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20 Nov 2020 09:52
Albion Enterprise VCT PLC: Half-yearly Financial ReportAlbion Enterprise VCT PLC
LEI Code 213800OVSRDHRJBMO720
As required by the UK Listing Authority's Disclosure Guidance and Transparency Rule 4.2, Albion Enterprise VCT PLC today makes public its information relating to the Half-yearly Financial Report (which is unaudited) for the six months to 30 September 2020. This announcement was approved by the Board of Directors on 20 November 2020.
The full Half-yearly Financial Report (which is unaudited) for the period to 30 September 2020, will shortly be sent to shareholders. Copies of the full Half-yearly Financial Report will be shown via the Albion Capital Group LLP website by clicking www.albion.capital/funds/AAEV/30Sep20.pdf .
Investment policy
Albion Enterprise VCT PLC (the “Company”) is a Venture Capital Trust and the investment objective of the Company is to provide investors with a regular source of income, combined with the prospect of longer term capital growth.
Investment policy
The Company will invest in a broad portfolio of higher growth businesses across a variety of sectors of the UK economy including higher risk technology companies. 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 both in terms of sector and stage of maturity of company.
VCT qualifying and non-VCT qualifying investments
Application of the investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs (“VCT regulations”). The maximum amount invested in any one company is limited to any HMRC annual investment limits. It is intended that normally at least 80 per cent. of the Company’s funds will be invested in VCT qualifying investments. The VCT regulations also have an impact on the type of investments and qualifying sectors in which the Company can make investment.
Funds held prior to investing in VCT qualifying assets or for liquidity purposes will be held as cash on deposit, invested in floating rate notes or similar instruments with banks or other financial institutions with high credit ratings or invested in liquid open-ended equity funds providing income and capital equity exposure (where it is considered economic to do so). Investment in such open-ended equity funds will not exceed 10 per cent. of the Company’s assets at the time of investment.
Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within venture capital trust qualifying industry sectors using a mixture of securities. The maximum amount which the Company will invest in a single 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.
Gearing
The Company’s maximum exposure in relation to gearing is restricted to 10 per cent. of its adjusted share capital and reserves.
Financial calendar
| Record date for second dividend | 5 February 2021 |
| Payment date for second dividend | 26 February 2021 |
| Financial year end | 31 March |
Financial summary
| Unaudited six months ended 30 September 2020 | Unaudited six months ended 30 September 2019 | Auditedyear ended 31 March 2020 | |
| (pence per share) | (pence per share) | (pence per share) | |
| Opening net asset value | 106.54 | 117.76 | 117.76 |
| Capital return/(loss) | 5.85 | 4.52 | (6.31) |
| Revenue return/(loss) | (0.20) | 0.31 | 0.61 |
| Total return/(loss) | 5.65 | 4.83 | (5.70) |
| Dividends paid | (2.70) | (3.00) | (6.00) |
| Impact from share capital movements | 0.06 | (0.17) | 0.48 |
| Net asset value | 109.55 | 119.42 | 106.54 |
| Total shareholder value to 30 September 2020: | (Pence per share) |
| Dividends paid during the year ended: | |
| 31 March 2008 | 0.70 |
| 31 March 2009 | 1.65 |
| 31 March 2010 | 2.00 |
| 31 March 2011 | 3.00 |
| 31 March 2012 | 3.00 |
| 31 March 2013 | 3.50 |
| 31 March 2014 | 5.00 |
| 31 March 2015 | 5.00 |
| 31 March 2016 | 5.00 |
| 31 March 2017 | 5.00 |
| 31 March 2018 | 5.00 |
| 31 March 2019 | 6.00 |
| 31 March 2020 | 6.00 |
| Dividends paid in the six months to 30 September 2020 | 2.70 |
| Total dividends paid to 30 September 2020 | 53.55 |
| Net asset value as at 30 September 2020 | 109.55 |
| Total shareholder value to 30 September 2020 | 163.10 |
In addition to the dividends summarised above, the Board has declared a second dividend for the year ending 31 March 2021, of 2.74 pence per share to be paid on 26 February 2021 to shareholders on the register on 5 February 2021.
NotesThe dividend of 0.70 pence per share paid during the period ended 31 March 2008 and first dividend of 0.40 pence per share paid during the year ended 31 March 2009 were paid to shareholders who subscribed in the 2006/2007 offer only.
