Artificial Intelligence
Albion Enterprise VCT PLC: Annual Financial Report
Albion Enterprise VCT PLC
LEI number: 213800OVSRDHRJBMO720
As required by the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules 4.1 and 6.3, Albion Enterprise VCT PLC today makes public its information relating to the Annual Report and Financial Statements for the year ended 31 March 2022.
This announcement was approved for release by the Board of Directors on 30 June 2022.
This announcement has not been audited.
The Annual Report and Financial Statements for the year ended 31 March 2022 (which have been audited), will shortly be sent to shareholders. Copies of the full Annual Report and Financial Statements will be shown via the Albion Capital Group LLP website by clicking www.albion.capital/funds/AAEV/31Mar2022.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 relevant 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 is 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 first interim dividend | 5 August 2022 |
| Payment date for first interim dividend | 31 August 2022 |
| Annual General Meeting | Noon on 30 August 2022 |
| Announcement of Half-yearly results for the six months ending 30 September 2022 | December 2022 |
Financial highlights
| 23.77p | Increase in total shareholder value (pence per share) for the year ended 31 March 2022† |
| 20.74% | Shareholder return for the year ended 31 March 2022† |
| 6.09p | Tax-free dividend per share for the year ended 31 March 2022 |
| 132.28p | Net asset value per share on 31 March 2022 |
| 194.66p | Total shareholder value to 31 March 2022† |
†These are considered Alternative Performance Measures, see notes 2 and 3 in the Strategic report below for further explanation.
| 31 March 2022 (pence per share) | 31 March 2021 (pence per share) |
|
| Opening net asset value | 114.60 | 106.54 |
| Capital return | 23.78 | 13.96 |
| Revenue return/(loss) | 0.19 | (0.51) |
| Total return | 23.97 | 13.45 |
| Dividends paid | (6.09) | (5.44) |
| Impact from share capital movements | (0.20) | 0.05 |
| Net asset value | 132.28 | 114.60 |
| Pence per share | |
| Total dividends paid per share to 31 March 2022 | 62.38 |
| Net asset value per share on 31 March 2022 | 132.28 |
| Total shareholder value per share to 31 March 2022 | 194.66 |
A more detailed breakdown of the dividends paid per year can be found at www.albion.capital/funds/AAEV under the ‘Dividend History’ section.
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2023, of 3.31 pence per Ordinary share to be paid on 31 August 2022 to shareholders on the register on 5 August 2022.
Chairman’s statement
Introduction
The Company has achieved an increase in total shareholder value of 23.77 pence per share for the year (20.7% on opening net asset value), after a strong year for several of our portfolio companies. The Company continues to benefit from the resilience of its portfolio, particularly its healthcare and software businesses, many of which have achieved excellent growth despite the worsening economic outlook resulting from the effects of the Covid-19 pandemic, the Russian invasion of Ukraine and high inflation. It is not clear how long the economy will be impacted, however I am encouraged that we continue to see attractive investment opportunities in the health technology and enterprise software sectors where the Manager has developed deep expertise.
Results and dividends
On 31 March 2022 the net asset value was 132.28 pence per share compared to 114.60 pence per share on 31 March 2021. The total return before taxation was £18.1 million compared to a return of £9.2 million for the previous year. The positive progress of a number of our portfolio companies is discussed later in this statement and in the Strategic report below. These excellent results for the year have resulted in a performance incentive fee payable to the Manager of £1.9 million (2021: £0.3 million).
In line with our variable dividend policy targeting around 5% of NAV per annum the Company paid dividends totalling 6.09 pence per share during the year ended 31 March 2022 (2021: 5.44 pence per share). The Company will pay a first dividend for the financial year ending 31 March 2023 of 3.31 pence per share on 31 August 2022 to shareholders on the register on 5 August 2022, being 2.5% of the latest reported NAV.
Investment performance and progress
The Company has received disposal proceeds of £10.2 million (2021: £5.3 million). Five portfolio companies were sold in the year:
• Phrasee generated proceeds of £2.7 million and a return of 3.2 times cost;
• MyMeds&Me generated proceeds of £2.4 million and a return of 3.4 times cost;
• Credit Kudos generated proceeds of £2.3 million and a return of 5.2 times cost;
• MPP Global Solutions generated proceeds of £1.3 million and a return of 1.3 times cost; and
• Innovation Broking Group generated proceeds of £0.9 million and a return of 10.3 times cost.
Further details of other realisations during the year can be found in the table in the Portfolio of Investments on pages 25 and 26 of the full Annual Report and Financial Statements.
There were net valuation gains on investments of £21.6 million in the year, an increase from £10.2 million in the previous year. The key contributors were the uplifts on Quantexa (£7.7 million) and Oviva (£2.5 million), both of which have been revalued after further externally led funding rounds and Egress Software Technologies (£2.4 million) and Proveca (£0.6 million), both of which continue to grow. However, our investments in Mirada Medical, Concirrus and Avora were written down following difficult trading conditions, in part because of the Covid-19 pandemic. We have also written-off our investment in Xperiome which went into administration.
The Company has been an active investor during the year with £9.0 million invested in new and existing companies. The Company has invested £2.8 million in six new portfolio companies, all of which are targeted to require further investment as the companies prove themselves and grow:
• £0.8 million into NuvoAir Holdings, a provider of digital therapeutics and decentralised clinical trials for respiratory conditions;
• £0.8 million into Gravitee Topco (trading as Gravitee.io), an application programming interface (API) management platform;
• £0.5 million into Perchpeek, a digital relocation platform;
• £0.3 million into Brytlyt, which uses patented software and artificial intelligence (AI), combined with the superior computation power of graphics processing units (GPUs), to derive insights thousands of times faster than legacy systems;
• £0.3 million into Accelex Technology, a data extraction and analytics technology for private capital markets; and
• £0.1 million into Regulatory Genome Development, a provider of machine readable structured regulatory content.
A further £6.2 million was invested into 16 existing portfolio companies, of which the largest were: £1.4 million into Oviva; £0.7 million into TransFICC; and £0.5 million each into Seldon Technologies, uMotif and Black Swan Data.
A review of business and future prospects is included in the Strategic report below.
A full list of the Company’s investments and disposals, including their movements in value for the year, can be found in the Portfolio of investments on pages 25 and 26 of the full Annual Report and Financial Statements.
Risks and uncertainties
In addition to the risks around Covid-19, which have been a major factor for the past 2 years, the UK is experiencing its highest level of inflation in decades, as well as the uncertainty over the future course and global impact of Russia’s invasion of Ukraine. Our investment portfolio, while concentrated mainly in the technology and healthcare sectors, remains diversified in terms of both sub-sector and stage of maturity and, importantly, we believe to be appropriately valued. While we would expect these valuations to be robust within the tolerance of normal market fluctuations, the potential but unknown, scale of any further adverse events arising out of the Ukraine invasion remain a major risk factor.
A detailed analysis of the other risks and uncertainties facing the business is shown in the Strategic report below.
Sunset Clause
In 2015 a VCT “sunset clause” was introduced as a requirement of an EU state aid notification. This provides that income tax relief will no longer be given to subscriptions made on or after 6 April 2025, unless the legislation is amended to make the scheme permanent or the “sunset clause” is extended. Our Manager, Albion Capital, is working, alongside the VCT industry, to demonstrate to Government the importance of VCTs as a source of early stage capital to support entrepreneurs creating innovative growth businesses employing thousands of people throughout the UK. Given its importance, the Board expects that the VCT scheme will continue to attract Government support.
Board composition
On 1 September 2021, Pippa Latham joined the Board. Pippa brings extensive experience across the financial sector as well as Board membership of a variety of successful technology and other commercial organisations. She is a Cambridge graduate, holds an MBA from INSEAD and is both a qualified accountant and a member of the Institute of Chartered Secretaries and Administrators. The Board believes that Pippa will add considerable value during her tenure.
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. 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. The Board continues to review the use of buy-backs and is satisfied that it is an important means of providing market liquidity for shareholders.
Cancellation of share premium and capital redemption reserve
The Company obtained authority to cancel the amount standing to the credit of its share premium and capital redemption reserves at the General Meeting on 21 February 2022. The purpose of the proposal was to increase the distributable reserves available to the Company for the payment of dividends, the buy-back of shares, and for other corporate purposes.
The proposal received the consent of the Court on 22 March 2022, and the changes have been registered at Companies House on 31 March 2022. Over time, this will create additional distributable reserves of £66.2 million.
Albion VCTs Prospectus Top Up Offers
Your Board, in conjunction with the boards of the other five VCTs managed by Albion Capital Group LLP, launched a prospectus top up offer of new Ordinary shares on 6 January 2022. The Board announced on 22 March 2022 that, following strong demand, it would utilise part of its over-allotment facility, bringing the total to be raised to £21.5 million. The Offer was fully subscribed and closed to further applications on 24 March 2022.
The proceeds are being used to provide support to our existing portfolio companies and to enable us to take advantage of new investment opportunities. Details of share allotments made during and after the financial year end can be found in notes 15 and 19 respectively.
Annual General Meeting (“AGM”)
Based on the success of last year’s live webcast AGM, the Board has decided to adopt a virtual format for the AGM again this year. The AGM will be held at noon on 30 August 2022 via the Lumi platform. Information on how to participate in the live webcast can be found on the Manager’s website www.albion.capital/vct-hub/agms-events.
The Board welcome questions from shareholders at the AGM and shareholders will be able to ask questions using the Lumi platform during the AGM. Alternatively, shareholders can email their questions to [email protected] prior to the AGM.
Shareholders’ views are important, and the Board encourages shareholders to vote on the resolutions.
Further details on the format and business to be conducted at the AGM can be found in the Directors’ report on pages 36 and 37 and in the Notice of the Meeting on pages 72 to 75 of the full Annual report and Financial Statements.
Outlook and prospect
These positive results demonstrate the resilience of our portfolio of companies which are at different stages of maturity and targeted at sectors such as software and healthcare. These are companies which provide products and services that are considered innovative and essential to their customers. I am confident that our portfolio companies are well positioned to grow, despite the considerable uncertainty around the longer-term impact of the pandemic, high levels of inflation, and an increasingly volatile geopolitical backdrop. The Board believes the Company is well placed to continue to deliver long term value to our shareholders, though remains mindful of the considerably uncertain economic outlook.
Maxwell Packe
Chairman
30 June 2022
Strategic report
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.
The full investment policy can be found above.
Current portfolio sector allocation
The pie charts at the end of this announcement show the split of the portfolio valuation on 31 March 2022 by: sector; stage of investment; and number of employees. This is a useful way of assessing how the Company and its portfolio is diversified across sector, portfolio companies’ maturity measured by revenues and their size measured by the number of people employed. As the Company continues to invest in software and other technology companies, FinTech (which is technology specifically applicable to financial services companies) is included as a subsector below due to its prominence. Details of the principal investments made by the Company are shown in the Portfolio of investments on pages 25 and 26 of the full Annual Report and Financial Statements.
