Half Yearly Report

RNS Number : 6534Q

Maven Income & Growth VCT PLC

21 October 2011

 



Maven Income and Growth VCT PLC

Interim results for the six months ended 31 August 2011 (unaudited)            

The Directors announce the unaudited Interim Management Report for the six months ended 31 August 2011.

Market commentary

There was a period of relative stability for global financial markets during the five months prior to August 2011, despite ongoing political turmoil throughout the Middle East and a generally uncertain economic landscape in Europe. However, markets have since experienced a period of significant correction, resulting from renewed concerns over levels of sovereign debt and the decision by Standard & Poor's to downgrade the USA's credit rating. Market confidence has also been affected by a stark warning by the US Federal Reserve about projected economic growth and the International Monetary Fund has cut its UK growth forecast for this year. There is a widespread anticipation that this economic environment will further inhibit a return of UK investor confidence, with stubbornly depressed levels of consumer spending in evidence, and interest rates remaining at record lows since early 2009.

Although the UK small business sector is directly affected by the wider economic fragility, and businesses remain constrained by the risk of short to medium term increases in interest rates and inflation, the majority of your Company's private company assets are trading well. Your Company invests in private companies operating cash-generative business models and having only modest levels of external debt, which significantly mitigates the risk of corporate failure in a difficult trading environment. Overall, the medium term deal prospects in the Manager's target private equity market continue to give cause for optimism, and the Manager believes that well resourced generalist VCT managers will continue to see a flow of attractive later-stage opportunities in the short to medium term.

Highlights for the six months:

·      net asset value (NAV) total return of 106.2 p per share at 31 August 2011, up 1.7% over the period;

·      NAV of 63.6p per share at 31 August 2011;

·      final dividend of 3.5p per share paid on 22 July 2011;

·      interim dividend of 1.5p per share declared for payment on 9 December 2011;

·      three substantial new investments during the period, with one completed after the period end; and

·      disposal of Walker Technical Resources, for a return of 2.9x cost.

Dividends

The Board has declared an interim dividend of 1.5p per share, to be paid on 9 December 2011 to Shareholders on the Register at 11 November 2011.

The Company paid dividends totalling 4.5p per Ordinary Share in respect of the year ended 28 February 2011 which represents a yield of 5.6% per annum on the Ordinary Shares based on their net cost after initial tax relief and is equivalent to 7.5% gross from a UK company for a 40% rate tax payer. Based on the mid-market price of 47.9p at 31 August 2011, the annualised equivalent yield is 9.4%, is paid tax-free and is equivalent to 12.5% for a 40% rate tax payer.

Performance

There has been a continual improvement in the performance of the Company since the Manager became responsible for your portfolio and investment strategy in late 2004. The asset base, and the level of income derived from it, has been transformed, with the portfolio now broadly invested in later-stage yielding companies that are capable of generating sufficient revenue to sustain consistently high levels of dividend. The portfolio now includes investments in more than 40 established private companies, across a wide range of industrial sectors.

Principal risks and uncertainties

The Board has reviewed the principal risks and uncertainties facing the Company for the second half of its financial year. These are unchanged from those it faced at the start of the year, which are set out in the Annual Report, and are the risks associated with investment in small and unquoted companies. In order to reduce the exposure to investment risk, the Company has invested in a broadly-based portfolio of established UK private company investments.

The Company is also required to satisfy the HMRC 70% qualifying test, and other tests, on a continuous basis. The Board regularly reviews the VCT qualifying status of the portfolio and is pleased to confirm that all criteria continue to be met.

Manager's strategy

The Manager's investment strategy is to build a large diversified portfolio of income producing later-stage private company assets, creating Shareholder value through investment in companies with strong balance sheets and robust business models. Investments are typically constituted mainly as secured loan stock, in transactions designed to produce an immediate yield. The aim is to generate a sustainable income stream from each asset and ultimately achieve a profitable exit.

The Manager also continues to selectively realise AIM quoted assets where it has identified limited future upside or in cases where sales are enforced by corporate events. The proceeds of AIM disposals are redeployed in acquiring additional later-stage private company assets, and the Manager believes that this strategy will continue to provide the liquidity required to make further such investments, with the objective of enhancing the prospects of revenue and capital dividends.

Maven deal teams operate from regional offices in Glasgow, London, Aberdeen, Edinburgh, Manchester and Birmingham and continue to see a high level of attractive investment opportunities across the key UK corporate finance territories, providing access, at attractive entry multiples, to a wide spectrum of profitable mature businesses across a range of sectors. Maven employs a highly selective investment process, which subjects every potential investment to a number of strict quality and yield generation criteria. Maven actively avoids investment in businesses which are at an early stage in their development, and does not consider companies where there are significant external borrowings or trading activity is overly reliant on a concentrated customer base or a single product.