Interim management report
Introduction
Despite the impact of the coronavirus (Covid-19) on the economy and the way we live, we are pleased to report a total return of 5.65 pence per share for the six months to 30 September 2020 (30 September 2019: 4.83 pence per share). Since the Company’s year end many of our portfolio companies have demonstrated resilient growth, providing products and services that are both innovative and necessary, even in these uncertain times. During this period a number of our portfolio companies have raised further investment at uplifted valuations.
Valuations and results
The net effect of the Board’s portfolio revaluation at 30 September 2020 has been an overall gain of £4.5 million. The key movements in the period include: a £2.5 million uplift in the valuation of Quantexa following a £50 million externally led fundraising; a £1.0 million uplift in Proveca as a result of strong sales across Europe; and £0.7 million uplift in Aridhia Informatics, a healthcare analytics company which is trading well.
Inevitably some of our portfolio companies are still impacted by Covid-19, which has resulted in reduced valuations. One such company is Mirada Medical, a medical imaging software company which uses deep learning to help clinicians plan radiation treatment. Its value reduced by £1.9 million due to the current difficulties selling to overstretched hospitals.
Similarly, our investment in the SVS Albion OLIM UK Equity Income Fund has been negatively impacted by the Covid-19 driven falls of UK quoted equities. Given the negative outlook for the UK Equity Income sector, the Board took the decision to dispose of this investment post period end with the intention of redeploying the funds into innovative growth companies where the Company is seeing resilient growth. This has resulted in a disappointing £0.9 million loss on cost, after accounting for dividends received and reduction in management fees over the life of the investment. An unrealised loss was reported in the prior year, consequently we are now reporting a small uplift reflecting a modest market recovery in the current period.
Shortly after the period end, our holding in Clear Review was sold, realising a profit of £0.3 million and generating a return of 2.1 times cost. During our short involvement, the Company scaled rapidly, becoming a leading provider of employee performance management and engagement software.
The net asset value of the Company increased from £72.5 million or 106.54 pence per share on 31 March 2020, to £74.3 million or 109.55 pence per share on 30 September 2020.
Dividend
A first dividend of 2.70 pence per share was paid on 28 August 2020. The Board has declared a second dividend of 2.74 pence per share payable on 26 February 2021, to shareholders on the register on 5 February 2021. This is in line with the new variable dividend policy, outlined in the Annual Report and Financial Statements, of targeting an annual dividend yield of around 5%. The Company continues to offer a Dividend Reinvestment Scheme whereby shareholders can elect to receive dividends in the form of new shares.
Investment activity
£3.7 million was invested in new and existing companies since 31 March. Investments in new companies included:
£564,000 in The Voucher Market Limited (trading as WeGift), a cloud platform that enables corporates to purchase digital gift cards and to distribute them to employees and customers; and£234,000 in TransFICC Limited, a provider of a connectivity solution, connecting financial institutions with trading venues via a single API.Follow on investments included £1.4m in Quantexa, to aid enterprises detecting financial crime, resulting in a significant valuation uplift; £348,000 in Phrasee, which is an AI platform that optimises digital marketing campaigns; and £294,000 in Oxsensis, a manufacturer of industrial sensors for use in ultra-high temperature environments.
Investment portfolio by sector
The pie chart at the end of this announcement outlines the different sectors in which the Company’s assets, at carrying value, are currently held.
Share buy-backs
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, including the maintenance of sufficient resources for investment in new and existing portfolio companies and the continued payment of dividends to shareholders. It is the Board’s intention for such buy-backs to be in the region of a 5% discount to net asset value so far as market conditions and liquidity permit.
Transactions with the Manager
Details of the transactions that took place with the Manager during the period can be found in note 5. Details of related party transactions can be found in note 11.
Risks & uncertainties
The 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. 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 detailed in note 13 below. 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.
Albion VCTs Top Up Offers
Details of the final allotment of shares under the Albion VCTs Prospectus Top Up Offers 2019/20 can be found in note 8. The Offer was fully subscribed and the Board elected not to exercise the over allotment facility, having raised £6 million.
The proceeds are being used to nurture our existing portfolio companies as they grow, 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.
Board composition
Lord St John of Bletso will retire from the board on 30 November 2020. Anthony has acted as Senior Independent Director and Chairman of our Audit Committee. We shall miss his contributions to the Board deliberations and wish him well in the future.
Outlook
Whilst Covid-19 continues to have a far-reaching impact on society and the economy, I am encouraged by the resilience of the portfolio. It is the Board’s priority to support the existing portfolio companies and to make new investments in businesses that can innovate and grow despite the healthcare crisis. It has been an encouraging six months, but I am mindful that the effects of the pandemic have not yet fully played out. Despite this, the Company and its portfolio are well positioned to continue to generate long term value to shareholders.
