TIDMAADV
Albion Development VCT PLC
LEI Code 213800FDDMBD9QLHLB38
As required by the UK Listing Authority's Disclosure Guidance and
Transparency Rules 4.1 and 6.3, Albion Development VCT PLC today makes
public its information relating to the Annual Report and Financial
Statements for the year ended 31 December 2020.
This announcement was approved for release by the Board of Directors on
26 March 2021.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31
December 2020 (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
https://www.globenewswire.com/Tracker?data=gBG9pBmzZ_QbHUxqOjc7KMfg-0uFKdByGHfal3TW7lKM2g9FkYGOhaMf-0jKTRbq7UD-g72uPX4gd3Zg3XI6-ukbp6sxAPay9seD0oFLUWxWD3reukTolAY4DNa0YnHUmMISSTX0dKbTx7BWLsiwXMN_8wUPAk2XSftuRhZKcfI=
www.albion.capital/funds/AADV/31Dec2020.pdf. The information contained
in the Annual Report and Financial Statements will include information
as required by the Disclosure Guidance and Transparency Rules, including
Rule 4.1.
Investment policy
The Company will invest in a broad portfolio of higher growth businesses
with a stronger focus on technology companies across a variety of
sectors of the UK economy. Allocation of assets will be determined by
the investment opportunities which become available but efforts will be
made to ensure that the portfolio is diversified 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 or up to 8 per cent. of its assets, at the time of
investment, in liquid open-ended equity funds providing income and
capital equity exposure (where it is considered economic to do so).
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within
Venture Capital Trust qualifying industry sectors using a mixture of
securities. The maximum amount which the Company will invest in a single
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.
The Company's maximum exposure in relation to gearing is restricted to
10 per cent. of the adjusted share capital and reserves.
Background to the Company
The Company is a Venture Capital Trust which raised a total of GBP33.3
million through the issue of shares between 1999 and 2004. The C shares
merged with the Ordinary shares in 2007. A further GBP6.3 million was
raised through an issue of new D shares in 2010. The D shares converted
to Ordinary shares in 2015.
An additional GBP54.5 million has been raised for the Ordinary shares
through the Albion VCTs Top Up Offers since January 2011.
Financial calendar
Record date for first dividend 7 May 2021
Annual General Meeting Noon on 12 May 2021
Payment of first dividend 28 May 2021
Announcement of Half-yearly results for the six months August 2021
ending 30 June 2021
Financial highlights
186.91p Total shareholder value per Ordinary share from launch
to 31 December 2020
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3.82% Shareholder return for the year ended 31 December
2020
------- ------------------------------------------------------
4.24p Tax-free dividend per Ordinary share for the year
ended 31 December 2020
------- ------------------------------------------------------
82.42p Net asset value per Ordinary share as at 31 December
2020
------- ------------------------------------------------------
Shareholder return is calculated by the movement in total shareholder
value for the year divided by the opening net asset value.
Ordinary shares
31 December 2020 31 December 2019
pence per share pence per share
Opening net asset value 83.47 84.70
Capital return 3.15 2.55
Revenue return 0.02 0.73
---------------- ----------------
Total return 3.17 3.28
Dividends paid (4.24) (4.50)
Impact from share capital movements 0.02 (0.01)
---------------- ----------------
Net asset value 82.42 83.47
----------------------------------------- ---------------- ----------------
Total shareholder value to 31 December 2020:
Ordinary shares (pence per
share)
------------------------------------------------ ----------------------------
Total dividends paid during
the year ended: 31 December 1999 1.00
31 December 2000 2.90
31 December 2001 3.95
31 December 2002 4.20
31 December 2003 4.50
31 December 2004 4.00
31 December 2005 5.20
31 December 2006 3.00
31 December 2007 5.00
31 December 2008 12.00
31 December 2009 4.00
31 December 2010 8.00
31 December 2011 5.00
31 December 2012 5.00
31 December 2013 5.00
31 December 2014 5.00
31 December 2015 5.00
31 December 2016 5.00
31 December 2017 4.00
31 December 2018 4.00
31 December 2019 4.50
31 December 2020 4.24
----------------------------
Total dividends paid to 31 December 2020 104.49
Net asset value as at 31 December 2020 82.42
----------------------------
Total shareholder value to 31 December 2020 186.91
----------------------------
The financial summary above is for the Company, Albion Development VCT
PLC Ordinary shares only. Details of the financial performance of the C
shares and D shares, which have been merged into the Ordinary shares,
can be found at
https://www.globenewswire.com/Tracker?data=gBG9pBmzZ_QbHUxqOjc7KMfg-0uFKdByGHfal3TW7lJw1qbh5Ouv_nGbZPCKDZnorDMlmbMiFR7sZrde71GDPhAqt5pkR3uzg55n4dbpTA-kpKXb08MqhaFAXWkp30eH
www.albion.capital/funds/AADV under the 'Financial summary for previous
funds' section.
In addition to the dividends paid above, the Board has declared a first
dividend for the year ending 31 December 2021 of 2.06 pence per Ordinary
share payable on 28 May 2021 to shareholders on the register on 7 May
2021.
Notes
Total shareholder value for every 100 pence invested on initial
allotment. The table above excludes tax benefits upon subscription.
Chairman's statement
Introduction
I am pleased to announce that the Company has achieved a positive total
return for the year of 3.17 pence per Ordinary share, in what has been a
particularly difficult year for so many businesses and individuals. This
return represents a 3.80% gain on opening net asset value. The year saw
a difficult first half, whilst the Company and its portfolio companies
came to terms with the initial Covid-19 lockdown with a total loss of
2.34%. The second half has been rather better with the Company
benefitting from the resilience of its portfolio in several of its
healthcare and software businesses despite the healthcare pandemic.
Although the full implications of the Covid-19 pandemic are still
unknown, I am optimistic that our portfolio companies will continue to
add value, and we can still find new investment opportunities which will
increase shareholder value over the longer term.
Investment performance and progress
There have been several realisations during the year totalling GBP3.2
million (2019: GBP10.5 million). The sale of G.Network Communications
has been completed, with a strong headline total return of 3.8 times
cost, although the terms of the sale will see proceeds being received in
three years' time. In the current year, this still reflects a
substantial GBP1.3 million of realised gains. Another strong exit
returning 2.1 times cost was our holding in Clear Review, which was sold
to the Advanced Computer Software Group. Further details on realisations
can be found in the realisations table on page 23 of the full Annual
Report and Financial Statements. I am also pleased to announce the
Company has completed the sale of OmPrompt Holdings after the year end,
which reflects a total return of 2.2 times cost. The sales proceeds have
been received by the Company and this uplift is accounted for in the net
asset value.
The Manager took the decision to dispose of the Company's investment in
the SVS Albion OLIM UK Equity Income Fund following a period of poor
performance, with the fund being impacted by the Covid-19 driven falls
of UK quoted equities and the negative outlook for the UK Equity Income
sector. It is the Board's intention that the sale proceeds shall be
redeployed into innovative unquoted growth companies where the Company
is seeing resilient growth. This has resulted in a disappointing GBP0.8
million loss on cost, after allowing for dividends received and
reduction in management fees over the life of the investment.
The results for the year showed net valuation gains on investments of
GBP4.1 million, an increase from GBP3.1 million in the previous year.
The key contributors were the uplift on Quantexa, which has been
revalued after a further externally led funding round and Proveca, which
continues to trade well both within the UK and EU. Egress Software
Technologies has also contributed to this uplift, after winning some key
new contracts during the Covid-19 pandemic, such as track and trace in
higher education. OmPrompt Holdings also contributed to the valuation
gain, due to the sale which completed post year end. However, Covid-19
has impacted some of our portfolio companies negatively, and there were
write-downs including Mirada Medical, due to the current difficulties
selling to overstretched hospitals, and Sandcroft Avenue (trading as
Hussle), which has been impacted by the ongoing closure of gyms.
The Company has been an active investor during the year investing a
total of GBP5.2 million. Of this, GBP2.1 million was invested into six
new portfolio companies, all of which are targeted to require further
investment as the companies prove themselves and grow:
-- GBP575,000 into Concirrus, a software provider bringing real-time
behavioural data analytics to the marine and transport insurance sector;
-- GBP492,000 into The Voucher Market (trading as WeGift), a cloud platform
that enables corporates to purchase digital gift cards and to distribute
them to employees and customers;
-- GBP356,000 into Seldon Technologies, a software company that enables
enterprises to deploy Machine Learning models in production;
-- GBP344,000 into Credit Kudos, a challenger credit bureau helping lenders
optimise and automate their affordability and risk assessments;
-- GBP207,000 into TransFICC, a provider of a connectivity solution,
connecting financial institutions with trading venues via a single API;
and
-- GBP128,000 into uMedeor (trading as uMed), a middleware technology
platform that enables life science organisations to conduct medical
research programmes.
A further GBP3.1 million was invested into existing portfolio companies,
including: GBP1.4 million into Quantexa to support the growth of its
analytics platform which helps detect and protect against financial
crime; GBP334,000 into uMotif, to continue to grow their clinical trials
technology platform; and GBP301,000 into Phrasee to support its growth.
For a review of business and future prospects please see the Strategic
report below.
