30 Oct 2015 07:00
Interim Report
For the period ended 31 August 2015
Officers and Professional Advisers
Directors | Auditors |
Harold Paisner (Chairman) Maurice Shear Graham Shore
| Baker Tilly Audit LLP Chartered Accountants 2 Bloomsbury Street London WC1B 3ST |
Secretary Eliot Kaye
Registered Number 09197956
|
Sponsors and Solicitors Howard Kennedy 19 Cavendish Square London W1A 2AW
|
Registered Office Bond Street House 14 Clifford Street London W1S 4JU | Bankers The Royal Bank of Scotland plc London City Office PO Box 412 62-63 Threadneedle Street London EC2R 8LA
|
Investment Manager Puma Investment Management Limited Bond Street House 14 Clifford Street London W1S 4JU
| VCT Tax Advisor PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH |
Registrar SLC Registrars Thames House Portsmouth Road Esther Surrey KT10 9AD | Custodian Pershing Securities Limited Capstan House One Clove Crescent East India Dock London E14 2BH |
Administrator PI Administration Services Limited Bond Street House 14 Clifford Street London W1S 4JU
|
Chairman's Statement
Highlights
· Fund raising of £30.2m completed, the largest raising by a planned exit VCT in the 2014/2015 tax year.
· Almost two-thirds of funds raised already deployed in high quality projects generating an attractive return.
Introduction
I am pleased to present the first interim report for Puma VCT 11 plc (the 'Company') for the period to 31 August 2015. The Board welcomes its new shareholders and thanks them for their investment.
The Company launched its Prospectus in October 2014 and the offer closed in June 2015, raising over £30 million, and representing more than half of the entire funds raised by planned exit VCTs in the 2014/2015 tax year. The Investment Manager, Puma Investments, now has over £100 million of VCT money under management in this and other Puma VCTs and a well-established, experienced VCT team to manage the Company's deal flow.
Investments
The period under review includes only a short time following completion of the fundraising. However, I am pleased to report that the Company completed a series of investments during the period and since the period end, deploying just under £20 million.
In May, the Company acquired £518,000 of shares in Nextenergy Solar Fund, a fully listed investment company focusing on operational solar photovoltaic assets located in the United Kingdom. Nextenergy benefits from relatively stable and predictable cashflows, making an investment in its shares similar in risk to a bond. It expects to yield a sustainable and attractive dividend that increases in line with RPI over the long term and an element of capital growth through the re-investment of net cash generated in excess of the target dividend.
During the period, the Company advanced a series of non-qualifying loans (including through affiliates Palmer Lending Limited, Valencia Lending Limited and Primrose Lending Limited) totalling £5.65 million to various entities within the Citrus Group. These loans, 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 benefit of a first charge over a geographically diversified portfolio of residential properties on conservative terms. Following the period end, £1 million of principal (together with all accrued interest) was repaid to the Company so that the Company's current exposure is £2.9 million.
In June 2015, the Company advanced loans of £2 million (through an affiliate Lothian Lending Limited) to Richmond Global Properties Limited. These loans, together with loans from other vehicles managed and advised by your Investment Manager totalling £6.9 million, are being advanced to fund the development of a 112 bed purpose built care home in Hamilton, Scotland. These loans are secured with a first charge over the site and are expected to generate an attractive return. The construction programme has commenced and is progressing well.
The Company has advanced loans of £2.5 million (through another affiliate, Latimer Lending Limited) to Toppan Holdings Limited. These funds, together with loans from other vehicles managed and advised by your Investment Manager totalling £5.6 million, are being advanced to fund the development of a 65 bed purpose built care home in Mill Hill, London. These loans are again secured with a first charge over the site and expected to generate an attractive return. The construction programme has also commenced for this project and is currently progressing well.
Towards the end of the period, the Company advanced a loan of £4 million (through an affiliate Mayfield Lending Limited) to Northern Land Developments Limited, secured with a first charge over two plots of land in Beckenham, Kent. The loan, together with loans from other vehicles managed and advised by your Investment Manager, facilitated the acquisition of two large residential houses on one of the plots. The borrower expects to receive planning permission in the coming months to replace these two units with up to eight town houses. Meanwhile, the Company's loan is generating an attractive return.
