Unicorn AIM VCT plc ("The Company")
Half-Yearly Report Announcement for the six months ended 31 March 2016
Investment Objective
The Company's objective is to provide Shareholders with an attractive return from a diversified portfolio of investments, predominantly in the shares of AIM quoted companies, by maintaining a steady flow of dividend distributions to Shareholders from the income as well as capital gains generated by the portfolio.
It is also the objective that the Company should continue to qualify as a Venture Capital Trust, so that Shareholders benefit from the taxation advantages that this brings. To achieve this at least 70% of the Company's total assets are to be invested in qualifying investments of which 30% by VCT value (70% for funds raised after 6 April 2011) must be in ordinary shares carrying no preferential rights (save as permitted under VCT rules) to dividends or return of capital and no rights to redemption.
Venture Capital Trust Status
The Company has satisfied the requirements for approval as a Venture Capital Trust (VCT) under section 274 of the Income Tax Act 2007 (ITA). It is the Directors' intention to continue to conduct the business of the Company so as to maintain compliance with that section.
Financial Highlights
For the six months ended 31 March 2016
Fund Performance
Ordinary shares |
Total assets (£million) |
Net asset value per share (NAV) (p) |
Cumulative dividends paid per share (p) * |
NAV total return to Shareholders since merger * per share (p) |
Share price
(p) |
31 March 2016 |
139.5 |
150.9 |
32.3 |
183.2 |
130.5 |
30 September 2015 |
124.6 |
155.6 |
26.0 |
181.6 |
137.0 |
31 March 2015 |
99.1 |
137.0 |
26.0 |
163.0 |
123.0 |
30 September 2014 |
92.2 |
143.7 |
20.0 |
163.7 |
130.0 |
Portfolio Summary
Allocation of qualifying investments by market sector |
|
||
|
As at 31 March 2016 % |
As at 30 September 2015 % |
|
Software & computer services |
24.9 |
23.6 |
|
Pharmaceutical & biotechnology |
21.8 |
22.8 |
|
Financial services |
8.3 |
10.8 |
|
Travel & leisure |
6.8 |
8.4 |
|
Healthcare equipment & services |
6.4 |
3.2 |
|
Food & drug retailers |
5.3 |
6.7 |
|
Aerospace & defence |
5.2 |
5.7 |
|
Media |
5.0 |
4.6 |
|
Industrial engineering |
4.4 |
3.1 |
|
Real estate investment & services |
2.6 |
2.8 |
|
Support services |
2.5 |
2.7 |
|
Retail |
2.0 |
2.4 |
|
Technology hardware & equipment |
1.4 |
0.1 |
|
Industrial transportation |
1.3 |
1.7 |
|
Chemicals |
1.2 |
0.7 |
|
Household goods & home construction |
0.4 |
0.3 |
|
Electronic & electrical equipment |
0.3 |
0.4 |
|
Oil equipment & services |
0.2 |
- |
|
Total |
100.0 |
100.0 |
|
Chairman's Statement
I am pleased to present the Half-Yearly Report (the "Report") of the Company for the six month period ended 31 March 2016.
As at 31 March 2016, the net assets of the Company were £139.5 million, which represents an increase of £40.4 million when compared with the end of the same period last year and growth of £14.9 million since the start of the current financial year. This growth in total net assets has arisen through a combination of well-supported Offer for Subscription, the successful completion of the acquisition of the assets of Rensburg AIM VCT ("Rensburg") and a period of solid, if unspectacular, performance from the existing portfolio.
During the period under review, the Company's unaudited Net Asset Value (NAV) per share decreased from 155.6 pence to 150.9 pence. After taking into account the 2014/2015 final dividend of 6.25 pence per share, which was paid in February 2016, this represents a positive total return for the period of 1%.
This performance compares favourably to a total return of -1.3% from the FTSE AIM All-Share Index over the same period. Fully listed larger companies fared better, with the FTSE All-Share Index delivering a positive total return of 3.5% in the six months to 31 March 2016.
Acquisition of the assets and liabilities of Rensburg
On 12 January 2016, the Company announced the completion of a transaction to acquire the assets and liabilities of Rensburg, pursuant to a Scheme of Reconstruction. The net assets acquired amounted to just over £11.5 million. Unicorn Asset Management Limited, our Investment Manager has paid the majority of the costs incurred by both the Company and by Rensburg in relation to the Scheme. Rensburg was an AIM focused VCT with the majority of its total assets invested in VCT qualifying, AIM-listed companies. The Company already held investments in many of these companies. The acquisition has therefore resulted in the Company acquiring additional qualifying investments to support VCT qualification, while also increasing total net assets, over which the fixed costs are spread, thereby benefitting all Shareholders.
I would like to take this opportunity to welcome all former Rensburg shareholders.
Offer for Subscription
A £10 million Offer for Subscription was opened in early February 2016 and closed the same month after quickly becoming over-subscribed. Once again, on behalf of the Board, I welcome all new Shareholders and thank existing Shareholders for their continued support.
Dividends
The final dividend of 6.25 pence per share, for the financial year ended 30 September 2015, was paid to Shareholders on 19 February 2016. This equates to a tax free yield of 4.1% based on the period end NAV of 150.9 pence per share.
Historically, the Board has proposed dividends on an annual basis. Given the Company's recent growth however, the Board has decided to review this policy with a view to introducing an interim dividend payment during the 2016/2017 financial year. I would welcome Shareholders' views on this subject. A short survey will be posted on the Company's website www.unicornaimvct.com and I would encourage all Shareholders to take a moment to express their preference.
Qualifying Investments
A review of the ten most meaningful contributions to performance (both positive and negative) follows:-
Animalcare Group (+12.0%) is a leading supplier of veterinary medicines. Animalcare performed well during the first six months of its financial year. Sales grew by 2.7% to over £7.1 million, when compared with the six month period ended 31 December 2014. Although earnings fell by 8.8%, this was due to continued investment to support future growth, reflected in a £0.2 million increase in overheads and a three-fold increase in product development costs to £0.6 million. Despite this significant additional investment, the group's strong financial position was maintained, with net cash balances increasing to £6.1 million (2014: £5.0 million) as at 31 December 2015.
