TIDMAAEV
Albion Enterprise VCT PLC
LEI number: 213800OVSRDHRJBMO720
As required by the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules 4.1 and 6.3, Albion Enterprise VCT
PLC today makes public its information relating to the Annual
Report and Financial Statements for the year ended 31 March
2021.
This announcement was approved for release by the Board of
Directors on 28 June 2021.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31
March 2021 (which have been audited), will shortly be sent to
shareholders. Copies of the full Annual Report and Financial
Statements will be shown via the Albion Capital Group LLP website
by clicking www.albion.capital/funds/AAEV/31Mar2021.pdf.
Investment policy
Albion Enterprise VCT PLC (the "Company") is a Venture Capital
Trust and the investment objective of the Company is to provide
investors with a regular source of income, combined with the
prospect of longer term capital growth.
The Company will invest in a broad portfolio of higher growth
businesses across a variety of sectors of the UK economy including
higher risk technology companies. 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 both in terms of sector and stage of maturity of
company.
VCT qualifying and non-VCT qualifying investments
Application of the investment policy is designed to ensure that
the Company continues to qualify and is approved as a VCT by HM
Revenue and Customs ("VCT regulations"). The maximum amount
invested in any one company is limited to relevant HMRC annual
investment limits. It is intended that normally at least 80 per
cent. of the Company's funds will be invested in VCT qualifying
investments. The VCT regulations also have an impact on the type of
investments and qualifying sectors in which the Company can make
investment.
Funds held prior to investing in VCT qualifying assets or for
liquidity purposes will be held as cash on deposit, invested in
floating rate notes or similar instruments with banks or other
financial institutions with high credit ratings or invested in
liquid open-ended equity funds providing income and capital equity
exposure (where it is considered economic to do so). Investment in
such open-ended equity funds will not exceed 10 per cent. of the
Company's assets at the time of investment.
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 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 is represents a significantly higher proportion of total
assets prior to a realisation opportunity being available.
Gearing
The Company's maximum exposure in relation to gearing is
restricted to 10 per cent. of its adjusted share capital and
reserves.
Financial calendar
Record date for first dividend 6 August 2021
Payment date for first dividend 31 August 2021
Annual General Meeting Noon on 11 August 2021
Announcement of Half-yearly results for the six months November 2021
ending 30 September 2021
Financial highlights
13.50p Total return per share for the year ended 31 March
2021
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12.67% Shareholder return for the year ended 31 March 2021
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5.44p Total tax-free dividend per share paid during the
year ended 31 March 2021
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114.60p Net asset value per share on 31 March 2021
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170.89p Total shareholder value to 31 March 2021
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These are considered APMs, see notes 2 and 3 in the Strategic
report below for further explanation.
31 March 2021 (pence per 31 March 2020
share) (pence per share)
Opening net asset value 106.54 117.76
Capital return/(loss) 13.96 (6.31)
Revenue (loss)/return (0.51) 0.61
---------------------------- ------------------
Total return/(loss) 13.45 (5.70)
Dividends paid (5.44) (6.00)
Impact from share capital
movements 0.05 0.48
---------------------------- ------------------
Net asset value 114.60 106.54
Total dividends paid to 31 March 2021 56.29
Net asset value on 31 March 2021 114.60
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Total shareholder value to 31 March 2021 170.89
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A more detailed breakdown of the dividends paid per year can be
found at www.albion.capital/funds/AAEV under the 'Dividend History'
section.
In addition to the dividends summarised above, the Board has
declared a first dividend for the year ending 31 March 2022, of
2.87 pence per Ordinary share to be paid on 31 August 2021 to
shareholders on the register on 6 August 2021.
Chairman's statement
Introduction
We are pleased to report a positive total return for the year of
13.45 pence per share, despite the Covid-19 pandemic being
extremely challenging for so many businesses. This represents a
12.6% gain on opening net asset value. Last year's results were
reported in the early days of the pandemic and, as such, were
negatively impacted by the uncertainty of the time. One year later
and, although there is still uncertainty, we have seen not only
resilience but in many cases growth from our portfolio, with many
of our companies continuing to provide products and services that
are considered innovative and essential to their customers.
Results and dividends
On 31 March 2021 the net asset value was 114.60 pence per share
compared to 106.54 pence per share on 31 March 2020. The total
return before taxation was GBP9.2 million compared to a loss of
GBP3.7 million for the previous year. The positive progress of a
number of our portfolio companies is discussed later in this
statement and in the Strategic report below. These excellent
results for the year have resulted in a performance incentive fee
payable to the Manager of GBP288,000. More detail on the
calculation of this fee can be found in the Strategic report
below.
In line with our variable dividend policy targeting around 5% of
NAV per annum the Company paid dividends totalling 5.44 pence per
share during the year to 31 March 2021 (2020: 6.00 pence per
share). The Company will pay a first dividend for the financial
year to 31 March 2022 of 2.87 pence per share on 31 August 2021 to
shareholders on the register on 6 August 2021, being 2.5% of the
latest reported NAV.
Investment performance and progress
There have been several disposals during the year with proceeds
of GBP5.3 million (2020: GBP15.5 million). The sale of OmPrompt
Holdings in March resulted in a return of 2.3 times cost, and
generated proceeds of GBP2.3 million. The sale of G.Network
Communications in December delivered a strong headline total return
of 3.8 times cost, although the terms of the sale will see the
majority of the proceeds being received in three years' time.
Portfolio companies Clear Review and SBD Automotive were also sold
in the year, generating 2.1 times cost in both instances. Further
details on these sales can be found in the table on page 25 of the
full Annual Report and Financial Statements.
As announced in the Half-yearly results to 30 September 2020,
the Company disposed of its investment in the SVS Albion OLIM UK
Equity Income Fund ("OUEIF") incurring a loss of GBP0.9m, which
followed a period of poor performance. The fund was particularly
impacted by the Covid-19 driven falls in UK quoted equities and the
negative outlook for the UK Equity Income sector. The Board intends
to redeploy the proceeds into innovative unquoted growth companies
where the Company is seeing resilient growth.
Several of our portfolio companies have performed extremely well
despite the pandemic, and this has contributed to the valuation
uplift in the year. Quantexa, has been revalued after a further
externally led funding round, this contributed GBP2.5 million to
the net valuation gains of GBP10.9 million in the year. Proveca
continues to trade well both within the UK and the EU and, together
with Egress Software Technologies, has contributed GBP3.5 million
to this uplift. Inevitably some of our portfolio companies continue
to be impacted by the pandemic, with Mirada Medical being written
down by GBP2.7 million this year due to sales to hospitals being
delayed by the pandemic.
The Company has been an active investor during the year with
more than GBP7.3 million invested in new and existing companies.
The Company has invested GBP2.7 million in five new portfolio
companies, all of which are targeted to require further investment
as the companies prove themselves and grow:
-- GBP1.4 million into Threadneedle Software Holdings (trading as Solidatus), a provider of data lineage software to enterprise customers in regulated sectors, which allows them to rapidly discover, visualise, catalogue and understand how data flows through their systems;
-- GBP0.6 million 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;
-- GBP0.4 million into Seldon Technologies, a software company that enables enterprises to deploy Machine Learning models in production;
-- GBP0.2 million into TransFICC, a provider of a connectivity solution, connecting financial institutions with trading venues via a single API; and
-- GBP0.1 million into uMedeor (trading as uMed), a software platform that enables life science organisations to use patient data, in a compliant way, to recruit participants for clinical trials.
A further GBP4.6 million was invested into 13 existing portfolio
companies, of which the largest were: GBP1.4 million into Quantexa
as part of a larger externally led funding round to support the
growth of its analytics platform which helps detect and protect
against financial crime; GBP0.9 million into Healios to continue
providing psychological care to children and adolescents using a
family centric approach; and GBP0.7 million into Black Swan Data,
to support the restructure of its business to focus primarily on
predictive analytics for consumer brands. A review of business and
future prospects is included in the Strategic report below.
