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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Puma Vct 11 Plc | LSE:PU11 | London | Ordinary Share | GB00BQVBS545 | 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% | 60.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMPU11
RNS Number : 9278C
Puma VCT 11 PLC
20 June 2019
HIGHLIGHTS
-- Funds substantially invested in a diverse range of businesses and projects -- HMRC requirement that qualifying investments are 70% of the fund is now met
-- 10p per share of dividends paid since inception (including 5p interim dividend paid in February 2019)
-- Provision of GBP1.5 million against the carrying value of our investment in Warm Hearth, a company owning two freehold pubs, to reflect difficult trading
-- Loss before tax of GBP1,621,000 representing 5.33p per share
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Company's fourth annual report for the year ended 28 February 2019.
The Company has now effectively deployed substantially all its funds in both qualifying and non-qualifying investments. As a result, it has met its minimum qualifying investment percentage (on an HMRC basis) of 70 per cent.
Investments
At the end of the year, the Company had just under GBP23 million invested in a mixture of qualifying and non-qualifying investments whilst maintaining our VCT qualifying status.
Further details of all our investments can be found in the Investment Manager's report on pages 3 to 6. This includes a discussion about Warm Hearth Limited, against which we have made a provision of GBP1.5 million.
Results
Before taking account of the provision, the Company had a small loss before tax of GBP121,000 for the year (2018: GBP273,000 profit), a post-tax loss of 0.41p (2018: 0.72p gain) per ordinary share (calculated on the weighted average number of shares). The provision reduced this to a pre-tax loss of GBP1,621,000 for the year resulting in a post-tax loss of 5.33p per ordinary share.
Reflecting the provision against the Warm Hearth investment, the Net Asset Value per ordinary share ("NAV") at 28 February 2019 was 93.06p (2018: 98.39p) after adding back dividends paid to date.
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 also assists the Investment Manager in establishing the status of investments as qualifying holdings and will continue to assist the Investment Manager in monitoring rule compliance.
Dividend
As envisaged in the Company's prospectus, the Company paid a dividend of 5p per ordinary share just before the end of the year.
Outlook
We are naturally disappointed with the performance of our investment in Warm Hearth. However, we remain focused on generating attractive risk-adjusted returns for the Company from both the qualifying and non-qualifying portfolio.
Whilst there will probably be some further changes in the composition of the portfolio, the Board expects to concentrate in the future on the monitoring of our existing investments and considering the options for exits in due course.
Harold Paisner
Chairman
20 June 2019
INVESTMENT MANAGER'S REPORT
Introduction
The Company's funds are now substantially deployed in both qualifying and non-qualifying investments, having met its minimum qualifying investment percentage of 70 per cent during the year. We report on all our portfolio holdings below.
Investments
Qualifying Investments
Pure Cremation - Crematorium and Direct Cremations
In November 2017, the Company invested GBP2 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 acquired a site near Andover to develop a new crematorium and central facility. We are pleased to report that the Andover facility opened earlier this year and the business is performing well.
Growing Fingers - Children's Nursery
As previously reported, the Company has invested GBP0.98 million (as part of a GBP2.8 million investment alongside other Puma VCTs) in Growing Fingers Limited. 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. The Company benefits from first charge security over the Wendover site and the Growing Fingers business.
Welcome Health - Chain of Pharmacies
The Company had previously invested GBP2.5 million (as part of a GBP5 million investment alongside other Puma VCTs) in Welcome Health Limited. Welcome Health owns and operates a series of mature pharmacies across the North East of England, focusing on providing pharmaceutical services to a currently underserviced and relatively deprived market. We are pleased to report that, following the year end, the entrepreneur behind Welcome Health has refinanced the group which should facilitate the redemption of the Company's investment in full in the coming months.
Mini Rainbows - Children's Nurseries
Mini Rainbows Limited (in which the Company invested GBP2.5 million as part of a GBP5 million investment alongside other Puma VCTs) owns and operates two mature children's day nurseries in Scotland - in Murrayfield, an affluent part of Edinburgh, and in Shawlands, Glasgow. Both sites are performing well with occupancy ahead of forecast.
