REG - Puma Alpha VCT PLC - Annual Financial Report
15/06/2023 15:15
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RNS Number : 8939C Puma Alpha VCT PLC 15 June 2023
Highlights
* All funds raised in prior periods have met their 80% qualifying investment
target before their 1 March 2023 deadline
* £7.5 million raised in new equity
* Additional £2.3m raised post-period end
Chairman Statement
INTRODUCTION
I am pleased to present the report and financial statements for Puma Alpha VCT
plc ("the Company") for the year to 28 February 2023.
OVERVIEW
The Company's Net Asset Value ("NAV") per share at the end of the year stood
at 130.53p a decrease of 5.95p and -4.36% from the same time in the previous
year.
The Company has not to-date held listed equities or other liquidity management
tools outside cash, so has not suffered from associated volatility. The
Company's loss for the year was -£386k (2022: profit £3.0m).
FUNDRAISING
We are happy to report that at the year end the Company had raised £7.5m, and
since the year end a further £2.3m has been raised. This gives the Company
additional deployable funds to continue building a robust portfolio and will
help spread fixed costs over a wider shareholder base.
INVESTMENT ACTIVITY AND PORTFOLIO
We are pleased to report that 2022-23 has been an active year for the Company
with two new qualifying investments having been made in the period, alongside
other Puma managed funds. These investments were: £0.5m into MUSO, an
anti-piracy data company and £0.3m into HR Duo, a HR solutions software
company. In addition, follow-on investments were made; £0.8m into Ron Dorff;
£1.9m into Le Col; £1.2m into Everpress and £0.6m into Dymag. This brings
the overall number of qualifying investments to 10. Post period end, an
investment was made into Iris for £0.2m, an advanced audio technology
company.
Within the portfolio, The Company's holdings in CameraMatics and Everpress
have generated positive valuation movements. In all cases, the Company
benefits from a defensive investment structure which has helped secure
value.
CameraMatics has had a write up of £1.5m due to its continued strong
performance. In the last year it has acquired UK telematics provider,
Telematicus and launched DashMatics, an innovative software solution designed
to improve visibility, digitise processes and manage risks.
Everpress has had a significant write up of £1.2m which is substantially
driven by structural protection within the investment. It has benefitted from
a number of high-profile campaigns with creators that align with the company's
core values.
Connectr has had a £1.2m write down due to significant cost cutting and cash
burn has been slowed substantially, with sales pipeline building. There
remains a need for a prudent valuation at the current point in time.
At the time of writing, the Company has over £4.3m ready to deploy. This,
together with the fact that the VCT is still relatively new and therefore not
burdened with a large legacy portfolio to defend, positions the Company well
to continue taking advantage of the post Covid landscape. The Investment
Manager continues to see several hundred investment opportunities a year, and
your Board is optimistic that the rapid deployment the Company has enjoyed
to-date will continue.
Allocation of non-qualifying holdings will continue to be considered by the
Investment Manager as the economic outlook continues to evolve.
NET ASSET VALUE ("NAV")
The Company's NAV stood at 130.53p (2022: 136.48p) at the year end of 28
February 2023. This impairment is largely driven by less significant valuation
gains in the year offset by the management fees and other expenses incurred in
the year.
VCT QUALIFYING STATUS
PricewaterhouseCoopers LLP ("PwC") provides the Board and the Investment
Manager with advice on the ongoing compliance with HMRC rules and regulations
concerning VCTs and has reported no issues in this regard for the Company to
date. PwC and other specialist advisors will continue to assist the
Investment Manager in establishing the status of potential investments as
qualifying holdings. PwC will continue to monitor rule compliance and
maintaining the qualifying status of the Company's holdings in the future.
OUTLOOK
The global economic picture has improved slightly since this time last year.
Whilst the war in Ukraine continues to undermine sentiment, energy prices have
moved lower, inflationary pressures are easing in some regions, particularly
the US and the Eurozone, and we are seeing a rebound of growth in China. The
UK is experiencing greater political stability with increased emphasis on the
need to encourage investment and innovation in the private sector. This is
having a positive effect on business sentiment evidenced by recent surveys of
the business community. Whilst this is encouraging compared to this time last
year challenges remain. Inflation is proving to be especially sticky in the UK
with little sign of a reversal in the cost of living crisis. The risk of a
wage price spiral is exercising policy makers with continued upward pressure
on interest rates. The picture therefore remains uncertain with most
forecasters expecting the UK economy to either flatline or contract this
year.
Nevertheless, challenging conditions always present opportunities for agile
businesses focused on resilient sectors. This VCT is in a position to adapt
quickly to changes in the economic environment when developing its portfolio.
Notwithstanding ongoing uncertainty, the UK continues to benefit from an
active and well-established SME market in which the Manager has a strong
reputation as a provider of capital. This applies especially to well-managed,
later-stage SMEs where bank lending, despite some policy support, continues to
remain challenging for even the best of these businesses. This, alongside the
institutional support the Manager is able to offer, continues to make for a
compelling equity offer from the Company. The ongoing uncertainty places added
emphasis on the Company's ability to focus efforts on sectors that are well
placed to navigate the current headwinds. We are confident that we have the
team to do this and assemble a portfolio capable of delivering attractive
returns to shareholders.
Egmont Kock
Chairman
15 June 2023
Investment Manager's Report
Despite the lockdown memories now beginning to fade, the global pandemic has
continued to cast a shadow over the UK economy. The last 12 months have seen
several ongoing challenges for British businesses: from supply constraints and
delays in logistics, to high staff vacancy rates and staff shortages. There
remain more than a million vacancies across the UK, exacerbated by a worrying
increase in long-term sickness. Alongside the ongoing war in Ukraine, these
economic headwinds have driven up inflation, which, as the latest data
indicates, is proving stubbornly slow to come down. Unfortunately none of us
are exempt from the impacts of such significant price growth, and all economic
actors - consumers, investors and businesses alike - have felt its damaging
effects. No wonder then, that in a bid to wrestle it under control and prevent
further damage to the economy, the Bank of England has been forced to drive up
rates so quickly, now surpassing the base case forecast of 4% as outlined last
September in our Prosper magazine.
It is not yet known what this means for the UK plc, although we seem to have
narrowly avoided a recession so far. Indeed, there are a number of positive
signs that the economy may actually be starting to strengthen as we move into
the summer period.
High energy prices did not last as long as had been predicted. The UK
Government provided a sustained and welcome level of financial support, so
that UK consumers were somewhat cushioned, and price rises were much less
severe than had been feared. As wholesale energy prices have started to fall,
the coming months are due to see these lower prices translate into retail
markets - which, in turn, should bring down inflation as well as bolster
consumer spending. Indeed, we appear to now be seeing some small green shoots
of growing confidence, with GFK reporting in its latest consumer index, that
overall consumer confidence is now up for its fifth consecutive month - albeit
at -27 points.
According to the Institute of Directors, half of all the 900 firms it surveyed
across all parts of the economy, reported that their order books were
healthier than at the end of 2022 - highlighting a pick-up in outlook across
all sectors.
From an investment perspective, the very high valuations that we saw in the
first half of 2022 have come down considerably. For those like ourselves with
capital to invest, there are now a number of exciting opportunities - although
good companies are sometimes cautious about coming forward for funding when
valuations are depressed. Fortunately, we have a strong and established
network of introducers. During 2022 we saw more than 445 companies for an
initial review - and inflows in the early months of 2023 have exceeded the
same time last year. To support this growth in activity, and to ensure we
maintain the very hands-on approach that we have refined over many years, we
have invested heavily in our team. We added to our value creation function in
2022 with the appointment of James Craig who brings consultancy training and
mindset after working with Accenture and Baringa. More recently we've taken
on our first dedicated regional staff member, welcoming Mark Lyons as an
Investment Director in Manchester. Mark's primary focus will be on scaling
businesses in the North of England, where we know there is huge growth and a
lot of interesting businesses looking for funding.
The past 12 months have re-affirmed the benefits of our generalist,
multi-sector approach. The dangers of pooling large numbers of similar assets
and viewing that as protective diversification was evident during the global
financial crisis, which struck at the end of 2007 and continued into 2008. The
turmoil was a direct result of derivatives that were backed by cheap,
carelessly diligenced mortgages in the US; mortgages that were supposed to
benefit from the protection of diversification by their sheer number, but
instead turned out to be highly correlated. As turmoil flowed through the
entire US property market, they all crashed together, and contagion and fear
brought much of the global banking system along too.
More recently, commentators have been talking about 'diversification' when
describing funds that have a large number of very similar companies - all at
the same stage, operating in the same sector. In our view, such portfolios
offer very little diversification since companies in the same sector have very
similar valuation movements (in response to interest rates) or have customers
with very similar demand patterns. Companies in the same sector have hidden
shared dependencies, and that drives up risk.
Many of you will have seen the recent collapse of Silicon Valley Bank - the
$212 billion tech-lender, whose demise triggered dreadful memories of 2007/8.
Its downfall has been yet another stark reminder that all sectors have
dominant counterparties (be they banks, suppliers, logistics providers etc),
and a portfolio that is highly concentrated in a single sector brings
significant exposure to those counterparties in ways that are not immediately
obvious. As a specialist technology lender, the collapse of SVB had huge
repercussions for those that were invested in tech. So, while sector focus may
bring specialism - it can also bring danger.
Our approach has always been purposefully multi-sector so that we can mitigate
against such risks and take a more holistic view across the whole economy. We
always have been, and will always be, as a sector-agnostic, generalist
investor, avoiding the 'hottest' or faddiest sectors. It's an approach that
continues to stand the test of time, and ensures we are best placed to weather
whatever economic storms the global macroeconomic environment might throw at
us.
Rupert West
Managing Director
CameraMatics: Continuing to drive its overseas expansion
CameraMatics provides a range of fleet management solutions which transform
how businesses operate and deliver value to their customers. Designed from a
deep understanding of customers' needs, its vehicle operations cloud platform
has been developed to support mobile workers and fleet managers automate the
manual processes involved in transportation and logistics and reduce
risks. In 2021, Puma Funds invested £4.72 million into CameraMatics. The
investment has been primarily focused on supporting the expansion of the US
branch of CameraMatics, and growing its offering to large enterprise
customers, following recent successes in the UK.
SECTOR OVERVIEW
According to Fortune Business Insights, the global fleet management software
market was valued at $18.2 billion in 2021 and is projected to grow to $67.38
billion by 2029. Increasingly fleet managers are looking for software
solutions to monitor holistic fleet performance - not only to provide
real-time data insights that optimise fleet efficiency, but also to meet Net
Zero and Vision Zero targets requiring safer fleets with a reduced carbon
footprint.
