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Puma VCT 10 PLC (PUMX)

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Thursday 20 June, 2019

Puma VCT 10 PLC

Annual Financial Report

RNS Number : 9276C
Puma VCT 10 PLC
20 June 2019
 

HIGHLIGHTS

 

·    24p per share of dividends paid since inception (including 6p interim dividend paid in February 2019), equivalent to an 8.6% per annum tax-free running yield on net investment.

·    NAV per share at the year-end was 91.14p (after adding back dividends paid to date).

·    As envisaged in the original Prospectus, resolutions will be put forward for a winding up of the VCT in the autumn of this year.

·    Provision of £1.5 million against the carrying value of Warm Hearth, a company owning two freehold pubs, to reflect difficult trading.

 

 

CHAIRMAN'S STATEMENT

 

Introduction

 

I am pleased to present the Company's fifth annual report for the year ended 28 February 2019.

 

The Company was launched and began investing in Spring 2014, with a planned life of five years. In this, its fifth year, the process of realising the Company's investments and preparing to return capital to investors has continued to make good progress.

 

Dividend

 

As envisaged in the Company's prospectus, the Company has for the fourth calendar year in succession paid a dividend of 6p per ordinary share, equivalent to a 8.6% per annum tax-free running yield on shareholders' net investment.

 

Investments

 

At the end of the year, the Company had just over £16 million invested in a mixture of qualifying and non-qualifying investments whilst maintaining our VCT qualifying status. Details of these investments can be found in the Investment Manager's report on pages 3 to 6.  This includes a discussion about Warm Hearth Limited, against which we have made a provision of £1.5 million.

 

Results

 

Before taking account of the provision, the Company had a pre-tax loss of £252,000 for the year (2018: £103,000 profit), a post-tax loss of 0.97p (2018: 0.43p gain) per ordinary share (calculated on the weighted average number of shares). The provision reduced this to a pre-tax loss of £1,752,000 for the year resulting in a post-tax loss of 6.40p per ordinary share.

 

Reflecting the provision against the Warm Hearth investment, the Net Asset Value per ordinary share ("NAV") at 28 February 2019 after adding back the 24p of dividends paid to date was 91.14p (2018: 97.54p).

 

 

 

 

VCT qualifying status

 

PricewaterhouseCoopers LLP ("PwC") provides the board and the Investment Manager with advice on the ongoing compliance with HMRC rules and regulations concerning VCTs and has reported no issues in this regard for the Company to date.  PwC will continue to assist the Investment Manager in monitoring rule compliance as the Company approaches the end of its planned life. 

 

Annual General Meeting and Proposal to Wind-Up the Company

 

The Annual General Meeting of the Company will be held at Bond Street House, 14 Clifford Street, London W1S 4JU on 28 August 2019 at 2.30 p.m.  Notice of the Annual General Meeting and Form of Proxy will be inserted within the annual accounts.

 

The Company has now just passed its fifth anniversary. In accordance with the plans set out in the Company's Prospectus, the Board expects to convene a General Meeting of the Company in the coming months, at which resolutions will be proposed to place the Company into members' solvent liquidation. If these are passed, liquidators will be appointed and the Company will de-list from the London Stock Exchange.

 

Once such resolutions have been passed by shareholders, for a maximum period of three years, many of the VCT rules, including the 70 per cent qualifying rule, are suspended whilst the Company retains its VCT status of tax free distribution to UK taxpayers. The intention is to return the balance of the capital in an orderly way, with disposals timed appropriately to enable further substantial distributions by the end of 2019.

 

 

 

David Vaughan

Chairman

20 June 2019



INVESTMENT MANAGER'S REPORT

 

 

Introduction

 

In its fifth year, the Company continues to make good progress. It is now beginning the process of returning capital to shareholders through the realisation of investments whilst maintaining its qualifying status. We believe our portfolio is well positioned to deliver attractive risk-adjusted returns to shareholders within the Company's expected remaining time horizon.

 

Investments

 

Qualifying Investments

 

Growing Fingers - Children's Nursery

As previously reported, the Company has invested £1.4 million (as part of a £2.8 million investment alongside other Puma VCTs) in Growing Fingers Limited. The investment is funding the construction and launch of a new purpose-built 108 place nursery school in Wendover, Buckinghamshire, an affluent commuter town with direct links to London.  The Company benefits from first charge security over the Wendover site and the Growing Fingers business.

 

Welcome Health - Chain of Pharmacies

The Company had previously invested £2.5 million (as part of a £5 million investment alongside other Puma VCTs) in Welcome Health Limited.  Welcome Health owns and operates a series of mature pharmacies across the North East of England, focusing on providing pharmaceutical services to a currently underserviced and relatively deprived market.  We are pleased to report that, following the year end, the entrepreneur behind Welcome Health has refinanced the group which should facilitate the redemption of the Company's investment in full in the coming months.

