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 2022.
This announcement was approved for release by the Board of
Directors on 6 April 2023.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31
December 2022 (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/31Dec2022.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.
Financial calendar
Record date for first dividend 5 May 2023
Annual General Meeting Noon on 30 May 2023
Payment of first dividend 31 May 2023
Announcement of Half-yearly results for the six months September 2023
ending 30 June 2023
Financial summary
202.22p Total shareholder value as at 31 December 2022 (2021:
203.84p)
-------------------------------------------------------
(1.71)% Shareholder return for the year ended 31 December
2022 (2021: gain of 20.54%)
-------------------------------------------------------
4.71p Tax-free dividend per share for the year ended 31
December 2022 (2021: 4.37p)
-------------------------------------------------------
88.65p Net asset value per share as at 31 December 2022 (2021:
94.98p)
-------------------------------------------------------
Total shareholder value at 31 December 2022 is calculated using
net asset value per share at 31 December 2022 plus dividends paid
per Ordinary share since launch to 31 December 2022.
These are considered Alternative Performance Measures, see note
3 in the KPI's and APM's section of the Strategic report for
further explanation.
Movements in net asset value
31 December 2022 31 December 2021
pence per share pence per share
Opening net asset value 94.98 82.42
Capital (loss)/return (2.36) 16.74
Revenue return 0.49 0.46
---------------- ----------------
Total (loss)/return (1.87) 17.20
Dividends paid (4.71) (4.37)
Impact from share capital movements 0.25 (0.27)
---------------- ----------------
Net asset value 88.65 94.98
------------------------------------ ---------------- ----------------
Total shareholder value
Ordinary shares
(pence per share)
-------------------------------------------- -----------------
Total dividends paid to 31 December 2022 113.57
Net asset value as at 31 December 2022 88.65
-----------------
Total shareholder value to 31 December 2022 202.22
-------------------------------------------- -----------------
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.
The Board has declared a first dividend for the year ending 31
December 2023 of 2.22 pence per share payable on 31 May 2023 to
shareholders on the register on 5 May 2023.
Chairman's Statement
Introduction
During the year, the Company's portfolio has faced a difficult
macroeconomic and geopolitical backdrop, including the war in
Ukraine, high inflation, rising interest rates and political
instability. This has had an adverse impact for the Company
resulting in a loss, of 1.87 pence per share, for the year ended 31
December 2022, representing a 2.0% loss on opening net asset
value.
Despite this loss and in the context of the considerable
uncertainty the Company has faced, the Board continues to be
encouraged by the progress being made by many of the portfolio
companies, demonstrating their resilience despite challenging
market conditions. The Board recognises the importance of
evaluating the returns of the Company over the longer-term, because
a venture capital portfolio can, by its nature, experience periods
of short term volatility.
Results and dividends
As at 31 December 2022 the net asset value was 88.65 pence per
share compared to 94.98 pence per share as at 31 December 2021. The
total loss before taxation was GBP2.3 million compared to a gain of
GBP17.5 million for the previous year.
In line with our variable dividend policy targeting 5% of NAV
per annum, the Company paid dividends totalling 4.71 pence per
share during the year to 31 December 2022 (2021: 4.37 pence per
share). The Company will pay a first dividend for the financial
year to 31 December 2023 of 2.22 pence per share on 31 May 2023 to
shareholders on the register on 5 May 2023, being 2.5% of this 31
December 2022 NAV.
Investment performance and progress
The results for the year showed net losses on investments of
GBP0.6 million, compared with net gains of GBP20.6 million for the
previous year. The net loss in the current year was driven by net
unrealised losses across the portfolio. The largest write downs
were in Black Swan Data which decreased by GBP1.6 million, Oviva by
GBP1.1 million and uMotif by GBP0.8 million, as a result of
difficult trading conditions. These losses have been offset by
gains in the investment portfolio, including a realised gain on
MyMeds&Me of GBP1.7 million and unrealised gains on Convertr of
GBP0.9 million and Solidatus of GBP0.7 million. Quantexa, the
largest company within our portfolio (13% of net asset value),
continues to show strong revenue growth which has counterbalanced
the well-publicised reduced technology sector valuations and
therefore has not seen a valuation movement during the year. After
the year end Quantexa completed an externally led Series E
fundraising, and further details can be found in the Updated NAV
announcement section that follows.
There have been several realisations during the year totalling
GBP7.7 million (2021: GBP6.3 million), leading to a net realised
gain of GBP2.4 million. The sales delivering the majority of the
returns were MyMeds&Me, which delivered a 3.4 times return on
cost, Phrasee, which delivered a 3.5 times return on cost, and
Credit Kudos, which delivered a 5.2 times return on cost. Against
this, there were realised losses including the write-off of
Sandcroft Avenue (T/A Hussle) with a realised loss of GBP1.3
million, and Concirrus with a realised loss of GBP0.6 million.
Further details on the above disposals, and other realisations, can
be found in the realisations table on page 29 of the full Annual
Report and Financial Statements.
The three largest investments in the Company's portfolio, being
Quantexa, Egress Software Technologies and Proveca, are valued at
GBP31.6 million and represent 27.6% of the Company's net asset
value.
The Company has been an active investor during the year
investing a total of GBP15.6 million. Of this, GBP8.7 million was
invested into fifteen new portfolio companies, all of which are
expected to require further investment as the companies prove
themselves and grow. The five largest new investments include:
-- GBP1.4 million into Peppy Health, a platform providing expert support for
underserved areas of health and wellness (e.g., menopause) via content,
video, chat support as an employment benefit for employees
-- GBP1.4 million into Toqio FinTech Holdings, a provider of embedded
FinTech solutions
-- GBP0.9 million into PeakData, a software platform providing insights and
analytics to pharmaceutical companies
-- GBP0.7 million into GX Molecular (T/A CS Genetics), a developer of
single-cell sequencing solutions
-- GBP0.6 million into OutThink, a software platform to measure and manage
human risk for enterprises
A further GBP6.9 million was invested into existing portfolio
companies, the largest being: GBP1.1 million into Healios; GBP1.1
million into Black Swan Data; and GBP0.8 million into Runa Network
(previously WeGift).
