TIDMAAEV
Albion Enterprise VCT PLC
LEI number: 213800OVSRDHRJBMO720
As required by the UK Listing Authority's Disclosure Guidance and
Transparency Rules 4.1 and 6.3, Albion Enterprise VCT PLC today makes
public its information relating to the Annual Report and Financial
Statements for the year ended 31 March 2019.
This announcement was approved for release by the Board of Directors on
21 June 2019.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31 March
2019 (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/AAEV/31Mar19.pdf. The information contained in
the Annual Report and Financial Statements will include information as
required by the Disclosure Guidance and Transparency Rules, including
Rule 4.1.
Investment policy
Albion Enterprise VCT PLC (the "Company") is a Venture Capital Trust and
the investment objective of the Company is to provide investors with a
regular and predictable source of income, combined with the prospect of
longer term capital growth.
Investment policy
The Company will invest in a broad portfolio of higher growth businesses
across a variety of sectors of the UK economy including higher risk
technology companies. 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 both in terms of sector and
stage of maturity of company.
VCT qualifying and non-VCT qualifying investments
Application of the investment policy is designed to ensure that the
Company continues to qualify and is approved as a VCT by HM Revenue and
Customs ("VCT regulations"). The maximum amount invested in any one
company is limited to any HMRC annual investment limits. It is intended
that normally at least 80 per cent. of the Company's funds will be
invested in VCT qualifying investments. The VCT regulations also have an
impact on the type of investments and qualifying sectors in which the
Company can make investment.
Funds held prior to investing in VCT qualifying assets or for liquidity
purposes will be held as cash on deposit, invested in floating rate
notes or similar instruments with banks or other financial institutions
with high credit ratings or invested in liquid open-ended equity funds
providing income and capital equity exposure (where it is considered
economic to do so). Investment in such open-ended equity funds will not
exceed 10 per cent. of the Company's assets at the time of investment.
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
company is 15 per cent. 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 is represents a significantly
higher proportion of total assets prior to a realisation opportunity
being available.
Gearing
The Company's maximum exposure in relation to gearing is restricted to
10 per cent. of its adjusted share capital and reserves.
Financial calendar
Annual General Meeting Noon on 30 July 2019
Record date for first dividend 2 August 2019
Payment date for first dividend 30 August 2019
Announcement of half-yearly results for the six months December 2019
ending 30 September 2019
Payment date for second dividend (subject to Board 28 February 2020
approval)
Financial highlights
14.3p Total return per share for the year ended 31 March
2019
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13.1% Return on opening net asset value per share
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6.0p Total tax-free dividend per share paid during the
year ended 31 March 2019
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117.8p Net asset value per share as at 31 March 2019
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162.6p Total shareholder return since launch to 31 March
2019
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31 March 2019 31 March 2018
(pence per share) (pence per share)
Opening net asset value 109.46 101.79
Capital return 14.35 13.79
Revenue return (0.01) (0.39)
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Total return 14.34 13.40
Dividends paid (6.00) (5.00)
Impact of fundraising/ buybacks (0.04) (0.73)
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Net asset value 117.76 109.46
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Total shareholder return to 31 March 2019:
(Pence per share)
Total dividends paid during the year ended:
31 March 2008 0.70
31 March 2009 1.65
31 March 2010 2.00
31 March 2011 3.00
31 March 2012 3.00
31 March 2013 3.50
31 March 2014 5.00
31 March 2015 5.00
31 March 2016 5.00
31 March 2017 5.00
31 March 2018 5.00
31 March 2019 6.00
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Total dividends paid to 31 March 2019 44.85
Net asset value as at 31 March 2019 117.76
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Total shareholder return to 31 March 2019 162.61
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In addition to the dividends summarised above, the Board has declared a
first dividend for the year ending 31 March 2020, of 3.00 pence per
share to be paid on 30 August 2019 to shareholders on the register on 2
August 2019.
Notes
The dividend of 0.70 pence per share paid during the period ended 31
March 2008 and the first dividend of 0.40 pence per share paid during
the year ended 31 March 2009 were paid to shareholders who subscribed in
the 2006/2007 offer only.
Chairman's statement
Introduction
I am very pleased to report that the Company achieved a total return for
the year of 14.3 pence per share, following the 13.4 pence per share
total return for the previous year. This is the tenth consecutive year
the Company has delivered a positive return to shareholders. This
excellent result is due to the continued development of the investment
portfolio, with a number of the companies that we invest in growing
strongly.
Change of investment policy
A material change to the Company's investment policy was voted on by
shareholders at the last Annual General Meeting. The change in
investment policy was approved by shareholders with an encouraging 99.9%
of shares voted for the resolution. The Company's new investment policy
can be found above.
Investment performance and progress
During the year over GBP6.8 million of cash was invested in new and
existing companies. New investments were made into the following
companies during the year:
-- GBP474,000 into Phrasee, which provides an AI platform that generates
language to optimise marketing campaigns;
-- GBP430,000 into Avora, which develops software to improve decision making
through augmented analytics & machine learning;
-- GBP290,000 into Arecor, to fund the development of biopharmaceuticals,
specialising in diabetes treatment;
-- GBP210,000 into uMotif, which provides a patient engagement and data
platform for use in medical observational research;
-- GBP190,000 into Forward Clinical, a secure mobile communications and
collaboration platform in healthcare;
-- GBP160,000 into ePatient Network, (trading as Raremark), which provides
an online community connecting people affected by rare diseases with
up-to-date scientific information, community insights and medical
research; and
-- GBP100,000 into Healios, which provides online delivery of mental health
therapy services.
Follow-on investments were made into 13 portfolio companies, of which
the largest were: GBP1,312,000 into Egress Software Technologies,
GBP961,000 into Sandcroft Avenue, GBP400,000 into Locum's Nest, and
GBP396,000 into Quantexa.
During the year we completed the sale of Grapeshot and, should the full
escrow amount be received, we will acheive a ten times return on
original cost.
The main contributors to the GBP10.4 million of investment gains were
Egress (GBP3.3 million), Quantexa (GBP2.1 million), Proveca (GBP1.1
million), and Mirada (GBP1.0 million), all of which have been revalued
following new investment rounds, supported by external third party
investors. Radnor House School has continued to mature and delivered a
considerable uplift, of GBP0.8 million, following a third party
valuation during the year. Further details can be found in the Portfolio
of investments section on pages 19 and 20 of the full Annual Report and
Financial Statements.
Results and dividends
On 31 March 2019 the net asset value was 117.76 pence per share compared
to 109.46 pence per share on 31 March 2018. The total return before
taxation was GBP8.2 million compared to GBP7.1 million for the previous
year. The Company will pay a first dividend for the financial year
ending 31 March 2020 of 3.00 pence per share on 30 August 2019 to
shareholders on the register on 2 August 2019.
Further details can be found in the Strategic report below.
Transactions with the Manager
Albion Capital agreed to reduce a proportion of its management fee
relating to the investments made by the Company in the SVS Albion OLIM
UK Equity Income Fund ("OUEIF") by 0.75 per cent. per annum, which
represents the management fee charged by OLIM. This avoids double
counting of fees and resulted in a reduction of the management fee of
GBP18,000 (2018: GBP2,000). Further details on the investments in the
OUEIF can be found in note 20 and details of transactions that took
place with the Manager during the year can be found in note 5.
