TIDMAAVC
Albion Venture Capital Trust PLC
LEI number: 213800JKELS32V2OK421
As required by the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules 4.1 and 6.3, Albion Venture Capital
Trust PLC today makes public its information relating to the Annual
Report and Financial Statements for the year ended 31 March
2023.
This announcement was approved for release by the Board of
Directors on 4 July 2023.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31
March 2023 (which have been audited), will shortly be sent to
shareholders. Copies of the full Annual Report and Financial
Statements will be shown via the Albion Capital Group LLP website
by clicking www.albion.capital/funds/AAVC/31Mar2023.pdf.
Investment policy
The Company is a Venture Capital Trust and the investment policy
is intended to produce a regular dividend stream with an
appreciation in capital value.
The Company will invest in a broad portfolio of smaller,
unquoted growth businesses across a variety of sectors including
higher risk technology companies. Investments may take the form of
equity or a mixture of equity and loans.
Allocation of funds will be determined by the investment
opportunities which become available but efforts will be made to
ensure that the portfolio is diversified both in terms of sector
and stage of maturity of company. Funds held pending investment or
for liquidity purposes will be held as cash on deposit.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses
within Venture Capital Trust qualifying industry sectors. The
maximum amount which the Company will invest in a single portfolio
company is 15% of the Company's assets at cost, thus ensuring a
spread of investment risk. The value of an individual investment
may increase over time as a result of trading progress and it is
possible that it may grow in value to a point where it represents a
significantly higher proportion of total assets prior to a
realisation opportunity being available.
Gearing
The Company's maximum exposure in relation to gearing is
restricted to 10% of the adjusted share capital and reserves.
Financial calendar
7 July 2023 Record date for first interim dividend
31 July 2023 Payment of first interim dividend
Noon on 7 September Annual General Meeting
2023
December 2023 Announcement of Half-yearly results for the six months
ending 30 September 2023
31 January 2024 Payment of second interim dividend (subject to Board
approval)
Financial highlights
Shareholder return for the year ended 31 March 2023
(2022: 7.6%) 0.3%
---------------------------------------------------- -------
Total tax-free dividend per share paid during the 2.65p
year ended 31 March 2023
(2022: 25.30p)
---------------------------------------------------- -------
Net asset value per share as at 31 March 2023 50.88p
(2022: 53.38p)
---------------------------------------------------- -------
Total shareholder value per share from launch to 31 242.87p
March 2023
(2022: 242.72p)
---------------------------------------------------- -------
These are considered Alternative Performance Measures, see notes
2 and 3 in the Strategic report below for further explanation.
Movements in net asset value
31 March 2023 31 March 2022
(pence per share) (pence per share)
Opening net asset value 53.38 73.13
Capital (loss)/return (0.34) 5.38
Revenue return 0.44 0.39
----------------- -----------------
Total return 0.10 5.77
Dividends paid (2.65) (25.30)
Impact from share capital movements 0.05 (0.22)
----------------- -----------------
Net asset value 50.88 53.38
Total shareholder value
Ordinary shares
(pence per share)
----------------------------------------- ------------------
Total dividends paid to 31 March 2023 191.99
Net asset value on 31 March 2023 50.88
------------------
Total shareholder value to 31 March 2023 242.87
A more detailed breakdown of the dividends paid per year can be
found at www.albion.capital/funds/AAVC under the 'Dividend History'
section.
The financial highlights above are for Albion Venture Capital
Trust PLC Ordinary shares only. Details of the financial
performance of the C shares and Albion Prime VCT PLC, which have
been merged into the Company, can be found at
www.albion.capital/funds/AAVC under the 'Financial summary for
previous funds' section.
In addition to the dividends summarised above, the Board has
declared a first dividend for the year ending 31 March 2024 of 1.27
pence per share to be paid on 31 July 2023 to shareholders on the
register on 7 July 2023.
Chairman's statement
Introduction
Over the course of the year, the Company's portfolio companies
have encountered a difficult macroeconomic and geopolitical
backdrop, particularly the war in Ukraine which has led to high
inflation, rising interest rates and political instability. The
year has also seen the valuation of quoted technology companies
fall sharply. In spite of this, the Company has been able to
generate a positive total return of 0.10 pence per share and a 0.3%
increase in shareholder return for the year ended 31 March
2023.
Given the economic environment in the financial year, and the
significant uncertainty the Company has faced, the Board continues
to be encouraged by the progress being made by many of the
portfolio companies, demonstrating their resilience despite
challenging market conditions. The Board recognises the importance
of evaluating the Company's returns over the longer-term, as a
venture capital portfolio can, by its nature, experience periods of
short term volatility.
Results and dividends
As at 31 March 2023, the net asset value ("NAV") was GBP71.0
million or 50.88 pence per share, compared to GBP63.9 million or
53.38 pence per share as at 31 March 2022. The total return before
taxation was GBP0.1 million compared to a return of GBP6.0 million
for the previous year. Further details of the progress of a number
of our portfolio companies are discussed later in this
statement.
In line with the variable dividend policy targeting around 5% of
NAV per annum, the Company paid interim dividends totalling 2.65
pence per share during the year ended 31 March 2023 (31 March 2022:
3.30 pence per share).
The Board has declared a first dividend for the year ending 31
March 2024 of 1.27 pence per share to be paid on 31 July 2023 to
shareholders on the register on 7 July 2023.
Investment performance and progress
Several of our portfolio companies have performed well despite
the global uncertainties they faced, and this has contributed to
the total uplift in value of GBP0.6 million to the Company's
investments for the year (31 March 2022: GBP6.6 million). The key
uplifts in the year were: Threadneedle Software Holdings (T/A
Solidatus) (GBP0.8m uplift) which exhibited strong growth in the
year; Kew Green VCT (Stansted) (GBP0.5m uplift), which operates the
Holiday Inn express hotel at Stansted airport and returned to
pre-covid trading levels; and Runa Network (previously WeGift)
(GBP0.4m uplift) which has been revalued after an externally led
funding round. The Company has also benefitted from its renewable
energy assets generating decent returns, largely driven by the
availability of inflation linked income. Inevitably, some portfolio
companies have been adversely impacted by the challenging economic
climate including write downs in the following investments: uMotif
(GBP0.9m), Elliptic Enterprises (GBP0.7m) and Cantab Research (T/A
Speechmatics) (GBP0.6m) where growth has been slower than
hoped.
The three largest investments in the Company's portfolio, being
Chonais River Hydro, Seldon Technologies and Radnor House School
(TopCo), are valued at GBP10.2 million and represent 14.4% of the
Company's NAV.
The Company has been an active investor during the year
investing a total of GBP9.4 million. Of this, GBP5.6 million was
invested into 13 new portfolio companies, all of which are expected
to require further investment as the companies prove themselves and
grow. The five largest new investments during the year were:
-- GBP1.2 million into Peppy Health, a platform providing expert support for
underserved areas of health and wellness (e.g., menopause) via content,
video, chat support as an employee benefit
-- GBP0.8 million into Toqio FinTech Holdings, a provider of embedded
FinTech solutions
-- GBP0.6 million into PeakData, a software platform providing insights and
analytics to pharmaceutical companies
-- GBP0.5 million into GX Molecular (T/A CS Genetics), a developer of
single-cell sequencing solutions
-- GBP0.4 million into Ophelos, an autonomous and ethical debt resolution
platform
A further GBP3.8 million was invested into existing portfolio
companies, the largest being: GBP0.8 million into Healios; GBP0.7
million into Gravitee TopCo (T/A Gravitee.io); and GBP0.7 million
into Runa Network (previously WeGift).
The Company held GBP22.9m of cash at the period end which will
enable it to invest in new opportunities that arise and also to
support its existing portfolio companies as they grow. The Manager,
Albion Capital, continues to target new investments in
business-to-business (B2B) mission critical software and healthcare
companies.
A full list of the Company's investments and disposals,
including their movements in value for the year, can be found in
the Portfolio of investments section on pages 27 to 28 of the full
Annual Report and Financial Statements.
Risks and uncertainties
There are a number of significant risks faced by the Company,
including rising interest rates, high levels of inflation, the
ongoing impact of Russia's invasion of Ukraine, and an expected
period of low or no economic growth, or even recession in the UK
over the coming year.
Our investment portfolio, while concentrated mainly in the
renewable energy, technology and healthcare sectors, remains
diversified in terms of both sub-sector and stage of maturity.
A detailed analysis of the other risks and uncertainties facing
the business is shown in the Strategic report below.
Share buy-backs
It remains the Board's policy to buy-back shares in the market,
subject to the overall constraint that such purchases are in the
Company's interest. This includes the maintenance of sufficient
cash resources for investment in new and existing portfolio
companies and the continued payment of dividends to
shareholders.
It is the Board's intention that such buy-backs should be at
around a 5% discount to net asset value, in so far as market
conditions and liquidity permit. The Board continues to review the
use of buy-backs and is satisfied that it is an important means of
providing market liquidity for shareholders.
Details of the Company's share buy-backs during the year can be
found in note 15.
Albion VCTs Prospectus Top Up Offers
Your Board, in conjunction with the boards of the other five
VCTs managed by Albion Capital Group LLP, launched a prospectus top
up offer of new Ordinary shares on 10 October 2022. The Board
announced on 9 January 2023 that, following strong demand, it would
opt to exercise its over-allotment facility, bringing the total to
be raised to GBP11 million. The Offer was fully subscribed and
closed to further applications on 21 February 2023.
The proceeds are being used to provide support to our existing
portfolio companies and to enable us to take advantage of new
investment opportunities. Details of share allotments made during
and after the financial year end can be found in notes 15 and 19
respectively.
Annual General Meeting ("AGM")
The AGM will be held at noon on 7 September 2023 via the Lumi
platform. Information on how to participate in the live webcast can
be found on the Manager's website
www.albion.capital/vct-hub/agms-events.
The Board welcomes questions from shareholders at the AGM and
shareholders will be able to ask questions using the Lumi platform
during the AGM. Alternatively, shareholders can email their
questions to AAVCchair@albion.capital
https://www.globenewswire.com/Tracker?data=-l347PnDG1eVTcKEk8d37ccoqKHjOOm-qXwTN8VLjHNRapArYsVF_J6lIP9LACIdCa6K-9f4_9wu8SX5WB-JzbXQoy562E98t3V_GrkeHq9RTEoFWFrgO6GRd0Gc6DOI
prior to the Meeting.
