Half-year Report

RNS Number : 0661U
Maven Income and Growth VCT 3 PLC
24 July 2020
 

Maven Income and Growth VCT 3 PLC

 

Interim Results for the Six Months Ended 31 May 2020

 

Highlights

 

• NAV total return at 31 May 2020 of 140.91p per share

 

• NAV at 31 May 2020 of 54.74p per share after payment of final dividend of 2.00p per share

 

• Interim dividend of 2.00p per share declared

 

•   £3.5 million invested in 12 new VCT qualifying private and AIM quoted companies, with a further four investments completed post the period end

 

• Follow-on funding provided to 13 portfolio companies as part of growth planning

 

• Realisation of Attraction World for a total return of 1.9 times cost

 

• Realisation of ITS Technology for a total return in excess of times cost

 

• Post the period end, partial realisation of Global Risk Partners for a total return of 2.1 times cost

 

Overview

 

During the reporting period, the global economy and financial markets have been significantly impacted by the COVID-19 pandemic, which has created a challenging operating environment for many portfolio companies. The Board and the Manager wish to reassure Shareholders that, since the emergence of the virus in the UK, Maven has acted swiftly to protect Shareholder value, whilst ensuring ongoing compliance with Government guidelines. In response to these unforeseen circumstances, the Manager has taken a small number of provisions against specific unlisted portfolio companies, in particular those with exposure to consumer facing sectors where the impact of the pandemic has been most pronounced. This resulted in a 6.7% reduction in NAV per share from 59.92p at 30 November 2019 to 55.91p at 20 March 2020, as announced on 26 March 2020. It is, however, important to highlight that, over recent years, your Company has been steadily constructing a broadly based portfolio of both private and AIM quoted companies, many of which have traded satisfactorily throughout the pandemic. Your Board is aware that, notwithstanding wider market conditions, regular income distributions remain an important component of Shareholder returns. Therefore, following recent exit activity, the Board has declared an interim dividend of 2.00p per share, reflecting an ongoing commitment to making distributions whenever possible.

The COVID-19 pandemic has had a profound impact on the personal and working lives of most people. Following the outbreak in the UK, Maven responded quickly to the situation and, in adherence with Government advice, cancelled all non-essential travel and introduced social distancing measures, with meetings taking place using video conference facilities and by telephone. All Maven employees have been working remotely throughout the lockdown and the investment team has been in active dialogue with portfolio companies to offer advice and assistance throughout the crisis. Where possible, portfolio companies have also availed themselves of Government led support, including the Coronavirus Job Retention Scheme and the Coronavirus Business Interruption Loan Scheme. During this period, the Board and the Manager have remained in regular contact regarding the evolving situation and will continue to provide updates to Shareholders when appropriate.

Despite the challenges presented by the coronavirus outbreak, it is encouraging to report that the Manager has maintained a good rate of deployment throughout the first half of the financial year, with the addition of a number of new private and AIM quoted company holdings to the portfolio. New investment activity is continuing cautiously, with meetings taking place remotely in line with Government guidelines. Several new investments have been completed during the lockdown period. In these cases, the transaction had been in process since the start of the year and underlying trading was relatively unaffected by the impact of COVID-19. Conversely, a small number of live transactions were also terminated in light of enhanced levels of client churn and a reduction in revenues.

The Manager remains committed to continuing to grow the portfolio through the addition of carefully selected private and AIM quoted companies from a broad range of market sectors. Maven believes that a hybrid model, offering the ability to invest across both private equity and AIM, is an important differentiator that helps to build a portfolio with complementary liquidity and return characteristics, as it provides Shareholders with access to a wider range of companies with scope to realise profits at different times. It is also worthwhile noting that, following the active investment strategy that has been pursued over the past few years, your Company currently has 54% invested, by value, in younger growth orientated businesses that typically operate with a flexible cost base. Many of these companies are focused on the software and technology space and have pre-existing contracts in place with good levels of recurring revenue, which offers some degree of protection from the current economic uncertainty.

 

The provision of follow-on funding to support portfolio companies that are making tangible commercial progress remains a key component of the investment strategy. The Manager generally adopts a phased or tranched approach to investment and, in certain cases, will make a small initial investment whilst retaining the option to invest further, subject to the company achieving specific agreed commercial milestones. This allows the Manager to closely monitor progress and assess performance before committing further financial support. Where possible, Maven favours co-investing alongside another VCT house or partner to help further diversify portfolio risk. In terms of new transaction activity, Maven continues to follow a highly selective approach to investment, using its nationwide investment team and office network, generally only supporting companies that offer a combination of management talent and sustainable growth in revenues. It is also important that the entry price of every new investment offers prospective returns commensurate with the early stage nature of VCT investment.

 

Realisations are an important element of generating enhancements to Shareholder value and in support a programme of regular dividend payments. The Maven team works closely with each portfolio company that is considering, or is actively engaged in, a sale process, helping to identify the most suitable adviser and potential acquirers that may be willing to pay a premium or strategic price for the business. The current economic uncertainty is, however, likely to result in fewer near term exits, with some sales processes temporarily put on hold until market conditions recover.

 

Dividends

 

As Shareholders will be aware from recent Annual and Interim Reports, decisions on distributions take into consideration the availability of surplus revenue, the realisation of capital gains, the adequacy of distributable reserves and the VCT qualifying level. These factors are kept under close and regular review by the Board and the Manager, both of whom recognise the importance of tax-free distributions to Shareholders.

 

In light of the recent realisation activity, an interim dividend in respect of the year ending 30 November 2020, of 2.00p per Ordinary Share, will be paid on 28 August 2020 to Shareholders on the register at 31 July 2020. Since the Company's

launch, and after receipt of this latest dividend, 88.17p per share will have been distributed in tax-free dividends. It should be noted that the effect of paying dividends is to reduce the NAV of the Company by the total cost of the distribution.

 

The Directors would like to remind Shareholders that, as the portfolio continues to expand and a greater proportion of holdings are in young companies with growth capital requirements, there will continue to be fluctuations in the quantum and timing of dividend payments. Distributions will be more closely linked to realisation activity and, if larger distributions are required as a consequence of exits, this could result in a commensurate reduction in NAV per share. However, the Board considers this to be a tax-efficient means of returning value to Shareholders, whilst maintaining compliance with the requirements of the VCT legislation.

