Albion Development VCT PLC: Annual Financial Re...
Albion Development VCT PLC
LEI Code 213800FDDMBD9QLHLB38
As required by the UK Listing Authority's Disclosure Guidance and Transparency Rules 4.1 and 6.3, Albion Development VCT PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 December 2021.
This announcement was approved for release by the Board of Directors on 24 March 2022.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31 December 2021 (which have been audited), will shortly be sent to shareholders. Copies of the full Annual Report and Financial Statements will be shown via the Albion Capital Group LLP website by clicking www.albion.capital/funds/AADV/31Dec2021.pdf.
Inves tment policy
The Company will invest in a broad portfolio of higher growth businesses with a stronger focus on technology companies across a variety of sectors of the UK economy. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified in terms of sector and stage of maturity of company.
Funds held pending investment or for liquidity purposes will be held as cash on deposit or up to 8% of its assets, at the time of investment, in liquid open-ended equity funds providing income and capital equity exposure (where it is considered economic to do so).
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within Venture Capital Trust qualifying industry sectors using a mixture of securities. The maximum amount which the Company will invest in a single portfolio company is 15% 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 10% of the adjusted share capital and reserves.
Background to the Company
The Company is a Venture Capital Trust which raised a total of £33.3 million through the issue of shares between 1999 and 2004. The C shares merged with the Ordinary shares in 2007. A further £6.3 million was raised through an issue of new D shares in 2010. The D shares converted to Ordinary shares in 2015.
An additional £67.3 million has been raised for the Ordinary shares through the Albion VCTs Top Up Offers since January 2011.
Financial calendar
| Record date for first dividend | 6 May 2022 |
| Annual General Meeting | Noon on 10 May 2022 |
| Payment of first dividend | 31 May 2022 |
| Announcement of Half-yearly results for the six months ending 30 June 2022 | September 2022 |
Financial highlights
| 20 3 . 84 p | Total shareholder value per share from launch to 31 December 2021† |
| 20 . 54 % | Shareholder return for the year ended 31 December 2021† |
| 4 . 37 p | Tax-free dividend per share for the year ended 31 December 2021 |
| 9 4 . 98 p | Net asset value per share as at 31 December 2021 |
†These are considered Alternative Performance Measures , see notes 2 and 3 in the Strategic report below for further explanation.
|
31 December 2021
pence per share |
31 December 2020 pence per share |
|
| Opening net asset value | 82.42 | 83.47 |
| Capital return | 1 6. 74 | 3.15 |
| Revenue return | 0. 46 | 0.02 |
| Total return | 17. 20 | 3.17 |
| Dividends paid | (4. 37 ) | (4.24) |
| Impact from share capital movements | (0.2 7 ) | 0.02 |
| Net asset value | 9 4.98 | 82.42 |
| Ordinary shares | |
| (pence per share) | |
| Total dividends paid to 31 December 2021 | 108.86 |
| Net asset value as at 31 December 2021 | 94.98 |
| Total shareholder value to 31 December 2021 | 20 3. 8 4 |
The financial summary above is for the Company, Albion Development VCT PLC Ordinary shares only. Details of the financial performance of the C shares and D shares, which have been merged into the Ordinary shares, can be found at www.albion.capital/funds/AADV under the ‘Financial summary for previous funds’ section.
A more detailed breakdown of the dividends paid per year can be found at www.albion.capital/funds/AADV under the ‘Dividend History’ section.
In addition to the dividends paid above, the Board has declared a first dividend for the year ending 31 December 20 2 2 of 2 . 3 7 pence per share payable on 31 May 20 2 2 to shareholders on the register on 6 May 20 2 2 .
Chairman’s statement
Introduction
I am pleased to report that the Company has achieved a positive total return of 17.2 pence per share and a shareholder return of 20.5% for the year, after an encouragingly strong year for several of our portfolio companies. The Company continues to benefit from the resilience of its portfolio, particularly of its healthcare and software businesses, many of which have seen strong growth. We continue to see investment opportunities in the health technology and enterprise software sectors where the Manager has developed deep expertise.
Results and dividends
As at 31 December 2021 the net asset value was 94.98 pence per share compared to 82.42 pence per share as at 31 December 2020. The total return before taxation was £17.5 million compared to £2.9 million for the previous year. The positive progress of a number of our portfolio companies is discussed later in this statement and in the Strategic report below. These excellent results for the year have resulted in a performance incentive fee payable to the Manager of £1.8 million (2020: £42,000). More detail on the calculation of this fee can be found in the Strategic report below.
In line with our variable dividend policy targeting 5% of NAV per annum the Company paid dividends totalling 4.37 pence per share during the year to 31 December 2021 (2020: 4.24 pence per share). The Company will pay a first dividend for the financial year to 31 December 2022 of 2.37 pence per share on 31 May 2022 to shareholders on the register on 6 May 2022, being 2.5% of the latest reported NAV.
Investment
performance
and
progress
There have been several realisations during the year totalling £6.3 million (2020: £3.2 million). The sale of OmPrompt Holdings delivered a 2.3 times return on cost and proceeds of £2.3 million. The sale of Innovation Broking Group delivered a 10.3 times return on cost and proceeds of £0.9 million. Further details on realisations can be found in the realisations table on page 26 of the full Annual Report and Financial Statements. I am also pleased to announce that, following the year end, the Company completed the sale of Phrasee generating proceeds of £2.1 million and a return of 3.0 times cost. In addition to this, the Company completed the sale of Credit Kudos generating proceeds of £1.6 million.
The results for the year showed net valuation gains on investments of £20.6 million, an increase from £4.1 million in the previous year. The key contributors were the uplifts on Quantexa and Oviva, both of which have been revalued after further externally led funding rounds and Egress Software Technologies and Proveca, both of which continue to grow. Phrasee and Credit Kudos also contributed to the valuation gain, due to their sales which completed post year end. However, our investments in Mirada Medical, Concirrus and Avora have seen write-downs following difficult trading conditions, in part because of the Covid-19 pandemic. We have also written-off our investment in Xperiome which went into administration following the year end.
The three largest investments in the Company’s portfolio, being Quantexa, Egress Software Technologies and Proveca, are valued at £31.9 million and represent 32.7 per cent of the Company’s net asset value.
The Company has been an active investor during the year investing a total of £7.0 million. Of this, £2.6 million was invested into five new portfolio companies, all of which are expected to require further investment as the companies prove themselves and grow:
- £1.2 million into Threadneedle Software Holdings (trading as Solidatus) a provider of data lineage software to enterprise customers in regulated sectors, which allows them to rapidly discover, visualise, catalogue and understand how data flows through their organisations;
- £0.5 million into Gravitee TopCo (trading as Gravitee.io) an application programming interface (API) management platform;
- £0.4 million into NuvoAir Holdings a provider of digital therapeutics and decentralised clinical trials for respiratory conditions;
- £0.3 million into Brytlyt which uses patented software and artificial intelligence (AI), combined with the superior computation power of graphics processing units (GPUs), to derive insights 1,000s of times faster than legacy systems; and
- £0.2 million into Accelex Technology, a data extraction and analytics technology for private capital markets.
A further £4.4 million was invested into existing portfolio companies, the largest being: £1.5 million into Oviva, as part of its Series C fundraise; £0.6 million into Black Swan Data, to support the restructure of its business to focus primarily on predictive analytics for consumer brands; and £0.6 million into Healios to support its growth.
A full list of the Company’s investments and disposals, including their movements in value for the year, can be found in the Portfolio of investments section on pages 24 to 26 of the full Annual Report and Financial Statements.
Risks and uncertainties
In addition to the risks around Covid-19, which have been a major factor for the past 2 years, there is now considerable uncertainty over the future course, and global impact, of Russia’s invasion of Ukraine. Our investment portfolio, while concentrated mainly in the technology and healthcare sectors, remains diversified in terms of both sub-sector and stage of maturity and, importantly, we believe to be appropriately valued. While we would expect these valuations to be robust within the tolerance of normal market fluctuations, the potential, though unknown, scale of any further adverse events arising out of the Ukraine invasion remain a major risk factor.
A detailed analysis of the other risks and uncertainties facing the business is shown in the Strategic report below.