Anpario (-19.7%) is a specialist producer of natural feed additives that promote animal health, hygiene and good nutrition. For the financial year ended 31 December 2015, Anpario recorded a profit before tax from continuing operations of £3.6 million (2014: £3.1 million). This growth in earnings was achieved despite a modest decline in group revenues through focusing on sales of higher margin feed additive products. Anpario's cash balances also grew strongly and, at the financial year end, net cash amounted to £6.6 million (2013: £4.8 million). The management team aims to grow the business organically in key markets around the world by developing local commercial teams. Investment in senior staff will therefore result in increased overhead costs over the short term in order to support stronger and sustained long term growth.
Avingtrans (+30.4%) designs, manufactures and supplies critical components to the global aerospace, energy and medical sectors. Interim results for the six months ended 30 November 2015 saw revenues decline by 5% to £26.3 million (H1 2015: £27.5 million), as year on year reductions in activity caused by the fall in the oil price were fully absorbed. On a positive note, profitability recovered strongly as a result of the completion of a restructuring programme. Adjusted profits before tax increased by 38%, to £1.2 million (H1 2015: £0.8 million), while the interim dividend was increased by 10% to 1.1 pence per share. Shortly after the period end, Avingtrans announced an intention to dispose of its Aerospace division for a net amount of £52 million. The proceeds of this proposed transaction will enable the return of substantial value to shareholders, while also providing additional investment for the Energy and Medical businesses where the board believes there is a realistic prospect of delivering significant further value.
Belvoir Lettings (-25.2%) is one of the UK's largest property franchises. Group revenues for the financial year ended 31 December 2015 increased by 19% to £6.9 million (2014: £5.9 million), while operating profits grew to £1.9 million (2014: £1.0 million). As a consequence of this strong period of trading, the group's year- end cash position improved to £2.7 million (2014: £1.5 million), while bank debt fell to £1.0 million (2014: £1.5 million). The final dividend was maintained at 3.4p (2014: 3.4p) giving a total dividend for the year of 6.8p (2014: 6.8p).
Castleton Technology (+38.0%) is a provider of software and managed services to the public and not-for-profit sectors. Castleton announced interim results for the six months ended 30 September 2015, in which adjusted earnings increased to £1.7 million (H1 2014: loss £0.1 million) on revenues of £8.5 million, including a four month contribution from two acquired businesses; Brixx and Impact. As a result of continued healthy organic growth combined with a series of successful acquisitions, Castleton has now put the building blocks in place to become a leading supplier to the public and not-for-profit sectors, specifically the social housing market.
Crawshaw Group (-7.2%) is a retailer of fresh meat and food-to- go. In April, management released final results for the financial year ended 31 January 2016. In what was a transformative year, Crawshaw delivered record sales growth, with turnover increasing by 51% to £37.1 million (2015: £24.6 million), while adjusted earnings grew by 45% to £2.6 million (2015: £1.8 million). After adding 17 stores during the year, the retail estate now consists of 40 stores and the continued success of the format has encouraged the management team to adopt an accelerated store roll-out strategy in order to establish Crawshaw as a national brand.
Idox (+16.2%) is a leading supplier of software and services to the public and private sectors. At its Annual General Meeting held in February 2016, the Chairman of Idox reported that trading for the current financial year was in line with expectations and that good progress was being made in winning contracts across local government and other segments. The group retains significant financial flexibility to fund further investment and potential acquisitions
Stride Gaming (-17.7%) is a multi-branded online gaming operator. In a recent trading update the Chairman of Stride Gaming, Nigel Payne, confirmed that the business had enjoyed a good start to its financial year, with trading in line with management expectations.
Totally (+23.6%) is a business that has been established to promote health and well-being by empowering individuals to 'self-care'. The business focuses on providing education and coaching, predominantly to NHS patients, who suffer from long- term conditions that may be affecting their ability to work. During the period, the business successfully raised £6.2 million from new and existing investors, including the Company, and completed the acquisition of Premier Physical Healthcare Limited for a maximum consideration of £6.75 million. Premier is a provider of physical healthcare services to both public and private patients.
Tracsis (+14.9%) is a leading provider of software and technology led products and services for the traffic data and transportation industry. In interim results for the six months ended 31 January 2016, management reported revenue growth of 19% to £14.3 million (2015: £12.0 million). Adjusted earnings from continuing operations, increased by 4% to £3.5 million (2015: £3.3 million). Despite significant acquisition costs and investment in new product development, Tracsis ended its first half with net cash balances of £8.0 million (31 January 2015 £10.0 million). An interim dividend payment of 0.5p per share was proposed, representing an increase of 25% on the previous half-year end. The business remains on track to deliver full year earnings in line with market expectations.
Non-Qualifying Investments
The overall performance of the non-qualifying investments was satisfactory in the period. The most notable contributions to performance came from Pinewood Group (+32.4%), Europe's largest provider of stage and studio space, which announced a strategic review including a possible sale of the business and Macfarlane Group (+34.4%), a packaging business, that delivered strong growth in 2015 with sales up 10% to £169.1 million (2014: £153.8 million) and profit before tax of £6.8 million (2014: £5.6 million), a 21% increase on the previous year.
The only material disappointment was delivered by Renold (-50.3%), a leading international supplier of industrial chains, which issued a downbeat trading statement highlighting significant weakening in demand for its products.
Investment Activity
Aside from the acquisition of VCT qualifying and non-qualifying assets from Rensburg, the six month period ended 31 March 2016 saw encouraging levels of investment activity. In total, almost £5.7 million was invested in qualifying and non- qualifying investments.
