Final Results
For immediate release 29 April 2019
Seneca Growth Capital VCT Plc
(formerly Hygea vct plc)
Annual Report and Financial Statements
For the year ended 31 December 2018
and
Notice of Annual General Meeting
The Directors are pleased to announce the audited results of the Company for the year ended 31 December 2018. A copy of the Annual Report and Financial Statements will be made available to shareholders shortly, and extracts are now set out below.
In addition, the Notice of Annual General Meeting ("AGM") is attached at the end of the Report and Financial Statements. The AGM will be held at the offices of Howard Kennedy LLP, No 1 London Bridge, London SE1 9BG on Monday 10 June 2019 at 11.00 am. A copy of both documents will be available on the Company's website: www.senecavct.co.uk
Financial Headlines
|
Ordinary Shares |
|
|
£2.9m |
Amount realised during the year from sale of Ordinary share pool investment in Hallmarq Veterinary Imaging Limited |
|
89.35p |
Ordinary share Net Asset Value ("NAV") plus cumulative dividends paid at 31 December 2018 |
|
65.1p |
Ordinary share NAV at 31 December 2018 |
|
10.0p |
Interim capital dividend declared per Ordinary share during year
|
|
B Shares |
|
|
£4.0m |
Amount raised during the year from the issue of B shares |
|
£0.5m |
Amount invested during the year into new investee company by B share pool |
|
99.1p |
B share NAV as at 31 December 2018 (no dividends paid or declared on the B shares at that date)
|
Financial Summary
|
|
Year to 31 December 2018 Ordinary share pool |
Year to 31 December 2018 B share pool
|
Year to 31 December 2017 (Ordinary share pool only) |
|
Net assets (£'000s) |
5,282 |
3,999 |
5,180 |
|
Return on ordinary activities after tax (£'000s) |
102 |
(36) |
(367) |
|
Earnings per share |
1.3p |
(0.9p) |
(4.5p) |
|
Net asset value per share |
65.1p |
99.1p |
63.8p |
|
Dividends paid since inception |
24.25p |
- |
24.25p |
|
Total return (NAV plus cumulative dividends paid) |
89.35p |
99.1p |
88.05p |
.
Enquiries:
John Hustler, Seneca Growth Capital VCT Plc at john.hustler@btconnect.com
Richard Manley, Seneca Growth Capital VCT Plc at Richard.Manley@senecapartners.co.uk
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014
Please note: page references in the extracts below refer to the page numbers in the Annual Report and Financial Statements
Chairman's Statement
I am pleased to present the 2018 Annual Report to Shareholders.
Overview
2018 has been a successful year of change for the Company. Following the initial allotment of B Shares under the Offer launched on 9 May 2018, we are delighted that Seneca was appointed as the Company's Investment Manager. Funds raised under the Offer totalled £5.5 million and five investments have already been made, details of which are set out in the Investment Manager's report. The Offer is now closed and I would like to take this opportunity of welcoming all our new B shareholders. Shareholders may have seen the recent announcement, prior to the last allotment, that the NAV at 31 March 2019 of the Ordinary shares is 51.1p per share and of the B shares is 98.9p per share.
As intimated in my last Chairman's Statement accompanying the 2017 accounts, we anticipated a liquidity event and were delighted to report that in December 2018 we sold the Company's Ordinary share portfolio holding in Hallmarq Veterinary Imaging Limited ('Hallmarq'). This realised a profit over cost of £1,807,000 and over carrying value of £894,000. As announced at the time of the realisation, it was also possible the Company would receive a small amount of further proceeds that had been deferred at completion and I am pleased to confirm that a further £37,666 was received in April 2019 and will be accounted for in the 2019 accounts. We are delighted that this realisation has allowed us to pay an interim dividend of 10p per Ordinary share and our further intentions regarding dividends are detailed below.
Details of the Ordinary share pool's remaining portfolio companies are included below and also in the Investment Manager's Report. The Net Asset Value of the Ordinary shares at 31 December 2018 has now increased to 65.1p per share and the Total Return is now 89.35p per share. As Ordinary shareholders will recall, following the raising of the minimum subscription of B shares in August 2018, the Ordinary share pool will suffer no running costs until July 2021. In addition, the Company's bank loan, which was a liability of the Ordinary share pool, has been repaid using proceeds from the Hallmarq sale and the debenture released.
Details of the B share investment made during the year along with details of the B share investments made since the year end are included in the Investment Manager's Report. The Net Asset Value of the B shares at 31 December 2018 was 99.1p and at that date no dividends had been paid in relation to the B shares.
The Board is also encouraged that as of today's date, the Investment Manager has already invested £2.75m of the funds raised under the Offer into 5 companies. This is in line with their expectations for deploying the capital raised under the Offer and indicative of the healthy pipeline of growth capital investment opportunities which Seneca maintains as a result of not only their appointment as the Company's Investment Manager, but also as an active growth capital investor through the EIS funds which they manage. We expect to issue a prospectus for a further B share offer shortly and look forward to the Investment Manager continuing to build a portfolio of diverse growth capital investments which will be attractive to the VCT investment community.
Results and Dividends
During the year, our revenue return on ordinary activities saw a loss of 0.72p per Ordinary share and a loss of 0.45p per B share, both principally as a result of the impact of the Company's running costs. The comparative loss for 2017, which related solely to the Ordinary shares, amounted to 1.5p per share. The Company's running expenses are capped at 3% of the B share NAV until July 2021 and as a result, an amount of £18,000 was due to the Company from the Investment Manager at 31 December 2018 which will be deducted from future payments falling due to Seneca.
The Capital return on the Ordinary share portfolio amounted to 2p per share driven by the profit generated on the disposal of our holding in Hallmarq, details of which I referred to above, net of changes to the valuations of some other Ordinary share pool investments. There is no change in the value of the B share portfolio since the first investment only completed on 31 December 2018.
During the year, the nominal value of the Ordinary shares was reduced from 50p per share to 1p per share and the majority of the balance standing to the credit of the Company's share premium account arising on the issue of B shares was reduced. Both of these transactions have given rise to a credit to the Special Distributable Reserve which may be used for the payment of dividends. Further details are included in note 14 on page 68. Your original Ordinary share certificates remain valid.
As previously stated, it is the Board's intention to distribute the majority of the proceeds generated by the Hallmarq exit to Ordinary shareholders, after repayment of the bank loan and retention of an appropriate proportion to cover small follow on investments in the existing Ordinary share portfolio and any costs attributable to the Ordinary share pool. In line with this intention, an interim dividend of 10p per Ordinary share was declared on 28 December 2018 and it is the current intention of the Board to declare a further interim dividend of 18p per Ordinary share in early May (following the filing of the Company's 2018 accounts at Companies House) for payment shortly thereafter.
In addition the Board was pleased to have declared an interim dividend of 1.5p per B share on 6 March 2019, which was paid in April 2019, reducing the NAV of a B share to 97.4p. The Board hopes to be able to continue to declare periodic dividends on the B shares as the B share investment portfolio develops.
Ordinary Share Investment Portfolio Review
The remaining Ordinary share portfolio has seen a reduction in value during the period. As at 31 December 2018 the value stood at £2.79m (having been at £3.535m at the end of the prior year excluding Hallmarq) with a large proportion of the reduction in the year resulting from the decline in the share price of AIM quoted Scancell Holdings plc ("Scancell') and Omega Diagnostics plc ("Omega") during the year. However, in the Board's opinion, the intrinsic values of both Scancell and Omega remain and we are firmly of the view that the potential upside in these assets merits their continued presence in the portfolio.
The value of the quoted and unquoted sections of the remaining Ordinary share portfolio were roughly equal at 31 December 2018. Scancell, valued at the bid price of 9p, represented 42% of the Ordinary share portfolio as at 31 December 2018. However, by the 31 March 2019 the bid price had reduced to 5.5p and accordingly the percentage of the entire Ordinary share portfolio represented by Scancell has fallen to 30.6%. This was the primary reason for the reduction in the NAV of an Ordinary share (in addition to the dividend of 10p per share that was paid on 25 January 2019) as at 31 March 2019. Details of progress in the Ordinary share pool unquoted portfolio are included in the Investment Manager's Report but the only significant investment, based on the valuations as at 31 December 2018, is OR Productivity Limited which continues to report success in its ambitions within the hospital operating environment.
We have written down the value of Exosect Limited ('Exosect'), which was placed into Administration on 18 October 2018, to nil and reduced the value of Arecor Limited ('Arecor') following their recent fund raising at a discounted price compared to our carrying value. We continue to hold a full provision against our investment in Immunobiology Limited due to share preferences held by other investors. Whilst we are unlikely to recover any value from Exosect, we would hope that the opportunities available to both Arecor and Immunobiology have the potential to realise further value for the Ordinary share portfolio.
The Board remains confident that, overall, the remaining Ordinary share portfolio has the opportunity to realise a significant gain for shareholders but we do not see any immediate opportunities for further realisations.
B Share Investment Portfolio Review
We are delighted to report that the new B share portfolio has now made 5 investments and invested £2.75 million. This is a very positive start to the development of the B share investment portfolio and demonstrates that Seneca has access to considerable deal flow with exciting opportunities. Full details are included in their Investment Manager's report
Annual General Meeting
The Company's AGM will be held at 11.00 a.m. on Monday 10 June 2019 at the offices of Howard Kennedy LLP, 1 London Bridge, London SE1 9BG and we look forward to welcoming you to the meeting.
Following the appointment of Seneca as Investment Manager, Charles Breese has indicated that he does not wish to seek re-election to the Board at the AGM. However we are pleased that he has agreed to continue as a consultant until the end of this year in order to facilitate an orderly handover of the relationships with the remaining companies in the Ordinary share portfolio. Charles has been a member of the Company's Board since its inception in 2001 and we thank him very much for his considerable advice and input, especially the benefit of his investment experience, during that time.
The Board has reviewed my performance and has asked me to continue as Chairman. A resolution for my re-election is included in the AGM Notice. A resolution for the re-election of Richard Manley, who was appointed during the year as Seneca's representative, is also included in the AGM Notice.
The Board is currently in the process of identifying a new non-executive Director.
As the Company has now paid interim dividends in respect of both the Ordinary shares and the B shares and is required to pay a further Ordinary share dividend before 12 June 2019 in order to satisfy VCT rules following disposal of the Hallmarq investment on 13 December 2018, no resolutions are included in respect of dividends.
The Notice of the AGM includes resolutions empowering the Directors to issue further B shares and Ordinary shares which will primarily be used to facilitate the launch of another B share offer for the 2019/2020 and 2020/2021 tax years referred to above which requires authorisation for the Directors to be able to allot up to a further 25,000,000 B Shares. Including these resolutions in the AGM business will avoid the Company having to produce and send out a separate circular.
A summary of the resolutions to be proposed by the Company at its Annual General Meeting is included on page 32.
VCT Qualifying Status
Philip Hare & Associates provides the Board with advice on the ongoing compliance with HMRC rules and regulations concerning VCTs; they have confirmed that we remain within all the appropriate VCT qualifying regulations as at 31 December 2018.
Fund Administration
Our administration remains unchanged at present but, as the B share portfolio increases, much of this will migrate to Seneca's Haydock offices, to where we have already moved the Company's Registered Office. Neville Registrars ('Nevilles') will continue to maintain the Register. Our website has now changed to www.senecavct.co.uk which includes all information in respect of both share classes including Annual Reports and notices of meetings. We would remind shareholders who have not opted for electronic communications that this is more efficient and ecologically friendly than receiving paper copies by post. If you wish to take advantage of this facility, please contact Nevilles whose details are on page 75.
