REG - British Smlr Comp 2 - Annual Financial Report
18/03/2025 13:00
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RNS Number : 1529B British Smaller Companies VCT2 Plc 18 March 2025
British Smaller Companies VCT2 plc
Annual Financial Report Announcement
for the year ended 31 December 2024
British Smaller Companies VCT2 plc (the "Company") today announces its audited
results for the year ended 31 December 2024.
HIGHLIGHTS
l 1.3 per cent return on opening net assets, driven by underlying revenue growth
in portfolio companies.
l Total Return increased by 0.80 pence to 146.35 pence per share; net asset
value at 31 December 2024 of 57.10 pence per share (2023: 59.30 pence per
share).
l Realisations generated total proceeds of £9.4 million in the year, a gain of
£0.2 million over the opening carrying value and £7.3 million over cost.
l Four new investments and ten follow-on investments totalling £15.1 million
completed during the year. One new investment of £1.4 million and two
follow-on investments of 2.8 million made subsequent to the year end.
l Total dividends paid during the year ended 31 December 2024 of 3.00 pence per
share (2023: 5.25 pence per share), bringing total cumulative dividends paid
since inception to 89.25 pence per share at 31 December 2024 (2023: 86.25
pence per share).
l Special dividend of 1.00 pence per share paid on 27 January 2025, taking
cumulative dividends paid to date to 90.25 pence per share. Consequently, the
adjusted last reported NAV of the shares is 56.10 pence per share.
l £34.5 million of allotted funds in the year from 2023/24 fundraising. Gross
applications of c.£29 million received in relation to 2024/25 offer, with
£9.8 million allotted in January 2025 and the remaining funds to be allotted
between 1 and 4 April 2025.
Chair's Statement
I am pleased to present the 2024 annual report and financial statements
of British Smaller Companies VCT2 plc ("the Company"), my first as Chair of
the Company. It has been a year of steady progress for the Company, with
some macroeconomic challenges, but with positivity from lowering inflation and
interest rates.
The year saw a change in UK government; this has brought political stability,
which should be a positive for long term investment. Additionally, as
inflation has come under control and towards the Bank of England's 2 per cent
target, so interest rates have been lowered, from 5.25 per cent to 4.5 per
cent today.
However, the more disruptive political environment in the US, accompanied by
the threat of tariffs, as well as continued cost pressures for companies to
absorb such as the increase in employers NI, has meant it remains a
challenging environment for portfolio companies to operate in.
Through this period, it was pleasing to see the positive performance of the
Company, which generated a 1.3 per cent return on its opening net asset value
in the year.
There have been increases in several assets within the portfolio during the
year, with over 50 per cent of the portfolio by value seeing increases in
annual recurring revenue of 25 per cent or higher. This growth is beginning
to register in the portfolio's value, with 25 companies showing valuation
uplifts in the period.
That said, overall performance has been dampened by the reduction in value of
a small number of portfolio companies, where specific circumstances have held
back their growth. The Company's Manager, YFM Private Equity Limited,
continues to work closely with these companies to navigate these current
challenges.
Pleasingly, as well as adding four new companies to the portfolio in the year,
the Company has had the opportunity to provide £9.4 million of further
funding to ten existing portfolio companies, with the vast majority of this
being deployed into the fastest growing companies to help accelerate their
impressive growth.
From an exit perspective, the Company has continued to realise investments
this year despite a subdued M&A environment, recognising £9.4 million of
proceeds from two partial exits, two full realisations and deferred
consideration.
Financial Performance
In 2024, the Company delivered a 0.80 pence per ordinary share increase in
Total Return, equivalent to 1.3 per cent of the opening net asset value at 31
December 2023. Total Return is now 146.35 pence per ordinary share.
This was driven by value growth in the portfolio, which generated a return of
£2.9 million, 3.1 per cent over its opening value. New and follow-on
investments totalling £15.1 million were completed.
New Investments
The Company invested £5.7 million into four new investments during the year
Investment Sector
Fuuse
Electric vehicle charge point management system
Spotless Water Ultra-pure water
distribution network
Ohalo
Unstructured data governance platform
Integrum ESG A specialist ESG
ratings and analytics platform
Post-year-end, in January 2025, the Company invested £1.4 million into new
investment Stormharvester, an AI analytics platform for wastewater utilities.
Follow-On Investments in the Year
In our continued support of the portfolio, ten companies received follow-on
funding, totalling £9.4 million in aggregate. Further details are given in
the Investment Review below.
Post-year-end, in March 2025 the Company invested 2.8 million into portfolio
companies DrDoctor and Vypr.
Realisations in the Year
Realisations of portfolio investments generated total proceeds of £9.4
million, generating a gain of £7.3 million over the original cost and £0.2
million over the opening carrying value.
KeTech, a provider of communications systems, was separated into its two
component parts (Rail and Defence) in 2023 to maximise shareholder value. In
January 2024, the Defence business was sold, generating proceeds of £1.5
million. To date, the Company has realised proceeds of £4.1 million from
its KeTech investment, a 2.0x return on cost, while still retaining its
investment in the Rail business, which at the year-end was valued at £1.3
million.
In January 2024 the Company realised part of its investment in Arcus,
generating proceeds of £0.2 million, while still retaining its investment in
the remaining restructured business; at year-end this was valued at £0.9
million. The combined £1.2 million of value to date equates to 0.6x cost.
In February 2024, the Company sold its investment in Displayplan for £4.8
million. Total proceeds received over the life of the investment are £6.7
million, an excellent 9.6x return on the Company's cost.
In October 2024, the Company sold its investment in Traveltek for £2.5
million. Total proceeds recognised over the life of the investment are £3.3
million, a 2.8x return on the Company's cost. There is the potential for
further deferred proceeds in due course, with £0.6 million of deferred
proceeds recognised at the year-end.
In the year the Company also received deferred consideration of £0.4 million
relating to investments realised in prior years.
Subsequent to the year-end, in February 2025 the Company realised its
investment in ACC Aviation, receiving £3.1 million in initial proceeds, with
additional deferred consideration of £1.5 million anticipated to be received
over the next two to four years. Including the deferred consideration, the
ACC investment has generated an overall return of £8.2 million, a 5.9x return
on the original cost of £1.4 million.
Treasury
Due to the nature of its structure, a proportion of the Company's net assets
will be held in cash and cash equivalents at any point in time. As interest
rates have remained at higher than historical levels, the Company has taken an
active approach to generating a good return on liquid funds, whilst remaining
focused on the primary goal of capital preservation.
A portion of the Company's liquid assets are held across a diversified range
of Triple-A rated money market funds, managed by global institutions, while
the balance is held as readily accessible cash, all of which is held at Tier 1
Financial Institutions (A2 rated or above).
In the year, the Company generated a return of £2.7 million on its liquid
assets, and at year-end was generating a weighted run-rate return on these
assets of around 4.5 per cent per annum.
Financial Results
The movement in net asset value ("NAV") per ordinary share and the dividends
paid are set out in the table below:
Pence per £000
ordinary share
NAV at 31 December 2023 59.30 135,616
Increase in value 1.10 3,105
Gain on disposal of investments 0.10 234
Net underlying change in investment portfolio 1.20 3,339
Net operating income 0.05 89
Incentive fee (0.30) (818)
Total Return in the year 0.95 2,610
Issue/buy-back of new shares (0.15) 30,724
NAV before the payment of dividends 60.10 168,950
Dividends paid (3.00) (8,499)
NAV at 31 December 2024 57.10 160,451
Cumulative dividends paid 89.25
Total Return: at 31 December 2024 146.35
at 31 December 2023 145.55
The charts on page 12 of the annual report show the movement in Total
Return and net asset value over time in greater detail.
The investments held at the beginning of the financial year, amounting to
£96.4 million, delivered a return over the year of £2.9 million.
The current portfolio's net valuation increased by £3.1 million. Within this
there were valuation gains of £11.5 million, offset by £8.4 million of
downward movements.
Following the portfolio's evolution towards younger, higher growth companies
after changes to VCT regulations in 2015, as expected the level of income
generated by the portfolio continues to decrease. Overall, £0.6 million was
recognised in the year, down from £0.7 million in 2023.
Dividends
Dividends paid in the year totalled 3.00 pence per ordinary share. These
comprised two 1.50 pence per ordinary share interim dividends. Cumulative
dividends paid as at 31 December 2024 were 89.25 pence per ordinary share.
Following the successful realisation of Traveltek in October 2024, a special
dividend of 1.00 pence per ordinary share for the year ending 31 December 2025
was paid on 27 January 2025 to shareholders on the register at 27 December
2024, taking cumulative dividends paid to date to 90.25 pence per ordinary
share.
Dividend Re-investment Scheme ("DRIS")
The Company operates a DRIS, which gives shareholders the opportunity to
re-invest any cash dividends; it is open to all shareholders, including those
who invested under the recent offers. The main advantages of the DRIS are:
1 the dividends remain tax free; and
2 any DRIS investment attracts income tax relief at
the rate of 30 per cent.
For the financial year ended 31 December 2024, £1.4 million was re-invested
by way of the DRIS, from overall dividend proceeds of £8.5 million.
Liquidity and Fundraising
The Company completed a successful fundraise during the year, allotting £34.5
million relating to the 2023/24 tax year.
At 31 December 2024, the Company's cash and money market reserves of £53.1
million represented 33.1 per cent of net assets.
Post-period end, in January 2025, a further £9.8 million of shares were
allotted, relating to the 2024/25 tax year. It is expected that a further
c.£19.2 million will be allotted in early April 2025, following the close of
the Company's joint share offer alongside British Smaller Companies VCT plc on
8 January 2025.
Distributable Reserves
In December 2024, the Company cancelled the balance of its share premium
account and its capital redemption reserve; and reduced the nominal value of
its issued share capital. These actions will create additional distributable
reserves for the Company, providing greater flexibility for the buy-back of
shares, payment of dividends and other corporate purposes. As a result of
these actions, £85.3 million of additional distributable reserves will be
created over the next three years. There was no dilution to shareholders'
interests.
Board Changes
On 13 June 2024, Peter Waller retired as Chair and stood down from the
Board. The Board and the Manager thank Peter for all of his efforts and
valuable contributions over the course of his tenure.
Also on 13 June 2024, Arif Ahmed joined the Board. Arif is a serial
entrepreneur and private equity investor with particular expertise in
healthcare and technology.
Investor Workshop
The annual shareholder workshop held on 20 June 2024 was well attended.
Attendees heard from Steve Frost, CEO of Workbuzz, and Scott Morris, Managing
Director of Displayplan.
