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RNS

Half-year Report

Released 12:13 15-May-2018

RNS Number : 1504O
Income & Growth VCT (The) PLC
15 May 2018
 

THE INCOME & GROWTH VCT PLC


HALF YEAR REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2018

The Income & Growth VCT plc ("the Company") today announces the half-year results for the six months ended 31 March 2018.

As at 31 March 2018:

Net assets: £83.58 million

Net asset value ("NAV") per share: 79.28 pence

 

Financial Highlights

Results for the six months ended 31 March 2018

-           Net asset value total return per share was 1.3% for the six months.

-           Share price total return per share was 1.4% for the six months.

-           The Board has declared an interim dividend in respect of the current year of 2.50 pence per share to be paid to shareholders on 21 June 2018.

 

-           The Company made three new investments and three follow-on investments totalling £3.10 million during the six months.

 

Performance summary

The table below shows the recent past performance of the Company's existing class of shares for each of the last five years, and the current year to date.

 

Reporting date

 

 

 

 

 

As at

Net assets

NAV per share

Share price¹

Cumulative dividends paid per share

Cumulative total return per share to shareholders²

Dividends paid and proposed in respect of each year

 

(NAV basis)

(Share price basis)

(£ m)

(p)

(p)

(p)

(p)

(p)

(p)

31 March 2018

83.58

79.28

71.00

105.50

184.78

176.50

2.504

30 September 2017

64.35

81.24

73.00

102.50

183.74

175.50

21.00

30 September 2016

70.84

98.51

88.80

80.50

179.01

169.30

10.00

30 September 2015

75.20

106.38

93.50

68.50

174.88

162.00

12.00

30 September 2014

69.31

114.60

103.503

50.50

165.10

154.00

18.00

30 September 2013

60.47

113.90

99.50

40.50

154.40

140.00

10.00

1     Source: Panmure Gordon & Co (mid-market price).    

2     Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (share price basis) plus cumulative dividends paid since launch of the current share class.

3     The share price at 30 September 2014 has been adjusted to add back the dividend of 8.00 pence per share paid on 30 October 2014, as the listed share price was quoted ex this dividend at the year-end.

4     An interim dividend of 2.50 pence per share, referred to in the Financial Highlights above, is payable to shareholders on 21 June 2018.

 

Chairman's Statement

I am pleased to present the Company's Half-Year Report for the six months ended 31 March 2018.

 

Overview

The half-year has again seen steady progress and a small positive return for the period, which is detailed in the Performance section below, and a continuation in the rate of growth capital investments made since the change in Investment Policy approved by shareholders in February 2016.

 

Twelve growth capital investments have now been completed in accordance with the Investment Policy, in response to the VCT legislation introduced by the Finance (No 2) Act 2015.  Most recently, additional changes to VCT legislation that were proposed in the 2017 Autumn Budget Statement were enacted in March 2018.  Further details and comments on these changes are set out in the Summary of VCT Regulations in the Half-Year Report and under the 'Industry and regulatory developments' section of my statement below. 

 

The Investment Adviser continues to report a healthy pipeline of growth capital opportunities. Meanwhile, the existing MBO focused portfolio constructed under the previous VCT rules has continued to perform steadily.

 

We are delighted with the strong support from investors for our recent fundraising, which was fully subscribed in March.  The Board appreciates the continued support from existing shareholders and at the same time welcomes new shareholders.

 

Performance

The Company's NAV total return per share was 1.3% for the six months to 31 March 2018 (2017: 2.0%) while the total share price return was 1.4% (2017: 1.9%).

 

The Cumulative NAV total return per share (being the closing net asset value plus total dividends paid to date) has increased to 184.78 pence compared to 183.74 pence at the year end. This represents an increase of 0.6% over the period.

 

Investment portfolio

The portfolio has performed satisfactorily during the period, increasing in value by 1.2% (2017: 1.5%) on a like-for-like basis. The aggregate portfolio saw a net increase of £1.81 million in realised gains against £1.25 million in unrealised losses over the six month period. The portfolio was valued at £47.11 million at the period-end (30 September 2017:  £48.03 million).

 

During the six months under review, the Company invested a total of £3.10 million, (2017: £4.07 million, including £0.72 million via a company preparing to trade) into six (2017: five) investments.  Three of these investments were into new businesses; Proactive Investors, a provider of investor media services; Super Carers Limited, an online platform connecting people seeking home care; and Hemmels Limited, a restorer of classic cars. 

 

The Company received cash proceeds of £4.63 million during the six month period, mostly attributable to the sale of the Company's investment in Gro-Group Holdings Limited in December 2017, an excellent result.

 

Details of these transactions and the performance of the portfolio are contained in the Investment Review and the Investment Portfolio Summary in the Half-Year Report.

 

Revenue account

The results for the period are set out in the Unaudited Condensed Income Statement and show a revenue return (after tax) of 0.92 pence per share (2017: 1.42 pence per share). The revenue return for the period of £0.86 million has decreased from last year's comparable figure of £1.02 million. This decrease is mainly due to a fall in income receivable arising from the realisation of Entanet as well as a provision against loan interest receivable for two companies which are currently experiencing a challenging trading environment.

 

Dividends

The Board continues to be committed to endeavouring to provide an attractive dividend stream to shareholders, and is pleased to declare an interim dividend of 2.50 pence per share for the year ending 30 September 2018, comprising 0.80 pence from income and 1.70 pence from capital.  This dividend will be paid on 21 June 2018 to shareholders on the Register on 25 May 2018 and will bring cumulative dividends paid per share to 108.00 pence.