Shareholders' views are important, and the Board encourages
shareholders to vote on the resolutions.
Further details on the format and business to be conducted at
the AGM can be found in the Directors' report on pages 48 and 49
and in the Notice of the Meeting on pages 89 to 92 of the full
Annual Report and Financial Statements.
Outlook and prospects
There remain many uncertainties facing the Company, including
high levels of inflation, elevated interest rates, and the war in
Ukraine, which makes it difficult to be entirely confident about
what lies ahead. However, the results for the year demonstrate the
resilience of our portfolio during challenging times. The portfolio
is well diversified, with companies at different stages of maturity
and targeted at sectors such as renewable energy, healthcare, and
mission critical software, with minimal exposure to consumer
expenditure. We believe that these sectors can continue to provide
positive results for the Company and its shareholders over the
longer-term.
Richard Glover
Chairman
4 July 2023
Strategic report
Investment policy
The Company will invest in a broad portfolio of smaller,
unquoted growth businesses across a variety of sectors including
higher risk technology companies. Investments may take the form of
equity or a mixture of equity and loans.
Allocation of funds will be determined by the investment
opportunities which become available but efforts will be made to
ensure that the portfolio is diversified both in terms of sector
and stage of maturity of company. Funds held pending investment or
for liquidity purposes will be held as cash on deposit.
The full investment policy can be found on page 7 of the full
Annual Report and Financial Statements.
Current portfolio analysis
The pie charts at the end of this announcement show the split of
the portfolio valuation as at 31 March 2023 by: sector; sector
(excluding cash and net assets); stage of investment; and number of
employees. This is a useful way of assessing how the Company and
its portfolio is diversified across sector, portfolio companies'
maturity measured by revenues and their size measured by the number
of people employed. As the Company continues to invest in software
and other technology companies, FinTech (which is technology
specifically applicable to financial services companies) is
included as a subsector below due to its increasing prominence.
Details of the principal investments made by the Company are shown
in the Portfolio of investments on pages 27 and 28 of the full
Annual Report and Financial Statements.
Direction of portfolio
The analysis of the Company's investment portfolio shows that it
is well diversified and evenly spread across the FinTech,
healthcare (including digital healthcare), software and technology
and renewable energy sectors.
Due to the timing of the share allotments under the 2021/22 and
2022/23 Prospectus Top Up Offers, cash and net current assets are a
significant proportion of the portfolio at 34%. The Manager has a
deep sector knowledge in healthcare, FinTech and software
investing, and these funds are expected to be invested
predominantly into higher growth technology companies within these
sectors.
Further details on portfolio companies can be found in the
Portfolio of investments on pages 27 and 28 of the full Annual
Report and Financial Statements.
Results and dividends GBP'000
Net capital loss for the year ended 31 March 2023 (421)
Net revenue return for the year ended 31 March 2023 546
---------------------
Total return for the year ended 31 March 2023 125
First interim dividend of 1.33 pence per share paid
on 29 July 2022 (1,614)
Second interim dividend of 1.32 pence per share paid
on 31 January 2023 (1,716)
Unclaimed dividends returned to the Company 12
---------------------
Transferred from reserves (3,193)
---------------------
Net assets as at 31 March 2023 71,015
=====================
Net asset value as at 31 March 2023 50.88 pence per share
===================================================== =====================
Results and dividends
The Company paid dividends totalling 2.65 pence per share during
the year ended 31 March 2023 (2022: 25.30 pence per share, which
included 22.00 pence per share of special dividends). The Board has
a variable dividend policy which targets an annual dividend yield
of around 5% on the prevailing net asset value. As a result, the
Board has declared a first dividend for the year ending 31 March
2024 of 1.27 pence per share to be paid on 31 July 2023 to
shareholders on the register on 7 July 2023.
As shown in the Company's Income statement on page 70 of the
full Annual Report and Financial Statements, the total return for
the year was 0.10 pence per share (2022: 5.77 pence per share). The
total investment income increased to GBP1,202,000 (2022:
GBP1,037,000), which was due mainly to dividend income increasing
to GBP121,000 (2022: GBP7,000) and bank interest and income from
fixed term funds increasing to GBP140,000 (2022: GBP4,000) as a
result of rising interest rates. Loan stock income decreased
slightly to GBP941,000 (2022: GBP1,026,000).
The capital return on investments for the year of GBP577,000
(2022: GBP6,553,000), has been discussed in the Chairman's
statement above. The net asset value of the Company has decreased
to 50.88 pence per share (2022: 53.38 pence per share), which was
primarily due to the payment of dividends to shareholders in the
year, totalling 2.65 pence per share.
There was a net cash outflow for the Company of GBP1,782,000 for
the year (2022: net outflow of GBP18,894,000) resulting from the
increased number of investments made into new and existing
portfolio companies during the year, dividends paid and share buy
backs, offset by the issue of Ordinary shares under the Albion VCTs
Top Up Offers 2021/22 and 2022/23. The net cash outflow has
decreased significantly from last year, mainly due to the payment
of two special dividends in the previous year.
Review of business and future changes
A detailed review of the Company's business during the year is
contained in the Chairman's statement above. The total return
before tax for the year was GBP125,000 (2022: GBP5,961,000).
There is a continuing focus on growing the healthcare (including
digital healthcare), FinTech and software and other technology
sectors. The majority of these investment returns are delivered
through equity and capital gains and are expected to be the key
driver of success for the Company. Investment income, which is
received primarily from our renewable energy investments, is
expected to remain steady over the coming years.
Details of significant events which have occurred since the end
of the financial year are listed in note 19. Details of
transactions with the Manager are shown in note 5.
Future prospects
The Company's portfolio remains well balanced across sectors and
risk classes, and is largely weathering the impacts of the ongoing
global issues caused as a result of high levels of interest rates
and inflation, and other economic headwinds. Although there remains
much uncertainty, the Board considers that the current portfolio
has the potential to deliver long term growth, whilst maintaining a
predictable stream of dividend payments to shareholders. Further
details on the Company's outlook and prospects can be found in the
Chairman's statement above.
Key performance indicators ("KPIs") and Alternative Performance
Measures ("APMs")
The Directors believe that the following KPIs (some of which are
APMs), which are typical for Venture Capital Trusts, used in its
own assessment of the Company, will provide shareholders with
sufficient information to assess how effectively the Company is
applying its investment policy to meet its objectives. The
Directors are satisfied that the results shown in the following
KPIs and APMs give a good indication that the Company is achieving
its investment objective and policy. These are:
1. Total shareholder value relative to FTSE All Share Index total return
The graph on page 8 of the full Annual Report and Financial
Statements shows the Company's total shareholder value relative to
the FTSE All-Share Index total return, with dividends reinvested.
The FTSE All-Share index is considered a reasonable benchmark as
the Company is classed as a generalist UK VCT investor, and this
index includes over 600 companies listed in the UK, including
small-cap, covering a range of sectors. Details on the performance
of the net asset value and return per share for the year are shown
in the Chairman's statement above.
2. Net asset value per share and total shareholder value
Total shareholder value increased by 0.15 pence to 242.87 pence
per share for the year ended 31 March 2023.
3. Movement in shareholder value in the year
The diagram on page 9 of the full Annual Report and Financial
Statements shows the Company's total shareholder return over the
previous ten years, five years, three years and the past year, and
the annual returns for the same period are detailed out below.
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
---- ---- ---- ----- ---- ----- ------ ----- ---- ----
2.8% 7.4% 7.5% 11.8% 7.4% 10.5% (4.9)% 10.3% 7.6% 0.3%
---- ---- ---- ----- ---- ----- ------ ----- ---- ----
Methodology: Calculated as the movement in total shareholder
value for the year divided by the opening net asset value.
The table above shows that total shareholder value has increased
in 9 of the last 10 years, with an average return of 6.1% per
annum.
4. Dividend distributions
Dividends paid in respect of the year ended 31 March 2023 were
2.65 pence per share (2022: 25.30 pence per share). Cumulative
dividends paid since inception amount to 191.99 pence per Ordinary
share.
5. Ongoing charges
The ongoing charges ratio for the year ended 31 March 2023 was
2.50% (2022: 2.44%). The ongoing charges ratio has been calculated
using The Association of Investment Companies' ("AIC") recommended
methodology. This figure shows shareholders the total recurring
annual running expenses (including investment management fees
charged to capital reserve) as a percentage of the average net
assets attributable to shareholders. The cap on the ongoing charges
ratio is 2.50%. During the year, the management fee was reduced by
GBP27,000 as a result of this cap (2022: GBPnil). The Directors
expect the ongoing charges ratio for the year ahead to be
approximately 2.50%.
6. VCT compliance*
The investment policy is designed to ensure that the Company
continues to qualify and is approved as a VCT by HMRC. In order to
maintain its status under Venture Capital Trust legislation, a VCT
must comply on a continuing basis with the provisions of Section
274 of the Income Tax Act 2007, details of which are provided in
the Directors' report on page 45 of the full Annual Report and
Financial Statements.
The relevant tests to measure compliance have been carried out
and independently reviewed for the year ended 31 March 2023. These
showed that the Company has complied with all tests and continues
to do so.
*VCT compliance is not a numerical measure of performance and
thus cannot be defined as an APM.
Gearing
As defined by the Articles of Association, the Company's maximum
exposure in relation to gearing is restricted to 10% of the
adjusted share capital and reserves. The Directors do not currently
have any intention to utilise gearing for the Company.
Operational arrangements
The Company has delegated the investment management of the
portfolio to the Manager, Albion Capital Group LLP, which is
authorised and regulated by the Financial Conduct Authority. The
Manager also provides company secretarial and other accounting and
administrative support to the Company.
Management agreement
Under the Management agreement, the Manager provides investment
management, secretarial and administrative services to the Company.
The Management agreement can be terminated by either party on 12
months' notice. The Management agreement is subject to earlier
termination in the event of certain breaches or on the insolvency
of either party. The Manager is paid an annual fee equal to 1.9% of
the net asset value of the Company, and an annual secretarial and
administrative fee of GBP60,000 (2022: GBP55,000) increased
annually by RPI. These fees are payable quarterly in arrears. Total
annual expenses, including the management fee, are limited to 2.5%
of the net asset value.
