Half-yearly Financial Report
22/09/2023 12:50
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Kings Arms Yard VCT PLC
LEI Code 213800DK8H27QY3J5R45
As required by the UK Listing Authority's Disclosure Guidance and Transparency
Rule 4.2, Kings Arms Yard VCT PLC today makes public its information relating
to the Half-yearly Financial Report (which is unaudited) for the six months to
30 June 2023. This announcement was approved by the Board of Directors on 22
September 2023.
The full Half-yearly Financial Report (which is unaudited) for the period to
30 June 2023 will shortly be sent to shareholders and will be available on the
Albion Capital Group LLP website by
clicking www.albion.capital/funds/KAY/30Jun2023.pdf.
Investment policy
The Company is a Venture Capital Trust and the investment policy is intended
to produce a regular and predictable dividend stream with an appreciation in
capital value.
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.
Funds held pending investment or for liquidity purposes are held as cash on
deposit or similar instruments with banks or other financial institutions with
high credit ratings assigned by international credit rating agencies.
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 portfolio company is
15% of the Company’s assets at cost, thus ensuring a spread of investment
risk. The value of an individual investment may increase over time as a result
of trading progress and it is possible that it may grow in value to a point
where it represents a significantly higher proportion of total assets prior to
a realisation opportunity being available.
The Company’s maximum exposure in relation to gearing is restricted to the
amount equal to its adjusted capital and reserves.
Financial calendar
6 October 2023 Record date for second dividend
31 October 2023 Payment of second dividend
31 December Financial year end
Financial highlights
Unaudited six months ended 30 June 20 2 3 Unaudited six months ended 30 June 2022 Audited year ended 31 December 2022
(pence per share) (pence per share) (pence per share)
Opening net asset value 20.95 23.05 23.05
Capital return 0.75 0.55 0.07
Revenue return 0.06 0.05 0. 09
Total return 0.81 0.60 0.16
Dividends paid (0. 5 2 ) (0.58) (2.30)
Impact of share capital movements 0.04 - 0.04
Net asset value 21.28 23.07 20.95
Shareholder return and shareholder value
Shareholder value from launch to 1 January 2011: (pence per share )
Subscription price per share at launch 100.00
Total dividends paid to 1 January 2011 58.66
Decrease in net asset value (83.40)
Total shareholder value to 1 January 2011 75.26
Shareholder return from 1 January 2011 to 30 June 202 3 (period that Albion Capital has been investment manager):
Total dividends paid 15.34
Increase in net asset value 4.68
Total shareholder return from 1 January 2011 to 30 June 2023 20.02
Shareholder value since launch:
Total dividends paid to 30 June 2023 74.00
Net asset value as at 30 June 2023 21.28
Total shareholder value as at 30 June 2023 95.28
The above financial summary is for the Company, Kings Arms Yard VCT PLC only.
Details of the financial performance of the various Quester, SPARK and Kings
Arms Yard VCT 2 PLC companies, which have been merged into the Company, can be
found at www.albion.capital/funds/KAY under the ‘Financial summary for
previous funds’ section.
The Directors have declared a second dividend of 0.53 pence per share for the
year ending 31 December 2023, which will be paid on 31 October 2023 to
shareholders on the register on 6 October 2023.
Interim management report
Introduction
In the six months to 30 June 2023, the Company generated a total return of
0.81 pence per share, representing a 3.9% return on opening NAV. During the
period, the Company continued to face a difficult macroeconomic and
geopolitical backdrop, including persistent high levels of inflation, rising
interest rates and volatility of quoted technology company valuations. Despite
this, the Board is encouraged by the positive total return generated by the
Company and optimistic that many of the portfolio companies will continue to
grow.
Valuations and results
The total gain on investments for the six-month period was £4.8 million (30
June 2022: gain of £3.5 million). The key movement to the total gain was
Quantexa increasing its value by £6.1 million following an externally led
$129 million Series E fundraising, which completed in April 2023. The latest
funding round made it the first UK “Unicorn” of 2023 (a private company
valuation over $1 billion) and the Board is excited about its future
prospects.
Other gains in the period included Ophelos, Accelex Technology and Proveca,
which resulted in a combined uplift of £1.2 million to the portfolio. These
gains were partially offset by write downs in Black Swan Data, which decreased
by £1.1 million, Neurofenix by £0.3 million and Locum’s Nest by £0.2
million.
The NAV per share has increased to 21.28 pence per share (30 June 2022: 23.07
pence per share; 31 December 2022: 20.95 pence per share).
Our top 3 portfolio companies, being Quantexa, Proveca and Egress Software
Technologies, now account for 28.7% of the Company’s NAV (30 June 2022:
22.5%; 31 December 2022: 24.2%).
Further details of the portfolio of investments and investment realisations
can be found below.
