TIDMPGOO
PROVEN GROWTH AND INCOME VCT PLC
Half-yearly report
For the six months ended 31 August 2019
Financial Summary
31 31 28
August August February
2019 2018 2019
----------------------------------------------------- ------ ------ --------
Net asset value per share ("NAV") 63.2p 74.3p 68.4p
----------------------------------------------------- ------ ------ --------
Dividends paid since class launch (Originally as 'C' 62.9p 56.4p 60.9p
Shares)
----------------------------------------------------- ------ ------ --------
Total return (NAV plus dividends paid since 'C' Share 126.1p 130.7p 129.3p
class launch)
----------------------------------------------------- ------ ------ --------
Chairman's Statement
Introduction
I have pleasure in presenting the half year report for ProVen Growth and
Income VCT plc (the "Company") for the six months ended 31 August 2019.
Net asset value
During the six-month period, the net asset value ("NAV") per share
decreased from 68.4p to 63.2p at 31 August 2019. The decrease of 5.2p
comprised a 3.2p decrease largely from valuation movements plus the
dividend of 2.0p for the year ended 28 February 2019 paid in July 2019.
Portfolio activity and valuation
During the six months to 31 August 2019, a total of GBP16.3 million was
invested. This comprised GBP9.9 million into four new investments,
Papier Ltd, Sannpa Limited (t/a Fnatic), Arctic Shores Limited and
Picasso Labs, Inc., and GBP6.4 million into five existing portfolio
companies to support their continued growth and development.
There was also one full disposal in the period, namely 7digital Group
plc. This resulted in an overall loss of GBP400,000 against cost though
fair valuation losses on the investment had largely been recognised in
previous periods. The sale was a strategic decision seeing that,
following recent developments in the company, the Company's shareholding
would have soon become VCT non-qualifying.
The venture capital investment portfolio showed disappointing net
unrealised losses for the six-month period of GBP4.9 million. This
equates to an approximate 7.7% decrease in valuation on the portfolio
position at 28 February 2019 and reflects a more cautious outlook on
several portfolio companies.
Results and dividends
The total loss on ordinary activities after taxation for the six-month
period to 31 August 2019 was GBP5.9 million.
During the six-month period, a final dividend of 2.0p per share in
respect of the year ended 28 February 2019 was paid on 19 July 2019 to
Shareholders on the register at 21 June 2019 following shareholder
approval at the Company's AGM.
The Board has declared an interim dividend of 1.5p per share which will
be paid on 6 December 2019 to shareholders on the register at 15
November 2019. The dividend represents a cash return of 2.3% on the
opening NAV per share at 1 March 2019, adjusted for the July dividend of
2.0p per share. The declaration of this interim dividend will result in
an equivalent reduction in the Company's NAV per share.
Shareholders are reminded that the Company operates a Dividend
Reinvestment Scheme ("DRIS") for shareholders who wish to have their
dividends reinvested in new shares and obtain further income tax relief
on those shares, subject to the usual restrictions. If you are not
currently registered for the DRIS and wish to have your dividends paid
in the form of new shares, DRIS forms are available from the
www.provenvcts.co.uk website or by contacting Beringea on 020 7845 7820.
Shareholders will need to be registered for the DRIS prior to 15
November 2019 to be eligible to receive the forthcoming dividend as new
shares.
Board appointment
I am delighted to announce the appointment of Anna Kuriakose to the
Board effective from 1 November 2019.
Anna is Chief Product Officer at TotallyMoney, one of the UK's fastest
growing fintech companies which seeks to assist customers in making
smarter and more informed credit choices and which last year raised
GBP29 million from investors to accelerate its development. She is also
the founder of ScaleupLean, an advisory business that provides coaching,
strategy and tools for startups and companies building technology
products. Anna's wide range of experience in product and technology will
provide new and complementary skills to the existing Board as we
navigate the investment opportunities ahead.
Fund raising and share issues
The Company launched a combined offer for subscription with ProVen VCT
plc on 11 January 2019 to raise up to a total of GBP30 million per
company, with an over-allotment facility of GBP10 million per company.
During the period, the Company allotted 43,969,723 shares at an average
price of 70.7p per share under the Company's offer for subscription
dated 11 January 2019. In the same period, the Company allotted a
further 851,834 shares at 65.2p per share under the Company's DRIS in
respect of the dividend paid on 19 July 2019.
