REG - Puma Alpha VCT PLC - Annual Financial Report
14/06/2024 13:45
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RNS Number : 5541S Puma Alpha VCT PLC 14 June 2024
Chairman Statement
Highlights
· Seven new portfolio companies added in the year taking the total
number of investments to 17
· £9.3 million raised in new equity and a further £1.6m raised post
year-end
· 5p dividend paid during the year in relation to TicTrac disposal
proceeds
Introduction
I am pleased to present the report and financial statements for Puma Alpha VCT
plc ("the Company") for the year to 29 February 2024.
Overview
The Company's Net Asset Value ("NAV") per share at the end of the year stood
at 108.35p (2023: 130.53p) a decrease of 22.2p, 17.2p after the 5p dividend
paid during the year, and 17.0% from the same time in the previous year.
The Company's loss for the year was £4.1m (2023: loss £0.4m).
Further to statements made by the Company in the prospectus published back in
December 2023, Puma Alpha VCT is proposing to launch a dividend reinvestment
scheme ("DRIS") under which shareholders will be able to reinvest any cash
dividends received into further shares. Details of the proposed DRIS and the
terms and conditions of the DRIS are set out at the end of the notice of
Annual General Meeting.
Fundraising
We are happy to report that at the year end the Company had raised £9.3m, and
since the year end a further £1.6m 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
2023-24 has been a very active year for the Company with seven new qualifying
investments having been made in the period, alongside other Puma managed
funds. These investments were: £0.1m into Bikmo, a specialist cycle and
e-mobility insurer; £0.2m into Iris an advanced audio technology company;
£0.7m into Lucky Saint, the UK's number 1 dedicated alcohol-free beer brand;
£0.5m into Pockit, a digital account provider; £0.4m into Thingtrax, a
SaaS-based manufacturing performance platform; £1.0m into Transreport, a
fast-growing accessibility technology company and £0.2m into TravelLocal,
global travel marketplace.
In addition, follow-on investments were made: £0.1m into Ostmodern; £0.3m
into Dymag; £0.3m into Connectr; £0.9m into CameraMatics and £0.7m into Ron
Dorff. This brings the overall number of qualifying investments to 17.
Within the portfolio, the Company's holdings in Deazy, HR Duo, Le Col and MUSO
have generated positive valuation movements. Six of the Company's qualifying
holdings were marked down in value.
Muso saw a modest increase of £0.3m in the year. Growth picked up in 2024
following a slowdown in 2023 as a result of the actors and writers' strikes.
2024 has seen new client wins and a strong pipeline.
Dymag has seen a decrease of £1.7m in the year as the after-market for car
wheels slowed and car manufacturers became more cautious despite ongoing
investment in product and sales capacity. Puma is working closely with
management recognising the challenges it faces.
Ostmodern has had a decrease of £0.8m in the year after challenging trading
conditions in a soft macro environment. Puma has worked closely with
management on its strategy and sales process as management look to reignite
revenue growth on the agency side, to help drive profitability.
Connectr was written down by £0.7m in the year due to a challenging trading
environment where many employers are cutting back on recruitment and
associated spend on software impacting new business growth and renewal rates
alike. Puma has supported the Company through a restructure which has had a
positive impact on cashflow and profitability.
At the year-end, the Company has over £5.4m ready to deploy. 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.
NAV
The Company's NAV stood at 108.35p (2023: 130.53p) at the year end of 29
February 2024. This impairment is largely driven by decreases in investment
valuations in the year, the payment of Alpha's first dividend, coupled with
management fees and other expenses incurred in the year.
VCT qualifying status
Shoosmiths LLP 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. Shoosmiths and
other specialist advisors will continue to assist the Investment Manager in
establishing the status of potential investments as qualifying holdings.
Shoosmiths will continue to monitor rule compliance and maintaining the
qualifying status of the Company's holdings in the future.
Outlook
The global economic picture is mixed and has yet to return to a period of
sustained stability. The wars in Ukraine and the Middle East are undermining
sentiment and growing geopolitical tensions are creating an environment of
considerable uncertainty. Whilst headline inflation is easing in some
countries, including the UK where it is close to the Bank of England's 2 per
cent target, the economic shock of a higher base level of prices has some way
to run.
