TIDMDEVC
DRAPER ESPRIT VCT PLC
Legal Entity Identifier: 2138003I9Q1QPDSQ9Z97
7 July 2021
Final Results
FINANCIAL SUMMARY
31 Mar 2021 31 Mar 2020
pence Pence
Net asset value per share ("NAV") 50.0 46.0
Cumulative dividends paid since launch 107.5 105.0
Total Return (NAV plus cumulative dividends paid per
share) 157.5 151.0
=========== ===========
Dividends in respect of financial year ended 31 March
2021
Interim dividend paid per share 1.0 1.5
Final dividend per share (payable on 17 September
2021) 1.5 1.5
2.5 3.0
=========== ===========
CHAIRMAN'S STATEMENT
I present the Company's Annual Report for the year ended 31
March 2021. This has been an unprecedented year with the
coronavirus pandemic having impacted everybody and in a much
greater way than was envisaged at the start of the outbreak.
I am pleased to report that generally the portfolio companies
have performed well and stood up to many of the challenges that
they have faced. Many of the businesses within the Company's
portfolio have been able to adapt well to the conditions and some
have completed further funding rounds which has provided
reassurance for their future prospects.
Net asset value and results
As at 31 March 2021, the Company's Net Asset Value per share
("NAV") stood at 50.0p, representing an increase of 6.5p (14.1%)
over the year after adding back dividends paid.
The Total Return to Shareholders who invested at the launch of
the Company in 1998 (NAV plus cumulative dividends) now stands at
157.5p, compared to the original cost (net of income tax relief) of
80.0p per share. A summary of the position for Shareholders who
invested in the Company's various other fundraisings is included in
the annual report.
The profit on ordinary activities after taxation for the year
was GBP8.5 million (2020: GBP6.3 million loss), comprising a
revenue loss of GBP546,000 (2020: GBP7,000 profit) and a capital
profit of GBP9.1 million (2020: GBP6.3 million loss).
Management arrangements
As shareholders will be aware, the Manager, Elderstreet
Investments has been working with the Draper Esprit Group for
several years, with all new investments made in recent years
arising from that arrangement. In line with the plans put in place
at the outset of that relationship, Draper Esprit plc acquired the
remaining shares of Elderstreet Investments Limited that it did not
already own in February 2021.
The Board is delighted to see this transaction complete and that
the Manager is now a full member of the Draper Esprit Group. We
look forward to continuing to develop the Company's portfolio of
growth technology investments that is already well-established,
coinvesting alongside Draper Esprit plc and the EIS funds that
Draper Esprit plc also manages.
As part of these changes, the Company put in place a new
investment management agreement, which was approved by Shareholders
on 17 March 2021, a summary can be found in the annual report. The
agreement is on broadly the same terms as the previous agreement
but introduces a new performance incentive scheme whereby the
Manager will receive a fee equal to 20% of realised gains if the
overall return on the investments made in a five year period
achieves an IRR exceeding 7% per annum. We believe this aligns the
interests of the Manager and Shareholders well.
Venture capital investments
Portfolio activity
During the year, Draper Esprit continued to provide the Company
with a strong flow of investment opportunities. The Company made
four new investments and six follow-on investments totalling GBP8.9
million.
The Company also made two non-qualifying investments that were
held short term and realised in the year. With uncertainly about
dividends expected from existing portfolio companies, the Company
made two investments in FTSE 100 companies in order to ensure that
it would comfortably meet the VCT income test for the year, whereby
the Company's income must be derived wholly or mainly from shares
and securities. These investments produced a realised gain of
GBP16,000 and dividend income of GBP52,000 during the period they
were held.
The Company also received retention proceeds from the earlier
exit of Podpoint Holdings Limited, of GBP22,000.
Further details on the investment activity can be found in the
Investment Manager's report.
Investment valuations
At the year end, the Company held a portfolio of 30 active
investments valued at GBP44.8 million.
The split of the investment portfolio between growth technology
investments introduced by Draper Esprit and the older legacy
investments is shown below:
Portfolio split as at 31 March 2021
Growth Technology Legacy Cash Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost 23,760 18,064 10,659 52,483
Gains/(losses) (64) 2,996 - 2,932
Valuation 23,696 21,060 10,659 55,415
================= ======= ======= =======
Percentage of portfolio 42.8% 38.0% 19.2% 100.0%
The newer growth technology investments are now the largest part
of the portfolio and this proportion will continue to grow as
further funds are raised and invested, and as there are further
realisations from the legacy portfolio.
The Board has reviewed the investment valuations at the year end
and some adjustments have been made accordingly. The most
significant valuation movements are summarised below.
Fords Packaging Topco Limited (trading as Fords Packaging
Systems) makes capping and sealing systems primarily for the food
and beverage industry. Despite reduced activity in the early part
of the pandemic, the business has performed well and has resumed to
its previous levels of trading, justifying an increase in value of
GBP1.3 million.
Freetrade Limited, the online investing app, has increased in
value by GBP1.1 million, as the business continues to grow and the
company has successfully raised further funds.
Endomagnetics Limited (trading as Endomag), a business which has
developed a magnetic tracking system for cancer tumours was
increased in value by GBP944,000 also as a result of a successful
further funding round in which the Company participated.
