TIDMHYG TIDMSVCT
RNS Number : 3247X
Seneca Growth Capital VCT PLC
29 April 2019
For immediate release 29 April 2019
Seneca Growth Capital VCT Plc
(formerly Hygea vct plc)
Annual Report and Financial Statements
For the year ended 31 December 2018
and
Notice of Annual General Meeting
The Directors are pleased to announce the audited results of the
Company for the year ended 31 December 2018. A copy of the Annual
Report and Financial Statements will be made available to
shareholders shortly, and extracts are now set out below.
In addition, the Notice of Annual General Meeting ("AGM") is
attached at the end of the Report and Financial Statements. The AGM
will be held at the offices of Howard Kennedy LLP, No 1 London
Bridge, London SE1 9BG on Monday 10 June 2019 at 11.00 am. A copy
of both documents will be available on the Company's website:
www.senecavct.co.uk
Financial Headlines
Ordinary Shares
GBP2.9m Amount realised during the year from sale of Ordinary share
pool investment in Hallmarq Veterinary Imaging Limited
89.35p Ordinary share Net Asset Value ("NAV") plus cumulative dividends
paid at 31 December 2018
65.1p Ordinary share NAV at 31 December 2018
10.0p Interim capital dividend declared per Ordinary share during
year
B Shares
GBP4.0m Amount raised during the year from the issue of B shares
GBP0.5m Amount invested during the year into new investee company by
B share pool
99.1p B share NAV as at 31 December 2018 (no dividends paid or declared
on the B shares at that date)
Financial Summary
Year to Year to
31 December Year to 31 December
2018 31 December 2017
Ordinary share 2018 (Ordinary share
pool B share pool pool only)
----------------------------------- ---------------- -------------- -----------------
Net assets (GBP'000s) 5,282 3,999 5,180
Return on ordinary activities
after tax (GBP'000s) 102 (36) (367)
Earnings per share 1.3p (0.9p) (4.5p)
Net asset value per share 65.1p 99.1p 63.8p
Dividends paid since inception 24.25p - 24.25p
Total return (NAV plus cumulative
dividends paid) 89.35p 99.1p 88.05p
----------------------------------- ---------------- -------------- -----------------
.
Enquiries:
John Hustler, Seneca Growth Capital VCT Plc at
john.hustler@btconnect.com
Richard Manley, Seneca Growth Capital VCT Plc at
Richard.Manley@senecapartners.co.uk
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014
Please note: page references in the extracts below refer to the
page numbers in the Annual Report and Financial Statements
Chairman's Statement
I am pleased to present the 2018 Annual Report to
Shareholders.
Overview
2018 has been a successful year of change for the Company.
Following the initial allotment of B Shares under the Offer
launched on 9 May 2018, we are delighted that Seneca was appointed
as the Company's Investment Manager. Funds raised under the Offer
totalled GBP5.5 million and five investments have already been
made, details of which are set out in the Investment Manager's
report. The Offer is now closed and I would like to take this
opportunity of welcoming all our new B shareholders. Shareholders
may have seen the recent announcement, prior to the last allotment,
that the NAV at 31 March 2019 of the Ordinary shares is 51.1p per
share and of the B shares is 98.9p per share.
As intimated in my last Chairman's Statement accompanying the
2017 accounts, we anticipated a liquidity event and were delighted
to report that in December 2018 we sold the Company's Ordinary
share portfolio holding in Hallmarq Veterinary Imaging Limited
('Hallmarq'). This realised a profit over cost of GBP1,807,000 and
over carrying value of GBP894,000. As announced at the time of the
realisation, it was also possible the Company would receive a small
amount of further proceeds that had been deferred at completion and
I am pleased to confirm that a further GBP37,666 was received in
April 2019 and will be accounted for in the 2019 accounts. We are
delighted that this realisation has allowed us to pay an interim
dividend of 10p per Ordinary share and our further intentions
regarding dividends are detailed below.
Details of the Ordinary share pool's remaining portfolio
companies are included below and also in the Investment Manager's
Report. The Net Asset Value of the Ordinary shares at 31 December
2018 has now increased to 65.1p per share and the Total Return is
now 89.35p per share. As Ordinary shareholders will recall,
following the raising of the minimum subscription of B shares in
August 2018, the Ordinary share pool will suffer no running costs
until July 2021. In addition, the Company's bank loan, which was a
liability of the Ordinary share pool, has been repaid using
proceeds from the Hallmarq sale and the debenture released.
Details of the B share investment made during the year along
with details of the B share investments made since the year end are
included in the Investment Manager's Report. The Net Asset Value of
the B shares at 31 December 2018 was 99.1p and at that date no
dividends had been paid in relation to the B shares.
The Board is also encouraged that as of today's date, the
Investment Manager has already invested GBP2.75m of the funds
raised under the Offer into 5 companies. This is in line with their
expectations for deploying the capital raised under the Offer and
indicative of the healthy pipeline of growth capital investment
opportunities which Seneca maintains as a result of not only their
appointment as the Company's Investment Manager, but also as an
active growth capital investor through the EIS funds which they
manage. We expect to issue a prospectus for a further B share offer
shortly and look forward to the Investment Manager continuing to
build a portfolio of diverse growth capital investments which will
be attractive to the VCT investment community.
Results and Dividends
During the year, our revenue return on ordinary activities saw a
loss of 0.72p per Ordinary share and a loss of 0.45p per B share,
both principally as a result of the impact of the Company's running
costs. The comparative loss for 2017, which related solely to the
Ordinary shares, amounted to 1.5p per share. The Company's running
expenses are capped at 3% of the B share NAV until July 2021 and as
a result, an amount of GBP18,000 was due to the Company from the
Investment Manager at 31 December 2018 which will be deducted from
future payments falling due to Seneca.
The Capital return on the Ordinary share portfolio amounted to
2p per share driven by the profit generated on the disposal of our
holding in Hallmarq, details of which I referred to above, net of
changes to the valuations of some other Ordinary share pool
investments. There is no change in the value of the B share
portfolio since the first investment only completed on 31 December
2018.
During the year, the nominal value of the Ordinary shares was
reduced from 50p per share to 1p per share and the majority of the
balance standing to the credit of the Company's share premium
account arising on the issue of B shares was reduced. Both of these
transactions have given rise to a credit to the Special
Distributable Reserve which may be used for the payment of
dividends. Further details are included in note 14 on page 68. Your
original Ordinary share certificates remain valid.
As previously stated, it is the Board's intention to distribute
the majority of the proceeds generated by the Hallmarq exit to
Ordinary shareholders, after repayment of the bank loan and
retention of an appropriate proportion to cover small follow on
investments in the existing Ordinary share portfolio and any costs
attributable to the Ordinary share pool. In line with this
intention, an interim dividend of 10p per Ordinary share was
declared on 28 December 2018 and it is the current intention of the
Board to declare a further interim dividend of 18p per Ordinary
share in early May (following the filing of the Company's 2018
accounts at Companies House) for payment shortly thereafter.
In addition the Board was pleased to have declared an interim
dividend of 1.5p per B share on 6 March 2019, which was paid in
April 2019, reducing the NAV of a B share to 97.4p. The Board hopes
to be able to continue to declare periodic dividends on the B
shares as the B share investment portfolio develops.
Ordinary Share Investment Portfolio Review
The remaining Ordinary share portfolio has seen a reduction in
value during the period. As at 31 December 2018 the value stood at
GBP2.79m (having been at GBP3.535m at the end of the prior year
excluding Hallmarq) with a large proportion of the reduction in the
year resulting from the decline in the share price of AIM quoted
Scancell Holdings plc ("Scancell') and Omega Diagnostics plc
("Omega") during the year. However, in the Board's opinion, the
intrinsic values of both Scancell and Omega remain and we are
firmly of the view that the potential upside in these assets merits
their continued presence in the portfolio.
The value of the quoted and unquoted sections of the remaining
Ordinary share portfolio were roughly equal at 31 December 2018.
Scancell, valued at the bid price of 9p, represented 42% of the
Ordinary share portfolio as at 31 December 2018. However, by the 31
March 2019 the bid price had reduced to 5.5p and accordingly the
percentage of the entire Ordinary share portfolio represented by
Scancell has fallen to 30.6%. This was the primary reason for the
reduction in the NAV of an Ordinary share (in addition to the
dividend of 10p per share that was paid on 25 January 2019) as at
31 March 2019. Details of progress in the Ordinary share pool
unquoted portfolio are included in the Investment Manager's Report
but the only significant investment, based on the valuations as at
31 December 2018, is OR Productivity Limited which continues to
report success in its ambitions within the hospital operating
environment.
We have written down the value of Exosect Limited ('Exosect'),
which was placed into Administration on 18 October 2018, to nil and
reduced the value of Arecor Limited ('Arecor') following their
recent fund raising at a discounted price compared to our carrying
value. We continue to hold a full provision against our investment
in Immunobiology Limited due to share preferences held by other
investors. Whilst we are unlikely to recover any value from
Exosect, we would hope that the opportunities available to both
Arecor and Immunobiology have the potential to realise further
value for the Ordinary share portfolio.
The Board remains confident that, overall, the remaining
Ordinary share portfolio has the opportunity to realise a
significant gain for shareholders but we do not see any immediate
opportunities for further realisations.
B Share Investment Portfolio Review
We are delighted to report that the new B share portfolio has
now made 5 investments and invested GBP2.75 million. This is a very
positive start to the development of the B share investment
portfolio and demonstrates that Seneca has access to considerable
deal flow with exciting opportunities. Full details are included in
their Investment Manager's report
Annual General Meeting
The Company's AGM will be held at 11.00 a.m. on Monday 10 June
2019 at the offices of Howard Kennedy LLP, 1 London Bridge, London
SE1 9BG and we look forward to welcoming you to the meeting.
Following the appointment of Seneca as Investment Manager,
Charles Breese has indicated that he does not wish to seek
re-election to the Board at the AGM. However we are pleased that he
has agreed to continue as a consultant until the end of this year
in order to facilitate an orderly handover of the relationships
with the remaining companies in the Ordinary share portfolio.
Charles has been a member of the Company's Board since its
inception in 2001 and we thank him very much for his considerable
advice and input, especially the benefit of his investment
experience, during that time.
The Board has reviewed my performance and has asked me to
continue as Chairman. A resolution for my re-election is included
in the AGM Notice. A resolution for the re-election of Richard
Manley, who was appointed during the year as Seneca's
representative, is also included in the AGM Notice.
The Board is currently in the process of identifying a new
non-executive Director.
As the Company has now paid interim dividends in respect of both
the Ordinary shares and the B shares and is required to pay a
further Ordinary share dividend before 12 June 2019 in order to
satisfy VCT rules following disposal of the Hallmarq investment on
13 December 2018, no resolutions are included in respect of
dividends.
The Notice of the AGM includes resolutions empowering the
Directors to issue further B shares and Ordinary shares which will
primarily be used to facilitate the launch of another B share offer
for the 2019/2020 and 2020/2021 tax years referred to above which
requires authorisation for the Directors to be able to allot up to
a further 25,000,000 B Shares. Including these resolutions in the
AGM business will avoid the Company having to produce and send out
a separate circular.
A summary of the resolutions to be proposed by the Company at
its Annual General Meeting is included on page 32.
VCT Qualifying Status
Philip Hare & Associates provides the Board with advice on
the ongoing compliance with HMRC rules and regulations concerning
VCTs; they have confirmed that we remain within all the appropriate
VCT qualifying regulations as at 31 December 2018.
