Summary
- Total net assets £123.5 million.
- An interim dividend of 4.2p per share was paid on
18 June 2021 , returning £8.1 million to Shareholders. - The portfolio value has increased by £11.9 million in the last six months.
- Net Asset Value per share increased by 2.7% in the period from 62.1p at
31 December 2020 to 63.8p at30 June 2021 . Including the payment of a 4.2p dividend made on18 June 2021 , NAV total return per share at30 June 2021 was 68.0p, representing a positive total return of 9.5% in the period.
Chairman’s Statement
I am pleased to present the unaudited Half-Yearly Report for
Material events during the period
Before providing other details, I would like to draw attention to the continuing impact of COVID-19 on the Company and its portfolio.
The COVID-19 virus has presented the Company and the management of every one of its portfolio companies with unprecedented challenges which it is anticipated will persist for a considerable time to come. The Manager continues to work closely with the portfolio companies, attempting to minimise any adverse impact and it is a great credit to the quality of the management of the portfolio companies that the fallout from the pandemic has not been even more significant. Until this virus is brought under worldwide control, it is impossible to assess its full impact and challenges remain.
The overall impact of the COVID-19 pandemic could be seen in the material fall in the valuation of the Company’s portfolio at
The end of the Brexit transition period on
Performance and portfolio activity
During the period Net Asset Value per share increased by 2.7% from 62.1p at
During the period under review the Manager completed three new investments and one follow‑on investment costing £4.1 million and £1.0 million respectively as well as announcing the sale of its investment in
potential attractive investment opportunities.
Dividends
An interim dividend of 4.2p per share was declared on
As noted in the Annual Report and Accounts and in light of the change in portfolio towards earlier stage, higher risk companies as required by the new VCT rules, the Board felt it prudent to adjust the dividend policy towards a targeted annual dividend yield of 5% of NAV per annum. The Board and the Manager hope that this may be enhanced by additional ‘special’ dividends as and when particularly successful portfolio exits are made. The impact of COVID-19 will be taken into consideration when the Board considers dividends in the near term.
Shareholder communication
We were disappointed that so far this year we still have not been able to meet with Shareholders in person as a result of the travel restrictions imposed due to COVID-19. As an alternative, we invited Shareholders to our virtual AGM in July, as well as an online investor forum facilitated by the Manager in June.
We appreciate how popular such events are with our investors and will continue to hold similar events remotely until it is considered safe to meet in person. Details of any such future events will be communicated to investors.
Board composition
The Board continues to review its own performance and undertakes succession planning to maintain an appropriate level of independence, experience, diversity and skills in order to be in a position to discharge all its responsibilities.
Outlook
The persisting uncertainty over the full impact of COVID-19 and the ongoing changes related to Brexit create truly exceptional challenges for every business. The Company invests primarily in developing companies which by their nature benefit from general economic growth and the current environment places considerable demands upon them and their management teams. The Manager’s Private Equity Team is well aware of the management and business needs of each of the companies within the investment portfolio and is working closely with them to help them progress during these testing times.
Until the pandemic is brought under worldwide control there will inevitably be further, mainly unhelpful, implications for many
Chairman
Investment Manager’s Review
Portfolio summary
As at
During the six months to June, the value of the investment portfolio held rose by £11.9 million. This was driven by £5.1 million of new and follow-on investments and an increase of £12.5 million in the value of existing investments offset by a realisation of £5.7 million. The Company’s portfolio continues to recover following the impact of COVID-19 over the past 18 months. Many of the portfolio companies have successfully navigated the new economic landscape, with some performing extremely strongly while others continue to adjust.
The Manager remains focused on supporting an annual dividend to Shareholders of at least 5% of the NAV per share whilst retaining a stable NAV. The Company has made reasonable progress against these objectives in the period.
New investments
The Manager has taken a prudent approach to investing since the onset of COVID-19. Repeated lockdowns have made it challenging for the Private Equity Team to meet prospective companies and their teams face to face, an important part of assessing investments and developing relationships with management teams. However, the Manager and SMEs have adjusted to this new landscape given companies still wish to grow their businesses despite the economic uncertainty. The Manager continued to meet new companies and advisers throughout this period. Relationships are now forged virtually with deals being introduced and completed entirely online.
As a result, three new investments were completed in the six months to
NorthWest EHealth
In
Also in
Additive Manufacturing Technologies
Finally, in
Post-period end, in
Follow-on investments
The Manager had expected that more portfolio companies would need additional capital to support them through difficult trading conditions resulting from the various lockdowns, driving an increase in follow-on investment. However, the portfolio has remained relatively resilient, supported by the Manager, which has increased oversight of the portfolio and provided guidance to portfolio management teams throughout the pandemic. The Company made one follow-on investment in the period, totalling £1.0 million, to support further growth opportunities post‑COVID-19 restrictions lifting. Further details are provided below.
