Albion Enterprise VCT PLC : Half-yearly report
Albion Enterprise VCT PLC
As required by the UK Listing Authority's Disclosure and Transparency Rule 4.2, Albion Enterprise VCT PLC today makes public its information relating to the Half-yearly Financial Report (which is unaudited) for the six months to 30 September 2013. This announcement was approved by the Board of Directors on 29 November 2013.
The full Half-yearly Financial Report (which is unaudited) for the period to 30 September 2013, will shortly be sent to shareholders. Copies of the full Half-yearly Financial Report will be shown via the Albion Ventures LLP website by clicking www.albion-ventures.co.uk/ourfunds/AAEV.htm.
Investment objectives
The aim of Albion Enterprise VCT PLC ("the Company") is to provide investors with a regular and predictable source of income, combined with the prospect of longer term capital growth. The Company intends to achieve this by investing up to 50 per cent. of the net funds raised in an asset-based portfolio of more stable, ungeared businesses, principally operating in the leisure sector and related areas (the "Asset-based Portfolio"). The balance of the net funds raised, other than funds retained for liquidity purposes, will be invested in a portfolio of higher growth businesses across a variety of sectors of the UK economy. These will range from more stable, income producing businesses to higher risk technology companies (the "Growth Portfolio"). In neither category would portfolio companies normally have any external borrowing with a charge ranking ahead of the Company. Up to two-thirds of qualifying investments by cost will comprise loan stock secured with a first charge on the portfolio company's assets. Funds awaiting investment in Qualifying Investments or retained for liquidity purposes will be held on deposit, invested in floating rate notes (in both cases with banks with a Moody's credit rating of 'A' or above) or invested in government gilts.
The Company's investment portfolio will thus be structured to provide a balance between income and capital growth for the longer term. The Asset-based Portfolio is designed to provide stability and income whilst still maintaining the potential for capital growth. The Growth Portfolio is intended to provide diversified exposure through its portfolio of investments in unquoted UK companies. Stock specific risk will be reduced by the Company's policy of holding a diversified portfolio of Qualifying Investments.
Financial calendar
| Record date for second dividend | 7 February 2014 |
| Payment date for second dividend | 28 February 2014 |
| Financial year end | 31 March 2014 |
Financial highlights (unaudited)
| Unaudited six months ended 30 September 2013 | Unaudited six months ended 30 September 2012 | Audited year ended 31 March 2013 | |
| (pence per share) | (pence per share) | (pence per share) | |
| Net asset value | 95.40 | 84.60 | 92.90 |
| Dividends paid | 2.50 | 1.75 | 3.50 |
| Revenue return | 0.80 | 0.80 | 1.80 |
| Net asset value uplift from buy-backs | 0.10 | 0.60 | 1.00 |
| Capital return | 4.10 | - | 8.70 |
| Total shareholder net asset value return to 30 September 2013: | (pence per share) |
| Dividends paid during the year ended: | |
| 31 March 2008 | 0.70 |
| 31 March 2009 | 1.65 |
| 31 March 2010 | 2.00 |
| 31 March 2011 | 3.00 |
| 31 March 2012 | 3.00 |
| 31 March 2013 | 3.50 |
| Total dividends paid in the six months to 30 September 2013 | 2.50 |
| Total dividends paid to 30 September 2013 | 16.35 |
| Net asset value as at 30 September 2013 | 95.40 |
| Total shareholder net asset value return to 30 September 2013 | 111.75 |
In addition to the above dividends, the Company will pay a second dividend of 2.50 pence per share, payable on 28 February 2014 to shareholders on the register at 7 February 2014.
Notes
- The dividend of 0.70 pence per share paid during the period ended 31 March 2008 and first dividend of 0.40 pence per share paid during the year ended 31 March 2009 were paid to shareholders who subscribed in the 2006/2007 offer only.
- All dividends paid by the Company are free of income tax. It is an H. M. Revenue & Customs requirement that dividend vouchers indicate the tax element should dividends have been subject to income tax. Investors should ignore this figure on the dividend voucher and need not disclose any income they receive from a VCT on their tax return.
- The net asset value of the Company is not its share price as quoted on the official list of the London Stock Exchange. The share price of the Company can be found in the Investment Companies - VCTs section of the Financial Times on a daily basis.
- Investors are reminded that it is common for shares in VCTs to trade at a discount to their net asset value as tax reliefs are only obtainable on initial subscription.
Interim management report
Introduction
I am pleased to announce that the Company achieved a total return for the six months to 30 September 2013 of 4.90 pence per share against 0.80 pence per share for the same period last year. Investment income increased by 13 per cent. over the same period, while net asset value, after the payment of the first dividend of 2.50 pence per share on 30 August 2013, was 95.40 pence per share compared to 92.90 pence per share at 31 March 2013.
Investment progress and prospects
During the period £1.3 million was invested in existing and new portfolio companies with an additional £1.3 million invested following the period end. There were two exits in the period. The first was Opta Sports Data, where we realised proceeds of £1.5 million against a cost of £653,000; after interest received over the life of our investment, the investment returned over 2.5 times cost. In addition, we sold our investment in Prime Care for £440,000 against a cost of £1 million. After interest received, we realised a loss of 47 per cent. of the sum invested and this loss is mainly a reflection of cuts in local authority funding for domiciliary care.
