2 Nov 2015 09:09
This announcement replaces the announcement 9878D made on 30 October 2015 at 08.45am. The corrections are to the ordinary share fund table in the Investment Manager's Report and to notes 7 and 8. The corrected information is included in the announcement below.
Ventus 2 VCT plc
Half-yearly Financial Report
for the six month period ended 31 August 2015
Registered No: 05667210
Chairman's Statement
I am pleased to present the financial report of Ventus 2 VCT plc (the "Company") for the six month period ended 31 August 2015.
The Investment Manager, Temporis Capital LLP, has continued its successful management of the portfolio with a focus on delivering predictable dividends to shareholders.
During the period, construction was completed of the wind farm owned by Bernard Matthews Green Energy Halesworth Limited, a company in which all three share funds of the Company hold an equity investment. The wind farm operates five Senvion MM82 turbines and has a generating capacity of 10.25 megawatts.
The hydroelectric schemes on the Glenfalloch Estate owned by Darroch Power Limited and Upper Falloch Power Limited are in the late stages of construction. It is expected they will be operational by the end of the year. All three share funds hold equity investments in these companies and have provided mezzanine loans.
Investment policy
To achieve its objectives, the Company's strategy has been to focus on investing in companies developing or operating renewable energy projects with installed capacities of 2 to 20 megawatts. The opportunity for VCTs to make further investments in renewable energy projects is limited given new investments in companies benefiting from Renewable Obligation Certificates or Feed-in Tariffs will be excluded from the VCT scheme. The Company is focused on optimising the value of the investments it holds.
In accordance with the strategic objectives set by the Board, the Investment Manager has continued to focus the Company's activities on wind and hydroelectric investments generating stable long-term income with the objective of providing predictable dividends to shareholders. In order to improve stability of cash returns from investee companies and enhance the predictability of dividends to shareholders of the Company, more recent investments are, on average, structured with lighter leverage than earlier investments. Further information can be found in the Investment Manager's Report below.
The Investment Manager's Report provides a detailed analysis of the portfolio held by each of the ordinary, "C" and "D" share funds including a schedule which sets out the stage of investment and the renewable energy technology type of the assets held by each investee company.
Dividend policy
As disclosed in the annual report and financial statements for the year ended 28 February 2015, the Directors anticipate a realistic target range in the medium term beyond 28 February 2015 of 4p to 6p per ordinary share per annum and 6p to 8p per "C" share per annum. The Company intends to pay a minimum of 5p per "D" share per annum starting in the year ending 29 February 2016 with a target dividend 6p to 8p per "D" share from the year ending 28 February 2019 onwards. It should be stressed that these are intentions only, and no forecasts are intended or should be inferred.
The charts below show historical annual dividends for ordinary and "C" shares, as well as target dividends for the next five years.
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Dividend targets are intentions only. Valuation models are based on assumptions that are subject to change. No forecasts are intended or inferred.
The interim dividends for the current financial year are set out in the section below.
Net Asset Value, Results and Dividend - Ordinary Shares
At 31 August 2015, the net asset value ("NAV") of the ordinary share fund of the Company attributable to equity shareholders stood at £19,302,000 or 79.1p per ordinary share.
The revenue profit attributable to ordinary shareholders for the six month period ended 31 August 2015 was £583,000 or 2.40p per ordinary share. The capital gain attributable to ordinary shareholders for the period was £751,000 or 3.07p per ordinary share, resulting in a net gain to ordinary shareholders for the period of £1,334,000 or 5.47p per ordinary share.
The value of investments held by the Company's ordinary share fund at 31 August 2015 was £17,763,000 compared to £16,975,000 at 28 February 2015. The Investment Manager's Report gives details of investments made and proceeds received during the period together with information about the valuation of all investee company holdings within the portfolio.
The Company has declared an interim dividend of 2.50p per ordinary share which will be paid on 13 January 2016 to all ordinary shareholders on the register as at the close of business on 11 December 2015.
Net Asset Value, Results and Dividend - "C" Shares
At the period end, the NAV per "C" share of the Company stood at £13,639,000 or 120.9p per "C" share.
The revenue profit attributable to "C" shareholders for the period was £361,000 or 3.20p per "C" share. The capital loss attributable to "C" shareholders for the period was £235,000 or 2.09p per "C" share, resulting in a net profit attributable to "C" shareholders for the six month period ended 31 August 2015 of £126,000 or 1.11p per "C" share.
The value of investments held at 31 August 2015 by the "C" share fund was £13,020,000 compared to £12,875,000 at 28 February 2015.
The Company has declared an interim dividend of 3.50p per "C" share which will be paid on 13 January 2016 to all "C" shareholders on the register as at the close of business on11 December 2015.
Net Asset Value, Results and Dividend - "D" Shares
At the period end, the NAV per "D" share of the Company stood at £2,129,000 or 106.9p per "D" share.
The revenue profit attributable to "D" shareholders for the period was £66,000 or 3.34p per "D" share. The capital gain attributable to "D" shareholders for the period was £188,000 or 9.41p per "D" share, resulting in a net gain attributable to "D" shareholders for the six month period ended 31 August 2015 of £254,000 or 12.75p per "D" share.
The value of investments held at 31 August 2015 in the "D" share fund was £1,933,000 compared to £712,000 at 28 February 2015.
The Company has declared an interim dividend of 2.00p per "D" share which will be paid on13 January 2016 to all "D" shareholders on the register as at the close of business on 11 December 2015.
VCT Qualifying Status
The Company retains Robertson Hare LLP to review its compliance with VCT regulations. The Directors are satisfied that the Company has continued to fulfil the conditions for maintaining VCT status.
Key Performance Indicators
The Directors consider the following key performance indicators, which are typical for VCTs, to best measure the Company's performance and to provide shareholders with a summary of how the business' objectives are pursued:
For the six months ended 31 August 2015 (unaudited) | Ordinary Shares | "C" Shares | "D" Shares | Total | |||
£000 | Pence per share 1 | £000 | Pence per share 1 | £000 | Pence per share 1 | £000 | |
Revenue profit attributable to equity shareholders | 583 | 2.40 | 361 | 3.20 | 66 | 3.34 | 1,010 |
Capital gain/ (loss) attributable to equity shareholders | 751 | 3.07 | (235) | (2.09) | 188 | 9.41 | 704 |
Net gain attributable to equity shareholders | 1,334 | 5.47 | 126 | 1.11 | 254 | 12.75 | 1,714 |
Dividends paid during the year | (512) | (2.10) | (395) | (3.50) | - | - | (907) |
Total movement in equity shareholders' funds | 822 | 3.37 | (269) | (2.39) | 254 | 12.75 | 807 |
On-going ratio 2 | 3.37% | 3.22% | 2.96% | 3.29% | |||
Ordinary Shares | "C" Shares | "D" Shares | Total | ||||
£000 | Pence per share | £000 | Pence per share | £000 | Pence per share | £000 | |
As at 31 August 2015 (unaudited) | |||||||
Net asset value 3 | 19,302 | 79.1 | 13,639 | 120.9 | 2,129 | 106.9 | 35,070 |
Total shareholder return 4 | 24,122 | 103.4 | 15,505 | 137.4 | 2,129 | 106.9 | 41,756 |
1 The "per share" value is determined in respect of the weighted average number of shares in issue during the period, except in respect of the dividends paid in the period, which is determined on the basis of the number of shares eligible to receive dividends at the time the dividends were paid.
2 The on-going charges ratio represents the Company's total operating expenditure during the period (excluding investment costs) as a percentage of the average NAV of the Company during the six month period.
The total annual running costs cap is set out in Note 3 to the financial statements.
3 The "per share" value is determined in respect of the number of shares in issue at the period end, except in respect of the total shareholder return which includes dividends paid and is determined on the basis of the number of shares eligible to receive dividends at the time the dividends were paid.
