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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Crown Place Vct Plc | LSE:CRWN | London | Ordinary Share | GB0002577434 | 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% | 28.90 | 28.40 | 29.40 | 28.90 | 28.90 | 28.90 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | 4.78M | 2.82M | 0.0100 | 28.90 | 81.13M |
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Crown Place VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency
Rules 4.1 and 6.3, Crown Place VCT PLC today makes public its
information relating to the Annual Report and Financial Statements for
the year ended 30 June 2016.
This announcement was approved for release by the Board of Directors on
30 September 2016.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial
Statements for the year to 30 June 2016 (which have been audited) at:
www.albion-ventures.co.uk/funds/CRWN. The Annual Report and Financial
Statements for the year to 30 June 2016 will be available as a PDF
document via a link in the 'Fund reports' 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
The investment objective and policy of the Company* is to achieve long
term capital and income growth principally through investment in smaller
unquoted companies in the United Kingdom.
In pursuing this policy, the Manager aims to build a portfolio which
concentrates on two complementary investment areas. The first are more
mature or asset-based investments that can provide a strong income
stream combined with a degree of capital protection. These will be
balanced by a lesser proportion of the portfolio being invested in
higher risk companies with greater growth prospects.
*The 'Company' is Crown Place VCT PLC. The 'Group' is the Company
together with its subsidiaries CP1 VCT PLC and CP2 VCT PLC.
Financial calendar
Record date for first dividend 4 November 2016
Annual General Meeting 11.00 am on 17
November 2016
Payment of first dividend 30 November 2016
Announcement of half-yearly results for the six months February 2017
ended 31 December 2016
Payment of second dividend (subject to Board approval) 31 March 2017
Financial highlights
28.9p Net asset value per share as at 30 June 2016
0.4p Total return per share to shareholders for the year
ended 30 June 2016
1.5% Increase in total shareholder value for the year
2.5p Total tax-free dividends per share paid during the
year ended 30 June 2016
9.1% Tax-free dividend yield on share price (dividend paid
in the year/share price as at 30 June 2016)
30 June 2016 30 June 2015
pence per share pence per share
Opening net asset value 30.97 32.04
Revenue return 0.59 0.73
Capital (loss)/return (0.18) 0.67
Total return 0.41 1.40
Dividends paid (2.50) (2.50)
Impact from buy-backs and issue of share
capital 0.06 0.03
Closing net asset value 28.94 30.97
Shareholder return and shareholder value
Crown Place
VCT PLC*
pence per
share
Shareholder return from launch to April 2005 (date
that Albion Ventures was appointed investment manager):
Total dividends paid to 6 April 2005 (i) 24.93
Decrease in net asset value (56.60)
Total shareholder return to 6 April 2005 (31.67)
Shareholder return from April 2005 to 30 June 2016:
Total dividends paid 26.80
Decrease in net asset value (14.46)
Total shareholder return from April 2005 to 30 June
2016 12.34
Shareholder value since launch:
Total dividends paid to 30 June 2016 (i) 51.73
Net asset value as at 30 June 2016 28.94
Total shareholder value as at 30 June 2016 80.67
Current annual dividend objective 2.00
Dividend yield on net asset value as at 30 June 2016 6.9%
Notes
(i) Prior to 6 April 1999, venture capital trusts were able to add 20
per cent. to dividends and figures for the period up until 6 April 1999
are included at the gross equivalent rate actually paid to shareholders.
* Formerly Murray VCT 3 PLC
The above financial summary is for the Company, Crown Place VCT PLC
only. Details of the financial performance of CP1 VCT PLC (previously
Murray VCT PLC) and CP2 VCT PLC (previously Murray VCT 2 PLC), which
have been merged into the Company, can be found on page 64 of the full
Annual Report and Financial Statements.
Total shareholder value since launch:
30 June 2016
(pence per share)
Total dividends paid during the period from launch
to 6 April 2005 (prior to change of manager) 24.93
Total dividends paid during:
the year ended 28 February 2006 1.00
the period ended 30 June 2007* 3.30
the year ended 30 June 2008 2.50
the year ended 30 June 2009 2.50
the year ended 30 June 2010 2.50
the year ended 30 June 2011 2.50
the year ended 30 June 2012 2.50
the year ended 30 June 2013 2.50
the year ended 30 June 2014 2.50
the year ended 30 June 2015 2.50
the year ended 30 June 2016 2.50
Total dividends paid to 30 June 2016 51.73
Net asset value as at 30 June 2016 28.94
Total shareholder value as at 30 June 2016 80.67
*16 month period
In addition to the dividends paid above, the Board has declared a first
dividend for the year ending 30 June 2017, of 1 penny per Crown Place
VCT PLC share, payable on 30 November 2016 to shareholders on the
register as at 4 November 2016.
Chairman's statement
Introduction
Crown Place VCT PLC delivered a disappointing total return of 0.41 pence
per share (1.3 per cent. on average NAV) for the year ended 30 June 2016
compared to 1.40 pence per share in the previous year (4.5 per cent. on
average NAV). Whilst the Company has delivered a positive return to
shareholders for each of the past seven years, the total return for the
period was impacted by write-downs in certain of the Company's higher
risk growth investments.
Results and dividends
As at 30 June 2016, the net asset value was GBP37.4 million or 28.94
pence per share compared to GBP33.0 million or 30.97 pence per share at
30 June 2015. The revenue return before taxation showed a slight decline
to GBP676,000 compared to GBP700,000 in the previous year, though
pleasingly, the ongoing charges ratio for the year reduced marginally to
2.5 per cent. (2015: 2.6 per cent.).
During the year, the Company's realised and unrealised capital gains
amounted to GBP238,000 compared to GBP1,036,000 in the previous year.
Notable increases in valuations include Radnor House School, which
continues to perform well and has grown its pupil size at both sites;
Shinfield Lodge Care, a luxury care home near Reading which completed
construction and opened in April 2016; and Exco Intouch. These uplifts
were offset by reductions in valuations of Blackbay, ELE Advanced
Technologies and DySIS which were made against a background of an
increasingly competitive environment in their respective markets. Write
down to market value were also required in respect of the Company's
three quoted investments, Mi-Pay Group, Augean and Avanti
Communications. Further details of the Company's financial performance
are given in the Strategic report.
The Company paid dividends totalling 2.5 pence per share during the
financial year in line with the Company's policy, which it has
maintained for the last nine years. This dividend, however, 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 an annual dividend target of 2.0
pence per share to be more appropriate, representing a dividend yield on
NAV of 6.9 per cent. (2015: 8.1 per cent.). Consequently the Board is
proposing a first dividend for the year to 30 June 2017 of 1 penny per
share, payable on 30 November 2016 to shareholders on the register as at
4 November 2016. The Company's balance sheet was strengthened in the
year by successful Prospectus Top-Up Offers which raised GBP6.6 million,
net of costs. The Company intends to deploy these funds into new
investment opportunities.