Maxwell Packe
Chairman20 November 2020
Responsibility statement
The Directors, Maxwell Packe, Lord St John of Bletso, The Dowager Lady Balfour of Burleigh, Christopher Burrows and Patrick Reeve, are responsible for preparing the Half-yearly Financial Report. In preparing these condensed Financial Statements for the period to 30 September 2020 we, the Directors of the Company, confirm that to the best of our knowledge:
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; 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 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
Maxwell Packe
Chairman20 November 2020
Portfolio of investments
| As at 30 September 2020 | ||||||
| Fixed asset investments | % voting rights | Cost£’000 | Cumulative movementin value£’000 | Value£’000 | Change in value for the period*£’000 | |
| Egress Software Technologies Limited | 9.9 | 3,365 | 5,936 | 9,301 | - | |
| Quantexa Limited | 3.5 | 2,108 | 4,738 | 6,846 | 2,541 | |
| Proveca Limited | 9.6 | 1,512 | 3,262 | 4,774 | 1,010 | |
| Radnor House School (TopCo) Limited | 9.4 | 1,729 | 1,213 | 2,942 | 119 | |
| Regenerco Renewable Energy Limited | 12.5 | 1,261 | 875 | 2,136 | 154 | |
| The Street by Street Solar Programme Limited | 8.6 | 891 | 751 | 1,642 | 33 | |
| G.Network Communications Limited | 2.7 | 273 | 1,206 | 1,479 | - | |
| Alto Prodotto Wind Limited | 11.1 | 868 | 591 | 1,459 | 21 | |
| Oviva AG | 3.4 | 1,021 | 418 | 1,439 | 167 | |
| Greenenerco Limited | 28.6 | 797 | 572 | 1,369 | 35 | |
| Phrasee Limited | 3.6 | 822 | 286 | 1,108 | 286 | |
| The Evewell (Harley Street) Limited | 7.3 | 1,054 | - | 1,054 | 183 | |
| Convertr Media Limited | 6.2 | 992 | 29 | 1,021 | 5 | |
| Oxsensis Limited | 4.3 | 1,011 | (8) | 1,003 | 227 | |
| OmPrompt Holdings Limited | 10.7 | 994 | (32) | 962 | - | |
| MPP Global Solutions Limited | 2.9 | 950 | - | 950 | - | |
| Aridhia Informatics Limited | 6.4 | 1,244 | (332) | 912 | 747 | |
| Mirada Medical Limited | 14.2 | 1,487 | (613) | 874 | (1,852) | |
| Black Swan Data Limited | 2.5 | 1,051 | (241) | 810 | (241) | |
| Elliptic Enterprises Limited | 1.0 | 792 | - | 792 | - | |
| Concirrus Limited | 1.5 | 755 | - | 755 | - | |
| Panaseer Limited | 2.3 | 547 | 204 | 751 | - | |
| Cantab Research Limited (T/A Speechmatics) | 1.7 | 696 | - | 696 | - | |
| MyMeds&Me Limited | 7.6 | 720 | (35) | 685 | - | |
| Beddlestead Limited | 8.1 | 966 | (294) | 672 | (40) | |
| uMotif Limited | 2.6 | 578 | 61 | 639 | 171 | |
| DySIS Medical Limited | 5.0 | 2,742 | (2,136) | 606 | 32 | |
| Koru Kids Limited | 2.5 | 541 | 57 | 598 | - | |
| The Voucher Market Limited (T/A WeGift) | 1.5 | 564 | - | 564 | - | |
| SBD Automotive Limited | 1.9 | 280 | 278 | 558 | 75 | |
| Clear Review Limited | 2.1 | 256 | 272 | 528 | 272 | |
| Cisiv Limited | 9.0 | 799 | (285) | 514 | 130 | |
| InCrowd Sports Limited | 3.9 | 499 | (11) | 488 | (7) | |
| Locum's Nest Limited | 4.8 | 500 | (31) | 469 | 49 | |
| ePatient Network Limited (T/A Raremark) | 3.4 | 384 | 74 | 458 | 90 | |
| Credit Kudos Limited | 2.1 | 454 | - | 454 | - | |
| Avora Limited | 2.4 | 430 | - | 430 | - | |
| Abcodia Limited | 5.6 | 953 | (616) | 337 | - | |
| memsstar Limited | 8.8 | 201 | 136 | 337 | 50 | |
| Limitless Technology Limited | 2.1 | 320 | - | 320 | - | |
| Sandcroft Avenue Limited (T/A Hussle) | 6.8 | 1,370 | (1,068) | 302 | 173 | |
| Arecor Limited | 1.5 | 290 | - | 290 | - | |