4 The total shareholder return represents the NAV at period end plus the cumulative dividends paid since incorporation.
Key Information as at 31 August 2015 (unaudited) | |||
Ordinary | C | D | |
Shares | Shares | Shares | |
Net asset value as at 31 August 2015 | £19.3m | £13.6m | £2.1m |
Net asset value per share as at 31 August 2015 | 79.1p | 120.9p | 106.9p |
Mid-market share price as at market close on 30 September 2015 | 66.0p | 99.5p | 100.0p |
Cumulative dividends per share paid to date | 24.30p | 16.50p | - |
Total Return per share (NAV plus cumulative dividends paid) | 103.4p | 137.4p | 106.9p |
Target dividend per share for year ending 29 February 2016: | |||
Tax-free dividend * | 5.25p | 8.0p | 5.0p |
Equivalent pre-tax dividend to Higher Rate taxpayer ** | 7.8p | 11.9p | 7.4p |
Equivalent pre-tax dividend to Additional Rate taxpayer ** | 8.5p | 12.9p | 8.1p |
Target dividend yield for year ending 29 February 2016 based on | |||
mid-market share price as at market close on 30 September 2015: | |||
After tax | 8.0% | 8.0% | 5.0% |
Equivalent pre-tax dividend to Higher Rate taxpayer | 11.8% | 11.9% | 7.4% |
Equivalent pre-tax dividend to Additional Rate taxpayer | 12.9% | 13.0% | 8.1% |
* Dividend targets are intentions only. No forecasts are intended or should be inferred. For | |||
eligible VCT investors (i.e., UK Residents aged over 18 years), there is no liability to tax on | |||
dividends and no Capital Gains Tax on realised gains. An investment limit of £200,000 per | |||
person per tax year applies. | |||
** Equivalent pre-tax yields are computed assuming a shareholder receives dividends from | |||
other sources in excess of the £5,000 per year tax-free dividend allowance (which will become | |||
effective from April 2016). From April 2016, Higher rate taxpayers will pay tax on dividends in | |||
excess of the £5,000 tax-free allowance at the rate of 32.5% and Additional Rate taxpayers | |||
(taxable income in excess of £150,000) will pay tax on dividends in excess of the £5,000 tax-free | |||
allowance at the rate of 38.1%. | |||
The performance of the Company is reviewed in the Investment Manager's Report, including the Company's compliance with HM Revenue & Customs ("HMRC") VCT regulations.
Alan Moore
Chairman
29 October 2015
Principal Risks and Uncertainties
Under the Financial Conduct Authority's Disclosure and Transparency Rules, the Directors are required to identify those material risks to which the Company is exposed and take appropriate steps to mitigate those risks. Other than the inherent risks associated with investment activities, which are discussed in the Investment Manager's Report, the risks described below are those which the Directors consider to be material. The Directors do not expect that the risks and uncertainties presented will change significantly over the current financial year.
· Failure to meet and maintain the investment requirements for compliance with HMRC VCT regulations may result in the Company losing its status as a VCT.
The Board mitigates this risk by regularly reviewing investment management activity and each new investment with appropriately qualified advisers and, typically, by obtaining pre-approval from HMRC for each qualifying investment.
· Inadequate control environment at service providers may lead to inaccurate reporting or misappropriation of assets
This risk is mitigated by only appointing service providers of a high standing under agreements that set out their responsibilities and by obtaining assurances from them that all exceptions have been reported to the Board. In addition, the Board has appointed an independent external party, Roffe Swayne, to report directly to the Board in respect of the Company's internal controls undertaken by the Investment Manager on behalf of the Company.
· Non-compliance with the Listing Rules of the Financial Conduct Authority, Companies Act Legislation and other applicable regulations may result in termination of the Company's Stock Exchange listing or other sanctions
This risk is mitigated by employing external advisers fully conversant with applicable statutory and regulatory requirements who report regularly to the Board on the Company's compliance.
· Reliance on the UK Government's continued support for the renewable energy sector and the risk of adverse changes in the application of government policies particularly in respect of the renewable energy sector and tax legislation.
The future level of Government-mandated support for renewables has important implications for the industry and could impact the value of investments the Company has made in companies which own and operate renewable projects. However, the Directors believe that any future reductions in renewable energy tariffs should not impact any existing investments in companies operating renewable energy assets, as the UK Government has a consistent history of grandfathering financial support mechanisms for existing projects and has a long term commitment to the renewable energy sector.
Going Concern
The Directors have concluded that it is appropriate to continue to adopt the going concern basis in preparing the accounts. The Company's major cash flows are within the Company's control (namely investments and dividends) or are reasonably predictable (namely the operating expenses). The Company is able to forecast cash inflows comprising proceeds from investments to a reasonable degree. Having reviewed a cash flow forecast for the next 18 months, the Board has a reasonable expectation that the Company is able to continue in operational existence for a period of at least 12 months from the date of this report.
Under changes to the UK Corporate Governance code, the Board is required to include a 'longer term' viability statement in the next annual report. This will detail the Board's reasonable expectation as to the Company's viability based on a robust assessment of its current position in respect to its principal risks. This will also state whether the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, which is expected to be a period significantly longer than 12 months. This viability statement will be included in the annual report for the year ending 29 February 2016.
Responsibility Statement
The Directors acknowledge responsibility for the interim results and approve this half-yearly report. The Directors confirm that to the best of their knowledge:
(a) the condensed financial statements have been prepared in accordance with International Accounting Standard 34 ("IAS 34") Interim Financial Reporting and give a true and fair view of the assets, liabilities, financial position and the profit or loss of the Company as required by Disclosure and Transparency Rule ("DTR") 4.2.4R;
(b) the interim management report, included within the Chairman's Statement and Investment Manager's Report, includes a fair review of the information required by DTR 4.2.7R, being the important events of the first half of the year and the principal risks and uncertainties for the remaining six months of the year as set out above; and
(c) the condensed financial statements include a fair review of related party transactions and changes thereto, as required by DTR 4.2.8R.
The Responsibility Statement has been approved by the Board.
Paul Thomas
Director
29 October 2015
Investment Manager's Report
In line with the strategic objectives set by the Board, the Investment Manager has continued to focus the Company's activities on renewable energy investments generating stable long-term income with the objective of providing predictable dividends to shareholders.
The three share funds of the Company are now fully invested in companies that own wind, hydro and landfill gas projects. All development investments have either been developed out, sold or written off. During the period, the Company's investments in Blawearie Wind Limited, BEL Holdco Limited and BEL Acquisition Limited, which in the aggregate were immaterial, were written down to nil or nominal values.
Under the current VCT regulations, new investments in renewable energy companies that benefit from Renewable Obligation Certificates ("ROCs") or Feed-in Tariffs are excluded as qualifying investments for VCTs. As such, the Company is limited in its ability to make further investments in accordance with the Investment Policy and has no plans to make further investments. The VCT restrictions do not affect any of the Company's existing investments.
The ordinary share fund of the Company has investments in companies operating eight UK wind farms with an aggregate installed capacity of 69.35 megawatts. Five of these investee companies are also owned in part by the "C" share fund and one such company is also owned in part by the "D" share fund. The ordinary share fund also has investments in three companies with hydroelectric projects with combined capacity of 4.79 megawatts. Two of those companies (Darroch Power Limited and Upper Falloch Power Limited), whose projects are still under construction, are also owned in part by the "C" share and "D" share funds. Finally, the ordinary share fund has an investment in a company operating a landfill gas project with a capacity of 2.3 megawatts.
The "C" share fund has investments in companies operating seven UK wind farms with an aggregate installed capacity of 75.15 megawatts. Five of these seven companies are also owned in part by the ordinary share fund and one is also owned in part by the "D" share fund. The "C" share fund has also invested jointly with the ordinary and "D" shares in Darroch Power Limited and Upper Falloch Power Limited (2.8 megawatts combined).
The "D" share fund currently has one operational investment, Bernard Matthews Green Energy Halesworth Limited, which operates a 10.25 megawatt wind farm and which is also owed in part by the ordinary and "C" share funds. The "D" share fund has also invested jointly with the ordinary and "C" shares in Darroch Power Limited and Upper Falloch Power Limited (2.8 megawatts combined).