Interest rates seem to be at or near their peak in the US and Europe and the
focus is increasingly on when central banks will start cutting rates. With the
recent positive news about UK inflation expectation is building that the Bank
of England will start to cut interest rates this coming summer. However, these
reductions are likely to be small and it is doubtful whether we will see
material rate cuts in the near future or the very low interest rates seen
before the pandemic. This, alongside prolonged economic stagnation and little
sign of an upturn in investment, poses a real risk to growth. A lack of
investment in capital and skills is also leading to low productivity. Whilst
there is increasing policy emphasis on the need to respond to this and
encourage investment and innovation in the private sector, question marks
remain over the degree to which this can be sustained in the face of record
government debt levels, not to mention the fast-approaching general election.
All of this points to uncertainty prevailing for the time being.
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
14 June 2024
Investment Manager's Report
The period has clearly been one of significant strain for smaller companies in
the UK, as indeed it has been for companies of all stages of growth plus
households and consumers. The challenges facing those building a business are
substantial from inflation to geopolitical conflict, supply shock, labour
shortages, strikes, energy price spikes, the list could go on.
Given these challenges and potential roadblocks, it's easy to overlook just
how much things have improved over the past 12-18 months. Inflation was still
stubbornly in double figures a little over a year ago(1), but is now forecast
to drop below 2% in the coming months (before rising again slightly)(2),
meaning interest rates are potentially expected to fall during the summer
months. On the back of this, the long-running CFO survey conducted by Deloitte
reported in April that sentiment among UK CFOs had risen for the third
consecutive quarter to a point well above its long-term average. Consumer
confidence has also improved, the latest GFK Consumer Confidence Barometer has
illustrated that consumer optimism when it comes to their personal finances
has improved significantly over the past year.
Yet, despite these promising trends, many companies are experiencing stretched
balance sheets with the majority of cost management options already
exhausted. This is especially true in sectors that have been most exposed to
supply chain, labour or demand shocks. Companies in these sectors have been
weakened, and any further shocks to the economy could be difficult to absorb.
We have seen this pattern reflected in the trading data of our well
diversified portfolio of investee companies. 2023 was extremely challenging,
with particular weakness in Q3 and a soft end to the year, 2024 has opened
with considerably more momentum. Encouragingly, we are starting to see steady
like-for-like growth across a number of sectors.
We consider potential investment opportunities against a broader valuation
landscape, and from the above we can see that the period covered in these
accounts was a challenging time to be selling companies, but an advantageous
time to be investing in them. As such, we are excited to have added 7
additional investee companies in the period, increasing the size of the
portfolio by 54%. This is particularly pleasing as overall VCT investment
activity during 2023 was significantly down, by approximately 30% according to
the AIC.
New additions to the portfolio include Bikmo, a specialist cycle and
e-mobility insurer which protects over 75,000 riders in the UK, Lucky Saint,
the UK's number one dedicated alcohol-free beer brand and Iris, a cutting-edge
audio technology company with a mission to enable the world to listen well.
Naturally given the economic environment, it has been appropriate to reduce
the carrying values of some of the positions in the portfolio. New investments
made in the period have been held at cost (as is the norm under the IPEV
guidelines covering VCTs). This masks the strong momentum that many of our new
investments exhibited when we made our original investment, but the growth
from this cohort should be visible in the future.
We remain very active in our approach and engagement with the companies in our
portfolio. We continue to host networking events and workshops through our
Senior Managers Club, directed at CEOs, CFOs and other heads of department to
enable them to share ideas and insight with each other. For example, the most
recent event focused on cyber security and efficiently scaling tech teams.
This, together with the support and oversight we provide the companies in our
portfolio, means our proposition continues to prove compelling in attracting
high quality companies.
1 Source: Consumer price inflation from the Office for National Statistics
2 Bank of England, March 2024
Qualifying investments
In this section, we look at the following investments within our portfolio in
more detail.
Bikmo
Bikmo is a specialist cycle and e-mobility insurer which protects over 75,000
riders in the UK, Ireland, Germany and Austria. Capitalising on growth in the
cycle market, Bikmo offers a range of insurance products to protect every type
of cyclist - from road cyclists and triathletes to daily commuters.
The business is B-Corp certified, it is focusing on expanding into other
European markets and supporting multinational partners, including British
Cycling, Cyclescheme and Brompton.
CameraMatics
CameraMatics is an award-winning solution for Fleet Risk Management.
