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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Albion Enterprise Vct Plc | LSE:AAEV | London | Ordinary Share | GB00B1G3LR35 | 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% | 119.50 | 118.00 | 121.00 | 119.50 | 119.50 | 119.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Investors, Nec | 5.74M | 2.77M | 0.0274 | 43.61 | 120.55M |
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TIDMAAEV
As required by the UK Listing Authority's Disclosure and Transparency
Rules 4.1 and 6.3, Albion Enterprise VCT PLC today makes public its
information relating to the Annual Report and Financial Statements for
the year ended 31 March 2017.
This announcement was approved for release by the Board of Directors on
13 July 2017.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial
Statements for the year ended 31 March 2017 (which have been audited)
at: www.albion.capital/funds/AAEV.The Annual Report and Financial
Statements for the year ended 31 March 2017 will be available as a PDF
document via a link in the 'Financial Reports and Circulars' section.
The information contained in the Annual Report and Financial Statements
will include information as required by the Disclosure and Transparency
Rules, including Rule 4.1.
Investment objective and policy
The investment objective of Albion Enterprise VCT PLC (the "Company") is
to provide investors with a regular and predictable source of income,
combined with the prospect of longer term capital growth.
The Company achieves this by investing up to 50 per cent. of the net
funds raised in an asset-based portfolio of more stable businesses (the
"Asset-based Portfolio"). The balance of the net funds raised, other
than funds retained for liquidity purposes, are invested in a portfolio
of higher growth businesses across a variety of sectors of the UK
economy. These range from more stable, income producing businesses to
higher risk technology companies (the "Growth Portfolio"). In neither
category do portfolio companies normally have any external borrowing
with a charge ranking ahead of the Company. Up to two-thirds of
qualifying investments by cost comprise loan stock secured with a first
charge on the portfolio company's assets.
The Company's investment portfolio is structured to provide a balance
between income and capital growth for the longer term. The Asset-based
Portfolio is designed to provide stability and income whilst still
maintaining the potential for capital growth. The Growth Portfolio is
intended to provide diversified exposure through its portfolio of
investments in unquoted UK companies. Stock specific risk will be
reduced by the Company's policy of holding a diversified portfolio of
Qualifying Investments.
Under its Articles of Association, the Company's maximum exposure in
relation to gearing is restricted to 10 per cent. of its adjusted share
capital and reserves.
Subject to shareholder approval at the forthcoming Annual General
Meeting, the Company can, prior to investing in VCT qualifying assets,
invest cash in deposits, in floating rate notes or similar instruments
with banks or other financial institutions with credit ratings, assigned
by international credit agencies, of A or better (on acquisition) or up
to 10 per cent. of its assets, at the time of investment, in liquid
open-ended equity funds providing income and capital equity exposure
(where it is considered economic to do so).
Financial calendar
Record date for first dividend 4 August 2017
Annual General Meeting 12 noon on 22 August 2017
Payment date for first dividend 31 August 2017
Announcement of half-yearly result November 2017
for the six months ended 30 September 2017
Payment of second dividend (subject to Board February 2018
approval)
Financial highlights
10.9p Total return per share for the year ended 31 March
2017
5.0p Total tax-free dividend per share paid during the
year ended 31 March 2017
101.8p Net asset value per share as at 31 March 2017
135.6p Total shareholder return since launch to 31 March
2017
5.3% Tax free yield on share price (dividend per annum/share
price as at 31 March 2017)
31 March 2017 31 March 2016
(pence per share) (pence per share)
Dividends paid 5.00 5.00
Revenue return 0.64 1.85
Capital return 10.23 3.48
Net asset value 101.79 96.41
Total shareholder return to 31 March 2017:
Total dividends paid during the year ended: (pence per share)
31 March 2008 0.70
31 March 2009 1.65
31 March 2010 2.00
31 March 2011 3.00
31 March 2012 3.00
31 March 2013 3.50
31 March 2014 5.00
31 March 2015 5.00
31 March 2016 5.00
31 March 2017 5.00
Total dividends paid to 31 March 2017 33.85
Net asset value as at 31 March 2017 101.79
Total shareholder return to 31 March 2017 135.64
In addition to the dividends summarised above, the Board has declared a
first dividend for the year ending 31 March 2018, of 2.50 pence per
share to be paid on 31 August 2017 to shareholders on the register on 4
August 2017.
Notes
-- The dividend of 0.70 pence per share paid during the period ended 31
March 2008 and the first dividend of 0.40 pence per share paid during the
year ended 31 March 2009 were paid to shareholders who subscribed in the
2006/2007 offer only.
-- All dividends paid by the Company are paid free of income tax. It is an
H.M. Revenue & Customs requirement that dividend vouchers indicate the
tax element should dividends have been subject to income tax. Investors
should ignore this figure on the dividend voucher and need not disclose
any income they receive from a VCT on their tax return.
-- The net asset value of the Company is not its share price as quoted on
the official list of the London Stock Exchange. The share price of the
Company can be found in the Investment Companies - VCTs section of the
Financial Times on a daily basis.
-- Investors are reminded that it is common for shares in VCTs to trade at a
discount to their net asset value as tax reliefs are only obtainable on
initial subscription.
Chairman's statement
Introduction
The Company achieved a total return of 10.87 pence per share, following
the 5.33 pence per share total return for the previous year. This
excellent return results from the continued development of the
investment portfolio, with a number of the companies that we invest in
achieving strong growth.
Portfolio progress
During the year over GBP3.4 million was invested in new and existing
companies. New investments included GBP583,000 into Convertr Media,
GBP327,000 into Black Swan Data, GBP303,000 into Quantexa, GBP280,000
into Secured by Design, and GBP159,000 into Oviva AG.
Follow-on investments included GBP785,000 into DySIS Medical, GBP357,000
into OmPrompt Holdings, GBP345,000 into Proveca, GBP157,000 into Abcodia,
GBP169,000 into Mirada Medical, GBP141,000 into Cisiv, and GBP115,000
into Grapeshot.
The key exits in the period were the sales of Exco Intouch and Masters
Pharmaceuticals where we realised three and two times our investment
respectively. Further information can be found in the realisations table
on page 18 of the full Annual Report and Financial Statements.
Companies that performed particularly well during the period included
Egress Software, whose encrypted email services grew significantly;
Radnor House School, where the existing Twickenham school is now close
to capacity; and Grapeshot, where company's online advertising search
facilities are seeing increasing customer demand. Write-downs were made
on certain investments, in particular three of our medical technology
businesses, DySIS Medical, Abcodia and Cisiv which required further
finance during the year. Further details can be found in the Portfolio
of investments section on page 17 of the full Annual Report and
Financial Statements.
The investment income in the year was 31 per cent. below the previous
year. This was principally due to the interest receivable from a number
of our investments being reinvested within the companies to fund further
acquisitions.
Results and dividends
On 31 March 2017, the net asset value was 101.79 pence per share
compared to 96.41 pence per share on 31 March 2016. The revenue return
before taxation was GBP356,000 compared to GBP911,000 for the previous
year. The Company will pay a first dividend for the financial year to 31
March 2018 of 2.50 pence per share, in line with its policy of a 5 pence
per share annual dividend. The dividend will be paid on 31 August 2017
to shareholders on the register on 4 August 2017.
Modification to investment policy
As described more fully in the Strategic report, the Manager and Board
are updating the Company's capacity, under its investment policy, to
invest cash with a level of exposure to quoted equities, pending
deployment in suitable private equity opportunities.
The recent acquisition by Albion of OLIM Investment Managers provides an
opportunity to invest in an open-ended equity fund, delivering income
and capital growth, with good liquidity and with a good performance
record, without any double charging of management fees. This will be
subject to shareholder approval but both Board and Manager believe that
it is a positive development for the Company, particularly in a low
interest rate environment. The revision to policy will contain
restrictions as to the amount that can be invested in non-qualifying
investments and how the investments will be made, as more fully
described in the Strategic report below.
Continuation as a venture capital trust
As prescribed in the Company's Articles of Association, at the 2017
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 the Company has the potential to be a highly
effective long-term investment vehicle, with a reliable tax-free
dividend stream over the long term. Therefore, the Board recommends that
shareholders should vote in favour of the Company continuing as a
venture capital trust, as they intend to vote in respect of their own
shares. Further details regarding the resolution can be found in the
Directors' report on page 24 of the full Annual Report and Financial
Statements.
