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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Albion Development Vct Plc | LSE:AADV | London | Ordinary Share | GB0004832472 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 87.00 | 85.50 | 88.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Investors, Nec | 558k | -2.25M | -0.0166 | -52.41 | 117.98M |
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Albion Development VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency
Rules 4.1 and 6.3, Albion Development VCT PLC today makes public its
information relating to the Annual Report and Financial Statements for
the year ended 31 December 2016.
This announcement was approved for release by the Board of Directors on
23 March 2017.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial
Statements for the year to 31 December 2016 (which have been audited)
at: www.albion-ventures.co.uk/funds/AADV.The Annual Report and Financial
Statements for the year to 31 December 2016 will be available as a PDF
document via a link in the 'Financial Reports and Circulars' section.
The information contained in the Annual Report and Financial Statements
will include information as required by the Disclosure and Transparency
Rules, including Rule 4.1.
Investment objective and policy
Albion Development VCT PLC's (the "Company's") investment policy is
intended to provide investors with a regular and predictable source of
dividend income combined with the prospects of long term capital growth.
This is achieved by establishing a diversified portfolio of holdings in
smaller, unquoted companies whilst at the same time selecting and
structuring investments in such a way as to reduce the risks normally
associated with investment in such companies. It is intended that this
will be achieved as follows:
-- Through investment in a number of higher risk companies with greater
growth prospects in sectors such as software and computer services, and
medical technology.
-- This is balanced by investment in more stable, often asset-backed
investments that provide a strong income stream. These include
asset-based businesses in the leisure, healthcare, education and
renewable energy sectors, as well as stable and profitable businesses in
other sectors. Such investments will constitute the majority of
investments by cost.
-- In neither category do portfolio companies normally have any external
borrowings with a prior charge ranking ahead of the Company.
-- Up to two-thirds of qualifying investments by cost comprise loan stock
secured with a first charge on the portfolio company's assets.
Under its Articles of Association, the Company's maximum exposure in
relation to gearing is restricted to 10 per cent. of its adjusted share
capital and reserves.
Background to the Company
The Company is a venture capital trust which raised a total of GBP33.3
million through the issue of shares between 1999 and 2004. The C shares
merged with the Ordinary shares in 2007.
A further GBP6.3 million was raised through an issue of new D shares in
2009/2010. The D shares converted to Ordinary shares on 31 March 2015 on
the basis of their respective audited net asset value per share at 31
December 2014, in line with the original prospectus. Accordingly, D
shareholders received 1.4975 Ordinary shares for each D share they
owned.
An additional GBP23.7 million has been raised for the Ordinary shares
through the Albion VCTs Top Up Offers since January 2011. The funds
raised have been invested in accordance with the Company's existing
investment policy.
Financial calendar
Record date for first dividend 5 May 2017
Annual General Meeting 12pm on 25 May 2017
Payment of first dividend 31 May 2017
Announcement of half-yearly results for the six months August 2017
ending 30 June 2017
Payment of second dividend (subject to Board approval) 29 September 2017
Financial highlights
158.5p Total shareholder return per Ordinary share from launch
to 31 December 2016.
6.6% Total return on opening net asset value for the year
ended 31 December 2016.
4.0p Target tax free dividend per Ordinary share for the
year ahead (5.0p paid per Ordinary share during the
year ended 31 December 2016).
70.7p Net asset value per Ordinary share as at 31 December
2016.
Ordinary shares
31 December 2016 31 December 2015
pence per share pence per share
Dividends paid 5.0 5.0
Revenue return 0.9 1.5
Capital return 3.8 1.6
Net asset value 70.7 71.1
Total shareholder return to 31 December 2016:
Ordinary
shares C shares D shares
(pence per share) (ii) (pence per share) (ii) (iv) (pence per share)(ii) (v)
Total
dividends
paid during
the year
ended:
31 December
1999(i) 1.0 - -
31 December
2000 2.9 - -
31 December
2001 3.9 - -
31 December
2002 4.2 - -
31 December
2003(iii) 4.5 0.7 -
31 December
2004 4.0 2.0 -
31 December
2005 5.2 5.9 -
31 December
2006 3.0 4.5 -
31 December
2007(iv) 5.0 5.3 -
31 December
2008 12.0 12.8 -
31 December
2009 4.0 4.3 -
31 December
2010 8.0 8.6 1.0
31 December
2011 5.0 5.4 2.5
31 December
2012 5.0 5.4 3.5
31 December
2013 5.0 5.4 5.0
31 December
2014 5.0 5.4 5.0
31 December
2015(v) 5.0 5.4 7.5
31 December
2016 5.0 5.4 7.5
Total
dividends
paid to 31
December
2016 87.8 76.5 32.0
Net asset
value as at
31 December
2016 70.7 75.8 105.9
Total
shareholder
return to
31 December
2016 158.5 152.3 137.9
In line with the annual dividend target of 4.0 pence per share, the
Board has declared a first dividend for the year ending 31 December 2017
of 2.0 pence per Ordinary share payable on 31 May 2017 to shareholders
on the register on 5 May 2017.
Notes
(i) Assuming subscription for Ordinary shares by the First Closing on 26
January 1999.
(ii) Excludes tax benefits upon subscription.
(iii) Those subscribing for C shares after 30 June 2003 were not
entitled to the interim dividend.
(iv) The C shares were converted into Ordinary shares on 31 March 2007,
with a conversion ratio of 1.0715 Ordinary shares for each C share. The
net asset value per share and all dividends paid subsequent to the
conversion of the C shares to the Ordinary shares are multiplied by the
conversion factor of 1.0715 in respect of the C shares return, in order
to give an accurate picture of the shareholder value since launch
relating to the C shares.
(v) The D shares were converted into Ordinary shares on 31 March 2015,
with a conversion ratio of 1.4975 Ordinary shares for each D share. The
net asset value per share and all dividends paid subsequent to the
conversion of the D shares to the Ordinary shares are multiplied by the
conversion factor of 1.4975 in respect of the D shares return, in order
to give an accurate picture of the shareholder value since launch
relating to the D shares.
Chairman's statement
Introduction
The results for Albion Development VCT PLC for the year to 31 December
2016 showed total return of 4.7 pence per Ordinary share, compared to
3.1 pence per Ordinary share for 2015, with a number of important
changes taking place within the portfolio.
Investment performance and progress
The results for the year recorded net gains on investments of GBP2.9
million, against GBP1.4 million for the previous year. The key elements
within this included the successful sale of Exco InTouch, the digital
health business, which was sold for around three times original cost.
Following the year end, we also sold AMS Sciences and exchanged
contracts for the sale of Blackbay, both at valuations above the
previous holding value and also our holding in Masters Pharmaceuticals.
In addition, strong trading at Radnor House (Sevenoaks) led to a
material revaluation of that school, while Proveca, which develops
paediatric drugs, gained its first regulatory approval. Egress was also
written up following continued strong growth. Against this, slow
progress at Abcodia and Cisiv both led to write-downs.
In addition to Exco InTouch, the assets held by The Charnwood Pub
Company and Q Gardens were also disposed of during the year. Meanwhile,
GBP1.3 million was invested in five new portfolio companies, including
Black Swan Data (predictive analytics services), Secured by Design (an
international automative consultancy) and Convertr Media (digital
marketing software). A further GBP1.4 million was invested in existing
portfolio companies, including GBP464,000 into Proveca, to bring its
newly approved drug, Sialanar, to market.