The following table shows key information about the renewable energy projects owned by the Company's investee companies:
Output as % of | Investment held by | ||||||
Capacity | Operational | budget | Ordinary Share | "C" Share | "D" Share | ||
MW | since | Location | six months ended 31 Aug 15 | Fund | Fund | Fund | |
Operational Wind | |||||||
Achairn Energy Limited | 6.00 | May 2009 | Caithness, Scotland | 72% | ü | ||
A7 Lochhead Limited | 6.00 | Jun 2009 | Lanarkshire, Scotland | 117% | ü | ||
Greenfield Wind Farm Limited
| 12.30 | Mar 2011 | Lanarkshire, Scotland | 99% | ü | ü | |
Biggleswade Wind Farm Limited | 20.00 | Dec 2013 | Bedfordshire | 105% | ü | ü | |
Eye Wind Power Limited | 6.80 | Apr 2014 | Suffolk | 89% | ü | ||
Bernard Matthews Green Energy Pickenham Limited/North Pickenham Energy Limited
| 4.00 | Apr 2014 | Norfolk | 98% | ü | ü | |
Bernard Matthews Green Energy Weston Limited/Weston Airfield Investments Ltd
| 4.00 | Apr 2014 | Norfolk | 95% | ü | ü | |
AD Wind Farmers Limited (Allt Dearg Windfarmers LLP)
| 10.20 | Dec 2012 | Argyll and Bute, Scotland | 109% | ü | ||
White Mill Windfarm Limited
| 14.40 | Aug 2012 | Cambridgeshire | 108% | ü | ||
Bernard Matthews Green Energy Halesworth Limited | 10.25 | Aug 2015 | Suffolk | N/A | ü | ü | ü |
Operational Hydro | |||||||
Osspower Limited (Allt Fionn) | 1.99 | Jul 2012 | Near Loch Lomond, Scotland | 154% | ü | ||
Operational Landfill Gas | |||||||
Renewable Power Systems (Dargan Road) Limited | 2.30 | Aug 2009 | Belfast, Northern Ireland | * | ü | ||
Hydro under Construction | |||||||
Darroch Power Limited (Derrydarroch) | 1.90 | N/A | Near Loch Lomond, Scotland | N/A | ü | ü | ü |
Upper Falloch Power Limited | 0.90 | N/A | Near Loch Lomond, Scotland | N/A | ü | ü | ü |
* The revenues earned by Renewable Power Systems (Dargan Road) Limited consist primarily of generator availability payments and are not dependent on electricity output.
Performance of investee companies during the period was generally satisfactory. One of the three turbines at the Achairn wind farm was out of operation for most of the period because of a damaged blade, however revenues were fully protected under warranty claims. In the six months ended 31 August 2015, the Bernard Matthews Green Energy Halesworth wind farm became operational. The Derrydarroch and Upper Falloch hydro projects were under construction during the period and are scheduled to be completed in November 2015.
The investment manager is working actively to increase the value of the Company's portfolio through improvements in the operations of underlying assets and, when possible, the optimisation of the financial structure of investee companies.
Ordinary share portfolio
A summary of the ordinary share fund's unaudited investment valuations as at 31 August 2015 and gains and losses during the six month period ended 31 August 2015 is given below.
Voting rights | Investment value | Investment cost | Investment value | Investment cost | ||||||||
Shares | Loans | Total | Shares | Loans | Total | Gain/ (loss) | Total | Total | ||||
as at | as at | as at | as at | as at | as at | as at | six months to | as at | as at | |||
31 August | 31 August | 31 August | 31 August | 31 August | 31 August | 31 August | 31 August | 28 February | 28 February | |||
2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | |||
% | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||
Operational wind | ||||||||||||
Achairn Energy Limited | * | Q | 40.40% | 2,840 | 1,363 | 4,203 | 1,226 | 1,289 | 2,515 | 168 | 4,035 | 2,515 |
A7 Lochhead Limited | * | Q | 20.00% | 653 | - | 653 | 568 | - | 568 | (83) | 736 | 568 |
Greenfield Wind Farm Limited | * | PQ | 16.65% | 1,459 | 1,344 | 2,803 | 665 | 1,222 | 1,887 | 49 | 2,784 | 1,917 |
Biggleswade Wind Farm Limited | * | Q | 3.50% | 263 | 291 | 554 | 86 | 264 | 350 | (40) | 594 | 350 |
Eye Wind Power Limited | ** | Q | 35.38% | 2,131 | - | 2,131 | 1,480 | - | 1,480 | 246 | 1,885 | 1,480 |
Bernard Matthews Green Energy Weston Limited | * | Q | 50.00% | 844 | - | 844 | 500 | - | 500 | (127) | 971 | 500 |
Bernard Matthews Green Energy Pickenham Limited | * | Q | 50.00% | 730 | - | 730 | 500 | - | 500 | 36 | 694 | 500 |
Bernard Matthews Green Energy Halesworth Limited | ** | Q | 10.09% | 689 | - | 689 | 351 | - | 351 | 153 | 536 | 351 |
Operational companies in the wind sector | ||||||||||||
Firefly Energy Limited | * | Q | 50.00% | - | 43 | 43 | 200 | 64 | 264 | - | 83 | 304 |
Operational landfill gas | ||||||||||||
Renewable Power Systems (Dargan Road) Limited | Q | 50.00% | 634 | 1,115 | 1,749 | 780 | 1,008 | 1,788 | (15) | 1,820 | 1,844 | |
Operational small hydro | ||||||||||||
Osspower Limited | 50.00% | 3,074 | - | 3,074 | 300 | - | 300 | 439 | 2,635 | 300 | ||
Small hydro under construction | ||||||||||||
Darroch Power Limited | * | Q | 11.46% | 143 | 46 | 189 | 20 | 46 | 66 | - | 125 | 2 |
Upper Falloch Power Limited | * | Q | 10.97% | 69 | 31 | 100 | 8 | 31 | 39 | - | 63 | 2 |
Development and pre-planning | ||||||||||||
BEL Holdco Limited | * | 1.91% | - | - | - | 200 | - | 200 | (2) | 2 | 200 | |
BEL Acquisition Limited | * | 1.91% | 1 | - | 1 | 10 | - | 10 | (9) | 10 | 10 | |
Realised investments | ||||||||||||
Ben Glas Power Limited | * | 00.00% | - | - | - | - | - | - | 2 | 2 | ||
Sandsfield Heat & Power Limited | 44.90% | - | - | - | 1,796 | 1,000 | 2,796 | - | - | 2,796 | ||
The Small Hydro Company Limited | 22.50% | - | - | - | 115 | - | 115 | - | - | 115 | ||
Redeven Energy Limited | * | 50.00% | - | - | - | - | 130 | 130 | - | - | 130 | |
Total | 13,530 | 4,233 | 17,763 | 8,805 | 5,054 | 13,859 | 815 | 16,975 | 13,886 | |||
BEL Holdco Limited was written down to a nil value in the prior year. However, liquidation proceeds of £3,000 were received during the six month period ended 31 August 2015 which have been treated as a realised gain.
Ben Glas Power Limited was sold during the six month period ended 31 August 2015 or a consideration of £87,000. This has been recognised as a realised gain in the income statement.
"C" share portfolio
A summary of the "C" share fund's unaudited investment valuations as at 31 August 2015 and gains and losses during the six month period ended 31 August 2015 is given below.
Voting rights | Investment value | Investment cost | Investment value | Investment cost | ||||||||
Shares | Loans | Total | Shares | Loans | Total | Gain/ (loss) | Total | Total | ||||
as at | as at | as at | as at | as at | as at | as at | six months to | as at | as at | |||
31 August | 31 August | 31 August | 31 August | 31 August | 31 August | 31 August | 31 August | 28 February | 28 February | |||
2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | |||
% | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||
Operational wind | ||||||||||||
Greenfield Wind Farm Limited | * | PQ | 12.50% | 1,096 | 1,009 | 2,105 | 500 | 917 | 1,417 | 39 | 2,089 | 1,440 |
White Mill Windfarm Limited | * | PQ | 25.00% | 2,022 | 349 | 2,371 | 1,000 | 318 | 1,318 | (492) | 2,863 | 1,318 |
AD Wind Farmers Limited | * | Q | 50.00% | 1,147 | - | 1,147 | 1,000 | - | 1,000 | (68) | 1,215 | 1,000 |
Biggleswade Wind Farm Limited | * | Q | 21.50% | 1,617 | 1,786 | 3,403 | 527 | 1,623 | 2,150 | (250) | 3,653 | 2,150 |
Weston Airfield Investments Limited | * | Q | 50.00% | 1,910 | - | 1,910 | 1,000 | - | 1,000 | 366 | 1,544 | 1,000 |
North Pickenham Energy Limited | * | Q | 50.00% | 1,405 | - | 1,405 | 1,000 | - | 1,000 | 226 | 1,179 | 1,000 |
Bernard Matthews Green Energy Halesworth Limited | ** | Q | 5.64% | 386 | - | 386 | 300 | - | 300 | 86 | 300 | 300 |
Hydroelectric scheme under construction | ||||||||||||
Darroch Power Limited | * | Q | 4.22% | 53 | 133 | 186 | 53 | 133 | 186 | - | - | - |
Upper Falloch Power Limited | * | Q | 2.79% | 17 | 90 | 107 | 17 | 90 | 107 | - | - | - |
Development and pre-planning | ||||||||||||
Blawearie Wind Limited | * | 50.00% | - | - | - | 32 | - | 32 | (32) | 32 | 32 | |
Realised investments | ||||||||||||
Iceni Renewables Limited | * | 50.00% | - | - | - | 400 | 17 | 417 | - | - | 417 | |
Total | 9,653 | 3,367 | 13,020 | 5,829 | 3,098 | 8,927 | (125) | 12,875 | 8,657 | |||
"D" share portfolio
A summary of the "D" share fund's unaudited investment valuations as at 31 August 2015 and gains during the six month period ended 31 August 2015 is given below.
