Proven Growth & Income VCT plc : Half-yearly re...

ProVen Growth & Income VCT PLC

Half-Yearly Report For the Six Months Ended 31 August 2014

 

Financial Summary

	31 Aug 2014	31 Aug 2013	28 Feb 2014
Ordinary Shares	Pence	Pence	Pence
Net asset value per share ("NAV")	84.2	83.1	85.2
Dividends paid since class launch (originally as 'C' Shares)	29.1	22.6	27.1
Total return (NAV plus dividends paid since 'C' Share class launch)	113.3	105.7	112.3

Chairman's Statement

Introduction
I am pleased to present my report for the six months ended 31 August 2014

Net asset value
As at 31 August 2014, the net asset value ("NAV") per share stood at 84.2p, an increase of 1.0p per share or 1.2% since the year end (after adjusting for the 2.0p dividend paid on 25 July 2014)

Venture capital investments
The Company has been an active investor during the six month period, completing some £9.6 million of new investments, along with £1.0 million of follow-on investments. The majority of the new funds invested have been in VCT qualifying investments, but £3.9 million has been invested in non-qualifying opportunities which allows the Company to benefit from a higher potential return than would otherwise be the case on funds held in cash.

There were also a number of realisations in the six month period producing £2.1 million of proceeds. The most significant disposals were those of Eagle Rock Entertainment Group and Pilat Media Global along with further earnout monies from the earlier disposals of Steak Media, Fjordnet and Espresso Group. Realised gains in the period totalled £539,000.

Within the existing portfolio there have been a number of positive and negative movements in individual valuations which has resulted in a net unrealised gain of £209,000 during the period. Generally the portfolio investments have continued to make satisfactory progress.

Further details of investment activity can be found in the Investment Manager's Report below.

Results and dividends
The Income Statement shows a return on ordinary activities after taxation for the Company during the period of £648,000 (£303,000 revenue return and £345,000 capital return).

An interim dividend of 2.0p per share will be paid on 21 November 2014 to Shareholders on the register at 31 October 2014.

Shareholders are reminded that the Company operates a Dividend Reinvestment Scheme ("DRIS") for Shareholders that wish to have their dividends reinvested in new shares and obtain further income tax relief on those shares. If you are not currently registered for the DRIS and wish to have your dividends paid in the form of new shares, DRIS forms are available from the www.provenvcts.co.uk website or by contacting Beringea on 020 7845 7820.  Shareholders will need to be registered for the DRIS prior to 31 October 2014 to ensure that they will be eligible to receive the forthcoming dividend as new shares.

Share issues
The Company allotted 108,956 shares under the Company's DRIS in respect of the dividend paid on 25 July 2014. The shares were issued at 83.2p per share.

Share buybacks
The Company continues to operate a policy of purchasing its own shares that become available in the market at a discount of approximately 5% to the latest published NAV.

During the period, the Company completed purchases of 677,055 shares, through the normal buyback facility, at an average price of 80.2p per share; these shares were subsequently cancelled.

Shareholders who are considering selling their shares may wish to consider contacting Panmure Gordon prior to any sale. Panmure is able to confirm the price at which they will buy in shares.

Outlook
Following the major realisations that have occurred in recent years, such as Steak Media and Espresso Group, the Manager continues to focus on replenishing the portfolio with new investments, while continuing to pursue exit opportunities for some of the more mature investments in the portfolio. Good progress on new investments has been made to this end in the first half of the year and, with the Manager continuing to report a strong pipeline of potential investment opportunities, the Board expects to see further additions over the remainder of the year. The existing portfolio includes a number of investments which are developing well and which, with the benefit of improving economic conditions, may be able to provide profitable realisations in due course.

Looking ahead, the Company is planning to launch a new offer for subscription later in the year. Full details will be sent to all Shareholders as soon as they are available.

Marc Vlessing
Chairman

Investment Manager's Report

Introduction
We have pleasure in presenting our half-yearly report for the six month period to 31 August 2014. This has been a particularly strong period for investment activity, with over £11 million of investments being completed in the period from 1 March 2014 to the date of this report. This represents over 20% of the Company's opening net asset value.  Ten new companies have been added to the investment portfolio and further investments have been made in five portfolio companies.   It has also been a successful period for investment realisations, with four full exits and the receipt of additional earnout proceeds in relation to earlier investment disposals.

Portfolio activity and valuation
At 31 August 2014, the Company's investment portfolio consisted of 38 investments of which 36 were unquoted, at a cost of £34.2 million and a valuation of £37.4 million. This represents an unrealised uplift on cost of 9%, or 13% when new investments made during the period, which are valued at cost, are excluded. Additionally, the Company held cash of £14.8 million.

