. Net Asset Value per Ordinary Share
As at As at
28 February 2018 28 February 2017
Net assets GBP29,779,000 GBP29,482,000
------------------ ------------------
Number of shares in issue 38,636,487 38,636,487
Less: management incentive
shares (see note 11) (7,727,297) (7,727,297)
------------------ ------------------
Number of shares in issue
for purposes of Net
Asset Value per share calculation 30,909,190 30,909,190
------------------ ------------------
Net asset value per share
Basic 96.34p 95.38p
Diluted 96.34p 95.38p
14. Financial Instruments
The Company's financial instruments comprise its investments, cash balances, debtors and certain creditors. The fair value of all of the Company's financial assets and liabilities is represented by the carrying value in the Balance Sheet. Excluding cash balances, the Company held the following categories of financial instruments at 28 February 2018:
As at 28 February As at 28 February
2018 2017
GBP'000 GBP'000
Financial assets at fair
value through profit or
loss 27,972 27,129
Financial assets that are
debt instruments measured
at amortised cost 1,501 458
Financial liabilities measured
at amortised cost (167) (165)
29,306 27,422
================== ==================
Management of risk
The main risks the Company faces from its financial instruments are 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 movements, liquidity risk, credit risk and interest rate risk. The Board regularly reviews and agrees policies for managing each of these risks. The Board's policies for managing these risks are summarised below and have been applied throughout the year.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager monitors counterparty risk on an ongoing basis. The carrying amount of financial assets best represents the maximum credit risk exposure at the balance sheet date. The Company's financial assets and maximum exposure to credit risk is as follows:
As at 28 February As at 28 February
2018 2017
GBP'000 GBP'000
Investments in loans, loan
notes and bonds 16,577 26,835
Cash at bank and in hand 473 2,060
Interest, dividends and other
receivables 1,501 458
18,551 29,353
================== ==================
The cash held by the Company at the year end is held in two U.K. banks. Bankruptcy or insolvency of the bank may cause the Company's rights with respect to the receipt of cash held to be delayed or limited. The Board monitors the Company's risk by reviewing regularly the financial position of the bank and should it deteriorate significantly the Investment Manager will, on instruction of the Board, move the cash holdings to another bank.
Credit risk associated with interest, dividends and other receivables are predominantly covered by the investment management procedures.
Investments in loans, loan notes and bonds comprises a fundamental part of the Company's venture capital investments, therefore credit risk in respect of these assets is managed within the Company's main investment procedures.
Market price risk
Market price risk arises mainly from uncertainty about future prices of financial instruments held by the Company. It represents the potential loss the Company might suffer through holding investments in the face of price movements. The Investment Manager actively monitors market prices and reports to the Board, which meets regularly in order to consider investment strategy.
The Company's strategy on the management of market price risk is driven by the Company's investment policy as outlined in the Strategic Report on page 17. The management of market price risk is part of the investment management process. The portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis, with an objective of maximising overall returns to shareholders.
Holdings in unquoted investments may pose higher price risk than quoted investments. Some of that risk can be mitigated by close involvement with the management of the investee companies along with review of their trading results.
0% (2017: 18%) of the Company's investments are quoted investments and 100% (2017: 82%) are unquoted investments.
Liquidity risk
Details of the Company's unquoted investments are provided in the Investment Portfolio summary on page 8. By their nature, unquoted investments may not be readily realisable, the Board considers exit strategies for these investments throughout the period for which they are held. As at the year end, the Company had no borrowings.
The Company's liquidity risk associated with investments is managed on an ongoing basis by the Investment Manager in conjunction with the Directors and in accordance with policies and procedures in place as described in the Report of the Directors and the Strategic Report. The Company's overall liquidity risks are monitored on a quarterly basis by the Board. The Company maintains sufficient investments in cash to pay accounts payable and accrued expenses.
Fair value interest rate risk
The benchmark that determines the interest paid or received on the current account is the Bank of England base rate, which was 0.5% at 28 February 2018 (2017: 0.25%). All of the loan and loan note investments are unquoted and hence not directly subject to market movements as a result of interest rate movements.
Cash flow interest rate risk
The Company has exposure to interest rate movements primarily through its cash deposits and loan notes which track either the Bank of England base rate or LIBOR.
Interest rate risk profile of financial assets
The following analysis sets out the interest rate risk of the Company's financial assets as at 28 February 2018.
Weighted Weighted
average average
interest period
Rate status rate until maturity Total
GBP'000
Cash at bank - Metro Floating 0.12% - 11
Cash at bank - RBS Floating 0.25% - 462
Loans and loan notes Floating 8.00% 38 months 1,000
Loans and loan notes Fixed 7.64% 44 months 15,504
Balance of assets Non-interest bearing - 12,969
29,946
========
The following analysis sets out the interest rate risk of the Company's financial assets as at 28 February 2017.
Weighted Weighted
average average
interest period
Rate status rate until maturity Total
GBP'000
Cash at bank - Metro Floating 0.10% - 2,060
Loans and loan notes Floating 7.75% 52 months 3,200
Floating rate liquidity
bonds Floating 1.22% 20 months 2,832
Loans, loan notes and liquidity
bonds Fixed 7.20% 55 months 13,124
Balance of assets Non-interest bearing - 8,431
29,647
========
Foreign currency risk
The reporting currency of the Company is Sterling. The Company has not held any non-Sterling investments during the year.
Fair value hierarchy
Financial assets and liabilities measured at fair value are disclosed using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurements, as follows:-
-- Level 1 - Fair value is measured using the unadjusted quoted price in an active market for identical assets.
-- Level 2 - Fair value is measured using inputs other quoted prices that are observable using market data.
-- Level 3 - Fair value is measured using unobservable inputs.
Fair values have been measured at the end of the reporting year as follows:-
2018 2017
GBP'000 GBP'000
Level 1
Investments listed on LSE - 4,894
Level 3
Unquoted investments 27,972 22,235
27,972 27,129
======== ========
The Level 3 investments have been valued in line with the Company's accounting policies and IPEV guidelines. Further details of these investments are provided in the Significant Investments section of the Annual Report on pages 9 to 15.
15. Capital management
The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern, so that it can provide an adequate return to shareholders by allocating its capital to assets commensurate with the level of risk.
By its nature, the Company must have an amount of capital, at least 70% (as measured under the tax legislation) of which must be, and remain, invested in the relatively high risk asset class of small UK companies within three years of that capital being subscribed. From April 2019 this is rising to 80%.
The Company accordingly has limited scope to manage its capital structure in the light of changes in economic conditions and the risk characteristics of the underlying assets. Subject to this overall constraint upon changing the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares, or sell assets to maintain a level of liquidity to remain a going concern.
The Board has the opportunity to consider levels of gearing, however there are no current plans to do so. It regards the net assets of the Company as the Company's capital, as the level of liabilities is small and the management of those liabilities is not directly related to managing the return to shareholders.
16. Contingencies, Guarantees and Financial Commitments
There were no commitments, contingencies or guarantees of the Company at the year-end (2017: none).
17. Controlling Party
In the opinion of the Directors there is no immediate or ultimate controlling party.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR EALKSAAPPEFF
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