Unicorn Asset Management Regulatory News (UAV)

Unicorn AIM VCT plc ("the Company")

Interim Management Statement 

For the period from 1 October 2019 to 31 December 2019

Introduction

This voluntary Interim Management Statement (IMS) covers the three-month period ended 31 December 2019, together with relevant information up to the date of publication. 

Investment Objective

The Company's objective is to provide Shareholders with an attractive return from a diversified portfolio of investments, predominantly in the shares of AIM quoted companies, by maintaining a steady flow of dividend distributions to Shareholders from the income as well as capital gains generated by the portfolio.

It is also the objective that the Company should continue to qualify as a Venture Capital Trust ("VCT"), so that Shareholders benefit from the taxation advantages that this brings. To achieve this, at least 80% of the Company's total assets are to be invested in qualifying investments of which 70% by VCT value (30% in respect of investments made before 6 April 2018 from funds raised before 6 April 2011) must be in ordinary shares, which carry no preferential rights (save as permitted under VCT rules) to dividends or return of capital and no rights to redemption.

Performance

The portfolio performed well in the period under review, despite low levels of economic growth in the UK and a distinctly unstable political environment, which combined to present significant challenges to the growth potential of the investee companies in the portfolio until the election result was known.

Notwithstanding these headwinds, the Company has continued to develop and grow. As at 31 December 2019, total net assets were at an all-time high of over £225 million, while the unaudited net asset value of 173.6 pence per share at the calendar year end, represented an increase of 12.8% on the audited closing net asset value per share of 153.9 pence per share on 30 September 2019. By comparison, the FTSE AIM All-Share Index posted a total return of +10.2% in the final quarter of 2019, while the FTSE All-Share Index delivered +4.2% in total return terms over the same period.

The decisive outcome of the recent election result has reduced political uncertainty and helped restore investor confidence at the smaller end of UK equity markets. The prospects for AIM-listed businesses, which often depend on state-aided funding in the early years of their development, therefore appear to have improved. 

Having struggled in relative performance terms during 2019, the FTSE AIM All-Share Index now looks poised to attract greater attention from investors, as the UK enters the new decade with the potential for faster and more sustainable economic growth.

The portfolio remains predominantly composed of investments in businesses listed on the Alternative Investment Market (AIM). Many of these investee companies are relatively mature and, typically are also consistently profitable, cash generative and dividend paying.

It is important however, to remind shareholders and potential new investors in the Company, that new capital raised in future Offers for Subscription will, by regulatory necessity, be targeted at younger, less well-established businesses, which means that they are typically loss-making at the point of initial investment. Despite this rules-driven change in focus, the outlook for the Company remains positive.

The Investment Manager is confident that the portfolio has good, long term growth prospects. In addition, the somewhat more stable political environment is likely to bring further VCT qualifying investment opportunities and we have already seen increased deal flow since the start of 2020.

At the period end, an estimated 86.4% of total assets were invested in VCT qualifying companies.

Material Transactions

During the period under review, four follow-on VCT qualifying investments were made at a total cost of £1.7 million.

In aggregate, approximately £2.3 million was raised from the disposal of three holdings during the period. Unusually, in the period under review, two of the three holdings referred to were, in fact, acquired by trade buyers.

Top Ten Holdings as at 31 December 2019

Share Buy-Backs

During the period from 1 October 2019 to 31 December 2019, the Company bought back 572,375 of its own Ordinary Shares for cancellation, at an average price of 139.1 pence per share including costs. As at 31 December 2019, there were 130,087,696 Ordinary Shares in issue.

Dividends

The Board has recommended a final dividend of 3.5 pence per share for the financial year ended 30 September 2019. The proposed dividend is subject to Shareholder approval at the Company's Annual General Meeting, to be held on 30 January 2020. If approved, total dividends paid in respect of the financial year ended 30 September 2019, will amount to 6.5 pence per share (2018: 6.5 pence per share).

Material Events

There were no other material events during the period from 1 October 2019 to 31 December 2019

Subsequent Events

On 6 January 2020, the Directors announced that they intend to launch an offer for subscription to raise £15 million (with an over-allotment facility to raise up to a further £10 million) through the issue of new ordinary shares ("the Offer"). The prospectus, which will contain the full details and terms and conditions of the Offer, is expected to be available in February 2020.

Chris Hutchinson

Unicorn Asset Management

Investment Manager

28 January 2020