TIDMAAVC
Albion Venture Capital Trust PLC
LEI 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
2022.
This announcement was approved for release by the Board of
Directors on 29 June 2022.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31
March 2022 (which have been audited), will shortly be sent to
shareholders. Copies of the full Annual Report and Financial
Statements will be shown via the Albion Capital Group LLP website
by clicking www.albion.capital/funds/AAVC/31Mar2022
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.pdf
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Investment policy
Albion Venture Capital Trust PLC (the "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 exposures
Risk 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 per cent. of the Company's assets at cost, thus
ensuring a spread of investment risk. The value of an individual
investment may increase over time as a result of trading progress
and it is possible that it may grow in value to a point where it
represents a significantly higher proportion of total assets prior
to a realisation opportunity being available.
Gearing
The Company's maximum exposure in relation to gearing is
restricted to 10 per cent. of the adjusted share capital and
reserves.
Financial calendar
Record date for first interim dividend 8 July 2022
Payment of first interim dividend 29 July 2022
Annual General Meeting Noon on 6 September
2022
Announcement of Half-yearly results for the six months December 2022
ending 30 September 2022
Payment of second interim dividend (subject to Board 31 January 2023
approval)
Financial highlights
242.72p Total shareholder value -- being net asset value plus
dividends paid per Ordinary share since launch
-----------------------------------------------------
7.6% Shareholder return for the year ended 31 March 2022
-----------------------------------------------------
25.30p Total tax-free dividend per share paid during the
year ended 31 March 2022
-----------------------------------------------------
53.38p Net asset value per share as at 31 March 2022
-----------------------------------------------------
These are considered Alternative Performance Measures, see notes
2 and 3 in the Strategic report below for further explanation.
31 March 2022 31 March 2021
(pence per share) (pence per share)
Opening net asset value 73.13 70.13
Capital return 5.38 5.64
Revenue return 0.39 1.46
----------------- -----------------
Total return 5.77 7.10
Dividends paid (25.30) (4.24)
Impact from share capital movements (0.22) 0.14
----------------- -----------------
Net asset value 53.38 73.13
Ordinary shares
(pence per share)
----------------------------------------- ------------------
Total dividends paid to 31 March 2022 189.34
Net asset value on 31 March 2022 53.38
------------------
Total shareholder value to 31 March 2022 242.72
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 2023 of 1.33
pence per share to be paid on 29 July 2022 to shareholders on the
register on 8 July 2022.
Chairman's statement
Introduction
I am delighted to announce that your Company has achieved a
positive total return in total shareholder value of 5.55 pence per
share, a 7.6% shareholder return for the year ended 31 March 2022
on the opening net asset value. The Company continues to benefit
from the resilience of its portfolio companies, many of whom have
shown growth over the past year, despite the ongoing uncertainty of
the Covid-19 pandemic, the high levels of inflation both in the UK
and across the world, and the war in Ukraine. There is still much
uncertainty on how the economy and the markets will be affected by
these ongoing disruptions. I am optimistic that our portfolio
companies will continue to add value over the longer term, and we
can still find new investment opportunities which will increase
shareholder value, but inevitably there will be disruption
ahead.
Results and dividends
As at 31 March 2022, the Net Asset Value ("NAV") was GBP63.9
million or 53.38 pence per share, compared to GBP72.7 million or
73.13 pence per share as at 31 March 2021. The large decrease in
the NAV was a result of the payment of total tax-free dividends of
25.30 pence per share during the year. The total return before
taxation was GBP6.0 million compared to GBP7.3 million for the
previous year. The positive progress in several of our portfolio
companies is discussed later in this statement and in the Strategic
report below.
In line with the variable dividend policy targeting around 5% of
NAV per annum, the Company paid interim dividends totalling 3.30
pence per share during the year ended 31 March 2022 (31 March 2021:
4.24 pence per share). As a result of the successful sale of the
Company's three care homes, which generated substantial cash
proceeds, the Company also paid special dividends totalling 22.00
pence per share during the year ended 31 March 2022 (31 March 2021:
nil).
The Board has declared a first dividend for the year ending 31
March 2023 of 1.33 pence per share to be paid on 29 July 2022 to
shareholders on the register on 8 July 2022.
Investment performance and progress
During the year, the Company completed the sale of Credit Kudos
generating proceeds of GBP3.0 million and a return on cost of 5.2
times. The Company also sold Phrasee generating proceeds of GBP1.7
million and a return on cost of 3.2 times. These are both excellent
results for the Company.
The results for the year showed net valuation gains on
investments of GBP6.6 million. The key contributors were the
uplifts on Cantab Research (T/A Speechmatics) and Elliptic
Enterprises, both of which have been revalued after further
externally led funding rounds. Phrasee and Credit Kudos also
contributed to the valuation gain, due to their sales which
completed during the year. However, our investments in Concirrus
and Avora have seen write-downs following difficult trading
conditions, in part because of the Covid-19 pandemic. We have also
written-off our investment in Xperiome which went into
administration.
The three largest investments in the Company's portfolio, being
Chonais River Hydro, Cantab Research (T/A Speechmatics) and
Elliptic Enterprises, are valued at GBP9.8 million and represent 15
per cent. of the Company's NAV.
The Company has been an active investor during the year
investing a total of GBP7.8 million. Of this, GBP3.2 million was
invested into six new portfolio companies, all of which are
expected to require further investment as the companies prove
themselves and grow:
-- GBP0.9 million into NuvoAir Holdings a provider of digital therapeutics
and decentralised clinical trials for respiratory conditions;
-- GBP0.8 million into Gravitee TopCo (trading as Gravitee.io) an
application programming interface (API) management platform;
-- GBP0.6 million into Brytlyt which uses patented software and artificial
intelligence (AI), combined with the superior computation power of
graphics processing units (GPUs), to derive insights thousands of times
faster than legacy systems;
-- GBP0.5 million into PerchPeek, a digital relocation platform;
-- GBP0.3 million into Accelex Technology, a data extraction and analytics
technology for private capital markets; and
-- GBP0.1 million into Regulatory Genome Development, a provider of machine
readable structured regulatory content.
A further GBP4.6 million was invested into existing portfolio
companies, the largest being: GBP1.3 million into Seldon
Technologies; GBP0.7 million into TransFICC; GBP0.7 million into
Elliptic; and GBP0.7 million into Speechmatics. Software and other
technology now accounts for 39% of our portfolio (excluding cash),
an increase of 6% from last year.
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 25 and 26 of the full
Annual Report and Financial Statements.
Board Composition
After serving as a Director since the Company's launch in 1996,
and subsequently as Audit Committee Chairman, John Kerr will be
retiring from the Board at the AGM on 6 September 2022. We have
valued his contributions and wish him well in the future. Ann
Berresford will succeed him as Audit Committee Chairman.
Following a formal selection process, Neeta Patel CBE will be
appointed as a non-executive Director with effect from 1 July 2022.
Neeta will be bringing over 35 years of experience in the
technology sector to the Board and is currently a non-executive
director of Allianz Technology Trust, CEO of the Centre for
Entrepreneurs, a board advisor for Tech London Advocates and an
entrepreneur mentor-in-residence at London Business School.
Principal and emerging risks
In addition to the risks around Covid-19, which have been a
major factor for the past 2 years, the UK is experiencing its
highest level of inflation in decades, as well as the uncertainty
over the future course, and global impact, of Russia's invasion of
Ukraine. Our investment portfolio, while concentrated mainly in the
technology and healthcare sectors, remains diversified in terms of
both sub-sector and stage of maturity and, importantly, we believe
it to be appropriately valued. While we would expect these
valuations to be robust within the tolerance of normal market
fluctuations, the potential but, unknown, scale of any further
adverse events arising out of the increasingly volatile
geopolitical backdrop remain a major risk factor.
A detailed analysis of the other risks and uncertainties facing
the business is shown in the Strategic report below.