Portfolio update announcement
As mentioned in the RNS announcement on 21 June 2021, I am
pleased to report that two companies within the portfolio are
undergoing external fundraising processes, which result in an
uplift to the net asset value. These are non-adjusting post balance
sheet events for the purposes of this audited Annual Report and
Financial Statements. When quantifying the effect at the date of
this Report, this results in an increase of 7.81 pence per share
(6.8%) to the audited 31 March 2021 net asset value of 114.60p per
share.
A further update will be made in due course, if required,
otherwise further information will be included in the Interim
Management Statement for the period to 30 June 2021, at which point
the entire portfolio will have been revalued to take account of
recent events. This is expected to be announced in August 2021.
Risks and uncertainties
The wide reaching implications of the Covid-19 crisis continues
to be the key risk facing the Company, including its impact on the
UK and Global economies. There may still also be further
implications following 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.
Board composition
Lord St John of Bletso retired from the Board on 30 November
2020. He acted as Chairman of our Audit Committee and as Senior
Independent Director. The Dowager Lady Balfour of Burleigh wishes
to retire from the Board and will not seek re-election at the
Annual General Meeting. We will miss their very positive
contributions to our deliberations and wish them both well in the
future.
Rhodri Whitlock joined the Board on 19 January 2021 and assumed
the role of chairman of our Audit Committee. Following The Dowager
Lady Balfour of Burleigh's retirement, Christopher Burrows will
assume the role of Senior Independent Director.
In order to provide the Board with more capacity for succession
planning, a resolution is being proposed at the forthcoming Annual
General Meeting ("AGM") to increase the cap on Directors
remuneration from GBP100,000 to GBP125,000 per annum. There is no
intention of increasing Directors' fees in the near term, but the
new level proposed under the Articles of Association provides extra
flexibility in the case, for example, of an additional Board member
being appointed prior to the retirement of an existing
Director.
Share buy-backs
It remains the Board's policy to buy back shares in the market,
subject to the overall constraint that such purchases are in the
Company's interest. This includes the maintenance of sufficient
cash resources for investment in new and existing portfolio
companies and the continued payment of dividends to
shareholders.
It is the Board's intention that such buy-backs should be at
around a 5% discount to net asset value, in so far as market
conditions and liquidity permit. The Board continues to review the
use of buy-backs and is satisfied that it is an important means of
providing market liquidity for shareholders.
Albion VCTs Top Up Offers
Your Board, in conjunction with the boards of 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 21
January 2021 that, following strong demand, it would utilise the
over-allotment facility, bringing the total to be raised to GBP9
million. The Offer was fully subscribed and closed to further
applications on 5 February 2021.
The proceeds raised by the Company pursuant to the offer will be
added to the liquid resources available for investment, positioning
the Company to take advantage of investment opportunities over the
next two to three years. Details on the share allotments 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. The Board considered last year's live streamed
AGM to have been a success and therefore, in the interests of
continued caution and the ongoing uncertainty from the continued
delay to the roadmap of lockdown lifting, the Board has decided to
repeat that format this year. The AGM will be held at noon on 11
August 2021, at the registered office, being 1 Benjamin Street,
London, EC1M 5QL. Shareholders will be able to attend the event via
the free platform, Hopin.
Full details of the business to be conducted at the Annual
General Meeting are given in the Notice of the Meeting on pages 69
to 72 and in the Directors' report on pages 34 and 35 of the full
Annual Report and Financial Statements.
It will not be possible to allow shareholders entry into the
building where the AGM is held, due to the ongoing uncertainty
around large indoor meetings. The Directors will attend in person
to ensure a quorum and allow the continuation of this AGM. There
will also be a representative of Albion Capital Group LLP as
Company Secretary.
At least two weeks prior to the AGM registration details will be
sent to all shareholders who have an email address registered with
Computershare. Shareholders who do not have an email address
registered with Computershare should get in touch with
marketing@albion.capital
https://www.globenewswire.com/Tracker?data=hVbxRQAIEUsDZP6T21acsvESxxo16v0FR1IG2niDNEv5jADbvJmmscmC_m51frYDfqQO5rEBAn8gav_IS_LRBTErZZrkTXM1S0mPKyuOJg0=
for information about the AGM. To encourage shareholder engagement,
the AGM will include a presentation from the Manager, the formal
business of the AGM and answering questions we receive from
shareholders.
Shareholders can submit their questions to the Board in advance
of the AGM up until noon on 10 August 2021 by emailing
AAEVchair@albion.capital.
https://www.globenewswire.com/Tracker?data=WAsQgElsehbnpbXwMy_r27lXEq3ms35RCf2moOGQNcqk8Ogawuf_j-K7Fio0hKOYHoMSt70on_X2wbO1oUt2CKXRZRxRR4UciKkI6u5v6Bycdg_9a1i0QNnobGhaOXCA
Alternatively there is a facility on the Hopin platform to submit
questions whilst attending the event. The Chairman will cover as
many questions as possible in the time allocated. Following the
AGM, a summary of responses will be published on the Managers
website at www.albion.capital/funds/AAEV.
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 Annual
General Meeting and recommends shareholders to vote in favour of
all the resolutions being proposed.
Outlook and prospect
These positive results, including the non-adjusting post balance
sheet events referred to above, demonstrate the resilience of our
portfolio which is both diversified and targeted at sectors such as
software and healthcare which have proved resilient during the
Covid-19 pandemic. Although there is still much uncertainty around
the longer term impact of the pandemic, I am confident that our
portfolio companies are well positioned to grow, providing products
and services critical to their customers, and therefore well placed
to continue to deliver long term value to our shareholders.
Maxwell Packe
Chairman
28 June 2021
Strategic report
Investment policy
The Company will invest in a broad portfolio of higher growth
businesses across a variety of sectors of the UK economy including
higher risk technology companies. 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 both 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 on 31 March 2021 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. As the
Company continues to invest in software and other technology
companies, FinTech (which is technology specifically applicable to
financial services companies) becomes a more prominent investment,
and therefore is included as a subsector below. Details of the
principal investments made by the Company are shown in the
Portfolio of investments on pages 24 and 25 of the full Annual
Report and Financial Statements.
Direction of portfolio
Due to the share allotment on 26 February 2021 under the 2020/21
Prospectus Top Up Offer, cash is a significant proportion of the
portfolio at 29%. These funds will be invested predominantly into
higher growth technology companies, and therefore the shift away
from asset based companies will continue. The Company has a
significant speciality in FinTech investing, which can be seen as a
growing part of the portfolio, represented by a 6% increase this
year. Healthcare technology is another area of particular strength,
which has increased by 2% over the last year.
Results and dividend policy
GBP'000
Net capital return for the year ended 31 March 2021 9,578
Net revenue loss for the year ended 31 March 2021 (349)
Total return for the year ended 31 March 2021 9,229
Dividend of 2.70 pence per share paid on 28 August
2020 (1,836)
Dividend of 2.74 pence per share paid on 26 February
2021 (1,854)
Reclaimed dividends 2
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Transferred to reserves 5,541
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Net assets on 31 March 2021 85,398
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Net asset value on 31 March 2021 (pence per share) 114.60
===================================================== =======
The Company paid dividends totalling 5.44 pence per share during
the year ended 31 March 2021 (2020: 6.00 pence per share). The
Board has declared a first dividend for the year ending 31 March
2022, of 2.87 pence per Ordinary share to be paid on 31 August 2021
to shareholders on the register on 6 August 2021.
As shown in the Company's Income statement below, the total
return for the year was 13.45 pence per share (2020: loss of 5.70
pence per share). Investment income decreased to GBP543,000 (2020:
GBP1,157,000), which is a significant decrease on last year, mainly
due to reduced distributions from the SVS Albion OLIM UK Equity
Income Fund which was sold during the year, as well as the
repayment of the G.Network Communications accrued interest in the
previous year.
