TIDMAAEV
Albion Enterprise VCT PLC
LEI number: 213800OVSRDHRJBMO720
As required by the Financial Conduct Authority's Disclosure
Guidance and Transparency Rules 4.1 and 6.3, Albion Enterprise VCT
PLC today makes public its information relating to the Annual
Report and Financial Statements for the year ended 31 March
2023.
This announcement was approved for release by the Board of
Directors on 5 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/AAEV/31Mar2023.pdf.
Investment objective and policy
Albion Enterprise VCT PLC (the "Company") is a Venture Capital
Trust and the investment objective of the Company is to provide
investors with a regular source of income, combined with the
prospect of longer term capital growth.
Investment policy
The Company will invest in a broad portfolio of higher growth
businesses across a variety of sectors of the UK economy including
higher risk technology companies. Allocation of assets will be
determined by the investment opportunities which become available
but efforts will be made to ensure that the portfolio is
diversified both in terms of sector and stage of maturity of
company.
VCT qualifying and non-VCT qualifying investments
Application of the investment policy is designed to ensure that
the Company continues to qualify and is approved as a VCT by HM
Revenue and Customs ("VCT regulations"). The maximum amount
invested in any one company is limited to relevant HMRC annual
investment limits. It is intended that normally at least 80 per
cent. of the Company's funds will be invested in VCT qualifying
investments. The VCT regulations also have an impact on the type of
investments and qualifying sectors in which the Company can make
investment.
Funds held prior to investing in VCT qualifying assets or for
liquidity purposes will be held as cash on deposit, invested in
floating rate notes or similar instruments with banks or other
financial institutions with high credit ratings or invested in
liquid open-ended equity funds providing income and capital equity
exposure (where it is considered economic to do so). Investment in
such open-ended equity funds will not exceed 10 per cent. of the
Company's assets at the time of investment.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses
within Venture Capital Trust qualifying industry sectors using a
mixture of securities. The maximum amount which the Company will
invest in a single company is 15 per cent. of the Company's assets
at cost, thus ensuring a spread of investment risk. The value of an
individual investment may increase over time as a result of trading
progress and it is possible that it may grow in value to a point
where is represents a significantly higher proportion of total
assets prior to a realisation opportunity being available.
Gearing
The Company's maximum exposure in relation to gearing is
restricted to 10 per cent. of its adjusted share capital and
reserves.
Financial calendar
4 August 2023 Record date for first interim dividend
Noon on 30 August 2023 Annual General Meeting
31 August 2023 Payment date for first interim dividend
December 2023 Announcement of Half-yearly results for the six months
ending 30 September 2023
Financial highlights
2.81p Increase in total shareholder value (pence per share)
for the year ended 31 March 2023
-----------------------------------------------------
2.12% Shareholder return for the year ended 31 March 2023
-----------------------------------------------------
6.49p Tax-free dividend per share for the year ended 31
March 2023
-----------------------------------------------------
128.60p Net asset value per share on 31 March 2023
-----------------------------------------------------
197.47p Total shareholder value per share from launch to 31
March 2023
-----------------------------------------------------
These are considered Alternative Performance Measures, see notes
2 and 3 in the Strategic report below for further explanation.
31 March 2023 (pence per 31 March 2022 (pence per
share) share)
Opening net asset value 132.28 114.60
Capital return 2.64 23.78
Revenue return 0.39 0.19
------------------------ ------------------------
Total return 3.03 23.97
Dividends paid (6.49) (6.09)
Impact from share capital
movements (0.22) (0.20)
------------------------ ------------------------
Net asset value 128.60 132.28
Pence per share
Total dividends paid per share to 31 March 2023 68.87
Net asset value per share on 31 March 2023 128.60
---------------
Total shareholder value per share to 31 March 2023 197.47
--------------------------------------------------- ---------------
A more detailed breakdown of the dividends paid per year can be
found at www.albion.capital/funds/AAEV under the 'Dividend History'
section.
In addition to the dividends summarised above, the Board has
declared a first dividend for the year ending 31 March 2024, of
3.22 pence per Ordinary share to be paid on 31 August 2023 to
shareholders on the register on 4 August 2023.
Chairman's statement
During the year, the Company's portfolio has faced a difficult
macroeconomic and geopolitical backdrop, including the
repercussions arising from the war in Ukraine, high inflation,
rising interest rates, political instability and a sharp fall in
the valuation of quoted technology companies. In spite of this, the
Company has achieved an increase in total shareholder value of 2.81
pence per share for the year (2.1% on opening net asset value).
Against this backdrop, the Board continues to be encouraged by
the progress being made by many of the portfolio companies,
demonstrating their resilience despite challenging market
conditions. Inevitably, a number of portfolio companies have fared
less well. The Board recognises the importance of evaluating the
returns of the Company over the longer-term because a venture
capital portfolio will, by its nature, experience periods of short
term volatility.
Results and dividends
The total return before taxation was GBP2.8 million compared to
a return of GBP18.1 million for the previous year. In line with our
variable dividend policy targeting around 5% of Net Asset Value
("NAV") per annum the Company paid dividends totalling 6.49 pence
per share during the year ended 31 March 2023 (2022: 6.09 pence per
share), which resulted in a slight decrease in the NAV on 31 March
2023 to 128.60 pence per share (2022: 132.28 pence per share).
The Company will pay a first dividend for the financial year to
31 March 2024 of 3.22 pence per share on 31 August 2023 to
shareholders on the register on 4 August 2023, being 2.5% of the
latest reported NAV.
Investment performance and progress
The results for the year showed net gains on investment of
GBP4.5 million, compared with net gains of GBP21.6 million for the
previous year. Quantexa, the largest company within our portfolio
(19% of net asset value), was the main contributor to the net gain
increasing its value by GBP9.8 million following an externally led
$129 million Series E fundraising which completed in April 2023.
Quantexa continues to record strong revenue growth which more than
offset the well-publicised reduced valuations ascribed to the
technology sector. Other gains in the year, again driven by revenue
growth, included unrealised gains on Convertr of GBP1.0 million and
Solidatus of GBP0.8 million. These gains were partially offset by
write downs in Black Swan Data which decreased by GBP2.1 million,
Oviva by GBP1.4 million and uMotif by GBP0.9 million, as a result
of difficult trading conditions.
The Company realised disposal proceeds of GBP1.8 million (2022:
GBP10.2 million). The largest disposals being Zift (GBP0.5 million)
and a part disposal of our shareholding in our quoted investment,
Arecor Therapeutics PLC (GBP0.4 million). Three investments were
written off during the year, their valuations had already been
reduced substantially in previous years. Further details on the
realisations during the year can be found in the realisations table
on page 29 of the full Annual Report and Financial Statements.
The three largest investments in the Company's portfolio,
Quantexa, Egress Software Technologies and Proveca are valued at
GBP43.8 million and represent 33.8% of the Company's NAV.
The Company has been an active investor during the year,
investing a total of GBP12.5 million, of which GBP7.9 million went
into 13 new portfolio companies which are expected to require
further investment as the companies prove themselves and grow. The
following are the five largest new investments:
-- GBP1.4 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 employment benefit for employees;
-- GBP1.3 million into Toqio FinTech, which bridges the gap between financial services and financial outcomes by providing an orchestration platform to any business large or small which wishes to launch a financial product;
-- GBP0.9 million into PeakData, a software platform that uses big data analytics and AI to collate data from across the web to provide insights and analytics for the world's top pharmaceutical companies, key opinion leaders and healthcare professionals before and after the launch of new therapies;
-- GBP0.8 million into GX Molecular (T/A CS Genetics), a developer of a wet-phase approach to single cell indexing in a single tube that enables increased scalability and high quality single cell analysis; and
-- GBP0.6 million into OutThink, a software platform to measure and manage human risk for enterprises.
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 29 of the full
Annual Report and Financial Statements.
