Information  X 
Enter a valid email address

Puma VCT 12 PLC (PU12)

  Print      Mail a friend

Thursday 27 June, 2019

Puma VCT 12 PLC

Annual Financial Report

RNS Number : 6529D
Puma VCT 12 PLC
27 June 2019
 

HIGHLIGHTS

 

·    Funds invested in a diverse range of businesses and projects

·    HMRC requirement that qualifying investments are 70% of the fund is now met

·    Provision against investment in Sweat Union of £3.35 million

·    Loss before tax of £3.28 million (10.61p per share); profit before tax and provision of £70,000

 

 

CHAIRMAN'S STATEMENT

 

Introduction

 

I am pleased to present to you as Chairman the annual report for Puma VCT 12 plc for the year to 28 February 2019, the Company's second full year of investment.

 

The Company has now effectively deployed substantially all its funds in both qualifying and non-qualifying investments. As a result, it has met its minimum qualifying investment percentage (on an HMRC basis) of 70 per cent.

 

Investments

 

During the year, the Company completed a series of qualifying investments for a total of just over £4.8 million.  At the end of the period, the Company had just under £24 million invested in a mixture of qualifying and non-qualifying investments.

 

The Company's portfolio of investments is generally performing well.  However, as reported on 1 May 2019, we have made a provision of £3.35 million against our investment in Sweat Union Limited ("Sweat"). Sweat, a budget gym operator has been experiencing severe trading difficulties. Sweat entered creditors' voluntary liquidation on 14 May 2019, from which the shareholders are not expected to make any recovery.

 

Notwithstanding this disappointing outcome, we remain confident that our portfolio is well positioned to deliver positive returns to shareholders within its expected time horizon.

 

Further details of all our investments can be found in the Investment Manager's report on pages 3 to 6.

 

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 establishing the status of potential investments as qualifying holdings, monitoring rule compliance and maintaining the qualifying status of the Company's holdings in the future. 

 

Results

 

Before taking account of the provision, the Company had a profit before tax of £70,000 for the year (2018: £297,000) and a post-tax gain of 0.23p per ordinary share (2018: 0.96p) calculated on the weighted average number of shares.  The provision reduced this to a pre-tax loss of £3.28 million for the year resulting in a post-tax loss of 10.61p per ordinary share.

 

Reflecting the provision against the Sweat investment, the Net Asset Value per ordinary share ("NAV") at 28 February 2019 was 85.73p (2018: 96.34p) after adding back dividends paid to date.

 

Dividend

 

In line with the Company's dividend policy as stated in the Prospectus, your board paid the Company's first dividend of 2p per share during the year.  The Board will propose at the Annual General Meeting a resolution to pay a second dividend of 1p per share.

 

Outlook

 

We are naturally disappointed with the outcome of our investment in Sweat.  We remain focused on generating strong returns for the Company from both the qualifying and non-qualifying portfolios, which contain some dynamic companies.

 

Whilst there will probably be some further changes in the composition of the portfolio, the Board expects to concentrate in the future on the monitoring of our existing investments and considering the options for exits in due course.

 

 

 

Ray Pierce

Chairman

 

26 June 2019



INVESTMENT MANAGER'S REPORT

 

 

Introduction

 

The Company's funds are now substantially deployed in both qualifying and non-qualifying investments, having met its minimum qualifying investment percentage of 70 per cent during the year.  We report on all our portfolio holdings below.

 

Investments

 

Qualifying Investments

 

NRG Gym - Budget Gyms

During the year, the Company invested £1.4 million (as part of a total investment round of £5 million) into S A Fitness Holdings Limited, a budget gym business operating under the "NRG Gym" brand.  The business currently operates from two sites, in Gravesend and in Watford, and specialises in providing an affordable gym experience with an exceptional large selection of high-end gym equipment.  The investment will provide funds to roll the brand out further.

 

Pure Cremation - Crematorium and Direct Cremations

In November 2017, the Company invested £3 million in Pure Cremation Holdings Limited (as part of a £5 million qualifying investment alongside another Puma VCT).  Pure Cremation is a leading provider of so-called direct cremations, meeting the needs of a growing number of people in the United Kingdom who want a respectful direct cremation arranged without any funeral, leaving them free to say farewell how, where and when is right for them.  The Pure Cremation team have many years' experience in the funeral services sector and acquired a site near Andover to develop a new crematorium and central facility.  As envisaged in Pure Cremation's business plan, the Company invested a further £1.05 million in Pure Cremation (as part of a £2.35 million follow-on qualifying investment alongside another Puma VCT) in November 2018.  We are pleased to report that the Andover facility opened earlier this year and the business is performing well.