We are pleased to announce that the next in-person shareholder workshop will
be held jointly with British Smaller Companies VCT plc on 19 June 2025 at 30
Euston Square, London NW1 2FB.
Shareholder Relations
Annual General Meeting
The Annual General Meeting of the Company will be held at 9:30 am on 12 June
2025 at Thomas House, 84 Ecclestone Square, London SW1V 1PX. Full details of
the agenda for this meeting are included in the Notice of the Annual General
Meeting on page 88 of the annual report.
The electronic communications policy continues to be a success, with 83 per
cent of shareholders now receiving communications in this way. Documents such
as the annual report are published on the website www.bscfunds.com rather than
by post, saving on printing costs, as well as being more environmentally
friendly.
The Company's website, www.bscfunds.com, is refreshed on a regular basis and
provides a comprehensive level of information in what I hope is a
user-friendly format.
General Meeting
The Company held a general meeting on 12 November 2024 at which special
resolutions were passed relating to the cancellation of the Company's share
premium account and capital redemption reserve, and the reduction in the
nominal value of the Company's issued share capital.
Post Balance Sheet Events
Subsequent to the year end, the Company invested £1.4 million into one new
investment, Stormharvester, and 2.8 million into portfolio companies DrDoctor
and Vypr. The Company also received £3.1 million from the realisation of ACC
Aviation, as detailed above.
On 27 January 2025 the Company issued 831,686 ordinary shares pursuant to its
Dividend Re-investment Scheme, following the special dividend of 1.00 pence
paid that day. On 30 January 2025 the Company issued 17,313,531 shares in
relation to the 2024/25 fundraising, raising gross proceeds of £9.8 million.
Following these allotments, the Company's issued share capital consists of
299,176,349 ordinary shares with voting rights and 28,770,963 shares held in
treasury.
Outlook
During 2024 the Company saw good levels of underlying revenue growth from much
of its existing portfolio, and took the opportunity to deploy further capital
into many of these companies to further accelerate their growth. The Manager
is working closely with the portfolio companies which saw decreases in their
value to navigate their particular challenges. It is hoped that these
positions will stabilise or improve in 2025, while the remainder of the
portfolio continues its growth, driving the Company's performance.
Macroeconomic conditions will continue to be closely monitored, with the
effects of possible US tariffs and retaliatory responses from impacted nations
having the potential to disrupt markets and growth in the year. However,
portfolio companies have proven themselves to be resilient to the challenges
presented in recent years, and with the support of the Manager we remain
optimistic that they can navigate any emerging headwinds.
The Company's 2024/25 fundraising puts it in a strong position to continue to
support the portfolio's growth, as well as adding new businesses through the
coming year. I thank shareholders for their continued support.
Barbara Anderson
Chair
18 March 2025
Objectives and Key Policies
The Company's objective is to maximise Total Return and provide investors
with a long-term tax free dividend yield whilst maintaining the Company's
status as a venture capital trust.
Investment Strategy
The Company seeks to build a broad portfolio of investments in early-stage
companies focused on growth, with the aim of spreading the maturity profiles
and maximising return, as well as ensuring compliance with VCT regulations.
The Company predominantly invests in unquoted smaller companies and expects
that this will continue to make up the significant majority of the portfolio.
It will also retain holdings in cash or near-cash investments to provide a
reserve of liquidity which will maximise the Company's flexibility as to the
timing of investment acquisitions and disposals, dividend payments and share
buy-backs.
Unquoted investments are structured using various investment instruments,
including ordinary shares, preference shares, convertible securities and very
occasionally loan stock, to achieve an appropriate balance of income and
capital growth, having regard to the VCT Regulations. The portfolio is
diversified by investing in a broad range of industry sectors. The normal
investment period into the portfolio companies is expected to be typically
between the range of five to seven years.
Investment Policy
The investment policy of the Company is to invest in UK businesses across a
broad range of sectors that blends a mix of businesses operating in
established and emerging industries that offer opportunities in the
application and development of innovation in their products and services.
These investments will all meet the definition of a Qualifying Investment and
be primarily in unquoted UK companies. It is anticipated that the majority of
these will be re-investing their profits for growth and the investments will
comprise mainly equity instruments.
The Company seeks to build a broad portfolio of investments in early-stage
companies focused on growth with the aim of spreading the maturity profiles
and maximising return as well as ensuring compliance with the VCT guidelines.
Borrowing
The Company does not borrow and has no borrowing facilities, choosing to fund
investments from its own resources.
Co-investment
British Smaller Companies VCT plc and British Smaller Companies VCT2 plc
(together "the VCTs") typically co-invest in investments, allocating such
investments 40 per cent to the Company and 60 per cent to British Smaller
Companies VCT plc. However, the Board of the Company has discretion as to
whether or not to take up its allocation; where British Smaller Companies VCT
plc does not take its allocation, the Board may opt to increase the Company's
allocation in such opportunities.
The VCTs may invest alongside co-investment funds managed by YFM, the Manager
of the VCTs. The VCTs have first priority on all equity investment
opportunities meeting the VCT qualifying criteria. Non-VCT qualifying
investments are allocated to YFM's co-investment funds.
Asset Mix
Cash which is pending investment in VCT-qualifying securities is held in money
market funds and interest bearing instant access and short-notice bank
accounts.
Remuneration Policy
The Company's policy on the remuneration of its directors, all of whom are
non-executive, can be found on page 49 of the annual report.
Other Key Policies
Details of the Company's policies on the payment of dividends, the DRIS and
the buy-back of shares are given on page 2 of the annual report. In addition
to these the Company's anti-bribery and environmental and social
responsibilities policies can be found below under the heading "Business
Conduct".
Processes and Operations
The Manager is responsible for the sourcing and screening of investment
opportunities, carrying out suitable due diligence investigations and making
submissions to the Board regarding potential investments.
Post investment, the Manager works with the businesses and management teams in
which the Company is invested, monitoring progress, effecting change and,
where applicable, redefining strategies with a view to maximising values
through structured exit processes.
The Board regularly monitors the performance of the portfolio and the
investment requirements set by the relevant VCT legislation. Reports are
received from the Manager regarding the trading and financial position of each
investee company and senior members of the Manager regularly attend the
Company's Board meetings. Monitoring reports on compliance with VCT
regulations are also received at each Board meeting so that the Board can
monitor that the Venture Capital Trust status of the Company is maintained and
take corrective action if appropriate. Monitoring reports carrying out an
independent review of this compliance are received twice a year.
The Board reviews the terms of YFM Private Equity Limited's appointment as
Manager on a regular basis.
YFM Private Equity Limited has performed investment advisory or management,
administrative and secretarial services for the Company since its inception on
28 November 2000. The principal terms of the agreement under which these
services are performed are set out in note 3 to the financial statements.
In the opinion of the directors, the continuing appointment of YFM Private
Equity Limited as Manager is in the interests of the shareholders as a whole,
in view of its experience in managing venture capital trusts and in making,
managing and exiting investments of the nature falling within the Company's
investment policies.
Key Performance Indicators
Total Return, calculated by reference to the cumulative dividends paid plus
net asset value (excluding tax reliefs received by shareholders), is the
primary measure of performance in the VCT industry. Further explanation is
given under the heading "Financial Performance" above. All returns are shown
as pence per share ("pps").
The chart on page 12 of the annual report shows how the Total Return of
the Company has developed over the last ten years.
The evaluation of comparative success of the Company's Total Return is by way
of reference to the Share Price Total Return for an index of VCTs that are
members of the AIC (based on figures provided by Morningstar). This is the
Company's stated benchmark index. A comparison and explanation of the
calculation of this return is shown in the Directors' Remuneration Report on
page 51 of the annual report.
The chart on page 12 of the annual report illustrates the Total Return
(excluding tax reliefs received by shareholders) for investors who subscribed
to the first fundraising in 2000/01 who have re-invested their dividends.
Shareholder Returns
The Board considers Total Return to be the primary measure of shareholder
value. The Internal Rate of Return (the "IRR") from the offers over the last
ten years are shown below. IRR, which is an Alternative Performance Measure,
is a key metric used to assess the potential profitability of an investment, a
higher IRR indicates a more profitable investment. More specifically, IRR is
the annual rate of return that equates the cost at the date of the original
investment, with the value of subsequent dividends plus the audited 31
December 2024 net asset value. This excludes the benefit of any initial tax
relief.
Year of fundraising IRR
2014 6.0%
2015 6.6%
2016 6.7%
2017 6.9%
2018 8.3%
2019 8.5%
2021 10.9%
2022 3.8%
The IRRs shown are based on fundraisings and offer prices during the
relevant calendar year whilst the table shows specific financial periods to 31
December 2024. Note there was no fundraising in 2020 and it is too soon to
give meaningful returns for the fundraisings in 2023 and 2024.
Set out below is the annualised return over 10, 5, 3 and 1 years to 31
December 2024. The annualised return is calculated with reference to the
cumulative dividends paid in the period plus the audited 31 December 2024 net
asset value, compared to the net asset value at the beginning of the relevant
period.
Period IRR
10 years 6.8%
5 years 9.2%
3 years 3.9%
1 year 1.4%
Expenses
Ongoing Charges
The Ongoing Charges figure, as calculated in line with the AIC recommended
methodology, is used by the Board to monitor expenses. This figure shows
shareholders the costs of the Company's recurring operational expenses,
expressed as a percentage of the average net asset value. Whilst based on
historical information, this provides an indication of the likely level of
costs that will be incurred in managing the Company in the future.
Year to Year to
31 December 31 December
2024 2023
(%) (%)
Ongoing Charges figure* 1.98 2.14
* Alternative Performance Measure
Shareholders also benefit from the Company's agreement with the Manager to pay
a lower level of management fee of 1 per cent on surplus cash. The Company's
ongoing charges ratio is one of the lowest in the VCT industry.
Expenses Cap
The total costs incurred by the Company in the year (excluding any performance
related fees, trail commission payable to financial intermediaries and VAT) is
capped at 2.9 per cent of the total net asset value as at the relevant year
end. The treatment of costs in excess of the cap is described in note 3. There
was no breach of the expenses cap in the current or prior year.
Compliance with VCT Legislative Tests
A principal risk facing the Company is the retention of its VCT qualifying
status. The Board receives regular reports on compliance with the VCT
legislative tests from the Manager. In addition, the Board receives formal
reports from its VCT Tax Adviser (Philip Hare & Associates LLP) twice a
year. The Board confirms that during the period, all VCT legislative tests
have been met.
Under Chapter 3 Part 6 of the Income Tax Act 2007, in addition to the
requirement for a VCT's ordinary share capital to be listed in the Official
List on a European regulated market throughout the period, there are further
specific tests that VCTs must meet following the initial three year
provisional period.