Since the period end, the Company has made three further investments.
The Company advanced a loan of £1.4 million (through Lothian Lending Limited) to Kingsmead Care Home Limited. Kingsmead operates a new purpose-built care home and dementia treatment centre in Mytchett, Surrey which is already trading well. The loan is secured with a first charge on the business and the property.
Following the period end, the Company advanced a loan of £116,000 (through an affiliate Lavender Lending Limited) to Athena Alpha Limited. This loan, together with loans from other vehicles managed and advised by your Investment Manager totalling £4.3 million, are being advanced to fund the development of a 80 bed purpose built care home in Dover, Kent, and are secured with a first charge over the development site.
The Company invested £3 million in a Royal Bank of Canada floating rate note, bearing an initial 1.2% per annum coupon with future interest adjusted in line with 3m LIBOR. Otherwise, and in anticipation of the strong pipeline of opportunities (both qualifying and non-qualifying), the rest of the Company's funds have been placed on cash deposit.
We are pleased that two-thirds of the Company's available cash has already been invested in a diverse portfolio of investments generating an attractive return. The balance of the net proceeds of the Offer have been placed on cash deposit whilst other opportunities (both qualifying and non-qualifying) are identified.
The Investment Manager is in legal process with a number of further investment opportunities and expects to begin making such investments in the second half of the year, discussed further in the Outlook section.
Net Asset Value ('NAV')
The NAV per share was 95.49p at 31 August 2015. This initial NAV per share primarily reflects the initial funds raised less the costs of flotation.
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.
Principal risks and uncertainties
Although the economy in the UK continues to improve, 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.
Outlook
The Investment Manager has a pipeline in legal process and many companies which are suitable for investment. There is therefore a strong flow of further opportunities likely to lead to suitable investments. The restrictions on availability of bank credit continue to affect the terms on which target companies can raise finance. This should both increase the demand for our offering and improve the terms we can secure. There are many suitable companies which are well-managed, in good market positions, which need our finance and can offer good security. We therefore believe the Company is strongly positioned to assemble a portfolio to deliver attractive returns to shareholders in the medium to long term.
Harold Paisner
Chairman
30 October 2015
Income Statement (unaudited)
For the period ended 31 August 2015
Period ended 31 August 2015 | ||||
Note | Revenue | Capital | Total | |
£'000 | £'000 | £'000 | ||
Gains on investments | - | 3 | 3 | |
Income | 161 | - | 161 | |
161 | 3 | 164 | ||
Investment management fees | 4 | (81) | (243) | (324) |
Other expenses | (202) | - | (202) | |
(283) | (243) | (526) | ||
Return/(loss) on ordinary activities before taxation | (122) | (240) | (362) | |
Tax on return on ordinary activities | - | - | - | |
Return/(loss) on ordinary activities after tax attributable to equity shareholders | (122) | (240) | (362) | |
Basic and diluted | ||||
Return/(loss) per Ordinary Share (pence) | 2 | (0.40p) | (0.79p) | (1.19p) |
The revenue column of this statement is the profit and loss of the Company. All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.
