TIDMPUMX
RNS Number : 0797J
Puma VCT 10 PLC
30 November 2018
Puma VCT 10 plc
Interim Report
For the period ended 31 August 2018
Officers and Professional Advisers
Directors Auditor
David Vaughan (Chairman) RSM UK Audit LLP
Peter L R Hewitt Chartered Accountants
Graham Shore 25 Farringdon Street
London EC4A 4AB
Secretary
Eliot Kaye Sponsors and Solicitors
Howard Kennedy
Registered Number No 1 London Bridge
08714913 London SE1 9BG
Registered Office Bankers
Bond Street House The Royal Bank of Scotland plc
14 Clifford Street London City Office
London W1S 4JU PO Box 412
62-63 Threadneedle Street
London EC2R 8LA
Investment Manager
Puma Investment Management Limited
Bond Street House
14 Clifford Street
London W1S 4JU
Registrar VCT Tax Advisor
SLC Registrars PricewaterhouseCoopers LLP
42- 50 Hersham Road 1 Embankment Place
Walton-on-Thames London WC2N 6RH
Surrey KT12 1RZ
Administrator Custodian
PI Administration Services Limited Pershing Securities Limited
Bond Street House 1 Canada Square
14 Clifford Street London
London W1S 4JU E14 5AL
Chairman's Statement
Highlights
-- Fund substantially invested in a diverse range of high quality businesses and projects.
-- 18p per share of dividends paid since inception, equivalent
to a 8.6% per annum tax-free running yield on net investment.
-- NAV of 97.20p at the half year to (adding back dividends paid to date).
Chairman's Statement
Introduction
As your Company enters into the final year of its expected
five-year life, I am pleased to report that your funds are
substantially deployed in both qualifying and non-qualifying
investments. It continues to meet its minimum qualifying investment
percentage of 70 per cent and remains on track to meet the new
minimum qualifying investment percentage of 80 per cent by the end
of the current tax year. We believe our portfolio is well
positioned to deliver returns in line with expectations to
shareholders within the Company's remaining time horizon.
Investments
Qualifying Investments
Having met its minimum qualifying investment percentage and in
light of its remaining planned life, the Company has not made any
new qualifying investments during the period. We report as follows
on its current portfolio of qualifying investments:
Growing Fingers - Children's Nursery
As previously reported, the Company has invested GBP1.4 million
(as part of a GBP2.8 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 headed by
a management team with many years' operational experience in
nurseries and healthcare facilities. The Company benefits from the
first charge security over the Wendover site and the Growing
Fingers business.
Welcome Health - Chain of Pharmacies
The Company had previously invested GBP2.5 million (as part of a
GBP5 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. The entrepreneur
behind Welcome Health has experience in this region and is focused
on providing pharmaceutical services to a currently underserviced
and relatively deprived market.
Mini Rainbows - Children's Nursery
As reported in the Company's previous annual report, Mini
Rainbows Limited (in which the Company invested GBP2.5 million as
part of a GBP5 million investment alongside other Puma VCTs)
acquired a mature children's day nursery in Murrayfield, an
affluent part of Edinburgh. We are pleased to report that the
Edinburgh nursery is performing well. During the period, Mini
Rainbows acquired a second nursery in Shawlands, Glasgow, founded
in 1991 and with capacity for up to 65 children. The Mini Rainbows'
experienced management team are in various stages of discussions to
acquire further nurseries in the coming months.
Warm Hearth - Pubs with Microbreweries
In late 2015, the Company invested GBP2.5 million (as part of a
GBP5 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. As previously reported,
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. Performance of these units has been below our
expectations. Management are focused on improving performance at
both pubs, as well as looking at planning options on both sites
which have the prospect of delivering value.
Saville Services - Construction projects
The Company's investment of GBP2.1 million (alongside other Puma
VCTs) into Saville Services Limited continues to perform well.
Saville Services has been working on a series of projects,
including most recently the construction of a 77-bed, purpose-built
care home in Chester. We are pleased to report that the care home
project completed successfully during the year and is now
generating attractive returns for Saville Services which will
benefit the Company when its investment is repaid in due course.
The team at Saville Services are 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 ("MRF") operated by Opes
Industries Limited ("Opes"), into which the Company invested a
total of GBP3.45m (as part of an GBP8.8m investment by Puma
entities). As a result of the incident, and as reported in the
Company's previous annual report, the board made a provision of
GBP510,000 against the carrying value of the Company's investment
in Opes. Opes owned a 73 hectare site in north Oxfordshire with a
MRF, including a landfill site for non-hazardous materials and an
aggregates/gravel quarrying business. The Company's investment was
to provide funding for the construction and equipping of the MRF
and working capital during the build-up of the trade. The funding
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. The directors have
now reversed GBP188,000 of the original GBP510,000 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 GBP1 million qualifying
investment (as part of a GBP4.7 million investment alongside other
Puma VCTs) in Sunlight Education Nucleus Limited, a company seeking
to develop, own and operate a series of special education needs
schools across the United Kingdom. The team at Sunlight are
progressing with plans for their first school in the West
Midlands.