Warm Hearth - Pubs with Microbreweries
In late 2015, the Company invested GBP2.5 million (as part of a GBP5 million investment alongside other Puma VCTs) in Warm Hearth Limited, a pub business seeking to capitalise on the strong growth trends within the craft beer sub-market. Warm Hearth entered into a franchise agreement with Brewhouse & Kitchen Limited ("B&K"), a strong and fast-growing national branded operator, offering craft micro-brewing activities within each of its pub units as a point of focus. Warm Hearth currently owns and operates two substantial freehold pub assets in Chester and Wilmslow. As previously reported, performance of these units has been significantly below our expectations for some time. Moreover, the market for pubs offering food has deteriorated over the last year and whilst the micro-brewing is a differentiator, it has not protected Warm Hearth from these trends. Management remain focused on improving performance, as well as looking at planning options, particularly at Chester to convert upstairs space into boutique hotel rooms, which have the prospect of delivering value. This notwithstanding, the Board has decided to provide against the carrying value of this investment.
Signal Building Services - Construction Projects
In September 2017, the Company invested GBP1 million (as part of a total investment round of GBP2 million) into Signal Building Services Limited, a 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. Signal Building Services is currently working on two projects: the construction of a 22 apartment supported living scheme in Wigan and the construction of a 14 apartment supported living scheme in Sutton-in-Ashfield.
Applebarn Nurseries - Children's Nursery
The Company had previously invested GBP1.1 million in Applebarn Nurseries Limited (as part of a GBP2.2 million qualifying investment alongside another Puma VCT). The management team include a successful operator of the nurseries, together with an experienced developer and contractor, and their first site, a new 120 place children's day nursery in Altrincham, South Manchester, opened in September 2018.
Knott End Pub Company - Pubs with Microbreweries
During the previous year, the Company invested GBP2.4 million (as part of a GBP4.8 million qualifying investment alongside another Puma VCT) in Knott End Pub Company 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. During the year, Knott End opened its first two pubs, in Milton Keynes and Horsham, West Sussex, both of which are trading well.
Kid & Play - Children's Nursery
In October 2017, the Company made a GBP1.7 million qualifying investment in Kid & Play Limited, alongside funds invested by another Puma VCT totalling GBP3.4 million. Kid & Play is seeking to develop, own and operate a new children's day nursery and has identified a number of potential sites which are currently in various stages of planning applications.
Sunlight Education Nucleus - Special Educational Needs Schools
In November 2017, the Company made a GBP1.35 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 educational needs schools across the United Kingdom. We are pleased to report that, shortly following the year end, the team at Sunlight completed on the purchase of the site for their first school in Stafford, West Midlands.
South-West Cliffe - Children's Nursery
As previously reported, the Company has 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.
Non-Qualifying Investments
Mixed Residential Commercial Development, Bloomsbury
As previously reported, a GBP1.2 million loan (as part of a total facility of GBP17.97 million) was advanced to Cudworth Limited (through the VCT's affiliate Mayfield Lending 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, the development is well progressed and we are pleased to report that contracts have recently been exchanged to sell the commercial units, both houses and a flat, with three further flats under offer.
Care Home for the Elderly, Formby
The GBP800,000 loan to New Care (Sefton) Limited in connection with the development and initial trading of a 75-bed purpose-built care home in Formby, Merseyside, continues to perform in line with expectations. The New Care Group is an experienced developer and operator of care homes. The loan (through an affiliate, Sloane Lending Limited) is part of an overall facility of GBP7.98 million and is secured with a first charge over the site. We are pleased to report that the borrower has agreed to sell the site on practical completion of the development which should facilitate the repayment of the loan in full.
Construction of Airport Hotel, Edinburgh
In June 2017, GBP1.6 million of loans (as part of an overall facility of GBP16 million) were advanced to Ability Hotels (Edinburgh) Limited (through affiliates, Meadow Lending Limited and Palmer Lending Limited) to fund the development of a new 240-room Hampton by Hilton hotel at Edinburgh Airport. We are pleased to report that the hotel opened last year and, following the year end, the loans were repaid in full.
Care Home for the Elderly, Egham
As previously reported, a loan of GBP1,208,000 had been advanced (through an affiliate, Meadow Lending Limited) to Windsar Care (UK) LLP to fund the development and initial trading of a 68-bed purpose-built care home in Egham, Windsor. This loan, together with loans from other vehicles managed and advised by the Investment Manager totalling GBP7.2 million, are secured with a first charge over the site. We are pleased to report that, following completion of the development earlier this year, the loan has been repaid in full since the reporting date.
Residential Development Project, Beckenham
A loan of GBP3 million (together with loans from other vehicles managed and advised by your Investment Manager totalling GBP5 million) had been advanced (through an affiliate, Mayfield Lending Limited) to Northern Land Developments Limited. The loans facilitated the acquisition of two large residential houses in Beckenham, Kent, funded planning costs to replace these two units with seven town houses and planning costs to develop a larger scheme on an adjacent larger parcel of land. As previously reported, the borrower obtained planning permission during the period for 105 new units comprising a mixture of four-bedroom houses and one, two and three bedroom apartments. We are pleased to report that the loans were repaid in full during the year giving a good rate of return.
IVF Clinic, Wickford
As previously reported, loans of GBP400,000 were advanced (through an affiliate, Lothian Lending Limited) to HPC (Wickford) Limited in a total loan package of GBP2.85 million together with other vehicles managed and advised by the Investment Manager. These loans are to facilitate the development and initial trading of a purpose-built IVF Fertility Clinic in Wickford, Essex. HPC (Wickford) Limited has entered into a lease with Bourn Hall Limited, one of the UK's largest independent fertility clinic groups. During the year, the clinic opened and the loans were repaid in full with a good rate of return.
Supported Living, Northumberland
In June 2018 the Company committed loans (through affiliates, Mayfield Lending Limited and Latimer Lending Limited) of GBP1.46 million to Homelife Developments Hexham Ltd. The developer is constructing a 9 apartment supported living scheme in Northumberland which is expected to be completed by the end of 2019.
Investment Strategy
We are pleased to have invested the Company's funds in a diverse range of businesses and projects. 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. Notwithstanding the performance of our investment in Warm Hearth, we remain confident that our portfolio is well positioned to deliver attractive returns to shareholders within the Fund's expected time horizon.
Puma Investment Management Limited
20 June 2019
Investment Portfolio Summary
As at 28 February 2019
Hot Features
Premium
Valuation
as a % of
Valuation Cost Gain/(loss) Net Assets
GBP'000 GBP'000 GBP'000
Qualifying Investments
Warm Hearth Limited 1,000 2,500 (1,500) 4%
Mini Rainbows Limited 2,500 2,500 - 10%
Welcome Health Limited 2,500 2,500 - 10%
Growing Fingers Limited 980 980 - 4%
Applebarn Nurseries
Limited 1,133 1,133 - 4%
Sunlight Education Nucleus
Limited 1,350 1,350 - 5%
Signal Building Services
Limited 1,000 1,000 - 4%
Kid & Play Limited 1,694 1,694 - 7%
Knott End Pub Company
Limited 2,400 2,400 - 9%
Pure Cremation Holdings
Limited 2,000 2,000 - 8%
South-West Cliffe Limited 2,100 2,100 - 8%
Total Qualifying Investments 18,657 20,157 (1,500) 73%
---------- -------- ------------ ------------
Non-Qualifying Investments
Palmer Lending Limited 260 260 - 1%
Mayfield Lending Limited 1,240 1,240 - 5%
Latimer Lending Limited 1 1 - 0%
Meadow Lending Limited 1,598 1,598 - 6%
Sloane Lending Limited 800 800 - 3%
Total Non-Qualifying
Investments 3,899 3,899 - 15%
---------- -------- ------------ ------------
Total Investments 22,556 24,056 (1,500) 88%
Balance of Portfolio 2,786 2,786 - 12%
Net Assets 25,342 26,842 (1,500) 100%
---------- -------- ------------ ------------
Of the investments held at 28 February 2019, all are incorporated in England and Wales.
Income Statement
For the year ended 28 February 2019
Year ended 28 February Year ended 28 February
2019 2018
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loss on investments 8 (b) - (1,500) (1,500) - (4) (4)
Income 2 698 - 698 1,153 - 1,153
698 (1,500) (802) 1,153 (4) 1,149
-------- -------- -------- -------- --------
Investment management
fees 3 (143) (431) (574) (148) (444) (592)
Other expenses 4 (245) - (245) (284) - (284)
(388) (431) (819) (432) (444) (876)
-------- -------- -------- -------- --------
(Loss)/profit before
taxation 310 (1,931) (1,621) 721 (448) 273
Taxation 5 (59) 54 (5) (137) 85 (52)
(Loss)/profit and total
comprehensive income
for the year 251 (1,877) (1,626) 584 (363) 221
======== ======== ======== ======== ======== ========
Basic and diluted
(Loss)/return per Ordinary
Share (pence) 6 0.82p (6.15p) (5.33p) 1.91p (1.19p) 0.72p
======== ======== ======== ======== ======== ========
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 February 2018.
Balance Sheet
As at 28 February 2019
As at As at
28 February 28 February
Note 2019 2018
GBP'000 GBP'000
Fixed Assets
Investments 8 (a) 22,556 26,776
------------- -------------
Current Assets
Debtors 9 2,920 2,365
Cash 42 198
------------- -------------
2,962 2,563
Creditors - amounts falling
due within one year 10 (176) (235)
Net Current Assets 2,786 2,328
------------- -------------
Net Assets 25,342 29,104
============= =============
Capital and Reserves
Called up share capital 12 19 19
Share premium account - 29,473
Capital reserve - realised (1,446) (1,069)
Capital reserve - unrealised (1,500) -
Revenue reserve 28,269 681
Total Equity 25,342 29,104
============= =============
Net Asset Value per Ordinary
Share 13 83.06p 95.39p
============= =============
The financial statements on pages 32 to 47 were approved and authorised for issue by the Board of Directors on 20 June 2019 and were signed on their behalf by:
Harold Paisner
Chairman
Statement of Cash Flows
For the year ended 28 February 2019
Year ended Year ended
28 February 28 February
2019 2018
GBP'000 GBP'000
(Loss)/Profit after tax (1,626) 221
Tax charge for the year 5 52
Loss on investments 1,500 4
Increase in debtors (555) (1,145)
Decrease in creditors (7) (20)
Cash outflow from operations (683) (888)
------------- -------------
Corporation tax paid (57) (74)
Net cash outflow from operating activities (740) (962)
------------- -------------
Cash flow from investing activities
Purchase of investments - (11,971)
Proceeds from disposal of investments
and repayments of loans 2,720 14,011
Net cash generated from investing
activities 2,720 2,040
------------- -------------
Cash flow from financing activities
Dividends paid (2,136) (915)
Net cash used for financing activities (2,136) (915)
------------- -------------
Net cash (decrease)/increase in cash
and cash equivalents (156) 163
Cash and cash equivalents at the beginning
of the period 198 35
Cash and cash equivalents at end of
year 42 198
============= =============
Statement of Changes in Equity
For the year ended 28 February 2019
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 March
2017 19 29,473 (728) 22 1,012 29,798
Total comprehensive
income for the year - - (363) - 584 221
Realised gain from
prior period - - 22 (22) - -
Dividends paid - - - - (915) (915)
---------- --------- ------------ -------------- --------- --------
Balance as at 28
February 2018 19 29,473 (1,069) - 681 29,104
Total comprehensive
income for the year - - (377) (1,500) 251 (1,626)
Cancellation of share
premium account - (29,473) - - 29,473 -
Dividends paid - - - - (2,136) (2,136)
Balance as at 28
February 2019 19 - (1,446) (1,500) 28,269 25,342
========== ========= ============ ============== ========= ========
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 GBP28,269,000 (2018: GBP681,000).
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.
The revenue reserve represents the cumulative revenue earned less cumulative distributions.
The company cancelled its share premium account in September 2018.
1. Accounting Policies
Accounting convention
Puma VCT 11 plc ("the Company") was incorporated, registered and is domiciled in England. The Company's registered number is 09197956. 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 February 2018 ("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 16.
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 multiples or 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 investments are taken to unrealised capital reserves.
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 7,627,992 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 38,139,963. 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 has 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.
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 other debtors and accrued income which are 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 6 and notes 8 and 14 of the financial statements.
2. Income
Year ended 28 February Year ended 28 February
2019 2018
GBP'000 GBP'000
Income from investments
Loan and loan note interest 697 1,137
Bond yields - 16
697 1,153
Other income
Bank deposit income 1 -
698 1,153
======================= =======================
3. Investment Management Fees
Year ended 28 February Year ended 28 February
2019 2018
GBP'000 GBP'000
Puma Investments fees 574 592
574 592
======================= =======================
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% (2018: 3.0 %) of the funds raised. Graham Shore (a director) holds a Directorship of the parent of the Investment Manager.
4. Other expenses
Year ended 28 February Year ended 28 February
2019 2018
GBP'000 GBP'000
PI Administration Services
fees 100 103
Directors' remuneration 48 48
Social security costs 2 2
Auditor's remuneration
for statutory audit 25 24
Legal and professional
fees 25 63
Other expenses 45 44
245 284
======================= =======================
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 22. The Company had no employees (other than Directors) during the year (2018: none). The average number of non-executive Directors during the year was 3 (2018: 3). The non-executive Directors are considered to be the Key Management Personnel of the Company with total remuneration for the year of GBP50,000 (2018: GBP50,000) including social security costs.
The Auditor's remuneration of GBP21,000 (2018: GBP20,000) has been grossed up in the table above to be inclusive of VAT. Non-audit fees charged during the year were GBP250 (2018: GBPnil) for iXBRL tagging of the 2018 financial statements.
5. Taxation
Year ended 28 Year ended 28
February 2019 February 2018
GBP'000 GBP'000
UK corporation tax charged
to revenue reserve 59 137
UK corporation tax credited
to capital reserve (54) (85)
UK corporation tax charge
for the year 5 52
=============== ===============
Factors affecting tax
charge for the year
(Loss)/profit before taxation (1,621) 273
=============== ===============
Tax charge calculated
on (loss)/profit before
taxation at the applicable
rate of 19% (308) 51
Tax on capital items not
taxable 285 1
Tax losses carried forward 23 -
Adjustments relating to
prior periods 5 -
5 52
=============== ===============
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 is recognised on capital gains or losses. Due to the intention to continue to comply with the VCT regulations, the Company has not provided for deferred tax on any realised or unrealised capital gains and losses. No deferred tax asset has been recognised in respect of the tax losses carried forward due to the uncertainty as to recovery.
6. Basic and diluted return/(loss) per Ordinary Share
Year ended 28 February 2019
Revenue Capital Total
Total comprehensive income
for the year GBP251,000 (GBP1,877,000) (GBP1,626,000)
Weighted average number
of shares in issue for
the year 38,139,963 38,139,963 38,139,963
Less: management incentive
shares (see note 11) (7,627,992) (7,627,992) (7,627,992)
Weighted average number
of shares for purposes
of return/(loss) per share
calculations 30,511,971 30,511,971 30,511,971
------------ --------------- ---------------
Return/(loss) per share 0.82p (6.15p) (5.33p)
Year ended 28 February 2018
Revenue Capital Total
Total comprehensive income
for the year GBP584,000 (GBP363,000) GBP221,000
Weighted average number
of shares in issue for
the year 38,139,963 38,139,963 38,139,963
Less: management incentive
shares (see note 11) (7,627,992) (7,627,992) (7,627,992)
Weighted average number
of shares for purposes
of return/(loss) per share
calculations 30,511,971 30,511,971 30,511,971
------------ ------------- ------------
Return/(loss) per share 1.91p (1.19p) 0.72p
7. Dividends
During the year, the directors paid the dividend approved at the 2018 AGM of 2p per share (2018: 3p paid in year, approved at 2017 AGM) resulting in a total dividend payment of GBP610,000 (2018: GBP915,000). The Directors do not propose a final dividend in relation to the year ended 28 February 2019. An interim dividend of 5p per ordinary share was paid from revenue reserves in the year ended 28 February 2019 totalling GBP1,526,000 (2018: GBPnil).
8. Investments
Qualifying Non-qualifying
(a) Movements in investments investments investments Total
GBP'000 GBP'000 GBP'000
Purchased at cost 20,157 6,619 26,776
Net unrealised gains/(losses) - - -
Valuation at 1 March
2018 20,157 6,619 26,776
Purchases at cost - - -
Disposal of investments
and repayments of loans
and loan notes - (2,720) (2,720)
Net unrealised loss (1,500) - (1,500)
Valuation at 28 February
2019 18,657 3,899 22,556
============= =============== ========
Book cost at 28 February
2019 20,157 3,899 24,056
Net unrealised losses
at 28 February 2019 (1,500) - (1,500)
Valuation at 28 February
2019 18,657 3,899 22,556
============= =============== ========
(b) Gains and losses on investments
The gains and losses on investments for the year shown in the Income Statement is analysed as follows:
Year ended Year ended
28 February 28 February
2019 2018
GBP'000 GBP'000
Realised losses in year - (4)
Unrealised losses in
year (1,500) -
(1,500) (4)
============= =============
(c) Quoted and unquoted investments
Market value Market value
as at 28 as at 28
February February
2019 2018
GBP'000 GBP'000
Unquoted investments 22,556 26,776
22,556 26,776
============= =============
Further details of these investments (including the unrealised loss in the year) are disclosed in the Chairman's Statement, Investment Manager's Report, Investment Portfolio Summary and Significant Investments on pages 1 to 14 of the Annual Report.
9. Debtors
As at 28 February As at 28 February
2019 2018
GBP'000 GBP'000
Other debtors 8 9
Accrued income 2,912 2,356
2,920 2,365
================== ==================
10. Creditors - amounts falling due within one year
As at 28 February As at 28 February
2019 2018
GBP'000 GBP'000
Accruals 162 169
Other creditors 14 14
Corporation tax - 52
176 235
================== ==================
11. Management Performance Incentive Arrangement
On 11 September 2014, 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 7,627,992 ordinary shares being 20% of the issued share capital of 38,139,963.
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
2019 2018
GBP'000 GBP'000
38,139,963 ordinary shares of 0.05p each 19 19
======== ========
13. Net Asset Value per Ordinary Share
As at As at
28 February 2019 28 February 2018
Net assets GBP25,342,000 GBP29,104,000
------------------ ------------------
Number of shares in issue
as at 28 February 2019 38,139,963 38,139,963
Less: management incentive
shares (see note 11) (7,627,992) (7,627,992)
------------------ ------------------
Number of shares in issue
for purposes of Net
Asset Value per share calculation 30,511,971 30,511,971
------------------ ------------------
Net asset value per share
Basic 83.06p 95.39p
Diluted 83.06p 95.39p
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 2019:
2019 2018
GBP'000 GBP'000
Financial assets at fair value
through profit or loss 22,556 26,776
Financial assets that are debt
instruments measured at amortised
cost 2,920 2,365
Financial liabilities measured
at amortised cost (176) (183)
25,300 28,958
======== ========
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 Company's maximum exposure to credit risk is as follows:
2019 2018
GBP'000 GBP'000
Investments in loans, loan
notes and bonds 9,646 12,367
Cash at bank and in hand 42 198
Interest, dividends and
other receivables 2,920 2,365
12,608 14,930
======== ========
The cash held by the Company at the year-end is held in one U.K. bank. 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 and loan notes 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 16. 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.
100% (2018: 100%) of the Company's investments are unquoted investments.
Liquidity risk
Details of the Company's unquoted investments are provided in the Investment Portfolio summary on page 7. By their nature, unquoted investments may not be readily realisable and 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 Strategic Report and the Report of the Directors. The Company's overall liquidity risks are monitored on a quarterly basis by the Board. The Company maintains access to cash reserves sufficient 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 0.75% at 28 February 2019 (2018: 0.5%). 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 2019.
Average
interest Period
Rate status rate until maturity Total
GBP'000
Cash at bank - RBS Floating 0.01% - 42
Loans and loan notes Floating 2.65% 20 months 2,250
Loans and loan notes Fixed 12.67% 33 months 7,396
Non-interest
Balance of assets bearing - 15,830
25,518
========
The following analysis sets out the interest rate risk of the Company's financial assets as at 28 February 2018.
Average
interest Period
Rate status rate until maturity Total
GBP'000
Cash at bank -
RBS Floating 0.01% - 198
Loans and loan
notes Floating 2.25% 32 months 2,250
Loans and loan
notes Fixed 8.85% 42 months 10,117
Non-interest
Balance of assets bearing - 16,774
29,339
========
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 than 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:-
2019 2018
GBP'000 GBP'000
Level 3
Unquoted investments 22,556 26,776
22,556 26,776
======== ========
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 8 to 14.
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 has 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. For accounting periods commencing after 5 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 (2018: none).
17. Controlling Party
In the opinion of the Directors there is no immediate or ultimate controlling party.
The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the year ended 28 February 2019, but has been extracted from the statutory financial statements for the year ended 28 February 2019 which were approved by the Board of Directors on 20 June 2019 and will be delivered to the Registrar of Companies. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 28 February 2018 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.
Copies of the full annual report and financial statements for the year ended 28 February 2019 will be available to the public at the registered office of the Company at Bond Street House, 14 Clifford Street, London, W1S 4JU and will be available for download from www.pumainvestments.co.uk.
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
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