Interim Report For the six months ended 31 August 2015
Officers and Professional Advisers Directors David Buchler (Chairman) Peter Hewitt Graham Shore Secretary Eliot Kaye Registered Number 07393404 Registered Office Bond Street House 14 Clifford Street London W1S 4JU Investment Manager Shore Capital Limited Bond Street House 14 Clifford Street London W1S 4JU Registrar SLC Registrars Thames House Portsmouth Road Esther Surrey KT10 9AD Auditors Baker Tilly Audit LLP Chartered Accountants 2 Bloomsbury Street London WC1B 3ST Sponsors and Solicitors Howard Kennedy 19 Cavendish Square London W1A 2AW Bankers The Royal Bank of Scotland plc City Office 62 63 Threadneedle Street London EC2R 8LR VCT Tax Advisor PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH Custodian Pershing Securities Limited Capstan House One Clove Crescent East India Dock London E14 2BH Administrator Shore Capital Fund Administration Services Limited Bond Street House 14 Clifford Street London W1S 4JU 2
Chairman s Statement Highlights Fully deployed in a diverse range of high quality loans and equities NAV gain of 1.02p per share for the period 20p per share of dividends paid since inception, equivalent to a 7.1% per annum tax-free running yield on net investment Introduction As your Company enters into the final year of its expected five-year life, I am pleased to report that your funds are fully deployed in both qualifying and non-qualifying investments. We believe our portfolio is well positioned to deliver attractive returns to shareholders within the Company s remaining time horizon. Net Asset Value ('NAV') The NAV per share at the period end was 94.68p after adding back dividends paid to date of 20p, representing a return of 1.02p per ordinary share for the period. Qualifying Investments Brewhouse and Kitchen The Company s 1,250,000 investment in Brewhouse and Kitchen Limited has continued to perform well. Brewhouse and Kitchen is managed by two highly experienced pub sector professionals and our funding has facilitated both the acquisition of freehold pubs and the roll-out of the brand. The investment was largely in the form of senior debt, secured with a first charge over both the business and each site acquired. Funds could be utilised to a maximum 65% loan-to-value ratio, and have produced an attractive return to the Company. Brewhouse & Kitchen now operates nine units across locations in London, Bristol and the South East of England and the portfolio continues to trade well. The Investment was fully repaid on 27 October 2015 after the end of the six months period being reporting upon. In total the Company received 1,446,220. The Albany, Barnes As previously reported, Huntly Trading Limited and Jephcote Trading Limited (in which the Company had invested 1,000,000 and 1,650,000 respectively) are, as members of SKPB Services LLP, engaged in a contract with Ansgate (Barnes) Limited to provide project management and contracting services for the construction of nine new houses and 12 new flats at a construction known as The Albany, in Barnes, south west London. We believe that 3
the project is progressing well, with a number of pre-sales already exchanged at attractive prices, with anticipated completions by the first quarter of next year. Supported Living SKPB Services LLP also entered into a contract with HB Villages Tranche 2 Limited to provide project management and contracting services in connection with the construction of 16 units in Bolton as accommodation and supported housing for psychiatric and learning disabled service users and their care-workers. We are pleased to report that the project recently completed with an attractive return to SKPB Services. As previously reported, your Company also made investments of 880,000 into each of two contracting companies, Frederica Trading Limited and Glenmoor Trading Limited. Frederica and Glenmoor (as members of a limited liability partnership, DEFG Trading LLP, with other contracting companies) have been providing contracting services for supported living developments in Bury and Clacton, the latter of which recently completed with an attractive return to DEFG Trading. Following the period end, Frederica redeemed its investment in full which the Company subsequently has reinvested into Elgin Trading Limited, another member of DEFG Trading, retaining its underlying exposure to DEFG Trading s growing contracting services business. Construction The Company s investment of 1,650,000 (alongside other Puma VCTs) into Saville Services Limited continues to perform well. Saville Services has been providing contracting services over a series of projects, including the construction of a private detached housing