Dividends and results
In line with our dividend policy targeting around 5% of NAV per annum the
Company paid a first dividend of 0.52 pence per share during the period to 30
June 2023 (30 June 2022: 0.58 pence per share). The Company will pay a second
dividend for the financial year ending 31 December 2023 of 0.53 pence per
share on 31 October 2023 to shareholders on the register on 6 October 2023,
being 2.5% of the 30 June 2023 NAV.
This will bring the total regular dividends paid for the year ending 31
December 2023 to 1.05 pence per share, which equates to a 5.0% yield on the
opening NAV of 20.95 pence per share, in line with the Boards dividend target.
Investment activity
Given the economic uncertainty of high inflation and rising interest rates, in
addition to the 15 new investments the Company made in 2022, the first half of
2023 has been more subdued in terms of new investment activity. During the
period the Company has invested £0.9 million in existing portfolio companies,
the largest being £0.5 million into Proveca, which specialises in the
reformulation of medicines for children, £0.2 million into Seldon
Technologies, which enables enterprises to deploy Machine Learning models in
production, and £0.2 million into Symetrica, a designer and manufacturer of
radiation detection equipment.
Investment activity has started to increase after the period end, with £1.8
million invested into new and follow-on investments since 30 June 2023.
Portfolio sector allocation
The pie chart at the end of this announcement outlines the different sectors
in which the Company’s assets, at carrying value, were invested at 30 June
2023.
Board composition and succession planning
As part of the Board’s succession planning, we are pleased to welcome Simon
Thorpe as a Director with effect from 1 September 2023. Simon is a qualified
Chartered Accountant and former chairman, and current Director, of Cambridge
Angels with extensive experience of analysing and investing in early-stage
public and private companies in the technology and technology enabled
healthcare sectors. His previous roles include him working as the Chief
Operating Officer for European Equity Research and UBS Global Equity Research.
The Nomination Committee continually monitors and reviews the membership of
the Board based on the spread of skills and contributions of its members, as
well as looking at succession planning requirements of the Company.
Share buy-backs
It remains the Board’s primary objective to maintain sufficient resources
for investment in new and existing portfolio companies and for the continued
payment of dividends to shareholders. The Board’s policy is to buy-back
shares in the market, subject to the overall constraint that such purchases
are in the Company’s interest. It is the Board’s intention for such
buy-backs to be in the region of a 5% discount to net asset value, so far as
market conditions and liquidity permit. The Board continues to review the use
of buy-backs and is satisfied that it is an important means of providing
market liquidity for shareholders.
Transactions with the Manager
Details of transactions with the Manager for the reporting period can be found
in note 4. Details of related party transactions can be found in note 10.
Risks and uncertainties
The Company faces a number of significant risks including rising interest
rates, persistent high levels of inflation, geopolitical tensions, and an
expected period of economic stagnation, or even recession, in the UK.
Our investment portfolio, while concentrated mainly in the technology and
healthcare sectors, remains diversified in terms of both sub-sector and stage
of maturity.
In accordance with DTR 4.2.7, the Board confirms that the principal risks and
uncertainties facing the Company have not materially changed from those
identified in the Annual Report and Financial Statements for the year ended 31
December 2022. The current high levels of inflation and geopolitical tensions
have created heightened uncertainty, but has not changed the nature of the
principal risks. The Board considers that the present processes for mitigating
those risks remain appropriate.
The principal risks faced by the Company are:
• Investment, performance, technology and valuation risk;
• VCT approval risk;
• Regulatory and compliance risk;
• Operational and internal control risk;
• Cyber and data security risk;
• Economic, political and social risk;
• Environmental, social and governance (“ESG”) risk; and
• Liquidity risk.
A detailed explanation of the principal risks facing the Company can be found
in the Annual Report and Financial Statements for the year ended 31 December
2022 on pages 23 to 26, copies of which are available on the Company’s
webpage on the Manager’s website at www.albion.capital/funds/KAY under the
‘Financial Reports and Circulars’ section.
Albion VCTs Top Up Offer
As announced in the Annual Report and Financial Statements for the year ended
31 December 2022, the Board was pleased the 2022/23 Offer was fully subscribed
and closed, having raised £8 million.
The proceeds are being used to provide support to our existing portfolio
companies and to enable us to take advantage of new and exciting investment
opportunities as they arise. Details on the share allotments during the period
can be found in note 7.
Shareholder seminar
The Board is pleased to report that the next Shareholder Seminar will be held
in person at the Royal College of Surgeons, Lincoln’s Inn Field, London on
15 November 2023 and the Board will be delighted to see as many shareholders
as possible at the event. The Board and Manager are keen to interact with
shareholders and look forward to sharing with you further portfolio updates,
as well as answering any questions. Places are limited and to reserve a place
please email info@albion.capital with subject heading “Shareholder
Seminar” and include your full name. You will receive an email confirmation
of your place, subject to availability.