Sunset Clause
In 2015 a VCT "sunset clause" was introduced as a requirement of
a EU state aid notification. This provides that income tax relief
will no longer be given to subscriptions made on or after 6 April
2025, unless the legislation is amended to make the scheme
permanent or the "sunset clause" is extended. Our Manager, Albion
Capital, is working, alongside the VCT industry, to demonstrate to
Government the importance of VCTs as a source of early-stage
capital to support entrepreneurs creating innovative growth
businesses employing thousands of people throughout the UK. Given
its importance, the Board expects that the VCT scheme will continue
to attract Government support.
Share buy-backs
It remains the Board's policy to buy-back shares in the market,
subject to the overall constraint that such purchases are in the
Company's interest. This includes the maintenance of sufficient
cash resources for investment in new and existing portfolio
companies and the continued payment of dividends to
shareholders.
It is the Board's intention that such buy-backs should be at
around a 5% discount to net asset value, in so far as market
conditions and liquidity permit. The Board continues to review the
use of buy-backs and is satisfied that it is an important means of
providing market liquidity for shareholders.
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, launched a prospectus top up offer
of new Ordinary shares on 6 January 2022. The Board announced on 16
February 2022 that, following strong demand, the Company had
reached its GBP10 million limit under the Offer and was fully
subscribed and closed to further applications.
The proceeds are being used to provide support to our existing
portfolio companies and to enable us to take advantage of new
investment opportunities. The first allotment of the shares under
the Offer was on 25 February 2022 and the second allotment was on
13 April 2022. Further details can be found in notes 15 and 19
respectively.
Annual General Meeting ("AGM")
Based on the success of last year's live webcast AGM, the Board
has decided to adopt a virtual format for the AGM again this year.
The AGM will be held at noon on 6 September 2022 via the Lumi
platform. Information on how to participate in the live webcast can
be found on the Manager's website
www.albion.capital/vct-hub/agms-events
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.
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
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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 36 and 37
and in the Notice of the Meeting on pages 72 to 75 of the full
Annual Report and Financial Statements.
Outlook and prospects
The positive results for the year just ended demonstrate the
resilience of our portfolio during what were challenging times. I
am confident that our portfolio companies are well positioned to
grow, despite the uncertainty around the longer-term impact of the
pandemic, the current cost of living in the UK and across the
world, and an increasingly volatile geopolitical and economic
backdrop. The Board believes the Company is well placed to continue
to deliver long term value to our shareholders, though remains
mindful of the considerable uncertainty over the Global
economy.
Richard Glover
Chairman
29 June 2022
Strategic report
Investment policy
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.
The full investment policy can be found on page 3 of the full
Annual Report and Financial Statements.
Current portfolio analysis
The pie charts at the end of this announcement show the split of
the portfolio valuation as at 31 March 2022 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. Details of the principal investments made by
the Company are shown in the Portfolio of investments on pages 25
and 26 of the full Annual Report and Financial Statements.
Direction of portfolio
The cash balance has decreased mainly due to the two special
dividends totalling GBP22 million that were paid out to
shareholders and further investments into higher growth technology
companies during the year. The percentage of cash remains high at
the year end, however this is largely a result of the allotment of
GBP9 million of shares under the Top Up Offers in February 2022, as
well as an additional GBP5 million from the disposals of Credit
Kudos and Phrasee which both completed in March 2022. The shift
away from asset-based companies continues, and the Company will
continue to invest these funds into higher growth technology
companies, including digital healthcare. The Manager has a
significant speciality in software and other technology investing,
which can be seen as a growing part of the portfolio, represented
by a 10% increase this year. Healthcare technology is another area
of particular strength, which has increased by 5%.
Further details on portfolio companies can be found in the
Portfolio of investments on page 25 of the full Annual Report and
Financial Statements.
Ordinary shares
Results and dividends GBP'000
Net capital return for the year ended 31 March 2022 5,554
Net revenue return for the year ended 31 March 2022 407
---------------
Total return for the year ended 31 March 2022 5,961
First interim and first special dividend of 16.83
pence per share paid on 30 July 2021 (16,728)
Second special dividend of 7.00 pence per share paid
on 31 December 2021 (7,141)
Second interim dividend of 1.47 pence per share paid
on 31 January 2022 (1,523)
Unclaimed dividends returned to the Company 10
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Transferred from reserves (19,421)
---------------
Net assets as at 31 March 2022 63,937
===============
Net asset value as at 31 March 2022 (pence per share) 53.38
====================================================== ===============
The Company paid dividends totalling 25.30 pence per share
during the year ended 31 March 2022 (2021: 4.24 pence per share).
This included two special dividends of 15.00 pence per share and
7.00 pence per share paid to shareholders on 30 July 2021 and 31
December 2021, respectively. The Board has declared a first
dividend for the year ending 31 March 2023, of 1.33 pence per share
to be paid on 29 July 2022 to shareholders on the register on 8
July 2022.
As shown in the Company's Income statement on page 54 of the
full Annual Report and Financial Statements, the total return for
the year was 5.77 pence per share (2021: 7.10 pence per share). The
total investment income decreased to GBP1,037,000 (2021:
GBP2,467,000), which was primarily due to the care homes sale in
March 2021. The Company will continue to receive income from its
renewable energy portfolio for the foreseeable future, however
investment income is expected to be much lower over the next few
years. The revenue return to equity holders has subsequently
decreased to GBP407,000 (2021: GBP1,468,000).
The capital return on investments for the year of GBP6,553,000
(2021: GBP6,508,000), has been discussed in the Chairman's
statement above. The net asset value of the Company has decreased
to 53.38 pence per share (2021: 73.13 pence per share), which was
primarily due to the two special dividends totalling 22.00 pence
per share paid to shareholders during the year. Whilst this reduced
the Company's assets, it provided a significant return to
shareholders and more detail on these special dividends can be
found in the Annual Report and Financial Statements for the year
ended 31 March 2021 and the Half-yearly Financial report to 30
September 2021.
There was a net cash outflow for the Company of GBP18,894,000
for the year (2021: net inflow of GBP21,782,000), resulting from
the payment of two special and interim dividends, the investment in
fixed asset investments, operating activities and the buy-back of
shares, offset by the issue of shares under the Albion VCTs Top Up
Offers 2021/2022 and the disposal of fixed asset investments.
Review of business and future changes
A detailed review of the Company's business during the year is
contained in the Chairman's statement. The total return before tax
for the year was GBP6.0 million (2021: GBP7.3 million).
There is a continuing focus on growing the healthcare (including
digital healthcare) and software and other technology sectors. The
majority of these investment returns are delivered through equity
and capital gains and therefore we expect our investment income to
continually reduce in future years.
Details of significant events which have occurred since the end
of the financial year are listed in note 19. Details of
transactions with the Manager are shown in note 5.
Future prospects
The Company's portfolio remains well balanced across sectors and
risk classes, and has largely weathered the pandemic so far.
Although there remains much uncertainty, the Manager has a strong
pipeline of investment opportunities in which the Company's cash
can be deployed. The Board considers that the current portfolio and
the pipeline of opportunities should enable the Company to maintain
a predictable stream of dividend payments to shareholders, as well
as delivering long term growth for shareholders.
Key performance indicators ("KPIs") and Alternative Performance
Measures ("APMs")
The Directors believe that the following KPIs (some of which are
APMs), which are typical for Venture Capital Trusts, used in its
own assessment of the Company, will provide shareholders with
sufficient information to assess how effectively the Company is
applying its investment policy to meet its objectives. The
Directors are satisfied that the results shown in the following
KPIs and APMs give a good indication that the Company is achieving
its investment objective and policy. These are:
1. Total shareholder value relative to FTSE All Share Index total return
The graph on page 4 of the full Annual Report and Financial
Statements shows the Company's total shareholder value relative to
the FTSE All-Share Index total return, with dividends reinvested.
The FTSE All-Share index is considered a reasonable benchmark as
the Company is classed as a generalist UK VCT investor, and this
index includes over 600 companies listed in the UK, including
small-cap, covering a range of sectors. Details on the performance
of the net asset value and return per share for the year are shown
in the Chairman's statement above.
2. Net asset value per share and total shareholder value
Total shareholder value increased by 5.55 pence to 242.72 pence
per share for the year ended 31 March 2022.
3. Movement in shareholder value in the year The graph on page 5 of the full Annual Report and Financial Statements shows the Company's total shareholder return over the previous ten years, five years, three years and the past year, and the annual returns for the same period are detailed out below.