Overall, 61 per cent. of the portfolio by value is now profitable,
measured by earnings before interest and tax, with a number of our
investments showing strong growth in fast-developing international
markets.
For a review of business and future prospects please see the Strategic
report below.
Risks and uncertainties
Other than investment performance, the key risks facing the Company are
from the broader economy. Despite some continued growth in the UK, the
outlook for the domestic economy following the decision to leave the EU
and an uncertain global situation, continue to be the key risks
affecting your Company. The Manager is clear in focussing efforts to
allocate resources to those sectors and opportunities where growth can
be both resilient and sustainable. Importantly, however, investment risk
is mitigated through a variety of processes including our policy of
ensuring that the Company has a first charge over portfolio companies'
assets wherever possible. We can never guarantee that future investments
will avoid the failings of some of the previous investments but the
rebalancing of the portfolio has resulted in a spread of investments
that is carefully balanced between stability and growth.
A detailed analysis of the other risks and uncertainties facing the
business is shown in the Strategic report below.
Board composition
Andy Phillipps retired from the Board on 17 March 2017 after nine years
with the Company. I would like to thank him for his excellent work, and
many years of wise counsel and service. Ben Larkin was appointed as a
Director on 5 December 2016. Ben has extensive experience in corporate
restructuring, turnaround, and insolvency, with particular experience in
real estate restructurings, and is currently a partner at Jones Day.
Share buy-backs
It remains the Board's primary objective to maintain sufficient
resources for investment in existing and new portfolio companies and for
the continued payment of dividends to shareholders, including in
considering the proposed change to investment policy for non-qualifying
investments. Therefore, the Board's policy is to buy back shares in the
market, subject to the overall constraint that such purchases are in the
Company's interest. It is the Board's intention for such buy-backs to be
in the region of a 5 per cent. discount to net asset value, so far as
market conditions and liquidity permit.
During the year, the Company purchased 1,299,000 Ordinary shares to be
held in treasury at a cost of GBP864,000 (2015: GBP649,000),
representing 2.2 per cent. of the opening shares in issue.
Transactions with the Manager
Details of transactions that took place with the Manager during the year
can be found in note 5 and principally relate to the management fee.
Dividends and results
It was announced on 3 November 2016 that the Company's dividend target
is changing. The Company paid dividends totalling 5.0 pence per share
during the financial year in line with the Company's policy, which it
has maintained for the last six years. For much of the period, however,
the dividend has not been fully covered by total returns, resulting in a
gradual decline in NAV per share over the years. In an economic
environment of persistently low interest rates, the Board considers a
recalibration of the annual dividend target to 4.0 pence per share to be
more appropriate, representing a dividend yield on current NAV of 5.7
per cent.. This target will apply from 2017. A first dividend of 2.0
pence per share will be paid on 31 May 2017 to shareholders on the
register on 5 May 2017.
As at 31 December 2016, the net asset value was 70.7 pence per share
compared to 71.1 pence at 31 December 2015. The total return after tax
was GBP2.9 million compared to GBP1.6 million in the year to 31 December
2015.
Albion VCTs Prospectus Top Up Offers
In November 2016, the Company announced the launch of the Albion VCTs
Prospectus Top Up Offers 2016/2017. In aggregate, the Albion VCTs raised
GBP34 million across six of the VCTs managed by Albion Ventures LLP,
with the Company raising GBP4 million. The Offers have now closed.
The funds raised by each Company pursuant to its Offer has been added to
the liquid resources available for investment so as to put each Company
into a position to take advantage of attractive investment opportunities
over the next two to three years. Accordingly, the proceeds of the
Offers are being applied in accordance with the respective Companies'
investment policies. The Company continues to participate in the Top Up
Offers and also benefits from receipts from dividend reinvestment, the
net proceeds of which are invested in new investment opportunities and
to provide additional working capital in the Company.
Outlook and prospects
There has been considerable progress within the portfolio since the
start of 2016, and it now seems well balanced for the future. The
combination of steady cash generation seen in the asset-based sectors of
renewable energy, leisure and education, combined with measured and
incremental investment in the growth sectors that the Manager knows well,
such as medical technology and specific areas within IT such as cyber
security, gives us confidence in the direction of the Company and the
returns to shareholders.
Geoffrey Vero
Chairman
23 March 2017
Strategic report
Investment objective and policy
The Company's investment policy is intended to provide investors with a
regular and predictable source of dividend income combined with the
prospects of long term capital growth. This is achieved by establishing
a diversified portfolio of holdings in smaller, unquoted companies
whilst at the same time selecting and structuring investments in such a
way as to manage and mitigate the risks normally associated with
investment in such companies. It is intended that this will be achieved
as follows:
-- Through investment in a number of higher risk companies with greater
growth prospects in sectors such as software and computer services, and
medical technology.
-- This is balanced by investment in more stable, often asset-backed
investments that provide a strong income stream. These include
asset-based businesses in the leisure, healthcare, education and
renewable energy sectors, as well as stable and profitable businesses in
other sectors. Such investments will constitute the majority of
investments by cost.
-- In neither category do portfolio companies normally have any external
borrowings with a prior charge ranking ahead of the Company.
-- Up to two-thirds of qualifying investments by cost comprise loan stock
secured with a first charge on the portfolio company's assets.
Funds held pending investment or for liquidity purposes will be held as
cash on deposit or in floating rate notes or similar instruments with
banks or other financial institutions with high credit ratings assigned
by international credit rating agencies.
Under its Articles of Association, the Company's maximum exposure in
relation to gearing is restricted to 10 per cent. of its adjusted share
capital and reserves.
Current portfolio sector allocation
As mentioned above, it is intended that the Company's investment
portfolio will be split between higher risk companies with greater
growth prospects, balanced by investment in more stable companies, which
are often asset-backed, that provide a strong income stream combined
with a protection of capital. The pie chart at the end of this
announcement shows the split of the portfolio valuation by industrial or
commercial sector as at 31 December 2016. Details of the principal
investments made by the Company are shown in the Portfolio of
investments on pages 16 to 18 of the full Annual Report and Financial
Statements.
Direction of portfolio
The sector analysis of the Company's investment portfolio at the end of
this announcement shows that healthcare now accounts for 15 per cent
compared to 18 per cent. in the previous financial year as a result of
the disposal of the investment in Exco InTouch. IT and software now
accounts for 17 per cent. of the portfolio compared to 16 per cent.
previously following the investment deployed into Secured By Design.
The current portfolio is well balanced in terms of sectors, with
renewable energy at 21 per cent., education accounting for 12 per cent.,
and leisure at 6 per cent. Cash balances have increased to 23 per cent.
of the portfolio and it is anticipated that investments will be deployed
into a number of new asset-based areas and the IT segment of the
portfolio.
Results and dividend policy
Ordinary
shares
GBP'000
Net revenue return for the year 549
Net capital gain for the year 2,313
Total return for the year ended 31 December 2016 2,862
Dividend of 2.5 pence per share paid on 31 May 2016 (1,572)
Dividend of 2.5 pence per share paid on 30 September
2016 (1,564)
Transferred from reserves (274)
Net assets as at 31 December 2016 44,085
Net asset value per share as at 31 December 2016 (pence) 70.7
The Company paid dividends totalling 5.0 pence per Ordinary share (2015:
5.0 pence per Ordinary share).
As described in the Chairman's statement, the Board has declared a first
dividend for the year ending 31 December 2017 of 2.0 pence per Ordinary
share payable on 31 May 2017 to shareholders on the register on 5 May
2017.