Move to electronic communications
The Board wishes to minimise the environmental impact of how the Company
communicates with its shareholders. With this in mind, those shareholders that
continue to receive physical copies of the Annual Report and other
documentation, will receive a letter alongside this half-yearly financial
report explaining the forthcoming move to electronic communications.
Prospects
The Board is cautious of the risks and uncertainties referred to above, but
are assured that the portfolio remains well diversified, with companies at
different stages of maturity and targeted at sectors such as healthcare,
mission critical software and a minimal exposure to consumer expenditure. We
believe that these sectors can continue to provide opportunities for resilient
growth, yielding positive results for the Company and its shareholders in the
longer-term.
Fiona Wollocombe
Chairman
22 September 2023
Portfolio of investments
As at 30 June 20 2 3
Fixed asset investments % voting rights Cost ((1)) £’000 Cumulative movement in value £’000 Value £’000 Change in value for the period ((2)) £’000
Quantexa 1.3 1,329 13,945 15,274 6,148
Proveca 15.2 2,792 7,623 10,415 210
Egress Software Technologies 4.8 1,644 4,594 6,238 (123)
Chonais River Hydro 6.5 2,428 1,016 3,444 123
Oviva 1.6 1,489 671 2,160 (214)
The Evewell Group 4.4 1,057 960 2,017 19
Healios 2.6 1,591 417 2,008 -
Gravitee Topco (T/A Gravitee.io) 3.8 1,561 400 1,961 -
The Street by Street Solar Programme 10.0 1,040 768 1,808 (106)
Academia 2.3 351 1,361 1,712 105
Toqio FinTech Holdings 2.1 1,498 - 1,498 -
Regenerco Renewable Energy 9.8 988 497 1,485 (144)
TransFICC 2.4 1,305 148 1,453 -
Celoxica Holdings PLC 4.4 513 926 1,439 -
Runa Network 1.7 1,164 209 1,373 -
NuvoAir Holdings 2.4 971 399 1,370 (70)
Peppy Health 1.5 1,359 - 1,359 -
Ophelos 2.8 724 606 1,330 606
Threadneedle Software Holdings (T/A Solidatus) 1.5 917 369 1,286 (188)
Alto Prodotto Wind 11.1 706 499 1,205 54
Seldon Technologies 3.4 1,178 - 1,178 -
PerchPeek 3.6 1,142 - 1,142 -
PeakData 2.3 1,009 59 1,068 (17)
Cantab Research (T/A Speechmatics) 1.1 898 158 1,056 (126)
Sift 42.1 2,256 (1,244) 1,012 (157)
Dragon Hydro 17.2 590 421 1,011 42
Accelex Technology 3.6 630 340 970 340
Symetrica 3.7 835 128 963 109
Convertr Media 3.0 482 444 926 (17)
Gharagain River Hydro 5.0 620 269 889 57
GX Molecular (T/A CS Genetics) 3.0 871 - 871 -
Panaseer 1.4 510 242 752 (128)
Elliptic Enterprises 0.5 750 - 750 -
OutThink 2.6 644 - 644 -
Diffblue 2.6 597 - 597 -
AVESI 14.8 484 101 585 (62)
Brytlyt 3.4 713 (168) 545 (168)
InCrowd Sports 2.1 321 217 538 82
Beddlestead 5.1 606 (72) 534 (22)
PetsApp 2.7 497 - 497 -
Aridhia Informatics 2.1 409 32 441 (66)
Locum's Nest 3.8 452 (39) 413 (244)
5Mins AI 2.2 398 - 398 -
Greenenerco 8.6 211 157 368 18
Koru Kids 1.3 430 (121) 309 (52)
uMedeor (T/A uMed) 1.4 228 80 308 78
Cisiv 2.1 277 13 290 124
Arecor Therapeutics PLC 0.4 149 124 273 (9)
Ramp Software 1.7 255 - 255 -
Neurofenix 2.7 552 (312) 240 (312)
Regulatory Genome Development 1.1 173 59 232 59
Tem Energy 1.6 206 - 206 -
Imandra 1.0 138 60 198 (9)
Erin Solar 5.7 160 4 164 -
Anthropics Technology 13.8 19 110 129 (11)
InFact Systems (T/A InFact) 1.7 90 - 90 -
Harvest AD - 70 7 77 -
Black Swan Data 4.1 2,002 (1,970) 32 (1,076)
Mirada Medical 0.6 390 (375) 15 -
Xention 10.6 38 (28) 10 -
uMotif 3.6 979 (978) 1 (103)
Limitless Technology 1.4 383 (383) - (193)
Other holdings (2 companies) 2 - 2 -
Total fixed asset investments 49,07 1 32,743 81,814 4,55 7
(1) Amounts shown as cost represent the acquisition cost in
the case of investments originally made by the Company and/or the valuation
attributed to the investments acquired from Quester VCT 2 PLC and Quester VCT
3 PLC at the date of the merger in 2005, and those acquired from Kings Arms
Yard VCT 2 PLC at the merger on 30 September 2011, plus any subsequent
acquisition costs, as reduced in certain cases by amounts written off as
representing an impairment value.