Risks and uncertainties
The Company faces a number of significant risks including rising
interest rates, high levels of inflation, the ongoing impact of
Russia's invasion of Ukraine, and an expected period of economic
stagnation, or even recession in the UK.
Our investment portfolio, while concentrated mainly in the
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 primary objective to maintain sufficient
resources for investment in existing and new portfolio companies
and for the continued payment of dividends to shareholders. The
Board's policy is to buy back shares in the market, subject to the
overall constraint that such purchases are in the Company's
interest.
It is the Board's intention for such buy-backs to be in the
region of a 5% discount to NAV, so far as market conditions and
liquidity permit. Details of shares bought back 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 5 January 2023 that, following strong demand, it would
opt to exercise its over-allotment facility, bringing the total to
be raised to GBP16.5 million. The Offer was fully subscribed and
closed to further applications on 17 March 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 virtually at noon on 30 August 2023 via the
Lumi platform. Information on how to participate in the live
webcast can be found on the Manager's website
https://www.globenewswire.com/Tracker?data=5nloIKbiLXP7sPEv0SzkYyB4BMOlgDip4qerfTtTxEA5i8A9kYyDr-wzjZqVxthWWuyLVNmdJ26Judvk8CSJgAhAd5iXVrTHBlgMgK7lDxwWkbbyYzSuH_nMUgQFcSNpuLpsBa7fJImQEXk8FSbaJw==
www.albion.capital/vct-hub/agms-events.
The Board welcome 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
https://www.globenewswire.com/Tracker?data=K_mYMcLgc0Qs9J9gjIITtMKX3u8FenyvebSj56VyqS1BkSf6I2f3U9flTkFlG5LNTfOsunHPpzyEg7hz14GcDCLFId56nCxZB9Dr_dx9JULuLQEhzHI9gfB_H_EA9EfM
AAEVchair@albion.capital prior to the AGM.
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 49 and 50
and in the Notice of the Meeting on pages 90 to 93 of the full
Annual Report and Financial Statements.
Outlook and prospect
With the risks and uncertainties referred to above, the Board
cannot be other than wary about what lies ahead, however, the
portfolio remains well diversified, with companies at different
stages of maturity and targeted at sectors such as healthcare,
mission critical software and a minimal exposure to consumer
expenditure. We believe that these sectors can continue to provide
opportunities for resilient growth, yielding positive results for
the Company and its shareholders in the longer-term.
Maxwell Packe
Chairman
5 July 2023
Strategic report
Investment policy
The Company will invest in a broad portfolio of higher growth
businesses across a variety of sectors of the UK economy including
higher risk technology companies. Allocation of assets will be
determined by the investment opportunities which become available
but efforts will be made to ensure that the portfolio is
diversified both in terms of sector and stage of maturity of
company.
The full investment policy can be found above.
Current portfolio sector allocation
The pie charts at the end of this announcement show the split of
the portfolio valuation on 31 March 2023 by: sector; stage of
investment; and number of employees. This is a useful way of
assessing how the Company and its portfolio is diversified across
sector, portfolio companies' maturity measured by revenues and
their size measured by the number of people employed. As the
Company continues to invest in software and other technology
companies, FinTech (which is technology specifically applicable to
financial services companies) is included as a subsector below due
to its prominence. Software and technology is predominantly focused
around areas of digital risk, data management and AI. 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 Company's investment portfolio is well-balanced across the
Healthcare, FinTech, and Software and Technology sectors. Due to
the share allotments under the 2022/23 Prospectus Top Up Offer,
cash and net assets is a significant proportion of the portfolio at
26%. The Manager has a deep sector knowledge in healthcare, FinTech
and software investing, and these funds will be used to support the
existing portfolio companies as they grow, as well as to capitalise
on new investment opportunities into higher growth technology
companies within these sectors.
Results and dividend policy
GBP'000
Net capital return for the year ended 31 March 2023 2,414
Net revenue return for the year ended 31 March 2023 352
Total return for the year ended 31 March 2023 2,766
Dividend of 3.31 pence per share paid on 31 August
2022 (2,969)
Dividend of 3.18 pence per share paid on 28 February
2023 (2,985)
Unclaimed dividends 3
----------------------
Transferred from reserves (3,185)
----------------------
Net assets on 31 March 2023 129,730
======================
Net asset value on 31 March 2023 128.60 pence per share
===================================================== ======================
The Company paid dividends totalling 6.49 pence per share during
the year ended 31 March 2023 (2022: 6.09 pence per share). The
Board has declared a first dividend for the year ending 31 March
2024, of 3.22 pence per Ordinary share to be paid on 31 August 2023
to shareholders on the register on 4 August 2023.
As shown in the Company's Income statement below, the total
return for the year was 3.03 pence per share (2022: 23.97 pence per
share). Investment income increased to GBP1,206,000 (2022:
GBP886,000), This is a result of dividend income increasing to
GBP272,000 (2022: GBPnil), including a dividend declared by
memsstar immediately prior to the disposal in the year, and bank
interest increasing to GBP184,000 (2022: GBP3,000) due to higher
interest rates. These increases were partially offset by loan stock
income decreasing slightly to GBP750,000 (2022: GBP883,000). The
revenue return to equity holders has subsequently increased to
GBP352,000 (2022: GBP141,000).
The capital return on investments for the year was GBP4,535,000
(2022: GBP21,636,000). The net gain was due to an increase in the
unrealised value of investments, with the main contributor being
Quantexa. Key valuation movements during the year are outlined in
the investment performance and progress section of the Chairman's
statement above.
There was a net cash inflow for the Company of GBP3,308,000 for
the year (2022: GBP5,123,000), which has arisen from both the
disposal of fixed asset investments and the issue of Ordinary
shares under the Albion VCTs Top Up Offers, reduced by the
investments made in new and existing portfolio companies, dividends
paid, operating expenses and the buy-back of shares.
Trade and other payables at the year end amounted to
GBP1,489,000 (2022: GBP2,704,000). This decrease was primarily due
to the management performance incentive fee, which was paid in 2022
as a result of the Company's strong return for 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 results for the
year to 31 March 2023 show total shareholder value of 197.47 pence
per share since launch (2022: 194.66 pence per share).
There is a continuing focus on growing the FinTech, healthcare
(including digital healthcare) and other software and technology
sectors. The majority of these investment returns are delivered
through equity and capital gains, and will 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 financial results for the year demonstrates that
the portfolio remains well balanced across sectors and risk
classes, despite the impacts of the ongoing global issues caused as
a result of high levels of interest rates and inflation, due in
part to the Russian invasion of Ukraine, however the full effects
of these issues will continue to be felt in years to come. 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 of the Company's outlook 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 and APMs, which
are typical for Venture Capital Trusts, used in its own assessment
of the Company, will provide shareholders with sufficient
information to assess how effectively the Company is applying its
investment policy to meet its objectives. The Directors are
satisfied that the results shown in the following KPIs and APMs
give a good indication that the Company is achieving its investment
objective and policy.
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
The chart on page 16 of the full Annual Report and Financial
Statements illustrates the movement in net asset value per share
plus cumulative dividends paid since launch to 31 March 2023. Total
shareholder value increased by 2.1% on opening net asset value to
197.47 pence per share for the year ended 31 March 2023.
3. Movement in shareholder value in the year
The table below shows the total shareholder value over the last
10 years, with an average return of 8.7% per annum.
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
---- ---- ---- ----- ----- ----- ------ ----- ----- ----
9.7% 4.5% 5.4% 10.8% 12.4% 13.1% (4.4)% 12.7% 20.7% 2.1%
---- ---- ---- ----- ----- ----- ------ ----- ----- ----
Methodology: Calculated by the movement in total shareholder
value for the year divided by the opening net asset value.
