ProVen Growth and Income VCT plc: Annual Financial Report
ProVen Growth and
Income VCT plc
Annual
Financial
ReportYear
Ended 28 February 2023
ProVen Growth and Income VCT plc, managed by Beringea LLP, today
announces the final results for the year ended 28 February 2023.
These results were approved by the Board of Directors on 9 June
2023.You may, in due course, view the Annual Financial Report in
full at www.proveninvestments.co.uk. All other statutory
information can also be found there.
Fund Overview
Ordinary Shares as at: |
28 February 2023 |
28 February 2022 |
Net asset value per Ordinary
Share |
54.2p |
67.3p |
Dividends paid since class launch
(originally as ‘C’ Shares) |
75.4p |
70.7p |
Total return (net asset value
plus dividends paid since ‘C’ Share class launch) |
129.6p |
138.0p |
Year on year change
in: |
|
|
Net asset value per Ordinary
Share (adjusted for dividends paid in the year)Dividends
paid/payable in respect of yearDividend yield |
(12.4)%3.25p5.1% |
14.3%4.75p7.9% |
Chair’s StatementI am pleased to present the
Annual Report for ProVen Growth and Income VCT plc (the “Company”)
for the year ended 28 February 2023. The financial year under
review was impacted by many macroeconomic and geopolitical
challenges. Despite this backdrop, your Company delivered several
profitable exits. However, the overall portfolio valuation suffered
owing to the significant market volatility, with the valuation of
three companies being fully written down in the period. This is
reflected in a negative total return (net asset value (“NAV”) per
share plus dividends) for the year to 28 February 2023.
Results for the yearFor the year, there was a
negative total return of 12.4%, which was largely attributable to
three significant realised losses in the period, namely MYCS,
Festicket and Thread, which together accounted for 6.4% of this
loss.
The loss on ordinary activities for the year was £23.8 million,
or 8.3p per share (2022: profit of £22.4 million, or 9.4p per
share), comprising a revenue loss of £1.2 million, or 0.4p per
share (2022: revenue loss of £1.4 million, or 0.6p per share) and a
capital loss of £22.6 million, or 7.9p per share (2022: profit of
£23.8 million, or 10.0p per share). This capital loss was
predominantly driven by realised and unrealised losses in the
portfolio of £10.9 million and £9.1 million respectively.
DividendsDuring the year ended 28 February
2023, the Company paid final and special dividends of 1.5p and
1.75p per share respectively on 5 August 2022 to Shareholders on
the register at 15 July 2022. These dividends were paid in respect
of the year ended 28 February 2022. The Company also paid an
interim dividend in respect of the year ended 28 February 2023 of
1.5p per share on 2 December 2022 to Shareholders on the register
at 11 November 2022.
Your Board is proposing a final dividend for the year ended 28
February 2023 of 1.75p per share to be paid on 4 August 2023 to
Shareholders on the register on 7 July 2023. The payment of this
dividend will result in an equivalent reduction in the Company’s
NAV per share.
The total tax-free dividends of 3.25p per share for the year
ended 28 February 2023 represents a cash return to Shareholders of
5.1% on the opening NAV per share at 1 March 2022, after deducting
the prior year’s final and special dividends of 3.25p per share in
total.
Portfolio activity and valuationThe Company
invested a total of £21.4 million in the year (2022: £32.7
million), with six new companies added to the portfolio at a cost
of £14.9 million, and follow-on investments totalling £6.5 million
in nine existing portfolio companies. This active year of investing
has provided further diversification to your Company’s investment
portfolio and it is pleasing to note that several of the new
additions have already shown strong commercial performance since
investment, for example, Lucky Saint and Dash. These additions to
the portfolio are discussed in more detail in the Investment
Manager’s Review.
The Company also saw strong exit activity within the portfolio,
with the partial realisation of Zoovu completing at the beginning
of the year, followed by the full realisations of Blis, Sealskinz
and Firefly. These companies provided a combined profit against
initial cost of £20.8 million. After the year end, two further
profitable exits occurred, from Monica Vinader and Aistemos.
The financial year began against a backdrop of economic
turbulence due to the invasion of Ukraine by Russia, which set in
motion a series of macroeconomic challenges. International supply
chains, which had only recently shown signs of recovery following
the COVID pandemic, faced huge disruption, affecting both
businesses and consumers. In addition, inflation increased to
levels not seen for decades, caused primarily by a surge in energy
prices. Interest rates increased globally in response and there was
a general tightening of liquidity in both debt and equity
markets.
These challenges had a significant impact across the portfolio,
most notably with three write-downs that have been treated as
realised losses in these accounts:
- MYCS was adversely impacted by loan providers introducing new
lending caps in March 2022, coupled with a sharp decline in
consumer confidence. These factors prompted the company to merge
with another private equity-backed business. As part of this
transaction, the Company disposed of its interest in MYCS for a
nominal amount, with potential for some proceeds in the future
should the buyer secure a sale for the enlarged group;
- Festicket, an online platform which packaged festival tickets
together with travel, accommodation and add-ons to provide complete
festival experiences, was badly impacted by the COVID-19 pandemic,
leaving the company with a weakened balance sheet. An erratic
reopening of the festival market in 2021, followed by the failure
of several festivals in 2022, resulted in highly challenging
cash-flow dynamics for Festicket. This led to the company entering
administration during the year; and
- Thread, a menswear e-commerce site, had been pursuing a high
growth strategy, including an entry into the US market, which had
delivered a significant increase in revenues since the Company’s
investment. However, increased risk-aversion among investors
resulted in Thread being unable to raise further capital to fund
its high growth strategy, which led to the business entering
administration during the year.
The profits and write-downs referred to above reflect the
early-stage, high-growth profile of the investments in your
Company's portfolio. Early-stage businesses carry inherent risk,
meaning that some will be very successful, and some will fail. When
substantial write-downs such as these do occur, your Board conducts
extensive reviews with the Investment Manager to understand whether
there are any learning points to be applied to future investment
activities. The risk of individual investments is balanced by your
Company’s diversified portfolio of more than fifty companies.
Historically, the successes in the Company’s portfolio have
significantly outweighed the losses over the medium term, although
past performance is not a guide to the future.
The unsettled market conditions also affected the unrealised
portfolio, which fell in value by £9.1 million. The valuations of
Papier, an online personalised stationery retailer, and Fnatic, an
esports organisation, were particularly affected by declining
market comparables (used as a basis for valuations), as well as a
softening in trading performance, and together account for an
unrealised loss in the period of £10.0 million. Apart from these
companies, however, performance across the portfolio has generally
been satisfactory.
Fundraising activities As communicated in the
Company’s Half Year Report, a combined offer for subscription with
ProVen VCT plc launched on 11 January 2022 to raise up to a total
of £20 million per company, with an over-allotment facility of up
to a further £20 million per company. It closed to further
applications on 12 August 2022 with £29.4 million of gross proceeds
raised for the Company.
The Company launched a further combined offer for subscription
with ProVen VCT plc on 19 October 2022 to raise up to £20 million
per company, with an over-allotment facility of £20 million per
company. As at the date of the Annual Report, the current offer has
raised £8.3 million of gross proceeds for the Company and has been
extended to 28 July 2023 (or such earlier date as the offer is
fully subscribed).
Share buybacksThe Company has a policy of
buying back shares that become available in the market at a
discount of approximately 5% to the latest published net asset
value, subject to the Company having sufficient liquidity. The
Company retains Panmure Gordon to act as its corporate broker.
Shareholders who are considering selling their shares should
contact Panmure Gordon who will be able to provide details of the
price at which the Company is buying shares.
During the year, the Company bought back 8,929,292 Ordinary
Shares at an average price of 58.5p per share and for an aggregate
consideration of £5,222,000. This represented 3.5% of the Company’s
issued share capital at the start of the year. All shares were
subsequently cancelled.
A special resolution to allow the Company to continue to make
market purchases of its own shares of up to 14.99% of the share
capital for cancellation will be proposed at the forthcoming Annual
General Meeting (“AGM”).
Performance Fee
The Company’s performance incentive arrangements
are an important aid for the Investment Manager in recruiting and
retaining talented investment professionals against competition
from other investment management companies. The performance fee
structure is designed to align the interests of the Investment
Manager with those of Shareholders and encourages capital growth as
well as significant payments to Shareholders by means of tax-free
dividends, as determined by the Directors.
However, at 28 February 2023, the relevant performance hurdles
were not met and therefore no performance fee is payable for the
year under review.
The payment of a performance fee in future years and the amount
thereof, if any, will be dependent on both the performance of the
Company and the level of dividends paid to Shareholders.
Environmental, Social & Governance (ESG)The
Board notes the Investment Manager’s commitment to ensuring
Environmental, Social and Governance (ESG) principles are high on
the agenda for the early-stage companies in which your Company
invests. Further detail on the Investment Manager’s approach to
ESG, including its role as Chair of ESG_VC, can be found in the
Investment Manager’s Review.
Annual General MeetingThe next AGM of the
Company will be held at the offices of Beringea LLP, at Charter
House, 55 Drury Lane, London, WC2B 5SQ at 10:30am on Wednesday 12
July 2023. Those intending to attend the AGM are asked to register
their intention by emailing info@beringea.co.uk in advance of the
meeting.
The Board values the opportunity to meet Shareholders in person
and I would encourage Shareholders to attend the AGM in person.
However, we also understand that attendance in person may not be
possible or desirable for all who wish to attend. Therefore, this
year, the Company will also offer Shareholders the option to follow
proceedings of the meeting online. Any Shareholders who wish to
listen to the meeting remotely, should email info@beringea.co.uk
for joining instructions.
Please note that Shareholders will not be able to vote or ask
questions at the AGM when joining remotely. Shareholders are
encouraged, even if they are planning to attend the AGM in person,
to exercise their votes by submitting their proxy electronically
via their Signal Shares account at www.signalshares.com and to
appoint the Chair of the AGM as their proxy with their voting
instructions.
Shareholders who wish to submit questions in advance of the AGM
may do so via e-mail to info@beringea.co.uk and the Board will
respond to questions raised at the meeting.
Shareholder eventThe Company’s Annual
Shareholder Event continues to be well received and provides an
important opportunity for Shareholders to hear from the Investment
Manager on topics such as performance and investment activity, to
ask questions of your Board, and to receive insights and updates
from the portfolio companies.
During the COVID pandemic these events were conducted virtually.
Last year the Investment Manager experimented with a hybrid event.
The majority of Shareholders attending last year’s event elected to
do so virtually. Consequently, it has been decided that we will
revert to hosting a fully virtual event in 2023. This will enable
any Shareholder to join without the need for travel into Central
London. This has been scheduled for 10:30am to 12.30pm on Thursday,
16 November 2023 and I would encourage you to join us for the
session. You can RSVP to events@beringea.co.uk.
VCT regulatory
developmentsShareholders may be aware that in 2015, owing
to EU rules in relation to notified state aid, the Government was
required to introduce a “Sunset Clause” into the VCT legislation.
Unless legislation to extend or remove the Sunset Clause is
enacted, income tax relief will no longer be available for new VCT
subscriptions made on or after 6 April 2025. The Government
announced in September 2022 its commitment to extending the VCT
scheme beyond 2025, which the Company welcomed in its Half Year
Report and continues to do so.
No further details of how the removal of the Sunset Clause will
be enacted have been announced to date. The VCT industry, along
with other influential bodies such as the BVCA, continues to press
the Government to implement the removal of the Sunset Clause as
soon as possible, in order to ensure that VCTs are able to continue
their support for early-stage UK companies.
Another development worthy of note is that HMRC has recently
started to adopt a stricter interpretation of the Financial Health
Test. This is a test in the VCT legislation designed to ensure that
VCT funds are only invested in companies of adequate financial
health. In the opinion of your Board and the Investment Manager,
HMRC’s new interpretation of this test is too rigorous, and is
preventing VCTs from providing follow-on funding to some existing
portfolio companies. The VCT industry, through the Venture Capital
Trust Association, has made representations to HMRC to highlight
the potentially damaging effect that their new interpretation of
this test is having on UK scale-up businesses.
Consumer DutyThe Financial Conduct Authority
(FCA) has established a new consumer duty (the ‘Consumer Duty’),
which will come into force in July 2023 for products and services
open to retail customers. The Consumer Duty sets higher and clearer
standards of consumer protection across financial services, and
requires firms to put their customers’ needs first.
VCTs are not directly subject to the new Consumer Duty. However,
the Investment Manager as an FCA-regulated firm, is subject to the
Consumer Duty and has completed a Consumer Duty review in advance
of the new rules coming into effect later this year. The Consumer
Duty highlights the FCA’s drive to protect the interests of retail
customers and the Board will be monitoring the actions put in place
by the Investment Manager to ensure our Shareholders continue to be
put at the heart of our business.
