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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Endeavour Mining Plc | LSE:EDV | London | Ordinary Share | GB00BL6K5J42 | ORD USD0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 39.00 | 2.26% | 1,767.00 | 1,768.00 | 1,770.00 | 1,769.00 | 1,711.00 | 1,711.00 | 298,141 | 16:35:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Gold Ores | 2.51B | -57.3M | -0.2324 | -128.70 | 7.38B |
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TIDMDEVC
DRAPER ESPRIT VCT PLC
LEI: 2138003I9Q1QPDSQ9Z97
FINAL RESULTS FOR THE YEARED 31 MARCH 2020
31 July 2020
FINANCIAL SUMMARY
31 Mar 2020 31 Mar 2019
pence pence
Net asset value per share ("NAV")^ 46.0 56.7
Cumulative dividends paid since launch* 105.0 102.0
Total Return (NAV plus cumulative dividends paid per
share)^ 151.0 158.7
*Key Performance Indicator ^Alternative Performance
Measure
Dividends in respect of financial year ended 31 March
2020
Interim dividend paid per share 1.5 1.5
Final dividend per share (payable on 23 October 2020) 1.5 1.5
3.0 3.0
A full dividend history for the Company can be found at
www.downing.co.uk.
CHAIRMAN'S STATEMENT
I write this statement during an unprecedented period. The coronavirus
pandemic has affected everybody and its full impact on the UK and global
economies and society as a whole will not be clear for some time.
The Company's focus has been to invest in knowledge-intensive growth
technology businesses since the investment arrangements with Draper
Esprit were put in place several years ago. These businesses are
typically young and require significant support as they develop, but
whereas the pandemic has created challenges for some portfolio companies,
some of the businesses are well funded and positioned to take advantage
of the changes that may arise from the pandemic. Economics are going to
change. Draper Esprit's probing for new investments may well meet those
changes.
With the Company's financial year end falling on 31 March 2020, these
results incorporate investment valuations which take account of our
estimate of the impact of the pandemic but benefit from the knowledge of
events which have taken place after the year end where, for example,
some portfolio companies have completed further funding rounds which has
provided reassurance for their future prospects.
Net asset value and results
As at 31 March 2020, the Company's Net Asset Value per share ("NAV")
stood at 46.0p, representing a decrease of 7.7p (13.6%) over the year
after adding back dividends paid.
The Total Return to Shareholders who invested at the launch of the
Company in 1998 (NAV plus cumulative dividends) now stands at 151.0p,
compared to the original cost (net of income tax relief) of 80.0p per
share. A summary of the position for Shareholders who invested in the
Company's various other fundraisings is included within the Annual
Report.
The loss on ordinary activities after taxation for the year was GBP6.3
million (2019: GBP1.3 million profit), comprising a revenue return of
GBP7,000 (2019: GBP171,000) and a capital loss of GBP6.3 million (2019:
GBP1.2 million profit).
Venture capital investments
Portfolio activity
During the year, the Company made five new investments and four
follow-on investments totalling GBP5.2 million. A small number of
realisations also occurred during the year. These included a successful
exit from Podpoint Holdings Limited at 2.2 times original cost. In total,
realisations generated proceeds of GBP2.2 million and a gain for the
year of GBP120,000.
Further details on the investment activity can be found in the
Investment Manager's report.
Investment valuations
At the year end, the Company held a portfolio of 24 active investments
valued at GBP26.0 million.
The split of the investment portfolio between growth technology
investments introduced by Draper Esprit and the older legacy investments
is shown below:
Portfolio split as at 31 March 2020
Growth Technology Legacy Cash Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost 14,830 18,689 8,422 41,941
Gains/(losses) (950) (6,474) - (7,424)
Valuation 13,880 12,215 8,422 34,517
Percentage of portfolio 40.2% 35.4% 24.4% 100.0%
The newer growth technology investments are now the largest part of the
portfolio. This proportion will continue to grow as further funds are
raised and invested, and when there are further realisations from the
legacy portfolio.
The Board has reviewed the investment valuations at the year end and, in
drawing its conclusions, has given consideration to the impact of the
pandemic and its likely aftermath.
The largest adjustments to the valuations are highlighted as follows:
Endomagnetics Limited (trading as Endomag), a business which has
developed a magnetic tracking system for cancer tumours. was increased
in value by GBP1.6 million as the business has continued to make good
progress.
Back Office Technology Limited (trading as Form3), a cloud payment
system provider, was increased in value by GBP990,000 as the business
has continued to develop well and attract attention from potential
investors.
Freetrade Limited, the online investing app, has increased in value by
GBP660,000, as the business continues to progress and successfully
completed a new funding round in May.
StreetTeam Software Limited (trading as Pollen) operates a social
ticketing system for travel, festivals and nightlife. The pandemic has
unsurprisingly had a major impact on this business, although it has been
able recently to complete a funding round that will help it through to
when more normal times might return. The valuation has been reduced by
GBP3.0 million.