The Manager's selective approach to new investment has, however, been maintained, with just one new VCT qualifying investment being completed during the period. The total cost of this investment in MaxCyte, a newly AIM listed company focused on the supply of cell engineering technology to biotechnology and pharmaceutical firms, was approximately £1.5 million.
Secondary investments were made in Belvoir Lettings,PhotonStar, Dillistone Group and Totally Plc. The investments in Belvoir, PhotonStar and Totally were confirmed by HMRC as being VCT qualifying. In aggregate, approximately £4.2 million was allocated to these four investments.
Transaction to note - SnackTime plc
SnackTime is a UK snack vending operator. Towards the end of 2015, SnackTime (of which Unicorn AIM VCT Director, Jeremy Hamer is the non-executive chairman), was in financial difficulties and proposed a balance sheet restructuring involving the conversion of debt to equity, together with the issue of new equity. The Company's Board (excluding Mr Hamer) considered the new legislation restricting the investments VCTs can make, which came into effect in November 2015 and took advice from the Company's VCT tax advisers PwC, who confirmed that participating in the restructuring could now jeopardise the Company's VCT status. In order to resolve this issue, the Board agreed to transfer the Company's ownership of its loan stock in SnackTime (which had been valued at £250,000 at the year-end) to the Investment Manager, Unicorn Asset Management, for a nominal amount. In the event that value is realised from the loan stock in due course, 75% of the proceeds will accrue to the Company and 25% to the Investment Manager, a split which the Company was advised as being the minimum acceptable to HMRC to demonstrate effective transfer of ownership. The Company has retained its equity holding in SnackTime ordinary shares which, following the restructuring, were relisted on AIM and were valued at £63,000 as at 31 March 2016 (30 September 2015: Nil).
Outlook
Although the UK economy has continued to grow, recent data suggests that the rate of growth is now slowing markedly. According to data released by the Office for National Statistics (ONS), while business investment increased by a healthy 5.2% between 2014 and 2015, the economy as a whole only grew by 2.3%. This compares to GDP growth of 2.8% reported for 2014. Given that the UK remains a largely services based economy, continued growth remains dependent on increases in consumer spending. In its latest release, the ONS reported that real household disposable income decreased by 0.6% between the third and fourth quarter of 2015. Recently released figures, appear to confirm this trend, with retail sales falling by 1.3% in March 2016. This was the second consecutive monthly drop in sales adding to evidence that GDP growth in the first quarter will weaken compared to the fourth quarter's 0.6% rise.
Job creation remains reasonably strong, unemployment has fallen to pre-recession lows, the savings ratio remains at all-time lows and the introduction of the National Living Wage means that the lowest paid workers should feel the benefits of having at least an additional £20 per week to spend. Logically, these factors should combine to improve consumer confidence and increase spending, however evidence suggests the opposite is happening. It seems possible that the explanation may lie in the uncertainty surrounding the forthcoming referendum on the UK's continued membership of the European Union. This uncertainty also appears to be having an impact on UK equity markets and it is increasingly likely that markets will remain volatile at least until the outcome of the referendum is known.
On a positive note, since year end, the Investment Manager has been able to deploy a significant proportion of the £10 million raised under the subscription offer into VCT qualifying companies.
The Investment Manager remains focused on identifying sensibly valued, well managed and, for the most part, profitable and cash generative businesses with strong leadership positions in niche, growing markets. It is encouraging to note that, despite recent changes to the laws governing State Aid funding, there continues to be a flow of VCT qualifying investment opportunities that meet the Manager's fundamental investment criteria.
Conclusion
Having enjoyed several years of strong performance, it appears likely that the financial year to 30 September 2016 will be one of consolidation.
Total returns in the first half of the period were 1% and the outlook for the remainder of the year remains clouded by referendum uncertainty and a slowing global economy.
The capital base of the Company has strengthened considerably, however, following completion of the acquisition of the assets of Rensburg and the subsequent, fully subscribed, Offer for Subscription. There are several important and obvious benefits that come from maintaining a solid and growing asset base. The Board believe the main advantages include spreading the total fixed costs across a significantly enlarged asset base, improved investment flexibility, better access to deal flow, greater resilience to market fluctuations and greater certainty over the sustainability of future dividend distributions.
The existing portfolio of investments remains in good shape. Many of the investee companies continue to experience sales growth, balance sheets are strengthening and profitability is generally improving. Current valuations should therefore be supported by future earnings growth and, as uncertainty surrounding Britain's place in the EU is resolved, there is scope for a return to more attractive capital growth.
In the meantime, your Investment Manager continues to manage the portfolio prudently. Our three central objectives remain unchanged; capital preservation, the payment of an attractive and sustainable stream of dividend distributions to Shareholders and the delivery of capital growth over the longer term.
Finally, the Company continues to meet comfortably all key HMRC tests governing the retention of VCT status. At the period end, approximately 86% of total assets, net of new monies raised in the last three years and not required to be part of the calculation, and valued in accordance with VCT rules was invested in VCT qualifying companies.
Peter Dicks
Chairman
17 May 2016
In order to achieve the Company's Investment Objective, the Board has agreed an Investment Policy which requires the Investment Manager to identify and invest in a diversified portfolio, predominantly of VCT qualifying companies quoted on AIM that display a majority of the following characteristics:
➢ experienced and well-motivated management;
➢ products and services supplying growing markets;
➢ sound operational and financial controls; and
➢ good cash generation to finance ongoing development allied with a progressive dividend policy.
Asset allocation and risk diversification policies, including maximum exposures, are to an extent governed by prevailing VCT legislation. No single holding may represent more than 15% (by value) of the Company's total investments and cash, at the date of investment.
There are a number of VCT conditions which need to be met by the Company which may change from time to time. The Investment Manager will seek to make qualifying investments in accordance with such requirements.