Dividends and results
The Company paid dividends totalling 4.24 pence per share during the
year ended 31 December 2020 (2019: 4.50 pence per share). The total
return after tax was GBP2.9 million compared to GBP2.7 million in the
year to 31 December 2019.
As set out in the Half-yearly Financial Report to 30 June 2020, the
Board considered it appropriate to move to a variable dividend policy
targeting an annual dividend yield of around 5%, based on prevailing net
asset value rather than at a fixed rate, as it has been in the past.
Semi-annual dividends will be paid, calculated as 2.5% of the most
recently announced net asset value when the dividend is declared (in
most cases this will be the net asset value announced in the Half-yearly
Financial Report or in the Annual Report and Financial Statements).
Therefore, the Board has declared a first dividend for the financial
year ending 31 December 2021 of 2.06 pence per Ordinary share payable on
28 May 2021 to shareholders on the register on 7 May 2021.
Risks and uncertainties
The wide reaching implications of the Covid-19 crisis is the key risk
facing the Company, including its impact on the UK and Global economies.
There may still also be further potential implications of the UK's
departure from the European Union which may adversely affect our
underlying portfolio companies. The Manager is continually assessing the
exposure to such risks for each portfolio company, and where possible
appropriate mitigating actions are being taken.
A detailed analysis of the other risks and uncertainties facing the
business is shown in the Strategic report below.
Share buy-backs
It remains the Board's 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.
Albion VCTs Prospectus Top Up Offers
Your Board, in conjunction with the boards of four of the other VCTs
managed by Albion Capital Group LLP, launched a prospectus top up offer
of new Ordinary shares on 5 January 2021. The Board announced on 26
January 2021 that, following strong demand, it would utilise the
over-allotment facility, bringing the total to be raised to GBP10
million. The Offer was fully subscribed and closed to further
applications on 11 February 2021.
The proceeds are being used to provide support to our existing portfolio
companies during the current pandemic and to enable us to take advantage
of new investment opportunities. The first allotment of the shares under
the Offer was on 26 February 2021. Details of share allotments made
during and after the financial year end can be found in notes 15 and 19
respectively.
Annual General Meeting
The Board has been considering the current rules around the Covid-19
pandemic on the arrangements for our forthcoming Annual General Meeting
("AGM"). These arrangements may be subject to change, and we will keep
shareholders up to date on our Manager's website at
www.albion.capital/vct-hub/agms-events.
We are required by law to hold an AGM within six months of our financial
year end. Whilst the roadmap announced by the government gives a target
of no earlier than 21 June 2021 as the date all legal limits on mixing
will be lifted, the Board is hesitant to delay the AGM, as the roadmap
is clear that data rather than dates are the true driver of
restrictions. The Board also consider last year's AGM to have been
successfully live streamed, and therefore the AGM will be held at noon
on 12 May 2021, at the registered office being 1 Benjamin Street, London,
EC1M 5QL.
Full details of the business to be conducted at the Annual General
Meeting are given in the Notice of the Meeting on pages 67 to 70 of the
full Annual Report and Financial Statements and in the Directors' report
on pages 32 and 33 of the full Annual Report and Financial Statements.
Covid-19 social distancing restrictions will still be in place, and
consequently it will not be possible to allow shareholders entry into
the building where the AGM is held. The quorum for the meeting is two,
therefore two Directors will attend in person to allow the continuation
of this AGM. There will also be a representative of Albion Capital Group
LLP as Company Secretary. Our Articles of Association do not currently
allow hybrid or wholly virtual AGMs, however, as outlined below a
resolution is being proposed to allow this in the future.
As discussed above, following the success of the live streamed AGM last
year, and in order to maintain shareholder engagement, the Board have
decided to again live stream the AGM, which will include a presentation
from the Manager, the formal business of the AGM and answering questions
we receive from shareholders. Registration details for the live stream
will be available at www.albion.capital/funds/AADV prior to the Meeting.
We always welcome questions from our shareholders at the AGM, and again
this year we request that shareholders submit their questions to the
Board in advance of the AGM. Shareholders can submit questions up until
noon on 10 May 2021 by emailing your questions to:
AADVchair@albion.capital
https://www.globenewswire.com/Tracker?data=_jwuoNFvXz_hv1aT8rD-BavY-lN91qTsJuMaPIZqJBv39soZRQcmamSt8UFaxTjVaolHcCpMkIRWKKzBhKyJpQCNIRhV1N8iCLYMvBPI7YY=
. Following the Meeting, a summary of responses will be published on the
Manager's website at www.albion.capital/funds/AADV.
Shareholders' views are important, and the Board encourages shareholders
to vote on the resolutions using the proxy form enclosed with this
Annual Report and Financial Statements, or electronically at
www.investorcentre.co.uk/eproxy. The Board has carefully considered the
business to be approved at the AGM and recommends shareholders to vote
in favour of all the resolutions being proposed.
Virtual and Hybrid Annual General Meetings
As noted above, the Company's Articles of Association do not currently
allow for hybrid or virtual meetings. The Covid-19 pandemic, and the
resulting social distancing rules, have brought to the Board's attention
the importance of the ability to continue to interact with shareholders
during unprecedented times. A resolution will be proposed at the
upcoming AGM to update the Articles of Association to allow the Company
to have the flexibility to hold hybrid or virtual meetings in the future,
if required.
Outlook and prospects
This has been an extraordinary year, with the impact of Covid-19 heavily
impacting the wider economy and some of our portfolio companies. However,
we have also seen resilience in the portfolio, with some companies
performing well despite the challenging times. We have also seen several
new investments in companies continuing to grow through innovation and
with the ambition to have a positive impact on the society in which they
operate. We continue to support our portfolio companies to make
investments and consider that the portfolio is well positioned to drive
further long term growth.
Ben Larkin
Chairman
26 March 2021
Strategic report
Investment policy
The Company will invest in a broad portfolio of higher growth businesses
with a stronger focus on technology companies across a variety of
sectors of the UK economy. Allocation of assets will be determined by
the investment opportunities which become available but efforts will be
made to ensure that the portfolio is diversified in terms of sector and
stage of maturity of company.
The full investment policy can be found above.
Current portfolio sector allocation
The pie charts at the end of this announcement show the split of the
portfolio valuation as at 31 December 2020 by: sector; stage of
investment; and number of employees. This is a useful way of assessing
how the Company and its portfolio is diversified across sector,
portfolio companies' maturity measured by revenues and their size
measured by the number of people employed. Details of the principal
investments made by the Company are shown in the Portfolio of
investments on pages 21 and 22 of the full Annual Report and Financial
Statements.
Direction of portfolio
With six new portfolio companies this year focused in the digital health
and software sectors, we continue to see the asset based part of the
portfolio reduce. We consider the portfolio to be well balanced, in both
sector and stage of investment, given the restrictions the VCT rules
place on investments. The cash balance of 22%, which has increased with
the allotment on 26 February 2021 leaves the Company able to support our
existing portfolio during the ongoing Covid-19 pandemic, as well as
continuing to find new investments to add value to shareholders.
Results and dividend policy
Ordinary
shares
GBP'000
Net capital gain for the year 2,896
Net revenue return for the year 17
Total return for the year ended 31 December 2020 2,913
Dividend of 2.25 pence per share paid on 29 May 2020 (2,077)
Dividend of 1.99 pence per share paid on 30 September
2020 (1,843)
Unclaimed dividends 4
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Transferred from reserves (1,003)
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Net assets as at 31 December 2020 75,859
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Net asset value per share as at 31 December 2020 (pence) 82.42
------------------------------------------------------------- -----------
The Company paid dividends totalling 4.24 pence per Ordinary share
(2019: 4.50 pence per Ordinary share). As described in the Chairman's
statement, the Board has moved to a variable dividend policy which
targets an annual dividend yield of around 5% on the prevailing net
asset value. As a result the Board has declared a first dividend for the
year ending 31 December 2021 of 2.06 pence per Ordinary share payable on
28 May 2021 to shareholders on the register on 7 May 2021.
As shown in the Income statement below, the total investment income
decreased to GBP692,000 (2019: GBP1,294,000). This is substantially due
to Radnor House capitalising interest, in order to fund future capital
expenditure and the repayment of the G.Network Communications loan,
including the interest that had been rolled up, in the prior year. The
revenue return to equity holders has subsequently decreased to GBP17,000
(2019: GBP593,000).
The capital return for the year has increased to GBP2,896,000 (2019:
GBP2,080,000). As discussed in the Chairman's statement above, this is
mainly attributable to the uplifts in the valuations of Quantexa,
Proveca, Egress and OmPrompt. This was partly offset by the reductions
in Mirada Medical and Sandcroft Avenue (trading as Hussle). We remain
confident that the portfolio will deliver over the longer term, and we
consider that the Company has performed well to show positive capital
returns in a year where Covid-19 has had such a devastating impact on
the economy.
The total return was 3.17 pence per share (2019: 3.28 pence per share).
The Balance sheet below shows that the net asset value has marginally
decreased over the year to 82.42 pence per share (2019: 83.47 pence per
share), which is primarily as a result of the dividends paid in the year
totalling 4.24 pence per share.
There was a net cash inflow for the Company of GBP1,116,000 for the year
(2019: GBP5,340,000), mainly resulting from the issue of Ordinary shares
under the Albion VCTs Top Up Offers 2019/20. Cash inflow from
fundraising has been utilised by investments into new and existing
portfolio companies, dividends paid, operating activities and the
buy-back of shares.