(2) The column shows the movement in the period from the
opening balance as at 1 January 2023 to the closing balance as at 30 June 2023
after adjustments for additions and disposals.
R ealisations in the period to 30 June 20 2 3 Cost £’000 Opening value £’000 Disposal proceeds £’000 Realised (loss)/gain £’000 Gain /(loss) on opening or acquired value £’000
Disposals:
Zift Channel Solutions 320 118 168 (152) 50
Arecor Therapeutics PLC 82 154 160 78 6
Forward Clinical (T/A Pando) 184 - - (184) -
ErgoMed PLC - 1 - - (1)
Loan stock repayments and other :
Alto Prodotto Wind 33 49 49 16 -
Greenenerco 9 13 13 4 -
Escrow adjustments* - - 506 50 50
Total 62 8 33 5 440 (188) 105
*These comprise fair value movements on deferred consideration on previously
disposed investments and expenses which are incidental to the purchase or
disposal of an investment.
£'000
Total change in value of investments for the period 4,557
Movement in loan stock accrued interest 20
Unrealised gains on fixed asset investments sub-total 4,57 7
Realised gains in current period 105
Unwinding of discount on deferred consideration 126
Total gains on investments as per Income statement 4,80 8
Responsibility statement
The Directors, Fiona Wollocombe, Thomas Chambers, Swarupa Pathakji and Simon
Thorpe, are responsible for preparing the Half-yearly Financial Report. In
preparing these condensed Financial Statements for the period to 30 June 2023
we, the Directors of the Company, confirm that to the best of our knowledge:
(a) the condensed set of Financial Statements, which has been prepared in
accordance with Financial Reporting Standard 104 “Interim Financial
Reporting”, gives a true and fair view of the assets, liabilities, financial
position and profit and loss of the Company as required by DTR 4.2.4R;
(b) the Interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
six months of the year); and
(c) the Interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties’ transactions and
changes therein).
This Half-yearly Financial Report has not been audited or reviewed by the
Auditor.
For and on behalf of the Board
Fiona Wollocombe
Chairman
22 September 2023
Condensed income statement
Unaudited six months ended 30 June 20 2 3 Unaudited six months ended 30 June 2022 Audited year ended 31 December 2022
Note Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000
Gains on investments 2 - 4,808 4,808 - 3,507 3,507 - 2,237 2,237
Investment income 3 673 - 673 544 - 544 1,079 - 1,079
Investment Manager’s fees 4 (110) (990) (1,100) (107) (964) (1,071) (214) (1,923) (2,137)
Other expenses (23 4 ) - (23 4 ) (224) - (224) (453) - (453)
Profit on ordinary activities before tax 329 3,818 4,147 213 2,543 2,756 412 314 726
Tax charge on ordinary activities - - - - - - - - -
Profit and total comprehensive income attributable to shareholders 32 9 3,818 4,147 213 2,543 2,756 412 314 726
Basic and diluted return per share (pence)* 6 0.06 0.75 0.81 0.05 0.55 0.60 0.09 0.07 0.16
*adjusted for treasury shares
The accompanying notes below form an integral part of this Half-yearly
Financial Report.
Comparative figures have been extracted from the unaudited Half-yearly
Financial Report for the six months ended 30 June 2022 and the audited
statutory accounts for the year ended 31 December 2022.
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 June 20 2 3 £’000 Unaudited 30 June 2022 £’000 Audited 31 December 2022 £’000
Fixed asset investments 81,814 69,013 76,706
Current assets
Trade and other receivables 1,819 2,001 1,773
Cash in bank and at hand 28,690 38,813 26,179
30,509 40,814 27,952
Payables: amounts falling due within one year
Trade and other payables ( 1,192 ) (866) (659)
Net current assets 29,317 39,948 27,293
Total assets less current liabilities 111,131 108,961 103,999
Equity attributable to equity holders
Called-up share capital 7 6,101 5,460 5,757
Share premium 21,016 7,848 13,888
Capital redemption reserve - - -
Unrealised capital reserve 32,503 27,512 27,634
Realised capital reserve 5,624 9,026 6,675
Other distributable reserve 45,887 59,115 50,045
Total equity shareholders’ funds 111,131 108,961 103,999
Basic and diluted net asset value per share (pence)* 21.28 23.07 20.95
*excluding treasury shares
The accompanying notes below form an integral part of this Half-yearly
Financial Report.
