TIDMCRWN
Crown Place VCT PLC
LEI number: 213800SYIQPA3L3T1Q68
As required by the UK Listing Authority's Disclosure Guidance
and Transparency Rules 4.1 and 6.3, Crown Place VCT PLC today makes
public its information relating to the Annual Report and Financial
Statements for the year ended 30 June 2023.
This announcement was approved for release by the Board of
Directors on 11 October 2023.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 30
June 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/CRWN/30Jun23.pdf.
Investment policy
The Company invests in a broad portfolio of smaller, unquoted
growth businesses across a variety of sectors including higher risk
technology companies. Investments take the form of equity or a
mixture of equity and loans.
Whilst allocation of funds is determined by the investment
opportunities which are available, efforts are made to ensure that
the portfolio is diversified both in terms of sector and stage of
maturity of investee businesses. Funds held pending investment or
for liquidity purposes will be held principally as cash on
deposit.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses
within Venture Capital Trust qualifying industry sectors using a
mixture of securities, as permitted. The maximum amount which the
Company will invest in a single portfolio company is 15% of the
Company's assets at cost thus ensuring a spread of investment risk.
The value of an individual investment may increase over time as a
result of trading progress and it is possible that it may grow in
value to a point where it represents a significantly higher
proportion of total assets prior to a realisation opportunity being
available.
The Company's maximum exposure in relation to gearing is
restricted to the amount of its adjusted share capital and
reserves. The Directors do not have any intention of utilising
long-term gearing.
Financial calendar
3 November 2023 Record date for first dividend
Noon on 22 November Annual General Meeting
2023
30 November 2023 Payment date of first dividend
March 2024 Announcement of Half-yearly results for the six months
ending 31 December 2023
28 March 2024 Payment date of second dividend (subject to Board
approval)
Financial highlights
1.06p 3.15% 1.63p 33.13p
Increase in total shareholder value per share for Total return uplift on opening net asset value per Total tax-free dividends per share paid during the Net asset value per share as at 30 June 2023 (2022:
the year ended 30 June 2023 (2022: 2.12p) share (2022: 6.10%) year ended 30 June 2023 (2022: 3.21p) 33.70p)
These are considered Alternative Performance Measures, see notes
2 and 3 of the Strategic report below for further explanation.
Movements in net asset value
30 June 2023 30 June 2022
pence per share pence per share
Opening net asset value 33.70 34.79
Capital return 0.92 1.95
Revenue return 0.13 0.14
--------------- ---------------
Total return 1.05 2.09
Dividends paid (1.63) (3.21)
Impact of share capital movements 0.01 0.03
Closing net asset value 33.13 33.70
---------------------------------- --------------- ---------------
Total shareholder value
Shareholder return and shareholder value (pence per share)
Shareholder return from launch to April 2005:
Total dividends paid to 6 April 2005(i) 24.93
Decrease in net asset value (56.60)
-----------------
Total shareholder return to 6 April 2005 (31.67)
-----------------
Shareholder return from April 2005 to 30 June 2023
(period that Albion Capital has been investment manager):
Total dividends paid 43.25
Decrease in net asset value (10.27)
-----------------
Total shareholder return from April 2005 to 30 June
2023 32.98
-----------------
Shareholder value since launch:
Total dividends paid to 30 June 2023(i) 68.18
Net asset value as at 30 June 2023 33.13
-----------------
Total shareholder value as at 30 June 2023 101.31
-----------------
Note
(i) Prior to 6 April 1999, Venture Capital Trusts were able to add 20% to dividends and figures for the period up until 6 April 1999 are included at the gross equivalent rate actually paid to shareholders.
A more detailed breakdown of the dividends paid per year can be
found at www.albion.capital/funds/CRWN under the 'Dividend History'
section.
In addition to the dividends paid above, the Board has declared
a first dividend for the year ending 30 June 2024 of 0.83 pence per
share payable on 30 November 2023 to shareholders on the register
on 3 November 2023.
Chairman's statement
Introduction
The year saw the Company's portfolio facing a challenging
macroeconomic and geopolitical backdrop due to high inflation,
rising interest rates and political instability which has caused
the valuation of quoted technology companies to fall sharply. In
spite of this, I am pleased to report an increase in total
shareholder value of 1.06 pence per share for the year ended 30
June 2023, representing a 3.1% uplift on the opening net asset
value.
Although the Company's portfolio faces uncertainties, the Board
remains encouraged by the progress that is being made by many of
the portfolio companies. The Board recognises the importance of
evaluating the Company's returns over the longer-term, as a venture
capital portfolio can, by its nature, experience periods of short
term volatility.
Results and dividends
As at 30 June 2023, the net asset value ("NAV") was GBP94.0
million or 33.13 pence per share compared with GBP85.8 million or
33.70 pence per share at 30 June 2022. The continuing progress of a
number of our portfolio companies is discussed later in this
statement and in the Strategic report below.
In line with the dividend policy targeting payment of around
5.0% of NAV per annum, the Company paid ordinary dividends of 1.63
pence per share during the year to 30 June 2023, which equates to
4.8% of the opening NAV (30 June 2022: 3.21 pence per share, which
included a special dividend of 1.50 pence per share).
The Board is pleased to declare a first dividend for the year
ending 30 June 2024 of 0.83 pence per share, representing 2.5% of
the prevailing NAV, to be paid on 30 November 2023 to shareholders
on the register on 3 November 2023.
Investment performance and progress
Our portfolio has performed well despite the global
uncertainties faced, and this has contributed to the total uplift
in value of GBP3.8 million to the Company's investments for the
year (30 June 2022: GBP6.4 million). Quantexa, the largest company
within our portfolio (18% of net asset value), was the main
contributor to the net gain, increasing its value by GBP6.8 million
following an externally led $129 million Series E fundraising which
completed in April 2023. Other unrealised gains in the year, again
driven by strong trading and revenue growth, included Convertr of
GBP0.6 million and Solidatus of GBP0.5 million. These gains were
partially offset by write downs in Black Swan which decreased by
GBP1.5 million, uMotif by GBP0.9 million and Oviva by GBP0.8
million.
The Company realised disposal proceeds of GBP0.7 million (2022:
GBP7.2 million). The largest disposals being a part disposal of our
shareholding in our AIM quoted investment, Arecor Therapeutics PLC
(GBP0.3 million) and an exit of Zift (GBP0.2 million). There were
also several investments written off during the year, however their
valuations had already been substantially reduced in previous years
and had little impact on the return for the year. 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, Proveca and Radnor House are valued at GBP24.8 million
and represent 26.4% of the Company's net asset value. The company
regularly monitors its concentration risk and as announced on 6
October 2023, the Company sold GBP1.2 million of its holding in
Quantexa at its current valuation to reduce its concentration
risk.
The Company has been an active investor during the year with
GBP7.9 million invested in 11 new and 11 existing portfolio
companies. The new portfolio companies are expected to require
further investment as the companies prove themselves and grow. The
following are the five largest new investments:
-- GBP1.2 million into Peppy Health, a platform providing expert support for
underserved areas of health and wellness (e.g. menopause) via content,
video, chat support as an employment benefit for employees
-- GBP1.0 million into Toqio FinTech Holdings 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
-- GBP0.6 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
-- GBP0.5 million into OutThink, a software platform to measure and manage
human risk enterprises
-- GBP0.4 million into Neurofenix, a platform providing neurorehabilitation
for patients recovering from stroke, TBI and spinal cord injury
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.
Board composition
I have had the privilege of serving as a Director of the Company
for nine years, including three as Chairman, and I will retire at
the Annual General Meeting in November 2023. I am delighted that
James Agnew, an existing Board member, will succeed me as
Chairman.
Following a formal selection process and as part of its ongoing
succession planning, the Board is pleased to welcome Tony Ellingham
who joined the Board on 1 September 2023.
When James Agnew becomes Chairman of the Board, Tony Ellingham
will become the Chairman of the Audit and Risk Committee; Pam
Garside will become the Senior Independent Director; and Ian Spence
will become Chairman of the Remuneration Committee.
Risks and uncertainties
The Company faces a number of significant risks, including
higher interest rates, high levels of inflation, the ongoing impact
of geopolitical tensions, and an expected period of economic
stagnation in the UK and other markets. This complex backdrop is
factored into how the Company is managed, including in its
management of cash.
Our investment portfolio, while concentrated mainly in the
technology and healthcare sectors, remains diversified in terms of
both sub-sector and stage of maturity and, importantly, we believe
it to be appropriately valued.
The Manager is continually assessing the exposure to these risks
for each portfolio company and appropriate actions, where possible,
are being implemented. This includes the potential provision of
further financial support to portfolio companies where
necessary.
A detailed analysis of the principal risks and uncertainties
facing the business is shown in the Strategic report below.
Share buy-backs and reserves
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 net asset value, so far as market
conditions and liquidity permit.
The Company also manages a relatively high level of
distributable reserves which can be used for share buy-backs and
the payment of dividends. As in the past, the Company has sought
authority from shareholders for the reclassification of the share
premium account to create additional distributable reserves, which
is being done again this year as explained on page 50 of the full
Annual Report and Financial Statements.
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. On 10 March
2023 the Offer was fully subscribed and closed to further
applications raising GBP11.5 million including the overallotment
facility. The Board was pleased to see the high level of demand for
the Company's shares from existing and new shareholders.
The proceeds raised by the Company pursuant to the Offer are
added to the liquid resources available for investment, positioning
the Company to take advantage of new investment opportunities.