Since 31 August 2019, the Company has allotted a further 7,732,634
shares at an average price of 66.0p per share. The Company's offer was
fully subscribed at this point.
Share buybacks
The Company continues to operate a policy of purchasing its own shares
as they become available in the market at a discount of approximately 5%
to the latest published NAV.
During the period, the Company completed purchases of 847,155 shares at
an average price of 63.4p per share and for aggregate consideration (net
of costs) of GBP537,236. This represented 0.6% of the shares in issue at
the start of the period. The shares were subsequently cancelled.
Outlook
Following several significant disposals by the Company during its last
two financial years, which generated substantial realised capital gains
for shareholders, I anticipate a quieter period for disposals over the
next six months. However, large corporates are still highly acquisitive,
so the possibility of further disposals in the next year or so should
not be discounted.
The Company has been an active investor in the half year with a number
of completed investments and further ones at an advanced stage. The
Investment Manager reports a healthy and robust flow of new investment
opportunities and the Company is well positioned to pursue these and
others given the recent strong fundraising.
Despite Brexit uncertainty and other global trade tensions slowing down
the economy, small companies with innovative and attractive market
propositions have the potential to grow significantly more quickly than
the economy as a whole. The Company's investment focus is on such
companies and as a consequence I continue to be cautiously optimistic
about the long term performance of the Company notwithstanding short
term or wider economic headwinds.
Marc Vlessing OBE
Chairman
4 November 2019
Investment Manager's Report
Introduction
We have pleasure in presenting our half year report for ProVen Growth
and Income VCT plc (the "Company") for the six months ended 31 August
2019.
Investment activity and portfolio valuation
At 31 August 2019, the Company's investment portfolio comprised 44
investments at a cost of GBP77.6 million and a valuation of GBP74.1
million. This represents an overall unrealised decrease on cost of
GBP3.5 million or 4.5%.
During the period, the Company invested a further GBP16.3 million,
comprising GBP9.9 million into four new companies and GBP6.4 million
into five existing portfolio companies.
The Company invested in Papier (GBP3.15 million), a stationery retailer
specialising in curated collections unique to the market, in July 2019.
The new investment in Sannpa Ltd (t/a Fnatic) (GBP2.84 million), an
eSports team owner and lifestyle brand, with professional teams in the
most popular games such as League of Legends, Dota 2 and Battlefield 4,
was completed in April 2019 and was discussed in the Company's most
recent annual report. The Company invested in Arctic Shores (GBP2.45
million), a provider of data-driven psychometric tests combining
neuroscience, artificial intelligence and game technology for more
predictive and less biased hiring, in August 2019. The Company also
invested GBP1.47 million in Picasso Labs, an automated creative
measurement platform that aims to enhance creativity through
objectivity. Their technology is used globally by Fortune 500 brands
like Unilever, Mondelez, Heineken, ABI, and more to measure creative
efficiency, consistency, and impact across all creatives worldwide.
The follow-on investments were made into ContactEngine (GBP1.64 million),
Aistemos (GBP1.40 million), Thread (GBP1.40 million), Mycs (GBP1.25
million) and MPB (GBP700,000).
The Company's shareholding in 7digital Group plc was sold in the period.
This resulted in a loss against cost of GBP400,000 though fair valuation
losses on the investment had largely been recognised in previous periods
and therefore had negligible impact on the NAV during the period. The
sale was a strategic decision as, following recent developments in the
company, the Company's shareholding would soon become VCT
non-qualifying.
Skills Matter repaid a small amount of its loan notes (GBP68,000) during
the period, but has been unable to secure further funding and so we
continue to have a full provision against the remaining investment.
Following an interim distribution in respect of the administration of
MEL Topco Limited (t/a Maplin) in July 2018, an additional GBP68,000 was
received in August 2019.
Overall, the venture capital investment portfolio showed an unrealised
loss of GBP4.9 million, equivalent to 2.6p per share over the period.
There were valuation uplifts for, amongst others, ContactEngine and
DeepCrawl, but disappointingly these were more than offset by valuation
decreases for Blis Media, Smart Assistant, POQ Studio, My First Years,
InContext and Cogora Group.
Post period end portfolio activity
Since 31 August 2019, there has been no significant portfolio activity
in the Company to report.
Outlook
Following two financial years marked by successful disposals and
substantial realised profits for shareholders, we are focused on
investing the funds raised this year, generating a significant pipeline
of investment opportunities and continuing to support the growth of our
portfolio companies. We do, however, anticipate a quieter period for
disposals over the next six months.