Fords Packaging Topco Limited (trading as Fords Packaging Systems) makes
capping and sealing systems primarily for the food and beverage
industry. The business has performed well, but the pandemic has caused
a significant disruption with new contract activity having to be
delayed. Prospects of the business resuming at its previous levels of
trading when more normal conditions return are good, however a provision
of GBP1.4 million has been made at the year end in view of the current
dip in profits.
Lyalvale Express Limited, a leading producer of shotgun ammunition, has
reduced in value by GBP1.1 million due to unclear sales figures during
this uncertain period.
Several of the Company's investments are quoted on AIM and are valued at
their share prices at 31 March 2020. The valuation of the investment in
Access Intelligence plc fell by GBP663,000 over the year and Fulcrum
Utility Services Limited by GBP595,000.
Overall, the unrealised valuation movements on the portfolio resulted in
a net decrease of GBP5.7 million for the year.
Further commentary on the portfolio, together with a schedule of
additions, disposals and details of the ten largest investments can be
found within the Investment Manager's Report and Review of Investments.
Dividends
Although the valuation of the portfolio has been impacted by the
pandemic, the Company still has sufficient liquid funds for its
requirements, and which allows it to pay a final dividend. A dividend of
1.5p per share is being proposed to be paid on 23 October 2020 to
Shareholders on the register at 25 September 2020. This will bring the
total dividends paid in respect of the year to 3.0p.
Fundraising
The Company launched a new offer for subscription in October 2019. To
date the offer has raised and allotted GBP11.0 million which provides
the Company with additional funds to support existing portfolio
companies and take advantage of new opportunities. All shares in
connection with the offer were allotted after the year end.
The Company also undertook an offer for subscription which closed in May
2019 having raised GBP7m and was fully subscribed.
Share Buybacks
The Company has a policy of purchasing its own shares that become
available in the market at a discount of approximately 5% to the latest
published NAV, subject to regulatory and liquidity constraints.
Any Shareholders who are considering selling their shares will need to
use a stockbroker. Such Shareholders should ask their stockbroker to
register their interest in selling their shares with Shore Capital.
During the year the Company purchased a total of 686,994 shares at an
average price of 53.34p per share. Resolution 12 will be proposed at the
AGM, to renew the authority for the Company to purchase its own shares.
Directorate
After 15 years of service, Barry Dean has decided to retire as a
non-executive director of the Company and will step down and not seek
re-election at the forthcoming AGM. On behalf of the Board, I would like
to thank Barry for the substantial contribution he has made throughout a
period which has seen many changes to the Company. I and my colleagues
will miss his consistently insightful input and wish him well for the
future.
The Board has no immediate plans to appoint a replacement but will keep
this under review.
Annual General Meeting ("AGM")
With social distancing still expected to be a significant issue for some
time, and considering the safety and wellbeing of our Shareholders, the
board is planning to take advantage of the government's legislation
regarding AGMs. Therefore, this years' AGM will be a closed meeting and
Shareholders will not be able to attend.
The closed AGM will take place on 22 September 2020 at 11 am.
Three items of special business are proposed at the AGM:
-one in respect of the authority to buy back shares as noted above; and
-two in respect of the authority to allot shares.
Full details of the business to be conducted at the AGM is included in
the Notice of the AGM at the back of this Report. Shareholders are
encouraged to submit their votes using the Form of Proxy which can be
scanned and emailed to devctagm@downing.co.uk. Furthermore, the Board
continues to welcome questions from Shareholders which can be sent to
the same email address. The Board and Manager will address the
questions that arise in an AGM statement that the Company will release
after the meeting.
Outlook
The coronavirus pandemic has produced challenging conditions for most
businesses and individuals everywhere. Businesses in some sectors will
be badly impacted and it is clear that some will not survive the
disruption and economic turmoil. However, businesses in some areas,
particularly technology, are better placed to cope with this situation
and may even be able to take advantage of the changes to the world that
we might see.
The general economic uncertainty will be a threat to all businesses but
the Draper Esprit team and Elderstreet will continue to work closely
with all portfolio companies to ensure they are supported as much as
they can be.
As a result of the recent offer for subscription, the Company has a
reasonable level of liquid funds which will allow it to support existing
portfolio businesses where there is a compelling case. Economic
downturns can often ultimately be some of the most successful times for
investing and the VCT currently has GBP15.7 million of cash. Over the
next year we expect to develop our portfolio by employing further funds
in new investment opportunities alongside Draper Esprit plc. Not all of
these investments will be successful, and some will take time to prove
their worth, but we believe, in the long term, the Company will have the
potential to deliver attractive returns.
The next update for Shareholders will be Half-Yearly Report to 30
September 2020, which we expect to be published in December.
David Brock
Chairman
INVESTMENT MANAGER'S REPORT
The co-investment arrangements with Draper Esprit plc, to share deal
flow, management experience and investment opportunities, continue to be
positive from both an investment and a fundraising perspective. We now
define the Company as having two portfolios; a new technology portfolio
invested alongside other Draper Esprit funds and a legacy portfolio
assembled before the Draper Esprit arrangement.
