TPVE.L Regulatory News (TPVE)

17 November 2022

Triple Point Income VCT plc

(the "Company")

RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2022

The Directors of Triple Point Income VCT plc are pleased to announce the unaudited results for the six months ended 30 September 2022.

You may view the Interim Report in due course on the Triple Point website: www.triplepoint.co.uk. Please note that page numbers in this announcement are in reference to the Interim Report.

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

The Company's LEI is 213800IXD8S5WY88L245

Further information on the Company can be found on its website https://www.triplepoint.co.uk/current-vcts/triple-point-income-vct-plc/s1238/.

Financial Summary

Triple Point Income VCT plc ("the Company") is a Venture Capital Trust ("VCT"). The Investment Manager is Triple Point Investment Management LLP ("TPIM" or "Triple Point"). The Company was incorporated in November 2007 and currently has three classes of issued Ordinary Shares:

· C Ordinary Shares ("C Shares"): these are the shares issued in the Offer that closed on 27 May 2014. A total of £14 million was raised and 13,413,088 C Shares were issued.

· D Ordinary Shares ("D Shares"): these are the shares issued in the Offer that closed on 30 April 2015. A total of £14.3 million was raised and 13,604,637 D Shares were issued.

· E Ordinary Shares ("E Shares"): these are the shares issued in the Offer that closed on 15 May 2017. Just under £30 million was raised and 28,940,076 E Shares were issued.

Key Highlights

· C Shares Cumulative Dividends Paid1: 147.75p (Nil C share dividend was paid during the period).

· D Shares Cumulative Dividends Paid1: 116.75p (Nil D share dividend was paid during the period).

· E Shares Cumulative Dividends Paid1: 32.50p (Nil E share dividend was paid during the period).

· Total Return per C Share2: 155.36p

· Total Return per D Share2: 125.45p

· Total Return per E Share2: 114.03p

1 The following dividends have been paid to shareholders following the period end:

· 5.24p per share to C Class Shareholders paid on 21 October 2022;

· 6.02p per share to D Class Shareholders paid on 21 October 2022;

· 4.76p per share to E Class Shareholders paid on 21 October 2022; and

· 7.24p per share to E Class Shareholders paid on 4 November 2022.

2Total Return is made up by current Net Asset Value plus Dividends paid to date. Total Return is defined as an Alternative Performance Measure ("APM"). Total Return, calculated by reference to the cumulative dividends paid plus net asset value (excluding tax reliefs received by shareholders), is the primary measure of performance in the VCT industry and the Board considers Total Return to be the primary measure of shareholder value.

Chair's Statement

I am pleased to present the Interim Report for the Company for the period ended 30 September 2022.

We are very pleased to report that, shortly after the end of the reporting period, we successfully sold our investment in Green Peak Generation Limited ("Green Peak") for a total of £2,633,610, representing a 4.36% uplift in the E Share Class's total return from 31 March 2022 following renewed interest in these types of assets due to changes in the energy market landscape. Further information on the sale and next steps for the E share class can be found below and in the Investment Manager's Review. 

The Company's funds on 30 September 2022 were 80.61% invested in a portfolio of VCT qualifying and non-qualifying unquoted investments. It continues to meet the condition that 80% of relevant funds must be invested in qualifying investments.

The wind-up and cancellation of the C and D Share Classes has commenced and funds are expected to be returned to C and D Class shareholders before the end of 2022. The E Share Class has realised investments in Green Peak and in Furnace Managed Services Limited ("FMS"). Further information regarding these share classes is set out in this Chair's Statement and in the Investment Manager's Review below.

Regulation

The Company continued to satisfy all requirements relevant to its status as a Venture Capital Trust.  

C Share Class

The C Share Class recorded a loss over the period of 0.14 pence per share. At 30 September 2022 the net asset value stood at 7.61 pence per share and is represented solely by cash and debtors, as its investment portfolio has been realised. Adding back the total dividends paid to date of 147.75 pence per share takes the total return, including the net asset value, to 155.36 pence per share. A dividend of 5.24 pence per share was paid after the period end on 21 October 2022 to the C Class Shareholders.

As previously indicated by the Company, following the disposals of the Company's hydroelectric power assets it is the Company's intention to wind down and cancel the C Share Class. Shareholders approved the reduction of the Company's share capital through a cancellation of the C Share Class at the General and Class Meetings held on 4 October 2022. It is expected that the share class will be wound up and a final return of capital be made to C Share Class Shareholders in early December 2022. The value to be distributed will also be subject to associated wind-up fees and costs payable on distribution.