Fund Administration
Our administration remains unchanged at present but, as the B
share portfolio increases, much of this will migrate to Seneca's
Haydock offices, to where we have already moved the Company's
Registered Office. Neville Registrars ('Nevilles') will continue to
maintain the Register. Our website has now changed to
www.senecavct.co.uk which includes all information in respect of
both share classes including Annual Reports and notices of
meetings. We would remind shareholders who have not opted for
electronic communications that this is more efficient and
ecologically friendly than receiving paper copies by post. If you
wish to take advantage of this facility, please contact Nevilles
whose details are on page 75.
Resignation of Auditor
As already announced, James Cowper Kreston ("JCK"), the
Company's previous auditor, have decided to withdraw from auditing
Public Interest Entities (which includes VCTs) for the time being
due to the increasing regulatory landscape and associated costs. As
a result JCK have resigned from their role as auditor to the
Company. The Company carried out a tender process for the
appointment of a new auditor, and the Board, on the recommendation
of the Audit Committee, appointed UHY Hacker Young LLP ("UHY") to
fill the casual vacancy that had arisen. UHY have audited the
Company's annual results for the year ending 31 December 2018, and
shareholders will be asked to reappoint them at the AGM for the
audit of the accounts for the year ending 31 December 201
Future Prospects
As I have previously indicated, we regard the prospects for the
remaining Ordinary share portfolio as good but once again I need to
seek shareholders' patience following the significant distributions
returned (and intended to be returned) to them in 2019 whilst we
await further realisation opportunities for the remaining
investments in the Ordinary share portfolio.
We are pleased with the support we have received from existing
and new shareholders in respect of the B share fund raising and
will be issuing our new prospectus in the near future. Seneca is
confident that there remains significant demand from potential
investee companies for the type of growth capital that the Company
can provide from its B share pool. As such, the Board remains
confident of continuing to increase the B share fund in the 2019/20
tax year and foresees being able to invest these funds profitably
well within the time limits imposed on VCTs.
Your Board continues to view the future of our Company with
confidence.
John Hustler
Chairman
26 April 2019
Investment Manager's Report
Seneca Partners were delighted to be formally appointed as the
Company's Investment Manager on 23 August 2018 following the
successful first allotment of shares under the B share offer, which
was launched on 9 May 2018 to raise in aggregate up to GBP10m.
We are active growth capital investors and since 2012 have
invested in excess of GBP50m of growth capital into more than 40
investee companies.
As many of the Company's B shareholders will know, Seneca are
head-quartered in the North West of England and as a result of our
position as active growth capital investors across the UK we
maintain a strong pipeline of investment opportunities. From this
pipeline of potential investments we have moved quickly to make our
first investments from the Company's B share pool and started the
process of building a diverse portfolio of growth capital
investments which we hope will provide attractive returns for the
benefit of the Company's B shareholders.
We are happy to report that a total of GBP5.5m was raised under
the new B share offer in our first year of fundraising of which
GBP0.5m had been invested into one investee company as at 31
December 2018.
This first investment was made into the fast growing e-commerce
business, SilkFred Limited, which specialises in independent
ladies' fashion brands. Seneca first invested in this business via
EIS funds which we manage in March 2018 and since that time we have
been impressed with the progress it has made and rate with which
the business is growing. The December 2018 investment made from the
Company's B share pool was part of a larger investment round
totalling c.GBP4m and will provide the working capital the business
requires to support its continued growth.
Since this first B share pool investment on 31 December 2018 we
have also now completed a further 4 investments from the B share
pool deploying an additional GBP2.25m and in all of these instances
the B share pool has co-invested alongside EIS funds also managed
by Seneca. This is a key feature of the B share pool's early
investments and brings an ability for the B share pool to
participate in larger deals into more established companies than
would be possible at this point if the Company's B share pool were
to invest on a standalone basis.
Our current investment portfolio is summarised in the table
below with additional detail in relation to each investee company
included thereafter.
We are very happy with the diverse nature of these initial 5 B
share pool investee companies and as it is our intention that the B
share portfolio has exposure to both private and AIM quoted
companies we are also particularly pleased that we have been able
to include an AIM quoted company in these initial investments.
It is our intention to launch another prospectus for a further B
share offer in the 2019/2020 tax year in the near future and to
continue to raise funds to support the ongoing development of the
existing portfolio and to fund new investments.
Shareholders will recall that whilst Seneca Partners are the
Company's Investment Manager, responsibility for the management of
the Ordinary share pool investments remain with those members of
the Board who were serving at the point of Seneca's appointment on
23 August 2018. During the year to 31 December 2018 a profit over
original cost of GBP1,807k was realised on the sale of the Ordinary
share portfolio's holding in Hallmarq. A further GBP19k profit over
cost was realised when 200,000 Scancell shares were sold for
liquidity management purposes. During the year former Ordinary
share pool investee company Glide was dissolved and the carrying
value of the Ordinary share pool's investment in Exosect was
written down to nil following the company entering administration
in October 2018.
Further details in relation to both Ordinary share pool and B
share pool investee companies are included below.
Investment Portfolio - Ordinary shares
Carrying Movement
value at in the year
Equity Investment Unrealised 31 December to
held at cost profit/(loss) 2018 31 December
Unquoted Investments % GBP'000 GBP'000 GBP'000 2018 GBP'000
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
OR Productivity plc 10.3 765 (101) 664 -
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Fuel 3D Technologies
Limited <1.0 299 (23) 276 -
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Arecor Limited 1.3 142 63 205 (47)
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Insense Limited 4.6 509 (389) 120 -
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Microarray Limited 1.8 132 (65) 67 -
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
ImmunoBiology Limited 2.0 868 (868) - -
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Exosect Limited 1.4 270 (270) - (120)
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Total unquoted investments 2,985 (1,653) 1,332 (167)
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Movement
Carrying in the year
Investment Unrealised value at to
Shares at cost profit/(loss) 31 December 31 December
Quoted Investments held GBP'000 GBP'000 2018 GBP'000 2018 GBP'000
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Scancell plc 13,049,730 789 385 1,174 (482)
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Omega Diagnostics plc 2,293,868 328 (41) 287 (92)
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Total quoted investments 1,117 344 1,461 (574)
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Total investments 4,102 (1,309) 2,793 (741)
--------------------------- ----------- ------------------ --------------- -------------- -----------------------
Investment Portfolio - B shares
Carrying Movement
value at in the year
Equity Investment Unrealised 31 December to
held at cost profit/(loss) 2018 31 December
Unquoted Investments % GBP'000 GBP'000 GBP'000 2018 GBP'000
---------------------------- -------- ----------- --------------- ------------- --------------
Silkfred Limited <1.0 500 - 500 -
---------------------------- -------- ----------- --------------- ------------- --------------
Total unquoted investments 500 - 500 -
-------------------------------------- ----------- --------------- ------------- --------------
Ordinary Share Pool - Investment Portfolio - Unquoted
Investments
1. OR Productivity Limited
Initial investment March 2011 At the end of 2011, Freehand 2010 (a Seneca Growth
date: Capital Ordinary share investee) was acquired
by OR Productivity plc (ORP) in exchange for
ORP shares.
Freehand 2010 owns the intellectual property
to technology incorporated in a product, FreeHand,
for robotically controlling the laparoscope (part
of the camera system) used in the growing sector
that is keyhole surgery. The business model is
built upon free placement of the system with
recurring revenue then being generated from the
subsequent sale of a consumable per operation.
Progress made by the company in 2018 includes:
* The publishing by Salisbury Hospital in May 2018 of
information comparing the outcomes from surgery using
FreeHand held cameras with the results of surgery
done with a human held camera. Of particular note was
a 22% average reduction in operating time of 35
minutes and a 25% average reduction in post-operative
stay from 2 days to 1.5 days when using FreeHand held
cameras which are significant reductions,
particularly at a time when the NHS is experiencing
staff and bed shortages;
* A strategic decision to focus sales efforts on
accounts capable of undertaking c.1,000 operations
p.a. with one such account already having been
secured; and
* Progress being made with the company's Development
Management Services offering with the completion of
the first stage of a development project for a
medical device delivering laser ablation of tumors.
The project saw the development of a robotic
assistant (based on FreeHand technology) taking
instructions from both MRI and CT imaging modalities
and other such projects are in the pipeline.
Cost: GBP765,000
----------------
Valuation: GBP664,000
----------------
Equity held: 10.3%
----------------
Last statutory 31 March
accounts: 2018
----------------
Turnover: GBP163,000
----------------
Loss before GBP762,000
tax:
----------------
Net assets: GBP(1,248,000)
----------------
Valuation method: Price of
last fundraise
----------------
2. Fuel 3D Technologies Limited
Initial investment March 2010 In 2014 Fuel 3D was formed to acquire the
date: computer 3D imaging IP of Seneca Growth Capital
Ordinary share investee company, Eykona. The
initial application for this IP targeted by
Eykona was measuring the volume of chronic
wounds, however this has since developed and
the current application focus is on a) measuring
tumours in animals used in drug development
via a product called BioVolume and b) enabling
the manufacture of products to fit a particular
individual eg masks used to treat certain
medical conditions.
BioVolume is Fuel 3D's lead product and improves
measurement accuracy, inter-operator consistency,
animal welfare, cost efficiencies, compliance
and the success of pre-clinical oncology research.
Progress made by the company in 2018 includes:
* Continued development of BioVolume by combining 3D
imaging with thermal imaging and paid for trials are
now being undertaken with a number of pharma
companies; and
* Using its technology in conjunction with 3D printing
to make products to fit a particular individual and a
development project is now underway with a third
party to facilitate the manufacture of masks for a
medical application.
---------------
Cost: GBP299,000
------------------- ---------------
Valuation: GBP276,000
------------------- ---------------
Equity held: < 1%
------------------- ---------------
Last statutory 31 December
accounts: 2017
------------------- ---------------
Turnover: GBP665,000
------------------- ---------------
Loss before GBP9.6 million
tax:
------------------- ---------------
Net assets: GBP4.7 million
------------------- ---------------
Valuation method: Price of last
fundraise
------------------- ---------------
3. Arecor Limited
Initial investment January 2008 Arecor was a spin-out from Insense (a Seneca
date: Growth Capital Ordinary share investee company
- see below) to commercialise technology developed
by Insense for enabling biologics to maintain
their integrity without the need for refrigeration
- this both reduces cost and also helps supply
chain logistics in developing countries where
temperature monitored cold storage facilities
are in short supply.
Progress made by the company in 2018 includes:
* In their financial year to 31 May 2018 they invested
GBP2.1m in R&D associated with their own product
development; and
* The company also raised GBP6.0m of equity in
September 2018 to fund the continued development of
Arecor's own products for diabetes care and during
2018, the company also filed a Clinical Trial
Application to conduct a Phase I study in Type 1
diabetes patients of Arecor's ultra-rapid acting
insulin product.
Cost: GBP142,000
--------------
Valuation: GBP205,000
--------------
Equity held: 1.3%
--------------
Last statutory 31 May 2018
accounts:
--------------
Turnover: GBP1,272,000
--------------
Loss before GBP1,176,000
tax:
--------------
Net assets: GBP679,000
--------------
Valuation method: Price of last
fundraise
--------------
4. Insense Limited
Initial investment July 2003 Insense is an innovative, biotechnology company
date: and was spun-out from Unilever's R&D laboratory
in 2001.