Review of business and future changes
The results for the year to 31 December 2020 show total shareholder
value of 186.91 pence per Ordinary share since launch (2019: 183.72
pence per share).
Following changes to the VCT regulations in 2017, the asset-based
investments are decreasing as a proportion of the portfolio. As a result,
revenue returns will remain a small proportion of overall returns, with
the majority of future returns coming from capital gains.
A detailed review of the Company's business during the year is contained
in the Chairman's statement above.
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
As detailed in the Chairman's statement, the ongoing impact of Covid-19
remains unknown, however, the Board believes that the Company's
portfolio is well balanced across sectors and risk classes, which has
been shown by the increase in shareholder value during the year and
continues to have the potential to deliver returns to shareholders over
the long term.
Key Performance Indicators ("KPIs") and Alternative Performance Measures
("APMs")
The Directors believe that the following KPIs and APMs, which are
typical for Venture Capital Trusts, used in its own assessment of the
Company, will provide shareholders with sufficient information to assess
how effectively the Company is applying its investment policy to meet
its objectives. The Directors are satisfied that the results shown in
the following KPIs and APMs give a good indication that the Company is
achieving its investment objective and policy. 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 total shareholder value against the FTSE All-Share Index total
return, in both instances with dividends reinvested. Details on the
performance of the net asset value and return per share for the year are
shown in the Chairman's statement.
2. Net asset value per share and total shareholder return
Total shareholder value is net asset value plus cumulative dividends
paid since launch to 31 December 2020.
Total return to shareholders increased by 3.82% on opening net asset
value to 186.91 pence per Ordinary share for the year ended 31 December
2020 as a result of the positive total return of 3.19 pence per share.
3. Movement in shareholder value in the year
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
---- ---- ---- ---- ---- ---- ----- ----- ---- ----
7.1% 4.6% 6.9% 5.4% 4.1% 6.5% 10.0% 20.3% 3.8% 3.8%
---- ---- ---- ---- ---- ---- ----- ----- ---- ----
Source: Albion Capital Group LLP
Calculated as the movement in total shareholder value for the year
divided by the opening net asset value.
4. Dividend distributions
Dividends paid in respect of the year ended 31 December 2020 were 4.24
pence per share (2019: 4.50 pence per share). Cumulative dividends paid
since inception are 104.49 pence per share.
5. Ongoing charges
The ongoing charges ratio for the year to 31 December 2020 was 2.5%
(2019: 2.5%). The ongoing charges ratio has been calculated using The
Association of Investment Companies' ("AIC") recommended methodology.
This figure shows shareholders the total recurring annual running
expenses (including investment management fees charged to capital
reserve) as a percentage of the average net assets attributable to
shareholders. The ongoing charges cap is 2.5%, which has resulted in a
saving of GBP97,000 to shareholders during the year (2019: GBP105,000).
6. VCT regulation*
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
30 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 December 2020. 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.
Operational arrangements
The Company has delegated the investment management of the portfolio to
Albion Capital Group LLP, which is authorised and regulated by the
Financial Conduct Authority. Albion Capital Group LLP 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 may be terminated by either party on 12 months'
notice and is subject to earlier termination in the event of certain
breaches or on the insolvency of either party. The Manager is paid an
annual fee equal to 2.25% of the net asset value of the Company paid
quarterly in arrears.
Additionally, for the period that the Company held the investment in the
SVS Albion OLIM UK Equity Income Fund ("OUEIF"), Albion agreed to reduce
that proportion of its management fee relating to the OUEIF by 0.75% per
annum, which represents the OUEIF management fee charged by OLIM to
avoid any double charging for the investment exposure.
Total annual expenses, including the management fee, are limited to 2.5%
of the net asset value, as per the resolution passed at the General
Meeting in 2019.
The Manager is also entitled to an arrangement fee, payable by each
portfolio company, of approximately 2% on each investment made and also
monitoring fees where the Manager has a representative on the portfolio
company's board.
Management performance incentive
As an incentive to maximise the return to investors, the Manager is
entitled to charge an incentive fee in the event that the returns exceed
minimum target levels.
The performance fee hurdle requires that the growth of the aggregate of
the net asset value per share and dividends paid by the Company compared
with the previous accounting date exceeds RPI plus 2%. The hurdle will
be calculated every year, based on the previous year's closing net asset
value per share. The starting net asset value is 84.70 pence per share,
being the audited net asset value at 31 December 2018. The Manager
continues to receive an amount equal to 20% of the returns achieved in
excess of the hurdle. 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.
As at 31 December 2020, the total return since 1 January 2019 was 91.16
pence, and the hurdle was 90.93 pence, resulting in an excess of 0.23
pence per share. As a result, a performance incentive fee is payable to
the Manager of GBP42,000 (2019: GBPnil).
Investment and co-investment
The Company co-invests with other Albion Capital Group LLP managed
Venture Capital Trusts and funds. Allocation of investments is on the
basis of an allocation agreement which is based, inter alia, on the
ratio of funds available for investment and the HMRC VCT qualifying
tests.
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% qualifying holdings investment
requirement for VCT status;
-- the long term prospects of the current portfolio of investments;
-- the management of treasury, including use of buy back and participation
in fund raising;
-- a review of the Management agreement and the services provided therein;
and
-- benchmarking the performance of the Manager to other service providers
including the performance of other VCTs that the Manager is responsible
for managing.
The Board believes that it is in the interests of shareholders as a
whole, and of the Company, to continue the appointment of the Manager
for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board appointed Albion Capital Group LLP 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, 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 way
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 Board considers its significant stakeholder groups to be: its
shareholders; suppliers, including direct agents of the Company such as
the Manager to whom most executive functions are delegated; its
portfolio companies; the community and the environment in the way that
investments are made and managed.
The Company's shareholders are key to the success of the Company. 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. During the year, the Board has approved
a new dividend policy, further details of which can be found in the
Chairman's statement above.
The Board temporarily suspended buy-backs on 18 March 2020 due to the
increasing uncertainty of the net asset value at the time. Buy-backs
were resumed from 22 April 2020 after the announcement of the Interim
Management Statement which included the net asset value for 31 March
2020. The buy-back policy is an important means of providing market
liquidity for shareholders.
Shareholders' views are important and the Board encourages shareholders
to vote on the resolutions at the AGM. The Company's AGM is typically
used as an opportunity to communicate with investors, including through
a presentation made by the investment management team. However, due to
the ongoing impact of the coronavirus outbreak, special circumstances
are again required for this year's AGM and further details are in the
Chairman's statement above.
Shareholders are also encouraged to attend the annual Shareholders'
Seminar. The seminar includes some of the portfolio companies 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.
Details of the seminar event are placed on the Manager's website.
Representatives of the Board attend the seminar.
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 Company's suppliers are fundamental to the operations of the Company,
particularly Albion Capital Group LLP as the Manager, given that
day-to-day management responsibilities are sub-contracted to the
Manager. The Board takes close account of how the Manager operates, with
very close contact during the year and not just at scheduled Board
meetings. Details of the Manager's and Board's responsibilities can be
found in the Statement of corporate governance on pages 36 to 40 of the
full Annual Report and Financial Statements.
The contractual arrangements with all the principal suppliers to the
Company are reviewed regularly and formally once a year, alongside the
performance of the suppliers in acquitting their responsibilities. The
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 above.
The portfolio companies are considered key stakeholders, not least
because they are principal drivers of value for the Company. As
discussed in the Environmental, Social and Governance ("ESG") section
below, the portfolio companies' impact on their stakeholders is also
important to the Company. In most cases, an Albion executive has a place
on the board of a portfolio company, in order to help with both business
operation decisions, as well as good ESG practice.
The Board receives reports on ESG factors within its portfolio from the
Manager as it is a signatory of the UN Principles for Responsible
Investment ("UN PRI"). Further details of this are set out below. ESG,
without its specific definition, has always been at the heart of the
responsible investing that the Company engages in and in how the Company
conducts itself with all of its stakeholders.
The Board, although non-executive, is fully engaged in both oversight
and the general strategic direction of the Company. During the year the
Board's main strategic discussions focused around cash management and
deployment of cash for future investments, dividends and share buy-backs,
resulting in the decision to participate in the Albion VCTs Top Up
Offers 2020/21. Time was also spent in ensuring the Board met Corporate
Governance requirements which continue to evolve. During the year the
Board held a further meeting in addition to its scheduled quarterly
meetings to discuss the effect of the Covid-19 pandemic on the Company's
portfolio.
Environmental, Social, and Governance ("ESG")
The Company's Manager, Albion Capital Group LLP, takes the concept of
sustainable and responsible investment very seriously for existing
investments and in reviewing new investment opportunities. In turn, the
Board is kept appraised of ESG issues in connection with both the
portfolio and in how Company affairs are conducted more generally as a
regular part of Board oversight.
Albion Capital Group LLP is a signatory of the UN PRI. The UN PRI is the
world's leading proponent of responsible investment, working to
understand the investment implications of ESG factors and to support its
international network of investor signatories in incorporating these
factors into their investment and ownership decisions.