 

Applebarn Nurseries - Children's Nursery

The Company had previously invested £1.1 million in Applebarn Nurseries Limited (as part of a £2.2 million qualifying investment alongside another Puma VCT). During the year, the Company completed a follow-on investment of £700,000 to further grow and develop the business. The management team includes a successful operator of the nurseries, together with an experienced developer and contractor, and their first site, a new 120 place children's day nursery in Altrincham, South Manchester, opened in September 2018.

 

Knott End - Pubs with Microbreweries

During the previous period, the Company invested £2.4 million (as part of a £4.8 million qualifying investment alongside another Puma VCT) in Knott End Pub Company Limited which has entered into a franchise agreement with Brewhouse & Kitchen Limited to roll out a portfolio of pubs offering on-site craft micro-brewing activities and good quality food.  During the year, Knott End opened its first two pubs, in Milton Keynes and Horsham, West Sussex, both of which are trading well, and in December 2018, the Company completed a further £1.65 million investment (as part of a £2.5 million follow-on qualifying investment alongside another Puma VCT) to facilitate the opening of further units.

 

Sweat Union - Budget Gyms

In November 2017, the Company invested £3.35 million (as part of a total investment round of £3.75 million) into Sweat Union Limited, a fitness business in the budget and mid-market gym space.  Sweat set out to offer a zoned fitness experience, pitched at a slight price premium to budget rivals given its dedicated spinning and aerobics studios.  Last year it unveiled a partnership with Debenhams to launch in-store gyms with a trial site in Sutton, South London and the Company's investment facilitated the continued roll-out of the brand to the current six units. 

 

We reported in the Company's previous interim results that trading conditions had proven more challenging for Sweat than the business plan envisaged and some management changes had been made to address these difficulties. Sweat's ambitious roll-out strategy unfortunately coincided with the beginning of a steep decline in consumer confidence and turmoil on the high street. At two of its six clubs, businesses in the immediate vicinity closed or moved, reducing the pool of people that the clubs could offer membership to. Sweat also suffered from a slow membership ramp-up of its newest unit at Sutton, not helped by the escalating speculation about the financial strength of Debenhams and its likelihood of survival. Ultimately the company could not sustain the level of cash losses that were being generated.

 

Once the problems became apparent, we engaged actively in trying to help the company address them.  This eventually included a proposed creditors' voluntary arrangement which could have allowed Sweat to restructure its creditors and move forward.  However, once it became clear to the directors of Sweat that the creditors' voluntary arrangement would not be passed, they began a process which may lead to Sweat entering creditors' voluntary liquidation. As reported on 1 May 2019, the Company is not expected to make any recovery from this liquidation hence the full provision against the carrying value of this investment.

 

Growing Fingers - Children's Nursery

As previously reported, the Company has invested £420,000 (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.  Growing Fingers is a new venture with a management team with many years' operational experience in nurseries and healthcare facilities.  The Company benefits from first charge security over the Wendover site and the Growing Fingers business.

 

Signal Building Services - Construction projects

The Company has invested £200,000 (as part of a total investment round of £2 million) into Signal Building Services Limited, a business specialising in delivering turnkey solutions to construction projects led by a management team with over 40 years' of combined experience in the construction sector.  Signal Building Services is currently working on two projects: the construction of a 22 apartment supported living scheme in Wigan and the construction of a 14 apartment supported living scheme in Sutton-in-Ashfield.

 

Kid & Play - Children's Nursery

As previously reported, the Company made a £1.7 million qualifying investment in Kid & Play Limited, alongside funds invested by another Puma VCT totalling £3.4 million.  Kid & Play is seeking to develop, own and operate a new children's day nursery and has identified a number of potential sites which are currently in various stages of planning applications.

 

Sunlight Education Nucleus - Special Educational Needs Schools

In November 2017, the Company made a £2.35 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.  Shortly following the period end, the team at Sunlight completed on the purchase of the site for their first school in Stafford, West Midlands.

 

South-West Cliffe - Children's Nursery

The Company has invested £2.1 million (as part of a £4.2 million qualifying investment alongside another Puma VCT) in South-West Cliffe Limited, supporting an experienced management team to roll out a portfolio of purpose-built day nurseries.

