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 2023.
This announcement was approved for release by
the Board of Directors on 5 July 2023.
This announcement has not been audited.
The Annual Report and Financial Statements for
the year ended 31 March 2023 (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/31Mar2023.pdf.
Investment objective and
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
4 August 2023 |
Record date for first interim
dividend |
Noon on 30 August 2023 |
Annual General Meeting |
31 August 2023 |
Payment date for first interim
dividend |
December 2023 |
Announcement of Half-yearly
results for the six months ending 30 September 2023 |
Financial highlights
2.81p |
Increase in total shareholder value (pence per share) for the year
ended 31 March 2023† |
|
|
2.12% |
Shareholder return for the year ended 31 March 2023† |
|
|
6.49p |
Tax-free dividend per share for the year ended 31 March 2023 |
|
|
128.60p |
Net asset value per share on 31 March 2023 |
|
|
197.47p |
Total shareholder value per share from launch to 31 March
2023† |
†These are considered Alternative Performance
Measures, see notes 2 and 3 in the Strategic report below for
further explanation.
|
31 March
2023
(pence per share) |
31 March 2022 (pence per share) |
Opening net asset value |
132.28 |
114.60 |
|
|
|
Capital return |
2.64 |
23.78 |
Revenue return |
0.39 |
0.19 |
Total return |
3.03 |
23.97 |
Dividends paid |
(6.49) |
(6.09) |
Impact from share capital
movements |
(0.22) |
(0.20) |
Net asset value |
128.60 |
132.28 |
|
|
|
|
Pence per share |
Total dividends paid per share
to 31 March 2023 |
68.87 |
Net asset
value per share on 31 March 2023 |
128.60 |
Total shareholder value per share
to 31 March 2023 |
197.47 |
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
2024,
of 3.22
pence per Ordinary
share to be paid
on 31 August
2023 to
shareholders on the register on
4 August
2023.
Chairman’s statement
During the year, the Company’s portfolio has
faced a difficult macroeconomic and geopolitical backdrop,
including the repercussions arising from the war in Ukraine, high
inflation, rising interest rates, political instability and a sharp
fall in the valuation of quoted technology companies. In spite of
this, the Company has achieved an increase in total shareholder
value of 2.81 pence per share for the year (2.1% on opening net
asset value).
Against this backdrop, the Board continues to be
encouraged by the progress being made by many of the portfolio
companies, demonstrating their resilience despite challenging
market conditions. Inevitably, a number of portfolio companies have
fared less well. The Board recognises the importance of evaluating
the returns of the Company over the longer-term because a venture
capital portfolio will, by its nature, experience periods of short
term volatility.
Results and
dividends The total return before taxation was
£2.8 million compared to a return of £18.1 million for the previous
year. In line with our variable dividend policy targeting around 5%
of Net Asset Value (“NAV”) per annum the Company paid dividends
totalling 6.49 pence per share during the year ended 31 March 2023
(2022: 6.09 pence per share), which resulted in a slight decrease
in the NAV on 31 March 2023 to 128.60 pence per share (2022: 132.28
pence per share).
The Company will pay a first dividend for the
financial year to 31 March 2024 of 3.22 pence per share on 31
August 2023 to shareholders on the register on 4 August 2023, being
2.5% of the latest reported NAV.
Investment performance and
progress The results for the year showed net gains on
investment of £4.5 million, compared with net gains of £21.6
million for the previous year. Quantexa, the largest company within
our portfolio (19% of net asset value), was the main contributor to
the net gain increasing its value by £9.8 million following an
externally led $129 million Series E fundraising which completed in
April 2023. Quantexa continues to record strong revenue growth
which more than offset the well-publicised reduced valuations
ascribed to the technology sector. Other gains in the year, again
driven by revenue growth, included unrealised gains on Convertr of
£1.0 million and Solidatus of £0.8 million. These gains were
partially offset by write downs in Black Swan Data which decreased
by £2.1 million, Oviva by £1.4 million and uMotif by £0.9 million,
as a result of difficult trading conditions.
The Company realised disposal proceeds of £1.8
million (2022: £10.2 million). The largest disposals being Zift
(£0.5 million) and a part disposal of our shareholding in our
quoted investment, Arecor Therapeutics PLC (£0.4 million). Three
investments were written off during the year, their valuations had
already been reduced substantially in previous years. Further
details on the realisations during the year can be found in the
realisations table on page 29 of the full Annual Report and
Financial Statements.
The three largest investments in the Company’s
portfolio, Quantexa, Egress Software Technologies and Proveca are
valued at £43.8 million and represent 33.8% of the Company’s
NAV.
The Company has been an active investor during
the year, investing a total of £12.5 million, of which £7.9 million
went into 13 new portfolio companies which are expected to require
further investment as the companies prove themselves and grow. The
following are the five largest new investments:
• £1.4 million into Peppy
Health, a platform providing expert support for underserved areas
of health and wellness (e.g. menopause) via content, video, chat
support as an employment benefit for
employees;• £1.3 million into Toqio FinTech,
which bridges the gap between financial services and financial
outcomes by providing an orchestration platform to any business
large or small which wishes to launch a financial
product;• £0.9 million into PeakData, a
software platform that uses big data analytics and AI to collate
data from across the web to provide insights and analytics for the
world’s top pharmaceutical companies, key opinion leaders and
healthcare professionals before and after the launch of new
therapies;• £0.8 million into GX Molecular
(T/A CS Genetics), a developer of a wet-phase approach to single
cell indexing in a single tube that enables increased scalability
and high quality single cell analysis;
and• £0.6 million into OutThink, a software
platform to measure and manage human risk for
enterprises.
A full list of the Company’s investments and
disposals, including their movements in value for the year, can be
found in the Portfolio of investments section on pages 27 to 29 of
the full Annual Report and Financial
Statements.
Risks and
uncertainties The Company faces a number of
significant risks including rising interest rates, high levels of
inflation, the ongoing impact of Russia’s invasion of Ukraine, and
an expected period of economic stagnation, or even recession in the
UK.
Our investment portfolio, while concentrated
mainly in the technology and healthcare sectors, remains
diversified in terms of both sub-sector and stage of
maturity.
A detailed analysis of the other risks and
uncertainties facing the business is shown in the Strategic report
below.
Share buy-backs It remains
the Board’s primary objective to maintain sufficient resources for
investment in existing and new portfolio companies and for the
continued payment of dividends to shareholders. The Board’s policy
is to buy back shares in the market, subject to the overall
constraint that such purchases are in the Company’s interest.
It is the Board’s intention for such buy-backs
to be in the region of a 5% discount to NAV, so far as market
conditions and liquidity permit. Details of shares bought back
during the year can be found in note 15.
Albion VCTs Prospectus Top Up
Offers Your Board, in conjunction with the boards of
the other five VCTs managed by Albion Capital Group LLP, launched a
prospectus top up offer of new Ordinary shares on 10 October 2022.
The Board announced on 5 January 2023 that, following strong
demand, it would opt to exercise its over-allotment facility,
bringing the total to be raised to £16.5 million. The Offer was
fully subscribed and closed to further applications on 17 March
2023.
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”) The AGM will be held virtually at noon on 30
August 2023 via the Lumi platform. Information on how to
participate in the live webcast can be found on the Manager’s
website www.albion.capital/vct-hub/agms-events.