The Board and Manager have exercised conscious principles in making
responsible investments throughout the life of the Company, not least in
providing finance for promising companies in a variety of important
sectors such as technology, healthcare and renewable energy. In making
the investments, the Manager is directly involved in the oversight and
governance of these investments, including ensuring standards of
reporting and visibility on business practices, all of which are
reported to the Board of the Company. By its nature, not least in making
qualifying investments which fulfil the criteria set by HMRC, the
Company has focused on sustainable and longer-term investment
propositions, some of which will fail (in the nature of all small
companies), but some of which will grow and serve important societal
demands. One of the most important drivers of performance is the quality
of the investment portfolio, which goes beyond the individual valuations
and examines the prospects of each of the portfolio companies, as well
as the sectors in which they operate -- all requiring a longer- term
view.
In the nature of venture capital investment, Albion Capital Group LLP is
more intimately involved in the affairs of portfolio companies than
might be the case for funds invested in listed securities. As such,
Albion Capital Group LLP is in a position to influence good governance
and behaviour in the portfolio companies, many of which are relatively
small companies without the support of a larger company's administration
and advisory infrastructure.
The Company adheres to the principles of the AIC Code of Corporate
Governance and is also aware of other governance and corporate conduct
guidance which it meets as far as practical, including in the
constitution of a diversified and independent Board capable of providing
constructive challenge.
The Company's portfolio is currently invested in healthcare, renewable
energy, education, software and other technology (which includes cyber
security and data protection), with the most significant percentage of
the Company's portfolio invested in sectors and companies which would be
seen by many measures to be both sustainable and socially aware on the
services they render.
Albion Capital Group LLP incorporates ESG considerations into its
investment decisions. These form part of its process to create value for
investors and develop sustainable long-term strategies for portfolio
companies. Albion Capital Group LLP reports ESG criteria to UN PRI
(annually) and to the Board quarterly.
ESG principles are integrated at the pre-investment, investment and exit
stages. This is reflected in transparency of reporting, governance
principles adopted by the Company and the portfolio companies, and
increasingly in the positive environmental or socially impactful nature
of investments made. Albion Capital Group LLP, where relevant, considers
climate-specific issues in its investment policies and activities.
However, as the majority of the Company's portfolio consists of small
(2-250 full time employees), private, typically software companies with
limited environmental impact, climate change is not considered to be a
significant risk, and actions are proportionate to that risk.
Pre-investment stage
An exclusion list is used to rule out investments in unsustainable areas,
or in areas which might be perceived as socially detrimental. ESG due
diligence is performed on each potential portfolio company to identify
any sustainability risks associated with the investment. Identified
sustainability risks are ranked from low to high and are reported to the
relevant investment committee. The investment committee considers each
potential investment. If sustainability risks are identified,
mitigations are assessed and, if necessary, mitigation plans are put in
place. If this is not deemed sufficient, the committee would consider
the appropriate level and structure of funding to balance the associated
risks. If this is not possible, investment committee approval will not
be provided, and the investment will not proceed.
Investment stage
All new and existing portfolio companies are asked to report against an
ESG Balanced Score Card annually. The ESG Balanced Score Card contains a
number of sustainability factors against which a portfolio company will
be assessed in order to determine the potential sustainability risks and
opportunities arising from the investment. The score cards form part of
the Manager's internal review meetings alongside discussions around
other risk factors, and any outstanding issues are addressed in
collaboration with the portfolio companies' senior management.
Exit stage
Albion Capital Group LLP aims to ensure that good ESG practices remain
in place following exit. For example, by ensuring that the company
creates a self-sustaining ESG management system during our period of
ownership, wherever feasible.
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.
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
These are set out in the Directors' report on page 31 of the full Annual
Report and Financial Statements.
General Data Protection Regulation
The General Data Protection Regulation has the objective of unifying
data privacy requirements across the European Union, and continues to
apply in the United Kingdom after Brexit. The Manager continues to take
action to ensure that the Manager and the Company are compliant with the
regulation.
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 risk has been
the global pandemic which has impacted not only public health and
mobility but also has had an adverse impact on the economy, the full
impact of which is likely to be uncertain for some time.
The Directors have carried out a robust assessment of the Company's
principal risks and uncertainties, and explain how they are being
mitigated as follows:
Risk Possible consequence Risk management
------------ --------------------------------------------------------------- -------------------------------------------------------------
Investment, The risk of investment in poor quality businesses, To reduce this risk, the Board places reliance upon
performance which could reduce the returns to shareholders and the skills and expertise of the Manager and its track
and could negatively impact on the Company's current and record over many years of making successful investments
valuation future valuations. in this segment of the market. In addition, the Manager
risk By nature, smaller unquoted businesses, such as those operates a formal and structured investment appraisal
that qualify for Venture Capital Trust purposes, are and review process, which includes an Investment Committee,
more volatile than larger, long established businesses. comprising investment professionals from the Manager
The Company's investment valuation methodology is for all investments, and at least one external investment
reliant on the accuracy and completeness of information professional for investments greater than GBP1 million
that is issued by portfolio companies. In particular, in aggregate across all the Albion managed VCTs. The
the Directors may not be aware of or take into account Manager also invites and takes account of comments
certain events or circumstances which occur after from non-executive Directors of the Company on matters
the information issued by such companies is reported. discussed at the Investment Committee meetings. Investments
are actively and regularly monitored by the Manager
(investment managers normally sit on portfolio company
boards), including the level of diversification in
the portfolio, and the Board receives detailed reports
on each investment as part of the Manager's report
at quarterly board meetings. The Board and Manager
regularly review the deployment of investments and
cash resources available to the Company in assessing
liquidity required for servicing the Company's buy-backs,
dividend payments and operational expenses.
The unquoted investments held by the Company are designated
at fair value through profit or loss and valued in
accordance with the International Private Equity and
Venture Capital Valuation Guidelines updated in 2018.
These guidelines set out recommendations, intended
to represent current best practice on the valuation
of venture capital investments. The valuation takes
into account all known material facts up to the date
of approval of the Financial Statements by the Board.
------------ --------------------------------------------------------------- -------------------------------------------------------------
VCT approval The Company must comply with section 274 of the Income To reduce this risk, the Board has appointed the Manager,
risk Tax Act 2007 which enables its investors to take advantage which has a team with significant experience in Venture
of tax relief on their investment and on future returns. Capital Trust management, used to operating within
Breach of any of the rules enabling the Company to the requirements of the Venture Capital Trust legislation.
hold VCT status could result in the loss of that status. In addition, to provide further formal reassurance,
the Board has appointed Philip Hare & Associates LLP
as its taxation adviser, who report quarterly to the
Board to independently confirm compliance with the
Venture Capital Trust legislation, to highlight areas
of risk and to inform on changes in legislation. Each
investment in a new portfolio company is also pre-cleared
with our professional advisers or H.M. Revenue & Customs.
The Company monitors closely the extent of qualifying
holdings and addresses this as required.
------------ --------------------------------------------------------------- -------------------------------------------------------------
Regulatory The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
and and is required to comply with the rules of the UK at senior levels within or advising quoted companies.
compliance Listing Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
risk Accounting Standards and other legislation. Failure updates on new regulation from its auditor, lawyers
to comply with these regulations could result in a and other professional bodies. The Company is subject
delisting of the Company's shares, or other penalties to compliance checks through the Manager's compliance
under the Companies Act or from financial reporting officer, and any issues arising from compliance or
oversight bodies. regulation are reported to its own board on a monthly
basis. These controls are also reviewed as part of
the quarterly Board meetings, and also as part of
the review work undertaken by the Manager's compliance
officer. The report on controls is also evaluated
by the internal auditors.
------------ --------------------------------------------------------------- -------------------------------------------------------------
Operational The Company relies on a number of third parties, in The Company and its operations are subject to a series
and internal particular the Manager, for the provision of investment of rigorous internal controls and review procedures
control management and administrative functions. Failures exercised throughout the year, and receives reports
risk in key systems and controls within the Manager's business from the Manager on its internal controls and risk
could put assets of the Company at risk or result management, including on matters relating to cyber
in reduced or inaccurate information being passed security.
to the Board or to shareholders. The Audit Committee reviews the Internal Audit Reports
prepared by the Manager's internal auditors, PKF Littlejohn
LLP and has access to the internal audit partner of
PKF Littlejohn LLP to provide an opportunity to ask
specific detailed questions in order to satisfy itself
that the Manager has strong systems and controls in
place including those in relation to business continuity
and cyber security.
From 1 October 2018, Ocorian Depositary (UK) Limited
was appointed as Depositary to oversee the custody
and cash arrangements and provide other AIFMD duties.
The Board reviews the quarterly reports prepared by
Ocorian Depositary (UK) Limited to ensure that Albion
Capital is adhering to its policies and procedures
as required by the AIFMD.
In addition, the Board regularly reviews the performance
of its key service providers, particularly the Manager,
to ensure they continue to have the necessary expertise
and resources to deliver the Company's investment
objective and policy. The Manager and other service
providers have also demonstrated to the Board that
there is no undue reliance placed upon any one individual.