The capital return on investments for the year of GBP10,892,000
(2020: loss of GBP2,884,000) has been explained in the Chairman's
statement above. This has led to a significant increase in net
asset value to 114.60 pence per share (2020: 106.54 pence per
share), which can be seen on the Balance sheet below. This increase
in net asset value is after taking account of the payment of 5.44
pence per share of dividends during the year.
There was a net cash inflow for the Company of GBP2,919,000 for
the year (2020: net inflow of GBP17,069,000), which has arisen from
both the disposal of fixed and current asset investments and the
issue of Ordinary shares under the Albion VCTs Top Up Offers,
reduced by the investment in fixed asset investments, dividends
paid, operating activities and the buy back of shares.
Review of business and future changes
A detailed review of the Company's business during the year is
contained in the Chairman's statement above. Total gains on
investments for the year were GBP10.9 million (2020: loss of GBP2.9
million).
There is a continuing focus on growing the FinTech, healthcare
and other software and technology sectors. The majority of these
investment returns are delivered through equity and capital gains,
and we therefore expect our investment income to continue to be
similar to the current level, as most of this is derived from the
existing renewable energy portion of our portfolio.
Details of significant events which have occurred since the end
of the financial year are listed in note 19. Details of
transactions with the Manager are shown in note 5.
Future prospects
The Company's portfolio remains well balanced across sectors and
risk classes, and has weathered the pandemic so far. Although there
remains much uncertainty, the Manager has a strong pipeline of
investment opportunities in which the Company's cash can be
deployed. The Board considers that the pipeline will continue to
enable the Company to maintain a predictable stream of dividend
payments to shareholders, and ultimately continue to deliver long
term growth.
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 Company's total shareholder value relative to
the FTSE All-Share Index total return, with dividends reinvested.
The FTSE All-Share index is considered a reasonable benchmark as
the Company is classed as a generalist UK VCT investor, and this
index includes over 600 companies listed in the UK, including
small-cap, covering a range of sectors. Details on the performance
of the net asset value and return per share for the year are shown
in the Chairman's statement.
2. Net asset value per share and total shareholder value
Total shareholder value increased by 13.50 pence per share to
170.89 pence per share for the year ended 31 March 2021 (return of
12.67% on opening net asset value).
3. Shareholder return in the year
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
---- ----- ---- ---- ---- ----- ----- ----- ------ -----
0.9% 13.5% 9.7% 4.5% 5.4% 10.8% 12.4% 13.1% (4.4)% 12.7%
---- ----- ---- ---- ---- ----- ----- ----- ------ -----
Source: Albion Capital Group LLP
Methodology: Shareholder return is calculated by 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 March 2021 were
5.44 pence per share (2020: 6.00 pence per share), a yield of 5.1%
on opening net asset value. The cumulative dividends paid since
inception total 56.29 pence per share.
5. Ongoing charges
The ongoing charges ratio for the year ended 31 March 2021 was
2.5% (2020: 2.7%). 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 GBP53,000 to shareholders
during the year (2020: GBP24,000).
6. VCT compliance*
The investment policy is designed to ensure that the Company
continues to qualify and is approved as a VCT by HMRC. In order to
maintain its status under Venture Capital Trust legislation, a VCT
must comply on a continuing basis with the provisions of Section
274 of the Income Tax Act 2007, details of which are provided in
the Directors' report on page 32 of the full Annual Report and
Financial Statements.
The relevant tests to measure compliance have been carried out
and independently reviewed for the year ended 31 March 2021. These
showed that the Company has complied with all tests and continues
to do so.
*VCT compliance is not a numerical measure of performance and
thus cannot be defined as an APM.
Gearing
As defined by the Articles of Association, the Company's maximum
exposure in relation to gearing is restricted to 10% of its
adjusted share capital and reserves. The Directors do not currently
have any intention to utilise gearing for the Company.
Operational arrangements
The Company has delegated the investment management of the
portfolio to 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 can be terminated by either party on 12
months' notice. The Management agreement is subject to earlier
termination in the event of certain breaches or on the insolvency
of either party. The Manager is paid an annual fee equal to 2% of
the net asset value of the Company paid quarterly in arrears, along
with an administration fee of 0.2% of the net asset value.
Additionally, for the period that the Company held the
investment in the SVS Albion OLIM UK Equity Income Fund ("OUEIF"),
Albion Capital Group LLP reduced the proportion of its management
fee relating to the investment in the OUEIF by 0.75%, which
represented 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, since 1 October 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.
Further details on the management fee can be found in note
5.
Management performance incentive fee
In order to align the interests of the Manager and the
shareholders with regards to generating positive returns, the
Company has a Management performance incentive arrangement with the
Manager. Under the incentive arrangement, the Company will pay an
incentive fee to the Manager of an amount equal to 20% of such
excess return that is calculated for each financial year.
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 the
higher of the average base rate of the Royal Bank of Scotland plus
2% or RPI plus 2%. The hurdle is calculated every year, based on
the starting rate of 100 pence per share in 2007.
For the year ended 31 March 2021, the total return of the
Company since launch (the performance incentive fee start date)
amounted to 170.89 pence per share, compared to the higher hurdle
of 168.79 pence per share. As a result, a performance incentive fee
of GBP288,000 is payable to the Manager (2020: GBPnil).
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-backs 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 in both the long and short term, having regard
to the interests of other stakeholders in the Company, such as
suppliers, and to do so with an understanding of the impact on the
community and environment and with high standards of business
conduct, which includes acting fairly between members of the
Company.
The Board is very conscious of these wider responsibilities in
the ways it promotes the Company's culture and ensures, as part of
its regular oversight, that the integrity of the Company's affairs
is foremost in the way the activities are managed and promoted.
This includes regular engagement with the wider stakeholders of the
Company and being alert to issues that might damage the Company's
standing in the way that it operates. The Board works very closely
with the Manager in reviewing how stakeholder issues are handled,
ensuring good governance and responsibility in managing the
Company's affairs, as well as visibility and openness in how the
affairs are conducted.
The Company is an externally managed investment company with no
employees, and as such has nothing to report in relation to
employee engagement but does keep close attention to how the Board
operates as a cohesive and competent unit. The Company also has no
customers in the traditional sense and, therefore, there is also
nothing to report in relation to relationships with customers.
The table below sets out the stakeholders the Board considers
most relevant, details how the Board has engaged with these key
stakeholders and the effect of these considerations on the
Company's decisions and strategies during the year.
Stakeholders Engagement with Stakeholders Decision outcomes based on engagement
------------ ------------------------------------------------------------- -----------------------------------------------------------
Shareholders The key methods of engaging with Shareholders are -- Shareholders' views are important and the Board
as follows: encourages Shareholders to exercise their right to
-- Annual General Meeting ("AGM") vote on the resolutions at the AGM. The Company's AGM
is typically used as an opportunity to communicate
-- Shareholder seminar with investors, including through a presentation made
by the investment management team. However, due to
-- Annual report, Half-yearly financial report, and the impact of Covid-19 last year, there were special
Interim management statements circumstances for last year's AGM, which will
continue on into this year. A live stream of the AGM
-- RNS announcements for all key decisions including was held last year, and the Board were able to take
appointment of a new Director, and the publication of questions from Shareholders. This enabled maximum
a Prospectus shareholder engagement in the absence of a
face-to-face event.
-- Website redesigned in the year to make it more user -- Shareholders are also encouraged to attend the annual
accessible 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.
Representatives of the Board attend the seminar. The
Board considers this an important interactive event,
and therefore in 2020, although Covid-19 restrictions
did not allow for face-to-face meetings, this was
also held as a live stream event.
-- Shareholders receive either a hard or soft copy of
the Annual report, and the Half-yearly financial
report, depending on their preference. These reports
are also available on the website, and announcement
is made on the London Stock Exchange. The Company
also provides voluntary Interim management statements
to keep Shareholders up to date quarterly.
-- During the year, there was a net asset value
announcement outside of the normal quarterly
reporting cycle, as the Board realised the importance
of information sharing during the period of
uncertainty caused by the pandemic.
