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Albion Enterprise VCT PLC  -  AAEV   

Half-yearly Financial Report

Released 15:00 04-Dec-2018

Half-yearly Financial Report

Albion Enterprise VCT PLC

LEI Code 213800OVSRDHRJBMO720

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 2018. This announcement was approved by the Board of Directors on 4 December 2018.

The full Half-yearly Financial Report (which is unaudited) for the period to 30 September 2018, will shortly be sent to shareholders. Copies of the full Half-yearly Financial Report will be shown via the Albion Capital Group LLP website by clicking www.albion.capital/funds/AAEV/30Sep18.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 and predictable source of income, combined with the prospect of longer term capital growth.

Investment policy

The Company will invest in a broad portfolio of higher growth businesses across a variety of sectors of the UK economy including higher risk technology companies. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified both in terms of sector and stage of maturity of company.

VCT qualifying and non-VCT qualifying investments

Application of the investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs (“VCT regulations”). The maximum amount invested in any one company is limited to any HMRC annual investment limits. It is intended that normally at least 80 per cent. of the Company's funds will be invested in VCT qualifying investments. The VCT regulations also have an impact on the type of investments and qualifying sectors in which the Company can make investment.

Funds held prior to investing in VCT qualifying assets or for liquidity purposes will be held as cash on deposit, invested in floating rate notes or similar instruments with banks or other financial institutions with high credit ratings or invested in liquid open-ended equity funds providing income and capital equity exposure (where it is considered economic to do so). Investment in such open-ended equity funds will not exceed 10 per cent. of the Company’s assets at the time of investment.

Risk diversification and maximum exposures

Risk is spread by investing in a number of different businesses within venture capital trust qualifying industry sectors using a mixture of securities. The maximum amount which the Company will invest in a single company is 15 per cent. of the Company’s assets at cost, thus ensuring a spread of investment risk. The value of an individual investment may increase over time as a result of trading progress and it is possible that it may grow in value to a point where 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 second dividend8 February 2019
  
Payment date for second dividend28 February 2019
  
Financial year end31 March

Financial highlights

 Unaudited six months ended
 30 September 2018
Unaudited six
months ended
30 September 2017
Audited
year ended
31 March 2018
 (pence per share)(pence per share)(pence per share)
Dividends paid3.002.505.00
Revenue return(0.02)-(0.39)
Capital return5.77  2.3413.79
Total return5.752.3413.40
Net asset value112.12101.62109.46


Total shareholder return to 30 September 2018:(Pence per share)
  
Dividends paid during the year ended: 
31 March 20080.70
31 March 20091.65
31 March 20102.00
31 March 20113.00
31 March 20123.00
31 March 20133.50
31 March 20145.00
31 March 20155.00
31 March 20165.00
31 March 20175.00
31 March 20185.00
Dividends paid in the six months to 30 September 20183.00
Total dividends paid to 30 September 201841.85
Net asset value as at 30 September 2018112.12
Total shareholder return to 30 September 2018153.97

In addition to the dividends summarised above, the Board has declared a second dividend for the year ending 31 March 2019, of 3.00 pence per share to be paid on 28 February 2019 to shareholders on the register on 8 February 2019.

Notes

Interim management report

Introduction

I am pleased to report a total return of 5.8 pence per share for the six months to 30 September 2018 (30 September 2017: 2.3 pence per share). These results demonstrate continued positive developments within our investment portfolio after excellent results over the past two years (31 March 2018: 13.4 pence per share; 31 March 2017: 10.9 pence per share). The Manager, Albion Capital, has recently won two awards: Investor Allstars Venture Capital Trust of the Year 2018 and Growth Investor of the Year 2018. I am pleased to see its strong performance recognised by fellow industry peers.

Investment performance and progress

During the period our holding in Grapeshot was sold to Oracle Corporation, realising £9.6 million and resulting in a 10 times return on original investment.