As shown in the Income statement, the total investment income decreased
to GBP1,114,000 (2015: GBP1,335,000). This is in part due to the
disposal of income producing investments in the prior year as well as
capitalising interest on a number of companies in order to fund further
acquisitions. As a result, the revenue return to equity holders has
decreased to GBP549,000 (2015: GBP769,000).
The total capital return for the year was GBP2,313,000 (2015:
GBP850,000). This is mainly attributable to the successful sale of Exco
InTouch, where a gain on opening value of GBP1.3 million was realised
and unrealised revaluation movements in the Company's investment
portfolio, in particular, increases in Radnor House School (Holdings),
Proveca and Egress Software Technologies, outweighing reductions in
Abcodia and Cisiv.
The total return was 4.7 pence per share (2015: 3.1 pence per share).
The Balance sheet shows that the net asset value has decreased slightly
over the last year to 70.7 pence per share (2015: 71.1 pence per share).
The decrease in net asset value can be attributed to the payment of 5.0
pence per Ordinary share of dividends offset by the total return for the
year.
The cash flow was positive for the year mainly as a result of the
disposal of investments and the issue of Ordinary shares, offset by a
number of new investments made and dividends paid during the year.
Review of business and future changes
The results for the year to 31 December 2016 show total shareholder
return of 158.5 pence per Ordinary share since launch (2015: 153.9 pence
per share). We believe there should be further progress in the current
year, with selected disposals and new investments, and focus on our core
area of IT/Software alongside new asset-based areas.
The Directors do not foresee any major changes in the activity
undertaken by the Company in the current year. The Company continues
with its objective to invest in unquoted companies throughout the United
Kingdom with a view to providing both capital growth and a reliable
dividend income to shareholders over the long term.
A detailed review of the Company's business during the year is contained
in the Chairman's statement.
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.
VCT regulation
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
22 of the full Annual Report and Financial Statements.
As part of the Government's wider review of the VCT regime, new rules
have been introduced under the Finance Act (No.2) 2015 and Finance Act
2016, which include:
-- Restrictions over the age of investments;
-- A prohibition on management buyouts or the purchase of existing
businesses;
-- An overall lifetime investment cap of GBP12 million from tax-advantaged
funds into any portfolio company; and
-- A VCT can only make qualifying investments or certain specified
non-qualifying investments such as money market securities and short term
deposits.
While these changes are significant, the Company has been advised that,
had they been in place previously, they would have affected only a
relatively small minority of the investments that we have made into new
portfolio companies over recent years. The Board's current view is that
there will be no material change in our investment policy and the
application of it as a result.
The relevant tests to measure compliance have been carried out and
independently reviewed for the year ended 31 December 2016. These showed
that the Company has complied with all tests and continues to do so.
Future prospects
The key drivers for returns within the portfolio are those sectors that
are involved in longer-term global trends. These include the importance
of healthcare in an ageing population, sustainable energy against a
background of climate change, education amid the need to improve the
national skills base and the developing use of information technology in
an environment of universal information. The portfolio is well
positioned to take advantage of these changes, with a longer term aim of
total return exceeding dividends.
Key performance indicators
The Directors believe that the following key performance indicators,
which are typical for venture capital trusts, used in its own assessment
of the Company, will provide shareholders with sufficient information to
assess how effectively the Company is applying its investment policy to
meet its objectives. The Directors are satisfied that the results shown
in the following key performance indicators give a good indication that
the Company is achieving its investment objective and policy. These are:
1. Total shareholder return relative to FTSE All-Share Index total return
The graph on page 4 of the full Annual Report and Financial Statements
shows the total shareholder return against the FTSE All-Share Index
total return, in both instances with dividends reinvested. Details on
the performance of the net asset value and return per share for the year
are shown in the Chairman's statement.
1. Net asset value per share and total shareholder return
Total return to shareholders increased by 3.0 per cent. to 158.5 pence
per Ordinary share for the year ended 31 December 2016 as a result of
the positive total return of 4.7 pence per share.
1. Dividend distributions
Dividends paid in respect of the year ended 31 December 2016 were 5.0
pence per share (2015: 5.0 pence per share). Cumulative dividends paid
since inception are 87.8 pence per share. The dividend target for the
2017 financial year is 4.0 pence per share as outlined in the Chairman's
statement.
1. Ongoing charges
The ongoing charges ratio for the year to 31 December 2016 was 2.7 per
cent. (2015: 2.8 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 next year to remain broadly at this current level.
Gearing
As defined by the Articles of Association, the Company's maximum
exposure in relation to gearing is restricted to 10 per cent. of the
adjusted share capital and reserves. The Directors do not currently have
any intention to utilise long term gearing.
Operational arrangements
The Company has delegated the investment management of the portfolio to
Albion Ventures LLP, which is authorised and regulated by the Financial
Conduct Authority. Albion Ventures LLP also provides company secretarial
and other accounting and administrative support to the Company.
Management agreement
Under the Management agreement, the Manager provides investment
management, secretarial and administrative services to the Company. The
Management agreement may be terminated by either party on 12 months'
notice and is subject to earlier termination in the event of certain
breaches or on the insolvency of either party. The Manager is paid an
annual fee equal to 2.25 per cent. of the net asset value of the Company
paid quarterly in arrears.
Total annual expenses, including the management fee, are limited to 3.0
per cent. of the net asset value.
In line with common practice, the Manager is also entitled to an
arrangement fee, payable by each portfolio company, of approximately 2
per cent. on each investment made and also monitoring fees where the
Manager has a representative on the portfolio company's board.
Management performance incentive
The management performance incentive structure sets a minimum target
level whereby no performance fee is payable to the Manager until the
total return exceeds 6.5 pence per share per annum from a base on 1
January 2007 of 98.7 pence for the Ordinary shares and 100 pence for the
D shares from 6 April 2010. 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. To the extent that the total return exceeds the threshold over
the relevant period, a performance fee will be paid to the Manager of an
amount equal to 20 per cent. of the excess.
As at 31 December 2016, the total return since 1 January 2007 for
Ordinary Shares was 129.7 pence and the total return since 6 April 2010
for the former D Shares was 137.9 pence, and the hurdle was 163.7 pence
for Ordinary Shares and 143.8 pence for the former D Shares.
Any performance fee payable will be calculated based on the above
hurdles, escalating at 6.5p per annum, and in respect of the relevant
proportion of that share class' share of the Company's net assets as at
31 December 2014.
There was no management performance incentive fee payable during the
year (2015: nil).
Investment and co-investment
The Company co-invests with other Albion Ventures LLP managed venture
capital trusts and funds. Allocation of investments is on the basis of
an allocation agreement which is based, inter alia, on the ratio of
funds available for investment.
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on the
returns generated by the Company, the continuing achievement of the 70
per cent. investment requirement for venture capital trust status, the
long term prospects of the current portfolio of investments, a review of
the Management agreement and the services provided therein, and
benchmarking the performance of the Manager to other service providers.
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 Ventures LLP as the Company's AIFM as
required by the AIFMD.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Act to
detail information about social and community issues, employees and
human rights; including any policies it has in relation to these matters
and effectiveness of these policies. As an externally managed investment
company with no employees, the Company has no policies in these matters
and as such these requirements do not apply.
Further policies
The Company has adopted a number of further policies relating to:
-- Environment
-- Global greenhouse gas emissions
-- Anti-bribery
-- Diversity
and these are set out in the Directors' report on pages 22 and 23 of the
full Annual Report and Financial Statements.