Resignation of Auditor
As already announced, James Cowper Kreston ("JCK"), the Company's previous auditor, have decided to withdraw from auditing Public Interest Entities (which includes VCTs) for the time being due to the increasing regulatory landscape and associated costs. As a result JCK have resigned from their role as auditor to the Company. The Company carried out a tender process for the appointment of a new auditor, and the Board, on the recommendation of the Audit Committee, appointed UHY Hacker Young LLP ("UHY") to fill the casual vacancy that had arisen. UHY have audited the Company's annual results for the year ending 31 December 2018, and shareholders will be asked to reappoint them at the AGM for the audit of the accounts for the year ending 31 December 201
Future Prospects
As I have previously indicated, we regard the prospects for the remaining Ordinary share portfolio as good but once again I need to seek shareholders' patience following the significant distributions returned (and intended to be returned) to them in 2019 whilst we await further realisation opportunities for the remaining investments in the Ordinary share portfolio.
We are pleased with the support we have received from existing and new shareholders in respect of the B share fund raising and will be issuing our new prospectus in the near future. Seneca is confident that there remains significant demand from potential investee companies for the type of growth capital that the Company can provide from its B share pool. As such, the Board remains confident of continuing to increase the B share fund in the 2019/20 tax year and foresees being able to invest these funds profitably well within the time limits imposed on VCTs.
Your Board continues to view the future of our Company with confidence.
John Hustler
Chairman
26 April 2019
Investment Manager's Report
Seneca Partners were delighted to be formally appointed as the Company's Investment Manager on 23 August 2018 following the successful first allotment of shares under the B share offer, which was launched on 9 May 2018 to raise in aggregate up to £10m.
We are active growth capital investors and since 2012 have invested in excess of £50m of growth capital into more than 40 investee companies.
As many of the Company's B shareholders will know, Seneca are head-quartered in the North West of England and as a result of our position as active growth capital investors across the UK we maintain a strong pipeline of investment opportunities. From this pipeline of potential investments we have moved quickly to make our first investments from the Company's B share pool and started the process of building a diverse portfolio of growth capital investments which we hope will provide attractive returns for the benefit of the Company's B shareholders.
We are happy to report that a total of £5.5m was raised under the new B share offer in our first year of fundraising of which £0.5m had been invested into one investee company as at 31 December 2018.
This first investment was made into the fast growing e-commerce business, SilkFred Limited, which specialises in independent ladies' fashion brands. Seneca first invested in this business via EIS funds which we manage in March 2018 and since that time we have been impressed with the progress it has made and rate with which the business is growing. The December 2018 investment made from the Company's B share pool was part of a larger investment round totalling c.£4m and will provide the working capital the business requires to support its continued growth.
Since this first B share pool investment on 31 December 2018 we have also now completed a further 4 investments from the B share pool deploying an additional £2.25m and in all of these instances the B share pool has co-invested alongside EIS funds also managed by Seneca. This is a key feature of the B share pool's early investments and brings an ability for the B share pool to participate in larger deals into more established companies than would be possible at this point if the Company's B share pool were to invest on a standalone basis.
Our current investment portfolio is summarised in the table below with additional detail in relation to each investee company included thereafter.
We are very happy with the diverse nature of these initial 5 B share pool investee companies and as it is our intention that the B share portfolio has exposure to both private and AIM quoted companies we are also particularly pleased that we have been able to include an AIM quoted company in these initial investments.
It is our intention to launch another prospectus for a further B share offer in the 2019/2020 tax year in the near future and to continue to raise funds to support the ongoing development of the existing portfolio and to fund new investments.
Shareholders will recall that whilst Seneca Partners are the Company's Investment Manager, responsibility for the management of the Ordinary share pool investments remain with those members of the Board who were serving at the point of Seneca's appointment on 23 August 2018. During the year to 31 December 2018 a profit over original cost of £1,807k was realised on the sale of the Ordinary share portfolio's holding in Hallmarq. A further £19k profit over cost was realised when 200,000 Scancell shares were sold for liquidity management purposes. During the year former Ordinary share pool investee company Glide was dissolved and the carrying value of the Ordinary share pool's investment in Exosect was written down to nil following the company entering administration in October 2018.
Further details in relation to both Ordinary share pool and B share pool investee companies are included below.
Investment Portfolio - Ordinary shares
|
Unquoted Investments |
Equity held % |
Investment at cost £'000 |
Unrealised profit/(loss) £'000 |
Carrying value at 31 December 2018 £'000 |
Movement in the year to 31 December 2018 £'000 |
|
OR Productivity plc |
10.3 |
765 |
(101) |
664 |
- |
|
Fuel 3D Technologies Limited |
<1.0 |
299 |
(23) |
276 |
- |
|
Arecor Limited |
1.3 |
142 |
63 |
205 |
(47) |
|
Insense Limited |
4.6 |
509 |
(389) |
120 |
- |
|
Microarray Limited |
1.8 |
132 |
(65) |
67 |
- |
|
ImmunoBiology Limited |
2.0 |
868 |
(868) |
- |
- |
|
Exosect Limited |
1.4 |
270 |
(270) |
- |
(120) |
|
Total unquoted investments |
|
2,985 |
(1,653) |
1,332 |
(167) |
|
|
|
|
|
|
|
|
Quoted Investments |
Shares held |
Investment at cost £'000 |
Unrealised profit/(loss) £'000 |
Carrying value at 31 December 2018 £'000 |
Movement in the year to 31 December 2018 £'000 |
|
Scancell plc |
13,049,730 |
789 |
385 |
1,174 |
(482) |
|
Omega Diagnostics plc |
2,293,868 |
328 |
(41) |
287 |
(92) |
|
Total quoted investments |
|
1,117 |
344 |
1,461 |
(574) |
|
Total investments |
|
4,102 |
(1,309) |
2,793 |
(741) |
|
|
|
|
|
|
|
Investment Portfolio - B shares
|
Unquoted Investments |
Equity held % |
Investment at cost £'000 |
Unrealised profit/(loss) £'000 |
Carrying value at 31 December 2018 £'000 |
Movement in the year to 31 December 2018 £'000 |
|
Silkfred Limited |
<1.0 |
500 |
- |
500 |
- |
|
Total unquoted investments |
|
500 |
- |
500 |
- |
Ordinary Share Pool - Investment Portfolio - Unquoted Investments
1. OR Productivity Limited
|
Initial investment date: |
March 2011 |
At the end of 2011, Freehand 2010 (a Seneca Growth Capital Ordinary share investee) was acquired by OR Productivity plc (ORP) in exchange for ORP shares. Freehand 2010 owns the intellectual property to technology incorporated in a product, FreeHand, for robotically controlling the laparoscope (part of the camera system) used in the growing sector that is keyhole surgery. The business model is built upon free placement of the system with recurring revenue then being generated from the subsequent sale of a consumable per operation. Progress made by the company in 2018 includes: · The publishing by Salisbury Hospital in May 2018 of information comparing the outcomes from surgery using FreeHand held cameras with the results of surgery done with a human held camera. Of particular note was a 22% average reduction in operating time of 35 minutes and a 25% average reduction in post-operative stay from 2 days to 1.5 days when using FreeHand held cameras which are significant reductions, particularly at a time when the NHS is experiencing staff and bed shortages;
· A strategic decision to focus sales efforts on accounts capable of undertaking c.1,000 operations p.a. with one such account already having been secured; and
· Progress being made with the company's Development Management Services offering with the completion of the first stage of a development project for a medical device delivering laser ablation of tumors. The project saw the development of a robotic assistant (based on FreeHand technology) taking instructions from both MRI and CT imaging modalities and other such projects are in the pipeline.
|
|
Cost: |
£765,000 |
|
|
Valuation: |
£664,000 |
|
|
Equity held: |
10.3% |
|
|
Last statutory accounts: |
31 March 2018 |
|
|
Turnover: |
£163,000 |
|
|
Loss before tax: |
£762,000 |
|
|
Net assets: |
£(1,248,000) |
|
|
Valuation method: |
Price of last fundraise |
2. Fuel 3D Technologies Limited
|
Initial investment date: |
March 2010 |
In 2014 Fuel 3D was formed to acquire the computer 3D imaging IP of Seneca Growth Capital Ordinary share investee company, Eykona. The initial application for this IP targeted by Eykona was measuring the volume of chronic wounds, however this has since developed and the current application focus is on a) measuring tumours in animals used in drug development via a product called BioVolume and b) enabling the manufacture of products to fit a particular individual eg masks used to treat certain medical conditions. BioVolume is Fuel 3D's lead product and improves measurement accuracy, inter-operator consistency, animal welfare, cost efficiencies, compliance and the success of pre-clinical oncology research. Progress made by the company in 2018 includes: · Continued development of BioVolume by combining 3D imaging with thermal imaging and paid for trials are now being undertaken with a number of pharma companies; and · Using its technology in conjunction with 3D printing to make products to fit a particular individual and a development project is now underway with a third party to facilitate the manufacture of masks for a medical application. |
|
Cost: |
£299,000 |
|
|
Valuation: |
£276,000 |
|
|
Equity held: |
< 1% |
|
|
Last statutory accounts: |
31 December 2017 |
|
|
Turnover: |
£665,000 |
|
|
Loss before tax: |
£9.6 million |
|
|
Net assets: |
£4.7 million |
|
|
Valuation method: |
Price of last fundraise |
3. Arecor Limited
|
Initial investment date: |
January 2008 |
Arecor was a spin-out from Insense (a Seneca Growth Capital Ordinary share investee company - see below) to commercialise technology developed by Insense for enabling biologics to maintain their integrity without the need for refrigeration - this both reduces cost and also helps supply chain logistics in developing countries where temperature monitored cold storage facilities are in short supply.
Progress made by the company in 2018 includes:
· In their financial year to 31 May 2018 they invested £2.1m in R&D associated with their own product development; and
· The company also raised £6.0m of equity in September 2018 to fund the continued development of Arecor's own products for diabetes care and during 2018, the company also filed a Clinical Trial Application to conduct a Phase I study in Type 1 diabetes patients of Arecor's ultra-rapid acting insulin product.
|
|
Cost: |
£142,000 |
|
|
Valuation: |
£205,000 |
|
|
Equity held: |
1.3% |
|
|
Last statutory accounts: |
31 May 2018 |
|
|
Turnover: |
£1,272,000 |
|
|
Loss before tax: |
£1,176,000 |
|
|
Net assets: |
£679,000 |
|
|
Valuation method: |
Price of last fundraise |
4. Insense Limited
|
Initial investment date: |
July 2003 |
Insense is an innovative, biotechnology company and was spun-out from Unilever's R&D laboratory in 2001.
It has since had two successful spin-outs, namely Arecor (see above) and Microarray (see below) and current Insense development activity is concentrated on dermatology products for both professional and consumer applications.
