TIDMAADV
Albion Development VCT PLC
LEI Code 213800FDDMBD9QLHLB38
As required by the UK Listing Authority's Disclosure Guidance
and Transparency Rules 4.1 and 6.3, Albion Development VCT PLC
today makes public its information relating to the Annual Report
and Financial Statements for the year ended 31 December 2021.
This announcement was approved for release by the Board of
Directors on 24 March 2022.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31
December 2021 (which have been audited), will shortly be sent to
shareholders. Copies of the full Annual Report and Financial
Statements will be shown via the Albion Capital Group LLP website
by clicking www.albion.capital/funds/AADV/31Dec2021.pdf.
Investment policy
The Company will invest in a broad portfolio of higher growth
businesses with a stronger focus on technology companies across a
variety of sectors of the UK economy. Allocation of assets will be
determined by the investment opportunities which become available
but efforts will be made to ensure that the portfolio is
diversified in terms of sector and stage of maturity of
company.
Funds held pending investment or for liquidity purposes will be
held as cash on deposit or up to 8% of its assets, at the time of
investment, in liquid open-ended equity funds providing income and
capital equity exposure (where it is considered economic to do
so).
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses
within Venture Capital Trust qualifying industry sectors using a
mixture of securities. The maximum amount which the Company will
invest in a single portfolio company is 15% of the Company's assets
at cost thus ensuring a spread of investment risk. The value of an
individual investment may increase over time as a result of trading
progress and it is possible that it may grow in value to a point
where it represents a significantly higher proportion of total
assets prior to a realisation opportunity being available.
The Company's maximum exposure in relation to gearing is
restricted to 10% of the adjusted share capital and reserves.
Background to the Company
The Company is a Venture Capital Trust which raised a total of
GBP33.3 million through the issue of shares between 1999 and 2004.
The C shares merged with the Ordinary shares in 2007. A further
GBP6.3 million was raised through an issue of new D shares in 2010.
The D shares converted to Ordinary shares in 2015.
An additional GBP67.3 million has been raised for the Ordinary
shares through the Albion VCTs Top Up Offers since January
2011.
Financial calendar
Record date for first dividend 6 May 2022
Annual General Meeting Noon on 10 May 2022
Payment of first dividend 31 May 2022
Announcement of Half-yearly results for the six months September 2022
ending 30 June 2022
Financial highlights
203.84p Total shareholder value per share from launch to 31
December 2021
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20.54% Shareholder return for the year ended 31 December
2021
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4.37p Tax-free dividend per share for the year ended 31
December 2021
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94.98p Net asset value per share as at 31 December 2021
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These are considered Alternative Performance Measures, see notes
2 and 3 in the Strategic report below for further explanation.
31 December 2021 31 December 2020
pence per share pence per share
Opening net asset value 82.42 83.47
Capital return 16.74 3.15
Revenue return 0.46 0.02
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Total return 17.20 3.17
Dividends paid (4.37) (4.24)
Impact from share capital movements (0.27) 0.02
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Net asset value 94.98 82.42
------------------------------------ ---------------- ----------------
Ordinary shares
(pence per share)
-------------------------------------------- -----------------
Total dividends paid to 31 December 2021 108.86
Net asset value as at 31 December 2021 94.98
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Total shareholder value to 31 December 2021 203.84
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The financial summary above is for the Company, Albion
Development VCT PLC Ordinary shares only. Details of the financial
performance of the C shares and D shares, which have been merged
into the Ordinary shares, can be found at
www.albion.capital/funds/AADV under the 'Financial summary for
previous funds' section.
A more detailed breakdown of the dividends paid per year can be
found at www.albion.capital/funds/AADV under the 'Dividend History'
section.
In addition to the dividends paid above, the Board has declared
a first dividend for the year ending 31 December 2022 of 2.37 pence
per share payable on 31 May 2022 to shareholders on the register on
6 May 2022.
Chairman's statement
Introduction
I am pleased to report that the Company has achieved a positive
total return of 17.2 pence per share and a shareholder return of
20.5% for the year, after an encouragingly strong year for several
of our portfolio companies. The Company continues to benefit from
the resilience of its portfolio, particularly of its healthcare and
software businesses, many of which have seen strong growth. We
continue to see investment opportunities in the health technology
and enterprise software sectors where the Manager has developed
deep expertise.
Results and dividends
As at 31 December 2021 the net asset value was 94.98 pence per
share compared to 82.42 pence per share as at 31 December 2020. The
total return before taxation was GBP17.5 million compared to GBP2.9
million for the previous year. The positive progress of a number of
our portfolio companies is discussed later in this statement and in
the Strategic report below. These excellent results for the year
have resulted in a performance incentive fee payable to the Manager
of GBP1.8 million (2020: GBP42,000). More detail on the calculation
of this fee can be found in the Strategic report below.
In line with our variable dividend policy targeting 5% of NAV
per annum the Company paid dividends totalling 4.37 pence per share
during the year to 31 December 2021 (2020: 4.24 pence per share).
The Company will pay a first dividend for the financial year to 31
December 2022 of 2.37 pence per share on 31 May 2022 to
shareholders on the register on 6 May 2022, being 2.5% of the
latest reported NAV.
Investment performance and progress
There have been several realisations during the year totalling
GBP6.3 million (2020: GBP3.2 million). The sale of OmPrompt
Holdings delivered a 2.3 times return on cost and proceeds of
GBP2.3 million. The sale of Innovation Broking Group delivered a
10.3 times return on cost and proceeds of GBP0.9 million. Further
details on realisations can be found in the realisations table on
page 26 of the full Annual Report and Financial Statements. I am
also pleased to announce that, following the year end, the Company
completed the sale of Phrasee generating proceeds of GBP2.1 million
and a return of 3.0 times cost. In addition to this, the Company
completed the sale of Credit Kudos generating proceeds of GBP1.6
million.
The results for the year showed net valuation gains on
investments of GBP20.6 million, an increase from GBP4.1 million in
the previous year. The key contributors were the uplifts on
Quantexa and Oviva, both of which have been revalued after further
externally led funding rounds and Egress Software Technologies and
Proveca, both of which continue to grow. Phrasee and Credit Kudos
also contributed to the valuation gain, due to their sales which
completed post year end. However, our investments in Mirada
Medical, Concirrus and Avora have seen write-downs following
difficult trading conditions, in part because of the Covid-19
pandemic. We have also written-off our investment in Xperiome which
went into administration following the year end.
The three largest investments in the Company's portfolio, being
Quantexa, Egress Software Technologies and Proveca, are valued at
GBP31.9 million and represent 32.7 per cent of the Company's net
asset value.
The Company has been an active investor during the year
investing a total of GBP7.0 million. Of this, GBP2.6 million was
invested into five new portfolio companies, all of which are
expected to require further investment as the companies prove
themselves and grow:
-- GBP1.2 million into Threadneedle Software Holdings (trading as Solidatus)
a provider of data lineage software to enterprise customers in regulated
sectors, which allows them to rapidly discover, visualise, catalogue and
understand how data flows through their organisations;
-- GBP0.5 million into Gravitee TopCo (trading as Gravitee.io) an
application programming interface (API) management platform;
-- GBP0.4 million into NuvoAir Holdings a provider of digital therapeutics
and decentralised clinical trials for respiratory conditions;
-- GBP0.3 million into Brytlyt which uses patented software and artificial
intelligence (AI), combined with the superior computation power of
graphics processing units (GPUs), to derive insights 1,000s of times
faster than legacy systems; and
-- GBP0.2 million into Accelex Technology, a data extraction and analytics
technology for private capital markets.
A further GBP4.4 million was invested into existing portfolio
companies, the largest being: GBP1.5 million into Oviva, as part of
its Series C fundraise; GBP0.6 million into Black Swan Data, to
support the restructure of its business to focus primarily on
predictive analytics for consumer brands; and GBP0.6 million into
Healios to support its growth.
A full list of the Company's investments and disposals,
including their movements in value for the year, can be found in
the Portfolio of investments section on pages 24 to 26 of the full
Annual Report and Financial Statements.
Risks and uncertainties
In addition to the risks around Covid-19, which have been a
major factor for the past 2 years, there is now considerable
uncertainty over the future course, and global impact, of Russia's
invasion of Ukraine. Our investment portfolio, while concentrated
mainly in the technology and healthcare sectors, remains
diversified in terms of both sub-sector and stage of maturity and,
importantly, we believe to be appropriately valued. While we would
expect these valuations to be robust within the tolerance of normal
market fluctuations, the potential, though unknown, scale of any
further adverse events arising out of the Ukraine invasion remain a
major risk factor.
A detailed analysis of the other risks and uncertainties facing
the business is shown in the Strategic report below.
Share buy-backs
It remains the Board's primary objective to maintain sufficient
resources for investment in existing and new portfolio companies
and for the continued payment of dividends to shareholders. The
Board's policy is to buy back shares in the market, subject to the
overall constraint that such purchases are in the Company's
interest.
It is the Board's intention for such buy-backs to be in the
region of a 5% discount to net asset value, so far as market
conditions and liquidity permit. Details of shares bought back
during the year can be found in note 15.
Albion VCTs Prospectus Top Up Offers
Your Board, in conjunction with the boards of the other five
VCTs managed by Albion Capital Group LLP, launched a prospectus top
up offer of new Ordinary shares on 6 January 2022. The Board
announced on 3 March 2022 that, following strong demand, it would
utilise the over-allotment facility, bringing the total to be
raised to GBP21 million. The Offer was fully subscribed and closed
to further applications on 23 March 2022.
The proceeds are being used to provide support to our existing
portfolio companies and to enable us to take advantage of new
investment opportunities. The first allotment of the shares under
the Offer was on 25 February 2022. Details of share allotments made
during and after the financial year end can be found in notes 15
and 19 respectively.
Annual General Meeting ("AGM")
Based on the success of last year's live webcast AGM, the Board
has decided to adopt a virtual format for the AGM again this year.
The AGM will be held at noon on 10 May 2022 via the Lumi platform.
Information on how to participate in the live webcast can be found
on the Manager's website
www.albion.capital/vct-hub/agms-events.
The Board welcome questions from shareholders at the AGM and
shareholders will be able to ask questions using the Lumi platform
during the AGM. Alternatively, shareholders can email their
questions to AADVchair@albion.capital
https://www.globenewswire.com/Tracker?data=7rk9EMolS4NYFVp1l5wJovpF4NrlriuGrdye9i045L-AKFDYfxRqKmVAJQOQLb_GfRtm5wf-D8h03tVe2j4y3o5x4-5nyPyBo0lX5ZaXV8U=
prior to the Meeting.