 

Mini Rainbows - Children's Nurseries

Mini Rainbows Limited (in which the Company invested £2.5 million as part of a £5 million investment alongside other Puma VCTs) owns and operates two mature children's day nurseries in Scotland - in Murrayfield, an affluent part of Edinburgh, and in Shawlands, Glasgow.  Both sites are performing well with occupancy ahead of forecast.

 

Warm Hearth - Pubs with Microbreweries

In late 2015, the Company invested £2.5 million (as part of a £5 million investment alongside other Puma VCTs) in Warm Hearth Limited, a pub business seeking to capitalise on the strong growth trends within the craft beer sub-market.  Warm Hearth entered into a franchise agreement with Brewhouse & Kitchen Limited ("B&K"), a strong and fast-growing national branded operator, offering craft micro-brewing activities within each of its pub units as a point of focus.  Warm Hearth currently owns and operates two substantial freehold pub assets in Chester and Wilmslow. As previously reported, performance of these units has been significantly below our expectations for some time.  Moreover, the market for pubs offering food has deteriorated over the last year and whilst the micro-brewing is a differentiator, it has not protected Warm Hearth from these trends. Management remain focused on improving performance, as well as looking at planning options, particularly at Chester to convert upstairs space into boutique hotel rooms, which have the prospect of delivering value.  This notwithstanding, the Board has decided to provide against the carrying value of this investment.

 

Saville Services - Construction projects

The Company's investment of £2.1 million (alongside other Puma VCTs) into Saville Services Limited continues to perform well.  Saville Services has worked on a series of projects during the year: the team completed the construction of a 77-bed, purpose-built care home in Chester and is currently working on the construction of a 9-unit supported living scheme in Bishop Auckland.

 

Materials Recycling Facility, Oxfordshire

As previously reported, a major fire occurred in February 2016 at the Materials Recycling Facility operated by Opes Industries Limited ("Opes"), into which the Company invested a total of £3.45m (as part of an £8.8m investment by Puma entities).  As a result of the incident, the Board made a provision of £510,000 against the carrying value of the Company's investment in Opes.  The investment was provided in the form of equity and loan stock and our interests are covered by a first fixed and floating charge over Opes' assets.  Following the incident, the Company appointed an administrator over Opes in order to protect the Company's investment.  The administrator has made substantial progress in recovering the Company's investment: the site was sold and a settlement was reached with Opes' insurers. As a result, a large part of the original capital invested has been recovered and, as previously reported, the directors have reversed £188,000 of the original £510,000 impairment to reflect the current position. The administrator continues to pursue several other avenues to recover the balance of the Company's investment.

 

Sunlight Education Nucleus - Special Educational Needs Schools

In November 2017, the Company made a £1 million qualifying investment (as part of a £4.7 million investment alongside other Puma VCTs) in Sunlight Education Nucleus Limited, a company seeking to develop, own and operate a series of special educational needs schools across the United Kingdom. We are pleased to report that, shortly following the year end, the team at Sunlight completed on the purchase of the site for their first school in Stafford, West Midlands.

 

 

Non-Qualifying Investments

 

Mixed Residential Commercial Development, Bloomsbury

As previously reported, a £1.2 million loan (as part of a total facility of £17.97 million) was advanced to Cudworth Limited (through the VCT's affiliate Lothian Lending Limited) to fund the construction of a mixed residential and commercial development in Bloomsbury, London, close to the British Museum and 600m from King's Cross station.  The development includes 11 apartments, 2 houses and 11,800 square feet of B1 commercial space.  The loan is secured with a first charge over the site, the development is well progressed and we are pleased to report that contracts have recently been exchanged to sell the commercial units, both houses and a flat, with three further flats under offer.

 

Apartment Development Project, Worthing

As previously reported, a loan of £500,000 was advanced (through an affiliate, Valencia Lending Limited) to Columbia House Development Limited.  This loan, together with loans from other vehicles managed and advised by the Investment Manager totalling £5 million, facilitated the acquisition of an office block in Worthing, for which the borrower sought planning permission for a conversion into 144 flats. The loan is secured with a first charge over the property at an appropriate loan to current value (the site already has planning permission for a 102 flat scheme).  We are pleased to report that the borrower has now obtained the enhanced planning consent and we expect the loan to be repaid in the coming months.

 

Care Home for the Elderly, Formby

The £800,000 loan to New Care (Sefton) Limited in connection with the development and initial trading of a 75-bed purpose-built care home in Formby, Merseyside, continues to perform in line with expectations.  The New Care Group is an experienced developer and operator of care homes. The loan (through an affiliate, Lavender Lending Limited) is part of an overall facility of £7.98 million and is secured with a first charge over the site.  We are pleased to report that the borrower has agreed to sell the site on practical completion of the development which should facilitate the repayment of the loan in full.

