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
2021.
This announcement was approved for release by
the Board of Directors on 29 September 2021.
This announcement has not been audited.
The Annual Report and Financial Statements for
the year ended 30 June 2021 (which have been audited), will shortly
be sent to shareholders. Copies of the full Annual Report and
Financial Statements will be shown via the Albion Capital Group LLP
website by clicking www.albion.capital/funds/CRWN/30Jun21.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 per cent. of the Company's assets at cost thus
ensuring a spread of investment risk. The value of an individual
investment may increase over time as a result of trading progress
and it is possible that it may grow in value to a point where 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
Record date for first interim
dividend and special dividend |
5 November 2021 |
|
|
Annual General Meeting |
Noon on 9 November 2021 |
|
|
Payment date of first interim
dividend and special dividend |
30 November 2021 |
|
|
Announcement of half-yearly
results for the six months ending 31 December 2021 |
February 2022 |
|
|
Payment date of second interim
dividend (subject to Board approval) |
31 March 2022 |
Financial highlights
34.79p |
Net asset value per share as at 30 June 2021 |
|
|
5.26p |
Increase in total shareholder value for the year ended 30 June
2021† |
|
|
15.87% |
Total uplift on opening net asset value per share† |
|
|
3.61p |
Total tax-free dividends per share paid during the year ended 30
June 2021 |
|
30 June
2021 |
30 June 2020 |
|
pence per share |
pence per share |
Opening net asset value |
33.14 |
35.29 |
Revenue (loss)/return |
(0.03) |
0.25 |
Capital return/(loss) |
5.58 |
(0.46) |
Total return/(loss) |
5.55 |
(0.21) |
Dividends paid |
(3.61) |
(2.00) |
Impact from share capital movements |
(0.29) |
0.06 |
Closing net asset value |
34.79 |
33.14 |
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
2021 (period
that Albion Capital has been investment
manager): |
|
|
|
Total dividends paid |
|
|
38.41 |
Decrease in net asset value |
|
|
(8.61) |
Total shareholder return from April 2005 to 30 June 2021 |
|
|
29.80 |
|
|
|
|
|
|
|
|
Shareholder
value since
launch: |
|
|
|
Total dividends paid to 30 June
2021(i) |
|
|
63.34 |
Net asset value as at 30 June
2021 |
|
|
34.79 |
Total shareholder value as at 30
June 2021 |
|
|
98.13 |
|
|
|
|
Notes
(i) Prior to
6 April 1999, Venture Capital Trusts were able to add 20 per cent.
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
interim dividend for the year ending 30
June 2022
of 0.87
pence per share
payable on 30
November
2021 to
shareholders on the register on
5 November
2021.
The Board has also declared a special dividend of
1.50
pence per share payable on 30
November 2021 to shareholders on the
register on 5 November 2021.
Details of the special dividend can be found in the
Chairman’s statement
below.
Chairman’s statement
IntroductionI am delighted to
report a strong increase in total shareholder value of 5.26 pence
per share for the year, representing a 15.87% uplift on the opening
net asset value. Last year’s results included several months where
our portfolio companies were impacted by the uncertainty seen in
the early stages of the pandemic. One year later and, although
there is still uncertainty, we have seen continuing resilience and,
in many cases, growth from our portfolio, with many of our
companies continuing to provide products and services that are
innovative and considered essential to their customers.
Results and
dividends As at 30 June 2021, the net asset value
(“NAV”) was £77.7 million or 34.79 pence per share compared with
£65.3 million or 33.14 pence per share at 30 June 2020. The
continuing progress of a number of our portfolio companies is
discussed later in this statement and in the Strategic report
below. These excellent results have resulted in a performance
incentive fee payable to the Manager of £823,000. More detail on
the calculation of this fee can be found in the Strategic report
below.
In line with the dividend policy targeting
around 5% of NAV per annum, announced last year, the Company paid
dividends of 1.61 pence per share during the year to 30 June 2021.
In addition to this, the Company paid a special dividend of 2.00
pence per share following a number of disposals in 2019, resulting
in total dividends of 3.61 pence per share for the year ended 30
June 2021 (30 June 2020: 2.00 pence per share).
The successful sale of the Company’s three care
home investments generated substantial cash proceeds, and together
with the Albion VCTs’ Top Up Offers discussed below, has resulted
in the cash balances of the Company reaching £27 million on 30 June
2021 (2020: £24 million), representing 35% (2020: 36%) of NAV.
Whilst it is important for a Venture Capital
Trust to hold sufficient cash to manage operating costs, to service
dividends and buy-backs and to make follow-on and new investments
as opportunities arise, this must be balanced against the
requirements of a Venture Capital Trust to meet a minimum threshold
of 80% invested in qualifying assets.
Therefore, the Board has concluded that a
special dividend of 1.50 pence per share should be paid to
shareholders, alongside the first interim dividend for the year
ending 30 June 2022 of 0.87 pence per share to be paid on 30
November 2021 to shareholders on the register on 5 November
2021.
For those that wish to take it, an opportunity
remains to re-invest the combined special dividend and first
interim dividend in the Company via the Dividend Reinvestment
Scheme (“DRIS”). Shareholders can elect for the DRIS via the
registrar’s website at www.investorcentre.co.uk. Please note that
shareholders who hold their shares in CREST will need to contact
their CREST service provider.
Investment realisationsThe
strong return for the year was primarily driven by a number of
successful exits which generated total proceeds of £12.3 million
for the Company. As noted above, the bulk of the proceeds came from
the sale of the three care homes; Active Lives Care, Ryefield Court
Care, and Shinfield Lodge Care. The first investment in the homes
was made over five years ago and the sale generated proceeds of
£9.8 million which represents a 2.5x return on cost (including
interest received over the holding period), an excellent result for
the Company. The homes were trading at mature occupancy levels and
were sold at attractive profit multiples.
The sale of G.Network Communications was also
completed in December 2020, with a strong headline total return on
all monies invested of 3.8x cost, although the terms of the sale
will see proceeds being received in three years’ time. In addition
to this, Clear Review, a software investment made in 2019, was sold
during the year, generating 2.1x return on cost. Further details on
realisations can be found in the table on page 29 of the full
Annual Report and Financial Statements.
Investment performance and
progressMany of our portfolio companies have performed
well despite the Covid-19 pandemic and this has contributed to the
total uplift in value of £13.0 million to the Company’s investments
for the year.
Quantexa and Oviva have both been revalued after
externally led funding rounds, resulting in uplifts of £5.3 million
and £1.6 million respectively. Proveca continues to trade well both
within the UK and the EU resulting in an uplift of £1.1 million.
Other investments with uplifts in the year were Phrasee (£1.0
million) and The Evewell (£0.9 million), both of which continue to
trade well. Inevitably some of our portfolio companies were
impacted by the pandemic, with Mirada Medical being written down by
a further £0.3 million due to sales to hospitals being delayed by
the pandemic, and Avora being written down by £0.3 million
following a period of difficult trading.
The Company has been an active investor during
the year with more than £8.3 million invested in new and existing
portfolio companies. Alongside the other Albion managed VCTs, the
Company has invested £4.4 million in eight new portfolio companies,
all of which are expected to require further investment as the
companies continue to grow:
- £1.2 million
into Threadneedle Software Holdings (trading as Solidatus), a
provider of data lineage software to enterprise customers in
regulated sectors, which allows them to rapidly discover,
visualise, catalogue and understand how data flows through their
systems;
- £0.8 million
into The Voucher Market (trading as WeGift), a cloud platform that
enables corporates to purchase digital gift cards and to distribute
them to employees and customers;
- £0.6 million
into Gravitee Topco (trading as Gravitee.io), an open source
Application Programming Interface (“API”) management platform that
enables enterprises to manage their APIs through their
lifecycle;
- £0.6 million
into NuvoAir AB, a provider of digital therapeutics and
decentralised clinical trials for respiratory conditions;
- £0.4 million
into Seldon Technologies, a software company that enables
enterprises to deploy machine learning models in production;
- £0.4 million
into Brytlyt, a provider of an AI and open source relational
database for Graphics Processing Unit (“GPU”) powered data
analytics;
- £0.2 million
into Accelex Technology, a provider of data extraction and
analytics technology for private capital markets; and
- £0.2 million
into uMedeor (trading as uMed), a software platform that enables
life science organisations to use patient data, in a compliant way,
to recruit participants for clinical trials.
A further £3.9 million was invested into 14
existing portfolio companies, of which the largest were: £1.4
million into Quantexa as part of a larger externally led funding
round to support the growth of its analytics platform which helps
detect and protect against financial crime; £0.8 million into
uMotif to take advantage of a growing market for its software that
gathers data from clinical trials; £0.5 million into Healios to
continue providing psychological care to children and adolescents
using a family centric approach; and £0.3 million into Black Swan
Data, to support the restructure of its business to focus primarily
on predictive analytics for consumer brands.
Full details of the companies in which we invest
can be found in the Portfolio of investments section on pages 26 to
29 of the full Annual Report and Financial Statements.
Risks and uncertaintiesThe wide
reaching implications of the Covid-19 crisis continue to be the key
risk facing the Company, including its impact on the UK and Global
economies. The risk of potential implications of the UK’s departure
from the European Union adversely affecting our underlying
portfolio companies appears to be reducing as detail of new
policies and procedures, where relevant, continue to be
communicated and portfolio companies are able to adapt. The Manager
is continually assessing the exposure to such risks for each
portfolio company and, where possible, appropriate mitigating
actions are being taken.
A detailed review of risk management is set out
below in the Strategic report.
Share
buy-backsIt 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. Given the current stability of the
portfolio and the Company’s current cash position, the Board has
decided that there will be no limit on the level of share
buy-backs.