We have successfully completed four new investments over the past six
months, backing growing businesses in rapidly emerging industries such
as artificial intelligence and eSports. These investments, which we
selected through rigorous commercial and financial due diligence, show
that innovative companies are continuing to flourish in spite of any
political or economic headwinds.
Five existing portfolio companies -- ContactEngine, MPB, Thread, Mycs
and Aistemos -- have shown resilient growth that enabled them to raise
follow-on funding. This, taken with the prospect of a strong pipeline of
future investment prospects, makes us cautiously confident about the
longer-term performance of the Company.
Beringea LLP
4 November 2019
Summary of Investment portfolio
as at 31 August 2019
Valuation
movement % of
Cost Valuation in period portfolio
GBP'000 GBP'000 GBP'000 by value
---------------------- ------------- ------------ ------------ ---------------
Top twenty venture
capital investments
(by value)
Dryden Holdings
Limited 5,000 4,761 - 4.0%
Zoovu Limited (t/a
Smart Assistant) 3,653 4,621 (1,478) 3.9%
ContactEngine Limited 2,330 4,600 926 3.9%
Sealskinz Holdings
Limited 3,116 4,461 30 3.7%
Poq Studio Limited 2,848 3,797 (801) 3.2%
Thread, Inc. 3,309 3,748 414 3.1%
D30 Holdings Ltd 3,550 3,743 387 3.1%
Infinity Reliance
Limited (t/a My 1st
Years) 2,769 3,276 (769) 2.7%
Papier Ltd 3,150 3,150 - 2.6%
Written Byte Ltd (t/a
DeepCrawl) 1,612 2,861 667 2.4%
Sannpa Limited (t/a
Fnatic) 2,839 2,839 - 2.4%
Mycs GmbH 2,520 2,520 - 2.1%
Arctic Shores Limited 2,450 2,450 - 2.1%
Response Tap Limited 1,440 2,313 (161) 1.9%
Blis Media Limited 1,083 2,091 (1,587) 1.8%
MPB Group Limited 1,489 1,875 386 1.6%
Rapid Charge Grid
Limited 1,888 1,854 28 1.6%
Been There Done That
Global Limited 1,448 1,778 331 1.5%
Aistemos Limited 1,681 1,678 (2) 1.4%
Litchfield Media
Limited 1,420 1,664 - 1.4%
Other venture capital
investments 28,013 14,062 (3,230) 12.0%
---------------------- ------------- ------------ ------------ ---------------
Total venture capital
investments 77,608 74,142 (4,859) 62.4%
---------------------- ------------- ------------ ------------ ---------------
Cash at bank and in
hand 44,760 37.6%
---------------------- ------------- ------------ ------------ ---------------
Total investments 118,902 100.0%
---------------------- ------------- ------------ ------------ ---------------
Other venture capital investments at 31 August 2019 comprise:Access
Systems, Inc., Buckingham Gate Financial Services Limited, Cogora Group
Limited, Deltadot Limited, Disposable Cubicle Curtains Limited,
Donatantonio Limited, Duncannon Holdings Limited, Exonar Limited,
Firefly Learning Limited, Iridium Topco Limited (formerly Honeycomb.TV
Limited), InContext Solutions, Inc., Inskin Media Limited, Lantum
Limited, MEL Topco Limited (t/a Maplin), Monica Vinader Limited, Netcall
plc, Picasso Labs, Inc., Senselogix Limited, Simplestream Limited,
Skills Matter Limited, TVPlayer Limited, Utility Exchange Online Limited,
Vigilant Applications Limited and Whistle Sports, Inc.
With the exception of Netcall plc which is quoted on AIM, all venture
capital investments are unquoted.
All of the above investments, with the exception of Deltadot Limited,
Duncannon Holdings Limited and Dryden Holdings Limited were also held by
ProVen VCT plc, of which Beringea LLP is the investment manager.
All venture capital investments are registered in England and Wales
except for InContext Solutions, Inc., Picasso Labs, Inc., Thread, Inc.
and Whistle Sports, Inc. which are Delaware registered corporations in
the United States of America, and Mycs GmbH, which is registered in
Germany.