Non-Qualifying Investments
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
period stood at GBP1 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 period, the loans were repaid in full giving a good rate
of return.
Mixed Residential-Commercial Development, Bloomsbury
During the year, a GBP1.2 million loan (as part of a total
facility of GBP17.97 million, increased from GBP17.5 million) was
advanced (through an affiliate, Lothian 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 and the development is progressing well.
Construction of Airport Hotel, Edinburgh
The GBP1.6 million loan advanced to Ability Hotels (Edinburgh)
Limited (as part of an overall facility of GBP16 million, through
affiliate Latimer Lending Limited) to fund the development of a new
240-room Hampton by Hilton hotel at Edinburgh Airport continues to
perform. The hotel is now expected to open before the end of the
year, well ahead of schedule, at which time it will be the newest
and nearest hotel to the airport terminal building. The Ability
Group is an experienced developer and operator of hotels and the
loan is secured with a first charge over the site.
Housing Development Project, Aberdeen
As previously reported, a GBP474,000 loan (as part of a GBP2.9
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
period, the loan was repaid in full giving a good rate of
return.
Care Home for the Elderly, Egham
As previously reported, a loan of GBP575,000 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 GBP7.2 million, are secured with a first charge
over the site. As previously reported, construction has been behind
schedule and over budget as a result of the non-performance of the
original building contractor. We are pleased to report that,
following a substantial injection of further equity by the
developer and careful management by the construction manager, Alyth
Trading, a new contractor has been appointed and the scheme is now
on track to reach practical completion by January 2019. We
understand that the borrowers are seeking to re-finance the scheme
to enable them to repay us on completion of the construction
project.
Care Home for the Elderly, Formby
The GBP800,000 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 is part of an overall facility of
GBP7.6 million, through an affiliate, Lavender Lending Limited, and
is secured with a first charge over the site.
Apartment Development Project, Worthing
As previously reported, a loan of GBP500,000 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
GBP5 million, facilitated the acquisition of an office block in
Worthing, for which the borrower is seeking 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).
The enhanced planning consent is taking the borrower longer than
anticipated to obtain; accordingly, and in light of the borrower
otherwise servicing the loans, the loans were recently extended to
January 2019.
Supported Living, Wigan
During the period, loans of GBP2.1 million were advanced
(through affiliates, Valencia Lending Limited and Lothian Lending
Limited) to Enabling Homes Investments Ltd, an experienced
developer of supported living homes. The loans are to fund the
development of a 22-apartment supported scheme in Wigan and are
secured with a first charge over the site. Construction is
progressing well and practical completion is targeted for Q2 2019.
Enabling Homes Investments Ltd has agreed terms to sell the scheme
immediately following practical completion which should generate
sufficient proceeds to repay the loans.
To further manage liquidity, the Company had exposure to a
GBP199,000 bond issued by Commonwealth Bank of Australia and
earning 1.1%, which matured in October 2018.
Results and Net Asset Value ('NAV')
The NAV per share at the period end was 79.20p, 97.20p after
adding back dividends paid to date. The Company made a small loss
of GBP96,000 in the period (representing a 0.34p per share post-tax
loss). This arose partly as a result of reduced income from
remunerative non-qualifying investments which as repaid were
replaced with less income-focused qualifying investments. It also
reflected a change in the Company's revenue recognition policy
whereby income expected from dividends from investee companies is
now only recognised on remittance to the VCT.
Dividends
As reported in the Company's annual report, the Company declared
a dividend of 6p per ordinary share in February 2018. Reflecting
this recent pay-out, your Board is not proposing a further dividend
at this interim stage but still intends to pay out a dividend of 6p
per ordinary share each year as envisaged in the Company's
prospectus.
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 also assists the
Investment Manager in establishing the status of investments as
qualifying holdings and will continue to assist the Investment
Manager in monitoring rule compliance.
Principal risks and uncertainties
Although the economy in the UK continues to improve, it remains
fragile, especially in light of the ongoing Brexit negotiations.
The consequences of this for the Company's investment portfolio
constitute the principal risk and uncertainty for the Company in
the second half of the year.
Life of fund
The Company was established with the intention that it would
have a limited life. The Prospectus stated that after five years
the Board would propose a resolution to shareholders for an orderly
liquidation of the Company's assets. Your Board currently intends
to propose this resolution within a year of this report.
