New investments at the right valuations are “scarce” following the changes to VCT rules introduced last year, says the chair of the Artemis VCT.
Fiona Wollocombe, chairwoman of the £38.5m Artemis VCT, says that it is difficult to see the full impact of the rule changes, but says “new investment opportunities at appropriate valuations remained scarce”.
The changes introduced by the Government last year placed stricter limits on the companies eligible for VCT investment, including caps on the level of funding companies can receive from VCTs and EISs over their lifetime, limits on employee numbers at companies, limits on the use of VCT money for acquisitions and further crackdowns on the types of companies eligible.
In the VCT’s half-yearly review for the six months ended 31 March 2016, the company made just one new investment, Yu Group, which provides gas and electricity to small and medium-sized businesses, and which it says is well-positioned to win market share from the ‘big six’ energy firms.
Wollocombe says: “While the company recently invested in Yu Group, attractively priced VCT qualifying deals like this remain quite scarce. It is hoped that as the new legislation becomes more widely understood, companies will look to VCTs for capital.”
As a result of the lack of investment opportunities currently available, the trust paid out a 2p per share interim dividend and a 4p per share special dividend, having realised some cash from investment disposals. The move will mean £3.2m is paid to shareholders in late June.
“While the company recently invested in Yu Group, attractively priced VCT qualifying deals like this remain quite scarce. It is hoped that as the new legislation becomes more widely understood, companies will look to VCTs for capital,” says Wollocombe.
“The board, in conjunction with the investment manager, will continue to monitor the level of new investment opportunities and this will remain a key factor in determining the level of dividends paid. The position will be reviewed again after the year end, when a decision on the final dividend for the year will be taken.”
Over the six-month period, the company sold its position in Vision Direct by Essilor International realising a £2.4m gain, which contributed 4.2 per cent to the fund’s performance.
The company also reduced its holdings in Proactis and Cohort, which had each grown to more than 7 per cent of the VCT’s holdings, and sold its entire stake in Amino Technologies, which was previously 4.6 per cent of the fund.
The VCT is currently trading at a 10.9 per cent discount to net asset value.