Shareholders' views are important, and the Board encourages
shareholders to vote on the resolutions.
Further details on the format and business to be conducted at
the AGM can be found in the Directors' report on pages 36 and 37
and in the Notice of the Meeting on pages 71 to 74 of the full
Annual Report and Financial Statements.
Outlook and prospects
These positive results demonstrate the resilience of our
portfolio of companies at different stages of maturity and targeted
at sectors such as software and healthcare. These are companies
which provide products and services that are considered innovative
and essential to their customers. I am confident that our portfolio
companies are well positioned to grow, despite the uncertainty
around the longer-term impact of the pandemic and an increasingly
volatile geopolitical backdrop. The Board believes the Company is
well placed to continue to deliver long term value to our
shareholders, though remains mindful of the considerable
uncertainty over the Global economy arising out of any future
events caused by the invasion of Ukraine.
Ben Larkin
Chairman
24 March 2022
Strategic report
Investment policy
The Company will invest in a broad portfolio of higher growth
businesses with a stronger focus on technology companies across a
variety of sectors of the UK economy. Allocation of assets will be
determined by the investment opportunities which become available
but efforts will be made to ensure that the portfolio is
diversified in terms of sector and stage of maturity of
company.
The full investment policy can be found above.
Current portfolio sector allocation
The pie charts at the end of this announcement show the split of
the portfolio valuation as at 31 December 2021 by: sector; stage of
investment; and number of employees. This is a useful way of
assessing how the Company and its portfolio is diversified across
sector, portfolio companies' maturity measured by revenues and
their size measured by the number of people employed. As the
Company continues to invest in software and other technology
companies, FinTech (which is technology specifically applicable to
financial services companies) becomes a more prominent investment,
and therefore is included as a subsector below. Details of the
principal investments made by the Company are shown in the
Portfolio of investments on pages 24 and 25 of the full Annual
Report and Financial Statements.
Direction of portfolio
After the year end, the cash balance has increased due to the
2021/22 Prospectus Top Up Offer share issuance on 25 February 2022.
These funds will be invested predominantly into higher growth
technology companies, and therefore the shift away from asset based
companies will continue. The Company has a significant speciality
in FinTech investing, which can be seen as a growing part of the
portfolio, represented by a 7% increase this year. Healthcare
technology is another area of particular strength, which has
increased by 5% over the last year.
Results and dividends
GBP'000
Net capital gain for the year 16,988
Net revenue return for the year 466
Total return for the year ended 31 December 2021 17,454
Dividend of 2.06 pence per share paid on 28 May 2021 (2,126)
Dividend of 2.31 pence per share paid on 30 September
2021 (2,383)
Unclaimed dividends 7
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Transferred to reserves 12,952
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Net assets as at 31 December 2021 97,639
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Net asset value per share as at 31 December 2021 (pence) 94.98
The Company paid dividends totalling 4.37 pence per share (2020:
4.24 pence per share). The Board has a variable dividend policy
which targets an annual dividend yield of around 5% on the
prevailing net asset value. As a result the Board has declared a
first interim dividend for the year ending 31 December 2022 of 2.37
pence per share payable on 31 May 2022 to shareholders on the
register on 6 May 2022.
As shown in the Income statement, the total investment income
increased to GBP988,000 (2020: GBP692,000). This is a result of
Radnor House repaying a portion of the previously capitalised
interest. The revenue return to equity holders has subsequently
increased to GBP466,000 (2020: GBP17,000). This is substantially
due to the increased percentage of investment management fees and
performance incentive fees allocated to the realised capital
reserve, to better align with the Board's expectation that over the
long term the majority of the Company's investment returns will be
in the form of capital gains. Further information can be found in
the Notes to the Financial Statements.
The capital return for the year has increased to GBP16,988,000
(2020: GBP2,896,000). As discussed in the Chairman's statement,
this is mainly attributable to the uplifts in the valuations of
Quantexa, Oviva, Proveca and Egress. This was partly offset by the
reductions in Mirada Medical and Xperiome. This resulted in a total
return of 17.20 pence per share (2020: 3.17 pence per share), and
an increase in net asset value to 94.98 pence per share (2020:
82.42 pence per share). We remain confident that the portfolio will
deliver value over the longer term.
There was a net cash inflow for the Company of GBP1,387,000 for
the year (2020: GBP1,116,000), mainly resulting from the issue of
Ordinary shares under the Albion VCTs Top Up Offers 2020/21. Cash
inflow from fundraising has been utilised by investments into new
and existing portfolio companies.
Trade and other payables at the year end amounted to
GBP2,459,000 (2020: GBP541,000). This increase was primarily due to
the management performance incentive fee accrued as a result of the
Company's strong return for the year. Further details on this can
be found below.
Review of business and future changes
A detailed review of the Company's business during the year is
contained in the Chairman's statement. The results for the year to
31 December 2021 show total shareholder value of 203.84 pence per
share since launch (2020: 186.91 pence per share).
There is a continuing focus on growing the FinTech, healthcare
and other software and technology sectors. The majority of these
investment returns are delivered through equity and capital gains,
and we therefore expect our investment income to continue to be
similar to the current level, as most of this is derived from the
existing renewable energy sector of our portfolio.
Details of significant events which have occurred since the end
of the financial year are listed in note 19. Details of
transactions with the Manager are shown in note 5.
Future prospects
The Company's financial results for the year demonstrates that
the portfolio remains well balanced across sectors and risk
classes, despite the effects of the pandemic so far. Many of the
companies in the portfolio have continued to grow throughout the
pandemic and have been providing products and services that are
considered essential to their customers. Although there remains
much uncertainty, the Manager has a strong pipeline of investment
opportunities in which the Company's cash can be deployed. The
Board considers that the pipeline will continue to enable the
Company to maintain a predictable stream of dividend payments to
shareholders, and ultimately continue to deliver long term
growth.
Key Performance Indicators ("KPIs") and Alternative Performance
Measures ("APMs")
The Directors believe that the following KPIs and APMs, which
are typical for Venture Capital Trusts, used in its own assessment
of the Company, will provide shareholders with sufficient
information to assess how effectively the Company is applying its
investment policy to meet its objectives. The Directors are
satisfied that the results shown in the following KPIs and APMs
give a good indication that the Company is achieving its investment
objective and policy. These are:
1. Total shareholder value relative to FTSE All-Share Index total return
The graph on page 4 of the full Annual Report and Financial
Statements shows the total shareholder value against the FTSE
All-Share Index total return, in both instances with dividends
reinvested. The FTSE All-Share index is considered a reasonable
benchmark as the Company is classed as a generalist UK VCT
investor, and this index includes over 600 companies listed in the
UK, including small-cap, covering a range of sectors. Details on
the performance of the net asset value and return per share for the
year are shown in the Chairman's statement.
2. Net asset value per share and total shareholder value
Total return to shareholders increased by 20.5% on opening net
asset value to 203.84 pence per share for the year ended 31
December 2021 as a result of the positive total return of 16.93
pence per share.
3. Movement in shareholder value in the year
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
---- ---- ---- ---- ---- ----- ----- ---- ---- -----
4.6% 6.9% 5.4% 4.1% 6.5% 10.0% 20.3% 3.8% 3.8% 20.5%
---- ---- ---- ---- ---- ----- ----- ---- ---- -----
Methodology: Calculated by the movement in total shareholder
value for the year divided by the opening net asset value.
The table above shows that total shareholder value has continued
to increase over the last 10 years, with an average return of 8.7%
per annum.
4. Dividend distributions
Dividends paid in respect of the year ended 31 December 2021
were 4.37 pence per share (2020: 4.24 pence per share). Cumulative
dividends paid since inception are 108.86 pence per share.
5. Ongoing charges
The ongoing charges ratio for the year to 31 December 2021 was
2.5% (2020: 2.5%). The ongoing charges ratio has been calculated
using The Association of Investment Companies' ("AIC") recommended
methodology. This figure shows shareholders the total recurring
annual running expenses (including investment management fees
charged to capital reserve) as a percentage of the average net
assets attributable to shareholders. The ongoing charges cap is
2.5%, which has resulted in a saving of GBP86,000 to shareholders
during the year (2020: GBP97,000).
6. VCT regulation*
The investment policy is designed to ensure that the Company
continues to qualify and is approved as a VCT by HMRC. In order to
maintain its status under Venture Capital Trust legislation, a VCT
must comply on a continuing basis with the provisions of Section
274 of the Income Tax Act 2007, details of which are provided in
the Directors' report on pages 34 and 35 of the full Annual Report
and Financial Statements.
The relevant tests to measure compliance have been carried out
and independently reviewed for the year ended 31 December 2021.
These showed that the Company has complied with all tests and
continues to do so.
*VCT compliance is not a numerical measure of performance and
thus cannot be defined as an APM.
Operational arrangements
The Company has delegated the investment management of the
portfolio to Albion Capital Group LLP, which is authorised and
regulated by the Financial Conduct Authority. Albion Capital Group
LLP also provides company secretarial and other accounting and
administrative support to the Company.
Management agreement
Under the Investment Management agreement, the Manager provides
investment management, secretarial and administrative services to
the Company. The Management agreement may be terminated by either
party on 12 months' notice and is subject to earlier termination in
the event of certain breaches or on the insolvency of either party.
The Manager is paid an annual fee equal to 2.25% of the net asset
value of the Company paid quarterly in arrears.
Total annual ongoing expenses, including the management fee but
excluding any performance incentive fee, are limited to 2.5% of the
net asset value, as per the resolution passed at the General
Meeting in 2019.
The Manager is also entitled to an arrangement fee, payable by
each portfolio company, of approximately 2% on each investment made
and also monitoring fees where the Manager has a representative on
the portfolio company's board. Further details of the Manager's fee
can be found in note 5.
Management performance incentive
In order to align the interests of the Manager and the
shareholders with regards to generating positive returns, the
Company has a Management performance incentive arrangement with the
Manager. Under the incentive arrangement, the Company will pay an
incentive fee to the Manager of an amount equal to 20% of such
excess return that is calculated for each financial year.