Investment performance
We had three principal exits in 2015: Kensington Health Club,
Lowcosttravelgroup and Silent Herdsman, which in total, returned cash
disposal proceeds in excess of GBP2.3 million, with further deferred
consideration due. The sale of Kensington Health Clubs achieved a return, including interest, of 1.4 times cost; Silent Herdsman achieved a return of 1.0 times cost and was sold for GBP58,000 more than its closing value at the end of last year; while we received cash proceeds of GBP408,000 for our investment in Lowcosttravelgroup, achieving a return including interest of 1.5 times cost with further sums due by way of deferred consideration. Overall, the Company achieved cash disposal proceeds, including repayments of loan stock by portfolio companies, of GBP2.9 million compared to GBP7.2 million in the previous year. Further information on realisations can be found on page 20 of the full Annual Report and Financial Statements. During the year, a total of GBP4.6 million was invested in new and existing portfolio companies, including GBP585,000 in Radnor House School, to purchase Combe Bank School in Sevenoaks, Kent; a combined GBP2.3 million in Active Lives Care, Ryefield Court Care and Shinfield Lodge Care to fund the construction of the three care homes; and GBP638,000 in Earnside Energy a company operating in the anaerobic digestion industry. A strong investment pipeline allowed new growth investments totalling GBP234,000 to be made namely; Panaseer Limited, a cybersecurity company offering data integration platforms to the financial services sector, Incrowd Sports Limited, a sports marketing company, Black Swan Data Limited which provides market research to consumer brands and Dickson Financial Services, a corporate insurance broker trading as Innovation Broking. Overall, the value of the Company's unquoted investment portfolio, excluding investments disposed of, increased by GBP704,000 during the year, largely driven by the asset-based investments, while that of the small quoted portfolio fell by GBP196,000. Companies in the portfolio that performed particularly well during the year included Radnor House School, where the existing Twickenham school is now close to being full and the Sevenoaks school starting to perform well; Shinfield Lodge Care, which following construction, opened in April 2016 providing luxury care for the elderly near Reading; Exco Intouch where the company's healthcare IT products are seeing strong customer demand; and Proveca, a company re-purposing off-patent medicines for use in children and other patient groups. The asset-based portfolio companies, on the whole, are continuing to make good progress with the remaining two care homes, Active Lives and Ryefield Court, now completed, operational, and successfully filling in line with budget. The renewable energy investments continue to perform to plan and provide a good yield to the Company despite falling global energy prices. The largest negative valuation movements over the period were mainly in the growth portfolio and included Blackbay, which was reduced by GBP296,000 due to a slowdown in sales with its largest customers; ELE Advanced Technologies reduced by GBP202,000; DySIS Medical reduced by GBP174,000 as sales, although encouraging, remain slower than hoped for; and AMS Sciences, reduced by GBP102,000, which has suffered from volatility in demand. Risks and uncertainties The prospective exit of the UK from the EU may have a negative effect on consumer and business confidence and it would be wise to prepare for a renewed economic slowdown in the UK. Meanwhile, global growth is muted and many countries are close to recession. Overall investment risk, however, is mitigated through a variety of processes, including our policies of ensuring that the Company has a first charge over portfolio companies' assets wherever possible, and secondly by aiming to achieve balance in the portfolio through the inclusion of sectors that are less exposed to the business and consumer cycles. A detailed review of risk management is set out in the Strategic report. Changes in VCT legislation The July 2015 budget introduced a number of changes to VCT legislation, including restrictions over the age of investments; a prohibition on management buyouts or the purchase of existing businesses; and an overall lifetime investment cap of GBP12 million from tax-advantaged funds into any portfolio company. While these changes are significant, the Manager's assessment is that had these been in place previously they would have affected only a relatively small number of the investments 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 as a result. Albion VCTs Top Up Offers In November 2015, the Company announced the launch of the Albion VCTs Prospectus Top Up Offers 2015/2016. In aggregate, the Albion VCTs aimed to raise up to GBP36 million across six of the VCTs managed by Albion Ventures LLP, with the Company aiming to raise up to GBP6 million. The Company was pleased to announce on 23 March 2016 before the tax year end that the Company reached its GBP6 million limit under its Offer which was fully subscribed and closed. During the year the Company raised in total GBP6.6 million under the Company's Offer as part of the Albion VCTs Top Up Offers 2014/2015 and 2015/2016, as shown in note 14. The proceeds of the Offers will be used to provide further resources at a time when a number of attractive new investment opportunities are being seen. Further Top Up Offers are planned for later this year and details are expected to be sent to shareholders in November 2016. Dividend re-investment scheme During the year, the Company raised GBP421,000 from the dividend re-investment scheme. Through the scheme, shareholders may elect to reinvest the whole of the dividend received by subscribing for new shares in the Company. Under current tax rules, shareholders re-investing their dividends will be eligible for the income and capital gains tax advantages available to investors subscribing for new shares in venture capital trusts and will be able to increase their shareholding in the Company, without incurring dealing costs or stamp duty. Full details of the scheme and the application form are available on the Manager's website at: www.albion-ventures.co.uk/funds/CRWN. Board composition Rachel Beagles retired from the Board on 12 November 2015 after nine years with the Company. I would like to thank her for her excellent work, particularly as Chairman of the Audit Committee and many years of wise counsel. James Agnew was appointed as a Director on 1 November 2015. James has extensive experience in investment banking and private equity fund management and is currently a partner at Harwood Capital. Continuation as a venture capital trust At the 2016 Annual General Meeting members have the opportunity to confirm that they wish the Company to continue as a venture capital trust. Otherwise the Board is required to make proposals for the reorganisation, reconstruction or the orderly liquidation and winding up of the Company and present these to the members at a general meeting. Those shareholders who have been using their investment in the VCT to defer a capital gain should note that, on a return of capital, that gain would become chargeable at the prevailing rate of capital gains tax. Your board believes that VCTs have the potential to be highly effective long-term savings vehicles with strong tax-free dividend streams. Consequently in view of its track record since the appointment of the Manager and the strong tax-free dividend stream to shareholders, your Board recommends that shareholders vote in favour of the Company to continuing as a venture capital trust for a further five years, as they intend to in respect of their own shares. Outlook Although the total return for the year was disappointingly low, there are a number of drivers in the portfolio that make us more confident for the year to 30 June 2017. On the asset-based side, two of our care homes and Radnor House School Sevenoaks, all of which are performing well, are still held at cost and these will be reviewed by our third party valuers during the year. On the growth side of the portfolio, meanwhile, we have a reasonable number of investments in companies that are showing good growth in their respective markets. Richard Huntingford Chairman 30 September 2016 Strategic report Investment objective and policy The Company's investment objective is to achieve long term capital and income growth principally through investment in smaller unquoted companies in the United Kingdom. The Company's investment portfolio is structured to provide a balance between income and capital growth for the longer term through a diversified, balanced approach to investment. The asset-based portfolio is designed to provide stability and income whilst maintaining the potential for capital growth, whilst the growth portfolio is intended to provide diversified exposure through its portfolio of investments in predominately unquoted UK companies. In neither category do portfolio companies normally have any external borrowing with a charge ranking ahead of the Company. Business model The Company operates as a Venture Capital Trust. This means that the Company has no employees other than its Directors and has outsourced the management of all its operations to Albion Ventures LLP, including secretarial and administrative services. Further details of the Management agreement can be found below. Current and future portfolio sector allocation The pie chart at the end of this announcement shows the split of the portfolio valuation by industrial or commercial sector as at 30 June 2016. The portfolio remains well diversified and as at the year end comprised 56 investments. There were 23 unquoted asset-based investments accounting for 57 per cent. of the net asset value of the Company; 29
unquoted growth investments accounting for 23 per cent. of the net asset
value of the Company; and 4 quoted investments, accounting for 1 per
cent. of the net asset value of the Company. 19 per cent. of the
Company's net asset value was represented by cash and cash equivalents.
The sector analysis of the Company's investment portfolio shows that
healthcare (both asset-based and growth) now accounts for 21 per cent.
of the portfolio, compared to 15 per cent. at the end of the previous
financial year, following further investments in the Company's three
care homes (and a revaluation of Shinfield). This is likely to increase
as the value of the care homes grows in the future.
Overall, the direction of the portfolio remained unchanged in the past
financial year, with the major development being the continued
construction of our three new care homes. The healthcare sector will
continue to be a core area of investment, particularly healthcare
services and medical technology. It is not currently envisaged to
increase our weighting in the renewable energy or education sectors.
Other potential asset-based areas are under review.
Results and dividend policy
GBP'000
Consolidated revenue return for the year ended 30
June 2016 676
Consolidated capital loss for the year ended 30 June
2016 (210)
Dividend of 1.25p per share paid on 30 November 2015 (1,361)
Dividend of 1.25p per share paid on 31 March 2016 (1,476)
Transferred from reserves (2,371)
Net assets as at 30 June 2016 37,385
Net asset value as at 30 June 2016 (pence per share) 28.94
The Company paid dividends totalling 2.50 pence per share during the
year ended 30 June 2016 (2015: 2.50 pence per share). The dividend
objective of the Board is to provide Shareholders with a strong,
predictable dividend flow. As mentioned in the Chairman's statement,
going forward the Company will target an annual dividend of 2.00 pence
per share.
The Board has declared a first dividend for the year ending 30 June 2017
of 1 penny per share. This dividend will be paid on 30 November 2016 to
shareholders on the register as at 4 November 2016.
As shown in the Consolidated statement of comprehensive income,
investment income has increased marginally to GBP1,114,000 (2015:
GBP1,105,000), the revenue return decreased by GBP24,000 to GBP676,000
(2015: GBP700,000). The capital loss for the year was GBP210,000 (2015:
profit of GBP639,000), as a result of the lower gains on investments in
the year not covering the portion of management fees charged to capital.
The total return for the year was 0.41 pence per share (2015: 1.40 pence
per share).
The Consolidated balance sheet shows that the net asset value has
decreased over the year to 28.94 pence per share (2015: 30.97 pence per
share), due to the payment of the dividend of 2.50 pence per share
during the year, partially offset by the total return for the year of
0.41 pence per share.
The consolidated cash flow for the business has been a net inflow of
GBP2,890,000 for the year (2015: GBP2,540,000), reflecting cash inflows
from operations, disposal proceeds and the issue of Ordinary shares
under the Albion VCTs Top Up Offers, offset by dividends paid, new
investments in the year and the buy-back of shares.
Review of the business
A review of the Company's business during the year is set out in the
Chairman's statement.
The Directors do not foresee any major changes in the activity
undertaken by the Company in the current year and have outlined their
thoughts on the direction of the portfolio above. 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 longer term.
Details of significant events which have occurred since the end of the
financial year are listed in note 18. Details of transactions with the
Manager are shown in note 4. The subsidiary undertakings affecting the
profits and net assets of the Group in the year are listed in note 11 to
the Financial Statements.
Update on CP2 VCT PLC
CP2 VCT PLC is a wholly-owned subsidiary of the Company. CP2 VCT PLC
transferred its business to Crown Place VCT PLC and ceased trading with
effect from the date of merger on 12 January 2006. Since then, CP2 VCT
PLC has had no further business other than to hold cash and intercompany
balances. CP2 VCT PLC had significant tax losses which have been
utilised by the Company through group relief. Following a review in
December 2015, the Board concluded that it was in the best interests of
the Company to appoint BDO LLP as liquidators and commence the process
of members' voluntary liquidation for CP2 VCT PLC. This is expected to
be completed by November 2016.
VCT legislation
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
24 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 which received
Royal Assent on 18 November 2015, which include:
-- Restrictions over the age of investments;
-- A prohibition on management buyouts or the purchase of existing
businesses; and
-- An overall lifetime investment cap of GBP12 million from tax-advantaged
funds into any portfolio company.
Further restrictions have been introduced on non-qualifying investments
with effect from 6 April 2016 (VCTs will only be able to make certain
limited non-qualifying investments for liquidity purposes).
While these changes are significant, the Manager's assessment is that
had they been in place previously, these 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 30 June 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
have exposure to longer term growth trends. These include healthcare in
an ageing population, sustainable energy against a background of climate
change and the developing use of information technology in an
environment of universal information. The portfolio is well diversified
and many investments are underpinned by property and other physical
assets. In addition, the great majority of investments are structured
to be cash generative in order to provide further support for your
Company's dividend. The Board remains confident in the long term
prospects of the Company to deliver an attractive return to
shareholders.