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.
Albion
VCTs’ Top Up
Offers Your Board, in conjunction with
the boards of other VCTs managed by Albion Capital Group LLP,
launched prospectus top up Offers of new Ordinary shares on 5
January 2021. The Company announced on 26 January 2021 that it
would exercise its over-allotment facility, bringing the total
amount to be raised to £9 million. On 10 February 2021 the Offers
were fully subscribed and closed. 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 have been added to the liquid resources available for
investment, positioning the Company to take advantage of investment
opportunities over the next two to three years. Details on the
share allotments during the year can be found in note 15.
Annual General MeetingBased on
the success of last year’s live streamed AGM, with a record number
of shareholders attending, and also to avoid the risk of having to
make any changes as a result of updated government guidelines on
Covid-19, the Board has decided to use the same format for the AGM
this year. The AGM will be held at noon on 9 November 2021, at the
registered office being 1 Benjamin Street, London, EC1M 5QL.
Shareholders will not be allowed entry into the building where the
AGM is held, but will be able to attend the event via the free
platform, Hopin.
The quorum for the meeting is two, therefore, at
least two Directors will attend in person to allow the continuation
of this AGM. There will also be a representative of Albion Capital
Group LLP as Company Secretary.
The AGM will include a presentation from the
Manager, the formal business of the AGM and the answers to
questions we receive from shareholders. Registration details for
the live stream will be emailed to shareholders and will be
available at www.albion.capital/annual-general-meeting-updates
prior to the Meeting.
Full details of the business to be conducted at
the AGM are given in the Notice of the Meeting on pages 76 and 77
of the full Annual Report and Financial Statements, and in the
Directors’ report on pages 39 and 40 of the full Annual Report and
Financial Statements.
We always welcome questions from our
shareholders at the AGM, and shareholders will be able to ask
questions using the Hopin platform during the AGM. Alternatively,
shareholders can email their questions to crownchair@albion.capital
prior to the Meeting.
Following the Meeting, a summary of responses
will be published on the Manager’s website at
www.albion.capital/funds/CRWN.
Shareholders’ views are important, and the Board
encourages shareholders to vote on the resolutions using the proxy
form enclosed with this Annual Report and Financial Statements, or
electronically at www.investorcentre.co.uk/eproxy. The Board has
carefully considered the business to be approved at the AGM and
recommends shareholders to vote in favour of all the resolutions
being proposed.
Shareholder seminarThe Board is
pleased to report that the current intention of the Manager, Albion
Capital, is to host a physical rather than virtual shareholder
seminar this year on 12 November 2021, in central London with the
venue to be confirmed. This will be dependent on government
guidelines and any changes thereto, and we will keep shareholders
informed as the date approaches. The Board is keen to interact with
shareholders and looks forward to updating you on portfolio
developments, as well as answering any questions.
More details will shortly be available on the
Albion Capital website www.albion.capital.
Outlook These positive results
demonstrate the resilience of our portfolio which is both
diversified with companies at different stages of maturity and
targeted at sectors such as software and healthcare which have
proved resilient during the Covid-19 pandemic. I am confident that
our portfolio companies are well positioned to grow, providing
products and services critical to their customers despite the
uncertainty around the longer-term impact of the pandemic. The
Board believes the Company is well placed to continue to deliver
long term value to our shareholders.
Penny FreerChairman29 September 2021
Strategic report
Crown Place VCT PLC (the “Company”) is a Venture
Capital Trust and its investment policy can be found above.
Business model The Company
operates as a Venture Capital Trust. This means that 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 Management
agreement can be found below.
Current
portfolio sector
allocation The pie charts at the end of this announcement
shows the split of the portfolio valuation as at 30 June 2021 by:
sector; stage of investment; and number of employees. This is a
useful way of assessing how the Company and its portfolio is
diversified across sector, portfolio companies’ maturity measured
by revenues and their size measured by the number of people
employed. As the Company continues to invest in software and other
technology companies, FinTech (which is technology specifically
applicable to financial services companies) becomes a more
prominent investment, and therefore is included as a subsector.
Details of the principal investments made by the Company are shown
in the Portfolio of investments on pages 26 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 evenly spread across the FinTech, healthcare, other software
and technology, renewable energy, and education sectors.
Due to the share allotments under the 2020/21
Prospectus Top Up Offer, and the sale of the Company’s care homes
in March 2021, cash is a significant proportion of the portfolio at
35%. These funds will be invested predominantly into higher growth
technology companies, and therefore the shift away from asset based
companies will continue. The Company has a significant speciality
in FinTech investing, which can be seen as a growing part of the
portfolio, represented by a 10% increase this year. The 8% decrease
in the healthcare sector is attributable to the sale of the care
homes, and, given that healthcare technology is another area of
particular strength, we would expect this to increase in the
future.
Results and dividends
|
£’000 |
Revenue loss for the year ended 30 June 2021 |
(63) |
Capital return for the year ended 30 June 2021 |
11,526 |
Total return for the year
ended 30 June 2021 |
11,463 |
Special dividend of 2.00 pence per share paid on 30 October
2020 |
(3,940) |
First interim dividend of 0.83
pence per share paid on 30 November 2020 |
(1,642) |
Second interim dividend of 0.78
pence per share paid on 31 March 2021 |
(1,744) |
Unclaimed dividends |
12 |
Transferred to
reserves |
4,149 |
|
|
Net assets as at 30 June 2021 |
77,650 |
|
|
Net asset value as at 30
June
2021
(pence per
share) |
34.79 |
|
|
The Company paid dividends totalling 3.61 pence
per share during the year ended 30 June 2021 (2020: 2.00 pence per
share). The dividend objective of the Board is to provide
shareholders with a regular dividend flow. The Board declared a
first interim dividend for the year ending 30 June 2022 of 0.87
pence per share. This dividend will be paid on 30 November 2021 to
shareholders on the register on 5 November 2021. The Board has also
declared a special dividend of 1.50 pence per share, payable on 30
November 2021 to shareholders on the register on 5 November
2021.
The gain on investments for the year was
£13,016,000 (2020: loss of £21,000). The key drivers of this gain
are detailed in the Chairman’s statement above. This has led to a
significant increase in net asset value to 34.79 pence per share
(2020: 33.14 pence per share), which can be seen on the Balance
sheet below. This increase in net asset value is after taking
account of the payment of 3.61 pence per share of dividends during
the year. A full analysis of the Portfolio of investments can be
seen on pages 26 to 29 of the full Annual Report and Financial
Statements.
Investment income has decreased to £820,000
(2020: £1,112,000) predominantly as a result of the sale of the
care homes during the year which, after accounting for the
performance incentive fee, resulted in a revenue loss of £63,000
(2020: gain £473,000). The total gain for the year was 5.55 pence
per share (2020: loss of 0.21 pence per
share). The cash
flow for the Company has been a net inflow of £3,460,000 for the
year (2020: £7,883,000), reflecting disposal proceeds, loan stock
income, and the issue of new Ordinary shares under the Top Up
Offer, offset by dividends paid, ongoing expenses, new investments
and the buy-back of shares.
Review of the
business and future changesA
review of the Company’s business during the year is set out in the
Chairman’s statement above.
There is a continuing focus on growing the
FinTech, healthcare and other software and technology sectors. The
majority of these investment returns are delivered through equity
and capital gains. The Company will continue to receive income from
its renewable energy portfolio for the foreseeable future, however,
following the sale of the care homes, we expect our investment
income to decrease in the next year.
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 to 30 June 2021 demonstrates that
the portfolio remains well balanced across sectors and risk
classes, despite the effects of the pandemic so far. Many of the
companies in the portfolio have continued to grow throughout the
pandemic and have been providing products and services that are
considered innovative and essential to their customers. Although
there remains much uncertainty, the Manager has a strong pipeline
of investment opportunities in which the Company’s cash can be
deployed. The Board considers that the pipeline will continue to
enable the Company to maintain a predictable stream of dividend
payments to shareholders, and ultimately continue to deliver long
term growth.
Key
Performance
Indicators (“KPIs”) and
Alternative Performance Measures (“APMs”)The Directors
believe that the following KPIs and APMs, which are typical for
VCTs and used in its own assessment of the Company, will provide
shareholders with sufficient information to assess how effectively
the Company has been applying its investment policy to meet its
objectives. The Directors are satisfied that the results shown in
the following KPIs and APMs, taken overall, give a good indication
that the Company is achieving its investment objective and policy.
These are:
- Increase in total shareholder
value
The graph on page 13 of the full Annual Report
and Financial Statements shows that total shareholder value
increased by 5.26 pence per share to 98.13 pence per share (2020:
92.87) for the year ended 30 June 2021.
2. Shareholder return in the year †
2012 |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
4.3% |
6.6% |
7.1% |
4.5% |
1.5% |
14.0% |
14.6% |
11.3% |
(0.4%) |
15.9% |
Source: Albion Capital Group LLP
† Methodology: Shareholder return is calculated
by the movement in total shareholder value for the year divided by
the opening net asset value.
3. Dividend distributions
Dividends paid in respect of the year ended 30
June 2021 were 3.61 pence per share (2020: 2.00 pence per share).
Cumulative dividends paid since launch (on 18 January 1998) amount
to 63.34 pence per share.
4. Ongoing charges The ongoing charges ratio for
the year ended 30 June 2021 reduced slightly to 2.2 per cent.
(2020: 2.3 per cent.). The ongoing charges ratio has been
calculated using The Association of Investment Companies’ (“AIC”)
recommended methodology. This figure shows shareholders the total
recurring annual running expenses (including investment management
fees charged to capital reserve) as a percentage of the average net
assets attributable to shareholders. The Directors expect the
ongoing charges ratio for the year ahead to remain stable at
approximately 2.2 per cent.