It has been a busy year for the management team, with a total of five
new investments having been completed alongside four follow-on
investments, and one disposal. GBP2.4 million was invested into the five
new companies, and GBP2.8 million into the four follow-on investments.
Two of those follow on investments were led by third party new investors
at higher valuations than the VCT invested. No further investment was
made into the legacy portfolio.
In the period Podpoint was sold to EDF realising proceeds of GBP1.9
million. This disposal realised a 2.2x return and represented an IRR of
over 60% on an investment made in July 2018. This is the first disposal
made from the Draper technology portfolio.
Post the year end two new investments have been made into the fin-tech
sector totalling GBP3.5 million, and three further follow-ons totalling
GBP1.8 million have been made. One of the new fin-tech investments,
Thought Machine, has been highlighted in a recent review by CB Insights,
a tech market intelligence company, as a future 'Unicorn' i.e. a company
with the potential to be valued at a billion pounds. Two of the
follow-ons were led either by third party institutional venture capital
and/or strategic investors at higher valuations than the VCT originally
invested.
As Managers of the VCT we were confident of the upward trend in the
portfolio valuations until the advent of the Covid crisis. In line with
the general market, we have seen mixed results in trading across our
portfolio companies.
As a result, the Company recorded a 7.7p decrease in the Total Return
(net asset value including cumulative dividends), from 158.7p to 151.0p.
The NAV per share fell to 46.0p after paying dividends of 3.0p during
the year. This fall in NAV of 13.6% broadly reflects the drop in equity
markets generally, although is less sharp partly because of the
proportion of the funds held in cash.
Within the Draper Esprit portfolio five new investments, alongside the
Draper Esprit group funds, were made into the following companies:
GBP'000
Hadean
Cloud native mass distribution computing platform 400
Freetrade
Zero commission stock trading platform 600
Sweepr
Home Smart devices support platform 515
United Authors Publishing (t/a Unbound)
Digital book publisher 442
Real Eyes
Emotion AI recognition technology 430
2,387
=======
These investments were all made alongside Draper Esprit funds and often
included other corporate and venture capitalists. This corroborates the
strategy of investing alongside a strong syndicate of investors. In all
of these new investments, a member of the Draper Esprit group is a
representative on the portfolio company board. At the year end the total
Draper technology portfolio consisted of 18 companies, (having exited
PodPoint in the period), and a further two new Fintech deals have
completed as at the end of June. As we flagged in last year's report we
expect there to be substantial follow-on investments into the Draper
Esprit businesses currently in the portfolio.
A highlight of the 19/20 investment vintage is Freetrade. the zero
commission stock trading platform, which has raised a further GBP6m from
new investors and grown Assets under Administration by over 350%.
From the 2018/19 vintage investments two have attracted good follow on
investors. Back Office Technology (t/a Form 3), the cloud native
fintech payments processor, has raised a substantial round including
large tier 1 corporate investors who are keen to use the technology
within their enterprise.
Evonetix, developing DNA gene synthesis technology, raised a further
round led by US venture investors Foresite Capital. Existing investors,
Draper Esprit, DCVC (Data Collective), the Morningside group, Providence
Investment Company, Cambridge Consultants Ltd, Rising Tide Fund, and
Civilization Ventures, also all participated in the round. The managers
believe the breadth of the syndicate investors in this and other Draper
investments is a unique and positive aspect of the Draper Esprit VCT.
On the downside, a large provision has been taken for StreetTeam (t/a
Pollen). While the company raised a further round from incumbent
investors in May 2020 at a valuation that is higher than the year end
carrying value would reflect, the business has a large exposure to the
travel and entertainment market, and a cautious approach has been taken
when valuing this company. The Managers are hopeful that this is a
temporary reduction in value and that an early recovery from the Covid
slowdown will lead to a mark-up in valuation in the near future.
Within the legacy portfolio, Fords Packaging Topco Limited ('Fords'), an
exporter of capping and sealing technology products, continues to
perform well albeit the Covid crisis has resulted in a temporary
stalling of orders as engineers have not been able to travel globally.
The order book remains healthy and we believe that Fords still has the
potential to provide further upside.
There are two meaningful AIM companies in the legacy portfolio; Access
Intelligence and Fulcrum. Over the year these saw a decrease of 22%
(adjusted for the receipt of GBP300k in repaid loans). However, at the
end of June 2020 we have seen a further 28% recovery in their value, an
increase of GBP1.1 million.
Lyalvale Express Limited, the shotgun cartridge manufacturer, has seen
an 8% year on year sales drop. While good management has ensured the
profit has remained stable the Covid crisis has resulted in little
visibility on the coming years shooting market. The valuation has
therefore been reduced at the year end.
After the year end the VCT allotted GBP11.0 million of Shares under the
2019 prospectus Offer. This Offer remains open until the end of July
unless extended by the Board. The Manager remains confident that the new
funds raised over the past fundraising seasons can be invested within
the qualifying timeframe. The Board is also planning to launch a further
Offer later this year.