development in the countryside outside Aberdeen, under contract to Churchill Homes Limited, a longstanding Aberdeenshire developer, which is progressing well. It has also been providing services for the development of 16 apartments for supported living for psychiatric and learning disabled service users in Wolverhampton. As previously reported, the Company realised its investment in SIP Communications plc during the period ended 28 February 2015 with a small loss of 63,000 (against a provision of 210,000 against the original 700,000 investment to reflect its trading difficulties). However, I am pleased to report that your Investment Manager has now been able to recover this 63,000 thus ensuring that the Company made no loss on the position. Non-Qualifying Investments During the period, the Company advanced a non-qualifying loan of 360,000 (through an affiliate Valencia Lending Limited) to Citrus PX Two Limited. This loan, together with loans from other vehicles managed and advised by your Investment Manager, form 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. The facility provides a series of loans to Citrus PX, with the 4
benefit of a first charge over a geographically diversified portfolio of residential properties on conservative terms. As previously reported, your Company, together with entities managed and advised by your Investment Manager, provided a 7.1 million bridging facility to companies within the Connolly and Callaghan group in several tranches. The Company participated in this through a 400,000 non-qualifying loan (advanced through a subsidiary, Buckhorn Lending Limited). The Connolly and Callaghan group is a provider of emergency overnight accommodation in Bristol with over 20 years experience in the sector. The overall facility was secured on a portfolio of over 20 freehold residential properties, was extended on a sub-50% loan-to-value basis and earned an attractive rate of interest. We are pleased to report that this loan was repaid in full during the period. The Company s 1,330,000 non-qualifying loan (as part of a 4 million financing with other Puma VCTs) to Puma Brandenburg Finance Limited, a subsidiary of Puma Brandenburg Limited, continues to perform [in line with expectations]. The loan is secured on a portfolio of flats in the middle class area of central Berlin, Germany. Since the loan was made, the property market in this area of Berlin has been very strong, further enhancing the excellent security we have for this loan. The loan attracts a fixed interest rate at a good coupon given the security profile. We have been informed by Puma Brandenburg Finance Limited that this loan will be repaid in early November. Dividends The Company declared a dividend of 5p per ordinary share for the year ended 28 February 2015, which was paid in February 2015. Reflecting this recent payout, your Board is not proposing a further dividend at this interim stage but intends to pay out a dividend of 5p 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 Her Majesty's Revenue & Customs ('HMRC') rules and regulations concerning VCTs. PwC assists the Investment Manager in establishing the status of investments as qualifying holdings and has reported that the Company has met all HMRC s criteria to date. As noted above, the Company has met its minimum qualifying investment percentage of 70 per cent. Principal risks and uncertainties Although the economy in the UK is showing signs of improvement, it remains fragile. The consequences of this for the Company's investment portfolio constitute the principal risk and uncertainty for the Company in the second half of 2015. 5
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 fully deployed in a diverse range of high quality businesses and projects which should offer the prospect of further growth in net assets per share. As the fund enters into its final year, your Board expects to concentrate primarily on the monitoring of our existing investments and considering the options for exits. David Buchler Chairman 30 October 2015 6
Income Statement (unaudited) For the six months ended 31 August 2015 Six months ended 31 August 2015 Six months ended 31 August 2014 Year ended 28 February 2015 Note Revenue Capital Total Revenue Capital Total Revenue Capital Total '000 '000 '000 '000 '000 '000 '000 '000 '000 Gain on investments - - - - 47 47-38 38 Income 368-368 300-300 606-606 368-368 300 47 347 606 38 644 Investment management fees 4 (28) (84) (112) (27) (81) (108) (53) (159) (212) Other expenses (86) - (86) (82) - (82) (170) - (170) (114) (84) (198) (109) (81) (190) (223) (159) (382) Return/(loss) on ordinary activities before taxation 254 (84) 170 191 (34) 157 383 (121) 262 Tax on return on ordinary activities (32) - (32) (3) - (3) (26) - (26) Return/(loss) on ordinary activities after tax attributable to equity shareholders 222 (84) 138 188 (34) 154 357 (121) 236 Basic and diluted Return/(loss) per Ordinary Share (pence) 2 1.64p (0.62p) 1.02p 1.39p (0.25p) 1.14p 2.65p (0.90p) 1.75p 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. 7