Summary of investment movements
for the six months ended 31 August 2019
Investment activity during the six months ended 31 August 2019 is
summarised as follows:
Additions Cost
GBP'000
Papier Ltd 3,150
Sannpa Limited (t/a Fnatic) 2,839
Arctic Shores Limited 2,450
ContactEngine Limited 1,642
Picasso Labs, Inc. 1,470
Aistemos Limited 1,404
Thread, Inc. 1,400
Mycs GmbH 1,245
MPB Group Limited 700
-------
Total 16,300
-------
Market value Gain/ (loss) Realised
at 1 March Disposal against gain in
Disposals Cost 2019 proceeds cost period
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
MEL Topco
Limited*
(t/a
Maplin) - - 68 68 68
Skills Matter
Limited 68 - 68 - 68
7digital
Group plc 400 1 - (400) (1)
Total 468 1 136 (332) 135
------- ------------ ------------ ------------ ------------
*The proceeds received in respect of MEL Topco Limited (t/a Maplin)
reflected a further interim distribution in respect of the company's
administration.
Unaudited Condensed Income Statement
for the six months ended 31 August 2019
(unaudited) (unaudited)
Six months ended Six months ended (audited)
31 Aug 2019 31 Aug 2018 Year ended 28 Feb 2019
Revenue Capital Total Revenue Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Income 179 - 179 129 - 129 355
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Realised gains on investments - 337 337 - 4,162 4,162 3,145
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Unrealised (losses)/ gains on
investments - (4,859) (4,859) - 3,537 3,537 3,375
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Investment management fee (305) (916) (1,221) (271) (814) (1,085) (2,083)
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Performance incentive fee - - - - (505) (505) (331)
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Other expenses (292) (1) (293) (317) - (317) (627)
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
(Loss)/ return on ordinary activities
before taxation (418) (5,439) (5,857) (459) 6,380 5,921 3,834
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Tax on ordinary activities - - - - - - -
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
(Loss)/ return attributable to equity
shareholders (418) (5,439) (5,857) (459) 6,380 5,921 3,834
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Basic and diluted (loss)/ return per
share (0.2p) (3.1p) (3.3p) (0.3p) 4.4p 4.1p 2.7p
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
All revenue and capital items in the above statement derive from
continuing operations. The total column within this statement represents
the Unaudited Condensed Income Statement of the Company.
The Company has no recognised gains or losses other than the results for
the six-month period as set out above.
The accompanying notes form an integral part of this announcement.
Unaudited Condensed Statement of Financial Position
as at 31 August 2019
(unaudited) (unaudited) (audited)
31 Aug 31 Aug 28 Feb
2019 2018 2019
GBP'000 GBP'000 GBP'000
Fixed assets
Investments 74,142 63,340 62,769
-------------------------------------------- ----------- ----------- ---------
Current assets
Debtors 944 2,263 481
-------------------------------------------- ----------- ----------- ---------
Cash at bank and in hand 44,760 42,151 36,380
-------------------------------------------- ----------- ----------- ---------
45,704 44,414 36,861
-------------------------------------------- ----------- ----------- ---------
Creditors: amounts falling due within one
year (965) (1,111) (1,157)
-------------------------------------------- ----------- ----------- ---------
Net current assets 44,739 43,303 35,704
-------------------------------------------- ----------- ----------- ---------
Net assets 118,881 106,643 98,473
-------------------------------------------- ----------- ----------- ---------
Capital and reserves
Called up share capital 3,044 2,323 2,331
-------------------------------------------- ----------- ----------- ---------
Capital redemption reserve 32 4 19
-------------------------------------------- ----------- ----------- ---------
Share premium account 31,852 - 946
-------------------------------------------- ----------- ----------- ---------
Special reserve 65,489 77,908 70,856
-------------------------------------------- ----------- ----------- ---------
Capital reserve - realised 18,071 16,292 19,050
-------------------------------------------- ----------- ----------- ---------
Revaluation reserve 2,583 11,611 7,043
-------------------------------------------- ----------- ----------- ---------
Revenue reserve (2,190) (1,495) (1,772)
-------------------------------------------- ----------- ----------- ---------
Total equity shareholders' funds 118,881 106,643 98,473
-------------------------------------------- ----------- ----------- ---------
Basic and diluted net asset value per share 63.2p 74.3p 68.4p
-------------------------------------------- ----------- ----------- ---------
The accompanying notes form an integral part of this announcement.