 

Shareholders are encouraged to ensure that Link, the Company's Registrar, has up-to-date details for them and to check whether they have received all dividends payable to them. We are aware that a number of dividends remain unclaimed by shareholders and whilst we continue to endeavour to contact shareholders if this is the case, we cannot guarantee that we will be able to do so if the Registrars do not have up-to-date contact details.

 

Dividend Investment Scheme

The Company's Dividend Investment Scheme ("the Scheme") is a convenient, easy and cost effective way for shareholders to build up their shareholding in the Company. Instead of receiving cash dividends, shareholders can elect to receive new shares in the Company. By opting to receive a dividend in this manner, there are three benefits to shareholders:

 

-    The dividend remains tax free;

 

-    Shareholders are allotted new shares in the Company which will, subject to their particular circumstances, attract VCT tax reliefs applicable for the tax year in which the shares are allotted. The tax relief currently available to investors in new VCT shares is 30% for the 2018/19 tax year for investments up to £200,000 in any one tax year; and

 

-    The Scheme also has one particular advantage. Under its terms, a member is able to re-invest at an advantageous price, being the average market price of the shares for the five business days prior to the dividend being paid. This price is likely to be at a discount of 10% to the underlying net asset value (provided that this is greater than 70% of the latest published net asset value per share).

 

Shareholders wishing to join the Scheme should submit a mandate form to Link Asset Services, the Scheme Administrator, by no later than, Wednesday, 6 June 2018, to ensure that they receive the above dividend as shares. Details of where to obtain an application form can be found under Shareholder Information in the Half-Year Report.

 

Industry and regulatory developments

As mentioned in my overview, the 2017 Autumn Budget Statement outlined the key findings from the Patient Capital Review, which was tasked with identifying and tackling factors considered to be adversely affecting the supply of longer-term capital to small and developing firms.  These findings have resulted in a number of legislative changes to the VCT scheme which include measures to exclude purely tax motivated investments where capital is not at risk (that is, principally seeking to preserve investors' capital) and to encourage VCTs to put their funds to work faster.

 

Your Board notes these changes, some of which place further restrictions on the way investments may be structured. However, they are not expected to materially affect the Company's present investment approach.

 

A summary of the current VCT regulations is included in the Summary of VCT Regulations in the Half-Year Report.

 

Liquidity

The recent fundraising round, which closed fully subscribed in March 2018 raising £25 million, has provided the Company with sufficient liquidity to meets its cash needs and maintain the current rate of investment in the medium term.  It is unlikely the Company will seek to raise further funds in the current 2018/19 tax year.

 

Cash available for investment

The Board continues to monitor credit risk in respect of its cash balances and to prioritise the security and protection of the Company's capital. Cash and liquidity fund balances as at 31 March 2018 amounted to £35.95 million. This figure included £31.32 million held in money market funds with AAA credit ratings and £4.63 million held in deposit accounts with a number of well-known financial institutions across a range of maturities. In addition, the investment portfolio contained £1.82 million in companies preparing to trade that also hold cash in money market funds.

 

Share buy-backs

During the six months ended 31 March 2018, the Company bought back and cancelled 1,173,968 of its own shares, representing 1.5% (2017: 0.1%) of the shares in issue at the beginning of the period, at a total cost of £0.85 million (2017: £0.03 million) inclusive of expenses.

 

It is the Company's policy to cancel all shares bought back in this way. The Board regularly reviews its buyback policy and currently seeks to maintain the discount at which the Company's shares trade at around 10% below the latest published NAV.

 

Shareholder communications

May I remind you that the Company has its own website which is available at www.incomeandgrowthvct.co.uk.

 

The Investment Adviser held its eighth annual Shareholder Event in January 2018 which, from the feedback submitted, was well received by Shareholders. The event included presentations on the investment activity and performance of all the Mobeus VCTs. I would like to thank those Shareholders who attended for helping to make it a success. The next Event will take place in February 2019 and Shareholders will be sent further details and an invitation nearer the time.

 

Outlook

UK growth is expected to remain modest due to subdued real consumer spending growth.  The environment is characterised by uncertainty which in turn will lead to continuing economic volatility.  The invested portfolio is well positioned against this backdrop as it is robustly funded using conservative levels of third party bank debt alongside the Company's funds. UK interest rates are forecast to remain at low levels, albeit some small rises are predicted for the balance of the year.  We believe that there is unlikely to be a step change in economic outlook until there is greater clarity on the UK's post-Brexit relationship with the EU.

 

Your Board remains of the opinion that your Company is well positioned to take advantage of the strong demand for growth capital investment, despite the uncertainties faced within the UK economy.  The portfolio has a solid foundation of investments made under the previous MBO strategy, and the Investment Adviser continues to source interesting growth capital investment opportunities to complement the portfolio. Mobeus has continued to recruit additional experienced growth capital investors into its team.  

 

Once again, I would like to take this opportunity to thank all Shareholders for their continued support.

 

Colin Hook

Chairman

15 May 2018

 

Investment Policy

The Company's policy is to invest primarily in a diverse portfolio of UK unquoted companies. Investments are generally structured as part loan and part equity in order to receive regular income and to generate capital gain upon sale.

 

Investments are made selectively across a number of sectors, principally in established companies.

 

The Company's cash and liquid resources are held in a range of instruments of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised.

 

VCT regulation

The Investment Policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC.

 

Amongst other conditions, the Company may not invest more than 15% of its investments (by VCT value at the time of investment) in a single company or group and must have at least 70% by VCT value of its investments throughout the period in shares or securities comprised in VCT qualifying holdings of which a minimum overall of 30% by VCT value (70% for funds raised after 6 April 2011) must be in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules). In addition, although the VCT can invest less than 30% (70% for funds raised after 6 April 2011) of an investment in a specific company in ordinary shares it must have at least 10% by VCT value of its total investments in each VCT qualifying company in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules).

