30 Nov 2016 10:33
Interim Report
For the period ended 31 August 2016
Officers and Professional Advisers
Directors | Auditor |
Harold Paisner (Chairman) Maurice Shear Graham Shore
| RSM UK Audit LLP Chartered Accountants 25 Farringdon Street London EC4A 4AB |
Secretary Eliot Kaye
Registered Number 09197956
|
Sponsors and Solicitors Howard Kennedy No 1 London Bridge London SE1 9BG
|
Registered Office Bond Street House 14 Clifford Street London W1S 4JU
Investment Manager Puma Investment Management Limited 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
Lloyds Bank International LimitedSarnia HouseLe TruchotSt Peter PortGuernsey, GY1 4EF
|
Registrar SLC Registrars 42-50 Hersham Road Walton-on-Thames Surrey KT12 1RZ
| VCT Tax Advisor PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH |
Administrator PI Administration Services Limited Bond Street House 14 Clifford Street London W1S 4JU
| Custodian Pershing Securities Limited 1 Canada Square London E14 5AL |
|
Chairman's Statement
Highlights
· NAV per share up 0.65p in the half year at 96.83p
· A significant proportion of funds raised now invested in a diverse range of high quality businesses and projects generating an attractive return
· Strong pipeline of investment opportunities as the Company completes its first year of operations
Chairman's Statement
Introduction
I am pleased to present the interim report for Puma VCT 11 plc (the 'Company') for the period to 31 August 2016. The Company has been actively seeking to deploy its cash resources in good quality investments, focusing on its mandate to exploit the opportunities which are arising as a result of continuing tight credit markets.
Net Asset Value ('NAV')
The NAV per share at the period end was 96.83p, comprising a profit before tax for the period of £197,000 and representing a return of 0.65p per ordinary share during the period. The Company's total net assets at the period end were just over £29.5 million.
Investments
Qualifying Investments
As previously reported, before the passing of the Finance (2) Act 2015, the Company invested a total of £7.5 million in three newly established qualifying businesses. Warm Hearth Limited, in which the Company invested £2.5 million (as part of a £5 million investment alongside other Puma VCTs), was established to operate a trading business in the hospitality and leisure sectors and/or to acquire businesses that operate within those sectors. Mini Rainbows Limited, in which the Company invested £2.5 million (as part of a £5 million investment alongside other Puma VCTs), was established to operate a trading business in the childcare sector and/or to acquire businesses that operate within that sector. Welcome Health Limited, in which the Company invested £2.5 million (as part of a £5 million investment alongside other Puma VCTs), was established to operate a trading business in the healthcare sector and/or to acquire businesses that operate within that sector.
I am pleased to report that, during the period, Warm Hearth Limited commenced its trade, seeking to capitalise on the strong growth trends within the craft beer sub market and add value from the roll-out and use of a strong brand. In pursuit of this strategy Warm Hearth was able to negotiate a franchise agreement with Brewhouse & Kitchen Limited ("B&K"), a strong and fast-growing branded operator. Its differentiation is to have craft micro-brewing activities within each of its pub units as a point of focus. Warm Hearth acquired three substantial freehold pub assets in Chester, Wilmslow and Bedford, all of which are now open and trading as fully branded B&K units with pleasing performance to date.
We understand that the directors of Mini Rainbows Limited and Welcome Health Limited are actively pursuing opportunities to deploy their funds in the near future. We have been advised by PwC that HMRC have confirmed that these investments should also be qualifying for VCT purposes.
Non-Qualifying Investments
As previously reported, we have adopted a strategy for the non-qualifying portfolio of secured loans (and other similar instruments) offering a good yield with hopefully limited downside risk. To that end, the Company had invested £21.4 million in a series of lending businesses with this strategy. Details of the loans that these lending businesses have made are set out below.
Loans of £1.2 million have been advanced to Windsar Care (UK) LLP to fund the development and initial trading of a 68-bed purpose-built care home in Egham, Windsor. These loans, together with loans from other vehicles managed and advised by your Investment Manager totalling £5.3 million, are secured with a first charge over the site and are expected to generate an attractive return. Construction has commenced on site and is progressing well.