Direction of portfolio
The portfolio remains well-balanced across the different sectors of FinTech, Healthcare and other Software & Technology. The renewable energy investments whilst maintaining their value during the year, are reducing as a percentage of the portfolio as the net asset value of the Company has been increasing over recent years. Cash and other net assets is relatively high at 32%, but this is a result of the recent fundraise, as well as the disposal of three of our portfolio companies in March 2022. These funds will continue to be invested predominantly into higher growth technology companies and the Manager has outlined to the Board a pipeline of new and follow-on investments where it aims to deploy cash over the next 12 months. The Company has a significant speciality in FinTech investing, which can be seen as a growing part of the portfolio, represented by a 3% increase this year.
Results and dividend policy
| £’000 | |
| Net capital return for the year ended 31 March 2022 | 17,940 |
| Net revenue return for the year ended 31 March 2022 | 141 |
| Total return for the year ended 31 March 2022 | 18,081 |
| Dividend of 2.87 pence per share paid on 31 August 2021 | (2,139) |
| Dividend of 3.22 pence per share paid on 28 February 2022 | (2,391) |
| Reclaimed dividends | 2 |
| Transferred to reserves | 13,553 |
| Net assets on 31 March 2022 | 118,415 |
| Net asset value on 31 March 2022 (pence per share) | 132.28 |
The Company paid dividends totalling 6.09 pence per share during the year ended 31 March 2022 (2021: 5.44 pence per share). The Board has declared a first dividend for the year ending 31 March 2023, of 3.31 pence per Ordinary share to be paid on 31 August 2022 to shareholders on the register on 5 August 2022.
As shown in the Company’s Income statement below, the total return for the year was 23.97 pence per share (2021: 13.45 pence per share). Investment income increased to £886,000 (2021: £543,000), This is a result of Radnor House repaying the previously capitalised interest and the Evewell Group Limited paying interest. Consequently, there is a net revenue gain to shareholders of £141,000 (2021: loss of £349,000). In addition, the total return has benefitted from the increased percentage of investment management fees and performance incentive fees allocated to the realised capital reserve, to better align with the Board’s expectation that over the long term the majority of the Company’s investment returns will be in the form of capital gains. Further information can be found in the Notes to the Financial Statements below.
The capital return on investments for the year of £21,636,000 (2021: £10,892,000) has been explained in the Chairman’s statement above. This has led to a significant increase in net asset value to 132.28 pence per share (2021: 114.60 pence per share), which can be seen on the Balance sheet below. This increase in net asset value is after taking account of the payment of 6.09 pence per share of dividends during the year.
There was a net cash inflow for the Company of £5,123,000 for the year (2021: £2,919,000), which has arisen from both the disposal of fixed asset investments and the issue of Ordinary shares under the Albion VCTs Top Up Offers, reduced by the investment in fixed asset investments, dividends paid, operating expenses and the buy back of shares.
Review of business and future changes
A detailed review of the Company’s business during the year is contained in the Chairman’s statement above. Total gains on investments for the year were £21.6 million (2021: £10.9 million).
There is a continuing focus on growing the FinTech, healthcare and other software and technology sectors. The majority of these investment returns are delivered through equity and capital gains, and we expect our investment income to continue to be similar to the current level.
Details of significant events which have occurred since the end of the financial year are listed in note 19. Details of transactions with the Manager are shown in note 5.
Future prospects
The Company’s financial results for the year demonstrates that the portfolio remains well balanced across sectors and risk classes, and has largely weathered the pandemic so far. Although there remains much uncertainty, the Manager has a strong pipeline of investment opportunities in which the Company’s cash can be deployed. The Board considers that the current portfolio and the pipeline of opportunities should enable the Company to maintain a predictable stream of dividend payments to shareholders, as well as delivering long term growth for shareholders.
Key performance indicators (“KPIs”) and Alternative Performance Measures (“APMs”)
The Directors believe that the following KPIs (some of which are APMs), which are typical for Venture Capital Trusts, used in its own assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company is applying its investment policy to meet its objectives. The Directors are satisfied that the results shown in the following KPIs and APMs give a good indication that the Company is achieving its investment objective and policy. These are:
1. Total shareholder value relative to FTSE All Share Index total return
The graph on page 4 of the full Annual report and Financial Statements shows the Company’s total shareholder value relative to the FTSE All-Share Index total return, with dividends reinvested. The FTSE All-Share index is considered a reasonable benchmark as the Company is classed as a generalist UK VCT investor, and this index includes over 600 companies listed in the UK, including small-cap, covering a range of sectors. Details on the performance of the net asset value and return per share for the year are shown in the Chairman’s statement above.
2. Net asset value per share and total shareholder value
Total shareholder value increased by 23.77 pence per share to 194.66 pence per share for the year ended 31 March 2022 (return of 20.74% on opening net asset value).
3. Shareholder return in the year†
The graph on page 5 of the full Annual report and Financial Statements shows the Company’s total shareholder return over the previous ten years, five years, three years and the past year, and the annual returns for the same period are detailed below.
| 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
| 13.5% | 9.7% | 4.5% | 5.4% | 10.8% | 12.4% | 13.1% | (4.4)% | 12.7% | 20.7% |
†Methodology: Shareholder return is calculated by the movement in total shareholder value for the year divided by the opening net asset value.
4. Dividend distributions
Dividends paid in respect of the year ended 31 March 2022 were 6.09 pence per share (2021: 5.44 pence per share), a yield of 5.3% on opening net asset value. The cumulative dividends paid since inception total 62.38 pence per share.
5. Ongoing charges
The ongoing charges ratio for the year ended 31 March 2022 was 2.50% (2021: 2.50%). The ongoing charges ratio has been calculated using The Association of Investment Companies’ (AIC) recommended methodology. This figure shows shareholders the total recurring annual running expenses (including investment management fees charged to capital reserve) as a percentage of the average net assets attributable to shareholders. The ongoing charges cap is 2.50%, which has resulted in a saving of £22,000 to shareholders during the year (2021: £53,000).
6. VCT compliance*
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HMRC. In order to maintain its status under Venture Capital Trust legislation, a VCT must comply on a continuing basis with the provisions of Section 274 of the Income Tax Act 2007, details of which are provided in the Directors’ report on page 34 of the full Annual report and Financial Statements.
The relevant tests to measure compliance have been carried out and independently reviewed for the year ended 31 March 2022. These showed that the Company has complied with all tests and continues to do so.
*VCT compliance is not a numerical measure of performance and thus cannot be defined as an APM.
Gearing
As defined by the Articles of Association, the Company’s maximum exposure in relation to gearing is restricted to 10% of its adjusted share capital and reserves. The Directors do not currently have any intention to utilise gearing for the Company.
Operational arrangements
The Company has delegated the investment management of the portfolio to Albion Capital Group LLP, the Manager, which is authorised and regulated by the Financial Conduct Authority. The Manager also provides company secretarial and other accounting and administrative support to the Company.
Management agreement
Under the Management agreement, the Manager provides investment management, secretarial and administrative services to the Company. The Management agreement can be terminated by either party on 12 months’ notice. The Management agreement is subject to earlier termination in the event of certain breaches or on the insolvency of either party. The Manager is paid an annual fee equal to 2% of the net asset value of the Company paid quarterly in arrears, along with an administration fee of 0.2% of the net asset value.
Total annual expenses, including the management fee, are limited to 2.50% of the net asset value.
In some instances, the Manager is entitled to an arrangement fee, payable by a portfolio company in which the Company invests, in the region of 2.0% of the investment made, and also monitoring fees where the Manager has a representative on the portfolio company’s board.
Further details on the management fee can be found in note 5.
Management performance incentive fee
In order to align the interests of the Manager and the shareholders with regards to generating positive returns, the Company has a Management performance incentive arrangement with the Manager. Under the incentive arrangement, the Company will pay an incentive fee to the Manager of an amount equal to 20% of such excess return that is calculated for each financial year.
The performance fee hurdle requires that the growth of the aggregate of the net asset value per share and dividends paid by the Company compared with the previous accounting date exceeds the higher of the average base rate of the Royal Bank of Scotland plus 2% or RPI plus 2%. The hurdle is calculated every year, based on the starting rate of 100 pence per share in 2007.
For the year ended 31 March 2022, the total return of the Company since launch (the performance incentive fee start date) amounted to 194.66 pence per share, compared to the higher hurdle of 181.85 pence per share. As a result, a performance incentive fee of £1,934,000 is payable to the Manager (2021: £288,000).
Evaluation of the Manager
The Board has evaluated the performance of the Manager based on:
• the returns generated by the Company;
• the continuing achievement of the 80% qualifying holdings investment requirement for VCT status;
• the long term prospects of the current portfolio of investments;
• the management of treasury, including use of buy-backs and participation in fund raising;
• a review of the Management agreement and the services provided therein; and
• benchmarking the performance of the Manager to other service providers including the performance of other VCTs that the Manager is responsible for managing.
The Board believes that it is in the interests of shareholders as a whole, and of the Company, to continue the appointment of the Manager for the forthcoming year.
Alternative Investment Fund Managers Directive (“AIFMD”)
The Board appointed the Manager as the Company’s AIFM in 2014 as required by the AIFMD. The Manager is a full-scope Alternative Investment Fund Manager under the AIFMD. Ocorian Depositary (UK) Limited is the appointed Depositary and oversees the custody and cash arrangements and provides other AIFMD duties with respect to the Company.
Companies Act 2006 Section 172 Reporting
Under Section 172 of the Companies Act 2006, the Board has a duty to promote the success of the Company for the benefit of its members as a whole in both the long and short term, having regard to the interests of other stakeholders in the Company, such as suppliers, and to do so with an understanding of the impact on the community and environment and with high standards of business conduct, which includes acting fairly between members of the Company.
The Board is very conscious of these wider responsibilities in the ways it promotes the Company’s culture and ensures, as part of its regular oversight, that the integrity of the Company’s affairs is foremost in the way the activities are managed and promoted. This includes regular engagement with the wider stakeholders of the Company and being alert to issues that might damage the Company’s standing in the way that it operates. The Board works very closely with the Manager in reviewing how stakeholder issues are handled, ensuring good governance and responsibility in managing the Company’s affairs, as well as visibility and openness in how the affairs are conducted.
The Company is an externally managed investment company with no employees, and as such has nothing to report in relation to employee engagement but does keep close attention to how the Board operates as a cohesive and competent unit. The Company also has no customers in the traditional sense and, therefore, there is also nothing to report in relation to relationships with customers.
The table below sets out the stakeholders the Board considers most relevant, details how the Board has engaged with these key stakeholders and the effect of these considerations on the Company’s decisions and strategies during the year.
| Stakeholders | Engagement with Stakeholders | Decision outcomes based on engagement |
| Shareholders | The key methods of engaging with Shareholders are as follows:
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| Suppliers | The key suppliers are:
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| Manager | The performance of Albion Capital Group LLP is essential to the long term success of the Company, including achieving the investment policy and generating returns to shareholders, as well as the impact the Company has on Environment, Social and Governance practice. |
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| Portfolio companies | The portfolio companies are considered key stakeholders, not least because they are principal drivers of value for the Company. However, as discussed in the Environmental, Social and Governance (“ESG”) section on pages 19 to 21 of the full Annual report and Financial Statements, the portfolio companies’ impact on their stakeholders is also important to the Company. |
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| Community and environment | The Company, with no employees, has no effect itself on the community and environment. However, as discussed above, the portfolio companies’ ESG impact is extremely important to the Board. |
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Environmental, Social, and Governance (“ESG”) report
The Board and the Company’s Manager, Albion Capital Group LLP, take ESG very seriously and more detail can be found on this in the ESG report on pages 19 to 21 of the full Annual report and Financial Statements.