Share buy-back policy
It remains the Board's primary objective to maintain sufficient
resources for investment in existing and new portfolio companies and for
the continued payment of dividends to shareholders. The Board's policy
is to buy back shares in the market, subject to the overall constraint
that such purchases are in the Company's interest.
It is the Board's intention for such buy-backs to be in the region of a
5 per cent. discount to net asset value, so far as market conditions and
liquidity permit.
Further details of shares bought back during the year ended 31 December
2016 can be found in note 15 of the Financial Statements.
Risk management
The Board carries out a regular review of the risk environment in which
the Company operates. The principal risks and uncertainties of the
Company as identified by the Board and how they are managed are as
follows:
Risk Possible consequence Risk management
Investment The risk of investment in poor quality assets, which To reduce this risk, the Board places reliance upon
and could reduce the capital and income returns to shareholders, the skills and expertise of the Manager and its track
performance and could negatively impact on the Company's current record over many years of making successful investments
risk and future valuations. in this segment of the market. In addition, the Manager
By nature, smaller unquoted businesses, such as those operates a formal and structured investment appraisal
that qualify for venture capital trust purposes, are and review process, which includes an Investment Committee,
more fragile than larger, long established businesses. comprising investment professionals from the Manager
and at least one external investment professional.
The Manager also invites and takes account of comments
from non-executive Directors of the Company on investments
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.
VCT The Company must comply with section 274 of the Income To reduce this risk, the Board has appointed the Manager,
approval Tax Act 2007 which enables its investors to take advantage which has a team with significant experience in venture
risk of tax relief on their investment and on future returns. capital trust management, used to operating within
Breach of any of the rules enabling the Company to the requirements of the venture capital trust legislation.
hold VCT status could result in the loss of that status. In addition, to provide further formal reassurance,
the Board has appointed Philip Hare & Associates LLP
as its taxation adviser, who report quarterly to the
Board to independently confirm compliance with the
venture capital trust legislation, to highlight areas
of risk and to inform on changes in legislation. Each
investment in a new portfolio company is also pre-cleared
with H.M. Revenue & Customs.
Regulatory The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
and and is required to comply with the rules of the UK at senior levels within or advising quoted companies.
compliance Listing Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
risk Accounting Standards and other legislation. Failure updates on new regulation from its auditor, lawyers
to comply with these regulations could result in a and other professional bodies. The Company is subject
delisting of the Company's shares, or other penalties to compliance checks through the Manager's Compliance
under the Companies Act or from financial reporting Officer. The Manager reports monthly to its Board
oversight bodies. on any issues arising from compliance or regulation.
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.
Economic Changes in economic conditions, including, for example, The Company invests in a diversified portfolio of
and interest rates, rates of inflation, industry conditions, companies across a number of industry sectors and
political competition, political and diplomatic events and other in addition often invests a mixture of equity and
risk factors could substantially and adversely affect the secured loan stock in portfolio companies and has
Company's prospects in a number of ways. a policy of not normally permitting 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.
Market The market value of Ordinary shares can fluctuate. The Company operates a share buy-back policy, which
value of The market value of an Ordinary share, as well as is designed to limit the discount at which the Ordinary
Ordinary being affected by its net asset value and prospective shares trade to around 5 per cent to net asset value,
shares net asset value, also takes into account its dividend by providing a purchaser through the Company in absence
yield and prevailing interest rates. As such, the of market purchasers. From time to time buy-backs
market value of an Ordinary share may vary considerably cannot be applied, for example when the Company is
from its underlying net asset value. The market prices subject to a close period, or if it were to exhaust
of shares in quoted investment companies can, therefore, its buy-back authorities, which are renewed each year.
be at a discount or premium to the net asset value New Ordinary shares are issued at sufficient premium
at different times, depending on supply and demand, to net asset value to cover the costs of issue and
market conditions, general investor sentiment and to avoid asset value dilution to existing investors.
other factors. Accordingly the market price of the
Ordinary shares may not fully reflect their underlying
net asset value.
Viability statement
In accordance with the FRC UK Corporate Governance Code published in
September 2014 and principle 21 of the AIC Code of Corporate Governance,
the Directors have assessed the prospects of the Company over three
years to 31 December 2019. 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 also considered the most appropriate given the
forecasts that the Board require from the Manager, and the estimated
timelines for finding, assessing and completing investments.
The Directors have carried out a robust assessment of the 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 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. The Board deliberated over the importance of the Manager
and the processes that they have in place for dealing with the principal
risks.
The Board assessed the ability of the Company to raise finance and
deploy capital. 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 price discount, 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 31 December
2019.
This Strategic report of the Company for the year ended 31 December 2016
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.
On behalf of the Board,
Geoffrey Vero
Chairman
23 March 2017
Responsibility statement
In preparing these Financial Statements for the year to 31 December
2016, the Directors of the Company, being Geoffrey Vero, Jonathan
Thornton, Ben Larkin and Patrick Reeve, confirm that to the best of
their knowledge:
- summary financial information contained in this announcement and the
full Annual Report and Financial Statements for the year ended 31
December 2016 for the Company have 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 and loss of the
Company for the year ended 31 December 2016 as required by DTR 4.1.12R;
- the Chairman's statement and Strategic report include a fair review of
the information required by DTR 4.2.7R (indication of important events
during the year ended 31 December 2016 and description of principal
risks and uncertainties that the Company faces); and
- the Chairman's statement and Strategic report includes a fair review
of the information required by DTR 4.2.8R (disclosure of related parties
transactions and changes therein).
A detailed "Statement of Directors' responsibilities" is contained on
page 25 within the full audited Annual Report and Financial Statements.
By order of the Board
Geoffrey Vero
Chairman
23 March 2017
Income statement
Year ended 31 December Year ended 31 December
2016 2015
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments 3 - 2,911 2,911 - 1,367 1,367
Investment income 4 1,114 - 1,114 1,335 - 1,335
Investment management fees 5 (239) (717) (956) (215) (646) (861)
Other expenses 6 (210) - (210) (202) - (202)
Profit on ordinary activities before tax 665 2,194 2,859 918 721 1,639
Tax (charge)/credit on ordinary activities 8 (116) 119 3 (149) 129 (20)
Profit and total comprehensive income attributable
to shareholders 549 2,313 2,862 769 850 1,619
Basic and diluted return per share (pence)* 10 0.9 3.8 4.7 1.5 1.6 3.1
* excluding 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
have been prepared in accordance with The Association of Investment
Companies' Statement of Recommended Practice.