In line with common practice, the Manager is also entitled to an
arrangement fee, payable by each new portfolio company, of
approximately 2% on each new investment made and any applicable
monitoring fees.
Management performance incentive
In order to align the interests of the Manager and the
shareholders with regards to generating positive returns, the
Manager is entitled to charge an incentive fee in the event that
the returns exceed minimum target levels.
The performance hurdle requires that the growth of the aggregate
of the net asset value per share and dividends paid by the Company
compared with the previous accounting date exceeds RPI plus 2%. The
hurdle will be calculated every year, based on the previous year's
closing NAV per share. The starting NAV is 79.00 pence per share,
being the audited net asset value at 31 March 2019. If the target
return is not achieved in a period, the cumulative shortfall is
carried forward to the next accounting period and has to be made up
before an incentive fee becomes payable.
There was no management performance incentive fee payable during
the year. As at 31 March 2023 the cumulative shortfall of the
target return was 13.31 pence per share (31 March 2022: shortfall
of 5.18 pence per share) and this amount needs to be made up in
following accounting periods before an incentive fee becomes
payable.
Investment and co-investment
The Company co-invests with other Venture Capital Trusts and
funds managed by the Manager. Allocation of investments is on the
basis of an allocation agreement which is based, inter alia, on the
ratio of funds available for investment.
Evaluation of the Manager
The Board has evaluated the performance of the Manager based
on:
-- the returns generated by the Company;
-- the continuing achievement of the HMRC tests for VCT status;
-- the long term prospects of the current portfolio of investments;
-- the management of treasury, including use of buy-backs and participation
in fund raising; and
-- benchmarking the performance of the Manager to other service providers
including the performance of other VCTs that the Manager is responsible
for managing.
The Board believes that it is in the interests of shareholders
as a whole, and of the Company, to continue the appointment of the
Manager for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board appointed the Manager as the Company's AIFM in 2014 as
required by the AIFMD. The Manager is a full-scope Alternative
Investment Fund Manager under the AIFMD. Ocorian Depositary (UK)
Limited is the appointed Depositary and oversees the custody and
cash arrangements and provides other AIFMD duties with respect to
the Company.
Companies Act 2006 Section 172 Reporting
Under Section 172 of the Companies Act 2006, the Board has a
duty to promote the success of the Company for the benefit of its
members as a whole in both the long and short term, having regard
to the interests of other stakeholders in the Company, such as
suppliers, and to do so with an understanding of the impact on the
community and environment and with high standards of business
conduct, which includes acting fairly between members of the
Company.
The Board is very conscious of these wider responsibilities in
the ways it promotes the Company's culture and ensures, as part of
its regular oversight, that the integrity of the Company's affairs
is foremost in the way the activities are managed and promoted.
This includes regular engagement with the wider stakeholders of the
Company and being alert to issues that might damage the Company's
standing in the way that it operates. The Board works very closely
with the Manager in reviewing how stakeholder issues are handled,
ensuring good governance and responsibility in managing the
Company's affairs, as well as visibility and openness in how the
affairs are conducted.
The Company is an externally managed investment company with no
employees, and as such has nothing to report in relation to
employee engagement but does keep close attention to how the Board
operates as a cohesive and competent unit. The Company also has no
customers in the traditional sense and, therefore, there is also
nothing to report in relation to relationships with customers.
The table that follows sets out the key stakeholders, details
how the Board has engaged with these key stakeholders, and the
effect of these considerations on the Company's decisions and
strategies during the year.
Engagement with Stakeholder Outcomes and decisions based on engagement
---------------------------------------------------------- -----------------------------------------------------------
Shareholders
-----------------------------------------------------------------------------------------------------------------------
The key methods of engaging with Shareholders are -- 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
-- Shareholder seminar is typically used as an opportunity to communicate
-- Annual Report and Financial Statements, Half-yearly with investors, including through a presentation made
financial report, and Interim management statements by the Manager. Undertaking this virtually enabled
-- RNS announcements in accordance with Listing Rules engagement with a wider audience of shareholders from
and DTR covering such things as appointment of a new across the country, and gave shareholders the
Director, and the publication of a Prospectus opportunity to ask questions and vote during the
-- Albion Capital website, social media pages, as well virtual AGM last year.
as publishing Albion News shareholder magazine -- Shareholders are also encouraged to attend the annual
Shareholders' Seminar. Last year's event took place
on 23 November 2022. The seminar included portfolio
companies sharing insights into their businesses and
also a Q&A from Albion executives on some of the key
factors affecting the investment outlook, as well as
a review of the past year and the plans for the year
ahead. Representatives of the Board attend the
seminar. The Board considers this an important
interactive event, and invites shareholders to attend
this year's event scheduled for 15 November 2023 at
the Royal College of Surgeons. Further information
will be available nearer the time.
-- The Board recognises the importance to Shareholders
of maintaining a share buy-back policy, in order to
provide market liquidity, and considered this when
establishing the current policy. The Board closely
monitors the discount to the net asset value to
ensure this is in the region of 5%.
-- The Board seeks to create value for Shareholders by
generating strong and sustainable returns to provide
shareholders with regular dividends and the prospect
of capital growth. The Board takes this into
consideration when making the decision to pay
dividends to Shareholders. The variable dividend
policy has resulted in a dividend yield of 5.0% on
opening net asset value.
-- During the year, the Board made the decision to
participate in the Albion Prospectus Top Up Offer,
launched on 10 October 2022, in order to raise funds
for deployment into new and existing portfolio
companies. The Board carefully considered whether
further funds were required, whether the VCT tests
would continue to be met, and whether it would be in
the interest of Shareholders, before agreeing to
publish the Prospectus. On allotment, an issue price
formula based on the prevailing net asset value is
used to ensure there is no dilution to existing
Shareholders.
-- Cash management and liquidity of the Company are key
quarterly discussions amongst the Board, with focus
on deployment of cash for future investments,
dividends and share buy-backs.
-- Shareholders can contact the Chairman using the email
AAVC mailto:AAVCchair@albion.capital
chair@albion.capital.
---------------------------------------------------------- -----------------------------------------------------------
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 Environmental, Social and Governance ("ESG") investments. All strategic decisions are discussed in
practice. detail and minuted, with an open dialogue between the
Board and the Manager.
-- The performance of the Manager in managing the
portfolio and in providing company secretarial,
administration and accounting services is reviewed in
detail each year, which includes reviewing comparator
engagement terms and portfolio performance. Further
details on the evaluation of the Manager, and the
decision to continue the appointment of the Manager
for the forthcoming year, can be found in this
report.
-- Details of the Manager's responsibilities can be
found in the Statement of corporate governance on
page 52 of the full Annual Report and Financial
Statements.
---------------------------------------------------------- -----------------------------------------------------------
Suppliers
-----------------------------------------------------------------------------------------------------------------------
The key suppliers are:
-- Corporate broker -- The Manager, on behalf of the Company, is in regular
contact with the suppliers and the contractual
-- VCT taxation adviser arrangements with all the principal suppliers to the
Company are reviewed regularly and formally once a
-- Depositary year, alongside the performance of the suppliers in
acquitting their responsibilities.
-- Registrar
-- The Manager reviews the performance of the providers
-- Auditor annually, and was satisfied with their performance.
-- Legal Advisor
---------------------------------------------------------- -----------------------------------------------------------
Portfolio companies
-----------------------------------------------------------------------------------------------------------------------
The portfolio companies are considered key stakeholders, -- The Board aims to have a diversified portfolio in
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 ESG details of this can be found in the pie charts at the
report on pages 34 to 37 of the full Annual Report end of this announcement.
and Financial Statements, the portfolio companies' -- In most cases, an Albion executive has either a place
impact on their stakeholders is also important to on the board of a portfolio company or is an observer
the Company. ,
in order to help with both business operation
decisions, as well as good ESG practices.
-- The Manager provides access to deep expertise on
growth strategy alignment, leadership team hiring,
organisational scaling and founder leader
development.
-- The Manager facilitates good dialogue with portfolio
companies, and often puts on events in order to help
portfolio companies benefit from the Albion network.
---------------------------------------------------------- -----------------------------------------------------------
Community and environment
-----------------------------------------------------------------------------------------------------------------------
The Company, with no employees, has no effect itself -- The Board receives reports on ESG factors within its
on the community and environment. However, as discussed portfolio from the Manager as it is a signatory of
above, the portfolio companies' ESG impact is extremely the United Nations Principles for Responsible
important to the Board. Investment ("UN PRI"). Further details of this are
set out in the ESG report below. ESG, without its
specific definition, has always been at the heart of
the responsible investing that the Company engages in
and in how the Company conducts itself with all of
its stakeholders.
---------------------------------------------------------- -----------------------------------------------------------
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the
Act to detail information about social and community issues,
employees and human rights; including any policies it has in
relation to these matters and effectiveness of these policies. As
an externally managed investment company with no employees, the
Company has no formal policies in these matters, however, it is at
the core of its responsible investment strategy as detailed
above.
General Data Protection Regulation
The General Data Protection Regulation ("GDPR") has the
objective of unifying data privacy requirements across the European
Union. GDPR forms part of the UK law after Brexit, now known as UK
GDPR. The Manager continues to take action to ensure that the
Manager and the Company are compliant with the regulation.
Further 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 pages 46 and
47 of the full Annual Report and Financial Statements.
Risk management
The Board carries out a regular review of the risk environment
in which the Company operates, together with changes to the
environment and individual risks. The Board also identifies
emerging risks which might impact on the Company. In the period the
most noticeable risks have been the emergence of rising interest
rates and inflation, caused in part as a result of the Russian
invasion of Ukraine, and pricing volatility in world markets,
particularly affecting growth stocks. The full impacts of these
risks are likely to continue to be uncertain for some time.