Investment activity

A total of £1,925,000 was invested during the six month period ended 31 August 2011, including three new private company assets and six follow-on investments where additional funding has helped to support the growth of existing portfolio companies.

One further private company investment was made after the period end.

The three new private company investments added to the portfolio during the period under review were:

·      Glacier Energy Services, an oil equipment services group with two specialist trading subsidiaries, Roberts Pipeline Machining and Wellclad. Roberts designs and manufactures on-site portable cutting machines for blue-chip oil & gas clients. Wellclad provides services to the European offshore and subsea equipment market. Glacier will focus on growth within its core UK market as well as promoting its technologies to the international energy services market;

·      Space Student Living, a provider of contracted management services across the student housing sector, offering a fully integrated accommodation solution covering a range of activities from the initial identification of sites, through overseeing the planning and development phases, to ultimately managing the accommodation under long term contract; and

·      Tosca Penta Exodus, a new company established by Penta Capital to implement a buy-and-build strategy in the business telecommunications service sector based on the converging of mobile, fixed-line, broadband, internet and IT technology businesses. Penta is an established private equity firm with which Maven previously co-invested in the successful 2010 management buy-out of esure.

The private company investment made after the period end was:

·      Dantec Hose, a specialist manufacturer of hand-built composite hoses for the global petrochemical industry. Composite hoses provide the vital flexible connection in many fluid transfer systems, and are used worldwide in applications such as unloading road, rail and marine tankers within chemical and oil plants, and in Formula 1 racing. Dantec exports around 70% of its output and is engaged in a number of significant overseas projects.

Details of investments completed during the period are noted in the table below:

Investment	Date	Activity	Investment cost  £'000	Website
Unlisted
Camwatch Limited	August 2011	Telecommunication services	187	www.camwatch.co.uk
Glacier Energy Services Group Limited	March 2011	Oil equipment services	229	www.glacier.co.uk
Lemac No. 1 Limited (trading as John McGavigan)	July 2011	Automobiles and parts	141	www.mcgavigan.com
Space Student Living Limited	June 2011	Support services	408	No website available
TC Communications Holdings Limited	May 2011	Basic Materials	54	www.tccommunications.co.uk
Torridon Capital Limited	April 2011	Financial services	286	www.elite-insurance.co.uk
Tosca Penta Exodus LP	June 2011	Telecommunication services	574	www.6dg.co.uk
Other unlisted investments			30
Total unlisted investment			1,909
AIM/PLUS
Marwyn Management Partners PLC	July 2011	Investment company	16	www.marwyn.com
Total AIM/PLUS investment			16
Total investment			1,925

Maven Income and Growth VCT has co-invested in the four new transactions with Maven Income and Growth VCT 2, Maven Income and Growth VCT 3, Maven Income and Growth VCT 4, Maven Income and Growth VCT 5 (formerly Bluehone AiM VCT2), Talisman First Venture Capital Trust and Ortus VCT, and is expected to continue to co-invest with these as well as other clients of the Manager. The advantage of this ability to co-invest with other VCTs is that the Company is able to underwrite a wider range and larger size of transaction than would be the case on a stand alone basis.

Portfolio developments

Most of the private companies in the portfolio have traded at or ahead of budget throughout the six month period, and in a number of cases it has been appropriate to increase valuations accordingly. At the period end, the portfolio held 43 private company and 15 AIM or PLUS quoted investments, at a total cost of £24.1 million and with a VCT qualifying level of 77.3%.

There was one notable private company exit during the period. The investment in Dalglen 1150 (Walker Technical Resources) was realised in July. Total proceeds over the life of the investment were £1,512,000 representing an overall 2.9x return on the initial investment cost. The exit was via a secondary buy-out funded by Gresham Private Equity, just two years after Maven originally led the management buy-in. Walker, which provides some of the most advanced composite repairs technology available for the global oil & gas industry, has consistently traded ahead of budget and has more than doubled earnings since the initial investment. In addition, repayments of loan stock were received from some of the investee companies as shown on the table below.

In line with the strategy of reducing exposure to the quoted markets in favour of profitable later-stage private companies, the Manager has continued to pursue the structured realisation of the AIM portfolio.