S hare buy-backs
It remains the Board’s primary objective to maintain sufficient resources for investment in existing and new portfolio companies and for the continued payment of dividends to shareholders. 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.
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. Details of shares bought back during the year can be found in note 15.
Albi on VCTs Prospectus Top Up Offers
Your Board, in conjunction with the boards of the other five VCTs managed by Albion Capital Group LLP, launched a prospectus top up offer of new Ordinary shares on 6 January 2022. The Board announced on 3 March 2022 that, following strong demand, it would utilise the over-allotment facility, bringing the total to be raised to £21 million. The Offer was fully subscribed and closed to further applications on 23 March 2022.
The proceeds are being used to provide support to our existing portfolio companies and to enable us to take advantage of new investment opportunities. The first allotment of the shares under the Offer was on 25 February 2022. Details of share allotments made during and after the financial year end can be found in notes 15 and 19 respectively.
Annual General Meeting
(“AGM
”
)
Based on the success of last year’s live webcast AGM, the Board has decided to adopt a virtual format for the AGM again this year. The AGM will be held at noon on 10 May 2022 via the Lumi platform. Information on how to participate in the live webcast can be found on the Manager’s website www.albion.capital/vct-hub/agms-events.
The Board welcome questions from shareholders at the AGM and shareholders will be able to ask questions using the Lumi platform during the AGM. Alternatively, shareholders can email their questions to AADVchair@albion.capital prior to the Meeting.
Shareholders' views are important, and the Board encourages shareholders to vote on the resolutions.
Further details on the format and business to be conducted at the AGM can be found in the Directors’ report on pages 36 and 37 and in the Notice of the Meeting on pages 71 to 74 of the full Annual Report and Financial Statements.
Outlook and prospects
These positive results demonstrate the resilience of our portfolio of companies at different stages of maturity and targeted at sectors such as software and healthcare. These are companies which provide products and services that are considered innovative and essential to their customers. I am confident that our portfolio companies are well positioned to grow, despite the uncertainty around the longer-term impact of the pandemic and an increasingly volatile geopolitical backdrop. The Board believes the Company is well placed to continue to deliver long term value to our shareholders, though remains mindful of the considerable uncertainty over the Global economy arising out of any future events caused by the invasion of Ukraine.
Ben Larkin
Chairman
24 March 2022
Strategic report
Investment policy
The Company will invest in a broad portfolio of higher growth businesses with a stronger focus on technology companies across a variety of sectors of the UK economy. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified in terms of sector and stage of maturity of company.
The full investment policy can be found above.
Current portfolio sector allocation
The pie charts at the end of this announcement show the split of the portfolio valuation as at 31 December 2021 by: sector; stage of investment; and number of employees. This is a useful way of assessing how the Company and its portfolio is diversified across sector, portfolio companies’ maturity measured by revenues and their size measured by the number of people employed. As the Company continues to invest in software and other technology companies, FinTech (which is technology specifically applicable to financial services companies) becomes a more prominent investment, and therefore is included as a subsector below. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 24 and 25 of the full Annual Report and Financial Statements.
Direction of portfolio
After the year end, the cash balance has increased due to the 2021/22 Prospectus Top Up Offer share issuance on 25 February 2022. These funds will be invested predominantly into higher growth technology companies, and therefore the shift away from asset based companies will continue. The Company has a significant speciality in FinTech investing, which can be seen as a growing part of the portfolio, represented by a 7% increase this year. Healthcare technology is another area of particular strength, which has increased by 5% over the last year.
Results and dividend s
| £’000 | |
| Net capital gain for the year | 16,988 |
| Net revenue return for the year | 466 |
| Total return for the year ended 31 December 2021 | 17, 454 |
| Dividend of 2.06 pence per share paid on 28 May 2021 | (2,126) |
| Dividend of 2.31 pence per share paid on 30 September 2021 | (2,383) |
| Unclaimed dividends | 7 |
| Transferred to reserves | 12,95 2 |
|
Net assets as at 31 December 2021 |
97,639 |
|
Net asset value per share as at 31 December 202 1 (pence) |
9 4 . 9 8 |
The Company paid dividends totalling 4.37 pence per share (2020: 4.24 pence per share). The Board has a variable dividend policy which targets an annual dividend yield of around 5% on the prevailing net asset value. As a result the Board has declared a first interim dividend for the year ending 31 December 2022 of 2.37 pence per share payable on 31 May 2022 to shareholders on the register on 6 May 2022.
As shown in the Income statement, the total investment income increased to £988,000 (2020: £692,000). This is a result of Radnor House repaying a portion of the previously capitalised interest. The revenue return to equity holders has subsequently increased to £466,000 (2020: £17,000). This is substantially due to the increased percentage of investment management fees and performance incentive fees allocated to the realised capital reserve, to better align with the Board’s expectation that over the long term the majority of the Company’s investment returns will be in the form of capital gains. Further information can be found in the Notes to the Financial Statements.
The capital return for the year has increased to £16,988,000 (2020: £2,896,000). As discussed in the Chairman’s statement, this is mainly attributable to the uplifts in the valuations of Quantexa, Oviva, Proveca and Egress. This was partly offset by the reductions in Mirada Medical and Xperiome. This resulted in a total return of 17.20 pence per share (2020: 3.17 pence per share), and an increase in net asset value to 94.98 pence per share (2020: 82.42 pence per share). We remain confident that the portfolio will deliver value over the longer term.
There was a net cash inflow for the Company of £1,387,000 for the year (2020: £1,116,000), mainly resulting from the issue of Ordinary shares under the Albion VCTs Top Up Offers 2020/21. Cash inflow from fundraising has been utilised by investments into new and existing portfolio companies.
Trade and other payables at the year end amounted to £2,459,000 (2020: £541,000). This increase was primarily due to the management performance incentive fee accrued as a result of the Company’s strong return for the year. Further details on this can be found below.
Review of business and
future changes
A detailed review of the Company’s business during the year is contained in the Chairman’s statement. The results for the year to 31 December 2021 show total shareholder value of 203.84 pence per share since launch (2020: 186.91 pence per share).
There is a continuing focus on growing the FinTech, healthcare and other software and technology sectors. The majority of these investment returns are delivered through equity and capital gains, and we therefore expect our investment income to continue to be similar to the current level, as most of this is derived from the existing renewable energy sector of our portfolio.
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 Company’s financial results for the year demonstrates that the portfolio remains well balanced across sectors and risk classes, despite the effects of the pandemic so far. Many of the companies in the portfolio have continued to grow throughout the pandemic and have been providing products and services that are considered essential to their customers. Although there remains much uncertainty, the Manager has a strong pipeline of investment opportunities in which the Company’s cash can be deployed. The Board considers that the pipeline will continue to enable the Company to maintain a predictable stream of dividend payments to shareholders, and ultimately continue to deliver long term growth.
Key
P
erformance
I
ndicators
(
“KPIs”) and Alternative Performance Measures (“APMs”)
The Directors believe that the following KPIs and APMs, which are typical for Venture Capital Trusts, used in its own assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company is applying its investment policy to meet its objectives. The Directors are satisfied that the results shown in the following KPIs and APMs give a good indication that the Company is achieving its investment objective and policy. These are:
1. Total shareholdervalue relative to FTSE All-Share Index total return
The graph on page 4 of the full Annual Report and Financial Statements shows the total shareholder value against the FTSE All-Share Index total return, in both instances with dividends reinvested. The FTSE All-Share index is considered a reasonable benchmark as the Company is classed as a generalist UK VCT investor, and this index includes over 600 companies listed in the UK, including small-cap, covering a range of sectors. Details on the performance of the net asset value and return per share for the year are shown in the Chairman’s statement.
2. Net asset value per share and total shareholder value
Total return to shareholders increased by 20.5% on opening net asset value to 203.84 pence per share for the year ended 31 December 2021 as a result of the positive total return of 16.93 pence per share.
3. Movement in shareholder value in the year†
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
| 4.6% | 6.9% | 5.4% | 4.1% | 6.5% | 10.0% | 20.3% | 3.8% | 3.8% | 20.5% |
† Methodology: C alculated by the movement in total shareholder value for the year divided by the opening net asset value.