Details on the share allotments during the year can be found in
note 15.
Annual General Meeting
The AGM will be held virtually at noon on 22 November 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=WSPL3PsKQpVgHgi34lz4BhXCw41y2PVNeuFErgbMNUby5JTYS5JTEd9sSd8tNccfOxvS68bzq1D-8oa3MvZx9zCVNxEwvM3xpldJb2Ur0ujyWRxJgSTvxeeUKsv-Dyzh_7yjYNkWSBK9jPGYCt7gpA==
www.albion.capital/vct-hub/agms-events.
The Board welcomes questions from shareholders at the AGM and
shareholders will be able to ask questions using the Lumi platform
during the AGM. Alternatively, shareholders can email their
questions to crownchair@albion.capital
https://www.globenewswire.com/Tracker?data=1SC--aAqqzzsbKdAfpwNjO3cXYCzWgykr1SUn6CUToSPxvWbZPPdU-6IVXWALxP1I3sE13HSyVhY7mF99WS78AZXlMDaW5BPRRPkJrTRTWVvxLm3kYuvlBzAUA24Mj2R
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 91 and 92, of the full
Annual Report and Financial Statements.
Audit tender process
Following a formal and rigorous audit tender process, the
intention is to appoint Johnston Carmichael LLP ("Johnston
Carmichael") as the new Auditor of the Company in October 2023.
Johnston Carmichael will conduct the audit of the Annual Report and
Financial Statements for the year ended 30 June 2024. Shareholders
will be asked to confirm the appointment of Johnston Carmichael at
the forthcoming Annual General Meeting. BDO conducted the audit of
the Annual Report and Financial Statements for the year ended 30
June 2023 and their report can be found on pages 64 to 70 of the
full Annual Report and Financial Statements. The Board would like
to express their gratitude to BDO for their diligent service over
16 years. Further details on the tender process can be found in the
Statement of corporate governance on page 56 of the full Annual
Report and Financial Statements.
Shareholder seminar
The next Shareholder Seminar will be held at the Royal College
of Surgeons, Lincoln's Inn Fields, London WC2A 3PE on 15 November
2023 and the Board will be delighted to see as many shareholders as
possible at the event. The Board and Manager are keen to interact
with shareholders and look forward to sharing with you further
portfolio updates, as well as answering any questions. Places are
limited and to reserve a place please email info@albion.capital
https://www.globenewswire.com/Tracker?data=M2FNmaJ_3sMgAXmJlwwtehUAGkjLY5Q36SEBhQgROPL8h5O5GfU_NInbpHEHJuGnZ30l8KQfSeM7_ginZ1e-Q7KeeLQetFvwzWjdm5tJ56c=
with subject heading "Shareholder Seminar" and include your full
name. You will receive an email confirmation of your place, subject
to availability.
More details are available on the Albion Capital website:
www.albion.capital.
Outlook and prospects
The Board is encouraged by the positive results for the year
just ended in what are uncertain times, principally outside the
Company's control. The Board believes the portfolio is well
diversified in terms of maturity and target sectors, many of which
do not depend on consumer sentiment. Therefore, the Board continues
to have confidence that the Company is well positioned in the
current economic environment to generate long term value for
shareholders.
Penny Freer
Chairman
11 October 2023
Strategic report
Crown Place VCT PLC (the "Company") is a Venture Capital Trust
and its investment policy can be found above.
Business model
As a Venture Capital Trust, the Company has no employees and has
outsourced the management of all its operations to Albion Capital
Group LLP, including secretarial and administrative services.
Further details of the Investment Management Agreement can be found
below.
Current portfolio sector allocation
The pie charts at the end of this announcement are a useful way
of showing the split of the portfolio valuation as at 30 June 2023
by: sector; stage of investment measured by revenues; and size
measured by number of employees. Details of the principal
investments made by the Company are shown in the Portfolio of
investments on pages 27 to 29 of the full Annual Report and
Financial Statements.
Direction of portfolio
The analysis of the Company's investment portfolio shows that it
is well diversified and spread across the FinTech, healthcare
(including digital healthcare), software and technology, renewable
energy, and education sectors.
Cash and net current assets are a significant proportion of the
portfolio at 28%. The main use of these funds will be to invest in
higher growth technology companies, and therefore the shift away
from asset based companies will continue. The funds will also be
used to pay dividends, buyback shares and for the operating
expenses of the Company. The Company has a significant speciality
in healthcare, FinTech and software investing, which account for
58% of the net asset value of the Company.
Results and dividends
GBP'000
--------------------------------------------------- ---------------------
Net revenue return for the year ended 30 June 2023 351
Net capital return for the year ended 30 June 2023 2,466
--------------------------------------------------- ---------------------
Total return for the year ended 30 June 2023 2,817
First dividend of 0.84 pence per share paid on 30
November 2022 (2,130)
Second dividend of 0.79 pence per share paid on 31
March 2023 (2,120)
Unclaimed dividends 13
--------------------------------------------------- ---------------------
Transferred from reserves (1,420)
--------------------------------------------------- ---------------------
Net assets as at 30 June 2023 93,969
--------------------------------------------------- ---------------------
Net asset value as at 30 June 2023 33.13 pence per share
--------------------------------------------------- ---------------------
The Company paid dividends totalling 1.63 pence per share during
the year ended 30 June 2023 (2022: 3.21 pence per share which
included a 1.50 pence per share special dividend). The dividend
objective of the Board is to provide shareholders with a regular
dividend flow. The Board declared a first dividend for the year
ending 30 June 2024 of 0.83 pence per share. This dividend will be
paid on 30 November 2023 to shareholders on the register on 3
November 2023.
As shown in the Company's Income statement below, the total
return for the year was 1.05 pence per share (2022: 2.09 pence per
share). The net asset value decreased to 33.13 pence per share
(2022: 33.70 pence per share). This decrease in net asset value was
primarily due to the payment of 1.63 pence per share of dividends
during the year, partly offset by the total return in the year.
Investment income has increased to GBP936,000 (2022:
GBP853,000). This is a result of bank interest and income from
fixed term funds increasing to GBP283,000 (2022: GBP17,000) as a
result of rising interest rates. Loan stock income decreased to
GBP569,000 (2022: GBP763,000) as the prior year included a large
payment of previously capitalised interest.
The gain on investments for the year was GBP3,846,000 (2022:
gain of GBP6,386,000). The key drivers of this gain are detailed in
the Chairman's statement above. A full analysis of the Portfolio of
investments can be seen on pages 27 to 29 of the full Annual Report
and Financial Statements.
The net cash flow for the Company has been a net outflow of
GBP3,018,000 for the year (2022: inflow of GBP598,000), reflecting
new investments, dividends paid, ongoing expenses and the buy-back
of shares, offset by disposal proceeds, loan stock income, and the
issue of new Ordinary shares under the Top Up Offer.
Review of the business and future changes
A detailed review of the Company's business during the year is
contained in the Chairman's statement above.
There is a continuing focus on growing the healthcare (including
digital healthcare), FinTech and software and other technology
sectors. The majority of these investment returns are delivered
through equity and capital gains and are expected to be the key
driver of success for the Company. Investment income, which is
received primarily from our renewable energy investments, is
expected to remain steady over the coming years.
Details of significant events which have occurred since the end
of the financial year are listed in note 19. Details of
transactions with the Manager are shown in note 5.
Future prospects
The Company's financial results for the year ended 30 June 2023
demonstrate that the portfolio remains well balanced across sectors
and risk classes, and is largely weathering the ongoing global
issues caused as a result of high levels of interest rates and
inflation, and other economic headwinds. Although there remains
much uncertainty, the Board considers that the current portfolio
and the pipeline of opportunities should enable the Company to
maintain a predictable stream of dividend payments to shareholders,
as well as delivering long term growth for shareholders. Further
details on the Company's outlook and prospects can be found in the
Chairman's statement above.
Key Performance Indicators ("KPIs") and Alternative Performance
Measures ("APMs")
The Directors believe that the following KPIs (some of which are
APMs), which are typical for Venture Capital Trusts, used in its
own assessment of the Company, will provide shareholders with
sufficient information to assess how effectively the Company is
applying its investment policy to meet its objectives. The
Directors are satisfied that the results shown in the following
KPIs and APMs give a good indication that the Company is achieving
its investment objective and policy. These are:
1. Total shareholder value relative to FTSE All Share Index total return
The graph on page 8 of the full Annual Report and Financial
Statements shows the Company's total shareholder value relative to
the FTSE All-Share Index total return, with dividends reinvested.
The FTSE All-Share Index is considered a reasonable benchmark as
the Company is classed as a generalist UK VCT investor, and this
index includes over 600 companies listed in the UK, including
small-cap, covering a range of sectors. Details on the performance
of the net asset value and return per share for the year are shown
in the Chairman's statement.
Total shareholder value increased by 1.06 pence per share to
101.31 pence per share (2022: 100.25) for the year ended 30 June
2023.
2. Movement in shareholder value in the year
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
---- ---- ---- ----- ----- ----- ------ ----- ---- ----
7.1% 4.5% 1.5% 14.0% 14.6% 11.3% (0.4%) 15.9% 6.1% 3.1%
---- ---- ---- ----- ----- ----- ------ ----- ---- ----
Methodology: Calculated as the movement in total shareholder
value for the year divided by the opening net asset value.