Continuing its mission to create safer roads for all, it released one of the
most advanced AI-powered collision avoidance system on the market. The system
promises radically to improve driver reaction times and blind spot visibility
by using deep learning algorithms, continually scanning for pedestrians,
hidden road users and cyclists.
The company has attended several trade shows across America and the UK to
bring its offerings to new audiences, with a continued focus on US expansion.
It has invested heavily into its sales and marketing team to aid this and
recently announced a new collaboration with Bosch Logistics Operating System.
This partnership will align CameraMatics with Bosch's mission to unite all
stakeholders in the logistics and transportation industry.
IRIS
IRIS is an audio specialist which has developed an AI-powered software which
removes distracting background noise from calls, integrating seamlessly with
existing platforms. IRIS achieved a top 20 placing in the Startups 100 Index
2024.
Le Col
Recently named best performance cycling brand by GQ Magazine, Le Col is
continuing its expansion into the US and is now available online at DICK'S
Sporting Goods (which has over 800 stores nationwide). In addition, Le Col has
partnered with US fabrics manufacturer Polartec to launch a new plant-based
performance fabric, 'Power Shield', which is made with 50% fewer emissions
than similar fabrics.
Lucky Saint
Lucky Saint is the UK's number one dedicated alcohol-free beer brand across
grocery and on-trade. The investment from Puma funds will support the brand's
next phase of growth both in the UK and globally.
The B-Corp certified company, voted 'Marketing Society Brand of the Year
2023', has recently expanded its offering by launching the Superior Hazy IPA,
which joins the award-winning Alcohol-Free Superior Unfiltered Lager as its
first new beer since launch in 2018. It is stocked in over 7,000 pubs, bars
and restaurants and sold in major supermarkets including Waitrose,
Sainsbury's, Tesco and Marks & Spencer.
Pockit
Pockit is a digital account provider offering pre-paid spending cards and
current accounts. The fintech company has focused on growing the senior team
and has appointed a new COO. The next phase of Pockit's growth strategy aims
to expand its customer base and introduce new services.
Ron Dorff
Ron Dorff, the premium athleisure brand, has grown sales by 42% in the two
years to December 2023 and is present across more than 50 countries including
the US, the UK, Germany and France. It launched a crowdfunding campaign, which
raised over the target, giving the Ron Dorff community an opportunity to be
part of its growth. The funds will be used to sustain global online growth, in
particular in the US, building brand awareness on and offline. It is due to
open a flagship store in Paris towards the end of 2024.
Thingtrax
Thingtrax is an IoT enabled software provider using AI and machine learning to
optimise performance in manufacturing facilities.
Its latest offering, Retail Pack Label Validation powered by AI, enables
manufacturers early detection of label discrepancies. The pairing of camera
vision with AI examines each label for specific text, dates, imagery, and
positioning, with an instant alert when a label fails to meet product
specifications, allowing mistakes to be addressed efficiently.
Transreport
Transreport's flagship technology, the Passenger Assistance app, supports
anyone who needs assistance whilst travelling, facilitating quicker and easier
use of public transport.
Since its launch in May 2021, the Passenger Assistance technology, nominated
for an Apple Design Award in the Inclusivity Category, has been downloaded
over 100,000 times, facilitating millions of passenger journeys to date.
Transreport has initially focussed on UK rail, where it works with every UK
rail operating company.
TravelLocal
TravelLocal is a leading online platform for tailor-made holidays that
connects clients directly with local experts in their destinations. Since the
business was founded in 2016, TravelLocal has helped more than 70,000
customers from 100 countries globally create the perfect trip. TravelLocal is
growing rapidly, many travellers demand genuinely authentic, more sustainable
holidays and prioritise spending on experiences, with annual bookings over USD
50m and growing over 100% year on year.
The new funding will support the company's international growth and has
already added Australia to its growing roster of over 90 international
destinations. In addition, the company looks to invest in its managed
marketplace platform and further brand marketing.
Liquidity management investments
An active approach is taken to manage any cash held, prior to investing in VCT
qualifying companies.
The rules for VCTs limit the income which can be received from bank deposits,
making them an unattractive way of holding funds waiting to be invested. As a
result, during a period where funds remain not yet deployed in qualifying
investments in smaller companies, to earn a return on these funds a VCT needs
to hold investments rather than cash deposits.
Rising interest rates have made investing in fixed-income securities more
attractive. The Company has therefore implemented a liquidity management
strategy focused on short term bonds held through collective investment
schemes.