4. Dividend distributions
In line with our dividend policy targeting around 5% of Net
Asset Value, dividends paid in respect of the year ended 31 March
2023 were 6.49 pence per share (2022: 6.09 pence per share).
Cumulative dividends paid since inception total 68.87 pence per
share.
5. Ongoing charges
The ongoing charges ratio for the year ended 31 March 2023 was
2.50% (2022: 2.50%). The ongoing charges ratio has been calculated
using The Association of Investment Companies' (AIC) recommended
methodology. This figure shows shareholders the total recurring
annual running expenses (including investment management fees
charged to capital reserve) as a percentage of the average net
assets attributable to shareholders. The ongoing charges cap is
2.50%, which has resulted in a saving of GBP24,000 to shareholders
during the year (2022: GBP22,000).
6. VCT compliance*
The investment policy is designed to ensure that the Company
continues to qualify and is approved as a VCT by HMRC. In order to
maintain its status under Venture Capital Trust legislation, a VCT
must comply on a continuing basis with the provisions of Section
274 of the Income Tax Act 2007, details of which are provided in
the Directors' report on page 46 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 its
adjusted share capital and reserves for any dividends declared.
Although the investment policy permits the Company to borrow, the
Directors do not currently have any intention of utilising
long-term gearing and have not done so in the past.
Operational arrangements
The Company has delegated the investment management of the
portfolio to Albion Capital Group LLP, the Manager, 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 2% of
the net asset value of the Company paid quarterly in arrears, along
with an administration fee of 0.2% of the net asset value.
Total annual expenses, including the management fee, are limited
to 2.50% of the net asset value.
In some instances, the Manager is entitled to an arrangement
fee, payable by a portfolio company in which the Company invests,
in the region of 2.0% of the investment made, and also monitoring
fees where the Manager has a representative on the portfolio
company's board.
Further details on the management fee can be found in note
5.
Management performance incentive fee
In order to align the interests of the Manager and the
shareholders with regards to generating positive returns, the
Company has a Management performance incentive arrangement with the
Manager. Under the incentive arrangement, the Company will pay an
incentive fee to the Manager of an amount equal to 20% of such
excess return that is calculated for each financial year.
The performance fee hurdle requires that the growth of the
aggregate of the net asset value per share and dividends paid by
the Company compared with the previous accounting date exceeds the
higher of the average base rate of the Royal Bank of Scotland plus
2% or RPI plus 2%. The hurdle is calculated every year, based on
the starting rate of 100 pence per share in 2007.
For the year ended 31 March 2023, the total return of the
Company since launch (the performance incentive fee start date)
amounted to 197.47 pence per share, compared to the higher hurdle
of 210.17 pence per share. As a result, no performance incentive
fee is payable to the Manager (2022: GBP1,934,000).
Evaluation of the Manager
The Board has evaluated the performance of the Manager based
on:
-- the returns generated by the Company;
-- continued compliance with VCT regulation;
-- the long term prospects of the current portfolio of investments;
-- the management of treasury, including use of buy-backs and participation in fund raising;
-- a review of the Management agreement and the services provided therein; and
-- benchmarking the performance of the Manager to other service providers including the performance of other VCTs that the Manager is responsible for managing.
The Board believes that it is in the interests of shareholders
as a whole, and of the Company, to continue the appointment of the
Manager for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board appointed the Manager as the Company's AIFM in 2014 as
required by the AIFMD. The Manager is a full-scope Alternative
Investment Fund Manager under the AIFMD. Ocorian Depositary (UK)
Limited is the appointed Depositary and oversees the custody and
cash arrangements and provides other AIFMD duties with respect to
the Company.
Companies Act 2006 Section 172 Reporting
Under Section 172 of the Companies Act 2006, the Board has a
duty to promote the success of the Company for the benefit of its
members as a whole in both the long and short term, having regard
to the interests of other stakeholders in the Company, such as
suppliers, and to do so with an understanding of the impact on the
community and environment and with high standards of business
conduct, which includes acting fairly between members of the
Company.
The Board is very conscious of these wider responsibilities in
the ways it promotes the Company's culture and ensures, as part of
its regular oversight, that the integrity of the Company's affairs
is foremost in the way the activities are managed and promoted.
This includes regular engagement with the wider stakeholders of the
Company and being alert to issues that might damage the Company's
standing in the way that it operates. The Board works very closely
with the Manager in reviewing how stakeholder issues are handled,
ensuring good governance and responsibility in managing the
Company's affairs, as well as visibility and openness in how the
affairs are conducted.
The Company is an externally managed investment company with no
employees, and as such has nothing to report in relation to
employee engagement but does keep close attention to how the Board
operates as a cohesive and competent unit. The Company also has no
customers in the traditional sense and, therefore, there is also
nothing to report in relation to relationships with customers.
The table below sets out the stakeholders the Board considers
most relevant, details how the Board has engaged with these key
stakeholders and the effect of these considerations on the
Company's decisions and strategies during the year.
Stakeholders Engagement with Stakeholders Decision outcomes based on engagement
------------ ----------------------------------------------------------- -----------------------------------------------------------
Shareholders The key methods of engaging with Shareholders are -- Shareholders' views are important and the Board
as follows: encourages Shareholders to exercise their right to
-- Annual General Meeting ("AGM") vote on the resolutions at the AGM. The Company's AGM
-- 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 DTRs covering such things as appointment of a new across the country (over 5 times more engagement than
Director, and the publication of a Prospectus historical physical AGMs), and gave shareholders the
-- Albion Capital website, social media pages, as well opportunity to ask questions and vote during the
as publishing Albion news shareholder magazine. virtual AGM last year. The virtual medium helps
facilitate greater shareholder participation and to
help those who are unable to attend the AGM in
person.
-- Shareholders are also encouraged to attend the in
person annual Shareholders' Seminar. Last year's
event took place on 23 November 2022 at the Royal
College of Surgeons. The seminar included portfolio
companies Speechmatics and Ophelos 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 4.9% on
opening net asset value.
-- During the year, the Board made the decision to
participate in the Albion Prospectus Top Up Offers,
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 was
used to ensure there was no dilution to existing
Shareholders.
-- Cash management and liquidity of the Company are key
quarterly discussions amongst the Board, with focus
on deployment of cash for future investments,
dividends and share buy-backs.
-- Shareholders can contact the Chairman using the email
AAEVchair@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
pages 52 to 58 of the full Annual Report and
Financial Statements.
------------ ----------------------------------------------------------- -----------------------------------------------------------
Suppliers The key suppliers with regular engagement from the
Manager are: -- The Manager, on behalf of the Company, is in regular
-- Corporate broker contact with the suppliers and the contractual
arrangements with all the principal suppliers to the
-- VCT taxation adviser Company are reviewed regularly and formally once a
year, alongside the performance of the suppliers in
-- Depositary acquitting their responsibilities.
-- Registrar -- The Board reviews the performance of the providers
annually and was satisfied with their performance.
-- Auditor
-- Legal adviser
------------ ----------------------------------------------------------- -----------------------------------------------------------
Portfolio The portfolio companies are considered key stakeholders, -- The Board aims to have a diversified portfolio in
companies not least because they are principal drivers of value terms of sector and stage of investment. Further
for the Company. However, as discussed in the ESG details of this can be found in the pie charts at the
section on pages 35 to 38 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 practice.
-- 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 The Company, with no employees, has no effect itself -- The Board receives reports on ESG factors within its
and on the community and environment. However, as discussed portfolio from the Manager as it is a signatory of
environment above, the portfolio companies' ESG impact is extremely the UN Principles for Responsible Investment ("UN
important to the Board. PRI"). Further details of this are set out in the ESG
report pages 35 to 38 of the full Annual Report and
Financial Statements. ESG, without its specific
definition, has always been at the heart of the
responsible investing that the Company engages in and
in how the Company conducts itself with all of its
stakeholders.