Performance incentive fee
The Board is pleased to announce that investment performance has
exceeded the targets set. Accordingly a management performance fee of
GBP255,000 is due for the year ended 31 March 2017, no such fee was
earned in previous years.
Further details can be found in the Strategic report below.
Share buy-backs
It remains the Board's policy to buy back shares in the market, subject
to the overall constraint that such purchases are in the Company's
interest, including the maintenance of sufficient resources for
investment in new and existing portfolio companies and the continued
payment of dividends to shareholders. 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.
Transactions with the Manager
Details of the transactions that took place with the Manager for the
year can be found in note 5.
Risks and uncertainties
The outlook for the UK and global economies continues to be the key risk
affecting your Company. The process for the withdrawal of Britain from
the European Union is likely to have an effect on the Company and its
investments. Although the extent of this is not quantifiable at this
time, we would expect it to be felt most in those sectors which are more
exposed to the consumer and business cycle.
Investment risk is mitigated through a variety of processes, including
our policy of ensuring that the Company has a first charge over
portfolio companies' assets wherever possible and of ensuring that the
portfolio is balanced through the inclusion of sectors that are less
exposed to the business and consumer cycles. A detailed analysis of the
other risks and uncertainties facing the business is shown in the
Strategic report below.
Albion VCTs Top Up Offers
In November 2016, the Company announced the launch of the Albion VCTs
Prospectus Top Up Offers 2016/2017. In aggregate, the Albion VCTs raised
GBP34 million across six of the VCTs managed by Albion Capital Group LLP,
with the Company raising GBP6 million.
The Company was pleased to announce on 20 February 2017 that it had
reached its GBP6m limit under its Offer which was fully subscribed and
closed. During the year the Company raised GBP5.6m under the Company's
Offer as part of the Albion VCTs Top Up Offers 2015/2016 and 2016/2017,
as shown in note 15. 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 identified.
The Company announced on 14 June 2017 that, subject to regulatory
approval, it intends to launch a prospectus top up offer of new ordinary
shares for subscription in the 2017/2018 and 2018/2019 tax years. Full
details of the Offer will be contained in a prospectus that is expected
to be published in early September 2017 and will be available on the
Albion Capital website (www.albion.capital).
Outlook and prospect
After an excellent result for the year, we remain confident that the
fundamentals within the companies that we are backing place the VCT well
for delivering positive shareholder returns.
Maxwell Packe
Chairman
13 July 2017
Strategic report
Investment objective and policy
The investment objective of the Company is to provide investors with a
regular and predictable source of income combined with the prospect of
longer term capital growth.
The Company intends to achieve this by investing up to 50 per cent. of
the net funds raised in an asset-based portfolio of more stable,
ungeared businesses (the "Asset-based Portfolio"). The balance of the
net funds raised, other than funds retained for liquidity purposes, are
invested in a portfolio of higher growth businesses across a variety of
sectors of the UK economy. These range from more stable, income
producing businesses to higher risk technology companies (the "Growth
Portfolio"). In neither category do portfolio companies normally have
any external borrowing with a charge ranking ahead of the Company. Up to
two-thirds of qualifying investments by cost comprise loan stock secured
with a first charge on the portfolio company's assets.
The Company's investment portfolio is structured to provide a balance
between income and capital growth for the longer term. The Asset-based
Portfolio is designed to provide stability and income whilst still
maintaining the potential for capital growth. The Growth Portfolio is
intended to provide diversified exposure through its portfolio of
investments in unquoted UK companies. Stock specific risk will be
reduced by the Company's policy of holding a diversified portfolio of
Qualifying Investments.
Subject to shareholder approval at the forthcoming Annual General
Meeting, the Company can, prior to investing in VCT qualifying assets,
invest cash in deposits, in floating rate notes or similar instruments
with banks or other financial institutions with credit ratings, assigned
by international credit agencies, of A or better (on acquisition) or up
to 10 per cent. of its assets, at the time of investment, in liquid
open-ended equity funds providing income and capital equity exposure
(where it is considered economic to do so). This is explained further
below.
Management of liquid resources
Since the Company's launch, non-qualifying investments have been held in
floating rate notes and bank deposits, with the latter category now
accounting for all of the Company's funds awaiting investment.
In November 2016, Albion Capital acquired OLIM Investment Managers
("OLIM"), a specialist fund manager of UK quoted equities. It is now
proposed that, in view of the very low interest rates earned on the
Company's bank deposits, that the current policy should be updated to
allow cash awaiting investment to be invested in liquid open-ended
equity funds including the SVS Albion OLIM UK Equity Income Fund
("OUEIF"). This is an authorised UK unit trust which has the objective
of achieving a return based on a combination of income and capital over
the long term, and invests in a diversified portfolio of FTSE-100 and
FTSE-250 UK companies. It has shown a total return, comprising income
and capital, since launch in 2002 of 212 per cent., and ranks 18 out of
55 of UK equity income funds in its performance over 10 years. Its
historic dividend yield is 4 per cent..
Any investment in OUEIF will be made as part of the Company's management
of surplus liquid funds, and will be limited to an amount of not more
than 10 per cent. of the company's net assets, from time to time, though
depending on market conditions, it may be much lower than this. The
holding will be capable of realisation within 7 days and, in order to
avoid double charging, Albion agrees to reduce that proportion of its
management fee relating to the investment in the OUEIF by 0.75 per
cent., which represents the OUEIF management fee charged by OLIM.
This change in investment policy, which is recommended by the Board,
together with other clarifications of the investment policy, is subject
to the approval of shareholders. Accordingly resolution 12 at the
forthcoming Annual General Meeting, which is set out on pages 56 and 57
of the full Annual Report and Financial Statements, will allow
shareholders to vote on the issue.
Current 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 31 March
2017. Details of the principal investments made by the Company are shown
in the Portfolio of investments on pages 17 and 18 of the full Annual
Report and Financial Statements.
Direction of portfolio
The analysis of the Company's investment portfolio shows that the
healthcare, renewable energy, and IT and other technology sectors
continue to be the largest elements of the portfolio.
The IT and other technology sector has continued to grow as a proportion
of the portfolio as we have continued to invest in key areas such as
cyber security and the management of big data. We are, however, looking
to invest in new asset-based sectors during the course of the year.
Results and dividend policy
GBP'000
Net revenue return for the year ended 31 March 2017 299
Net capital gain for the year ended 31 March 2017 4,781
Total return for the year ended 31 March 2017 5,080
Dividend of 2.50 pence per share paid on 31 August
2016 (1,156)
Dividend of 2.50 pence per share paid on 28 February
2017 (1,249)
Transferred to reserves 2,675
Net assets as at 31 March 2017 52,458
Net asset value per share as at 31 March 2017 (pence) 101.79
The Company paid dividends totaling 5.00 pence per share during the year
ended 31 March 2017 (2016: 5.00 pence per share). As described in the
Chairman's statement, the Board has declared a first dividend of 2.50
pence per share for the year ending 31 March 2018. This dividend will be
paid on 31 August 2017 to shareholders on the register on 4 August 2017.
As shown in the Company's Income statement below, investment income
decreased to GBP939,000 (2016: GBP1,367,000) due to capitalising
interest on a number of companies in order to fund further acquisitions.
The capital gain for the year of GBP4,781,000 (2016: GBP1,410,000), was
mainly attributable to the upward unrealised revaluations in the
Company's investment portfolio.
The total return was 10.87 pence per share (2016: 5.33 pence per share).
The Balance sheet below shows that the net asset value has increased
over the last year to 101.79 pence per share (2016: 96.41 pence per
share), attributable to the increased valuations.
The cash flow for the Company has been a net inflow of GBP6,000 for the
year (2016: net inflow of GBP3,359,000), reflecting cash inflows from
operations, disposal of investments and the issue of Ordinary shares
under the Albion VCTs Top Up Offers which raised GBP5.6 million (GBP0.3
million received after the year end), offset by dividends paid, new
investments in the year and the buy-back of shares.
Review of business and future changes
A review of the Company's portfolio performance and progress during the
year is contained in the Chairman's statement. Total gains on
investments for the year were GBP5.8 million (2016: GBP2.0 million). The
key contributors to this were the increase in valuations of Egress
Software Technologies of GBP2,567,000, Grapeshot of GBP1,017,000,
Proveca of GBP980,000 and Radnor House School (Holdings) of GBP852,000.