Where capital is available for investment while awaiting suitable VCT qualifying opportunities, or is in excess of the 70% VCT qualification threshold, it may be invested in cash or invested in money market funds, collective investment vehicles or non-qualifying shares and securities "of quoted and unquoted companies registered in the UK".*
To date the Company has operated without recourse to borrowing. The Board may however consider the possibility of introducing modest levels of gearing up to a maximum of 10% of the adjusted capital and reserves, should circumstances suggest that such action is in the interests of Shareholders.
The Board has overall responsibility for the Company's affairs including the determination of its investment policy. Risk is spread by investing in a number of different businesses across different industry sectors. The Investment Manager is responsible for managing sector and stock specific risk and the Board does not impose formal limits in respect of such exposures. However, in order to maintain compliance with HMRC rules and to ensure that an appropriate spread of investment risk is achieved, the Board receives and reviews comprehensive reports from the Investment Manager and the Administrator on a monthly basis. When the Investment Manager proposes to make any investment in an unquoted company, the prior approval of the Board is required. The Board continues to take the need for transparency and independence seriously. When a conflict arises involving a relationship between any Director and an investee or proposed investee company that Director abstains from any discussion or consideration on any such investment by the Company.
The Administrator, ISCA Administration Services Limited, provides Company Secretarial and Accountancy services to the Company.
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|
Qualifying investments |
Book cost £'000 |
Valuation £'000 |
% of net assets by value * |
AIM quoted investments: |
|
|
|
Abcam plc |
1,768 |
10,460 |
7.5 |
Tracsis plc |
1,584 |
9,300 |
6.7 |
Mattioli Woods plc |
1,680 |
5,708 |
4.1 |
Anpario plc |
1,585 |
5,251 |
3.8 |
Crawshaw Group plc |
1,538 |
5,093 |
3.7 |
Cohort plc |
1,414 |
5,044 |
3.6 |
Animalcare Group plc |
2,423 |
3,854 |
2.8 |
Totally plc |
2,607 |
3,298 |
2.3 |
Idox plc |
1,242 |
3,213 |
2.3 |
Stride Gaming plc |
1,400 |
2,492 |
1.8 |
Avingtrans plc |
996 |
2,390 |
1.7 |
ULS Technology plc |
1,500 |
2,063 |
1.5 |
Sanderson Group plc |
1,360 |
1,947 |
1.4 |
Tristel plc |
878 |
1,881 |
1.3 |
MaxCyte Inc. |
1,500 |
1,693 |
1.2 |
Castleton Technology plc |
464 |
1,617 |
1.2 |
Belvoir Lettings plc |
1,882 |
1,385 |
1.0 |
Access Intelligence plc |
1,667 |
1,333 |
0.9 |
Gama Aviation plc |
760 |
1,260 |
0.9 |
Redcentric plc |
393 |
1,217 |
0.9 |
European Wealth Group plc |
1,758 |
1,209 |
0.9 |
Instem plc |
985 |
1,154 |
0.8 |
HML Holdings plc |
431 |
1,108 |
0.8 |
AB Dynamics plc |
801 |
1,023 |
0.7 |
Pressure Technologies plc |
1,140 |
907 |
0.6 |
Quixant plc |
648 |
864 |
0.6 |
Dods Group plc |
1,176 |
760 |
0.6 |
Plastics Capital plc |
656 |
676 |
0.5 |
Keywords Studio plc |
369 |
624 |
0.5 |
Driver Group plc |
552 |
616 |
0.4 |
Vianet plc |
725 |
600 |
0.4 |
Omega Diagnostics Group plc |
500 |
594 |
0.4 |
eg solutions plc |
706 |
525 |
0.4 |
Hardide plc |
1,000 |
500 |
0.4 |
Surgical Innovations Group plc |
436 |
466 |
0.3 |
Tangent Communications plc |
963 |
456 |
0.3 |
Dillistone Group plc |
356 |
440 |
0.3 |
PhotonStar LED Group plc |
747 |
428 |
0.3 |
19 investments, each valued at less than 0.3% of net assets |
8,130 |
2,232 |
1.6 |
|
50,720 |
85,681 |
61.4 |
Fully listed shares: |
|
|
|
NCC Group plc |
400 |
2,340 |
1.7 |
Braemar Shipping Services plc |
63 |
54 |
0.0 |
|
463 |
2,394 |
1.7 |
Unlisted investments: |
|
|
|
Blue Inc |
2,000 |
2,000 |
1.5 |
The City Pub Company (West) plc |
1,125 |
1,438 |
1.0 |
The City Pub Company (East) plc |
1,125 |
1,438 |
1.0 |
Hasgrove |
1,329 |
1,417 |
1.0 |
Interactive Investor |
1,250 |
1,250 |
0.9 |
Hearstone Inns |
1,113 |
1,113 |
0.8 |
Access Intelligence plc - loan stock |
1,050 |
1,050 |
0.8 |
2 investments, each valued at less than 0.1% of net assets |
651 |
160 |
0.1 |
|
9,643 |
9,866 |
7.1 |
Total qualifying investments |
60,826 |
97,941 |
70.2 |
|
|
|
|
Non-qualifying investments |
|
|
|
AIM quoted investments |
13,112 |
16,298 |
11.7 |
Fully listed UK equities |
7,144 |
8,636 |
6.2 |
Interactive Investor - unlisted |
2,197 |
2,547 |
1.8 |
Unicorn Mastertrust Fund (OEIC) |
1,031 |
2,134 |
1.5 |
Unicorn UK Smaller Companies Fund (OEIC) |
839 |
2,097 |
1.5 |
Unicorn UK Growth Fund (OEIC) |
828 |
2,062 |
1.5 |
Franklin Templeton MidCap |
1,031 |
1,034 |
0.8 |
The City Pub Company (East) plc - preference shares |
1,000 |
1,000 |
0.7 |
The City Pub Company (West) plc - preference shares |
1,000 |
1,000 |
0.7 |
Lloyds Bank plc - preference shares |
267 |
275 |
0.2 |
APC Technology plc - loan stock |
250 |
125 |
0.1 |
Other unlisted investments |
373 |
163 |
0.1 |
Total non- qualifying investments |
29,072 |
37,371 |
26.8 |
Total investments |
89,898 |
135,312 |
97.0 |
Other assets |
|
7,144 |
5.1 |
Current liabilities |
|
(2,940) |
(2.1) |
Net assets |
|
139,516 |
100.0 |
*based on fair value not VCT carrying value
The important events that have occurred during the period under review and the key factors influencing the financial statements are set out in the Chairman's Statement above.