 

The companies in which investments are made must have no more than £15 million of gross assets at the time of investment and £16 million immediately following the investment to be classed as a VCT qualifying holding.

 

Asset Mix

The Company initially holds its funds in a portfolio of interest bearing investments and deposits. The investment portfolio of qualifying investments is built up over a three year period with the aim of investing and maintaining at least 70% of net funds raised in qualifying investments.

 

Risk diversification and maximum exposures

Risk is spread by investing in a number of different businesses across different industry sectors. To reduce the risk of high exposure to equities, each qualifying investment is structured to achieve the optimum balance between loan stock and equity to provide protection against downside risk alongside the best potential overall returns.

 

Co-investment

The Company is entitled to invest alongside other VCTs advised by Mobeus Equity Partners LLP that have a similar investment policy, normally on a pro rata to net assets basis.

 

Borrowing

The Company's articles of association permit borrowing of up to 10% of the adjusted capital and reserves (as defined therein). However, it has never borrowed and the Board has currently no plans to undertake any borrowing.

 

Investment Review

 

New investments in the half-year

A total of £1.77 million was invested into three new investments during the period under review as detailed below.

 

Company

Business

Date of Investment

Amount of new investment (£m)

Proactive Investors

Investor media services

January 2018

0.45

Proactive Investors specialises in up-to-the-minute multi-media news provision, events organisation, digital services and investor research. Proactive provides breaking news, commentary and analysis on hundreds of small-cap listed companies and pre-IPO businesses across the globe, 24/7. The investment will enable Proactive to expand its services into the US market, which is the largest global market in the world.  The company's audited accounts for the year ended 30 June 2017 show turnover of £3.99 million and a profit before interest, tax and amortisation of goodwill of £0.53 million.

Super Carers

Online care provision

March 2018

0.65

Super Carers provides an online platform connecting people, typically family members seeking home care for their elderly parents, with independent carers.  Carers and care-seekers manage care directly thus reducing the administrative burden and the need for care managers, enabling care to be delivered with greater flexibility and more cost effectively.  The company's audited accounts for the year ended 31 March 2017 show revenues of £0.18 million and a loss before interest, tax and amortisation of £0.72 million.

Hemmels

Classic car restoration

March 2018

0.67

Hemmels specialises in the sourcing, restoration, selling and servicing of high value classic cars.  Hemmels currently focusses on classic Mercedes Benz, and plans to expand into the Porsche marque under a separate brand.  The investment will enable Hemmels to proceed with its expansion plans and secure sufficient development stock.  Hemmels generated £1.21 million of revenues and a £0.28 million loss before interest, tax and amortisation in the year ended 31 December 2017.

 

Further investments in existing portfolio companies in the half-year

A total of £1.33 million was invested into three existing portfolio companies during the period under review as detailed below.

 

Company

Business

Date of Investment

Amount of new investment (£m)

BookingTek

A provider of direct booking systems to major hotel groups

November 2017

0.09

London-based BookingTek provides software that enables hotels to reduce their reliance on third-party booking systems through an enterprise-grade, real-time booking platform for meeting rooms and restaurant reservations. BookingTek's existing clients include two of the world's top 10 hotel groups and the UK's largest hotel chain. The company's latest audited accounts for the year ended 31 July 2016 show turnover of £2.03 million and a loss before interest, tax and amortisation of goodwill of £0.29 million.

MPB

Online marketplace for used camera and video equipment

December 2017 and February 2018

0.62

Mpb is Europe's leading online marketplace for used camera and video equipment.  Based in Brighton, its custom-designed pricing technology enables Mpb to offer both buy and sell services through the same platform and offers a one-stop shop for all its customers. Having expanded into the US (opening a New York office) and German markets as part of the initial VCT investment round, this follow-on investment, alongside funds provided by the Proven VCTs, is to support its continued growth plan. Having doubled its sales over the last year, this investment will give the company sufficient capital to achieve its next planned expansion.  The company's latest audited accounts for the year ended 31 March 2017 show turnover of £13.20 million and a loss before interest, tax and amortisation of goodwill of £0.45 million.

Tapas Revolution

Restaurant chain

March 2018

0.62

Based in London, Tapas Revolution is a leading Spanish restaurant chain in the casual dining sector focussing on shopping centre sites with high footfall.  Having opened its first restaurant in Shepherd's Bush Westfield, with the support of the initial VCT investment in 2017, the business now operates six established restaurants.  This follow on investment is to finance the opening of several new locations around the UK. The company's latest audited accounts for the year ended 25 October 2016 show a turnover of £4.25 million and a loss before interest, tax and amortisation of goodwill of £0.25 million.

 

Realisation in the half-year

The Company realised its investment in Gro-Group Holdings during the period under review, generating cash proceeds totalling £4.33 million as detailed below.

 

Company

Business

Period of investment

Total cash proceeds over the life of the investment / Multiple over cost

Gro-Group

Manufacturer and distributor of baby sleep products

March 2013 to December 2017

£5.43 million

2.3 times cost

The Company sold its investment in Gro-Group for £4.19 million in December 2017.  Since this date, deferred consideration of £0.14 million has also been received.  Including this deferred consideration, the Company has realised a gain over the life of the investment of £3.03 million.  This equates to a multiple of 2.3 times the investment cost of £2.40 million and an IRR of 21%.

 

Loan stock repayments and other receipts

Loan stock repayments totalled £0.16 million for the period, all from TPSFF Holdings Limited (formerly Plastic Surgeon). Other receipts of £0.14 million were also received; primarily from Alaric Systems, a company realised in a prior period.

