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3 Sep 2020 14:15
Albion Development VCT PLC: Half-yearly Financial ReportAlbion Development VCT PLC
LEI Code 213800FDDMBD9QLHLB38
As required by the UK Listing Authority's Disclosure Guidance and Transparency Rule 4.2, Albion Development VCT PLC today makes public its information relating to the Half-yearly Financial Report (which is unaudited) for the six months to 30 June 2020. This announcement was approved by the Board of Directors on 3 September 2020.
The full Half-yearly Financial Report (which is unaudited) for the period to 30 June 2020 will shortly be sent to shareholders and will be available on the Albion Capital Group LLP website by clicking www.albion.capital/funds/AADV/30Jun2020.pdf.
Investment policy
The Company will invest in a broad portfolio of higher growth businesses with a stronger focus on technology companies across a variety of sectors of the UK economy. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified in terms of sector and stage of maturity of company.
Funds held pending investment or for liquidity purposes will be held as cash on deposit or up to 8 per cent. of its assets, at the time of investment, in liquid open-ended equity funds providing income and capital equity exposure (where it is considered economic to do so).
Risk diversification and maximum exposuresRisk is spread by investing in a number of different businesses within venture capital trust qualifying industry sectors using a mixture of securities. The maximum amount which the Company will invest in a single portfolio company is 15 per cent. of the Company's assets at cost thus ensuring a spread of investment risk. The value of an individual investment may increase over time as a result of trading progress and it is possible that it may grow in value to a point where it represents a significantly higher proportion of total assets prior to a realisation opportunity being available.
The Company's maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves.
Background to the Company
The Company is a venture capital trust which raised a total of £33.3 million through the issue of shares between 1999 and 2004. The C shares merged with the Ordinary shares in 2007. A further £6.3 million was raised through an issue of new D shares in 2010. The D shares converted to Ordinary shares in 2015.
An additional £45.2 million has been raised for the Ordinary shares through the Albion VCTs Top Up Offers since 2011.
Financial calendar
| Record date for second dividend for the year | 11 September 2020 |
| Payment date for second dividend for the year | 30 September 2020 |
| Financial year end | 31 December |
Financial summary
| Ordinary shares | Unaudited six months ended 30 June 2020(pence per share) | Unaudited six months ended 30 June 2019(pence per share) | Audited year ended 31 December 2019(pence per share) |
| Opening net asset value | 83.47 | 84.70 | 84.70 |
| Capital (loss)/return | (2.03) | 2.64 | 2.55 |
| Revenue return | 0.08 | 0.28 | 0.73 |
| Total (loss)/return | (1.95) | 2.92 | 3.28 |
| Impact from share capital movements | 0.03 | (0.09) | (0.01) |
| Dividends paid | (2.25) | (2.25) | (4.50) |
| Net asset value | 79.30 | 85.28 | 83.47 |
| Total shareholder value to 30 June 2020 | Ordinary shares (pence per share) | |
| Total dividends paid during the period ended: | ||
| 31 December 1999 | 1.00 | |
| 31 December 2000 | 2.90 | |
| 31 December 2001 | 3.95 | |
| 31 December 2002 | 4.20 | |
| 31 December 2003 | 4.50 | |
| 31 December 2004 | 4.00 | |
| 31 December 2005 | 5.20 | |
| 31 December 2006 | 3.00 | |
| 31 December 2007 | 5.00 | |
| 31 December 2008 | 12.00 | |
| 31 December 2009 | 4.00 | |
| 31 December 2010 | 8.00 | |
| 31 December 2011 | 5.00 | |
| 31 December 2012 | 5.00 | |
| 31 December 2013 | 5.00 | |
| 31 December 2014 | 5.00 | |
| 31 December 2015 | 5.00 | |
| 31 December 2016 | 5.00 | |
| 31 December 2017 | 4.00 | |
| 31 December 2018 | 4.00 | |
| 31 December 2019 | 4.50 | |
| 30 June 2020 | 2.25 | |
| Total dividends paid to 30 June 2020 | 102.50 | |
| Net asset value as at 30 June 2020 | 79.30 | |
| Total shareholder value to 30 June 2020 | 181.80 | |
The financial summary above is for the Company, Albion Development VCT PLC Ordinary shares only. Details of the financial performance of the C shares and D shares, which have been merged into the Ordinary shares, can be found at www.albion.capital/funds/AADV under the ‘Financial summary for previous funds’ section.
In addition to the dividends summarised above, the Board has declared a second dividend for the year ending 31 December 2020, of 1.99 pence per Ordinary share to be paid on 30 September 2020 to shareholders on the register on 11 September 2020. The details of the new dividend policy can be found in the Interim Management Report below.
NotesTotal shareholder value for every 100 pence invested on initial allotment. The table above excludes tax benefits upon subscription.
Interim management report
IntroductionSince the announcement of our year end results to 31 December 2019, we have entered a global health and economic crisis due to the coronavirus (Covid-19) pandemic, and unsurprisingly our portfolio has been affected. However, the Board has been in close contact with the Manager and has undergone a rigorous and robust revaluation process to quantify the effect of the coronavirus (Covid-19) pandemic on the portfolio.
Valuations and results The net effect of the Board’s portfolio valuation exercise has been an overall loss on investments of £1.3 million for the six months to 30 June 2020.
I am pleased to report that there have been some uplifts to portfolio companies during this time, showing the resilience of our portfolio and some of the businesses we have backed. There was a £2.6 million uplift in the valuation of Quantexa, following a £50 million externally led fundraising, and a £0.9 million uplift in the valuation of Proveca, due to strong sales of its product Sialanar across Europe.