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
---- ---- ---- ---- ----- ---- ----- ------ ----- ----
1.4% 2.8% 7.4% 7.5% 11.8% 7.4% 10.5% (4.9)% 10.3% 7.6%
---- ---- ---- ---- ----- ---- ----- ------ ----- ----
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 continued
to increase over the last 10 years, with an average return of 6.2%
per annum.
4. Dividend distributions
The chart that follows shows the dividends paid in each year and
the cumulative dividends paid since launch.
Dividends paid in respect of the year ended 31 March 2022 were
25.30 pence per share (2021: 4.24 pence per share). This included
the payment of two special dividends amounting to 22.00 pence per
share (2021: nil). Cumulative dividends paid since inception amount
to 189.34 pence per Ordinary share.
5. Ongoing charges
The ongoing charges ratio for the year ended 31 March 2022 was
2.44% (2021: 2.37%). 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 Directors expect the
ongoing charges ratio for the year ahead to increase to
approximately 2.50% due to the reduction in the net asset value of
the Company after the payment of the significant special dividends.
The cap on the ongoing charges ratio is 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 34 of the full Annual Report and
Financial Statements.
The relevant tests to measure compliance have been carried out
and independently reviewed for the year ended 31 March 2022. These
showed that the Company has complied with all tests and continues
to do so.
*VCT compliance is not a numerical measure of performance and
thus cannot be defined as an APM.
Gearing
As defined by the Articles of Association, the Company's maximum
exposure in relation to gearing is restricted to 10 per cent. of
the adjusted share capital and reserves. The Directors do not
currently have any intention to utilise gearing for the
Company.
Operational arrangements
The 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 per
cent. of the net asset value of the Company, and an annual
secretarial and administrative fee of GBP55,000 (2021: GBP54,000)
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 per cent. on each new investment made and any
applicable monitoring fees.
Management performance incentive
In 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 2022 the cumulative shortfall of the
target return was 5.18 pence per share (31 March 2021: shortfall of
2.72 pence per share) and this amount needs to be made up in
following accounting periods before an incentive fee becomes
payable.
Investment and co-investment
The 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 Manager
The Board has evaluated the performance of the Manager based
on:
-- the returns generated by the Company;
-- the continuing achievement of the 80 per cent. qualifying holdings
investment requirement for VCT status;
-- the long term prospects of the current portfolio of investments;
-- a review of the Management agreement and the services provided therein;
and
-- benchmarking the performance of the Manager to other service providers
including the performance of other VCTs that the Manager is responsible
for managing.
The Board believes that it is in the interests of shareholders
as a whole, and of the Company, to continue the appointment of the
Manager for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board appointed the Manager as the Company's AIFM in 2014 as
required by the AIFMD. The Manager is a full-scope Alternative
Investment Fund Manager under the AIFMD. Ocorian Depositary (UK)
Limited is the appointed Depositary and oversees the custody and
cash arrangements and provides other AIFMD duties with respect to
the Company.
Companies Act 2006 Section 172 Reporting
Under Section 172 of the Companies Act 2006, the Board has a
duty to promote the success of the Company for the benefit of its
members as a whole in both the long and short term, having regard
to the interests of other stakeholders in the Company, such as
suppliers, and to do so with an understanding of the impact on the
community and environment and with high standards of business
conduct, which includes acting fairly between members of the
Company.
The Board is very conscious of these wider responsibilities in
the ways it promotes the Company's culture and ensures, as part of
its regular oversight, that the integrity of the Company's affairs
is foremost in the way the activities are managed and promoted.
This includes regular engagement with the wider stakeholders of the
Company and being alert to issues that might damage the Company's
standing in the way that it operates. The Board works very closely
with the Manager in reviewing how stakeholder issues are handled,
ensuring good governance and responsibility in managing the
Company's affairs, as well as visibility and openness in how the
affairs are conducted.
The Company is an externally managed investment company with no
employees, and as such has nothing to report in relation to
employee engagement but does keep close attention to how the Board
operates as a cohesive and competent unit. The Company also has no
customers in the traditional sense and, therefore, there is also
nothing to report in relation to relationships with customers.
The table below sets out the 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.
Stakeholders Engagement with Stakeholder Outcome and decisions based on engagement
------------ ------------------------------------------------------------- -----------------------------------------------------------
Shareholders The key methods of engaging with Shareholders are -- Shareholders' views are important and the Board
as follows: encourages Shareholders to exercise their right to
-- Annual General Meeting ("AGM") vote on the resolutions at the AGM. The Company's AGM
is typically used as an opportunity to communicate
-- Shareholder seminar with investors, including through a presentation made
by the investment management team. In light of the
-- Annual Report and Financial Statements, Half-yearly Covid-19 pandemic, the Board took the decision to
financial report, and Interim management statements update the Company's Articles of Association to allow
for virtual/hybrid events in order for the 2022 AGM
-- RNS announcements for all key decisions including the to be live streamed for Shareholders. The Board was
publication of a Prospectus able to take questions from Shareholders at the AGM
enabling maximum shareholder engagement in the
-- Website redesigned in the year to make it more user absence of a face-to-face event. Following last
accessible year's success and the overwhelming positive feedback
from shareholders, the Board has decided that this
year's AGM will again be held as a virtual event to
facilitate shareholder participation.
-- Shareholders are also encouraged to attend the annual
Shareholders' Seminar. Last year's event took place
on 12 November 2021. The seminar included Quantexa
and Healios sharing insights into their businesses
and also presentations from Albion executives on some
of the key factors affecting the investment outlook,
as well as a review of the past year and the plans
for the year ahead. Representatives of the Board
attend the seminar. The Board considers this an
important interactive event and invites shareholders
to attend this year's event scheduled for 23 November
2022 at the Royal College of Surgeons. To reserve a
place, email mailto:info@albion.capital
info@albion.capita mailto:info@albion.capital l.
-- The Board recognises the importance to Shareholders
of maintaining a share buy-back policy, in order to
provide market liquidity, and considered this when
establishing the current policy. The Board closely
monitors the discount to the net asset value to
ensure this is in the region of 5%.
-- The Board seeks to create value for Shareholders by
generating strong and sustainable returns to provide
shareholders with regular dividends and the prospect
of capital growth. The Board takes this into
consideration when making the decision to pay
dividends to Shareholders. The variable dividend
policy has been enacted, and has resulted in a
dividend yield of 4.5% on opening net asset value. In
addition to the regular dividend policy, a first
special dividend of 15.00 pence per share was paid on
30 July 2021 and a second special dividend of 7.00
pence per share was paid on 31 December 2021. A total
of 25.30 pence of dividends were paid during the year
,
which was 34.6% of the opening net asset value.
-- During the year, the decision to publish a Prospectus
was taken, in order to raise more funds for
deployment into new and existing portfolio companies.
The Board carefully considered whether further funds
were required, whether the VCT tests would continue
to be met, and whether it would be in the interest of
Shareholders, before agreeing to publish the
Prospectus. On allotment, the decision was made to
use an issue price formula on the prevailing net
asset value to ensure there was no dilution to
existing Shareholders.
-- Cash management and liquidity of the Company are key
quarterly discussions amongst the Board, with focus
on deployment of cash for future investments,
dividends and share buy-backs.
-- The Board decided to propose a special resolution at
the 2021 AGM to increase the Company's distributable
reserves by way of a reduction of share premium
account and capital redemption reserve. This
resolution was approved with 99.5% of Shareholders
voting in favour of the resolution.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Suppliers The key suppliers are:
-- Corporate broker -- The Manager is in regular contact with the suppliers
and the contractual arrangements with all the
-- VCT taxation adviser principal suppliers to the Company are reviewed
regularly and formally once a year, alongside the
-- Depositary performance of the suppliers in acquitting their
responsibilities.
-- Registrar
-- The Board reviews the performance of the providers
-- Auditor annually in line with the Manager, and was satisfied
with their performance.