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 27 to 29 of the full
Annual Report and Financial Statements.
Updated NAV announcement
On 2 March 2023, a post year end NAV update was announced with a
pleasing 5.25 pence per share uplift, representing a 5.92% increase
on the 31 December 2022 NAV. This uplift has resulted from a
portfolio company, Quantexa, undergoing an external fundraising
process after the year end. This transaction has since completed
and was announced by Quantexa on 4 April 2023.
Risks and uncertainties
The Company faces a number of significant risks, including
rising interest rates, high levels of inflation, the ongoing impact
of Russia's invasion of Ukraine, and an expected period of economic
stagnation, or even recession, in the UK.
Our investment portfolio, while concentrated mainly in the
technology and healthcare sectors, remains diversified in terms of
both sub-sector and stage of maturity.
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 Offer
(including the over-allotment facility) of GBP21 million was fully
subscribed and closed to further applications on 23 March 2022.
A second prospectus Top Up Offer was launched on 10 October
2022. The Board announced on 4 January 2023 that, following strong
demand, it would opt to exercise its over-allotment facility,
bringing the total amount to be raised to GBP13 million. On 9 March
2023 the offers were fully subscribed and closed to further
applications.
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 2 December 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")
The AGM will be held virtually at noon on 30 May 2023 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=vxDQweT8UzUrCA--sBGCIrfdLkz47loelyMs--bWoJQVOuSsaCqRUObvzhMSzI_LKNj8KuX6EM8KFf9zKEpNwEWznUE7Gd1S4ImtR6VO10s=
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 49 and 50
and in the Notice of the Meeting on pages 90 to 94 of the full
Annual Report and Financial Statements.
Outlook and prospects
There remains many uncertainties facing the Company, including
higher levels of inflation and the war in Ukraine, which makes it
difficult to be entirely confident about what lies ahead. However,
the portfolio remains well diversified, with companies at different
stages of maturity and targeted in sectors such as healthcare,
software and FinTech, with minimal exposure to consumer
expenditure. We believe that these sectors can continue to provide
opportunities for resilient growth, yielding positive results for
the Company and its shareholders in the longer-term. Given this
context, the recently announced NAV uplift is encouraging.
Ben Larkin
Chairman
6 April 2023
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 2022 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
sector, 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 27 and 28 of the full Annual
Report and Financial Statements.
Direction of portfolio
Due to the share allotments under the 2021/22 and 2022/23
Prospectus Top Up Offers, and a number of exits during the year,
cash is a significant proportion of the portfolio at 25%. The
Manager has a deep sector knowledge in healthcare, FinTech and
software investing, and these funds will be invested predominantly
into higher growth technology companies within these sectors.
Results and dividends
GBP'000
Net capital loss for the year (2,843)
Net revenue return for the year 591
Total loss for the year ended 31 December 2022 (2,252)
Dividend of 2.37 pence per share paid on 31 May 2022 (2,925)
Dividend of 2.34 pence per share paid on 30 September
2022 (2,892)
Unclaimed dividends 7
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Transferred from reserves (8,062)
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Net assets as at 31 December 2022 114,458
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Net asset value per share as at 31 December 2022 (pence) 88.65
The Company paid dividends totalling 4.71 pence per share (2021:
4.37 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 dividend for the year ending 31 December 2023 of 2.22 pence
per share payable on 31 May 2023 to shareholders on the register on
5 May 2023.
As shown in the Income statement, the total investment income
increased to GBP1,194,000 (2021: GBP988,000). This is a result of
dividend income increasing to GBP172,000 (2021: GBP23,000),
including a dividend declared by Memsstar immediately prior to the
disposal in the year, and bank interest increasing to GBP106,000
(2021: GBP1,000) due to higher interest rates. These increases were
partially offset by loan stock income decreasing slightly to
GBP916,000 (2021: GBP964,000). The revenue return to equity holders
has subsequently increased to GBP591,000 (2021: GBP466,000).
The net capital loss for the year was GBP2,843,000 (2021: net
return of GBP16,988,000). The net loss was largely due to a fall in
the unrealised value of investments, offset partially by gains on
disposals. Key valuation movements during the year are outlined in
the investment portfolio section of the Chairman's statement. The
total loss for the year was 1.87 pence per share (2021: gain of
17.20 pence per share).
There was a net cash inflow for the Company of GBP9,459,000 for
the year (2021: GBP1,387,000), mainly resulting from the issue of
Ordinary shares under the Albion VCTs Top Up Offers, disposal
proceeds and loan stock income, offset by new investments,
dividends paid, share buy-backs and ongoing expenses. 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 GBP722,000
(2021: GBP2,459,000). This decrease was primarily due to the
management performance incentive fee, which was paid in 2022 as a
result of the Company's strong return for the previous 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 2022 show total shareholder value of 202.22 pence per
share since launch (2021: 203.84 pence per share).
There is a continuing focus on growing the FinTech, healthcare
(including digital healthcare) and other software and technology
sectors. The majority of these investment returns are delivered
through equity and capital gains, and will be the key driver of
success for the Company. Investment income, which is received
primarily from our renewable energy investments, is expected to
remain steady over the coming years.
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 impacts of the ongoing global issues caused as
a result of high levels of interest rates and inflation, due in
part to the Russian invasion of Ukraine, however the full effects
of these issues will continue to be felt in years to come. Although
there remains much uncertainty, the Board considers that the
current portfolio has the potential to deliver long term growth,
whilst maintaining a predictable stream of dividend payments to
shareholders. Further details of the Company's outlook and
prospects can be found in the Chairman's statement.
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.
1. Total shareholder value relative to FTSE All-Share Index total return
The graph on page 8 of the full Annual Report and Financial
Statements shows the Company's total shareholder value relative to
the FTSE All-Share Index total return, 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 decreased by 1.7% on opening net
asset value to 202.22 pence per share for the year ended 31
December 2022 as a result of the negative total return of 1.87
pence per share.