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 37 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 2021. These showed that the Company has complied with all
tests and continues to do so.
*VCT compliance is not a numerical measure of
performance and thus cannot be defined as an APM.
GearingAs defined by the
Articles of Association, the Company’s maximum exposure in relation
to gearing is restricted to its adjusted share capital and
reserves. The Directors do not currently have any intention to
utilise gearing for the Company.
Operational arrangements The
Company has delegated the investment management of the portfolio to
Albion Capital Group LLP, which is authorised and regulated by the
Financial Conduct Authority. Albion Capital Group LLP also provides
company secretarial and other accounting and administrative support
to the Company.
Management agreementUnder the
terms of the Management agreement, the Manager is paid an annual
fee equal to 1.75 per cent. of the net asset value of the Company
plus a £50,000 fee per annum for administrative and secretarial
services. Total normal running costs, including the management fee,
are limited to 3.0 per cent. 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 per cent. of the investment made, and also monitoring fees
where the Manager has a representative on the portfolio company’s
board.
Further details of fees paid to the Manager can
be found in note 5.
The management agreement 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.
Management performance
incentive feeIn order to provide the
Manager with an incentive to maximise the return to investors, the
Manager is entitled to charge an incentive fee in the event that
the returns exceed minimum target levels per share. 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 target level 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 per cent. 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 2021, 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 69.26 pence per share, compared to
a hurdle of 67.42 pence per share. As a result, a performance
incentive fee of £823,000 is payable to the Manager (2020: £nil).
The previous time a performance incentive fee was paid was in
2007.
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 80% qualifying holdings investment requirement
for VCT status;
• the long term
prospects of the current portfolio of investments;
• the management of
treasury, including use of buy-backs and participation in fund
raising; • a review
of the Management agreement and the services provided therein; and
• benchmarking the
performance of the Manager to other service providers including the
performance of other VCTs that the Manager is responsible for
managing.
The Board believes that it is in the interests of shareholders
as a whole, and of the Company, to continue the appointment of the
Manager for the forthcoming year.
Alternative Investment Fund Managers
Directive (“AIFMD”)The Board appointed Albion Capital
Group LLP as the Company’s AIFM in 2014 as required by the AIFMD.
The Manager is a full-scope Alternative Investment Fund Manager
under the AIFMD. Ocorian Depositary (UK) Limited is the appointed
Depositary and oversees the custody and cash arrangements and
provides other AIFMD duties with respect to the Company.
Companies Act 2006 Section 172
Reporting Under Section 172 of the Companies Act
2006, the Board has a duty to promote the success of the Company
for the benefit of its members as a whole in both the long and
short term, having regard to the interests of other stakeholders in
the Company, such as suppliers, and to do so with an understanding
of the impact on the community and environment and with high
standards of business conduct, which includes acting fairly between
members of the Company.
The Board is very conscious of these wider
responsibilities in the ways it promotes the Company’s culture and
ensures, as part of its regular oversight, that the integrity of
the Company’s affairs is foremost in the way the activities are
managed and promoted. This includes regular engagement with the
wider stakeholders of the Company and being alert to issues that
might damage the Company’s standing in the way that it operates.
The Board works very closely with the Manager in reviewing how
stakeholder issues are handled, ensuring good governance and
responsibility in managing the Company’s affairs, as well as
visibility and openness in how the affairs are conducted.
The Company is an externally managed investment
company with no employees, and as such has nothing to report in
relation to employee engagement but does keep close attention to
how the Board operates as a cohesive and competent unit. The
Company also has no customers in the traditional sense and,
therefore, there is also nothing to report in relation to
relationships with customers.
The table below sets out the stakeholders the
Board considers most relevant, details how the Board has engaged
with these key stakeholders and the effect of these considerations
on the Company’s decisions and strategies during the year.
Stakeholder |
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, Half-yearly
financial report, and Interim management statements
- RNS announcements for all key
decisions including appointment of a new Director, and the
publication of a Prospectus
- Website redesigned in the year to
make it more user accessible
|
- 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 investment management team. A
live stream of the AGM was held last year, and the Board were able
to take questions from Shareholders. This enabled maximum
shareholder engagement in the absence of a face-to-face event and
saw higher number of attendees compared to previous years. This
year’s AGM will again be live streamed to facilitate shareholder
participation.
- Shareholders are also encouraged to
attend the annual Shareholders’ Seminar. This year’s event is
scheduled for 12 November 2021. The venue is yet to be confirmed
but will be in central London with easy access to public transport.
More details will shortly be available on the Albion Capital
website. The seminar includes some of the portfolio companies
sharing insights into their businesses and also presentations from
Albion executives on some of the key factors affecting the
investment outlook, as well as a review of the past year and the
plans for the year ahead. Representatives of the Board attend the
seminar. The Board considers this an important interactive event,
and therefore in 2020, although Covid-19 restrictions did not allow
for face-to-face meetings, this was also held as a live stream
event.
- Shareholders receive either a hard
or soft copy of the Annual report, and the Half-yearly financial
report, depending on their preference. These reports are also
available on the website, and announcement is made on the London
Stock Exchange. The Company also provides voluntary Interim
management statements to keep Shareholders up to date
quarterly.
- The share buy-back policy is an
important means of providing market liquidity for Shareholders, and
has been offered throughout the year. The Board monitors closely
the discount to the net asset value to ensure this is in the region
of 5%.
- The Board seeks to create value for
Shareholders by generating strong and sustainable returns to
provide shareholders with regular dividends and the prospect of
capital growth. During the year, the new dividend policy has been
enacted, and has resulted in a dividend yield of 5.2% on opening
net asset value. In addition to the regular dividend policy, a
special dividend of 2 pence per share was paid on 30 October 2020.
A total of 3.61 pence of dividends were paid during the year, which
was 10.9% of the opening net asset value.
- During the year, the decision to
publish a Prospectus was taken, in order to raise more funds for
deployment into new and existing portfolio companies. The Board
carefully considered whether further funds were required, and
whether the VCT tests would continue to be met before agreeing to
publish the Prospectus. On allotment, the decision was made to use
different issue prices to ensure there was no dilution to existing
Shareholders, whilst also ensuring new Shareholders were investing
at a fair price.
- Cash management and liquidity of
the Company are key quarterly discussions amongst the Board, with
focus on deployment of cash for future investments, dividends and
share buy-backs.
- Shareholders can contact the
Chairman using the email crownchair@albion.capital
|
Suppliers |
The key suppliers with regular engagement from the Manager are:
- Corporate broker
- VCT taxation advisor
- Depositary
- Registrar
- Auditor
- Lawyer
|
- The Manager 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 Board reviews the performance
of the providers annually in line with the Manager.
|
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
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 pages 42 and 43 of the full Annual Report and
Financial Statements.
|
Portfolio companies |
The portfolio companies are considered key stakeholders, not least
because they are principal drivers of value for the Company.
However, as discussed in the Environmental, Social and Governance
(“ESG”) section below, 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 a place on the board of a portfolio company, in order to help
with both business operation decisions, as well as good ESG
practices.
- The Manager ensures good dialogue
with portfolio companies, and often puts on events in order to help
portfolio companies benefit from the Albion network.
|
Community 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 UN Principles for Responsible Investment (“UN PRI”). Further
details of this are set out in the ESG section below. ESG, without
its specific definition, has always been at the heart of the
responsible investing that the Company engages in and in how the
Company conducts itself with all of its stakeholders.
|
Environmental, Social, and Governance
(“ESG”)The Company’s Manager, Albion Capital Group LLP,
takes the concept of sustainable and responsible investment very
seriously for existing investments and in reviewing new investment
opportunities. In turn, the Board is kept appraised of ESG issues
in connection with both the portfolio and in how Company affairs
are conducted more generally as a regular part of Board
oversight.
Albion Capital Group LLP is a signatory of the
UN PRI. The UN PRI is the world’s leading proponent of responsible
investment, working to understand the investment implications of
ESG factors and to support its international network of investor
signatories in incorporating these factors into their investment
and ownership decisions.
The Board and Manager have exercised conscious
principles in making responsible investments throughout the life of
the Company, not least in providing finance for promising companies
in a variety of important sectors such as technology, healthcare
and renewable energy. In making the investments, the Manager is
directly involved in the oversight and governance of these
investments, including ensuring standards of reporting and
visibility on business practices, all of which are reported to the
Board of the Company. By its nature, not least in making qualifying
investments which fulfil the criteria set by HMRC, the Company has
focused on sustainable and longer-term investment propositions,
some of which will grow and serve important societal demands. One
of the most important drivers of performance is the quality of the
investment portfolio, which goes beyond the individual valuations
and examines the prospects of each of the portfolio companies, as
well as the sectors in which they operate – all requiring a longer-
term view.
In the nature of venture capital investment,
Albion Capital Group LLP is more intimately involved in the affairs
of portfolio companies than might be the case for funds invested in
listed securities. As such, Albion Capital Group LLP is in a
position to influence good governance and behaviour in the
portfolio companies, many of which are relatively small companies
without the support of a larger company’s administration and
advisory infrastructure.
The Company adheres to the principles of the AIC
Code of Corporate Governance and is also aware of other governance
and corporate conduct guidance which it meets as far as practical,
including in the constitution of a diversified and independent
Board capable of providing constructive challenge.
The Company's portfolio is currently invested in
healthcare, renewable energy, education, FinTech, software and
other technology (which includes cyber security and data
protection), with the most significant percentage of the Company’s
portfolio invested in sectors and companies which would be seen by
many measures to be both sustainable and socially aware on the
services they render.