It has since had two successful spin-outs,
namely Arecor (see above) and Microarray (see
below) and current Insense development activity
is concentrated on dermatology products for
both professional and consumer applications.
Progress made by the company in 2018 includes:
* work continuing in conjunction with a leading
microbiologist to prepare its leading dermatology
product (fungal nail treatment) for efficacy and
usability tests with the aim of finalising product
specification for first-in-man trials.
Cost: GBP509,000
----------------
Valuation: GBP120,000
----------------
Equity held: 4.6%
----------------
Last statutory 31 December
accounts: 2017
----------------
Turnover: GBP18,000
----------------
Loss before tax: GBP255,000
----------------
Net assets: GBP322,000
----------------
Valuation method: Price of
last fundraise
----------------
5. Microarray Limited
Initial investment January 2011 Microarray Ltd is a UK-based specialist wound
date: healing company. Founded in 2000, Microarray
was merged with Archimed,a spin-out from Insense
(see above) the company is now privately owned.
The company has access to wide ranging expertise
in the fields of wound dressing product development,
marketing and sales; electrochemistry and diagnostic
sensor technologies; biochemistry, oxygen and
iodine chemistry; enzymology, immunology and
inflammation. Current research and development
activities are concentrated on innovative,
electrochemically-active wound dressings for
the treatment of chronic wounds and on wound
care diagnostics.
Microarray owns and continues to develop new
intellectual property in its specialist fields.
It works independently and with expert academic
and industrial partners.
Progress made by the company in 2018 includes:
* wound sample material being obtained from a Wounds
Innovation Centre, where the company is working with
a world leading wound clinician; and
* interim data from a sizeable trial ongoing with data
due in 2019, and the design expected to be frozen in
Q3 2019.
Cost: GBP132,000
-----------------
Valuation: GBP67,000
-----------------
Equity held: 1.8%
-----------------
Last statutory 31 December
accounts: 2017
-----------------
Turnover: GBP58,000
-----------------
Loss before GBP1.1 million
tax:
-----------------
Net assets: GBP(2.3 million)
-----------------
Valuation method: Directors'
valuation
-----------------
6. ImmunoBiology Limited
Initial investment November ImmunoBiology is a biotechnology company that
date: 2005 is focused on developing treatments for illnesses
such as meningitis, tuberculosis, influenza
and hepatitis C. The company's technology is
based on the discovery that a group of proteins
known as 'heat shock proteins' has a pivotal
role in controlling the normal immune response
to infections.
The focus is currently on a vaccine for Pneumococcal
Disease, for which the challenge is that there
are >90 strains in circulation but present
treatments address only a small proportion.
In 2016 a first in human study demonstrated
safety in adults.
Progress made by the company in 2018 includes:
* Preparation for a significant fundraise to finance a
PnuBioVax Phase II clinical trial, with the objective
of a successful outcome leading to a shareholder exit
and in early 2019 also concluded a regional licensing
agreement.
Cost: GBP868,000
-------------
Valuation: GBPnil
-------------
Equity held: 2.0%
-------------
Last statutory 31 May 2018
accounts:
-------------
Turnover: GBPnil
-------------
Loss before GBP665,000
tax:
-------------
Net assets: GBP532,000
-------------
Valuation method: Directors'
valuation
-------------
7. Exosect Limited
Initial investment January 2010 Exosect was spun-out of Southampton University
date: in 2001 to commercialise innovative pest control
technology and reduce the use of insecticides.
Until 2015, it sought to develop its own pesticide
products. However, following a change of CEO,
the strategy was changed whereby the company
regarded its technology as a platform for
helping pesticide manufacturers target their
products more accurately and thereby achieve
environmental benefits (through enabling a
50% reduction in active ingredients required
as currently more than 50% of applied agrochemicals
do not reach their intended target) with resulting
cost savings.
Unfortunately this change in strategy ultimately
proved to be unsuccessful and administrators
were appointed to the company on 18 October
2018, with no return being anticipated to
shareholders.
Cost: GBP270,000
---------------
Valuation: GBPnil
---------------
Equity held: 1.4%
---------------
Last statutory 31 December
accounts: 2017
---------------
Turnover: GBP83,000
---------------
Loss before tax: GBP2.4 million
---------------
Net assets: GBP(370,000)
---------------
Valuation method: Investment
fully written
down
---------------
Ordinary Share Pool - Investment Portfolio - AIM Quoted
Investments
1. Scancell plc
Initial investment December Scancell is an AIM listed biotechnology company
date: 2003 that is developing a pipeline of therapeutic
vaccines to target various types of cancer, with
the first target being melanoma.
The Immunobody platform technology, in effect,
educates the immune system how to respond - this
means that the technology can also be licensed
to pharmaceutical companies to assist the development
of their own therapeutic vaccines, which is an
area of emerging importance for which a number
of big pharmas do not have in-house technology.
In addition, in 2012 a second platform technology,
Moditope, was announced and is based on exploiting
the normal immune response to stressed cells,
and is complementary to the Immunobody platform.
Progress made by the company in 2018 includes:
* The announcement of a Clinical Development
Partnership with Cancer Research UK (CRUK) to develop
SCIB2, for the treatment of patients with solid
tumours, including non-small cell lung cancer. CRUK
will fund and sponsor a UK-based Phase I/II clinical
trial of SCIB2 in combination with a checkpoint
inhibitor;
* The announcement of a collaboration with BioNTech for
the Moditope product being developed for the
treatment of lung, triple-negative breast cancer,
ovarian and endometrial cancers. BioNTech is one of
Europe's new immuno-oncology power-houses;
* The appointment of a new CEO in January 2018. He was
VP Business Development at Arana when it acquired
Scancell's monoclonal antibody business in 2006; and
* The initiation of preparations for a) a SCIB1-
checkpoint inhibitor Phase II US combination study in
late stage melanoma (the study is expected to start
in H2 2019), and b) a First-in-Human study with
Modi-1 in patients with triple negative breast cancer,
ovarian cancer and sarcoma.
Cost: GBP789,000
----------------
Valuation: GBP1,174,000
----------------
Equity held: 3.4%
----------------
Last statutory 30 April
accounts: 2018
----------------
Turnover: GBPnil
----------------
Loss before GBP4.9 million
tax:
----------------
Net assets: GBP13.9 million
----------------
Valuation method: Bid price
of 9.0p per
share
----------------
2. Omega Diagnostics plc
Initial investment August 2007 Omega Diagnostics plc ("Omega") is quoted on
date: AIM and specialises in Food Intolerance Testing,
Allergy Testing and HIV Point-of-Care (POC)
Testing.
Progress made by the company in 2018:
* In December 2017 the founding CEO stepped down and
was replaced by the COO who had joined in August
2015, having previously been Managing Director of
Axis-Shield Diagnostics. Following a strategic review
by the new CEO, a restructuring took place in order
to position the group with a profitable core business
with attractive organic growth potential (Food
Intolerance Testing), and two products under
development with significant growth potential
(Allergy Testing, and HIV POC Testing). The
restructuring involved the closure of the
manufacturing site in India and the manual allergy
testing business, eliminating EBITDA losses of
c.GBP800,000 in 2017/18 in addition to the sale of
the low growth/low margin infectious diseases
business; and
* In addition to the completion of the restructuring,
the first sales have been achieved in relation to the
automated allergy tests project and the first sales
have also been achieved with regard to the HIV POC
Testing CD4 350 test (on which development started in
2012 and CE marking was achieved in 2017). CE marking
of the second test, CD4 200 (which is anticipated to
have the greater market potential) was achieved in
March 2019.
Cost: GBP328,000
---------------------
Valuation: GBP287,000
---------------------
Equity held: 1.8%
---------------------
Last statutory 31 March 2018
accounts:
---------------------
Turnover: GBP13.6 million
---------------------
Loss before GBP6.9 million
tax: (incl GBP5.9
million exceptional
charge)
---------------------
Net assets: GBP17.1 million
---------------------
Valuation method: Bid price
of 12.5p per
share
---------------------
B Share Pool - Investment Portfolio - Unquoted Investments as at
31 December 2018
1. SilkFred Limited
Initial investment December Silkfred is an online marketplace for independent
date: 2018 ladies' fashion brands. The business was founded
in 2011 with the aim of creating an efficient
marketplace for emerging fashion designers to
bring products to market and establish their
brand in the sector. The business now works
with c.600 independent brands, selling to over
500k customers.
Silkfred acts as a central marketing and sales
platform for these brands, charging commission
in exchange for these services, and as a result
the business itself takes minimal inventory
/ working capital risk on new brands, lines
or products.
The business model revolves around a market
leading and scalable customer service platform,
and as such Silkfred are continually investing
in core infrastructure and constantly seeking
innovative methods to enhance the customer experience.
Cost: GBP500,000
---------------
Valuation: GBP500,000
---------------
Equity held: <1%
---------------
Last statutory 31 December
accounts: 2017
---------------
Turnover: Not disclosed
---------------
Loss before Not disclosed
tax:
---------------
Net assets: GBP3.5 million
---------------
Valuation method: At cost
---------------
B Share Pool - Investment Portfolio - Additional Unquoted
Investments as at 26 April 2019
1. Fabacus Holdings Limited
Initial investment February Fabacus is an independent software company that
date: 2019 has developed a Complete Product Lifecycle Solution:
Xelacore, aimed at bringing transparency to
supply chain networks, with an initial focus
on resolving the interaction and information
flow between global licensors and their licensees.
Currently, there is a fundamentally flawed data
capture process between licensors and licensees;
and a disconnection from the framework of retail
standards that have underpinned and continue
to enable the retail value chain. This has resulted
in an inability to correctly address known shortcomings
in respect to data management and hinder the
needed digital transformation of licensors in
the digitally evolving retail landscape.
Fabacus's solution, Xelacore, is a modular,
Software as a Service ("SaaS") solution with
an intuitive interface and proprietary data
aggregation and management engine that allows
all stakeholders to operate on a single unified
and collaborative platform. It bridges the gaps
in an inefficient process within the current
retail ecosystem by creating authenticated,
enriched universal records that unlock opportunities,
reduce risk and drive performance for both licensors
and licensees.
Cost: GBP500,000
---------------
Equity held: 2.2%
---------------
Last statutory 31 December
accounts: 2018
---------------
Turnover: Not disclosed
---------------
Loss before Not disclosed
tax:
---------------
Net assets: GBP4.6 million
---------------
2. Old St Labs Limited
Initial investment March 2019 Old St Labs is a provider of cloud based, supplier
date: collaboration tools for large, blue chip customers,
enabling them to manage key supplier relationships
and strategic project work. The core product,
Vizibl, seeks to make supplier collaboration
much more straight forward, with key focus on
compliance, savings / efficiency and driving
growth across the business.
Vizibl is the only SaaS workspace that supports
collaborative supplier relationships, bringing
all points of contact together in one place,
providing visibility across the company and
eliminating duplication of efforts. Vizibl's
real-time reporting speeds up decision making,
drawing on and sharing the expertise of the
community in the process. The offering taps
into a growing trend in supplier collaboration,
having moved on from the initial focus on compliance,
to an increased emphasis on savings / efficiency,
and recent developments highlighting the benefits
in terms of wider growth strategy for large
customers.
Vizibl provides the infrastructure, governance
and reporting capabilities to optimise present
supplier performance and acts as a springboard
for those collaborative supplier relationships.