------------ --------------------------------------------------------------- -------------------------------------------------------------
Economic, Changes in economic conditions, including, for example, The Company invests in a diversified portfolio of
political interest rates, rates of inflation, industry conditions, companies across a number of industry sectors and
and social competition, political and diplomatic events, such in addition often invests in a mixture of instruments
risk as the impact of Brexit, and other factors could substantially in portfolio companies and has a policy of minimising
and adversely affect the Company's prospects in a any external bank borrowings within portfolio companies.
number of ways. This also includes risks of social At any given time, the Company has sufficient cash
upheaval, including from infection and population resources to meet its operating requirements, including
re-distribution, as well as economic risk challenges share buy-backs and follow-on investments.
as a result of healthcare pandemics/infection. In common with most commercial operations, exogenous
The current significant exogenous risk to the Company, risks over which the Company has no control are always
the wider population and economy, is the Covid-19 a risk and the Company does what it can to address
pandemic. these risks where possible, not least as the nature
of the investments the Company makes are long term.
The Board and Manager are continuously assessing the
resilience of the portfolio, the Company and its operations
and the robustness of the Company's external agents
during the health crisis, as well as considering longer
term impacts on how the Company might be positioned
in how it invests and operates. Ensuring liquidity
in the portfolio to cope with exigent and unexpected
pressures on the finances of the portfolio and the
Company is an important part of the risk mitigation
in these uncertain times. The portfolio is structured
as an all-weather portfolio with c.60 companies which
are diversified as discussed above. Exposure is relatively
small to at-risk sectors that include leisure, hospitality,
retail and travel.
------------ --------------------------------------------------------------- -------------------------------------------------------------
Market value The market value of Ordinary shares can fluctuate. The Company operates a share buy-back policy, which
of Ordinary The market value of an Ordinary share, as well as is designed to limit the discount at which the Ordinary
shares being affected by its net asset value and prospective shares trade to around 5 per cent to net asset value,
net asset value, also takes into account its dividend by providing a purchaser through the Company in absence
yield and prevailing interest rates. As such, the of market purchasers. From time to time buy-backs
market value of an Ordinary share may vary considerably cannot be applied, for example when the Company is
from its underlying net asset value. The market prices subject to a close period, or if it were to exhaust
of shares in quoted investment companies can, therefore, any buy-back authorities.
be at a discount or premium to the net asset value New Ordinary shares are issued at sufficient premium
at different times, depending on supply and demand, to net asset value to cover the costs of issue and
market conditions, general investor sentiment and to avoid asset value dilution to existing investors.
other factors. Accordingly, the market price of the
Ordinary shares may not fully reflect their underlying
net asset value.
------------ --------------------------------------------------------------- -------------------------------------------------------------
Reputational The Company relies on the judgement and reputation The Board regularly questions the Manager on its ethics,
risk of the Manager which is itself subject to the risk procedures, safeguards and investment philosophy,
of loss. which should consequently result in the risk to reputational
damage being minimised.
------------ --------------------------------------------------------------- -------------------------------------------------------------
Viability statement
In accordance with the FRC UK Corporate Governance Code published in
2018 and principle 36 of the AIC Code of Corporate Governance, the
Directors have assessed the prospects of the Company over three years to
31 December 2023. The Directors believe that three years is a reasonable
period in which they can assess the future of the Company to continue to
operate and meet its liabilities as they fall due and is also the period
used by the Board in the strategic planning process and is considered
reasonable for a business of our nature and size. The three year period
is considered the most appropriate given the forecasts that the Board
requires from the Manager and the estimated timelines for finding,
assessing and completing investments. The three year period also takes
account of the potential impact of new regulations, should they be
imposed, and how they may impact the Company over the longer term, and
the availability of cash, but cannot take into account the full extent
of the exogenous risks that are impacting on global economies at the
date of these accounts.
The Directors have carried out a robust assessment of the emerging and
principal risks facing the Company as explained above, including those
that could threaten its business model, future performance, solvency or
liquidity. The Board also considered the procedures in place to identify
emerging risks and the risk management processes in place to avoid or
reduce the impact of the underlying risks. The Board focused on the
major factors which affect the economic, regulatory and political
environment, including any potential impact from Brexit. The Board,
after careful consideration, believes that Brexit will have no major
impact on the going concern of the Company, primarily due to the markets
our portfolio companies target, which in most cases are the UK and
increasingly, the US, for our software and technology businesses.
Portfolio companies targeting European markets have also shown
resilience so far. The coronavirus (Covid-19) pandemic therefore remains
the largest uncertainty impacting on the Company. In light of this
continuing uncertainty, robust stress tested cashflows, process
resilience and contingencies have been examined in trying to deal with
the principal risks faced by the Company.
The Board assessed the ability of the Company to raise finance and
deploy capital, as well as the existing cash resources of the Company.
The portfolio is well balanced and geared towards long term growth,
delivering dividends and capital growth to shareholders. In assessing
the prospects of the Company, the Directors have considered the cash
flow by looking at the Company's income and expenditure projections and
funding pipeline over the assessment period of three years and they
appear realistic.
Taking into account the processes for mitigating risks, monitoring costs,
share buy-backs and issuance, the Manager's compliance with the
investment objective, policies and business model and the balance of the
portfolio, the Directors have 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
December 2023.
This Strategic report of the Company for the year ended 31 December 2020
has been prepared in accordance with the requirements of section 414A of
the Companies Act 2006 (the "Act"). The purpose of this report is to
provide shareholders with sufficient information to enable them to
assess the extent to which the Directors have performed their duty to
promote the success of the Company in accordance with Section 172 of the
Act.
For and on behalf of the Board
Ben Larkin
Chairman
26 March 2021
Responsibility statement
In preparing these Financial Statements for the year to 31 December
2020, the Directors of the Company, being Ben Larkin, Lyn Goleby, Lord
O'Shaughnessy and Patrick Reeve, confirm that to the best of their
knowledge:
-- summary financial information contained in this announcement and the full
Annual Report and Financial Statements for the year ended 31 December
2020 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 35 within the full audited Annual Report and Financial Statements.
On behalf of the Board,
Ben Larkin
Chairman
26 March 2021
Income statement
Year ended 31 December Year ended 31 December
2020 2019
------------------------- -------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ------- ------- ------- ------- ------- -------
Gains on investments 3 - 4,073 4,073 - 3,074 3,074
Investment income 4 692 - 692 1,294 - 1,294
Investment management fee 5 (382) (1,146) (1,528) (357) (1,070) (1,427)
Performance incentive fee 5 (11) (31) (42) - - -
Other expenses 6 (282) - (282) (268) - (268)
------- ------- ------- ------- ------- -------
Profit on ordinary activities before tax 17 2,896 2,913 669 2,004 2,673
Tax (charge)/credit on ordinary activities 8 - - - (76) 76 -
------- ------- ------- ------- ------- -------
Profit and total comprehensive income attributable
to shareholders 17 2,896 2,913 593 2,080 2,673
------- ------- ------- ------- ------- -------
Basic and diluted return per share (pence)* 10 0.02 3.15 3.17 0.73 2.55 3.28
--------------------------------------------------- ---- ------- ------- ------- ------- ------- -------
* adjusted for treasury shares
The accompanying notes below form an integral part of these Financial
Statements.
The total column of this Income statement represents the profit and loss
account of the Company. The supplementary revenue and capital columns
have been prepared in accordance with The Association of Investment
Companies' Statement of Recommended Practice.
Balance sheet
31 December 2020 31 December 2019
Note GBP'000 GBP'000
---------------------------------- ---- ------------------ ----------------
Fixed asset investments 11 58,998 51,406
Current assets
Current asset investments 13 - 3,878
Trade and other receivables 13 1,757 304
Cash and cash equivalents 15,645 14,529
------------------ ----------------
17,402 18,711
Total assets 76,400 70,117
Payables: amounts falling due
within one year
Trade and other payables less than
one year 14 (541) (434)
------------------ ----------------
Total assets less current
liabilities 75,859 69,683
------------------ ----------------
Equity attributable to equity
holders
Called-up share capital 15 1,040 938
Share premium 44,978 36,712
Capital redemption reserve 12 12
Unrealised capital reserve 18,020 14,702
Realised capital reserve 12,886 15,151
Other distributable reserve (1,077) 2,168
------------------ ----------------
Total equity shareholders' funds 75,859 69,683
------------------ ----------------
Basic and diluted net asset value
per share (pence)* 16 82.42 83.47
---------------------------------- ---- ------------------ ----------------
* excluding treasury shares
The accompanying notes below form an integral part of these Financial
Statements.
These Financial Statements were approved by the Board of Directors, and
authorised for issue on 26 March 2021 and were signed on its behalf by
Ben Larkin
Chairman
Company number: 03654040
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
-------------- --------------- ------- ---------- ---------- -------- ------------- -------
As at 1
January 2020 938 36,712 12 14,702 15,151 2,168 69,683
Profit and
total
comprehensive
income for
the year - - - 4,595 (1,699) 17 2,913
Transfer of
unrealised
gains on
disposal of
investments - - - (1,277) 1,277 - -
Purchase of
shares for
treasury - - - - - (1,189) (1,189)
Issue of
equity 102 8,478 - - - - 8,580
Cost of issue
of equity - (212) - - - - (212)
Dividends paid - - - - (1,843) (2,073) (3,916)
-------------- --------------- ------- ---------- ---------- -------- ------------- -------
As at 31
December
2020 1,040 44,978 12 18,020 12,886 (1,077) 75,859
-------------- --------------- ------- ---------- ---------- -------- ------------- -------
As at 1
January 2019 839 28,406 12 16,234 11,539 6,348 63,378
Profit and
total
comprehensive
income for
the year - - - 1,667 413 593 2,673
Transfer of
unrealised
gains on
disposal of
investments - - - (3,199) 3,199 - -
Purchase of
shares for
treasury - - - - - (1,013) (1,013)
Issue of
equity 99 8,521 - - - - 8,620
Cost of issue
of equity - (215) - - - - (215)
Dividends paid - - - - - (3,760) (3,760)
-------------- --------------- ------- ---------- ---------- -------- ------------- -------
As at 31
December
2019 938 36,712 12 14,702 15,151 2,168 69,683
-------------- --------------- ------- ---------- ---------- -------- ------------- -------
* These reserves amount to GBP11,809,000 (2019: GBP17,319,000) which is
considered distributable.