 

Supported Living, Wigan

During the year, a loan facility of £2.1 million was provided (through affiliates, Valencia Lending Limited and Lothian Lending Limited) to Enabling Homes Investments Ltd, an experienced developer of supported living homes.  The loans are funding the development of a 22-apartment supported living scheme in Wigan and are secured with a first charge over the site.  Construction is progressing well and practical completion is targeted for early this summer.  Enabling Homes Investments Ltd has agreed terms to sell the scheme immediately following practical completion which should generate sufficient proceeds to repay the loans.

 

Part Exchange, Citrus Group

As previously reported, a series of loans had been advanced to various entities within the Citrus Group, which at the start of the year stood at £1 million (through an affiliate, Victoria Lending Limited).  These loans, together with loans from other vehicles managed and advised by your Investment Manager, formed part of a series of revolving credit facilities to provide working capital to the Citrus PX business. Citrus PX operates a property part exchange service facilitating the rapid purchase of properties for developers and homeowners. We are pleased to report that, during the year, the loans were repaid in full.

 

Housing Development Project, Aberdeen

As previously reported, a £474,000 loan (as part of a £2.9 million facility from other vehicles managed and advised by your Investment Manager) had been extended (through an affiliate, Valencia Lending Limited) to Churchill Homes (Culter House) Limited. Churchill Homes is a longstanding Aberdeenshire developer and the facility provided funding towards the construction of a private detached housing development in one of Aberdeen's finest residential suburbs.  We are pleased to report that, during the year, the loan was repaid in full.

 

Construction of Airport Hotel, Edinburgh

In June 2017, £0.8 million of loans were advanced to Ability Hotels (Edinburgh) Limited (as part of an overall facility of £16 million, through an affiliate, Latimer Lending Limited) to fund the development of a new 240-room Hampton by Hilton hotel at Edinburgh Airport.  We are pleased to report that the hotel opened last year and, following the year end, the loans were repaid in full.

 

Care Home for the Elderly, Egham

As previously reported, a loan of £575,000 had been advanced (through an affiliate, Meadow Lending Limited) to Windsar Care (UK) LLP to fund the development and initial trading of a 68-bed purpose-built care home in Egham, Windsor.  This loan, together with loans from other vehicles managed and advised by the Investment Manager totalling £7.2 million, are secured with a first charge over the site.  We are pleased to report that, following completion of the development earlier this year, the loan has been repaid in full after the year end.

 

Liquidity Management

To further manage liquidity, the Company had exposure to a £199,000 bond issued by Commonwealth Bank of Australia which matured during the year.

 

Investment Strategy

 

We are pleased to have invested the Company's funds in a balanced portfolio of both qualifying and non-qualifying investments and are working on improving the liquidity of the portfolio wherever possible whilst maintaining an appropriate risk adjusted return. We continue to focus on the monitoring of our investments and are focused on exits. The objective remains to achieve an orderly winding up of the Company's assets at the end of its life, subject to shareholder approval at the forthcoming General Meeting.

 

 

Puma Investment Management Limited

20 June 2019

 

 

 



Investment Portfolio Summary

As at 28 February 2019 

 


Valuation

Cost

Gain/(loss)

Valuation as a % of Net Assets


£'000

£'000

£'000


Qualifying Investments





Opes Industries Limited

2,328

2,650

(322)

13%

Warm Hearth Limited

1,000

2,500

(1,500)

5%

Mini Rainbows Limited

2,500

2,500

-

13%

Welcome Health Limited

2,500

2,500

-

13%

Saville Services Limited

2,139

2,139

-

12%

Growing Fingers Limited

1,400

1,400

-

8%

Sunlight Education Nucleus Limited

1,000

1,000

-

5%






Total Qualifying Investments

12,867

14,689

(1,822)

69%






Non-Qualifying Investments





Valencia Lending Limited

901

901

-

5%

Lothian Lending Limited

664

664

-

4%

Latimer Lending Limited

722

722

-

4%

Lavender Lending Limited

600

600

-

3%

Victoria Lending Limited

400

400

-

2%

Meadow Lending Limited

475

475

-

3%






Total Non-Qualifying investments

3,762

3,762

-

21%






Total Investments

16,629

18,451

(1,822)

90%

Balance of Portfolio

1,924

1,924

-

10%






Net Assets

18,553

20,375

(1,822)

100%

 

 

Of the investments held at 28 February 2019, all are incorporated in England and Wales.