Social and community issues, employees and human rights
The Board recognises the requirement under section 414C of the Act to detail information about social and community issues, employees and human rights; including any policies it has in relation to these matters and effectiveness of these policies. As an externally managed investment company with no employees, the Company has no formal policies in these matters, however, it is at the core of its responsible investment strategy as detailed above.
Further policies
The Company has adopted a number of further policies relating to:
- Environment
- Global greenhouse gas emissions
- Anti-bribery
- Anti-facilitation of tax evasion
- Diversity
and these are set out in the Directors’ report on page 35 of the full Annual report and Financial Statements.
General Data Protection Regulation
The General Data Protection Regulation has the objective of unifying data privacy requirements across the European Union. GDPR forms part of the UK law after Brexit, now known as UK GDPR. The Manager continues to take action to ensure that the Manager and the Company are compliant with the regulation.
Risk management
The Board carries out a regular review of the risk environment in which the Company operates, together with changes to the environment and individual risks. The Board also identifies emerging risks which might impact on the Company. In the period the most noticeable risks have been the global pandemic and the invasion of Ukraine which have impacted not only public health and mobility but also had an adverse impact on the economy, the full impact of which is likely to be uncertain for some time.
The Board has carried out a robust assessment of the Company’s principal risks and uncertainties and seeks to mitigate these risks through regular reviews of performance and monitoring progress and compliance. The Board applies the principles detailed in the Financial Reporting Council’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, in the mitigation and management of these risks. More information on specific mitigation measures for the principal risks and uncertainties are explained below:
| Risk | Possible consequence | Risk assessment during the year | Risk management |
| Investment, performance and valuation risk | Investment in smaller unquoted growth businesses carries a higher degree of risk and is more volatile than investing in larger, long-established businesses. This could negatively impact shareholder returns.
The Company relies on the judgement and reputation of the Manager to provide strong investment returns and valuations for shareholders. The Company’s investment valuation methodology is based on fair value, which for smaller unquoted growth businesses can be difficult to determine due to the lack of observable market data and the limitation of external reference points. |
Incremental increase in the period due to the interrelated economic and geopolitical issues referred to in the Chairman’s statement. | Although this risk category has increased, it is a central part of the Company’s business model to invest in higher growth businesses which, by their very nature have a heightened risk profile. In this regard, the Board places reliance upon the skills and expertise of the Manager and its track record of making successful investments in higher growth technology businesses. The Manager operates a structured investment appraisal and due diligence process. This includes a review from one external investment professional and comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings. In response to the heightened risk, the Manager undertook additional measures to assess the cash requirements of its portfolio companies to ensure sufficient runway over the next 24 months.
Investments are monitored by the Manager through monthly portfolio updates and typically an investment manager sitting on portfolio company boards. The Board receives detailed reports on each investment and their valuation as part of their quarterly board meetings. Review and oversight of the non-executive Directors ensures that the risk to the Company’s and Manager’s reputation is kept to a minimum. Investments are valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines, which represent current best practice for investment valuation and are reviewed by the Manager’s Valuation Committee. |
| VCT approval and regulatory change risk | Any breach of section 274 of the Income Tax Act 2007, including any legislative changes, could result in the loss of the Company’s HMRC qualifying status and tax reliefs for investors. | No change. | The Company’s VCT qualifying status is monitored monthly by the Manager and quarterly by the Board. The Board has appointed Philip Hare & Associates LLP as its taxation adviser, who independently confirms compliance, highlights areas of risk and informs on any legislative changes, including those which may arise from the withdrawal from the European Union. |
| Regulatory and compliance risk | The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company’s shares, or other penalties under the Companies Act or from financial reporting oversight bodies. | No change. | The Board and the Manager receive regular updates on new regulation, including legislation on the management of the Company, from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks through the Manager’s compliance officer, and any issues arising from compliance or regulation are reported to its own board on a monthly basis. The Board ensures the Company is compliant as part of its quarterly Board meetings. The Board reviews the quarterly reports prepared by Ocorian Depositary (UK) Limited (the Company’s Depositary) to ensure the Manager is adhering to the AIFMD requirements. |
| Operational and internal control risk (including cyber and data security) | The Company relies on a number of third parties, in particular the Manager, for the provision of investment management and administrative functions. Failures in key systems and controls within the Manager’s business could put assets of the Company at risk, resulting in inaccurate information being passed to the Board or to shareholders. This could additionally result in losses for the Company and its shareholders. | No change. | The Company operations and IT systems are subject to rigorous internal controls which are reviewed on a regular basis and reported to the Board.
The Audit Committee reviews the Internal Audit Reports prepared by the Manager’s internal auditors, Azets and has access to their internal audit partner to whom it can ask specific detailed questions in order to satisfy itself that the Manager has strong systems and controls in place including those in relation to risk management, business continuity and cyber security. The Board reviews the systems and processes (including cyber and data security) in place for the Company’s key suppliers to ensure that there is an appropriate risk mitigation in place. |
| Economic and political risk | Events such as the Covid-19 pandemic, the impact of Brexit, an economic recession, fluctuation in inflation and interest rates, or significant political events could adversely affect the companies within the portfolio and consequently the Company’s net asset value. | Increased (due to high levels of inflation and the geopolitical risks from the invasion of Ukraine). | The Company invests in a diversified portfolio of c.50 companies, predominantly in the United Kingdom, and has a policy of minimising any external bank borrowings within portfolio companies.
Exogenous risks over which the Company has no control are always a risk and the Company does what it can to address these risks. The inherent long-term nature of the portfolio helps to mitigate these exogenous risks. The Board and Manager are continuously assessing the resilience of the portfolio as a result of the ongoing economic and political risks, to ascertain where support is required. The Company has sufficient cash resources to cope with any such exigent and unexpected pressures. Exposure is relatively small to at-risk sectors that include leisure, hospitality, retail and travel (1% of NAV). The Company’s investment policy and the Board’s scrutiny of the investment portfolio ensures that this increased risk continues to be mitigated where possible. |
| Liquidity risk | The Company may not have sufficient cash available to meet its financial obligations.
The Company’s portfolio is primarily in smaller unquoted companies, which are inherently illiquid as there is no readily available market, and thus it may be difficult to realise their fair value at short notice. |
No change. | The Board reviews the Company’s three year cash flow forecasts on a quarterly basis. These include potential investment realisations (which are closely monitored by the Manager), Top Up Offers, dividend payments and operational expenditure. This ensures that there are sufficient cash resources available for the Company’s liabilities as they fall due. |
| Environmental, social and governance (“ESG”) risk | An insufficient ESG policy could lead to an increased negative impact on the environment, including the Company’s carbon footprint.
Non-compliance with reporting requirements could lead to a fall in demand from investors, reputational damage and penalties. |
Increased (due to the new guidance issued on climate change reporting and increased importance to stakeholders). | The Manager is a signatory of the UN PRI and the Board is kept appraised of the evolving ESG policies at quarterly Board meetings.
Full details of the specific procedures and risk mitigation can be found in the ESG report on pages 19 to 21 of the full Annual report and Financial Statements. These procedures ensure that this increased risk continues to be mitigated where possible. |
Viability statement
In accordance with the FRC UK Corporate Governance Code published in 2018 and principle 36 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over three years to 31 March 2025. The Directors believe that three years is a reasonable period in which they can assess the future of the Company to continue to operate and meet its liabilities as they fall due. This is the period used by the Board as part of its strategic planning process, which includes: the estimated timelines for finding, assessing and completing investments; the potential impact of any new regulations; and the availability of cash.
The Board has carried out a robust assessment of the emerging and principal risks facing the Company, including those that could threaten its business model, future performance, solvency or liquidity and focused on the major factors which affect the economic, regulatory and political environment. The Board carefully assessed, and were satisfied with, the risk management processes in place to avoid or reduce the impact of these risks. The Board has carried out robust stress testing of cashflows which included; assessing the resilience of portfolio companies, including the requirement for any future financial support, and evaluating the impact of high inflation, both within the Company and within its portfolio.
The Board has additionally considered the ability of the Company to comply with the ongoing conditions to ensure it maintains its VCT qualifying status under its current investment policy. As a result of the Board’s quarterly valuation reviews, it has concluded that the portfolio is well balanced and geared towards delivering long term growth and strong returns to shareholders.
The Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three year period to 31 March 2025. The Board is mindful of the ongoing risks and will continue to ensure that appropriate safeguards are in place, in addition to monitoring the quarterly cashflow forecasts to ensure the Company has sufficient liquidity.
This Strategic report of the Company for the year ended 31 March 2022 has been prepared in accordance with the requirements of section 414A of the Companies Act 2006 (the “Act”). The purpose of this report is to provide shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with Section 172 of the Act.
For and on behalf of the Board
Maxwell Packe
Chairman
30 June 2022
Responsibility Statement
In preparing these financial statements for the year ended 31 March 2022, the Directors of the Company, being Maxwell Packe, Christopher Burrows, Philippa Latham, Patrick Reeve, and Rhodri Whitlock confirm that to the best of their knowledge:
- summary financial information contained in this announcement and the full Annual Report and Financial Statements for the year ended 31 March 2022 for the Company has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law) and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
- the Chairman’s statement and Strategic report include a fair review of the development and performance of the business and the financial position of the Company, together with a description of the principal risks and uncertainties it faces.
We consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced, and understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.
A detailed “Statement of Directors’ responsibilities” is contained on page 38 within the full audited Annual Report and Financial Statements.
On behalf of the Board,
Maxwell Packe
Chairman
30 June 2022
Income statement
| Year ended 31 March 2022 |
Year ended 31 March 2021 |
||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
| Gains on investments | 3 | – | 21,636 | 21,636 | – | 10,892 | 10,892 |
| Investment income | 4 | 886 | – | 886 | 543 | – | 543 |
| Investment Manager’s fees* | 5 | (196) | (3,696) | (3,892) | (438) | (1,314) | (1,752) |
| Other expenses | 6 | (549) | – | (549) | (454) | – | (454) |
|
Return/(loss) on ordinary activities before taxation |
141 | 17,940 | 18,081 | (349) | 9,578 | 9,229 | |
| Tax on ordinary activities | 8 | – | – | – | – | – | – |
|
Return/(loss) and total comprehensive income attributable to shareholders |
141 | 17,940 | 18,081 | (349) | 9,578 | 9,229 | |
|
Basic and diluted return/(loss) per share (pence)** |
10 | 0.19 | 23.78 | 23.97 | (0.51) | 13.96 | 13.45 |
*For more information on the allocation between revenue and capital please see the accounting policies below.
