Proven VCT plc : Half-yearly report

ProVen VCT plc

Half-Yearly Report for the six months ended 31 August 2013

Financial Summary

	31 Aug 2013	31 Aug 2012	28 Feb 2013
	Pence	Pence	Pence
New Ordinary Shares
Net asset value per share ("NAV")	98.4	101.7*	103.3
Dividends paid per share since conversion/ consolidation	5.0	-	-
Total return per £1 invested	165.7	164.8	165.6

*rebased in respect of the share consolidation that took place on 30 October 2012.

Chairman's Statement
Introduction
I am pleased to present my report for the six months ended 31 August 2013. Although general conditions remain challenging, the Company has been able to make continued progress in terms of securing further profitable exits.

Net asset value
As at 31 August 2013, the net asset value ("NAV") per Share stood at 98.4p, an increase of 0.1p per share or 0.1% (after adjusting for the dividend of 5p per share paid on 2 August 2013) since the year end.

Venture capital investments
The Company made three follow on investments at a total cost of £1.4 million. There were two significant disposals that took place in the period. The sale of the investment in Fjordnet realised a gain against original cost of £3.3 million and also has the potential for further proceeds over the next year. The investment in the salad bar chain, Tossed, was also sold, producing a gain against original cost of £320,000. In addition, there were several loan stock redemptions which took place at par value or slightly above, and the receipt of deferred consideration in respect of a historic disposal which had been valued at nil.

In reviewing the investment valuations at the period end, the Board has agreed a number of adjustments.  The net effect of the movements was an unrealised loss of £63,000, alongside net realised gains in the period of £158,000. Further details of the investment activity are set out in the Investment Manager's Report below.

Results and dividends
The Income Statement shows a loss on ordinary activities after taxation for the Company during the period of £108,000 (£174,000 revenue return and £282,000 capital loss).

An interim dividend of 2.5p per share will be paid on 15 November 2013 to Shareholders on the register at 25 October 2013.  

Shareholders are reminded that the Company operates a Dividend Reinvestment Scheme ("DRIS") for Shareholders that wish to have their dividends reinvested in new shares and obtain further income tax relief on those shares.  If you are not currently registered for the DRIS and wish to have your dividends paid in the form of new shares, DRIS forms are available from the www.provenvcts.co.uk website or by contacting Beringea on 020 7845 7820.  Shareholders will need to be registered for the DRIS prior to 25 October 2013 to ensure that they will be eligible to receive the forthcoming dividend as new shares.

New board appointment
Shareholders will be aware that ProVen VCT has grown in size in recent years and now has net assets approaching £50 million. During this period of growth, it has become clear that the Board could function more efficiently and effectively by increasing the number of independent non-executive directors from two to three.  Accordingly, the board undertook an exercise and identified an excellent candidate who joined the Board on 30 July 2013.

Lorna Tilbian is an Executive Director and Head of the Media Sector at Numis Corporation plc, where she has worked since 2001. Previously she has had roles at Sheppards, SG Warburg and WestLB Panmure. Lorna is highly respected in the media sector, an area in which ProVen VCT has significant exposure.

My fellow board members and I believe that Lorna's skills and experience are a valuable addition and I welcome her to the Board.

Share buybacks
The Company continues to have a policy of purchasing its own shares that become available in the market in order to help provide liquidity to those Shareholders that need it.

The Board monitors the market in its own shares as well as trends amongst other VCTs. Shareholders will be aware from my statement in the Annual Report that the Company has now appointed Panmure Gordon as its corporate broker. The Board is pleased to note that this move has already significantly reduced the spread on the Company's shares and, as a result, is providing more reliable pricing for Shareholders seeking to buy or sell shares. Furthermore, the Board has decided to reduce the discount at which it expects to buy in shares in the market from a 10% discount to a 5% discount to the latest published NAV with immediate effect.

During the period, the Company purchased 396,845 shares, through the normal buyback facility, at an average price of 91p per share; these shares were subsequently cancelled. As reported previously, the Company also offered an enhanced share buyback facility during the period whereby 4.8 million shares were purchased from shareholders at 102.7p per share and 4.7 million new shares were issued at 105.9p per share.