Income Test
The Company's income in the period must be derived wholly or mainly (70 per
cent) from shares or securities.
Retained Income Test
The Company must not retain more than 15 per cent of its income from shares
and securities.
Qualifying Investments Test
At least 80 per cent by value of the Company's investments must be represented
throughout the period by shares or securities comprised in Qualifying
Investments of investee companies.
For shares issued in accounting periods beginning on or after 6 April 2018, at
least 30 per cent of those share issues must be invested in Qualifying
Investments of investee companies by the anniversary of the accounting period
in which those shares are issued.
Eligible Shares Test
At least 70 per cent of the Company's Qualifying Investments must be
represented throughout the period by holdings of non-preferential shares.
Investments made before 6 April 2018 from funds raised before 6 April 2011 are
excluded from this requirement.
At least 10 per cent of the Company's total investment in each Qualifying
Investment must be in eligible shares.
In addition, monies are not permitted to be used to finance buy-outs or
otherwise to acquire existing businesses or shares.
Investment Limits
There is an annual limit for each investee company which provides that they
may not raise more than £5 million of state aided investment (including from
VCTs) in the 12 months ending on the date of each investment (£10 million for
Knowledge Intensive Companies).
There is also a lifetime limit that a business may not raise more than £12
million of state aided investment (including from VCTs); the limit for
Knowledge Intensive Companies is £20 million.
Maximum Single Investment Test
The value of any one investment must not, at any time in the period, represent
more than 15 per cent of the Company's total investment value. This is
calculated at the time of investment and updated should there be further
additions; as such, it cannot be breached passively.
The Board can confirm that during the period, all of the VCT legislative tests
set out above have been met, where required.
Further restrictions placed on VCTs are:
Dividends from Cancelled Share Premium
The Finance Act 2014 introduced a restriction with respect to the use of
monies in respect of VCTs. In particular, no dividends can be paid out of
share capital or cancelled share premium arising from shares allotted on or
after 6 April 2014 until at least three full financial years have elapsed from
the date of allotment.
In December 2024 the Company cancelled the balance of its Share Premium and
Capital Redemption Reserve of £54.3 million, of which £0.1 million is now
distributable. The remaining £54.2 million will become distributable over the
period to 1 January 2028, as set out below.
Also in December 2024, the Company reduced the nominal value of the share
capital of the Company from 10 pence per ordinary share to 0.01 pence per
ordinary share, creating additional distributable reserves of £30.9 million,
of which £15.8 million is now distributable. The remaining £15.1 million
will become distributable over the period to 1 January 2028, as set out on
page 63 of the annual report.
Other
No more than seven years can have elapsed since the first commercial sale
achieved by the business (ten years in the case of a Knowledge Intensive
Company), unless:
a. The business has previously received an investment from a
source that has received state aid; or
b. The investment comprises more than 50 per cent of the
average of the previous five years' turnover and the funds are to be used in
the business to fund growth into new product markets and/or new geographies.
Wherever possible, the Company self-assures that an investment is a Qualifying
Investment, subject to the receipt of professional advice.
Portfolio Structure and Analysis
Portfolio Structure
The broad range of the portfolio is illustrated below, with 51 per cent of the
portfolio valuation being held for more than five years, whilst 94 per cent is
held at cost or above. 5 per cent of the portfolio value is held in loans and
preference shares.
AGE OF INVESTMENTS (%)
2024 2023
Less than 1 year 6% 8%
Between 1 and 3 years 28% 22%
Between 3 and 5 years 15% 29%
Greater than 5 years 51% 41%
Total 100% 100%
VALUE COMPARED TO COST (%)
2024 2023
Value above cost 88% 93%
At cost 6% 4%
Value below cost 6% 3%
Total 100% 100%
INVESTMENT INSTRUMENT (%)
2024 2023
Loan 2% 3%
Preference shares 3% 5%
5% 8%
Equity 95% 92%
Total 100% 100%
Portfolio Analysis
Also included below is a profile of the portfolio by industry sector.
INDUSTRY SECTOR (%)
2024 2023
Data 28% 30%
Application Software 24% 22%
Tech-enabled Services 17% 18%
Cloud & DevOps 12% 7%
New Media 7% 10%
Business Services 6% 8%
Retail & Brands 4% 4%
Other 2% 1%
Total 100% 100%
Investment Review
The movements in the investment portfolio are set out in Table A below:
Table A Investment Portfolio
Investment
portfolio
£million
Opening fair value at 1 January 2024 96.4
Additions 15.1
Disposal proceeds (9.0)
Valuation movement 3.0
Closing fair value at 31 December 2024 105.5
Accrued income 1.3
Financial assets - investments 106.8
At 31 December 2024 the investment portfolio was valued at £105.5 million,
representing 65.8 per cent of net assets (71.1 per cent at 31 December 2023).
Cash, cash equivalents and current asset investments at 31 December 2024 of
£53.1 million represent 33.1 per cent of net assets (28.2 per cent at 31
December 2023).
The Portfolio
£105.5 million Fair value of the portfolio (2023: £96.4 million)
31 Number of portfolio companies with an investment value of more than £0.75 (2023: 26)
million
£0.6 million Income from the portfolio (2023: £0.7 million)
£15.1 million Level of investment (2023: £10.0 million)
£2.9 million Return from the portfolio (2023: £9.1 million)
The portfolio showed steady performance in the period, adding £2.9 million
of value on the opening fair value of £96.4 million. The composition of
investments continues to show its dynamism, with £15.1 million invested in
the period and proceeds of £9.4 million recognised.
Fair value changes
Table B Gain from Investment Portfolio
£million
Gain in fair value from the portfolio 3.1
Loss on disposal over opening value from the portfolio (0.2)
Gain arising from the portfolio 2.9
Deferred income recognised 0.4
Gain arising from the investment portfolio 3.3
Of the £3.3 million gain in the year, £0.2 million arose from investments
which were realised, including deferred consideration received from
investments realised in prior years. Further details can be found in the
Chair's Statement and note 7 to the financial statements.
The ongoing portfolio delivered a net value gain of £3.1 million in the year.
It is pleasing to see the fair value increases arising across a range of
companies, including tech-focused businesses such as Vypr, Summize,
AutomatePro, Arcus, Xapien and SharpCloud, as well as legacy companies such as
ACC Aviation and Teraview.
Some decreases in value have been seen, with notable reductions for the
investments in Matillion, Wooshii and Outpost. The Manager continues to work
closely with the companies' management teams to navigate their current
challenges.
Other Significant Investment Movements
Investments
During the year ended 31 December 2024, the Company invested £15.1 million
across fourteen companies.
Four new companies were added to the portfolio, receiving aggregate investment
of £5.7 million; while a further £9.4 million was invested across ten
existing portfolio companies. The analysis of these investments is shown in
Table C. The case studies on page 24 of the annual report give more
information on the investments in Xapien and AutomatePro.
Table C Investments
Company Investments made
New Follow-on Total
£million £million £million
Xapien - 2.9 2.9
Fuuse 2.0 - 2.0
Spotless Water 1.4 - 1.4
Quality Clouds - 1.3 1.3
Integrum ESG 1.2 - 1.2
AutomatePro - 1.2 1.2
Ohalo 1.1 - 1.1
Plandek - 1.0 1.0
Outpost - 0.8 0.8
SharpCloud - 0.6 0.6
Biorelate - 0.5 0.5
Summize - 0.5 0.5
Relative Insight - 0.4 0.4
Wooshii - 0.2 0.2
Portfolio 5.7 9.4 15.1
In January 2025 the Company invested £1.4 million into new investment
Stormharvester, an AI analytics platform for wastewater utilities, and in
March 2025 the Company invested 2.8 million into portfolio companies DrDoctor
and Vypr.
Disposal of Investments
During the year to 31 December 2024, the Company received proceeds from
disposals of £9.4 million, a net gain of £0.2 million over the opening
carrying value at the beginning of the year, and an overall net gain of £7.3
million over cost. This included the successful realisations of Displayplan
and Traveltek. Further details are given in the Chair's statement above.
Table D Disposal of Investments
Net Opening (Loss) gain on
proceeds value opening value
from sale 31 December £million
of investments 2023
£million £million
Portfolio 9.0 9.2 (0.2)
Deferred consideration 0.4 - 0.4
Total investment disposals 9.4 9.2 0.2
Further analysis of all investments sold in the year can be found in note 7
to the financial statements.
Investment Portfolio Composition
As at 31 December 2024, the portfolio was valued at £105.5 million,
comprising wholly of unquoted investments. An analysis of the movements in the
year is shown on page 75 of the annual report.
The portfolio has 31 investments valued above £0.75 million, five more than a
year earlier, with the single largest investment, Matillion, representing 12.2
per cent of the net asset value.
The charts on pages 16 and 17 of the annual report show the diversity of the
portfolio, split by industry sector, age of investment, investment instrument
and the valuation compared to cost.
Treasury Management
Under VCT legislation, it is not possible to deposit funds for longer than
seven days, which means that cash deposits must be available on very short
notice. The Company takes an active approach to cash management, whilst
pursuing its primary aim of capital preservation. This is effected through the
use of a pool of money market funds (which can be converted back to cash with
immediate notice) and cash deposits held with Tier 1 banking institutions.
£2.7 million of income was earned from money market funds and bank deposits
during the year. At 31 December 2024, the Company was achieving a weighted
average return on liquid assets of 4.5 per cent. This rate had reduced to 4.2
per cent at 28 February 2025.
Valuation Policy
Unquoted investments are valued in accordance with both IFRS 13 'Fair Value
Measurement' and International Private Equity and Venture Capital Guidelines
(the "IPEV Guidelines").
Initially, at the first quarter-end following investment, investments are
valued at the price of the funding round; following this, the valuation
switches to a new primary basis for all subsequent periods.
The valuation methodology applied depends upon the facts and circumstances of
each individual investment. This may be with reference to revenue multiples,
earnings multiples, net assets, discounted cash flows or calibrated from the
price of the most recent investment.
The full valuation policy is set out in note 1 on pages 66 and 67 of the
annual report.
Table E shows the value of investments within each valuation category as at 31
December 2024.
With continued investment in earlier stage businesses that are investing for
growth, the majority of valuations continue to be based on revenue multiples.