On the downside, IESO Digital Health Limited, the UK's largest
provider of online mental healthcare, has decreased in value
GBP950,000. The business has however stabilised and is now focussed
on NHS business.
Several of the Company's investments are quoted on AIM and are
valued at their share prices at 31 March 2021. The two largest such
holdings performed well. The valuation of the investment in Access
Intelligence plc increased by GBP7.0 million over the year and
Fulcrum Utility Services Limited by GBP547,000.
Overall, the unrealised valuation movements on the portfolio
resulted in a net increase of GBP9.7 million for the year.
Further commentary on the portfolio, together with a schedule of
additions and disposals can be found within the Investment
Manager's Report and Review of Investments below.
Dividends
The Board is proposing a final dividend of 1.5p per share, to be
paid on 17 September 2021 to Shareholders on the register at 20
August 2021. This will bring the total dividends paid in respect of
the year to 2.5p.
Fundraising
The Company completed an offer for subscription which had
launched in October 2019, and closed in August 2020 having raised
GBP13.5m.
The Company also launched a new offer for subscription in
February 2021. The offer was extremely successful, reaching full
capacity in a very short space of time raising GBP19.9 million,
with shares being allotted after the year end in April 2021,
raising the Company's net assets to GBP75 million. This provides
the Company with a significant level of funds to take advantage of
new opportunities and also support existing portfolio
companies.
Share Buybacks
The Company has a policy of purchasing its own shares that
become available in the market at a discount of approximately 5% to
the latest published NAV, subject to regulatory and liquidity
constraints.
Any Shareholders who are considering selling their shares will
need to use a stockbroker. Such Shareholders should ask their
stockbroker to register their interest in selling their shares with
Panmure Gordon & Co.
During the year the Company purchased a total of 524,183 shares
at an average price of 43.96p per share. Resolution 11 will be
proposed at the AGM, to renew the authority for the Company to
purchase its own shares.
Directorate
With the completion of the transaction which has seen the
Manager become part of the Draper Esprit Group, the Company has now
entered the next stage of its life. This completes a journey that
ensures that we have a high-quality manager which is fit for the
future requirements of the Company, and we believe, over time, can
deliver desirable results for Shareholders.
Michael Jackson, the founder of Elderstreet Investments and a
non-executive director of the Company since its launch in 1998,
will step down at the forthcoming AGM. Michael has made a
substantial contribution to the Company over those years in his
role as the investment manager and as a non-executive director. On
behalf of the Board, I would like to thank him for all he has done
for the Company over the last 23 years and wish him well for the
future. The whole board will miss working with him.
The Company intends to appoint Richard Marsh to represent our
new investment manager, Draper Esprit, as a non-executive director
of the Company with effect from 11 August 2021, following the AGM.
Richard is Senior Partner at Draper Esprit Plc, a member of the
Investment Committee and co-founded and built the EIS activities
within the Draper Esprit Group from 2011. He has been a venture
capital investor since 2007 and prior to that had a decade of
operating experience in the software sector. As an entrepreneur he
was Founder/CEO of Datanomic, a software business that was sold to
Oracle. Richard holds an MA and PhD from Cambridge University and
an MBA from IMD, Lausanne where he was a Sainsbury's Management
Fellow. The Board has been working with Richard for some time in
his role at Draper Esprit and believes he will be an excellent
addition to the Board.
Annual General Meeting ("AGM")
The Directors are now reviewing the composition of the Board to
ensure that it comprises an appropriate balance of skills,
particularly in view of the increasing proportion of growth
technology investments.
With social distancing restrictions expected to be relaxed we
are planning to hold a physical AGM this year with Shareholders
able to attend.
The AGM will take place at 20 Garrick Street, WC2E 9BT on 11
August 2021 at 11 a.m.
Three items of special business are proposed at the AGM:
-- one in respect of the authority to buy back shares as noted above; and
-- two in respect of the authority to allot shares.
Full details of the business to be conducted at the AGM is
included in the annual report. Shareholders are encouraged to
submit their votes using the Form of Proxy which can be scanned and
emailed to devctagm@downing.co.uk
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. Furthermore, the Board continues to welcome questions from
Shareholders which can be sent to the same email address.
Outlook
The Board has been pleased with the overall performance of the
portfolio throughout the pandemic and the fact that the flow of new
investments quickly resumed after a short pause. As the economy
gradually starts to return to more normal conditions and with the
Investment Manager now formally part of the Draper Esprit Group, we
expect new investment activity to increase further over the coming
year, particularly as the Company now has a significant level of
new funds available for investment.
We believe that the portfolio includes a number of growth
technology prospects that have the potential to drive performance
going forward, and some of our legacy portfolio investments are
also well positioned.
The Board was very encouraged to see the positive response by
investors to the recent fundraising and is now considering plans
for the next VCT fundraising season. We will of course let
Shareholders know details in due course.
The next update for Shareholders will be the Half-Yearly Report
to 30 September 2021, which we expect to be published in
December.
David Brock
Chairman
INVESTMENT MANAGER'S REPORT
The co-investment arrangements with Draper Esprit plc to share
deal flow, management experience and investment opportunities,
continue to be positive from both an investment and a fundraising
perspective. We refer internally to the Company having two elements
of its portfolio; a new technology portfolio invested alongside
other Draper Esprit funds and a legacy portfolio assembled before
the Draper Esprit arrangement.