Shareholders who are considering selling their shares may wish to consider contacting Panmure Gordon prior to any sale. Panmure is able to confirm the price at which they will buy in shares.

Outlook
Your Board remains pleased with progress made by the Company and satisfied that the existing portfolio offers potential for further capital growth and profitable realisations. Additional comfort is taken from the fact that there are now some indications that the UK economy is starting to make some steps towards recovery.

With funds available for new investment, the Board is reassured that the Manager continues to have a steady pipeline of potential new opportunities and expects to see several new investments be completed over the remainder of the year, including in some of the niche sectors where the Company has had significant success in the past. A new fundraising offer is also expected to launch shortly, giving Shareholders a further opportunity to invest in the Company.

Andrew Davison
Chairman

Investment Manager's Report
Introduction
We have pleasure in presenting our half yearly report to 31 August 2013 for ProVen VCT plc.

Portfolio activity and valuation
At 31 August 2013, the Company's investment portfolio comprised holdings in 28 companies, of which 26 were unquoted and 2 were quoted on AIM, and £22.4 million in cash. The venture capital portfolio valuation of £24.6 million represents an overall uplift of 18% on the original acquisition cost of £20.9 million. Whilst there have been a number of strong performers within the portfolio, it is reassuring that this uplift is not dependent on a small number of companies: 18 companies, or almost 65% of the portfolio by number, are valued at or above cost. This is during a time when general economic conditions have been particularly difficult and finance for both businesses and consumers has been constrained.

Investments during the first six months of the financial year totalled £1.4 million, comprising further investments of £1.1 million in Monica Vinader, £210,000 in Utility Exchange Online ("UEO") and £75,000 in APM Healthcare. All these investments were to support further growth of the businesses.  The investment in Monica Vinader was part of a £2.5 million funding round which will be used primarily to open new stand-alone Monica Vinader stores, following the success of the first such store which opened in London's Mayfair in 2011.  UEO will use the additional funding for investment in marketing initiatives, with the objective of increasing its already rapidly growing customer base.  APM Healthcare has already opened 18 pharmacies in doctors' surgeries across the UK. The further funding is part of a total funding round of £300,000 which will enable it to continue this roll-out.

One of the most significant developments during the period was the sale of portfolio company Fjordnet, which delivered a four times return on the Company's equity investment over a four and a half year period.  This continues a list of notable successes in the digital media sector alongside Mergermarket, ILG Digital, Steak Media and Saffron Media. Tossed was sold to management in April generating a return of 36% on the initial investment in three years.

Campden Media was restructured during the period with the division which focuses on the wealth management sector being divested.  ProVen VCT now holds an increased equity interest in the company which is now a specialist healthcare marketing and communications business.  It also holds a secured loan in the wealth management business.  

We continue to see a good flow of companies seeking funding to support their growth plans and expect to make a number of new investments over the next few months.  In the meantime, we are looking at ways of increasing the return from the cash awaiting investment and being held to fund future dividends, share buy backs and expenses, without significantly increasing the risk profile of this portion of the portfolio.  

In July, shareholders approved a change in the investment policy of the Company, to enable it to invest some of its assets in debt and debt related securities of growth companies. We have recently recruited a new investment manager who has significant experience in this area, with the objective of building a portfolio of debt-based investments.

Outlook
Recent macroeconomic news on the UK economy has been encouraging, although arguably much remains to be done to get the economy on a sustainable footing. Whilst such news provides grounds for cautious optimism for both portfolio company earnings growth and potential exit opportunities, we remain focussed on identifying investment opportunities that can prosper no matter what the economic environment. Some of these will be existing "best in class" smaller companies whilst others may be taking advantage of new technologies and trends that create new markets.

We are pleased with the overall progress of the existing portfolio over the period and look forward to reporting on further developments in the next Annual Report.  