In summary, it has been a busy period for the Company which has seen a
significant level of new investment and follow on activity. Whilst the
new Draper Esprit investments offer some exciting prospects for the
future, a number of these businesses are still at an early stage and it
is too soon to judge whether they will ultimately be successful,
although several are showing good promise.
While the Covid pandemic and forthcoming Brexit negotiations provide
substantial headwinds to the global economy, investments into technology
retain their ability to scale quickly and harness good gross margins. We
remain cautiously optimistic for the portfolio and restate our belief
that technology retains the attributes of good potential for future
growth.
Elderstreet Investments Limited
REVIEW OF INVESTMENTS
Portfolio of investments
The following investments were held at 31 March 2020. All companies are
registered in England and Wales, with the exception of Fulcrum Utility
Services Limited, which is registered in the Cayman Islands.
Valuation
movement % of portfolio
Cost Valuation in year by value
GBP'000 GBP'000 GBP'000
Ten largest venture capital investments (by
value)
Fords Packaging Topco Limited 2,433 5,626 (1,353) 16.3%
Access Intelligence plc* 2,586 3,742 (663) 10.9%
Endomagnetics Limited 912 2,466 1,553 7.1%
IESO Digital Health Limited 1,900 1,900 - 5.5%
Back Office Technology Limited 700 1,690 990 4.9%
Lyalvale Express Limited 1,915 1,428 (1,143) 4.1%
Freetrade Limited 600 1,260 660 3.7%
Evonetix Limited 793 1,183 390 3.4%
Resolving Limited 799 799 - 2.3%
Sweepr Technologies Limited 515 526 11 1.5%
13,153 20,620 445 59.7%
------- ----------- --------- --------------
Other venture capital investments
Cashfac plc 260 525 - 1.5%
Fulcrum Utility Services Limited* 386 514 (595) 1.5%
Push Dr Limited 1,756 501 (1,255) 1.5%
Apperio Limited 500 500 - 1.5%
Crowdcube Limited 400 476 (236) 1.4%
Roomex UK Limited 616 463 (153) 1.3%
United Authors Publishing Limited 442 442 - 1.3%
RealEyes Holding Limited 430 430 - 1.3%
Hadean Supercomputing Limited 400 400 - 1.2%
IXL PremFina Limited 756 378 (378) 1.1%
Light Blue Optics Limited 483 327 (155) 0.9%
Macranet Limited 1,037 259 - 0.7%
StreetTeam Software Limited 2,503 140 (3,042) 0.4%
Servoca plc 333 120 - 0.3%
AngloINFO Limited 3,527 - - -
Ocelot Realisations Limited (formerly Baldwin
& Francis Ltd) 1,534 - - -
Uvenco UK plc* 1,326 - - -
Location Sciences Group plc* 860 - (7) -
Kellan Group plc* 657 - (2) -
The National Solicitors Network Limited 501 - - -
Ridee Limited 499 - - -
AppUx Limited 326 - (326) -
The QSS Group Limited 268 - - -
RB Sport & Leisure Holdings plc 188 - - -
Infoserve Group plc 128 - - -
EDO Consulting Limited 125 - - -
Sift Limited 125 - (42) -
20,366 5,475 (6,191) 15.9%
------- ----------- --------- --------------
33,519 26,095 (5,746) 75.6%
Cash at bank and in hand 8,422 24.4%
Total investments 34,517 100.0%
All venture capital investments are unquoted unless otherwise stated
*Quoted on AIM
Investment movements for the year ended 31 March 2020
ADDITIONS
Venture capital investments GBP'000
StreetTeam Software Limited 1,218
Push Dr Limited 1,032
Freetrade Limited 600
Sweepr Technologies Limited 515
United Authors Publishing Limited 442
RealEyes Holding Limited 430
IESO Digital Health Limited 400
Hadean Supercomputing Limited 400
Light Blue Optics Limited 171
5,208
=======
DISPOSALS
Value at Profit/(loss)
Cost 1 April 2019 Proceeds vs cost Realised gain
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Quoted
investments
Access
Intelligence
plc* 300 300 300 - -
Venture
Capital
Investments
Pod Point
Holdings
Limited 860 1,745 1,865 1,005 120
1,160 2,045 2,165 1,005 120
======= ============= ======== ============= =============
*Quoted on AIM
Directors' responsibilities statement
The Directors are responsible for preparing the Report of the Directors,
the Strategic Report, the Directors' Remuneration Report and the
financial statements in accordance with applicable law and regulations.
They are also responsible for ensuring that the Annual Report includes
information required by the Listing Rules of the Financial Conduct
Authority.
Company law requires the Directors to prepare financial statements for
each financial year. Under that law, the Directors have elected to
prepare the financial statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law), including Financial Reporting Standard
102, the financial reporting standard applicable in the UK and Republic
of Ireland (FRS 102).
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Company and of the profit or loss of the
Company for that period.