Risks and uncertainties
Other than investment performance, the key risks facing the Company are
from the broader economy, including changes to VCT rules. The outlook
for the UK and global economies, and the implications of the withdrawal
of the UK from the European Union continue to be the biggest risks for
the Company. An assessment has been done on a portfolio company level to
assess exposure to Europe, and appropriate actions, where possible, have
been implemented. The Manager continues to believe that there is merit
in focussing efforts to allocate resources to those sectors and
opportunities where growth can be both resilient and sustainable in
order to mitigate these risks.
A detailed analysis of the other risks and uncertainties facing the
business is shown in the Strategic report below.
Albion VCTs Top Up Offers
In January 2019, the Company announced the launch of the Albion VCTs
Prospectus Top Up Offers 2018/19. In aggregate, the Albion VCTs raised
GBP48 million across the VCTs managed by Albion Capital Group LLP.
The Company was pleased to announce on 2 April 2019 that it had reached
its GBP8m limit under its Offer which was fully subscribed and closed.
Further details of the amounts raised under offers open during the year
can be found in note 15 and note 19.
The funds raised by the Company pursuant to its Offer will be added to
the liquid resources available for investment, putting the Company into
a position to take advantage of investment opportunities over the next
two to three years. The proceeds of the Offers are being applied in
accordance with the Company's investment policy. The Company continues
to participate in the Top Up Offers and also benefits from receipts from
dividend reinvestment, the net proceeds of which are invested in new
investment opportunities and to provide additional working capital in
the Company. It is important that the Company continues to have cash
available for future investments and the Top Up Offers and dividend
reinvestments are important sources of that capital.
Annual General Meeting
The Annual General Meeting of the Company will be held at The
Charterhouse, Charterhouse Square, London EC1M 6AN at noon on 30 July
2019. Full details of the business to be conducted at the Annual General
Meeting are given in the Notice of the Meeting on page 64 of the full
Annual Report and Financial Statements. Please note that this is a new
location for the Annual General Meeting.
The Board welcomes your attendance at the meeting as it gives an
opportunity for shareholders to ask questions of the Board and the
Manager. If you are unable to attend the Annual General Meeting in
person, we would encourage you to make use of your proxy votes.
Outlook and prospect
Your Board sees the portfolio as well balanced across a variety of
growth sectors. Although recent changes to the Company's investment
policy may result in increased volatility within the portfolio, we
remain confident that the fundamentals in the companies within our
portfolio, and the new companies that we are backing, give the Company
the potential to continue to deliver positive shareholder returns.
Maxwell Packe
Chairman
21 June 2019
Strategic report
Investment policy
The Company will invest in a broad portfolio of higher growth businesses
across a variety of sectors of the UK economy including higher risk
technology companies. 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 both 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 shows the split of the
portfolio valuation as at 31 March 2019 by: sector; stage of investment;
and number of employees. Details of the principal investments made by
the Company are shown in the Portfolio of investments on pages 19 and 20
of the full Annual Report and Financial Statements.
Direction of portfolio
The analysis of the Company's investment portfolio shows that the IT and
other technology, healthcare, and renewable energy sectors continue to
be the largest elements of the portfolio.
We will continue to invest in higher growth technology companies in the
coming year, in line with our new investment policy. therefore we expect
IT and other technology and healthcare sectors to continue to be the
largest elements of the portfolio.
Results and dividend policy
GBP'000
Net capital gain for the year ended 31 March 2019 8,214
Net revenue return for the year ended 31 March 2019 (2)
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Total return for the year ended 31 March 2019 8,212
Dividend of 3.00 pence per share paid on 31 August
2018 (1,716)
Dividend of 3.00 pence per share paid on 28 February
2019 (1,716)
Transferred to reserves 4,780
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Net assets as at 31 March 2019 67,388
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Net asset value as at 31 March 2019 (pence per share) 117.76
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The Company paid dividends totalling 6.00 pence per share during the
year ended 31 March 2019 (2018: 5.00 pence per share). The Board has
declared a first dividend of 3.00 pence per share for the year ending 31
March 2020. This dividend will be paid on 30 August 2019 to shareholders
on the register on 2 August 2019.
As shown in the Company's Income statement below, the total return for
the year was 14.34 pence per share (2018: 13.40 pence per share).
Investment income increased to GBP992,000 (2018: GBP651,000) mainly due
to the resumption of loan stock interest payments from our solar
renewable portfolio companies, and distributions from the SVS Albion
OLIM UK Equity Income Fund.
The capital gain on investments for the year of GBP10,408,000 (2018:
GBP9,205,000), was mainly attributable to the upward unrealised
revaluations in the Company's investment portfolio, as detailed below in
the review of business and future changes section.
The Balance sheet below shows that the net asset value has increased
over the last year to 117.76 pence per share (2018: 109.46 pence per
share). This increase in net asset value is attributable to the total
return of 14.34 pence per share offset by the payment of 6.00 pence per
share of dividends.
There was a net cash outflow for the Company of GBP5,319,000 for the
year (2018: net outflow of GBP5,361,000), from the investment in current
and fixed asset investments, dividends paid, operating activities and
the buy-back of shares, offset by the disposal of fixed asset
investments and the issue of Ordinary shares under the Albion VCTs Top
Up Offers.
Review of business and future changes
A review of the Company's portfolio performance and progress during the
year is contained in the Chairman's statement above. Total gains on
investments for the year were GBP10.4 million (2018: GBP9.2 million).
These gains more than offset the reduction in value of a small number of
our investments, the largest being memsstar of GBP240,000 and Abcodia of
GBP166,000.
As we continue to invest in accordance with our new investment policy,
asset-based investments will continue to decrease as a proportion of the
portfolio, and greater emphasis will be given to growth and technology
investments. The Company continues with its objective to invest in
unquoted companies throughout the United Kingdom with a view to
providing both capital growth and a reliable dividend income to
shareholders over the long term.
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 portfolio is well balanced across sectors and risk classes
and the Board believes that the Company has a number of investments
which have strong prospects and the potential to continue to deliver
attractive returns to shareholders.
Key performance indicators
The Directors believe that the following key performance indicators,
which are typical for venture capital trusts, and used in their 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 key performance indicators give
a good indication that the Company is achieving its investment policy.
These are:
1. Total shareholder return relative to FTSE All Share Index total return
The graph on page 4 of the full Annual Report and Financial Statements
shows the Company's total shareholder return against the FTSE All-Share
Index total return, with dividends reinvested.
1. Net asset value per share and total shareholder return
Net asset value per share increased by 7.6% to 117.76 pence per share
for the year ended 31 March 2019.
Total shareholder return increased by 14.3 pence to 162.61 pence per
Ordinary share for the year ended 31 March 2019 (13.1% on opening net
asset value).
1. Dividend distributions
Dividends paid in respect of the year ended 31 March 2019 were 6.00
pence per share (2018: 5.00 pence per share), a yield of 5.5% on opening
net asset value. The cumulative dividend paid since inception is 44.85
pence per share.
1. Ongoing charges
The ongoing charges ratio for the year ended 31 March 2019 was 2.9%
(2018: 2.9%) against a cap of 3.0%. The ongoing charges ratio has been
calculated using The Association of Investment Companies' (AIC)
recommended methodology. This figure shows shareholders the total
recurring annual running expenses (including investment management fees
charged to capital reserve) as a percentage of the average net assets
attributable to shareholders. The Directors expect the ongoing charges
ratio for the year ahead to be approximately 2.9%.