Particularly good progress was achieved by Quantexa, with an uplift of £2.1 million following a third party led funding round. In addition, the annual professional third party valuation of Radnor House School (Holdings) increased due to the strong performance of both the Twickenham school, which is close to its student capacity, and the Sevenoaks school, which now has a student roll of 430 children against 223 on acquisition in 2015 and with significant further capacity to grow. G.Network Communications also had an uplift in valuation during the period as a result of a further fundraising round which completed in October 2018. This will further expand their fibre optic broadband network in central London.

During the period, some £4.0 million was invested in new and existing companies. Investments in new companies included:

Significant follow on investments included: £961,000 in Sandcroft Avenue (PayAsUGym.com), a provider of flexible access to health and fitness clubs; and £400,000 in Locum’s Nest, which provides a technology solution for the management of locum doctors for the NHS.

Results and dividends

On 30 September 2018, the net asset value was £64.3 million or 112.12 pence per share compared to £61.9 million or 109.46 pence per share on 31 March 2018. The total return before taxation was £3.3 million compared to £1.2 million for the six months to 30 September 2017.

As described in the Annual Report and Financial Statements for the year ended 31 March 2018, in light of the strong performance in recent years, the Directors increased the annual dividend target for the Company to 6 pence per share (previously 5 pence per share). A first dividend of 3 pence per share was paid to shareholders on 31 August 2018 to shareholders on the register on 3 August 2018.

In line with the new annual dividend target of 6 pence per share, the Directors declare a second dividend for the year of 3 pence per share payable on 28 February 2019 to shareholders on the register on 8 February 2019.

Risks & uncertainties

The outlook for the UK economy continues to be a key risk affecting your Company, in particular, the effect of the withdrawal of Britain from the European Union is difficult to quantify at this time.

The Company’s investment risk is mitigated through a variety of processes, including investing in a diversified portfolio in terms of sector and stage of maturity and focusing on opportunities where it is believed growth can be resilient and sustainable.

Other principal risks and uncertainties remain unchanged and are detailed in note 13 below.

Share buy-backs

It remains the Board’s policy to buy back shares in the market, subject to the overall constraint that such purchases are in the Company’s interest, including the maintenance of sufficient resources for investment in new and existing portfolio companies and the continued payment of dividends to shareholders. It is the Board’s intention for such buy-backs to be in the region of a 5 per cent. discount to net asset value so far as market conditions and liquidity permit.

Transactions with the Manager

Details of the transactions that took place with the Manager during the period can be found in note 5.

Albion Capital agreed to reduce a proportion of its management fee relating to the investments made by the Company in the SVS Albion OLIM UK Equity Income Fund (“OUEIF”) by 0.75 per cent., which represents the management fee charged by OLIM. This avoids double counting of fees and resulted in a reduction of the management fee of £7,400. Further details of related party transactions can be found in note 11.

Albion VCTs Prospectus Top Up Offers 2018/19

The Company announced on 6 November 2018 that, subject to obtaining the requisite regulatory approval, it is the Company’s intention to launch a prospectus top up offer to raise up to £6 million before issue costs, with a further over-allotment facility of £2 million, of new Ordinary shares for subscription in the 2018/19 and 2019/20 tax years. Full details of the offer will be contained in a prospectus that is expected to be published in early January 2019.

Outlook

We are encouraged by these interim results. We as a Board see the portfolio as being well balanced across a variety of growth sectors and with a number of businesses having the capability of significant further increase in value. We look forward to the full year results with confidence.

Maxwell Packe

Chairman

4 December 2018

Responsibility statement

The Directors, Maxwell Packe, Lord St John of Bletso, Lady Balfour of Burleigh, Christopher Burrows and Patrick Reeve, are responsible for preparing the Half-yearly Financial Report. In preparing these condensed Financial Statements for the period to 30 September 2018 we, the Directors of the Company, confirm that to the best of our knowledge:

  1. the condensed set of Financial Statements, which has been prepared in accordance with Financial Reporting Standard 104 “Interim Financial Reporting”, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company as required by DTR 4.2.4R;
     
  2. the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
     
  3. the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein).

This Half-yearly Financial Report has not been audited or reviewed by the Auditor.