In a year which has been difficult for many people and
businesses, our portfolio companies have demonstrated resilience
and, in many cases, growth, even in these uncertain times. There
has been a broad spectrum of coronavirus experiences within the
portfolio, from companies in sectors with challenging trading to
others which have had a dramatic acceleration and growth because of
the dynamics of the past year. No businesses have failed. Against
the difficult backdrop of the pandemic, the results for the Company
show a year on year increase in NAV of 6.5 pence per share after
adding back dividends paid from a low in March 2020 reflecting
'peak Covid'.
Despite the pandemic, deal flow has continued to be strong and
the team completed four new investments totalling GBP5.4 million
alongside six follow-on investments totalling GBP3.5 million. There
were no new exits.
Post the year end, two new investments have completed totalling
GBP0.8 million and one further follow-on totalling GBP0.1 million,
with a further two new investments totalling GBP3.2 million having
been signed off which are awaiting HMRC Advanced Assurance prior to
completing.
Within the technology portfolio, six companies took advantage of
the Government-backed Future Fund Loan Scheme. Due to the VCT
scheme rules, participation by the VCT in these rounds is
prohibited. This has resulted in some downward pressure on the VCT
valuation of these companies, as these loans have a first priority
return above the VCT equity holding. These loans have options to be
repaid or converted in future funding rounds.
Over the year, the Company recorded a 6.5p increase in the Total
Return (net asset value including cumulative dividends), from
151.0p to 157.5p. The NAV per share rose by 4.0p to 50.0p after
paying dividends of 2.5p in the year.
Within the Draper Esprit portfolio, four new investments were
made into the following companies:
GBP'000
ThoughtMachine
Cloud native core banking software 2,400
Ravelin
AI fraud management software 1,133
Primary Bid
Consumer facing IPO platform 950
RiverLane Research
Quantum Computing operating software 901
5,384
=======
These investments were all made alongside Draper Esprit funds
and often included other corporate and venture capital investors.
This corroborates the strategy of investing alongside a strong
syndicate of investors. In all of these new investments, a member
of the Draper Esprit group is a representative on the portfolio
company board. At the year end the total Draper technology
portfolio consisted of 22 companies and post the period end a
further two new deals have completed with two more committed. As we
flagged in last year's report, we expect there to be continuing
follow-on investments into the Draper Esprit businesses currently
in the portfolio.
During the year, two of the technology portfolio companies have
attracted sizeable follow on investments at attractive valuations
gains. Freetrade, the commission free trading app, raised a further
$69m led by Left Lane Capital, a new investor, to accelerate its
European growth.
Endomag, the cancer detection company, raised a further GBP15
million from existing investors, including the VCT, to accelerate
growth. Endomag has been officially named as one of the 'FT 1000:
Europe's Fastest Growing Companies of 2021'. The list is compiled
of the top 1,000 companies in Europe
https://www.globenewswire.com/Tracker?data=Nn33GDnJYEeiZOWMIivLgKwiytrkPKOif6AV05g4QJgQ3lp9syk0i-5RV4wyKn1OgB-_5l8dE7oV1_zpi0_tA9ZhkLdz62E_nUk1gZNZaImc96g6h-opMsuzxjji1A0Gho-adMoH3U58651KadMmd-oKLd4GfJljdH978HsmrMM=
as measured by revenue growth, with Endomag the 7th highest rated
Healthcare company featured.
On the downside, provisions have been made for a number of
companies for example where there is an envisaged financing
requirement that has not yet concluded. These may take the form of
convertible loans which the VCT are prohibited from investing in,
and while positive for the portfolio company cash flow, are
potentially dilutive, or where there are evolving strategic changes
underway. These provisions are a point in time impairment that may
be removed in due course.
Within the legacy portfolio, Fords Packaging Topco Limited, a
manufacturer of capping and sealing technology products, continues
to perform well and is recovering from the initial setback of the
Covid crisis which resulted in a temporary stalling of orders as
engineers were not able to travel globally. The order book remains
healthy and we believe that Fords still has the potential to
provide further upside.
There are two meaningful AIM companies in the legacy portfolio;
Access Intelligence and Fulcrum. Access Intelligence has performed
extremely well over the year increasing in value by 188%. Fulcrum
has risen 106% over the period.
Lyalvale Express Limited, the shotgun cartridge manufacturer,
has had a tough year with a year on year sales drop, albeit
management has ensured the business remains profitable with good
cash resources. Management is hopeful of a recovery in the coming
year's shooting market.
After the year end the VCT allotted GBP20 million of Ordinary
Shares under the 2021 prospectus offer. The Manager remains
confident that the new funds raised over the past fundraising
seasons will be invested within the qualifying timeframe.
It has been a busy period for the Company which has seen a
significant level of new investment and follow-on activity. Whilst
the new Draper Esprit investments offer some exciting prospects for
the future, a number of these businesses are still at an early
stage and it is too soon to judge their ultimate trajectory,
although several are showing good promise.
In summary, despite the continuing challenges of Covid we are
encouraged by the resilience of the portfolio and many of the
companies in which we have invested continue to show strong growth.