Called
up Capital Share
Six months ended 31 Aug 2019 share redemption premium Special Capital Revaluation Revenue
(unaudited) capital reserve account reserve reserve - realised reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
At 1 March 2019 2,331 19 946 70,856 19,050 7,043 (1,772) 98,473
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Issue of new shares 726 - 30,906 (1,149) - - - 30,483
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Total comprehensive income - - - - (580) (4,859) (418) (5,857)
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Transfer of previously
unrealised gains now
realised - - - - (399) 399 - -
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Share buybacks and
cancellation (13) 13 - (541) - - - (541)
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Dividends paid - - - (3,677) - - - (3,667)
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
At 31 August 2019 3,044 32 31,852 65,489 18,071 2,583 (2,190) 118,881
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Unaudited Condensed Statement of Changes in Equity
Called
up Capital Share
Six months ended 31 Aug 2018 share redemption premium Special Capital Revaluation Revenue
(unaudited) capital reserve account reserve reserve - realised reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
At 1 March 2018 2,330 1,168 69,935 9,970 11,443 10,080 (1,036) 103,890
-------------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Issue of new shares 9 - 410 - - - - 419
-------------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Total comprehensive income - - - - 2,843 3,537 (459) 5,921
-------------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Transfer of previously
unrealised gains now realised - - - - 2,006 (2,006) - -
-------------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Cancellation of capital
redemption reserve - (1,180) - 1,180 - - - -
-------------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Cancellation of share premium
account - - (70,345) 70,345 - - - -
-------------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Share buybacks and cancellation (16) 16 - (723) - - - (723)
-------------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Dividends paid - - - (2,864) - - - (2,864)
-------------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
At 31 August 2018 2,323 4 - 77,908 16,292 11,611 (1,495) 106,643
-------------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
The special reserve, capital reserve - realised and revenue reserve are
distributable reserves. Reserves available for distribution therefore
amount to GBP81,370,000 (2018: GBP92,705,000).
The accompanying notes form an integral part of this half-yearly report.
Unaudited Condensed Statement of Cash Flows
for the six months ended 31 August 2019
(unaudited) (unaudited) (audited)
Six months Six months Year
ended ended ended
31 Aug 31 Aug 28 Feb
2019 2018 2019
Note GBP'000 GBP'000 GBP'000
-------------------------------------------------- ----- ----------- ----------- ---------
Net cash used in operating activities A (1,686) (4,097) (3,536)
-------------------------------------------------- ------ ----------- ----------- ---------
Cashflows from investing activities
-------------------------------------------------- ----- ----------- ----------- ---------
Purchase of investments (16,300) (3,706) (9,900)
---------------------------------------------------------- ----------- ----------- ---------
Sale of investments 136 9,060 14,741
---------------------------------------------------------- ----------- ----------- ---------
Net cash (used in)/ from investing activities (16,164) 5,354 4,841
---------------------------------------------------------- ----------- ----------- ---------
Cashflows from financing activities
-------------------------------------------------- ----- ----------- ----------- ---------
Proceeds from share issues 31,077 - -
---------------------------------------------------------- ----------- ----------- ---------
Share issue costs (1,151) - -
---------------------------------------------------------- ----------- ----------- ---------
Purchase of own shares (574) (723) (1,057)
---------------------------------------------------------- ----------- ----------- ---------
Equity dividends paid (3,122) (2,445) (7,930)
---------------------------------------------------------- ----------- ----------- ---------
Net cash from/ (used in) financing 26,230 (3,168) (8,987)
---------------------------------------------------------- ----------- ----------- ---------
Increase/ (decrease) in cash and cash equivalents B 8,380 (1,911) (7,682)
-------------------------------------------------- ------ ----------- ----------- ---------
Notes to the cash flow statement:
A Cash flow from operating activities
(Loss)/ return on ordinary activities before taxation (5,857) 5,921 3,834
---------------------------------------------------------- ----------- ----------- ---------
Loss/ (gain) on investments 4,522 (7,699) (6,520)
---------------------------------------------------------- ----------- ----------- ---------
Increase in prepayments, accrued income and other
debtors (194) (1,755) (68)
---------------------------------------------------------- ----------- ----------- ---------
Decrease in accruals and other creditors (157) (564) (782)
---------------------------------------------------------- ----------- ----------- ---------
Net cash used in operating activities (1,686) (4,097) (3,536)
---------------------------------------------------------- ----------- ----------- ---------
B Analysis of net funds
Beginning of period/ year 36,380 44,062 44,062
---------------------------------------------------------- ----------- ----------- ---------
Net cash inflows/ (outflows) 8,380 (1,911) (7,682)
---------------------------------------------------------- ----------- ----------- ---------
End of period/ year 44,760 42,151 36,380
---------------------------------------------------------- ----------- ----------- ---------
The accompanying notes form an integral part of this announcement.