 

Investment Portfolio Summary

as at 31 March 2018


Total cost at

Valuation at

Additional

Valuation at


31 March 2018

(unaudited)

30 September 2017

investments

in the period

31 March 2018

 

(unaudited)


(audited)


£

£

£

£

Tovey Management Limited (trading as Access IS)

3,313,932

3,880,197

-

3,812,894

Provider of data capture and scanning hardware





Manufacturing Services Investment Limited (trading as Wetsuit Outlet)

3,205,182

3,205,182

-

3,205,182

Online retailer in the water sports market





Virgin Wines Holding Company Limited

2,745,503

3,483,880

-

2,954,610

Online wine retailer





ASL Technology Holdings Limited

2,722,106

2,845,619

-

2,766,762

Printer and photocopier services





EOTH Limited (trading as Equip Outdoor Technologies)

1,383,313

1,809,879

-

2,576,214

Distributor of branded outdoor equipment and clothing including the Rab and Lowe Alpine brands





Media Business Insight Holdings Limited

3,666,556

2,443,888

-

2,226,136

A publishing and events business focussed on the creative production industries





MPB Group Limited

1,423,974

1,023,613

619,119

2,178,431

Online marketplace for used photographic equipment





CGI Creative Graphics International Limited

1,943,948

1,301,638

-

2,004,548

Vinyl graphics to global automotive, recreation vehicle and aerospace markets





Preservica Limited

935,000

935,000

-

1,666,214

Seller of proprietary digital archiving software





Vian Marketing Limited (trading as Red Paddle Co)

1,207,437

1,906,790

-

1,662,334

Design, manufacture and sale of stand-up paddleboards and windsurfing sails





Tharstern Group Limited

1,454,278

1,770,484

-

1,634,822

Software based management Information systems for the printing industry





Master Removers Group Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van)

682,183

1,379,326

-

1,613,649

A specialist logistics, storage and removals business





Ibericos Etc. Limited (trading as Tapas Revolution)

1,397,386

776,386

621,000

1,469,615

Spanish restaurant chain





Pattern Analytics Limited (trading as Biosite)

857,014

857,014

-

1,285,521

Workforce management and security services for the construction industry





BookingTek Limited

872,646

779,095

93,551

1,235,289

Software for hotel groups





I-Dox plc

453,881

2,687,629

-

1,229,226

Developer and supplier of knowledge management products





Bourn Bioscience Limited

1,610,379

925,420

-

1,188,206

Management of In-vitro fertilisation clinics





Redline Worldwide Limited

1,129,121

1,145,887

-

1,140,424

Provider of security services to the aviation industry and other sectors





Buster and Punch Holdings Limited (formerly Chatfield Services Limited)

725,226

725,226

-

920,492

Industrial inspired lighting and interiors retailer





Turner Topco Limited (trading as ATG Media)

1,529,075

1,209,162

-

900,160

Publisher and online auction platform operator





Aquasium Technology Limited

166,667

706,592

-

850,225

Manufacturing and marketing of bespoke electron beam welding and vacuum furnace equipment





TPSFF Holdings Limited (formerly The Plastic Surgeon Holdings Limited)

105,533

765,694

-

757,276

Supplier of snagging and finishing services to the property sector





RDL Corporation Limited

1,441,667

1,072,527

-

743,145

Recruitment consultants within the pharmaceutical, business intelligence and IT industries





Hemmels Limited

671,203

-

671,203

671,203

Sourcing and restoration of classic cars





Vectair Holdings Limited

53,400

601,006

-

655,985

Designer and distributor of washroom products





Super Carers Limited

649,528

-

649,528

649,528

Online introductory platform connecting local individuals with carers





Fullfield Limited (trading as Motorclean)

1,517,734

1,606,346

-

642,445

Vehicle cleaning and valet services





My TutorWeb Limited

636,477

636,477

-

636,477

Digital marketplace connecting school pupils seeking one-to-one online tutoring





Hollydale Management Limited

994,560

621,600

-

621,600

Company seeking to carry on a business in the food sector





Blaze Signs Holdings Limited

418,281

438,320

-

596,272

Manufacturer and installer of signs





Proactive Group Holdings Inc

449,514

-

449,514

449,514

Media Services and investor conferences





Omega Diagnostics Group plc

280,026

501,682

-

338,344

In-vitro diagnostics for food intolerance, autoimmune diseases and infectious diseases





Jablite Holdings Limited

498,790

304,755

-

304,755

Manufacturer of expanded polystyrene products





Backhouse Management Limited

782,080

300,800

-

300,800

Company seeking to carry on a business in the motor sector





Barham Consulting Limited

782,080

300,800

-

300,800

Company seeking to carry on a business in the catering sector





Creasy Marketing Services Limited

782,080

300,800

-

300,800

Company seeking to carry on a business in the textile sector





McGrigor Management Limited

782,080

300,800

-

300,800

Company seeking to carry on a business in the pharmaceutical sector





Veritek Global Holdings Limited

2,289,859

1,752,129

-

243,641

Maintenance of imaging equipment





LightWorks Software Limited

20,471

87,596

-

48,669

Provider of software for CAD and CAM vendors





BG Training Limited                                                                  

53,125

26,563

-

26,563

Technical training business





Corero Network Security plc

600,000

7,866

-

5,408

Provider of e-business technologies





Oxonica Limited

2,524,527

-

-

-

International nanomaterials group





Racoon International Group Limited (formerly Racoon International Holdings)

655,851

-

-

-

Supplier of hair extensions, hair care products and training





NexxtDrive Limited/Nexxt E-drive Limited

487,014

-

-

-

Developer and exploiter of mechanical transmission technologies





CB Imports Group Limited (trading as Country Baskets)

