Annual Financial Report
Albion Venture Capital Trust
PLCLEI number: 213800JKELS32V2OK421
As required by the Financial Conduct Authority's
Disclosure Guidance and Transparency Rules 4.1 and 6.3, Albion
Venture Capital Trust PLC today makes public its information
relating to the Annual Report and Financial Statements for the year
ended 31 March 2023.
This announcement was approved for release by
the Board of Directors on 4 July 2023.
This announcement has not been audited.
The Annual Report and Financial Statements for
the year ended 31 March 2023 (which have been audited), will
shortly be sent to shareholders. Copies of the full Annual Report
and Financial Statements will be shown via the Albion Capital Group
LLP website by clicking
www.albion.capital/funds/AAVC/31Mar2023.pdf.
Investment
policyThe Company is a Venture Capital Trust and
the investment policy is intended to produce a regular dividend
stream with an appreciation in capital value.
The Company will invest in a broad portfolio of
smaller, unquoted growth businesses across a variety of sectors
including higher risk technology companies. Investments may take
the form of equity or a mixture of equity and loans.
Allocation of funds will be determined by the
investment opportunities which become available but efforts will be
made to ensure that the portfolio is diversified both in terms of
sector and stage of maturity of company. Funds held pending
investment or for liquidity purposes will be held as cash on
deposit.
Risk diversification and maximum
exposuresRisk is spread by investing in a number of
different businesses within Venture Capital Trust qualifying
industry sectors. The maximum amount which the Company will invest
in a single portfolio company is 15% of the Company's assets at
cost, thus ensuring a spread of investment risk. The value of an
individual investment may increase over time as a result of trading
progress and it is possible that it may grow in value to a point
where it represents a significantly higher proportion of total
assets prior to a realisation opportunity being available.
GearingThe Company's maximum
exposure in relation to gearing is restricted to 10% of the
adjusted share capital and reserves.
Financial calendar
|
7 July 2023 |
Record date for first interim dividend |
|
31 July 2023 |
Payment of first interim dividend |
|
Noon on 7 September 2023 |
Annual General Meeting |
|
December 2023 |
Announcement of Half-yearly results for the six months ending 30
September 2023 |
|
31 January 2024 |
Payment of second interim dividend (subject to Board approval) |
Financial highlights
|
Shareholder return for the year ended 31 March 2023†(2022:
7.6%) |
0.3% |
|
|
|
|
Total tax-free dividend per share paid during the year ended 31
March 2023(2022: 25.30p) |
2.65p |
|
|
|
|
Net asset value per share as at 31 March 2023(2022: 53.38p) |
50.88p |
|
|
|
|
Total shareholder value per share from launch to 31 March
2023†(2022: 242.72p) |
242.87p |
†These are considered Alternative Performance
Measures, see notes 2 and 3 in the Strategic report below for
further explanation.
Movements in net asset
value
|
|
31 March 2023 |
31 March 2022 |
|
|
(pence per
share) |
(pence per share) |
|
Opening net asset value |
53.38 |
73.13 |
|
Capital (loss)/return |
(0.34) |
5.38 |
|
Revenue return |
0.44 |
0.39 |
|
Total return |
0.10 |
5.77 |
|
Dividends paid |
(2.65) |
(25.30) |
|
Impact from share capital movements |
0.05 |
(0.22) |
|
Net asset value |
50.88 |
53.38 |
Total shareholder value
|
|
Ordinary
shares(pence per
share) |
|
Total dividends paid to 31 March
2023 |
191.99 |
|
Net asset value on 31 March 2023 |
50.88 |
|
Total shareholder value to 31 March
2023 |
242.87 |
A more detailed breakdown of the dividends paid
per year can be found at www.albion.capital/funds/AAVC under the
‘Dividend History’ section.
The financial highlights above are for Albion
Venture Capital Trust PLC Ordinary shares only. Details of the
financial performance of the C shares and Albion Prime VCT PLC,
which have been merged into the Company, can be found at
www.albion.capital/funds/AAVC under the ‘Financial summary for
previous funds’ section.
In addition to the dividends summarised
above, the Board has declared a first dividend for the year ending
31 March
2024
of 1.27
pence per share to be paid on 31
July
2023 to
shareholders on the register on
7 July
2023.
Chairman’s statement
IntroductionOver the course of
the year, the Company’s portfolio companies have encountered a
difficult macroeconomic and geopolitical backdrop, particularly the
war in Ukraine which has led to high inflation, rising interest
rates and political instability. The year has also seen the
valuation of quoted technology companies fall sharply. In spite of
this, the Company has been able to generate a positive total return
of 0.10 pence per share and a 0.3% increase in shareholder return
for the year ended 31 March 2023.
Given the economic environment in the financial
year, and the significant uncertainty the Company has faced, the
Board continues to be encouraged by the progress being made by many
of the portfolio companies, demonstrating their resilience despite
challenging market conditions. The Board recognises the importance
of evaluating the Company’s returns over the longer-term, as a
venture capital portfolio can, by its nature, experience periods of
short term volatility.
Results and dividends As at 31
March 2023, the net asset value (“NAV”) was £71.0 million or 50.88
pence per share, compared to £63.9 million or 53.38 pence per share
as at 31 March 2022. The total return before taxation was £0.1
million compared to a return of £6.0 million for the previous year.
Further details of the progress of a number of our portfolio
companies are discussed later in this statement.
In line with the variable dividend policy
targeting around 5% of NAV per annum, the Company paid interim
dividends totalling 2.65 pence per share during the year ended 31
March 2023 (31 March 2022: 3.30 pence per share).
The Board has declared a first dividend for the
year ending 31 March 2024 of 1.27 pence per share to be paid on 31
July 2023 to shareholders on the register on 7 July 2023.
Investment performance and
progressSeveral of our portfolio companies have performed
well despite the global uncertainties they faced, and this has
contributed to the total uplift in value of £0.6 million to the
Company’s investments for the year (31 March 2022: £6.6 million).
The key uplifts in the year were: Threadneedle Software Holdings
(T/A Solidatus) (£0.8m uplift) which exhibited strong growth in the
year; Kew Green VCT (Stansted) (£0.5m uplift), which operates the
Holiday Inn express hotel at Stansted airport and returned to
pre-covid trading levels; and Runa Network (previously WeGift)
(£0.4m uplift) which has been revalued after an externally led
funding round. The Company has also benefitted from its renewable
energy assets generating decent returns, largely driven by the
availability of inflation linked income. Inevitably, some portfolio
companies have been adversely impacted by the challenging economic
climate including write downs in the following investments: uMotif
(£0.9m), Elliptic Enterprises (£0.7m) and Cantab Research (T/A
Speechmatics) (£0.6m) where growth has been slower than hoped.
The three largest investments in the Company’s
portfolio, being Chonais River Hydro, Seldon Technologies and
Radnor House School (TopCo), are valued at £10.2 million and
represent 14.4% of the Company’s NAV.
The Company has been an active investor during
the year investing a total of £9.4 million. Of this, £5.6 million
was invested into 13 new portfolio companies, all of which are
expected to require further investment as the companies prove
themselves and grow. The five largest new investments during the
year were:
- £1.2 million into Peppy Health, a
platform providing expert support for underserved areas of health
and wellness (e.g., menopause) via content, video, chat support as
an employee benefit
- £0.8 million into Toqio FinTech
Holdings, a provider of embedded FinTech solutions
- £0.6 million into PeakData, a
software platform providing insights and analytics to
pharmaceutical companies
- £0.5 million into GX Molecular (T/A
CS Genetics), a developer of single-cell sequencing solutions
- £0.4 million into Ophelos, an
autonomous and ethical debt resolution platform
A further £3.8 million was invested into
existing portfolio companies, the largest being: £0.8 million into
Healios; £0.7 million into Gravitee TopCo (T/A Gravitee.io); and
£0.7 million into Runa Network (previously WeGift).
The Company held £22.9m of cash at the period
end which will enable it to invest in new opportunities that arise
and also to support its existing portfolio companies as they grow.
The Manager, Albion Capital, continues to target new investments in
business-to-business (B2B) mission critical software and healthcare
companies.
A full list of the Company’s investments and
disposals, including their movements in value for the year, can be
found in the Portfolio of investments section on pages 27 to 28 of
the full Annual Report and Financial Statements.
Risks and
uncertainties There are a number of significant risks
faced by the Company, including rising interest rates, high levels
of inflation, the ongoing impact of Russia’s invasion of Ukraine,
and an expected period of low or no economic growth, or even
recession in the UK over the coming year.
Our investment portfolio, while concentrated
mainly in the renewable energy, technology and healthcare sectors,
remains diversified in terms of both sub-sector and stage of
maturity.
A detailed analysis of the other risks and
uncertainties facing the business is shown in the Strategic report
below.
Share
buy-backsIt remains the Board’s policy to
buy-back shares in the market, subject to the overall constraint
that such purchases are in the Company’s interest. This includes
the maintenance of sufficient cash resources for investment in new
and existing portfolio companies and the continued payment of
dividends to shareholders.
It is the Board’s intention that such buy-backs
should be at around a 5% discount to net asset value, in so far as
market conditions and liquidity permit. The Board continues to
review the use of buy-backs and is satisfied that it is an
important means of providing market liquidity for shareholders.
Details of the Company’s share buy-backs during
the year can be found in note 15.
Albion VCTs Prospectus Top Up
Offers Your Board, in conjunction with the boards of the
other five VCTs managed by Albion Capital Group LLP, launched a
prospectus top up offer of new Ordinary shares on 10 October 2022.
The Board announced on 9 January 2023 that, following strong
demand, it would opt to exercise its over-allotment facility,
bringing the total to be raised to £11 million. The Offer was fully
subscribed and closed to further applications on 21 February
2023.
The proceeds are being used to provide support
to our existing portfolio companies and to enable us to take
advantage of new investment opportunities. Details of share
allotments made during and after the financial year end can be
found in notes 15 and 19 respectively.
Annual General Meeting
(“AGM”)The AGM will be held at noon on 7 September 2023
via the Lumi platform. Information on how to participate in the
live webcast can be found on the Manager’s website
www.albion.capital/vct-hub/agms-events.
The Board welcomes questions from shareholders
at the AGM and shareholders will be able to ask questions using the
Lumi platform during the AGM. Alternatively, shareholders can email
their questions to AAVCchair@albion.capital prior to the
Meeting.
Shareholders' views are important, and the Board
encourages shareholders to vote on the resolutions.
Further details on the format and business to be
conducted at the AGM can be found in the Directors’ report on pages
48 and 49 and in the Notice of the Meeting on pages 89 to 92 of the
full Annual Report and Financial Statements.
Outlook and prospects There
remain many uncertainties facing the Company, including high levels
of inflation, elevated interest rates, and the war in Ukraine,
which makes it difficult to be entirely confident about what lies
ahead. However, the results for the year demonstrate the resilience
of our portfolio during challenging times. The portfolio is well
diversified, with companies at different stages of maturity and
targeted at sectors such as renewable energy, healthcare, and
mission critical software, with minimal exposure to consumer
expenditure. We believe that these sectors can continue to provide
positive results for the Company and its shareholders over the
longer-term.
Richard GloverChairman4 July
2023
Strategic report
Investment policyThe Company
will invest in a broad portfolio of smaller, unquoted growth
businesses across a variety of sectors including higher risk
technology companies. Investments may take the form of equity or a
mixture of equity and loans.