The remaining investment portfolio has performed strongly with a further substantial write-up of Radnor House School following its most recent independent professional valuation which in turn follows the granting of planning to increase the size of the school to 440 pupils. In addition, our investments in Mirada Medical, Hilson Moran and Masters Pharmaceuticals all benefitted from further write-ups as a result of strong trading. Partial provisions, however, were made against Mi-Pay and DySIS due to slower than anticipated progress.
In general, we remain positive on the outlook of the Company and anticipate further progress, particularly in our renewable energy and healthcare investments. It is also encouraging to note that, in what is becoming a mature portfolio, there are sufficient funds available to add promising new investments. These include Relayware (£761,000) which provides software for the managing of distribution partners; and Aridhia (£760,000) which provides health informatics to key healthcare providers in the UK and the Middle East.
Risks & uncertainties
The outlook for the UK and global economies continue to be the key risk affecting your Company, despite the welcome return of the UK to growth. Investment risk is mitigated in a number of ways, including our policy that portfolio companies should have no external borrowing, and that the portfolio should be balanced across sectors and should include a significant level of asset backing.
Other risks and uncertainties remain unchanged and are as detailed in note 14.
Discount management and 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 VCT's interest, including the maintenance of sufficient resources for investment in new and existing portfolio companies and the continued payment of dividends to shareholders. It is the Board's intention for such buy-backs to be in the region of a 5 per cent. discount to net asset value, so far as market conditions and liquidity permit.
Transactions with Manager
Details of the transactions that took place with the Manager during the period can be found in note 5.
There are no related party transactions or balances that require disclosure.
Albion VCTs Top Up Offers 2013/2014
Your Board, in conjunction with the boards of other VCTs managed by Albion Ventures LLP, has recently launched a top up offer of new Ordinary shares. Albion Enterprise VCT PLC will be aiming to raise circa £2.5 million out of the target of £15 million in aggregate that the Albion VCTs are seeking to raise. The proceeds will be used to provide further resources at a time when a number of attractive investment opportunities are being seen. An Investor Guide and Offer Document is being posted to shareholders.
Results and dividends
As at 30 September 2013, the net asset value was 95.40 pence per share or £31.1 million compared to 92.90 pence per share or £29.6 million at 31 March 2013. The revenue return before taxation was £325,000 compared to £272,000 for the six months to 30 September 2012. In line with the annual dividend target of 5 pence per share, the Directors declare a second dividend for the year of 2.50 pence per share payable on 28 February 2014 to shareholders on the register as at 7 February 2014.
M Packe
Chairman
29 November 2013
Responsibility statement
The Directors, Maxwell Packe, Lady Balfour of Burleigh, Lord St. John of Bletso and Patrick Reeve, are responsible for preparing the Half-yearly Financial Report. The Directors have chosen to prepare this Half-yearly Financial Report for the Company in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP").
In preparing these summarised Financial Statements for the six months to 30 September 2013 we, the Directors of the Company, confirm that to the best of our knowledge:
the summarised set of Financial Statements has been prepared in accordance with the pronouncement on interim reporting issued by the Accounting Standards Board;
the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year);
the summarised set of Financial Statements gives a true and fair view in accordance with UK GAAP of the assets, liabilities, financial position and profit and loss of the Company for the six months ended 30 September 2013 and comply with UK GAAP and Companies Act 2006; and
the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
The accounting policies applied to the Half-yearly Financial Report have been consistently applied in current and prior periods and are those applied in the Annual Report and Financial Statements for the year ended 31 March 2013.
This Half-yearly Financial Report has not been audited or reviewed by the Auditor.
By order of the Board
M Packe
Chairman
29 November 2013
Portfolio of investments (unaudited)
The following list is a summary of fixed asset investments as at 30 September 2013:
| Fixed asset investments | % voting rights | Cost £'000 | Cumulative movement in value £'000 | Value £'000 | Change in value for the period* £'000 | |
| Asset-based investments | ||||||
| Radnor House School (Holdings) Limited | 9.8 | 1,700 | 1,299 | 2,999 | 667 | |
| Bravo Inns II Limited | 13.1 | 2,150 | 31 | 2,181 | 10 | |
| Regenerco Renewable Energy Limited | 12.5 | 1,195 | 79 | 1,274 | 10 | |
| Alto Prodotto Wind Limited | 11.1 | 1,000 | 270 | 1,270 | (7) | |
| Taunton Hospital Limited | 15.8 | 1,000 | 241 | 1,241 | 192 | |
| TEG Biogas (Perth) Limited | 16.4 | 986 | 101 | 1,087 | (7) | |
| Greenenerco Limited | 28.6 | 1,000 | - | 1,000 | - | |
| The Street by Street Solar Programme Limited | 8.6 | 860 | 133 | 993 | 6 | |