D Share Class

The D Share Class recorded a profit over the period of 0.03 pence per share. At 30 September 2022 the net asset value stood at 8.70 pence per share and is represented solely by cash and debtors, as its investment portfolio has been realised. Adding back the total dividends paid to date of 116.75 pence per share takes the total return, including the net asset value, to 125.45 pence per share. During the period, the Company transferred its interest in Green Highland Shenval Limited (Shenval), a hydroelectric power company, from the D Share Class to the E Share Class at its most recent audited value (31 March 2022) and adjusted for developments since that date. A dividend of 6.02 pence per share was paid after the period end on 21 October 2022 to the D Class Shareholders.

As previously indicated by the Company, following the disposals of the Company's hydroelectric power assets and the transfer of the final hydroelectric asset to the E Share Class, it is the Company's intention to wind down and cancel the D Share Class. Shareholders approved the reduction of the Company's share capital through a cancellation of the D Share Class at the General and Class Meetings held on 4 October 2022. It is expected that the share class will be wound up and a final return of capital be made to D Share Class Shareholders in early December 2022. The value to be distributed will also be subject to associated wind-up fees and costs payable on distribution.

E Share Class

The E Share Class holds a diverse portfolio of investments spanning controlled environment agriculture, solar, gas fired energy and hydroelectric power. The E Share Class held an investment in FMS which owned and operated a crematorium. The investment in FMS was fully divested during the period.  The E Share Class recorded a profit over the period of 4.76 pence per share. At 30 September 2022 the net asset value stood at 81.53 pence per share. Adding back the total dividends paid of 32.50 pence per share takes the total return, including the net asset value, to 114.03 pence per share. A dividend of 4.76 pence per share was paid after the period end on 21 October 2022 and an additional dividend of 7.24 pence per share was paid on 4 November 2022 to the E Class Shareholders following the sale of its gas fired energy holdings.

Following the period end on 10 October 2022, the Company completed the sale of its gas fired energy holdings by selling its investment in Green Peak for total consideration of £2,633,610, as part of a wider portfolio sale of gas fired energy generation companies and following a competitive bidding process.

As a result of that sale, the Board announced a dividend of 7.24 pence per share for E Shareholders to return the net proceeds of the sale of these assets and to ensure the Company's continuing qualifying status. As announced by the Company on 31 October 2022, the interim dividend of 12.0 pence per share to E Class Shareholders was corrected to 7.24 pence per share, following an administrative error in the calculation of the amount available for distribution, which did not account for the interim dividend of 4.76 pence per share paid to E Class Shareholders on 21 October 2022. We appreciate this will have caused some disappointment for E Class Shareholders and we and the Investment Manager would like to apologise for any inconvenience caused. The Investment Manager has implemented improved internal controls.

Also, as a result of the sale, the E Share NAV increased due to achieving a price significantly higher than the previous valuation on 31 March 2022. Since that date the operating performance of Green Peak has improved significantly and the energy market landscape moved in favour of gas fired energy assets, leading to significant improvements in actual and projected trading performance. 

The Company also sold its final residual interest in crematorium business FMS for total consideration of £25,001. This investment outperformed expectations at the point of its original investment as a result of contract extensions with the Local Authority.

The Company's investment in Perfectly Fresh Cheshire ("PFC") continues to progress slowly, but has nonetheless achieved some positive milestones. PFC maintains a strong trading relationship with a leading retailer, whilst also establishing new opportunities with further retail market leaders who desire to create a premium tier product offering in their stores. PFC has faced challenges during the year in its ability to capitalise on the demand seen for its product, due to very limited growing capacity and difficulties in securing a new facility, given the increase in material costs and operating expenses. However, PFC has continued to pursue its expansion plan and it is expected that the first funding round will be launched in Q4 2022.

The solar and hydroelectric power investments continue to perform in line with expectations.

Outlook

The macroeconomic environment for the UK and internationally looks increasingly challenging with the energy crisis and related cost of living/inflation pressures being met by central banks which are still raising interest rates. That interest rates are rising, even as economic headwinds blow harder, is a new development relative to the experience of the last few decades where, in the US and UK in particular, monetary policy tended to loosen quite early in economic downturns. Thus, we are not complacent about the portfolio.

Initial discussions, and levels of interest between PFC and potential investors are positive and customer engagement and interest in PFC's product continue to remain strong. However, given the current macroeconomic environment, and rising operating costs, it will be challenging for PFC to scale up and capitalise on increasing demand, and we will continue to monitor this.

The Company's solar and hydro investments are expected to be more resilient to the current macroeconomic climate, with contracted revenues and inflation-linked subsidies dominating the revenue stack. However, we remain cautious about the prospect of possible regulatory change including for example the possibility of an energy price cap or additional taxation on profits. We will continue to monitor these developments.