Allocation of funds will be determined by the
investment opportunities which become available but efforts will be
made to ensure that the portfolio is diversified both in terms of
sector and stage of maturity of company. Funds held pending
investment or for liquidity purposes will be held as cash on
deposit.
The full investment policy can be found on page
7 of the full Annual Report and Financial Statements.
Current portfolio
analysisThe pie charts at the end of this
announcement show the split of the portfolio valuation as at 31
March 2023 by: sector; sector (excluding cash and net assets);
stage of investment; and number of employees. This is a useful way
of assessing how the Company and its portfolio is diversified
across sector, portfolio companies’ maturity measured by revenues
and their size measured by the number of people employed. As the
Company continues to invest in software and other technology
companies, FinTech (which is technology specifically applicable to
financial services companies) is included as a subsector below due
to its increasing prominence. Details of the principal investments
made by the Company are shown in the Portfolio of investments on
pages 27 and 28 of the full Annual Report and Financial
Statements.
Direction of portfolioThe
analysis of the Company’s investment portfolio shows that it is
well diversified and evenly spread across the FinTech, healthcare
(including digital healthcare), software and technology and
renewable energy sectors.
Due to the timing of the share allotments under
the 2021/22 and 2022/23 Prospectus Top Up Offers, cash and net
current assets are a significant proportion of the portfolio at
34%. The Manager has a deep sector knowledge in healthcare, FinTech
and software investing, and these funds are expected to be invested
predominantly into higher growth technology companies within these
sectors.
Further details on portfolio companies can be
found in the Portfolio of investments on pages 27 and 28 of the
full Annual Report and Financial Statements.
|
Results and dividends |
£'000 |
|
|
|
|
Net capital loss for the year ended 31 March 2023 |
(421) |
|
Net revenue return for the year ended 31 March 2023 |
546 |
|
Total return for the year ended 31 March 2023 |
125 |
|
First interim dividend of 1.33 pence per share paid on 29 July
2022 |
(1,614) |
|
Second interim dividend of 1.32 pence per share paid on 31 January
2023 |
(1,716) |
|
Unclaimed dividends returned to the Company |
12 |
|
Transferred from reserves |
(3,193) |
|
|
|
|
Net assets as at 31 March 2023 |
71,015 |
|
|
|
|
Net asset value as at 31
March 2023 |
50.88
pence per share |
Results and
dividendsThe Company paid dividends totalling 2.65
pence per share during the year ended 31 March 2023 (2022: 25.30
pence per share, which included 22.00 pence per share of special
dividends). The Board has a variable dividend policy which targets
an annual dividend yield of around 5% on the prevailing net asset
value. As a result, the Board has declared a first dividend for the
year ending 31 March 2024 of 1.27 pence per share to be paid on 31
July 2023 to shareholders on the register on 7 July 2023.
As shown in the Company’s Income statement on
page 70 of the full Annual Report and Financial Statements, the
total return for the year was 0.10 pence per share (2022: 5.77
pence per share). The total investment income increased to
£1,202,000 (2022: £1,037,000), which was due mainly to dividend
income increasing to £121,000 (2022: £7,000) and bank interest and
income from fixed term funds increasing to £140,000 (2022: £4,000)
as a result of rising interest rates. Loan stock income decreased
slightly to £941,000 (2022: £1,026,000).
The capital return on investments for the year
of £577,000 (2022: £6,553,000), has been discussed in the
Chairman’s statement above. The net asset value of the Company has
decreased to 50.88 pence per share (2022: 53.38 pence per share),
which was primarily due to the payment of dividends to shareholders
in the year, totalling 2.65 pence per share.
There was a net cash outflow for the Company of
£1,782,000 for the year (2022: net outflow of £18,894,000)
resulting from the increased number of investments made into new
and existing portfolio companies during the year, dividends paid
and share buy backs, offset by the issue of Ordinary shares under
the Albion VCTs Top Up Offers 2021/22 and 2022/23. The net cash
outflow has decreased significantly from last year, mainly due to
the payment of two special dividends in the previous year.
Review of business and future
changesA detailed review of the Company’s business during
the year is contained in the Chairman’s statement above. The total
return before tax for the year was £125,000 (2022: £5,961,000).
There is a continuing focus on growing the
healthcare (including digital healthcare), FinTech and software and
other technology sectors. The majority of these investment returns
are delivered through equity and capital gains and are expected to
be the key driver of success for the Company. Investment income,
which is received primarily from our renewable energy investments,
is expected to remain steady over the coming years.
Details of significant events which have
occurred since the end of the financial year are listed in note 19.
Details of transactions with the Manager are shown in note 5.
Future prospectsThe Company’s
portfolio remains well balanced across sectors and risk classes,
and is largely weathering the impacts of the ongoing global issues
caused as a result of high levels of interest rates and inflation,
and other economic headwinds. Although there remains much
uncertainty, the Board considers that the current portfolio has the
potential to deliver long term growth, whilst maintaining a
predictable stream of dividend payments to shareholders. Further
details on the Company’s outlook and prospects can be found in the
Chairman’s statement above.
Key performance indicators
(“KPIs”) and Alternative Performance Measures
(“APMs”)The Directors believe that the following KPIs
(some of which are APMs), which are typical for Venture Capital
Trusts, used in its own assessment of the Company, will provide
shareholders with sufficient information to assess how effectively
the Company is applying its investment policy to meet its
objectives. The Directors are satisfied that the results shown in
the following KPIs and APMs give a good indication that the Company
is achieving its investment objective and policy. These are:
1. Total
shareholder value relative to FTSE All Share Index total returnThe
graph on page 8 of the full Annual Report and Financial Statements
shows the Company’s total shareholder value relative to the FTSE
All-Share Index total return, with dividends reinvested. The FTSE
All-Share index is considered a reasonable benchmark as the Company
is classed as a generalist UK VCT investor, and this index includes
over 600 companies listed in the UK, including small-cap, covering
a range of sectors. Details on the performance of the net asset
value and return per share for the year are shown in the Chairman’s
statement above.
2. Net asset
value per share and total shareholder valueTotal shareholder value
increased by 0.15 pence to 242.87 pence per share for the year
ended 31 March 2023.
3. Movement in
shareholder value in the year†The diagram on page 9 of the full
Annual Report and Financial Statements shows the Company’s total
shareholder return over the previous ten years, five years, three
years and the past year, and the annual returns for the same period
are detailed out below.
|
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
|
2.8% |
7.4% |
7.5% |
11.8% |
7.4% |
10.5% |
(4.9)% |
10.3% |
7.6% |
0.3% |
†Methodology: Calculated as the movement in
total shareholder value for the year divided by the opening net
asset value.
The table above shows that total shareholder
value has increased in 9 of the last 10 years, with an average
return of 6.1% per annum.
4. Dividend
distributionsDividends paid in respect of the year ended 31 March
2023 were 2.65 pence per share (2022: 25.30 pence per share).
Cumulative dividends paid since inception amount to 191.99 pence
per Ordinary share.
5. Ongoing
charges The ongoing charges ratio for the year ended 31 March 2023
was 2.50% (2022: 2.44%). The ongoing charges ratio has been
calculated using The Association of Investment Companies’ (“AIC”)
recommended methodology. This figure shows shareholders the total
recurring annual running expenses (including investment management
fees charged to capital reserve) as a percentage of the average net
assets attributable to shareholders. The cap on the ongoing charges
ratio is 2.50%. During the year, the management fee was reduced by
£27,000 as a result of this cap (2022: £nil). The Directors expect
the ongoing charges ratio for the year ahead to be approximately
2.50%.
6.
VCT compliance*The investment policy is designed to ensure that the
Company continues to qualify and is approved as a VCT by HMRC. In
order to maintain its status under Venture Capital Trust
legislation, a VCT must comply on a continuing basis with the
provisions of Section 274 of the Income Tax Act 2007, details of
which are provided in the Directors’ report on page 45 of the full
Annual Report and Financial Statements.
The relevant tests to measure compliance have
been carried out and independently reviewed for the year ended 31
March 2023. These showed that the Company has complied with all
tests and continues to do so.
*VCT compliance is not a numerical measure of
performance and thus cannot be defined as an APM.
GearingAs defined by the
Articles of Association, the Company’s maximum exposure in relation
to gearing is restricted to 10% of the adjusted share capital and
reserves. The Directors do not currently have any intention to
utilise gearing for the Company.
Operational arrangementsThe
Company has delegated the investment management of the portfolio to
the Manager, Albion Capital Group LLP, which is authorised and
regulated by the Financial Conduct Authority. The Manager also
provides company secretarial and other accounting and
administrative support to the Company.
Management
agreement Under
the Management agreement, the Manager provides investment
management, secretarial and administrative services to the Company.
The Management agreement can be terminated by either party on 12
months’ notice. The Management agreement is subject to earlier
termination in the event of certain breaches or on the insolvency
of either party. The Manager is paid an annual fee equal to 1.9% of
the net asset value of the Company, and an annual secretarial and
administrative fee of £60,000 (2022: £55,000) increased annually by
RPI. These fees are payable quarterly in arrears. Total annual
expenses, including the management fee, are limited to 2.5% of the
net asset value.
In line with common practice, the Manager is
also entitled to an arrangement fee, payable by each new portfolio
company, of approximately 2% on each new investment made and any
applicable monitoring fees.
Management performance
incentiveIn order to align the interests of the Manager
and the shareholders with regards to generating positive returns,
the Manager is entitled to charge an incentive fee in the event
that the returns exceed minimum target levels.
The performance hurdle requires that the growth
of the aggregate of the net asset value per share and dividends
paid by the Company compared with the previous accounting date
exceeds RPI plus 2%. The hurdle will be calculated every year,
based on the previous year’s closing NAV per share. The starting
NAV is 79.00 pence per share, being the audited net asset value at
31 March 2019. If the target return is not achieved in a period,
the cumulative shortfall is carried forward to the next accounting
period and has to be made up before an incentive fee becomes
payable.
There was no management performance incentive
fee payable during the year. As at 31 March 2023 the cumulative
shortfall of the target return was 13.31 pence per share (31 March
2022: shortfall of 5.18 pence per share) and this amount needs to
be made up in following accounting periods before an incentive fee
becomes payable.
Investment and co-investmentThe
Company co-invests with other Venture Capital Trusts and funds
managed by the Manager. Allocation of investments is on the basis
of an allocation agreement which is based, inter alia, on the ratio
of funds available for investment.
Evaluation of the ManagerThe
Board has evaluated the performance of the Manager based on:
- the returns generated by the
Company;
- the continuing achievement of the
HMRC tests for VCT status;
- the long term prospects of the
current portfolio of investments;
- the management of treasury,
including use of buy-backs and participation in fund raising;
and
- benchmarking the performance of the
Manager to other service providers including the performance of
other VCTs that the Manager is responsible for managing.
The Board believes that it is in the interests
of shareholders as a whole, and of the Company, to continue the
appointment of the Manager for the forthcoming year.
Alternative Investment Fund Managers
Directive (“AIFMD”)The Board appointed the Manager as the
Company’s AIFM in 2014 as required by the AIFMD. The Manager is a
full-scope Alternative Investment Fund Manager under the AIFMD.
Ocorian Depositary (UK) Limited is the appointed Depositary and
oversees the custody and cash arrangements and provides other AIFMD
duties with respect to the Company.