The Board welcome questions from shareholders at
the AGM and shareholders will be able to ask questions using the
Lumi platform during the AGM. Alternatively, shareholders can email
their questions to 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
49 and 50 and in the Notice of the Meeting on pages 90 to 93 of the
full Annual Report and Financial Statements.
Outlook and prospect With
the risks and uncertainties referred to above, the Board cannot be
other than wary about what lies ahead, however, the portfolio
remains well diversified, with companies at different stages of
maturity and targeted at sectors such as healthcare, mission
critical software and a minimal exposure to consumer expenditure.
We believe that these sectors can continue to provide opportunities
for resilient growth, yielding positive results for the Company and
its shareholders in the longer-term.
Maxwell
Packe Chairman 5
July 2023
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 2023 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. Software and technology is
predominantly focused around areas of digital risk, data management
and AI. Details of the principal investments made by the Company
are shown in the Portfolio of investments on pages 27 and 28 of the
full Annual Report and Financial Statements.
Direction of portfolio
The Company’s investment portfolio is
well-balanced across the Healthcare, FinTech, and Software and
Technology sectors. Due to the share allotments under the 2022/23
Prospectus Top Up Offer, cash and net assets is a significant
proportion of the portfolio at 26%. The Manager has a deep sector
knowledge in healthcare, FinTech and software investing, and these
funds will be used to support the existing portfolio companies as
they grow, as well as to capitalise on new investment opportunities
into higher growth technology companies within these sectors.
Results and dividend policy
|
£'000 |
|
|
Net capital return for the year ended 31 March 2023 |
2,414 |
Net revenue return for the year ended 31 March 2023 |
352 |
Total return for the year
ended 31 March 2023 |
2,766 |
Dividend of 3.31 pence per share paid on 31 August 2022 |
(2,969) |
Dividend of 3.18 pence per share paid on 28 February 2023 |
(2,985) |
Unclaimed
dividends |
3 |
Transferred from
reserves |
(3,185) |
|
|
Net assets on 31 March 2023 |
129,730 |
|
|
Net asset value on 31 March
2023 |
128.60
pence per share |
The Company paid dividends totalling 6.49 pence
per share during the year ended 31 March 2023 (2022: 6.09 pence per
share). The Board has declared a first dividend for the year ending
31 March 2024, of 3.22 pence per Ordinary share to be paid on 31
August 2023 to shareholders on the register on 4 August 2023.
As shown in the Company’s Income statement
below, the total return for the year was 3.03 pence per share
(2022: 23.97 pence per share). Investment income increased to
£1,206,000 (2022: £886,000), This is a result of dividend income
increasing to £272,000 (2022: £nil), including a dividend declared
by memsstar immediately prior to the disposal in the year, and bank
interest increasing to £184,000 (2022: £3,000) due to higher
interest rates. These increases were partially offset by loan stock
income decreasing slightly to £750,000 (2022: £883,000). The
revenue return to equity holders has subsequently increased to
£352,000 (2022: £141,000).
The capital return on investments for the year
was £4,535,000 (2022: £21,636,000). The net gain was due to an
increase in the unrealised value of investments, with the main
contributor being Quantexa. Key valuation movements during the year
are outlined in the investment performance and progress section of
the Chairman’s statement above.
There was a net cash inflow for the Company of
£3,308,000 for the year (2022: £5,123,000), 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
investments made in new and existing portfolio companies, dividends
paid, operating expenses and the buy-back of shares.
Trade and other payables at the year end
amounted to £1,489,000 (2022: £2,704,000). This decrease was
primarily due to the management performance incentive fee, which
was paid in 2022 as a result of the Company’s strong return for the
previous year.
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. The
results for the year to 31 March 2023 show total shareholder value
of 197.47 pence per share since launch (2022: 194.66 pence per
share).
There is a continuing focus on growing the
FinTech, healthcare (including digital healthcare) and other
software and technology sectors. The majority of these investment
returns are delivered through equity and capital gains, and will be
the key driver of success for the Company. Investment income, which
is received primarily from our renewable energy investments, is
expected to remain steady over the coming years.
Details of significant events which have
occurred since the end of the financial year are listed in note 19.
Details of transactions with the Manager are shown in note 5.
Future prospects
The Company’s financial results for the year
demonstrates that the portfolio remains well balanced across
sectors and risk classes, despite the impacts of the ongoing global
issues caused as a result of high levels of interest rates and
inflation, due in part to the Russian invasion of Ukraine, however
the full effects of these issues will continue to be felt in years
to come. Although there remains much uncertainty, the Board
considers that the current portfolio has the potential to deliver
long term growth, whilst maintaining a predictable stream of
dividend payments to shareholders. Further details of the Company’s
outlook can be found in the Chairman’s statement above.
Key performance indicators (“KPIs”) and
Alternative Performance Measures (“APMs”)The Directors
believe that the following KPIs and APMs, which are typical for
Venture Capital Trusts, used in its own assessment of the Company,
will provide shareholders with sufficient information to assess how
effectively the Company is applying its investment policy to meet
its objectives. The Directors are satisfied that the results shown
in the following KPIs and APMs give a good indication that the
Company is achieving its investment objective and policy.
1. Total
shareholder value relative to FTSE All Share Index total returnThe
graph on page 8 of the full Annual Report and Financial Statements
shows the Company’s total shareholder value relative to the FTSE
All-Share Index total return, with dividends reinvested. The FTSE
All-Share index is considered a reasonable benchmark as the Company
is classed as a generalist UK VCT investor, and this index includes
over 600 companies listed in the UK, including small-cap, covering
a range of sectors. Details on the performance of the net asset
value and return per share for the year are shown in the Chairman’s
statement above.
2. Net
asset value per share and total shareholder value
The chart on page 16 of the full Annual Report
and Financial Statements illustrates the movement in net asset
value per share plus cumulative dividends paid since launch to 31
March 2023. Total shareholder value increased by 2.1% on opening
net asset value to 197.47 pence per share for the year ended 31
March 2023.
3. Movement
in shareholder value in the year†The table below shows the total
shareholder value over the last 10 years, with an average return of
8.7% per annum.
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
9.7% |
4.5% |
5.4% |
10.8% |
12.4% |
13.1% |
(4.4)% |
12.7% |
20.7% |
2.1% |
†Methodology: Calculated by the movement in
total shareholder value for the year divided by the opening net
asset value.
4. Dividend
distributions
In line with our dividend policy targeting
around 5% of Net Asset Value, dividends paid in respect of the year
ended 31 March 2023 were 6.49 pence per share (2022: 6.09 pence per
share). Cumulative dividends paid since inception total 68.87 pence
per share.
5. Ongoing
charges
The ongoing charges ratio for the year ended 31
March 2023 was 2.50% (2022: 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 £24,000 to
shareholders during the year (2022: £22,000).
6. VCT
compliance*The investment policy is designed to ensure that the
Company continues to qualify and is approved as a VCT by HMRC. In
order to maintain its status under Venture Capital Trust
legislation, a VCT must comply on a continuing basis with the
provisions of Section 274 of the Income Tax Act 2007, details of
which are provided in the Directors’ report on page 46 of the full
Annual Report and Financial Statements.
