Proven VCT plc : Half-yearly report

ProVen VCT PLC

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

Financial Summary

	31 Aug 2014	31 Aug 2013	28 Feb 2014
	Pence	Pence	Pence
Ordinary Shares
Net asset value per share ("NAV")	97.9	98.4	103.6
Dividends paid per share since conversion/ consolidation*	12.5	5.0	7.5
Total return (NAV plus dividends paid*)	110.4	103.4	111.1

*Dividends paid represent dividends paid since the consolidation of 5p Ordinary Shares into 10p Ordinary Shares on 30 October 2012. Prior to this date, the Company paid dividends totalling 113.95p on the 5p Ordinary Shares.

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 97.9p, a small decrease of 0.7p per share or 0.7% since the year end (after adjusting for the total dividends of 5.0p per share paid during the period)

Venture capital investments
The Company has been an active investor during the six month period, completing some £10.9 million of new investments, along with £584,000 of follow-on investments. A further £2.8 million was invested after the period end up to the date of the report. 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 £3.0 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 £424,000.

Within the existing portfolio there have been a number of positive and negative movements in individual valuations which has resulted in a net unrealised loss of £508,000 during the period. However, generally the 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 loss on ordinary activities after taxation for the Company during the period of £259,000 (£313,000 revenue return and £572,000 capital loss).

An interim dividend of 2.5p 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.com 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.

Fundraising and share issues
The offer for subscription that launched on 22 October 2013 closed on 30 September 2014 having raised gross proceeds of £16.6 million. The new funds ensure that the Company continues to hold a significant level of cash and is well-placed to take advantage of new investment opportunities in an improving climate.

The Company allotted 111,633 shares under the Company's DRIS in respect of the dividend paid on 28 March 2014. The shares were issued at 99.6p per share. The Company allotted 162,276 shares under the Company's DRIS in respect of the dividend paid on 25 July 2014. The shares were issued at 98.3p 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 410,409 shares, through the normal buyback facility, at an average price of 94.7p 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.

Andrew Davison
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 £14 million of investments being completed in the period from 1 March 2014 to the date of this report. This represents over 25% 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 three 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 35 investments of which 34 were unquoted, at a cost of £32.4 million and a valuation of £35.3 million. This represents an unrealised uplift on cost of 9%, or 14% when new investments made during the period, which are valued at cost, are excluded. Additionally, the Company held cash of £25.1 million, a significant proportion of which related to the recent fundraising which closed on 30 September 2014 and resulted in total net funds being raised of £16.6 million.  Some £2.8 million of this cash was deployed in new investments between 31 August 2014 and the date of this report.

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, (£1.6 million), Response Tap, a cloud-based, telephone call analytics solution (£1.1 million), Big Data Partnership, a services/ consultancy firm specialising in the area of big data analytics (£530,000), 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 (£2.1 million), Perfect Channel (£1.7 million) 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 VCT and ProVen Growth and Income 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 £584,000 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 £2.6 million into Watchfinder, an online retailer of pre-owned luxury watches and an investment of £115,000 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. Further significant sales proceeds were also received in relation to the sale of Steak Media (£1.5 million), taking the total return to 5.6 times the initial investment cost, and Fjordnet (£377,000).  A further £636,000 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 and SPC International.

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

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	35,303		24,610		26,906
Current assets
Debtors	950		211		2,591
Cash at bank and in hand	25,066		22,404		27,174
	26,016		22,615		29,765
Creditors: amounts falling due within one year	(527)		(371)		(597)
Net current assets	25,489		22,244		29,168
Net assets	60,792		46,854		56,074
Capital and reserves
Called up share capital	6,153		4,764		4,876
Capital redemption reserve	3,440		3,320		3,399
Share premium account	12,096		28,343		70
Share capital to be issued	543		-		5,550
Special reserve	29,433		2,041		30,398
Capital reserve - realised	5,115		3,825		6,940
Revaluation reserve	3,978		4,758		5,120
Revenue reserve	34		(197)		(279)
Equity shareholders' funds	60,792		46,854		56,074
Net asset value per share:	97.9p		98.4p		103.6p

