Puma VCT VII plc Interim Report 2014

Puma VCT VII plc
Interim Report

For the six months ended 31 August 2014

Chairman’s Statement

Highlights

• Fully deployed in a diverse range of high quality loans and equities

• NAV gain of 1.14p for the period

• 15p per share of dividends paid since inception, equivalent to a 7.1% per annum tax-free running yield on net investment

Introduction

The Company has now deployed a substantial proportion of its funds in both qualifying and non-qualifying investments, having met its minimum qualifying investment percentage of 70 per cent during the previous period.  We believe our portfolio is well positioned to deliver attractive returns to shareholders within its expected remaining time horizon.

Net Asset Value (‘NAV’)

The NAV per share at the period end was 93.05p after adding back dividends paid to date of 15p, representing a return of 1.14p per ordinary share for the period.

Qualifying Investments

Brewhouse and Kitchen
The Company’s £1,250,000 investment in Brewhouse and Kitchen Limited continues to perform well. Brewhouse and Kitchen is managed by two highly experienced pub sector professionals and our funding will facilitate the acquisition of freehold pubs and the roll-out of the brand.  The investment is largely in the form of senior debt, secured with a first charge over the business and each site acquired.  Funds can be utilised to a maximum 65% loan-to-value ratio, and are expected to produce an attractive return to the Company. Having opened its first pub, the White Swan in Portsmouth, last year, Brewhouse and Kitchen opened its second pub, the Station Master’s House in Dorchester, in April after a substantial renovation.  Both have been trading well, and, since the period end, Brewhouse and Kitchen have taken leases on a further three units in London and Bristol.

The Albany, Barnes
As previously reported, Huntly Trading Limited and Jephcote Trading Limited (in which the Company had invested £1,000,000 and £1,650,000 respectively) were, as members of SKPB Services LLP, engaged in a contract with Ansgate (Barnes) Limited to provide project management and contracting services in connection with the construction of nine new houses and 12 new flats at a construction known as The Albany, in Barnes, south west London.  We understand that the project is progressing with a view to completion by the fourth quarter of next year.

Supported Living
SKPB Services LLP has also recently entered into a contract with HB Villages Tranche 2 Limited to provide project management and contracting services in connection with the construction of 16 units as accommodation and supported housing for psychiatric and learning disabled service users, and their care-workers, in Bolton.

The Company’s investments of £880,000 into each of two contracting companies, Frederica Trading Limited (“Frederica”) and Glenmoor Trading Limited (“Glenmoor”) are progressing well.  Frederica and Glenmoor (as members of a limited liability partnership with other contracting companies) are currently providing contracting services in connection with a supported living development in Clacton.

Construction
As previously reported, in March 2013 the Company invested £1,100,000 (alongside other Puma VCTs) into Saville Services Limited, a company providing contracting services over a series of projects including the construction of a private detached housing development in the countryside outside Aberdeen, under contract to Churchill Homes Limited, a longstanding Aberdeenshire developer, and the development of up to 20 apartments for supported living for psychiatric and learning disabled service users in Grimsby, North East Lincolnshire. I am pleased to report that the Aberdeen project is progressing well and that the Grimsby project recently completed.  We understand that Saville Services’ directors are actively pursuing opportunities to continue to deploy the capital and profits arising from these projects in similar projects in the near future.

Following the period end, the Company has agreed to subscribe a further £550,000 in Saville Services Limited to provide further working capital for another supported living project.

The Company has now realised its investment in SIP Communications plc, in which it invested £700,000. We had provided £210,000 against this investment to reflect its trading difficulties, but we are pleased to report that the realisation was substantially closer to the original investment. Over its life the Company recovered £637,000 from this investment.

Non-Qualifying Investments

During the period, the Company, together with entities managed and advised by your Investment Manager, provided a £7.1 million bridging facility to companies within the Connolly and Callaghan group in several tranches.  The Company participated in this through a £400,000 non-qualifying loan (advanced through a subsidiary, Buckhorn Lending Limited). The Connolly and Callaghan group is a provider of emergency overnight accommodation in Bristol with over 20 years’ experience in the sector.  The overall facility is secured on a portfolio of over 20 freehold residential properties, was extended on a sub-50% loan-to-value basis and is earning an attractive rate of interest. 

As previously reported, the Company had extended a £650,000 non-qualifying loan (as part of a £1.3 million financing with other Puma VCTs) to Countywide Property Holdings Limited, secured on a 5.6 acre site, including a large house, in Brackley near Silverstone.  I am pleased to report that, having successfully obtained planning permission for 50 new homes on the site, Countywide Property Holdings completed the sale of the site to one of the UK’s largest house builders and repaid the Company’s loan in full. 

The Company’s £1,330,000 non-qualifying loan (as part of a £4 million financing with other Puma VCTs) to Puma Brandenburg Finance Limited, a subsidiary of Puma Brandenburg Limited, continues to perform.  The loan is secured on a portfolio of flats in the middle class area of central Berlin, Germany.  Since the loan was made, the property market in this area of Berlin has been very strong, further enhancing the excellent security we have for this loan.  The loan attracts a fixed interest rate at a good coupon given the security profile. 