In preparing these financial statements, the Directors are required to:
-select suitable accounting policies and then apply them consistently;
-make judgements and accounting estimates that are reasonable and
prudent;
-state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the
financial statements;
-prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in business;
and
-prepare a director's report, a strategic report and director's
remuneration report which comply with the requirements of the Companies
Act 2006.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company's transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
Each of the Directors considers that the Annual Report, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Company's performance, business
model and strategy.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and
dissemination of the financial statements and other information included
in annual reports may differ from legislation in other jurisdictions.
INCOME STATEMENT
for the year ended 31 March 2020
Year ended 31 March 2020 Year ended 31 March 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 585 - 585 634 - 634
Gains/(losses) on investments - (5,626) (5,626) - 1,817 1,817
585 (5,626) (5,041) 634 1,817 2,451
Investment management fees (212) (636) (848) (196) (588) (784)
Other expenses (366) - (366) (267) (75) (342)
Return/(loss) on ordinary activities before tax 7 (6,262) (6,255) 171 1,154 1,325
Tax on return/(loss) - - - - - -
Return/(loss) attributable to equity shareholders,
being total comprehensive income for the period 7 (6,262) (6,255) 171 1,154 1,325
======= ======= ======== ======= ======= =======
Basic and diluted return/(loss)
per share - (7.8p) (7.8p) 0.2p 1.7p 1.9p
All Revenue and Capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the year. The total column within the Income Statement represents
the Statement of Total Comprehensive Income of the Company prepared in
accordance with Financial Reporting Standards ("FRS 102"). The
supplementary revenue and capital return columns are prepared in
accordance with the Statement of Recommended Practice issued in October
2019 by the Association of Investment Companies ("AIC SORP").
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2020
Capital Share
Share Redemption Premium Merger Special Capital Capital Revenue
capital reserve account reserve reserve reserve -unrealised reserve - realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended 31 March 2019
At 1 April 2018 3,194 533 22,054 1,828 452 5,515 3,331 (187) 36,720
Total
comprehensive
income - - - - - 1,571 (417) 171 1,325
Transfer between
reserves* - - - - (2,649) 1,317 1,194 138 -
Cancellation of
Share Premium - - (25,625) - 25,625 - - - -
Transactions
with owners
Issue of new
shares 308 - 3,571 - - - - - 3,879
Share issue
costs - - - - (153) - - - (153)
Purchase of own
shares (66) 66 - - (730) - - - (730)
Dividends paid - - - - - - (1,934) (138) (2,072)
At 31 March 2019 3,436 599 - 1,828 22,545 8,403 2,174 (16) 38,969
For the year ended 31 March 2020
At 1 April 2019
Total
comprehensive
income - - - - - (5,746) (516) 7 (6,255)
Transfer between
reserves* - - - - (3,281) 1,760 1,521 - -
Transactions
with owners
Issue of new
shares 595 - 6,388 - - - - - 6,983
Share issue
costs - - - - (185) - - - (185)
Purchase of own
shares (34) 34 - - (366) - - - (366)
Dividends paid - - - - - - (2,403) - (2,403)
At 31 March 2020 3,997 633 6,388 1,828 18,713 4,417 776 (9) 36,743
*A transfer of GBP1,760,000 (2019: GBP1,317,000), representing
impairment losses during the year, as well as cumulative unrealised
gains on investments which were disposed of during the year has been
made from the Capital reserve - unrealised to the Capital Reserve --
realised. A transfer of GBP1,521,000 (2019: GBP1,194,000), representing
realised gains on investment disposals plus capital expenses in the year,
has been made from Capital Reserve -- realised to the Special reserve. A
transfer of GBPnil (2019: GBP25,625,000), from the cancellation of Share
premium, has been made from the Share Premium account to the Special
reserve.
BALANCE SHEET
at 31 March 2020
31 Mar 31 Mar
2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 26,095 28,678
Current assets
Debtors 2,416 48
Cash at bank and in hand 8,422 10,455
10,838 10,503
Creditors: amounts falling due within
one year (190) (212)
Net current assets 10,648 10,291
-------- ---------
Net assets 36,743 38,969
======== =========
Capital and reserves
Called up share capital 3,997 3,436
Capital redemption reserve 633 599
Share premium account 6,388 -
Merger reserve 1,828 1,828
Special reserve 18,713 22,545
Capital reserve -- unrealised 4,417 8,403
Capital reserve -- realised 776 2,174
Revenue reserve (9) (16)
--------
Total equity shareholders' funds 36,743 38,969
======== =========
Basic and diluted net asset value 46.0p 56.7p
per share
STATEMENT OF CASH FLOWS
for the year ended 31 March 2020
31 Mar 31 Mar
2020 2019
GBP'000 GBP'000
Cash flow from operating activities
(Loss)/profit on ordinary activities before taxation (6,255) 1,325
Losses/(gains) on investments 5,626 (1,817)
Increase in debtors (2,403) 71
Increase in creditors 16 (5)
Net cash outflow from operating activities (3,016) (426)
Cash flow from investing activities
Purchase of investments (5,208) (6,889)
Proceeds from disposal of investments 2,165 856
Net cash outflow from investing activities (3,043) (6,033)
------- -------
Cash flow from financing activities
Equity dividends paid (2,403) (2,072)
Proceeds from share issue 6,983 3,879
Share issue costs (165) (173)
Purchase of own shares (389) (707)
Net cash inflow from financing activities 4,026 927
Net decrease in cash (2,033) (5,532)
Cash and cash equivalents at start of year 10,455 15,987
Cash and cash equivalents at end of year 8,422 10,455
Cash and cash equivalents comprise
Cash at bank and in hand 8,422 10,455
Total cash and cash equivalents 8,422 10,455
NOTES TO THE ACCOUNTS
for the year ended 31 March 2020
1. Accounting policies
General information
Draper Esprit VCT plc ("the Company") is a venture capital trust
established under the legislation introduced in the Finance Act 1995 and
is domiciled in the United Kingdom and incorporated in England and
Wales. The Company is a premium listed entity on the London Stock
Exchange.