Statement of cash flows
Year ended Year ended
31 December 2020 31 December 2019
GBP'000 GBP'000
---------------------------------------- ----------------- -----------------
Cash flow from operating activities
Loan stock income received 583 1,131
Deposit interest received 35 49
Dividend income received 191 151
Investment management fees paid (1,475) (1,435)
Performance incentive fee paid - (420)
Other cash payments (283) (253)
Corporation tax paid - -
Net cash flow from operating activities (949) (777)
Cash flow from investing activities
Purchase of current asset investments (1,190) (2,400)
Purchase of fixed asset investments (5,156) (5,675)
Disposal of current asset investments 3,945 -
Disposal of fixed asset investments 1,201 10,560
Net cash flow from investing activities (1,200) 2,485
----------------- -----------------
Cash flow from financing activities
Issue of share capital 7,737 7,807
Cost of issue of shares (33) (30)
Equity dividends paid* (3,251) (3,132)
Purchase of own shares (including costs) (1,188) (1,013)
----------------- -----------------
Net cash flow from financing activities 3,265 3,632
----------------- -----------------
Increase in cash and cash equivalents 1,116 5,340
Cash and cash equivalents at start of
period 14,529 9,189
----------------- -----------------
Cash and cash equivalents at end of
period 15,645 14,529
---------------------------------------- ----------------- -----------------
*The 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.
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 29 and 30 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 in note 2
below.
Company information is shown on page 2 of the full Annual Report and
Financial Statements.
2. Accounting policies
Fixed and current 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, revenue multiples, the level
of third party offers received, cost or price of recent investment rounds,
net assets and industry valuation benchmarks. Where price of recent
investment is used as a starting point for estimating fair value at
subsequent measurement dates, this has been benchmarked using an
appropriate valuation technique permitted by the IPEV guidelines.
-- In situations where cost or price of recent investment is used,
consideration is given to the circumstances of the portfolio company
since that date in determining fair value. This includes consideration of
whether there is any evidence of deterioration or strong definable
evidence of an increase in value. In the absence of these indicators, 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 income
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 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:
-- 75 per cent. of management fees and performance incentive fees, if any,
are allocated to the realised capital reserve. This is in line with the
Board's expectation that over the long term 75 per cent. 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 reserve accounts for the nominal value of the Company's shares.
Share premium
This reserve accounts for the difference between the price paid for the
Company's shares and the nominal value of those shares, less issue costs
and transfers to the other distributable reserve.
Capital redemption 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.
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;
-- 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 and
other non-capital realised movements.
Dividends
Dividends by the Company are accounted for in the period in which the
dividend is paid or approved at the Annual General Meeting.
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/(losses) on investments
Year ended Year ended
31 December 2020 31 December 2019
GBP'000 GBP'000
Unrealised gains on fixed asset
investments 4,595 1,431
Unrealised gains on current asset
investments - 236
Realised gains on fixed asset
investments 601 1,407
Realised losses on current asset
investments (1,123) -
4,073 3,074
----------------- -----------------
4. Investment income
Year ended Year ended
31 December 2020 31 December 2019
GBP'000 GBP'000
----------------------------------------
Loan stock interest and other fixed
returns 584 977
Dividend income 74 268
Bank deposit interest 34 49
692 1,294
----------------- -----------------
5. Investment management fees
Year ended Year ended
31 December 2020 31 December 2019
GBP'000 GBP'000
Investment management fee charged to
revenue 382 357
Investment management fee charged to
capital 1,146 1,070
Performance incentive fee charged to
revenue 11 -
Performance incentive fee charged to
capital 31 -
----------------- -----------------
1,570 1,427
----------------- -----------------
Further details of the Management agreement under which the investment
management fee and performance incentive fee are paid is given in the
Strategic report above.
During the year, services of a total value of GBP1,528,000 (2019:
GBP1,427,000) were purchased by the Company from Albion Capital Group
LLP in respect of management fees. There is a performance incentive fee
of GBP42,000 payable this year (2019: GBPnil). At the financial year end,
the amount due to Albion Capital Group LLP in respect of these services
disclosed as accruals was GBP443,000 (2019: GBP347,000). The total
annual running costs of the Company are capped at an amount equal to
2.5% of the Company's net assets, with any excess being met by Albion
Capital Group LLP by way of a reduction in management fees. During the
year, the management fee was reduced by GBP97,000 as a result of this
cap (2019: GBP105,000).
During the year, the Company was not charged by Albion Capital Group LLP
in respect of Patrick Reeve's services as a Director (2019: GBPnil).
Albion Capital Group LLP, its partners and staff hold 680,066 Ordinary
shares in the Company as at 31 December 2020.
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 December 2020, fees of GBP168,000 attributable to the
investments of the Company were received by Albion Capital Group LLP
pursuant to these arrangements (2019: GBP198,000).
The Company has entered into an offer agreement relating to the Offers
with the Company's investment manager Albion Capital Group LLP, pursuant
to which Albion Capital will receive a fee of 2.5% of the gross proceeds
of the Offers and out of which Albion Capital will pay the costs of the
Offers, as detailed in the Prospectus.
The SVS Albion OLIM UK Equity Income Fund ("OUEIF") was disposed of in
October 2020. Prior to the disposal an amount of GBP1,190,000 was
invested during the year in the OUEIF (2019: GBP2,400,000), and to avoid
double charging, Albion agreed to reduce its management fee relating to
the investment in the OUEIF by 0.75% per annum, which represents the
OUEIF management fee charged by OLIM. This resulted in a further
reduction of the management fee of GBP21,000 (2019: GBP20,000). Further
details on the SVS Albion OLIM UK Equity Income Fund disposal can be
found in the Chairman's statement above.
6. Other expenses
Year ended Year ended
31 December 2020 31 December 2019
GBP'000 GBP'000
Directors' fees (including NIC) 75 74
Auditor's remuneration for statutory audit services
(excluding VAT) 34 31
Other administrative expenses 173 163
282 268
----------------- -----------------
7. Directors' fees
The amounts paid to and on behalf of the Directors during the year are
as follows:
Year ended Year ended
31 December 2020 31 December 2019
GBP'000 GBP'000
Directors' fees 69 69
National insurance 6 5
----------------- -----------------
75 74
----------------- -----------------
The Company's key management personnel are the non-executive Directors.
Further information regarding Directors' remuneration can be found in
the Directors' remuneration report on pages 41 and 42 of the full Annual
Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
31 December 2020 31 December 2019
GBP'000 GBP'000
- -
UK corporation tax charge in respect of current year
- -
----------------- -----------------
Year ended Year ended
31 December 2020 31 December 2019
Factors affecting the tax charge: GBP'000 GBP'000
---------------------------------------------------
Profit on ordinary activities before taxation 2,913 2,673
----------------- -----------------
Tax charge on profit at the average companies rate
of 19 per cent.
(2019: 19 per cent.) 553 508
Factors affecting the charge:
Non-taxable gains (774) (584)
Income not taxable (14) (51)
Excess management expenses carried forward 235 127
- -
----------------- -----------------
The tax charge for the year shown in the Income statement is lower than
the average companies rate of corporation tax in the UK of 19 per cent.
(2019: 19 per cent.). The differences are explained above.
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
GBP3,882,000 (2019: GBP2,652,000) that are available for offset against
future profits. A deferred tax asset of GBP738,000 (2019: GBP451,000)
has not been recognised in respect of these losses as they will be
recoverable only to the extent that the Company has sufficient future
taxable profits.
9. Dividends
Year ended Year ended
31 December 2020 31 December 2019
GBP'000 GBP'000
---------------------------------------------------------- ----------------- -----------------
Dividend of 2.25p per Ordinary share paid on 31 May
2019 - 1,880
Dividend of 2.25p per Ordinary share paid on 30 September
2019 - 1,885
Dividend of 2.25p per Ordinary share paid on 29 May
2020 2,077 -
Dividend of 1.99p per Ordinary share paid on 30 September
2020 1,843 -
Unclaimed dividends (4) (5)
----------------- -----------------
3,916 3,760
----------------- -----------------
Details of the consideration issued under the Dividend Reinvestment
Scheme included in the dividends above can be found in note 15.
In addition to the dividends summarised above, the Board has declared a
first dividend of 2.06 pence per share for the year ending 31 December
2021, payable on 28 May 2021 to shareholders on the register on 7 May
2021. The details of the new dividend policy can be found in the
Chairman's statement above. The total dividend will be approximately
GBP2,129,000.