 



 

Income Statement

For the year ended 28 February 2019

 



Year ended 28 February 2019

Year ended 28 February 2018


Note

Revenue

Capital

Total

Revenue

Capital

Total



£'000

£'000

£'000

£'000

£'000

£'000

(Loss)/gain on investments

8 (b)

-

(1,501)

(1,501)

-

190

190

Income

2

398

-

398

644

-

644











398

(1,501)

(1,103)

644

190

834









Investment management fees

3

(109)

(326)

(435)

(117)

(351)

(468)

Other expenses

4

(214)

-

(214)

(263)

-

(263)











(323)

(326)

(649)

(380)

(351)

(731)









Profit/(loss) before taxation


75

(1,827)

(1,752)

264

(161)

103

Taxation

5

(14)

(2)

(16)

(50)

66

16









Profit/(loss) and total comprehensive income for the year


61

(1,829)

(1,768)

214

(95)

119









Basic and diluted








Return/(loss) per ordinary share (pence)

6

0.22p

(6.62p)

(6.40p)

0.77p

(0.34p)

0.43p

 

 

All items in the above statement derive from continuing operations. 

 

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

 

The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'.  The supplementary revenue and capital columns are prepared in accordance with the Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014 by the Association of Investment Companies and updated in February 2018.

 



Balance Sheet

As at 28 February 2019

 

 


Note

As at
28 February 2019

As at
28 February 2018



£'000

£'000

Fixed Assets




Investments

8

16,629

20,313









Current Assets




Debtors

9

2,054

1,725

Cash


25

90



2,079

1,815

Creditors - amounts falling due within one year

10

(155)

(149)





Net Current Assets


1,924

1,666





Net Assets


18,553

21,979





Capital and Reserves




Called up share capital

12

17

17

Share premium account


15,624

15,624

Capital reserve - realised


(1,495)

(1,166)

Capital reserve - unrealised


(1,821)

(321)

Revenue reserve


6,228

7,825





Total Equity


18,553

21,979









Net Asset Value per Ordinary Share

13

67.14p

79.54p

 

 

The financial statements on pages 32 to 46 were approved and authorised for issue by the Board of Directors on 20 June 2019 and were signed on their behalf by:

 

 

 

Peter Hewitt

Director

 



Statement of Cash Flows

For the year ended 28 February 2019

 

 

 





Year ended 28 February 2019

Year ended 28 February 2018


£'000

£'000




(Loss)/profit after tax

(1,768)

119

Tax charge/(credit) in the year

16

(16)

Unrealised loss on investments

1,500

-

Realised loss/(gain) on investments

1

(190)

Increase in debtors

(391)

(576)

Increase/(decrease) in creditors

6

(4)




Cash outflow from operations

(636)

(667)




Corporation tax received/(paid)

45

(95)




Net cash outflow from operating activities

(591)

(762)




Cash flow from investing activities



Purchase of investments

-

(2,067)

Proceeds from disposal of investments and repayments of loans

2,184

4,334




Net cash generated from investing activities

2,184

2,267




Cash flow from financing activities



Dividends paid to shareholders

(1,658)

(1,658)




Net cash used for financing activities

(1,658)

(1,658)




Decrease in cash and cash equivalents

(65)

(153)




Cash and cash equivalents at the beginning of the year

90

243




Cash and cash equivalents at the end of the year

25

90

 

 

 

 



 

Statement of Changes in Equity

For the year ended 28 February 2019

 

 


Called up share capital

Share premium account

Capital reserve - realised

Capital reserve - unrealised

Revenue reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000








Balance as at 1 March 2017

17

15,624

(933)

(459)

9,269

23,518

Realised gain from the prior period

-

-

50

(50)

-

-

Total comprehensive income for the year

-

-

(283)

188

214

119

Dividends paid

-

-

-

-

(1,658)

(1,658)

Balance as at 28 February 2018

17

15,624

(1,166)

(321)

7,825

21,979

Total comprehensive income for the year

-

-

(329)

(1,500)

61

(1,768)

Dividends paid

-

-

-

-

(1,658)

(1,658)

Balance as at 28 February 2019

17

15,624

(1,495)

(1,821)

6,228

18,553

 

 

Distributable reserves comprise: Capital reserve-realised, Capital reserve-unrealised (excluding gains on unquoted investments) and the Revenue reserve. At the year-end distributable revenue reserves were £6,228,000 (2018: £7,825,000).

 

The Capital reserve-realised includes gains/losses that have been realised in the year due to the sale of investments, net of related costs. The Capital reserve-unrealised represents the investment holding gains/losses and shows the gains/losses on investments still held by the company not yet realised by an asset sale.

 

Share premium represents premium on shares issued less issue costs.

 

The revenue reserve represents the cumulative revenue earned less cumulative distributions.


1.       Accounting Policies

 

 

Accounting convention

Puma VCT 10 plc ("the Company") was incorporated, registered and is domiciled in England. The Company's registered number is 08714913. The registered office is Bond Street House, 14 Clifford Street, London W1S 4JU. The Company is a public limited company (limited by shares) whose shares are listed on LSE with a premium listing. The company's principal activities and a description of the nature of the Company's operations are disclosed in the Strategic Report.

 

The financial statements have been prepared under the historical cost convention, modified to include investments at fair value, and in accordance with the requirements of the Companies Act 2006, including the provisions of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' ("FRS 102") and the Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014 by the Association of Investment Companies and updated in February 2018 ("the SORP").