Albion Capital Group LLP incorporates ESG
considerations into its investment decisions. These form part of
its process to create value for investors and develop sustainable
long-term strategies for portfolio companies. Albion Capital Group
LLP reports ESG criteria to UN PRI annually and to the Board
quarterly.
ESG principles are integrated at the
pre-investment, investment and exit stages. This is reflected in
transparency of reporting, governance principles adopted by the
Company and the portfolio companies, and increasingly in the
positive environmental or socially impactful nature of investments
made. Albion Capital Group LLP, where relevant, considers
climate-specific issues in its investment policies and activities.
However, as the majority of the Company’s portfolio consists of
small (2-250 full time employees), private, typically software
companies with limited environmental impact, climate change is not
considered to be a significant risk, and actions are proportionate
to that risk.
Pre-investment stage An exclusion list is used
to rule out investments in unsustainable areas, or in areas which
might be perceived as socially detrimental. ESG due diligence is
performed on each potential portfolio company to identify any
sustainability risks associated with the investment. Identified
sustainability risks are ranked from low to high and are reported
to the relevant investment committee. The investment committee
considers each potential investment. If sustainability risks are
identified, mitigations are assessed and, if necessary, mitigation
plans are put in place. If this is not deemed sufficient, the
committee would consider the appropriate level and structure of
funding to balance the associated risks. If this is not possible,
investment committee approval will not be provided, and the
investment will not proceed.
Investment stageAll new and existing portfolio
companies are asked to report against an ESG Balanced Score Card
annually. The ESG Balanced Score Card contains a number of
sustainability factors against which a portfolio company will be
assessed in order to determine the potential sustainability risks
and opportunities arising from the investment. The score cards form
part of the Manager’s internal review meetings alongside
discussions around other risk factors, and any outstanding issues
are addressed in collaboration with the portfolio companies’ senior
management.
Exit stageAlbion Capital Group LLP aims to
ensure that good ESG practices remain in place following exit. For
example, by ensuring that the portfolio company creates a
self-sustaining ESG management system during our period of
ownership, wherever feasible.
Social and community issues,
employees and human rightsThe
Board recognises the requirement under section 414C of the
Companies Act 2006 (the “Act”) to detail information about social
and community issues, employees and human rights; including any
policies it has in relation to these matters and effectiveness of
these policies. As an externally managed investment company with no
employees, the Company has no formal policies in these matters,
however, it is at the core of its responsible investment strategy
as detailed above.
General Data Protection RegulationThe General
Data Protection Regulation has the objective of unifying data
privacy requirements across the European Union, and continues to
apply in the United Kingdom after Brexit. The Manager continues to
take action to ensure that the Manager and the Company are
compliant with the regulation.
Further policies and
statementsThe Company has adopted a number of further
policies and statements relating to:
- Environment;
- Global greenhouse gas
emissions;
- Anti-bribery;
- Anti-facilitation of tax evasion;
and
- Diversity.
These are set out in the Directors’ report on
page 38 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 risk
has been the global pandemic which has impacted not only public
health and mobility but also has had an adverse impact on the
economy, the full impact of which is likely to be uncertain for
some time.
The Directors have carried out a robust
assessment of the Company’s principal risks and uncertainties, and
explain how they are being mitigated as follows.
Risk |
Possible consequence |
Risk management |
Investment, performance 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.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. |
To reduce this risk, the Board places reliance upon the skills and
expertise of the Manager and its track record over many years of
making successful investments in this segment of the market. In
addition, the Manager operates a formal and 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 sit on portfolio company boards), including the
level of diversification in the portfolio, and the Board receives
detailed reports on each investment as part of the Manager’s report
at quarterly board meetings. The Board and Manager regularly review
the deployment of investments and cash resources available to the
Company in assessing liquidity required for servicing the Company’s
buy-backs, dividend payments and operational expenses. The decision
to issue a Prospectus for the 2020/21 Top-Up was due to careful
analysis of these factors.The unquoted investments held by the
Company are designated at fair value through profit or loss and
valued in accordance with the International Private Equity and
Venture Capital Valuation Guidelines updated in 2018. These
guidelines set out recommendations, intended to represent current
best practice on the valuation of venture capital investments. The
valuation takes into account all known material facts up to the
date of approval of the Financial Statements by the Board. |
VCT approval 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. |
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. |
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. |
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, lawyers and other professional bodies. The
Company is subject to compliance checks through the Manager’s
compliance officer, 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. |
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. |
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, including on matters relating to
cyber security.The Audit and Risk Committee reviews the Internal
Audit Reports prepared by the Manager’s internal auditors, PKF
Littlejohn LLP and has access to the internal audit partner of PKF
Littlejohn LLP to provide an opportunity to ask specific detailed
questions in order to satisfy itself that the Manager has strong
systems and controls in place including those in relation to
business continuity and cyber security. Ocorian Depositary (UK)
Limited is the Company’s Depositary, appointed to oversee the
custody and cash arrangements and provide other AIFMD duties. The
Board reviews the quarterly reports prepared by Ocorian Depositary
(UK) Limited to ensure that Albion Capital is adhering to its
policies and procedures as required by the AIFMD. In addition, the
Board annually reviews the performance of its key service
providers, particularly the Manager, to ensure they continue to
have the necessary expertise and resources to deliver the Company’s
investment objective and policy. The Manager and other service
providers have also demonstrated to the Board that there is no
undue reliance placed upon any one individual. |
Economic, political and social 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.The political risk with the most uncertainty
for the future of the UK economy, which the Company largely
operates in, is Brexit.The current significant exogenous risk to
the Company, the wider population and economy, is the Covid-19
pandemic. |
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 Company largely operates within
the UK, and increasingly the US, and therefore impacts from Brexit
are reduced as there are few cross-border transactions with Europe.
Since 2016, the portfolio of companies has not seen any significant
impacts from the uncertainty around Brexit, nor since the end of
the transition period (1 January 2021).The Board and Manager are
continuously assessing the resilience of the portfolio, the Company
and its operations and the robustness of the Company’s external
agents during the health crisis, as well as considering longer term
impacts on how the Company might be positioned in how it invests
and operates. Ensuring liquidity in the portfolio to cope with
exigent and unexpected pressures on the finances of the portfolio
and the Company is an important part of the risk mitigation in
these uncertain times. The portfolio is structured as an
all-weather portfolio with c.60 companies which are diversified as
discussed above. Exposure is relatively small to at-risk sectors
that include leisure, hospitality, retail and travel. |
Emerging risks |
The Board meets at least four times a year to discuss current
affairs and any potential emerging risks which could affect the
Company. The key emerging risk affecting the Company is the
Environmental (including climate change), Social and Governance
requirements, both from a regulatory and investor preferences
standpoint. There is the risk of loss of funding from investors, as
well as the risk of penalties from regulatory non-compliance. |
The ESG section above details the Company’s work towards these
risks, and highlights the importance of these, above the statutory
reporting requirements, to the Company.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,
where that preference has been specified. |
Market value of Ordinary shares |
The market value of Ordinary shares can fluctuate. The market value
of an Ordinary share, as well as being affected by its net asset
value and prospective net asset value, also takes into account its
dividend yield and prevailing interest rates. As such, the market
value of an Ordinary share may vary considerably from its
underlying net asset value. The market prices of shares in quoted
investment companies can, therefore, be at a discount or premium to
the net asset value at different times, depending on supply and
demand, market conditions, general investor sentiment and other
factors. Accordingly, the market price of the Ordinary shares may
not fully reflect their underlying net asset value. |
The Company operates a share buy-back policy, which is designed to
limit the discount at which the Ordinary shares trade to around 5%
to net asset value, by providing a purchaser through the Company in
absence of market purchasers. From time to time buy-backs cannot be
applied, for example when the Company is subject to a close period,
or if it were to exhaust any buy-back authorities. The Company’s
corporate broker helps to ensure that the discount is
appropriate.New Ordinary shares are issued at sufficient premium to
net asset value to cover the costs of issue and to avoid asset
value dilution to existing investors. |
Reputational risk |
The Company relies on the judgement and reputation of the Manager
which is itself subject to the risk of loss. |
The Board regularly questions the Manager on its ethics,
procedures, safeguards and investment philosophy, which should
consequently result in the risk to reputational damage being
minimised. |
Viability
statementIn accordance with the FRC UK Corporate
Governance Code published in 2018 and principle 36 of the AIC Code
of Corporate Governance, the Directors have assessed the prospects
of the Company over three years to 30 June 2024. The Directors
believe that three years is a reasonable period in which they can
assess the future of the Company to continue to operate and meet
its liabilities as they fall due and is also the period used by the
Board in the strategic planning process and is considered
reasonable for a business of our nature and size. The three year
period is considered the most appropriate given the forecasts that
the Board requires from the Manager and the estimated timelines for
finding, assessing and completing investments. The three year
period also takes account of the potential impact of new
regulations, should they be imposed, and how they may impact the
Company over the longer term, and the availability of cash, but
cannot take into account the full extent of the exogenous risks
that are impacting on global economies at the date of these
accounts.
The Directors have carried out a robust
assessment of the emerging and principal risks facing the Company
as explained above, including those that could threaten its
business model, future performance, solvency or liquidity. The
Board also considered the procedures in place to identify emerging
risks and the risk management processes in place to avoid or reduce
the impact of the underlying risks. The Board focused on the major
factors which affect the economic, regulatory and political
environment, including any potential impact from Brexit. The Board,
after careful consideration, believes that Brexit has had no major
impact on the going concern of the Company, primarily due to the
markets our portfolio companies target, which in most cases are the
UK and increasingly, the US, for our software and technology
businesses. Portfolio companies targeting European markets have
also shown resilience so far. The coronavirus (Covid-19) pandemic
therefore remains the largest uncertainty impacting on the Company.