It continues to be our priority to support our existing portfolio
and to make new investments in businesses that can innovate and
grow despite the healthcare crisis.
As a final point we would like to inform the shareholders that
Draper Esprit plc, the parent company of the investment manager,
has, in the last year, adopted a Policy around Responsible
Investment & Sustainability. This Policy was adopted for and on
behalf of the Draper Esprit group following approval by the board
of directors of Draper Esprit plc on 28 September 2020, and
summarises our values, our environmental, social and governance
(ESG) goals, and our approach to responsible investment. This
policy is available to view on the Draper Esprit plc website via
the link below:
draperesprit.com/investors/sustainability
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Elderstreet Investments Limited
Part of the Draper Esprit Group
REVIEW OF INVESTMENTS
Portfolio of investments
The following investments were held at 31 March 2021. All
companies are registered in England and Wales, with the exception
of Fulcrum Utility Services Limited, which is registered in the
Cayman Islands.
Total value
of
other funds
managed
Valuation % of by
movement portfolio Draper
Cost Valuation in year by value Esprit plc(1)
GBP'000 GBP'000 GBP'000 GBP'000
Ten largest venture capital investments
(by value)
Access Intelligence plc* 2,586 10,788 7,046 19.5% -
Fords Packaging Topco Limited 2,433 6,878 1,252 12.4% -
Endomagnetics Limited 2,147 4,644 944 8.4% 33,434
Back Office Technology Limited 1,420 2,409 - 4.3% 19,240
Thought Machine Group Limited 2,400 2,400 - 4.3% 25,827
Freetrade Limited 600 2,367 1,107 4.3% 29,448
Evonetix Limited 1,485 1,882 7 3.4% 7,302
Lyalvale Express Limited 1,915 1,428 - 2.6% -
Roomex Limited 1,081 1,174 246 2.1% 8,785
Ravelin Technology Limited 1,133 1,133 - 2.1% 8,123
17,200 35,103 10,602 63.4% 132,159
------- --------- --------- ---------- --------------
Other venture capital investments
Fulcrum Utility Services Limited* 386 1,061 547 1.9% -
IESO Digital Health Limited 1,900 950 (950) 1.7% 4,076
PrimaryBid Limited 950 950 - 1.7% 5,376
River Lane Research Limited 901 901 - 1.6% 8,108
Resolving Limited 799 799 - 1.4% 4,492
Crowdcube Limited 400 750 274 1.4% 9,623
United Authors Publishing Limited 442 719 277 1.3% 1,596
IXL PremFina Limited 756 660 282 1.2% 1,688
Sweepr Technologies Limited 515 526 - 0.9% 4,722
Cashfac plc 260 525 - 0.9% -
Hadean Supercomputing Limited 400 400 - 0.7% 4,822
StreetTeam Software Limited 2,819 320 (137) 0.6% 7,558
RealEyes Holding Limited 430 262 (168) 0.5% 6,010
Macranet Limited 1,037 259 - 0.5% -
Apperio Limited 500 250 (250) 0.5% 1,475
Push Dr Limited 1,873 159 (459) 0.3% 3,982
Servoca plc 333 120 - 0.2% -
Lifesize Inc (formerly Light
Blue Optics Limited) 483 42 (286) 0.1% 25
AngloINFO Limited 3,527 - - - -
Ocelot Realisations Limited (formerly
Baldwin & Francis Ltd) 1,534 - - - -
Uvenco UK plc* 1,326 - - - -
Location Sciences Group plc* 860 - - - -
Kellan Group plc* 657 - - - -
The National Solicitors Network
Limited 501 - - - -
AppUx Limited 326 - - - -
The QSS Group Limited 268 - - - -
RB Sport & Leisure Holdings plc 188 - - - -
Infoserve Group plc 128 - - - -
Sift Limited 125 - - - -
24,624 9,653 (870) 17.4% 63,553
------- --------- --------- ---------- --------------
41,824 44,756 9,732 80.8% 195,712
Cash at bank and in hand 10,659 19.2%
Total investments 55,415 100.0%
* Quoted on AIM
All venture capital investments are unquoted unless otherwise
stated
(1) Other funds also managed by Draper Esprit Plc as Investment
Manager as at 31 March 2021 include Draper Esprit Plc and
Draper Esprit EIS
Investment movements for the year ended 31 March 2021
ADDITIONS
Venture capital investments GBP'000
Thought Machine Group Limited 2,400
Endomagnetics Limited 1,235
Ravelin Technology Limited 1,133
PrimaryBid Limited 950
River Lane Research Limited 901
Back Office Technology Limited 720
Evonetix Limited 692
Roomex Ltd 465
StreetTeam Software Limited 316
Push Dr Limited 117
8,929
-----------
GlaxoSmithKline plc** 1,968
J Sainsbury plc** 514
2,482
-----------
11,411
===========
DISPOSALS
Value at Profit/(loss) Realised
Cost 1 April 2020* Proceeds vs cost gain/(loss)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Quoted investments
GlaxoSmithKline
plc** 1,968 1,968 1,987 19 19
J Sainsbury plc** 514 514 511 (3) (3)
Venture Capital
Investments
Ridee Limited 500 - - (500) -
EDO Consulting
Limited 125 - - (125) -
Retention Proceeds
Pod Point Holdings
Limited - - 22 22 22
3,107 2,482 2,520 (587) 38
======= ============== ======== ============= ============
* Adjusted for purchases in the year where applicable
** Quoted on the Main Market of the London Stock Exchange
Directors' responsibilities statement
The Directors are responsible for preparing the Report of the
Directors, the Strategic Report, the Directors' Remuneration Report
and the financial statements in accordance with applicable law and
regulations. They are also responsible for ensuring that the Annual
Report includes information required by the Listing Rules of the
Financial Conduct Authority.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law), including
Financial Reporting Standard 102, the financial reporting standard
applicable in the UK and Republic of Ireland (FRS 102).