* adjusted for treasury shares
The accompanying notes below form an integral part of these Financial Statements.
The total column of this Income statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies’ Statement of Recommended Practice.
Balance sheet
| Note | 31 March 2022 £’000 |
31 March 2021 £’000 |
|
| Fixed asset investments | 11 | 80,842 | 60,615 |
|
Current assets |
|||
| Trade and other receivables | 13 | 10,725 | 1,772 |
| Cash and cash equivalents | 29,552 | 24,429 | |
| 40,277 | 26,201 | ||
| Total assets | 121,119 | 86,816 | |
|
Payables: amounts falling due within one year |
|||
| Trade and other payables less than one year | 14 | (2,704) | (1,418) |
| Total assets less current liabilities | 118,415 | 85,398 | |
|
Equity attributable to equity holders |
|||
| Called-up share capital | 15 | 1,017 | 852 |
| Share premium | 8,278 | 53,258 | |
| Capital redemption reserve | – | 104 | |
| Unrealised capital reserve | 32,790 | 17,538 | |
| Realised capital reserve | 17,416 | 14,728 | |
| Other distributable reserve | 58,914 | (1,082) | |
| Total equity shareholders’ funds | 118,415 | 85,398 | |
| Basic and diluted net asset value per share (pence) * | 16 | 132.28 | 114.60 |
* excluding treasury shares
The accompanying notes below form an integral part of these Financial Statements.
These Financial Statements were approved by the Board of Directors, and were authorised for issue on 30 June 2022 and were signed on its behalf by
Maxwell Packe
Chairman
Company number: 05990732
Statement of changes in equity
| Called–up share capital £’000 |
Share premium £’000 |
Capital redemption reserve |
Unrealised capital reserve £’000 |
Realised capital reserve* £’000 |
Other distributable reserve* £’000 |
Total £’000 |
|
| On 1 April 2021 | 852 | 53,258 | 104 | 17,538 | 14,728 | (1,082) | 85,398 |
| Return and total comprehensive income for the year | – | – | – | 17,239 | 701 | 141 | 18,081 |
| Transfer of previously unrealised gains on disposal of investments | – | – | – | (1,987) | 1,987 | – | – |
| Issue of equity | 165 | 21,638 | – | – | – | – | 21,803 |
| Cost of issue of equity | – | (544) | – | – | – | – | (544) |
| Reduction of share premium and capital redemption reserve | – | (66,074) | (104) | – | – | 66,178 | – |
| Purchase of own shares for treasury | – | – | – | – | – | (1,795) | (1,795) |
| Dividends paid | – | – | – | – | – | (4,528) | (4,528) |
| On 31 March 2022 | 1,017 | 8,278 | – | 32,790 | 17,416 | 58,914 | 118,415 |
| On 1 April 2020 | 770 | 44,183 | 104 | 8,636 | 14,052 | 4,808 | 72,553 |
| Return/(loss) and total comprehensive income for the year | – | – | – | 8,836 | 742 | (349) | 9,229 |
| Transfer of previously unrealised losses on disposal of investments | – | – | – | 66 | (66) | – | – |
| Issue of equity | 82 | 9,277 | – | – | – | – | 9,359 |
| Cost of issue of equity | – | (202) | – | – | – | – | (202) |
| Purchase of own shares for treasury | – | – | – | – | – | (1,853) | (1,853) |
| Dividends paid | – | – | – | – | – | (3,688) | (3,688) |
| On 31 March 2021 | 852 | 53,258 | 104 | 17,538 | 14,728 | (1,082) | 85,398 |
* Included within these reserves is an amount of £37,334,000 (2021: £13,646,000) which is considered distributable. Over the next four years an additional £37,129,000 will become distributable. This is due to the HMRC requirement that the Company cannot use capital raised in the past three years to make a payment or distribution to shareholders. On 1 April 2022, £1,310,000 became distributable in line with this.
Statement of cash flows
| Year ended 31 March 2022 £’000 |
Year ended 31 March 2021 £’000 |
||
| Cash flow from operating activities | |||
| Investment income received | 826 | 434 | |
| Dividend income received | – | 94 | |
| Deposit interest received | 3 | 17 | |
| Investment Manager’s fees paid | (2,084) | (1,403) | |
| Other cash payments | (503) | (465) | |
| Net cash flow from operating activities | (1,758) | (1,323) | |
| Cash flow from investing activities | |||
| Disposal of current asset investments | – | 3,691 | |
| Purchase of fixed asset investments | (8,519) | (7,324) | |
| Disposal of fixed asset investments | 9,379 | 3,683 | |
| Net cash flow from investing activities | 860 | 50 | |
| Cash flow from financing activities | |||
| Issue of share capital | 12,230 | 8,568 | |
| Cost of issue of equity | (19) | (17) | |
| Dividends paid* | (3,806) | (3,094) | |
| Purchase of own shares (including costs) | (2,384) | (1,265) | |
| Net cash flow from financing activities | 6,021 | 4,192 | |
| Increase in cash and cash equivalents | 5,123 | 2,919 | |
| Cash and cash equivalents at start of the year | 24,429 | 21,510 | |
| Cash and cash equivalents at end of the year | 29,552 | 24,429 |
* The dividends paid shown in the cash flow are different to the dividends disclosed in note 9 as a result of the non-cash effect of the Dividend Reinvestment Scheme.
Notes to the Financial Statements
1. Accounting convention
The Financial Statements have been prepared in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 (“FRS 102”), and with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (“SORP”) issued by The Association of Investment Companies (“AIC”). The Financial Statements have been prepared on a going concern basis and further details can be found in the Directors’ report on pages 33 and 34 of the full Annual report and Financial Statements.
The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at Fair Value Through Profit and Loss (“FVTPL”) in accordance with FRS 102 sections 11 and 12. The Company values investments by following the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines as updated in 2018 and further detail on the valuation techniques used are outlined in note 2 below.
Company information is shown on page 2 of the full Annual report and Financial Statements.
2. Accounting policies
Fixed asset investments
The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.
In accordance with the requirements of section 9 of FRS 102, those undertakings in which the Company holds more than 20% of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments, including loan stock, are 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 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, revenue multiples, the level of third party offers received, cost or price of recent investment rounds, net assets, discounted cash flows 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.
Current assets and payables
Receivables (including debtors due after more than one year), payables and cash are carried at amortised cost, in accordance with FRS 102. Debtors due after more than one year meet the definition of a financing transaction held at amortised cost, and interest will be recognised through capital over the credit period using the effective interest method. There are no financial liabilities other than payables.
Investment income
Equity income
Dividend income is included in revenue when the investment is quoted ex-dividend.
Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are recognised when the Company’s right to receive payment and expect settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.
Bank interest income
Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.
Investment management fee, performance incentive fee and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged through the other distributable reserve except the following which are charged through the realised capital reserve:
- 90% of management fees and 100% of performance incentive fees, if any, are allocated to the realised capital reserve. This has changed from 75% for both management fees and performance incentive fees in the year ended 31 March 2022, to better align with the Board’s expectation that over the long term the majority of the Company’s investment returns will be in the form of capital gains; and
- expenses which are incidental to the purchase or disposal of an investment are charged through the realised capital reserve.
Taxation
Taxation is applied on a current basis in accordance with FRS 102. Current tax is tax payable/(refundable) in respect of the taxable profit (tax loss) for the current period or past reporting periods using the tax rates and laws that have been enacted or substantively enacted at the financial reporting date. Taxation associated with capital expenses is applied in accordance with the SORP.
Deferred tax is provided in full on all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the Financial Statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the Financial Statements. As a VCT the Company has an exemption from tax on capital gains. The Company intends to continue meeting the conditions required to obtain approval as a VCT for the foreseeable future. The Company therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.
Share capital and reserves
Called-up share capital
This accounts for the nominal value of the Company’s shares.
Share premium
This accounts for the difference between the price paid for the Company’s shares and the nominal value of those shares, less issue costs and transfers to the other distributable reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company’s own shares.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the year end against cost are included in this reserve.
Realised capital reserve
The following are disclosed in this reserve:
- gains and losses compared to cost on the realisation of investments, or permanent diminutions in value (including gains recognised on the realisation of investment where consideration is deferred that are not distributable as a matter of law);
- finance income in respect of the unwinding of the discount on deferred consideration that is not distributable as a matter of law;
- expenses, together with the related taxation effect, charged in accordance with the above policies; and
- dividends paid to equity holders where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were combined in 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 buy-back of shares, transfers from the share premium and capital redemption reserve, and other non-capital realised movements.
Dividends
Dividends by the Company are accounted for when the liability to make the payment (record date) has been established.
Going concern
The Board has assessed the Company’s operation as a going concern. The Company has sufficient cash and liquid resources, its portfolio of investments is well diversified in terms of sector, and the major cash outflows of the Company (namely investments, buy-backs and dividends) are within the Company’s control. Cash flow forecasts are discussed quarterly at Board level with regards to going concern. The cash flow forecasts have been updated and stress tested. Accordingly, after making diligent enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence over a period of at least twelve months from the date of approval of the Financial Statements. For this reason, the Directors have adopted the going concern basis in preparing the accounts. The Directors do not consider there to be any material uncertainty over going concern.
Segmental reporting
The Directors are of the opinion that the Company is engaged in a single operating segment of business, being investment in smaller companies principally based in the UK.
3. Gains/(losses) on investments
| Year ended 31 March 2022 £’000 |
Year ended 31 March 2021 £’000 |
|
| Unrealised gains on fixed asset investments | 17,239 | 8,836 |
| Realised gains on fixed asset investments | 4,129 | 1,866 |
| Finance income from deferred consideration | 268 | – |
| Realised gains on current asset investments | – | 190 |
| 21,636 | 10,892 |
4. Investment income
| Year ended 31 March 2022 £’000 |
Year ended 31 March 2021 £’000 |
|
| Loan stock interest | 883 | 434 |
| Dividend income | – | 94 |
| Bank deposit interest | 3 | 15 |
| 886 | 543 |
5. Investment Manager’s fees
| Year ended 31 March 2022 £’000 |
Year ended 31 March 2021 £’000 |
|
|
Investment management fees charged to revenue |
196 | 366 |
| Investment management fees charged to capital | 1,762 | 1,098 |
| Performance incentive fee charged to revenue | – | 72 |
| Performance incentive fee charged to capital | 1,934 | 216 |
| 3,892 | 1,752 |
Further details of the Management agreement under which the investment management fee and performance incentive fee are paid is given in the Strategic report above.
During the year, services of a total value of £4,090,000 (2021: £1,905,000) were purchased by the Company from Albion Capital Group LLP; this includes £1,958,000 (2021: £1,464,000) of management fee, £198,000 (2021: £153,000) of administration fee; and a performance incentive fee of £1,934,000 (2021: £288,000). At the financial year end, the amount due to Albion Capital Group LLP in respect of these services disclosed as accruals was £2,562,000 (2021: £739,000). The total annual running costs of the Company are capped at an amount equal to 2.5% of the Company’s net assets, with any excess being met by Albion Capital Group LLP by way of a reduction in management fees. During the year, the management fee was reduced by £22,000 as a result of this cap (2021: £53,000).