Puma Investment Management Limited
14 June 2024
Investment portfolio summary
As at 29 February 2024
Of the investments held at 29 February 2024, 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') 263 1,008 (745) 1% 0.26x
Bikmo Limited 115 115 - 0% 1.00x
Deazy Limited 1,085 1,000 85 4% 1.08x
Dymag Group Limited 288 1,957 (1,669) 1% 0.15x
Everpress Limited 2,986 2,100 886 11% 1.42x
Forde Resolution Company Limited ('HR Duo') 456 347 109 2% 1.32x
Iris Audio Technologies Limited 223 223 - 1% 1.00x
Le Col Holdings Limited 2,803 2,599 204 10% 1.08x
Muso Limited 821 500 321 3% 1.64x
MyKindaCrowd Limited ('Connectr') 1,164 1,949 (785) 4% 0.60x
MySafeDrive Limited ('CameraMatics') 6,008 2,514 3,494 22% 2.39x
Not Another Beer Co Limited ('Lucky Saint') 711 711 - 3% 1.00x
NQOCD Consulting Limited ('Ron Dorff') 3,128 2,545 583 11% 1.23x
Pockit Limited 530 530 - 2% 1.00x
Thingtrax Limited 422 422 - 2% 1.00x
Transreport Limited 1,017 1,017 - 4% 1.00x
TravelLocal Limited 234 234 - 1% 1.00x
Total Qualifying Investments 22,254 19,771 2,483 80% 1.13x
Total Investments 22,254 19,771 2,483 80%
Balance of Portfolio 5,412 5,412 - 20%
Net Assets 27,666 25,183 2,483 100%
Strategic Report
The Directors present their Strategic Report of the Company for the year ended
29 February 2024. 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
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 29 February
2024.
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
may comprise quoted ordinary shares or securities on a regulated market,
collective investment schemes (including UCITs), shares or units in an
alternative investment fund, and cash on short-term 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 15 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
mitigates the risk by maintaining close contact with all investee companies as
well as by maintaining a diverse portfolio. 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 several
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 to monitor compliance with regulations and engages external
independent advisers to undertake an independent VCT status monitoring role.
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 2027.
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 does not have customers, only shareholders, and its suppliers are the
service providers.
The Annual Report 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 considered 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, whose names and functions are listed in the Directors'
Biographies, 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 and
the Strategic Report 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
14 June 2024
Income Statement
For the year ended 29 February 2024
Year ended 29 February 2024 Year ended 28 February 2023
Note Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Loss)/gain on fixed asset investments 8 (b) - (3,458) (3,458) - 316 316
Gain on current asset investments - 75 75 - - -
Income 2 192 - 192 35 - 35
192 (3,383) (3,191) 35 316 351
Investment management fees 3 (140) (419) (559) (111) (332) (443)
Performance fee 3 - - - - - -
Other expenses 4 (378) - (378) (294) - (294)
(518) (419) (937) (405) (332) (737)
Loss before tax (326) (3,802) (4,128) (370) (16) (386)
Tax 5 - - - - - -
Loss after tax (326) (3,802) (4,128) (370) (16) (386)
Basic and diluted loss per Ordinary Share (pence) 6 (1.44p) (16.82p) (18.26p) (2.17p) (0.09p) (2.26p)
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 29 February 2024
Note As at As at
29 February 2024
28 February 2023
£'000 £'000
Fixed assets
Investments 8 22,254 20,180
Current assets
Cash 1,817 3,911
Applications cash(1) 826 425
Investments 10 3,534 -
Debtors 9 282 185
6,459 4,521
Current liabilities 11 (1,047) (606)
Net current assets 5,412 3,915
Net assets 27,666 24,095
Capital and reserves
Called up share capital 13 255 185
Share premium account 10,816 1,938
Capital reserve - realised (1,032) (612)
Capital reserve - unrealised 2,559 5,941
Revenue reserve (1,234) 16,643
Special distributable reserve 16,302 -
Total equity 27,666 24,095
Net Asset Value per Ordinary Share 14 108.35p 130.53p
(1) Funds raised from investors since Alpha VCT opened for new investment
which have not been allotted as at year end.