Table E Valuation Policy
2024 2023
Valuation % of % of
£million portfolio portfolio
by value by value
Revenue multiple 90.7 86 84
Earnings multiple 9.8 9 7
Net assets, reviewed for change in fair value 2.7 3 2
Cost or price of recent investment, reviewed for change in fair value 2.3 2 -
Sale proceeds - - 7
Total 105.5 100 100
Responsible Investment and Environmental, Social and Governance ("ESG")
Management
The Company seeks to build a broad portfolio of investments in early-stage
companies focused on growth with the additional aim of building better
businesses that are ultimately more sustainable.
In order to deliver more sustainable businesses, and to meet its commitments
under the Principles for Responsible Investment (the "PRI"), the Manager has
continued to develop its processes in this area.
The Manager's approach is based on the belief that good businesses:
· Grow our economy
· Improve our society
· Value their people
· Protect the environment
These aims are consistent with the Company's financial because businesses
which improve in these areas also strengthen their resilience and value
creation potential through their increased attractiveness to customers,
employees, suppliers, and eventual future owners and investors.
Responsible Investment Principles
This set of principles guides the Manager's investment process:
> To seek to understand the ESG related impacts and
risk factors of the businesses the Company invests in, aiming to enhance
positive impacts and to avoid, reduce or minimise any negative impacts where
possible, over an investment's lifetime, leaving them overall better
businesses;
> To play a positive role in the investor, business
and wider communities by promoting good practice in ESG management, and by
being transparent in the way that investments are made and how the Manager
behaves;
> To increase focus on the challenge of climate
change both as it may be affected by our investments, and as it may impact on
the Manager's portfolio companies and their resilience to possible climate
change scenarios;
> To show leadership by managing the Manager's own
business' ESG impacts to the best of its ability; and
> To be a proactive signatory to the PRI and to
integrate its principles into the Manager's business practices.
In line with the PRI the Manager has developed processes to help portfolio
companies to improve in each of these spheres, by assessing them in terms of
creating positive impacts and outcomes and preventing or minimising negative
ones.
The Manager has developed and integrated the following ESG management
processes:
>Pre-investment Phase:
Structured processes at the pre-investment stage to identify areas of
potential ESG improvement and risk as part of the due diligence and
pre-investment deliberations. Appropriate data is collected and assessed on
each business against ESG criteria at the point of investment as a benchmark
against which to evaluate future progress.
>Portfolio Phase:
Based on the data collected at the point of investment, at the start of the
portfolio phase, bespoke areas for improvement are agreed with each management
team, together with consequent objectives and targets. Improvements are then
monitored, measured and recorded against a set of ESG criteria using the
Manager's bespoke ESG framework. During the portfolio phase, targets are
refreshed and increased focus is placed on any new issue as they become more
material in the management of the company and in meeting the expectations of
its stakeholders.
>Reporting:
Annual reports are produced using the Manager's ESG framework, recording the
ESG KPI performance of each company and providing an overview of progress
across the Manager's portfolios.
Investment Companies, such as the Company, are not within scope for reporting
under the Task Force on Climate-Related Financial Disclosures (TCFD); and the
Company does not use more than 40,000kWh of energy and therefore is not
required to report on its energy usage within Streamlined Energy and Carbon
Reporting regulations.
>Oversight and Support:
To ensure effective oversight and support, the Manager has established an ESG
Committee that meets quarterly to oversee its responsible investment strategy
ESG approach. Additionally, in 2024 the Manager has recruited an ESG &
Sustainability Manager who works across its portfolio companies to implement
ESG initiatives and encourage and share ESG best practice. The support
offered includes operating a programme of events and webinars and providing
ESG resources to the portfolio focused on key ESG themes, such as
environmental management, diversity and inclusion, company culture, and cyber
security.
ESG Performance Data and Reporting
ESG KPI data analysis
The Manager has developed its own ESG KPI data collation process, allowing it
to monitor year-on-year performance and benchmark across its portfolio. This
includes providing its portfolio companies with a bespoke annual Healthcheck
report showing their performance across a range of ESG areas.
2024 ESG KPI Report for Investments held in the British Smaller Companies VCT
funds
Growing our economy
> £56 million of R&D investment during 2024
> £108 million of export sales achieved in 2024
> c.600 new jobs were created from date of
investment to 2024, representing a 41 per cent increase
Improving our society
> 84 per cent of the portfolio provided employees
with cyber-security training
> 66 per cent of portfolio companies had a cyber
accreditation or management system in place
> on average 75 per cent of our portfolio companies
rate their employees good or above
> 84 per cent of companies were independently
chaired in 2024
Valuing our people
> 53 per cent of portfolio companies had mental
well-being programmes in place and 66 per cent held regular employee
engagement surveys
> 44 per cent of the portfolio are measuring
DE&I metrics and have a policy in place
> 44 per cent of companies had female
representation at board-level, with 13 per cent having a female CEO/MD
> 53 per cent of businesses had a designated board
member with responsibility for improving ESG issues
> 34,000 hours of non-statutory training was given
to employees across the portfolio
Protecting our environment
> 44 per cent had environmental policies in place
> 16 per cent formally measure their carbon
footprint with 13 per cent formally setting a target and strategy for
achieving net zero carbon emissions
> 9 per cent per cent offset all or a defined
portion of their carbon emissions
Summary and Outlook
Despite increased geopolitical uncertainty and tariff threats from a change
in government in the US, and subdued business confidence in the UK, there has
been promising growth from portfolio companies in the year, driven by
increases in underlying revenue and market multiples.
Navigating the macroeconomic headwinds, we have been encouraged by the
progress made by the portfolio, with strong rates of revenue growth seen from
many companies this year. Where companies are performing strongly, we have
taken the opportunity to provide further funding to allow them to continue
their positive progress.
Thanks to the support of shareholders the Company remains well funded to both
continue to support the portfolio in this way, as well as to invest in
exciting fast growing UK businesses.
Eamon Nolan
YFM Private Equity Limited
Portfolio Summary at 31 December 2024
Name of Date of Location Industry Amount Valuation at Recognised Realised &
company initial Sector invested 31 December income/ unrealised
investment 2024 proceeds value to date*
to date
£000 £000 £000 £000
Matillion Limited Nov-16 Manchester Data 1,778 19,624 5,946 25,570
Unbiased EC1 Limited Dec-19 London Tech-enabled Services 3,731 8,962 - 8,962
Xapien (via Digital Insight Technologies Limited) Mar-23 London Application Software 4,064 5,132 - 5,132
Outpost VFX Limited Feb-21 Bournemouth New Media 3,833 5,058 84 5,142
SharpCloud Software Limited Oct-19 London Data 2,920 4,789 - 4,789
Vypr Validation Technologies Limited Jan-21 Manchester Tech-enabled Services 2,200 4,475 - 4,475
Force24 Ltd Nov-20 Leeds Application Software 2,600 4,331 74 4,405
ACC Aviation Group Limited Nov-14 Reigate Business Services 1,379 4,285 3,525 7,810
AutomatePro Limited Dec-22 London Cloud & DevOps 2,683 4,253 - 4,253
Quality Clouds Limited May-22 London Cloud & DevOps 3,880 4,118 - 4,118
Elucidat Ltd May-19 Brighton Application Software 2,840 4,057 382 4,439
Summize Limited Oct-22 Manchester Application Software 1,700 3,256 - 3,256
Plandek Limited Oct-22 London Cloud & DevOps 2,360 2,908 - 2,908
Investment companies Apr-15 - - 2,500 2,687 93 2,780
Tonkotsu Limited Jun-19 London Retail & Brands 1,592 2,546 - 2,546
Workbuzz Analytics Limited Jun-23 Milton Keynes Application Software 1,718 2,476 - 2,476
DrDoctor (via ICNH Ltd) Feb-23 London Application Software 2,377 2,377 - 2,377
GEEIQ (via Checkpoint GG Limited) Sep-23 London Data 1,572 2,146 - 2,146
Fuuse Limited May-24 Lancaster Application Software 2,000 2,000 - 2,000
Spotless Water Limited Jun-24 Frimley Business Services 1,456 1,729 - 1,729
Vuealta Holdings Limited Sep-21 London Tech-enabled Services 2,386 1,594 3,106 4,700
Frescobol Carioca Ltd Mar-19 London Retail & Brands 1,200 1,447 - 1,447
Wooshii Limited May-19 London New Media 3,277 1,419 557 1,976
Ohalo Limited Jun-24 Bicester Data 1,110 1,277 - 1,277
KeTech Technology Holdings Limited Nov-15 Nottingham Tech-enabled Services 2,000 1,275 4,059 5,334
Biorelate Limited Nov-22 Manchester Application Software 1,540 1,199 - 1,199
Relative Insight Limited Mar-22 Lancaster Tech-enabled Services 2,920 1,180 4 1,184
Integrum ESG Limited Sep-24 London Data 1,160 1,160 - 1,160
Teraview Limited Apr-17 Cambridge Advanced Manufacturing 377 1,100 - 1,100
Panintelligence (via Paninsight Limited) Nov-19 Leeds Data 1,000 1,000 - 1,000
Arcus Global Limited May-18 Cambridge Application Software 2,050 940 229 1,169
Sipsynergy (via Hosted Network Services Limited) Jun-16 Hampshire Cloud & DevOps 2,045 726 1 727
Other investments below £0.5 million 6,869 - 4,487 4,487
Total unquoted investments 77,117 105,526 22,547 128,073
Full disposals to date 51,448 - 90,148 90,148
Total portfolio 128,565 105,526 112,695 218,221
*represents recognised income and proceeds received to date plus the
unrealised valuation at 31 December 2024.