For and on behalf of the Board

Maxwell Packe

Chairman

4 December 2018

Portfolio of investments

The following is a summary of investments as at 30 September 2018:

Fixed asset investments% voting rights Cost
£’000
Cumulative movement
in value
£’000
 

Value
£’000
 Change in
value for the period*
£’000
Radnor House School (Holdings) Limited9.83,0794,2737,352 780
Egress Software Technologies Limited10.92,0522,5884,640 -
Quantexa Limited2.86992,1972,896 2,074
Bravo Inns II Limited13.12,1506302,780 68
Mirada Medical Limited15.11,0541,4182,473 (10)
Regenerco Renewable Energy Limited12.51,2617131,974 62
Proveca Limited9.49059961,901 (27)
G.Network Communications Limited4.78509461,796 436
Earnside Energy Limited8.71,3943261,720 47
Alto Prodotto Wind Limited11.19666841,650 20
The Street by Street Solar Programme Limited8.68916661,557 50
Greenenerco Limited28.69076071,514 (1)
Process Systems Enterprise Limited4.04061,0401,446 178
DySIS Medical Limited7.52,742(1,344)1,398 181
Sandcroft Avenue Limited (PayAsUGym.com)7.11,274501,324 -
Zift Channel Solutions Inc.2.01,0531281,181 21
Convertr Media Limited6.38751281,003 250
MPP Global Solutions Limited3.2950-950 -
The Evewell (Harley Street) Limited7.3917-917 -
MyMeds&Me Limited7.6720113833 (118)
Beddlestead Limited8.1800(1)799 (1)
Black Swan Data Limited1.6749-749 -
Oviva AG3.76426648 (155)
Cisiv Limited9.7663(32)631 289
OmPrompt Holdings Limited9.5864(280)584 (133)
Panaseer Limited2.3405156561 -
memsstar Limited8.8314238551 (96)
Locum’s Nest Limited5.150030530 30
Phrasee Limited2.3474-474 -
Bravo Inns Limited8.4755(298)457 9
Aridhia Informatics Limited6.61,160(741)419 1
Secured by Design Limited1.9280104384 103
Oxsensis Limited3.3625(253)372 114
Abcodia Limited5.6953(616)337 (166)
Koru Kids Limited2.6320-320 -
AVESI Limited5.517983262 10
InCrowd Sports Limited2.723122253 -
Mi-Pay Group plc6.31,504(1,254)250 13
Arecor Limited1.4232-232 -
uMotif Limited1.3210-210 -
Forward Clinical Limited1.8190-190 -
ePatient Network Limited (T/A Raremark)1.8160-160 -
Innovation Broking Group Limited8.48443127 (1)
Healios Limited1.0100-100 -
MHS 1 Limited1.283(1)82 -
Total fixed asset investments 37,62213,36550,987 4,028

*As adjusted for additions and disposals during the period.


Total change in value of investments for the period
 4,028
Movement in loan stock accrued interest     10
Unrealised gains on fixed asset investments     4,038
Realised gains on fixed asset investments     194
Unrealised gains on current asset investments     33
Total gains on investments as per Income statement    4,265


Current asset investmentsCost
£’000
Cumulative movement
in value
£’000
 

Value
£’000
 Change in
value for the period*
£’000
SVS Albion OLIM UK Equity Income Fund2,600(40)2,560 33
Total current asset investments2,600(40)2,560 33

*As adjusted for additions during the period.

The following is a summary of the fixed asset realisations for the period ended 30 September 2018:

Fixed asset realisationsCost
£’000
Opening
carrying
value
£’000
Disposal
proceeds
£’000
Total
realised
gain
£’000
Gain/(loss) on
opening
value
£’000
Disposals:     
Grapeshot Limited1,0269,4519,6398,613188
      
Loan stock repayments and other:     
DySIS Medical Limited5456186308512
MyMeds&Me Limited306420412106(8)
Alto Prodotto Wind Limited1725258-
Greenenerco Limited1521216-
memsstar Limited151515--
Escrow adjustments--222
      