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

	Year first invested	Complete/ partial exit	Cost of shares disposed of £'000	Value at 28 February 2011 £'000	Sales proceeds £'000	Realised gain/ (loss) £'000	Realised gain/(loss) over 28 February 2011 valuation £'000
Unlisted
Attraction World Holdings Limited	2010	Partial	98	98	98	-	-
Dalglen 1150 Limited (trading as Walker Technical Resources)	2009	Complete	527	1,189	1,251	724	62
Driver Hire Investments Group Limited	2004	Partial	182	174	177	(5)	3
House of Dorchester Limited	2002	Partial	76	76	76	-	-
Other unlisted disposals			223	92	94	(129)	2
Total unlisted disposals			1,106	1,629	1,696	590	67
AIM/PLUS
System C Healthcare PLC	2005	Complete	310	258	402	92	144
Other AIM/PLUS disposals			192	36	40	(152)	4
Total AIM/PLUS disposals			502	294	442	(60)	148
Total disposals			1,608	1,923	2,138	530	215

Two companies were struck off the Register during the period, resulting in a loss of £833,000 being realised, but there was no related impact on the NAV as a full provision had been made in earlier periods.

Share Capital

During the period the Manager raised further funds for the Company through the second Maven linked VCT offer. The maximum amount which the Company could raise was restricted to 10% of its listed share capital, thereby avoiding the higher costs associated with issuing a full prospectus. An additional £1,238,944 was raised for the Company through the linked offer, at a cost of only 5.0% of total funds raised, and 1,954,171 new shares were issued. Also during the period under review, the Company bought back 195,000 shares for cancellation at 47.75p per share.

Outlook

The Manager has continued to diversify your Company's investment portfolio, with a focus on identifying later-stage private company investments with income generating characteristics.

UK growth businesses continue to seek finance in the face of a continued shortage in capital available from more traditional sources, and the market for private equity transactions has become increasingly competitive. Maven is able to leverage its significant UK market presence and experience to further expand the portfolio on behalf of VCT investors. Investment in high quality and income producing assets diversified across a range of sectors has produced steady increases in Shareholder total return, including healthy levels of tax-free dividends.

Whilst the general economic environment is expected to remain challenging for the small business sector, well managed companies can continue to take market share and attract interest from larger trade or private equity buyers. There has been significant recent interest in a number of portfolio companies, which will hopefully lead to successful exits and further significant tax-free returns for investors.

Maven Capital Partners UK LLP

Manager

21 October 2011

Summary of Investment Changes for the six months ended 31 August 2011
	Valuation 28 February 2011		Net investment/ (disinvestment)	Appreciation/ (depreciation)	Valuation 31 August 2011
	£'000	%	£'000	£'000	£'000	£'000
Unlisted investments
Equities	6,915	27.7	(616)	898	7,197	28.6
Preference shares	927	3.7	(8)	1	920	3.7
Loan stock	12,605	50.5	837	(624)	12,818	51.0
Total unlisted investments	20,447	81.9	213	275	20,935	83.3
AIM/PLUS quoted investments	948	3.8	(426)	45	567	2.3
Total investments	21,395	85.7	(213)	320	21,502	85.6
Other net assets	3,569	14.3	83	-	3,652	14.4
Net assets	24,964	100.0	(130)	320	25,154	100.0