1. VCT regulation
The investment policy is designed to ensure that the Company continues
to qualify and is approved as a VCT by HMRC. In order to maintain its
status under Venture Capital Trust legislation, a VCT must comply on a
continuing basis with the provisions of Section 274 of the Income Tax
Act 2007, details of which are provided in the Directors' report on page
27 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 March 2019. These showed
that the Company has complied with all tests and continues to do so.
Gearing
As defined by the Articles of Association, the Company's maximum
exposure in relation to gearing is restricted to 10 per cent. of its
adjusted share capital and reserves. The Directors do not currently have
any intention to utilise gearing for the Company.
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 Management agreement, the Manager provides investment
management, secretarial and administrative services to the Company. The
Management agreement can be terminated by either party on 12 months'
notice. The Management agreement 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 2.5 per cent. of the net asset
value of the Company, payable quarterly in arrears. Total annual
expenses, including the management fee, are limited to 3.0 per cent. of
the net asset value.
Additionally, Albion Capital agreed to reduce that proportion of its
management fee relating to the investment in the SVS Albion OLIM UK
Equity Income Fund ("OUEIF") by 0.75 per cent., which represents the
OUEIF management fee charged by OLIM to avoid any double charging for
the investment exposure.
In line with common practice, the Manager is also entitled to an
arrangement fee, payable by each portfolio company, of approximately 2
per cent. on each new investment made and monitoring fees where the
Manager has a representative on the portfolio company's board.
Management performance incentive fee
In order to provide the Manager with an incentive to maximise the return
to investors, the Company has entered into 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 per cent. of such excess return that is calculated for each
financial year.
The minimum target level, comprising dividends and net asset value, will
be equivalent to an annualised rate of return of the average base rate
of the Royal Bank of Scotland plc plus 2 per cent. per annum on the
original subscription price of GBP1. Any shortfall of the target return
will be carried forward into subsequent periods and the incentive fee
will only be paid once all previous and current target returns have been
met.
For the year ended 31 March 2019, the total return of the Company since
launch (the performance incentive fee start date) amounted to 162.61
pence per share, compared to the hurdle of 150.98 pence per share. As a
result, a performance incentive fee is payable to the Manager of
GBP1,332,000 (2018: GBP1,100,000).
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 70
per cent. (to be 80 per cent. in respect of accounting periods starting
on or after 6 April 2019) qualifying investment holdings requirement for
the Venture Capital Trust status, the long term prospects of current
investments, a review of the Management agreement and the services
provided therein, and benchmarking the performance and remuneration of
the Manager to other service providers.
The Board believes that it is in the interest 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
June 2014 as required by the AIFMD. The Manager became a full-scope
Alternative Investment Fund Manager under the AIFMD on 1 October 2018.
As a result, from that date, Ocorian (UK) Limited was appointed as
Depository to oversee the custody and cash arrangements and provide
other AIFMD duties with respect to the Company.
Share buy-backs
It remains the Board's policy to buy back shares in the market, subject
to the overall constraint that such purchases are in the Company's
interest, including the maintenance of sufficient resources for
investment in new and existing portfolio companies and the continued
payment of dividends to shareholders.
It is the Board's intention for such buy-backs to be in the region of a
5 per cent. discount to net asset value, so far as market conditions and
liquidity permit.
Further details of shares bought back during the year ended 31 March
2019 can be found in note 15 of the Financial Statements.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Companies
Act 2006 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
policies in these matters and as such these requirements do not apply.
General Data Protection Regulation
The General Data Protection Regulation came into effect on 25 May 2018
with the objective of unifying data privacy requirements across the
European Union. The Manager, Albion Capital Group LLP, has taken action
to ensure that the Manager and the Company are compliant with the
regulation.
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
and these are set out in the Directors' report on pages 27 and 28 of the
full Annual Report and Financial Statements.
Risk management
The Board carries out a robust review of the risk environment in which
the Company operates. The principal risks and uncertainties of the
Company as identified by the Board and how they are managed are as
follows:
Risk Possible consequence Risk management
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Investment, The risk of investment in poor quality assets, which To reduce this risk, the Board places reliance upon
performance could reduce returns to shareholders, and could negatively the skills and expertise of the Manager and its track
and impact on the Company's current and future valuations. record over many years of making successful investments
valuation By nature, smaller unquoted businesses, such as those in this segment of the market. In addition, the Manager
risk that qualify for venture capital trust purposes, are operates a formal and structured investment appraisal
more volatile than larger, long established businesses. and review process, which includes an Investment Committee,
Investments in open-ended equity funds result in exposure comprising investment professionals from the Manager
to market risk through movements in price per unit. and at least one external investment professional.
The Company's investment valuation methodology is The Manager also invites and takes account of comments
reliant on the accuracy and completeness of information from non-executive Directors of the Company on matters
that is issued by portfolio companies. In particular, discussed at the Investment Committee meetings. Investments
the Directors may not be aware of or take into account are actively and regularly monitored by the Manager
certain events or circumstances which occur after (investment managers normally sit on portfolio company
the information issued by such companies is reported. 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 reviews the deployment of cash resources
into equity markets, the extent of exposure and performance
of the exposure.
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. 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.
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VCT The Company must comply with section 274 of the Income To reduce this risk, the Board has appointed the Manager,
approval Tax Act 2007 which enables its investors to take advantage which has a team with significant experience in venture
risk of tax relief on their investment and on future returns. capital trust management and are used to operating
Breach of any of the rules enabling the Company to within the requirements of the venture capital trust
hold VCT status could result in the loss of that status. legislation. 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.
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Regulatory The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
and and is required to comply with the rules of the UK at senior levels within or advising quoted companies.
compliance Listing Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
risk Accounting Standards and other legislation. Failure updates on new regulation, including legislation on
to comply with these regulations could result in a the management of the Company, from its auditor, lawyers
delisting of the Company's shares, or other penalties and other professional bodies. The Company is subject
under the Companies Act or from financial reporting to compliance checks through the Manager's compliance
oversight bodies. officer. The Manager reports monthly to its Board
on any issues arising from compliance or regulation.
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.
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Operational The Company relies on a number of third parties, in The Company and its operations are subject to a series
and particular the Manager, for the provision of investment of rigorous internal controls and review procedures
internal management and administrative functions. Failures exercised throughout the year, and receives reports
control in key systems and controls within the Manager's business from the Manager on internal controls and risk management,
risk could place assets of the Company at risk or result including on matters relating to cyber security.
in reduced or inaccurate information being passed The Audit Committee reviews the Internal Audit Reports
to the Board or to shareholders. prepared by the Manager's internal auditors, PKF Littlejohn
LLP and has access to the internal audit partner of
PKF Littlejohn LLP to provide an opportunity to 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.
From 1 October 2018, Ocorian (UK) Limited was appointed
as Depository to oversee the custody and cash arrangements
and provide other AIFMD duties. The Board reviews
the quarterly reports prepared by Ocorian (UK) Limited
to ensure that Albion Capital is adhering to its policies
and procedures as required by the AIFMD.
In addition, the Board regularly 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 policies. The Manager and other service
providers have also demonstrated to the Board that
there is no undue reliance placed upon any one individual.