Key performance indicators
The Directors believe that the following key performance indicators,
which are typical for venture capital trusts and used in its own
assessment of the Company, will provide shareholders with sufficient
information to assess how effectively the Company has been applying its
investment policy to meet its objectives. The Directors are satisfied
that the results shown in the following key performance indicators,
taken overall, give a good indication that the Company is achieving its
investment objective and policy. These are:
1. Increase in total shareholder value
The graph on page 10 of the full Annual Report and Financial Statements
shows that total shareholder value increased by 0.47 pence per share to
80.67 pence per share (2015: 80.20) for the year ended 30 June 2016.
2. Movement in total shareholder value +
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
3.8% 11.9% (2.7%) (10.6%) 6.3% 6.6% 4.3% 6.6% 7.1% 4.5% 1.5%
Source: Albion Ventures LLP
+ Methodology: Total shareholder value is calculated by including
original amount invested (rebased to 100) from when Albion Ventures LLP
became Manager on 6 April 2005, assuming that dividends were reinvested
at net asset value of the Company at the time the shares were quoted
ex-dividend. Transaction costs are not taken into account.
Annual total return to shareholders has remained positive for the
seventh consecutive year and for the year ended 30 June 2016 was 1.5 per
cent.
3. Dividend distributions
Dividends paid in respect of the year ended 30 June 2016 were 2.50 pence
per share (2015: 2.50 pence per share). Cumulative dividends paid since
launch (on 18 January 1998) amount to 51.73 pence per share.
4. Ongoing charges
The ongoing charges ratio for the year to 30 June 2016 was 2.5 per cent.
(2015: 2.6 per cent.). The ongoing charges ratio has been calculated
using The Association of Investment Companies' (AIC) recommended
methodology. This figure shows shareholders the total recurring annual
running expenses (including investment management fees charged to
capital reserve) as a percentage of the average net assets attributable
to shareholders. The Directors expect the ongoing charges ratio for the
year ahead to be approximately 2.5 per cent.
5. Running yield
The running yield on the portfolio (gross income divided by the average
net asset value) for the year to 30 June 2016 was 3.2 per cent. (2015:
3.6 per cent.).
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 Group 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 Group.
Management agreement
Under the terms of the Management agreement, the Manager is paid an
annual fee equal to 1.75 per cent. of the net asset value of the Company
plus GBP50,000 fee per annum for administrative and secretarial
services. Total normal running costs, including the management fee, are
limited to 3.0 per cent. of the net asset value. The Manager is entitled
to an arrangement fee, payable by each portfolio company in which the
Company invests, in the region of 2.0 per cent. on each investment made,
and is also entitled to non-executive director fees when placing an
investment executive from Albion Ventures LLP on the portfolio company
Board.
Further details of fees paid to the Manager can be found in note 4.
The management agreement can be terminated by either party on 12 months'
notice and is subject to earlier termination in the event of certain
breaches or on the insolvency of either party.
Management performance incentive
In order to provide the Manager with an incentive to maximise the return
to investors, the Manager is entitled to charge an incentive fee in the
event that the returns exceed minimum target levels per share.
The target level requires that the growth of the aggregate of the net
asset value per share and dividends paid by the Company or declared by
the Board and approved by the shareholders during the relevant period
(both revenue and capital), compared with the previous accounting date,
exceeds the average base rate of the Royal Bank of Scotland plc plus 2.0
per cent. If the target return is not achieved in a period, the
cumulative shortfall is carried forward to the next accounting period
and has to be made up before an incentive fee becomes payable.
There was no management performance incentive fee payable during the
year (2015: nil). As at 30 June 2016 the cumulative shortfall of the
target return was 8.40 pence per share (2015: 7.41 pence per share) and
this amount needs to be made up in the next accounting period before an
incentive fee becomes payable.
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 current 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 interest 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 has appointed Albion Ventures LLP as the Company's AIFM as
required by the AIFMD.
Discount management and 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. Thereafter, it is
the Board's policy to buy back shares in the market, subject to the
overall constraint that such purchases are in the VCT's interest and 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 30 June 2016
can be found in note 14 of the Financial Statements.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Companies
Act 2006 (the "Act") to detail information about social and community
issues, employees and human rights; including any policies it has in
relation to these matters and effectiveness of these policies. As an
externally managed investment company with no employees, the Company has
no policies in these matters and as such these requirements do not
apply.
Further policies and statements
The Company has adopted a number of further policies and statements
relating to:
-- Environment
-- Global greenhouse gas emissions
-- Anti-bribery
-- Diversity
and these are set out in the Directors' report on pages 24 and 25 of the
full Annual Report and Financial Statements.
Risk management
The Board carries out a regular review of the risk environment in which
the Company operates. 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
Economic Changes in economic conditions, including, for example, To reduce this risk, in addition to investing equity
risk interest rates, rates of inflation, industry conditions, in portfolio companies, the Company often invests
competition, political and diplomatic events and other in fixed interest secured loan stock and has a policy
factors could substantially and adversely affect the of not normally permitting any external bank borrowings
Company's prospects in a number of ways. within portfolio companies. Additionally, the Manager
has been rebalancing the sector exposure of the portfolio
with a view to reducing reliance on consumer led sectors.
Investment This is the risk of investment in poor quality assets To reduce this risk, the Board places reliance upon
risk which reduces the capital and income returns to shareholders, the skills and expertise of the Manager in investing
and negatively impacts on the Company's reputation. in this segment of the market. The Manager invests
By nature, smaller unquoted businesses, such as those in a diversified portfolio of companies, across a
that qualify for venture capital trust purposes, are number of sectors of the economy, thus spreading investment
more fragile than larger, long established businesses. risk. In addition, the Manager operates a formal and
The success of investments in certain sectors is also structured investment process, which includes an Investment
subject to regulatory risk, such as those affecting Committee, comprising investment professionals from
companies involved in UK renewable energy. 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) and the Board receives detailed reports on
each investment as part of the Manager's report at
quarterly board meetings. It is the policy of the
Company for portfolio companies to not normally have
external borrowings. The Board and the Manager closely
monitor regulatory changes in the sectors in which
the Company is invested.
Valuation The Company's investment valuation methodology is As described in note 1 of the Financial Statements,
risk reliant on the accuracy and completeness of information the unquoted equity investments, convertible loan
that is issued by portfolio companies. In particular, stock and debt issued at a discount held by the Company
the Directors may not be aware of or take into account are designated at fair value through profit or loss
certain events or circumstances which occur after and valued in accordance with the International Private
the information issued by such companies is reported. Equity and Venture Capital Valuation Guidelines. These
guidelines set out recommendations, intended to represent
current best practice on the valuation of venture
capital investments. These investments are valued
on the basis of forward looking estimates and judgements
about the business itself, its market and the environment
in which it operates, together with the state of the
mergers and acquisitions market, stock market conditions
and other factors. In making these judgements the
valuation takes into account all known material facts
up to the date of approval of the Financial Statements
by the Board. The sensitivity of these assumptions
are commented on further in notes 9 and 16. All other
unquoted loan stock is measured at amortised cost.
The values of a number of investments are also underpinned
by independent third party professional valuations.
VCT approval The Company's current approval as a venture capital To reduce this risk, the Board has appointed the Manager,
risk trust allows investors to take advantage of tax reliefs which has a team with significant experience in venture
on initial investment and ongoing tax-free capital capital trust management, used to operating within
gains and dividend income. Failure to meet the qualifying the requirements of the venture capital trust legislation.
requirements could result in investors losing the In addition, to provide further formal reassurance,
tax relief on initial investment and loss of tax relief the Board has appointed Philip Hare & Associates LLP
on any tax-free income or capital gains received. as its taxation adviser who report quarterly to the
In addition, failure to meet the qualifying requirements Board to independently confirm compliance with the
could result in a loss of listing of the shares. 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.
VCT The Company is required to comply with regular changes The Board receives advice from Philip Hare & Associates
regulatory to VCT specific regulations including the latest ones LLP in respect of these requirements and conducts
changes relating to European State Aid regulations which are its affairs in order to comply with these requirements.
risk enacted by the UK Government. Non-compliance could The Manager engages regularly with policy makers on
result in a loss of VCT status and/or demands for regulation. In addition, the Board places reliance
repayment of State Aid by a portfolio company or by upon the skills and expertise of the Manager in investing
VCT investors. in this segment of the market.
Compliance The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
risk and is required to comply with the rules of the UK at senior levels within or advising quoted businesses.
Listing Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
Accounting Standards and other legislation. Failure updates on new regulation from its auditor, 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 via 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
Manager Board meetings, and also as part of the review
work undertaken by the Manager's Compliance Officer.
The report on controls is evaluated by Internal Audit
during its reports.
Internal Failures in key controls, within the Board or within The Audit and Risk Committee meets with the Manager's
control the Manager's business, could put assets of the Company Internal Auditor, PKF Littlejohn LLP, when required,
risk at risk or result in reduced or inaccurate information receiving a report regarding the last formal internal
being passed to the Board or to shareholders. audit performed on the Manager, and providing the
opportunity for the Audit and Risk Committee to ask
specific and detailed questions. Karen Brade as the
Chairman of the Audit and Risk Committee meets during
the year with the internal audit partner of PKF Littlejohn
LLP to discuss the Internal Audit Report on the Manager.