| Orchard Portman Hospital Limited | 10.2 | 690 | 179 | 869 | 137 | |
| Bravo Inns Limited | 8.4 | 750 | (265) | 485 | (2) | |
| AVESI Limited | 5.5 | 172 | - | 172 | - | |
| The Charnwood Pub Company Limited | 1.2 | 257 | (139) | 118 | (13) | |
| Total asset-based investments | 11,760 | 1,929 | 13,689 | 993 | ||
| Growth investments | ||||||
| Mirada Medical Limited | 15.0 | 389 | 1,060 | 1,449 | 353 | |
| Masters Pharmaceuticals Limited | 6.3 | 1,070 | 307 | 1,377 | 240 | |
| DySIS Medical Limited | 10.7 | 1,221 | (25) | 1,196 | (174) | |
| Process Systems Enterprise Limited | 3.9 | 365 | 515 | 880 | 1 | |
| Hilson Moran Holdings Limited | 10.0 | 545 | 332 | 877 | 249 | |
| Relayware Limited | 3.5 | 761 | 2 | 763 | 2 | |
| Mi-Pay Limited | 9.4 | 1,382 | (734) | 648 | (343) | |
| memsstar Limited | 5.5 | 384 | 3 | 387 | (41) | |
| Proveca Limited | 6.1 | 289 | 10 | 299 | 7 | |
| Oxsensis Limited | 3.8 | 559 | (314) | 245 | (6) | |
| Abcodia Limited | 6.4 | 225 | - | 225 | - | |
| MyMeds&Me Limited | 3.6 | 180 | 6 | 186 | 5 | |
| Lowcosttravelgroup Limited | 1.0 | 270 | (124) | 146 | (42) | |
| Total growth investments | 7,640 | 1,038 | 8,678 | 251 | ||
| Total fixed asset investments | 19,400 | 2,967 | 22,367 | 1,244 |
| Current asset investments | Cost £'000 | Cumulative movement in value £'000 | Value £'000 | Change in value for the period* £'000 | |
| Close Brothers Bank Limited fixed term deposit 12 March 2014 | 1,553 | - | 1,553 | - | |
| Contingent future receipts on disposal of fixed asset investments | - | 13 | 43 | 13 | |
| Total current asset investments | 1,553 | 13 | 1,596 | 13 |
*As adjusted for additions and disposals
| Total change in value of investments for the year | 1,257 | |||||
| Realised gains on fixed asset investments | 260 | |||||
| Movement in loan stock accrued interest | 83 | |||||
| Total gains on investments as per Income statement | 1,600 | |||||
| Fixed asset realisations | Cost £'000 | Opening carrying value £'000 | Disposal proceeds £'000 | Total realised gain/(loss) £'000 | Gain/(loss) on opening value £'000 |
| Opta Sports Data Limited | 653 | 1,176 | 1,481 | 828 | 305 |
| Prime Care Holdings Limited | 1,016 | 485 | 438 | (578) | (47) |
| Masters Pharmaceuticals Limited (loan stock repayment) | 168 | 186 | 188 | 20 | 2 |
| Hilson Moran Holdings Limited (loan stock repayment) | 135 | 167 | 167 | 32 | - |
| Radnor House School (Holdings) Limited (loan stock repayment) | - | 152 | 152 | 152 | - |
| Total fixed asset realisations | 1,972 | 2,166 | 2,426 | 454 | 260 |
Summary income statement (unaudited)
| Unaudited six months ended 30 September 2013 | Unaudited six months ended 30 September 2012 | Audited year ended 31 March 2013 | ||||||||
| Note | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | |
| Gains on investments | 3 | - | 1,600 | 1,600 | - | 261 | 261 | - | 3,224 | 3,224 |
| Investment income | 4 | 514 | - | 514 | 454 | - | 454 | 1,152 | - | 1,152 |
| Investment management fees | 5 | (95) | (284) | (379) | (86) | (259) | (345) | (175) | (526) | (701) |
| Other expenses | (94) | - | (94) | (96) | - | (96) | (206) | - | (206) | |
| Return on ordinary activities before taxation | 325 | 1,316 | 1,641 | 272 | 2 | 274 | 771 | 2,698 | 3,469 | |
| Tax (charge)/credit on ordinary activities | (70) | 63 | (7) | - | - | - | (178) | 144 | (34) | |
| Return attributable to shareholders | 255 | 1,379 | 1,634 | 272 | 2 | 274 | 593 | 2,842 | 3,435 | |
| Basic and diluted return per share (pence)* | 7 | 0.80 | 4.10 | 4.90 | 0.80 | - | 0.80 | 1.80 | 8.70 | 10.50 |
* excluding treasury shares
Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 September 2012 and the audited statutory accounts for the year ended 31 March 2013.
The accompanying notes form an integral part of this Half-yearly Financial Report.
The total column of this Summary 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.
All revenue and capital items in the above statement derive from continuing operations.
There are no recognised gains or losses other than the results for the periods disclosed above. Accordingly a Statement of total recognised gains and losses is not required. The difference between the reported return on ordinary activities before tax and the historical profit is due to the fair value movements on investments. As a result a note on historical cost profit and losses has not been prepared.
Summary balance sheet (unaudited)
| Note | Unaudited 30 September 2013 £'000 | Unaudited 30 September 2012 £'000 | Audited 31 March 2013 £'000 | |
| Fixed asset investments | 22,367 | 21,220 | 22,088 | |
| Current assets | ||||
| Trade and other debtors | 409 | 81 | 52 | |
| Current asset investments | 1,596 | 1,518 | 1,583 | |
| Cash at bank | 10 | 7,120 | 4,906 | 6,198 |
| 9,125 | 6,505 | 7,833 | ||
| Creditors: amounts falling due within one year | (406) | (380) | (322) | |
| Net current assets | 8,719 | 6,125 | 7,511 | |
| Net assets | 31,086 | 27,345 | 29,599 | |
| Capital and reserves | ||||
| Called up share capital | 8 | 362 | 17,055 | 345 |
| Share premium | 1,988 | 1,362 | 290 | |
| Capital redemption reserve | 99 | 97 | 97 | |
| Unrealised capital reserve | 2,956 | (641) | 1,810 | |
| Realised capital reserve | (303) | (923) | (536) | |
| Other distributable reserve | 25,984 | 10,395 | 27,593 | |
| Total equity shareholders' funds | 31,086 | 27,345 | 29,599 | |
| Basic and diluted net asset value per share (pence)* | 95.40 | 84.60 | 92.90 |
* excluding treasury shares
Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 September 2012 and the audited statutory accounts for the year ended 31 March 2013.