-- The share buy-back policy is an important means of
providing market liquidity for Shareholders, and has
been offered throughout the year. The Board monitors
closely the discount to the net asset value to ensure
this is in the region of 5%.
-- The Board seeks to create value for Shareholders by
generating strong and sustainable returns to provide
shareholders with regular dividends and the prospect
of capital growth. During the year, the new dividend
policy has been enacted, and has resulted in a
dividend yield of 5.11% on opening net asset value.
-- During the year, the decision to publish a Prospectus
was taken, in order to raise more funds for
deployment into new and existing portfolio companies.
The Board carefully considered whether further funds
were required, and whether the VCT tests would
continue to be met before agreeing to publish the
Prospectus. On allotment, the decision was made to
use different issue prices to ensure there was no
dilution to existing Shareholders, whilst also
ensuring new Shareholders were investing at a fair
price.
-- Cash management and liquidity of the Company are key
quarterly discussions amongst the Board, with focus
on deployment of cash for future investments,
dividends and share buy-backs.
-- Shareholders can contact the Chairman using the email
AAEVchair@albion.capital.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Suppliers The key suppliers with regular engagement from the
Manager are: -- The Manager is in regular contact with the suppliers
-- Corporate broker and the contractual arrangements with all the
principal suppliers to the Company are reviewed
-- VCT taxation advisor regularly and formally once a year, alongside the
performance of the suppliers in acquitting their
-- Depositary responsibilities.
-- Registrar -- The Board reviews the performance of the providers
annually in line with the Manager.
-- Auditor
-- Lawyer
------------ ------------------------------------------------------------- -----------------------------------------------------------
Manager The performance of Albion Capital Group LLP is essential -- The Manager meets with the Board at least quarterly
to the long term success of the Company, including to discuss the performance of the Company, and is in
achieving the investment policy and generating returns regular contact in between these meetings, e.g. to
to shareholders, as well as the impact the Company share investment papers for new and follow on
has on Environment, Social and Governance practice. investments. All strategic decisions are discussed in
detail and minuted, with an open dialogue between the
Board and the Manager.
-- The performance of the Manager in managing the
portfolio and in providing company secretarial,
administration and accounting services is reviewed in
detail each year, which includes reviewing comparator
engagement terms and portfolio performance. Further
details on the evaluation of the Manager, and the
decision to continue the appointment of the Manager
for the forthcoming year, can be found in this
report.
-- Details of the Manager's responsibilities can be
found in the Statement of corporate governance on
pages 37 to 41 of the full Annual Report and
Financial Statements.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Portfolio The portfolio companies are considered key stakeholders, -- The Board aims to have a diversified portfolio in
companies not least because they are principal drivers of value terms of sector and stage of investment. Further
for the Company. However, as discussed in the Environmental, details of this can be found in the pie charts at the
Social and Governance ("ESG") section below, the portfolio end of this announcement.
companies' impact on their stakeholders is also important -- In most cases, an Albion executive has a place on the
to the Company. board of a portfolio company, in order to help with
both business operation decisions, as well as good
ESG practice.
-- The Manager ensures good dialogue with portfolio
companies, and often puts on events in order to help
portfolio companies benefit from the Albion network.
------------ ------------------------------------------------------------- -----------------------------------------------------------
Community The Company, with no employees, has no effect itself -- The Board receives reports on ESG factors within its
and on the community and environment. However, as discussed portfolio from the Manager as it is a signatory of
environment above, the portfolio companies' ESG impact is extremely the UN Principles for Responsible Investment ("UN
important to the Board. PRI"). Further details of this are set out in the ESG
section 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.
------------ ------------------------------------------------------------- -----------------------------------------------------------
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, FinTech, 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
portfolio 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
and these are set out in the Directors' report on page 33 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. They are satisfied that there has
not been a material change in the Company's exposure against each
of the identified risks below.
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 decision
to issue a Prospectus for the 2020/21 Top-Up was due
to careful analysis of these factors.
The unquoted investments held by the Company are designated
at fair value through profit or loss and valued in
accordance with the International Private Equity and
Venture Capital Valuation Guidelines updated in 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 Financial at senior levels within or advising quoted companies.
compliance Conduct 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 every two
months. These controls are also reviewed as part of
the quarterly Board meetings, and also as part of
the review work undertaken by the Manager's compliance
officer. The report on controls is also evaluated
by the internal auditors.
------------ ----------------------------------------------------------- -------------------------------------------------------------
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.
Ocorian Depositary (UK) Limited is the Company's Depositary,
appointed to oversee the custody and cash arrangements
and provide other AIFMD duties. The Board reviews
the quarterly reports prepared by Ocorian Depositary
(UK) Limited to ensure that Albion Capital is adhering
to its policies and procedures as required by the
AIFMD.
In addition, the Board annually reviews the performance
of its key service providers, particularly the Manager,
to ensure they continue to have the necessary expertise
and resources to deliver the Company's investment
objective and policy. The Manager and other service
providers have also demonstrated to the Board that
there is no undue reliance placed upon any one individual.
------------ ----------------------------------------------------------- -------------------------------------------------------------
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, and in addition often invests in a mixture of instruments
risk other factors could substantially and adversely affect in portfolio companies and has a policy of minimising
the Company's prospects in a number of ways. This any external bank borrowings within portfolio companies.
also includes risks of social upheaval, including At any given time, the Company has sufficient cash
from infection and population re-distribution, as resources to meet its operating requirements, including
well as economic risk challenges as a result of healthcare share buy-backs and follow-on investments.
pandemics/infection. In common with most commercial operations, exogenous
The political risk with the most uncertainty for the risks over which the Company has no control are always
future of the UK economy, which the Company largely a risk and the Company does what it can to address
operates in, is Brexit. these risks where possible, not least as the nature
The current significant exogenous risk to the Company, of the investments the Company makes are long term.
the wider population and economy, is the Covid-19 The Company largely operates within the UK, and increasingly
pandemic. the US, and therefore impacts from Brexit are reduced
as there are few cross-border transactions with Europe.
Since 2016, the portfolio of companies has not seen
any significant impacts from the uncertainty around
Brexit, nor since the end of the transition period
(1 January 2021).
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.
------------ ----------------------------------------------------------- -------------------------------------------------------------
Emerging The Board meets at least four times a year to discuss The ESG section below details the Company's work towards
risks current affairs and any potential emerging risks which these risks, and highlights the importance of these,
could affect the Company. above the statutory reporting requirements, to the
The key emerging risk affecting the Company is the Company.
Environmental (including climate change), Social and Whilst the Company itself has limited impact on climate
Governance requirements, both from a regulatory and change, due to no employees nor greenhouse gas emissions,
investor preferences standpoint. There is the risk the Board works closely with the Manager to ensure
of loss of funding from investors, as well as the the Manager themselves are working towards reducing
risk of penalties from regulatory non-compliance. their impact on the environment, and that the Manager
takes account of ESG factors, including climate change,
when making new investment decisions. With specific
respect to the Company, a key operation is increasing
the use of electronic communications with Shareholders,
where that preference has been specified.
------------ ----------------------------------------------------------- -------------------------------------------------------------
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% to net asset value, by providing
net asset value, also takes into account its dividend a purchaser through the Company in absence of market
yield and prevailing interest rates. As such, the purchasers. From time to time buy-backs cannot be
market value of an Ordinary share may vary considerably applied, for example when the Company is subject to
from its underlying net asset value. The market prices a close period, or if it were to exhaust any buy-back
of shares in quoted investment companies can, therefore, authorities. The Company's corporate broker, appointed
be at a discount or premium to the net asset value during the year, helps to ensure that the discount
at different times, depending on supply and demand, is appropriate.
market conditions, general investor sentiment and New Ordinary shares are issued at sufficient premium
other factors. Accordingly, the market price of the to net asset value to cover the costs of issue and
Ordinary shares may not fully reflect their underlying to avoid asset value dilution to existing investors.
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 March 2024. 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 March 2024.