Our previous review in the annual report to 28 February 2014 commented on the post year end investments in MyOptique Group, Europe's leading online eyewear retailer, (£2.4 million), Response Tap, a cloud-based, telephone call analytics solution (£1.4 million), Big Data Partnership, a services/ consultancy firm specialising in the area of big data analytics (£720,000), and Peerius, a software provider (£600,000). In addition to these, we made further new investments during the period to 31 August 2014 in Maplin (£2.5 million), Chargemaster (£925,000), Perfect Channel (£255,000) and Celoxica (£750,000).

Maplin is a familiar presence on the British High Street as a specialist retailer of a wide range of electronic equipment and has a turnover of £200 million a year. Maplin was the subject of a management buyout from its private equity owner in June 2014, with equity finance provided primarily by Rutland Partners, with ProVen Growth and Income VCT and ProVen VCT each investing £2.5 million. The investment is not VCT qualifying, as the Company exceeds the gross assets and employee limits set by the VCT rules, but we believe it has the potential to deliver an attractive return and will therefore hold it as part of the non-qualifying portion of the Company's assets. Chargemaster is the UK's leading provider of electric vehicle charging infrastructure. The ProVen VCTs' investment of £3.0 million will be used to strengthen the company's position in the UK market and fund further expansion into Europe. The company was recently placed 32nd in the Sunday Times Hiscox Tech Track 100, a list of the UK's top 100 fastest growing private technology companies. Perfect Channel is a provider of online auction platforms for business. It works with businesses including the auctioneer Christie's, Manchester City FC and Lloyds of London using its market leading technology and significant experience to facilitate improved results for the auction process. The £2.0 million ProVen VCTs' investment is being used to fund the international growth of the business. Celoxica is the Company's second debt investment and provides market data and trading solutions for financial services firms. The total ProVen VCTs' investment of £1.5 million will be used to fund further growth.  

The Company also invested a further £1.0 million in Skills Matter, Charterhouse Leisure and Senselogix and provided a small debt facility to Eagle-i Music following its spinout from Eagle Rock Entertainment Group.

The period since 31 August 2014 has seen the completion of a further two new investments: an investment of £551,000 into Watchfinder, an online retailer of pre-owned luxury watches and £415,000 into Simplestream, a provider of livestreaming, catch-up TV and media management solutions for broadcast and media clients. In addition, the Company has committed £600,000 to InContext Solutions. InContext is a US based company which provides 3D virtual store research and simulation. This is the first VCT investment alongside our US managed funds which we view as part of both a growth and diversification strategy for the Company.

The Company has also seen activity in realisations. The disposal of the Company's investment in quoted company Pilat Media Global crystallised an overall return of 3.9 times the total investment; Eagle Rock Entertainment Group was sold to Universal Music Group, generating a modest initial profit, with the potential for further proceeds depending on performance; and Altacor generated initial proceeds of £516,000 on a carrying value of £258,000. Further significant sales proceeds were also received in relation to the sale of Steak Media (£2.1 million), taking the total return to 5.6 times the initial investment cost, and Fjordnet (£505,000). A further £238,000 was received after the period end in respect of Espresso Group. Some of these proceeds were accrued at the end of the last financial year and so the current period profit effect is not the total proceeds received. There were also a number of loan repayments notably from Donatantonio Group.

Polytherics Limited listed on the Alternative Investment Market under the name Abzena plc at a placing price of 81p per share. The placing was backed by major institutional shareholders including Invesco, Imperial Innovations plc and Woodford Investment Management (which additionally holds a significant direct investment in Imperial Innovations). The Company's shareholding in Abzena is subject to a 12 month lock-up period and so the Company continues to hold the investment. Even with a discount to reflect this restriction, the Company's investment has increased in value by £1.0m, an uplift of 80% on the 28 February 2014 valuation.

Other than the uplifts in value achieved on these investment disposals and the uplift for Abzena plc, there were no material valuation movements during the period. The portfolio continues to make good overall progress.

Outlook
The continuing recovery in the UK economy has resulted in high levels of confidence among the owners of UK SMEs, which is encouraging them to seek investment to drive higher growth.  This has resulted in a strong flow of investment opportunities for the Company and the significant level of investment activity in the period.  We expect deal flow to remain strong in the second half of the year, although the rate of investment is not likely to be as high as the exceptional levels seen in the last few months. 