The performance fee hurdle requires that the growth of the
aggregate of the net asset value per share and dividends paid by
the Company compared with the previous accounting date exceeds RPI
plus 2%. The hurdle will be calculated every year, based on the
previous year's closing net asset value per share. The starting net
asset value is 84.70 pence per share, being the audited net asset
value at 31 December 2018. If the target return is not achieved in
a period, the cumulative shortfall is carried forward to the next
accounting period and has to be made up before an incentive fee
becomes payable.
As at 31 December 2021, the total return since 1 January 2019
was 108.09 pence, and the hurdle was 99.03 pence, resulting in an
excess of 9.06 pence per share. As a result, a performance
incentive fee is payable to the Manager of GBP1,838,000 (2020:
GBP42,000).
Evaluation of the Manager
The Board has evaluated the performance of the Manager based
on:
-- the returns generated by the Company;
-- the continuing achievement of the 80% qualifying holdings investment
requirement for VCT status;
-- the long term prospects of the current portfolio of investments;
-- the management of treasury, including use of buy back and participation
in fund raising;
-- a review of the Management agreement and the services provided therein;
and
-- benchmarking the performance of the Manager to other service providers
including the performance of other VCTs that the Manager is responsible
for managing.
The Board believes that it is in the interests of shareholders
as a whole, and of the Company, to continue the appointment of the
Manager for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board appointed Albion Capital Group LLP as the Company's
AIFM in 2014 as required by the AIFMD. The Manager is a full-scope
Alternative Investment Fund Manager under the AIFMD. Ocorian
Depositary (UK) Limited is the appointed Depositary and oversees
the custody and cash arrangements and provides other AIFMD duties
with respect to the Company.
Companies Act 2006 Section 172 Reporting
Under Section 172 of the Companies Act 2006, the Board has a
duty to promote the success of the Company for the benefit of its
members as a whole in both the long and short term, having regard
to the interests of other stakeholders in the Company, such as
suppliers, and to do so with an understanding of the impact on the
community and environment and with high standards of business
conduct, which includes acting fairly between members of the
Company.
The Board is very conscious of these wider responsibilities in
the ways it promotes the Company's culture and ensures, as part of
its regular oversight, that the integrity of the Company's affairs
is foremost in the way the activities are managed and promoted.
This includes regular engagement with the wider stakeholders of the
Company and being alert to issues that might damage the Company's
standing in the way that it operates. The Board works very closely
with the Manager in reviewing how stakeholder issues are handled,
ensuring good governance and responsibility in managing the
Company's affairs, as well as visibility and openness in how the
affairs are conducted.
The Company is an externally managed investment company with no
employees, and as such has nothing to report in relation to
employee engagement but does keep close attention to how the Board
operates as a cohesive and competent unit. The Company also has no
customers in the traditional sense and, therefore, there is also
nothing to report in relation to relationships with customers.
The table below sets out the key stakeholders and details how
the Board has engaged with these key stakeholders and the effect of
these considerations on the Company's decisions and strategies
during the year.
Stakeholder Engagement with Stakeholder Outcome and decisions based on engagement
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Shareholders The key methods of engaging with Shareholders are -- Shareholders' views are important and the Board
as follows: encourages Shareholders to exercise their right to
-- Annual General Meeting ("AGM") vote on the resolutions at the AGM. The Company's AGM
is typically used as an opportunity to communicate
-- Shareholder seminar with investors, including through a presentation made
by the investment management team. In light of the
-- Annual report and Financial Statements, Half-yearly Covid-19 pandemic, the Board took the decision to
financial report, and Interim management statements update the Company's Articles of Association to allow
for virtual/hybrid events in order for the 2021 AGM
-- RNS announcements for all key decisions including the to be live streamed for Shareholders. The Board was
publication of a Prospectus able to take questions from Shareholders at the AGM
enabling maximum shareholder engagement in the
-- Website redesigned in the year to make it more user absence of a face-to-face event. Following last
accessible year's success and the overwhelming positive feedback
from shareholders, the Board has decided that this
year's AGM will again be held as a virtual event to
facilitate shareholder participation.
-- Shareholders are also encouraged to attend the annual
Shareholders' Seminar. This year's event took place
on 12 November 2021. The seminar included Quantexa
and Healios sharing insights into their businesses
and also presentations from Albion executives on some
of the key factors affecting the investment outlook,
as well as a review of the past year and the plans
for the year ahead. Representatives of the Board
attend the seminar. The Board considers this an
important interactive event, and expects to continue
to run this in 2022.
-- The Board recognises the importance to Shareholders
of maintaining a share buy-back policy, in order to
provide market liquidity, and considered this when
establishing the current policy. The Board closely
monitors the discount to the net asset value to
ensure this is in the region of 5%.
-- The Board seeks to create value for Shareholders by
generating strong and sustainable returns to provide
shareholders with regular dividends and the prospect
of capital growth. The Board takes this into
consideration when making the decision to pay
dividends to Shareholders. The variable dividend
policy has been enacted, and has resulted in a
dividend yield of 5.3% on opening net asset value.
-- During the year, the decision to publish a Prospectus
was taken, in order to raise more funds for
deployment into new and existing portfolio companies.
The Board carefully considered whether further funds
were required, whether the VCT tests would continue
to be met, and whether it would be in the interest of
Shareholders, before agreeing to publish the
Prospectus. On allotment, an issue price formula
based on the prevailing net asset value was used to
ensure there was no dilution to existing
Shareholders.
-- Cash management and liquidity of the Company are key
quarterly discussions amongst the Board, with focus
on deployment of cash for future investments,
dividends and share buy-backs.
-- The Board decided to propose a special resolution at
the 2021 AGM to increase the Company's distributable
reserves by way of a reduction of share premium
account and capital redemption reserve. This
resolution was approved with 96.5% of Shareholders
voting in favour of the resolution. Further details
on this can be found in the Directors report on page
36 of the full Annual Report and Financial
Statements.
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Suppliers The key suppliers with regular engagement from the
Manager are: -- The Manager is in regular contact with the suppliers
-- Corporate broker and the contractual arrangements with all the
principal suppliers to the Company are reviewed
-- VCT taxation adviser regularly and formally once a year, alongside the
performance of the suppliers in acquitting their
-- Depositary responsibilities.
-- Registrar -- The Board reviews the performance of the providers
annually in line with the Manager, and was satisfied
-- Auditor with their performance.
-- Lawyer
------------ ------------------------------------------------------------- -----------------------------------------------------------
Manager The performance of Albion Capital Group LLP is essential -- The Manager meets with the Board at least quarterly
to the long term success of the Company, including to discuss the performance of the Company, and is in
achieving the investment policy and generating returns regular contact in between these meetings, e.g. to
to shareholders, as well as the impact the Company share investment papers for new and follow-on
has on Environment, Social and Governance practice. investments. All strategic decisions are discussed in
detail and minuted, with an open dialogue between the
Board and the Manager.
-- The performance of the Manager in managing the
portfolio and in providing company secretarial,
administration and accounting services is reviewed in
detail each year, which includes reviewing comparator
engagement terms and portfolio performance. Further
details on the evaluation of the Manager, and the
decision to continue the appointment of the Manager
for the forthcoming year, can be found in this
report.
-- During the year, the Board has reviewed the current
Management Agreement, and a new agreement was signed
which updated the agreement for new regulatory
requirements, such as GDPR and AIFMD, but did not
change any commercial terms with the Manager.
-- Details of the Manager's responsibilities can be
found in the Statement of corporate governance on
pages 39 and 40 of the full Annual Report and
Financial Statements.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Portfolio The portfolio companies are considered key stakeholders, -- The Board aims to have a diversified portfolio in
companies not least because they are principal drivers of value terms of sector and stage of investment. Further
for the Company. However, as discussed in the Environmental, details of this can be found in the pie charts at the
Social and Governance ("ESG") report on pages 18 to end of this announcement.
20 of the full Annual Report and Financial Statements, -- In most cases, an Albion executive has a place on the
the portfolio companies' impact on their stakeholders board of a portfolio company, in order to help with
is also important to the Company. both business operation decisions, as well as good
ESG practices.
-- The Manager ensures good dialogue with portfolio
companies, and often puts on events in order to help
portfolio companies benefit from the Albion network.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Community The Company, with no employees, has no effect itself -- The Board receives reports on ESG factors within its
and on the community and environment. However, as discussed portfolio from the Manager as it is a signatory of
environment above, the portfolio companies' ESG impact is extremely the United Nations Principles for Responsible
important to the Board. Investment ("UN PRI"). Further details of this are
set out in the ESG report below. ESG, without its
specific definition, has always been at the heart of
the responsible investing that the Company engages in
and in how the Company conducts itself with all of
its stakeholders.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Environmental, Social, and Governance ("ESG") report
The Board and the Company's Manager, Albion Capital Group LLP,
take ESG very seriously and more detail can be found on this in the
ESG report on page 18 to 20 of the full Annual Report and Financial
Statements.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the
Act to detail information about social and community issues,
employees and human rights; including any policies it has in
relation to these matters and effectiveness of these policies. As
an externally managed investment company with no employees, the
Company has no formal policies in these matters, however, it is at
the core of its responsible investment strategy as detailed
above.
Further policies
The Company has adopted a number of further policies relating
to:
-- Environment
-- Global greenhouse gas emissions
-- Anti-bribery
-- Anti-facilitation of tax evasion
-- Diversity
These are set out in the Directors' report on page 35 of the
full Annual Report and Financial Statements.
General Data Protection Regulation
The General Data Protection Regulation has the objective of
unifying data privacy requirements across the European Union, and
continues to apply in the United Kingdom after Brexit. The Manager
continues to take action to ensure that the Manager and the Company
are compliant with the regulation.
Risk management
The Board carries out a regular review of the risk environment
in which the Company operates, together with changes to the
environment and individual risks. The Board also identifies
emerging risks which might impact on the Company. In the period the
most noticeable risk has been the global pandemic which has
impacted not only public health and mobility but also has had an
adverse impact on the economy, the full impact of which is likely
to be uncertain for some time.
The Board has carried out a robust assessment of the Company's
principal risks and uncertainties and seeks to mitigate these risks
through regular reviews of performance and monitoring progress and
compliance. The Board applies the principles detailed in the
Financial Reporting Council's Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting, in the
mitigation and management of these risks. More information on
specific mitigation measures for the principal risks and
uncertainties are explained below:
Risk Possible consequence Risk assessment during the year Risk management
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Investment, performance and valuation risk Investment in smaller unquoted growth businesses carries No change. The Board places reliance upon the skills and expertise
a higher degree of risk and is more volatile than of the Manager and its track record of making successful
investing in larger, long-established businesses. investments in higher growth technology businesses.