The table above shows that total shareholder value has continued to increase over the last 10 years, with an average return of 8.7% per annum.
4. Dividend distributions
Dividends paid in respect of the year ended 31 December 2021 were 4.37 pence per share (2020: 4.24 pence per share). Cumulative dividends paid since inception are 108.86 pence per share.
5. Ongoing charges
The ongoing charges ratio for the year to 31 December 2021 was 2.5% (2020: 2.5%). 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 ongoing charges cap is 2.5%, which has resulted in a saving of £86,000 to shareholders during the year (2020: £97,000).
6. VCT regulation*
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under Venture Capital Trust legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007, details of which are provided in the Directors’ report on pages 34 and 35 of the full Annual Report and Financial Statements.
The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 December 2021. 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.
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 Investment Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement may 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. The Manager is paid an annual fee equal to 2.25% of the net asset value of the Company paid quarterly in arrears.
Total annual ongoing expenses, including the management fee but excluding any performance incentive fee, are limited to 2.5% of the net asset value, as per the resolution passed at the General Meeting in 2019.
The Manager is also entitled to an arrangement fee, payable by each portfolio company, of approximately 2% on each investment made and also monitoring fees where the Manager has a representative on the portfolio company’s board. Further details of the Manager’s fee can be found in note 5.
M
anagement performance incentive
In order to align the interests of the Manager and the shareholders with regards to generating positive returns, the Company has a Management performance incentive arrangement with the Manager. Under the incentive arrangement, the Company will pay an incentive fee to the Manager of an amount equal to 20% of such excess return that is calculated for each financial year.
The performance fee hurdle requires that the growth of the aggregate of the net asset value per share and dividends paid by the Company compared with the previous accounting date exceeds RPI plus 2%. The hurdle will be calculated every year, based on the previous year’s closing net asset value per share. The starting net asset value is 84.70 pence per share, being the audited net asset value at 31 December 2018. 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.
As at 31 December 2021, the total return since 1 January 2019 was 108.09 pence, and the hurdle was 99.03 pence, resulting in an excess of 9.06 pence per share. As a result, a performance incentive fee is payable to the Manager of £1,838,000 (2020: £42,000).
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on:
- the returns generated by the Company;
- the continuing achievement of the 80% qualifying holdings investment requirement for VCT status;
- the long term prospects of the current portfolio of investments;
- the management of treasury, including use of buy back and participation in fund raising;
- a review of the Management agreement and the services provided therein; and
- benchmarking the performance of the Manager to other service providers including the performance of other VCTs that the Manager is responsible for managing.
The Board believes that it is in the interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.
Alternative Investment Fund Managers Directive (“AIFMD”)
The Board appointed Albion Capital Group LLP as the Company’s AIFM in 2014 as required by the AIFMD. The Manager is a full-scope Alternative Investment Fund Manager under the AIFMD. Ocorian Depositary (UK) Limited is the appointed Depositary and oversees the custody and cash arrangements and provides 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 in both the long and short term, having regard to the interests of other stakeholders in the Company, such as suppliers, and to do so with an understanding of the impact on the community and environment and with high standards of business conduct, which includes acting fairly between members of the Company.
The Board is very conscious of these wider responsibilities in the ways it promotes the Company’s culture and ensures, as part of its regular oversight, that the integrity of the Company’s affairs is foremost in the way the activities are managed and promoted. This includes regular engagement with the wider stakeholders of the Company and being alert to issues that might damage the Company’s standing in the way that it operates. The Board works very closely with the Manager in reviewing how stakeholder issues are handled, ensuring good governance and responsibility in managing the Company’s affairs, as well as visibility and openness in how the affairs are conducted.
The 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 table below sets out the key stakeholders and details how the Board has engaged with these key stakeholders and the effect of these considerations on the Company’s decisions and strategies during the year.
| Stakeholder | Engagement with Stakeholder | Outcome and decisions based on engagement |
| Shareholders | The key methods of engaging with Shareholders are as follows:
|
|
| Suppliers | The key suppliers with regular engagement from the Manager are:
|
|
| Manager | The performance of Albion Capital Group LLP is essential to the long term success of the Company, including achieving the investment policy and generating returns to shareholders, as well as the impact the Company has on Environment, Social and Governance practice. |
|
| Portfolio companies | 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”) report on pages 18 to 20 of the full Annual Report and Financial Statements, the portfolio companies’ impact on their stakeholders is also important to the Company. |
|
| Community and environment | The Company, with no employees, has no effect itself on the community and environment. However, as discussed above, the portfolio companies’ ESG impact is extremely important to the Board. |
|
Environmental, Social, and Governance (“ESG”) report
The Board and the Company’s Manager, Albion Capital Group LLP, take ESG very seriously and more detail can be found on this in the ESG report on page 18 to 20 of the full Annual Report and Financial Statements.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Act to detail information about social and community issues, employees and human rights; including any policies it has in relation to these matters and effectiveness of these policies. As an externally managed investment company with no employees, the Company has no formal policies in these matters, however, it is at the core of its responsible investment strategy as detailed above.
Further policies
The Company has adopted a number of further policies relating to:
- Environment
- Global greenhouse gas emissions
- Anti-bribery
- Anti-facilitation of tax evasion
- Diversity
These are set out in the Directors’ report on page 35 of the full Annual Report and Financial Statements.
General Data Protection Regulation
The General Data Protection Regulation has the objective of unifying data privacy requirements across the European Union, and continues to apply in the United Kingdom after Brexit. The Manager continues to take action to ensure that the Manager and the Company are compliant with the regulation.
Risk management
The Board carries out a regular review of the risk environment in which the Company operates, together with 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 risk has been the global pandemic which has impacted not only public health and mobility but also has had an adverse impact on the economy, the full impact of which is likely to be uncertain for some time.
