Albion Enterprise VCT PLC: Annual Financial Report
Albion Enterprise VCT PLC
LEI number:
213800OVSRDHRJBMO720
As required by the Financial Conduct 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 2022.
This announcement was approved for release by
the Board of Directors on 30 June 2022.
This announcement has not been audited.
The Annual Report and Financial Statements for
the year ended 31 March 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/AAEV/31Mar2022.pdf.
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 source of income, combined
with the prospect of longer term capital growth.
Investment policyThe 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 relevant 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.
GearingThe Company's maximum
exposure in relation to gearing is restricted to 10 per cent. of
its adjusted share capital and reserves.
Financial calendar
|
|
Record date for first interim
dividend |
5 August 2022 |
Payment date for first interim
dividend |
31 August 2022 |
Annual General Meeting |
Noon on 30 August 2022 |
Announcement of Half-yearly
results for the six months ending 30 September 2022 |
December 2022 |
Financial highlights
23.77p |
Increase in total shareholder value (pence per share) for the year
ended 31 March 2022† |
|
|
20.74% |
Shareholder return for the year ended 31 March 2022† |
|
|
6.09p |
Tax-free dividend per share for the year ended 31 March 2022 |
|
|
132.28p |
Net asset value per share on 31 March 2022 |
|
|
194.66p |
Total shareholder value to 31 March 2022† |
†These are considered Alternative Performance
Measures, see notes 2 and 3 in the Strategic report below for
further explanation.
|
31 March
2022
(pence per share) |
31 March 2021 (pence per share) |
Opening net asset value |
114.60 |
106.54 |
|
|
|
Capital return |
23.78 |
13.96 |
Revenue return/(loss) |
0.19 |
(0.51) |
Total return |
23.97 |
13.45 |
Dividends paid |
(6.09) |
(5.44) |
Impact from share capital
movements |
(0.20) |
0.05 |
Net asset value |
132.28 |
114.60 |
|
|
|
|
Pence per share |
Total dividends paid per share
to 31 March 2022 |
62.38 |
Net asset
value per share on 31 March 2022 |
132.28 |
Total shareholder value per share
to 31 March 2022 |
194.66 |
A more detailed breakdown of the dividends paid
per year can be found at www.albion.capital/funds/AAEV under the
‘Dividend History’ section.
In addition to the
dividends
summarised
above, the Board has
declared a first dividend for the year
ending 31 March
2023,
of
3.31
pence per Ordinary
share to be paid
on 31 August
2022 to
shareholders on the register on
5 August
2022.
Chairman’s statement
Introduction The Company
has achieved an increase in total shareholder value of 23.77 pence
per share for the year (20.7% on opening net asset value), after a
strong year for several of our portfolio companies. The Company
continues to benefit from the resilience of its portfolio,
particularly its healthcare and software businesses, many of which
have achieved excellent growth despite the worsening economic
outlook resulting from the effects of the Covid-19 pandemic, the
Russian invasion of Ukraine and high inflation. It is not clear how
long the economy will be impacted, however I am encouraged that we
continue to see attractive investment opportunities in the health
technology and enterprise software sectors where the Manager has
developed deep expertise.
Results and
dividends On 31 March 2022 the net asset value
was 132.28 pence per share compared to 114.60 pence per share on 31
March 2021. The total return before taxation was £18.1 million
compared to a return of £9.2 million for the previous year. The
positive progress of a number of our portfolio companies is
discussed later in this statement and in the Strategic report
below. These excellent results for the year have resulted in a
performance incentive fee payable to the Manager of £1.9 million
(2021: £0.3 million).
In line with our variable dividend policy
targeting around 5% of NAV per annum the Company paid dividends
totalling 6.09 pence per share during the year ended 31 March 2022
(2021: 5.44 pence per share). The Company will pay a first dividend
for the financial year ending 31 March 2023 of 3.31 pence per share
on 31 August 2022 to shareholders on the register on 5 August 2022,
being 2.5% of the latest reported NAV.
Investment performance and
progress The Company has received disposal proceeds
of £10.2 million (2021: £5.3 million). Five portfolio companies
were sold in the year:
• Phrasee generated
proceeds of £2.7 million and a return of 3.2 times
cost; • MyMeds&Me generated
proceeds of £2.4 million and a return of 3.4 times
cost; • Credit Kudos generated proceeds
of £2.3 million and a return of 5.2 times
cost; • MPP Global Solutions generated
proceeds of £1.3 million and a return of 1.3 times cost;
and • Innovation Broking Group
generated proceeds of £0.9 million and a return of 10.3 times
cost.
Further details of other realisations during the
year can be found in the table in the Portfolio of Investments on
pages 25 and 26 of the full Annual Report and Financial
Statements.
There were net valuation gains on investments of
£21.6 million in the year, an increase from £10.2 million in the
previous year. The key contributors were the uplifts on Quantexa
(£7.7 million) and Oviva (£2.5 million), both of which have been
revalued after further externally led funding rounds and Egress
Software Technologies (£2.4 million) and Proveca (£0.6 million),
both of which continue to grow. However, our investments in Mirada
Medical, Concirrus and Avora were written down following difficult
trading conditions, in part because of the Covid-19 pandemic. We
have also written-off our investment in Xperiome which went into
administration.
The Company has been an active investor during
the year with £9.0 million invested in new and existing companies.
The Company has invested £2.8 million in six new portfolio
companies, all of which are targeted to require further investment
as the companies prove themselves and grow:
• £0.8 million into
NuvoAir Holdings, a provider of digital therapeutics and
decentralised clinical trials for respiratory
conditions;• £0.8 million into Gravitee
Topco (trading as Gravitee.io), an application programming
interface (API) management platform;• £0.5
million into Perchpeek, a digital relocation
platform;• £0.3 million into Brytlyt, which
uses patented software and artificial intelligence (AI), combined
with the superior computation power of graphics processing units
(GPUs), to derive insights thousands of times faster than legacy
systems;• £0.3 million into Accelex
Technology, a data extraction and analytics technology for private
capital markets; and• £0.1 million into
Regulatory Genome Development, a provider of machine readable
structured regulatory content.
A further £6.2 million was invested into
16 existing portfolio companies, of which the largest were: £1.4
million into Oviva; £0.7 million into TransFICC; and £0.5 million
each into Seldon Technologies, uMotif and Black Swan
Data.
A review of business and future prospects is
included in the Strategic report below.
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 on pages 25 and 26 of the
full Annual Report and Financial Statements.
Risks and uncertainties In
addition to the risks around Covid-19, which have been a major
factor for the past 2 years, the UK is experiencing its highest
level of inflation in decades, as well as the uncertainty over the
future course and global impact of Russia’s invasion of Ukraine.
Our investment portfolio, while concentrated mainly in the
technology and healthcare sectors, remains diversified in terms of
both sub-sector and stage of maturity and, importantly, we believe
to be appropriately valued. While we would expect these valuations
to be robust within the tolerance of normal market fluctuations,
the potential but unknown, scale of any further adverse events
arising out of the Ukraine invasion remain a major risk
factor.
A detailed analysis of the other risks and
uncertainties facing the business is shown in the Strategic report
below.
Sunset ClauseIn 2015 a VCT
“sunset clause” was introduced as a requirement of an EU state aid
notification. This provides that income tax relief will no longer
be given to subscriptions made on or after 6 April 2025, unless the
legislation is amended to make the scheme permanent or the “sunset
clause” is extended. Our Manager, Albion Capital, is working,
alongside the VCT industry, to demonstrate to Government the
importance of VCTs as a source of early stage capital to support
entrepreneurs creating innovative growth businesses employing
thousands of people throughout the UK. Given its importance, the
Board expects that the VCT scheme will continue to attract
Government support.
Board composition On
1 September 2021, Pippa Latham joined the Board. Pippa brings
extensive experience across the financial sector as well as Board
membership of a variety of successful technology and other
commercial organisations. She is a Cambridge graduate, holds an MBA
from INSEAD and is both a qualified accountant and a member of the
Institute of Chartered Secretaries and Administrators. The Board
believes that Pippa will add considerable value during her
tenure.
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. This includes the maintenance of sufficient cash
resources for investment in new and existing portfolio companies
and the continued payment of dividends to
shareholders.
It is the Board’s intention that such buy-backs
should be at around a 5% discount to net asset value, in so far as
market conditions and liquidity permit. The Board continues to
review the use of buy-backs and is satisfied that it is an
important means of providing market liquidity for
shareholders.