This could negatively impact shareholder returns. The Manager operates a structured investment appraisal
The Company relies on the judgement and reputation and due diligence process. This includes a review
of the Manager to provide strong investment returns from one external investment professional and comments
and valuations for shareholders. from non-executive Directors of the Company on matters
The Company's investment valuation methodology is discussed at the Investment Committee meetings.
based on fair value, which for smaller unquoted growth Investments are monitored by the Manager, through
businesses can be difficult to determine due to the monthly portfolio updates and typically an investment
lack of observable market data and the limitation manager sitting on portfolio company boards. The Board
of external reference points. receives detailed reports on each investment and their
valuation as part of their quarterly board meetings.
Review and oversight of the non-executive Directors
ensures that the risk to the Company's and Manager's
reputation is kept to a minimum.
Investments are valued in accordance with the International
Private Equity and Venture Capital Valuation Guidelines,
which represent current best practice for investment
valuation and are reviewed by the Manager's Valuation
Committee.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
VCT approval and regulatory change risk Any breach of section 274 of the Income Tax Act 2007, No change. The Company's VCT qualifying status is monitored monthly
including any legislative changes, could result in by the Manager and quarterly by the Board. The Board
the loss of the Company's HMRC qualifying status and has appointed Philip Hare & Associates LLP as its
tax reliefs for investors. taxation adviser, who independently confirms compliance,
highlights areas of risk and informs on any legislative
changes, including those which may arise from the
withdrawal from the European Union.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Regulatory and compliance risk The Company is listed on The London Stock Exchange No change. The Board and the Manager receive regular updates
and is required to comply with the rules of the UK on new regulation, including legislation on the management
Listing Authority, as well as with the Companies Act, of the Company, from its auditor, lawyers and other
Accounting Standards and other legislation. Failure professional bodies. The Company is subject to compliance
to comply with these regulations could result in a checks through the Manager's compliance officer, and
delisting of the Company's shares, or other penalties any issues arising from compliance or regulation are
under the Companies Act or from financial reporting reported to its own board on a monthly basis. The
oversight bodies. Board
ensures the Company is compliant as part of its quarterly
Board meetings.
The Board reviews the quarterly reports prepared by
Ocorian Depositary (UK) Limited (the Company's Depositary)
to ensure the Manager is adhering to the AIFMD requirements.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Operational and internal control risk (including cyber The Company relies on a number of third parties, in No change. The Company's operations and IT systems are subject
and data security) particular the Manager, for the provision of investment to rigorous internal controls which are reviewed on
management and administrative functions. Failures a regular basis and reported to the Board.
in key IT systems and controls within the Manager's The Audit Committee reviews the Internal Audit Reports
business could place assets of the Company at risk, prepared by the Manager's internal auditors, Azets
resulting in inaccurate information being passed to and has access to their internal audit partner to
the Board or shareholders. This could additionally whom it can ask specific detailed questions in order
result in losses for the Company and its shareholders. to satisfy itself that the Manager has strong systems
and controls in place including those in relation
to risk management, business continuity and cyber
security.
The Board reviews the systems and processes (including
cyber and data security) in place for the Company's
key suppliers to ensure that there is an appropriate
risk mitigation in place.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Economic and political risk Events such as the Covid-19 pandemic, the impact of Increased (due to ongoing Covid-19 uncertainty and The Company invests in a diversified portfolio of
Brexit, an economic recession, fluctuation in inflation the geopolitical risks from the invasion of Ukraine). c.60 companies, predominantly in the United Kingdom,
and interest rates, or significant political events and has a policy of minimising any external bank borrowings
could adversely affect the companies within the portfolio within portfolio companies.
and consequently the Company's net asset value. Exogenous risks over which the Company has no control
are always a risk and the Company does what it can
to address these risks. The inherent long-term nature
of the portfolio helps to mitigate these exogeneous
risks.
The Board and Manager are continuously assessing the
resilience of the portfolio as a result of the ongoing
economic and political risks, to ascertain where support
is required. The Company has sufficient cash resources
to cope with any such exigent and unexpected pressures.
Exposure is relatively small to at-risk sectors that
include leisure, hospitality, retail and travel (1%
of NAV).
The Company's investment policy and the Board's scrutiny
of the investment portfolio ensures that this increased
risk continues to be mitigated where possible.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Liquidity risk The Company may not have sufficient cash available No change. The Board reviews the Company's three year cash flow
to meet its financial obligations. forecasts on a quarterly basis. These include potential
The Company's portfolio is primarily in smaller unquoted investment realisations (which are closely monitored
companies, which are inherently illiquid as there by the Manager), Top Up Offers, dividend payments
is no readily available market, and thus it may be and operational expenditure. This ensures that there
difficult to realise their fair value at short notice. are sufficient cash resources available for the Company's
liabilities as they fall due.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Environmental, social and governance ("ESG") risk An insufficient ESG policy could lead to an increased Increased (due to the new guidance issued on climate The Manager is a signatory of the UN PRI and the Board
negative impact on the environment, including the change reporting and increased importance to stakeholders). is kept appraised of the evolving ESG policies at
Company's carbon footprint. quarterly Board meetings.
Non-compliance with reporting requirements could lead Full details of the specific procedures and risk mitigation
to a fall in demand from investors, reputational damage can be found in the ESG report on pages 18 to 20 of
and penalties. the full Annual Report and Financial Statements.
These procedures ensure that this increased risk continues
to be mitigated where possible.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Viability statement
In accordance with the FRC UK Corporate Governance Code
published in 2018 and provision 36 of the AIC Code of Corporate
Governance, the Directors have assessed the prospects of the
Company over three years to 31 December 2024. The Directors believe
that three years is a reasonable period in which they can assess
the ability of the Company to continue to operate and meet its
liabilities as they fall due. This is the period used by the Board
as part of its strategic planning process, which includes: the
estimated timelines for finding, assessing and completing
investments; the potential impact of any new regulations; and the
availability of cash.
The Board has carried out a robust assessment of the principal
and emerging risks facing the Company, including those that could
threaten its business model, future performance, solvency or
liquidity, and focused on the major factors which affect the
economic, regulatory and political environment. The Board carefully
assessed, and were satisfied with, the risk management processes in
place to avoid or reduce the impact of these risks. The Board has
carried out robust stress testing of cashflows which included;
assessing the resilience of portfolio companies, including the
requirement for any future financial support.
The Board has additionally considered the ability of the Company
to comply with the ongoing conditions to ensure it maintains its
VCT qualifying status under its current investment policy. As a
result of the Board's quarterly valuation reviews, it has concluded
that the portfolio is well balanced and geared towards delivering
long term growth and strong returns to shareholders.
The Board has concluded that there is a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the three year period to 31
December 2024. The Board is mindful of the ongoing risks and will
continue to ensure that appropriate safeguards are in place, in
addition to monitoring the quarterly cashflow forecasts to ensure
the Company has sufficient liquidity.
This Strategic report of the Company for the year ended 31
December 2021 has been prepared in accordance with the requirements
of section 414A of the Companies Act 2006 (the "Act"). The purpose
of this report is to provide Shareholders with sufficient
information to enable them to assess the extent to which the
Directors have performed their duty to promote the success of the
Company in accordance with Section 172 of the Act.
For and on behalf of the Board
Ben Larkin
Chairman
24 March 2022
Responsibility statement
In preparing these Financial Statements for the year ended 31
December 2021, the Directors of the Company, being Ben Larkin, Lyn
Goleby, Lord O'Shaughnessy and Patrick Reeve, confirm that to the
best of their knowledge:
-- summary financial information contained in this announcement and the full
Annual Report and Financial Statements for the year ended 31 December
2021 for the Company has been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law) and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
-- the Chairman's statement and Strategic 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 it faces.
We consider that the Annual Report and Financial Statements,
taken as a whole, are fair, balanced, and understandable and
provide the information necessary for shareholders to assess the
Company's position, performance, business model and strategy.
A detailed "Statement of Directors' responsibilities" is
contained on page 38 within the full audited Annual Report and
Financial Statements.
On behalf of the Board,
Ben Larkin
Chairman
24 March 2022
Income statement
Year ended 31 December Year ended 31 December
2021 2020
-------------------------- --------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ---- ------- ------- -------- ------- ------- --------
Gains on investments 3 - 20,592 20,592 - 4,073 4,073
Investment income 4 988 - 988 692 - 692
Investment Manager's fees* 5 (196) (3,604) (3,800) (393) (1,177) (1,570)
Other expenses 6 (326) - (326) (282) - (282)
------- ------- -------- ------- ------- --------
Profit on ordinary activities before tax 466 16,988 17,454 17 2,896 2,913
Tax on ordinary activities 8 - - - - - -
------- ------- -------- ------- ------- --------
Profit and total comprehensive income attributable
to shareholders 466 16,988 17,454 17 2,896 2,913
------- ------- -------- ------- ------- --------
Basic and diluted return per share (pence)** 10 0.46 16.74 17.20 0.02 3.15 3.17
--------------------------------------------------- ---- ------- ------- -------- ------- ------- --------
*For more information on the allocation of the split between
revenue and capital please see the accounting policies below.
** adjusted for treasury shares
The accompanying notes form an integral part of these Financial
Statements.
The total column of this Income statement represents the profit
and loss account of the Company. The supplementary revenue and
capital columns have been prepared in accordance with The
Association of Investment Companies' Statement of Recommended
Practice.