Unfortunately, two of our portfolio companies have been particularly hard hit by Covid-19, which has resulted in corresponding declines in their value. These are Mirada Medical, a medical imaging software company which uses deep learning to help clinicians plan radiation treatment, which saw a reduction of £1.5 million in the period, and Sandcroft Avenue (trading as Hussle), a provider of flexible gym memberships to thousands of venues across the UK, whose value declined by £1.1 million. Our investment in the SVS Albion OLIM UK Equity Income Fund declined by £1.0 million due to the impact of Covid-19 on quoted markets.
Further details of the portfolio of investments can be found below.
This has resulted in a total loss for the six months to 30 June 2020 of 1.95 pence per share (2.34% loss on opening net asset value) compared to a positive total return of 2.92 pence per share for the same period in the previous year.
The net asset value per share has fallen to 79.30 pence (30 June 2019: 85.28 pence; 31 December 2019: 83.47 pence) following the loss during the period and the payment of a 2.25 pence per share dividend on 29 May 2020.
New dividend policyThe Board is aware of the importance of dividends to shareholders and it remains its intention to continue to pay regular dividends, as far as liquidity permits. Given the uncertainty that the current pandemic has created and the volatile nature of investing in small unquoted growth businesses, the Board considers it appropriate to move to a variable dividend policy targeting an annual dividend yield of around 5%. Semi-annual dividends will be paid calculated as 2.5% of the most recently announced net asset value when the dividend is declared (in most cases this will be the net asset value announced in the Half-yearly Financial Report or in the Annual Report and Financial Statements). This has the advantage of avoiding unsustainably high dividends if the net asset value falls, whilst rewarding shareholders more immediately if the net asset value rises.
As a result, the Company will pay a second dividend for the financial year ending 31 December 2020 of 1.99 pence per share on 30 September 2020 to shareholders on the register on 11 September 2020.
Investment activityDuring the period the Company has invested £1.6 million of cash into new and existing portfolio companies, with new investments comprising:
£575,000 into Concirrus (a software provider bringing real-time behavioural data analytics to the marine and transport insurance industries);£344,000 into Credit Kudos (a challenger credit bureau helping lenders optimise and automate their affordability and risk assessments); and£207,000 into TransFICC (a provider of a connectivity solution, connecting financial institutions with trading venues via a single API).Following the period end, the Company has invested a further £2.6 million into new and existing companies, the largest being £1.4 million into Quantexa. Further details of post balance sheet events can be found in note 10.
Investment portfolio by sectorThe pie chart at the end of this announcement outlines the different sectors in which the Company’s assets, at carrying value, are currently held.
Corporate broker and share buy-backs The Board was pleased to announce on 17 June 2020 the appointment of Panmure Gordon (UK) Limited as corporate broker.
It remains the Board’s policy to buy-back shares in the market, subject to the overall constraint that such purchases are in the Company’s interest. This includes the maintenance of sufficient cash resources for investment in new and existing portfolio companies and the continued payment of dividends to shareholders.
It is the Board’s intention that such buy-backs should be at around a 5% discount to net asset value, in so far as market conditions and liquidity permit.
Transactions with the ManagerDetails of transactions with the Manager for the reporting period can be found in note 5. Details of related party transactions can be found in note 11.
Risks and uncertaintiesThe wide reaching implications arising from the Covid-19 crisis is the key risk facing the Company, including its impact on the UK and Global economies and recent turmoil in the quoted market. There are also the potential implications of the UK’s departure from the European Union which may adversely affect our underlying portfolio companies. The Manager is continually assessing the exposure to such risks for each portfolio company, and where possible appropriate actions are being implemented.
Other principal risks and uncertainties remain unchanged and are as detailed in note 13.
Albion VCTs Top Up OffersAs announced in the Annual Report and Financial Statements for the year ended 31 December 2019, the Board was pleased to close the Offer having raised £8 million for the 2019/20 tax year.
The proceeds are continually being used to nurture our existing portfolio companies as they grow, as highlighted by our further investment into Quantexa detailed above, but also to support existing portfolio companies during the current pandemic. The proceeds raised also enable us to take advantage of new and exciting investment opportunities as they arise, and three of such are detailed above. Details on the share allotments during the period can be found in note 8.
Prospects Given the current uncertainty around the Covid-19 pandemic, the Board was pleased to see some large uplifts in the Company’s investment portfolio during the period. The priority of the Board is to give support to the existing portfolio where it is needed, whilst also taking advantage of new business ideas which are proving resilient to the current pandemic. We believe the portfolio is well positioned to continue to provide long term growth to shareholders.
Ben LarkinChairman3 September 2020
Responsibility statement
The Directors, Ben Larkin, Lyn Goleby, Lord O’ Shaughnessy and Patrick Reeve, are responsible for the preparation of the Half-yearly Financial Report. In preparing these condensed Financial Statements for the period to 30 June 2020 we, the Directors of the Company, confirm that to the best of our knowledge:
(a) the condensed set of Financial Statements, which has been prepared in accordance with Financial Reporting Standard 104 “Interim Financial Reporting”, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company as required by DTR 4.2.4R;
(b) the Interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c) the Interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein).
This Half-yearly Financial Report has not been audited or reviewed by the Auditor.