These gains more than offset the reduction in value of a small number of
our investments, the largest being DySIS Medical of GBP710,000, Abcodia
of GBP478,000 and Cisiv of GBP453,000. Two of our investments, Exco
Intouch and Masters Pharmaceuticals were sold during the year for a gain
on cost of GBP1,856,000 and GBP363,000 respectively.
The Directors do not foresee any major changes in the activity
undertaken by the Company in the current year. The Company continues
with its objective to invest in unquoted companies throughout the United
Kingdom with a view to providing both capital growth and a reliable
dividend income to shareholders over the long term.
Details of significant events which have occurred since the end of the
financial year are listed in note 19. Details of transactions with the
Manager are shown in note 5.
VCT regulation
The investment policy is designed to ensure that the Company continues
to qualify and is approved as a VCT by HMRC. In order to maintain its
status under Venture Capital Trust legislation, a VCT must comply on a
continuing basis with the provisions of Section 274 of the Income Tax
Act 2007, details of which are provided in the Directors' report on page
22 of the full Annual Report and Financial Statements.
As part of EU state obligations, new rules have been introduced under
the Finance Act (No.2) 2015 and Finance Act 2016, which include:
-- Restrictions over the age of investments;
-- A prohibition on management buyouts or the purchase of existing
businesses;
-- An overall lifetime investment cap of GBP12 million from tax-advantaged
funds into any portfolio company; and
-- A VCT can only make qualifying investments or certain specified
non-qualifying investments such as money market securities and short term
deposits.
While these changes are significant, the Company has been advised that,
had they been in place previously, they would have affected only a
relatively small minority of the investments that we have made into new
portfolio companies over recent years. The Board's current view is that
there will be no material change in our investment policy and the
application of it as a result.
Future prospects
The key drivers for returns within the portfolio are those sectors that
are involved in the longer-term global trends. These include the
importance of healthcare in an ageing population; sustainable energy
against a background of climate change; education amid the need to
improve the national skills base; and the developing use of information
technology in an environment of universal information. The portfolio is
well positioned to take advantage of these changes.
Key performance indicators
The Directors believe that the following key performance indicators,
which are typical for venture capital trusts, used in their own
assessment of the Company, will provide shareholders with sufficient
information to assess how effectively the Company is applying its
investment policy to meet its objectives. The Directors are satisfied
that the results shown in the following key performance indicators give
a good indication that the Company is achieving its investment objective
and policy. These are:
1. Total shareholder return relative to FTSE All Share Index total return
The graph on page 4 of the full Annual Report and Financial Statements
shows the Company's total shareholder return against the FTSE All-Share
Index total return, with dividends reinvested.
1. Net asset value per share and total shareholder return
Net asset value per share increased by 5.6 per cent. to 101.79 pence per
share for the year ended 31 March 2017.
Total shareholder return increased by 8.3 per cent. to 135.64 pence per
share for the year ended 31 March 2017.
1. Dividend distributions
Dividends paid in respect of the year ended 31 March 2017 were 5.00
pence per share (2016: 5.00 pence per share), in line with the Board's
dividend objective. The cumulative dividend paid since inception is
33.85 pence per share.
1. Ongoing charges
The ongoing charges ratio for the year ended 31 March 2017 was 3.0 per
cent. (2016: 3.0 per cent.) against a cap of 3.0 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 3.0 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 gearing for the Company. On an exceptional
basis, certain portfolio companies may take on external borrowings,
where the Board considers this will offer a significant benefit to the
Company.
Operational arrangements
The Company has delegated the investment management of the portfolio to
Albion Capital Group LLP, which is authorised and regulated by the
Financial Conduct Authority. Albion Capital Group LLP also provides
company secretarial and other accounting and administrative support to
the Company.
Management agreement
Under the Management agreement, the Manager provides investment
management, secretarial and administrative services to the Company. The
Management agreement can be terminated by either party on 12 months'
notice. The Management agreement is subject to earlier termination in
the event of certain breaches or on the insolvency of either party. The
Manager is paid an annual fee equal to 2.5 per cent. of the net asset
value of the Company, payable quarterly in arrears. Total annual
expenses, including the management fee, are limited to 3.0 per cent. of
the net asset value.
In line with common practice, the Manager is also entitled to an
arrangement fee, payable by each portfolio company, of approximately 2
per cent. on each investment made and Directors' fees where the Manager
has a representative on the portfolio company's board.
Management performance incentive
In order to provide the Manager with an incentive to maximise the return
to investors, the Company has entered into a Management performance
incentive arrangement with the Manager. Under the incentive arrangement,
the Company will pay an incentive fee to the Manager of an amount equal
to 20 per cent. of such excess return that is calculated for each
financial year.
The minimum target level, comprising dividends and net asset value, will
be equivalent to an annualised rate of return of the average base rate
of the Royal Bank of Scotland plc plus 2 per cent. per annum on the
original subscription price of GBP1. Any shortfall of the target return
will be carried forward into subsequent periods and the incentive fee
will only be paid once all previous and current target returns have been
met.
For the year ended 31 March 2017, the total return of the Company since
launch (the performance incentive fee start date) amounted to 135.64
pence per share, compared to the hurdle of 132.92 pence per share. As a
result, a performance incentive fee is payable to the Manager of
GBP255,000 (2016: GBPnil).
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 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 and remuneration 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 appointed Albion Capital Group LLP as the Company's AIFM in
June 2014 as required by the AIFMD.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Companies
Act 2006 to detail information about social and community issues,
employees and human rights; including any policies it has in relation to
these matters and effectiveness of these policies. As an externally
managed investment company with no employees, the Company has no
policies in these matters and as such these requirements do not apply.
Further policies
The Company has adopted a number of further policies relating to:
-- Environment
-- Global greenhouse gas emissions
-- Anti-bribery
-- Diversity
and these are set out in the Directors' report on pages 22 and 23 of the
full Annual Report and Financial Statements.
Risk management
The Board carries out a robust review of the risk environment in which
the Company operates. The principal risks and uncertainties of the
Company as identified by the Board and how they are managed are as
follows:
Risk Possible consequence Risk management
Investment The risk of investment in poor quality assets, which To reduce this risk, the Board places reliance upon
and could reduce the capital and income returns to shareholders, the skills and expertise of the Manager and its track
performance and could negatively impact on the Company's current record over many years of making successful investments
risk and future valuations. in this segment of the market. In addition, the Manager
By nature, smaller unquoted businesses, such as those operates a formal and structured investment appraisal
that qualify for venture capital trust purposes, are and review process, which includes an Investment Committee,
more fragile than larger, long established businesses. comprising investment professionals from the Manager
and at least one external investment professional.
The Manager also invites and takes account of comments
from non-executive Directors of the Company on investments
discussed at the Investment Committee meetings. Investments
are actively and regularly monitored by the Manager
(investment managers normally sit on portfolio company
boards), including the level of diversification in
the portfolio, and the Board receives detailed reports
on each investment as part of the Manager's report
at quarterly board meetings.
VCT The Company must comply with section 274 of the Income To reduce this risk, the Board has appointed the Manager,
approval Tax Act 2007 which enables its investors to take advantage which has a team with significant experience in venture
risk of tax relief on their investment and on future returns. capital trust management, used to operating within
Breach of any of the rules enabling the Company to the requirements of the venture capital trust legislation.
hold VCT status could result in the loss of that status. In addition, to provide further formal reassurance,
the Board has appointed Philip Hare & Associates LLP
as its taxation adviser, who report quarterly to the
Board to independently confirm compliance with the
venture capital trust legislation, to highlight areas
of risk and to inform on changes in legislation. Each
investment in a new portfolio company is also pre-cleared
with H.M. Revenue & Customs.
Regulatory The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
and and is required to comply with the rules of the UK at senior levels within or advising quoted companies.
compliance Listing Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
risk Accounting Standards and other legislation. Failure updates on new regulation from its auditor, lawyers
to comply with these regulations could result in a and other professional bodies. The Company is subject
delisting of the Company's shares, or other penalties to compliance checks through the Manager's Compliance
under the Companies Act or from financial reporting Officer. The Manager reports monthly to its Board
oversight bodies. on any issues arising from compliance or regulation.
These controls are also reviewed as part of the quarterly
Board meetings, and also as part of the review work
undertaken by the Manager's Compliance Officer. The
report on controls is also evaluated by the internal
auditors.