Progress made by the company in 2018 includes:
· work continuing in conjunction with a leading microbiologist to prepare its leading dermatology product (fungal nail treatment) for efficacy and usability tests with the aim of finalising product specification for first-in-man trials. |
|
Cost: |
£509,000 |
|
|
Valuation: |
£120,000 |
|
|
Equity held: |
4.6% |
|
|
Last statutory accounts: |
31 December 2017 |
|
|
Turnover: |
£18,000 |
|
|
Loss before tax: |
£255,000 |
|
|
Net assets: |
£322,000 |
|
|
Valuation method: |
Price of last fundraise |
5. Microarray Limited
|
Initial investment date: |
January 2011 |
Microarray Ltd is a UK-based specialist wound healing company. Founded in 2000, Microarray was merged with Archimed,a spin-out from Insense (see above) the company is now privately owned.
The company has access to wide ranging expertise in the fields of wound dressing product development, marketing and sales; electrochemistry and diagnostic sensor technologies; biochemistry, oxygen and iodine chemistry; enzymology, immunology and inflammation. Current research and development activities are concentrated on innovative, electrochemically-active wound dressings for the treatment of chronic wounds and on wound care diagnostics.
Microarray owns and continues to develop new intellectual property in its specialist fields. It works independently and with expert academic and industrial partners.
Progress made by the company in 2018 includes:
· wound sample material being obtained from a Wounds Innovation Centre, where the company is working with a world leading wound clinician; and
· interim data from a sizeable trial ongoing with data due in 2019, and the design expected to be frozen in Q3 2019. |
|
Cost: |
£132,000 |
|
|
Valuation: |
£67,000 |
|
|
Equity held: |
1.8% |
|
|
Last statutory accounts: |
31 December 2017 |
|
|
Turnover: |
£58,000 |
|
|
Loss before tax: |
£1.1 million |
|
|
Net assets: |
£(2.3 million) |
|
|
Valuation method: |
Directors' valuation |
6. ImmunoBiology Limited
|
Initial investment date: |
November 2005 |
ImmunoBiology is a biotechnology company that is focused on developing treatments for illnesses such as meningitis, tuberculosis, influenza and hepatitis C. The company's technology is based on the discovery that a group of proteins known as 'heat shock proteins' has a pivotal role in controlling the normal immune response to infections.
The focus is currently on a vaccine for Pneumococcal Disease, for which the challenge is that there are >90 strains in circulation but present treatments address only a small proportion. In 2016 a first in human study demonstrated safety in adults.
Progress made by the company in 2018 includes:
· Preparation for a significant fundraise to finance a PnuBioVax Phase II clinical trial, with the objective of a successful outcome leading to a shareholder exit and in early 2019 also concluded a regional licensing agreement. |
|
Cost: |
£868,000 |
|
|
Valuation: |
£nil |
|
|
Equity held: |
2.0% |
|
|
Last statutory accounts: |
31 May 2018 |
|
|
Turnover: |
£nil |
|
|
Loss before tax: |
£665,000 |
|
|
Net assets: |
£532,000 |
|
|
Valuation method: |
Directors' valuation |
7. Exosect Limited
|
Initial investment date: |
January 2010 |
Exosect was spun-out of Southampton University in 2001 to commercialise innovative pest control technology and reduce the use of insecticides.
Until 2015, it sought to develop its own pesticide products. However, following a change of CEO, the strategy was changed whereby the company regarded its technology as a platform for helping pesticide manufacturers target their products more accurately and thereby achieve environmental benefits (through enabling a 50% reduction in active ingredients required as currently more than 50% of applied agrochemicals do not reach their intended target) with resulting cost savings.
Unfortunately this change in strategy ultimately proved to be unsuccessful and administrators were appointed to the company on 18 October 2018, with no return being anticipated to shareholders. |
|
Cost: |
£270,000 |
|
|
Valuation: |
£nil |
|
|
Equity held: |
1.4% |
|
|
Last statutory accounts: |
31 December 2017 |
|
|
Turnover: |
£83,000 |
|
|
Loss before tax: |
£2.4 million |
|
|
Net assets: |
£(370,000) |
|
|
Valuation method: |
Investment fully written down |
Ordinary Share Pool - Investment Portfolio - AIM Quoted Investments
1. Scancell plc
|
Initial investment date: |
December 2003 |
Scancell is an AIM listed biotechnology company that is developing a pipeline of therapeutic vaccines to target various types of cancer, with the first target being melanoma.
The Immunobody platform technology, in effect, educates the immune system how to respond - this means that the technology can also be licensed to pharmaceutical companies to assist the development of their own therapeutic vaccines, which is an area of emerging importance for which a number of big pharmas do not have in-house technology.
In addition, in 2012 a second platform technology, Moditope, was announced and is based on exploiting the normal immune response to stressed cells, and is complementary to the Immunobody platform.
Progress made by the company in 2018 includes:
· The announcement of a Clinical Development Partnership with Cancer Research UK (CRUK) to develop SCIB2, for the treatment of patients with solid tumours, including non-small cell lung cancer. CRUK will fund and sponsor a UK-based Phase I/II clinical trial of SCIB2 in combination with a checkpoint inhibitor;
· The announcement of a collaboration with BioNTech for the Moditope product being developed for the treatment of lung, triple-negative breast cancer, ovarian and endometrial cancers. BioNTech is one of Europe's new immuno-oncology power-houses;
· The appointment of a new CEO in January 2018. He was VP Business Development at Arana when it acquired Scancell's monoclonal antibody business in 2006; and
· The initiation of preparations for a) a SCIB1- checkpoint inhibitor Phase II US combination study in late stage melanoma (the study is expected to start in H2 2019), and b) a First-in-Human study with Modi-1 in patients with triple negative breast cancer, ovarian cancer and sarcoma.
|
|
Cost: |
£789,000 |
|
|
Valuation: |
£1,174,000 |
|
|
Equity held: |
3.4% |
|
|
Last statutory accounts: |
30 April 2018 |
|
|
Turnover: |
£nil |
|
|
Loss before tax: |
£4.9 million |
|
|
Net assets: |
£13.9 million |
|
|
Valuation method: |
Bid price of 9.0p per share |
2. Omega Diagnostics plc
|
Initial investment date: |
August 2007 |
Omega Diagnostics plc ("Omega") is quoted on AIM and specialises in Food Intolerance Testing, Allergy Testing and HIV Point-of-Care (POC) Testing.
Progress made by the company in 2018:
· In December 2017 the founding CEO stepped down and was replaced by the COO who had joined in August 2015, having previously been Managing Director of Axis-Shield Diagnostics. Following a strategic review by the new CEO, a restructuring took place in order to position the group with a profitable core business with attractive organic growth potential (Food Intolerance Testing), and two products under development with significant growth potential (Allergy Testing, and HIV POC Testing). The restructuring involved the closure of the manufacturing site in India and the manual allergy testing business, eliminating EBITDA losses of c.£800,000 in 2017/18 in addition to the sale of the low growth/low margin infectious diseases business; and
· In addition to the completion of the restructuring, the first sales have been achieved in relation to the automated allergy tests project and the first sales have also been achieved with regard to the HIV POC Testing CD4 350 test (on which development started in 2012 and CE marking was achieved in 2017). CE marking of the second test, CD4 200 (which is anticipated to have the greater market potential) was achieved in March 2019. |
|
Cost: |
£328,000 |
|
|
Valuation: |
£287,000 |
|
|
Equity held: |
1.8% |
|
|
Last statutory accounts: |
31 March 2018 |
|
|
Turnover: |
£13.6 million |
|
|
Loss before tax: |
£6.9 million (incl £5.9 million exceptional charge) |
|
|
Net assets: |
£17.1 million |
|
|
Valuation method: |
Bid price of 12.5p per share |
B Share Pool - Investment Portfolio - Unquoted Investments as at 31 December 2018
1. SilkFred Limited
|
Initial investment date: |
December 2018 |
Silkfred is an online marketplace for independent ladies' fashion brands. The business was founded in 2011 with the aim of creating an efficient marketplace for emerging fashion designers to bring products to market and establish their brand in the sector. The business now works with c.600 independent brands, selling to over 500k customers.
Silkfred acts as a central marketing and sales platform for these brands, charging commission in exchange for these services, and as a result the business itself takes minimal inventory / working capital risk on new brands, lines or products.
The business model revolves around a market leading and scalable customer service platform, and as such Silkfred are continually investing in core infrastructure and constantly seeking innovative methods to enhance the customer experience.
|
|
Cost: |
£500,000 |
|
|
Valuation: |
£500,000 |
|
|
Equity held: |
<1% |
|
|
Last statutory accounts: |
31 December 2017 |
|
|
Turnover: |
Not disclosed |
|
|
Loss before tax: |
Not disclosed |
|
|
Net assets: |
£3.5 million |
|
|
Valuation method: |
At cost |
B Share Pool - Investment Portfolio - Additional Unquoted Investments as at 26 April 2019
1. Fabacus Holdings Limited
|
Initial investment date: |
February 2019 |
Fabacus is an independent software company that has developed a Complete Product Lifecycle Solution: Xelacore, aimed at bringing transparency to supply chain networks, with an initial focus on resolving the interaction and information flow between global licensors and their licensees.
Currently, there is a fundamentally flawed data capture process between licensors and licensees; and a disconnection from the framework of retail standards that have underpinned and continue to enable the retail value chain. This has resulted in an inability to correctly address known shortcomings in respect to data management and hinder the needed digital transformation of licensors in the digitally evolving retail landscape.
Fabacus's solution, Xelacore, is a modular, Software as a Service ("SaaS") solution with an intuitive interface and proprietary data aggregation and management engine that allows all stakeholders to operate on a single unified and collaborative platform. It bridges the gaps in an inefficient process within the current retail ecosystem by creating authenticated, enriched universal records that unlock opportunities, reduce risk and drive performance for both licensors and licensees.
|
|
Cost: |
£500,000 |
|
|
Equity held: |
2.2% |
|
|
Last statutory accounts: |
31 December 2018 |
|
|
Turnover: |
Not disclosed |
|
|
Loss before tax: |
Not disclosed |
|
|
Net assets: |
£4.6 million |
|
|
|
|
2. Old St Labs Limited
|
Initial investment date: |
March 2019 |
Old St Labs is a provider of cloud based, supplier collaboration tools for large, blue chip customers, enabling them to manage key supplier relationships and strategic project work. The core product, Vizibl, seeks to make supplier collaboration much more straight forward, with key focus on compliance, savings / efficiency and driving growth across the business.
Vizibl is the only SaaS workspace that supports collaborative supplier relationships, bringing all points of contact together in one place, providing visibility across the company and eliminating duplication of efforts. Vizibl's real-time reporting speeds up decision making, drawing on and sharing the expertise of the community in the process. The offering taps into a growing trend in supplier collaboration, having moved on from the initial focus on compliance, to an increased emphasis on savings / efficiency, and recent developments highlighting the benefits in terms of wider growth strategy for large customers.
Vizibl provides the infrastructure, governance and reporting capabilities to optimise present supplier performance and acts as a springboard for those collaborative supplier relationships. The product is CRM / ERP agnostic, working alongside all major software providers to ensure the collaboration software is insightful and informative. |
|
Cost: |
£500,000 |
|
|
Equity held: |
3.44% |
|
|
Last statutory accounts: |
31 March 2018 |
|
|
Turnover: |
Not disclosed |
|
|
Loss before tax: |
Not disclosed |
|
|
Net assets: |
(£0.7) million |
|
|
|
|
3. Qudini Limited
|
Initial investment date: |
April 2019 |
Founded in 2012, Qudini is a B2B software company that provides customer experience SaaS solutions to organisations in retail, hospitality, the public sector and healthcare.
