Interim / Quarterly Report • Sep 28, 2018
Interim / Quarterly Report
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RNS Number : 2499C
Dunedin Enterprise Inv Trust PLC
28 September 2018
For release 28 September 2018
Dunedin Enterprise Investment Trust PLC
Half year ended 30 June 2018
Dunedin Enterprise Investment Trust PLC, the private equity investment trust which specialises in investing in UK mid-market buyouts, announces its results for the half year ended 30 June 2018.
Financial Highlights:
· Net asset value per share at 30 June 2018: 447.5p (489.2p at 31/12/17), after 5.5p dividend and 50p return of capital
· Share price at 30 June 2018: 386p (396.5p at 31/12/17)
· Net asset value total return: 2.8% in the six months to 30 June 2018
· Share price total return: 15.9% in the six months to 30 June 2018
· Realisations: £2.6m in the half year
· New investments: £10.0m in the half year
· Pyroguard realised in September 2018 generating proceeds of £9.3m
· Further £10.3m to be returned via B shares in October 2018
Comparative Total Return Performance (%)
| Periods to 30 June 2018 | Net asset value (per share) | Share price | FTSE Small Cap (ex Inv Cos) Index |
FTSE All-Share (ex Inv Cos) Index |
|
| Six months | 2.8 | 15.9 | 0.1 | 1.6 | |
| One year | 20.4 | 67.5 | 6.4 | 9.0 | |
| Three years | 31.0 | 104.7 | 31.6 | 31.2 | |
| Five years | 28.7 | 63.4 | 78.7 | 51.9 | |
| Ten years | 47.8 | 124.8 | 174.6 | 110.1 |
For further information please contact:
| Graeme Murray Dunedin LLP 0131 225 6699 0131 718 2310 07813 138367 |
In the half year to 30 June 2018 your Company's net asset value per share decreased from 489.2p to 447.5p. After allowing for the return of capital in February 2018 of 50p per share and a final dividend for 2017 of 5.5p paid in May 2018, the total return to shareholders was 2.8%, in terms of net asset value, and 15.9% in terms of share price.
The share price of 386p at 30 June 2018 represents a discount of 13.7% to the net asset value of 447.5p per share.
Following the half year end, on 27 September 2018 the successful realisation of Pyroguard, the specialist fire resistant glass manufacturer, was completed. Total proceeds from the sale amounted to £9.3m which represents an uplift of £0.4m over the valuation of £8.9m at 31 March 2018. The original cost of the investment was £3.8m and, over its life, a total of £22.5m has been received by Dunedin Enterprise, representing a 5.9 times return and an IRR of 35%.
During the half year one new investment was made and following the half year end one realisation was achieved.
An investment of £6.4m was made in GPS, the global payments processor which supports a number of digital banks, challenger banks, fintechs and financial institutions. GPS is a market leader in issuer processing, enabling next generation payment technology.
Deferred proceeds were received from the realisation of Steeper and there was a recapitalisation of Dolz which is held within the Realza portfolio.
As noted above, Pyroguard was successfully realised in September 2018.
The trading performance of our portfolio companies has generally improved in the half year. Unrealised value increases of £7.8m were partially offset by value decreases of £4.9m. Valuation uplifts were achieved at Red, FRA, Pyroguard and Realza. In the case of Pyroguard the valuation at 30 June 2018 reflects the proceeds received in September. The valuation of the other businesses benefitted from good organic growth.
The most significant valuation reduction in the half year to 30 June 2018 was at Formaplex. Further details are provided in the Manager's Review.
The Company had outstanding commitments to limited partnership funds of £42.2m at 30 June 2018 which was reduced to £35.5m following a drawdown in July 2018 by Dunedin Buyout Fund III LP ("DBFIII") for the investment in GPS. The outstanding commitment position following this drawdown consisted of £33.3m to Dunedin managed funds and £2.2m to the European funds. Assuming these funds are held to maturity, it is estimated that only some £23m of this total outstanding commitment will be drawn over the remaining life of the funds.
The majority of the Company's assets are held by way of limited partnership interests in Dunedin's funds, one of which is still actively investing. Although DBFIII's investment period ceases on 7 November 2018 the fund may make a new investment after that date provided the transaction was already at an advanced stage.
The Company has a revolving credit facility with Lloyds Bank of £10m which was undrawn at 30 June 2018 and is available until 31 May 2019. This facility was reduced from £20m to £10m at 31 May 2018 and the Board will keep under review the need to retain a credit facility depending upon the timing of further realisations from the portfolio.