175,000

-

-

-

Importer and distributor of artificial flowers, floral sundries and home decor products





Biomer Technology Limited

137,170

-

-

-

Developer of  biomaterials for medical devices





Newquay Helicopters (2013) Limited (in liquidation)

15,234

-

-

-

Helicopter service operator





Watchgate Limited

1,000

-

-

-

Holding company










Realised investments










Gro-Group Holdings Limited

-

2,606,640

-

-

Baby sleep products















Total

51,229,091

48,030,308

3,103,915

47,114,979

 

Statement of the Directors' Responsibilities 

 

Responsibility statement

In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Colin Hook (Chairman), Jonathan Cartwright (Chairman of the Audit and Nomination & Remuneration Committees) and Helen Sinclair (Chairman of the Investment Committee), being the Directors of the Company, confirm that to the best of their knowledge:

 

(a)

The condensed set of financial statements, which has been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" gives a true and fair view of the assets, liabilities, financial position and profit of the Company as required by DTR 4.2.10;



(b)

the Half-Year Management Report, which comprises the Chairman's Statement, Investment Policy, Investment Review 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;



(c)

a description of the principal risks and uncertainties facing the Company for the remaining six months is set out below, in accordance with DTR 4.2.7; and



(d)

there were no 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.

 

Principal risks and uncertainties

In accordance with DTR 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Financial Statements for the year ended 30 September 2017 ("the Annual Report").

 

The principal risks faced by the Company are:

 

•             Investment and strategic

•             Loss of approval as a Venture Capital Trust;

•             Regulatory;

•             Counterparty;

•             Economic;

•             Financial and operating;

•             Market;

•             Asset liquidity; and

•             Market liquidity;

 

A detailed explanation of the principal risks facing the Company can be found in the Annual Report on pages 25 and 26, and in Note 16 on Financial Instruments on pages 60 to 67. Copies can be viewed or downloaded from the Company's website: www.incomeandgrowthvct .co.uk.

 

Going Concern

The Board has assessed the Company's operation as a going concern. The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Half-Year Management Report. The Directors have satisfied themselves that the Company continues to maintain a significant cash position. The majority of companies in the portfolio continue to trade profitably and the portfolio taken as a whole remains resilient and well-diversified. The major cash outflows of the Company (namely investments, share buybacks and dividends) are within the Company's control.

 

The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in Note 16 on pages 60 to 67 of the Annual Report. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the half-year report and financial statements.

 

Cautionary Statement

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.

 

For and on behalf of the Board:

 

Colin Hook

Chairman

 

15 May 2018

 

Unaudited Condensed Income Statement

for the six months ended 31 March 2018

 



Six months ended 31 March 2018

(unaudited)

Six months ended 31 March 2017

 (unaudited)


Notes

Revenue

Capital

Total

Revenue

Capital

Total



£

£

£

£

£

£

Unrealised (losses) / gains on investments held at fair value

9

-

(1,251,618)

(1,251,618)

-

725,815

725,815

Realised gains on investments held at fair value

9

-

1,810,102

1,810,102

-

69,100

69,100

Income

4

1,476,579

-

1,476,579

1,640,297

-

1,640,297

Investment Adviser's fees

5

(205,694)

(617,082)

(822,776)

(197,406)

(592,219)

(789,625)

Other expenses


(234,496)

-

(234,496)

(206,829)

-

(206,829)

Profit / (loss) on ordinary activities before taxation


1,036,389

(58,598)

977,791

1,236,062

202,696

1,438,758

Tax on profit/(loss) on ordinary activities

6

(173,800)

173,800

-

(211,109)

211,109

-

Profit for the period and total comprehensive income


862,589

115,202

977,791

1,024,953

413,805

1,438,758

Basic and diluted earnings per ordinary share

7

0.92p

0.12p

1.04p

1.42p

0.57p

1.99p

 



Year ended 30 September 2017

(audited)


Notes

Revenue

Capital

Total



£

£

£

Unrealised (losses) / gains on investments held at fair value


-

(794,007)

(794,007)

Realised gains on investments held at fair value


-

3,883,829

3,883,829

Income

4

3,266,634

-

3,266,634

Investment Adviser's fees

5

(394,012)

(1,182,037)

(1,576,049)

Investment Adviser's performance fees

5

-

(571,879)

(571,879)

Other expenses


(423,354)

-

(423,354)

Profit / (loss) on ordinary activities before taxation


2,449,268

1,335,906

3,785,174

Tax on profit/(loss) on ordinary activities

6

(421,283)

421,283

-

Profit for the period and total comprehensive income


2,027,985

1,757,189

3,785,174

Basic and diluted earnings per ordinary share

7

2.79p

2.42p

5.21p

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised (losses)/gains and realised gains on investments and the proportion of the Investment Adviser's fee and performance fee charged to capital.

 

The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to better reflect the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") issued by the Association of Investment Companies ("AIC") and updated in January 2017, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity 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 the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the period.