Qudini provides a software solution for appointment bookings, queue management, event management and task management - enabling businesses to improve shop floor operations by managing staff activity, breaks and performance, and by assigning tasks at store or head office level.
Qudini is aiming to revolutionise digital queue and appointment management. It achieves this through deployment of its data-centric, cloud-based (Amazon Web Services), cross-platform service, which improves a business' ability to manage the flow of customers awaiting service, using algorithms to provide accurate, live data, such as estimated wait times. Wait times are relayed to the customer typically via an SMS/text sent from the Qudini platform. Through integration with various software platforms and compatible with wide variety of hardware, Qudini enables detailed analytics focused on customer trends, and provides a unique insight into areas such as customer footfall, peak demand times, and wait times.
|
|
Cost: |
£500,000 |
|
|
Equity held: |
2.22% |
|
|
Last statutory accounts: |
31 December 2018 |
|
|
Turnover: |
Not disclosed |
|
|
Loss before tax: |
Not disclosed |
|
|
Net assets: |
£1.7 million |
|
|
|
|
B Share Pool - Investment Portfolio - Additional Quoted Investments as at 26 April 2019
1. SkinBioTherapeutics Plc
|
Initial investment date: |
February 2019 |
SkinBioTherapeutics is a life science company focused on skin health. The Company's proprietary platform technology, SkinBiotix®, is based upon discoveries made by CEO Dr. Cath O'Neill and Professor Andrew McBain.
SkinBioTherapeutics' platform applies research discoveries made on the activities of lysates derived from probiotic bacteria when applied to the skin. The Company has shown that the SkinBiotix® platform can improve the barrier effect of skin models, protect skin models from infection and repair skin models. Proof of principle studies have shown that the SkinBiotix® platform has beneficial attributes applicable to each of these areas.
The aim of the Company is to develop its SkinBiotix® technology into commercially successful products supported by a strong scientific evidence base. SkinBioTherapeutics' commercial strategy is to engage health and wellbeing and/or pharmaceutical companies in early dialogue to build up relationships and maintain communication on technical progress until one or more commercial deals can be secured. |
|
Cost: |
£750,000 |
|
|
Equity held: |
3.7% - 4,677,107 shares
|
|
|
Last statutory accounts: |
30 June 2018 |
|
|
Turnover: |
Nil |
|
|
Loss before tax: |
£0.9 million |
|
|
Net assets: |
£3.4 million |
|
|
|
|
Directors' Report
The Directors present their Report and the audited Financial Statements for the year ended 31 December 2018.
The Directors consider that the Annual Report and Financial Statements, taken as a whole are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Review of Business Activities
The Directors are required by s417 of the Companies Act 2006 to include a Business Review to shareholders. This is set out on page 25 and forms part of the Strategic Report. The Chairman's Statement on page 10 to 13, and the Investment Manager's Report on pages 14 to 24 also form part of the Strategic Report.
The purpose of this review is to provide shareholders with a snapshot summary setting out the business objectives of the Company, the Board's strategy to achieve those objectives, the risks faced, the regulatory environment and the key performance indicators used to measure performance.
Directors' Shareholdings - Ordinary shares
The Directors of the Company during the period and their interests (in respect of which transactions are notifiable under Disclosure and Transparency Rule 3.1.2R) in the issued Ordinary shares of 1p (2017: nominal value 50p) are shown in the table below:
|
|
31 December 2018 |
31 December 2017 |
|
|
Number of Shares |
Number of Shares |
|
John Hustler |
190,000 |
190,000 |
|
Charles Breese |
105,000 |
105,000 |
|
Richard Roth |
209,612 |
209,612 |
|
Richard Manley |
- |
- |
All of the Directors' shares were held beneficially. There have been no changes in the Directors' Ordinary share interests between 31 December 2018 and the date of this report.
Directors' Shareholdings - B Shares
The Directors of the Company during the period and their interests (in respect of which transactions are notifiable under Disclosure and Transparency Rule 3.1.2R) in the issued B shares of 1p are shown in the table below:
|
|
31 December 2018 |
31 December 2017 |
|
|
Number of Shares |
Number of Shares |
|
John Hustler |
- |
- |
|
Charles Breese |
- |
- |
|
Richard Roth |
15,000 |
- |
|
Richard Manley |
24,750 |
- |
All of the Directors' shares were held beneficially. There have been no changes in the Directors' B share interests between 31 December 2018 and the date of this report.
Directors' and Officers' Liability Insurance
The Company has maintained directors' and officers' liability insurance cover on behalf of the Directors and Company Secretary.
Whistleblowing
The Board has approved a Whistleblowing Policy for the Company, its directors and any employees, consultants and contractors, to allow them to raise concerns, in confidence, in relation to possible improprieties in matters of financial reporting and other matters.
Bribery Act
The Board has approved an Anti-Bribery Policy to ensure full compliance with the Bribery Act 2010 and to ensure that the highest standards of professional and ethical conduct are maintained.
Management
On 23 August 2018 Seneca was appointed as the Company's Investment Manager.
Whilst Seneca has been appointed as the Company's Investment Manager and will be responsible for the management of the Company's B share pool investments, responsibility for the management of the Ordinary share pool investments has been delegated to those members of the board of directors who served immediately prior to 23 August 2018.
Share Issues
During the year, the Company did not issue any Ordinary shares (2017: nil). During the year, the Company issued 4,036,370 B shares raising £4.0m (2017: nil). Subsequently an additional 1,351,294 B shares have been issued under the Offer.
Share Capital
The Company's issued Ordinary share capital as at 31 December 2018 was 8,115,376 Ordinary shares of 1p each (31 December 2017: 8,115,376 of 50p each) and 4,036,370 B shares of 1p each (31 December 2017: nil).
Directors
Biographical details of the Directors are shown on page 29.
In accordance with the Articles, John Hustler who has been a director for more than nine years will retire and offer himself for re-election at the forthcoming AGM. Richard Manley has been appointed since the last AGM and will therefore retire and offer himself for re-election at the forthcoming AGM.
The Board is satisfied that, following individual performance appraisals, both the Chairman and Richard Manley, who are retiring, continue to be effective and demonstrate commitment to their roles and therefore offer themselves for re-election with the support of the Board.
Following the appointment of Seneca as Investment Manager, Charles Breese has indicated that he does not wish to seek re-election to the Board at the AGM. However we are pleased that he has agreed to continue as a consultant until the end of this year in order to facilitate an orderly handover of the relationships with the remaining companies in the Ordinary share portfolio.
The Board is cognisant of shareholders' preference for Directors not to sit on the boards of too many listed companies ("over-boarding"). As part of their assessment as to his suitability, the Directors considered Richard Roth's other directorships at the time of his appointment, given that he also sits on the boards of the four Oxford Technology ("OT") VCTs. The Directors noted that those four funds have a common board, and there is an element of overlap in the workload across the four entities, such that the time required is less than would be necessary for four totally separate and listed companies. They also note that Seneca Growth Capital has a number of shared portfolio companies with the OT VCTs. The Board was satisfied that Richard Roth had the time to focus on the requirements of the Company, and this has proven to be the case.
International Financial Reporting Standards
As the Company is not part of a group it is not mandatory for it to comply with International Financial Reporting Standards. The Company does not anticipate that it will voluntarily adopt International Financial Reporting Standards. The Company has adopted Financial Reporting Standard 102 - The Financial Reporting Standard Applicable in the United Kingdom and Republic of Ireland.
Environmental Policy
The Company always makes a full effort to conduct its business in a manner that is responsible to the environment.
Going Concern
The Company's business activities and the factors likely to affect its future performance and position are set out in the Chairman's Statement and Investment Manager's Report on pages 10 to 13 and pages 14 to 24. Further details on the management of financial risk may be found in note 16 to the Financial Statements.
The Board receives regular reports from the Administration Manager and the Directors believe that, as no material uncertainties leading to significant doubt about going concern have been identified, it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements.
As at 31 December 2018 the Company had more than £6m of cash and in addition, the other assets of the Company consist mainly of securities, some of which are readily realisable. As such, the Company has adequate financial resources to continue in operational existence for the foreseeable future.
Substantial Shareholdings
At 31 December 2018, two disclosures of major shareholdings had been made to the Company under Disclosure and Transparency Rule 5 (Vote Holder and Issuer Notification Rules).
· James Leek has disclosed a shareholding of 4.57% (555,340 shares).
· David Blundell has disclosed a shareholding of 3.04% (369,900 shares).
Annual General Meeting
The Notice convening the 2019 Annual General Meeting ("AGM") of the Company is set out at the end of this document (and a form of proxy in relation to the meeting is enclosed separately). Part of the business of the AGM will be to consider resolutions in relation to the following matters:
Resolution 6 will seek the re-appointment of UHY Hacker Young LLP as Independent Auditor to the Company.
Resolution 8 will authorise the Directors to allot further B Ordinary shares and Ordinary shares. This would enable the Directors until the next AGM to allot up to 31,000,000 B Ordinary shares in connection with any offer(s) for subscription (and any subsequent top up offer of B Ordinary shares) and up to 405,800 Ordinary shares (for any miscellaneous offers of such shares), representing approximately 575% of the Company's issued B Ordinary share capital and approximately 5% of its issued Ordinary share capital as at 25 April 2019.
Resolution 9 will, under sections 570 of the Act, disapply pre-emption rights in respect of any allotment of the B Ordinary shares and/or Ordinary shares authorised under Resolution 8.
Resolution 10 will authorise the Board, pursuant to the Act, to make one or more market purchases of up to 14.99% of the issued B Ordinary share capital of the Company from time to time. The price paid must not be less than 1p per B Ordinary share, nor more than 5% above the average middle market price of a B Ordinary share for the preceding five business days. Any B Ordinary shares bought back under this authority may be cancelled by the Board.
Resolution 11 will authorise the cancellation of the share premium account of the Company. This share premium account will arise on the issue of further B Ordinary Shares pursuant to any offer for subscription. All of the share premium account at the date of the order made by the Court confirming such cancellation will be cancelled, and will be used to establish a new reserve which may be treated as distributable and which can be used, among other things, to fund the Company's buy-back of shares and the payment of future dividends. In accordance with the VCT Rules, such distributable reserves cannot, however, be utilised for such purposes until after three years from the end of the accounting period in which the relevant shares were issued.
The Directors intend to use the authorities in Resolutions 8 and 9 for the purposes of a further offer for subscription of B Ordinary Shares, though may also subsequently utilise the authorities for further offer(s) for subscription or issue of B Ordinary Shares. The Directors have no current intention to utilise the authority in relation to the Ordinary Shares.
By Order of the Board
Craig Hunter
Company Secretary
26 April 2019
Income Statement
|
|
|
Combined Year to 31 December 2018 |
Combined Year to 31 December 2017 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
Gain on disposal of fixed asset investments |
10 |
- |
903 |
903 |
- |
19 |
19 |
|
|
|
|
|
|
|
|
|
|
Loss on valuation of fixed asset investments |
10 |
- |
(716) |
(716) |
- |
(359) |
(359) |
|
|
|
|
|
|
|
|
|
|
Income |
2 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Performance fee |
6 |
- |
(26) |
(26) |
- |
91 |
91 |
|
|
|
|
|
|
|
|
|
|
Investment management fee net of cost cap |
3 |
36 |
(18) |
18 |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Other expenses |
4 |
(113) |
- |
(113) |
(118) |
- |
(118) |
|
Return on ordinary activities before tax |
|
(77) |
143 |
66 |
(118) |
(249) |
(367) |
|
|
|
|
|
|
|
|
|
|
Taxation on return on ordinary activities |
7 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Return on ordinary activities after tax |
|
(77) |
143 |
66 |
(118) |
(249) |
(367) |
|
Return on ordinary activities after tax attributable to: |
|
|
|
|
|
|
|
|
Owners of the fund |
|
(77) |
143 |
66 |
(118) |
(249) |
(367) |
There was no other Comprehensive Income recognised during the year
· The 'Total' column of the income statement and statement of comprehensive income is the profit and loss account of the Company; the supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Companies.