Balance sheet
31 December 2021 31 December 2020
Note GBP'000 GBP'000
------------------------------------ ---- ---------------- ----------------
Fixed asset investments 11 80,500 58,998
Current assets
Trade and other receivables 13 2,566 1,757
Cash and cash equivalents 17,032 15,645
---------------- ----------------
19,598 17,402
Total assets 100,098 76,400
Payables: amounts falling due within
one year
Trade and other payables 14 (2,459) (541)
---------------- ----------------
Total assets less current
liabilities 97,639 75,859
---------------- ----------------
Equity attributable to equity
holders
Called-up share capital 15 1,167 1,040
Share premium - 44,978
Capital redemption reserve - 12
Unrealised capital reserve 36,048 18,020
Realised capital reserve 7,344 12,886
Other distributable reserve 53,080 (1,077)
---------------- ----------------
Total equity shareholders' funds 97,639 75,859
---------------- ----------------
Basic and diluted net asset value
per share (pence)* 16 94.98 82.42
------------------------------------ ---- ---------------- ----------------
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
These Financial Statements were approved by the Board of
Directors, and authorised for issue on 24 March 2022 and were
signed on its behalf by
Ben Larkin
Chairman
Company number: 03654040
Statement of changes in equity
Capital Unrealised Realised Other
Called-up share Share redemption capital capital distributable
capital premium reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- -------
As at 1 January 2021 1,040 44,978 12 18,020 12,886 (1,077) 75,859
Profit and total comprehensive income for the year - - - 19,786 (2,798) 466 17,454
Transfer of unrealised gains on disposal of
investments - - - (1,758) 1,758 - -
Purchase of shares for treasury - - - - - (1,661) (1,661)
Issue of equity 127 10,626 - - - - 10,753
Cost of issue of equity - (264) - - - - (264)
Reduction of share premium and capital redemption
reserve - (55,340) (12) - - 55,352 -
Dividends paid - - - - (4,502) - (4,502)
-------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- -------
As at 31 December 2021 1,167 - - 36,048 7,344 53,080 97,639
-------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- -------
As at 1 January 2020 938 36,712 12 14,702 15,151 2,168 69,683
Profit and total comprehensive income for the year - - - 4,595 (1,699) 17 2,913
Transfer of unrealised gains on disposal of
investments - - - (1,277) 1,277 - -
Purchase of shares for treasury - - - - - (1,189) (1,189)
Issue of equity 102 8,478 - - - - 8,580
Cost of issue of equity - (212) - - - - (212)
Dividends paid - - - - (1,843) (2,073) (3,916)
-------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- -------
As at 31 December 2020 1,040 44,978 12 18,020 12,886 (1,077) 75,859
-------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- -------
* Included within these reserves is an amount of GBP28,992,000
(2020: GBP11,809,000) which is considered distributable. Over the
next four years an additional GBP29,635,000 will become
distributable. This is due to the HMRC requirement that the Company
cannot use capital raised in the past three years to make a payment
or distribution to shareholders. On 1 January 2022, GBP2,701,000
became distributable in line with this.
Statement of cash flows
Year ended Year ended
31 December 2021 31 December 2020
GBP'000 GBP'000
---------------------------------------- ----------------- -----------------
Cash flow from operating activities
Loan stock income received 736 583
Deposit interest received 1 35
Dividend income received 24 191
Investment Manager's fees paid (1,877) (1,475)
Other cash payments (326) (283)
Corporation tax paid - -
Net cash flow from operating activities (1,442) (949)
Cash flow from investing activities
Purchase of current asset investments - (1,190)
Purchase of fixed asset investments (7,500) (5,156)
Disposal of current asset investments - 3,945
Disposal of fixed asset investments 6,003 1,201
Net cash flow from investing activities (1,497) (1,200)
----------------- -----------------
Cash flow from financing activities
Issue of share capital 9,767 7,737
Cost of issue of shares (35) (33)
Equity dividends paid* (3,744) (3,251)
Purchase of own shares (including costs) (1,662) (1,188)
----------------- -----------------
Net cash flow from financing activities 4,326 3,265
----------------- -----------------
Increase in cash and cash equivalents 1,387 1,116
Cash and cash equivalents at start of
period 15,645 14,529
----------------- -----------------
Cash and cash equivalents at end of
period 17,032 15,645
---------------------------------------- ----------------- -----------------
*The dividends paid shown in the cash flow are different to the
dividends disclosed in note 9 as a result of the non-cash effect of
the Dividend Reinvestment Scheme.
Notes to the Financial Statements
1. Basis of preparation
The Financial Statements have been prepared in accordance with
applicable United Kingdom law and accounting standards, including
Financial Reporting Standard 102 ("FRS 102"), and with the
Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" ("SORP")
issued by The Association of Investment Companies ("AIC"). The
Financial Statements have been prepared on a going concern basis
and further details can be found in the Directors' report on pages
33 and 34 of the full Annual Report and Financial Statements.
The preparation of the Financial Statements requires management
to make judgements and estimates that affect the application of
policies and reported amounts of assets, liabilities, income and
expenses. The most critical estimates and judgements relate to the
determination of carrying value of investments at Fair Value
Through Profit and Loss ("FVTPL") in accordance with FRS 102
sections 11 and 12. The Company values investments by following the
International Private Equity and Venture Capital Valuation ("IPEV")
Guidelines as updated in 2018 and further detail on the valuation
techniques used are outlined in note 2 below.
Company information can be found on page 2 of the full Annual
Report and Financial Statements.
2. Accounting policies
Fixed asset investments
The Company's business is investing in financial assets with a
view to profiting from their total return in the form of income and
capital growth. This portfolio of financial assets is managed and
its performance evaluated on a fair value basis, in accordance with
a documented investment policy, and information about the portfolio
is provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those
undertakings in which the Company holds more than 20% of the equity
as part of an investment portfolio are not accounted for using the
equity method. In these circumstances the investment is measured at
FVTPL.
Upon initial recognition (using trade date accounting)
investments, including loan stock, are designated by the Company as
FVTPL and are included at their initial fair value, which is cost
(excluding expenses incidental to the acquisition which are written
off to the Income statement).
Subsequently, the investments are valued at 'fair value', which
is measured as follows:
-- Investments listed on recognised exchanges are valued at their bid prices
at the end of the accounting period, including a discount for any
restricted sales of shares, or otherwise at fair value based on published
price quotations.
-- Unquoted investments, where there is not an active market, are valued
using an appropriate valuation technique in accordance with the IPEV
Guidelines. Indicators of fair value are derived using established
methodologies including earnings multiples, revenue multiples, the level
of third party offers received, cost or price of recent investment rounds,
net assets and industry valuation benchmarks. Where price of recent
investment is used as a starting point for estimating fair value at
subsequent measurement dates, this has been benchmarked using an
appropriate valuation technique permitted by the IPEV guidelines.
-- In situations where cost or price of recent investment is used,
consideration is given to the circumstances of the portfolio company
since that date in determining fair value. This includes consideration of
whether there is any evidence of deterioration or strong definable
evidence of an increase in value. In the absence of these indicators, the
investment in question is valued at the amount reported at the previous
reporting date. Examples of events or changes that could indicate a
diminution include:
-- the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was
based;
-- a significant adverse change either in the portfolio company's
business or in the technological, market, economic, legal or
regulatory environment in which the business operates; or
-- market conditions have deteriorated, which may be indicated by a
fall in the share prices of quoted businesses operating in the
same or related sectors.
Investments are recognised as financial assets on legal
completion of the investment contract and are de-recognised on
legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value
movement of an investment, but is recognised separately as
investment income through the other distributable reserve when a
share becomes ex-dividend.
Current assets and payables
Receivables (including debtors due after more than one year),
payables and cash are carried at amortised cost, in accordance with
FRS 102. Debtors due after more than one year meet the definition
of a financing transaction held at amortised cost, and interest
will be recognised through capital over the credit period using the
effective interest method. There are no financial liabilities other
than payables.
Investment income
Equity income
Dividend income is included in revenue when the investment is
quoted ex-dividend.
Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are
recognised when the Company's right to receive payment and expect
settlement is established. Where interest is rolled up and/or
payable at redemption then it is recognised as income unless there
is reasonable doubt as to its receipt.
Bank interest income
Interest income is recognised on an accruals basis using the
rate of interest agreed with the bank.
Investment management fee, performance incentive fee and
expenses
All expenses have been accounted for on an accruals basis.
Expenses are charged through the other distributable reserve except
the following which are charged through the realised capital
reserve:
-- 90% of management fees and 100% of performance incentive fees if any, are
allocated to the realised capital reserve. This has changed from 75% for
both management fees and performance incentive fees in the year ended 31
December 2020, to better align with the Board's expectation that over the
long term the majority of the Company's investment returns will be in the
form of capital gains.
-- expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Taxation
Taxation is applied on a current basis in accordance with FRS
102. Current tax is tax payable/(refundable) in respect of the
taxable profit/(tax loss) for the current period or past reporting
periods using the tax rates and laws that have been enacted or
substantively enacted at the financial reporting date. Taxation
associated with capital expenses is applied in accordance with the
SORP.
Deferred tax is provided in full on all timing differences at
the reporting date. Timing differences are differences between
taxable profits and total comprehensive income as stated in the
Financial Statements that arise from the inclusion of income and
expenses in tax assessments in periods different from those in
which they are recognised in the Financial Statements. As a VCT the
Company has an exemption from tax on capital gains. The Company
intends to continue meeting the conditions required to obtain
approval as a VCT in the foreseeable future. The Company therefore,
should have no material deferred tax timing differences arising in
respect of the revaluation or disposal of investments and the
Company has not provided for any deferred tax.
Share capital and reserves
Called-up share capital
This reserve accounts for the nominal value of the Company's
shares.
Share premium
This reserve accounts for the difference between the price paid
for the Company's shares and the nominal value of those shares,
less issue costs and transfers to the other distributable
reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share
capital is diminished through the repurchase and cancellation of
the Company's own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at
the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments, or
permanent diminutions in value (including gains recognised on the
realisation of investment where consideration is deferred that are not
distributable as a matter of law);
-- finance income in respect of the unwinding of the discount on deferred
consideration that is not distributable as a matter of law;
-- expenses, together with the related taxation effect, charged in
accordance with the above policies; and
-- dividends paid to equity holders where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and the revenue
reserve were combined in 2012 to form a single reserve named other
distributable reserve.
This reserve accounts for movements from the revenue column of
the Income statement, the payment of dividends, the buy-back of
shares and other non-capital realised movements.
Dividends
Dividends by the Company are accounted for when the liability to
make the payment (record date) has been established.
Going concern
The Board has assessed the Company's operation as a going
concern. The Company has sufficient cash and liquid resources, its
portfolio of investments is well diversified in terms of sector,
and the major cash outflows of the Company (namely investments,
buy-backs and dividends) are within the Company's control. Cash
flow forecasts are discussed quarterly at Board level with regards
to going concern. The cash flow forecasts have been updated and
stress tested. Accordingly, after making diligent enquiries, the
Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence over a
period of at least twelve months from the date of approval of the
Financial Statements. For this reason, the Directors have adopted
the going concern basis in preparing the accounts. The Directors do
not consider there to be any material uncertainty over going
concern.
Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single operating segment of business, being investment in smaller
companies principally based in the UK.
