Interim Report
October 28 2008 - 3:02AM
UK Regulatory
Interim Report
Puma VCT II plc
Interim Report
For the six months ended 31 August 2008
Chairman's Statement
Highlights
* Net asset value per share of 100.72p. This represents a
3.2% decrease from year-end (adding back the 1.5p 2008 final
dividend paid on 2 July 2008) compared to a decrease of 21.4% on
the FTSE AIM Index for the same period.
Introduction
During the six months to 31 August 2008, the investment manager's
conservative approach has held Puma VCT II plc's performance stable
though the continuing turmoil inflicting the wider financial markets,
resulting in a small drop in NAV.
The fund has a remit to invest in both unquoted and AIM/Plus listed
equities, but the investment manager has concentrated upon
investments in unquoted companies. The focus in unquoted investments
is on providing secured mezzanine finance whilst taking minimum
equity risk. The fund also holds some AIM stocks where the
Investment Manager considered that the fund-raising offered good
medium term value.
This strategy has proven to be prudent as the AIM market fell 21.4%
during the six months to 31 August 2008, suffering from the
continuing economic downturn affecting global financial markets. It
is likely that the value of typical unquoted equities of a kind in
which VCTs can invest will have fallen by the same amount or more. In
the same period the Company is reporting a fall of only 3.2% (adding
back the 1.5p 2008 final dividend paid on 2 July 2008) in the NAV per
share which now stands at 100.72p.
The fall in value is primarily attributable to the Company's AIM
quoted stocks, many of which are trading at a discount to their
respective net asset values. This is less to do with the quality of
these companies than the continuing result of the volatility and
sentiment in the stock market for smaller companies that we reported
on for the period ended 29 February 2008.
Existing Qualifying investments
Of the existing unquoted stocks, the �1.5m investment in Cadbury
House Hotel & Country Club plc (Cadbury House), the leisure centre
and hotel complex near Bristol, continues to trade very well and
ahead of budget. Also, Cadbury House had applied for planning
permission to build an extension to the hotel containing a further 58
bedrooms and the application is expected to be considered by the
relevant committees over the next few months. This should generate
further value to the Company's existing investment.
The Company invested �419k in Stocklight, the parent company of
Bloomsbury Auctions. This investment is in mezzanine finance and is
very well secured both by freehold commercial property and a
well-spread inventory of rare books. Stocklight is trading
profitably as a group, but the company has invested significantly in
establishing a global footprint of its auction business. The auction
sites in Rome and New York are taking time to generate a return, but
overall our investment is secure.
The value of the quoted qualifying stocks at the period end was
�897,000, compared to �1,199,000 at the period ended 29 February 2008
and is responsible for the bulk of the fall in NAV in the period.
This reflects the difficult market conditions facing all AIM stocks.
However these stocks make up only 10.6% of the overall portfolio and
we expect that at least some of the recent falls will reverse in due
course.
Non-qualifying investments
The market value of the non-qualifying investment portfolio was
�2,459,000 at the period end against an underlying book cost of
�2,230,000. This portfolio consists of three elements, listed
stocks, hedge funds and a non-qualifying private equity investment.
Performance for this portfolio for the six months was slightly
negative.
The non-qualifying private equity investment is in a hotel
development project on the outskirts of Winchester in the green
belt. Having secured planning permission in this location we expect,
in due course, to record a gain on this holding. At present we are
carrying it at cost. Construction of a 120 bedroom hotel, to be a
Holiday Inn Express, is expected to begin in September and to take
about a year.
Results and dividends
As set-out in the accounts for the period ended 29 February 2008, a
dividend of 1.5p per ordinary share was declared during the period
and paid on 2 July 2008. Your Board is not proposing a dividend in
relation to this interim period but reiterates the intention to
distribute a large element of the available income and, if
appropriate, realised capital gains in due course.
VAT on management fees
The Government has announced that VCTs will be exempt from paying VAT
on investment management fees with effect from 1 October 2008,
following a European Court of Justice judgement against the
Government in a case relating to VAT payable by investment trusts.
This represents a prospective annual cost saving for the Company of
around �37,000. More recently, the Government has conceded that VCTs
will be able to obtain a repayment of VAT paid on management fees in
earlier periods (the benefit of this has not been included in the
current NAV). We will report on our progress in respect of this
beneficial development in due course.
Principal risks and uncertainties
It is clear that the UK economy is in turmoil. The consequences of
this for our investment portfolio constitute the principal risk and
uncertainty for the Company in the second half of the year.
The Board
Chris Ring has resigned as a director of the Company and the Board
has appointed Graham Shore, a director of Shore Capital Limited, as
his replacement. Chris has been a director of Puma VCT II plc since
its inception and has played a full and active role in the
development of the Company. I would like thank him for his
contribution.