Voting rights |
Investment value
|
Investment cost
| Investment value | Investment cost | ||||||||
Shares | Loans | Total | Shares | Loans | Total | Gain/ (loss) | Total | Total | ||||
as at | as at | as at | as at | as at | as at | as at | six months to | as at | as at | |||
31 August | 31 August | 31 August | 31 August | 31 August | 31 August | 31 August | 31 August | 28 February | 28 February | |||
2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | 2015 | |||
% | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||
Operational wind | ||||||||||||
Bernard Matthews Green Energy Halesworth Limited | ** | Q | 13.38% | 915 | - | 915 | 712 | - | 712 | 203 | 712 | 712 |
Hydroelectric scheme under construction | ||||||||||||
Darroch Power Limited | * | Q | 25.50% | 319 | 325 | 644 | 319 | 325 | 644 | - | - | - |
Upper Falloch Power Limited | * | Q | 29.58% | 185 | 189 | 374 | 185 | 189 | 374 | - | - | - |
Total | 1,419 | 514 | 1,933 | 1,216 | 514 | 1,730 | 203 | 712 | 712 | |||
Q Investment complies with VCT regulations on qualifying holdings.
PQ Part of the investment complies with VCT regulations on qualifying holdings.
* A company in which Ventus VCT plc has also invested (or in which Ventus VCT plc had invested prior to the investment being realised).
** A company in which Temporis Capital Renewable Infrastructure EIS Fund and Ventus VCT plc have also invested
The Company, Ventus VCT plc and Temporis Capital Renewable Infrastructure EIS Fund are managed by
Temporis Capital LLP.
Valuation of Investments
It is the accounting policy of the Company to hold its investments at fair value. The Company's investments in investee companies which operate renewable energy assets are valued using a discounted cash flow methodology. The Company has changed its approach to the valuation methodology. Previously, the valuation analysis was performed using a discount factor applied to the leveraged cash flows of the investee companies. However, to determine the valuations as at 31 August 2015, the Company has applied a discount rate to the unleveraged cash flows to determine the enterprise value of the investee company and then has subtracted the market value of any senior debt (including any prepayment fees and swap break costs) to calculate the value of the equity and/or mezzanine debt in the investee company. In recent years an active market for the purchase of operational renewable energy assets has emerged; the revised valuation approach conforms with the methodology that has become prevalent in the market. It is, therefore, deemed a more appropriate method to value the Company's investments. The discount rates used to value the unleveraged cash flows of investee companies range from 7.5% to 10%, with discount rates applied to the cash flows of operating wind farms generally being in the range of 8.25% to 9%.
The key assumptions that have a significant impact on discounted cash flow valuations for these assets are the discount rate, the price at which the power and associated benefits can be sold, the amount of electricity the investee companies' generating assets are expected to produce and operating costs.
The fair value of the Company's investments in project companies which have not passed an initial satisfactory operational period are determined to be the price of investment subject to a periodic impairment review.
Sensitivity of Net Asset Value to Changes in Key Assumptions
The charts below illustrate the sensitivity of the NAV of the Company's share funds to changes of certain key input assumptions applied to the unleveraged cash flows in the valuation models.
The price at which the output from the generating assets is sold is a factor of both wholesale electricity prices and Government subsidies. The selling price is often fixed in the medium term under power purchase agreements. For periods outside the terms of these agreements the assumed future prices are estimated using external third party forecasts which take the form of specialist consultancy reports.
Specifically commissioned external consultant reports are used to estimate the expected generating output of the investee company's generating assets taking into account their type and location. The analysis set out below describes the sensitivity of each share fund's NAV to a higher (P75) or lower (P25) probability of exceedance of the forecast long term average output versus the base case (P50).
The discount factor and inflation rate applied to the cash flows are regularly reviewed by the Investment Committee of the Investment Manager to ensure they are set at the appropriate levels. The Investment Committee and the Board will also give consideration to the specific performance characteristics of the particular type of generating technology being used. The range of discount factors which form the base case in the sensitivity analysis is set out in the section above. The base case inflation rate used in the sensitivity analysis is 2.5%.
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Investment Policy
The Company has focused on investing in companies developing renewable energy projects with installed capacities of up to 20 megawatts. Investments are generally in companies which own and operate projects initiated by specialist small-scale developers and smaller projects which are not attractive to large development companies and utilities.
Asset Allocation
The Investment Manager seeks to allocate the Company's investments in equity securities and loan stock of companies owning renewable energy projects, primarily wind energy and hydroelectric. Up to 10% of net proceeds raised from share offers may be allocated to companies developing early stage renewable energy projects prior to planning permissions being obtained.
The Company together with Ventus VCT plc has an allocation agreement in place with the Investment Manager. The allocation agreement prescribes the allocation of investments between the two companies and their share funds in accordance with the ratio of available funds in each share fund, subject to adjustment in consideration of maintaining the VCT status of both companies, concentration risk, expected timing of realisations and projected dividend profiles.When there is a conflict or potential conflict of interest between the investment strategy of the Company and that of another fund managed by Temporis Capital LLP, the matter is referred to the Investment Manager's compliance officer who ensures any conflicts are dealt with fairly. Any investment made in a company in which another fund managed by the Investment Manager has invested or intends to invest will be approved by the Directors who are independent of the Investment Manager, unless the investment is made at the same time and on the same terms or in accordance with a specific pre-existing agreement between the Company and the Investment Manager.
The Company's policy is to maintain cash reserves of at least 5% of net proceeds raised from share offers for the purpose of meeting operating expenses and purchasing its shares in the market. Circumstances may arise which would require the Company to hold less than 5% of net proceeds in cash for a limited period of time.
In order to comply with VCT requirements, at least 70% by value of the Company's investments are required to be comprised of qualifying investments.
The Company typically owns 25% to 50% of the equity share capital of each investee company and a portion of its investment in each investee company may be in the form of loan stock.
The Company's uninvested funds are placed on deposit or invested in short-term fixed income securities until suitable investment opportunities are found.
Risk Diversification
The geographical focus of the Company's portfolio is the UK and the majority of investments made to date are in the wind sector. Funds are invested in a range of companies with small-scale projects so project risk is not concentrated in only a few schemes. The portfolio contains projects at different stages of the asset lifecycle, ranging from pre-planning to construction and then into operation. However, the portfolio is now mostly comprised of companies which own operating assets. Investments are made via subscriptions for new share capital, acquiring existing share capital or via loan stock instruments in order to secure a negotiated level of return from the project. The majority of investments are made in special purpose companies set up specifically to develop each project.
Gearing
The Company does not intend to borrow funds for investment purposes. However the Company is exposed to gearing through its investee companies which typically fund the construction costs of each project through senior debt which is non-recourse to the Company. The Investment Manager is involved in assisting investee companies in negotiating the terms of this finance to ensure competitive terms are achieved. The interest rate is typically fixed for the duration of the loan so that investee companies are not exposed to changes in market interest rates.
To the extent that borrowing should be required by the Company for any purpose, the Directors will restrict the borrowings of the Company. The aggregate principal amount at any time outstanding in respect of money borrowed by the Company will not, without the previous sanction of an ordinary resolution of the Company, exceed a sum equal to 10% of the adjusted share capital and reserves of the Company in accordance with its Articles.
Maximum Exposures
In order to gauge the maximum exposure of the Company to various risks, the following can be used as a guide:
i) Investments in qualifying holdings
Under VCT regulations, at least 70% of the Company's funds should be invested in qualifying holdings. When there is an issue of new shares, the 70% requirement does not apply to the new funds raised for any accounting periods which end earlier than three years from the date of allotment of the new shares.
For the purposes of the 70% qualifying holdings requirement, disposals of qualifying investments for cash may be disregarded for a period of six months. Where a VCT breaches any requirement due to factors outside of its control, it may apply to HMRC for a determination that the breach will be disregarded for a period of 90 days while the breach is remedied.
ii) Concentration limits
Under VCT regulations, no more than 15% of the Company's total assets should be in a single investee company at the time the investment is made in that investee company.
iii) Investments in pre-planning projects
In accordance with the Company's investment policy, a maximum of 10% of the net funds raised from share offers may be invested in companies developing pre-planning projects.
