TIDMPVN
PROVEN VCT PLC
Half-yearly report
For the six months ended 31 August 2019
Financial Summary
31 August 2019 31 August 2018 28 February 2019
---------------------------- -------------- -------------- ----------------
Net asset value per share 76.40p 108.90p 82.20p
("NAV")
---------------------------- -------------- -------------- ----------------
Dividends paid per share 66.25p 38.50p 63.75p
since conversion/
consolidation*
---------------------------- -------------- -------------- ----------------
Total return (NAV plus 142.65p 147.40p 145.95p
dividends paid*)
---------------------------- -------------- -------------- ----------------
*Dividends paid represent dividends paid since the consolidation of 5p
Ordinary Shares into 10p Ordinary Shares on 30 October 2012. Prior to
this date, the Company paid dividends totalling 113.95p on the 5p
Ordinary Shares.
Chairman's Statement
Introduction
I have pleasure in presenting the half year report for ProVen 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 82.2p to 76.4p at 31 August 2019. This decrease of 5.8p
comprised a 3.3p decrease largely from valuation movements plus the
final dividend of 2.5p 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 GBP6.8 million was
invested. This comprised GBP4.1 million into four new investments,
Papier Ltd, Arctic Shores Limited, Sannpa Limited (t/a Fnatic) and
Picasso Labs, Inc., and GBP2.7 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 GBP1.1 million against cost
though fair valuation losses on the investment had largely been
recognised in previous periods. The sale was a strategic decision as,
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 GBP5.2 million. This
equates to an approximate 7.3% 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 GBP5.6 million.
During the six-month period, a final dividend of 2.5p 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 2.0p 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 2.5% on the
opening NAV per share at 1 March 2019, adjusted for the July dividend of
2.5p 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.
Fund raising and share issues
The Company launched a combined offer for subscription with ProVen
Growth and Income 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. Due to strong investor demand, the Company's offer
was fully subscribed.
During the period, the Company allotted 46,313,896 shares at an average
price of 86.4p per share under the Company's offer for subscription
dated 11 January 2019. In the same period, the Company allotted a
further 817,650 shares at 78.7p per share under the Company's DRIS in
respect of the dividend paid on 19 July 2019.
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 1,118,679 shares
at an average price of 76.5p per share and for aggregate consideration
(net of costs) of GBP855,713. This represented 1.06% 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 the uncertainty created by Brexit and trade skirmishes slowing
down the global 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.
Neal Ransome
Chairman
4 November 2019
Investment Manager's Report
Introduction
We have pleasure in presenting our half year report for ProVen 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 45
investments at a cost of GBP74.8 million and a valuation of GBP72.7
million. This represents an overall unrealised decrease on cost of
GBP2.1 million or 2.8%.
During the period, the Company invested a further GBP6.8 million,
comprising GBP4.1 million into four new companies and GBP2.7 million
into five existing portfolio companies.
The Company invested in Papier (GBP1.35 million), a stationery retailer
specialising in curated collections unique to the market, in July 2019.
The Company also invested in Arctic Shores (GBP1.05 million), a provider
of data-driven psychometric tests combining neuroscience, artificial
intelligence and game technology for more predictive and less biased
employee recruitment, in August 2019. The new investment in Fnatic
(GBP1.03 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 also invested
GBP630,000 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 (GBP704,000),
Thread (GBP600,000), Aistemos (GBP595,000), Mycs (GBP533,000) and MPB
(GBP300,000).
The Company's shareholding in 7digital Group plc was sold in the period.
This resulted in a loss against cost of GBP1.1 million 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 Limited repaid a small amount of its loan notes
(GBP32,000) 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
Maplin in July 2018, an additional GBP68,000 was received in August
2019.
Overall, the venture capital investment portfolio showed an unrealised
loss of GBP5.2 million, equivalent to 3.4p per share over the period.