Companies Act 2006 Section 172
Reporting Under Section 172 of the Companies Act 2006, the
Board has a duty to promote the success of the Company for the
benefit of its members as a whole in both the long and short term,
having regard to the interests of other stakeholders in the
Company, such as suppliers, and to do so with an understanding of
the impact on the community and environment and with high standards
of business conduct, which includes acting fairly between members
of the Company.
The Board is very conscious of these wider
responsibilities in the ways it promotes the Company’s culture and
ensures, as part of its regular oversight, that the integrity of
the Company’s affairs is foremost in the way the activities are
managed and promoted. This includes regular engagement with the
wider stakeholders of the Company and being alert to issues that
might damage the Company’s standing in the way that it operates.
The Board works very closely with the Manager in reviewing how
stakeholder issues are handled, ensuring good governance and
responsibility in managing the Company’s affairs, as well as
visibility and openness in how the affairs are conducted.
The Company is an externally managed investment
company with no employees, and as such has nothing to report in
relation to employee engagement but does keep close attention to
how the Board operates as a cohesive and competent unit. The
Company also has no customers in the traditional sense and,
therefore, there is also nothing to report in relation to
relationships with customers.
The table that follows sets out the key
stakeholders, details how the Board has engaged with these key
stakeholders, and the effect of these considerations on the
Company’s decisions and strategies during the year.
|
Engagement with Stakeholder |
Outcomes and decisions
based on engagement |
|
Shareholders |
The key methods of engaging with Shareholders are as follows:
- Annual General Meeting (“AGM”)
- Shareholder seminar
- Annual Report and Financial
Statements, Half-yearly financial report, and Interim management
statements
- RNS announcements in accordance
with Listing Rules and DTR covering such things as appointment of a
new Director, and the publication of a Prospectus
- Albion Capital website, social
media pages, as well as publishing Albion News shareholder
magazine
|
- Shareholders’ views are important
and the Board encourages Shareholders to exercise their right to
vote on the resolutions at the AGM. The Company’s AGM is typically
used as an opportunity to communicate with investors, including
through a presentation made by the Manager. Undertaking this
virtually enabled engagement with a wider audience of shareholders
from across the country, and gave shareholders the opportunity to
ask questions and vote during the virtual AGM last year.
- Shareholders are also encouraged to
attend the annual Shareholders’ Seminar. Last year’s event took
place on 23 November 2022. The seminar included portfolio companies
sharing insights into their businesses and also a Q&A from
Albion executives on some of the key factors affecting the
investment outlook, as well as a review of the past year and the
plans for the year ahead. Representatives of the Board attend the
seminar. The Board considers this an important interactive event,
and invites shareholders to attend this year’s event scheduled for
15 November 2023 at the Royal College of Surgeons. Further
information will be available nearer the time.
- The Board recognises the importance
to Shareholders of maintaining a share buy-back policy, in order to
provide market liquidity, and considered this when establishing the
current policy. The Board closely monitors the discount to the net
asset value to ensure this is in the region of 5%.
- The Board seeks to create value for
Shareholders by generating strong and sustainable returns to
provide shareholders with regular dividends and the prospect of
capital growth. The Board takes this into consideration when making
the decision to pay dividends to Shareholders. The variable
dividend policy has resulted in a dividend yield of 5.0% on opening
net asset value.
- During the year, the Board made the
decision to participate in the Albion Prospectus Top Up Offer,
launched on 10 October 2022, in order to raise funds for deployment
into new and existing portfolio companies. The Board carefully
considered whether further funds were required, whether the VCT
tests would continue to be met, and whether it would be in the
interest of Shareholders, before agreeing to publish the
Prospectus. On allotment, an issue price formula based on the
prevailing net asset value is used to ensure there is no dilution
to existing Shareholders.
- Cash management and liquidity of
the Company are key quarterly discussions amongst the Board, with
focus on deployment of cash for future investments, dividends and
share buy-backs.
- Shareholders can contact the
Chairman using the email AAVCchair@albion.capital.
|
|
Manager |
|
The performance of Albion Capital Group LLP is essential to the
long term success of the Company, including achieving the
investment policy and generating returns to shareholders, as well
as the impact the Company has on Environmental, Social and
Governance (“ESG”) practice. |
- The Manager meets with the Board at
least quarterly to discuss the performance of the Company, and is
in regular contact in between these meetings, e.g. to share
investment papers for new and follow-on investments. All strategic
decisions are discussed in detail and minuted, with an open
dialogue between the Board and the Manager.
- The performance of the Manager in
managing the portfolio and in providing company secretarial,
administration and accounting services is reviewed in detail each
year, which includes reviewing comparator engagement terms and
portfolio performance. Further details on the evaluation of the
Manager, and the decision to continue the appointment of the
Manager for the forthcoming year, can be found in this report.
- Details of the Manager’s
responsibilities can be found in the Statement of corporate
governance on page 52 of the full Annual Report and Financial
Statements.
|
|
Suppliers |
The key suppliers are:
- Corporate broker
- VCT taxation adviser
- Depositary
- Registrar
- Auditor
- Legal Advisor
|
- The Manager, on behalf of the
Company, is in regular contact with the suppliers and the
contractual arrangements with all the principal suppliers to the
Company are reviewed regularly and formally once a year, alongside
the performance of the suppliers in acquitting their
responsibilities.
- The Manager reviews the performance
of the providers annually, and was satisfied with their
performance.
|
|
Portfolio companies |
|
The portfolio companies are considered key stakeholders, not least
because they are principal drivers of value for the Company.
However, as discussed in the ESG report on pages 34 to 37 of the
full Annual Report and Financial Statements, the portfolio
companies’ impact on their stakeholders is also important to the
Company. |
- The Board aims to have a
diversified portfolio in terms of sector and stage of investment.
Further details of this can be found in the pie charts at the end
of this announcement.
- In most cases, an Albion executive
has either a place on the board of a portfolio company or is an
observer, in order to help with both business operation decisions,
as well as good ESG practices.
- The Manager provides access to deep
expertise on growth strategy alignment, leadership team hiring,
organisational scaling and founder leader development.
- The Manager facilitates good
dialogue with portfolio companies, and often puts on events in
order to help portfolio companies benefit from the Albion
network.
|
|
Community and environment |
|
The Company, with no employees, has no effect itself on the
community and environment. However, as discussed above, the
portfolio companies’ ESG impact is extremely important to the
Board. |
- The Board receives reports on ESG
factors within its portfolio from the Manager as it is a signatory
of the United Nations Principles for Responsible Investment (“UN
PRI”). Further details of this are set out in the ESG report below.
ESG, without its specific definition, has always been at the heart
of the responsible investing that the Company engages in and in how
the Company conducts itself with all of its stakeholders.
|
Social and community issues,
employees and human rightsThe
Board recognises the requirement under section 414C of the Act to
detail information about social and community issues, employees and
human rights; including any policies it has in relation to these
matters and effectiveness of these policies. As an externally
managed investment company with no employees, the Company has no
formal policies in these matters, however, it is at the core of its
responsible investment strategy as detailed above.
General Data Protection
Regulation The General Data Protection Regulation (“GDPR”)
has the objective of unifying data privacy requirements across the
European Union. GDPR forms part of the UK law after Brexit, now
known as UK GDPR. The Manager continues to take action to ensure
that the Manager and the Company are compliant with the
regulation.
Further policiesThe Company has
adopted a number of further policies relating to:
- Environment
- Global greenhouse gas
emissions
- Anti-bribery
- Anti-facilitation of tax
evasion
- Diversity
and these are set out in the Directors’ report
on pages 46 and 47 of the full Annual Report and Financial
Statements.
Risk managementThe Board
carries out a regular review of the risk environment in which the
Company operates, together with changes to the environment and
individual risks. The Board also identifies emerging risks which
might impact on the Company. In the period the most noticeable
risks have been the emergence of rising interest rates and
inflation, caused in part as a result of the Russian invasion of
Ukraine, and pricing volatility in world markets, particularly
affecting growth stocks. The full impacts of these risks are likely
to continue to be uncertain for some time.
The Board has carried out a robust assessment of
the Company’s principal risks and uncertainties and seeks to
mitigate these risks through regular reviews of performance
and monitoring progress and compliance. The Board applies the
principles detailed in the Financial Reporting Council’s Guidance
on Risk Management, Internal Control and Related Financial and
Business Reporting, in the mitigation and management of these
risks. More information on specific mitigation measures for the
principal risks and uncertainties are explained below:
|
Possible consequence |
Risk assessment during the year |
Risk management |
|
Risk: Investment,
performance, technology, and
valuation risk |
|
The risk of investment in poor quality businesses, which could
reduce the returns to shareholders and could negatively impact on
the Company’s current and future valuations. By nature, smaller
unquoted businesses, such as those that qualify for Venture Capital
Trust purposes, are more volatile than larger, long-established
businesses. Technology related risks are also likely to be greater
in early, rather than later, stage technology investments,
including the risks of the technology not becoming generally
accepted by the market or the obsolescence of the technology
concerned, often due to greater financial resources being available
to competing companies. The Company’s investment valuation
methodology is reliant on the accuracy and completeness of
information that is issued by portfolio companies. In particular,
the Directors may not be aware of or take into account certain
events or circumstances which occur after the information issued by
such companies is reported. |
Increased in the year due to the heightened economic and
geopolitical issues as referred to in the Chairman’s statement. In
addition, in the current economic climate the valuations of
technology companies are more volatile. |
To reduce this risk, the Board places reliance upon the skills and
expertise of the Manager and its track record of making successful
investments in higher growth technology businesses. The Manager
operates a structured investment appraisal and review process,
which includes an Investment Committee, comprising investment
professionals from the Manager for all investments, and at least
one external investment professional for investments greater than
£1 million in aggregate across all the Albion managed VCTs. The
Manager also invites and takes account of comments from
non-executive Directors of the Company on matters discussed at the
Investment Committee meetings.Investments are actively and
regularly monitored by the Manager (investment managers observe or
sit on portfolio company boards), including the level of
diversification in the portfolio, and the Board receives detailed
reports on each investment as part of the Manager’s report at
quarterly board meetings. The Board and Manager regularly review
the deployment of investments and cash resources available to the
Company in assessing liquidity required for servicing the Company’s
buy-backs, dividend payments and operational expenses. The decision
to issue a Prospectus for the 2022/23 Top Ups was due to careful
analysis of these factors.The unquoted investments held by the
Company are designated at fair value through profit or loss and
valued in accordance with the International Private Equity and
Venture Capital Valuation Guidelines updated in 2022. These
guidelines set out recommendations, intended to represent current
best practice on the valuation of venture capital investments. The
valuation takes into account all known material facts up to the
date of approval of the Financial Statements by the Board. |
|
Risk: VCT approval and regulatory change
risk |
|
The Company must comply with section 274 of the Income Tax Act 2007
which enables its investors to take advantage of tax relief on
their investment and on future returns. Breach of any of the rules
enabling the Company to hold VCT status could result in the loss of
that status. |
No change in the year. |
To reduce this risk, the Board has appointed the Manager, which has
a team with significant experience in Venture Capital Trust
management, used to operating within the requirements of the
Venture Capital Trust legislation. In addition, to provide further
formal reassurance, the Board has appointed Philip Hare &
Associates LLP as its taxation adviser, who report quarterly to the
Board to independently confirm compliance with the Venture Capital
Trust legislation, to highlight areas of risk and to inform on
changes in legislation. Each investment in a new portfolio company
is also pre-cleared with our professional advisers or H.M. Revenue
& Customs. The Company monitors closely the extent of
qualifying holdings and addresses this as required. |
|
Risk: Regulatory and compliance
risk |
|
The Company is listed on The London Stock Exchange and is required
to comply with the rules of the Financial Conduct Authority, as
well as with the Companies Act, Accounting Standards and other
legislation. Failure to comply with these regulations could result
in a delisting of the Company’s shares, or other penalties under
the Companies Act or from financial reporting oversight
bodies. |
No change in the year. |
Board members and the Manager have experience of operating at
senior levels within or advising quoted companies. In addition, the
Board and the Manager receive regular updates on new regulation
from its auditor, legal advisors and other professional bodies. The
Company is subject to compliance checks through the Manager’s
compliance function, and any issues arising from compliance or
regulation are reported to its own board every two months. These
controls are also reviewed as part of the quarterly Board meetings,
and also as part of the review work undertaken by the Manager’s
compliance officer. The report on controls is also evaluated by the
internal auditors. |
|
Risk: Operational and internal control
risk |
|
The Company relies on a number of third parties, in particular the
Manager, for the provision of investment management and
administrative functions. Failures in key systems and controls
within the Manager’s business could put assets of the Company at
risk or result in reduced or inaccurate information being passed to
the Board or to shareholders. |
No change in the year. |
The Company and its operations are subject to a series of rigorous
internal controls and review procedures exercised throughout the
year. The Board receives reports from the Manager on its internal
controls and risk management.The Audit and Risk Committee reviews
the Internal Audit Reports prepared by the Manager’s internal
auditors, Azets, and has access to their internal audit partner to
whom it can ask specific detailed questions in order to satisfy
itself that the Manager has strong systems and controls in place
including those in relation to business continuity and cyber
security, as mentioned below. Ocorian Depositary (UK) Limited is
the Company’s Depositary, appointed to oversee the custody and cash
arrangements and provide other AIFMD duties. The Board reviews the
quarterly reports prepared by Ocorian Depositary (UK) Limited to
ensure that the Manager is adhering to its policies and procedures
as required by the AIFMD. In addition, the Board annually reviews
the performance of its key service providers, particularly the
Manager, to ensure they continue to have the necessary expertise
and resources to deliver the Company’s investment objective and
policy. The Manager and other service providers have also
demonstrated to the Board that there is no undue reliance placed
upon any one individual. |
|
Risk: Cyber and data
security |
|
A cyber-attack on one of the Company's third party suppliers could
result in the security of, potentially sensitive, data being
compromised, leading to financial loss, disruption or damage to the
reputation of the Company. |
Increased in the year due to an increase in cyber-attacks
worldwide. |
The Manager outsources some of its IT services, including hardware
and software procurement, server management, backup provision and
day-to-day support through an outsourcing arrangement with an IT
consultant. In house IT support is also provided.The Manager takes
cyber risks seriously and the need to guard against these are in
the Service level agreement with our key outsourced service
provider. During the year, further investment was made in our IT
infrastructure and awareness training.In addition, the Manager also
has a business continuity plan which includes off-site storage of
records and remote access provisions. This is revised and tested
annually and is also subject to Compliance, Group Risk and Internal
Audit reporting. Penetration tests are also carried out to ensure
that IT systems are not susceptible to any cyber-attacks.The
Manager’s Internal Auditor performs reviews on IT general controls
and data confidentiality and makes recommendations where necessary.