The Board has carried out a robust assessment of the Company's
principal risks and uncertainties and seeks to mitigate these risks
through regular reviews of performance and monitoring progress and
compliance. The Board applies the principles detailed in the
Financial Reporting Council's Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting, in the
mitigation and management of these risks. More information on
specific mitigation measures for the principal risks and
uncertainties are explained below:
Possible consequence Risk assessment during the year Risk management
-------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Risk: Investment, performance, technology, and valuation
risk
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The risk of investment in poor quality businesses, Increased in the year due to the heightened economic To reduce this risk, the Board places reliance upon
which could reduce the returns to shareholders and and geopolitical issues as referred to in the Chairman's the skills and expertise of the Manager and its track
could negatively impact on the Company's current and statement. In addition, in the current economic climate record of making successful investments in higher
future valuations. the valuations of technology companies are more volatile. growth technology businesses. The Manager operates
By nature, smaller unquoted businesses, such as those a structured investment appraisal and review process,
that qualify for Venture Capital Trust purposes, are which includes an Investment Committee, comprising
more volatile than larger, long-established businesses. investment professionals from the Manager for all
Technology related risks are also likely to be greater investments, and at least one external investment
in early, rather than later, stage technology investments, professional for investments greater than GBP1 million
including the risks of the technology not becoming in aggregate across all the Albion managed VCTs. The
generally accepted by the market or the obsolescence Manager also invites and takes account of comments
of the technology concerned, often due to greater from non-executive Directors of the Company on matters
financial resources being available to competing companies. discussed at the Investment Committee meetings.
The Company's investment valuation methodology is Investments are actively and regularly monitored by
reliant on the accuracy and completeness of information the Manager (investment managers observe or sit on
that is issued by portfolio companies. In particular, portfolio company boards), including the level of
the Directors may not be aware of or take into account diversification in the portfolio, and the Board receives
certain events or circumstances which occur after detailed reports on each investment as part of the
the information issued by such companies is reported. Manager's report at quarterly board meetings. The
Board and Manager regularly review the deployment
of investments and cash resources available to the
Company in assessing liquidity required for servicing
the Company's buy-backs, dividend payments and operational
expenses. The decision to issue a Prospectus for the
2022/23 Top Ups was due to careful analysis of these
factors.
The unquoted investments held by the Company are designated
at fair value through profit or loss and valued in
accordance with the International Private Equity and
Venture Capital Valuation Guidelines updated in 2022.
These guidelines set out recommendations, intended
to represent current best practice on the valuation
of venture capital investments. The valuation takes
into account all known material facts up to the date
of approval of the Financial Statements by the Board.
-------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Risk: VCT approval and regulatory change risk
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The Company must comply with section 274 of the Income No change in the year. To reduce this risk, the Board has appointed the Manager,
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.
-------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Risk: Regulatory and compliance risk
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The Company is listed on The London Stock Exchange No change in the year. Board members and the Manager have experience of operating
and is required to comply with the rules of the Financial at senior levels within or advising quoted companies.
Conduct Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
Accounting Standards and other legislation. Failure updates on new regulation from its auditor, legal
to comply with these regulations could result in a advisors and other professional bodies. The Company
delisting of the Company's shares, or other penalties is subject to compliance checks through the Manager's
under the Companies Act or from financial reporting compliance function, and any issues arising from compliance
oversight bodies. or regulation are reported to its own board every
two months. These controls are also reviewed as part
of the quarterly Board meetings, and also as part
of the review work undertaken by the Manager's compliance
officer. The report on controls is also evaluated
by the internal auditors.
-------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Risk: Operational and internal control risk
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The Company relies on a number of third parties, in No change in the year. The Company and its operations are subject to a series
particular the Manager, for the provision of investment of rigorous internal controls and review procedures
management and administrative functions. Failures exercised throughout the year. The Board receives
in key systems and controls within the Manager's business reports from the Manager on its internal controls
could put assets of the Company at risk or result and risk management.
in reduced or inaccurate information being passed The Audit and Risk Committee reviews the Internal
to the Board or to shareholders. Audit Reports prepared by the Manager's internal auditors,
Azets, and has access to their internal audit partner
to whom it can ask specific detailed questions in
order to satisfy itself that the Manager has strong
systems and controls in place including those in relation
to business continuity and cyber security, as mentioned
below.
Ocorian Depositary (UK) Limited is the Company's Depositary,
appointed to oversee the custody and cash arrangements
and provide other AIFMD duties. The Board reviews
the quarterly reports prepared by Ocorian Depositary
(UK) Limited to ensure that the Manager is adhering
to its policies and procedures as required by the
AIFMD.
In addition, the Board annually reviews the performance
of its key service providers, particularly the Manager,
to ensure they continue to have the necessary expertise
and resources to deliver the Company's investment
objective and policy. The Manager and other service
providers have also demonstrated to the Board that
there is no undue reliance placed upon any one individual.
-------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Risk: Cyber and data security
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
A cyber-attack on one of the Company's third party Increased in the year due to an increase in cyber-attacks The Manager outsources some of its IT services, including
suppliers could result in the security of, potentially worldwide. hardware and software procurement, server management,
sensitive, data being compromised, leading to financial backup provision and day-to-day support through an
loss, disruption or damage to the reputation of the outsourcing arrangement with an IT consultant. In
Company. house IT support is also provided.
The Manager takes cyber risks seriously and the need
to guard against these are in the Service level agreement
with our key outsourced service provider. During the
year, further investment was made in our IT infrastructure
and awareness training.
In addition, the Manager also has a business continuity
plan which includes off-site storage of records and
remote access provisions. This is revised and tested
annually and is also subject to Compliance, Group
Risk and Internal Audit reporting. Penetration tests
are also carried out to ensure that IT systems are
not susceptible to any cyber-attacks.
The Manager's Internal Auditor performs reviews on
IT general controls and data confidentiality and makes
recommendations where necessary. The most recent internal
audit focused specifically on IT systems, and was
completed in February 2023.
-------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Risk: Economic and political risk
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in economic conditions, including, for example, Increased in the year due to the high levels of inflation, The Company invests in a diversified portfolio of
interest rates, rates of inflation, industry conditions, rising interest rates and the geopolitical risks from companies across a number of industry sectors and
competition, political and diplomatic events, and the invasion of Ukraine. in addition often invests in a mixture of instruments
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
risks over which the Company has no control are always
a risk and the Company does what it can to address
these risks where possible, not least as the nature
of the investments the Company makes are long term.
The Board and Manager are continuously assessing the
resilience of the portfolio, the Company and its operations
and the robustness of the Company's external agents,
as well as considering longer term impacts on how
the Company might be positioned in how it invests
and operates. Ensuring liquidity in the portfolio
to cope with exigent and unexpected pressures on the
finances of the portfolio and the Company is an important
part of the risk mitigation in these uncertain times.
The portfolio is structured as an all-weather portfolio
with c.50 companies which are diversified as discussed
above. Exposure is relatively small to at-risk sectors
that include leisure, hospitality, retail and travel.
-------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Risk: Environmental, social and governance ("ESG")
risk
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
An insufficient ESG policy could lead to an increased No change in the year. The Manager is a signatory of the UN PRI and the Board
negative impact on the environment, including the is kept updated of the evolving ESG policies at quarterly
Company's carbon footprint. Non-compliance with reporting Board meetings. Full details of the specific procedures
requirements could lead to a fall in demand from investors, and risk mitigation can be found in the ESG report
reputational damage and penalties. Climate risks could on pages 34 to 37 of the full Annual Report and Financial
also negatively impact on the value of portfolio investments. Statements. These procedures ensure that this risk
continues to be mitigated where possible.
Whilst the Company itself has limited impact on climate
change, due to no employees nor greenhouse gas emissions,
the Board works closely with the Manager to ensure
the Manager themselves are working towards reducing
their impact on the environment, and that the Manager
takes account of ESG factors, including climate change,
when making new investment decisions. With specific
respect to the Company, a key operation is increasing
the use of electronic communications with Shareholders.
-------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Risk: Liquidity risk
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The Company may not have sufficient cash available No change in the year. To reduce this risk, the Board reviews the Company's
to meet its financial obligations. The Company's portfolio three year cash flow forecasts on a quarterly basis.
is primarily in smaller unquoted companies, which These include potential investment realisations (which
are inherently illiquid as there is no readily available are closely monitored by the Manager), Top Up Offers,
market, and thus it may be difficult to realise their dividend payments and operational expenditure. This
fair value at short notice. ensures that there are sufficient cash resources available
for the Company's liabilities as they fall due.
-------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Viability statement
In accordance with the FRC UK Corporate Governance Code
published in 2018 and provision 36 of the AIC Code of Corporate
Governance, the Directors have assessed the prospects of the
Company over three years to 31 March 2026. The Directors believe
that three years is a reasonable period in which they can assess
the ability of the Company to continue to operate and meet its
liabilities as they fall due. This is the period used by the Board
as part of its strategic planning process, which includes: the
estimated timelines for finding, assessing and completing
investments; the potential impact of any new regulations; and the
availability of cash.
The Board has carried out a robust assessment of the principal
and emerging risks facing the Company, including those that could
threaten its business model, future performance, solvency or
liquidity, and focused on the major factors which affect the
economic, regulatory and political environment. The Board carefully
assessed, and were satisfied with, the risk management processes in
place to avoid or reduce the impact of these risks. The Board has
carried out robust stress testing of cashflows which included;
factoring in higher levels of inflation when budgeting for future
expenses, only including proceeds from investment disposals where
there is a high probability of completion, whilst also assessing
the resilience of investee companies given the current decline in
the global economy, including the requirement for any future
financial support.
The Board has additionally considered the ability of the Company
to comply with the ongoing conditions to ensure it maintains its
VCT qualifying status under its current investment policy. As a
result of the Board's quarterly valuation reviews, it has concluded
that the portfolio is well balanced and geared towards delivering
long term growth and strong returns to shareholders.
The Board has concluded that there is a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the three year period to 31 March
2026. The Board is mindful of the ongoing risks and will continue
to ensure that appropriate safeguards are in place, in addition to
monitoring the quarterly cashflow forecasts to ensure the Company
has sufficient liquidity.
Companies Act 2006
This Strategic report of the Company for the year ended 31 March
2023 has been prepared in accordance with the requirements of
section 414A of the Companies Act 2006 (the "Act"). The purpose of
this report is to provide Shareholders with sufficient information
to enable them to assess the extent to which the Directors have
performed their duty to promote the success of the Company in
accordance with Section 172 of the Act.