The financial statements were approved and authorised for issue by the Board
of Directors on 14 June 2024 and were signed on their behalf by:
Egmont Kock
Chairman
Statement of Cash Flows
For the year ended 29 February 2024
Note Year ended 29 February 2024 Year ended 28 February 2023
£'000 £'000
Reconciliation of loss after tax
Loss before tax (4,128) (386)
Loss/(gain) on fixed asset investments 3,458 (316)
Gain on current asset investments (75) -
Increase in debtors (97) (61)
Increase/(decrease) in creditors 40 (473)
Outflow from operating activities (802) (1,236)
Cash flow from investing activities
Purchase of fixed asset investments (5,532) (5,268)
Purchase of current asset investments (3,459) -
Proceeds from disposal of investments - 1,157
Outflow from investing activities (8,991) (4,111)
Cash flow from financing activities
Proceeds received from issue of ordinary share capital 9,252 7,476
Expense paid for issue of share capital (304) (198)
Movement in applications account 401 425
Dividends paid (1,249) -
Inflow from financing activities 8,100 7,703
Net (decrease)/increase in cash and cash equivalents (1,693) 2,356
Cash and cash equivalents at the beginning of the year 4,336 1,980
Cash and cash equivalents at the end of the year 2,643 4,336
Cash and cash equivalents comprise
Cash at bank 1,817 3,911
Applications cash 19 826 425
Cash and cash equivalents at the end of the year 2,643 4,336
Statement of Changes in Equity
For the year ended 29 February 2024
Called up share capital Share premium account Capital reserve - realised Capital reserve - unrealised Revenue reserve Special distributable reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1 March 2022 126 12,271 (836) 6,182 (540) - 17,203
Comprehensive income for the year
(Loss)/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
Comprehensive income for the year
Loss after tax - - (420) (3,382) (326) - (4,128)
Total comprehensive income for the year - - (420) (3,382) (326) - (4,128)
Transactions with owners, recognised directly in equity
Issue of shares 70 9,182 - - - - 9,252
Share issue cost - (304) - - - - (304)
Dividends paid - - - - - (1,249) (1,249)
Total transactions with owners, recognised directly in equity 70 8,878 - - - (1,249) 7,699
Other movements
Re-classification to Special distributable reserve - - - - (17,551) 17,551 -
Total other movements - - - - (17,551) 17,551 -
Balance as at 29 February 2024 255 10,816 (1,032) 2,559 (1,234) 16,302 27,666
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
expenses.
The special distributable reserve represents reserves available for dividends
and repurchases of shares subject to additional VCT restrictions surrounding
retention of the share capital and share premium account.
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. The functional and
presentational currency of the Company is sterling.
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.
Cash and cash equivalents
Cash, for the purposes of the cash flow statement, comprises cash at bank.
Cash equivalents are current asset investments which are disposable without
curtailing or disrupting the business and are either readily convertible into
known amounts of cash at or close to their carrying values. Interest earned on
cash balances is recorded as income.
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
Performance fees are 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 charged to capital.
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. The special distributable reserve includes cancelled
share premium and represents reserves available for dividends and repurchases
of shares subject to additional VCT restrictions surrounding retention of the
share capital and share premium account.
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
Dividends payable are recognised as distributions in the financial statements
when the VCT's liability to make the payment has been established. This
liability is established on the record date, the date on which those
shareholders on the share register are entitled to the dividend.
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 15 to the financial statements.
2. Income
Year ended 29 February 2024 Year ended 28 February 2023
£'000 £'000
Income from investments
Qualifying interest income 112 35
Qualifying dividend income 62 -
Non-qualifying interest income 18 -
192 35
3. Investment management fee
Year ended 29 February 2024 Year ended 28 February 2023
£'000 £'000
Investment management fee 559 443
559 443
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. Puma
Investments has been appointed as the Investment Manager for four years. 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 3.4% of the Net Asset
Value (2023: 3.1%).
In addition to the investment manager fees disclosed above, during the year
ended 29 February 2024, Puma Investments Management Limited charged fees
totalling £63,930 (2023: £66,060) in relation to share issue costs.
4. Other expenses
Year ended 29 February 2024 Year ended 28 February 2023
£'000 £'000
Administration - Puma Investments 98 77
Directors' remuneration 60 60
Social security costs 6 5
Auditor's remuneration for statutory audit 64 61
Insurance 9 9
Legal and professional fees 32 6
Other expenses 109 76
378 294
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 (2023: none).
The average number of non-executive Directors during the year was 3 (2023:
3).
Auditor's fees of £59,400 (2023: £52,800) have 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 (2023: £nil).