The most recent internal audit focused specifically on IT systems,
and was completed in February 2023. |
|
Risk: Economic and political
risk |
|
Changes in economic conditions, including, for example, interest
rates, rates of inflation, industry conditions, competition,
political and diplomatic events, and other factors could
substantially and adversely affect the Company’s prospects in a
number of ways. This also includes risks of social upheaval,
including from infection and population re-distribution, as well as
economic risk challenges as a result of healthcare
pandemics/infection. |
Increased in the year due to the high levels of inflation, rising
interest rates and the geopolitical risks from the invasion of
Ukraine. |
The Company invests in a diversified portfolio of companies across
a number of industry sectors and in addition often invests in a
mixture of instruments in portfolio companies and has a policy of
minimising any external bank borrowings within portfolio
companies.At any given time, the Company has sufficient cash
resources to meet its operating requirements, including share
buy-backs and follow-on investments.In common with most commercial
operations, exogenous risks over which the Company has no control
are always a risk and the Company does what it can to address these
risks where possible, not least as the nature of the investments
the Company makes are long term. The Board and Manager are
continuously assessing the resilience of the portfolio, the Company
and its operations and the robustness of the Company’s external
agents, as well as considering longer term impacts on how the
Company might be positioned in how it invests and operates.
Ensuring liquidity in the portfolio to cope with exigent and
unexpected pressures on the finances of the portfolio and the
Company is an important part of the risk mitigation in these
uncertain times. The portfolio is structured as an all-weather
portfolio with c.50 companies which are diversified as discussed
above. Exposure is relatively small to at-risk sectors that include
leisure, hospitality, retail and travel. |
|
Risk: Environmental, social and governance
(“ESG”) risk |
|
An insufficient ESG policy could lead to an increased negative
impact on the environment, including the Company’s carbon
footprint. Non-compliance with reporting requirements could lead to
a fall in demand from investors, reputational damage and penalties.
Climate risks could also negatively impact on the value of
portfolio investments. |
No change in the year. |
The Manager is a signatory of the UN PRI and the Board is kept
updated of the evolving ESG policies at quarterly Board meetings.
Full details of the specific procedures and risk mitigation can be
found in the ESG report on pages 34 to 37 of the full Annual Report
and Financial Statements. These procedures ensure that this risk
continues to be mitigated where possible.Whilst the Company itself
has limited impact on climate change, due to no employees nor
greenhouse gas emissions, the Board works closely with the Manager
to ensure the Manager themselves are working towards reducing their
impact on the environment, and that the Manager takes account of
ESG factors, including climate change, when making new investment
decisions. With specific respect to the Company, a key operation is
increasing the use of electronic communications with
Shareholders. |
|
Risk: Liquidity risk |
|
The Company may not have sufficient cash available to meet its
financial obligations. The Company’s portfolio is primarily in
smaller unquoted companies, which are inherently illiquid as there
is no readily available market, and thus it may be difficult to
realise their fair value at short notice. |
No change in the year. |
To reduce this risk, the Board reviews the Company’s three year
cash flow forecasts on a quarterly basis. These include potential
investment realisations (which are closely monitored by the
Manager), Top Up Offers, dividend payments and operational
expenditure. This ensures that there are sufficient cash resources
available for the Company’s liabilities as they fall due. |
Viability statementIn
accordance with the FRC UK Corporate Governance Code published in
2018 and provision 36 of the AIC Code of Corporate Governance, the
Directors have assessed the prospects of the Company over three
years to 31 March 2026. The Directors believe that three years is a
reasonable period in which they can assess the ability of the
Company to continue to operate and meet its liabilities as they
fall due. This is the period used by the Board as part of its
strategic planning process, which includes: the estimated timelines
for finding, assessing and completing investments; the potential
impact of any new regulations; and the availability of cash.
The Board has carried out a robust assessment of
the principal and emerging risks facing the Company, including
those that could threaten its business model, future performance,
solvency or liquidity, and focused on the major factors which
affect the economic, regulatory and political environment. The
Board carefully assessed, and were satisfied with, the risk
management processes in place to avoid or reduce the impact of
these risks. The Board has carried out robust stress testing of
cashflows which included; factoring in higher levels of inflation
when budgeting for future expenses, only including proceeds from
investment disposals where there is a high probability of
completion, whilst also assessing the resilience of investee
companies given the current decline in the global economy,
including the requirement for any future financial support.
The Board has additionally considered the
ability of the Company to comply with the ongoing conditions to
ensure it maintains its VCT qualifying status under its current
investment policy. As a result of the Board’s quarterly valuation
reviews, it has concluded that the portfolio is well balanced and
geared towards delivering long term growth and strong returns to
shareholders.
The Board has concluded that there is a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the three
year period to 31 March 2026. The Board is mindful of the ongoing
risks and will continue to ensure that appropriate safeguards are
in place, in addition to monitoring the quarterly cashflow
forecasts to ensure the Company has sufficient liquidity.
Companies Act 2006This
Strategic report of the Company for the year ended 31 March 2023
has been prepared in accordance with the requirements of section
414A of the Companies Act 2006 (the “Act”). The purpose of this
report is to provide Shareholders with sufficient information to
enable them to assess the extent to which the Directors have
performed their duty to promote the success of the Company in
accordance with Section 172 of the Act.
Richard GloverChairman4 July
2023
Statement of Directors’
responsibilities
In preparing these Financial Statements for the
year to 31 March 2023, the Directors of the Company, being Richard
Glover, Ann Berresford, Neeta Patel CBE and Richard Wilson, confirm
to the best of their knowledge:
- summary financial information
contained in this announcement and the full Annual Report and
Financial Statements for the year ended 31 March 2023 for the
Company has been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law) and give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
and
- the Chairman’s statement and
Strategic report include a fair review of the development and
performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties it faces.
We consider that the Annual Report and Financial
Statements, taken as a whole, are fair, balanced, and
understandable and provide the information necessary for
shareholders to assess the Company’s position, performance,
business model and strategy.
A detailed “Statement of Directors’
responsibilities” is contained on page 50 of the full Annual Report
and Financial Statements.
For and on behalf of the Board
Richard GloverChairman4 July
2023
Income statement
|
|
|
Year ended 31 March
2023 |
Year ended 31 March 2022 |
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Note |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
Net gains on investments |
3 |
- |
577 |
577 |
- |
6,553 |
6,553 |
|
Investment income |
4 |
1,202 |
- |
1,202 |
1,037 |
- |
1,037 |
|
Investment Manager’s fees |
5 |
(122) |
(1,097) |
(1,219) |
(122) |
(1,097) |
(1,219) |
|
Other expenses |
6 |
(435) |
- |
(435) |
(411) |
- |
(411) |
|
Profit/(loss) on ordinary
activities before tax |
|
645 |
(520) |
125 |
504 |
5,456 |
5,960 |
|
Tax (charge)/credit on ordinary activities |
8 |
(99) |
99 |
- |
(97) |
98 |
1 |
|
Profit/(loss) and total
comprehensive income attributable to shareholders |
|
546 |
(421) |
125 |
407 |
5,554 |
5,961 |
|
Basic and diluted return/(loss)
per share (pence)* |
10 |
0.44 |
(0.34) |
0.10 |
0.39 |
5.38 |
5.77 |
* Adjusted for treasury shares
The accompanying notes form an integral part of
these Financial Statements.
The total column of this Income statement
represents the profit and loss account of the Company. The
supplementary revenue and capital columns have been prepared in
accordance with The Association of Investment Companies’ Statement
of Recommended Practice.