The accompanying notes form an integral part of this Half-yearly Financial Report.
These Financial Statements were approved by the Board of Directors, and authorised for issue on 29 November 2013 and were signed on its behalf by
M Packe
Chairman
Company number 05990732
Summary reconciliation of movement in shareholders' funds (unaudited)
| Called-up share capital £'000 | Share premium £'000 | Capital redemption reserve £'000 | Unrealised capital reserve * £'000 | Realised capital reserve* £'000 | Other distributable reserve* £'000 | Total £'000 | |
| As at 1 April 2013 (audited) | 345 | 290 | 97 | 1,810 | (536) | 27,593 | 29,599 |
| Return for the period | - | - | - | 1,340 | 39 | 255 | 1,634 |
| Transfer of previously unrealised gains on sale of investments | - | - | - | (194) | 194 | - | - |
| Issue of share capital | 19 | 1,698 | - | - | - | - | 1,717 |
| Purchase of shares for treasury | - | - | - | - | - | (1,044) | (1,044) |
| Cancellation of treasury shares | (2) | - | 2 | - | - | - | - |
| Dividends paid | - | - | - | - | - | (820) | (820) |
| As at 30 September 2013 (unaudited) | 362 | 1,988 | 99 | 2,956 | (303) | 25,984 | 31,086 |
| As at 1 April 2012 (audited) | 16,703 | 1,065 | - | (776) | (795) | 11,766 | 27,963 |
| Return for the period | - | - | - | 261 | (259) | 272 | 274 |
| Transfer of previously unrealised gains on sale of investments | - | - | - | (126) | 126 | - | - |
| Issue of share capital | 449 | 297 | - | - | - | - | 746 |
| Purchase of shares for cancellation | (69) | - | 69 | - | - | (137) | (137) |
| Cancellation of treasury shares | (28) | - | 28 | - | - | - | - |
| Purchase of shares for treasury | - | - | - | - | - | (931) | (931) |
| Dividends paid | - | - | - | - | - | (571) | (571) |
| Transfer from other distributable reserve | - | - | - | - | 3 | (3) | - |
| As at 30 September 2012 (unaudited) | 17,055 | 1,362 | 97 | (641) | (923) | 10,395 | 27,345 |
| As at 1 April 2012 (audited) | 16,703 | 1,065 | - | (776) | (795) | 11,766 | 27,963 |
| Return for the period | - | - | - | 2,740 | 102 | 593 | 3,435 |
| Transfer of previously unrealised gains on sale of investments | - | - | - | (154) | 154 | - | - |
| Issue of share capital | 453 | 587 | - | - | - | - | 1,040 |
| Purchase of shares for cancellation | (69) | - | 69 | - | - | (97) | (97) |
| Purchase of shares for treasury | - | - | - | - | - | (1,610) | (1,610) |
| Cancellation of treasury shares | (28) | - | 28 | - | - | - | - |
| Dividends paid | - | - | - | - | - | (1,132) | (1,132) |
| Transfer from other distributable reserve | - | - | - | - | 3 | (3) | - |
| Reduction in share capital and cancellation of share premium reserve** | (16,714) | (1,362) | - | - | - | 18,076 | - |
| As at 31 March 2013 (audited) | 345 | 290 | 97 | 1,810 | (536) | 27,593 | 29,599 |
* Included within the aggregate of these reserves is an amount of £25,681,000 (30 September 2012: £8,831,000; 31 March 2013: £27,057,000) which is considered distributable.
** The reduction in the nominal value of shares from 50 pence to 1 penny and the cancellation of the share premium reserve (as approved by shareholders at the Annual General Meeting held on 4 September 2012 and by order of the Court dated 31 October 2012) has increased the value of the other distributable reserve.
The special reserve, treasury share reserve and the revenue reserve have been combined in the balance sheet to form a single reserve named other distributable reserve. The Directors consider the presentation of a single reserve to enhance the clarity of financial reporting. More details regarding treasury shares can be found in note 8.
Summary cash flow statement (unaudited)
| Note | Unaudited six months ended 30 September 2013 £'000 | Unaudited six months ended 30 September 2012 £'000 | Audited year ended 31 March 2013 £'000 | |
| Operating activities | ||||
| Dividend income received | 9 | - | - | |
| Loan stock income received | 522 | 347 | 988 | |
| Deposit interest received | 40 | 39 | 126 | |
| Investment management fees paid | (370) | (350) | (691) | |
| Other cash payments | (114) | (118) | (200) | |
| Net cash flow from operating activities | 9 | 87 | (82) | 223 |
| Taxation | ||||
| UK corporation tax | - | 81 | 80 | |
| Capital expenditure and financial investments | ||||
| Purchase of fixed asset investments | (1,338) | (1,190) | (700) | |
| Disposal of fixed asset investments | 2,319 | 1,077 | 2,572 | |
| Disposal of current asset investments | - | 203 | 203 | |
| Net cash flow from investing activities | 981 | 90 | 2,075 | |
| Management of liquid resources | ||||
| Purchase of current asset investments | - | - | (1,553) | |
| Disposal of current asset investments | - | - | 1,500 | |
| Net cash flow from management of liquid resources | - | - | (53) | |
| Equity dividends paid (net of costs of shares issued under the Dividend Reinvestment Scheme) | (742) | (523) | (1,037) | |
| Net cash flow before financing | 326 | (434) | 1,288 | |
| Financing | ||||
| Issue of ordinary share capital (net of costs) | 1,640 | 698 | 944 | |
| Purchase of own shares (including costs) | (1,044) | (1,031) | (1,707) | |
| Net cash flow from financing | 596 | (333) | (763) | |
| Cash flow in the period | 10 | 922 | (767) | 525 |
Notes to the unaudited summarised Financial Statements
1. Accounting convention
The Financial Statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards 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") in January 2009. Accounting policies have been applied consistently in current and prior periods, however to enhance clarity of financial reporting, the special reserve, treasury share reserve and revenue reserve have been presented as a single reserve named other distributable reserve.