Richard Glover
Chairman
4 July 2023
Statement of Directors' responsibilities
In preparing these Financial Statements for the year to 31 March
2023, the Directors of the Company, being Richard Glover, Ann
Berresford, Neeta Patel CBE and Richard Wilson, confirm to the best
of their knowledge:
-- summary financial information contained in this announcement and the full
Annual Report and Financial Statements for the year ended 31 March 2023
for the Company has been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law) and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
-- the Chairman's statement and Strategic report include a fair review of
the development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties it faces.
We consider that the Annual Report and Financial Statements,
taken as a whole, are fair, balanced, and understandable and
provide the information necessary for shareholders to assess the
Company's position, performance, business model and strategy.
A detailed "Statement of Directors' responsibilities" is
contained on page 50 of the full Annual Report and Financial
Statements.
For and on behalf of the Board
Richard Glover
Chairman
4 July 2023
Income statement
Year ended 31 March 2023 Year ended 31 March 2022
---------------------------------------------------------- ---- ------------------------- -------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ---- ------- ------- ------- ------- ------- -------
Net gains on investments 3 - 577 577 - 6,553 6,553
Investment income 4 1,202 - 1,202 1,037 - 1,037
Investment Manager's fees 5 (122) (1,097) (1,219) (122) (1,097) (1,219)
Other expenses 6 (435) - (435) (411) - (411)
Profit/(loss) on ordinary activities before tax 645 (520) 125 504 5,456 5,960
Tax (charge)/credit on ordinary activities 8 (99) 99 - (97) 98 1
Profit/(loss) and total comprehensive income attributable
to shareholders 546 (421) 125 407 5,554 5,961
Basic and diluted return/(loss) per share (pence)* 10 0.44 (0.34) 0.10 0.39 5.38 5.77
----------------------------------------------------------
* Adjusted for treasury shares
The accompanying notes form an integral part of these Financial
Statements.
The total column of this Income statement represents the profit
and loss account of the Company. The supplementary revenue and
capital columns have been prepared in accordance with The
Association of Investment Companies' Statement of Recommended
Practice.
Balance sheet
31 March 2023 31 March 2022
Note GBP'000 GBP'000
------------------------------------------ ---- ------------- -------------
Fixed asset investments 11 46,823 37,604
Current assets
Trade and other receivables 13 1,960 1,926
Cash in bank and at hand 22,886 24,668
24,846 26,594
Payables: amounts falling due within one
year
Trade and other payables 14 (654) (261)
------------- -------------
Net current assets 24,192 26,333
Total assets less current liabilities 71,015 63,937
------------- -------------
Equity attributable to equity holders
Called-up share capital 15 1,587 1,369
Share premium 21,531 10,047
Capital redemption reserve 31 22
Unrealised capital reserve 8,415 6,550
Realised capital reserve 2,089 7,693
Other distributable reserve 37,362 38,256
Total equity shareholders' funds 71,015 63,937
------------- -------------
Basic and diluted net asset value per
share (pence)* 16 50.88 53.38
*Excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
These Financial Statements were approved by the Board of
Directors and authorised for issue on 4 July 2023, and were signed
on its behalf by:
Richard Glover
Chairman
Company number: 03142609
Statement of changes in equity
Capital Unrealised Realised Other
Called-up share Share redemption capital capital distributable
capital premium reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- --------
At 1 April 2022 1,369 10,047 22 6,550 7,693 38,256 63,937
Return/(loss) and total comprehensive income for the
year - - - 492 (913) 546 125
Transfer of previously unrealised losses on realisations
of investments - - - 1,373 (1,373) - -
Purchase of shares for cancellation (9) - 9 - - (455) (455)
Purchase of treasury shares - - - - - (985) (985)
Issue of equity 227 11,754 - - - - 11,981
Cost of issue of equity - (270) - - - - (270)
Net dividends paid (note 9) - - - - (3,318) - (3,318)
At 31 March 2023 1,587 21,531 31 8,415 2,089 37,362 71,015
--------------------------------------------------------- --------------- -------- ---------- ---------- -------- ------------- --------
At 1 April 2021 1,165 40,668 7 3,588 21,829 5,431 72,688
Return and total comprehensive income for the year - - - 3,784 1,770 407 5,961
Transfer of previously unrealised gains on realisations
of investments - - - (822) 822 - -
Purchase of shares for cancellation (39) - 39 - - (2,013) (2,013)
Issue of equity 243 12,694 - - - - 12,937
Cost of issue of equity - (254) - - - - (254)
Reduction of share premium and capital redemption
reserve - (43,061) (24) - - 43,085 -
Net dividends paid (note 9) - - - - (16,728) (8,654) (25,382)
---------------------------------------------------------
At 31 March 2022 1,369 10,047 22 6,550 7,693 38,256 63,937
---------------------------------------------------------
*These reserves include an amount of GBP20,254,000 (2022:
GBP26,804,000) which is considered distributable. Over the next
three years an additional GBP17,018,000 will become distributable.
This is due to the HMRC requirement that the Company cannot use
capital raised in the past three years to make a payment or
distribution to shareholders. On 1 April 2023, GBP13,435,000 became
distributable in line with this.
The accompanying notes form an integral part of these Financial
Statements.
Statement of cash flows
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
Cash flow from operating activities
Loan stock income received 851 978
Dividend income received 121 7
Income from fixed term funds received 85 2
Bank interest received 55 2
Investment Manager's fees paid (1,019) (1,434)
Other cash payments (431) (389)
UK Corporation tax paid - (42)
Net cash flow used in operating activities (338) (876)
Cash flow from investing activities
Purchase of fixed asset investments (9,425) (7,771)
Proceeds from disposals of fixed asset
investments 834 4,649
-------------- --------------
Net cash flow used in investing activities (8,591) (3,122)
Cash flow from financing activities
Issue of share capital 11,159 8,941
Cost of issue of equity (6) (35)
Dividends paid* (2,758) (21,589)
Purchase of own shares (including costs) (1,248) (2,213)
Net cash flow from/(used in) financing
activities 7,147 (14,896)
Decrease in cash in bank and at hand (1,782) (18,894)
Cash in bank and at hand at start of the year 24,668 43,562
-------------- --------------
Cash in bank and at hand at end of the year 22,886 24,668
---------------------------------------------- -------------- --------------
*The equity dividends paid shown in the cash flow are different
to the dividends disclosed in note 9 as a result of the non-cash
effect of the Dividend Reinvestment Scheme and the timing of
unclaimed dividends.
The accompanying notes form an integral part of these Financial
Statements.
Notes to the Financial Statements
1. Basis of preparation
The Financial Statements have been prepared in accordance with
applicable United Kingdom law and accounting standards, including
Financial Reporting Standard 102 ("FRS 102"), and with the
Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" ("SORP")
issued by The Association of Investment Companies ("AIC"). The
Financial Statements have been prepared on a going concern basis
and further details can be found in the Directors' report on page
44 of the full Annual Report and Financial Statements.
The preparation of the Financial Statements requires management
to make judgements and estimates that affect the application of
policies and reported amounts of assets, liabilities, income and
expenses. The most critical estimates and judgements relate to the
determination of carrying value of investments at Fair Value
Through Profit and Loss ("FVTPL") in accordance with FRS 102
sections 11 and 12. The Company values investments by following the
International Private Equity and Venture Capital Valuation ("IPEV")
Guidelines as updated in 2022 and further detail on the valuation
techniques used are outlined below.
Company information is shown on page 4 of the full Annual Report
and Financial Statements.
2. Accounting policies
Fixed asset 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, the level of third party
offers received, cost or price of recent investment rounds, net assets,
discounted cash flows and industry valuation benchmarks. Where price of
recent investment is used as a starting point for estimating fair value
at subsequent measurement dates, this has been benchmarked using an
appropriate valuation technique permitted by the IPEV guidelines.
-- In situations where cost or price of recent investment is used,
consideration is given to the circumstances of the portfolio company
since that date in determining fair value. This includes consideration of
whether there is any evidence of deterioration or strong definable
evidence of an increase in value. In the absence of these indicators, the
investment in question is valued at the amount reported at the previous
reporting date. Examples of events or changes that could indicate a
diminution include:
-- the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was
based;
-- a significant adverse change either in the portfolio company's
business or in the technological, market, economic, legal or
regulatory environment in which the business operates; or
-- market conditions have deteriorated, which may be indicated by a
fall in the share prices of quoted businesses operating in the
same or related sectors.
Investments are recognised as financial assets on legal
completion of the investment contract and are de-recognised on
legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value
movement of an investment, but is recognised separately as
investment income through the other distributable reserve when a
share becomes ex-dividend.
Current assets and payables
Receivables (including debtors due after more than one year),
payables and cash are carried at amortised cost, in accordance with
FRS 102. Deferred consideration meets the definition of a financing
transaction held at amortised cost, and interest will be recognised
through capital over the credit period using the effective interest
method. There are no financial liabilities other than payables.
Investment income
Dividend income
Dividend income is included in revenue when the investment is
quoted ex-dividend.
Unquoted loan stock
Fixed returns on non-equity shares and debt securities are
recognised when the Company's right to receive payment and expect
settlement is established. Where interest is rolled up and/or
payable at redemption then it is recognised as income unless there
is reasonable doubt as to its receipt.
Fixed term funds income
Funds income is recognised on an accruals basis using the agreed
rate of interest.
Bank deposit income
Interest income is recognised on an accruals basis using the
rate of interest agreed with the bank.
Investment management fee, performance incentive fee and other
expenses
All expenses have been accounted for on an accruals basis.
Expenses are charged through the other distributable reserve except
the following which are charged through the realised capital
reserve:
-- 90% of management fees and 100% of performance incentive fees, if any,
are allocated to the realised capital reserve; and
-- expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Taxation
Taxation is applied on a current basis in accordance with FRS
102. Current tax is tax payable (refundable) in respect of the
taxable profit (tax loss) for the current period or past reporting
periods using the tax rates and laws that have been enacted or
substantively enacted at the financial reporting date. Taxation
associated with capital expenses is applied in accordance with the
SORP.
Deferred tax is provided in full on all timing differences at
the reporting date. Timing differences are differences between
taxable profits and total comprehensive income as stated in the
financial statements that arise from the inclusion of income and
expenses in tax assessments in periods different from those in
which they are recognised in the financial statements. As a VCT the
Company has an exemption from tax on capital gains. The Company
intends to continue meeting the conditions required to obtain
approval as a VCT in the foreseeable future. The Company therefore,
should have no material deferred tax timing differences arising in
respect of the revaluation or disposal of investments and the
Company has not provided for any deferred tax.