Following the realisation of Pyroguard, the Company holds cash and cash equivalents of £24.3m. In light of the outstanding commitments to limited partnership funds, the Board has decided to return £10.3m to shareholders via a further issue of B Shares of 50p each. These B Shares will be paid up from capital and issued to all shareholders by way of a bonus issue pro-rata to their holding of Ordinary Shares on the basis of one B Share for every one Ordinary Share held at the record date of 6.00pm on 8 October 2018. The B Shares will be issued on 9 October 2018 and immediately redeemed at 50p each. The Ordinary Shares will trade ex-B Share entitlement with effect from 5 October 2018. The proceeds from the redemption of the B Shares will be sent to shareholders on 23 October 2018, either through CREST to uncertificated shareholders or via cheque to certificated shareholders.
A final dividend of 5.5p per share relating to the year ended 31 December 2017 was paid to shareholders in May 2018 amounting to £1.1m.
The Board will continue to maximise shareholder value through the orderly wind-down of the remaining investments held by the Company. This policy has served shareholders well to date.
The Board will continue to monitor the secondary market for interests in private equity funds to evaluate whether shareholders' interests are best served by realising our fund interests or whether continuing to hold them is likely to provide better returns.
The Board is encouraged that the pricing of realisations of quality businesses and fund interests remains buoyant, and by the improving trading performance in the majority of the portfolio.
28 September 2018
In the six months to 30 June 2018, Dunedin Enterprise's net asset value per share total return was 2.8%, after taking account of dividends paid for 2017 of 5.5p per share (paid in May 2018) and an issue and redemption of B shares equivalent to 50p per share (paid in February 2018). This compares with an increase in the FTSE Small Cap Index (ex Inv. Cos) over the same period of 0.1%.
In the six months to 30 June 2018 Dunedin Enterprise invested a total of £10.0m and realised £2.6m from investments.
The movement in net asset value is summarised in the table below: -
| £'m | |
| Net asset value at 31 December 2017 | 100.9 |
| Unrealised value increases | 7.8 |
| Unrealised value decreases | (4.9) |
| Realised profit over opening valuation | 0.3 |
| Dividends paid to shareholders | (1.1) |
| B share redemption | (10.3) |
| Other movements | (0.3) |
| Net asset value at 30 June 2018 | 92.4 |
Cash movements in the half year to 30 June 2018 can be summarised as follows: -
| £'m | |
| Cash & near cash balances at 31 December 2017 | 32.9 |
| Investments made *1 | (3.3) |
| Investments realised | 2.6 |
| B share redemption | (10.3) |
| Dividends paid to shareholders | (1.1) |
| Operating activities | 0.9 |
| Cash & near cash balances at 30 June 2018 | 21.7 |
Dunedin Enterprise holds investments in unquoted companies through: -
- Dunedin managed funds (including direct investments), and
- Third party managed funds.
The portfolio movements can be analysed as shown in the table below: -
| Valuation at 31-12-17 £'m |
Additions in half year £'m |
Disposals in half year £'m |
Realised movement £'m |
Unrealised movement £'m |
Valuation at 30-6-18 £'m |
|
| Dunedin managed | 57.2 | 9.9 | (1.6) | 0.3 | 2.3 | 68.1 |
| Third party managed | 10.0 | 0.1 | (1.0) | - | 0.6 | 9.7 |
| Investment portfolio | 67.2 | 10.0 | (2.6) | 0.3 | 2.9 | 77.8 |
| AAA rated money market funds *2 | 23.5 | - | (2.1) | - | - | 21.4 |
| Total | 90.7 | 10.0 | (4.7) | 0.3 | 2.9 | 99.2 |
In June 2018, the Company made an investment of £6.4m through Dunedin Buyout Fund III LP in GPS, the global payments processor which supports a number of digital banks, challenger banks, fintechs and financial institutions. GPS is a market leader in issuer processing, enabling next generation payment technology. It provides a single, global integrated platform, GPS Apex, that powers and enables functionality of next generation fintech payment companies. GPS employs circa 150 people based in London and Newcastle.
There were follow-on investments into Formaplex (£1.5m), Hawksford (£1.1m) and Premier Hytemp (£0.5m). A follow-on investment was made into Formaplex, the designer and manufacturer of injection-moulded tooling, composite tooling and lightweight components for the automotive industry, to provide ongoing working capital support. Hawksford, the provider of corporate, private client and specialist fund services, completed an acquisition in Asia which was funded by a combination of bank debt and investment from Dunedin managed funds. An investment was made in Premier Hytemp, the provider of highly engineered steel and nickel alloys and components for the oil and gas industry, to fund the acquisition of a facility in Malaysia.
A further £0.5m was drawn down by Dunedin and third party managed funds to meet management fees and ongoing expenses.
In the half year a total of £2.6m was realised from the portfolio of investments.
Deferred realisation proceeds of £1.3m were received from Steeper during the half year. A further £0.3m was also received in August 2018. Red repaid £0.3m of loan stock following a period of strong trading.