OUR VIEW ON THE SECTOR
"The regulatory-driven adoption of systems, and the increased focus on driver
safety and wellness, are driving demand for systems which provide complete
visibility of fleet management. With AI and other new technologies coming on
stream at an ever-increasing pace, the fleet management solutions sector
promises sustained opportunities for growth."
Ben Leslie, Investment Director, Puma Private Equity
KEY RECENT SUCCESSES
In May 2022, CameraMatics acquired Telematicus to extend its green fleet
management capabilities and to improve its support for the insurance industry.
Telematicus was founded in 2009, and quickly became a visible and respected
player working within the insurance sector, focused on reducing risk for
insurers and running high-profile projects, such as the technology partner of
choice for O2 and its O2Drive campaign. The driver app runs on IOS and Android
smartphones, and helps drivers manage risk, environmental impact and vehicle
running costs.
In the summer of 2022, CameraMatics launched DashMatics - an innovative
software solution designed to improve visibility, digitise processes and
manage risks. The system helps to prevent accidents, but can be also used if
an incident does occur. The app allows both fleet managers and drivers to
manage the process, making manual paper-based reports a thing of the past.
In September 2022, CameraMatics hired a number of key personnel in the US. It
launched a new website specifically designed for decision-makers managing US
trucking fleets and business vehicle operators, to help them improve safety,
efficiency and compliance in their vehicles. CameraMatics is also expanding
into mainland Europe and the Middle East and expects to create more than 50
jobs over the next two to three years in the UK and Ireland.
SUSTAINABILITY
Many governments have made commitments to reach Net Zero by 2050. One area of
focus for the Net Zero standard is cutting the emissions from supply chains
since transportation is one of the largest contributors to global emissions,
better optimisation of fleet operations plays a central and critical role in
an organisation's ability to reduce its emissions.
CameraMatics not only offers a comprehensive range of products which enable
companies to gather key insights and information to better manage their
sustainability goals, it also provides support for transitioning to electric
fleets. In addition, analysis by CameraMatics has shown that its products have
enabled companies to benefit from up to a 30% reduction in fuel usage - saving
money as well as helping reduce carbon emissions.
WHY WE'VE INVESTED
CameraMatics provides a comprehensive range of scalable, innovative and
customer-centric solutions for fleet managers. These help to meet a wide range
of commercial, regulatory and safety needs identified through the team's deep
understanding of the logistics and transportation industry. Its focus on its
customers with continued development of new propositions to support day-to-day
needs is a key USP for the business. It has a sustained track record of
winning new contracts, and now has more than 85 employees and services more
than 1,000 commercial fleets.
4.7m investment (Alpha VCT participation 1.6m)
OUR INVESTMENT VIEW
"CameraMatics is leading the way in fleet safety technology solutions, and our
funding has enabled it to expand into both the US and Europe, thereby
strengthening its position in the global market. In the last 12 months its new
product launches have supported its existing product suite and allowed it to
enter new market verticals. The business is now focused on unlocking the
opportunity to scale in the US, and we are pleased with the progress it has
made."
Ben Leslie, Investment Director, Puma Private Equity
CAMERAMATIC'S VIEW
"We have worked with Puma Private Equity for the last three years. We have
found them to be supportive, strategic and practical to work with over this
time. While most VCs say they are 'founder-friendly' we have found that Puma
actually are, and they have become a key part of our team as we continue to
scale internationally. Their advice is always honest, insightful and in the
best interests of the business and all stakeholders."
Mervyn O'Callaghan, CEO and Co-Founder, CameraMatics
Connectr: Building better engagement and equity in the workforce
Connectr is an award-winning, industry-leading provider of cloud-based
mentoring software for enterprise-level organisations. It supports many of the
world's largest employers to attract, recruit, progress and retain future and
existing hires, with high-impact, scalable mentoring programmes which drive
engagement, inclusion and belonging via its online platforms - Connectr for
Candidates and Connectr for Employees.
Puma Funds initially invested £2.75 million in August 2019, to support
Connectr to develop its core product. Following impressive revenue growth in
the following two years, Puma invested another £6 million in two later
investment rounds (October 2020 and December 2021) to capitalise on the
expansion opportunities available to the company.
SECTOR OVERVIEW
Despite some progress in diversity, equity and inclusion (DE&I) policies
being implemented, there is progress to be made in ensuring greater equity in
the workplace. A recent study by the Chartered Institute of Personnel and
Development showed that just under half (47%) of UK employers surveyed do not
have a dedicated DE&I strategy in place. Only 38% of employers said they
collected some kind of equal opportunities monitoring data, and managers in
28% of organisations stated they were not given the time and resources to
foster an inclusive and diverse team.
In addition, while the commercial and moral case for DE&I is clear, too
many individuals from working class or underprivileged backgrounds find
themselves disadvantaged in the workplace. The Global Social Mobility Report
2020: Equality, Opportunity and a New Economic Imperative, found that the UK
ranked among the worst countries in terms of progression for those from poorer
socio-economic backgrounds.
The growth in HR and technology systems that support the DE&I market
continues, as companies seek solutions to help them better understand and
promote policies and practices which support equity in the workplace. A report
by Mercers in February 2019 suggested that the market was worth upwards of
$100 million. And in a recent study, Gartner stated that by 2025, 60% of
global mid-market and large enterprises will have invested in a cloud-deployed
human capital management suite for administrative HR and talent management.
OUR VIEW ON THE SECTOR
"Mentoring has moved into the mainstream, as more and more HR leaders
understand its benefits. The people function in many organisations is
increasingly utilising technology to help combat the challenges they face in
hiring, engaging and retaining staff. Hybrid working patterns have
fundamentally changed the working landscape, and we see huge opportunities for
tech adoption in the HR space."
Ben Leslie, Investment Director, Puma Private Equity
KEY RECENT SUCCESSES
The team has had a busy 12 months, with expansions in several areas. It has
invested in adding new functionality to its existing products, as well as
bringing to market Connectr for Employees, which expands the product offering
from the recruitment cycle to the entire employee lifecycle. It has also had a
number of large new client wins, including the Phoenix Group, which is one of
the UK's largest life and pensions organisations.
AWARDS
The team continues to be recognised for its innovation, with the following
awards in the last 12 months:
· Learning Platform of the Year (Bronze) at the Learning and
Performance Institute's Learning Awards
· Highly Commended for the Marriott Harrison Candidate Experience
Solution of the Year
· Nominated for D&I Initiative of the Year at the British HR Awards
WHY WE'VE INVESTED
Connectr provides a growing platform for HR solutions which enable employers
to attract, retain and develop their people. It has a growing track record of
securing and retaining new clients, and in the last 12 months alone, more than
20,000 new users have connected with its platform and more than 70,000
learning content tasks have been completed.
8.7m investment (Alpha VCT participation 1.7m)
OUR INVESTMENT VIEW
"Connectr creates a positive social impact for businesses, employees and
under-represented groups across the UK. Our investment allows Connectr to
continue setting the standard for its sector, further develop its market
leading mentor platform, and support customers to attract the best talent.
Connectr helps HR and people teams create an environment where individuals can
thrive.
"We are delighted to continue supporting the growing team at Connectr on the
next stages of its journey."
Ben Leslie, Investment Director, Puma Private Equity
CONNECTR'S VIEW
"We are excited about the future. Puma's continued financial and strategic
support enables us to continue investing in building out our product suite,
enabling us to be integrated far deeper into the candidate and employee
journey."
Will Akerman, CEO Connectr
Dymag: Driving wheel innovation since 1974
Dymag is a British designer and manufacturer of high-performance car and
motorbike wheels, which was founded in 1974 by Max Bostrom. The company has
been making carbon motorcycle wheels since 1995, and carbon-hybrid automotive
wheels since 2004, and considers itself a racing and road pioneer. The
business continues to grow its presence, both in aftermarket wheels using
relationships with several leading US distributors, and through project work
with several leading-performance original equipment manufacturers (OEMs).
Puma Funds has made a number of investments into Dymag: £3.6 million in
December 2018, £2.9 million during 2020, £1.5 million in October 2021 and
£750,000 in December 2022. These investments have been made to improve scale
and reduce production costs - particularly of carbon-hybrid automotive wheels,
which are seeing significant demand growth.
SECTOR OVERVIEW
The automotive sector has faced numerous challenges in recent years, with
Covid-19 and well-publicised chip shortages that were further exacerbated by
the war in Ukraine. Although the global chip shortage has affected many
industries, the automotive sector - as ardent followers of a 'just in time'
manufacturing strategy - has been particularly badly hit, and many
manufacturers have removed options available on their cars due to the limited
availability of semi-conductors. This has pushed up demand and the price of
used cars, with many manufacturers reporting lengthy wait times of months - in
some cases years - for some new models.
At the same time, the industry is seeing huge changes as new regulations,
technologies and consumer preferences combine to create a growing need for
electric vehicles (EVs). McKinsey estimates that about $115 billion of
investment has gone into EVs since 2010 and worldwide demand for EVs will grow
sixfold from 2021 to 2030, with annual unit sales going from 6.5 million to
roughly 40 million over that period. The automotive sector remains a huge
industry and one that continues to grow.
KEY RECENT SUCCESSES
Lightweight components go hand in hand with the desire to electrify, and Dymag
is well positioned to capitalise on the growing demand for EVs. Having coped
with the significant labour and supply chain shortages in recent years, Dymag
has posted material revenue growth. This has been underpinned by streamlined
new production methodologies introduced under the new Director of
Manufacturing and Quality - Simon Locke - who joined after 22 years at Dyson.
Dymag has also recently signed a strategic partnership with Hankuk Carbon, a
listed composites manufacturing group headquartered in South Korea, to explore
the mass production of its state-of-the-art carbon composite wheels for the
automotive industry.
MANAGEMENT TEAM CHANGES
Tom de Lange joined Dymag as COO in May 2019, becoming Managing Director in
January 2020 and finally CEO in January 2021. Tom was previously Head of
Research, Process Improvement at Dyson, and had a stellar career in automotive
racing and aerodynamic engineering with NASCAR and F1 before Dyson. Simon
Locke joined Dymag in August 2022 as the new Director of Manufacturing and
Quality, and Tom Ellaway joined in March 2022 as Head of Sales and Marketing.
WHY WE'VE INVESTED
EVs are the future, but they require more innovation than just advances in
electric motors and batteries - the EVs that we will see in the coming years
need super-light, super-strong components to optimise journey efficiency. The
advances being made in lightweight alloys are as important to EVs as any
advances being made in aerodynamics or battery cells in the last decade, and
Dymag is at the cutting edge of advances in wheel technology.
10.3m investment (Alpha VCT participation 1.7m)
OUR INVESTMENT VIEW
"We see the growth in demand for EVs continuing, and this provides a huge
opportunity for Dymag as an innovator in automotive wheel technology. The
expertise it has brought into the business, as well as the strategic
partnerships it is forging, will help drive growth and improve operational
efficiency, and we believe it is well positioned to accelerate its plans in
the coming months."