Acquisition activity by large corporate buyers is also at a cyclically high level and we do not foresee any let up in the near future.  Several of the companies in the Company's portfolio have recently been approached by corporate buyers.  These approaches may lead to further disposals from the portfolio in the next few months, although there is no guarantee of this.

Overall, we are cautiously optimistic about the prospects for the investment portfolio.

Beringea LLP

Unaudited Balance Sheet as at 31 August 2014

	31 Aug 2014		31 Aug 2013		28 Feb 2014
	£'000		£'000		£'000
Fixed assets
Investments	37,369		22,310		28,138
Current assets
Debtors	465		340		2,832
Cash at bank and in hand	14,815		28,049		22,806
	15,280		28,389		25,638
Creditors: amounts falling due within one year	(362)		(448)		(437)
Net current assets	14,918		27,941		25,201
Net assets	52,287		50,251		53,339
Capital and reserves
Called up share capital	1,005		979		1,014
Capital redemption reserve	1,091		1,069		1,080
Share premium account	763		36,320		674
Special reserve	42,416		8,562		43,283
Capital reserve - realised	3,812		2,286		4,312
Revaluation reserve	3,506		2,129		3,585
Revenue reserve	(306)		(1,094)		(609)
Equity shareholders' funds	52,287		50,251		53,339
Net asset value per Share:	84.2p		83.1p		85.2p

Reconciliation of Movements in Shareholders' Funds for the six months ended 31 August 2014

	31 Aug 2014			31 Aug 2013		28 Feb 2014
		Total		Total		Total
		£'000		£'000		£'000
Opening shareholders' funds		53,339		38,339		38,339
Proceeds from share issues		91		19,234		21,655
Share issue costs		-		(268)		(362)
Movement in share capital to be issued		-		(781)		(781)
Purchase of own shares		(545)		(4,330)		(4,838)
Total recognised gains for the period		648		146		4,203
Dividends paid in the period		(1,246)		(2,089)		(4,877)
Closing shareholders' funds		52,287		50,251		53,339

Unaudited Income Statement for the six months ended 31 August 2014

	Six months ended 31 Aug 2014				Six months ended 31 Aug 2013				Year  ended  28 Feb  2014
	Revenue	Capital	Total		Revenue	Capital	Total		Total
	£'000	£'000	£'000		£'000	£'000	£'000		£'000
Income
Continuing operations	628	-	628		482	-	482		856
Acquisitions	-	-	-		7	-	7		44
	628	-	628		489	-	489		900
Gains on investments
Continuing operations	-	748	748		-	293	293		4,544
Acquisitions	-	-	-		-	62	62		460
	-	748	748		-	355	355		5,004
Total income	628	748	1,376		489	355	844		5,904
Investment management fees	(131)	(392)	(523)		(120)	(359)	(479)		(1,031)
Performance incentive fees	-	-	-		-	-	-		(79)
Other expenses	(194)	(11)	(205)		(215)	(4)	(219)		(591)
Return/(loss) on ordinary activities before taxation	303	345	648		154	(8)	146		4,203
Tax on ordinary activities	-	-	-		-	-	-		-
Return/(loss) attributable to equity shareholders	303	345	648		154	(8)	146		4,203
Basic and diluted return per Ordinary Share	0.5p	0.5p	1.0p		0.3p	0.0p	0.3p		7.5p

Unaudited Cash Flow Statement for the six months ended 31 August 2014

		Six months ended 31 Aug 2014	Six months ended 31 Aug 2013	Year  ended 28 Feb 2014
	Note	£'000	£'000	£'000
Net cash inflow/(outflow) from operating activities	A	2,204	15	(597)
Capital expenditure
Purchase of investments		(10,601)	(843)	(6,551)
Disposal of investments		2,118	9,283	11,131
Net cash (outflow)/inflow from capital expenditure		(8,483)	8,440	4,580
Acquisitions
Cash acquired		-	2,746	2,746
Acquisition costs		-	(140)	-
		-	2,606	2,746
Equity distributions paid		(1,246)	(2,089)	(4,877)
Net cash (outflow)/inflow before financing		(7,525)	8,972	1,852
Financing
Proceeds from share issue		91	12,960	15,426
Share issue costs		-	(268)	(362)
Purchase of own shares		(557)	(4,330)	(4,825)
Movement in unallotted share capital		-	(781)	(781)
Net cash (outflow)/inflow from financing		(466)	7,581	9,458
(Decrease)/increase in cash	B	(7,991)	16,553	11,310
Notes to the cash flow statement:
A Net cash flow from operating activities
Return on ordinary activities before taxation		648	146	4,203
Gains on investments		(748)	(355)	(5,004)
Net cost of acquisition		-	(11)	-
Decrease in debtors		2,365	105	129
(Decrease)/increase in creditors		(61)	130	75
Net cash inflow/(outflow) from operating activities		2,204	15	(597)
B  Analysis of net funds
Beginning of period		22,806	11,496	11,496
Net cash (outflow)/inflow		(7,991)	16,553	11,310
End of period		14,815	28,049	22,806