In light of this continuing uncertainty, robust stress tested
cashflows, process resilience and contingencies have been examined
in trying to deal with the principal risks faced by the
Company.
The Board assessed the ability of the Company to
raise finance and deploy capital, as well as the existing cash
resources of the Company. The portfolio is well balanced and geared
towards long term growth, delivering dividends and capital growth
to shareholders. In assessing the prospects of the Company, the
Directors have considered the cash flow by looking at the Company’s
income and expenditure projections and funding pipeline over the
assessment period of three years and they appear realistic.
Taking into account the processes for mitigating
risks, monitoring costs, share buy-backs and issuance, the
Manager’s compliance with the investment objective, policies and
business model and the balance of the portfolio, the Directors have
concluded that there is a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as
they fall due over the three year period to 30 June 2024.
This Strategic report of the Company for the
year ended 30 June 2021 has been prepared in accordance with the
requirements of section 414A of the Companies Act 2006 (the “Act”).
The purpose of this report is to provide shareholders with
sufficient information to enable them to assess the extent to which
the Directors have performed their duty to promote the success of
the Company in accordance with Section 172 of the Act.
For and on behalf of the Board
Penny Freer Chairman29 September 2021
Responsibility Statement
In preparing these Financial Statements for the
year to 30 June 2021, the Directors of the Company, being Penny
Freer, James Agnew, Pam Garside and Ian Spence, confirm that to the
best of their knowledge:
- summary financial information contained in
this announcement and the full Annual Report and Financial
Statements for the year ended 30 June 2021 for the Company has been
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (UK Accounting Standards and applicable law)
and give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
-the Chairman's statement and Strategic
report include a fair review of the development and performance of
the business and the position of the Company, together with a
description of the principal risks and uncertainties it faces.
We consider that the Annual Report and Financial
Statements, taken as a whole, are fair, balanced, and
understandable and provide the information necessary for
shareholders to assess the Company’s position, performance,
business model and strategy.
A detailed Statement of Directors'
responsibilities is contained on page 41 within the full Annual
Report and Financial Statements.
On behalf of the Board,
Penny FreerChairman29 September 2021
Income statement
|
|
Year ended 30 June
2021 |
Year ended 30 June 2020 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Note |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Gain/(loss) on investments |
3 |
- |
13,016 |
13,016 |
- |
(21) |
(21) |
Investment income |
4 |
820 |
- |
820 |
1,112 |
- |
1,112 |
Investment management fees |
5 |
(291) |
(873) |
(1,164) |
(285) |
(856) |
(1,141) |
Performance incentive fee |
5 |
(206) |
(617) |
(823) |
- |
- |
- |
Other expenses |
6 |
(386) |
- |
(386) |
(354) |
- |
(354) |
(Loss)/profit
on ordinary activities before tax |
|
(63) |
11,526 |
11,463 |
473 |
(877) |
(404) |
Tax on ordinary activities |
8 |
- |
- |
- |
- |
- |
- |
(Loss)/profit
and total comprehensive income attributable to
shareholders |
|
(63) |
11,526 |
11,463 |
473 |
(877) |
(404) |
Basic and diluted earnings per Ordinary share
(pence)* |
10 |
(0.03) |
5.58 |
5.55 |
0.25 |
(0.46) |
(0.21) |
* 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
2021 |
30 June 2020 |
|
Note |
£’000 |
£’000 |
|
|
|
|
Fixed asset
investments |
11 |
50,454 |
41,621 |
|
|
|
|
Current
assets |
|
|
|
Trade and other
receivables |
13 |
1,213 |
81 |
Cash and cash equivalents |
|
27,426 |
23,966 |
|
|
28,639 |
24,047 |
|
|
|
|
Total
assets |
|
79,093 |
65,668 |
|
|
|
|
Payables: amounts falling due within one
year |
|
|
|
Trade and other payables less
than one year |
14 |
(1,443) |
(395) |
|
|
|
|
Total assets
less current liabilities |
|
77,650 |
65,273 |
|
|
|
|
Equity attributable to
equity holders |
|
|
|
Called up share capital |
15 |
2,521 |
2,200 |
Share premium |
|
23,011 |
13,366 |
Unrealised capital
reserve |
|
18,643 |
12,032 |
Realised capital reserve |
|
9,905 |
4,990 |
Other distributable
reserve |
|
23,570 |
32,685 |
Total equity
shareholders’ funds |
|
77,650 |
65,273 |
|
|
|
|
Basic and diluted net
asset value per share (pence)* |
16 |
34.79 |
33.14 |
* 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 29 September 2021
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 2020 |
2,200 |
13,366 |
12,032 |
4,990 |
32,685 |
65,273 |
Profit/(loss) and total comprehensive income |
- |
- |
11,564 |
(38) |
(63) |
11,463 |
Transfer
of previously unrealised gains on disposal of investments |
- |
- |
(4,953) |
4,953 |
- |
- |
Dividends paid |
- |
- |
- |
- |
(7,314) |
(7,314) |
Purchase
of shares for treasury (including costs) |
- |
- |
- |
- |
(1,738) |
(1,738) |
Issue of
equity |
321 |
9,874 |
- |
- |
- |
10,195 |
Cost of
issue of equity |
- |
(229) |
- |
- |
- |
(229) |
As at 30 June 2021 |
2,521 |
23,011 |
18,643 |
9,905 |
23,570 |
77,650 |
As at 1 July 2019 |
2,072 |
9,061 |
19,756 |
(1,857) |
36,963 |
65,995 |
(Loss)/profit and total comprehensive income |
- |
- |
(651) |
(226) |
473 |
(404) |
Transfer
of previously unrealised gains on disposal of investments |
- |
- |
(7,073) |
7,073 |
- |
- |
Dividends paid |
- |
- |
- |
- |
(3,814) |
(3,814) |
Purchase
of shares for treasury (including costs) |
- |
- |
- |
- |
(937) |
(937) |
Issue of
equity |
129 |
4,418 |
- |
- |
- |
4,547 |
Cost of
issue of equity |
- |
(114) |
- |
- |
- |
(114) |
As at 30 June 2020 |
2,200 |
13,366 |
12,032 |
4,990 |
32,685 |
65,273 |
* Included within these reserves is an amount of
£28,289,000 (2020: £26,438,000) which is considered distributable.
On 1 July 2021, a further £5,186,000 became distributable.
The nature of each reserve is described in note
2 below.
Statement of
cash flows
|
|
Year ended 30
June 2021£’000 |
Year ended 30 June 2020£’000 |
Cash flow from operating
activities |
|
|
|
Loan
stock income received |
|
1,033 |
935 |
Deposit
interest received |
|
2 |
89 |
Dividend
income received |
|
13 |
16 |
Investment management fees paid |
|
(1,110) |
(1,145) |
Other
cash payments |
|
(398) |
(341) |
Corporation tax paid |
|
- |
- |
Net cash flow from operating activities |
|
(460) |
(446) |
|
|
|
|
Cash flow from investing activities |
|
|
|
Purchase
of fixed asset investments |
|
(8,326) |
(4,195) |
Disposal
of fixed asset investments |
|
11,156 |
12,837 |
Net cash flow from investing activities |
|
2,830 |
8,642 |
|
|
|
|
Cash flow from financing activities |
|
|
|
Issue of
share capital |
|
8,789 |
3,839 |
Cost of
issue of equity |
|
(20) |
(30) |
Equity
dividends paid* |
|
(6,106) |
(3,185) |
Purchase
of own shares for treasury (including costs) |
|
(1,573) |
(937) |
Net cash flow from financing
activities |
|
1,090 |
(313) |
|
|
|
|
Increase in cash and cash equivalents |
|
3,460 |
7,883 |
Cash and cash equivalents at the start of the year |
23,966 |
16,083 |
Cash and cash equivalents at the end of
the year |
27,426 |
23,966 |
|
|
|
* 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 pages 36 and 37 of the full Annual Report and Financial
Statements.
The preparation of the Financial Statements
requires management to make judgements and estimates that affect
the application of policies and reported amounts of assets,
liabilities, income and expenses. The most critical estimates and
judgements relate to the determination of carrying value of
investments at Fair Value Through Profit and Loss (“FVTPL”) in
accordance with FRS 102 sections 11 and 12. The Company values
investments by following the International Private Equity and
Venture Capital Valuation (“IPEV”) Guidelines as updated in 2018
and further detail on the valuation techniques used are outlined in
note 2 below.
Company information is shown on page 2 of the
full Annual Report and Financial Statements.
2. Accounting
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 per
cent. of the equity as part of an investment portfolio are not
accounted for using the equity method. In these circumstances the
investment is measured at FVTPL.
Upon initial recognition (using trade date
accounting) investments, including loan stock, are classified by
the Company as FVTPL and are included at their initial fair value,
which is cost (excluding expenses incidental to the acquisition
which are written off to the Income statement).
Subsequently, the investments are valued at
‘fair value’, which is measured as follows:
- Investments listed on recognised
exchanges are valued at their bid prices at the end of the
accounting period or otherwise at fair value based on published
price quotations;
- Unquoted investments, where there
is not an active market, are valued using an appropriate valuation
technique in accordance with the IPEV Guidelines. Indicators of
fair value are derived using established methodologies including
earnings multiples, revenue multiples, the level of third party
offers received, cost or price of recent investment rounds, net
assets and industry valuation benchmarks. Where price of recent
investment is used as a starting point for estimating fair value at
subsequent measurement dates, this has been benchmarked using an
appropriate valuation technique permitted by the IPEV
guidelines.