3. Dividend distributions
Dividends paid in respect of the year ended 30 June 2023 were
1.63 pence per share (2022: 3.21 pence per share, which included a
special dividend of 1.50 pence per share). Cumulative dividends
paid since launch (on 18 January 1998) amount to 68.18 pence per
share.
4. Ongoing charges
The ongoing charges ratio for the year ended 30 June 2023 was
2.20% (2022: 2.18%). 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, but excluding any performance incentive
fees) as a percentage of the average net assets attributable to
shareholders. The Directors expect the ongoing charges ratio for
the year ahead to remain stable at approximately 2.20%.
5. 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 30 June 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 the adjusted share
capital and reserves. The Directors do not currently have any
intention to utilise gearing for the Company.
Operational arrangements
The Company has delegated the investment management of the
portfolio to the Manager, Albion Capital Group LLP, which is
authorised and regulated by the Financial Conduct Authority. The
Manager also provides company secretarial and other accounting and
administrative support to the Company.
Investment Management Agreement
Under the Investment Management Agreement ("IMA"), the Manager
provides investment management, secretarial and administrative
services to the Company. The IMA can be terminated by either party
on 12 months' notice and is subject to earlier termination in the
event of certain breaches or on the insolvency of either party. The
Manager is paid an annual fee equal to 1.75% of the net asset value
of the Company, and an annual secretarial and administrative fee of
GBP50,000 per annum. Total annual expenses, including the
management fee, are limited to 3% 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.
Management performance incentive fee
In order to align the interests of the Manager and shareholders
with regards to generating positive returns, the Manager is
entitled to charge an incentive fee in the event that the returns
exceed minimum target levels. Under the incentive arrangements, 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 hurdle requires that the growth of the aggregate
of the net asset value per share and dividends paid by the Company
or declared by the Board and approved by the shareholders during
the relevant period (both revenue and capital), compared with the
previous accounting date, exceeds the average base rate of the
Royal Bank of Scotland plc plus 2.0%. If the target return is not
achieved in a period, the cumulative shortfall is carried forward
to the next accounting period and has to be made up before an
incentive fee becomes payable.
For the year ended 30 June 2023, the aggregate of the net asset
value per share and dividends paid by the Company or declared by
the Board and approved by the shareholders during the relevant
period amounted to 34.76 pence per share, compared to a hurdle of
35.69 pence per share. As a result, no performance incentive fee is
payable to the Manager (2022: GBP584,000).
Investment and co-investment
The Company co-invests with other Venture Capital Trusts and
funds managed by the Manager. Allocation of investments is on the
basis of an allocation agreement which is based, inter alia, on the
ratio of funds available for investment.
Evaluation of the Manager
The Board has evaluated the performance of the Manager based
on:
-- the returns generated by the Company;
-- the continuing achievement of the HMRC tests for VCT status;
-- the long term prospects of the current portfolio of investments;
-- the management of treasury, including use of buy-backs and participation in fund raising; and
-- benchmarking the performance of the Manager to other service providers including the performance of other VCTs that the Manager is responsible for managing.
The Board believes that it is in the interests of shareholders
as a whole, and of the Company, to continue the appointment of the
Manager for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board appointed the Manager as the Company's AIFM in 2014 as
required by the AIFMD. The Manager is a full-scope Alternative
Investment Fund Manager under the AIFMD. Ocorian Depositary (UK)
Limited is the appointed Depositary and oversees the custody and
cash arrangements and provides other AIFMD duties with respect to
the Company.
Consumer duty
The Consumer Duty came into effect from 31 July 2023. These new
rules set a higher standard of consumer protection in financial
services. The Manager as AIFM is within scope of the FCA's Consumer
Duty, but the Company itself is not.
The Manager is a manufacturer of the Company's shares as it is a
firm that has some influence over design and distribution of the
Company's share product. The Manager's first assessment of value
for the Company's shares was completed in April 2023. The value
assessment concluded that the Company provides fair value for
shareholders.
Where the Manager concludes that changes will help deliver good
outcomes for consumers, it will recommend these changes to the
Board.
Companies Act 2006 Section 172 Reporting
Under Section 172 of the Companies Act 2006, the Board has a
duty to promote the success of the Company for the benefit of its
members as a whole in both the long and short term, having regard
to the interests of other stakeholders in the Company, such as
suppliers, and to do so with an understanding of the impact on the
community and environment and with high standards of business
conduct, which includes acting fairly between members of the
Company.
The Board is very conscious of these wider responsibilities in
the ways it promotes the Company's culture and ensures, as part of
its regular oversight, that the integrity of the Company's affairs
is foremost in the way the activities are managed and promoted.
This includes regular engagement with the wider stakeholders of the
Company and being alert to issues that might damage the Company's
standing in the way that it operates. The Board works very closely
with the Manager in reviewing how stakeholder issues are handled,
ensuring good governance and responsibility in managing the
Company's affairs, as well as visibility and openness in how the
affairs are conducted.
The Company is an externally managed investment company with no
employees, and as such has nothing to report in relation to
employee engagement but does keep close attention to how the Board
operates as a cohesive and competent unit. The Company also has no
customers in the traditional sense and, therefore, there is also
nothing to report in relation to relationships with customers.
The table that follows sets out the key stakeholders, details
how the Board has engaged with these key stakeholders, and the
effect of these considerations on the Company's decisions and
strategies during the year.
Engagement with Stakeholder 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 Disclosure Guidance and Transparency Rules across the country, and gave shareholders the
("DTRs") covering such things as the publication of a opportunity to ask questions and vote during the
Prospectus virtual AGM last year. The virtual medium helps
-- Albion Capital website, social media pages, as well facilitate greater shareholder participation and to
as publishing Albion News shareholder magazine help those who are unable to attend the AGM in person
,
as well as provide a recording of the event for
Shareholders to watch on demand.
-- Shareholders are also encouraged to attend the in
person annual Shareholder Seminar. Last year's event
took place on 23 November 2022. The seminar included
portfolio companies sharing insights into their
businesses and also a Q&A from Albion executives on
some of the key factors affecting the investment
outlook, as well as a review of the past year and the
plans for the year ahead. Representatives of the
Board attended the seminar. The Board considers this
an important interactive event and invites
shareholders to attended this year's event scheduled
for 15 November 2023 at the Royal College of
Surgeons. To reserve your place email
info@albion.capital with your full name.
-- 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 4.8% on
opening net asset value.
-- During the year, the Board made the decision to
participate in the Albion Prospectus Top Up Offer,
launched on 10 October 2022, in order to raise funds
for deployment into new and existing portfolio
companies. The Board carefully considered whether
further funds were required, whether the VCT tests
would continue to be met, and whether it would be in
the interest of Shareholders, before agreeing to
publish the Prospectus. On allotment, an issue price
formula based on the prevailing net asset value 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. The Board has
therefore proposed a special resolution at the 2023
AGM to increase the Company's distributable reserves
by way of a reduction of the share premium account.
This will provide flexibility, if it is required, for
the Company to make buy backs and dividend payments.
Further details on this can be found in the
Chairman's Statement above.
-- Shareholders can contact the Chairman using the email
crownchair@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 Environment, Social and Governance ("ESG") investments. All strategic decisions are discussed in
practice. detail and minuted, with an open dialogue between the
Board and the Manager.
-- The performance of the Manager in managing the
portfolio and in providing company secretarial,
administration and accounting services is reviewed in
detail each year, which includes reviewing comparator
engagement terms and portfolio performance. Further
details on the evaluation of the Manager, and the
decision to continue the appointment of the Manager
for the forthcoming year, can be found in this
report.
-- Details of the Manager's responsibilities can be
found in the Statement of corporate governance on
page 54 of the full Annual Report and Financial
Statements.
----------------------------------------------------------- -----------------------------------------------------------
Suppliers
----------------------------------------------------------- -----------------------------------------------------------
The key suppliers are:
-- Auditor; -- The Manager, on behalf of the Company, is in regular
contact with the suppliers and the contractual
-- Corporate broker; arrangements with all the principal suppliers to the
Company are reviewed regularly and formally once a
-- Depositary; year, alongside the performance of the suppliers in
acquitting their responsibilities.
-- Legal adviser;
-- The Manager reviews the performance of the providers
-- Registrar; and annually and was satisfied with their performance.
-- VCT taxation adviser.
----------------------------------------------------------- -----------------------------------------------------------
Portfolio companies
----------------------------------------------------------- -----------------------------------------------------------
The portfolio companies are considered key stakeholders, -- The Board aims to have a diversified portfolio in
not least because they are principal drivers of value terms of sector and stage of investment. Further
for the Company. Also, as discussed in the ESG report details of this can be found in the pie charts at the
on pages 35 to 38 of the full Annual Report and Financial end of this announcement.
Statements the portfolio companies' impact on their -- In most cases, an Albion executive has either a place
stakeholders is also important to the Company. on the board of a portfolio company or is an observer
,
in order to help with both business operation
decisions, as well as good ESG practices.
-- The Manager provides access to deep expertise on
growth strategy alignment, leadership team hiring,
organisational scaling and founder leader
development.
-- The Manager facilitates good dialogue with portfolio
companies, and often puts on events in order to help
portfolio companies benefit from the Albion network.