Balance
sheet
|
|
|
31 March 2023 |
31 March 2022 |
|
|
Note |
£’000 |
£’000 |
|
|
|
|
|
|
Fixed asset investments |
11 |
46,823 |
37,604 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Trade and other receivables |
13 |
1,960 |
1,926 |
|
Cash in bank and at hand |
|
22,886 |
24,668 |
|
|
|
24,846 |
26,594 |
|
|
|
|
|
|
Payables: amounts falling due within one year |
|
|
|
|
Trade and other payables |
14 |
(654) |
(261) |
|
|
|
|
|
|
Net current assets |
|
24,192 |
26,333 |
|
|
|
|
|
|
Total assets less current
liabilities |
|
71,015 |
63,937 |
|
|
|
|
|
|
Equity attributable to equity holders |
|
|
|
|
Called-up share capital |
15 |
1,587 |
1,369 |
|
Share premium |
|
21,531 |
10,047 |
|
Capital redemption reserve |
|
31 |
22 |
|
Unrealised capital reserve |
|
8,415 |
6,550 |
|
Realised capital reserve |
|
2,089 |
7,693 |
|
Other distributable reserve |
|
37,362 |
38,256 |
|
Total equity shareholders’ funds |
|
71,015 |
63,937 |
|
|
|
|
|
|
Basic and diluted net asset value per share
(pence)* |
16 |
50.88 |
53.38 |
|
|
|
|
|
*Excluding treasury shares
The accompanying notes form an integral part of
these Financial Statements.
These Financial Statements were approved by the
Board of Directors and authorised for issue on 4 July 2023, and
were signed on its behalf by:
Richard GloverChairman
Company number: 03142609
Statement of changes in
equity
|
|
Called-up
sharecapital |
Share premium |
Capital redemption reserve |
Unrealised capital reserve |
Realised capital reserve* |
Other distributable reserve* |
Total |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
At 1 April 2022 |
1,369 |
10,047 |
22 |
6,550 |
7,693 |
38,256 |
63,937 |
|
Return/(loss) and total comprehensive income for the year |
- |
- |
- |
492 |
(913) |
546 |
125 |
|
Transfer of previously unrealised losses on realisations of
investments |
- |
- |
- |
1,373 |
(1,373) |
- |
- |
|
Purchase of shares for cancellation |
(9) |
- |
9 |
- |
- |
(455) |
(455) |
|
Purchase of treasury shares |
- |
- |
- |
- |
- |
(985) |
(985) |
|
Issue of equity |
227 |
11,754 |
- |
- |
- |
- |
11,981 |
|
Cost of issue of equity |
- |
(270) |
- |
- |
- |
- |
(270) |
|
Net dividends paid (note 9) |
- |
- |
- |
- |
(3,318) |
- |
(3,318) |
|
At 31 March
2023 |
1,587 |
21,531 |
31 |
8,415 |
2,089 |
37,362 |
71,015 |
|
At 1 April 2021 |
1,165 |
40,668 |
7 |
3,588 |
21,829 |
5,431 |
72,688 |
|
Return and total comprehensive income for the year |
- |
- |
- |
3,784 |
1,770 |
407 |
5,961 |
|
Transfer of previously unrealised gains on realisations of
investments |
- |
- |
- |
(822) |
822 |
- |
- |
|
Purchase of shares for cancellation |
(39) |
- |
39 |
- |
- |
(2,013) |
(2,013) |
|
Issue of equity |
243 |
12,694 |
- |
- |
- |
- |
12,937 |
|
Cost of issue of equity |
- |
(254) |
- |
- |
- |
- |
(254) |
|
Reduction of share premium and capital redemption reserve |
- |
(43,061) |
(24) |
- |
- |
43,085 |
- |
|
Net dividends paid (note 9) |
- |
- |
- |
- |
(16,728) |
(8,654) |
(25,382) |
|
At 31 March 2022 |
1,369 |
10,047 |
22 |
6,550 |
7,693 |
38,256 |
63,937 |
*These reserves include an amount of £20,254,000
(2022: £26,804,000) which is considered distributable. Over the
next three years an additional £17,018,000 will become
distributable. This is due to the HMRC requirement that the Company
cannot use capital raised in the past three years to make a payment
or distribution to shareholders. On 1 April 2023, £13,435,000
became distributable in line with this.
The accompanying notes form an integral part of
these Financial Statements.
Statement of cash flows
|
|
Year ended 31 March
2023 |
Year ended 31 March 2022 |
|
|
£’000 |
£’000 |
|
Cash flow from operating activities |
|
|
|
Loan stock income received |
851 |
978 |
|
Dividend income received |
121 |
7 |
|
Income from fixed term funds received |
85 |
2 |
|
Bank interest received |
55 |
2 |
|
Investment Manager’s fees paid |
(1,019) |
(1,434) |
|
Other cash payments |
(431) |
(389) |
|
UK Corporation tax paid |
- |
(42) |
|
Net cash flow used in operating activities |
(338) |
(876) |
|
|
|
|
|
Cash flow from investing activities |
|
|
|
Purchase of fixed asset investments |
(9,425) |
(7,771) |
|
Proceeds from disposals of fixed asset investments |
834 |
4,649 |
|
Net cash flow used in investing activities |
(8,591) |
(3,122) |
|
|
|
|
|
Cash flow from financing activities |
|
|
|
Issue of share capital |
11,159 |
8,941 |
|
Cost of issue of equity |
(6) |
(35) |
|
Dividends paid* |
(2,758) |
(21,589) |
|
Purchase of own shares (including costs) |
(1,248) |
(2,213) |
|
Net cash flow
from/(used
in) financing
activities |
7,147 |
(14,896) |
|
|
|
|
|
Decrease in cash in bank and at hand |
(1,782) |
(18,894) |
|
Cash in bank and at hand at start of the year |
24,668 |
43,562 |
|
Cash in bank and at hand at end of the year |
22,886 |
24,668 |
*The equity dividends paid shown in the cash flow
are different to the dividends disclosed in note 9 as a result of
the non-cash effect of the Dividend Reinvestment Scheme and the
timing of unclaimed dividends.
The accompanying notes form an integral part of
these Financial Statements.
Notes to the Financial
Statements
1. Basis of
preparationThe Financial Statements have been prepared in
accordance with applicable United Kingdom law and accounting
standards, including Financial Reporting Standard 102 (“FRS 102”),
and with the Statement of Recommended Practice “Financial
Statements of Investment Trust Companies and Venture Capital
Trusts” (“SORP”) issued by The Association of Investment Companies
(“AIC”). The Financial Statements have been prepared on a going
concern basis and further details can be found in the Directors’
report on page 44 of the full Annual Report and Financial
Statements.
The preparation of the Financial Statements
requires management to make judgements and estimates that affect
the application of policies and reported amounts of assets,
liabilities, income and expenses. The most critical estimates and
judgements relate to the determination of carrying value of
investments at Fair Value Through Profit and Loss (“FVTPL”) in
accordance with FRS 102 sections 11 and 12. The Company values
investments by following the International Private Equity and
Venture Capital Valuation (“IPEV”) Guidelines as updated in 2022
and further detail on the valuation techniques used are outlined
below.
Company information is shown on page 4 of the
full Annual Report and Financial Statements.
2. Accounting policies
Fixed asset
investmentsThe Company’s business is
investing in financial assets with a view to profiting from their
total return in the form of income and capital growth. This
portfolio of financial assets is managed and its performance
evaluated on a fair value basis, in accordance with a documented
investment policy, and information about the portfolio is provided
internally on that basis to the Board.
In accordance with the requirements of FRS 102,
those undertakings in which the Company holds more than 20% of the
equity as part of an investment portfolio are not accounted for
using the equity method. In these circumstances the investment is
measured at FVTPL.
Upon initial recognition (using trade date
accounting) investments, including loan stock, are classified by
the Company as FVTPL and are included at their initial fair value,
which is cost (excluding expenses incidental to the acquisition
which are written off to the Income statement).
Subsequently, the investments are valued at
‘fair value’, which is measured as follows:
- Investments listed on recognised
exchanges are valued at their bid prices at the end of the
accounting period or otherwise at fair value based on published
price quotations.
- Unquoted investments, where there
is not an active market, are valued using an appropriate valuation
technique in accordance with the IPEV Guidelines. Indicators of
fair value are derived using established methodologies including
earnings multiples, the level of third party offers received, cost
or price of recent investment rounds, net assets, discounted cash
flows and industry valuation benchmarks. Where price of recent
investment is used as a starting point for estimating fair value at
subsequent measurement dates, this has been benchmarked using an
appropriate valuation technique permitted by the IPEV
guidelines.
- In situations where cost or price
of recent investment is used, consideration is given to the
circumstances of the portfolio company since that date in
determining fair value. This includes consideration of whether
there is any evidence of deterioration or strong definable evidence
of an increase in value. In the absence of these indicators, the
investment in question is valued at the amount reported at the
previous reporting date. Examples of events or changes that could
indicate a diminution include:
- the performance and/or prospects of
the underlying business are significantly below the expectations on
which the investment was based;
- a significant adverse change either
in the portfolio company’s business or in the technological,
market, economic, legal or regulatory environment in which the
business operates; or
- market conditions have
deteriorated, which may be indicated by a fall in the share prices
of quoted businesses operating in the same or related sectors.
Investments are recognised as financial assets
on legal completion of the investment contract and are
de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the
fair value movement of an investment, but is recognised separately
as investment income through the other distributable reserve when a
share becomes ex-dividend.
Current assets and
payablesReceivables (including debtors due after more than
one year), payables and cash are carried at amortised cost, in
accordance with FRS 102. Deferred consideration meets the
definition of a financing transaction held at amortised cost, and
interest will be recognised through capital over the credit period
using the effective interest method. There are no financial
liabilities other than payables.
Investment incomeDividend
incomeDividend income is included in revenue when the investment is
quoted ex-dividend.
Unquoted loan stock Fixed returns on non-equity
shares and debt securities are recognised when the Company’s right
to receive payment and expect settlement is established. Where
interest is rolled up and/or payable at redemption then it is
recognised as income unless there is reasonable doubt as to its
receipt.
Fixed term funds incomeFunds income is
recognised on an accruals basis using the agreed rate of
interest.
Bank deposit incomeInterest income is recognised
on an accruals basis using the rate of interest agreed with the
bank.
Investment management
fee, performance incentive fee
and other expensesAll expenses have been accounted
for on an accruals basis. Expenses are charged through the other
distributable reserve except the following which are charged
through the realised capital reserve:
- 90% of management fees and 100% of
performance incentive fees, if any, are allocated to the realised
capital reserve; and
- expenses which are incidental to
the purchase or disposal of an investment are charged through the
realised capital reserve.
TaxationTaxation is applied on
a current basis in accordance with FRS 102. Current tax is tax
payable (refundable) in respect of the taxable profit (tax loss)
for the current period or past reporting periods using the tax
rates and laws that have been enacted or substantively enacted at
the financial reporting date. Taxation associated with capital
expenses is applied in accordance with the SORP.
Deferred tax is provided in full on all timing
differences at the reporting date. Timing differences are
differences between taxable profits and total comprehensive income
as stated in the financial statements that arise from the inclusion
of income and expenses in tax assessments in periods different from
those in which they are recognised in the financial statements. As
a VCT the Company has an exemption from tax on capital gains. The
Company intends to continue meeting the conditions required to
obtain approval as a VCT in the foreseeable future. The Company
therefore, should have no material deferred tax timing differences
arising in respect of the revaluation or disposal of investments
and the Company has not provided for any deferred tax.
ReservesCalled-up share
capitalThis accounts for the nominal value of the Company’s
shares.
Share premium This accounts for the difference
between the price paid for shares and the nominal value of the
shares, less issue costs and transfers on cancellation of share
premium once consent of the court is given.
Capital redemption reserveThis reserve accounts
for amounts by which the issued share capital is diminished through
the repurchase and cancellation of the Company’s own shares, less
any transfers on cancellation of share premium once consent of the
court is given.
Unrealised capital reserveIncreases and
decreases in the valuation of investments held at the year end
against cost are included in this reserve.