- In situations where cost or price
of recent investment is used, consideration is given to the
circumstances of the portfolio company since that date in
determining fair value. This includes consideration of whether
there is any evidence of deterioration or strong definable evidence
of an increase in value. In the absence of these indicators, the
investment in question is valued at the amount reported at the
previous reporting date. Examples of events or changes that could
indicate a diminution include:
- the performance and/or prospects of
the underlying business are significantly below the expectations on
which the investment was based;
- a significant adverse change either
in the portfolio company’s business or in the technological,
market, economic, legal or regulatory environment in which the
business operates; or
- market conditions have
deteriorated, which may be indicated by a fall in the share prices
of quoted businesses operating in the same or related sectors.
Investments are recognised as financial assets
on legal completion of the investment contract and are
de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the
fair value movement of an investment, but is recognised separately
as investment income through the other distributable reserve when a
share becomes ex-dividend.
Current assets and payablesReceivables
(including debtors due after more than one year), payables and cash
are carried at amortised cost, in accordance with FRS 102. Debtors
due after more than one year meet the definition of a financing
transaction held at amortised cost, and interest will be recognised
through capital over the credit period using the effective interest
method. There are no financial liabilities other than payables.
Investment incomeEquity
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.
Bank interest 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:
- 75 per cent. of management fees and
performance incentive fees, if any, are allocated to the capital
account to the extent that these relate to an enhancement in the
value of the investments. This is in line with the Board’s
expectation that over the long term 75 per cent. of the Company’s
investment returns will be in the form of capital gains; and
- expenses which are incidental to
the purchase or disposal of an investment are charged through the
realised capital reserve.
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.
Share capital and
reservesCalled up share capital This
accounts for the nominal value of the Company’s shares.
Share premium This reserve accounts for the
difference between the price paid for the Company’s shares and the
nominal value of those shares, less issue costs.
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.
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 diminution in
value;
- expenses, together with the related
taxation effect, charged in accordance with the above policies;
and
- dividends paid to equity holders
where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and
the revenue reserve were combined in 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 and other non-capital realised
movements.
DividendsDividends by the
Company are accounted for in the period in which the dividend is
paid or approved at the Annual General Meeting.
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.
Gains/(losses) on
investments
|
Year ended 30 June
2021 |
Year ended 30 June 2020 |
|
£’000 |
£’000 |
Unrealised gain/(loss) on fixed asset investments |
11,564 |
(651) |
Realised gains on fixed asset
investments |
1,452 |
630 |
|
13,016 |
(21) |
|
|
|
4. Investment
income
|
Year ended 30
June
2021 |
Year ended 30 June 2020 |
Income recognised on investments |
£’000 |
£’000 |
Loan stock interest |
806 |
1,007 |
UK dividend income |
13 |
16 |
Bank deposit interest |
1 |
89 |
|
820 |
1,112 |
5. Investment
management fees
|
Year ended 30 June
2021 |
Year ended 30 June 2020 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Investment management fee |
291 |
873 |
1,164 |
285 |
856 |
1,141 |
Performance incentive fee |
206 |
617 |
823 |
- |
- |
- |
Further details of the Management agreement
under which the investment management fee is paid are given in the
Strategic report above.
During the year, services of a total value of
£1,214,000 (2020: £1,191,000) were purchased by the Company from
Albion Capital Group LLP comprising £1,164,000 of management fees
(2020: £1,141,000) and £50,000 of administration fees (2020:
£50,000). There is a performance incentive fee of £823,000 payable
this year (2020: £nil). At the financial year end, the amount due
to Albion Capital Group LLP in respect of these services disclosed
as accruals and deferred income was £1,173,500 (administration fee
accrual: £12,500, management fee accrual £338,000, performance
incentive fee £823,000) (2020: £296,500).
Albion Capital Group LLP is, from time to time,
eligible to receive an arrangement fee and monitoring fees from
portfolio companies. During the year ended 30 June 2021 fees of
£223,000 attributable to the investments of the Company were
received pursuant to these arrangements (2020: £131,000).
Albion Capital Group LLP, its partners and staff holds 1,363,508
Ordinary shares in the Company as at 30 June 2021.
The Company entered into an offer agreement
relating to the Offers with the Company’s investment manager,
Albion Capital Group LLP, pursuant to which Albion Capital Group
LLP received a fee of 2.5 per cent. of the gross proceeds of the
Offers and out of which Albion Capital paid the costs of the
Offers, as detailed in the Prospectus.
6. Other
expenses
|
Year ended 30
June
2021 |
Year ended 30 June 2020 |
|
£’000 |
£’000 |
Directors’ fees (including NIC) |
105 |
109 |
Auditor’s remuneration for
statutory audit services (excluding VAT) |
37 |
35 |
Other administrative
expenses |
244 |
210 |
|
386 |
354 |
|
|
|
7. Directors’ feesThe amounts
paid to (or on behalf of) the Directors during the year are as
follows:
|
Year ended 30 June
2021£’000 |
Year ended 30 June 2020£’000 |
Directors’ fees |
97 |
100 |
National insurance |
8 |
9 |
|
105 |
109 |
The Company’s key management personnel are the
Directors. Further information regarding Directors’ remuneration
can be found in the Directors’ remuneration report on pages 48 to
50 of the full Annual Report and Financial Statements.
8. Tax on ordinary
activities
|
|
|
|
Year ended 30 June
2021£’000 |
Year ended 30 June 2020£’000 |
UK corporation tax charge |
- |
- |
|
Year ended 30 June
2021 |
Year ended 30 June 2020 |
Factors affecting the tax charge |
£’000 |
£’000 |
Return/(loss) on ordinary
activities before taxation |
11,463 |
(404) |
Tax charge on return/(loss) at
the average companies rate of 19.0% (2020: 19.0%) |
2,178 |
(77) |
Factors affecting the
charge: |
|
|
Non-taxable (gains)/losses |
(2,473) |
4 |
Income not taxable |
(2) |
(3) |
Unutilised management
expenses |
297 |
76 |
|
- |
- |
The tax charge for the year shown in the Income
statement is lower than the average standard rate of corporation
tax of 19.0 per cent. (2020: 19.0 per cent.). The differences are
explained above.
Notes
(i)
Venture Capital
Trusts are not subject to corporation tax on capital gains.(ii)
Tax relief on
expenses charged to capital has been determined by allocating tax
relief to expenses by reference to the applicable corporation tax
rate and allocating the relief between revenue and capital in
accordance with the SORP.(iii)
No provision for
deferred tax has been made in the current or prior accounting
period. The Company has excess management expenses of £18,700,000
(2020: £17,144,000) that are available for offset against future
profits. A deferred tax asset of £3,553,000 (2020: £3,257,000) 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
2021 |
Year ended 30 June 2020 |
|
£’000 |
£’000 |
Special dividend of 2.00 pence
per share paid on 30 October 2020 |
3,940 |
- |
Dividend of 0.83 pence per
share paid on 30 November 2020 (29 November 2019 – 1 penny per
share) |
1,642 |
1,861 |
Dividend of 0.78 pence per
share paid on 31 March 2021 (31 March 2020 – 1 penny per
share) |
1,744 |
1,964 |
Unclaimed dividends |
(12) |
(11) |
|
7,314 |
3,814 |
In addition to the dividends paid above, the
Board has declared a first interim dividend for the year ending 30
June 2022 of 0.87 pence per share. This will be paid on 30 November
2021 to shareholders on the register on 5 November 2021. The total
dividend will be approximately £1,942,000.
The Board has also declared a special dividend
of 1.50 pence per share, payable on 30 November 2021 to
shareholders on the register on 5 November 2021. The total dividend
will be approximately £3,348,000.
Details of the special dividend can be found in
the Chairman’s statement above. All dividends are paid from the
other distributable reserve.
During the year, unclaimed dividends older than twelve years of
£12,000 (2020: £11,000) 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 (loss)/return per
share
|
Year ended 30 June
2021 |
Year ended 30 June 2020 |
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
(Loss)/return attributable to equity shares (£’000) |
(63) |
11,526 |
11,463 |
473 |
(877) |
(404) |
Weighted average shares
(adjusted for treasury shares) |
206,558,772 |
190,892,747 |
(Loss)/return attributable per
Ordinary share (pence) (basic and diluted) |
(0.03) |
5.58 |
5.55 |
0.25 |
(0.46) |
(0.21) |
The (loss)/return per share has been calculated
after adjusting for treasury shares of 28,895,986 (2020:
23,061,630).
There are no convertible instruments,
derivatives or contingent share agreements in issue so basic and
diluted (loss)/return per share are the same.
11.
Fixed asset investments
Investments held at
fair value through profit or loss |
30 June
2021£’000 |
30 June 2020£’000 |
Unquoted equity and preference shares |
41,381 |
29,031 |
Quoted equity |
544 |
- |
Loan stock |
8,529 |
12,590 |
|
50,454 |
41,621 |
|
30 June
2021 £’000 |
30 June 2020 £’000 |
Opening valuation |
41,621 |
49,943 |
Purchases at cost |
8,326 |
4,409 |
Disposal proceeds |
(12,281) |
(12,782) |
Realised gains |
1,452 |
630 |
Movement in loan stock accrued
income |
(228) |
72 |
Unrealised gains/(losses) |
11,564 |
(651) |
Closing
valuation |
50,454 |
41,621 |
|
|
|
Movement in loan stock
accrued income |
|
|
Opening accumulated loan stock
accrued income |
278 |
206 |
Movement in loan stock accrued
income |
(228) |
72 |
Closing accumulated loan
stock accrued income |
50 |
278 |
|
|
|
Movement in unrealised
gains |
|
|
Opening accumulated unrealised
gains |
11,965 |
19,689 |
Transfer of previously unrealised
gains to realised reserves on disposal of investments |
(4,953) |
(7,073) |
Movement in unrealised gains |
11,564 |
(651) |
Closing accumulated
unrealised gains |
18,576 |
11,965 |
|
|
|
Historic cost
basis |
|
|
Opening book cost |
29,378 |
30,048 |
Purchases at cost |
8,326 |
4,409 |
Disposals at cost |
(5,876) |
(5,079) |
Closing book
cost |
31,828 |
29,378 |
|
|
|
Purchases and disposals detailed above do not
agree to the Statement of cash flows due to restructuring of
investments, conversion of convertible loan stock and settlement
receivables and payables.