The relevant tests to measure compliance have
been carried out and independently reviewed for the year ended 31
March 2023. 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 for any dividends declared. Although the investment policy
permits the Company to borrow, the Directors do not currently have
any intention of utilising long-term gearing and have not done so
in the past.
Operational 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 2023, the total
return of the Company since launch (the performance incentive fee
start date) amounted to 197.47 pence per share, compared to the
higher hurdle of 210.17 pence per share. As a result, no
performance incentive fee is payable to the Manager (2022:
£1,934,000).
Evaluation of the ManagerThe
Board has evaluated the performance of the Manager based on:
• the returns
generated by the Company;
• continued
compliance with VCT regulation;
• 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 in accordance
with Listing Rules and DTRs covering such things as appointment of
a new Director, and the publication of a Prospectus
- Albion Capital
website, social media pages, as well as publishing Albion news
shareholder magazine.
|
- 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 Manager. Undertaking this
virtually enabled engagement with a wider audience of shareholders
from across the country (over 5 times more engagement
than historical physical AGMs), and gave shareholders the
opportunity to ask questions and vote during the virtual AGM last
year. The virtual medium helps facilitate greater shareholder
participation and to help those who are unable to attend the AGM in
person.
- Shareholders are also encouraged to
attend the in person annual Shareholders’ Seminar. Last year’s
event took place on 23 November 2022 at the Royal College of
Surgeons. The seminar included portfolio companies Speechmatics and
Ophelos sharing insights into their businesses and also a Q & A
from Albion executives on some of the key factors affecting the
investment outlook, as well as a review of the past year and the
plans for the year ahead. Representatives of the Board attend the
seminar. The Board considers this an important interactive event,
and invites shareholders to attend this year’s event scheduled for
15 November 2023 at the Royal College of Surgeons. Further
information will be available nearer the time.
- The Board recognises the importance
to Shareholders of maintaining a share buy-back policy, in order to
provide market liquidity, and considered this when establishing the
current policy. The Board closely monitors the discount to the net
asset value to ensure this is in the region of 5%.
- The Board seeks to create value for
Shareholders by generating strong and sustainable returns to
provide shareholders with regular dividends and the prospect of
capital growth. The Board takes this into consideration when making
the decision to pay dividends to Shareholders. The variable
dividend policy has resulted in a dividend yield of 4.9% on opening
net asset value.
- During the year, the Board made the
decision to participate in the Albion Prospectus Top Up Offers,
launched on 10 October 2022, in order to raise funds for deployment
into new and existing portfolio companies. The Board carefully
considered whether further funds were required, whether the VCT
tests would continue to be met, and whether it would be in the
interest of Shareholders, before agreeing to publish the
Prospectus. On allotment, an issue price formula based on the
prevailing net asset value was used to ensure there was no dilution
to existing Shareholders.
- Cash management and liquidity of
the Company are key quarterly discussions amongst the Board, with
focus on deployment of cash for future investments, dividends and
share buy-backs.
- Shareholders can contact the
Chairman using the email AAEVchair@albion.capital
|
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 Environmental, Social and
Governance (“ESG”) 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.
- Details of the Manager’s
responsibilities can be found in the Statement of corporate
governance on pages 52 to 58 of the full Annual Report and
Financial Statements.
|
Suppliers |
The key suppliers with regular engagement from the Manager are:
- Corporate broker
- VCT taxation adviser
- Depositary
- Registrar
- Auditor
- Legal adviser
|
- The Manager, on behalf of the
Company, 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 and was satisfied with their
performance.
|
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 ESG section on pages 35 to 38 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 either a place on the board of a portfolio company or is an
observer, in order to help with both business operation decisions,
as well as good ESG practice.
- The Manager provides access to deep
expertise on growth strategy alignment, leadership team hiring,
organisational scaling and founder leader development.
- The Manager facilitates 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 35 to 38 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.
|
Social and community issues, employees
and human rightsThe Board recognises the requirement under
section 414C of the Companies Act 2006 (the “Act”) to detail
information about social and community issues, employees and human
rights; including any policies it has in relation to these matters
and effectiveness of these policies. As an externally managed
investment company with no employees, the Company has no formal
policies in these matters, however, it is at the core of its
responsible investment strategy as detailed above.
Further 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 pages 47 and 48 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 emergence of rising interest rates and
inflation, caused in part as a result of the Russian invasion of
Ukraine, whilst the pandemic has continued to impact on mobility,
public health and have an adverse influence on the economy. The
full impact of these risks are likely to continue to be uncertain
for some time.
The Board has carried out a robust assessment of
the Company’s principal risks and uncertainties and seeks to
mitigate these risks through regular reviews of performance and
monitoring progress and compliance. The Board applies the
principles detailed in the Financial Reporting Council’s Guidance
on Risk Management, Internal Control and Related Financial and
Business Reporting, in the mitigation and management of these
risks. More information on specific mitigation measures for the
principal risks and uncertainties are explained below:
Risk |
Possible consequence |
Risk assessment during the year |
Risk management |
Investment, performance, technology and valuation risk |
The risk of investment in poor quality businesses, which could
reduce the returns to shareholders and could negatively impact on
the Company’s current and future valuations. By nature, smaller
unquoted businesses, such as those that qualify for Venture Capital
Trust purposes, are more volatile than larger, long-established
businesses. The Company’s investment valuation methodology is
reliant on the accuracy and completeness of information that is
issued by portfolio companies. In particular, the Directors may not
be aware of or take into account certain events or circumstances
which occur after the information issued by such companies is
reported. |
Increased in the year due to the heightened economic and
geopolitical issues as referred to in the Chairman’s statement. In
addition, in the current economic climate the valuations of
technology companies are more volatile. |
To reduce this risk, the Board places reliance upon the skills and
expertise of the Manager and its track record over many years of
making successful investments in this segment of the market. In
addition, the Manager operates a formal and structured investment
appraisal and review process, which includes an Investment
Committee, comprising investment professionals from the Manager for
all investments, and at least one external investment professional
for investments greater than £1 million in aggregate across all the
Albion managed VCTs. The Manager also invites and takes account of
comments from non-executive Directors of the Company on matters
discussed at the Investment Committee meetings.Investments are
actively and regularly monitored by the Manager (investment
managers observe or sit on portfolio company boards), including the
level of diversification in the portfolio, and the Board receives
detailed reports on each investment as part of the Manager’s report
at quarterly board meetings. The Board and Manager regularly review
the deployment of investments and cash resources available to the
Company in assessing liquidity required for servicing the Company’s
buy-backs, dividend payments and operational expenses. The unquoted
investments held by the Company are designated at fair value
through profit or loss and valued in accordance with the
International Private Equity and Venture Capital Valuation
Guidelines updated in 2022. These guidelines set out
recommendations, intended to represent current best practice on the
valuation of venture capital investments. The valuation takes into
account all known material facts up to the date of approval of the
Financial Statements by the Board. |
VCT approval risk |
The Company must comply with section 274 of the Income Tax Act 2007
which enables its investors to take advantage of tax relief on
their investment and on future returns. Breach of any of the rules
enabling the Company to hold VCT status could result in the loss of
that status. |
No change in the year. |
To reduce this risk, the Board has appointed the Manager, which has
a team with significant experience in Venture Capital Trust
management, used to operating within the requirements of the
Venture Capital Trust legislation. In addition, to provide further
