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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 |
Hot Features
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TIDMAAEV
Albion Enterprise VCT PLC
LEI number: 213800OVSRDHRJBMO720
As required by the UK Listing Authority's Disclosure Guidance 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 2020.
This announcement was approved for release by the Board of Directors on
29 June 2020.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31 March
2020 (which have been audited), will shortly be sent to shareholders.
Copies of the full Annual Report and Financial Statements will be shown
via the Albion Capital Group LLP website by clicking
www.albion.capital/funds/AAEV/31Mar2020.pdf. The information contained
in the Annual Report and Financial Statements will include information
as required by the Disclosure Guidance and Transparency Rules, including
Rule 4.1.
Investment policy
Albion Enterprise VCT PLC (the "Company") is a Venture Capital Trust and
the investment objective of the Company is to provide investors with a
regular source of income, combined with the prospect of longer term
capital growth.
Investment policy
The Company will invest in a broad portfolio of higher growth businesses
across a variety of sectors of the UK economy including higher risk
technology companies. Allocation of assets will be determined by the
investment opportunities which become available but efforts will be made
to ensure that the portfolio is diversified both in terms of sector and
stage of maturity of company.
VCT qualifying and non-VCT qualifying investments
Application of the investment policy is designed to ensure that the
Company continues to qualify and is approved as a VCT by HM Revenue and
Customs ("VCT regulations"). The maximum amount invested in any one
company is limited to any HMRC annual investment limits. It is intended
that normally at least 80 per cent. of the Company's funds will be
invested in VCT qualifying investments. The VCT regulations also have an
impact on the type of investments and qualifying sectors in which the
Company can make investment.
Funds held prior to investing in VCT qualifying assets or for liquidity
purposes will be held as cash on deposit, invested in floating rate
notes or similar instruments with banks or other financial institutions
with high credit ratings or invested in liquid open-ended equity funds
providing income and capital equity exposure (where it is considered
economic to do so). Investment in such open-ended equity funds will not
exceed 10 per cent. of the Company's assets at the time of investment.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within
venture capital trust qualifying industry sectors using a mixture of
securities. The maximum amount which the Company will invest in a single
company is 15 per cent. of the Company's assets at cost, thus ensuring a
spread of investment risk. The value of an individual investment may
increase over time as a result of trading progress and it is possible
that it may grow in value to a point where is represents a significantly
higher proportion of total assets prior to a realisation opportunity
being available.
Gearing
The Company's maximum exposure in relation to gearing is restricted to
10 per cent. of its adjusted share capital and reserves.
Financial calendar
Record date for first dividend 7 August 2020
Payment date for first dividend 28 August 2020
Annual General Meeting Noon on 3 September 2020
Announcement of half-yearly results for the six months November 2020
ending 30 September 2020
Financial summary
(5.70)p Total loss per share for the year ended 31 March 2020
------- -----------------------------------------------------
(4.43)% Shareholder return for the year ended 31 March 2020
------- -----------------------------------------------------
6.00p Total tax-free dividend per share paid during the
year ended 31 March 2020
------- -----------------------------------------------------
106.54p Net asset value per share as at 31 March 2020
------- -----------------------------------------------------
157.39p Total shareholder value to 31 March 2020
------- -----------------------------------------------------
31 March 2020 31 March 2019
(pence per share) (pence per share)
Opening net asset value 117.76 109.46
Capital return (6.31) 14.35
Revenue return 0.61 (0.01)
------------------ ------------------
Total return (5.70) 14.34
Dividends paid (6.00) (6.00)
Impact from share capital movements 0.48 (0.04)
------------------ ------------------
Net asset value 106.54 117.76
------------------------------------ ------------------ ------------------
Total shareholder value to 31 March 2020:
(Pence per share)
Total dividends paid during the year ended: 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
31 March 2018 5.00
31 March 2019 6.00
31 March 2020 6.00
------------------
Total dividends paid to 31 March 2020 50.85
Net asset value as at 31 March 2020 106.54
------------------
Total shareholder value to 31 March 2020 157.39
------------------
In addition to the dividends summarised above, the Board has declared a
first dividend for the year ending 31 March 2021, of 2.70 pence per
Ordinary share to be paid on 28 August 2020 to shareholders on the
register on 7 August 2020.
The details of the new dividend policy can be found in the Chairman's
statement below.
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.
Chairman's statement
Introduction
Shareholders will be acutely aware that we are in the midst of a health
and economic crisis caused by the coronavirus (Covid-19) pandemic. The
Board has undertaken a robust revaluation process to quantify the impact
on the Company's portfolio, but there is still much uncertainty
resulting from the pandemic. Despite this, I am pleased to report some
excellent outcomes from various exits during the year, which to some
extent offset the effect of Covid-19 on our wider portfolio.
Results
On 31 March 2020 the net asset value was 106.54 pence per share compared
to 117.76 pence per share on 31 March 2019. The total loss before
taxation was GBP3.7 million compared to a gain of GBP8.2 million for the
previous year. The Company paid dividends totalling 6.00 pence per share
during the year ended 31 March 2020 (2019: 6.00 pence per share).
Further details can be found in the Strategic report below.
Investment performance and progress
We realised profits from the sale of a number of portfolio companies
during the year with proceeds totalling GBP15.5 million (2019: GBP12.3
million). Following a reorganisation, our school, Radnor House
(Twickenham), was sold generating proceeds of GBP4.5 million. The
Company first invested in Radnor House Twickenham in 2010 and achieved a
return of 3.75 times cost (including interest received). The sale of
Process Systems Enterprise delivered a return of 10 times cost, and
realised GBP4.2 million. Following the successful sale of Grapeshot last
year this is the second time that the Company has sold a technology
investment for a ten times multiple. We also sold our holding in the two
Bravo Inns pub companies, delivering a return of 1.85 times cost
(including interest received). Further details on realisations can be
found in the table on page 25 of the full Annual Report and Financial
Statements.
In the final quarter of the year there was a reduction in the value of
our portfolio as a direct result of Covid-19. The results for the year
showed net losses on investments of GBP2.9 million, against a gain of
GBP10.4 million for the previous year.
We have been fortunate that the portfolio is well diversified, with
weightings in sectors that are less badly affected by Covid-19 and that
many companies in which we have invested are well suited to operating
remotely. The companies most affected have been Sandcroft Avenue
(trading as Hussle) and Mirada Medical, accounting for a devaluation of
GBP2.1 million in the year. Our investment in the SVS Albion OLIM UK
Equity Income Fund was also heavily impacted and decreased in value by
GBP1.3 million during the year (a loss of GBP1.5 million during the
final quarter), due to public markets falling sharply as investors
reacted to the lockdown imposed as a consequence of the pandemic.
Notwithstanding the onset of the pandemic in the final quarter of the
year, the Company continued to look for opportunities and more than
GBP6.0 million was invested in new and existing companies. The Company
has invested GBP3.4 million in eight new portfolio companies, all of
which are expected to require further investment as the companies prove
themselves and grow:
-- GBP792,000 into Elliptic Enterprises, a provider of Anti Money
Laundering services to digital asset institutions;
-- GBP755,000 into Concirrus, a software provider bringing
real-time behavioural data analytics to the marine and transport
insurance industries;
-- GBP696,000 into Cantab Research (trading as Speechmatics), a
provider of low footprint automated speech recognition software which
can be deployed in the cloud, on premise or on device across 29
languages;
-- GBP378,000 into Credit Kudos, a challenger credit bureau
helping lenders optimise and automate their affordability and risk
assessments;
-- GBP320,000 into Limitless Technology, a provider of a customer
service platform powered by the crowd and machine learning technology;
-- GBP256,000 into Clear Review, a provider of talent management
software to mid market enterprises;
-- GBP121,000 into Imandra, a provider of automated software
testing and an enhanced learning experience for artificial neural
networks; and
-- GBP47,000 into Symetrica, a designer and manufacturer of
radiation detection equipment.
Follow-on investments were made into 15 portfolio companies, of which
the largest were: GBP607,000 into Proveca to support its development of
further paediatric drugs, GBP268,000 into InCrowd Sports to support its
growth, and GBP240,000 into Oviva, to support the expansion of its
geographical footprint, as well as to further transition the company's
focus on digital diabetes therapeutics.
New management arrangements and reduction in expenses cap
As noted in the Half-yearly Financial Report, the Board has reviewed the
management arrangements in place with the Manager, in order to provide
further benefit to shareholders. The following changes were made and
were effective from 1 October 2019:
1. A reduction in the management fee from 2.5% to 2.0% of net asset
value;
2. Implementation of an administration fee of 0.2% of net asset value;
3. Increasing the hurdle, before which any performance incentive fee is
payable, to the higher of (i) Retail Price Index plus 2% and (ii) the
existing arrangement of Base Rate plus 2%; and
4. Reducing the total expenses cap from 3.0% to 2.5% of ongoing charges
(before any incentive fee).
This was a collaborative exercise with the Manager, who has voluntarily
agreed to a change in the contractual terms of the Investment Management
Agreement set out above, for which the Board is appreciative. These new
management arrangements have resulted in a saving to shareholders
totalling GBP135,000 in the six months since 1 October 2019. Further
details of these changes can be found in the Strategic report below.