Unsolicited Communication with
ShareholdersWhile we are not aware of any instances in the
last year, we have in prior years been informed that some
Shareholders in ProVen Growth and Income VCT plc have received
unsolicited phone calls, in which the caller has sought to discuss
their shareholdings. We have previously advised all Shareholders
that these calls may be associated with an attempted fraud, and
Shareholders should not engage with the caller. If you do receive a
suspect call, we strongly suggest that you hang up as soon as
possible, and contact the Investment Manager. The FCA has published
useful guidance for shareholders on how to protect themselves from
scams, which you may wish to read. You can find it online at:
https://www.fca.org.uk/consumers/protect-yourself-scams.
Outlook While it is disappointing to report a
loss for the year under review, your Board is encouraged by the
resilience shown by most companies within the portfolio. Despite a
very challenging operating environment, most companies in the
portfolio have continued to grow their revenues, and exit activity
has shown the potential of the portfolio to deliver positive
returns in spite of economic headwinds.
At the time of writing there are mixed signals from the economy,
with a recession avoided to date but inflation remaining stubbornly
high and interest rates likely to rise further. Despite this, the
ambitious entrepreneurs in your Company’s portfolio continue to
seek out and take advantage of growth opportunities. Your
Investment Manager continues to work closely with and support the
leadership teams at investee companies to help them navigate the
challenges and opportunities of scaling their businesses.
Looking ahead, your Board anticipates that the next twelve
months will continue to be challenging but hopes to see some of the
economic pressures easing. We remain confident that the Company’s
large and diverse portfolio will yield solid growth over the
medium-term, and the Investment Manager will continue to identify
attractive new investment opportunities to bring into the
portfolio, enabling the Company to deliver the target returns to
Shareholders.
Marc Vlessing OBEChair
Investment Manager’s ReviewWe are pleased to
present our annual review for the year ended 28 February 2023.
Through a year that was characterised by economic and geopolitical
disruption, the investment rate remained strong with a total of
£21.4 million deployed into six new and nine existing portfolio
companies. However, challenging market conditions led to the
write-downs of three significant holdings, and portfolio valuations
overall were tempered by declining market comparables.
The year also saw a good run of investment realisations, with
aggregate disposal proceeds of £30.6 million resulting in realised
gains over cost of £14.5 million. Against a backdrop of economic
uncertainty, this demonstrated the strength of the investment
portfolio and the potential for continued returns. Furthermore, the
Company completed two more exits shortly after the end of the
financial year, with the sales of Monica Vinader and Aistemos
completing in March 2023 and returning 11.8x and 1.7x on cost
respectively.
However, despite the profits realised on exits during the year,
three significant losses, namely MYCS, Festicket and Thread,
contributed to a net realised loss for the year of £10.9m, and a
total loss of £23.8 million.
At 28 February 2023, the Company’s venture capital portfolio
comprised 52 investments at a cost of £114.8 million and a
valuation of £116.2 million, an overall increase of 1.2% on
cost.
Since the year end, the Company has issued 7,144,716 Ordinary
Shares for an aggregate gross consideration of £4.0 million under
the combined offer for subscription with ProVen VCT plc which
launched on 19 October 2022. Net proceeds for the Company after
share issue costs were £3.8 million. This, coupled with the
previous offer, means the Company remains well capitalised to take
advantage of new investment opportunities and to support existing
portfolio companies where appropriate.
Investment activityNew investmentsAfter a
record year for new investments in the previous financial year, a
high volume of deal flow continued in the period, with a strong
pipeline of opportunities translating into £14.9 million of
investment into six new portfolio companies in the year. More
details on the four largest new investments are given below.
The largest investment in the period was made in June 2022 in
WiredScore (£3.5 million), a company that assesses, certifies and
improves digital connectivity and smart technology in offices and
homes globally.
In December 2022 the Company invested £3.3 million into Dash, a
leading brand of sparkling zero-calorie seltzer water infused with
flavours from real fruit.
Two further new investments were made in August 2022 for £2.2
million each:
- Chattermill, a cloud-based customer experience management
solution that helps businesses collect, manage and analyse customer
feedback across chats, emails, app store reviews, surveys, social
interactions and other channels; and
- Lucky Saint, an award-winning alcohol-free beer company.
Follow-on investmentsThe Company also continued to support the
development and growth of its existing portfolio companies,
providing further funding to nine companies during the year.
In April 2022, the Company invested £1.2 million into CreativeX
as part of a $25m funding round. CreativeX helps marketers measure
their digital content against four indicators of long-term brand
growth: creative quality, brand consistency, compliance, and
representation.
The Company also invested £1.0 million in July 2022 into each of
Social Value Portal and Second Nature to support their continued
growth. A further £1.0 million was invested into Litta in December
2022.
Other follow-on investments were made in Lumar (formerly
Deepcrawl) (£734,000), MYCS (£551,000), Arctic Shores (£459,000),
Commonplace (£370,000) and Plum Guide (£88,000).
Investment disposalsThe Company experienced an increase in exit
activity during the previous financial year and this continued
through to 28 February 2023, as detailed below.
In March 2022, there was a partial disposal of the Company’s
holding in Zoovu. The Company received proceeds of £17.5 million, a
return of 5.1x against the cost of the shares sold. Having
performed well since the initial investment by the Company in
August 2017, Zoovu had been exploring options for additional
fundraising. It agreed on an offer which saw the Company sell 70%
of its holding and roll over its remaining shares. Zoovu also
raised additional primary capital to fund further expansion as part
of the transaction.
In June 2022, the Company disposed of its entire holding in Blis
for proceeds of £7.2 million, in a transaction with Lloyds
Development Capital. This resulted in a return against cost of
6.7x.
In November 2022, the Company exited Sealskinz for proceeds of
£3.9 million and a return against cost of 1.2x. In January 2023 the
Company’s full holding in Firefly Learning was sold for initial
proceeds of £0.7 million and the potential for further proceeds in
the future.
Unfortunately, MYCS was heavily impacted by adverse market
conditions. Following the Russian invasion of Ukraine there was a
sharp decline in consumer confidence in the company’s key markets
and therefore a slowdown in sales. MYCS’ lenders also introduced
new caps on the amount they would advance at the end of March 2022.
These two developments led to the company merging with another
private equity-backed business. As part of this transaction, the
Company disposed of its interest in MYCS for a nominal amount, with
potential for some additional proceeds in the future should the
buyer secure a sale for the enlarged group. During the year the
Company also disposed of its holding in Exonar which had been fully
written down in a prior year.
Key developments at existing portfolio companiesThe financial
year opened with economic turbulence due to the invasion of Ukraine
by Russia, which at the time of writing is still ongoing. In
addition, inflation increased to levels not seen for decades, with
interest rates rising globally in an attempt to moderate this
inflation. The valuations of many quoted technology stocks have
also declined significantly during a period of correction following
the high valuations seen over the last few years.
These factors have had varying levels of impact across the
portfolio, most notably with significant write-downs in the
valuation of two companies during the period under review, which
combined resulted in £7.5 million in realised losses for the
Company.
Festicket, an online platform which packaged festival tickets
together with travel, accommodation and add-ons to provide complete
festival experiences, was badly impacted by the COVID pandemic,
leaving the company with a weakened balance sheet. An erratic
reopening of the festival market in 2021, followed by the failure
of several festivals in 2022, resulted in highly challenging
cash-flow dynamics for Festicket. This led to the company entering
administration during the year.
Thread, a menswear e-commerce site, had been pursuing a high
growth strategy, including an entry into the US market, which had
delivered a significant increase in revenues since the Company’s
investment. However, increased risk-aversion among investors led to
Thread being unable to raise further capital to fund its high
growth strategy, which led to the business entering administration
during the year.
These two companies have been recognised as realised losses in
the Company’s income statement due to them both entering
administration during the year.
The valuations of Papier, an online personalised stationery
retailer, and Fnatic, an esports organisation, were particularly
affected by declining market comparables, as well as a softening in
trading performance, and together account for an unrealised loss in
the period of £10.0 million. The valuation of Zoovu also fell
(decrease of £2.5 million) owing to lower market comparables.
Elsewhere in the portfolio, despite the challenges noted above,
most companies showed resilience in trading performance during the
year.
Notable increases in valuation in the year were seen in Asterra
(increase of £2.1 million), Cogora (increase of £1.5 million) and
Social Value Portal (increase of £1.5 million). All increases were
due to robust trading performance outweighing the impact of
weakening market comparables.
Other News & DevelopmentsPortfolio
Value-Add InitiativeThe Investment Manager’s Portfolio Value-Add
Initiative, aimed at supporting companies in overcoming barriers to
growth and harnessing commercial opportunities, has developed
further in the past year. The initiative is led by Harry Thomas,
the Manager’s Portfolio Director, with support from Vanessa
Evanson-Goddard (General Counsel), and Henry Philipson (Director of
Marketing and Communications). Together, the team provides both
ad-hoc and structured support on a range of topics from recruitment
to marketing and fundraising.
The Beringea Scale-Up Academy is one of the primary pillars of
the Value-Add Initiative, offering a year-round programme of events
for portfolio leadership teams. In 2022, the Academy delivered ten
webinars to portfolio company senior managers, providing valuable
insight and training on topics such as pricing strategy, accessing
R&D tax credits, and hiring.
The Investment Manager’s Portfolio Value-Add Initiative also
offers a range of services to support portfolio companies in their
growth journey. These services include: identifying existing and
potential service providers and negotiating group discounts;
establishing a central database of information and contacts related
to key operational and strategic concerns for companies; hosting
in-person and online events for sharing knowledge and ideas;
building relationships with external stakeholders, including
investors, customers and suppliers; helping to identify potential
acquisition or exit opportunities; and encouraging companies to
consider and adopt ESG initiatives.
Environmental, Social and GovernanceThe Investment Manager has
further expanded its initiatives focused on driving improved
performance across environmental, social and governance (“ESG”)
factors.
To evaluate impact and improvement in its internal operations,
the Investment Manager has developed an ESG committee responsible
for assessing and strengthening the firm’s approach to
sustainability, diversity and inclusion, and governance. The
Manager has performed particularly strongly in its
diversity-focused initiatives, and it is now certified as a Level 2
firm under the Diversity VC Standard, an industry accreditation for
diversity and inclusion best practice. The Investment Manager is
also a signatory of the Investing in Women Code, submitting annual
data on the diversity of companies in the portfolio and investment
pipeline.
The Investment Manager’s ongoing role as Chair of ESG_VC, an
industry initiative that brings together more than 200 leading VC
firms across the UK and Europe, has also provided valuable
opportunities for the firm and the portfolio. As a result of its
pivotal role within ESG_VC, the Investment Manager was shortlisted
among the leading firms for ESG in venture capital at the Real
Deals Awards 2022, and Henry Philipson, Director of Marketing and
Communications, was named among the Future 40 ESG Innovators.
Post year end developments
Between 28 February 2023 and the date of this
report, the Company issued 7,144,716 Ordinary Shares for an
aggregate consideration of £4.0 million under the combined offer
for subscription with ProVen VCT plc which launched on 19 October
2022. Share issue costs thereon amounted to £0.2 million.
In March 2023, the Company disposed of its
holding in Monica Vinader for initial proceeds of £2.4 million,
representing an 11.8x return on cost, with potential for future
proceeds. A strong performer in the Company’s portfolio for several
years, Monica Vinader had been exploring funding options and agreed
a strategic sale to Bridgepoint Development Capital IV. After
originally investing in Monica Vinader in 2010, the Company sold
60% of its holding in February 2016 for proceeds of £2.0 million
and a multiple on cost of 5.2x.
The Company also disposed of its holding in
Aistemos in March 2023, with proceeds of £2.9 million, representing
a multiple on cost of 1.7x.
OutlookDespite signs that
inflation and energy prices are stabilising, the outlook for the UK
economy, and indeed the global economy, continues to be uncertain.
While some economic constraints may begin to loosen, there are
still challenges ahead as evidenced by the turbulence seen recently
in the global banking sector.
Your Company backs young, growing companies, a
contingent that can be particularly affected by an unsettled
economic environment. Conversely though, smaller companies tend to
be agile and innovative, and therefore able to navigate challenges
quickly and effectively, and this has been demonstrated in several
portfolio companies over the year. We continue to work closely with
our portfolio companies to support them through challenges as they
arise. Proceeds from the current and previous offers, as well as
from successful exit activity over the last twelve months, means we
are well placed to provide further investment to the portfolio
where appropriate.
We also continue to look for compelling new
investment opportunities, and we are well placed to take advantage
of these when they arise. Given recent market dynamics, however, we
expect the rate of new investment in the current year to be lower
than in the year to 28th February 2023.
Beringea LLPInvestment Manager
Investment activity
Investment activity during the year is summarised as
follows:
Additions
|
Cost£’000 |
|
|
WS HoldCo, PBC (t/a
WiredScore) |
3,494 |
Dash Brands Ltd |
3,282 |
Not Another Beer Co Ltd (t/a
Lucky Saint) |
2,202 |
Chattermill Analytics
Limited |
2,199 |
Gorillini NV (t/a Gorilla) |
1,949 |
Doctify Limited |
1,778 |
Picasso Labs, Inc. (t/a
CreativeX) |
1,185 |
Second Nature Healthy Habits
Ltd |
1,042 |
Social Value Portal Ltd |
1,042 |
Litta App Limited |
990 |
DeepCrawl Holding Company, Inc.
