Crown Place VCT PLC: Annual Financial Report
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 2023 |
Annual General Meeting |
|
|
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 the year ended 30
June 2023 (2022: 2.12p)† |
Total return uplift on opening net asset value per share (2022:
6.10%)† |
Total tax-free dividends per share paid during the year ended 30
June 2023 (2022: 3.21p) |
Net asset value per share as at 30 June 2023 (2022: 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
IntroductionThe 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 £94.0 million or 33.13
pence per share compared with £85.8 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
progressOur portfolio has performed well despite the
global uncertainties faced, and this has contributed to the total
uplift in value of £3.8 million to the Company’s investments for
the year (30 June 2022: £6.4 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 £6.8 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
£0.6 million and Solidatus of £0.5 million. These gains were
partially offset by write downs in Black Swan which decreased by
£1.5 million, uMotif by £0.9 million and Oviva by £0.8 million.
The Company realised disposal proceeds of £0.7
million (2022: £7.2 million). The largest disposals being a part
disposal of our shareholding in our AIM quoted investment, Arecor
Therapeutics PLC (£0.3 million) and an exit of Zift (£0.2 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 £24.8
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 £1.2 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 £7.9 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:
- £1.2 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
- £1.0 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
- £0.6 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
- £0.5 million
into OutThink, a software platform to measure and manage human risk
enterprises
- £0.4 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 compositionI 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 uncertaintiesThe
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 reservesIt
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 £11.5 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 MeetingThe 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
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 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 processFollowing 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 seminarThe 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 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 prospectsThe 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 FreerChairman11 October
2023
Strategic report
Crown Place VCT PLC (the “Company”) is a Venture
Capital Trust and its investment policy can be found above.
Business modelAs 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 portfolioThe
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
|
£’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 £936,000
(2022: £853,000). This is a result of bank interest and income from
fixed term funds increasing to £283,000 (2022: £17,000) as a result
of rising interest rates. Loan stock income decreased to £569,000
(2022: £763,000) as the prior year included a large payment of
previously capitalised interest.
The gain on investments for the year was
£3,846,000 (2022: gain of £6,386,000). 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 £3,018,000 for the year
(2022: inflow of £598,000), 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
changesA 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 prospectsThe 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:
- 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.
GearingAs 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
AgreementUnder 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 £50,000 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
feeIn 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: £584,000).
Investment and co-investmentThe
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 ManagerThe
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 dutyThe 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 as follows:
- Annual General Meeting (“AGM”)
- Shareholder seminar
- Annual Report and Financial
Statements, Half-yearly financial report, and Interim management
statements
- RNS announcements in accordance
with Listing Rules and Disclosure Guidance and Transparency Rules
(“DTRs”) covering such things as the publication of a
Prospectus
- Albion Capital website, social
media pages, as well as publishing Albion News shareholder
magazine
|
- Shareholders’ views are important
and the Board encourages Shareholders to exercise their right to
vote on the resolutions at the AGM. The Company’s AGM is typically
used as an opportunity to communicate with investors, including
through a presentation made by the Manager. Undertaking this
virtually enabled engagement with a wider audience of shareholders
from across the country, and gave shareholders the opportunity to
ask questions and vote during the virtual AGM last year. The
virtual medium helps facilitate greater shareholder participation
and to help those who are unable to attend the AGM in person, 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 to the
long term success of the Company, including achieving the
investment policy and generating returns to shareholders, as well
as the impact the Company has on Environment, Social and Governance
(“ESG”) practice. |
- The Manager meets with the Board at
least quarterly to discuss the performance of the Company, and is
in regular contact in between these meetings, e.g. to share
investment papers for new and follow-on investments. All strategic
decisions are discussed in detail and minuted, with an open
dialogue between the Board and the Manager.
- The performance of the Manager in
managing the portfolio and in providing company secretarial,
administration and accounting services is reviewed in detail each
year, which includes reviewing comparator engagement terms and
portfolio performance. Further details on the evaluation of the
Manager, and the decision to continue the appointment of the
Manager for the forthcoming year, can be found in this report.
- Details of the Manager’s
responsibilities can be found in the Statement of corporate
governance on page 54 of the full Annual Report and Financial
Statements.
|
Suppliers |
|
The key suppliers are:
- Auditor;
- Corporate broker;
- Depositary;
- Legal adviser;
- Registrar; and
- VCT taxation adviser.
|
- The Manager, on behalf of the
Company, is in regular contact with the suppliers and the
contractual arrangements with all the principal suppliers to the
Company are reviewed regularly and formally once a year, alongside
the performance of the suppliers in acquitting their
responsibilities.