Cancellation of share premium and
capital redemption reserve The Company obtained authority
to cancel the amount standing to the credit of its share premium
and capital redemption reserves at the General Meeting on 21
February 2022. The purpose of the proposal was to increase the
distributable reserves available to the Company for the payment of
dividends, the buy-back of shares, and for other corporate
purposes.
The proposal received the consent of the Court
on 22 March 2022, and the changes have been registered at Companies
House on 31 March 2022. Over time, this will create additional
distributable reserves of £66.2 million.
Albion VCTs Prospectus Top Up
Offers Your Board, in conjunction with the boards of
the other five VCTs managed by Albion Capital Group LLP, launched a
prospectus top up offer of new Ordinary shares on 6 January 2022.
The Board announced on 22 March 2022 that, following strong demand,
it would utilise part of its over-allotment facility, bringing the
total to be raised to £21.5 million. The Offer was fully subscribed
and closed to further applications on 24 March 2022.
The proceeds are being used to provide support
to our existing portfolio companies and to enable us to take
advantage of new investment opportunities. Details of share
allotments made during and after the financial year end can be
found in notes 15 and 19 respectively.
Annual General Meeting
(“AGM”) Based on the success of last year’s live
webcast AGM, the Board has decided to adopt a virtual format for
the AGM again this year. The AGM will be held at noon on 30 August
2022 via the Lumi platform. Information on how to participate in
the live webcast can be found on the Manager’s website
www.albion.capital/vct-hub/agms-events.
The Board welcome questions from shareholders at
the AGM and shareholders will be able to ask questions using the
Lumi platform during the AGM. Alternatively, shareholders can email
their questions to AAEVchair@albion.capital prior to the
AGM.
Shareholders' views are important, and the Board
encourages shareholders to vote on the resolutions.
Further details on the format and business to be
conducted at the AGM can be found in the Directors’ report on pages
36 and 37 and in the Notice of the Meeting on pages 72 to 75 of the
full Annual report and Financial Statements.
Outlook and prospect These
positive results demonstrate the resilience of our portfolio of
companies which are at different stages of maturity and targeted at
sectors such as software and healthcare. These are companies which
provide products and services that are considered innovative and
essential to their customers. I am confident that our portfolio
companies are well positioned to grow, despite the considerable
uncertainty around the longer-term impact of the pandemic, high
levels of inflation, and an increasingly volatile geopolitical
backdrop. The Board believes the Company is well placed to continue
to deliver long term value to our shareholders, though remains
mindful of the considerably uncertain economic outlook.
Maxwell
Packe Chairman 30
June 2022
Strategic report
Investment
policyThe 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
show the split of the portfolio valuation on 31 March 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) is included as a
subsector below due to its prominence. Details of the principal
investments made by the Company are shown in the Portfolio of
investments on pages 25 and 26 of the full Annual Report and
Financial Statements.
Direction of portfolio
The portfolio remains well-balanced across the
different sectors of FinTech, Healthcare and other Software &
Technology. The renewable energy investments whilst maintaining
their value during the year, are reducing as a percentage of the
portfolio as the net asset value of the Company has been increasing
over recent years. Cash and other net assets is relatively high at
32%, but this is a result of the recent fundraise, as well as the
disposal of three of our portfolio companies in March 2022. These
funds will continue to be invested predominantly into higher growth
technology companies and the Manager has outlined to the Board a
pipeline of new and follow-on investments where it aims to deploy
cash over the next 12 months. The Company has a significant
speciality in FinTech investing, which can be seen as a growing
part of the portfolio, represented by a 3% increase this year.
Results and dividend policy
|
£'000 |
|
|
Net capital return for the year ended 31 March 2022 |
17,940 |
Net revenue return for the year ended 31 March 2022 |
141 |
Total return for the year
ended 31 March 2022 |
18,081 |
Dividend of 2.87 pence per share paid on 31 August 2021 |
(2,139) |
Dividend of 3.22 pence per share paid on 28 February 2022 |
(2,391) |
Reclaimed
dividends |
2 |
Transferred to
reserves |
13,553 |
|
|
Net assets on 31 March 2022 |
118,415 |
|
|
Net asset value on 31 March 2022
(pence per share) |
132.28 |
The Company paid dividends totalling 6.09 pence
per share during the year ended 31 March 2022 (2021: 5.44 pence per
share). The Board has declared a first dividend for the year ending
31 March 2023, of 3.31 pence per Ordinary share to be paid on 31
August 2022 to shareholders on the register on 5 August 2022.
As shown in the Company’s Income statement
below, the total return for the year was 23.97 pence per share
(2021: 13.45 pence per share). Investment income increased to
£886,000 (2021: £543,000), This is a result of Radnor House
repaying the previously capitalised interest and the Evewell Group
Limited paying interest. Consequently, there is a net revenue gain
to shareholders of £141,000 (2021: loss of £349,000). In addition,
the total return has benefitted from the increased percentage of
investment management fees and performance incentive fees allocated
to the realised capital reserve, to better align with the Board’s
expectation that over the long term the majority of the Company’s
investment returns will be in the form of capital gains. Further
information can be found in the Notes to the Financial Statements
below.
The capital return on investments for the year
of £21,636,000 (2021: £10,892,000) has been explained in the
Chairman’s statement above. This has led to a significant increase
in net asset value to 132.28 pence per share (2021: 114.60 pence
per share), which can be seen on the Balance sheet below. This
increase in net asset value is after taking account of the payment
of 6.09 pence per share of dividends during the year.
There was a net cash inflow for the Company of
£5,123,000 for the year (2021: £2,919,000), which has arisen from
both the disposal of fixed asset investments and the issue of
Ordinary shares under the Albion VCTs Top Up Offers, reduced by the
investment in fixed asset investments, dividends paid, operating
expenses and the buy back of shares.
Review of business and future changes
A detailed review of the Company’s business
during the year is contained in the Chairman’s statement above.
Total gains on investments for the year were £21.6 million (2021:
£10.9 million).
There is a continuing focus on growing the
FinTech, healthcare and other software and technology sectors. The
majority of these investment returns are delivered through equity
and capital gains, and we expect our investment income to continue
to be similar to the current level.
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, and has largely weathered the pandemic so
far. Although there remains much uncertainty, the Manager has a
strong pipeline of investment opportunities in which the Company’s
cash can be deployed. The Board considers that the current
portfolio and the pipeline of opportunities should enable the
Company to maintain a predictable stream of dividend payments to
shareholders, as well as delivering long term growth for
shareholders.
Key performance indicators (“KPIs”) and
Alternative Performance Measures (“APMs”)The Directors
believe that the following KPIs (some of which are APMs), which are
typical for Venture Capital Trusts, used in its own assessment of
the Company, will provide shareholders with sufficient information
to assess how effectively the Company is applying its investment
policy to meet its objectives. The Directors are satisfied that the
results shown in the following KPIs and APMs give a good indication
that the Company is achieving its investment objective and policy.
These are:
1. Total
shareholder value relative to FTSE All Share Index total returnThe
graph on page 4 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 above.
2. Net
asset value per share and total shareholder value
Total shareholder value increased by 23.77 pence
per share to 194.66 pence per share for the year ended 31 March
2022 (return of 20.74% on opening net asset value).
3. Shareholder
return in the year†
The graph on page 5 of the full Annual report
and Financial Statements shows the Company’s total shareholder
return over the previous ten years, five years, three years and the
past year, and the annual returns for the same period are detailed
below.
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
13.5% |
9.7% |
4.5% |
5.4% |
10.8% |
12.4% |
13.1% |
(4.4)% |
12.7% |
20.7% |
†Methodology: Shareholder return is 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
March 2022 were 6.09 pence per share (2021: 5.44 pence per share),
a yield of 5.3% on opening net asset value. The cumulative
dividends paid since inception total 62.38 pence per share.
5. Ongoing
charges
The ongoing charges ratio for the year ended 31
March 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 running expenses (including investment
management fees charged to capital reserve) as a percentage of the
average net assets attributable to shareholders. The ongoing
charges cap is 2.50%, which has resulted in a saving of £22,000 to
shareholders during the year (2021: £53,000).
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 34 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 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.
GearingAs defined by the
Articles of Association, the Company’s maximum exposure in relation
to gearing is restricted to 10% of its adjusted share capital and
reserves. The Directors do not currently have any intention to
utilise gearing for the Company.