Summary of Portfolio Movement
Name of company Investment Disposal Additions Valuation Investment
valuation at proceeds gains including valuation at
31 December profits/ (losses) 31 December
2023 on disposal 2024
£000 £000 £000 £000 £000
ACC Aviation Group Limited 2,905 - - 1,380 4,285
Vypr Validation Technologies Limited 3,222 - - 1,253 4,475
Summize Limited 1,604 - 500 1,152 3,256
AutomatePro Limited 2,088 - 1,200 965 4,253
Arcus Global Limited 200 (200) - 940 940
Xapien (via Digital Insight Technologies Limited) 1,294 - 2,904 934 5,132
SharpCloud Software Limited 3,309 - 649 831 4,789
Teraview Limited 338 - - 762 1,100
Unbiased EC1 Limited 8,365 - - 597 8,962
Plandek Limited 1,380 - 980 548 2,908
Tonkotsu Limited 2,020 - - 526 2,546
Workbuzz Analytics Limited 2,111 - - 365 2,476
GEEIQ (via Checkpoint GG Limited) 1,821 - - 325 2,146
Spotless Water Limited - - 1,456 273 1,729
Investment Companies 2,443 - - 244 2,687
Force24 Ltd 4,126 - - 205 4,331
Ohalo Limited - - 1,110 167 1,277
Quality Clouds Limited 2,763 - 1,270 85 4,118
Displayplan Holdings Limited 4,741 (4,821) - 80 -
Sipsynergy (via Hosted Network Services Limited) 715 - - 11 726
DrDoctor (via ICNH Ltd) 2,377 - - - 2,377
Fuuse Limited - - 2,000 - 2,000
Integrum ESG Limited - - 1,160 - 1,160
KeTech Holdings Limited/ KeTech Technology Holdings Limited 2,765 (1,461) - (29) 1,275
Panintelligence (via Paninsight Limited) 1,046 - - (46) 1,000
Vuealta Holdings Limited 1,660 - - (66) 1,594
Frescobol Carioca Ltd 1,518 - - (71) 1,447
Other investments below £0.5 million 133 - - (133) -
Traveltek Group Holdings Limited 2,731 (2,494) - (237) -
Elucidat Ltd 4,398 - - (341) 4,057
Biorelate Limited 1,146 - 500 (447) 1,199
Relative Insight Limited 1,357 - 384 (561) 1,180
Outpost VFX Limited 5,879 - 833 (1,654) 5,058
Wooshii Limited 3,638 - 181 (2,400) 1,419
Matillion Limited 22,334 - - (2,710) 19,624
Total unquoted investments 96,427 (8,976) 15,127 2,948 105,526
Accrued income 1,241
Financial assets - investments 106,767
Risk Factors
The Board carries out a regular review of the risk environment in which
the Company operates. The emerging and principal risks and uncertainties
identified by the Board and techniques used to mitigate these risks are set
out in this section.
The Board seeks to mitigate its emerging and principal risks by setting
policy, regularly reviewing performance and monitoring progress and
compliance. In the mitigation and management of these risks, the Board
rigorously applies the principles detailed in section 8: "Audit, Risk and
Internal Control" of the AIC Code. Details of the Company's internal controls
are contained in the Corporate Governance Internal Control section on pages 47
and 48 of the annual report and further information on exposure to risks,
including those associated with financial instruments, can be found in note 16
of the financial statements.
The Board carries out a regular review of the risk environment in which the
Company operates, together with changes to the operational environment. The
Board also seeks to identify emerging risks which might impact on the Company.
The principal and emerging risks identified by the Board, and how the Board
manages the risks are set out below.
Risk Commentary Mitigation
Macroeconomic: Up. The Board, in conjunction with the Manager, regularly assesses the resilience
of the portfolio. The Company has a clear Investment Policy (summarised above)
and invests in a diverse portfolio of companies across a range of sectors,
which helps to mitigate against the impact on any one sector. The Manager also
Macroeconomic risk refers to the potential for losses or adverse effects on an Events such as the conflicts in the Middle East and Ukraine, elections and the seeks to maintain adequate liquidity to ensure it can provide follow-on
investment or business due to broad economic factors such as inflation, threat of US trade tariffs continue to present risks to trading conditions. investment to those portfolio companies which require funding when supported
interest rates, economic growth, and political stability. These risks can impact entire markets and economies, influencing the by the individual investment case
performance of investments and the overall business environment.
The crystallisation of these risks could adversely affect smaller companies'
valuations, as they may be more vulnerable to changes in trading conditions or
the sectors in which they operate. This could lead to a reduction in the
Company's share price, resulting in capital losses for Shareholders.
Portfolio: Unchanged. The Board comprises individuals experienced in assessing suitable investment
opportunities. The Manager has significant experience, expertise and a strong
track record of investing in early-stage unquoted companies. The Manager has a
rigorous and robust formal process in selecting new companies which includes
Portfolio risk refers to the potential for losses within an investment The Company invests in small and medium-sized VCT qualifying companies, which, appropriate due diligence and approval by an Investment Committee made up of
portfolio due to various factors, including market volatility, economic by their nature, entail a higher level of risk and shorter cash runway than senior members of the Manager's investment team.
changes, and specific risks associated with individual assets. It encompasses investments in larger quoted companies. Poor performance could reduce returns
both systematic risk, which affects the entire market, and idiosyncratic risk, for shareholders through downward valuations.
which is unique to specific investments.
A current emerging risk that we are actively monitoring is the impact of the
rapid advancement of AI and machine leading technology and its potential to
disrupt a range of industries and sectors.
A failure to implement effective portfolio risk management such as
diversification, regular monitoring, and strategic adjustments to mitigate
these risks could result in poor investment outcomes.
ESG: Unchanged The Manager has implemented a robust governance framework designed to ensure
compliance with regulatory initiatives. This framework also aims to support
and educate portfolio companies. Additionally, the Manager actively conducts
horizon scanning to anticipate and respond to emerging ESG trends.
ESG risk refers to ESG factors that can affect portfolio companies and the Investors are increasingly focusing on ESG-related challenges such as climate
Manager. These risks include exposure to regulatory non-compliance, transition, biodiversity, and regulatory changes. Should the Company fail to
reputational damage, climate related vulnerabilities, and workforce or supply properly manage the risk of regulatory non-compliance it could suffer
chain issues. financial penalties, reputational damage or erode investor trust.
Strategic: Unchanged. The Board reviews strategy annually. At each of the Board meetings, the
directors review the appropriateness of the Company's objectives and stated
strategy in response to changes in the operating environment and peer group
activity. It also reviews compliance of the Manager with the stated investment
Strategic risk involves the potential for losses due to poor strategic The Board sets appropriate strategic objectives and monitors the Company's strategy.
decisions, such as market positioning, misjudging market trends, or failing to implementation of the strategy.
adapt to regulatory changes. This risk can impact our ability to achieve the
investment objectives and deliver returns to investors.
The Manager also tracks the Company's VCT qualifying status on an ongoing and
The key strategy being to maintain VCT qualifying status, a loss of this continual basis. Furthermore, external independent experts have been retained
status could lead to investors losing the various tax benefits associated with and report on the VCT qualifying status twice per year.
VCT investments.
The Manager reports to the Board on a quarterly basis.
Further information on these requirements can be found under the heading
"Compliance with VCT Legislative Tests" on pages 14 and 15 of the annual
report.
Legislative & Regulatory: Unchanged. The Manager ensures that it has suitably qualified members of staff who are
experienced with regulatory requirements and relevant accounting standards.
The Manager and the Company Secretary have procedures in place to ensure
recurring Listing Rules requirements are met.
Legislative and regulatory risk refers to the potential for losses or adverse Should the Company fail to comply with applicable laws and regulations, or
outcomes due to changes in laws, regulations, or non-compliance with existing adapt to new legal requirements, it could suffer financial loss, reputational
rules. This risk can impact an organisation's operations, financial damage or regulatory intervention, including the loss of VCT status.
performance, and reputation.
The Board and Manager review corporate governance, regulatory legislative
change and political developments on a continual basis and seek additional
advice as and when required.
Key relevant legislation and regulation includes VCT rules, UK Listing
Authority Rules, AIC Code on Corporate Governance, Stewardship Code, Companies
Act, Bribery Act, Market Abuse Regulations, data protection rules, Criminal
Finances Act and relevant Taxes Acts The Manager is a member of the Venture Capital Trust Association which engages
with the Government to help shape future legislation.
Changes to the UK legislation, in particular relating to the VCT rules, could
have an adverse effect on the Company's ability to achieve investment returns.
Failure to adapt to new legal requirements, maintain compliance with current
regulations, and manage the consequences of any legal or regulatory breaches
could result in regulatory action.
Operational: Unchanged. The Board regularly reviews the system of internal controls, both financial
and non-financial, operated by the Company and the Manager. These include
controls designed to ensure that the Company's assets are safeguarded and
proper accounting records are maintained.
Operational risk refers to the potential for losses resulting from inadequate Effective management of operational risk involves implementing robust internal
or failed internal processes, systems, human errors, or external events. This controls, regular monitoring, and contingency planning to minimise the impact
includes risks such as fraud, system failures, data breaches, and natural of these risks on the operations and financial stability of the Company.
disasters.
Failure of key service providers, such as the Manager, to have adequate
procedures for the identification, evaluation and management of risks could
put the Company's assets and data at risk.
Liquidity: Unchanged. The Company's overall liquidity risks and cashflow forecasts are monitored on
an ongoing basis by the Manager and on a quarterly basis by the Board.
Liquidity risk refers to the potential difficulty a fund may face in meeting Should the Company fail to manage its liquidity risk it may result in
its short-term financial obligations due to an inability to quickly convert financial losses owing to discounted sales, reputational damage and potential The Company's valuation methodology takes account of potential liquidity
assets into cash without significant loss in value. regulatory action. restrictions in the markets in which it invests.
The Manager regularly reviews its exit plans for portfolio companies to aim to
identify what it believes to be the optimal point at which to seek a sale. As
part of a planned exit, the assistance of a third party adviser will normally
be sought, with a view to identifying the most appropriate number of possible
purchasers.
Emerging Risk - Cyber Security & Information Technology: Up. The Manager has in place significant cybersecurity controls, including
multifactor authentication, email protection software, monitored firewalls and
regularly updated electronic devices. Staff at the Manager regularly receive
training in relation to their cybersecurity obligations. The Manager is Cyber
Cybersecurity & information technology risk refers to the potential for A failure to implement effective management involving robust security Essentials Plus certified.
financial loss, operational disruption, or reputational damage due to cyber measures, regular system updates, employee training, and incident response
threats and IT system failures. This includes risks such as data breaches, plans to protect sensitive information and ensure the resilience of IT
hacking, malware attacks, and system outages. infrastructure could result in data loss, operational disruptions, financial
losses, reputational damage and regulatory fines. Due diligence is conducted on other service providers, including a review on
their controls for information security.
Other Matters
Section 172 Statement
This Section 172 Statement should be read in conjunction with the other
contents of the Strategic Report, on pages 6 to 36 of the annual report.
Section 172 of the Companies Act 2006 requires that a director must act in the
way that they consider, in good faith, would be most likely to promote the
success of the company for the benefit of its members as a whole, and in doing
so have regard (amongst other matters) to:
> The likely consequences of any decision in the long
term;
> The interests of the company's employees;
> The need to foster the company's business relationships
with suppliers, customers and others;
> The impact of the company's operations on the community
and the environment;
> The desirability of the company maintaining a
reputation for high standards of business conduct; and
> The need to act fairly as between members of the
company.
The Company takes a number of steps to understand the views of investors and
other key stakeholders and considers these, along with the matters set out
above, in Board discussions and decision making.
Key Stakeholders
As an investment company with no employees, the Company's key stakeholders are
its investors, its service providers and its portfolio companies.