2. Accounting policies
Investments
Fixed and current asset investments
Unquoted equity investments, debt issued at a discount and convertible bonds
In accordance with FRS 26 "Financial Instruments Recognition and Measurement", unquoted equity, debt issued at a discount and convertible bonds are designated as fair value through profit or loss ("FVTPL"). Fair value is determined by the Directors in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEVCV guidelines).
Fair value movements on equity investments and gains and losses arising on the disposal of investments are reflected in the capital column of the Income statement in accordance with the AIC SORP and realised gains or losses on the sale of investments will be reflected in the realised capital reserve, and unrealised gains or losses arising from the revaluation of investments will be reflected in the unrealised capital reserve.
Warrants and unquoted equity derived instruments
Warrants and unquoted equity derived instruments are only valued if there is additional value to the Company in exercising or converting as at the balance sheet date. Otherwise these instruments are held at nil value. The valuation techniques used are those used for the underlying equity investment.
Unquoted loan stock
Unquoted loan stock (excluding debt issued at a discount and convertible bonds) are classified as loans and receivables as permitted by FRS 26 and measured at amortised cost using the Effective Interest Rate method less impairment. Movements in amortised cost relating to interest income are reflected in the revenue column of the Income statement, and hence are reflected in the other distributable reserve, and movements in respect of capital provisions are reflected in the capital column of the Income statement and are reflected in the realised capital reserve following sale, or in the unrealised capital reserve on impairment from revaluations of the fair value of the security.
For all unquoted loan stock, whether fully performing, past due or impaired, the Board considers that the fair value is equal to or greater than the security value of these assets. For unquoted loan stock, the amount of the impairment is the difference between the asset's cost and the present value of estimated future cash flows, discounted at the original effective interest rate. The future cash flows are estimated based on the fair value of the security less the estimated selling costs.
Current asset investments
Contractual future contingent receipts on the disposal of fixed asset investments are designated at fair value through profit and loss and are subsequently measured at fair value.
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 revenue reserve when a share becomes ex-dividend.
Loan stock accrued interest is recognised in the Balance sheet as part of the carrying value of the loans and receivables at the end of each reporting period.
In accordance with the exemptions under FRS 9 "Associates and joint ventures", those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method.
Investment income
Unquoted equity income
Dividend income is included in revenue when the investment is quoted ex-dividend.
Unquoted loan stock and other preferred income
Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis using the effective interest rate over the life of the financial instrument. Income which is not capable of being received within a reasonable period of time is reflected in the capital value of the investment.
Bank interest income
Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.
Investment management fees and other expenses
All expenses have been accounted for on an accruals basis. Expenses are charged through the revenue account except the following which are charged through the realised capital reserve:
- 75 per cent. of management fees are allocated to the capital account to the extent that these relate to an enhancement in the value of the investments. This is in line with the Board's expectation that over the long term 75 per cent. of the Company's investment returns will be in the form of capital gains; and
- expenses which are incidental to the purchase or disposal of an investment.
Total recurring expenses including management fees and excluding performance fees will not exceed 3.5 per cent. of net asset value of the Company at year end.
Performance incentive fee
In the event that a performance incentive fee crystallises, the fee will be allocated between other distributable and realised capital reserves based upon the proportion to which the calculation of the fee is attributable to revenue and capital returns.
Taxation
Taxation is applied on a current basis in accordance with FRS 16 "Current tax". Taxation associated with capital expenses is applied in accordance with the SORP. In accordance with FRS 19 "Deferred tax", deferred taxation is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the Financial Statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.
Reserves
Share premium account
This reserve accounts for the difference between the price paid for shares and the nominal value of the share, less issue costs and transfers to the other distributable reserve.
Unrealised capital reserve
Increases and decreases in the valuation of investments held at the period end against cost are included in this 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.
Realised capital reserve
The following are disclosed in this reserve:
- gains and losses compared to cost on the realisation of investments;
- expenses, together with the related taxation effect, charged in accordance with the above policies; and
- dividends paid to equity holders.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve have been combined as a single reserve named other distributable reserve.
This reserve accounts for movements from the revenue column of the Income statement, the payment of dividends, the buyback of shares and other non capital realised movements.
Dividends
In accordance with FRS 21 "Events after the balance sheet date", dividends declared by the Company are accounted for in the period in which the dividend has been paid or approved by shareholders in an Annual General Meeting.