During the year, the Company was not charged by Albion Capital Group LLP in respect of Patrick Reeve’s services as a Director (2021: £nil).
Albion Capital Group LLP, its partners and staff hold a total of 687,260 shares in the Company on 31 March 2022.
The Manager is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the year ended 31 March 2022, fees of £177,000 attributable to the investments of the Company were received pursuant to these arrangements (2021: £205,000).
The Company has entered into an offer agreement relating to the Offers with the Manager, Albion Capital Group LLP, pursuant to which Albion Capital will receive a fee of 2.5% 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.
6. Other expenses
| Year ended 31 March 2022 £’000 |
Year ended 31 March 2021 £’000 |
|
|
Directors’ fees (including NIC) |
97 | 95 |
| Auditor’s remuneration for statutory audit services (exclusive of VAT) | 39 | 37 |
| Administration fee | 198 | 153 |
| Other administrative expenses | 215 | 169 |
| 549 | 454 |
7. Directors’ fees
The amounts paid to and on behalf of the Directors during the year are as follows:
| Year ended 31 March 2022 £’000 |
Year ended 31 March 2021 £’000 |
|
|
Directors’ fees |
90 | 88 |
| National insurance | 7 | 7 |
| 97 | 95 |
The Company’s key management personnel are the non-executive Directors. Further information regarding Directors’ remuneration can be found in the Directors’ remuneration report on pages 45 to 47 of the full Annal Report and Financial Statements.
8. Tax on ordinary activities
| Year ended 31 March 2022 £’000 |
Year ended 31 March 2021 £’000 |
|
|
UK corporation tax charge in respect of current year |
– | – |
| – | – |
| Factors affecting the tax charge: | Year ended 31 March 2022 £’000 |
Year ended 31 March 2021 £’000 |
|
Return on ordinary activities before taxation |
18,081 | 9,229 |
| Tax charge on profit at the average companies rate of 19% (2021: 19%) |
3,435 | 1,754 |
| Factors affecting the charge: | ||
| Non-taxable gains | (4,111) | (2,069) |
| Income not taxable | – | (18) |
| Excess management expenses carried forward | 676 | 333 |
| – | – |
The tax charge for the year shown in the Income statement is lower than the average companies rate of corporation tax in the UK of 19% (2021: 19%). The differences are explained above.
Notes
(i) Venture Capital Trusts are not subject to corporation tax on capital gains.
(ii) Tax relief on expenses charged to capital has been determined by allocating tax relief to expenses by reference to the applicable corporation tax rate and allocating the relief between revenue and capital in accordance with the SORP.
(iii) The Company has excess management expenses of £11,649,000 (2021: £8,090,000) that are available for offset against future profits. A deferred tax asset of £2,912,000 (2021: £1,537,000) has not been recognised in respect of these losses as they will be recoverable only to the extent that the Company has sufficient future taxable profits.
9. Dividends
| Year ended 31 March 2022 £’000 |
Year ended 31 March 2021 £’000 |
|
| First dividend of 2.87p per share paid on 31 August 2021 (28 August 2020 – 2.70p per share) | 2,139 | 1,836 |
| Second dividend of 3.22p per share paid on 28 February 2022 (26 February 2021 – 2.74p per share) | 2,391 | 1,854 |
| Unclaimed dividends | (2) | (2) |
| 4,528 | 3,688 |
Details of the consideration issued under the Dividend Reinvestment Scheme included in the dividends above can be found in note 15.
In addition to the dividends summarised above, the Board has declared a first dividend for the year ending 31 March 2023 of 3.31 pence per share to be paid on 31 August 2022 to shareholders on the register on 5 August 2022. The total dividend will be approximately £2,984,000.
10. Basic and diluted return per share
| Year ended 31 March 2022 |
Year ended 31 March 2021 |
|||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| Return/(loss) attributable to equity shares (£’000) | 141 | 17,940 | 18,081 | (349) | 9,578 | 9,229 |
| Weighted average shares in issue (adjusted for treasury shares) | 75,440,864 | 68,620,876 | ||||
| Return/(loss) attributable per equity share (pence) | 0.19 | 23.78 | 23.97 | (0.51) | 13.96 | 13.45 |
There are no convertible instruments, derivatives or contingent share agreements in issue for the Company, and therefore no dilution affecting the return per share. The basic return per share is therefore the same as the diluted return per share.
The weighted average number of shares is calculated after adjusting for treasury shares of 12,195,568 (2021: 10,713,420).
11. Fixed asset investments
| Investments held at fair value through profit or loss | 31 March 2022 £’000 |
31 March 2021 £’000 |
||
| Unquoted equity and preference shares | 68,138 | 48,450 | ||
| Unquoted loan stock | 11,486 | 12,165 | ||
| Quoted equity | 1,218 | – | ||
| 80,842 | 60,615 | |||
| 31 March 2022 £’000 |
31 March 2021 £’000 |
|||
| Opening valuation | 60,615 | 47,859 | ||
| Purchases at cost | 8,952 | 7,324 | ||
| Disposal proceeds | (10,151) | (5,270) | ||
| Realised gains | 4,129 | 1,866 | ||
| Movement in loan stock revenue accrued income | 58 | – | ||
| Unrealised gains | 17,239 | 8,836 | ||
| Closing valuation | 80,842 | 60,615 | ||
| Movement in loan stock revenue accrued income | ||||
| Opening accumulated loan stock revenue accrued income | 1 | 1 | ||
| Movement in loan stock revenue accrued income | 58 | – | ||
| Closing accumulated loan stock revenue accrued income | 59 | 1 | ||
| Movement in unrealised gains | ||||
| Opening accumulated unrealised gains | 17,539 | 10,129 | ||
| Movement in unrealised gains | 17,239 | 8,836 | ||
| Transfer of previously unrealised gains to realised reserve on disposal of investments | (1,987) | (1,426) | ||
| Closing accumulated unrealised gains | 32,791 | 17,539 | ||
| Historic cost basis | ||||
| Opening book cost | 43,076 | 37,730 | ||
| Purchases at cost | 8,952 | 7,324 | ||
| Disposals at cost | (4,035) | (1,978) | ||
| Closing book cost | 47,993 | 43,076 | ||
Purchases and disposals detailed above do not agree to the Statement of cash flows due to restructuring of investments, conversion of convertible loan stock and settlement debtors and creditors.
Unquoted fixed asset investments are valued at fair value in accordance with the IPEV guidelines as follows:
| 31 March 2022 | 31 March 2021 | |
| Valuation methodology | £’000 | £’000 |
| Cost and price of recent investment (reviewed for impairment or uplift) | 39,353 | 23,438 |
| Revenue multiple | 26,204 | 25,130 |
| Third party valuation – Discounted cash flow | 6,422 | 6,448 |
| Third party valuation – Earnings multiple | 3,417 | 3,053 |
| Net assets | 1,146 | 141 |
| Earnings multiple | 3,082 | 2,405 |
| 79,624 | 60,615 |
When using the cost or price of a recent investment in the valuations, the Company looks to re-calibrate this price at each valuation point by reviewing progress within the investment, comparing against the initial investment thesis, assessing if there are any significant events or milestones that would indicate the value of the investment has changed and considering whether a market-based methodology (i.e. using multiples from comparable public companies) or a discounted cashflow forecast would be more appropriate.
The main inputs into the calibration exercise, and for the valuation models using multiples, are revenue, EBITDA and P/E multiples (based on the most recent revenue, EBITDA or earnings achieved and equivalent corresponding revenue, EBITDA or earnings multiples of comparable companies), quality of earnings assessments and comparability difference adjustments. Revenue multiples are often used, rather than EBITDA or earnings, due to the nature of the Company’s investments, being in growth and technology companies which are not normally expected to achieve profitability or scale for a number of years. Where an investment has achieved scale and profitability the Company would normally then expect to switch to using an EBITDA or earnings multiple methodology.
In the calibration exercise and in determining the valuation for the Company’s equity instruments, comparable trading multiples are used. In accordance with the Company’s policy, appropriate comparable companies based on industry, size, developmental stage, revenue generation and strategy are determined and a trading multiple for each comparable company identified is then calculated. The multiple is calculated by dividing the enterprise value of the comparable group by its revenue, EBITDA or earnings. The trading multiple is then adjusted for considerations such as illiquidity, marketability and other differences, advantages and disadvantages between the portfolio company and the comparable public companies based on company specific facts and circumstances.
Fair value investments had the following movements between valuation methodologies between 31 March 2021 and 31 March 2022:
| Change in valuation methodology (2021 to 2022) | Value on 31 March 2022 £’000 |
Explanatory note |
| Revenue multiple to cost and price of recent investment (reviewed for impairment or uplift) | 2,107 | More appropriate valuation methodology |
| Cost and price of recent investment (reviewed for impairment or uplift) to revenue multiple | 1,377 | More appropriate valuation methodology |
| Cost and price of recent investment (reviewed for impairment or uplift) to bid price | 1,218 | Company listed on AIM in period |
| Cost and price of recent investment (reviewed for impairment or uplift) to net assets | 1,078 | More appropriate valuation methodology |
| Third party valuation – earnings multiple to net assets | 68 | More appropriate valuation methodology |
The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. The Directors believe that, within these parameters, these are the most relevant methods of valuation which would be reasonable on 31 March 2022.
FRS 102 and the SORP requires the Company to disclose the inputs to the valuation methods applied to its investments measured at fair value through profit or loss in a fair value hierarchy. The table below sets out fair value hierarchy definitions using FRS102 s.11.27.
| Fair value hierarchy | Definition |
| Level 1 | Unadjusted quoted prices in an active market |
| Level 2 | Inputs to valuations are from observable sources and are directly or indirectly derived from prices |
| Level 3 | Inputs to valuations not based on observable market data |
Quoted investments are valued according to Level 1 valuation methods. Unquoted equity, preference shares and loan stock are all valued according to Level 3 valuation methods.
Investments held at fair value through profit or loss (Level 3) had the following movements:
| 31 March 2022 | 31 March 2021 | |||
| £’000 | £’000 | |||
| Opening balance | 60,615 | 47,859 | ||
| Additions | 8,952 | 7,324 | ||
| Movement from Level 3 to Level 1* | (573) | – | ||
| Disposals | (10,151) | (5,270) | ||
| Realised gains | 4,129 | 1,866 | ||
| Accrued loan stock interest | 58 | – | ||
| Unrealised gains | 16,594 | 8,836 | ||
| Closing balance | 79,624 | 60,615 | ||
* This relates to Arecor Therapeutics PLC, which listed on the AIM stock exchange during the period. This is the only Level 1 investment.
There are no Level 2 investments.
FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. 63% of the portfolio of investments, consisting of equity and loan stock, is based on recent investment price, net assets and cost, which are considered the most appropriate valuation methodology. As such the Board believes that changes to reasonable possible alternative input assumptions (by adjusting the earnings and revenue multiples) for the valuation of the remainder of the portfolio could lead to a significant change in the fair value of the portfolio. Therefore, for the remainder of the portfolio, the Board has adjusted the inputs for a number of the largest portfolio companies (by value) resulting in a total coverage of 91% of the portfolio of investments.