 

Unaudited Condensed Balance Sheet

as at 31 March 2018



31 March 2018

(unaudited)


31 March 2017

(unaudited)


30 September 2017





(audited)


Notes

£


£


£

Fixed assets







Investments at fair value

9

47,114,979


51,896,586


48,030,308

Current assets







Debtors and prepayments


718,466


455,875


3,372,032

Current asset investments

10 

34,467,981


9,891,458


12,412,671

Cash at bank

10 

1,483,126


7,805,131


1,375,065



36,669,573


18,152,464


17,159,768

Creditors: amounts falling due within one year


(199,647)


(167,622)


(841,325)

Net current assets


36,469,926


17,984,842


16,318,443

Net assets


83,584,905


69,881,428


64,348,751

Capital and reserves







Called up share capital


1,054,360


724,688


792,047

Capital redemption reserve


25,754


12,313


14,014

Share premium reserve


45,949,915


18,809,469


24,099,311

Revaluation reserve


2,484,528


5,645,322


4,020,689

Special distributable reserve


21,727,185


24,404,104


23,215,643

Realised capital reserve


9,878,415


18,129,188


10,134,703

Revenue reserve


2,464,748


2,156,344


2,072,344

Equity Shareholders' funds


83,584,905


69,881,428


64,348,751

Basic and diluted net asset value:







Basic and diluted net asset value per share

11 

79.28p


96.43p


81.24p

Unaudited Condensed Statement of Changes in Equity

for the six months ended 31 March 2018

 


Non-distributable reserves

Distributable reserves

Total


Called up share capital

Capital redemption reserve

Share premium reserve

Revaluation reserve

Special distributable reserve

(note a)

Realised capital reserve

(note b)

Revenue reserve

 

(note b)



£

£

£

£

£

£

£

£

At 1 October 2017

792,047

14,014

24,099,311

4,020,689

23,215,643

10,134,703

2,072,344

64,348,751

Comprehensive income for the period









(Loss)/profit for the period

-

-

-

(1,251,618)

-

1,366,820

862,589

977,791

Total comprehensive income for the period

-

-

-

(1,251,618)

-

1,366,820

862,589

977,791

Contributions by and distributions to owners









Share offered via Offer for Subscription (Note c)

266,076

-

21,293,047

-

(199,395)

-

-

21,359,728

Dividends reinvested into new shares

7,977

-

557,557

-

-

-

-

565,534

Shares bought back (Note d)

(11,740)

11,740

-

-

(845,781)

-

-

(845,781)

Dividends paid

-

-

-

-

-

(2,350,933)

(470,185)

(2,821,118)

Total contributions by and distributions to owners

262,313

11,740

21,850,604

-

(1,045,176)

(2,350,933)

(470,185)

18,258,363

Other movements









Realised losses transferred to special reserve (Note a)

-

-

-

-

(443,282)

443,282

-

-

Realisation of previously unrealised appreciation

-

-

-

(284,543)

-

284,543

-

-

Total other movements

-

-

-

(284,543)

(443,282)

727,825

-

-

At 31 March 2018

1,054,360

25,754

45,949,915

2,484,528

21,727,185

9,878,415

2,464,748

83,584,905

Note a): The Special distributable reserve also provides the Company with a reserve to absorb any existing and future realised losses and, when considered by the Board to be in the interests of shareholders, to fund share buybacks and for other corporate purposes. All of this reserve originates from funds raised prior to 6 April 2014. The transfer of £443,282 to the special reserve from the realised capital reserve above is the total of realised losses incurred by the Company in the period.

 

Note b): The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company.

 

Note c): Under the 2017/18 Offer, 26,607,590 shares were allotted during the period, raising net funds of £21,359,728 for the Company. This figure differs from that shown in the Statement of Cash Flows by £2,946,209, which are the net funds raised under the first allotment that took place on 28 September 2017. These funds were held in debtors at the previous year end and received in the current period.

 

Note d): During the period, the Company repurchased 1,173,968 of its own shares at the prevailing market price for a total cost (including stamp duty) of £845,781, which were subsequently cancelled. This differs to the figure shown in the Statement of Cash Flows by £82,638. This amount was included in creditors at the previous year end.

 

Unaudited Condensed Statement of Changes in Equity

for the six months ended 31 March 2017


Non-distributable reserves

Distributable reserves



Called up share capital

Capital redemption reserve

Share premium reserve

Revaluation reserve

Special distributable reserve

Realised capital reserve

Revenue reserve

Total


£

£

£

£

£

£

£

£

At 1 October 2016

719,140

11,985

18,308,887

4,744,396

24,980,045

20,225,980

1,850,205

70,840,638

Comprehensive income for the period









Profit/(loss) for the period

-

-

-

725,815

-

(312,010)

1,024,953

1,438,758

Total comprehensive income for the period

-

-

-

725,815

-

(312,010)

1,024,953

1,438,758

Contributions by and distributions to owners









Dividends re-invested into new shares

5,876

-

500,582

-

-

-

-

506,458

Shares bought back

(328)

328

-

-

(29,170)

-

-

(29,170)

Dividends paid

-

-

-

-

-

(2,156,442)

(718,814)

(2,875,256)

Total contributions by and distributions to owners

5,548

328

500,582

-

(29,170)

(2,156,442)

(718,814)

(2,397,968)

Other movements









Realised losses transferred to special reserve

-

-

-

-

(546,771)

546,771

-

-

Realisation of previously unrealised depreciation

-

-

-

175,111

-

(175,111)

-

-

Total other movements

-

-

-

175,111

(546,771)

371,660

-

-

At 31 March 2017

724,688

12,313

18,809,469

5,645,322

24,404,104

18,129,188

2,156,344

69,881,428


Unaudited Condensed Statement of Cash Flows

for the six months ended 31 March 2018


Notes

Six months ended 31 March 2018 (unaudited)

Six months ended 31 March 2017 (unaudited)

Year ended 30 September 2017 (audited)



£

£

£

Cash flows from operating activities




Profit for the financial period


977,791

1,438,758

3,785,174

Adjustments for:





Net unrealised losses/(gains) on investments


1,251,618

(725,815)

794,007

Realised gains on realisations on investments


(1,810,102)

(69,100)

(3,883,829)

Increase in debtors


(228,772)

(150,940)

(120,887)