Operational arrangementsThe
Company has delegated the investment management of the portfolio to
Albion Capital Group LLP, the Manager, which is authorised and
regulated by the Financial Conduct Authority. The Manager also
provides company secretarial and other accounting and
administrative support to the Company.
Management agreementUnder 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% of
the net asset value of the Company paid quarterly in arrears, along
with an administration fee of 0.2% of the net asset value.
Total annual expenses, including the management
fee, are limited to 2.50% of the net asset value.
In some instances, the Manager is entitled to an
arrangement fee, payable by a portfolio company in which the
Company invests, in the region of 2.0% of the investment made, and
also monitoring fees where the Manager has a representative on the
portfolio company’s board.
Further details on the management fee can be
found in note 5.
Management
performance incentive
feeIn order to align the interests of the Manager
and the shareholders with regards to generating positive returns,
the Company has a Management performance incentive arrangement with
the Manager. Under the incentive arrangement, the Company will pay
an incentive fee to the Manager of an amount equal to 20% of such
excess return that is calculated for each financial year.
The performance fee hurdle requires that the
growth of the aggregate of the net asset value per share and
dividends paid by the Company compared with the previous accounting
date exceeds the higher of the average base rate of the Royal Bank
of Scotland plus 2% or RPI plus 2%. The hurdle is calculated every
year, based on the starting rate of 100 pence per share in
2007.
For the year ended 31 March 2022, the total
return of the Company since launch (the performance incentive fee
start date) amounted to 194.66 pence per share, compared to the
higher hurdle of 181.85 pence per share. As a result, a performance
incentive fee of £1,934,000 is payable to the Manager (2021:
£288,000).
Evaluation of the ManagerThe
Board has evaluated the performance of the Manager based on:
• the returns
generated by the Company;
• the continuing
achievement of the 80% qualifying holdings investment requirement
for VCT status;
• the long term
prospects of the current portfolio of investments;
• the management of
treasury, including use of buy-backs and participation in fund
raising; • a review
of the Management agreement and the services provided therein; and
• benchmarking the performance of the
Manager to other service providers including the performance of
other VCTs that the Manager is responsible for managing.
The Board believes that it is in the interests of shareholders
as a whole, and of the Company, to continue the appointment of the
Manager for the forthcoming year.
Alternative Investment Fund Managers
Directive (“AIFMD”)The Board appointed the Manager 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 stakeholders the
Board considers most relevant, 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.
Stakeholders |
Engagement with Stakeholders |
Decision outcomes based on engagement |
Shareholders |
The key methods of engaging with Shareholders are as follows:
- Annual General Meeting (“AGM”)
- Shareholder seminar
- Annual report and Financial
Statements, Half-yearly financial report, and Interim management
statements
- RNS announcements for all key
decisions including appointment of a new Director, and the
publication of a Prospectus
- Website redesigned in the year to
make it more user accessible
|
- Shareholders’ views are important
and the Board encourages Shareholders to exercise their right to
vote on the resolutions at the AGM. The Company’s AGM is typically
used as an opportunity to communicate with investors, including
through a presentation made by the investment management team. In
light of the Covid-19 pandemic, the Board took the decision to
update the Company’s articles of Association to allow for
virtual/hybrid events in order for the 2021 AGM to be live streamed
for Shareholders. The Board was able to take questions from
Shareholders at the AGM enabling maximum shareholder engagement in
the absence of a face-to-face event. Following last year’s success
and the overwhelming positive feedback from shareholders, the Board
has decided that this year’s AGM will again be held as a virtual
event to facilitate shareholder participation.
- Shareholders are also encouraged to
attend the annual Shareholders’ Seminar. Last year’s event took
place on 12 November 2021. The seminar included Quantexa and
Healios sharing insights into their businesses and also
presentations from Albion executives on some of the key factors
affecting the investment outlook, as well as a review of the past
year and the plans for the year ahead. Representatives of the Board
attend the seminar. The Board considers this an important
interactive event, and invites shareholders to attend this year’s
event scheduled for 23 November 2022 at the Royal College of
Surgeons. To reserve a place, email info@albion.capital.
- The Board recognises the importance
to Shareholders of maintaining a share buy-back policy, in order to
provide market liquidity, and considered this when establishing the
current policy. The Board closely monitors the discount to the net
asset value to ensure this is in the region of 5%.
- The Board seeks to create value for
Shareholders by generating strong and sustainable returns to
provide shareholders with regular dividends and the prospect of
capital growth. The Board takes this into consideration when making
the decision to pay dividends to Shareholders. The variable
dividend policy has been enacted, and has resulted in a dividend
yield of 5.3% on opening net asset value.
- During the year, the decision to
publish a Prospectus was taken, in order to raise more funds for
deployment into new and existing portfolio companies. The Board
carefully considered whether further funds were required, whether
the VCT tests would continue to be met, and whether it would be in
the interest of Shareholders, before agreeing to publish the
Prospectus. On allotment, an issue price formula based on the
prevailing net asset value was used to ensure there was no dilution
to existing Shareholders.
- Cash management and liquidity of
the Company are key quarterly discussions amongst the Board, with
focus on deployment of cash for future investments, dividends and
share buy-backs.
- The Board decided to hold a General
Meeting on 21 February 2022 to propose a special resolution to
increase the Company’s distributable reserves by way of a reduction
of share premium account and capital redemption reserve. This
resolution was approved with 99.3% of Shareholders voting in favour
of the resolution.
|
Suppliers |
The key suppliers are:
- Corporate broker
- VCT taxation adviser
- Depositary
- Registrar
- Auditor
- Lawyer
|
- The Manager is in regular contact
with the suppliers and the contractual arrangements with all the
principal suppliers to the Company are reviewed regularly and
formally once a year, alongside the performance of the suppliers in
acquitting their responsibilities.
- The Board reviews the performance
of the providers annually in line with the Manager and was
satisfied with their performance.
|
Manager |
The performance of Albion Capital Group LLP is essential to the
long term success of the Company, including achieving the
investment policy and generating returns to shareholders, as well
as the impact the Company has on Environment, Social and Governance
practice. |
- The Manager meets with the Board at
least quarterly to discuss the performance of the Company, and is
in regular contact in between these meetings, e.g. to share
investment papers for new and follow on investments. All strategic
decisions are discussed in detail and minuted, with an open
dialogue between the Board and the Manager.
- The performance of the Manager in
managing the portfolio and in providing company secretarial,
administration and accounting services is reviewed in detail each
year, which includes reviewing comparator engagement terms and
portfolio performance. Further details on the evaluation of the
Manager, and the decision to continue the appointment of the
Manager for the forthcoming year, can be found in this report.
- During the
year, the Board has reviewed the current Management Agreement, and
a new agreement was signed which updated the agreement for new
regulatory requirements, such as GDPR and AIFMD, but did not change
any commercial terms with the Manager.
- Details of the Manager’s
responsibilities can be found in the Statement of corporate
governance on page 40 of the full Annual report and Financial
Statements.
|
Portfolio companies |
The portfolio companies are considered key stakeholders, not least
because they are principal drivers of value for the Company.
However, as discussed in the Environmental, Social and Governance
(“ESG”) section on pages 19 to 21 of the full Annual report and
Financial Statements, the portfolio companies’ impact on their
stakeholders is also important to the Company. |
- The Board aims to have a
diversified portfolio in terms of sector and stage of investment.
Further details of this can be found in the pie charts at the end
of this announcement.
- In most cases, an Albion executive
has a place on the board of a portfolio company, in order to help
with both business operation decisions, as well as good ESG
practice.
- 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 and environment |
The Company, with no employees, has no effect itself on the
community and environment. However, as discussed above, the
portfolio companies’ ESG impact is extremely important to the
Board. |
- The Board receives reports on ESG
factors within its portfolio from the Manager as it is a signatory
of the UN Principles for Responsible Investment (“UN PRI”). Further
details of this are set out in the ESG report pages 19 to 21 of the
full Annual report and Financial Statements. ESG, without its
specific definition, has always been at the heart of the
responsible investing that the Company engages in and in how the
Company conducts itself with all of its stakeholders.
|
Environmental, Social, and Governance (“ESG”)
reportThe Board and the Company’s Manager,
Albion Capital Group LLP, take ESG very seriously and more
detail can be found on this in the ESG report on pages 19 to 21 of
the full Annual report and Financial Statements.