Rupert West, Managing Director, Puma Private Equity
DYMAG'S VIEW
"We're pleased with the progress we are making in cost-optimising our wheels
and designing them for more scalable manufacture. Our next big step is to
increase production capability from 2,000 units a year to 10,000 units a year.
We're currently investigating how we can utilise microfactories to help us
achieve this scale flexibly and at lower capital cost than traditional
factories, where clients need them, which will save hugely on emissions and
shipping costs. The investments made into Dymag have also helped us look at
more sustainable operations, including recycling composites and new materials
that could be leveraged in future wheels. We are excited about the role our
wheels can play in EVs as part of an overall system designed to save energy,
and have a much lower impact on its environment in the future."
Tom de Lange, CEO, Dymag
Everpress: Enabling creativity to flourish
Everpress started with a simple mission - to support grassroots creators and
reduce waste in fashion. Today, it provides a full-service solution through
which creators can upload their designs and create campaigns - using the
platform's toolkit to choose garment types, sale duration and prices - before
launching to a global audience via Everpress's website.
In August 2021, Puma Funds invested £3.2 million into Everpress, with a
further investment of £3.2 million in August 2022, to help the business
execute on plan with a focus on driving up profitability.
SECTOR OVERVIEW
According to data from the Office for National Statistics (ONS), the Retail
Sales Index shows that the volume of sales in clothing stores unexpectedly saw
small increases in November and December 2022, with 1.1% and 1% rises
respectively. Despite falling confidence in the economy, the ONS has stated
that consumers have "increased their spending this winter to maintain their
level of consumption of clothing and footwear as opposed to cutting back".
However, figures released in February 2023 by the British Retail Consortium
(BRC) and KPMG indicated that while sales of health, beauty, footwear,
jewellery and watches were up, sales of clothing were down. Paul Martin, the
UK Head of Retail at KPMG, stated, "Consumers are continuing to hold back on
non-essential spending with sales of clothing, footwear and accessories -
which have been very influential in spending for many months - continuing to
decline in February." With inflation appearing to be easing, it is hoped that
consumer confidence will return and discretionary spending increase in the
coming months.
OUR VIEW ON THE SECTOR
"We know that the market for clothing has remained challenging - but against
the backdrop of increasingly environmentally conscious consumers, the ability
to deliver discrete, small-run, personalised clothing is positive. Clothing
which enables individuals to connect with their favourite creators while
expressing themselves and their values will remain desirable."
Ben Leslie, Investment Director, Puma Private Equity
KEY RECENT SUCCESSES
The last 12 months have seen Everpress launch a number of high-profile
campaigns with creators that align with Everpress's core values, as well as
fundraising initiatives for various charities and appeals. These have included
Choose Love with the likes of Sebastian Croft, Taron Egerton and Olivia
Colman, as well as fundraisers for the war in Ukraine, and disaster relief for
those in Turkey and Syria following the earthquake earlier this year.
Everpress has also successfully launched integrations with other e-commerce
platforms, including Shopify, Spotify, Etsy and Trekstock.
SUSTAINABILITY
Everpress was created with sustainability at its heart and having spent a
considerable amount of time and effort, received its final B Corp
accreditation in July 2022. This provides validation to consumers of its
ethical credentials, and differentiates it from fast-fashion brands. In
addition, Everpress has launched a number of campaigns in the last 12 months
which have raised significant funds for a range of appeals and charities
supporting equality, diversity and inclusion.
WHY WE'VE INVESTED
While some fashion brands are faced with high levels of stock, and rising
costs that cannot easily be passed onto the consumer, Everpress has a model of
limited time campaigns and printing, which limits its exposure to excess
inventory that ties up cashflow. It has brought on key new hires in sales and
business development, and has a number of initiatives planned. These include:
· Creator weekends - planned for every quarter, with 25% more profits
going to creators/fundraisers after its 'anti' Black Friday campaign success.
· Integrations - further partnerships are in the pipeline which
integrate Everpress with other brand platforms - thereby unlocking further
distribution as well as access to more creatives.
· Initiatives calendar - with key themes each month which resonate with
its wider community, such as solidarity/power for events including Pride,
International Women's Day and Black History Month.
6.4m investment (Alpha VCT participation 2.1m)
OUR INVESTMENT VIEW
"Everpress has a unique business model which ensured the company continued to
thrive despite challenging market conditions in the consumer sector. The
Everpress platform enables creators to engage with and grow their following,
which is ever-more important in the current environment. The pre-order model
ensures the company carries limited stock and is able to be agile in line with
market evolutions."
Ben Leslie, Investment Director, Puma Private Equity
EVERPRESS'S VIEW
"Puma Private Equity has been a long-term supporter of Everpress and shares
our mission and our values. The team has helped us succeed on our journey, and
with the additional investment they have made as well as their skills,
knowledge, expertise and contacts, I am confident that we can realise our
vision."
Alex Econs, CEO, Everpress
Deazy: Development made easy
Deazy is a platform which enables enterprises, including PE/VC-backed growth
companies to hire high-quality software developers, by intelligently matching
developers with project requirements. Founded in 2016, Puma Funds invested £5
million of equity into Deazy in December 2021, to enable the business to scale
its commercial teams and accelerate its growth plans.
SECTOR OVERVIEW
The demand for highly skilled software developers continues to grow to address
priorities such as digital transformation and modernising legacy applications,
to improving cyber defences and cloud migration. According to Forbes, there
will be a shortfall of four million developers by 2025, with the US Bureau of
Labor Statistics showing that almost 200,000 developer jobs will need filling
each year to the end of the decade. Budget constraints can make it challenging
to recruit sufficient staff to manage in-house requirements, and research and
development tax cuts have impacted the level of claims that scale-ups can
obtain from HMRC - effectively increasing the cost of in-house developers.
Getting access to external, flexible software development resources as and
when businesses need them, is therefore becoming increasingly essential.
KEY RECENT SUCCESSES
Deazy continues to grow at pace, and achieved its highest monthly revenue ever
in January 2023. It recently announced that it was ranked 13(th) in the 2022
Deloitte UK Technology Fast 50 (which ranks the 50 fastest-growing tech
companies in the UK). It has also made a number of significant new hires:
· Ben Morris was appointed as the Head of People and Culture at the end
of the summer, to help the business double its headcount.
· In December 2022, Freya Wordsworth joined as Partnership Manager to
focus on strategic partnerships, consultancies and PE/VC-backed business
service providers.
· Laura Wall recently joined as Head of Marketing. Laura joins from
Codurance (a global software company) where she was the Global Head of
Marketing.
WHY WE'VE INVESTED
Puma invested in Deazy on the back of the company showing impressive growth in
its revenue - annual turnover growth over the last three years has been in
excess of 100%. The management team is firmly focused on scaling customer
acquisition, with a number of experienced new hires. We see the challenges of
software developer shortages in a number of our portfolio companies, and we
believe this is a sector that will continue to experience growth. Deazy is
well positioned to capitalise on that growth, with a differentiated offer that
focuses on working with established teams.
5.0m investment (Alpha VCT participation 1.0m)
OUR INVESTMENT VIEW
"Deazy now works in over 25 countries around the world and has more than 5,000
developers in its ecosystem. We have been working closely with it in refining
its strategy and helping it to recruit key staff members to support its growth
ambitions. We believe Deazy is the perfect delivery partner for a growing
number of companies who need flexible, scalable, on-demand services."
Kelvin Reader, Investment Director, Puma Private Equity
DEAZY'S VIEW
"There is a long-term skills gap in technology and our platform makes it easy
for organisations to fill that gap - that's what's been powering our growth
and what will see us grow even faster in the future. We've spent 2022
developing our proposition and building the team so that the company is ready
for further growth during 2023."
Any Peddar, CEO and Co-Founder, Deazy
HR Duo: Intelligent HR solutions for modern workplaces
HR Duo provides HR solutions to SMEs, by integrating industry knowledge with
the latest technology to deliver a number of HR requirements automatically.
Its easy, low-cost, cloud-based subscription service has been specially
developed to act as a bolt-on support to HR personnel, or as an HR back-up for
companies without a dedicated HR department, ideal for SMEs with 50-1,000
employees.
In December 2022, Puma Funds invested €3.75m into HR Duo, to accelerate
product development, grow its workforce and drive international expansion.
SECTOR OVERVIEW
Galvanised by the pandemic, worker engagement and happiness continue to be a
key focus for companies, driving growth in the HR tech space. Digital products
are rendering workforce management more efficient, with a large greenfield
opportunity to target SMEs which are resource-constrained and often require
investment in their HR function.
This is a high-growth sector, with growing levels of funding and competition.
In 2021, venture investors funnelled more than $12.3 billion into global HR
tech start-ups across 809 deals, roughly 3.6 times the amount of capital
invested in 2020, according to PitchBook data. Fortune Business Insights
estimates the global HR tech market at $24 billion in 2022 and expects it to
grow to $39.9 billion by 2029 (7.5% CAGR).
KEY RECENT SUCCESSES
During the last 12 months, HR Duo has seen a 38% growth in revenues and a 28%
growth in clients. It has also seen an increase in its average and median
contract values, as its clients see the value of its services in supporting
their businesses. The funding provided in December has enabled HR Duo to
establish a UK-based sales team, which is already showing initial signs of
success in the market. It has also completed a rebrand of the company with a
keen focus on the 'Duo' aspect of the brand, and has launched a new website.
WHY WE'VE INVESTED
Puma Funds invested to fund the existing sales plans and to drive growth,
particularly in the UK domestic market, where there are more than 5.5 million
SMEs. HR Duo's team of 52 is continuing to recruit talent to help drive growth
and capitalise on the product investments already made. Over the coming
months, the team intends to grow its presence in Ireland, and expand its
product offering to include third-party integrations which provide a wider
suite of functionality.
3.2m investment (Alpha VCT participation 0.3m)
OUR INVESTMENT VIEW
With the UK's HR tech market rapidly growing and SMEs increasingly seeking to
improve their employees' working experience, it's the perfect time for an
innovative and ambitious company such as HR Duo to expand into the UK market.
"We see significant potential to empower UK SMEs - harnessing the management
team's established HR experience through a comprehensive tech solution. We are
thrilled to be working with HR Duo and its management team, and are excited to
see where this journey takes us."
Henri Songeur, Investment Manager, Puma Private Equity
HR DUO'S VIEW
"We are delighted to welcome Puma on board, who will provide not only the
necessary funding but also the expertise that will help drive our ambitious
growth strategy. Our near to mid-term objectives are rapid revenue growth and
staff expansion - not only in Ireland but in the UK where we see an enormous
untapped opportunity for the unique services that HR Duo offers. This is an
exciting time for the company and we look forward to a bright future
revolutionising the HR needs of thousands of SMEs worldwide."