Balance Sheet (unaudited)
As at 31 August 2015
Note | As at31 August 2015 | |
£'000 | ||
Fixed Assets | ||
Investments | 7 | 14,686 |
Current Assets | ||
Prepayments | 135 | |
Cash | 16,482 | |
16,617 | ||
Creditors - amounts falling due within one year | (2,166) | |
Net Current Assets | 14,451 | |
Net Assets | 29,137 | |
Capital and Reserves | ||
Called up share capital | 19 | |
Share premium account | 29,480 | |
Capital reserve - realised | (243) | |
Capital reserve - unrealised | 3 | |
Revenue reserve | (122) | |
Equity Shareholders' Funds | 29,137 | |
Net Asset Value per Ordinary Share | 3 | 95.49p |
Diluted Net Asset Value per Ordinary Share | 3 | 95.49p |
Cash Flow Statement (unaudited)
For the period ended 31 August 2015
Period ended 31 August 2015 | |
£'000 | |
Operating activities | |
Loss on ordinary activities before tax | (362) |
Gains on investments | (3) |
Increase in debtors | (135) |
Increase in creditors | 2,166 |
Net cash outflow from operating activities | 1,666 |
Corporation tax paid | - |
Capital expenditure and financial investment | |
Purchase of investments | (14,683) |
Net cash outflow from capital expenditure and financial investment | (14,683) |
Equity dividend paid | |
Financing | |
Proceeds received from issue of ordinary share capital | 30,256 |
Expenses paid for issue of share capital | (757) |
Proceeds received from issue of redeemable preference shares | 13 |
Redemption of redeemable preference shares | (13) |
Net cash inflow from financing | 29,499 |
Increase in cash | 16,482 |
Net cash at start of the period | - |
Net funds at the period end | 16,482 |
Reconciliation of Movements in Shareholders' Funds (unaudited)
For the period ended 31 August 2015
Called up share capital | Share premium account | Capital reserve - realised | Capital reserve - unrealised | Revenue reserve | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Shares issued in the period | 19 | 30,237 | - | - | 30,256 | |
Expense of share issue | - | (757) | - | - | - | (757) |
Total recognised (losses)/gains for the period | - | - | (243) | 3 | (122) | (362) |
Balance as at 31 August 2015 | 19 | 29,480 | (243) | 3 | (122) | 29,137 |
Notes to the Interim Report
For the period 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 loss per share of 1.19p is based on the loss for the period of £362,000 and the weighted average number of shares in issue as at 31 August 2015 of 30,511,969 calculated from the date of the first receipt of proceeds from the issue of ordinary share capital.
3. Net asset value per share
As at31 August 2015 | |
Net assets | 29,137,000 |
Number of shares in issue as at 31 August 2015 | 38,139,963 |
Less: management incentive shares (see below) | (7,627,994) |
Number of shares in issue for purposes of Net Asset Value per calculation | 30,511,969 |
Net asset value per share | |
Basic | 95.49p |
Diluted | 95.49p |
On 11 September 2014, the Company entered into various agreements with the members of the Management Team (as defined in the Company's prospectus dated 8 October 2014) such that the Management Team will be entitled in aggregate to share in 20 per cent of the aggregate excess on any amounts realised by the Company in excess of £1 per Ordinary Share, the Performance Target.
This incentive is effective through the issue of ordinary shares in the Company, such that the Management Team hold 7,627,994 ordinary shares being 20% of the issued share capital of 38,139,963.
The Management Team will waive all rights to dividends until a return of £1 per share (whether capital or income) has been paid to the other shareholders.
The performance incentive structure provides a strong incentive for the Investment Manager to ensure that the Company performs well, enabling the Board to approve distributions as high and as soon as possible.
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
The Company has appointed Puma Investment Management Limited to provide investment management services.
The Company has appointed Puma Investment Advisory Services Limited, a related company to Puma Investment Management Limited, to provide accounting, secretarial and administrative services.
6. The financial information for the period 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.
Notes to the Interim Report continued
For the period ended 31 August 2015
7. Investment portfolio summary
Valuation | Cost | Gain/(loss) | Valuation as a % of Net Assets | |
£'000 | £'000 | £'000 | ||
As at 31 August 2015 | ||||
Qualifying Investment - Unquoted | ||||
- | 0% | |||
Total Qualifying Investments | - | - | - | 0% |
Non-Qualifying Investments | ||||
Nextenergy Solar | 521 | 518 | 3 | 2% |
Palmer Lending Limited | 2,300 | 2,300 | - | 8% |
Valencia Lending Limited | 1,350 | 1,350 | - | 5% |
Primrose Lending Limited | 2,000 | 2,000 | - | 7% |
Mayfield Lending Limited | 4,000 | 4,000 | - | 14% |
Latimer Lending Limited | 2,481 | 2,467 | - | 9% |
Lothian Lending Limited | 2,034 | 2,048 | - | 7% |
0% | ||||
Total Non-Qualifying investments | 14,686 | 14,683 | 3 | 52% |
Total Investments | 14,686 | 14,683 | 52% | |
Balance of Portfolio | 14,451 | 14,451 | 48% | |
Net Assets | 29,137 | 29,134 | - | 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/pages/view/investors-information-vcts