In June 2016 the Company advanced an £800,000 loan, secured against a portfolio of freehold assets and the associated ground rents, as part of a package from other vehicles managed and advised by your Investment Manager totalling £3 million. The portfolio of ground rents consists of 1,415 individual units in total across 16 freeholds, with all leases in excess of 90 years. The sponsor of the transaction is Grangeford Asset Management, a manager of some 7,000 individual ground rents across 130 properties in the United Kingdom valued at £50 million.
We are pleased to report that the residual £640,000 loan to Kingsmead Care Home Limited, which owns and operates a care and dementia treatment facility in Mytchett, Surrey, was repaid in full following the period end, giving a good rate of return.
During the period, a series of loans totalling £2.75 million were advanced 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.
We made a loan of £2.5 million to Toppan Holdings Limited together with loans from other vehicles managed and advised by your Investment Manager totalling £5.6 million. It was advanced to fund the development of a 65 bed purpose built care home in Mill Hill, London. The development has completed and the loans are secured with a first charge over the site. The care home, to be known as Aarandale Manor, has recently opened.
In 2015, a loan of £3 million was advanced to Northern Land Developments Limited to facilitate the acquisition of two large residential houses in Beckenham, Kent, and to fund planning costs to replace these two units with seven town houses. We are pleased to report that planning permission was duly granted after the period end. The loan is secured with a first charge over the site and also an adjacent larger parcel of land with significant further development potential.
The loans of £2 million to Richmond Global Properties Limited continue to perform. 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 is well progressed and the home is expected to open in the Spring of 2017.
The £800,000 loan to Athena (Alpha) Limited, as part of a £4.4 million facility from other vehicles managed and advised by your Investment Manager, is funding the development of a new purpose-built, 80-bed residential care home in Dover, Kent. The site occupies a prominent location adjacent to the recently opened new community hospital, approximately a 5 minute drive from Dover town centre. We are pleased to report that construction is progressing well and expects to complete before the end of the year. We understand that the borrower, who has recently developed and sold two similar care homes, is in discussions with a potential purchaser of this care home on terms which would see the loan repaid in full.
As previously reported, a £1 million loan was advanced to Regent Formations 265 Limited, which, together with loans from other vehicles managed and advised by your Investment Manager totalling £2.8 million, is being advanced to fund the development of a new 88 bed care home in Melton Mowbray, Leicestershire. These loans are again secured with a first charge over the site and expected to generate an attractive return. The construction programme is progressing well and the care home is expected to open in Q1 2017.
A £1.2 million facility, as part of a total facility of £3 million, has been completed with an entity within the Ironbridge Group. The facilities provide the senior 70% slice of "stretched senior" bridging loans on non-owner-occupied properties in London and the South East with Ironbridge funding the subordinated 30% slice. Ironbridge operate a bridge lending business and have successfully deployed over £50m of customer loans to date. Loans are being advanced from 6 to 24 months with the senior slice at a conservative loan-to-value ratio.
As reported in the Company's annual report, the Company had acquired £519,000 shares in Nextenergy Solar Fund, a fully listed investment company focusing on operational solar photovoltaic assets located in the United Kingdom. Due to a change in power-generation markets resulting from declining energy prices, we began to reduce the Company's exposure and fully exited this investment during the period.
To further manage liquidity, the Company has exposure to £3 million in a floating rate note issued by Royal Bank of Canada and £1.3 million in a floating rate note issued by Commonwealth Bank of Australia. It is intended that these positions will be liquidated in due course as the Company makes qualifying investments.
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
The economy in the UK may have become more fragile, especially in the light of recent political events. The consequences of this for the Company's investment portfolio constitute the principal risk and uncertainty for the Company in the second half of the year.
