Final Results

RNS Number : 9428E

Maven Income & Growth VCT PLC

07 June 2012

 



Maven Income and Growth VCT PLC

 

Final results for the year ended 29 February 2012

The Directors are pleased to report the Company's financial results for the year ended 29 February 2012.

Chairman's Statement

The Board is pleased to report that the year to 29 February 2012 has seen positive progress in Shareholder returns, with further expansion of the portfolio and a continued focus on making later-stage, income producing private company investments. This strong performance has been achieved against a background of persistent economic uncertainty and a challenging trading environment for the UK smaller company sector.

The key objective for your Company is to generate long-term capital growth and maintainable levels of tax-free income, by investing only in mature cash generative private companies, on prudent entry multiples. This investment approach has allowed your Company to build a widely diversified portfolio and deliver growth in NAV for Shareholders, while paying an increasing level of tax-free dividends.

Overall your Board is encouraged by the progress being made by your Company, which validates the investment strategy, and has noted recent market analysis which reflects the success of that approach. The Manager's ability to identify high growth private company assets was highlighted in the Deloitte Buyout Track 100 report in February 2012. Four of your Company's existing portfolio investments feature in this report, which tracks the performance of the top 100 private equity backed medium-sized companies in Britain over the past two years.

The highlights of the year under review are:

·      NAV total return of 112.0p per share (2011: 104.4p) at year end, up 7.3%;

·      NAV of 67.9p per share (2011: 65.3p);

·      five new later-stage high yielding private company investments completed, with two further holdings acquired after the period end;

·      disposal of Walker Technical Resources for a total return of 3.0 times original investment cost, with two further profitable exits completed after the period end; and

·      a final dividend proposed of 3.5p per share, comprising 0.5p revenue and 3.0p capital, to make a total of 5.0p for the year.

Performance

The NAV total return per share at 29 February 2012 was 112.0p, an increase of 7.3% over the equivalent figure at 28 February 2011. The most important measure of performance for a VCT is the NAV total return, being the long-term record of dividend payments out of income and capital gains combined with the current NAV. In the short term, the NAV in isolation is a less important measure of performance as the underlying investments are long-term in nature and not readily realisable. At 29 February 2012, the NAV per Ordinary Share was 67.9p.

 

VCT qualifying status

The Company is required to meet the VCT qualifying criteria on a continuous basis. The Board regularly reviews the status of these criteria and is pleased to confirm that all tests have continued to be met.

Dividends

The Board is proposing a final dividend of 3.5p per share, comprising 0.5p of revenue and 3.0p of capital, to be paid on 20 July 2012 to Shareholders on the register at close of business on 22 June 2012. Including the interim dividend of 1.5p per share paid in December 2011, the total tax-free yield is 8.7% based on the share price of 57.25p at the year end, which is equivalent to 11.6% on a taxable UK equity investment for a 40% tax payer. The effect of paying the proposed final dividend of 3.5p will be to reduce the NAV per Ordinary Share to 64.4p.

Investment strategy

Your Company's strategy is to invest in a broadly based portfolio of income producing later-stage UK private companies across a range of industry sectors, while also looking to achieve significant regional diversification.

The Manager has a nationwide office network, with six regionally based teams which are introduced to a wide range of prospective private company transactions each year. Each potential investment is carefully scrutinised and subject to strict selection criteria. New investments will only be made where businesses are available at conservative entry prices, in transactions typically structured with a significant element of secured loan stock in order to generate an immediate high yield.

The structured exit from the AIM/PLUS portfolio has also continued during the year, with a number of further disposals made to realise cash to fund the expansion of the private company portfolio. The Board and the Manager take the view that the potential returns available from AIM and PLUS quoted investments remain too uncertain at the current time and, at the period end, these represented less than 2% of the portfolio by value.

The Listing Rules require your Board to ensure that this Report includes information on the investment policy, including a description of the asset mix, the spread of risk and maximum exposures. This information is contained in the Directors' Report and in the various tabular analyses of the portfolio.

 

Principal risks and uncertainties

The Board has reviewed the principal risks and uncertainties facing the Company for the financial year. In order to minimise the exposure to investment risk, the Company has invested in a broadly-based portfolio of holdings in private and AIM or PLUS quoted companies in the UK.