Realised capital reserveThe following are
disclosed in this reserve:
- gains and losses compared to cost
on the realisation of investments, or permanent diminutions in
value (including gains recognised on the realisation of investment
where consideration is deferred that are not distributable as a
matter of law);
- finance income in respect of the
unwinding of the discount on deferred consideration that is not
distributable as a matter of law;
- expenses, together with the related
taxation effect, charged in accordance with the above policies;
and
- dividends paid to equity holders
where paid out by capital.
Other distributable reserveThe special reserve,
treasury share reserve and the revenue reserve were combined in
2012 to form a single reserve named other distributable
reserve.
This reserve accounts for movements from the
revenue column of the Income statement, the payment of dividends,
the buy-back of shares, transfers from the share premium and
capital redemption reserve, and other non-capital realised
movements.
DividendsDividends by the
Company are accounted for when the liability to make the payment
(record date) has been established.
Segmental reportingThe
Directors are of the opinion that the Company is engaged in a
single operating segment of business, being investment in smaller
companies principally based in the UK.
3.
Gains/(losses) on
investments
|
|
Year ended 31 March
2023 |
Year ended 31 March 2022 |
|
|
£’000 |
£’000 |
|
Unrealised gains on fixed asset investments |
492 |
3,784 |
|
Realised (losses)/gains on fixed asset investments |
(176) |
2,546 |
|
Unwinding of discount on deferred consideration |
261 |
223 |
|
|
577 |
6,553 |
4. Investment income
|
|
Year ended 31 March
2023 |
Year ended 31 March 2022 |
|
|
£’000 |
£’000 |
|
Loan stock interest |
941 |
1,026 |
|
Dividend income |
121 |
7 |
|
Income from fixed term funds |
85 |
2 |
|
Bank interest |
55 |
2 |
|
|
1,202 |
1,037 |
5. Investment
Manager’s
fees
|
|
Year ended31 March
2023£’000 |
Year ended31 March 2022£’000 |
|
Investment management fee charged to revenue |
122 |
122 |
|
Investment management fee charged to capital |
1,097 |
1,097 |
|
|
1,219 |
1,219 |
Further details of the Management agreement
under which the investment manager is paid are given in the
Strategic report above.
During the year, services of a total value of
£1,279,000 (2022: £1,274,000), were purchased by the Company from
Albion Capital Group LLP (“Albion”); this includes £1,219,000
(2022: £1,219,000) of investment management fee and £60,000 (2022:
£55,000) of secretarial and administration fee. At the financial
year end, the amount due to Albion in respect of these services
disclosed within payables was £345,000 (2022: £144,000). The total
annual running costs of the Company are capped at an amount equal
to 2.5% of the Company’s net assets, with any excess being met by
Albion by a way of a reduction in management fees. During the year,
the management fee was reduced by £27,000 as a result of this cap
(2022: £nil).
Albion is, from time to time, eligible to
receive arrangement fees and monitoring fees from portfolio
companies. During the year ended 31 March 2023, fees of £193,000
attributable to the investments of the Company were received by
Albion pursuant to these arrangements (2022: £155,000).
Albion, its partners and staff hold a total of
1,434,141 shares in the Company as at 31 March 2023.
The Company entered into an offer agreement
relating to the Offers pursuant to which Albion received a fee of
2.5% of the gross proceeds of the Offers and out of which Albion
paid the costs of the Offers, as detailed in the Prospectus.
6. Other expenses
|
|
Year ended 31 March
2023 |
Year ended 31 March 2022 |
|
|
£’000 |
£’000 |
|
Directors’ fees (including NIC) |
114 |
103 |
|
Auditor’s remuneration for statutory audit services (excluding
VAT) |
48 |
39 |
|
Secretarial and administration fee |
60 |
55 |
|
Other administrative expenses |
213 |
214 |
|
|
435 |
411 |
7. Directors’ fees The amounts
paid to and on behalf of Directors during the year are as
follows:
|
|
Year ended 31 March
2023 |
Year ended 31 March 2022 |
|
|
£’000 |
£’000 |
|
Directors’ fees |
104 |
95 |
|
National insurance |
10 |
8 |
|
|
114 |
103 |
The Company’s key management personnel are the
Directors. Further information regarding Directors’ remuneration
can be found in the Directors’ remuneration report on page 59 of
the full Annual Report and Financial Statements.
8. Tax
(charge)/credit
on ordinary activities
|
|
Year ended 31 March
2023 |
Year ended 31 March 2022 |
|
|
Revenue£’000 |
Capital£’000 |
Total£’000 |
Revenue£’000 |
Capital£’000 |
Total£’000 |
|
UK corporation tax in respect of current year |
99 |
(99) |
- |
98 |
(98) |
- |
|
UK corporation tax in respect of prior year |
- |
- |
- |
(1) |
- |
(1) |
|
|
99 |
(99) |
- |
97 |
(98) |
(1) |
|
Reconciliation of profit on ordinary activities to taxation
charge |
Year ended 31 March
2023 £’000 |
Year ended 31 March 2022 £’000 |
|
Return on ordinary activities before taxation |
125 |
5,960 |
|
|
|
|
|
Tax charge on profit at the standard rate of 19.00% (2022:
19.00%) |
24 |
1,132 |
|
|
|
|
|
Factors affecting the charge: |
|
|
|
Non-taxable gains |
(110) |
(1,245) |
|
Income not taxable |
(23) |
(1) |
|
Prior year refund |
- |
1 |
|
Excess management expenses carried forward |
109 |
112 |
|
|
- |
(1) |
The tax charge for the year shown in the Income
statement is lower than the standard rate of corporation tax in the
UK of 19.00% (2022: 19.00%). The differences are explained above.
From 1 April 2023, the Company’s rate of corporation tax will
increase in the UK from 19% to 25%.
Notes (i)
Venture Capital
Trusts are not subject to corporation tax on capital
gains.(ii) Tax relief on expenses
charged to capital has been determined by allocating tax relief to
expenses by reference to the applicable corporation tax rate and
allocating the relief between revenue and capital in accordance
with the SORP.(iii) The Company has
excess management expenses of £1,154,000 (2022: £582,000) that are
available for offset against future profits. A deferred tax asset
of £289,000 (2022: £146,000) has not been recognised in respect of
these losses as they will be recoverable only to the extent that
the Company has sufficient future taxable profits.
9. Dividends
|
|
Year ended 31 March
2023 |
Year ended 31 March 2022 |
|
|
£’000 |
£’000 |
|
First interim dividend of 1.33p per share paid on 29 July 2022 (31
July 2021: First interim and first special dividend of 16.83p per
share) |
1,614 |
16,728 |
|
Second special dividend of 7.00p per share paid on 31 December
2021 |
- |
7,141 |
|
Second interim dividend of 1.32p per share paid on 31 January 2023
(31 January 2022: Second interim dividend of 1.47p per share) |
1,716 |
1,523 |
|
Unclaimed dividends |
(12) |
(10) |
|
|
3,318 |
25,382 |
In addition to the dividends summarised above,
the Board has declared a first dividend for the year ending 31
March 2024 of 1.27 pence per share to be paid on 31 July 2023 to
shareholders on the register on 7 July 2023. The total dividend
will be approximately £1,783,000.
During the year, unclaimed dividends older than
twelve years of £12,000 (2022: £10,000) were returned to the
Company in accordance with the terms of the Articles of Association
and have been accounted for on an accruals basis.
10.
Basic and diluted return/(loss)
per share
|
|
Year ended 31 March
2023 |
Year ended 31 March 2022 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Return/(loss) attributable to equity shares (£’000) |
546 |
(421) |
125 |
407 |
5,554 |
5,961 |
|
Weighted average shares in issue (adjusted for treasury
shares) |
|
123,938,910 |
|
|
103,265,706 |
|
|
Return/(loss) attributable per equity share (pence) |
0.44 |
(0.34) |
0.10 |
0.39 |
5.38 |
5.77 |
The weighted average number of shares is
calculated after adjusting for treasury shares of 19,137,781 (2022:
17,153,431).
There are no convertible instruments,
derivatives or contingent share agreements in issue so basic and
diluted return per share are the same.
11.
Fixed asset investments
|
Investments held at fair value through profit or
loss |
31 March 2023£’000 |
31 March 2022£’000 |
|
Unquoted equity |
34,202 |
24,388 |
|
Unquoted loan stock |
12,354 |
12,460 |
|
Quoted equity |
267 |
756 |
|
|
46,823 |
37,604 |
|
Opening valuation |
37,604 |
28,355 |
|
Purchases at cost |
9,425 |
7,771 |
|
Disposal proceeds |
(612) |
(4,899) |
|
Realised (losses)/gains |
(176) |
2,546 |
|
Movement in loan stock accrued income |
90 |
47 |
|
Unrealised gains |
492 |
3,784 |
|
Closing valuation |
46,823 |
37,604 |
|
|
|
|
|
Movement in loan stock accrued income |
|
|
|
Opening accumulated loan stock accrued income |
246 |
199 |
|
Movement in loan stock accrued income |
90 |
47 |
|
Closing accumulated loan stock accrued income |
336 |
246 |
|
|
|
|
|
Movement in unrealised gains |
|
|
|
Opening accumulated unrealised gains |
6,550 |
3,588 |
|
Transfer of previously unrealised losses/(gains) to realised
reserve on realisations of investments |
1,373 |
(822) |
|
Unrealised gains |
492 |
3,784 |
|
Closing accumulated unrealised gains |
8,415 |
6,550 |
|
|
|
|
|
Historic cost basis |
|
|
|
Opening book cost |
30,808 |
24,568 |
|
Purchases at cost |
9,425 |
7,771 |
|
Disposals at cost |
(2,160) |
(1,531) |
|
Closing book cost |
38,073 |
30,808 |
Purchases and disposals detailed above may not
agree to purchases and disposals in the Statement of cash flows due
to restructuring of investments, conversion of convertible loan
stock and settlement of receivables and payables.
The Company does not hold any assets as a result
of the enforcement of security during the period, and believes that
the carrying values for both impaired and past due assets are
covered by the value of security held for these loan stock
investments.
Unquoted fixed asset investments are valued at fair
value in accordance with the IPEV guidelines as follows:
|
|
31 March 2023 |
31 March 2022 |
|
Valuation methodology |
£’000 |
£’000 |
|
Cost and price of recent investment (calibrated and reviewed for
impairment) |
20,040 |
16,678 |
|
Third party valuation – Discounted cash flow |
10,140 |
10,026 |
|
Revenue multiple |
6,497 |
1,595 |
|
Third party valuation - Earnings multiple |
4,953 |
3,085 |
|
Earnings multiple |
2,756 |
2,426 |
|
Net assets |
2,170 |
3,038 |
|
|
46,556 |
36,848 |
When using the cost or price of recent
investment in the valuations, the Company looks to re-calibrate
this price at each valuation point by reviewing progress within the
investment, comparing against the initial investment thesis,
assessing if there are any significant events or milestones that
would indicate the value of the investment has changed and
considering whether a market-based methodology (i.e. using
multiples from comparable public companies) or a discounted
cashflow forecast would be more appropriate. The background to the
transaction is also considered when the price of investment may not
be an appropriate measure of fair value, for example,
disproportionate dilution of existing investors from a new investor
coming on board or the market conditions at the time of investment
no longer being a true reflection of fair value.