Outlook
We are pleased that a significant proportion of the Company's available cash is now invested in a diverse portfolio of qualifying and non-qualifying investments, generating an attractive return. The Investment Manager is in legal process with a number of further qualifying investment opportunities and expects to make such investments in the second half of the year. 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 November 2016
Income Statement (unaudited)
For the period ended 31 August 2016
Period ended 31 August 2016 | Period ended 31 August 2015 | Period ended 29 February 2016 | ||||||||
Note | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Gains on investments | - | 50 | 50 | - | 3 | 3 | - | (53) | (53) | |
Income | 573 | - | 573 | 161 | - | 161 | 764 | - | 764 | |
573 | 50 | 623 | 161 | 3 | 164 | 764 | (53) | 711 | ||
Investment management fees | 4 | (74) | (222) | (296) | (81) | (243) | (324) | (144) | (433) | (577) |
Other expenses | (130) | - | (130) | (202) | - | (202) | (279) | - | (279) | |
(204) | (222) | (426) | (283) | (243) | (526) | (423) | (433) | (856) | ||
Profit/(loss) on ordinary activities before taxation | 369 | (172) | 197 | (122) | (240) | (362) | 341 | (486) | (145) | |
Tax on return on ordinary activities | - | - | - | - | - | - | (68) | 68 | - | |
Profit/(loss) on ordinary activities after tax attributable to equity shareholders | 369 | (172) | 197 | (122) | (240) | (362) | 273 | (418) | (145) | |
Basic and diluted | ||||||||||
Profit/(loss) per Ordinary Share (pence) | 2 | 1.21p | (0.56p) | 0.65p | (0.40p) | (0.79p) | (1.19p) | 1.35p | (2.07p) | (0.72p) |
The total 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 2016
Note | As at31 August 2016 | As at31 August 2015 | As at29 February 2016 | |
£'000 | £'000 | £'000 | ||
Fixed Assets | ||||
Investments | 6 | 30,720 | 14,686 | 25,890 |
Current Assets | ||||
Prepayments | 476 | 135 | 2,200 | |
Cash | 132 | 16,482 | 2,513 | |
608 | 16,617 | 4,713 | ||
Creditors - amounts falling due within one year | (1,784) | (2,166) | (1,256) | |
Net Current Assets | (1,176) | 14,451 | 3,457 | |
Net Assets | 29,544 | 29,137 | 29,347 | |
Capital and Reserves | ||||
Called up share capital | 19 | 19 | 19 | |
Share premium account | 29,473 | 29,480 | 29,473 | |
Capital reserve - realised | (613) | (243) | (365) | |
Capital reserve - unrealised | 23 | 3 | (53) | |
Revenue reserve | 642 | (122) | 273 | |
Equity Shareholders' Funds | 29,544 | 29,137 | 29,347 | |
Net Asset Value per Ordinary Share | 3 | 96.83p | 95.49p | 96.18p |
Diluted Net Asset Value per Ordinary Share | 3 | 96.83p | 95.49p | 96.18p |
Cash Flow Statement (unaudited)
For the period ended 31 August 2016
Period ended 31 August 2016 | Period ended 31 August 2015 | Period ended 29 February 2016 | |
£'000 | £'000 | £'000 | |
Operating activities | |||
Profit/(loss) after tax | 197 | (362) | (145) |
Unrealised (gain)/loss on investments | (76) | (3) | 53 |
Realised loss on investments | 26 | - | - |
Decrease/(increase) in debtors | 1,724 | (135) | (2,200) |
Increase in creditors | 528 | 2,166 | 1,256 |
Net cash outflow from operating activities | 2,399 | 1,666 | (1,036) |
Capital expenditure and financial investment | |||
Purchase of investments | (5,275) | (14,683) | (25,943) |
Proceeds from sale of investments | 495 | - | - |
Net cash outflow from capital expenditure and financial investment | (4,780) | (14,683) | (25,943) |
Financing | |||
Proceeds received from issue of ordinary share capital | - | 30,256 | 30,242 |
Expenses paid for issue of share capital | - | (757) | (750) |
Proceeds received from issue of redeemable preference shares | - | 13 | 13 |
Redemption of redeemable preference shares | - | (13) | (13) |
Net cash inflow from financing | - | 29,499 | 29,492 |
(Decrease)/increase in cash | (2,381) | 16,482 | 2,513 |
Net cash at start of the period | 2,513 | - | - |
Net funds at the period end | 132 | 16,482 | 2,513 |
Reconciliation of Movements in Shareholders' Funds (unaudited)
For the period ended 31 August 2016
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) |
Return after taxation attributable to equity shareholders | - | - | (243) | 3 | (122) | (362) |
Balance as at 31 August 2015 | 19 | 29,480 | (243) | 3 | (122) | 29,137 |
Shares issued in the period | - | (14) | - | - | - | (14) |
Expense of share issue | - | 7 | - | - | - | 7 |
Return after taxation attributable to equity shareholders | - | - | (122) | (56) | 395 | 217 |
Balance as at 29 February 2016 | 19 | 29,473 | (365) | (53) | 273 | 29,347 |
Return after taxation attributable to equity shareholders | - | - | (248) | 76 | 369 | 197 |
Balance as at 31 August 2016 | 19 | 29,473 | (613) | 23 | 642 | 29,544 |
Notes to the Interim Report
For the period ended 31 August 2016
1. Accounting Policies
The financial statements have been prepared under the historical cost convention, modified to include the revaluation of fixed asset investments, and in accordance with applicable Accounting Standards and with the Statement of Recommended Practice, "Financial Statements of Investment Trust Companies and Venture Capital Trusts" ("SORP") and in accordance with the Financial Reporting Standard 102 ("FRS102").
