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Draper Esprit VCT plc   -  DEVC   

Half-year report

Released 12:50 20-Dec-2019

Half-year report

Draper Esprit VCT plc
Legal Entity Identifier: 2138003I9Q1QPDSQ9Z97
Half-Yearly Report for the six months ended 30 September 2019

Recent performance summary

 30 Sept
2019
 30 Sept
2018
 31 Mar
2019
 Pence Pence Pence
      
Net Asset Value (“NAV”) per Share57.1 60.1 56.7
Cumulative distributions paid per Share102.0 99.0 102.0
Total Return per Share159.1 159.1 158.7
      

CHAIRMAN’S STATEMENT
I am pleased to present the Half-Yearly Report for the Company for the six months ended 30 September 2019.

Throughout the period, the Company has continued to employ its available funds in growth technology opportunities introduced by Draper Esprit plc, the leading venture capital investor, under the arrangements which commenced in November 2016. The investments made alongside Draper Esprit plc are generally progressing well.

Net Asset Value, results and dividends

At 30 September 2019, the Company’s Net Asset Value (“NAV”) per Share stood at 57.1p, an increase of 0.4p or 0.7% since 31 March 2019.

The gain on activities after taxation for the period was £228,000 (2018: £1.6 million), comprising a revenue return of £134,000 (2018: £262,000) and a capital gain of £94,000 (2018: £1.4 million).

An interim dividend of 1.5p per Share will be paid on 27 March 2020, to Shareholders on the register as at 6 March 2020.

Venture capital investments
Investment activity
During the period the Company made one new investment and three follow-on investments totalling £2.8 million.

The Company invested £400,000 in Hadean Supercomputing Limited, which has developed a cloud computing platform that supports developers in running their applications at any scale.

A follow-on investment of £1.2 million was made into StreetTeam Software Limited, a peer-to-peer event marketing platform trading as “Pollen” which enables users to earn free tickets, rewards and festival experiences by selling tickets and recommending the festival to friends. This investment round was led by new investors Northzone and Sienna ventures.
A further £832,000 was invested in Push Dr Limited, a digital health consumer brand, connecting patients to a smart network of qualified GPs, giving them quick access to a doctor.

£400,000 was invested in IESO Digital Health Limited, a provider of online mental healthcare.

Investment valuations
At the period end, the Company held a portfolio of 34 venture capital investments, valued at £31.9 million.

The Board reviewed the valuations of the unquoted investments as at 30 September 2019 and has made a number of adjustments to the carrying values.

Endomagnetics Limited (trading as Endomag) was increased in value by £1.1 million on the back of good progress by the business and aligning its valuation with market comparables.

The investment in StreetTeam Software Limited was uplifted in value by £145,000 as at 30 September 2019, to bring it to a level consistent with its recent funding round.

The valuations of the quoted venture capital investments are set by their prevailing market prices as at 30 September 2019. The most notable movements from 31 March 2019 were decreases in share price of both Access Intelligence plc and Fulcrum Utility Services Limited. This resulted in a reduction in value of Access Intelligence plc by £332,000 and of Fulcrum Utility Services Limited by £289,000 over the period.

The above and other smaller movements resulted in a net valuation uplift of £386,000 for the period across the portfolio.

Fundraising

The Company launched a new offer for subscription in October 2019 seeking to raise up to £20M. Subject to capacity, the offer will stay open until 5 April 2020 in respect of the 2019/20 tax year and 31 May 2020 in respect of the 2020/21 tax year. Approximately £4M has been raised under the offer to date.

Share buybacks

The Company continues to operate a policy of buying in Shares that become available in the market at approximately a 5% discount to the latest published NAV, subject to regulatory and liquidity constraints.

In line with this policy, during the period the Company purchased 327,185 Shares for cancellation for an aggregate consideration of £177,000, equating to an average price of 54.02p per Share.

Any Shareholder considering selling their Shares will need to use a stockbroker. Such Shareholders should ask their stockbroker to register their interest in selling their shares with Shore Capital, who act as the Company’s corporate broker. Shareholders should note that the Company may not be able to sell shares during closed periods just before results are released and there may therefore occasionally be delays in share sales being processed.