New dividend policy
The Board is aware of the importance of dividends to shareholders and it
remains its intention to continue to pay regular dividends, as far as
liquidity permits. Given the uncertainty that the current pandemic has
created and the volatile nature of investing in small unquoted growth
businesses, the Board considers it appropriate to move to a variable
dividend policy targeting an annual dividend yield of around 5%.
Semi-annual dividends will be paid calculated as 2.5% of the most
recently announced net asset value when the dividend is declared (in
most cases this will be the net asset value announced in the Half-yearly
Financial Report or in the Annual Report and Financial Statements). This
has the advantage of avoiding unsustainably high dividends if the net
asset value falls, whilst rewarding shareholders more immediately if the
net asset value rises.
As a result, the Company will pay a first dividend for the financial
year ending 31 March 2021 of 2.70 pence per share on 28 August 2020 to
shareholders on the register on 7 August 2020.
Risks and uncertainties
The wide reaching implications arising from the Covid-19 crisis is the
key risk facing the Company, including its impact on the UK and Global
economies and recent turmoil in the quoted companies market. There are
also the potential implications of the UK's departure from the European
Union which may adversely affect our underlying portfolio companies. The
Manager is continually assessing the exposure to such risks for each
portfolio company, and where possible appropriate actions are being
implemented.
A detailed analysis of the other risks and uncertainties facing the
business is shown in the Strategic report below.
Corporate broker and share buy-backs
The Board was pleased to announce on 17 June 2020 the appointment of
Panmure Gordon (UK) Limited as corporate broker.
Given uncertainty on valuations caused by Covid-19 and its impact on
financial markets, the Board agreed to suspend the Company's buy back
operation on 18 March 2020.
With the announcement of the Annual Report and Financial Statements for
the year ended 31 March 2020, including the publication of the Company's
audited net asset value, the Board is pleased to announce the resumption
of its share buy-back policy. This remains subject to the overall
constraint that such purchases are in the Company's interest, including
the maintenance of sufficient resources for investment in existing and
new portfolio companies and the continued payment of dividends to
shareholders. However, the level of share buybacks until the
announcement of the Company's interim results, expected during November
2020 will be limited to GBP750,000.
It is the Board's intention that such buy-backs should be at around a 5
per cent. discount to net asset value, in so far as market conditions
and liquidity permit.
Albion VCTs Top Up Offers
Your Board, in conjunction with the boards of four of the other VCTs
managed by Albion Capital Group LLP, launched a prospectus top up offer
of new Ordinary shares on 22 October 2019. The Board was pleased to
announce the Offer closed on 20 December 2019, at which time the Board
elected to not exercise the over allotment facility, having raised GBP6
million.
The proceeds are being used to provide support to our existing portfolio
companies during the current pandemic and to enable us to take advantage
of new investment opportunities. Details on the share allotments during
and after the financial year end can be found in notes 15 and 19
respectively.
Annual General Meeting
The Board has been considering the potential impact of the Covid-19
outbreak on the arrangements for our forthcoming Annual General Meeting
("AGM"). These arrangements will evolve and we will keep shareholders up
to date with any changes on our Manager's website at
www.albion.capital/funds/AAEV.
We are required by law to hold an AGM within six months of our financial
year end and a lengthy postponement or adjournment is not possible in
this case. Our AGM will therefore be held at noon on 3 September 2020,
at the registered office being 1 Benjamin Street, London, EC1M 5QL.
Full details of the business to be conducted at the Annual General
Meeting are given in the Notice of the Meeting on pages 69 to 74 of the
full Annual Report and Financial Statements and in the Directors' report
on pages 34 and 35 of the full Annual Report and Financial Statements.
Based on the current government advice and social distancing guidelines,
shareholders will not be allowed entry into the building where the AGM
is held. The quorum for the meeting is two, therefore two Directors will
attend in person to allow the continuation of this AGM. There will also
be a representative of Albion Capital Group LLP as Company Secretary.
Our Articles of Association do not currently allow hybrid or wholly
virtual AGMs, however as outlined below a resolution is being proposed
to allow this in the future.
In order to maintain shareholder engagement, the Board have decided to
live stream the AGM, which will include a presentation from the Manager,
the formal business of the AGM and the answering of some of the
questions we receive from shareholders in advance of the Meeting.
Registration details for the live stream will be available at
https://www.globenewswire.com/Tracker?data=TfyK4mH7MZ9XwMTGYeUofk2IXKnOGDABoHxVURlhwlhptH4YrIdyRBi8fvUOzirnKz-j8cDMMcfvkiLgMLX2FDoM08y5NLsVDUt1qVJ3ohUf3WLLMyaiddw82FRnSF8V
www.albion.capital/funds/AAEV prior to the Meeting.
We always welcome questions from our shareholders at the AGM, but this
year we request that shareholders submit their questions to the Board
before the AGM. Shareholders can submit questions up until noon on 2
September 2020 in the following ways:
-- By email: send your questions to AAEVchair@albion.capital
-- By telephone: contact Shareholder relations on 020 7601 1850
Following the Meeting, a summary of responses will be published on the
Managers website at www.albion.capital/funds/AAEV.
Shareholders' views are important, and the Board encourages shareholders
to vote on the resolutions using the proxy form enclosed with this
Annual Report and Financial Statements, or electronically at
www.investorcentre.co.uk/eproxy. The Board has carefully considered the
business to be approved at the Annual General Meeting and recommends
shareholders to vote in favour of all the resolutions being proposed.
Virtual and Hybrid Annual General Meetings
The Company's Articles of Association do not currently allow for hybrid
or virtual meetings. The Covid-19 pandemic, and the resulting social
distancing rules, have brought to the Board's attention the importance
of the ability to continue to interact with shareholders during
unprecedented times. A resolution will be proposed at the upcoming AGM
to update the Articles of Association in order to allow the Company to
have the flexibility to hold hybrid or virtual meetings in the future if
required.
Electronic Communications
To ensure efficient Shareholder communication the Board is actively
encouraging Shareholders who are currently receiving hard copy
information to change their preferences to electronic communications. To
encourage the change, for every Shareholder signing up to receive
electronic communications, the Manager will donate GBP1 towards a
Covid-19 supporting charity chosen by the Albion team.
There are many reasons why we think this is the right thing to do
including less human contact, speed, reduced paper use and cost savings
for the Company. All the information and documents relating to the
Company can be found on the Company's webpage on the Manager's website
at www.albion.capital/funds/AAEV.
We encourage shareholders to sign up to electronic communications by
registering on the Computershare website at www.investorcentre.co.uk.
Once registered, Shareholders are able to update their electronic
communication details for all their Albion managed VCT's, and can also
update their address or bank details, as well as see their dividend
payment history. Alternatively, please contact shareholder relations at
info@albion.capital who will also be able to assist.
Fraud warning
We note over recent months an increase in the number of shareholders
being contacted in connection with increasingly sophisticated but
fraudulent financial scams. This is often by a phone call or an email
which normally originates from outside of the UK, often claiming or
appearing to come from a corporate finance firm and typically offering
to buy your VCT shares at an inflated price. If you are contacted, we
recommend that you do not respond with any personal information and say
you are not interested.
The Manager maintains a page on their website in relation to fraud
advice at www.albion.capital/investor-centre/fraud-advice. Details of
how to sell shares through reputable channels can also be found here.
If you are in any doubt, we recommend that you seek financial advice
before taking any action. You can also call shareholder relations on 020
7601 1850, or email info@albion.capital, if you wish to check whether
any claims made are genuine.
Outlook and prospect
Until the full extent of the economic impact of Covid-19 is more certain,
our priority will be to support our existing portfolio companies as they
weather the storm but we will also be making selective new investments
into businesses that are driving innovation in a rapidly changing world.
Encouragingly, despite the inevitable economic destruction caused by the
pandemic, a number of our companies continue to show strong growth. This
means that whilst there are likely to be increased challenges to be
faced by the companies within our portfolio, we remain confident that
the Company has the potential to continue to deliver long term returns
to shareholders.
Maxwell Packe
Chairman
29 June 2020
Strategic report
Investment policy
The Company will invest in a broad portfolio of higher growth businesses
across a variety of sectors of the UK economy including higher risk
technology companies. Allocation of assets will be determined by the
investment opportunities which become available but efforts will be made
to ensure that the portfolio is diversified both in terms of sector and
stage of maturity of company.
The full investment policy can be found above.
Current portfolio sector allocation
The pie charts at the end of this announcement show the split of the
portfolio valuation as at 31 March 2020 by: sector; stage of investment;
and number of employees. This is a useful way of assessing how the
Company and its portfolio is diversified across sector, investee
companies maturity measured by revenues and their size measured by the
number of people employed. Details of the principal investments made by
the Company are shown in the Portfolio of investments on pages 23 and 24
of the full Annual Report and Financial Statements.
Direction of portfolio
During the year the Company sold a number of its asset-based businesses,
which has resulted in its cash and net current assets increasing to 34%
of the portfolio at 31 March 2020 (2019: 12%). In line with the
Company's investment policy, these funds will be invested predominately
into higher growth technology companies. This is reflected in the pie
chart above, where IT and other technology and healthcare sectors
together contribute to 48% of the portfolio and we expect to see these
areas increase as a proportion of the portfolio over the coming years.
The substantial cash balance of the Company will allow it to give
support to our portfolio companies who require it as well as be able to
capitalise on any new investment opportunities that may arise.