 

Monetary amounts in these financial statements are rounded to the nearest whole £1,000, except where otherwise indicated.

 

Investments

All investments are measured at fair value.  They are all held as part of the Company's investment portfolio and are managed in accordance with the investment policy set out on page 16.

 

Listed investments are stated at bid price at the reporting date.

 

Unquoted investments are stated at fair value by the Directors with reference to the International Private Equity and Venture Capital Valuation Guidelines ("IPEV") as follows:

 

·          Investments which have been made within the last twelve months or where the investee company is in the early stage of development will usually be valued at the price of recent investment except where the company's performance against plan is significantly different from expectations on which the investment was made, in which case a different valuation methodology will be adopted.

 

·          Other investments (comprising equity and loan notes) and investments in debt instruments will usually be valued by applying a discounted cash flow methodology based on expected future returns of the investment.

 

·          Alternative methods of valuation such as multiples or net asset value may be applied in specific circumstances if considered more appropriate.

 

Realised surpluses or deficits on the disposal of investments are taken to realised capital reserves, and unrealised surpluses and deficits on the revaluation of investments are taken to unrealised capital reserves.

 

Income

Dividends receivable on listed equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company's right to receive payment is established and there is no reasonable doubt that payment will be received.  Interest receivable is recognised wholly as a revenue item on an accruals basis.

 

Performance fees

Upon its inception, the Company agreed performance fees payable to the Investment Manager, Puma Investment Management Limited, and members of the investment management team at 20% of the aggregate excess of the amounts realised over £1 per Ordinary Share returned to Ordinary Shareholders.  This incentive will only be effective once the other holders of Ordinary Shares have received distributions of £1 per share.  

 

The performance incentive has been satisfied through the issue of 6,908,306 Ordinary Shares (as set out in note 11 of the financial statements) to the Investment Manager and members of the investment management team being 20% of the total issued Ordinary Share capital of 34,541,530.  Under the terms of the incentive arrangement, all rights to dividends will be waived until the £1 per Ordinary Share performance target has been met.  The performance fee is accounted for as an equity-settled share-based payment.

Section 26 of FRS 102 "Share-Based Payment" requires the recognition of an expense in respect of share-based payments in exchange for goods or services.  Entities are required to measure the goods or services received at their fair value, unless that fair value cannot be estimated reliably in which case that fair value should be estimated by reference to the fair value of the equity instruments granted.

 

At each balance sheet date, the Company estimates that fair value by reference to any excess of the net asset value, adjusted for dividends paid, over £1 per share in issue at the balance sheet date. Any change in fair value is recognised in the Income Statement with a corresponding adjustment to equity.

 

Expenses

All expenses (inclusive of VAT) are accounted for on an accruals basis. Expenses are charged wholly to revenue, with the exception of:

 

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

·      the investment management fee, 75% of which has been charged to capital to reflect an element which is, in the directors' opinion, attributable to the maintenance or enhancement of the value of the Company's investments in accordance with the Board's expected long-term split of return; and

·      the performance fee which is allocated proportionally to revenue and capital based on the respective contributions to the Net Asset Value.

 

Taxation

Corporation tax is applied to profits chargeable to corporation tax, if any, at the applicable rate for the year. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the marginal basis as recommended by the SORP.

 

Deferred tax 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, 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 taxable 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.

 

Reserves

Realised losses and gains on investments, transaction costs, the capital element of the investment management fee and taxation are taken through the Income Statement and recognised in the Capital Reserve - Realised on the Balance sheet.  Unrealised losses and gains on investments and the capital element of the performance fee are also taken through the Income Statement and are recognised in the Capital Reserve - Unrealised.

 

Debtors

Debtors include accrued income which is recognised at amortised cost, equivalent to the fair value of the expected balance receivable.

 

Creditors

Creditors are initially measured at the transaction price and subsequently measured at amortised cost, being the transaction price less any amounts settled.

 

Dividends

Final dividends payable are recognised as distributions in the financial statements when the Company's liability to make payment has been established. The liability is established when the dividends proposed by the Board are approved by the Shareholders. Interim dividends are recognised when paid.

 

Key accounting estimates and assumptions

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial period relate to the fair value of unquoted investments.  Further details of the unquoted investments are disclosed in the Investment Manager's Report on pages 3 to 6 and notes 8 and 14 of the financial statements.