10. Basic and diluted return per share
Year ended
31 December Year ended 31 December
2020 2019
Revenue Capital Total Revenue Capital Total
-------------------------------------------------------- -------- ------- ----------- ------- ------- -------
Profit attributable to equity shares (GBP'000) 17 2,896 2,913 593 2,080 2,673
Weighted average shares in issue (adjusted for treasury
shares) 91,755,964 81,487,820
Return attributable per equity share (pence) 0.02 3.15 3.17 0.73 2.55 3.28
The weighted average number of Ordinary shares is calculated after
adjusting for treasury shares of 11,938,106 (2019: 10,350,156).
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 December 2020 31 December 2019
GBP'000 GBP'000
------------------------------------------
Investments held at fair value through
profit or loss
Unquoted equity and preference shares 44,350 37,372
Unquoted loan stock 14,648 14,012
Quoted equity - 22
58,998 51,406
---------------- ----------------
31 December 2020 31 December 2019
GBP'000 GBP'000
----------------------------------------------------
Opening valuation 51,406 52,663
Purchases at cost 5,577 6,595
Disposal proceeds (3,181) (10,519)
Realised gains 601 1,407
Movement in loan stock accrued income - (171)
Unrealised gains 4,595 1,431
---------------- ----------------
Closing valuation 58,998 51,406
---------------- ----------------
Movement in loan stock accrued income
Opening accumulated loan stock accrued income 113 284
Movement in loan stock accrued income - (171)
---------------- ----------------
Closing accumulated loan stock accrued income 113 113
---------------- ----------------
Movement in unrealised gains
Opening accumulated unrealised gains 14,447 16,215
Transfer of previously unrealised gains to realised
reserve on disposal of investments (1,199) (3,199)
Movement in unrealised gains 4,595 1,431
---------------- ----------------
Closing accumulated unrealised gains 17,843 14,447
---------------- ----------------
Historic cost basis
Opening book cost 36,846 36,164
Purchases at cost 5,577 6,595
Sales at cost (1,381) (5,913)
Closing book cost 41,042 36,846
---------------- ----------------
Purchases and disposals detailed above do not agree to the Statement of
cash flows due to restructuring of investments, conversion of
convertible loan stock and settlement debtors and creditors.
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.
Unquoted fixed asset investments are valued at fair value in accordance
with the IPEV guidelines as follows:
31 December 2020 31 December 2019
Valuation methodology GBP'000 GBP'000
--------------------------------------------------
Cost and price of recent investment (reviewed for
impairment or uplift) 21,624 33,479
Revenue multiple 20,499 2,969
Third party valuation -- discounted cash flow 9,063 9,104
Third party valuation - earnings multiple 2,625 2,723
Net assets 2,395 2,347
Discounted offer price 2,202 -
Earnings multiple 590 762
58,998 51,384
---------------- ----------------
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 December 2019 and 31 December 2020:
Change in valuation methodology (2019 to 2020) Value as at Explanatory note
31 December 2020
GBP'000
------------------------------------------------------ -----------------
Cost or price of recent investment to revenue multiple 19,056 Discounted revenue multiple more relevant based on
current trading
Cost or price of recent investment to discounted offer 2,202 Third party offer accepted and completed after the
price year end
Price of recent investment to net assets 387 Covid-19 impact on portfolio company has lead to
revaluation
Revenue multiple to net assets 174 Covid-19 impact on portfolio company has lead to
revaluation
Quoted bid price to net assets 22 Company delisted and in liquidation
The valuation will be the most appropriate valuation methodology for an
investment within its market, with regard to the financial health of the
investment and the IPEV Guidelines. The Directors believe that, within
these parameters, these are the most relevant methods of valuation which
would be reasonable as at 31 December 2020.
FRS 102 and the SORP requires the Company to disclose the inputs to the
valuation methods applied to its investments measured at fair value
through profit or loss in a fair value hierarchy. The table below sets
out fair value hierarchy definitions using FRS102 s.11.27.
Fair value hierarchy Definition
-------------------- ----------------------------------------------------
Level 1 Unadjusted quoted prices in an active market
-------------------- ----------------------------------------------------
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
-------------------- ----------------------------------------------------
Level 3 Inputs to valuations not based on observable market
data
-------------------- ----------------------------------------------------
Quoted investments are valued according to Level 1 valuation methods.
Unquoted equity, preference shares and loan stock are all valued
according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3) had the
following movements:
31 December 2020 31 December 2019
GBP'000 GBP'000
---------------------------------- ---------------- ----------------
Opening balance 51,384 52,532
Additions 5,577 6,595
Movement from Level 1 to Level 3* 22 -
Disposals (3,181) (10,513)
Accrued loan stock interest - (171)
Realised gains 601 1,510
Unrealised gains 4,595 1,431
---------------- ----------------
Closing balance 58,998 51,384
---------------- ----------------
*This relates to the investment in Mi-Pay Group PLC changing from Level
1 to Level 3 in the fair value hierarchy, as this is in liquidation, and
no longer listed.
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. 61% of the portfolio of investments,
consisting of equity and loan stock, is based on recent investment price,
discounted offer price, net assets and cost, and as such the Board
believe 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
83% of the portfolio of investments. The main inputs considered for each
type of valuation is as follows:
Change in
fair value
Portfolio Change of Change in NAV
Valuation company Base in investments (pence per
technique sector Input Case* input (GBP'000) share)
---------- ----------- --------- ------ ------ ----------- -----------------
Software &
Revenue other Revenue
multiple technology multiple 5.4x +0.5 690 0.75
---------- ----------- --------- ------ ------ ----------- -----------------
-0.5 (690) (0.75)
--------------------------------------- ------ ----------- -----------------
Software &
Revenue other Revenue
multiple technology multiple 4.5x +0.5 624 0.68
---------- ----------- --------- ------ ------ ----------- -----------------
-0.5 (624) (0.68)
--------------------------------------- ------ ----------- -----------------
*As detailed in the accounting policies above, the base case is based on
market comparables, discounted where appropriate for marketability, in
accordance with the IPEV guidelines.
The impact of these changes could result in an overall increase in the
valuation of the equity investments by GBP1,313,000 (3.0%) or a decrease
in the valuation of equity investments by GBP1,313,000 (3.0%).
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. The size and structure of the companies with
unquoted securities may result in certain holdings in the portfolio
representing a participating interest without there being any
partnership, joint venture or management consortium agreement. The
investment listed below is held as part of an investment portfolio and
therefore, as permitted by FRS 102 section 9.9B, it is measured at fair
value through profit and loss and not consolidated as a subsidiary.
The Company has interests of greater than 20% of the nominal value of
any class of the allotted shares in the portfolio company as at 31
December 2020 as described below:
% total
Aggregate voting
Registered capital % class rights
address and and and held by Profit/(loss)
country of Principal reserves share the before tax
Company incorporation activity GBP'000 type Company GBP'000
----------- -------------- ------------ --------- -------- --------- -------------
Albion Former owner
Investment of
Properties residential 68.2% A
Limited EC1M 5QL, UK property (706) Ordinary 68.2% n/a*
* The company files filleted accounts which does not disclose this
information.
13. Current assets
Current asset investments 31 December 2020 31 December 2019
GBP'000 GBP'000
-------------------------------------- ---------------- ----------------
SVS Albion OLIM UK Equity Income Fund - 3,878
---------------- ----------------
For further details on the disposal of the SVS Albion OLIM UK Equity
Income Fund, please see the Chairman's statement above.
Trade and other receivables 31 December 2020 31 December 2019
GBP'000 GBP'000
-------------------------------------- ---------------- ----------------
Prepayments and accrued income 23 17
Other receivables 3 156
Deferred consideration under one year 192 131
Deferred consideration over one year 1,539 -
---------------- ----------------
1,757 304
---------------- ----------------
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. Payables: amounts falling due within one year
31 December 2020 31 December 2019
GBP'000 GBP'000
----------------------------- ----------------- ----------------
Accruals and deferred income 519 417
Trade payables 22 17
541 434
----------------- ----------------
The Directors consider that the carrying amount of payables is not
materially different to their fair value.
15. Called-up share capital
Allotted, called-up and fully paid shares: GBP'000
----------------------------------------------------------
93,828,305 Ordinary shares of 1 penny each at 31 December
2019 938
10,146,199 Ordinary shares of 1 penny each issued
during the year 102
103,974,504 Ordinary shares of 1 penny each at 31
December 2020 1,040
10,350,156 Ordinary shares of 1 penny each held in
treasury at 31 December 2019 (104)
1,587,950 Ordinary shares of 1 penny each purchased
during the year to be held in treasury (16)
11,938,106 Ordinary shares of 1 penny each held in
treasury at 31 December 2020 (120)
----------------------------------------------------------- -------
Voting rights of 92,036,398 Ordinary shares of 1 penny
each at 31 December 2020 920
----------------------------------------------------------- -------
The Company purchased 1,587,950 Ordinary shares (2019: 1,278,000) at a
cost of GBP1,189,000 including stamp duty (2019: GBP1,013,000) to be
held in treasury during the year to 31 December 2020. Total share
buy-backs in 2020 represents 1.5% (2019: 1.4%) of called-up share
capital as at 31 December 2020.
The Company holds a total of 11,938,106 shares (2019: 10,350,156) in
treasury representing 11.5% (2019: 11.0%) of the issued Ordinary share
capital at 31 December 2020.