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 impaired and past due
assets are covered by the value of security held for these loan
stock investments.
Unquoted fixed asset investments are valued in
accordance with the IPEV guidelines as follows:
|
30 June
2021 |
30 June 2020 |
Investment valuation
methodology |
£’000 |
£’000 |
Cost and price of recent
investment (reviewed for impairment or uplift) |
26,279 |
13,884 |
Revenue multiple |
13,146 |
7,338 |
Third party valuation –
discounted cash flow |
6,853 |
7,194 |
Third party valuation –
earnings multiple |
2,768 |
11,542 |
Net assets |
801 |
1,091 |
Earnings multiple |
63 |
572 |
|
49,910 |
41,621 |
When using the cost or price of a recent
investment in the valuations the Company looks to ‘re-calibrate’
this price at each valuation point by reviewing progress within the
investment, comparing against the initial investment thesis,
assessing if there are any significant events or milestones that
would indicate the value of the investment has changed and
considering whether a market-based methodology (i.e. using
multiples from comparable public companies) or a discounted
cashflow forecast would be more appropriate.
The main inputs into the calibration exercise,
and for the valuation models using multiples, are revenue, EBITDA
and P/E multiples (based on the most recent revenue, EBITDA or
earnings achieved and equivalent corresponding revenue, EBITDA or
earnings multiples of comparable companies), quality of earnings
assessments and comparability difference adjustments. Revenue
multiples are often used, rather than EBITDA or earnings, due to
the nature of the Company’s investments, being in growth and
technology companies which are not normally expected to achieve
profitability or scale for a number of years. Where an investment
has achieved scale and profitability the Company would normally
then expect to switch to using an EBITDA or earnings multiple
methodology.
In the calibration exercise and in determining
the valuation for the Company’s equity instruments, comparable
trading multiples are used. In accordance with the Company’s
policy, appropriate comparable companies based on industry, size,
developmental stage, revenue generation and strategy are determined
and a trading multiple for each comparable company identified is
then calculated. The multiple is calculated by dividing the
enterprise value of the comparable group by its revenue, EBITDA or
earnings. The trading multiple is then adjusted for considerations
such as illiquidity, marketability and other differences,
advantages and disadvantages between the portfolio company and the
comparable public companies based on company specific facts and
circumstances.
Fair value investments had the following
movements between investment methodologies between 30 June 2020 and
30 June 2021:
Change in investment valuation
methodology
(2020
to
2021) |
Value as at 30 June
2021£’000 |
Explanatory note |
Cost and price of recent
investment (reviewed for impairment or uplift) to revenue
multiple |
3,004 |
More appropriate valuation
methodology |
Revenue multiple to cost and
price of recent investment (reviewed for impairment or uplift) |
321 |
Recent funding round |
|
|
|
|
|
|
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 possible methods of valuation which would be
reasonable as at 30 June 2021.
FRS 102 and the SORP requires the Company to
disclose the inputs to the valuation methods applied to its
investments measured at fair value through profit or loss in a fair
value hierarchy. The table below sets out fair value hierarchy
definitions using FRS 102 s.11.27.
Fair value hierarchy |
Definition |
Level 1 |
Unadjusted quoted prices in an active market |
Level 2 |
Inputs to valuations are from observable sources and are directly
or indirectly derived from prices |
Level 3 |
Inputs to valuations not based on observable market data |
Unquoted equity, preference shares and loan
stock are all valued according to Level 3 valuation methods.
The Company’s investments measured at fair value
through profit or loss (Level 3) had the following movements:
|
30 June
2021 |
30 June 2020 |
|
£’000 |
£’000 |
Opening balance |
41,621 |
49,405 |
Additions* |
8,246 |
4,429 |
Disposal proceeds |
(12,281) |
(12,373) |
Realised gains |
1,452 |
738 |
Unrealised gains/(losses) |
11,310 |
(651) |
Accrued loan stock interest |
(228) |
72 |
Investments transferred to level
1 |
(210) |
- |
Closing
balance |
49,910 |
41,621 |
*Additions 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.
65 per cent. of the portfolio of investments consisting of equity
and loan stock is based on recent investment price, net assets and
cost, and as such the Board believe that changes to reasonable
possible alternative input assumptions (by adjusting the earnings
and revenue multiples) for the valuation of the remainder of the
portfolio could lead to a significant change in the fair value of
the portfolio. Therefore, for the remainder of the portfolio, the
Board has adjusted the inputs for a number of the largest portfolio
companies (by value) resulting in a total coverage of 84 per cent.
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 |
5.5x |
+0.5x |
313 |
0.14 |
-0.5x |
(313) |
(0.14) |
Third party valuation – discounted cash flow |
Renewable energy |
Discount factor |
5.5% |
+0.5% |
(213) |
(0.10) |
-0.5% |
235 |
0.11 |
Third party valuation – discounted cash flow |
Renewable energy |
Discount factor |
5.5% |
+0.5% |
(58) |
(0.03) |
-0.5% |
61 |
0.03 |
Revenue multiple |
Software and other technology |
Revenue multiple |
6.0x |
+0.5x |
133 |
0.06 |
-0.5x |
(133) |
(0.06) |
Revenue multiple |
Software and other technology |
Revenue multiple |
8.0x |
+0.5x |
69 |
0.03 |
-0.5x |
(69) |
(0.03) |
* As detailed in the accounting policies above,
the base case is based on market comparables, discounted where
appropriate for marketability, in accordance with the IPEV
guidelines.
The impact of these changes could result in an
overall increase in the valuation of the equity investments by
£812,000 (2.0%) or a decrease in the valuation of equity
investments by £786,000 (1.9%).
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
per cent. of the nominal value of any class of the allotted shares
in the portfolio companies as at 30 June 2021.
13.
Current assets
Trade and
other receivables |
30 June
2021 |
30 June 2020 |
|
£’000 |
£’000 |
Prepayments and accrued
income |
30 |
13 |
Deferred consideration under
one year |
48 |
68 |
Deferred consideration over
one year |
1,135 |
- |
|
1,213 |
81 |
The deferred consideration over one year relates
to the sale of G.Network Communications Limited in December 2020.
These proceeds are receivable in January 2024, and have been
discounted to present value at the prevailing market rate,
including a provision for counterparty risk. This constitutes a
financing transaction, and has been accounted for using the policy
disclosed in note 2.
The Directors consider that the carrying amount
of receivables is not materially different to their fair value.
14.
Payables: amounts falling due within one
year
|
30 June
2021 |
30 June 2020 |
|
£’000 |
£’000 |
Accruals and deferred
income |
1,264 |
379 |
Trade payables |
179 |
16 |
|
1,443 |
395 |
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 |
220,036,874 Ordinary shares of
1 penny each at 30 June 2020 |
2,200 |
32,083,218 Ordinary shares of 1 penny each issued during the
year |
321 |
252,120,092 Ordinary
shares of 1 penny each at 30 June
2021 |
2,521 |
23,061,630 Ordinary shares of 1 penny each held in treasury at 30
June 2020 |
(231) |
5,834,356 Ordinary shares of 1 penny each purchased during the year
to be held in treasury |
(58) |
28,895,986 Ordinary shares of 1 penny
each held in treasury at 30 June
2021 |
(289) |
Voting rights of 223,224,106
Ordinary shares of 1 penny each at 30 June
2021 |
2,232 |
The Company purchased 5,834,356 Ordinary shares
for treasury (2020: 2,893,220) during the year at a total cost of
£1,738,000 (2020: £937,000).
The total number of shares held in treasury as
at 30 June 2021 was 28,895,986 (2020: 23,061,630) representing 11.5
per cent. of the shares in issue as at 30 June 2021.
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 October 2020 |
2,031,730 |
20 |
31.14 |
616 |
30.00 |
30 November 2020 |
877,066 |
9 |
30.51 |
266 |
29.40 |
31 March 2021 |
976,922 |
10 |
30.35 |
295 |
29.40 |
|
3,885,718 |
|
|
1,177 |
|
Under the terms of the Albion VCTs’ Prospectus
Top Up Offers 2020/21, 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) |
26 February 2021 |
4,058,515 |
41 |
31.70 |
1,267 |
29.60 |
26 February 2021 |
1,224,514 |
12 |
31.80 |
382 |
29.60 |
26 February 2021 |
21,684,450 |
217 |
32.00 |
6,767 |
29.60 |
09 April 2021 |
372,349 |
4 |
30.90 |
113 |
29.40 |
09 April 2021 |
21,290 |
- |
31.00 |
6 |
29.40 |
09 April 2021 |
836,382 |
8 |
31.20 |
254 |
29.40 |
|
28,197,500 |
|
|
8,789 |
|
16.