Total fixed asset realisations1,92410,55010,7448,820194

Condensed income statement

  Unaudited
six months ended
30 September 2018
Unaudited
six months ended
30 September 2017
Audited
year ended
31 March 2018
 NoteRevenue £’000Capital £’000Total £’000Revenue £’000Capital £’000Total £’000Revenue £’000Capital £’000Total £’000
           
Gains on
investments
3-4,2654,265-1,7941,794-9,2059,205
           
Investment income4434-434316-316651-651 
           
Investment
management fee
5(195)(586)(781)(164)(492)(656)(342)(1,027)(1,369)
           
Performance incentive fee5(125)(375)(500)(31)(93)(124)(275)(825)(1,100)
           
Other expenses (128)-(128)(120)-(120)(241)-(241)
           
Return/(loss) on
ordinary activities before taxation
 (14)3,3043,29011,2091,210(207)7,3537,146 
           
Tax (charge)/credit on ordinary activities --------
           
Return/(loss) and total comprehensive income attributable to shareholders (14)3,3043,29011,2091,210(207)7,3537,146 
           
Basic and diluted return/(loss) per share (pence)*7(0.02)5.775.75-2.342.34(0.39)13.79 13.40

* excluding treasury shares

Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 September 2017 and the audited statutory accounts for the year ended 31 March 2018.

The accompanying notes form an integral part of this Half-yearly Financial Report.

The total column of this Condensed income statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies’ Statement of Recommended Practice.

Condensed balance sheet

  

 

 

Note
Unaudited
30 September 2018
£’000
Unaudited
30 September 2017
£’000
Audited
31 March
2018
£’000
     
Fixed asset investments 50,98742,03552,436
     
Current assets    
Current asset investments 2,560-1,127
Trade and other receivables less than one year 1,2561,673105
Cash and cash equivalents 10,4019,3859,760
  14,21711,05810,992
     
Total assets 65,20453,09363,428
     
Payables: amounts falling due within one year    
Trade and other payables less than one year (945)(545)(1,557)
Total assets less current liabilities 64,25952,54861,871
     
Equity attributable to equity holders    
Called up share capital8648585638
Share premium 29,99623,70628,945
Capital redemption reserve 104104104
Unrealised capital reserve 13,10110,35117,657
Realised capital reserve 8,7502,052890
Other distributable reserve 11,66015,75013,637
     
Total equity shareholders’ funds 64,25952,54861,871
     
Basic and diluted net asset value per share (pence)* 112.12101.62109.46

* excluding treasury shares

Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 September 2017 and the audited statutory accounts for the year ended 31 March 2018.

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 4 December 2018 and were signed on its behalf by

Maxwell Packe

Chairman

Company number: 05990732

Condensed statement of changes in equity

 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 201863828,94510417,65789013,63761,871
Return/(loss) and total comprehensive income for the period---4,071(767)(14)3,290
Transfer of previously unrealised gains on disposal of investments---(8,627)8,627--
Issue of equity101,072----1,082
Cost of issue of equity-(21)----(21)
Purchase of own shares for treasury-----(247)(247)
Dividends paid-----(1,716)(1,716)
As at 30 September 201864829,99610413,1018,75011,66064,259
        
        
As at 1 April 2017 58023,2251049,9101,28417,35552,458
Return/(loss) and total comprehensive income for the period---1,535(326)11,210
Transfer of previously unrealised gains on disposal of investments---(1,094)1,094--
Issue of equity5491----496
Cost of issue of equity-(10)----(10)
Purchase of own shares for treasury-----(312)(312)
Dividends paid-----(1,294)(1,294)
As at 30 September 2017 58523,70610410,3512,05215,75052,548
        
As at 1 April 201758023,2251049,9101,28417,35552,458
Return/(loss) and total comprehensive income for the year       
---8,852(1,499)(207)7,146
Transfer of previously unrealised gains on disposal of investments---(1,105)1,105--
Issue of equity585,845----5,903
Cost of issue of equity-(125)----(125)
Purchase of own shares for treasury-----(800)(800)
Dividends paid-----(2,711)(2,711)
As at 31 March 201863828,94510417,65789013,63761,871

* These reserves amount to £20,410,000 (30 September 2017: £17,802,000; 31 March 2018: £14,527,000) which is considered distributable.