| Healios Limited | 0.9 | 270 | - | 270 | - | |
| AVESI Limited | 5.5 | 179 | 82 | 261 | 6 | |
| TransFICC Limited | 1.6 | 234 | - | 234 | - | |
| Innovation Broking Group Limited | 8.4 | 84 | 148 | 232 | 41 | |
| Zift Channel Solutions Inc. | 2.0 | 1,053 | (852) | 201 | (127) | |
| Imandra Inc. | 1.3 | 121 | - | 121 | - | |
| MHS 1 Limited | 1.2 | 83 | (10) | 73 | - | |
| Forward Clinical Limited (T/A Pando) | 1.8 | 219 | (147) | 72 | (1) | |
| Symetrica Limited | 0.2 | 55 | (11) | 44 | 12 | |
| Mi-Pay Group PLC | 5.8 | 39 | - | 39 | - | |
| Total fixed asset investments | 41,404 | 14,467 | 55,871 | 4,361 | ||
| As at 30 September 2020 | |||||
| Current asset investments | Cost£’000 | Cumulative movementin value£’000 | Value£’000 | Change in value for the period*£’000 | |
| SVS Albion OLIM UK Equity Income Fund | 4,990 | (1,392) | 3,602 | 101 | |
| Total current asset investments | 4,990 | (1,392) | 3,602 | 101 | |
* as adjusted for additions and disposals during the period; including realised gains/(losses).
| Investment realisations in the period to 30 September 2020 | Cost£’000 | Openingcarryingvalue£’000 | Disposalproceeds£’000 | Totalrealisedgain£’000 | Gain onopeningvalue£’000 |
| Loan stock repayments and other: | |||||
| Greenenerco Limited | 27 | 38 | 38 | 11 | - |
| Alto Prodotto Wind Limited | 25 | 38 | 38 | 13 | - |
| memsstar Limited | 19 | 19 | 19 | - | - |
| Escrow adjustments** | - | - | 37 | 37 | 37 |
| Total fixed asset realisations | 71 | 95 | 132 | 61 | 37 |
** Fair value movements on deferred consideration from previously disposed investments.
| Total change in value of investments for the period | 4,361 | |||||
| Movement in loan stock accrued interest | 2 | |||||
| Unrealised gains on fixed asset investments | 4,363 | |||||
| Realised gains on fixed asset investments | 37 | |||||
| Unrealised gains on current asset investments | 101 | |||||
| Total gains on investments as per Income statement | 4,501 | |||||
Condensed income statement
| Unaudited six months ended 30 September 2020 | Unaudited six months ended 30 September 2019 | Audited year ended 31 March 2020 | ||||||||
| Note | Revenue £’000 | Capital £’000 | Total £’000 | Revenue £’000 | Capital £’000 | Total £’000 | Revenue £’000 | Capital £’000 | Total £’000 | |
| Gains/(losses) on investments | 3 | - | 4,501 | 4,501 | - | 3,860 | 3,860 | - | (2,884) | (2,884) |
| Investment income | 4 | 266 | - | 266 | 659 | - | 659 | 1,157 | - | 1,157 |
| Investment management fee | 5 | (171) | (513) | (684) | (220) | (661) | (881) | (396) | (1,189) | (1,585) |
| Performance incentive fee | 5 | - | - | - | (105) | (314) | (419) | - | - | - |
| Other expenses | (231) | - | (231) | (138) | - | (138) | (363) | - | (363) | |
| Return/(loss) on ordinary activities before taxation | (136) | 3,988 | 3,852 | 196 | 2,885 | 3,081 | 398 | (4,073) | (3,675) | |
| Tax on ordinary activities | - | - | - | - | - | - | - | - | - | |
| Return/(loss) and total comprehensive income attributable to shareholders | (136) | 3,988 | 3,852 | 196 | 2,885 | 3,081 | 398 | (4,073) | (3,675) | |
| Basic and diluted return/(loss) per share (pence)* | 7 | (0.20) | 5.85 | 5.65 | 0.31 | 4.52 | 4.83 | 0.61 | (6.31) | (5.70) |
* adjusted for treasury shares
Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 September 2019 and the audited statutory accounts for the year ended 31 March 2020.