For and on behalf of the Board
Ben LarkinChairman3 September 2020
Portfolio of investments
| As at 30 June 2020 | |||||
| Fixed asset investments | % voting rights | Cost£’000 | Cumulative movement in value£’000 | Value£’000 | Change in value for the period*£’000 |
| Egress Software Technologies Limited | 6.9 | 2,332 | 4,115 | 6,447 | - |
| Quantexa Limited | 2.9 | 727 | 4,925 | 5,652 | 2,641 |
| Proveca Limited | 11.8 | 1,829 | 3,628 | 5,457 | 915 |
| Radnor House School (TopCo) Limited | 8.5 | 1,560 | 1,033 | 2,593 | (130) |
| Chonais River Hydro Limited | 4.6 | 1,705 | 660 | 2,365 | 7 |
| The Street by Street Solar Programme Limited | 12.4 | 1,291 | 1,002 | 2,293 | (70) |
| Regenerco Renewable Energy Limited | 11.9 | 1,204 | 759 | 1,963 | (71) |
| Black Swan Data Limited | 3.9 | 1,610 | - | 1,610 | - |
| G.Network Communications Limited | 2.7 | 273 | 1,206 | 1,479 | - |
| Alto Prodotto Wind Limited | 9.4 | 741 | 516 | 1,257 | 4 |
| Oviva AG | 3.4 | 1,021 | 160 | 1,181 | (210) |
| Panaseer Limited | 3.2 | 752 | 281 | 1,033 | - |
| Convertr Media Limited | 6.2 | 992 | 27 | 1,019 | 5 |
| MPP Global Solutions Limited | 3.0 | 1,000 | - | 1,000 | - |
| OmPrompt Holdings Limited | 10.7 | 994 | (32) | 962 | - |
| Albion Investment Properties Limited | 68.2 | 929 | 27 | 956 | 28 |
| The Evewell (Harley Street) Limited | 7.5 | 1,027 | (93) | 934 | (93) |
| MyMeds&Me Limited | 9.9 | 940 | (46) | 894 | 5 |
| Beddlestead Limited | 8.6 | 1,026 | (270) | 756 | (265) |
| Aridhia Informatics Limited | 5.8 | 1,129 | (420) | 709 | 559 |
| Cantab Research Limited (T/A Speechmatics) | 1.7 | 685 | - | 685 | - |
| SBD Automotive Limited | 2.2 | 330 | 339 | 669 | 27 |
| Elliptic Enterprises Limited | 0.8 | 639 | - | 639 | - |
| Concirrus Limited | 1.2 | 575 | - | 575 | - |
| InCrowd Sports Limited | 4.3 | 545 | (12) | 533 | (170) |
| Locum's Nest Limited | 5.6 | 550 | (18) | 532 | 10 |
| Mirada Medical Limited | 7.7 | 909 | (396) | 513 | (1,545) |
| Clear Review Limited | 3.2 | 409 | 103 | 512 | 103 |
| Koru Kids Limited | 2.1 | 460 | 48 | 508 | (208) |
| AVESI Limited | 10.5 | 340 | 138 | 478 | (29) |
| Limitless Technology Limited | 2.8 | 440 | - | 440 | - |
| The Q Garden Company Limited | 16.6 | 466 | (49) | 417 | (48) |
| Phrasee Limited | 2.0 | 410 | - | 410 | - |
| Avora Limited | 2.2 | 400 | - | 400 | - |
| Dragon Hydro Limited | 5.5 | 217 | 137 | 354 | 10 |
| Credit Kudos Limited | 1.6 | 344 | - | 344 | - |
| uMotif Limited | 1.2 | 300 | 40 | 340 | 122 |
| ePatient Network Limited (T/A Raremark) | 2.9 | 270 | 62 | 332 | (32) |
| Cisiv Limited | 7.7 | 686 | (357) | 329 | (66) |
| Abcodia Limited | 4.7 | 809 | (523) | 286 | - |
| Arecor Limited | 1.5 | 280 | - | 280 | - |
| Healios Limited | 0.9 | 270 | - | 270 | - |
| DySIS Medical Limited | 1.9 | 1,038 | (815) | 223 | (219) |
| Innovation Broking Group Limited | 8.4 | 84 | 134 | 218 | 30 |
| Greenenerco Limited | 4.0 | 121 | 86 | 207 | (1) |
| TransFICC Limited | 1.4 | 207 | - | 207 | - |
| MHS 1 Limited | 3.3 | 231 | (24) | 207 | (24) |
| Zift Channel Solutions Inc. | 1.7 | 885 | (715) | 170 | (335) |
| Imandra Inc. | 1.7 | 166 | - | 166 | - |
| Oxsensis Limited | 1.7 | 274 | (111) | 163 | (47) |
| Sandcroft Avenue Limited (T/A Hussle) | 6.4 | 1,281 | (1,160) | 121 | (1,142) |
| memsstar Limited | 2.8 | 68 | 51 | 119 | 5 |
| Premier Leisure (Suffolk) Limited | 6.2 | 109 | - | 109 | (12) |
| Erin Solar Limited | 4.3 | 120 | (17) | 103 | (12) |
| Forward Clinical Limited (T/A Pando) | 1.8 | 219 | (146) | 73 | (56) |
| Symetrica Limited | 0.3 | 89 | (18) | 71 | (13) |
| Mi-Pay Group PLC | 3.2 | 22 | - | 22 | - |
| Elements Software Limited | 0.6 | 3 | (3) | - | - |
| Total fixed asset investments | 38,333 | 14,252 | 52,585 | (327) | |
| As at 30 June 2020 | ||||
| Current asset investments | Cost £’000 | Cumulative movement in value £’000 | Value £’000 | Change in value for the period* £’000 |
| SVS Albion OLIM UK Equity Income Fund | 4,990 | (933) | 4,057 | (1,011) |
| Total current asset investments | 4,990 | (933) | 4,057 | (1,011) |
* as adjusted for additions and disposals during the period; including realised gains/(losses).