The Board has carried out a robust assessment of the Company’s principal risks and uncertainties and seeks to mitigate these risks through regular reviews of performance and monitoring progress and compliance. The Board applies the principles detailed in the Financial Reporting Council’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, in the mitigation and management of these risks. More information on specific mitigation measures for the principal risks and uncertainties are explained below:
| Risk | Possible consequence | Risk assessment during the year | Risk management |
| Investment, performance and valuation risk | Investment in smaller unquoted growth businesses carries a higher degree of risk and is more volatile than investing in larger, long-established businesses. This could negatively impact shareholder returns. The Company relies on the judgement and reputation of the Manager to provide strong investment returns and valuations for shareholders. The Company’s investment valuation methodology is based on fair value, which for smaller unquoted growth businesses can be difficult to determine due to the lack of observable market data and the limitation of external reference points. |
No change. | The Board places reliance upon the skills and expertise of the Manager and its track record of making successful investments in higher growth technology businesses. The Manager operates a structured investment appraisal and due diligence process. This includes a review from one external investment professional and comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings. Investments are monitored by the Manager, through monthly portfolio updates and typically an investment manager sitting on portfolio company boards. The Board receives detailed reports on each investment and their valuation as part of their quarterly board meetings. Review and oversight of the non-executive Directors ensures that the risk to the Company’s and Manager’s reputation is kept to a minimum. Investments are valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines, which represent current best practice for investment valuation and are reviewed by the Manager’s Valuation Committee. |
| VCT approval and regulatory change risk | Any breach of section 274 of the Income Tax Act 2007, including any legislative changes, could result in the loss of the Company’s HMRC qualifying status and tax reliefs for investors. |
No change. | The Company’s VCT qualifying status is monitored monthly by the Manager and quarterly by the Board. The Board has appointed Philip Hare & Associates LLP as its taxation adviser, who independently confirms compliance, highlights areas of risk and informs on any legislative changes, including those which may arise from the withdrawal from the European Union. |
| Regulatory and compliance risk | The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company’s shares, or other penalties under the Companies Act or from financial reporting oversight bodies. | No change. | The Board and the Manager receive regular updates on new regulation, including legislation on the management of the Company, from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks through the Manager’s compliance officer, and any issues arising from compliance or regulation are reported to its own board on a monthly basis. The Board ensures the Company is compliant as part of its quarterly Board meetings. The Board reviews the quarterly reports prepared by Ocorian Depositary (UK) Limited (the Company’s Depositary) to ensure the Manager is adhering to the AIFMD requirements. |
| Operational and internal control risk (including cyber and data security) | The Company relies on a number of third parties, in particular the Manager, for the provision of investment management and administrative functions. Failures in key IT systems and controls within the Manager’s business could place assets of the Company at risk, resulting in inaccurate information being passed to the Board or shareholders. This could additionally result in losses for the Company and its shareholders. |
No change. | The Company’s operations and IT systems are subject to rigorous internal controls which are reviewed on a regular basis and reported to the Board. The Audit Committee reviews the Internal Audit Reports prepared by the Manager’s internal auditors, Azets and has access to their internal audit partner to whom it can ask specific detailed questions in order to satisfy itself that the Manager has strong systems and controls in place including those in relation to risk management, business continuity and cyber security. The Board reviews the systems and processes (including cyber and data security) in place for the Company’s key suppliers to ensure that there is an appropriate risk mitigation in place. |
| Economic and political risk | Events such as the Covid-19 pandemic, the impact of Brexit, an economic recession, fluctuation in inflation and interest rates, or significant political events could adversely affect the companies within the portfolio and consequently the Company’s net asset value. |
Increased (due to ongoing Covid-19 uncertainty and the geopolitical risks from the invasion of Ukraine). | The Company invests in a diversified portfolio of c.60 companies, predominantly in the United Kingdom, and has a policy of minimising any external bank borrowings within portfolio companies. Exogenous risks over which the Company has no control are always a risk and the Company does what it can to address these risks. The inherent long-term nature of the portfolio helps to mitigate these exogeneous risks. The Board and Manager are continuously assessing the resilience of the portfolio as a result of the ongoing economic and political risks, to ascertain where support is required. The Company has sufficient cash resources to cope with any such exigent and unexpected pressures. Exposure is relatively small to at-risk sectors that include leisure, hospitality, retail and travel (1% of NAV). The Company’s investment policy and the Board’s scrutiny of the investment portfolio ensures that this increased risk continues to be mitigated where possible. |
| Liquidity risk | The Company may not have sufficient cash available to meet its financial obligations. The Company’s portfolio is primarily in smaller unquoted companies, which are inherently illiquid as there is no readily available market, and thus it may be difficult to realise their fair value at short notice. |
No change. | The Board reviews the Company’s three year cash flow forecasts on a quarterly basis. These include potential investment realisations (which are closely monitored by the Manager), Top Up Offers, dividend payments and operational expenditure. This ensures that there are sufficient cash resources available for the Company’s liabilities as they fall due. |
| Environmental, social and governance (“ESG”) risk | An insufficient ESG policy could lead to an increased negative impact on the environment, including the Company’s carbon footprint. Non-compliance with reporting requirements could lead to a fall in demand from investors, reputational damage and penalties. |
Increased (due to the new guidance issued on climate change reporting and increased importance to stakeholders). | The Manager is a signatory of the UN PRI and the Board is kept appraised of the evolving ESG policies at quarterly Board meetings. Full details of the specific procedures and risk mitigation can be found in the ESG report on pages 18 to 20 of the full Annual Report and Financial Statements. These procedures ensure that this increased risk continues to be mitigated where possible. |
Viability statement
In accordance with the FRC UK Corporate Governance Code published in 2018 and provision 36 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over three years to 31 December 2024. The Directors believe that three years is a reasonable period in which they can assess the ability of the Company to continue to operate and meet its liabilities as they fall due. This is the period used by the Board as part of its strategic planning process, which includes: the estimated timelines for finding, assessing and completing investments; the potential impact of any new regulations; and the availability of cash.
The Board has carried out a robust assessment of the principal and emerging risks facing the Company, including those that could threaten its business model, future performance, solvency or liquidity, and focused on the major factors which affect the economic, regulatory and political environment. The Board carefully assessed, and were satisfied with, the risk management processes in place to avoid or reduce the impact of these risks. The Board has carried out robust stress testing of cashflows which included; assessing the resilience of portfolio companies, including the requirement for any future financial support.
The Board has additionally considered the ability of the Company to comply with the ongoing conditions to ensure it maintains its VCT qualifying status under its current investment policy. As a result of the Board’s quarterly valuation reviews, it has concluded that the portfolio is well balanced and geared towards delivering long term growth and strong returns to shareholders.
The Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 December 2024. The Board is mindful of the ongoing risks and will continue to ensure that appropriate safeguards are in place, in addition to monitoring the quarterly cashflow forecasts to ensure the Company has sufficient liquidity.
This Strategic report of the Company for the year ended 31 December 2021 has been prepared in accordance with the requirements of section 414A of the Companies Act 2006 (the “Act”). The purpose of this report is to provide Shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with Section 172 of the Act.
For and on behalf of the Board
Ben Larkin
Chairman
24 March 2022
Responsibility statement
In preparing these Financial Statements for the year ended 31 December 2021, the Directors of the Company, being Ben Larkin, Lyn Goleby, Lord O’Shaughnessy and Patrick Reeve, confirm that to the best of their knowledge:
- summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 December 2021 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 38 within the full audited Annual Report and Financial Statements.
On behalf of the Board,
Ben Larkin
Chairman
24 March 2022
Inc ome statement
| Y ear ended 31 December 20 2 1 | Year ended 31 December 2020 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Gains on investments | 3 | - | 20, 592 | 20, 592 | - | 4,073 | 4,073 |
| Investment income | 4 | 98 8 | - | 98 8 | 692 | - | 692 |
| Investment Manager’s fees* | 5 | (196) | (3,6 04 ) | (3,8 00 ) | (393) | (1,177) | (1,570) |
| Other expenses | 6 | (326) | - | (326) | (282) | - | (282) |
| Profit on ordinary activities before tax | 466 | 1 6,988 | 17, 454 | 17 | 2,896 | 2,913 | |
| Tax on ordinary activities | 8 | - | - | - | - | - | - |
| Profit and total comprehensive income attributable to shareholders | 466 | 1 6,988 | 17, 454 | 17 | 2,896 | 2,913 | |
| Basic and diluted return per share (pence)* * | 10 | 0. 46 | 16. 74 | 17. 20 | 0.02 | 3.15 | 3.17 |
*For more information on the allocation of the split between revenue and capital please see the accounting policies below.
** 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 have been prepared in accordance with The Association of Investment Companies’ Statement of Recommended Practice.