Social and community issues,
employees and human rightsThe
Board recognises the requirement under section 414C of the Act to
detail information about social and community issues, employees and
human rights; including any policies it has in relation to these
matters and effectiveness of these policies. As an externally
managed investment company with no employees, the Company has no
formal policies in these matters, however, it is at the core of its
responsible investment strategy as detailed above.
Further policiesThe 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 page 35 of the full Annual report and Financial Statements.
General Data Protection
Regulation The General Data Protection Regulation has the
objective of unifying data privacy requirements across the European
Union. 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 managementThe 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 global pandemic and the invasion of Ukraine
which have impacted not only public health and mobility but also
had an adverse impact on the economy, the full impact of which is
likely to be uncertain for some time.
The Board has carried out a robust assessment of
the Company’s principal risks and uncertainties and seeks to
mitigate these risks through regular reviews of performance and
monitoring progress and compliance. The Board applies the
principles detailed in the Financial Reporting Council’s Guidance
on Risk Management, Internal Control and Related Financial and
Business Reporting, in the mitigation and management of these
risks. More information on specific mitigation measures for the
principal risks and uncertainties are explained below:
Risk |
Possible consequence |
Risk assessment during the year |
Risk management |
Investment, performance and valuation risk |
Investment in smaller unquoted growth businesses carries a higher
degree of risk and is more volatile than investing in larger,
long-established businesses. This could negatively impact
shareholder returns. The Company relies on the judgement and
reputation of the Manager to provide strong investment returns and
valuations for shareholders.The Company’s investment valuation
methodology is based on fair value, which for smaller unquoted
growth businesses can be difficult to determine due to the lack of
observable market data and the limitation of external reference
points. |
Incremental increase in the period due to the interrelated economic
and geopolitical issues referred to in the Chairman’s
statement. |
Although this risk category has increased, it is a central part of
the Company’s business model to invest in higher growth businesses
which, by their very nature have a heightened risk profile. In this
regard, the Board places reliance upon the skills and expertise of
the Manager and its track record of making successful investments
in higher growth technology businesses. The Manager operates a
structured investment appraisal and due diligence process. This
includes a review from one external investment professional and
comments from non-executive Directors of the Company on matters
discussed at the Investment Committee meetings. In response to the
heightened risk, the Manager undertook additional measures to
assess the cash requirements of its portfolio companies to ensure
sufficient runway over the next 24 months. Investments are
monitored by the Manager through monthly portfolio updates and
typically an investment manager sitting on portfolio company
boards. The Board receives detailed reports on each investment and
their valuation as part of their quarterly board meetings.Review
and oversight of the non-executive Directors ensures that the risk
to the Company’s and Manager’s reputation is kept to a
minimum.Investments are valued in accordance with the International
Private Equity and Venture Capital Valuation Guidelines, which
represent current best practice for investment valuation and are
reviewed by the Manager’s Valuation Committee. |
VCT approval and regulatory change risk |
Any breach of section 274 of the Income Tax Act 2007, including any
legislative changes, could result in the loss of the Company’s HMRC
qualifying status and tax reliefs for investors. |
No change. |
The Company’s VCT qualifying status is monitored monthly by the
Manager and quarterly by the Board. The Board has appointed Philip
Hare & Associates LLP as its taxation adviser, who
independently confirms compliance, highlights areas of risk and
informs on any legislative changes, including those which may arise
from the withdrawal from the European Union. |
Regulatory and compliance risk |
The Company is listed on The London Stock Exchange and is required
to comply with the rules of the UK Listing Authority, as well as
with the Companies Act, Accounting Standards and other legislation.
Failure to comply with these regulations could result in a
delisting of the Company’s shares, or other penalties under the
Companies Act or from financial reporting oversight bodies. |
No change. |
The Board and the Manager receive regular updates on new
regulation, including legislation on the management of the Company,
from its auditor, lawyers and other professional bodies. The
Company is subject to compliance checks through the Manager’s
compliance officer, and any issues arising from compliance or
regulation are reported to its own board on a monthly basis. The
Boardensures the Company is compliant as part of its quarterly
Board meetings.The Board reviews the quarterly reports prepared by
Ocorian Depositary (UK) Limited (the Company’s Depositary) to
ensure the Manager is adhering to the AIFMD requirements. |
Operational and internal control risk (including cyber and data
security) |
The Company relies on a number of third parties, in particular the
Manager, for the provision of investment management and
administrative functions. Failures in key systems and controls
within the Manager’s business could put assets of the Company at
risk, resulting in inaccurate information being passed to the Board
or to shareholders. This could additionally result in losses for
the Company and its shareholders. |
No change. |
The Company operations and IT systems are subject to rigorous
internal controls which are reviewed on a regular basis and
reported to the Board.The Audit Committee reviews the Internal
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 risk management, business continuity and cyber
security. The Board reviews the systems and processes (including
cyber and data security) in place for the Company’s key suppliers
to ensure that there is an appropriate risk mitigation in
place. |
Economic and political risk |
Events such as the Covid-19 pandemic, the impact of Brexit, an
economic recession, fluctuation in inflation and interest rates, or
significant political events could adversely affect the companies
within the portfolio and consequently the Company’s net asset
value. |
Increased (due to high levels of inflation and the geopolitical
risks from the invasion of Ukraine). |
The Company invests in a diversified portfolio of c.50 companies,
predominantly in the United Kingdom, and has a policy of minimising
any external bank borrowings within portfolio companies. Exogenous
risks over which the Company has no control are always a risk and
the Company does what it can to address these risks. The inherent
long-term nature of the portfolio helps to mitigate these exogenous
risks.The Board and Manager are continuously assessing the
resilience of the portfolio as a result of the ongoing economic and
political risks, to ascertain where support is required. The
Company has sufficient cash resources to cope with any such exigent
and unexpected pressures. Exposure is relatively small to at-risk
sectors that include leisure, hospitality, retail and travel (1% of
NAV).The Company’s investment policy and the Board’s scrutiny of
the investment portfolio ensures that this increased risk continues
to be mitigated where possible. |
Liquidity risk |
The Company may not have sufficient cash available to meet its
financial obligations. The Company’s portfolio is primarily in
smaller unquoted companies, which are inherently illiquid as there
is no readily available market, and thus it may be difficult to
realise their fair value at short notice. |
No change. |
The Board reviews the Company’s three year cash flow forecasts on a
quarterly basis. These include potential investment realisations
(which are closely monitored by the Manager), Top Up Offers,
dividend payments and operational expenditure. This ensures that
there are sufficient cash resources available for the Company’s
liabilities as they fall due. |
Environmental, social and governance (“ESG”) risk |
An insufficient ESG policy could lead to an increased negative
impact on the environment, including the Company’s carbon
footprint.Non-compliance with reporting requirements could lead to
a fall in demand from investors, reputational damage and
penalties. |
Increased (due to the new guidance issued on climate change
reporting and increased importance to stakeholders). |
The Manager is a signatory of the UN PRI and the Board is kept
appraised of the evolving ESG policies at quarterly Board meetings.
Full details of the specific procedures and risk mitigation can be
found in the ESG report on pages 19 to 21 of the full Annual report
and Financial Statements.These procedures ensure that this
increased risk continues to be mitigated where possible. |
Viability statement
In accordance with the FRC UK Corporate
Governance Code published in 2018 and principle 36 of the AIC Code
of Corporate Governance, the Directors have assessed the prospects
of the Company over three years to 31 March 2025. 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. 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 emerging and principal risks facing the Company, including
those that could threaten its business model, future performance,
solvency or liquidity and focused on the major factors which affect
the economic, regulatory and political environment. The Board
carefully assessed, and were satisfied with, the risk management
processes in place to avoid or reduce the impact of these risks.
The Board has carried out robust stress testing of cashflows which
included; assessing the resilience of portfolio companies,
including the requirement for any future financial support, and
evaluating the impact of high inflation, both within the Company
and within its portfolio.
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 March 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.
This Strategic report of the Company for the
year ended 31 March 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
Maxwell PackeChairman30 June 2022
Responsibility Statement
In preparing these financial statements for the
year ended 31 March 2022, the Directors of the Company, being
Maxwell Packe, Christopher Burrows, Philippa Latham, Patrick Reeve,
and Rhodri Whitlock 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 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 financial position of the
Company, together with a description of the principal risks and
uncertainties it faces.