 

 

Non-Qualifying Investments

 

As previously reported, the Company had initially invested just over £20 million in a series of lending businesses offering an appropriate risk adjusted return in the short to medium term.  It was intended that these positions would be liquidated in due course as the Company made qualifying investments.  Many of these loans have now been repaid in full.  Details of the loans that these lending businesses have made are set out below.

 

Construction of Airport Hotel, Edinburgh

In June 2017, £2.8 million of loans (as part of an overall facility of £16 million) were advanced (through affiliates, Piccadilly Lending Limited and Tottenham Lending Limited) to Ability Hotels (Edinburgh) 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. 

 

Mixed Residential Commercial Development, Bloomsbury

As previously reported, a £3.9 million loan (as part of a total initial facility of £17.97 million that increased to £19.17 million during the period) was advanced (through affiliates, Tottenham Lending Limited, Victoria Lending Limited and Marble Lending Limited) to Cudworth 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.

 

Care Home for the Elderly, Chester

A £608,000 loan (as part of an overall facility of £7.4 million) had been advanced (through an affiliate, Victoria Lending Limited) to New Care (Chester) Limited to fund the development and initial trading of a 77-bed purpose-built care home in Chester.  The New Care Group is an experienced developer and operator of care homes and the loan was secured with a first charge over the site.  We are pleased to report that, during the period, the development was completed and the care home was refinanced resulting in the loan being repaid in full.

 

Mixed Residential Commercial Development, Tower Bridge

A £1.8 million facility (together with loans from other vehicles managed and advised by the Investment Manager totalling £4.3 million) had been provided (through an affiliate, Marble Lending Limited) to Empire TBR Limited to fund the construction of a mixed residential and commercial development near Tower Bridge, London.  During the year, the loan was repaid in full.

 

Citrus Group

As previously reported, a series of loans had been advanced to various entities within the Citrus Group (through affiliates, Valencia Lending Limited and Tottenham Lending Limited), which at the start of the period stood at £1 million. 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 giving a good rate of return.

 

Investment Strategy

 

We are pleased to have invested the Company's funds in a diverse range of businesses and projects.  We remain focused on generating strong returns for the Company in both the qualifying and non-qualifying portfolios, whilst balancing these returns with maintaining an appropriate risk exposure.   Notwithstanding the outcome of our investment in Sweat, we remain confident that our portfolio is well positioned to deliver positive returns to shareholders within the Fund's expected time horizon

 

 

 

Puma Investment Management Limited

26 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





Growing Fingers Limited

420

420

-

2%

Kid & Play Limited

1,694

1,694

-

7%

South-West Cliffe Limited

2,100

2,100

-

8%

Signal Building Services Limited

200

200

-

1%

Applebarn Nurseries Limited

1,833

1,833

-

7%

Knott End Pub Company Limited

4,053

4,053

-

16%

Sunlight Education Nucleus Limited

2,350

2,350

-

9%

Sweat Union Limited

-

3,350

(3,350)

-

Pure Cremations Limited

4,053

4,053

-

16%

SA Fitness Holdings Limited

1,417

1,417

-

5%






Total Qualifying Investments

18,120

21,470

(3,350)

70%






Non-Qualifying Investments





Piccadilly Lending Limited

1,240

1,240

-

5%

Victoria Lending Limited

1,617

1,617

-

6%

Tottenham Lending Limited

700

700

-

3%

Marble Lending Limited

1,850

1,850

-

7%






Total Non-Qualifying investments

5,407

5,407

-

21%











Total Investments

23,527

26,877

(3,350)

91%

Balance of Portfolio

2,354

2,354

-

9%






Net Assets

25,881

29,231

(3,350)

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 on investments

8 (b)

-

(3,350)

(3,350)

-

-

-

Income

2

909

-

909

1,147

-

1,147











909

(3,350)

(2,441)

1,147

-

1,147









Investment management fees

3

(148)

(443)

(591)

(149)

(447)

(596)

Other expenses

4

(248)

-

(248)

(254)

-

(254)











(396)

(443)

(839)

(403)

(447)

(850)









(Loss)/profit before taxation


513

(3,280)

744

(447)

297

Taxation

5

(97)

97

-

(142)

142

-









(Loss)/profit and total comprehensive income for the year


416

(3,696)

(3,280)

602

(305)

297









Basic and diluted








(Loss)/return per Ordinary Share (pence)

6

1.35p

(11.96p)