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Economic Changes in economic conditions, including, for example, The Company invests in a diversified portfolio of
and interest rates, rates of inflation, industry conditions, companies across a number of industry sectors and
political competition, political and diplomatic events and other in addition often invests a mixture of instruments
risk factors could substantially and adversely affect the in portfolio companies and has a policy of not normally
Company's prospects in a number of ways. permitting any external bank borrowings within portfolio
companies. At any given time, the Company has sufficient
cash resources to meet its operating requirements,
including share buybacks and follow on investments.
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Market The market value of Ordinary shares can fluctuate. The Company operates a share buyback policy, which
value of The market value of an Ordinary share, as well as is designed to limit the discount at which the Ordinary
Ordinary being affected by its net asset value and prospective shares trade to around 5 per cent. to net asset value,
shares net asset value, also takes into account its dividend by providing a purchaser through the Company in absence
yield and prevailing interest rates. As such, the of market purchasers. From time to time buybacks cannot
market value of an Ordinary share may vary considerably be applied, for example when the Company is subject
from its underlying net asset value. The market prices to a close period, or if it were to exhaust any buyback
of shares in quoted investment companies can, therefore, authorities.
be at a discount or premium to the net asset value New Ordinary shares are issued at sufficient premium
at different times, depending on supply and demand, to net asset value to cover the costs of issue and
market conditions, general investor sentiment and to avoid asset value dilution to existing investors.
other factors. Accordingly the market price of the
Ordinary shares may not fully reflect their underlying
net asset value.
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Viability statement
In accordance with the FRC UK Corporate Governance Code published in
2016 and principle 21 of the AIC Code of Corporate Governance, the
Directors have assessed the prospects of the Company over three years to
31 March 2022. The Directors believe that three years is a reasonable
period in which they can assess the future of the Company to continue to
operate and meet its liabilities as they fall due and is also the period
used by the Board in the strategic planning process and is considered
reasonable for a business of our nature and size. The three year period
is considered the most appropriate given the forecasts that the Board
require from the Manager and the estimated timelines for finding,
assessing and completing investments.
The Directors have carried out a robust assessment of the principal
risks facing the Company as explained above, including those that could
threaten its business model, future performance, solvency or liquidity.
The Board also considered the risk management processes in place to
avoid or reduce the impact of the underlying risks. The Board focused on
the major factors which affect the economic, regulatory and political
environment. The Board deliberated over the importance of the Manager
and the processes that they have in place for dealing with the principal
risks.
The Board assessed the ability of the Company to raise finance. The
portfolio is well balanced and geared towards long term growth
delivering dividends and capital growth to shareholders. In assessing
the prospects of the Company, the Directors have considered the cash
flow by looking at the Company's income and expenditure projections and
funding pipeline over the assessment period of three years and they
appear realistic.
Taking into account the processes for mitigating risks, monitoring costs,
share price discount, the Manager's compliance with the investment
objective, policies and business model and the balance of the portfolio
the Directors have 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 March
2022.
This Strategic report of the Company for the year ended 31 March 2019
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
Maxwell Packe
Chairman
21 June 2019
Responsibility Statement
In preparing these financial statements for the year ended 31 March
2019, the Directors of the Company, being Maxwell Packe, Lord St John of
Bletso, Lady Balfour of Burleigh, Christopher Burrows 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 March
2019 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 31 within the full audited Annual Report and Financial Statements.
On behalf of the Board,
Maxwell Packe
Chairman
21 June 2019
Income statement
Year ended Year ended
31 March 2019 31 March 2018
------------------------------------------------------------ ---- ------------------------- -------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------ ---- ------- ------- ------- ------- ------- -------
Gains on investments 3 - 10,408 10,408 - 9,205 9,205
Investment income 4 992 - 992 651 - 651
Investment management fees 5 (398) (1,195) (1,593) (342) (1,027) (1,369)
Performance incentive fee 5 (333) (999) (1,332) (275) (825) (1,100)
Other expenses 6 (263) - (263) (241) - (241)
------- ------- ------- ------- ------- -------
Return/(loss) on ordinary activities before taxation (2) 8,214 8,212 (207) 7,353 7,146
Tax on ordinary activities 8 - - - - - -
------- ------- ------- ------- ------- -------
Return/(loss) and total comprehensive income attributable
to shareholders (2) 8,214 8,212 (207) 7,353 7,146
------- ------- ------- ------- ------- -------
Basic and diluted return/(loss) per share (pence)* 10 (0.01) 14.35 14.34 (0.39) 13.79 13.40
------------------------------------------------------------ ---- ------- ------- ------- ------- ------- -------
* adjusted for treasury shares
The accompanying notes below 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 March 31 March
2019 2018
Note GBP'000 GBP'000
---------------------------------------------------- ---- -------- --------
Fixed asset investments 11 59,146 52,436
Current assets
Current asset investments 13 3,642 1,127
Trade and other receivables less than one year 13 1,974 105
Cash and cash equivalents 4,441 9,760
-------- --------
10,057 10,992
-------- --------
Total assets 69,203 63,428
Payables: amounts falling due within one year
Trade and other payables less than one year 14 (1,815) (1,557)
-------- --------
Total assets less current liabilities 67,388 61,871
-------- --------
Equity attributable to equity holders
Called up share capital 15 650 638
Share premium 30,255 28,945
Capital redemption reserve 104 104
Unrealised capital reserve 18,672 17,657
Realised capital reserve 8,089 890
Other distributable reserve 9,618 13,637
-------- --------
Total equity shareholders' funds 67,388 61,871
-------- --------
Basic and diluted net asset value per share (pence)
* 16 117.76 109.46
---------------------------------------------------- ---- -------- --------
* excluding treasury shares
The accompanying notes below form an integral part of these Financial
Statements.
These Financial Statements were approved by the Board of Directors, and
were authorised for issue on 21 June 2019 and were signed on its behalf
by
Maxwell Packe
Chairman
Company number: 05990732
Statement of changes in equity
Called up Unrealised Realised
share Share capital capital Other distributable
capital premium Capital redemption reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- --------- -------- ---------------------------- ---------- --------- ------------------- --------
As at 1 April 2018 638 28,945 104 17,657 890 13,637 61,871
Return/(loss) and total comprehensive income for the
year - - - 9,835 (1,621) (2) 8,212
Transfer of previously unrealised gains on disposal
of investments - - - (8,820) 8,820 - -
Issue of equity 12 1,333 - - - - 1,345
Cost of issue of equity - (23) - - - - (23)
Purchase of own shares for treasury - - - - - (585) (585)
Dividends paid - - - - - (3,432) (3,432)
As at 31 March 2019 650 30,255 104 18,672 8,089 9,618 67,388
----------------------------------------------------- --------- -------- ---------------------------- ---------- --------- ------------------- --------
As at 1 April 2017 580 23,225 104 9,910 1,284 17,355 52,458
Return/(loss) and total comprehensive income for the
year - - - 8,852 (1,499) (207) 7,146
Transfer of previously unrealised gains on disposal
of investments - - - (1,105) 1,105 - -
Issue of equity 58 5,845 - - - - 5,903
Cost of issue of equity - (125) - - - - (125)
Purchase of own shares for treasury - - - - - (800) (800)
Dividends paid - - - - - (2,711) (2,711)
As at 31 March 2018 638 28,945 104 17,657 890 13,637 61,871
----------------------------------------------------- --------- -------- ---------------------------- ---------- --------- ------------------- --------
* These reserves amount to GBP17,707,000 (2018: GBP14,527,000) which is
considered distributable.