Condensed statement of cash flows

 Unaudited
six months ended
30 September 2018
£’000
Unaudited
six months ended
30 September 2017
£’000
Audited
year ended
31 March 2018
£’000
Cash flow from operating activities   
Investment income received361283581
Dividend income received472839
Deposit interest received20212
Investment management fee paid(769)(655)(1,312)
Performance incentive fee paid(1,100)(255)(255)
Other cash payments(158)(147)(236)
UK corporation tax paid---
Net cash flow from operating
activities
(1,599)(744)(1,171)
    
    
Cash flow from investing activities   
Purchase of current asset investments(1,400)-(1,200)
Purchase of fixed asset investments(4,016)(4,023)(7,143)
Disposal of fixed asset investments8,5591281,907
Net cash flow from investing
activities
3,143(3,895)(6,436)
    
Cash flow from financing activities   
Issue of share capital7932875,359
Cost of issue of equity(2)(2)(3)
Dividends paid(1,447)(1,094)(2,289)
Purchase of own shares (including costs)(247)(288)(821)
Net cash flow from financing activities(903)(1,097)2,246
    
Increase/(decrease) in cash and cash equivalents641(5,736)(5,361)
Cash and cash equivalents at start of the period9,76015,12115,121
Cash and cash equivalents at end of the period10,4019,3859,760
    
Cash and cash equivalents comprise   
Cash at bank10,4019,3859,760
Cash equivalents---
Total cash and cash equivalents10,4019,3859,760

Notes to the condensed Financial Statements

1.         Accounting convention

The condensed Financial Statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of investments, in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 (“FRS 102”), Financial Reporting Standard 104 – Interim Financial Reporting (“FRS 104”), and with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (“SORP”) issued by The Association of Investment Companies (“AIC”).

The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at fair value through profit and loss (“FVTPL”). The Company values investments by following the International Private Equity and Venture Capital Valuation (“IPEVCV”) Guidelines and further detail on the valuation techniques used are outlined in note 2 below.

The Half-yearly Financial Report has not been audited, nor has it been reviewed by the auditor pursuant to the FRC’s guidance on Review of interim financial information.

Company information can be found on page 2 of the Half-yearly Financial Report.

2.         Accounting policies
Fixed and current 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 FRS 102, those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.

Upon initial recognition (using trade date accounting) investments, including loan stock, are classified by the Company as FVTPL and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the Income statement).

Subsequently, the investments are valued at ‘fair value’, which is measured as follows:

Investments 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.

Receivables and payables and cash are carried at amortised cost, in accordance with FRS 102. 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 and other preferred income
Fixed returns on non-equity shares and debt securities are recognised when the Company’s right to receive payment and expected settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.

Bank interest 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:

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 in the foreseeable future. The Company therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.

Reserves
Share premium
This reserve accounts for the difference between the price paid for shares and the nominal value of the shares, less issue costs.

Capital redemption 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 period 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;
·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 buyback of shares and other non-capital realised movements.

Dividends
Dividends by the Company are accounted for in the period in which the dividend is paid or approved at the Annual General Meeting.

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 on investments

     
 
Unaudited

six months ended
30 September 2018
£’000

Unaudited
six months ended
30 September 2017
£’000
Audited
year ended
31 March 2018
£’000
Unrealised gains on fixed asset investments4,0381,5358,925
Unrealised gains/(losses) on current asset investments33-(73)
Realised gains on fixed asset investments194259353
    
 4,2651,7949,205
  1. Investment income
 
Unaudited

six months ended
30 September 2018
£’000

Unaudited
six months ended
30 September 2017
£’000
Audited
year ended
31 March 2018
£’000
Income recognised on investments    
Interest from loans to portfolio companies367286599
Dividends472839
Bank deposit interest20213
 434316651

All of the Company’s income is derived from operations based in the United Kingdom.