(t/a Lumar) |
734 |
Mycs GmbH |
551 |
Arctic Shores Limited |
459 |
Commonplace Digital Limited |
370 |
Plu&m Limited (t/a Plum
Guide) |
88 |
Total |
21,365 |
The total cost of additions in the year of £21,365,000 as shown
above is lower than the ‘Purchase of investments’ cashflow figure
of £21,359,000 as recorded in the Statement of Cash Flows due to
£6,000 of legal costs associated with the purchase of an investment
which were recognised in the previous year but paid in the year
under review.
Disposals
|
Cost£’000 |
Market value at
01/03/22£’000 |
Disposalproceeds
£’000 |
Realised gain/ (loss) against
cost£’000 |
Realised gain/ (loss) during the
year£’000 |
Zoovu Limited (t/a
SmartAssistant) |
3,449 |
17,471 |
17,464 |
14,015 |
(7) |
Blis Global Ltd |
1,083 |
6,138 |
7,246 |
6,163 |
1,108 |
Firefly Learning Limited |
857 |
959 |
737 |
(120) |
(222) |
Sealskinz Holdings Limited |
3,116 |
3,116 |
3,882 |
766 |
766 |
Lupa Foods Limited |
357 |
464 |
464 |
107 |
- |
Rapid Charge Grid Limited |
220 |
220 |
220 |
- |
- |
Contact Engine |
- |
- |
41 |
41 |
41 |
Netcall plc |
324 |
335 |
279 |
(45) |
(56) |
InSkin |
- |
- |
119 |
119 |
119 |
Response Tap |
- |
- |
78 |
78 |
78 |
D30 |
- |
- |
34 |
34 |
34 |
Exonar Limited |
1,602 |
- |
- |
(1,602) |
- |
Mycs GmbH |
5,038 |
6,001 |
(2) |
(5,040) |
(6,003) |
Total |
16,046 |
34,704 |
30,562 |
14,516 |
(4,142) |
Of the disposals above, ContactEngine Limited,
Response Tap Limited, InSkin Media Limited and D30 Holdings Limited
were realised in prior periods, but deferred proceeds were
recognised in the current period in excess of the amounts
previously accrued.
The disposal proceeds above for Blis Global Ltd
and Firefly Learning Limited include amounts of deferred proceeds
which have been recognised in these accounts but have not yet been
received.
Total disposal proceeds of £30,562,000 as shown
above is higher than the ‘Sale of investments’ cashflow figure of
£30,468,000 as recorded in the Statement of Cash Flows. The
difference arises due to a deferred proceeds debtor of£632,000 held
at the year end, partly offset by a loan repayment debtor of
£538,000 at the previous year end which was received in the year
under review.
Investment PortfolioAs at 28 February
2023The following investments were held
at 28 February 2023:
|
|
|
|
|
|
|
Valuation |
% of |
Cost |
Valuation |
movement in year |
portfolio by value |
£’000 |
£’000 |
£’000 |
|
Venture capital investments (by value) |
|
|
|
|
Picasso Labs, Inc. (t/a CreativeX) |
4,546 |
10,794 |
(1,336) |
6.7% |
Luxury Promise Limited |
6,020 |
8,268 |
(1,477) |
5.1% |
Social Value Portal Ltd |
2,542 |
5,012 |
1,454 |
3.1% |
Been There Done That Global
Limited |
3,149 |
4,825 |
1,190 |
3.0% |
Papier Ltd |
4,703 |
4,703 |
(5,524) |
2.9% |
DeepCrawl Holding Company, Inc.
(t/a Lumar) |
4,033 |
4,600 |
241 |
2.9% |
MPB Group Limited |
1,194 |
4,561 |
339 |
2.8% |
Utilis Israel Ltd (t/a
Asterra) |
2,144 |
4,384 |
2,136 |
2.7% |
Infinity Reliance Limited (t/a My
1st Years) |
2,769 |
3,974 |
(645) |
2.5% |
Second Nature Healthy Habits
Ltd |
3,842 |
3,842 |
(179) |
2.4% |
WS HoldCo, PBC (t/a
WiredScore) |
3,494 |
3,627 |
133 |
2.2% |
Dash Brands Ltd |
3,282 |
3,282 |
- |
2.0% |
Arctic Shores Limited |
2,909 |
3,026 |
117 |
1.9% |
Aistemos Limited |
1,681 |
2,852 |
1,173 |
1.8% |
Litchfield Media Limited* |
1,420 |
2,737 |
1,118 |
1.7% |
Monica Vinader Limited** |
204 |
2,687 |
(349) |
1.7% |
Lupa Foods Limited |
646 |
2,597 |
1,058 |
1.6% |
Zoovu Limited (t/a
SmartAssistant) |
847 |
2,579 |
(2,462) |
1.6% |
Commonplace Digital Limited |
1,870 |
2,573 |
185 |
1.6% |
Sannpa Limited (t/a Fnatic) |
6,718 |
2,376 |
(4,518) |
1.5% |
YardLink Ltd |
2,319 |
2,319 |
- |
1.4% |
Dealroom.co B.V. |
2,012 |
2,255 |
287 |
1.4% |
EMS Operations Ltd (t/a
Archdesk) |
2,234 |
2,234 |
- |
1.4% |
Not Another Beer Co Ltd (t/a
Lucky Saint) |
2,202 |
2,202 |
- |
1.4% |
Chattermill Analytics
Limited |
2,199 |
2,199 |
- |
1.4% |
Litta App Limited |
2,053 |
2,052 |
(1) |
1.3% |
Gorillini NV (t/a Gorilla) |
1,949 |
1,958 |
9 |
1.2% |
Access Systems, Inc. |
1,783 |
1,935 |
(66) |
1.2% |
Cogora Group Limited** |
1,320 |
1,851 |
1,539 |
1.1% |
Doctify Limited |
1,778 |
1,778 |
- |
1.1% |
Stylescape Limited (t/a
EDITED) |
1,500 |
1,734 |
(158) |
1.1% |
DeepStream Technologies
Limited |
2,744 |
1,638 |
(1,106) |
1.0% |
Enternships Limited (t/a
Learnerbly) |
1,575 |
1,575 |
- |
1.0% |
CG Hero Ltd |
1,249 |
1,249 |
- |
0.8% |
Moonshot CVE Ltd |
1,112 |
1,178 |
(96) |
0.7% |
Plu&m Limited (t/a Plum
Guide) |
2,851 |
1,148 |
(1,702) |
0.7% |
Andcrafted Ltd (t/a Plank
Hardware) |
1,087 |
1,087 |
- |
0.7% |
Rapid Charge Grid Limited* |
933 |
799 |
23 |
0.5% |
Disposable Cubicle Curtains
Limited (t/a Hygenica)** |
3,561 |
529 |
(10) |
0.3% |
Simplestream |
690 |
465 |
(310) |
0.3% |
|
95,164 |
115,484 |
(8,937) |
71.7% |
Other venture capital
investments |
19,623 |
679 |
(6,973) |
0.4% |
Total venture capital
investments |
114,787 |
116,163 |
|
72.1% |
Cash at bank and in hand |
|
45,058 |
|
27.9% |
Total Investments |
|
161,221 |
|
100.0% |
Valuation movement in the year excludes the cost of investments
made in the year. Other venture capital investments at 28 February
2023 comprise:
Buckingham Gate Financial Services Limited, , Dryden Holdings
Limited*, Festicket Ltd, Honeycomb.TV Limited*, InContext Solutions
Limited, Lantum Limited, Poq Studio Ltd, Thread, Inc., Senselogix
Limited, Skills Matter Limited**, Vigilant Applications Limited*
and Whistle Sports, Inc.
* Non-qualifying investment** Partially non-qualifying
investment† Investee company 100% owned by the Company but not
consolidated as held exclusively for resale as part of an
investment portfolio.
All venture capital investments are unquoted.
All venture capital investments are registered in England and
Wales except for Access Systems, Inc., DeepCrawl Holding Company,
Inc. (t/a Lumar), InContext Solutions, Inc., Picasso Labs, Inc.
(t/a CreativeX), Thread, Inc., Whistle Sports, Inc., WS HoldCo, PBC
(t/a WiredScore) which are Delaware registered corporations in the
United States of America, Utilis Israel Limited (t/a Asterra),
which is registered in Israel, Dealroom.co B.V., which is
registered in the Netherlands and Gorillini NV (t/a Gorilla), which
is registered in Belgium.
Strategic ReportThe Directors present the
Strategic Report for the year ended 28 February 2023. The Board
prepared the Annual Report & Accounts in accordance with the
Companies Act 2006 (Strategic Report and Directors’ Reports)
Regulations 2013.
Principal objectives and
strategyThe Company’s investment objective is to achieve
long-term returns greater than those available from investing in a
portfolio of quoted companies, by investing in:
- a portfolio of carefully selected
qualifying investments in small and medium sized unquoted companies
with excellent growth prospects; and
- a portfolio of non-qualifying
investments permitted for liquidity management purposes,
within the conditions imposed on all VCTs, and
to minimise the risk of each investment and the portfolio as a
whole.
The Company has been approved by HM Revenue and
Customs (“HMRC”) as a Venture Capital Trust in accordance with Part
6 of the Income Tax Act 2007 and, in the opinion of the Directors,
the Company has conducted its affairs so as to enable it to continue
to maintain approval. Approval for the year ended 28 February 2023
is subject to review should there be any subsequent enquiry under
corporation tax self-assessment.
The Directors consider that the Company was not,
at any time, up to the date of the Annual Report & Accounts, a
close company for the purpose of the Income Tax Act 2007.
Business modelThe business acts
as an investment company, investing in a portfolio of carefully
selected smaller companies. The Company operates as a Venture
Capital Trust to ensure that its Shareholders can benefit from tax
reliefs available and has outsourced the portfolio management and
administration duties.
Business review and developmentsThe Company
began the year with £145.4 million of venture capital investments
and ended with £116.2 million spread over a portfolio of 52
companies. Of these companies, 49 investments with a value of
£112.9 million were VCT qualifying (or part qualifying).
The loss on ordinary activities after taxation for the year was
£23.8 million, comprising a revenue loss of £1.2 million and a
capital loss of £22.6 million. The Ongoing Charges ratio (which is
calculated in line with the AIC methodology as recurring
operational expenses excluding performance fees, trail commission
and recoverable VAT divided by the Company’s average net assets in
the period) is an Alternative Performance Measure used by the Board
to monitor expenses. Recurring operational expenses for the year
ended 28 February 2023, excluding trail commission of £180,000,
were £4,011,000, and the average net assets over the year were
£168,944,000. Therefore, the Ongoing Charges ratio in respect of
the year ended 28 February 2023 was 2.4% (2022: 2.4%) and was
within the Company’s cap of 3.6%.
The Company’s business review and developments during the year
are reviewed further within the Chair’s Statement, Investment
Manager’s Review and Review of Investments.
Investment policyThe Company’s investment
policy covers several areas as follows:
Qualifying investmentsThe Company seeks to make investments in
VCT-qualifying companies with the following characteristics:
- a strong, balanced and well-motivated management team with a
proven track record of achievement;
- a defensible market position;
- good growth potential;
- an attractive entry price for the Company; and
- a clearly identified route for a profitable realisation within
a three to four year period.
The Company invests in companies at various stages of
development, including those requiring capital for expansion, but
not in start-ups or in management buy-outs or businesses seeking to
use funding to acquire other businesses. Investments are spread
across a range of different sectors.
Other investmentsFunds not invested in qualifying investments
may be invested in non-qualifying investments permitted for
liquidity management purposes, which include cash, alternative
investment funds (“AIFs”) and UCITS which may be redeemed on no
more than 7 days’ notice, or ordinary shares or securities in a
company that are acquired on a regulated market.
BorrowingsIt is not the Company’s intention to have any
borrowings. The Company, does, however, have the ability to borrow
a maximum amount equal to the nominal capital of the Company and
its distributable and non-distributable reserves which, at 28
February 2023, was equal to £161.1 million (2022: £169.6 million).
There are no plans for the Company to borrow at the current
time.
Maximum exposuresNo investment will constitute more than 15% of
the Company's portfolio by value at the time of investment.
Listing Rules In accordance with the Listing
Rules:(i) the Company may not invest more than
10%, in aggregate, of the value of the total assets of the Company
at the time an investment is made in other listed closed-ended
investment funds except listed closed-ended investment funds which
have published investment policies which permit them to invest no
more than 15% of their total assets in other listed closed-ended
investment funds; (ii) the Company must not
conduct any trading activity which is significant in the context of
the Company; and(iii) the Company must, at all
times, invest and manage its assets in a way which is consistent
with its objective of spreading investment risk and in accordance
with its published investment policy set out in this document. This
investment policy is in line with Chapter 15 of the Listing Rules
and Part 6 Income Tax Act 2007. Venture capital trust
regulationsThe Company has engaged Philip Hare &
Associates LLP to advise it on compliance with VCT requirements,
including evaluation of investment opportunities as appropriate and
regular review of the portfolio. Although Philip Hare &
Associates LLP works closely with the Investment Manager, they
report directly to the Board.