Balance sheet
| 31 December 202 1 | 31 December 2020 | ||
| Note | £’000 | £’000 | |
| Fixed asset investments | 11 | 80, 500 | 58,998 |
| Current assets | |||
| Trade and other receivables | 13 | 2,56 6 | 1,757 |
| Cash and cash equivalents | 1 7,032 | 15,645 | |
| 19,59 8 | 17,402 | ||
| Total assets | 100, 098 | 76,400 | |
| Payables: amounts falling due within one year | |||
| Trade and other payables | 14 | ( 2, 4 59 ) | (541) |
| Total assets less current liabilities | 97, 639 | 75,859 | |
| Equity attributable to equity holders | |||
| Called-up share capital | 15 | 1,167 | 1,040 |
| Share premium | - | 44,978 | |
| Capital redemption reserve | - | 12 | |
| Unrealised capital reserve | 36, 048 | 18,020 | |
| Realised capital reserve | 7,3 4 4 | 12,886 | |
| Other distributable reserve | 53,08 0 | (1,077) | |
| Total equity shareholders’ funds | 97, 639 | 75,859 | |
| Basic and diluted net asset value per share (pence)* | 16 | 9 4.98 | 82.42 |
* 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 March 2022 and were signed on its behalf by
Ben Larkin
Chairman
Company number: 03654040
Statement of changes in equity
|
Called
-
up share
capital |
Share premium | Capital redemption reserve | Unrealised capital reserve | Realised capital reserve* | Other distributable reserve* | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| As at 1 January 2021 | 1,040 | 44,978 | 12 | 18,020 | 12,886 | (1,077) | 75,859 |
| Profit and total comprehensive income for the year | - | - | - | 19, 786 | ( 2, 798 ) | 466 | 17,454 |
| Transfer of unrealised gains on disposal of investments | - | - | - | ( 1,75 8 ) | 1,75 8 | - | - |
| Purchase of shares for treasury | - | - | - | - | - | ( 1, 66 1 ) | ( 1, 66 1 ) |
| Issue of equity | 12 7 | 10,62 6 | - | - | - | - | 10,75 3 |
| Cost of issue of equity | - | ( 2 6 4 ) | - | - | - | - | (26 4 ) |
| Reduction of share premium and capital redemption reserve | - | (55,3 4 0 ) | (12) | - | - | 55,35 2 | - |
| Dividends paid | - | - | - | - | (4,50 2 ) | - | ( 4,50 2 ) |
| As at 31 December 20 2 1 | 1,167 | - | - | 36, 048 | 7, 3 4 4 | 5 3,080 | 97, 639 |
| As at 1 January 2020 | 938 | 36,712 | 12 | 14,702 | 15,151 | 2,168 | 69,683 |
| Profit and total comprehensive income for the year | - | - | - | 4,595 | (1,699) | 17 | 2,913 |
| Transfer of unrealised gains on disposal of investments | - | - | - | (1,277) | 1,277 | - | - |
| Purchase of shares for treasury | - | - | - | - | - | (1,189) | (1,189) |
| Issue of equity | 102 | 8,478 | - | - | - | - | 8,580 |
| Cost of issue of equity | - | (212) | - | - | - | - | (212) |
| Dividends paid | - | - | - | - | (1,843) | (2,073) | (3,916) |
| As at 31 December 2020 | 1,040 | 44,978 | 12 | 18,020 | 12,886 | (1,077) | 75,859 |
* Included within these reserves is an amount of £28,992,000 (2020: £11,809,000) which is considered distributable. Over the next four years an additional £29,635,000 will become distributable. This is due to the HMRC requirement that the Company cannot use capital raised in the past three years to make a payment or distribution to shareholders. On 1 January 2022, £2,701,000 became distributable in line with this.
Statement of cash flows
|
Year ended 31 December 202 1 £’000 |
Year ended 31 December 2020 £’000 |
|
| Cash flow from operating activities | ||
| Loan stock income received | 736 | 583 |
| Deposit interest received | 1 | 35 |
| Dividend income received | 24 | 191 |
| Investment Manager’s fees paid | ( 1,877 ) | (1,475) |
| Other cash payments | ( 32 6 ) | (283) |
| Corporation tax paid | - | - |
| Net cash flow from operating activities | ( 1,442 ) | (949) |
| Cash flow from investing activities | ||
| Purchase of current asset investments | - | (1,190) |
| Purchase of fixed asset investments | ( 7,500 ) | (5,156) |
| Disposal of current asset investments | - | 3,945 |
| Disposal of fixed asset investments | 6,003 | 1,201 |
| Net cash flow from investing activities | ( 1,497 ) | (1,200) |
| Cash flow from financing activities | ||
| Issue of share capital | 9,767 | 7,737 |
| Cost of issue of shares | ( 35 ) | (33) |
| Equity dividends paid* | (3 ,744 ) | (3,251) |
| Purchase of own shares (including costs) | (1, 662 ) | (1,188) |
| Net cash flow from financing activities | 4,326 | 3,265 |
| Increase in cash and cash equivalents | 1,387 | 1,116 |
| Cash and cash equivalents at start of period | 15,645 | 14,529 |
| Cash and cash equivalents at end of period | 17,032 | 15,645 |
*The 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 33 and 34 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 updated in 2018 and further detail on the valuation techniques used are outlined in note 2 below.
Company information can be found on page 2 of the full Annual Report and Financial Statements.
2. Accounting policies
Fixed
asset investments
The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, those undertakings in which the Company holds more than 20% 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 designated 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, including a discount for any restricted sales of shares, 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.
- the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;
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 (including debtors due after more than one year), payables and cash are carried at amortised cost, in accordance with FRS 102. Debtors due after more than one year meet the definition of a financing transaction held at amortised cost, and interest will be recognised through capital over the credit period using the effective interest method. There are no financial liabilities other than payables.
Investment income
E
quity 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 fee, performance incentive fee and 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:
- 90% of management fees and 100% of performance incentive fees if any, are allocated to the realised capital reserve. This has changed from 75% for both management fees and performance incentive fees in the year ended 31 December 2020, to better align with the Board’s expectation that over the long term the majority of the Company’s investment returns will be in the form of capital gains.
- 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.
Share capital and r
eserves
Called
-
up share capital
This reserve accounts for the nominal value of the Company’s shares.
Share premium
This reserve accounts for the difference between the price paid for the Company’s shares and the nominal value of those shares, less issue costs and transfers to the other distributable reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company’s own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
- gains and losses compared to cost on the realisation of investments, or permanent diminutions in value (including gains recognised on the realisation of investment where consideration is deferred that are not distributable as a matter of law);
- finance income in respect of the unwinding of the discount on deferred consideration that is not distributable as a matter of law;
- 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 when the liability to make the payment (record date) has been established.
Going concern
The Board has assessed the Company’s operation as a going concern. The Company has sufficient cash and liquid resources, its portfolio of investments is well diversified in terms of sector, and the major cash outflows of the Company (namely investments, buy-backs and dividends) are within the Company’s control. Cash flow forecasts are discussed quarterly at Board level with regards to going concern. The cash flow forecasts have been updated and stress tested. Accordingly, after making diligent enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence over a period of at least twelve months from the date of approval of the Financial Statements. For this reason, the Directors have adopted the going concern basis in preparing the accounts. The Directors do not consider there to be any material uncertainty over going concern.
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
31 December 2021 £’000 |
Year ended 31 December 2020 £’000 |
|
| Unrealised gains on fixed asset investments | 19, 786 | 4,595 |
| Realised gains on fixed asset investments | 549 | 601 |
| Unwinding of discount on deferred consideration | 257 | - |
| Realised losses on current asset investments | - | (1,123) |
| 20, 592 | 4,073 |
4. Investment income
|
Year ended
31 December 20 2 1 £’000 |
Year ended 31 December 2020 £’000 |
|
| Loan stock interest | 964 | 584 |
| Dividend income | 23 | 74 |
| Bank deposit interest | 1 | 34 |
| 988 | 692 |
5. Investment Manager’s fees
|
Year ended
31 December 20 2 1 £’000 |
Year ended 31 December 2020 £’000 |
|
| Investment management fee charged to revenue | 196 | 382 |
| Investment management fee charged to capital | 1,76 6 | 1,146 |
| Performance incentive fee charged to revenue | - | 11 |
| Performance incentive fee charged to capital | 1,8 38 | 31 |
| 3, 8 00 | 1,570 |
Further details of the Management agreement under which the investment management fee and performance incentive fee are paid is given in the Strategic report.
During the year, services of a total value of £1,962,000 (2020: £1,528,000) were purchased by the Company from Albion Capital Group LLP (“Albion”) in respect of management fees. There is a performance incentive fee of £1,838,000 payable this year (2020: £42,000). At the financial year end, the amount due to Albion in respect of these services disclosed as accruals was £2,366,000 (2020: £443,000). The total annual running costs of the Company are capped at an amount equal to 2.5% of the Company’s net assets, with any excess being met by Albion by way of a reduction in management fees. During the year, the management fee was reduced by £86,000 as a result of this cap (2020: £97,000).
During the year, the Company was not charged by Albion in respect of Patrick Reeve’s services as a Director (2020: £nil).
Albion, its partners and staff hold 800,470 Ordinary shares in the Company as at 31 December 2021.
Albion is, from time-to-time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the year ended 31 December 2021, fees of £187,000 attributable to the investments of the Company were received by Albion pursuant to these arrangements (2020: £168,000).
The Company has entered into an offer agreement relating to the Offers with the Company’s investment manager Albion, pursuant to which Albion will receive a fee of 2.5% of the gross proceeds of the Offers and out of which Albion will pay the costs of the Offers, as detailed in the Prospectus.