Statement of cash flows
Year ended Year ended
31 March 2019 31 March 2018
GBP'000 GBP'000
------------------------------------------- -------------- --------------
Cash flow from operating activities
Investment income received 773 581
Dividend income received 170 39
Deposit interest received 38 12
Investment management fee paid (1,568) (1,312)
Performance incentive fee paid (1,100) (255)
Other cash payments (261) (236)
Net cash flow from operating activities (1,948) (1,171)
Cash flow from investing activities
Purchase of current asset investments (2,600) (1,200)
Purchase of fixed asset investments (6,824) (7,143)
Disposal of fixed asset investments 8,748 1,907
Net cash flow from investing activities (676) (6,436)
Cash flow from financing activities
Issue of share capital 793 5,359
Cost of issue of equity (3) (3)
Dividends paid (2,900) (2,289)
Purchase of own shares (including costs) (585) (821)
-------------- --------------
Net cash flow from financing activities (2,695) 2,246
Decrease in cash and cash equivalents (5,319) (5,361)
Cash and cash equivalents at start of the
year 9,760 15,121
-------------- --------------
Cash and cash equivalents at end of the year 4,441 9,760
Cash and cash equivalents comprise
Cash at bank 4,441 9,760
Cash equivalents - -
-------------- --------------
Total cash and cash equivalents 4,441 9,760
Notes to the Financial Statements
1. Accounting convention
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 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"). The Company values investments by following the International
Private Equity and Venture Capital Valuation ("IPEV") Guidelines and
further detail on the valuation techniques used are outlined in note 2
below.
Company information can be found on page 2 of the full Annual Report and
Financial Statements.
2. Accounting policies
Fixed and current 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 per cent. 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 classified 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, including liquid open-ended
equity funds, are valued at their bid prices at the end of the accounting
period 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 the Company has an
investment in an early stage enterprise, the price of a recent investment
is often the most appropriate approach to determining fair value.
-- In situations where cost or price of recent investment is used,
consideration is given to the circumstances of the portfolio company
since that date in determining fair value. This includes consideration
of whether there is any evidence of deterioration or strong definable
evidence of an increase in value. In the absence of these indicators, the
investment in question is valued at the amount reported at the previous
reporting date. Examples of events or changes that could indicate a
diminution include:
-- the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was
based;
-- a significant adverse change either in the portfolio company's
business or in the technological, market, economic, legal or
regulatory environment in which the business operates; or
-- market conditions have deteriorated, which may be indicated by a
fall in the share prices of quoted businesses operating in the
same or related sectors.
Investments are recognised as financial assets on legal completion of
the investment contract and are de-recognised on legal completion of the
sale of an investment.
Dividend income is not recognised as part of the fair value movement of
an investment, but is recognised separately as investment income through
the other distributable reserve when a share becomes ex-dividend.
Other current assets and payables
Receivables and payables and cash are carried at amortised cost, in
accordance with FRS 102. 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 accrual basis using the rate of
interest agreed with the bank.
Investment management fees and other 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:
-- 75 per cent. of management fees are allocated to the capital account to
the extent that these relate to an enhancement in the value of the
investments. This is in line with the Board's expectation that over the
long term 75 per cent. of the Company's investment returns will be in the
form of capital gains; and
-- expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Performance incentive fee
Any performance incentive fee will be allocated between other
distributable and realised capital reserves based upon the proportion to
which the calculation of the fee is attributable to revenue and capital
returns.
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.
Reserves
Share premium reserve
This reserve accounts for the difference between the price paid for
shares and the nominal value of the shares, less issue costs.
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;
-- 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 2013 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 in the period in which the
dividend is paid or approved at the Annual General Meeting.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
operating segment of business, being investment in smaller companies
principally based in the UK.
3. Gains on investments
Year ended Year ended
31 March 2019 31 March 2018
GBP'000 GBP'000
---------------------------------------------- -------------- --------------
Unrealised gains on fixed asset investments 9,919 8,925
Unrealised losses on current asset investments (84) (73)
Realised gains on fixed asset investments 573 353
10,408 9,205
-------------- --------------
4. Investment income
Year ended Year ended
31 March 2019 31 March 2018
GBP'000 GBP'000
Interest from loans to portfolio companies 785 599
Dividends 170 39
Bank interest 37 13
992 651
-------------- --------------
5. Investment management fees
Year ended Year ended
31 March 2019 31 March 2018
GBP'000 GBP'000
Investment management fee charged to revenue 398 342
Investment management fee charged to capital 1,195 1,027
Performance incentive fee charged to revenue 333 275
Performance incentive fee charged to capital 999 825
-------------- --------------
2,925 2,469
-------------- --------------
Further details of the Management agreement under which the investment
management fee and performance incentive fee are paid is given in the
Strategic report above.
During the year, services of a total value of GBP1,593,000 (2018:
GBP1,369,000) were purchased by the Company from Albion Capital Group
LLP in respect of management fees. In addition, a performance incentive
fee with a value of GBP1,332,000 (2018: GBP1,100,000) has been disclosed
in the Income statement. At the financial year end, the amount due to
Albion Capital Group LLP in respect of these services disclosed as
accruals and deferred income was GBP1,747,000 (2018: GBP1,485,000).
Patrick Reeve is the chairman of the Manager, Albion Capital Group LLP.
During the year, the Company was charged by Albion Capital Group LLP
GBP6,000 including VAT (2018: GBP24,000) in respect of his services as a
Director. From 30 June 2018, Patrick Reeve agreed to waive his fees for
his services as a Director.
Albion Capital Group LLP, its partners and staff hold a total of 368,104
shares in the Company as at 31 March 2019.
The Manager is, from time to time, eligible to receive arrangement fees
and monitoring fees from portfolio companies. During the year ended 31
March 2019, fees of GBP201,000 attributable to the investments of the
Company were received pursuant to these arrangements (2018: GBP232,000).
The Company has entered into an offer agreement relating to the Offers
with the Company's investment manager Albion Capital Group LLP, pursuant
to which Albion Capital will receive a fee of 2.5 per cent. of the gross
proceeds of the Offers and out of which Albion Capital will pay the
costs of the Offers, as detailed in the Prospectus.
During the period an amount of GBP2,600,000 (2018: GBP1,200,000) was
invested in the SVS Albion OLIM UK Equity Income Fund ("OUEIF") as part
of the Company's management of surplus liquid funds. To avoid double
charging, Albion agreed to reduce its management fee relating to the
investment in the OUEIF by 0.75 per cent., which represents the OUEIF
management fee charged by OLIM. This resulted in a reduction of the
management fee of GBP18,000 (2018: GBP2,000).