Balance sheet
31 December 2016 31 December 2015
Note GBP'000 GBP'000
Fixed asset investments 11 33,798 31,565
Current assets
Trade and other receivables less
than one year 13 441 685
Cash and cash equivalents 10,153 6,972
10,594 7,657
Total assets 44,392 39,222
Creditors: amounts falling due
within one year
Trade and other payables less than
one year 14 (307) (322)
Total assets less current
liabilities 44,085 38,900
Equity attributable to
equityholders
Called up share capital 15 689 600
Share premium 17,886 11,652
Capital redemption reserve 12 12
Unrealised capital reserve 7,253 4,883
Realised capital reserve 4,763 4,820
Other distributable reserve 13,482 16,933
Total equity shareholders' funds 44,085 38,900
Basic and diluted net asset value
per share (pence)* 16 70.7 71.1
* 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 23 March 2017 and were signed on its behalf by
Geoffrey Vero
Chairman
Company number: 03654040
Statement of changes in equity
Capital Unrealised Realised Other
Called up share Share redemption capital capital distributable
capital premium reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 January 2016 600 11,652 12 4,883 4,820 16,933 38,900
Profit/(loss) and total comprehensive income for the
period - - - 1,690 623 549 2,862
Transfer of unrealised losses on disposal or write
off of investments - - - 680 (680) - -
Purchase of shares for treasury - - - - - (864) (864)
Issue of equity 89 6,389 - - - - 6,478
Cost of issue of equity - (155) - - - - (155)
Dividends paid - - - - - (3,136) (3,136)
As at 31 December 2016 689 17,886 12 7,253 4,763 13,482 44,085
As at 1 January 2015 482 5,560 12 1,954 4,500 21,927 34,435
Profit/(loss) and total comprehensive income for the
period - - - 1,971 (1,121) 769 1,619
Transfer of unrealised losses on disposal or write
off of investments - - - 958 (958) - -
Purchase of shares for treasury - - - - - (649) (649)
Issue of equity 118 6,275 - - - (33) 6,360
Cost of issue of equity - (183) - - - - (183)
Transfer from other distributable reserve to realised
capital reserve - - - - 2,399 (2,399) -
Dividends paid - - - - - (2,682) (2,682)
As at 31 December 2015 600 11,652 12 4,883 4,820 16,933 38,900
* These reserves amount to GBP18,245,000 (2015: GBP21,753,000) which is
considered distributable.
Statement of cash flows
Year ended Year ended
31 December 2016 31 December 2015
GBP'000 GBP'000
Cash flow from operating activities
Loan stock income received 767 1,076
Deposit interest received 96 64
Dividend income received 74 82
Investment management fees paid (926) (835)
Other cash payments (217) (213)
Corporation tax paid (20) -
Net cash flow from operating activities (226) 174
Cash flow from investing activities
Purchase of fixed asset investments (2,715) (3,995)
Disposal of fixed asset investments 3,797 3,302
Net cash flow from investing activities 1,082 (693)
Cash flow from financing activities
Issue of share capital 5,820 5,807
Cost of issue of shares (including D share conversion
in 2015) - (17)
Equity dividends paid (2,631) (2,295)
Purchase of own shares (including costs) (864) (649)
Net cash flow from financing activities 2,325 2,846
Increase in cash and cash equivalents 3,181 2,327
Cash and cash equivalents at start of period 6,972 4,645
Cash and cash equivalents at end of period 10,153 6,972
Cash and cash equivalents comprise:
Cash at bank and in hand 10,153 6,972
Cash equivalents - -
Total cash and cash equivalents 10,153 6,972
Notes to the Financial Statements
1. Basis of preparation
The Financial Statements have been prepared in accordance with the
historical cost convention, modified to include the revaluation of
investments, in accordance with applicable United Kingdom law and
accounting standards, including Financial Reporting Standard 102 ("FRS
102"), and with the 2014 Statement of Recommended Practice "Financial
Statements of Investment Trust Companies and Venture Capital Trusts"
("SORP") issued by The Association of Investment Companies ("AIC").
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"). The Company values investments by following the IPEVCV
Guidelines and further detail on the valuation techniques used are in
note 2 below.
Company information is shown on page 2 of the full Annual Report and
Financial Statements.
2. Accounting policies
Fixed asset investments
The Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital
growth. This portfolio of financial assets is managed and its
performance evaluated on a fair value basis, in accordance with a
documented investment policy, and information about the portfolio is
provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those undertakings in
which the Company holds more than 20 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 IPEVCV
Guidelines. Indicators of fair value are derived using established
methodologies including earnings multiples, the level of third party
offers received, prices of recent investment rounds, net assets and
industry valuation benchmarks. Where the Company has an investment in an
early stage enterprise, the price of a recent investment round is often
the most appropriate approach to determining fair value. In situations
where a period of time has elapsed since the date of the most recent
transaction, 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.
Debtors and creditors and cash are carried at amortised cost, in
accordance with FRS 102. There are no financial liabilities other than
creditors.
Investment income
Equity income
Dividend income is included in revenue when the investment is quoted
ex-dividend.
Unquoted loan stock and other preferred income
Fixed returns on non-equity shares and debt securities are recognised
when the Company's right to receive payment and expect settlement is
established. Where interest is rolled up and/or payable at redemption
then it is recognised as income unless there is reasonable doubt as to
its receipt.
Bank interest income
Interest income is recognised on an accruals basis using the rate of
interest agreed with the bank.
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are
charged through the other distributable reserve except the following
which are charged through the realised capital reserve:
-- 75 per cent. of management fees 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.
Performance incentive fee
In the event that a performance incentive fee crystallises, the fee will
be allocated between other distributable and realised capital reserves
based upon the proportion to which the calculation of the fee is
attributable to revenue and capital returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 102.
Current tax is tax payable (refundable) in respect of the taxable profit
(tax loss) for the current period or past reporting periods using the
tax rates and laws that have been enacted or substantively enacted at
the financial reporting date. Taxation associated with capital expenses
is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the
reporting date. Timing differences are differences between taxable
profits and total comprehensive income as stated in the Financial
Statements that arise from the inclusion of income and expenses in tax
assessments in periods different from those in which they are recognised
in the Financial Statements. As a VCT the Company has an exemption from
tax on capital gains. The Company intends to continue meeting the
conditions required to obtain approval as a VCT in the foreseeable
future. The Company therefore, should have no material deferred tax
timing differences arising in respect of the revaluation or disposal of
investments and the Company has not provided for any deferred tax.
Reserves
Share premium account
This reserve accounts for the difference between the price paid for
shares and the nominal value of the shares, less issue costs.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is
diminished through the repurchase and cancellation of the Company's own
shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year
end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments, or
permanent diminutions in value;
-- 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.
Dividends
Dividends by the Company are accounted for in the period in which the
dividend is paid or approved at the Annual General Meeting.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
operating segment of business, being investment in equity and debt. The
Company invests in smaller companies principally based in the UK.
3. Gains on investments
Year ended Year ended
31 December 2016 31 December 2015
GBP'000 GBP'000
Unrealised gains on fixed asset
investments 1,690 1,971
Realised gains/(losses) on fixed asset
investments 1,221 (604)
2,911 1,367
4. Investment income
Year ended Year ended
31 December 2016 31 December 2015
GBP'000 GBP'000
Income recognised on investments
Loan stock interest and other fixed
returns 949 1,186
UK dividend income 74 82
Bank deposit interest 91 67
1,114 1,335
Interest income earned on impaired investments at 31 December 2016
amounted to GBP42,000 (2015: GBP45,000).
5. Investment management fees
Year ended Year ended
31 December 2016 31 December 2015
GBP'000 GBP'000
Investment management fee charged to
revenue 239 215
Investment management fee charged to
capital 717 646
956 861
Further details of the Management agreement under which the investment
management fee is paid are given in the Strategic report.
During the year, services of a total value of GBP956,000 (2015:
GBP861,000) were purchased by the Company from Albion Ventures LLP in
respect of management fees. At the financial year end, the amount due to
Albion Ventures LLP in respect of these services disclosed as accruals
was GBP248,000 (2015: GBP219,000).
During the year, the Company was not charged by Albion Ventures LLP in
respect of Patrick Reeve's services as a Director (2015: GBPnil).
Albion Ventures LLP, the Manager, holds 42,188 Ordinary shares in the
Company.