3. Gains on investments
Unaudited six months ended 30 September 2013 £'000 | Unaudited six months ended 30 September 2012 £'000 | Audited year ended 31 March 2013 £'000 | |
| Unrealised gains on fixed asset investments held at fair value through profit or loss | 1,349 | 145 | 2,798 |
| Unrealised (impairments)/reversals of impairments on fixed asset investments held at amortised cost | (22) | 98 | (88) |
| Unrealised gains on fixed asset investments sub-total | 1,327 | 243 | 2,710 |
| Unrealised gains on current asset investments held at fair value through profit or loss | 13 | 18 | 30 |
| Unrealised gains sub-total | 1,340 | 261 | 2,740 |
| Realised gains on fixed asset investments held at fair value through profit or loss | 465 | 6 | 490 |
| Realised losses on fixed asset investments held at amortised cost | (205) | - | - |
| Realised gains on fixed asset investments sub-total | 260 | 6 | 490 |
| Realised losses on current asset investments held at fair value through profit or loss | - | (6) | (6) |
| Realised gains sub-total | 260 | - | 484 |
| 1,600 | 261 | 3,224 |
Investments measured at amortised cost are unquoted loan stock instruments as described in note 2.
4. Investment income
Unaudited six months ended 30 September 2013 £'000 | Unaudited six months ended 30 September 2012 £'000 | Audited year ended 31 March 2013 £'000 | |
| Income recognised on investments held at fair value through profit or loss | |||
| Dividend income received | 9 | - | - |
| Interest on convertible bonds and debt issued at a discount | 161 | 113 | 340 |
| 170 | 113 | 340 | |
| Income recognised on investments held at amortised cost | |||
| Return on loan stock investments | 279 | 276 | 690 |
| Bank deposit interest | 65 | 65 | 122 |
| 344 | 341 | 812 | |
| 514 | 454 | 1,152 |
All of the Company's income is derived from operations based in the United Kingdom.
5. Investment management fees
Unaudited six months ended 30 September 2013 £'000 | Unaudited six months ended 30 September 2012 £'000 | Audited year ended 31 March 2013 £'000 | |
| Investment management fee charged to revenue | 95 | 86 | 175 |
| Investment management fee charged to capital | 284 | 259 | 526 |
| 379 | 345 | 701 |
The Manager, Albion Ventures LLP, is party to a management agreement with the Company (details disclosed on page 19 of the Annual Report and Financial Statements for the year ended 31 March 2013) and Patrick Reeve, a Director of the Company, is also Managing Partner of Albion Ventures LLP.
During the period, services of a total value of £379,000 (30 September 2012: £345,000; 31 March 2013: £701,000) were purchased by the Company from Albion Ventures LLP. At the financial period end, the amount due to Albion Ventures LLP in respect of these services disclosed within accruals and deferred income was £194,000 (30 September 2012: £171,000; 31 March 2013: £185,000).
During the period, the Company was charged £10,800 including VAT (30 September 2012: £10,800; 31 March 2013: £21,600) by Albion Ventures LLP in respect of Patrick Reeve's services as a Director. At the financial period end, the amount due to Albion Ventures LLP in respect of these services disclosed as accruals and deferred income was £5,400 (30 September 2012: £5,000; 31 March 2013: £5,400).
The Company raised funds through the Albion VCTs Top Up Offers 2012/2013 during the period. The total cost of the issue of these shares was 3 per cent. of the sums subscribed. Of these costs, an amount of £2,945 (30 September 2012: £3,166; 31 March 2013: £3,613) was paid to the Manager in respect of receiving agent services. There were no sums outstanding in respect of these services as at 30 September 2013.
6. Dividends
Unaudited six months ended 30 September 2013 £'000 | Unaudited six months ended 30 September 2012 £'000 | Audited year ended 31 March 2013 £'000 | ||||
| Dividend of 1.75p per share paid on 31 August 2012 | - | 571 | 571 | |||
| Dividend of 1.75p per share paid on 28 February 2013 | - | - | 561 | |||
| Dividend of 2.50p per share paid on 30 August 2013 | 820 | - | - | |||
| 820 | 571 | 1,132 |
In addition to the dividends summarised above, the Board has declared a second dividend for the year ending 31 March 2014 of 2.50 pence per share which will be paid on 28 February 2014 to shareholders on the register on 7 February 2014. This is expected to amount to approximately £815,000.
7. Basic and diluted return per share
| Unaudited six months ended 30 September 2013 | Unaudited six months ended 30 September 2012 | Audited year ended 31 March 2013 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |||
| Return attributable to equity shares (£'000) | 255 | 1,379 | 1,634 | 272 | 2 | 274 | 593 | 2,842 | 3,435 | ||
| Weighted average shares in issue (excluding treasury shares) | 33,046,443 | 33,159,628 | 32,642,931 | ||||||||
| Return attributable per Ordinary share (pence) (basic and diluted) | 0.80 | 4.10 | 4.90 | 0.80 | - | 0.80 | 1.80 | 8.70 | 10.50 | ||
The weighted average number of shares is calculated excluding treasury shares of 3,614,255 (30 September 2012: 1,792,255; 31 March 2013: 2,599,255).
There are no convertible instruments, derivatives or contingent share agreements in issue for Albion Enterprise VCT PLC, hence there are no dilution effects to the return per share. The basic return per share is therefore the same as the diluted return per share.