Compliance with the main VCT regulations as at 28 February 2023
and for the year then ended is summarised as follows:
(i) the
Company holds at least 80 per cent. of its investments in
qualifying companies (as defined by Part 6 of the Income Tax Act
2007); |
Complied |
(ii) at
least 70 per cent. in the case of funds raised after 5 April 2011
of the Company’s qualifying investments (by value) are held in
“eligible shares” (“eligible shares” generally being ordinary share
capital); |
Complied |
(iii) the
Company’s ordinary share capital has throughout the period been
listed on a regulated European market; |
Complied |
(iv) no
investment in a company constitutes more than 15 per cent. of the
Company’s portfolio (by value at time of investment); |
Complied |
(v) the
Company’s income for each financial year is derived wholly or
mainly from shares and securities; |
Complied |
(vi) the
Company distributes sufficient revenue dividends to ensure that not
more than 15 per cent. of the income from shares and securities in
any one year is retained; |
Complied |
(vii) the
Company has not made a prohibited payment to Shareholders derived
from an issue of shares since 6 April 2014; |
Complied |
(viii) no
investment made by the Company causes an investee company to
receive more than the permitted investment from State Aid sources
(including from VCTs); |
Complied |
(ix) since
18 November 2015, the Company has not made an investment in a
company which exceeds the maximum permitted age requirement; |
Complied |
(x) the
funds invested by the Company in another company since 18 November
2015 have not been used to make a prohibited acquisition; |
Complied |
(xi) since
6 April 2016, the Company has not made a prohibited non-qualifying
investment;
and (xii) of
funds raised on or after 1 March 2019, at least 30% has been
invested in qualifying holdings by the anniversary of the end of
the accounting period in which the shares were issued. |
CompliedComplied |
Investment management and administration
feesBeringea provides investment management services to
the Company for an annual fee of 2.0% of the net assets per annum.
Beringea is also entitled to receive performance incentive fees as
described below. The investment management agreement is terminable
by either party at any time by one year’s prior written notice. The
total fees relating to this service amounted to £3,444,000 (2022:
£5,386,000), comprising a management fee of £3,444,000 (2022:
£3,256,000) and performance incentive fees as described below of
£nil (2022: £2,130,000). At the year end, an amount of £nil (2022:
£2,130,000) was outstanding.
The Board is satisfied with Beringea’s approach and procedures
in providing investment management services to the Company. The
Directors have therefore concluded that the continuing appointment
of Beringea as Investment Manager remains in the best interests of
Shareholders.
Throughout the year ended 28 February 2023, Beringea also
provided administration services to the Company. In the year, total
administration fees amounted to £63,000 (2022: £58,000).
The annual running costs (excluding any performance fees
payable) of the Company are subject to a cap of 3.6% of the
Company’s net assets at the end of the year. Any running costs in
excess of this are borne by Beringea.
Beringea also received arrangement fees in respect of
investments made by the Company and other VCTs managed by Beringea
totalling £305,000 (2022: £348,000) and director and monitoring
fees of £501,000 (2022: £605,000) during the year ended 28 February
2023. These fees are payable by the investee companies into which
the Company invests and are not a direct liability or expense of
the Company.
Performance incentive feesThe
Investment Manager is entitled to receive an annual performance
incentive fee in respect of the shares in issue at 29 February 2012
(the “Original Offer”) and each share offer made by the Company
since the Original Offer (each being a “Relevant Offer”), if the
Performance Value of the Relevant Offer achieves a Hurdle
Amount.
The “Performance Value” is calculated on an annual basis based
on the latest annual audited NAV, plus cumulative dividends and any
previous performance fees paid in respect of the Relevant Offer
since 29 February 2012.
The “Hurdle Amount” is represented by the higher of: (i) 1.25
times the initial share offer NAV; and (ii) the initial share offer
NAV compounded by the annual Bank of England base rate plus 1%.
Please note the hurdle amount for the Original Offer is calculated
differently but based on similar principles.
For each Relevant Offer, if the Hurdle Amount is not met, no
performance incentive fee will be payable. Once the Hurdle Amount
has been met, the performance incentive fee payable in relation to
a financial year is 20% of the amount by which the Performance
Value exceeds the initial NAV of the Relevant Offer, less any
performance fees paid previously.
Performance fees will be reduced, if necessary, to ensure that
i) the cumulative performance fee per share payable to the
Investment Manager in respect of a Relevant Offer does not exceed
20% of the relevant cumulative dividends paid in respect of that
share; ii) the cumulative performance fee per share payable to the
Investment Manager in respect of a Relevant Offer does not exceed
50% of the amount by which the Relevant Offer Performance Value
exceeds the Relevant Offer Hurdle; and iii) the audited net asset
value per share at the relevant financial year end plus the
relevant cumulative dividends is at least equal to the relevant
respective Hurdle Amount.
Performance fees for the year ended 28 February 2023 amounted to
£nil (2021: £2,130,000).
Key performance indicatorsAt each Board
meeting, the Directors consider a number of performance measures to
assess the Company’s success in meeting its objective of delivering
long term returns. Some of these are classified as alternative
performance measures (“APMs”) in line with Financial Reporting
Council (“FRC”) guidance. The Board believes the Company’s key
performance indicators are:
• total return (net asset value plus dividends paid since
launch)*;• dividends paid and the dividend yield;• change in net
asset value per share (adjusted for dividends paid in the year)*;•
ongoing charges ratio*; and• VCT compliance.
*Classified as an APM.
The total return is calculated by the net asset value per share
plus the cumulative dividends paid to date. This is a performance
measure of the fund and used to evaluate the total value generated
for Shareholders.
The following table shows the total return, annual return shown
as the movement in net asset value per share, dividends paid in
respect of each year and the dividend yield.
|
28/02/2019 |
29/02/2020 |
28/02/2021 |
28/02/2022 |
28/02/2023 |
Total
return |
129.3 |
123.0 |
129.2 |
138.0 |
129.6 |
Change in net asset value per
share (adjusted for dividends paid in the year) 1 |
|
|
|
|
|
Opening NAV per share (p) |
72.1 |
68.4 |
58.6 |
61.5 |
67.3 |
Closing NAV per share (p) |
68.4 |
58.6 |
61.5 |
67.3 |
54.2 |
(Decrease)/increase in NAV per share
(p) |
(3.7) |
(9.8) |
2.9 |
5.8 |
(13.1) |
Dividends paid per share in the
year (p) |
6.5 |
3.5 |
3.3 |
3.0 |
4.75 |
Increase/(decrease) in
NAV per share (adjusted for dividends paid in the year)
(p) |
2.8 |
(6.3) |
6.2 |
8.8 |
(8.35) |
Increase/(decrease) in
NAV per share (adjusted for dividends paid in the year)
(%) |
3.9% |
(9.2)% |
10.6% |
14.3% |
(12.4)% |
Dividends |
|
|
|
|
|
Opening NAV per share (p) |
72.1 |
68.4 |
58.6 |
61.5 |
67.3 |
Less: final/special dividend(s)
paid per share in relation to prior year (p) |
2.5 |
2.0 |
1.75 |
1.5 |
3.25 |
Adjusted opening NAV per
share (p) |
69.6 |
66.4 |
56.85 |
60.0 |
64.05 |
Dividends paid and payable in
respect of year(p) |
|
|
|
|
|
Dividends paid per share |
6.5 |
3.25 |
3.0 |
4.75 |
3.25 |
Dividend
yield2 |
9.3% |
4.9% |
5.3% |
7.9% |
5.1% |
1 Calculated as the change in total return in the year divided
by the opening net asset value.
2 Calculated as the total dividends paid in respect of the
financial year divided by the opening net asset value, adjusted for
the final dividend paid in respect of the previous year.
The change in net asset value per share (adjusted for dividends
paid in the year) is defined as an APM and the Board considers it
to be the primary measure of shareholder value.
Risk and risk managementThe
Board carries out a regular review of the risk environment in which
the Company operates, and reviews the mitigating controls and
actions applicable to those risks. In the period the most
noticeable change to the risks faced by the Company have been as a
result of the economic turbulence due to the invasion of Ukraine by
Russia and rising interest rates and inflation globally. The full
impacts of these risks are likely to continue to be uncertain for
some time.
Emerging risksThe Board also discusses emerging risks as they
arise and puts in place appropriate procedures to monitor and,
where possible, mitigate the effects of these emerging risks on the
Company and the portfolio. The following are some of the potential
emerging risks the Investment Manager and the Board are currently
monitoring:
• adverse changes in global macroeconomic environment; and•
geo-political instability.
Principal risks
Risk |
Mitigation |
Change during period |
Investment riskBy nature, companies that qualify for venture
capital trust purposes have a higher level of risk than larger
quoted companies and poor performance could reduce returns for
Shareholders through downward valuations. |
The Directors place reliance on the Investment Manager’s experience
and expertise in adding new companies to the portfolio. The
Investment Manager has a rigorous and robust formal process in
selecting new companies which includes financial and legal due
diligence and review by an Investment Committee made up of senior
investors, whilst alsodrawing on the expertise of the Directors. In
addition, a member of the Manager’s team is usually appointed to
the board of each portfolio company on investment.The Board reviews
the investment portfolio and its performance at least on a
quarterly basis. |
Increased due to the economic and geopolitical disruption referred
to above. |
VCT qualifying statusA breach of the VCT rules and loss of approval
as a VCT could lead to Shareholders losing tax benefits associated
with VCT investments. |
VCT qualification monitoring reports are prepared by the
Administration Manager and approved by the Board on a quarterly
basis. On a bi-annual basis, the Company’s VCT status adviser
reports to the Audit Committee in relation to compliance with the
VCT legislation. The report for the year ended 28 February2023
showed compliance with all aspects of the VCT regulations. The
Investment Manager regularly liaises with the Company’s VCT status
adviser in relation to VCT qualification on individual investments
and addresses any recommended actions to ensure compliance. |
No change |
ValuationThe companies within the portfolio are valued in
accordance with the International Private Equity and Venture
Capital (IPEV) guidelines but establishing fair value can be
difficult and is reliant on the accuracy and completeness of
information provided. |
The unquoted investment valuations are prepared by the Investment
Manager and agreed by the Board on a quarterly basis although new
valuations may beprepared and agreed as required in the event of a
material movement in the valuations. On an annual basis, at the
year end, the Company’s Auditor, BDOLLP, reports to, and discusses
with, the Audit Committee their findings and any concerns arising
from their review of the investment valuations. |
Increased due to the economic and geopolitical disruption referred
to above. |
Legislative and RegulatoryThe Company operates in a complex
regulatory environment, failure to comply could lead to suspension
from the Stock Exchange, penalties and damage to the Company’s
reputation. A change in VCT regulation could also restrict the
ability for the Company to invest. |
The Investment Manager ensures that it hires suitably qualified
members of staff who are experienced with regulatory requirements
and relevant accounting standards and the Investment Manager and
the Company Secretary have procedures in place to ensure recurring
Listing Rules requirements are met. Legislative and regulatory
developments are also kept under review with the Company’s
solicitor and specialist compliance consultants. The
InvestmentManager is also a member of the Venture Capital Trust
Association which engages with the Government to help shape future
legislation. |
No change |
EconomicEconomic changes such as the war in Ukraine, higher
interest rates, economicrecession, social upheaval from events such
as COVID and Brexit and change in Government could affect trading
conditions for smaller companies and consequently the value of the
Company’s qualifying investments. |
The Board and Investment Manager continuously assess the resilience
of the portfolio, and ongoing discussions and planning are held
with the portfolio companies to provide assistance and support,
particularly during periods of economic uncertainly. The Company
has a clear investment policy and a diversified portfolio operating
in a range of sectors which helps to mitigate against sector
specific impacts. Additionally, ensuring adequate liquidity to cope
with unexpected pressures on the finances of the portfolio and
allow the Company to make follow-on investments where suitable is
an important part of the risk mitigation in times of economic
uncertainty. |
Increased due to the high levels of inflation, rising interest
rates and the geopolitical risks from the invasion of Ukraine. |
OperationalThe Company is reliant on a number of third parties, in
particular the Investment Manager, for management and
administration services. Failure of the operational systems and
controls of third parties could result in an inability to provide
accurate reporting and monitoring. |
The Investment Manager has a documented business continuity plan,
which provides for back-up services in the event of a system
breakdown. The Investment Manager’s systems are protected against
viruses and other cyber-attacks and appropriate insurances are
maintained. The Board reviews the performance of all service
providers at least annually and the Investment Manager conducts due
diligence on all new service providers to ensure that third parties
have adequate operational systems in place. |
No change |
Cyber security & ITOutsourcing and the increase in remote
working could give rise to cyber and data security risk. Failure in
key IT systems and controls might lead to business interruption,
loss of data or loss of access to systems. |
The Investment Manager has significant cybersecurity controls,
including two factor authentication, email protection software,
monitored firewalls and staff regularly receive training in
relation to their cybersecurity obligations. Due diligence is
conducted on service providers including a review of controls, to
reduce the risk of business interruption due to insufficient cyber
security controls of third parties. The Investment Manager has a
robust cyber insurance to ensure that financial liabilities are
mitigated in the event of a cyber-attack. |
No change |
ESGFailure to comply with current and future requirements and
recommended practices could result in reduced investor attraction
which may affect the level of capital the Company has available to
meet its investment objectives. |
The Investment Manager has further expanded its initiatives focused
on driving improved performance across environmental, social and
governance (“ESG”) factors, both internally and across the
portfolio. To evaluate impact and improvement in its internal
operations, the Investment Manager has developed an ESG committee
responsible for assessing and strengthening the firm’s approach to
sustainability, diversity and inclusion, and governance. |
No change |
Foreign exchangeThe Company has made a number of its initial
investments in a foreign currency; most often in Euros or US
Dollars. Furthermore, somecompanies may function, in part, in a
currency other than GBP. The portfolio is therefore exposed, to
some extent, to foreign exchange risk and specifically that of
transaction risk and translation risk. |
The Investment Manager and the Board regularly review the exposure
to foreign currency movement to make sure the level of risk is
appropriately managed.Investments are primarily made in GBP, EUR
and USD so exposure is limited to a small number of currencies.On
realisation of investments held in foreign currencies, cash is
translated to GBP shortly after receiving the proceeds to limit the
amount of time exposed to foreign currency fluctuations. |
No change |
Liquidity The Company invests into smaller unquoted companies,
which are inherently illiquid as there is no readily available
market for these shares. Therefore, these may be difficult to
realise for their fair market value at short notice. |
The Company’s liquidity risk is managed by the Investment Manager
in line with guidance agreed with the Board and is reviewed by the
Board at regular intervals. The Company always holds sufficient
levels of funds as cash in order to meet expenses and other cash
outflows as required. For these reasons, the Board believes that
the Company’s exposure to liquidity risk is minimal. |
No change |
Going concernThe Directors
have, at the time of approving the financial statements, a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the twelve months from the
date of sign off of these financial statements. In its assessment
of the Company’s activities as a going concern, the Board has
reviewed the risks to future performance and considered the
potential impacts of those on the Company’s future ability to
continue as a going concern. The Company’s cash resources are
currently healthy, and the portfolio of investments is diverse and
not reliant on any one sector. All significant cash outflows,
including dividends, share buybacks and investments, are all within
the Company’s control. Therefore, the Board expects that the
Company has sufficient cash resources to withstand any reasonable
stress scenario, for example if the Company was unable to raise
further funds, and believes that it is appropriate to continue to
adopt the going concern basis of accounting in preparing these
financial statements.