Summary of Investment Portfolio as at 31 August 2014

	Cost	Valuation	Valuation movement in the  period	% of portfolio by value
	£'000	£'000	£'000
Top ten venture capital investments (by value)
Cognolink Limited	2,051	3,515	15	6.8%
Pulpitum Limited	2,900	2,823	(77)	5.4%
MEL TopCo Limited (t/a Maplin)	2,500	2,500	-	4.8%
MyOptique Group Limited	2,400	2,400	-	4.6%
Abzena plc (formerly Polytherics Limited)	1,278	2,310	1,026	4.4%
APM Healthcare Limited	1,731	2,206	44	4.2%
Utility Exchange Online Limited	2,090	2,033	31	3.9%
Skills Matter Limited	1,981	1,981	-	3.8%
Inskin Media Limited	1,435	1,965	(53)	3.8%
Disposable Cubicle Curtains Limited	1,730	1,730	-	3.3%
	20,096	23,463	986	45.0%
Other venture capital investments	14,139	13,906	(777)	26.6%
	34,235	37,369	209	71.6%
Cash at bank and in hand		14,815		28.4%
Total		52,184		100.0%

Other venture capital investments at 31 August 2014 comprise: Charterhouse Leisure Limited, Blis Media Limited, Monica Vinader Limited, Response Tap Limited, Donatantonio Group Limited, Chargemaster plc, Chess Technologies Limited, Celoxica Limited, Big Data Partnership Limited, Matssoft Limited, Cogora Group Limited, Peerius Limited, Eagle-i Music Limited, Cross Solar PV Limited, Campden Wealth Limited, Perfect Channel Limited, Speed-Trap Holdings Limited, Dianomi Limited, Cinergy International Limited, Senselogix Limited, Long Eaton Healthcare Limited, Amura Holdings Limited, Steribottle Global Limited, Vigilant Applications Limited, 7digital Group plc (formerly UBC Media Group plc), Omni Dental Sciences Limited, Population Genetics Technologies Limited and Deltadot Limited.

With the exception of 7digital Group plc and Abzena plc which are quoted on AIM, all venture capital investments are unquoted.

Summary of Investment Movements for the six months ended 31 August 2014

Additions	Cost
	£'000
MEL TopCo Limited (t/a Maplin)	2,500
MyOptique Group Limited	2,400
Response Tap Limited	1,440
Chargemaster plc	925
Celoxica Limited	750
Big Data Partnership Limited	720
Skills Matter Limited	683
Peerius Limited	600
Perfect Channel Limited	255
Charterhouse Leisure Limited	250
Eagle-i Music Limited	48
Senselogix Limited	30
	10,601

Disposals

		Market value at 1 March  2014*		Gain/(loss) Against cost	Realised gain in period
	Cost		Disposal  Proceeds
	£'000	£'000	£'000	£'000	£'000
Eagle Rock Entertainment Group  Limited	680	726	737	57	11
Altacor Limited	256	258	516	260	258
Pilat Media Global plc	49	230	236	187	6
Donatantonio Group Limited	204	265	265	61	-
Peerius Limited	79	79	79	-	-
Sports Holdings Limited	12	11	11	(1)	-
Celoxica Limited	10	10	10	-	-
Fjordnet Limited**	-	-	59	59	59
Espresso Group Limited**	-	-	19	19	19
Steak Media Limited**	-	-	186	186	186
	1,290	1,579	2,118	828	539

*Or cost, if acquired during the period under review

**The Company received a total of £505,000 and £2.1 million in relation to Fjordnet Limited and Steak Media Limited during the period and £238,000 from Espresso Group Limited after the period end. The disposal proceeds in the table reflect proceeds received during the period adjusted for the change in the contingent proceeds accrual over the period.

Notes to the Unaudited Financial Statements

1. The unaudited half-yearly results cover the six months to 31 August 2014 and have been prepared in accordance with UK Generally Accepted Accounting Practice ("UK GAAP"). Where presentational guidance set out in the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised January 2009 ("SORP") is consistent with the requirements of UK GAAP, the Directors have sought to prepare the financial statements on a consistent basis compliant with the recommendations of the SORP.