The accompanying notes below form an integral part of this Half-yearly Financial Report.
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 | Unaudited 30 September 2020£’000 | Unaudited 30 September 2019£’000 | Audited 31 March 2020£’000 | |
| Fixed asset investments | 55,871 | 62,616 | 47,859 | |
| Current assets | ||||
| Current asset investments | 3,602 | 4,948 | 3,501 | |
| Trade and other receivables less than one year | 178 | 2,681 | 182 | |
| Cash and cash equivalents | 15,542 | 6,947 | 21,510 | |
| 19,322 | 14,576 | 25,193 | ||
| Total assets | 75,193 | 77,192 | 73,052 | |
| Payables: amounts falling due within one year | ||||
| Trade and other payables less than one year | (913) | (988) | (499) | |
| Total assets less current liabilities | 74,280 | 76,204 | 72,553 | |
| Equity attributable to equity holders | ||||
| Called up share capital | 8 | 775 | 720 | 770 |
| Share premium | 44,679 | 38,285 | 44,183 | |
| Capital redemption reserve | 104 | 104 | 104 | |
| Unrealised capital reserve | 13,075 | 21,789 | 8,636 | |
| Realised capital reserve | 13,601 | 7,857 | 14,052 | |
| Other distributable reserve | 2,046 | 7,449 | 4,808 | |
| Total equity shareholders’ funds | 74,280 | 76,204 | 72,553 | |
| Basic and diluted net asset value per share (pence)* | 109.55 | 119.42 | 106.54 |
* excluding treasury shares
Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 September 2019 and the audited statutory accounts for the year ended 31 March 2020.
The accompanying notes below form an integral part of this Half-yearly Financial Report.
These Financial Statements were approved by the Board of Directors, and authorised for issue on 20 November 2020 and were signed on its behalf by
Maxwell Packe
Chairman
Company number: 05990732
Condensed statement of changes in equity
| Called upsharecapital£’000 | Sharepremium£’000 | Capital redemption reserve£’000 | Unrealisedcapitalreserve £’000 | Realisedcapitalreserve*£’000 | Other distributablereserve*£’000 | Total£’000 | |
| As at 1 April 2020 | 770 | 44,183 | 104 | 8,636 | 14,052 | 4,808 | 72,553 |
| Return/(loss) and total comprehensive income for the period | - | - | - | 4,464 | (476) | (136) | 3,852 |
| Transfer of previously unrealised gains on disposal of investments | - | - | - | (25) | 25 | - | - |
| Issue of equity | 5 | 502 | - | - | - | - | 507 |
| Cost of issue of equity | - | (6) | - | - | - | - | (6) |
| Purchase of own shares for treasury | - | - | - | - | - | (790) | (790) |
| Dividends paid | - | - | - | - | - | (1,836) | (1,836) |
| As at 30 September 2020 | 775 | 44,679 | 104 | 13,075 | 13,601 | 2,046 | 74,280 |
| As at 1 April 2019 | 650 | 30,255 | 104 | 18,672 | 8,089 | 9,618 | 67,388 |
| Return/(loss) and total comprehensive income for the period | - | - | - | 3,599 | (714) | 196 | 3,081 |
| Transfer of previously unrealised gains on disposal of investments | - | - | - | (482) | 482 | - | - |
| Issue of equity | 70 | 8,229 | - | - | - | - | 8,299 |
| Cost of issue of equity | - | (199) | - | - | - | - | (199) |
| Purchase of own shares for treasury | - | - | - | - | - | (454) | (454) |
| Dividends paid | - | - | - | - | - | (1,911) | (1,911) |
| As at 30 September 2019 | 720 | 38,285 | 104 | 21,789 | 7,857 | 7,449 | 76,204 |
| As at 1 April 2019 | 650 | 30,255 | 104 | 18,672 | 8,089 | 9,618 | 67,388 |
| Return/(loss) and total comprehensive income for the year | |||||||
| - | - | - | (5,996) | 1,923 | 398 | (3,675) | |
| Transfer of previously unrealised gains on disposal of investments | - | - | - | (4,040) | 4,040 | - | - |
| Issue of equity | 120 | 14,270 | - | - | - | - | 14,390 |
| Cost of issue of equity | - | (342) | - | - | - | - | (342) |
| Purchase of own shares for treasury | - | - | - | - | - | (1,252) | (1,252) |
| Dividends paid | - | - | - | - | - | (3,956) | (3,956) |
| As at 31 March 2020 | 770 | 44,183 | 104 | 8,636 | 14,052 | 4,808 | 72,553 |
* These reserves amount to £15,647,000 (30 September 2019: £15,306,000; 31 March 2020: £18,860,000) which is considered distributable.