Comparative figures have been extracted from the unaudited Half-yearly
Financial Report for the six months ended 30 June 2022 and the audited
statutory accounts for the year ended 31 December 2022.
The Financial Statements were approved by the Board of Directors, and
authorised for issue on 22 September 2023 and were signed on its behalf by
Fiona Wollocombe
Chairman
Company number: 03139019
Condensed statement of changes in equity
Called - up share capital Share premium Capital redemption reserve Unrealised capital reserve Realised capital reserve* Other distributable reserve * Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 January 2023 5,757 13,888 - 27,634 6,675 50,045 103,999
Profit/(loss) and total comprehensive income for the period - - - 4,57 7 (7 59 ) 32 9 4,147
Transfer of previously unrealised losses on disposal of investments - - - 29 2 (29 2 ) - -
Purchase of own shares for treasury - - - - - ( 1, 752 ) (1,752)
Issue of equity 3 44 7,329 - - - - 7,673
Cost of issue of equity - ( 20 1 ) - - - - (201)
Dividends paid - - - - - ( 2,7 35 ) (2,7 35 )
At 30 June 20 2 3 6,101 21,016 - 32,503 5,624 45,887 111,131
At 1 January 2022 5,103 60,854 11 29,199 4,796 1,868 101,831
Profit/(loss) and total comprehensive income for the period - - - (77) 2,620 213 2,756
Transfer of previously unrealised gains on disposal of investments - - - (1,610) 1,610 - -
Purchase of own shares for treasury - - - - - (1,089) (1,089)
Issue of equity 357 8,053 - - - - 8,410
Cost of issue of equity - (205) - - - - (205)
Dividends paid - - - - - (2,742) (2,742)
Cancellation of share premium and capital redemption reserve - (60,854) (11) - - 60,865 -
At 30 June 2022 5,460 7,848 - 27,512 9,026 59,115 108,961
At 1 January 2022 5,103 60,854 11 29,199 4,796 1,868 101,831
Profit/(loss) and total comprehensive income for the period - - - (1,269) 1,583 412 726
Transfer of previously unrealised gains on disposal of investments - - - (296) 296 - -
Purchase of own shares for treasury - - - - - (2,254) (2,254)
Issue of equity 654 14,247 - - - - 14,901
Cost of issue of equity - (359) - - - - (359)
Dividends paid - - - - - (10,846) (10,846)
Cancellation of share premium and capital redemption reserve - (60,854) (11) - - 60,865 -
At 31 December 2022 5,757 13,888 - 27,634 6,675 50,045 103,999
*These reserves include an amount of £23,428,000 (30 June 2022: £32,896,000;
31 December 2022: £22,036,000) which is considered distributable. Over the
next three years an additional £25,029,000 will become distributable. This is
due to the HMRC requirement that the Company cannot use capital raised in the
past three years to make a payment or distribution to shareholders.
The accompanying notes below form an integral part of this Half-yearly
Financial Report.
Comparative figures have been extracted from the unaudited Half-yearly
Financial Report for the six months ended 30 June 2022 and the audited
statutory accounts for the year ended 31 December 2022.
Condensed statement of cash flows
Unaudited six months ended 30 June 20 2 3 £’000 Unaudited six months ended 30 June 2022 £’000 Audited year ended 31 December 2022 £’000
Cash flow from operating activities
Investment income received 398 348 725
Bank interest received 142 14 68
Interest from fixed term funds received 95 9 59
Dividend income received 17 71 125
Investment Manager’s fees paid (1,041) (2,059) (3,166)
Other cash payments (2 75 ) (258) (448)
UK corporation tax paid - - -
Net cash flow generated from operating activities ( 664 ) (1,875) (2,637)
Cash flow from investing activities
Purchase of fixed asset investments ( 885 ) (5,977) (15,249)
Disposal of fixed asset investments 539 8,260 8,818
Net cash flow generated from investing activities (346) 2,283 (6,431)
Cash flow from financing activities
Issue of share capital 7,080 7,808 12,926
Cost of issue of equity (19) - (52)
Purchase of own shares (including costs) ( 1,250 ) (922) (2,254)
Equity dividends paid* (2, 290 ) (2,326) (9,218)
Net cash flow generated from financing activities 3,521 4,560 1,402
Increase /(decrease) in cash in bank and at hand 2,511 4,968 (7,666)
Cash in bank and at hand at start of period 26,179 33,845 33,845
Cash in bank and at hand at end of period 28,690 38,813 26,179
* The equity dividends paid shown in the cash flow are different to the
dividends disclosed in note 5 as a result of the non-cash effect of the
Dividend Reinvestment Scheme.
The accompanying notes below form an integral part of this Half-yearly
Financial Report.
Comparative figures have been extracted from the unaudited Half-yearly
Financial Report for the six months ended 30 June 2022 and the audited
statutory accounts for the year ended 31 December 2022.