Beringea LLP

Unaudited Balance Sheet as at 31 August 2013

	31 Aug 2013		31 Aug 2012		28 Feb 2013
	£'000		£'000		£'000
Fixed assets
Investments	24,610		27,648		31,103
Current assets
Debtors	211		151		283
Current investments	-		6,200		-
Cash at bank and in hand	22,404		12,160		16,777
	22,615		18,511		17,060
Creditors: amounts falling due within one year	(371)		(390)		(356)
Net current assets	22,244		18,121		16,704
Net assets	46,854		45,769		47,807
Capital and reserves
Called up share capital	4,764		5,874		4,572
Capital redemption reserve	3,320		751		2,795
Share premium account	28,343		21,216		21,570
Share capital to be issued	-		-		597
Special reserve	2,041		9,311		8,127
Capital reserve - realised	3,825		2,310		1,303
Revaluation reserve	4,758		6,137		8,405
Revenue reserve	(197)		170		438
Equity shareholders' funds	46,854		45,769		47,807
Net asset value per share:	98.4p		101.7p*		103.3p

* rebased in respect of the share consolidation and conversions that took place on 30 October 2012.

Unaudited Income Statement for the six months ended 31 August 2013

	Six months ended 31 Aug 2013				Six months ended 31 Aug 2012				Year ended 28 Feb 2013
	Revenue	Capital	Total		Revenue	Capital	Total		Total
	£'000	£'000	£'000		£'000	£'000	£'000		£'000
Income	541	-	541		981	-	981		1,554
Gains on investments	-	95	95		-	1,654	1,654		2,508
	541	95	636		981	1,654	2,635		4,062
Investment management fee	(123)	(368)	(491)		(112)	(333)	(445)		(920)
Other expenses	(244)	(9)	(253)		(171)	-	(171)		(395)
Return/(loss) on ordinary activities before taxation	174	(282)	(108)		698	1,321	2,019		2,747
Tax on ordinary activities	-	-	-		-	-	-		-
Return/(loss) attributable to equity shareholders	174	(282)	(108)		698	1,321	2,019		2,747
Basic and diluted (loss)/ gain per share	0.4p	(0.6p)	(0.2p)		1.6p*	3.1p*	4.7p*		6.2p

* rebased in respect of the share consolidation and conversions that took place on 30 October 2012

Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 August 2013

	31 Aug 2013		31 Aug  2012		28 Feb 2013
	£'000		£'000		£'000
Opening shareholders' funds	47,807		36,434		36,434
Proceeds from share issues	7,538		12,764		13,924
Share issue costs	(50)		(702)		(766)
Purchase of own shares	(5,357)		(1,540)		(1,923)
Movement in share capital to be issued	(597)		(3,206)		(2,609)
Total recognised gains for the period	(108)		2,019		2,747
Dividends	(2,379)		-		-
Closing shareholders' funds	46,854		45,769		47,807

Unaudited Cash Flow Statement for the six months ended 31 August 2013

		Six months ended 31 Aug 2013		Six months ended 31 Aug 2012		Year ended 28 Feb 2013
	Note	£'000		£'000		£'000
Net cash outflow from operating activities	A	(116)		(659)		(43)
Capital expenditure
Purchase of investments		(1,371)		(1,000)		(4,309)
Disposal of investments		7,959		563		1,270
Net cash inflow/(outflow) from capital expenditure		6,588		(437)		(3,039)
Equity distributions paid		(2,379)		-		-
Management of liquid resources
Withdrawal from liquidity funds		-		-		6,200
Net cash inflow from liquid resources		-		-		6,200
Net cash inflow/(outflow) before financing		4,093		(1,096)		3,118
Financing
Proceeds from share issue		7,538		12,764		10,718
Share issue costs		(50)		(702)		(766)
Purchase of own shares		(5,357)		(1,542)		(1,923)
Share capital to be issued		(597)		(3,206)		597
Proceeds received on behalf of a co-investor		-	-	-	-	(909)
Net cash inflow from financing		1,534		7,314		7,717
Increase in cash	B	5,627		6,218		10,835
Notes to the cash flow statement:
A Net cash flow from operating activities
(Loss)/ return on ordinary activities before taxation		(108)		2,019		2,747
Gains on investments		(95)		(1,654)		(2,508)
Decrease/(increase) in debtors		72		92		(41)
Increase/(decrease) in creditors		15		(1,116)		(241)
Net cash outflow from operating activities		(116)		(659)		(43)
B Analysis of net funds
Beginning of period		16,777		5,942		5,942
Net cash inflow		5,627		6,218		10,835
End of period		22,404		12,160		16,777