Operational The Company relies on a number of third parties, in The Company and its operations are subject to a series
and particular the Manager, for the provision of investment of rigorous internal controls and review procedures
internal management and administrative functions. Failures exercised throughout the year.
control in key systems and controls within the Manager's business The Audit Committee reviews the Internal Audit Reports
risk could put assets of the Company at risk or result prepared by the Manager's internal auditors, PKF Littlejohn
in reduced or inaccurate information being passed LLP. On an annual basis, the Audit Committee chairman
to the Board or to shareholders. meets with the internal audit Partner to provide an
opportunity to ask specific detailed questions in
order to satisfy itself that the Manager has strong
systems and controls in place including those in relation
to business continuity and cyber security.
In addition, the Board regularly reviews the performance
of its key service providers, particularly the Manager,
to ensure they continue to have the necessary expertise
and resources to deliver the Company's investment
objective and policies. The Manager and other service
providers have also demonstrated to the Board that
there is no undue reliance placed upon any one individual
within Albion Capital Group LLP.
Economic Changes in economic conditions, including, for example, The Company invests in a diversified portfolio of
and interest rates, rates of inflation, industry conditions, companies across a number of industry sectors and
political competition, political and diplomatic events and other in addition often invests a mixture of equity and
risk factors could substantially and adversely affect the secured loan stock in portfolio companies and has
Company's prospects in a number of ways. a policy of not normally permitting any external bank
borrowings within portfolio companies. At any given
time, the Company has sufficient cash resources to
meet its operating requirements, including share buybacks
and follow on investments.
Market The market value of Ordinary shares can fluctuate. The Company operates a share buyback policy, which
value of The market value of an Ordinary share, as well as is designed to limit the discount at which the Ordinary
Ordinary being affected by its net asset value and prospective shares trade to around 5 per cent to net asset value,
shares net asset value, also takes into account its dividend by providing a purchaser through the Company in absence
yield and prevailing interest rates. As such, the of market purchasers. From time to time buybacks cannot
market value of an Ordinary share may vary considerably be applied, for example when the Company is subject
from its underlying net asset value. The market prices to a close period, or if it were to exhaust its buyback
of shares in quoted investment companies can, therefore, authorities, which are renewed each year.
be at a discount or premium to the net asset value New Ordinary shares are issued at sufficient premium
at different times, depending on supply and demand, to net asset value to cover the costs of issue and
market conditions, general investor sentiment and to avoid asset value dilution to existing investors.
other factors. Accordingly the market price of the
Ordinary shares may not fully reflect their underlying
net asset value.
Viability statement
In accordance with the FRC UK Corporate Governance Code published in
September 2014 and principle 21 of the AIC Code of Corporate Governance,
the Directors have assessed the prospects of the Company over three
years to 31 March 2020. The Directors believe that three years is a
reasonable period in which they can assess the future of the Company to
continue to operate and meet its liabilities as they fall due and is
also the period used by the Board in the strategic planning process and
is considered reasonable for a business of our nature and size. The
three year period is considered the most appropriate given the forecasts
that the Board require from the Manager and the estimated timelines for
finding, assessing and completing investments.
The Directors have carried out a robust assessment of the principal
risks facing the Company as explained above, including those that could
threaten its business model, future performance, solvency or liquidity.
The Board also considered the risk management processes in place to
avoid or reduce the impact of the underlying risks. The Board focused on
the major factors which affect the economic, regulatory and political
environment. The Board deliberated over the importance of the Manager
and the processes that they have in place for dealing with the principal
risks.
The Board assessed the ability of the Company to raise finance. The
portfolio is well balanced and geared towards long term growth
delivering dividends and capital growth to shareholders. In assessing
the prospects of the Company, the Directors have considered the cash
flow by looking at the Company's income and expenditure projections and
funding pipeline over the assessment period of three years and they
appear realistic.
Taking into account the processes for mitigating risks, monitoring costs,
share price discount, the Manager's compliance with the investment
objective, policies and business model and the balance of the portfolio
the Directors have concluded that there is a reasonable expectation that
the Company will be able to continue in operation and meet its
liabilities as they fall due over the three year period to 31 March
2020.
This Strategic report of the Company for the year ended 31 March 2017
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,
Maxwell Packe
Chairman
13 July 2017
Responsibility statement
In preparing these Financial Statements for the year to 31 March 2017,
the Directors of the Company, being Maxwell Packe, Lady Balfour of
Burleigh, Lord St John of Bletso and Patrick Reeve, confirm that to the
best of their knowledge:
- summary financial information contained in this announcement and the
full Annual Report and Financial Statements for the year ended 31 March
2017 for the Company have been prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (UK Accounting Standards
and applicable law) and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Company for
the year ended 31 March 2017 as required by DTR 4.1.12R;
- the Chairman's statement and Strategic report include a fair review of
the information required by DTR 4.2.7R (indication of important events
during the year ended 31 March 2017 and description of principal risks
and uncertainties that the Company faces); and
- the Chairman's statement and Strategic report includes a fair review
of the information required by DTR 4.2.8R (disclosure of related parties
transactions and changes therein).
A detailed "Statement of Directors' responsibilities" is contained on
page 26 within the full audited Annual Report and Financial Statements.
By order of the Board
Maxwell Packe
Chairman
13 July 2017
Income statement
Year ended Year ended
31 March 2017 31 March 2016
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments 3 - 5,790 5,790 - 2,003 2,003
Investment income 4 939 - 939 1,367 - 1,367
Investment management fees 5 (292) (875) (1,167) (247) (741) (988)
Performance incentive fee 5 (64) (191) (255) - - -
Other expenses 6 (227) - (227) (209) - (209)
Return on ordinary activities before tax 356 4,724 5,080 911 1,262 2,173
Tax (charge)/credit on ordinary activities 8 (57) 57 - (159) 148 (11)
Return and total comprehensive income attributable
to shareholders 299 4,781 5,080 752 1,410 2,162
Basic and diluted return per share (pence)* 10 0.64 10.23 10.87 1.85 3.48 5.33
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
The total column of this Income statement represents the profit and loss
account of the Company. The supplementary revenue and capital columns
have been prepared in accordance with the Association of Investment
Companies' Statement of Recommended Practice.
Balance sheet
31 March 31 March
2017 2016
Note GBP'000 GBP'000
Fixed asset investments 11 37,775 32,971
Current assets
Trade and other receivables less than one year 13 232 2,880
Cash and cash equivalents 15,121 8,980
15,353 11,860
Total assets 53,128 44,831
Payables: amounts falling due within one year
Trade and other payables less than one year 14 (670) (361)
Total assets less current liabilities 52,458 44,470
Equity attributable to equity holders
Called up share capital 15 580 518
Share premium 23,225 17,285
Capital redemption reserve 104 104
Unrealised capital reserve 9,910 6,389
Realised capital reserve 1,284 24
Other distributable reserve 17,355 20,150
Total equity shareholders' funds 52,458 44,470
Basic and diluted net asset value per share (pence)
* 16 101.79 96.41
* 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
were authorised for issue on 13 July 2017 and were signed on its behalf
by
Maxwell Packe
Chairman
Company number: 05990732
Statement of changes in equity
Called up Unrealised Realised
share Share capital capital Other distributable
capital premium Capital redemption reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 April 2016 518 17,285 104 6,389 24 20,150 44,470
Return/(loss) and total comprehensive income for the
year - - - 5,016 (235) 299 5,080
Transfer of previously unrealised gains on sale of
investments - - - (1,495) 1,495 - -
Issue of equity 62 6,106 - - - - 6,168
Cost of issue of equity - (166) - - - - (166)
Purchase of shares for treasury - - - - - (689) (689)
Dividends paid - - - - - (2,405) (2,405)
As at 31 March 2017 580 23,225 104 9,910 1,284 17,355 52,458
As at 1 April 2015 409 6,969 104 4,189 814 22,177 34,662
Return/(loss) and total comprehensive income for the
year - - - 2,047 (637) 752 2,162
Transfer of previously unrealised losses on sale of
investments - - - 153 (153) - -
Issue of equity 109 10,610 - - - - 10,719
Cost of issue of equity - (294) - - - - (294)
Purchase of shares for treasury - - - - - (692) (692)
Dividends paid - - - - - (2,087) (2,087)
As at 31 March 2016 518 17,285 104 6,389 24 20,150 44,470
* These reserves amount to GBP18,639,000 (2016: GBP20,174,000) which is
considered distributable.