The product is CRM / ERP agnostic, working alongside
all major software providers to ensure the collaboration
software is insightful and informative.
Cost: GBP500,000
--------------
Equity held: 3.44%
--------------
Last statutory 31 March
accounts: 2018
--------------
Turnover: Not disclosed
--------------
Loss before Not disclosed
tax:
--------------
Net assets: (GBP0.7)
million
--------------
3. Qudini Limited
Initial investment April 2019 Founded in 2012, Qudini is a B2B software company
date: that provides customer experience SaaS solutions
to organisations in retail, hospitality, the
public sector and healthcare.
Qudini provides a software solution for appointment
bookings, queue management, event management
and task management - enabling businesses to
improve shop floor operations by managing staff
activity, breaks and performance, and by assigning
tasks at store or head office level.
Qudini is aiming to revolutionise digital queue
and appointment management. It achieves this
through deployment of its data-centric, cloud-based
(Amazon Web Services), cross-platform service,
which improves a business' ability to manage
the flow of customers awaiting service, using
algorithms to provide accurate, live data, such
as estimated wait times. Wait times are relayed
to the customer typically via an SMS/text sent
from the Qudini platform. Through integration
with various software platforms and compatible
with wide variety of hardware, Qudini enables
detailed analytics focused on customer trends,
and provides a unique insight into areas such
as customer footfall, peak demand times, and
wait times.
Cost: GBP500,000
---------------
Equity held: 2.22%
---------------
Last statutory 31 December
accounts: 2018
---------------
Turnover: Not disclosed
---------------
Loss before Not disclosed
tax:
---------------
Net assets: GBP1.7 million
---------------
B Share Pool - Investment Portfolio - Additional Quoted
Investments as at 26 April 2019
1. SkinBioTherapeutics Plc
Initial investment February SkinBioTherapeutics is a life science company
date: 2019 focused on skin health. The Company's proprietary
platform technology, SkinBiotix(R), is based
upon discoveries made by CEO Dr. Cath O'Neill
and Professor Andrew McBain.
SkinBioTherapeutics' platform applies research
discoveries made on the activities of lysates
derived from probiotic bacteria when applied
to the skin. The Company has shown that the
SkinBiotix(R) platform can improve the barrier
effect of skin models, protect skin models from
infection and repair skin models. Proof of principle
studies have shown that the SkinBiotix(R) platform
has beneficial attributes applicable to each
of these areas.
The aim of the Company is to develop its SkinBiotix(R)
technology into commercially successful products
supported by a strong scientific evidence base.
SkinBioTherapeutics' commercial strategy is
to engage health and wellbeing and/or pharmaceutical
companies in early dialogue to build up relationships
and maintain communication on technical progress
until one or more commercial deals can be secured.
Cost: GBP750,000
---------------
Equity held: 3.7%
- 4,677,107
shares
---------------
Last statutory 30 June 2018
accounts:
---------------
Turnover: Nil
---------------
Loss before GBP0.9 million
tax:
---------------
Net assets: GBP3.4 million
---------------
Directors' Report
The Directors present their Report and the audited Financial
Statements for the year ended 31 December 2018.
The Directors consider that the Annual Report and Financial
Statements, taken as a whole are fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company's performance, business model and strategy.
Review of Business Activities
The Directors are required by s417 of the Companies Act 2006 to
include a Business Review to shareholders. This is set out on page
25 and forms part of the Strategic Report. The Chairman's Statement
on page 10 to 13, and the Investment Manager's Report on pages 14
to 24 also form part of the Strategic Report.
The purpose of this review is to provide shareholders with a
snapshot summary setting out the business objectives of the
Company, the Board's strategy to achieve those objectives, the
risks faced, the regulatory environment and the key performance
indicators used to measure performance.
Directors' Shareholdings - Ordinary shares
The Directors of the Company during the period and their
interests (in respect of which transactions are notifiable under
Disclosure and Transparency Rule 3.1.2R) in the issued Ordinary
shares of 1p (2017: nominal value 50p) are shown in the table
below:
31 December 31 December
2018 2017
Number of Shares Number of Shares
---------------- ----------------- -----------------
John Hustler 190,000 190,000
Charles Breese 105,000 105,000
Richard Roth 209,612 209,612
Richard Manley - -
---------------- ----------------- -----------------
All of the Directors' shares were held beneficially. There have
been no changes in the Directors' Ordinary share interests between
31 December 2018 and the date of this report.
Directors' Shareholdings - B Shares
The Directors of the Company during the period and their
interests (in respect of which transactions are notifiable under
Disclosure and Transparency Rule 3.1.2R) in the issued B shares of
1p are shown in the table below:
31 December 31 December
2018 2017
Number of Shares Number of Shares
--------------- ----------------- -----------------
John Hustler - -
Charles Breese - -
Richard Roth 15,000 -
Richard Manley 24,750 -
--------------- ----------------- -----------------
All of the Directors' shares were held beneficially. There have
been no changes in the Directors' B share interests between 31
December 2018 and the date of this report.
Directors' and Officers' Liability Insurance
The Company has maintained directors' and officers' liability
insurance cover on behalf of the Directors and Company
Secretary.
Whistleblowing
The Board has approved a Whistleblowing Policy for the Company,
its directors and any employees, consultants and contractors, to
allow them to raise concerns, in confidence, in relation to
possible improprieties in matters of financial reporting and other
matters.
Bribery Act
The Board has approved an Anti-Bribery Policy to ensure full
compliance with the Bribery Act 2010 and to ensure that the highest
standards of professional and ethical conduct are maintained.
Management
On 23 August 2018 Seneca was appointed as the Company's
Investment Manager.
Whilst Seneca has been appointed as the Company's Investment
Manager and will be responsible for the management of the Company's
B share pool investments, responsibility for the management of the
Ordinary share pool investments has been delegated to those members
of the board of directors who served immediately prior to 23 August
2018.
Share Issues
During the year, the Company did not issue any Ordinary shares
(2017: nil). During the year, the Company issued 4,036,370 B shares
raising GBP4.0m (2017: nil). Subsequently an additional 1,351,294 B
shares have been issued under the Offer.
Share Capital
The Company's issued Ordinary share capital as at 31 December
2018 was 8,115,376 Ordinary shares of 1p each (31 December 2017:
8,115,376 of 50p each) and 4,036,370 B shares of 1p each (31
December 2017: nil).
Directors
Biographical details of the Directors are shown on page 29.
In accordance with the Articles, John Hustler who has been a
director for more than nine years will retire and offer himself for
re-election at the forthcoming AGM. Richard Manley has been
appointed since the last AGM and will therefore retire and offer
himself for re-election at the forthcoming AGM.
The Board is satisfied that, following individual performance
appraisals, both the Chairman and Richard Manley, who are retiring,
continue to be effective and demonstrate commitment to their roles
and therefore offer themselves for re-election with the support of
the Board.
Following the appointment of Seneca as Investment Manager,
Charles Breese has indicated that he does not wish to seek
re-election to the Board at the AGM. However we are pleased that he
has agreed to continue as a consultant until the end of this year
in order to facilitate an orderly handover of the relationships
with the remaining companies in the Ordinary share portfolio.
The Board is cognisant of shareholders' preference for Directors
not to sit on the boards of too many listed companies
("over-boarding"). As part of their assessment as to his
suitability, the Directors considered Richard Roth's other
directorships at the time of his appointment, given that he also
sits on the boards of the four Oxford Technology ("OT") VCTs. The
Directors noted that those four funds have a common board, and
there is an element of overlap in the workload across the four
entities, such that the time required is less than would be
necessary for four totally separate and listed companies. They also
note that Seneca Growth Capital has a number of shared portfolio
companies with the OT VCTs. The Board was satisfied that Richard
Roth had the time to focus on the requirements of the Company, and
this has proven to be the case.
International Financial Reporting Standards
As the Company is not part of a group it is not mandatory for it
to comply with International Financial Reporting Standards. The
Company does not anticipate that it will voluntarily adopt
International Financial Reporting Standards. The Company has
adopted Financial Reporting Standard 102 - The Financial Reporting
Standard Applicable in the United Kingdom and Republic of
Ireland.
Environmental Policy
The Company always makes a full effort to conduct its business
in a manner that is responsible to the environment.
Going Concern
The Company's business activities and the factors likely to
affect its future performance and position are set out in the
Chairman's Statement and Investment Manager's Report on pages 10 to
13 and pages 14 to 24. Further details on the management of
financial risk may be found in note 16 to the Financial
Statements.
The Board receives regular reports from the Administration
Manager and the Directors believe that, as no material
uncertainties leading to significant doubt about going concern have
been identified, it is appropriate to continue to adopt the going
concern basis in preparing the Financial Statements.
As at 31 December 2018 the Company had more than GBP6m of cash
and in addition, the other assets of the Company consist mainly of
securities, some of which are readily realisable. As such, the
Company has adequate financial resources to continue in operational
existence for the foreseeable future.
Substantial Shareholdings
At 31 December 2018, two disclosures of major shareholdings had
been made to the Company under Disclosure and Transparency Rule 5
(Vote Holder and Issuer Notification Rules).
-- James Leek has disclosed a shareholding of 4.57% (555,340 shares).
-- David Blundell has disclosed a shareholding of 3.04% (369,900 shares).
Annual General Meeting
The Notice convening the 2019 Annual General Meeting ("AGM") of
the Company is set out at the end of this document (and a form of
proxy in relation to the meeting is enclosed separately). Part of
the business of the AGM will be to consider resolutions in relation
to the following matters:
Resolution 6 will seek the re-appointment of UHY Hacker Young
LLP as Independent Auditor to the Company.
Resolution 8 will authorise the Directors to allot further B
Ordinary shares and Ordinary shares. This would enable the
Directors until the next AGM to allot up to 31,000,000 B Ordinary
shares in connection with any offer(s) for subscription (and any
subsequent top up offer of B Ordinary shares) and up to 405,800
Ordinary shares (for any miscellaneous offers of such shares),
representing approximately 575% of the Company's issued B Ordinary
share capital and approximately 5% of its issued Ordinary share
capital as at 25 April 2019.
Resolution 9 will, under sections 570 of the Act, disapply
pre-emption rights in respect of any allotment of the B Ordinary
shares and/or Ordinary shares authorised under Resolution 8.
Resolution 10 will authorise the Board, pursuant to the Act, to
make one or more market purchases of up to 14.99% of the issued B
Ordinary share capital of the Company from time to time. The price
paid must not be less than 1p per B Ordinary share, nor more than
5% above the average middle market price of a B Ordinary share for
the preceding five business days. Any B Ordinary shares bought back
under this authority may be cancelled by the Board.
Resolution 11 will authorise the cancellation of the share
premium account of the Company. This share premium account will
arise on the issue of further B Ordinary Shares pursuant to any
offer for subscription. All of the share premium account at the
date of the order made by the Court confirming such cancellation
will be cancelled, and will be used to establish a new reserve
which may be treated as distributable and which can be used, among
other things, to fund the Company's buy-back of shares and the
payment of future dividends. In accordance with the VCT Rules, such
distributable reserves cannot, however, be utilised for such
purposes until after three years from the end of the accounting
period in which the relevant shares were issued.
The Directors intend to use the authorities in Resolutions 8 and
9 for the purposes of a further offer for subscription of B
Ordinary Shares, though may also subsequently utilise the
authorities for further offer(s) for subscription or issue of B
Ordinary Shares. The Directors have no current intention to utilise
the authority in relation to the Ordinary Shares.