Summary of Investment Portfolio as at 31 August 2013

	Cost	Valuation	Valuation  movement  in the period	% of portfolio by value
	£'000	£'000	£'000
Top ten venture capital investments (by value)
Espresso Group Limited	1,317	3,414	175	7.3%
Think Limited	1,606	2,954	(443)	6.3%
SPC International Limited	2,021	2,582	173	5.5%
Monica Vinader Limited	1,447	2,177	95	4.6%
Donatantonio Limited	1,396	2,128	(264)	4.5%
Blis Media Limited	482	1,308	189	2.8%
Chess Technologies Limited	600	1,037	346	2.2%
Utility Exchange Online Limited	970	970	-	2.1%
Charterhouse Leisure Limited	700	960	136	2.0%
Cognolink Limited	949	949	-	2.0%
	11,488	18,479	407	39.3%
Other venture capital investments	9,406	6,131	(470)	13.0%
	20,894	24,610	(63)	52.3%
Cash at bank and in hand		22,404		47.7%
Total		47,014		100.0%

Other venture capital investments at 31 August 2013 comprise: Eagle Rock Entertainment Group Limited, Campden Media Limited, APM Healthcare Limited, Matssoft Limited , Pilat Media Global plc, Skills Matter Limited, Speed-Trap Holdings Limited, Campden Wealth Limited, Inskin Media Limited, Cross Solar PV Limited, Cinergy International Limited, UBC Media Group plc, Senselogix Limited, Dianomi Limited, Long Eaton Healthcare Limited, Baby Innovations S.A. t/a Steribottle, Sports Holdings Limited and Vigilant Applications Limited.

With the exclusion of Pilat Media Global plc and UBC Media Group plc which are quoted on AIM, all venture capital investments are unquoted.

Summary of Investment Movements for the six months ended 31 August 2013

Additions	Cost
	£'000
Monica Vinader Limited	1,086
Utility Exchange Online Limited	210
APM Healthcare Limited	75
	1,371

Disposals

		Market
		value at		Gain	Realised
	Cost	1 March 2013	Disposal proceeds	against  cost	gain in period
	£'000	£'000	£'000	£'000	£'000
Fjordnet Limited	1,675	4,939	4,939	3,264	-
Tossed Limited	1,226	1,546	1,546	320	-
Campden Media Limited	647	647	647	-	-
Cross Solar PV Limited	598	598	598	-	-
Donatantonio Limited	71	71	92	21	21
Steak Media Limited	-	-	135	135	135
Isango! Limited	-	-	2	2	2
	4,217	7,801	7,959	3,742	158

Of the investments above, Steak Media Limited and Isango! Limited were realised in prior periods but received proceeds in the current period in excess of the amounts previously accrued.

Notes to the Unaudited Financial Statements
1. The unaudited half-yearly results cover the six months to 31 August 2013 and have been prepared in accordance with UK Generally Accepted Accounting Practice ("UK GAAP"). Where presentational guidance set out in the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" revised January 2009 ("SORP") is consistent with the requirements of UK GAAP, the Directors have sought to prepare the financial statements on a consistent basis compliant with the recommendations of the SORP.

2. All revenue and capital items in the Income Statement derive from continuing operations.

3. There are no recognised gains or losses other than those disclosed in the Income Statement.

4. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

5. The comparative figures are in respect of the six months ended 31 August 2012 and the year ended 28 February 2013.

6. Return per share for the period has been calculated on the following:

Revenue return per share based on:
Net revenue return after taxation (£'000)	174
Capital return per share based on:
Net revenue return after taxation (£'000)	(282)
Weighted average number of shares in issue	47,302,677

7. NAV per share for the period has been calculated on the following:

Net assets (£'000)	46,854
Number of shares in issue at period end	47,635,371

8. Dividends

		Six months to 31 Aug 2013				Six months to 31 Aug 2012				Year ended 28 Feb 2013
		Revenue	Capital	Total		Revenue	Capital	Total		Total
Pence		£'000	£'000	£'000		£'000	£'000	£'000		£'000
Dividends paid in period
2013 Interim	5.00	809	1,570	2,379		-	-	-		-