Notes to the condensed Financial Statements
1. Accounting policies
Basis of accounting
The condensed Financial Statements have been prepared in accordance with
applicable United Kingdom law and accounting standards, including Financial
Reporting Standard 102 (“FRS 102”), Financial Reporting Standard 104 –
Interim Financial Reporting (“FRS 104”), and with the Statement of
Recommended Practice “Financial Statements of Investment Trust Companies and
Venture Capital Trusts” (“SORP”) issued by The Association of Investment
Companies (“AIC”). The Financial Statements have been prepared on a going
concern basis.
The preparation of the Financial Statements requires management to make
judgements and estimates that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The most critical
estimates and judgements relate to the determination of carrying value of
investments at fair value through profit and loss (“FVTPL”) in accordance
with FRS 102 sections 11 and 12. The Company values investments by following
the International Private Equity and Venture Capital Valuation (“IPEV”)
Guidelines as updated in 2022 and further detail on the valuation techniques
used are outlined below.
Company information can be found on page 4 of the Half-yearly Financial
Report.
Fixed asset investments
The Company’s business is investing in financial assets with a view to
profiting from their total return in the form of income and capital growth.
This portfolio of financial assets is managed and its performance evaluated on
a fair value basis, in accordance with a documented investment policy, and
information about the portfolio is provided internally on that basis to the
Board.
In accordance with the requirements of FRS 102, those undertakings in which
the Company holds more than 20% of the equity as part of an investment
portfolio are not accounted for using the equity method. In these
circumstances the investment is measured at FVTPL.
Upon initial recognition (using trade date accounting) investments, including
loan stock, are designated by the Company as FVTPL and are included at their
initial fair value, which is cost (excluding expenses incidental to the
acquisition which are written off to the Income statement).
Subsequently, the investments are valued at ‘fair value’, which is
measured as follows:
* Investments listed on recognised exchanges are valued at their bid prices at
the end of the accounting period or otherwise at fair value based on published
price quotations.
* Unquoted investments, where there is not an active market, are valued using
an appropriate valuation technique in accordance with the IPEV Guidelines.
Indicators of fair value are derived using established methodologies including
earnings multiples, revenue multiples, the level of third party offers
received, cost or price of recent investment rounds, net assets and industry
valuation benchmarks. Where price of recent investment is used as a starting
point for estimating fair value at subsequent measurement dates, this has been
benchmarked using an appropriate valuation technique permitted by the IPEV
guidelines.
* In situations where cost or price of recent investment is used,
consideration is given to the circumstances of the portfolio company since
that date in determining fair value. This includes consideration of whether
there is any evidence of deterioration or strong definable evidence of an
increase in value. In the absence of these indicators, other valuation
techniques are employed to conclude on the fair value as at the measurement
date. Examples of events or changes that could indicate a diminution include:
* the performance and/or prospects of the underlying business are
significantly below the expectations on which the investment was based;
* a significant adverse change either in the portfolio company’s business or
in the technological, market, economic, legal or regulatory environment in
which the business operates; or
* market conditions have deteriorated, which may be indicated by a fall in the
share prices of quoted businesses operating in the same or related sectors.
Investments are recognised as financial assets on legal completion of the
investment contract and are de-recognised on legal completion of the sale of
an investment.
Dividend income is not recognised as part of the fair value movement of an
investment, but is recognised separately as investment income through the
Income statement when a share becomes ex-dividend.
Current assets and payables
Receivables (including debtors due after more than one year), payables and
cash are carried at amortised cost, in accordance with FRS 102. Deferred
consideration meets the definition of a financing transaction held at
amortised cost, and interest will be ecognized through capital over the credit
period using the effective interest method. There are no financial liabilities
other than payables.
Investment income
Dividend income
Dividend income is included in revenue when the investment is quoted
ex-dividend.
Unquoted loan stock income
Fixed returns on non-equity shares and debt securities are ecognized when the
Company’s right to receive payment and expect settlement is established.
Where interest is rolled up and/or payable at redemption then it is ecognized
as income unless there is reasonable doubt as to its receipt.
Fixed term funds income
Funds income is recognised on an accruals basis using the agreed rate of
interest.
Bank deposit income
Interest income is recognised on an accruals basis using the rate of interest
agreed with the bank.
Investment management fee, performance incentive fee and other expenses
All expenses have been accounted for on an accruals basis. Expenses are
charged through the other distributable reserve except the following which are
charged through the realised capital reserve:
* 90% of management fees and 100% of performance incentive fees if any, are
allocated to the realised capital reserve; and
* expenses which are incidental to the purchase or disposal of an investment
are charged through the realised capital reserve.
Taxation
Taxation is applied on a current basis in accordance with FRS 102. Current tax
is tax payable (refundable) in respect of the taxable profit (tax loss) for
the current period or past reporting periods using the tax rates and laws that
have been enacted or substantively enacted at the financial reporting date.