We consider that the Annual Report and Financial
Statements, taken as a whole, are fair, balanced, and
understandable and provide the information necessary for
shareholders to assess the Company’s position, performance,
business model and strategy.
A detailed "Statement of Directors'
responsibilities” is contained on page 38 within the full audited
Annual Report and Financial Statements.
On behalf of the Board,
Maxwell PackeChairman30 June 2022
Income
statement
|
|
|
|
|
|
Year ended31 March
2022 |
Year ended31 March 2021 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Note |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Gains on investments |
3 |
- |
21,636 |
21,636 |
- |
10,892 |
10,892 |
Investment income |
4 |
886 |
- |
886 |
543 |
- |
543 |
Investment Manager’s
fees* |
5 |
(196) |
(3,696) |
(3,892) |
(438) |
(1,314) |
(1,752) |
Other expenses |
6 |
(549) |
- |
(549) |
(454) |
- |
(454) |
Return/(loss)
on ordinary activities before taxation |
|
141 |
17,940 |
18,081 |
(349) |
9,578 |
9,229 |
Tax on ordinary
activities |
8 |
- |
- |
- |
- |
- |
- |
Return/(loss)
and total comprehensive income attributable to
shareholders |
|
141 |
17,940 |
18,081 |
(349) |
9,578 |
9,229 |
Basic and
diluted return/(loss)
per share (pence)** |
10 |
0.19 |
23.78 |
23.97 |
(0.51) |
13.96 |
13.45 |
*For more information on the allocation between
revenue and capital please see the accounting policies below.
* 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
|
Note |
31
March2022£’000 |
31 March2021£’000 |
Fixed asset
investments |
11 |
80,842 |
60,615 |
Current
assets |
|
|
|
Trade and other
receivables |
13 |
10,725 |
1,772 |
Cash and cash equivalents |
|
29,552 |
24,429 |
|
|
40,277 |
26,201 |
|
|
|
|
Total
assets |
|
121,119 |
86,816 |
Payables: amounts
falling due within one year |
|
|
|
Trade and other payables less
than one year |
14 |
(2,704) |
(1,418) |
|
|
|
|
Total assets
less current liabilities |
|
118,415 |
85,398 |
Equity attributable to
equity holders |
|
|
|
Called-up share capital |
15 |
1,017 |
852 |
Share premium |
|
8,278 |
53,258 |
Capital redemption
reserve |
|
- |
104 |
Unrealised capital
reserve |
|
32,790 |
17,538 |
Realised capital reserve |
|
17,416 |
14,728 |
Other distributable
reserve |
|
58,914 |
(1,082) |
Total equity
shareholders’ funds |
|
118,415 |
85,398 |
Basic and diluted net asset value per share (pence)
* |
16 |
132.28 |
114.60 |
* 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 30 June 2022
and were signed on its behalf by
Maxwell PackeChairmanCompany
number: 05990732
Statement of changes in equity
|
Called-upsharecapital£’000 |
Sharepremium£’000 |
Capital redemption
reserve£’000 |
Unrealisedcapitalreserve
£’000 |
Realisedcapitalreserve*£’000 |
Other
distributablereserve*£’000 |
Total£’000 |
On 1 April 2021 |
852 |
53,258 |
104 |
17,538 |
14,728 |
(1,082) |
85,398 |
Return and total comprehensive income for the year |
- |
- |
- |
17,239 |
701 |
141 |
18,081 |
Transfer of previously unrealised gains on disposal of
investments |
- |
- |
- |
(1,987) |
1,987 |
- |
- |
Issue of equity |
165 |
21,638 |
- |
- |
- |
- |
21,803 |
Cost of issue of equity |
- |
(544) |
- |
- |
- |
- |
(544) |
Reduction of share premium and capital redemption reserve |
- |
(66,074) |
(104) |
- |
- |
66,178 |
- |
Purchase of own shares for treasury |
- |
- |
- |
- |
- |
(1,795) |
(1,795) |
Dividends paid |
- |
- |
- |
- |
- |
(4,528) |
(4,528) |
|
|
|
|
|
|
|
|
On 31 March
2022 |
1,017 |
8,278 |
- |
32,790 |
17,416 |
58,914 |
118,415 |
|
|
|
|
|
|
|
|
On 1 April 2020 |
770 |
44,183 |
104 |
8,636 |
14,052 |
4,808 |
72,553 |
Return/(loss) and total comprehensive income for the year |
- |
- |
- |
8,836 |
742 |
(349) |
9,229 |
Transfer of previously unrealised losses on disposal of
investments |
- |
- |
- |
66 |
(66) |
- |
- |
Issue of equity |
82 |
9,277 |
- |
- |
- |
- |
9,359 |
Cost of issue of equity |
- |
(202) |
- |
- |
- |
- |
(202) |
Purchase of own shares for treasury |
- |
- |
- |
- |
- |
(1,853) |
(1,853) |
Dividends paid |
- |
- |
- |
- |
- |
(3,688) |
(3,688) |
|
|
|
|
|
|
|
|
On 31 March 2021 |
852 |
53,258 |
104 |
17,538 |
14,728 |
(1,082) |
85,398 |
* Included within these reserves is an amount of
£37,334,000 (2021: £13,646,000) which is considered distributable.
Over the next four years an additional £37,129,000 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 April 2022, £1,310,000 became
distributable in line with this.
Statement of cash
flows
|
|
Year ended31 March
2022£’000 |
Year ended31 March 2021£’000 |
Cash flow from operating
activities |
|
|
|
Investment income
received |
|
826 |
434 |
Dividend income received |
|
- |
94 |
Deposit interest received |
|
3 |
17 |
Investment Manager’s fees
paid |
|
(2,084) |
(1,403) |
Other cash payments |
|
(503) |
(465) |
Net cash flow from
operating activities |
|
(1,758) |
(1,323) |
|
|
|
|
Cash flow from
investing activities |
|
|
|
Disposal of current asset
investments |
|
- |
3,691 |
Purchase of fixed asset
investments |
|
(8,519) |
(7,324) |
Disposal of fixed asset
investments |
|
9,379 |
3,683 |
Net cash flow from
investing activities |
|
860 |
50 |
|
|
|
|
Cash flow from
financing activities |
|
|
|
Issue of share capital |
|
12,230 |
8,568 |
Cost of issue of equity |
|
(19) |
(17) |
Dividends paid* |
|
(3,806) |
(3,094) |
Purchase of own shares
(including costs) |
|
(2,384) |
(1,265) |
Net cash flow from
financing activities |
|
6,021 |
4,192 |
|
|
|
|
Increase in cash and
cash equivalents |
|
5,123 |
2,919 |
Cash and cash equivalents at
start of the year |
|
24,429 |
21,510 |
Cash and cash
equivalents at end of the year |
|
29,552 |
24,429 |
* The dividends paid shown in the cash flow are different to the
dividends disclosed in note 9 as a result of the non-cash effect of
the Dividend Reinvestment
Scheme.
Notes to the Financial
Statements
1. Accounting conventionThe
Financial Statements have been prepared in accordance with
applicable United Kingdom law and accounting standards, including
Financial Reporting Standard 102 (“FRS 102”), and with the
Statement of Recommended Practice “Financial Statements of
Investment Trust Companies and Venture Capital Trusts” (“SORP”)
issued by The Association of Investment Companies (“AIC”). The
Financial Statements have been prepared on a going concern basis
and further details can be found in the Directors’ report on pages
33 and 34 of the full Annual report and Financial Statements.
The preparation of the Financial Statements
requires management to make judgements and estimates that affect
the application of policies and reported amounts of assets,
liabilities, income and expenses. The most critical estimates and
judgements relate to the determination of carrying value of
investments at Fair Value Through Profit and Loss (“FVTPL”) in
accordance with FRS 102 sections 11 and 12. The Company values
investments by following the International Private Equity and
Venture Capital Valuation (“IPEV”) Guidelines as updated in 2018
and further detail on the valuation techniques used are outlined in
note 2 below.
Company information is shown on page 2 of the
full Annual report and Financial Statements.
2. Accounting
policiesFixed asset
investmentsThe 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 section 9
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 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 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, discounted cash flows and industry valuation benchmarks.
Where price of recent investment is used as a starting point for
estimating fair value at subsequent measurement dates, this has
been benchmarked using an appropriate valuation technique permitted
by the IPEV guidelines.