3. Movement in shareholder value in the year
The table below shows the total shareholder value over the last
10 years, with an average return of 8.0% per annum.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
---- ---- ---- ---- ----- ----- ---- ---- ----- ------
6.9% 5.4% 4.1% 6.5% 10.0% 20.3% 3.8% 3.8% 20.5% (1.7%)
---- ---- ---- ---- ----- ----- ---- ---- ----- ------
Methodology: Calculated by the movement in total shareholder
value for the year divided by the opening net asset value.
4. Dividend distributions
Dividends paid in respect of the year ended 31 December 2022
were 4.71 pence per share (2021: 4.37 pence per share). Cumulative
dividends paid since inception are 113.57 pence per share.
5. Ongoing charges
The ongoing charges ratio for the year to 31 December 2022 was
2.50% (2021: 2.50%). The ongoing charges ratio has been calculated
using The Association of Investment Companies' ("AIC") recommended
methodology. This figure shows shareholders the total recurring
annual operational 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
2.50%, which has resulted in a saving of GBP41,000 to shareholders
during the year (2021: GBP86,000).
6. VCT compliance*
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 page 46 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 2022.
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.
Gearing
As defined by the Articles of Association, the Company's maximum
exposure in relation to gearing is restricted to 10% of the share
capital and reserves adjusted for any dividends declared. Although
the investment policy permits the Company to borrow, the Directors
do not currently have any intention of utilising long-term gearing
and have not done so in the past.
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, Albion Capital Group
LLP provides investment management, company 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.
In some instances, the Manager is entitled to an arrangement
fee, payable by a portfolio company in which the Company invests,
in region of 2% of the investment made, and also monitoring fees
where the Manager has a representative on the portfolio company's
board; these fees are payable by the portfolio company. Further
details of the Manager's fee can be found in note 5 to the
financial statements.
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 any
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 2022, the total return since 1 January 2019
was 106.47 pence, and the hurdle was 122.75 pence, resulting in a
shortfall of 16.28 pence per share. As a result, no performance
incentive fee is payable to the Manager for the year (2021:
GBP1,838,000).
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 HMRC tests 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; 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. 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
------------ ------------------------------------------------------------- -----------------------------------------------------------
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
vote on the resolutions at the AGM. The Company's AGM
-- Annual General Meeting ("AGM") is typically used as an opportunity to communicate
with investors, including through a presentation made
-- Shareholder seminar by the investment management team. The use of the
Lumi platform enabled engagement with a wider
-- Annual report and Financial Statements, Half-yearly audience of shareholders from across the country, and
financial report, and Interim management statements gave shareholder the opportunity to ask questions and
vote during the virtual AGM last year.
-- RNS announcements for all key decisions including the -- Shareholders are also encouraged to attend the in
publication of a Prospectus person annual Shareholders' Seminar. This year's
event took place on 23 November 2022 at the Royal
-- Albion Capital website, social media pages, as well College of Surgeons. The seminar included
as publishing Albion news shareholder magazine. Speechmatics and Ophelos sharing insights into their
businesses and also a Q&A 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 2023.
-- 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 resulted in a dividend yield of 5.3% on
opening net asset value.
-- During the year, the Board made the decision to
participate in the Albion Prospectus Top Up Offers,
launched on 6 January 2022 and 10 October 2022, 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.
-- Shareholders can contact the Chairman using the email
AADVchair@albion.capital
------------ ------------------------------------------------------------- -----------------------------------------------------------
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.
-- Details of the Manager's responsibilities can be
found in the Statement of corporate governance on
pages 52 and 53 of the full Annual Report and
Financial Statements.
------------ ------------------------------------------------------------- -----------------------------------------------------------
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
------------ ------------------------------------------------------------- -----------------------------------------------------------
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 35 to end of this announcement.
38 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 AlbionVC platform team provide access to deep
expertise on growth strategy alignment, leadership
team hiring, organisational scaling and founder
leader development.
-- 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. 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.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the
Companies Act 2006 (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 pages 47 and 48 of
the full Annual Report and Financial Statements.
General Data Protection Regulation
The General Data Protection Regulation ("GDPR") has the
objective of unifying data privacy requirements across the European
Union. GDPR forms part of the UK law after Brexit, now known as UK
GDPR. 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 risks have been the emergence of rising interest
rates and inflation, caused in part as a result of the Russian
invasion of Ukraine, whilst the pandemic has continued to impact on
mobility, public health and have an adverse influence on the
economy. The full impacts of these risks are likely to continue 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 in the following table:
Risk Possible consequence Risk assessment during the year Risk management
-------------- -------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Investment, The risk of investment in poor quality businesses, Increased in the year due to the heightened economic To reduce this risk, the Board places reliance upon
performance which could reduce the returns to shareholders and and geopolitical issues as referred to in the Chairman's the skills and expertise of the Manager and its track
and valuation could negatively impact on the Company's current and statement. record over many years of making successful investments
risk future valuations. in this segment of the market. In addition, the Manager
By nature, smaller unquoted businesses, such as those operates a formal and structured investment appraisal
that qualify for Venture Capital Trust purposes, are and review process, which includes an Investment Committee,
more volatile than larger, long-established businesses. comprising investment professionals from the Manager
The Company's investment valuation methodology is for all investments, and at least one external investment
reliant on the accuracy and completeness of information professional for investments greater than GBP1 million
that is issued by portfolio companies. In particular, in aggregate across all the Albion managed VCTs. The
the Directors may not be aware of or take into account Manager also invites and takes account of comments
certain events or circumstances which occur after from non-executive Directors of the Company on matters
the information issued by such companies is reported. discussed at the Investment Committee meetings.
Investments are actively and regularly monitored by
the Manager (investment managers normally sit on portfolio
company boards), including the level of diversification
in the portfolio, and the Board receives detailed
reports on each investment as part of the Manager's
report at quarterly board meetings. The Board and
Manager regularly review the deployment of investments
and cash resources available to the Company in assessing
liquidity required for servicing the Company's buy-backs,
dividend payments and operational expenses.