· All revenue and capital items in the above statement derive from continuing operations.
· The Company has only one class of business and derives its income from investments made in shares and securities and from bank and money market funds.
The Company has no recognised gains or losses other than the results for the year as set out above.
The accompanying notes are an integral part of the Financial Statements.
Ordinary Share Income Statement (non-statutory analysis)
|
|
|
Ordinary shares Year to 31 December 2018 |
Ordinary shares Year to 31 December 2017 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
Gain on disposal of fixed asset investments |
10 |
- |
903 |
903 |
- |
19 |
19 |
|
|
|
|
|
|
|
|
|
|
Loss on valuation of fixed asset investments |
10 |
- |
(716) |
(716) |
- |
(359) |
(359) |
|
|
|
|
|
|
|
|
|
|
Income |
2 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Performance fee |
6 |
- |
(26) |
(26) |
- |
91 |
91 |
|
|
|
|
|
|
|
|
|
|
Investment management fee |
3 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Other expenses |
4 |
(59) |
- |
(59) |
(118) |
- |
(118) |
|
Return on ordinary activities before tax |
|
(59) |
161 |
102 |
(118) |
(249) |
(367) |
|
|
|
|
|
|
|
|
|
|
Taxation on return on ordinary activities |
7 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Return on ordinary activities after tax |
|
(59) |
161 |
102 |
(118) |
(249) |
(367) |
|
Return on ordinary activities after tax attributable to: |
|
|
|
|
|
|
|
|
Owners of the fund |
|
(59) |
161 |
102 |
(118) |
(249) |
(367) |
|
Earnings per share - basic and diluted |
8 |
(0.7)p |
2.0p |
1.3p |
(1.5)p |
(3.0)p |
(4.5p) |
B Share Income Statement (non-statutory analysis)
|
|
|
B shares Year to 31 December 2018 |
B shares Year to 31 December 2017 |
||||
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
Gain on disposal of fixed asset investments |
10 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Loss on valuation of fixed asset investments |
10 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Income |
2 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Performance fee |
6 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Investment management fee net of cost cap |
3 |
36 |
(18) |
18 |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Other expenses |
4 |
(54) |
- |
(54) |
- |
- |
- |
|
Return on ordinary activities before tax |
|
(18) |
(18) |
(36) |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Taxation on return on ordinary activities |
7 |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
|
Return on ordinary activities after tax |
|
(18) |
(18) |
(36) |
- |
- |
- |
|
Return on ordinary activities after tax attributable to: |
|
|
|
|
|
|
|
|
Owners of the fund |
|
(18) |
(18) |
(36) |
- |
- |
- |
|
Earnings per share - basic and diluted |
8 |
(0.45)p |
(0.45)p |
(0.9)p |
- |
- |
- |
Statement of Changes in Equity
|
|
Share capital |
Share premium |
Special distributable reserve |
Capital redemption reserve |
Capital reserve gains/ (losses) |
Capital reserve holding gains/ (losses) |
Revenue reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
As at 1 January 2017 |
4,058 |
- |
3,397 |
38 |
(121) |
(53) |
(1,772) |
5,547 |
|
Revenue return on ordinary activities after tax |
- |
- |
- |
- |
- |
- |
(118) |
(118) |
|
Performance fee allocated as capital expenditure |
- |
- |
- |
- |
91 |
- |
- |
91 |
|
Current period gains on disposal |
- |
- |
- |
- |
19 |
- |
- |
19 |
|
Current period losses on fair value of investments |
- |
- |
- |
- |
- |
(359) |
- |
(359) |
|
Prior years' unrealised losses now realised |
- |
- |
- |
- |
(421) |
421 |
- |
- |
|
Balance as at 31 December 2017 |
4,058 |
- |
3,397 |
38 |
(432) |
9 |
(1,890) |
5,180 |
|
|
|
|
|
|
|
|
|
|
|
B share issue |
40 |
3,995 |
- |
- |
- |
- |
- |
4,035 |
|
Capital restructuring |
(3,977) |
- |
- |
3,977 |
- |
- |
- |
- |
|
Capital reduction |
- |
(3,427) |
7,442 |
(4,015) |
- |
- |
- |
- |
|
Revenue return on ordinary activities after tax |
- |
- |
- |
- |
- |
- |
(77) |
(77) |
|
Expenses charged to capital |
- |
- |
- |
- |
(18) |
- |
- |
(18) |
|
Performance fee allocated as capital expenditure |
- |
- |
- |
- |
(26) |
- |
- |
(26) |
|
Current period gains on disposal |
- |
- |
- |
- |
903 |
- |
- |
903 |
|
Current period losses on fair value of investments |
- |
- |
- |
- |
- |
(716) |
- |
(716) |
|
Prior years' unrealised losses now realised |
- |
- |
- |
- |
602 |
(602) |
- |
- |
|
Balance as at 31 December 2018 |
121 |
568 |
10,839 |
- |
1,029 |
(1,309) |
(1,967) |
9,281 |
Refer to note 14 for details of the share restructure and capital reduction undertaken in the year.
The accompanying notes are an integral part of the Financial Statements.
Ordinary Shares - Statement of Changes in Equity
|
|
Share capital |
Share premium |
Special distributable reserve |
Capital redemption reserve |
Capital reserve gains/ (losses) |
Capital reserve holding gains/ (losses) |
Revenue reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
As at 1 January 2017 |
4,058 |
- |
3,397 |
38 |
(121) |
(53) |
(1,772) |
5,547 |
|
Revenue return on ordinary activities after tax |
- |
- |
- |
- |
- |
- |
(118) |
(118) |
|
Performance fee allocated as capital expenditure |
- |
- |
- |
- |
91 |
- |
- |
91 |
|
Current period gains on disposal |
- |
- |
- |
- |
19 |
- |
- |
19 |
|
Current period losses on fair value of investments |
- |
- |
- |
- |
- |
(359) |
- |
(359) |
|
Prior years' unrealised losses now realised |
- |
- |
- |
- |
(421) |
421 |
- |
- |
|
Balance as at 31 December 2017 |
4,058 |
- |
3,397 |
38 |
(432) |
9 |
(1,890) |
5,180 |
|
|
|
|
|
|
|
|
|
|
|
Capital restructuring |
(3,977) |
- |
- |
3,977 |
- |
- |
- |
- |
|
Capital reduction |
- |
- |
4,015 |
(4,015) |
- |
- |
- |
- |
|
Revenue return on ordinary activities after tax |
- |
- |
- |
- |
- |
- |
(59) |
(59) |
|
Expenses charged to capital |
- |
- |
- |
- |
- |
- |
- |
- |
|
Performance fee allocated as capital expenditure |
- |
- |
- |
- |
(26) |
- |
- |
(26) |
|
Current period gains on disposal |
- |
- |
- |
- |
903 |
- |
- |
903 |
|
Current period losses on fair value of investments |
- |
- |
- |
- |
- |
(716) |
- |
(716) |
|
Prior years' unrealised gains now realised |
- |
- |
- |
- |
602 |
(602) |
- |
- |
|
Balance as at 31 December 2018 |
81 |
- |
7,412 |
- |
1,047 |
(1,309) |
(1,949) |
5,282 |
B Shares - Statement of Changes in Equity
|
|
Share capital |
Share premium |
Special distributable reserve |
Capital redemption reserve |
Capital reserve gains/ (losses) |
Capital reserve holding gains/ (losses) |
Revenue reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
As at 1 January 2018 |
- |
- |
- |
- |
- |
- |
- |
- |
|
B share issue |
40 |
3,995 |
- |
- |
- |
- |
- |
4,035 |
|
Capital reduction |
- |
(3,427) |
3,427 |
- |
- |
- |
- |
- |
|
Revenue return on ordinary activities after tax |
- |
- |
- |
- |
- |
- |
(18) |
(18) |
|
Expenses charged to capital |
- |
- |
- |
- |
(18) |
- |
- |
(18) |
|
Balance as at 31 December 2018 |
40 |
568 |
3,427 |
- |
(18) |
- |
(18) |
3,999 |
|
Balance Sheet |
|||||
|
|
|
Combined as at 31 December 2018 |
Combined as at 31 December 2017 |
||
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
Fixed asset investments* |
10 |
|
3,293 |
|
5,564 |
|
Current assets: |
|
|
|
|
|
|
Debtors |
11 |
23 |
|
7 |
|
|
Cash at bank and in hand/(Bank overdraft) |
|
6,446 |
|
(160) |
|
|
Creditors: amounts falling due within one year |
12 |
(291) |
|
(67) |
|
|
Net current assets |
|
|
6,178 |
|
(220) |
|
Creditors: amounts falling due after more than one year |
12 |
(190) |
|
(164) |
|
|
Net assets |
|
|
9,281 |
|
5,180 |
|
|
|
|
|
|
|
|
Called up equity share capital |
13 |
|
121 |
|
4,058 |
|
Share premium |
14 |
|
568 |
|
- |
|
Special distributable reserve |
14 |
|
10,839 |
|
3,397 |
|
Capital redemption reserve |
14 |
|
- |
|
38 |
|
Capital reserve - realised gains and losses |
14 |
|
1,029 |
|
(432) |
|
- holding gains and losses |
14 |
|
(1,309) |
|
9 |
|
Revenue reserve |
14 |
|
(1,967) |
|
(1,890) |
|
Total equity shareholders' funds |
|
|
9,281 |
|
5,180 |
*At fair value through profit and loss
The accompanying notes are an integral part of the Financial Statements.