The Manager has a comprehensive business continuity
plan in place in the event that operational continuity
is threatened. Further details regarding the Board's
management and review of the Company's internal controls
through the implementation of the Risk Guidance report
are detailed on page 31 of the full Annual Report
and Financial Statements.
Measures are in place to mitigate information security
risk in order to ensure the integrity, availability
and confidentiality of information used within the
business.
Reliance The Group and the Company are reliant upon the services There are provisions within the Management agreement
upon third of Albion Ventures LLP and other third party service for the change of Manager under certain circumstances
parties providers for the provision of investment management (for further detail, see the Management agreement
risk and administrative functions. paragraph above). In addition, the Manager has demonstrated
to the Board that there is no undue reliance placed
upon any one individual within Albion Ventures LLP.
The Board monitors the performance of other third
party service providers annually.
Financial By its nature, as a venture capital trust, the Company The Company's policies for managing these risks and
risk is exposed to investment risk (which comprises investment its financial instruments are outlined in full in
price risk and cash flow interest rate risk), credit note 16 to the Financial Statements.
risk and liquidity risk. All of the Group's income and expenditure is denominated
in sterling and hence the Group has no foreign currency
risk. The Group is financed through equity and does
not have any borrowings. The Group does not use derivative
financial instruments for speculative purposes.
Reputational This arises from broader performance and ethical issues, The Board clearly articulates to the Investment Manager
risk including investment in businesses and sectors that its broader aims and standards including those sectors
are inconsistent with the values of Board and the which are consistent with the values of the Board.
VCT or, by the Boards of portfolio companies taking The Board regularly reviews the performance and investment
actions which similarly are inconsistent with the strategy of the Investment Manager. The Investment
values of the VCT. Manager periodically attends Board meetings of the
VCT's portfolio companies and across the portfolio
receives periodic management information and is alert
to potential threats to reputation.
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
published by the AIC in February 2015, the Directors have assessed the
prospects of the Company over three years to 30 June 2019. The Directors
have taken a three year period as the Code does not specify a time
period, except it must be longer than 12 months. 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 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. The
Company's income more than covers on-going expenses which going forward
should increase as our asset-based investments continue to mature. 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 30 June 2019.
This Strategic report of the Company for the year ended 30 June 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,
Richard Huntingford
Chairman
30 September 2016
Responsibility Statement
In preparing these financial statements for the year to 30 June 2016,
the Directors of the Company, being Richard Huntingford, James Agnew,
Karen Brade and Penny Freer, confirm that to the best of their
knowledge:
-- summary financial information contained in this announcement and the full
Annual Report and Financial Statements for the year ended 30 June 2016
for the Group has been prepared in accordance with International
Financial Reporting Standards, and for the Company has been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice (UK
Accounting Standards and applicable law) and give a true and fair view of
the assets, liabilities, financial position and profit and loss of the
Group and the Company for the year ended 30 June 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 30 June 2016 and description of principal risks and
uncertainties that the Group and the Company faces); and
-- the Chairman's statement and Strategic report include 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 27 of the full audited Annual Report and Financial Statements.
By order of the Board
Richard Huntingford
Chairman
30 September 2016
Consolidated statement of comprehensive income
Year ended Year ended
30 June 2016 30 June 2015
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments 2 - 238 238 - 1,036 1,036
Investment income and deposit interest 3 1,114 - 1,114 1,105 - 1,105
Investment management fees 4 (149) (448) (597) (133) (397) (530)
Other expenses 5 (289) - (289) (272) - (272)
Profit/(loss) before taxation 676 (210) 466 700 639 1,339
Taxation 6 - - - - - -
Profit/(loss) and total comprehensive income attributable
to shareholders 676 (210) 466 700 639 1,339
Basic and diluted earnings/(loss) per Ordinary share
(pence)* 8 0.59 (0.18) 0.41 0.73 0.67 1.40
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
The total column of this statement represents the Group's statement of
comprehensive income, prepared in accordance with International
Financial Reporting Standards ('IFRS'). The supplementary revenue and
capital columns are prepared under guidance published by the Association
of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations and are wholly attributable to the owners of the
parent Company.
Consolidated balance sheet
30 June 2016 30 June 2015
Note GBP'000 GBP'000
Non-current assets
Investments 9 30,296 28,531
Current assets
Trade and other receivables less than one
year 12 476 788
Cash and cash equivalents 6,896 4,006
7,372 4,794
Total assets 37,668 33,325
Current liabilities
Trade and other payables less than one year 13 (283) (244)
Total assets less current liabilities 37,385 33,081
Equity attributable to equityholders
Ordinary share capital 14 14,110 11,767
Share premium 13,872 9,234
Capital redemption reserve 1,415 1,415
Unrealised capital reserve 2,131 1,612
Realised capital reserve (900) (171)
Other distributable reserve 6,757 9,224
Total equity shareholders' funds 37,385 33,081
Basic and diluted net asset value per share
(pence)* 15 28.94 30.97
* 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 30 September 2016 and were signed on its behalf
by
Richard Huntingford
Chairman
Company number: 03495287
Company balance sheet
30 June 2016 30 June 2015
Note GBP'000 GBP'000
Non-current assets
Investments 9 30,296 28,531
Investment in subsidiary undertakings 11 6,823 6,619
37,119 35,150
Current assets
Investment in subsidiary undertakings 11 8,230 8,473
Trade and other receivables less than one
year 12 436 788
Cash and cash equivalents 6,880 3,950
15,546 13,211
Total assets 52,665 48,361
Current liabilities
Trade and other payables less than one year 13 (15,280) (15,280)
Total assets less current liabilities 37,385 33,081
Equity attributable to equityholders
Ordinary share capital 14 14,110 11,767
Share premium 13,872 9,234
Capital redemption reserve 1,415 1,415
Unrealised capital reserve 2,127 1,647
Realised capital reserve (1,109) (380)
Other distributable reserve 6,970 9,398
Total equity shareholders' funds 37,385 33,081
Basic and diluted net asset value per share
(pence)* 15 28.94 30.97
* 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 30 September 2016 and were signed on its behalf
by
Richard Huntingford
Chairman
Company number: 03495287
Consolidated statement of changes in equity
Capital Unrealised Realised Other
Ordinary 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 July 2015 11,767 9,234 1,415 1,612 (171) 9,224 33,081
Profit and total comprehensive income - - - 422 (632) 676 466
Transfer of previously unrealised losses on sale or
write off of investments - - - 97 (97) - -
Dividends paid - - - - - (2,837) (2,837)
Purchase of shares for treasury (including costs) - - - - - (306) (306)
Issue of equity 2,343 4,819 - - - - 7,162
Cost of issue of equity - (181) - - - - (181)
As at 30 June 2016 14,110 13,872 1,415 2,131 (900) 6,757 37,385
As at 1 July 2014 10,006 5,527 1,415 657 145 11,300 29,050
Profit and total comprehensive income - - - 759 (120) 700 1,339
Transfer of previously unrealised losses on sale or
write off of investments - - - 196 (196) - -
Dividends paid - - - - - (2,337) (2,337)
Purchase of shares for treasury (including costs) - - - - - (439) (439)
Issue of equity 1,761 3,860 - - - - 5,621
Cost of issue of equity - (153) - - - - (153)
As at 30 June 2015 11,767 9,234 1,415 1,612 (171) 9,224 33,081
The nature of each reserve is described in note 1 below.
Company statement of changes in equity
Capital Unrealised Realised Other
Ordinary 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 July 2015 11,767 9,234 1,415 1,647 (380) 9,398 33,081
Profit and total comprehensive income - - - 422 (632) 715 505
Revaluation of investment in subsidiaries - - - (39) - - (39)
Transfer of previously unrealised losses on disposal
of investments - - - 97 (97) - -
Dividends paid - - - - - (2,837) (2,837)
Purchase of shares for treasury (including costs) - - - - - (306) (306)
Issue of equity 2,343 4,819 - - - - 7,162
Cost of issue of equity - (181) - - - - (181)
As at 30 June 2016 14,110 13,872 1,415 2,127 (1,109) 6,970 37,385
As at 1 July 2014 10,006 5,527 1,415 695 (64) 11,471 29,050
Profit and total comprehensive income - - - 759 (120) 703 1,342
Revaluation of investment in subsidiaries - - - (3) - - (3)
Transfer of previously unrealised losses on disposal
of investments - - - 196 (196) - -
Dividends paid - - - - - (2,337) (2,337)
Purchase of shares for treasury (including costs) - - - - - (439) (439)
Issue of equity 1,761 3,860 - - - - 5,621
Cost of issue of equity - (153) - - - - (153)
As at 30 June 2015 11,767 9,234 1,415 1,647 (380) 9,398 33,081
* Included within these reserves is an amount of GBP5,861,000 (2015:
GBP9,018,000) which is considered distributable.
The nature of each reserve is described in note 1 below.