There was a £1.0m repayment of loan stock from within the Realza portfolio following a recapitalisation of Dolz, the automotive pump manufacturer.
Unrealised valuation increases in the half year amounted to £7.8m. There were valuation uplifts at Red (£2.5m), FRA (£2.2m), Pyroguard (£1.2m) and Steeper (£1.1m).
Red, the supplier of SAP software experts on both a contract and permanent basis, has continued to experience a strengthening demand for its services particularly in the contracting division. This has resulted in a 24% increase in maintainable EBITDA in the half year.
FRA, the provider of forensic accounting, data analytics and e-discovery expertise, continues to experience a strong demand for its services since the buyout was completed in March 2017. The company is significantly outperforming the original business plan with maintainable EBITDA increasing a further 15% during the half year. This performance has been driven by a combination of growth in existing projects and new project wins. The pipeline for new projects remains strong.
Pyroguard, the manufacturer and distributor of fire resistant glass, has been valued at the realised proceeds received in September 2018.
The principal valuation reduction was at Formaplex (£2.8m). The maintainable EBITDA of Formaplex has suffered in the period from a number of lost and delayed orders. This has resulted in maintainable EBITDA being reduced by 28% in the half year.
The average earnings multiple applied to the valuation of the Dunedin managed portfolio was 7.9x EBITDA (31 December 2017: 7.6x) or 9.6x EBITA (31 December 2017: 9.3x). These multiples are applied to the maintainable earnings of portfolio companies. Within the Dunedin managed portfolio, the weighted average gearing of the companies was 2.9x EBITDA (31 December 2017: 3.1x) or 3.5x EBITA (31 December 2017: 3.7x).
The portfolio continues to be valued in accordance with the International Private Equity Venture Capital valuation guidelines (www.privateequityvaluation.com).
28 September 2018
Ten largest investments by value at 30 June 2018
| Approx. percentage of equity % |
Cost of investment £'000 |
Directors' valuation £'000 |
Percentage of net assets % |
|
| Hawksford | 17.8 | 6,746 | 11,488 | 12.4 |
| FRA | 5.4 | 6,035 | 11,410 | 12.4 |
| Weldex | 15.1 | 9,505 | 9,611 | 10.4 |
| Realza | 8.9 | 6,649 | 9,394 | 10.2 |
| Pyroguard | 41.7 | 9,450 | 9,266 | 10.0 |
| Kingsbridge | 12.7 | 4,112 | 6,963 | 7.5 |
| GPS | 8.2 | 6,357 | 6,357 | 6.9 |
| CitySprint | 5.1 | 7,308 | 5,964 | 6.5 |
| RED | 20.1 | 9,665 | 4,918 | 5.3 |
| U-POL | 5.0 | 5,657 | 3,743 | 4.1 |
| 71,484 | 79,114 | 85.7 |
Total return of ten largest investments at 30 June 2018
| Original cost of investment £'000 |
Realised to date £'000 |
Directors' valuation £'000 |
Total return £'000 |
|
| Hawksford | 6,910 | 362 | 11,488 | 11,850 |
| FRA | 6,035 | 28 | 11,410 | 11,438 |
| Weldex | 9,505 | 119 | 9,611 | 9,730 |
| Realza | 11,545 | 6,081 | 9,394 | 15,475 |
| Pyroguard | 3,791 | 13,262 | 9,266 | 22,528 |
| Kingsbridge | 4,212 | 105 | 6,963 | 7,068 |
| GPS | 6,357 | - | 6,357 | 6,357 |
| CitySprint | 9,838 | 19,763 | 5,964 | 25,727 |
| RED | 10,844 | 1,405 | 4,918 | 6,323 |
| U-POL | 5,657 | 2,590 | 3,743 | 6,333 |
| 74,694 | 43,715 | 79,114 | 122,829 |
| Percentage of equity held 17.8% Cost of Investment £6.7m Directors' valuation £11.5m Percentage of net assets 12.4% |
## Hawksford Hawksford is a leading international provider of corporate, private client and funds services. The business offers a comprehensive range of services to, and solutions for, trusts, companies, foundations, partnerships, family offices and investment funds. ## Hawksford completed the acquisition of P&P, a Hong Kong based trust business in June 2018. Hawksford's international clients will now have access to a greater depth of service across Asia, while P&P clients will be able to utilise Hawksford's wider services in other locations. To date Hawksford has completed six major acquisitions in Jersey, the Middle East and the Far East and further extended the company's global reach in the Far East by opening an office in Hong Kong in 2015. These acquisitions have further enhanced Hawksford's market-leading position through additional high-quality people and clients. The focus of the business remains on providing excellent service and increasing client choice by growing the international footprint. |
| Percentage of equity held 5.4% Cost of Investment £6.0m Directors' valuation £11.4m Percentage of net assets 12.4% |
## FRA FRA is an international consultancy business that provides forensic accounting, data analytics and e-discovery expertise to help businesses respond to major regulatory investigations in an increasingly regulated global environment. FRA works on some of the largest and most complex regulatory investigations globally. Its clients are typically blue-chip multinational corporates seeking advice to help navigate regulatory scrutiny, effect compliant cross border data transfer and manage risk. It has offices in London, Providence (Rhode Island), Paris, Dallas and Washington DC. It also runs data centres near each office location as well as in Montreal and Zurich. |
| Percentage of equity held 15.1% Cost of Investment £9.5m Directors' valuation £9.6m Percentage of net assets 10.4% |