 

Dividend Investment Scheme (DIS)

 

The Company has in place a DIS, through which Shareholders may elect to have their dividend payments used to apply for new Ordinary Shares issued by the Company under the standing authority granted by Shareholders at AGMs. However, on 26 March 2020, the Board announced that the DIS had been suspended due to the volatility in financial markets caused by the COVID-19 pandemic, with the payment of the final dividend for the year ended 30 November 2019 on 17 April 2020 being made by either cheque or bank transfer using existing mandate instructions.

 

The Directors have resolved to re-introduce the DIS with immediate effect. This means that, unless they advise the Company otherwise, those Shareholders who had previously elected to participate in the DIS will revert to receiving new shares with effect from 28 August 2020, being the payment date of the above interim dividend. Shareholders who have not previously applied to participate in the DIS and who wish to do so in respect of the interim dividend payable on 28 August 2020, should ensure that a mandate form, or CREST instruction if appropriate, is received by the Registrar, Link Market Services, prior to the dividend election date of 14 August 2020. Shares issued under the DIS should qualify for VCT tax reliefs applicable for the tax year in which they are allotted. Terms & conditions of the scheme, together with a mandate form, are available from the Company's website at: www.mavencp.com/migvct3.

 

Allotment Update

 

On 13 November 2019, the Directors of your Company, together with the board of Maven Income and Growth VCT 4 PLC, launched joint Offers for Subscription of new Ordinary Shares for up to £15 million in aggregate (£7.5 million for each company). Your Company's Offer closed on 28 January 2020, fully subscribed.

 

The allotment of 11,065,572 new Ordinary Shares, in respect of the 2019/20 tax year, was made on 5 February 2020. The allotment of 1,443,232 new Ordinary Shares, in respect of the 2020/21 tax year, was made on 9 July 2020.

 

This additional liquidity will enable your Company to continue to invest in both unlisted and AIM companies, alongside providing follow-on funding to support existing companies where there is an ongoing business case and commercial traction that merits support. Furthermore, the funds raised will allow your Company to maintain its share buy-back policy, whilst also spreading costs over a wider asset base in line with the objective of maintaining a competitive total expense ratio for the benefit of all Shareholders.

 

Portfolio Developments

 

Whilst your Company's portfolio is well diversified and broadly spread, the rapid change in economic activity resulting from the outbreak of COVID-19 has inevitably had an impact on the trading conditions of certain portfolio companies.

 

As announced on 26 March 2020, the Board and the Manager acted swiftly by taking a small number of protective provisions against those unlisted companies with exposure to consumer facing sectors, which were most immediately affected by the lockdown. The Manager continues to work closely with the management teams of all investee companies, taking corrective actions as quickly as possible on a case-by-case basis.

 

During the period, the oil price was adversely affected due to a dispute between Saudi Arabia and Russia just as the spread of COVID-19 was resulting in a dramatic fall in the global demand for oil. Following an agreement to cut oil production by a record amount, the market has stabilised and the oil price has started to recover. Those portfolio companies with exposure to the sector have continued to trade throughout the lockdown with most remaining profitable. Following a number of realisations in recent years, the energy services sector now accounts for less than 8% of the portfolio by value with all of the remaining assets operating in the service sector, and more specifically in areas related to mandatory rather than discretionary spend, which offers some protection in the current economic climate.

 

In addition to the provisions taken in response to COVID-19, a full provision was also taken against the value of the holding in Cognitive Geology, which failed to commercialise its petroleum geoscience software. Notwithstanding the challenges presented by the pandemic, most portfolio companies continue to trade well and make encouraging progress.

 

In 2013, your Company invested in Global Risk Partners, participating in a syndicate to back a highly experienced management team to pursue a buy & build strategy in the speciality insurance and reinsurance markets. Since launch, the business has achieved significant scale, having completed and successfully integrated over 50 acquisitions, with the enlarged business now achieving annual gross written premium in excess of £750 million. Global Risk Partners is now within the top ten insurance brokers in the UK market and is the UK's second largest independent insurance broker. Given the scale achieved, the management team, together with the support of institutional investors, engaged with a specialist corporate finance adviser to market the business for sale. Following a competitive process, an offer for the business was received from a US private equity buyer, with a partial exit completing conditionally in February 2020. Regulatory approval for the transaction was subsequently granted and the sale completed shortly after the period end, generating a total return of approximately 2.1 times cost including all yield paid.

 

The first purpose-built facility of Horizon Cremation, the Clyde Coast & Garnock Valley, opened in April 2018 and has been steadily building a strong market presence, having been named Best Crematoria in Scotland at the 2019 Scottish Funeral Awards. As part of its growth strategy, Horizon recently acquired two further sites and obtained planning consent for the construction of new crematoria at each location. Building work is now underway at Cannock in Staffordshire and is due to commence at the site in the suburbs of Glasgow during summer 2020. Two further sites are also now under option, with planning applications submitted. The strategic objective remains to build a portfolio of modern crematoria that provide the highest levels of service and care, alongside best ethical practice and environmental standards.

 

In 2016, your Company invested in The GP Service (The GPS), which provides a secure end-to-end system that allows patients to consult with a doctor online and to have a prescription dispensed at a local pharmacy that is registered with the service. The "on-demand" sector for medical consultations has experienced significant growth over recent years. The GPS remains at the forefront of this market having secured Care Quality Commission accreditation, using General Medical Council registered doctors and being the only supplier to have access to NHS Summary Care Records, enhancing the service offering. The management team continue to progress a number of significant commercial agreements, which could be transformational for the business.

 

Martel, the manufacturer and supplier of custom-built compact printers, portable data loggers and display units to the medical, pharmaceutical and other testing and compliance markets has benefitted from a period of strong trading over recent months. The company has proven resilient during the COVID-19 crisis and is experiencing good levels of demand for products from the medical market, which is expected to continue post the end of the lockdown. Martel has a strong order book, is currently operating at full capacity and is forecast to deliver another positive financial performance in 2020.