------------ ----------------------------------------------------------- -----------------------------------------------------------
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the
Companies Act 2006 (the "Act") to detail information about social
and community issues, employees and human rights; including any
policies it has in relation to these matters and effectiveness of
these policies. As an externally managed investment company with no
employees, the Company has no formal policies in these matters,
however, it is at the core of its responsible investment strategy
as detailed above.
Further policies
The Company has adopted a number of further policies relating
to:
-- Environment.
-- Global greenhouse gas emissions.
-- Anti-bribery.
-- Anti-facilitation of tax evasion.
-- Diversity.
and these are set out in the Directors' report on pages 47 and
48 of the full Annual Report and Financial Statements.
General Data Protection Regulation
The General Data Protection Regulation has the objective of
unifying data privacy requirements across the European Union. 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.
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, whilst the pandemic has continued to impact on
mobility, public health and have an adverse influence on the
economy. The full impact 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:
Risk Possible consequence Risk assessment during the year Risk management
------------------------------------------------- -------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Investment, performance, technology and valuation 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
risk 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 over many years of making successful investments
future valuations. the valuations of technology companies are more volatile. in this segment of the market. In addition, the Manager
By nature, smaller unquoted businesses, such as those operates a formal and structured investment appraisal
that qualify for Venture Capital Trust purposes, are and review process, which includes an Investment Committee,
more volatile than larger, long-established businesses. comprising investment professionals from the Manager
The Company's investment valuation methodology is for all investments, and at least one external investment
reliant on the accuracy and completeness of information professional for investments greater than GBP1 million
that is issued by portfolio companies. In particular, in aggregate across all the Albion managed VCTs. The
the Directors may not be aware of or take into account Manager also invites and takes account of comments
certain events or circumstances which occur after from non-executive Directors of the Company on matters
the information issued by such companies is reported. discussed at the Investment Committee meetings.
Investments are actively and regularly monitored by
the Manager (investment managers observe or sit on
portfolio company boards), including the level of
diversification in the portfolio, and the Board receives
detailed reports on each investment as part of the
Manager's report at quarterly board meetings. The
Board and Manager regularly review the deployment
of investments and cash resources available to the
Company in assessing liquidity required for servicing
the Company's buy-backs, dividend payments and operational
expenses.
The 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.
------------------------------------------------- -------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
VCT approval 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.
------------------------------------------------- -------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
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 advisers 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.
------------------------------------------------- -------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
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.
------------------------------------------------- -------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Cyber and data security risk 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 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.
------------------------------------------------- -------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
Economic, political and social 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.55 companies which are diversified as discussed
above. Exposure is relatively small to at-risk sectors
that include leisure, hospitality, retail and travel.
------------------------------------------------- -------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
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. Full
Company's carbon footprint. Non-compliance with reporting details of the specific procedures and risk mitigation
requirements could lead to a fall in demand from investors, can be found in the ESG report on pages 35 to 38 of
reputational damage and penalties. Climate risks could the full Annual Report and Financial Statements. These
also negatively impact on the value of portfolio investments. procedures ensure that this increased 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 objective is increasing
the use of electronic communications with Shareholders.
------------------------------------------------- -------------------------------------------------------------- ---------------------------------------------------------- -------------------------------------------------------------
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 principle 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 future 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 emerging
and principal 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 high 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 portfolio 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.
For and on behalf of the Board
Maxwell Packe
Chairman
5 July 2023
Responsibility Statement
In preparing these financial statements for the year ended 31
March 2023, the Directors of the Company, being Maxwell Packe,
Christopher Burrows, Philippa Latham, Patrick Reeve, and Rhodri
Whitlock confirm that to the best of their knowledge:
-- summary financial information contained in this announcement and the full
Annual Report and Financial Statements for the year ended 31 March 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 financial
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 51 of the full Annual Report and Financial
Statements.
On behalf of the Board,
Maxwell Packe
Chairman
5 July 2023
Income statement
Year ended Year ended
31 March 2023 31 March 2022
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- ---- ------- ------- ------- ------- ------- -------
Gains on investments 3 - 4,535 4,535 - 21,636 21,636
Investment income 4 1,206 - 1,206 886 - 886
Investment Manager's fees 5 (236) (2,121) (2,357) (196) (3,696) (3,892)
Other expenses 6 (618) - (618) (549) - (549)
------- ------- ------- ------- ------- -------
Profit on ordinary activities before taxation 352 2,414 2,766 141 17,940 18,081
Tax on ordinary activities 8 - - - - - -
------- ------- ------- ------- ------- -------
Profit and total comprehensive income attributable
to shareholders 352 2,414 2,766 141 17,940 18,081
------- ------- ------- ------- ------- -------
Basic and diluted return per share (pence)* 10 0.39 2.64 3.03 0.19 23.78 23.97
------- ------- ------- ------- ------- -------
* adjusted for treasury shares
The accompanying notes below form an integral part of these
Financial Statements.
The total column of this Income statement represents the profit
and loss account of the Company. The supplementary revenue and
capital columns have been prepared under guidance published by The
Association of Investment Companies.
Balance sheet
31 March 31 March
2023 2022
Note GBP'000 GBP'000
---------------------------------------------------- ---- -------- --------
Fixed asset investments 11 95,798 80,842
Current assets
Trade and other receivables 13 2,561 10,725
Cash in bank and at hand 32,860 29,552
-------- --------
35,421 40,277
-------- --------
Payables: amounts falling due within one year
Trade and other payables less than one year 14 (1,489) (2,704)
-------- --------
Net current assets 33,932 37,573
-------- --------
Total assets less current liabilities 129,730 118,415
-------- --------
Equity attributable to equity holders
Called-up share capital 15 1,154 1,017
Share premium 25,520 8,278
Unrealised capital reserve 41,735 32,790
Realised capital reserve 10,885 17,416
Other distributable reserve 50,436 58,914
-------- --------
Total equity shareholders' funds 129,730 118,415
-------- --------
Basic and diluted net asset value per share (pence)* 16 128.60 132.28
---------------------------------------------------- ---- -------- --------
* excluding treasury shares
The accompanying notes below form an integral part of these
Financial Statements.
These Financial Statements were approved by the Board of
Directors and authorised for issue on 5 July 2023 and were signed
on its behalf by
Maxwell Packe
Chairman
Company number: 05990732
Statement of changes in equity
Called-up Unrealised Realised
share Share Capital redemption capital capital Other distributable
capital premium reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- --------- -------- ------------------- ---------- --------- ------------------- --------
On 1 April 2022 1,017 8,278 - 32,790 17,416 58,914 118,415
Profit/(loss) and total comprehensive income for the
year - - - 4,805 (2,391) 352 2,766
Transfer of previously unrealised losses on disposal
of investments - - - 4,140 (4,140) - -
Issue of equity 137 17,680 - - - - 17,817
Cost of issue of equity - (438) - - - - (438)
Purchase of own shares for treasury - - - - - (2,879) (2,879)
Dividends paid - - - - - (5,951) (5,951)
On 31 March 2023 1,154 25,520 - 41,735 10,885 50,436 129,730
----------------------------------------------------- --------- -------- ------------------- ---------- --------- ------------------- --------
On 1 April 2021 852 53,258 104 17,538 14,728 (1,082) 85,398
Profit and total comprehensive income for the year - - - 17,239 701 141 18,081
Transfer of previously unrealised gains on disposal
of investments - - - (1,987) 1,987 - -
Issue of equity 165 21,638 - - - - 21,803
Cost of issue of equity - (544) - - - - (544)
Reduction of share premium and capital redemption
reserve - (66,074) (104) - - 66,178 -
Purchase of own shares for treasury - - - - - (1,795) (1,795)
Dividends paid - - - - - (4,528) (4,528)
On 31 March 2022 1,017 8,278 - 32,790 17,416 58,914 118,415
----------------------------------------------------- --------- -------- ------------------- ---------- --------- ------------------- --------
* Included within these reserves is an amount of GBP22,964,000
(2022: GBP37,334,000) which is considered distributable. Over the
next four years an additional GBP35,819,000 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, GBP13,928,000
became distributable in line with this.