Taxation associated with capital expenses is applied in accordance with the
SORP.
Deferred tax is provided in full on all timing differences at the reporting
date. Timing differences are differences between taxable profits and total
comprehensive income as stated in the financial statements that arise from the
inclusion of income and expenses in tax assessments in periods different from
those in which they are recognised in the financial statements. As a VCT the
Company has an exemption from tax on capital gains. The Company intends to
continue meeting the conditions required to obtain approval as a VCT 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.
Share capital and reserves
Called-up share capital
This reserve accounts for the nominal value of the shares.
Share premium
This reserve accounts for the difference between the price paid for the
Company’s shares and the nominal value of those 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 diminution in value (including gains recognised on the realisation
of investment where consideration is deferred and not distributable as a
matter of law);
* finance income in respect of the unwinding of the discount on deferred
consideration that is not distributable as a matter of law;
* expenses, together with the related taxation effect, charged in accordance
with the above policies; and
* dividends paid to equity holders where paid out by capital.
Other distributable reserve
The special reserve, treasury share reserve and the revenue reserve were
combined in 2012 to form a single reserve named other distributable reserve.
This reserve accounts for movements from the revenue column of the Income
statement, the payment of dividends, the buy-back of shares 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.
2. Gains on investments
Unaudited six months ended 30 June 2023 £’000 Unaudited six months ended 30 June 2022 £’000 Audited year ended 31 December 2022 £’000
Unrealised gains/(losses) on fixed asset investments 4,577 (77) (1,269)
Realised gains on fixed asset investments 105 3,477 3,282
Unwinding of discount on deferred consideration 126 107 224
4,808 3,507 2,237
3. Investment income
Unaudited six months ended 30 June 20 2 3 £’000 Unaudited six months ended 30 June 2022 £’000 Audited year ended 31 December 2022 £’000
Loan stock interest 378 421 827
Bank interest 142 14 68
Income from fixed term funds 95 9 59
Dividends 58 100 125
673 544 1,079
4. Investment Manager’s fee
Unaudited six months ended 30 June 20 2 3 £’000 Unaudited six months ended 30 June 2022 £’000 Audited year ended 31 December 2022 £’000
Investment management fee charged to revenue 110 107 214
Investment management fee charged to capital 990 964 1,923
1,100 1,071 2,137
Further details of the Management agreement under which the investment
management fee and performance incentive fee are paid are given in the
Strategic report on pages 18 and 19 of the Annual Report and Financial
Statements for the year ended 31 December 2022.
During the period, services with a value of £1,100,000 (30 June 2022:
£1,071,000; 31 December 2022: £2,137,000) and £25,000 (30 June 2022:
£25,000; 31 December 2022: £50,000) were purchased by the Company from
Albion Capital Group LLP (“Albion”) in respect of management and
administration fees respectively. At the period end, the amount due to Albion
in respect of these services disclosed as accruals was £592,000 (30 June
2022: £574,000; 31 December 2022: £534,000). For the period to 30 June 2023,
no performance incentive fee has been accrued, however any performance
incentive fee is calculated on year end results and payable in line with the
Management agreement (30 June 2022: £nil; 31 December 2022: £nil).
Albion is, from time to time, eligible to receive arrangement fees and
monitoring fees from portfolio companies. During the period, fees of £62,000
(30 June 2022: £116,000; 31 December 2022: £274,000) attributable to the
investments of the Company were paid pursuant to these arrangements.
Albion, its partners and staff hold 3,458,571 Ordinary shares in the Company
as at 30 June 2023.
The Company entered into an offer agreement relating to the Offers with the
Company’s investment manager Albion, pursuant to which Albion received a fee
of 2.5% of the gross proceeds of the Offers and out of which Albion paid the
costs of the Offers, as detailed in the Prospectus.
5. Dividends
Unaudited six months ended 30 June 2023 £’000 Unaudited six months ended 30 June 2022 £’000 Audited year ended 31 December 2022 £’000
Special dividend of 1.14 pence per share paid on 29 July 2022 - - 5,385
Second dividend of 0.58 pence per share paid on 31 October 2022 - - 2,761
First dividend of 0.52 pence per share paid on 28 April 2023 (29 April 2022: 0.58 pence per share) 2,743 2,742 2,742
Unclaimed dividends returned to the Company (8) - (42)
2,735 2,742 10,846
The Directors have declared a second dividend of 0.53 pence per share for the
year ending 31 December 2023, which will be paid on 31 October 2023 to
shareholders on the register on 6 October 2023.