The unquoted investments held by the Company are designated
at fair value through profit or loss and valued in
accordance with the International Private Equity and
Venture Capital Valuation Guidelines updated in 2022.
These guidelines set out recommendations, intended
to represent current best practice on the valuation
of venture capital investments. The valuation takes
into account all known material facts up to the date
of approval of the Financial Statements by the Board.
-------------- -------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
VCT approval The Company must comply with section 274 of the Income No change in the year. To reduce this risk, the Board has appointed the Manager,
risk Tax Act 2007 which enables its investors to take advantage which has a team with significant experience in Venture
of tax relief on their investment and on future returns. Capital Trust management, used to operating within
Breach of any of the rules enabling the Company to the requirements of the Venture Capital Trust legislation.
hold VCT status could result in the loss of that status. In addition, to provide further formal reassurance,
the Board has appointed Philip Hare & Associates LLP
as its taxation adviser, who report quarterly to the
Board to independently confirm compliance with the
Venture Capital Trust legislation, to highlight areas
of risk and to inform on changes in legislation. Each
investment in a new portfolio company is also pre-cleared
with our professional advisers or H.M. Revenue & Customs.
The Company monitors closely the extent of qualifying
holdings and addresses this as required.
-------------- -------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Regulatory and The Company is listed on The London Stock Exchange No change in the year. Board members and the Manager have experience of operating
compliance and is required to comply with the rules of the Financial at senior levels within or advising quoted companies.
risk Conduct Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
Accounting Standards and other legislation. Failure updates on new regulation from its auditor, lawyers
to comply with these regulations could result in a and other professional bodies. The Company is subject
delisting of the Company's shares, or other penalties to compliance checks through the Manager's compliance
under the Companies Act or from financial reporting officer, and any issues arising from compliance or
oversight bodies. regulation are reported to its own board every two
months. These controls are also reviewed as part of
the quarterly Board meetings, and also as part of
the review work undertaken by the Manager's compliance
officer. The report on controls is also evaluated
by the internal auditors.
-------------- -------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Operational The Company relies on a number of third parties, in No change in the year. The Company and its operations are subject to a series
and internal particular the Manager, for the provision of investment of rigorous internal controls and review procedures
control risk management and administrative functions. Failures exercised throughout the year. The Board receives
in key systems and controls within the Manager's business reports from the Manager on its internal controls
could put assets of the Company at risk or result and risk management.
in reduced or inaccurate information being passed The Audit and Risk Committee reviews the Internal
to the Board or to shareholders. Audit Reports prepared by the Manager's internal auditors,
Azets and has access to their internal audit partner
to whom it can ask specific detailed questions in
order to satisfy itself that the Manager has strong
systems and controls in place including those in relation
to business continuity and cyber security, as mentioned
below.
Ocorian Depositary (UK) Limited is the Company's Depositary,
appointed to oversee the custody and cash arrangements
and provide other AIFMD duties. The Board reviews
the quarterly reports prepared by Ocorian Depositary
(UK) Limited to ensure that the Manager is adhering
to its policies and procedures as required by the
AIFMD.
In addition, the Board annually reviews the performance
of its key service providers, particularly the Manager,
to ensure they continue to have the necessary expertise
and resources to deliver the Company's investment
objective and policy. The Manager and other service
providers have also demonstrated to the Board that
there is no undue reliance placed upon any one individual.
-------------- -------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Cyber and data A cyber-attack on one of the Company's third party Increased in the year, due to an increase in cyber-attacks The Manager outsources some of its IT services, including
security risk suppliers could result in the security of, potentially worldwide. hardware and software procurement, server management,
sensitive, data being compromised, leading to financial backup provision and day-to-day support through an
loss, disruption or damage to the reputation of the outsourcing arrangement with an IT consultant. In
Company. house IT support is also provided.
In addition, the Manager also has a business continuity
plan which includes off-site storage of records and
remote access provisions. This is revised and tested
annually and is also subject to Compliance, Group
Risk and Internal Audit reporting. Penetration tests
are also carried out to ensure that IT systems are
not susceptible to any cyber-attacks.
The Manager's Internal Auditor performs reviews on
IT general controls and data confidentiality and makes
recommendations where necessary. The most recent internal
audit focused specifically on IT systems, and was
completed in February 2023.
-------------- -------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Economic, Changes in economic conditions, including, for example, Increased in the year, due to the high levels of inflation, The Company invests in a diversified portfolio of
political and interest rates, rates of inflation, industry conditions, rising interest rates and the geopolitical risks from companies across a number of industry sectors and
social risk competition, political and diplomatic events, and the invasion of Ukraine. in addition often invests in a mixture of instruments
other factors could substantially and adversely affect in portfolio companies and has a policy of minimising
the Company's prospects in a number of ways. This any external bank borrowings within portfolio companies.
also includes risks of social upheaval, including At any given time, the Company has sufficient cash
from infection and population re-distribution, as resources to meet its operating requirements, including
well as economic risk challenges as a result of healthcare share buy-backs and follow-on investments.
pandemics/infection. In common with most commercial operations, exogenous
risks over which the Company has no control are always
a risk and the Company does what it can to address
these risks where possible, not least as the nature
of the investments the Company makes are long term.
The Board and Manager are continuously assessing the
resilience of the portfolio, the Company and its operations
and the robustness of the Company's external agents,
as well as considering longer term impacts on how
the Company might be positioned in how it invests
and operates. Ensuring liquidity in the portfolio
to cope with exigent and unexpected pressures on the
finances of the portfolio and the Company is an important
part of the risk mitigation in these uncertain times.
The portfolio is structured as an all-weather portfolio
with c.65 companies which are diversified as discussed
above. Exposure is relatively small to at-risk sectors
that include leisure, hospitality, retail and travel.