## Weldex Weldex was established in 1979 and has grown into the UK's largest crawler crane hire company. The company employs over 100 staff and operates nationwide and overseas from its headquarters in Inverness and its depot at Alfreton. The company provides its customers with an established team of fully accredited operators, site managers and service engineers and also supplies associated lifting equipment including wheeled cranes, forklifts, lorry loaders and trailers. Weldex serves the offshore wind, oil & gas, commercial construction and infrastructure markets. Its cranes, including two of the largest in the UK, have been used in a number of significant construction projects including Heathrow Terminal 5, the iconic arch at the new Wembley Stadium, the 2012 Olympic site and Crossrail. More recent projects include erecting a Mitsubishi wind turbine at the offshore test facility at Hunterston, North Ayrshire and refurbishing the blast furnace at the Tata steel works in Scunthorpe. |
||
| Percentage of equity held 8.9% Cost of Investment £6.6m Directors' valuation £9.4m Percentage of net assets 10.2% |
## Realza Capital Realza Capital is a Spanish private equity fund making investments in Spain and Portugal. The fund is limited to investing 15% of commitments in Portugal. Dunedin Enterprise's investment is held via Dunedin Fund of Funds LP. The fund invests in companies with leading market positions and attractive growth prospects either through organic growth or through merger & acquisition activity. Realza seeks to invest in companies with an enterprise value normally ranging from €20m to €100m. The fund's typical equity investment ranges from €10m to €25m. |
||
| Percentage of equity held 41.7% Cost of Investment £9.5m Directors' valuation £9.3m Percentage of net assets 10.0% |
## CGI (trading as Pyroguard) CGI, trading under the Pyroguard brand, is a leading designer, manufacturer and supplier of specialist fire resistant glass. The company serves the construction markets in the UK, Ireland, France, Holland, Scandinavia, Iberia and the Middle East from its manufacturing bases in Haydock, UK and Seingbouse, France. Significant recent projects completed by CGI include the installation of fire-resistant glass at Here East (the multipurpose redevelopment of the former 2012 Olympic site), the Biomedicum medical facility in Stockholm, the Paris Expo redevelopment project, and Zaanstad Prison in the Netherlands. The investment in Pyroguard was realised in September 2018 and over the life of the investment, a total of £22.5m has been received by Dunedin Enterprise, representing a 5.9 times return and an IRR of 35%. |
||
| Percentage of equity held 12.7% Cost of Investment £4.1m Directors' valuation £7.0m Percentage of net assets 7.5% |
## Kingsbridge Kingsbridge is a market leading FCA regulated specialist insurance intermediary which operates through two core divisions, a contractor insurance division and a corporate brokerage division. Working alongside its strong partner network, Kingsbridge covers a broad range of industry sectors in its market, including aerospace, banking and finance, rail, automotive, nuclear, oil and gas and information technology. ## Kingsbridge is forecast to continue to grow the market as insurance becomes more of a standard requirement for both contractors and corporates alike. This growth will come through expansion into new occupations and through the introduction of new products that are tailored for the contractor market. |
|
| Percentage of equity held 8.2% Cost of Investment £6.4m Directors' valuation £6.4m Percentage of net assets 6.9% |
## GPS Global Processing Services ("GPS"), is a global payments processor which supports a number of digital banks, challenger banks, fintechs and financial institutions. GPS is the market leader in issuer processing, enabling next generation payment technology with 100+ clients including Starling Bank, Revolut, Pockit, Volt Bank, Loot, Stocard, Glint, Osper and Curve. GPS provides a single, global integrated platform, GPS Apex, that powers and enables functionality of next generation fintech payment companies. GPS has demonstrated rapid growth, driven by market and customer demand for its market leading technical functionality and speed in getting customers' new products to market. The addressable international market for GPS is large, serving innovative and emerging fintech/challenger bank offerings and gaining traction with traditional providers. The Company has circa 150 employees based in London and Newcastle. |
| Percentage of equity held 5.1% Cost of Investment £7.3m Directors' valuation £6.0m Percentage of net assets 6.5% |