Outlook
The Board is satisfied with progress being made in deploying the Company’s funds. We expect to see further new investments made over the remainder of the year as the portfolio continues to gain more exposure to younger growth and knowledge intensive businesses which are now the main focus. As I mentioned before, this will result in a further increase to the risk profile of the portfolio compared to historic levels, however the potential for good rewards also increases and generally progress of the newer investments to date appears positive.

I look forward to updating Shareholders in the next Annual Report, which will be issued in July 2020.

David Brock
Chairman

SUMMARY OF INVESTMENT PORTFOLIO

Investment Portfolio as at 30 September 2019CostValuationValuation
movement
in period
% of
 portfolio
by value
 £’000£’000£’000 
Top ten venture capital investments    
Fords Packaging Topco Limited2,4336,979-15.2%
Access Intelligence plc*2,8864,373(332)9.5%
StreetTeam Software Limited2,5043,3261457.3%
Lyalvale Express Limited1,9152,571-5.6%
Endomagnetics Limited9121,9761,0644.3%
IESO Digital Health Limited1,9001,900-4.1%
Pod Point Holding Limited8601,8611164.1%
Push Dr Limited1,5561,556-3.4%
Fulcrum Utility Services Limited*386820(289)1.8%
Resolving Limited799799-1.7%
 16,15126,16170457.0%
Other venture capital investments 16,1705,752(318)12.5%
 32,32131,91338669.5%
Cash at bank and in hand 14,036 30.5%
Total investments 45,949 100.0%

SUMMARY OF INVESTMENT MOVEMENTS

Investment additions 
  
Venture capital investments£’000
StreetTeam Software Limited1,218
Push Dr Limited832
IESO Digital Health Limited400
Hadean Supercomputing Limited400
 2,850

*Quoted on AIM
All venture capital investments are unquoted unless otherwise stated.

UNAUDITED BALANCE SHEET
as at 30 September 2019

  30 Sept
 2019
 30 Sept
 2018
 31 March
2019
 Note£’000 £’000 £’000
       
Fixed assets      
Investments931,913 25,389 28,678
       
Current assets      
Debtors 75 97 48
Cash at bank and in hand 14,036 16,352 10,455
  14,111 16,449 10,503
       
Creditors: amounts falling due within one year (205) (191) (212)
       
Net current assets 13,906 16,258 10,291
       
Net assets 45,819 41,647 38,969
       
       
Capital and reserves      
Called up Share capital74,015 3,463 3,436
Capital redemption reserve 615 572 599
Share premium account 6,387 25,625 -
Merger reserve 1,828 1,828 1,828
Special reserve821,729 (928) 22,545
Capital reserve - unrealised 8,952 6,993 8,403
Capital reserve - realised82,175 4,019 2,174
Revenue reserve8118 75 (16)
       
Equity Shareholders’ funds645,819 41,647 38,969
       
Basic and diluted Net Asset Value per Share657.1p 60.1p 56.7p

UNAUDITED INCOME STATEMENT
for the six months ended 30 September 2019

  

 

 
 

Six months ended
30 Sept 2019
  

Six months ended
30 Sept 2018
 Year
ended
31 March
2019
  RevenueCapitalTotal RevenueCapitalTotal Total
Note£’000£’000£’000 £’000£’000£’000 £’000
           
Income 411-411 491-491 634
Gains/(losses) on investments         
  Realised --- -8484 246
  Unrealised -386386 -1,6391,639 1,571
  411386797 4911,7232,214 2451
           
Investment management fees(98)(292)(390) (92)(275)(367) (784)
Other expenses (179)-(179) (137)(75)(212) (342)
           
Return/(loss) on ordinary activities before taxation 13494228 2621,3731,635 1,352
           
Tax on total comprehensive income and ordinary activities --- --- -
           
Return/(loss) attributable to equity Shareholders413494228 2621,3731,635 1,352
           
Basic and diluted return/(loss) per Share40.2p0.1p0.3p 0.4p2.0p2.4p 1.9p

All Revenue and Capital items in the above statement are derived from continuing operations. The total column within the Income Statement represents the profit and loss account of the Company.