Statement of cash flows
Year ended Year ended
31 March 2017 31 March 2016
GBP'000 GBP'000
Cash flow from operating activities
Investment income received 733 1,098
Dividend income received 70 117
Deposit interest received 76 84
Investment management fees paid (1,117) (927)
Other cash payments (226) (208)
UK corporation tax (paid)/refund (11) 8
Net cash flow from operating activities (475) 172
Cash flow from investing activities
Purchase of fixed asset investments (3,375) (2,941)
Disposal of fixed asset investments 4,424 1,114
Net cash flow from investing activities 1,049 (1,827)
Cash flow from financing activities
Issue of share capital (1) 8,271 7,499
Cost of issue of equity (1) (7)
Dividends paid (2,037) (1,786)
Purchase of own shares (including costs) (666) (692)
Net cash flow from financing activities 5,567 5,014
Increase in cash and cash equivalents 6,141 3,359
Cash and cash equivalents at start of the
year 8,980 5,621
Cash and cash equivalents at end of the year 15,121 8,980
Cash and cash equivalents comprise
Cash at bank and in hand 15,121 8,980
Cash equivalents - -
Total cash and cash equivalents 15,121 8,980
1. Amounts received in the year included GBP2,634,000 from the share issue
declared in March 2016.
Notes to the Financial Statements
1. Accounting convention
The Financial Statements have been prepared in accordance with the
historical cost convention, modified to include the revaluation of
investments, in accordance with applicable United Kingdom law and
accounting standards, including Financial Reporting Standard 102 ("FRS
102"), and with the 2014 Statement of Recommended Practice "Financial
Statements of Investment Trust Companies and Venture Capital Trusts"
("SORP") issued by The Association of Investment Companies ("AIC").
The preparation of the Financial Statements requires management to make
judgements and estimates that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. The most
critical estimates and judgements relate to the determination of
carrying value of investments at fair value through profit and loss
(FVTPL). The Company values investments by following the IPEVCV
Guidelines and further detail on the valuation techniques used are
outlined in note 2 below.
Company information can be found on page 2 of the full Annual Report and
Financial Statements.
2. Accounting policies
Fixed asset investments
The Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital
growth. This portfolio of financial assets is managed and its
performance evaluated on a fair value basis, in accordance with a
documented investment policy, and information about the portfolio is
provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those undertakings in
which the Company holds more than 20 per cent. of the equity as part of
an investment portfolio are not accounted for using the equity method.
In these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments,
including loan stock, are classified by the Company as FVTPL and are
included at their initial fair value, which is cost (excluding expenses
incidental to the acquisition which are written off to the Income
statement).
Subsequently, the investments are valued at 'fair value', which is
measured as follows:
-- Investments listed on recognised exchanges are valued at their bid prices
at the end of the accounting period or otherwise at fair value based on
published price quotations;
-- Unquoted investments, where there is not an active market, are valued
using an appropriate valuation technique in accordance with the IPEVCV
Guidelines. Indicators of fair value are derived using established
methodologies including earnings multiples, the level of third party
offers received, prices of recent investment rounds, net assets and
industry valuation benchmarks. Where the Company has an investment in an
early stage enterprise, the price of a recent investment round is often
the most appropriate approach to determining fair value. In situations
where a period of time has elapsed since the date of the most recent
transaction, consideration is given to the circumstances of the portfolio
company since that date in determining fair value. This includes
consideration of whether there is any evidence of deterioration or strong
definable evidence of an increase in value. In the absence of these
indicators, the investment in question is valued at the amount reported
at the previous reporting date. Examples of events or changes that could
indicate a diminution include:
-- the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was
based;
-- a significant adverse change either in the portfolio company's
business or in the technological, market, economic, legal or
regulatory environment in which the business operates; or
-- market conditions have deteriorated, which may be indicated by a
fall in the share prices of quoted businesses operating in the
same or related sectors.
Investments are recognised as financial assets on legal completion of
the investment contract and are de-recognised on legal completion of the
sale of an investment.
Dividend income is not recognised as part of the fair value movement of
an investment, but is recognised separately as investment income through
the other distributable reserve when a share becomes ex-dividend.
Receivables and payables and cash are carried at amortised cost, in
accordance with FRS 102. There are no financial liabilities other than
payables.
Investment income
Equity income
Dividend income is included in revenue when the investment is quoted
ex-dividend.
Unquoted loan stock and other preferred income
Fixed returns on non-equity shares and debt securities are recognised
when the Company's right to receive payment and expect settlement is
established. Where interest is rolled up and/or payable at redemption
then it is recognised as income unless there is reasonable doubt as to
its receipt.
Bank interest income
Interest income is recognised on an accrual basis using the rate of
interest agreed with the bank.
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are
charged through the other distributable reserve except the following
which are charged through the realised capital reserve:
-- 75 per cent. of management fees are allocated to the capital account to
the extent that these relate to an enhancement in the value of the
investments. This is in line with the Board's expectation that over the
long term 75 per cent. of the Company's investment returns will be in the
form of capital gains; and
-- expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Performance incentive fee
Any performance incentive fee will be allocated between other
distributable and realised capital reserves based upon the proportion to
which the calculation of the fee is attributable to revenue and capital
returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 102.
Current tax is tax payable (refundable) in respect of the taxable profit
(tax loss) for the current period or past reporting periods using the
tax rates and laws that have been enacted or substantively enacted at
the financial reporting date. Taxation associated with capital expenses
is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the
reporting date. Timing differences are differences between taxable
profits and total comprehensive income as stated in the Financial
Statements that arise from the inclusion of income and expenses in tax
assessments in periods different from those in which they are recognised
in the Financial Statements. As a VCT the Company has an exemption from
tax on capital gains. The Company intends to continue meeting the
conditions required to obtain approval as a VCT in the foreseeable
future. The Company therefore, should have no material deferred tax
timing differences arising in respect of the revaluation or disposal of
investments and the Company has not provided for any deferred tax.
Reserves
Share premium account
This reserve accounts for the difference between the price paid for
shares and the nominal value of the shares, less issue costs.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is
diminished through the repurchase and cancellation of the Company's own
shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year
end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments, or
permanent diminutions in value;
-- expenses, together with the related taxation effect, charged in
accordance with the above policies; and
-- dividends paid to equity holders where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were
combined in 2013 to form a single reserve named other distributable
reserve.
This reserve accounts for movements from the revenue column of the
Income statement, the payment of dividends, the buy-back of shares and
other non-capital realised movements.
Dividends
Dividends by the Company are accounted for in the period in which the
dividend is paid or approved at the Annual General Meeting.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
operating segment of business, being investment in equity and debt. The
Company invests in smaller companies principally based in the UK.
3. Gains on investments
Year ended Year ended
31 March 2017 31 March 2016
GBP'000 GBP'000
Unrealised gains on fixed asset investments 5,016 2,047
Realised gains/(losses) on fixed asset
investments 774 (44)
5,790 2,003
4. Investment income
Year ended Year ended
31 March 2017 31 March 2016
GBP'000 GBP'000
Income recognised on investments
Interest from loans to portfolio companies 800 1,166
Dividends 70 117
Bank deposit interest 69 84
939 1,367
Interest income earned on impaired investments at 31 March 2017 amounted
to GBP15,000 (2016: GBP45,000).
All of the Company's income is derived from operations in the United
Kingdom.
5. Investment management fees
Year ended Year ended
31 March 2017 31 March 2016
GBP'000 GBP'000
Investment management fee charged to revenue 292 247
Investment management fee charged to capital 875 741
Performance incentive fee charged to revenue 64 -
Performance incentive fee charged to capital 191 -
1,422 988
Further details of the Management agreement under which the investment
management fee and performance incentive fee are paid is given in the
Strategic report.
During the year, services of a total value of GBP1,167,000 (2016:
GBP988,000) were purchased by the Company from Albion Capital Group LLP
in respect of management fees. In addition, a performance incentive fee
with a value of GBP255,000 (2016: GBPnil) has been disclosed in the
Income statement. At the financial year end, the amount due to Albion
Capital Group LLP in respect of these services disclosed as accruals and
deferred income was GBP583,000 (2016: GBP278,000).
Patrick Reeve is the managing partner of the Manager, Albion Capital
Group LLP. During the year, the Company was charged by Albion Capital
Group LLP GBP24,000 including VAT (2016: GBP21,600) in respect of his
services as a Director. At the year end, the amount due to Albion
Capital Group LLP in respect of these services disclosed as accruals and
deferred income was GBP6,000 (2016: GBP5,400).
Albion Capital Group LLP, holds 17,262 Ordinary shares in the Company.