By Order of the Board
Craig Hunter
Company Secretary
26 April 2019
Income Statement
Combined Combined
Year to 31 December 2018 Year to 31 December 2017
----------------------------------------------- -----
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Gain on disposal of fixed asset investments 10 - 903 903 - 19 19
Loss on valuation of fixed asset investments 10 - (716) (716) - (359) (359)
Income 2 - - - - - -
Performance fee 6 - (26) (26) - 91 91
Investment management fee net of cost cap 3 36 (18) 18 - - -
Other expenses 4 (113) - (113) (118) - (118)
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Return on ordinary activities before tax (77) 143 66 (118) (249) (367)
Taxation on return on ordinary activities 7 - - - - - -
Return on ordinary activities after tax (77) 143 66 (118) (249) (367)
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Return on ordinary activities after tax
attributable to:
Owners of the fund (77) 143 66 (118) (249) (367)
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
There was no other Comprehensive Income recognised during the
year
-- The 'Total' column of the income statement and statement of
comprehensive income is the profit and loss account of the Company;
the supplementary revenue return and capital return columns have
been prepared under guidance published by the Association of
Investment Companies.
-- All revenue and capital items in the above statement derive from continuing operations.
-- The Company has only one class of business and derives its
income from investments made in shares and securities and from bank
and money market funds.
The Company has no recognised gains or losses other than the
results for the year as set out above.
The accompanying notes are an integral part of the Financial
Statements.
Ordinary Share Income Statement (non-statutory analysis)
Ordinary shares Ordinary shares
Year to 31 December 2018 Year to 31 December 2017
----------------------------------------------- -----
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Gain on disposal of fixed asset investments 10 - 903 903 - 19 19
Loss on valuation of fixed asset investments 10 - (716) (716) - (359) (359)
Income 2 - - - - - -
Performance fee 6 - (26) (26) - 91 91
Investment management fee 3 - - - - - -
Other expenses 4 (59) - (59) (118) - (118)
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Return on ordinary activities before tax (59) 161 102 (118) (249) (367)
Taxation on return on ordinary activities 7 - - - - - -
Return on ordinary activities after tax (59) 161 102 (118) (249) (367)
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Return on ordinary activities after tax
attributable to:
Owners of the fund (59) 161 102 (118) (249) (367)
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Earnings per share - basic and diluted 8 (0.7)p 2.0p 1.3p (1.5)p (3.0)p (4.5p)
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
B Share Income Statement (non-statutory analysis)
B shares B shares
Year to 31 December 2018 Year to 31 December 2017
----------------------------------------------- -----
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Gain on disposal of fixed asset investments 10 - - - - - -
Loss on valuation of fixed asset investments 10 - - - - - -
Income 2 - - - - - -
Performance fee 6 - - - - - -
Investment management fee net of cost cap 3 36 (18) 18 - - -
Other expenses 4 (54) - (54) - - -
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Return on ordinary activities before tax (18) (18) (36) - - -
Taxation on return on ordinary activities 7 - - - - - -
Return on ordinary activities after tax (18) (18) (36) - - -
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Return on ordinary activities after tax
attributable to:
Owners of the fund (18) (18) (36) - - -
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Earnings per share - basic and diluted 8 (0.45)p (0.45)p (0.9)p - - -
----------------------------------------------- ----- --------- --------- -------- --------- --------- --------
Statement of Changes in Equity
Capital
Capital reserve
Special Capital reserve holding
Share Share distributable redemption gains/ gains/ Revenue
capital premium reserve reserve (losses) (losses) reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- --------- --------- --------------- ------------ ---------- ---------- --------- --------
As at 1 January
2017 4,058 - 3,397 38 (121) (53) (1,772) 5,547
Revenue return on
ordinary
activities after
tax - - - - - - (118) (118)
Performance fee
allocated
as capital
expenditure - - - - 91 - - 91
Current period
gains
on disposal - - - - 19 - - 19
Current period
losses
on fair value of
investments - - - - - (359) - (359)
Prior years'
unrealised
losses now
realised - - - - (421) 421 - -
-------------------- --------- --------- --------------- ------------ ---------- ---------- --------- --------
Balance as at 31
December
2017 4,058 - 3,397 38 (432) 9 (1,890) 5,180
B share issue 40 3,995 - - - - - 4,035
Capital
restructuring (3,977) - - 3,977 - - - -
Capital reduction - (3,427) 7,442 (4,015) - - - -
Revenue return on
ordinary
activities after
tax - - - - - - (77) (77)
Expenses charged to
capital - - - - (18) - - (18)
Performance fee
allocated
as capital
expenditure - - - - (26) - - (26)
Current period
gains
on disposal - - - - 903 - - 903
Current period
losses
on fair value of
investments - - - - - (716) - (716)
Prior years'
unrealised
losses now
realised - - - - 602 (602) - -
-------------------- --------- --------- --------------- ------------ ---------- ---------- --------- --------
Balance as at 31
December
2018 121 568 10,839 - 1,029 (1,309) (1,967) 9,281
-------------------- --------- --------- --------------- ------------ ---------- ---------- --------- --------
Refer to note 14 for details of the share restructure and
capital reduction undertaken in the year.
The accompanying notes are an integral part of the Financial
Statements.
Ordinary Shares - Statement of Changes in Equity
Capital
Capital reserve
Special Capital reserve holding
Share Share distributable redemption gains/ gains/ Revenue
capital premium reserve reserve (losses) (losses) reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- --------- --------- --------------- ------------ ---------- ---------- --------- --------
As at 1 January
2017 4,058 - 3,397 38 (121) (53) (1,772) 5,547
Revenue return on
ordinary
activities after
tax - - - - - - (118) (118)
Performance fee
allocated
as capital
expenditure - - - - 91 - - 91
Current period
gains
on disposal - - - - 19 - - 19
Current period
losses
on fair value of
investments - - - - - (359) - (359)
Prior years'
unrealised
losses now
realised - - - - (421) 421 - -
-------------------- --------- --------- --------------- ------------ ---------- ---------- --------- --------
Balance as at 31
December
2017 4,058 - 3,397 38 (432) 9 (1,890) 5,180
Capital
restructuring (3,977) - - 3,977 - - - -
Capital reduction - - 4,015 (4,015) - - - -
Revenue return on
ordinary
activities after
tax - - - - - - (59) (59)
Expenses charged to - - - - - - - -
capital
Performance fee
allocated
as capital
expenditure - - - - (26) - - (26)
Current period
gains
on disposal - - - - 903 - - 903
Current period
losses
on fair value of
investments - - - - - (716) - (716)
Prior years'
unrealised
gains now realised - - - - 602 (602) - -
-------------------- --------- --------- --------------- ------------ ---------- ---------- --------- --------
Balance as at 31
December
2018 81 - 7,412 - 1,047 (1,309) (1,949) 5,282
-------------------- --------- --------- --------------- ------------ ---------- ---------- --------- --------
B Shares - Statement of Changes in Equity
Capital
Capital reserve
Special Capital reserve holding
Share Share distributable redemption gains/ gains/ Revenue
capital premium reserve reserve (losses) (losses) reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 January - - - - - - - -
2018
B share issue 40 3,995 - - - - - 4,035
Capital reduction - (3,427) 3,427 - - - - -
Revenue return on
ordinary
activities after
tax - - - - - - (18) (18)
Expenses charged to
capital - - - - (18) - - (18)
Balance as at 31
December
2018 40 568 3,427 - (18) - (18) 3,999
-------------------- --------- --------- --------------- ------------ ---------- ---------- --------- --------
Balance Sheet
Combined as at Combined as at
31 December 2018 31 December 2017
Note GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- ----- --------- --------- --------- ---------
Fixed asset investments* 10 3,293 5,564
Current assets:
Debtors 11 23 7
Cash at bank and in hand/(Bank overdraft) 6,446 (160)
Creditors: amounts falling due within
one year 12 (291) (67)
---------------------------------------------------- ----- --------- --------- --------- ---------
Net current assets 6,178 (220)
Creditors: amounts falling due after
more than one year 12 (190) (164)
Net assets 9,281 5,180
---------------------------------------------------- ----- --------- --------- --------- ---------
Called up equity share capital 13 121 4,058
Share premium 14 568 -
Special distributable reserve 14 10,839 3,397
Capital redemption reserve 14 - 38
Capital reserve - realised gains
and losses 14 1,029 (432)
- holding gains and losses 14 (1,309) 9
Revenue reserve 14 (1,967) (1,890)
---------------------------------------------------- ----- --------- --------- --------- ---------
Total equity shareholders' funds 9,281 5,180
---------------------------------------------------- ----- --------- --------- --------- ---------
*At fair value through profit and loss
The accompanying notes are an integral part of the Financial
Statements.
The statements were approved by the Directors and authorised for
issue on 26 April 2019 and are signed on their behalf by:
John Hustler
Chairman
Company No: 04221489
Ordinary Share Balance Sheet (non-statutory analysis)
Ordinary shares Ordinary Shares
as at as at
31 December 2018 31 December 2017
Note GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- ----- --------- --------- --------- ---------
Fixed asset investments* 10 2,793 5,564
Current assets:
Debtors 11 - 7
Cash at bank and in hand/(Bank overdraft) 2,738 (160)
Creditors: amounts falling due within
one year 12 (59) (67)
---------------------------------------------------- ----- --------- --------- --------- ---------
Net current assets 2,679 (220)
Creditors: amounts falling due after
more than one year 12 (190) (164)
Net assets 5,282 5,180
---------------------------------------------------- ----- --------- --------- --------- ---------
Called up equity share capital 13 81 4,058
Share premium 14 - -
Special distributable reserve 14 7,412 3,397
Capital redemption reserve 14 - 38
Capital reserve - realised gains
and losses 14 1,047 (432)
- holding gains and losses 14 (1,309) 9
Revenue reserve 14 (1,949) (1,890)
---------------------------------------------------- ----- --------- --------- --------- ---------
Total equity shareholders' funds 5,282 5,180
---------------------------------------------------- ----- --------- --------- --------- ---------
Net asset value per share 9 65.1p 63.8p
--------- --------- --------- ---------
*At fair value through profit and loss
B Share Balance Sheet (non-statutory analysis)
B shares as at B shares as at
31 December 2018 31 December 2017
Note GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- ----- --------- --------- --------- ---------
Fixed asset investments* 10 500 -
Current assets:
Debtors 11 23 -
Cash at bank and in hand 3,708 -
Creditors: amounts falling due within
one year 12 (232) -
---------------------------------------------------- ----- --------- --------- --------- ---------
Net current assets 3,499 -
Creditors: amounts falling due after
more than one year 12 - -
Net assets 3,999 -
---------------------------------------------------- ----- --------- --------- --------- ---------
Called up equity share capital 13 40 -
Share premium 14 568 -
Special distributable reserve 14 3,427 -
Capital redemption reserve 14 - -
Capital reserve - realised gains
and losses 14 (18) -
- holding gains and losses 14 - -
Revenue reserve 14 (18) -
---------------------------------------------------- ----- --------- --------- --------- ---------
Total equity shareholders' funds 3,999 -
---------------------------------------------------- ----- --------- --------- --------- ---------
Net asset value per share 9 99.1p -
--------- --------- --------- ---------
*At fair value through profit and loss
Statement of Cash Flows
Combined Year to Combined Year to
31 December 2018 31 December 2017
Note GBP'000 GBP'000
Cash flows from operating activities
Return on ordinary activities before tax 66 (367)
Adjustments for:
Increase in debtors 11 (16) (3)
Increase/(Decrease) in creditors 12 31 (79)
Gain on disposal of fixed assets 10 (903) (19)
Loss on valuation of fixed asset investments 10 716 359
---------------------------------------------- ----- ------------------ ------------------
Cash from operations (106) (109)
Income taxes paid 7 - -
---------------------------------------------- ----- ------------------ ------------------
Net cash used in operating activities (106) (109)
Cash flows from investing activities
Purchase of fixed asset investments 10 (500) -
Sale of fixed asset investments 10 2,958 134
---------------------------------------------- ----- ------------------ ------------------
Total cash flows from investing activities 2,458 134
Cash flows from financing activities
Issue of B shares 4,035 -
Awaiting B share issue 219 -
---------------------------------------------- ----- ------------------ ------------------
Total cash flows from financing activities 4,254 -
Increase in cash and cash equivalents 6,606 25
Opening cash and cash equivalents (160) (185)
Closing cash and cash equivalents 6,446 (160)
---------------------------------------------- ----- ------------------ ------------------
The accompanying notes are an integral part of the Financial
Statements.