Basis of accounting
The Company has prepared its financial statements in accordance with the
Financial Reporting Standard 102 ("FRS 102") and in accordance with the
Statement of Recommended Practice "Financial Statements of Investment
Trust Companies and Venture Capital Trusts" issued in October 2019
("SORP") and with the Companies Act 2006.
Going concern
After reviewing the Company's forecasts and projections, the Directors
have a reasonable expectation that the major cash outflows of the
Company (most notably investments, share buybacks and dividends) are
within the Company's control and therefore the Company has sufficient
cash to meet its expenses and liabilities when they fall due. The impact
of COVID-19 has been considered, more detail on these considerations can
be found within the Corporate Governance report. As such, the Board
confirms that the Company has adequate resources to continues in
operational existence for at least 12 months from the date of approval
of the financial statements. The Company therefore continues to adopt
the going concern basis in preparing its financial statements.
Presentation of Income Statement
In order to better reflect the activities of a venture capital trust,
and in accordance with the SORP, supplementary information which
analyses the Income Statement between items of a revenue and capital
nature has been presented alongside the Income Statement. The net
revenue is the measure the Directors believe appropriate in assessing
the Company's compliance with certain requirements set out in Part 6 of
the Income Tax Act 2007.
Judgement in applying accounting policies and key sources of estimation
uncertainty
Investments
Investments are designated as "fair value through profit or loss" assets,
upon acquisition, due to investments being managed and performance
evaluated on a fair value basis. A financial asset is designated within
this category if it is both acquired and managed, with a view to selling
after a period of time, in accordance with the Company's documented
Investment Policy.
Of the Company's assets measured at fair value, it is possible to
determine their fair values within a reasonable range of estimates. The
fair value of an investment upon acquisition is deemed to be cost.
Thereafter, investments are measured at fair value in accordance with
the International Private Equity and Venture Capital Valuation
Guidelines ("IPEV") together with FRS 102 sections 11 and 12.
Listed fixed income investments and investments quoted on AIM and the
Main Market are measured using bid prices in accordance with the IPEV.
For unquoted instruments, fair value is established using the IPEV. The
valuation methodologies for unquoted entities used by the IPEV to
ascertain the fair value of an investment are as follows:
-Multiples;
-Industry valuation benchmarks;
-Discounted cash flows or earnings (of underlying business);
-Discounted cash flows (from the investment);
-Net assets; and
-Calibrating to the price of a recent investment.
The methodology applied takes account of the nature, facts and
circumstances of the individual investment and uses reasonable data,
market inputs, assumptions and estimates in order to ascertain fair
value as explained in the investment accounting policy above.
Where an investee company has gone into receivership, liquidation, or
administration (where there is little likelihood of recovery), the loss
on the investment, although not physically disposed of, is treated as
being realised. Permanent impairments in the value of investments are
deemed to be realised losses and held within the Capital Reserve --
Realised.
Gains and losses arising from changes in fair value are included in the
Income Statement for the period as a capital item and transaction costs
on acquisition or disposal of the investment expensed.
It is not the Company's policy to exercise significant influence over
investee companies. Therefore, the results of these companies are not
incorporated in the Income Statement, except to the extent of any income
accrued. This is in accordance with the SORP and FRS 102 sections 14 and
15 that do not require portfolio investments to be accounted for using
the equity method of accounting.
The key source of estimation uncertainty is the selection of a multiple
to be applied when valuing unquoted companies. Whilst there is a degree
of subjectivity in the process of selecting a multiple, the Manager
undertakes a rigorous internal valuations process which involves
challenging all relevant valuation inputs. The Board then challenges the
proposed valuations once this process is complete.
Income
Dividend income from investments is recognised when the Shareholders'
rights to receive payment have been established, normally the
ex-dividend date.