formal reassurance, the Board has appointed Philip Hare &
Associates LLP as its taxation adviser, who report quarterly to the
Board to independently confirm compliance with the Venture Capital
Trust legislation, to highlight areas of risk and to inform on
changes in legislation. Each investment in a new portfolio company
is also pre-cleared with our professional advisers or H.M. Revenue
& Customs. The Company monitors closely the extent of
qualifying holdings and addresses this as required. |
Regulatory and compliance risk |
The Company is listed on The London Stock Exchange and is required
to comply with the rules of the Financial Conduct 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 in the year. |
Board members and the Manager have experience of operating at
senior levels within or advising quoted companies. In addition, the
Board and the Manager receive regular updates on new regulation
from its auditor, legal advisers and other professional bodies. The
Company is subject to compliance checks through the Manager’s
compliance function, and any issues arising from compliance or
regulation are reported to its own board every two months. These
controls are also reviewed as part of the quarterly Board meetings,
and also as part of the review work undertaken by the Manager’s
compliance officer. The report on controls is also evaluated by the
internal auditors. |
Operational and internal control risk |
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 or result in reduced or inaccurate information being passed to
the Board or to shareholders. |
No change in the year. |
The Company and its operations are subject to a series of rigorous
internal controls and review procedures exercised throughout the
year. The Board receives reports from the Manager on its internal
controls and risk management.The Audit and Risk 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 business continuity and cyber
security, as mentioned below. Ocorian Depositary (UK) Limited is
the Company’s Depositary, appointed to oversee the custody and cash
arrangements and provide other AIFMD duties. The Board reviews the
quarterly reports prepared by Ocorian Depositary (UK) Limited to
ensure that the Manager is adhering to its policies and procedures
as required by the AIFMD. In addition, the Board annually reviews
the performance of its key service providers, particularly the
Manager, to ensure they continue to have the necessary expertise
and resources to deliver the Company’s investment objective and
policy. The Manager and other service providers have also
demonstrated to the Board that there is no undue reliance placed
upon any one individual. |
Cyber and data security risk |
A cyber attack on one of the Company’s third party suppliers could
result in the security of, potentially sensitive, data being
compromised, leading to financial loss, disruption or damage to the
reputation of the Company. |
Increased in the year, due to an increase in cyber-attacks
worldwide. |
The Manager outsources some of its IT services, including hardware
and software procurement, server management, backup provision and
day-to-day support through an outsourcing arrangement with an IT
consultant. In house IT support is also provided. The Manager takes
cyber risks seriously and the need to guard against these are in
the Service level agreement with our key outsourced service
provider. During the year, further investment was made in our IT
infrastructure and awareness training.In addition, the Manager also
has a business continuity plan which includes off-site storage of
records and remote access provisions. This is revised and tested
annually and is also subject to Compliance, Group Risk and Internal
Audit reporting. Penetration tests are also carried out to ensure
that IT systems are not susceptible to cyber-attacks.The Manager’s
Internal Auditor performs reviews on IT general controls and data
confidentiality and makes recommendations where necessary. The most
recent internal audit focused specifically on IT systems, and was
completed in February 2023. |
Economic, political and social risk |
Changes in economic conditions, including, for example, interest
rates, rates of inflation, industry conditions, competition,
political and diplomatic events, and other factors could
substantially and adversely affect the Company’s prospects in a
number of ways. This also includes risks of social upheaval,
including from infection and population re-distribution, as well as
economic risk challenges as a result of healthcare
pandemics/infection. |
Increased in the year due to the high levels of inflation, rising
interest rates and the geopolitical risks from the invasion of
Ukraine. |
The Company invests in a diversified portfolio of companies across
a number of industry sectors and in addition often invests in a
mixture of instruments in portfolio companies and has a policy of
minimising any external bank borrowings within portfolio
companies.At any given time, the Company has sufficient cash
resources to meet its operating requirements, including share
buy-backs and follow-on investments.In common with most commercial
operations, exogenous risks over which the Company has no control
are always a risk and the Company does what it can to address these
risks where possible, not least as the nature of the investments
the Company makes are long term. The Board and Manager are
continuously assessing the resilience of the portfolio, the Company
and its operations and the robustness of the Company’s external
agents, as well as considering longer term impacts on how the
Company might be positioned in how it invests and operates.
Ensuring liquidity in the portfolio to cope with exigent and
unexpected pressures on the finances of the portfolio and the
Company is an important part of the risk mitigation in these
uncertain times. The portfolio is structured as an all-weather
portfolio with c.55 companies which are diversified as discussed
above. Exposure is relatively small to at-risk sectors that include
leisure, hospitality, retail and travel. |
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.
Climate risks could also negatively impact on the value of
portfolio investments. |
No change in the year. |
The Manager is a signatory of the UN PRI and the Board is kept
updated of the evolving ESG policies. Full details of the specific
procedures and risk mitigation can be found in the ESG report on
pages 35 to 38 of the full Annual Report and Financial Statements.
These procedures ensure that this increased risk continues to be
mitigated where possible.Whilst the Company itself has limited
impact on climate change, due to no employees nor greenhouse gas
emissions, the Board works closely with the Manager to ensure the
Manager themselves are working towards reducing their impact on the
environment, and that the Manager takes account of ESG factors,
including climate change, when making new investment decisions.
With specific respect to the Company, a key objective is increasing
the use of electronic communications with Shareholders. |
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 in the year. |
To reduce this risk, 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. |
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 2026. 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; factoring in high levels of inflation when budgeting for
future expenses, only including proceeds from investment disposals
where there is a high probability of completion, whilst also
assessing the resilience of portfolio companies given the current
decline in the global economy, including the requirement for any
future financial support.
The Board has additionally considered the
ability of the Company to comply with the ongoing conditions to
ensure it maintains its VCT qualifying status under its current
investment policy. As a result of the Board’s quarterly valuation
reviews, it has concluded that the portfolio is well balanced and
geared towards delivering long term growth and strong returns to
shareholders.
The Board has concluded that there is a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the three
year period to 31 March 2026. The Board is mindful of the ongoing
risks and will continue to ensure that appropriate safeguards are
in place, in addition to monitoring the quarterly cashflow
forecasts to ensure the Company has sufficient liquidity.
Companies Act 2006
This Strategic report of the Company for the
year ended 31 March 2023 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 PackeChairman5 July 2023
Responsibility Statement
In preparing these financial statements for the
year ended 31 March 2023, 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 2023 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 51 of the full Annual Report
and Financial Statements.
On behalf of the Board,
Maxwell PackeChairman5 July 2023
Income
statement
|
|
|
|
|
|
Year ended31 March 2023 |
Year ended31 March 2022 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Note |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Gains on investments |
3 |
- |
4,535 |
4,535 |
- |
21,636 |
21,636 |
Investment income |
4 |
1,206 |
- |
1,206 |
886 |
- |
886 |
Investment Manager’s fees |
5 |
(236) |
(2,121) |
(2,357) |
(196) |
(3,696) |
(3,892) |
Other expenses |
6 |
(618) |
- |
(618) |
(549) |
- |
(549) |
Profit on ordinary
activities before taxation |
|
352 |
2,414 |
2,766 |
141 |
17,940 |
18,081 |
Tax on ordinary
activities |
8 |
- |
- |
- |
- |
- |
- |
Profit and total
comprehensive income attributable to shareholders |
|
352 |
2,414 |
2,766 |
141 |
17,940 |
18,081 |
Basic and diluted
return per share (pence)* |
10 |
0.39 |
2.64 |
3.03 |
0.19 |
23.78 |
23.97 |
|
|
|
|
|
|
|
|
* 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 under
guidance published by The Association of Investment Companies.