This Strategic report of the Company for the year ended 31 March
2021 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
Maxwell Packe
Chairman
28 June 2021
Responsibility Statement
In preparing these financial statements for the year ended 31
March 2021, the Directors of the Company, being Maxwell Packe, The
Dowager Lady Balfour of Burleigh, Christopher Burrows, Patrick
Reeve, and Rhodri Whitlock 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 March 2021
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 36 within the full audited Annual Report and
Financial Statements.
On behalf of the Board,
Maxwell Packe
Chairman
28 June 2021
Income statement
Year ended Year ended
31 March 2021 31 March 2020
----------------------------------------------------------- ---- -------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------------- ---- ------- ------- ------- ------- ------- -------
Gains/(losses) on investments 3 - 10,892 10,892 - (2,884) (2,884)
Investment income 4 543 - 543 1,157 - 1,157
Investment management fee 5 (366) (1,098) (1,464) (396) (1,189) (1,585)
Performance incentive fee 5 (72) (216) (288) - - -
Other expenses 6 (454) - (454) (363) - (363)
------- ------- ------- ------- ------- -------
(Loss)/return on ordinary activities before taxation (349) 9,578 9,229 398 (4,073) (3,675)
Tax on ordinary activities 8 - - - - - -
------- ------- ------- ------- ------- -------
(Loss)/return and total comprehensive income attributable
to shareholders (349) 9,578 9,229 398 (4,073) (3,675)
------- ------- ------- ------- ------- -------
Basic and diluted (loss)/return per share (pence)* 10 (0.51) 13.96 13.45 0.61 (6.31) (5.70)
------- ------- ------- ------- ------- -------
* 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 March 31 March
2021 2020
Note GBP'000 GBP'000
---------------------------------------------------- ---- -------- --------
Fixed asset investments 11 60,615 47,859
Current assets
Current asset investments 13 - 3,501
Trade and other receivables 13 1,772 182
Cash and cash equivalents 24,429 21,510
-------- --------
26,201 25,193
-------- --------
Total assets 86,816 73,052
Payables: amounts falling due within one year
Trade and other payables less than one year 14 (1,418) (499)
-------- --------
Total assets less current liabilities 85,398 72,553
-------- --------
Equity attributable to equity holders
Called-up share capital 15 852 770
Share premium 53,258 44,183
Capital redemption reserve 104 104
Unrealised capital reserve 17,538 8,636
Realised capital reserve 14,728 14,052
Other distributable reserve (1,082) 4,808
-------- --------
Total equity shareholders' funds 85,398 72,553
-------- --------
Basic and diluted net asset value per share (pence)
* 16 114.60 106.54
---------------------------------------------------- -------- --------
* 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 were authorised for issue on 28 June 2021 and were
signed on its behalf by
Maxwell Packe
Chairman
Company number: 05990732
Statement of changes in equity
Called-up Unrealised Realised
share Share capital capital Other distributable
capital premium Capital redemption reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- --------- -------- -------------------------- ---------- --------- ------------------- --------
On 1 April 2020 770 44,183 104 8,636 14,052 4,808 72,553
Return/(loss) and total comprehensive income for the
year - - - 8,836 742 (349) 9,229
Transfer of previously unrealised losses on disposal
of investments - - - 66 (66) - -
Issue of equity 82 9,277 - - - - 9,359
Cost of issue of equity - (202) - - - - (202)
Purchase of own shares for treasury - - - - - (1,853) (1,853)
Dividends paid - - - - - (3,688) (3,688)
On 31 March 2021 852 53,258 104 17,538 14,728 (1,082) 85,398
----------------------------------------------------- --------- -------- -------------------------- ---------- --------- ------------------- --------
On 1 April 2019 650 30,255 104 18,672 8,089 9,618 67,388
Return/(loss) and total comprehensive income for the
year - - - (5,996) 1,923 398 (3,675)
Transfer of previously unrealised gains on disposal
of investments - - - (4,040) 4,040 - -
Issue of equity 120 14,270 - - - - 14,390
Cost of issue of equity - (342) - - - - (342)
Purchase of own shares for treasury - - - - - (1,252) (1,252)
Dividends paid - - - - - (3,956) (3,956)
On 31 March 2020 770 44,183 104 8,636 14,052 4,808 72,553
----------------------------------------------------- --------- -------- -------------------------- ---------- --------- ------------------- --------
* These reserves amount to GBP13,646,000 (2020: GBP18,860,000)
which is considered distributable.
Statement of cash flows
Year ended Year ended
31 March 2021 31 March 2020
GBP'000 GBP'000
------------------------------------------- -------------- --------------
Cash flow from operating activities
Investment income received 434 1,001
Dividend income received 94 310
Deposit interest received 17 71
Investment management fee paid (1,403) (1,648)
Performance incentive fee paid - (1,332)
Other cash payments (465) (307)
Net cash flow from operating activities (1,323) (1,905)
Cash flow from investing activities
Purchase of current asset investments - (1,194)
Disposal of current asset investments 3,691 -
Purchase of fixed asset investments (7,324) (5,340)
Disposal of fixed asset investments 3,683 16,656
Net cash flow from investing activities 50 10,122
Cash flow from financing activities
Issue of share capital 8,568 13,432
Cost of issue of equity (17) (17)
Dividends paid* (3,094) (3,311)
Purchase of own shares (including costs) (1,265) (1,252)
-------------- --------------
Net cash flow from financing activities 4,192 8,852
Increase in cash and cash equivalents 2,919 17,069
Cash and cash equivalents at start of the
year 21,510 4,441
-------------- --------------
Cash and cash equivalents at end of the year 24,429 21,510
* 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 and the timing of the unclaimed
dividends.
Notes to the Financial Statements
1. Accounting convention
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
31 and 32 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% 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 other
expenses
All expenses have been accounted for on an accruals basis.
Expenses are charged through the other distributable reserve except
the following which are charged through the realised capital
reserve:
-- 75% 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% 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 for 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 2013 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 March 2021 31 March 2020
GBP'000 GBP'000
----------------------------------------------
Unrealised gains/(losses) on fixed asset
investments 8,836 (4,661)
Unrealised losses on current asset investments - (1,335)
Realised gains on fixed asset investments 1,866 3,112
Realised gains on current asset investments 190 -
10,892 (2,884)
-------------- --------------
4. Investment income
Year ended Year ended
31 March 2021 31 March 2020
GBP'000 GBP'000
Loan stock interest 434 776
Dividend income 94 310
Bank deposit interest 15 71
543 1,157
-------------- --------------
5. Investment management fees
Year ended Year ended
31 March 2021 31 March 2020
GBP'000 GBP'000
Investment management fee charged to revenue 366 396
Investment management fee charged to capital 1,098 1,189
Performance incentive fee charged to revenue 72 -
Performance incentive fee charged to capital 216 -
-------------- --------------
1,752 1,585
-------------- --------------
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 GBP1,905,000
(2020: GBP1,659,000) were purchased by the Company from Albion
Capital Group LLP; this includes GBP1,464,000 (2020: GBP1,585,000)
of management fee and GBP153,000 (2020: GBP74,000) of
administration fee; and a performance incentive fee of GBP288,000
(2020: GBPnil). At the financial year end, the amount due to Albion
Capital Group LLP in respect of these services disclosed as
accruals was GBP739,000 (2020: GBP384,000). 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 GBP53,000 as a result
of this cap (2020: GBP24,000).
During the year, the Company was not charged by Albion Capital
Group LLP in respect of Patrick Reeve's services as a Director
(2020: GBPnil).
Albion Capital Group LLP, its partners and staff hold a total of
584,126 shares in the Company on 31 March 2021.
The Manager is, from time to time, eligible to receive
arrangement fees and monitoring fees from portfolio companies.
During the year ended 31 March 2021, fees of GBP205,000
attributable to the investments of the Company were received
pursuant to these arrangements (2020: GBP186,000).