| Investment realisations in the period to 30 June 2020 | Cost£’000 | Opening value£’000 | Disposal proceeds£’000 | Total realised gain/(loss)£’000 | Gain/(loss) on opening value£’000 |
| Disposals: | |||||
| TWCL Limited | 518 | 487 | 485 | (33) | (2) |
| Loan stock repayments and other: | |||||
| Alto Prodotto Wind Limited | 21 | 31 | 31 | 10 | - |
| memsstar Limited | 6 | 6 | 6 | - | - |
| Greenenerco Limited | 3 | 4 | 4 | 1 | - |
| Escrow adjustments** | - | - | 45 | 45 | 45 |
| Total | 548 | 528 | 571 | 23 | 43 |
** Fair value movements on deferred consideration from previously disposed investments.
| Unrealised losses on fixed asset investments | (327) | ||
| Unrealised losses on current asset investments | (1,011) | ||
| Realised gains in the current period | 43 | ||
| Total losses on investments as per Income statement | (1,295) |
Condensed income statement
| Unauditedsix months ended 30 June 2020 | Unauditedsix months ended 30 June 2019 | Auditedyear ended 31 December 2019 | ||||||||
| Note | Revenue£’000 | Capital£’000 | Total£’000 | Revenue£’000 | Capital£’000 | Total£’000 | Revenue£’000 | Capital£’000 | Total£’000 | |
| (Losses)/gains on investments | 3 | - | (1,295) | (1,295) | - | 2,678 | 2,678 | - | 3,074 | 3,074 |
| Investment income | 4 | 403 | - | 403 | 593 | - | 593 | 1,294 | - | 1,294 |
| Investment management fee | 5 | (186) | (558) | (744) | (172) | (515) | (687) | (357) | (1,070) | (1,427) |
| Performance incentive fee | 5 | - | - | - | (32) | (94) | (126) | - | - | - |
| Other expenses | (141) | - | (141) | (143) | - | (143) | (268) | - | (268) | |
| Profit/(loss) on ordinary activities before tax | 76 | (1,853) | (1,777) | 246 | 2,069 | 2,315 | 669 | 2,004 | 2,673 | |
| Tax (charge)/credit on ordinary activities | (2) | 2 | - | (21) | 21 | - | (76) | 76 | - | |
| Profit/(loss) and total comprehensive income attributable to shareholders | 74 | (1,851) | (1,777) | 225 | 2,090 | 2,315 | 593 | 2,080 | 2,673 | |
| Basic and diluted return/(loss) per share (pence)* | 7 | 0.08 | (2.03) | (1.95) | 0.28 | 2.64 | 2.92 | 0.73 | 2.55 | 3.28 |
* adjusted for treasury shares
The accompanying notes below form an integral part of this Half-yearly Financial Report.
Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 June 2019 and the audited statutory accounts for the year ended 31 December 2019.
The total column of this condensed income statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies’ Statement of Recommended Practice.
Condensed balance sheet
| Note | Unaudited30 June 2020 £’000 | Unaudited30 June 2019£’000 | Audited31 December 2019 £’000 | |
| Fixed asset investments | 52,585 | 56,233 | 51,406 | |
| Current assets | ||||
| Current asset investments | 4,057 | 2,603 | 3,878 | |
| Trade and other receivables less than one year | 177 | 1,403 | 304 | |
| Cash and cash equivalents | 17,074 | 11,753 | 14,529 | |
| 21,308 | 15,759 | 18,711 | ||
| Total assets | 73,893 | 71,992 | 70,117 | |
| Payables: amounts falling due within one year | ||||
| Trade and other payables less than one year | (446) | (545) | (434) | |
| Total assets less current liabilities | 73,447 | 71,447 | 69,683 | |
| Equity attributable to equity holders | ||||
| Called up share capital | 8 | 1,036 | 934 | 938 |
| Share premium | 44,687 | 36,418 | 36,712 | |
| Capital redemption reserve | 12 | 12 | 12 | |
| Unrealised capital reserve | 13,383 | 18,320 | 14,702 | |
| Realised capital reserve | 14,619 | 11,543 | 15,151 | |
| Other distributable reserve | (290) | 4,220 | 2,168 | |
| Total equity shareholders’ funds | 73,447 | 71,447 | 69,683 | |
| Basic and diluted net asset value per share (pence)* | 79.30 | 85.28 | 83.47 |
*excluding treasury shares
The accompanying notes below form an integral part of this Half-yearly Financial Report.
Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 June 2019 and the audited statutory accounts for the year ended 31 December 2019.
These Financial Statements were approved by the Board of Directors and authorised for issue on 3 September 2020, and were signed on its behalf by
Ben LarkinChairman
Company number: 03654040
Condensed statement of changes in equity
| Called up sharecapital | Share premium | Capital redemption reserve | Unrealised capital reserve | Realised capital reserve* | Other distributable reserve* | Total | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| As at 1 January 2020 | 938 | 36,712 | 12 | 14,702 | 15,151 | 2,168 | 69,683 |
| Profit/(loss) and total comprehensive income for the period | - | - | - | (1,338) | (513) | 74 | (1,777) |
| Transfer of previously unrealised losses on disposal of investments | - | - | - | 19 | (19) | - | - |
| Purchase of shares for treasury | - | - | - | - | - | (456) | (456) |
| Issue of equity | 98 | 8,172 | - | - | - | - | 8,270 |
| Cost of issue of equity | - | (197) | - | - | - | - | (197) |
| Dividends paid | - | - | - | - | - | (2,076) | (2,076) |
| As at 30 June 2020 | 1,036 | 44,687 | 12 | 13,383 | 14,619 | (290) | 73,447 |
| As at 1 January 2019 | 839 | 28,406 | 12 | 16,234 | 11,539 | 6,348 | 63,378 |
| Profit/(loss) and total comprehensive income for the period | - | - | - | 2,510 | (420) | 225 | 2,315 |
| Transfer of previously unrealised gains on disposal of investments | - | - | - | (424) | 424 | - | - |
| Purchase of shares for treasury | - | - | - | - | - | (473) | (473) |
| Issue of equity | 95 | 8,211 | - | - | - | - | 8,306 |
| Cost of issue of equity | - | (199) | - | - | - | - | (199) |
| Dividends paid | - | - | - | - | - | (1,880) | (1,880) |
| As at 30 June 2019 | 934 | 36,418 | 12 | 18,320 | 11,543 | 4,220 | 71,447 |
| As at 1 January 2019 | 839 | 28,406 | 12 | 16,234 | 11,539 | 6,348 | 63,378 |
| Profit and total comprehensive income for the period | - | - | - | 1,667 | 413 | 593 | 2,673 |
| Transfer of unrealised gains on disposal of investments | - | - | - | (3,199) | 3,199 | - | - |
| Purchase of shares for treasury | - | - | - | - | - | (1,013) | (1,013) |
| Issue of equity | 99 | 8,521 | - | - | - | - | 8,620 |
| Cost of issue of equity | - | (215) | - | - | - | - | (215) |
| Dividends paid | - | - | - | - | - | (3,760) | (3,760) |
| As at 31 December 2019 | 938 | 36,712 | 12 | 14,702 | 15,151 | 2,168 | 69,683 |
\* These reserves amount to £14,329,000 (30 June 2019: £15,763,000; 31 December 2019: £17,319,000) which is considered distributable.