Results and dividend policy
GBP'000
Net revenue return for the year ended 31 March 2020 398
Net capital loss for the year ended 31 March 2020 (4,073)
Total loss for the year ended 31 March 2020 (3,675)
Dividend of 3.00 pence per share paid on 30 August
2019 (1,911)
Dividend of 3.00 pence per share paid on 28 February
2020 (2,045)
Transferred from reserves (7,631)
-------
Net assets as at 31 March 2020 72,553
=======
Net asset value as at 31 March 2020 (pence per share) 106.54
====================================================== =======
The Company paid dividends totaling 6.00 pence per share during the year
ended 31 March 2020 (2019: 6.00 pence per share). The Board has declared
a first dividend for the year ending 31 March 2021, of 2.70 pence per
Ordinary share to be paid on 28 August 2020 to shareholders on the
register on 7 August 2020. The details of the new dividend policy can be
found in the Chairman's statement above.
As shown in the Company's Income statement below, the total loss for the
year was 5.70 pence per share (2019: return of 14.34 pence per share).
Investment income increased to GBP1,157,000 (2019: GBP992,000) mainly
due to the catch-up interest payment of the G.Network loan stock, and
distributions from the SVS Albion OLIM UK Equity Income Fund.
The capital loss on investments for the year of GBP2,884,000 (2019: gain
of GBP10,408,000), was mainly attributable to the impact on the
Company's investment portfolio as a result of the coronavirus pandemic.
There were some excellent exits in the year, including a ten times
return on the sale of PSE, delivering a GBP2.7 million gain in the year,
and the sale of our final two pub investments generating gains of
GBP472,000 in the year. However, due to the impact of coronavirus, a
number of our portfolio companies have experienced a devaluation, the
significant write-downs being Sandcroft Avenue (trading as Hussle),
Mirada Medical, Zift Channel Solutions and DySIS Medical. Together these
account for GBP3.7 million of losses, which offset the gains listed
above. A full analysis of the Portfolio of investments can be seen on
pages 23 and 24 of the full Annual Report and Financial Statements.
The Balance sheet below shows that the net asset value has decreased
over the year to 106.54 pence per share (2019: 117.76 pence per share).
This decrease in net asset value is mostly attributable to the total
loss of 5.70 pence per share coupled with the payment of 6.00 pence per
share of dividends.
There was a net cash inflow for the Company of GBP17,069,000 for the
year (2019: net outflow of GBP5,319,000), from both the disposal of
fixed asset investments detailed above and the issue of Ordinary shares
under the Albion VCTs Top Up Offers, offset by the investment in current
and fixed asset investments, dividends paid, operating activities and
the buy-back of shares.
Review of business and future changes
A detailed review of the Company's business during the year is contained
in the Chairman's statement above. Total losses on investments for the
year were GBP2.9 million (2019: gain of GBP10.4 million).
There is a continuing focus on growing the technology and healthcare
sectors as well as strong exits this year from our final two pub
investments, and one of our schools. This has resulted in a decrease of
asset-based investment as a percentage of the portfolio. As a
consequence, we expect our investment income to reduce in future years,
as most of our loan stock interest is received from the asset-based
portion of the portfolio, and the returns for the Company to be
delivered from capital rather than revenue.
Details of significant events which have occurred since the end of the
financial year are listed in note 19. Details of transactions with the
Manager are shown in note 5.
Future prospects
The world is currently navigating a global pandemic, which will likely
leave no company unaffected. The Board believes that the Company's
portfolio is well balanced, and with a significant proportion in cash
and net current assets (34% of the net asset value) the Board believes
the Company has the potential to both support the portfolio companies,
as well as deliver long term results to shareholders.
Key performance indicators ("KPIs") and Alternative Performance Measures
("APMs")
The Directors believe that the following KPIs and APMs, which are
typical for venture capital trusts, used in its own assessment of the
Company, will provide shareholders with sufficient information to assess
how effectively the Company is applying its investment policy to meet
its objectives. The Directors are satisfied that the results shown in
the following KPIs and APMs give a good indication that the Company is
achieving its investment objective and policy. These are:
1. Total shareholder value 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 value relative to the FTSE
All-Share Index total return, with dividends reinvested. Details on the
performance of the net asset value and return per share for the year are
shown in the Chairman's statement.
2. Net asset value per share and total shareholder value
Total shareholder value is net asset value per share plus cumulative
dividends paid since launch.
Total shareholder value decreased by 5.22 pence per share to 157.39
pence per share for the year ended 31 March 2020 (loss of 4.4% on
opening net asset value).
3. Shareholder return in the year
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
---- ---- ----- ---- ---- ---- ----- ----- ----- ------
2.1% 0.9% 13.5% 9.7% 4.5% 5.4% 10.8% 12.4% 13.1% (4.4)%
---- ---- ----- ---- ---- ---- ----- ----- ----- ------
Source: Albion Capital Group LLP
Methodology: Shareholder return is calculated by the movement in total
shareholder value for the year divided by the opening net asset value.
4. Dividend distributions
Dividends paid in respect of the year ended 31 March 2020 were 6.00
pence per share (2019: 6.00 pence per share), a yield of 5.1% on opening
net asset value. The cumulative dividend paid since inception is 50.85
pence per share.
5. Ongoing charges
The ongoing charges ratio for the year ended 31 March 2020 was 2.7%
(2019: 2.9%). From 1 April 2019 to 30 September 2019, the ongoing
charges cap was 3.0%. From 1 October 2019, the ongoing charges cap was
reduced to 2.5%, which has resulted in a saving of GBP24,000 to
shareholders during this period. 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.
6. 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
pages 32 and 33 of the full Annual Report and Financial Statements.
The relevant tests to measure compliance have been carried out and
independently reviewed for the year ended 31 March 2020. These showed
that the Company has complied with all tests and continues to do so.
*VCT compliance is not a numerical measure of performance and thus
cannot be defined as an APM.
Gearing
As defined by the 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. The Directors do not currently have
any intention to utilise gearing for the Company.
Operational arrangements
The Company has delegated the investment management of the portfolio to
Albion Capital Group LLP, which is authorised and regulated by the
Financial Conduct Authority. Albion Capital Group LLP also provides
company secretarial and other accounting and administrative support to
the Company.
Management agreement
As announced in the Half-yearly Financial Report, the Board has reviewed
the management arrangements in place with Albion Capital Group LLP, the
Manager, with a view to provide further benefit to shareholders. These
arrangements took effect from 1 October 2019.
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.
These details have remained unchanged.
For the period to 30 September 2019, the Manager was paid an annual fee
equal to 2.5% of the net asset value of the Company, payable quarterly
in arrears. Total annual expenses, including the management fee, were
limited to 3.0% of the net asset value. From 1 October 2019, the Manager
reduced the annual fee to 2% of the net asset value of the Company, and
implemented an administration fee of 0.2% of net asset value. The total
annual expenses, including the management fee and administration fee,
were limited to 2.5% of the net asset value.
Additionally, Albion Capital reduces the proportion of its management
fee relating to the investment in the SVS Albion OLIM UK Equity Income
Fund ("OUEIF") by 0.75%, which represents the OUEIF management fee
charged by OLIM to avoid any double charging for the investment
exposure.
The Manager is also entitled to an arrangement fee, payable by each
portfolio company, of approximately 2% on each investment made and also
monitoring fees where the Manager has a representative on the portfolio
company's board.
Further details on the management fee can be found in note 5.
Management performance incentive fee
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% of such excess return that is calculated for each financial year.
In addition to the management arrangements discussed above, the
performance incentive fee has also been revised from 1 October 2019.
From 1 April 2019 to 30 September 2019, the minimum target level
("hurdle"), comprising dividends and net asset value, was equivalent to
an annualised rate of return of the average base rate of the Royal Bank
of Scotland plc plus 2% 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. From 1 October 2019,
the hurdle has been increased, to the higher of (i) an annualised rate
of return of the average retail price index ("RPI") plus 2% per annum
and (ii) the existing arrangement in place as discussed above.
For the year ended 31 March 2020, the total return of the Company since
launch (the performance incentive fee start date) amounted to 157.39
pence per share, compared to the higher hurdle of 165.32 pence per
share. As a result, no performance incentive fee is payable to the
Manager (2019: GBP1,332,000).
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. (80 per cent. from 1 April 2020 for the Company) qualifying
holdings investment requirement for venture capital trust status, the
long term prospects of the current portfolio of investments, a review of
the Management agreement and the services provided therein, and
benchmarking the performance of the Manager to other service providers
including the performance of other VCTs that the Manager is responsible
for managing.
The Board believes that it is in the interests of shareholders as a
whole, and of the Company, to continue the appointment of the Manager
for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board appointed Albion Capital Group LLP as the Company's AIFM in
June 2014 as required by the AIFMD. The Manager is a full-scope
Alternative Investment Fund Manager under the AIFMD. Ocorian (UK)
Limited is the appointed Depositary and oversees the custody and cash
arrangements and provide other AIFMD duties with respect to the Company.
Companies Act 2006 Section 172 Reporting
Under Section 172 of the Companies Act 2006, the Board has a duty to
promote the success of the Company for the benefit of its members as a
whole, having regard to the interests of other stakeholders in the
Company, such as suppliers, and to do so with an understanding of the
impact on the community and environment and with high standards of
business conduct, which includes acting fairly between members of the
Company.