-- Lawyer
------------ ------------------------------------------------------------- -----------------------------------------------------------
Manager The performance of Albion Capital Group LLP is essential -- The Manager meets with the Board at least quarterly
to the long term success of the Company, including to discuss the performance of the Company, and is in
achieving the investment policy and generating returns regular contact in between these meetings, e.g. to
to shareholders, as well as the impact the Company share investment papers for new and follow-on
has on Environment, Social and Governance practice. investments. All strategic decisions are discussed in
detail and minuted, with an open dialogue between the
Board and the Manager.
-- The performance of the Manager in managing the
portfolio and in providing company secretarial,
administration and accounting services is reviewed in
detail each year, which includes reviewing comparator
engagement terms and portfolio performance. Further
details on the evaluation of the Manager, and the
decision to continue the appointment of the Manager
for the forthcoming year, can be found in this
report.
-- Details of the Manager's responsibilities can be
found in the Statement of corporate governance on
pages 39 and 40 of the full Annual Report and
Financial Statements.
During the year, the Board has reviewed the current
Management Agreement, and a new agreement was signed
which updated the agreement for new regulatory
requirements,
such as GDPR and AIFMD, but did not change any commercial
terms with the
Manager.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Portfolio The portfolio companies are considered key stakeholders, -- The Board aims to have a diversified portfolio in
companies not least because they are principal drivers of value terms of sector and stage of investment. Further
for the Company. However, as discussed in the Environmental, details of this can be found in the pie charts at the
Social and Governance ("ESG") report on pages 19 to end of this announcement.
21 of the full Annual Report and Financial Statements, -- In most cases, an Albion executive has a place on the
the portfolio companies' impact on their stakeholders board of a portfolio company, in order to help with
is also important to the Company. both business operation decisions, as well as good
ESG practices.
-- The Manager ensures good dialogue with portfolio
companies, and often puts on events in order to help
portfolio companies benefit from the Albion network.
-- Albion Capital has a Talent Platform which focuses on
aligning growth strategy with leadership team hiring,
leadership development, and organisational scaling in
our portfolio companies. By assessing their
leadership potential, identifying and strengthening
portfolio company management teams, the Talent
platform helps early-stage businesses accelerate
their growth to scale into category defining
businesses, which ultimately benefits VCT investors.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Community The Company, with no employees, has no effect itself
and on the community and environment. However, as discussed -- The Board receives reports on ESG factors within its
environment above, the portfolio companies' ESG impact is extremely portfolio from the Manager as it is a signatory of
important to the Board. the United Nations Principles for Responsible
Investment ("UN PRI"). Further details of this are
set out in the ESG report on pages 19 to 21 of the
full Annual Report and Financial Statements. ESG,
without its specific definition, has always been at
the heart of the responsible investing that the
Company engages in and in how the Company conducts
itself with all of its stakeholders.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Environmental, Social, and Governance ("ESG") report
The Board and the Company's Manager, Albion Capital Group LLP,
take ESG very seriously and more detail can be found on this in the
ESG report on pages 19 to 21 of the full Annual Report and
Financial Statements.
Social and community issues, employees and human rights
The 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 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 policies
The Company has adopted a number of further policies relating
to:
-- Environment
-- Global greenhouse gas emissions
-- Anti-bribery
-- Anti-facilitation of tax evasion
-- Diversity
and these are set out in the Directors' report on page 35 of the
full Annual Report and Financial Statements.
Risk management
The Board carries out a regular review of the risk environment
in which the Company operates, together with changes to the
environment and individual risks. The Board also identifies
emerging risks which might impact on the Company. In the period the
most noticeable risks have been the global pandemic and the
invasion of Ukraine which have impacted not only public health and
mobility but also had an adverse impact on the economy, the full
impact of which is likely to be uncertain for some time.
The Board has carried out a robust assessment of the Company's
principal risks and uncertainties and seeks to mitigate these risks
through regular reviews of performance and monitoring progress and
compliance. The Board applies the principles detailed in the
Financial Reporting Council's Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting, in the
mitigation and management of these risks. More information on
specific mitigation measures for the principal risks and
uncertainties are explained below:
Risk Possible consequence Risk assessment during the year Risk management
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Investment, performance and valuation risk Investment in smaller unquoted growth businesses carries Increased (due to high levels of inflation and the The Board places reliance upon the skills and expertise
a higher degree of risk and is more volatile than geopolitical risks following the invasion of Ukraine). of the Manager and its track record of making successful
investing in larger, long-established businesses. investments in higher growth technology businesses.
This could negatively impact shareholder returns. The Manager operates a structured investment appraisal
The Company relies on the judgement and reputation and due diligence process. This includes a review
of the Manager to provide strong investment returns from one external investment professional and comments
and valuations for shareholders. from non-executive Directors of the Company on matters
The Company's investment valuation methodology is discussed at the Investment Committee meetings.
based on fair value, which for smaller unquoted growth Investments are monitored by the Manager, through
businesses can be difficult to determine due to the monthly portfolio updates and typically an investment
lack of observable market data and the limitation manager sitting on portfolio company boards. The Board
of external reference points. receives detailed reports on each investment and their
valuation as part of their quarterly board meetings.
Review and oversight by the non-executive Directors
ensures that the risk to the Company's and Manager's
reputation is kept to a minimum.
Investments are valued in accordance with the International
Private Equity and Venture Capital Valuation Guidelines,
which represent current best practice for investment
valuation and are reviewed by the Manager's Valuation
Committee.
These procedures ensure that this increased risk continues
to be mitigated where possible.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
VCT approval and regulatory change risk Any breach of section 274 of the Income Tax Act 2007, No change. The Company's VCT qualifying status is monitored monthly
including any legislative changes, could result in by the Manager and quarterly by the Board. The Board
the loss of the Company's HMRC qualifying status and has appointed Philip Hare & Associates LLP as its
tax reliefs for investors. taxation adviser, who independently confirms compliance,
highlights areas of risk and informs on any legislative
changes, including those which may arise from the
withdrawal from the European Union.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Regulatory and compliance risk The Company is listed on The London Stock Exchange No change. The Board and the Manager receive regular updates
and is required to comply with the rules of the UK on new regulation, including legislation on the management
Listing Authority, as well as with the Companies Act, of the Company, from its auditor, lawyers and other
Accounting Standards and other legislation. Failure professional bodies. The Company is subject to compliance
to comply with these regulations could result in a checks through the Manager's compliance officer, and
delisting of the Company's shares, or other penalties any issues arising from compliance or regulation are
under the Companies Act or from financial reporting reported to its own board on a monthly basis. The
oversight bodies. Board ensures the Company is compliant as part of
its quarterly Board meetings.
The Board reviews the quarterly reports prepared by
Ocorian Depositary (UK) Limited (the Company's Depositary)
to ensure the Manager is adhering to the AIFMD requirements.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Operational and internal control risk (including cyber The Company relies on a number of third parties, in No change. The Company's operations and IT systems are subject
and data security) particular the Manager, for the provision of investment to rigorous internal controls which are reviewed on
management and administrative functions. Failures a regular basis and reported to the Board.
in key IT systems and controls within the Manager's The Audit Committee reviews the Internal Audit Reports
business could place assets of the Company at risk, prepared by the Manager's internal auditors, Azets,
resulting in inaccurate information being passed to and has access to their internal audit partner to
the Board or shareholders. This could additionally whom it can ask specific detailed questions in order
result in losses for the Company and its shareholders. to satisfy itself that the Manager has strong systems
and controls in place including those in relation
to risk management, business continuity and cyber
security.
The Board reviews the systems and processes (including
cyber and data security) in place for the Company's
key suppliers to ensure that there is an appropriate
risk mitigation in place.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Economic and political risk Events such as the Covid-19 pandemic, the impact of Increased (due to high levels of inflation and the The Company invests in a diversified portfolio of
Brexit, an economic recession, fluctuation in inflation geopolitical risks from the invasion of Ukraine). c.38 companies, predominantly in the United Kingdom,
and interest rates, or significant political events and has a policy of minimising any external bank borrowings
could adversely affect the companies within the portfolio within portfolio companies.
and consequently the Company's net asset value. Exogenous risks over which the Company has no control
are always a risk and the Company does what it can
to address these risks. The inherent long-term nature
of the portfolio helps to mitigate these exogenous
risks.