The main inputs considered for each type of valuation is as follows:
| Valuation technique | Portfolio company sector | Input | Base Case* | Change in input | Change in fair value of investments (£’000) | Change in NAV (pence per share) |
| Revenue multiple | Other software & technology | Revenue multiple | 5.9x | +0.6x | 1,331 | 1.49 |
| -0.6x | (1,331) | (1.49) | ||||
| Revenue multiple | Healthcare (including digital healthcare) | Revenue multiple | 5.6x | +0.6x | 627 | 0.70 |
| -0.6x | (627) | (0.70) | ||||
| Third party valuation – discounted cashflow | Renewable energy | Third party valuation – discounted cashflow | 10.0% discount rate | +0.5% | 176 | 0.20 |
| -0.5% | (227) | (0.25) |
*As detailed in the accounting policies above, the base case is based on market comparables, discounted where appropriate for marketability, in accordance with the IPEV guidelines.
The impact of these changes could result in an overall increase in the valuation of the equity investments by £2,134,000 (3.1%) (2021: £1,605,000 (3.3%)) or a decrease in the valuation of equity investments by £2,185,000 (3.2%) (2021: £2,268,000 (4.7%)).
12. Significant interests
The principal activity of the Company is to select and hold a portfolio of investments in unquoted securities. Although the Company, through the Manager, will, in some cases, be represented on the board of the portfolio company, it will not take a controlling interest or become involved in the management of a portfolio company. The size and structure of the companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement. The investment listed below is held as part of an investment portfolio and therefore, as permitted by FRS 102 section 9.9B, it is measured at fair value through profit and loss and not accounted for using the equity method.
The Company has interests of greater than 20% of the nominal value of any class of the allotted shares in the portfolio company on 31 March 2022 as described below:
|
Company |
Registered address and country of incorporation | Profit/(loss) before tax £’000 |
Aggregate capital and reserves £’000 |
Result for year ended |
% class and share type | % total voting rights |
| Greenenerco Limited | EC1M 5QL, UK | n/a* | 443 | 31 March 2021 | 28.6% A Ordinary | 28.6% |
*The company files filleted accounts which do not disclose this information.
13. Trade and other receivables
| 31 March 2022 | 31 March 2021 | |
| £’000 | £’000 | |
| Deferred consideration under one year | 488 | 149 |
| Deferred consideration over one year | 1,867 | 1,600 |
| Prepayments and accrued income | 26 | 21 |
| Other receivables | 8,344 | 2 |
| 10,725 | 1,772 |
The deferred consideration over one year relates to the sale of G.Network Communications Limited in December 2020. These proceeds are receivable in January 2024, and have been discounted to present value at the prevailing market rate, including a provision for counterparty risk. This constitutes a financing transaction, and has been accounted for using the policy disclosed in note 2.
Other debtors includes £8,342,000 (£nil) owed to the Company in respect of the allotment of shares that took place on 31 March 2022 and was received on 1 April 2022. Further details are given in note 15.
The Directors consider that the carrying amount of receivables is not materially different to their fair value.
14. Trade and other payables less than one year
| 31 March 2022 | 31 March 2021 | |
| £’000 | £’000 | |
| Accruals and deferred income | 2,662 | 812 |
| Trade payables | 42 | 606 |
| 2,704 | 1,418 |
The Directors consider that the carrying amount of payables is not materially different to their fair value.
15. Called–up share capital
| Allotted, called–up and fully paid shares: | £’000 |
| 85,232,100 Ordinary shares of 1 penny each at 31 March 2021 | 852 |
| 16,479,705 Ordinary shares of 1 penny each issued during the year | 165 |
| 101,711,805 Ordinary shares of 1 penny each at 31 March 2022 | 1,017 |
| 10,713,420 Ordinary shares of 1 penny each held in treasury at 31 March 2021 | (107) |
| 1,482,148 Ordinary shares of 1 penny each purchased during the year to be held in treasury | (15) |
| 12,195,568 Ordinary shares of 1 penny each held in treasury at 31 March 2022 | (122) |
| Voting rights of 89,516,237 Ordinary shares of 1 penny each at 31 March 2022 | 895 |
The Company purchased 1,482,148 shares (2021: 1,768,106) to be held in treasury at a nominal value of £14,821 and a cost of £1,795,000 (2021: £1,853,000) representing 1.5% of the shares in issue on 31 March 2022, leading to a balance of 12,195,568 shares (2021: 10,713,420) in treasury representing 12.0% (2021: 12.6%) of the shares in issue on 31 March 2022.
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 year:
| Date of allotment | Number of shares allotted |
Aggregate nominal value of shares (£’000) |
Issue price (pence per share) |
Net invested (£’000) |
Opening market price on allotment date (pence per share) |
| 31 August 2021 | 275,632 | 3 | 125.06 | 327 | 119.50 |
| 28 February 2022 | 290,517 | 3 | 129.67 | 359 | 123.50 |
| 566,149 | 686 |
During the year the following new Ordinary shares of nominal value 1 penny each were allotted under the terms of the Albion VCTs Prospectus Top Up Offers 2020/21 and 2021/22:
| 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) |
| 9 April 2021 | 144,118 | 1 | 114.00 | 162 | 106.50 |
| 9 April 2021 | 9,249 | – | 114.60 | 10 | 106.50 |
| 9 April 2021 | 229,987 | 2 | 115.20 | 258 | 106.50 |
| 25 February 2022 | 973,740 | 10 | 131.70 | 1,263 | 123.50 |
| 25 February 2022 | 317,042 | 3 | 132.40 | 411 | 123.50 |
| 25 February 2022 | 7,806,927 | 78 | 133.00 | 10,125 | 123.50 |
| 31 March 2022 | 6,432,493 | 64 | 133.00 | 8,342 | 122.50 |
| 15,913,556 | 20,571 |
16. Basic and diluted net asset value per share
| 31 March 2022 | 31 March 2021 | |
| (pence per share) | (pence per share) | |
| Basic and diluted net asset value per Ordinary share | 132.28 | 114.60 |
The basic and diluted net asset value per share at the year end is calculated in accordance with the Articles of Association and is based upon total shares in issue (excluding treasury shares) of 89,516,237 Ordinary shares (2021: 74,518,680) at 31 March 2022.
17. Capital and financial instruments risk management
The Company’s capital comprises Ordinary shares as described in note 15. The Company is permitted to buy-back its own shares for cancellation or treasury purposes, and this is described on page 33 of the Directors’ report in the full Annual report and Financial Statements.
The Company’s financial instruments comprise equity and loan stock investments in unquoted and quoted companies, cash balances, short term receivables and payables which arise from its operations. The main purpose of these financial instruments is to generate cash flow and revenue and capital appreciation for the Company’s operations. The Company has no gearing or other financial liabilities apart from short term payables. The Company does not use any derivatives for the management of its Balance sheet.
The principal risks arising from the Company’s operations are:
- market and investment risk (which comprises investment price and cash flow interest rate risk);
- credit risk; and
- liquidity risk.
The Board regularly reviews and agrees policies for managing each of these risks. There have been no changes in the nature of the risks that the Company has faced during the past year, and apart from where noted below, there have been no changes in the objectives, policies or processes for managing risks during the past year. The key risks are summarised below.
Market risk
As a Venture Capital Trust, it is the Company’s specific nature to evaluate the market risk of its portfolio in unquoted companies. Market risk is the exposure of the Company to the revaluation and devaluation of investments as a result of macroeconomic changes. The main driver of market risk is the dynamics of market quoted comparators, as well as the financial and operational performance of portfolio companies. The Board seeks to reduce this risk by having a spread of investments across a variety of sectors. More details on the sectors the Company invests in can be found in the pie chart at the end of this announcement.
The Manager and the Board formally review market risk, both at the time of initial investment and at quarterly Board meetings.
The Board monitors the prices at which sales of investments are made to ensure that profits to the Company are maximised, and that valuations of investments retained within the portfolio appear sufficiently prudent and realistic compared to prices being achieved in the market for sales of unquoted investments.
Under FRS 102 the Board is required to illustrate by way of a sensitivity analysis the extent to which the assets are exposed to market risk. The Board considers that the value of the fixed asset investment portfolio is sensitive to a change of 10% based on the current economic climate. The impact of a 10% change has been selected as this is considered reasonable given the current level of volatility observed. When considering the appropriate level of sensitivity to be applied, the Board has considered both historic performance and future expectations.
The sensitivity of a 10% increase or decrease in the valuation of the fixed asset investment portfolio (keeping all other variables constant) would increase or decrease the net asset value and return for the year by £8,084,000. Further sensitivity analysis on fixed asset investments is included in note 11.
Investment risk (including investment price risk)
Investment risk (including investment price risk) is the risk that the fair value of future investment cash flows will fluctuate due to factors specific to an investment instrument or to a market in similar instruments. The management of risk within the venture capital portfolio is addressed through careful investment selection, by diversification across different industry segments, by maintaining a wide spread of holdings in terms of financing stage and by limitation of the size of individual holdings. The Manager receives management accounts from portfolio companies and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk. The Directors monitor the Manager’s compliance with the investment policy, review and agree policies for managing this risk and monitor the overall level of risk on the portfolio on a regular basis.
Valuations are based on the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the IPEV Guidelines. Details of the industries in which investments have been made are contained in the pie chart at the end of this announcement.
The maximum investment risk on the balance sheet date is the value of the fixed asset investment portfolio which is £80,842,000 (2021: £60,615,000). Fixed asset investments form 68% of the net asset value on 31 March 2022 (2021: 71%).
More details regarding the classification of fixed asset investments are shown in note 11.
Interest rate risk
It is the Company’s policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company’s analysis, it was estimated that a rise of 1% in all interest rates would have increased total return before tax for the year by approximately £270,000 (2021: £230,000). Furthermore, it was considered that a fall of interest rates below current levels during the year would have been very unlikely.
The weighted average effective interest rate applied to the Company’s unquoted loan stock during the year was approximately 9.8% (2021: 4.9%). The weighted average period to expected maturity for the unquoted loan stock is approximately 4.0 years (2021: 4.5 years).
The Company’s financial assets and liabilities, all denominated in pounds sterling, consist of the following:
| 31 March 2022 | 31 March 2021 | |||||||
|
Fixed |
Floating rate £’000 |
Non- interest bearing £’000 |
Total £’000 |
Fixed |
Floating rate £’000 |
Non- interest bearing £’000 |
Total £’000 |
|
| Unquoted equity | – | – | 68,138 | 68,138 | – | – | 48,450 | 48,450 |
| Quoted equity | – | – | 1,218 | 1,218 | – | – | – | – |
| Unquoted loan stock | 9,934 | – | 1,552 | 11,486 | 11,508 | – | 657 | 12,165 |
| Receivables* | – | – | 10,699 | 10,699 | – | – | 1,751 | 1,751 |
| Current liabilities | – | – | (2,704) | (2,704) | – | – | (1,418) | (1,418) |
| Cash | – | 29,552 | – | 29,552 | – | 24,429 | – | 24,429 |
| 9,934 | 29,552 | 78,903 | 118,389 | 11,508 | 24,429 | 49,440 | 85,377 | |
*The receivables do not reconcile to the Balance sheet as prepayments are not included in the above table.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its receivables, investment in unquoted loan stock and through the holding of cash on deposit with banks.