----------------------------------------------------------- -----------------------------------------------------------
Community and environment
----------------------------------------------------------- -----------------------------------------------------------
The Company, with no employees, has no effect itself -- The Board receives reports on ESG factors within its
on the community and environment. However, as discussed portfolio from the Manager as it is a signatory of
above, the portfolio companies' ESG impact is extremely the United Nations Principles for Responsible
important to the Board. Investment ("UN PRI"). Further details of this are
set out in the ESG report. ESG, without its specific
definition, has always been at the heart of the
responsible investing that the Company engages in and
in how the Company conducts itself with all of its
stakeholders.
----------------------------------------------------------- -----------------------------------------------------------
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the
Act to detail information about social and community issues,
employees and human rights; including any policies it has in
relation to these matters and effectiveness of these policies. As
an externally managed investment company with no employees, the
Company has no formal policies in these matters, however, it is at
the core of its responsible investment strategy as detailed
above.
General Data Protection Regulation
The General Data Protection Regulation ("GDPR") has the
objective of unifying data privacy requirements across the European
Union. GDPR forms part of the UK law after Brexit, now known as UK
GDPR. The Manager continues to take action to ensure that the
Manager and the Company are compliant with the regulation.
Further policies
The Company has adopted a number of further policies relating
to:
-- Environment;
-- Global greenhouse gas emissions;
-- Anti-bribery;
-- Anti-facilitation of tax evasion; and
-- Diversity.
and these are set out in the Directors' report on page 47 of the
full Annual Report and Financial Statements.
Risk management
The Board carries out a regular review of the risk environment
in which the Company operates, together with changes to the
environment and individual risks. The Board also identifies
emerging risks which might impact on the Company. In the period the
most noticeable risks have been rising interest rates and
inflation, caused in part as a result of the geopolitical tensions,
and pricing volatility in world markets, particularly affecting
growth stocks. 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:
Possible consequence Risk assessment during the year Risk management
-------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Risk: Investment, performance, technology, and valuation
risk
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The risk of investment in poor quality businesses, Increased in the year due to the heightened economic To reduce this risk, the Board places reliance upon
which could reduce the returns to shareholders and and geopolitical issues as referred to in the Chairman's the skills and expertise of the Manager and its track
could negatively impact on the Company's current and statement. In addition, in the current economic climate record of making successful investments in higher
future valuations. the valuations of technology companies are more volatile. growth technology businesses. The Manager operates
By nature, smaller unquoted businesses, such as those a structured investment appraisal and review process,
that qualify for Venture Capital Trust purposes, are which includes an Investment Committee, comprising
more volatile than larger, long-established businesses. investment professionals from the Manager for all
Technology related risks are also likely to be greater investments, and at least one external investment
in early, rather than later, stage technology investments, professional for investments greater than GBP1 million
including the risks of the technology not becoming in aggregate across all the Albion managed VCTs. The
generally accepted by the market or the obsolescence Manager also invites and takes account of comments
of the technology concerned, often due to greater from non-executive Directors of the Company on matters
financial resources being available to competing companies. discussed at the Investment Committee meetings.
The Company's investment valuation methodology is Investments are actively and regularly monitored by
reliant on the accuracy and completeness of information the Manager (investment managers normally observe
that is issued by portfolio companies. In particular, or sit on portfolio company boards), including the
the Directors may not be aware of or take into account level of diversification in the portfolio, and the
certain events or circumstances which occur after Board receives detailed reports on each investment
the information issued by such companies is reported. as part of the Manager's report at quarterly board
meetings. The Board and Manager regularly review the
deployment of investments and cash resources available
to the Company in assessing liquidity required for
servicing the Company's buy-backs, dividend payments
and operational expenses. The decision to issue a
Prospectus for the 2022/23 Top Ups was due to careful
analysis of these factors.
The unquoted investments held by the Company are designated
at fair value through profit or loss and valued in
accordance with the International Private Equity and
Venture Capital Valuation Guidelines updated in 2022.
These guidelines set out recommendations, intended
to represent current best practice on the valuation
of venture capital investments. The valuation takes
into account all known material facts up to the date
of approval of the Financial Statements by the Board.
-------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Risk: VCT approval and regulatory change risk
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The Company must comply with section 274 of the Income No change in the year. To reduce this risk, the Board has appointed the Manager,
Tax Act 2007 which enables its investors to take advantage which has a team with significant experience in Venture
of tax relief on their investment and on future returns. Capital Trust management, used to operating within
Breach of any of the rules enabling the Company to the requirements of the Venture Capital Trust legislation.
hold VCT status could result in the loss of that status. In addition, to provide further formal reassurance,
the Board has appointed Philip Hare & Associates LLP
as its taxation adviser, who report quarterly to the
Board to independently confirm compliance with the
Venture Capital Trust legislation, to highlight areas
of risk and to inform on changes in legislation. Each
investment in a new portfolio company is also pre-cleared
with our professional advisers or H.M. Revenue & Customs.
The Company monitors closely the extent of qualifying
holdings and addresses this as required.
-------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Risk: Regulatory and compliance risk
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The Company is listed on The London Stock Exchange No change in the year. Board members and the Manager have experience of operating
and is required to comply with the rules of the Financial at senior levels within or advising quoted companies.
Conduct Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
Accounting Standards and other legislation. Failure updates on new regulation from its auditor, legal
to comply with these regulations could result in a advisors and other professional bodies. The Company
delisting of the Company's shares, or other penalties is subject to compliance checks through the Manager's
under the Companies Act or from financial reporting compliance function, and any issues arising from compliance
oversight bodies. or regulation are reported to its own board every
two months. These controls are also reviewed as part
of the quarterly Board meetings, and also as part
of the review work undertaken by the Manager's compliance
officer. The report on controls is also evaluated
by the internal auditors.
-------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Risk: Operational and internal control risk
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The Company relies on a number of third parties, in No change in the year. The Company and its operations are subject to a series
particular the Manager, for the provision of investment of rigorous internal controls and review procedures
management and administrative functions. Failures exercised throughout the year. The Board receives
in key systems and controls within the Manager's business reports from the Manager on its internal controls
could put assets of the Company at risk or result and risk management.
in reduced or inaccurate information being passed The Audit and Risk Committee reviews the Internal
to the Board or to shareholders. Audit Reports prepared by the Manager's internal auditors,
Azets and has access to their internal audit partner
to whom it can ask specific detailed questions in
order to satisfy itself that the Manager has strong
systems and controls in place including those in relation
to business continuity and cyber security, as mentioned
below.
Ocorian Depositary (UK) Limited is the Company's Depositary,
appointed to oversee the custody and cash arrangements
and provide other AIFMD duties. The Board reviews
the quarterly reports prepared by Ocorian Depositary
(UK) Limited to ensure that the Manager is adhering
to its policies and procedures as required by the
AIFMD.
In addition, the Board annually reviews the performance
of its key service providers, particularly the Manager,
to ensure they continue to have the necessary expertise
and resources to deliver the Company's investment
objective and policy. The Manager and other service
providers have also demonstrated to the Board that
there is no undue reliance placed upon any one individual.
-------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Risk: Cyber and data security 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 the Manager's
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.
-------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Risk: Economic and political risk
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in economic conditions, including, for example, Increased in the year, due to the high levels of inflation, The Company invests in a diversified portfolio of
interest rates, rates of inflation, industry conditions, rising interest rates and the general risks. companies across a number of industry sectors and
competition, political and diplomatic events, and 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.60 companies which are diversified as discussed
above. Exposure is relatively small to at-risk sectors
that include leisure, hospitality, retail and travel.
-------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Risk: Environmental, social and governance ("ESG")
risk
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
An insufficient ESG policy could lead to an increased No change in the year. The Manager is a signatory of the UN PRI and the Board
negative impact on the environment, including the is kept updated of the evolving ESG policies at quarterly
Company's carbon footprint. Non-compliance with reporting Board meetings. Full details of the specific procedures
requirements could lead to a fall in demand from investors, and risk mitigation can be found in the ESG report
reputational damage and penalties. Climate risks could on pages 35 to 38 of the full Annual Report and Financial
also negatively impact on the value of portfolio investments. Statements. These procedures ensure that this risk
continues to be mitigated where possible.
Whilst the Company itself has limited impact on climate
change, due to no employees nor greenhouse gas emissions,
the Board works closely with the Manager to ensure
the Manager themselves are working towards reducing
their impact on the environment, and that the Manager
takes account of ESG factors, including climate change,
when making new investment decisions. With specific
respect to the Company, a key operation is increasing
the use of electronic communications with Shareholders.
-------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Risk: Liquidity risk
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The Company may not have sufficient cash available No change in the year. To reduce this risk, the Board reviews the Company's
to meet its financial obligations. The Company's portfolio three year cash flow forecasts on a quarterly basis.
is primarily in smaller unquoted companies, which These include potential investment realisations (which
are inherently illiquid as there is no readily available are closely monitored by the Manager), Top Up Offers,
market, and thus it may be difficult to realise their dividend payments and operational expenditure. This
fair value at short notice. ensures that there are sufficient cash resources available
for the Company's commitments and liabilities as they
fall due.
-------------------------------------------------------------- ----------------------------------------------------------- -------------------------------------------------------------
Viability statement
In accordance with the FRC UK Corporate Governance Code
published in 2018 and provision 36 of the AIC Code of Corporate
Governance, the Directors have assessed the prospects of the
Company over three years to 30 June 2026. The Directors believe
that three years is a reasonable period in which they can assess
the ability of the Company to continue to operate and meet its
liabilities as they fall due. This is the period used by the Board
as part of its strategic planning process, which includes: the
estimated timelines for finding, assessing and completing
investments; the potential impact of any new regulations; and the
availability of cash.
