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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Crown Place Vct Plc | LSE:CRWN | London | Ordinary Share | GB0002577434 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 28.90 | 28.40 | 29.40 | 28.90 | 28.90 | 28.90 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | 4.78M | 2.82M | 0.0100 | 28.90 | 81.13M |
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TIDMCRWN
Crown Place VCT PLC
LEI number: 213800SYIQPA3L3T1Q68
As required by the UK Listing Authority's Disclosure Guidance and
Transparency Rules 4.1 and 6.3, Crown Place VCT PLC today makes public
its information relating to the Annual Report and Financial Statements
for the year ended 30 June 2018.
This announcement was approved for release by the Board of Directors on
25 September 2018.
This announcement has not been audited.
You will shortly be able to view the Annual Report and Financial
Statements for the year ended 30 June 2018 (which have been audited) at:
https://www.globenewswire.com/Tracker?data=eEpbmswoTFq-g1eS4JBcWS6xm294Kyu0VNTYICANAinNpIHtTXutSMiI2A4dU5fUyg-5gZeeO7LuKE1puQQ9OajQzzqeMWVX64nzoegNJoSobfVQjWv8uECAC8b37HjF
www.albion.capital/funds/CRWN.The Annual Report and Financial Statements
for the year ended 30 June 2018 will be available as a PDF document via
a link in the 'Financial Reports and Circulars' section. The information
contained in the Annual Report and Financial Statements will include
information as required by the Disclosure Guidance and Transparency
Rules, including Rule 4.1.
Investment objective and policy
Crown Place VCT PLC is a venture capital trust and its current general
investment policy is as follows:
To achieve long term capital and income growth principally through
investment in smaller unquoted companies in the United Kingdom.
In pursuing this policy, the Manager aims to build a portfolio which
concentrates both on more mature or asset-based investments and higher
risk companies with greater growth prospects.
In this way, 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
it represents a significantly higher proportion of total assets prior to
a realisation opportunity being available.
Under its Articles of Association, the Company's maximum exposure in
relation to gearing is restricted to the amount of its adjusted share
capital and reserves.
As mentioned in the Half-yearly Financial Report, in the November 2017
Autumn Budget, a number of changes to the legislation governing venture
capital trusts were announced. Those changes have now been enacted in
the Finance Act 2017-19 and further information has been provided in
Guidance Notes issued by HM Revenue & Customs. Some of these changes
took effect from the date upon which the Finance Act received Royal
Assent and others have come into force from 6 April 2018. In future,
VCTs may no longer offer secured loans to portfolio companies and to
qualify for VCT tax reliefs, portfolio companies must satisfy a "risk to
capital condition". This means that the portfolio company must have an
objective to grow and develop over the long term and there must be a
significant risk that there could be a loss of capital to the VCT of an
amount exceeding the net return. The overall aim of HM Treasury is to
encourage more high growth investment through VCTs rather than low risk,
heavily asset backed investments.
As a result of changes in The Finance Act 2018, the Board is now
recommending a change to the Company's general investment policy. The
proposed new investment policy, which is subject to shareholder approval,
enables the Company to invest in a broad range of businesses and is as
follows:
Proposed new investment policy
The Company will invest in a broad portfolio of smaller, unquoted growth
businesses across a variety of sectors including higher risk technology
companies. Investments may take the form of equity or a mixture of
equity and loans.
Whilst allocation of funds will be determined by the investment
opportunities which become available, efforts will be made to ensure
that the portfolio is diversified both in terms of sector and stage of
maturity of investee businesses. Funds held pending investment or for
liquidity purposes will be held principally as cash on deposit.
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, as permitted. The maximum amount which the Company will
invest in a single portfolio 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
it represents a significantly higher proportion of total assets prior to
a realisation opportunity being available.
The Company's maximum exposure in relation to gearing is restricted to
the amount of its adjusted share capital and reserves.
Financial highlights
33.5p Net asset value per share as at 30 June 2018
-------------------------------------------------------
4.6p Total return per share to shareholders for the year
ended 30 June 2018
-------------------------------------------------------
14.6% Total return on opening net asset value per share
-------------------------------------------------------
2.0p Total tax-free dividends per share paid during the
year ended 30 June 2018
-------------------------------------------------------
6.7 Tax-free dividend yield on share price (total dividends
paid in the year/share price as at 30 June 2018)
-------------------------------------------------------
30 June 2018 30 June 2017
pence per share pence per share
Opening net asset value 30.98 28.94
Revenue return 0.36 0.73
Capital return 4.28 3.31
------------- -------------
Total return 4.64 4.04
Dividends paid (2.00) (2.00)
Impact from buy-backs and issue of share
capital (0.12) -
------------- -------------
Closing net asset value 33.50 30.98
----------------------------------------
Shareholder return and shareholder value
(pence per share)
Shareholder return from launch to April 2005 (date
that Albion Capital was appointed investment manager):
Total dividends paid to 6 April 2005 (i) 24.93
Decrease in net asset value (56.60)
Total shareholder return to 6 April 2005 (31.67)
Shareholder return from April 2005 to 30 June 2018:
Total dividends paid 30.80
Decrease in net asset value (9.90)
Total shareholder return from April 2005 to 30 June
2018 20.90
Shareholder value since launch:
Total dividends paid to 30 June 2018 (i) 55.73
Net asset value as at 30 June 2018 33.50
Total shareholder value as at 30 June 2018 89.23
Notes
1. Prior to 6 April 1999, venture capital trusts were able to add 20 per
cent. to dividends and figures for the period up until 6 April 1999 are
included at the gross equivalent rate actually paid to shareholders.
Current annual dividend objective 2.00
Dividend yield on net asset value as at 30 June 2018 6.0%
Total shareholder value since launch: (pence per share)
-------------------------------------------------------- ------------------
Total dividends paid during:
the period from launch to 6 April 2005 (prior to change
of manager) 24.93
the year ended 28 February 2006 1.00
the period ended 30 June 2007 3.30
the year ended 30 June 2008 2.50
the year ended 30 June 2009 2.50
the year ended 30 June 2010 2.50
the year ended 30 June 2011 2.50
the year ended 30 June 2012 2.50
the year ended 30 June 2013 2.50
the year ended 30 June 2014 2.50
the year ended 30 June 2015 2.50
the year ended 30 June 2016 2.50
the year ended 30 June 2017 2.00
the year ended 30 June 2018 2.00
Total dividends paid to 30 June 2018 55.73
Net asset value as at 30 June 2018 33.50
------------------
Total shareholder value as at 30 June 2018 89.23
-------------------------------------------------------- ------------------
In addition to the dividends paid above, the Board has declared a first
dividend for the year ending 30 June 2019, of 1 penny per Crown Place
VCT PLC share, payable on 30 November 2018 to shareholders on the
register on 2 November 2018.
Financial calendar
Record date for first dividend 2 November 2018
Annual General Meeting 11.00 am on 29
November 2018
Payment of first dividend 30 November 2018
Announcement of half-yearly results for the six months February 2019
ending 31 December 2018
Payment of second dividend (subject to Board approval) 29 March 2019
Chairman's statement
Introduction
I am delighted to report that Crown Place VCT PLC achieved a total
return of 4.64 pence per share for the year ended 30 June 2018, which is
a 14.6 per cent. return on our opening net asset value per share,
extending our track record of delivering a positive total return to
shareholders for the last nine years. The portfolio has performed well
across all sectors and stages of maturity, and pleasingly the Company
saw significant interest from investors, with the Top Up Offer raising
the full subscription amount of GBP6.0 million, well ahead of its
planned closing date.
Results and dividends
As at 30 June 2018, the net asset value was GBP55.4 million or 33.50
pence per share compared to GBP45.6 million or 30.98 pence per share at
30 June 2017. The ongoing charges ratio for the year remained at 2.4 per
cent. (2017: 2.4 per cent.).
During the year, the Company's realised and unrealised capital gains on
investments amounted to GBP7,366,000 compared to GBP5,011,000 in the
previous year. Notable increases in valuation include ELE Advanced
Technologies, which has continued to trade strongly; Quantexa, which has
grown rapidly since our initial investment in March 2017; Chonais River
Hydro and Gharagain River Hydro, which have benefitted from a reduction
in discount rates used to value such projects; Shinfield Lodge Care,
Active Lives Care and Ryefield Court Care, the three luxury care homes,
as they progress to maturity; Radnor House School, where the Sevenoaks
school has seen an increase in the student roll as it moves towards
capacity; and G. Network Communications, as the business ramps up
installations of ultra-fast fibre optic broadband in central London.
These uplifts were further supplemented by the successful exit of
Grapeshot, the digital marketing business, which was sold for
approaching ten times original cost, and Hilson Moran, the engineering
consultancy, selling for three times original cost.
Further details of the Company's financial performance are given in the
Strategic report below.
The Company paid dividends totalling 2.0 pence per share during the
financial year, representing a dividend yield on NAV of 6.0 per cent.
(2017: 6.5 per cent.). The Board is proposing a first dividend for the
year to 30 June 2019 of 1 penny per share, payable on 30 November 2018
to shareholders on the register on 2 November 2018. Shareholders will
recall that it was announced in 2016 that the dividend had not been
covered by the total return for a number of years, and although this
year's strong result covers the dividend twice over, the Board will
require a further strong increase in NAV, before it considers increasing
the dividend to its former level.
Investment performance
We had three principal exits in 2018: Grapeshot, Hilson Moran and The
Crown Hotel Harrogate, which in total, returned disposal proceeds of
GBP4.2 million. For Grapeshot, we have received proceeds of GBP1.5
million, nine times our original investment, and should we receive the
full escrow amount, total proceeds will amount to ten times our original
investment; for Hilson Moran we received proceeds of GBP693,000, three
times our original investment; and for The Crown Hotel Harrogate we
received proceeds of GBP2.0 million versus our holding value of GBP1.9
million. Overall, the Company achieved disposal proceeds, including
repayments of loan stock by portfolio companies, of GBP6.0 million
compared to GBP2.4 million in the previous year. Further information on
realisations can be found on page 24 of the full Annual Report and
Financial Statements.
During the year, a total of GBP4.3 million was deployed into portfolio
companies, with GBP1.2 million invested in new portfolio companies
namely; GBP778,000 in The Evewell (Harley Street), to develop and
operate a women's health centre with a focus on fertility; GBP200,000 in
Koru Kids, which offers an online marketplace connecting parents and
nannies; GBP140,000 in uMotif, which operates a patient engagement and
data capture platform for use in research; and GBP75,000 in Healios, a
provider of online delivery of mental health therapy services. We also
continued to support existing portfolio companies, with a total of
GBP3.1 million deployed, including GBP886,000 in Beddlestead to develop
the wedding venue into an operable site; GBP394,000 in G. Network
Communications to assist with the ramp up of rolling out ultra-fast
fibre optic broadband across central London; GBP327,000 in Oviva, our
technology enabled service business in medical nutritional therapy,
GBP256,000 in Black Swan Data to assist with the expansion into the US,
a combined GBP205,000 in Active Lives Care and Ryefield Court Care to
aid maturity of the care homes; and GBP200,000 in Convertr Media to
promote further growth and increase revenues.
Although the gains on investments were very positive, there were a few
investments where valuations declined over the year, the largest being
Aridhia, which required further finance during the year as it continues
to develop its business. The valuation of The Stanwell Hotel was also
reduced in the period due to current trading levels. With regards to the
quoted investments, which in total represent less than 1% of the
Company's NAV, the share prices of the AIM quoted Mi-Pay Group and
Augean fell during the year.
Risks and uncertainties
The outlook for the UK and global economies continues to be the key risk
affecting the Company, and the withdrawal of the UK from the European
Union is likely to have an impact on the Company and its investments,
although it is difficult to quantify it at this time. Overall investment
risk, however, is mitigated through a variety of processes, including
investing in a diversified portfolio in terms of sector and stage of
maturity, with a focus on opportunities where growth can be sustained
and resilient.
A detailed review of risk management is set out on in the Strategic
report below.
Update of investment policy
As explained more fully above and in the Strategic report, the Manager
and Board are recommending that the investment policy be updated in
light of the November 2017 Autumn Budget. While the Company has pursued
an asset-based policy for half of its portfolio since 2005, for the
reasons stated, this policy for new investments will now cease. Given
the Manager's record and experience in growth and technology investing,
the Board is confident that it has the expertise in place to capitalise
on the opportunities available in line with HM Treasury's policy
objectives of investment in higher growth businesses.
Albion VCTs Top Up Offers
In September 2017, the Company announced the launch of the Albion VCTs
Prospectus Top Up Offers 2017/18 and was pleased to announce on 26
February 2018 that it had reached its GBP6 million limit under its Offer
which was fully subscribed and closed, as detailed in note 16. The
proceeds raised continue to be deployed into new portfolio companies,
some of which were noted above, but also used to further support growth
in existing portfolio companies. We continue to see an attractive
pipeline of new investment opportunities.
The Board is currently reviewing, in conjunction with the Manager,
whether the Company will launch a prospectus Top Up offer of new
Ordinary shares for subscription in the 2018/19 and 2019/20 tax years.
Should an offer be launched then full details of the offer, including
the amount to be raised, will be contained in a prospectus that is
expected to be published in early January 2019.
Reduction of share capital and cancellation of capital redemption and
share premium reserves
As noted in the Half-yearly Financial Report, the Company obtained
authority to reduce the nominal value of its Ordinary shares from 10
pence to 1 penny and to cancel the amount standing to the credit of its
share premium and capital redemption reserves at the Annual General
Meeting on 8 November 2017. The purpose of the proposal was to increase
the distributable reserves available to the Company for the payment of
dividends, the buy-back of shares, and for other corporate purposes.
The proposal received the consent of the Court on 13 February 2018, and
the changes have been registered at Companies House. Therefore, with
effect from 13 February 2018, the share capital of the Company had a
nominal value of 1 penny per share. Over time, this will create
additional distributable reserves of GBP39.2 million.
Outlook
The progress across the portfolio has been very pleasing for both
existing investments and those exited during the year. I am confident
that the Company can continue to deliver good returns to shareholders
for the foreseeable future through our investments in a well-balanced
and diversified portfolio.
Richard Huntingford
Chairman
25 September 2018
Strategic report
Crown Place VCT PLC is a venture capital trust and its current general
investment policy can be found above.
As a result of changes in The Finance Act 2018, the Board is now
recommending a change to the Company's general investment policy. The
proposed new investment policy, which is subject to shareholder approval,
is as follows:
Proposed new investment policy
The Company will invest in a broad portfolio of smaller, unquoted growth
businesses across a variety of sectors including higher risk technology
companies. Investments may take the form of equity or a mixture of
equity and loans.
Whilst allocation of funds will be determined by the investment
opportunities which become available, efforts will be made to ensure
that the portfolio is diversified both in terms of sector and stage of
maturity of investee businesses. Funds held pending investment or for
liquidity purposes will be held principally as cash on deposit.
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, as permitted. The maximum amount which the Company will
invest in a single portfolio 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
it represents a significantly higher proportion of total assets prior to
a realisation opportunity being available.
The Company's maximum exposure in relation to gearing is restricted to
the amount of its adjusted share capital and reserves.
As mentioned in the Chairman's statement, under the new VCT rules, the
making of new asset-based investments is unlikely to be practicable, so
the main concentration of new investments will be in growth and
technology companies. The current asset-based portion of the portfolio
will, as a result, gradually diminish over time.
Business model
The Company operates as a Venture Capital Trust. This means that the
Company has no employees other than its Directors and has outsourced the
management of all its operations to Albion Capital Group LLP, including
secretarial and administrative services. Further details of the
Management agreement can be found below.
Current portfolio sector allocation
The pie chart at the end of the announcement shows the split of the
portfolio valuation by sector as at 30 June 2018. Details of the
principal investments made by the Company are shown in the Portfolio of
investments on pages 21 to 23 of the full Annual Report and Financial
Statements.
Direction of portfolio
The analysis of the Company's investment portfolio shows that the
renewable energy, healthcare, education, IT and healthcare technology
sectors continue to be the largest elements of the portfolio.
The IT and healthcare technology sectors have continued to grow as a
proportion of the portfolio as we have continued to invest in key areas
such as cyber security and the management of big data. In line with the
proposed new investment policy, we will continue to invest in higher
growth technology companies in the future.
Results and dividends
GBP'000
Revenue return for the year ended 30 June 2018 560
Capital return for the year ended 30 June 2018 6,706
Total return for the year ended 30 June 2018 7,266
------
Dividend of 1 penny per share paid on 30 November
2017 (1,467)
Dividend of 1 penny per share paid on 29 March 2018 (1,632)
Unclaimed dividends 14
Transferred to reserves 4,181
Net assets as at 30 June 2018 55,414
Net asset value as at 30 June 2018 (pence per share) 33.50
The Company paid dividends totalling 2.00 pence per share during the
year ended 30 June 2018 (2017: 2.00 pence per share). The dividend
objective of the Board is to provide shareholders with a strong,
predictable dividend flow. The Company will target an annual dividend of
2.00 pence per share for the year ending 30 June 2019, and has declared
a first dividend for the year ending 30 June 2019 of 1 penny per share.
This dividend will be paid on 30 November 2018 to shareholders on the
register on 2 November 2018.
As shown in the Income statement the capital gain for the year was
GBP6,706,000 (2017: GBP4,480,000), mainly as a result of the disposals
of Grapeshot and Hilson Moran, and the unrealised capital uplifts on ELE
Advanced Technologies, Quantexa and Chonais River Hydro. After
accounting for intercompany transactions in the prior year, investment
income has increased marginally to GBP1,105,000 (2017: GBP1,032,000),
with revenue return remaining stable at GBP560,000 (2017: GBP561,000).
The total return for the year was 4.64 pence per share (2017: 4.04 pence
per share).
The Balance sheet shows that the net asset value has increased over the
year to 33.50 pence per share (2017: 30.98 pence per share), due to the
total return for the year of 4.64 pence per share offset by the payment
of the dividend of 2.00 pence per share during the year.
The cash flow for the Company has been a net inflow of GBP3,355,000 for
the year (2017: GBP2,369,000), reflecting disposal proceeds and the
issue of Ordinary shares under the Top Up Offer, offset by dividends
paid, new investments in the year and the buy-back of shares.
Review of the business and future changes
A review of the Company's business during the year is set out in the
Chairman's statement. We believe there should be further progress in the
current year, with selected disposals and new investments, and a
continued focus on the IT/Software area, alongside other new growth
opportunities.
In light of the new VCT regulations set out in the recent Finance Act,
asset-based investments will continue to decrease as a proportion of the
portfolio, and greater emphasis will be given to growth and technology
investments.
Details of significant events which have occurred since the end of the
financial year are listed in note 21. Details of transactions with the
Manager are shown in note 5.
Reduction of share capital and cancellation of capital redemption and
share premium reserves
As noted in the Half-yearly Financial Report, the Company obtained
authority to reduce the nominal value of its Ordinary shares from 10
pence to 1 penny and cancel the amount standing to the credit of its
share premium and capital redemption reserves at the Annual General
Meeting on 8 November 2017. The purpose of the proposal was to increase
the distributable reserves available to the Company for the payment of
dividends, the buy-back of shares, and for other corporate purposes.
The proposal received the consent of the High Court on 13 February 2018,
and the changes have been registered at Companies House. Therefore, with
effect from 13 February 2018, the share capital of the Company had a
nominal value of 1 penny per share. Over time, this will create
additional distributable reserves of GBP39.2 million.
Update on CP1 VCT PLC
CP1 VCT PLC was a wholly-owned subsidiary of the Company. CP1 VCT PLC
transferred its business to Crown Place VCT PLC and ceased trading with
effect from the date of merger on 12 January 2006. Since then, CP1 VCT
PLC has had no further business other than to hold cash and intercompany
balances. As mentioned in the Half-yearly Financial Report, PKF Geoffrey
Martin & Co Limited were appointed as liquidators to commence the
process of members' voluntary liquidation for CP1 VCT PLC. The final
account was agreed and signed off on 29 March 2018, at which point there
was no control held by Crown Place VCT PLC. As such, company financial
statements have been prepared for Crown Place VCT PLC only.
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 31 and 32 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 30 June 2018. These showed
that the Company has complied with all tests and continues to do so.
The Finance Act 2018 contained a number of measures that affects all
VCTs. These include:
-- a principles-based test for qualifying companies to ensure that
investment activities focuses on higher risk opportunities;
-- an increase in the proportion of the portfolio invested in qualifying
unquoted companies from 70 per cent. to 80 per cent. in respect of
accounting periods starting on or after 6 April 2019 (so from 1 July 2019
for this Company); and
-- VCT loan investments to be unsecured and have a rate of return which
represents no more than a normal commercial rate.
Future prospects
The Company's portfolio is well balanced across sectors and risk classes
and the Board believes that the Company is well positioned to seek out
and capitalise on new opportunities.
After a promising result for the year, the Board remains confident that
the fundamentals of the companies within the portfolio and the new
companies that are being backed, will allow the Company to continue to
deliver attractive returns for shareholders.
Key performance indicators
The Directors believe that the following key performance indicators,
which are typical for VCTs and used in its own assessment of the Company,
will provide shareholders with sufficient information to assess how
effectively the Company has been applying its investment policy to meet
its objectives. The Directors are satisfied that the results shown in
the following key performance indicators, taken overall, give a good
indication that the Company is achieving its investment objective and
policy. These are:
1. Increase in total shareholder value
The graph on page 12 of the full Annual Report and Financial Statements
shows that total shareholder value increased by 4.52 pence per share to
89.23 pence per share (2017: 84.71) for the year ended 30 June 2018.
2. Shareholder return in the year
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
---- ---- ---- ----- ---- ---- ---- ---- ---- ---- ---- ---- ----
3.8% 11.9% (2.7%) (10.6%) 6.3% 6.6% 4.3% 6.6% 7.1% 4.5% 1.5% 14.0% 14.6%
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.
Annual total return to shareholders has remained positive for the ninth
consecutive year and for the year ended 30 June 2018 was 14.6 per cent.
3. Dividend distributions
Dividends paid in respect of the year ended 30 June 2018 were 2.00 pence
per share (2017: 2.00 pence per share). Cumulative dividends paid since
launch (on 18 January 1998) amount to 55.73 pence per share.
4. Ongoing charges
The ongoing charges ratio for the year ended 30 June 2018 remained
stable at 2.4 per cent. (2017: 2.4 per cent.). The ongoing charges ratio
has been calculated using The Association of Investment Companies' (AIC)
recommended methodology. This figure shows shareholders the total
recurring annual running expenses (including investment management fees
charged to capital reserve) as a percentage of the average net assets
attributable to shareholders. The Directors expect the ongoing charges
ratio for the year ahead to remain stable at approximately 2.4 per cent.
5. Running yield
The running yield on the portfolio (investment income divided by the
average net asset value) for the year to 30 June 2018 was 2.2 per cent.
(2017: 2.5 per cent.).
Operational arrangements
The Company has delegated the investment management of the portfolio to
Albion Capital Group LLP, which is authorised and regulated by the
Financial Conduct Authority. Albion Capital Group LLP also provides
company secretarial and other accounting and administrative support to
the Company.
Management agreement
Under the terms of the Management agreement, the Manager is paid an
annual fee equal to 1.75 per cent. of the net asset value of the Company
plus GBP50,000 fee per annum for administrative and secretarial
services. Total normal running costs, including the management fee, are
limited to 3.0 per cent. of the net asset value. The Manager is entitled
to an arrangement fee, payable by each portfolio company in which the
Company invests, in the region of 2.0 per cent. on each investment made,
and also monitoring fees where the Manager has a representative on the
portfolio company's board.
Further details of fees paid to the Manager can be found in note 5.
The management agreement can be terminated by either party on 12 months'
notice and is subject to earlier termination in the event of certain
breaches or on the insolvency of either party.
Management performance incentive
In order to provide the Manager with an incentive to maximise the return
to investors, the Manager is entitled to charge an incentive fee in the
event that the returns exceed minimum target levels per share. Under the
incentive arrangements, 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.
The target level requires that the growth of the aggregate of the net
asset value per share and dividends paid by the Company or declared by
the Board and approved by the shareholders during the relevant period
(both revenue and capital), compared with the previous accounting date,
exceeds the average base rate of the Royal Bank of Scotland plc plus 2.0
per cent. If the target return is not achieved in a period, the
cumulative shortfall is carried forward to the next accounting period
and has to be made up before an incentive fee becomes payable.
There was no management performance incentive fee payable during the
year (2017: nil). As at 30 June 2018 the cumulative shortfall of the
target return was 2.68 pence per share (2017: 5.72 pence per share) and
this amount needs to be made up in the next accounting period(s) before
an incentive fee becomes payable.
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on the
returns generated by the Company, the continuing achievement of the 70
per cent. (to be 80 per cent. in respect of accounting periods starting
on or after 6 April 2019) investment requirement for venture capital
trust status, the long term prospects of current investments, a review
of the Management agreement and the services provided therein and
benchmarking the performance of the Manager to other service providers.
Having carried out this evaluation, the Board believes that it is in the
interest of shareholders as a whole, and of the Company, to continue the
appointment of the Manager for the forthcoming year.
Alternative Investment Fund Managers Directive ("AIFMD")
The Board has appointed Albion Capital Group LLP as the Company's AIFM
as required by the AIFMD.
Share buy-backs
It remains the Board's primary objective to maintain sufficient
resources for investment in existing and new portfolio companies and for
the continued payment of dividends to shareholders. Thereafter, it is
the Board's policy to buy back shares in the market, subject to the
overall constraint that such purchases are in the Company's interest and
it is the Board's intention for such buy-backs to be in the region of a
5 per cent. discount to net asset value, so far as market conditions and
liquidity permit.
Further details of shares bought back during the year ended 30 June 2018
can be found in note 16 of the Financial Statements.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Companies
Act 2006 (the "Act") to detail information about social and community
issues, employees and human rights; including any policies it has in
relation to these matters and effectiveness of these policies. As an
externally managed investment company with no employees, the Company has
no policies in these matters and as such these requirements do not
apply.
General Data Protection Regulation
The General Data Protection Regulation ("GDPR") was effective from 25
May 2018 with the objective of unifying data privacy requirements across
the European Union. The Manager, Albion Capital Group LLP, has taken
action to ensure that the Manager and the Company are compliant with the
regulation.
Further policies and statements
The Company has adopted a number of further policies and statements
relating to:
-- Environment;
-- Global greenhouse gas emissions;
-- Anti-bribery;
-- Anti-facilitation of tax evasion; and
-- Diversity.
and these are set out in the Directors' report on pages 32 and 33 of the
full Annual Report and Financial Statements.
Risk management
The Board carries out a regular review of the risk environment in which
the Company operates. In addition to the risks and uncertainties
outlined in the Chairman's statement, the principal risks and
uncertainties of the Company, as identified by the Board, and how they
are managed are as follows:
Risk Possible consequence Risk management
----------- ------------------------------------------------------------- ------------------------------------------------------------
Investment, The risk of investment in poor quality assets, which To reduce this risk, the Board places reliance upon
performance could reduce the capital and income returns to shareholders, the skills and expertise of the Manager and its track
and and could negatively impact on the Company's current record over many years of making successful investments
valuation 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 fragile than larger, long established businesses. comprising investment professionals from the Manager
The Company's investment valuation methodology is and at least one external investment professional.
reliant on the accuracy and completeness of information The Manager also invites and takes account of comments
that is issued by portfolio companies. In particular, from non-executive Directors of the Company on matters
the Directors may not be aware of or take into account discussed at the Investment Committee meetings. Investments
certain events or circumstances which occur after are actively and regularly monitored by the Manager
the information issued by such companies is reported. (investment managers normally sit on portfolio company
boards), including the level of diversification in
the portfolio, and the Board receives detailed reports
on each investment as part of the Manager's report
at quarterly Board meetings.
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. 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 The Company must comply with section 274 of the Income To reduce this risk, the Board has appointed the Manager,
approval Tax Act 2007 which enables its investors to take advantage which has a team with significant experience in venture
risk of tax relief on their investment and on future returns. capital trust management, used to operating within
Breach of any of the rules enabling the Company to the requirements of the venture capital trust legislation.
hold VCT status could result in the loss of that status. In addition, to provide further formal reassurance,
the Board has appointed Philip Hare & Associates LLP
as its taxation adviser, who report quarterly to the
Board to independently confirm compliance with the
venture capital trust legislation, to highlight areas
of risk and to inform on changes in legislation. Each
investment in a new portfolio company is also pre-cleared
with H.M. Revenue & Customs or our professional advisers.
----------- ------------------------------------------------------------- ------------------------------------------------------------
Regulatory The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
and and is required to comply with the rules of the UK at senior levels within or advising quoted companies.
compliance Listing Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
risk Accounting Standards and other legislation. Failure updates on new regulation from its auditor, lawyers
to comply with these regulations could result in a and other professional bodies. The Company is subject
delisting of the Company's shares, or other penalties to compliance checks through the Manager's compliance
under the Companies Act or from financial reporting officer. The Manager reports monthly to its Board
oversight bodies. on any issues arising from compliance or regulation.
These controls are also reviewed as part of the quarterly
Board meetings, and also as part of the review work
undertaken by the Manager's compliance officer. The
report on controls is also evaluated by the internal
auditor.
----------- ------------------------------------------------------------- ------------------------------------------------------------
Operational The Company relies on a number of third parties, in The Company and its operations are subject to a series
and particular the Manager, for the provision of investment of rigorous internal controls and review procedures
internal management and administrative functions. Failures exercised throughout the year.
control in key systems and controls within the Manager's business The Audit and Risk Committee reviews the Internal
risk could put assets of the Company at risk or result Audit Reports prepared by the Manager's internal auditor,
in reduced or inaccurate information being passed PKF Littlejohn LLP and has access to the internal
to the Board or to shareholders. 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.
In addition, the Board regularly reviews the performance
of the Manager, to ensure they continue to have the
necessary expertise and resources to deliver the Company's
investment objective and policies. The Manager regularly
reviews the performance of its key service providers
and reports its results to the Board. 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
and interest rates, rates of inflation, industry conditions, companies across a number of industry sectors and
political competition, political and diplomatic events and other in addition often invests a mixture of instruments
risk factors could substantially and adversely affect the in portfolio companies.
Company's prospects in a number of ways. At any given time, the Company has sufficient cash
resources to meet its operating requirements, including
share buy-backs and follow on investments.
----------- ------------------------------------------------------------- ------------------------------------------------------------
Market The market value of Ordinary shares can fluctuate. The Company operates a share buy-back policy, which
value of The market value of an Ordinary share, as well as is designed to limit the discount at which the Ordinary
Ordinary being affected by its net asset value and prospective shares trade to around 5 per cent. to net asset value,
shares net asset value, also takes into account its dividend by providing a purchaser through the Company in absence
yield and prevailing interest rates. As such, the of market purchasers. From time to time buy-backs
market value of an Ordinary share may vary considerably cannot be applied, for example when the Company is
from its underlying net asset value. The market prices subject to a close period, or if it were to exhaust
of shares in quoted investment companies can, therefore, 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 net asset value dilution to existing investors.
other factors. Accordingly the market price of the
Ordinary shares may not fully reflect their underlying
net asset value.
----------- ------------------------------------------------------------- ------------------------------------------------------------
Viability statement
In accordance with the FRC UK Corporate Governance Code published in
2016 and principle 21 of the AIC Code of Corporate Governance, the
Directors have assessed the prospects of the Company over three years to
30 June 2021. The Directors believe that three years is a reasonable
period in which they can assess the ability of the Company to continue
to operate and meet its liabilities, as they fall due and is also the
period used by the Board in the strategic planning process and is
considered reasonable for a business of our nature and size. The three
year period is considered the most appropriate given the forecasts that
the Board require from the Manager and the estimated timelines for
finding, assessing and completing investments.
The Directors have carried out a robust assessment of the principal
risks facing the Company as explained above, including those that could
threaten its business model, future performance, solvency or liquidity.
The Board also considered the risk management processes in place to
avoid or reduce the impact of the underlying risks. The Board focused on
the major factors which affect the economic, regulatory and political
environment. The Board deliberated over the importance of the Manager
and the processes that it has in place for dealing with the principal
risks.
The Board assessed the ability of the Company to raise finance and
deploy capital. The portfolio is well balanced and geared towards long
term growth delivering dividends and capital growth to shareholders. In
assessing the prospects of the Company the Directors have considered the
cash flow by looking at the Company's income and expenditure projections
and funding pipeline over the assessment period of three years and they
appear realistic.
Taking into account the processes for mitigating risks, monitoring costs,
share price discount, the Manager's compliance with the investment
objective, policies and business model and the balance of the portfolio
the Directors have concluded that there is a reasonable expectation that
the Company will be able to continue in operation and meet its
liabilities as they fall due over the three year period to 30 June 2021.
This Strategic report of the Company for the year ended 30 June 2018 has
been prepared in accordance with the requirements of section 414A of the
Act. The purpose of this report is to provide Shareholders with
sufficient information to enable them to assess the extent to which the
Directors have performed their duty to promote the success of the
Company in accordance with section 172 of the Act.
On behalf of the Board,
Richard Huntingford
Chairman
25 September 2018
Responsibility Statement
In preparing these financial statements for the year to 30 June 2018,
the Directors of the Company, being Richard Huntingford, James Agnew,
Karen Brade and Penny Freer, confirm that to the best of their
knowledge:
-- summary financial information contained in this announcement and the full
Annual Report and Financial Statements for the year ended 30 June 2018
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 for the year ended
30 June 2018 as required by DTR 4.1.12R;
-- the Chairman's statement and Strategic report include a fair review of
the information required by DTR 4.2.7R (indication of important events
during the year ended 30 June 2018 and description of principal risks and
uncertainties that the Company faces); and
-- the Chairman's statement and Strategic report include a fair review of
the information required by DTR 4.2.8R (disclosure of related parties
transactions and changes therein).
A detailed "Statement of Directors' responsibilities" is contained on
page 35 of the full audited Annual Report and Financial Statements.
By order of the Board
Richard Huntingford
Chairman
25 September 2018
Income statement
Year ended Year ended
30 June 2018 30 June 2017
--------------------------------------------------- ---- ------------------------- ---------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------- ---- ------- ------- ------- ------- ------- ---------
Gains on investments 3 - 7,366 7,366 - 5,011 5,011
Investment income 4 1,105 - 1,105 2,082 - 2,082
Investment management fees 5 (220) (660) (880) (177) (531) (708)
Other expenses 6 (325) - (325) (920) - (920)
Profit on ordinary activities before tax 560 6,706 7,266 985 4,480 5,465
Tax on ordinary activities 8 - - - - - -
Profit and total comprehensive income attributable
to shareholders 560 6,706 7,266 985 4,480 5,465
Basic and diluted earnings per Ordinary share
(pence)* 10 0.36 4.28 4.64 0.73 3.31 4.04
--------------------------------------------------- ----
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
The total column of this Income statement represents the profit and loss
account of the Company. The supplementary revenue and capital columns
are prepared under guidance published by The Association of Investment
Companies.
Balance sheet
30 June 2018 30 June 2017
Note GBP'000 GBP'000
------------------------------------------ ---- ------------ --------------
Fixed asset investments 11 42,911 36,328
Current assets
Investment in subsidiary undertakings 13 - 6,400
Trade and other receivables less than one
year 14 266 303
Cash and cash equivalents 12,604 9,249
12,870 15,952
Total assets 55,781 52,280
Payables: amounts falling due within one
year
Trade and other payables less than one
year 15 (367) (6,699)
Total assets less current liabilities 55,414 45,581
Equity attributable to equityholders
Called up share capital 16 1,829 16,211
Share premium 974 18,032
Capital redemption reserve - 1,415
Unrealised capital reserve 12,973 6,311
Realised capital reserve (769) (813)
Other distributable reserve 40,407 4,425
Total equity shareholders' funds 55,414 45,581
Basic and diluted net asset value per
share (pence)* 17 33.50 30.98
------------------------------------------ ----
* excluding treasury shares
The accompanying notes form an integral part of these Financial
Statements.
These Financial Statements were approved by the Board of Directors, and
authorised for issue on 25 September 2018 and were signed on its behalf
by
Richard Huntingford
Chairman
Company number: 03495287
Statement of changes in equity
Capital Unrealised Realised Other
Called up share Share redemption capital capital distributable
capital premium reserve reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- ----------------- -------- ------------ ------------ ----------- --------------- ---------
As at 1 July 2017 16,211 18,032 1,415 6,311 (813) 4,425 45,581
Profit and total comprehensive income - - - 5,814 892 560 7,266
Transfer of previously unrealised losses on disposal
of investments - - - 420 (420) - -
Transfer of previously unrealised revaluations on
liquidation of subsidiaries - - - 428 (428) - -
Dividends paid - - - - - (3,085) (3,085)
Purchase of shares for treasury (including costs) - - - - - (715) (715)
Issue of equity 1,778 4,724 - - - - 6,502
Cost of issue of equity - (135) - - - - (135)
Reduction of share capital and cancellation of
reserves (16,160) (21,647) (1,415) - - 39,222 -
As at 30 June 2018 1,829 974 - 12,973 (769) 40,407 55,414
----------------------------------------------------- ---------- ----- ------- ------- --- ------- --- ------ ------- ------ ------
As at 1 July 2016 14,110 13,872 1,415 2,127 (1,109) 6,970 37,385
Profit/(loss) and total comprehensive income - - - 4,986 (82) 985 5,889
Revaluation of investment in subsidiaries - - - (424) - - (424)
Transfer of previously unrealised gains on disposal
of investments - - - (378) 378 - -
Dividends paid - - - - - (2,687) (2,687)
Purchase of shares for treasury (including costs) - - - - - (843) (843)
Issue of equity 2,101 4,334 - - - - 6,435
Cost of issue of equity - (174) - - - - (174)
----------------------------------------------------- ----- --- --- --- ------
As at 30 June 2017 16,211 18,032 1,415 6,311 (813) 4,425 45,581
----------------------------------------------------- ----- --- --- ------
* Included within these reserves is an amount of GBP20,029,000 (2017:
GBP3,612,000) which is considered distributable. In time, a further
GBP19,609,000 will become distributable.
The nature of each reserve is described in note 2 below.
Statement of cash flows
Year ended Year ended
30 June 30 June
2018 2017
GBP'000 GBP'000
-------------------------------------------------- ----------- ----------
Cash flow from operating activities
Loan stock income received 950 858
Deposit interest received 15 34
Dividend income received 36 1,098
Investment management fees paid (836) (672)
Intercompany interest paid - (1,050)
Other cash payments (316) (315)
Net cash flow from operating activities (151) (47)
----------- ----------
Cash flow from investing activities
Purchase of fixed asset investments (4,252) (2,917)
Disposal of fixed asset investments 5,188 2,546
Receipt of subsidiary cash upon liquidation 11 37
Net cash flow from investing activities 947 (334)
Cash flow from financing activities
Issue of share capital 5,869 5,833
Cost of issue of equity (3) (2)
Equity dividends paid (2,595) (2,255)
Purchase of own shares for treasury (including
costs) (712) (826)
Net cash flow from financing activities 2,559 2,750
----------- ----------
Increase in cash and cash equivalents 3,355 2,369
Cash and cash equivalents at the start of the year 9,249 6,880
Cash and cash equivalents at the end of the year 12,604 9,249
Cash and cash equivalents comprise:
Cash at bank and in hand 12,604 9,249
Cash equivalents - -
Total cash and cash equivalents 12,604 9,249
---------------------------------------------------
Notes to the Financial Statements
1. Basis of preparation
The Financial Statements have been prepared in accordance with the
historical cost convention, modified to include the revaluation of
investments, in accordance with applicable United Kingdom law and
accounting standards, including Financial Reporting Standard 102 ("FRS
102"), and with the Statement of Recommended Practice "Financial
Statements of Investment Trust Companies and Venture Capital Trusts"
("SORP") issued by The Association of Investment Companies ("AIC").
Following the liquidation of CP1 VCT PLC on 29 March 2018 (and CP2 VCT
PLC in March 2017), there ceased to be a Group, and as such, the
Directors opted to prepare the Company accounts in accordance with FRS
102. As such, the comparative Income statement and related notes are for
the Company and not the Group. This is the first period in which the
Financial Statements have been prepared under FRS 102. On adoption of,
and in accordance with, FRS 102, loans and receivables previously
measured at amortised cost using the effective interest rate method less
impairment have been classified at fair value through profit or loss
("FVTPL"). This has not led to a material change in value and so has not
led to a restatement of comparatives, further details of which are in
note 18.
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 FVTPL. The Company values investments
by following the IPEVCV Guidelines and further detail on the valuation
techniques used are in note 2 below.
Company information is shown on page 2 of the full Annual Report and
Financial Statements.
2. Accounting policies
Fixed asset investments
The Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital
growth. This portfolio of financial assets is managed and its
performance evaluated on a fair value basis, in accordance with a
documented investment policy, and information about the portfolio is
provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those undertakings in
which the Company holds more than 20 per cent. of the equity as part of
an investment portfolio are not accounted for using the equity method.
In these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments,
including loan stock, are classified by the Company as FVTPL and are
included at their initial fair value, which is cost (excluding expenses
incidental to the acquisition which are written off to the income
statement).
Subsequently, the investments are valued at 'fair value', which is
measured as follows:
-- Investments listed on recognised exchanges are valued at their bid prices
at the end of the accounting period or otherwise at fair value based on
published price quotations;
-- Unquoted investments, where there is not an active market, are valued
using an appropriate valuation technique in accordance with the IPEVCV
Guidelines. Indicators of fair value are derived using established
methodologies including earnings and revenue multiples, the level of
third party offers received, prices of recent investment rounds, net
assets and industry valuation benchmarks. Where the Company has an
investment in an early stage enterprise, the price of a recent investment
round is often the most appropriate approach to determining fair value.
In situations where a period of time has elapsed since the date of the
most recent transaction, consideration is given to the circumstances of
the portfolio company since that date in determining fair value. This
includes consideration of whether there is any evidence of deterioration
or strong definable evidence of an increase in value. In the absence of
these indicators, the investment in question is valued at the amount
reported at the previous reporting date. Examples of events or changes
that could indicate a diminution include:
-- the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was
based;
-- a significant adverse change either in the portfolio company's
business or in the technological, market, economic, legal or
regulatory environment in which the business operates; or
-- market conditions have deteriorated, which may be indicated by a
fall in the share prices of quoted businesses operating in the
same or related sectors.
Investments are recognised as financial assets on legal completion of
the investment contract and are de-recognised on legal completion of the
sale of an investment.
Dividend income is not recognised as part of the fair value movement of
an investment, but is recognised separately as investment income through
the other distributable reserve when a share becomes ex-dividend.
Debtors and creditors and cash are carried at amortised cost, in
accordance with FRS 102. There are no financial liabilities other than
creditors.
Investment income
Quoted and unquoted equity income
Dividends receivable on quoted equity shares are recognised on the
ex-dividend date. Income receivable on unquoted equity is recognised
when the Company's right to receive payment and expected settlement is
established.
Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are recognised
when the Company's right to receive payment and expect settlement is
established. Where interest is rolled up and/or payable at redemption
then it is recognised as income unless there is reasonable doubt as to
its receipt.
Bank interest income
Interest income is recognised on an accruals basis using the rate of
interest agreed with the bank.
Investment management fees, performance incentive fees and other
expenses
All expenses have been accounted for on an accruals basis. Expenses are
charged through the revenue column of the Income statement, except for
management fees and performance incentive fees which are allocated in
part to the capital column of the Income statement, to the extent that
these relate to the maintenance or enhancement in the value of the
investments and in line with the Board's expectation that over the long
term 75 per cent. of the Company's investment returns will be in the
form of capital gains.
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 reserve
This reserve accounts for the difference between the price paid for
shares and the nominal value of the shares, less issue costs and
transfers to the other distributable reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is
diminished through the repurchase and cancellation of the Company's own
shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year
end against cost, are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments;
-- expenses, together with the related taxation effect, charged in
accordance with the above policies; and
-- dividends paid to equity holders where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were
combined in 2012 to form a single reserve named other distributable
reserve.
This reserve accounts for movements from the revenue column of the
Income statement, the payment of dividends, the buy-back of shares and
other non-capital realised movements.
Dividends
Dividends by the Company are accounted for in the period in which the
dividend is paid or approved at the Annual General Meeting.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
operating segment of business, being investment in smaller companies
principally based in the UK.
3. Gains on investments
Year ended Year ended
30 June 2018 30 June 2017
GBP'000 GBP'000
----------------------------------------------- ------------- -------------
Unrealised gains on fixed asset investments 5,814 4,986
Realised gains on fixed asset investments 1,552 449
Unrealised losses on revaluation of subsidiary - (424)
7,366 5,011
------------- -------------
4. Investment income
Year ended Year ended
30 June 2018 30 June 2017
GBP'000 GBP'000
-------------------------------------------- ------------- -------------
Income recognised on investments
Loan stock interest and other fixed returns 1,056 953
UK dividend income 32 51
Bank deposit interest 17 28
Dividend income from subsidiary - 1,050
------------- -------------
1,105 2,082
------------- -------------
No interest income was earned on impaired investments during the year
(2017: GBP68,000).
5. Investment management fees
Year ended 30 June 2018 Year ended 30 June 2017
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------- ------- ------- ------- ------- -------
Investment management fee 220 660 880 177 531 708
------- ------- ------- ------- ------- -------
Further details of the Management agreement under which the investment
management fee is paid are given in the Strategic report.
During the year, services of a total value of GBP930,000 (2017:
GBP758,000) were purchased by the Company from Albion Capital Group LLP
comprising GBP880,000 in respect of management fees (2017: GBP708,000)
and GBP50,000 in respect of administration fees (2017: GBP50,000). At
the financial year end, the amount due to Albion Capital Group LLP in
respect of these services disclosed as accruals and deferred income was
GBP254,500 (administration fee accrual: GBP12,500, management fee
accrual GBP242,000) (2017: GBP211,500).
Albion Capital Group LLP is, from time to time, eligible to receive an
arrangement fee and monitoring fees from portfolio companies. During the
year ended 30 June 2018 fees of GBP155,000 attributable to the
investments of the Company were received pursuant to these arrangements
(2017: GBP125,000).
Albion Capital Group LLP, its partners and staff hold 732,510 Ordinary
shares in the Company.
6. Other expenses
Year ended Year ended
30 June 2018 30 June 2017
GBP'000 GBP'000
---------------------------------------------------------- ------------- -------------
Directors' fees (including NIC) 93 92
Auditor's remuneration:
- audit of the statutory Financial Statements (excluding
VAT) 29 26
- the auditing of accounts of subsidiaries of the
Company pursuant to legislation (excluding VAT) - 3
Fees for the liquidation of CP1 VCT PLC (excluding
VAT) 4 -
Other administrative expenses 199 173
Interest paid to subsidiary - 626
------------- -------------
325 920
------------- -------------
7. Directors' fees
The amounts paid to the Directors during the year are as follows:
Year ended Year ended
30 June 2018 30 June 2017
GBP'000 GBP'000
Directors' fees 86 86
National insurance 7 6
------------- -------------
93 92
------------- -------------
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 and 43 of the full Annual
Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
30 June 2018 30 June 2017
GBP'000 GBP'000
- -
UK corporation tax charge
Year ended Year ended
30 June 30 June
2018 2017
Factors affecting the charge GBP'000 GBP'000
--------------------------------------------------- ----------- ------------
Return on ordinary activies before taxation 7,266 5,465
Tax charge on profit at the average companies rate
of 19.0% (2017: 19.75%) 1,381 1,079
Factors affecting the charge:
Non-taxable gains (1,400) (990)
Income not taxable (6) (217)
Unutilised management expenses 25 128
- -
----------- ------------
The tax charge for the year shown in the Income statement is lower than
the average standard rate of corporation tax of 19.00 per cent. (2017:
average rate of 19.75 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) No provision for deferred tax has been made in the
current or prior accounting period. The Company has not recognised a
deferred tax asset of GBP2,830,000 (2017: GBP2,805,000) in respect of
unutilised management expenses and non-trading deficits as it is not
considered sufficiently probable that there will be taxable profits
against which to utilise these expenses in the foreseeable future.
9. Dividends
Year ended Year ended
30 June 2018 30 June 2017
GBP'000 GBP'000
-------------------------------------------------------- --- ------------- ---------------
First dividend of 1 penny per share paid on 30 November
2017
(30 November 2016 -- 1 penny per share) 1,467 1,282
Second dividend of 1 penny per share paid on 29 March
2018
(31 March 2017 -- 1 penny per share) 1,632 1,405
Unclaimed dividends (14) -
---------------
3,085 2,687
---------------
In addition to the dividends paid above, the Board has declared a first
dividend for the year ending 30 June 2019, of 1 penny per share. This
will be paid on 30 November 2018 to shareholders on the register on 2
November 2018. The total dividend will be approximately GBP1,654,000.
10. Basic and diluted return per share
Year ended 30 June 2018 Year ended 30 June 2017
Revenue Capital Total Revenue Capital Total
------------------------------------------------------ ------- ------- ----- ------- ------- ------
Return attributable to equity shares (GBP'000) 560 6,706 7,266 985 4,480 5,465
Weighted average shares (excluding treasury shares) 156,706,633 135,345,435
Return attributable per Ordinary share (pence) (basic
and diluted) 0.36 4.28 4.64 0.73 3.31 4.04
The return per share has been calculated excluding treasury shares of
17,471,410 (2017: 15,002,410).
There are no convertible instruments, derivatives or contingent share
agreements in issue so basic and diluted return per share are the same.
11. Fixed asset investments
30 June 2018 30 June 2017
GBP'000 GBP'000
Investments held at fair value through profit or
loss
Unquoted equity and preference shares 26,105 18,573
Quoted equity 273 395
Loan stock 16,533 17,360
------------ ------------
42,911 36,328
------------ ------------
30 June 2018 30 June 2017
GBP'000 GBP'000
---------------------------------------------------- ------------ ------------
Opening valuation 36,328 30,296
Purchases at cost 5,069 2,922
Disposal proceeds (5,951) (2,414
Realised gains 1,552 449
Movement in loan stock accrued income 99 89
Unrealised gains 5,814 4,986
Closing valuation 42,911 36,328
Movement in loan stock accrued income
Opening accumulated movement in loan stock accrued
income 306 217
Movement in loan stock accrued income 99 89
Closing accumulated movement in loan stock accrued
income 405 306
------------ ------------
Movement in unrealised gains
Opening accumulated unrealised gains 6,672 2,064
Transfer of previously unrealised gains/(losses) to
realised reserves on disposal of investments 420 (378)
Movement in unrealised gains 5,814 4,986
Closing accumulated unrealised gains 12,906 6,672
------------ ------------
Historic cost basis
Opening book cost 29,350 28,015
Purchases at cost 5,069 2,922
Disposals at cost (4,819) (1,419)
Cost of investments written off but still held - (167)
Closing book cost 29,600 29,350
Purchases and disposals detailed above do not agree to the Statement of
cash flows due to restructuring of investments, conversion of
convertible loan stock and settlement debtors and creditors.
The Company does not hold any assets as the result of the enforcement of
security during the period, and believes that the carrying values for
both impaired and past due assets are covered by the value of security
held for these loan stock investments.
Unquoted fixed asset investments are valued in accordance with the
IPEVCV guidelines as follows:
30 June 2018 30 June 2017
Investment valuation methodology GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Third party valuation -- earnings multiple 16,142 18,151
Cost and price of recent investment (reviewed for
impairment or uplift) 10,103 5,892
Third party valuation -- discounted cash flow 8,795 6,735
Earnings multiple 3,900 279
Revenue multiple 2,715 1,462
Net assets 983 2,933
Agreed sale price/Offer price - 481
42,638 35,933
------------ ------------
Fair value investments had the following movements between investment
methodologies between 30 June 2017 and 30 June 2018:
Value as at Explanatory
Change in investment valuation methodology (2017 to 30 June 2018 note
2018) GBP'000
---------------------------------------------------- ------------- -----------
Net assets to earnings multiple 3,404 More
relevant
valuation
methodology
Cost to revenue multiple 1,157 More
relevant
valuation
methodology
Cost to earnings multiple 289 More
relevant
valuation
methodology
The valuation will be the most appropriate valuation methodology for an
investment within its market, with regard to the financial health of the
investment and the IPEVCV Guidelines. The Directors believe that, within
these parameters, there are no other possible methods of valuation which
would be reasonable as at 30 June 2018.
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.
The Company's investments measured at fair value through profit or loss
(Level 3) had the following movements in the year to 30 June 2018:
30 June 2018 30 June 2017
Equity Loan stock Total Equity Loan stock Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------- ---------- ------- ------- ---------- -------
Opening balance 18,573 17,360 35,933 11,542 8,903 20,445
Adjustment to fair
value* - - - - 9,333 9,333
------------------
Opening balance
(adjusted to fair
value) 18,573 17,360 35,933 11,542 18,236 29,778
Additions 1,743 3,326 5,069 2,002 2,415 4,417
Disposal proceeds (2,621) (3,330) (5,951) (995) (2,969) (3,964)
Debt/equity
conversion 915 (915) - 1,555 (1,500) 55
Realised gains 1,494 58 1,552 71 378 449
Unrealised
gains/(losses) 6,001 (65) 5,936 4,398 711 5,109
Accrued loan stock
interest - 99 99 - 89 89
Closing balance 26,105 16,533 42,638 18,573 17,360 35,933
* As per FRS 102 adoption the loan stock balance for 2017 has been
adjusted to include GBP9,333,000 of investments at fair value that were
previously held under amortised cost.
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. 56 per cent. of the portfolio of
investments consisting of equity and loan stock is based on recent
investment price, net assets and cost, and as such the Board believe
that changes to reasonable possible alternative input assumptions (by
adjusting the earnings and revenue multiples) for the valuation of the
remainder of the portfolio could lead to a significant change in the
fair value of the portfolio. The impact of these changes could result in
an increase in the valuation of the equity investments by GBP715,000
(2.7%) or a decrease in the valuation of equity investments by
GBP709,000 (2.7%). For valuations based on earnings and revenue
multiples, the Board considers that the most significant input is the
price/earnings ratio; for valuations based on third party valuations,
the Board considers that the most significant inputs are price/earnings
ratio, discount factors, market values for buildings and market value
per room for care homes; which have been adjusted to drive the above
sensitivities.
12. Significant interests
The principal activity of the Company is to select and hold a portfolio
of investments in unquoted securities. Although the Company, through the
Manager, will, in some cases, be represented on the board of the
portfolio company, it will not take a controlling interest or become
involved in the management of a portfolio company. The size and
structure of the companies with unquoted securities may result in
certain holdings in the portfolio representing a participating interest
without there being any partnership, joint venture or management
consortium agreement. The investments listed below are held as part of
an investment portfolio and therefore, as permitted by FRS 102 section
9.9B, they are measured at fair value through profit or loss and not
consolidated as subsidiaries.
The Company has interests of greater than 20 per cent. of the nominal
value of any class of the allotted shares in the portfolio companies as
at 30 June 2018 as described below:
Aggregate
Registered capital
address and % class % total and
country of and share voting reserves Profit for the year
Company incorporation Principal activity type rights GBP'000 GBP'000
------------- -------------- --------------------- --------- ------- --------- -------------------
Cotton Tree
Lane,
Lancashire, Manufacturer of
ELE Advanced BB8 7BH, precision
Technologies Great engineering 74.3% B
Limited Britain components Ordinary 41.9% 4,400 34
13. Investments in subsidiary undertakings
30 June 2018
CP1 VCT PLC CP2 VCT PLC Total
GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- -------
Carrying value as at 1 July 2017 6,400 - 6,400
Movement in subsidiary net assets (6,400) - (6,400)
-----------
Carrying value as at 30 June 2018 - - -
-----------
30 June 2017
CP1 VCT PLC CP2 VCT PLC Total
GBP'000 GBP'000 GBP'000
---------------------------------- ----------- ----------- -------
Carrying value as at 1 July 2016 6,823 8,230 15,053
Movement in subsidiary net assets (423) (8,230) (8,653)
Carrying value as at 30 June 2017 6,400 - 6,400
As mentioned in the Half-yearly Financial Report, PKF Geoffrey Martin &
Co Limited were appointed as liquidators to commence the process of
members' voluntary liquidation for CP1 VCT PLC. The final account was
agreed and signed off on 29 March 2018, at which point intercompany
balances were offset and waived, and there was no control held by Crown
Place VCT PLC.
CP1 VCT PLC 30 June 2018 30 June 2017
--------------------------------------- ------------ ------------
Nominal value of shares held - GBP6,382,746
Percentage of total voting rights held - 100%
14. Current assets
Trade and other receivables less than one year 30 June 2018 30 June 2017
GBP'000 GBP'000
----------------------------------------------- ------------ ------------
Prepayments and accrued income 18 19
Other debtors 248 284
------------ ------------
266 303
------------ ------------
15. Payables: amounts falling due within one year
30 June 2018 30 June 2017
GBP'000 GBP'000
--------------------------------------- ------------ ------------
Accruals & deferred income 319 272
Trade creditors 48 43
Amounts due to subsidiary undertakings - 6,384
------------ ------------
367 6,699
------------ ------------
16. Called up share capital
Ordinary shares GBP'000
-------------------------------------------------------- --------
162,110,978 Ordinary shares of 10p each at 30 June
2017 16,211
17,449,881 Ordinary shares of 10p each issued during
the period to 12 February 2018 1,745
Reduction of nominal amount of Ordinary shares of
10p each to 1 penny each on 13 February 2018 (16,160)
3,305,299 Ordinary shares of 1 penny each issued from
13 February 2018 to 30 June 2018 33
--------------------------------------------------------
182,866,158 Ordinary shares of 1 penny each at 30
June 2018 1,829
--------------------------------------------------------
15,002,410 Ordinary shares of 10p each held in treasury
at 30 June 2017 (1,500)
1,309,000 Ordinary shares of 10p each purchased during
the period to 12 February 2018 to be held in treasury (131)
Reduction of nominal amount of Ordinary shares of
10p each to 1 penny each on 13 February 2018 1,468
1,160,000 Ordinary shares of 1 penny each purchased
during the period from 13 February 2018 to 30 June
2018 to be held in treasury (12)
--------------------------------------------------------
17,471,410 Ordinary shares of 1 penny each held in
treasury at 30 June 2018 (175)
--------------------------------------------------------
Voting rights of 165,394,748 Ordinary shares of 1
penny each at 30 June 2018 1,654
--------------------------------------------------------
Reduction of share capital and cancellation of capital redemption and
share premium reserves
As noted in the Half-yearly Financial Report, the Company obtained
authority to reduce the nominal value of its Ordinary shares from 10
pence to 1 penny and cancel the amount standing to the credit of its
share premium and capital redemption reserves at the Annual General
Meeting on 8 November 2017. The purpose of the proposal was to increase
the distributable reserves available to the Company for the payment of
dividends, the buy-back of shares, and for other corporate purposes.
The proposal received the consent of the Court on 13 February 2018, and
the changes have been registered at Companies House. Therefore, with
effect from 13 February 2018, the share capital of the Company has a
nominal value of 1 penny per share.
The Company purchased 2,469,000 Ordinary shares for treasury (2017:
3,087,000) during the year at a total cost of GBP715,000 (2017:
GBP843,000).
The total number of shares held in treasury as at 30 June 2018 was
17,471,410 (2017: 15,002,410) representing 9.6 per cent. of the shares
in issue as at 30 June 2018.
Under the terms of the Dividend Reinvestment Scheme Circular dated 26
February 2009, the following new Ordinary shares of nominal value 10
pence each (up to 13 February 2018)/1 penny each (from 13 February 2018)
were allotted during the year:
Aggregate nominal value of shares Issue price Net invested Opening market price on allotment
Allotment date Number of shares allotted (GBP'000) (pence per share) (GBP'000) (pence per share)
----------------- --------------------------- --------------------------------- ------------------- ------------ ---------------------------------
30 November 2017 761,258 76 30.71 232 28.88
29 March 2018 888,509 9 30.47 269 28.40
1,649,767 501
--------------------------- ------------
Under the terms of the Albion VCTs Prospectus Top Up Offers 2017/18, the
following new Ordinary shares of nominal value 10 pence each (up to 13
February 2018)/1 penny each (from 13 February 2018) were issued during
the year:
Aggregate nominal value of shares Issue price Net consideration received Opening market price on allotment
Allotment date Number of shares allotted (GBP'000) (pence per share) (GBP'000) (pence per share)
----------------- --------------------------- --------------------------------- ------------------ -------------------------- ---------------------------------
17 November 2017 4,335,689 433 31.20 1,332 28.88
17 November 2017 2,657,447 266 31.40 818 28.88
17 November 2017 5,346,269 535 31.50 1,642 28.88
31 January 2018 4,349,218 435 31.50 1,336 28.60
5 April 2018 1,980,778 20 31.30 605 29.00
11 April 2018 169,993 2 31.00 52 28.40
11 April 2018 5,787 - 31.10 2 28.40
11 April 2018 260,232 3 31.30 79 28.40
19,105,413 5,866
--------------------------- --------------------------
17. Basic and diluted net asset value per share
The Company net asset value attributable to the Ordinary shares at the
year end was as follows:
30 June 2018 30 June 2017
-------------------------------------------- ------------ ------------
Net asset value per share attributable (pence) 33.50 30.98
------------ ------------
The net asset value per share at the year end is calculated in
accordance with the Articles of Association and is based upon total
shares in issue less treasury shares of 165,394,748 shares (2017:
147,108,568) as at 30 June 2018.
There are no convertible instruments, derivatives or contingent share
agreements in issue.
18. First time adoption of FRS 102
In the prior year Financial Statements, loan stock (excluding
convertible bonds and debt issued at a discount) were classified as
loans and receivables as permitted by IAS 39 and measured at amortised
cost using the effective interest rate method less impairment. This is
the first year of application of FRS 102 and if FRS 102 had been applied
in the prior year and loan stock had been valued at "fair value" this
would have seen a reduction in value of loan stock by GBP136,000 which
would have been a 0.8% difference as a percentage of total loan stock
valuation (GBP17,360,000). As the first time adoption of FRS 102 had no
material impact, no restatement of comparatives is necessary.
19. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 16.
The Company is permitted to buy back its own shares for cancellation or
treasury purposes, and this is described in more detail in the Strategic
report.
The Company's financial instruments comprise equity and loan stock
investments in unquoted companies, equity in quoted companies,
contingent receipts on disposal of fixed asset investments, cash
balances, debtors and creditors which arise from its operations. The
main purpose of these financial instruments is to generate revenue and
capital appreciation for the 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 as follows:
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
and quoted companies, details of which are shown on pages 21 to 23 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 review investment risk (which
includes market price risk), both at the time of initial investment and
at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made to
ensure that profits to the Company are maximised, and that valuations of
investments retained within the portfolio appear sufficiently prudent
and realistic compared to prices being achieved in the market for sales
of unquoted investments.
The maximum investment risk as at the balance sheet date is the value of
the fixed asset investment portfolio which is GBP42,911,000 (2017:
GBP36,328,000). Fixed asset investments form 77 per cent. of the net
asset value as at 30 June 2018 (2017: 80 per cent.).
More details regarding the classification of fixed asset investments are
shown in note 11.
Investment price risk
Investment price risk is the risk that the fair value of future
investment cash flows will fluctuate due to factors specific to an
investment instrument or to a market in similar instruments. To mitigate
the investment price risk for the Company as a whole, the strategy of
the Company is to invest in a broad spread of industries with
approximately two-thirds of the unquoted investments comprising debt
securities, which, owing to the structure of their yield and the fact
that they are usually secured, have a lower level of price volatility
than equity. Details of the industries in which investments have been
made are contained in the Portfolio of investments section on pages 21
to 23 of the full Annual Report and Financial Statements and in the
Strategic report.
Valuations are based on the most appropriate valuation methodology for
an investment within its market, with regard to the financial health of
the investment and the IPEVCV Guidelines.
As required under FRS 102 section 34.29, the Board is required to
illustrate by way of a sensitivity analysis, the degree of exposure to
market risk. The Board considers that the value of the fixed asset
investment portfolio is sensitive to a 10 per cent. change based on the
current economic climate. The impact of a 10 per cent. change has been
selected as this is considered reasonable given the current level of
volatility observed both on a historical basis and future expectations.
The sensitivity of a 10 per cent. (2017: 10 per cent.) increase or
decrease in the valuation of the fixed asset investments (keeping all
other variables constant) would increase or decrease the net asset value
and return for the year by GBP4,291,100 (2017: GBP3,632,800). Further
sensitivity analysis on fixed asset investments is included in note 11.
Interest rate risk
It is the Company's policy to accept a degree of interest rate risk on
its financial assets through the effect of interest rate changes. On the
basis of the Company's analysis, it is estimated that a rise or fall of
half a percentage point in all interest rates would be immaterial due to
the level of fixed rate loan stock held within the portfolio. The impact
of half a percentage point change has been selected as this is
considered reasonable given the current level of volatility observed
both on a historical basis and future expectations.
The weighted average interest rate applied to the Company's fixed rate
assets during the year was approximately 7.0 per cent. (2017: 5.9 per
cent.). The weighted average period to maturity for the fixed rate
assets is approximately 3.2 years (2017: 3.2 years).
The Company's financial assets and liabilities, all denominated in
pounds sterling, consist of the following:
30 June 2018 30 June 2017
Fixed rate Floating rate Non-interest Total Fixed rate Floating rate Non-interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ------------ ------------- ------------ -------- ------------ ------------- ------------ --------
Loan stock 15,913 - 620 16,533 16,826 - 534 17,360
Equity - - 26,378 26,378 - - 18,968 18,968
Receivables* - - 248 248 - - 285 285
Payables - - (367) (367) (6,384) - (315) (6,699)
Cash - 12,604 - 12,604 - 9,249 - 9,249
------------ ------------- -------------
15,913 12,604 26,879 55,396 10,442 9,249 19,472 39,163
------------ ------------- -------------
*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
debtors, investment in loan stock, and cash on deposit with banks.
The Manager evaluates credit risk on loan stock and other similar
instruments prior to investment, and as part of its ongoing monitoring
of investments. In doing this, it takes into account the extent and
quality of any security held. Typically loan stock instruments have a
first fixed charge or a fixed and floating charge over the assets of the
portfolio company in order to mitigate the gross credit risk. The
Manager receives management accounts from portfolio companies, and
members of the investment management team often sit on the boards of
unquoted portfolio companies; this enables the close identification,
monitoring and management of investment-specific credit risk.
Bank deposits are held with banks with high credit ratings assigned by
international credit rating agencies. The 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 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 at 30 June 2018 was limited to
GBP16,533,000 (2017: GBP17,360,000) of loan stock instruments (all are
secured on the assets of the portfolio company), GBP12,604,000 (2017:
GBP9,249,000) of cash deposits with banks and GBP248,000 (2017:
GBP285,000) of deferred consideration and receivables.
As at the balance sheet date, the cash held by the Company is held with
Lloyds Bank Plc, Scottish Widows Bank plc (part of Lloyds Banking Group),
National Westminster Bank plc and Barclays Bank plc. Credit risk on cash
transactions is mitigated by transacting with counterparties that are
regulated entities subject to prudential supervision, with high credit
ratings assigned by international credit-rating agencies.
The credit profile of loan stock is described under liquidity risk shown
below.
The cost, impairment and carrying value of impaired loan stocks at 30
June 2018 and 30 June 2017 are as follows:
30 June 2018 30 June 2017
Carrying Carrying
Cost Impairment value Cost Impairment value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- ------- ------------ -------- ------- ------------ --------
Impaired
loan
stock 2,158 (702) 1,456 4,279 (867) 3,412
------- ------------ -------- ------- ------------ --------
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 short term deposit accounts.
Under the terms of its Articles, the Company has the ability to borrow
up to the amount of its adjusted capital and reserves of the latest
published audited balance sheet, which amounts to GBP53,760,000 (2017:
GBP44,110,000) as at 30 June 2018.
The Company has no committed borrowing facilities as at 30 June 2018
(2017: nil) and had cash balances of GBP12,604,000 (2017: GBP9,249,000).
The main cash outflows are for new investments, dividends and share
buy-backs, which are within the control of the Company. The Manager
formally reviews the cash requirements of the Company on a monthly basis,
and the Board on a quarterly basis, as part of its review of management
accounts and forecasts.
All of the Company's financial liabilities are short term in nature and
total GBP367,000 (2017: GBP6,699,000) for the year to 30 June 2018.
The carrying value of loan stock investments, analysed by expected
maturity dates is as follows:
30 June 2018 30 June 2017
Redemption Fully performing Impaired Past due Total Fully performing Impaired Past due Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ---------------- -------- -------- -------- ---------------- -------- -------- --------
Less than
one year 785 1,288 307 2,380 1,083 1,238 320 2,641
1-2 years 4,971 63 979 6,013 3,379 2,086 556 6,021
2-3 years 2,580 105 637 3,322 1,487 6 1,474 2,967
3-5 years 2,111 - 332 2,443 2,775 82 575 3,432
5 + years 701 - 1,674 2,375 1,973 - 326 2,299
---------------- -------- -------- -------- ---------------- -------- -------- --------
Total 11,148 1,456 3,929 16,533 10,697 3,412 3,251 17,360
---------------- -------- -------- -------- ---------------- -------- -------- --------
Loan stock can be past due as a result of interest or capital not being
paid in accordance with contractual terms. Past due loan stock is not
impaired. The average annual interest yield on the total cost of past
due loan stocks is 3.4 per cent. (2017: 7.2 per cent.).
No balances, other than loan stock, are past due or impaired.
In view of the availability of adequate cash balances and the repayment
profile of loan stock investments, the Board considers that the 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 30 June 2018
are stated at fair value as determined by the Directors, with the
exception of receivables and payables and cash which are carried at
amortised cost, in accordance with FRS 102. There are no financial
liabilities other than payables. The Company's financial liabilities are
all non-interest bearing. It is the Directors' opinion that the book
value of the financial liabilities is not materially different to the
fair value and all are payable within one year.
20. Contingencies and guarantees
As at 30 June 2018, the Company had no financial commitments in respect
of investments (2017: GBP5,000).
There are no contingencies or guarantees of the Company as at 30 June
2018 (2017: GBPnil).
21. Post balance sheet events
Since 30 June 2018 the Company has completed the following investment
transactions:
-- Investment of GBP356,000 in Phrasee Limited;
-- Investment of GBP320,000 in Locum's Nest Limited;
-- Investment of GBP248,000 in Quantexa Limited;
-- Investment of GBP168,000 in Arecor Limited; and
-- Investment of GBP115,000 in ePatient Network Limited.
22. Related party transactions
23. Other information
The information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 434 of the
Companies Act 2006 for the years ended 30 June 2018 and 30 June 2017,
and is derived from the statutory accounts for those financial years,
which have been, or in the case of the accounts for the year ended 30
June 2018, which will be, delivered to the Registrar of Companies. The
Auditor reported on those accounts; the reports were unqualified and did
not contain a statement under s498 (2) or (3) of the Companies Act 2006.
The Company's Annual General Meeting will be held at The City of London
Club, 19 Old Broad Street, London, EC2N 1DS on 29 November 2018 at 11:00
am.
24. 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=eEpbmswoTFq-g1eS4JBcWS6xm294Kyu0VNTYICANAime7c9jqp6J-R166OdExFY4v_hnNXKCzYotAU3rHOeeAHlKPP-Ke_8zIaBl6JThcEp9dfs6SdMZSE07JNIIPKWO
www.albion.capital/funds/CRWN, where the Report can be accessed via a
link in the 'Financial Reports and Circulars' section.
Attachment
-- Current sector portfolio allocation
https://prlibrary-eu.nasdaq.com/Resource/Download/8b6dae8a-c40c-43c2-923b-4d2fd8a9eb43
(END) Dow Jones Newswires
September 25, 2018 12:29 ET (16:29 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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