The Board and Manager are continuously assessing the
resilience of the portfolio as a result of the ongoing
economic and political risks, to ascertain where support
is required. The Company has sufficient cash resources
to cope with any such exigent and unexpected pressures.
Exposure is relatively small to at-risk sectors that
include leisure, hospitality, retail and travel (3%
of NAV).
The Company's investment policy and the Board's scrutiny
of the investment portfolio ensures that this increased
risk continues to be mitigated where possible.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Liquidity risk The Company may not have sufficient cash available No change. The Board reviews the Company's three year cash flow
to meet its financial obligations. forecasts on a quarterly basis. These include potential
The Company's portfolio is primarily in smaller unquoted investment realisations (which are closely monitored
companies, which are inherently illiquid as there by the Manager), Top Up Offers, dividend payments
is no readily available market, and thus it may be and operational expenditure. This ensures that there
difficult to realise their fair value at short notice. are sufficient cash resources available for the Company's
liabilities as they fall due.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Environmental, social and governance ("ESG") risk An insufficient ESG policy could lead to an increased Increased (due to the new guidance issued on climate The Manager is a signatory of the UN PRI and the Board
negative impact on the environment, including the change reporting and increased importance to stakeholders). is kept appraised of the evolving ESG policies at
Company's carbon footprint. quarterly Board meetings.
Non-compliance with reporting requirements could lead Full details of the specific procedures and risk mitigation
to a fall in demand from investors, reputational damage can be found in the ESG report on pages 19 to 21 of
and penalties. the full Annual Report and Financial Statements.
These procedures ensure that this increased risk continues
to be mitigated where possible.
------------------------------------------------------ ---------------------------------------------------------- ------------------------------------------------------------ -------------------------------------------------------------
Viability statement
In accordance with the FRC UK Corporate Governance Code
published in 2018 and provision 36 of the AIC Code of Corporate
Governance, the Directors have assessed the prospects of the
Company over three years to 31 March 2025. The Directors believe
that three years is a reasonable period in which they can assess
the 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
assessing the resilience of portfolio companies, including the
requirement for any future financial support, and evaluating the
impact of high inflation, both within the Company and within its
portfolio.
The Board has additionally considered the ability of the Company
to comply with the ongoing conditions to ensure it maintains its
VCT qualifying status under its current investment policy. As a
result of the Board's quarterly valuation reviews, it has concluded
that the portfolio is well balanced and geared towards delivering
long term growth and strong returns to shareholders.
The Board has concluded that there is a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the three year period to 31 March
2025. The Board is mindful of the ongoing risks and will continue
to ensure that appropriate safeguards are in place, in addition to
monitoring the quarterly cashflow forecasts to ensure the Company
has sufficient liquidity.
This Strategic report of the Company for the year ended 31 March
2022 has been prepared in accordance with the requirements of
section 414A of the Companies Act 2006 (the "Act"). The purpose of
this report is to provide Shareholders with sufficient information
to enable them to assess the extent to which the Directors have
performed their duty to promote the success of the Company in
accordance with Section 172 of the Act.
Richard Glover
Chairman
29 June 2022
Statement of Directors' responsibilities
In preparing these Financial Statements for the year to 31 March
2022, the Directors of the Company, being Richard Glover, John
Kerr, Ann Berresford 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 2022
for the Company has been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law) and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
-- the Chairman's statement and Strategic report include a fair review of
the development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties it faces.
We consider that the Annual Report and Financial Statements,
taken as a whole, are fair, balanced, and understandable and
provide the information necessary for shareholders to assess the
Company's position, performance, business model and strategy.
A detailed "Statement of Directors' responsibilities" is
contained on page 38 of the full Annual Report and Financial
Statements.
For and on behalf of the Board
Richard Glover
Chairman
29 June 2022
Income statement
Year ended 31 March 2022 Year ended 31 March 2021
--------------------------------------------------- ---- ------------------------- -------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ----
Gains on investments 3 - 6,553 6,553 - 6,508 6,508
Investment income 4 1,037 - 1,037 2,467 - 2,467
Investment Manager's fees* 5 (122) (1,097) (1,219) (337) (1,010) (1,347)
Other expenses 6 (411) - (411) (363) - (363)
Profit on ordinary activities before tax 504 5,456 5,960 1,767 5,498 7,265
Tax (charge)/credit on ordinary activities 8 (97) 98 1 (299) 192 (107)
Profit and total comprehensive income attributable
to shareholders 407 5,554 5,961 1,468 5,690 7,158
Basic and diluted return per share (pence)** 10 0.39 5.38 5.77 1.46 5.64 7.10
--------------------------------------------------- ----
*For more information on the allocation between revenue and
capital please see the accounting policies below.
** 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 2022 31 March 2021
Note GBP'000 GBP'000
------------------------------------------ ---- ------------- -------------
Fixed asset investments 11 37,604 28,355
Current assets
Trade and other receivables 13 1,926 1,561
Cash and cash equivalents 24,668 43,562
------------- -------------
26,594 45,123
Total assets 64,198 73,478
Payables: amounts falling due within one
year
Trade and other payables 14 (261) (790)
------------- -------------
Total assets less current liabilities 63,937 72,688
------------- -------------
Equity attributable to equity holders
Called-up share capital 15 1,369 1,165
Share premium 10,047 40,668
Capital redemption reserve 22 7
Unrealised capital reserve 6,550 3,588
Realised capital reserve 7,693 21,829
Other distributable reserve 38,256 5,431
------------- -------------
Total equity shareholders' funds 63,937 72,688
------------- -------------
Basic and diluted net asset value per
share (pence)* 16 53.38 73.13
*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 29 June 2022, and were signed
on its behalf by:
Richard Glover
Chairman
Company number: 03142609
Statement of changes in equity
Capital Unrealised Realised Other
Called-up share Share redemption capital capital distributable
capital premium reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- --------
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
-------------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- --------
At 1 April 2020 1,148 39,477 7 13,178 6,549 10,269 70,628
Return and total comprehensive income for the year - - - 1,831 3,859 1,468 7,158
Transfer of previously unrealised gains on realisations
of investments - - - (11,421) 11,421 - -
Purchase of treasury shares - - - - - (2,043) (2,043)
Issue of equity 17 1,225 - - - - 1,242
Cost of issue of equity - (34) - - - - (34)
Net dividends paid (note 9) - - - - - (4,263) (4,263)
-------------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- --------
At 31 March 2021 1,165 40,668 7 3,588 21,829 5,431 72,688
-------------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- --------
*Included within these reserves is an amount of GBP26,804,000
(2021: GBP27,260,000) which is considered distributable. Over the
next four years an additional GBP17,585,000 will become
distributable. This is due to the HMRC requirement that the Company
cannot use capital raised in the past three years to make a payment
or distribution to shareholders. On 1 April 2022, GBP567,000 became
distributable in line with this.
The accompanying notes form an integral part of these Financial
Statements.
Statement of cash flows
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
Cash flow from operating activities
Loan stock income received 978 2,985
Deposit interest received 4 14
Dividend income received 7 24
Investment Manager's fees paid (1,434) (1,337)
Other cash payments (389) (378)
UK Corporation tax paid (42) (204)
Net cash flow from operating activities (876) 1,104
Cash flow from investing activities
Purchase of fixed asset investments (7,771) (5,040)
Disposal of fixed asset investments 4,649 30,620
-------------- --------------
Net cash flow from investing activities (3,122) 25,580
Cash flow from financing activities
Issue of share capital 8,941 668
Cost of issue of equity (35) (17)
Dividends paid* (21,589) (3,714)
Purchase of own shares (including costs) (2,213) (1,841)
Net cash flow from financing activities (14,896) (4,904)
(Decrease)/increase in cash and cash
equivalents (18,894) 21,780
Cash and cash equivalents at start of the year 43,562 21,782
-------------- --------------
Cash and cash equivalents at end of the year 24,668 43,562
---------------------------------------------- -------------- --------------
*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 preparation
The Financial Statements have been prepared in accordance with
applicable United Kingdom law and accounting standards, including
Financial Reporting Standard 102 ("FRS 102"), and with the
Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" ("SORP")
issued by The Association of Investment Companies ("AIC"). The
Financial Statements have been prepared on a going concern basis
and further details can be found in the Directors' report on pages
33 and 34 of the full Annual Report and Financial Statements.