The statements were approved by the Directors and authorised for issue on 26 April 2019 and are signed on their behalf by:
John Hustler
Chairman
Company No: 04221489
|
Ordinary Share Balance Sheet (non-statutory analysis)
|
|||||
|
|
|
Ordinary shares as at 31 December 2018 |
Ordinary Shares as at 31 December 2017 |
||
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
Fixed asset investments* |
10 |
|
2,793 |
|
5,564 |
|
Current assets: |
|
|
|
|
|
|
Debtors |
11 |
- |
|
7 |
|
|
Cash at bank and in hand/(Bank overdraft) |
|
2,738 |
|
(160) |
|
|
Creditors: amounts falling due within one year |
12 |
(59) |
|
(67) |
|
|
Net current assets |
|
|
2,679 |
|
(220) |
|
Creditors: amounts falling due after more than one year |
12 |
(190) |
|
(164) |
|
|
Net assets |
|
|
5,282 |
|
5,180 |
|
|
|
|
|
|
|
|
Called up equity share capital |
13 |
|
81 |
|
4,058 |
|
Share premium |
14 |
|
- |
|
- |
|
Special distributable reserve |
14 |
|
7,412 |
|
3,397 |
|
Capital redemption reserve |
14 |
|
- |
|
38 |
|
Capital reserve - realised gains and losses |
14 |
|
1,047 |
|
(432) |
|
- holding gains and losses |
14 |
|
(1,309) |
|
9 |
|
Revenue reserve |
14 |
|
(1,949) |
|
(1,890) |
|
Total equity shareholders' funds |
|
|
5,282 |
|
5,180 |
|
Net asset value per share |
9 |
|
65.1p |
|
63.8p |
*At fair value through profit and loss
|
B Share Balance Sheet (non-statutory analysis)
|
|||||
|
|
|
B shares as at 31 December 2018 |
B shares as at 31 December 2017 |
||
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
Fixed asset investments* |
10 |
|
500 |
|
- |
|
Current assets: |
|
|
|
|
|
|
Debtors |
11 |
23 |
|
- |
|
|
Cash at bank and in hand |
|
3,708 |
|
- |
|
|
Creditors: amounts falling due within one year |
12 |
(232) |
|
- |
|
|
Net current assets |
|
|
3,499 |
|
- |
|
Creditors: amounts falling due after more than one year |
12 |
- |
|
- |
|
|
Net assets |
|
|
3,999 |
|
- |
|
|
|
|
|
|
|
|
Called up equity share capital |
13 |
|
40 |
|
- |
|
Share premium |
14 |
|
568 |
|
- |
|
Special distributable reserve |
14 |
|
3,427 |
|
- |
|
Capital redemption reserve |
14 |
|
- |
|
- |
|
Capital reserve - realised gains and losses |
14 |
|
(18) |
|
- |
|
- holding gains and losses |
14 |
|
- |
|
- |
|
Revenue reserve |
14 |
|
(18) |
|
- |
|
Total equity shareholders' funds |
|
|
3,999 |
|
- |
|
Net asset value per share |
9 |
|
99.1p |
|
- |
*At fair value through profit and loss
Statement of Cash Flows
|
|
Note |
Combined Year to 31 December 2018 £'000 |
Combined Year to 31 December 2017 £'000 |
|
Cash flows from operating activities |
|
|
|
|
Return on ordinary activities before tax |
|
66 |
(367) |
|
Adjustments for: |
|
|
|
|
Increase in debtors |
11 |
(16) |
(3) |
|
Increase/(Decrease) in creditors |
12 |
31 |
(79) |
|
Gain on disposal of fixed assets |
10 |
(903) |
(19) |
|
Loss on valuation of fixed asset investments |
10 |
716 |
359 |
|
Cash from operations |
|
(106) |
(109) |
|
Income taxes paid |
7 |
- |
- |
|
Net cash used in operating activities |
|
(106) |
(109) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchase of fixed asset investments |
10 |
(500) |
- |
|
Sale of fixed asset investments |
10 |
2,958 |
134 |
|
Total cash flows from investing activities |
|
2,458 |
134 |
|
|
|
|
|
|
Cash flows from financing activities Issue of B shares |
|
4,035 |
- |
|
Awaiting B share issue |
|
219 |
- |
|
Total cash flows from financing activities |
|
4,254 |
- |
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
6,606 |
25 |
|
|
|
|
|
|
Opening cash and cash equivalents |
|
(160) |
(185) |
|
|
|
|
|
|
Closing cash and cash equivalents |
|
6,446 |
(160) |
The accompanying notes are an integral part of the Financial Statements.
Ordinary Shares Statement of Cash Flows
|
|
Note |
Ordinary shares Year to 31 December 2018 £'000 |
Ordinary shares Year to 31 December 2017 £'000 |
|
Cash flows from operating activities |
|
|
|
|
Return on ordinary activities before tax |
|
102 |
(367) |
|
Adjustments for: |
|
|
|
|
Decrease/(Increase) in debtors |
11 |
7 |
(3) |
|
Increase/(Decrease) in creditors |
12 |
18 |
(79) |
|
Gain on disposal of fixed assets |
10 |
(903) |
(19) |
|
Loss on valuation of fixed asset investments |
10 |
716 |
359 |
|
Cash from operations |
|
(60) |
(109) |
|
Income taxes paid |
7 |
- |
- |
|
Net cash used in operating activities |
|
(60) |
(109) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchase of fixed asset investments |
10 |
- |
- |
|
Sale of fixed asset investments |
10 |
2,958 |
134 |
|
Total cash flows from investing activities |
|
2,958 |
134 |
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
Total cash flows from financing activities |
|
- |
- |
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
2,898 |
25 |
|
|
|
|
|
|
Opening cash and cash equivalents |
|
(160) |
(185) |
|
|
|
|
|
|
Closing cash and cash equivalents |
|
2,738 |
(160) |
B Shares Statement of Cash Flows
|
|
Note |
B shares Year to 31 December 2018 £'000 |
B shares Year to 31 December 2017 £'000 |
|
Cash flows from operating activities |
|
|
|
|
Return on ordinary activities before tax |
|
(36) |
- |
|
Adjustments for: |
|
|
|
|
Increase in debtors |
11 |
(23) |
- |
|
Increase in creditors |
12 |
13 |
- |
|
Gain on disposal of fixed assets |
10 |
- |
- |
|
Loss on valuation of fixed asset investments |
10 |
- |
- |
|
Cash from operations |
|
(46) |
- |
|
Income taxes paid |
7 |
- |
- |
|
Net cash used in operating activities |
|
(46) |
- |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchase of fixed asset investments |
10 |
(500) |
- |
|
Sale of fixed asset investments |
10 |
- |
- |
|
Total cash flows from investing activities |
|
(500) |
- |
|
|
|
|
|
|
Cash flows from financing activities Issue of B shares |
|
4,035 |
- |
|
Awaiting B share issue |
|
219 |
- |
|
Total cash flows from financing activities |
|
4,254 |
- |
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
3,708 |
- |
|
|
|
|
|
|
Opening cash and cash equivalents |
|
- |
- |
|
|
|
|
|
|
Closing cash and cash equivalents |
|
3,708 |
- |
Notes to the Financial Statements
1. Principal Accounting Policies
Basis of preparation
The Financial Statements have been prepared under the historical cost convention, except for the measurement at fair value of certain financial instruments, and in accordance with UK Generally Accepted Accounting Practice ("GAAP"), including FRS 102 and with the Companies Act 2006 and the Statement of Recommended Practice (SORP) 'Financial Statements of Investment Trust Companies and Venture Capital Trusts (revised 2014)'.
The principal accounting policies have remained materially unchanged from those set out in the Company's 2017 Annual Report and Financial Statements, apart from an addition to the policy on allocating expenses partly to capital as a result of the introduction of an investment management fee for the B shares, and clarifying the split of costs between the two share pools. A summary of the principal accounting policies is set out below.
The Company held all fixed asset investments at fair value through profit or loss. Accordingly, all interest income, fee income, expenses and gains and losses on investments are attributable to assets held at fair value through profit or loss.
The most important policies affecting the Company's financial position are those related to investment valuation and require the application of subjective and complex judgements, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods. These are discussed in more detail below.
Going Concern
After reviewing the Company's forecasts and expectations, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The Company therefore continues to adopt the going concern basis in preparing its Financial Statements.
Key judgements and estimates
The preparation of the Financial Statements requires the Board to make judgements and estimates regarding the application of policies affecting the reported amounts of assets, liabilities, income and expenses. Estimates and assumptions mainly relate to the fair valuation of the fixed asset investments particularly unquoted investments. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. The estimates and the assumptions are under continuous review with particular attention paid to the carrying value of the investments.
Investments are regularly reviewed to ensure that the fair values are appropriately stated. Unquoted investments are valued in accordance with current International Private Equity and Venture Capital Valuation (IPEV) guidelines, which can be found on their website at www.privateequityvaluation.com, although this does rely on subjective estimates such as appropriate sector earnings multiples, forecast results of investee companies, asset values of investee companies and liquidity or marketability of the investments held.
Although the Directors believe that the assumptions concerning the business environment and estimate of future cash flows are appropriate, changes in estimates and assumptions could result in changes in the stated values. This could lead to additional changes in fair value in the future.
Functional and presentational currency
The Financial Statements are presented in Sterling (£). The functional currency is also Sterling (£).
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts.
Fixed asset investments
The Company's principal financial assets are its investments and the policies in relation to those assets are set out below.
Purchases and sales of investments are recognised in the Financial Statements at the date of the transaction (trade date).
These investments will be managed and their performance evaluated on a fair value basis and information about them is provided internally on that basis to the Board. Accordingly, as permitted by FRS 102, the investments are measured as being fair value through profit or loss on the basis that they qualify as a group of assets managed, and whose performance is evaluated, on a fair value basis in accordance with a documented investment strategy. The Company's investments are measured at subsequent reporting dates at fair value.
In the case of investments quoted on a recognised stock exchange, fair value is established by reference to the closing bid price on the relevant date or the last traded price, depending upon convention of the exchange on which the investment is quoted. In the case of AIM quoted investments this is the closing bid price. In the case of unquoted investments, fair value is established by using measures of value such as the price of recent transactions, earnings multiple, discounted cash flows and net assets. These are consistent with the IPEV guidelines.
Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the capital reserve - holding gains/(losses).
In the preparation of the valuations of assets the Directors are required to make judgements and estimates that are reasonable and incorporate their knowledge of the performance of the investee companies.
Fair value hierarchy
Paragraph 34.22 of FRS 102 regarding financial instruments that are measured in the balance sheet at fair value requires disclosure of fair value measurements dependent on whether the stock is quoted and the level of the accuracy in the ability to determine its fair value. The fair value measurement hierarchy is as follows:
For quoted investments:
Level 1: quoted prices in active markets for an identical asset. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held is the bid price at the Balance Sheet date.
Level 2: where quoted prices are not available (or where a stock is normally quoted on a recognised stock exchange that no quoted price is available), the price of a recent transaction for an identical asset, providing there has been no significant change in economic circumstances or a significant lapse in time since the transaction took place. The Company holds no such investments in the current or prior year.
For investments not quoted in an active market:
Level 3: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable data (eg: the price of recent transactions, earnings multiple, discounted cash flows and/or net assets) where it is available and rely as little as possible on entity specific estimates.
There have been no transfers between these classifications in the year (2017: none). The change in fair value for the current and previous year is recognised through the profit and loss account.
Current asset investments
No current asset investments were held at 31 December 2018 or 31 December 2017. Should current assets be held, gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the capital reserve - gains/(losses) on disposal.
Income
Investment income includes interest earned on bank balances and from unquoted loan note securities, and dividends. Fixed returns on debt are recognised on a time apportionment basis so as to reflect the effective yield, provided it is probable that payment will be received in due course.
Expenses
All expenses are accounted for on an accruals basis. Expenses are charged wholly to revenue with the exception of the performance fee, which is charged 100% to the capital reserve. In addition, the investment management fee charged to the B shares has been split 25% revenue and 75% capital, in line with industry practice and to reflect the Board's estimated split of investment returns which will be achieved by the company's B shares over the long term. Expenses and liabilities not specific to a share class are allocated to the B share pool for a period of three years from 1 July 2018 in line with the Articles of Association.
Revenue and capital
The revenue column of the Income Statement includes all income and revenue expenses of the Company. The capital column includes gains and losses on disposal and holding gains and losses on investments, as well as those expenses that have been charged as capital costs. Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the appropriate capital reserve on the basis of whether they are realised or unrealised at the balance sheet date.
Taxation
Current tax is recognised for the amount of income tax payable in respect of the taxable profit for the current or past reporting periods using the current tax rate. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the "marginal" basis as recommended in the SORP.