Jerome Forde, CEO, HR Duo
Le Col: Helping the world's fastest cyclists go faster
Le Col has a very clear ambition to be the pre-eminent performance cycling
apparel company in the world.
In 2018, Puma Funds invested £2.35 million to support Le Col's initial growth
plans, and following continued strong performance, a further £2.5 million was
invested in 2019. In 2022, additional investment was provided to fuel the
company's overseas expansion, as well as its sales and marketing efforts,
which have significantly raised the brand's profile over the last two years.
In 2022, Puma Funds invested a further £9.5 million to support the brand's
long-term growth trajectory.
SECTOR OVERVIEW
The current cost-of-living crisis is having a global impact, with Covid and
the ongoing war in Ukraine playing a significant role. Consumers are feeling
the pinch of the highest prices they've seen in a generation, with energy
bills soaring, food costs rising, and mortgage interest rates reaching 15-year
highs. It's no wonder then that individuals are spending less as they become
more cautious with their money.
Online sales - which saw intense growth over the pandemic - have fallen back,
and latest analysis from the ONS shows that UK ecommerce sales are now down to
their lowest peak since January 2021, accounting for just 26.6% of total
retail sales in January 2023, compared with a 37.8% peak two years ago.
Bike sales reached their lowest level in two decades in 2022. Total UK
mechanical bike volumes fell 22% to an estimated 1.88 million units in 2022.
This was 27% below pre-Covid levels in 2019, according to data from the
Bicycle Association. With falling consumer confidence and increasing costs,
the cycling industry as seen several brands fail in recent months including
Milltag and VeloVixen.
OUR VIEW ON THE SECTOR
"Having experienced phenomenal growth, in the last 18 months we have seen a
significant slowdown in demand for cycling equipment and apparel. While the
outlook remains challenging, products that are at the cutting edge of
technology and innovation in this sector will remain in demand."
Harriet Rosethorn Investment Director, Puma Private Equity
KEY RECENT SUCCESSES
The team at Le Col has continued to focus on the US, where it continues to see
encouraging signs of growth. This includes building a custom offering for the
US market (such as supporting cycling clubs), and it has recently launched
onto Amazon Marketplace in the US.
In 2022 the team returned to the UCI World Tour with BORA-hansgrohe, and it
has spent the last year putting together a world-beating package of kit that
includes the fastest skinsuits and speedsuits - harnessing technology from its
Project Aero collaboration with McLaren. Jai Hindley won the Giro d'Italia in
Le Col kit - proving that Le Col provides the fastest cycling apparel to the
fastest cyclists in the world today.
WHY WE'VE INVESTED
Le Col has grown rapidly over the investment period - fuelled in part by
renewed interest in the cycling sector, but also because of the quality of its
product, which has helped deliver results, particularly for competitive
cycling. The business has had to navigate significant growth challenges, as
well as external political and economic factors such as Brexit, Covid and
ongoing supply chain challenges. The business has an impressive management
team and we have been working with it extensively to help the organisation
flex and shape, so it is in an increasingly strong position to stabilise and
grow.
14.4m investment (Alpha VCT participation 2.6m)
OUR INVESTMENT VIEW
"Le Col is a best-in-class provider of cycling apparel, and we are committed
to providing it with the necessary capital and strategic support to enable the
business to continue to scale. We are impressed with the way in which it has
navigated significant growth challenges, and we are working closely with the
team on its amazing journey."
Harriet Rosethorn, Investment Director, Puma Private Equity
LE COL's VIEW
"Le Col has always been agile and fleet of foot - constantly exploring new
ways of doing things. This is a key business strength and one that has allowed
us to accelerate our growth in recent times. It is clear from what we are
seeing across our core markets that the economic climate has taken a
remarkable turn with pressure coming from general inflation, interest rate
increases and high energy prices. We need to ensure our business is in a
strong position to enable us to weather such changes. Our most recent
investment by Puma Funds enables us to transition to a more efficient
operational model: one that will help to solidify our position and enable us
to act nimbly in what is fast becoming a volatile operating market. It will
also enable us to continue making strategic investments that support our
growth plan."
Yanto Barker, Founder and CEO, Le Col
MUSO: Dominating the market for global piracy
MUSO is a London-based data company which provides a complete and trusted view
of global piracy and unlicensed media consumption. Its unique and
transformative data is fast becoming a must-have data currency for
entertainment companies, and is already used by, among others, Amazon Studios,
National Association of Theatre Owners (NATO), NOS, Lionsgate, MNRK (formerly
eOne Music) and Sony Interactive Entertainment Europe. MUSO's technology
measures hundreds of billions of visits to piracy websites each year and
provides unrivalled consumption and audience data allowing rights-holders to
strengthen the protection of their content from piracy.
In August 2022, MUSO received a £3.2 million investment from Puma Funds. The
investment will support the establishment of MUSO's marketing function and
larger build-out of its sales teams, in both the UK and the US.
SECTOR OVERVIEW
MUSO's data points to the continuation of the rise in digital piracy for film
and TV in 2023, fuelled by a combination of factors, including the increasing
volume of content post-pandemic, releases being increasingly exclusive to a
large number of legal subscription platforms, and global inflationary and
economic pressures. Film piracy increased by 38.6% and visits to piracy
websites for TV content grew by 8.8% in 2022, when compared with 2021.
This trend continues to be a major issue for the industry, significantly
impacting the revenues and livelihoods of all involved - particularly smaller,
independent creators - and damaging the wider economy. According to the
Motion Picture Association (MPA), online TV and film piracy costs the US
economy at least $29 billion in lost revenue each year. What's more,
spiralling global visits to such sites are also estimated to be robbing the
entertainment industry of hundreds of thousands of jobs.
OUR VIEW ON THE SECTOR
"Data shows that with the cost-of-living challenges that many consumers are
facing, global piracy is on the increase. The need to protect revenues in
music, film and TV will be increasingly important for all organisations in
this sector - to secure jobs and industry futures as much as secure
profits."
Harriet Rosethorn, Investment Director, Puma Private Equity
KEY RECENT SUCCESSES
Following the investment in August 2022, MUSO has recruited a number of new
hires. In October, Alaina Creedy joined as Head of Customer Success. Alaina
was previously at Incopro where she was Vice President, Alliances &
Partnerships. Neil Harvey joined in November 2022 as Marketing Director. Neil
joined from Ekimetrics, where he was Director for Global Demand Generation.
And Tim Colyer also joined the team in November 2022, as Enterprise Sales
Director. Tim was previously a Sales Executive at Corsearch and prior to that
a Director at Entura International.
Together the team is focused on client acquisition and client management.
WHY WE'VE INVESTED
Puma Funds invested to help the team fund growth and expand overseas -
particularly into the US. MUSO is well recognised as a leader in global
piracy, and has an impressive roster of clients, including some of the biggest
names in film, music and TV.
3.2m investment (Alpha VCT participation 0.5m)
OUR INVESTMENT VIEW
"We're really excited to be working with MUSO, as we believe the business
shows significant growth potential to capitalise on the rise in global piracy.
The team has made a number of significant hires in recent months to strengthen
its sales and marketing efforts, and this is starting to translate into new
client wins. We are enjoying working closely with the team to achieve their
goals."
Harriet Rosethorn, Investment Director, Puma Private Equity
MUSO'S VIEW
"MUSO has made excellent progress since Puma's investment, with growth in
revenue and customer numbers, and hitting product milestones. Our focus for
FY24 remains on delivering triple-digit ARR growth and adding to its global
enterprise customer logos, which currently include Disney, Amazon, Sony
Interactive, PlayStation, Krafton and AMC. We remain the only company in the
market that measures audience demand from unlicensed streaming websites and
are well resourced to capture significant market share and become omnipresent
as the market authority."
Andy Chatterley, CEO and Founder, MUSO
Ostmodern: Riding the tidal wave of new video content
Ostmodern is a digital product specialist and creative technology company. The
team collaborates with businesses to develop unique digital products and
services. It has produced bespoke rich media and video on demand (VOD) for
many high-profile clients across the world, including Formula 1, Sky NZ and
Rakuten. Building on the management's expertise in the VOD sector, Ostmodern
has developed a content management system (CMS) for rich media, Skylark, to
enable content owners to better manage and commercialise their video content.
In December 2020, Puma Funds invested £2 million in Ostmodern, to enable it
to further develop the Skylark product and continue its transition from a
service provider to a productised offering. The ultimate goal is to provide an
affordable and easy-to-plug-in CMS to a wider range of content owners.
SECTOR OVERVIEW
The proliferation of VOD has continued, as more tools are developed to enable
content owners to publish and commercialise their rich media assets direct to
their audience. Ostmodern is part of this wave, providing best-in-breed
development services and solutions around the provision of video content
online.
According to Fortune Business Insights, the global VOD market is projected to
grow from $82.77 billion in 2022 to $257.59 billion by 2029, at a CAGR of
17.6%. This growth is being fuelled by a number of factors, including growing
global mobile internet penetration and a huge surge post-pandemic in demand
for subscription-based TV, movies and documentaries.
Kantar's Entertainment on Demand study in the US has found that from September
to December 2022, the number of households with video streaming rose 2.5
million, reaching a total of 115.6 million households. Household penetration
of video streaming is now 89%. The average US household now accesses 5.4
different streaming services, up from 5.2 in Q3 2022.
KEY RECENT SUCCESSES
The team at Ostmodern has worked hard in the last 12 months, to drive
operational efficiencies and grow revenue in line with its plans to achieve
profitability. The last six months of 2022 saw significant gains in sales,
with overall revenues growing 37% on the same period in 2021.
Much of this growth has been driven by the expansion of the services side of
the business, with the management team successfully designing and implementing
a more formalised account management structure, which provided better client
service and clearer visibility on projects. During the remainder of this year
it wishes to continue improvements in this space - building on its reputation
as a provider of high-quality digital services. The services part of the
business is planned to reach profitability by the end of H1 2023.
The team also successfully launched Skylark 10 in beta - its latest iteration
of its headless CMS solution - and it has forecast a significant sales drive
from this launch in 2023, with the aim that this will be the best-in-breed
headless CMS on the market.
WHY WE'VE INVESTED
Puma has backed a relatively established business (services side) with a
best-in-breed SaaS product growth option (Skylark). The management team has a
strong reputation in the sector for providing digital services of the highest
quality around VOD.
The commercialisation of content online continues to grow. Sectors such as
sports, education, retail are expected to move in a similar direction to media
companies, thereby significantly increasing the serviceable market for
Ostmodern and Skylark.