Consolidated statement of cash flows
Year ended Year ended
30 June 30 June
2016 2015
GBP'000 GBP'000
Operating activities
Investment income received 948 965
Deposit interest received 47 30
Dividend income received 38 51
Investment management fees paid (579) (512)
Other cash payments (283) (282)
Net cash flow from operating activities 171 252
Cash flow from investing activities
Purchase of non-current asset investments (4,566) (7,006)
Disposal of non-current asset investments 2,879 7,187
Net cash flow from investing activities (1,687) 181
Cash flow from financing activities
Issue of share capital 7,164 4,614
Equity dividends paid (2,413) (2,078)
Cost of issue of equity (2) (4)
Purchase of shares for treasury (303) (425)
Transfer of CP2 VCT PLC cash to liquidator (40) -
Net cash flow from financing activities 4,406 2,107
Increase in cash and cash equivalents 2,890 2,540
Cash and cash equivalents at the start of the year 4,006 1,466
Cash and cash equivalents at the end of the year 6,896 4,006
Company statement of cash flows
Year ended Year ended
30 June 30 June
2016 2015
GBP'000 GBP'000
Operating activities
Investment income received 948 965
Deposit interest received 47 30
Dividend income received 943 1,866
Investment management fees paid (579) (512)
Intercompany interest paid (905) (1,815)
Other cash payments (283) (282)
Net cash flow from operating activities 171 252
Cash flow from investing activities
Purchase of non-current asset investments (4,566) (7,006)
Disposal of non-current asset investments 2,879 7,187
Net cash flow from investing activities (1,687) 181
Cash flow from financing activities
Issue of share capital 7,164 4,614
Equity dividends paid (2,413) (2,078)
Cost of issue of equity (2) (4)
Purchase of own shares for treasury (including
costs) (303) (425)
Net cash flow from financing activities 4,446 2,107
Increase in cash and cash equivalents 2,930 2,540
Cash and cash equivalents at the start of the year 3,950 1,410
Cash and cash equivalents at the end of the year 6,880 3,950
Notes to the Financial Statements
1. Accounting policies
The following policies refer to the Group and the Company except where
noted. References to International Financial Reporting Standards
('IFRS') relate to the Group Financial Statements. Following the
publication of FRS 100 'Application of Financial Reporting Requirements'
by the Financial Reporting Council, the Company is required to change
the accounting framework for its individual financial statements, the
Company has adopted FRS 101 "Reduced Disclosure Framework", which is
based on the recognition and measurement requirements of International
Financial Reporting Standards ('EU IFRS') as adopted by the European
Union.
Basis of accounting
The Financial Statements have been prepared in accordance with
International Financial Reporting Standards ('EU IFRS') as adopted by
the European Union (and therefore comply with Article 4 of the EU IAS
regulation), in the case of the Group, and in accordance with FRS 101
"Reduced Disclosure Framework" in the case of the Company. No disclosure
exemptions have been taken by the Company.
Both the Group and the Company Financial Statements also apply the
Statement of Recommended Practice: "Financial Statements of Investment
Companies and Venture Capital Trusts" ('SORP') issued by the Association
of Investment Companies ("AIC") in 2014, in so far as this does not
conflict with IFRS. The Financial Statements have been prepared in
accordance with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS and UK GAAP. These Financial Statements
are presented in Sterling to the nearest thousand. Accounting policies
have been applied consistently in current and prior periods.
At the balance sheet date, there are no new International Accounting
Standards and interpretations that were in issue but not yet effective
that are expected to have any material impact on the Financial
Statements, although some changes may be required to the format of the
Financial Statements and disclosures.
Basis of consolidation
The Group consolidated Financial Statements incorporate the Financial
Statements of the Company for the year ended 30 June 2016 and the
entities controlled by the Company (its subsidiaries), for the same
period. Where necessary, adjustments are made to the Financial
Statements of subsidiaries to bring the accounting policies into line
with those used by the Group. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
As permitted by Section 408 of the Companies Act 2006, the Company has
not presented its own profit and loss account. The amount of the
Company's profit before tax for the year dealt with in the accounts of
the Group is GBP505,000 (2015: GBP1,342,000).
Segmental reporting
The Directors are of the opinion that the Group and the Company are
engaged in a single operating segment of business, being investment in
equity and debt. The Group and the Company report to the Board which
acts as the chief operating decision maker. The Group invests in smaller
companies principally based in the UK.
Business combinations
The acquisition of subsidiaries is accounted for using the purchase
method in the Group Financial Statements. The cost of the acquisition is
measured at the aggregate of the fair values, at the date of exchange,
of assets given, liabilities incurred or assumed, and equity instruments
issued by the Group in exchange for control of the subsidiaries, plus
any costs directly attributable to the business combination. The
subsidiary's identifiable assets, liabilities and contingent liabilities
that meet the conditions for recognition under IFRS 3 "Business
Combinations" are recognised at their fair value at the acquisition
date.
Estimates
The preparation of the Group's and Company's Financial Statements
requires estimates, assumptions and judgements to be made, which affect
the reported results and balances. Actual outcomes may differ from these
estimates, with a consequential impact on the results of future periods.
Those estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are those used to determine the fair
value of investments at fair value through the profit or loss.
Reasonable possible alternative assumptions have been considered,
details of which are given in note 9.
The valuation of investments held at fair value through profit or loss
or measured in assessing any impairment of loan stocks is determined by
using valuation techniques. The Group and the Company use judgements to
select a variety of methods and makes assumptions that are mainly based
on market conditions and portfolio company performance at each balance
sheet date.
Investment in subsidiaries
Investments in subsidiaries are revalued at the balance sheet date based
on the fair value of the net assets of the subsidiary. Revaluation
movements are recognised in the unrealised reserve.
CP2 VCT PLC is a wholly-owned subsidiary of the Company. CP2 VCT PLC
transferred its business to Crown Place VCT PLC and ceased trading with
effect from the date of merger on 12 January 2006. Since then, CP2 VCT
PLC has had no further business other than to hold cash and intercompany
balances. CP2 VCT PLC had significant tax losses which have been
utilised by the Company through group relief. The Directors took the
decision to appoint a liquidator and commence a process of members'
voluntary liquidation for CP2 VCT PLC which is expected to be completed
by November 2016. As a result, the assets and liabilities of CP2 VCT
PLC totalling GBP8,230,000 included in the consolidated financial
statements have been determined on a basis other than going concern.
The above decision will not affect CP1 VCT PLC, which continues to be a
wholly supported subsidiary company.
Non-current asset investments
Quoted and unquoted equity investments, debt issued at a discount, and
convertible bonds
In accordance with IAS 39 'Financial Instruments: Recognition and
Measurement', quoted and unquoted equity, debt issued at a discount and
convertible bonds are designated as fair value through profit or loss
("FVTPL"). Investments listed on recognised exchanges are valued at the
closing bid prices at the end of the accounting period. Unquoted
investments' fair value is determined by the Directors in accordance
with the International Private Equity and Venture Capital Valuation
Guidelines (IPEVCV guidelines).
Fair value movements and gains and losses arising on the disposal of
investments are reflected in the capital column of the Statement of
comprehensive income in accordance with the AIC SORP. Realised gains or
losses on the sale of investments will be reflected in the realised
capital reserve, and unrealised gains or losses arising from the
revaluation of investments will be reflected in the unrealised capital
reserve.
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.
Warrants and unquoted equity derived instruments
Warrants and unquoted equity derived instruments are only valued if
there is deemed to be additional value to the Company in exercising or
converting as at the balance sheet date. Otherwise these instruments are
held at nil value. The valuation techniques used are those used for the
underlying equity investment as a whole on a unit of account basis.
Unquoted loan stock
Unquoted loan stock (excluding debt issued at a discount and convertible
bonds) is classified as loans and receivables as permitted by IAS 39 and
measured at amortised cost using the effective interest rate method less
impairment. Movements in the amortised cost relating to interest income
are reflected in the revenue column of the Statement of comprehensive
income, and hence are reflected in the other distributable reserve, and
movements in respect of capital provisions are reflected in the capital
column of the Statement of comprehensive income and are reflected in the
realised capital reserve following sale, or in the unrealised capital
reserve for impairments arising from revaluations of the fair value of
the security.
For all unquoted loan stock, fully performing, past due or impaired, the
Board considers that the fair value is equal to or greater than the
security value of these assets. For unquoted loan stock, the amount of
the impairment is the difference between the asset's cost and the
present value of estimated future cash flows, discounted at the original
effective interest rate. The future cash flows are estimated based on
the fair value of the security held less estimated selling costs.
Loan stock accrued interest is recognised in the Balance sheet as part
of the carrying value of the loans and receivables at the end of each
reporting period.
In accordance with the exemptions under IAS 28 "Investments in
associates", those undertakings in which the Group or Company holds more
than 20 per cent. of the equity as part of an investment portfolio are
not accounted for using the equity method.
Investment income
Quoted and unquoted equity income
Dividends receivable on quoted equity shares are recognised on the
ex-dividend date. Income receivable on unquoted equity is recognised
when the Company's right to receive payment and expected settlement is
established.
Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are recognised on
a time apportionment basis using an effective interest rate over the
life of the financial instrument. Income which is not capable of being
received within a reasonable period of time is reflected in the capital
value of the investment.
Bank interest income
Interest income is recognised on an accruals basis using the rate of
interest agreed with the bank.
Investment management fees, performance incentive fees and other
expenses
All expenses have been accounted for on an accruals basis. Expenses are
charged through the revenue column of the Statement of comprehensive
income, except for management fees and performance incentive fees which
are allocated in part to the capital column of the Statement of
comprehensive income, to the extent that these relate to the maintenance
or enhancement in the value of the investments and in line with the
Board's expectation that over the long term 75 per cent. of the Group's
investment returns will be in the form of capital gains.
Issue costs
Issue costs associated with the allotment of share capital have been
deducted from the share premium account.
Taxation
Taxation is applied on a current basis in accordance with IAS 12 "Income
taxes". Taxation associated with capital expenses is applied in
accordance with the SORP. Deferred taxation is provided in full on
timing differences, and temporary differences (in accordance with IAS
12) 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.
Temporary differences arise from differences between the carrying
amounts of assets and liabilities for financial reporting and the
amounts used for taxation purposes. Timing differences (IAS 12) 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 Financial Statements. Deferred tax assets are recognised to the
extent that it is probable that future taxable profit will be available
against which unused tax losses and credits can be utilised. Deferred
tax assets and liabilities are not discounted.