Reserves
Called-up share capital
This accounts for the nominal value of the Company's shares.
Share premium
This accounts for the difference between the price paid for
shares and the nominal value of the shares, less issue costs and
transfers on cancellation of share premium once consent of the
court is given.
Capital redemption reserve
This reserve accounts for amounts by which the issued share
capital is diminished through the repurchase and cancellation of
the Company's own shares, less any transfers on cancellation of
share premium once consent of the court is given.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at
the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments, or
permanent diminutions in value (including gains recognised on the
realisation of investment where consideration is deferred that are not
distributable as a matter of law);
-- finance income in respect of the unwinding of the discount on deferred
consideration that is not distributable as a matter of law;
-- expenses, together with the related taxation effect, charged in
accordance with the above policies; and
-- dividends paid to equity holders where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and the revenue
reserve were combined in 2012 to form a single reserve named other
distributable reserve.
This reserve accounts for movements from the revenue column of
the Income statement, the payment of dividends, the buy-back of
shares, transfers from the share premium and capital redemption
reserve, and other non-capital realised movements.
Dividends
Dividends by the Company are accounted for when the liability to
make the payment (record date) has been established.
Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single operating segment of business, being investment in smaller
companies principally based in the UK.
3. Gains/(losses) on investments
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
---------------------------------------------- -------------- --------------
Unrealised gains on fixed asset investments 492 3,784
Realised (losses)/gains on fixed asset
investments (176) 2,546
Unwinding of discount on deferred
consideration 261 223
577 6,553
-------------- --------------
4. Investment income
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
----------------------------- -------------- --------------
Loan stock interest 941 1,026
Dividend income 121 7
Income from fixed term funds 85 2
Bank interest 55 2
1,202 1,037
-------------- --------------
5. Investment Manager's fees
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
---------------------------------------------
Investment management fee charged to revenue 122 122
Investment management fee charged to capital 1,097 1,097
-------------- --------------
1,219 1,219
-------------- --------------
Further details of the Management agreement under which the
investment manager is paid are given in the Strategic report
above.
During the year, services of a total value of GBP1,279,000
(2022: GBP1,274,000), were purchased by the Company from Albion
Capital Group LLP ("Albion"); this includes GBP1,219,000 (2022:
GBP1,219,000) of investment management fee and GBP60,000 (2022:
GBP55,000) of secretarial and administration fee. At the financial
year end, the amount due to Albion in respect of these services
disclosed within payables was GBP345,000 (2022: GBP144,000). The
total annual running costs of the Company are capped at an amount
equal to 2.5% of the Company's net assets, with any excess being
met by Albion by a way of a reduction in management fees. During
the year, the management fee was reduced by GBP27,000 as a result
of this cap (2022: GBPnil).
Albion is, from time to time, eligible to receive arrangement
fees and monitoring fees from portfolio companies. During the year
ended 31 March 2023, fees of GBP193,000 attributable to the
investments of the Company were received by Albion pursuant to
these arrangements (2022: GBP155,000).
Albion, its partners and staff hold a total of 1,434,141 shares
in the Company as at 31 March 2023.
The Company entered into an offer agreement relating to the
Offers pursuant to which Albion received a fee of 2.5% of the gross
proceeds of the Offers and out of which Albion paid the costs of
the Offers, as detailed in the Prospectus.
6. Other expenses
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
---------------------------------------------------- -------------- --------------
Directors' fees (including NIC) 114 103
Auditor's remuneration for statutory audit services
(excluding VAT) 48 39
Secretarial and administration fee 60 55
Other administrative expenses 213 214
435 411
-------------- --------------
7. Directors' fees
The amounts paid to and on behalf of Directors during the year
are as follows:
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
------------------- -------------- --------------
Directors' fees 104 95
National insurance 10 8
-------------- --------------
114 103
-------------- --------------
The Company's key management personnel are the Directors.
Further information regarding Directors' remuneration can be found
in the Directors' remuneration report on page 59 of the full Annual
Report and Financial Statements.
8. Tax (charge)/credit on ordinary activities
Year ended 31 March 2023 Year ended 31 March 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------
UK corporation tax
in respect of
current year 99 (99) - 98 (98) -
UK corporation tax
in respect of
prior year - - - (1) - (1)
-------- -------- -------- -------- -------- --------
99 (99) - 97 (98) (1)
-------- -------- -------- -------- -------- --------
Year ended Year ended
Reconciliation of profit on ordinary activities to 31 March 2023 31 March 2022
taxation charge GBP'000 GBP'000
----------------------------------------------------
Return on ordinary activities before taxation 125 5,960
-------------- --------------
Tax charge on profit at the standard rate of 19.00%
(2022: 19.00%) 24 1,132
Factors affecting the charge:
Non-taxable gains (110) (1,245)
Income not taxable (23) (1)
Prior year refund - 1
Excess management expenses carried forward 109 112
- (1)
-------------- --------------
The tax charge for the year shown in the Income statement is
lower than the standard rate of corporation tax in the UK of 19.00%
(2022: 19.00%). The differences are explained above. From 1 April
2023, the Company's rate of corporation tax will increase in the UK
from 19% to 25%.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital gains.
(ii) Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP.
(iii) The Company has excess management expenses of GBP1,154,000 (2022: GBP582,000) that are available for offset against future profits. A deferred tax asset of GBP289,000 (2022: GBP146,000) 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 2023 31 March 2022
GBP'000 GBP'000
----------------------------------------------------------- -------------- --------------
First interim dividend of 1.33p per share paid on
29 July 2022 (31 July 2021: First interim and first
special dividend of 16.83p per share) 1,614 16,728
Second special dividend of 7.00p per share paid on
31 December 2021 - 7,141
Second interim dividend of 1.32p per share paid on
31 January 2023 (31 January 2022: Second interim dividend
of 1.47p per share) 1,716 1,523
Unclaimed dividends (12) (10)
-------------- --------------
3,318 25,382
-------------- --------------
In addition to the dividends summarised above, the Board has
declared a first dividend for the year ending 31 March 2024 of 1.27
pence per share to be paid on 31 July 2023 to shareholders on the
register on 7 July 2023. The total dividend will be approximately
GBP1,783,000.
During the year, unclaimed dividends older than twelve years of
GBP12,000 (2022: GBP10,000) were returned to the Company in
accordance with the terms of the Articles of Association and have
been accounted for on an accruals basis.
10. Basic and diluted return/(loss) per share
Year ended 31 March 2023 Year ended 31 March 2022
Revenue Capital Total Revenue Capital Total
--------------------------------------------------------
Return/(loss) attributable to equity shares (GBP'000) 546 (421) 125 407 5,554 5,961
Weighted average shares in issue (adjusted for treasury
shares) 123,938,910 103,265,706
Return/(loss) attributable per equity share (pence) 0.44 (0.34) 0.10 0.39 5.38 5.77
The weighted average number of shares is calculated after
adjusting for treasury shares of 19,137,781 (2022: 17,153,431).
There are no convertible instruments, derivatives or contingent
share agreements in issue so basic and diluted return per share are
the same.
11. Fixed asset investments
31 March 2023 31 March 2022
Investments held at fair value through profit or loss GBP'000 GBP'000
Unquoted equity 34,202 24,388
Unquoted loan stock 12,354 12,460
Quoted equity 267 756
46,823 37,604
------------- -------------
Opening valuation 37,604 28,355
Purchases at cost 9,425 7,771
Disposal proceeds (612) (4,899)
Realised (losses)/gains (176) 2,546
Movement in loan stock accrued income 90 47
Unrealised gains 492 3,784
-------
Closing valuation 46,823 37,604
------- -------
Movement in loan stock accrued income
Opening accumulated loan stock accrued income 246 199
Movement in loan stock accrued income 90 47
------- -------
Closing accumulated loan stock accrued income 336 246
------- -------
Movement in unrealised gains
Opening accumulated unrealised gains 6,550 3,588
Transfer of previously unrealised losses/(gains) to
realised reserve on realisations of investments 1,373 (822)
Unrealised gains 492 3,784
------- -------
Closing accumulated unrealised gains 8,415 6,550
------- -------
Historic cost basis
Opening book cost 30,808 24,568
Purchases at cost 9,425 7,771
Disposals at cost (2,160) (1,531)
-------
Closing book cost 38,073 30,808
------- -------
Purchases and disposals detailed above may not agree to
purchases and disposals in the Statement of cash flows due to
restructuring of investments, conversion of convertible loan stock
and settlement of receivables and payables.
The Company does not hold any assets as a result of the
enforcement of security during the period, and believes that the
carrying values for both impaired and past due assets are covered
by the value of security held for these loan stock investments.
Unquoted fixed asset investments are valued at fair value in
accordance with the IPEV guidelines as follows:
31 March 31 March
2023 2022
Valuation methodology GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Cost and price of recent investment (calibrated and
reviewed for impairment) 20,040 16,678
Third party valuation -- Discounted cash flow 10,140 10,026
Revenue multiple 6,497 1,595
Third party valuation - Earnings multiple 4,953 3,085
Earnings multiple 2,756 2,426
Net assets 2,170 3,038
46,556 36,848
----------- -----------
When using the cost or price of recent investment in the
valuations, the Company looks to re-calibrate this price at each
valuation point by reviewing progress within the investment,
comparing against the initial investment thesis, assessing if there
are any significant events or milestones that would indicate the
value of the investment has changed and considering whether a
market-based methodology (i.e. using multiples from comparable
public companies) or a discounted cashflow forecast would be more
appropriate. The background to the transaction is also considered
when the price of investment may not be an appropriate measure of
fair value, for example, disproportionate dilution of existing
investors from a new investor coming on board or the market
conditions at the time of investment no longer being a true
reflection of fair value.
The main inputs into the calibration exercise, and for the
valuation models using multiples, are revenue, EBITDA and P/E
multiples (based on the most recent revenue, EBITDA or earnings
achieved and equivalent corresponding revenue, EBITDA or earnings
multiples of comparable companies), quality of earnings assessments
and comparability difference adjustments. Revenue multiples are
often used, rather than EBITDA or earnings, due to the nature of
the Company's investments, being in growth and technology companies
which are not normally expected to achieve profitability or scale
for a number of years. Where an investment has achieved scale and
profitability the Company would normally then expect to switch to
using an EBITDA or earnings multiple methodology.