In accordance with DTR 4.2.7, the Directors consider that the principal risks and uncertainties facing the Company have not materially changed since the publication of the Annual Report and Accounts for the year ended 30 September 2015.
The principal risks faced by the Company include, but are not limited to:
• investment and strategic
• regulatory and tax
• operational
• fraud and dishonesty
• financial instruments
• economic
A more detailed explanation of these risks and the way in which they are managed can be found in the Strategic Report on page 9 and in the Notes to the Financial Statements on pages 57 and 58 of the 2015 Annual Report and Accounts - copies can be found via the Company's website, www.unicornaimvct.co.uk.
Directors' Statement of Responsibilities in Respect of the Financial Statements
In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Peter Dicks (Chairman), James Grossman, Jeremy Hamer (Chairman of the Audit Committee) and Jocelin Harris (Senior Independent Director), the Directors, confirm that to the best of their knowledge:
● the condensed set of financial statements, which have been prepared in accordance with FRS 104 "Interim Financial Reporting" give a true and fair view of the assets, liabilities, financial position and profit of the Company for the period ended 31 March 2016, as required by DTR 4.2.4;
● this Half-Yearly Report includes a fair review of the information required as follows;
● the interim management report included within the Chairman's Statement and Investment Portfolio Summary includes a fair review of the information required by DTR 4.2.7 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 facing the Company for the remaining six months of the year; and
● other than the SnackTime note above there were no other related party transactions in the first six months of the current financial year that are required to be disclosed in accordance with DTR 4.2.8.
This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be construed as a profit forecast.
This Half-Yearly Report was approved by the Board of Directors on 17 May 2016 and the above responsibility statement was signed on its behalf by:
Peter Dicks
Chairman
17 May 2016
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Six months ended 31 March 2016 (unaudited) |
Six months ended 31 March 2015 (unaudited) |
Year ended 30 September 2015 (audited) |
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Notes |
Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
Revenue £'000 |
Capital £'000 |
Total £'000 |
Unrealised gains /(losses) on investments |
7 |
- |
1,553 |
1,553 |
- |
(322) |
(322) |
- |
14,384 |
14,384 |
|
|
|
|
|
|
|
|
|
|
|
Realised (losses)/gains on investments |
7 |
- |
(200) |
(200) |
- |
75 |
75 |
- |
470 |
470 |
|
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|
|
|
|
|
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|
Income |
4 |
911 |
- |
911 |
830 |
- |
830 |
1,885 |
- |
1,885 |
|
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|
|
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|
|
|
|
|
Investment management fees |
2 |
(298) |
(895) |
(1,193) |
(221) |
(664) |
(885) |
(477) |
(1,430) |
(1,907) |
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|
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|
|
|
|
|
|
Other expenses |
|
(329) |
- |
(329) |
(263) |
- |
(263) |
(585) |
- |
(585) |
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) on ordinary activities before taxation |
|
284 |
458 |
742 |
346 |
(911) |
(565) |
823 |
13,424 |
14,247 |
|
|
|
|
|
|
|
|
|
|
|
Tax on profit/(loss) on ordinary activities |
3 |
- |
- |
- |
- |
- |
- |
- |
-
|
- |
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) and total comprehensive income on ordinary activities after taxation |
|
284 |
458 |
742 |
346 |
(911) |
(565) |
823 |
13,424 |
14,247 |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share: Ordinary Shares |
5 |
0.34p |
0.54p |
0.88p |
0.51p |
(1.34)p |
(0.83)p |
1.11p |
18.12p |
19.23p |
All revenue and capital items in the above statement derive from continuing operations of the Company.
The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 by the Association of Investment Companies ("AIC SORP").
Other than revaluation movements arising on investments held at fair value through Profit and Loss Account, there were no differences between the profit/(loss) as stated above and at historical cost.
|
Notes |
As at 31 March 2016
(unaudited) £'000 |
As at 31 March 2015
(unaudited) £'000 |
As at 30 September 2015 (audited) £'000 |
Non-current assets |
|
|
|
|
Investments at fair value |
1e & 7 |
135,312 |
95,530 |
122,582 |
|
|
|
|
|
Current assets |
|
|
|
|
Debtors and prepayments |
|
276 |
296 |
367 |
Current investments |
8 |
- |
1 |
1 |
Cash at bank |
|
6,868 |
5,721 |
1,952 |
|
|
7,144 |
6,018 |
2,320 |
Creditors; amounts falling due within one year |
|
(2,940) |
(2,416) |
(286) |
Net current assets |
|
4,204 |
3,602 |
2,034 |
|
|
|
|
|
Net assets |
|
139,516 |
99,132 |
124,616 |
|
|
|
|
|
Share capital and reserves |
|
|
|
|
Called up share capital |
|
925 |
724 |
801 |
Capital redemption reserve |
|
45 |
31 |
37 |
Share premium account |
|
57,785 |
25,864 |
37,206 |
Revaluation reserve |
|
51,053 |
31,394 |
49,322 |
Special distributable reserve |
|
24,949 |
32,662 |
27,927 |
Profit and loss account |
|
4,759 |
8,457 |
9,323 |
|
|
|
|
|
Equity Shareholders' funds |
|
139,516 |
99,132 |
124,616 |
|
|
|
|
|
Basic and diluted net asset value per share of 1p each |
|
|
|
|
Ordinary Shares |
9 |
150.87p |
137.00p |
155.61p |
The financial information for the six months ended 31 March 2016 and the six months ended 31 March 2015 has not been audited.