Dividends
In accordance with IAS 10 "Events after the balance sheet date",
dividends are accounted for in the period in which the dividend is paid
or approved at the Annual General Meeting.
Reserves
Share premium reserve
This reserve accounts for the difference between the price paid for the
Company's shares and the nominal value of those shares, less issue costs
and transfers to the other distributable reserve.
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;
-- expenses, together with the related taxation effect, charged in
accordance with the above policies; and
-- dividends paid to equity holders.
Other distributable reserve
This reserve accounts for movements from the revenue column of the
Statement of Comprehensive Income, the payment of dividends, the
buy-back of shares and other non-capital realised movements.
2. Gains on investments
Year ended Year ended
30 June 2016 30 June 2015
GBP'000 GBP'000
Unrealised gains on investments held at fair value
through profit or loss 288 185
Reversal of impairments on investments measured at
amortised cost 133 574
Unrealised gains on investments 422 759
Realised (losses)/gains on investments held at fair
value through profit or loss (152) 487
Realised losses on investments measured at amortised
cost (32) (216)
Realised (losses)/gains on non-current asset investments
sub-total (184) 271
Realised gains on current asset investments held at
fair value through profit or loss - 6
Realised (losses)/gains on investments (184) 277
238 1,036
Investments measured at amortised cost are unquoted loan stock
investments as described in note 9.
3. Investment income and deposit interest
Year ended Year ended
30 June 2016 30 June 2015
GBP'000 GBP'000
Income recognised on investments held at fair value
through profit or loss
UK dividend income 38 51
Interest on convertible bonds and debt issued at a
discount 469 295
507 346
Income recognised on investments measured at amortised
cost
Return on loan stock investments 557 729
Bank deposit interest 50 30
607 759
1,114 1,105
Interest income earned on impaired investments at 30 June 2016 amounted
to GBP88,000 (2015: GBP205,000). These investments are all held at
amortised cost.
4. Investment management fees
Year ended 30 June 2016 Year ended 30 June 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management fee 149 448 597 133 397 530
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 GBP647,000 (2015:
GBP580,000) were purchased by the Company from Albion Ventures LLP
comprising GBP597,000 in respect of management fees (2015: GBP530,000)
and GBP50,000 in respect of administration fees (2015: GBP50,000). At
the financial year end, the amount due to Albion Ventures LLP in respect
of these services disclosed as accruals and deferred income was
GBP174,500 (administration fee accrual: GBP12,500, management fee
accrual GBP162,000) (2015: GBP156,500).
Albion Ventures LLP is, from time to time, eligible to receive
transaction fees and Directors' fees from portfolio companies. During
the year ended 30 June 2016 fees of GBP125,000 attributable to the
investments of the Company were received pursuant to these arrangements
(2015: GBP211,000).
Albion Ventures LLP, the Manager, holds 54,323 Ordinary shares in the
Company.
5. Other expenses
Year ended Year ended
30 June 2016 30 June 2015
GBP'000 GBP'000
Directors' remuneration 81 75
National insurance on Directors' remuneration 6 6
Auditor's remuneration:
- audit of the statutory Financial Statements (excluding
VAT) 28 26
- the auditing of accounts of subsidiaries of the
Company pursuant to legislation (excluding VAT) 3 5
Fees for the liquidation of CP2 VCT PLC (excluding
VAT) 3 -
Other expenses 168 160
289 272
Further information regarding Directors' remuneration can be found in
the audited section of the Directors' remuneration report on page 34 of
the full Annual Report and Financial Statements.
6. Taxation
Year ended 30 June 2016 Year ended 30 June 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
- - - - - -
UK corporation tax charge
The tax charge for the year shown in the Statement of comprehensive
income is lower than the standard rate of corporation tax of 20 per
cent. (2015: average rate of 20.75 per cent.). The differences are
explained below:
Year ended Year ended
30 June 30 June
2016 2015
GBP'000 GBP'000
Profit before taxation 466 1,339
Profit multiplied by the standard rate of corporation
tax (93) (278)
Effect of capital gains not subject to taxation 48 215
Effect of income not subject to taxation 8 11
Utilisation of tax losses 37 52
- -
No provision for deferred tax has been made in the current or prior
accounting period. The Company and Group have not recognised a deferred
tax asset of GBP3,013,000 (2015: GBP3,037,000) in respect of unutilised
management expenses and non-trading deficits as it is not considered
sufficiently probable that there will be taxable profits against which
to utilise these expenses in the foreseeable future. The Group has not
recognised a further deferred tax asset of GBP122,000 (2015: GBP302,000)
in respect of unutilised management expenses and deficits arising from
non-trading relationships which would only be used if its subsidiaries
made significant profits.
7. Dividends
Year ended Year ended
30 June 2016 30 June 2015
GBP'000 GBP'000
First dividend paid on 30 November 2015
(28 November 2014) (1.25 pence per share) 1,361 1,142
Second dividend paid on 31 March 2016
(31 March 2015) (1.25 pence per share) 1,476 1,195
2,837 2,337
In addition to the dividends paid above, the Board has declared a first
dividend for the year ending 30 June 2017, of 1 penny per share. This
will be paid on 30 November 2016 to shareholders on the register as at 4
November 2016. The total dividend will be approximately GBP1,292,000.
8. Basic and diluted return/(loss) per share
Year ended 30 June 2016 Year ended 30 June 2015
Revenue Capital Total Revenue Capital Total
Return/(loss) attributable to equity shares
(GBP'000) 676 (210) 466 700 639 1,339
Weighted average shares (excluding treasury
shares) 114,998,634 95,555,497
Return/(loss) attributable per Ordinary share
(pence) (basic and diluted) 0.59 (0.18) 0.41 0.73 0.67 1.40
The return per share has been calculated excluding treasury shares of
11,915,410 (2015: 10,852,410).
There are no convertible instruments, derivatives or contingent share
agreements in issue, and therefore no dilution affecting the return per
share. The basic return per share is therefore the same as the diluted
return per share.
9. Non-current asset investments
30 June 2016 30 June 2015
GBP'000 GBP'000
Group and Company
Investments held at fair value through profit or
loss
Unquoted equity and preference shares 11,542 10,467
Quoted equity 518 701
Discounted debt and convertible loan stock 8,903 7,277
20,963 18,445
Investments measured at amortised cost
Unquoted loan stock 9,333 10,086
30,296 28,531
30 June 2016 30 June 2015
GBP'000 GBP'000
Opening valuation 28,531 27,689
Purchases at cost 4,614 7,060
Disposal proceeds (3,174) (7,316)
Realised gains/(losses) (184) 271
Movement in loan stock accrued income 86 69
Unrealised gains 422 759
Closing valuation 30,296 28,531
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued
income 131 62
Movement in loan stock accrued income 86 69
Closing accumulated movement in loan stock accrued
income 217 131
Movement in unrealised gains
Opening accumulated unrealised gains 1,545 549
Transfer of previously unrealised gains to realised
reserves on disposal (300) (1,305)
Transfer of previously unrealised losses to realised
reserves on investments written off but still held 397 1,542
Movement in unrealised gains 422 759
Closing accumulated unrealised gains 2,064 1,545
Historic cost basis
Opening book cost 26,855 27,079
Purchases at cost 4,614 7,060
Disposals at cost (2,980) (5,383)
Cost of investments written off but still held (474) (1,901)
Closing book cost 28,015 26,855
Closing cost is net of amounts of GBP2,030,000 (2015:
GBP1,901,000) written off in respect of investments
still held at the balance sheet date.
The Directors believe that the carrying value of loan stock measured at
amortised cost is not materially different to fair value. The Company
does not hold any assets as a result of the enforcement of security
during the year, 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.
Additions and disposal proceeds included in the statement of cash flows
differ from the amounts shown in the note above, due to deferred
consideration and settlement creditors and the restructuring of
investments.
A schedule of disposals during the year is shown on page 20 of the full
Annual Report and Financial Statements.
IFRS 13 'Fair value measurement' and IFRS 7 'Financial Instruments:
Disclosures' requires the Company to disclose the valuation methods
applied to its investments measured at fair value through profit or loss
in a fair value hierarchy according to the following definitions:
Fair value hierarchy Definition of valuation method
Level 1 Unadjusted quoted (bid) prices applied
Level 2 Inputs to valuation are from observable sources and
are directly or indirectly derived from prices
Level 3 Inputs to valuations are not based on observable market
data
Quoted investments are valued according to Level 1 valuation methods.
Unquoted equity, preference shares, convertible loan stock and debt
issued at a discount are all valued according to Level 3 valuation
methods.
The Company's investments measured at fair value through profit or loss
(Level 3) had the following movements in the year to 30 June 2016:
30 June 2016 30 June 2015
Discounted Discounted
debt and debt and
convertible convertible
Equity loan stock Total Equity loan stock Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening balance 10,467 7,277 17,744 12,161 3,635 15,796
Additions 1,438 1,799 3,237 1,137 4,260 5,397
Disposal
proceeds (738) (243) (981) (3,819) (611) (4,430)
Debt/equity
conversion 40 (40) - 299 (120) 179
Realised
(losses)/gains (93) (60) (153) 734 (15) 719
Unrealised
gains/(losses) 428 126 554 (45) 73 28
Accrued loan
stock
interest - 44 44 - 55 55
Closing balance 11,542 8,903 20,445 10,467 7,277 17,744
Unquoted investments held at fair value through profit or loss are
valued in accordance with the IPEVCV guidelines as follows:
30 June 2016 30 June 2015
Investment valuation methodology GBP'000 GBP'000
Valuation supported by third party valuation 13,004 9,124
Earnings multiple 828 1,356
Net asset value 1,910 2,112
Cost and price of recent investment 2,546 2,650
Revenue multiple 1,566 1,189
Agreed sale price/Offer price 591 1,313
20,445 17,744
Level 3 valuations include inputs based on non-observable market data.