Notes to the half-yearly report
for the six months ended 31 August 2019
1. Accounting policies
Basis of accounting
The Company has prepared its financial statements under Financial
Reporting Standard 104 ("FRS104") and in accordance with the Statement
of Recommended Practice 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' (the "SORP") issued by the
Association of Investment Companies ("AIC") in February 2018.
The following accounting policies have been applied consistently
throughout the period. Further details of principal accounting policies
were disclosed in the Annual Report and Accounts for the year ended 28
February 2019. There has been no change to the accouting policies from
those disclosed in the financial statements for the year ended 28
February 2019.
The unaudited financial statements set out herein have not been subject
to review by the auditor and do not constitute statutory accounts within
the meaning of Section 434 of the Companies Act 2006. The figures for
the year ended 28 February 2019 have been extracted from the financial
statements for that period, which have been delivered to the Registrar
of Companies; the Auditor's report on those financial statements was
unqualified.
a) Presentation of Income Statement
In order to better reflect the activities of an investment company and,
in accordance with guidance issued by the AIC, supplementary information
which analyses the Income Statement between items of a revenue and
capital nature has been presented alongside the Income Statement. The
revenue return attributable to equity shareholders is the measure the
Directors believe appropriate in assessing the Company's compliance with
certain requirements set out in Part 6 of the Income Tax Act 2007.
b) Investments
Investments, including equity and loan stock, are recognised at their
trade date and measured at "fair value through profit or loss" due to
investments being managed and performance evaluated on a fair value
basis. A financial asset is designated within this category if it is
both acquired and managed, with a view to selling after a period of time,
in accordance with the Company's documented investment policy. The fair
value of an investment upon acquisition is deemed to be cost.
Thereafter investments are measured at fair value in accordance with
International Private Equity and Venture Capital Valuation Guidelines
("IPEV Guidelines") issued in December 2018, together with Sections 11
and 12 of FRS102.
Publicly traded investments are measured using bid prices in accordance
with the IPEV Guidelines.
Key judgements and estimates
The valuation methodologies used by the Directors for estimating the
fair value of unquoted investments are in accordance with the IPEV
guidelines and as follows:
-- where a company is in the early stage of development, the estimate of
fair value is calculated based on market data and assumptions as to the
potential outcomes and may for a limited period be based on the price of
a recent transaction;
-- where a company is well established after an appropriate period, the
investment may be valued by applying a suitable earnings or revenue
multiple to that company's maintainable earnings or revenue. The
multiple used is based on comparable listed companies or a sector but
discounted to reflect factors such as the different sizes of the
comparable businesses, different growth rates and the lack of
marketability of unquoted shares;
-- where a value is indicated by a material arm's-length transaction by a
third party in the shares of the company, the valuation will normally be
based on this, reviewed for impairment as appropriate;
-- where alternative methods of valuation, such as net assets of the
business or the discounted cash flows arising from the business are more
appropriate, then such methods may be used; and
-- where repayment of the equity is not probable, redemption premiums will
be recognised.
The methodology applied takes account of the nature, facts and
circumstances of the individual investment and uses reasonable data,
market inputs, assumptions and estimates in order to ascertain fair
value. Methodologies are applied consistently from year to year except
where a change results in a better estimate of fair value.
Where an investee company has gone into receivership or liquidation, or
the loss in value below cost is considered to be permanent, or there is
little likelihood of a recovery from a company in administration, the
loss on the investment, although not physically disposed of, is treated
as being realised.
All investee companies are held as part of an investment portfolio and
measured at fair value. Therefore, it is not the policy for investee
companies to be consolidated and any gains or losses arising from
changes in fair value are included in the Unaudited Condensed Income
Statement for the period as a capital item.
Gains and losses arising from changes in fair value are included in the
Unaudited Condensed Income Statement for the period as a capital item
and transaction costs on acquisition or disposal of the investment are
expensed.
Investments are derecognised when the contractual rights to the cash
flows from the asset expire or the Company transfers the asset and
substantially all the risks and rewards of ownership of the asset to
another entity.