|
|
|
|
|
|
|
|
|
Called up share capital £'000 |
Capital redemption reserve £'000 |
Share premium account £'000 |
Revaluation reserve £'000 |
Special distributable reserve £'000 |
Profit and loss account £'000 |
Total £'000 |
Six months ended 31 March 2016 |
|
|
|
|
|
||
As at 1 October 2015 |
801 |
37 |
37,206 |
49,322 |
27,927 |
9,323 |
124,616 |
Shares repurchased for cancellation |
(8) |
8 |
- |
- |
(1,122) |
- |
(1,122) |
Shares issued under Offer for Subscription |
61 |
- |
9,314 |
- |
- |
- |
9,375 |
Expenses of shares issued under Offer for Subscription |
- |
- |
(170) |
- |
- |
- |
(170) |
Shares issued as part of Rensburg merger |
71 |
- |
11,435 |
- |
- |
- |
11,506 |
Transfer to special reserve |
- |
- |
- |
- |
(1,856) |
1,856 |
- |
Realisation of previously unrealised valuation movements |
- |
- |
- |
178 |
- |
(178) |
- |
Losses on disposal of investments (net of transaction costs) |
- |
- |
- |
- |
- |
(200) |
(200) |
Net increase in unrealised valuations in the period |
- |
- |
- |
1,553 |
- |
- |
1,553 |
Dividend paid in the period |
- |
- |
- |
- |
- |
(5,431) |
(5,431) |
Investment management fee charged to capital |
- |
- |
- |
- |
- |
(895) |
(895) |
Profit and total comprehensive income after taxation |
- |
- |
- |
- |
- |
284 |
284 |
At 31 March 2016 |
925 |
45 |
57,785 |
51,053 |
24,949 |
4,759 |
139,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Called up share capital £'000 |
Capital redemption reserve £'000 |
Share premium account £'000 |
Revaluation reserve £'000 |
Special distributable reserve £'000 |
Profit and loss account £'000 |
Total £'000 |
Six months ended 31 March 2015 |
|
|
|
|
|
||
As at 1 October 2014 |
642 |
24 |
13,372 |
32,320 |
34,402 |
11,452 |
92,212 |
Shares repurchased for cancellation |
(7) |
7 |
- |
- |
(890) |
- |
(890) |
Shares issued under Offer for Subscription |
89 |
- |
12,734 |
- |
- |
- |
12,823 |
Expenses of shares issued under Offer for Subscription |
- |
- |
(242) |
- |
- |
- |
(242) |
Transfer to special reserve |
- |
- |
- |
- |
(850) |
850 |
- |
Realisation of previously unrealised valuation movements |
- |
- |
- |
(604) |
- |
604 |
- |
Gains on disposal of investments (net of transaction costs) |
- |
- |
- |
- |
- |
75 |
75 |
Net decrease in unrealised valuations in the period |
- |
- |
- |
(322) |
- |
- |
(322) |
Dividend paid in the period |
- |
- |
- |
- |
- |
(4,206) |
(4,206) |
Investment management fee charged to capital |
- |
- |
- |
- |
- |
(664) |
(664) |
Profit and total comprehensive income after taxation |
- |
- |
- |
- |
- |
346 |
346 |
At 31 March 2015 |
724 |
31 |
25,864 |
31,394 |
32,662 |
8,457 |
99,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Called up share capital £'000 |
Capital redemption reserve £'000 |
Share premium account £'000 |
Revaluation reserve £'000 |
Special distributable reserve £'000 |
Profit and loss account £'000 |
Total £'000 |
Year ended 30 September 2015 |
|
|
|
|
|
||
As at 1 October 2014 |
642 |
24 |
13,372 |
32,320 |
34,402 |
11,452 |
92,212 |
Shares repurchased for cancellation |
(13) |
13 |
- |
- |
(1,643) |
- |
(1,643) |
Shares issued under Offer for Subscription |
172 |
- |
24,400 |
- |
- |
- |
24,572 |
Expenses of shares issued under Offer for Subscription |
- |
- |
(566) |
- |
- |
- |
(566) |
Transfer to special reserve |
- |
- |
- |
- |
(4,832) |
4,832 |
- |
Realisation of previously unrealised valuation movements |
- |
- |
- |
2,618 |
- |
(2,618) |
- |
Gains on disposal of investments (net of transaction costs) |
- |
- |
- |
- |
- |
470 |
470 |
Net increase in unrealised valuations in the period |
- |
- |
- |
14,384 |
- |
- |
14,384 |
Dividend paid in the period |
- |
- |
- |
- |
- |
(4,206) |
(4,206) |
Investment management fee charged to capital |
- |
- |
- |
- |
- |
(1,430) |
(1,430) |
Profit and total comprehensive income after taxation |
- |
- |
- |
- |
- |
823 |
823 |
At 30 September 2015 |
801 |
37 |
37,206 |
49,322 |
27,927 |
9,323 |
124,616 |
|
|
|
|
|
|
|
|
The financial information for the six months ended 31 March 2016 and the six months ended 31 March 2015 has not been audited.