Other expenses are made up of several smaller items, the largest of these
being fees paid for registrar services.
5. Taxation
Year ended 29 February 2024 Year ended 28 February 2023
£'000 £'000
UK corporation tax charge for the period - -
Factors affecting tax charge for the period
Loss before taxation (4,128) (386)
Tax charge calculated on loss before taxation at the applicable rate of (1,032) (73)
25%/19%
Losses/(gains) on investments 846 (60)
Tax losses carried forward 186 133
- -
The corporation tax rate for the current year is 25% (2023: 19%).
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 29 February 2024
Revenue Capital Total
£'000 £'000 £'000
Loss for the year (326) (3,802) (4,128)
Weighted average number of shares 22,607,660 22,607,660 22,607,660
Loss per share (1.44p) (16.82p) (18.26p)
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 per share (2.17p) (0.09p) (2.26p)
This calculation is carried out in accordance with IAS 33.
7. Dividends
During the year, a dividend of 5p per Ordinary Share was paid from the Special
Distributable Reserve in relation to the TicTrac disposal proceeds received in
the year ended 28 February 2023. The dividend was paid on 10 November 2023
totalling £1.3 million.
8. Investments
(a) Movements in investments Qualifying investments Total
£'000 £'000
Book cost at 1 March 2023 14,239 14,239
Net unrealised gains at 1 March 2023 5,941 5,941
Valuation at 1 March 2023 20,180 20,180
Purchases at cost 5,532 5,532
Net unrealised loss (3,458) (3,458)
Valuation at 29 February 2024 22,254 22,254
Book cost at 29 February 2024 19,771 19,771
Unrealised gains at 29 February 2024 2,483 2,483
Valuation at 29 February 2024 22,254 22,254
(b) Gains/(losses) on investments
Year ended 29 February 2024 Year ended 28 February 2023
£'000 £'000
Realised gains in the year - 6
Unrealised (loss)/gains in year (3,458) 310
(3,458) 316
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 qualifying investments as at 29 February 2024 and 28
February 2023 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 29 February 2024 As at 28 February 2023
£'000 £'000
Other debtors 5 (5)
Prepayments 163 150
Accrued income 114 40
282 185
Contained within prepayments are PR fees totalling £116,000 made up of a
number of small items. In 2023, the balance was largely attributable to
admission fees to the London Stock Exchange of £99,000.
10. Current asset investments
As at 29 February 2024 As at 28 February 2023
£'000 £'000
Current asset investments 3,534 -
3,534 -
Current asset investments comprise short term bonds held through collective
investment schemes and are readily convertible into cash at the option of Puma
Alpha VCT.
11. Creditors - amounts falling due within one year
As at 29 February 2024 As at 28 February 2023
£'000 £'000
Accruals 221 181
Applications cash (see note 19) 826 425
1,047 606
Included within accruals is nil (2023: £nil) in relation to performance fees
payable.
Applications cash is cash received from investors to Puma Alpha VCT but not
yet allotted.
12. 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 PIF 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.
Following shareholder approval at the 2023 AGM, the methodology for
calculating the PIF was amended to make it fairer to shareholders by removing
the impact of changes to the share capital of the Company. The amount of the
PIF continues to be calculated in the manner described above.
13. Called up share capital
As at 29 February 2024 As at As at 29 February 2024 As at 28 February 2023
28 February 2023
£'000 £'000
Allotted, called up and fully paid:
Ordinary shares of £0.01 each 25,534,137 18,460,066 255 185
Allotted, called up and partly paid:
Redeemable preference shares of £1 each - - - -
During the year, 7,074,071 shares were issued at an average price of 130.8p
per share (2023: 5,855,244 shares were issued at a price of 130.4p per share).
The consideration received for these shares was £9.3 million (2023: £7.6
million).
14. Net Asset Value per Ordinary Share
As at As at
29 February 2024
28 February 2023
Net assets 27,666,338 24,095,381
Number of shares in issue for purposes of Net
Asset Value per share calculation 25,534,137 18,460,066
Net Asset Value per share 108.35p 130.53p
15. 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 29 February 2024 As at 28 February 2023
£'000 £'000
Financial assets at fair value through profit or loss 23,509 19,731
Financial assets measured at amortised cost 2,561 634
Financial liabilities measured at amortised cost (221) (181)
25,849 20,184
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 29 February 2024 As at 28 February 2023
Investments in loan notes 2,279 449
Cash at bank and in hand 1,817 3,911
Applications cash (see note 11 and 19) 826 425
Current asset investments 3,534 -
Other receivables 282 185
8,738 4,970
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.