 

2.       Income


Year ended 28 February 2019

Year ended 28 February 2018


£'000

£'000

Income from investments



Loan and loan note interest

398

639

Bond yields

-

5


398

644

 

3.      Investment Management Fees

 


Year ended 28 February 2019

Year ended 28 February 2018


£'000

£'000

Puma Investments fees

435

468


435

468

 

Puma Investment Management Limited ("Puma Investments") has been appointed as the Investment Manager of the Company for an initial period of five years, which can be terminated by not less than twelve months' notice, given at any time by either party, on or after the fifth anniversary. The Board is satisfied with the performance of the Investment Manager. Under the terms of this agreement Puma Investments will be paid an annual fee of 2% of the Net Asset Value payable quarterly in arrears calculated on the relevant quarter end NAV of the Company. These fees are capped, the Investment Manager having agreed to reduce its fee (if necessary to nothing) to contain total annual costs (excluding performance fee and trail commission) to within 3.5% of funds raised. Total costs this year were 2.4% of the funds raised (2018: 2.7%). Graham Shore (a director) holds a Directorship of the parent of the Investment Manager.

 

4.       Other expenses


Year ended 28 February 2019

Year ended 28 February 2018


£'000

£'000

PI Administration Services Limited

76

82

Directors' Remuneration

48

48

Social security costs

3

2

Auditor's remuneration for statutory audit

25

24

Legal and professional fees

14

50

Other expenses

48

57





214

263

 

PI Administration Services Limited provides administrative services to the Company for an aggregate annual fee of 0.35% of the Net Asset Value of the Fund, payable quarterly in arrears.

 

Remuneration for each Director for the year is disclosed in the Directors' Remuneration Report on page 22. The Company had no employees (other than Directors) during the year (2018: none).  The average number of non-executive Directors during the year was 3 (2018: 3).  The non-executive Directors are considered to be the Key Management Personnel of the Company with total remuneration for the year of £51,000 (2018: £50,000), including social security costs.

 

The Auditor's remuneration of £21,000 (2018: £20,000) has been grossed up in the table above to be inclusive of VAT. Non-audit fees charged during the year were £250 (2018: £nil) for iXBRL tagging of the 2018 financial statements.

 

5.      Taxation


Year ended 28 February 2019

Year ended 28 February 2018


£'000

£'000

UK corporation tax charged to revenue reserve

14

50

UK corporation tax charged/(credited) to capital reserve

2

(66)




UK corporation tax charge/(credit) for the year

16

(16)




Factors affecting tax charge for the year


(Loss)/profit before taxation

(1,752)

103




Tax charge calculated on (loss)/profit before taxation at the applicable rate of 19%

(333)

20

Tax on capital items not taxable

285

(36)

Tax losses carried forward

48

-

Adjustment in respect of prior year

16

-





16

(16)




Capital returns are not taxable as the Company is exempt from tax on realised capital gains whilst it continues to comply with the VCT regulations, so no corporation tax is recognised on capital gains or losses.  Due to the intention to continue to comply with the VCT regulations, the Company has not provided for deferred tax on any realised or unrealised capital gains and losses. No deferred tax asset has been recognised in respect of the tax losses carried forward due to the uncertainty as to recovery.

 

6.       Basic and diluted return/(loss) per Ordinary Share


Year ended 28 February 2019


Revenue

Capital

Total

Total comprehensive income for the year

£61,000

(£1,829,000)

(£1,768,000)

Number of shares in issue

34,541,530

34,541,530

34,541,530

Less: management incentive shares

(6,908,306)

(6,908,306)

(6,908,306)





Number of shares in issue for purposes of basic and diluted return/(loss) per share calculations

27,633,224

27,633,224

27,633,224





Basic and diluted return/(loss) per share

0.22p

(6.62p)

(6.40p)






Year ended 28 February 2018


Revenue

Capital

Total

Total comprehensive income the year

£214,000

(£95,000)

£119,000

 

Number of shares in issue

34,541,530

34,541,530

34,541,530

 

Less: management incentive shares

 

(6,908,306)

(6,908,306)

(6,908,306)

Number of shares in issue for purposes of basic and diluted return/(loss) per share calculations

 

27,633,224

27,633,224

27,633,224

Based and diluted return/(loss) per share

0.77p

(0.34p)

0.43p





 

7.       Dividends

 

The Directors do not propose a final dividend in relation to the year ended 28 February 2019 (2018: £nil). An interim dividend of 6p per ordinary share was paid from revenue reserves in the year ended 28 February 2019 totalling £1,658,000 (2018: £1,658,000).

 

8.      Investments

(a) Movements in investments


Qualifying investments

Non-qualifying investments

Total



£'000

£'000

£'000

Book cost at 28 February 2018


14,989

5,646

20,635

Unrealised gains/(losses) at 28 February 2018


(322)

-

(322)






Valuation at 28 February 2018


14,667

5,646

20,313






Purchases at cost


-

-

-

Disposal of investments and repayment of loans and loan notes


(300)

(1,883)

(2,183)

Realised loss on disposal


-

(1)

(1)

Unrealised losses


(1,500)

-

(1,500)






Valuation at 28 February 2019


12,867

3,762

16,629






Book cost at 28 February 2019


14,689

3,762

18,451

Net unrealised gains/(losses) at 28 February 2019


(1,822)

-

(1,822)






Valuation at 28 February 2019


12,867

3,762

16,629

 

During the year, the Company sold its quoted bonds in Commonwealth Bank of Australia for £198,000. These bonds were originally acquired for £199,000 and were stated at £199,000 as at 28 February 2018.