5.        Investment management fee and performance incentive fee

 
Unaudited
six months ended
30 September 2018
£’000

Unaudited
six months ended
30 September 2017
£’000
Audited
year ended
31 March 2018
£’000
Investment management fee charged to revenue195164342
Investment management fee charged to capital5864921,027
Performance incentive fee charged to revenue12531275
Performance incentive fee charged to capital37593825
 1,2817802,469

Further details of the Management agreement under which the investment management fee and performance incentive fee are paid is given in the Strategic report on pages 12 and 13 of the Annual Report and Financial Statements for the year ended 31 March 2018.

During the period, services of a total value of £781,000 (30 September 2017: £656,000; 31 March 2018: £1,369,000) were purchased by the Company from Albion Capital Group LLP. At the financial period end, the amount due to Albion Capital Group LLP in respect of these services disclosed within payables was £397,000 (30 September 2017: £328,000; 31 March 2018: £385,000). For the period to 30 September 2018, a provisional performance incentive fee of £500,000 has been accrued, however any performance incentive fee is calculated and only payable based on year end results (30 September 2017: £124,000; 31 March 2018: £1,100,000).

Patrick Reeve is the Managing Partner of the Manager, Albion Capital Group LLP. During the period, the Company was charged £6,000 including VAT by Albion Capital Group LLP in respect of Patrick Reeve’s services as a Director (30 September 2017: £12,000; 31 March 2018: £24,000). At the financial period end, the amount due to Albion Capital Group LLP in respect of these services disclosed as payables was £nil (30 September 2017: £6,000; 31 March 2018: £6,000). From 30 June 2018, Patrick Reeve has agreed to waive his fees for his services as a Director.

Albion Capital Group LLP, its partners and staff (including Patrick Reeve) hold a total of 362,908 shares in the Company as at 30 September 2018.

Albion Capital Group LLP is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the period to 30 September 2018, fees of £112,000 attributable to the investments of the Company were received pursuant to these arrangements (30 September 2017: £135,000; 31 March 2018: £232,000).

During the period, an amount of £1,400,000 (30 September 2017: £nil; 31 March 2018: £1,200,000) was invested in the SVS Albion OLIM UK Equity Income Fund (“OUEIF”) as part of the Company’s management of surplus liquid funds. The total amount invested in OUEIF as at 30 September 2018 was £2,600,000 (30 September 2017: £nil; 31 March 2018: £1,200,000). To avoid double charging, Albion Capital agreed to reduce its management fee relating to the investment in the OUEIF by 0.75 per cent., which represents the OUEIF management fee charged by OLIM. This resulted in a reduction of the management fee of £7,400 (30 September 2017: £nil; 31 March 2018: £2,000).

  1. Dividends
   Unaudited
six months ended
30 September 2018
£’000
Unaudited
six months ended
30 September 2017
£’000
 Audited
year ended
31 March 2018
£’000
Dividend of 2.50p per share paid on 31 August 2017  -1,294 1,294
Dividend of 2.50p per share paid on 28 February 2018  -- 1,417
Dividend of 3.00p per share paid on 31 August 2018  1,716- -
   1,7161,294 2,711

In addition to the dividends summarised above, the Board has declared a second dividend for the year ending 31 March 2019 of 3.00 pence per share which will be paid on 28 February 2019 to shareholders on the register on 8 February 2019. This is expected to amount to approximately £1,719,000.

  1. Basic and diluted return per share
 Unaudited
six months ended
30 September 2018
Unaudited
six months ended
30 September 2017
Audited
year ended
31 March 2018
 RevenueCapitalTotalRevenueCapitalTotal
RevenueCapitalTotal
          
Return/(loss) attributable to equity shares (£’000)(14)3,3043,29011,2091,210(207)7,3537,146
Weighted average shares in issue (excluding treasury shares)57,255,90151,809,94453,333,261
Return/(loss) attributable per Ordinary share (pence) (basic and diluted)(0.02)5.775.75-2.342.34(0.39)13.7913.40

The weighted average number of shares is calculated excluding treasury shares of 7,509,443 (30 September 2017: 6,753,443; 31 March 2018: 7,270,443).

There are no convertible instruments, derivatives or contingent share agreements in issue for the Company, therefore no dilution affecting the return per share. The basic return per share is therefore the same as the diluted return per share.