The accompanying notes below form an integral part of these
Financial Statements.
The nature of each reserve is described in note 2 below.
Statement of cash flows
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
------------------------------------------- -------------- --------------
Cash flow from operating activities
Investment income received 641 826
Dividend income received 152 -
Income from fixed term funds 102 1
Bank deposit interest 82 2
Investment Manager's fees paid (4,233) (2,084)
Other cash payments (626) (503)
Net cash flow used in operating activities (3,882) (1,758)
Cash flow from investing activities*
Purchase of fixed asset investments (12,455) (8,519)
Proceeds from disposals of fixed asset
investments 2,088 9,379
Net cash flow (used in)/investing activities (10,367) 860
Cash flow from financing activities
Issue of share capital 24,753 12,230
Cost of issue of equity** (53) (19)
Dividends paid*** (4,945) (3,806)
Purchase of own shares (including costs) (2,198) (2,384)
-------------- --------------
Net cash flow from financing activities 17,557 6,021
Increase in cash in bank and at hand 3,308 5,123
Cash in bank and at hand at start of the
year 29,552 24,429
-------------- --------------
Cash in bank and at hand at end of the year 32,860 29,552
* Purchases and disposals detailed above do not agree to note 11
due to restructuring of investments, conversion of convertible loan
stock and settlement of receivables and payables.
** The cost of issue of equity does not agree to the Statement
of changes in equity due to prospectus fundraising amounts being
received net of fees.
*** The equity dividends paid shown in the cash flow are
different to the dividends disclosed in the Statement of changes in
equity and note 9 as a result of the non-cash effect of the
Dividend Reinvestment Scheme and unclaimed dividends.
The accompanying notes below form an integral part of these
Financial Statements.
Notes to the Financial Statements
1. Accounting convention
The Financial Statements have been prepared in accordance with
applicable United Kingdom law and accounting standards, including
Financial Reporting Standard 102 ("FRS 102"), and with the
Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" ("SORP")
issued by The Association of Investment Companies ("AIC"). The
Financial Statements have been prepared on a going concern basis
and further details can be found in the Directors' report on page
45 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 in note 2 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 designated 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, including a discount for any
restricted sale of shares, or otherwise at fair value based on published
price quotations.
-- Unquoted investments, where there is not an active market, are valued
using an appropriate valuation technique in accordance with the IPEV
Guidelines. Indicators of fair value are derived using established
methodologies including earnings multiples, revenue multiples, the level
of third party offers received, cost or price of recent investment rounds,
net assets and industry valuation benchmarks. Where price of recent
investment is used as a starting point for estimating fair value at
subsequent measurement dates, this has been benchmarked using an
appropriate valuation technique permitted by the IPEV guidelines.
-- In situations where cost or price of recent investment is used,
consideration is given to the circumstances of the portfolio company
since that date in determining fair value. This includes consideration of
whether there is any evidence of deterioration or strong definable
evidence of an increase in value. In the absence of these indicators,
other valuation techniques are employed to conclude on the fair value as
at the measurement 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; or
-- a significant adverse change either in the portfolio company's
business or in the technological, market, economic, legal or
regulatory environment in which the business operates; or
-- market conditions have deteriorated, which may be indicated by a
fall in the share prices of quoted businesses operating in the
same or related sectors.
Investments are recognised as financial assets on legal
completion of the investment contract and are de-recognised on
legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value
movement of an investment, but is recognised separately as
investment income through the other distributable reserve when a
share becomes ex-dividend.
Current assets and payables
Receivables (including debtors due after more than one year),
payables and cash are carried at amortised cost, in accordance with
FRS 102. Debtors that meet the definition of a financing
transaction are 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 income
Fixed returns on non-equity shares and debt securities are
recognised when the Company's right to receive payment and expect
settlement is established. Where interest is rolled up and/or
payable at redemption then it is recognised as income unless there
is reasonable doubt as to its receipt.
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.
-- 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 in respect of the taxable profit
for the current period or past reporting periods using the tax
rates and laws that have been enacted or substantively enacted at
the financial reporting date. Taxation associated with capital
expenses is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at
the reporting date. Timing differences are differences between
taxable profits and total comprehensive income as stated in the
Financial Statements that arise from the inclusion of income and
expenses in tax assessments in periods different from those in
which they are recognised in the Financial Statements. As a VCT the
Company has an exemption from tax on capital gains. The Company
intends to continue meeting the conditions required to obtain
approval as a VCT for the foreseeable future. The Company
therefore, should have no material deferred tax timing differences
arising in respect of the revaluation or disposal of investments
and the Company has not provided for any deferred tax.
Share capital and reserves
Called-up share capital
This accounts for the nominal value of the Company's shares.
Share premium
This reserve accounts for the difference between the price paid
for the Company's shares and the nominal value of those shares,
less issue costs and transfers to the other distributable
reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share
capital is diminished through the repurchase and cancellation of
the Company's own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at
the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments, or
permanent diminutions in value (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 2013 to form a single reserve named other
distributable reserve.
This reserve accounts for movements from the revenue column of
the Income statement, the payment of dividends, the buy-back of
shares, 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 on investments
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
----------------------------------------------
Unrealised gains on fixed asset investments 4,805 17,239
Realised (losses)/gains on fixed asset
investments (582) 4,129
Unwinding of discount on deferred
consideration 312 268
4,535 21,636
-------------- --------------
4. Investment income
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
Loan stock interest 750 883
Dividend income 272 -
Income from fixed term funds 102 1
Bank deposit interest 82 2
1,206 886
-------------- --------------
5. Investment Manager's fees
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
Investment management fees charged to revenue 236 196
Investment management fees charged to capital 2,121 1,762
Performance incentive fee charged to capital - 1,934
-------------- --------------
2,357 3,892
-------------- --------------
Further details of the Management agreement under which the
investment management fee and performance incentive fee are paid is
given in the Strategic report above.
During the year, services of a total value of GBP2,595,000
(2022: GBP4,090,000) were purchased by the Company from Albion
Capital Group LLP ("Albion"); this includes GBP2,357,000 (2022:
GBP1,958,000) of management fee and GBP238,000 (2022: GBP198,000)
of administration fee. There is no performance incentive fee
payable in the year (2022: GBP1,934,000). At the financial year
end, the amount due to Albion in respect of these services
disclosed as accruals was GBP692,000 (2022: GBP2,562,000). 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 way of a reduction in management fees. During the
year, the management fee was reduced by GBP24,000 as a result of
this cap (2022: GBP22,000).
During the year, the Company was not charged by Albion in
respect of Patrick Reeve's services as a Director (2022:
GBPnil).
Albion, its partners and staff (including Patrick Reeve) held a
total of 799,999 shares in the Company on 31 March 2023.
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 GBP252,000 attributable to the
investments of the Company were received by Albion pursuant to
these arrangements (2022: GBP177,000).