Investors
The Board engages and communicates with shareholders in a variety of ways.
The Company encourages shareholders to attend its Annual General Meeting.
Along with British Smaller Companies VCT plc, the Company held an Investor
Workshop on 24 June 2024, which was well attended. A further event is
scheduled for June 2025.
Maintaining the Company's status as a VCT is critical to meeting the Company's
objective to maximise Total Return and provide investors with an attractive
long-term tax-free dividend yield. The Company receives regular reports on
this issue from the Manager and has taken various steps in the year to ensure
that the relevant tests are met.
The Board also aims for investors to continue to have tax efficient
opportunities to invest in the Company, and to generate tax-free returns from
both capital appreciation and ongoing dividends.
After carefully considering its funding needs, on 17 October 2024 the Company
issued a prospectus, alongside British Smaller Companies VCT plc, to raise up
to £75 million in aggregate for the 2024/25 tax year.
During the year the Board kept its arrangements for dividends, share buy-backs
and the dividend re-investment scheme under constant review. Along with normal
dividends totalling 3.00 pence per ordinary share in the year ended 31
December 2024, a special dividend of 1.00 pence per ordinary share was paid in
January 2025, following the realisation of the Company's investment in
Traveltek in 2024.
To ensure the Company has sufficient distributable reserves to facilitate the
above arrangements, the Company called a General Meeting on 12 November 2024
which recommended resolutions relating to the cancellation of the Company's
share premium account and capital redemption reserve, and the reduction in the
nominal value of the Company's issued share capital. The approved resolutions
will create £85.3 million of additional distributable reserves over the next
three years. There was no dilution to shareholders interest from the
resolutions.
Manager
The Company's most important service provider is its Manager. There is regular
contact with the Manager, and members of the Manager's board attend all of the
Company's Board meetings. There is also an annual strategy meeting with the
Manager, alongside the board of British Smaller Companies VCT plc.
The Manager maintains strong relationships with relevant media publications
and a wide range of distributors for the Company's shares, including wealth
managers, independent financial advisers and execution-only brokers. RAM
Capital acts as a promoter of the Company's shares to smaller distributors.
The Company is a member of the Association of Investment Companies which
promotes the interests of investment companies, including VCTs. The Manager is
a founder member of the Venture Capital Trust Association, which promotes the
interests of VCTs in a variety of ways.
Portfolio Companies
The Company holds minority investments in its portfolio companies and has
delegated the management of the portfolio to the Manager. The Manager provides
the Board with regular updates on the performance of each portfolio company at
least quarterly and the Board is made aware of all major issues.
The Manager has a dedicated Portfolio team to assist the portfolio companies
with the challenges that they face as fast-growing companies. The Manager
promotes ongoing sustainable growth within the businesses; this often involves
improving systems and processes, as well as significant job creation.
Employees
The Company has no employees. The Board is composed of one female
non-executive director and two male non-executive directors. For a review of
the policies used when appointing directors to the Board of the Company,
please refer to the Directors' Remuneration Report.
Environment and Community
The Company seeks to ensure that its business is conducted in a manner that is
responsible to the environment. The management and administration of the
Company is undertaken by the Manager, YFM Private Equity Limited, which
recognises the importance of its environmental responsibilities and is a
signatory of the United Nations' Principles for Responsible Investment.
More details of the work that the Manager has achieved in this area are set
out below. Its Responsible Investment Policy can be found at
www.yfmep.com/who-we-are/our_impact/.
Business Conduct
The Company has a zero tolerance approach to bribery and corruption. The
following is a summary of the controls in place:
> The Company conducts all its business in an honest and
ethical manner. The Company is committed to acting professionally, fairly and
with integrity in all its business dealings and relationships;
> The Company prohibits the offering, the giving, the
solicitation or the acceptance of any bribe;
> The Company has communicated its Anti-Bribery &
Corruption Policy to the Manager and its other service providers; and
> The Manager has its own Anti-Bribery & Corruption
Policy and monitors portfolio companies' compliance with their legal
obligations.
Statement on Long-term Viability
The statement on long-term viability on page 39 of the annual report is
included in the Strategic Report by reference.
Barbara Anderson
Chair
FINANCIAL STATEMENTS
Statement of Comprehensive Income
For the year ended 31 December 2024
Notes 2024 2023
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains on investments held at fair value 7 - 3,105 3,105 - 8,043 8,043
Gain on disposal of investments 7 - 234 234 - 1,018 1,018
Gain arising from the investment portfolio - 3,339 3,339 - 9,061 9,061
Income 2 3,336 - 3,336 2,047 - 2,047
Total income 3,336 3,339 6,675 2,047 9,061 11,108
Administrative expenses:
Manager's fee (624) (1,872) (2,496) (536) (1,611) (2,147)
Incentive fee - (818) (818) - (1,601) (1,601)
Other expenses (751) - (751) (669) - (669)
3 (1,375) (2,690) (4,065) (1,205) (3,212) (4,417)
Profit before taxation 1,961 649 2,610 842 5,849 6,691
Taxation 4 (12) 12 - - - -
Profit for the year 1,949 661 2,610 842 5,849 6,691
Total comprehensive income for the year 1,949 661 2,610 842 5,849 6,691
Basic and diluted earnings per ordinary share 6 0.72p 0.24p 0.96p 0.39p 2.69p 3.08p
The accompanying notes on pages 65 to 87 of the annual report are an
integral part of the financial statements.
The Total column of this statement represents the Company's Statement of
Comprehensive Income, prepared in accordance with UK adopted international
accounting standards. The supplementary Revenue and Capital columns are
prepared under the Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' (issued in July 2022 -
"SORP") published by the AIC.
Balance Sheet
At 31 December 2024
Notes 2024 2023
£000 £000
Assets
Non-current assets at fair value through profit or loss
Financial assets at fair value through profit or loss 7 106,767 97,702
Accrued income and other assets - 210
106,767 97,912
Current assets
Accrued income and other assets 1,651 475
Current asset investments 35,500 23,500
Cash at bank 17,627 15,571
54,778 39,546
Liabilities
Current liabilities
Trade and other payables (1,094) (1,842)
Net current assets 53,684 37,704
Net assets 160,451 135,616
Shareholders' equity
Share capital 31 25,014
Share premium account - 25,386
Capital redemption reserve - 88
Other reserves 2 2
Merger reserve 217 5,525
Capital reserve 121,455 37,458
Investment holding gains and losses reserve 7 36,280 40,245
Revenue reserve 2,466 1,898
Total shareholders' equity 160,451 135,616
Net asset value per ordinary share 8 57.10p 59.3p
The accompanying notes on pages 65 to 87 of the annual report are an
integral part of the financial statements.
The financial statements were approved and authorised for issue by the Board
of Directors and were signed on its behalf on 18 March 2025.
Barbara Anderson
Chair
Statement of Changes in Equity
For the year ended 31 December 2024
Share Share Other Capital Investment Revenue Total
capital premium reserves* reserve holding gains reserve equity
account and losses
reserve
£000 £000 £000 £000 £000 £000 £000
Balance at 31 December 2022 20,014 858 5,615 52,263 31,762 1,357 111,869
Revenue return for the year - - - - - 842 842
Expenses charged to capital - - - (3,212) - - (3,212)
Investment holding gain on investments held at fair value - - - - 8,043 - 8,043
Realisation of investments in the year - - - 1,018 - - 1,018
Total comprehensive (expense) income for the year - - (2,194) 8,043 842 6,691
Issue of share capital 4,636 24,077 - - - - 28,713
Issue of shares - DRIS 364 1,719 - - - 2,083
Issue costs ** - (1,268) - - - - (1,268)
Purchase of own shares - - - (1,516) - - (1,516)
Dividends - - - (10,655) - (301) (10,956)
Total transactions with owners 5,000 24,528 - (12,171) - (301) 17,056
Realisation of prior year investment holding losses - - - (440) 440 - -
Balance at 31 December 2023 25,014 25,386 5,615 37,458 40,245 1,898 135,616
Revenue return for the year - - - - - 1,961 1,961
Expenses charged to capital - - - (2,690) - - (2,690)
Investment holding gain on investments held at fair value - - - - 3,105 - 3,105
Realisation of investments in the year - - - 234 - - 234
Taxation - - - 12 - (12) -
Total comprehensive (expense) income for the year - - (2,444) 3,105 1,949 2,610
Issue of share capital 5,720 28,822 - - - - 34,542
Issue of shares - DRIS 246 1,153 - - - 1,399
Issue costs ** - (1,131) - - - - (1,131)
Reduction in nominal value (30,949) - - 30,949 - - -
Share premium cancellation (54,230) (88) 54,318 - - -
Purchase of own shares - - - (4,086) - - (4,086)
Dividends - - - (7,118) - (1,381) (8,499)
Total transactions with owners (24,983) (25,386) (88) 74,063 - (1,381) 22,225
Transfer between reserves - - (5,308) 5,308 - - -
Realisation of prior year investment holding gains - - - 7,070 (7,070) - -
Balance at 31 December 2024 31 - 219 121,455 36,280 2,466 160,451
The accompanying notes on pages 65 to 87 of the annual report are an integral
part of the financial statements.
Reserves available for distribution
Under the Companies Act 2006 the capital reserve and the revenue reserve
are distributable reserves. The table below shows amounts that are available
for distribution.
Capital Revenue Total
reserve reserve
£000 £000 £000
Distributable reserves as shown above 121,455 2,466 123,921
Income/proceeds not yet distributable (1,170) (1,281) (2,451)
Share capital and cancelled share premium not yet distributable (see below) (89,580) - (89,580)
Reserves available for distribution*** 30,705 1,185 31,890
* Other reserves include the merger reserve and
the other reserve, which are non-distributable. The other reserve was created
upon the exercise of warrants, and the merger reserve was created on the
merger with British Smaller Technologies Company VCT plc.
** Issue costs include both fundraising costs and costs
incurred from the Company's DRIS.
*** Following the circulation of the Annual Report to
shareholders.
The merger reserve arose following the Company's acquisition of the assets
and liabilities of British Smaller Technology Companies VCT plc in 2005. The
reserve accounted for the difference between the nominal and fair value of
shares issued as consideration, in accordance with section 131 of the
Companies Act 1985 and the provisions of the Companies Act 2006 for merger
relief. As the majority of the assets and liabilities acquired in the merger
have subsequently been realised, £5,308,000 of the merger reserve was
transferred to distributable reserves during the year. The remaining merger
reserve will become distributable once the remaining assets acquired are
realised.