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	623	-	623		541	-	541		1,022
(Loss)/gain on investments	-	(84)	(84)		-	95	95		4,575
	623	(84)	539		541	95	636		5,597
Investment management fees	(161)	(482)	(643)		(123)	(368)	(491)		(977)
Performance incentive fees	-	-	-		-	-	-		(466)
Other expenses	(149)	(6)	(155)		(244)	(9)	(253)		(512)
Return/(loss) on ordinary activities before taxation	313	(572)	(259)		174	(282)	(108)		3,642
Tax on ordinary activities	-	-	-		-	-	-		-
Return/(loss) attributable to equity shareholders	313	(572)	(259)		174	(282)	(108)		3,642
Basic and diluted gain/(loss) per share	0.5p	(1.0p)	(0.5p)		0.4p	(0.6p)	(0.2p)		7.7p

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

	31 Aug 2014		31 Aug  2013		28 Feb 2014
	£'000		£'000		£'000
Opening shareholders' funds	56,074		47,807		47,807
Proceeds from share issues	8,140		7,538		8,804
Share issue costs	(427)		(50)		(77)
Purchase of own shares	(391)		(5,357)		(5,489)
Movement in share capital to be issued	543		(597)		4,953
Total recognised (losses)/gains for the period	(259)		(108)		3,642
Dividends paid in the period	(2,888)		(2,379)		(3,566)
Closing shareholders' funds	60,792		46,854		56,074

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	1,395		(116)		(587)
Capital expenditure
Purchase of investments		(11,444)		(1,371)		(5,642)
Disposal of investments		2,964		7,959		12,001
Net cash (outflow)/inflow from capital expenditure		(8,480)		6,588		6,359
Equity distributions paid		(2,888)		(2,379)		(3,566)
Net cash (outflow)/inflow before financing		(9,973)		4,093		2,206
Financing
Proceeds from share issue		8,140		7,538		8,804
Share issue costs		(427)		(50)		(77)
Purchase of own shares		(391)		(5,357)		(5,489)
Share capital to be issued		543		(597)		4,953
Net cash inflow from financing		7,865		1,534		8,191
(Decrease)/increase in cash	B	(2,108)		5,627		10,397
Notes to the cash flow statement:
A Net cash flow from operating activities
(Loss)/return on ordinary activities before taxation		(259)		(108)		3,642
Loss/(gains) on investments		84		(95)		(4,575)
Decrease in debtors		1,641		72		105
(Decrease)/increase in creditors		(71)		15		241
Net cash inflow/(outflow) from operating activities		1,395		(116)		(587)
B  Analysis of net funds
Beginning of period		27,174		16,777		16,777
Net cash (outflow)/inflow		(2,108)		5,627		10,397
End of period		25,066		22,404		27,174

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)
Monica Vinader Limited	1,447	4,134	(17)	6.8%
Think Limited	1,606	2,989	17	5.0%
MEL TopCo Limited (t/a Maplin)	2,500	2,500	-	4.1%
Chargemaster plc	2,075	2,075	-	3.4%
Pulpitum Limited	2,100	2,045	(55)	3.4%
SPC International Limited	982	1,887	140	3.1%
Perfect Channel Limited	1,745	1,745	-	2.9%
Cognolink Limited	949	1,626	7	2.7%
MyOptique Group Limited	1,600	1,600	-	2.7%
Blis Media Limited	482	1,308	-	2.2%
	15,486	21,909	92	36.3%
Other venture capital investments	16,880	13,394	(600)	22.2%
	32,366	35,303	(508)	58.5%
Cash at bank and in hand		25,066		41.5%
Total		60,369		100.0%

Other venture capital investments at 31 August 2014 comprise: Donatantonio Group Limited, Cogora Group Limited, Speed-Trap Holdings Limited, Cross Solar PV Limited, Charterhouse Leisure Limited, Senselogix Limited, Utility Exchange Online Limited, Chess Technologies Limited, MatsSoft Limited, APM Healthcare Limited, Inskin Media Limited, Cinergy International Limited, Dianomi Limited, Long Eaton Healthcare Limited, Skills Matter Limited, Disposable Cubicle Curtains Limited, Response Tap Limited, Big Data Partnership Limited, Steribottle Global Limited, Vigilant Applications Limited, Campden Wealth Limited, Peerius Limited, Eagle-i Music Limited, Celoxica Limited and 7digital Group plc (formerly UBC Media Group plc).

