Hargreave Hale AIM 2 Hargreave Hale Aim Vct 2 Plc : Interim Management Statement
28 Luglio 2017 - 12:15PM
UK Regulatory
TIDMHHVT
Investment Manager's Report
This report covers the first quarter of the 2017/18 financial year, 1
March 2017 to 31 May 2017.
Investment Report
Global equity markets had a strong quarter on the back of positive
economic data. President Trump's promises to cut taxes and reduce
business regulations were well received by US equity markets, which hit
new highs. In the UK, the Bank of England put through a small upgrade to
their projections for economic growth this year, principally because of
stronger than expected consumer spending, although we have since
witnessed some signs of consumer retrenchment in the face of higher
inflation and decreases in real wage growth.
Despite posting large gains, UK equity markets were volatile over the
period as investors responded to the uncertain economic outlook and
political instability within the UK. As is the way these days, each
quarter brings with it new challenges and risks. Brexit chat is not a
regular feature in our company meetings beyond the implications of
weakness in Sterling, although we expect it to re-emerge as a talking
point once we get a better feel for the mechanics and implications of
our exit from the European Union. We remain cautious on certain sectors
such as financials and consumer discretionary; however, we still see
ample opportunity for growth within our investee companies, particularly
those with strong product differentiation and/or structural growth in
their end markets. Weaker companies are vulnerable, particularly those
in consumer discretionary, traditional retail or where there is a high
risk of substitution. We continue to find interesting investment
opportunities in qualifying companies.
Performance
In the three months to 31 May 2017, the NAV increased from 109.86p to
119.58p. No dividends were paid, giving investors a total return of 9.72
pence per share, which translates to a gain of 8.9%. During the same
period the FTSE AIM All-Share Total Return gained 9.9% and the FTSE 100
Total Return gained 4.7%.
The qualifying investments made a net contribution of 4.94 pence per
share with thirty-two out of the seventy-five making gains, ten marking
time and thirty-three losing ground. The balance was a mixture of
non-qualifying portfolio gains, costs, income and small gains made
through share buy backs.
ECSC was the top performing qualifying investment (+142.9%, +1.00 pence
per share). The company operates as a cyber security consultant and
managed services provider. After floating in December 2016, the shares
rallied hard as investors sought exposure to a sector that is expected
to benefit from new UK legislation to be introduced next year. Interest
was further boosted by a series of high profile cyber-attacks that
further highlighted the potential consequences of an attack. The rally
took the shares considerably beyond fair value, triggering a series of
disposals that significantly reduced our exposure. Management have since
announced downward revisions to their 2017 revenue projections, which
have now pushed the shares back towards IPO price. Faron Pharma (+120.3%,
+0.86 pence per share) performed very well following a positive update
in May that confirmed their continued progress towards the conclusion of
its Phase 3 clinical programme for Traumakine. We expect an update later
this year. Having added to our position in February, we decided to lock
in some profit as the valuation increasingly looked to price in a
successful outcome ahead of publication of the trial data. Eagle Eye
(+123.3%, +0.75 pence per share) and Hardide (+78.9%, +0.75 pence per
share) also performed well.
The biggest losses within the period came from DP Poland (-17.0%, -0.38
pence per share) which saw its shares slide gradually lower. The shares
have had a remarkable run and we do not believe there is anything
structurally wrong with the investment. The company raised GBP5m in June
2017 and recently reported trading in-line with management expectations
with 17% growth in like-for-like system sales. Other losses came from
Medaphor (-40.0%, -0.13 pence per share), Paragon Entertainment (-23.8%,
-0.12 pence per share) and Creo (-7.8%, -0.12 pence per share).
Medaphor is still dealing with the fallout from a US patent dispute
(resolved in Dec 16); Paragon and Creo continue to progress in line with
our expectations.
We made six qualifying investments over the period, which included three
additional investments into existing qualifying companies (one private)
and three IPOs. We invested a total of GBP2.2m into qualifying
investments over the quarter.
Following strong runs, we reduced the size of our investments in ECSC,
Faron Pharma, and Gfinity. Due to persistent poor performance, we exited
investments in Directa Plus, Haydale Graphene and Audioboom.
Portfolio Structure
The VCT is comfortably through the HMRC defined investment test and
ended the period at 86.75% invested as measured by the HMRC investment
test. By market value, the VCT had a 47.8% weighting to qualifying
investments.
The allocation to non-qualifying equity investments increased marginally
from 20.6% to 22.0%, representing the funds on-going participation in
non-qualifying equity investments. In line with the investment policy,
we continued to make use of the Marlborough Special Situations Fund as a
temporary home for proceeds from fundraising. The allocation marginally
increased from 12.0% to 15.2% this year. We are pleased to report that
the non-qualifying investments contributed +5.12 pence per share to the
overall gains. Fixed income as a percentage of the fund fell from 0.4%
to 0.3% and cash fell from 20.3 to 15.1%.
The HMRC investment tests are set out in Chapter 3 of Part 6 Income Tax
Act 2007, which should be read in conjunction with this section of the
interim management statement. Funds raised by VCTs are first included in
the investment tests from the start of the accounting period containing
the third anniversary of the date on which the funds were raised.
Therefore, the allocation of qualifying investments as defined by the
legislation can be different to the portfolio weighting as measured by
market value relative to the net assets of the VCT.
Buybacks
In total, 279,206 ordinary shares were purchased between 1 March 2017
and 31 May 2017, at a total value of GBP306,132. Since the period end, a
further 89,267 ordinary shares were purchased at a total value of
GBP100,343.
Dividends
There were no dividends paid out in the 3 months to 31 May 2017, a final
dividend of 4 pence per ordinary share was paid on 25 July 2017.
Post Period End Update
Deal flow has been strong since period end with five additional
qualifying investment made in DP Poland, Gousto, Honest Brew, Imaginatik
and Surface Transforms. We have executed an investment agreement for
another investment with completion delayed pending HMRC advanced
assurance. We have several other deals that may complete in the coming
weeks.
For further information please contact:
Stuart Brookes
Company Secretary
Hargreave Hale AIM VCT 2 plc
01253 754740
Date: 28 July 2017
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Hargreave Hale AIM VCT 2 plc via Globenewswire
https://hargreaveaimvcts.co.uk/
(END) Dow Jones Newswires
July 28, 2017 06:15 ET (10:15 GMT)
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