The Manager is, from time to time, eligible to receive transaction fees
and Directors' fees from portfolio companies. During the year ended 31
March 2017, fees of GBP167,000 attributable to the investments of the
Company were received pursuant to these arrangements (2016: GBP162,000).
6. Other expenses
Year ended Year ended
31 March 2017 31 March 2016
GBP'000 GBP'000
Directors' fees and associated costs (inclusive of
NIC and VAT) 97 85
Auditor's remuneration for statutory audit services
(exclusive of VAT) 26 27
Other administrative expenses 104 97
227 209
7. Directors' fees and associated costs
The amounts paid to and on behalf of the Directors during the year are
as follows:
Year ended Year ended
31 March 2017 31 March 2016
GBP'000 GBP'000
Directors' fees 86 74
National insurance and/or VAT 10 8
Expenses 1 3
97 85
The Company's key management personnel are the Directors. Expenses
charged related to travel expenses in furtherance of their duties as
Directors. Further information regarding Directors' remuneration can be
found in the Directors' remuneration report on pages 32 and 33 of the
full Annual Report and Financial Statements.
8. Tax charge on ordinary activities
Year ended Year ended
31 March 2017 31 March 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK corporation tax
in respect of the
current year 57 (57) - 159 (148) 11
UK corporation tax
in respect of
prior year - - - - - -
57 (57) - 159 (148) 11
Year ended Year ended
31 March 2017 31 March 2016
GBP'000 GBP'000
Return on ordinary activities before tax 5,080 2,173
Tax charge on profit at the standard companies rate
of 20% (2016: 20%) 1,016 435
Factors affecting the charge:
Non taxable gains (1,158) (401)
Income not taxable (14) (23)
Unutilised management expenses 156 -
- 11
The tax charge for the year shown in the Income statement is lower than
the standard company's rate of corporation tax in the UK of 20 per cent.
(2016: 20 per cent.). The differences are explained above.
The Company has excess management expenses of GBP779,000 (2016: GBPnil)
that are available for offset against future profits. A deferred tax
asset of GBP132,000 (2016: GBPnil) has not been recognised in respect of
those losses as they will be recoverable only to the extent that the
Company has sufficient future taxable profits.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on
capital gains.
(ii) Tax relief on expenses charged to capital has been
determined by allocating tax relief to expenses by reference to the
applicable corporation tax rate and allocating the relief between
revenue and capital in accordance with the SORP.
9. Dividends
Year ended
Year ended 31 March 2016
31 March 2017 GBP'000 GBP'000
Dividend of 2.50p per share paid on 28
August 2015 - 999
Dividend of 2.50p per share paid on 29
February 2016 - 1,088
Dividend of 2.50p per share paid on 31
August 2016 1,156 -
Dividend of 2.50p per share paid on 28
February 2017 1,249 -
2,405 2,087
Details of the consideration paid under the Dividend Reinvestment Scheme
included in the dividends above can be found in note 15.
In addition to the dividends summarised above, the Board has declared a
first dividend for the year ending 31 March 2018 of 2.50 pence per
share. This dividend will be paid on 31 August 2017 to shareholders on
the register on 4 August 2017. The total dividend will be approximately
GBP1,296,000.
10. Basic and diluted return per share
Year ended Year ended
31 March 2017 31 March 2016
Revenue Capital Total Revenue Capital Total
The return per share has been based on the following
figures:
Return attributable to equity shares (GBP'000) 299 4,781 5,080 911 1,262 2,173
Weighted average shares in issue (excluding treasury
shares) 46,759,602 40,534,139
Return attributable per equity share (pence) 0.64 10.23 10.87 1.85 3.48 5.33
There are no convertible instruments, derivatives or contingent share
agreements in issue for the Company, and therefore no dilution affecting
the return per share. The basic return per share is therefore the same
as the diluted return per share.
The weighted average number of shares is calculated excluding treasury
shares of 6,429,443 (2016: 5,670,000).
11. Fixed asset investments
31 March 2017 31 March 2016
GBP'000 GBP'000
Investments held at fair value through profit or loss
Unquoted equity and preference shares 21,426 16,734
Quoted equity 368 605
Unquoted loan stock 15,981 15,632
37,775 32,971
31 March 2017 31 March 2016
GBP'000 GBP'000
Opening valuation 32,971 29,283
Purchases at cost 3,407 2,941
Disposal proceeds (4,427) (1,324)
Realised gains/(losses) 774 (44)
Movement in loan stock revenue accrued income 35 67
Unrealised gains 5,016 2,047
Closing valuation 37,775 32,971
Movement in loan stock revenue accrued income
Opening accumulated movement in loan stock revenue
accrued income 181 114
Movement in loan stock revenue accrued income 35 67
Closing accumulated movement in loan stock revenue
accrued income 216 181
Movement in unrealised gains
Opening accumulated unrealised gains 6,389 4,189
Movement in unrealised gains 5,016 2,047
Transfer of previously unrealised (gains)/losses to
realised reserve on disposal of investments (1,495) 153
Closing accumulated unrealised gains 9,910 6,389
Historic cost basis
Opening book cost 26,400 24,980
Purchases at cost 3,407 2,941
Sales at cost (2,158) (1,521)
Closing book cost 27,649 26,400
The amounts shown for the purchase and disposal of fixed assets included
in the cash flow statement differ from the amounts shown above, due to
deferred consideration shown as a receivable, and investment settlement
recievables and payables.
The Company does not hold any assets as the result of an enforcement of
security during the period, and believes that the carrying values for
both impaired and past due assets are covered by the value of security
held for these loan stock investments.
Unquoted fixed asset investments are valued at fair value in accordance
with the IPEVCV guidelines as follows:
31 March 31 March
2017 2016
Valuation methodology GBP'000 GBP'000
Valuation supported by third party valuation or desktop
valuation 16,950 15,851
Cost and price of recent investment (reviewed for
impairment or uplift) 14,640 7,365
Revenue multiple 4,115 6,128
Earnings multiple 1,702 2,448
Discount to third party offer - 574
37,407 32,366
Full valuations are prepared by independent RICS qualified surveyors in
full compliance with the RICS Red Book.
Fair value investments had the following movements between valuation
methodologies between 31 March 2016 and 31 March 2017:
Change in valuation Value as at Explanatory note
methodology (2016 31 March 2017
to 2017) GBP'000
Revenue multiple to 3,949 Investment round has recently taken place
price of recent
investment
Discount to third 1,329 Investment round has recently taken place
party offer to
price of recent
investment
Cost to revenue 532 More relevant valuation methodology
multiple
The valuation will be the most appropriate valuation methodology for an
investment within its market, with regard to the financial health of the
investment and the IPEVCV Guidelines. The Directors believe that, within
these parameters, there are no other possible methods of valuation which
would be reasonable as at 31 March 2017.
FRS 102 and the SORP requires the Company to disclose the inputs to the
valuation methods applied to its investments measured at fair value
through profit or loss in a fair value hierarchy. The table below sets
out fair value hierarchy definitions using FRS102 s.11.27, which has
been adopted early.
Fair value hierarchy Definition
Level 1 Unadjusted quoted prices in an active market
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
Level 3 Inputs to valuations not based on observable market
data
Quoted investments are valued according to Level 1 valuation methods.
Unquoted equity, preference shares and loan stock are all valued
according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3) had the
following movements in the year to 31 March 2017:
31 March 2017 31 March 2016
Unquoted Unquoted
Equity loan stock Total Equity loan stock Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Opening balance 16,734 15,632 32,366 13,933 14,836 28,769
Additions 2,345 1,062 3,407 1,484 1,458 2,942
Disposals (3,271) (1,156) (4,427) (547) (777) (1,324)
Realised
gains/(losses) 774 - 774 (51) 7 (44)
Debt/equity
swap 343 (343) - 293 (293) -
Accrued loan
stock
interest - 35 35 - 67 67
Unrealised
gains 4,501 751 5,252 1,622 334 1,956
Closing balance 21,426 15,981 37,407 16,734 15,632 32,366
FRS 102 requires the Directors to consider the impact of changing one or
more of the inputs used as part of the valuation process to reasonable
possible alternative assumptions. 71 per cent. of the portfolio of
investments is based on cost, recent investment price or is loan stock,
and as such the Board considers that the assumptions used for their
valuations are the most reasonable. The Directors believe that changes
to reasonable possible alternative assumptions (by adjusting the revenue
and earnings multiples) for the valuations of the remainder of the
portfolio companies could result in an increase in the valuation of
investments by GBP463,000 or a decrease in the valuation of investments
by GBP702,000. For valuations based on earnings and revenue multiples,
the Board considers that the most significant input is the
price/earnings ratio; for valuations based on third party valuations,
the Board considers that the most significant inputs are price/earnings
ratio, discount factors and market values for buildings; which have been
adjusted to drive the above sensitivities.