- In situations where cost or price
of recent investment is used, consideration is given to the
circumstances of the portfolio company since that date in
determining fair value. This includes consideration of whether
there is any evidence of deterioration or strong definable evidence
of an increase in value. In the absence of these indicators, the
investment in question is valued at the amount reported at the
previous reporting date. Examples of events or changes that could
indicate a diminution include:
- the performance and/or prospects of
the underlying business are significantly below the expectations on
which the investment was based;
- a significant adverse change either
in the portfolio company’s business or in the technological,
market, economic, legal or regulatory environment in which the
business operates; or
- market conditions have
deteriorated, which may be indicated by a fall in the share prices
of quoted businesses operating in the same or related sectors.
Investments are recognised as financial assets
on legal completion of the investment contract and are
de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the
fair value movement of an investment, but is recognised separately
as investment income through the other distributable reserve when a
share becomes ex-dividend.
Current assets and
payablesReceivables (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 incomeEquity
incomeDividend income is included in revenue when the investment is
quoted ex-dividend.
Unquoted loan stock incomeFixed 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 incomeInterest income is
recognised on an accruals basis using the rate of interest agreed
with the bank.
Investment management
fee, performance incentive fee
and other expensesAll expenses have been accounted
for on an accruals basis. Expenses are charged through the other
distributable reserve except the following which are charged
through the realised capital reserve:
- 90% of management fees and 100% of
performance incentive fees, if any, are allocated to the realised
capital reserve. This has changed from 75% for both management fees
and performance incentive fees in the year ended 31 March 2022, to
better align with the Board’s expectation that over the long term
the majority of the Company’s investment returns will be in the
form of capital gains; and
- expenses which are incidental to
the purchase or disposal of an investment are charged through the
realised capital reserve.
TaxationTaxation 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 for 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
reservesCalled-up share capitalThis
accounts for the nominal value of the Company’s shares.
Share premiumThis 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 reserveThis 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 reserveIncreases and
decreases in the valuation of investments held at the year end
against cost are included in this reserve.
Realised capital reserveThe 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 reserveThe 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, transfers from the share premium and
capital redemption reserve, and other non-capital realised
movements.
DividendsDividends by the
Company are accounted for when the liability to make the payment
(record date) has been established.
Going concernThe 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 reportingThe
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/(losses) on investments
|
Year ended 31 March
2022£’000 |
Year ended 31 March 2021£’000 |
Unrealised gains on fixed asset investments |
17,239 |
8,836 |
Realised gains on fixed asset
investments |
4,129 |
1,866 |
Finance income from deferred
consideration |
268 |
- |
Realised gains on current
asset investments |
- |
190 |
|
21,636 |
10,892 |
4. Investment
income
|
Year ended 31 March
2022£’000 |
Year ended 31 March 2021£’000 |
Loan stock interest |
883 |
434 |
Dividend income |
- |
94 |
Bank deposit interest |
3 |
15 |
|
886 |
543 |
5. Investment
Manager’s fees
|
Year ended31 March
2022£’000 |
Year ended31 March 2021£’000 |
Investment management fees charged to revenue |
196 |
366 |
Investment management fees
charged to capital |
1,762 |
1,098 |
Performance incentive fee
charged to revenue |
- |
72 |
Performance incentive fee
charged to capital |
1,934 |
216 |
|
3,892 |
1,752 |
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
£4,090,000 (2021: £1,905,000) were purchased by the Company from
Albion Capital Group LLP; this includes £1,958,000 (2021:
£1,464,000) of management fee, £198,000 (2021: £153,000) of
administration fee; and a performance incentive fee of £1,934,000
(2021: £288,000). At the financial year end, the amount due to
Albion Capital Group LLP in respect of these services disclosed as
accruals was £2,562,000 (2021: £739,000). 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 Capital
Group LLP by way of a reduction in management fees. During the
year, the management fee was reduced by £22,000 as a result of this
cap (2021: £53,000).
During the year, the Company was not charged by
Albion Capital Group LLP in respect of Patrick Reeve’s services as
a Director (2021: £nil).
Albion Capital Group LLP, its partners and staff
hold a total of 687,260 shares in the Company on 31 March 2022.
The Manager is, from time to time, eligible to
receive arrangement fees and monitoring fees from portfolio
companies. During the year ended 31 March 2022, fees of £177,000
attributable to the investments of the Company were received
pursuant to these arrangements (2021: £205,000).
The Company has entered into an offer agreement
relating to the Offers with the Manager, Albion Capital Group LLP,
pursuant to which Albion Capital will receive a fee of 2.5% 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.
6. Other
expenses
|
Year ended 31 March
2022£’000 |
Year ended 31 March 2021£’000 |
Directors’ fees (including NIC) |
97 |
95 |
Auditor’s remuneration for
statutory audit services (exclusive of VAT) |
39 |
37 |
Administration fee |
198 |
153 |
Other administrative
expenses |
215 |
169 |
|
549 |
454 |
7. Directors’
fees The amounts paid to and on behalf of the Directors
during the year are as follows:
|
Year ended 31 March
2022£’000 |
Year ended 31 March 2021£’000 |
Directors’ fees |
90 |
88 |
National insurance |
7 |
7 |
|
97 |
95 |
The Company’s key management personnel are the
non-executive Directors. Further information regarding Directors’
remuneration can be found in the Directors’ remuneration report on
pages 45 to 47 of the full Annal Report and Financial
Statements.
8. Tax on ordinary
activities
|
Year ended 31 March
2022£’000 |
Year ended 31 March 2021£’000 |
UK corporation tax charge in respect of current year |
- |
- |
|
- |
- |
|
|
|
Factors affecting the tax charge: |
Year ended 31 March
2022£’000 |
Year ended 31 March 2021£’000 |
Return on ordinary activities before taxation |
18,081 |
9,229 |
|
|
|
Tax charge on profit at the average companies rate of 19% (2021:
19%) |
3,435 |
1,754 |
|
|
|
Factors affecting the charge: |
|
|
Non-taxable gains |
(4,111) |
(2,069) |
Income not taxable |
- |
(18) |
Excess management expenses carried forward |
676 |
333 |
|
- |
- |
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.
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 £11,649,000 (2021: £8,090,000) that
are available for offset against future profits. A deferred tax
asset of £2,912,000 (2021: £1,537,000) 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 31 March
2022
£’000 |
Year ended 31 March 2021 £’000 |
|
|
|
First dividend of
2.87p per share paid on 31 August 2021 (28 August 2020 – 2.70p per
share) |
2,139 |
1,836 |
Second dividend of 3.22p per
share paid on 28 February 2022 (26 February 2021 – 2.74p per
share) |
2,391 |
1,854 |
Unclaimed dividends |
(2) |
(2) |
|
4,528 |
3,688 |
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 2023 of 3.31 pence per share to be paid on 31 August 2022 to
shareholders on the register on 5 August 2022. The total dividend
will be approximately £2,984,000.
10. Basic and diluted
return per share
|
Year ended31 March
2022 |
Year ended31 March 2021 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
|
|
|
|
Return/(loss) attributable to
equity shares (£’000) |
141 |
17,940 |
18,081 |
(349) |
9,578 |
9,229 |
Weighted average shares in
issue (adjusted for treasury shares) |
75,440,864 |
68,620,876 |
Return/(loss) attributable per
equity share (pence) |
0.19 |
23.78 |
23.97 |
(0.51) |
13.96 |
13.45 |
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 12,195,568 (2021:
10,713,420).