In the calibration exercise and in determining the valuation for
the Company's equity instruments, comparable trading multiples are
used. In accordance with the Company's policy, appropriate
comparable companies based on industry, size, developmental stage,
revenue generation and strategy are determined and a trading
multiple for each comparable company identified is then calculated.
The multiple is calculated by dividing the enterprise value of the
comparable group by its revenue, EBITDA or earnings. The trading
multiple is then adjusted for considerations such as illiquidity,
marketability and other differences, advantages and disadvantages
between the portfolio company and the comparable public companies
based on company specific facts and circumstances.
Fair value investments had the following movements between
valuation methodologies between 31 March 2022 and 31 March
2023:
Change in valuation methodology Value as at 31 March 2023 Explanatory
(2022 to 2023) GBP'000 note
---------------------------------------------------
Cost and price of recent investment (calibrated and 3,927 Revenue
reviewed for impairment) to revenue multiple multiple
more
relevant
based on
current
trading
Cost and price of recent investment (calibrated and 2,756 Earnings
reviewed for impairment) to earnings multiple multiple
more
relevant
based on
current
trading
Net assets to third party valuation -- earnings 1,028 Third party
multiple valuation
conducted
The valuation will be the most appropriate valuation methodology
for an investment within its market, with regard to the financial
health of the investment and the IPEV Guidelines. The Directors
believe that, within these parameters, there are no other more
relevant methods of valuation which would be reasonable as at 31
March 2023.
FRS 102 and the SORP requires the Company to disclose the inputs
to the valuation methods applied to its investments measured at
FVTPL in a fair value hierarchy. The table below sets out fair
value hierarchy definitions using FRS 102 s.11.27.
Fair value hierarchy Definition
-------------------- ----------------------------------------------------
Level 1 The unadjusted quoted price in an active market
-------------------- ----------------------------------------------------
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
-------------------- ----------------------------------------------------
Level 3 Inputs to valuations not based on observable market
data
-------------------- ----------------------------------------------------
Quoted investments are valued according to Level 1 valuation
methods. Unquoted equity, preference shares and loan stock are all
valued according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3)
had the following movements:
31 March 2023 31 March 2022
GBP'000 GBP'000
-------------------------------------- ------------- -------------
Opening valuation 36,848 28,355
Purchases at cost 9,425 7,771
Movement from Level 3 to Level 1* - (356)
Unrealised gains 622 3,384
Movement in loan stock accrued income 90 47
Realised net gains on disposal (66) 2,546
Disposal proceeds (363) (4,899)
Closing valuation 46,556 36,848
------------- -------------
*This relates to Arecor Therapeutics PLC, which listed on the
AIM stock exchange during the prior year.
FRS 102 requires the Directors to consider the impact of
changing one or more of the inputs used as part of the valuation
process to reasonable possible alternative assumptions. 68% of the
portfolio of investments, consisting of equity and loan stock, is
based on recent investment price, net assets and cost, which is
considered and as such the Board believes that changes to
reasonable possible alternative input assumptions (by adjusting the
earnings and revenue multiples) for the valuation of the remainder
of the portfolio could lead to a significant change in the fair
value of the portfolio. Therefore, for the remainder of the
portfolio, the Board has adjusted the inputs for a number of the
largest portfolio companies (by value) resulting in a total
coverage of 80% of the portfolio of investments. The main inputs
considered for each type of valuation is as follows:
Change in
fair value
Change of Change in NAV
Base in investments (pence per
Valuation technique Portfolio company sector Input Case* input (GBP'000) share)
--------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- -----------------
Third party valuation -- Discounted cashflow Renewable energy Discount rate 6.5% +0.5% 118 0.08
--------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- -----------------
-0.5% (109) (0.08)
----------------------------------------------------------------------------------------------------------- ----- ------ ----------- -----------------
Third party valuation -- Earnings multiple Education Earnings multiple 18.8x +1.9x 223 0.16
--------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- -----------------
-1.9x (223) (0.16)
----------------------------------------------------------------------------------------------------------- ----- ------ ----------- -----------------
Earnings multiple Healthcare (including digital healthcare) Earnings multiple 8.0x +0.8x 177 0.13
--------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- -----------------
-0.8x (177) (0.13)
----------------------------------------------------------------------------------------------------------- ----- ------ ----------- -----------------
*As detailed in the accounting policies above, the base case is
based on market comparables, discounted where appropriate for
marketability, in accordance with the IPEV guidelines.
The impact of these changes could result in an overall increase
in the valuation of the unquoted equity investments by GBP517,000
(1.5%) or a decrease in the valuation of unquoted equity
investments by GBP508,000 (1.5%).
12. Significant interests
The principal activity of the Company is to select and hold a
portfolio of investments in unquoted securities. Although the
Company, through the Manager, will, in some cases, be represented
on the board of the portfolio company, it will not take a
controlling interest or become involved in the management of a
portfolio company. The size and structure of the companies with
unquoted securities may result in certain holdings in the portfolio
representing a participating interest without there being any
partnership, joint venture or management consortium agreement.
The Company has interests of greater than 20% of the nominal
value of any class (some of which are non-voting) of the allotted
shares in the portfolio companies as at 31 March 2023 as described
below.
Registered
address and Results
country of Profit/(loss) before tax Aggregate capital and reserves for year % class and % total voting
Company incorporation GBP'000 GBP'000 ended share type rights
----------- -------------- ------------------------- ------------------------------ -------- -------------- --------------
Kew Green
VCT 31
(Stansted) December
Limited EC1M 5QL, UK n/a* 2,331 2021 45.2% Ordinary 45.2%
*The company files filleted accounts which do not disclose this
information.
13. Trade and other receivables
31 March 2023 31 March 2022
GBP'000 GBP'000
-------------------------------------- ------------- -------------
Other receivables 115 342
Prepayments 25 24
Deferred consideration over one year - 1,560
Deferred consideration under one year 1,820 -
1,960 1,926
------------- -------------
The deferred consideration under one year relates to the sale of
G. Network Communications Limited in December 2020. These proceeds
are receivable in January 2024, and have been discounted to present
value at the prevailing market rate, including a provision for
counterparty risk. This constitutes a financing transaction, and
has been accounted for using the policy disclosed in note 2.
The Directors consider that the carrying amount of receivables
is not materially different to their fair value.
14. Trade and other payables
31 March 2023 31 March 2022
GBP'000 GBP'000
----------------------------- ------------- -------------
Trade payables 208 27
Accruals and deferred income 446 234
------------- -------------
654 261
------------- -------------
The Directors consider that the carrying amount of payables is
not materially different to their fair value.
15. Called-up share capital
Allotted, called-up and fully paid GBP'000
------------------------------------------------------------
136,927,633 Ordinary shares of 1 penny each at 31
March 2022 1,369
22,703,401 Ordinary shares of 1 penny each issued
during the year 227
914,702 Ordinary shares of 1 penny each cancelled
during the year (9)
------------------------------------------------------------ -------
158,716,332 Ordinary shares of 1 penny each at 31
March 2023 1,587
------------------------------------------------------------ -------
17,153,431 Ordinary shares of 1 penny each held in
treasury at 31 March 2022 (172)
1,984,350 Ordinary shares of 1 penny each purchased
during the year to be held in treasury (19)
19,137,781 Ordinary shares of 1 penny each held in
treasury at 31 March 2023 (191)
------------------------------------------------------------ -------
139,578,551 Ordinary shares of 1 penny each in circulation*
at 31 March 2023 1,396
------------------------------------------------------------ -------
* Carrying one vote each
The Company purchased 1,984,350 Ordinary shares which were held
in treasury (2022: nil) at a cost of GBP985,000 (2022: GBPnil),
representing 1.3% (2022: nil%) of issued share capital as at 31
March 2023. The Company also purchased 914,702 Ordinary shares for
cancellation (2022: 3,919,566 shares) at a cost of GBP455,000
(2022: GBP2,013,000) representing 0.6% (2022: 2.9%) of issued share
capital as at 31 March 2023. The shares purchased for treasury were
funded from the other distributable reserve.
The Company holds a total of 19,137,781 shares (2022:
17,153,431) in treasury at a nominal value of GBP191,000,
representing 12.1% of the issued Ordinary share capital as at 31
March 2023.
Under the terms of the Dividend Reinvestment Scheme Circular
dated 10 July 2008, the following new Ordinary shares of nominal
value 1 penny each were allotted during the year:
Aggregate
nominal Opening market
value of Net price on
shares Issue price invested allotment date
Number of
shares
Date of allotment alloted GBP'000 (pence per share) GBP'000 (pence per share)
29 July 2022 525,971 5 52.05 272 49.55
31 January 2023 546,247 6 51.58 280 49.00
1,072,218 11 552
--------- --------- --------
During the year, the Company issued the following new Ordinary
shares of nominal value 1 penny each under the Albion VCTs
Prospectus Top Up Offers 2021/22 and 2022/23:
Aggregate
nominal Net Opening market
value of consideration price on
shares Issue price received allotment date
Date of allotment Number of shares allotted GBP'000 (pence per share) GBP'000 (pence per share)
11 April 2022 446,260 5 52.30 230 48.60
11 April 2022 23,806 - 52.50 12 48.60
11 April 2022 1,126,685 11 52.80 580 48.60
2 December 2022 2,520,630 25 53.80 1,336 50.00
2 December 2022 575,473 6 54.00 305 50.00
2 December 2022 7,301,049 73 54.30 3,866 50.00
31 March 2023 9,637,280 96 51.40 4,830 47.60
------------------------- --------- -------------
21,631,183 216 11,159
------------------------- --------- -------------
16. Basic and diluted net asset value per share
31 March 2023 31 March 2022
Basic and diluted net asset value per share
(pence) 50.88 53.38
The basic and diluted net asset value per share at the year end
are calculated in accordance with the Articles of Association and
are based upon total shares in issue (adjusted for treasury shares)
of 139,578,551 Ordinary shares (2022: 119,774,202).