Deferred tax is recognised on an undiscounted basis in respect of all timing differences that have originated but not reversed at the balance sheet date, except as otherwise indicated.
Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
Financial instruments
The Company's principal financial assets are its investments and its cash and the policies in relation to those assets are set out above. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument.
Capital management is monitored and controlled using the internal control procedures set out on page 35 of this report. The capital being managed includes equity and fixed-interest investments, cash balances and liquid resources including debtors and creditors.
The Company does not have any externally imposed capital requirements.
Reserves
Called up equity share capital - represents the nominal value of shares that have been issued.
Share premium account - includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium.
Special distributable reserve - includes cancelled share premium and capital redemption reserves available for distribution.
Capital reserve - holding gains and losses - when the Company revalues the investments still held during the period with any gains or losses arising being credited/ charged to the Capital reserve - holding gains and losses.
Capital reserve - gains and losses on disposal - when an investment is sold any balance held on the Capital reserve - holding gains and losses is transferred to the Capital reserve - gains and losses on disposal, as a movement in reserves.
Revenue reserve - represents the aggregate value of accumulated realised profits, less losses and dividends.
Dividends Payable
Dividends payable are recognised as distributions in the Financial Statements when the Company's liability to make payment has been established. This liability is established for interim dividends when they are declared by the Board, and for final dividends when they are approved by the shareholders.
2. Income
|
|
Year to 31 December 2018 |
Year to 31 December 2017 |
|
|
£'000 |
£'000 |
|
Dividends received |
- |
- |
|
Loan note interest receivable |
- |
- |
|
|
- |
- |
3. Investment Management Fee for B shares
|
|
Year to 31 December 2018 |
Year to 31 December 2017 |
|
|
£'000 |
£'000 |
|
Gross Investment management fee |
24 |
- |
|
Cost cap refund from Seneca |
(42) |
- |
|
Investment management fee net of cost cap |
(18) |
- |
Following its appointment on 23 August 2018, Seneca has received a fee of 2% of the weighted average net asset value of the B shares (2017: n/a). Seneca will also be entitled to certain monitoring fees from investee companies and the Board reviews the amounts.
Seneca are entitled to receive a performance incentive fee in relation to the B share pool of an amount equal to 20% of the Shareholder Proceeds arising in respect of any performance period, provided that the payment of such a fee shall also be conditional upon (i) a return being generated on the B share pool for B Shareholders in respect of that performance period of more than 5% per annum (pro-rated if that period is less than a year) and (ii) that such a return calculated for the period from 23 August 2018 to the end of the relevant performance period exceeds 5% per annum.
Shareholder Proceeds are, in relation to the B shares and calculated on a per share basis in relation to the relevant share, all amounts paid by way of dividend or other distributions, share buy backs, proceeds on a sale or liquidation of the Company and any other proceeds or value received or deemed to be received by the holders of the relevant shares (excluding any income tax relief on subscription).
For a three year period with effect from 1 July 2018, expenses are capped at 3% of the weighted average net asset value of the B shares, including the management fee (but excluding any performance fee). (Following this initial period, expenses are capped at 3% of the Company's total net asset value, including the assets in the Ordinary share pool). Accordingly Seneca reduced its management fee by £42,000 in the year to 31 December 2018 (2017: n/a).
Expenses are charged wholly to revenue with the exception of the (gross) investment management fee which has been charged 75% to the capital reserve in line with industry practice.
4. Other Expenses
|
|
Year to 31 December 2018 |
Year to 31 December 2017 |
|
|
£'000 |
£'000 |
|
Directors' remuneration |
41 |
38 |
|
Fees payable to the Company's auditor for the audit of the Financial Statements |
14 |
8 |
|
Fees payable to the Company's auditor for other services - tax compliance |
- |
1 |
|
Legal and professional expenses |
38 |
41 |
|
Accounting and administration services |
9 |
14 |
|
Other expenses |
11 |
16 |
|
|
113 |
118 |
All expenses were charged to the Ordinary shares for the period to 30 June 2018. In line with the offer for subscription for B shares, and following the initial allotment of B shares on 23 August 2018, all the Company's general expenses are chargeable to the B share pool for a period of three years from 1 July 2018 (subject to the cost cap discussed in note 3). Any expenditure related specifically to assets in one pool is chargeable to that pool.
5. Directors' Remuneration
|
|
Year to 31 December 2018 |
Year to 31 December 2017 |
|
|
£ |
£ |
|
Directors' emoluments: |
|
|
|
John Hustler (Chairman) |
12,750 |
12,750 |
|
Charles Breese |
12,750 |
12,750 |
|
Richard Roth |
15,250 |
12,750 |
|
Richard Manley |
- |
- |
|
|
40,750 |
38,250 |
Richard Manley, a director of the Investment Manager, has elected to waive his Director's fee, until the Company's operating costs are less than the expenses cost cap.
Included in the figure above for Richard Roth is £2,500 for work undertaken in relation to the setting up of the new B share structure and preparation of the offer for subscription as detailed in the Directors' Remuneration Report. Apart from this, none of the Directors received any other remuneration from the Company during the year.
Certain Directors may become entitled to receive a share of the Performance Incentive Fee related to the Ordinary share pool as detailed in the Directors' Remuneration Report on page 39 and in note 6.
The Company has no employees other than non-executive Directors. The average number of non-executive Directors in the year was three (2017: three). Richard Manley joined the Board on 23 August 2018 which increased the number of directors for the remainder of the year from 3 to 4.
6. Performance fees for Ordinary shares
The Commercial Advisory Committee took over management of the Company's investments on 30 July 2007, and at that time, a revised Performance Incentive Scheme was implemented, such that its members would be entitled to 20% of all cash returns above the initial net cost to subscribing shareholders of 80p.
On 7 October 2015, this scheme was varied such that any returns above the 31 December 2014 levels would be subject to a hurdle, and the share to the CAC reduced from 20% to 10%. The hurdle is a compound 6% per annum on any amounts below the latest hurdle still due to be paid to shareholders (i.e. in recognition of dividends paid, actual returns to shareholders will be subtracted from the compounding threshold in the year these are paid).
The Total Gross Return at 31 December 2014 on which the performance fee liability of £702,000 was calculated was 123.3p, resulting in the quoted net asset value of 114.6p. For the purposes of this note 6, Total Gross Return is defined as the total return made by the fund, before the deduction of any dividend payments or accruals and/or payments made relating to any potential (or actual) performance incentive fee.
Any dividends paid above 80p will be split 80% to shareholders and 20% to the members of the CAC as at 31 December 2014 (i.e. 25% of all dividends paid to shareholders), until shareholders have received dividends totalling 114.6p.
A performance fee may be payable on any further dividends above this level, but only if the hurdle applicable at that time has been met.
As at 31 December 2018, the Total Gross Return is 91.68p, and so 2.34p per share totalling £190,000 has been accrued (31 December 2017, 90.1p, 2.02p and £164,000).
Assuming the only dividends paid on the Ordinary shares in the year are the 10p dividend per share paid on 25 January 2019, and the 18p per share expected to be declared soon after this Annual Report has been submitted to Companies House, the Total Gross Return would need to exceed 152.9p at 31 December 2019 before any fee above £702,000 could be due, and at that time, it would be 10% of any cash payments made above this threshold. If such a performance fee is not triggered (as it has not been in this financial year) the hurdle, net of dividends paid, increments by a compound annual growth rate of 6%, applied quarterly.
7. Tax on Ordinary Activities
The corporation tax charge for the period was £nil (2017: £nil).
The current rate of tax is the small companies' rate of corporation tax at 19% (2017: 19.25 %)
|
Current tax reconciliation: |
Year to 31 December 2018 |
Year to 31 December 2017 |
|
|
£'000 |
£'000 |
|
Return on Ordinary activities before tax |
66 |
(367) |
|
Current tax at 19% (2017: 19.25%) |
13 |
(71) |
|
Gains/losses not subject to tax |
(36) |
65 |
|
Excess management expenses carried forward |
23 |
6 |
|
Total current tax charge and tax on results of ordinary activities |
- |
- |
The company has excess management expenses of £2,741,000 (2017: £2,619,000) to carry forward to offset against future taxable profits.
Approved VCTs are exempt from tax on capital gains within the Company. Since the Directors intend that the Company will continue to conduct its affairs so as to maintain its approval as a VCT, no current deferred tax has been provided in respect of any capital gains or losses arising on the revaluation or disposal of investments.
8. Earnings per Share
The earnings per Ordinary share is based on 8,115,376 (31 December 2017: 8,115,376) shares, being the weighted average number of Ordinary shares in issue during the year, and a return for the year totalling £102,000 (31 December 2017: (£367,000)).
The earnings per B share is based on 3,412,545 (31 December 2017: nil) shares, being the weighted average number of B shares in issue since 23 August 2018, and a return for the year totalling (£36,000) (31 December 2017: nil).
There are no potentially dilutive capital instruments in issue and, therefore, no diluted returns per share figures are relevant. The basic and diluted earnings per share are therefore identical.
9. Net Asset Value per Share
The calculation of NAV per Ordinary share as at 31 December 2018 is based on 8,115,376 Ordinary shares in issue at that date (31 December 2017: 8,115,376).
The calculation of NAV per B share as at 31 December 2018 is based on 4,036,370 B shares in issue at that date (31 December 2017: nil).
10. Fixed Asset Investments
Ordinary shares
|
|
Level 1: AIM-quoted investments |
Level 3: Unquoted investments |
Total investments |
|
|
£'000 |
£'000 |
£'000 |
|
Valuation and net book amount: |
|
|
|
|
Book cost as at 1 January 2018 |
1,129 |
4,426 |
5,555 |
|
Cumulative revaluation |
906 |
(897) |
9 |
|
Valuation at 1 January 2018 |
2,035 |
3,529 |
5,564 |
|
|
|
|
|
|
Movement in the year: |
|
|
|
|
Purchases at cost |
- |
- |
- |
|
Disposal proceeds |
(31) |
(2,927) |
(2,958) |
|
Gain/(loss) on disposal |
6 |
897 |
903 |
|
Revaluation in year |
(549) |
(167) |
(716) |
|
Valuation at 31 December 2018 |
1,461 |
1,332 |
2,793 |
|
|
|
|
|
|
Book cost at 31 December 2018 |
1,117 |
2,985 |
4,102 |
|
Revaluation to 31 December 2018 |
344 |
(1,653) |
(1,309) |
|
|
|
|
|
|
Valuation at 31 December 2018 |
1,461 |
1,332 |
2,793 |
B Shares
|
|
Level 1: AIM-quoted investments |
Level 3: Unquoted investments |
Total investments |
|
|
£'000 |
£'000 |
£'000 |
|
Valuation and net book amount: |
|
|
|
|
Book cost as at 1 January 2018 |
- |
- |
- |
|
Cumulative revaluation |
- |
- |
- |
|
Valuation at 1 January 2018 |
- |
- |
- |
|
|
|
|
|
|
Movement in the year: |
|
|
|
|
Purchases at cost |
- |
500 |
500 |
|
Disposal proceeds |
- |
- |
- |
|
Gain/(loss) on disposal |
- |
- |
- |
|
Revaluation in year |
- |
- |
- |
|
Valuation at 31 December 2018 |
- |
500 |
500 |
|
|
|
|
|
|
Book cost at 31 December 2018 |
- |
500 |
500 |
|
Revaluation to 31 December 2018 |
- |
- |
- |
|
|
|
|
|
|
Valuation at 31 December 2018 |
- |
500 |
500 |
Further details of the fixed asset investments held by the Company are shown within the Investment Manager's Report on pages 14 to 24.