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the
financial statements;
-- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business; and
-- prepare a director's report, a strategic report and director's
remuneration report which comply with the requirements of the Companies
Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Each of the Directors considers that the Annual Report, taken as
a whole, is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Company's
position, business model and strategy.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements and other
information included in annual reports may differ from legislation
in other jurisdictions.
INCOME STATEMENT
for the year ended 31 March 2021
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 104 - 104 585 - 585
Gains/(losses) on investments - 9,770 9,770 - (5,626) (5,626)
104 9,770 9,874 585 (5,626) (5,041)
Investment management fees (230) (691) (921) (212) (636) (848)
Other expenses (420) - (420) (366) - (366)
Return/(loss) on ordinary activities before tax (546) 9,079 8,533 7 (6,262) (6,255)
Tax on return/(loss) - - - - - -
Return/(loss) attributable to equity shareholders,
being total comprehensive income for the period (546) 9,079 8,533 7 (6,262) (6,255)
======= ======= ======= ======= ======= =======
Basic and diluted return/(loss) per share (0.5) 8.4 7.9 - (7.8p) (7.8p)
All Revenue and Capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the year. The total column within the Income Statement
represents the Statement of Total Comprehensive Income of the
Company prepared in accordance with Financial Reporting Standards
("FRS 102"). The supplementary revenue and capital return columns
are prepared in accordance with the Statement of Recommended
Practice issued in October 2019 by the Association of Investment
Companies ("AIC SORP").
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2021
Capital Share
Share Redemption Premium Merger Special Capital Capital Revenue
capital reserve account reserve reserve reserve -unrealised reserve - realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended
31 March 2020
At 1 April 2019 3,436 599 - 1,828 22,545 8,403 2,174 (16) 38,969
Total
comprehensive
income - - - - - (5,746) (516) 7 (6,255)
Transfer
between
reserves* - - - - (3,281) 1,760 1,521 - -
Transactions
with owners
Issue of new
shares 595 - 6,388 - - - - - 6,983
Share issue
costs - - - - (185) - - - (185)
Purchase of
own shares (34) 34 - - (366) - - - (366)
Dividends paid - - - - - - (2,403) - (2,403)
At 31 March 2020 3,997 633 6,388 1,828 18,713 4,417 776 (9) 36,743
======== =========== ======== ======== ======== ==================== =================== ======== =======
For the year ended
31 March 2021
At 1 April 2020
Total
comprehensive
income - - - - - 9,732 (653) (546) 8,533
Transfer between
reserves* - - - - (2,565) 10 2,555 - -
Transactions
with owners
Issue of new
shares 1,566 - 11,933 - - - - - 13,499
Share issue
costs - - - - (455) - - - (455)
Purchase of own
shares (26) 26 - - (230) - - - (230)
Dividends paid - - - - - - (2,678) - (2,678)
At 31 March 2021 5,537 659 18,321 1,828 15,463 14,159 - (555) 55,412
======== =========== ======== ======== ======== ==================== =================== ======== =======
* A transfer of GBP10,000 (2020: GBP1,760,000), representing
impairment losses during the year, as well as cumulative unrealised
gains on investments which were disposed of during the year has
been made from the Capital reserve - unrealised to the Capital
Reserve -- realised. A transfer of GBP704,000 (2020: GBP1,521,000),
representing realised losses on investment disposals plus capital
expenses in the year, has been made from Capital Reserve --
realised to the Special reserve. A transfer of GBP1,861,000 (2020:
GBPnil) from Special Reserve to Capital reserve-realised has been
made to replenish the reserve.