Viability statementThe Board
has assessed the Company’s prospects over the three-year period to
28 February 2026. A three-year period has been considered
appropriate as it broadly aligns with the time frame during which
the Investment Manager will be required to invest 80% of the funds
from the most recent offer for subscription in qualifying
investments.
In order to support this statement, the Board has carried out a
robust assessment of the principal and emerging risks faced by the
Company, as detailed above, including those risks associated with
the current economic landscape and the war in Ukraine, and
considered the availability of mitigating factors.
The Board considers that the primary risk faced by the Company
is compliance with the VCT rules and although there are a number of
mitigating factors such as a robust deal identification and
diligence process, an experienced investment team and consultation
with the Company’s VCT status advisers to ensure that investments
made comply with the VCT rules, these factors cannot mitigate the
risk that insufficient qualifying investments are identified to
ensure ongoing compliance with the VCT rules.
Accordingly, the amount required to invest in qualifying
holdings to maintain compliance with the VCT rules was a major
consideration in the Board’s analysis. Together with the expected
liabilities of the Company for the three years to 28 February 2026,
the Board considered the forecast cash requirements against the
expected cash position, taking into account a level of assumed
investment realisations and investment income during the period.
The Board has also considered stress scenarios whereby no proceeds
upon the realisation of investments are received and no further
funds are raised.
Based on the assessment of the above considerations on the cash
flow forecasts and stress scenarios, the Board has determined that
the Company will be able to continue in operation, maintain
compliance with the VCT rules and meet its liabilities as they fall
due for the three years to 28 February 2026.
Section 172 StatementSection 172 of the
Companies Act 2006 requires the Directors of the Company to act in
a way that they consider, in good faith, will most likely promote
the success of the Company for the benefit of the members as a
whole. In doing so, the Directors should have regard (amongst other
matters) to:
• the likely
consequences of any decision in the long
term;• the interests
of the Company’s
employees;• the need
to foster the Company’s business relationships with suppliers,
customers and
others;• the impact
of the Company’s operations on the community and the
environment;• the
desirability of the Company maintaining a reputation for high
standards of business conduct;
and• the need to act
fairly as between members of the Company.
The Board considers its significant stakeholder groups to be its
Shareholders, its suppliers (including the Investment Manager to
whom most executive functions are delegated) and its portfolio
companies. The Company is an externally managed investment company
with no employees and no customers in the traditional sense and,
therefore, there is nothing to report in relation to these
relationships. The Company takes a number of steps to understand
the views of its key stakeholders and considers these, along with
the matters set out above, in Board discussions and decision
making.
ShareholdersThe Company’s Shareholders are key to the success of
the Company and the Board engages and communicates withShareholders
by various means. The Company encourages all Shareholders to attend
its annual shareholder event, which last year was held as a hybrid
event on 16 November 2022 and attended by approximately 200
Shareholders and which gives Shareholders the opportunity to ask
questions of the Board and the Investment Manager and hear from
some of the Company’s portfolio companies. Following the success of
last year’s event and our previous virtual events, plans are in
motion for a virtual event in 2023, allowing the maximum number of
Shareholders to attend. The event has been scheduled for 10.30am to
12.30pm on Thursday, 16 November 2023.
The Board also encourages all Shareholders to attend and vote on
the resolutions proposed at the Annual General Meeting, which this
year will be held at 10:30am on Wednesday 12 July 2023 at the
offices of Beringea LLP, at Charter House, 55 Drury Lane, London
WC2B 5SQ. We are pleased to report that this year the Company will
also offer Shareholders the option to follow proceedings of the
meeting online. Please note that Shareholders will not be able to
vote or ask questions at the AGM when joining remotely and
therefore Shareholders are encouraged to vote electronically before
the deadline of 10:30am on 10 July 2023.
As a result of the shareholder event, together with other
communications with Shareholders and advisors, the Company has
received useful feedback which allows the Board to understand the
nature of stakeholder concerns better. The Board works very closely
with the Investment Manager in reviewing how Shareholder issues are
handled, ensuring good governance and responsibility in managing
the Company’s affairs. Ultimately, the Directors’ decisions are
intended to achieve the Company’s principal objective of long term
returns for Shareholders greater than those available from
investing in a portfolio of quoted companies.
The Board recognises the value of the buyback scheme and
approves the level of buyback authority on a quarterly basis within
the maximum authority provided by the Shareholders annually at the
AGM. The buyback policy has been offered to Shareholders throughout
the period under review, providing Shareholders with liquidity
should they wish to sell their shares.
The Board also understands the importance of tax free dividends
to Shareholders and takes this into consideration when making the
decision to pay dividends to Shareholders. During the period under
review, the Company paid an interim dividend in respect of the year
ended 28 February 2023 of 1. 5p per share on 2 December 2022 and is
proposing a final dividend for the year ended 28 February 2023 of
1.75p per share to be paid on 4 August 2023 to Shareholders on the
register on 7 July 2023. The total tax-free dividends of 3.25p per
share for the year ended 28 February 2023 represents a cash return
to Shareholders of 5.1% on the opening NAV per share at 1 March
2022 (after deducting the prior year’s final and special dividends
of 3.25p per share in total). This cash return is in line with the
target dividend yield of 5% per annum which, although not
guaranteed, when achieved can provide predictable income returns
and create value for Shareholders. The Board is not proposing a
special dividend for the year ended 28 February 2023, principally
due to the level of realised losses during the year.
SuppliersThe Company’s suppliers, and in particular Beringea as
Investment Manager, are the cornerstone of the Company’s business.
There is regular contact with the Investment Manager and members of
the Investment Manager’s senior management team attend all of the
Company’s Board meetings.
Portfolio CompaniesThe Investment Manager provides updates to
the Board on the entire portfolio at least quarterly. Furthermore,
the Investment Manager continuously supports the portfolio via a
host of practices, including, but not limited to, having a
representative of the Investment Manager on the boards of most of
our material portfolio companies. The Investment Manager’s
Portfolio Value-Add Initiative has developed further in the past
year, supporting companies in overcoming barriers to growth and
harnessing commercial opportunities. The initiative is led by Harry
Thomas, the firm’s Portfolio Director, with support from Vanessa
Evanson-Goddard (General Counsel), and Henry Philipson (Director of
Marketing and Communications). Together, the team provides both
ad-hoc and structured support on a range of topics from recruitment
to marketing and fundraising.
The Beringea Scale-Up Academy is one of the primary pillars of
the Value-Add Initiative, offering a year-round programme of events
for portfolio leadership teams. In 2022, the Academy delivered ten
webinars to portfolio company senior managers, providing valuable
insight and training on topics such as pricing strategy, accessing
R&D tax credits, and hiring.
The Investment Manager’s Portfolio Value-Add Initiative also
offers a range of services to support portfolio companies in their
growth journey. These services include: identifying existing and
potential service providers and negotiating group discounts;
establishing a central database of information and contacts related
to key operational and strategic concerns for companies; hosting
in-person and online events for sharing knowledge and ideas;
building relationships with external stakeholders, including
investors, customers and suppliers; helping to identify potential
acquisition or exit opportunities; and encouraging companies to
consider and adopt ESG initiatives.
Environmental, Social, Human Rights Policy and
Greenhouse EmissionsThe Board seeks to conduct the
Company’s affairs responsibly and maintain high standards in
respect of ethical, environmental, governance and social issues.
The Board recognises the requirement under section 414C of the
Companies Act 2006 to detail information about social and community
issues, employees and human rights; including any policies it has
in relation to these matters and effectiveness of these
policies.
As an externally managed investment company with no employees,
the Company has no formal policies in these matters. However, the
Company and the Investment Manager recognise the need for the
Company and the businesses within its portfolio to embrace
environmental, social and governance (“ESG”) practices. The
Investment Manager has played a pivotal role in the creation of
ESG_VC and its development of a standardised framework for
evaluating ESG within early-stage companies, which has been
endorsed by the British Private Equity and Venture Capital
Association (BVCA). Completing the ESG_VC Measurement Framework is
now part of the annual reporting requested from members of the
ProVen VCTs’ portfolio, it is used as part of the onboarding of new
investments, and it is used to inform resources and events for the
portfolio.
The Investment Manager’s ongoing role as Chair of ESG_VC, which
now brings together more than 200 leading VC firms across the UK
and Europe, has also provided valuable opportunities for the firm
and the portfolio. As a result of its role within ESG_VC, the
Investment Manager was shortlisted among the leading firms for ESG
in venture capital at the Real Deals Awards 2022, and Henry
Philipson, Director of Marketing and Communications, was named
among the Future 40 ESG Innovators.
To evaluate impact and improvement in its internal operations,
the Investment Manager has an ESG committee responsible for
assessing and strengthening the firm’s approach to sustainability,
diversity and inclusion, and governance. The firm has performed
particularly strongly in its diversity-focused initiatives, and it
is now certified as a Level 2 firm under the Diversity VC Standard,
an industry accreditation for diversity and inclusion best
practice. The Investment Manager is also a signatory of the
Investing in Women Code, submitting annual data on the diversity of
companies in the portfolio and investment pipeline.
On a general note, the Board considers that the Company’s
investment operations create employment, aid economic growth,
generate tax revenues and produce wealth, thus benefiting the
community and the economy more generally. Where appropriate, the
investment proposals considered by the Investment Manager and the
Board also include any relevant information on any social,
employee, ethical or environmental matters relevant to that
investment.
Whilst as a UK quoted company the VCT is required to report on
its Greenhouse Gas (GHG) Emissions for any direct emissions, as it
outsources all of its activities and does not have any physical
assets, property, employees or operations, it is not responsible
for any direct emissions. As a result, total energy emissions are
less than 40,000 kWh and the additional Streamlined Energy and
Carbon Reporting (SECR) disclosures have not been made.
Directors and senior managementThe Company had
four non-executive Directors at the year end, two of whom are male
and two of whom are female. The Company has no employees and the
same was true of the previous year.