3. Gains on investments
Year ended Year ended
31 December 2021 31 December 2020
GBP'000 GBP'000
Unrealised gains on fixed asset
investments 19,786 4,595
Realised gains on fixed asset
investments 549 601
Unwinding of discount on deferred
consideration 257 -
Realised losses on current asset
investments - (1,123)
20,592 4,073
----------------- -----------------
4. Investment income
Year ended Year ended
31 December 2021 31 December 2020
GBP'000 GBP'000
---------------------- ----------------- -----------------
Loan stock interest 964 584
Dividend income 23 74
Bank deposit interest 1 34
988 692
----------------- -----------------
5. Investment Manager's fees
Year ended Year ended
31 December 2021 31 December 2020
GBP'000 GBP'000
Investment management fee charged to
revenue 196 382
Investment management fee charged to
capital 1,766 1,146
Performance incentive fee charged to
revenue - 11
Performance incentive fee charged to
capital 1,838 31
----------------- -----------------
3,800 1,570
----------------- -----------------
Further details of the Management agreement under which the
investment management fee and performance incentive fee are paid is
given in the Strategic report.
During the year, services of a total value of GBP1,962,000
(2020: GBP1,528,000) were purchased by the Company from Albion
Capital Group LLP ("Albion") in respect of management fees. There
is a performance incentive fee of GBP1,838,000 payable this year
(2020: GBP42,000). At the financial year end, the amount due to
Albion in respect of these services disclosed as accruals was
GBP2,366,000 (2020: GBP443,000). The total annual running costs of
the Company are capped at an amount equal to 2.5% of the Company's
net assets, with any excess being met by Albion by way of a
reduction in management fees. During the year, the management fee
was reduced by GBP86,000 as a result of this cap (2020:
GBP97,000).
During the year, the Company was not charged by Albion in
respect of Patrick Reeve's services as a Director (2020:
GBPnil).
Albion, its partners and staff hold 800,470 Ordinary shares in
the Company as at 31 December 2021.
Albion is, from time-to-time, eligible to receive arrangement
fees and monitoring fees from portfolio companies. During the year
ended 31 December 2021, fees of GBP187,000 attributable to the
investments of the Company were received by Albion pursuant to
these arrangements (2020: GBP168,000).
The Company has entered into an offer agreement relating to the
Offers with the Company's investment manager Albion, pursuant to
which Albion will receive a fee of 2.5% of the gross proceeds of
the Offers and out of which Albion will pay the costs of the
Offers, as detailed in the Prospectus.
6. Other expenses
Year ended Year ended
31 December 2021 31 December 2020
GBP'000 GBP'000
Directors' fees (including NIC) 75 75
Auditor's remuneration for statutory audit services
(excluding VAT) 38 34
Other administrative expenses 213 173
326 282
----------------- -----------------
7. Directors' fees
The amounts paid to and on behalf of the Directors during the
year are as follows:
Year ended Year ended
31 December 2021 31 December 2020
GBP'000 GBP'000
Directors' fees 69 69
National insurance 6 6
----------------- -----------------
75 75
----------------- -----------------
The Company's key management personnel are the non-executive
Directors. Further information regarding Directors' remuneration
can be found in the Directors' remuneration report on pages 45 and
46 of the full Annual Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
31 December 2021 31 December 2020
GBP'000 GBP'000
UK corporation tax charge in respect of - -
current year
- -
----------------- -----------------
Year ended Year ended
31 December 2021 31 December 2020
Factors affecting the tax charge: GBP'000 GBP'000
--------------------------------------------------- ----------------- -----------------
Profit on ordinary activities before taxation 17,454 2,913
----------------- -----------------
Tax charge on profit at the average companies rate
of 19% (2020: 19%) 3,316 553
Factors affecting the charge:
Non-taxable gains (3,912) (774)
Income not taxable (4) (14)
Excess management expenses carried forward 600 235
- -
----------------- -----------------
The tax charge for the year shown in the Income statement is
lower than the average companies rate of corporation tax in the UK
of 19% (2020: 19%). The differences are explained above.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital gains.
(ii) Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP.
(iii) The Company has excess management expenses of GBP7,026,000 (2020: GBP3,882,000) that are available for offset against future profits. A deferred tax asset of GBP1,757,000 (2020: GBP738,000) has not been recognised in respect of these losses as they will be recoverable only to the extent that the Company has sufficient future taxable profits.
9. Dividends
Year ended Year ended
31 December 2021 31 December 2020
GBP'000 GBP'000
-------------------------------------------------------- ----------------- -----------------
First interim dividend of 2.06p per share paid on
28 May 2021 (29 May 2020: 2.25p per share) 2,126 2,077
Second interim dividend of 2.31p per share paid on
30 September 2021 (30 September 2020: 1.99p per share) 2,383 1,843
Unclaimed dividends (7) (4)
----------------- -----------------
4,502 3,916
----------------- -----------------
Details of the consideration issued under the Dividend
Reinvestment Scheme included in the dividends above can be found in
note 15.
In addition to the dividends summarised above, the Board has
declared a first interim dividend of 2.37 pence per share for the
year ending 31 December 2022, payable on 31 May 2022 to
shareholders on the register on 6 May 2022. The total dividend will
be approximately GBP2,742,000.
10. Basic and diluted return per share
Year ended 31 December Year ended 31 December
2021 2020
Revenue Capital Total Revenue Capital Total
-------------------------------------------------------- ------- ------- -------- ------- ------- -------
Profit attributable to equity shares (GBP'000) 466 16,988 17,454 17 2,896 2,913
Weighted average shares in issue (adjusted for treasury
shares) 101,474,066 91,755,964
Return attributable per equity share (pence) 0.46 16.74 17.20 0.02 3.15 3.17
The weighted average number of Ordinary shares is calculated
after adjusting for treasury shares of 13,946,475 (2020:
11,938,106).
There are no convertible instruments, derivatives or contingent
share agreements in issue so basic and diluted return per share are
the same.
11. Fixed asset investments
31 December 2021 31 December 2020
GBP'000 GBP'000
------------------------------------------ ---------------- ----------------
Investments held at fair value through
profit or loss
Unquoted equity and preference shares 66,082 44,350
Unquoted loan stock 13,227 14,648
Quoted equity 1,191 -
80,500 58,998
---------------- ----------------
31 December 2021 31 December 2020
GBP'000 GBP'000
---------------------------------------------------- ---------------- ----------------
Opening valuation 58,998 51,406
Purchases at cost 6,983 5,577
Disposal proceeds (6,043) (3,181)
Realised gains 549 601
Movement in loan stock accrued income 227 -
Unrealised gains 19,786 4,595
---------------- ----------------
Closing valuation 80,500 58,998
---------------- ----------------
Movement in loan stock accrued income
Opening accumulated loan stock accrued income 113 113
Movement in loan stock accrued income 227 -
---------------- ----------------
Closing accumulated loan stock accrued income 340 113
---------------- ----------------
Movement in unrealised gains
Opening accumulated unrealised gains 17,843 14,447
Transfer of previously unrealised gains to realised
reserve on disposal of investments (1,758) (1,199)
Movement in unrealised gains 19,786 4,595
---------------- ----------------
Closing accumulated unrealised gains 35,871 17,843
---------------- ----------------
Historic cost basis
Opening book cost 41,042 36,846
Purchases at cost 6,983 5,577
Sales at cost (3,737) (1,381)
Closing book cost 44,288 41,042
---------------- ----------------
Purchases and disposals detailed above do not agree to the
Statement of cash flows due to restructuring of investments,
conversion of convertible loan stock and settlement of receivables
and payables.
Fixed asset investments are valued at fair value in accordance
with the IPEV guidelines as follows:
31 December 2021 31 December 2020
Valuation methodology GBP'000 GBP'000
-------------------------------------------------- ---------------- ----------------
Cost and price of recent investment (reviewed for
impairment or uplift) 34,857 21,624
Revenue multiple 25,488 20,499
Third party valuation -- discounted cash flow 8,498 9,063
Discounted offer price 6,316 2,202
Third party valuation - earnings multiple 3,287 2,625
Bid price 1,191 -
Net assets 809 2,395
Earnings multiple 54 590
80,500 58,998
---------------- ----------------
When using the cost or price of recent investment in the
valuations, the Company looks to re-calibrate this price at each
valuation point by reviewing progress within the investment,
comparing against the initial investment thesis, assessing if there
are any significant events or milestones that would indicate the
value of the investment has changed and considering whether a
market-based methodology (i.e. Using multiples from comparable
public companies) or a discounted cashflow forecast would be more
appropriate.
The main inputs into the calibration exercise, and for the
valuation models using multiples, are revenue, EBITDA and P/E
multiples (based on the most recent revenue, EBITDA or earnings
achieved and equivalent corresponding revenue, EBITDA or earnings
multiples of comparable companies), quality of earnings assessments
and comparability difference adjustments. Revenue multiples are
often used, rather than EBITDA or earnings, due to the nature of
the Company's investments, being in growth and technology companies
which are not normally expected to achieve profitability or scale
for a number of years. Where an investment has achieved scale and
profitability the Company would normally then expect to switch to
using an EBITDA or earnings multiple methodology.
In the calibration exercise and in determining the valuation for
the Company's equity instruments, comparable trading multiples are
used. In accordance with the Company's policy, appropriate
comparable companies based on industry, size, developmental stage,
revenue generation and strategy are determined and a trading
multiple for each comparable company identified is then calculated.
The multiple is calculated by dividing the enterprise value of the
comparable group by its revenue, EBITDA or earnings. The trading
multiple is then adjusted for considerations such as illiquidity,
marketability and other differences, advantages and disadvantages
between the portfolio company and the comparable public companies
based on company specific facts and circumstances.
Fair value investments had the following movements between
valuation methodologies between 31 December 2020 and 31 December
2021:
Change in valuation Value as at Explanatory note
methodology (2020 to 31 December 2021
2021) GBP'000
----------------------- ----------------- ----------------------------------
Cost to discounted 4,204 Third party offers received
offer price
Price of recent 3,199 Revenue multiple more
investment to revenue relevant based on current trading
multiple
Revenue multiple to 2,196 External investment round led to
price of recent revaluation of investment
investment
Revenue multiple to 2,112 Third party offer received
discounted offer price
Net assets to bid price 1,191 Company listed on AIM in period
Revenue multiple to net 9 Covid-19 impact on portfolio
assets company has lead to revaluation
The valuation will be the most appropriate valuation methodology
for an investment within its market, with regard to the financial
health of the investment and the IPEV Guidelines. The Directors
believe that, within these parameters, these are the most relevant
methods of valuation which would be reasonable as at 31 December
2021.