The main inputs into the calibration exercise,
and for the valuation models using multiples, are revenue, EBITDA
and P/E multiples (based on the most recent revenue, EBITDA or
earnings achieved and equivalent corresponding revenue, EBITDA or
earnings multiples of comparable companies), quality of earnings
assessments and comparability difference adjustments. Revenue
multiples are often used, rather than EBITDA or earnings, due to
the nature of the Company’s investments, being in growth and
technology companies which are not normally expected to achieve
profitability or scale for a number of years. Where an investment
has achieved scale and profitability the Company would normally
then expect to switch to using an EBITDA or earnings multiple
methodology.
In the calibration exercise and in determining
the valuation for the Company’s equity instruments, comparable
trading multiples are used. In accordance with the Company’s
policy, appropriate comparable companies based on industry, size,
developmental stage, revenue generation and strategy are determined
and a trading multiple for each comparable company identified is
then calculated. The multiple is calculated by dividing the
enterprise value of the comparable group by its revenue, EBITDA or
earnings. The trading multiple is then adjusted for considerations
such as illiquidity, marketability and other differences,
advantages and disadvantages between the portfolio company and the
comparable public companies based on company specific facts and
circumstances.
Fair value investments had the following movements
between valuation methodologies between 31 March 2022 and 31 March
2023:
|
Change in valuation methodology
(2022
to
2023) |
Value as at 31
March
2023£’000 |
Explanatory note |
|
Cost and price of recent investment (calibrated and reviewed for
impairment) to revenue multiple |
3,927 |
Revenue multiple more relevant based on current trading |
|
Cost and price of recent investment (calibrated and reviewed for
impairment) to earnings multiple |
2,756 |
Earnings multiple more relevant based on current trading |
|
Net assets to third party valuation – earnings multiple |
1,028 |
Third party valuation conducted |
The valuation will be the most appropriate
valuation methodology for an investment within its market, with
regard to the financial health of the investment and the IPEV
Guidelines. The Directors believe that, within these parameters,
there are no other more relevant methods of valuation which would
be reasonable as at 31 March 2023.
FRS 102 and the SORP requires the Company to
disclose the inputs to the valuation methods applied to its
investments measured at FVTPL in a fair value hierarchy. The table
below sets out fair value hierarchy definitions using FRS 102
s.11.27.
|
Fair value hierarchy |
Definition |
|
Level 1 |
The unadjusted quoted price in an active market |
|
Level 2 |
Inputs to valuations are from observable sources and are directly
or indirectly derived from prices |
|
Level 3 |
Inputs to valuations not based on observable market data |
Quoted investments are valued according to Level
1 valuation methods. Unquoted equity, preference shares and loan
stock are all valued according to Level 3 valuation methods.
Investments held at fair value through profit or
loss (Level 3) had the following movements:
|
|
31 March 2023 |
31 March 2022 |
|
|
£’000 |
£’000 |
|
Opening valuation |
36,848 |
28,355 |
|
Purchases at cost |
9,425 |
7,771 |
|
Movement from Level 3 to Level 1* |
- |
(356) |
|
Unrealised gains |
622 |
3,384 |
|
Movement in loan stock accrued income |
90 |
47 |
|
Realised net gains on disposal |
(66) |
2,546 |
|
Disposal proceeds |
(363) |
(4,899) |
|
Closing valuation |
46,556 |
36,848 |
*This relates to Arecor Therapeutics PLC, which
listed on the AIM stock exchange during the prior year.
FRS 102 requires the Directors to consider the
impact of changing one or more of the inputs used as part of the
valuation process to reasonable possible alternative assumptions.
68% of the portfolio of investments, consisting of equity and loan
stock, is based on recent investment price, net assets and cost,
which is considered and as such the Board believes that changes to
reasonable possible alternative input assumptions (by adjusting the
earnings and revenue multiples) for the valuation of the remainder
of the portfolio could lead to a significant change in the fair
value of the portfolio. Therefore, for the remainder of the
portfolio, the Board has adjusted the inputs for a number of the
largest portfolio companies (by value) resulting in a total
coverage of 80% of the portfolio of investments. The main inputs
considered for each type of valuation is as follows:
|
Valuation technique |
Portfolio company sector |
Input |
Base Case* |
Change in input |
Change in fair value of investments (£’000) |
Change in NAV (pence per share) |
|
Third party valuation – Discounted cashflow |
Renewable energy |
Discount rate |
6.5% |
+0.5% |
118 |
0.08 |
|
-0.5% |
(109) |
(0.08) |
|
Third party valuation – Earnings multiple |
Education |
Earnings multiple |
18.8x |
+1.9x |
223 |
0.16 |
|
-1.9x |
(223) |
(0.16) |
|
Earnings multiple |
Healthcare (including digital healthcare) |
Earnings multiple |
8.0x |
+0.8x |
177 |
0.13 |
|
-0.8x |
(177) |
(0.13) |
*As detailed in the accounting policies above,
the base case is based on market comparables, discounted where
appropriate for marketability, in accordance with the IPEV
guidelines.
The impact of these changes could result in an
overall increase in the valuation of the unquoted equity
investments by £517,000 (1.5%) or a decrease in the valuation of
unquoted equity investments by £508,000 (1.5%).
12.
Significant interestsThe principal activity of the Company
is to select and hold a portfolio of investments in unquoted
securities. Although the Company, through the Manager, will, in
some cases, be represented on the board of the portfolio company,
it will not take a controlling interest or become involved in the
management of a portfolio company. The size and structure of the
companies with unquoted securities may result in certain holdings
in the portfolio representing a participating interest without
there being any partnership, joint venture or management consortium
agreement.
The Company has interests of greater than 20% of
the nominal value of any class (some of which are non-voting) of
the allotted shares in the portfolio companies as at 31 March 2023
as described below.
|
Company |
Registered address and country of
incorporation |
Profit/(loss) before
tax£’000 |
Aggregate capital and
reserves£’000 |
Results for year
ended |
% class and share type |
% total votingrights |
|
Kew Green VCT (Stansted) Limited |
EC1M 5QL, UK |
n/a* |
2,331 |
31 December 2021 |
45.2% Ordinary |
45.2% |
*The company files filleted accounts which do
not disclose this information.
13.
Trade and other receivables
|
|
31 March
2023 |
31 March 2022 |
|
|
£’000 |
£’000 |
|
Other receivables |
115 |
342 |
|
Prepayments |
25 |
24 |
|
Deferred consideration over one year |
- |
1,560 |
|
Deferred consideration under one year |
1,820 |
- |
|
|
1,960 |
1,926 |
The deferred consideration under one year
relates to the sale of G. Network Communications Limited in
December 2020. These proceeds are receivable in January 2024, and
have been discounted to present value at the prevailing market
rate, including a provision for counterparty risk. This constitutes
a financing transaction, and has been accounted for using the
policy disclosed in note 2.
The Directors consider that the carrying amount
of receivables is not materially different to their fair value.
14.
Trade and other payables
|
|
31 March 2023 |
31 March 2022 |
|
|
£’000 |
£’000 |
|
Trade payables |
208 |
27 |
|
Accruals and deferred income |
446 |
234 |
|
|
654 |
261 |
The Directors consider that the carrying amount
of payables is not materially different to their fair value.
15.
Called-up share
capital
|
Allotted, called-up and
fully paid |
£’000 |
|
136,927,633 Ordinary shares of 1 penny each at 31 March 2022 |
1,369 |
|
22,703,401 Ordinary shares of 1 penny each issued during the
year |
227 |
|
914,702 Ordinary shares of 1 penny each cancelled during the
year |
(9) |
|
158,716,332 Ordinary shares of 1 penny
each at 31 March
2023 |
1,587 |
|
|
|
|
17,153,431 Ordinary shares of 1 penny each held in treasury at 31
March 2022 |
(172) |
|
1,984,350 Ordinary shares of 1 penny each purchased during the year
to be held in treasury |
(19) |
|
19,137,781 Ordinary shares of 1 penny each
held in treasury at 31 March
2023 |
(191) |
|
|
|
|
139,578,551 Ordinary shares of 1 penny
each in circulation* at 31 March
2023 |
1,396 |
* Carrying one vote each
The Company purchased 1,984,350 Ordinary shares
which were held in treasury (2022: nil) at a cost of £985,000
(2022: £nil), representing 1.3% (2022: nil%) of issued share
capital as at 31 March 2023. The Company also purchased 914,702
Ordinary shares for cancellation (2022: 3,919,566 shares) at a cost
of £455,000 (2022: £2,013,000) representing 0.6% (2022: 2.9%) of
issued share capital as at 31 March 2023. The shares purchased for
treasury were funded from the other distributable reserve.
The Company holds a total of 19,137,781 shares
(2022: 17,153,431) in treasury at a nominal value of £191,000,
representing 12.1% of the issued Ordinary share capital as at 31
March 2023.
Under the terms of the Dividend Reinvestment
Scheme Circular dated 10 July 2008, the following new Ordinary
shares of nominal value 1 penny each were allotted during the
year:
|
Date of allotment |
Number of shares alloted |
Aggregate nominal value of shares |
Issue price |
Net invested |
Opening market price on allotment date |
|
£’000 |
(pence per share) |
£’000 |
(pence per share) |
|
29 July 2022 |
525,971 |
5 |
52.05 |
272 |
49.55 |
|
31 January 2023 |
546,247 |
6 |
51.58 |
280 |
49.00 |
|
|
1,072,218 |
11 |
|
552 |
|
During
the year, the Company issued the following new Ordinary shares of
nominal value 1 penny each under the Albion VCTs Prospectus Top Up
Offers 2021/22 and 2022/23:
|
Date of allotment |
Number of shares allotted |
Aggregate nominal value of shares |
Issue price |
Net consideration received |
Opening market price on allotment date |
|
£'000 |
(pence per share) |
£'000 |
(pence per share) |
|
11 April 2022 |
446,260 |
5 |
52.30 |
230 |
48.60 |
|
11 April 2022 |
23,806 |
- |
52.50 |
12 |
48.60 |
|
11 April 2022 |
1,126,685 |
11 |
52.80 |
580 |
48.60 |
|
2 December 2022 |
2,520,630 |
25 |
53.80 |
1,336 |
50.00 |
|
2 December 2022 |
575,473 |
6 |
54.00 |
305 |
50.00 |
|
2 December 2022 |
7,301,049 |
73 |
54.30 |
3,866 |
50.00 |
|
31 March 2023 |
9,637,280 |
96 |
51.40 |
4,830 |
47.60 |
|
|
21,631,183 |
216 |
|
11,159 |
|
16. Basic and diluted net
asset value per share
|
|
31 March 2023 |
31 March 2022 |
|
Basic and diluted net asset value per share (pence) |
50.88 |
53.38 |
The basic and diluted net asset value per share
at the year end are calculated in accordance with the Articles of
Association and are based upon total shares in issue (adjusted for
treasury shares) of 139,578,551 Ordinary shares (2022:
119,774,202).
17.
Capital and financial instruments risk managementThe
Company’s capital comprises Ordinary shares as described in note
15. The Company is permitted to buy back its own shares for
cancellation or treasury purposes.
The Company’s financial instruments comprise
equity and loan stock investments in quoted and unquoted companies,
cash balances and short term receivables and payables which arise
from its operations. The main purpose of these financial
instruments is to generate cash flow, revenue and capital
appreciation for the Company’s operations. The Company has no
gearing or other financial liabilities apart from short term
payables. The Company does not use any derivatives for the
management of its Balance sheet.