2.0m investment (Alpha VCT participation 0.9m)
OUR INVESTMENT VIEW
"We are delighted to be supporting Ostmodern's strong management team, as it
draws on its long-standing experience in the industry to capitalise on the
considerable growth of video on demand that we are seeing worldwide. With
customer and end-user experience becoming increasingly important in our new
digital landscape, we look forward to seeing the team lead the way in the rich
media market."
Kelvin Reader, Investment Director, Puma Private Equity
OSTMODERN'S VIEW
"Puma Private Equity's funding and strategic support enables us to put in
place appropriate plans for growth, and over the coming months, set up our
reseller channel and referral partner network. We are excited about the
future."
Tom Williams, CEO, Ostmodern
Ron Dorff: Exploiting growing demand for luxury athleisure wear
In 2020, the Puma Funds invested £3.59 million into men's athleisure wear
business, Ron Dorff. Aligning Swedish functionality with French style, Ron
Dorff is a well-respected premium bodywear brand, having been voted one of the
three best swimwear brands for men in 2020 by Vogue magazine. In February
2022, Puma Funds made a further investment of £1.67 million, to enable the
business to continue its overseas expansion, particularly in the US.
SECTOR OVERVIEW
According to research by McKinsey, after experiencing 18 months of robust
growth (early 2021 to mid-2022), the fashion industry is again facing a tough
time. Inflation, and depressed customer confidences, resulted in declining
growth rates in the second half of 2022, and it expects that the slowdown to
continue through 2023. However, the luxury sector will outperform the rest of
the industry, as wealthy shoppers continue to travel and spend. The luxury
sector is expected to grow 5-10% in 2023, driven by strong momentum in China
(projected to grow 9-14%) and in the US (projected to grow 5-10%). In
addition, according to the Boston Consulting Group, the global luxury industry
is expected to climb from an estimated €388 billion in 2022 to an estimated
€494 billion in 2026.
OUR VIEW ON THE SECTOR
"While clothing in general has been affected by the economic slowdown, demand
for premium and luxury clothing continues to climb. We are seeing a number of
brands release collaborations and design partnerships to huge success, and we
see this trend continuing in this premium space."
Ben Leslie, Investment Director, Puma Private Equity
KEY RECENT SUCCESSES
The team has had an incredibly busy year, with double-digital growth in
revenue across all primary channels, a number of new hires and some successful
collaborations. It also won Best Sportswear Brand in Robb Report's Annual Best
of the Best 2022.
In the spring of 2022 it donated underwear, T-shirts and socks shipped by
truck via Poland into western Ukraine, following requests from Vogue UA
(https://url.avanan.click/v2/___https:/www.linkedin.com/company/vogue-ua/___.YXAxZTpzaG9yZWNhcDphOm86NTM0ZTYzZTI4ZTRhNmMwNjUyNzA5ZmJmNjY5MDVlNWI6NjozYjgxOjJjMTRiYjVkODU2MjFhMzBlNjA3M2MxMTkzMjVhNTI4ZTAzNGIxMmY0ZDZiZTlmZGJlM2ZlNjk2YzFjNTNhYjc6cDpU)
Venya Brykalin
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. Ron Dorff also launched a charity 'Independent Boy' T-shirt in support of
Ukraine, building on the existing range, which focuses on locations the
company operates in.
In the summer Ron Dorff opened a successful pop-up store in Fire Island, which
it will be repeating from May 2023. It also launched a limited-edition
collection in a collaboration with Rivieras. Recognised as a classic, the
Rivieras beach loafer is simple and timeless - and by aligning with Ron Dorff
on a capsule collection, this exclusive collaboration was a great success.
In September 2022 it launched its Papa collection with Neil Patrick Harris.
The 20-piece limited-edition collection of Ron Dorff's minimalist wardrobe
basics donates 15% of its proceeds to the World Central Kitchen charity.
Ron Dorff has also signed new wholesale relationships with lighthouse
partners, including Harrods, Equinox and Pantechnicon.
WHY WE'VE INVESTED
Ron Dorff continues to deliver on its strategic plans, and the business has
continued revenue growth in its core markets. It has shown to be able to not
just cope, but actively thrive in a challenging economic climate, through its
ability to innovate and collaborate with brands that resonate with its growing
customer base.
7.6m investment (Alpha VCT participation 1.9m)
OUR INVESTMENT VIEW
"Ron Dorff has gone from strength to strength following our initial investment
in 2020. Its successful launch into the US market, brand collaborations, and a
significant upgrade to the company's e-commerce capability, have all
contributing to the brand's success. We are delighted to continue our support
for Ron Dorff with further investment, and look forward to a prosperous
journey ahead."
Ben Leslie, Investment Director, Puma Private Equity
RON DORFF'S VIEW
"Back in 2020, despite lockdowns and a general world crisis, the team at Puma
Private Equity believed in Ron Dorff and our strategy that the US was the way
to go. Thanks to them we opened our US flagship store in New York, and in
parallel invested heavily online, making the US our number one, most
profitable marketplace. An LA store will open in May 2023 and Miami is just
around the corner - both of which will support online sales in these two key
States. This was all part of the business plan that Puma Private Equity
approved back in 2020 when the world looked very different. A plan is only a
plan until it becomes real. And it became real thanks to a fantastic team at
Puma who have supported us from day one."
Claus Lindorff, CEO, Ron Dorff
Investment Portfolio Summary
As at 28 February 2023
Of the investments held at 28 February 2023, all are incorporated in England
and Wales, except for MySafeDrive Limited and HR Duo Limited who are
incorporated in Ireland.
Valuation Cost Gain/(loss) Valuation as a % of Net Assets Multiple
£'000 £'000 £'000
Qualifying Investments
ABW Group Limited ("Ostmodern") 981 900 81 4% 1.09x
Deazy Limited 1,076 1,000 76 4% 1.08x
Dymag Group Limited 1,713 1,680 33 7% 1.02x
Everpress Limited 3,304 2,100 1,204 14% 1.57x
Forde Resolution Company ("HR Duo Limited") 347 347 - 1% 1.00x
Le Col Holdings Limited 2,730 2,599 131 11% 1.05x
Muso Limited 500 500 - 2% 1.00x
MyKindaCrowd Limited ("Connectr") 1,544 1,650 (106) 6% 0.94x
MySafeDrive Limited ("CameraMatics") 5,393 1,593 3,800 22% 3.38x
NQOCD Consulting Limited ("Ron Dorff") 2,591 1,870 721 11% 1.39x
Total Qualifying Investments 20,180 14,239 5,941 84% 1.42x
Total Investments 20,180 14,239 5,941 84%
Balance of Portfolio 3,915 3,915 - 16%
Net Assets 24,095 18,154 5,941 100%
Strategic Report
The Directors present their Strategic Report of the Company for the year ended
28 February 2023. The purpose of the report is to inform members of the
company and help them assess how the directors have performed their duty to
promote the success of the company.
Principal Activities and Status
The Company was incorporated on 11 April 2019. The principal activity of the
Company is the making of investments in qualifying and non-qualifying holdings
of shares or securities. The Company is an investment company within the
meaning of Section 833 of the Companies Act 2006. The Company has been granted
provisional approval by the Inland Revenue under Section 274 of the Income Tax
Act 2007 as a Venture Capital Trust. The Directors have managed, and continue
to manage, the Company's affairs in such a manner as to comply with Section
274 of the Income Tax Act 2007. The Company's ordinary shares of 0.01p each
were listed on the Official List of the UK Listing Authority on 5 June 2020.
Business Model and Strategy
The Company operates as a VCT to enable its shareholders to benefit from tax
reliefs available. The Directors aim to maximise tax free distributions to
shareholders by way of dividends paid out of income received from investments
and capital gains received following successful realisations. The Company's
strategy is set out in the Investment Policy set out below.
Investment Policy
Puma Alpha VCT plc seeks to achieve its overall investment objective (of
proactively managing the assets of the fund with an emphasis on realising
gains in the medium term) to maximise distributions from capital gains and
income generated from the Company's assets. It intends to do so whilst
maintaining its qualifying status as a VCT, by pursuing the following
Investment Policy:
The Company may invest in a mix of qualifying and non-qualifying assets. The
qualifying investments may be quoted on AIM or a similar market or be unquoted
companies. The Company may invest in a diversified portfolio of growth
orientated qualifying companies which seek to raise new capital on flotation
or by way of a secondary issue. The Company will target investments in
unquoted companies with a strong and experienced management team, a
proposition that is commercially validated through sales volume, a clear and
comprehensive plan for growth, and operating in a well-defined market niche
with proven market fit. The Company had to have in excess of 80% of its assets
invested in qualifying investments as defined for VCT purposes by 28 February
2023.
The portfolio of non-qualifying investments will be managed with the intention
of ensuring the Company has sufficient liquidity to invest in Qualifying
Investments as and when opportunities arise. Subject to the Board and
Investment Manager's view from time to time of desirable asset allocation, it
will comprise quoted and unquoted investments (direct or indirect) in cash or
cash equivalents, secured loans, bonds, equities, vehicles investing in
property and funds of funds or on cash deposit.
A full text of the Company's investment policy can be found within the
Company's prospectus at www.pumainvestments.co.uk
(https://url.avanan.click/v2/___http:/www.pumainvestments.co.uk___.YXAxZTpzaG9yZWNhcDphOm86NTM0ZTYzZTI4ZTRhNmMwNjUyNzA5ZmJmNjY5MDVlNWI6NjoxMGM3OjBhYWRmM2EyOWQ2YTRkMGIwYzk5Y2JiNjk5YTc2MGJmMTY3NzRjMWVkZGIxYTE2ZmJjNzRmOWE3ZTc2YTEzNzY6cDpU)
.
Principal Risks and Uncertainties
The Board have carried out a robust assessment of the Company's emerging and
principal risks, including those that might threaten the Company's business
model, future performance, solvency or liquidity and reputation. The Board
receives regular reports from the Investment Manager and uses this information
along with their own knowledge and experience to identify any emerging risks,
so that appropriate procedures can be put in place to manage or mitigate such
risks.
The principal risks facing the Company relate to its investment activities,
specifically market price risk, as well as interest rate risk, credit risk and
liquidity risk. An explanation of these risks and how they are managed is
contained in note 14 to the financial statements. Additional risks faced by
the Company are as follows:
Market Conditions
There is a risk that geo-political and economic events, can have an impact on
the prospects of certain of the Company's investments. The Investment Manager
maintains close contact with all investee companies to endeavour to mitigate
the risk as far as possible. Further details of the investments are set out in
the Investment Manager's Report.
Investment Risk
Inappropriate stock selection leading to underperformance in absolute and
relative terms is a risk which the Investment Manager and the Board mitigate
by reviewing performance throughout the year and formally at Board meetings.