## CitySprint CitySprint is the UK's largest national time-critical and same day distribution network. It benefits from an asset-light business model with over 3,000 self-employed couriers, making the business both highly flexible and scalable. It operates from 40 service centres in the UK and handles over ten million critical same day deliveries a year. CitySprint offers a range of services including SameDay Courier, UK Overnight and International courier services, as well as more complex logistics services. It services a number of different sectors, including healthcare, online retail fulfilment and parts fulfilment such as outsourced supply chain services for engineering and servicing companies. During the period of Dunedin's investment, CitySprint has completed 29 acquisitions. CitySprint now has the UK's largest same day healthcare courier network. In February 2016 the investment in CitySprint was partially realised in a sale to LDC. On completion Dunedin Enterprise received proceeds totalling £26.1m of which £22.8m was capital and £3.3m was loan interest. A total of £7.3m has been rolled into a CitySprint Newco alongside LDC, resulting in net cash proceeds received of £18.8m by Dunedin Enterprise. Dunedin Enterprise retains a 5% interest in the Newco. The overall return to Dunedin Enterprise was 2.8 times the original investment of £9.8m over five years. |
| Percentage of equity held 20.1% Cost of Investment £9.7m Directors' valuation £4.9m Percentage of net assets 5.3% |
## RED RED is a global supplier of SAP experts to international corporations and consultancies. SAP stands for Systems, Applications and Products in data processing. SAP is the market leader in ERP software (Enterprise Resource Planning software), which helps companies of all sizes and industries operate more efficiently, including many of the world's largest organisations. ## Red, which was founded in 2000, now has a global footprint with access to over 200,000 SAP experts in 80 countries, and has offices in the UK, Germany, Switzerland and the US. Clients include Bosch, Johnson & Johnson and Novartis. |
| Percentage of equity held 5.0% Cost of Investment £5.7m Directors' valuation £3.7m Percentage of net assets 4.1% |
## UPOL U-POL is a leading independent manufacturer of automotive refinish products including body fillers, coatings, aerosols, polishing compounds and consumables. Included in the product range is RAPTOR™, a tough protective coating product which can be used over a multitude of surfaces. Sales of RAPTOR™ continue to grow steadily and the business is exploring opportunities to sell this product into adjacent sectors. From its UK manufacturing base in Wellingborough, U-POL exports a range of products to 120 countries worldwide. The company has a strong market position in the UK and a growing position in other large markets such as the USA, the Far East, the Middle East, Africa and Russia. Its growth strategy is to continue expanding in both developed and emerging markets. ## In August 2016 a re-financing of the business was undertaken with Dunedin Enterprise receiving proceeds of £2.6m. |
Overview of portfolio
Fund Analysis
| 30 June 2018 % |
||
| Direct | 13 | |
| Dunedin Buyout Fund II | 45 | |
| Dunedin Buyout Fund III | 28 | |
| Equity Harvest Fund (Dunedin managed) | 2 | |
| Third party managed | 12 |
Analysed by valuation method
| 30 June 2018 % |
||
| Cost/written down | 9 | |
| Earnings - provision | 21 | |
| Earnings - uplift | 45 | |
| Assets basis | 14 | |
| Exit value | 11 |
Analysed by geographic location
| 30 June 2018 % |
||
| UK | 89 | |
| Rest of Europe | 11 |
Analysed by sector
| 30 June 2018 % |
||
| Automotive | 4 | |
| Construction and building materials | 11 | |
| Consumer products & services | 4 | |
| Financial services | 30 | |
| Industrials | 9 | |
| Support services | 41 | |
| Technology, media & telecoms | 1 |
Analysed by age of investment
| 30 June 2018 % |
||
| <1 year | 8 | |
| 1-3 years | 31 | |
| 3-5 years | 3 | |
| >5 years | 58 |
Income Statement (unaudited)
for the six months ended 30 June 2018
| Six months ended | Six months ended | Year ended | ||||||||
| 30 June 2018 | 30 June 2017 | 31 December 2017 | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Investment income | 156 | - | 156 | 2,687 | - | 2,687 | 4,589 | - | 4,589 | |
| Gain / (loss) on investments | - | 3,267 | 3,267 | - | 3,858 | 3,858 | - | 20,573 | 20,573 | |
| Total Income | 156 | 3,267 | 3,423 | 2,687 | 3,858 | 6,545 | 4,589 | 20,573 | 25,162 | |
| Expenses | ||||||||||
| Investment management fees | (30) | (89) | (119) | (15) | (44) | (59) | (26) | (77) | (103) | |
| Other expenses | (221) | (60) | (281) | (230) | (47) | (277) | (490) | (63) | (553) | |
| Profit / (loss) before finance costs and tax | (95) | 3,118 | 3,023 | 2,442 | 3,767 | 6,209 | 4,073 | 20,433 | 24,506 | |
| Finance costs | (45) | (136) | (181) | (47) | (141) | (188) | (94) | (284) | (378) | |
| Profit / (loss) before tax | (140) | 2,982 | 2,842 | 2,395 | 3,626 | 6,021 | 3,979 | 20,149 | 24,128 | |
| Taxation | - | - | - | (167) | 167 | - | (52) | 55 | 3 | |
| Profit / (loss) for the period | (140) | 2,982 | 2,842 | 2,228 | 3,793 | 6,021 | 3,927 | 20,204 | 24,131 | |
| Earnings per ordinary share (basic & diluted) | (0.7)p | 14.5p | 13.8p | 10.8p | 18.4p | 29.2p | 19.0p | 97.9p | 116.9p | |
The Total column of this statement represents the Income Statement of the Company, prepared in accordance with International Financial Reporting Standards as adopted by the EU. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.