FRS 102 and the SORP requires the Company to disclose the inputs
to the valuation methods applied to its investments measured at
fair value through profit or loss in a fair value hierarchy. The
table below sets out fair value hierarchy definitions using FRS102
s.11.27.
Fair value hierarchy Definition
-------------------- ----------------------------------------------------
Level 1 Unadjusted quoted prices in an active market
-------------------- ----------------------------------------------------
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
-------------------- ----------------------------------------------------
Level 3 Inputs to valuations not based on observable market
data
-------------------- ----------------------------------------------------
Quoted investments are valued according to Level 1 valuation
methods. Unquoted equity, preference shares and loan stock are all
valued according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3)
had the following movements:
31 December 2021 31 December 2020
GBP'000 GBP'000
Opening balance 58,998 51,384
Additions 6,983 5,577
Movement from Level 1 to Level 3* - 22
Movement from Level 3 to Level 1** (1,191) -
Disposals (6,043) (3,181)
Accrued loan stock interest 227 -
Realised gains 549 601
Unrealised gains 19,786 4,595
---------------- ----------------
Closing balance 79,309 58,998
---------------- ----------------
*This relates to the investment in Mi-Pay Group PLC changing
from Level 1 to Level 3 in the fair value hierarchy, as this was in
liquidation, and no longer listed.
** This relates to Arecor Therapeutics PLC, which listed on the
AIM stock exchange during the period.
The Directors are required to consider the impact of changing
one or more of the inputs used as part of the valuation process to
reasonable possible alternative assumptions. 66% of the portfolio
of investments, consisting of equity and loan stock, is based on
recent investment price, discounted offer price, net assets and
cost. For the remainder of the portfolio, the Board has considered
the reasonable possible alternative input assumptions on the
valuation of the portfolio and believes that changes to inputs (by
adjusting the earnings and revenue multiples) could lead to a
change in the fair value of the portfolio. The Board has reviewed
the Manager's adjusted inputs for a number of the largest portfolio
companies (by value) which covers 20% of the portfolio. This has
resulted in a total coverage of 86% of the portfolio of
investments. The main inputs considered for each type of valuation
is as follows:
Change in
fair value
Change of Change in NAV
Base in investments (pence per
Valuation technique Portfolio company sector Input Case* input (GBP'000) share)
---------------------------------------------- ------------------------------------------ ----------------- ----- ------ ----------- -----------------
Revenue multiple Software & other technology Revenue multiple 6.0x +0.5 769 0.75
---------------------------------------------- ------------------------------------------ ----------------- ----- ------ ----------- -----------------
-0.5 (769) (0.75)
----------------------------------------------------------------------------------------------------------- ----- ------ ----------- -----------------
Revenue multiple Healthcare (including digital healthcare) Revenue multiple 5.2x +0.5 665 0.65
---------------------------------------------- ------------------------------------------ ----------------- ----- ------ ----------- -----------------
-0.5 (665) (0.65)
----------------------------------------------------------------------------------------------------------- ----- ------ ----------- -----------------
Renewable energy Discount rate 5.5% -0.5% 77 0.07
------------------------------------------ ---------------------------------------------------------------- ----- ------ ----------- -----------------
Third party valuation -- discounted cash flow +0.5% (70) (0.07)
------------------------------------------------------------------------------------------------------------- ----- ------ ----------- -----------------
*As detailed in the accounting policies, the base case is based
on market comparables, discounted where appropriate for
marketability, in accordance with the IPEV guidelines.
The impact of these changes could result in an overall increase
in the valuation of the equity investments by GBP1,511,000 (2.3%)
or a decrease in the valuation of equity investments by
GBP1,503,000 (2.3%).
12. Significant interests
The principal activity of the Company is to select and hold a
portfolio of investments in unquoted securities. Although the
Company, through the Manager, will, in some cases, be represented
on the board of the portfolio company, it will not ordinarily take
a controlling interest or become involved in the management. The
size and structure of companies with unquoted securities may result
in certain holdings in the portfolio representing a participating
interest without there being any partnership, joint venture or
management consortium agreement.
The Company has no interests of greater than 20% of the nominal
value of any class of the allotted shares in the portfolio
companies as at 31 December 2021.
13. Current assets
31 December 2021 31 December 2020
Trade and other receivables GBP'000 GBP'000
-------------------------------------- ---------------- ----------------
Prepayments and accrued income 24 23
Other receivables 520 3
Deferred consideration under one year 226 192
Deferred consideration over one year 1,796 1,539
---------------- ----------------
2,566 1,757
---------------- ----------------
The deferred consideration over one year relates to the sale of
G.Network Communications Limited in December 2020. These proceeds
are receivable in January 2024, and have been discounted to present
value at the prevailing market rate, including a provision for
counterparty risk. This constitutes a financing transaction, and
has been accounted for using the policy disclosed in note 2.
The Directors consider that the carrying amount of receivables
is not materially different to their fair value.
14. Payables: amounts falling due within one year
31 December 2021 31 December 2020
GBP'000 GBP'000
----------------------------- ---------------- ----------------
Accruals and deferred income 2,453 519
Trade payables 6 22
2,459 541
---------------- ----------------
The Directors consider that the carrying amount of payables is
not materially different to their fair value.
15. Called-up share capital
Allotted, called-up and fully paid shares: GBP'000
---------------------------------------------------- -------
103,974,504 Ordinary shares of 1 penny each at 31
December 2020 1,040
12,772,890 Ordinary shares of 1 penny each issued
during the year 127
116,747,394 Ordinary shares of 1 penny each at 31
December 2021 1,167
11,938,106 Ordinary shares of 1 penny each held in
treasury at 31 December 2020 (119)
2,008,369 Ordinary shares of 1 penny each purchased
during the year to be held in treasury (20)
13,946,475 Ordinary shares of 1 penny each held in
treasury at 31 December 2021 (139)
---------------------------------------------------- -------
Voting rights of 102,800,919 Ordinary shares of 1
penny each at 31 December 2021 1,028
---------------------------------------------------- -------
The Company purchased 2,008,369 shares (2020: 1,587,950) to be
held in treasury at a nominal value of GBP20,084 and a cost of
GBP1,661,000 (2020: GBP1,189,000) representing 1.7% of the shares
in issue on 31 December 2021, leading to a balance of 13,946,475
shares (2020: 11,938,106) in treasury representing 11.9% (2020:
11.5%) of the shares in issue on 31 December 2021.
Under the terms of the Dividend Reinvestment Scheme, the
following new Ordinary shares of nominal value 1 penny each were
allotted during the year:
Aggregate
Number nominal
of value of Issue price Net
shares shares (pence per invested Opening market price on allotment date (pence per
Date of allotment allotted (GBP'000) share) (GBP'000) share)
------------------- -------- --------- ----------------- --------- -------------------------------------------------
28 May 2021 434,384 4 82.01 339 78.00
30 September 2021 444,130 4 90.10 383 86.00
-------- ---------
878,514 722
Under the terms of the Albion VCTs Prospectus Top Up Offers
2020/21, the following new Ordinary shares of nominal value 1 penny
each, were allotted during the year:
Aggregate
nominal Net
Number of value of Issue price consideration
Date of shares shares (pence per received Opening market price on allotment date (pence per
allotment allotted (GBP'000) share) (GBP'000) share)
---------- ---------- --------- ----------------- ------------- -------------------------------------------------
26
February
2021 1,932,052 19 83.30 1,585 78.00
26
February
2021 515,665 5 83.80 424 78.00
26
February
2021 8,866,225 89 84.20 7,279 78.00
9 April
2021 202,566 2 83.70 167 78.50
9 April
2021 32,777 - 84.20 27 78.50
9 April
2021 345,091 3 84.60 285 78.50
---------- -------------
11,894,376 9,767
16. Basic and diluted net asset value per share
31 December 2021 (pence 31 December 2020 (pence
per share) per share)
------------------------ ----------------------- ------------------------
Basic and diluted net
asset value per share 94.98 82.42
The basic and diluted net asset values per share at the year end
are calculated in accordance with the Articles of Association and
are based upon total shares in issue (adjusting for treasury
shares) of 102,800,919 Ordinary shares as at 31 December 2021
(2020: 92,036,398).
17. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in
note 15. The Company is permitted to buy back its own shares for
cancellation or treasury purposes, and this is described in more
detail in the Chairman's statement.
The Company's financial instruments comprise equity and loan
stock investments in quoted and unquoted companies, deferred
receipts on disposal of fixed asset investments, cash balances and
receivables and payables which arise from its operations. The main
purpose of these financial instruments is to generate cashflow and
revenue and capital appreciation for the Company's operations. The
Company has no gearing or other financial liabilities apart from
short term payables. The Company does not use any derivatives for
the management of its Balance sheet.
The principal financial instrument risks arising from the
Company's operations are:
-- Market and investment risk (which comprises investment price and cash
flow interest rate risk);
-- credit risk; and
-- liquidity risk.
The Board regularly reviews and agrees policies for managing
each of these risks. There have been no changes in the nature of
the risks that the Company has faced during the past year and there
have been no changes in the objectives, policies or processes for
managing risks during the past year. The key risks are summarised
below.
Market risk
As a Venture Capital Trust, it is the Company's specific nature
to evaluate the market risk of its portfolio in unquoted companies.
Market risk is the exposure of the Company to the revaluation and
devaluation of investments as a result of macroeconomic changes.
The main driver of market risk is the dynamics of market quoted
comparators, as well as the financial and operational performance
of portfolio companies. The Board seeks to reduce this risk by
having a spread of investments across a variety of sectors. More
details on the sectors the Company invests in can be found in the
pie chart at the end of this announcement.
The Manager and the Board formally review market risk, both at
the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are
made to ensure that profits to the Company are maximised, and that
valuations of investments retained within the portfolio appear
sufficiently prudent and realistic compared to prices being
achieved in the market for sales of unquoted investments.
As required under FRS 102 the Board is required to illustrate by
way of a sensitivity analysis the extent to which the assets are
exposed to market risk. The Board considers that the value of the
fixed asset investment portfolio is sensitive to a change of 10%
based on the current economic climate. The impact of a 10% change
has been selected as this is considered reasonable given the
current level of volatility observed. When considering the
appropriate level of sensitivity to be applied, the Board has
considered both historic performance and future expectations.