|
Notes |
Six months ended 31 March 2016 (unaudited) £'000 |
Six months ended 31 March 2015 (unaudited) £'000 |
Year ended 30 September 2015 (audited) £'000 |
Operating activities |
|
|
|
|
Investment income received |
|
938 |
863 |
1,699 |
Investment management fees paid |
|
(1,193) |
(886) |
(1,907) |
Other cash payments |
|
(293) |
(212) |
(474) |
Net cash outflow from operating activities
|
|
(548) |
(235) |
(682) |
Investing activities |
|
|
|
|
Purchase of investments |
7 |
(3,226) |
(4,903) |
(19,542) |
Sale of investments |
7 |
5,875 |
2,155 |
2,855 |
Net cash inflow/(outflow) from investing activities |
|
2,649 |
(2,748) |
(16,687) |
Equity dividends |
|
|
|
|
Dividend paid |
6 |
(5,431) |
(4,206) |
(4,206) |
Net cash outflow before liquid resource management and financing
|
|
(3,330) |
(7,189) |
(21,575)
|
Financing |
|
|
|
|
Monies received on Rensburg merger |
|
28 |
- |
- |
Shares issued as part of Offer for Subscription (net of transaction costs) |
|
9,339 |
12,630 |
24,000 |
Shares bought back |
|
(1,122) |
(890) |
(1,643) |
Net cash inflow from financing |
|
8,245 |
11,740 |
22,357 |
Management of liquid resources |
|
|
|
|
Decrease in current investments |
|
1 |
- |
- |
Increase in cash |
|
4,916 |
4,551 |
782 |
Reconciliation of net cash flow to movement in net funds |
|
|
|
|
Increase in cash for the period |
|
4,916 |
4,551 |
782 |
Net funds at start of period |
|
1,952 |
1,170 |
1,170 |
Net funds at end of period |
|
6,868 |
5,721 |
1,952 |
|
|
|
|
|
Reconciliation of operating profit/(loss) to net cash outflow from operating activities |
|
|
|
|
Profit/(loss) on ordinary activities before taxation |
|
742 |
(565) |
14,247 |
Net unrealised (gains)/losses on investments |
|
(1,553) |
322 |
(14,384) |
Net (losses)/gains on realisations of investments |
|
200 |
(75) |
(470) |
Transaction costs |
|
(11) |
(7) |
(18) |
Adjustment for non-cash items |
|
(68) |
- |
- |
Decrease/(increase) in debtors |
|
91 |
36 |
(188) |
Increase in creditors |
|
51 |
54 |
131 |
Net cash outflow from operating activities |
|
(548) |
(235) |
(682) |
In order to better reflect the activities of a VCT and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. The revenue column of profit attributable to Shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.
All investments held by the Company are classified as "fair value through profit and loss", in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines, as updated in December 2015. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.
For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional.
Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEVCV guidelines and in accordance with Sections 11 and 12.
All unquoted investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, the following factors will be considered:
(i) Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used.
(ii) In the absence of i), and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:-
a) an earnings multiple basis. The shares may be valued by applying a suitable price-earnings ratio to that company's historic, current or forecast post-tax earnings before interest and amortisation (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Manager compared to the sector including, inter alia, a lack of marketability).
or:
b) where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate. Where the value of an investment has fallen permanently below cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Manager, will agree the values that represent the extent to which an investment loss has become realised. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value.
(iii) Premiums on loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable.
(iv) Where an earnings multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted cash flow or net asset valuation bases may be applied.
f) Short debtors and creditors
The Directors have charged 75% of the investment management fees to the capital reserve.
There is no tax charge for the period, as the Company has incurred taxable losses in the period.
|
Six months ended 31 March 2016 (unaudited) £'000 |
Six months ended 31 March 2015 (unaudited) £'000 |
Year ended 30 September 2015 (audited) £'000 |
|
|
|
|
Dividends |
760 |
737 |
1,610 |
Unicorn managed OEICs |
32 |
12 |
79 |
Bank deposits |
2 |
2 |
5 |
Loan stock interest |
117 |
79 |
191 |
|
|
|
|
|
911 |
830 |
1,885 |
` |
Six months ended 31 March 2016 (unaudited) £'000 |
Six months ended 31 March 2015 (unaudited) £'000 |
Year ended 30 September 2015 (audited) £'000 |
|
|
|
|
Total earnings after taxation |
742 |
(565) |
14,247 |
Basic and diluted earnings per share |
0.88p |
(0.83)p |
19.23p |
|
|
|
|
Net revenue from ordinary activities after taxation |
284 |
346 |
823 |
Revenue earnings per share |
0.34p |
0.51p |
1.11p |
|
|
|
|
|
|
|
|
Total capital return |
458 |
(911) |
13,424 |
Capital earnings per share |
0.54p |
(1.34)p |
18.12p |
Weighted average number of shares in issue in the period |
83,913,551 |
68,089,001 |
74,087,534 |
6. Dividends
|
Six months ended 31 March 2016 (unaudited) £'000 |
Six months ended 31 March 2015 (unaudited) £'000 |
Year ended 30 September 2015 (audited) £'000 |
Final capital dividend of 5.50 pence per share and final income dividend of 0.50 pence per share for the year ended 30 September 2014 paid on 20 February 2015
|
- |
4,206 |
4,206 |
Final capital dividend of 5.25 pence per share and final income dividend of 1.00 pence per share for the year ended 30 September 2015 paid on 19 February 2016 |
5,431 |
- |
- |
|
|
|
|
|
5,431 |
4,206 |
4,206 |
|
Fully Listed £'000 |
Traded on AIM £'000 |
Unlisted ordinary and preference shares £'000 |
Unlisted Loan stock £'000 |
Unicorn OEIC funds £'000 |
Total £'000 |
|
Book cost at 30 September 2015 |
7,294 |
52,181 |
12,570 |
2,150 |
4,704 |
78,899 |
|
Unrealised gains/(losses) at 30 September 2015 |
4,576 |
41,076 |
900 |
(725) |
3,495 |
49,322 |
|
Permanent impairment in value of investments |
- |
(5,059) |
(580) |
- |
- |
(5,639) |
|
Valuation at 30 September 2015 |
11,870 |
88,198 |
12,890 |
1,425 |
8,199 |
122,582 |
|
Purchases at cost |
2,743 |
12,847 |
593 |
- |
1,058 |
17,241 |
|
Sale proceeds |
(2,567) |
(1,257) |
- |
- |
(2,051) |
(5,875) |
|
Realised (losses)/gains |
(70) |
55 |
- |
(250) |
76 |
(189) |
|
Unrealised (losses)/gains in the period |
(672) |
2,136 |
44 |
- |
45 |
1,553 |
|
Closing valuation at 31 March 2016 |
11,304 |
101,979 |
13,527 |
1,175 |
7,327 |
135,312 |
|
Book cost at 31 March 2016 |
7,874 |
63,832 |
13,163 |
1,300 |
3,729 |
89,898 |
|
Unrealised gains/(losses) at 31 March 2016 |
3,430 |
43,206 |
944 |
(125) |
3,598 |
51,053 |
|
Permanent impairment in value of investments |
- |
(5,059) |
(580) |
- |
- |
(5,639) |
|
Valuation at 31 March 2016 |
11,304 |
101,979 |
13,527 |
1,175 |
7,327 |
135,312 |
|
Transaction costs on the purchase and disposal of investments of £11,000 were incurred in the period. These are excluded from realised gains shown above of £189,000, but were included in arriving at losses on realisations of investments disclosed in the Income Statement of £200,000.