All income is attributable to the equity shareholders of Dunedin Enterprise Investment Trust PLC.
Statement of Changes in Equity (unaudited)
for the six months ended 30 June 2018
Six months ended 30 June 2018
| Share capital £'000 |
Capital redemption reserve £'000 |
Capital Reserve realised £'000 |
Capital reserve - unrealised £'000 |
Special Distributable Reserve £'000 |
Revenue account £'000 |
Total retained earnings £'000 |
Total equity £'000 |
|
| At 31 December 2017 | 5,161 | 23,409 | 57,936 | (18,752) | 26,956 | 6,278 | 72,418 | 100,988 |
| Profit/(loss) for the half year | - | - | 576 | 2,406 | - | (140) | 2,842 | 2,842 |
| B shares issued | 10,322 | (10,322) | - | - | - | - | - | - |
| B shares redeemed | (10,322) | 10,322 | - | - | (10,322) | - | (10,322) | (10,322) |
| Dividends paid | - | - | - | - | - | (1,135) | (1,135) | (1,135) |
| At 30 June 2018 | 5,161 | 23,409 | 58,512 | (16,346) | 16,634 | 5,003 | 63,803 | 92,373 |
Six months ended 30 June 2017
| Share capital £'000 |
Capital redemption reserve £'000 |
Capital Reserve realised £'000 |
Capital reserve - unrealised £'000 |
Special Distributable Reserve £'000 |
Revenue account £'000 |
Total retained earnings £'000 |
Total equity £'000 |
|
| At 31 December 2016 | 5,161 | 2,765 | 49,204 | (9,580) | 47,600 | 8,751 | 95,975 | 103,901 |
| Profit/(loss) for the half year | - | - | 4,472 | (679) | - | 2,228 | 6,021 | 6,021 |
| Dividends paid | - | - | - | - | - | (3,613) | (3,613) | (3,613) |
| At 30 June 2017 | 5,161 | 2,765 | 53,676 | (10,259) | 47,600 | 7,366 | 98,383 | 106,309 |
Year ended 31 December 2017
| Share capital £'000 |
Capital redemption reserve £'000 |
Capital Reserve realised £'000 |
Capital reserve - unrealised £'000 |
Special Distributable Reserve £'000 |
Revenue account £'000 |
Total retained earnings £'000 |
Total equity £'000 |
|
| At 31 December 2016 | 5,161 | 2,765 | 49,204 | (9,580) | 47,600 | 8,751 | 95,975 | 103,901 |
| Profit/(loss) for the year | - | - | 29,376 | (9,172) | - | 3,927 | 24,131 | 24,131 |
| B shares issued | 20,644 | - | (20,644) | - | - | - | (20,644) | - |
| B shares redeemed | (20,644) | 20,644 | - | - | (20,644) | - | (20,644) | (20,644) |
| Dividends paid | - | - | - | - | - | (6,400) | (6,400) | (6,400) |
| At 31 December 2017 | 5,161 | 23,409 | 57,936 | (18,752) | 26,956 | 6,278 | 72,418 | 100,988 |
Balance Sheet (unaudited)
As at 30 June 2018
| 30 June 2018 £'000 |
30 June 2017 £'000 |
31 December 2017 £'000 |
|
| Non-current assets | |||
| Investments held at fair value | 99,211 | 103,621 | 90,690 |
| Current assets | |||
| Other receivables | 38 | 66 | 1,032 |
| Cash and cash equivalents | 294 | 3,904 | 9,441 |
| 332 | 3,970 | 10,473 | |
| Total assets | 99,543 | 107,591 | 101,163 |
| Current liabilities | |||
| Other liabilities | (7,170) | (1,282) | (175) |
| Net assets | 92,373 | 106,309 | 100,988 |
| Capital and reserves | |||
| Share capital | 5,161 | 5,161 | 5,161 |
| Capital redemption reserve | 23,409 | 2,765 | 23,409 |
| Capital reserve - realised | 58,512 | 53,676 | 57,936 |
| Capital reserve - unrealised | (16,346) | (10,259) | (18,752) |
| Special distributable reserve | 16,634 | 47,600 | 26,956 |
| Revenue reserve | 5,003 | 7,366 | 6,278 |
| Total equity | 92,373 | 106,309 | 100,988 |
| Net asset value per ordinary share (basic and diluted) | 447.5p | 515.0p | 489.2p |
Cash Flow Statement (unaudited)
for the six months ended 30 June 2018
| 30 June 2018 £'000 |
30 June 2017 £'000 |
31 December 2017 £'000 |
|
| Operating activities | |||
| Profit before tax | 2,842 | 6,021 | 24,128 |
| Adjustments for: | |||
| (Gain) on investments | (3,267) | (3,858) | (20,573) |
| Interest paid | 181 | 188 | 378 |
| (Increase) / decrease in debtors | 994 | 39 | (927) |
| Increase / (decrease) in creditors | 291 | 171 | (935) |
| Net cash from operating activities | 1,041 | 2,561 | 2,071 |
| Cash flows from investing activities | |||
| Purchase of investments | (3,151) | (8,223) | (9,393) |
| Drawn from subsidiary | (82) | (291) | (385) |
| Purchase of 'AAA' rated money market funds | (31) | (10,604) | (42,117) |
| Sale of investments | 1,604 | 7,960 | 53,142 |
| Distribution from subsidiary | 1,014 | 4,606 | 13,794 |
| Sale of 'AAA' rated money market funds | 2,100 | 11,606 | 19,658 |
| Net cash used in investing activities | 1,454 | 5,054 | 34,699 |