8. Called up share capital
| Unaudited 30 September 2013 £'000 | Unaudited 30 September 2012 £'000 | Audited 31 March 2013 £'000 | |
| Allotted, called up and fully paid 36,197,684 Ordinary shares of 1 penny each (30 September 2012 of 50p each: 34,110,228; 31 March 2013 of 1 penny each: 34,458,394) | 362 | 17,055 | 345 |
Voting rights
32,583,429 shares of 1 penny each (net of treasury shares) (30 September 2012: 32,317,973 of 50p each; 31 March 2013: 31,859,139 of 1 penny each).
In the six months to 30 September 2013 the Company purchased 1,245,000 shares (30 September 2012: 1,375,666; 31 March 2013: 2,182,666) to be held in treasury at a cost of £1,044,000, representing 3.8 per cent. (30 September 2012: 4.1 per cent.; 31 March 2013: 6.3 per cent.) of the shares in issue (excluding treasury shares) as at 30 September 2013. In addition 230,000 shares were cancelled from Treasury (September 2012: 56,421; March 2013: 56,421)
The Company did not purchase any shares for cancellation (30 September 2012:nil; 31 March 2013: 137,063 shares for a cost of £97,000).
The Company holds a total of 3,614,255 shares (30 September 2012: 1,792,255; 31 March 2013: 2,599,255) in treasury representing 9.9 per cent. (30 September 2012: 5.5 per cent.; 31 March 2013: 7.5 per cent.) of the shares in issue as at 30 September 2013.
Under the terms of the Dividend Reinvestment Scheme Circular dated 26 November 2009, the following Ordinary shares of nominal value 1 penny were allotted in the six months to 30 September 2013:
| 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) |
| 30 August 2013 | 88,706 | 1 | 90.40 | 78 | 88.00 |
During the period from 1 April 2013 to 30 September 2013, the Company issued the following new Ordinary shares of nominal value 1 penny under the Albion VCTs Top Up Offers 2012/2013:
| 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) |
| 5 April 2013 | 1,492,828 | 15 | 89.90 | 1,302 | 82.25 |
| 12 June 2013 | 387,756 | 4 | 89.90 | 338 | 82.00 |
| 1,880,584 | 19 | 1,640 |
The Offer closed on 12 June 2013.
9. Reconciliation of revenue return on ordinary activities before taxation to net cash flow from operating activities
| Unaudited six months ended 30 September 2013 £'000 | Unaudited six months ended 30 September 2012 £'000 | Audited year ended 31 March 2013 £'000 | |
| Revenue return on ordinary activities before taxation | 325 | 272 | 771 |
| Investment management fee charged to capital | (284) | (259) | (526) |
| Movement in accrued amortised loan stock interest | 83 | (40) | (43) |
| (Increase)/ decrease in debtors | (25) | (28) | 4 |
| (Decrease)/ Increase in creditors | (12) | (27) | 17 |
| Net cash flow from operating activities | 87 | (82) | 223 |
10. Analysis of change in cash during the period
| Unaudited six months ended 30 September 2013 £'000 | Unaudited six months ended 30 September 2012 £'000 | Audited year ended 31 March 2013 £'000 | |
| Opening cash balances | 6,198 | 5,673 | 5,673 |
| Net cash flow | 922 | (767) | 525 |
| Closing cash balances | 7,120 | 4,906 | 6,198 |
11. Commitments and contingencies
As at 30 September 2013, the Company had the following financial commitments in respect of investments:
- Proveca Limited, £181,000
- Abcodia Limited, £30,000
- Relayware Limited, £304,000
- MyMeds&Me Limited, £200,000
- DySIS Medical Limited, £46,000
(30 September 2012: nil; 31 March 2013: £624,000).
There are no contingent liabilities or guarantees given by the Company as at 30 September 2013 (30 September 2012: £nil, 31 March 2013: £nil).
12. Post balance sheet events
Since 30 September 2013, the Company has completed the following material transactions:
Investment of £760,000 in Aridhia Informatics Limited;
Investment of £248,000 in Silent Herdsman Holdings Limited;
Investment of £297,000 in Cisiv Limited;
Investment of £30,000 in Abcodia Limited.
On 6 November 2013 the Company announced the launch of a top up offer as part of the Albion VCTs Top Up Offers 2013/2014 (the 'Offers'). As the maximum amount that can be raised under the Offer (over any 12 month period) will not exceed the lower of 10% of issued share capital and 5m Euros, the Company is not required to publish a full prospectus under the Prospectus Rules or the Financial Services and Markets Act 2000.
In total, six of the VCTs managed by Albion Ventures LLP are making top up offers seeking to raise up to £15m in aggregate.
The proceeds of the Offers will be used to provide useful additional liquidity for the Companies in order to take advantage of appropriate investment opportunities that fall within current VCT legislation, as well as helping fund the Company's annual running costs, market purchases of own shares and the payment of dividends.
The Offers will be split into 3 separate phases. The first phase will close on or before 2pm on 31 January 2014. The second phase will close at 2pm on 5 April 2014 (for the tax year ending 5 April 2014) and the third phase will close at 2pm on 13 June 2014 for the tax year ending 5 April 2015, unless fully subscribed, closed or extended beforehand. Investors who apply before 31 January 2014 will be entitled to an "Early Bird" discount on the issue price. An Investor Guide and Offer Document is being posted to shareholders.
13. Related party transactions
There are no related party transactions or balances requiring disclosure.
14. Risks and uncertainties
The Board considers that the Company faces the following major risks and uncertainties:
1. Economic risk
Changes in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and other factors could substantially and adversely affect the Company's prospects in a number of ways.