As previously reported, the Company extended a £881,000 loan to provide an innovative £4 million revolving credit facility to Ennovor Trading 1 Limited (formerly known as Organic Waste Management Trading Limited) together with other Puma VCTs. The facility provided working capital for the purchase of used cooking oil for conversion into bio-diesel.  In order to provide the liquidity necessary for a further qualifying investment, during the Company sold its position in Ennovor Trading 1 to another Puma VCT.

Dividends

As set out in the accounts for the period ended 28 February 2014, the Company declared a dividend of 5p per ordinary share for that period which was paid in February 2014.  Reflecting this recent payout, your Board is not proposing a further dividend at this interim stage but still intends to pay out a dividend of 5p per ordinary share each year as envisaged in the Company’s prospectus.

VCT Qualifying Status

PricewaterhouseCoopers LLP (‘PwC’) provides the board and the investment manager with advice on the ongoing compliance with Her Majesty’s Revenue & Customs (‘HMRC’) rules and regulations concerning VCTs.  PwC assists the Investment Manager in establishing the status of investments as qualifying holdings and has reported that the Company has met all HMRC’s criteria to date. As noted above, the Company has met its minimum qualifying investment percentage of 70 per cent.

Principal risks and uncertainties

Although the economy in the UK is showing signs of improvement, it remains fragile.  The consequences of this for the Company’s investment portfolio constitute the principal risk and uncertainty for the Company in the second half of 2014.

Outlook

We are pleased that the Company’s net assets are now fully deployed in a diverse range of high quality businesses and projects.  The lack of availability of bank credit has enabled the Company to assemble a portfolio of investments on attractive terms. This should offer the prospect of further growth in net assets per share.  Whilst there will be some further changes in the composition of the portfolio to ensure that the Company continues to satisfy its HMRC qualifying targets, the Board expects to concentrate in the future primarily on the monitoring of our existing investments and considering the options for exits.

 
David Buchler
Chairman
29 October 2014

 

Income Statement (unaudited)

For the six months ended 31 August 2014

   

Six months ended
 31 August 2014

Six months ended
 30 June 2013

Period ended
 28 February 2014

 

Note

Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total

   

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

£’000

Gain/(loss) on investments

 

47

47

(218)

(218)

(218)

(218)

Income

 

300

300

373

373

741

741

       

 

   

 

     
   

300

47

347

373

(218)

155

741

(218)

523

       

 

   

 

     

Investment management fees

4

(27)

(81)

(108)

(27)

(81)

(108)

(65)

(195)

(260)

Other expenses

 

(82)

(82)

(61)

(61)

(203)

(203)

       

 

   

 

     
   

(109)

(81)

(190)

(88)

(81)

(169)

(268)

(195)

(463)

       

 

   

 

     

Return/(loss) on ordinary activities before taxation

 

191

(34)

157

285

(299)

(14)

473

(413)

60

Tax on return on ordinary activities

 

(3)

(3)

       

 

   

 

     

Return/(loss) on ordinary activities after tax attributable to equity shareholders

 

188

(34)

154

285

(299)

(14)

473

(413)

60

       

 

   

 

     

Basic and diluted

     

 

   

 

     

Return/(loss) per  Ordinary Share (pence)

2

1.39p

(0.25p)

1.14p

2.11p

(2.21p)

(0.10p)

3.50p

(3.06p)

0.44p

                     

The revenue column of this statement is the profit and loss of the Company.  All revenue and capital items in the above statement derive from continuing operations.  No operations were acquired or discontinued in the period.

 

Balance Sheet (unaudited)

As at 31 August 2014

 

Note

As   at
  31 August 2014

As   at
  30 June 2013

As   at
  28 February 2014

   

£’000

£’000

£’000

Fixed Assets

       

Investments

7

8,490  

9,461  

9,956  

         

Current Assets

       

Debtors

 

834

245

172

Cash

 

1,369  

1,323  

388

   

2,203  

1,568  

560

Creditors – amounts falling due within one year

       

Other creditors

 

(144)

(36)

(124)

Tax liabilities

 

(3)

         

Net Current Assets

 

2,056  

1,532  

436

         

Total Assets less Current Liabilities

 

10,546  

10,993  

10,392  

         

Creditors – amounts falling due after more than   one year (including convertible debt)

 

(1)

(1)

(1)

         

Net Assets

 

10,545  

10,992  

10,391  

         

Capital and Reserves

       

Called up share capital

 

135

135

135

Share premium account

 

Capital reserve – realised

 

(886)

(528)

(642)

Capital reserve – unrealised

 

(210)

(210)

Revenue reserve

 

11,296  

11,595  

11,108  

         

Equity Shareholders’ Funds

 

10,545  

10,992  

10,391  

         
         

Net Asset Value per Ordinary Share

3

78.06p  

81.37p  

76.92p  

         

Diluted Net Asset Value per Ordinary Share

3

78.06p  

81.37p  

76.92p  

         

 

Cash Flow Statement (unaudited)

For the six months ended 31 August 2014

 

 