Interest income is accrued on a timely basis, by reference to the
principal outstanding and at the effective interest rate applicable and
only where there is reasonable certainty of collection. Where previously
accrued income is considered unrecoverable a corresponding bad debt
expense is recognised.
Expenses
All expenses are accounted for on an accruals basis. In respect of the
analysis between revenue and capital items presented within the Income
Statement, all expenses have been presented as revenue items except as
follows:
-Expenses which are incidental to the acquisition of an investment are
deducted as a capital item.
-Expenses which are incidental to the disposal of an investment are
deducted from the disposal proceeds of the investment.
-Expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of the
investments held can be demonstrated. The Company has adopted the policy
of allocating investment manager's fees, 75% to capital and 25% to
revenue as permitted by the SORP. The allocation is in line with the
Board's expectation of long term returns from the Company's investments
in the form of capital gains and income respectively.
-Performance incentive fees arising are treated as a capital item.
Taxation
The tax effects on different items in the Income Statement are allocated
between capital and revenue on the same basis as the particular item to
which they relate using the Company's effective rate of tax for the
accounting period.
Due to the Company's status as a Venture Capital Trust and the continued
intention to meet the conditions required to comply with Part 6 of the
Income Tax Act 2007, no provision for taxation is required in respect of
any realised or unrealised appreciation of the Company's investments
which arise.
Deferred taxation is not discounted and is provided in full on timing
differences that result in an obligation at the balance sheet date to
pay more tax, or a right to pay less tax, at a future date, at rates
expected to apply when they crystallise based on current tax rates and
law. Timing differences arise from the inclusion of items of income and
expenditure in taxation computations in periods different from those in
which they are included in the accounts.
A deferred tax asset is only recognised to the extent that it is
probable there will be taxable profits in the future against which the
asset can be offset.
Other debtors and other creditors
Other debtors (including accrued income) and other creditors are
included within the accounts at amortised cost.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call
with banks with an original maturity of three months or less.
Dividends
Dividends payable are recognised as distributions in the financial
statements when the company's liability to make payment has been
established, typically once declared by the Board or approved by
Shareholders at the AGM.
Issue costs
Issue costs in relation to the shares issued are deducted from the
special reserve.
Reportable segments
The Company has one reportable segment as the sole activity of the
Company is to operate as a VCT and all of the Company's resources are
allocated to this activity.
2. Basic and diluted return per share
Year to Period to
31 Mar 31 Mar
2020 2019
Basic and diluted (loss)/return per
share (7.8p) 1.9p
Return per share based on:
Net revenue return for the financial
year (GBP'000) 7 171
Net capital gains/(losses) for the
financial year (GBP'000) (6,262) 1,154
Total Return/(loss) for the financial
year (GBP'000) (6,255) 1,325
Weighted average number of shares in
issue 80,113,600 69,241,683
As the Company has not issued any convertible securities or share
options, there is no dilutive effect on return per share. The return per
share disclosed, therefore, represents both basic and diluted return per
share.
3. Basic and diluted net asset value per share
31 March 2020 31 March 2019
Number in issue as at 31 March Net asset value Net asset value
Pence Pence
2020 2019 per share GBP'000 per share GBP'000
Ordinary
Shares 79,934,164 68,719,111 46.0 36,743 56.7 38,969
As the Company has not issued any convertible securities or share
options, there is no dilutive effect on net asset value per share. The
net asset value per share disclosed therefore represents both basic and
diluted net asset value per share.
4. Principal Risks
The Company's investment activities expose the Company to a number of
risks associated with financial instruments and the sectors in which the
Company invests. The principal financial risks arising from the
Company's operations are:
-Market risks;
-Credit risk; and
-Liquidity risk.
The Board regularly reviews these risks and the policies in place for
managing them. There have been no significant changes to the nature of
the risks that the Company is exposed to over the year and there have
also been no significant changes to the policies for managing those
risks during the year.
The risk management policies used by the Company in respect of the
principal financial risks and a review of the financial instruments held
at the year-end are provided in the Annual Report.