Albion Ventures LLP is, from time to time, eligible to receive
transaction fees and monitoring fees from portfolio companies. During
the year ended 31 December 2016, fees of GBP150,000 attributable to the
investments of the Company were received by Albion Ventures LLP pursuant
to these arrangements (2015: GBP179,000).
6. Other expenses
Year ended Year ended
31 December 2016 31 December 2015
GBP'000 GBP'000
Directors' fees (including NIC) 76 67
Auditor's remuneration for statutory audit services
(excluding VAT) 26 27
Other administrative expenses 108 108
210 202
7. Directors' fees
The amounts paid to the Directors during the year are as follows:
Year ended Year ended
31 December 2016 31 December 2015
GBP'000 GBP'000
Directors' fees 71 62
National insurance 5 5
76 67
The Company's key management personnel are the Directors. Further
information regarding Directors' remuneration can be found in the
Directors' remuneration report on pages 31 and 32 of the full Annual
Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
31 December 2016 31 December 2015
GBP'000 GBP'000
UK corporation tax charge in respect of current year - 39
UK corporation tax credit in respect of prior years (3) (19)
(3) 20
Factors affecting the tax charge:
Year ended Year ended
31 December 2016 31 December 2015
GBP'000 GBP'000
Return on ordinary activities before taxation 2,859 1,639
Tax charge on profit at the small companies rate of
20 per cent.
(2015: 20 per cent.) 572 328
Factors affecting the charge:
Non-taxable gains (582) (273)
Income not taxable (15) (16)
Excess management expenses carried forward 25 -
Adjustment in respect of prior years (3) (19)
(3) 20
The tax (credit)/charge for the year shown in the Income statement is
lower than the companies rate of corporation tax in the UK of 20 per
cent. (2015: 20 per cent.). The differences are explained above.
Consortium relief is recognised in the accounts in the period in which
the claim is submitted to HMRC and is shown as tax in respect of prior
years.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on
capital gains.
(ii) Tax relief on expenses charged to capital has been
determined by allocating tax relief to expenses by reference to the
applicable corporation tax rate and allocating the relief between
revenue and capital in accordance with the SORP.
(iii) The Company has excess management expenses of GBP123,000
(2015: GBPnil) that are available for offset against future profits. A
deferred tax asset of GBP25,000 (2015: GBPnil) has not been recognised
in respect of these losses as they will be recoverable only to the
extent that the Company has sufficient future taxable profits
9. Dividends
Year ended Year ended
31 December 2016 31 December 2015
GBP'000 GBP'000
Dividend of 2.5p per Ordinary share paid on 29 May
2015 - 1,335
Dividend of 2.5p per Ordinary share paid on 30 September
2015 - 1,347
Dividend of 2.5p per Ordinary share paid on 31 May
2016 1,572 -
Dividend of 2.5p per Ordinary share paid on 30 September
2016 1,564 -
3,136 2,682
In addition to the dividends summarised above, the Board has declared a
first dividend of 2.0 pence per Ordinary share for the year ending 31
December 2017, payable on 31 May 2017 to shareholders on the register on
5 May 2017. The total dividend will be approximately GBP1,354,000.
10. Basic and diluted return per share
Year ended 31 December
Year ended 31 December 2016 2015
Revenue Capital Total Revenue Capital Total
Profit attributable to equity shares (GBP'000) 549 2,313 2,862 769 850 1,619
Weighted average shares in issue (excluding treasury
shares) 61,380,295 52,626,429
Return attributable per equity share (pence) 0.9 3.8 4.7 1.5 1.6 3.1
The weighted average number of Ordinary shares is calculated excluding
the treasury shares of 6,556,700 (2015: 5,257,700).
There are no convertible instruments, derivatives or contingent share
agreements in issue so basic and diluted return per share are the same.
11. Fixed asset investments
31 December 2016 31 December 2015
GBP'000 GBP'000
Investments held at fair value through
profit or loss
Unquoted equity and preference shares 15,322 13,777
Unquoted loan stock 18,172 17,394
Quoted equity 304 394
33,798 31,565
31 December 2016 31 December 2015
GBP'000 GBP'000
Opening valuation 31,565 29,873
Purchases at cost 2,715 4,007
Disposal proceeds (3,575) (3,792)
Realised gains/(losses) 1,221 (604)
Movement in loan stock accrued income 182 110
Unrealised gains 1,690 1,971
Closing valuation 33,798 31,565
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued
income 244 134
Movement in loan stock accrued income 182 110
Closing accumulated movement in loan stock accrued
income 426 244
Movement in unrealised gains
Opening accumulated unrealised gains 4,706 1,777
Transfer of previously unrealised gains to realised
reserve on disposal of investments (540) (1,072)
Transfer of previously unrealised losses to realised
reserves on investments written off but still held 1,221 2,030
Movement in unrealised gains 1,690 1,971
Closing accumulated unrealised gains 7,077 4,706
Historic cost basis
Opening book cost 26,614 27,962
Purchases at cost 2,715 4,007
Sales at cost (1,812) (3,325)
Cost of investments written off but still held (1,221) (2,030)
Closing book cost 26,297 26,614
Purchases and disposals detailed above do not agree to the Statement of
cash flows due to restructuring of investments, conversion of
convertible loan stock and settlement debtors and creditors.
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 at fair value in accordance
with the IPEVCV guidelines as follows:
31 December 2016 31 December 2015
Valuation methodology GBP'000 GBP'000
Valuation supported by third party or desktop
valuation 17,922 16,804
Cost and price of recent investment (reviewed for
impairment or uplift) 8,304 5,418
Revenue multiple 5,195 6,812
Earnings multiple 1,916 1,902
Discount to third party offer 158 235
33,494 31,171
Fair value investments had the following movements between valuation
methodologies between 31 December 2015 and 31 December 2016:
Change in valuation Value as at Explanatory note
methodology (2015 to 2016) 31 December 2016
GBP'000
Revenue multiple to price of 893 Recent external funding round
recent investment
Revenue multiple to third 158 More relevant valuation
party offer methodology
Cost (reviewed for 115 More relevant valuation
impairment) to earnings methodology
multiple
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 IPEVCV Guidelines. The Directors believe that, within
these parameters, there are no other possible methods of valuation which
would be reasonable as at 31 December 2016.
FRS 102 and the SORP requires the Company to disclose the inputs to the
valuation methods applied to its investments measured at fair value
through profit or loss in a fair value hierarchy. The table below sets
out fair value hierarchy definitions using FRS102 s.11.27, which has
been adopted early.
Fair value hierarchy Definition
Level 1 Unadjusted quoted prices in an active market
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
Level 3 Inputs to valuations not based on observable market
data
Quoted investments are valued according to Level 1 valuation methods.
Unquoted equity, preference shares and loan stock are all valued
according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3) had the
following movements in the year to 31 December 2016:
31 December 2016 31 December 2015
Equity Loan stock Total Equity Loan stock Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening balance 13,777 17,394 31,171 12,349 17,123 29,472
Additions 1,775 940 2,715 1,123 2,821 3,944
Disposals (1,896) (1,679) (3,575) (1,690) (2,102) (3,792)
Accrued loan stock
interest - 182 182 - 110 110
Realised
gains/(losses) 675 546 1,221 (467) (137) (604)
Debt/equity swap
and
restructurings 5 (5) - 480 (480) -
Unrealised gains 986 793 1,779 1,982 59 2,041
Closing balance 15,322 18,173 33,495 13,777 17,394 31,171
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. 66 per cent. of the portfolio of
investments is based on cost, recent investment price, agreed offer
price or is loan stock, and as such the Board considers that the
assumptions used for their valuations are the most reasonable. The
Directors believe that changes to reasonable possible alternative
assumptions (by adjusting the revenue and earnings multiples) for the
valuations of the remainder of the portfolio companies could result in
an increase in the valuation of investments by GBP603,000 or a decrease
in the valuation of investments by GBP686,000. For valuations based on
earnings and revenue multiples, the Board considers that the most
significant input is the price/earnings ratio; for valuations based on
third party valuations, the Board considers that the most significant
inputs are price/earnings ratio, discount factors and market values for
buildings; which have been adjusted to drive the above sensitivities.