 

(b) Gains and losses on investments

 

The gains and losses on investments for the year shown in the Income Statement is analysed as follows:




Year ended 28 February 2019

Year ended 28 February 2018




£'000

£'000

Realised (loss)/gain on disposal



(1)

2

Unrealised (losses)/gains in the year



(1,500)

188









(1,501)

190

 

 

(c) Quoted and unquoted investments




Market value as at 28 February 2019

Market value as at 28 February 2018




£'000

£'000

Quoted investments



-

199

Unquoted investments



16,629

20,114









16,629

20,313

 

Further details of these investments (including the unrealised loss in the year) are disclosed in the Chairman's Statement, Investment Manager's Report, Investment Portfolio Summary and Significant Investments on pages 1 to 14 of the Annual Report.

 

9.      Debtors

 


As at 28 February 2019

As at 28 February 2018


£'000

£'000

Accrued income

2,047

1,654

Other debtors

7

10

Corporation tax

-

61





2,054

1,725

 

10.    Creditors - amounts falling due within one year

 


As at 28 February 2019

As at 28 February 2018


£'000

£'000

Accruals

155

149





155

149

 

11.    Management Performance Incentive Arrangement

 

On 7 October 2013, the Company entered into an Agreement with the Investment Manager and members of the investment management team (together "the Management Team") such that the Management Team will be entitled in aggregate to share in 20% of the aggregate excess on any amounts realised by the Company in excess of £1 per Ordinary Share, the Performance Target.

 

This incentive is effective through the issue of ordinary shares in the Company, such that the Management Team hold 6,908,306 ordinary shares being 20% of the issued share capital of 34,541,530.

 

The Management Team will waive all rights to dividends until a return of £1 per share (whether capital or income) has been paid to the other shareholders.

 

The performance incentive structure provides a strong incentive for the Investment Manager to ensure that the Company performs well, enabling the Board to approve distributions as high and as soon as possible.

 

 

12.    Called Up Share Capital

 


As at 28 February 2019

As at 28 February 2018


£'000

£'000




34,541,530 ordinary shares of 0.05p each

17

17

 

 

13.     Net Asset Value per Ordinary Share

 


2019

2018

Net assets

£18,553,000

£21,979,000




Number of shares in issue

34,541,530

34,541,530




Less: management incentive shares (see note 11)

(6,908,306)

(6,908,306)




Number of shares in issue for purposes of Net



Asset Value per share calculation

27,633,224

27,633,224




Net asset value per share



Basic

67.14p

79.54p

Diluted

67.14p

79.54p

 

14.    Financial Instruments

 

The Company's financial instruments comprise its investments, cash balances, debtors and certain creditors.  The fair value of all of the Company's financial assets and liabilities is represented by the carrying value in the Balance Sheet. Excluding cash balances, the Company held the following categories of financial instruments at 28 February 2019:


2019

2018


£'000

£'000




Financial assets at fair value through profit or loss

16,629

20,313




Financial assets that are debt instruments measured at amortised cost

2,054

1,664




Financial liabilities measured at amortised cost

(155)

(149)





18,528

21,828

 

Management of risk

The main risks the Company faces from its financial instruments are market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency movements, liquidity risk, credit risk and interest rate risk. The Board regularly reviews and agrees policies for managing each of these risks. The Board's policies for managing these risks are summarised below and have been applied throughout the year.

 

Credit risk

Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager monitors counterparty risk on an ongoing basis.  

 

The Company's maximum exposure to credit risk is as follows:

 


2019

2018


£'000

£'000




Investments in loans, loan notes and bonds

8,072

17,264

Cash at bank and in hand

25

90

Interest, dividends and other receivables

2,054

1,664





10,151

19,018

 

The cash held by the Company at the year-end is held in one U.K. bank. Bankruptcy or insolvency of the bank may cause the Company's rights with respect to the receipt of cash held to be delayed or limited. The Board monitors the Company's risk by reviewing regularly the financial position of the bank and should it deteriorate significantly the Investment Manager will, on instruction of the Board, move the cash holdings to another bank.

 

Credit risk associated with interest, dividends and other receivables are predominantly covered by the investment management procedures.

 

Investments in loans, loan notes and bonds comprise a fundamental part of the Company's venture capital investments, therefore credit risk in respect of these assets is managed within the Company's main investment procedures.

 

Market price risk

Market price risk arises mainly from uncertainty about future prices of financial instruments held by the Company. It represents the potential loss the Company might suffer through holding investments in the face of price movements.  The Investment Manager actively monitors market prices and reports to the Board, which meets regularly in order to consider investment strategy.