The preparation of the Financial Statements requires management
to make judgements and estimates that affect the application of
policies and reported amounts of assets, liabilities, income and
expenses. The most critical estimates and judgements relate to the
determination of carrying value of investments at Fair Value
Through Profit and Loss ("FVTPL") in accordance with FRS 102
sections 11 and 12. The Company values investments by following the
International Private Equity and Venture Capital Valuation ("IPEV")
Guidelines as updated in 2018 and further detail on the valuation
techniques used are outlined below.
Company information is shown on page 2 of the full Annual Report
and Financial Statements.
2. Accounting policies
Fixed asset investments
The 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 per cent. 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 payables
Receivables (including debtors due after more than one year),
payables and cash are carried at amortised cost, in accordance with
FRS 102. Debtors due after more than one year meet the definition
of a financing transaction held at amortised cost, and interest
will be recognised through capital over the credit period using the
effective interest method. There are no financial liabilities other
than payables.
Investment income
Equity income
Dividend 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.
Bank interest income
Interest income is recognised on an accruals basis using the
rate of interest agreed with the bank.
Investment management fee, performance incentive fee and other
expenses
All expenses have been accounted for on an accruals basis.
Expenses are charged through the other distributable reserve except
the following which are charged through the realised capital
reserve:
-- 90% of management fees and 100% of performance incentive fees, if any,
are allocated to the realised capital reserve. This has changed from 75%
for both management fees and performance incentive fees in the year ended
31 March 2021, to better align with the Board's expectation that over the
long term the majority of the Company's investment returns will be in the
form of capital gains; and
-- expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Taxation
Taxation 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.
Reserves
Called-up share capital
This 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 reserve
This 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 reserve
Increases and decreases in the valuation of investments held at
the year end against cost are included in this reserve.
Realised capital reserve
The 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 reserve
The 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.
Going concern
The Board has assessed the Company's operation as a going
concern. The Company has sufficient cash and liquid resources, its
portfolio of investments is well diversified in terms of sector,
and the major cash outflows of the Company (namely investments,
buy-backs and dividends) are within the Company's control. Cash
flow forecasts are discussed quarterly at Board level with regards
to going concern. The cash flow forecasts have been updated and
stress tested. Accordingly, after making diligent enquiries, the
Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence over a
period of at least twelve months from the date of approval of the
Financial Statements. For this reason, the Directors have adopted
the going concern basis in preparing the accounts. The Directors do
not consider there to be any material uncertainty over going
concern.
Dividends
Dividends by the Company are accounted for when the liability to
make the payment (record date) has been established.
Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single operating segment of business, being investment in smaller
companies principally based in the UK.
3. Gains on investments
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
-------------------------------------------- -------------- --------------
Unrealised gains on fixed asset investments 3,784 1,831
Realised gains on fixed asset investments 2,546 4,626
Finance income from deferred consideration 223 51
6,553 6,508
-------------- --------------
4. Investment income
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
-------------------- -------------- --------------
Loan stock interest 1,026 2,432
Dividend income 7 24
Bank interest 4 11
1,037 2,467
-------------- --------------
5. Investment Manager's fees
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
Investment management fee charged to revenue 122 337
Investment management fee charged to capital 1,097 1,010
-------------- --------------
1,219 1,347
-------------- --------------
Further details of the Management agreement under which the
investment management fee and any performance incentive fee is paid
are given in the Strategic report above.
During the year, services of a total value of GBP1,274,000
(2021: GBP1,401,000), were purchased by the Company from Albion
Capital Group LLP; this includes GBP1,219,000 (2021: GBP1,347,000)
of investment management fee and GBP55,000 (2021: GBP54,000) of
secretarial and administration fee. At the financial year end, the
amount due to Albion Capital Group LLP in respect of these services
disclosed within payables was GBP144,000 (2021: GBP359,000).
Albion Capital Group LLP is, from time to time, eligible to
receive arrangement fees and monitoring fees from portfolio
companies. During the year ended 31 March 2022, fees of GBP155,000
attributable to the investments of the Company were received by
Albion Capital Group LLP pursuant to these arrangements (2021:
GBP193,000).
Albion Capital Group LLP, its partners and staff hold a total of
1,324,035 shares in the Company as at 31 March 2022.
The Company entered into an offer agreement relating to the
Offers with the Company's investment manager Albion Capital Group
LLP ("Albion"), pursuant to which Albion received a fee of 2.5 per
cent. 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 Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
---------------------------------------------------- -------------- --------------
Directors' fees (including NIC) 103 101
Auditor's remuneration for statutory audit services
(excluding VAT) 39 37
Secretarial and administration fee 55 54
Other administrative expenses 214 171
411 363
-------------- --------------
7. Directors' fees
The amounts paid to and on behalf of Directors during the year
are as follows:
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
------------------- -------------- --------------
Directors' fees 95 93
National insurance 8 8
-------------- --------------
103 101
-------------- --------------
The Company's key management personnel are the Directors.
Further information regarding Directors' remuneration can be found
in the Directors' remuneration report on page 46 of the full Annual
Report and Financial Statements.
8. Tax (credit)/charge on ordinary activities
Year ended 31 March 2022 Year ended 31 March 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------
UK corporation tax
in respect of
current year 98 (98) - 332 (192) 140
UK corporation tax
in respect of
prior year (1) - (1) (33) - (33)
-------- -------- -------- -------- -------- --------
97 (98) (1) 299 (192) 107
-------- -------- -------- -------- -------- --------
Year ended Year ended
Reconciliation of profit on ordinary activities to 31 March 2022 31 March 2021
taxation charge GBP'000 GBP'000
Return on ordinary activities before taxation 5,960 7,265
-------------- --------------
Tax charge on profit at the standard rate of 19% (2021:
19%) 1,132 1,380
Factors affecting the charge:
Non-taxable gains (1,245) (1,236)
Income not taxable (1) (4)
Consortium relief in respect of prior years - (33)
Prior year refund 1 -
Excess management expenses carried forward 112 -
(1) 107
-------------- --------------
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 per
cent. (2021: 19 per cent.). The differences are explained
above.
Consortium relief is recognised in the accounts in the period in
which the claim is submitted to HMRC and is shown as tax in respect
of prior year.
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 GBP582,000 (2021: GBPnil) that are available for offset against future profits. A deferred tax asset of GBP146,000 (2021: GBPnil) 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 Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
------------------------------------------------------------ ------------------ --------------
First interim and first special dividend of 16.83p
per share paid on 30 July 2021 (31 July 2020: First
interim dividend of 2.50p per share) 16,728 2,541
Second special dividend of 7.00p per share paid on
31 December 2021 7,141 -
Second interim dividend of 1.47p per share paid on 31
January 2022 (29 January 2021: Second interim dividend of
1.74p per share) 1,523 1,745
Unclaimed dividends (10) (23)
-------------- --------------
25,382 4,263
-------------- --------------
In addition to the dividends summarised above, the Board has
declared a first dividend for the year ending 31 March 2023 of 1.33
pence per share to be paid on 29 July 2022 to shareholders on the
register on 8 July 2022. The total dividend will be approximately
GBP1,614,000.