The cash held by the Company at the year-end is held in RBS and the
applications cash is held at NatWest. Bankruptcy or insolvency of the banks
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 relating to current asset investments is mitigated by investing in
a portfolio of investment instruments of high credit quality.
Credit risk associated with other receivables are predominantly covered by the
investment management 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% (2023: 100%) of the Company's investments are unquoted investments held
at fair value. 85% of the portfolio (69% 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% (£30.3m). Conversely,
a decrease in the multiple used by 20% would decrease the net asset value by
9.2% (£25.1m). The 20% sensitivity used provides the most meaningful impact
of average multiple changes across the portfolio.
The sensitivity analysis is based on the year-end position of the investments
and so may not be reflective of the year as a whole.
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 5.25% at 29 February 2024
(2023: 4.0%).
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 following analysis sets out the interest rate risk of the Company's
financial assets as at 29 February 2024.
Rate status Average interest rate Period until maturity Total
£'000
Cash at bank - RBS Floating 0.00% - 180
Cash at bank - RBS Floating 1.70% - 1637
Applications cash - NatWest (see note 11 and 19) Floating 0.00% - 826
Loan notes Fixed 9.20% 52 months 2,279
Balance of assets Non-interest bearing - 23,791
28,713
The following analysis sets out the interest rate risk of the Company's
financial assets as at 28 February 2023.
Rate status Average interest rate Period until maturity Total
£'000
Cash at bank - RBS Floating 0.00% - 3,911
Applications cash - NatWest (see note 11 and 19) Floating 0.00% - 425
Loans and loan notes Fixed 10.00% 38 months 449
Balance of assets Non-interest bearing - 19,916
24,701
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 29 As at 28 February 2023
February 2024
Level 1
Current asset investments 3,534 -
Level 3
Unquoted investments 22,254 20,180
25,788 20,180
The Level 1 investments have been valued using the current quoted price.
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.
16. 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.
17. Contingencies, guarantees and financial commitments
There were no commitments, contingencies or guarantees of the Company at the
year-end (2023: none).
18. 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.
19. Re-presentation of comparative figures
The comparative figures for the year ended 28 February 2023
have been re-presented with an additional line item for 'Applications cash'
included within current assets and current liabilities. Applications cash
relates to funds received from investors but have not yet been allotted as at
the year end. The net impact of this re-presentation on the NAV is nil and is
purely a balance sheet gross up adjustment.
20. Post Balance Sheet events
Post year-end, a further 1,419,795 ordinary shares have been issued for cash
consideration of £1.6m.
On 2 May 2024 a portfolio company, Ron Dorff, raised third-party funding
through a Crowdfunding investment round, which valued the company at €27m.
The investment opportunity was made available to Ron Dorff customers as part
of the launch of Ron Dorff's new loyalty programme, Le Club Ron Dorff.
Incoming third-party investors did not benefit from EIS relief. For the VCT,
this results in a NAV uplift of £0.9m at June 2024. The valuation at February
2024 was £3.1m.
In May 2024, the Directors chose to write the value of the VCTs holdings in
its portfolio company Dymag to nil. The valuation at February 2024 was £0.2m,
meaning a net decrease to the NAV of £0.2m at June 2024. This decision was
taken on the back of the unexpected cancellation of a large OEM project which
Dymag had expected to win, and continued weakness in the aftermarket.
On 22 May 2024 a portfolio company, Iris, completed a £3.5m investment round
with a new external US investor. Puma Funds also participated in the round
with Puma Alpha VCT investing an additional £41k. This round valued the
company at £35m which values the VCT's initial investment at 2x the invested
sum. This has resulted in a £0.2m NAV uplift at June 2024. At February 2024
Iris was held at cost of £0.2m.
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 29 February 2024 but has been extracted
from the statutory financial statements for the year ended 29 February 2024
which were approved by the Board of Directors on 14 June 2024 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 2023 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
29 February 2024 will be available to the public at the registered office of
the Company at Cassini House, 57 St James's Street, London, SW1A 1LD and is
available for download from
https://www.pumainvestments.co.uk/products/venture-capital-trusts/puma-alpha-vct.
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