Balance
sheet
|
Note |
31
March2023£’000 |
31 March2022£’000 |
Fixed asset
investments |
11 |
95,798 |
80,842 |
Current
assets |
|
|
|
Trade and other
receivables |
13 |
2,561 |
10,725 |
Cash in bank and at hand |
|
32,860 |
29,552 |
|
|
35,421 |
40,277 |
|
|
|
|
Payables: amounts
falling due within one year |
|
|
|
Trade and other payables less
than one year |
14 |
(1,489) |
(2,704) |
|
|
|
|
Net current
assets |
|
33,932 |
37,573 |
|
|
|
|
Total assets less
current liabilities |
|
129,730 |
118,415 |
Equity attributable to
equity holders |
|
|
|
Called-up share capital |
15 |
1,154 |
1,017 |
Share premium |
|
25,520 |
8,278 |
Unrealised capital
reserve |
|
41,735 |
32,790 |
Realised capital reserve |
|
10,885 |
17,416 |
Other distributable
reserve |
|
50,436 |
58,914 |
Total equity
shareholders’ funds |
|
129,730 |
118,415 |
Basic and diluted net asset value per share
(pence)* |
16 |
128.60 |
132.28 |
* 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 authorised for issue on 5 July 2023 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 2022 |
1,017 |
8,278 |
- |
32,790 |
17,416 |
58,914 |
118,415 |
Profit/(loss) and total comprehensive income for the year |
- |
- |
- |
4,805 |
(2,391) |
352 |
2,766 |
Transfer of previously unrealised losses on disposal of
investments |
- |
- |
- |
4,140 |
(4,140) |
- |
- |
Issue of equity |
137 |
17,680 |
- |
- |
- |
- |
17,817 |
Cost of issue of equity |
- |
(438) |
- |
- |
- |
- |
(438) |
Purchase of own shares for treasury |
- |
- |
- |
- |
- |
(2,879) |
(2,879) |
Dividends paid |
- |
- |
- |
- |
- |
(5,951) |
(5,951) |
|
|
|
|
|
|
|
|
On 31 March 2023 |
1,154 |
25,520 |
- |
41,735 |
10,885 |
50,436 |
129,730 |
On 1 April 2021 |
852 |
53,258 |
104 |
17,538 |
14,728 |
(1,082) |
85,398 |
Profit 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 |
* Included within these reserves is an amount of
£22,964,000 (2022: £37,334,000) which is considered distributable.
Over the next four years an additional £35,819,000 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 2023, £13,928,000
became distributable in line with this.
The accompanying notes below form an integral
part of these Financial Statements.
The nature of each reserve is described in note
2 below.
Statement of cash
flows
|
|
Year ended31 March
2023£’000 |
Year ended31 March 2022£’000 |
Cash flow from operating activities |
|
|
|
Investment income
received |
|
641 |
826 |
Dividend income received |
|
152 |
- |
Income from fixed term
funds |
|
102 |
1 |
Bank deposit interest |
|
82 |
2 |
Investment Manager’s fees
paid |
|
(4,233) |
(2,084) |
Other cash payments |
|
(626) |
(503) |
Net cash flow used in
operating activities |
|
(3,882) |
(1,758) |
|
|
|
|
Cash flow from
investing activities* |
|
|
|
Purchase of fixed asset
investments |
|
(12,455) |
(8,519) |
Proceeds from disposals of
fixed asset investments |
|
2,088 |
9,379 |
Net cash flow (used
in)/investing activities |
|
(10,367) |
860 |
|
|
|
|
Cash flow from
financing activities |
|
|
|
Issue of share capital |
|
24,753 |
12,230 |
Cost of issue of equity** |
|
(53) |
(19) |
Dividends paid*** |
|
(4,945) |
(3,806) |
Purchase of own shares
(including costs) |
|
(2,198) |
(2,384) |
Net cash flow from
financing activities |
|
17,557 |
6,021 |
|
|
|
|
Increase in cash in
bank and at hand |
|
3,308 |
5,123 |
Cash in bank and at hand at
start of the year |
|
29,552 |
24,429 |
Cash in bank and at
hand at end of the year |
|
32,860 |
29,552 |
* Purchases and disposals detailed above do not agree to note 11
due to restructuring of investments, conversion of convertible loan
stock and settlement of receivables and payables.
** The cost of issue of equity does not agree to the Statement
of changes in equity due to prospectus fundraising amounts being
received net of fees.
*** The equity dividends paid shown in the cash flow are
different to the dividends disclosed in the Statement of changes in
equity and note 9 as a result of the non-cash effect of the
Dividend Reinvestment Scheme and unclaimed dividends.
The accompanying notes below form an integral
part of these Financial Statements.
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 page
45 of the full Annual Report and Financial Statements.
The preparation of the Financial Statements
requires management to make judgements and estimates that affect
the application of policies and reported amounts of assets,
liabilities, income and expenses. The most critical estimates and
judgements relate to the determination of carrying value of
investments at Fair Value Through Profit and Loss (“FVTPL”) in
accordance with FRS 102 sections 11 and 12. The Company values
investments by following the International Private Equity and
Venture Capital Valuation (“IPEV”) Guidelines as updated in 2022
and further detail on the valuation techniques used are outlined in
note 2 below.
Company information is shown on page 4 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 FRS 102,
those undertakings in which the Company holds more than 20% of the
equity as part of an investment portfolio are not accounted for
using the equity method. In these circumstances the investment is
measured at FVTPL.
Upon initial recognition (using trade date
accounting) investments, including loan stock, are designated by
the Company as FVTPL and are included at their initial fair value,
which is cost (excluding expenses incidental to the acquisition
which are written off to the Income statement).
Subsequently, the investments are valued at
‘fair value’, which is measured as follows:
- Investments listed on recognised
exchanges are valued at their bid prices at the end of the
accounting period, including a discount for any restricted sale of
shares, or otherwise at fair value based on published price
quotations.
- Unquoted investments, where there
is not an active market, are valued using an appropriate valuation
technique in accordance with the IPEV Guidelines. Indicators of
fair value are derived using established methodologies including
earnings multiples, revenue multiples, the level of third party
offers received, cost or price of recent investment rounds, net
assets and industry valuation benchmarks. Where price of recent
investment is used as a starting point for estimating fair value at
subsequent measurement dates, this has been benchmarked using an
appropriate valuation technique permitted by the IPEV
guidelines.
- In situations where cost or price
of recent investment is used, consideration is given to the
circumstances of the portfolio company since that date in
determining fair value. This includes consideration of whether
there is any evidence of deterioration or strong definable evidence
of an increase in value. In the absence of these indicators, other
valuation techniques are employed to conclude on the fair value as
at the measurement date. Examples of events or changes that could
indicate a diminution include:
- the performance and/or prospects of
the underlying business are significantly below the expectations on
which the investment was based; or
- 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 that meet the definition of a
financing transaction are 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 incomeDividend
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.
Fixed term funds incomeFunds income is
recognised on an accruals basis using the agreed rate of
interest.