Directors’ remunerationIt is a
requirement under Companies Act 2006 for Shareholders to approve
the Directors’ remuneration policy every three years, or sooner if
the Company wishes to make changes to the policy. No changes are
being proposed to the Directors’ remuneration policy. The
Directors’ remuneration policy that was approved at the AGM of the
Company on 14 July 2021 received the following votes at that
AGM:
Voting |
Votes received |
Percentage |
Votes for |
8,719,931 |
90.07% |
Votes for – discretion |
488,989 |
5.05% |
Votes against |
472,666 |
4.88% |
Votes received |
9,681,586 |
100.00% |
Votes withheld |
293,992 |
|
Future prospectsThe Company’s
future prospects are set out in the Chair’s Statement and
Investment Manager’s Review.
The Directors do not foresee any major changes in the activity
undertaken by the Company in the coming year. The Company continues
with its objective to invest in unquoted companies throughout the
United Kingdom or with a presence in the United Kingdom, with a
view to providing both capital growth and dividend income to
Shareholders over the long term whilst maintaining VCT qualifying
status. As noted in the Chair's Statement, unless legislation to
extend or remove the Sunset Clause is enacted, income tax relief
will no longer be available for new VCT subscriptions made on or
after 6 April 2025. However, the Government announced in September
2022 its commitment to extending the VCT scheme beyond 2025, and
the Directors look forward to receiving details from the Government
in due course of how the removal of the Sunset Clause will be
enacted.
By order of the Board
Beringea LLPCompany Secretary of ProVen Growth
and Income VCT plc
Directors’ responsibilitiesThe
Board considers that the Annual Report and Accounts, taken as a
whole, are fair, balanced and understandable and that they provide
the information necessary for Shareholders to assess the Company’s
performance, business model and strategy.
The Directors are responsible for preparing the
Annual Report and the financial statements in accordance with
applicable law and regulations. They are also responsible for
ensuring that the Annual Report and Accounts includes information
required by the Listing Rules of the Financial Conduct
Authority.
Company law requires the Directors to prepare
financial statements for each financial year. Under that law the
Directors have elected to prepare the financial statements in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law).
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss
of the Company for that period.
In preparing the financial statements, the Directors are required
to:• select suitable accounting policies and
then apply them consistently;• make judgments
and accounting estimates that are reasonable and
prudent;• state whether
applicable UK accounting standards have been followed, subject to
any material departures disclosed and explained in the financial
statements;• prepare the
financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business; and• prepare a
directors’ report, a strategic report and directors’ remuneration
report which comply with the Companies Act 2006.
The Directors are responsible for keeping
adequate accounting records that are sufficient to show and explain
the Company’s transactions, to disclose with reasonable accuracy at
any time the financial position of the Company and to enable them to
ensure that the financial statements comply with the requirements of
the Companies Act 2006. The maintenance and integrity of the
Company’s website is the responsibility of the directors. They are
also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Directors’ responsibilities pursuant to the Disclosure and
Transparency Rule 4
Each of the Directors confirms that to the best
of each person’s knowledge:• the
financial statements, which have been prepared in accordance with UK
Generally Accepted Accounting Practice, give a true and fair view
of the assets, liabilities, financial position and profit or loss of
the Company; and• the Directors’
Report, Chair’s Statement, Strategic Report, Investment Manager’s
Review and Review of Investments include a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
Statement as to disclosure of
information to the
AuditorThe Directors in office at
the date of the Report have confirmed, as far as they are aware,
that there is no relevant audit information of which the Auditor is
unaware. Each of the Directors confirmed that they have taken all
the steps that they ought to have taken as Directors in order to
make themselves aware of any relevant audit information and to
establish that it has been communicated to the Auditor. This
confirmation is given and should be interpreted in accordance with
the provisions of section 418 of the Companies Act 2006.
The Directors’ Report, which has been approved
by the Board, includes all relevant information required to be
disclosed under LR9.8.4R.
Income Statement
for the year ended 28 February
2023
|
|
|
Year ended 28 February 2023 |
|
Year ended 28 February 2022 |
|
|
Revenue |
|
Capital |
|
Total |
|
Revenue |
|
Capital |
|
Total |
|
|
|
£’000 |
|
£’000 |
|
£’000 |
|
£’000 |
|
£’000 |
|
£’000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income |
|
|
383 |
|
– |
|
383 |
|
122 |
|
– |
|
122 |
Realised (losses) / gains on
investments |
|
|
– |
|
(10,907) |
|
(10,907) |
|
– |
|
5,113 |
|
5,113 |
Unrealised (losses) / gains on
investments |
|
|
– |
|
(9,143) |
|
(9,143) |
|
– |
|
23,340 |
|
23,340 |
|
|
|
383 |
|
(20,050) |
|
(19,667) |
|
122 |
|
28,453 |
|
28,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees |
|
|
(861) |
|
(2,583) |
|
(3,444) |
|
(814) |
|
(2,442) |
|
(3,256) |
Performance incentive fees |
|
|
– |
|
– |
|
– |
|
– |
|
(2,130) |
|
(2,130) |
Other expenses |
|
|
(746) |
|
(1) |
|
(747) |
|
(743) |
|
(6) |
|
(749) |
FX Translation |
|
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/return on ordinary
activities before tax |
|
|
(1,224) |
|
(22,634) |
|
(23,858) |
|
(1,435) |
|
23,875 |
|
22,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax on ordinary activities |
|
|
– |
|
– |
|
– |
|
– |
|
– |
|
– |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/return
attributable to equity shareholders |
|
|
(1,224) |
|
(22,634) |
|
(23,858) |
|
(1,435) |
|
23,875 |
|
22,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
(loss)/return per share |
|
|
(0.4p) |
|
(7.9p) |
|
(8.3p) |
|
(0.6p) |
|
10.0p |
|
9.4p |
All revenue and capital movements in the year relate to
continuing operations. No operations were acquired or discontinued
during the year. The total column within the Income Statement
represents the Income Statement of the Company, prepared in
accordance with the accounting policies detailed in note 1 to the
financial statements. The supplementary revenue and capital columns
are presented for information purposes in accordance with the
Statement of Recommended Practice issued by the Association of
Investment Companies.
A Statement of Comprehensive Income has not been prepared as no
items have been recognised in ‘other comprehensive income’ in the
current or prior year as shown.
Statement of Changes in Equity
for the year ended 28 February
2023
|
|
Called up share capital£'000 |
Capitalredemption
reserve£'000 |
Specialreserve£'000 |
SharePremium
reserve£'000 |
Revaluation
reserve£'000 |
Capitalreserve-
realised£'000 |
Revenue reserve
£'000 |
Total£'000 |
At 1 March 2022 |
|
4,081 |
190 |
40,200 |
76,198 |
38,737 |
15,206 |
(5,048) |
169,564 |
Comprehensive Income
for the year: |
|
|
|
|
|
|
|
|
|
Management fees allocated as
capital expenditure |
|
– |
– |
– |
– |
– |
(2,583) |
– |
(2,583) |
Legal fees allocated as capital
expense |
|
– |
– |
– |
– |
– |
– |
– |
– |
Realised loss on investments |
|
– |
– |
– |
– |
– |
(10,907) |
– |
(10,907) |
Unrealised loss on
investments |
|
– |
– |
– |
– |
(9,143) |
– |
– |
(9,143) |
Loss after tax |
|
– |
– |
– |
– |
– |
– |
(1,224) |
(1,224) |
Total
comprehensive loss |
|
– |
– |
– |
– |
(9,143) |
(13,490) |
(1,224) |
(23,857) |
|
|
|
|
|
|
|
|
|
|
Contributions by and
distributions to owners: |
|
|
|
|
|
|
|
|
|
Issue of new shares (includes
DRIS) (net of share issue costs) |
|
878 |
– |
(1,423) |
34,906 |
– |
– |
– |
34,361 |
Share buybacks |
|
(145) |
145 |
(5,248) |
– |
– |
– |
– |
(5,248) |
Dividends paid (includes
DRIS) |
|
– |
– |
(13,752) |
– |
– |
– |
– |
(13,752) |
Total contributions by
and distributions to owners |
|
733 |
145 |
(20,423) |
34,906 |
– |
– |
– |
15,361 |
Other
movements: |
|
|
|
|
|
|
|
|
|
Transfer of previously unrealised
gains now realised |
|
– |
– |
– |
– |
(15,868) |
15,868 |
– |
– |
FX translation |
|
– |
– |
– |
– |
– |
– |
– |
– |
Total other
movements |
|
– |
– |
– |
– |
(15,868) |
15,868 |
– |
– |
At 28 February
2023 |
|
4,814 |
335 |
19,777 |
111,104 |
13,726 |
17,584 |
(6,272) |
161,068 |
Year ended 28 February 2022
|
|
Called up share capital£'000 |
Capitalredemption
reserve£'000 |
Specialreserve£'000 |
SharePremium
reserve£'000 |
Revaluation
reserve£'000 |
Capitalreserve-
realised£'000 |
Revenue reserve
£'000 |
Total£'000 |
At 1 March 2021 |
|
3,598 |
129 |
50,992 |
55,656 |
16,463 |
13,605 |
(3,613) |
136,830 |
Comprehensive Income
for the year: |
|
|
|
|
|
|
|
|
|
Management fees allocated as
capital expenditure |
|
– |
– |
– |
– |
– |
(2,442) |
– |
(2,442) |
Legal fees allocated as capital
expense |
|
– |
– |
– |
– |
– |
(6) |
– |
(6) |
Realised gain on investments |
|
– |
– |
– |
– |
– |
5,113 |
– |
5,113 |
Unrealised gain on
investments |
|
– |
– |
– |
– |
23,340 |
– |
– |
23,340 |
Loss after tax |
|
– |
– |
– |
– |
– |
– |
(1,435) |
(1,435) |
Performance fee |
|
– |
– |
– |
– |
– |
(2,130) |
– |
(2,130) |
Total comprehensive
profit |
|
– |
– |
– |
– |
23,340 |
535 |
(1,435) |
22,440 |
|
|
|
|
|
|
|
|
|
|
Contributions by and
distributions to owners: |
|
|
|
|
|
|
|
|
|
Issue of new shares |
|
544 |
– |
(900) |
20,542 |
– |
– |
– |
20,186 |
Share buybacks |
|
(61) |
61 |
(2,293) |
– |
– |
– |
– |
(2,293) |
Dividends paid (includes
DRIS) |
|
– |
– |
(7,599) |
– |
– |
– |
– |
(7,599) |
Total contributions by
and distributions to owners |
|
483 |
61 |
(10,792) |
20,542 |
– |
– |
– |
10,294 |
Other
movements: |
|
|
|
|
|
|
|
|
|
Transfer of previously unrealised
gains now realised |
|
– |
– |
– |
– |
(1,066) |
1,066 |
– |
– |
Total other
movements |
|
– |
– |
– |
– |
(1,066) |
1,066 |
– |
– |
At 28 February
2022 |
|
4,081 |
190 |
40,200 |
76,198 |
38,737 |
15,206 |
(5,048) |
169,564 |
The special reserve, capital reserve-realised and revenue
reserve are all distributable reserves. Reserves available for
distribution therefore amount to £31,090,000 (2022: £50,358,000).
During the year, the Company repurchased 8,929,292 shares (2022:
3,831,711) with a nominal value of £144,541 (2022: £62,025). All
shares were subsequently cancelled.
The composition of each of these reserves is explained
below:
Called up share capital - The nominal value of
shares issued, increased for subsequent share issues either via an
offer for subscription or the Company’s dividend reinvestment
scheme, or reduced due to shares bought back by the Company for
cancellation.
Capital redemption reserve - The nominal value
of shares bought back and cancelled.
Special reserve – The Company has previously
cancelled its share premium reserve and capital redemption reserve
to create a special reserve that can assist in writing off losses,
which in turn enhances the ability for a company to make
distributions and implement share buybacks. This is the
distributable reserve which is currently used to fund shares bought
back by the Company for cancellation and share issue costs on
shares issued under an Offer for Subscription. Dividends that are
classified as capital may be paid from this reserve. The special
reserve is currently wholly distributable as it does not contain
any capital arising from shares issued less than three years
ago.
Share premium reserve - This reserve contains
the excess of gross proceeds over the nominal value of shares
allotted under offers for subscription and the Company’s dividend
reinvestment scheme, to the extent that it has not been
cancelled.
Revaluation reserve - Increases and decreases
in the valuation of investments held at the year end are accounted
for in this reserve, except to the extent that the diminution is
deemed permanent.
In accordance with stating all investments at fair value through
profit and loss, all such movements through both revaluation and
capital reserve – realised are shown within the Income Statement
for the year.
Capital reserve realised - The following are
accounted for in this reserve:
- gains and losses on realisation of investments;
- permanent diminution in value of investments;
- transaction costs incurred in the acquisition of
investments;
- 75% of the investment manager’s fee expense and 100% of any
performance incentive fee payable; and
- other capital expenses and charges.
Revenue reserve - Income and expenses that are
revenue in nature are accounted for in this reserve together with
the related tax effect, as well as dividends paid that are
classified as revenue in nature.