BALANCE SHEET
at 31 March 2021
31 Mar 31 Mar
2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 44,756 26,095
Current assets
Debtors 78 2,416
Cash at bank and in hand 10,659 8,422
10,737 10,838
Creditors: amounts falling due
within one year (81) (190)
Net current assets 10,656 10,648
Net assets 55,412 36,743
Capital and reserves
Called up share capital 5,537 3,997
Capital redemption reserve 659 633
Share premium account 18,321 6,388
Merger reserve 1,828 1,828
Special reserve 15,463 18,713
Capital reserve -- unrealised 14,159 4,417
Capital reserve -- realised - 776
Revenue reserve (555) (9)
Total equity shareholders' funds 55,412 36,743
Basic and diluted net asset 50.0p 46.0p
value per share
STATEMENT OF CASH FLOWS
for the year ended 31 March 2021
31 Mar 31 Mar
2021 2020
GBP'000 GBP'000
Cash flow from operating activities
Profit/(loss) on ordinary activities before taxation 8,533 (6,255)
(Gains)/losses on investments (9,770) 5,626
Increase in debtors (16) (3)*
(Decrease)/increase in creditors (15) 16
Net cash outflow from operating activities (1,268) (616)
------- --------
Cash flow from investing activities
Purchase of investments (9,011) (7,608)*
Proceeds from disposal of investments 2,520 2,165
Net cash outflow from investing activities (6,491) (5,443)
------- --------
Cash flow from financing activities
Equity dividends paid (2,772) (2,403)
Proceeds from share issue 13,499 6,983
Share issue costs (501) (165)
Purchase of own shares (230) (389)
Net cash inflow from financing activities 9,996 4,026
------- --------
Net increase/(decrease) in cash 2,237 (2,033)
Cash and cash equivalents at start of year 8,422 10,455
Cash and cash equivalents at end of year 10,659 8,422
======= ========
Cash and cash equivalents comprise
Cash at bank and in hand 10,659 8,422
Total cash and cash equivalents 10,659 8,422
*The prior year cash flow has been re-presented to reclassify
GBP2.4 million of funds held for an investment from operating
activities to investing activities.
NOTES TO THE ACCOUNTS
for the year ended 31 March 2021
1. Accounting policies
General information
Draper Esprit VCT plc ("the Company") is a venture capital trust
established under the legislation introduced in the Finance Act
1995 and is domiciled in the United Kingdom and incorporated in
England and Wales. The Company is a premium listed entity on the
London Stock Exchange.
Basis of accounting
The Company has prepared its financial statements in accordance
with the Financial Reporting Standard 102 ("FRS 102") and in
accordance with the Statement of Recommended Practice "Financial
Statements of Investment Trust Companies and Venture Capital
Trusts" issued in October 2019 ("SORP") and with the Companies Act
2006.
Going concern
After reviewing the Company's forecasts and projections, the
Directors have a reasonable expectation that the major cash
outflows of the Company (most notably investments, share buybacks
and dividends) are within the Company's control and therefore the
Company has sufficient cash to meet its expenses and liabilities
when they fall due. The impact of COVID-19 has been considered,
more detail on these considerations can be found within the
Corporate Governance report. As such, the Board confirms that the
Company has adequate resources to continues in operational
existence for at least 12 months from the date of approval of the
financial statements. The Company therefore continues to adopt the
going concern basis in preparing its financial statements as noted
further within the Corporate Governance report within the annual
report.
Presentation of Income Statement
In order to better reflect the activities of a venture capital
trust, and in accordance with the SORP, supplementary information
which analyses the Income Statement between items of a revenue and
capital nature has been presented alongside the Income Statement.
The net revenue is the measure the Directors believe appropriate in
assessing the Company's compliance with certain requirements set
out in Part 6 of the Income Tax Act 2007.
Investments
Investments are designated as "fair value through profit or
loss" assets, upon acquisition, due to investments being managed
and performance evaluated on a fair value basis. A financial asset
is designated within this category if it is both acquired and
managed, with a view to selling after a period of time, in
accordance with the Company's documented Investment Policy.
Listed fixed income investments and investments quoted on AIM
and the Main Market are measured using bid prices in accordance
with the International Private Equity and Venture Capital Valuation
Guidelines ("IPEV").
For unquoted instruments, fair value is established using the
IPEV. The valuation methodologies for unquoted entities used by the
IPEV to ascertain the fair value of an investment are as
follows:
-- Multiples;
-- Industry valuation benchmarks;
-- Discounted cash flows or earnings (of underlying business);
-- Discounted cash flows (from the investment);
-- Net assets; and
-- Calibrating to the price of a recent investment.
The methodology applied takes account of the nature, facts and
circumstances of the individual investment and uses reasonable
data, market inputs, assumptions and estimates in order to
ascertain fair value as explained in the investment accounting
policy above.
Where an investee company has gone into receivership,
liquidation, or administration (where there is little likelihood of
recovery), the loss on the investment, although not physically
disposed of, is treated as being realised. Permanent impairments in
the value of investments are deemed to be realised losses and held
within the Capital Reserve -- Realised.
Gains and losses arising from changes in fair value are included
in the Income Statement for the period as a capital item and
transaction costs on acquisition or disposal of the investment
expensed.
It is not the Company's policy to exercise significant influence
over investee companies. Therefore, the results of these companies
are not incorporated in the Income Statement, except to the extent
of any income accrued. This is in accordance with the SORP and FRS
102 sections 14 and 15 that do not require portfolio investments to
be accounted for using the equity method of accounting.
Calibration to price of recent investment requires a level of
judgment to be applied in assessing and reviewing any additional
information available since the last investment date. The Board and
Adviser consider a range of factors in order to determine if there
is any indication of decline in value or evidence of increase in
value since the recent investment date. If no such indications are
noted the price of the recent investment will be used as the fair
value for the investment.
Examples of signals which could indicate a movement in value
are: -
Changes in results against budget or in expectations of
achievement of technical milestones patents/testing/ regulatory
approvals)
Significant changes in the market of the products or in the
economic environment in which it operates
Significant changes in the performance of comparable
companies
Internal matters such as fraud, litigation or management
structure.