| Taxation | |||
| Tax recovered | - | - | 3 |
| Cash flows from financing activities | |||
| Redemption of B shares | (10,322) | (20,644) | |
| Dividends paid | (1,135) | (3,613) | (6,400) |
| Interest paid | (181) | (188) | (378) |
| Net cash used in financing activities | (11,638) | (3,801) | (27,422) |
| Net increase / (decrease) in cash and cash equivalents | (9,143) | 3,814 | 9,351 |
| Cash and cash equivalents at the start of the period | 9,441 | 90 | 90 |
| Effect of exchange rate fluctuations on cash held | (4) | - | - |
| Cash and cash equivalents at the end of the period | 294 | 3,904 | 9,441 |
in respect of the half-yearly financial report
We confirm that to the best of our knowledge:
- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU
- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
By Order of the Board
Duncan Budge
Chairman
28 September 2018
The comparative financial information contained in this report for the year ended 31 December 2017 does not constitute the Company's statutory accounts but is derived from those accounts. Statutory accounts for the year ended 31 December 2017 have been delivered to the Registrar of Companies. The auditor has reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The financial statements for the six months ended 30 June 2017 and 30 June 2018 have not been audited.
These condensed set of financial statements for the six months ended 30 June 2018 have been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA) and IAS 34 Interim Financial Reporting as adopted by the European Union (EU). They do not include all the information required by International Financial Reporting Standards (IFRS) in full annual financial statements and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2017.
The Association of Investment Companies ('AIC') issued a revised Statement of Recommended Practice for the Financial Statements of Investment Trust Companies and Venture Capital Trusts in February 2018 ('SORP') applicable to accounting periods commencing on or after 1 January 2019. Where presentational guidance set out in the SORP is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
In May 2016 shareholders approved a change in the investment policy of the Company. The Company's new investment objective is to conduct an orderly realisation of its relatively illiquid assets, to be effected in a manner that seeks to achieve a balance between maximising the value of its assets and progressively returning cash to shareholders. As it is likely this process, which is expected to have a duration of several years, will ultimately lead to the liquidation of the Company, these financial statements have not been prepared on a going concern basis. No adjustments were necessary to the investment valuations or other assets and liabilities included in the financial statement as a consequence of the change in the basis of preparation.
| Six months to 30 June 2018 £'000 |
Six months to 30 June 2017 £'000 |
Year to 31 December 2017 £'000 |
|
| Dividend income - UK | - | 967 | 967 |
| Interest income - UK | 23 | 611 | 635 |
| Limited partnership income - UK | 99 | 946 | 2,807 |
| AAA rated money market funds | 31 | 4 | 17 |
| Deposit interest | 3 | - | 4 |
| Other income | - | 159 | 159 |
| 156 | 2,687 | 4,589 |
| Six months to 30 June 2018 £'000 |
Six months to 30 June 2017 £'000 |
Year to 31 December 2017 £'000 |
|
| Dividends paid in the period | 1,135 | 3,613 | 6,400 |
The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
• Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
• Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
• Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
The table below analyses financial instruments, measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised:
| At 30 June 2018 £'000 |
At 30 June 2017 £'000 |
At 31 December 2017 £'000 |
|
| Level 1 'AAA' rated money market funds OEICs |
21,398 | 6 | 23,467 |
| Level 2 | - | - | - |
| Level 3 | |||
| Unlisted investments | 77,813 | 103,615 | 67,223 |
| 99,211 | 103,621 | 90,690 | |
The Company recognises transfers between the levels of the fair value hierarchy as of the end of the reporting period during which the transfer occurred. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended 30 June 2018.