2. All revenue and capital items in the Income Statement derive from continuing operations and acquisitions.

3. There are no recognised gains or losses other than those disclosed in the Income Statement.

4. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

5. The comparative figures were in respect of the period ended 31 August 2013 and the year ended 28 February 2014.

6. Return per share for the period has been calculated on the following:

	Ordinary Shares
Revenue return per share based on:
Net revenue return after taxation (£'000)	303
Capital return per share based on:
Net capital return after taxation (£'000)	345
Weighted average number of shares in issue	62,463,809

7. NAV per share for the period has been calculated on the following:

	Ordinary Shares
Net assets (£'000)	52,287
Number of shares in issue at period end	62,063,191

8. Dividends

					Six months to 31 Aug 2014				Six months to 31 Aug 2013				Year ended 28 Feb 2014
					Revenue	Capital	Total		Revenue	Capital	Total		Total
		Pence			£'000	£'000	£'000		£'000	£'000	£'000		£'000
2014 Final			2.0		-	1,246	1,246		-	-	-		-
2014 Special Interim				2.5	-	-	-		-	-	-		1,565
2014 First Interim			2.0		-	-	-		-	-	-		1,224
2013 Interim			4.0		-	-	-		687	1,401	2,088		2,088

9. Reserves

	Capital redemption reserve		Share premium account	Special reserve	Capital reserve - realised	Revaluation reserve	Revenue reserve
	£'000		£'000	£'000	£'000	£'000	£'000
At 1 March 2014		1,080	674	43,283	4,312	3,585	(609)
Purchase of own shares		11	-	(545)	-	-	-
Issue of new shares		-	89	-	-	-	-
Expenses capitalised		-	-	-	(403)	-	-
Gains on investments		-	-	-	539	209	-
Retained revenue		-	-	-	-	-	303
Transfer between reserves		-	-	(322)	610	(288)	-
Distributions paid		-	-	-	(1,246)	-	-
At 31 August 2014		1,091	763	42,416	3,812	3,506	(306)

The Special reserve, Capital reserve-realised and Revenue reserve are all distributable reserves. The Revaluation reserve includes losses of £2,845,000 which are included in the calculation of distributable reserves. Total distributable reserves are £43,077,000.

10. Contingent liabilities, guarantees and financial commitments
The Company has no contingent liabilities, guarantees and financial commitments.

11. Controlling party and related party transactions
In the opinion of the Directors there is no immediate or ultimate controlling party.

Malcolm Moss is a Partner of Beringea LLP. Beringea LLP was the Company's Investment Manager during the period. During the 6 months ended 31 August 2014, £523,000 was payable to Beringea LLP in respect of these services. At the period end the Company owed Beringea LLP £253,000.

12. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the year ended 28 February 2014 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor's report on those financial statements was unqualified.

13. The Directors confirm that, to the best of their knowledge, the half-yearly financial statements have been prepared in accordance with the "Statement: Half-Yearly Financial Reports" issued by the UK Accounting Standards Board and the half-yearly financial report includes a fair review of the information required by:

a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

14. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required, in the Company's half-yearly results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

The Board has concluded that the key risks facing the Company over the remainder of the financial year are as follows:

i. investment risk associated with investing in small and immature businesses;
ii. investment risk arising from volatile stock market conditions and their potential effect on investment valuation; and
iii. failure to maintain approval as a VCT.

In the case of (i), the Board is satisfied with the Company's approach. The Investment Manager follows a rigorous process in vetting and careful structuring of new investments and, after an investment is made, close monitoring of the business. In respect of (ii), the Company seeks to hold a diversified portfolio. However, the Company's ability to manage this risk is quite limited, primarily due to the restrictions arising from the VCT regulations and the general nature of investing in small unquoted businesses.

The Company's compliance with the VCT regulations is continually monitored by the Administrator, who reports regularly to the Board on the current position. The Company also retains PricewaterhouseCoopers to provide regular reviews and advice in this area. The Board considers that this approach reduces the risk of a breach of the VCT regulations to a minimal level.

15. Going concern
The Company has considerable financial resources both at the period end and at the date of this report, and holds a diversified portfolio of investments. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook.

The Directors confirm that they are satisfied that the Company has adequate resources to continue in business for the foreseeable future. For this reason, they believe that the Company continues to be a going concern and that it is appropriate to apply the going concern basis in preparing the financial statements.

16. Copies of the unaudited half-yearly results will be sent to Shareholders. Further copies can be obtained from the Company's Registered Office and will be available for download from www.provenvcts.co.uk.

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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Proven Growth & Income VCT plc via Globenewswire

HUG#1864588