In respect of disclosures required by the SORP for the 10
largest investments held by the Company, the most recent publicly
available accounts information, either as filed at Companies House,
or announced to the London Stock Exchange, is disclosed. In the
case of unlisted investments, this may be abbreviated information
only.
Judgement in applying accounting policies and key sources of
estimation uncertainty
The key estimates in the financial statements is the
determination of the fair value of the unquoted investments by the
Directors as it impacts the valuation of the unquoted investments
at the balance sheet date.
Of the Company's assets measured at fair value, it is possible
to determine their fair values within a reasonable range of
estimates. The fair value of an investment upon acquisition is
deemed to be cost. Thereafter, investments are measured at fair
value in accordance with FRS 102 sections 11 and 12, together with
the IPEV.
Income
Dividend income from investments is recognised when the
Shareholders' rights to receive payment have been established,
normally the ex-dividend date.
Interest income is accrued on a timely basis, by reference to
the principal outstanding and at the effective interest rate
applicable and only where there is reasonable certainty of
collection. Where previously accrued income is considered
unrecoverable a corresponding bad debt expense is recognised.
Expenses
All expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within
the Income Statement, all expenses have been presented as revenue
items except as follows:
-- Expenses which are incidental to the acquisition of an investment are
deducted as a capital item.
-- Expenses which are incidental to the disposal of an investment are
deducted from the disposal proceeds of the investment.
-- Expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of the
investments held can be demonstrated. The Company has adopted the policy
of allocating investment manager's fees, 75% to capital and 25% to
revenue as permitted by the SORP. The allocation is in line with the
Board's expectation of long term returns from the Company's investments
in the form of capital gains and income respectively.
-- Performance incentive fees arising are treated as a capital item.
Taxation
The tax effects on different items in the Income Statement are
allocated between capital and revenue on the same basis as the
particular item to which they relate using the Company's effective
rate of tax for the accounting period.
Due to the Company's status as a Venture Capital Trust and the
continued intention to meet the conditions required to comply with
Part 6 of the Income Tax Act 2007, no provision for taxation is
required in respect of any realised or unrealised appreciation of
the Company's investments which arise.
Deferred taxation is not discounted and is provided in full on
timing differences that result in an obligation at the balance
sheet date to pay more tax, or a right to pay less tax, at a future
date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the
inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are
included in the accounts.
A deferred tax asset is only recognised to the extent that it is
probable there will be taxable profits in the future against which
the asset can be offset.
Other debtors and other creditors
Other debtors (including accrued income) and other creditors are
included within the accounts at amortised cost.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held
at call with banks with an original maturity of three months or
less.
Dividends
Dividends payable are recognised as distributions in the
financial statements when the company's liability to make payment
has been established, typically once declared by the Board or
approved by Shareholders at the AGM.
Issue costs
Issue costs in relation to the shares issued are deducted from
the special reserve.
Reportable segments
The Company has one reportable segment as the sole activity of
the Company is to operate as a VCT and all of the Company's
resources are allocated to this activity.
2. Basic and diluted return per share
Year to Period to
31 Mar 31 Mar
2021 2020
Basic and diluted return/(loss) per share 7.9p (7.8p)
Return per share based on:
Net revenue (loss)/return for the financial
year (GBP'000) (546) 7
Net capital gains/(losses) for the financial
year (GBP'000) 9,079 (6,262)
Total Return/(loss) for the financial year
(GBP'000) 8,533 (6,255)
=========== ==========
Weighted average number of shares in issue 108,677,601 80,113,600
As the Company has not issued any convertible securities or
share options, there is no dilutive effect on return per share. The
return per share disclosed, therefore, represents both basic and
diluted return per share.
3. Principle Risks
The Company's investment activities expose the Company to a
number of risks associated with financial instruments and the
sectors in which the Company invests. The principal financial risks
arising from the Company's operations are:
-- Market risks;
-- Credit risk; and
-- Liquidity risk.
The Board regularly reviews these risks and the policies in
place for managing them. There have been no significant changes to
the nature of the risks that the Company is exposed to over the
year and there have also been no significant changes to the
policies for managing those risks during the year.
The risk management policies used by the Company in respect of
the principal financial risks and a review of the financial
instruments held at the year-end are provided below.
Market risks
As a VCT, the Company is exposed to investment risks in the form
of potential losses that may arise on the investments it holds in
accordance with its Investment Policy. The management of these
investment risks is a fundamental part of investment activities
undertaken by the Investment Manager and overseen by the Board. The
Manager monitors investments through regular contact with
management of investee companies, regular review of management
accounts and other financial information and attendance at investee
company board meetings. This enables the Manager to manage the
investment risk in respect of individual investments. Investment
risk is also mitigated by holding a diversified portfolio spread
across various business sectors and asset classes.
The key investment risks to which the Company is exposed
are:
-- Investment price risk; and
-- Interest rate risk.
The Company has undertaken sensitivity analysis on its financial
instruments, split into the relevant component parts, taking into
consideration the economic climate at the time of review in order
to ascertain the appropriate risk allocation.
Investment price risk
Investment price risk arises from uncertainty about the future
prices and valuations of financial instruments held in accordance
with the Company's investment objectives. It represents the
potential loss that the Company might suffer through investment
price movements in respect of quoted investments, and changes in
the fair value of unquoted investments that it holds.