Bank deposit 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.
- 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 in respect of the taxable profit 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 reserve accounts for the
difference between the price paid for the Company’s shares and the
nominal value of those shares, less issue costs and transfers to
the other distributable reserve.
Capital redemption 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.
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
on investments
|
Year ended 31 March
2023£’000 |
Year ended 31 March 2022£’000 |
Unrealised gains on fixed asset investments |
4,805 |
17,239 |
Realised (losses)/gains on
fixed asset investments |
(582) |
4,129 |
Unwinding of discount on
deferred consideration |
312 |
268 |
|
4,535 |
21,636 |
4. Investment
income
|
Year ended 31 March
2023£’000 |
Year ended 31 March 2022£’000 |
Loan stock interest |
750 |
883 |
Dividend income |
272 |
- |
Income from fixed term funds |
102 |
1 |
Bank deposit interest |
82 |
2 |
|
1,206 |
886 |
5. Investment
Manager’s fees
|
Year ended31 March
2023£’000 |
Year ended31 March 2022£’000 |
Investment management fees charged to revenue |
236 |
196 |
Investment management fees
charged to capital |
2,121 |
1,762 |
Performance incentive fee
charged to capital |
- |
1,934 |
|
2,357 |
3,892 |
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
£2,595,000 (2022: £4,090,000) were purchased by the Company from
Albion Capital Group LLP (“Albion”); this includes £2,357,000
(2022: £1,958,000) of management fee and £238,000 (2022: £198,000)
of administration fee. There is no performance incentive fee
payable in the year (2022: £1,934,000). At the financial year end,
the amount due to Albion in respect of these services disclosed as
accruals was £692,000 (2022: £2,562,000). The total annual running
costs of the Company are capped at an amount equal to 2.5% of the
Company’s net assets, with any excess being met by Albion by way of
a reduction in management fees. During the year, the management fee
was reduced by £24,000 as a result of this cap (2022: £22,000).
During the year, the Company was not charged by
Albion in respect of Patrick Reeve’s services as a Director (2022:
£nil).
Albion, its partners and staff (including
Patrick Reeve) held a total of 799,999 shares in the Company on 31
March 2023.
Albion is, from time to time, eligible to
receive arrangement fees and monitoring fees from portfolio
companies. During the year ended 31 March 2023, fees of £252,000
attributable to the investments of the Company were received by
Albion pursuant to these arrangements (2022: £177,000).
The Company has entered into an offer agreement
relating to the Offers, pursuant to which Albion will receive a fee
of 2.5% of the gross proceeds of the Offers and out of which Albion
will pay the costs of the Offers, as detailed in the
Prospectus.
6. Other
expenses
|
Year ended 31 March
2023£’000 |
Year ended 31 March 2022£’000 |
Directors’ fees (including NIC) |
109 |
97 |
Auditor’s remuneration for
statutory audit services (exclusive of VAT) |
48 |
39 |
Administration fee |
238 |
198 |
Other administrative
expenses |
223 |
215 |
|
618 |
549 |
7. Directors’
fees The amounts paid to and on behalf of the Directors
during the year are as follows:
|
Year ended 31 March
2023£’000 |
Year ended 31 March 2022£’000 |
Directors’ fees |
100 |
90 |
National insurance |
9 |
7 |
|
109 |
97 |
The Company’s key management personnel are the
non-executive Directors. Further information regarding Directors’
remuneration can be found in the Directors’ remuneration report on
pages 59 to 62 of the full Annual Report and Financial
Statements.
8. Tax on ordinary
activities
|
Year ended 31 March
2023£’000 |
Year ended 31 March 2022£’000 |
UK corporation tax charge in respect of current year |
- |
- |
|
- |
- |
|
|
|
Factors affecting the tax charge: |
Year ended 31 March
2023£’000 |
Year ended 31 March 2022£’000 |
Profit on ordinary activities before taxation |
2,766 |
18,081 |
|
|
|
Tax charge on profit at the average companies rate of 19% (2022:
19%) |
526 |
3,435 |
|
|
|
Factors affecting the charge: |
|
|
Non-taxable gains |
(862) |
(4,111) |
Income not taxable |
(52) |
- |
Excess management expenses carried forward |
388 |
676 |
|
- |
- |
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% (2022: 19%). The differences are explained
above. From 1 April 2023, the Company’s rate of corporation tax
will increase from 19% to 25%.
Notes
(i)
Venture Capital
Trusts are not subject to corporation tax on capital gains.(ii)
Tax relief on
expenses charged to capital has been determined by allocating tax
relief to expenses by reference to the applicable corporation tax
rate and allocating the relief between revenue and capital in
accordance with the SORP.(iii)
The Company has
excess management expenses of £13,671,000 (2022: £11,649,000) that
are available for offset against future profits. A deferred tax
asset of £3,418,000 (2022: £2,912,000) 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 2023
£’000 |
Year ended 31 March 2022 £’000 |
|
|
|
First dividend of 3.31p per
share paid on 31 August 2022 (31 August 2021 – 2.87p per
share) |
2,969 |
2,139 |
Second dividend of 3.18p per
share paid on 28 February 2023 (28 February 2022 – 3.22p per
share) |
2,985 |
2,391 |
Unclaimed dividends |
(3) |
(2) |
|
5,951 |
4,528 |
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 2024 of 3.22 pence per share to be paid on 31 August 2023 to
shareholders on the register on 4 August 2023. The total dividend
will be approximately £3,262,000.
10. Basic and diluted
return per share
|
Year ended31 March 2023 |
Year ended31 March 2022 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
|
|
|
|
Profit attributable to equity
shares (£’000) |
352 |
2,414 |
2,766 |
141 |
17,940 |
18,081 |
Weighted average shares in
issue (adjusted for treasury shares) |
91,226,939 |
75,440,864 |
Return attributable per equity
share (pence) |
0.39 |
2.64 |
3.03 |
0.19 |
23.78 |
23.97 |
There are no convertible instruments,
derivatives or contingent share agreements in issue so basic and
diluted return per share are the same.
The weighted average number of shares is
calculated after adjusting for treasury shares of 14,558,366 (2022:
12,195,568).