 

The Company's strategy on the management of market price risk is driven by the Company's investment policy as outlined in the Strategic Report on page 16. The management of market price risk is part of the investment management process. The portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis, with an objective of maximising overall returns to shareholders.

 

Holdings in unquoted investments may pose higher price risk than quoted investments.  Some of that risk can be mitigated by close involvement with the management of the investee companies along with review of their trading results.

 

0% (2018: 1%) of the Company's investments are quoted investments and 100% (2018: 99%) are unquoted investments.

 

Liquidity risk

Details of the Company's unquoted investments are provided in the Investment Portfolio summary on page 7. By their nature, unquoted investments may not be readily realisable and the Board considers exit strategies for these investments throughout the period for which they are held. As at the year end, the Company had no borrowings.

 

The Company's liquidity risk associated with investments is managed on an ongoing basis by the Investment Manager in conjunction with the Directors and in accordance with policies and procedures in place as described in the Strategic Report and the Report of the Directors. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.  The Company maintains access to sufficient cash to pay accounts payable and accrued expenses.

 

Fair value interest rate risk

The benchmark that determines the interest paid or received on the current account is the Bank of England base rate, which was 0.75% at 28 February 2019 (2018: 0.5%). All of the loan and loan note investments are unquoted and hence not directly subject to market movements as a result of interest rate movements.

 

Cash flow interest rate risk

The Company has exposure to interest rate movements primarily through its cash deposits and loan notes which track either the Bank of England base rate or LIBOR.

 

Interest rate risk profile of financial assets

The following analysis sets out the interest rate risk of the Company's financial assets as at 28 February 2019:


Rate status

Weighted average interest rate

Weighted average period until maturity

Total





£'000

Cash at bank - RBS

Floating

0.01%

-

25

Loans, loan notes and bonds

Floating

2.25%

23 months

2,650

Loans, loan notes and bonds

Fixed

13.74%

14 months

4,724

Balance of assets

Non-interest bearing

-

11,309










18,708

 

The following analysis sets out the interest rate risk of the Company's financial assets as at 28 February 2018:


Rate status

Weighted average interest rate

Weighted average period until maturity

Total





£'000

Cash at bank - RBS

Floating

0.01%

-

90

Loans, loan notes and bonds

Floating

1.73%

38 months

3,250

Loans, loan notes and bonds

Fixed

9.6%

30 months

6,008

Balance of assets

Non-interest bearing

-

12,719










22,067

 

Foreign currency risk

The reporting currency of the Company is Sterling. The Company has not held any non-Sterling investments during the year.

 

Fair value hierarchy

Financial assets and liabilities measured at fair value are disclosed using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurements, as follows:-

·      Level 1 - Fair value is measured using the unadjusted quoted price in an active market for identical assets.

·      Level 2- Fair value is measured using inputs other than quoted prices that are observable using market data.

·      Level 3 - Fair value is measured using unobservable inputs.

 

Fair values have been measured at the end of the reporting period as follows:-


2019

2018


£'000

£'000

Level 1



Investments listed on LSE

-

199




Level 3



Unquoted investments

16,629

20,114





16,629

20,313

 

The Level 3 investments have been valued in line with the Company's accounting policies and IPEV guidelines.  Further details of these investments are provided in the significant investments section of the Annual Report on pages 8 to 14.

 

15.    Capital management

The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern, so that it can provide an adequate return to shareholders by allocating its capital to assets commensurate with the level of risk.

By its nature, the Company has an amount of capital, at least 70% (as measured under the tax legislation) of which must be, and remain, invested in the relatively high-risk asset class of small UK companies within three years of that capital being subscribed. For accounting periods commencing after 5 April 2019 this is rising to 80%.

The Company accordingly has limited scope to manage its capital structure in the light of changes in economic conditions and the risk characteristics of the underlying assets. Subject to this overall constraint upon changing the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares, or sell assets to maintain a level of liquidity to remain a going concern.

The Board has the opportunity to consider levels of gearing, however there are no current plans to do so. It regards the net assets of the Company as the Company's capital, as the level of liabilities is small and the management of those liabilities is not directly related to managing the return to shareholders.

 

16.    Contingencies, Guarantees and Financial Commitments

 

There were no commitments, contingencies or guarantees of the Company at the year-end (2018: none).

 

17.    Controlling Party

 

In the opinion of the Directors there is no immediate or ultimate controlling party. 

 

 

The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the year ended 28 February 2019, but has been extracted from the statutory financial statements for the year ended 28 February 2019 which were approved by the Board of Directors on 20 June 2019 and will be delivered to the Registrar of Companies. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

 

The statutory accounts for the year ended 28 February 2019 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

 

Copies of the full annual report and financial statements for the year ended 28 February 2019 will be available to the public at the registered office of the Company at Bond Street House, 14 Clifford Street, London, W1S 4JU and will be available for download from www.pumainvestments.co.uk.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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