 

Visual asset management services group Whiterock continues to make good progress in line with the core objectives identified at the time of the original investment in December 2016. Whiterock's ZynQ360 software solution enables clients to navigate areas of hard to access assets such as offshore platforms, refineries or government buildings using 360° photography and video to create a high-definition digital view. The business has developed its technology platform and secured a number of material contracts with international blue-chip clients in the oil & gas and mining sectors, providing a positive endorsement of the product and its capabilities.

 

Maven has a dedicated London based AIM VCT team with a deep understanding of the market and long-standing relationships with the local broking community. During the period, the AIM portfolio delivered a positive contribution to the overall performance of your Company. One of the key contributors to this performance was Byotrol, a company that develops and manufactures antimicrobial and antiviral products for the home, healthcare and personal markets and has experienced exceptional levels of demand since the outbreak of COVID-19, which has been reflected in share price appreciation.

 

Liquidity Management

 

The Board and the Manager continue to operate an active policy with respect to liquidity management, with the objective of generating income from cash resources held prior to investment. While the Finance Bill 2016 introduced the restriction on holding investments in instruments such as treasury bills, or other government-backed securities for liquidity management purposes, it does permit holding certain other listed securities. Based on the Manager's recommendation, the Board has authorised the Manager to invest in a small portfolio of listed investment trusts that offer attractive income characteristics. The Manager maintains a positive view on these holdings and will continue to consider any other permitted liquidity management investment options that have the potential to generate income alongside the prospect of capital appreciation.

 

New Investments

 

During the period, your Company provided development capital to seven VCT qualifying private companies offering interesting growth opportunities:

 

Coniq has developed a market leading customer engagement platform that is used by shopping malls and destination retail villages to support customer loyalty programmes, which are ultimately designed to increase customer spend. The business has a global presence, with key customers in Europe and the Middle East, where there is a high prevalence of large scale retail malls. The VCT funding is being used to accelerate technical development of the software platform including Artificial Intelligence (AI) driven capabilities to automate customer loyalty activities, to support the hiring of sales and marketing personnel, and to facilitate international expansion with offices in Barcelona, Chicago and Warsaw scheduled to open in the near term.

 

HiveHR has developed an employee engagement software as a service (SaaS) platform that provides real time, responsive and automated employee feedback surveys to enable organisations to better understand their employees. The company has a diverse customer base that includes Accenture, Hermes, River Island, Shop Direct, Tarmac, Travelodge and various NHS and public sector organisations, and retains a high level of recurring revenue. The VCT funding is being used to support the growth of the business as it expands its client base.

 

Intilery.com is a developer and provider of a digital customer engagement platform that provides a holistic view of a client's marketing activities, as well as using real-time data about their customers' behaviour to identify opportunities for enhancing multi-channel marketing campaigns. Personalised interactions and real time reminders are used to create a better customer experience, to help improve levels of engagement, enhance customer loyalty and ultimately increase revenues. The VCT funding will be used to expand the sales and marketing team as well as further develop the product and associated technology.

 

Nano Interactive is an advertising technology business, which uses online search activity to identify relevant individuals that corporate clients and media agencies should target with their advertising. Nano then places these advertisements in real time, or shortly afterwards, on behalf of clients. The company has a strong blue-chip client base of advertisers, including Microsoft and agency groups such as Omnicom and Publicis. The VCT funding will be used for further product development and to establish a presence in the USA.

Precursive is a B2B business that provides an easy to use SaaS platform to allow technology and service-based customers to automate their client onboarding and workforce capacity management. The platform bridges the gap between customer relationship management (CRM) sales systems and customer success platforms, in order to improve operational efficiency, enhance customer experience and reduce client churn. Precursive has built a strong market position on the back of a number of high-quality relationships with customers such as Google, DPD, GoCardless and SES, which also provides excellent levels of forward revenue visibility. The VCT funding will be used to hire additional development staff, to grow outbound and channel sales and to invest in product development.

Push Technology is an established technology business that provides client solutions to improve the speed, security and efficiency of real time data transfers. Push has built a strong blue-chip customer base across financial services (including CME and ICAP), e-gaming companies and IOT (Internet of Things), where real-time data is of particularly high importance and value. Push engages with customers through a combination of long-term software licenses combined with annual recurring maintenance and support income. The VCT funding will be used to develop the business internationally and to enhance the technology offering.

The Algorithm People has developed a SaaS platform for the transport and logistics sectors that enables operators to reduce costs by helping them plan the most efficient route and job schedule for their vehicle fleet (including electric vehicles). The application is delivered through a web browser (My Transport Planner) thereby reducing any implementation costs or complications. The VCT funding will be used to progress new partnerships and increase market presence.

In addition, five new AIM quoted investments were added to the portfolio:

Diurnal is a speciality pharmaceutical company developing high quality products for the life-long treatment of rare and chronic endocrine conditions, including congenital adrenal hyperplasia and adrenal insufficiency. Your Company participated in the £11.2 million fundraising, which completed in March 2020. The proceeds are being used to support the development and commercialisation of Diurnal's products.

Eden Research develops and supplies innovative biopesticide products and natural micro-capsulation technologies to the global crop protection, animal health and consumer products industries. Your Company participated in the £10.1 million fundraising, which completed in March 2020. The proceeds will enable the company to develop, register and commercialise key new products in categories such as insecticides, formulations and seed treatment, taking a leading position in the rapidly growing sustainable agriculture market.

Faron Pharmaceuticals is a clinical stage biopharmaceutical company that is developing novel treatments for medical conditions where there is currently significant unmet need. Your Company participated in a market placing, which raised a total of £12 million, which completed in April 2020. The proceeds will be used to support the expansion of the precision immunotherapy candidates, Clevegen, into planned cancer targets. It will also help to strengthen the balance sheet to assist further research and development.

Genedrive is a molecular diagnostics company that is developing and commercialising a low cost, rapid and simple to use point of need molecular diagnostics platform for the diagnosis of infectious diseases, and for use in patient stratification pathogen detection and other indications. Genedrive recently announced the development of a high throughput SARS-CoV-2 test to detect people with the COVID-19 infection. Your Company participated in the £7.0 million placing, which completed in May 2020. The proceeds will be used to support the developments of the SAR-CoV-2 assays and fund product development.