Condensed statement of cash flows
| Unaudited six months ended 30 September 2020£’000 | Unaudited six months ended 30 September 2019£’000 | Audited year ended 31 March 2020£’000 | |
| Cash flow from operating activities | |||
| Investment income received | 211 | 735 | 1,001 |
| Dividend income received | 42 | 106 | 310 |
| Deposit interest received | 16 | 27 | 71 |
| Investment management fee paid | (710) | (832) | (1,648) |
| Performance incentive fee paid | - | (1,332) | (1,332) |
| Other cash payments | (268) | (160) | (307) |
| UK corporation tax paid | - | - | - |
| Net cash flow from operating activities | (709) | (1,456) | (1,905) |
| Cash flow from investing activities | |||
| Purchase of current asset investments | - | (1,190) | (1,194) |
| Purchase of fixed asset investments | (3,745) | (2,978) | (5,340) |
| Disposal of fixed asset investments | 139 | 2,340 | 16,656 |
| Net cash flow from investing activities | (3,606) | (1,828) | 10,122 |
| Cash flow from financing activities | |||
| Issue of share capital | 205 | 7,807 | 13,432 |
| Cost of issue of equity | (17) | (2) | (17) |
| Dividends paid | (1,535) | (1,603) | (3,311) |
| Purchase of own shares (including costs) | (306) | (412) | (1,252) |
| Net cash flow from financing activities | (1,653) | 5,790 | 8,852 |
| (Decrease)/increase in cash and cash equivalents | (5,968) | 2,506 | 17,069 |
| Cash and cash equivalents at start of the period | 21,510 | 4,441 | 4,441 |
| Cash and cash equivalents at end of the period | 15,542 | 6,947 | 21,510 |
Notes to the condensed Financial Statements
1. Accounting convention
The condensed Financial Statements have been prepared 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 and further detail on the valuation techniques used are outlined 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, those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments, including loan stock, are classified by the Company as FVTPL and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the Income statement).
Subsequently, the investments are valued at ‘fair value’, which is measured as follows:
Investments listed on recognised exchanges, 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 the Company has an investment in an early stage enterprise, the price of a recent investment is often the most appropriate approach to determining fair value. 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; ormarket 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 payables.
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 expected 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 fee, performance incentive fee and other 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 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; andexpenses 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 (tax loss) for the current period or past reporting periods using the tax rates and laws that have been enacted or substantively enacted at the financial reporting date. Taxation associated with capital expenses is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the Financial Statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the Financial Statements. As a VCT the Company has an exemption from tax on capital gains. The Company intends to continue meeting the conditions required to obtain approval as a VCT in the foreseeable future. The Company, therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.
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; and·dividends paid to equity holders.
Other distributable reserveThe special reserve, treasury share reserve and the revenue reserve were combined in 2013 to form a single reserve named other distributable reserve.
This reserve accounts for movements from the revenue column of the Income statement, the payment of dividends, the buyback 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. Gains/(losses) on investments
| Unaudited six months ended 30 September 2020£’000 | Unaudited six months ended 30 September 2019£’000 | Audited year ended 31 March 2020£’000 | |
| Unrealised gains/(losses) on fixed asset investments | 4,363 | 3,484 | (4,661) |
| Unrealised gains/(losses) on current asset investments | 101 | 115 | (1,335) |
| Realised gains on fixed asset investments | 37 | 261 | 3,112 |
| 4,501 | 3,860 | (2,884) |
4. Investment income
| Unaudited six months ended 30 September 2020£’000 | Unaudited six months ended 30 September 2019£’000 | Audited year ended 31 March 2020£’000 | |
| Interest from loans to portfolio companies | 209 | 526 | 776 |
| Dividends | 42 | 106 | 310 |
| Bank deposit interest | 15 | 27 | 71 |
| 266 | 659 | 1,157 |
5. Investment management fee and performance incentive fee
| Unaudited six months ended 30 September 2020£’000 | Unaudited six months ended 30 September 2019£’000 | Audited year ended 31 March 2020£’000 | |
| Investment management fee charged to revenue | 171 | 220 | 396 |
| Investment management fee charged to capital | 513 | 661 | 1,189 |
| Performance incentive fee charged to revenue | - | 105 | - |
| Performance incentive fee charged to capital | - | 314 | - |
| 684 | 1,300 | 1,585 |
Further details of the Management agreement under which the investment management fee and performance incentive fee are paid is given in the Strategic report on page 14 of the Annual Report and Financial Statements for the year ended 31 March 2020.