The Board is very conscious of these wider responsibilities in the ways
it promotes the Company's culture and ensures, as part of its regular
oversight, that the integrity of the Company's affairs is foremost in
the way the activities are managed and promoted. This includes regular
engagement with the wider stakeholders of the Company and being alert to
issues that might damage the Company's standing in the way that it
operates. The Board works very closely with the Manager in reviewing how
stakeholder issues are handled, ensuring good governance and
responsibility in managing the Company's affairs, as well as visibility
and openness in how the affairs are conducted.
The Board considers its significant stakeholder groups to be its
Shareholders; suppliers, including direct agents of the Company such as
the Manager to whom most executive functions are delegated; its
portfolio companies; the community and the environment in the way that
investments are made and managed.
The Company's Shareholders are key to the success of the Company. The
Board seeks to create value for Shareholders by generating strong and
sustainable returns to provide shareholders with regular dividends and
the prospect of capital growth. During the year, the Board has approved
a new dividend policy, further details of which can be found in the
Chairman's statement above.
The Board temporarily suspended buybacks on 18 March 2020 due to the
increasing uncertainty of the net asset value at the time. As outlined
in the Chairman's statement above, the buybacks will be resumed on the
announcement of this Annual Report and Financial Statements. The buyback
policy is an important means of providing market liquidity for
Shareholders.
Shareholders' views are important and the Board encourages Shareholders
to vote on the resolutions at the Annual General Meeting ("AGM"). The
Company's AGM is typically used as an opportunity to communicate with
investors, including through a presentation made by the investment
management team. However, due to the impact of the coronavirus outbreak,
special circumstances are required for this year's AGM and further
details are in the Chairman's statement above. Details of the location
and time of the AGM can be found in the Directors' report on page 34 of
the full Annual Report and Financial Statements.
Shareholders are also encouraged to attend the annual Shareholders'
Seminar, which the Manager is hoping to hold (public health advice
permitting). The seminar includes some of the portfolio companies
sharing insights into their businesses and also presentations from
Albion executives on some of the key factors affecting the investment
outlook, as well as a review of the past year and the plans for the year
ahead. Details of the seminar event are placed on the Manager's website.
Representatives of the Board attend the seminar.
The Company is an externally managed investment company with no
employees, and as such has nothing to report in relation to employee
engagement but does keep close attention to how the Board operates as a
cohesive and competent unit. The Company also has no customers in the
traditional sense and, therefore, there is also nothing to report in
relation to relationships with customers.
The Company's suppliers are fundamental to the operations of the Company,
particularly Albion Capital Group LLP as the Manager, given that
day-to-day management responsibilities are sub-contracted to the
Manager. Details of the Manager's and Board's responsibilities can be
found in the Statement of corporate governance on pages 37 to 41 of the
full Annual Report and Financial Statements.
The contractual arrangements with all the principal suppliers to the
Company are reviewed regularly and formally once a year, alongside the
performance of the suppliers in acquitting their responsibilities. The
performance of the Manager in managing the portfolio and in providing
company secretarial, administration and accounting services is reviewed
in detail each year, which includes reviewing comparator engagement
terms and portfolio performance. During the year, the contractual
agreements were updated, which has resulted in further benefits to
shareholders. Further details of the new arrangements can be found in
this report above. Further details on the evaluation of the Manager, and
the decision to continue the appointment of the Manager for the
forthcoming year, can be found in this report above.
The portfolio companies are considered key stakeholders, not least
because they are principal drivers of value for the Company. However, as
discussed in the Environmental, Social and Governance ("ESG") section
below, the portfolio companies' impact on their stakeholders is also
important to the Company. In most cases, an Albion executive has a place
on the board of a portfolio company, in order to help with both business
operation decisions, as well as good ESG practice.
The Board receives reports on ESG factors within its portfolio from the
Manager as it is a signatory of the UN Principles for Responsible
Investment. Further details of this are set out below. ESG, without its
specific definition, has always been at the heart of the responsible
investing that the Company engages in and in how the Company conducts
itself with all of its stakeholders.
The Board, although non-executive, is fully engaged in both oversight
and the general strategic direction of the Company. During the year the
Board's main strategic discussions focussed around cash management and
deployment of cash for future investments, dividends and share buybacks,
resulting in the decision to participate in the Albion VCTs Top Up
Offers 2019/20. Time was also spent in ensuring the Board met Corporate
Governance requirements which continue to evolve, including the
introduction of the new AIC Code last year.
Environmental, Social, and Governance ("ESG")
The Manager became a signatory of the UN Principles for Responsible
Investment ("UN PRI") on 14 May 2019. The UN PRI is the world's leading
proponent of responsible investment, working to understand the
investment implications of ESG factors and to support its international
network of investor signatories in incorporating these factors into
their investment and ownership decisions.
The Manager made its first trial submission in 2020 against this
framework and will make the first full submission in 2021. The trial
process in 2020 will identify initial gaps in information being
collected and areas that require action. This annual process will inform
fuller ESG disclosure by 2021 and create a regular audit function to
ensure continual improvement.
To ensure that the principles are starting to be translated into both
the investment and portfolio management processes, since June 2019 all
quarterly valuations and investment papers include a section covering
relevant aspects of ESG for each investment. In addition, all fund level
reports also include ESG sections and ESG will be included as a standing
item on the agendas of all investment committees and the Manager's
internal board meetings, and any findings are discussed at fund board
meetings (VCTs and LP funds). Reporting is intentionally light in the
first instance, partly due to the stage and nature of investments and to
encourage widespread adoption. The level of reporting is expected to
build over time as the range of factors to consider increases and as our
compliance with the UN PRI guidelines becomes apparent.
The Board and Manager have exercised conscious principles in making
responsible investments throughout the life of the Company, not least in
providing finance for nascent companies in a variety of important
sectors such as technology, healthcare and renewable energy. In making
the investments, the Manager is directly involved in the oversight and
governance of these investments, including ensuring standards of
reporting and visibility on business practices, all of which is reported
to the Board of the Company. By its nature, not least in making
qualifying investments which fulfil the criteria set by HMRC, the
Company has focused on sustainable and longer-term investment
propositions, some of which will fail in the nature of small companies,
but some of which will grow and serve important societal demands. The
quality of the investment portfolio goes beyond the individual
valuations and examines the prospects of each of the portfolio companies,
as well as the sectors in which they operate -- all requiring a
longer-term view.
The Company adheres to the principles of the AIC Code of Corporate
Governance and is also aware of other governance and other corporate
conduct guidance which it meets as far as practical including in the
constitution of a diversified and independent board capable of providing
constructive challenge.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Act to
detail information about social and community issues, employees and
human rights; including any policies it has in relation to these matters
and effectiveness of these policies. As an externally managed investment
company with no employees, the Company has no formal 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
-- Anti-facilitation of tax evasion
-- Diversity
and these are set out in the Directors' report on page 33 of the full
Annual Report and Financial Statements.
General Data Protection Regulation
The General Data Protection Regulation came into effect on 25 May 2018
with the objective of unifying data privacy requirements across the
European Union. The Manager continues to take action to ensure that the
Manager and the Company are compliant with the regulation.
Risk management
The Board carries out a regular review of the risk environment in which
the Company operates, changes to the environment and individual risks.
The Board also identifies emerging risks which might impact on the
Company. In the period the most noticeable emerging risk has been the
global pandemic which has impacted on not only public health and
mobility but also has had an adverse impact on global traded markets,
the impact of which, by its nature, is likely to be uncertain for some
time.
The Directors have carried out a robust assessment of the Company's
principal risks and uncertainties, and explain how they are being
mitigated as follows:
Risk Possible consequence Risk management
------------ ----------------------------------------------------------- ------------------------------------------------------------
Investment, The risk of investment in poor quality businesses, To reduce this risk, the Board places reliance upon
performance which could reduce the capital and income returns the skills and expertise of the Manager and its track
and to shareholders and could negatively impact on the record over many years of making successful investments
valuation Company's current and future valuations. in this segment of the market. In addition, the Manager
risk 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 volatile than larger, long established businesses. comprising investment professionals from the Manager
Investments in open-ended equity funds result in exposure and at least one external investment professional.
to market risk through movements in price per unit. The Manager also invites and takes account of comments
The Company's investment valuation methodology is from non-executive Directors of the Company on matters
reliant on the accuracy and completeness of information discussed at the Investment Committee meetings. Investments
that is issued by portfolio companies. In particular, are actively and regularly monitored by the Manager
the Directors may not be aware of or take into account (investment managers normally sit on portfolio company
certain events or circumstances which occur after boards), including the level of diversification in
the information issued by such companies is reported. the portfolio, and the Board receives detailed reports
on each investment as part of the Manager's report
at quarterly board meetings. The Board and Manager
regularly reviews the deployment of cash resources
into equity markets, the extent of exposure and performance
of the exposure.
The unquoted investments held by the Company are designated
at fair value through profit or loss and valued in
accordance with the International Private Equity and
Venture Capital Valuation Guidelines updated in 2018.
These guidelines set out recommendations, intended
to represent current best practice on the valuation
of venture capital investments. The valuation takes
into account all known material facts up to the date
of approval of the Financial Statements by the Board.