11. Fixed asset
investments
Investments held at fair value through profit or
loss |
31 March 2023£’000 |
31 March 2022£’000 |
Unquoted equity and preference shares |
82,583 |
68,138 |
Unquoted loan stock |
12,785 |
11,486 |
Quoted equity |
430 |
1,218 |
|
95,798 |
80,842 |
|
|
|
|
31 March 2023£’000 |
31 March 2022£’000 |
Opening valuation |
80,842 |
60,615 |
Purchases at cost |
12,455 |
8,952 |
Disposal proceeds |
(1,831) |
(10,151) |
Realised (losses)/gains |
(582) |
4,129 |
Movement in loan stock revenue
accrued income |
109 |
58 |
Unrealised gains |
4,805 |
17,239 |
Closing
valuation |
95,798 |
80,842 |
|
|
|
Movement in loan stock
revenue accrued income |
|
|
Opening accumulated loan stock
revenue accrued income |
59 |
1 |
Movement in loan stock revenue
accrued income |
109 |
58 |
Closing accumulated
loan stock revenue accrued income |
168 |
59 |
|
|
|
Movement in unrealised
gains |
|
|
Opening accumulated unrealised
gains |
32,791 |
17,539 |
Movement in unrealised
gains |
4,805 |
17,239 |
Transfer of previously
unrealised losses/(gains) to realised reserve on disposal of
investments |
4,140 |
(1,987) |
Closing accumulated
unrealised gains |
41,736 |
32,791 |
|
|
|
Historic cost
basis |
|
|
Opening book cost |
47,993 |
43,076 |
Purchases at cost |
12,455 |
8,952 |
Disposals at cost |
(6,553) |
(4,035) |
Closing book
cost |
53,895 |
47,993 |
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 2023 |
31 March 2022 |
Valuation methodology |
£’000 |
£’000 |
Cost and price of recent investment (calibrated and reviewed for
impairment) |
52,243 |
39,353 |
Revenue multiple |
29,005 |
26,204 |
Third party valuation –
Discounted cash flow |
6,076 |
6,422 |
Third party valuation –
Earnings multiple |
4,703 |
3,417 |
Earnings multiple |
3,254 |
3,082 |
Net assets |
87 |
1,146 |
|
95,368 |
79,624 |
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, milestones or other
background to the transaction that would indicate the value of the
investment has changed and considering whether a market-based
methodology (i.e. using multiples from comparable public companies)
or a discounted cashflow forecast would be more appropriate. The
background to the transaction is also considered when the price of
investment may not be an appropriate measure of fair value, for
example, disproportionate dilution of existing investors from a new
investor coming on board or the market conditions at the time of
investment no longer being a true reflection of fair value.
The main inputs into the calibration exercise,
and for the valuation models using multiples, are revenue, EBITDA
and P/E multiples (based on the most recent revenue, EBITDA or
earnings achieved and equivalent corresponding revenue, EBITDA or
earnings multiples of comparable companies), quality of earnings
assessments and comparability difference adjustments. Revenue
multiples are often used, rather than EBITDA or earnings, due to
the nature of the Company’s investments, being in growth and
technology companies which are not normally expected to achieve
profitability or scale for a number of years. Where an investment
has achieved scale and profitability the Company would normally
then expect to switch to using an EBITDA or earnings multiple
methodology.
In the calibration exercise and in determining
the valuation for the Company’s equity instruments, comparable
trading multiples are used. In accordance with the Company’s
policy, appropriate comparable companies based on industry, size,
developmental stage, revenue generation and strategy are determined
and a trading multiple for each comparable company identified is
then calculated. The multiple is calculated by dividing the
enterprise value of the comparable group by its revenue, EBITDA or
earnings. The trading multiple is then adjusted for considerations
such as illiquidity, marketability and other differences,
advantages and disadvantages between the portfolio company and the
comparable public companies based on company specific facts and
circumstances.
Fair value investments had the following
movements between valuation methodologies between 31 March 2022 and
31 March 2023:
Change in valuation methodology (2022 to
2023) |
Value on 31 March
2023£’000 |
Explanatory note |
Cost and price of recent
investment (calibrated and reviewed for impairment) to revenue
multiple |
3,343 |
More appropriate valuation
methodology |
Price of recent investment to
earnings multiple |
3,254 |
More appropriate valuation
methodology |
Net assets to third party
valuation – earnings multiple |
847 |
Third party valuation
conducted |
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 2023.
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 2023 |
31 March 2022 |
|
£’000 |
£’000 |
Opening balance |
79,624 |
60,615 |
Additions |
12,455 |
8,952 |
Movement from Level 3 to Level
1* |
- |
(573) |
Disposals |
(1,430) |
(10,151) |
Realised (losses)/gains |
(403) |
4,129 |
Accrued loan stock
interest |
109 |
58 |
Unrealised gains |
5,013 |
16,594 |
Closing
balance |
95,368 |
79,624 |
* This relates to Arecor Therapeutics PLC, which
listed on the AIM stock exchange during the prior year.
The Directors are required to consider the
impact of changing one or more of the inputs used as part of the
valuation process to reasonable possible alternative assumptions.
66% of the portfolio of investments, consisting of equity and loan
stock, is based on recent investment price, discounted offer price,
net assets and cost. For the remainder of the portfolio, the Board
has considered the reasonable possible alternative input
assumptions on the valuation of the portfolio and believes that
changes to inputs (by adjusting the earnings and revenue multiples)
could lead to a change in the fair value of the portfolio. The
Board has reviewed the Manager’s adjusted inputs for a number of
the largest portfolio companies (by value) which covers 22% of the
portfolio. This has resulted in a total coverage of 88% 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 |
4.6x |
+0.5x |
1,294 |
1.47 |
-0.5x |
(1,294) |
(1.10) |
Revenue multiple |
Healthcare (including digital healthcare) |
Revenue multiple |
5.5x |
+0.6x |
617 |
0.61 |
-0.6x |
(617) |
(0.61) |
Third party valuation – discounted cashflow |
Renewable energy |
Third party valuation – discounted cashflow |
6.0% discount rate |
+0.6% |
159 |
0.16 |
-0.6% |
(209) |
(0.21) |
*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
£2,257,000 (2.7%) or a decrease in the valuation of equity
investments by £1,932,000 (2.3%).
12. Significant
interests
The principal activity of the Company is to
select and hold a portfolio of investments in unquoted securities.
Although the Company, through the Manager, will, in some cases, be
represented on the board of the portfolio company, it will not
ordinarily take a controlling interest or become involved in the
management. The size and structure of 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 2023 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* |
407 |
31 March 2022 |
28.6% A Ordinary |
28.6% |
*Filleted accounts which do not disclose this
information.
13.
Trade and other receivables
|
31 March 2023 |
31 March 2022 |
|
£’000 |
£’000 |
Deferred consideration under
one year |
2,226 |
488 |
Deferred consideration over
one year |
- |
1,867 |
Prepayments and accrued
income |
29 |
26 |
Other receivables |
306 |
8,344 |
|
2,561 |
10,725 |
The deferred consideration over one year in the
prior year relates to the sale of G.Network Communications Limited
in December 2020. These proceeds are receivable in January 2024,
and have been discounted to present value at the prevailing market
rate, including a provision for counterparty risk. This constitutes
a financing transaction, and has been accounted for using the
policy disclosed in note 2.
The large decrease in other debtors compared to
the prior year is a result of an amount of £8,342,000 being owed to
the Company in respect of the allotment of shares that took place
on 31 March 2022 which was received on 1 April 2022.
The Directors consider that the carrying amount
of receivables is not materially different to their fair value.
14.
Payables: amounts falling
due within one year
|
31 March 2023 |
31 March 2022 |
|
£’000 |
£’000 |
Accruals and deferred
income |
787 |
2,662 |
Trade payables |
702 |
42 |
|
1,489 |
2,704 |
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 |
101,711,805 Ordinary shares of 1 penny each at 31 March 2022 |
1,017 |
13,723,611 Ordinary shares of 1 penny each issued during the
year |
137 |
115,435,416 Ordinary shares of 1 penny each at 31 March
2023 |
1,154 |
|
|
12,195,568 Ordinary shares of 1 penny each held in treasury at 31
March 2022 |
(122) |
2,362,798 Ordinary shares of 1 penny each purchased during the year
to be held in treasury |
(24) |
14,558,366 Ordinary shares of 1 penny each held in treasury
at 31 March 2023 |
(146) |
|
|
Voting rights of 100,877,050 Ordinary shares of 1 penny
each at 31 March 2023 |
1,009 |
The Company purchased 2,362,798 shares (2022:
1,482,148) to be held in treasury at a nominal value of £23,628 and
a cost of £2,879,000 (2022: £1,795,000) representing 2.0% of the
shares in issue on 31 March 2023, leading to a balance of
14,558,366 shares (2022: 12,195,568) in treasury representing 12.6%
(2022: 12.0%) of the shares in issue on 31 March 2023.