The Company has entered into an offer agreement relating to the
Offers, pursuant to which Albion will receive a fee of 2.5% of the
gross proceeds of the Offers and out of which Albion will pay 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) 109 97
Auditor's remuneration for statutory audit services
(exclusive of VAT) 48 39
Administration fee 238 198
Other administrative expenses 223 215
-------------- --------------
618 549
-------------- --------------
7. Directors' fees
The amounts paid to and on behalf of the Directors during the
year are as follows:
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
Directors' fees 100 90
National insurance 9 7
109 97
-------------- --------------
The Company's key management personnel are the non-executive
Directors. Further information regarding Directors' remuneration
can be found in the Directors' remuneration report on pages 59 to
62 of the full Annual Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
31 March 2023 31 March 2022
GBP'000 GBP'000
- -
UK corporation tax charge in respect of current year
- -
-------------- --------------
Year ended Year ended
31 March 2023 31 March 2022
Factors affecting the tax charge: GBP'000 GBP'000
---------------------------------------------------
Profit on ordinary activities before taxation 2,766 18,081
-------------- --------------
Tax charge on profit at the average companies rate
of 19%
(2022: 19%) 526 3,435
Factors affecting the charge:
Non-taxable gains (862) (4,111)
Income not taxable (52) -
Excess management expenses carried forward 388 676
- -
-------------- --------------
The tax charge for the year shown in the Income statement is
lower than the average companies rate of corporation tax in the UK
of 19% (2022: 19%). The differences are explained above. From 1
April 2023, the Company's rate of corporation tax will increase
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 GBP13,671,000 (2022: GBP11,649,000) that are available for offset against future profits. A deferred tax asset of GBP3,418,000 (2022: GBP2,912,000) 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 2022
31 March 2023 GBP'000 GBP'000
-------------------------------------------------------
First dividend of 3.31p per share paid on 31 August
2022 (31 August 2021 -- 2.87p per share) 2,969 2,139
Second dividend of 3.18p per share paid on 28 February
2023 (28 February 2022 -- 3.22p per share) 2,985 2,391
Unclaimed dividends (3) (2)
5,951 4,528
---------------------- --------------
Details of the consideration issued under the Dividend
Reinvestment Scheme included in the dividends above can be found in
note 15.
In addition to the dividends summarised above, the Board has
declared a first dividend for the year ending 31 March 2024 of 3.22
pence per share to be paid on 31 August 2023 to shareholders on the
register on 4 August 2023. The total dividend will be approximately
GBP3,262,000.
10. Basic and diluted return per share
Year ended Year ended
31 March 2023 31 March 2022
Revenue Capital Total Revenue Capital Total
-------------------------------------------------------- ------- ------- ----- ------- ------- ------
Profit attributable to equity shares (GBP'000) 352 2,414 2,766 141 17,940 18,081
Weighted average shares in issue (adjusted for treasury
shares) 91,226,939 75,440,864
Return attributable per equity share (pence) 0.39 2.64 3.03 0.19 23.78 23.97
There are no convertible instruments, derivatives or contingent
share agreements in issue so basic and diluted return per share are
the same.
The weighted average number of shares is calculated after
adjusting for treasury shares of 14,558,366 (2022: 12,195,568).
11. Fixed asset investments
Investments held at fair value through profit or 31 March 2023 31 March 2022
loss GBP'000 GBP'000
---------------------------------------------------- ------------- -------------
Unquoted equity and preference shares 82,583 68,138
Unquoted loan stock 12,785 11,486
Quoted equity 430 1,218
------------- -------------
95,798 80,842
------------- -------------
31 March 2023 31 March 2022
GBP'000 GBP'000
---------------------------------------------------- ------------- -------------
Opening valuation 80,842 60,615
Purchases at cost 12,455 8,952
Disposal proceeds (1,831) (10,151)
Realised (losses)/gains (582) 4,129
Movement in loan stock revenue accrued income 109 58
Unrealised gains 4,805 17,239
------------- -------------
Closing valuation 95,798 80,842
------------- -------------
Movement in loan stock revenue accrued income
Opening accumulated loan stock revenue accrued
income 59 1
Movement in loan stock revenue accrued income 109 58
------------- -------------
Closing accumulated loan stock revenue accrued
income 168 59
------------- -------------
Movement in unrealised gains
Opening accumulated unrealised gains 32,791 17,539
Movement in unrealised gains 4,805 17,239
Transfer of previously unrealised losses/(gains) to
realised reserve on disposal of investments 4,140 (1,987)
------------- -------------
Closing accumulated unrealised gains 41,736 32,791
------------- -------------
Historic cost basis
Opening book cost 47,993 43,076
Purchases at cost 12,455 8,952
Disposals at cost (6,553) (4,035)
------------- -------------
Closing book cost 53,895 47,993
------------- -------------
Purchases and disposals detailed above do not agree to the
Statement of cash flows due to restructuring of investments,
conversion of convertible loan stock and settlement debtors and
creditors.
Unquoted fixed asset investments are valued at fair value in
accordance with the IPEV guidelines as follows:
31 March 31 March
2023 2022
Valuation methodology GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Cost and price of recent investment (calibrated and
reviewed for impairment) 52,243 39,353
Revenue multiple 29,005 26,204
Third party valuation -- Discounted cash flow 6,076 6,422
Third party valuation -- Earnings multiple 4,703 3,417
Earnings multiple 3,254 3,082
Net assets 87 1,146
95,368 79,624
----------- -----------
When using the cost or price of a recent investment in the
valuations, the Company looks to re-calibrate this price at each
valuation point by reviewing progress within the investment,
comparing against the initial investment thesis, assessing if there
are any significant events, milestones or other background to the
transaction that would indicate the value of the investment has
changed and considering whether a market-based methodology (i.e.
using multiples from comparable public companies) or a discounted
cashflow forecast would be more appropriate. The background to the
transaction is also considered when the price of investment may not
be an appropriate measure of fair value, for example,
disproportionate dilution of existing investors from a new investor
coming on board or the market conditions at the time of investment
no longer being a true reflection of fair value.
The main inputs into the calibration exercise, and for the
valuation models using multiples, are revenue, EBITDA and P/E
multiples (based on the most recent revenue, EBITDA or earnings
achieved and equivalent corresponding revenue, EBITDA or earnings
multiples of comparable companies), quality of earnings assessments
and comparability difference adjustments. Revenue multiples are
often used, rather than EBITDA or earnings, due to the nature of
the Company's investments, being in growth and technology companies
which are not normally expected to achieve profitability or scale
for a number of years. Where an investment has achieved scale and
profitability the Company would normally then expect to switch to
using an EBITDA or earnings multiple methodology.
In the calibration exercise and in determining the valuation for
the Company's equity instruments, comparable trading multiples are
used. In accordance with the Company's policy, appropriate
comparable companies based on industry, size, developmental stage,
revenue generation and strategy are determined and a trading
multiple for each comparable company identified is then calculated.
The multiple is calculated by dividing the enterprise value of the
comparable group by its revenue, EBITDA or earnings. The trading
multiple is then adjusted for considerations such as illiquidity,
marketability and other differences, advantages and disadvantages
between the portfolio company and the comparable public companies
based on company specific facts and circumstances.
Fair value investments had the following movements between
valuation methodologies between 31 March 2022 and 31 March
2023:
Change in valuation methodology (2022 to 2023) Value on Explanatory
31 March 2023 note
GBP'000
--------------------------------------------------- -------------- -----------
Cost and price of recent investment (calibrated and 3,343 More
reviewed for impairment) to revenue multiple appropriate
valuation
methodology
Price of recent investment to earnings multiple 3,254 More
appropriate
valuation
methodology
Net assets to third party valuation -- earnings 847 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, these are the most relevant
methods of valuation which would be reasonable on 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
fair value through profit or loss in a fair value hierarchy. The
table below sets out fair value hierarchy definitions using FRS102
s.11.27.
Fair value hierarchy Definition
-------------------- ----------------------------------------------------
Level 1 Unadjusted quoted prices in an active market
-------------------- ----------------------------------------------------
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
-------------------- ----------------------------------------------------
Level 3 Inputs to valuations not based on observable market
data
-------------------- ----------------------------------------------------
Quoted investments are valued according to Level 1 valuation
methods. Unquoted equity, preference shares and loan stock are all
valued according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3)
had the following movements:
31 March 2023 31 March 2022
GBP'000 GBP'000
---------------------------------- -------------
Opening balance 79,624 60,615
Additions 12,455 8,952
Movement from Level 3 to Level 1* - (573)
Disposals (1,430) (10,151)
Realised (losses)/gains (403) 4,129
Accrued loan stock interest 109 58
Unrealised gains 5,013 16,594
------------- -------------
Closing balance 95,368 79,624
------------- -------------
* This relates to Arecor Therapeutics PLC, which listed on the
AIM stock exchange during the prior year.