The Board has carried out a robust assessment of the principal
and emerging risks facing the Company, including those that could
threaten its business model, future performance, solvency or
liquidity, and focused on the major factors which affect the
economic, regulatory and political environment. The Board carefully
assessed, and were satisfied with, the risk management processes in
place to avoid or reduce the impact of these risks. The Board has
carried out robust stress testing of cashflows which included;
factoring in higher levels of inflation when budgeting for future
expenses, only including proceeds from investment disposals where
there is a high probability of completion, whilst also assessing
the requirement for any future financial support of portfolio
companies.
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 30 June
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 30 June
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
Penny Freer
Chairman
11 October 2023
Statement of Directors' responsibilities
In preparing these Financial Statements for the year to 30 June
2023, the Directors of the Company, being Penny Freer, James Agnew,
Tony Ellingham, Pam Garside and Ian Spence, confirm to the best of
their knowledge:
-- summary financial information contained in this announcement and the full
Annual Report and Financial Statements for the year ended 30 June 2023
for the Company has been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law) and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
-- the Chairman's statement and Strategic report include a fair review of
the development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties it faces.
We consider that the Annual Report and Financial Statements,
taken as a whole, are fair, balanced, and understandable and
provide the information necessary for shareholders to assess the
Company's position, performance, business model and strategy.
A detailed "Statement of Directors' responsibilities" is
contained on page 52 of the full Annual Report and Financial
Statements.
For and on behalf of the Board
Penny Freer
Chairman
11 October 2023
Income statement
Year ended Year ended
30 June 2023 30 June 2022
--------------------------------------------------- ---- ------------------------- -------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ---- ------- ------- ------- ------- ------- -------
Gain on investments 3 - 3,846 3,846 - 6,386 6,386
Investment income 4 936 - 936 853 - 853
Investment Manager's fees 5 (153) (1,380) (1,533) (137) (1,822) (1,959)
Other expenses 6 (432) - (432) (391) - (391)
------- ------- ------- ------- ------- -------
Profit on ordinary activities before tax 351 2,466 2,817 325 4,564 4,889
Tax on ordinary activities 8 - - - - - -
------- ------- ------- ------- ------- -------
Profit and total comprehensive income attributable
to shareholders 351 2,466 2,817 325 4,564 4,889
------- ------- ------- ------- ------- -------
Basic and diluted earnings per Ordinary share
(pence)* 10 0.13 0.92 1.05 0.14 1.95 2.09
--------------------------------------------------- ---- ------- ------- ------- ------- ------- -------
* adjusted for treasury shares
The accompanying notes form an integral part of these Financial
Statements.
The total column of this Income statement represents the profit
and loss account of the Company. The supplementary revenue and
capital columns are prepared under guidance published by The
Association of Investment Companies.
Balance sheet
30 June 2023 30 June 2022
Note GBP'000 GBP'000
-------------------------------------------- ---- ------------ ------------
Fixed asset investments 11 68,000 57,170
Current assets
Trade and other receivables 13 1,684 1,869
Cash in bank and at hand 25,006 28,024
------------ ------------
26,690 29,893
------------ ------------
Payables: amounts falling due within one
year
Trade and other payables less than one year 14 (721) (1,224)
------------ ------------
Net current assets 25,969 28,669
Total assets less current liabilities 93,969 85,839
------------ ------------
Equity attributable to equity holders
Called up share capital 15 3,269 2,905
Share premium 47,067 35,522
Unrealised capital reserve 26,402 20,384
Realised capital reserve 9,177 12,729
Other distributable reserve 8,054 14,299
------------ ------------
Total equity shareholders' funds 93,969 85,839
------------ ------------
Basic and diluted net asset value per share
(pence)* 16 33.13 33.70
------------ ------------
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
These Financial Statements were approved by the Board of
Directors, and authorised for issue on 11 October 2023 and were
signed on its behalf by
Penny Freer
Chairman
Company number: 03495287
Statement of changes in equity
Unrealised Realised Other
Called up share Share capital capital distributable
capital premium reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- --------------- ------- ---------- -------- ------------- -------
As at 1 July 2022 2,905 35,522 20,384 12,729 14,299 85,839
Profit and total comprehensive income - - 3,803 (1,337) 351 2,817
Transfer of previously unrealised losses on disposal
of investments - - 2,216 (2,216) - -
Dividends paid - - - - (4,237) (4,237)
Purchase of shares for treasury (including costs) - - - - (2,359) (2,359)
Issue of equity 364 11,854 - - - 12,218
Cost of issue of equity - (309) - - - (309)
As at 30 June 2023 3,269 47,067 26,402 9,177 8,054 93,969
----------------------------------------------------- --------------- ------- ---------- -------- ------------- -------
As at 1 July 2021 2,521 23,011 18,643 9,905 23,570 77,650
Profit and total comprehensive income - - 2,756 1,808 325 4,889
Transfer of previously unrealised gains on disposal
of investments - - (1,015) 1,015 - -
Dividends paid - - - - (7,384) (7,384)
Purchase of shares for treasury (including costs) - - - - (2,212) (2,212)
Issue of equity 384 12,834 - - - 13,218
Cost of issue of equity - (323) - - - (323)
As at 30 June 2022 2,905 35,522 20,384 12,729 14,299 85,839
----------------------------------------------------- --------------- ------- ---------- -------- ------------- -------
* Included within these reserves is an amount of GBP12,804,000
(2022: GBP24,165,000) which is considered distributable.
The nature of each reserve is described in note 2 below.
Statement of cash flows
Year ended Year ended
30 June 30 June
2023 2022
GBP'000 GBP'000
--------------------------------------------------- ---------- ----------
Cash flow from operating activities
Loan stock income received 550 671
Dividend income received 39 64
Income from fixed term funds received 145 9
Deposit interest received 138 8
Investment Manager's fees paid (2,081) (2,162)
Other cash payments (425) (390)
Corporation tax paid - -
Net cash flow generated from operating activities (1,634) (1,800)
---------- ----------
Cash flow from investing activities
Purchase of fixed asset investments* (7,870) (7,510)
Proceeds from disposals of fixed asset investments* 1,139 6,643
Net cash flow generated from investing activities (6,731) (867)
---------- ----------
Cash flow from financing activities
Issue of share capital 11,226 11,710
Cost of issue of equity** (37) (36)
Equity dividends paid*** (3,517) (6,176)
Purchase of own shares for treasury (including
costs) (2,325) (2,233)
Net cash flow generated from financing activities 5,347 3,265
---------- ----------
(Decrease)/increase in cash in bank and at hand (3,018) 598
Cash in bank and at hand at the start of the year 28,024 27,426
---------- ----------
Cash in bank and at hand at the end of the year 25,006 28,024
* Purchases and disposals detailed above do not agree to note 11
due to restructuring of investments, conversion of convertible loan
stock and settlement 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 note 9 as a result of the
non-cash effect of the Dividend Reinvestment Scheme.
Notes to the Financial Statements
1. Basis of preparation
The Financial Statements have been prepared in accordance with
applicable United Kingdom law and accounting standards, including
Financial Reporting Standard 102 ("FRS 102"), and with the
Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" ("SORP")
issued by The Association of Investment Companies ("AIC"). The
Financial Statements have been prepared on a going concern basis
and further details can be found in the Directors' report on 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 below.
Company information is shown on page 4 of the full Annual Report
and Financial Statements.
2. Accounting policies
Fixed asset investments
The Company's business is investing in financial assets with a
view to profiting from their total return in the form of income and
capital growth. This portfolio of financial assets is managed, and
its performance evaluated on a fair value basis, in accordance with
a documented investment policy, and information about the portfolio
is provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those
undertakings in which the Company holds more than 20% of the equity
as part of an investment portfolio are not accounted for using the
equity method. In these circumstances the investment is measured at
FVTPL.
Upon initial recognition (using trade date accounting)
investments, including loan stock, are classified by the Company as
FVTPL and are included at their initial fair value, which is cost
(excluding expenses incidental to the acquisition which are written
off to the Income statement).
Subsequently, the investments are valued at 'fair value', which
is measured as follows:
-- Investments listed on recognised exchanges are valued at their bid prices
at the end of the accounting period or otherwise at fair value based on
published price quotations.
-- Unquoted investments, where there is not an active market, are valued
using an appropriate valuation technique in accordance with the IPEV
Guidelines. Indicators of fair value are derived using established
methodologies including earnings multiples, revenue multiples, the level
of third party offers received, cost or price of recent investment rounds,
net assets, discounted cash flows and industry valuation benchmarks.
Where price of recent investment is used as a starting point for
estimating fair value at subsequent measurement dates, this has been
benchmarked using an appropriate valuation technique permitted by the
IPEV guidelines.
-- In situations where cost or price of recent investment is used,
consideration is given to the circumstances of the portfolio company
since that date in determining fair value. This includes consideration of
whether there is any evidence of deterioration or strong definable
evidence of an increase in value. In the absence of these indicators, the
investment in question is valued at the amount reported at the previous
reporting date. Examples of events or changes that could indicate a
diminution include:
-- the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was
based; 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. Deferred consideration meets the definition of a financing
transaction held at amortised cost, and interest will be recognised
through capital over the credit period using the effective interest
method. There are no financial liabilities other than payables.
Investment income
Dividend income
Dividend income is included in revenue when the investment is
quoted ex-dividend.