There were valuation uplifts for, amongst others, ContactEngine and Deep
Crawl, but disappointingly these were more than offset by valuation
decreases in Blis Media, My First Years, Smart Assistant, InContext, POQ
Studio 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 focussed 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
Cost Valuation Valuation movement in period % of portfolio
GBP'000 GBP'000 GBP'000 by value
---------------------- --------- ----------- ----------------------------- ----------------
Top twenty venture
capital investments
(by value)
Infinity Reliance
Limited (t/a My 1st
Years) 4,731 5,323 (898) 4.7%
Poq Studio Limited 3,152 4,372 (1,029) 3.8%
Litchfield Media
Limited 3,850 4,195 - 3.7%
Zoovu Limited (t/a
Smart Assistant) 3,487 4,162 (996) 3.7%
Rapid Charge Grid
Limited 4,200 4,124 62 3.6%
Mycs GmbH 4,084 4,084 - 3.6%
Thread, Inc. 3,351 3,861 478 3.4%
Access Systems, Inc. 3,500 3,500 - 3.1%
Monica Vinader Limited 534 3,317 - 2.9%
Festicket Ltd 3,248 3,248 - 2.9%
ContactEngine Limited 1,266 3,124 758 2.7%
Written Byte Limited
(t/a DeepCrawl) 1,888 2,965 691 2.6%
MPB Group Limited 2,511 2,676 165 2.3%
Exonar Limited 2,496 2,496 - 2.2%
Aistemos Limited 1,818 1,821 2 1.6%
Donatantonio Group
Limited 1,078 1,760 5 1.5%
Response Tap Limited 1,060 1,703 (118) 1.5%
Disposable Cubicle
Curtains Limited 2,871 1,652 (542) 1.4%
Blis Media Limited 841 1,624 (1,232) 1.4%
Papier Ltd 1,350 1,350 - 1.2%
Other venture capital
investments 23,433 11,343 (2,536) 10.0%
---------------------- --------- ----------- ----------------------------- ----------------
Total venture capital
investments 74,749 72,700 (5,190) 63.8%
---------------------- --------- ----------- ----------------------------- ----------------
Cash at bank and in
hand 41,167 36.2%
---------------------- --------- ----------- ----------------------------- ----------------
Total investments 113,867 100.0%
---------------------- --------- ----------- ----------------------------- ----------------
Other venture capital investments at 31 August 2019 comprise: Arctic
Shores Limited, Been There Done That Limited, Buckingham Gate Financial
Services Limited, Cogora Group Limited, D30 Holdings Ltd, Firefly
Learning Limited, InContext Solutions, Inc., Inskin Media Limited,
Lantum Limited, Macklin Holdings Limited, MEL Topco Limited (t/a Maplin),
Monmouth Holdings Limited, Netcall plc, Picasso Labs, Inc., Sannpa
Limited (t/a Fnatic), Sealskinz Holdings Limited, Senselogix Limited,
Simplestream Limited, Skills Matter Limited, SPC International 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 Macklin Holdings
Limited, Monmouth Holdings Limited and SPC International Limited, were
also held by ProVen Growth and Income 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 is summarised
as follows:
Additions Cost
GBP'000
Papier Ltd 1,350
Arctic Shores Limited 1,050
Sannpa Limited (t/a Fnatic) 1,029
ContactEngine Limited 704
Picasso Labs, Inc. 630
Thread, Inc. 600
Aistemos Limited 595
Mycs GmbH 533
MPB Group Limited 300
Total 6,791
-------
Market value Gain/ (loss) Realised
at 1 March Disposal against gain/ (loss)
Disposals Cost 2019 proceeds cost in period
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
MEL Topco
Limited*
(t/a
Maplin) - - 68 68 68
Skills Matter
Limited 32 - 32 - 32
7digital
Group plc 1,101 4 1 (1,100) (3)
Total 1,133 4 101 (1,032) 97
------- ------------ ------------ ------------ ------------
*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 193 - 193 183 - 183 405
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Realised gains on investments - 886 886 - 15,609 15,609 17,995
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Unrealised (losses)/ gains on
investments - (5,190) (5,190) - 3,420 3,420 213
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Investment management fee (301) (904) (1,205) (296) (888) (1,184) (2,045)
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Performance incentive fee - - - - (5,771) (5,771) (5,614)
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Other expenses (274) (3) (277) (304) - (304) (608)
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
(Loss)/ return on ordinary activities
before taxation (382) (5,211) (5,593) (417) 12,370 11,953 10,346
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Tax on ordinary activities - - - - - - -
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
(Loss)/ return attributable to equity
shareholders (382) (5,211) (5,593) (417) 12,370 11,953 10,346
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
Basic and diluted (loss)/ return per
share (0.2p) (3.7p) (3.9p) (0.4p) 12.2p 11.8p 10.1p