Interest rate risk
The Company accepts exposure to interest rate risk on
floating-rate financial assets through the effect of changes in
prevailing interest rates. The Company receives interest on its
cash deposits at a rate agreed with its bankers and on liquidity
funds at rates based on the underlying investments. Investments in
loan notes and fixed interest investments attract interest
predominately at fixed rates. A summary of the interest rate
profile of the Company's investments is shown below.
Interest rate risk profile of financial assets and financial
liabilities
There are three levels of interest which are attributable to the
financial instruments as follows:
-- "Fixed rate" assets represent investments with predetermined yield
targets and comprise fixed interest and loan note investments.
-- "Floating rate" assets predominantly bear interest at rates linked to
Bank of England base rate and comprise cash at bank and Cash Trust
investments.
-- "No interest rate" assets do not attract interest and comprise equity
investments, loans and receivables (excluding cash at bank) and other
financial liabilities.
The Company monitors the level of income received from fixed,
floating and non-interest rate assets and, if appropriate, may make
adjustments to the allocation between the categories, in
particular, should this be required to ensure compliance with the
VCT regulations.
The Bank of England base rate has been 0.1% per annum since
March 2020. Any potential change in the base rate, at the current
level, would have an immaterial impact on the net assets and Total
Return of the Company.
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument is unable to discharge a commitment to the Company made
under that instrument. The Company is exposed to credit risk
through its holdings of loan notes in investee companies,
investments in fixed income securities, cash deposits and
debtors.
The Manager manages credit risk in respect of loan notes with a
similar approach as described under interest rate risk above. In
addition, the credit risk is partially mitigated by registering
floating charges over the assets of certain investee companies. The
strength of this security in each case is dependent on the nature
of the investee company's business and its identifiable assets. The
level of security is a key means of managing credit risk.
Similarly, the management of credit risk associated interest,
dividends and other receivables is covered within the investment
management procedures.
Cash is mainly held at Bank of Scotland plc, with a balance also
maintained at Royal Bank of Scotland plc, both of which are A-rated
financial institutions. Consequently, the Directors consider that
the risk profile associated with cash deposits is low.
There have been no changes in fair value during the year that
can be directly attributable to changes in credit risk.
As at 31 March 2021, there were no loan notes where, although
the principal remains within term, the investee company is not
fully servicing the interest obligations under the loan note and is
in arrears. (31 March 2020: GBPnil)
As at 31 March 2021 there were no loan stock balances whereby
the principal amount had passed its maturity date (31 March 2020:
GBPnil).
Liquidity risk
Liquidity risk is the risk that the Company encounters
difficulties in meeting obligations associated with its financial
liabilities. Liquidity risk may also arise from either the
inability to sell financial instruments when required at their fair
values or from the inability to generate cash inflows as required.
The Company normally has a relatively low level of creditors (31
March 2021: GBP81,000, 31 March 2020: GBP190,000) and has no
borrowings. The Company always holds sufficient levels of funds as
cash and readily realisable investments in order to meet expenses
and other cash outflows as they arise. For these reasons, the Board
believes that the Company's exposure to liquidity risk is
minimal.
The Company's liquidity risk is managed by the Investment
Manager, in line with guidance agreed with the Board and is
reviewed by the Board at regular intervals.
4. Related party transactions
Michael Jackson is a Director of Elderstreet Investments Limited
which provided investment management services to the Company.
During the year, GBP921,000 (2020: GBP848,000) was due in respect
of these services. No performance incentive fees were due to
Elderstreet Investments Limited in respect of the year under review
(2020: GBPnil). As at 31 March 2021, GBPnil (2020: GBPnil) was
outstanding and payable.
Nicholas Lewis is a partner of Downing LLP, which provides
administration services to the Company. During the year, GBP65,000
(2020: GBP57,500) was due to Downing LLP in respect of these
services. As at 31 March 2021, GBPnil (2020: GBP7,500) was
outstanding and payable.
ANNOUNCEMENT BASED ON AUDITED ACCOUNTS
The financial information set out in this announcement does not
constitute the Company's statutory financial statements in
accordance with section 434 Companies Act 2006 for the year ended
31 March 2021, but has been extracted from the statutory financial
statements for the year ended 31 March 2021 which were approved by
the Board of Directors on 2 July 2021 and will be delivered to the
Registrar of Companies. The Independent Auditor's Report on those
financial statements was unqualified and did not contain any
emphasis of matter nor statements under s 498(2) and (3) of the
Companies Act 2006.
The statutory accounts for the year ended 31 March 2020 have
been delivered to the Registrar of Companies and received an
Independent Auditors report which was unqualified and did not
contain any emphasis of matter nor statements under s 498(2) and
(3) of the Companies Act 2006.
A copy of the full annual report and financial statements for
the year ended 31 March 2021 will be printed and posted to
shareholders shortly. Copies will also be available to the public
at the registered office of the Company at St. Magnus House, 3
Lower Thames Street, London EC3R 6HD and will be available for
download from www.draperespritvct.com and
www.downing.co.uk/existing-investor/draper-esprit-vct .
(END) Dow Jones Newswires
July 05, 2021 02:00 ET (06:00 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
Draper Esprit Vct (LSE:DEVC)
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