6. Other expenses
Year ended Year ended
31 March 2019 31 March 2018
GBP'000 GBP'000
Directors' fees and associated costs (inclusive of
NIC and VAT) 98 96
Auditor's remuneration for statutory audit services
(exclusive of VAT) 28 28
Other administrative expenses 137 117
-------------- --------------
263 241
-------------- --------------
7. Directors' fees and associated costs
The amounts paid to and on behalf of the Directors during the year are
as follows:
Year ended Year ended
31 March 2019 31 March 2018
GBP'000 GBP'000
Directors' fees 91 86
National insurance and/or VAT 7 10
98 96
-------------- --------------
The Company's key management personnel are the Directors. Further
information regarding Directors' remuneration can be found in the
Directors' remuneration report on pages 37 to 39 of the full Annual
Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
31 March 2019 31 March 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- -------- -------- -------- -------- --------
UK corporation tax - - - - - -
in respect of the
current year
-------- -------- -------- -------- -------- --------
Year ended Year ended
31 March 2019 31 March 2018
Factors affecting the tax charge GBP'000 GBP'000
-------------- --------------
Return on ordinary activities before tax 8,212 7,146
-------------- --------------
Tax charge on profit at the standard companies rate
of 19% (2018: 19%) 1,560 1,358
Factors affecting the charge:
Non taxable gains (1,977) (1,749)
Non taxable income (32) (7)
Unutilised management expenses 449 398
- -
-------------- --------------
The tax charge for the year shown in the Income statement is lower than
the standard company's rate of corporation tax in the UK of 19 per cent.
(2018: 19 per cent.). The differences are explained above. The Company
has excess management expenses of GBP5,241,000 (2018: GBP2,878,000) that
are available for offset against future profits. A deferred tax asset of
GBP891,000 (2018: GBP489,000) has not been recognised in respect of
those losses as they will be recoverable only to the extent that the
Company has sufficient future taxable profits.
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.
9. Dividends
Year ended Year ended
31 March 2019 31 March 2018
GBP'000 GBP'000
---------------------------------------------- -------------- --------------
Dividend of 2.50p per share paid on 31 August
2017 - 1,294
Dividend of 2.50p per share paid on 28
February 2018 - 1,417
Dividend of 3.00p per share paid on 31 August
2018 1,716 -
Dividend of 3.00p per share paid on 28
February 2019 1,716 -
3,432 2,711
-------------- --------------
Details of the consideration issued under the Dividend Reinvestment
Scheme included in the dividends above can be found in note 15.
In addition to the dividends summarised above, the Board has declared a
first dividend for the year ending 31 March 2020 of 3.00 pence per share
to be paid on 30 August 2019 to shareholders on the register on 2 August
2019. The total dividend will be approximately GBP1,919,000.
10. Basic and diluted return per share
Year ended Year ended
31 March 2019 31 March 2018
Revenue Capital Total Revenue Capital Total
-------------------------------------------------------- ------- ------- ----- ------- ------- -----
The return per share has been based on the following
figures:
Return/(loss) attributable to equity shares (GBP'000) (2) 8,214 8,212 (207) 7,353 7,146
Weighted average shares in issue (adjusted for treasury
shares) 57,257,089 53,333,261
Return/(loss) attributable per equity share (pence) (0.01) 14.35 14.34 (0.39) 13.79 13.40
There are no convertible instruments, derivatives or contingent share
agreements in issue for the Company, and therefore no dilution affecting
the return per share. The basic return per share is therefore the same
as the diluted return per share.
The weighted average number of shares is calculated after adjusting for
treasury shares of 7,821,443 (2018: 7,270,443).
11. Fixed asset investments
31 March 2019 31 March 2018
GBP'000 GBP'000
Investments held at fair value through profit or loss
Unquoted equity and preference shares 42,802 34,581
Quoted equity 289 237
Unquoted loan stock 16,055 17,618
------------- ---------------
59,146 52,436
------------- ---------------
31 March 2019 31 March 2018
GBP'000 GBP'000
------------------------------------------------------ ------------- -------------
Opening valuation 52,436 37,775
Purchases at cost 8,570 8,200
Disposal proceeds (12,344) (2,834)
Realised gains 573 353
Movement in loan stock revenue accrued income (8) 17
Unrealised gains 9,919 8,925
------------- -------------
Closing valuation 59,146 52,436
------------- -------------
Movement in loan stock revenue accrued income
Opening accumulated movement in loan stock revenue
accrued income 233 216
Movement in loan stock revenue accrued income (8) 17
------------- -------------
Closing accumulated movement in loan stock revenue
accrued income 225 233
------------- -------------
Movement in unrealised gains
Opening accumulated unrealised gains 17,730 9,910
Movement in unrealised gains 9,919 8,925
Transfer of previously unrealised gains to realised
reserve on disposal of investments (8,820) (1,105)
------------- -------------
Closing accumulated unrealised gains 18,829 17,730
------------- -------------
Historic cost basis
Opening book cost 34,473 27,649
Purchases at cost 8,570 8,200
Sales at cost (2,951) (1,376)
------------- -------------
Closing book cost 40,092 34,473
------------- -------------
The Company does not hold any assets as the result of an enforcement of
security during the period, and believes that the carrying values for
both impaired and past due assets are covered by the value of security
held for these loan stock investments.
Unquoted fixed asset investments are valued at fair value in accordance
with the IPEV guidelines as follows:
31 March 31 March
2019 2018
Valuation methodology GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Cost and price of recent investment (reviewed for
impairment or uplift) 32,632 16,727
Third party valuation -- Earnings multiple 10,687 9,732
Third party valuation -- Discounted cash flow 6,966 8,538
Revenue multiple 5,681 7,007
Offer price 1,853 9,451
Earnings multiple 956 662
Net assets 82 82
58,857 52,199
------------ ------------
Fair value investments had the following movements between valuation
methodologies between 31 March 2018 and 31 March 2019:
Change in valuation methodology (2018 to 2019) Value as at Explanatory
31 March 2019 note
GBP'000
------------------------------------------------------ -------------- -----------
Revenue multiple to price of recent investment 6,499 Recent
external
funding
round
Third party valuation -- discounted cash flow to Offer 1,853 Third party
price offer
accepted
Cost to revenue multiple 950 More
relevant
information
available
Cost to earnings multiple 564 More
relevant
information
available
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, there are no other more relevant methods of valuation
which would be reasonable as at 31 March 2019.
FRS 102 and the SORP requires the Company to disclose the inputs to the
valuation methods applied to its investments measured at fair value
through profit or loss in a fair value hierarchy. The table below sets
out fair value hierarchy definitions using FRS102 s.11.27.
Fair value hierarchy Definition
-------------------- ----------------------------------------------------
Level 1 Unadjusted quoted prices in an active market
-------------------- ----------------------------------------------------
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
-------------------- ----------------------------------------------------
Level 3 Inputs to valuations not based on observable market
data
-------------------- ----------------------------------------------------
Quoted investments are valued according to Level 1 valuation methods.
Unquoted equity, preference shares and loan stock are all valued
according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3) had the
following movements in the year to 31 March 2019:
31 March 2019 31 March 2018
GBP'000 GBP'000
----------------------------- -------- -------------
Opening balance 52,199 37,407
Additions 8,570 8,200
Disposals (12,344) (2,834)
Realised gains 573 353
Accrued loan stock interest (8) 17
Unrealised gains 9,867 9,056
-------- -------------
Closing balance 58,857 52,199
-------- -------------
FRS 102 requires the Directors to consider the impact of changing one or
more of the inputs used as part of the valuation process to reasonable
possible alternative assumptions. 76 per cent. of the portfolio of
investments is based on cost or recent investment price, offer price or
is loan stock, and as such the Board considers that the assumptions used
for their valuations are the most reasonable. The Directors believe that
changes to reasonable possible alternative assumptions (by adjusting the
revenue and earnings multiples) for the valuations of the remainder of
the portfolio companies could result in an increase in the valuation of
investments by GBP525,000 or a decrease in the valuation of investments
by GBP525,000. For valuations based on earnings and revenue multiples,
the Board considers that the most significant input is the
price/earnings ratio; for valuations based on third party valuations,
the Board considers that the most significant inputs are price/earnings
ratio, discount factors and market values for buildings; which have been
adjusted to drive the above sensitivities.