Unquoted loan stock 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; and
-- expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Taxation
Taxation is applied on a current basis in accordance with FRS
102. Current tax is tax payable (refundable) in respect of the
taxable profit (tax loss) for the current period or past reporting
periods using the tax rates and laws that have been enacted or
substantively enacted at the financial reporting date. Taxation
associated with capital expenses is applied in accordance with the
SORP.
Deferred tax is provided in full on all timing differences at
the reporting date. Timing differences are differences between
taxable profits and total comprehensive income as stated in the
Financial Statements that arise from the inclusion of income and
expenses in tax assessments in periods different from those in
which they are recognised in the Financial Statements. As a VCT the
Company has an exemption from tax on capital gains. The Company
intends to continue meeting the conditions required to obtain
approval as a VCT in the foreseeable future. The Company therefore,
should have no material deferred tax timing differences arising in
respect of the revaluation or disposal of investments and the
Company has not provided for any deferred tax.
Reserves
Called-up share capital
This accounts for the nominal value of the Company's shares.
Share premium
This accounts for the difference between the price paid for
shares and the nominal value of the shares, less issue costs and
transfers on cancellation of share premium once consent of the
court is given.
Capital redemption reserve
This reserve accounts for amounts by which the issued share
capital is diminished through the repurchase and cancellation of
the Company's own shares, less any transfers on cancellation of
share premium once consent of the court is given.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at
the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments, or
permanent diminutions in value (including gains recognised on the
realisation of investment where consideration is deferred that are not
distributable as a matter of law);
-- finance income in respect of the unwinding of the discount on deferred
consideration that is not distributable as a matter of law;
-- expenses, together with the related taxation effect, charged in
accordance with the above policies; and
-- dividends paid to equity holders where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and the revenue
reserve were combined in 2012 to form a single reserve named other
distributable reserve.
This reserve accounts for movements from the revenue column of
the Income statement, the payment of dividends, the buy-back of
shares, transfers from the share premium and capital redemption
reserve, and other non-capital realised movements.
Dividends
Dividends by the Company are accounted for when the liability to
make the payment (record date) has been established.
Segmental reporting
The Directors are of the opinion that the Company is engaged in
a single operating segment of business, being investment in smaller
companies principally based in the UK.
3. Gain on investments
Year ended Year ended
30 June 2023 30 June 2022
GBP'000 GBP'000
------------------------------------------------ ------------- -------------
Unrealised gain on fixed asset investments 3,803 2,756
Realised (loss)/gain on fixed asset investments (178) 3,440
Unwinding of discount on deferred consideration 221 190
3,846 6,386
------------- -------------
4. Investment income
Year ended Year ended
30 June 2023 30 June 2022
GBP'000 GBP'000
----------------------------- ------------- -------------
Loan stock interest 569 763
Dividend income 84 74
Income from fixed term funds 145 9
Bank interest 138 7
936 853
------------- -------------
5. Investment Manager's fees
Year ended 30 June 2023 Year ended 30 June 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- -------- ------- -------- -------- -------
Investment
management fee 153 1,380 1,533 137 1,238 1,375
Performance
incentive fee - - - - 584 584
153 1,380 1,533 137 1,822 1,959
-------- -------- ------- -------- -------- -------
Further details of the Investment Management Agreement under
which the investment manager's fee is paid are given in the
Strategic report above.
During the year, services of a total value of GBP1,583,000
(2022: GBP1,425,000) were purchased by the Company from Albion
Capital Group LLP ("Albion") comprising GBP1,533,000 of management
fees (2022: GBP1,375,000) and GBP50,000 of administration fees
(2022: GBP50,000). There is no performance incentive fee payable
this year (2022: GBP584,000). At the financial year end, the amount
due to Albion in respect of these services disclosed as accruals
and deferred income was GBP422,500 (administration fee accrual:
GBP12,500, management fee accrual GBP410,000) (2022:
GBP971,500).
Albion is, from time to time, eligible to receive an arrangement
fee and monitoring fees from portfolio companies. During the year
ended 30 June 2023 fees of GBP299,000 attributable to the
investments of the Company were received pursuant to these
arrangements (2022: GBP121,000).
Albion, its partners and staff holds 2,385,697 Ordinary shares
in the Company as at 30 June 2023.
The Company entered into an offer agreement relating to the
Offers pursuant to which Albion received a fee of 2.5% of the gross
proceeds of the Offers and out of which Albion paid the costs of
the Offers, as detailed in the Prospectus.
6. Other expenses
Year ended Year ended
30 June 2023 30 June 2022
GBP'000 GBP'000
---------------------------------------------------- ------------- -------------
Directors' fees (including NIC) 109 107
Auditor's remuneration for statutory audit services
(excluding VAT) 48 40
Secretarial and administration fee 50 50
Other administrative expenses 225 194
432 391
------------- -------------
7. Directors' fees
The amounts paid to and on behalf of the Directors during the
year are as follows:
Year ended Year ended
30 June 2023 30 June 2022
GBP'000 GBP'000
Directors' fees 100 98
National insurance 9 9
------------- -------------
109 107
------------- -------------
The Company's key management personnel are the Directors.
Further information regarding Directors' remuneration can be found
in the Directors' remuneration report on pages 61 and 62 of the
full Annual Report and Financial Statements.
8. Tax (charge)/credit on ordinary activities
Year ended Year ended
30 June 2023 30 June 2022
GBP'000 GBP'000
- -
UK corporation tax charge
Year ended Year ended
30 June 30 June
2023 2022
Reconciliation of profit on ordinary activities to
taxation charge GBP'000 GBP'000
--------------------------------------------------- ----------- ------------
Return on ordinary activities before taxation 2,817 4,889
----------- ------------
Tax charge on profit at the average rate of 20.50%
from 1 April 2023 (2022: 19%) 577 929
Factors affecting the charge:
Non-taxable gains (788) (1,213)
Income not taxable (17) (14)
Unutilised management expenses 228 298
- -
----------- ------------
The tax charge for the year shown in the Income statement is
lower than the average standard rate of corporation tax of 20.50%
(2022: 19.0%). The differences are explained above. From 1 April
2023, the Company's rate of corporation tax increased 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 GBP21,392,000 (2022: GBP20,279,000) that are available for offset against future profits. A deferred tax asset of GBP5,348,000 (2022: GBP3,853,000) 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
30 June 2023 30 June 2022
GBP'000 GBP'000
---------------------------------------------------- ------------- -------------
First dividend of 0.84 pence per share paid on 30
November 2022 (30 November 2021 -- 0.87 pence per
share) 2,130 1,932
Second dividend of 0.79 pence per share paid on 31
March 2023 (31 March 2022 -- 0.84 pence per share) 2,120 2,134
Special dividend of 1.50 pence per share paid on 30
November 2021 - 3,331
Unclaimed dividends (13) (13)
------------- -------------
4,237 7,384
------------- -------------
In addition to the dividends paid above, the Board has declared
a first dividend for the year ending 30 June 2024 of 0.83 pence per
share. This will be paid on 30 November 2023 to shareholders on the
register on 3 November 2023. The total dividend will be
approximately GBP2,354,000. All dividends are paid from the other
distributable reserve.
During the year, unclaimed dividends older than twelve years of
GBP13,000 (2022: GBP13,000) were returned to the Company in
accordance with the terms of the Articles of Association and have
been accounted for on an accruals basis.
10. Basic and diluted return per share
Year ended 30 June 2023 Year ended 30 June 2022
Revenue Capital Total Revenue Capital Total
--------------------------------------------------------
Return attributable to equity shares (GBP'000) 351 2,466 2,817 325 4,564 4,889
Weighted average shares in issue (adjusted for treasury
shares) 266,724,287 234,049,617
Return attributable per equity share (pence) 0.13 0.92 1.05 0.14 1.95 2.09
The weighted average number of shares is calculated after
adjusting for treasury shares of 43,285,891 (2022: 35,822,916).
There are no convertible instruments, derivatives or contingent
share agreements in issue so basic and diluted return/(loss) per
share are the same.
11. Fixed asset investments
Investments held at fair value through profit or 30 June 2023 30 June 2022
loss GBP'000 GBP'000
Unquoted equity 57,468 47,449
Quoted equity 260 760
Unquoted loan stock 10,272 8,961
------------ ------------
68,000 57,170
------------ ------------
30 June 2023 30 June 2022
GBP'000 GBP'000
----------------------------------------------------
Opening valuation 57,170 50,454
Purchases at cost 7,870 7,675
Disposal proceeds (684) (7,247)
Realised (loss)/gain (178) 3,440
Movement in loan stock accrued income 19 92
Unrealised gains 3,803 2,756
------------ ------------
Closing valuation 68,000 57,170
------------ ------------
Movement in loan stock accrued income
Opening accumulated loan stock accrued income 142 50
Movement in loan stock accrued income 19 92
Closing accumulated loan stock accrued income 161 142
------------ ------------
Movement in unrealised gains
Opening accumulated unrealised gains 20,317 18,576
Transfer of previously unrealised gains/(losses) to
realised reserves on realisations of investments 2,216 (1,015)
Unrealised gains 3,803 2,756
Closing accumulated unrealised gains 26,336 20,317
------------ ------------
Historic cost basis
Opening book cost 36,711 31,828
Purchases at cost 7,870 7,675
Disposals at cost (3,078) (2,792)
Closing book cost 41,503 36,711
------------ ------------
Purchases and disposals detailed above may not agree to the
Statement of cash flows due to restructuring of investments,
conversion of convertible loan stock and settlement receivables and
payables.