Condensed statement of cash flows
| Unauditedsix months ended 30 June 2020£’000 | Unauditedsix months ended 30 June 2019£’000 | Auditedyear ended 31 December 2019£’000 | |
| Cash flow from operating activities | |||
| Loan stock income received | 301 | 588 | 1,131 |
| Deposit interest received | 34 | 24 | 49 |
| Dividend income received | 141 | 104 | 151 |
| Investment management fee paid | (716) | (708) | (1,435) |
| Performance incentive fee paid | - | (420) | (420) |
| Other cash payments | (154) | (145) | (253) |
| Corporation tax paid | - | - | - |
| Net cash flow from operating activities | (394) | (557) | (777) |
| Cash flow from investing activities | |||
| Purchase of current asset investments | (1,190) | (1,200) | (2,400) |
| Purchase of fixed asset investments | (1,614) | (2,832) | (5,675) |
| Disposal of fixed asset investments | 196 | 1,382 | 10,560 |
| Net cash flow from investing activities | (2,608) | (2,650) | 2,485 |
| Cash flow from financing activities | |||
| Issue of share capital | 7,738 | 7,807 | 7,807 |
| Cost of issue of shares | (16) | (2) | (30) |
| Equity dividends paid | (1,719) | (1,561) | (3,132) |
| Purchase of own shares (including costs) | (456) | (473) | (1,013) |
| Net cash flow from financing activities | 5,547 | 5,771 | 3,632 |
| Increase in cash and cash equivalents | 2,545 | 2,564 | 5,340 |
| Cash and cash equivalents at start of period | 14,529 | 9,189 | 9,189 |
| Cash and cash equivalents at end of period | 17,074 | 11,753 | 14,529 |
Notes to the condensed Financial Statements
1. Basis of accountingThe condensed Financial Statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 (“FRS 102”), Financial Reporting Standard 104 – Interim Financial Reporting (“FRS 104”), and with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (“SORP”) issued by The Association of Investment Companies (“AIC”). The Financial Statements have been prepared on a going concern basis.
The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at fair value through profit and loss (“FVTPL”). The Company values investments by following the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines as issued in 2018 and further detail on the valuation techniques used are in note 2 below.
This Half-yearly Financial Report has not been audited, nor has it been reviewed by the auditor pursuant to the FRC’s guidance on Review of interim financial information.
Company information can be found on page 2 of the full Half-yearly Financial Report.
2. Accounting policiesFixed and current asset investmentsThe Company’s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.
In accordance with the requirements of FRS 102, the undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments are designated by the Company as FVTPL and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the income statement).
Subsequently, the investments are valued at fair value, which is measured as follows:
● Investments listed on recognised exchanges, including liquid open-ended equity funds, are valued at their bid prices at the end of the accounting period or otherwise at fair value based on published price quotations;
● Unquoted investments, where there is not an active market, are valued using an appropriate valuation technique in accordance with the IPEV Guidelines. Indicators of fair value are derived using established methodologies including earnings multiples, the level of third party offers received, cost or price of recent investment rounds, net assets and industry valuation benchmarks. Where price of recent investment is used as a starting point for estimating fair value at subsequent measurement dates, this has been benchmarked using an appropriate valuation technique permitted by the IPEV guidelines.
● In situations where cost or price of recent investment is used, consideration is given to the circumstances of the portfolio company since that date in determining fair value. This includes consideration of whether there is any evidence of deterioration or strong definable evidence of an increase in value. In the absence of these indicators, the investment in question is valued at the amount reported at the previous reporting date. Examples of events or changes that could indicate a diminution include:
● the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;● a significant adverse change either in the portfolio company’s business or in the technological, market, economic, legal or regulatory environment in which the business operates; or● market conditions have deteriorated, which may be indicated by a fall in the share prices of quoted businesses operating in the same or related sectors.
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.
Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the other distributable reserve when a share becomes ex-dividend.
Other current assets and payablesReceivables, payables and cash are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than creditors.
Investment incomeEquity incomeDividend income is included in revenue when the investment is quoted ex-dividend.
Unquoted loan stockFixed returns on non-equity shares and debt securities are recognised when the Company’s right to receive payment and expect settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.
Bank interest incomeInterest income is recognised on an accruals basis using the rate of interest agreed with the bank.