-------------------------------------- ------- ------- ------- ------- ------- ------- -----------------------
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 72,700 70,040 71,133
---------------------------------------------- ----------- ----------- ---------
Current assets
Debtors 2,426 4,734 1,478
---------------------------------------------- ----------- ----------- ---------
Cash at bank and in hand 41,167 41,953 19,897
---------------------------------------------- ----------- ----------- ---------
43,593 46,687 21,375
-------------------------------------------- ----------- ----------- ---------
Creditors: amounts falling due within one year (955) (6,417) (6,172)
---------------------------------------------- ----------- ----------- ---------
Net current assets 42,638 40,270 15,203
---------------------------------------------- ----------- ----------- ---------
Net assets 115,338 110,310 86,336
---------------------------------------------- ----------- ----------- ---------
Capital and reserves
Called up share capital 15,105 10,125 10,504
---------------------------------------------- ----------- ----------- ---------
Capital redemption reserve 214 24 102
---------------------------------------------- ----------- ----------- ---------
Share premium account 39,296 - 3,367
---------------------------------------------- ----------- ----------- ---------
Special reserve 54,773 58,956 60,820
---------------------------------------------- ----------- ----------- ---------
Capital reserve - realised 5,295 29,420 6,412
---------------------------------------------- ----------- ----------- ---------
Revaluation reserve 2,705 13,210 6,799
---------------------------------------------- ----------- ----------- ---------
Revenue reserve (2,050) (1,425) (1,668)
---------------------------------------------- ----------- ----------- ---------
Total equity shareholders' funds 115,338 110,310 86,336
---------------------------------------------- ----------- ----------- ---------
Basic and diluted net asset value per share 76.4p 108.9p 82.2p
---------------------------------------------- ----------- ----------- ---------
The accompanying notes form an integral part of this announcement.
Unaudited Condensed Statement of Changes in Equity
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 10,504 102 3,367 60,820 6,412 6,799 (1,668) 86,336
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Issue of new shares 4,713 - 35,929 (1,418) - - - 39,224
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Total comprehensive income - - - - (21) (5,190) (382) (5,593)
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Transfer of previously
unrealised gains now
realised - - - - (1,096) 1,096 - -
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Share buybacks and
cancellation (112) 112 - (861) - - - (861)
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
Dividends paid - - - (3,768) - - - (3,768)
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
At 31 August 2019 15,105 214 39,296 54,773 5,295 2,705 (2,050) 115,338
----------------------------- ------- ---------- ------- ------- ------------------- ----------- ------- -------
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 10,187 3,837 52,786 5,469 10,583 19,677 (1,008) 101,531
----------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Issue of new shares 32 - 317 - - - - 349
----------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Total comprehensive income - - - - 8,950 3,420 (417) 11,953
----------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Transfer of previously
unrealised gains now
realised - - - - 9,887 (9,887) - -
----------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Share buybacks and
cancellation (94) 94 - (993) - - - (993)
----------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Cancellation of share premium - - (53,103) 53,103 - - - -
----------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Cancellation of capital
redemption reserve - (3,907) - 3,907 - - - -
----------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
Dividends paid - - - (2,530) - - - (2,530)
----------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
At 31 August 2018 10,125 24 - 58,956 29,420 13,210 (1,425) 110,310
----------------------------- ------- ---------- -------- ------- ------------------- ----------- ------- -------
The special reserve, capital reserve - realised and revenue reserve are
distributable reserves. Reserves available for distribution therefore
amount to GBP58,018,000 (2018: GBP86,951,000).
The accompanying notes form an integral part of this announcement.