There is also a regular review by the Board of the investment mandate and
long-term investment strategy and monitoring of whether the Company should
change its investment strategy.
Regulatory Risk
The Company operates in a complex regulatory environment and faces a number of
related risks. A breach of s274 of the Income Tax Act 2007 could result in the
Company being subject to capital gains on the sale of investments. A breach of
the VCT Regulations could result in the loss of VCT status and consequent loss
of tax relief currently available to shareholders. Serious breach of other
regulations, such as the UKLA Listing Rules and the Companies Act 2006 could
lead to suspension from the Stock Exchange.
The Board receives quarterly reports in order to monitor compliance with
regulations.
In addition, to the principal risks explained above, the principal uncertainty
that may affect the Company relate to material changes to the VCT regulations.
The Board will continue to monitor this and take appropriate action if
required.
Risk Management
The Company's investment policy allows for a large proportion of the Company's
assets to be held in unquoted investments. These investments are not publicly
traded so there is not a liquid market for them. Therefore, these investments
may be difficult to realise.
The Company manages its investment risk within the restrictions of maintaining
its qualifying VCT status by using the following methods:
· the active monitoring of its investments by the Investment Manager
and the Board;
· seeking Board representation associated with each investment, if
possible;
· seeking to hold larger investment stakes by co-investing with other
companies managed by the Investment Manager, so as to gain more influence over
the investment;
· ensuring a spread of investments is achieved.
Business Review and Future Developments
The Company's business review and future developments are set out in the
Chairman's Statement, the Investment Manager's Report and Investment Portfolio
Summary.
Key Performance Indicators
At each board meeting, the Directors consider a number of performance measures
to assess the Company's success in meeting its objectives. The Board believes
the Company's key performance indicators are movement in Net Asset Value per
ordinary share and Total Return per ordinary share. The Board considers that
the Company has no non-financial key performance indicators. In addition, the
Board considers the Company's compliance with the Venture Capital Trust
Regulations to ensure that it will maintain its VCT status. An analysis of the
Company's key performance indicators and the performance of the Company's
portfolio and specific investments is included in the Chairman's Statement,
the Investment Manager's Report and the Investment Portfolio Summary.
Viability Statement
The Directors have conducted a robust assessment of the principal risks facing
the Company including those that would threaten its business model, future
performance, solvency or liquidity. This is summarised above. The Directors
have assessed the prospects of the Company for the three-year period from the
balance sheet date. This is a period for which developments are considered to
be reasonably foreseeable.
This review included consideration of compliance with VCT regulations, the
Company's current financial position and expected cash flows for the period
and the current economic outlook.
Based on this review, the Directors have concluded that there is a reasonable
expectation that the Company has adequate cash resources to enable it to
continue in operation and meet its liabilities as they fall due over the
three-year period to 28 February 2026.
Section 172 Statement - Duty to promote the success of the company
Section 172 of the Companies Act requires directors of a company to act in the
way they consider, in good faith, would be most likely to promote the success
of the company for the benefit of its members as a whole, and in doing so have
regard (amongst other matters) to:
a) the likely consequences of any decision in the long term,
b) the interests of the company's employees,
c) the need to foster the company's business relationships
with suppliers, customers and others,
d) the impact of the company's operations on the community and
the environment,
e) the desirability of the company maintaining a reputation
for high standards of business conduct, and
f) the need to act fairly between members of the company.
This section of the Strategic Report also sets out the disclosures required in
respect of how the company engages with suppliers, customers and others in a
business relationship with the company.
The company does not have any employees and delegates day to day operations to
service providers. The board's principal concern is to focus on the needs and
priorities of its shareholders as well as considering the wider community
including the company's service providers and its investee companies (as
disclosed in the Investment Manager's Report). The board consider that the
company's shareholders are its customers, and its suppliers are the service
providers.
The Annual Report as a whole sets out how the board promotes the success of
the company for the benefit of its shareholders. The board is focused on high
standards of business conduct and recognises the need to act fairly between
shareholders.
The board engages with the investment manager at every board meeting to ensure
that there is a close and constructive working relationship and a good
understanding of the investee companies. The company also engages regularly
with its other service providers. The board ensures that the interests of
current and potential stakeholders, and the impact of the company's
investments on the wider community and the environment are taken into account
when decisions are made.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Strategic Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102
"The Financial Reporting Standard applicable in the UK and Republic of
Ireland", and applicable law). Under company law, the Directors must not
approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of the profit or
loss of the Company for that period. In preparing those financial statements,
the directors are required to:
a) select suitable accounting policies and then apply them
consistently;
b) make judgements and accounting estimates that are
reasonable and prudent;
c) state whether applicable UK Accounting Standards
(comprising FRS 102 "The Financial Reporting Standard applicable in the UK and
Republic of Ireland", and applicable law). have been followed, subject to any
material departures disclosed and explained in the financial statements;
d) prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
Directors' statement pursuant to the disclosure and transparency rules
Each of the Directors confirms that, to the best of each person's knowledge:
a) the financial statements, prepared in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 102 "The Financial Reporting Standard
applicable in the UK and Republic of Ireland", and applicable law), give a
true and fair view of the assets, liabilities, financial position and profit/
(loss) of the Company; and
b) the Chairman's Statement, Investment Manager's Report, the
Strategic Report contained in the Annual Report include a fair review of the
development and performance of the business and the position of the Company
together with a description of the principal risks and uncertainties that it
faces.
Directors' Statement Regarding Annual Report and Accounts
The Directors consider that the annual report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Company's position and performance, business
model and strategy.
Electronic Publication
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website. The
financial statements are published on www.pumainvestments.co.uk, a website
maintained by the Investment Manager.
Legislation in the United Kingdom regulating the preparation and dissemination
of the financial statements may differ from legislation in other
jurisdictions.
On behalf of the Board.
Egmont Kock
Chairman
15 June 2023
Income Statement
For the year ended 28 February 2023
Year ended 28 February 2023 Year ended 28 February 2022
Note Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gain on investments 8 (b) - 316 316 - 4,051 4,051
Income 2 35 - 35 6 - 6
35 316 351 6 4,051 4,057
Investment management fees 3 (111) (332) (443) (71) (212) (283)
Performance fee 3 - - - - (519) (519)
Other expenses 4 (294) - (294) (224) - (224)
(405) (332) (737) (295) (731) (1,026)
(Loss)/profit before tax (370) (16) (386) (289) 3,320 3,031
Tax 5 - - - - - -
(Loss)/profit after tax (370) (16) (386) (289) 3,320 3,031
Basic and diluted
(loss)/return per Ordinary Share (pence) 6 (2.17p) (0.09p) (2.26p) (2.48p) 28.51p 26.03p
All items in the above statement derive from continuing operations.
There are no gains or losses other than those disclosed in the Income
Statement.
The total column of this statement is the Statement of Total Comprehensive
Income of the Company prepared in accordance with FRS 102 'The Financial
Reporting Standard applicable in the UK and Republic of Ireland'. The
supplementary revenue and capital columns are prepared in accordance with the
Statement of Recommended Practice, 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' issued by the Association of Investment
Companies.
There were no items of other comprehensive income during the year.
Balance Sheet
As at 28 February 2023
Note As at As at
28 February 2023
28 February 2022
£'000 £'000
Fixed Assets
Investments 8 20,180 15,753
Current Assets
Debtors 9 185 124
Cash 3,911 1,980
4,096 2,104
Creditors - amounts falling due within one year 10 (181) (654)
Net Current Assets 3,915 1,450
Total Assets less Current Liabilities 24,095 17,203
Net Assets 24,095 17,203
Capital and Reserves
Called up share capital 12 185 126
Share premium account 1,938 12,271
Capital reserve - realised (612) (836)
Capital reserve - unrealised 5,941 6,182
Revenue reserve 16,643 (540)
Total Equity 24,095 17,203
Net Asset Value per Ordinary Share 13 130.53p 136.48p
The financial statements were approved and authorised for issue by the Board
of Directors on 15 June 2023 and were signed on their behalf by:
Egmont Kock
Chairman
Statement of Cash Flows
For the year ended 28 February 2023
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Reconciliation of (loss) after tax
(Loss)/profit before tax (386) 3,031
(Gain) on investments (316) (4,051)
(Increase) in debtors (61) (95)
(Decrease)/Increase in creditors (473) 621
Net cash (used in) operating activities (1,236) (494)
Cash flow from investing activities
Purchase of investments (5,268) (3,725)
Proceeds from disposal of investments 1,157 -
(Outflow) from investing activities (4,111) (3,725)
Cash flow from financing activities
Proceeds received from issue of ordinary share capital 7,476 4,277
Expense paid for issue of share capital (198) (138)
Inflow from financing activities 7,278 4,139
Net increase/(decrease) in cash and cash equivalents 1,931 (80)
Cash and cash equivalents at the beginning of the year 1,980 2,060
Cash and cash equivalents at the end of the year 3,911 1,980
Statement of Changes in Equity
For the year ended 28 February 2023
Called up share capital Share premium account Capital reserve - realised Capital reserve - unrealised Revenue reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1 March 2021 86 8,172 (105) 2,131 (251) 10,033
Comprehensive income for the year
Profit after tax - - (731) 4,051 (289) 3,031
Total comprehensive income for the year - - (731) 4,051 (289) 3,031
Transactions with owners, recognised directly in equity
Issue of shares 40 4,237 - - - 4,277
Share issue cost - (138) - - - (138)
Total transactions with owners, recognised directly in equity 40 4,099 - - - 4,139
Balance as at 28 February 2022 126 12,271 (836) 6,182 (540) 17,203
Comprehensive income for the year
Profit after tax - - (327) 310 (369) (386)
Total comprehensive income for the year - - (327) 310 (369) (386)
Transactions with owners, recognised directly in equity
Issue of shares 59 7,417 - - - 7,476
Share issue cost - (198) - - - (198)
Cancellation of share premium (17,552) 17,552 -
Total transactions with owners, recognised directly in equity 59 (10,333) - - 17,552 7,278
Other movements
Prior year fixed asset gains now realised - - 551 (551) - -
Total other movements - - 551 (551) - -
Balance as at 28 February 2023 185 1,938 (612) 5,941 16,643 24,095
There is £16 million (2022: nil) considered to be distributable to
shareholders.
The capital reserve - realised will include gains/losses that have been
realised due to the sale of investments, net of related costs. The capital
reserve - unrealised represents the investment holding gains/losses and shows
the gains/losses on investments still held by the Company not yet realised by
an asset sale.
Share premium account represents premium on shares issued less issue costs.
The revenue reserve represents the cumulative revenue earned less cumulative
distributions.
Share premium cancellation represents amounts approved by the High Court of
Justice to be cancelled to create a pool of distributable reserves as approved
by shareholders at the 2021 AGM.