Investment Portfolio Summary as at 31 August 2011
Investments	Valuation £'000	Cost £'000	% of net assets	% of equity held	% of equity held by other clients1
Unlisted
TPL (Midlands) Limited (formerly Transys Holdings)	1,600	2,771	6.4	31.7	40.1
Homelux Nenplas Limited	1,410	391	5.6	7.9	32.1
House of Dorchester Limited	1,346	531	5.4	44.2	-
Torridon Capital Limited	1,234	627	4.9	4.5	35.5
Westway Services Limited	1,167	450	4.6	4.9	17.0
Oliver Kay Holdings Limited	1,084	763	4.3	4.9	15.1
Camwatch Limited	1,041	1,152	4.1	14.4	28.5
Martel Instruments Holdings Limited	965	807	3.8	14.9	29.3
Adler & Allan Holdings Limited	868	623	3.5	2.2	4.8
ELE Advanced Technologies Limited	856	192	3.4	11.3	-
Lawrence Recycling & Waste Management Limited	802	802	3.2	10.4	51.6
Nessco Group Holdings Limited	753	472	3.0	5.8	29.3
Atlantic Foods Group Limited	719	522	2.9	2.9	5.9
Steminic Limited	656	656	2.6	8.8	42.8
Beckford Capital Limited	640	640	2.5	48.2	51.8
Flexlife Group Limited	594	448	2.4	1.8	12.8
Tosca Penta Exodus LP	574	574	2.3	1.1	3.5
Attraction World Holdings Limited	467	314	1.9	6.2	32.2
PLM Dollar Group Limited	432	455	1.7	5.9	6.9
Intercede (Scotland) 1 Limited (trading as Electoflow Controls)	428	428	1.7	4.7	23.8
Space Student Living Limited	408	408	1.6	4.5	25.5
Tosca Penta Investments LP (trading as esure)	364	250	1.4	0.1	0.2
CHS Engineering Services Limited	360	360	1.4	4.0	19.4
ATR Holdings Limited	320	198	1.3	13.8	39.3
Venmar Limited (trading as XPD8 Solutions)	273	358	1.1	5.4	29.6
TC Communications Holdings Limited	272	303	1.1	10.4	62.9
Lemac No. 1 Limited (trading as John McGavigan)	267	267	1.1	9.1	27.7
Claven Holdings Limited	230	89	0.9	15.6	34.4
Training for Travel Group Limited	229	446	0.9	5.1	24.9
Glacier Energy Services Group Limited	229	229	0.9	2.2	22.8
PSCA International Limited	154	154	0.6	-	-
Enpure Holdings Limited	100	100	0.4	0.4	2.2
ID Support Services Group Limited	68	89	0.3	0.6	1.6
Other unlisted investments	25	5,019	0.1
Total unlisted investments	20,935	21,888	83.3
AIM/PLUS
Plastics Capital Plc	233	281	1.0	1.0	2.7
Cello Group Plc	96	310	0.4	0.4	0.1
Hasgrove Plc	75	168	0.3	0.6	1.1
Tangent Communications Plc	42	98	0.2	0.4	2.6
Brookwell Limited	36	51	0.1	-	-
Brulines Group Plc	28	37	0.1	0.1	1.6
Chime Communications Plc	25	26	0.1	-	0.3
Spectrum Interactive Plc	16	209	0.1	0.7	0.9
Marwyn Management Partners Plc	12	17	-	-	0.3
Other AIM/PLUS investments	4	1,039	-
Total AIM/PLUS investments	567	2,236	2.3
Total investments	21,502	24,124	85.6
1Other clients of Maven Capital Partners UK LLP.

Maven Income and Growth VCT PLC
Income Statement
	Six months ended 31 August 2011 (unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Investment income and deposit interest	813	-	813
Investment management fees	(44)	(176)	(220)
Other expenses	(93)	-	(93)
Gains on investments	-	320	320
Net return on ordinary activities before taxation	676	144	820
Tax on ordinary activities	(81)	24	(57)
Return attributable to Equity Shareholders	595	168	763
Earnings per share (pence)	1.51	0.43	1.94

Maven Income and Growth VCT PLC
Income Statement
	Six months ended 31 August 2010 (unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Investment income and deposit interest	376	-	376
Investment management fees	(32)	(128)	(160)
Other expenses	(136)	-	(136)
Gains on investments	-	663	663
Net return on ordinary activities before taxation	208	535	743
Tax on ordinary activities	(27)	18	(9)
Return attributable to Equity Shareholders	181	553	734
Earnings per share (pence)	0.48	1.48	1.96

Maven Income and Growth VCT PLC
Income Statement
	Year ended 28 February 2011 (audited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Investment income and deposit interest	864	-	864
Investment management fees	(92)	(367)	(459)
Other expenses	(345)	-	(345)
Gains on investments	-	2,599	2,599
Net return on ordinary activities before taxation	427	2,232	2,659
Tax on ordinary activities	(76)	76	-
Return attributable to Equity Shareholders	351	2,308	2,659
Earnings per share (pence)	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.
All items in the above statement are derived from continuing operations. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.
The total column of this statement is the Profit and Loss Account of the Company.
The accompanying Notes are an integral part of the Financial Statements.

Maven Income and Growth VCT PLC
Reconciliation of movements in Shareholders' funds
	Six months ended 31 August 2011	Six months ended  31 August 2010	Year ended 28 February 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Opening Shareholders' funds	24,964	21,797	21,797
Net return for the period	763	734	2,659
Proceeds of share issue 2010	-	1,864	1,864
Proceeds of share issue 2011	912	-	267
Repurchase and cancellation of shares	(93)	(10)	(104)
Dividends paid - revenue	(398)	(228)	(228)
Dividends paid - capital	(994)	(912)	(1,291)
Closing Shareholders' funds	25,154	23,245	24,964
The accompanying Notes are an integral part of the Financial Statements.