6. Other expenses
|
Year ended
31 December 20 2 1 £’000 |
Year ended 31 December 2020 £’000 |
|
| Directors’ fees (including NIC) | 75 | 75 |
| Auditor’s remuneration for statutory audit services (excluding VAT) | 38 | 34 |
| Other administrative expenses | 213 | 173 |
| 326 | 282 |
7. Directors’ fees
The amounts paid to and on behalf of the Directors during the year are as follows:
|
Y
ear ended
31 December 20 2 1 £’000 |
Year ended 31 December 2020 £’000 |
|
| Directors’ fees | 69 | 69 |
| National insurance | 6 | 6 |
| 75 | 75 |
The Company’s key management personnel are the non-executive Directors. Further information regarding Directors’ remuneration can be found in the Directors’ remuneration report on pages 45 and 46 of the full Annual Report and Financial Statements.
8 . Tax on ordinary activities
|
Year ended
31 December 20 2 1 £’000 |
Year ended 31 December 2020 £’000 |
|
| UK corporation tax charge in respect of current year | - | - |
| - | - |
| Factors affecting the tax charge: |
Year ended
31 December 20 2 1 £’000 |
Year ended 31 December 2020 £’000 |
| Profit on ordinary activities before taxation | 17, 454 | 2,913 |
| Tax charge on profit at the average companies rate of 19% (2020: 19%) | 3,3 16 | 553 |
| Factors affecting the charge: | ||
| Non-taxable gains | ( 3,9 12 ) | (774) |
| Income not taxable | ( 4 ) | (14) |
| Excess management expenses carried forward | 60 0 | 235 |
| - | - |
The tax charge for the year shown in the Income statement is lower than the average companies rate of corporation tax in the UK of 19% (2020: 19%). The differences are explained above.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital gains.
(ii) Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP.
(iii) The Company has excess management expenses of £7,026,000 (2020: £3,882,000) that are available for offset against future profits. A deferred tax asset of £1,757,000 (2020: £738,000) has not been recognised in respect of these losses as they will be recoverable only to the extent that the Company has sufficient future taxable profits.
9 . Dividends
|
Year ended
31 December 20 2 1 |
Year ended 31 December 2020 |
|
| £’000 | £’000 | |
| First interim dividend of 2.06p per share paid on 28 May 2021 (29 May 2020: 2.25p per share) | 2,126 | 2,077 |
| Second interim dividend of 2.31p per share paid on 30 September 2021 (30 September 2020: 1.99p per share) | 2,383 | 1,843 |
| Unclaimed dividends | ( 7 ) | (4) |
| 4,50 2 | 3,916 |
Details of the consideration issued under the Dividend Reinvestment Scheme included in the dividends above can be found in note 15.
In addition to the dividends summarised above, the Board has declared a first interim dividend of 2.37 pence per share for the year ending 31 December 2022, payable on 31 May 2022 to shareholders on the register on 6 May 2022. The total dividend will be approximately £2,742,000.
10 . Basic and diluted return per share
| Year ended 31 December 20 2 1 | Year ended 31 December 2020 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Profit attributable to equity shares (£’000) | 466 | 1 6,988 | 17, 454 | 17 | 2,896 | 2,913 |
| Weighted average shares in issue (adjusted for treasury shares) | 101,474,066 | 91,755,964 | ||||
| Return attributable per equity share (pence) | 0. 46 | 16. 74 | 17. 20 | 0.02 | 3.15 | 3.17 |
The weighted average number of Ordinary shares is calculated after adjusting for treasury shares of 13,946,475 (2020: 11,938,106).
There are no convertible instruments, derivatives or contingent share agreements in issue so basic and diluted return per share are the same.
11 . Fixed asset investments
|
31 December
20
2
1
£’000 |
31 December 2020 £’000 |
|
| Investments held at fair value through profit or loss | ||
| Unquoted equity and preference shares | 66, 082 | 44,350 |
| Unquoted loan stock | 13,227 | 14,648 |
| Quoted equity | 1,191 | - |
| 80, 500 | 58,998 |
|
31 December
20
2
1
£’000 |
31 December 2020 £’000 |
|
| Opening valuation | 58,998 | 51,406 |
| Purchases at cost | 6,98 3 | 5,577 |
| Disposal proceeds | ( 6, 043 ) | (3,181) |
| Realised gains | 549 | 601 |
| Movement in loan stock accrued income | 227 | - |
| Unrealised gains | 19, 786 | 4,595 |
| Closing valuation | 80, 500 | 58,998 |
| Movement in loan stock accrued income | ||
| Opening accumulated loan stock accrued income | 113 | 113 |
| Movement in loan stock accrued income | 227 | - |
| Closing accumulated loan stock accrued income | 340 | 113 |
| Movement in unrealised gains | ||
| Opening accumulated unrealised gains | 17,843 | 14,447 |
| Transfer of previously unrealised gains to realised reserve on disposal of investments | (1, 758 ) | (1,199) |
| Movement in unrealised gains | 19, 786 | 4,595 |
| Closing accumulated unrealised gains | 3 5,871 | 17,843 |
| Historic cost basis | ||
| Opening book cost | 41,042 | 36,846 |
| Purchases at cost | 6,98 3 | 5,577 |
| Sales at cost | ( 3,737 ) | (1,381) |
| Closing book cost | 44,28 8 | 41,042 |
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 of receivables and payables.
Fixed asset investments are valued at fair value in accordance with the IPEV guidelines as follows:
| Valuation methodology |
31 December
20
2
1
£’000 |
31 December 2020 £’000 |
| Cost and price of recent investment (reviewed for impairment or uplift) | 34,857 | 21,624 |
| Revenue multiple | 25,488 | 20,499 |
| Third party valuation – discounted cash flow | 8, 498 | 9,063 |
| Discounted offer price | 6, 316 | 2,202 |
| Third party valuation - earnings multiple | 3,287 | 2,625 |
| Bid price | 1,191 | - |
| Net assets | 80 9 | 2,395 |
| Earnings multiple | 54 | 590 |
| 80, 500 | 58,998 |
When using the cost or price of recent investment in the valuations, the Company looks to re-calibrate this price at each valuation point by reviewing progress within the investment, comparing against the initial investment thesis, assessing if there are any significant events or milestones that would indicate the value of the investment has changed and considering whether a market-based methodology (i.e. Using multiples from comparable public companies) or a discounted cashflow forecast would be more appropriate.
The main inputs into the calibration exercise, and for the valuation models using multiples, are revenue, EBITDA and P/E multiples (based on the most recent revenue, EBITDA or earnings achieved and equivalent corresponding revenue, EBITDA or earnings multiples of comparable companies), quality of earnings assessments and comparability difference adjustments. Revenue multiples are often used, rather than EBITDA or earnings, due to the nature of the Company’s investments, being in growth and technology companies which are not normally expected to achieve profitability or scale for a number of years. Where an investment has achieved scale and profitability the Company would normally then expect to switch to using an EBITDA or earnings multiple methodology.
In the calibration exercise and in determining the valuation for the Company’s equity instruments, comparable trading multiples are used. In accordance with the Company’s policy, appropriate comparable companies based on industry, size, developmental stage, revenue generation and strategy are determined and a trading multiple for each comparable company identified is then calculated. The multiple is calculated by dividing the enterprise value of the comparable group by its revenue, EBITDA or earnings. The trading multiple is then adjusted for considerations such as illiquidity, marketability and other differences, advantages and disadvantages between the portfolio company and the comparable public companies based on company specific facts and circumstances.
Fair value investments had the following movements between valuation methodologies between 31 December 2020 and 31 December 2021:
| Change in valuation methodology ( 20 20 to 20 2 1 ) |
Value as at
31 December 20 2 1 £’000 |
Explanatory note |
| Cost to discounted offer price | 4,204 | Third party offers received |
| Price of recent investment to revenue multiple | 3,199 | Revenue multiple more relevant based on current trading |
| Revenue multiple to price of recent investment | 2,196 | External investment round led to revaluation of investment |
| Revenue multiple to discounted offer price | 2,112 | Third party offer received |
| Net assets to bid price | 1, 191 | Company listed on AIM in period |
| Revenue multiple to net assets | 9 | Covid-19 impact on portfolio company has lead to revaluation |
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, these are the most relevant methods of valuation which would be reasonable as at 31 December 2021.