Ordinary Shares Statement of Cash Flows
Ordinary shares Ordinary shares
Year to Year to
31 December 2018 31 December 2017
Note GBP'000 GBP'000
Cash flows from operating activities
Return on ordinary activities before tax 102 (367)
Adjustments for:
Decrease/(Increase) in debtors 11 7 (3)
Increase/(Decrease) in creditors 12 18 (79)
Gain on disposal of fixed assets 10 (903) (19)
Loss on valuation of fixed asset investments 10 716 359
---------------------------------------------- ----- ------------------ ------------------
Cash from operations (60) (109)
Income taxes paid 7 - -
---------------------------------------------- ----- ------------------ ------------------
Net cash used in operating activities (60) (109)
Cash flows from investing activities
Purchase of fixed asset investments 10 - -
Sale of fixed asset investments 10 2,958 134
---------------------------------------------- ----- ------------------ ------------------
Total cash flows from investing activities 2,958 134
Cash flows from financing activities
Total cash flows from financing activities - -
Increase in cash and cash equivalents 2,898 25
Opening cash and cash equivalents (160) (185)
Closing cash and cash equivalents 2,738 (160)
---------------------------------------------- ----- ------------------ ------------------
B Shares Statement of Cash Flows
B shares B shares
Year to Year to
31 December 2018 31 December 2017
Note GBP'000 GBP'000
Cash flows from operating activities
Return on ordinary activities before tax (36) -
Adjustments for:
Increase in debtors 11 (23) -
Increase in creditors 12 13 -
Gain on disposal of fixed assets 10 - -
Loss on valuation of fixed asset investments 10 - -
---------------------------------------------- ----- ------------------ ------------------
Cash from operations (46) -
Income taxes paid 7 - -
---------------------------------------------- ----- ------------------ ------------------
Net cash used in operating activities (46) -
Cash flows from investing activities
Purchase of fixed asset investments 10 (500) -
Sale of fixed asset investments 10 - -
---------------------------------------------- ----- ------------------ ------------------
Total cash flows from investing activities (500) -
Cash flows from financing activities
Issue of B shares 4,035 -
Awaiting B share issue 219 -
---------------------------------------------- ----- ------------------ ------------------
Total cash flows from financing activities 4,254 -
Increase in cash and cash equivalents 3,708 -
Opening cash and cash equivalents - -
Closing cash and cash equivalents 3,708 -
---------------------------------------------- ----- ------------------ ------------------
Notes to the Financial Statements
1. Principal Accounting Policies
Basis of preparation
The Financial Statements have been prepared under the historical
cost convention, except for the measurement at fair value of
certain financial instruments, and in accordance with UK Generally
Accepted Accounting Practice ("GAAP"), including FRS 102 and with
the Companies Act 2006 and the Statement of Recommended Practice
(SORP) 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts (revised 2014)'.
The principal accounting policies have remained materially
unchanged from those set out in the Company's 2017 Annual Report
and Financial Statements, apart from an addition to the policy on
allocating expenses partly to capital as a result of the
introduction of an investment management fee for the B shares, and
clarifying the split of costs between the two share pools. A
summary of the principal accounting policies is set out below.
The Company held all fixed asset investments at fair value
through profit or loss. Accordingly, all interest income, fee
income, expenses and gains and losses on investments are
attributable to assets held at fair value through profit or
loss.
The most important policies affecting the Company's financial
position are those related to investment valuation and require the
application of subjective and complex judgements, often as a result
of the need to make estimates about the effects of matters that are
inherently uncertain and may change in subsequent periods. These
are discussed in more detail below.
Going Concern
After reviewing the Company's forecasts and expectations, the
Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the
foreseeable future. The Company therefore continues to adopt the
going concern basis in preparing its Financial Statements.
Key judgements and estimates
The preparation of the Financial Statements requires the Board
to make judgements and estimates regarding the application of
policies affecting the reported amounts of assets, liabilities,
income and expenses. Estimates and assumptions mainly relate to the
fair valuation of the fixed asset investments particularly unquoted
investments. Estimates are based on historical experience and other
assumptions that are considered reasonable under the circumstances.
The estimates and the assumptions are under continuous review with
particular attention paid to the carrying value of the
investments.
Investments are regularly reviewed to ensure that the fair
values are appropriately stated. Unquoted investments are valued in
accordance with current International Private Equity and Venture
Capital Valuation (IPEV) guidelines, which can be found on their
website at www.privateequityvaluation.com, although this does rely
on subjective estimates such as appropriate sector earnings
multiples, forecast results of investee companies, asset values of
investee companies and liquidity or marketability of the
investments held.
Although the Directors believe that the assumptions concerning
the business environment and estimate of future cash flows are
appropriate, changes in estimates and assumptions could result in
changes in the stated values. This could lead to additional changes
in fair value in the future.
Functional and presentational currency
The Financial Statements are presented in Sterling (GBP). The
functional currency is also Sterling (GBP).
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short-term highly liquid investments with
original maturities of three months or less and bank
overdrafts.
Fixed asset investments
The Company's principal financial assets are its investments and
the policies in relation to those assets are set out below.
Purchases and sales of investments are recognised in the
Financial Statements at the date of the transaction (trade
date).
These investments will be managed and their performance
evaluated on a fair value basis and information about them is
provided internally on that basis to the Board. Accordingly, as
permitted by FRS 102, the investments are measured as being fair
value through profit or loss on the basis that they qualify as a
group of assets managed, and whose performance is evaluated, on a
fair value basis in accordance with a documented investment
strategy. The Company's investments are measured at subsequent
reporting dates at fair value.
In the case of investments quoted on a recognised stock
exchange, fair value is established by reference to the closing bid
price on the relevant date or the last traded price, depending upon
convention of the exchange on which the investment is quoted. In
the case of AIM quoted investments this is the closing bid price.
In the case of unquoted investments, fair value is established by
using measures of value such as the price of recent transactions,
earnings multiple, discounted cash flows and net assets. These are
consistent with the IPEV guidelines.
Gains and losses arising from changes in fair value of
investments are recognised as part of the capital return within the
Income Statement and allocated to the capital reserve - holding
gains/(losses).
In the preparation of the valuations of assets the Directors are
required to make judgements and estimates that are reasonable and
incorporate their knowledge of the performance of the investee
companies.
Fair value hierarchy
Paragraph 34.22 of FRS 102 regarding financial instruments that
are measured in the balance sheet at fair value requires disclosure
of fair value measurements dependent on whether the stock is quoted
and the level of the accuracy in the ability to determine its fair
value. The fair value measurement hierarchy is as follows:
For quoted investments:
Level 1: quoted prices in active markets for an identical asset.
The fair value of financial instruments traded in active markets is
based on quoted market prices at the balance sheet date. A market
is regarded as active if quoted prices are readily and regularly
available, and those prices represent actual and regularly
occurring market transactions on an arm's length basis. The quoted
market price used for financial assets held is the bid price at the
Balance Sheet date.
Level 2: where quoted prices are not available (or where a stock
is normally quoted on a recognised stock exchange that no quoted
price is available), the price of a recent transaction for an
identical asset, providing there has been no significant change in
economic circumstances or a significant lapse in time since the
transaction took place. The Company holds no such investments in
the current or prior year.
For investments not quoted in an active market:
Level 3: the fair value of financial instruments that are not
traded in an active market is determined by using valuation
techniques. These valuation techniques maximise the use of
observable data (eg: the price of recent transactions, earnings
multiple, discounted cash flows and/or net assets) where it is
available and rely as little as possible on entity specific
estimates.
There have been no transfers between these classifications in
the year (2017: none). The change in fair value for the current and
previous year is recognised through the profit and loss
account.
Current asset investments
No current asset investments were held at 31 December 2018 or 31
December 2017. Should current assets be held, gains and losses
arising from changes in fair value of investments are recognised as
part of the capital return within the Income Statement and
allocated to the capital reserve - gains/(losses) on disposal.
Income
Investment income includes interest earned on bank balances and
from unquoted loan note securities, and dividends. Fixed returns on
debt are recognised on a time apportionment basis so as to reflect
the effective yield, provided it is probable that payment will be
received in due course.
Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged wholly to revenue with the exception of the performance
fee, which is charged 100% to the capital reserve. In addition, the
investment management fee charged to the B shares has been split
25% revenue and 75% capital, in line with industry practice and to
reflect the Board's estimated split of investment returns which
will be achieved by the company's B shares over the long term.
Expenses and liabilities not specific to a share class are
allocated to the B share pool for a period of three years from 1
July 2018 in line with the Articles of Association.
Revenue and capital
The revenue column of the Income Statement includes all income
and revenue expenses of the Company. The capital column includes
gains and losses on disposal and holding gains and losses on
investments, as well as those expenses that have been charged as
capital costs. Gains and losses arising from changes in fair value
of investments are recognised as part of the capital return within
the Income Statement and allocated to the appropriate capital
reserve on the basis of whether they are realised or unrealised at
the balance sheet date.
Taxation
Current tax is recognised for the amount of income tax payable
in respect of the taxable profit for the current or past reporting
periods using the current tax rate. The tax effect of different
items of income/gain and expenditure/loss is allocated between
capital and revenue return on the "marginal" basis as recommended
in the SORP.
Deferred tax is recognised on an undiscounted basis in respect
of all timing differences that have originated but not reversed at
the balance sheet date, except as otherwise indicated.
Deferred tax assets are only recognised to the extent that it is
probable that they will be recovered against the reversal of
deferred tax liabilities or other future taxable profits.
Financial instruments
The Company's principal financial assets are its investments and
its cash and the policies in relation to those assets are set out
above. Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all
of its financial liabilities. Where the contractual terms of share
capital do not have any terms meeting the definition of a financial
liability then this is classed as an equity instrument.
Capital management is monitored and controlled using the
internal control procedures set out on page 35 of this report. The
capital being managed includes equity and fixed-interest
investments, cash balances and liquid resources including debtors
and creditors.
The Company does not have any externally imposed capital
requirements.
Reserves
Called up equity share capital - represents the nominal value of
shares that have been issued.
Share premium account - includes any premiums received on issue
of share capital. Any transaction costs associated with the issuing
of shares are deducted from share premium.