IFRS 13 requires an entity to disclose quantitative information about
the significant unobservable inputs used. Of the Company's Level 3
investments, 12 per cent are held on an Earnings or Revenue multiple
basis, which have significant judgement applied to the valuation inputs.
The table below sets out the range of Earnings and Revenue multiples and
discounts applied. The remainder of Level 3 investments are held at cost
(reviewed for impairment), recent investment price, net asset value
(supported by independent valuation) or net assets.
Support services Healthcare (growth) Software
Earnings multiples
PE multiple range 8.7 - 26.1 14.0 3.5 - 10.0
Marketability discount
range 9.6% - 75% 30% 50% - 75%
Revenue Multiples
Revenue multiple range - 1.0 - 3.0 2.8 - 3.0
Marketability discount
range - 0%-50% 11% - 50%
IFRS 13 and IFRS 7 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. After due consideration
and noting that the valuation methodology applied to 79 per cent. of the
Level 3 investments (by valuation) is based on third party independent
evidence, recent investment price, agreed sale price/offer price and
cost, the Directors believe that changes to reasonable possible
alternative input assumptions (a reasonable discount to the earnings or
revenue multiple) for the valuation of the remainder of the portfolio
could lead to a significant change in the fair value of the portfolio.
The impact of these changes could result in an increase in the valuation
of the equity investments by GBP637,000 or a decrease in the valuation
of equity investments by GBP426,000.
The unquoted instruments held at FVTPL had the following movements
between investment methodologies between 30 June 2015 and 30 June 2016:
Value as at Explanatory note
Change in investment valuation methodology (2015 to 30 June 2016
2016) GBP'000
Cost to revenue multiple 611 More relevant valuation
methodology
Cost and price of recent investment to valuation supported 317 Third party valuation has
by third party valuation recently taken place
Revenue multiple to price of recent investment 222 More appropriate following recent
investment round
The valuation method used 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 30 June
2016.
10. Significant interests
The principal activity of the Group is to select and hold a portfolio of
investments in unquoted securities. Although the Company, through the
Manager, will, in some cases, be represented on the board of the
portfolio company, it will not take a controlling interest or become
involved in the management of a portfolio company. The size and
structure of the companies with unquoted securities may result in
certain holdings in the portfolio representing a participating interest
without there being any partnership, joint venture or management
consortium agreement.
The Company has interests of greater than 20 per cent. of the nominal
value of any class of the allotted shares in the portfolio companies as
at 30 June 2016 as described below:
Country of % class and % total
Company incorporation Principal activity share type voting rights
ELE Advanced Manufacturer of precision engineering components for
Technologies the industrial gas turbine, aerospace and automotive 74.3% B
Limited Great Britain markets Ordinary 41.9%
56.7% B
Ordinary/A
Preference
and B
Uctal Limited Great Britain TV production company Preference 24.2%
The investments listed above are held as part of an investment portfolio
and therefore, as permitted by IAS 28, they are measured at fair value
and not accounted for using the equity method.
11. Investments in subsidiary undertakings
30 June 2016
CP1 VCT PLC CP2 VCT PLC Total
GBP'000 GBP'000 GBP'000
Carrying value as at 1 July 2015 6,619 8,473 15,092
Movement in subsidiary net assets 204 (243) (39)
Carrying value as at 30 June 2016 6,823 8,230 15,053
30 June 2015
CP1 VCT PLC CP2 VCT PLC Total
GBP'000 GBP'000 GBP'000
Carrying value as at 1 July 2014 6,622 8,473 15,095
Movement in subsidiary net assets (3) - (3)
Carrying value as at 30 June 2015 6,619 8,473 15,092
The subsidiary companies currently hold intercompany balances and CP1
VCT PLC also holds cash. These investments are valued according to Level
2 valuation methods.
Both CP1 VCT PLC and CP2 VCT PLC are wholly owned by Crown Place VCT PLC
as follows:
30 June 2016
CP1 VCT PLC CP2 VCT PLC
Nominal value of shares held GBP6,382,746 GBP8,219,350
Percentage of total voting rights held 100% 100%
30 June 2015
CP1 VCT PLC CP2 VCT PLC
Nominal value of shares held GBP6,382,746 GBP8,219,350
Percentage of total voting rights held 100% 100%
12. Trade and other receivables less than one year
30 June 2016 30 June 2015
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other receivables less than one
year 476 436 788 788
13. Trade and other payables less than one year
30 June 2016 30 June 2015
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Amounts due to subsidiary undertakings - 14,997 - 15,036
Other payables 46 46 23 23
Accruals 237 237 221 221
283 15,280 244 15,280
Interest is chargeable on intercompany balances at a rate of 12 per
cent. per annum. Intercompany balances are payable on demand. CP1 VCT
PLC's current business is to hold cash and intercompany balances. CP2
VCT PLC holds intercompany balances only.
14. Ordinary share capital
30 June 2016 30 June 2015
GBP'000 GBP'000
Allotted, called up and fully paid
141,097,990 Ordinary shares of 10p each (2015:
117,667,064) 14,110 11,767
Voting rights
129,182,580 Ordinary shares of 10p each (2015:
106,814,654)
The Company purchased 1,063,000 Ordinary shares for treasury (2015:
1,476,000) during the year at a total cost of GBP306,000 (2015:
GBP439,000).
The total number of shares held in treasury as at 30 June 2016 was
11,915,410 (2015: 10,852,410) representing 8.4 per cent. of the shares
in issue as at 30 June 2016.
Under the terms of the Dividend Reinvestment Scheme Circular dated 26
February 2009, the following Ordinary shares of nominal value 10 pence
each were allotted during the year:
Aggregate
nominal Opening
Number of value of Issue price Net consideration market price
shares shares (pence per received on allotment
Allotment date allotted (GBP'000) share) (GBP'000) (pence per share)
30 November 2015 641,404 64 30.32 193 29.00
31 March 2016 791,479 80 29.01 228 29.00
1,432,883 144 421
Under the terms of the Albion VCTs Prospectus Top Up Offers 2014/2015,
the following Ordinary shares of nominal value 10 pence were issued
during the year:
Aggregate Opening
nominal Net market price
Number of value of Issue price consideration on allotment
shares shares (pence per received (pence per
Allotment date allotted (GBP'000) share) (GBP'000) share)
30 September 2015 2,156,003 216 32.00 669 29.00
Under the terms of the Albion VCTs Prospectus Top Up Offers 2015/2016,
the following Ordinary shares of nominal value 10 pence were issued
during the year:
Aggregate Opening
nominal Net market price
Number of value of Issue price consideration on allotment
shares shares (pence per received (pence per
Allotment date allotted (GBP'000) share) (GBP'000) share)
29 January 2016 5,883,837 588 31.00 1,788 28.50
29 January 2016 3,383,685 338 31.10 1,026 28.50
31 March 2016 10,148,414 1,015 30.00 2,953 29.00
6 April 2016 271,378 27 29.70 79 28.75
6 April 2016 123,968 12 30.00 36 28.75
6 April 2016 30,758 3 29.80 9 28.75
19,842,040 1,983 5,891
15. Basic and diluted net asset value per share
The Group and Company net asset value attributable to the Ordinary
shares at the year end was as follows:
30 June 2016 30 June 2015
Net asset value per share attributable (pence) 28.94 30.97
The net asset value per share at the year end is calculated in
accordance with the Articles of Association and is based upon total
shares in issue less treasury shares of 129,182,580 shares (2015:
106,814,654) as at 30 June 2016.
There are no convertible instruments, derivatives or contingent share
agreements in issue.
16. Capital and financial instruments risk management
The following policies are with reference to both the Company and the
Group except where 'the Company' is used below.
The Group's capital comprises Ordinary shares as described in note 14.
The Company is permitted to buy back its own shares for cancellation or
treasury purposes, and this is described in more detail in the Strategic
report.
The Group's financial instruments comprise equity and loan stock
investments in unquoted companies, equity in quoted companies,
contingent receipts on disposal of non-current asset investments, cash
balances, debtors and creditors which arise from its operations. The
main purpose of these financial instruments is to generate revenue and
capital appreciation for the Group's operations. The Group has no
gearing or other financial liabilities apart from short term creditors.
The Group does not use any derivatives for the management of its balance
sheet.
The principal risks arising from the Group'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 Group 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 as follows:
Investment risk
As a venture capital trust, it is the Group's specific nature to
evaluate and control the investment risk of its portfolio in unquoted
and quoted companies, details of which are shown on pages 18 to 20 of
the full Annual Report and Financial Statements. Investment risk is the
exposure of the Group to the revaluation and devaluation of investments.
The main driver of investment risk is the operational and financial
performance of the portfolio companies 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 Group 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 non-current and current asset investment portfolio which is
GBP30,296,000 (2015: GBP28,531,000). Non-current and current asset
investments form 81 per cent. of the net asset value as at 30 June 2016
(2015: 86 per cent.).
More details regarding the classification of non-current investments are
shown in note 9.
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 Group as a whole, the strategy of the
Group is to invest in a broad spread of industries with approximately
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 18 to 20 of the full Annual
Report and Financial Statements and in the Strategic report. The
Company's investments in subsidiaries are explained further in note 11.