  1. Called up share capital
Allotted, called up and fully paidUnaudited
30 September 2018
£’000
Unaudited
30 September 2017
£’000
Audited
31 March 2018
£’000
64,821,000 Ordinary shares of 1 penny each (30 September 2017: 58,462,876; 31 March 2018: 63,794,152)648585638

Voting rights
57,311,557 shares of 1 penny each (net of treasury shares) (30 September 2017: 51,709,433; 31 March 2018: 56,523,709).

In the six months to 30 September 2018, the Company purchased 239,000 shares (30 September 2017: 324,000; 31 March 2018: 841,000) to be held in treasury at a nominal value of £2,390 and at a cost of £247,000 (30 September 2017: £312,000; 31 March 2018: £800,000), representing 0.4 per cent. of the shares in issue (excluding treasury shares) as at 30 September 2018.

The Company holds a total of 7,509,443 shares (30 September 2017: 6,753,443; 31 March 2018: 7,270,443) in treasury representing 11.6 per cent. of the shares in issue as at 30 September 2018.

Under the terms of the Dividend Reinvestment Scheme Circular (dated 26 November 2009), the following new Ordinary shares of nominal value 1 penny each were allotted during the period to 30 September 2018:

Date of allotmentNumber 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 2018244,5132110.24268108.00

Under the terms of the Albion VCTs Prospectus Top Up Offers 2017/18, the following new Ordinary shares of nominal value 1 penny each were allotted during the period to 30 September 2018:

Date of allotmentNumber 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 2018575,3866104.0058495.50
11 April 201877,8611103.007994.00
11 April 20185,603-103.50594.00
11 April 2018123,4851104.0012594.00
 782,3358 793 

9.             Commitments and contingencies

As at 30 September 2018, the Company had financial commitments totalling £58,000 (30 September 2017: £nil; 31 March 2018: £nil), which are expected to be invested during the next 12 months as follows:

There are no contingencies or guarantees of the Company as at 30 September 2018 (30 September 2017: £nil; 31 March 2018: £nil).

10.      Post balance sheet events
Since 30 September 2018, the Company has had the following post balance sheet events:

           ·Investment of £400,000 in SVS Albion OLIM UK Equity Income Fund; and
           ·Investment of £136,000 in Cisiv Limited.

11.      Related party transactions
During the period, a total of £1,400,000 (30 September 2017: £nil; 31 March 2018: £1,200,000) was invested into the SVS Albion OLIM UK Equity Income Fund (“OUEIF”), a fund managed by OLIM Limited which is part of the Albion Capital group. The total amount invested in OUEIF as at 30 September 2018 was £2,600,000 (30 September 2017: £nil; 31 March 2018: £1,200,000).

Other than transactions with the Manager as described in note 5 and that disclosed above, there are no other related party transactions.

12.      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 2018, and is detailed on pages 61 and 62 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 the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued by the Financial Reporting Council in September 2014.

13.       Risks and uncertainties
In addition to the current economic risks outlined in the Interim management report, the Board considers that the Company faces the following principle risks and uncertainties:

  1. Investment and performance risk

The risk of investment in poor quality assets, which could reduce the capital and income returns to shareholders, and could negatively impact on the Company’s current and future valuations. By nature, smaller unquoted businesses, such as those that qualify for venture capital trust purposes, are more fragile than larger, long established businesses. Investments in open-ended equity funds result in exposure to market risk through movements in price per unit.
                 
To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its track record over many years of making successful investments in this segment of the market. In addition, the Manager operates a formal and structured investment appraisal and review process, which includes an Investment Committee, comprising investment professionals from the Manager and at least one external investment professional. The Manager also invites and takes account of comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards), including the level of diversification in the portfolio, and the Board receives detailed reports on each investment as part of the Manager’s report at quarterly board meetings. The Board and Manager regularly reviews the deployment of cash resources into equity markets, the extent of exposure and performance of the exposure.
                 