Statement of Financial Position
as at 28 February
2023
|
|
|
28 February 2023 |
|
28 February 2022 |
Fixed assets |
|
|
£’000 |
|
£’000 |
Investments |
|
|
116,163 |
|
145,410 |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Debtors |
|
|
852 |
|
746 |
Cash at bank and in hand |
|
|
45,058 |
|
25,890 |
|
|
|
45,910 |
|
26,636 |
Creditors: amounts falling due within one
year |
|
|
(1,005) |
|
(2,482) |
|
|
|
|
|
|
Net current assets |
|
|
44,905 |
|
24,154 |
|
|
|
|
|
|
Total assets less current liabilities |
|
|
161,068 |
|
169,564 |
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
Called up share capital |
|
|
4,814 |
|
4,081 |
Capital redemption reserve |
|
|
335 |
|
190 |
Special reserve |
|
|
19,777 |
|
40,200 |
Share premium reserve |
|
|
111,104 |
|
76,198 |
Revaluation reserve |
|
|
13,726 |
|
38,737 |
Capital reserve – realised |
|
|
17,584 |
|
15,206 |
Revenue reserve |
|
|
(6,272) |
|
(5,048) |
|
|
|
|
|
|
Total equity shareholders’ funds |
|
|
161,068 |
|
169,564 |
Basic and diluted net asset value per share |
|
|
54.2p |
|
67.3p |
Statement of Cash Flows
for the year ended 28 February 2023
|
|
Year ended 28 February 2023 |
Year ended 28 February 2022 |
|
|
Total |
Total |
|
|
£’000 |
£’000 |
(Loss)/return on ordinary activities before taxation |
|
(23,858) |
22,440 |
Loss/(gain) on investments |
|
20,050 |
(28,453) |
(Increase)/decrease in prepayments, accrued income and other
debtors |
|
(10) |
140 |
(Decrease) / increase in accruals and other creditors |
|
(2,123) |
2,152 |
Net cash outflow from operating activities |
|
(5,941) |
(3,721) |
|
|
|
|
Cash flows from investing activities |
|
|
|
Purchase of investments |
|
(21,359) |
(32,663) |
Sale of investments |
|
30,468 |
15,310 |
Net cash
inflow/(outflow)
from investing activities |
|
9,109 |
(17,353) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Proceeds from share
issues |
|
33,683 |
19,955 |
Share issue costs |
|
(1,278) |
(899) |
Purchase of own shares |
|
(4,758) |
(2,293) |
Equity dividends paid |
|
(11,648) |
(6,468) |
Net cash inflow from financing activities |
|
15,999 |
10,295 |
|
|
|
|
Increase/(decrease) in
cash and cash equivalents |
|
19,167 |
(10,779) |
Cash at beginning of year |
|
25,890 |
36,669 |
Cash at end of year |
|
45,057 |
25,890 |
‘Net cash used in operating activities’ includes interest
received of £225,000 (2022: £260,000) and dividends received of
£nil (2022: £6,000). No interest was paid during the year (2022:
£nil).
Notes to the Announcement
for the year ended 28 February
2023
1. Accounting
policiesBasis of preparationThe Company
has prepared its financial statements under Financial Reporting
Standard 102 (“FRS102”) and in accordance with the Statement of
Recommended Practice ‘Financial Statements of Investment Trust
Companies and Venture Capital Trusts’ (the “SORP”) issued by the
Association of Investment Companies (“AIC”), which was updated in
July 2022.
The financial statements are prepared under the
historical cost convention except for the revaluation of certain
financial instruments measured at fair value.
The following accounting policies have been applied
consistently throughout the period.
Going concernThe Directors
have, at the time of approving the financial statements, a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the twelve months from the
date of sign off of these financial statements. In its assessment
of the Company’s activities as a going concern, the Board has
reviewed the risks to future performance and considered the
potential impacts of those on the Company’s future ability to
continue as a going concern. The Company’s cash resources are
currently healthy, and the portfolio of investments is diverse and
not reliant on any one sector. All significant cash outflows,
including dividends, share buybacks and investments, are within the
Company’s control. Therefore, the Board expects that the Company
has sufficient cash resources to withstand any reasonable stress
scenario, for example if the Company was unable to raise further
funds, and believes that it is appropriate to continue to adopt the
going concern basis of accounting in preparing the financial
statements.
Presentation of Income
StatementIn order to better reflect the activities of an
investment company and, in accordance with guidance issued by the
AIC, supplementary information which analyses the Income Statement
between items of a revenue and capital nature has been presented
alongside the Income Statement. The revenue return attributable to
equity shareholders is the measure the Directors believe
appropriate in assessing the Company’s compliance with certain
requirements set out in Part 6 of the Income Tax Act 2007.
InvestmentsInvestments,
including equity and loan stock, are recognised at their trade date
and measured at “fair value through profit or loss” due to
investments being managed and performance evaluated on a fair value
basis. A financial asset is designated within this category if it is
both acquired and managed, with a view to selling after a period of
time, in accordance with the Company’s documented investment
policy. The fair value of an investment upon acquisition is deemed
to be cost. Thereafter investments are measured at fair value in
accordance with International Private Equity and Venture Capital
Valuation Guidelines (“IPEV Guidelines”) issued in December 2018,
together with sections 11 and 12 of FRS102.
Publicly traded investments are measured using
bid prices in accordance with the IPEV Guidelines.
Key judgementsThe valuation
methodologies used by the Directors for estimating the fair value
of unquoted investments are as follows:
- where a company is in the early
stage of development, the estimate of fair value is based on market
data and assumptions as to the potential outcomes, benchmarked
against alternative valuation methodologies during this time;
- where a company is well established
after an appropriate period, the investment may be valued by
applying a suitable earnings revenue or transaction multiple to
that company’s maintainable earnings or revenue. The multiple used
is based on comparable listed companies, transaction data or a
sector but discounted to reflect factors such as the different
sizes of the comparable businesses, different growth rates and the
lack of marketability of unquoted shares;
- where a value is indicated by a
material arms-length transaction by a third party in the shares of
the company the valuation will normally be based on this, whilst
also being benchmarked against alternative valuation
methodologies;
- where alternative methods of
valuation, such as net assets of the business, are more appropriate
than such methods may be used; and
- where repayment of the equity is
not probable, redemption premiums will be recognised.
The methodology applied takes account of the nature, facts and
circumstances of the individual investment and uses reasonable
data, market inputs, assumptions and estimates in order to
ascertain fair value. Methodologies are applied consistently from
year to year except where a change results in a better estimate of
fair value.
Where an investee company has gone into receivership or
liquidation, or the loss in value below cost is considered to be
permanent, or there is little likelihood of a recovery from a
company in administration, the loss on the investment, although not
physically disposed of, is treated as being realised.
All investee companies are held as part of an investment
portfolio and measured at fair value. Therefore, it is not the
policy for investee companies to be consolidated and any gains or
losses arising from changes in fair value are included in the
Income Statement for the period as a capital item.
Gains and losses arising from changes in fair value are included
in the Income Statement for the year as a capital item and
transaction costs on acquisition or disposal of the investment are
expensed.
Investments are derecognised when the contractual rights to the
cash flows from the asset expire or the Company transfers the asset
and substantially all the risks and rewards of ownership of the
asset to another entity.
Key estimatesThe key estimates involved in
determining the fair value of a company can
include:• identifying
a relevant basket of market
comparables;• deducing
the discount to take on those market
comparables;• determining
reoccurring
revenue;• determining
reoccurring earnings;
or• identifying
surplus cash.
The table below shows the investment portfolio categorised by
valuation methodology, as well as the range of market comparables
used in reaching the closing valuations. The table also shows the
possible outcomes if different ranges of multiples were used in
valuing the portfolio.
Valuation
basis |
Range of market comparables |
Valuation as at 28 February 2023 £’000 |
Range of market comparables
when reduced by 15% |
Valuation outcome £’000 |
Range of market comparables
when increased by 15% |
Valuation outcome £’000 |
Multiple of revenue or
EBITDA |
1.0x – 8.7x |
86,372 |
0.9x – 7.4x |
76,040 |
1.1x – 10.0x |
101,757 |
Price of recent investment |
n/a |
18,832 |
n/a |
18,832 |
n/a |
18,832 |
Price of recent offer |
n/a |
7,422 |
n/a |
7,422 |
n/a |
7,422 |
Net asset value |
n/a |
3,537 |
n/a |
3,537 |
n/a |
3,537 |
Total |
|
116,163 |
|
105,831 |
|
130,548 |
Fair valueFair value is defined
as the amount for which an asset could be exchanged between
knowledgeable, willing parties in an arm’s length transaction. The
Company has categorised its financial instruments that are measured
subsequent to initial recognition at fair value, using the fair
value hierarchy as follows:
Level 1: The unadjusted quoted price in an
active market for identical assets or liabilities that the entity
can access at the measurement date.
Level 2: Inputs other than quoted prices
included within Level 1 that are observable (i.e., developed using
market data) for the asset or liability, either directly or
indirectly.
Level 3: Inputs are unobservable (i.e., for
which market data is unavailable) for the asset or liability.
Income Dividend income from investments is
recognised when the shareholders’ rights to receive payment has
been established, normally the ex-dividend date.
Interest income is accrued on a time basis, by
reference to the principal outstanding and at the effective
interest rate applicable and only where there is reasonable
certainty of collection in the foreseeable future. Income which is
not capable of being received within a reasonable period of time is
reflected in the capital value of the investments. A provision is
made for any fixed income not expected to be received.
ExpensesAll expenses are
accounted for on an accruals basis. In respect of the analysis
between revenue and capital items presented within the Income
Statement, all expenses have been presented as revenue items except
as follows:
- expenses which are incidental to
the acquisition of an investment are deducted from the Capital
Account;
- expenses which are incidental to
the disposal of an investment are deducted from the disposal
proceeds of the investment;
- expenses are split and presented
partly as capital items where a connection with the maintenance or
enhancement of the value of the investments held can be
demonstrated. Accordingly, the investment management fee has been
allocated 25% to revenue and 75% to capital in order to reflect the
Directors’ expected long-term view of the nature of the investment
returns of the Company; and
- performance incentive fees are
treated as a capital item.
TaxationThe tax effects of
different items in the Income Statement are allocated between
capital and revenue on the same basis as the particular item to
which they relate using the Company’s effective rate of tax for the
accounting period.
Due to the Company’s status as a venture capital
trust and the continued intention to meet the conditions required
to comply with Part 6 of the Income Tax Act 2007, no provision for
taxation is required in respect of any realised or unrealised
appreciation of the Company’s investments.
Deferred taxation, which is not discounted, is
provided in full on timing differences that result in an obligation
at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they
crystallise based on current tax rates and law.
Timing differences arise from the inclusion of
items of income and expenditure in taxation computations in periods
different from those in which they are included in the financial
statements. Deferred tax assets are recognised to the extent that
it is regarded as more likely than not that they will be
recovered.
Share issue costsExpenses in
relation to share issues are deducted from the Special Reserve.
CashCash comprises cash on hand
and demand deposits.
DebtorsShort term debtors are
initially measured at transaction price. Subsequent remeasurement
deducts any impairment from the transaction price.
CreditorsShort term trade
creditors are initially and subsequently measured at the
transaction price and are settled in a short timeframe.
2. Basic and diluted
return per share
|
Year ended 28 February 2023 |
|
Year ended 28 February 2022 |
|
Revenue loss per share based
on: |
|
|
|
|
Net revenue loss after taxation
(£’000) |
(1,224) |
|
(1,435) |
|
|
|
|
|
|
Weighted average number of shares
in issue |
287,122,476 |
|
238,055,965 |
|
|
|
|
|
|
Pence per share |
(0.4p) |
|
(0.6p) |
|
|
|
|
|
|
Capital (loss)/return per share
based on: |
|
|
|
|
Net capital (loss)/return for the
financial year (£‘000) |
(22,634) |
|
23,875 |
|
|
|
|
|
|
Weighted average number of shares
in issue |
287,122,476 |
|
238,055,965 |
|
|
|
|
|
|
Pence per share |
(7.9p) |
|
10.0p |
|
|
|
|
|
|
Total (loss)/return per share
based on: |
|
|
|
|
Total (loss)/return for the
financial year (£‘000) |
(23,858) |
|
22,440 |
|
|
|
|
|
|
Weighted average number of shares
in issue |
287,122,476 |
|
238,055,965 |
|
|
|
|
|
|
Pence per share |
(8.3p) |
|
9.4p |
|
As the Company has not issued any convertible
securities or share options, there is no dilutive effect on return
per share. The return per share disclosed therefore represents both
basic and diluted return per share.