-------------- -------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Liquidity risk The Company may not have sufficient cash available No change in the year. To reduce this risk, the Board reviews the Company's
to meet its financial obligations. The Company's portfolio three year cash flow forecasts on a quarterly basis.
is primarily in smaller unquoted companies, which These include potential investment realisations (which
are inherently illiquid as there is no readily available are closely monitored by the Manager), Top Up Offers,
market, and thus it may be difficult to realise their dividend payments and operational expenditure. This
fair value at short notice. ensures that there are sufficient cash resources available
for the Company's liabilities as they fall due.
-------------- -------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Environmental, An insufficient ESG policy could lead to an increased No change in the year. The Manager is a signatory of the UN PRI and the Board
social and negative impact on the environment, including the is kept appraised of the evolving ESG policies at
governance Company's carbon footprint. Non-compliance with reporting quarterly Board meetings. Full details of the specific
("ESG") risk requirements could lead to a fall in demand from investors, procedures and risk mitigation can be found in the
reputational damage and penalties. Climate risks could ESG report on pages 35 to 38 of the full Annual Report
also negatively impact on the value of portfolio investments. and Financial Statements. These procedures ensure
that this risk continues to be mitigated where possible.
Whilst the Company itself has limited impact on climate
change, due to no employees nor greenhouse gas emissions,
the Board works closely with the Manager to ensure
the Manager themselves are working towards reducing
their impact on the environment, and that the Manager
takes account of ESG factors, including climate change,
when making new investment decisions. With specific
reference to the Company, a key objective is increasing
the use of electronic communications with Shareholders,
where that preference has been specified.
-------------- -------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
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 2025. 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;
factoring in high levels of inflation when budgeting for future
expenses, only including proceeds from investment disposals where
there is a high probability of completion, whilst also assessing
the resilience of portfolio companies given the current decline in
the global economy, 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 2025. 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.
Companies Act 2006
This Strategic report of the Company for the year ended 31
December 2022 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
6 April 2023
Responsibility statement
In preparing these Financial Statements for the year ended 31
December 2022, 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
2022 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 51 within the full audited Annual Report and
Financial Statements.
On behalf of the Board,
Ben Larkin
Chairman
6 April 2023
Income statement
Year ended 31 December Year ended 31 December
2022 2021
-------------------------- --------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ---- ------- ------- -------- ------- ------- --------
Net (losses)/gains on investments 3 - (636) (636) - 20,592 20,592
Investment income 4 1,194 - 1,194 988 - 988
Investment Manager's fees 5 (245) (2,207) (2,452) (196) (3,604) (3,800)
Other expenses 6 (358) - (358) (326) - (326)
------- ------- -------- ------- ------- --------
Profit/(loss) on ordinary activities before tax 591 (2,843) (2,252) 466 16,988 17,454
Tax on ordinary activities 8 - - - - - -
------- ------- -------- ------- ------- --------
Profit/(loss) and total comprehensive income attributable
to shareholders 591 (2,843) (2,252) 466 16,988 17,454
------- ------- -------- ------- ------- --------
Basic and diluted return/(loss) per share (pence)* 10 0.49 (2.36) (1.87) 0.46 16.74 17.20
---------------------------------------------------------- ---- ------- ------- -------- ------- ------- --------
*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 2022 31 December 2021
Note GBP'000 GBP'000
------------------------------------ ---- ---------------- ----------------
Fixed asset investments 11 86,286 80,500
Current assets
Trade and other receivables 13 2,403 2,566
Cash in bank and in hand 26,491 17,032
---------------- ----------------
28,894 19,598
Payables: amounts falling due within
one year
Trade and other payables 14 (722) (2,459)
---------------- ----------------
Net current assets 28,172 17,139
---------------- ----------------
Total assets less current
liabilities 114,458 97,639
---------------- ----------------
Equity attributable to equity
holders
Called-up share capital 15 1,456 1,167
Share premium 26,837 -
Capital redemption reserve - -
Unrealised capital reserve 32,516 36,048
Realised capital reserve 8,032 7,344
Other distributable reserve 45,617 53,080
---------------- ----------------
Total equity shareholders' funds 114,458 97,639
---------------- ----------------
Basic and diluted net asset value
per share (pence)* 16 88.65 94.98
------------------------------------ ---- ---------------- ----------------
* 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 6 April 2023 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 2022 1,167 - - 36,048 7,344 53,080 97,639
(Loss)/profit and total comprehensive income for the
year - - - (3,258) 415 591 (2,252)
Transfer of unrealised gains on disposal of
investments - - - (273) 273 - -
Purchase of shares for treasury - - - - - (2,244) (2,244)
Issue of equity 288 27,509 - - - - 27,797
Cost of issue of equity - (672) - - - - (672)
Reduction of share premium and capital redemption
reserve - - - - - - -
Dividends paid - - - - - (5,810) (5,810)
----------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- -------
As at 31 December 2022 1,456 26,837 - 32,516 8,032 45,617 114,458
----------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- -------
As at 1 January 2021 1,040 44,978 12 18,020 12,886 (1,077) 75,859
Profit/(loss) 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
----------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- -------
* Included within these reserves is an amount of GBP24,619,000
(2021: GBP28,992,000) which is considered distributable. Over the
next three years an additional GBP26,933,000 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 2023, GBP8,306,000
became distributable in line with this.
Statement of cash flows
Year ended Year ended
31 December 2022 31 December 2021
GBP'000 GBP'000
---------------------------------------- ----------------- -----------------
Cash flow from operating activities
Loan stock income received 996 736
Deposit interest received 106 1
Dividend income received 133 24
Investment Manager's fees paid (4,216) (1,877)
Other cash payments (338) (326)
Corporation tax paid - -
Net cash flow from operating activities (3,319) (1,442)
Cash flow from investing activities
Purchase of fixed asset investments* (14,235) (7,500)
Proceeds from disposals of fixed asset
investments* 7,946 6,003
Net cash flow from investing activities (6,289) (1,497)
----------------- -----------------
Cash flow from financing activities
Issue of share capital 26,132 9,767
Cost of issue of equity** (36) (35)
Equity dividends paid*** (4,785) (3,744)
Purchase of own shares (2,244) (1,662)
----------------- -----------------
Net cash flow from financing activities 19,067 4,326
----------------- -----------------
Increase in cash in bank and in hand 9,459 1,387
Cash in bank and in hand at start of
period 17,032 15,645
----------------- -----------------
Cash in bank and in hand at end of
period 26,491 17,032
---------------------------------------- ----------------- -----------------
* Purchases and disposals detailed above do not agree to note 11
due to restructuring of investments, conversion of convertible loan
stock and settlement of receivables and payables.