Special distributable reserve - includes cancelled share premium
and capital redemption reserves available for distribution.
Capital reserve - holding gains and losses - when the Company
revalues the investments still held during the period with any
gains or losses arising being credited/ charged to the Capital
reserve - holding gains and losses.
Capital reserve - gains and losses on disposal - when an
investment is sold any balance held on the Capital reserve -
holding gains and losses is transferred to the Capital reserve -
gains and losses on disposal, as a movement in reserves.
Revenue reserve - represents the aggregate value of accumulated
realised profits, less losses and dividends.
Dividends Payable
Dividends payable are recognised as distributions in the
Financial Statements when the Company's liability to make payment
has been established. This liability is established for interim
dividends when they are declared by the Board, and for final
dividends when they are approved by the shareholders.
2. Income
Year to Year to
31 December 2018 31 December 2017
GBP'000 GBP'000
------------------------------ ------------------ ------------------
Dividends received - -
Loan note interest receivable - -
------------------------------ ------------------ ------------------
- -
------------------------------ ------------------ ------------------
3. Investment Management Fee for B shares
Year to Year to
31 December 2018 31 December 2017
GBP'000 GBP'000
------------------------------------------ ------------------ ------------------
Gross Investment management fee 24 -
Cost cap refund from Seneca (42) -
------------------------------------------ ------------------ ------------------
Investment management fee net of cost cap (18) -
------------------------------------------ ------------------ ------------------
Following its appointment on 23 August 2018, Seneca has received
a fee of 2% of the weighted average net asset value of the B shares
(2017: n/a). Seneca will also be entitled to certain monitoring
fees from investee companies and the Board reviews the amounts.
Seneca are entitled to receive a performance incentive fee in
relation to the B share pool of an amount equal to 20% of the
Shareholder Proceeds arising in respect of any performance period,
provided that the payment of such a fee shall also be conditional
upon (i) a return being generated on the B share pool for B
Shareholders in respect of that performance period of more than 5%
per annum (pro-rated if that period is less than a year) and (ii)
that such a return calculated for the period from 23 August 2018 to
the end of the relevant performance period exceeds 5% per
annum.
Shareholder Proceeds are, in relation to the B shares and
calculated on a per share basis in relation to the relevant share,
all amounts paid by way of dividend or other distributions, share
buy backs, proceeds on a sale or liquidation of the Company and any
other proceeds or value received or deemed to be received by the
holders of the relevant shares (excluding any income tax relief on
subscription).
For a three year period with effect from 1 July 2018, expenses
are capped at 3% of the weighted average net asset value of the B
shares, including the management fee (but excluding any performance
fee). (Following this initial period, expenses are capped at 3% of
the Company's total net asset value, including the assets in the
Ordinary share pool). Accordingly Seneca reduced its management fee
by GBP42,000 in the year to 31 December 2018 (2017: n/a).
Expenses are charged wholly to revenue with the exception of the
(gross) investment management fee which has been charged 75% to the
capital reserve in line with industry practice.
4. Other Expenses
Year to Year to
31 December 2018 31 December 2017
GBP'000 GBP'000
------------------------------------------------------------------------------ ------------------ ------------------
Directors' remuneration 41 38
Fees payable to the Company's auditor for the audit of the Financial
Statements 14 8
Fees payable to the Company's auditor for other services - tax compliance - 1
Legal and professional expenses 38 41
Accounting and administration services 9 14
Other expenses 11 16
------------------------------------------------------------------------------ ------------------ ------------------
113 118
------------------------------------------------------------------------------ ------------------ ------------------
All expenses were charged to the Ordinary shares for the period
to 30 June 2018. In line with the offer for subscription for B
shares, and following the initial allotment of B shares on 23
August 2018, all the Company's general expenses are chargeable to
the B share pool for a period of three years from 1 July 2018
(subject to the cost cap discussed in note 3). Any expenditure
related specifically to assets in one pool is chargeable to that
pool.
5. Directors' Remuneration
Year to Year to
31 December 2018 31 December 2017
GBP GBP
------------------------- ------------------ ------------------
Directors' emoluments:
John Hustler (Chairman) 12,750 12,750
Charles Breese 12,750 12,750
Richard Roth 15,250 12,750
Richard Manley - -
40,750 38,250
------------------------- ------------------ ------------------
Richard Manley, a director of the Investment Manager, has
elected to waive his Director's fee, until the Company's operating
costs are less than the expenses cost cap.
Included in the figure above for Richard Roth is GBP2,500 for
work undertaken in relation to the setting up of the new B share
structure and preparation of the offer for subscription as detailed
in the Directors' Remuneration Report. Apart from this, none of the
Directors received any other remuneration from the Company during
the year.
Certain Directors may become entitled to receive a share of the
Performance Incentive Fee related to the Ordinary share pool as
detailed in the Directors' Remuneration Report on page 39 and in
note 6.
The Company has no employees other than non-executive Directors.
The average number of non-executive Directors in the year was three
(2017: three). Richard Manley joined the Board on 23 August 2018
which increased the number of directors for the remainder of the
year from 3 to 4.
6. Performance fees for Ordinary shares
The Commercial Advisory Committee took over management of the
Company's investments on 30 July 2007, and at that time, a revised
Performance Incentive Scheme was implemented, such that its members
would be entitled to 20% of all cash returns above the initial net
cost to subscribing shareholders of 80p.
On 7 October 2015, this scheme was varied such that any returns
above the 31 December 2014 levels would be subject to a hurdle, and
the share to the CAC reduced from 20% to 10%. The hurdle is a
compound 6% per annum on any amounts below the latest hurdle still
due to be paid to shareholders (i.e. in recognition of dividends
paid, actual returns to shareholders will be subtracted from the
compounding threshold in the year these are paid).
The Total Gross Return at 31 December 2014 on which the
performance fee liability of GBP702,000 was calculated was 123.3p,
resulting in the quoted net asset value of 114.6p. For the purposes
of this note 6, Total Gross Return is defined as the total return
made by the fund, before the deduction of any dividend payments or
accruals and/or payments made relating to any potential (or actual)
performance incentive fee.
Any dividends paid above 80p will be split 80% to shareholders
and 20% to the members of the CAC as at 31 December 2014 (i.e. 25%
of all dividends paid to shareholders), until shareholders have
received dividends totalling 114.6p.
A performance fee may be payable on any further dividends above
this level, but only if the hurdle applicable at that time has been
met.
As at 31 December 2018, the Total Gross Return is 91.68p, and so
2.34p per share totalling GBP190,000 has been accrued (31 December
2017, 90.1p, 2.02p and GBP164,000).
Assuming the only dividends paid on the Ordinary shares in the
year are the 10p dividend per share paid on 25 January 2019, and
the 18p per share expected to be declared soon after this Annual
Report has been submitted to Companies House, the Total Gross
Return would need to exceed 152.9p at 31 December 2019 before any
fee above GBP702,000 could be due, and at that time, it would be
10% of any cash payments made above this threshold. If such a
performance fee is not triggered (as it has not been in this
financial year) the hurdle, net of dividends paid, increments by a
compound annual growth rate of 6%, applied quarterly.
7. Tax on Ordinary Activities
The corporation tax charge for the period was GBPnil (2017:
GBPnil).
The current rate of tax is the small companies' rate of
corporation tax at 19% (2017: 19.25 %)
Year to Year to
Current tax reconciliation: 31 December 2018 31 December 2017
GBP'000 GBP'000
-------------------------------------------------------------------- ------------------ ------------------
Return on Ordinary activities before tax 66 (367)
-------------------------------------------------------------------- ------------------ ------------------
Current tax at 19% (2017: 19.25%) 13 (71)
Gains/losses not subject to tax (36) 65
Excess management expenses carried forward 23 6
-------------------------------------------------------------------- ------------------ ------------------
Total current tax charge and tax on results of ordinary activities - -
The company has excess management expenses of GBP2,741,000
(2017: GBP2,619,000) to carry forward to offset against future
taxable profits.
Approved VCTs are exempt from tax on capital gains within the
Company. Since the Directors intend that the Company will continue
to conduct its affairs so as to maintain its approval as a VCT, no
current deferred tax has been provided in respect of any capital
gains or losses arising on the revaluation or disposal of
investments.
8. Earnings per Share
The earnings per Ordinary share is based on 8,115,376 (31
December 2017: 8,115,376) shares, being the weighted average number
of Ordinary shares in issue during the year, and a return for the
year totalling GBP102,000 (31 December 2017: (GBP367,000)).
The earnings per B share is based on 3,412,545 (31 December
2017: nil) shares, being the weighted average number of B shares in
issue since 23 August 2018, and a return for the year totalling
(GBP36,000) (31 December 2017: nil).
There are no potentially dilutive capital instruments in issue
and, therefore, no diluted returns per share figures are relevant.
The basic and diluted earnings per share are therefore
identical.
9. Net Asset Value per Share
The calculation of NAV per Ordinary share as at 31 December 2018
is based on 8,115,376 Ordinary shares in issue at that date (31
December 2017: 8,115,376).
The calculation of NAV per B share as at 31 December 2018 is
based on 4,036,370 B shares in issue at that date (31 December
2017: nil).
10. Fixed Asset Investments
Ordinary shares
Level 3:
Level 1: Unquoted Total
AIM-quoted investments investments investments
GBP'000 GBP'000 GBP'000
--------------------------------- ------------------------ ------------- -------------
Valuation and net book amount:
Book cost as at 1 January 2018 1,129 4,426 5,555
Cumulative revaluation 906 (897) 9
--------------------------------- ------------------------ ------------- -------------
Valuation at 1 January 2018 2,035 3,529 5,564
Movement in the year:
Purchases at cost - - -
Disposal proceeds (31) (2,927) (2,958)
Gain/(loss) on disposal 6 897 903
Revaluation in year (549) (167) (716)
--------------------------------- ------------------------ ------------- -------------
Valuation at 31 December 2018 1,461 1,332 2,793
Book cost at 31 December 2018 1,117 2,985 4,102
Revaluation to 31 December 2018 344 (1,653) (1,309)
Valuation at 31 December 2018 1,461 1,332 2,793
--------------------------------- ------------------------ ------------- -------------
B Shares
Level 3:
Level 1: Unquoted Total
AIM-quoted investments investments investments
GBP'000 GBP'000 GBP'000
--------------------------------- ------------------------- ------------- -------------
Valuation and net book amount:
Book cost as at 1 January 2018 - - -
Cumulative revaluation - - -
--------------------------------- ------------------------- ------------- -------------
Valuation at 1 January 2018 - - -
Movement in the year:
Purchases at cost - 500 500
Disposal proceeds - - -
Gain/(loss) on disposal - - -
Revaluation in year - - -
--------------------------------- ------------------------- ------------- -------------
Valuation at 31 December 2018 - 500 500
Book cost at 31 December 2018 - 500 500
Revaluation to 31 December 2018 - - -
Valuation at 31 December 2018 - 500 500
--------------------------------- ------------------------- ------------- -------------
Further details of the fixed asset investments held by the
Company are shown within the Investment Manager's Report on pages
14 to 24.
All investments are initially measured at fair value through
profit or loss, and all capital gains or losses on investments are
so measured. The changes in fair value of such investments
recognised in these Financial Statements are treated as unrealised
holding gains or losses.