3. Basic and diluted net
asset value per share
|
2023 |
|
2022 |
|
|
Shares in issue |
Net asset value |
|
Net asset value |
|
|
2023 |
2022 |
Pence per share |
|
£’000 |
|
Pence per share |
|
£’000 |
|
Ordinary Shares |
297,414,345 |
252,090,729 |
|
54.2 |
|
161,068 |
|
|
67.3 |
|
169,564 |
As the Company has not issued any convertible
securities or share options, there is no dilutive effect on net
asset value per share. The net asset value per share disclosed
therefore represents both basic and diluted return per share.
4. Principal risks and
management objectivesThe Company’s investment activities
expose the Company to a number of risks associated with financial
instruments and the sectors in which the Company invests. The
principal financial risks arising from the Company’s operations
are:
- Market risks;
- Credit risk; and
- Liquidity risk.
The Board regularly reviews these risks and the policies in
place for managing them. There have been no significant changes to
the nature of the risks that the Company is exposed to over the
year and there have also been no significant changes to the
policies for managing those risks during the year. The risk
management policies used by the Company in respect of the principal
financial risks and a review of the financial instruments held at
the year end are provided below:
Market risksAs a VCT, the Company
is exposed to market risks in the form of potential losses and
gains that may arise on the investments it holds. The management of
these market risks is a fundamental part of investment activities
undertaken by the Investment Manager and overseen by the Board. The
Investment Manager monitors investments through regular contact
with the management of investee companies, regular review of
management accounts and other financial information and attendance
at investee company board meetings. This enables the Investment
Manager to manage the investment risk in respect of individual
investments.The key market risks to which the Company is exposed
are:
- Market price risk; and
- Interest rate risk.
Market price riskMarket price risk
arises from uncertainty about the future prices and valuations of
financial instruments held in accordance with the Company’s
investment objectives. It represents the potential loss that the
Company might suffer through market price movements in respect of
quoted investments and also changes in the fair value of unquoted
investments that it holds.
At 28 February 2023, the Company had no
AIM-quoted portfolio companies and therefore the AIM-quoted
portfolio was valued at £nil (2022: £337,000).
At 28 February 2023, the unquoted portfolio was
valued at £116,163,000 (2022: £145,073,000). As many of the
Company’s unquoted investments are valued using revenue or earnings
multiples of comparable companies or sectors, a fall in listed
share prices generally would impact on the valuation of the
unquoted portfolio. A 15% movement in the multiples used to reach
the valuations of the unquoted investments held by the Company
would have an effect as follows:
Valuation
basis |
Range of market comparables |
Valuation as at 28 February 2023 £’000 |
Range of market comparables
when reduced by 15% |
Valuation outcome £’000 |
Range of market comparables
when increased by 15% |
Valuation outcome £’000 |
Multiple of revenue or
EBITDA |
1.0x – 8.7x |
86,732 |
0.9x – 7.4x |
76,040 |
1.1x – 10.0x |
101,757 |
Price of recent investment |
n/a |
18,832 |
n/a |
18,832 |
n/a |
18,832 |
Price of recent offer |
n/a |
7,422 |
n/a |
7,422 |
n/a |
7,422 |
Net asset value |
n/a |
3,537 |
n/a |
3,537 |
n/a |
3,537 |
Total |
|
116,163 |
|
105,121 |
|
130,351 |
Interest rate riskThe Company
is exposed to interest rate risk on floating-rate financial assets
through the effect of changes in prevailing interest rates. The
Company receives interest on its cash deposits at a rate agreed
with its bankers. Investments in loan stock attract interest
predominately at fixed rates. A summary of the interest rate
profile of the Company’s financial instruments is shown below.
There are three categories in respect of interest which are
attributable to the financial instruments held by the Company as
follows:
- “Fixed rate” assets represent investments with predetermined
yield targets and comprise certain loan note investments.
- “Floating rate” assets predominantly bear interest at rates
linked to Bank of England base rate or LIBOR and comprise cash at
bank and certain loan note investments. The Company holds one class
of loan with a portfolio company where the interest is partly based
on LIBOR. As this loan is past due and is not being repaid, nor is
it expected to be repaid in the near future, the Company has not
yet renegotiated the interest terms of this loan since the
transition from LIBOR. Should there be an expectation that the loan
will be repaid, the Company will renegotiate the interest terms
before repayment occurs.
- “No interest rate” assets do not attract interest and comprise
equity investments, certain loan note investments, loans and
receivables (excluding cash at bank) and other financial
liabilities.
|
Average |
|
Average period |
|
2023 |
|
2022 |
|
interest rate |
|
until maturity |
|
£’000 |
|
£’000 |
Fixed rate |
6.8% |
|
815 days |
|
6,456 |
|
10,929 |
Floating rate |
0.6% |
|
18 days |
|
45,747 |
|
25,962 |
No interest rate |
|
|
|
|
108,865 |
|
132,673 |
|
|
|
|
|
161,068 |
|
169,564 |
The Company monitors the level of income received from fixed,
floating and non-interest bearing assets and, if appropriate, may
make adjustments to the allocation between the categories, in
particular should this be required to ensure compliance with the
VCT regulations.
Based on the assumption that the yield of all floating rate
financial instruments would change by an amount equal to the
movement in prevailing interest rates, it is estimated that an
increase or decrease of 1% in interest rates would have increased
or decreased total return before taxation for the year by £457,000
(2022: £260,000).
Foreign Exchange riskThe Company has made a
number of its initial investments in a foreign currency; most often
in Euros or US Dollars, though these costs are recorded in their
GBP equivalents on the relevant transaction dates. Furthermore, as
not all companies’ operations are restricted to the UK, some
companies may function, in part, in a currency other than GBP. The
portfolio is therefore exposed, to some extent, to foreign exchange
risk and specifically that of transaction risk and translation
risk.
The Investment Manager and the Board regularly review the
exposure to foreign currency movement to make sure the level of
risk is appropriately managed. On realisation of investments held
in foreign currencies, cash is translated to GBP shortly after
receiving the proceeds to limit the amount of time exposed to
foreign currency fluctuations.
Credit riskCredit risk is the
risk that a counterparty to a financial instrument is unable to
discharge a commitment to the Company made under that instrument.
The Company is exposed to credit risk through its investments in
cash deposits and debtors. Credit risk relating to loan stock
investee companies is considered to be part of market risk.
The Company is exposed to credit risk as
follows:
|
|
2023 |
|
2022 |
|
|
£’000 |
|
£’000 |
Cash and cash equivalents |
|
45,057 |
|
28,890 |
Interest, dividends and other receivables |
|
177 |
|
165 |
|
|
45,234 |
|
26,055 |
The management of credit risk associated with
interest, dividends and other receivables is covered within the
investment management procedures.
For the year ended 28 February 2023, cash was
mainly held by the Royal Bank of Scotland plc, rated A and A+ by
Standard and Poor’s and Fitch, respectively, and is also ultimately
part-owned by the UK Government. Following the year end, in order
to take advantage of recent increases in interest rates, cash
balances have been placed in high quality liquidity funds held with
JP Morgan, Morgan Stanley and UBS. Consequently, the Directors
consider that the risk profile associated with cash deposits is
low.
There have been no changes in fair value during
the year that are directly attributable to changes in credit
risk.
Liquidity riskLiquidity risk is
the risk that the Company encounters difficulties in meeting
obligations associated with its financial liabilities. Liquidity
risk may also arise from either the inability to sell financial
instruments when required at their fair values or from the
inability to generate cash inflows as required. The Company
maintains a relatively low level of creditors (£1.0 million
relative to cash balances of £45.1 million at 28 February 2023) and
has no borrowings.
The Company always holds sufficient levels of
funds as cash in order to meet expenses and other cash outflows as
required. For these reasons, the Board believes that the Company’s
exposure to liquidity risk is minimal.
The Company’s liquidity risk is managed by the
Investment Manager in line with guidance agreed with the Board and
is reviewed by the Board at regular intervals.
Although the Company’s investments are not held
to meet the Company’s liquidity requirements, the table below shows
an analysis of the loan notes, highlighting the length of time that
it could take the Company to realise its loan stock assets if it
were required to do so.
The carrying value of loan stock investments (as
opposed to the contractual cash flows) at 28 February 2023 as
analysed by expected maturity date is as follows:
|
Not later |
Between |
Between |
Between |
More |
|
|
than 1 |
1 and 2 |
2 and 3 |
3 and 5 |
than |
Total |
|
years |
years |
years |
years |
5 years |
Total |
As at 28 February 2023 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Fully performing loan stock |
– |
491 |
2,521 |
3,260 |
– |
6,272 |
Past due loan stock |
– |
874 |
– |
– |
– |
874 |
|
– |
1,365 |
2,521 |
3,260 |
– |
7,146 |
|
|
|
|
|
|
|
As at 28 February 2022 |
|
|
|
|
|
|
Fully performing loan stock |
3,044 |
274 |
– |
3,667 |
– |
6,985 |
Past due loan stock |
4,015 |
– |
– |
– |
– |
4,015 |
|
7,059 |
274 |
– |
3,667 |
– |
11,000 |
Of the loan stock classified as “past due” above, the full amount
relates to the principal of loan notes where the principal has
passed its maturity date.
Fair Value of Financial
InstrumentsFair value measurements recognised in
the balance sheetInvestments are valued at fair value as
determined using the measurement policies described in note 1. The
carrying value of financial assets and liabilities recorded at
amortised cost, which includes short term debtors and creditors, is
considered by Directors to be equivalent to their fair value.
The Company has categorised its financial instruments that are
measured subsequent to initial recognition at fair value, using the
fair value hierarchy as follows:
Level 1 Reflects
financial instruments quoted in an active market.Level
2 Reflects financial
instruments that have been valued using inputs, other than quoted
prices, that are observable.Level
3 Reflects financial
instruments that have been valued using valuation techniques with
unobservable inputs.
|
2023 |
|
2022 |
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
|
£’000 |
£’000 |
£’000 |
£’000 |
AIM quoted |
– |
– |
– |
– |
|
337 |
– |
– |
337 |
Loan notes |
– |
– |
7,146 |
7,146 |
|
– |
– |
11,000 |
11,000 |
Unquoted investments |
– |
– |
109,017 |
109,017 |
|
– |
– |
134,073 |
134,073 |
|
– |
– |
116,163 |
116,163 |
|
337 |
– |
145,073 |
145,410 |
There have been no movements between levels during the financial
year to 28 February 2023.
Reconciliation of fair value for Level 3
financial instruments held at the year end
|
LoanNotes |
|
Unquoted equity |
|
Total |
|
£’000 |
|
£’000 |
|
£’000 |
Balance at 1 March 2022 |
11,000 |
|
134,073 |
|
145,073 |
Movements in the income statement: |
|
|
|
|
|
Gains/ (Losses) in the income statement |
2,918 |
|
(22,909) |
|
(19,992) |
|
|
|
|
|
|
Reclassification at value |
(1,891) |
|
1,891 |
|
- |
Purchases at cost |
1,042 |
|
20,323 |
|
21,365 |
Sales proceeds |
(5,923) |
|
(24,360) |
|
(30,283) |
Balance at 28 February 2023 |
7,146 |
|
109,017 |
|
116,163 |
There is an element of judgement in the choice
of assumptions for unquoted investments and if different
assumptions were used, different valuations would have been
attributed to certain investments.
5. Post balance sheet
events
Between 28 February 2023 and the date of the
Annual Report & Accounts, the Company issued 7,144,716 Ordinary
Shares for an aggregate consideration of £4.0 million under the
combined offer for subscription with ProVen VCT plc which launched
on 19 October 2022. Share issue costs thereon amounted to £0.2
million.
In March 2023, the Company disposed of its
holding in Monica Vinader for initial proceeds of £2.4 million,
representing an 11.8x return on cost at 28 February 2023, with
potential for future proceeds. A strong performer in the Company’s
portfolio for several years, Monica Vinader had been exploring
funding options and agreed a strategic sale to Bridgepoint
Development Capital IV. After originally investing in Monica
Vinader in 2010, the Company sold 60% of its holding in February
2016 for proceeds of £2.0 million and a multiple on cost of
5.2x.
The Company also disposed of its holding in
Aistemos in March 2023, with proceeds of £2.9 million, representing
a multiple on cost of 1.7x.
Announcement based on audited
accountsThe financial information set out in this
announcement does not constitute the Company's statutory financial
statements in accordance with section 434 Companies Act 2006 for
the year ended 28 February 2023, but has been extracted from the
statutory financial statements for the year ended 28 February 2023,
which were approved by the Board of Directors on 9 June 2023 and
will be delivered to the Registrar of Companies following the
Company's Annual General Meeting. The Independent Auditor's Report
on those financial statements was unqualified and did not contain
any emphasis of matter nor statements under s 498(2) and (3) of the
Companies Act 2006.
The statutory accounts for the year ended 28
February 2022 have been delivered to the Registrar of Companies and
received an Independent Auditors report which was unqualified and
did not contain any emphasis of matter nor statements under S498(2)
and (3) of the Companies Act 2006.
A copy of the full annual report and financial
statements for the year ended 28 February 2023 will be made
available to Shareholders shortly. Copies will be available for
download from www.proveninvestments.co.uk in due course.
- End
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