FRS 102 and the SORP requires the Company to disclose the inputs to the valuation methods applied to its investments measured at fair value through profit or loss in a fair value hierarchy. The table below sets out fair value hierarchy definitions using FRS102 s.11.27.
| Fair value hierarchy | Definition |
| Level 1 | Unadjusted quoted prices in an active market |
| Level 2 |
Inputs to valuations are from observable sources and are directly or indirectly derived from prices |
| Level 3 | Inputs to valuations not based on observable market data |
Quoted investments are valued according to Level 1 valuation methods. Unquoted equity, preference shares and loan stock are all valued according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3) had the following movements:
|
31 December 20
2
1
£’000 |
31 December 2020 £’000 |
|
| Opening balance | 58,998 | 51,384 |
| Additions | 6,98 3 | 5,577 |
| Movement from Level 1 to Level 3* | - | 22 |
| Movement from Level 3 to Level 1** | (1,191) | - |
| Disposals | (6, 043 ) | (3,181) |
| Accrued loan stock interest | 227 | - |
| Realised gains | 549 | 601 |
| Unrealised gains | 19, 786 | 4,595 |
| Closing balance | 79, 309 | 58,998 |
*This relates to the investment in Mi-Pay Group PLC changing from Level 1 to Level 3 in the fair value hierarchy, as this was in liquidation, and no longer listed.
** This relates to Arecor Therapeutics PLC, which listed on the AIM stock exchange during the period.
The Directors are required to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. 66% of the portfolio of investments, consisting of equity and loan stock, is based on recent investment price, discounted offer price, net assets and cost. For the remainder of the portfolio, the Board has considered the reasonable possible alternative input assumptions on the valuation of the portfolio and believes that changes to inputs (by adjusting the earnings and revenue multiples) could lead to a change in the fair value of the portfolio. The Board has reviewed the Manager’s adjusted inputs for a number of the largest portfolio companies (by value) which covers 20% of the portfolio. This has resulted in a total coverage of 86% of the portfolio of investments. The main inputs considered for each type of valuation is as follows:
| Valuation technique | Portfolio company sector | Input | Base Case* | Change in input | Change in f air v alue of i nvestments (£’000) | Change in NAV (pence per share) |
| Revenue multiple |
Software & other technology |
Revenue multiple |
6.0x |
+0.5 | 769 | 0.75 |
| -0.5 | (769) | (0.75) | ||||
| Revenue multiple |
Healthcare (including digital healthcare) |
Revenue multiple |
5.2x |
+0.5 | 665 | 0.65 |
| -0.5 | (665) | (0.65) | ||||
| Third party valuation – discounted cash flow |
Renewable energy |
Discount rate |
5.5% |
-0.5% | 77 | 0.07 |
| +0.5% | (70) | (0.07) |
*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 £1,511,000 (2.3%) or a decrease in the valuation of equity investments by £1,503,000 (2.3%).
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 ordinarily take a controlling interest or become involved in the management. The size and structure of 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% of the nominal value of any class of the allotted shares in the portfolio companies as at 31 December 2021.
13. Current assets
| Trade and other receivables |
31 December
20
2
1
£’000 |
31 December 2020 £’000 |
| Prepayments and accrued income | 2 4 | 23 |
| Other receivables | 520 | 3 |
| Deferred consideration under one year | 226 | 192 |
| Deferred consideration over one year | 1,79 6 | 1,539 |
| 2,56 6 | 1,757 |
The deferred consideration over one year relates to the sale of G.Network Communications Limited in December 2020. These proceeds are receivable in January 2024, and have been discounted to present value at the prevailing market rate, including a provision for counterparty risk. This constitutes a financing transaction, and has been accounted for using the policy disclosed in note 2.
The Directors consider that the carrying amount of receivables is not materially different to their fair value.
1 4 . Payables : amounts falling due within one year
|
31 December 2021
£’000 |
31 December 2020 £’000 |
|
| Accruals and deferred income | 2, 4 53 | 519 |
| Trade payables | 6 | 22 |
| 2, 4 59 | 541 |
The Directors consider that the carrying amount of payables is not materially different to their fair value.
1 5 . Called - up share capital
| Allotted, called-up and fully paid shares: | £’000 |
| 103,974,504 Ordinary shares of 1 penny each at 31 December 2020 | 1,040 |
| 12,772,890 Ordinary shares of 1 penny each issued during the year | 127 |
| 116,747,394 O rdinary shares of 1 penn y each at 31 December 20 2 1 | 1, 167 |
| 11,938,106 Ordinary shares of 1 penny each held in treasury at 31 December 2020 | (119) |
| 2,008,369 Ordinary shares of 1 penny each purchased during the year to be held in treasury | (20) |
| 13,946,475 O rdinary shares of 1 penny each held in treasury at 31 December 20 2 1 | ( 1 39 ) |
| Voting rights of 102,800,919 O rdinary shares of 1 penny each at 31 December 20 2 1 | 1,028 |
The Company purchased 2,008,369 shares (2020: 1,587,950) to be held in treasury at a nominal value of £20,084 and a cost of £1,661,000 (2020: £1,189,000) representing 1.7% of the shares in issue on 31 December 2021, leading to a balance of 13,946,475 shares (2020: 11,938,106) in treasury representing 11.9% (2020: 11.5%) of the shares in issue on 31 December 2021.
Under the terms of the Dividend Reinvestment Scheme, the following new Ordinary shares of nominal value 1 penny each were allotted during the year:
|
Date of allotment |
Number of shares allotted | Aggregate nominal value of shares (£’000) | Issue price (pence per share) | Net invested (£’000) | Opening market price on allotment date (pence per share) |
| 28 May 2021 | 434,384 | 4 | 82.01 | 339 | 78.00 |
| 30 September 2021 | 444,130 | 4 | 90.10 | 383 | 86.00 |
| 878,514 | 72 2 |
Under the terms of the Albion VCTs Prospectus Top Up Offers 2020/21, the following new Ordinary shares of nominal value 1 penny each, were allotted during the year:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares (£’000) | Issue price (pence per share) | Net consideration received (£’000) | Opening market price on allotment date (pence per share) |
| 26 February 2021 | 1,932,052 | 19 | 83.30 | 1,585 | 78.00 |
| 26 February 2021 | 515,665 | 5 | 83.80 | 424 | 78.00 |
| 26 February 2021 | 8,866,225 | 89 | 84.20 | 7,279 | 78.00 |
| 9 April 2021 | 202,566 | 2 | 83.70 | 167 | 78.50 |
| 9 April 2021 | 32,777 | - | 84.20 | 27 | 78.50 |
| 9 April 2021 | 345,091 | 3 | 84.60 | 285 | 78.50 |
| 11,894,376 | 9,767 |
1 6 . Ba sic and diluted net asset value per share
| 31 December 20 2 1 (pence per share) | 31 December 2020 (pence per share) | ||
| Basic and diluted net asset value per share | 9 4.9 8 | 82.42 |
The basic and diluted net asset values per share at the year end are calculated in accordance with the Articles of Association and are based upon total shares in issue (adjusting for treasury shares) of 102,800,919 Ordinary shares as at 31 December 2021 (2020: 92,036,398).
1
7
. Capital and financial instruments risk management
The Company’s capital comprises Ordinary shares as described in note 15. The Company is permitted to buy back its own shares for cancellation or treasury purposes, and this is described in more detail in the Chairman’s statement.
The Company’s financial instruments comprise equity and loan stock investments in quoted and unquoted companies, deferred receipts on disposal of fixed asset investments, cash balances and receivables and payables which arise from its operations. The main purpose of these financial instruments is to generate cashflow and revenue and capital appreciation for the Company’s operations. The Company has no gearing or other financial liabilities apart from short term payables. The Company does not use any derivatives for the management of its Balance sheet.
The principal financial instrument risks arising from the Company’s operations are:
- Market and investment 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 there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below.
Market risk
As a Venture Capital Trust, it is the Company’s specific nature to evaluate the market risk of its portfolio in unquoted companies. Market risk is the exposure of the Company to the revaluation and devaluation of investments as a result of macroeconomic changes. The main driver of market risk is the dynamics of market quoted comparators, as well as the financial and operational performance of portfolio companies. The Board seeks to reduce this risk by having a spread of investments across a variety of sectors. More details on the sectors the Company invests in can be found in the pie chart at the end of this announcement.