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 (6,737) (6,373) (3,584)
-------------------------------------------------- ------ ----------- ----------- ---------
Cashflows from investing activities
-------------------------------------------------- ----- ----------- ----------- ---------
Purchase of investments (6,791) (8,620) (23,468)
---------------------------------------------------------- ----------- ----------- ---------
Sale of investments 101 31,449 43,578
---------------------------------------------------------- ----------- ----------- ---------
Net cash (used in)/ from investing activities (6,690) 22,829 20,110
---------------------------------------------------------- ----------- ----------- ---------
Cashflows from financing activities
-------------------------------------------------- ----- ----------- ----------- ---------
Proceeds from share issues 39,998 - -
---------------------------------------------------------- ----------- ----------- ---------
Share issue costs (1,418) - -
---------------------------------------------------------- ----------- ----------- ---------
Purchase of own shares (759) (993) (1,417)
---------------------------------------------------------- ----------- ----------- ---------
Equity dividends paid (3,124) (2,181) (23,883)
---------------------------------------------------------- ----------- ----------- ---------
Net cash from/ (used in) financing 34,697 (3,174) (25,300)
---------------------------------------------------------- ----------- ----------- ---------
Increase/ (decrease) in cash and cash equivalents B 21,270 13,282 (8,774)
-------------------------------------------------- ------ ----------- ----------- ---------
Notes to the cash flow statement:
A Cash used in operating activities
(Loss)/ return on ordinary activities before taxation (5,593) 11,953 10,346
---------------------------------------------------------- ----------- ----------- ---------
Loss/ (gain) on investments 4,304 (19,029) (18,208)
---------------------------------------------------------- ----------- ----------- ---------
Increase in prepayments, accrued income and other
debtors (128) (4,160) (98)
---------------------------------------------------------- ----------- ----------- ---------
(Decrease)/ increase in accruals and other creditors (5,320) 4,863 4,376
---------------------------------------------------------- ----------- ----------- ---------
Net cash used in operating activities (6,737) (6,373) (3,584)
---------------------------------------------------------- ----------- ----------- ---------
B Analysis of net funds
Beginning of period/ year 19,897 28,671 28,671
---------------------------------------------------------- ----------- ----------- ---------
Net cash inflows/ (outflows) 21,270 13,282 (8,774)
---------------------------------------------------------- ----------- ----------- ---------
End of period/ year 41,167 41,953 19,897
---------------------------------------------------------- ----------- ----------- ---------
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 accounting 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
142,917,030 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
151,054,397 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 2019 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 2.50 - - - - 2,530 2,530 2,530
----------- ----- ------- ------- ------- ------- ------- ------- ---------
2019
Special
Interim 25.25 - - - - - - 25,526
----------- ----- ------- ------- ------- ------- ------- ------- ---------
2019 Final 2.50 - 3,768 3,768 - - - -
----------- ----- ------- ------- ------- ------- ------- ------- ---------
Total
dividends
paid - 3,768 3,768 - 2,530 2,530 28,056
----------- ----- ------- ------- ------- ------- ------- ------- ---------
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
Growth and Income 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. Due to strong investor demand, the Company's offer
was fully subscribed.
During the period, the Company allotted 46,313,896 shares at an average
price of 86.4p per share under the 11 January offer. In the same period,
the Company allotted a further 817,650 shares at 78.7p 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 1,118,679 shares
at an average price of 76.5p per share and for aggregate consideration
(net of costs) of GBP855,713. This represented 1.06% of the shares in
issue at the start of the period. The shares were subsequently
cancelled.
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 141 - - 141 130 - - 130
----------- ------- ------- ------- ------- ------- ------- ------- -------
Loan notes - - 11,643 11,643 - - 12,908 12,908
----------- ------- ------- ------- ------- ------- ------- ------- -------
Unquoted
equity - - 25,835 25,835 - - 34,493 34,493
----------- ------- ------- ------- ------- ------- ------- ------- -------
Preference
shares - - 35,081 35,081 - - 23,602 23,602
----------- ------- ------- ------- ------- ------- ------- ------- -------
Total 141 - 72,559 72,700 130 - 71,003 71,133
----------- ------- ------- ------- ------- ------- ------- ------- -------
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, GBP1,205,000 (2018:
GBP1,184,000) was payable to Beringea LLP in respect of these services.
At the period end the Company owed Beringea LLP GBP197,000 (2018:
GBP215,000).
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 GBP31,000 (2018:
GBP31,000) of which GBP15,000 (2018: GBP15,000) 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 GBP61,000 (2018:
GBP72,000) 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=eE1P22-K_gfGhuZLE2zmHzU_ObeZf6Ew9kX6E8c0Gs8gBKJrHdvon5TAQUvXm6p4tRRKk41AoQQS2AD2szAR3N2IAqYCM0q59tEwmh2T2tE=
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.
(END) Dow Jones Newswires
November 05, 2019 12:52 ET (17:52 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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