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 take a controlling interest or become
involved in the management of a portfolio company. The size and
structure of the 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 investments listed below are held as part of
an investment portfolio and therefore, as permitted by FRS 102 section
9.9B, they are measured at fair value through profit and loss and not
accounted for using the equity method.
The Company has interests of greater than 20 per cent. of the nominal
value of any class of the allotted shares in the portfolio company as at
31 March 2019 as described below:
Registered % class
address and and % total
country of Principal Profit/(loss) before tax Aggregate capital and reserves share voting
Company incorporation activity GBP'000 GBP'000 Result for year ended type rights
------------ -------------- ---------- ------------------------- ------------------------------ ----------------------- -------- -------
Owner and
operator
Greenenerco of a wind 28.6% A
Limited EC2R 7AF, UK project n/a* 464 31 March 2018 Ordinary 28.6%
------------ -------------- ---------- ------------------------- ------------------------------ ----------------------- -------- -------
*The company files filleted accounts which do not disclose this
information.
13. Current assets
Current asset investments 31 March 2019 31 March 2018
GBP'000 GBP'000
-------------------------------------- ------------- -------------
SVS Albion OLIM UK Equity Income Fund 3,642 1,127
Current asset investments at 31 March 2019 consist of cash invested in
SVS Albion OLIM UK Equity Income Fund and is capable of realisation
within 7 days. These are valued using the level 1 fair value hierarchy
as defined in note 11.
Trade and other receivables less than one year 31 March 2019 31 March 2018
GBP'000 GBP'000
----------------------------------------------- ------------- -------------
Deferred consideration on disposed investments 1,519 97
Investments awaiting completion* 441 -
Prepayments and accrued income 8 8
Other debtors 6 -
------------- -------------
1,974 105
------------- -------------
The Directors consider that the carrying amount of receivables is not
materially different to their fair value. Deferred consideration
predominantly relates to Grapeshot Limited with proceeds expected in
November 2019.
*Investments awaiting completion consisted of Limitless Technology
Limited and Imandra Inc which both completed in April 2019 and can be
found in note 19.
14. Payables: amounts falling due within one year
31 March 2019 31 March 2018
GBP'000 GBP'000
----------------------------- ------------- -------------
Trade payables 10 11
Accruals and deferred income 1,805 1,546
1,815 1,557
------------- -------------
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 GBP'000
----------------------------------------------------------- -------
63,794,152 Ordinary shares of 1 penny each at 31 March
2018 638
1,253,351 Ordinary shares of 1 penny each issued during
the year 12
----------------------------------------------------------- -------
65,047,503 Ordinary shares of 1 penny each at 31 March
2019 650
----------------------------------------------------------- -------
7,270,443 Ordinary shares of 1 penny each held in
treasury at 31 March 2018 (72)
551,000 Ordinary shares purchased during the year
to be held in treasury (6)
----------------------------------------------------------- -------
7,821,443 Ordinary shares of 1 penny each held in
treasury at 31 March 2019 (78)
----------------------------------------------------------- -------
57,226,060 Ordinary shares of 1 penny each in circulation*
at 31 March 2019 572
----------------------------------------------------------- -------
*Carrying one vote each
The Company purchased 551,000 shares (2018: 841,000) to be held in
treasury at a nominal value of GBP5,510 and a cost of GBP585,000 (2018:
GBP800,000) representing 0.8 per cent. of the shares in issue as at 31
March 2019, leading to a balance of 7,821,443 shares (2018: 7,270,443)
in treasury representing 12.0 per cent. (2018: 11.4 per cent.) of the
shares in issue as at 31 March 2019.
Under the terms of the Dividend Reinvestment Scheme Circular (dated 26
November 2009), the following new Ordinary shares of nominal value 1
penny each were allotted during the year:
Aggregate
nominal value Net
Date of Number of of shares Issue price invested Opening market price on allotment date (pence per
allotment shares allotted (GBP'000) (pence per share) (GBP'000) share)
---------- ---------------- -------------- ------------------ ---------- -------------------------------------------------
31 August
2018 244,513 2 110.24 268 108.00
28
February
2019 226,503 2 115.94 261 110.00
---------------- ----------
471,016 529
---------------- ----------
During the year the following new Ordinary shares of nominal value 1
penny each were allotted under the terms of the Albion VCTs Prospectus
Top Up Offers 2017/18:
Aggregate Net
nominal value consideration
Date of Number of of shares Issue price received Opening market price on allotment date (pence per
allotment shares allotted (GBP'000) (pence per share) (GBP'000) share)
---------- ---------------- -------------- ------------------ -------------- -------------------------------------------------
5 April
2018 575,386 6 104.00 584 95.50
11 April
2018 77,861 1 103.00 79 94.00
11 April
2018 5,603 - 103.50 5 94.00
11 April
2018 123,485 1 104.00 125 94.00
782,335 8 793
---------------- -------------- --------------
16. Basic and diluted net asset value per share
31 March 2019 31 March 2018
(pence per share) (pence per share)
--------------------------------------- ----------------- ------------------
Basic and diluted net asset value per
Ordinary share 117.76 109.46
The basic and diluted net asset value per share at the year end is
calculated in accordance with the Articles of Association and is based
upon total shares in issue (adjusted for treasury shares) of 57,226,060
Ordinary shares (2018: 56,523,709) at 31 March 2019.
17. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 15.
The Company is permitted to buy-back its own shares for cancellation or
treasury purposes, and this is described in more detail in the Strategic
report above.
The Company's financial instruments comprise equity and loan stock
investments in unquoted and quoted companies, cash balances, short term
receivables and payables which arise from its operations. The main
purpose of these financial instruments is to generate cash flow 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 risks arising from the Company's operations are:
-- Investment (or market) 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 apart from where noted
below, there have been no changes in the objectives, policies or
processes for managing risks during the past year. The key risks are
summarised below.
Investment risk
As a venture capital trust, it is the Company's specific nature to
evaluate and control the investment risk of its portfolio in unquoted
investments, details of which are shown on pages 19 and 20 of the full
Annual Report and Financial Statements. Investment risk is the exposure
of the Company to the revaluation and devaluation of investments. The
main driver of investment risk is the operational and financial
performance of the portfolio companies and the dynamics of market quoted
comparators. 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 Manager and the Board formally reviews investment risk (which
includes market price 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 and quoted investments.
The maximum investment risk as at the balance sheet date is the value of
the fixed and current asset investment portfolio which is GBP62,788,000
(2018: GBP53,563,000). Fixed and current asset investments form 93 per
cent. of the net asset value as at 31 March 2019 (2018: 87 per cent.).
More details regarding the classification of fixed asset investments is
shown in note 11.
Investment price risk
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 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.
As required under FRS 102 section 34.29, the Board is required to
illustrate by way of a sensitivity analysis, the degree of exposure to
market risk. The Board considers that the value of the fixed and current
asset investment portfolio is sensitive to a 10 per cent. change based
on the current economic climate. The impact of a 10 per cent. change has
been selected as this is considered reasonable given the current level
of volatility observed both on a historical basis and future
expectations.