(10.61p)

1.95p

(0.99p)

0.96p

 

 

 

 

 

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

23,527

27,972









Current Assets




Debtors

9

2,413

1,501

Cash


107

473



2,520

1,974

Creditors - amounts falling due within one year

 

10

(166)

(167)





Net Current Assets


2,354

1,807





Net Assets


25,881

29,779





Capital and Reserves




Called up share capital

12

19

19

Share premium account


29,833

29,833

Capital reserve - realised


(1,050)

(704)

Capital reserve - unrealised


(3,350)

-

Revenue reserve


429

631





Total Equity


25,881

29,779









Net Asset Value per Ordinary Share

13

83.73p

96.34p

 

 

The financial statements on pages 32 to 47 were approved and authorised for issue by the Board of Directors on 26 June 2019 and were signed on their behalf by:

 

 

 

 

 

Ray Pierce

Chairman

 



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

(3,280)

297

Loss on investments

3,350

-

Increase in debtors

(912)

(1,043)

(Decrease)/increase in creditors

(1)

2




Net cash used in operating activities

(843)

(744)




Cash flow from investing activities



Purchase of investments and loans advanced

(4,823)

(16,957)

Proceeds from disposal of investments and repayments of loans

5,918

16,114




Net cash generated from/(used in) investing activities

1,095

(843)




Cash flow from financing activities



Dividends paid

(618)

-




Net cash used for financing activities

(618)

-




Net decrease in cash and cash equivalents

(366)

(1,587)




Cash and cash equivalents at the beginning of the period

473

2,060




Cash and cash equivalents at the end of the period

107

473

 

 

 



 


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 28 February 2017

19

29,833

(425)

26

29

29,482

Realised gain from prior period

-

-

26

(26)

-

-

Total comprehensive income for the year

-

-

(305)

-

602

297

Balance as at 28 February 2018

19

29,833

(704)

-

631

29,779

Dividends paid

-

-

-

-

(618)

(618)

Total comprehensive income for the year

-

-

(346)

(3,350)

416

(3,280)

Balance as at 28 February 2019

19

29,833

(1,050)

(3,350)

429

25,881

Statement of Changes in Equity

For the year ended 28 February 2019

 

 

 

 

 

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 £429,000 (2018: £631,000).

 

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 12 plc ("the Company") was incorporated in England on 2 September 2015 and is registered and domiciled in England and Wales. The Company's registered number is 09758309. 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 and with 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.

 

·          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 7,727,297 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 38,636,487.  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 year 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

908

1,111

Bond yields

-

35





908

1,146

Other income



Bank deposit income

1

1


909

1,147

 

 

3.      Investment Management Fees

 


Year ended 28 February 2019

Year ended 28 February 2018


£'000

£'000

Puma Investments fees

591

596


591

596

 

 

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 2.8% (2018: 2.8%) of the funds raised. 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 fees

103

104

Directors' remuneration

55

56

Social security costs

3

1

Auditor's remuneration for statutory audit

25

24

Other expenses

62

69





248

254

 

 

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.  Director's remuneration disclosed above has been grossed up, where applicable, to be inclusive of VAT. 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 £58,000 (2018: £57,000) 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

97

142

UK corporation tax credited to capital reserve

(97)

(142)




UK corporation tax charge for the year

-

-




Factors affecting tax charge for the year


(Loss)/profit before taxation

(3,280)

297




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

(623)

56

Tax on capital items not taxable

637

-

Tax losses utilised

(14)

(56)





-

-

 

 

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 or deferred tax is recognised on capital gains or losses.

 

No provision for deferred tax has been made in the current accounting year. Due to the Company's status as a Venture Capital Trust and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.



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

         

         


Year ended 28 February 2019


Revenue

Capital

Total

Total comprehensive income for the year

£416,000

(£3,696,000)

(£3,280,000)





Weighted average number of shares in issue for the year

38,636,487

38,636,487

38,636,487





Less: management incentive shares (see note 11)

(7,727,297)

(7,727,297)

(7,727,297)





Weighted average number of shares for purposes of return/(loss) per share calculations

30,909,190

30,909,190

30,909,190





Return/(loss) per share

1.35p

(11.96p)

(10.61p)





         

         


Year ended 28 February 2018


Revenue

Capital

Total

Total comprehensive income for the year

£602,000

(£305,000)

£297,000





Weighted average number of shares in issue for the year

38,636,487

38,636,487

38,636,487





Less: management incentive shares (see note 11)

(7,727,297)

(7,727,297)

(7,727,297)





Weighted average number of shares for purposes of return/(loss) per share calculations

30,909,190

30,909,190

30,909,190





Return/(loss) per share

1.95p

(0.99p)

0.96p





 

 

7.      Dividends

 

The Directors will propose a resolution at the Annual General Meeting to pay a final dividend of 1p per share (2018: 2p per share), which if approved, will result in a total dividend payment of £309,000 (2018: £618,000).