Investment management fees, performance incentive fees and expensesAll expenses have been accounted for on an accruals basis. Expenses are charged through the other distributable reserve except the following which are charged through the realised capital reserve:
75 per cent. of management fees and performance incentive fees are allocated to the capital account to the extent that these relate to an enhancement in the value of the investments. This is in line with the Board’s expectation that over the long term 75 per cent. of the Company’s investment returns will be in the form of capital gains; and expenses which are incidental to the purchase or disposal of an investment are charged through the realised capital reserve.TaxationTaxation is applied on a current basis in accordance with FRS 102. Current tax is tax payable (refundable) in respect of the taxable profit (loss) for the current period or past reporting periods using the tax rates and laws that have been enacted or substantively enacted at the financial reporting date. Taxation associated with capital expenses is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the Financial Statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the Financial Statements. As a VCT the Company has an exemption from tax on capital gains. The Company intends to continue meeting the conditions required to obtain approval as a VCT in the foreseeable future. The Company therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.
ReservesShare premium This reserve accounts for the difference between the price paid for shares and the nominal value of the shares, less issue costs.
Capital redemption reserveThis reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company’s own shares.
Unrealised capital reserveIncreases and decreases in the valuation of investments held at the period end against cost, are included in this reserve.
Realised capital reserveThe following are disclosed in this reserve:
gains and losses compared to cost on the realisation of investments, or permanent diminutions in value;expenses, together with the related taxation effect, charged in accordance with the above policies; anddividends paid to equity holders.Other distributable reserveThe special reserve, treasury share reserve and the revenue reserve were combined in 2012 to form a single reserve named other distributable reserve.
This reserve accounts for the movements from the revenue column of the Income statement, the payment of dividends, the buy-back of shares and other non-capital realised movements.
DividendsDividends by the Company are accounted for in the period in which the dividend is paid or approved at the Annual General Meeting.
Segmental reportingThe Directors are of the opinion that the Company is engaged in a single operating segment of business, being investment in equity and debt. The Company invests in smaller companies principally based in the UK.
3. (Losses)/gains on investments
| Unauditedsix months ended 30 June 2020 £’000 | Unauditedsix months ended 30 June 2019 £’000 | Auditedyear ended 31 December 2019 £’000 | |
| Unrealised (losses)/gains on fixed asset investments | (327) | 2,350 | 1,431 |
| Unrealised (losses)/gains on current asset investments | (1,011) | 160 | 236 |
| Realised gains on fixed asset investments | 43 | 168 | 1,407 |
| (1,295) | 2,678 | 3,074 |
4. Investment income
| Unauditedsix months ended 30 June 2020 £’000 | Unauditedsix months ended 30 June 2019 £’000 | Auditedyear ended 31 December 2019 £’000 | |
| Loan stock interest and other fixed returns | 302 | 435 | 977 |
| UK dividend income | 68 | 134 | 268 |
| Bank deposit interest | 33 | 24 | 49 |
| 403 | 593 | 1,294 |
5. Investment management fee and performance incentive fee
| Unauditedsix months ended 30 June 2020 £’000 | Unauditedsix months ended 30 June 2019 £’000 | Auditedyear ended 31 December 2019 £’000 | |
| Investment management fee charged to revenue | 186 | 172 | 357 |
| Investment management fee charged to capital | 558 | 515 | 1,070 |
| Performance incentive fee charged to revenue | - | 32 | - |
| Performance incentive fee charged to capital | - | 94 | - |
| 744 | 813 | 1,427 | |
Further details of the Management agreement under which the investment management fee and performance incentive fee are paid are given in the Strategic report on page 12 of the Annual Report and Financial Statements for the year ended 31 December 2019.
During the period, services to a total value of £744,000 (30 June 2019: £687,000; 31 December 2019: £1,427,000) were purchased by the Company from Albion Capital Group LLP. At the financial period end, the amount due to Albion Capital Group LLP in respect of these services was £375,000 (30 June 2019: £333,000; 31 December 2019: £347,000). The total annual running costs of the Company are capped at an amount equal to 2.5 per cent. of the Company’s net assets, with any excess being met by Albion by way of a reduction in management fees. During the period, the management fee was reduced by £48,000 as a result of this cap (30 June 2019: £64,000; 31 December 2019: £105,000). For the period to 30 June 2020, no performance incentive fee has been accrued, however any performance incentive fee is only payable on year end results (30 June 2019: £126,000; 31 December 2019: £nil).
During the period, the Company was not charged by Albion Capital Group LLP in respect of Patrick Reeve’s services as a Director (30 June 2019: £nil; 31 December 2019: £nil).
Albion Capital Group LLP, its Partners and staff (including Patrick Reeve) hold 660,830 Ordinary shares in the Company as at 30 June 2020.
The Manager is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the period ended 30 June 2020, fees of £77,000 attributable to the investments of the Company were paid pursuant to these arrangements (30 June 2019: £108,000; 31 December 2019: £198,000).
The Company has entered into an offer agreement relating to the Offers with the Company’s investment manager Albion Capital Group LLP, pursuant to which Albion Capital will receive a fee of 2.5 per cent. of the gross proceeds of the Offers and out of which Albion Capital will pay the costs of the Offers, as detailed in the Prospectus.
During the period, an amount of £1,190,000 (30 June 2019: £1,200,000; 31 December 2019: £2,400,000) was invested in the SVS Albion OLIM UK Equity Income Fund (“OUEIF”) as part of the Company’s management of surplus liquid funds. To avoid double charging, Albion agreed to reduce its management fee relating to the investment in the OUEIF by 0.75 per cent., which represents the OUEIF management fee charged by OLIM. This resulted in a further reduction of the management fee of £12,000 (30 June 2019: £7,000; 31 December 2019: £20,000).