Outlook
The Investment Manager continues to review opportunities as potential
investee companies look for alternate sources of debt finance brought
about by tighter credit conditions. The VCTs offering of mezzanine
and equity finance for asset-backed growing companies continues to be
attractive benefiting from the ability to increase the sum offered by
spreading the investment across the five Puma VCTs.
The current portfolio of private equity holdings are sustaining their
strong position and limit the Company's risk exposure in qualifying
investments. The AIM qualifying stocks, a small element of the
portfolio, have not performed well during the period but the
Investment Manager is monitoring them closely and expects at least
some of current losses to reverse in due course.
The investment manager is seeking new qualifying opportunities which
match the risk averse mandate of the Company. The Company has
sufficient cash resources to capitalise on any opportunities which
arise and the timing for making investments into mezzanine in solid
private companies is now much more favourable.
I look forward to reporting the progress of the Company with the next
Annual Report for the year ended 28 February 2009.
Sir Aubrey Brocklebank Bt
Chairman
28th October 2008
Income Statement (unaudited)
For the six months ended 31 August 2008
Six months ended Six months ended Period ended
31 August 2008 30 June 2007 29 February 2008
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
(Loss)/gains
on
investments - (396) (396) - 432 432 - (400) (400)
Income 195 - 195 92 - 92 364 - 364
195 (396) (201) 92 432 524 364 (400) (36)
Investment
management
fees 4 25 75 100 28 85 113 64 191 255
Performance
fees 21 (90) (69) 3 69 72 36 (116) (80)
Other
expenses 46 - 46 47 - 47 110 - 110
92 (15) 77 78 154 232 210 75 285
(Loss)/return
on ordinary
activities
before
taxation 103 (381) (278) 14 278 292 154 (475) (321)
Tax on return
on ordinary
activities (19) 19 - 3 (3) - (12) 12 -
(Loss)/return
on ordinary
activities
after tax
attributable
to
equity
shareholders 84 (362) (278) 17 275 292 142 (463) (321)
(Loss)/return
per Ordinary
Share (pence) 2 1.01p (4.35)p (3.34)p 0.19p 3.31p 3.50p 1.72p (5.58)p (3.86)p
The revenue column of this statement is the profit and loss of the
Company. All revenue and capital items in the above statement derive
from continuing operations. No operations were acquired or
discontinued in the period.
Balance Sheet (unaudited)
As at 31 August 2008
As at As at As at
31 August 30 June 29 February
Note 2008 2007 2008
�'000 �'000 �'000
Fixed Assets
Investments 7 8,028 9,602 8,561
Current Assets
Debtors 183 97 137
Cash 282 38 293
465 135 430
Creditors - amounts falling
due within one year (70) (77) (96)
Net Current Assets 395 58 334
Total Assets less Current
Liabilities 8,423 9,660 8,895
Creditors - amounts falling
due after more than one year
(including convertible debt) (1) (1) (1)
Net Assets 8,422 9,659 8,894
Capital and Reserves
Called up share capital 83 83 83
Capital reserve - realised 630 331 769
Capital reserve - unrealised (508) 891 (285)
Other reserve 65 286 134
Revenue reserve 8,152 8,068 8,193
Equity Shareholders' Funds 8,422 9,659 8,894
Net Asset Value per Ordinary
Share 3 101.50p 116.38p 107.17p
Diluted Net Asset Value per
Ordinary Share 3 100.72p 112.92p 105.56p
Cash Flow Statement (unaudited)
For the six months ended 31 August 2008
Six months Six months Period ended
ended ended 29 February
31 August 2008 30 June 2007 2008
�'000 �'000 �'000
Operating activities
Investment income received 148 71 280
Investment management fees (164) (327)
paid (100)
Cash paid to directors (7) (7) (17)
Foreign exchange gain/(loss) 18 19
on cash (2)
Other cash payments (45) (54) (102)
Net cash outflow from
operating activities (6) (136) (147)
Equity dividend paid (125) (75) (75)
Capital expenditure and
financial investment
Purchase of investments (183) (2,832) (5,206)
Proceeds from sale of 2,563 5,154
investments 347
Acquisition costs - - (1)
Net realised (loss)/gain on
forward foreign exchange
contracts (44) 13 63
Net cash outflow from
capital expenditure and
financial investment 120 (256) 10
Decrease in cash (11) (467) (212)
Reconciliation of net cash
flow to movement in net
funds
Decrease in cash for the (212)
period (11) (467)
Net cash at start of the 505 505
period 293
Net funds at the period end 282 38 293