During the period, services of a total value of £757,000 (30 September 2019: £881,000; 31 March 2020: £1,659,000) were purchased by the Company from Albion Capital Group LLP; this includes £684,000 (30 September 2019: £881,000; 31 March 2020: £1,585,000) of management fee and £73,000 (30 September 2019: £nil; 31 March 2020: £74,000) of administration fee. At the financial period end, the amount due to Albion Capital Group LLP in respect of these services disclosed within payables was £359,000 (30 September 2019: £460,000; 31 March 2020: £384,000). For the period to 30 September 2020, no performance incentive fee has been accrued (30 September 2019: £419,000; 31 March 2020: £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 September 2019: £nil; 31 March 2020: £nil).
Albion Capital Group LLP, its partners and staff (including Patrick Reeve) hold a total of 468,349 shares in the Company as at 30 September 2020.
Albion Capital Group LLP is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the period to 30 September 2020, fees of £89,000 attributable to the investments of the Company were received pursuant to these arrangements (30 September 2019: £103,000; 31 March 2020: £186,000).
The Company entered into an offer agreement relating to the Offers which were open in the period with the Company’s investment manager Albion Capital Group LLP, pursuant to which Albion Capital receives 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 part of the Company’s management of surplus liquid funds, there was a current asset investment held during this period; SVS Albion OLIM UK Equity Income Fund (“OUEIF”). To avoid double charging, Albion Capital 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 reduction of the management fee of £13,900 (30 September 2019: £16,100; 31 March 2020: £32,000).
6. Dividends
| Unaudited six months ended 30 September 2020 £’000 | Unaudited six months ended 30 September 2019 £’000 | Audited year ended 31 March 2020 £’000 | |
| Dividend of 3.00p per share paid on 30 August 2019 | - | 1,911 | 1,911 |
| Dividend of 3.00p per share paid on 28 February 2020 | - | - | 2,045 |
| Dividend of 2.70p per share paid on 28 August 2020 | 1,836 | - | - |
| 1,836 | 1,911 | 3,956 |
In addition to the dividends summarised above, the Board has declared a second dividend for the year ending 31 March 2021 of 2.74 pence per share which will be paid on 26 February 2021 to shareholders on the register on 5 February 2021. This is expected to amount to approximately £1,858,000.
7. Basic and diluted return/(loss) per share
| Unauditedsix months ended30 September 2020 | Unauditedsix months ended30 September 2019 | Auditedyear ended31 March 2020 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |
| Return/(loss) attributable to equity shares (£’000) | (136) | 3,988 | 3,852 | 196 | 2,885 | 3,081 | 398 | (4,073) | (3,675) |
| Weighted average shares in issue (adjusting for treasury shares) | 68,156,133 | 63,802,980 | 64,506,507 | ||||||
| Return/(loss) attributable per Ordinary share (pence) (basic and diluted) | (0.20) | 5.85 | 5.65 | 0.31 | 4.52 | 4.83 | 0.61 | (6.31) | (5.70) |
The weighted average number of shares is calculated after adjusting for treasury shares of 9,717,736 (30 September 2019: 8,231,443; 31 March 2020: 8,945,314).
There are no convertible instruments, derivatives or contingent share agreements in issue for the Company, therefore no dilution affecting 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 shares of 1 penny each | Unaudited30 September 2020 | Unaudited30 September 2019 | Audited31 March 2020 | |||
| Number of shares | 77,523,553 | 72,041,984 | 77,044,547 | |||
| Nominal value of allotted shares (£’000) | 775 | 720 | 770 | |||
| Voting rights (number of shares net of treasury shares) | 67,805,817 | 63,810,541 | 68,099,233 | |||
In the six months to 30 September 2020, the Company purchased 772,422 shares (30 September 2019: 410,000; 31 March 2020: 1,123,871) to be held in treasury at a nominal value of £7,724 and at a cost of £790,000 (30 September 2019: £454,000; 31 March 2020: £1,252,000), representing 1.1% of the shares in issue (excluding treasury shares) as at 30 September 2020.