Basic and diluted net asset value per
share
The net asset value attributable to the Ordinary
shares at the year end was as follows:
|
|
|
30 June
2021 |
30 June 2020 |
Net asset value per share (pence) |
|
|
34.79 |
33.14 |
The net asset value per share at the year end is
calculated in accordance with the Articles of Association and is
based upon total shares in issue (adjusted for treasury shares) of
223,224,106 shares as at 30 June 2021 (2020: 196,975,244).
There are no convertible instruments,
derivatives or contingent share agreements in issue.
17. Capital and
financial instruments risk management
The Company’s capital comprises Ordinary shares
as described in note 15. The Company is permitted to buy back its
own shares for cancellation or treasury purposes, and this is
described in more detail in the Directors’ report on page 36 of the
full Annual Report and Financial Statements.
The Company’s financial instruments comprise
equity and loan stock investments in unquoted companies, deferred
receipts on disposal of fixed asset investments, cash balances,
receivables and payables which arise from its operations. The main
purpose of these financial instruments is to generate revenue and
capital appreciation for the Company’s operations. The Company has
no gearing or other financial liabilities apart from short term
payables. The Company does not use any derivatives for the
management of its Balance sheet.
The principal risks arising from the Company’s
operations are:
- Market and investment risk (which
comprises investment price and cash flow interest rate risk);
- credit risk; and
- liquidity risk.
The Board regularly reviews and agrees policies
for managing each of these risks. There have been no changes in the
nature of the risks that the Company has faced during the past
year, and apart from where noted below, there have been no changes
in the objectives, policies or processes for managing risks during
the past year. The key risks are summarised below:
Market riskAs
a Venture Capital Trust, it is the Company’s specific nature to
evaluate the market risk of its portfolio in unquoted companies,
details of which are shown on pages 26 to 29 of the full Annual
Report and Financial Statements. Market risk is the exposure of the
Company to the revaluation and devaluation of investments as a
result of macroeconomic changes. The main driver of market risk is
the dynamics of market quoted comparators, as well as the financial
and operational performance of portfolio companies. The Board seeks
to reduce this risk by having a spread of investments across a
variety of sectors. More details on the sectors the Company invests
in can be found in the pie chart at the end of the
announcement.
The Manager and the Board formally review market
risk, both at the time of initial investment and at quarterly Board
meetings.
The Board monitors the prices at which sales of
investments are made to ensure that profits to the Company are
maximised, and that valuations of investments retained within the
portfolio appear sufficiently prudent and realistic compared to
prices being achieved in the market for sales of unquoted
investments.
Under FRS 102 the Board is required to
illustrate by way of a sensitivity analysis the extent to which the
assets are exposed to market risk. The Board considers that the
value of the fixed asset investment portfolio is sensitive to a
change of 10% based on the current economic climate. The impact of
a 10% change has been selected as this is considered reasonable
given the current level of volatility observed. When considering
the appropriate level of sensitivity to be applied, the Board has
considered both historic performance and future expectations.
The sensitivity of a 10% increase or decrease in
the valuation of the fixed asset investment portfolio (keeping all
other variables constant) would increase or decrease the net asset
value and return for the year by £5,045,000. Further sensitivity
analysis on fixed asset investments is included in note 11.
Investment risk
(including investment price risk)Investment risk
(including investment price risk) is the risk that the fair value
of future investment cash flows will fluctuate due to factors
specific to an investment instrument or to a market in similar
instruments. The management of risk within the venture capital
portfolio is addressed through careful investment selection, by
diversification across different industry segments, by maintaining
a wide spread of holdings in terms of financing stage and by
limitation of the size of individual holdings. The Manager receives
management accounts from portfolio companies and members of the
investment management team often sit on the boards of unquoted
portfolio companies; this enables the close identification,
monitoring and management of investment risk. The Directors monitor
the Manager’s compliance with the investment policy, review and
agree policies for managing this risk and monitor the overall level
of risk on the portfolio on a regular basis.
Valuations are based on the most appropriate
valuation methodology for an investment within its market, with
regard to the financial health of the investment and the IPEV
Guidelines. Details of the industries in which investments have
been made are contained in the pie chart at the end of this
announcement.
The maximum investment risk on the balance sheet
date is the value of the fixed asset investment portfolio which is
£50,454,000 (2020: £41,621,000). Fixed asset investments form 65%
of the net asset value on 30 June 2021 (2020: 64%).
More details regarding the classification of
fixed asset investments are shown in note 11.
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 half a percentage point in all interest
rates would have increased total return before tax for the year by
approximately £128,000 (2020: £100,000). 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
4.5 per cent. (2020: 8.1 per cent.). The weighted average period to
maturity for the fixed rate assets is approximately 2.7 years
(2020: 2.2 years).
The Company’s financial assets and liabilities, all denominated
in pounds sterling, consist of the following:
|
30 June
2021 |
30 June 2020 |
|
Fixed rate £’000 |
Floating rate £’000 |
Non-interest £’000 |
Total£’000 |
Fixed rate £’000 |
Floating rate £’000 |
Non-interest £’000 |
Total£’000 |
Loan stock |
8,000 |
- |
529 |
8,529 |
11,814 |
- |
776 |
12,590 |
Equity |
- |
- |
41,925 |
41,925 |
- |
- |
29,031 |
29,031 |
Receivables* |
- |
- |
1,183 |
1,183 |
- |
- |
70 |
70 |
Payables |
- |
- |
(1,443) |
(1,443) |
- |
- |
(395) |
(395) |
Cash |
- |
27,426 |
- |
27,426 |
- |
23,966 |
- |
23,966 |
|
8,000 |
27,426 |
42,194 |
77,620 |
11,814 |
23,966 |
29,482 |
65,262 |
*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 loan stock, and 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 69.9 per
cent. 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.
Bank deposits are held with banks with high
credit ratings assigned by international credit rating agencies.
The Company has an informal policy of limiting counterparty banking
exposure to a maximum of 20 per cent. of net asset value for any
one counterparty.
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
2021 was limited to £8,529,000 (2020: £12,590,000) of loan stock
instruments, £27,426,000 (2020: £23,966,000) of cash deposits with
banks and £1,183,000 (2020: £70,000) of deferred consideration and
receivables.
At the balance sheet date, the cash held by the
Company was held with Lloyds Bank Plc, Scottish Widows Bank plc
(part of Lloyds Banking Group), National Westminster Bank plc and
Barclays Bank plc. Credit risk on cash transactions was mitigated
by transacting with counterparties that are regulated entities
subject to prudential supervision, with high credit ratings
assigned by international credit-rating agencies.
The credit profile of loan stock is described
under liquidity risk shown below.
Impaired loan stock instruments have a first
fixed charge or a fixed and floating charge over the assets of the
portfolio company and the Board estimate that the security value
approximates to the carrying value.
Liquidity riskLiquid assets are
held as cash on current short term deposit accounts. 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 £72,360,000
(2020: £59,698,000) as at 30 June 2021.
The Company has no committed borrowing
facilities as at 30 June 2021 (2020: nil) and had cash balances of
£27,426,000 (2020: £23,966,000). 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 £1,443,000 (2020: £395,000) as at 30
June 2021.
The carrying value of loan stock investments,
analysed by expected maturity dates is as follows:
|
30 June
2021 |
30 June 2020 |
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 |
2,534 |
381 |
411 |
3,326 |
6,290 |
613 |
443 |
7,346 |
1-2 years |
1,037 |
845 |
1 |
1,883 |
452 |
- |
42 |
494 |
2-3 years |
30 |
- |
- |
30 |
1,287 |
738 |
65 |
2,090 |
3-5 years |
1,975 |
- |
- |
1,975 |
1,120 |
105 |
- |
1,225 |
5 + years |
1,315 |
- |
- |
1,315 |
1,435 |
- |
- |
1,435 |
Total |
6,891 |
1,226 |
412 |
8,529 |
10,584 |
1,456 |
550 |
12,590 |
Loan stock can be past due as a result of
interest or capital not being paid in accordance with contractual
terms. Past due loan stock is not considered to be impaired.
The cost of loan stock investments valued below cost is £681,000
(2020: £670,000).
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 2021 are stated at fair value as
determined by the Directors, with the exception of receivables
(including debtors due after more than one year), and payables and
cash which are carried at amortised cost, in accordance with FRS
102. There are no financial liabilities other than payables. The
Company’s financial liabilities are all non-interest bearing. It is
the Directors’ opinion that the book value of the financial
liabilities is not materially different to the fair value and all
are payable within one year.
18. Contingencies and
guaranteesAs at 30 June 2021, the Company had no financial
commitments in respect of investments (2020: £nil).
There are no contingencies or guarantees of the Company as at 30
June 2021 (2020: £nil).
19. Post balance sheet
events
Since 30 June 2021 the Company has completed the
following investment transactions:
- Investment of £985,000 in an
existing portfolio company, Oviva AG;
- Investment of £346,000 in an
existing portfolio company, The Evewell Group Limited; and
- Investment of £49,000 in an
existing portfolio company, Imandra Inc..
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 pages 48 to 50 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 2021 and 30 June
2020, and is derived from the statutory accounts for those
financial years, which have been, or in the case of the accounts
for the year ended 30 June 2021, which will be, delivered to the
Registrar of Companies. The Auditor reported on those accounts; the
reports were unqualified and did not contain a statement under s498
(2) or (3) of the Companies Act 2006.
22. Publication The full
audited Annual Report and Financial Statements are being sent to
shareholders and copies will be made available to the public at the
registered office of the Company, Companies House, the National
Storage Mechanism and also electronically at
www.albion.capital/funds/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)
Gráfica de Acción Histórica
De Mar 2024 a Abr 2024
Crown Place Vct (LSE:CRWN)
Gráfica de Acción Histórica
De Abr 2023 a Abr 2024