Balance Sheet (unaudited) As at 31 August 2015 Note As at 31 August 2015 As at 31 August 2014 As at 28 February 2015 '000 '000 '000 Fixed Assets Investments 7 9,400 8,490 9,040 Current Assets Debtors 874 834 653 Cash 70 1,369 424 944 2,203 1,077 Creditors - amounts falling due within one year Other creditors (196) (144) (139) Tax liabilities (58) (3) (26) Net Current Assets 690 2,056 912 Total Assets less Current Liabilities 10,090 10,546 9,952 Creditors - amounts falling due after more than one year (including convertible debt) (1) (1) (1) Net Assets 10,089 10,545 9,951 Capital and Reserves Called up share capital 135 135 135 Capital reserve (1,057) (886) (973) Revenue reserve 11,011 11,296 10,789 Equity Shareholders Funds 10,089 10,545 9,951 Net Asset Value per Ordinary Share 3 74.68p 78.06p 73.66p Diluted Net Asset Value per Ordinary Share 3 74.68p 78.06p 73.66p 8
Cash Flow Statement (unaudited) For the six months ended 31 August 2015 Six months ended 31 August 2015 Six months ended 31 August 2014 Year ended 28 February 2015 '000 '000 '000 Operating activities Return on ordinary activities before tax 170 157 262 Gains on investments - (47) (38) Increase in debtors (221) (662) (481) Increase in creditors 57 20 15 Net cash inflow/(outflow) from operating activities 6 (532) (242) Corporation tax paid - - - Capital expenditure and financial investment Purchase of investments (360) (400) (950) Proceeds from sale of investments - 1,913 1,904 Net cash outflow from capital expenditure and financial investment (360) 1,513 954 Equity dividend paid - - (676) (Decrease) / increase in cash (354) 981 36 Net cash at start of the period 424 388 388 Net funds at the period end 70 1,369 424 9
Reconciliation of Movements in Shareholders Funds (unaudited) For the six months ended 31 August 2015 Called up share capital Capital reserve - realised Capital reserve - unrealised Revenue reserve Total '000 '000 '000 '000 '000 Balance as at 1 March 2014 135 (642) (210) 11,108 10,391 Total recognised (losses)/gains for the period - (34) - 188 154 Realisation of valuations from prior period - (210) 210 - - Dividends paid - - - - - Balance as at 31 August 2014 135 (886) - 11,296 10,545 Total recognised (losses)/gains for the period - (87) - 169 82 Dividends paid - - - (676) (676) Balance as at 28 February 2015 135 (973) - 10,789 9,951 Total recognised (losses)/gains for the period - (84) - 222 138 Balance as at 31 August 2015 135 (1,057) - 11,011 10,089 10
Notes to the Interim Report For the six months ended 31 August 2015 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 ). 2. Return per Ordinary Share The total profit per share of 1.02p is based on the profit for the period of 138,000 (2014: 154,000) and the weighted average number of shares in issue as at 31 August 2015 of 13,508,925 (2014: 13,508,925). 3. Net asset value per share As at 31 August 2015 As at 31 August 2014 As at 28 February 2015 Net assets 10,089,000 10,545,000 9,951,000 Shares in issue 13,508,925 13,508,925 13,508,925 Net asset value per share Basic 74.68p 78.06p 73.66p Diluted 74.68p 78.06p 73.66p 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. Related Party Transactions There were no Related party transactions. 6. The financial information for the six months ended 31 August 2015 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. 11
Notes to the Interim Report continued For the six months ended 31 August 2015 7. Investment portfolio summary Valuation Cost Gain/(loss) 000 000 000 Valuation as a % of Net Assets As at 31 August 2015 Qualifying Investment - Unquoted Brewhouse & Kitchen 1,250 1,250-12% Frederica Trading Limited 880 880-9% Glenmoor Trading Limited 880 880-9% Huntly Trading Limited 1,000 1,000-10% Jephcote Trading Limited 1,650 1,650-16% Saville Services Limited 1,650 1,650-16% Total Qualifying Investments 7,310 7,310-72% Non-Qualifying Investments PBL Finance Limited 1,330 1,330-13% Buckhorn Lending limited 400 400-4% Valencia Lending Limited 360 360-4% Total Non-Qualifying investments 2,090 2,090-21% Total Investments 9,400 9,400 93% Balance of Portfolio 689 689 7% Net Assets 10,089 10,089-100% Copies of this Interim Statement will be posted to shareholders in due course and made available on the website: http://www.pumainvestments.co.uk/investors/our-investments/venture-capital-trusts/investor-information 12