Temporis Capital LLP
Investment Manager
29 October 2015
Directors and Advisers
Directors
Alan Moore (Chairman)
Paul Thomas
Colin Wood
Company Secretary
The City Partnership (UK) Limited
Thistle House
21 Thistle Street
Edinburgh
EH2 1DF
Auditor
BDO LLP55 Baker Street
London
W1U 7EU
Principal Banker
Barclays Bank Plc
1 Churchill Place
London
E14 1DF
Investment Manager & Registered Office
Temporis Capital LLP
Berger House
36/38 Berkeley Square
London
W1J 5AE
Registrar
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Broker
Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
VCT Taxation Adviser
Robertson Hare LLP
Suite C, First Floor
4 - 6 Staple Inn
London
WC1V 7QH
Solicitors
Howard Kennedy LLP
No.1 London Bridge
London
SE1 9BG
Independent Review Report to Ventus 2 VCT plc
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six month period ended 31 August 2015 which comprises the Condensed Statement of Comprehensive Income, the Condensed Statement of Financial Position, the Condensed Statement of Changes in Equity, the Condensed Statement of Cash Flows and the related explanatory notes.
We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been approved by the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six month period ended 31 August 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
BDO LLP
Chartered Accountants
London, United Kingdom
29 October 2015
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Condensed Statement of Comprehensive Income
For the six month period ended 31 August 2015 (unaudited)
Ordinary Shares | "C" Shares | "D" Shares | Total | ||||||||||
Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | ||
Note | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
Realised loss on investments | 6 | - | 85 | 85 | - | - | - | - | - | - | - | 85 | 85 |
Net unrealised gain/ (loss) on investments | 6 | - | 820 | 820 | - | (125) | (125) | - | 203 | 203 | - | 898 | 898 |
Income | 780 | - | 780 | 471 | - | 471 | 83 | - | 83 | 1,334 | - | 1,334 | |
Investment management fees | 3 | (58) | (172) | (230) | (44) | (133) | (177) | (6) | (18) | (24) | (108) | (323) | (431) |
Other expenses | (121) | - | (121) | (43) | - | (43) | (8) | - | (8) | (172) | - | (172) | |
Profit/ (loss) before taxation | 601 | 733 | 1,334 | 384 | (258) | 126 | 69 | 185 | 254 | 1,054 | 660 | 1,714 | |
Taxation | 4 | (18) | 18 | - | (23) | 23 | - | (3) | 3 | - | (44) | 44 | - |
Profit/ (loss) and total comprehensive income attributable to equity shareholders | 583 | 751 | 1,334 | 361 | (235) | 126 | 66 | 188 | 254 | 1,010 | 704 | 1,714 | |
Return per share | |||||||||||||
Basic and diluted return per share (p) | 5 | 2.40 | 3.07 | 5.47 | 3.20 | (2.09) | 1.11 | 3.34 | 9.41 | 12.75 | |||
The Company has only one class of business and derives its income from investments made in the UK.
The total column of this statement represents the Company's Condensed Statement of Comprehensive Income, prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union. The revenue and capital columns shown above constitute supplementary information prepared under the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" 2009 ("SORP") published by the Association of Investment Companies.
The accompanying notes set out below form an integral part of these Financial Statements.
Condensed Statement of Comprehensive Income
For the six month period ended 31 August 2014 (unaudited)
Ordinary Shares | "C" Shares | "D" Shares | Total | ||||||||||
Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | ||
Note | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
Realised gains on investments | 6 | - | 95 | 95 | - | - | - | - | - | - | - | 95 | 95 |
Net unrealised gains on investments | 6 | - | 671 | 671 | - | 519 | 519 | - | - | - | - | 1,190 | 1,190 |
Income | 596 | - | 596 | 417 | - | 417 | - | - | - | 1,013 | - | 1,013 | |
Investment management fees | 3 | (55) | (166) | (221) | (41) | (123) | (164) | (5) | (14) | (19) | (101) | (303) | (404) |
Other expenses | (104) | (8) | (112) | (50) | - | (50) | (7) | - | (7) | (161) | (8) | (169) | |
Profit/ (loss) before taxation | 437 | 592 | 1,029 | 326 | 396 | 722 | (12) | (14) | (26) | 751 | 974 | 1,725 | |
Taxation | 4 | (13) | 13 | - | (26) | 26 | - | 3 | (3) | - | (36) | 36 | - |
Profit/ (loss) and total comprehensive income attributable to equity shareholders | 424 | 605 | 1,029 | 300 | 422 | 722 | (9) | (17) | (26) | 715 | 1,010 | 1,725 | |
Return per share | |||||||||||||
Basic and diluted return per share (p) | 5 | 1.74 | 2.48 | 4.22 | 2.65 | 3.73 | 6.38 | (0.60) | (1.14) | (1.74) | |||
The Company has only one class of business and derives its income from investments made in the UK.
The total column of this statement represents the Company's Condensed Statement of Comprehensive Income, prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as adopted by the European Union. The revenue and capital columns shown above constitute supplementary information prepared under the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" 2009 ("SORP") published by the Association of Investment Companies.
The accompanying notes set out below form an integral part of these Financial Statements.
Condensed Statement of Financial Position
as at 31 August 2015 (unaudited)
As at 31 August 2015 | As at 28 February 2015 | ||||||||||
(unaudited) | (audited) | ||||||||||
Ordinary Shares | "C" Shares | "D" Shares | Total | Ordinary Shares | "C" Shares | "D" Shares | Total | ||||
Note | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |||
Non-current assets | |||||||||||
Investments | 6 | 17,763 | 13,020 | 1,933 | 32,716 | 16,975 | 12,875 | 712 | 30,562 | ||
Trade and other receivables | - | - | - | - | 801 | - | - | 801 | |||
17,763 | 13,020 | 1,933 | 32,716 | 17,776 | 12,875 | 712 | 31,363 | ||||
Current assets | |||||||||||
Trade and other receivables | 7 | 1,287 | 224 | 83 | 1,594 | 348 | 263 | 1 | 612 | ||
Cash and cash equivalents | 417 | 421 | 120 | 958 | 458 | 833 | 1,173 | 2,464 | |||
1,704 | 645 | 203 | 2,552 | 806 | 1,096 | 1,174 | 3,076 | ||||
Total assets | 19,467 | 13,665 | 2,136 | 35,268 | 18,582 | 13,971 | 1,886 | 34,439 | |||
Current liabilities | |||||||||||
Trade and other payables | (165) | (26) | (7) | (198) | (102) | (63) | (11) | (176) | |||
Net current assets | 1,539 | 619 | 196 | 2,354 | 704 | 1,033 | 1,163 | 2,900 | |||
Net assets | 19,302 | 13,639 | 2,129 | 35,070 | 18,480 | 13,908 | 1,875 | 34,263 | |||
Equity attributable to equity holders | |||||||||||
Share capital | 6,097 | 2,832 | 498 | 9,427 | 6,097 | 2,832 | 498 | 9,427 | |||
Capital redemption reserve | 2,105 | - | - | 2,105 | 2,105 | - | - | 2,105 | |||
Share premium | - | - | 1,433 | 1,433 | - | - | 1,433 | 1,433 | |||
Special reserve | 13,472 | 7,725 | - | 21,197 | 13,472 | 7,725 | - | 21,197 | |||
Capital reserve - realised | (10,298) | (1,608) | (53) | (11,959) | (10,914) | (1,498) | (38) | (12,450) | |||
Capital reserve - unrealised | 7,796 | 4,574 | 203 | 12,573 | 7,661 | 4,699 | - | 12,360 | |||
Revenue reserve | 130 | 116 | 48 | 294 | 59 | 150 | (18) | 191 | |||
Total equity | 19,302 | 13,639 | 2,129 | 35,070 | 18,480 | 13,908 | 1,875 | 34,263 | |||
Basic and diluted net asset value per share (p) | 8 | 79.1 | 120.9 | 106.9 | 75.8 | 123.3 | 94.2 | ||||
Approved by the Board and authorised for issue on 29 October 2015.
Paul Thomas
Director
Ventus 2 VCT plc. Registered No: 05667210
The accompanying notes set out below form an integral part of these Financial Statements.