The sensitivity of a 10 per cent. increase or decrease in the valuation
of the fixed and current asset investments (keeping all other variables
constant) would increase or decrease the net asset value and return for
the year by GBP6,279,000 (2018: GBP5,356,000).
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 was estimated that a rise of 1.0 per
cent. in all interest rates would have increased total return before tax
for the year by approximately GBP117,000 (2018: GBP65,000). Furthermore,
it was considered that a fall of interest rates below current levels
during the year would have been very unlikely.
The weighted average effective interest rate applied to the Company's
unquoted loan stock during the year was approximately 5.7 per cent.
(2018: 4.3 per cent.). The weighted average period to expected maturity
for the unquoted loan stock is approximately 4.5 years (2018: 4.8
years).
The Company's financial assets and liabilities, all denominated in
pounds sterling, consist of the following:
31 March 2019 31 March 2018
Non- Non-
Fixed Floating interest Fixed Floating interest
rate rate bearing Total rate rate bearing Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- --------- -------- --------- -------- --------- -------- --------- --------
Unquoted
equity - - 42,802 42,802 - - 34,581 34,581
Quoted equity - - 289 289 - - 237 237
Unquoted loan
stock 15,155 - 900 16,055 16,482 - 1,136 17,618
Current asset
investments - - 3,642 3,642 - - 1,127 1,127
Receivables* - - 1,967 1,967 - - 99 99
Current
liabilities - - (1,815) (1,815) - - (1,557) (1,557)
Cash - 4,441 - 4,441 - 9,760 - 9,760
15,155 4,441 47,785 67,381 16,482 9,760 35,623 61,865
--------- -------- --------- -------- --------- -------- --------- --------
*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 and other similar
instruments prior to investment, and as part of its ongoing monitoring
of investments. In doing this, it takes into account the extent and
quality of any security held. For loan stock investments made prior to 6
April 2018, which account for 97.1 per cent. of loan stock by value,
typically loan stock instruments have a fixed or floating charge, which
may or may not have been 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.
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 as at 31 March 2019 was limited to
GBP16,055,000 (2018: GBP17,618,000) of unquoted loan stock instruments,
GBP4,441,000 (2018: GBP9,760,000) of cash deposits with banks and
GBP1,967,000 (2018: GBP99,000) of other receivables.
At the balance sheet date, the cash held by the Company was held with
Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group
plc), Barclays Bank Plc 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 per cent. of net asset value for any one
counterparty.
The credit profile of unquoted loan stock is described under liquidity
risk below.
Impaired loan stock instruments have a first fixed charge or a fixed and
floating charge over the assets of the portfolio company and the Board
estimate that the security value approximates to the carrying value.
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 per cent. of its adjusted
share capital and reserves of the latest published audited Balance sheet,
which amounts to GBP6,547,000 (2018: GBP6,015,000) as at 31 March 2019.
The Company has no committed borrowing facilities as at 31 March 2019
(2018: nil) and had cash balances of GBP4,441,000 (2018: GBP9,760,000),
and current asset investments of GBP3,642,000 (2018: GBP1,127,000),
which are considered to be readily realisable within the timescales
required to make cash available for investment. The main cash outflows
are for new investments, share buy-backs 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 the Company's financial liabilities are short term in
nature and total GBP1,815,000 as at 31 March 2019 (2018: GBP1,557,000).
The carrying value of loan stock investments as analysed by expected
maturity dates is as follows:
31 March 2019 31 March 2018
Redemption Fully performing Past due Valued below cost Total Fully performing Past due Valued below cost Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
Less than
one year 4,634 1,669 908 7,211 4,256 1,326 515 6,097
1-2 years 981 104 - 1,085 1,289 600 - 1,889
2-3 years 427 - 133 560 1,156 124 15 1,295
3-5 years 2,660 - 257 2,917 3,992 - - 3,992
Greater
than 5
years 4,282 - - 4,282 4,345 - - 4,345
---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
Total 12,984 1,773 1,298 16,055 15,038 2,050 530 17,618
---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
Loan stock can be past due as a result of interest or capital not being
paid in accordance with contractual terms.
The cost of loan stock investments valued below cost is GBP1,530,000
(2018: GBP590,000).
In view of the factors identified above, 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 March 2019,
are stated at fair value as determined by the Directors, with the
exception of receivables, 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. Commitments and contingencies
As at 31 March 2019, the Company had no financial commitments (2018:
nil).
There were no contingent liabilities or guarantees given by the Company
as at 31 March 2019 (2018: nil).
19. Post balance sheet events
The following are the post balance sheet events since 31 March 2019:
-- Disposal of Earnside Energy Limited for GBP1.9 million
-- Investment of GBP606,000 in Proveca Limited
-- Investment of GBP600,000 in SVS Albion OLIM UK Equity Income Fund
-- Investment of GBP320,000 in Limitless Technology Limited
-- Investment of GBP130,000 in OmPrompt Holdings Limited
-- Investment of GBP121,000 in Imandra Inc
-- Investment of GBP92,000 in Oxsensis Limited
-- Investment of GBP83,000 in Aridhia Informatics Limited
-- Investment of GBP47,000 in Symetrica Limited
The following new Ordinary shares of nominal value 1 penny each were
allotted under the Albion VCTs Prospectus Top Up Offers 2018/19 after 31
March 2019:
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)
---------- --------- --------- ------------------------ ------------- ----------------------------------------
1 April
2019 1,028,359 10 117.80 1,193 110.00
1 April
2019 218,561 2 118.40 254 110.00
1 April
2019 4,839,369 48 119.00 5,615 110.00
5 April
2019 214,463 2 119.00 249 110.00
12 April
2019 143,535 1 117.80 166 110.00
12 April
2019 2,702 - 118.40 3 110.00
12 April
2019 281,572 3 119.00 327 110.00
--------- --------- -------------
6,728,561 67 7,807
--------- --------- -------------
20. Related party transactions
During the year, a total of GBP2,600,000 (2018: GBP1,200,000) was
invested into the SVS Albion OLIM UK Equity Income Fund ("OUEIF") a fund
managed by OLIM Limited, which is part of the Albion Group, with a
further GBP600,000 invested after the year end.
Albion agreed to reduce that proportion of its management fee relating
to the investment in the OUEIF by 0.75 per cent., which represents the
OUEIF management fee charged by OLIM; this resulted in a reduction of
the management fee of GBP18,000 (2018: GBP2,000).
Other than transactions with the Manager as disclosed in note 5 and that
disclosed above, there are no other related party transactions 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 March 2019 and 31 March 2018,
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
March 2019, 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
https://www.globenewswire.com/Tracker?data=xBoc7uNfJ5c4vnZh4ZU7mWxiFVhIsz1RSYQ-RZ_hcDVwmxUWphlQpMKPW_YlzZcKa1JdN8U7aBiYdODI6wis5IcudC4HZgFLZBtMUiJU9axUlPl1I9UJY5Sztbh0Nz3G
www.albion.capital/funds/AAEV , where the Report can be accessed as a
PDF document via a link in the 'Financial Reports and Circulars'
section.
Attachment
-- Split of Portfolio by sector, stage of investment and number of employees
https://ml-eu.globenewswire.com/Resource/Download/73123d05-ab36-4e04-9bff-815a3531e710
(END) Dow Jones Newswires
June 21, 2019 09:43 ET (13:43 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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