The Company has entered into an offer agreement relating to the
Offers with the 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, 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 represented
the OUEIF management fee charged by OLIM. This resulted in a
further reduction of the management fee of GBP15,000 (2020:
GBP32,000). Further details on the OUEIF disposal can be found in
the Chairman's statement above.
6. Other expenses
Year ended Year ended
31 March 2021 31 March 2020
GBP'000 GBP'000
Directors' fees (including NIC) 95 99
Auditor's remuneration for statutory audit services
(exclusive of VAT) 37 34
Administration fee 153 74
Other administrative expenses 169 156
-------------- --------------
454 363
-------------- --------------
7. Directors' fees
The amounts paid to and on behalf of the Directors during the
year are as follows:
Year ended Year ended
31 March 2021 31 March 2020
GBP'000 GBP'000
Directors' fees 88 91
National insurance 7 8
95 99
-------------- --------------
The Company's key management personnel are the Directors.
Further information regarding Directors' remuneration can be found
in the Directors' remuneration report on pages 42 to 44 of the full
Annual Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
31 March 2021 31 March 2020
GBP'000 GBP'000
UK corporation tax charge in respect of - -
current year
- -
-------------- --------------
Year ended Year ended
31 March 2021 31 March 2020
Factors affecting the tax charge: GBP'000 GBP'000
------------------------------------------------------
Return/(loss) on ordinary activities before taxation 9,229 (3,675)
-------------- --------------
Tax charge on profit at the average companies rate
of 19%
(2020: 19%) 1,754 (698)
Factors affecting the charge:
Non-taxable (gains)/losses (2,069) 548
Income not taxable (18) (59)
Excess management expenses carried forward 333 209
- -
-------------- --------------
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% (2020: 19%). 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 GBP8,090,000 (2020: GBP6,249,000) that are available for offset against future profits. A deferred tax asset of GBP1,537,000 (2020: GBP1,062,000) 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 March 2021 31 March 2020
GBP'000 GBP'000
-------------------------------------------------------
First dividend of 2.70p per share paid on 28 August
2020 (30 August 2019 -- 3.00p per share) 1,836 1,911
Second dividend of 2.74p per share paid on 26 February
2021 (28 February 2020 -- 3.00p per share) 1,854 2,045
Unclaimed dividends (2) -
3,688 3,956
-------------- --------------
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 for the year ending 31 March 2022 of 2.87
pence per share to be paid on 31 August 2021 to shareholders on the
register on 6 August 2021. The total dividend will be approximately
GBP2,150,000.
10. Basic and diluted return per share
Year ended Year ended
31 March 2021 31 March 2020
Revenue Capital Total Revenue Capital Total
-------------------------------------------------------- ------- ------- -------
(Loss)/return attributable to equity shares (GBP'000) (349) 9,578 9,229 398 (4,073) (3,675)
Weighted average shares in issue (adjusted for treasury
shares) 68,620,876 64,506,507
(Loss)/return attributable per equity share (pence) (0.51) 13.96 13.45 0.61 (6.31) (5.70)
There are no convertible instruments, derivatives or contingent
share agreements in issue for the Company, and therefore no
dilution affecting the return per share. The basic return per share
is therefore the same as the diluted return per share.
The weighted average number of shares is calculated after
adjusting for treasury shares of 10,713,420 (2020: 8,945,314).
11. Fixed asset investments
Investments held at fair value through profit or 31 March 2021 31 March 2020
loss GBP'000 GBP'000
Unquoted equity and preference shares 48,450 37,560
Unquoted loan stock 12,165 10,299
------------- -------------
60,615 47,859
------------- -------------
31 March 2021 31 March 2020
GBP'000 GBP'000
---------------------------------------------------- ------------- -------------
Opening valuation 47,859 59,146
Purchases at cost 7,324 6,035
Disposal proceeds (5,270) (15,549)
Realised gains 1,866 3,112
Movement in loan stock revenue accrued income - (224)
Unrealised gains/(losses) 8,836 (4,661)
------------- -------------
Closing valuation 60,615 47,859
------------- -------------
Movement in loan stock revenue accrued income
Opening accumulated loan stock revenue accrued
income 1 225
Movement in loan stock revenue accrued income - (224)
------------- -------------
Closing accumulated loan stock revenue accrued
income 1 1
------------- -------------
Movement in unrealised gains
Opening accumulated unrealised gains 10,129 18,829
Movement in unrealised gains 8,836 (4,661)
Transfer of previously unrealised gains to realised
reserve on disposal of investments (1,426) (4,040)
------------- -------------
Closing accumulated unrealised gains 17,539 10,129
------------- -------------
Historic cost basis
Opening book cost 37,730 40,092
Purchases at cost 7,324 6,035
Sales at cost (1,978) (8,397)
------------- -------------
Closing book cost 43,076 37,730
------------- -------------
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.
Unquoted fixed asset investments are valued at fair value in
accordance with the IPEV guidelines as follows:
31 March 31 March
2021 2020
Valuation methodology GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Revenue multiple 25,130 20,268
Cost and price of recent investment (reviewed for
impairment or uplift) 23,438 16,754
Third party valuation -- Discounted cash flow 6,448 6,693
Third party valuation -- Earnings multiple 3,053 2,823
Earnings multiple 2,405 789
Net assets 141 532
60,615 47,859
------------ ------------
When using the cost or price of a recent investment in the
valuations, the Company looks to re-calibrate this price at each
valuation point by reviewing progress within the investment,
comparing against the initial investment thesis, assessing if there
are any significant events or milestones that would indicate the
value of the investment has changed and considering whether a
market-based methodology (i.e. using multiples from comparable
public companies) or a discounted cashflow forecast would be more
appropriate.
The main inputs into the calibration exercise, and for the
valuation models using multiples, are revenue, EBITDA and P/E
multiples (based on the most recent revenue, EBITDA or earnings
achieved and equivalent corresponding revenue, EBITDA or earnings
multiples of comparable companies), quality of earnings assessments
and comparability difference adjustments. Revenue multiples are
often used, rather than EBITDA or earnings, due to the nature of
the Company's investments, being in growth and technology companies
which are not normally expected to achieve profitability or scale
for a number of years. Where an investment has achieved scale and
profitability the Company would normally then expect to switch to
using an EBITDA or earnings multiple methodology.
In the calibration exercise and in determining the valuation for
the Company's equity instruments, comparable trading multiples are
used. In accordance with the Company's policy, appropriate
comparable companies based on industry, size, developmental stage,
revenue generation and strategy are determined and a trading
multiple for each comparable company identified is then calculated.
The multiple is calculated by dividing the enterprise value of the
comparable group by its revenue, EBITDA or earnings. The trading
multiple is then adjusted for considerations such as illiquidity,
marketability and other differences, advantages and disadvantages
between the portfolio company and the comparable public companies
based on company specific facts and circumstances.
Fair value investments had the following movements between
valuation methodologies between 31 March 2020 and 31 March
2021:
Change in valuation methodology (2020 to 2021) Value on Explanatory
31 March 2021 note
GBP'000
-------------------------------------------------------
Cost and price of recent investment (reviewed for 7,194 More
impairment or uplift) to revenue multiple appropriate
valuation
methodology.
Revenue multiple to cost and price of recent investment 3,393 Funding
(reviewed for impairment or uplift) round led to
new
methodology.
Cost to earnings multiple 2,036 More
appropriate
valuation
methodology.
Net assets to cost and price of recent investment 573 External
(reviewed for impairment or uplift) funding
round led to
new
methodology.
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 on 31 March
2021.
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 March 2021 31 March 2020
GBP'000 GBP'000
----------------------------- -------------
Opening balance 47,859 58,857
Additions 7,324 6,074
Disposals (5,270) (15,549)
Realised gains 1,866 3,362
Accrued loan stock interest - (224)
Unrealised gains/(losses) 8,836 (4,661)
------------- -------------
Closing balance 60,615 47,859
------------- -------------
There are no Level 1 or 2 investments, nor have there been any
transfers between Levels during the course of the year.