------------ ----------------------------------------------------------- ------------------------------------------------------------
VCT approval The Company must comply with section 274 of the Income To reduce this risk, the Board has appointed the Manager,
risk Tax Act 2007 which enables its investors to take advantage which has a team with significant experience in venture
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 our professional advisers or H.M. Revenue & Customs.
The Company monitors closely the extent of qualifying
holdings and addresses this as required.
------------ ----------------------------------------------------------- ------------------------------------------------------------
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, and any issues arising from compliance or
oversight bodies. regulation are reported to its own Board on a monthly
basis. 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 internal particular the Manager, for the provision of investment of rigorous internal controls and review procedures
control management and administrative functions. Failures exercised throughout the year, and receives reports
risk in key systems and controls within the Manager's business from the Manager on internal controls and risk management,
could put assets of the Company at risk or result including on matters relating to cyber security.
in reduced or inaccurate information being passed The Audit Committee reviews the Internal Audit Reports
to the Board or to shareholders. prepared by the Manager's internal auditors, PKF Littlejohn
LLP and has access to the internal audit partner of
PKF Littlejohn LLP to provide an opportunity to ask
specific detailed questions in order to satisfy itself
that the Manager has strong systems and controls in
place including those in relation to business continuity
and cyber security.
From 1 October 2018, Ocorian (UK) Limited was appointed
as Depositary to oversee the custody and cash arrangements
and provide other AIFMD duties. The Board reviews
the quarterly reports prepared by Ocorian (UK) Limited
to ensure that Albion Capital is adhering to its policies
and procedures as required by the AIFMD.
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 policy. The Manager and other service
providers have also demonstrated to the Board that
there is no undue reliance placed upon any one individual.
------------ ----------------------------------------------------------- ------------------------------------------------------------
Economic, Changes in economic conditions, including, for example, The Company invests in a diversified portfolio of
political interest rates, rates of inflation, industry conditions, companies across a number of industry sectors and
and social competition, political and diplomatic events and other in addition often invests a mixture of instruments
risk factors could substantially and adversely affect the in portfolio companies and has a policy of minimising
Company's prospects in a number of ways. This also any external bank borrowings within portfolio companies.
includes risks of social upheaval, including from At any given time, the Company has sufficient cash
infection and population re-distribution, as well resources to meet its operating requirements, including
as economic risk challenges as a result of healthcare share buy-backs and follow on investments.
pandemics/infection. In common with most commercial operations, exogenous
The current risk to the Company, and the wider population risks over which the Company has no control are always
and economy, is the coronavirus (Covid-19) pandemic. a risk and the Company does what it can to address
these risks where possible, not least as the nature
of the investments the Company makes are long term.
With regards to coronavirus (Covid-19), the Manager
is having ongoing discussions with all portfolio companies,
in order to ascertain where support is most needed.
Cash comprises a significant proportion of net assets,
following a strong year of exits and the most recent
Top Up, which can be used in part to help mitigate
any immediate cashflow problems for these portfolio
companies. The portfolio is structured as an all-weather
portfolio with c.50 companies which are diversified
as discussed above. Exposure is small to at-risk sectors
that include leisure, hospitality, retail and travel.
------------ ----------------------------------------------------------- ------------------------------------------------------------
Market value The market value of Ordinary shares can fluctuate. The Company operates a share buy-back policy, which
of Ordinary The market value of an Ordinary share, as well as is designed to limit the discount at which the Ordinary
shares being affected by its net asset value and prospective shares trade to around 5 per cent to net asset value,
net asset value, also takes into account its dividend by providing a purchaser through the Company in absence
yield and prevailing interest rates. As such, the of market purchasers. From time to time buy-backs
market value of an Ordinary share may vary considerably cannot be applied, for example when the Company is
from its underlying net asset value. The market prices subject to a close period, or if it were to exhaust
of shares in quoted investment companies can, therefore, any buy-back authorities.
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.
------------ ----------------------------------------------------------- ------------------------------------------------------------
Reputational The Company relies on the judgement and reputation The Board regularly questions the Manager on its ethics,
risk of the Manager which is itself subject to the risk procedures, safeguards and investment philosophy,
of loss. which should consequently result in the risk to reputation
being minimised.
------------ ----------------------------------------------------------- ------------------------------------------------------------
Viability statement
In accordance with the FRC UK Corporate Governance Code published in
2018 and principle 36 of the AIC Code of Corporate Governance, the
Directors have assessed the prospects of the Company over three years to
31 March 2023. 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 three year period also takes
account of the potential impact of new regulations, should they be
imposed, and how they may impact the Company over the longer term, and
the availability of cash, but cannot fully take into account the
exogenous risks that are impacting on global economies at the date of
these accounts.
The Directors have carried out a robust assessment of the emerging and
principal risks facing the Company as explained above, including those
that could threaten its business model, future performance, solvency or
liquidity. The Board also considered the procedures in place to identify
emerging risks and the risk management processes in place to avoid or
reduce the impact of the underlying risks. The Board focused on the
major factors which affect the economic, regulatory and political
environment. The Board have deliberated at length the potential impact
of the coronavirus pandemic on the Company. They have thoroughly
examined cashflows with stressed assumptions, and also deliberated over
the importance of the Manager and the processes that they have in place
for dealing with the principal risks.
The Board assessed the ability of the Company to raise finance and
deploy capital, as well as the existing cash resources of the Company.
The portfolio is well balanced and geared towards long term growth,
delivering dividends and capital growth to shareholders. In assessing
the prospects of the Company, the Directors have considered the cash
flow by looking at the Company's income and expenditure projections and
funding pipeline over the assessment period of three years and they
appear realistic.
Taking into account the processes for mitigating risks, monitoring costs,
share 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
2023.
This Strategic report of the Company for the year ended 31 March 2020
has been prepared in accordance with the requirements of section 414A of
the Companies Act 2006 (the "Act"). The purpose of this report is to
provide shareholders with sufficient information to enable them to
assess the extent to which the Directors have performed their duty to
promote the success of the Company in accordance with section 172 of the
Act.
For and on behalf of the Board
Maxwell Packe
Chairman
29 June 2020
Responsibility Statement
In preparing these financial statements for the year ended 31 March
2020, the Directors of the Company, being Maxwell Packe, Lord St John of
Bletso, The Dowager Lady Balfour of Burleigh, Christopher Burrows 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 2020
for the Company has been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law) and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
-- the Chairman's statement and Strategic report include a fair review of
the development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties it faces.
We consider that the Annual Report and Financial Statements, taken as a
whole, are fair, balanced, and understandable and provide the
information necessary for shareholders to assess the Company's position,
performance, business model and strategy.
A detailed "Statement of Directors' responsibilities" is contained on
page 36 within the full audited Annual Report and Financial Statements.
On behalf of the Board,
Maxwell Packe
Chairman
29 June 2020
Income statement
Year ended Year ended
Note 31 March 2020 31 March 2019
------------------------------------------------------------ ---- ------------------------- -------------------------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------ ---- ------- ------- ------- ------- ------- -------
(Losses)/gains on investments 3 - (2,884) (2,884) - 10,408 10,408
Investment income 4 1,157 - 1,157 992 - 992
Investment management fee 5 (396) (1,189) (1,585) (398) (1,195) (1,593)
Performance incentive fee 5 - - - (333) (999) (1,332)
Other expenses 6 (363) - (363) (263) - (263)
------- ------- ------- ------- ------- -------
Return/(loss) on ordinary activities before taxation 398 (4,073) (3,675) (2) 8,214 8,212
Tax on ordinary activities 8 - - - - - -
------- ------- ------- ------- ------- -------
Return/(loss) and total comprehensive income attributable
to shareholders 398 (4,073) (3,675) (2) 8,214 8,212
------- ------- ------- ------- ------- -------
Basic and diluted return/(loss) per share (pence)* 10 0.61 (6.31) (5.70) (0.01) 14.35 14.34
------------------------------------------------------------ ---- ------- ------- ------- ------- ------- -------
* adjusted for treasury shares
The accompanying notes below 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
2020 2019
Note GBP'000 GBP'000
---------------------------------------------------- ---- -------- --------
Fixed asset investments 11 47,859 59,146
Current assets
Current asset investments 13 3,501 3,642
Trade and other receivables less than one year 13 182 1,974
Cash and cash equivalents 21,510 4,441
-------- --------
25,193 10,057
-------- --------
Total assets 73,052 69,203
Payables: amounts falling due within one year
Trade and other payables less than one year 14 (499) (1,815)
-------- --------
Total assets less current liabilities 72,553 67,388
-------- --------
Equity attributable to equity holders
Called up share capital 15 770 650
Share premium 44,183 30,255
Capital redemption reserve 104 104
Unrealised capital reserve 8,636 18,672
Realised capital reserve 14,052 8,089
Other distributable reserve 4,808 9,618
-------- --------
Total equity shareholders' funds 72,553 67,388
-------- --------
Basic and diluted net asset value per share (pence)
* 16 106.54 117.76
---------------------------------------------------- ---- -------- --------
* excluding treasury shares
The accompanying notes below form an integral part of these Financial
Statements.