Level 3 fair values
Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the six months ended 30 June 2018 are set out below:-
| Level 3 £'000 |
|
| Book cost at 31 December 2017 | 85,975 |
| Unrealised (depreciation) | (18,752) |
| Valuation at 31 December 2017 | 67,223 |
| Purchases at cost | 9,937 |
| Sales - proceeds | (2,618) |
| Sales - realised gains against cost | 865 |
| Increase in unrealised appreciation | 2,406 |
| Valuation at 30 June 2018 | 77,813 |
| Book cost at 30 June 2018 | 94,159 |
| Closing unrealised (depreciation) | (16,346) |
Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the six months ended 30 June 2017 are set out below:-
| Level 3 £'000 |
|
| Book cost at 31 December 2016 | 113,388 |
| Unrealised (depreciation) | (9,580) |
| Valuation at 31 December 2016 | 103,808 |
| Purchases at cost | 8,514 |
| Sales - proceeds | (12,566) |
| Sales - realised gains against cost | 4,538 |
| Decrease in unrealised appreciation | (679) |
| Valuation at 30 June 2017 | 103,615 |
| Book cost at 30 June 2017 | 113,874 |
| Closing unrealised (depreciation) | (10,259) |
Details of the determination of Level 3 fair value measurements and the movements in Level 3 fair values during the year ended 31 December 2017 are set out below:-
| Level 3 £'000 |
|
| Book cost at 31 December 2016 | 113,388 |
| Unrealised appreciation | (9,580) |
| Valuation at 31 December 2016 | 103,808 |
| Purchases at cost | 9,778 |
| Sales - proceeds | (66,936) |
| Sales - realised gains against cost | 29,745 |
| Decrease in unrealised appreciation | (9,172) |
| Valuation at 31 December 2017 | 67,223 |
| Book cost at 31 December 2017 | 85,975 |
| Closing unrealised (depreciation) | (18,752) |
Valuation of investments
Unquoted investments are fair valued by the Directors in accordance with the following rules, which are consistent with the International Private Equity and Venture Capital Valuation Guidelines:
· Investments are only valued at cost for a limited period after the date of acquisition, otherwise investments are valued on one of the other basis detailed below. Generally the earnings multiple basis of valuation will be used.
· When valuing on an earnings basis, the maintainable earnings of a company are multiplied by an appropriate multiple.
· An investment may be valued by reference to the value of its net assets. This is appropriate for businesses whose value derives mainly from the underlying value of its assets rather than its earnings.
· When investments have obtained an exit (either by listing or trade sale) after the valuation date but before finalisation of the relevant accounts (interim or final), the valuation is based on the exit valuation.
· Accrued interest on loans to portfolio companies is included in valuations where there is an expectation that the interest will be received.
IFRS 13 requires disclosure, by class of financial instrument, if the effect of changing one or more inputs to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen with reference to the specific underlying circumstances and position of the investee company. On that basis the Board believe that the impact of changing one or more of the inputs to reasonably possible alternative assumptions would not change the fair value significantly.
The Directors consider the carrying value of financial instruments in the financial statements to represent their fair value.
6. Statement of Principal Risks and Uncertainties
The Directors believe that the principal risks and uncertainties faced by the Company include investment and strategic, liquidity, cash drag, people and loss of investment trust status risks. These risks and other risks, and the way in which they are managed, are described in more detail under the heading "Principal Risks, Risk Management and Regulatory Environment" in the Strategic Report Review in the Company's Annual Report and Accounts for the year ended 31 December 2017. The Company's principal risks and uncertainties have not changed materially since the date of that report. These principal risks and uncertainties are not expected to change materially for the remaining six months of the Company's financial year.
| Six months to 30 June 2018 £'000 |
Six months to 30 June 2017 £'000 |
Year to 31 December 2017 £'000 |
|
| Revenue return per ordinary share (p) | (0.7) | 10.8 | 19.0 |
| Capital return per ordinary share (p) | 14.5 | 18.4 | 97.9 |
| Earnings per ordinary share (p) | 13.8 | 29.2 | 116.9 |
| Weighted average number of shares | 20,644,062 | 20,644,062 | 20,644,062 |
The earnings per share figures are based on the weighted average numbers of shares set out above. Earnings per share is based on the revenue profit in the period as shown in the consolidated income statement.
8. Related party transactions
There have been no material changes to the related party transactions described in the last annual report.
ENDS
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
END
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