The Manager and the Board formally review market 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.
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 10% based on the current economic climate. The impact of a 10% change has been selected as this 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.
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 £8,050,000. Further sensitivity analysis on fixed asset investments is included in note 11.
Investment risk
(including investment price risk)
Investment risk (including 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 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 Directors monitor the Manager’s compliance with the investment policy, review and agree policies for managing this risk and monitor the overall level of risk on the investment portfolio on a regular basis.
Valuations are based on the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. Details of the industries in which investments have been made are contained in the pie chart at the end of this announcement.
The maximum investment risk as at the Balance sheet date is the value of the fixed asset investment portfolio which is £80,500,000 (2020: £58,998,000). Fixed asset investments form 82% of net asset value as at 31 December 2021 (2020: 78%).
More details regarding the classification of fixed asset investments are shown in note 11.
I
nterest rate risk
It is the Company’s policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company’s analysis, it is estimated that a rise of 1% in all interest rates would have increased total return before tax for the year by approximately £163,000 (2020: £151,000). Furthermore, it was considered that a material fall in interest rates below current levels during the year would have been unlikely.
The weighted average effective interest rate applied to the Company’s fixed rate assets during the year was approximately 7.7% (2020: 4.5%). The weighted average period to maturity for the fixed rate assets is approximately 4.9 years (2020: 5.2 years).
The Company’s financial assets and liabilities, all denominated in pounds sterling, consist of the following:
| 31 December 20 2 1 | 31 December 2020 | |||||||
| Fixed rate £’000 |
Floating rate
£’000 |
Non-interest bearing
£’000 |
Total
£’000 |
Fixed rate £’000 |
Floating rate £’000 |
Non-interest bearing £’000 |
Total £’000 |
|
| Unquoted equity | - | - | 66,082 | 66,082 | - | - | 44,350 | 44,350 |
| Quoted equity | - | - | 1,191 | 1,191 | - | - | - | - |
| Unquoted loan stock | 12,594 | 175 | 458 | 13,227 | 13,752 | 185 | 711 | 14,648 |
| Receivables* | - | - | 2,54 2 | 2,54 2 | - | - | 1,734 | 1,734 |
| Current liabilities | - | - | ( 2, 4 59 ) | ( 2, 4 59 ) | - | - | (541) | (541) |
| Cash | - | 17,032 | - | 17,032 | - | 15,645 | - | 15,645 |
| Total | 12,594 | 17,207 | 6 7 , 814 | 97, 615 | 13,752 | 15,830 | 46,254 | 75,836 |
*The receivables do not reconcile to the Balance sheet as prepayments are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its receivables, investment in unquoted loan stock and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock instruments prior to investment and as part of its ongoing monitoring of investments. For investments made prior to 6 April 2018, which account for 94% of loan stock value, typically loan stock instruments will have a fixed or floating charge, which may or may not be 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% 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 31 December 2021 was limited to £13,227,000 (2020: £14,648,000) of unquoted loan stock instruments, £17,302,000 (2020: £15,645,000) of cash deposits with banks and £2,542,000 (2020: £1,757,000) of other receivables.
At the Balance sheet date, the cash and cash equivalents held by the Company were held with Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group), Barclays Bank plc, Société Générale S.A. and National Westminster Bank plc. Credit risk on cash transactions was mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, with high credit ratings assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking exposure to a maximum of 20% of net asset value for any one counterparty.
The credit profile of unquoted loan stock is described under liquidity risk shown below.
Liquidity risk
Liquid assets are held as cash on current account, cash on deposit or short term money market account. Under the terms of its Articles, the Company has the ability to borrow up to 10% of its adjusted capital and reserves of the latest published audited Balance sheet, which amounts to £9,490,000 as at 31 December 2021 (2020: £7,373,000).
The Company had no committed borrowing facilities as at 31 December 2021 (2020: nil) and the Company had cash balances of £17,032,000 (2020: £15,645,000). The main cash outflows are for new investments, buy-back of shares and dividend payments, which are within the control of the Company. The Manager formally reviews the cash requirements of the Company on a monthly basis, and the Board on a quarterly basis, as part of its review of management accounts and forecasts. All of the Company’s financial liabilities are short term in nature and total £2,459,000 (2020: £541,000).
The carrying value of loan stock investments, analysed by expected maturity dates is as follows:
| 31 December 20 2 1 | 31 December 2020 | |||||||
| Redemption date |
Fully performing
£’000 |
Valued below cost
£’000 |
Past due
£’000 |
Total
£’000 |
Fully performing £’000 |
Valued below cost £’000 |
Past due £’000 |
Total £’000 |
| Less than one year | 6,055 | 689 | - | 6,744 | 2,160 | 736 | 1,738 | 4,634 |
| 1-2 years | 175 | 1 | - | 176 | 1,887 | 38 | 94 | 2,019 |
| 2-3 years | 261 | 7 | - | 268 | 175 | 136 | - | 311 |
| 3-5 years | 762 | - | 97 | 859 | 1,948 | - | 78 | 2,026 |
| 5 + years | 5,180 | - | - | 5,180 | 5,555 | - | 103 | 5,658 |
| Total | 12,43 3 | 697 | 97 | 13,227 | 11,725 | 910 | 2,013 | 14,648 |
Loan stock can be past due as a result of interest or capital not being paid in accordance with contractual terms.
The cost of loan stock investments valued below cost is £1,202,000 (2020: £1,036,000).
The Company does not hold any assets as the result of the enforcement of security during the period, and believes that the carrying values for both those valued below cost and past due assets are covered by the value of security held for these loan stock investments.
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 31 December 2021 are stated at fair value as determined by the Directors, with the exception of receivables (including debtors due after more than one year), 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.
1 8 . Contingencies and c om m i t ments
As at 31 December 2021, the Company had no financial commitments (2020: £nil).
There were no contingent liabilities or guarantees given by the Company as at 31 December 2021 (2020: £nil).
19
. Post balance sheet events
Since the year end, the Company made the following material investment transactions:
- Proceeds of £2,141,000 received for the sale of Phrasee Limited;
- Proceeds of £1,647,000 received for the sale of Credit Kudos Limited:
- Investment of £721,000 in an existing portfolio company, Black Swan Data Limited;
- Investment of £684,000 in an existing portfolio company, TransFICC Limited;
- Investment of £517,000 in a new portfolio company, PerchPeek Limited; and
- Investment of £391,000 in an existing portfolio company, Cantab Research Limited (trading as Speechmatics).
The following new Ordinary shares of nominal value 1 penny each were allotted under the Albion VCTs Prospectus Top Up Offers 2021/22 after 31 December 2021:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares |
Issue price (pence per |
Net consideration received |
Opening market price on allotment date |
| £’000 | share) | £’000 | (pence per share) | ||
| 25 February 2022 | 1,360,570 | 14 | 96.50 | 1,293 | 91.00 |
| 25 February 2022 | 462,648 | 5 | 97.00 | 440 | 91.00 |
| 25 February 2022 | 11,077,966 | 111 | 97.50 | 10,531 | 91.00 |
| 12,901,184 | 12,264 |
2
0
. Related party transactions
Other than transactions with the Manager as disclosed in note 5, and the Directors’ remuneration disclosed in the Directors’ remuneration report on pages 45 and 46 of the full Annual Report and Financial Statements, there are no other related party transactions or balances requiring disclosure.
21. Other Information
The information set out in this announcement does not constitute the Company's statutory accounts within the terms of section 434 of the Companies Act 2006 for the years ended 31 December 2021 and 31 December 2020, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 December 2021, 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 www.albion.capital/funds/AADV, where the Report can be accessed as a PDF document via a link in the 'Financial Reports and Circulars' section.
Attachment
COMPANIES COVERED:
Latest directors dealings
- 1 day ago Legal & General Group
- 1 day ago Baillie Gifford Japan Trust
- 1 day ago British Land Company
- 1 day ago Premier Miton Global Renewables Trust
- 1 day ago NATWEST GROUP