 

Valuation process

Investments held by Maven Income and Growth VCT in unquoted companies are valued in accordance with the International Private Equity And Venture Capital Valuation Guidelines.

Investments quoted or traded on a recognised stock exchange, including the Alternative Investment Market (AIM), are valued at their bid prices.

Portfolio developments

During the year there were five new and eight follow-on investments completed, and the Manager has also invested in two new private companies since the year end. In line with the strategy of investing only in established cash-generative businesses, each of the new assets has little or no bank or other external debt and is forecast to generate substantial levels of income from the outset. The private equity portfolio is generally performing well, with most companies trading at or ahead of plan. The increasing maturity of a number of holdings is also leading to the emergence of M&A interest in several existing portfolio companies, and the Manager is currently working on a number of potential exits, although there can be no certainty that these will ultimately lead to profitable disposals.

The Board is pleased to report that there have been three profitable private company exits for the Company, including two after the year end. The realisation of Walker Technical Resources in July 2011 achieved a 3.0 times total return on the initial investment cost, whilst the exit from ATR Group in March 2012 realised a return of 1.7 times investment cost. More significantly, the disposal of the holding in TPL (Midlands) Limited (trading as Transys Projects) was completed in early June 2012. For contractual reasons the Directors are not able to publish specific details of the transaction, which has not been reflected in the Financial Statements for the year ended 29 February 2012. However, as a result, there will be an increase of approximately 4.7p per share in the net asset value of the Company, representing an uplift of 6.9% on the year-end figure.

Share buy-backs

The Company has bought back a total of 495,000 shares for cancellation throughout the year. Buying these shares in the market created some liquidity and the discount had narrowed to 15.7% at the year end. At the forthcoming AGM, the Company will again seek the authority of Shareholders to continue to buy back shares in the market.

Recovery of VAT

The Board has continued its dialogue with Aberdeen Asset Management PLC (Aberdeen) with a view to making further recovery of VAT paid previously by the Company in respect of investment management fees. An offer of £118,425 in respect of VAT paid during the period from 28 June 2004 to 30 September 2005, plus interest of £18,585, was received and accepted as final settlement on the basis that the Company will remain entitled to any additional VAT and interest recovered from HMRC by Aberdeen. The receipt of these amounts has been reflected in the Financial Statements.

 

 

 

Co-investment scheme of the Manager

The co-investment scheme, which allows executive members of the Manager to invest alongside the Company, continued in operation during the year. The scheme operates through a nominee company which participates in every transaction completed by the Company, including any follow-on investments. The scheme closely aligns the interests of the executives and the Company's Shareholders, while providing an incentive to enable the Manager to retain the existing skills and capacity of the investment team in what is a competitive market for talent.

 

Share capital and fund raising

In the period to 3 May 2011 your Company raised additional funds through a linked VCT Top-up Offer with Maven Income and Growth VCT 2, Maven Income and Growth VCT 3 and Maven Income and Growth VCT 4. Net proceeds of £912,000 were raised, after deduction of costs, and 1,511,929 new shares were issued.

In December 2011 your Board announced a further Top-up Offer for Subscription, in parallel with similar Offers by Maven Income and Growth VCT 2, Maven Income and Growth VCT 3 and Maven Income and Growth VCT 4, with each Company aiming to raise £1.25 million before expenses (this amount being within the maximum permitted under the Prospectus Rules and avoiding the Company having to incur the higher costs associated with publishing a full prospectus). I am pleased to report that the Offer was oversubscribed and closed early on 1 March 2012, which in the view of the Board is a positive reflection of the Manager's generalist strategy that has produced improved Shareholder returns in recent years.

The monies raised under such Offers may be used by the Company to pay dividends and cover general running costs, which has the advantage of preserving for investment purposes an equivalent sum of valuable 'old money' which operates under more flexible VCT regulations. The proceeds will also provide additional liquidity for the Company to make more later-stage investments, and allow it to spread its costs over a larger asset base to the benefit of all Shareholders.