Many companies used forms of Government support, such as the furlough scheme and the Coronavirus Business Interruption Loan Scheme, which reduced the need for additional equity injections in the period. However, as these schemes unwind, the Manager anticipates some requirements for follow-on investment in the next six months.
Clubspark
In
Biotherapy Services
Post-period end, in
Fertility Focus
In
Pipeline
At
Exits and realisations
The M&A climate has remained surprisingly buoyant during the last 18 months. At first, most trade acquirers focused on their core business and private equity investors focused on their existing portfolios or on distressed acquisitions.
However, since the second half of last year, the Manager has seen acquisition interest returning, particularly in the healthcare, technology and e-commerce sectors, with numerous investment opportunities being presented for consideration.
In
Post-period end, the Company announced the successful sale of Mologic, a health diagnostics company providing both contract research services for clients and developing its own range of proprietary point-of-care diagnostics products. It was sold to
The Company’s investment in
Disposals in the six months to
Company | Detail | Accounting cost at date of disposal (£) | Proceeds (£) | Realised gain (£) | Valuation at (£) |
Full Disposal | 1,372,002 | 5,651,7561 | 4,279,754 | 5,723,459 |
1A further £71,703 in deferred consideration has been reflected in the accounts.
Key portfolio developments
In the first six months of the year, the portfolio has shown further recovery, which started in the second half of 2020, as businesses adapt to the new economic climate combined with the gradual easing of restrictions.
The value of unquoted investments held rose by £11.9 million in the six months to June, driven by deployment of £5.1 million and an increase in value of existing investments by £12.5 million offset by a realisation of £5.7 million. A disciplined approach to investment valuations has been maintained in light of COVID-19. During the prior period, the value of investments held rose by £26.2 million, driven by deployment of £6.5 million and an increase in the value of existing investments of £19.7 million.
Material changes in valuation, defined as increasing or decreasing by £1.0 million or more since
Key valuation changes in the period
Company | Valuation (£) | Valuation Change (£) |
3,317,884 | 2,057,468 | |
8,559,163 | 1,377,859 | |
4,072,294 | 1,075,795 | |
4,294,035 | 1,070,285 | |
3,257,940 | 1,055,793 |
Outlook
The
The rules are changing constantly, and it is clear that COVID-19 will still continue to impact trading in the medium term and businesses must remain cautious through this transition to the ‘new normal’. The Manager will continue to provide added support to its portfolio companies and, if the situation worsens, will be on standby to administer the same ‘toolbox’ of support as in prior lockdowns.
On a positive note, the
Whilst COVID-19 has brought unprecedented disruption, it has also prompted many organisations to reassess their business models and take action to adapt to a new economic landscape. A number of the Company’s portfolio have used this as an opportunity to review their overall strategy, venture into a new market or launch a new product or service.
For example, to supplement lost revenues from their core business some portfolio companies have procured and provided PPE or other protective equipment, such as hand sanitising stations or screens. Healthcare and life science investments have also contributed to national efforts to defeat the virus by manufacturing COVID-19 testing kits.
Some of the portfolio companies used this time as an opportunity to improve online activity and have seen an uptick in revenues as a consequence. With the trend towards e-commerce accelerating during COVID-19, retail businesses will need to continue embracing this channel fully and make it a core part of the overall growth strategy.
The Manager is working closely with portfolio companies to ensure they are well-positioned to capitalise on this opportunity.
Beyond COVID-19, the end of the Brexit transition period on
Notwithstanding this uncertain economic backdrop, the Manager continues to see encouraging levels of activity from smaller
Despite the challenges of COVID-19 in the medium and long term, the
on behalf of
Head of Private Equity
Unaudited half-yearly results and responsibilities statements
Principal risks and Uncertainties
The principal risks faced by the Company are as follows:
- Performance
- Regulatory
- Economic (external shocks)
- Operational
- Financial
The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Accounts for the period ended
In the view of the Board, there has been a further change to the fundamental nature of these risks since the previous report. As the Brexit transition period ended on
Directors’ responsibility statement
The Disclosure and Transparency Rules (‘DTR’) of the
The Directors confirm to the best of their knowledge that:
- The summarised set of financial statements has been prepared in accordance with FRS 104
- The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year)
- The summarised set of financial statements gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.2.4R
- The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein)
Going concern
The Company’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report of the Annual Report. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the Chairman’s Statement, Strategic Report and Notes to the Accounts of the
In addition, the Annual Report includes the Company’s objectives, policies and processes for managing its capital; its financial
risk management objectives; details of its financial instruments; and its exposures to credit risk and liquidity risk.