The valuation method used 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.
As required under IFRS 7, 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 non-current 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 non-current asset investments (keeping
all other variables constant) would increase or decrease the net asset
value and return for the year by GBP3,029,600 (2015: GBP2,853,100).
Interest rate risk
It is the Group's policy to accept a degree of interest rate risk on its
financial assets through the effect of interest rate changes. On the
basis of the Group's and Company's analysis, it is estimated that a rise
or fall of half a percentage point in all interest rates would be
immaterial due to the level of fixed rate loan stock held within the
portfolio. The impact of half a percentage point 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 weighted average interest rate applied to the Group's fixed rate
assets during the year was approximately 5.7 per cent. (2015: 5.1 per
cent.). The weighted average period to maturity for the fixed rate
assets is approximately 3.6 years (2015: 3.6 years).
The Group's financial assets and liabilities as at 30 June 2016, all
denominated in pounds sterling, consist of the following:
30 June 2016 30 June 2015
Fixed rate Floating rate Non-interest Total Fixed rate Floating rate Non-interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unquoted loan stock (including convertible loan stock
and discounted debt) 16,243 - 1,993 18,236 15,290 - 2,073 17,363
Equity - - 12,060 12,060 - - 11,168 11,168
Receivables* - - 460 460 - - 772 772
Payables - - (283) (283) - - (244) (244)
Cash - 6,896 - 6,896 - 4,006 - 4,006
16,243 6,896 14,230 37,369 15,290 4,006 13,769 33,065
*The receivables do not reconcile to the balance sheet as prepayments
are not included in the above table.
The Company's financial assets and liabilities as at 30 June 2016, all
denominated in pounds sterling, consist of the following:
30 June 2016 30 June 2015
Fixed rate Floating rate Non-interest Total Fixed rate Floating rate Non-interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unquoted loan stock (including convertible loan stock
and discounted bonds) 16,243 - 1,993 18,236 15,290 - 2,073 17,363
Equity - - 12,060 12,060 - - 11,168 11,168
Receivables* - - 420 420 - - 772 772
Payables (14,997) - (283) (15,280) (15,036) - (244) (15,280)
Cash - 6,880 - 6,880 - 3,950 - 3,950
1,246 6,880 14,190 22,316 254 3,950 13,769 17,973
*The receivables do not reconcile to the balance sheet as prepayments
are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument
will fail to discharge an obligation or commitment that it has entered
into with the Group. The Group is exposed to credit risk through its
debtors, investment in unquoted loan stock, and cash on deposit with
banks.
The Manager evaluates credit risk on loan stock and other similar
instruments prior to investment, and as part of its ongoing monitoring
of investments. In doing this, it takes into account the extent and
quality of any security held. 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.
Bank deposits are held with banks with high credit ratings assigned by
international credit rating agencies. The Group has an informal policy
of limiting counterparty banking exposure to a maximum of 20 per cent.
of net asset value for any one counterparty.
The Manager and the Board formally review credit risk (including
receivables) and other risks, both at the time of initial investment and
at quarterly Board meetings.
The Group's total gross credit risk at 30 June 2016 was limited to
GBP18,236,000 (2015: GBP17,363,000) of unquoted loan stock instruments
(all are secured on the assets of the portfolio company), GBP6,896,000
(2015: GBP4,006,000) of cash deposits with banks and GBP460,000 (2015:
GBP772,000) of deferred consideration and receivables.
The Company's total gross credit risk at 30 June 2016 was limited to
GBP18,236,000 (2015: GBP17,363,000) of unquoted loan stock instruments
(all are secured on the assets of the portfolio company), GBP6,880,000
(2015: GBP3,950,000) of cash deposits with banks and GBP420,000 (2015:
GBP772,000) of deferred consideration and receivables.
As at the balance sheet date, the cash held by the Group is held with
Lloyds Bank Plc, Scottish Widows Bank plc (part of Lloyds Banking Group),
National Westminster Bank plc and Barclays Bank plc. Credit risk on cash
transactions 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 credit profile of unquoted loan stock is described under liquidity
risk shown below.
The cost, impairment and carrying value of impaired loan stocks at 30
June 2016 and 30 June 2015 are as follows:
30 June 2016 30 June 2015
Carrying Carrying
Cost Impairment value Cost Impairment value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Impaired
loan
stock 4,314 (970) 3,344 5,738 (549) 5,189
Impaired loan stock instruments have a first fixed charge or a fixed and
floating charge over the assets of the portfolio company and the Board
estimate that the security value approximates to the carrying value.
Liquidity risk
Liquid assets are held as cash on current or liquidity account. Under
the terms of its Articles, the Group has the ability to borrow up to the
amount of its adjusted capital and reserves of the latest published
audited consolidated balance sheet, which amounts to GBP35,770,000
(2015: GBP31,719,000) as at 30 June 2016.
The Group has no committed borrowing facilities as at 30 June 2016
(2015: nil) and had cash balances of GBP6,896,000 (2015: GBP4,006,000)
(Company GBP6,880,000; 2015: GBP3,950,000). The main cash outflows are
for new investments, dividends and share buy-backs, which are within the
control of the Group. The Manager formally reviews the cash requirements
of the Group on a monthly basis, and the Board on a quarterly basis, as
part of its review of management accounts and forecasts.
All of the Group's financial liabilities are short term in nature and
total GBP283,000 (2015: GBP244,000) for the year to 30 June 2016
(Company: GBP15,280,000; 2015: GBP15,280,000). An amount of
GBP14,997,000 (2015: GBP15,036,000) which is included within the
Company's creditors, relates to intercompany balances and is not
considered to carry liquidity risk because the Board has control over
the intercompany repayments.
The carrying value of loan stock investments at 30 June 2016, analysed
by expected maturity dates is as follows:
Fully performing Past due Impaired Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 4,036 438 3,328 7,802
1-2 years 205 309 6 520
2-3 years 723 146 - 869
3-5 years 5,649 607 10 6,266
More than 5 years 2,305 474 - 2,779
12,918 1,974 3,344 18,236
The carrying value of loan stock investments at 30 June 2015, analysed
by expected maturity dates is as follows:
Fully performing Past due Impaired Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 4,672 - 2,652 7,324
1-2 years 312 - 2,484 2,796
2-3 years 160 307 - 467
3-5 years 3,209 760 53 4,022
More than 5 years 2,342 412 - 2,754
10,695 1,479 5,189 17,363
Loan stocks 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
stocks is 10.2 per cent. (2015: 5.1 per cent.).
No balances, other than loan stock, are past due or impaired.
In view of the availability of adequate cash balances and the repayment
profile of loan stock investments, the Board considers that the Group is
subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Group's financial assets and liabilities as at 30 June 2016 are
stated at fair value as determined by the Directors, with the exception
of loans and receivables included within investments, cash, receivables
and payables, which are measured at amortised cost, as permitted by IAS
39. In the opinion of the Directors, the amortised cost of loan stock is
not materially different to the fair value of the loan stock. There are
no financial liabilities other than short term trade and other payables.
The Group'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, and that the Group is subject to low financial risk as a
result of having nil gearing and positive cash balances.
17. Contingencies and guarantees
As at 30 June 2016, the Company had the following financial commitments
in respect of investments:
-- Ryefield Court Care Limited; GBP190,000
-- Active Lives Care Limited; GBP180,000
-- DySIS Medical Limited; GBP87,000
-- Shinfield Lodge Care Limited; GBP50,000
-- Proveca Limited; GBP22,000
There are no contingencies or guarantees of the Company as at 30 June
2016 (2015: GBPnil).
Under the terms of the Transfer Agreement dated 16 January 2006, Crown
Place VCT PLC has indemnified its subsidiaries, CP1 VCT PLC and CP2 VCT
PLC in respect of all costs, claims and liabilities in exchange for the
transfer of assets.
18. Post balance sheet events
Since 30 June 2016 the Company has completed the following investment
transactions:
-- Investment of GBP220,000 in Secured by Design Limited;
-- Investment of GBP190,000 in Ryefield Court Care Limited;
-- Investment of GBP180,000 in Active Lives Care Limited;
-- Investment of GBP108,000 in Oviva AG;
-- Investment of GBP87,000 in DySIS Medical Limited;
-- Investment of GBP69,000 in Proveca Limited;
-- Investment of GBP27,000 in Abcodia Limited;
-- Proceeds of GBP50,000 (deferred consideration) from the sale of House of
Dorchester Limited in July 2014; and
-- Proceeds of GBP30,000 received from the repayment of loan stock by Kew
Green VCT (Stansted) Limited.
As detailed in note 1, CP2 VCT PLC is in the process of a members'
voluntary liquidation. HMRC clearance permitting closing the liquidation
was received on 13 June 2016 and therefore CP2 VCT PLC is expected to be
dissolved by the Registrar of Companies by the end of November 2016.
19. Related party transactions
Other than transactions with 100 per cent. owned Group companies and
those with the Manager as disclosed in note 4, there are no other
related party transactions.
20. Other information
The information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 434 of the
Companies Act 2006 for the years ended 30 June 2016 and 30 June 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 30
June 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 17 November 2016 at 11:00
am.
21. 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/CRWN, where the Report can be accessed
as a PDF document via a link in the 'Financial Reports and Circulars'
section.
Crown Place VCT PLC Split of investment portfolio by sector:
http://hugin.info/141806/R/2045481/764136.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: Crown Place VCT PLC via Globenewswire
http://www.closeventures.co.uk
(END) Dow Jones Newswires
September 30, 2016 09:17 ET (13:17 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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