 

Outlook

The Company is well placed to continue to achieve attractive long-term tax-efficient returns, by deploying capital in sensibly priced mature private company assets capable of delivering long-term capital appreciation. The private company portfolio continues to generate strong revenues for your Company in support of a sustainable dividend programme, and your Board believes that the later stage investment strategy employed by the Manager will produce ongoing improvements in Shareholder returns.

John Pocock

Chairman

17 June 2011

Maven Income and Growth VCT PLC
Income Statement
For the year ended 29 February 2012
	Year ended 29 February 2012			Year ended 28 February 2011
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income and deposit interest	1,478	-	1,478	864	-	864
Investment management fees	(163)	(653)	(816)	(92)	(367)	(459)
Other expenses	(213)	-	(213)	(345)	-	(345)
Gains on investments	-	2,636	2,636	-	2,599	2,599
Net return on ordinary activities before taxation	1,102	1,983	3,085	427	2,232	2,659
Tax on ordinary activities	(234)	159	(75)	(76)	76	-
Return attributable to Equity Shareholders	868	2,142	3,010	351	2,308	2,659
Earnings per share (pence)	2.2	5.4	7.6	0.9	6.1	7.0

A Statement of Total Recognised Gains and Losses has not been prepared, as all gains and losses are recognised in the Income Statement.

The total column of this statement is the Profit and Loss Account of the Company.

Reconciliation of Movements in Shareholders' Funds
For the year ended 29 February 2012
	Year ended 29 February 2012		Year ended 28 February 2011
	£'000		£'000
Opening Shareholders' funds	24,964		21,797
Net return for year	3,010		2,659
Proceeds of 2010 share issue	-		1,864
Proceeds of 2011 share issue	912		267
Repurchase and cancellation of shares	(242)		(104)
Dividends paid - revenue	(792)		(228)
Dividends paid - capital	(1,190)		(1,291)
Closing Shareholders' funds	26,662		24,964

Maven Income and Growth VCT PLC
Balance Sheet
As at 29 February 2012
	29 February 2012		28 February 2011
	£'000	£'000	£'000	£'000
Investments at fair value through profit or loss		25,328		21,395
Current assets
Debtors	923		590
Cash and overnight deposits	1,074		3,166
	1,997		3,756
Creditors
Amounts falling due within one year	663		187
Net current assets		1,334		3,569
Net assets		26,662		24,964
Capital and reserves
Called up share capital		3,927		3,825
Share premium account		1,142		381
Capital reserve - realised		(7,657)		(4,733)
Capital reserve - unrealised		1,308		(2,568)
Special distributable reserve		27,455		27,697
Capital redemption reserve		70		21
Revenue reserve		417		341
Net assets attributable to Shareholders		26,662		24,964
Net asset value per Ordinary Share (pence)		67.9		65.3

Maven Income and Growth VCT PLC
Cash Flow Statement
For the year ended 29 February 2012
	29 February 2012		28 February 2011
	£'000	£'000	£'000	£'000
Operating activities
Investment income received	1,141		773
Deposit interest received	12		14
Investment management fees paid	(397)		(65)
Secretarial fees paid	(60)		(59)
Directors' expenses paid	(61)		(61)
Other cash payments	(108)		(214)
Net cash inflow from operating activities		527		388
Taxation
Corporation tax paid	(3)		(174)
		(3)		(174)
Financial investment
Purchase of investments	(4,243)		(3,662)
Sale of investments	2,939		3,331
Net cash outflow from financial investment		(1,304)		(331)
Equity dividends paid		(1,982)		(1,519)
Net cash outflow before financing		(2,762)		(1,636)
Financing
Issue of Ordinary Shares	912		2,131
Repurchase of Ordinary Shares	(242)		(104)
Net cash inflow from financing		670		2,027
(Decrease)/increase in cash		(2,092)		391

Notes

Accounting Policies - UK Generally Accepted Accounting Practice

(a) Basis of preparation

The Financial Statements have been prepared under the historical cost convention, modified to include the revaluation of investments, and in accordance with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the SORP) issued in January 2009.

The disclosures on Going Concern in the Directors' Report on page 27 form part of these Financial Statements.