12. Significant interests
The principal activity of the Company is to select and hold a portfolio
of investments in unquoted securities. Although the Company, through the
Manager, will, in some cases, be represented on the board of the
portfolio company, it will not take a controlling interest or become
involved in the management. 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
investments listed below are held as part of an investment portfolio and
therefore, as permitted by FRS 102 section 9.9B, they are measured at
fair value through profit and loss and not consolidated as subsidiaries.
The Company has interests of greater than 20 per cent. of the nominal
value of any class of the allotted shares in the portfolio companies as
at 31 December 2016 as described below:
% total
voting
% class rights
Profit/(loss) Result and held by
Country of before tax Net assets/ for year Principal share the
Company incorporation GBP'000 (liabilities) GBP'000 ended activity type Company
Albion
Investment 31 Owner of
Properties December residential 68.2% A
Limited Great Britain n/a* (988) 2015 property Ordinary 68.2%
* The company files abbreviated accounts which does not disclose this
information.
13. Current assets
31 December 31 December
Trade and other receivables less than one year 2016 2015
GBP'000 GBP'000
Prepayments and accrued income 15 19
Corporation tax receivable 3 19
Other debtors 423 647
441 685
14. Creditors: amounts falling due within one year
31 December 2016 31 December 2015
GBP'000 GBP'000
Accruals and deferred income 303 266
Trade creditors 4 17
UK corporation tax payable - 39
307 322
15. Called up share capital
Allotted, called up and fully paid shares:
Ordinary shares 31 December 2016 GBP'000
59,965,643 Ordinary shares of 1 penny each at 31 December
2015 600
8,917,931 Ordinary shares of 1 penny each issued during
the year 89
68,883,574 Ordinary shares of 1 penny each at 31 December
2016 689
5,257,700 Ordinary shares of 1 penny each held in
treasury at 31 December 2015 (53)
1,299,000 Ordinary shares of 1 penny each purchased
during the year to be held in treasury (13)
6,556,700 Ordinary shares of 1 penny each held in
treasury at 31 December 2016 (66)
Voting rights of 62,326,874 Ordinary shares of 1 penny
each at 31 December 2016 623
The Company purchased 1,299,000 Ordinary shares (2015: 951,000) at a
cost of GBP864,000 including stamp duty (2015: GBP649,000) to be held in
treasury during the year to 31 December 2016. Total share buy backs in
2016 represents 1.9% (2015: 1.6%) of called-up share capital as at 31
December 2016.
Under the terms of the Dividend Reinvestment Scheme, the following new
Ordinary shares of nominal value 1 penny each were allotted during the
year:
Aggregate
Number nominal
of amount of Issue price Net
shares shares (pence per invested Opening market price on allotment date (pence per
Date of allotment issued (GBP'000) share) (GBP'000) share)
31 May 2016 366,881 4 68.6 247 68.0
30 September 2016 381,011 4 66.8 253 66.3
747,892 503
Under the terms of the Albion VCTs Prospectus Top Up Offers 2015/2016,
the following new Ordinary shares of nominal value 1 penny each, were
allotted during the year:
Aggregate
nominal Net
Number of amount of Issue price consideration
Date of shares shares (pence per received Opening market price on allotment date (pence per
allotment issued (GBP'000) share) (GBP'000) share)
29 January
2016 2,807,295 28 72.8 2,003 68.3
29 January
2016 1,581,367 16 73.2 1,129 68.3
31 March
2016 3,604,114 36 73.3 2,562 68.0
6 April
2016 103,435 1 72.6 73 68.0
6 April
2016 12,554 - 73.0 9 68.0
6 April
2016 61,274 1 73.3 44 68.0
8,170,039 82 5,820
16. Basic and diluted net asset value per share
31 December 2016 (pence 31 December 2015 (pence
per share) per share)
Basic and diluted net
asset value per Ordinary
share 70.7 71.1
The basic and diluted net asset values per share at the year end are
calculated in accordance with the Articles of Association and are based
upon total shares in issue (less treasury shares) of 62,326,874 Ordinary
shares as at 31 December 2016 (2015: 54,707,943).
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 on page 21 of
the Directors' report in the full Annual Report and Financial
Statements.
The Company's financial instruments comprise equity and loan stock
investments in quoted and unquoted companies, cash balances and debtors
and creditors which arise from its operations. The main purpose of these
financial instruments is to generate cashflow and revenue and capital
appreciation for the Company's operations. The Company has no gearing or
other financial liabilities apart from short term creditors. The Company
does not use any derivatives for the management of its Balance sheet.
The principal risks arising from the Company's operations are:
-- Investment (or market) 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.
Investment risk
As a venture capital trust, it is the Company's specific nature to
evaluate and control the investment risk of its portfolio in quoted and
unquoted investments, details of which are shown on pages 16 to 18 of
the full Annual Report and Financial Statements. Investment risk is the
exposure of the Company to the revaluation and devaluation of
investments. The main driver of investment risk is the operational and
financial performance of the portfolio company and the dynamics of
market quoted comparators. 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 Manager and the Board formally review investment risk (which
includes market price 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.
The maximum investment risk as at the Balance sheet date is the value of
the fixed asset investment portfolio which is GBP33,798,000 (2015:
GBP31,565,000). Fixed asset investments form 77 per cent. of net asset
value as at 31 December 2016 (2015: 81 per cent.).
More details regarding the classification of fixed asset investments are
shown in note 11.
Investment price risk
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. To mitigate
the investment price risk for the Company as a whole, the strategy of
the Company is to invest in a broad spread of industries with up to
two-thirds of the unquoted investments comprising debt securities, which,
owing to the structure of their yield and the fact that they are usually
secured, have a lower level of price volatility than equity. Details of
the industries in which investments have been made are contained in the
Portfolio of investments section on pages 16 to 18 of the full Annual
Report and Financial Statements and in the Strategic report.
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 IPEVCV Guidelines.
As required under FRS 102 section 34.29, the Board is required to
illustrate by way of a sensitivity analysis the degree of exposure to
market risk. The Board considers that the value of the fixed asset
investment portfolio is sensitive to a 10 per cent. change based on the
current economic climate. The impact of a 10 per cent. change has been
selected as this is considered reasonable given the current level of
volatility observed both on a historical basis and future expectations.
The sensitivity of a 10 per cent. (2015: 10 per cent.) increase or
decrease in the valuation of the fixed asset investments (keeping all
other variables constant) would increase or decrease the net asset value
and return for the year by GBP3,379,800 (2015: GBP3,156,500).
Interest rate risk
The Company is exposed to fixed and floating rate 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 one
percentage point in all interest rates would have increased total return
before tax for the year by approximately GBP89,000 (2015: GBP35,000).
Furthermore, it is considered that a fall of interest rates below
current levels during the year would have been very unlikely.
The weighted average effective interest rate applied to the Company's
fixed rate assets during the year was approximately 6.2 per cent. (2015:
7.4 per cent.). The weighted average period to maturity for the fixed
rate assets is approximately 5.9 years (2015: 6.5 years).