The difference between the purchases in Note 7 and that shown in the Cash Flow Statement is £14,015,000. This is the result of a purchase of shares in Totally Plc. amounting to £2,449,000 outstanding at the period end, the investments acquired as a result of the Rensburg merger amounting to £11,498,000 and corporate actions amounting to £68,000. There is no difference between disposals per Note 7 above and that shown in the Cash Flow Statement.
Fair value hierarchy
In accordance with FRS 102 and FRS 104 the Company must disclose the fair value hierarchy of financial instruments. The fair value hierarchy consists of the following three classifications:
Level A - valued using quoted prices in active markets for identical assets.
Level B - valuation by reference to valuation techniques using directly observable inputs other than quoted prices included within Level A.
Level C - valued by reference to valuation techniques using inputs that are not based on observable market data.
The valuation techniques used by the Company are explained in the accounting policies in Note 1.
The majority of the Level C investments are held at cost or recent transaction price and the remaining Level C investments are insignificant therefore no assumptions are disclosed or sensitivity analysis provided.
The table below sets out the Company's fair value hierarchy investments as at 31 March 2016:
|
Level A £'000 |
Level B £'000 |
Level C £'000 |
Total £'000 |
At 31 March 2016 |
|
|
|
|
Equity investments |
113,008 |
- |
11,527 |
124,535 |
Non-equity investments |
275 |
- |
2,000 |
2,275 |
Loan stock investments |
- |
- |
1,175 |
1,175 |
Open ended investment Companies |
7,327 |
- |
- |
7,327 |
Money market funds |
- |
- |
- |
- |
|
|
|
|
|
Total |
120,610 |
- |
14,702 |
135,312 |
|
|
|
|
|
At 31 March 2015 |
|
|
|
|
Equity investments |
78,438 |
- |
9,718 |
88,156 |
Loan stock investments |
- |
- |
1,500 |
1,500 |
Open ended investment Companies |
5,874 |
- |
- |
5,874 |
Money market funds |
1 |
- |
- |
1 |
|
|
|
|
|
Total |
84,313 |
- |
11,218 |
95,531 |
|
|
|
|
|
At 30 September 2015 |
|
|
|
|
Equity investments |
100,068 |
- |
10,890 |
110,958 |
Non-equity investments |
- |
- |
2,000 |
2,000 |
Loan stock investments |
- |
- |
1,425 |
1,425 |
Open ended investment Companies |
8,199 |
- |
- |
8,199 |
Money market funds |
1 |
- |
- |
1 |
|
|
|
|
|
Total |
108,268 |
- |
14,315 |
122,583 |
There have been no transfers during the period between Levels A and B.
A reconciliation of fair value measurements in Level C is set out below:
|
Non-equity investments £'000 |
Equity investments £'000 |
Loan stock investments £'000 |
Total £'000 |
Opening balance at 1 October 2015 |
2,000 |
10,890 |
1,425 |
14,315 |
Purchases |
- |
593 |
- |
593 |
Sales |
- |
- |
- |
- |
Total gains/(losses) included in gains on investments in the Income Statement |
|
|
|
|
- on assets sold |
- |
- |
(250) |
(250) |
- on assets held at the period end |
- |
44 |
- |
44 |
|
|
|
|
|
Closing balance at 31 March 2016 |
2,000 |
11,527 |
1,175 |
14,702 |
These previously comprised an investment in one (31 March 2015: one; 30 September 2015: one) Dublin based OEIC money market fund, managed by Blackrock Investment Management UK Ltd and amounted to £1,000 (31 March 2015: £1,000; 30 September 2015: £1,000). This account was closed during the period.
|
At 31 March 2016 (unaudited) £'000 |
At 31 March 2015 (unaudited) £'000 |
At 30 September 2015 (audited) £'000 |
|
|
|
|
Net assets |
139,516 |
99,132 |
124,616 |
Number of shares in issue |
92,474,500 |
72,360,980 |
80,080,231 |
Net asset value per share |
150,87p |
137.00p |
155.61p |
On 7 April 2016 the Company purchased 200,000 shares for cancellation, representing approximately 0.22% of the issued share capital at a total cost of £263,000, representing 131.5 pence per share.
On 13 May 2016 the Company purchased 275,000 shares for cancellation, representing approximately 0.30% of the issued share capital at a total cost of £368,000, representing 133.8 pence per share.
On 7 April 2016 the Company, as part of the Offer for Subscription, issued 405,935 shares at prices ranging from 151.0989p to 154.7842p raising £613,000 after expenses.
11. Merger with Rensburg
On 11 January 2016 the Company merged with Rensburg AIM VCT plc. At that date it acquired assets totaling £11.75 million and liabilities of £0.25 million. The Company issued 7,075,352 shares to implement the merger.
12. Related party transaction
Details of the transfer of SnackTime loan stock from the Company to the Investment Manager are given in the Chairman's Statement above.
13. Copies of this statement are being sent to Shareholders.
Further copies are available free of charge from the Company Secretary, ISCA Administration Services Limited on 01392 487056, email: unicornaimvct@iscaadmin.co.uk, or from the Company's website: www.unicornaimvct.co.uk.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of this announcement.