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 2022 |
410,130 |
4 |
126.89 |
503 |
120.50 |
28 February 2023 |
404,464 |
4 |
119.83 |
465 |
113.50 |
|
814,594 |
|
|
968 |
|
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 2021/22 and
2022/23:
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) |
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 |
2 December 2022 |
1,144,527 |
11 |
129.00 |
1,454 |
120.50 |
2 December 2022 |
245,176 |
2 |
129.60 |
311 |
120.50 |
2 December 2022 |
3,289,782 |
33 |
130.30 |
4,180 |
120.50 |
31 March 2023 |
7,585,003 |
76 |
130.20 |
9,629 |
120.50 |
|
12,909,017 |
|
|
16,410 |
|
16.
Basic and diluted net asset value per
share
|
31 March 2023 |
31 March 2022 |
|
(pence per share) |
(pence per share) |
Basic and diluted net asset value per Ordinary share |
128.60 |
132.28 |
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 100,877,050 Ordinary shares at 31 March 2023
(2022: 89,516,237).
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 in the
Chairman’s statement.
The Company’s financial instruments comprise
equity and loan stock investments in unquoted and quoted companies,
deferred receipts on disposal of fixed asset investments, cash
balances and receivables and payables which arise from its
operations. The main purpose of these financial instruments is to
generate 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 financial instrument risks arising
from the Company’s operations are:
- market and investment risk (which
comprises investment price and cash flow interest rate risk);
- credit risk; and
- liquidity risk.
The Board regularly reviews and agrees policies
for managing each of these risks. There have been no changes in the
nature of the risks that the Company has faced during the past year
and there have been no changes in the objectives, policies or
processes for managing risks during the past year. The key risks
are summarised below.
Market 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.
As required under FRS 102, the Board is required
to illustrate by way of a sensitivity analysis the extent to which
the assets are exposed to market risk. In order to show the impact
of sensitivity in market movements on the Company, 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 £9,580,000.
Accordingly, a 20% 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 £19,160,000. 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
£95,798,000 (2022: £80,842,000). Fixed asset investments form 74%
of the net asset value on 31 March 2023 (2022: 68%).
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
£312,000 (2022: £270,000). Furthermore, it was considered that a
material fall of interest rates below current levels during the
year would have been unlikely.
The weighted average effective interest rate
applied to the Company’s unquoted loan stock during the year was
approximately 7.8% (2022: 9.8%). The weighted average period to
expected maturity for the unquoted loan stock is approximately 3.6
years (2022: 4.0 years).
The Company’s financial assets and liabilities,
all denominated in pounds sterling, consist of the following:
|
31 March 2023 |
31 March 2022 |
|
Fixedrate£’000 |
Floatingrate£’000 |
Non-interestbearing£’000 |
Total£’000 |
Fixedrate£’000 |
Floatingrate£’000 |
Non-interestbearing£’000 |
Total£’000 |
Unquoted equity |
- |
- |
82,583 |
82,583 |
- |
- |
68,138 |
68,138 |
Quoted equity |
- |
- |
430 |
430 |
- |
- |
1,218 |
1,218 |
Unquoted loan stock |
11,833 |
- |
952 |
12,785 |
9,934 |
- |
1,552 |
11,486 |
Receivables* |
- |
- |
2,532 |
2,532 |
- |
- |
10,699 |
10,699 |
Current liabilities |
- |
- |
(1,489) |
(1,489) |
- |
- |
(2,704) |
(2,704) |
Cash |
- |
32,860 |
- |
32,860 |
- |
29,552 |
- |
29,552 |
|
11,833 |
32,860 |
85,008 |
129,701 |
9,934 |
29,552 |
78,903 |
118,389 |
*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. For investments made prior
to 6 April 2018, which account for 63% 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 2023 was limited to £12,785,000 (2022: £11,486,000) of
unquoted loan stock instruments, £32,860,000 (2022: £29,552,000) of
cash deposits with banks and £2,561,000 (2022: £10,725,000) of
other receivables.
At the balance sheet date, the cash in bank and
at hand held by the Company was held with Lloyds Bank plc, Scottish
Widows Bank plc (part of Lloyds Banking Group plc), Barclays Bank
plc, Bank of Montreal, 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 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 £12,647,000 (2022: £11,543,000) on 31 March 2023.
The Company has no committed borrowing
facilities on 31 March 2023 (2022: nil) and had cash of £32,860,000
(2022: £29,552,000). 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 £1,489,000 on 31 March 2023 (2022:
£2,704,000).
The carrying value of loan stock investments as
analysed by expected maturity dates is as follows:
|
|
31 March 2023 |
|
|
31 March 2022 |
|
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 |
5,148 |
87 |
- |
5,235 |
4,811 |
- |
70 |
4,881 |
1-2 years |
2,121 |
- |
- |
2,121 |
94 |
- |
2 |
96 |
2-3 years |
664 |
- |
- |
664 |
2,092 |
- |
3 |
2,095 |
3-5 years |
1,868 |
- |
- |
1,868 |
1,894 |
- |
- |
1,894 |
Greater than 5 years |
2,897 |
- |
- |
2,897 |
2,520 |
- |
- |
2,520 |
Total |
12,698 |
87 |
- |
12,785 |
11,411 |
- |
75 |
11,486 |
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 £nil
(2022: £544,000).
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 2023 are stated at fair value as
determined by the Directors, with the exception of receivables,
payables and cash which are carried at amortised cost, in
accordance with FRS 102. There are no financial liabilities other
than payables. The Company’s financial liabilities are all
non-interest bearing. It is the Directors’ opinion that the book
value of the financial liabilities is not materially different to
the fair value and all are payable within one year.
18. Commitments and
contingencies
On 31 March 2023, the Company had no financial
commitments (2022: £nil).
There were no contingent liabilities or
guarantees given by the Company on 31 March 2023 (2022: £nil).
19. Post balance sheet
eventsSince the year end, the Company has not made any
material investment transactions.
The following new Ordinary shares of nominal
value 1 penny each were allotted under the Albion VCTs Prospectus
Top Up Offers 2022/23 after 31 March 2023:
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) |
14 April 2023 |
66,837 |
1 |
128.90 |
85 |
120.50 |
14 April 2023 |
37,836 |
- |
129.50 |
48 |
120.50 |
14 April 2023 |
311,202 |
3 |
130.20 |
395 |
120.50 |
|
415,875 |
|
|
528 |
|
20.
Related party transactions Other than transactions with
the Manager as disclosed in note 5, and the Directors’ remuneration
disclosed in the Directors’ remuneration report on pages 59 to 62
of the full Annual Report and Financial Statements, there are no
other related party transactions or balances requiring
disclosure.
21. Other Information The
information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 434 of the
Companies Act 2006 for the years ended 31 March 2023 and 31 March
2022, 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 2023, 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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