** The cost of issue of equity does not agree to the Statement
of changes in equity due to prospectus fundraising amounts being
received net of fees.
*** The equity dividends paid shown in the cash flow are
different to the dividends disclosed in the Statement of changes in
equity and note 9 as a result of the non-cash effect of the
Dividend Reinvestment Scheme.
The accompanying notes form an integral part of these Financial
Statements.
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 page
45 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 2022 and further detail on the valuation
techniques used are outlined below.
Company information can be found on page 4 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,
other valuation techniques are employed to conclude on the fair value as
at the measurement 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.
-- 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. Net (losses)/gains on investments
Year ended Year ended
31 December 2022 31 December 2021
GBP'000 GBP'000
Unrealised (losses)/gains on fixed asset
investments (3,258) 19,786
Realised gains on fixed asset
investments 2,322 549
Unwinding of discount on deferred
consideration 300 257
(636) 20,592
----------------- -----------------
4. Investment income
Year ended Year ended
31 December 2022 31 December 2021
GBP'000 GBP'000
---------------------- ----------------- -----------------
Loan stock interest 916 964
Dividend income 172 23
Bank deposit interest 106 1
1,194 988
----------------- -----------------
5. Investment Manager's fees
Year ended Year ended
31 December 2022 31 December 2021
GBP'000 GBP'000
Investment management fee charged to
revenue 245 196
Investment management fee charged to
capital 2,207 1,766
Performance incentive fee charged to
capital - 1,838
----------------- -----------------
2,452 3,800
----------------- -----------------
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 GBP2,452,000
(2021: GBP1,962,000) were purchased by the Company from Albion
Capital Group LLP ("Albion") in respect of management fees. There
is no performance incentive fee payable in the year (2021:
GBP1,838,000). At the financial year end, the amount due to Albion
in respect of these services disclosed as accruals was GBP618,000
(2021: GBP2,366,000). 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
GBP41,000 as a result of this cap (2021: GBP86,000).
During the year, the Company was not charged by Albion in
respect of Patrick Reeve's services as a Director (2021:
GBPnil).
Albion, its partners and staff (including Patrick Reeve) held
1,134,269 Ordinary shares in the Company as at 31 December
2022.
Albion is, from time-to-time, eligible to receive arrangement
fees and monitoring fees from portfolio companies. During the year
ended 31 December 2022, fees of GBP257,000 attributable to the
investments of the Company were received by Albion pursuant to
these arrangements (2021: GBP187,000).
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 2022 31 December 2021
GBP'000 GBP'000
Directors' fees (including NIC) 84 75
Auditor's remuneration for statutory audit services
(excluding VAT) 48 38
Other administrative expenses 226 213
358 326
----------------- -----------------
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 2022 31 December 2021
GBP'000 GBP'000
Directors' fees 77 69
National insurance 7 6
----------------- -----------------
84 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 59 to
62 of the full Annual Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
31 December 2022 31 December 2021
GBP'000 GBP'000
UK corporation tax charge in respect of - -
current year
- -
----------------- -----------------
Year ended Year ended
31 December 2022 31 December 2021
Factors affecting the tax charge: GBP'000 GBP'000
--------------------------------------------------- ----------------- -----------------
(Loss)/profit on ordinary activities before
taxation (2,252) 17,454
----------------- -----------------
Tax charge on profit at the average companies rate
of 19% (2021: 19%) (428) 3,316
Factors affecting the charge:
Non-taxable gains/(losses) 121 (3,912)
Income not taxable (33) (4)
Excess management expenses carried forward 340 600
- -
----------------- -----------------
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% (2021: 19%). The differences are explained above. From April
2023, the Company's rate of corporation tax will increase in the UK
from 19% to 25%.
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 GBP8,814,000 (2021: GBP7,026,000) that are available for offset against future profits. A deferred tax asset of GBP2,204,000 (2021: GBP1,757,000) 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 2022 31 December 2021
GBP'000 GBP'000
-------------------------------------------------------- ----------------- -----------------
First dividend of 2.37p per share paid on 31 May 2022
(28 May 2021: 2.06p per share) 2,925 2,126
Second dividend of 2.34p per share paid on 30 September
2022 (30 September 2021: 2.31p per share) 2,892 2,383
Unclaimed dividends (7) (7)
----------------- -----------------
5,810 4,502
----------------- -----------------
Details of the consideration issued under the Dividend
Reinvestment Scheme included in the dividends above can be found in
note 15.
The Board has declared a first dividend of 2.22 pence per share
for the year ending 31 December 2023, payable on 31 May 2023 to
shareholders on the register on 5 May 2023. The total dividend will
be approximately GBP3,025,000.
10. Basic and diluted return per share
Year ended 31 December Year ended 31 December
2022 2021
Revenue Capital Total Revenue Capital Total
-------------------------------------------------------- ------- ------- -------- ------- ------- --------
Profit/(loss) attributable to equity shares (GBP'000) 591 (2,843) (2,252) 466 16,988 17,454
Weighted average shares in issue (adjusted for treasury
shares) 120,150,815 101,474,066
Return/(loss) attributable per equity share (pence) 0.49 (2.36) (1.87) 0.46 16.74 17.20
The weighted average number of Ordinary shares is calculated
after adjusting for treasury shares of 16,468,548 (2021:
13,946,475).