 

 

8.      Investments

 

(a) Movements in investments


Qualifying  investments

Non-qualifying investments

Total



£'000

£'000

£'000

Purchased at cost


16,647

11,325

27,972

Net unrealised gains/(losses)


-

-

-






Valuation at 28 February 2018


16,647

11,325

27,972






Purchases at cost


4,823

-

4,823

Disposal of investments and repayment of loans and loan notes


-

(5,918)

(5,918)

Net unrealised loss


(3,350)

-

(3,350)






Valuation at 28 February 2019


18,120

5,407

23,527






Book cost at 28 February 2019


21,470

5,407

26,877

Net unrealised losses at 28 February 2019


(3,350)

-

(3,350)






Valuation at 28 February 2019


18,120

5,407

23,527






(b) Gains/(losses) on investments








Year ended 28 February 2019

Year ended 28 February 2018




£'000

£'000

Unrealised losses in year



(3,350)

-









(3,350)

-






(c) Quoted and unquoted investments








Market value as at 28 February 2019

Market value as at 28 February 2018




£'000

£'000

Unquoted investments



23,527

27,972









23,527

27,972

 

 

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




Other debtors

Accrued income

3

2,410

-

1,501





2,413

1,501

 

 

 

10.    Creditors - amounts falling due within one year

 


As at 28 February 2019

As at 28 February 2018


£'000

£'000




Accruals

166

167








166

167

 

 

11.    Management Performance Incentive Arrangement

 

 

On 3 September 2015, 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 per cent 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 7,727,297 ordinary shares being 20% of the issued share capital of 38,636,487.

 

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 2018 and 28 February 2019


£'000



38,636,487 ordinary shares of 0.05p each

19

 

 

13.     Net Asset Value per Ordinary Share

 


As at
28 February 2019

As at
28 February 2018




Net assets

£25,881,000

£29,779,000




Number of shares in issue

38,636,487

38,636,487




Less: management incentive shares (see note 11)

(7,727,297)

(7,727,297)




Number of shares in issue for purposes of Net



Asset Value per share calculation

30,909,190

30,909,190




Net asset value per share



Basic

83.73p

96.34p

Diluted

83.73p

96.34p

 

 

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:


As at 28 February 2019

As at 28 February 2018


£'000

£'000




Financial assets at fair value through profit or loss

23,527

27,972




Financial assets that are debt instruments measured at amortised cost

2,413

1,501




Financial liabilities measured at amortised cost

(166)

(167)





25,774

29,306

 

 

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:

 


As at 28 February 2019

As at 28 February 2018


£'000

£'000




Investments in loans and loan notes

9,336

16,577

Cash at bank and in hand

107

473

Interest, dividends and other receivables

2,413

1,501





11,856

18,551

 

The cash held by the Company at the year-end is held in two U.K. banks. 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 and loan notes comprises 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.

 

100% (2018: 100%) of the Company's investments 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 Report of the Directors and the Strategic Report. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.  The Company maintains access to cash reserves sufficient 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

Average interest rate

Period until maturity

Total





£'000

Cash at bank - Metro

Floating

0.10%

-

2

Cash at bank - RBS

Floating

0.50%

-

105






Loans and loan notes

Fixed

10.56%

34 months

9,336






Balance of assets

Non-interest bearing

-

16,604










26,047

 

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 - Metro

Floating

0.12%

-

11

Cash at bank - RBS

Floating

0.25%

-

462






Loans and loan notes

Floating

8.00%

38 months

1,000

Loans and loan notes

Fixed

7.64%

44 months

15,504






Balance of assets

Non-interest bearing

-

12,969










29,946

 

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 year as follows:-

 


2019

2018


£'000

£'000




Level 3



Unquoted investments

23,527

27,972





23,527

27,972

 

 

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 must have 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 26 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 2018 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.
 
END
 
 
FR EANKXAAPNEEF

a d v e r t i s e m e n t