FRS 102 requires the Directors to consider the impact of
changing one or more of the inputs used as part of the valuation
process to reasonable possible alternative assumptions. 55% of the
portfolio of investments, consisting of equity and loan stock, is
based on recent investment price, net assets and cost. For the
remainder of the portfolio, the Board has considered the reasonable
possible alternative input assumptions on the valuation of the
portfolio and believes that changes to inputs (by adjusting the
earnings and revenue multiples) could lead to a change in the fair
value of the portfolio. The Board has reviewed the Manager's
adjusted inputs for a number of the largest portfolio companies (by
value) which covers 29% of the portfolio. This has resulted in a
total coverage of 84% of the portfolio of investments. The main
inputs considered for each type of valuation is as follows:
Change in
fair value
Change of Change in NAV
Valuation Base in investments (pence per
technique Portfolio company sector Input Case* input (GBP'000) share)
----------------- ------------------------------------------ ----------------- ------ ------ ----------- -----------------
Revenue multiple Other software & technology Revenue multiple 5.6x +0.5 923 1.24
----------------- ------------------------------------------ ----------------- ------ ------ ----------- -----------------
-0.5 (915) (1.23)
------------------------------------------------------------------------------------- ------ ----------- -----------------
Revenue multiple Healthcare (including digital healthcare) Revenue multiple 5.2x +0.2 177 0.24
----------------- ------------------------------------------ ----------------- ------ ------ ----------- -----------------
-0.7 (639) (0.86)
------------------------------------------------------------------------------------- ------ ----------- -----------------
Revenue multiple Other software & technology Revenue multiple 6.0x +1.4 505 0.68
----------------- ------------------------------------------ ----------------- ------ ------ ----------- -----------------
-2.0 (714) (0.96)
------------------------------------------------------------------------------------- ------ ----------- -----------------
*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 GBP1,605,000 (3.3%)
or a decrease in the valuation of equity investments by
GBP2,268,000 (4.7%).
12. Significant interests
The principal activity of the Company is to select and hold a
portfolio of investments in unquoted securities. Although the
Company, through the Manager, will, in some cases, be represented
on the board of the portfolio company, it will not take a
controlling interest or become involved in the management of a
portfolio company. The size and structure of the companies with
unquoted securities may result in certain holdings in the portfolio
representing a participating interest without there being any
partnership, joint venture or management consortium agreement. The
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 accounted for using
the equity method.
The Company has interests of greater than 20% of the nominal
value of any class of the allotted shares in the portfolio company
on 31 March 2021 as described below:
Registered % class
address and and % total
country of Principal Profit/(loss) before tax Aggregate capital and reserves share voting
Company incorporation activity GBP'000 GBP'000 Result for year ended type rights
------------ -------------- ---------- ------------------------- ------------------------------ ---------------------- -------- -------
Owner and
operator
Greenenerco of a wind 28.6% A
Limited EC1M 5QL, UK project n/a* 575 31 March 2020 Ordinary 28.6%
------------ -------------- ---------- ------------------------- ------------------------------ ---------------------- -------- -------
*The company files filleted accounts which do not disclose this
information.
13. Current assets
Current asset investments 31 March 2021 31 March 2020
GBP'000 GBP'000
-------------------------------------- ------------- -------------
SVS Albion OLIM UK Equity Income Fund - 3,501
------------- -------------
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 March 2021 31 March 2020
GBP'000 GBP'000
-------------------------------------- ------------- -------------
Deferred consideration under one year 149 162
Deferred consideration over one year 1,600 -
Prepayments and accrued income 21 16
Other debtors 2 4
1,772 182
------------- -------------
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 March 2021 31 March 2020
GBP'000 GBP'000
----------------------------- ------------- -------------
Accruals and deferred income 812 469
Trade payables 606 30
1,418 499
------------- -------------
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
--------------------------------------------------------
77,044,547 Ordinary shares of 1 penny each at 31 March
2020 770
8,187,553 Ordinary shares of 1 penny each issued during
the year 82
-------------------------------------------------------- -------
85,232,100 Ordinary shares of 1 penny each at 31 March
2021 852
-------------------------------------------------------- -------
8,945,314 Ordinary shares of 1 penny each held in
treasury at 31 March 2020 (89)
1,768,106 Ordinary shares purchased during the year
to be held in treasury (18)
-------------------------------------------------------- -------
10,713,420 Ordinary shares of 1 penny each held in
treasury at 31 March 2021 (107)
-------------------------------------------------------- -------
Voting rights of 74,518,680 Ordinary shares of 1 penny
each at 31 March 2021 745
-------------------------------------------------------- -------
The Company purchased 1,768,106 shares (2020: 1,123,871) to be
held in treasury at a nominal value of GBP17,681 and a cost of
GBP1,853,000 (2020: GBP1,252,000) representing 2.1% of the shares
in issue on 31 March 2021, leading to a balance of 10,713,420
shares (2020: 8,945,314) in treasury representing 12.6% (2020:
11.6%) of the shares in issue on 31 March 2021.
Under the terms of the Dividend Reinvestment Scheme Circular
(dated 26 November 2009), the following new Ordinary shares of
nominal value 1 penny each were allotted during the year:
Aggregate
nominal value Net
Date of Number of of shares Issue price invested Opening market price on allotment date (pence per
allotment shares allotted (GBP'000) (pence per share) (GBP'000) share)
----------
28 August
2020 286,480 3 103.84 296 98.00
26
February
2021 262,339 3 112.23 293 106.50
---------------- ----------
548,819 589
---------------- ----------
During the year the following new Ordinary shares of nominal
value 1 penny each were allotted under the terms of the Albion VCTs
Prospectus Top Up Offers 2019/20 and 2020/21:
Aggregate Net
nominal value consideration
Date of Number of of shares Issue price received Opening market price on allotment date (pence per
allotment shares allotted (GBP'000) (pence per share) (GBP'000) share)
----------
30 April
2020 90,192 1 108.20 96 95.00
30 April
2020 102,334 1 109.30 109 95.00
26
February
2021 1,516,559 15 114.00 1,703 106.50
26
February
2021 378,823 4 114.60 425 106.50
26
February
2021 5,550,826 56 115.20 6,235 106.50
7,638,734 8,568
---------------- --------------
16. Basic and diluted net asset value per share
31 March 2021 31 March 2020
(pence per share) (pence per share)
---------------------------------------- ----------------- -----------------
Basic and diluted net asset value per
Ordinary share 114.60 106.54
The basic and diluted net asset value per share at the year end
is calculated in accordance with the Articles of Association and is
based upon total shares in issue (excluding treasury shares) of
74,518,680 Ordinary shares (2020: 68,099,233) at 31 March 2021.
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 31 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 and quoted companies, cash balances,
short term receivables and payables which arise from its
operations. The main purpose of these financial instruments is to
generate cash flow 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:
-- Market and investment risk (which comprises investment price and cash
flow interest rate risk);
-- credit risk; and
-- liquidity risk.
The Board regularly reviews and agrees policies for managing
each of these risks. There have been no changes in the nature of
the risks that the Company has faced during the past year, and
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.
Market risk
As a Venture Capital Trust, it is the Company's specific nature
to evaluate the market risk of its portfolio in unquoted companies,
details of which are shown on pages 24 and 25 of the full Annual
Report and Financial Statements. Market risk is the exposure of the
Company to the revaluation and devaluation of investments as a
result of macroeconomic changes. The main driver of market risk is
the dynamics of market quoted comparators, as well as the financial
and operational performance of portfolio companies. The Board seeks
to reduce this risk by having a spread of investments across a
variety of sectors. More details on the sectors the Company invests
in can be found in the pie chart at the end of this
announcement.
The Manager and the Board formally review market risk, both at
the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are
made to ensure that profits to the Company are maximised, and that
valuations of investments retained within the portfolio appear
sufficiently prudent and realistic compared to prices being
achieved in the market for sales of unquoted investments.
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 GBP6,062,000. Further sensitivity
analysis on fixed asset investments is included in note 11.