With the exception of 7digital Group plc which is 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
Chargemaster Plc	2,075
Perfect Channel Limited	1,745
MyOptique Group Limited	1,600
Response Tap Limited	1,060
Celoxica Limited	750
Peerius Limited	600
Big Data Partnership Limited	530
Skills Matter Limited	317
Charterhouse Leisure Limited	175
Senselogix Limited	79
Eagle-i Music Limited	13
	11,444

Disposals

	Cost	Market value  at 1 March 2014*	Disposal proceeds	Gain against  cost	Realised gain in period
	£'000	£'000	£'000	£'000	£'000
Eagle Rock Entertainment Group  Limited	1,224	1,169	1,327	103	158
Donatantonio Group Limited	219	285	285	66	-
Pilat Media Global plc	173	802	821	648	19
SPC International Limited	163	163	163	-	-
Peerius Limited	79	79	79	-	-
Sports Holding Limited	37	32	32	(5)	-
Celoxica Limited	10	10	10	-	-
Steak Media Limited**	-	-	137	137	137
Fjordnet Limited**	-	-	58	58	58
Espresso Group Limited**	-	-	52	52	52
	1,905	2,540	2,964	1,059	424

*Or cost, if acquired during the period under review

**The Company received a total of £1.5 million and £377,000 in relation to Steak Media and Fjordnet during the period and £636,000 from Espresso Group 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.

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 are in respect of the six months 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)	313
Capital return per share based on:
Net capital return after taxation (£'000)	(572)
Weighted average number of shares in issue	58,326,281

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

	Ordinary  Shares
Net assets (£'000)	60,792
Number of shares in issue at period end	61,529,169

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	2.5	-	1,539	1,539		-	-	-		-
2014 Special Interim	2.5	-	1,349	1,349		-	-	-		-
2014 First Interim	2.5	-	-	-		-	-	-		1,188
2013 Interim	5.0	-	-	-		756	1,622	2,378		2,378

9. Reserves

Capital redemption reserve				Share premium account	Share capital to be issued	Special reserve	Capital reserve  - realised	Revaluation  reserve	Revenue reserve
	£'000			£'000	£'000	£'000	£'000	£'000	£'000
At 1 March 2014	3,399			70	5,550	30,398	6,940	5,120	(279)
Expenses capitalised		-		-	-	-	(489)	-	-
Share issue			-	12,373	(5,007)	-	-	-	-
Share issue costs			-	(347)	-	(80)	-	-	-
Purchase of own shares		41		-	-	(391)	-	-	-
Gains on investments		-		-	-	-	424	(508)	-
Retained revenue		-		-	-	-	-	-	313
Dividends paid	-			-	-	(2,888)	-	-	-
Transfer between reserves			-	-	-	2,394	(1,760)	(634)	-
At 31 August 2014	3,440			12,096	543	29,433	5,115	3,978	34

The Special reserve, Capital reserve-realised and Revenue reserve are all distributable reserves. The Revaluation reserve includes losses of £3,671,000 which are included in the calculation of distributable reserves. Total distributable reserves are £30,911,000.

10. Contingent liabilities, guarantees and financial commitments
The Company has no contingent liabilities, guarantees and financial commitments at 31 August 2014.

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, £643,000 was payable to Beringea LLP in respect of these services. At the period end the Company owed Beringea LLP £305,000.

Beringea LLP, acted as promoter for the Share offers during the period. The fees in the period amounted to £525,000 out of which it paid the costs of the offer including initial commissions. At the period end the company owed Beringea LLP £nil in respect of these services.

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.

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 sufficient financial resources at the period end, 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 VCT plc via Globenewswire

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