1. All revenue and capital items in the Unaudited Condensed Income Statement
derive from continuing operations.
2. There are no other items of comprehensive income other than those
disclosed in the Unaudited Condensed Income Statement.
3. The Company has only one operating segment as reported to the Board of
Directors in their capacity as chief operating decision makers and
derives its income from investments made in shares, securities and bank
deposits.
4. The comparative figures are in respect of the year ended 28 February 2019
and the six-month period ended 31 August 2018.
5. Basic and diluted return per share for the period has been calculated on
177,779,487 shares, being the weighted average number of shares in issue
during the period.
6. Basic and diluted NAV per share for the period has been calculated on
188,021,663 shares, being the number of shares in issue at the period
end.
7. Dividends
(unaudited) (unaudited) (audited)
Year
Six months ended Six months ended ended
28 Feb
31 Aug 2019 31 Aug 2018 2019
Revenue Capital Total Revenue Capital Total Total
Pence GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ----- ------- ------- ------- ------- ------- ------- ---------
2018 Final 2.0 - - - - 2,864 2,864 2,864
----------- ----- ------- ------- ------- ------- ------- ------- ---------
2019
Special
Interim 4.5 - - - - - - 6,453
----------- ----- ------- ------- ------- ------- ------- ------- ---------
2019 Final 2.0 - 3,667 3,667 - - - -
----------- ----- ------- ------- ------- ------- ------- ------- ---------
Total
dividends
paid - 3,667 3,667 - 2,864 2,864 9,317
----------- ----- ------- ------- ------- ------- ------- ------- ---------
9. Contingent liabilities, guarantees and financial commitments
Based on the NAV per share at 31 August 2019, before any performance fee
accrual, and cumulative dividends paid and payable ahead of 29 February
2020, no performance fee is currently payable. The performance fee
structure contains certain restrictions to ensure that hurdles are met
before the payment of a performance fee and to encourage the payment of
tax-free dividends. After applying these restrictions, no accrual has
been made for a performance fee at 31 August 2019. Any performance
incentive fee, if any, will only be payable once the full year results
have been finalised.
The Company has no contingent liabilities, guarantees or financial
commitments at 31 August 2019.
10. Called up share capital
The Company launched a combined offer for subscription with ProVen VCT
plc on 11 January 2019 to raise up to a total of GBP30 million per
company, with an over-allotment facility of GBP10 million per company.
During the period, the Company allotted 43,969,723 shares at an average
price of 70.7p per share under the 11 January offer. In the same period,
the Company allotted a further 851,834 shares at 65.2p per share under
the Company's DRIS in respect of the dividend paid on 19 July 2019.
During the period, the Company completed purchases of 847,155 shares at
an average price of 63.4p per share and for aggregate consideration (net
of costs) of GBP537,236. This represented 0.6% of the shares in issue at
the start of the period. The shares were subsequently cancelled.
Since 31 August 2019, the Company has allotted a further 7,732,634
shares at an average price of 66.0p per share. The Company's offer was
fully subscribed at this point.
1. Financial instruments Investments are valued at fair value as determined
using the measurement policies described in note 1.The Company has
categorised its financial instruments that are measured subsequent to
initial recognition at fair value, using the fair value hierarchy as
follows:
Level 1 Reflects instruments quoted in an active market.
Level 2 Reflects financial instruments that have been valued using
inputs, other than quoted prices, that are observable.
Level 3 Reflects financial instruments that have been valued using
valuation techniques with unobservable inputs.
(unaudited) (audited)
31 Aug 2019 28 Feb 2019
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ------- ------- ------- ------- ------- ------- ------- -------
AIM quoted 159 - - 159 143 - - 143
----------- ------- ------- ------- ------- ------- ------- ------- -------
Loan notes - - 14,352 14,352 - - 15,451 15,451
----------- ------- ------- ------- ------- ------- ------- ------- -------
Unquoted
equity - - 24,558 24,558 - - 27,715 27,715
----------- ------- ------- ------- ------- ------- ------- ------- -------
Preference
shares - - 35,073 35,073 - - 19,460 19,460
----------- ------- ------- ------- ------- ------- ------- ------- -------
Total 159 - 73,983 74,142 143 - 62,626 62,769
----------- ------- ------- ------- ------- ------- ------- ------- -------
There have been no transfers between the three levels outlined above.
12. Controlling party and related party transactions
In the opinion of the Directors there is no immediate or ultimate
controlling party.