- The Manager reviews the performance
of the providers annually and was satisfied with their
performance.
|
Portfolio companies |
|
The portfolio companies are considered key stakeholders, not least
because they are principal drivers of value for the Company. Also,
as discussed in the ESG report on pages 35 to 38 of the full Annual
Report and Financial Statements the portfolio companies’ impact on
their stakeholders is also important to the Company. |
- The Board aims to have a
diversified portfolio in terms of sector and stage of investment.
Further details of this can be found in the pie charts at the end
of this announcement.
- In most cases, an Albion executive
has either a place 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 on the
community and environment. However, as discussed above, the
portfolio companies’ ESG impact is extremely important to the
Board. |
- The Board receives reports on ESG
factors within its portfolio from the Manager as it is a signatory
of the United Nations Principles for Responsible 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 rightsThe 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 policiesThe 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 managementThe 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, which could
reduce the returns to shareholders and could negatively impact on
the Company’s current and future valuations. By nature, smaller
unquoted businesses, such as those that qualify for Venture Capital
Trust purposes, are more volatile than larger, long-established
businesses. Technology related risks are also likely to be greater
in early, rather than later, stage technology investments,
including the risks of the technology not becoming generally
accepted by the market or the obsolescence of the technology
concerned, often due to greater financial resources being available
to competing companies.The Company’s investment valuation
methodology is reliant on the accuracy and completeness of
information that is issued by portfolio companies. In particular,
the Directors may not be aware of or take into account certain
events or circumstances which occur after the information issued by
such companies is reported. |
Increased in the year due to the heightened economic and
geopolitical issues as referred to in the Chairman’s statement. In
addition, in the current economic climate the valuations of
technology companies are more volatile. |
To reduce this risk, the Board places reliance upon the skills and
expertise of the Manager and its track record of making successful
investments in higher growth technology businesses. The Manager
operates a structured investment appraisal and review process,
which includes an Investment Committee, comprising investment
professionals from the Manager for all investments, and at least
one external investment professional for investments greater than
£1 million in aggregate across all the Albion managed VCTs. The
Manager also invites and takes account of comments from
non-executive Directors of the Company on matters discussed at the
Investment Committee meetings.Investments are actively and
regularly monitored by the Manager (investment managers normally
observe or sit on portfolio company boards), including the level of
diversification in the portfolio, and the Board receives detailed
reports on each investment as part of the Manager’s report at
quarterly board meetings. The Board and Manager regularly review
the deployment of investments and cash resources available to the
Company in assessing liquidity required for servicing the Company’s
buy-backs, dividend payments and operational expenses. The 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 Tax Act 2007
which enables its investors to take advantage of tax relief on
their investment and on future returns. Breach of any of the rules
enabling the Company to hold VCT status could result in the loss of
that status. |
No change in the year. |
To reduce this risk, the Board has appointed the Manager, which has
a team with significant experience in Venture Capital Trust
management, used to operating within the requirements of the
Venture Capital Trust legislation. 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 and is required
to comply with the rules of the Financial Conduct Authority, as
well as with the Companies Act, Accounting Standards and other
legislation. Failure to comply with these regulations could result
in a delisting of the Company’s shares, or other penalties under
the Companies Act or from financial reporting oversight
bodies. |
No change in the year. |
Board members and the Manager have experience of operating at
senior levels within or advising quoted companies. In addition, the
Board and the Manager receive regular updates on new regulation
from its auditor, legal advisors and other professional bodies. The
Company is subject to compliance checks through the Manager’s
compliance function, and any issues arising from compliance 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 particular the
Manager, for the provision of investment management and
administrative functions. Failures in key systems and controls
within the Manager’s business could put assets of the Company at
risk or result in reduced or inaccurate information being passed to
the Board or to shareholders. |
No change in the year. |
The Company and its operations are subject to a series of rigorous
internal controls and review procedures exercised throughout the
year. The Board receives reports from the Manager on its internal
controls and risk management.The Audit and Risk Committee reviews
the Internal 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 suppliers could
result in the security of, potentially sensitive, data being
compromised, leading to financial loss, disruption or damage to the
reputation of the Company. |
Increased in the year, due to an increase in cyber-attacks
worldwide. |
The Manager outsources some of its IT services, including hardware
and software procurement, server management, backup provision and
day-to-day support through an outsourcing arrangement with an IT
consultant. In 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, interest
rates, rates of inflation, industry conditions, competition,
political and diplomatic events, and other factors could
substantially and adversely affect the Company’s prospects in a
number of ways. This also includes risks of social upheaval,
including from infection and population re-distribution, as well as
economic risk challenges as a result of healthcare
pandemics/infection. |
Increased in the year, due to the high levels of inflation, rising
interest rates and the general risks. |
The Company invests in a diversified portfolio of companies across
a number of industry sectors and in addition often invests in a
mixture of instruments in portfolio companies and has a policy of
minimising any external bank borrowings within portfolio
companies.At any given time, the Company has sufficient cash
resources to meet its operating requirements, including share
buy-backs and follow-on investments.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 negative
impact on the environment, including the Company’s carbon
footprint. Non-compliance with reporting requirements could lead to
a fall in demand from investors, reputational damage and penalties.