2. Return per Ordinary Share
The total profit per share of 0.65p is based on the profit for the period of £197,000 and the weighted average number of shares in issue as at 31 August 2016 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 2016 | As at31 August 2015 | As at29 February 2016 | |
Net assets | 29,544,000 | 29,137,000 | 29,347,000 |
Shares in issue | 30,511,969 | 30,511,969 | 30,511,969 |
Net asset value per share | |||
Basic | 96.83p | 95.49p | 96.18p |
Diluted | 96.83p | 95.49p | 96.18p |
4. Management fees
The Company pays the Investment Manager an annual management fee of 2% of the Company's net assets. The fee is payable quarterly in arrears. The annual management fee is allocated 75% to capital and 25% to revenue.
5. Financial information provided
The financial information for the period ended 31 August 2016 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 2016
6. Investment portfolio summary
Valuation | Cost | Gain | Valuation as a % of Net Assets | |
As at 31 August 2016 | £'000 | £'000 | £'000 | |
Qualifying Investment - Unquoted | ||||
Warm Hearth Limited | 2,500 | 2,500 | - | 8% |
Mini Rainbows Limited | 2,500 | 2,500 | - | 8% |
Welcome Health Limited | 2,500 | 2,500 | - | 8% |
Total Qualifying Investments | 7,500 | 7,500 | - | 24% |
Non-Qualifying Investments | ||||
Palmer Lending Limited | 1,011 | 1,011 | - | 3% |
Valencia Lending Limited | 1,350 | 1,350 | - | 5% |
Primrose Lending Limited | 2,000 | 2,000 | - | 7% |
Mayfield Lending Limited | 4,000 | 4,000 | - | 14% |
Lothian Lending Limited | 3,174 | 3,174 | - | 11% |
Lavender Lending Limited | 116 | 116 | - | 0% |
Latimer Lending Limited | 2,481 | 2,481 | - | 8% |
Meadow Lending Limited | 2,575 | 2,575 | - | 9% |
Tottenham Lending Limited | 800 | 800 | - | 3% |
Marble Lending Limited | 600 | 600 | - | 2% |
Sloane Lending Limited | 800 | 800 | - | 3% |
Total Non-Qualifying investments | 18,907 | 18,907 | - | 65% |
Liquidity Management | ||||
Commonwealth Bank of Australia bonds* (via Palmer Lending Limited) | 1,295 | 1,288 | 7 | 4% |
Royal Bank of Canada bonds* | 3,018 | 3,002 | 16 | 10% |
Total Liquidity Management Investments | 4,313 | 4,290 | 23 | 14% |
Total Investments | 30,720 | 30,697 | 23 | 103% |
Balance of Portfolio | (1,176) | (1,176) | - | -3% |
Net Assets | 29,544 | 29,521 | 23 | 100% |
* Quoted investment listed on the London Stock Exchange
Of the investments held at 31 August 2016, all are incorporated in England and Wales with the exception of the liquidity management holdings.
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