1. Accounting Policies
Accounting convention
Puma Alpha VCT plc ("the Company") was incorporated in England on 11 April
2019 and is registered and domiciled in England and Wales. The Company's
registered number is 11939975. The registered office is Cassini House, 57 St
James's Street, London SW1A 1LD. The Company is a public limited company
(limited by shares) whose shares are listed on LSE with a premium listing. The
Company's principal activities and a description of the nature of the
Company's operations are disclosed in the Strategic Report.
The financial statements have been prepared under the historical cost
convention, modified to include investments at fair value, and in accordance
with the requirements of the Companies Act 2006, including the provisions of
the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 and with FRS 102 'The Financial Reporting Standard applicable
in the UK and Republic of Ireland' ("FRS 102") and the Statement of
Recommended Practice, 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts' issued in October 2019 by the Association of
Investment Companies ("the SORP").
Monetary amounts in these financial statements are rounded to the nearest
whole £1,000, except where otherwise indicated.
Going concern
The Directors have considered a period of 12 months from the date of this
report for the purposes of determining the Company's going concern status
which has been assessed in accordance with the guidance issued by the
Financial Reporting Council. The Directors have a reasonable expectation that
the Company has adequate resources to continue in operational existence for
the foreseeable future and believe that it is appropriate to continue to apply
the going concern basis in preparing the financial statements. This is
appropriate as the Company's listed shares are held for liquidity purposes and
will be sold as and when required to ensure the Company has adequate cash
reserves to meet the Company's running costs.
Investments
All investments are measured at fair value through profit or loss. They are
all held as part of the Company's investment portfolio and are managed in
accordance with the investment policy.
Unquoted investments are stated at fair value by the Directors with reference
to the International Private Equity and Venture Capital Valuation Guidelines
("IPEV") as follows:
· Investments which have been made within the last twelve months or
where the investee company is in the early stage of development will usually
be valued at either the price of recent investment or cost as the closest
approximation to fair value, except where the company's performance against
plan is significantly different from expectations on which the investment was
made, in which case a different valuation methodology will be adopted.
· For investments that have been held for longer than twelve months,
methods of valuation such as earnings or revenue-based multiples or net asset
value may be used to arrive at the fair value.
· Investments in debt instruments are held at amortised cost and accrue
interest at the rate agreed within the Investment Agreement. Interest is shown
separately within debtors.
· Realised gains and losses on the disposal of investments are first
recognised in the profit and loss and subsequently taken to realised capital
reserves.
· Unrealised gains and losses on the revaluation of investments are
first recognised in the profit and loss and subsequently taken to unrealised
capital reserves.
· In preparation of the valuations of assets the Directors are required
to make judgements and estimates that are reasonable and incorporate their
knowledge of the performance of the portfolio companies. A key judgement made
in applying the above accounting policy relates to impairment of the
investments. Valuations are based upon financial information received from the
underlying investee companies, together with the extensive knowledge and
expertise of the team who work closely with the investee companies, a fair
value is reached using appropriate valuation techniques consistent with the
IPEV guidelines. Any deviations in expectations of performance of the
underlying companies are captured within the information received and as such,
reflected in the fair value.
· Impairment of debt instruments is considered when arriving at the
valuations for equity shareholders. Loan notes are deducted from the overall
enterprise value before distributing in line with the appropriate waterfall
arrangements between equity shareholders. If the enterprise value is greater
than the debt instrument, the loan note is not considered to be impaired.
Income
Dividends receivable on listed equity shares are brought into account on the
ex-dividend date. Dividends receivable on unquoted equity shares are brought
into account when the Company's right to receive payment is established and
there is no reasonable doubt that payment will be received. Interest
receivable is recognised wholly as a revenue item on an accruals basis.
Performance fees
Upon its inception, the Company agreed performance fees payable to the
Investment Manager, Puma Investment Management Limited, and members of the
investment management team at 20% of the amount by which the Performance Value
per Share at the end of an accounting period exceeds the High Water Mark
(being the higher of 120p and the highest Performance Value per Share at the
end of any previous accounting period), and multiplied by the number of Shares
in issue at the end of the relevant period.
At each balance sheet date, the Company accrues for any performance fee
payable based on the calculation set out above.
Expenses
All expenses (inclusive of VAT) are accounted for on an accruals basis.
Expenses are charged wholly to revenue, with the exception of:
· expenses incidental to the acquisition or disposal of an investment
and performance fees charged to capital; and
· the investment management fee, 75% of which has been charged to
capital to reflect an element which is, in the directors' opinion,
attributable to the maintenance or enhancement of the value of the Company's
investments in accordance with the Board's expected long-term split of return;
and
· the performance fee which is allocated proportionally to revenue and
capital based on the respective contributions to the Net Asset Value.
Tax
Corporation tax is applied to profits chargeable to corporation tax, if any,
at the applicable rate for the year. The tax effect of different items of
income/gain and expenditure/loss is allocated between capital and revenue
return on the marginal basis as recommended by the SORP.
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date, where transactions or
events that result in an obligation to pay more, or right to pay less, tax in
the future have occurred at the balance sheet date. This is subject to
deferred tax assets only being recognised if it is considered more likely than
not that there will be suitable taxable profits from which the future reversal
of the underlying timing differences can be deducted. Timing differences are
differences arising between the Company's taxable profits and its results as
stated in the financial statements which are capable of reversal in one or
more subsequent periods. Deferred tax is measured on a non-discounted basis at
the tax rates that are expected to apply in the periods in which timing
differences are expected to reverse, based on tax rates and laws enacted or
substantively enacted at the balance sheet date.
Reserves
Realised losses and gains on investments, transaction costs, the capital
element of the investment management fee, performance fee and taxation are
taken through the Income Statement and recognised in the Capital Reserve -
Realised on the Balance sheet. Unrealised losses and gains on investments
are also taken through the Income Statement and are recognised in the Capital
Reserve - Unrealised.
Debtors
Debtors include other debtors and accrued income. These are initially recorded
at the transaction price and subsequently measured at amortised cost, being
the transaction price less any amounts settled.
Creditors
Creditors are initially measured at the transaction price and subsequently
measured at amortised cost, being the transaction price less any amounts
settled.
Dividends
Final dividends payable are recognised as distributions in the financial
statements when the Company's liability to make payment has been established.
The liability is established when the dividends proposed by the Board are
approved by the Shareholders. Interim dividends are recognised when paid.
Key accounting estimates and assumptions
The Company makes estimates and assumptions concerning the future. The
resulting accounting estimates and assumptions will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of
assets within the next financial year relate to the fair value of unquoted
investments. Unquoted investments are stated at fair value at each measurement
date in accordance with the appropriate valuation techniques consistent with
the IPEV guidelines outlined in the Investments section in note 1 to the
financial statements. Valuations are based upon financial information received
from the underlying investee companies, together with the extensive knowledge
and expertise of the team who work closely with the investee companies. Any
deviations in expectations of performance of the underlying companies are
captured within the information received and as such, reflected in the fair
value.
Further details of the unquoted investments are disclosed in the Investment
Manager's Report and notes 8 and 14 to the financial statements.
2. Income
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Income from investments
Qualifying interest income 35 6
35 6
3. Investment Management Fee
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Investment management Fee 443 283
Performance fee - 519
443 802
Puma Investment Management Limited ("Puma Investments") has
been appointed as the Investment Manager of the Company for an initial period
of five years, which can be terminated by no less than twelve months' notice,
given at any time by either party, on or after the fifth anniversary. The
Board is satisfied with the performance of the Investment Manager. Under the
terms of this agreement Puma Investments will be paid an annual fee of 2% of
the Net Asset Value payable quarterly in arrears calculated on the relevant
quarter end NAV of the Company. These fees commenced on 16 January 2020 (the
date of the first share allotment). These fees are capped, the Investment
Manager having agreed to reduce its fee (if necessary to nothing) to contain
total annual costs (excluding performance fee and trail commission) to within
3.5% of Net Asset Value. Total costs this year were 3.1% of the Net Asset
Value (2022: 2.9%).
In addition to the investment manager fees disclosed above, during the year
ended 28 February 2023, Puma Investments Management Limited charged fees
totalling £66,060 (2022: £60,521) in relation to share issue costs.
4. Other Expenses
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Administration - Puma Investments 77 47
Directors Remuneration 60 60
Social security costs 5 5
Auditor's remuneration for statutory audit 61 48
Insurance 9 8
Legal and professional fees 6 -
Other expenses 76 56
294 224
Puma Investments Management Limited ('Puma Investments) provides
administrative services to the Company for an aggregate annual fee of 0.35% of
the Net Asset Value of the Fund, payable quarterly in arrears.
The Company has no employees other than non-executive Directors (2022: none).
The average number of non-executive Directors during the year was 3 (2022:
3).
Auditor's fees of £52,800 (2022: £40,000) has been grossed up in the table
above to be inclusive of VAT. No non-audit services were provided by the
Company's auditor in the year (2022: £nil).
Other expenses are made up of several smaller items, the largest of these
being fees paid for registrar services.
5. Taxation
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
UK corporation tax charge for the period - -
Factors affecting tax charge for the period
(Loss)/profit before taxation (386) 3,031
Tax charge calculated on (loss)/profit before taxation at the applicable rate (73) 576
of 19%
Gains on investments (60) (770)
Tax losses carried forward 133 194
- -
Capital returns are not taxable as the Company is exempt from tax on realised
capital gains whilst it continues to comply with the VCT regulations, so no
corporation tax is recognised on capital gains or losses.
Due to the intention to continue to comply with the VCT regulations, the
Company has not provided for deferred tax on any realised or unrealised
capital gains and losses. No deferred tax asset has been recognised in respect
of the tax losses carried forward due to the uncertainty as to recovery.
6. Basic and diluted profit/(loss) per Ordinary Share
Year ended 28 February 2023
Revenue Capital Total
£'000 £'000 £'000
Loss for the year (370) (16) (386)
Weighted average number of shares 17,073,079 17,073,079 17,073,079
(Loss)/profit per share (2.17)p (0.09)p (2.26)p
Year ended 28 February 2022
Revenue Capital Total
£'000 £'000 £'000
Profit for the year (289) 3,320 3,031
Weighted average number of shares 11,645,061 11,645,061 11,645,061
(Loss)/profit per share (2.48)p 28.51p 26.03p
7. Dividends
The Directors will not propose a resolution at the Annual General Meeting to
pay a final dividend (2022: nil).