During the year, unclaimed dividends older than twelve years of
GBP10,000 (2021: GBP23,000) 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 per share
Year ended 31 March 2022 Year ended 31 March 2021
Revenue Capital Total Revenue Capital Total
--------------------------------------------------------
Return attributable to equity shares (GBP'000) 407 5,554 5,961 1,468 5,690 7,158
Weighted average shares in issue (adjusted for treasury
shares) 103,265,706 100,836,952
Return attributable per equity share (pence) 0.39 5.38 5.77 1.46 5.64 7.10
The weighted average number of shares is calculated after
adjusting for treasury shares of 17,153,431 (2021: 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
31 March 2022 31 March 2021
Investments held at fair value through profit or loss GBP'000 GBP'000
Unquoted equity 24,388 17,563
Unquoted loan stock 12,460 10,792
Quoted equity 756 -
37,604 28,355
------------- -------------
31 March 2022 31 March 2021
GBP'000 GBP'000
-----------------------------------------------------
Opening valuation 28,355 49,243
Purchases at cost 7,771 5,040
Disposal proceeds (4,899) (31,883)
Realised gains 2,546 4,677
Movement in loan stock accrued income 47 (553)
Unrealised gains 3,784 1,831
-------------
Closing valuation 37,604 28,355
------------- -------------
Movement in loan stock accrued income
Opening accumulated loan stock accrued income 199 752
Movement in loan stock accrued income 47 (553)
------------- -------------
Closing accumulated loan stock accrued income 246 199
------------- -------------
Movement in unrealised gains
Opening accumulated unrealised gains 3,588 13,178
Transfer of previously unrealised gains to realised
reserve on realisations of investments (822) (11,421)
Unrealised gains 3,784 1,831
------------- -------------
Closing accumulated unrealised gains 6,550 3,588
------------- -------------
Historic cost basis
Opening book cost 24,568 35,313
Purchases at cost 7,771 5,040
Disposals at cost (1,531) (15,785)
-------------
Closing book cost 30,808 24,568
------------- -------------
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 31 March
2022 2021
Valuation methodology GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Cost and price of recent investment (reviewed for
impairment or uplift) 16,678 11,408
Third party valuation -- Discounted cash flow 10,026 9,835
Third party valuation - Earnings multiple 3,085 2,196
Net assets 3,038 1,850
Revenue multiple 1,595 1,400
Bid price 756 -
Earnings multiple 2,426 1,666
37,604 28,355
------------ ------------
When using the cost or price of a recent investment in the
valuations the Company looks to re-calibrate this price at each
valuation point by reviewing progress within the investment,
comparing against the initial investment thesis, assessing if there
are any significant events or milestones that would indicate the
value of the investment has changed and considering whether a
market-based methodology (i.e. using multiples from comparable
public companies) or a discounted cashflow forecast would be more
appropriate.
The main inputs into the calibration exercise, and for the
valuation models using multiples, are revenue, EBITDA and P/E
multiples (based on the most recent revenue, EBITDA or earnings
achieved and equivalent corresponding revenue, EBITDA or earnings
multiples of comparable companies), quality of earnings assessments
and comparability difference adjustments. Revenue multiples are
often used, rather than EBITDA or earnings, due to the nature of
the Company's investments, being in growth and technology companies
which are not normally expected to achieve profitability or scale
for a number of years. Where an investment has achieved scale and
profitability the Company would normally then expect to switch to
using an EBITDA or earnings multiple methodology.
In the calibration exercise and in determining the valuation for
the Company's equity instruments, comparable trading multiples are
used. In accordance with the Company's policy, appropriate
comparable companies based on industry, size, developmental stage,
revenue generation and strategy are determined and a trading
multiple for each comparable company identified is then calculated.
The multiple is calculated by dividing the enterprise value of the
comparable group by its revenue, EBITDA or earnings. The trading
multiple is then adjusted for considerations such as illiquidity,
marketability and other differences, advantages and disadvantages
between the portfolio company and the comparable public companies
based on company specific facts and circumstances.
Fair value investments had the following movements between
valuation methodologies between 31 March 2021 and 31 March
2022:
Change in valuation methodology (2021 to 2022) Value as at Explanatory
31 March 2022 note
GBP'000
Cost and price of recent investment (reviewed for 1,595 Revenue
impairment or uplift) to revenue multiple multiple
more
relevant
based on
current
trading
Cost and price of recent investment (reviewed for 1,292 More
impairment or uplift) to net assets appropriate
valuation
methodology
Cost and price of recent investment (reviewed for 756 IPO listing
impairment or uplift) to bid price
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 2022.
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
-------------------- ----------------------------------------------------
All fixed asset investments (unquoted equity, preference shares
and loan stock) are valued according to Level 3 valuation
methods.
Investments held at fair value through profit or loss (Level 3)
had the following movements:
31 March 2022 31 March 2021
GBP'000 GBP'000
-------------------------------------- ------------- -------------
Opening valuation 28,355 49,243
Purchases at cost 7,771 5,040
Movement from Level 3 to Level 1* (356) -
Unrealised gains 3,384 1,831
Movement in loan stock accrued income 47 (553)
Realised net gains on disposal 2,546 4,677
Disposal proceeds (4,899) (31,883)
Closing valuation 36,848 28,355
------------- -------------
*This relates to Arecor Therapeutics PLC, which listed on the
AIM stock exchange during the period.
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. 79% 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 88% of the portfolio of investments. The main inputs
considered for each type of valuation is as follows:
Change in
fair value
Change of Change in NAV
Portfolio company Base in investments (pence per
Valuation technique sector Input Case* input (GBP'000) share)
--------------------------------------------- ----------------- ------------------ ----- ------ ----------- -----------------
Third party valuation -- Discounted cashflow Renewable energy Discount rate 5.5% +0.5% 144 0.12
--------------------------------------------- ----------------- ------------------ ----- ------ ----------- -----------------
-0.5% (131) (0.11)
---------------------------------------------------------------------------------- ----- ------ ----------- -----------------
Third party valuation -- Earnings multiple Education Earnings multiple 22.5x 2.25x 186 0.16
--------------------------------------------- ----------------- ------------------ ----- ------ ----------- -----------------
-2.25x (186) (0.16)
---------------------------------------------------------------------------------- ----- ------ ----------- -----------------
*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 GBP330,000
(1.4%) or a decrease in the valuation of unquoted equity
investments by GBP317,000 (1.3%).
12. Significant interests
The principal activity of the Company is to select and hold a
portfolio of investments in unquoted securities. Although the
Company, through the Manager, will, in some cases, be represented
on the board of the portfolio company, it will not 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 per cent. 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 2022 as
described below.
Registered
address and Results
country of Profit/(loss) before tax Aggregate capital and reserves for year % class and % total voting
Company incorporation GBP'000 GBP'000 ended share type rights
Kew Green
VCT 31
(Stansted) December
Limited EC1M 5QL, UK n/a* 3,001 2020 45.2% Ordinary 45.2%
*The company files filleted accounts which do not disclose this
information.
13. Trade and other receivables
31 March 2022 31 March 2021
GBP'000 GBP'000
------------------------------------- ------------- -------------
Other receivables 342 107
UK corporation tax receivable - 97
Prepayments 24 21
Deferred consideration over one year 1,560 1,336
1,926 1,561
------------- -------------
The deferred consideration over one year relates to the sale of
G. Network Communications Limited in December 2020. These proceeds
are receivable in January 2024, and have been discounted to present
value at the prevailing market rate, including a provision for
counterparty risk. This constitutes a financing transaction, and
has been accounted for using the policy disclosed in note 2.
The Directors consider that the carrying amount of receivables
is not materially different to their fair value.
14. Trade and other payables
31 March 2022 31 March 2021
GBP'000 GBP'000
----------------------------- ------------- -------------
Trade payables 27 219
UK Corporation tax payable - 140
Accruals and deferred income 234 431
------------- -------------
261 790
------------- -------------
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 GBP'000
116,549,525 Ordinary shares of 1 penny each at 31
March 2021 1,165
24,297,674 Ordinary shares of 1 penny each issued
during the year 243
3,919,566 Ordinary shares of 1 penny each cancelled
during the year (39)
------------------------------------------------------------ -------
136,927,633 Ordinary shares of 1 penny each at 31
March 2022 1,369
------------------------------------------------------------ -------
17,153,431 Ordinary shares of 1 penny each held in
treasury at 31 March 2021 (172)
17,153,431 Ordinary shares of 1 penny each held in
treasury at 31 March 2022 (172)
------------------------------------------------------------ -------
119,774,202 Ordinary shares of 1 penny each in circulation*
at 31 March 2022 1,198
------------------------------------------------------------ -------
* Carrying one vote each
The Company purchased 3,919,566 Ordinary shares to be cancelled
(2021: 3,069,400 to be held in treasury) at a cost of GBP2,013,000
(2021: GBP2,043,000) representing 2.9 per cent. (2021: 2.6 per
cent.) of its issued share capital as at 31 March 2022. The shares
purchased for treasury in the prior year were funded from the other
distributable reserve.