6. Basic and diluted return per share
Unaudited six months ended 30 June 20 2 3 Unaudited six months ended 30 June 2022 Audited year ended 31 December 2022
Revenue Capital Revenue Capital Revenue Capital
Profit attributable to shareholders (£’000) 329 3,818 213 2,543 412 314
Weighted average shares in issue (adjusted for treasury shares) 510,894,955 463,540,737 471,274,000
Return attributable per equity share (pence) 0.06 0.75 0.05 0.55 0.09 0.07
The weighted average number of Ordinary shares is calculated after adjusting
for treasury shares of 87,982,092 (30 June 2022: 73,661,999; 31 December 2022:
79,380,503).
There are no convertible instruments, derivatives or contingent share
agreements in issue so basic and diluted return per share are the same.
7. Called-up share capital
Allotted, called - up and fully paid Ordinary shares of 1 penny each Unaudited 30 June 202 3 Unaudited 30 June 2022 Audited 31 December 2022
Number of shares 610,110,901 546,010,920 575,728,901
Nominal value of allotted shares (£’000) 6,101 5,460 5,757
Voting rights (number of shares net of treasury shares) 522,128,809 472,348,921 496,348,398
The Company operates a share buy-back programme, as detailed in the Interim
management report above. During the period the Company purchased 8,601,589
Ordinary shares with a nominal value of £86,016 (30 June 2022: 5,052,674; 31
December 2022: 10,771,178) representing 1.4% of the issued called-up share
capital as at 30 June 2023, at a cost of £1,752,000 (30 June 2022:
£1,089,000; 31 December 2022: £2,254,000), including stamp duty, to be held
in treasury. The Company holds a total of 87,982,092 Ordinary shares in
treasury, representing 14.4% of the issued Ordinary share capital as at 30
June 2023.
During the period from 1 January 2023 to 30 June 2023, the Company issued the
following new Ordinary shares of 1 penny each under the terms of the Dividend
Reinvestment Scheme Circular dated 19 April 2011:
Date of allotment Number of shares allotted Aggregate nominal value of shares ( £’000 ) Issue price (pence per share) Net invested (£’000) Opening market price on allotment date (pence per share)
28 April 2023 1,933,358 19 21.27 391 20.30
Under the terms of the Albion VCTs Prospectus Top Up Offers 2022/23, the
following new Ordinary shares of nominal value 1 penny each were allotted
during the period to 30 June 2023:
Date of allotment Number of shares allotted Aggregate nominal value of shares ( £’000 ) Issue price (pence per share) Net consideration received (£’000) Opening market price on allotment date (pence per share)
31 March 2023 31,071,626 311 22.40 6,786 20.70
14 April 2023 195,210 2 21.60 42 20.30
14 April 2023 114,678 1 21.80 24 20.30
14 April 2023 1,067,128 11 21.90 228 20.30
32,448,642 7, 080
8. Commitments, contingencies and guarantees
As at 30 June 2023, the Company had no financial commitments (30 June 2022:
£nil; 31 December 2022: £nil).
There were no contingent liabilities or guarantees given by the Company as at
30 June 2023 (30 June 2022: £nil; 31 December 2022: £nil).
9. Post balance sheet events
Since 30 June 2023, there have not been any material post balance sheet
events.
10. Related party disclosures
Other than transactions with the Manager as disclosed in note 4, there are no
related party transactions or balances requiring disclosure.
11. Going concern
The Board has conducted a detailed assessment of the Company’s ability to
meet its liabilities as they fall due. Cash flow forecasts are updated and
discussed quarterly at Board level and have been stress tested to allow for
the forecasted impact of the current economic climate and increasingly
volatile geopolitical backdrop. The Board has revisited and updated their
assessment of liquidity risk and concluded that it remains unchanged since the
last Annual Report and Financial Statements. Further details can be found on
page 26 of those accounts.
The portfolio of investments is diversified in terms of sector and the major
cash outflows of the Company (namely investments, dividends and share
buy-backs) are within the Company’s control. Accordingly, after making
diligent enquiries, the Directors have a reasonable expectation that the
Company has adequate cash and liquid resources to continue in operational
existence for the foreseeable future. For this reason, the Directors have
adopted the going concern basis in preparing this Half-yearly Financial Report
and this is in accordance with the Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting issued by the Financial
Reporting Council in September 2014, and the subsequent updated Going concern,
risk and viability guidance issued by the FRC in 2021.
12. 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 June 2023 and 30 June 2022,
and is unaudited. The information for the year ended 31 December 2022 does not
constitute statutory accounts within the terms of section 434 of the Companies
Act 2006 and is derived from the statutory accounts for that financial year,
which have been delivered to the Registrar of Companies. The Auditor reported
on those accounts; their report was unqualified and did not contain a
statement under s498 (2) or (3) of the Companies Act 2006.
13. 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/KAY, where the Report can be accessed from the
'Financial Reports and Circulars' section.
Attachment
* Investment Portfolio by Sector
(https://ml-eu.globenewswire.com/Resource/Download/b117925a-2010-40af-96d5-e6d62ac50306)