Under the terms of the Dividend Reinvestment Scheme, the following new
Ordinary shares of nominal value 1 penny each were allotted during the
year:
Aggregate
Number nominal
of value of Issue price Net
shares shares (pence per invested Opening market price on allotment date (pence per
Date of allotment allotted (GBP'000) share) (GBP'000) share)
-------------------
29 May 2020 467,957 5 75.41 336 72.00
30 September 2020 401,094 4 77.31 294 73.50
-------- --------- ---------
869,051 9 630
Under the terms of the Albion VCTs Prospectus Top Up Offers 2019/20, the
following new Ordinary shares of nominal value 1 penny each, were
allotted during the year:
Aggregate
nominal Net
Number of value of Issue price consideration
Date of shares shares (pence per received Opening market price on allotment date (pence per
allotment allotted (GBP'000) share) (GBP'000) share)
----------
31 January
2020 1,843,797 18 84.80 1,540 79.50
31 January
2020 401,498 4 85.30 336 79.50
31 January
2020 6,789,082 68 85.70 5,674 79.50
30 April
2020 137,627 1 78.90 106 74.50
30 April
2020 105,144 1 79.70 81 74.50
--------- --------- -------------
9,277,148 93 7,737
16. Basic and diluted net asset value per share
31 December 2020 (pence 31 December 2019 (pence
per share) per share)
------------------------
Basic and diluted net
asset value per Ordinary
share 82.42 83.47
The basic and diluted net asset values per share at the year end are
calculated in accordance with the Articles of Association and are based
upon total shares in issue (adjusting for treasury shares) of 92,036,398
Ordinary shares as at 31 December 2020 (2019: 83,478,149).
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 29 of
the Directors' report of the full Annual Report and Financial
Statements.
The Company's financial instruments comprise equity and loan stock
investments in unquoted companies, deferred receipts on disposal of
fixed asset investments, cash balances and receivables and payables
which arise from its operations. The main purpose of these financial
instruments is to generate cashflow and revenue and capital appreciation
for the Company's operations. The Company has no gearing or other
financial liabilities apart from short term payables. The Company does
not use any derivatives for the management of its Balance sheet.
The principal risks arising from the Company's operations are:
-- investment (or market) 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 apart from where noted
below, there have been no changes in the objectives, policies or
processes for managing risks during the past year. The key risks are
summarised below.
Investment risk
As a Venture Capital Trust, it is the Company's specific nature to
evaluate and control the investment risk of its portfolio in unquoted
companies, details of which are shown on pages 21 to 23 of the full
Annual Report and Financial Statements. Investment risk is the exposure
of the Company to the revaluation and devaluation of investments. The
main driver of investment risk is the operational and financial
performance of the portfolio company and the dynamics of market quoted
comparators. 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 Manager and the Board formally review investment risk (which
includes market price 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.
The maximum investment risk as at the Balance sheet date is the value of
the fixed asset investment portfolio which is GBP58,998,000 (2019:
GBP55,284,000). Fixed asset investments form 78% of net asset value as
at 31 December 2020 (2019: 79%).
More details regarding the classification of fixed asset investments are
shown in note 11.
Investment price risk
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 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 Portfolio of
investments section on pages 21 to 23 of the full Annual Report and
Financial Statements and in the Strategic report.
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 GBP5,899,800. Further sensitivity analysis on fixed asset investments
is included in note 11.
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 is estimated that a rise of a
percentage point in all interest rates would have increased total return
before tax for the year by approximately GBP151,000 (2019: GBP121,000).
Furthermore, it was considered that a material fall in 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 4.5% (2019: 7.0%).
The weighted average period to maturity for the fixed rate assets is
approximately 5.2 years (2019: 6.0 years).
The Company's financial assets and liabilities, all denominated in
pounds sterling, consist of the following:
31 December 2020 31 December 2019
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 - - 44,350 44,350 - - 37,372 37,372
Quoted equity - - - - - - 22 22
Unquoted loan
stock 13,752 185 711 14,648 12,913 193 906 14,012
Current asset
investments - - - - - - 3,878 3,878
Receivables* - - 1,734 1,734 - - 289 289
Current
liabilities - - (541) (541) - - (434) (434)
Cash - 15,645 - 15,645 - 14,529 - 14,529
-------------------- ------------- -------------------- -------- -------------------- ------------- -------------------- --------
Total 13,752 15,830 46,254 75,836 12,913 14,722 42,033 69,668
-------------------- ------------- -------------------- -------- -------------------- ------------- -------------------- --------
*The receivables do not reconcile to the Balance sheet as prepayments
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 85% of loan stock by value, typically loan
stock instruments have a first fixed charge or a fixed and floating
charge 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 at 31 December 2020 was limited to
GBP14,648,000 (2019: GBP14,012,000) of unquoted loan stock instruments,
GBP15,645,000 (2019: GBP14,529,000) of cash deposits with banks and
GBP1,757,000 (2019: GBP304,000) of other receivables.
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 and National Westminster Bank plc. Credit risk on cash
transactions was mitigated by transacting with counterparties that are
regulated entities subject to prudential supervision, with high credit
ratings assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking
exposure to a maximum of 20% of net asset value for any one
counterparty.
The credit profile of unquoted loan stock is described under liquidity
risk shown below.
Liquidity risk
Liquid assets are held as cash on current account, cash on deposit or
short term money market account. Under the terms of its Articles, the
Company has the ability to borrow up to 10% of its adjusted capital and
reserves of the latest published audited Balance sheet, which amounts to
GBP7,373,000 as at 31 December 2020 (2019: GBP6,760,000).
The Company had no committed borrowing facilities as at 31 December 2020
(2019: nil) and the Company had cash balances of GBP15,645,000 (2019:
GBP14,529,000). 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 of the Company's
financial liabilities are short term in nature and total GBP541,000
(2019: GBP434,000).
The carrying value of loan stock investments, analysed by expected
maturity dates is as follows:
31 December 2020 31 December 2019
Redemption Fully performing Valued below cost Past due Total Fully performing Valued below cost Past due Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-----------
Less than
one year 2,160 736 1,738 4,634 1,515 613 1,618 3,746
1-2 years 1,887 38 94 2,019 608 113 - 721
2-3 years 175 136 - 311 1,658 112 - 1,770
3-5 years 1,948 - 78 2,026 1,825 211 - 2,036
5 + years 5,555 - 103 5,658 5,623 - 116 5,739
---------------- ----------------- -------- -------- ---------------- ----------------- -------- --------
Total 11,725 910 2,013 14,648 11,229 1,049 1,734 14,012
---------------- ----------------- -------- -------- ---------------- ----------------- -------- --------
Loan stock can be past due as a result of interest or capital not being
paid in accordance with contractual terms.
The cost of loan stock investments valued below cost is GBP1,036,000
(2019: GBP1,682,000).
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 December
2020 are stated at fair value as determined by the Directors, with the
exception of receivables (including debtors due after more than one
year), payables and cash which are carried at amortised cost, in
accordance with FRS 102. There are no financial liabilities other than
payables. The Company's financial liabilities are all non-interest
bearing. It is the Directors' opinion that the book value of the
financial liabilities is not materially different to the fair value and
all are payable within one year.
18. Contingencies and commitments
As at 31 December 2020, the Company had no financial commitments (2019:
GBPnil).
There were no contingent liabilities or guarantees given by the Company
as at 31 December 2020 (2019: GBPnil).
19. Post balance sheet events
The following are the post balance sheet events since 31 December 2020:
-- Sale of OmPrompt Holdings Limited for proceeds of GBP2,202,000;
-- Investment of GBP1,209,000 in a new portfolio company, Threadneedle
Software Holding Limited (trading as Solidatus);
-- Investment of GBP577,000 in an existing portfolio company, Healios
Limited;
-- Sale of SBD Automotive Limited for proceeds of GBP458,000; and
-- Investment of GBP54,000 in an existing portfolio company, ePatient
Limited (trading as Raremark).
The following new Ordinary shares of nominal value 1 penny each were
allotted under the Albion VCTs Prospectus Top Up Offers 2020/21 after 31
December 2020:
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)
---------- ---------- --------- ---------- ------------- -----------------
26
February
2021 1,932,052 19 83.30 1,585 78.00
26
February
2021 515,665 5 83.80 424 78.00
26
February
2021 8,866,225 89 84.20 7,279 78.00
11,313,942 113 9,288
---------- --------- -------------
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5, and the
Directors' remuneration disclosed in the Directors' remuneration report
on pages 41 and 42 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 December 2020 and 31 December
2019, 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 December 2020, 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
https://www.globenewswire.com/Tracker?data=gBG9pBmzZ_QbHUxqOjc7KMfg-0uFKdByGHfal3TW7lK9tmQxeXDnhwzvmnhXBWq1_b1Z-yTgCXHllLF75AtFZKyEfLHjsTwdxrbl8I1Ifbabf7Gi7gxA_oByZo1OF_W-
www.albion.capital/funds/AADV, where the Report can be accessed as a PDF
document via a link in the 'Financial Reports and Circulars' section.
Attachment
-- Pie Charts
https://ml-eu.globenewswire.com/Resource/Download/7bf149f7-852c-467b-ae83-1179653f457f
(END) Dow Jones Newswires
March 26, 2021 13:04 ET (17:04 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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