Decrease in creditors and accruals


(559,039)

(1,152,217)

(561,152)

Net cash (outflow)/inflow from operating activities


(368,504)

(659,314)

13,313






Cash flows from investing activities





Purchase of investments

9

(3,103,915)

(3,347,495)

(5,304,234)

Disposal of investments

9

                 4,513,856

                    6,610,782

              14,728,706

No change/decrease in bank deposits with a maturity over three months


                                -  

                    2,028,243

                2,028,243

Net cash inflow from investing activities


                 1,409,941

                    5,291,530

              11,452,715






Cash flows from financing activities





Shares issued as part of Offer for Subscription


               24,305,937

                                   -  

                               -  

Equity dividends paid

8

(2,255,584)

(2,368,798)

(13,062,948)

Purchase of own shares


(928,419)

(66,509)

(115,024)

Net cash inflow/(outflow) from financing activities


               21,121,934

(2,435,307)

(13,177,972)

Net increase/(decrease) in cash and cash equivalents


22,163,371

2,196,909

(1,711,944)

Cash and cash equivalents at start of period


10,635,967

12,347,911

12,347,911






Cash and cash equivalents at end of period


32,799,338

14,544,820

10,635,967

Cash and equivalents comprise:





Cash at bank and in hand

10

1,483,126

7,805,131

1,375,065

Cash equivalents

10

31,316,212

6,739,689

9,260,902


The notes below form part of these Half-Year Financial Statements

 

Notes to the Unaudited Condensed Financial Statements

for the six months ended 31 March 2018



1.

Company Information


The Income & Growth VCT plc is a public limited company incorporated in England and Wales, registration number 4069483.  The registered office is 30 Haymarket, London SW1Y 4EX.

 

2.

Basis of preparation of the Financial Statements


These Financial Statements prepared in accordance with accounting policies consistent with Financial Reporting Standard 102 ("FRS102"), Financial Reporting Standard 104 ("FRS104") - Interim Financial Reporting, with the Companies Act 2006 and the 2014 Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in January 2017) issued by the Association of Investment Companies. The Financial Statements have been prepared on the historical cost basis except for the modification to a fair value basis for certain financial instruments as specified in note 9.

 

The Half-Year Report has not been audited, nor has it been reviewed by the auditor pursuant to the Financial Reporting Council's (FRC) guidance on Review of Interim Financial Information.

 

3.

Principal accounting policies


The accounting policies have been applied consistently throughout the period. Full details of principal accounting policies will be disclosed in the Annual Report, while the policy in respect of investments is included within an outlined box at the top of note 9 on investments.

 

4.

Income



Six months ended 31 March 2018 (unaudited)

Six months ended 31 March 2017 (unaudited)

Year ended 30 September 2017 (audited)


£

£

£

Income




 - Dividends

           121,857

         180,519

         288,843

 - Money market funds

             33,569

            10,951

           21,960

 - Loan stock interest

       1,290,981

      1,412,723

      2,899,869

 - Bank deposit interest

             22,433

            36,036

           55,893

 - Other income

               7,739

                    68

                   69

Total Income

       1,476,579

      1,640,297

      3,266,634





5.

Investment Adviser's fees and performance fees

 



Six months ended 31 March 2018 (unaudited)

Six months ended 31 March 2017 (unaudited)

Year ended                            30 September 2017 (audited)


£

£

£

Allocated to revenue return: Investment Adviser's fees

           205,694

         197,406

         394,012

Allocated to capital return: Investment Adviser's fees

           617,082

         592,219

      1,182,037

Investment Adviser's performance fees

                      -  

                     -  

         571,879

Total

           822,776

         789,625

      2,147,928





Investment Adviser's fee

           822,776

         789,625

      1,576,049

Investment Adviser's performance fees

                      -  

                     -  

         571,879

Total

822,776

789,625

2,147,928



6.

Taxation


There is no tax charge for the period as the Company has tax losses brought forward from previous periods, which can be offset against taxable income.

 

7.

Basic and diluted earnings and return per share


 



Six months ended 31 March 2018

(unaudited)

Six months ended 31 March 2017

(unaudited)

Year ended                                                       30 September 2017

(audited)



£

 

£

 

£

 

i)

Total earnings after taxation:

977,791

1,438,758

3,785,174


Basic earnings per share

1.04 p

1.99 p

5.21 p

ii)

Revenue earnings from ordinary activities





after taxation

862,589

1,024,953

2,027,985


Basic revenue earnings per share

0.92 p

1.42 p

2.79 p


Net unrealised capital (losses)/gains on investments

(1,251,618)

725,815

(794,007)


Net realised capital gains on investments

             1,810,102

                  69,100

              3,883,829


Capitalised Investment Adviser fees and performance fees less taxation

(443,282)

(381,110)

(1,332,633)

iii)

Total capital return

115,202

413,805

1,757,189


Basic capital earnings per share

0.12 p

0.57 p

2.42 p

iv)

Weighted average number of shares





in issue in the period

93,616,928

72,037,688

72,621,839

Notes:

a)     Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue.

 

b)    Basic revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue.

 

c)     Basic capital earnings per share is the total capital return after taxation divided by the weighted average number of shares in issue.

 

8.

