Unicorn AIM VCT plc ("the Company")
LEI: 21380057QDV7D34E9870
Interim Management Statement
For the period from 1 April 2018 to 30 June 2018
Introduction
This voluntary Interim Management Statement (IMS) covers the three month period ended 30 June 2018, 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
Following a difficult first quarter of 2018, UK equity markets recovered strongly during the three month period to the end of June.
The FTSE All Share Index recorded a total return of +9.2% during the second quarter of 2018, while the FTSE AIM All Share Index ended the quarter up by +7.2%, on the same total return basis.
The performance of UK equity indices was surprisingly resilient during the quarter under review, despite an increasingly weak and unstable political backdrop. The negotiations with Brussels regarding Britain's exit from the European Union rumble on, while members of the UK's governing Conservative Party appear content to continue fighting amongst themselves. This lack of unity 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, after a sustained rally during 2017, the value of Sterling has again started to weaken when compared to the US Dollar, which should have a beneficial effect on those British businesses that export the majority of their goods and services. This currency tailwind is almost certainly helping to support the valuation of the UK equity market and this is most evident in the FTSE 100 Index, which is mainly composed of large UK businesses that are typically global in scope.
The Company's performance was also positive during the period under review, with Net Asset Value per share increasing by 5.9%. Having started the period at 156.4 pence per share, the unaudited NAV per share as at 30 June 2018 was 165.7 pence per share.
VCT Qualifying Investments
Forty of the VCT qualifying investments held in the portfolio recorded share price gains during the period under review. Of these, nineteen investments generated capital gains in excess of £200,000 each.
Of particular note, were the four largest contributors to performance, which between them generated a combined total of almost £5.5 million in unrealised capital gains during the period.
These were:-
Abcam (+7.7%), a global leader in the supply of life science research tools, is the largest individual holding in the portfolio, representing 10% of total assets at the period end. Abcam continues to trade strongly in multiple international markets and has recently also been benefitting from favourable exchange rates. In a recent trading update, Abcam confirmed that revenues for the financial year ended 30 June 2018 had grown by over 10% and that EBITDA margins were in line with expectations. Abcam will release its full year results in September.
City Pub Group (+32.8%) owns and operates an estate of premium pubs across the southern half of England and Wales. The Group's pub estate comprises over 40 free houses located largely in London, cathedral cities and market towns, each of which is focused on appealing specifically to its local market. In May, City Pub Group released a trading update which confirmed that the business had traded strongly during the first eighteen weeks of its current financial year.
Tracsis (+14.1%), 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. Revenues and profits grew strongly in the first half of Tracsis' financial year and the business remains well positioned to deliver further growth during its second half.
VR Education (+62.8%) is a leading virtual reality technology company focused on the education space. The business floated on AIM in February 2018 and its shares have performed strongly since then, despite an absence of tangible newsflow.
Eight VCT qualifying holdings delivered negative contributions of more than £200,000 each, of which only two cost the VCT more than 0.5% in performance terms.
The two most meaningful detractors from performance were:-
Animalcare (-40.7%), is a pan-European animal health business. During the period, Animalcare released its first financial results since the transformational acquisition of Ecuphar, a Belgian competitor. Although the new management team are confident that the enlarged business will deliver double digit revenue and profit growth during its current financial year, investors remain nervous about the financial implications of a 'bad' Brexit and Animalcare's share price has been under pressure as a result.
ULS Technology (-17.4%), 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 month period ended 31 March 2018, ULS once again increased its share of the UK conveyancing market and delivered strong growth in revenues, underlying profits and an increased dividend. Current trading is challenging however, given reduced instruction levels in the residential housing market. Despite this current issue, the Board of ULS remains positive about the outlook for the business.
Non-Qualifying Investments
The performance of the non-qualifying investments was stable during the period under review. With the exception of Royal Dutch Shell, there were no significant share price movements to report on. The investment in Shell was short term in nature and was made in order to maintain liquidity and in preference to holding excessive levels of cash following the successful Offer for Subscription which closed in November 2017. Shell's share price performed strongly during the period and the VCT's holding was sold in its entirety in June 2018, crystallising a total return on investment of £529k.
Other Material Transactions
One new VCT qualifying investment was made during the period with £1.5 million being allocated to Microsaic Systems, a developer of mass spectrometry instruments that are designed to improve the efficiency of pharmaceutical research and manufacturing.
Additional VCT qualifying shares, to the value of £0.5 million, were acquired in Access Intelligence, as part of a placing of new shares.
Shares were acquired in Lloyds Banking Group and Legal & General, which are both non-qualifying, short term investments and are being held for liquidity purposes.
Top Ten Holdings at 30 June 2018
Stock |
% of fund |
|
|
Abcam |
10.0 |
Tracsis |
4.8 |
Anpario |
4.7 |
Mattioli Woods |
3.9 |
City Pub Group |
3.7 |
Maxcyte |
3.4 |
Tristel |
2.6 |
ULS Technology |
2.5 |
Victrex |
2.5 |
Keywords Studios |
2.2 |
Total |
40.3 |
Share Buy-Backs
During the period from 1 April 2018 to 30 June 2018, the Company bought back 741,000 of its own Ordinary Shares for cancellation, at an average price, including costs of 141.7 pence per share. The average discount to underlying Net Asset Value at which these shares were purchased was 12.3%.
There were 117,833,174 Ordinary Shares in issue as at 30 June 2018.
Dividends
As previously advised, the Board has declared an interim dividend of 3.0 pence per share in respect of the Company's half-year ended 31 March 2018. This interim dividend will be paid on 10 August 2018 to Shareholders on the register at the close of business on 20 July 2018.
Material Events
There were no material events during the period from 1 April 2018 to 30 June 2018.
Chris Hutchinson
Unicorn Asset Management
Investment Manager
31 July 2018