Condensed Statement of Changes in Equity
for the six month period ended 31 August 2015 (unaudited)
Share capital | Capital redemption reserve | Share premium | Special reserve | Capital reserve realised | Capital reserve unrealised | Revenue reserve | Total | |
Ordinary Shares | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 March 2015 | 6,097 | 2,105 | - | 13,472 | (10,914) | 7,661 | 59 | 18,480 |
Transfers of unrealised gains on investments to realised gains on investments | - | - | - | - | 685 | (685) | - | - |
Profit/ (loss) and total comprehensive income for the period | - | - | - | - | (69) | 820 | 583 | 1,334 |
Dividends paid in the period | - | - | - | - | - | - | (512) | (512) |
At 31 August 2015 | 6,097 | 2,105 | - | 13,472 | (10,298) | 7,796 | 130 | 19,302 |
"C" Shares | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 March 2015 | 2,832 | - | - | 7,725 | (1,498) | 4,699 | 150 | 13,908 |
Profit/ (loss) and total comprehensive income for the period | - | - | - | - | (110) | (125) | 361 | 126 |
Dividends paid in the period | - | - | - | - | - | - | (395) | (395) |
At 31 August 2015 | 2,832 | - | - | 7,725 | (1,608) | 4,574 | 116 | 13,639 |
"D" Shares | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 March 2015 | 498 | - | 1,433 | - | (38) | - | (18) | 1,875 |
Profit/ (loss) and total comprehensive income for the period | - | - | - | - | (15) | 203 | 66 | 254 |
At 31 August 2015 | 498 | - | 1,433 | - | (53) | 203 | 48 | 2,129 |
Total | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 March 2015 | 9,427 | 2,105 | 1,433 | 21,197 | (12,450) | 12,360 | 191 | 34,263 |
Transfers of unrealised gains on investments to realised gains on investments | - | - | - | - | 685 | (685) | - | - |
Profit and total comprehensive income for the period | - | - | - | - | (194) | 898 | 1,010 | 1,714 |
Dividends paid in the period | - | - | - | - | - | - | (907) | (907) |
At 31 August 2015 | 9,427 | 2,105 | 1,433 | 21,197 | (11,959) | 12,573 | 294 | 35,070 |
The revenue reserve and realised capital reserve are distributable reserves. The special reserves may be used to fund buy-backs and pay dividends if they are considered by the Board to be in the interests of the shareholders.
The accompanying notes set out below form an integral part of these Financial Statements.
Condensed Statement of Changes in Equity
for the six month period ended 31 August 2014 (unaudited)
Share capital | Capital redemption reserve | Share premium | Special reserve | Capital reserve realised | Capital reserve unrealised | Revenue reserve | Total | |
Ordinary Shares | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 March 2014 | 6,097 | 2,105 | - | 13,575 | (10,860) | 6,553 | 227 | 17,697 |
Transfers of unrealised losses on investments to realised losses on investments | - | - | - | - | 210 | (210) | - | - |
Profit/ (loss) and total comprehensive income for the period | - | - | - | - | (66) | 671 | 424 | 1,029 |
Dividends paid in the period | - | - | - | - | - | - | (427) | (427) |
At 31 August 2014 | 6,097 | 2,105 | - | 13,575 | (10,716) | 7,014 | 224 | 18,299 |
"C" Shares | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 March 2014 | 2,832 | - | - | 7,770 | (1,242) | 4,225 | 248 | 13,833 |
Shares repurchased in the year | - | - | - | (45) | - | - | - | (45) |
Profit/ (loss) and total comprehensive income for the period | - | - | - | - | (97) | 519 | 300 | 722 |
Dividends paid in the period | - | - | - | - | - | - | (283) | (283) |
At 31 August 2014 | 2,832 | - | - | 7,725 | (1,339) | 4,744 | 265 | 14,227 |
"D" Shares | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 March 2014 | - | - | - | - | - | - | - | - |
Shares issued in the period | 498 | - | 1,489 | - | - | - | - | 1,987 |
Issue costs | - | - | (51) | - | - | - | - | (51) |
Loss and total comprehensive income for the period | - | - | - | - | (17) | - | (9) | (26) |
At 31 August 2014 | 498 | - | 1,438 | - | (17) | - | (9) | 1,910 |
Total | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
At 1 March 2014 | 8,929 | 2,105 | - | 21,345 | (12,102) | 10,778 | 475 | 31,530 |
Shares issued in the period | 498 | - | 1,489 | - | - | - | - | 1,987 |
Issue costs | - | - | (51) | - | - | - | - | (51) |
Shares repurchased in the year | - | - | - | (45) | - | - | - | (45) |
Transfers of unrealised losses on investments to realised losses on investments | - | - | - | - | 210 | (210) | - | - |
Profit/ (loss) and total comprehensive income for the period | - | - | - | - | (180) | 1,190 | 715 | 1,725 |
Dividends paid in the period | - | - | - | - | - | - | (710) | (710) |
At 31 August 2014 | 9,427 | 2,105 | 1,438 | 21,300 | (12,072) | 11,758 | 480 | 34,436 |
The accompanying notes set out below form an integral part of these Financial Statements.
Condensed Statement of Cash Flows
for the six month period ended 31 August 2015 (unaudited)
Six months ended 31 August 2015 | Six months ended 31 August 2014 | |||||
(unaudited) | (unaudited) | |||||
Ordinary Shares | "C" Shares | "D" Shares | Total | Total | ||
£000 | £000 | £000 | £000 | £000 | ||
Cash flows from operating activities | ||||||
Investment income received | 652 | 510 | - | 1,162 | 1,020 | |
Investment management fees paid | (231) | (177) | (24) | (432) | (404) | |
Other cash payments | (65) | (79) | (11) | (155) | (450) | |
Net cash from/ (used in) operations | 356 | 254 | (35) | 575 | 166 | |
Taxes paid | - | - | - | - | - | |
Net cash inflow/ (outflow) from operating activities | 356 | 254 | (35) | 575 | 166 | |
Cash flows from investing activities | ||||||
Purchases of investments | (102) | (294) | (1,018) | (1,414) | (722) | |
Disposals of investments | 87 | - | - | 87 | 1 | |
Proceeds from investments | 130 | 23 | - | 153 | 1,230 | |
Net cash (outflow)/ inflow from investing activities | 115 | (271) | (1,018) | (1,174) | 509 | |
Cash flows from financing activities | ||||||
"D" shares issued | - | - | - | - | 1,987 | |
"D" share issue costs | - | - | - | - | (51) | |
Dividends paid | (512) | (395) | - | (907) | (710) | |
"C" share repurchase | - | - | - | - | (45) | |
Net cash (outflow)/ inflow from financing activities | (512) | (395) | - | (907) | 1,181 | |
Net (decrease)/ increase in cash and cash equivalents | (41) | (412) | (1,053) | (1,506) | 1,855 | |
Cash and cash equivalents at the beginning of the period | 458 | 833 | 1,173 | 2,464 | 1,081 | |
Cash and cash equivalents at the end of the period | 417 | 421 | 120 | 958 | 2,936 | |
The accompanying notes set out below form an integral part of these Financial Statements.
Explanatory Notes to the Condensed Financial Statements
for the six month period ended 31 August 2015 (unaudited)
1. Accounting convention and policies
The unaudited half-yearly results which cover the six month period ended 31 August 2015 have been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year ended 28 February 2015. The half-yearly financial statements have been prepared under IAS 34 Interim Financial Reporting.
The accounting policies are consistent with those of the previous financial year. The Directors do not expect the accounting policies to change over the current financial year.
2. Publication of non-statutory accounts
The financial information for the year ended 28 February 2015 does not constitute the Company's statutory accounts for that period but has been derived from them. The financial information for the six month periods ended 31 August 2015 and 31 August 2014 has not been audited but have been reviewed by the auditor.
Statutory accounts in respect of the year ended 28 February 2015 have been audited and reported on by the auditor and delivered to the Registrar of Companies and included the Report of the Auditor which was unqualified, did not draw attention to any matter by way of emphasis and did not contain a statement under S498(2) or S498(3) of the Companies Act 2006.
3. Investment management fees
The Company pays the Investment Manager an annual management fee equal to 2.5% of the Company's net assets. The fee is not subject to VAT and is payable quarterly in advance. The annual management fee is allocated 75% to capital and 25% to revenue. Total annual running costs are in aggregate capped at 3.6% of NAV (excluding the Investment Manager's performance fee, any irrecoverable VAT and investment costs), with any excess being borne by the Investment Manager.