The Company does not hold any assets as a result of the
enforcement of security during the period, and believes that the
carrying values for both impaired and past due assets are covered
by the value of security held for these loan stock investments.
Unquoted fixed asset investments are valued at fair value in
accordance with the IPEV guidelines as follows:
30 June 30 June
2023 2022
Valuation methodology GBP'000 GBP'000
---------------------------------------------------- ----------- -----------
Cost and price of recent investment (calibrated and
reviewed for impairment) 40,107 37,393
Revenue multiple 11,281 7,801
Third party valuation -- Discounted cash flow 7,358 7,221
Third party valuation -- Earnings multiple 4,595 3,159
Earnings multiple 2,472 45
Net assets 971 791
Discounted offer price 956 -
67,740 56,410
----------- -----------
When using the cost or price of a recent investment in the
valuations, the Company looks to re-calibrate this price at each
valuation point by reviewing progress within the investment,
comparing against the initial investment thesis, assessing if there
are any significant events or milestones that would indicate the
value of the investment has changed and considering whether a
market-based methodology (i.e. using multiples from comparable
public companies) or a discounted cashflow forecast would be more
appropriate. The 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, growth rate 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 30 June 2022 and 30 June 2023:
Value as at Explanatory
Change in valuation methodology (2022 to 2023) 30 June 2023 note
GBP'000
-----------
Cost and price of recent investment (calibrated and 3,770 More
reviewed for impairment) to revenue multiple appropriate
valuation
methodology
Cost and price of recent investment (calibrated and 2,472 More
reviewed for impairment) to earnings multiple appropriate
valuation
methodology
Cost and price of recent investment (calibrated and 970 Third party
reviewed for impairment) to third party valuation valuation
conducted
Cost and price of recent investment (calibrated and 956 More
reviewed for impairment) to discounted offer price appropriate
valuation
methodology
The valuation will be the most appropriate valuation methodology
for an investment within its market, with regard to the financial
health of the investment and the IPEV Guidelines. The Directors
believe that, within these parameters, there are no other more
relevant methods of valuation which would be reasonable as at 30
June 2023.
FRS 102 and the SORP requires the Company to disclose the inputs
to the valuation methods applied to its investments measured at
FVTPL in a fair value hierarchy. The table below sets out fair
value hierarchy definitions using FRS 102 s.11.27.
Fair value hierarchy Definition
-------------------- ----------------------------------------------------
Level 1 The unadjusted quoted price in an active market
-------------------- ----------------------------------------------------
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
-------------------- ----------------------------------------------------
Level 3 Inputs to valuations not based on observable market
data
-------------------- ----------------------------------------------------
Quoted investments are valued according to Level 1 valuation
methods. Unquoted equity, preference shares and loan stock are all
valued according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3)
had the following movements:
30 June 2023 30 June 2022
GBP'000 GBP'000
---------------------------------------- ------------ ------------
Opening balance 56,410 49,910
Purchases at cost* 7,870 7,675
Disposal proceeds* (375) (7,202)
Realised net (losses)/gains on disposal (100) 3,395
Unrealised gains 3,916 2,540
Movement in loan stock accrued income 19 92
Closing balance 67,740 56,410
------------ ------------
*Additions and disposals do not agree to the cash flow due to
loan stock conversions and non-cash consideration.
FRS 102 requires the Directors to consider the impact of
changing one or more of the inputs used as part of the valuation
process to reasonable possible alternative assumptions. 70% of the
portfolio of investments, consisting of equity and loan stock, is
based on recent investment price, net assets and cost. For the
remainder of the portfolio, the Board has considered the reasonable
possible alternative input assumptions on the valuation of the
portfolio and believes that changes to inputs (by adjusting the
earnings and revenue multiples) could lead to a change in the fair
value of the portfolio. Therefore, for the remainder of the
portfolio, the Board has adjusted the inputs for a number of the
largest portfolio companies (by value) resulting in a total
coverage of 84% of the portfolio of investments. The main inputs
considered for each type of valuation is as follows:
Change in
fair value
Change of
Base in investments Change in NAV
Valuation technique Portfolio company sector Input case* input (GBP'000) (pence per share)
---------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- ------------------
Revenue multiple Healthcare (including digital healthcare) Revenue multiple 5.1x +0.5x 392 0.14
---------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- ------------------
-0.5x (392) (0.14)
------------------------------------------------------------------------------------------------------------ ----- ------ ----------- ------------------
Third party valuation -- discounted cash flow Renewable energy Discount factor 6.5% -0.5% 178 0.06
---------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- ------------------
+0.5% (165) (0.06)
------------------------------------------------------------------------------------------------------------ ----- ------ ----------- ------------------
Third party valuation -- earnings multiple Other (including education) Earnings multiple 18.8x +1.9x 281 0.10
---------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- ------------------
-1.9x (281) (0.10)
------------------------------------------------------------------------------------------------------------ ----- ------ ----------- ------------------
Earnings multiple Healthcare (including digital healthcare) Earnings multiple 10.5x +1.1x 146 0.05
---------------------------------------------- ------------------------------------------ ------------------ ----- ------ ----------- ------------------
-1.1x (146) (0.05)
------------------------------------------------------------------------------------------------------------ ----- ------ ----------- ------------------
* As detailed in the accounting policies above, the base case is
based on market comparables, discounted where appropriate for
marketability, in accordance with the IPEV guidelines.
The impact of these changes could result in an overall increase
in the valuation of the unquoted equity investments by GBP997,000
(1.7%) or a decrease in the valuation of unquoted equity
investments by GBP984,000 (1.7%). Due to the size of the holding in
Quantexa, a 10% change in this valuation would result in a movement
of GBP1,694,000 (1.8%).
12. Significant interests
The principal activity of the Company is to select and hold a
portfolio of investments in unquoted securities. Although the
Company, through the Manager, will, in some cases, be represented
on the board of the portfolio company, it will not take a
controlling interest or become involved in the management of a
portfolio company. The size and structure of the companies with
unquoted securities may result in certain holdings in the portfolio
representing a participating interest without there being any
partnership, joint venture or management consortium agreement.
The Company has no interests of greater than 20% of the nominal
value of any class of the allotted shares in the portfolio
companies as at 30 June 2023.
13. Trade and other receivables
30 June 2023 30 June 2022
GBP'000 GBP'000
-------------------------------------- ------------ ------------
Prepayments 38 34
Deferred consideration under one year 1,646 510
Deferred consideration over one year - 1,325
1,684 1,869
------------ ------------
The deferred consideration under one year includes deferred
proceeds from the sale of G.Network Communications in December
2020. These proceeds are receivable in January 2024, and have been
discounted to present value at the prevailing market rate,
including a provision for counterparty risk. This constitutes a
financing transaction, and has been accounted for using the policy
disclosed in note 2.
The Directors consider that the carrying amount of receivables
is not materially different to their fair value.
14. Trade and other payables
30 June 2023 30 June 2022
GBP'000 GBP'000
----------------------------- ------------ ------------
Accruals and deferred income 520 1,061
Trade payables 201 163
721 1,224
------------ ------------
The Directors consider that the carrying amount of payables is
not materially different to their fair value.
15. Called-up share capital
Allotted, called up and fully paid GBP'000
---------------------------------------------------- --------
290,523,837 Ordinary shares of 1 penny each at 30
June 2022 2,905
36,360,869 Ordinary shares of 1 penny each issued
during the year 364
---------------------------------------------------- --------
326,884,706 Ordinary shares of 1 penny each at 30
June 2023 3,269
---------------------------------------------------- --------
35,822,916 Ordinary shares of 1 penny each held in
treasury at 30 June 2022 (358)
7,462,975 Ordinary shares of 1 penny each purchased
during the year to be held in treasury (75)
---------------------------------------------------- --------
43,285,891 Ordinary shares of 1 penny each held in
treasury at 30 June 2023 (433)
---------------------------------------------------- --------
Voting rights of 283,598,815 Ordinary shares of 1
penny each at 30 June 2023 2,836
---------------------------------------------------- --------
The Company purchased 7,462,975 Ordinary shares for treasury
(2022: 6,926,930) during the year at a total cost of GBP2,359,000
(2022: GBP2,212,000).
The total number of shares held in treasury as at 30 June 2023
was 43,285,891 (2022: 35,822,916) representing 13.2% of the shares
in issue as at 30 June 2023.
Under the terms of the Dividend Reinvestment Scheme Circular
dated 26 February 2009, the following new Ordinary shares of
nominal value 1 penny each were allotted during the year:
Aggregate nominal value of shares Issue price Net invested Opening market price on allotment
Allotment date Number of shares allotted (GBP'000) (pence per share) (GBP'000) (pence per share)
----------------
30 November 2022 1,116,653 11 32.93 350 31.30
31 March 2023 1,077,920 11 32.72 333 31.10
2,194,573 683
-------------------------- ------------
Under the terms of the Albion VCTs' Prospectus Top Up Offers
2022/23, the following new Ordinary shares of nominal value 1 penny
each were issued during the year:
Aggregate nominal value of shares Issue price Net consideration received Opening market price on allotment
Allotment date Number of shares allotted (GBP'000) (pence per share) (GBP'000) (pence per share)
----------------
2 December 2022 3,844,616 38 33.50 1,269 31.30
2 December 2022 616,505 6 33.70 204 31.30
2 December 2022 10,931,256 109 33.80 3,602 31.30
31 March 2023 17,882,171 179 33.60 5,858 31.10
14 April 2023 204,704 2 33.30 67 31.10
14 April 2023 74,850 1 33.40 25 31.10
14 April 2023 612,194 6 33.60 201 31.10
34,166,296 11,226
-------------------------- --------------------------
16. Basic and diluted net asset value per share
30 June 2023 30 June 2022
--------------------------------------------
Basic and diluted net asset value per share
(pence) 33.13 33.70
------------ ------------
The basic and diluted net asset value per share at the year end
is calculated in accordance with the Articles of Association and
are based upon total shares in issue (adjusted for treasury shares)
of 283,598,815 shares as at 30 June 2023 (2022: 254,700,921).
17. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in
note 15. The Company is permitted to buy back its own shares for
cancellation or treasury purposes.
The Company's financial instruments comprise equity and loan
stock investments in quoted and unquoted companies, cash balances
and short term receivables and payables which arise from its
operations. The main purpose of these financial instruments is to
generate cash flow, revenue and capital appreciation for the
Company's operations. The Company has no gearing or other financial
liabilities apart from short term payables. The Company does not
use any derivatives for the management of its Balance sheet.
The principal risks arising from the Company's operations
are:
-- Market and investment risk (which comprises investment price and cash
flow interest rate risk);
-- credit risk; and
-- liquidity risk.
The Board regularly reviews and agrees policies for managing
each of these risks. There have been no changes in the nature of
the risks that the Company has faced during the past year and there
have been no changes in the objectives, policies or processes for
managing risks during the past year. The key risks are summarised
below:
Market risk
As a Venture Capital Trust, it is the Company's specific nature
to evaluate the market risk of its portfolio in unquoted companies.
Market risk is the exposure of the Company to the revaluation and
devaluation of investments as a result of macroeconomic changes.
The main driver of market risk is the dynamics of market quoted
comparators, as well as the financial and operational performance
of portfolio companies. The Board seeks to reduce this risk by
having a spread of investments across a variety of sectors. More
details on the sectors the Company invests in can be found in the
pie chart at the end of this announcement.
The Manager and the Board formally review market risk, both at
the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are
made to ensure that profits to the Company are maximised, and that
valuations of investments retained within the portfolio appear
sufficiently prudent and realistic compared to prices being
achieved in the market for sales of unquoted investments.
As required under FRS 102 the Board is required to illustrate by
way of a sensitivity analysis the extent to which the assets are
exposed to market risk. In order to show the impact of sensitivity
in market movements on the Company, a 10% increase or decrease in
the valuation of the fixed asset investment portfolio (keeping all
other variables constant) would increase or decrease the net asset
value and return for the year by GBP6,800,000. 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
GBP13,600,000. Further sensitivity analysis on fixed asset
investments is included in note 11.
Investment risk (including investment price risk)
Investment risk (including investment price risk) is the risk
that the fair value of future investment cash flows will fluctuate
due to factors specific to an investment instrument or to a market
in similar instruments. The management of risk within the venture
capital portfolio is addressed through careful investment
selection, by diversification across different industry segments,
by maintaining a wide spread of holdings in terms of financing
stage and by limitation of the size of individual holdings. The
Manager receives management accounts from portfolio companies and
members of the investment management team often sit on the boards
of unquoted portfolio companies; this enables the close
identification, monitoring and management of investment risk. The
Directors monitor the Manager's compliance with the investment
policy, review and agree policies for managing this risk and
monitor the overall level of risk on the investment portfolio on a
regular basis.
Valuations are based on the most appropriate valuation
methodology for an investment within its market, with regard to the
financial health of the investment and the IPEV Guidelines. Details
of the industries in which investments have been made are contained
in the pie chart at the end of this announcement.
The maximum investment risk on the balance sheet date is the
value of the fixed asset investment portfolio which is
GBP68,000,000 (2022: GBP57,170,000). Fixed asset investments form
72% of the net asset value on 30 June 2023 (2022: 67%).
Interest rate risk
It is the Company's policy to accept a degree of interest rate
risk on its financial assets through the effect of interest rate
changes. On the basis of the Company's analysis, it is estimated
that a rise of 1% in all interest rates would have increased total
return before tax for the year by approximately GBP265,000 (2022:
GBP139,000). Furthermore, it was considered that a material fall in
interest rates below current levels during the year would have been
unlikely.
The weighted average interest rate applied to the Company's
fixed rate assets during the year was approximately 7.2% (2022:
10.1%). The weighted average period to maturity for the fixed rate
assets is approximately 2.1 years (2022: 2.1 years).
The Company's financial assets and liabilities, all denominated
in pounds sterling, consist of the following:
30 June 2023 30 June 2022
Fixed rate Floating rate Non-interest Total Fixed rate Floating rate Non-interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------
Loan stock 9,263 - 1,009 10,272 7,527 - 1,434 8,961
Equity - - 57,728 57,728 - - 48,209 48,209
Receivables* - - 1,646 1,646 - - 1,835 1,835
Payables - - (721) (721) - - (1,224) (1,224)
Cash - 25,006 - 25,006 - 28,024 - 28,024
---------- ------------- ------------ -------- ----------- ------------- ------------ --------
9,263 25,006 59,662 93,931 7,527 28,024 50,254 85,805
---------- ------------- ------------ -------- ----------- ------------- ------------ --------
*The receivables do not reconcile to the Balance sheet as
prepayments are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company. The Company is exposed to
credit risk through its receivables, investment in unquoted loan
stock, and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock and other
similar instruments prior to investment, and as part of its ongoing
monitoring of investments. In doing this, it takes into account the
extent and quality of any security held. For loan stock investments
made prior to 6 April 2018, which account for 78.4% 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 at 30 June 2023 was
limited to GBP10,272,000 of unquoted loan stock instruments (2022:
GBP8,961,000), GBP25,006,000 cash deposits with banks (2022:
GBP28,024,000) and GBP1,646,000 of other receivables (2022:
GBP1,835,000).
At the balance sheet date, the cash in bank and at hand held by
the Company was held with Lloyds Bank Plc, Scottish Widows Bank plc
(part of Lloyds Banking Group), Barclays Bank plc, National
Westminster Bank plc and Bank of Montreal. Credit risk on cash
transactions was mitigated by transacting with counterparties that
are regulated entities subject to prudential supervision, with high
credit ratings assigned by international credit-rating
agencies.
The Company has an informal policy limiting counterparty banking
and floating rate note exposure to a maximum of 20% of net asset
value for any one counterparty.
The credit profile of unquoted loan stock is described under
liquidity risk.
Liquidity risk
Liquid assets are held as cash on current account, on deposit or
short term money market account. Under the terms of its Articles,
the Company has the ability to borrow up to the amount of its
adjusted capital and reserves of the latest published audited
Balance sheet, which amounts to GBP91,615,000 as at 30 June 2023
(2022: GBP83,700,000).
The Company has no committed borrowing facilities as at 30 June
2023 (2022: nil) and had cash balances of GBP25,006,000 (2022:
GBP28,024,000). The main cash outflows are for new investments,
dividends and share buy-backs, which are within the control of the
Company. The Manager formally reviews the cash requirements of the
Company on a monthly basis, and the Board on a quarterly basis, as
part of its review of management accounts and forecasts. All of the
Company's financial liabilities are short term in nature and total
GBP721,000 as at 30 June 2023 (2022: GBP1,224,000).
The carrying value of loan stock investments as analysed by
expected maturity dates is as follows:
30 June 2023 30 June 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 6,027 971 - 6,998 4,704 1,374 410 6,488
1-2 years 110 - - 110 94 - - 94
-3 years 39 - - 39 116 - - 116
3-5 years 2,086 - - 2,086 1,238 - - 1,238
5 + years 1,039 - - 1,039 1,025 - - 1,025
---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
Total 9,301 971 - 10,272 7,177 1,374 410 8,961
---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
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:
GBP681,000).
The Company does not hold any assets as the result of the
enforcement of security during the period, and believes that the
carrying values for both those valued below cost and past due
assets are covered by the value of security held for these loan
stock investments.
In view of the availability of adequate cash balances and the
repayment profile of loan stock investments, the Board considers
that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 30 June
2023 are stated at fair value as determined by the Directors, with
the exception of receivables, payables and cash which are carried
at amortised cost. There are no financial liabilities other than
payables. The Company's financial liabilities are all non-interest
bearing. It is the Directors' opinion that the book value of the
financial liabilities is not materially different to the fair value
and all are payable within one year.
18. Commitments and contingencies
The Company had no financial commitments in respect of
investments at 30 June 2023 (2022: GBPnil).
There are no contingencies or guarantees of the Company as at 30
June 2023 (2022: GBPnil).
19. Post balance sheet events
Since the year end, the Company has completed the following
material investment transactions:
-- Part disposal of Quantexa for proceeds of GBP1.2 million; and
-- Investments totalling GBP2.3 million in three new and four existing
portfolio companies.
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5,
and the Directors' remuneration disclosed in the Directors'
remuneration report on page 61 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 30 June 2023 and 30 June
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 30 June 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/CRWN, where the Report can be accessed via
a link in the 'Financial Reports and Circulars' section.
Attachment
-- Current portfolio sector allocation
https://ml-eu.globenewswire.com/Resource/Download/dcbd09ff-5213-422d-8a3f-d1a28e9fecab
(END) Dow Jones Newswires
October 11, 2023 13:13 ET (17:13 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
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