The sensitivity of a 10% increase or decrease in the valuation
of the fixed asset investment portfolio (keeping all other
variables constant) would increase or decrease the net asset value
and return for the year by GBP8,050,000. Further sensitivity
analysis on fixed asset investments is included in note 11.
Investment risk (including investment price risk)
Investment risk (including investment price risk) is the risk
that the fair value of future investment cash flows will fluctuate
due to factors specific to an investment instrument or to a market
in similar instruments. The management of risk within the venture
capital portfolio is addressed through careful investment
selection, by diversification across different industry segments,
by maintaining a wide spread of holdings in terms of financing
stage and by limitation of the size of individual holdings. The
Manager receives management accounts from portfolio companies and
members of the investment management team often sit on the boards
of unquoted portfolio companies; this enables the close
identification, monitoring and management of investment risk. The
Directors monitor the Manager's compliance with the investment
policy, review and agree policies for managing this risk and
monitor the overall level of risk on the investment portfolio on a
regular basis.
Valuations are based on the most appropriate valuation
methodology for an investment within its market, with regard to the
financial health of the investment and the IPEV Guidelines. Details
of the industries in which investments have been made are contained
in the pie chart at the end of this announcement.
The maximum investment risk as at the Balance sheet date is the
value of the fixed asset investment portfolio which is
GBP80,500,000 (2020: GBP58,998,000). Fixed asset investments form
82% of net asset value as at 31 December 2021 (2020: 78%).
More details regarding the classification of fixed asset
investments are shown in note 11.
Interest rate risk
It is the Company's policy to accept a degree of interest rate
risk on its financial assets through the effect of interest rate
changes. On the basis of the Company's analysis, it is estimated
that a rise of 1% in all interest rates would have increased total
return before tax for the year by approximately GBP163,000 (2020:
GBP151,000). Furthermore, it was considered that a material fall in
interest rates below current levels during the year would have been
unlikely.
The weighted average effective interest rate applied to the
Company's fixed rate assets during the year was approximately 7.7%
(2020: 4.5%). The weighted average period to maturity for the fixed
rate assets is approximately 4.9 years (2020: 5.2 years).
The Company's financial assets and liabilities, all denominated
in pounds sterling, consist of the following:
31 December 2021 31 December 2020
Fixed
rate Floating rate Non-interest bearing Total Floating rate Non-interest bearing Total
GBP'000 GBP'000 GBP'000 GBP'000 Fixed rate GBP'000 GBP'000 GBP'000 GBP'000
------------- ------- ------------- -------------------- -------- ------------------- ------------- -------------------- --------
Unquoted
equity - - 66,082 66,082 - - 44,350 44,350
Quoted equity - - 1,191 1,191 - - - -
Unquoted loan
stock 12,594 175 458 13,227 13,752 185 711 14,648
Receivables* - - 2,542 2,542 - - 1,734 1,734
Current
liabilities - - (2,459) (2,459) - - (541) (541)
Cash - 17,032 - 17,032 - 15,645 - 15,645
------- ------------- -------------------- -------- ------------------- ------------- -------------------- --------
Total 12,594 17,207 67,814 97,615 13,752 15,830 46,254 75,836
------- ------------- -------------------- -------- ------------------- ------------- -------------------- --------
*The receivables do not reconcile to the Balance sheet as
prepayments are not included in the above table.
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 Company is exposed to
credit risk through its receivables, investment in unquoted loan
stock and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock instruments
prior to investment and as part of its ongoing monitoring of
investments. For investments made prior to 6 April 2018, which
account for 94% of loan stock value, typically loan stock
instruments will have a fixed or floating charge, which may or may
not be subordinated, over the assets of the portfolio company in
order to mitigate the gross credit risk.
The Manager receives management accounts from portfolio
companies and members of the investment management team often sit
on the boards of unquoted portfolio companies; this enables the
close identification, monitoring and management of investment
specific credit risk.
Bank deposits are held with banks with high credit ratings
assigned by international credit rating agencies. The Company has
an informal policy of limiting counterparty banking exposure to a
maximum of 20% of net asset value for any one counterparty.
The Manager and the Board formally review credit risk (including
receivables) and other risks, both at the time of initial
investment and at quarterly Board meetings.
The Company's total gross credit risk at 31 December 2021 was
limited to GBP13,227,000 (2020: GBP14,648,000) of unquoted loan
stock instruments, GBP17,302,000 (2020: GBP15,645,000) of cash
deposits with banks and GBP2,542,000 (2020: GBP1,757,000) of other
receivables.
At the Balance sheet date, the cash and cash equivalents held by
the Company were held with Lloyds Bank plc, Scottish Widows Bank
plc (part of Lloyds Banking Group), Barclays Bank plc, Société
Générale S.A. and National Westminster Bank plc. Credit risk on
cash transactions was mitigated by transacting with counterparties
that are regulated entities subject to prudential supervision, with
high credit ratings assigned by international credit-rating
agencies.
The Company has an informal policy of limiting counterparty
banking exposure to a maximum of 20% of net asset value for any one
counterparty.
The credit profile of unquoted loan stock is described under
liquidity risk shown below.
Liquidity risk
Liquid assets are held as cash on current account, cash on
deposit or short term money market account. Under the terms of its
Articles, the Company has the ability to borrow up to 10% of its
adjusted capital and reserves of the latest published audited
Balance sheet, which amounts to GBP9,490,000 as at 31 December 2021
(2020: GBP7,373,000).
The Company had no committed borrowing facilities as at 31
December 2021 (2020: nil) and the Company had cash balances of
GBP17,032,000 (2020: GBP15,645,000). The main cash outflows are for
new investments, buy-back of shares and dividend payments, which
are within the control of the Company. The Manager formally reviews
the cash requirements of the Company on a monthly basis, and the
Board on a quarterly basis, as part of its review of management
accounts and forecasts. All of the Company's financial liabilities
are short term in nature and total GBP2,459,000 (2020:
GBP541,000).
The carrying value of loan stock investments, analysed by
expected maturity dates is as follows:
31 December 2021 31 December 2020
Redemption Fully performing Valued below cost Past due Total Fully performing Valued below cost Past due Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ---------------- ----------------- -------- -------- ---------------- ----------------- -------- --------
Less than
one year 6,055 689 - 6,744 2,160 736 1,738 4,634
1-2 years 175 1 - 176 1,887 38 94 2,019
2-3 years 261 7 - 268 175 136 - 311
3-5 years 762 - 97 859 1,948 - 78 2,026
5 + years 5,180 - - 5,180 5,555 - 103 5,658
---------------- ----------------- -------- -------- ---------------- ----------------- -------- --------
Total 12,433 697 97 13,227 11,725 910 2,013 14,648
---------------- ----------------- -------- -------- ---------------- ----------------- -------- --------
Loan stock can be past due as a result of interest or capital
not being paid in accordance with contractual terms.
The cost of loan stock investments valued below cost is
GBP1,202,000 (2020: GBP1,036,000).
The Company does not hold any assets as the result of the
enforcement of security during the period, and believes that the
carrying values for both those valued below cost and past due
assets are covered by the value of security held for these loan
stock investments.
In view of the availability of adequate cash balances and the
repayment profile of loan stock investments, the Board considers
that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 31
December 2021 are stated at fair value as determined by the
Directors, with the exception of receivables (including debtors due
after more than one year), payables and cash which are carried at
amortised cost, in accordance with FRS 102. There are no financial
liabilities other than payables. The Company's financial
liabilities are all non-interest bearing. It is the Directors'
opinion that the book value of the financial liabilities is not
materially different to the fair value and all are payable within
one year.
18. Contingencies and commitments
As at 31 December 2021, the Company had no financial commitments
(2020: GBPnil).
There were no contingent liabilities or guarantees given by the
Company as at 31 December 2021 (2020: GBPnil).
19. Post balance sheet events
Since the year end, the Company made the following material
investment transactions:
-- Proceeds of GBP2,141,000 received for the sale of Phrasee Limited;
-- Proceeds of GBP1,647,000 received for the sale of Credit Kudos Limited:
-- Investment of GBP721,000 in an existing portfolio company, Black Swan
Data Limited;
-- Investment of GBP684,000 in an existing portfolio company, TransFICC
Limited;
-- Investment of GBP517,000 in a new portfolio company, PerchPeek Limited;
and
-- Investment of GBP391,000 in an existing portfolio company, Cantab
Research Limited (trading as Speechmatics).
The following new Ordinary shares of nominal value 1 penny each
were allotted under the Albion VCTs Prospectus Top Up Offers
2021/22 after 31 December 2021:
Aggregate
Number of nominal Net
Date of shares value of consideration
allotment allotted shares Issue price (pence per received Opening market price on allotment date
GBP'000 share) GBP'000 (pence per share)
---------- ---------- --------- ----------------------- ------------- ---------------------------------------
25
February
2022 1,360,570 14 96.50 1,293 91.00
25
February
2022 462,648 5 97.00 440 91.00
25
February
2022 11,077,966 111 97.50 10,531 91.00
12,901,184 12,264
---------- -------------
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5,
and the Directors' remuneration disclosed in the Directors'
remuneration report on pages 45 and 46 of the full Annual Report
and Financial Statements, there are no other related party
transactions or balances requiring disclosure.
21. Other Information
The information set out in this announcement does not constitute
the Company's statutory accounts within the terms of section 434 of
the Companies Act 2006 for the years ended 31 December 2021 and 31
December 2020, and is derived from the statutory accounts for those
financial years, which have been, or in the case of the accounts
for the year ended 31 December 2021, which will be, delivered to
the Registrar of Companies. The Auditor reported on those accounts;
the reports were unqualified and did not contain a statement under
s498 (2) or (3) of the Companies Act 2006.
22. Publication
The full audited Annual Report and Financial Statements are
being sent to shareholders and copies will be made available to the
public at the registered office of the Company, Companies House,
the National Storage Mechanism and also electronically at
www.albion.capital/funds/AADV, where the Report can be accessed as
a PDF document via a link in the 'Financial Reports and Circulars'
section.
Attachment
-- Split of Portfolio by sector, stage of investment and number of employees
https://ml-eu.globenewswire.com/Resource/Download/29dda5f4-5dd7-4d32-9889-687f3c190e7f
(END) Dow Jones Newswires
March 24, 2022 12:52 ET (16:52 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
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