(b) Income

Dividends receivable on equity shares and unit trusts are treated as revenue for the period on an ex-dividend basis. Where no ex-dividend date is available dividends receivable on or before the year end are treated as revenue for the period. Provision is made for any dividends not expected to be received. The fixed returns on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the effective interest rate on the debt securities and shares. Provision is made for any fixed income not expected to be received. Interest receivable from cash and short term deposits and interest payable are accrued to the end of the year.

(c) Expenses

All expenses are accounted for on an accruals basis and charged to the income statement. Expenses are charged through the revenue account except as follows:

·      expenses which are incidental to the acquisition and disposal of an investment are charged to capital; and

·      expenses are charged to realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fee has been allocated 20% to revenue and 80% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.

(d) Taxation

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the Financial Statements which are capable of reversal in one or more subsequent periods.

Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted, or substantively enacted, at the balance sheet date.

The tax effect of different items of income/gain and expenditure/loss is allocated between capital reserves and revenue account on the same basis as the particular item to which it relates using the Company's effective rate of tax for the period.

UK Corporation tax is provided at amounts expected to be paid/recovered using the tax rates and laws that have been enacted, or substantively enacted, at the balance sheet date.

(e) Investments

In valuing unlisted investments the Directors follow the criteria set out below. These procedures comply with the revised

International Private Equity and Venture Capital Valuation Guidelines (IPEVCV) for the valuation of private equity and venture capital investments. Investments are recognised at their trade date and are designated by the Directors as fair value through profit and loss. At subsequent reporting dates, investments are valued at fair value, which represents the Directors' view of the amount for which an asset could be exchanged between knowledgeable and willing parties in an arm's length transaction. This does not assume that the underlying business is saleable at the reporting date or that its current shareholders have an intention to sell their holding in the near future.

A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires.

1.   For investments completed within the 12 months prior to the reporting date, and those at an early stage in their development, fair value is determined using the Price of Recent Investment Method except that adjustments are made when there has been a material change in the trading circumstances of the company or a substantial movement in the relevant sector of the stock market.

2.   Whenever practical, recent investments will be valued by reference to a material arm's length transaction or a quoted price.

3.   Mature companies are valued by applying a multiple to their fully taxed prospective earnings to determine the enterprise value of the company.

3.1        To obtain a valuation of the total ordinary share capital held by management and the institutional             investors, the value of third party debt, institutional loan stock, debentures and preference share capital             is deducted from the enterprise value. The effect of any performance related mechanisms is taken into             account when determining the value of the ordinary share capital.

3.2        Preference shares, debentures and loan stock are valued using the Price of Recent Investment Method. When a redemption premium has accrued, this will only be valued if there is a reasonable prospect of it being paid. Preference shares which carry a right to convert into ordinary share capital are valued at the higher of the Price of Recent Investment Method basis and the price/earnings basis, both described above.

4.   Where there is evidence of impairment, a provision may be taken against the previous valuation of the investment.

5.   In the absence of evidence of a deterioration, or strong defensible evidence of an increase in value, the fair value is determined to be that reported at the previous balance sheet date.

6.   All unlisted investments are valued individually by the portfolio management team of Maven Capital Partners UK LLP. The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company.

7.   In accordance with normal market practice, investments listed on the Alternative Investment Market or a recognised stock exchange are valued at their bid market price.

(f) Fair value measurement

Fair value is defined as the price that the Company would receive upon selling an investment in a timely transaction to an independent buyer in the principal or the most advantageous market for the investment. A three-tier hierarchy has been established to maximise the use of observable market data and minimise the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity.

Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on best information available in the circumstances

The three-tier hierarchy of inputs is summarised in the three broad levels listed below:

·      Level 1 - quoted prices in active markets for identical investments;

·      Level 2 - other significant observable inputs (included quoted prices for similar investments, interest rates, prepayment speeds, credit risk etc); and

·      Level 3 - significant unobservable inputs (including the Company's own assumptions in determining the fair value of investments).

(g) Gains and losses on investments

When the Company sells or revalues its investments during the year, any gains or losses arising are credited/charged to the Income Statement.