The amount paid to the Investment Manager for the six month period ended 31 August 2015 in respect of net asset value attributable to ordinary shareholders was £230,000 (six month period ended 31 August 2014: £221,000). The amount paid to the Investment Manager for the six month period ended 31 August 2015 in respect of the net assets attributable to the "C" shareholders was £177,000 (six month period ended 31 August 2014: £164,000). The amount paid to the Investment Manager for the six month period ended 31 August 2015 in respect of the net assets attributable to the "D" shareholders was £24,000 (six month period ended 31 August 2014: £19,000).
4. Taxation
The Company has accrued £nil tax charge for the six month period ended 31 August 2015 in the ordinary share fund (six month period ended 31 August 2014: £nil tax charge), £nil tax charge in the "C" share fund (six month period ended 31 August 2014: £nil tax charge) and £nil tax charge in the "D" share fund (six month period ended 31 August 2014: £nil tax charge). The tax charges are accrued using an effective tax rate of 20% for the 2015/16 tax year and 21% for the 2014/15 tax year, however dividends and capital gains are not subject to tax resulting in a lower effective tax rate than the standard applicable rate in the UK.
No provision for deferred taxation has been made on potential capital gains due to the Company's current status as a VCT under section 274 of the ITA and the Directors' intention to maintain that status. The Company intends to continue to meet the conditions required to maintain its status as a VCT for the foreseeable future.
5. Basic and diluted return per share
For the six months ended 31 August 2015 (unaudited) | Ordinary Shares | "C" Shares | "D" Shares | |
Revenue return for the period | p per share | 2.40 | 3.20 | 3.34 |
Based on: | ||||
Revenue return for the period | £000 | 583 | 361 | 66 |
Weighted average number of shares in issue | number of shares | 24,392,655 | 11,283,207 | 1,990,767 |
Capital gain/ (loss) for the period | p per share | 3.07 | (2.09) | 9.41 |
Based on: | ||||
Capital gain/ (loss) for the period | £000 | 751 | (235) | 188 |
Weighted average number of shares in issue | number of shares | 24,392,655 | 11,283,207 | 1,990,767 |
Net profit for the period | p per share | 5.47 | 1.11 | 12.75 |
Based on: | ||||
Net gain for the period | £000 | 1,334 | 126 | 254 |
Weighted average number of shares in issue | number of shares | 24,392,655 | 11,283,207 | 1,990,767 |
For the six months ended 31 August 2014 (unaudited) | Ordinary Shares | "C" Shares | "D" Shares | |
Revenue return for the period | p per share | 1.74 | 2.65 | (0.60) |
Based on: | ||||
Revenue return for the period | £000 | 424 | 300 | (9) |
Weighted average number of shares in issue | number of shares | 24,392,655 | 11,314,224 | 1,488,332 |
Capital gain/(loss) for the period | p per share | 2.48 | 3.73 | (1.14) |
Based on: | ||||
Capital gain/(loss) for the period | £000 | 605 | 422 | (17) |
Weighted average number of shares in issue | number of shares | 24,392,655 | 11,314,224 | 1,488,332 |
Net profit/(loss) for the period | p per share | 4.22 | 6.38 | (1.74) |
Based on: | ||||
Net gain/(loss) for the period | £000 | 1,029 | 722 | (26) |
Weighted average number of shares in issue | number of shares | 24,392,655 | 11,314,224 | 1,488,332 |
There were no differences between basic and diluted return per ordinary share, per "C" share or per "D" share because no dilutive instruments had been issued or granted.
6. Investments
Ordinary Shares | "C" Shares | "D" Shares | Total | |||||||||
Six months ended 31 August 2015 | Shares | Loan stock | Total | Shares | Loan stock | Total | Shares | Loan stock | Total | Shares | Loan stock | Total |
(unaudited) | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
Opening position | ||||||||||||
Opening cost | 8,783 | 5,103 | 13,886 | 5,759 | 2,898 | 8,657 | 712 | - | 712 | 15,254 | 8,001 | 23,255 |
Opening realised losses | (2,564) | (1,228) | (3,792) | (464) | (17) | (481) | - | - | - | (3,028) | (1,245) | (4,273) |
Opening unrealised gains | 6,469 | 412 | 6,881 | 4,472 | 227 | 4,699 | - | - | - | 10,941 | 639 | 11,580 |
Opening fair value | 12,688 | 4,287 | 16,975 | 9,767 | 3,108 | 12,875 | 712 | - | 712 | 23,167 | 7,395 | 30,562 |
During the period | ||||||||||||
Purchases at cost | 24 | 77 | 101 | 70 | 223 | 293 | 504 | 514 | 1,018 | 598 | 814 | 1,412 |
Investment proceeds | (2) | (126) | (128) | - | (23) | (23) | - | - | - | (2) | (149) | (151) |
Realised losses | (5) | - | (5) | - | - | - | - | - | - | (5) | - | (5) |
Unrealised gains/ (losses) | 825 | (5) | 820 | (184) | 59 | (125) | 203 | - | 203 | 844 | 54 | 898 |
Closing fair value | 13,530 | 4,233 | 17,763 | 9,653 | 3,367 | 13,020 | 1,419 | 514 | 1,933 | 24,602 | 8,114 | 32,716 |
Closing position | ||||||||||||
Closing cost | 8,807 | 5,054 | 13,861 | 5,829 | 3,099 | 8,928 | 1,216 | 514 | 1,730 | 15,852 | 8,666 | 24,518 |
Closing realised losses | (2,569) | (1,228) | (3,797) | (464) | (17) | (481) | - | - | - | (3,033) | (1,245) | (4,278) |
Closing unrealised gains | 7,292 | 407 | 7,699 | 4,288 | 286 | 4,574 | 203 | - | 203 | 11,783 | 693 | 12,476 |
Closing fair value | 13,530 | 4,233 | 17,763 | 9,653 | 3,367 | 13,020 | 1,419 | 514 | 1,933 | 24,602 | 8,114 | 32,716 |
BEL Holdco Limited was written down to a nil value in the prior year. However, liquidation proceeds of £3,000 were received during the six month period ended 31 August 2015 which have been treated as a realised gain.
Ben Glas Power Limited was sold during the six month period ended for a consideration of £87,000. This has been recognised as a realised gain in the income statement.
Ordinary Shares | "C" Shares | "D" Shares | Total | |||||||||
Year ended 28 February 2015 | Shares | Loan stock | Total | Shares | Loan stock | Total | Shares | Loan stock | Total | Shares | Loan stock | Total |
(audited) | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 |
Opening position | ||||||||||||
Opening cost | 10,042 | 5,893 | 15,935 | 5,457 | 3,740 | 9,197 | - | - | - | 15,499 | 9,633 | 25,132 |
Opening realised losses | (4,234) | (1,228) | (5,462) | (464) | (17) | (481) | - | - | - | (4,698) | (1,245) | (5,943) |
Opening unrealised gains | 5,397 | 469 | 5,866 | 3,984 | 241 | 4,225 | - | - | - | 9,381 | 710 | 10,091 |
Opening fair value | 11,205 | 5,134 | 16,339 | 8,977 | 3,964 | 12,941 | - | - | - | 20,182 | 9,098 | 29,280 |
During the year | ||||||||||||
Purchases at cost | 15 | - | 15 | 2 | - | 2 | 712 | - | 712 | 729 | - | 729 |
Investment proceeds | (303) | (490) | (793) | - | (541) | (541) | - | - | - | (303) | (1,031) | (1,334) |
Conversion of loan stock to shares | 300 | (300) | - | - | - | - | - | - | - | 300 | (300) | - |
Realised gains/ (losses) | 96 | - | 96 | 300 | (301) | (1) | - | - | - | 396 | (301) | 95 |
Unrealised gains/ (losses) | 1,375 | (57) | 1,318 | 488 | (14) | 474 | - | - | - | 1,863 | (71) | 1,792 |
Closing fair value | 12,688 | 4,287 | 16,975 | 9,767 | 3,108 | 12,875 | 712 | - | 712 | 23,167 | 7,395 | 30,562 |
Closing position | ||||||||||||
Closing cost | 8,783 | 5,103 | 13,886 | 5,759 | 2,898 | 8,657 | 712 | - | 712 | 15,254 | 8,001 | 23,255 |
Closing realised losses | (2,564) | (1,228) | (3,792) | (464) | (17) | (481) | - | - | - | (3,028) | (1,245) | (4,273) |
Closing unrealised gains | 6,469 | 412 | 6,881 | 4,472 | 227 | 4,699 | - | - | - | 10,941 | 639 | 11,580 |
Closing fair value | 12,688 | 4,287 | 16,975 | 9,767 | 3,108 | 12,875 | 712 | - | 712 | 23,167 | 7,395 | 30,562 |
The shares held by the Company represent equity holdings in unquoted UK companies. The Investment Manager's Report above provides details in respect of the Company's shareholding in each investment. The investments acquired and disposed of during the period are detailed in the Investment Manager's Report.