  1. VCT approval risk

The Company must comply with section 274 of the Income Tax Act 2007 which enables its investors to take advantage of tax relief on their investment and on future returns. Breach of any of the rules enabling the Company to hold VCT status could result in the loss of that status.
                 
To reduce this risk, the Board has appointed the Manager, which has a team with significant experience in venture capital trust management, used to operating within the requirements of the venture capital trust legislation. In addition, to provide further formal reassurance, the Board has appointed Philip Hare & Associates LLP as its taxation adviser, who report quarterly to the Board to independently confirm compliance with the venture capital trust legislation, to highlight areas of risk and to inform on changes in legislation. Each investment in a new portfolio company is also pre-cleared with H.M. Revenue & Customs or our professional advisers.
                 

  1. Regulatory and compliance risk

The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company’s shares, or other penalties under the Companies Act or from financial reporting oversight bodies.
                 
Board members and the Manager have experience of operating at senior levels within or advising quoted companies. In addition, the Board and the Manager receive regular updates on new regulation, 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. The Manager reports monthly to its Board on any issues arising from compliance or regulation. These controls are also reviewed as part of the quarterly Board meetings, and also as part of the review work undertaken by the Manager’s compliance officer. The report on controls is also evaluated by the internal auditors.
                 

  1. Operational and internal control risk

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 or result in reduced or inaccurate information being passed to the Board or to shareholders.
                 
 The Company and its operations are subject to a series of rigorous internal controls and review procedures exercised throughout the year, and receives reports from the Manager on internal controls and risk management, including on matters relating to cyber security. The Audit Committee reviews the Internal Audit Reports prepared by the Manager’s internal auditors, PKF Littlejohn LLP and has access to the internal audit partner of PKF Littlejohn LLP to provide an opportunity to ask specific detailed questions in order to satisfy itself that the Manager has strong systems and controls in place including those in relation to business continuity and cyber security. In addition, the Board regularly reviews the performance of its key service providers, particularly the Manager, to ensure they continue to have the necessary expertise and resources to deliver the Company’s investment objective and policies. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual.
                 

  1. Economic and political 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.
                 
The Company invests in a diversified portfolio of companies across a number of industry sectors and in addition often invests a mixture of equity and loan stock in portfolio companies and has a policy of not normally permitting any external bank borrowings within portfolio companies. At any given time, the Company has sufficient cash resources to meet its operating requirements, including share buybacks and follow on investments.
                 

  1. Market value of Ordinary shares

The market value of Ordinary shares can fluctuate. The market value of an Ordinary share, as well as being affected by its net asset value and prospective net asset value, also takes into account its dividend yield and prevailing interest rates. As such, the market value of an Ordinary share may vary considerably from its underlying net asset value. The market prices of shares in quoted investment companies can, therefore, be at a discount or premium to the net asset value at different times, depending on supply and demand, market conditions, general investor sentiment and other factors. Accordingly the market price of the Ordinary shares may not fully reflect their underlying net asset value.
                 
The Company operates a share buyback policy, which is designed to limit the discount at which the Ordinary shares trade to around 5 per cent to net asset value, by providing a purchaser through the Company in absence of market purchasers.  From time to time buybacks cannot be applied, for example when the Company is subject to a close period, or if it were to exhaust any buyback authorities. New Ordinary shares are issued at sufficient premium to net asset value to cover the costs of issue and to avoid asset value dilution to existing investors.

14.       Other information
The information set out in this Half-yearly Financial Report does not constitute the Company’s statutory accounts within the terms of section 435 of the Companies Act 2006 for the periods ended 30 September 2018 and 30 September 2017, and is unaudited. The information for the year ended 31 March 2018 does not constitute statutory accounts within the terms of section 435 of the Companies Act 2006 but is derived from the statutory accounts for the financial year, which have been delivered to the Registrar of Companies. The Auditor reported on those accounts; their report was unqualified and did not contain statements under s498 (2) or (3) of the Companies Act 2006.

15.      Publication
This Half-yearly Financial Report is being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion.capital/funds/AAEV, where the Report can be accessed from the ‘Financial Reports and Circulars’ section.


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Half-yearly Financial Report - RNS