Market risks
As a VCT, the Company is exposed to investment risks in the form of
potential losses that may arise on the investments it holds in
accordance with its Investment Policy. The management of these
investment risks is a fundamental part of investment activities
undertaken by the Investment Manager and overseen by the Board. The
Manager monitors investments through regular contact with management of
investee companies, regular review of management accounts and other financial information and attendance at investee company board meetings. This enables the Manager to manage the investment risk in respect of individual investments. Investment risk is also mitigated by holding a diversified portfolio spread across various business sectors and asset classes. The key investment risks to which the Company is exposed are: -Investment price risk; and -Interest rate risk. The Company has undertaken sensitivity analysis on its financial instruments, split into the relevant component parts, taking into consideration the economic climate at the time of review in order to ascertain the appropriate risk allocation. Investment price risk Investment price risk arises from uncertainty about the future prices and valuations of financial instruments held in accordance with the Company's investment objectives. It represents the potential loss that the Company might suffer through investment price movements in respect of quoted investments, and changes in the fair value of unquoted investments that it holds. Interest rate risk The Company accepts exposure to interest rate risk on floating-rate financial assets through the effect of changes in prevailing interest rates. The Company receives interest on its cash deposits at a rate agreed with its bankers and on liquidity funds at rates based on the underlying investments. Investments in loan notes and fixed interest investments attract interest predominately at fixed rates. A summary of the interest rate profile of the Company's investments is shown below. Interest rate risk profile of financial assets and financial liabilities There are three levels of interest which are attributable to the financial instruments as follows: -"Fixed rate" assets represent investments with predetermined yield targets and comprise fixed interest and loan note investments. -"Floating rate" assets predominantly bear interest at rates linked to Bank of England base rate and comprise cash at bank and Cash Trust investments. -"No interest rate" assets do not attract interest and comprise equity investments, loans and receivables (excluding cash at bank) and other financial liabilities. The Company monitors the level of income received from fixed, floating and non-interest rate assets and, if appropriate, may make adjustments to the allocation between the categories, in particular, should this be required to ensure compliance with the VCT regulations. The Bank of England base rate has been 0.75% per annum since August 2018. Any potential change in the base rate, at the current level, would have an immaterial impact on the net assets and Total Return of the Company. Credit risk Credit risk is the risk that a counterparty to a financial instrument is unable to discharge a commitment to the Company made under that instrument. The Company is exposed to credit risk through its holdings of loan notes in investee companies, investments in fixed income securities, cash deposits and debtors. The Manager manages credit risk in respect of loan notes with a similar approach as described under interest rate risk on the previous page. In addition, the credit risk is partially mitigated by registering floating charges over the assets of certain investee companies. The strength of this security in each case is dependent on the nature of the investee company's business and its identifiable assets. The level of security is a key means of managing credit risk. Similarly, the management of credit risk associated interest, dividends and other receivables is covered within the investment management procedures. Cash is mainly held at Bank of Scotland plc, with a balance also maintained at Royal Bank of Scotland plc, both of which are A-rated financial institutions. Consequently, the Directors consider that the risk profile associated with cash deposits is low. There have been no changes in fair value during the year that can be directly attributable to changes in credit risk. Liquidity risk Liquidity risk is the risk that the Company encounters difficulties in meeting obligations associated with its financial liabilities. Liquidity risk may also arise from either the inability to sell financial instruments when required at their fair values or from the inability to generate cash inflows as required. The Company normally has a relatively low level of creditors (31 March 2020: GBP190,000, 31 March 2019: GBP212,000) and has no borrowings. The Company always holds sufficient levels of funds as cash and readily realisable investments in order to meet expenses and other cash outflows as they arise. For these reasons, the Board believes that the Company's exposure to liquidity risk is minimal. The Company's liquidity risk is managed by the Investment Manager, in line with guidance agreed with the Board and is reviewed by the Board at regular intervals. 5. Related party transactions Michael Jackson is a Director of Elderstreet Investments Limited which provides investment management services to the Company. During the year, GBP848,000 (2019: GBP784,000) was due in respect of these services. No performance incentive fees were due to Elderstreet Investments Limited in respect of the year under review (2019: GBPnil). As at 31 March 2020, GBPnil (2019: GBPnil) was outstanding and payable. Nicholas Lewis is a partner of Downing LLP, which provides administration services to the Company. During the year, GBP57,500 (2019: GBP50,000) was due to Downing LLP in respect of these services. As at 31 March 2020, GBP7,500 (2019: GBPnil) was outstanding and payable. During 2015, as a result of changes to the VCT rules, the Company was unable to convert its existing loans in Uvenco UK plc (formerly SnackTime plc). Following advice from specialist VCT advisors, the Company sold the loans to the Investment Manager, who converted the loans into equity. Under the terms of the transaction, the Company is due sums equal to 75% of any disposal proceeds that the Investment manager may receive on the shares. The market value of those shares is nil and accordingly the debtor due from the Investment Manager is nil. 6. Events after the end of the reporting period Since the year end, the Company allotted 25,854,564 Ordinary Shares of 5p each at an average price of 42.23p per Ordinary Share under the terms of the Offer for Subscription dated October 2019. The aggregate consideration for the shares was GBP11.0 million. ANNOUNCEMENT BASED ON AUDITED ACCOUNTS The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the period ended 31 March 2020, but has been extracted from the statutory financial statements for the period ended 31 March 2020, which were approved by the Board of Directors on 31 July 2020 and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s498(2) and (3) of the Companies Act 2006. The statutory accounts for the period ended 31 March 2020 have been delivered to the Registrar of Companies and received an Independent Auditors report which was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006. A copy of the full annual report and financial statements for the period ended 31 March 2020 will be printed and posted to shareholders shortly. Copies will also be available to the public at the registered office of the Company at 6(th) Floor, St. Magnus House, 3 Lower Thames Street, London EC3R 6HD, and will be available for download from www.downing.co.uk.
(END) Dow Jones Newswires
July 31, 2020 11:59 ET (15:59 GMT)
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