Reconciliation of Movements in Shareholders' Funds (unaudited)
For the six months ended 31 August 2008
Called
up Capital Capital
share reserve- reserve- Other Revenue
capital realised unrealised reserve reserve Total
�'000 �'000 �'000 �'000 �'000 �'000
Six months ended 31 August 2008
Balance at 1 March
2008 83 769 (285) 134 8,193 8,894
Total recognised
(losses)/gains for
the period - (139) (223) (69) 84 (347)
Dividends paid - - - - (125) (125)
Balance at 31
August 2008 83 630 (508) 65 8,152 8,422
Six months ended 30 June 2007
Balance at 1
January 2007 83 115 832 214 8,126 9,370
Total recognised
(losses)/gains for
the period - 216 59 72 17 364
Equity dividend
paid - - - - (75) (75)
Balance at 30 June
2007 83 331 891 286 8,068 9,659
For the period ended 29 February 2008
At 1 January 2007 83 115 832 214 8,126 9,370
Total recognised
(losses)/gains for
the period - 654 (1,117) (80) 142 (401)
Equity dividend
paid - - - - (75) (75)
Balance at 29
February 2008 83 769 (285) 134 8,193 8,894
Notes to the Interim Report
For the six months ended 31 August 2008
1. Accounting Policies
The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of fixed asset
investments, and in accordance with applicable Accounting Standards
and with the Statement of Recommended Practice, "Financial Statements
of Investment Trust Companies" ("SORP") December 2005. Although this
SORP principally applies to Investment Trusts, many of the
characteristics of Investment Trusts are shared by VCTs therefore the
Company will continue to follow the SORP until investment company
status is revoked.
2. Return per Ordinary Share
The total loss per share of 3.34p (30 June 2007 - return of 3.50p) is
based on the loss for the period of �278,000 (30 June 2007 - profit
of �292,000) and the weighted average number of shares in issue as at
31 August 2008 of 8,299,300 (30 June 2007 - 8,299,300).
3. Net asset value per share
Period Net Asset Value per share
Net assets Shares in issue Basic Diluted
31 August 2008 �8,422,000 8,299,300 101.50p 100.72p
29 February 2008 �8,894,000 8,299,300 107.17p 105.56p
30 June 2007 �9,659,000 8,299,300 116.38p 112.92p
4. Management fees
The Company pays the Investment Manager an annual management fee of
2% (plus VAT) of the Company's net assets. The fee is payable
quarterly in arrears. The annual management fee is allocated 75% to
capital and 25% to revenue.
5. Related Party Transactions
Related party transactions are described the 2008 Annual Report and
Accounts on page 36. There were no other related party transactions
during the 6 months ended 31 August 2008.
6. The financial information for the six months ended 31
August 2008 and 30 June 2007 has not been audited and does not
comprise full financial statements within the meaning of Section 240
of the Companies Act 1985. The financial information for the period
ended 29 February 2008 has been extracted from the company's full
financial statements for the period then ended that have been
delivered to the Registrar of Companies, and on which the report of
the Auditors was unqualified. The interim financial statements have
been prepared on the same basis as the annual financial statements.
Notes to the Interim Report continued
For the six months ended 31 August 2008
7. Investment portfolio summary
Cost Valuation Gain/ Valuation as a %
As at 31 August 2008 �'000 �'000 (loss) of Net Assets
Qualifying investment -
unquoted
Albemarle Contracting Ltd 700 700 - 8%
Bond Contracting Ltd 1,054 1,054 - 13%
Clifford Contracting Ltd 1,040 1,040 - 12%
Cadbury House Hotel &
Country Club plc 1,459 1,459 - 17%
Stocklight Limited 419 419 - 5%
Qualifying investment -
quoted
@UK plc 285 17 (268) 0%
Alterian plc 13 14 1 0%
Clarity Commerce Solutions
plc 98 30 (68) 0%
I-Design Group plc 41 21 (20) 0%
INVU plc 81 61 (20) 1%
Mount Engineering plc 153 142 (11) 2%
Patsystems plc 214 321 107 4%
Sport Media plc 210 51 (159) 1%
Universe Group plc 120 64 (56) 1%
Vertu Motors plc 407 176 (231) 2%
Total qualifying investments 6,294 5,569 (725) 66%
Non-qualifying investments
Hedge fund portfolio 1,289 1,586 297 19%
Loan stock - interest
bearing 204 230 26 3%
Other quoted investments 737 643 (94) 7%
Total non-qualifying
investments 2,230 2,459 229 29%
Total investments 8,524 8,028 (496) 95%
Balance of portfolio 394 394 5%
Net Assets 8,918 8,422 (496) 100%
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