Malcolm Moss, a Director of the Company, is also a Partner of Beringea
LLP. Beringea LLP was the Company's Investment Manager during the
period. During the six months ended 31 August 2019, GBP1,221,000 (2018:
GBP1,085,000) was payable to Beringea LLP in respect of these services.
At the period end the Company owed Beringea LLP GBP219,000 (2018:
GBP181,000).
Beringea LLP was also the Company's Administration Manager during the
period. Fees paid to Beringea in its capacity as Administration Manager
for the six months ended 31 August 2019 amounted to GBP27,000 (2018:
GBP27,000) of which GBP14,000 (2018: GBP14,000) remained outstanding at
the period end.
As the Company's investment manager, Beringea LLP is also entitled to
receive a performance incentive fee based on the Company's performance
for each financial year to 28 February. The performance incentive fee
arrangements are set out, in detail, in the Annual Report and Accounts.
For the period ended 31 August 2019, no performance incentive fee has
been accrued. The actual performance incentive fee, if any, will only be
payable once the full year results have been finalised.
Beringea LLP may charge arrangement fees, in line with industry practice,
to companies in which it invests. It may also receive directors fees or
monitoring fees from investee companies. These costs are borne by the
investee company not the Company. In the six-month period to 31 August
2019, GBP316,000 (2018: GBP93,000) was payable to Beringea LLP for
arrangement fees under such arrangements. Directors and monitoring fees
payable to Beringea LLP in the six-month period to 31 August 2019
amounted to GBP253,000 (2018: GBP274,000).
During the six months to 31 August 2019, an amount of GBP60,000 (2018:
GBP60,000) was payable to the Directors of the Company as remuneration
for services provided to the Company. No amount was outstanding at the
period-end.
1. The Directors confirm that, to the best of their knowledge, the
half-yearly financial statements have been prepared in accordance with
Financial Reporting Standard 104 issued by the Financial Reporting
Council and the half-yearly financial report includes a fair review of
the information required by:
2. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties
for the remaining six months of the year; and
3. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position
or performance of the entity during that period, and any changes in the
related party transactions described in the last annual report that could
do so.
4. Risk and uncertainties
1. investment risk associated with investing in small and immature
businesses;
2. investment risk arising from volatile stock market conditions and
their potential effect on the value of the Company's venture
capital investments and the exit opportunity for those
investments; and
3. breach of VCT regulations.
Under the Disclosure and Transparency Directive, the Board is required
in the Company's half-yearly results, to report on the principal risks
and uncertainties facing the Company over the remainder of the financial
year.
The Board has concluded that the key risks facing the Company over the
remainder of the financial year are as follows:
In the case of (i), the Board is satisfied with the Company's approach.
The Investment Manager follows a rigorous process in vetting and careful
structuring of new investments and, after an investment is made, close
monitoring of the business. In respect of (ii), the Company seeks to
hold a diversified portfolio. However, the Company's ability to manage
this risk is quite limited, primarily due to the restrictions arising
from the VCT regulations.
The Company's compliance with the VCT regulations is continually
monitored by the Administration Manager, who reports regularly to the
Board on the current position. The Company also retains Philip Hare &
Associates LLP to provide regular reviews and advice in this area. The
Board considers that this approach reduces the risk of a breach of the
VCT regulations to an appropriate level.
15. Going concern
The Directors have reviewed the Company's financial resources at the
period end and concluded that the Company is well placed to manage its
business risks.
The Board confirms that it is satisfied that the Company has adequate
resources to continue in business for the foreseeable future. For this
reason, the Board believes that the Company continues to be a going
concern and that it is appropriate to apply the going concern basis in
preparing the financial statements.
Copies of the unaudited half yearly results will be sent to
shareholders. Further copies can be obtained from the Company's
registered office and will be available for download from
https://www.globenewswire.com/Tracker?data=YEG6-5BrM5jRTAuok4iHLKsLVWBsm6aIN7myzvw6116QPowcJm6nccrWIWOKwr1nrJmr9a0hqrM8966uU2yNThMU1uzITuL51dlDopJ6HQA=
www.provenvcts.co.uk.
16. Post balance sheet events
Since 31 August 2019, there have been no post balance sheet events,
either adjusting or non-adjusting, in the Company to report.
-(1,180)-1,180----
(END) Dow Jones Newswires
November 05, 2019 12:55 ET (17:55 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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