UNAUDITED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2019

 Called
 Up
 Share
 capital
 

Capital redemption reserve
Share
 premium
Merger
reserve
Special
reserve
Capital
 reserve
unrealised
Capital
 reserve
realised
Revenue
 reserve
Total
 £’000£’000£’000£’000£’000£’000£’000£’000£’000
At 1 April 20183,19453322,0541,8284525,5153,331(187)36,720
Total comprehensive income-----1,571(417)1711,325
Transfer between reserves----(2,649)1,3171,194138-
Cancellation of Share Premium--(25,625)-25,625----
Transactions with owners         
Issue of new Shares308-3,571-----3,879
Share Issue costs----(153)---(153)
Purchase of own Shares(66)66--(730)---(730)
Dividends paid------(1,934)(138)(2,072)
At 31 March 20193,436599-1,82822,5458,4032,174(16)38,969
Total comprehensive income-----386(292)134228
Transfer between reserves----(455)163292--
Transactions with owners         
Issue of new Shares595-6,387-----6,982
Share Issue costs----(185)---(185)
Purchase of own Shares(16)16--(176)---(176)
Dividends paid------1-1
At 30 September 20194,0156156,3871,82821,7298,9522,17511845,819

UNAUDITED STATEMENT OF CASH FLOWS

for the six months ended 30 September 2019

  Six months
ended
 30 Sept
2019
 Six months
 ended
30 Sept
 2018
 

 
Period
ended
31 March

2019
  £’000 £’000 £’000
       
Cash flow from operating activities      
Return on ordinary activities before taxation 228 1,635 1,325
(Gains)/Losses on investments (386) (1,722) (1,817)
Decrease/(increase) in debtors (10) 42 71
(Decrease)/increase in creditors 13 (3) (5)
       
Net cash (outflow)/inflow generated from operating activities  

(155)
  

(48)
 (426)
       
Cash flow from investing activities      
Purchase of investments (2,850) (3,532) (6,889)
Sale of investments - 694 856
       
Net cash (outflow)/inflow from investing activities (2,850)  

(2,838)
  

(6,033)
       
Cash flows from financing activities      
Proceeds from Share issue 6,982 3,879 3,879
Share issue costs (203) (193) (173)
Purchase of own Shares (194) (435) (707)
Equity dividends paid 1 - (2,072)
       
 

Net cash inflow from financing activities
  

6,586
  

3,251
  

927
       
Increase/(decrease) in cash 3,581 365 (5,532)
       
Net movement in cash      
Beginning of period 10,455 15,987 15,987
Net cash inflow 3,581 365 (5,532)
End of period 14,036 16,352 10,455

 

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

1. The unaudited Half-Yearly Report covers the six months to 30 September 2019 and has been prepared in accordance with the accounting policies set out in the statutory accounts for the period ended 31 March 2019, which were prepared in accordance with the Financial Reporting Standard 102 (“FRS 102”) and the Statement of Recommended Practice “Financial Statements of Investment Trust Companies” issued in November 2014 (revised in February 2018) (“SORP”).

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

3. The comparative figures are in respect of the six months ended 30 September 2018 and the year ended 31 March 2019 respectively.

4. Basic and diluted return per Share

 30 Sept
2019
 30 Sept
2018
 31 March
2019
Return per Share based on:     
Net revenue gain for the period (£’000)134 262 171
      
Capital return per Share based on:     
Net capital (loss)/gain for the period (£’000)94 1,373 1,154
      
Weighted average number of Shares80,116,839 69,412,617 69,241,683

5. Dividends


 
  30 September
2019
 31 March
2019
 Per Share RevenueCapitalTotal Total
 pence £’000£’000£’000 £’000
Payable       
2020 Interim1.5p -1,2041.204 -
2019 Final1.5p -1,2051,205 -
   -2,4092,409 -
Paid in the period       
2019 Interim1.5p --- 1,033
2018 Final1.5p --- 1,039
   --- 2,072