9. Reserves

	Capital Redemption  reserve				Share premium account	Share capital to be issued	Special  reserve	Capital reserve  - realised	Revaluation  reserve	Revenue  reserve
	£'000				£'000	£'000	£'000	£'000	£'000	£'000
At 1 March 2013	2,795				21,570	597	8,127	1,303	8,405	438
Share issue				-	6,823	(597)	-	-	-	-
Share issue costs				-	(50)	-	-	-	-	-
Share capital to be issued				-	-	-	-	-	-	-
Purchase of own shares			523		-	-	(5,357)	-	-	-
Gains on investments			-		-	-	-	158	(63)	-
Expenses capitalised			-		-	-	-	(377)	-	-
Retained revenue			-		-	-	-	-	-	174
Dividends paid	-				-	-	(1,570)	-	-	(809)
Transfer between reserves				2	-	-	841	2,741	(3,584)	-
At 31 August 2013		3,320			28,343	-	2,041	3,825	4,758	(197)

The Special reserve, Capital reserve-realised and Revenue reserve are all distributable reserves. The Revaluation reserve includes losses of £3,070,000 which are included in the calculation of distributable reserves. Total distributable reserves are £2,599,000.

10. Contingent liabilities, guarantees and financial commitments
The Company has no contingent liabilities, guarantees and financial commitments at 31 August 2013.

11. Controlling party and related party transactions
 In the opinion of the Directors there is no immediate or ultimate controlling party.

Malcolm Moss is a Partner of Beringea LLP. Beringea LLP was the Company's Investment Manager during the year. During the 6 months ended 31 August 2013, £491,000 was payable to Beringea LLP in respect of these services. At the period end the Company owed Beringea LLP £237,000.

Beringea LLP, acted as promoter for the Share offers during the period. The fees in the period amounted to £71,000 out of which it paid the costs of the offer including initial commissions. At the period end the company owed Beringea LLP £nil in respect of these services.

12. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the year ended 28 February 2013 have been extracted from the financial statements for that year, which have been delivered to the Registrar of Companies; the Auditor's report on those financial statements was unqualified.

13. The Directors confirm that, to the best of their knowledge, the half-yearly financial statements have been prepared in accordance with the "Statement: Half-Yearly Financial Reports" issued by the UK Accounting Standards Board and the half-yearly financial report includes a fair review of the information required by:

a. DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

b. DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period, and any changes in the related party transactions described in the last annual report that could do so.

14. Risks and uncertainties
Under the Disclosure and Transparency Directive, the Board is required, in the Company's half-yearly results, to report on principal risks and uncertainties facing the Company over the remainder of the financial year.

The Board has concluded that the key risks facing the Company over the remainder of the financial year are as follows:

i. investment risk associated with investing in small and immature businesses;
ii. investment risk arising from volatile stock market conditions and their potential effect on investment valuation; and
iii. failure to maintain approval as a VCT.

In the case of (i), the Board is satisfied with the Company's approach. The Investment Manager follows a rigorous process in vetting and careful structuring of new investments and, after an investment is made, close monitoring of the business. In respect of (ii), the Company seeks to hold a diversified portfolio. However, the Company's ability to manage this risk is quite limited, primarily due to the restrictions arising from the VCT regulations.

The Company's compliance with the VCT regulations is continually monitored by the Administrator, who reports regularly to the Board on the current position. The Company also retains PricewaterhouseCoopers to provide regular reviews and advice in this area. The Board considers that this approach reduces the risk of a breach of the VCT regulations to a minimal level.

15. Going concern
The Company has sufficient financial resources at the period end, and holds a diversified portfolio of investments. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook.

The Directors confirm that they are satisfied that the Company has adequate resources to continue in business for the foreseeable future. For this reason, they believe that the Company continues to be a going concern and that it is appropriate to apply the going concern basis in preparing the financial statements.

16. Copies of the unaudited half-yearly results will be sent to Shareholders. Further copies can be obtained from the Company's Registered Office and will be available for download from www.provenvcts.com and www.downing.co.uk.

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Source: Proven VCT plc via Thomson Reuters ONE

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