Voluntary Interim Management Statement

RNS Number : 2689L

Unicorn AIM VCT PLC

17 July 2017

 

Unicorn AIM VCT plc ("the Company")

Interim Management Statement 

For the period from 1 April 2017 to 30 June 2017

Introduction

This voluntary Interim Management Statement (IMS) covers the three month period ended 30 June 2017, together with relevant information up to the date of publication. 

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.

Performance

The performance of UK equity markets was modestly positive during the second quarter of 2017.

The FTSE All Share Index recorded a total return of +1.4% during the period under review, while the FTSE AIM All Share Index ended the quarter up by +4.3%, on the same total return basis.

UK equity indices continue to demonstrate resilience, despite continuing uncertainty surrounding BREXIT and an increasingly volatile political situation. The recent General Election highlighted deep divisions within political parties and amongst the UK population as a whole. The resulting hung parliament inevitably means it will be more difficult for the government to act decisively to resolve key issues such as immigration and trade between the UK and the remaining EU Member States. As a consequence, it is now generally accepted that the outlook for continued UK economic growth has become less positive, which may well impact on the performance of the UK equity market in due course. In the meantime, the continued weakness of Sterling compared to the world's other major currencies is having a beneficial effect on those British businesses that export their goods and services internationally. This currency tailwind is almost certainly helping to support UK equity markets and is most evident in the FTSE 100 Index, which is mainly composed of large UK businesses that are global in scope.        

The Company's overall performance was stable during the period under review, with Net Asset Value per share remaining essentially unchanged. Having started the period at 162.4 pence per share, the unaudited NAV per share as at 30 June 2017 was 162.2 pence per share.

VCT Qualifying Investments

Thirty one of the VCT qualifying investments held in the portfolio recorded share price gains during the period under review. Of these, ten investments generated capital gains in excess of £150,000 each.

Of particular note, were the five largest contributors to performance, which between them generated a combined total of almost £5 million in realised and unrealised capital gains during the period under review.

These were:-

Abcam (+17.9%), a global leader in the supply of life science research tools, is the largest individual holding in the portfolio, representing 9.0% of total assets at the period end. Abcam continues to trade strongly in multiple international markets and has also been benefitting from favourable exchange rates following the collapse in the value of Sterling after the BREXIT vote in June last year. 

Anpario (+10.5%) is an international producer and distributor of natural feed additives for animal health, hygiene and nutrition. Anpario has delivered strong sales growth in its financial year to date, which is directly attributable to a significant investment in sales and marketing capability made during 2016.

ECSC Group (+8.8%) is a provider of Cyber Security services. ECSC floated on AIM in December 2016 with the intention of investing the capital raised in a rapid expansion of the sales and delivery teams. This organic growth strategy is working although it is now taking longer than originally expected to convert leads into sales. Revenues for its current financial year are therefore expected to be lower than originally anticipated. ECSC's share price has been under pressure since a trading statement was released on 30 June 2017.

Hardide (+92.9%), a developer and provider of advanced surface coating technology, announced results for its half year ended 31 March 2017 during the period under review. The results included a meaningful increase in revenues, which indicate that demand for Hardide's product is improving.

ULS Technology (+26.0%), a provider of online technology platforms for the UK conveyancing market, released its full year financial results toward the end of the period under review. During the 12 months to 31 March 2017, ULS has successfully increased its share of the UK conveyancing market, while current trading and instruction levels are reported as being buoyant.

Fifteen VCT qualifying holdings delivered negative contributions of more than £150,000 each.

Of these, three investee companies experienced share price falls that were directly related to unexpectedly poor trading or specific operational issues, while the remainder experienced share price weakness linked to general market uncertainty and weak investor sentiment.

In absolute terms the five largest detractors from performance were:-

Animalcare (-14.8%), is a veterinary medicines and animal products business. During the period, Animalcare announced the successful completion of a placing of new shares at a discounted price of 350 pence per share. The placing raised gross proceeds of approximately £30.0 million for Animalcare, which, after costs, are to be solely used to help finance the acquisition of a European competitor, The Ecuphar Group. In the short term, Animalcare's share price has experienced a downward adjustment to reflect the discounted nature and dilutive effect of the fundraising. It is anticipated however, that the acquisition will result in material value creation for shareholders over time.  