6. Basic and diluted Net Asset Value per Share

 30 Sept
 2019
 30 Sept
2018
 31 Mar
2019
Net asset value per Share based on:     
Net assets (£’000)45,819 41,647 38,969
      
Number of Shares in issue at the period end80,293,973 69,249,111 68,719,111
      
Net Asset Value per Share57.1p 60.1p 56.7p

7. Called up Share capital

 30 Sept
2019
 30 Sept
2018
 31 Mar
2019
Ordinary Shares of 5p each     
Number of Shares in issue at the period end80,293,973 69,249,111 68,719,111
      
Nominal value (£’000)4,015 3,463 3,436

During the period the Company allotted 11,902,047 Ordinary Shares of 5p each (“Ordinary Shares”) under an Offer for Subscription that launched in January 2019, at an average price of 58.67p per Share. Gross proceeds received thereon were £7.0 million, with issue costs in respect of the Offer amounting to £185,000.

During the period, the Company purchased 327,185 Shares for cancellation for an aggregate consideration of £177,000, at an average price of 54.02p per Share (approximately equal to a 5.2% discount to the most recently published NAV at the time of purchase) and representing 0.5% of the Share capital in issue as at 1 April 2019.

8. Reserves
The special reserve is available to the Company to enable the purchase of its own Shares in the market without affecting its ability to pay dividends and allows the Company to write back realised capital losses arising on disposals and impairments.

Distributable reserves are calculated as follows:

 30 Sept
2019
30 Sept
2018
31 Mar
2019
 £’000 £’000 £’000
Special reserve21,729 (928) 22,545
Capital reserve - realised2,175 4,019 2,174
Revenue reserve118 75 (16)
Merger reserve - distributable element423 423 423
Unrealised losses - net of unquoted gains(524) 288 253
 23,921 3,877 3,231

In October 2018, the balances on the Share Premium account and the capital redemption reserve were cancelled and added to the special reserve, contributing an additional £26.2 million to distributable reserves. The VCT regulations place some restrictions on the use of these reserves during the first three to four years after the funds on which they arose were raised.

9. Investments
The fair value of investments is determined using the detailed accounting policy as set out in Note 1 of the Annual Report.

The Company has categorised its financial instruments using the fair value hierarchy as follows:

Level 1 Reflects financial instruments quoted in an active market (fixed interest investments, and investments in shares quoted on either the Main or AIM Markets);
Level 2 Reflects financial instruments that have prices that are observable either directly or indirectly; and
Level 3 Reflects financial instruments that use valuation techniques that are not based on observable market data (unquoted equity investments and loan note investments).

 Six months ended 30 Sept 2019 Period ended 31 Mar 2019
 Level 1Level 2Level 3Total Level 1Level 2Level 3Total
 £’000£’000£’000£’000 £’000£’000£’000£’000
          
AIM quoted shares4,726297-5,023 5,300344-5,644
Loan notes--808808 --808808
Unquoted shares--26,08226,082 --22,22622,226
 4,72629726,89031,913 5,30034423,03428,678

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

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

In all cases the Board is satisfied with the Company’s approach to these risks. As a VCT, the Company is forced to have significant exposure to relatively immature businesses. This risk is mitigated to some extent by holding a well-diversified portfolio.

With a reasonably illiquid venture capital investment portfolio, the Board ensures that it maintains an appropriate proportion of its assets in cash and liquid instruments.

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

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

The Directors have concluded that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.

11. The Directors confirm that, to the best of their knowledge, the half-yearly financial statements have been prepared in accordance with the “Statement: Half-Yearly Financial Reports” issued by the UK Accounting Standards Board as well as in accordance with FRS 104 Interim Financial Reporting and the half-yearly financial report includes a fair review of the information required by:

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

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

12. The unaudited financial statements set out herein do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and have not been delivered to the Registrar of Companies. The figures for the period ended 31 March 2019 have been extracted from the financial statements for that period, which have been delivered to the Registrar of Companies; the Auditor’s report on those financial statements was unqualified.

13. Copies of the unaudited Half-Yearly Report will be sent to Shareholders shortly. Further copies can be obtained from the Company’s registered office or downloaded from www.draperespritvct.com and www.downing.co.uk.


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Half-year report - RNS