Investment risk (including investment price risk)
Investment risk (including investment price risk) is the risk
that the fair value of future investment cash flows will fluctuate
due to factors specific to an investment instrument or to a market
in similar instruments. The management of risk within the venture
capital portfolio is addressed through careful investment
selection, by diversification across different industry segments,
by maintaining a wide spread of holdings in terms of financing
stage and by limitation of the size of individual holdings. The
Manager receives management accounts from portfolio companies and
members of the investment management team often sit on the boards
of unquoted portfolio companies; this enables the close
identification, monitoring and management of investment risk. The
Directors monitor the Manager's compliance with the investment
policy, review and agree policies for managing this risk and
monitor the overall level of risk on the portfolio on a regular
basis.
Valuations are based on the most appropriate valuation
methodology for an investment within its market, with regard to the
financial health of the investment and the IPEV Guidelines. Details
of the industries in which investments have been made are contained
in the pie chart at the end of this announcement.
The maximum investment risk on the balance sheet date is the
value of the fixed asset investment portfolio which is
GBP60,615,000 (2020: fixed and current assets; GBP51,360,000).
Fixed asset investments form 71% of the net asset value on 31 March
2021 (2020: fixed and current assets; 71%).
More details regarding the classification of fixed asset
investments are shown 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 was estimated
that a rise of 1% in all interest rates would have increased total
return before tax for the year by approximately GBP230,000 (2020:
GBP178,000). Furthermore, it was considered that a fall of interest
rates below current levels during the year would have been very
unlikely.
The weighted average effective interest rate applied to the
Company's unquoted loan stock during the year was approximately
4.9% (2020: 7.2%). The weighted average period to expected maturity
for the unquoted loan stock is approximately 4.5 years (2020: 5.1
years).
The Company's financial assets and liabilities, all denominated
in pounds sterling, consist of the following:
31 March 2021 31 March 2020
Non- Non-
Fixed Floating interest Fixed Floating interest
rate rate bearing Total rate rate bearing Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------
Unquoted
equity - - 48,450 48,450 - - 37,560 37,560
Unquoted loan
stock 11,508 - 657 12,165 9,426 - 873 10,299
Current asset
investments - - - - - - 3,501 3,501
Receivables* - - 1,751 1,751 - - 167 167
Current
liabilities - - (1,418) (1,418) - - (499) (499)
Cash - 24,429 - 24,429 - 21,510 - 21,510
11,508 24,429 49,440 85,377 9,426 21,510 41,602 72,538
-------- -------- --------- -------- -------- -------- --------- --------
*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 68.6% of loan stock
by value, typically loan stock instruments have a fixed or floating
charge, which may or may not have been subordinated, over the
assets of the portfolio company in order to mitigate the gross
credit risk.
The Manager receives management accounts from portfolio
companies, and members of the investment management team often sit
on the boards of unquoted portfolio companies; this enables the
close identification, monitoring and management of
investment-specific credit risk.
The Manager and the Board formally review credit risk (including
receivables) and other risks, both at the time of initial
investment and at quarterly Board meetings.
The Company's total gross credit risk on 31 March 2021 was
limited to GBP12,165,000 (2020: GBP10,299,000) of unquoted loan
stock instruments, GBP24,429,000 (2020: GBP21,510,000) of cash
deposits with banks and GBP1,751,000 (2020: GBP167,000) 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 plc), 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 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 share capital and reserves of the latest published audited
Balance sheet, which amounts to GBP8,325,000 (2020: GBP7,071,000)
on 31 March 2021.
The Company has no committed borrowing facilities on 31 March
2021 (2020: nil) and had cash of GBP24,429,000 (2020:
GBP21,510,000). The main cash outflows are for new investments,
share buy-backs and dividend payments, which are within the control
of the Company. The Manager formally reviews the cash requirements
of the Company on a monthly basis, and the Board on a quarterly
basis as part of its review of management accounts and forecasts.
All the Company's financial liabilities are short term in nature
and total GBP1,418,000 on 31 March 2021 (2020: GBP499,000).
The carrying value of loan stock investments as analysed by
expected maturity dates is as follows:
31 March 2021 31 March 2020
Redemption Fully performing Past due Valued below cost Total Fully performing Past due Valued below cost Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-----------
Less than
one year 2,752 - 206 2,958 2,392 - 73 2,465
1-2 years 1,362 656 45 2,063 466 - 132 598
2-3 years 93 - 161 254 958 - 866 1,824
3-5 years 4,322 - 8 4,330 1,761 - 209 1,970
Greater
than 5
years 2,560 - - 2,560 3,442 - - 3,442
---------------- -------- ----------------- ---------------- -------- ----------------- --------
Total 11,089 656 420 12,165 9,019 - 1,280 10,299
---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
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
GBP510,000 (2020: GBP1,760,000).
The Company does not hold any assets as the result of the
enforcement of security during the period, and believes that the
carrying values for both those valued below cost and past due
assets are covered by the value of security held for these loan
stock investments.
In view of the availability of adequate cash balances and the
repayment profile of loan stock investments, the Board considers
that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities on 31 March
2021 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. Commitments and contingencies
On 31 March 2021, the Company had no financial commitments
(2020: GBP139,000).
There were no contingent liabilities or guarantees given by the
Company on 31 March 2021 (2020: nil).
19. Post balance sheet events
Since 31 March 2021 the Company has had the following post
balance sheet events:
-- As announced on 21 June 2021, and outlined in the Chairman's statement
above, two companies within the portfolio are undergoing external
fundraising processes. The Manager's current view of the effect of these
events on the valuations, as at the date of this Report, is an increase
of 7.81 pence per share (6.8%) to the audited 31 March 2021 net asset
value of 114.60p per share;
-- Investment of GBP763,000 in a new portfolio company, Gravitee Topco
Limited, an open source API management platform that enables enterprises
to manage their APIs through their lifecycle;
-- Investment of GBP644,000 in a new portfolio company, NuvoAir AB, a
digital therapeutics and decentralised clinical trials product for
respiratory conditions;
-- Investment of GBP531,000 in an existing portfolio company, uMotif Limited,
a patient engagement and data capture platform for use in real world and
observational research;
-- Investment of GBP269,000 in an existing portfolio company, Panaseer
Limited, a provider of cyber security services;
-- Investment of GBP265,000 in a new portfolio company, Accelex Technology
Limited (T/A Accelex), a data extraction and analytics technology for
private capital markets; and
-- Investment of GBP34,000 in an existing portfolio company, Abcodia Limited,
a provider of validation and discovery of serum biomarkers.
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 March 2021:
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)
---------- --------- --------- ---------- ------------- -----------------
9 April
2021 144,118 1 114.00 162 106.50
9 April
2021 9,249 - 114.60 10 106.50
9 April
2021 229,987 2 115.20 258 106.50
383,354 430
--------- -------------
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 42 to 44 of the full Annual Report and
Financial Statements, there are no other related party transactions
or balances requiring disclosure.
21. Other Information
The information set out in this announcement does not constitute
the Company's statutory accounts within the terms of section 434 of
the Companies Act 2006 for the years ended 31 March 2021 and 31
March 2020, and is derived from the statutory accounts for those
financial years, which have been, or in the case of the accounts
for the year ended 31 March 2021, which will be, delivered to the
Registrar of Companies. The Auditor reported on those accounts; the
reports were unqualified and did not contain a statement under s498
(2) or (3) of the Companies Act 2006.
22. Publication
The full audited Annual Report and Financial Statements are
being sent to shareholders and copies will be made available to the
public at the registered office of the Company, Companies House,
the National Storage Mechanism and also electronically at
www.albion.capital/funds/AAEV, where the Report can be accessed as
a PDF document via a link in the 'Financial Reports and Circulars'
section.
Attachment
-- Pie charts for announcement 31 Mar 2021
https://ml-eu.globenewswire.com/Resource/Download/e5a8fa04-fd98-412c-8ce7-003d9a9cc599
(END) Dow Jones Newswires
June 28, 2021 10:31 ET (14:31 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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