Trackwise Designs is a leading provider of specialist interconnector products, using printed circuit technology for use across multiple sectors and applications. Your Company participated in the £5.9 million fundraising, which completed in March 2020 and provides the necessary growth capital to enable the business to further develop its proprietary technology.

The following investments have been completed during the reporting period:

 

 

 

Investments

 

 

Date

 

 

Sector

Investment

cost

£'000

 

 

Website

New unlisted

 

 

 

 

CODILINK UK Limited (trading as Coniq)

December 2019

Software & computer services

(marketing)

450

www.coniq.com

HiveHR Limited

February 2020

Software & computer services (employment services)

300

www.hivehr.com

Intilery.com Limited

April 2020

Software & computer services

(marketing)

75

www.intilery.com

Nano Interactive Group Limited

March 2020

Software & computer services

(advertising)

625

www.nanointeractive.com

Precursive Limited

March 2020

Software & computer services

750

www.precursive.com

 

 

(professional/employment

 

 

 

 

services)

 

 

Push Technology Limited

March 2020

Software & computer services

(consumer services)

525

www.pushtechnology.com

The Algorithm People Limited

May 2020

Software & computer services

(transport)

300

www.thealgorithmpeople.co.uk

Total new unlisted

 

 

3,025

 

 

Follow-on unlisted

 

 

 

 

ADC Biotechnology Limited1

January and March 2020

Pharmaceuticals & biotechnology

124

www.adcbio.com

AVID Technology Group Limited

March 2020

Automobile & parts

71

www.avidtp.com

Boiler Plan (UK) Limited

March 2020

Software & computer services

(consumer services)

200

www.boilerplanuk.com

Bright Network (UK) Limited

March 2020

Software & computer services (employment services)

666

www.brightnetwork.co.uk

Curo Compensation Limited

April 2020

Software & computer services (employment services)

81

www.curocomp.com

e.fundamentals (Group) Limited

April 2020

Software & computer services

(marketing)

333

www.efundamentals.com

Horizon Cremation Limited

May 2020

Support services (consumer

services)

600

www.horizoncremation.co.uk

Lending Works Limited

February 2020

Software & computer services

(financial services)

15

www.lendingworks.co.uk

Life's Great Group Limited (trading as Mojo Mortgages)

March 2020

Software & computer services

(financial services)

117

www.mojomortgages.com

Optoscribe Limited

March 2020

Diversified industrials

88

www.optoscribe.com

QikServe Limited1

December 2019

and March 2020

Software & computer services

(hospitality)

77

www.qikserve.com

The GP Service (UK) Limited

May 2020

Health

162

www.thegpservice.co.uk

Total follow-on unlisted

 

 

2,534

 

 

 

 

 

 

Total unlisted

 

 

5,559

 

 

 

Investments

 

 

Date

 

 

Sector

Investment

cost

£'000

 

 

Website

New quoted

 

 

 

 

Diurnal Group PLC

March 2020

Pharmaceuticals & biotechnology

63

www.diurnal.co.uk

Eden Research PLC

March 2020

Chemicals

102

www.edenresearch.com

Faron Pharmaceuticals Oy

April 2020

Pharmaceuticals & biotechnology

250

www.faron.com

Genedrive PLC

May 2020

Pharmaceuticals & biotechnology

25

www.genedriveplc.com

Trackwise Design PLC

March 2020

Electronic & electrical equipment

63

www.trackwise.co.uk

Total new quoted

 

 

503

 

 

Follow-on quoted

C4X Discovery Holdings PLC

 

 

May 2020

 

 

Pharmaceuticals & biotechnology

 

 

41

 

 

www.c4xdiscovery.com

Total follow-on quoted

 

 

41

 

 

 

 

 

 

Total quoted

 

 

544

 

 

 

 

 

 

Total investments

 

 

6,103

 

 

1 Follow-on investment made in two stages.

 

At the period end, the portfolio stood at 87 unlisted and quoted investments, at a total cost of £33.33 million.

 

Realisations

 

The exit from ITS Technology completed in December 2019, representing the first realisation from the early stage portfolio. The initial investment completed in June 2017 and within a relatively short space of time it became apparent that, in order to achieve commercial scale, the business would require an investor that was not constrained by the VCT rules. As a result, a specialist corporate finance adviser was appointed in early 2019, to lead a process to help secure a sale of the business and identify an investor who could support its long-term funding requirements. It is pleasing to report that the exit completed shortly before the period end through a sale to Aviva Investors, the global asset management business of Aviva, which has committed £45 million to support the roll-out of the full fibre broadband network across the country. The exit generated a total return slightly in excess of cost over the holding period.

 

In February 2020, your Company realised its holding in Attraction World, one of the UK's largest theme park and attraction ticket specialists. Since Maven originally backed the MBO of the business in December 2010, Attraction World has enabled millions of customers to pre-book tickets for 5,000 experiences in over 50 countries, including amusement parks, sightseeing tours, theatre shows and experience days. In 2016, the company made the strategic acquisition of Day Out With The Kids, the UK's biggest website and online community for family attractions and children's activities. The realisation, via a secondary buyout led by the CEO, generated a total return of 1.9 times cost for Maven clients.

 

The table below gives details of all realisations achieved during the reporting period:

 

 

 

 

 

Sales

 

 

 

Year first invested

 

 

 

Complete/ partial exit

Cost of shares disposed

of

£'000

Value at

30

November

2019

£'000

 

 

Sales proceeds

£'000

 

 

Realised gain/(loss)

£'000

Gain/(loss) over 30 November 2019 value

£'000

Unlisted

 

 

 

 

 

 

 

Attraction World Holdings Limited

2010

Complete

23

264

264

241

-

ITS Technology Group Limited1

2017

Complete

695

695

601

(94)

(94)

Lambert Contracts Holdings Limited

2013

Complete

-

-

20

20

20

Other unlisted investments

 

 

-

-

1

1

1

Total unlisted

 

 

718

959

886

168

(73)

 

Quoted

 

 

 

 

 

 

 

Byotrol PLC

2017

Partial

77

32

118

41

86

Diaceutics PLC

2019

Partial

78

94

122

44

28

Eden Research PLC

2020

Partial

1

1

1

-

-

Genedrive PLC

2020

Partial

9

-

21

12

21

Total quoted

 

 

165

127

262

97

135

 

 

 

 

 

 

 

 

Total sales

 

 

883

1,086

1,148

265

62

 

1   Proceeds exclude yield and redemption premiums received, which are disclosed as revenue for financial reporting purposes.