The capital reserve and revenue reserve are both distributable reserves. The
reserves total £123,921,000, representing an increase of £84,565,000 during
the year. The directors also take into account the level of the investment
holding gains and losses reserve and the future requirements of the Company
when determining the level of dividend payments.
Of the potentially distributable reserves of £123,921,000 shown above,
£2,451,000 relates to income/proceeds not yet distributable and £89,580,000
relates to cancelled share premium and the reduction in the nominal value of
share capital which will become distributable from the dates shown in the
table below.
Share premium* Share Capital** Total
£000 £000 £000
1 January 2026 21,051 4,202 25,253
1 January 2027 24,528 4,995 29,523
1 January 2028 28,844 5,960 34,804
Total amount not yet distributable 74,423 15,157 89,580
* includes £54,230,000 cancelled in 2024 and £20,193,000 cancelled in 2022
** excludes £15,792,000 reduction in nominal value of share capital already
distributable
Statement of Cash Flows
For the year ended 31 December 2024
Notes 2024 2023
£000 £000
Net cash outflow from operating activities (1,491) (1,821)
Cash flows generated from (used in) investing activities
Proceeds from sale of financial assets at fair value through profit or loss 7 8,406 6,031
Deferred consideration 43 27
Purchase of financial assets at fair value through profit or loss 7 (15,127) (10,696)
Cash maturing from fixed term deposits - 1,988
Net cash outflow from investing activities (6,678) (2,650)
Cash flows from (used in) financing activities
Issue of ordinary shares 34,542 28,713
Costs of ordinary share issues* (1,131) (1,268)
Purchase of own ordinary shares (4,086) (1,516)
Dividends paid 5 (7,100) (8,873)
Net cash inflow from financing activities 22,225 17,056
Net increase in cash and cash equivalents 14,056 12,585
Cash and cash equivalents at the beginning of the year 39,071 26,486
Cash and cash equivalents at the end of the year 53,127 39,071
* Issue costs include both fundraising costs and expenses incurred from
the Company's DRIS
Cash and cash equivalents comprise:
Money market funds 35,500 23,500
Cash at bank 17,627 15,571
Cash and cash equivalents at the end of the year 53,127 39,071
Reconciliation of Profit before Taxation to Net Cash Outflow from Operating
Activities
2024 2023
£000 £000
Profit before taxation* 2,610 6,691
(Decrease) increase in trade and other payables (748) 1,021
Increase in accrued income and other assets** (14) (472)
Gain on disposal of investments (234) (1,018)
Gains on investments held at fair value (3,105) (8,043)
Net cash outflow from operating activities (1,491) (1,821)
* Includes net income from
Dividends 248 323
Interest 3,083 1,253
** Includes accrued income and other assets disclosed in Note 7
- Financial Assets at Fair Value through Profit or Loss - Investments.
The accompanying notes on pages 65 to 87 of the annual report are an integral
part of the financial statements.
Notes to the Financial Statements
1. Principal Accounting Policies
Basis of Preparation
The accounts have been prepared on a going concern
basis as set out in the Directors Report on page 38 of the annual report and
in accordance with UK adopted international accounting standards.
The directors have carefully considered the issue of
going concern in view of the Company's activities and associated risks. The
Company has a well-diversified portfolio with businesses in a variety of
sectors, many of which are well funded. Some portfolio companies may require
additional funding in the near- to medium-term; the Company is well placed to
provide this, where appropriate.
The Company has a significant level of liquidity,
which will be further enhanced by the current fundraising. In addition, the
Board has control over, and can flex as appropriate, the Company's major
outgoings, which predominantly comprise investments, dividends and share
buy-backs.
The directors have also assessed whether material
uncertainties exist and their potential impact on the Company's ability to
continue as a going concern; they have concluded that no such material
uncertainties exist.
Taking all of the above into consideration, the
directors are satisfied that the Company has sufficient resources to meet its
obligations for at least 12 months from the date of this report and therefore
believe that it is appropriate to continue to apply the going concern basis of
accounting in preparing the financial statements.
The financial statements have been prepared under the
historical cost basis as modified by the measurement of investments at fair
value through profit or loss.
The accounts have been prepared in compliance with
the recommendations set out in the Statement of Recommended Practice
'Financial Statements of Investment Trust Companies and Venture Capital
Trusts' issued by the Association of Investment Companies (issued in July 2022
- the "SORP") to the extent that they do not conflict with UK adopted
international accounting standards.
The financial statements are prepared in accordance
with UK adopted international accounting standards (International Financial
Reporting Standards ("IFRS") and International Accounting Standards ("IAS"))
and interpretations in force at the reporting date. From 1 January 2023 IAS 1
has been amended introducing the concept Material Accounting Policy
Information. The Company has performed a review of its existing accounting
policies and updated where relevant. Other new standards coming into force
during the year and future standards that come into effect after the year-end
have not had a material impact on these financial statements.
The Company has carried out an assessment of
accounting standards, amendments and interpretations that have been issued by
the International Accounting Standards Board and that are effective for the
current reporting period. The Company has determined that the transitional
effects of the standards do not have a material impact.
The financial statements are presented in sterling
and all values are rounded to the nearest thousand (£000), except where
stated.
Financial Assets held at Fair Value through Profit or
Loss - Investments
Financial assets designated as at fair value through
profit or loss ("FVPL") at inception are those that are managed and whose
performance is evaluated on a fair value basis, in accordance with the
documented investment strategy of the Company. Information about these
financial assets is provided internally on a fair value basis to the Company's
key management. The Company's investment strategy is to invest cash resources
in venture capital investments as part of the Company's long-term capital
growth strategy. Consequently, all investments are classified as held at fair
value through profit or loss.
All investments are measured at fair value on the
whole unit of account basis with gains and losses arising from changes in fair
value being included in the Statement of Comprehensive Income as gains or
losses on investments held at fair value. Accrued income on loans/preference
shares that is rolled to exit and is not yet past due, forms part of the
investment's fair value.
Transaction costs on purchases are expensed
immediately through profit or loss.
Although the Company holds more than 20 per cent of
the equity of certain companies, it is considered that the investments are
held as part of the investment portfolio, and their value to the Company lies
in their marketable value as part of that portfolio. These investments are
therefore not accounted for using equity accounting, as permitted by IAS 28
'Investments in associates' and IFRS 11 'Joint arrangements' which give
exemptions from equity accounting for venture capital organisations.
Under IFRS 10 "Consolidated Financial Statements",
control is presumed to exist when the Company has power over an investee
(whether or not used in practice); exposure or rights; to variable returns
from that investee, and ability to use that power to affect the reporting
entities returns from the investees. The Company does not hold more than 50
per cent of the equity of any of the companies within the portfolio. The
Company does not control any of the companies held as part of the investment
portfolio. It is not considered that any of the holdings represent investments
in subsidiary undertakings.
Due to the above factors, the Company has applied the
IFRS 10 investment entity consolidation exemption and has not prepared
consolidated financial statements.
Valuation of Investments
Unquoted investments are valued in accordance with
IFRS 13 "Fair Value Measurement" and using the International Private Equity
and Venture Capital Valuation Guidelines (the "IPEV Guidelines"). A detailed
explanation of the valuation policies of the Company is included below.
Initial Measurement
The best estimate of the initial fair value of an
unquoted investment is the cost of the investment. Unless there are
indications that this is inappropriate, an unquoted investment will be held at
this value within the first three months of investment.
Subsequent Measurement
Based on the IPEV Guidelines we have identified six
of the most widely used valuation methodologies for unquoted investments. The
IPEV Guidelines advocate that the best valuation methodologies are those that
draw on external, objective market-based data in order to derive a fair value.
Unquoted Investments
> Revenue multiples. An appropriate multiple, given the
risk profile and revenue growth prospects of the underlying company, is
applied to the revenue of the company. The multiple is adjusted to reflect any
risk associated with lack of marketability and to take account of the
differences between the investee company and the benchmark company or
companies used to derive the multiple.
> Earnings multiple. An appropriate multiple, given the
risk profile and earnings growth prospects of the underlying company, is
applied to the maintainable earnings of the company. The multiple is adjusted
to reflect any risk associated with lack of marketability and to take account
of the differences between the investee company and the benchmark company or
companies used to derive the multiple.
> Net assets. The value of the business is derived by
using appropriate measures to value the assets and liabilities of the investee
company.
> Discounted cash flows of the underlying business. The
present value of the underlying business is derived by using reasonable
assumptions and estimations of expected future cash flows and the terminal
value, and discounted by applying the appropriate risk-adjusted rate that
quantifies the risk inherent in the company.
> Discounted cash flows from the investment. Under this
method, the discounted cash flow concept is applied to the expected cash flows
from the investment itself rather than the underlying business as a whole.
> Price of recent investment. This may represent the most
appropriate basis where a significant amount of new investment has been made
by an independent third party. This is adjusted, if necessary, for factors
relevant to the background of the specific investment such as preference
rights and will be benchmarked against other valuation techniques. In line
with the IPEV Guidelines the price of recent investment will usually only be
used for the initial period following the round and after this an alternative
basis will be found.
Due to the significant subjectivity involved,
discounted cash flows are only likely to be reliable as the main basis of
estimating fair value in limited situations. Their main use is to support
valuations derived using other methodologies and for assessing reductions in
fair value.
One of the valuation methods described above is used
to derive the gross attributable enterprise value of the company, after which
adjustments are made to reflect specific circumstances. This value is then
apportioned appropriately to reflect the respective debt and equity
instruments in the event of a sale at that level at the reporting date.
Income
Dividends and interest are received from financial
assets measured at fair value through profit and loss and are recognised on
the same basis in the Statement of Comprehensive Income. This includes
interest and preference dividends rolled up and/or payable at redemption.
Interest income is also received on cash, cash equivalents and current asset
investments. Dividend income from unquoted equity shares is recognised at the
time when the right to the income is established.
Expenses
Expenses are accounted for on an accruals basis.
Expenses are charged through the Revenue column of the Statement of
Comprehensive Income, except for the Manager's fee and incentive fees. Of the
Manager's fees 75 per cent are allocated to the Capital column of the
Statement of Comprehensive Income, to the extent that these relate to an
enhancement in the value of the investments and 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. The incentive fee payable to the
Manager (as set out in note 3) is charged wholly through the Capital column.
Tax relief is allocated to the Capital Reserve using
a marginal basis.