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 2022 31 December 2021
GBP'000 GBP'000
------------------------------------------ ---------------- ----------------
Investments held at fair value through
profit or loss
Unquoted equity and preference shares 70,536 66,082
Unquoted loan stock 15,194 13,227
Quoted equity 556 1,191
86,286 80,500
---------------- ----------------
31 December 2022 31 December 2021
GBP'000 GBP'000
---------------------------------------------------- ---------------- ----------------
Opening valuation 80,500 58,998
Purchases at cost 14,917 6,983
Disposal proceeds (8,114) (6,043)
Realised gains 2,322 549
Movement in loan stock accrued income (80) 227
Unrealised (losses)/gains (3,258) 19,786
---------------- ----------------
Closing valuation 86,286 80,500
---------------- ----------------
Movement in loan stock accrued income
Opening accumulated loan stock accrued income 340 113
Movement in loan stock accrued income (80) 227
---------------- ----------------
Closing accumulated loan stock accrued income 260 340
---------------- ----------------
Movement in unrealised gains
Opening accumulated unrealised gains 35,871 17,843
Transfer of previously unrealised gains to realised
reserve on disposal of investments (273) (1,758)
Movement in unrealised (losses)/gains (3,258) 19,786
---------------- ----------------
Closing accumulated unrealised gains 32,341 35,871
---------------- ----------------
Historic cost basis
Opening book cost 44,288 41,042
Purchases at cost 14,917 6,983
Sales at cost (5,520) (3,737)
Closing book cost 53,684 44,288
---------------- ----------------
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 2022 31 December 2021
Valuation methodology GBP'000 GBP'000
---------------------------------------------------- ---------------- ----------------
Cost and price of recent investment (calibrated and
reviewed for impairment) 46,204 34,857
Revenue multiple 23,084 25,488
Third party valuation - discounted cash flow 8,632 8,498
Third party valuation - earnings multiple 3,962 3,287
Earnings multiple 2,840 54
Net assets 998 809
Bid price 556 1,191
Discounted offer price 10 6,316
86,286 80,500
---------------- ----------------
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, milestones or other background to the
transaction 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 background to the
transaction is also considered when the price of investment may not
be an appropriate measure of fair value, for example,
disproportionate dilution of existing investors from a new investor
coming on board or the market conditions at the time of investment
no longer being a true reflection of fair value.
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 2021 and 31 December
2022:
Change in valuation methodology (2021 to 2022) Value as at Explanatory
31 December 2022 note
GBP'000
-------------------------------------------------------
Discounted offer price to earnings multiple 2,840 Sale did
not
materialise
Cost and price of recent investment (calibrated and 2,271 Revenue
reviewed for impairment) to revenue multiple multiple
more
relevant
based on
current
trading
Revenue multiple to cost and price of recent investment 1,924 Recent
(calibrated and reviewed for impairment) funding
round
Cost and price of recent investment (calibrated and 942 Third party
reviewed for impairment) to third party valuation valuation
-- earnings multiple conducted
Cost and price of recent investment (calibrated and 10 Third party
reviewed for impairment) to offer price offer
received
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
2022.
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 FRS 102
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 2022 31 December 2021
GBP'000 GBP'000
Opening balance 79,309 58,998
Additions 14,917 6,983
Movement from Level 3 to Level 1* - (1,191)
Disposals (7,906) (6,043)
Accrued loan stock interest (80) 227
Realised gains 2,399 549
Unrealised (losses)/gains (2,908) 19,786
---------------- ----------------
Closing balance 85,730 79,309
---------------- ----------------
* This relates to Arecor Therapeutics PLC, which listed on the
AIM stock exchange during the prior 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. 71% 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 21% of the portfolio. This has
resulted in a total coverage of 92% 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 5.0x +0.5 897 0.69
---------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- -----------------
-0.5 (897) (0.69)
------------------------------------------------------------------------------------------------------------ ----- ------ ----------- -----------------
Revenue multiple Healthcare (including digital healthcare) Revenue multiple 5.4x +0.5 665 0.51
---------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- -----------------
-0.5 (665) (0.51)
------------------------------------------------------------------------------------------------------------ ----- ------ ----------- -----------------
Earnings multiple Healthcare (including digital healthcare) Earnings multiple 7.5x +0.5 109 0.08
---------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- -----------------
-0.5 (109) (0.08)
------------------------------------------------------------------------------------------------------------ ----- ------ ----------- -----------------
Renewable energy Discount rate 5.5% -0.5% 71 0.06
------------------------------------------ ----------------------------------------------------------------- ----- ------ ----------- -----------------
Third party valuation -- discounted cash flow +0.5% (65) (0.05)
-------------------------------------------------------------------------------------------------------------- ----- ------ ----------- -----------------
*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 GBP1,742,000 (2.5%)
or a decrease in the valuation of equity investments by
GBP1,736,000 (2.4%).
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 2022.
13. Current assets
31 December 2022 31 December 2021
Trade and other receivables GBP'000 GBP'000
-------------------------------------- ---------------- ----------------
Prepayments and accrued income 30 24
Other receivables 142 520
Deferred consideration under one year 134 226
Deferred consideration over one year 2,097 1,796
---------------- ----------------
2,403 2,566
---------------- ----------------
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 2022 31 December 2021
GBP'000 GBP'000
----------------------------- ---------------- ----------------
Accruals and deferred income 722 2,453
Trade payables - 6
722 2,459
---------------- ----------------
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
---------------------------------------------------- -------
116,747,394 Ordinary shares of 1 penny each at 31
December 2021 1,167
28,834,906 Ordinary shares of 1 penny each issued
during the year 288
145,582,300 Ordinary shares of 1 penny each at 31
December 2022 1,456
13,946,475 Ordinary shares of 1 penny each held in
treasury at 31 December 2021 (139)
2,522,073 Ordinary shares of 1 penny each purchased
during the year to be held in treasury (25)
16,468,548 Ordinary shares of 1 penny each held in
treasury at 31 December 2022 (165)
---------------------------------------------------- -------
Voting rights of 129,113,752 Ordinary shares of 1
penny each at 31 December 2022 1,291
---------------------------------------------------- -------
The Company purchased 2,522,073 shares (2021: 2,008,369) to be
held in treasury at a nominal value of GBP25,221 and a cost of
GBP2,244,000 (2021: GBP1,661,000) representing 1.7% of the shares
in issue on 31 December 2022, leading to a balance of 16,468,548
shares (2021: 13,946,475) in treasury representing 11.3% of the
shares in issue on 31 December 2022.