The Company has considerable financial resources together with investments and income generated therefrom across a variety of industries and sectors. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully.
The Directors have reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
The Half-Yearly Financial Report has not been audited nor reviewed by the auditors.
On behalf of the Board
Chairman
Financial Statements
Unaudited Income Statement
for the six months ended
Six months ended | Six months ended | Nine months ended | |||||||
(Unaudited) | (Unaudited) | (Audited) | |||||||
Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Investment holding gains | - | 8,253 | 8,253 | - | 9,990 | 9,990 | - | 20,372 | 20,372 |
Realised gains/(losses) on investments | - | 4,280 | 4,280 | - | - | - | - | (623) | (623) |
Income | 190 | - | 190 | 324 | - | 324 | 67 | - | 67 |
Investment management fees | (290) | (871) | (1,161) | (295) | (884) | (1,179) | (434) | (1,301) | (1,735) |
Other expenses | (291) | - | (291) | (270) | - | (270) | (490) | - | (490) |
(Loss)/return on ordinary activities before taxation | (391) | 11,662 | 11,271 | (241) | 9,106 | (8,865) | (857) | 18,448 | 17,591 |
Taxation | - | - | - | - | - | - | - | - | - |
(Loss)/return on ordinary activities after taxation | (391) | 11,662 | 11,271 | (241) | 9,106 | (8,865) | (857) | 18,448 | 17,591 |
(Loss)/return per share: | (0.2)p | 6.0p | 5.8p | (0.1)p | 4.7p | 4.6p | (0.4)p | 9.5p | 9.1p |
During the period, the Company shortened its accounting period from
The total columns of this statement are the profit and loss account of the Company and the revenue and capital columns represent supplementary information.
All revenue and capital items in the above Income Statement are derived from continuing operations. No operations were acquired or discontinued in the period.
The Company has no recognised gains or losses other than those shown above, therefore no separate statement of total recognised gains and losses has been presented.
The Company has only one class of business and one reportable segment, the results of which are set out in the Income Statement and Balance Sheet.
There are no potentially dilutive capital instruments in issue and, therefore, no diluted earnings per share figures are relevant. The basic and diluted earnings per share are, therefore, identical.
Unaudited Balance Sheet
at
Registered Number: 03506579
As at | As at | As at | |
30 June | 30 September | 31 December | |
2021 | 2020 | 2020 | |
£'000 | £'000 | £'000 | |
(Unaudited) | (Unaudited) | (Audited) | |
Fixed assets | |||
Investments held at fair value through profit or loss | 104,338 | 76,196 | 92,441 |
Current assets | |||
Debtors | 149 | 971 | 162 |
Cash and cash equivalents | 19,258 | 34,884 | 27,862 |
Total current assets | 19,407 | 35,855 | 28,024 |
Creditors | |||
Amounts falling due within one year | (214) | (124) | (111) |
Net current assets | 19,193 | 35,731 | 27,913 |
Net assets | 123,531 | 111,927 | 120,354 |
Capital and reserves | |||
Called-up share capital | 1,938 | 1,944 | 1,939 |
Share premium account | 68,344 | 80,002 | 67,458 |
Capital redemption reserve | 539 | 518 | 523 |
Special distributable reserve | 58,921 | 56,678 | 68,307 |
Capital reserve | (48,505) | (50,874) | (51,914) |
Revaluation reserve | 42,294 | 23,659 | 34,041 |
Equity Shareholders' funds | 123,531 | 111,927 | 120,354 |
Net Asset Value per share: | 63.8p | 57.6p | 62.1p |
Unaudited Reconciliation of Movements in Shareholders’ Funds
for the six months ended
Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve1 | Capital reserve1 | Revaluation reserve | Total | |
£’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
As at | 1,939 | 67,458 | 523 | 68,307 | (51,914) | 34,041 | 120,354 |
Share issues in the period | 15 | 918 | - | - | - | - | 933 |
Expenses in relation to share issues | - | (32) | - | - | - | - | (32) |
Repurchase of shares | (16) | - | 16 | (909) | - | - | (909) |
Realised gains on disposals of investments | - | - | - | - | 4,280 | - | 4,280 |
Investment holding gains | - | - | - | - | - | 8,253 | 8,253 |
Dividends paid | - | - | - | (8,086) | - | - | (8,086) |
Management fees charges to capital | - | - | - | - | (871) | - | (871) |
Revenue loss for the period | - | - | - | (391) | - | - | (391) |
As at | 1,938 | 68,344 | 539 | 58,921 | (48,505) | 42,294 | 123,531 |
1Reserve is available for distribution, total distributable reserves at
Unaudited Cash Flow Statement
for the six months ended
Six months ended | Six months ended | Nine months ended | |
30 June 2021 | 31 December 2020 | ||
£'000 | £'000 | £'000 | |
(Unaudited) | (Unaudited) | (Audited) | |