17. Capital and financial instruments risk 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.
The Company's financial instruments comprise equity and loan
stock investments in quoted and unquoted companies, cash balances
and short term receivables and payables which arise from its
operations. The main purpose of these financial instruments is to
generate cash flow, revenue and capital appreciation for the
Company's operations. The Company has no gearing or other financial
liabilities apart from short term payables. The Company does not
use any derivatives for the management of its Balance sheet.
The principal risks arising from the Company's operations
are:
-- Market and investment risk (which comprises investment price and cash
flow interest rate risk);
-- credit risk; and
-- liquidity risk.
The Board regularly reviews and agrees policies for managing
each of these risks. There have been no changes in the nature of
the risks that the Company has faced during the past year and there
have been no changes in the objectives, policies or processes for
managing risks during the past year. The key risks are summarised
below.
Market risk
As a Venture Capital Trust, it is the Company's specific nature
to evaluate the market risk of its portfolio in unquoted companies.
Market risk is the exposure of the Company to the revaluation and
devaluation of investments as a result of macroeconomic changes.
The main driver of market risk is the dynamics of market quoted
comparators, as well as the financial and operational performance
of portfolio companies. The Board seeks to reduce this risk by
having a spread of investments across a variety of sectors. More
details on the sectors the Company invests in can be found in the
pie chart at the end of this announcement.
The Manager and the Board formally review market risk, both at
the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are
made to ensure that profits to the Company are maximised, and that
valuations of investments retained within the portfolio appear
sufficiently prudent and realistic compared to prices being
achieved in the market for sales of unquoted investments.
As required under FRS 102, the Board is required to illustrate
by way of a sensitivity analysis the extent to which the assets are
exposed to market risk. In order to show the impact of sensitivity
in market movements on the Company, a 10% increase or decrease in
the valuation of the fixed asset investment portfolio (keeping all
other variables constant) would increase or decrease the net asset
value and return for the year by GBP4,682,000. Accordingly, a 20%
increase or decrease in the valuation of the fixed asset investment
portfolio (keeping all other variables constant) would increase or
decrease the net asset value and return for the year by
GBP9,365,000. Further sensitivity analysis on fixed asset
investments is included in note 11.
Investment risk (including investment price risk)
Investment risk (including investment price risk) is the risk
that the fair value of future investment cash flows will fluctuate
due to factors specific to an investment instrument or to a market
in similar instruments. The management of risk within the venture
capital portfolio is addressed through careful investment
selection, by diversification across different industry segments,
by maintaining a wide spread of holdings in terms of financing
stage and by limitation of the size of individual holdings. The
Manager receives management accounts from portfolio companies and
members of the investment management team often sit on the boards
of unquoted portfolio companies; this enables the close
identification, monitoring and management of investment risk. The
Directors monitor the Manager's compliance with the investment
policy, review and agree policies for managing this risk and
monitor the overall level of risk on the investment portfolio on a
regular basis.
Valuations are based on the most appropriate valuation
methodology for an investment within its market, with regard to the
financial health of the investment and the IPEV Guidelines. Details
of the industries in which investments have been made are contained
in the pie chart at the end of this announcement.
The maximum investment risk on the balance sheet date is the
value of the fixed asset investment portfolio which is
GBP46,823,000 (2022: GBP37,604,000). Fixed asset investments form
66% of the net asset value on 31 March 2023 (2022: 59%).
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 GBP238,000 (2022:
GBP341,000). Furthermore, it was considered that a fall of interest
rates below current levels during the year would have been
unlikely.
The weighted average effective interest rate applied to the
Company's fixed rate assets during the year was approximately 8.8%
(2022: 7.3%). The weighted average period to maturity for the fixed
rate assets is approximately 5.3 years (2022: 6.0 years).
The Company's financial assets and liabilities, all denominated
in Sterling, consist of the following:
31 March 2023 31 March 2022
Floating rate Non-interest bearing Total Floating rate Non-interest bearing Total
Fixed rate GBP'000 GBP'000 GBP'000 GBP'000 Fixed rate GBP'000 GBP'000 GBP'000 GBP'000
-------------
Unquoted
equity - - 34,202 34,202 - - 24,388 24,388
Quoted equity - - 267 267 - - 756 756
Unquoted loan
stock 11,795 219 340 12,354 11,922 233 305 12,460
Receivables* - - 1,935 1,935 - - 1,902 1,902
Payables - - (654) (654) - - (261) (261)
Cash - 22,886 - 22,886 - 24,668 - 24,668
------------------- ------------- -------------------- -------- ------------------- ------------- -------------------- --------
11,795 23,105 36,090 70,990 11,922 24,901 27,090 63,913
------------------- ------------- -------------------- -------- ------------------- ------------- -------------------- --------
*The receivables do not reconcile to the Balance sheet as
prepayments are not included in the above table.
Credit 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 75% of loan stock by
value, typically loan stock instruments have a fixed or floating
charge, which may or may not have been subordinated, over the
assets of the portfolio company in order to mitigate the gross
credit risk.
The Manager receives management accounts from portfolio
companies, and members of the investment management team often sit
on the boards of unquoted portfolio companies; this enables the
close identification, monitoring and management of
investment-specific credit risk.
The Manager and the Board formally review credit risk (including
receivables) and other risks, both at the time of initial
investment and at quarterly Board meetings.
The Company's total gross credit risk as at 31 March 2023 was
limited to GBP12,354,000 of unquoted loan stock instruments (2022:
GBP12,460,000), GBP22,886,000 cash deposits with banks (2022:
GBP24,668,000) and GBP1,960,000 of other receivables (2022:
GBP1,926,000).
At the Balance sheet date, the cash in bank and at hand held by
the Company was held with Lloyds Bank plc, Scottish Widows Bank plc
(part of Lloyds Banking Group), Barclays Bank plc, National
Westminster Bank plc and Bank of Montreal. Credit risk on cash
transactions was mitigated by transacting with counterparties that
are regulated entities subject to prudential supervision, with high
credit ratings assigned by international credit-rating
agencies.
The Company has an informal policy of limiting counterparty
banking and floating rate note exposure to a maximum of 20% of net
asset value for any one counterparty.
The credit profile of the unquoted loan stock is described under
liquidity risk.
Liquidity risk
Liquid assets are held as cash on current account, on deposit or
short term money market account. Under the terms of its Articles,
the Company has the ability to borrow up to 10% of its adjusted
capital and reserves of the latest published audited Balance sheet,
which amounts to GBP6,923,000 as at 31 March 2023 (2022:
GBP6,232,000).
The Company has no committed borrowing facilities as at 31 March
2023 (2022: GBPnil) and had cash balances of GBP22,886,000 (2022:
GBP24,668,000). The main cash outflows are for new investments,
buy-back of shares and dividend payments, which are within the
control of the Company. The Manager formally reviews the cash
requirements of the Company on a monthly basis, and the Board on a
quarterly basis as part of its review of management accounts and
forecasts. All the Company's financial liabilities are short term
in nature and total GBP654,000 as at 31 March 2023 (2022:
GBP261,000).
The carrying value of loan stock investments as analysed by
expected maturity dates is as follows:
31 March 2023 31 March 2022
Redemption Fully performing Past due Valued below cost Total Fully performing Past due Valued below cost Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-----------
Less than
one year 1,823 1,636 - 3,459 1,741 469 857 3,067
1-2 years 1,406 - - 1,406 - - - -
2-3 years - - - - 1,395 - 2 1,397
3-5 years 1,915 - - 1,915 2,422 - - 2,422
5+ years 5,039 535 - 5,574 5,154 420 - 5,574
Total 10,183 2,171 - 12,354 10,712 889 859 12,460
----------- ---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
Loan stock can be past due as a result of interest or capital
not being paid in accordance with contractual terms. The cost of
loan stock valued below cost is GBPnil (2022: GBP1,045,000).
The Company does not hold any assets as the result of the
enforcement of security during the period, and believes that the
carrying values for both those valued below cost and past due
assets are covered by the value of security held for these loan
stock investments.
In view of the availability of adequate cash balances and the
repayment profile of loan stock investments, the Board considers
that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 31
March 2023 are stated at fair value as determined by the Directors,
with the exception of receivables, payables and cash which are
carried at amortised cost. There are no financial liabilities other
than payables. The Company's financial liabilities are all
non-interest bearing. It is the Directors' opinion that the book
value of the financial liabilities is not materially different to
the fair value and all are payable within one year.
18. Commitments and contingencies
The Company had no financial commitments in respect of
investments at 31 March 2023 (2022: GBPnil).
There are no contingent liabilities or guarantees given by the
Company as at 31 March 2023 (2022: GBPnil).
19. Post balance sheet events
Since the year end, the Company has not made any material
investment transactions.
The following new Ordinary shares of nominal value 1 penny each
were allotted under the Albion VCTs Prospectus Top Up Offers
2022/23 after 31 March 2023:
Aggregate
nominal Net Opening market
value of consideration price on
shares Issue price received allotment date
Number
of
Date of shares
allotment allotted GBP'000 (pence per share) GBP'000 (pence per share)
-----------------
14 April
2023 377,529 4 50.90 189 47.60
14 April
2023 48,922 - 51.10 25 47.60
14 April
2023 381,518 4 51.40 191 47.60
-------- --------- -------------
807,969 8 405
-------- --------- -------------
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5,
and the Directors' remuneration disclosed in the Directors'
remuneration report on pages 59 and 60 of the full Annual Report
and Financial Statements, there are no other related party
transactions or balances requiring disclosure.
21. Other 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 2023 and 31
March 2022, and is derived from the statutory accounts for those
financial years, which have been, or in the case of the accounts
for the year ended 31 March 2023, which will be, delivered to the
Registrar of Companies. The Auditor reported on those accounts; the
reports were unqualified and did not contain a statement under s498
(2) or (3) of the Companies Act 2006.
22. Publication
The full audited Annual Report and Financial Statements are
being sent to shareholders and copies will be made available to the
public at the registered office of the Company, Companies House,
the National Storage Mechanism and also electronically at
www.albion.capital/funds/AAVC/31Mar2023.pdf.
Attachment
-- Split of portfolio by sector, stage of investment and number of employees
https://ml-eu.globenewswire.com/Resource/Download/9232d192-978e-4196-8b93-0532c4367bef
(END) Dow Jones Newswires
July 04, 2023 12:15 ET (16:15 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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