 

Material Developments Since the Period End

 

Since 31 May 2020, two new private company holdings have been added to the portfolio.

 

· Hublsoft is a data analytics specialist that aims to provide better support for corporate decision makers. Through its SaaS platform, Hublsoft simplifies the analysis of big data, filtering options using natural language and charts that are simple to interpret and understand. The smart user interface enables the process to be accessible and engaging, opening up the opportunity for big data to clients who had previously found it too complex or heavily reliant on third parties. The VCT funding will be used to support the growth in new markets in the UK and Europe.

 

· Quorum Cyber Security provides managed service security and consulting services to clients across the UK, Europe and the Middle East. The company's platform, Clarity, provides enterprise grade cyber security at an accessible price point. Quorum has achieved good growth over the past year and is on track to maintain this momentum. The VCT funding will be used to invest in sales and marketing and to further develop the relationship with Microsoft, which should enable Quorum to target larger customers in the future.

 

In addition, follow-on funding was provided to Growth Capital Ventures, Mojo Mortgages and Relative Insight.

 

Two new AIM quoted companies were also added to the portfolio:

 

· AFC Energy is a leading provider of hydrogen power generation technologies. Your Company participated in the £31.6m fundraising, which completed in June 2020. The proceeds will be used to support the continued development of the company as it moves from the development phase into commercialisation of its products and technology.

 

· Feedback is a specialist medical imaging technology company that provides innovative software systems, which advance the work of radiologists, clinicians and medical researchers by improving workflow and giving unique insight into disease, including cancer. Your Company participated in the £5.0 million fundraising, which completed in June 2020 and the proceeds from which will be used for product development, to support sales and marketing activities and to expand into new territories.

 

Principal and Emerging Risks and Uncertainties

 

The principal and emerging risks and uncertainties facing the Company were set out in full in the Strategic Report contained within the 2019 Annual Report, and are the risks associated with investment in small and medium sized unlisted and AIM/ NEX quoted companies which, by their nature, carry a higher level of risk and are subject to lower liquidity than investments in larger quoted companies. The valuation of investee companies may be affected by economic conditions, the credit environment and other risks including legislation, regulation, adherence to VCT qualifying rules and the effectiveness of the internal controls operated by the Company and the Manager. These risks and procedures are reviewed regularly by the Audit & Risk Committee and reported to your Board. The Board has confirmed that all tests, including the criteria for VCT qualifying status, continue to be monitored and met.

 

During the period under review, the COVID-19 pandemic developed from being an emerging risk to a principal risk that had implications for the Company, the Manager, investee companies and both the UK and global economies. The Board and the Manager have sought to identify all of the individual associated risks that could impact on the Company and the steps that are required to mitigate them. These have been recorded in separate risk registers that are maintained by the Company and the Manager, and these will be reviewed on a regular basis as the situation continues to evolve.

 

Share Buy-backs

 

Shareholders have given the Board authority to buy back shares for cancellation or to be held in treasury, subject always to such transactions being in the best interests of Shareholders. It is intended that, subject to market conditions, available liquidity and the maintenance of the Company's VCT status, shares will continue to be bought back at prices representing a discount of between 5% and 10% of the prevailing NAV per share. During the period under review, a total of 711,694 shares were bought back at a total cost of £364,000.

 

Regulatory Update

 

Following the outbreak of the COVID-19 pandemic, there have been a number of regulatory developments that each aim to assist and support companies through this crisis. The Corporate Insolvency and Governance Act, which received Royal Assent on 25 June 2020, will temporarily suspend parts of insolvency law to support directors to continue trading through the emergency, without the threat of personal liability for wrongful trading and to protect companies from creditor action. In addition, Company Law and other legislation will be amended to provide companies temporary easements on company filings and the holding of AGMs. However, it is hoped that your Company will not be required to take advantage of these amendments.

 

The Financial Conduct Authority (FCA) has recognised that fund managers and auditors could face challenges in preparing financial information as a result of the pandemic and have announced an extension to the filing deadlines for annual and interim reports. Your Company, however, does not expect to have to take advantage of these extended filing deadlines.

 

The FCA has also published detailed information setting out its expectations during the crisis. The FCA expects firms to take reasonable steps to ensure that they are prepared to meet the challenges presented by coronavirus in order to maintain business continuity. Firms are encouraged to ensure that they are managing their financial resilience and liquidity, and to report to the FCA if they believe they will face difficulties. The FCA has also set out its high-level expectations on the application of firms' systems and controls for combatting and preventing financial crime, including client identity verification.

 

On 27 March 2020, the International Private Equity and Venture Capital Valuation (IPEV) Guidelines Board issued special valuation guidance to assist managers who are applying the IPEV Valuation Guidelines to their portfolios from 31 March 2020. The guidelines were last updated in 2018 and are the prevailing framework for fair value information in the private equity and venture capital industry. The special valuation guidance reinforces key valuation principles in order to ensure the robustness of information making its way to investors and other stakeholders; in the current global crisis it is vitally important that information continues to flow in a timely and consistent manner.

 

Outlook

 

Notwithstanding the unforeseen difficulties presented by the COVID-19 pandemic, your Company remains well positioned with a diverse portfolio of younger companies seeking to achieve rapid growth and scale, balanced by a number of more established and mature private and AIM quoted investments. The strategy for the second half of the financial year will remain focused on cautiously expanding and further developing the portfolio, in particular seeking out those growth companies that have strong recurring or contractual revenues, or that are active in counter cyclical sectors, operate an online business model, or are generally more defensive to the market and trading conditions experienced in the first half of the year.