Climate risks could also negatively impact on the value of
portfolio investments. |
No change in the year. |
The Manager is a signatory of the UN PRI and the Board is kept
updated of the evolving ESG policies at quarterly Board meetings.
Full details of the specific procedures and risk mitigation can be
found in the ESG report on pages 35 to 38 of the full Annual Report
and Financial 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 to meet its
financial obligations. The Company’s portfolio is primarily in
smaller unquoted companies, which are inherently illiquid as there
is no readily available market, and thus it may be difficult to
realise their fair value at short notice. |
No change in the year. |
To reduce this risk, the Board reviews the Company’s three year
cash flow forecasts on a quarterly basis. These include potential
investment realisations (which are closely monitored by the
Manager), Top Up Offers, dividend payments and operational
expenditure. This ensures that there are sufficient cash resources
available for the Company’s commitments and liabilities as they
fall due. |
Viability statementIn
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 Chairman11 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 30 June 2023 |
Year ended 30 June 2022 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Note |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’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 |
£’000 |
£’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 FreerChairman
Company number: 03495287
Statement of changes in
equity
|
Called up sharecapital |
Share premium |
Unrealised capital reserve |
Realised capital reserve* |
Other distributable reserve* |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’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
£12,804,000 (2022: £24,165,000) which is considered
distributable.
The nature of each reserve is described in note
2 below.
Statement of cash flows
|
|
Year ended 30 June
2023£’000 |
Year ended 30 June 2022£’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 preparationThe
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
policiesFixed asset investmentsThe
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
payablesReceivables (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 incomeDividend
incomeDividend income is included in revenue when the investment is
quoted ex-dividend.
Unquoted loan stock incomeFixed 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 incomeFunds income is
recognised on an accruals basis using the agreed rate of
interest.
Bank deposit incomeInterest income is recognised
on an accruals basis using the rate of interest agreed with the
bank.
Investment management fee, performance
incentive fee and other expensesAll 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.
TaxationTaxation 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.
ReservesCalled-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 reserveThis 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 reserveIncreases and
decreases in the valuation of investments held at the year end
against cost are included in this reserve.
Realised capital reserveThe 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 reserveThe 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.
DividendsDividends by the
Company are accounted for when the liability to make the payment
(record date) has been established.
Segmental reportingThe
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 30 June 2023 |
Year ended 30 June 2022 |
|
£’000 |
£’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 30 June 2023 |
Year ended 30 June 2022 |
|
£’000 |
£’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 |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’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
£1,583,000 (2022: £1,425,000) were purchased by the Company from
Albion Capital Group LLP (“Albion”) comprising £1,533,000 of
management fees (2022: £1,375,000) and £50,000 of administration
fees (2022: £50,000). There is no performance incentive fee payable
this year (2022: £584,000). At the financial year end, the amount
due to Albion in respect of these services disclosed as accruals
and deferred income was £422,500 (administration fee accrual:
£12,500, management fee accrual £410,000) (2022: £971,500).
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 £299,000
attributable to the investments of the Company were received
pursuant to these arrangements (2022: £121,000).