6. Dividends
| Unauditedsix months ended 30 June 2020 £’000 | Unauditedsix months ended 30 June 2019 £’000 | Auditedyear ended 31 December 2019 £’000 | |
| Dividend of 2.25p per Ordinary share paid on 31 May 2019 | - | 1,880 | 1,880 |
| Dividend of 2.25p per Ordinary share paid on 30 September 2019 | - | - | 1,885 |
| Dividend of 2.25p per Ordinary share paid on 29 May 2020 | 2,076 | - | - |
| Unclaimed dividends | - | - | (5) |
| 2,076 | 1,880 | 3,760 |
The Directors have declared a second dividend for the year ending 31 December 2020 of 1.99 pence per Ordinary share (total approximately £1,843,000), payable on 30 September 2020 to shareholders on the register on 11 September 2020. The details of the new dividend policy can be found in the Interim management report above.
7. Basic and diluted return/(loss) per share
| Unauditedsix months ended 30 June 2020 | Unauditedsix months ended 30 June 2019 | Auditedyear ended 31 December 2019 | ||||||
| Revenue | Capital | Revenue | Capital | Revenue | Capital | |||
| Return/(loss) attributable to Ordinary shares (£’000) | 74 | (1,851) | 225 | 2,090 | 593 | 2,080 | ||
| Weighted average shares in issue | 91,020,671 | 79,196,675 | 81,487,820 | |||||
| Return/(loss) per Ordinary share (pence) | 0.08 | (2.03) | 0.28 | 2.64 | 0.73 | 2.55 | ||
The weighted average number of shares is calculated after adjusting for treasury shares of 10,954,270 (30 June 2019: 9,668,156; 31 December 2019: 10,350,156).
There are no convertible instruments, derivatives or contingent share agreements in issue hence there are no dilution effects to the return per share. The basic return per share is therefore the same as the diluted return per share.
8. Called up share capital
| Allotted, called up and fully paid Ordinary shares of 1 penny each | Unaudited30 June 2020 | Unaudited30 June 2019 | Audited31 December 2019 |
| Number of shares | 103,573,410 | 93,449,963 | 93,828,305 |
| Nominal value of allotted shares (£’000) | 1,036 | 934 | 938 |
| Voting rights (number of shares net of treasury shares) | 92,619,140 | 83,781,807 | 83,478,149 |
During the period to 30 June 2020 the Company purchased 604,114 Ordinary shares (nominal value £6,041) for treasury at a cost of £456,000. The total number of Ordinary shares held in treasury as at 30 June 2020 was 10,954,270 (30 June 2019: 9,668,156; 31 December 2019: 10,350,156) representing 10.6 per cent. of the Ordinary shares in issue as at 30 June 2020.
Under the terms of the Dividend Reinvestment Scheme Circular dated 27 August 2008, the following new Ordinary shares, of nominal value 1 penny each, were allotted:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares (£’000) | Issue price (pence per share) | Net invested (£’000) | Opening market price on allotment date (pence per share) |
| 29 May 2020 | 467,957 | 5 | 75.41 | 336 | 72.00 |
Under the terms of the Albion VCTs Prospectus Top Up Offers 2019/20, the following new Ordinary shares, of nominal value 1 penny each, were allotted during the period to 30 June 2020:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares (£’000) | Issue price (pence per share) | Net consideration received (£’000) | Opening market price on allotment date (pence per share) |
| 31 January 2020 | 1,843,797 | 18 | 84.80 | 1,540 | 79.50 |
| 31 January 2020 | 401,498 | 4 | 85.30 | 336 | 79.50 |
| 31 January 2020 | 6,789,082 | 68 | 85.70 | 5,674 | 79.50 |
| 30 April 2020 | 137,627 | 1 | 78.90 | 106 | 74.50 |
| 30 April 2020 | 105,144 | 1 | 79.70 | 81 | 74.50 |
| 9,277,148 | 93 | 7,737 |
9. Commitments and contingenciesAs at 30 June 2020, the Company had no financial commitments in respect of investments (30 June 2019: £nil; 31 December 2019: £nil).
There were no contingencies or guarantees of the Company as at 30 June 2020 (30 June 2019: £nil; 31 December 2019: £nil).
10. Post balance sheet events The following are the post balance sheet events since 30 June 2020:
·Investment of £1,374,000 in Quantexa Limited;·Investment of £492,000 in a new portfolio company, which provides a cloud platform that enables corporates to purchase digital gift cards and to distribute them to employees and customers;·Investment of £301,000 in Phrasee Limited;·Investment of £234,000 in uMotif Limited;·Investment of £112,000 in Oxsensis Limited; and·Investment of £47,000 in The Evewell (Harley Street) Limited.
11. Related party transactions Other than transactions with the Manager as disclosed in note 5 and that disclosed above, there are no other related party transactions or balances requiring disclosure.
12. Going concern
The Board has conducted a detailed assessment of the Company’s ability to meet its liabilities as they fall due. Cash flow forecasts are updated and discussed quarterly at Board level and have been stress tested to allow for the forecasted impact of Coronavirus (Covid-19). The Board have revisited and updated their assessment of liquidity risk and concluded that it remains unchanged since the last Annual Report and Financial Statements. Further details can be found on page 62 of those accounts.
The portfolio of investments is diversified in terms of sector and the major cash outflows of the Company (namely investments, dividends and share buy-backs) are within the Company’s control. Accordingly, after making diligent enquiries, the Directors have a reasonable expectation that the Company has adequate cash and liquid resources to continue in operational existence for the foreseeable future. For this reason, the Directors have adopted the going concern basis in preparing this Half-yearly Financial Report and this is in accordance with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued by the Financial Reporting Council in September 2014.