In respect of the C Share Class and the D Share Class, the next stage is for the Company to wind-up and ultimately for it to cancel these share classes, which is expected in early December 2022, with final distributions to be paid to enable the Company to maintain its VCT qualifying status.

If you have any questions or comments, please do not hesitate to contact Triple Point on 020 7201 8989.

David Frank

Chair

16 November 2022

Investment Manager's Review

Sector Analysis

The unquoted investment portfolio can be analysed as follows:

Investments by Sector - E Share Class

We are pleased to present our interim review of the six months ended 30 September 2022.

The VCT was established to fund small and medium-sized enterprises. As at 30 September 2022 it has three share classes. The overall portfolio comprises investments in 9 small, unquoted companies spanning sectors including hydroelectric power, solar, gas fired energy, SME funding and controlled environment agriculture.

At 30 September 2022 the Company continues to meet the condition that at least 80% of relevant funds must be invested in VCT qualifying investments within three years.

Review and Future Developments

The UK and global economy bounced back from Covid-19 only to be faced with a severely inflationary environment caused by the QE and fiscal expansion that governments undertook during Covid, by supply chain disruption and by the rising costs of energy as a result of the Russia-Ukraine war. This has resulted in a fall in global stock markets, a sharp rise in bond yields and economic weakness in the UK and EU. This has affected and will continue to affect valuations of businesses both in the public and private markets.

Only the E Share Class within the Company remains fully invested as both the C and D Share Classes are in the process of being wound down. The E Share Class contains investments across rooftop solar, gas fired energy, hydroelectric power, and controlled environment agriculture.

C and D Share Classes

The C and D Share Classes are represented solely by cash and are in the process of being wound down to enable the Company to return funds to these shareholders.

E Share Class

Crematorium Management

The Company held an investment in a business called FMS that provided crematory and mercury abatement services for the crematoria of a London Borough. This investment received revenues from local authorities and generated a steady return over the years it has been held. The Company sold its final residual interest in the business for total consideration of £25,001. This investment has outperformed expectations at the point of its original investment as a result of contract extensions with the Local Authority.

Hydroelectric Power

The remaining hydroelectric power asset, Shenval, performed in line with expectations and there were no material asset management concerns. Shenval recently appointed a new external asset manager to optimise the performance of the asset. The investment is protected in a high inflationary environment due to its revenues being linked to RPI.

Solar

The Company holds four separate portfolios of rooftop solar systems which are performing in line with expectations and there were no material asset management concerns. The companies each recently appointed an external asset manager to optimise the performance of the assets. The investments are protected in a high inflationary environment due to revenues being linked to RPI.

Controlled Environment Agriculture

The Company holds an investment in a controlled environment agriculture business called PFC, which trades under the brand name, Perfectly Fresh. Over the last 6 months, the business has continued to pursue its plan for product improvement and expansion of its growing facilities. 

Existing Site Performance

The existing product facility at Alderley Edge has continued to produce product successfully and perform slightly ahead of forecasted revenue. Perfectly Fresh has continued to ramp up production with the aim of reaching 0.5 tonnes per week by 31 December 2022. Over the last 6 months, since the re-fresh of the Alderley site, the business has been able to increase supply to its leading retail partner without any breaks in production.

A site for a second larger Perfectly Fresh facility had been identified.

Customer Relationships

Perfectly Fresh is in discussions with both its existing customer and other retailers to supply product from the planned second facility. Overall, the customer engagement and interest in Perfectly Fresh controlled environment agriculture salad is strong, and believed to be sufficient to support the funding and development of the second facility.

Restructure and Funding

As reported in our 2022 Annual Report, the Perfectly Fresh senior team has expanded and refined the strategy to help the company scale. This includes a restructure and rebranding exercise to broaden the customer base and enable the business to conduct a professional fund-raising round. The restructure is progressing, with a newly branded website and online presence launched in early November 2022.

Early discussions with potential investors have demonstrated interest, and Perfectly Fresh is expecting to launch an initial funding round in Q4 2022.

Challenges

The cost plan for the planned new facility has proved challenging, given the increase in material costs and operational expenses. Perfectly Fresh is looking to value engineer a solution and continues to explore other options, as its current growing capacity is limiting its ability to capitalise on the demand for its product.

The impact of the general macroeconomic environment in the UK on fund raising is unknown, but initial discussions and levels of interest have been positive.

Gas Fired Energy

Following an extensive process to improve the operating performance of the gas fired energy generation centre we entered into discussions for the disposal of this investment to an independent third party. We are pleased to announce that on 10 October 2022 following a competitive tender process we completed on the sale of the Company's investment in Green Peak for total consideration of £2,633,610. This was part of a wider portfolio sale of gas-fired energy generation companies to a third party, independent of the Investment Manager.