Cash flow from operating activities | |||
Loan interest received on investments | 205 | 29 | 136 |
Dividends received from investments | 21 | - | - |
Deposit and similar interest received | 1 | 26 | 28 |
Investment management fees paid | (1,161) | (1,179) | (1,283) |
Secretarial fees paid | (79) | (79) | (119) |
Other cash payments | (216) | (147) | (349) |
Net cash outflow from operating activities | (1,229) | (1,350) | (1,587) |
Cash flow from investing activities | |||
Purchase of investments | (5,087) | - | (6,532) |
Net proceeds on sale of investments | 5,652 | - | 46 |
Net cash inflow/(outflow) from investing activities | 565 | - | (6,532) |
Cash flow from financing activities | |||
Expenses of fund raising | (32) | (19) | (28) |
Repurchase of own shares | (756) | (795) | (1,085) |
Equity dividends paid | (7,152) | (4,824) | (4,824) |
Net cash outflow from financing activities | (7,940) | (5,638) | (5,937) |
Net outflow in cash in the period | (8,604) | (6,988) | (14,010) |
Reconciliation of net cash flow to movement in net funds | |||
Decrease in cash and cash equivalents for the period | (8,604) | (6,998) | (14,010) |
Net cash and cash equivalents at start of period | 27,862 | 41,872 | 41,872 |
Net cash and cash equivalents at end of period | 19,258 | 34,884 | 27,862 |
Analysis of changes in net debt
At | Cash Flow | At | |
£’000 | £’000 | £’000 | |
Cash and cash equivalents | 27,862 | (8,604) | 19,258 |
Notes to the Unaudited Half-Yearly Results
for the six months ended
- The Unaudited Half-Yearly Financial Report has been prepared on the basis of the accounting policies set out in the statutory accounts of the Company for the nine months ended
31 December 2020 . Unquoted investments have been valued in accordance with IPEV Valuation Guidelines. - These are not statutory accounts in accordance with S436 of the Companies Act 2006 and the financial information for the six months ended
30 June 2021 and30 September 2020 has been neither audited nor formally reviewed. Statutory accounts in respect of the nine months ended31 December 2020 have been audited and reported on by the Company’s auditors and delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under S498(2) or S498(3) of the Companies Act 2006. No statutory accounts in respect of any period after31 December 2020 have been reported on by the Company’s auditors or delivered to the Registrar of Companies. - Copies of the Unaudited Half-Yearly Financial Report will be sent to Shareholders via their chosen method and will be available for inspection at the
Registered Office of the Company at The Shard,32 London Bridge Street ,London , SE1 9SG. - Net Asset Value per share
The Net Asset Value per share is based on net assets at the end of the period and on the number of shares in issue at the date.
Net Assets | Shares in Issue | |
£123,531,000 | 193,758,305 | |
£111,927,000 | 194,420,778 | |
£120,354,000 | 193,859,213 |
- Return per share
The weighted average number of shares used to calculate the respective returns are shown in the table below.
Shares | |
Six months ended | 193,660,150 |
Six months ended | 194,054,492 |
Nine months ended | 194,099,123 |
Earnings for the period should not be taken as a guide to the results for the full year.
- Income
Six months ended | Six months ended | Nine months ended | |
30 June 2021 | |||
£'000 | £'000 | £'000 | |
Loan stock interest | 168 | 278 | 19 |
Dividends | 21 | - | - |
Deposit and similar interest received | 1 | 26 | 28 |
Other income | - | 20 | 20 |
Total income | 190 | 324 | 67 |
- Investments held at fair value through profit or loss
£'000 | |
Book cost as at | 58,400 |
Investment holding gains | 34,041 |
Valuation at | 92,441 |
Movements in the period: | |
Purchases | 5,087 |
Disposal proceeds1 | (5,652) |
Realised gains | 4,280 |
Investment holding gains2 | 8,182 |
Valuation at | 104,338 |
Book cost at | 62,115 |
Investment holding gains | 42,223 |
Valuation at | 104,338 |
1The Company received £5,651,756 from the disposal of investments during the period. The book cost of these investments when they were disposed was £1,372,002. These investments have been revalued over time and until they were sold any unrealised gains or losses were included in the fair value of the investments.
2Investment holding gains in the income statement include the deferred consideration debtor of £71,703, relating to
- Related party transactions
No Director has an interest in any contract to which the Company is a party other than their appointment and payment as Directors.
- Transactions with the manager
During the period, administration services of a total cost of £79,000 (
At
END
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