11. Fixed asset
investments
Investments held at
fair value through profit or loss |
31 March
2022£’000 |
31 March 2021£’000 |
Unquoted equity and preference shares |
68,138 |
48,450 |
Unquoted loan stock |
11,486 |
12,165 |
Quoted equity |
1,218 |
- |
|
80,842 |
60,615 |
|
|
|
|
|
31 March
2022£’000 |
31 March 2021£’000 |
|
Opening valuation |
60,615 |
47,859 |
|
Purchases at
cost |
8,952 |
7,324 |
|
Disposal
proceeds |
(10,151) |
(5,270) |
|
Realised
gains |
4,129 |
1,866 |
|
Movement in loan
stock revenue accrued income |
58 |
- |
|
Unrealised
gains |
17,239 |
8,836 |
|
Closing
valuation |
80,842 |
60,615 |
|
|
|
|
|
Movement
in loan stock revenue accrued income |
|
|
|
Opening
accumulated loan stock revenue accrued income |
1 |
1 |
|
Movement in loan
stock revenue accrued income |
58 |
- |
|
Closing
accumulated loan stock revenue accrued income |
59 |
1 |
|
|
|
|
|
Movement
in unrealised gains |
|
|
|
Opening
accumulated unrealised gains |
17,539 |
10,129 |
|
Movement in
unrealised gains |
17,239 |
8,836 |
|
Transfer of
previously unrealised gains to realised reserve on disposal of
investments |
(1,987) |
(1,426) |
|
Closing
accumulated unrealised gains |
32,791 |
17,539 |
|
|
|
|
|
Historic
cost basis |
|
|
|
Opening book
cost |
43,076 |
37,730 |
|
Purchases at
cost |
8,952 |
7,324 |
|
Disposals at
cost |
(4,035) |
(1,978) |
|
Closing
book cost |
47,993 |
43,076 |
|
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
debtors and creditors.
Unquoted fixed asset investments are valued at
fair value in accordance with the IPEV guidelines as follows:
|
31 March
2022 |
31 March 2021 |
Valuation methodology |
£’000 |
£’000 |
Cost and price of recent investment (reviewed for impairment or
uplift) |
39,353 |
23,438 |
Revenue multiple |
26,204 |
25,130 |
Third party valuation –
Discounted cash flow |
6,422 |
6,448 |
Third party valuation –
Earnings multiple |
3,417 |
3,053 |
Net assets |
1,146 |
141 |
Earnings multiple |
3,082 |
2,405 |
|
79,624 |
60,615 |
When using the cost or price of a recent
investment in the valuations, the Company looks to re-calibrate
this price at each valuation point by reviewing progress within the
investment, comparing against the initial investment thesis,
assessing if there are any significant events or milestones that
would indicate the value of the investment has changed and
considering whether a market-based methodology (i.e. using
multiples from comparable public companies) or a discounted
cashflow forecast would be more appropriate.
The main inputs into the calibration exercise,
and for the valuation models using multiples, are revenue, EBITDA
and P/E multiples (based on the most recent revenue, EBITDA or
earnings achieved and equivalent corresponding revenue, EBITDA or
earnings multiples of comparable companies), quality of earnings
assessments and comparability difference adjustments. Revenue
multiples are often used, rather than EBITDA or earnings, due to
the nature of the Company’s investments, being in growth and
technology companies which are not normally expected to achieve
profitability or scale for a number of years. Where an investment
has achieved scale and profitability the Company would normally
then expect to switch to using an EBITDA or earnings multiple
methodology.
In the calibration exercise and in determining
the valuation for the Company’s equity instruments, comparable
trading multiples are used. In accordance with the Company’s
policy, appropriate comparable companies based on industry, size,
developmental stage, revenue generation and strategy are determined
and a trading multiple for each comparable company identified is
then calculated. The multiple is calculated by dividing the
enterprise value of the comparable group by its revenue, EBITDA or
earnings. The trading multiple is then adjusted for considerations
such as illiquidity, marketability and other differences,
advantages and disadvantages between the portfolio company and the
comparable public companies based on company specific facts and
circumstances.
Fair value investments had the following
movements between valuation methodologies between 31 March 2021 and
31 March 2022:
Change in valuation methodology
(2021
to
2022) |
Value on 31
March
2022£’000 |
Explanatory note |
Revenue multiple to cost and
price of recent investment (reviewed for impairment or uplift) |
2,107 |
More appropriate valuation
methodology |
Cost and price of recent
investment (reviewed for impairment or uplift) to revenue
multiple |
1,377 |
More appropriate valuation
methodology |
Cost and price of recent
investment (reviewed for impairment or uplift) to bid price |
1,218 |
Company listed on AIM in
period |
Cost and price of recent
investment (reviewed for impairment or uplift) to net assets |
1,078 |
More appropriate valuation
methodology |
Third party valuation -
earnings multiple to net assets |
68 |
More appropriate valuation
methodology |
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 on 31 March 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 FRS102 s.11.27.
Fair value hierarchy |
Definition |
Level 1 |
Unadjusted quoted prices in an active market |
Level 2 |
Inputs to valuations are from observable sources and are directly
or indirectly derived from prices |
Level 3 |
Inputs to valuations not based on observable market data |
Quoted investments are valued according to Level
1 valuation methods. Unquoted equity, preference shares and loan
stock are all valued according to Level 3 valuation methods.
Investments held at fair value through profit or
loss (Level 3) had the following movements:
|
31 March 2022 |
|
31
March 2021 |
|
£’000 |
£’000 |
Opening
balance |
60,615 |
47,859 |
Additions |
8,952 |
7,324 |
Movement from
Level 3 to Level 1* |
(573) |
- |
Disposals |
(10,151) |
(5,270) |
Realised
gains |
4,129 |
1,866 |
Accrued loan stock
interest |
58 |
- |
Unrealised
gains |
16,594 |
8,836 |
Closing
balance |
79,624 |
60,615 |
* This relates to Arecor Therapeutics PLC, which
listed on the AIM stock exchange during the period. This is the
only Level 1 investment.
There are no Level 2 investments.
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.
63% of the portfolio of investments, consisting of equity and loan
stock, is based on recent investment price, net assets and cost,
which are considered the most appropriate valuation methodology. As
such the Board believes that changes to reasonable possible
alternative input assumptions (by adjusting the earnings and
revenue multiples) for the valuation of the remainder of the
portfolio could lead to a significant change in the fair value of
the portfolio. Therefore, for the remainder of the portfolio, the
Board has adjusted the inputs for a number of the largest portfolio
companies (by value) resulting in a total coverage of 91% of the
portfolio of investments.
The main inputs considered for each type of
valuation is as follows:
Valuation technique |
Portfolio company sector |
Input |
Base Case* |
Change in input |
Change in fair value of investments (£’000) |
Change in NAV (pence per share) |
Revenue multiple |
Other software & technology |
Revenue multiple |
5.9x |
+0.6x |
1,331 |
1.49 |
-0.6x |
(1,331) |
(1.49) |
Revenue multiple |
Healthcare (including digital healthcare) |
Revenue multiple |
5.6x |
+0.6x |
627 |
0.70 |
-0.6x |
(627) |
(0.70) |
Third party valuation – discounted cashflow |
Renewable energy |
Third party valuation – discounted cashflow |
10.0% discount rate |
+0.5% |
176 |
0.20 |
-0.5% |
(227) |
(0.25) |
*As detailed in the accounting policies above,
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
£2,134,000 (3.1%) (2021: £1,605,000 (3.3%)) or a decrease in the
valuation of equity investments by £2,185,000 (3.2%) (2021:
£2,268,000 (4.7%)).
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
investment listed below is held as part of an investment portfolio
and therefore, as permitted by FRS 102 section 9.9B, it is measured
at fair value through profit and loss and not accounted for using
the equity method.
The Company has interests of greater than 20% of
the nominal value of any class of the allotted shares in the
portfolio company on 31 March 2022 as described below:
Company |
Registered address and country of
incorporation |
Profit/(loss) before
tax£’000 |
Aggregate capital and
reserves£’000 |
Result for year ended |
% class and share
type |
% total voting
rights |
Greenenerco Limited |
EC1M 5QL, UK |
n/a* |
443 |
31 March 2021 |
28.6% A Ordinary |
28.6% |
*The company files filleted accounts which do
not disclose this information.
13.
Trade and other receivables
|
31 March
2022 |
31 March 2021 |
|
£’000 |
£’000 |
Deferred
consideration under one year |
488 |
149 |
Deferred consideration over
one year |
1,867 |
1,600 |
Prepayments and accrued
income |
26 |
21 |
Other receivables |
8,344 |
2 |
|
10,725 |
1,772 |
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.
Other debtors includes £8,342,000 (£nil) owed to
the Company in respect of the allotment of shares that took place
on 31 March 2022 and was received on 1 April 2022. Further details
are given in note 15.
The Directors consider that the carrying amount
of receivables is not materially different to their fair value.
14.