Maven Income and Growth VCT PLC
Balance Sheet
	31 August	31 August	28 February
	2011	2010	2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Fixed assets
Investments at fair value through profit or loss	21,502	18,362	21,395
Current assets
Debtors	622	568	590
Cash and overnight deposits	3,241	4,343	3,166
	3,863	4,911	3,756
Creditors
Amounts falling due within one year	211	28	187
Net current assets	3,652	4,883	3,569
Net assets	25,154	23,245	24,964
Capital and reserves
Called up share capital	3,957	3,799	3,825
Share premium account	1,142	159	381
Capital reserve - realised	(6,182)	(2,790)	(4,733)
Capital reserve - unrealised	(1,945)	(5,887)	(2,568)
Special distributable reserve	27,604	27,791	27,697
Capital redemption reserve	40	2	21
Revenue reserve	538	171	341
Net assets attributable to Equity Shareholders	25,154	23,245	24,964
Net asset value per Ordinary Share (pence)	63.6	61.2	63.6
The Financial Statements were approved and authorised for issue by the Board of Directors on 21 October 2011 and were signed on its behalf by: John D W Pocock Director
The accompanying Notes are an integral part of the Financial Statements.

Maven Income and Growth VCT PLC
Cash Flow Statement
	Six months ended 31 August 2011	Six months ended 31 August 2010	Year ended 28 February 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Operating activities
Investment income received	785	324	773
Deposit interest received	7	7	14
Investment management fees paid	(317)	97	(65)
Secretarial fees paid	(30)	(30)	(59)
Directors' fees paid	(31)	(30)	(61)
Other cash payments	(72)	(103)	(214)
Net cash inflow from operating activities	342	265	388
Taxation
Corporation tax	-	(174)	(174)
	-	(174)	(174)
Financial investment
Purchase of investments	(1,925)	(1,447)	(3,662)
Sale of investments	2,138	2,210	3,331
Net cash inflow/(outflow) from financial investment	213	763	(331)
Equity dividends paid	(1,392)	(1,140)	(1,519)
Net cash outflow before financing	(837)	(286)	(1,636)
Financing
Issue of Ordinary Shares	912	1,864	2,131
Repurchase of Ordinary Shares	-	(10)	(104)
Net cash inflow from financing	912	1,854	2,027
Increase in cash	75	1,568	391
The accompanying Notes are an integral part of the Financial Statements.

Maven Income and Growth VCT PLC

Notes to the Financial Statements

1. Accounting policies

The financial information for the six months ended 31 August 2011 and the six months ended 31 August 2010 comprises non-statutory accounts within the meaning 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 28 February 2011, which have been filed at Companies House and which contained an Auditor's Report which was not qualified and did not contain a statement under S498(2) or S498(3) of the Companies Act 2006.

2. 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
As at 28 February 2011	381	(4,733)	(2,568)	27,697	21	341
Losses on sales of investments	-	(303)	-	-	-	-
Net increase in value of investments	-	-	623	-	-	-
Investment management fees	-	(176)	-	-	-	-
Dividends paid	-	(994)	-	-	-	(398)
Tax effect of capital items	-	24	-	-	-	-
Repurchase and cancellation of shares	-	-	-	(93)	19	-
Share issue - 5 April 2011	609	-	-	-	-	-
Share issue - 3 May 2011	152	-	-	-	-	-
Net return on ordinary activities after taxation	-	-	-	-	-	595
As at 31 August 2011	1,142	(6,182)	(1,945)	27,604	40	538

3. Returns per Ordinary Share

The returns per Ordinary Share are based on the following figures:

	Six months ended
	31 August 2011
	£'000
Weighted average number of Ordinary Shares in issue	39,414,381
Revenue return	£595,000
Capital return	£168,000

Directors' responsibility statement

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

·      the Financial Statements for the six months ended 31 August 2011 have been prepared in accordance with applicable accounting standards, the Companies Act 2006 and the 2009 Statement of Recommended Practice 'Financial Statements of Investment Trust Companies (the SORP);

·      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 risks and uncertainties facing the Company during the second six months, of the year ending 28 February 2012; and

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

Other information

The Net Asset Value per Ordinary Share has been calculated using the number of Ordinary Shares in issue at 31 August 2011 of 39,565,962.

A summary of investment changes for the six months under review and an investment portfolio summary as at 31 August 2011 are included above.

A full copy of the Interim Report and Financial Statements will be printed and issued to Shareholders.

Copies of this announcement will be available to the public at the office of Maven Capital Partners UK LLP, 149 St Vincent Street, Glasgow G2 5NW and at the registered office of the Company, 5th Floor, 9-13 St Andrew Street, London EC4A 3AF.

On behalf of the Board

Maven Capital Partners UK LLP

Secretary

21 October 2011

 

END

 

 

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