All investments are initially measured at fair value through profit or loss, and all capital gains or losses on investments are so measured. The changes in fair value of such investments recognised in these Financial Statements are treated as unrealised holding gains or losses.
11. Debtors
|
|
31 December 2018 |
31 December 2017 |
|
|
£'000 |
£'000 |
|
Prepayments and accrued income |
23 |
7 |
|
|
23 |
7 |
12. Creditors
|
|
31 December 2018 |
31 December 2017 |
|
|
£'000 |
£'000 |
|
Amounts falling due within one year |
|
|
|
Accruals |
43 |
34 |
|
Trade creditors |
- |
4 |
|
Awaiting B share issue |
219 |
- |
|
Other creditors |
29 |
29 |
|
Total amounts falling due within one year |
291 |
67 |
|
|
|
|
|
Amounts falling due after one year |
|
|
|
Accruals |
190 |
164 |
|
Total amounts falling due after one year |
190 |
164 |
The amount falling due after more than one year relates to the potential liability for a performance fee on the Ordinary share portfolio. More details are in note 6.
13. Share Capital
|
|
31 December 2018 |
31 December 2017 |
|
|
£'000 |
£'000 |
|
Allotted and fully paid up: |
|
|
|
8,115,376 Ordinary shares of 1p (2017: 8,115,376 shares of 50p) 4,036,370 B Ordinary shares of 1p (2017 : nil) |
81 40 |
4,058 - |
|
|
121 |
4,058 |
The capital of the Company is managed in accordance with its investment policy with a view to the achievement of its investment objective as set on page 8.
During the year, the Company did not issue, nor buy back, any Ordinary shares. On 5 April 2018, following approval at the Company's annual general meeting, the nominal value of the Ordinary shares was reduced from 50p to 1p. More details are included in the Chairman's Statement on page 10 and in note 14.
The Company issued a total of 4,036,370 B Ordinary shares at prices between 99.7p and 105.8p per B Ordinary share. pursuant to an offer for subscription for B shares launched on 9 May 2018 to raise, in aggregate, up to £10 million with an over-allotment facility of up to a further £10 million (before issue costs). The Company has not bought back any B Ordinary shares.
14. Movement in Shareholders' Funds
|
|
|
||
|
|
Year ended 31 December 2018 |
Year ended 31 December 2017 |
|
|
|
£'000 |
£'000 |
|
|
Shareholders' funds at start of year |
5,180 |
5,547 |
|
|
Return on ordinary activities after tax |
66 |
(367) |
|
|
Increase due to issue of B shares |
4,035 |
- |
|
|
Shareholders' funds at end of year |
9,281 |
5,180 |
|
The analysis of changes in equity by the various reserves are shown in the Statement of Changes in Equity on page 50.
When the Company revalues its investments during the period, any gains or losses arising are credited/charged to the Income Statement. Changes in fair value of investments held are then transferred to the capital reserve - holding gains/(losses). When an investment is sold any balance held on the capital reserve - holding gains/(losses) reserve is transferred to the capital reserve - gains/(losses) on disposal as a movement in reserves.
The purpose of the special distributable reserve was to create a reserve which will be capable of being used by the Company to pay dividends and for the purpose of making repurchases of its own shares in the market with a view to narrowing the discount at which the Company's shares trade to net asset value, providing shareholder authority has been granted.
During 2010, the Company revoked investment company status in order to allow payment of dividends from distributable reserves. During 2018, the Company effected a capital reduction exercise, whereby the nominal value of its Ordinary shares was reduced from 50p to 1p, creating a capital redemption reserve. The Company also issued 4,036,370 B shares at a premium. On 7 December 2018, following shareholder approval, the Company sought, and received approval from the High Court to the reduction of the amount standing to the credit of the Capital Redemption Reserve of the Company by £4,014,135 and of the Share Premium Account of the Company by £3,427,184, thereby creating additional distributable reserves of £7,441,319. Distributable reserves are represented by the special distributable reserve, the capital reserve gains/(losses) on disposal and the revenue reserve reduced by negative holding reserves (if any) which total £8,592,000 as at 31 December 2018 (2017: £1,075,000). Although the distributable reserves total £8,592,000 as at 31 December 2018, only £5,181,000 is actually able to be distributed as the reserves contain £ 3,427,000 from the cancellation of the share premium account on the newly issued B shares, which cannot be distributed until the beginning of 2022 without breaching VCT rules.
An interim capital dividend of 10 pence per Ordinary share for the year to 31 December 2018 was paid on 25 January 2019, reducing shareholder funds by £811,537.60.
15. Financial Instruments
The Company's financial instruments comprise equity investments, cash balances and liquid resources including debtors and creditors.
Classification of financial instruments
The Company held the following categories of financial instruments, all of which are included in the balance sheet at fair value, at 31 December 2018 and 31 December 2017:
|
|
31 December 2018 |
31 December 2017 |
|
|
£'000 |
£'000 |
|
Financial assets at fair value through profit or loss |
|
|
|
Fixed asset investments |
3,293 |
5,564 |
|
Total |
3,293 |
5,564 |
|
|
|
|
|
Financial assets measured at amortised cost |
|
|
|
Cash at bank and in hand |
6,446 |
- |
|
Debtors |
23 |
7 |
|
Total |
6,469 |
7 |
|
|
|
|
|
Financial liabilities measured at amortised cost |
|
|
|
Bank Overdraft |
- |
(160) |
|
Creditors |
(29) |
(33) |
|
Total |
(29) |
(193) |
Fixed asset investments (see note 10) are valued at fair value. Unquoted investments are carried at fair value as determined by the Directors in accordance with current venture capital industry guidelines. The fair value of all other financial assets and liabilities is represented by their carrying value in the balance sheet. The Directors believe that the fair value of the assets held at the year end is equal to their book value.
The Company's creditors and debtors are recognised at fair value which is usually the transaction cost or net realisable value if lower.
As at 31 December 2017, the Company had an overdraft facility of £200,000 with the Royal Bank of Scotland, which was converted into a loan in April 2018, both of which were secured by a debenture. The loan was a liability of the Ordinary share pool and was repaid at the end of August 2018 once the company had access to the funds from the initial allotment of B shares, and the debenture was released. The funds in the B share pool have since been replenished from the proceeds from the Ordinary share pool's sale of its investment in Hallmarq.
16. Financial Risk Management
In carrying on its investment activities, the Company is exposed to various types of risk associated with the financial instruments and markets in which it invests. The most significant types of financial risk facing the Company are market risk, credit risk and liquidity risk. The Company's approach to managing these risks is set out below together with a description of the nature and amount of the financial instruments held at the balance sheet date.
Market risk
The Company's strategy for managing investment risk is determined with regard to the Company's investment objective, as outlined on page 8. The management of market risk is part of the investment management process. The Company's portfolio is managed with regard to the possible effects of adverse price movements and with the objective of maximising overall returns to shareholders in the medium term. Investments in unquoted companies, by their nature, usually involve a higher degree of risk than investments in companies quoted on a recognised stock exchange, though the risk can be mitigated to a certain extent by diversifying the portfolio across business sectors and asset classes. The overall disposition of the Company's assets is regularly monitored by the Board.
Details of the Company's investment portfolio at the balance sheet date are set out on page 15.
19.7% (2017: 68.1%) by value of the Company's net assets comprise investments in unquoted companies held at fair value. The valuation methods used by the Company include the application of a price/earnings ratio derived from listed companies with similar characteristics, and consequently the value of the unquoted element of the portfolio can be indirectly affected by price movements on the London Stock Exchange. A 10% overall increase in the valuation of the unquoted investments at 31 December 2018 would have increased net assets and the total return for the year by £183,000 (2017: £353,000) disregarding the impact of the performance fee; an equivalent change in the opposite direction would have reduced net assets and the total return for the year by the same amount.
15.7% (2017: 39.3%) by value of the Company's net assets comprises equity securities quoted on AIM. A 10% increase in the bid price of these securities as at 31 December 2018 would have increased net assets and the total return for the year by £146,000 (2017: £204,000) disregarding the impact of the performance fee; a corresponding fall would have reduced net assets and the total return for the year by the same amount.
Credit risk
There were no significant concentrations of credit risk to counterparties at 31 December 2018 or 31 December 2017.
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Board carries out a regular review of counterparty risk. The carrying values of financial assets represent the maximum credit risk exposure at the balance sheet date.
Liquidity risk
The Company's financial assets include investments in unquoted equity securities which are not traded on a recognised stock exchange and which generally are illiquid. They also include investments in AIM-quoted companies, which, by their nature, involve a higher degree of risk than investments on the main market. As a result, the Company may not be able to realise some of its investments in these instruments quickly at an amount close to their fair value in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the creditworthiness of any particular issuer.
The Company's liquidity risk is managed and monitored on a continuing basis by the Board in accordance with policies and procedures laid down by the Board.
17. Events After the Balance Sheet Date
Since 31 December 2018:
Pursuant to the Offer, the Company has made the following allotments of B shares:
|
Date |
Number of shares allotted |
Allotment price range |
|
7 March 2019 |
643,278 |
99.1p to 102.2p per share |
|
3 April 2019 5 April 2019 |
442,148 241,485 |
99.1p to 104.9p per share 97.6p to 103.3p per share |
|
25 April 2019 |
24,383 |
102.5p per share |
As at 26 April 2019, the Company had a total of 5,387,664 B shares in issue
The Company has also made the following new investments from the B share pool
|
Company Name |
Date of Investment |
Amount subscribed |
|
|
Fabacus Holdings Limited |
15 February 2019 |
£500,000 |
|
|
SkinBioTherapeutics Plc |
21 February 2019 |
£750,000 |
|
|
Old St Labs Limited |
28 March 2019 |
£500,000 |
|
|
Qudini Limited |
4 April 2019 |
£500,000 |
|
18. Contingencies, Guarantees and Financial Commitments
There were no contingencies, guarantees or financial commitments as at 31 December 2018 (2017: £nil).
19. Related Party Transactions
The Board acted as the investment manager of the Company until Seneca were appointed on 23 August 2018. No remuneration has been paid to the Board during the year in its capacity as investment manager. Certain Directors are entitled to participate in a performance bonus as detailed in note 6. Seneca have earnt £24,000 in management fees since 23 August 2018 (2% of the weighted average net assets of the B share portfolio). No payment has been made to Seneca, as £42,000 is recoverable from Seneca as a result of the cost cap, as detailed in note 3. Therefore at the year end, £18,000 was due from Seneca, which will be deducted from fees to be paid to them for services in 2019 (2017: nil).
Seneca accrued £19,997 (2017: £nil) transaction fees and directors' fees from investee companies. Seneca may also become entitled to a performance fee. See note 3 to the financial statements for more information on these fees.
As detailed in the offer for subscription document dated 9 May 2018, Seneca (as promoters of the offer) are entitled to charge the Company up to 5.5% of investors' subscriptions. A total of £40,596 has been paid to Seneca, based on the allotments of £4,035,000 as at 31 December 2018 (2017: n/a).
Charles Breese is a director of OR Productivity and received £nil from OR Productivity in fees for his support during the year (2017: £nil).
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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