11. Debtors
31 December 2018 31 December 2017
GBP'000 GBP'000
-------------------------------- ----------------- -----------------
Prepayments and accrued income 23 7
-------------------------------- ----------------- -----------------
23 7
-------------------------------- ----------------- -----------------
12. Creditors
31 December 2018 31 December 2017
GBP'000 GBP'000
------------------------------------------- ----------------- -----------------
Amounts falling due within one year
Accruals 43 34
Trade creditors - 4
Awaiting B share issue 219 -
Other creditors 29 29
------------------------------------------- ----------------- -----------------
Total amounts falling due within one year 291 67
------------------------------------------- ----------------- -----------------
Amounts falling due after one year
Accruals 190 164
------------------------------------------- ----------------- -----------------
Total amounts falling due after one year 190 164
------------------------------------------- ----------------- -----------------
The amount falling due after more than one year relates to the
potential liability for a performance fee on the Ordinary share
portfolio. More details are in note 6.
13. Share Capital
31 December 2018 31 December 2017
GBP'000 GBP'000
----------------------------------------------------------------- ----------------- -----------------
Allotted and fully paid up:
8,115,376 Ordinary shares of 1p (2017: 8,115,376 shares of 50p) 81 4,058
4,036,370 B Ordinary shares of 1p (2017 : nil) 40 -
----------------------------------------------------------------- ----------------- -----------------
121 4,058
----------------------------------------------------------------- ----------------- -----------------
The capital of the Company is managed in accordance with its
investment policy with a view to the achievement of its investment
objective as set on page 8.
During the year, the Company did not issue, nor buy back, any
Ordinary shares. On 5 April 2018, following approval at the
Company's annual general meeting, the nominal value of the Ordinary
shares was reduced from 50p to 1p. More details are included in the
Chairman's Statement on page 10 and in note 14.
The Company issued a total of 4,036,370 B Ordinary shares at
prices between 99.7p and 105.8p per B Ordinary share. pursuant to
an offer for subscription for B shares launched on 9 May 2018 to
raise, in aggregate, up to GBP10 million with an over-allotment
facility of up to a further GBP10 million (before issue costs). The
Company has not bought back any B Ordinary shares.
14. Movement in Shareholders' Funds
Year ended
Year ended 31 December
31 December 2018 2017
GBP'000 GBP'000
-------------------------------------- ------------------ -------------
Shareholders' funds at start of year 5,180 5,547
Return on ordinary activities after
tax 66 (367)
Increase due to issue of B shares 4,035 -
-------------------------------------- ------------------ -------------
Shareholders' funds at end of year 9,281 5,180
-------------------------------------- ------------------ -------------
The analysis of changes in equity by the various reserves are
shown in the Statement of Changes in Equity on page 50.
When the Company revalues its investments during the period, any
gains or losses arising are credited/charged to the Income
Statement. Changes in fair value of investments held are then
transferred to the capital reserve - holding gains/(losses). When
an investment is sold any balance held on the capital reserve -
holding gains/(losses) reserve is transferred to the capital
reserve - gains/(losses) on disposal as a movement in reserves.
The purpose of the special distributable reserve was to create a
reserve which will be capable of being used by the Company to pay
dividends and for the purpose of making repurchases of its own
shares in the market with a view to narrowing the discount at which
the Company's shares trade to net asset value, providing
shareholder authority has been granted.
During 2010, the Company revoked investment company status in
order to allow payment of dividends from distributable reserves.
During 2018, the Company effected a capital reduction exercise,
whereby the nominal value of its Ordinary shares was reduced from
50p to 1p, creating a capital redemption reserve. The Company also
issued 4,036,370 B shares at a premium. On 7 December 2018,
following shareholder approval, the Company sought, and received
approval from the High Court to the reduction of the amount
standing to the credit of the Capital Redemption Reserve of the
Company by GBP4,014,135 and of the Share Premium Account of the
Company by GBP3,427,184, thereby creating additional distributable
reserves of GBP7,441,319. Distributable reserves are represented by
the special distributable reserve, the capital reserve
gains/(losses) on disposal and the revenue reserve reduced by
negative holding reserves (if any) which total GBP8,592,000 as at
31 December 2018 (2017: GBP1,075,000). Although the distributable
reserves total GBP8,592,000 as at 31 December 2018, only
GBP5,181,000 is actually able to be distributed as the reserves
contain GBP 3,427,000 from the cancellation of the share premium
account on the newly issued B shares, which cannot be distributed
until the beginning of 2022 without breaching VCT rules.
An interim capital dividend of 10 pence per Ordinary share for
the year to 31 December 2018 was paid on 25 January 2019, reducing
shareholder funds by GBP811,537.60.
15. Financial Instruments
The Company's financial instruments comprise equity investments,
cash balances and liquid resources including debtors and
creditors.
Classification of financial instruments
The Company held the following categories of financial
instruments, all of which are included in the balance sheet at fair
value, at 31 December 2018 and 31 December 2017:
31 December 2018 31 December 2017
GBP'000 GBP'000
------------------------------------------------------- ----------------- -----------------
Financial assets at fair value through profit or loss
Fixed asset investments 3,293 5,564
------------------------------------------------------- ----------------- -----------------
Total 3,293 5,564
Financial assets measured at amortised cost
Cash at bank and in hand 6,446 -
Debtors 23 7
------------------------------------------------------- ----------------- -----------------
Total 6,469 7
Financial liabilities measured at amortised cost
Bank Overdraft - (160)
Creditors (29) (33)
------------------------------------------------------- ----------------- -----------------
Total (29) (193)
Fixed asset investments (see note 10) are valued at fair value.
Unquoted investments are carried at fair value as determined by the
Directors in accordance with current venture capital industry
guidelines. The fair value of all other financial assets and
liabilities is represented by their carrying value in the balance
sheet. The Directors believe that the fair value of the assets held
at the year end is equal to their book value.
The Company's creditors and debtors are recognised at fair value
which is usually the transaction cost or net realisable value if
lower.
As at 31 December 2017, the Company had an overdraft facility of
GBP200,000 with the Royal Bank of Scotland, which was converted
into a loan in April 2018, both of which were secured by a
debenture. The loan was a liability of the Ordinary share pool and
was repaid at the end of August 2018 once the company had access to
the funds from the initial allotment of B shares, and the debenture
was released. The funds in the B share pool have since been
replenished from the proceeds from the Ordinary share pool's sale
of its investment in Hallmarq.
16. Financial Risk Management
In carrying on its investment activities, the Company is exposed
to various types of risk associated with the financial instruments
and markets in which it invests. The most significant types of
financial risk facing the Company are market risk, credit risk and
liquidity risk. The Company's approach to managing these risks is
set out below together with a description of the nature and amount
of the financial instruments held at the balance sheet date.
Market risk
The Company's strategy for managing investment risk is
determined with regard to the Company's investment objective, as
outlined on page 8. The management of market risk is part of the
investment management process. The Company's portfolio is managed
with regard to the possible effects of adverse price movements and
with the objective of maximising overall returns to shareholders in
the medium term. Investments in unquoted companies, by their
nature, usually involve a higher degree of risk than investments in
companies quoted on a recognised stock exchange, though the risk
can be mitigated to a certain extent by diversifying the portfolio
across business sectors and asset classes. The overall disposition
of the Company's assets is regularly monitored by the Board.
Details of the Company's investment portfolio at the balance
sheet date are set out on page 15.
19.7% (2017: 68.1%) by value of the Company's net assets
comprise investments in unquoted companies held at fair value. The
valuation methods used by the Company include the application of a
price/earnings ratio derived from listed companies with similar
characteristics, and consequently the value of the unquoted element
of the portfolio can be indirectly affected by price movements on
the London Stock Exchange. A 10% overall increase in the valuation
of the unquoted investments at 31 December 2018 would have
increased net assets and the total return for the year by
GBP183,000 (2017: GBP353,000) disregarding the impact of the
performance fee; an equivalent change in the opposite direction
would have reduced net assets and the total return for the year by
the same amount.
15.7% (2017: 39.3%) by value of the Company's net assets
comprises equity securities quoted on AIM. A 10% increase in the
bid price of these securities as at 31 December 2018 would have
increased net assets and the total return for the year by
GBP146,000 (2017: GBP204,000) disregarding the impact of the
performance fee; a corresponding fall would have reduced net assets
and the total return for the year by the same amount.
Credit risk
There were no significant concentrations of credit risk to
counterparties at 31 December 2018 or 31 December 2017.
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company. The Board carries out a
regular review of counterparty risk. The carrying values of
financial assets represent the maximum credit risk exposure at the
balance sheet date.
Liquidity risk
The Company's financial assets include investments in unquoted
equity securities which are not traded on a recognised stock
exchange and which generally are illiquid. They also include
investments in AIM-quoted companies, which, by their nature,
involve a higher degree of risk than investments on the main
market. As a result, the Company may not be able to realise some of
its investments in these instruments quickly at an amount close to
their fair value in order to meet its liquidity requirements, or to
respond to specific events such as deterioration in the
creditworthiness of any particular issuer.
The Company's liquidity risk is managed and monitored on a
continuing basis by the Board in accordance with policies and
procedures laid down by the Board.
17. Events After the Balance Sheet Date
Since 31 December 2018:
Pursuant to the Offer, the Company has made the following
allotments of B shares:
Date Number of shares allotted Allotment price range
7 March 2019 643,278 99.1p to 102.2p per share
3 April 2019 442,148 99.1p to 104.9p per share
5 April 2019 241,485 97.6p to 103.3p per share
25 April 2019 24,383 102.5p per share
As at 26 April 2019, the Company had a total of 5,387,664 B
shares in issue
The Company has also made the following new investments from the
B share pool
Company Name Date of Investment Amount
subscribed
Fabacus Holdings 15 February 2019 GBP500,000
Limited
------------------------------ -----------------------
SkinBioTherapeutics 21 February 2019 GBP750,000
Plc
------------------------------ -----------------------
Old St Labs Limited 28 March 2019 GBP500,000
------------------------------ -----------------------
Qudini Limited 4 April 2019 GBP500,000
------------------------------ -----------------------
18. Contingencies, Guarantees and Financial Commitments
There were no contingencies, guarantees or financial commitments
as at 31 December 2018 (2017: GBPnil).
19. Related Party Transactions
The Board acted as the investment manager of the Company until
Seneca were appointed on 23 August 2018. No remuneration has been
paid to the Board during the year in its capacity as investment
manager. Certain Directors are entitled to participate in a
performance bonus as detailed in note 6. Seneca have earnt
GBP24,000 in management fees since 23 August 2018 (2% of the
weighted average net assets of the B share portfolio). No payment
has been made to Seneca, as GBP42,000 is recoverable from Seneca as
a result of the cost cap, as detailed in note 3. Therefore at the
year end, GBP18,000 was due from Seneca, which will be deducted
from fees to be paid to them for services in 2019 (2017: nil).
Seneca accrued GBP19,997 (2017: GBPnil) transaction fees and
directors' fees from investee companies. Seneca may also become
entitled to a performance fee. See note 3 to the financial
statements for more information on these fees.
As detailed in the offer for subscription document dated 9 May
2018, Seneca (as promoters of the offer) are entitled to charge the
Company up to 5.5% of investors' subscriptions. A total of
GBP40,596 has been paid to Seneca, based on the allotments of
GBP4,035,000 as at 31 December 2018 (2017: n/a).
Charles Breese is a director of OR Productivity and received
GBPnil from OR Productivity in fees for his support during the year
(2017: GBPnil).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UWAARKOASUUR
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