To reduce this risk, in addition to investing equity in portfolio companies, the Company often invests in secured loan stock and has a policy of not normally permitting any external bank borrowings within portfolio companies. Additionally, the Manager has been rebalancing the sector exposure of the portfolio with a view to reducing reliance on consumer led sectors.
2. Investment risk
This is the risk of investment in poor quality assets which reduces the capital and income returns to shareholders, and negatively impacts on the Company's reputation. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses.
The success of investments in certain sectors is also subject to regulatory risk, such as those affecting companies involved in UK renewable energy.
To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its strong track record for investing in this segment of the market. In addition, the Manager operates a formal and structured investment process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on investments discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards) and the Board receives detailed reports on each investment as part of the Manager's report at quarterly board meetings. It is the policy of the Company for portfolio companies to not normally have external borrowings.
The Board and the Manager closely monitor regulatory changes within the sectors invested in.
3. Valuation risk
The Company's investment valuation method is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported.
As described in note 2, the unquoted equity investments, convertible loan stock and debt issued at a discount held by the Company are designated at fair value through profit or loss and valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. These investments are valued on the basis of forward looking estimates and judgements about the business itself, its market and the environment in which it operates, together with the state of the mergers and acquisitions market, stock market conditions and other factors. In making these judgements the valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board. The sensitivity of these assumptions is commented on further in notes 11 and 19 on page 38 to 46 of the full Annual Report and Financial Statements. All other unquoted loan stock is measured at amortised cost.
4. Venture capital trust approval risk
The Company's current approval as a venture capital trust allows investors to take advantage of tax reliefs on initial investment and ongoing tax free capital gains and dividend income. Failure to meet the qualifying requirements could result in investors losing the tax relief on initial investment and loss of tax relief on any tax-free income or capital gains received. In addition, failure to meet the qualifying requirements could result in a loss of listing of the shares.
To reduce this risk, the Board has appointed the Manager, who has a team with experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed PricewaterhouseCoopers LLP as its taxation advisor. PricewaterhouseCoopers LLP report quarterly to the Board to independently confirm compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation.
5. Compliance risk
The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company's shares, or other penalties under the Companies Act or from financial reporting oversight bodies.
Board members and the Manager have experience of operating at senior levels within quoted businesses. In addition, the Board and the Manager receive regular updates on new regulation from its auditor, lawyers and other professional bodies.
6. Internal control risk
Failures in key controls, within the Board or within the Manager's business, could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders.
The Audit Committee meets with the Manager's Internal Auditor, Littlejohn LLP, when required, receiving a report regarding the last formal internal audit performed on the Manager, and providing the opportunity for the Audit Committee to ask specific and detailed questions. Lord St. John of Bletso, as Audit Committee Chairman, met with the internal audit Partner of Littlejohn LLP in February 2013 to discuss the most recent Internal Audit Report on the Manager. The Manager has a comprehensive business continuity plan in place in the event that operational continuity is threatened. Further details regarding the Board's management and review of the Company's internal controls through the implementation of the Turnbull guidance are detailed on page 24 of the full Annual Report and Financial Statements.
Measures are in place to mitigate information risk in order to ensure the integrity, availability and confidentiality of information used within the business.
7. Reliance upon third parties risk
The Company is reliant upon the services of Albion Ventures LLP for the provision of investment management and administrative functions. There are provisions within the management agreement for the change of Manager under certain circumstances (for further detail, see the management agreement paragraph on page 19 of the full Annual Report and Financial Statements). In addition, the Manager has demonstrated to the Board that there is no undue reliance placed upon any one individual within Albion Ventures LLP.
8. Financial risk
By its nature, as a venture capital trust, the Company is exposed to investment risk (which comprises investment price risk and cash flow interest rate risk), credit risk and liquidity risk. The Company's policies for managing these risks and its financial instruments are outlined in full in note 19 to the Financial Statements.
All of the Company's income and expenditure is denominated in sterling and hence the Company has no foreign currency risk. The Company is financed through equity and does not have any borrowings. The Company does not use derivative financial instruments for speculative purposes.
15. Going concern
The Board's assessment of liquidity risk remains unchanged since the last Annual Report and Financial Statements for the year ended 31 March 2013, and is detailed on page 45 and 46 of those accounts. The Company has adequate cash and liquid resources and has no borrowing. The portfolio of investments is diversified in terms of sector, and the major cash outflows of the Company (namely investments, share buy-backs and dividends) are within the Company's control. Accordingly, after making diligent enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors have adopted the going concern basis in preparing this Half-yearly Financial Report and this is in accordance with 'Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009' published by the Financial Reporting Council.
16. Other information
The information set out in this Half-yearly Financial Report does not constitute the Company's statutory accounts within the terms of section 434 of the Companies Act 2006 for the periods ended 30 September 2013 and 30 September 2012, and is unaudited. The information for the year ended 31 March 2013 does not constitute statutory accounts within the terms of section 434 of the Companies Act 2006 and is derived from the statutory accounts for the financial year, which have been delivered to the Registrar of Companies. The Auditor reported on those accounts; their report was unqualified and did not contain statements under s498 (2) or (3) of the Companies Act 2006.
17. Publication
This Half-yearly Financial Report is being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion-ventures.co.uk/our funds/AAEV.htm.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Albion Enterprise VCT PLC via Globenewswire
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