The Manager evaluates credit risk on loan stock and other similar instruments prior to investment, and as part of its ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. For loan stock investments made prior to 6 April 2018, which account for 70% of loan stock by value, typically loan stock instruments have a fixed or floating charge, which may or may not have been subordinated, over the assets of the portfolio company in order to mitigate the gross credit risk.
The Manager receives management accounts from portfolio companies, and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment-specific credit risk.
The Manager and the Board formally review credit risk (including receivables) and other risks, both at the time of initial investment and at quarterly Board meetings.
The Company’s total gross credit risk on 31 March 2022 was limited to £11,486,000 (2021: £12,165,000) of unquoted loan stock instruments, £29,552,000 (2021: £24,429,000) of cash deposits with banks and £10,725,000 (2021: £1,751,000) of other receivables.
At the balance sheet date, the cash held by the Company was held with Lloyds Bank plc, Scottish Widows Bank plc (part of Lloyds Banking Group plc), Barclays Bank plc, Société Générale S.A and National Westminster Bank plc. Credit risk on cash transactions was mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, with high credit ratings assigned by international credit-rating agencies.
The Company has an informal policy of limiting counterparty banking exposure to a maximum of 20% of net asset value for any one counterparty.
The credit profile of unquoted loan stock is described under liquidity risk below.
Liquidity risk
Liquid assets are held as cash on current account, cash on deposit or short term money market account. Under the terms of its Articles, the Company has the ability to borrow up to 10% of its adjusted share capital and reserves of the latest published audited Balance sheet, which amounts to £11,543,000 (2021: £8,325,000) on 31 March 2022.
The Company has no committed borrowing facilities on 31 March 2022 (2021: nil) and had cash of £29,552,000 (2021: £24,429,000). The main cash outflows are for new investments, share buy-backs and dividend payments, which are within the control of the Company. The Manager formally reviews the cash requirements of the Company on a monthly basis, and the Board on a quarterly basis as part of its review of management accounts and forecasts. All the Company’s financial liabilities are short term in nature and total £2,704,000 on 31 March 2022 (2021: £1,418,000).
The carrying value of loan stock investments as analysed by expected maturity dates is as follows:
| 31 March 2022 | 31 March 2021 | |||||||
| Redemption date | Fully performing £’000 |
Past due £’000 |
Valued below cost £’000 |
Total £’000 |
Fully performing £’000 |
Past due £’000 |
Valued below cost £’000 |
Total £’000 |
| Less than one year | 4,811 | – | 70 | 4,881 | 2,752 | – | 206 | 2,958 |
| 1-2 years | 94 | – | 2 | 96 | 1,362 | 656 | 45 | 2,063 |
| 2-3 years | 2,092 | – | 3 | 2,095 | 93 | – | 161 | 254 |
| 3-5 years | 1,894 | – | – | 1,894 | 4,322 | – | 8 | 4,330 |
| Greater than 5 years | 2,520 | – | – | 2,520 | 2,560 | – | – | 2,560 |
| Total | 11,411 | – | 75 | 11,486 | 11,089 | 656 | 420 | 12,165 |
Loan stock can be past due as a result of interest or capital not being paid in accordance with contractual terms.
The cost of loan stock investments valued below cost is £544,000 (2021: £510,000).
The Company does not hold any assets as the result of the enforcement of security during the period, and believes that the carrying values for both those valued below cost and past due assets are covered by the value of security held for these loan stock investments.
In view of the availability of adequate cash balances and the repayment profile of loan stock investments, the Board considers that the Company is subject to low liquidity risk.
Fair values of financial assets and financial liabilities
All the Company’s financial assets and liabilities on 31 March 2022 are stated at fair value as determined by the Directors, with the exception of receivables (including debtors due after more than one year), payables and cash which are carried at amortised cost, in accordance with FRS 102. There are no financial liabilities other than payables. The Company’s financial liabilities are all non-interest bearing. It is the Directors’ opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.
18. Commitments and contingencies
On 31 March 2022, the Company had no financial commitments (2021: £nil).
There were no contingent liabilities or guarantees given by the Company on 31 March 2022 (2021: £nil).
19. Post balance sheet events
Since 31 March 2022 the Company has had the following post balance sheet events:
- Investment of £1,037,000 in a new portfolio company;
- Investment of £668,000 in an existing portfolio company, Gravitee TopCo Limited;
- Investment of £526,000 in a new portfolio company, Ophelos Limited;
- Investment of £265,000 in an existing portfolio company, Cantab Research Limited;
- Investment of £252,000 in an existing portfolio company, Accelex Technology Limited; and
- Investment of £75,000 in an existing portfolio company, Concirrus Limited.
The following new Ordinary shares of nominal value 1 penny each were allotted under the Albion VCTs Prospectus Top Up Offers 2021/22 after 31 March 2022:
| 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) | ||
| 11 April 2022 | 133,797 | 1 | 131.70 | 174 | 122.50 |
| 11 April 2022 | 17,745 | – | 132.40 | 23 | 122.50 |
| 11 April 2022 | 492,987 | 5 | 133.00 | 639 | 122.50 |
| 644,529 | 836 |
20. Related party transactions
Other than transactions with the Manager as disclosed in note 5, and the Directors’ remuneration disclosed in the Directors’ remuneration report on page 46 of the full Annual Report and Financial Statements, there are no other related party transactions or balances requiring disclosure.
21. Other Information
The information set out in this announcement does not constitute the Company’s statutory accounts within the terms of section 434 of the Companies Act 2006 for the years ended 31 March 2022 and 31 March 2021, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 March 2022, which will be, delivered to the Registrar of Companies. The Auditor reported on those accounts; the reports were unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.
22. Publication
The full audited Annual Report and Financial Statements are being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion.capital/funds/AAEV, where the Report can be accessed as a PDF document via a link in the ‘Financial Reports and Circulars’ section.
Attachment
Artificial Intelligence
Car as a Connected Living Ecosystem worth USD 1.5 trillion by 2035 | MarketsandMarkets
CHICAGO, May 9, 2024 /PRNewswire/ — Car as a Connected Living Ecosystem is estimated to grow from USD 8 billion in 2023 to more than USD 1.5 trillion by 2035 at the CAGR of 54.5%. according to a new report by MarketsandMarkets. Factors such as technology developments and advanced connectivity levels across automotive OEMs and customer perceptions & service expectations from connected cars are driving the growth of the car as a connected living ecosystem market. Customers, especially the GenZ customers and customers paying a premium for the advanced connectivity, expect to see a range of connected features such as advanced safety, remote vehicle features, security, car-home connectivity, and EV & energy management services. Almost all OEMs such as Mercedes Benz, BMW, Stellantis, VW and others are aggressively focused on the connected car market to earn new revenue streams.
Download an Illustrative overview: https://www.marketsandmarkets.com/pdfdownloadNew.asp?id=32781103
Car as a Connected Living Ecosystem Scope:
Report Coverage
Details
Market Revenue in 2023
USD 8 billion
Estimated Value by 2035
USD 1.5 trillion
Growth Rate
Poised to grow at a CAGR of 54.5%
Market Size Available for
2023–2035
Forecast Period
2024–2035
Forecast Units
Value (USD Billion – Trillion)
Report Coverage
Revenue Forecast, Competitive Landscape, Growth Factors, and Trends
Segments Covered
Connected Living (through the car) Market by Segments – In-car connectivity, Connected Energy, Connected Aftermarket, Connected Health, and other
Geographies Covered
Global
Report Highlights
Updated financial information / product portfolio of players
Key Market Opportunities
Greenfield Market
Key Market Drivers
Advanced Technologies & Customer Propensity to Adopt
The car is emerging as the new smartphone.
Connected cars have moved beyond being data generating machines for fleet management and safety compliance. Connected cars have emerged as the golden goose for automakers, with its ability to drive continuous revenues across lifetime. The cars are capable of performing almost any function that is offered by our smartphones today and even more, offering comprehensive connected living solutions at the touch of a button. The cars can remotely unlock, drive and navigate themselves, save themselves from potential hazards and security threats, manage energy requirements, offer in-car marketplaces with integrated payment platforms, entertain passengers, take care of their health and homes, manage work diaries, civil responsibilities, and can integrate the physical and virtual realm.
The In-Car Connectivity segment is expected to dominate the digital connected living services market.
There services are expected to be available to customers at an annual cost of $1,600 by 2035. Over the next decade, OEMs must identify their connectivity and subscription revenue strategy – in-car experience is expected to earn the lion’s share of revenue at 87% with health, energy, and aftermarket developing as formidable segments. However, the key challenge is to strike the right balance between subscription costs and customer willingness to pay.
The wider ecosystem of connected car offers further growth potential.
OEMs stand to gain further through developing competencies in the wider automotive ecosystem such as energy management services and connected insurance. Tesla, Hyundai, GM, and Ford are not just selling EVs but the entire spectrum of services such as renewable energy generation, energy storage, and V2G technology, required for energy independence. Tesla, GM, and JLR are leveraging connected vehicle data to offer connected insurance services underwritten by insurance companies. A third revenue stream is data monetization partnerships with various stakeholders such as cities, automotive workshops, and others. Several other revenue streams could emerge from a single connected car.
From being able to communicate with drivers, offering AR based driver assist and autonomous driving systems and automatically managed maintenance systems, to managing energy services, insurance and healthcare through the car’s ecosystem. 6G connectivity, V2X technology, and VR repair and maintenance will change the way customers experience the car.
Inquiry Before Buying: https://www.marketsandmarkets.com/Enquiry_Before_BuyingNew.asp?id=32781103
Key Market Players of Car as a Connected Living Ecosystem Industry:
Major players in the Car as a Connected Living include Mercedez Benz (Germany), BMW (Germany), VW (Germany), Stellantis (Netherlands), Hyundai (South Korea), Toyota (Japan), GM (USA), Ford (USA), Nio (China), Xpeng (China). All OEMs offer vary levels of connectivity solutions through the car.