Outlook
The Company's net assets are substantially deployed in a diverse
range of high quality businesses and projects which should offer
the prospect of further growth in net assets per share. Whilst
there may be some further changes in the composition of the
portfolio to ensure that the Company continues to satisfy its HMRC
qualifying targets, the Board expects to concentrate in the future
primarily on the monitoring of our existing investments and
considering the options for exits.
David Vaughan
Chairman
30 November 2018
Income Statement (unaudited)
For the period ended 31 August 2018
Six months ended Period ended Year ended
31 August 2018 31 August 2017 28 February 2018
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Loss)/gain
on investments - (1) (1) - (51) (51) - 190 190
Income 228 - 228 487 - 487 644 - 644
228 (1) 227 487 (51) 436 644 190 834
-------- -------- -------- -------- -------- -------- --------
Investment
management
fees 4 (55) (165) (220) (59) (175) (234) (117) (351) (468)
Other expenses (118) - (118) (122) - (122) (263) - (263)
(173) (165) (338) (181) (175) (356) (380) (351) (731)
-------- -------- -------- -------- -------- -------- --------
Profit/(loss)
on ordinary
activities
before taxation 55 (166) (111) 306 (226) 81 264 (161) 103
Tax on profit
on ordinary
activities (8) 24 16 (61) 47 (14) (50) 66 16
Profit/(loss)
and total
comprehensive
income for
the year 47 (142) (95) 245 (179) 67 214 (95) 119
======== ======== ======== ======== ======== ======== ======== ======== ========
Basic and
diluted
Return/(loss)
per Ordinary
Share (pence) 2 0.17p (0.51p) (0.34p) 0.88p (0.64p) 0.24p 0.77p (0.34p) 0.43p
======== ======== ======== ======== ======== ======== ======== ======== ========
The revenue column of this statement is the profit and loss of
the Company. All revenue and capital items in the above statement
derive from continuing operations. No operations were acquired or
discontinued in the period.
Balance Sheet (unaudited)
As at 31 August 2018
As at As at As at
31 August 31 August 28 February
Note 2018 2017 2018
GBP'000 GBP'000 GBP'000
Fixed Assets
Investments 6 19,729 22,360 20,313
----------- ----------- -------------
Current Assets
Debtors 1,879 1,463 1,725
Cash 392 99 90
----------- ----------- -------------
2,271 1,562 1,815
Creditors - amounts falling due
within one year (115) (338) (149)
Net Current Assets 2,156 1,224 1,666
----------- ----------- -------------
Total Assets less Current
Liabilities 21,885 23,584 21,979
Net Assets 21,885 23,584 21,979
=========== =========== =============
Capital and Reserves
Called up share capital 17 17 17
Share premium account 15,624 15,624 15,624
Capital reserve - realised (1,307) (1,061) (1,166)
Capital reserve - unrealised (322) (510) (321)
Revenue reserve 7,873 9,514 7,825
Equity Shareholders' Funds 21,885 23,584 21,979
=========== =========== =============
Net Asset Value per Ordinary
Share 3 79.20p 85.35p 79.54p
=========== =========== =============
Diluted Net Asset Value
per Ordinary Share 3 79.20p 85.35p 79.54p
=========== =========== =============
Cash Flow Statement (unaudited)
For the period ended 31 August 2018
Six months
ended Period ended Year ended
31 August 31 August 28 February
2018 2017 2018
GBP'000 GBP'000 GBP'000
(Loss)/profit after tax (95) 67 119
Taxation (16) 14 (16)
Loss/(gains) on investments 1 50 (190)
Increase in debtors (154) (376) (576)
Increase/(decrease) in creditors (17) 121 (4)
Tax paid - - (95)
Net cash (used in)/generated
from operating activities (281) (124) (762)
----------- ------------- -------------
Cash flow from investing activities
Purchase of investments - (420) (2,067)
Proceeds from sale of investments 583 400 4,334
Net cash generated from/(used
in) investing activities 583 (20) 2,267
----------- ------------- -------------
Cash flow from financing activities
Dividends paid - - (1,658)
Net cash used in financing activities - - (1,658)
----------- ------------- -------------
Net increase/(decrease) in cash
and cash equivalents 302 (144) (153)
Cash and cash equivalents at
the beginning of the period 90 243 243
Cash and cash equivalents at
the end of the period 392 99 90
=========== ============= =============
Reconciliation of Movements in Shareholders' Funds
(unaudited)
For the period ended 31 August 2018
Called Share Capital Capital
up share premium reserve reserve Revenue
capital account - realised - unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 March
2017 17 15,624 (933) (459) 9,268 23,517
Realised gain from prior
period 51 (51) -
Total recognised (losses)/gains
for the period - - (179) - 246 67
Balance as at 31 August
2017 17 15,624 (1,061) (510) 9,514 23,584
Realised gain in the period - - (1) 1 - -
Total recognised (losses)/gains
for the period - - (104) 188 (32) 52
Dividends paid - - - - (1,657) (1,657)
Balance as at 28 February
2018 17 15,624 (1,166) (321) 7,825 21,979
Total recognised (losses)/gains
for the period - - (141) (1) 47 (95)
Balance as at 31 August
2018 17 15,624 (1,307) (322) 7,873 21,885
========== ========= ============ ============== ========= ========
Notes to the Interim Report
For the period ended 31 August 2018
1. Accounting Policies
The financial statements have been prepared under the historical
cost convention, modified to include the revaluation of fixed asset
investments, and in accordance with applicable Accounting Standards
and with the Statement of Recommended Practice, "Financial
Statements of Investment Trust Companies and Venture Capital
Trusts" ("SORP") and in accordance with the Financial Reporting
Standard 102 ("FRS102").