Directa Plus (-41.0%) is one of the world's larger producers and suppliers of graphene-based products for use in consumer and industrial markets. In the thirteen month period since the company floated on AIM, Directa Plus has gained significant new customers and seen existing customers launch new products that incorporate their G+ graphene based products. Production capacity has also been improved as has development and engineering capability. While the company continues to make good progress, it has nonetheless fallen behind initial forecasts for revenue growth, which in turn delays the point at which the business can be expected to reach break-even in terms of profitability. This delay in reaching sustainable profitability, increases the likelihood that the business will require a further injection of capital. As a consequence, Directa's share price has experienced a period of sustained weakness.

IDOX (-13.2%) is a leading supplier of specialist information management solutions and services. In financial results for the six months ended 30 April 2017, IDOX reported strong growth in revenues, while profits were down somewhat as a result of a significant but planned increase in investment in digital services. The outlook for the remainder of IDOX's financial year is encouraging given the reported strong visibility of orders combined with the expected realisation of benefits from increased investment.

Maxcyte (-13.0%) is a global company focused on the discovery, development, manufacturing and commercialisation of next-generation, cell-based medicines. In the period under review Maxcyte announced and completed a placing, which raised £20.0 million before costs. The net proceeds of the placing will be used to accelerate Maxcyte's growth strategy and execute on the significant commercial opportunities available. The Company participated in this latest fundraising, acquiring £1.65m worth of new VCT qualifying ordinary shares.

Tracsis (-11.7%), a leading provider of software and technology led products and services for the traffic data and transportation industry, released interim results shortly before the period under review  commenced. Although revenues grew strongly in the first half of its financial year, the management team have made particular reference to significant seasonality within some of the Group's divisions. This seasonal influence means that forecasts for full year profitability are now far more dependent on continued strong trading in the second half of Tracsis' financial year. As a result, share price performance has been weak of late.

Non-Qualifying Investments

The performance of the non-qualifying investments was stable during the period under review, with an absence of any notable newsflow or significant share price movements to report on.

Material Transactions

One new VCT qualifying investment was made during the period. Approximately £1.2 million was allocated to Escape Hunt, a global 'escape game' company, which reversed into an AIM-listed cash shell in May 2017.

Additional VCT qualifying shares, to the value of £1.65 million, were acquired in Maxcyte, as part of a placing of new shares. 

The only outright sales in the period were Easyjet, Lloyds Banking Group and Persimmon, which were non-qualifying, short term investments held for liquidity purposes. The total proceeds from these disposals amounted to just over £10.1 million, while the realised total return was £998,000.

A number of partial disposals were made during the period. The purpose of such disposals is threefold; to help manage liquidity requirements, to ensure stock specific risk is contained and to lock in capital profits for future distribution to shareholders via dividend payments.

Top Ten Holdings at 30 June 2017

Stock	% of fund
Abcam	9.0
Mattioli Woods	4.6
Anpario	4.2
Maxcyte	3.9
Tracsis	3.8
Animalcare	3.6
Cohort	3.1
ULS Technology	2.8
ECSC Group	2.7
IDOX	2.4
Total	40.1%

Share Buy-Backs

During the period from 1 April 2017 to 30 June 2017, the Company bought back 586,247 of its own Ordinary Shares for cancellation, at an average price, including costs of 143.8 pence per share.

There were 99,957,864 Ordinary Shares in issue as at 30 June 2017.

Dividends

As previously advised, the Board has adopted a new policy of payment of two dividends a year and it has declared an interim dividend of 3.0 pence per share in respect of the Company's half-year ended 31 March 2017. This interim dividend will be paid on 11 August 2017 to Shareholders on the register at the close of business on 21 July 2017.

Material Events

On 13 July 2017, the Company announced its intention to launch an Offer for Subscription to raise up to £30 million of new capital, together with an over-allotment option of up to a further £20 million. The prospectus, which will contain the full details and terms and conditions of the Offer, is expected to be available in late July 2017.

In recognition of this potentially substantial increase to the Company's net assets and, following discussions with the Board, the Manager, Unicorn Asset Management, has agreed to waive its entitlement to possible future performance incentive fees. The existing Performance Incentive Arrangement will therefore be terminated.  All other aspects of the Investment Management Arrangements remain unchanged.

There were no other material events during the period from 1 April 2017 to 30 June 2017.

Chris Hutchinson

Unicorn Asset Management

Investment Manager

17 July 2017

 

END

 

 

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