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
nominal
Number 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)
------------------- --------- --------- ----------------- --------- -------------------------------------------------
31 May 2022 548,418 5 94.78 501 90.00
30 September 2022 559,250 6 91.21 492 87.00
---------
1,107,668 993
Under the terms of the Albion VCTs Prospectus Top Up Offers
2021/22, 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)
---------- ---------- --------- ----------------- ------------- -------------------------------------------------
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 10,532 91.00
31 March
2022 7,756,832 78 97.50 7,374 91.00
11 April
2022 162,918 2 96.50 155 91.00
11 April
2022 24,223 - 97.00 23 91.00
11 April
2022 709,442 7 97.50 674 91.00
---------- -------------
21,554,599 20,491
Under the terms of the Albion VCTs Prospectus Top Up Offers
2022/23, 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)
---------- --------- --------- ----------------- ------------- -------------------------------------------------
2 December
2022 1,417,019 14 92.80 1,295 87.00
2 December
2022 278,687 3 93.20 255 87.00
2 December
2022 4,476,933 45 93.70 4,090 87.00
--------- -------------
6,172,639 5,640
16. Basic and diluted net asset value per share
31 December 2022 (pence 31 December 2021 (pence
per share) per share)
------------------------ ----------------------- ------------------------
Basic and diluted net
asset value per share 88.65 94.98
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 129,113,752 Ordinary shares as at 31 December 2022
(2021: 102,800,919).
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 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 GBP8,629,000. 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
GBP86,286,000 (2021: GBP80,500,000). Fixed asset investments form
75% of net asset value as at 31 December 2022 (2021: 82%).
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 GBP218,000 (2021:
GBP163,000). 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 6.4%
(2021: 7.7%). The weighted average period to maturity for the fixed
rate assets is approximately 4.4 years (2021: 4.9 years).
The Company's financial assets and liabilities, all denominated
in pounds sterling, consist of the following:
31 December 2022 31 December 2021
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 - - 70,536 70,536 - - 66,082 66,082
Quoted equity - - 556 556 - - 1,191 1,191
Unquoted loan
stock 14,261 175 758 15,194 12,594 175 458 13,227
Receivables* - - 2,373 2,373 - - 2,542 2,542
Current
liabilities - - (722) (722) - - (2,459) (2,459)
Cash - 26,491 - 26,491 - 17,032 - 17,032
------- ------------- -------------------- -------- ------------------- ------------- -------------------- --------
Total 14,261 26,666 73,501 114,428 12,594 17,207 67,814 97,615
------- ------------- -------------------- -------- ------------------- ------------- -------------------- --------
*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 83% 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 2022 was
limited to GBP15,194,000 (2021: GBP13,227,000) of unquoted loan
stock instruments, GBP26,491,000 (2021: GBP17,302,000) of cash
deposits with banks and GBP2,373,000 (2021: GBP2,542,000) of other
receivables.
At the Balance sheet date, the cash in bank and in hand held by
the Company were held with Lloyds Bank plc, Scottish Widows Bank
plc (part of Lloyds Banking Group), Barclays Bank plc, Bank of
Montreal, 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 GBP11,143,000 as at 31 December
2022 (2021: GBP9,490,000).
The Company had no committed borrowing facilities as at 31
December 2022 (2021: nil) and the Company had cash balances of
GBP26,491,000 (2021: GBP17,032,000). 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 GBP722,000 (2021:
GBP2,459,000).
The carrying value of loan stock investments, analysed by
expected maturity dates is as follows:
31 December 2022 31 December 2021
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 5,643 - 1,612 7,255 6,055 689 - 6,744
1-2 years 297 - 76 373 175 1 - 176
2-3 years 105 - - 105 261 7 - 268
3-5 years 2,629 - 123 2,752 762 - 97 859
5 + years 4,709 - - 4,709 5,180 - - 5,180
---------------- ----------------- -------- -------- ---------------- ----------------- -------- --------
Total 13,383 - 1,811 15,194 12,433 697 97 13,227
---------------- ----------------- -------- -------- ---------------- ----------------- -------- --------
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
GBP29,000 (2021: GBP1,202,000).
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 2022 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 2022, the Company had no financial commitments
(2021: GBPnil).
There were no contingent liabilities or guarantees given by the
Company as at 31 December 2022 (2021: GBPnil).
19. Post balance sheet events
Since the year end, the Company has not made any material
investment transactions.
On 2 March 2023, a post year end NAV update was announced with a
pleasing 5.25 pence per share uplift, representing a 5.92% increase
on the 31 December 2022 NAV. This uplift has resulted from a
portfolio company, Quantexa, undergoing an external fundraising
process after the year end. This transaction has since completed
and was announced by Quantexa on 4 April 2023.
The following new Ordinary shares of nominal value 1 penny each
were allotted under the Albion VCTs Prospectus Top Up Offers
2022/23 after 31 December 2022:
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)
---------- --------- --------- ----------------------- ------------- ---------------------------------------
31 March
2023 7,134,319 7 96.40 6,706 89.50
---------- --------- --------- ----------------------- ------------- ---------------------------------------
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 59 to 62 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 2022 and 31
December 2021, 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 2022, 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/31Dec2022.pdf.
Attachment
-- AADV - Split of portfolio by sector, stage of investment and number of
employees
https://ml-eu.globenewswire.com/Resource/Download/fcb3882d-795b-42d0-8119-f2f0eb1d0a8b
(END) Dow Jones Newswires
April 06, 2023 11:50 ET (15:50 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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