Under IFRS 7 and IFRS 13, the Company is required to report the category of fair value measurements used in determining the value of its investments, to be disclosed by the source of inputs, using a three-level hierarchy:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
• Those involving inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and
• Those with inputs for the instrument that are not based on observable market data (unobservable inputs) (Level 3).
As at 31 August 2015, each of the Company's investments held was valued using inputs which are considered to be Level 3 inputs and a reconciliation of the movements is in the table above.
The Board has considered the key assumptions which may affect the results reported in the Financial Statements and the Company is further required to disclose the effect of changing one or more inputs with reasonable alternative assumptions where a significant change to the fair value measurement would result.
The key assumptions that have a significant impact on fair value in the discounted future cash flow valuations are the discount factors used (which range from 7.5% to 10.0%), the price at which power and associated benefits may be sold and the levels of electricity the investee companies' generating assets are likely to produce (which are taken from specialist consultant reports).
As at 31 August 2015, the value of the Company's investment in Bernard Matthews Green Energy Halesworth Limited was determined on a discounted cash flow basis as it is now operational, whereas previously the investment was valued on the basis of the price of recent investment.
The Board has determined that a reasonable alternative assumption may be made in respect of the discount factors applied; the sensitivity of the value of the portfolio to the application of an increase or decrease in discount factors is set out below.
The investment portfolio has been reviewed for the effect of alternative valuation inputs, namely the sensitivity of the total value of all investments to a 0.5% increase or decrease in the discount factors applied to the valuation models which have been valued using the discounted future cash flows from the underlying business.
The following table demonstrates the impact the application of the upside and downside alternative discount factor to the net asset value of each share fund:
Discount Factor +0.5% | Net Asset Value | Discount Factor -0.5% | |
£000 | £000 | £000 | |
Ordinary shares | 18,357 | 19,302 | 20,298 |
"C" shares | 12,912 | 13,639 | 14,405 |
"D" shares | 2,049 | 2,129 | 2,213 |
Further sensitivity analysis is provided in the Investment Manager's Report.
7. Trade and other receivables (current)
At 31 August 2015, the ordinary share fund held current trade receivables totalling £1,287,000 which includes £797,000 representing the amortised cost value of the outstanding balance of the consideration arising from the Company's sale of Craig Wind Farm Limited plus the accrued interest on the outstanding balance. As at 31 August 2015, this amount has been treated as a current asset as the Directors' have a reasonable expectation it will received within a period of one year. As at 28 February 2015 the outstanding balance of £801,000 was treated as a non-current asset. The deferred consideration receivable of £685,000 has been transferred from the unrealised capital reserve to the realised capital reserve during the six month period ended 31 August 2015. The accrued interest outstanding in respect of the deferred consideration amounted to £112,000 as at 31 August 2015 and has been treated as realised income in the revenue reserve.
8. Basic and diluted net asset value per share
As at 31 August 2015 (unaudited) | Ordinary Shares | "C" Shares | "D" Shares | |
Net asset value per share | p per share | 79.1 | 120.9 | 106.9 |
Based on: | ||||
Net asset value | £000 | 19,302 | 13,639 | 2,129 |
Number of shares | number of shares | 24,392,655 | 11,283,207 | 1,990,768 |
As at 28 February 2015 (audited) | Ordinary Shares | "C" Shares | "D" Shares | |
Net asset value per share | p per share | 75.8 | 123.3 | 94.2 |
Based on: | ||||
Net asset value | £000 | 18,480 | 13,908 | 1,875 |
Number of shares | number of shares | 24,392,655 | 11,283,207 | 1,990,768 |
9. Dividends
A final dividend for the year ended 28 February 2015 of 2.10p per ordinary share was paid to ordinary shareholders on 5 August 2015.
An interim dividend of 2.50p per ordinary share has been declared for the six month period ended 31 August 2015 which will be paid on 13 January 2016 to all ordinary shareholders on the register as at close of business on 11 December 2015.
A final dividend for the year ended 28 February 2015 of 3.50p per "C" share was paid to "C" shareholders on 5 August 2015.
An interim dividend of 3.50p per "C" share has been declared for the six months period ended 31 August 2015 which will be paid on 13 January 2016 to all "C" shareholders on the register as at close of business on 11 December 2015.
No dividend was paid to "D" shareholders for the year ended 28 February 2015.
An interim dividend of 2.00p per "D" share has been declared for the six months period ended 31 August 2015 which will be paid on 13 January 2016 to all "C" shareholders on the register as at close of business on 11 December 2015.
10. Contingencies, guarantees and financial commitments
The contingencies, guarantees and financial commitments of the Company were disclosed in the annual report and financial statements for the year ended 28 February 2015. All the guarantees disclosed therein remain in force, along with those described below.
On 20 March 2015, the Company registered a share charge over its shares in Darroch Power Limited to GCP Hydro 1 Limited as security for a senior loan facility of £6,525,000 raised by Darroch Power Limited to finance the construction costs of its hydroelectric scheme. The liability of the Company under this charge of shares is limited to the value of the Company's investment in shares of Darroch Power Limited.
On 20 March 2015, the Company registered a share charge over its shares in Upper Falloch Power Limited to GCP Hydro 1 Limited as security for a senior loan facility of £3,360,000 raised by Upper Falloch Power Limited to finance the construction costs of its hydroelectric scheme. The liability of the Company under this charge of shares is limited to the value of the Company's investment in shares of Upper Falloch Power Limited.
In its Annual Report and Financial Statements for the year ended 28 February 2015, the Company disclosed that a claim had been filed against the Company under a warranty in the Share Purchase Agreement pertaining to the sale of an investee company previously owned by the Company. The disclosure stated that the Company was vigorously defending the claim, that no provision had been made in the accounts and that the Directors did not expect the outcome to have a material impact on the Company's accounts. The claim in question has now been settled with an immaterial impact on the Company's net asset value. The settlement specifies that the deferred consideration due to the Company pursuant to the sale in question will now be due by 31 December 2016 at the latest. The deferred consideration continues to accrue interest.
11. Related party transactions
The investee companies in which the Company has a shareholding of 20% or more are considered to be related parties. The significant changes to the balances and transactions with these companies are presented in the Investment Manager's Report. The aggregate balances at the period end and transactions with these companies during the six month period ended 31 August 2015 are summarised below.
Ordinary Shares | "C" shares | "D" shares | Total | |
£000 | £000 | £000 | £000 | |
Balances as at 31 August 2015 (unaudited) | ||||
Investments - shares | 13,529 | 9,653 | 1,419 | 24,601 |
Investments - loan stock | 4,233 | 3,367 | 514 | 8,114 |
Accrued interest income | 376 | 193 | 27 | 596 |
Transactions in the six months ended 31 August 2015 (unaudited) | ||||
Loan stock interest income | 166 | 201 | 27 | 394 |
Dividend income | 485 | 270 | 56 | 811 |
Ordinary Shares | "C" shares | "D" shares | Total | |
£000 | £000 | £000 | £000 | |
Balances as at 31 August 2014 (unaudited) | ||||
Investments - shares | 11,965 | 9,797 | 712 | 22,474 |
Investments - loan stock | 4,405 | 3,142 | - | 7,547 |
Accrued interest income | 215 | 385 | - | 600 |
Transactions in the six months ended 31 August 2014 (unaudited) | ||||
Loan stock interest income | 272 | 210 | - | 482 |
Dividend income | 294 | 206 | - | 500 |
Ordinary Shares | "C" shares | "D" shares | Total | |
£000 | £000 | £000 | £000 | |
Balances as at 28 February 2015 (audited) | ||||
Investments - shares | 12,676 | 9,767 | 712 | 23,155 |
Investments - loan stock | 4,287 | 3,108 | - | 7,395 |
Accrued interest income | 274 | 180 | - | 454 |
Transactions in the year ended 28 February 2015 (audited) | ||||
Loan stock interest income | 541 | 410 | - | 951 |
Dividend income | 361 | 283 | - | 644 |
12. Report distribution
In accordance with the Company's commitment to environmental sustainability and to minimise costs wherever appropriate, the financial statements will continue to be made available through regulated news service providers and will also be available in the Financial Reports section of the Company's website www.ventusvct.com. Any shareholder who wishes to receive notification of reports by email or post may request this by contacting the Registrar, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU.