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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 |
Hot Features
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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 2020.
This announcement was approved for release by the Board of Directors on
24 September 2020.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 30 June
2020 (which have been audited), will shortly be sent to shareholders.
Copies of the full Annual Report and Financial Statements will be shown
via the Albion Capital Group LLP website by clicking
https://www.globenewswire.com/Tracker?data=pAcNTVBcMcaJ_ZPIZgvFoPSAZJZtjvADxS6-L9yqGTurwOdEXYIaR1DFcR1HCBe8FGraYm6NZqzQOX0jHXY_LBjPqm3INuE17oQmNOVJF7-C7GDerlMogAXTU1CEPRZP2OJOECq_sA0xP2hKKJPEusLGT7VLuX6M85HPn-86lQw=
www.albion.capital/funds/CRWN/30Jun20.pdf. The information contained in
the Annual Report and Financial Statements will include information as
required by the Disclosure Guidance and Transparency Rules, including
Rule 4.1.
Investment policy
The Company invests in a broad portfolio of smaller, unquoted growth
businesses across a variety of sectors including higher risk technology
companies. Investments take the form of equity or a mixture of equity
and loans.
Whilst allocation of funds is determined by the investment opportunities
which are available, efforts are 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. The Directors do
not have any intention of utilising long-term gearing.
Financial calendar
Record date for special dividend 9 October 2020
Payment date for special dividend 30 October 2020
Record date for first interim dividend 6 November 2020
Annual General Meeting Noon on 26 November
2020
Payment date of first interim dividend 30 November 2020
Announcement of half-yearly results for the six months February 2021
ending 31 December 2020
Payment date of second interim dividend (subject to 31 March 2021
Board approval)
Financial summary
33.14p Net asset value per share as at 30 June 2020
--------------------------------------------------
(0.21p) Total loss per share to shareholders for the year
ended 30 June 2020
--------------------------------------------------
(0.6%) Total loss on opening net asset value per share
--------------------------------------------------
2.0p Total tax-free dividends per share paid during the
year ended 30 June 2020
--------------------------------------------------
30 June 2020 30 June 2019
pence per share pence per share
Opening net asset value 35.29 33.50
Revenue return 0.25 0.41
Capital (loss)/return (0.46) 3.34
--------------- ---------------
Total (loss)/return (0.21) 3.75
Dividends paid (2.00) (2.00)
Impact from share capital movements 0.06 0.04
Closing net asset value 33.14 35.29
------------------------------------ --------------- ---------------
Shareholder return and shareholder value (pence per share)
Shareholder return from launch to April 2005:
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 2020
(period that Albion Capital has been investment manager):
Total dividends paid 34.80
Decrease in net asset value (10.26)
-----------------
Total shareholder return from April 2005 to 30 June
2020 24.54
-----------------
Shareholder value since launch:
Total dividends paid to 30 June 2020(i) 59.73
Net asset value as at 30 June 2020 33.14
-----------------
Total shareholder value as at 30 June 2020 92.87
-----------------
Notes
(i) Prior to 6 April 1999, Venture Capital Trusts were able
to add 20 per cent. to dividends and figures for the period up until 6
April 1999 are included at the gross equivalent rate actually paid to
shareholders.
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
the year ended 30 June 2019 2.00
the year ended 30 June 2020 2.00
Total dividends paid to 30 June 2020 59.73
Net asset value as at 30 June 2020 33.14
------------------
Total shareholder value as at 30 June 2020 92.87
-------------------------------------------------------- ------------------
In addition to the dividends paid above, the Board has declared a first
interim dividend for the year ending 30 June 2021 of 0.83 pence per
share payable on 30 November 2020 to shareholders on the register on 6
November 2020. The Board has also declared a special dividend of 2.00
pence per share payable on 30 October 2020 to shareholders on the
register on 9 October 2020. Details of the new variable dividend policy
and the special dividend can be found in the Chairman's statement below.
Chairman's statement
Introduction
Without doubt it has been a year of two halves for our Company with the
reporting period dominated by the emergence of the coronavirus
(Covid-19) pandemic which has had such an impact on all our lives.
I am therefore pleased to report some excellent outcomes from various
exits during the year and some significant unrealised gains, which
offset some of the effect of the ongoing health and economic crisis on
our wider portfolio. The Board has undertaken a robust revaluation
process to quantify the effect on the Company's portfolio, which, in
turn, has impacted on the year-end net asset value of the Company.
Results and investment performance
As at 30 June 2020, the net asset value was GBP65.3 million or 33.14
pence per share compared to GBP66.0 million or 35.29 pence per share at
30 June 2019. The ongoing charges ratio for the year remained at 2.3%
(2019: 2.3%).
Further details of the Company's financial performance are given in the
Strategic report below.
In the first half of the financial year, the Company took advantage of
the prevailing favourable financial conditions to realise profits from
the sale of a number of portfolio companies with proceeds totalling
GBP12.8 million (2019: GBP3.4 million) equivalent to 19.6% of the
Company's net asset value. There were four significant disposals in this
period:
-- The investment in ELE Advanced Technologies was sold for GBP5.0 million,
resulting in a total return of 4.75 times original cost;
-- Following a reorganisation, Radnor House (Twickenham), one of the two
Radnor House branded schools, was sold generating proceeds of GBP4.1
million. The Company first invested in Radnor House Twickenham in 2010
and achieved a return of 3.75 times cost (including interest received);
-- The sale of Process Systems Enterprise delivered a return of 10 times
cost, and realised GBP1.4 million. Following the successful sale of
Grapeshot last year this is the second time that the Company has sold a
technology investment for a return of ten times investment cost; and
-- We sold our holding in the two Bravo Inns pub companies, delivering a
return of 1.85 times cost (including interest received).
Further information on realisations can be found on page 28 of the full
Annual Report and Financial Statements.
Impact of Covid-19
The second half of the year saw a dramatic change in economic conditions,
as the effects of the pandemic took hold. The Board has taken this into
account when reassessing the carrying values of all companies within the
portfolio and has reduced those which are adversely impacted by the
changed economic and market conditions. Therefore, the results for the
year show net losses on investments of GBP21,000, against a gain of
GBP6.5 million for the previous year. We have benefitted from our
diversified portfolio with weightings in sectors that are less badly
affected by the pandemic, such as digital health and enterprise software
technology, and that many companies in which we have invested are well
suited to operating remotely which has reduced the disruption to their
operations.
The companies most affected by the pandemic have been Mirada Medical,
DySIS Medical, Zift Channel Solutions and Beddlestead, which account for
a devaluation of GBP2.1 million in the year. The first two have a direct
sales model into hospitals, which became impossible given hospital's
immediate priorities, while the latter is a wedding venue which has not
been able to operate given the rules on public health. This devaluation
was offset by a GBP1.6 million valuation uplift for Quantexa, following
a further GBP51.2 million externally led fundraising round to continue
to grow globally, and GBP542,000 for Proveca, due to strong sales of its
specialist pharmaceutical product Sialanar across Europe.
Notwithstanding the onset of the pandemic in the final half of the year,
the Company continued to look for investment opportunities and a further
GBP1.7 million was invested in new and existing companies, adding to the
GBP2.5 million invested in the first half. Of the total GBP4.2 million
invested during the full year, the Company invested GBP2.9 million in
five new portfolio companies, all of which are expected to require
further planned investment as the companies accelerate their growth:
-- GBP779,000 into Cantab Research (trading as Speechmatics), a provider of
low footprint automated speech recognition software across 29 languages
which can be deployed in the cloud, on premise or on device;
-- GBP755,000 into Concirrus, a software provider bringing real-time
behavioural data analytics to the marine and transport insurance
industries;
-- GBP724,000 into Elliptic Enterprises, a provider of Anti Money Laundering
technology and services to digital asset institutions;
-- GBP454,000 into Credit Kudos, a challenger credit bureau helping lenders
optimise and automate their affordability and risk assessments; and
-- GBP220,000 into TransFICC, a provider of connectivity solutions, giving
financial institutions access to trading venues via a single API.
We also continued to invest in our existing portfolio companies, with a
total of GBP1.3 million deployed, including GBP257,000 in Oviva, as part
of an externally led funding round, to support the expansion of its
geographical footprint, as well as to further transition the company's
focus on digital diabetes therapeutics, GBP171,000 in InCrowd Sport and
GBP160,000 in Black Swan Data, to support their growth.
Full details of the companies in which we invest can be found in the
Portfolio of investments section on pages 25 to 28 of the full Annual
Report and Financial Statements.
Special dividend
Following changes to the VCT rules and the investment policy, the
Company continues to focus on investing in higher growth technology
companies, which inevitably leads to increased volatility in returns. As
detailed above, there has been a number of significant disposals in the
year, which has resulted in cash balances at 30 June 2020 of GBP24.0
million, which represents 36% of net assets (2019: 24%). Whilst it is
important for a Venture Capital Trust, which by its nature has illiquid
investments, to hold sufficient cash to manage operating costs, to
service dividends and buy-backs and, most importantly, to make follow on
and new investments as opportunities arise, this must be balanced
against the requirements of a Venture Capital Trust to meet a minimum
threshold of 80% invested in qualifying investments. As a result of
these significant disposals and the additional liquidity they generated,
and in order to maintain the Company's qualifying VCT status, the Board
has declared a special dividend of 2.00 pence per share, payable on 30
October 2020 to shareholders on the register on 9 October 2020. Whilst
this reduces the Company's assets, it provides a significant income
return to shareholders and, for those that wish to take it, an
opportunity to re-invest the special dividend in the Company via the
Dividend Reinvestment Scheme as described below.
The Company continues to offer a Dividend Reinvestment Scheme ("DRIS")
whereby shareholders can elect to receive dividends in the form of new
shares. For shareholders not currently in the DRIS, the Company is
offering shareholders the option to elect for a one-off sign up to have
this special dividend reinvested into new shares through the DRIS.
Shareholders can take advantage of this by emailing
https://www.globenewswire.com/Tracker?data=9fG0G2HFBLGJk78Ik3-9g0yeek-QUnLQMaMv6I7_a_c55WewOiRxV89JblO7cHVP5SQG7P2h4Lji3oi7yo7FbhSEuWOEwdT6RivXw26bBd88xK2z_jf4EOCAV55qHFQN
crownchair@albion.capital before midday on 7 October 2020. To elect for
the reinvestment, please ensure your email contains your full name,
Shareholder Reference Number, telephone number and confirms you have
read the DRIS terms and conditions. As outlined below, the Company has
moved to a variable dividend, calculated as a percentage of the net
asset value, which will, in the near term, reduce the absolute amount of
dividend receivable per ordinary share (previously 2 pence per annum, 1
penny semi-annually). By re-investing the special dividend in the
capital of the Company, shareholders would be expected to broadly
maintain the level of relative income they have been receiving from the
Company under the new variable dividend policy.
The terms and conditions for the DRIS can be found on the Company's
webpage on the Manager's website at
https://www.globenewswire.com/Tracker?data=pAcNTVBcMcaJ_ZPIZgvFoPSAZJZtjvADxS6-L9yqGTsIotm6ND2GLNYUzBbqaCEzLmWIbVGD-xtIxCYlt8gisz1cu3yVqzJh1IBKljMkyqzZmbAClrxNQqpHXVWUai4y
www.albion.capital/funds/CRWN under the Fund reports section.
New dividend policy
The Board is aware of the importance of dividends to shareholders and it
remains its intention to continue to pay regular dividends, as far as
liquidity permits. Given the uncertainty that the current pandemic has
created and the volatile nature of investing in small unquoted growth
businesses, the Board considers it appropriate to move to a variable
dividend policy targeting an annual dividend yield of around 5%.
Semi-annual dividends will be paid calculated as 2.5% of the most
recently announced net asset value when the dividend is declared (in
most cases this will be the net asset value announced in the Half-yearly
Financial Report or in the Annual Report and Financial Statements). This
has the advantage of avoiding unsustainably high dividends if the net
asset value falls, whilst rewarding shareholders more immediately if the
net asset value rises.
As a result, the Company will pay a first interim dividend for the year
ending 30 June 2021 of 0.83 pence per share (29 November 2019: 1 penny
per share), payable on 30 November 2020 to shareholders on the register
on 6 November 2020.
Board composition
As announced on 20 February 2020, after almost eight years on the Board
including six years as Chairman, I will retire from the Board on 30
September 2020. Penny Freer, who has been on the Board since 2014 and
Chairman of the Remuneration Committee since 2015, will succeed me as
Chair.
It has been a huge pleasure to Chair your Company and I would like to
thank my fellow Directors (past and present), the Albion management and
staff, our advisers and service providers, and all our shareholders for
their support over the years.
The Board announced on 21 April 2020 that, following a formal selection
process, Ian Spence would be appointed to the Board as a non-executive
Director with effect from 1 May 2020. Ian is highly experienced in the
technology sector, having researched and advised companies in this
industry for over 20 years. Ian joins the Board at a time when the
Company's technology portfolio is increasing in size and will continue
to do so and his knowledge and experience will therefore be highly
relevant and valuable to the Board and the Company.
Risks and uncertainties
The implication of the financial turmoil arising from the coronavirus
(Covid-19) crisis is the key risk facing the Company, including its
impact on the UK and Global economies. There are also potential
implications of the UK leaving the European Union which may adversely
affect our underlying portfolio companies. The Manager is continually
assessing the exposure to these risks for each portfolio company
alongside its management and other co-investors, and appropriate
mitigating actions, where possible, are being implemented.
A detailed review of risk management is set out in the Strategic report
below.
Corporate broker and share buy-backs
The Board was pleased to announce on 17 June 2020 the appointment of
Panmure Gordon (UK) Limited as corporate broker.
It remains the Board's primary objective to maintain sufficient
resources for investment in existing and new portfolio companies and for
the continued payment of dividends to shareholders. The Board's policy
is to buy back shares in the market, subject to the overall constraint
that such purchases are in the Company's interest. Given the current
stability of the portfolio and the Company's current cash position, the
Board have decided that there will be no limit on the level of share
buy-backs.
It is the Board's intention for such buy-backs to be in the region of a
5% discount to net asset value, so far as market conditions and
liquidity permit.
Albion VCTs' Top Up Offers
The Board was pleased to announce on 10 December 2019 that the Company
had reached its GBP4 million limit under its Offer pursuant to the
Prospectus dated 22 October 2019, and so was closed to further
applications. Due to the successful disposals detailed above, the Board
elected not to exercise the over-allotment facility. The proceeds of the
Offer will be used to provide further resources at a time when a number
of attractive investment opportunities are being seen.
Annual General Meeting
The Board has been considering the potential impact of the Covid-19
outbreak on the arrangements for our forthcoming Annual General Meeting
("AGM"). These arrangements will evolve and we will keep shareholders up
to date with any changes on our Manager's website at
www.albion.capital/funds/CRWN.
We are required by law to hold an AGM within six months of our financial
year end and a lengthy postponement or adjournment is not possible in
this case. Our AGM will therefore be held at noon on 26 November 2020,
at the registered office being 1 Benjamin Street, London, EC1M 5QL.
Full details of the business to be conducted at the Annual General
Meeting are given in the Notice of the Meeting on pages 74 to 77 of the
full Annual Report and Financial Statements, and in the Directors'
report on pages 38 and 39 of the full Annual Report and Financial
Statements.
Based on the current government advice and social distancing guidelines,
shareholders will not be allowed entry into the building where the AGM
is held. The quorum for the meeting is two, therefore, two Directors
will attend in person to allow the continuation of this AGM. There will
also be a representative of Albion Capital Group LLP as Company
Secretary. Our Articles of Association do not currently allow hybrid or
wholly virtual AGMs, however, as outlined below a resolution is being
proposed to allow this in the future.
In order to maintain shareholder engagement, the Board has decided to
live stream the AGM, which will include a presentation from the Manager,
the formal business of the AGM and the answering of some of the
questions we receive from shareholders in advance of the Meeting.
Registration details for the live stream will be emailed to shareholders
and available at www.albion.capital/funds/CRWN prior to the Meeting.
We always welcome questions from our shareholders at the AGM, and this
year we request that shareholders submit their questions to the Board
before the AGM. Shareholders can submit questions up until noon on 25
November 2020 in the following ways:
-- by email: send your questions to crownchair@albion.capital;
and
-- by telephone: contact Shareholder Relations on 020 7601 1850.
Following the Meeting, a summary of responses will be published on the
Manager's website at www.albion.capital/funds/CRWN.
Shareholders' views are important, and the Board encourages shareholders
to vote on the resolutions using the proxy form enclosed with this
Annual Report and Financial Statements, or electronically at
www.investorcentre.co.uk/eproxy. The Board has carefully considered the
business to be approved at the AGM and recommends shareholders to vote
in favour of all the resolutions being proposed.
Virtual and hybrid Annual General Meetings
The Company's Articles of Association do not currently allow for hybrid
or virtual meetings. The Covid-19 pandemic, and the resulting social
distancing rules, have brought to the Board's attention the importance
of the ability to continue to interact with shareholders during
unprecedented times. A resolution will be proposed at the upcoming AGM
to update the Articles of Association in order to allow the Company to
have the flexibility to hold hybrid or virtual meetings in the future if
required.
Electronic communications
To ensure efficient shareholder communication the Board is actively
encouraging shareholders who are currently receiving hard copy
information to change their preferences to electronic communications. To
encourage the change, for every shareholder signing up to receive
electronic communications, the Manager will donate GBP1 towards a
Covid-19 supporting charity chosen by the Albion team.
There are many reasons why we think this is the right thing to do
including less human contact, speed, reduced paper use and cost savings
for the Company. All the information and documents relating to the
Company can be found on the Company's webpage on the Manager's website
at www.albion.capital/funds/CRWN.
We encourage shareholders to sign up to electronic communications by
registering on the Computershare website at www.investorcentre.co.uk.
Once registered, shareholders are able to update their electronic
communication details for all their Albion managed VCTs, and can also
update their address or bank details, as well as see their dividend
payment history. Alternatively, please contact Shareholder Relations at
info@albion.capital who will also be able to assist.
Fraud warning
We note that shareholders continue to be contacted in connection with
increasingly sophisticated but fraudulent financial scams. This is often
by a phone call or an email which normally originates from outside of
the UK, often claiming or appearing to come from a corporate finance
firm and typically offering to buy your VCT shares at an inflated price.
If you are contacted, we recommend that you do not respond with any
personal information and say you are not interested.
The Manager maintains a page on their website in relation to fraud
advice at www.albion.capital/investor-centre/fraud-advice. Details of
how to sell shares through reputable channels can also be found here.
If you are in any doubt, we recommend that you seek financial advice
before taking any action. You can also call Shareholder Relations on 020
7601 1850, or email info@albion.capital, if you wish to check whether
any claims made are genuine.
Outlook
Whilst there are still considerable uncertainties as to the full extent
of the ongoing economic and societal impact of Covid-19, our priority
will be to support our existing portfolio companies as they weather the
storm and take advantage of new opportunities. The Company will also be
making selective new investments into businesses that are driving
innovation in a rapidly changing world. Encouragingly, despite the
challenges caused by the pandemic, many of the companies in which we
have invested continue to show strong growth, and we remain confident
that the Company has the potential to continue to deliver attractive
long term returns to shareholders.
Richard Huntingford
Chairman
24 September 2020
Strategic report
Crown Place VCT PLC (the "Company") is a Venture Capital Trust and its
investment policy can be found above.
Business model
The Company operates as a Venture Capital Trust. This means that the
Company has no employees 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 charts at the end of this announcement shows the split of the
portfolio valuation as at 30 June 2020 by: sector; stage of investment;
and number of employees. Details of the principal investments made by
the Company are shown in the Portfolio of investments on pages 25 to 28
of the full Annual Report and Financial Statements.
Direction of portfolio
The analysis of the Company's investment portfolio shows that it is well
diversified and evenly spread across the renewable energy, healthcare,
education, IT and healthcare technology sectors.
The IT sector has continued to grow as a proportion of the portfolio as
we invest in key areas such as cyber security and machine learning
applications. During the year the Company sold a number of its
asset-based businesses, which has resulted in its cash and net current
assets increasing to 36% of the portfolio at 30 June 2020 (2019: 24%).
In line with the Company's investment policy, these funds will be
invested predominately into higher growth technology companies. The
substantial cash balance of the Company will allow it to give support to
our portfolio companies who require it, as well as to be able to
capitalise on any new investment opportunities that may arise.
Results and dividends
GBP'000
----------------------------------------------------- -------
Revenue return for the year ended 30 June 2020 473
Capital loss for the year ended 30 June 2020 (877)
----------------------------------------------------- -------
Total loss for the year ended 30 June 2020 (404)
Dividend of 1 penny per share paid on 30 November
2020 (1,861)
Dividend of 1 penny per share paid on 31 March 2020 (1,964)
Unclaimed dividends 11
----------------------------------------------------- -------
Transferred from reserves (4,218)
----------------------------------------------------- -------
Net assets as at 30 June 2020 65,273
----------------------------------------------------- -------
Net asset value as at 30 June 2020 (pence per share) 33.14
----------------------------------------------------- -------
The Company paid dividends totalling 2.00 pence per share during the
year ended 30 June 2020 (2019: 2.00 pence per share). The dividend
objective of the Board is to provide shareholders with a regular
dividend flow. As noted in the Chairman's statement, the Board has
approved a new variable dividend policy where the Company will target an
annual dividend yield of around 5% per annum and has therefore declared
a first interim dividend for the year ending 30 June 2021 of 0.83 pence
per share. This dividend will be paid on 30 November 2020 to
shareholders on the register on 6 November 2020. The Board has also
declared a special dividend of 2.00 pence per share, payable on 30
October 2020 to shareholders on the register on 9 October 2020.
As shown in the Income statement below, the capital loss on investments
for the year was GBP21,000 (2019: gain of GBP6,475,000). There were some
excellent exits in the year, including the sale of our investment in ELE
Advanced Technologies for GBP5.0 million, resulting in a total return of
4.75 times original cost, and the sale of PSE, delivering a ten times
return on cost. Additionally, following a third party investment round,
Quantexa was written-up by GBP1.6 million. However, due to the impact of
coronavirus, a number of our portfolio companies have experienced a
devaluation, the significant write-downs being Mirada Medical, DySIS
Medical, Zift Channel Solutions and Beddlestead. Together these account
for GBP2.1 million of write-downs, which offset the gains listed above.
A full analysis of the Portfolio of investments can be seen on pages 25
to 28 of the full Annual Report and Financial Statements.
Investment income has decreased to GBP1,112,000 (2019: GBP1,285,000),
resulting in a decreased revenue return of GBP473,000 (2019:
GBP697,000). The total loss for the year was 0.21 pence per share (2019:
gain of 3.75 pence per share).
The Balance sheet below, shows that the net asset value has decreased
over the year to 33.14 pence per share (2019: 35.29 pence per share),
mainly due to the payment of the dividend of 2.00 pence per share during
the year and the total loss for the year of 0.21 pence per share.
The cash flow for the Company has been a net inflow of GBP7,883,000 for
the year (2019: GBP3,479,000), reflecting disposal proceeds, loan stock
income, and the issue of new Ordinary shares under the Top Up Offer,
offset by dividends paid, ongoing expenses, new investments 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 above. Total losses on investments for the year
were GBP21,000 (2019: gain of GBP6.5 million).
There is a continuing focus on growing the technology and healthcare
sectors. There have been strong exits this year from our final two pub
investments, and one of our schools, which has resulted in a decrease of
asset-based investment as a percentage of the portfolio. As a
consequence, we expect our investment income to reduce in future years,
as most of our loan stock interest is received from the asset-based
portion of the portfolio, and the returns for the Company to be
delivered from capital rather than revenue.
Details of significant events which have occurred since the end of the
financial year are listed in note 19. Details of transactions with the
Manager are shown in note 5.
Future prospects
The world is currently navigating a global pandemic, which will likely
leave no company unaffected. The Board believes that the Company's
portfolio is well balanced, and with a significant proportion in cash
(36% of the net asset value) the Board believes the Company has the
potential to both support our portfolio companies, as well as deliver
long term results to shareholders.
Key Performance Indicators ("KPIs") and Alternative Performance Measures
("APMs")
The Directors believe that the following KPIs and APMs, which are
typical for 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 KPIs and APMs, 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 14 of the full Annual Report and Financial Statements
shows that total shareholder value decreased by 0.15 pence per share to
92.87 pence per share (2019: 93.02) for the year ended 30 June 2020.
2. Shareholder return in the year
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
---- ---- ---- ---- ---- ---- ----- ----- ----- ------
6.6% 4.3% 6.6% 7.1% 4.5% 1.5% 14.0% 14.6% 11.3% (0.4%)
---- ---- ---- ---- ---- ---- ----- ----- ----- ------
Source: Albion Capital Group LLP
Methodology: Shareholder return is calculated by the movement in total
shareholder value for the year divided by the opening net asset value.
3. Dividend distributions
Dividends paid in respect of the year ended 30 June 2020 were 2.00 pence
per share (2019: 2.00 pence per share). Cumulative dividends paid since
launch (on 18 January 1998) amount to 59.73 pence per share.
4. Ongoing charges
The ongoing charges ratio for the year ended 30 June 2020 remained at
2.3 per cent. (2019: 2.3 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 2.3 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 2020 was 1.7 per cent.
(2019: 2.2 per cent.). Following a number of disposals, particularly
those of asset-based investments as most of our loan stock interest is
received from the asset-based portion of the portfolio, we expect our
investment income to reduce in future years, and the returns for the
Company to be delivered from capital growth rather than revenue income.
6. VCT regulation*
The investment policy is designed to ensure that the Company continues
to qualify and is approved as a VCT by HMRC. In order to maintain its
status under Venture Capital Trust legislation, a VCT must comply on a
continuing basis with the provisions of Section 274 of the Income Tax
Act 2007, details of which are provided in the Directors' report on page
36 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 2020. These showed
that the Company has complied with all tests and continues to do so.
*VCT compliance is not a numerical measure of performance and thus
cannot be defined as an APM.
Gearing
As defined by the Articles of Association, the Company's maximum
exposure in relation to gearing is restricted to its adjusted share
capital and reserves. The Directors do not currently have any intention
to utilise gearing for the Company.
Operational arrangements
The Company has delegated the investment management of the portfolio to
Albion Capital Group LLP, which is authorised and regulated by the
Financial Conduct Authority. Albion Capital Group LLP also provides
company secretarial and other accounting and administrative support to
the Company.
Management agreement
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 a 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. In some instances, the
Manager is entitled to an arrangement fee, payable by a portfolio
company in which the Company invests, in the region of 2.0 per cent. of
the 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 (2019: nil). As at 30 June 2020 the cumulative shortfall of the
target return was 2.40 pence per share (2019: 0.60 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 80
per cent. investment requirement for Venture Capital Trust status, the
long term prospects of current investments, a review of the Management
agreement and the services provided therein and benchmarking the
performance of the Manager to other service providers. 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. The Manager became a full-scope Alternative
Investment Fund Manager under the AIFMD on 1 October 2018. As a result,
from that date, Ocorian (UK) Limited was appointed as Depositary to
oversee the custody and cash arrangements and provide other AIFMD duties
with respect to the Company.
Companies Act 2006 Section 172 Reporting
Under Section 172 of the Companies Act 2006, the Board has a duty to
promote the success of the Company for the benefit of its members as a
whole, having regard to the interests of other stakeholders in the
Company, such as suppliers, and to do so with an understanding of the
impact on the community and environment and with high standards of
business conduct, which includes acting fairly between members of the
Company.
The Board is very conscious of these wider responsibilities in the way
it promotes the Company's culture and ensures, as part of its regular
oversight, that the integrity of the Company's affairs is foremost in
the way the activities are managed and promoted. This includes regular
engagement with the wider stakeholders of the Company and being alert to
issues that might damage the Company's standing in the way that it
operates. The Board works very closely with the Manager in reviewing how
stakeholder issues are handled, ensuring good governance and
responsibility in managing the Company's affairs, as well as visibility
and openness in how the affairs are conducted.
The Board considers its significant stakeholder groups to be its
shareholders; suppliers, including direct agents of the Company such as
the Manager to whom most executive functions are delegated; its
portfolio companies; the community and the environment in the way that
investments are made and managed.
The Company's shareholders are key to the success of the Company. The
Board seeks to create value for shareholders by generating strong and
sustainable returns to provide shareholders with regular dividends and
the prospect of capital growth. During the year, the Board has approved
a new dividend policy, further details of which can be found in the
Chairman's statement above. The new variable policy has the advantage of
avoiding unsustainably high dividends if the net asset value falls,
whilst rewarding shareholders more immediately if the net asset value
rises.
The Board temporarily suspended buy-backs on 18 March 2020 due to the
increasing uncertainty of the net asset value at the time. Buy-backs
were resumed from 22 April 2020 after the announcement of the Interim
Management Statement which included the net asset value for 31 March
2020. The buy-back policy is an important means of providing market
liquidity for shareholders.
Shareholders' views are important and the Board encourages shareholders
to vote on the resolutions at the AGM. The Company's AGM is typically
used as an opportunity to communicate with investors, including through
a presentation made by the investment management team. However, due to
the impact of the coronavirus outbreak, special circumstances are
required for this year's AGM and further details are in the Chairman's
statement above. Details of the location and time of the AGM can be
found in the Directors' report on page 38 of the full Annual Report and
Financial Statements.
The Company is an externally managed investment company with no
employees, and as such has nothing to report in relation to employee
engagement but does keep close attention to how the Board operates as a
cohesive and competent unit. The Company also has no customers in the
traditional sense and, therefore, there is also nothing to report in
relation to relationships with customers.
The Company's suppliers are fundamental to the operations of the Company,
particularly Albion Capital Group LLP as the Manager, given that
day-to-day management responsibilities are sub-contracted to the
Manager. Details of the Manager's and Board's responsibilities can be
found in the Statement of corporate governance on pages 41 to 46 of the
full Annual Report and Financial Statements.
The contractual arrangements with all the principal suppliers to the
Company are reviewed regularly and formally once a year, alongside the
performance of the suppliers in acquitting their responsibilities. The
performance of the Manager in managing the portfolio and in providing
company secretarial, administration and accounting services is reviewed
in detail each year, which includes reviewing comparator engagement
terms and portfolio performance. Further details on the evaluation of
the Manager, and the decision to continue the appointment of the Manager
for the forthcoming year, can be found above.
The portfolio companies are considered key stakeholders, not least
because they are principal drivers of value for the Company. However, as
discussed in the Environmental, Social and Governance ("ESG") section
below, the portfolio companies' impact on their stakeholders is also
important to the Company. In most cases, an Albion executive has a place
on the board of a portfolio company, in order to help with both business
operation decisions, as well as good ESG practice.
The Board receives reports on ESG factors within its portfolio from the
Manager as it is a signatory of the UN Principles for Responsible
Investment. Further details of this are set out below. ESG, without its
specific definition, has always been at the heart of the responsible
investing that the Company engages in and in how the Company conducts
itself with all of its stakeholders.
The Board, although non-executive, is fully engaged in both oversight
and the general strategic direction of the Company. During the year the
Board's main strategic discussions focussed around cash management and
deployment of cash for future investments, dividends and share buybacks,
resulting in the decision to participate in the Albion VCTs' Top Up
Offers 2019/20. Time was also spent in ensuring the Board met Corporate
Governance requirements which continue to evolve, including the
introduction of the new AIC Code last year. During the year the Board
held a further meeting in addition to its regular quarterly meetings to
discuss the effect of the coronavirus (Covid-19) pandemic on the
Company's portfolio.
Environmental, Social, and Governance ("ESG")
The Manager became a signatory of the UN Principles for Responsible
Investment ("UN PRI") on 14 May 2019. The UN PRI is the world's leading
proponent of responsible investment, working to understand the
investment implications of ESG factors and to support its international
network of investor signatories in incorporating these factors into
their investment and ownership decisions.
The Manager made its first trial submission in 2020 against this
framework and will make the first full submission in 2021. The trial
process in 2020 will identify initial gaps in information being
collected and areas that require action. This annual process will inform
fuller ESG disclosure by 2021 and create a regular audit function to
ensure continual improvement.
To ensure that the principles are starting to be translated into both
the investment and portfolio management processes, since June 2019 all
quarterly valuations and investment papers include a section covering
relevant aspects of ESG for each investment. In addition, all fund level
reports also include ESG sections and ESG will be included as a standing
item on the agendas of all investment committees and the Manager's
internal board meetings, and any findings are discussed at our board
meetings. Reporting is intentionally light in the first instance, partly
due to the stage and nature of investments and to encourage widespread
adoption. The level of reporting is expected to build over time as the
range of factors to be considered increases and as our compliance with
the UN PRI guidelines becomes apparent.
The Board and Manager have exercised conscious principles in making
responsible investments throughout the life of the Company, not least in
providing finance for nascent companies in a variety of important
sectors such as technology, healthcare and renewable energy. In making
the investments, the Manager is directly involved in the oversight and
governance of these investments, including ensuring standards of
reporting and visibility on business practices, all of which are
reported to the Board of the Company. By its nature, not least in making
qualifying investments which fulfil the criteria set by HMRC, the
Company has focused on sustainable and longer-term investment
propositions, some of which will fail in the nature of small companies,
but some of which will grow and serve important societal demands. The
quality of the investment portfolio goes beyond the individual
valuations and examines the prospects of each of the portfolio companies,
as well as the sectors in which they operate -- all requiring a
longer-term view.
The Company adheres to the principles of the AIC Code of Corporate
Governance and is also aware of other governance and other corporate
conduct guidance which it meets as far as practical including in the
constitution of a diversified and independent board capable of providing
constructive challenge.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the 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 came into effect on 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.
These are set out in the Directors' report on page 37 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, changes to the environment and individual risks.
The Board also identifies emerging risks which might impact on the
Company. In the period the most noticeable emerging risk has been the
global pandemic which has impacted on not only public health and
mobility but also has had an adverse impact on global traded markets,
the full impact of which, by its nature, is likely to be uncertain for
some time.
The Directors have carried out a robust assessment of the Company's
principal risks and emerging uncertainties, and explain how they are
being mitigated as follows:
Risk Possible consequence Risk management
------------ ----------------------------------------------------------- ------------------------------------------------------------
Investment, The risk of investment in poor quality businesses, To reduce this risk, the Board places reliance upon
performance which could reduce the capital and income returns the skills and expertise of the Manager and its track
and to shareholders, and could negatively impact on the record over many years of making successful investments
valuation Company's current and future valuations. in this segment of the market. In addition, the Manager
risk By nature, smaller unquoted businesses, such as those operates a formal and structured investment appraisal
that qualify for Venture Capital Trust purposes, are and review process, which includes an Investment Committee,
more volatile than larger, long established businesses. comprising investment professionals from the Manager
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 as updated in
2018. These guidelines set out recommendations, intended
to represent current best practice on the valuation
of venture capital investments. The valuation takes
into account all known material facts up to the date
of approval of the Financial Statements by the Board.
------------ ----------------------------------------------------------- ------------------------------------------------------------
VCT approval The Company must comply with section 274 of the Income To reduce this risk, the Board has appointed the Manager,
risk Tax Act 2007 which enables its investors to take advantage which has a team with significant experience in Venture
of tax relief on their investment and on future returns. Capital Trust management used to operating within
Breach of any of the rules enabling the Company to the requirements of the Venture Capital Trust legislation.
hold VCT status could result in the loss of that status. In addition, to provide further formal reassurance,
the Board has appointed Philip Hare & Associates LLP
as its taxation adviser, who report quarterly to the
Board to independently confirm compliance with the
Venture Capital Trust legislation, to highlight areas
of risk and to inform on changes in legislation. Each
investment in a new portfolio company is also pre-cleared
with our professional advisers or H.M. Revenue & Customs.
The Company monitors closely the extent of qualifying
holdings and addresses this as required.
------------ ----------------------------------------------------------- ------------------------------------------------------------
Regulatory The Company is listed on The London Stock Exchange Board members and the Manager have experience of operating
and and is required to comply with the rules of the UK at senior levels within or advising quoted companies.
compliance Listing Authority, as well as with the Companies Act, In addition, the Board and the Manager receive regular
risk Accounting Standards and other legislation. Failure updates on new regulation from its auditor, lawyers
to comply with these regulations could result in a and other professional bodies. The Company is subject
delisting of the Company's shares, or other penalties to compliance checks through the Manager's compliance
under the Companies Act or from financial reporting officer, and any issues arising from compliance or
oversight bodies. regulation are reported to its own board on a monthly
basis. These controls are also reviewed as part of
the quarterly Board meetings, and also as part of
the review work undertaken by the Manager's compliance
officer. The report on controls is also evaluated
by the internal auditors.
------------ ----------------------------------------------------------- ------------------------------------------------------------
Operational The Company relies on a number of third parties, in The Company and its operations are subject to a series
and internal particular the Manager, for the provision of investment of rigorous internal controls and review procedures
control management and administrative functions. Failures exercised throughout the year, and receives reports
risk in key systems and controls within the Manager's business from the Manager on internal controls and risk management,
could place assets of the Company at risk or result including on matters relating to cyber security.
in reduced or inaccurate information being passed The Audit and Risk Committee reviews the Internal
to the Board or to shareholders. Audit Reports prepared by the Manager's internal auditor,
PKF Littlejohn LLP and has access to the internal
audit partner of PKF Littlejohn LLP to provide an
opportunity to ask specific detailed questions in
order to satisfy itself that the Manager has strong
systems and controls in place including those in relation
to business continuity and cyber security.
From 1 October 2018, Ocorian (UK) Limited was appointed
as Depositary to oversee the custody and cash arrangements
and provide other AIFMD duties. The Board reviews
the quarterly reports prepared by Ocorian (UK) Limited
to ensure that Albion Capital is adhering to its policies
and procedures as required by the AIFMD.
In addition, the Board regularly reviews the performance
of its key service providers, particularly the Manager,
to ensure they continue to have the necessary expertise
and resources to deliver the Company's investment
objective and policy. The Manager and other service
providers have also demonstrated to the Board that
there is no undue reliance placed upon any one individual.
------------ ----------------------------------------------------------- ------------------------------------------------------------
Economic, Changes in economic conditions, including, for example, The Company invests in a diversified portfolio of
political interest rates, rates of inflation, industry conditions, companies across a number of industry sectors and
and social competition, political and diplomatic events and other in addition often invests a mixture of instruments
risk factors could substantially and adversely affect the in portfolio companies and has a policy of minimising
Company's prospects in a number of ways. This also any external bank borrowings within portfolio companies.
includes risks of social upheaval, including from At any given time, the Company has sufficient cash
infection and population re-distribution, as well resources to meet its operating requirements, including
as economic risk challenges as a result of healthcare share buy-backs and follow-on investments.
pandemics/infection. In common with most commercial operations, exogenous
The current risk to the Company, and the wider population risks over which the Company has no control are always
and economy, is the coronavirus (Covid-19) pandemic. a risk and the Company does what it can to address
these risks where possible, not least as the nature
of the investments the Company makes are long term.
With regards to coronavirus (Covid-19), the Manager
is having ongoing discussions with all portfolio companies,
in order to ascertain where support is most needed.
Cash comprises a significant proportion of net assets,
following a strong year of exits and the most recent
Top Up, which can be used in part to help mitigate
any immediate cashflow problems for these portfolio
companies. The portfolio is structured as an all-weather
portfolio with c.60 companies which are diversified
as discussed above. Exposure is small to at-risk sectors
that include leisure, hospitality, retail and travel.
------------ ----------------------------------------------------------- ------------------------------------------------------------
Market value The market value of Ordinary shares can fluctuate. The Company operates a share buy-back policy, which
of Ordinary The market value of an Ordinary share, as well as is designed to limit the discount at which the Ordinary
shares being affected by its net asset value and prospective shares trade to around 5 per cent. to net asset value,
net asset value, also takes into account its dividend by providing a purchaser through the Company in absence
yield and prevailing interest rates. As such, the of market purchasers. From time to time buy-backs
market value of an Ordinary share may vary considerably cannot be applied, for example when the Company is
from its underlying net asset value. The market prices subject to a close period, or if it were to exhaust
of shares in quoted investment companies can, therefore, any buy-back authorities.
be at a discount or premium to the net asset value New Ordinary shares are issued at sufficient premium
at different times, depending on supply and demand, to net asset value to cover the costs of issue and
market conditions, general investor sentiment and to avoid asset value dilution to existing investors.
other factors. Accordingly, the market price of the
Ordinary shares may not fully reflect their underlying
net asset value.
------------ ----------------------------------------------------------- ------------------------------------------------------------
Reputational The Company relies on the judgement and reputation The Board regularly questions the Manager on its ethics,
risk of the Manager which is itself subject to the risk procedures, safeguards and investment philosophy,
of loss. which should consequently result in the risk to reputation
being minimised.
------------ ----------------------------------------------------------- ------------------------------------------------------------
Viability statement
In accordance with the FRC UK Corporate Governance Code published in
2018 and principle 36 of the AIC Code of Corporate Governance, the
Directors have assessed the prospects of the Company over three years to
30 June 2023. The Directors believe that three years is a reasonable
period in which they can assess the future of the Company to continue to
operate and meet its liabilities as they fall due and is also the period
used by the Board in the strategic planning process and is considered
reasonable for a business of our nature and size. The three year period
is considered the most appropriate given the forecasts that the Board
require from the Manager and the estimated timelines for finding,
assessing and completing investments. The three year period also takes
account of the potential impact of new regulations, should they be
imposed, and how they may impact the Company over the longer term, and
the availability of cash but cannot fully take into account the
exogenous risks that are impacting on global economies at the date of
these accounts.
The Directors have carried out a robust assessment of the emerging and
principal risks facing the Company as explained above, including those
that could threaten its business model, future performance, solvency or
liquidity. The Board also considered the procedures in place to identify
emerging risks and the risk management processes in place to avoid or
reduce the impact of the underlying risks. The Board focused on the
major factors which affect the economic, regulatory and political
environment. The Board have deliberated at length the potential impact
of the coronavirus (Covid-19) pandemic on the Company. They have
examined robust stress tested cashflows, and also deliberated over the
importance of the Manager and the processes that they have in place for
dealing with the principal risks.
The Board assessed the ability of the Company to raise finance and
deploy capital, as well as the existing cash resources of the Company.
The portfolio is well balanced and geared towards long term growth,
delivering dividends and capital growth to shareholders. In assessing
the prospects of the Company, the Directors have considered the cash
flow by looking at the Company's income and expenditure projections and
funding pipeline over the assessment period of three years and they
appear realistic.
Taking into account the processes for mitigating risks, monitoring costs,
share price discount, the Manager's compliance with the investment
objective, policies and business model and the balance of the portfolio
the Directors have concluded that there is a reasonable expectation that
the Company will be able to continue in operation and meet its
liabilities as they fall due over the three year period to 30 June 2023.
This Strategic report of the Company for the year ended 30 June 2020 has
been prepared in accordance with the requirements of section 414A of the
Companies Act 2006 (the "Act"). The purpose of this report is to provide
shareholders with sufficient information to enable them to assess the
extent to which the Directors have performed their duty to promote the
success of the Company in accordance with section 172 of the Act.
On behalf of the Board,
Richard Huntingford
Chairman
24 September 2020
Responsibility Statement
In preparing these Financial Statements for the year to 30 June 2020,
the Directors of the Company, being Richard Huntingford, James Agnew,
Penny Freer, Pam Garside and Ian Spence, 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
2020 for the Company has been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (UK Accounting Standards and
applicable law) and give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
-the Chairman's statement and Strategic report include a fair review of
the development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties it faces.
We consider that the Annual Report and Financial Statements, taken as a
whole, are fair, balanced, and understandable and provide the
information necessary for shareholders to assess the Company's position,
performance, business model and strategy.
A detailed Statement of Directors' responsibilities is contained on page
40 within the full Annual Report and Financial Statements.
On behalf of the Board,
Richard Huntingford
Chairman
24 September 2020
Income statement
Year ended Year ended
30 June 2020 30 June 2019
---------------------------------------------------------- ---- ------------------------- -------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ---- ------- ------- ------- ------- ------- -------
(Loss)/Gain on investments 3 - (21) (21) - 6,475 6,475
Investment income 4 1,112 - 1,112 1,285 - 1,285
Investment management fees 5 (285) (856) (1,141) (260) (780) (1,040)
Other expenses 6 (354) - (354) (328) - (328)
------- ------- ------- ------- ------- -------
Profit/(loss) on ordinary activities before tax 473 (877) (404) 697 5,695 6,392
Tax on ordinary activities 8 - - - - - -
------- ------- ------- ------- ------- -------
Profit/(loss) and total comprehensive income attributable
to shareholders 473 (877) (404) 697 5,695 6,392
------- ------- ------- ------- ------- -------
Basic and diluted earnings per Ordinary share (pence)* 10 0.25 (0.46) (0.21) 0.41 3.34 3.75
---------------------------------------------------------- ---- ------- ------- ------- ------- ------- -------
* adjusted for 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 2020 30 June 2019
Note GBP'000 GBP'000
-------------------------------------------- ---- ------------ ------------
Fixed asset investments 11 41,621 49,943
Current assets
Trade and other receivables less than one
year 13 81 359
Cash and cash equivalents 23,966 16,083
------------ ------------
24,047 16,442
------------ ------------
Total assets 65,668 66,385
Payables: amounts falling due within one
year
Trade and other payables less than one year 14 (395) (390)
Total assets less current liabilities 65,273 65,995
------------ ------------
Equity attributable to equity holders
Called up share capital 15 2,200 2,072
Share premium 13,366 9,061
Unrealised capital reserve 12,032 19,756
Realised capital reserve 4,990 (1,857)
Other distributable reserve 32,685 36,963
------------ ------------
Total equity shareholders' funds 65,273 65,995
------------ ------------
Basic and diluted net asset value per share
(pence)* 16 33.14 35.29
-------------------------------------------- ---- ------------ ------------
* 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 24 September 2020 and were signed on its behalf
by
Richard Huntingford
Chairman
Company number: 03495287
Statement of changes in equity
Unrealised Realised Other
Called up share Share capital capital distributable
capital premium reserve reserve* reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------------------------- --------------- ------- ---------- -------- ------------- -------
As at 1 July 2019 2,072 9,061 19,756 (1,857) 36,963 65,995
(Loss)/profit and total comprehensive income - - (651) (226) 473 (404)
Transfer of previously unrealised gains on disposal
of investments - - (7,073) 7,073 - -
Dividends paid - - - - (3,814) (3,814)
Purchase of shares for treasury (including costs) - - - - (937) (937)
Issue of equity 129 4,418 - - - 4,547
Cost of issue of equity - (114) - - - (114)
As at 30 June 2020 2,200 13,366 12,032 4,990 32,685 65,273
----------------------------------------------------- --------------- ------- ---------- -------- ------------- -------
As at 1 July 2018 1,829 974 12,973 (769) 40,407 55,414
Profit/(loss) and total comprehensive income - - 5,929 (234) 697 6,392
Transfer of previously unrealised losses on disposal
of investments - - 854 (854) - -
Dividends paid - - - - (3,280) (3,280)
Purchase of shares for treasury (including costs) - - - - (861) (861)
Issue of equity 243 8,277 - - - 8,520
Cost of issue of equity - (190) - - - (190)
As at 30 June 2019 2,072 9,061 19,756 (1,857) 36,963 65,995
----------------------------------------------------- --------------- ------- ---------- -------- ------------- -------
* Included within these reserves is an amount of GBP26,438,000 (2019:
GBP17,123,000) which is considered distributable. In time, a further
GBP11,237,000 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
2020 2019
GBP'000 GBP'000
-------------------------------------------------- ----------- ----------
Cash flow from operating activities
Loan stock income received 935 1,378
Deposit interest received 89 45
Dividend income received 16 61
Investment management fees paid (1,145) (993)
Other cash payments (341) (316)
Corporation tax paid - -
Net cash flow from operating activities (446) 175
----------- ----------
Cash flow from investing activities
Purchase of fixed asset investments (4,195) (3,536)
Disposal of fixed asset investments 12,837 2,686
Net cash flow from investing activities 8,642 (850)
----------- ----------
Cash flow from financing activities
Issue of share capital 3,839 7,802
Cost of issue of equity (30) (3)
Equity dividends paid* (3,185) (2,749)
Purchase of own shares for treasury (including
costs) (937) (896)
Net cash flow from financing activities (313) 4,154
----------- ----------
Increase in cash and cash equivalents 7,883 3,479
Cash and cash equivalents at the start of the year 16,083 12,604
----------- ----------
Cash and cash equivalents at the end of the year 23,966 16,083
* The equity dividends paid shown in the cash flow are different to the
dividends disclosed in note 9 as a result of the non-cash effect of the
Dividend Reinvestment Scheme.
Notes to the Financial Statements
1. Basis of preparation
The Financial Statements have been prepared in accordance with
applicable United Kingdom law and accounting standards, including
Financial Reporting Standard 102 ("FRS 102"), and with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies
and Venture Capital Trusts" ("SORP") issued by The Association of
Investment Companies ("AIC"). The Financial Statements have been
prepared on a going concern basis and further details can be found in
the Directors' report on pages 35 and 36 of the full Annual Report and
Financial Statements.
The preparation of the Financial Statements requires management to make
judgements and estimates that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. The most
critical estimates and judgements relate to the determination of
carrying value of investments at Fair Value Through Profit and Loss
("FVTPL") in accordance with FRS 102 sections 11 and 12. The Company
values investments by following the International Private Equity and
Venture Capital Valuation ("IPEV") Guidelines as issued in 2018 and
further detail on the valuation techniques used are outlined 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 IPEV
Guidelines. Indicators of fair value are derived using established
methodologies including earnings multiples, revenue multiples, the level
of third party offers received, cost or price of recent investment rounds,
net assets and industry valuation benchmarks. Where price of recent
investment is used as a starting point for estimating fair value at
subsequent measurement dates, this has been benchmarked using an
appropriate valuation technique permitted by the IPEV guidelines.
-- In situations where cost or price of recent investment is used,
consideration is given to the circumstances of the portfolio company
since that date in determining fair value. This includes consideration of
whether there is any evidence of deterioration or strong definable
evidence of an increase in value. In the absence of these indicators, the
investment in question is valued at the amount reported at the previous
reporting date. Examples of events or changes that could indicate a
diminution include:
-- the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was
based;
-- a significant adverse change either in the portfolio company's
business or in the technological, market, economic, legal or
regulatory environment in which the business operates; or
-- market conditions have deteriorated, which may be indicated by a
fall in the share prices of quoted businesses operating in the
same or related sectors.
Investments are recognised as financial assets on legal completion of
the investment contract and are de-recognised on legal completion of the
sale of an investment.
Dividend income is not recognised as part of the fair value movement of
an investment, but is recognised separately as investment income through
the other distributable reserve when a share becomes ex-dividend.
Current assets and payables
Receivables, payables and cash are carried at amortised cost, in
accordance with FRS 102. There are no financial liabilities other than
payables.
Investment income
Equity income
Dividend income is included in revenue when the investment is quoted
ex-dividend.
Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are recognised
when the Company's right to receive payment and expect settlement is
established. Where interest is rolled up and/or payable at redemption
then it is recognised as income unless there is reasonable doubt as to
its receipt.
Bank interest income
Interest income is recognised on an 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 other distributable reserve except the following
which are charged through the realised capital reserve:
-- 75 per cent. of management fees and performance incentive fees, if any,
are allocated to the capital account to the extent that these relate to
an enhancement in the value of the investments. This is in line with the
Board's expectation that over the long term 75 per cent. of the Company's
investment returns will be in the form of capital gains; and
-- expenses which are incidental to the purchase or disposal of an
investment are charged through the realised capital reserve.
Taxation
Taxation is applied on a current basis in accordance with FRS 102.
Current tax is tax payable (refundable) in respect of the taxable profit
(tax loss) for the current period or past reporting periods using the
tax rates and laws that have been enacted or substantively enacted at
the financial reporting date. Taxation associated with capital expenses
is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the
reporting date. Timing differences are differences between taxable
profits and total comprehensive income as stated in the Financial
Statements that arise from the inclusion of income and expenses in tax
assessments in periods different from those in which they are recognised
in the Financial Statements. As a VCT the Company has an exemption from
tax on capital gains. The Company intends to continue meeting the
conditions required to obtain approval as a VCT in the foreseeable
future. The Company therefore, should have no material deferred tax
timing differences arising in respect of the revaluation or disposal of
investments and the Company has not provided for any deferred tax.
Reserves
Called up share capital
This reserve accounts for the nominal value of the shares.
Share premium
This reserve accounts for the difference between the price paid for
shares and the nominal value of the shares, less issue costs.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is
diminished through the repurchase and cancellation of the Company's own
shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year
end against cost, are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
-- gains and losses compared to cost on the realisation of investments, or
permanent diminution in value;
-- expenses, together with the related taxation effect, charged in
accordance with the above policies; and
-- dividends paid to equity holders where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were
combined in 2012 to form a single reserve named other distributable
reserve.
This reserve accounts for movements from the revenue column of the
Income statement, the payment of dividends, the buy-back of shares and
other non-capital realised movements.
Dividends
Dividends by the Company are accounted for in the period in which the
dividend is paid.
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 2020 30 June 2019
GBP'000 GBP'000
------------------------------------------------ ------------- -------------
Unrealised (loss)/gain on fixed asset
investments (651) 5,929
Realised gains on fixed asset investments 630 546
(21) 6,475
------------- -------------
4. Investment income
Year ended Year ended
30 June 2020 30 June 2019
Income recognised on investments GBP'000 GBP'000
--------------------------------- ------------- -------------
Loan stock interest 1,007 1,179
UK dividend income 16 61
Bank deposit interest 89 45
1,112 1,285
------------- -------------
5. Investment management fees
Year ended 30 June 2020 Year ended 30 June 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------- ------- ------- ------- ------- -------
Investment management fee 285 856 1,141 260 780 1,040
------- ------- ------- ------- ------- -------
Further details of the Management agreement under which the investment
management fee is paid are given in the Strategic report above.
During the year, services of a total value of GBP1,191,000 (2019:
GBP1,090,000) were purchased by the Company from Albion Capital Group
LLP comprising GBP1,141,000 in respect of management fees (2019:
GBP1,040,000) and GBP50,000 in respect of administration fees (2019:
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 GBP296,500 (administration fee accrual: GBP12,500,
management fee accrual GBP284,000) (2019: GBP300,500).
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 2020 fees of GBP131,000 attributable to the
investments of the Company were received pursuant to these arrangements
(2019: GBP167,000).
Albion Capital Group LLP, its partners and staff holds 1,113,080
Ordinary shares in the Company as at 30 June 2020.
The Company entered into an offer agreement relating to the Offers with
the Company's investment manager Albion Capital Group LLP, pursuant to
which Albion Capital received a fee of 2.5 per cent. of the gross
proceeds of the Offers and out of which Albion Capital paid the costs of
the Offers, as detailed in the Prospectus.
6. Other expenses
Year ended Year ended
30 June 2020 30 June 2019
GBP'000 GBP'000
---------------------------------------------------- ------------- -------------
Directors' fees (including NIC) 109 105
Auditor's remuneration for statutory audit services
(excluding VAT) 35 29
Other administrative expenses 210 194
354 328
------------- -------------
7. Directors' fees
The amounts paid to (or on behalf of) the Directors during the year are
as follows:
Year ended Year ended
30 June 2020 30 June 2019
GBP'000 GBP'000
Directors' fees 100 97
National insurance 9 8
------------- -------------
109 105
------------- -------------
The Company's key management personnel are the Directors. Further
information regarding Directors' remuneration can be found in the
Directors' remuneration report on pages 47 to 49 of the full Annual
Report and Financial Statements.
8. Tax on ordinary activities
Year ended Year ended
30 June 2020 30 June 2019
GBP'000 GBP'000
- -
UK corporation tax charge
Year ended Year ended
30 June 30 June
2020 2019
Factors affecting the tax charge GBP'000 GBP'000
----------------------------------------------------- ---------- -----------
(Loss)/return on ordinary activities before taxation (404) 6,392
---------- -----------
Tax charge on (loss)/profit at the average companies
rate of 19.0% (2019: 19.0%) (77) 1,214
Factors affecting the charge:
Non-taxable (losses)/gains 4 (1,230)
Income not taxable (3) (12)
Unutilised management expenses 76 28
- -
---------- -----------
The tax charge for the year shown in the Income statement is lower than
the average standard rate of corporation tax of 19.0 per cent. (2019:
average rate of 19.0 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.
1. 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
GBP3,257,000 (2019: GBP2,847,000) 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 2020 30 June 2019
GBP'000 GBP'000
-------------------------------------------------------- ------------- -------------
First dividend of 1 penny per share paid on 29 November
2019 (30 November 2018 -- 1 penny per share) 1,861 1,649
Second dividend of 1 penny per share paid on 31 March
2020
(29 March 2019 -- 1 penny per share) 1,964 1,646
Unclaimed dividends (11) (15)
------------- -------------
3,814 3,280
------------- -------------
In addition to the dividends paid above, the Board has declared a first
interim dividend for the year ending 30 June 2021 of 0.83 pence per
share. This will be paid on 30 November 2020 to shareholders on the
register on 6 November 2020. The total dividend will be approximately
GBP1,635,000.
The Board has also declared a special dividend of 2.00 pence per share,
payable on 30 October 2020 to shareholders on the register on 9 October
2020. The total dividend will be approximately GBP3,940,000.
Details of the new variable dividend policy and special dividend can we
found in the Chairman's statement above. All dividends are paid from the
other distributable reserve.
During the year, unclaimed dividends older than twelve years of
GBP11,000 (2019: GBP15,000) were returned to the Company in accordance
with the terms of the Articles of Association and have been accounted
for on an accruals basis.
10. Basic and diluted return/(loss) per share
Year ended 30 June 2020 Year ended 30 June 2019
Revenue Capital Total Revenue Capital Total
------------------------------------------------------
Return/(loss) attributable to equity shares (GBP'000) 473 (877) (404) 697 5,695 6,392
Weighted average shares (adjusted for treasury shares) 190,892,747 170,478,118
Return/(loss) attributable per Ordinary share (pence)
(basic and diluted) 0.25 (0.46) (0.21) 0.41 3.34 3.75
The return/(loss) per share has been calculated after adjusting for
treasury shares of 23,061,630 (2019: 20,168,410).
There are no convertible instruments, derivatives or contingent share
agreements in issue so basic and diluted return/(loss) per share are the
same.
11. Fixed asset investments
Investments held at fair value through profit or 30 June 2020 30 June 2019
loss GBP'000 GBP'000
Unquoted equity and preference shares 29,031 35,377
Quoted equity - 538
Loan stock 12,590 14,028
------------ ------------
41,621 49,943
------------ ------------
30 June 2020 30 June 2019
GBP'000 GBP'000
----------------------------------------------------
Opening valuation 49,943 42,911
Purchases at cost 4,409 4,122
Disposal proceeds (12,782) (3,366)
Realised gains 630 546
Movement in loan stock accrued income 72 (199)
Unrealised (losses)/gains (651) 5,929
------------ ------------
Closing valuation 41,621 49,943
------------ ------------
Movement in loan stock accrued income
Opening accumulated loan stock accrued income 206 405
Movement in loan stock accrued income 72 (199)
Closing accumulated loan stock accrued income 278 206
------------ ------------
Movement in unrealised gains
Opening accumulated unrealised gains 19,689 12,906
Transfer of previously unrealised (gains)/losses to
realised reserves on disposal of investments (7,073) 854
Movement in unrealised (losses)/gains (651) 5,929
Closing accumulated unrealised gains 11,965 19,689
------------ ------------
Historic cost basis
Opening book cost 30,048 29,600
Purchases at cost 4,409 4,122
Disposals at cost (5,079) (3,674)
Closing book cost 29,378 30,048
------------ ------------
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 receivables and payables.
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 IPEV
guidelines as follows:
30 June 2020 30 June 2019
Investment valuation methodology GBP'000 GBP'000
-------------------------------------------------- ------------ ------------
Cost and price of recent investment (reviewed for
impairment or uplift) 13,884 16,324
Third party valuation -- earnings multiple 11,542 17,238
Revenue multiple 7,338 1,249
Third party valuation -- discounted cash flow 7,194 7,129
Net assets 1,091 1,001
Earnings multiple 572 5,092
Contracted sales price - 1,372
41,621 49,405
------------ ------------
When using the cost or price of a recent investment in the valuations
the Company looks to 're-calibrate' this price at each valuation point
by reviewing progress within the investment, comparing against the
initial investment thesis, assessing if there are any significant events
or milestones that would indicate the value of the investment has
changed and considering whether a market-based methodology (i.e. using
multiples from comparable public companies) or a discounted cashflow
forecast would be more appropriate.
The main inputs into the calibration exercise, and for the valuation
models using multiples, are revenue, EBITDA and P/E multiples (based on
the most recent revenue, EBITDA or earnings achieved and equivalent
corresponding revenue, EBITDA or earnings multiples of comparable
companies), quality of earnings assessments and comparability difference
adjustments. Revenue multiples are often used, rather than EBITDA or
earnings, due to the nature of the Company's investments, being in
growth and technology companies which are not normally expected to
achieve profitability or scale for a number of years. Where an
investment has achieved scale and profitability the Company would
normally then expect to switch to using an EBITDA or earnings multiple
methodology.
In the calibration exercise and in determining the valuation for the
Company's equity instruments, comparable trading multiples are used. In
accordance with the Company's policy, appropriate comparable companies
based on industry, size, developmental stage, revenue generation and
strategy are determined and a trading multiple for each comparable
company identified is then calculated. The multiple is calculated by
dividing the enterprise value of the comparable group by its revenue,
EBITDA or earnings. The trading multiple is then adjusted for
considerations such as illiquidity, marketability and other differences,
advantages and disadvantages between the portfolio company and the
comparable public companies based on company specific facts and
circumstances.
Fair value investments had the following movements between investment
methodologies between 30 June 2019 and 30 June 2020:
Change in investment valuation methodology (2019 to Value as at 30 June 2020 Explanatory
2020) GBP'000 note
-----------
Cost and price of recent investment (reviewed for 6,749 More
impairment or uplift) to revenue multiple appropriate
valuation
methodology
Revenue multiple to cost and price of recent investment 682 Recent
(reviewed for impairment or uplift) funding
round
Cost and price of recent investment (reviewed for 225 More
impairment or uplift) to net assets appropriate
valuation
methodology
Bid price to net assets 20 Portfolio
company
delisted
The valuation will be the most appropriate valuation methodology for an
investment within its market, with regard to the financial health of the
investment and the IPEV Guidelines. The Directors believe that, within
these parameters, there are no other possible methods of valuation which
would be reasonable as at 30 June 2020.
FRS 102 and the SORP requires the Company to disclose the inputs to the
valuation methods applied to its investments measured at fair value
through profit or loss in a fair value hierarchy. The table below sets
out fair value hierarchy definitions using FRS102 s.11.27.
Fair value hierarchy Definition
-------------------- ----------------------------------------------------
Level 1 Unadjusted quoted prices in an active market
-------------------- ----------------------------------------------------
Level 2 Inputs to valuations are from observable sources and
are directly or indirectly derived from prices
-------------------- ----------------------------------------------------
Level 3 Inputs to valuations not based on observable market
data
-------------------- ----------------------------------------------------
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:
30 June 2020 30 June 2019
GBP'000 GBP'000
---------------------------- ------------ ------------
Opening balance 49,405 42,638
Additions* 4,429 4,122
Disposal proceeds (12,373) (3,358)
Realised gains 738 548
Unrealised (losses)/gains (651) 5,654
Accrued loan stock interest 72 (199)
------------ ------------
Closing balance 41,621 49,405
------------ ------------
*Additions do not agree to the cash flow due to GBP214,000 of loan stock
conversions and non-cash consideration, and GBP20,000 of delisted
investments in the year.
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. 58 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. Therefore, for the remainder of the
portfolio, the Board has adjusted the inputs for a number of the largest
portfolio companies (by value) resulting in a total coverage of 83 per
cent. of the portfolio of investments. The main inputs considered for
each type of valuation is as follows:
Portfolio Change
Valuation company Base in Change in Fair Value of Investments Change in NAV
technique sector Input Case* input (GBP'000) (pence per share)
----------- ----------- --------- ----- ------ ----------------------------------- ------------------
Third party
valuation
--
earnings Earnings
multiple Healthcare multiple 11x +1.0 569 0.29
----------- ----------- --------- ----- ------ ----------------------------------- ------------------
-1.0 (569) (0.29)
--------------------------------- ----- ------ ----------------------------------- ------------------
Third party
valuation
--
earnings Discount
multiple Education applied 7.5% +2.5% (145) (0.07)
----------- ----------- --------- ----- ------ ----------------------------------- ------------------
-2.5% 145 0.07
--------------------------------- ----- ------ ----------------------------------- ------------------
Revenue Healthcare Revenue
multiple technology multiple 4.2x +0.5 293 0.15
----------- ----------- --------- ----- ------ ----------------------------------- ------------------
-0.5 (293) (0.15)
--------------------------------- ----- ------ ----------------------------------- ------------------
Third party
valuation
--
discounted Renewable Discount
cash flow energy rate 5.75% +0.5% (217) (0.11)
----------- ----------- --------- ----- ------ ----------------------------------- ------------------
-0.5% 240 0.12
--------------------------------- ----- ------ ----------------------------------- ------------------
* As detailed in the accounting policies, the base case is based on
market comparables, discounted where appropriate for marketability, in
accordance with the IPEV guidelines.
The impact of these changes could result in an overall increase in the
valuation of the equity investments by GBP1,247,000 (4.3%) or a decrease
in the valuation of equity investments by GBP1,224,000 (4.2%).
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 Company has no 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 2020.
13. Current assets
Trade and other receivables less than one year 30 June 2020 30 June 2019
GBP'000 GBP'000
----------------------------------------------- ------------ ------------
Prepayments and accrued income 13 16
Other receivables 68 343
------------ ------------
81 359
------------ ------------
14. Payables: amounts falling due within one year
30 June 2020 30 June 2019
GBP'000 GBP'000
----------------------------- ------------ ------------
Accruals and deferred income 379 371
Trade payables 16 19
395 390
------------ ------------
15. Called up share capital
Allotted, called up and fully paid GBP'000
----------------------------------------------------
207,170,647 Ordinary shares of 1 penny each at 30
June 2019 2,072
12,866,227 Ordinary shares of 1 penny each issued
during the year 129
---------------------------------------------------- --------
220,036,874 Ordinary shares of 1 penny each at 30
June 2020 2,200
---------------------------------------------------- --------
20,168,410 Ordinary shares of 1 penny each held in
treasury at 30 June 2019 (202)
2,893,220 Ordinary shares of 1 penny each purchased
during the year to be held in treasury (29)
---------------------------------------------------- --------
23,061,630 Ordinary shares of 1 penny each held in
treasury at 30 June 2020 (231)
---------------------------------------------------- --------
Voting rights of 196,975,244 Ordinary shares of 1
penny each at 30 June 2020 1,970
---------------------------------------------------- --------
The Company purchased 2,893,220 Ordinary shares for treasury (2019:
2,697,000) during the year at a total cost of GBP937,000 (2019:
GBP861,000).
The total number of shares held in treasury as at 30 June 2020 was
23,061,630 (2019: 20,168,410) representing 10.5 per cent. of the shares
in issue as at 30 June 2020.
Under the terms of the Dividend Reinvestment Scheme Circular dated 26
February 2009, the following new Ordinary shares of nominal value 1
penny each were allotted during the year:
Number
of
Allotment shares Aggregate nominal value of shares Issue price Net invested Opening market price on allotment
date allotted (GBP'000) (pence per share) (GBP'000) (pence per share)
29 November
2019 864,564 9 34.82 285 32.70
31 March
2020 967,763 10 33.73 310 29.50
1,832,327 595
--------- ------------
Under the terms of the Albion VCTs' Prospectus Top Up Offers 2019/20,
the following new Ordinary shares of nominal value 1 penny each were
issued during the year:
Number of
Allotment shares Aggregate nominal value of shares Issue price Net consideration received Opening market price on allotment
date allotted (GBP'000) (pence per share) (GBP'000) (pence per share)
31 January
2020 4,051,167 41 35.40 1,413 32.70
31 January
2020 904,613 9 35.60 316 32.70
31 January
2020 5,684,033 57 35.80 1,983 32.70
30 April
2020 287,098 3 32.60 92 32.50
30 April
2020 106,989 1 32.90 34 32.50
11,033,900 3,838
---------- --------------------------
16. Basic and diluted net asset value per share
The net asset value attributable to the Ordinary shares at the year end
was as follows:
30 June 2020 30 June 2019
----------------------------------
Net asset value per share (pence) 33.14 35.29
------------ ------------
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 (adjusted for treasury shares) of 196,975,244 shares as
at 30 June 2020 (2019: 187,002,237).
There are no convertible instruments, derivatives or contingent share
agreements in issue.
17. Capital and financial instruments risk management
The Company's capital comprises Ordinary shares as described in note 15.
The Company is permitted to buy back its own shares for cancellation or
treasury purposes, and this is described in more detail in the
Directors' report on page 35 of the full Annual Report and Financial
Statements.
The Company's financial instruments comprise equity and loan stock
investments in unquoted companies, deferred receipts on disposal of
fixed asset investments, cash balances, receivables and payables 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
companies, details of which are shown on pages 25 to 28 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 GBP41,621,000 (2019:
GBP49,943,000). Fixed asset investments form 64 per cent. of the net
asset value as at 30 June 2020 (2019: 76 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. The
management of risk within the venture capital portfolio is addressed
through careful investment selection, by diversification across
different industry segments, by maintaining a wide spread of holdings in
terms of financing stage and by limitation of the size of individual
holdings. The Directors monitor the Manager's compliance with the
investment policy, review and agree policies for managing this risk and
monitor the overall level of risk on the investment portfolio on a
regular basis.
Valuations are based on the most appropriate valuation methodology for
an investment within its market, with regard to the financial health of
the investment and the IPEV Guidelines. Details of the industries in
which investments have been made are contained in the Portfolio of
investments section on pages 25 to 28 of the full Annual Report and
Financial Statements and in the Strategic report above.
As required under FRS 102 the Board is required to illustrate by way of
a sensitivity analysis the extent to which the assets are exposed to
market risk. The Board considers that the value of the fixed asset
investment portfolio is sensitive to a change of between 10% and 20%
based on the current economic climate. The impact of a 10% to 20% change
has been selected as this is a range which is considered reasonable
given the current level of volatility observed. When considering the
appropriate level of sensitivity to be applied, the Board has considered
both historic performance and future expectations.
At the lower end of the range, the sensitivity of a 10% increase or
decrease in the valuation of the fixed asset investment portfolio
(keeping all other variables constant) would increase or decrease the
net asset value and return for the year by GBP4,162,000. At the higher
end of the range, the sensitivity of a 20% increase or decrease in the
valuation of the fixed asset investment portfolio (keeping all other
variables constant) would increase or decrease the net asset value and
return for the year by GBP8,324,000. 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 of half a
percentage point in all interest rates would have increased total return
before tax for the year by approximately GBP100,000 (2019: GBP56,000).
Furthermore, it was considered that a material fall in interest rates
below current levels during the year would have been unlikely.
The weighted average interest rate applied to the Company's fixed rate
assets during the year was approximately 8.1 per cent. (2019: 9.5 per
cent.). The weighted average period to maturity for the fixed rate
assets is approximately 2.2 years (2019: 2.7 years).
The Company's financial assets and liabilities, all denominated in
pounds sterling, consist of the following:
30 June 2020 30 June 2019
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 11,814 - 776 12,590 13,674 - 354 14,028
Equity - - 29,031 29,031 - - 35,915 35,915
Receivables* - - 70 70 - - 344 344
Payables - - (395) (395) - - (390) (390)
Cash - 23,966 - 23,966 - 16,083 - 16,083
------------ ------------- ------------ -------- ------------ ------------- ------------ --------
11,814 23,966 29,482 65,262 13,674 16,083 36,223 65,980
------------ ------------- ------------ -------- ------------ ------------- ------------ --------
*The receivables do not reconcile to the Balance sheet as prepayments
are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument
will fail to discharge an obligation or commitment that it has entered
into with the Company. The Company is exposed to credit risk through its
receivables, investment in 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. For loan stock investments made prior to 6
April 2018, which account for 87.3 per cent. of loan stock by value,
typically loan stock instruments have a fixed or floating charge, which
may or may not have been subordinated, over the assets of the portfolio
company in order to mitigate the gross credit risk.
The Manager receives management accounts from portfolio companies, and
members of the investment management team often sit on the boards of
unquoted portfolio companies; this enables the close identification,
monitoring and management of investment-specific credit risk.
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 2020 was limited to
GBP12,590,000 (2019: GBP14,028,000) of loan stock instruments,
GBP23,966,000 (2019: GBP16,083,000) of cash deposits with banks and
GBP70,000 (2019: GBP344,000) of deferred consideration and receivables.
At the balance sheet date, the cash held by the Company was held with
Lloyds Bank Plc, Scottish Widows Bank plc (part of Lloyds Banking Group),
National Westminster Bank plc and Barclays Bank plc. Credit risk on cash
transactions was mitigated by transacting with counterparties that are
regulated entities subject to prudential supervision, with high credit
ratings assigned by international credit-rating agencies.
The credit profile of loan stock is described under liquidity risk shown
below.
Impaired loan stock instruments have a first fixed charge or a fixed and
floating charge over the assets of the portfolio company and the Board
estimate that the security value approximates to the carrying value.
Liquidity risk
Liquid assets are held as cash on current 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 GBP59,698,000 (2019:
GBP64,125,000) as at 30 June 2020.
The Company has no committed borrowing facilities as at 30 June 2020
(2019: nil) and had cash balances of GBP23,966,000 (2019:
GBP16,083,000). 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 GBP395,000 (2019: GBP390,000) for the year to 30 June 2020.
The carrying value of loan stock investments, analysed by expected
maturity dates is as follows:
30 June 2020 30 June 2019
Redemption Fully performing Past due Valued below cost Total Fully performing Past due Valued below cost Total
date GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-----------
Less than
one year 6,290 613 443 7,346 5,162 282 770 6,214
1-2 years 452 - 42 494 2,507 - 111 2,618
2-3 years 1,287 738 65 2,090 675 - 42 717
3-5 years 1,120 105 - 1,225 2,360 - 95 2,455
5 + years 1,435 - - 1,435 1,871 153 - 2,024
---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
Total 10,584 1,456 550 12,590 12,575 435 1,018 14,028
---------------- -------- ----------------- -------- ---------------- -------- ----------------- --------
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 cost of loan stock investments valued below cost is GBP670,000
(2019: GBP1,189,000).
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 2020
are stated at fair value as determined by the Directors, with the
exception of receivables and payables and cash which are carried at
amortised cost, in accordance with FRS 102. There are no financial
liabilities other than payables. The Company's financial liabilities are
all non-interest bearing. It is the Directors' opinion that the book
value of the financial liabilities is not materially different to the
fair value and all are payable within one year.
18. Contingencies and guarantees
As at 30 June 2020, the Company had no financial commitments in respect
of investments (2019: GBPnil).
There are no contingencies or guarantees of the Company as at 30 June
2020 (2019: GBPnil).
19. Post balance sheet events
Since 30 June 2020 the Company has completed the following investment
transactions:
-- Investment of GBP1,359,000 in Quantexa Limited;
-- Investment of GBP828,000 in a new portfolio company, which provides a
cloud platform that enables corporates to purchase digital gift cards and
to distribute them to employees and customers;
-- Investment of GBP346,000 in uMotif Limited;
-- Investment of GBP261,000 in Phrasee Limited;
-- Investment of GBP112,000 in Oxsensis Limited;
-- Investment of GBP46,000 in ePatient Network Limited (T/A Raremark); and
-- Investment of GBP39,000 in The Evewell (Harley Street) Limited.
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5, there
are no other related party transactions or balances requiring
disclosure.
21. Other information
The information set out in this announcement does not constitute the
Company's statutory accounts within the terms of section 434 of the
Companies Act 2006 for the years ended 30 June 2020 and 30 June 2019,
and is derived from the statutory accounts for those financial years,
which have been, or in the case of the accounts for the year ended 30
June 2020, which will be, delivered to the Registrar of Companies. The
Auditor reported on those accounts; the reports were unqualified and did
not contain a statement under s498 (2) or (3) of the Companies Act 2006.
22. Publication
The full audited Annual Report and Financial Statements are being sent
to shareholders and copies will be made available to the public at the
registered office of the Company, Companies House, the National Storage
Mechanism and also electronically at
https://www.globenewswire.com/Tracker?data=pAcNTVBcMcaJ_ZPIZgvFoPSAZJZtjvADxS6-L9yqGTueU8EgcLOy_VZAjlv6vUO25IvYxRNYBf--JVzhsFji9FX6smU8eMl0GZ4RLnG7vad8GXRa3n9YyKVwGYB9px7N
www.albion.capital/funds/CRWN, where the Report can be accessed via a
link in the 'Financial Reports and Circulars' section.
Attachment
-- Current portfolio sector allocation
https://ml-eu.globenewswire.com/Resource/Download/9d8bab23-2fd5-4e27-931b-cd0406197a7a
(END) Dow Jones Newswires
September 24, 2020 10:55 ET (14:55 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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