The Company holds a total of 9,717,736 shares (30 September 2019: 8,231,443; 31 March 2020: 8,945,314) in treasury representing 12.5% of the shares in issue as at 30 September 2020.
Under the terms of the Dividend Reinvestment Scheme Circular (dated 26 November 2009), the following new Ordinary shares of nominal value 1 penny each were allotted during the period to 30 September 2020:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares | Issue price (pence per | Net invested | Opening market price on allotment date | |
| £’000 | share) | £’000 | (pence per share) | |||
| 28 August 2020 | 286,480 | 3 | 103.84 | 296 | 98.00 | |
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 September 2020:
| Date of allotment | Number of shares allotted | Aggregate nominal value of shares | Issue price (pence per | Net consideration received | Opening market price on allotment date |
| £’000 | share) | £’000 | (pence per share) | ||
| 30 April 2020 | 90,192 | 1 | 108.20 | 96 | 95.00 |
| 30 April 2020 | 102,334 | 1 | 109.30 | 109 | 95.00 |
| 192,526 | 2 | 205 |
9. Commitments and contingencies
As at 30 September 2020, the Company had no financial commitments in respect of investments (30 September 2019: £nil; 31 March 2020: £139,000).
There were no contingencies or guarantees of the Company as at 30 September 2020 (30 September 2019: £nil; 31 March 2020: £nil).
10. Post balance sheet events
The following are the post balance sheet events since 30 September 2020:
Our holding in SVS Albion OLIM UK Equity Income Fund was exited with total proceeds (including dividends and management fees saved) of £4.11 million on cost of £4.99 million;Proceeds of £528,000 received from the sale of Clear Review Limited on cost of £256,000;Investment of £371,000 in a new portfolio company, Seldon Technologies Limited, a software company that enables enterprises to deploy Machine Learning models in production;Investment of £151,000 in an existing portfolio company, Limitless Technology Limited, a provider of a customer service platform powered by the crowd and Machine Learning technology;Investment of £134,000 in a new portfolio company, uMedeor Limited (trading as uMed), a middleware technology platform that enables life science organisations to conduct medical research programmes; andInvestment of £110,000 in an existing portfolio company, Arecor Limited, which develops biopharmaceuticals through the application of a formulation technology platform.11. Related party transactionsOther than transactions with the Manager as described in note 5, there are no other related party transactions.
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 67 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.
13. Risks and UncertaintiesIn 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 March 2020. 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 risk The 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 volatile than larger, long established businesses. Investments in open-ended equity funds result in exposure to market risk through movements in price per unit. 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 Board and Manager regularly reviews the deployment of cash resources into equity markets, the extent of exposure and performance of the exposure. 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 updated in 2018. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. The valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board.
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 professional advisers or H.M. Revenue & Customs. The Company monitors closely the extent of qualifying holdings and addresses this as required.
3. Regulatory and compliance riskThe 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, and receives reports from the Manager on internal controls and risk management, including on matters relating to cyber security. 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 and cyber security. From 1 October 2018, Ocorian (UK) Limited was appointed as Depositary to oversee the custody and cash arrangements and provide other AIFMD duties. The Board reviews the quarterly reports prepared by Ocorian (UK) Limited to ensure that Albion Capital is adhering to its policies and procedures as required by the AIFMD. In addition, the Board regularly reviews the performance of its key service providers, particularly the Manager, to ensure they continue to have the necessary expertise and resources to deliver the Company’s investment objective and policy. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual. 5. Economic, political and social risk Changes 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 current risk to the Company, and the wider population and economy, is the coronavirus (Covid-19) pandemic..
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. With regards to coronavirus (Covid-19), the Manager is having ongoing discussions with all portfolio companies, in order to ascertain where support is most needed. Cash comprises a significant proportion of net assets, following a strong year of exits and the most recent Top Up, which can be used in part to help mitigate any immediate cashflow problems for these portfolio companies. The portfolio is structured as an all-weather portfolio with c.50 companies which are diversified as discussed above. Exposure is small to at-risk sectors that include leisure, hospitality, retail and travel.
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 information
The 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 September 2020 and 30 September 2019, and is unaudited. The information for the year ended 31 March 2020 does not constitute statutory accounts within the terms of section 434 of the Companies Act 2006 but is derived from the 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 statements under s498 (2) or (3) of the Companies Act 2006.
15. Publication
This 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/AAEV, where the Report can be accessed from the ‘Financial Reports and Circulars’ section.
Attachment
Pie chart for AAEV announcement 30.09.2020