These Financial Statements were approved by the Board of Directors, and
were authorised for issue on 29 June 2020 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 2019 650 30,255 104 18,672 8,089 9,618 67,388
Return/(loss) and total comprehensive income for the
year - - - (5,996) 1,923 398 (3,675)
Transfer of previously unrealised gains on disposal
of investments - - - (4,040) 4,040 - -
Issue of equity 120 14,270 - - - - 14,390
Cost of issue of equity - (342) - - - - (342)
Purchase of own shares for treasury - - - - - (1,252) (1,252)
Dividends paid - - - - - (3,956) (3,956)
As at 31 March 2020 770 44,183 104 8,636 14,052 4,808 72,553
----------------------------------------------------- --------- -------- ---------------------------- ---------- --------- ------------------- --------
As at 1 April 2018 638 28,945 104 17,657 890 13,637 61,871
Return/(loss) and total comprehensive income for the
year - - - 9,835 (1,621) (2) 8,212
Transfer of previously unrealised gains on disposal
of investments - - - (8,820) 8,820 - -
Issue of equity 12 1,333 - - - - 1,345
Cost of issue of equity - (23) - - - - (23)
Purchase of own shares for treasury - - - - - (585) (585)
Dividends paid - - - - - (3,432) (3,432)
As at 31 March 2019 650 30,255 104 18,672 8,089 9,618 67,388
----------------------------------------------------- --------- -------- ---------------------------- ---------- --------- ------------------- --------
* These reserves amount to GBP18,860,000 (2019: GBP17,707,000) which is
considered distributable.
Statement of cash flows
Year ended Year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
---------------------------------------------- -------------- --------------
Cash flow from operating activities
Investment income received 1,001 773
Dividend income received 310 170
Deposit interest received 71 38
Investment management fee paid (1,648) (1,568)
Performance incentive fee paid (1,332) (1,100)
Other cash payments (307) (261)
Net cash flow from operating activities (1,905) (1,948)
Cash flow from investing activities
Purchase of current asset investments (1,194) (2,600)
Purchase of fixed asset investments (5,340) (6,824)
Disposal of fixed asset investments 16,656 8,748
Net cash flow from investing activities 10,122 (676)
Cash flow from financing activities
Issue of share capital 13,432 793
Cost of issue of equity (17) (3)
Dividends paid (3,311) (2,900)
Purchase of own shares (including costs) (1,252) (585)
-------------- --------------
Net cash flow from financing activities 8,852 (2,695)
Increase/ (decrease) in cash and cash
equivalents 17,069 (5,319)
Cash and cash equivalents at start of the year 4,441 9,760
-------------- --------------
Cash and cash equivalents at end of the year 21,510 4,441
---------------------------------------------- -------------- --------------
Notes to the Financial Statements
1. Accounting convention
The Financial Statements have been prepared in accordance with
applicable United Kingdom law and accounting standards, including
Financial Reporting Standard 102 ("FRS 102"), and with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies
and Venture Capital Trusts" ("SORP") issued by The Association of
Investment Companies ("AIC"). The financial statements have been
prepared on a going concern basis.
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 International
Private Equity and Venture Capital Valuation ("IPEV") Guidelines as
issued in 2018 and further detail on the valuation techniques used are
in note 2 below.
Company information is shown on page 2 of the full Annual Report and
Financial Statements.
2. Accounting policies
Fixed and current 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 IPEV
Guidelines. Indicators of fair value are derived using established
methodologies including earnings multiples, the level of third party
offers received, cost or price of recent investment rounds, net assets
and industry valuation benchmarks. Where price of recent investment is
used as a starting point for estimating fair value at subsequent
measurement dates, this has been benchmarked using an appropriate
valuation technique permitted by the IPEV guidelines.
-- In situations where cost or price of recent investment is used,
consideration is given to the circumstances of the portfolio company
since that date in determining fair value. This includes consideration of
whether there is any evidence of deterioration or strong definable
evidence of an increase in value. In the absence of these indicators, the
investment in question is valued at the amount reported at the previous
reporting date. Examples of events or changes that could indicate a
diminution include:
-- the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was
based;
-- a significant adverse change either in the portfolio company's
business or in the technological, market, economic, legal or
regulatory environment in which the business operates; or
-- market conditions have deteriorated, which may be indicated by a
fall in the share prices of quoted businesses operating in the
same or related sectors.
Investments are recognised as financial assets on legal completion of
the investment contract and are de-recognised on legal completion of the
sale of an investment.
Dividend income is not recognised as part of the fair value movement of
an investment, but is recognised separately as investment income through
the other distributable reserve when a share becomes ex-dividend.
Other current assets and payables
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 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, performance incentive 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 and performance incentive 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.
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
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 smaller companies
principally based in the UK.
3. (Losses)/gains on investments
Year ended Year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
----------------------------------------------
Unrealised (losses)/gains on fixed asset
investments (4,661) 9,919
Unrealised losses on current asset investments (1,335) (84)
Realised gains on fixed asset investments 3,112 573
(2,884) 10,408
-------------- --------------
4. Investment income
Year ended Year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
Interest from loans to portfolio companies 776 785
Dividends 310 170
Bank interest 71 37
1,157 992
-------------- --------------
5. Investment management fees
Year ended Year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
Investment management fee charged to revenue 396 398
Investment management fee charged to capital 1,189 1,195
Performance incentive fee charged to revenue - 333
Performance incentive fee charged to capital - 999
-------------- --------------
1,585 2,925
-------------- --------------
Further details of the Management agreement under which the investment
management fee and performance incentive fee are paid, which were
updated during the year, are given in the Chairman's statement above and
the Strategic report above. These changes have resulted in a saving of
GBP135,000 for shareholders in the six months since 1 October 2019.
During the year, services of a total value of GBP1,659,000 (2019:
GBP1,593,000) were purchased by the Company from Albion Capital Group
LLP; this includes GBP1,585,000 (2019: GBP1,593,000) of management fee
and GBP74,000 (2019: GBPnil) of administration fee. There is no
performance incentive fee payable this year (2019: GBP1,332,000). At the
financial year end, the amount due to Albion Capital Group LLP in
respect of these services disclosed as accruals was GBP384,000 (2019:
GBP1,747,000). From 1 October 2019, the total annual running costs of
the Company are capped at an amount equal to 2.5 per cent. of the
Company's net assets (previously 3.0 per cent.). Any excess is met by
Albion by way of a reduction in management fees. During the year, the
management fee was reduced by GBP24,000 as a result of this cap (2019:
GBPnil).
During the year, the Company was not charged by Albion Capital Group LLP
in respect of Patrick Reeve's services as a Director (2019: GBP6,000).
Albion Capital Group LLP, its partners and staff hold a total of 460,911
shares in the Company as at 31 March 2020.
The Manager is, from time to time, eligible to receive arrangement fees
and monitoring fees from portfolio companies. During the year ended 31
March 2020, fees of GBP186,000 attributable to the investments of the
Company were received pursuant to these arrangements (2019: GBP201,000).
The Company has entered into an offer agreement relating to the Offers
with the Company's investment manager Albion Capital Group LLP, pursuant
to which Albion Capital will receive a fee of 2.5 per cent. of the gross
proceeds of the Offers and out of which Albion Capital will pay the
costs of the Offers, as detailed in the Prospectus.
During the period an amount of GBP1,194,000 (2019: GBP2,600,000) was
invested in the SVS Albion OLIM UK Equity Income Fund ("OUEIF") as part
of the Company's management of surplus liquid funds. To avoid double
charging, Albion agreed to reduce 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 resulted in a further reduction of
the management fee of GBP32,000 (2019: GBP18,000).
6. Other expenses
Year ended Year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
Directors' fees and associated costs (inclusive of
NIC and VAT) 99 98
Auditor's remuneration for statutory audit services
(exclusive of VAT) 34 28
Administration fee 74 -
Other administrative expenses 156 137
-------------- --------------
363 263
-------------- --------------
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 2020 31 March 2019
GBP'000 GBP'000
Directors' fees 91 91
National insurance and/or VAT 8 7
99 98
-------------- --------------
The Company's key management personnel are the Directors. Further
information regarding Directors' remuneration can be found in the
Directors' remuneration report on pages 42 to 44 of the full Annual
Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
- -
UK corporation tax charge in respect of current year
- -
-------------- --------------
Year ended Year ended
31 March 2020 31 March 2019
Factors affecting the tax charge: GBP'000 GBP'000
-------------------------------------------------------
(Loss)/return on ordinary activities before taxation (3,675) 8,212
-------------- --------------
Tax charge on profit at the average companies rate
of 19 per cent.
(2019: 19 per cent.) (698) 1,560
Factors affecting the charge:
Non-taxable losses/(gains) 548 (1,977)
Income not taxable (59) (32)
Excess management expenses carried forward 209 449
- -
-------------- --------------
The tax charge for the year shown in the Income statement is lower than
the average companies rate of corporation tax in the UK of 19 per cent.
(2019: 19 per cent.). The differences are explained above.
Notes
(i) Venture Capital Trusts are not subject to corporation tax
on capital gains.
(ii) Tax relief on expenses charged to capital has been
determined by allocating tax relief to expenses by reference to the
applicable corporation tax rate and allocating the relief between
revenue and capital in accordance with the SORP.
(iii) The Company has excess management expenses of
GBP6,249,000 (2019: GBP5,241,000) that are available for offset against
future profits. A deferred tax asset of GBP1,062,000 (2019: GBP891,000)
has not been recognised in respect of these losses as they will be
recoverable only to the extent that the Company has sufficient future
taxable profits.
9. Dividends
Year ended Year ended
31 March 2020 31 March 2019
GBP'000 GBP'000
----------------------------------------------
Dividend of 3.00p per share paid on 31 August
2018 - 1,716
Dividend of 3.00p per share paid on 28
February 2019 - 1,716
Dividend of 3.00p per share paid on 30 August
2019 1,911 -
Dividend of 3.00p per share paid on 28
February 2020 2,045 -
3,956 3,432
-------------- --------------
Details of the consideration issued 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 2021, of 2.70 pence per
share to be paid on 28 August 2020 to shareholders on the register on 7
August 2020. The details of the new dividend policy can be found in the
Chairman's statement above. The total dividend will be approximately
GBP1,844,000.
10. Basic and diluted return per share
Year ended Year ended
31 March 2020 31 March 2019
Revenue Capital Total Revenue Capital Total
-------------------------------------------------------- ------- -----
The return per share has been based on the following
figures:
Return/(loss) attributable to equity shares (GBP'000) 398 (4,073) (3,675) (2) 8,214 8,212
Weighted average shares in issue (adjusted for treasury
shares) 64,506,507 57,257,089
Return/(loss) attributable per equity share (pence) 0.61 (6.31) (5.70) (0.01) 14.35 14.34
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 after adjusting for
treasury shares of 8,945,314 (2019: 7,821,443).
11. Fixed asset investments
31 March 2020 31 March 2019
GBP'000 GBP'000
Investments held at fair value through profit or loss
Unquoted equity and preference shares 37,560 42,802
Quoted equity - 289
Unquoted loan stock 10,299 16,055
------------- -------------
47,859 59,146
------------- -------------
31 March 2020 31 March 2019
GBP'000 GBP'000
------------------------------------------------------ ------------- -------------
Opening valuation 59,146 52,436
Purchases at cost 6,035 8,570
Disposal proceeds (15,549) (12,344)
Realised gains 3,112 573
Movement in loan stock revenue accrued income (224) (8)
Unrealised (losses)/gains (4,661) 9,919
------------- -------------
Closing valuation 47,859 59,146
------------- -------------
Movement in loan stock revenue accrued income
Opening accumulated loan stock revenue accrued income 225 233
Movement in loan stock revenue accrued income (224) (8)
------------- -------------
Closing accumulated loan stock revenue accrued income 1 225
------------- -------------
Movement in unrealised gains
Opening accumulated unrealised gains 18,829 17,730
Movement in unrealised (losses)/gains (4,661) 9,919
Transfer of previously unrealised gains to realised
reserve on disposal of investments (4,040) (8,820)
------------- -------------
Closing accumulated unrealised gains 10,129 18,829
------------- -------------
Historic cost basis
Opening book cost 40,092 34,473
Purchases at cost 6,035 8,570
Sales at cost (8,397) (2,951)
------------- -------------
Closing book cost 37,730 40,092
------------- -------------
The Company does not hold any assets as the result of the enforcement of
security during the period, and believes that the carrying values for
both those valued below cost and past due assets are covered by the
value of security held for these loan stock investments.
Unquoted fixed asset investments are valued at fair value in accordance
with the IPEV guidelines as follows:
31 March 31 March
2020 2019
Valuation methodology GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Revenue multiple 20,268 5,681
Cost and price of recent investment (reviewed for
impairment or uplift) 16,754 32,632
Third party valuation -- Discounted cash flow 6,693 6,966
Third party valuation -- Earnings multiple 2,823 10,687
Earnings multiple 789 956
Net assets 532 82
Offer price - 1,853
47,859 58,857
------------ ------------
When using the cost or price of a recent investment in the valuations
the Company looks to 're-calibrate' this price at each valuation point
by reviewing progress within the investment, comparing against the
initial investment thesis, assessing if there are any significant events
or milestones that would indicate the value of the investment has
changed and considering whether a market-based methodology (i.e. using
multiples from comparable public companies) or a discounted cashflow
forecast would be more appropriate.
The main inputs into the calibration exercise, and for the valuation
models using multiples, are revenue, EBITDA and P/E multiples (based on
the most recent revenue, EBITDA or earnings achieved and equivalent
corresponding revenue, EBITDA or earnings multiples of comparable
companies), quality of earnings assessments and comparability difference
adjustments. Revenue multiples are often used, rather than EBITDA or
earnings, due to the nature of the Company's investments, being in
growth and technology companies which are not normally expected to
achieve profitability or scale for a number of years. Where an
investment has achieved scale and profitability the Company would
normally then expect to switch to using an EBITDA or earnings multiple
methodology.
In the calibration exercise and in determining the valuation for the
Company's equity instruments, comparable trading multiples are used. In
accordance with the Company's policy, appropriate comparable companies
based on industry, size, developmental stage, revenue generation and
strategy are determined and a trading multiple for each comparable
company identified is then calculated. The multiple is calculated by
dividing the enterprise value of the comparable group by its revenue,
EBITDA or earnings. The trading multiple is then adjusted for
considerations such as illiquidity, marketability and other differences,
advantages and disadvantages between the portfolio company and the
comparable public companies based on company specific facts and
circumstances.
Fair value investments had the following movements between valuation
methodologies between 31 March 2019 and 31 March 2020:
Change in Value as at Explanatory note
valuation 31 March 2020
methodology GBP'000
(2019 to
2020)
--------------
Cost and price 15,805 More appropriate valuation methodology.
of recent
investment to
revenue
multiple
Cost and price 420 Coronavirus (Covid-19) impact has led to a valuation
of recent based on underlying software.
investment to
net assets
Bid price to 39 Portfolio company delisted.
net assets
The valuation will be the most appropriate valuation methodology for an
investment within its market, with regard to the financial health of the
investment and the IPEV Guidelines. The Directors believe that, within
these parameters, there are no other more relevant methods of valuation
which would be reasonable as at 31 March 2020.
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.
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 2020:
31 March 2020 31 March 2019
GBP'000 GBP'000
Opening balance 58,857 52,199
Additions 6,074 8,570
Disposals (15,549) (12,344)
Realised gains 3,362 573
Accrued loan stock interest (224) (8)
Unrealised (losses)/gains (4,661) 9,867
-------- -------------
Closing balance 47,859 58,857
-------- -------------
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. 50 per cent. of the portfolio of
investments is based on cost, recent investment price, net assets, 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 GBP1,754,000 or a decrease in the valuation of
investments by GBP2,066,000. The portfolio companies chosen for this
exercise have been valued based on revenue multiples. 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 ratios and discount factors; 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 investment listed below is held as part of an
investment portfolio and therefore, as permitted by FRS 102 section 9.9B,
it is 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 2020 as described below:
Registered % class
address and and % total
country of Principal Profit/(loss) before tax Aggregate capital and reserves share voting
Company incorporation activity GBP'000 GBP'000 Result for year ended type rights
Owner and
operator
Greenenerco of a wind 28.6% A
Limited EC1M 5QL, UK project n/a* 429 31 March 2019 Ordinary 28.6%
------------ -------------- ---------- ------------------------- ------------------------------ ----------------------- -------- -------
*The company files filleted accounts which do not disclose this
information.
13. Current assets
Current asset investments 31 March 2020 31 March 2019
GBP'000 GBP'000
-------------------------------------- ------------- -------------
SVS Albion OLIM UK Equity Income Fund 3,501 3,642
------------- -------------
Current asset investments at 31 March 2020 consist of investments in the
SVS Albion OLIM UK Equity Income Fund and is capable of realisation
within 7 days. These are valued using the level 1 fair value hierarchy
as defined in note 11.
Trade and other receivables less than one year 31 March 2020 31 March 2019
GBP'000 GBP'000
----------------------------------------------- ------------- -------------
Deferred consideration on disposed investments 162 1,519
Prepayments and accrued income 16 8
Other debtors 4 6
Investments awaiting completion - 441
182 1,974
------------- -------------
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 2020 31 March 2019
GBP'000 GBP'000
----------------------------- ------------- -------------
Trade payables 30 10
Accruals and deferred income 469 1,805
499 1,815
------------- -------------
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 shares: GBP'000
-----------------------------------------------------------
65,047,503 Ordinary shares of 1 penny each at 31 March
2019 650
11,997,044 Ordinary shares of 1 penny each issued
during the year 120
----------------------------------------------------------- -------
77,044,547 Ordinary shares of 1 penny each at 31 March
2020 770
----------------------------------------------------------- -------
7,821,443 Ordinary shares of 1 penny each held in
treasury at 31 March 2019 (78)
1,123,871 Ordinary shares purchased during the year
to be held in treasury (11)
----------------------------------------------------------- -------
8,945,314 Ordinary shares of 1 penny each held in
treasury at 31 March 2020 (89)
----------------------------------------------------------- -------
68,099,233 Ordinary shares of 1 penny each in circulation*
at 31 March 2020 681
----------------------------------------------------------- -------
*Carrying one vote each
The Company purchased 1,123,871 shares (2019: 551,000) to be held in
treasury at a nominal value of GBP11,239 and a cost of GBP1,252,000
(2019: GBP585,000) representing 1.5 per cent. of the shares in issue as
at 31 March 2020, leading to a balance of 8,945,314 shares (2019:
7,821,443) in treasury representing 11.6 per cent. (2019: 12.0 per
cent.) of the shares in issue as at 31 March 2020.
Under the terms of the Dividend Reinvestment Scheme Circular (dated 26
November 2009), 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)
30 August
2019 265,920 3 115.42 291 109.00
28
February
2020 294,718 3 115.70 325 110.00
---------------- -------------- ----------
560,638 6 616
---------------- -------------- ----------
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 2018/19 and Albion VCTs Prospectus Top Up Offers 2019/20:
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)
1 April
2019 1,028,359 10 117.80 1,193 110.00
1 April
2019 218,561 2 118.40 254 110.00
1 April
2019 4,839,369 48 119.00 5,615 110.00
5 April
2019 214,463 2 119.00 249 110.00
12 April
2019 143,535 1 117.80 166 110.00
12 April
2019 2,702 - 118.40 3 110.00
12 April
2019 281,572 3 119.00 327 110.00
31 January
2020 1,286,925 13 121.30 1,538 113.00
31 January
2020 266,214 3 121.90 318 113.00
31 January
2020 3,154,706 32 122.50 3,769 113.00
11,436,406 114 13,432
---------------- -------------- --------------
16. Basic and diluted net asset value per share
31 March 2020 31 March 2019
(pence per share) (pence per share)
--------------------------------------- ----------------- ------------------
Basic and diluted net asset value per
Ordinary share 106.54 117.76
--------------------------------------- ----------------- ------------------
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 (excluding treasury shares) of 68,099,233
Ordinary shares (2019: 57,226,060) at 31 March 2020.
17. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 15.
The Company is permitted to buy-back its own shares for cancellation or
treasury purposes, and this is described in more detail on page 31 of
the Directors' report in the full Annual Report and Financial
Statements.
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.
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 23 and 24 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 quoted and unquoted investments.
The maximum investment risk as at the balance sheet date is the value of
the fixed and current asset investment portfolio which is GBP51,360,000
(2019: GBP62,788,000). Fixed and current asset investments form 71 per
cent. of the net asset value as at 31 March 2020 (2019: 93 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. The
management of risk within the venture capital portfolio is addressed
through careful investment selection, by diversification across
different industry segments, by maintaining a wide spread of holdings in
terms of financing stage and by limitation of the size of individual
holdings. The Directors monitor the Manager's compliance with the
investment policy, review and agree policies for managing this risk and
monitor the overall level of risk on the investment portfolio on a
regular basis.
Valuations are based on the most appropriate valuation methodology for
an investment within its market, with regard to the financial health of
the investment and the IPEV Guidelines. Details of the industries in
which investments have been made are contained in the pie chart at the
end of this announcement.
As required under FRS 102 the Board is required to illustrate by way of
a sensitivity analysis the extent to which the assets are exposed to
market risk. The Board considers that the value of the fixed and current
asset investment portfolio is sensitive to a change of between 10% to
20% based on the current economic climate. The impact of a 10% to 20%
change has been selected as this is a range which is considered
reasonable given the current level of volatility observed. When
considering the appropriate level of sensitivity to be applied, the
Board has considered both historic performance and future expectations.
At the lower end of the range, the sensitivity of a 10% increase or
decrease in the valuation of the fixed and current asset investment
portfolio (keeping all other variables constant) would increase or
decrease the net asset value and return for the year by GBP5,136,000. At
the higher end of the range, the sensitivity of a 20% increase or
decrease in the valuation of the fixed and current asset investment
portfolio (keeping all other variables constant) would increase or
decrease the net asset value and return for the year by GBP10,272,000.
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 was 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 GBP178,000 (2019: GBP117,000). Furthermore,
it was 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 7.2 per cent.
(2019: 5.7 per cent.). The weighted average period to expected maturity
for the unquoted loan stock is approximately 5.1 years (2019: 4.5
years).
The Company's financial assets and liabilities, all denominated in
pounds sterling, consist of the following:
31 March 2020 31 March 2019
---------------------------------------- ----------------------------------------
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 - - 37,560 37,560 - - 42,802 42,802
Quoted equity - - - - - - 289 289
Unquoted loan
stock 9,426 - 873 10,299 15,155 - 900 16,055
Current asset
investments - - 3,501 3,501 - - 3,642 3,642
Receivables* - - 167 167 - - 1,967 1,967
Current
liabilities - - (499) (499) - - (1,815) (1,815)
Cash - 21,510 - 21,510 - 4,441 - 4,441
9,426 21,510 41,602 72,538 15,155 4,441 47,785 67,381
--------- -------- --------- -------- --------- -------- --------- --------
*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 Company. The Company is exposed to credit risk through its
receivables, 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. For loan stock investments made prior to 6
April 2018, which account for 80.9 per cent. of loan stock by value,
typically loan stock instruments have a fixed or floating charge, which
may or may not have been subordinated, over the assets of the portfolio
company in order to mitigate the gross credit risk.
The Manager receives management accounts from portfolio companies, and
members of the investment management team often sit on the boards of
unquoted portfolio companies; this enables the close identification,
monitoring and management of investment-specific credit risk.
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 2020 was limited to
GBP10,299,000 (2019: GBP16,055,000) of unquoted loan stock instruments,
GBP21,510,000 (2019: GBP4,441,000) of cash deposits with banks and
GBP167,000 (2019: GBP1,967,000) of other receivables.
At the balance sheet date, the cash held by the Company was held with
Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group
plc), Barclays Bank Plc and National Westminster Bank plc. Credit risk
on cash transactions was mitigated by transacting with counterparties
that are regulated entities subject to prudential supervision, with high
credit ratings assigned by international credit-rating agencies.
The 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 GBP7,071,000 (2019: GBP6,547,000) as at 31 March 2020.
The Company has no committed borrowing facilities as at 31 March 2020
(2019: nil) and had cash balances of GBP21,510,000 (2019: GBP4,441,000),
and current asset investments of GBP3,501,000 (2019: GBP3,642,000),
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 GBP499,000 as at 31 March 2020 (2019: GBP1,815,000).
The carrying value of loan stock investments as analysed by expected
maturity dates is as follows:
31 March 2020 31 March 2019
Redemption Fully performing Past due Valued below cost Total Fully performing Past due Valued below cost Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-----------
Less than
one year 2,392 - 73 2,465 4,634 1,669 908 7,211
1-2 years 466 - 132 598 981 104 - 1,085
2-3 years 958 - 866 1,824 427 - 133 560
3-5 years 1,761 - 209 1,970 2,660 - 257 2,917
Greater
than 5
years 3,442 - - 3,442 4,282 - - 4,282
---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
Total 9,019 - 1,280 10,299 12,984 1,773 1,298 16,055
---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
Loan stock can be past due as a result of interest or capital not being
paid in accordance with contractual terms.
The cost of loan stock investments valued below cost is GBP1,760,000
(2019: GBP1,530,000).
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 2020
are stated at fair value as determined by the Directors, with the
exception of receivables, 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
As at 31 March 2020, the Company had the following financial commitments
(2019: nil):
--Investment of GBP139,000 in Oviva AG.
There were no contingent liabilities or guarantees given by the Company
as at 31 March 2020 (2019: nil).
19. Post balance sheet events
The following are the post balance sheet events since 31 March 2020:
-- Investment of GBP264,000 in Black Swan Limited;
-- Investment of GBP234,000 in a new portfolio company, TransFICC Limited;
-- Investment of GBP139,000 in Oviva AG;
-- Investment of GBP76,000 in Credit Kudos Limited; and
-- Investment of GBP37,000 in The Evewell (Harley Street) Limited.
The following new Ordinary shares of nominal value 1 penny each were
allotted under the Albion VCTs Prospectus Top Up Offers 2019/20 after 31
March 2020:
Aggregate Issue
Number of nominal price Net Opening market
Date of shares value of (pence consideration price on
allotment allotted shares per received allotment date
GBP'000 share) GBP'000 (pence per share)
---------- --------- --------- ---------- ------------- -----------------
30 April
2020 90,192 1 108.20 96 95.00
30 April
2020 102,334 1 109.30 109 95.00
192,526 2 205
--------- --------- -------------
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5, there
are no other related party transactions or balances requiring
disclosure.
21. Other Information
The information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 434 of the
Companies Act 2006 for the years ended 31 March 2020 and 31 March 2019,
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 2020, which will be, delivered to the Registrar of Companies. The
Auditor reported on those accounts; the reports were unqualified and did
not contain a statement under s498 (2) or (3) of the Companies Act 2006.
22. Publication
The full audited Annual Report and Financial Statements are being sent
to shareholders and copies will be made available to the public at the
registered office of the Company, Companies House, the National Storage
Mechanism and also electronically at
https://www.globenewswire.com/Tracker?data=TfyK4mH7MZ9XwMTGYeUofk2IXKnOGDABoHxVURlhwljh3usVpc7NyazCsryYwI-q_EZD3ccjRi5Hl0WSsKHMPtB-3nM20HdSBc-oy8EsqfGAiH5eAIclOmojFNys6pMC
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.
Attachment
-- Split of Portfolio by sector, stage of investment and number of employees
https://ml-eu.globenewswire.com/Resource/Download/0a043cda-57ff-40af-adef-e8c8e0e9021a
(END) Dow Jones Newswires
June 29, 2020 12:39 ET (16:39 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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