Six   months ended
   31 August 2014

Six   months ended
   30 June 2013

Period   ended
   28 February 2014

 

£’000

£’000

£’000

       

Operating activities

     

Return/(loss) on ordinary activities before tax

157

(14)

60

(Gains)/losses on investments

(47)

218

218

Increase in debtors

(662)

(170)

(97)

Increase/(decrease) in creditors

20

(99)

(11)

       

Net cash (outflow)/inflow from operating   activities

(532)

(65)

170

       

Corporation tax paid

       

Capital expenditure and financial investment

     

Purchase of investments

(400)

(2,550)

(3,200)

Proceeds from sale of investments

1,913  

3,688  

3,843  

Net realised loss on forward foreign exchange   contracts

       

Net cash outflow from capital expenditure and   financial investment

1,513  

1,138  

643

       
       

Equity dividend paid

(676)

(1,351)

       

Financing

     

Redemption of redeemable preference shares

       

Net cash outflow from financing

       

Decrease in cash

981

397

(538)

Net cash at start of the period

388

926

926

       

Net funds at the period end

1,369  

1,323  

388

       

 

Reconciliation of Movements in Shareholders’ Funds (unaudited)

For the six months ended 31 August 2014

 

 

Called   up share capital

Share   premium account

Capital   reserve – realised

Capital   reserve – unrealised

Revenue   reserve

Total

 

£’000

£’000

£’000

£’000

£’000

£’000

             

Balance as at 1 January 2013

135

(718)

279

11,986  

11,682  

Total recognised (losses)/gains for the period

190

(489)

285

(14)

Dividends paid

(676)

(676)

 

 

 

 

 

 

 

Balance as at 30 June 2013

135

(528)

(210)

11,595  

10,992  

             

Total recognised (losses)/gains for the period

(393)

279

188

74

Realisation of valuations from prior period

279

(279)

Dividends paid

(675)

(675)

 

 

 

 

 

 

 

Balance as at 28 February 2014

135

(642)

(210)

11,108  

10,391  

             

Total recognised (losses)/gains for the period

(34)

188

154

Realisation of valuations from prior period

(210)

210

Dividends paid

 

 

 

 

 

 

 

Balance as at 31 August 2014

135

(886)

11,296  

10,545  

             

 

Notes to the Interim Report

For the six months ended 31 August 2014

 

1.             Accounting Policies

The financial statements have been prepared under the historical cost convention, modified to include the revaluation of fixed asset investments, and in accordance with applicable Accounting Standards and with the Statement of Recommended Practice, “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (“SORP”).

 

2.             Return per Ordinary Share

The total profit per share of 1.14p is based on the profit for the period of £154,000 (2013: £60,000) and the weighted average number of shares in issue as at 31 August 2014 of 13,508,925 (2013: 13,508,925).

 

3.             Net asset value per share

 

 

As   at
  31 August 2014

As   at
  30 June 2013

As   at
  28 February 2014

Net assets

10,545,000  

10,992,000  

10,391,000  

Shares in issue

13,508,925  

13,508,925  

13,508,925  

       

Net asset value per share

     

Basic

78.06p  

81.37p  

76.92p  

Diluted

78.06p  

81.37p  

76.92p  

       

 

4.             Management fees

The Company pays the Investment Manager an annual management fee of 2% of the Company’s net assets.  The fee is payable quarterly in arrears.  The annual management fee is allocated 75% to capital and 25% to revenue.

 

5.             Related Party Transactions

Related party transactions are described in the 2014 Annual Report and Accounts on page 37. There were no other related party transactions during the six months ended 31 August 2014.

 

6.             The financial information for the six months ended 31 August 2014 has not been audited and does not comprise full financial statements within the meaning of Section 423 of the Companies Act 2006. The interim financial statements have been prepared on the same basis as will be used to prepare the annual financial statements.

7.             Investment portfolio summary

 

Valuation

Cost

Gain/(loss)

Valuation   as a % of Net Assets

 

£’000

£’000

£’000

 
         

As at 31 August 2014

       
         

Qualifying Investment – Unquoted

       

Brewhouse & Kitchen

1,250  

1,250  

12%

Frederica Trading Limited

880

880

8%

Glenmoor Trading Limited

880

880

8%

Huntly Trading Limited

1,000  

1,000  

9%

Jephcote Trading Limited

1,650  

1,650  

16%

Saville Services Limited

1,100  

1,100  

10%

 

 

 

 

 

Total Qualifying Investments

6,760  

6,760  

63%

         

Non-Qualifying Investments

       

PBL finance Limited

1,330  

1,330  

13%

Buckhorn lending limited

400

400

4%

         

Total Non-Qualifying investments

1,730  

1,730  

17%

         

Total    Investments

8,490  

8,490  

 

80%

Balance of Portfolio

2,055  

2,055  

 

20%

         

Net Assets

10,545  

10,545  

100%

 

       

Copies of this Interim Statement will be posted to shareholders in due course and made available on the website: http://www.pumainvestments.co.uk/investors/our-investments/venture-capital-trusts/investor-information

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Puma VCT VII Interim Report 2014

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