 

 

 

On behalf of the Board

Maven Capital Partners UK LLP

Secretary

 

24 July 2020

 

 

Summary of Investment Changes

For the six months ended 31 May 2020

 

 

Valuation 

30 November 2019

  £'000  %

Net investment/ (disinvestment)

£'000

Appreciation/ (depreciation)

£'000

Valuation

31 May 2020

  £'000  %

Unlisted investments

 

 

 

 

 

 

Equities

14,290

35.1

4,713

(1,485)

17,518

40.8

Loan stock

8,887

21.8

(40)

(950)

7,897

18.4

 

23,177

56.9

4,673

(2,435)

25,415

59.2

AIM/NEX investments

 

 

 

 

 

 

Equities

905

2.2

282

398

1,585

3.7

Listed investments

 

 

 

 

 

 

Investment trusts

2,541

6.2

-

(426)

2,115

4.9

Total investments

26,623

65.3

4,955

(2,463)

29,115

67.8

 

Other net assets

 

14,115

 

34.7

 

-

 

(344)

 

13,771

 

32.2

Net assets

40,738

100.0

4,955

(2,807)

42,886

100.0

 

 

Investment Portfolio Summary

 

As at 31 May 2020

 

 

 

 

Investment

 

 

Valuation

£'000

 

 

Cost

£'000

 

 

% of

total assets

 

 

% of

equity held

% of

equity held by other clients1

Unlisted

 

 

 

 

 

Horizon Cremation Limited

1,288

1,288

3.1

3.7

18.6

CatTech International Limited

1,169

627

2.7

6.0

24.0

Martel Instruments Holdings Limited

1,128

1,026

2.6

12.4

31.8

Bright Network (UK) Limited

1,054

1,015

2.5

4.9

25.1

Maven Co-invest Endeavour Limited Partnership

1,042

417

2.4

8.9

91.1

(invested in Global Risk Partners)

 

 

 

 

 

Vodat Communications Group Limited

1,024

567

2.4

4.2

22.6

The GP Service (UK) Limited2

884

852

2.1

9.4

40.2

CB Technology Group Limited

812

558

1.9

11.2

67.7

Life's Great Group Limited

796

787

1.9

9.0

26.8

(trading as Mojo Mortgages)

 

 

 

 

 

Filtered Technologies Limited

750

750

1.7

8.0

18.6

Precursive Limited

750

750

1.7

6.5

15.1

HCS Control Systems Group Limited

746

746

1.7

6.1

30.4

Glacier Energy Services Holdings Limited

686

686

1.6

2.6

25.0

Rockar 2016 Limited (trading as Rockar)

670

578

1.6

3.0

12.6

TC Communications Holdings Limited

645

980

1.5

8.3

21.7

Ensco 969 Limited (trading as DPP)

641

1,133

1.5

4.8

29.7

RMEC Group Limited

634

446

1.5

2.7

47.4

Nano Interactive Group Limited

625

625

1.5

3.7

11.2

Contego Solutions Limited (trading as NorthRow)

597

597

1.4

3.7

14.6

Flow UK Holdings Limited

597

597

1.4

7.0

28.0

Delio Limited

533

533

1.2

3.7

10.3

Push Technology Limited

525

525

1.2

2.8

8.5

QikServe Limited

493

658

1.1

3.4

14.5

Whiterock Group Limited

485

320

1.1

5.1

24.9

e.fundamentals (Group) Limited

467

467

1.1

2.1

8.4

AVID Technology Group Limited

461

461

1.1

4.4

13.0

CODILINK UK Limited (trading as Coniq)

450

450

1.0

1.3

3.6

Boiler Plan (UK) Limited

450

450

1.0

7.2

40.5

Relative Insight Limited

400

400

0.9

2.3

23.1

WaterBear Education Limited

370

370

0.9

8.7

35.0

ebb3 Limited

366

326

0.9

7.4

48.2

Symphonic Software Limited

350

350

0.8

4.2

10.2

BioAscent Discovery Limited

338

199

0.8

5.0

35.0

GradTouch Limited

300

400

0.7

5.8

29.7

HiveHR Limited

300

300

0.7

5.2

33.7

 

 

Investment Portfolio Summary (Continued)

 

As at 31 May 2020

 

Investment

 

 

Valuation

£'000

 

 

Cost

£'000

 

 

% of

total assets

 

 

% of

equity held

% of

equity held by other clients1

Unlisted (continued)

 

 

 

 

 

The Algorithm People Limited

300

300

0.7

9.7

16.3

Growth Capital Ventures Limited

268

256

0.6

6.1

32.4

ADC Biotechnology Limited

252

704

0.6

3.1

15.2

Altra Consultants Limited

250

250

0.6

4.2

55.8

Curo Compensation Limited

228

298

0.5

2.4

16.6

Shortbite Limited (trading as DigitalBridge)

225

225

0.5

3.6

15.0

ISN Solutions Group Limited

205

321

0.5

4.5

50.5

Optoscribe Limited

187

187

0.4

1.0

9.0

eSafe Global Limited

186

248

0.4

4.6

27.4

R&M Engineering Group Limited

171

761

0.4

8.3

62.3

Fathom Systems Group Limited

77

710

0.2

7.8

52.2

Intilery.com Limited

75

75

0.2

3.3

23.1

Honcho Markets Limited

65

64

0.2

1.5

23.0

FLXG Scotland Limited

55

369

0.1

2.4

11.9

(formerly Flexlife Group Limited)

 

 

 

 

 

Space Student Living Limited

45

-

0.1

11.5

68.6

Other unlisted investments

-

3,047

-

 

 

Total unlisted

25,415

29,049

59.2

 

 

 

Quoted

 

 

 

 

 

Diaceutics PLC

310

163

0.8

0.5

0.5

MaxCyte Inc

250

250

0.6

0.3

0.3

Faron Pharmaceuticals Oy

244

250

0.6

0.2

0.1

Byotrol PLC

184

120

0.4

1.2

2.3

C4X Discovery Holdings PLC

144

139

0.3

0.6

1.1

Eden Research PLC

101

101

0.2

0.5

1.4

Trackwise Designs PLC

74

63

0.2

0.4

1.0

Diurnal Group PLC

64

63

0.1

0.2

0.6

Cello Health PLC

57

54

0.1

0.1

0.4

Osirium Technologies PLC

57

100

0.1

1.5

4.4

Entertainment AI PLC

42

75

0.1

0.4

2.2

Genedrive PLC

33

16

0.1

0.1

0.1

Vianet Group PLC (formerly Brulines Group PLC)

20

31

0.1

0.1

1.4

Other quoted investments

5

585

-

 

 

Total quoted

1,585

2,010

3.7

 

 

 

 

Investment Portfolio Summary (Continued)

 

As at 31 May 2020

 

 

 

 

Investment

 

 

Valuation

£'000

 

 

Cost

£'000

 

 

% of

total assets

 

 

% of

equity held

% of

equity held by other clients1

Private equity investment trusts

 

 

 

 

 

HgCapital Trust PLC

300

249

0.7

-

0.1

ICG Enterprise Trust PLC

286

333

0.7

0.1

0.1

Apax Global Alpha Limited

251

250

0.6

-

0.1

HarbourVest Global Private Equity Limited

245

250

0.6

-

0.1

Princess Private Equity Holding Limited

238

270

0.6

0.1

0.1

BMO Private Equity Trust PLC

230

253

0.5

0.1

0.3

(formerly F&C Private Equity Trust PLC)

 

 

 

 

 

Pantheon International PLC

178

180

0.4

-

0.1

Standard Life Private Equity Trust PLC

101

110

0.2

-

0.1

Total private equity investment trusts

1,829

1,895

4.3

 

 

 

Real estate investment trusts

 

 

 

 

 

Target Healthcare REIT Limited

91

96

0.2

-

0.1

Regional REIT Limited

80

101

0.2

-

0.1

Schroder REIT Limited

64

107

0.1

-

0.1

Custodian REIT PLC

51

71

0.1

-

-

Total real estate investment trusts

286

375

0.6

 

 

 

 

 

 

 

 

Total investments

29,115

33,329

67.8

 

 

 

1 Other clients of Maven Capital Partners UK LLP.

Atul Devani is executive chairman of this company.

 

 

Income Statement

 

For the six months ended 31 May 2020

 

 

 

Six months ended

31 May 2020

(unaudited)

Six months ended

31 May 2019

(unaudited)

Year ended

30 November 2019

(audited)

 

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

Revenue

£'000

Capital

£'000

Total

£'000

(Losses)/gains on investments

-

(2,463)

(2,463)

-

603

603

-

641

641

Income from investments

609

-

609

359

-

359

922

-

922

Other income

14

-

14

30

-

30

60

-

60

Investment management fees

(110)

(439)

(549)

(108)

(435)

(543)

(213)

(854)

(1,067)

Other expenses

(143)

-

(143)

(133)

-

(133)

(300)

-

(300)

Net return on ordinary activities before taxation

370

(2,902)

(2,532)

148

168

316

469

(213)

256

 

Tax on ordinary activities

 

(32)

 

-

 

(12)

 

12

 

-

 

(78)

 

78

 

-

Return attributable to Equity Shareholders

338

(2,870)

(2,532)

136

180

316

391

(135)

256

 

Earnings per share (pence)

 

0.45

 

(3.84)

 

(3.39)

 

0.20

 

0.26

 

0.46

 

0.57

 

(0.20)

 

0.37

 

All gains and losses are recognised in the Income Statement.

 

All items in the above statement are derived from continuing operations. The Company has only one class of business and one reportable segment, the results of which are set out in the Income Statement and Balance Sheet. The Company derives its income from investments made in shares, securities and bank deposits.

 

There are no potentially dilutive capital instruments in issue and, therefore, no diluted earnings per share figures are relevant. The basic and diluted earnings per share are, therefore, identical.

 

The accompanying Notes are an integral part of the Financial Statements.

 

 

Statement of Changes in Equity

Six months ended 31 May 2020

 

Six months ended 31 May 2020 (unaudited)

 

 

 

 

Share capital

£'000

Share premium account

£'000

Capital reserve realised

£'000

Capital reserve unrealised

£'000

Special distributable

reserve

£'000

Capital redemption

reserve

£'000

 

Revenue reserve

£'000

 

 

Total

£'000

At 30 November 2019

Net return

Dividends paid

Repurchase and cancellation of shares

Net proceeds of share issue

6,798

-

-

(71)

1,107

-

-

-

-

5,513

(12,858)

(142)

(1,182)

-

-

(1,486)

(2,728)

-

-

-

47,002

-

-

(364)

-

35

-

-

71

-

1,247

338

(394)

-

-

40,738

(2,532)

(1,576)

(364)

6,620

At 31 May 2020

7,834

5,513

(14,182)

(4,214)

46,638

106

1,191

42,886

 

Six months ended 31 May 2019 (unaudited)

 

 

 

 

Share capital

£'000

Share premium account

£'000

Capital reserve realised

£'000

Capital reserve unrealised

£'000

Special distributable

reserve

£'000

Capital redemption

reserve

£'000

 

Revenue reserve

£'000

 

 

Total

£'000

At 30 November 2018

Net return

6,897

-

31,285

-

(9,784)

(388)

(3,058)

568

15,323

-

890

-

856

136

42,409

316

Repurchase and cancellation of shares

(37)

-

-

-

(209)

37

-

(209)

At 31 May 2019

6,860

31,285

(10,172)

(2,490)

15,114

927

992

42,516

 

Year ended 30 November 2019 (audited)

 

 

 

 

Share capital

£'000

Share premium account

£'000

Capital reserve realised

£'000

Capital reserve unrealised

£'000

Special distributable

reserve

£'000

Capital redemption

reserve

£'000

 

Revenue reserve

£'000

 

 

Total

£'000

At 30 November 2018

Net return

6,897

-

31,285

-

(9,784)

(1,707)

(3,058)

1,572

15,323

-

890

-

856

391

42,409

256

Cancellation of share premium account

-

(31,379)

-

-

31,379

-

-

-

Cancellation of capital redemption reserve

-

-

-

-

977

(977)

-

-

Share premium cancellation costs

-

(2)

-

-

-

-

-

(2)

Dividends paid

-

-

(1,367)

-

-

-

-

(1,367)

Repurchase and cancellation of shares

(122)

-

-

-

(677)

122

-

(677)

Net proceeds of DIS issue

23

96

-

-

-

-

-

119

At 30 November 2019

6,798

-

(12,858)

(1,486)

47,002

35

1,247

40,738

 

The accompanying Notes are an integral part of the Financial Statements.

 

 

Balance Sheet

 

As at 31 May 2020

 

 

31 May 2020

(unaudited)

£'000

31 May 2019

(unaudited)

£'000

30 November 2019

(audited)

£'000

Fixed assets

Investments at fair value through profit or loss

 

29,115

 

25,580

 

26,623

 

Current assets

Debtors

Cash

 

 

388

13,411

 

 

294

16,694

 

 

333

13,822

 

13,799

16,988

14,155

Creditors

 

 

 

Amounts falling due within one year

(28)

(52)

(40)

Net current assets

13,771

16,936

14,115

Net assets

42,886

42,516

40,738

 

Capital and reserves

 

 

 

Called up share capital

7,834

6,860

6,798

Share premium account

5,513

31,285

-

Capital reserve - realised

(14,182)

(10,172)

(12,858)

Capital reserve - unrealised

(4,214)

(2,490)

(1,486)

Special distributable reserve

46,638

15,114

47,002

Capital redemption reserve

106

927

35

Revenue reserve

1,191

992

1,247

Net assets attributable to Ordinary Shareholders

42,886

42,516

40,738

 

 

 

 

Net asset value per Ordinary Share (pence)

54.74

61.97

59.92

 

The financial statements of Maven Income and Growth VCT 3 PLC, registered number 04283350, were approved by the Board and were signed on its behalf by:

 

 

 

Atul Devani

Director

 

24 July 2020

 

The accompanying Notes are an integral part of the Financial Statements.

 

 

Cash Flow Statement

 

For the six months ended 31 May 2020

 

 

Six months ended

31 May 2020

(unaudited)

£'000

Six months ended

31 May 2019

(unaudited)

£'000

Year ended

30 November 2019

(audited)

£'000

Net cash flows from operating activities

 

Cash flows from investing activities

Purchase of investments

Sale of investments

(107)

 

 

(6,103)

1,119

(207)

 

 

(3,916)

47

(292)

 

 

(7,367)

2,429

Net cash flows from investing activities

(4,984)

(3,869)

(4,938)

 

Cash flows from financing activities

 

 

 

Equity dividends paid

(1,576)

-

(1,367)

Issue of Ordinary Shares

6,620

-

119

Share premium cancellation costs

-

-

(2)

Repurchase of Ordinary Shares

(364)

(209)

(677)

Net cash flows from financing activities

4,680

(209)

(1,927)

 

 

 

 

Net decrease in cash

(411)

(4,285)

(7,157)

 

Cash at beginning of period

 

13,822

 

20,979

 

20,979

Cash at end of period

13,411

16,694

13,822

 

The accompanying Notes are an integral part of the Financial Statements.

 

 

Notes To The Financial Statements

 

1.  Accounting policies

 

The financial information for the six months ended 31 May 2020 and the six months ended 31 May 2019 comprises non-statutory accounts within the meaning of S435 of the Companies Act 2006. The financial information contained in this report has been prepared on the basis of the accounting policies set out in the Annual Report and Financial Statements for the year ended 30 November 2019, which have been filed at Companies House and contained an Auditor's report that was not qualified and did not contain a statement under S498(2) or S498(3) of the Companies Act 2006.

 

2.  Reserves

 

Share premium account

The share premium account represents the premium above nominal value received by the Company on issuing shares net of issue costs. This reserve is non-distributable.

 

Capital reserves

Gains or losses on investments realised in the year that have been recognised in the Income Statement are transferred to the capital reserve realised account on disposal. Furthermore, any prior unrealised gains or losses on such investments are transferred from the capital reserve unrealised account to the capital reserve realised account on disposal.

 

Increases and decreases in the fair value of investments are recognised in the Income Statement and are then transferred to the capital reserve unrealised account. The capital reserve realised account also represents capital dividends, capital investment management fees and the tax effect of capital items. This reserve is distributable.

 

Special distributable reserve

The total cost to the Company of the repurchase and cancellation of shares is represented in the special distributable reserve. This reserve is distributable.

 

Capital redemption reserve

The nominal value of shares repurchased and cancelled is represented in the capital redemption reserve. This reserve is non-distributable.

 

Revenue reserve

The revenue reserve represents accumulated profits retained by the Company that have not been distributed to Shareholders. This reserve is distributable.

 

3.  Return per Ordinary Share

 

 

Six months ended

31 May 2020

The returns per share have been based on the following figures:

Weighted average number of Ordinary Shares

 

Revenue return

Capital return

 

74,780,620

 

£338,000

(£2,870,000)

Total return

(£2,532,000)

 

 

Directors' Responsibility Statement

 

Each Director believes that, to the best of their knowledge:

 

• the Financial Statements for the six months ended 31 May 2020 have been prepared in accordance with FRS 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland;

 

• the Interim Management Report includes a fair review of the information required by DTR 4.2.7R in relation to the indication of important events during the first six months, and of the principal and emerging risks and uncertainties facing the Company during the second six months, of the year ending 30 November 2020; and

 

• the Interim Management Report includes adequate disclosure of the information required by DTR 4.2.8R in relation to material related party transactions and any changes therein.

 

 

Other information

 

The NAV per Ordinary Share has been calculated using the number of Ordinary Shares in issue at 31 May 2020, which was 78,337,478.  A summary of investment changes for the six months under review and an investment portfolio summary as at 31 May 2020 are included above. A full copy of the Interim Report and Financial Statements will be printed and issued to Shareholders in due course. Copies of this announcement will be available to the public at the office of Maven Capital Partners UK LLP, Kintyre House, 205 West George Street, Glasgow, G2 2LW; at the Registered office of the Company at 1 - 2 Royal Exchange Buildings, London, EC3V 3LF; and on the Company's website at: www.mavencp.com/migvct3.

 

Neither the content of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

 

On behalf of the Board

Maven Capital Partners UK LLP

Secretary

 

24 July 2020

 

 

 

 

 

 


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