Movement in reserves

	Share premium account	Capital reserve - realised	Capital reserve - unrealised	Special distributable reserve	Capital redemption reserve	Revenue reserve
	£'000	£'000	£'000	£000	£000	£'000
At 1 March 2011	381	(4,733)	(2,568)	27,697	21	341
Losses on sales of investments	-	(1,240)	-	-	-	-
Net increase in value of investments	-	-	3,876	-	-	-
Investment management fees	-	(653)	-	-	-	-
Dividends paid	-	(1,190)	-	-	-	(792)
Tax effect of capital items	-	159	-	-	-	-
Repurchase and cancellation of shares	-	-	-	(242)	49	-
Share issue - 5 April 2011	609	-	-	-	-	-
Share issue - 3 May 2011	152	-	-	-	-	-
Net return on ordinary activities after taxation	-	-	-	-	-	868
At 29 February 2012	1,142	(7,657)	1,308	27,455	70	417

Earnings per share

The returns per share are based on the following figures:

	Year ended	Year ended
	29 February 2012	28 February 2011
	£'000	£'000
Weighted average number of Ordinary Shares in issue	39,408,099	37,682,987
Revenue return	£868,000	£351,000
Capital return	£2,142,000	£2,308,000
Total return	£3,010,000	£2,659,000

Net asset value per Ordinary Share

Net asset value per Ordinary Share as at 29 February 2012 has been calculated using the number of Ordinary Shares in issue at that date of 39,265,962 (2011: 38,249,033).

Principal risks and uncertainties

The principal risks facing the Company relate to its investment activities and include market price, interest rate and liquidity risk.

Additional risks faced by the Company, and the mitigation approach adopted by the Board, are as follows:

·      investment objective: the Board's aim is to maximise absolute returns to Shareholders while managing risk by ensuring an appropriate diversification of investments;

·      investment policy: inappropriate stock selection leading to underperformance in absolute and relative terms is a risk which the Manager mitigates by operating within investment guidelines and regularly monitoring performance against the peer group. The regulations affecting Venture Capital Trusts are central to the Company's investment policy;

·      discount volatility: due to the lack of liquidity in the secondary market, venture capital trust shares tend to trade at discounts to net asset values; and

·      regulatory risk: the Company operates in a complex regulatory environment and faces a number of related risks. A breach of Section 274 of the Income Tax Act 2007 could result in the Company being subject to capital gains tax on the sale of its investments. A breach of the VCT Regulations could result in the loss of VCT status and consequent loss of tax reliefs currently available to Shareholders. A serious breach of other regulations, such as the UKLA Listing Rules or the Companies Act, would lead to suspension of its shares from the Stock Exchange, loss of VCT status and reputational damage. The Board receives quarterly reports from the Manager in order to monitor compliance with regulations.

At least twice each year the Board considers all of the above risks and the measures in place to manage them.

Other information

The Annual General Meeting will be held on 12 July 2012, commencing at 12.00 noon.

This Announcement has been prepared on the same basis as the Annual Report and Financial Statements for the year ended 28 February 2011. The Annual Report and Financial Statements for the year ended 29 February 2012 will be submitted to the National Storage Mechanism and be available for inspection at: www.Hemscott.com/nsm.do, and will also be filed with the Registrar of Companies and issued to Shareholders in due course. 

The financial information contained within this Announcement does not constitute the Company's statutory Financial Statements as defined in the Companies Act 2006. The statutory Financial Statements for the year ended 28 February 2011 have been delivered to the Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under S498(2) or S498(3) of the Companies Act 2006.

Copies of this announcement, and of the Annual Report and Financial Statements Annual Report and Financial Statements for the year ended 29 February 2012, will be available to the public at the office of Maven Capital Partners UK LLP, Kintyre House, 205 West George Street, Glasgow G2 52LW; at the registered office of the Company, 9-13 St Andrew Street, London EC4A 3AF and on the Company's website at www.mavencp.com/migvct.

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.

Directors' responsibility statement

The Directors confirm that, to the best of their knowledge:

·      the Financial Statements have been prepared in accordance with the applicable accounting standards and give a true and fair view of the assets, liabilities and financial position of the Company as at 29 February 2012 and for the year to that date; and

·      the Directors' Report includes a fair review of the development and performance of the Company, together with a description of the principal risks and uncertainties that it faces.

By Order of the Board

Maven Capital Partners UK LLP

Secretary

7 June 2012

 

END

 

 

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