Trade and other payables less than one year
|
31 March
2022 |
31 March 2021 |
|
£’000 |
£’000 |
Accruals and
deferred income |
2,662 |
812 |
Trade payables |
42 |
606 |
|
2,704 |
1,418 |
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: |
£’000 |
85,232,100 Ordinary shares of 1 penny each at 31 March 2021 |
852 |
16,479,705 Ordinary shares of 1 penny each issued during the
year |
165 |
101,711,805 Ordinary shares of 1 penny
each at 31 March
2022 |
1,017 |
|
|
10,713,420 Ordinary shares of 1 penny each held in treasury at 31
March 2021 |
(107) |
1,482,148 Ordinary shares of 1 penny each purchased during the year
to be held in treasury |
(15) |
12,195,568
Ordinary shares of 1 penny each held in treasury
at 31 March
2022 |
(122) |
|
|
Voting rights of
89,516,237
Ordinary shares of 1 penny each
at 31 March
2022 |
895 |
The Company purchased 1,482,148 shares (2021:
1,768,106) to be held in treasury at a nominal value of £14,821 and
a cost of £1,795,000 (2021: £1,853,000) representing 1.5% of the
shares in issue on 31 March 2022, leading to a balance of
12,195,568 shares (2021: 10,713,420) in treasury representing 12.0%
(2021: 12.6%) of the shares in issue on 31 March 2022.
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:
Date of allotment |
Number of shares allotted |
Aggregatenominal value of
shares (£’000) |
Issue price
(pence per
share) |
Net invested
(£’000) |
Opening market price on allotment date (pence per
share) |
31 August 2021 |
275,632 |
3 |
125.06 |
327 |
119.50 |
28 February 2022 |
290,517 |
3 |
129.67 |
359 |
123.50 |
|
566,149 |
|
|
686 |
|
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 2020/21 and
2021/22:
Date of allotment |
Number of shares allotted |
Aggregatenominal value of
shares (£’000) |
Issue price
(pence per
share) |
Net
consideration
received (£’000) |
Opening market price on allotment date (pence per
share) |
9 April 2021 |
144,118 |
1 |
114.00 |
162 |
106.50 |
9 April 2021 |
9,249 |
- |
114.60 |
10 |
106.50 |
9 April 2021 |
229,987 |
2 |
115.20 |
258 |
106.50 |
25 February 2022 |
973,740 |
10 |
131.70 |
1,263 |
123.50 |
25 February 2022 |
317,042 |
3 |
132.40 |
411 |
123.50 |
25 February 2022 |
7,806,927 |
78 |
133.00 |
10,125 |
123.50 |
31 March 2022 |
6,432,493 |
64 |
133.00 |
8,342 |
122.50 |
|
15,913,556 |
|
|
20,571 |
|
16.
Basic and diluted net asset value per
share
|
31 March
2022 |
31 March 2021 |
|
(pence per
share) |
(pence per share) |
Basic and diluted net asset value per Ordinary share |
132.28 |
114.60 |
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 (excluding
treasury shares) of 89,516,237 Ordinary shares (2021: 74,518,680)
at 31 March 2022.
17.
Capital and financial instruments risk managementThe
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 on page 33
of the Directors’ report in the full Annual report and Financial
Statements.
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:
- 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 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.
Market riskAs 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.
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 £8,084,000. 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 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 on the balance sheet
date is the value of the fixed asset investment portfolio which is
£80,842,000 (2021: £60,615,000). Fixed asset investments form 68%
of the net asset value on 31 March 2022 (2021: 71%).
More details regarding the classification of
fixed asset investments are shown in note 11.
Interest rate
riskIt 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% in all interest rates would have
increased total return before tax for the year by approximately
£270,000 (2021: £230,000). 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 9.8% (2021: 4.9%). The weighted average period to
expected maturity for the unquoted loan stock is approximately 4.0
years (2021: 4.5 years).
The Company’s financial assets and liabilities,
all denominated in pounds sterling, consist of the following:
|
31 March
2022 |
31 March 2021 |
|
Fixedrate£’000 |
Floatingrate£’000 |
Non-interestbearing£’000 |
Total£’000 |
Fixedrate£’000 |
Floatingrate£’000 |
Non-interestbearing£’000 |
Total£’000 |
Unquoted equity |
- |
- |
68,138 |
68,138 |
- |
- |
48,450 |
48,450 |
Quoted equity |
- |
- |
1,218 |
1,218 |
- |
- |
- |
- |
Unquoted loan stock |
9,934 |
- |
1,552 |
11,486 |
11,508 |
- |
657 |
12,165 |
Receivables* |
- |
- |
10,699 |
10,699 |
- |
- |
1,751 |
1,751 |
Current liabilities |
- |
- |
(2,704) |
(2,704) |
- |
- |
(1,418) |
(1,418) |
Cash |
- |
29,552 |
- |
29,552 |
- |
24,429 |
- |
24,429 |
|
9,934 |
29,552 |
78,903 |
118,389 |
11,508 |
24,429 |
49,440 |
85,377 |
*The receivables do not reconcile to the Balance
sheet as prepayments are not included in the above table.
Credit riskCredit 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 70% 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 on 31
March 2022 was limited to £11,486,000 (2021: £12,165,000) of
unquoted loan stock instruments, £29,552,000 (2021: £24,429,000) of
cash deposits with banks and £10,725,000 (2021: £1,751,000) 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, 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 below.
Liquidity riskLiquid 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 share capital
and reserves of the latest published audited Balance sheet, which
amounts to £11,543,000 (2021: £8,325,000) on 31 March 2022.
The Company has no committed borrowing
facilities on 31 March 2022 (2021: nil) and had cash of £29,552,000
(2021: £24,429,000). 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 £2,704,000 on 31 March 2022 (2021:
£1,418,000).
The carrying value of loan stock investments as
analysed by expected maturity dates is as follows:
|
|
31 March
2022 |
|
|
31 March 2021 |
|
Redemption date |
Fully performing£’000 |
Past due£’000 |
Valued below cost£’000 |
Total£’000 |
Fully performing£’000 |
Past due£’000 |
Valued below cost£’000 |
Total£’000 |
Less than one
year |
4,811 |
- |
70 |
4,881 |
2,752 |
- |
206 |
2,958 |
1-2 years |
94 |
- |
2 |
96 |
1,362 |
656 |
45 |
2,063 |
2-3 years |
2,092 |
- |
3 |
2,095 |
93 |
- |
161 |
254 |
3-5 years |
1,894 |
- |
- |
1,894 |
4,322 |
- |
8 |
4,330 |
Greater than 5 years |
2,520 |
- |
- |
2,520 |
2,560 |
- |
- |
2,560 |
Total |
11,411 |
- |
75 |
11,486 |
11,089 |
656 |
420 |
12,165 |
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 £544,000
(2021: £510,000).
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 liabilitiesAll the Company’s financial assets
and liabilities on 31 March 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. Commitments and
contingencies
On 31 March 2022, the Company had no financial
commitments (2021: £nil).
There were no contingent liabilities or
guarantees given by the Company on 31 March 2022 (2021: £nil).
19. Post balance sheet
eventsSince 31 March 2022 the Company has had the
following post balance sheet events:
- Investment of £1,037,000 in a new
portfolio company;
- Investment of £668,000 in an
existing portfolio company, Gravitee TopCo Limited;
- Investment of £526,000 in a new
portfolio company, Ophelos Limited;
- Investment of £265,000 in an
existing portfolio company, Cantab Research Limited;
- Investment of £252,000 in an
existing portfolio company, Accelex Technology Limited; and
- Investment of £75,000 in an
existing portfolio company, Concirrus Limited.
The following new Ordinary shares of nominal
value 1 penny each were allotted under the Albion VCTs Prospectus
Top Up Offers 2021/22 after 31 March 2022:
Date of allotment |
Number of shares allotted |
Aggregate nominal value of shares |
Issue price (pence per |
Net consideration received |
Opening market price on allotment date |
|
|
£’000 |
share) |
£’000 |
(pence per
share) |
11 April 2022 |
133,797 |
1 |
131.70 |
174 |
122.50 |
11 April 2022 |
17,745 |
- |
132.40 |
23 |
122.50 |
11 April 2022 |
492,987 |
5 |
133.00 |
639 |
122.50 |
|
644,529 |
|
|
836 |
|
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 page 46 of the
full Annual Report and Financial Statements, there are no other
related party transactions or balances requiring disclosure.
21. Other Information The
information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 434 of the
Companies Act 2006 for the years ended 31 March 2022 and 31 March
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 March 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. PublicationThe 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/AAEV, where the Report can be accessed as
a PDF document via a link in the 'Financial Reports and Circulars'
section.
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