12. Significant interests
The principal activity of the Company is to select and hold a portfolio
of investments in unquoted securities. Although the Company, through the
Manager, will, in some cases, be represented on the board of the
portfolio company, it will not take a controlling interest or become
involved in the management 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 investments listed below are held as part of
an investment portfolio and therefore, as permitted by FRS 102 section
9.9B, they are measured at fair value through profit and loss and not
accounted for using the equity method.
The Company has interests of greater than 20 per cent. of the nominal
value of any class of the allotted shares in the portfolio company as at
31 March 2017 as described below:
% class
and % total
Country of Profit before tax Net assets share voting
Company incorporation GBP'000 GBP'000 Result for year ended type rights
Greenenerco 28.6% A
Limited Great Britain 56 547 31 March 2016 Ordinary 28.6%
13. Current assets
Trade and other receivables less than one year 31 March 2017 31 March 2016
GBP'000 GBP'000
Fundraising receivable* - 2,635
Deferred consideration** 226 223
Prepayments and accrued income 6 18
Other receivables - 4
232 2,880
*The shares were allotted on 31 March 2016 but the monies were received
by the Company in April 2016.
**Deferred consideration in relation to the sale of Silent Herdsman
Holdings Limited (GBP147,000), Masters Pharmaceuticals Limited
(GBP47,000) and Exco Intouch Limited (GBP32,000).
The Directors consider that the carrying amount of receivables is not
materially different to their fair value.
14. Payables: amounts falling due within one year
31 March 2017 31 March 2016
GBP'000 GBP'000
Trade payables 30 18
Accruals and deferred income 640 332
UK corporation tax payable - 11
670 361
The Directors consider that the carrying amount of payables is not
materially different to their fair value.
15. Called up share capital
Allotted, called up and fully paid GBP'000
51,796,503 Ordinary shares of 1 penny each at 31 March
2016 518
6,168,271 Ordinary shares of 1 penny each issued during
the year 62
57,964,774 Ordinary shares of 1 penny each at 31 March
2017 580
5,670,000 Ordinary shares of 1 penny each held in
treasury at 31 March 2016 (57)
759,443 Ordinary shares purchased during the year
to be held in treasury (7)
6,429,443 Ordinary shares of 1 penny each held in
treasury at 31 March 2017 (64)
51,535,331 Ordinary shares of 1 penny each in circulation*
at 31 March 2017 516
*Carrying one vote each
The Company purchased 759,443 shares (2016: 763,000) to be held in
treasury at a nominal value of GBP7,600 and a cost of GBP689,000 (2016:
GBP692,000) representing 1.3 per cent. of the shares in issue as at 31
March 2017.
The Company did not cancel any shares from treasury during the year
ended 31 March 2017 (2016: nil), leaving a balance of 6,429,443 shares
(2016: 5,670,000) in treasury representing 11.1 per cent. (2016: 11 per
cent.) of the shares in issue as at 31 March 2017 with a nominal value
of GBP64,000.
Under the terms of the Dividend Reinvestment Scheme Circular, the
following new Ordinary shares of nominal value 1 penny each were
allotted during the year:
Aggregate
nominal value Net
Date of Number of of shares Issue price Invested Opening market price on allotment date (pence per
allotment shares allotted (GBP'000) (pence per share) (GBP'000) share)
31 August
2016 184,698 2 94.66 173 88.50
28
February
2017 198,854 2 97.44 192 95.00
383,552 4 365
During the year the following new Ordinary shares of nominal value 1
penny each were allotted under the terms of the Albion VCTs Prospectus
Top Up Offers 2015/2016 and the Albion VCTs Prospectus Top Up Offers
2016/2017:
Aggregate Net
nominal value Consideration
Date of Number of of shares Issue price received Opening market price on allotment date (pence per
allotment shares allotted (GBP'000) (pence per share) (GBP'000) share)
6 April
2016 53,319 1 97.70 51 91.50
6 April
2016 7,296 - 98.20 7 91.50
6 April
2016 52,994 1 98.70 51 91.50
31 January
2017 892,917 9 99.40 870 92.00
31 January
2017 309,346 3 99.90 301 92.00
31 January
2017 2,782,544 28 100.50 2,713 92.00
28 March
2017 1,686,303 17 100.50 1,644 95.00
5,784,719 58 5,637
16. Basic and diluted net asset value per share
31 March 2017 31 March 2016
(pence per share) (pence per share)
Basic and diluted net asset value per
Ordinary share 101.79 96.41
The basic and diluted 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 51,535,331 Ordinary
shares (2016: 46,126,503) at 31 March 2017.
17. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 15.
The Company is permitted to buy-back its own shares for cancellation or
treasury purposes, and this is described in more detail in the
Chairman's statement.
The Company's financial instruments comprise equity and loan stock
investments in unquoted and quoted companies, cash balances, short term
receivables and payables which arise from its operations. The main
purpose of these financial instruments is to generate cash flow and
revenue and capital appreciation for the Company's operations. The
Company has no gearing or other financial liabilities apart from short
term payables. The Company does not use any derivatives for the
management of its Balance sheet.
The principal risks arising from the Company's operations are:
-- Investment (or market) risk (which comprises investment price and cash
flow interest rate risk);
-- credit risk; and
-- liquidity risk.
The Board regularly reviews and agrees policies for managing each of
these risks. There have been no changes in the nature of the risks that
the Company has faced during the past year, and apart from where noted
below, there have been no changes in the objectives, policies or
processes for managing risks during the past year. The key risks are
summarised below.
The Company's objectives when managing capital are to safeguard the
Company's ability to continue as a going concern, so that it can
continue to provide returns for shareholders and to provide an adequate
return to shareholders by allocating its capital to assets commensurate
with the level of risk.
By its nature, the Company has an amount of capital, at least 70 per
cent. (as measured under the tax legislation) of which is and must be,
and remain, invested in the relatively high risk asset class of small UK
companies within three years of that capital being subscribed. The
Company accordingly has limited scope to manage its capital structure in
the light of changes in economic conditions and the risk characteristics
of the underlying assets. Subject to this overall constraint upon
changing the capital structure, the group may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue
new shares, or sell assets if so required to maintain a level of
liquidity to remain a going concern.
Although, as the Investment Policy implies, the Board would consider
levels of gearing, there are no current plans to do so. It regards the
net assets of the Company as the Company's capital, as the levels of
liabilities are small and the management of them is not directly related
to managing the return to shareholders. There has been no change in this
approach from the previous year.
Investment risk
As a venture capital trust, it is the Company's specific nature to
evaluate and control the investment risk of its portfolio in unquoted
investments, details of which are shown on pages 17 and 18 of the full
Annual Report and Financial Statements. Investment risk is the exposure
of the Company to the revaluation and devaluation of investments. The
main driver of investment risk is the operational and financial
performance of the portfolio 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 reviews investment risk (which
includes market price risk), both at the time of initial investment and
at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made to
ensure that profits to the Company are maximised, and that valuations of
investments retained within the portfolio appear sufficiently prudent
and realistic compared to prices being achieved in the market for sales
of unquoted and quoted investments.
The maximum investment risk as at the balance sheet date is the value of
the fixed asset investment portfolio which is GBP37,775,000 (2016:
GBP32,971,000). Fixed asset investments form 72 per cent. of the net
asset value as at 31 March 2017 (2016: 74 per cent.).
More details regarding the classification of fixed asset investments is
shown in note 11.
Investment price risk
Investment price risk is the risk that the fair value of future
investment cash flows will fluctuate due to factors specific to an
investment instrument or to a market in similar instruments. To mitigate
the investment price risk for the Company as a whole, the strategy of
the Company is to invest in a broad spread of industries with
approximately 65 per cent. 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 17
and 18 of the full Annual Report and Financial Statements and in the
Strategic report.
Valuations are based on the most appropriate valuation methodology for
an investment within its market, with regard to the financial health of
the investment and the IPEVCV Guidelines.
As required under FRS 102 section 34.29, the Board is required to
illustrate by way of a sensitivity analysis, the degree of exposure to
market risk. The Board considers that the value of the fixed asset
investment portfolio is sensitive to a 10 per cent. change based on the
current economic climate. The impact of a 10 per cent. change has been
selected as this is considered reasonable given the current level of
volatility observed both on a historical basis and future expectations.
The sensitivity of a 10 per cent. increase or decrease in the valuation
of the fixed asset investments (keeping all other variables constant)
would increase or decrease the net asset value and return for the year
by GBP3,778,000 (2016: GBP3,297,000).
Interest rate risk
It is the Company's policy to accept a degree of interest rate risk on
its financial assets through the effect of interest rate changes. On the
basis of the Company's analysis, it is estimated that a rise of 1.0 per
cent. in all interest rates would have increased total return before tax
for the year by approximately GBP77,000 (2016: GBP66,000). Furthermore,
it is considered that a fall of interest rates below current levels
during the year would have been very unlikely.
The weighted average effective interest rate applied to the Company's
unquoted loan stock during the year was approximately 6.3 per cent.
(2016: 8.8 per cent.). The weighted average period to expected maturity
for the unquoted loan stock is approximately 5.0 years (2016: 5.4
years).
The Company's financial assets and liabilities as at 31 March 2017, all
denominated in pounds sterling, consist of the following:
31 March 2017 31 March 2016
Non- Non-
Fixed Floating interest Fixed Floating interest
rate rate bearing Total rate rate bearing Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Unquoted
equity - - 21,426 21,426 - - 16,734 16,734
Quoted equity - - 368 368 - - 605 605
Unquoted loan
stock* 15,571 - 410 15,981 15,090 - 542 15,632
Receivables** - - 227 227 - - 2,868 2,868
Cash - 15,121 - 15,121 - 8,980 - 8,980
Current
liabilities** - - (670) (670) - - (350) (350)
15,571 15,121 21,761 52,453 15,090 8,980 20,399 44,469
*Including convertible loan stock and debt issued at a discount.
**The receivables and current liabilities do not reconcile to the
Balance sheet as prepayments and tax payable are not included in the
above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument
will fail to discharge an obligation or commitment that it has entered
into with the Company. The Company is exposed to credit risk through its
receivables, contingent future receipts, investment in unquoted loan
stock and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock and other similar
instruments prior to investment, and as part of its ongoing monitoring
of investments. In doing this, it takes into account the extent and
quality of any security held. Typically loan stock instruments have a
first fixed charge or a fixed and floating charge over the assets of the
portfolio company in order to mitigate the gross credit risk. The
Manager receives management accounts from portfolio companies, and
members of the investment management team often sit on the boards of
unquoted portfolio companies; this enables the close identification,
monitoring and management of investment-specific credit risk.
The Manager and the Board formally review credit risk (including
receivables) and other risks, both at the time of initial investment and
at quarterly Board meetings.
The Company's total gross credit risk as at 31 March 2017 was limited to
GBP15,981,000 (2016: GBP15,632,000) of unquoted loan stock instruments
(all of which are secured on the assets of the portfolio company),
GBP15,121,000 (2016: GBP8,980,000) of cash deposits with banks and
GBP227,000 (2016: GBP2,861,000) of other receivables.
As at the balance sheet date, the cash held by the Company is held with
the Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking
Group plc), Barclays Bank Plc and National Westminster Bank plc. Credit
risk on cash transactions is mitigated by transacting with
counterparties that are regulated entities subject to prudential
supervision, with high credit ratings assigned by international
credit-rating agencies.
The Company has an informal policy of limiting counterparty banking
exposure to a maximum of 20 per cent. of net asset value for any one
counterparty.
The credit profile of unquoted loan stock is described under liquidity
risk below.
Impaired loan stock instruments have a first fixed charge or a fixed and
floating charge over the assets of the portfolio company and the Board
estimate that the security value approximates to the carrying value.
Liquidity risk
Liquid assets are held as cash on current account, cash on deposit or
short term money market account. Under the terms of its Articles, the
Company has the ability to borrow up to 10 per cent. of its adjusted
share capital and reserves of the latest published audited Balance sheet,
which amounts to GBP5,116,000 (2016: GBP4,331,000) as at 31 March 2017.
The Company has no committed borrowing facilities as at 31 March 2017
(2016: GBPnil) and had cash balances of GBP15,121,000 (2016:
GBP8,980,000), which are considered to be readily realisable within the
timescales required to make cash available for investment. The main cash
outflows are for new investments, share buy-backs and dividend payments,
which are within the control of the Company. The Manager formally
reviews the cash requirements of the Company on a monthly basis, and the
Board on a quarterly basis as part of its review of management accounts
and forecasts. All the Company's financial liabilities are short term in
nature and total GBP670,000 as at 31 March 2017 (2016: GBP361,000).
The carrying value of loan stock investments at 31 March 2017 as
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 4,074 1,210 534 5,818
1-2 years 1,322 124 - 1,446
2-3 years 1,617 555 - 2,172
3-5 years 2,328 113 - 2,441
Greater than 5 years 4,104 - - 4,104
Total 13,445 2,002 534 15,981
Loan stock can be past due as a result of interest or capital not being
paid in accordance with contractual terms.
The average annual interest yield on the total cost of past due loan
stock is 8.5 per cent. (2016: 11.0 per cent.).
Impaired loan stock has a cost of GBP606,000 (2016: GBP667,000).
The carrying value of loan stock investments at 31 March 2016 as
analysed by expected maturity dates was as follows:
Fully performing Past due Impaired Total
Redemption date GBP'000 GBP'000 GBP'000 GBP'000
Less than one year 3,419 921 553 4,893
1-2 years 706 174 - 880
2-3 years 1,587 - - 1,587
3-5 years 3,613 645 15 4,273
Greater than 5 years 3,999 - - 3,999
Total 13,324 1,740 568 15,632
In view of the factors identified above, the Board considers that the
Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company's financial assets and liabilities as at 31 March 2017,
are stated at fair value as determined by the Directors, with the
exception of receivables and payables and cash, which are carried at
amortised cost, in accordance with FRS 102. There are no financial
liabilities other than payables. The Company's financial liabilities are
all non-interest bearing. It is the Directors' opinion that the book
value of the financial liabilities is not materially different to the
fair value and all are payable within one year.
18. Commitments and contingencies
There are no contingent liabilities or guarantees given by the Company
as at 31 March 2017 (31 March 2016: nil).
19. Post balance sheet events
Since 31 March 2017 the Company has had the following post balance sheet
events:
-- Investment of GBP950,000 in MPP Global Solutions Limited;
-- Investment of GBP273,000 in G.Network Communications Limited;
-- Investment of GBP167,000 in Grapeshot Limited;
-- Investment of GBP100,000 in Locum's Nest Limited;
-- Investment of GBP100,000 in Panaseer Limited;
-- Investment of GBP85,000 in Mirada Medical Limited; and
-- Investment of GBP15,000 in Aridhia Informatics Limited.
The following new Ordinary shares of nominal value 1 penny each were
allotted under the Albion VCTs Prospectus Top Up Offers 2016/2017 after
31 March 2017:
Number Aggregate
of nominal Net
Date of shares value of consideration
allotment allotted shares Issue price (pence per received Opening market price on allotment date
GBP'000 share) GBP'000 (pence per share)
7 April
2017 15,240 - 99.40 15 95.00
7 April
2017 16,057 - 99.90 16 95.00
7 April
2017 263,313 3 100.50 256 95.00
294,610 3 287
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5, there
are no related party transactions or balances requiring disclosure.
21. Other information
The information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 434 of the
Companies Act 2006 for the years ended 31 March 2017 and 31 March 2016,
and is derived from the statutory accounts for those financial years,
which have been, or in the case of the accounts for the year ended 31
March 2017, 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 22 August 2017 at 12
noon.
22. Publication
The full audited Annual Report and Financial Statements are being sent
to shareholders and copies will be made available to the public at the
registered office of the Company, Companies House, the National Storage
Mechanism and also electronically at www.albion.capital/Funds/AAEV ,
where the Report can be accessed as a PDF document via a link in the
'Financial Reports and Circulars' section.
LEI number: 213800OVSRDHRJBMO720
Split of investment portfolio by sector:
http://hugin.info/141807/R/2120261/807728.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Albion Enterprise VCT PLC via Globenewswire
http://www.closeventures.co.uk
(END) Dow Jones Newswires
July 13, 2017 08:00 ET (12:00 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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