The carrying value was last updated at the year-end which was a time when there was significant uncertainty over the valuation of the assets. In addition to the uncertainty around secondary market valuation for this type of asset, the centre had experienced some downtime and issues in relation to water ingress. Since then, the asset was fully repaired and operated well. Following the Russia-Ukraine war and ensuing energy market volatility, the market has also moved in favour of generating assets, leading to significant improvements in trading performance and increased interest from prospective secondary market acquirors. As a result we have been able to secure prices for these investments which we believe to be attractive and which led to securing an uplift in valuations for E Shareholders.

Outlook

As stated in the Chair's letter, in respect of the C and D Share Classes, the next stage is for the Company to wind up and ultimately for it to cancel these share classes, which is expected to take place in early December 2022, following which final distributions will be made to investors.

The Company's solar and hydroelectric investments are expected to perform well in the current macroeconomic climate, with contracted revenues and inflation-linked subsidies dominating the revenue stack. However, we remain cautious about the prospect of possible regulatory or tax changes and will continue to monitor these developments.

If you have any questions, please do not hesitate to call us on 020 7201 8989.

Jonathan Parr

Partner, Head of Energy

Triple Point Investment Management LLP

16 November 2022

Investment Portfolio Summary

Principal Risks and Uncertainties

The Audit Committee, which assists the Board with its responsibilities for managing risk, considers that the principal risks and uncertainties as presented on pages 22 to 24 of our 2022 Annual Report were unchanged during the period and will remain unchanged for the remaining six months of the financial year.

The following additional emerging risk has been identified, and is detailed below:

Emerging Risks

Macroeconomic Environment

The macroeconomic environment for the UK and internationally looks increasingly challenging with the energy crisis and related cost of living/inflation pressures being met by central banks which are still raising interest rates. That interest rates are rising even as economic headwinds blow harder is a new development relative to the experience of the last few decades where, in the US and UK in particular, monetary policy tended to loosen quite early in economic downturns. This time we appear to be faced by economic weakness and still rising interest rates which could lead to either a deep or a prolonged recession despite UK fiscal policies aimed at countering such a threat. Until inflation rates clearly peak and fall, the economic outlook is likely to remain difficult. Thus, we are not complacent about the portfolio.

Directors' Responsibility Statement

The Directors have elected to prepare the Interim Financial Report for the Company in accordance with International Financial Reporting Standards ("IFRS").

In preparing the Interim Financial Report for the six month period to 30 September 2022, the Directors confirm that, to the best of their knowledge, this condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union and that the Chair's statement on pages 8 to 12 includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8 of the Disclosure and Transparency rules of the United Kingdom's Financial Conduct Authority namely:

a) the Interim Financial Report includes a fair review of important events during the period and their effect on the Financial Statements and a description of specific risks and uncertainties for the remainder of the accounting period;

b) the Interim Financial Report gives a true and fair view in accordance with IFRS of the assets, liabilities, financial position and of the results of the Company for the period and complies with IFRS and the Companies Act 2006; 

c) the Interim Financial Report includes a fair review of related party transactions and changes therein. There were no related party transactions for the accounting period; and

d) the Directors believe that the Company has sufficient financial resources to manage its business risks in the current uncertain economic outlook.

The Directors have reasonable expectations that the Company has adequate resources to continue in operational existence for at least the next 12 months. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

This Interim Financial Report has not been audited or reviewed by the Company's auditor.

David Frank

Chair

16 November 2022

Unaudited Statement of Comprehensive Income

The Total column of this statement is the Statement of Comprehensive Income of the Company prepared in accordance with International Financial Reporting Standards (IFRS). The supplementary Revenue Return and Capital columns have been prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. This Statement of Comprehensive Income includes all recognised gains and losses.

The accompanying notes are an integral part of this statement.

Unaudited Balance Sheet

The Statements were approved by the Directors and authorised for issue on 16 November 2022 and are signed on their behalf by:

David Frank

Chair

16 November 2022

The accompanying notes are an integral part of this statement.

Unaudited Statement of Changes in Shareholders' Equity

The capital reserve represents the proportion of Investment Management fees charged against capital and realised/unrealised gains or losses on the disposal/revaluation of investments. The unrealised capital reserve, share redemption reserve and share premium reserve are not distributable. The special distributable reserve was created on court cancellation of the share premium account. The revenue, special distributable and realised capital reserves are distributable by way of dividend.

At 30 September the total reserves available for distribution were £19,620,000. This consisted of the distributable revenue reserve, net of the realised capital loss, plus the special distributable reserve.

Unaudited Statement of Cash Flows

The accompanying notes are an integral part of this statement.

Unaudited Non-Statutory Analysis - The C Share Fund