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Car as a Connected Living Ecosystem Industry Recent Developments:
In January 2024, Mercedes Benz unveiled its AI powered MBUX Virtual Assistant.In January 2024, Stellantis acquired Artificial Intelligence Technologies and IP from CloudMade for advanced connectivity features.In January 2024, GM introduced OnStar connectivity features in Saudi Arabia.Car as a Connected Living Ecosystem Size – Key Benefits of Buying the Report:
The report will help the market leaders/new entrants in this market with information on the closest approximations of the revenue numbers for the connected living solutions.This report will help stakeholders understand the competitive landscape and gain more insights to position their businesses better and plan suitable go-to-market strategies.The report also helps stakeholders understand the pulse of the market and provides them with information on key market drivers, restraints, challenges, and opportunities. This report provides insights on:
Analysis of key drivers (advanced technologies, customer propensity to adopt), restraints (cost of technology development), challenges (undertaking strategic partnerships), and opportunities (first mover advantage).Product Development/Innovation: Detailed insights on upcoming technologies, research & development activities, and new product & service launches in the connected living space.Market Development: Comprehensive information about lucrative markets – the report analyses the future of connected living solutions through the car.Market Diversification: Exhaustive information about new products & services, recent developments, and investments in the connected living space.Competitive Assessment: Competitor benchmarking to understand ket industry connected living service offerings.Get access to the latest updates on Car as a Connected Living Ecosystem Industry Growth
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Connected Car Market – Global Forecast to 2026
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The B2B economy is witnessing the emergence of $25 trillion of new revenue streams that are substituting existing revenue streams in this decade alone. We work with clients on growth programs, helping them monetize this $25 trillion opportunity through our service lines – TAM Expansion, Go-to-Market (GTM) Strategy to Execution, Market Share Gain, Account Enablement, and Thought Leadership Marketing.
Built on the ‘GIVE Growth’ principle, we work with several Forbes Global 2000 B2B companies – helping them stay relevant in a disruptive ecosystem. Our insights and strategies are molded by our industry experts, cutting-edge AI-powered Market Intelligence Cloud, and years of research. The KnowledgeStore™ (our Market Intelligence Cloud) integrates our research, facilitates an analysis of interconnections through a set of applications, helping clients look at the entire ecosystem and understand the revenue shifts happening in their industry.
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Artificial Intelligence
Infosys and Formula E Strike New Partnership to Enable Next-Gen Fan Experiences Powered by AI and Digital Innovations
This multi-year technology association will provide in-race insights, fan engagement, and sustainability solutions for the world’s first all-electric motorsport
BENGALURU, India, May 9, 2024 /PRNewswire/ — Infosys (NSE : INFY), (BSE: INFY), (NYSE: INFY), a global leader in next-generation digital services and consulting, today announced a strategic three-year partnership with the ABB FIA Formula E World Championship, the global motorsport championship for electric cars, as its official Digital Innovation Partner. Through this collaboration, Infosys will provide in-race analytics, unlock fan engagement experiences, and enhance sustainability reporting and tracking for the Formula E championship.
The partnership between Infosys and Formula E will focus on three core areas: fan growth, technology innovation, and continued environmental stewardship.
Creating a new Fan Customer Data Platform: With the aim of engaging 500 million fans by 2030, Infosys will help build an AI-powered Fan Customer Data Platform for Formula E to unlock deep fan engagement and personalization opportunities, allowing Formula E to better serve its growing global fan base.In-race insights and Driver Statistics: Leveraging Infosys Topaz, an AI-first suite of offerings using generative AI technologies, the collaboration aims to provide real-time insights and real time driver statistics during races, enhancing the overall viewing experience for fans.An enhanced sustainability data management tool: With the objective of playing a pivotal role in supporting Formula E’s carbon reduction target of 45% by 2030, Infosys will work to transform the sport’s carbon reporting capabilities by using AI to improve accuracy, reliability, and traceability of data collection, and setting new standards in sustainability assessments for the championship.Jeff Dodds, Chief Executive Officer, Formula E, said, “Infosys’ expertise in cutting-edge technologies makes them the ideal partner to help us drive the future of electric motorsport. We are excited to work with them to deliver exceptional experiences for our global fan base and further strengthen Formula E’s position as a leader in sustainable, digital-first sports. Infosys’ commitment to sustainability and innovation aligns perfectly with our vision, and we are confident that this collaboration will unlock new avenues in our key focus areas.”
Sumit Virmani, EVP & Global Chief Marketing Officer, Infosys, said, “Infosys has built and nurtured several strategic sports collaborations globally. We are now delighted to partner with Formula E, a visionary motorsport series, that shares our passion for sustainability and AI-led innovation. This strategic collaboration will showcase our AI, digital, and analytics prowess, elevating the fan experience, while enhancing Formula E’s sustainability goals. Together, we aim to redefine the possibilities in electric motorsport.”
As a brand, Infosys has been successfully associated with the global tennis ecosystem for nine years through strong partnerships with Roland-Garros, Australian Open, ATP, and the International Tennis Hall of Fame. In addition, we continue to accelerate brand momentum through our collaboration with the Madison Square Garden, including key MSG properties New York Knicks, New York Rangers, and the Madison Square Garden Arena. Through all these partnerships, Infosys has successfully demonstrated how it brings to life the benefits of AI into sports.
About Formula E and the ABB FIA Formula E World Championship
As the world’s first all-electric FIA World Championship and the only sport certified net zero carbon since inception, the ABB FIA Formula E World Championship brings dramatic racing to the heart of some of the world’s most iconic cities providing an elite motorsport platform for the world’s leading automotive manufacturers to accelerate electric vehicle innovation.
The Formula E network of teams, manufacturers, partners, broadcasters, and host cities are united by a passion for the sport and belief in its potential to accelerate sustainable human progress and create a better future for people and planet.
www.FIAFormulaE.com
About Infosys
Infosys is a global leader in next-generation digital services and consulting. Over 300,000 of our people work to amplify human potential and create the next opportunity for people, businesses and communities. We enable clients in more than 56 countries to navigate their digital transformation. With over four decades of experience in managing the systems and workings of global enterprises, we expertly steer clients, as they navigate their digital transformation powered by cloud and AI. We enable them with an AI-first core, empower the business with agile digital at scale and drive continuous improvement with always-on learning through the transfer of digital skills, expertise, and ideas from our innovation ecosystem. We are deeply committed to being a well-governed, environmentally sustainable organization where diverse talent thrives in an inclusive workplace.
Visit www.infosys.com to see how Infosys (NSE, BSE, NYSE: INFY) can help your enterprise navigate your next.
Safe Harbor
Certain statements in this release concerning our future growth prospects, or our future financial or operating performance, are forward-looking statements intended to qualify for the ‘safe harbor’ under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results or outcomes to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the execution of our business strategy, our ability to attract and retain personnel, our transition to hybrid work model, economic uncertainties, technological innovations such as Generative AI, the complex and evolving regulatory landscape including immigration regulation changes, our ESG vision, our capital allocation policy and expectations concerning our market position, future operations, margins, profitability, liquidity, capital resources, our corporate actions including acquisitions, and cybersecurity matters. Important factors that may cause actual results or outcomes to differ from those implied by the forward-looking statements are discussed in more detail in our US Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2023. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Company’s filings with the Securities and Exchange Commission and our reports to shareholders. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company unless it is required by law.
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Artificial Intelligence
Latest VIPRE Security Group Email Threat Trends Research Exposes Global Phishing and Malware Threat Landscape
The US, UK, Ireland, and Japan emerge as the main source of spam; manufacturing, government, and IT sectors are most victimized; Pikabot top malware family
LONDON, May 9, 2024 /PRNewswire/ — VIPRE Security Group, a global leader and award-winning cybersecurity, privacy, and data protection company, today released its Q1 2024 Email Threat Trends report, based on an analysis of 1.8 billion emails. The findings reveal the evolving landscape of email-based threats and emerging tactics malicious actors are employing.
The US, UK, Ireland, and Japan top the spam sources listThe report identifies the US as the top source of spam emails globally, followed by the U.K., Ireland, and Japan. The US, UK, and Canada are the top three countries most subjected to email-based attacks.
Attackers aim at the manufacturing sectorThe manufacturing, government, and IT sectors are the most victimized by malicious actors. In Q1 2024, the manufacturing sector suffered 43% of email-based attacks, with the government (15%) and IT (11%) trailing well behind. This is a change from Q1 2023, when attackers targeted the financial (25%), healthcare (22%), and education (15%) sectors most often.
Scams surpassing phishing This research warns that ‘scams’ within the spam category are growing in popularity among cybercriminals, overtaking phishing emails in the first quarter of 2024.
There’s been a notable increase in phishing emails masquerading as communications from Human Resources, falsely claiming to relate to employee benefits, compensation, or insurance within a company. These emails contain malicious attachments in .html or .pdf formats, featuring phishing QR codes that redirect recipients to phishing sites upon scanning.
New phishing trends and techniquesIn email phishing campaigns, 75% of emails leverage links, 24% favor attachments, and 1% use QR codes. Attackers are employing links in phishing emails for URL redirection (54%), compromised websites (22%), and newly created domains (15%).
Emerging tactics employed by cybercriminals to execute phishing attacks include the use of .ics calendar invite and .rtf attachment file formats to trick recipients into opening malicious content.
Malspam links and top malware familyEncouraged by the success of password-oriented phishing emails that use links, cybercriminals are opting for malicious links in malspam emails instead of attachments. Malware is increasingly being hidden in cloud storage platforms such as Google Drive. The use of malware-based emails employing attachments has increased to 22% in Q1 2024, from only 3% in Q1 2023.
Due to the void left by the dismantled Qakbot malware, Pikabot has emerged as the top malware family, with IceID a distant second.
Exploiting software vulnerabilitiesCriminals are exploiting a web application vulnerability, most notably Reflected Cross-Site Scripting (XSS), focusing on the tag attribute “href”, to circumvent detection by using a variety of tactics such as images as the entire email content, encoding URLs, and directing the victim through multiple URLs.
Malicious actors are also finding success with thread hijacking of NTLM (NT LAN Manager), a security protocol used by Microsoft Windows operating systems for authentication. By hijacking the authentication thread, attackers extract NTLM challenge-response hashes from legitimate SMB (Server Message Block) sessions, to enable them to impersonate authenticated users and gain unauthorized access.
“Criminals are using email with success to scam, infiltrate networks, and unleash malicious payloads,” warns Usman Choudhary, Chief Product and Technology Officer, VIPRE Security Group. “We’re witnessing bad actors relentlessly exploiting human vulnerabilities and software flaws, circumventing email gateways and security measures with alarming precision. Robust email and endpoint defenses, coupled with a vigilant human frontline, remain our strongest defense against these unyielding attacks.”
To read the full report, click here: VIPRE’s Email Threat Trends Report: Q1 2024.
VIPRE leverages its unique understanding of email security to equip organizations with the information they need to protect themselves. This report is based on proprietary intelligence gleaned from round-the-clock vigilance of the cybersecurity landscape.
About VIPRE Security Group VIPRE Security Group, part of Ziff Davis, Inc., is a leading provider of internet security solutions purpose-built to protect businesses, solution providers, and home users from costly and malicious cyber threats. With over 25 years of industry expertise, VIPRE is one of the world’s largest threat intelligence clouds, delivering exceptional protection against today’s most aggressive online threats. Our award-winning software portfolio includes next-generation antivirus endpoint cloud solutions, advanced email security products, along with threat intelligence for real-time malware analysis, and security awareness training for compliance and risk management. VIPRE solutions deliver easy-to-use, comprehensive layered defense through cloud-based and server security, with mobile interfaces that enable instant threat response. VIPRE is a proud Advanced Technology Partner of Amazon Web Services operating globally across North America and Europe.
The group operates under various brands, including VIPRE®, StrongVPN®, IPVanish®, Inspired eLearning®, Livedrive®, and SugarSync®. www.VIPRE.com
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