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 30 June 2023 |
Year ended 30 June 2022 |
|
£’000 |
£’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’ feesThe amounts
paid to and on behalf of the Directors during the year are as
follows:
|
Year ended 30 June
2023£’000 |
Year ended 30 June 2022£’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 30 June
2023£’000 |
Year ended 30 June 2022£’000 |
UK corporation tax charge |
- |
- |
|
Year ended 30 June 2023 |
Year ended 30 June 2022 |
Reconciliation of profit on ordinary activities to taxation
charge |
£’000 |
£’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 £21,392,000 (2022: £20,279,000) that
are available for offset against future profits. A deferred tax
asset of £5,348,000 (2022: £3,853,000) 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 30 June 2023 |
Year ended 30 June 2022 |
|
£’000 |
£’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 £2,354,000. All dividends are paid
from the other distributable reserve.
During the year, unclaimed dividends older than
twelve years of £13,000 (2022: £13,000) 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 (£’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
loss |
30 June 2023£’000 |
30 June 2022£’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 £’000 |
30 June 2022 £’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 2023 |
30 June 2022 |
Valuation methodology |
£’000 |
£’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:
Change in valuation methodology (2022 to
2023) |
Value as at30 June
2023£’000 |
Explanatory note |
Cost and price of recent
investment (calibrated and reviewed for impairment) to revenue
multiple |
3,770 |
More appropriate valuation methodology |
Cost and price of recent
investment (calibrated and reviewed for impairment) to earnings
multiple |
2,472 |
More appropriate valuation methodology |
Cost and price of recent
investment (calibrated and reviewed for impairment) to third party
valuation |
970 |
Third party valuation conducted |
Cost and price of recent
investment (calibrated and reviewed for impairment) to discounted
offer price |
956 |
More 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 |
|
£’000 |
£’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:
Valuation technique |
Portfolio company sector |
Input |
Base case* |
Change in input |
Change in fair value of investments (£’000) |
Change in NAV (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 £997,000 (1.7%) or a decrease in the valuation of
unquoted equity investments by £984,000 (1.7%). Due to the size of
the holding in Quantexa, a 10% change in this valuation would
result in a movement of £1,694,000 (1.8%).
12. Significant interestsThe
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 |
|
£’000 |
£’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 |
|
£’000 |
£’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 |
£'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
£2,359,000 (2022: £2,212,000).
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:
Allotment date |
Number of shares allotted |
Aggregate nominal value of shares
(£’000) |
Issue price (pence per
share) |
Net invested(£’000) |
Opening market price on allotment (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:
Allotment date |
Number of shares allotted |
Aggregate nominal value of shares
(£’000) |
Issue price (pence per
share) |
Net consideration
received(£’000) |
Opening market price on allotment (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 riskAs 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 £6,800,000.
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 £13,600,000. 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
£68,000,000 (2022: £57,170,000). Fixed asset investments form 72%
of the net asset value on 30 June 2023 (2022: 67%).
Interest rate riskIt 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 £265,000 (2022: £139,000).
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 £’000 |
Floating rate £’000 |
Non-interest £’000 |
Total£’000 |
Fixed rate £’000 |
Floating rate £’000 |
Non-interest £’000 |
Total£’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 riskCredit 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 £10,272,000 of unquoted loan stock instruments
(2022: £8,961,000), £25,006,000 cash deposits with banks (2022:
£28,024,000) and £1,646,000 of other receivables (2022:
£1,835,000).
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 riskLiquid 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 £91,615,000 as at 30 June 2023 (2022: £83,700,000).
The Company has no committed borrowing
facilities as at 30 June 2023 (2022: nil) and had cash balances of
£25,006,000 (2022: £28,024,000). 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 £721,000 as at 30 June 2023 (2022:
£1,224,000).
The carrying value of loan stock investments as
analysed by expected maturity dates is as follows:
|
30 June 2023 |
30 June 2022 |
Redemption date |
Fully performing£’000 |
Past due £’000 |
Valued below cost£’000 |
Total£’000 |
Fully performing£’000 |
Past due £’000 |
Valued below cost£’000 |
Total£’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 £nil
(2022: £681,000).
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 liabilitiesAll 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 contingenciesThe Company
had no financial commitments in respect of investments at 30 June
2023 (2022: £nil).
There are no contingencies or guarantees of the
Company as at 30 June 2023 (2022: £nil).
19. Post balance sheet
eventsSince the year end, the Company has completed the
following material investment transactions:
- Part disposal of Quantexa for
proceeds of £1.2 million; and
- Investments totalling £2.3 million
in three new and four existing portfolio companies.
20. Related party
transactionsOther 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 informationThe
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. PublicationThe 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.
- Current portfolio sector allocation
Crown Place Vct (LSE:CRWN)
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