2. Return per Ordinary Share
The total loss per share of 0.34p is based on the loss for the
period of GBP95,000 and the weighted average number of shares in
issue as at 31 August 2018 of 27,633,222.
3. Net asset value per share
As at As at As at
31 August 31 August 28 February
2018 2017 2018
Net assets 21,885,000 23,584,000 21,979,000
Shares in issue 27,633,222 27,633,222 27,633,222
Net asset value
per share
Basic 79.20p 85.35p 79.54p
Diluted 79.20p 85.35p 79.54p
4. Management fees
The Company pays the Investment Manager an annual management fee
of 2% of the Company's net assets. The fee is payable quarterly in
arrears. The annual management fee is allocated 75% to capital and
25% to revenue.
5. Financial information provided
The financial information for the period ended 31 August 2018
has not been audited and does not comprise full financial
statements within the meaning of Section 423 of the Companies Act
2006. The interim financial statements have been prepared on the
same basis as will be used to prepare the annual financial
statements.
Notes to the Interim Report continued
For the period ended 31 August 2018
6. Investment portfolio summary
Valuation
Valuation HMRC basis
Valuation Cost Gain/(loss) HMRC basis as a % of
GBP'000 GBP'000 GBP'000 GBP'000 Net Assets
As at 31 August 2018
Qualifying Investment
- Unquoted
Opes Industries Limited 2,628 2,950 (322) 2,950 14%
Warm Hearth Limited 2,500 2,500 - 2,500 12%
Mini Rainbows Limited 2,500 2,500 - 2,500 12%
Welcome Health Limited 2,500 2,500 - 2,500 12%
Saville Services Limited 2,139 2,139 - 3,739 16%
Growing Fingers Limited 1,400 1,400 - 1,400 6%
Sunlight Education
Nucleus Limited 1,000 1,000 - 1,000 5%
Total Qualifying Investments(1) 14,667 14,989 (322) 16,589 77%
---------- -------- ------------ ------------ ------------
Non-Qualifying Investments
Valencia Lending Limited 901 901 - 901 4%
Lothian Lending Limited 1,266 1,266 - 1,266 6%
Latimer Lending Limited 822 822 - 822 4%
Lavender Lending Limited 800 800 - 800 4%
Victoria Lending Limited 500 500 - 500 2%
Meadow Lending Limited 575 575 - 575 2%
Total Non-Qualifying
Investments 4,864 4,864 - 4,864 22%
---------- -------- ------------ ------------ ------------
Liquidity Management
Commonwealth Bank
of Australia bond 198 199 (1) 199 1%
Total Liquidity Management
Investments 198 199 (1) 199 1%
---------- -------- ------------ ------------ ------------
Total Investments(1) 19,729 20,052 (323) 21,652 100%
Balance of Portfolio 2,156 2,156 - - 0%
Net Assets 21,885 22,208 (323) 21,652 100%
---------- -------- ------------ ------------ ------------
Of the investments held at 31 August 2018, all are incorporated
in England and Wales with the exception of the liquidity management
holdings.
(1) The HMRC valuation differs from FRS102, because FRS102
requires changes to reflect current market valuations whereas HMRC
requires such changes when further securities of the same company
are bought or sold by the VCT. It also omits the items shown as
'Balance of Portfolio'.
Copies of this Interim Statement will be made available on the
website:
http://www.pumainvestments.co.uk/pages/view/investors-information-vcts
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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of this information may apply. For further information, please
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END
IR URSARWOAAOAA
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November 30, 2018 06:50 ET (11:50 GMT)
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