13. Risks and uncertainties
In addition to the risks and uncertainties outlined in the Interim management report, the Board confirms that the following major risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Financial Statements for the year ended 31 December 2019. The impact of the Coronavirus (Covid-19) pandemic has created heightened uncertainty but has not changed the nature of these risks. The Board considers that the processes for mitigating these risks remain appropriate.
1. Investment, performance and valuation riskThe risk of investment in poor quality businesses, which could reduce the capital and income returns to shareholders and could negatively impact on the Company’s current and future valuations.
By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses.
The Company’s investment valuation methodology is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported.
To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its track record over many years of making successful investments in this segment of the market. In addition, the Manager operates a formal and structured investment appraisal and review process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards), including the level of diversification in the portfolio, and the Board receives detailed reports on each investment as part of the Manager’s report at quarterly board meetings.
The unquoted investments held by the Company are designated at fair value through profit or loss and valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. The valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board.
2. VCT approval riskThe Company must comply with section 274 of the Income Tax Act 2007 which enables its investors to take advantage of tax relief on their investment and on future returns. Breach of any of the rules enabling the Company to hold VCT status could result in the loss of that status.
To reduce this risk, the Board has appointed the Manager, which has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Philip Hare & Associates LLP as its taxation adviser, who report quarterly to the Board to independently confirm compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation. Each investment in a new portfolio company is also pre-cleared with our profession advisors or H.M. Revenue & Customs. The Company monitors closely the extent of qualifying holdings and addresses this as required.
3. Regulatory and compliance risk The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company’s shares, or other penalties under the Companies Act or from financial reporting oversight bodies.
Board members and the Manager have experience of operating at senior levels within or advising quoted companies. In addition, the Board and the Manager receive regular updates on new regulation from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks through the Manager’s compliance officer, and any issues arising from compliance or regulation are reported to its own Board on a monthly basis. These controls are also reviewed as part of the quarterly Board meetings, and also as part of the review work undertaken by the Manager’s compliance officer. The report on controls is also evaluated by the internal auditors.
4. Operational and internal control riskThe Company relies on a number of third parties, in particular the Manager, for the provision of investment management and administrative functions. Failures in key systems and controls within the Manager’s business could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders.
The Company and its operations are subject to a series of rigorous internal controls and review procedures exercised throughout the year.
The Audit Committee reviews the Internal Audit Reports prepared by the Manager’s internal auditors, PKF Littlejohn LLP and has access to the internal audit partner of PKF Littlejohn LLP to provide an opportunity to ask specific detailed questions in order to satisfy itself that the Manager has strong systems and controls in place including those in relation to business continuity.
From 1 October 2018, Ocorian (UK) Limited was appointed as Depositary to oversee the custody and cash arrangements and provide other AIFMD duties. The Board reviews the quarterly reports prepared by Ocorian (UK) Limited to ensure that Albion Capital is adhering to its policies and procedures as required by the AIFMD.
In addition, the Board regularly reviews the performance of its key service providers, particularly the Manager, to ensure they continue to have the necessary expertise and resources to deliver the Company’s investment objective and policies. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual.
5. Economic, political and social riskChanges in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company’s prospects in a number of ways. This also includes risks of social upheaval, including from infection and population re-distribution, as well as economic risk challenges as a result of healthcare pandemics/infection.
The Company invests in a diversified portfolio of companies across a number of industry sectors and in addition often invests a mixture of instruments in portfolio companies and has a policy of minimising any external bank borrowings within portfolio companies.
At any given time, the Company has sufficient cash resources to meet its operating requirements, including share buy-backs and follow on investments.
In common with most commercial operations, exogenous risks over which the Company has no control are always a risk and the Company does what it can to address these risks where possible, not least as the nature of the investments the Company makes are long term.
6. Market value of Ordinary sharesThe market value of Ordinary shares can fluctuate. The market value of an Ordinary share, as well as being affected by its net asset value and prospective net asset value, also takes into account its dividend yield and prevailing interest rates. As such, the market value of an Ordinary share may vary considerably from its underlying net asset value. The market prices of shares in quoted investment companies can, therefore, be at a discount or premium to the net asset value at different times, depending on supply and demand, market conditions, general investor sentiment and other factors. Accordingly, the market price of the Ordinary shares may not fully reflect their underlying net asset value.
The Company operates a share buy-back policy, which is designed to limit the discount at which the Ordinary shares trade to around 5 per cent to net asset value, by providing a purchaser through the Company in absence of market purchasers. From time to time buy-backs cannot be applied, for example when the Company is subject to a close period, or if it were to exhaust any buy-back authorities.
New Ordinary shares are issued at sufficient premium to net asset value to cover the costs of issue and to avoid asset value dilution to existing investors.
7. Reputational riskThe Company relies on the judgement and reputation of the Manager which is itself subject to the risk of loss.
The Board regularly questions the Manager on its ethics, procedures, safeguards and investment philosophy, which should consequently result in the risk to reputation being minimised.
14. Other informationThe information set out in this Half-yearly Financial Report does not constitute the Company’s statutory accounts within the terms of section 434 of the Companies Act 2006 for the periods ended 30 June 2020 and 30 June 2019 and is unaudited. The information for the year ended 31 December 2019, does not constitute statutory accounts within the terms of section 434 of the Companies Act 2006 but is derived from the audited statutory accounts for the financial year, which have been delivered to the Registrar of Companies. The Auditor reported on those accounts; their report was unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.
15. PublicationThis Half-yearly Financial Report is being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion.capital/funds/AADV, where the Report can be accessed from the ‘Financial Reports and Circulars’ section.
Attachment
Pie chart AADV June 2020