8. Investments
(a) Movements in investments Qualifying investments Total
£'000 £'000
Book cost at 1 March 2022 9,571 9,571
Net unrealised gains at 1 March 2022 6,182 6,182
Valuation at 1 March 2022 15,753 15,753
Purchases at cost 5,268 5,268
Proceeds from disposal of investments (1,157) (1,157)
Realised gains on disposals 6 6
Net unrealised gains 310 310
Valuation at 28 February 2023 20,180 20,180
Book cost at 28 February 2023 14,239 14,239
Unrealised gains at 28 February 2023 5,941 5,941
Valuation at 28 February 2023 20,180 20,180
(b) Gains/(losses) on investments
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Realised gains in the period 6 -
Unrealised gains in period 310 4,051
316 4,051
The Company's investments are revalued each year, so until they are sold any
unrealised gains or losses are included in the fair value of the investments.
All the Company's investments as at 28 February 2023 and 28 February 2022 were
unquoted.
Further details of these investments (including the unrealised gain in the
year) are disclosed in the Chairman's Statement, Investment Manager's Report
and Investment Portfolio Summary.
9. Debtors
As at 28 February 2023 As at 28 February 2022
£'000 £'000
Other debtors 35 6
Prepayments 150 118
185 124
Contained within prepayments are admission fees to the London Stock Exchange
of £99,000 (2022: £62,000).
10. Creditors - amounts falling due within one year
As at 28 February 2023 As at 28 February 2022
£'000 £'000
Accruals 181 654
181 654
Contained within the accruals is an accrued performance fee of £nil (2022:
£519,000).
11. Management Performance Incentive Arrangement
On 5 July 2019, the Company entered into an Agreement with the Investment
Manager such that they will be entitled to a Performance Incentive Fee ("PIF")
payable in relation to each accounting period, subject to the Performance
Value per Share being at least 120p at the end of the relevant period. The
amount of the performance incentive fee will be equal to 20% of the amount by
which the Performance Value per Share at the end of an accounting period
exceeds the High Water Mark (being the higher of 120p and the highest
Performance Value per Share at the end of any previous accounting period) and
multiplied by the number of Shares in issue at the end of the relevant
period.
Upon review of the operation of the current PIF arrangements, and following
consultation with the Board and the Company's sponsor, the Company is
proposing to put forth, for shareholder approval, an amended methodology for
calculating the PIF for the accounting period beginning 1 March 2022 (with
retrospective effect) and subsequent accounting periods at a general meeting
to be held on or around the date of the Company's 2023 AGM. Under this amended
methodology, a provision for the PIF of £nil has been included in the
February 2023 year-end accounts. A circular setting out the details of the
proposed changes will be distributed to shareholders in advance of the general
meeting.
12. Called Up Share Capital
As at 28 February 2023 As at As at 28 February 2023 As at 28 February 2022
28 February 2022
£'000 £'000
Allotted, called up and fully paid:
Ordinary shares of £0.01 each 18,460,066 12,604,822 185 126
Allotted, called up and partly paid:
Redeemable preference shares of £1 each - - - -
13. Net Asset Value per Ordinary Share
As at As at
28 February 2023
28 February 2022
Net assets 24,095,381 17,202,908
Number of shares in issue for purposes of Net
Asset Value per share calculation 18,460,066 12,604,822
Net Asset Value per share 130.53p 136.48p
14. Financial Instruments
The Company's financial instruments comprise its investments, cash balances,
debtors and certain creditors. The fair value of all the Company's financial
assets and liabilities is represented by the carrying value in the Balance
Sheet. Excluding cash balances, the Company held the following categories of
financial instruments:
As at 28 February 2023 As at 28 February 2022
£'000 £'000
Financial assets at fair value through profit or loss 19,731 15,454
Financial assets measured at amortised cost 634 423
Financial liabilities measured at amortised cost (181) (654)
20,184 15,223
Management of risk
The main risks the Company faces from its financial instruments are market
price risk, being the risk that the value of investment holdings will
fluctuate as a result of changes in market prices caused by factors other than
interest rate or currency movements, liquidity risk, credit risk and interest
rate risk.
The Board regularly reviews and agrees policies for managing each of these
risks. The Board's policies for managing these risks are summarised below and
have been applied throughout the period.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with
the Company. The Investment Manager monitors counterparty risk on an ongoing
basis. The Company's maximum exposure to credit risk is as follows:
As at 28 February 2023 As at 28 February 2022
Investments in loan notes 449 299
Cash at bank and in hand 3,911 1,980
Other receivables 185 124
4,545 2,403
The cash held by the Company at the year-end is held in RBS. Bankruptcy or
insolvency of the bank may cause the Company's rights with respect to the
receipt of cash held to be delayed or limited. The Board monitors the
Company's risk by reviewing regularly the financial position of the bank and
should it deteriorate significantly the Investment Manager will, on
instruction of the Board, move the cash holdings to another bank.
Credit risk associated with other receivables are predominantly covered by the
investment management procedures.
Investments in loans and loan notes comprises a fundamental part of the
Company's venture capital investments, therefore credit risk in respect of
these assets is managed within the Company's main investment procedures.
Market price risk
Market price risk arises mainly from uncertainty about future prices of
financial instruments held by the Company. It represents the potential loss
the Company might suffer through holding investments in the face of price
movements. The Investment Manager actively monitors market prices and
reports to the Board, which meets regularly in order to consider investment
strategy.
The Company's views on the economic environment which also impacts market
price risk are discussed in the Investment Manager's Report. The Company's
strategy on the management of market price risk is driven by the Company's
investment policy as outlined in the Strategic Report. The management of
market price risk is part of the investment management process. The portfolio
is managed with an awareness of the effects of adverse price movements through
detailed and continuing analysis, with an objective of maximising overall
returns to shareholders.
Holdings in unquoted investments may pose higher price risk than quoted
investments. Some of that risk can be mitigated by close involvement with
the management of the investee companies along with review of their trading
results.
100% (2022: 100%) of the Company's investments are unquoted investments held
at fair value. 96% of the portfolio (80% of net assets) is valued using the
application of earnings/revenue-based multiples. An increase in the multiple
used by 20% would increase the net asset value by 9.6% (£26.4m). Conversely,
a decrease in the multiple used by 20% would decrease the net asset value by
17.0% (£20.0m). The 20% sensitivity used provides the most meaningful impact
of average multiple changes across the portfolio.
Liquidity risk
Details of the Company's unquoted investments are provided in the Investment
Portfolio summary. By their nature, unquoted investments may not be readily
realisable and the Board considers exit strategies for these investments
throughout the period for which they are held. As at the year end, the Company
had no borrowings.
The Company's liquidity risk associated with investments is managed on an
ongoing basis by the Investment Manager in conjunction with the Directors and
in accordance with policies and procedures in place as described in the
Directors' Report and the Strategic Report. The Company's overall liquidity
risks are monitored on a quarterly basis by the Board. The Company maintains
access to sufficient cash resources to pay accounts payable and accrued
expenses.
Fair value interest rate risk
The benchmark that determines the interest paid or received on the current
account is the Bank of England base rate, which was 4.0% at 28 February 2023
(2022: 0.5%).
Cash flow interest rate risk
The Company has exposure to interest rate movements primarily through its cash
deposits which track the Bank of England base rate.
Interest rate risk profile of financial assets
The Company's only asset was cash at bank at 28 February 2023 of £3,911,000
which is in a non-interest bearing bank account.
Foreign currency risk
The Company's functional and presentation currency is Sterling. The Company
has not held any non-Sterling investments during the year.
Fair value hierarchy
Financial assets and liabilities measured at fair value are disclosed using a
fair value hierarchy that reflects the significance of the inputs used in
making the fair value measurements, as follows:-
· Level 1 - Fair value is measured using the unadjusted quoted price in
an active market for identical assets.
· Level 2 - Fair value is measured using inputs other than quoted
prices that are observable using market data.
· Level 3 - Fair value is measured using unobservable inputs.
Fair values have been measured at the end of the reporting period as
follows:-
As at 28 February 2023 As at 28 February 2022
Level 3
Unquoted investments 20,180 15,753
20,180 15,753
The Level 3 investments have been valued in line with the Company's accounting
policies and IPEV guidelines. This comprises of both loan and equity
instruments, which are considered to be one instrument due to them being bound
together when assessing the portfolio's returns to the shareholders.
15. Capital Management
The Company's objectives when managing capital are to safeguard the Company's
ability to continue as a going concern, so that it can provide an adequate
return to shareholders by allocating its capital to assets commensurate with
the level of risk.
The Company must have an amount of capital, at least 80% (as measured under
the tax legislation) of which must be, and remain, invested in the relatively
high risk asset class of small UK companies within three years of that capital
being subscribed.
The Company accordingly has limited scope to manage its capital structure in
the light of changes in economic conditions and the risk characteristics of
the underlying assets. Subject to this overall constraint upon changing the
capital structure, the Company may adjust the amount of dividends paid to
shareholders, issue new shares, or sell assets to maintain a level of
liquidity to remain a going concern.
The Board has the opportunity to consider levels of gearing, however there are
no current plans to do so. It regards the net assets of the Company as the
Company's capital, as the level of liabilities is small, and the management of
those liabilities is not directly related to managing the return to
shareholders.
16. Contingencies, Guarantees and Financial Commitments
There were no commitments, contingencies or guarantees of the Company at the
year-end (2022: none).
17. Related Party Disclosures
The Company has delegated the investment management of the portfolio to Puma
Investment Management Limited. Further details of the transactions with these
entities are disclosed in note 3 of the financial statements.
18. Post Balance Sheet Events
Post year-end, a further 1,762,258 ordinary shares have been issued for cash
consideration of £2.3m.
Upon review of the operation of the current PIF arrangements, and following
consultation with the Board and the Company's sponsor, the Company is
proposing to put forth, for shareholder approval, an amended methodology for
calculating the PIF for the accounting period beginning 1 March 2022 (with
retrospective effect) and subsequent accounting periods at a General Meeting
to be held on or around the date of the Company's 2023 AGM. A circular setting
out the details of the proposed changes will be distributed to shareholders in
advance of the General Meeting.
The financial information set out in this announcement does not constitute the
Company's statutory financial statements in accordance with section 434
Companies Act 2006 for the year ended 28 February 2023 but has been extracted
from the statutory financial statements for the year ended 28 February 2023
which were approved by the Board of Directors on 15 June 2023 and will be
delivered to the Registrar of Companies. The Independent Auditor's Report on
those financial statements was unqualified and did not contain any emphasis of
matter nor statements under s 498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 28 February 2022 have been delivered
to the Registrar of Companies and received an Independent Auditors report
which was unqualified and did not contain any emphasis of matter nor
statements under s 498(2) and (3) of the Companies Act 2006.
Copies of the full annual report and financial statements for the year ended
28 February 2023 are available to the public at the registered office of the
Company at Cassini House, 57 St James's Street, London, SW1A 1LD and will be
available for download from
https://www.pumainvestments.co.uk/pages/view/investors-information-vcts.
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