The Company holds a total of 17,153,431 shares (2021:
17,153,431) in treasury at a nominal value of GBP172,000,
representing 12.5 per cent. of the issued Ordinary share capital as
at 31 March 2022.
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:
Aggregate Issue
Number of nominal price Opening market
Date of shares value of (pence Net price on
allotment allotted shares per invested allotment date
GBP'000 share) GBP'000 (pence per share)
30 July
2021 4,358,920 44 56.30 2,437 53.50
31 December
2021 2,065,224 21 51.80 1,052 49.45
31 January
2022 508,281 5 50.33 254 47.40
---------- ---------- ----------
6,932,425 69 3,743
---------- ---------- ----------
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:
Aggregate Issue
Number of nominal price Net Opening market
Date of shares value of (pence consideration price on
allotment allotted shares per received allotment date
GBP'000 share) GBP'000 (pence per share)
---------- ---------- --------- ---------- ------------- -----------------
25
February
2022 1,836,706 18 52.30 946 49.00
25
February
2022 760,552 8 52.50 391 49.00
25
February
2022 14,767,991 148 52.80 7,603 49.00
---------- --------- -------------
17,365,249 174 8,940
---------- --------- -------------
16. Basic and diluted net asset value per share
31 March 2022 31 March 2021
Basic and diluted net asset value per share
(pence) 53.38 73.13
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 119,774,202 Ordinary shares (2021: 99,396,094).
17. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in
note 15. The Company is permitted to buy back its own shares for
cancellation or treasury purposes, and this is described in more
detail on page 33 of the Directors' report within the full Annual
Report and Financial Statements.
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 risk
As 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 on page 9.
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. The Board considers that the value of the
fixed asset investment portfolio is sensitive to a change of 10%
based on the current economic climate. The impact of a 10% change
has been selected as this is considered reasonable given the
current level of volatility observed. When considering the
appropriate level of sensitivity to be applied, the Board has
considered both historic performance and future expectations.
The sensitivity of a 10% increase or decrease in the valuation
of the fixed asset investment portfolio (keeping all other
variables constant) would increase or decrease the net asset value
and return for the year by GBP3,760,000. 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 in the Strategic report above.
The maximum investment risk on the balance sheet date is the
value of the fixed asset investment portfolio which is
GBP37,604,000 (2021: GBP28,355,000). Fixed asset investments form
59 per cent. Of the net asset value on 31 March 2022 (2021: 39 per
cent.).
Interest rate risk
It 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 per cent. In all interest rates would have
increased total return before tax for the year by approximately
GBP341,000 (2021: GBP327,000). 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 7.3
per cent. (2021: 11.9 per cent.). The weighted average period to
maturity for the fixed rate assets is approximately 6.0 years
(2021: 6.9 years).
The Company's financial assets and liabilities, all denominated
in Sterling, consist of the following:
31 March 2022 31 March 2021
Floating rate Non-interest bearing Total Floating rate Non-interest bearing Total
Fixed rate GBP'000 GBP'000 GBP'000 GBP'000 Fixed rate GBP'000 GBP'000 GBP'000 GBP'000
Unquoted
equity - - 24,388 24,388 - - 17,563 17,563
Quoted
equity - - 756 756 - - - -
Unquoted
loan stock 11,922 233 305 12,460 10,233 247 312 10,792
Receivables
* - - 1,902 1,902 - - 1,443 1,443
Payables* - - (261) (261) - - (650) (650)
Cash - 24,668 - 24,668 - 43,562 - 43,562
------------------- ------------- -------------------- -------- ------------------- ------------- -------------------- --------
11,922 24,901 27,090 63,913 10,233 43,809 18,668 72,710
------------------- ------------- -------------------- -------- ------------------- ------------- -------------------- --------
* The receivables and payables do not reconcile to the Balance
sheet as prepayments and tax receivable/(payable) are not included
in the above table.
Credit risk
Credit 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 78 per cent. 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 2022 was
limited to GBP12,460,000 of unquoted loan stock instruments (2021:
GBP10,792,000), GBP24,668,000 cash deposits with banks (2021:
GBP43,562,000) and GBP1,926,000 of other receivables (2021:
GBP1,561,000).
At the Balance sheet date, the cash held by the Company was held
with Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds
Banking Group), Barclays Bank plc, National Westminster Bank plc
and Société Générale S.A. 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 per
cent. Of net asset value for any one counterparty.
The credit profile of the unquoted loan stock is described under
liquidity risk.
Liquidity risk
Liquid 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 per cent. of its
adjusted capital and reserves of the latest published audited
Balance sheet, which amounts to GBP6,232,000 as at 31 March 2022
(2021: GBP5,596,000).
The Company has no committed borrowing facilities as at 31 March
2022 (2021: GBPnil) and had cash balances of GBP24,668,000 (2021:
GBP43,562,000). 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 GBP261,000 as at 31 March 2022 (2021:
GBP790,000).
The carrying value of loan stock investments as analysed by
expected maturity dates is as follows:
31 March 2022 31 March 2021
Redemption Fully performing Past due Valued below cost Total Fully performing Past due Valued below cost Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Less than
one year 1,741 469 857 3,067 864 486 916 2,266
1-2 years - - - - - 806 - 806
2-3 years 1,395 - 2 1,397 - - - -
3-5 years 2,422 - - 2,422 1,618 - 5 1,623
5+ years 5,154 420 - 5,574 5,649 448 - 6,097
Total 10,712 889 859 12,460 8,131 1,740 921 10,792
----------- ---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
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 GBP1,045,000 (2021:
GBP1,045,000).
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 liabilities
All the Company's financial assets and liabilities as at 31
March 2022 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 contingencies
The Company had no financial commitments in respect of
investments at 31 March 2022 (2021: GBPnil).
There are no contingent liabilities or guarantees given by the
Company as at 31 March 2022 (2021: GBPnil).
19. Post balance sheet events
Since 31 March 2022 the Company has had the following material
post balance sheet events:
-- Investment of GBP711,000 in an existing portfolio company, Gravitee TopCo
Limited (T/A Gravitee.io), an API management platform;
-- Investment of GBP565,000 in a new portfolio company which provides
insights and analytics to pharmaceutical companies about therapeutic
areas;
-- Investment of GBP435,000 in an existing portfolio company, Cantab
Research Limited (T/A Speechmatics), a provider of low footprint
automated speech recognition which can be deployed in the cloud, on
premise or on device across over 31 languages; and
-- Investment of GBP433,000 in a new portfolio company which is an
autonomous debt resolution platform.
The following new Ordinary shares of nominal value 1 penny each
were allotted under the Albion VCTs Prospectus Top Up Offers
2021/22 after 31 March 2022:
Aggregate Issue
Number of nominal price Net Opening market
Date of shares value of (pence consideration price on
allotment allotted shares per received allotment date
GBP'000 share) GBP'000 (pence per share)
---------- --------- --------- ---------- ------------- -----------------
11 April
2022 446,260 4 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
--------- --------- -------------
1,596,751 16 822
--------- --------- -------------
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5,
and the Directors' remuneration disclosed in the Directors'
remuneration report on page 46 of the full Annual Report and
Financial Statements, there are no other related party transactions
or balances requiring disclosure.
21. Other information
The information set out in this announcement does not constitute
the Company's statutory accounts within the terms of section 434 of
the Companies Act 2006 for the years ended 31 March 2022 and 31
March 2021, and is derived from the statutory accounts for those
financial years, which have been, or in the case of the accounts
for the year ended 31 March 2022, which will be, delivered to the
Registrar of Companies. The Auditor reported on those accounts; the
reports were unqualified and did not contain a statement under s498
(2) or (3) of the Companies Act 2006.
22. Publication
The 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/31Mar2022.pdf.
Attachment
-- Split of portfolio by sector, sector (excluding cash), stage of
investment and number of employees
https://ml-eu.globenewswire.com/Resource/Download/651a9356-b4f3-456c-ab6e-e7afee2d9cb5
(END) Dow Jones Newswires
June 29, 2022 09:49 ET (13:49 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
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