The Company's financial assets and liabilities, all denominated in
pounds sterling, consist of the following:
31 December 2016 31 December 2015
Floating rate Non-interest bearing Total Floating rate Non-interest bearing Total
Fixed rate GBP'000 GBP'000 GBP'000 GBP'000 Fixed rate GBP'000 GBP'000 GBP'000 GBP'000
Unquoted equity - - 15,322 15,322 - - 13,777 13,777
Quoted equity - - 304 304 - - 394 394
Unquoted loan
stock 17,345 209 618 18,172 16,889 - 505 17,394
Debtors* - - 423 423 - - 655 655
Current
liabilities* - - (307) (307) - - (283) (283)
Cash - 10,153 - 10,153 - 6,972 - 6,972
Total 17,345 10,362 16,360 44,067 16,889 6,972 15,048 38,909
*The debtors and current liabilities do not reconcile to the Balance
sheet as prepayments and tax payable/refundable are not included in the
above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument
will fail to discharge an obligation or commitment that it has entered
into with the Company. The Company is exposed to credit risk through its
debtors, investment in unquoted loan stock, and through the holding of
cash on deposit with banks.
The Manager evaluates credit risk on loan stock and other similar
instruments prior to investment, and as part of its ongoing monitoring
of investments. In doing this, it takes into account the extent and
quality of any security held. Typically loan stock instruments have a
first fixed charge or a fixed and floating charge over the assets of the
portfolio company in order to mitigate the gross credit risk. The
Manager receives management accounts from portfolio companies, and
members of the investment management team often sit on the boards of
unquoted portfolio companies; this enables the close identification,
monitoring and management of investment-specific credit risk.
The Manager and the Board formally review credit risk (including
debtors) and other risks, both at the time of initial investment and at
quarterly Board meetings.
The Company's total gross credit risk for Ordinary shares at 31 December
2016 was limited to GBP18,172,000 (2015: GBP17,394,000) of unquoted loan
stock instruments (all are secured on the assets of the portfolio
company), GBP10,153,000 (2015: GBP6,972,000) of cash deposits with banks
and GBP441,000 (2015: GBP647,000) of other debtors.
As at the Balance sheet date, the cash held by the Company is held with
Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group),
Barclays Bank plc and National Westminster Bank plc. Credit risk on cash
transactions is mitigated by transacting with counterparties that are
regulated entities subject to prudential supervision, with high credit
ratings assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking
exposure to a maximum of 20 per cent. of net asset value for any one
counterparty.
The credit profile of unquoted loan stock is described under liquidity
risk shown below.
The cost, impairment and carrying value of impaired loan stock in the
portfolio held at fair value through profit and loss are as follows:
31 December 2016 31 December 2015
Cost Impairment Carrying value Cost Impairment Carrying value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Impaired
loan
stock 2,987 (645) 2,342 3,287 (865) 2,422
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
consider the security value approximates to the carrying value.
Liquidity risk
Liquid assets are held as cash on current account, cash on deposit or
short term money market account. Under the terms of its Articles, the
Company has the ability to borrow up to 10 per cent. of its adjusted
capital and reserves of the latest published audited Balance sheet,
which amounts to GBP4,273,000 as at 31 December 2016 (2015:
GBP3,742,000).
The Company had no committed borrowing facilities as at 31 December 2016
(2015: nil) and the Company had cash and fixed term deposit balances of
GBP10,153,000 (2015: GBP6,972,000). The main cash outflows are for new
investments, buy-back of shares and dividend payments, which are within
the control of the Company. The Manager formally reviews the cash
requirements of the Company on a monthly basis, and the Board on a
quarterly basis, as part of its review of management accounts and
forecasts. All of the Company's financial liabilities are short term in
nature and total GBP307,000 (2015: GBP283,000).
The carrying value of loan stock investments at 31 December 2016,
analysed by expected maturity dates is as follows:
Fully performing Impaired Past due Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 3,946 1,351 634 5,931
1-2 years 1,035 968 243 2,246
2-3 years 777 - 221 998
3-5 years 3,013 23 52 3,088
Greater than 5 years 4,214 - 1,695 5,909
12,985 2,342 2,845 18,172
Loan stock can be past due as a result of interest or capital not being
paid in accordance with contractual terms.
The average annual interest yield on the total cost of past due loan
stock is 8.4 per cent. (2015: 4.1 per cent.).
The carrying value of the loan stock investments at 31 December 2015,
analysed by expected maturity dates is as follows:
Fully performing Impaired Past due Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 3,676 1,910 7 5,593
1-2 years 714 475 - 1,189
2-3 years 340 - 629 969
3-5 years 3,326 37 425 3,788
Greater than 5 years 4,250 - 1,605 5,855
12,306 2,422 2,666 17,394
In view of the availability of adequate cash balances and the repayment
profile of loan stock investments, the Board considers that the Company
is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 31 December
2016 are stated at fair value as determined by the Directors, with the
exception of debtors and creditors and cash which are carried at
amortised cost, in accordance with FRS 102. There are no financial
liabilities other than creditors. 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 commitments
As at 31 December 2016, the Company had no financial commitments (2015:
GBP214,000).
There were no contingent liabilities or guarantees given by the Company
as at 31 December 2016 (2015: GBPnil).
19. Post balance sheet events
Since the year end, the Company had the following material investment
transactions:
-- Disposal of Masters Pharmaceuticals Limited for GBP497,000;
-- Disposal of AMS Sciences Limited for GBP169,000 of which GBP30,000 is
deferred and held in escrow;
-- Investment of GBP315,000 in Quantexa Limited;
-- Investment of GBP155,000 in Black Swan Data Limited.
On 29 November 2016 the Company announced the publication of a
prospectus in relation to an offer for subscription for new Ordinary
shares. A Securities Note, which forms part of the prospectus, has been
sent to shareholders.
The following new Ordinary shares of nominal value 1 penny each were
allotted under the Offers after 31 December 2016:
Net
Number of consideration
shares Aggregate nominal value of shares received Opening market price on allotment date (pence per
Date of allotment allotted (GBP'000) Issue price (pence per share) (GBP'000) share)
31 January 2017 1,203,858 12 70.4 831 64.8
31 January 2017 621,281 6 70.7 428 64.8
31 January 2017 3,549,732 36 71.1 2,448 64.8
5,374,871 54 3,707
The Board is pleased to announce that it has reached its GBP4 million
limit under its Offer, which as of 30 January 2017 was fully subscribed
and has now closed.
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5, there
are no other related party transactions or balances requiring
disclosure.
21. Other information
The information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 434 of the
Companies Act 2006 for the years ended 31 December 2016 and 31 December
2015, and is derived from the statutory accounts for those financial
years, which have been, or in the case of the accounts for the year
ended 31 December 2016, 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.
The Company's Annual General Meeting will be held at The City of London
Club, 19 Old Broad Street, London, EC2N 1DS on 25 May 2017 at 12.00pm.
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-ventures.co.uk/funds/AADV , where the Report can be accessed
as a PDF document via a link in the 'Financial Reports and Circulars'
section.
LEI Code 213800FDDMBD9QLHLB38
Investment portfolio by sector (PDF):
http://hugin.info/141803/R/2089738/788980.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Albion Development VCT PLC - Ordinary Shares via Globenewswire
http://www.closeventures.co.uk
(END) Dow Jones Newswires
March 23, 2017 12:03 ET (16:03 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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