The principal risks arising from the Company’s
operations are:
- Market and investment risk (which
comprises investment price and cash flow interest rate risk);
- credit risk; and
- liquidity risk.
The Board regularly reviews and agrees policies
for managing each of these risks. There have been no changes in the
nature of the risks that the Company has faced during the past year
and there have been no changes in the objectives, policies or
processes for managing risks during the past year. The key risks
are summarised below.
Market riskAs
a Venture Capital Trust, it is the Company’s specific nature to
evaluate the market risk of its portfolio in unquoted companies.
Market risk is the exposure of the Company to the revaluation and
devaluation of investments as a result of macroeconomic changes.
The main driver of market risk is the dynamics of market quoted
comparators, as well as the financial and operational performance
of portfolio companies. The Board seeks to reduce this risk by
having a spread of investments across a variety of sectors. More
details on the sectors the Company invests in can be found in the
pie chart at the end of this announcement.
The Manager and the Board formally review market
risk, both at the time of initial investment and at quarterly Board
meetings.
The Board monitors the prices at which sales of
investments are made to ensure that profits to the Company are
maximised, and that valuations of investments retained within the
portfolio appear sufficiently prudent and realistic compared to
prices being achieved in the market for sales of unquoted
investments.
As required under FRS 102, the Board is required
to illustrate by way of a sensitivity analysis the extent to which
the assets are exposed to market risk. In order to show the impact
of sensitivity in market movements on the Company, a 10% increase
or decrease in the valuation of the fixed asset investment
portfolio (keeping all other variables constant) would increase or
decrease the net asset value and return for the year by £4,682,000.
Accordingly, a 20% increase or decrease in the valuation of the
fixed asset investment portfolio (keeping all other variables
constant) would increase or decrease the net asset value and return
for the year by £9,365,000. Further sensitivity analysis on fixed
asset investments is included in note 11.
Investment risk (including investment
price risk)Investment risk (including investment price
risk) is the risk that the fair value of future investment cash
flows will fluctuate due to factors specific to an investment
instrument or to a market in similar instruments. The management of
risk within the venture capital portfolio is addressed through
careful investment selection, by diversification across different
industry segments, by maintaining a wide spread of holdings in
terms of financing stage and by limitation of the size of
individual holdings. The Manager receives management accounts from
portfolio companies and members of the investment management team
often sit on the boards of unquoted portfolio companies; this
enables the close identification, monitoring and management of
investment risk. The Directors monitor the Manager’s compliance
with the investment policy, review and agree policies for managing
this risk and monitor the overall level of risk on the investment
portfolio on a regular basis.
Valuations are based on the most appropriate
valuation methodology for an investment within its market, with
regard to the financial health of the investment and the IPEV
Guidelines. Details of the industries in which investments have
been made are contained in the pie chart at the end of this
announcement.
The maximum investment risk on the balance sheet
date is the value of the fixed asset investment portfolio which is
£46,823,000 (2022: £37,604,000). Fixed asset investments form 66%
of the net asset value on 31 March 2023 (2022: 59%).
Interest rate
riskIt is the Company’s policy to accept a degree of
interest rate risk on its financial assets through the effect of
interest rate changes. On the basis of the Company’s analysis, it
was estimated that a rise of 1% in all interest rates would have
increased total return before tax for the year by approximately
£238,000 (2022: £341,000). Furthermore, it was considered that a
fall of interest rates below current levels during the year would
have been unlikely.
The weighted average effective interest rate
applied to the Company’s fixed rate assets during the year was
approximately 8.8% (2022: 7.3%). The weighted average period to
maturity for the fixed rate assets is approximately 5.3 years
(2022: 6.0 years).
The Company’s financial assets and liabilities,
all denominated in Sterling, consist of the following:
|
|
31 March
2023 |
31 March 2022 |
|
|
Fixed rate £’000 |
Floating rate £’000 |
Non-interest bearing£’000 |
Total£’000 |
Fixed rate £’000 |
Floating rate £’000 |
Non-interest bearing£’000 |
Total£’000 |
|
Unquoted equity |
- |
- |
34,202 |
34,202 |
- |
- |
24,388 |
24,388 |
|
Quoted equity |
- |
- |
267 |
267 |
- |
- |
756 |
756 |
|
Unquoted loan stock |
11,795 |
219 |
340 |
12,354 |
11,922 |
233 |
305 |
12,460 |
|
Receivables* |
- |
- |
1,935 |
1,935 |
- |
- |
1,902 |
1,902 |
|
Payables |
- |
- |
(654) |
(654) |
- |
- |
(261) |
(261) |
|
Cash |
- |
22,886 |
- |
22,886 |
- |
24,668 |
- |
24,668 |
|
|
11,795 |
23,105 |
36,090 |
70,990 |
11,922 |
24,901 |
27,090 |
63,913 |
*The receivables do not reconcile to the Balance
sheet as prepayments are not included in the above table.
Credit riskCredit risk is the
risk that the counterparty to a financial instrument will fail to
discharge an obligation or commitment that it has entered into with
the Company. The Company is exposed to credit risk through its
receivables, investment in unquoted loan stock, and through the
holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock
and other similar instruments prior to investment, and as part of
its ongoing monitoring of investments. In doing this, it takes into
account the extent and quality of any security held. For loan stock
investments made prior to 6 April 2018, which account for 75% of
loan stock by value, typically loan stock instruments have a fixed
or floating charge, which may or may not have been subordinated,
over the assets of the portfolio company in order to mitigate the
gross credit risk.
The Manager receives management accounts from
portfolio companies, and members of the investment management team
often sit on the boards of unquoted portfolio companies; this
enables the close identification, monitoring and management of
investment-specific credit risk.
The Manager and the Board formally review credit
risk (including receivables) and other risks, both at the time of
initial investment and at quarterly Board meetings.
The Company’s total gross credit risk as at 31
March 2023 was limited to £12,354,000 of unquoted loan stock
instruments (2022: £12,460,000), £22,886,000 cash deposits with
banks (2022: £24,668,000) and £1,960,000 of other receivables
(2022: £1,926,000).
At the Balance sheet date, the cash in bank and
at hand held by the Company was held with Lloyds Bank plc, Scottish
Widows Bank plc (part of Lloyds Banking Group), Barclays Bank plc,
National Westminster Bank plc and Bank of Montreal. Credit risk on
cash transactions was mitigated by transacting with counterparties
that are regulated entities subject to prudential supervision, with
high credit ratings assigned by international credit-rating
agencies.
The Company has an informal policy of limiting
counterparty banking and floating rate note exposure to a maximum
of 20% of net asset value for any one counterparty.
The credit profile of the unquoted loan stock is
described under liquidity risk.
Liquidity riskLiquid assets are
held as cash on current account, on deposit or short term money
market account. Under the terms of its Articles, the Company has
the ability to borrow up to 10% of its adjusted capital and
reserves of the latest published audited Balance sheet, which
amounts to £6,923,000 as at 31 March 2023 (2022: £6,232,000).
The Company has no committed borrowing
facilities as at 31 March 2023 (2022: £nil) and had cash balances
of £22,886,000 (2022: £24,668,000). The main cash outflows are for
new investments, buy-back of shares and dividend payments, which
are within the control of the Company. The Manager formally reviews
the cash requirements of the Company on a monthly basis, and the
Board on a quarterly basis as part of its review of management
accounts and forecasts. All the Company’s financial liabilities are
short term in nature and total £654,000 as at 31 March 2023 (2022:
£261,000).
The carrying value of loan stock investments as
analysed by expected maturity dates is as follows:
|
|
31 March
2023 |
31 March 2022 |
|
Redemption date |
Fully performing £’000 |
Past due£’000 |
Valued below cost
£’000 |
Total£’000 |
Fully performing£’000 |
Past due£’000 |
Valued below cost £’000 |
Total£’000 |
|
Less than one year |
1,823 |
1,636 |
- |
3,459 |
1,741 |
469 |
857 |
3,067 |
|
1-2 years |
1,406 |
- |
- |
1,406 |
- |
- |
- |
- |
|
2-3 years |
- |
- |
- |
- |
1,395 |
- |
2 |
1,397 |
|
3-5 years |
1,915 |
- |
- |
1,915 |
2,422 |
- |
- |
2,422 |
|
5+ years |
5,039 |
535 |
- |
5,574 |
5,154 |
420 |
- |
5,574 |
|
Total |
10,183 |
2,171 |
- |
12,354 |
10,712 |
889 |
859 |
12,460 |
Loan stock can be past due as a result of
interest or capital not being paid in accordance with contractual
terms. The cost of loan stock valued below cost is £nil (2022:
£1,045,000).
The Company does not hold any assets as the
result of the enforcement of security during the period, and
believes that the carrying values for both those valued below cost
and past due assets are covered by the value of security held for
these loan stock investments.
In view of the availability of adequate cash
balances and the repayment profile of loan stock investments, the
Board considers that the Company is subject to low liquidity
risk.
Fair values of financial assets and
financial liabilitiesAll the Company’s financial assets
and liabilities as at 31 March 2023 are stated at fair value as
determined by the Directors, with the exception of receivables,
payables and cash which are carried at amortised cost. There are no
financial liabilities other than payables. The Company’s financial
liabilities are all non-interest bearing. It is the Directors’
opinion that the book value of the financial liabilities is not
materially different to the fair value and all are payable within
one year.
18.
Commitments and contingenciesThe Company had no
financial commitments in respect of investments at 31 March 2023
(2022: £nil).
There are no contingent liabilities or
guarantees given by the Company as at 31 March 2023 (2022:
£nil).
19. Post balance sheet
eventsSince the year end, the Company has not made any
material investment transactions.
The following new Ordinary shares of nominal
value 1 penny each were allotted under the Albion VCTs Prospectus
Top Up Offers 2022/23 after 31 March 2023:
|
Date of allotment |
Number of shares allotted |
Aggregate nominal value of shares |
Issue price |
Net consideration received |
Opening market price on allotment date |
|
£’000 |
(pence per share) |
£’000 |
(pence per
share) |
|
14 April 2023 |
377,529 |
4 |
50.90 |
189 |
47.60 |
|
14 April 2023 |
48,922 |
- |
51.10 |
25 |
47.60 |
|
14 April 2023 |
381,518 |
4 |
51.40 |
191 |
47.60 |
|
|
807,969 |
8 |
|
405 |
|
20.
Related party transactions Other than transactions with
the Manager as disclosed in note 5, and the Directors’ remuneration
disclosed in the Directors’ remuneration report on pages 59 and 60
of the full Annual Report and Financial Statements, there are no
other related party transactions or balances requiring
disclosure.
21. Other informationThe
information set out in this announcement does not constitute the
Company’s statutory accounts within the terms of section 434 of the
Companies Act 2006 for the years ended 31 March 2023 and 31 March
2022, and is derived from the statutory accounts for those
financial years, which have been, or in the case of the accounts
for the year ended 31 March 2023, which will be, delivered to the
Registrar of Companies. The Auditor reported on those accounts; the
reports were unqualified and did not contain a statement under s498
(2) or (3) of the Companies Act 2006.
22. PublicationThe full audited
Annual Report and Financial Statements are being sent to
shareholders and copies will be made available to the public at the
registered office of the Company, Companies House, the National
Storage Mechanism and also electronically at
www.albion.capital/funds/AAVC/31Mar2023.pdf.
- Split of portfolio by sector, stage of investment and number of
employees
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