Dividends paid


 

Dividend

Type

For the year ended September

Pence per share

Date paid

Six months ended 31 March 2018 (unaudited)

£

Six months ended 31 March 2017 (unaudited)£

Year ended               30 September 2017

(audited)

£









Final

Income

2016

1.00p

15 February 2017

-

718,814

718,814

Final

Capital

2016

3.00p

15 February 2017

-

2,156,442

2,156,442

Interim

Income

2017

1.50p

20 June 2017

-

-

1,087,032

Interim

Capital

2017

1.50p

20 June 2017

-

-

1,087,032

Special

Capital

2017

15.00p

31 August 2017

-

-

10,931,992

Final

Income

2017

0.50p

15 February 2018

470,185

-

-

Final

Capital

2017

2.50p

15 February 2018

2,350,933

-

-

Total*





2,821,118

2,875,256

15,981,312

* - £2,821,118 (31 March 2017: £2,875,256; 30 September 2017: £15,981,312) disclosed above differs to that shown in the Statement of Cash Flows of £2,255,584 (31 March 2017: £2,368,798; 30 September 2017: £13,062,948) due to £565,534 (31 March 2017: £506,458; 30 September 2017: £2,918,364) of new shares issued as part of the Company's Dividend Investment Scheme.

 

9.

Summary of movement on investments during the period



Traded on   AIM         Level 1

Unquoted ordinary shares Level 3

Unquoted preference shares Level 3

Unquoted loan stock  Level 3

Total


£

£

£

£

£

Valuation at 1 October 2017

3,197,177

14,353,491

414,186

30,065,454

48,030,308







Purchases at cost

-

1,739,323

-

1,364,592

3,103,915

Sales - proceeds (Note a)

-

(2,293,975)

(1,017)

(2,332,736)

(4,627,728)

         - realised gains (Note b)

-

1,860,102

-

-

1,860,102

Unrealised (losses)/gains on investments in the period

(1,624,199)

2,209,217

6,131

(1,842,767)

(1,251,618)

Valuation at 31 March 2018

1,572,978

17,868,158

419,300

27,254,543

47,114,979







Book cost at 31 March 2018

1,333,907

23,271,311

24,740

26,599,133

51,229,091

Unrealised gains at 31 March 2018

739,071

608,300

394,560

742,597

2,484,528

Permanent impairment of valuation of investments

(500,000)

(6,011,453)

-

(87,187)

(6,598,640)

Valuation at 31 March 2018

1,572,978

17,868,158

419,300

27,254,543

47,114,979







(Losses)/gains on investments






Realised gains based on historical cost

-

2,067,814

-

26,831

2,094,645

Less amounts recognised as unrealised gains in previous years

-

(257,712)

-

(26,831)

(284,543)







Realised gains based on carrying value at 30 September 2017

-

1,810,102

-

-

1,810,102

Net movement in unrealised (losses)/gains in the period

(1,624,199)

2,209,217

6,131

(1,842,767)

(1,251,618)

(Losses)/gains on investments for the period ended 31 March 2018

(1,624,199)

4,019,319

6,131

(1,842,767)

558,484

 

Note a) Investment proceeds shown above of £4,627,728 differs from the sale proceeds shown in the Statement of Cash flows of £4,513,856 by £113,872. This difference arises because of deferred consideration due from the disposal of Gro-Group held in debtors at the period end.

 

Note b) Realised gains above of £1,860,102 differ from that shown in the Income Statement of £1,810,102. The difference of £50,000 is a reduction for the period in the estimated fair value of contingent consideration held at the Balance Sheet date, to nil. This reduction is because such consideration of £134,241 was received in the period in respect of Alaric Systems, an investment realised in a prior period, of which £50,000 was recognised in a previous year.

 

There has been no significant change in the risk analysis as disclosed in Note 18 of the Financial Statements in the Company's Annual Report. The decrease in unrealised valuations of the loan stock investments above reflect the changes in the entitlement to loan premiums, and/or in the underlying enterprise value of the investee company. The decrease does not arise from assessments of credit or market risk upon these instruments.

 

10.

Current asset investments and Cash at bank



as at 31 March 2018 (unaudited)

as at 31 March 2017 (unaudited)

as at  30 September 2017

       (audited)


£

£

£

OEIC Money market funds

31,316,212

6,739,689

9,260,902

Cash equivalents per Statement of Cash Flows

31,316,212

6,739,689

9,260,902

Bank deposits that mature after three months

3,151,769

3,151,769

3,151,769

Current asset investments

34,467,981

9,891,458

12,412,671

Cash at bank

1,483,126

7,805,131

1,375,065

11.

Net asset value per share


 


as at 31 March 2018

(unaudited)

as at 31 March 2017

(unaudited)

as at 30 September 2017

(audited)





Net assets

£83,584,905

£69,881,428

£64,348,751





Number of shares in issue

    105,435,973

      72,468,771

              79,204,702





Net asset value per share - basic and diluted

79.28p

96.43p

81.24p

12.

Post balance sheet events


On 30 April 2018, TPSFF Holdings Limited (formerly Plastic Surgeon) repaid loan stock of £77,560.

 

13.

Statutory information


The financial information for the six months ended 31 March 2018 and the six months ended 31 March 2017 has not been audited.

 

The financial information contained in this Half-Year results announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The Financial Statements for the year ended 30 September 2017 have been filed with the Registrar of Companies.  The auditor has reported on these Financial Statements and that report was unqualified and did not contain a statement under either Section 498(2) or 498(3) of the Companies Act 2006.

 

14.

Half-Year Report


Copies of the Half-Year Report are being sent to all shareholders.  Further copies are available free of charge from the Company's registered office, 30 Haymarket, London, SW1Y 4EX, or can be downloaded via the Company's website at www.incomeandgrowthvct.co.uk

 

Contact details for further enquiries:

Rob Brittain or Robert King at Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to vcts@mobeusequity.co.uk

 

Mobeus Equity Partners LLP (the Investment Adviser) on 020 7024 7600 or by e-mail to info@mobeusequity.co.uk

 

DISCLAIMER

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

 

 

 

 

 

 


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Half-year Report - RNS