The Directors are required to consider the impact of changing
one or more of the inputs used as part of the valuation process to
reasonable possible alternative assumptions. 66% of the portfolio
of investments, consisting of equity and loan stock, is based on
recent investment price, discounted offer price, net assets and
cost. For the remainder of the portfolio, the Board has considered
the reasonable possible alternative input assumptions on the
valuation of the portfolio and believes that changes to inputs (by
adjusting the earnings and revenue multiples) could lead to a
change in the fair value of the portfolio. The Board has reviewed
the Manager's adjusted inputs for a number of the largest portfolio
companies (by value) which covers 22% of the portfolio. This has
resulted in a total coverage of 88% of the portfolio of
investments.
The main inputs considered for each type of valuation is as
follows:
Change in
fair value
Change of Change in NAV
in investments (pence per
Valuation technique Portfolio company sector Input Base Case* input (GBP'000) share)
--------------------------------------------- ------------------------------------------ --------------------------------------------- ------------------- ------ ----------- -----------------
Revenue multiple Other software & technology Revenue multiple 4.6x +0.5x 1,294 1.47
--------------------------------------------- ------------------------------------------ --------------------------------------------- ------------------- ------ ----------- -----------------
-0.5x (1,294) (1.10)
---------------------------------------------------------------------------------------------------------------------------------------------------------- ------ ----------- -----------------
Revenue multiple Healthcare (including digital healthcare) Revenue multiple 5.5x +0.6x 617 0.61
--------------------------------------------- ------------------------------------------ --------------------------------------------- ------------------- ------ ----------- -----------------
-0.6x (617) (0.61)
---------------------------------------------------------------------------------------------------------------------------------------------------------- ------ ----------- -----------------
Third party valuation -- discounted cashflow Renewable energy Third party valuation -- discounted cashflow 6.0% discount rate +0.6% 159 0.16
--------------------------------------------- ------------------------------------------ --------------------------------------------- ------------------- ------ ----------- -----------------
-0.6% (209) (0.21)
---------------------------------------------------------------------------------------------------------------------------------------------------------- ------ ----------- -----------------
*As detailed in the accounting policies above, the base case is
based on market comparables, discounted where appropriate for
marketability, in accordance with the IPEV guidelines.
The impact of these changes could result in an overall increase
in the valuation of the equity investments by GBP2,257,000 (2.7%)
or a decrease in the valuation of equity investments by
GBP1,932,000 (2.3%).
12. Significant interests
The principal activity of the Company is to select and hold a
portfolio of investments in unquoted securities. Although the
Company, through the Manager, will, in some cases, be represented
on the board of the portfolio company, it will not ordinarily take
a controlling interest or become involved in the management. The
size and structure of the companies with unquoted securities may
result in certain holdings in the portfolio representing a
participating interest without there being any partnership, joint
venture or management consortium agreement. The investment listed
below is held as part of an investment portfolio and therefore, as
permitted by FRS 102 section 9.9B, it is measured at fair value
through profit and loss and not accounted for using the equity
method.
The Company has interests of greater than 20% of the nominal
value of any class of the allotted shares in the portfolio company
on 31 March 2023 as described below:
Registered % class
address and and % total
country of Profit/(loss) before tax Aggregate capital and reserves share voting
Company incorporation GBP'000 GBP'000 Result for year ended type rights
------------ -------------- ------------------------- ------------------------------ ---------------------- -------- -------
Greenenerco 28.6% A
Limited EC1M 5QL, UK n/a* 407 31 March 2022 Ordinary 28.6%
------------ -------------- ------------------------- ------------------------------ ---------------------- -------- -------
*Filleted accounts which do not disclose this information.
13. Trade and other receivables
31 March 2023 31 March 2022
GBP'000 GBP'000
-------------------------------------- ------------- -------------
Deferred consideration under one year 2,226 488
Deferred consideration over one year - 1,867
Prepayments and accrued income 29 26
Other receivables 306 8,344
2,561 10,725
------------- -------------
The deferred consideration over one year in the prior 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 large decrease in other debtors compared to the prior year
is a result of an amount of GBP8,342,000 being owed to the Company
in respect of the allotment of shares that took place on 31 March
2022 which was received on 1 April 2022.
The Directors consider that the carrying amount of receivables
is not materially different to their fair value.
14. Payables: amounts falling due within one year
31 March 2023 31 March 2022
GBP'000 GBP'000
----------------------------- -------------
Accruals and deferred income 787 2,662
Trade payables 702 42
1,489 2,704
------------- -------------
The Directors consider that the carrying amount of payables is
not materially different to their fair value.
15. Called-up share capital
Allotted, called-up and fully paid shares: GBP'000
----------------------------------------------------
101,711,805 Ordinary shares of 1 penny each at 31
March 2022 1,017
13,723,611 Ordinary shares of 1 penny each issued
during the year 137
---------------------------------------------------- -------
115,435,416 Ordinary shares of 1 penny each at 31
March 2023 1,154
---------------------------------------------------- -------
12,195,568 Ordinary shares of 1 penny each held in
treasury at 31 March 2022 (122)
2,362,798 Ordinary shares of 1 penny each purchased
during the year to be held in treasury (24)
---------------------------------------------------- -------
14,558,366 Ordinary shares of 1 penny each held in
treasury at 31 March 2023 (146)
---------------------------------------------------- -------
Voting rights of 100,877,050 Ordinary shares of 1
penny each at 31 March 2023 1,009
---------------------------------------------------- -------
The Company purchased 2,362,798 shares (2022: 1,482,148) to be
held in treasury at a nominal value of GBP23,628 and a cost of
GBP2,879,000 (2022: GBP1,795,000) representing 2.0% of the shares
in issue on 31 March 2023, leading to a balance of 14,558,366
shares (2022: 12,195,568) in treasury representing 12.6% (2022:
12.0%) of the shares in issue on 31 March 2023.
Under the terms of the Dividend Reinvestment Scheme Circular
(dated 26 November 2009), the following new Ordinary shares of
nominal value 1 penny each were allotted during the year:
Aggregate
nominal value Net
Date of Number of of shares Issue price invested Opening market price on allotment date (pence per
allotment shares allotted (GBP'000) (pence per share) (GBP'000) share)
---------- ---------------- -------------- ------------------ ---------- -------------------------------------------------
31 August
2022 410,130 4 126.89 503 120.50
28
February
2023 404,464 4 119.83 465 113.50
---------------- ----------
814,594 968
---------------- ----------
During the year the following new Ordinary shares of nominal
value 1 penny each were allotted under the terms of the Albion VCTs
Prospectus Top Up Offers 2021/22 and 2022/23:
Aggregate Net
nominal value consideration
Date of Number of of shares Issue price received Opening market price on allotment date (pence per
allotment shares allotted (GBP'000) (pence per share) (GBP'000) share)
---------- ---------------- -------------- ------------------ -------------- -------------------------------------------------
11 April
2022 133,797 1 131.70 174 122.50
11 April
2022 17,745 - 132.40 23 122.50
11 April
2022 492,987 5 133.00 639 122.50
2 December
2022 1,144,527 11 129.00 1,454 120.50
2 December
2022 245,176 2 129.60 311 120.50
2 December
2022 3,289,782 33 130.30 4,180 120.50
31 March
2023 7,585,003 76 130.20 9,629 120.50
12,909,017 16,410
---------------- --------------
16. Basic and diluted net asset value per share
31 March 2023 31 March 2022
(pence per share) (pence per share)
---------------------------------------- ----------------- -----------------
Basic and diluted net asset value per
Ordinary share 128.60 132.28
The basic and diluted net asset value per share at the year end
is calculated in accordance with the Articles of Association and is
based upon total shares in issue (excluding treasury shares) of
100,877,050 Ordinary shares at 31 March 2023 (2022:
89,516,237).
17. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in
note 15. The Company is permitted to buy-back its own shares for
cancellation or treasury purposes, and this is described in the
Chairman's statement.
The Company's financial instruments comprise equity and loan
stock investments in unquoted and quoted companies, deferred
receipts on disposal of fixed asset investments, cash balances and
receivables and payables which arise from its operations. The main
purpose of these financial instruments is to generate cash flow and
revenue and capital appreciation for the Company's operations. The
Company has no gearing or other financial liabilities apart from
short term payables. The Company does not use any derivatives for
the management of its Balance sheet.
The principal financial instrument 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 GBP9,580,000. 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
GBP19,160,000. Further sensitivity analysis on fixed asset
investments is included in note 11.
Investment risk (including investment price risk)
Investment risk (including investment price risk) is the risk
that the fair value of future investment cash flows will fluctuate
due to factors specific to an investment instrument or to a market
in similar instruments. The management of risk within the venture
capital portfolio is addressed through careful investment
selection, by diversification across different industry segments,
by maintaining a wide spread of holdings in terms of financing
stage and by limitation of the size of individual holdings. The
Manager receives management accounts from portfolio companies and
members of the investment management team often sit on the boards
of unquoted portfolio companies; this enables the close
identification, monitoring and management of investment risk. The
Directors monitor the Manager's compliance with the investment
policy, review and agree policies for managing this risk and
monitor the overall level of risk on the portfolio on a regular
basis.
Valuations are based on the most appropriate valuation
methodology for an investment within its market, with regard to the
financial health of the investment and the IPEV Guidelines. Details
of the industries in which investments have been made are contained
in the pie chart at the end of this announcement.
The maximum investment risk on the balance sheet date is the
value of the fixed asset investment portfolio which is
GBP95,798,000 (2022: GBP80,842,000). Fixed asset investments form
74% of the net asset value on 31 March 2023 (2022: 68%).
More details regarding the classification of fixed asset
investments are shown in note 11.
Interest rate risk
It is the Company's policy to accept a degree of interest rate
risk on its financial assets through the effect of interest rate
changes. On the basis of the Company's analysis, it was estimated
that a rise of 1% in all interest rates would have increased total
return before tax for the year by approximately GBP312,000 (2022:
GBP270,000). Furthermore, it was considered that a material 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 unquoted loan stock during the year was approximately
7.8% (2022: 9.8%). The weighted average period to expected maturity
for the unquoted loan stock is approximately 3.6 years (2022: 4.0
years).
The Company's financial assets and liabilities, all denominated
in pounds sterling, consist of the following:
31 March 2023 31 March 2022
Non- Non-
Fixed Floating interest Fixed Floating interest
rate rate bearing Total rate rate bearing Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- -------- -------- --------- -------- -------- -------- --------- --------
Unquoted
equity - - 82,583 82,583 - - 68,138 68,138
Quoted equity - - 430 430 - - 1,218 1,218
Unquoted loan
stock 11,833 - 952 12,785 9,934 - 1,552 11,486
Receivables* - - 2,532 2,532 - - 10,699 10,699
Current
liabilities - - (1,489) (1,489) - - (2,704) (2,704)
Cash - 32,860 - 32,860 - 29,552 - 29,552
11,833 32,860 85,008 129,701 9,934 29,552 78,903 118,389
-------- -------- --------- -------- -------- -------- --------- --------
*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. For investments made prior to 6 April
2018, which account for 63% of loan stock by value, typically loan
stock instruments have a fixed or floating charge, which may or may
not have been subordinated, over the assets of the portfolio
company in order to mitigate the gross credit risk.
The Manager receives management accounts from portfolio
companies, and members of the investment management team often sit
on the boards of unquoted portfolio companies; this enables the
close identification, monitoring and management of
investment-specific credit risk.
The Manager and the Board formally review credit risk (including
receivables) and other risks, both at the time of initial
investment and at quarterly Board meetings.
The Company's total gross credit risk on 31 March 2023 was
limited to GBP12,785,000 (2022: GBP11,486,000) of unquoted loan
stock instruments, GBP32,860,000 (2022: GBP29,552,000) of cash
deposits with banks and GBP2,561,000 (2022: GBP10,725,000) of other
receivables.
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 plc), Barclays Bank plc, Bank of
Montreal, and National Westminster Bank plc. Credit risk on cash
transactions was mitigated by transacting with counterparties that
are regulated entities subject to prudential supervision, with high
credit ratings assigned by international credit-rating
agencies.
The credit profile of unquoted loan stock is described under
liquidity risk below.
Liquidity risk
Liquid assets are held as cash on current account, cash on
deposit or short term money market account. Under the terms of its
Articles, the Company has the ability to borrow up to 10% of its
adjusted share capital and reserves of the latest published audited
Balance sheet, which amounts to GBP12,647,000 (2022: GBP11,543,000)
on 31 March 2023.
The Company has no committed borrowing facilities on 31 March
2023 (2022: nil) and had cash of GBP32,860,000 (2022:
GBP29,552,000). The main cash outflows are for new investments,
share buy-backs and dividend payments, which are within the control
of the Company. The Manager formally reviews the cash requirements
of the Company on a monthly basis, and the Board on a quarterly
basis as part of its review of management accounts and forecasts.
All the Company's financial liabilities are short term in nature
and total GBP1,489,000 on 31 March 2023 (2022: GBP2,704,000).
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 5,148 87 - 5,235 4,811 - 70 4,881
1-2 years 2,121 - - 2,121 94 - 2 96
2-3 years 664 - - 664 2,092 - 3 2,095
3-5 years 1,868 - - 1,868 1,894 - - 1,894
Greater
than 5
years 2,897 - - 2,897 2,520 - - 2,520
---------------- -------- ----------------- ---------------- -------- ----------------- --------
Total 12,698 87 - 12,785 11,411 - 75 11,486
---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
Loan stock can be past due as a result of interest or capital
not being paid in accordance with contractual terms.
The cost of loan stock investments valued below cost is GBPnil
(2022: GBP544,000).
The Company does not hold any assets as the result of the
enforcement of security during the period, and believes that the
carrying values for both those valued below cost and past due
assets are covered by the value of security held for these loan
stock investments.
In view of the availability of adequate cash balances and the
repayment profile of loan stock investments, the Board considers
that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities on 31 March
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, in accordance with FRS 102. There are no
financial liabilities other than payables. The Company's financial
liabilities are all non-interest bearing. It is the Directors'
opinion that the book value of the financial liabilities is not
materially different to the fair value and all are payable within
one year.
18. Commitments and contingencies
On 31 March 2023, the Company had no financial commitments
(2022: GBPnil).
There were no contingent liabilities or guarantees given by the
Company on 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:
Number Aggregate
of nominal Net
Date of shares value of consideration
allotment allotted shares Issue price (pence per received Opening market price on allotment date
(GBP'000) share) (GBP'000) (pence per share)
---------- -------- --------- ----------------------- ------------- ---------------------------------------
14 April
2023 66,837 1 128.90 85 120.50
14 April
2023 37,836 - 129.50 48 120.50
14 April
2023 311,202 3 130.20 395 120.50
415,875 528
-------- -------------
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 to 62 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/AAEV, where the Report can be accessed as
a PDF document via a link in the 'Financial Reports and Circulars'
section.
Attachment
-- Pie charts
https://ml-eu.globenewswire.com/Resource/Download/1c145571-392a-41e3-8703-afca6de4884f
(END) Dow Jones Newswires
July 05, 2023 10:44 ET (14:44 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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