Incentive Fee
The incentive fee is accounted for on an accruals
basis. As further detailed in note 3, the incentive fee is calculated as 20
per cent of the amount by which the cumulative dividends per ordinary share
paid as at the last business day in December in any year, plus the average of
the Company's middle market price per ordinary share on the five dealing days
prior to that day, exceeds the Hurdle (as defined in note 3), multiplied by
the number of ordinary shares issued and the ordinary shares under option. At
the end of each reporting period, an accrual is recognised based upon the
cumulative dividends per ordinary share paid to the reporting date, plus the
average of the Company's middle market price per ordinary share on the five
dealing days prior to the reporting date. The incentive fee is charged wholly
through the Capital column.
Cash, Cash Equivalents and Current Asset Investments
Cash at bank comprises cash at hand and bank deposits
with an original maturity of less than three months, readily convertible to a
known amount of cash and subject to an insignificant risk of changes in value.
Current asset investments comprise money market
funds.
Cash and cash equivalents include cash at hand, money
market funds and bank deposits repayable on up to three months' notice, as
these meet the definition in IAS 7 'Statement of cash flows' of a short-term
highly liquid investment that is readily convertible into known amounts of
cash and subject to insignificant risk of change in value.
Cash and cash equivalents are valued at amortised
cost, which equates to fair value.
Cash flows classified as "operating activities" for
the purposes of the Statement of Cash Flows are those arising from the Revenue
column of the Statement of Comprehensive Income, together with the items in
the Capital column that do not fall to be easily classified under the headings
for "investing activities" given by IAS 7 'Statement of cash flows', being
management and incentive fees payable to the Manager. The capital cash flows
relating to the acquisition and disposal of investments are presented under
"investing activities" in the Statement of Cash Flows in line with both the
requirements of IAS 7 and the positioning given to these headings by general
practice in the industry.
Share Capital and Reserves
Share Capital
This reserve contains the nominal value of all shares
allotted under offers for subscription.
Share Premium Account
This reserve contains the excess of gross proceeds
less issue costs over the nominal value of shares allotted under offers for
subscription, to the extent that it has not been cancelled.
Capital Reserve
The following are included within this reserve:
> Gains and losses on realisation of investments;
> Realised losses upon permanent diminution in value of
investments;
> Capital income from investments;
> 75 per cent of the Manager's fee expense, together with
the related taxation effect to this reserve in accordance with the policy on
expenses in note 1 of the financial statements;
> Incentive fee payable to the Manager;
> Capital dividends paid to shareholders;
> Applicable share issue costs;
> Transfers from the merger reserve;
> Purchase and holding of the Company's own shares; and
> Credits arising from the cancellation of any share
premium account or changes in the nominal value of share capital.
Investment Holding Gains and Losses Reserve
Increases and decreases in the valuation of
investments held at the year-end are accounted for in this reserve, except to
the extent that the diminution is deemed permanent.
Revenue Reserve
This reserve includes all revenue income from
investments along with any costs associated with the running of the Company -
less 75 per cent of the Manager's fee expense as detailed in the Capital
Reserve above.
Taxation
Due to the Company's status as a Venture Capital
Trust and the continued intention to meet the conditions required to comply
with Chapter 3 Part 6 of the Income Tax Act 2007, no provision for taxation is
required in respect of any realised or unrealised appreciation of the
Company's investments which arises. Deferred tax is recognised on all
temporary differences that have originated, but not reversed, by the balance
sheet date.
Deferred tax assets are only recognised to the extent
that they are regarded as recoverable. Deferred tax is calculated at the tax
rates that are expected to apply when the asset is realised. Deferred tax
assets and liabilities are not discounted.
Dividends Payable
Dividends payable are recognised only when an
obligation exists. Interim and special dividends are recognised when paid and
final dividends are recognised when approved by shareholders in general
meetings.
Segmental Reporting
In accordance with IFRS 8 'Operating Segments' and
the criteria for aggregating reportable segments, segmental reporting has been
determined by the directors based upon the reports reviewed by the Board. The
directors are of the opinion that the Company has engaged in a single
operating segment - investing in equity and debt securities within the United
Kingdom - and therefore no reportable segmental analysis is provided.
Critical Accounting Estimates and Judgements
The preparation of financial statements in conformity
with generally accepted accounting practice requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are based on
management's best knowledge of the amount, event or actions, actual results
may ultimately differ from those estimates. The estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are those
used to determine the fair value of investments at fair value through profit
or loss, as disclosed in note 7 to the financial statements.
The fair value of investments at fair value through
profit or loss is determined by using valuation techniques. As explained
above, the Board uses its judgement to select from a variety of methods and
makes assumptions that are mainly based on market conditions at each balance
sheet date.
The Board uses its judgement to select the
appropriate method for determining the fair value of investments through
profit or loss.
2. Income
2024 2023
£000 £000
Dividends from unquoted companies 430 531
Interest on loans to unquoted companies 172 152
Income from unquoted portfolio 602 683
Income from listed investment funds - 47
Income from investments held at fair value through profit or loss 602 730
Income from bank deposits/money market funds 2,734 1,317
3,336 2,047
3. Administrative Expenses
2024 2023
£000 £000
Manager's fee 2,496 2,147
Administration fee 90 85
Total payable to YFM Private Equity Limited 2,586 2,232
Incentive fee 818 1,601
Other expenses:
General expenses 141 135
Directors' remuneration 119 112
Listing and registrar fees 80 93
Trail commission 128 75
Printing 74 57
Auditor's remuneration - audit fees (excluding irrecoverable VAT) 67 63
Irrecoverable VAT 52 49
4,065 4,417
Ongoing charges figure 1.98% 2.14%
Directors' remuneration comprises only short term benefits including
national insurance contributions of £11,000 (2023: £10,000).
The Company does not have employees other than non-executive directors.
No fees are payable to the auditor in respect of other services (2023: £nil).
YFM Private Equity Limited has acted as Manager and performed administrative
and secretarial duties for the Company under an Investment Agreement dated 28
November 2000, superseded by an agreement dated 31 October 2005 and as varied
by agreements dated 8 December 2010, 26 October 2011, 16 November 2012, 17
October 2014, 7 August 2015 and 13 November 2019 (the "IA"). The agreement may
be terminated by not less than twelve months' notice given by either party at
any time. Under an Investment Agreement dated 13 November 2019, YFM Private
Equity Limited was appointed as the Company's Alternative Investment Fund
Manager. On 19 September 2023 YFM Private Equity Limited was approved as a
full-scope Alternative Investment Fund Manager; from this date Thompson Taraz
Depositary Limited were appointed as the Depositary and assumed responsibility
for asset safekeeping, cash flow monitoring and oversight duties.
The key features of the agreement are:
> YFM Private Equity Limited receives a Manager's fee,
payable quarterly in advance, calculated at half-yearly intervals as at 30
June and 31 December. The fee is allocated between capital and revenue as
described in note 1;
> The annual Manager's fee payable to the Manager is 1.0
per cent on all surplus cash, defined as all cash above £5 million. The
annual fee on all other assets is 2.0 per cent of net assets per annum. Based
on the Company's net assets at 31 December 2024 of £160,451,000, and cash and
cash equivalents of £53,127,000 at that date this equates to approximately
£2,728,000 per annum;
> YFM Private Equity Limited shall bear the annual
operating costs of the Company (including the Manager's fee set out above but
excluding any payment of the performance incentive fee, details of which are
set out below and excluding VAT and trail commissions) to the extent that
those costs exceed 2.9 per cent of the net asset value of the Company; and
> Under the IA, YFM Private Equity Limited also provides
administrative and secretarial services to the Company for a fee of £46,000
per annum plus annual adjustments to reflect movements in the Retail Prices
Index. This fee is charged fully to revenue, and totalled £90,000 for the
year ended 31 December 2024 (2023: £85,000).
When the Company makes investments into its unquoted portfolio, the Manager
charges that investee an advisory fee. With effect from 1 October 2013, if the
average of relevant fees exceeds 3.0 per cent of the total invested into new
portfolio companies and 2.0 per cent into follow-on investments over the
Company's financial year, this excess will be rebated to the Company. As at 31
December 2024, the Company was due a rebate from the Manager of £22,000
(2023: £nil).
Monitoring and directors' fees the Manager receives from the investee
companies are limited to a maximum of £40,000 (excluding VAT) per annum per
company.
The total remuneration payable to YFM Private Equity Limited under the IA in
the year was £2,586,000 (2023: £2,232,000).
Under the IA, YFM Private Equity Limited is entitled to receive fees from
investee companies in respect of the provision of non-executive directors and
other advisory services. YFM Private Equity Limited is responsible for paying
the due diligence and other costs incurred in connection with proposed
investments which for whatever reason do not proceed to completion. In the
year ended 31 December 2024, the fees receivable by YFM Private Equity Limited
from investee companies which were attributable to advisory and directors' and
monitoring fees amounted to £2,012,000 (2023: £1,869,000).
Under the Subscription Rights Agreement dated 23 November 2001 between the
Company, YFM Private Equity Limited and Chord Capital Limited ("Chord"
formerly Generics Asset Management Limited), as amended by an agreement
between those parties dated 31 October 2005, YFM Private Equity Limited and
Chord have a performance-related incentive, structured so as to entitle them
to an amount equivalent to 20 per cent of the amount by which the cumulative
dividends per ordinary share paid as at the last business day in December in
any year, plus the average of the middle market price per ordinary share on
the five dealing days prior to that day (the "Share Price"), exceeds 120 pence
per ordinary share, multiplied by the number of ordinary shares issued and the
ordinary shares under option (if any) (the "Hurdle"). Under the terms of the
Subscription Rights Agreement, once the Hurdle has been exceeded it is reset
at that value going forward, which becomes the new Hurdle. Any subsequent
exercise of these rights will only occur once the new Hurdle has been
exceeded. The subscription rights are exercisable in the ratio 95:5 between
the Manager and Chord Capital Limited.
As at 31 December 2023 the total of cumulative cash dividends paid and the
Share Price was 140.75 pence per ordinary share. Consequently the Hurdle was
exceeded and a performance related incentive of £1,601,000 for the year ended
31 December 2023 was paid.
The Company, the Manager and Chord have amended the previous agreement with
effect from 1 January 2024. The Hurdle for each financial year will be
increased by an agreed percentage of the corresponding Share Price for each of
the five years starting from the year ended 31 December 2023, commencing with
1 per cent for the year ended 31 December 2024 and increasing by an additional
1 per centage point per year until the year ending 31 December 2028 when the
increase to the Hurdle will be 5 per cent of the corresponding Share Price.
Following the changes, the Hurdle for the year ended 31 December 2024 was
reset at 141.295 pence per ordinary share. In addition, from 1 January 2027
the subscription rights will be wholly exercisable to the Manager.
As at 31 December 2024 the total of cumulative cash dividends paid and the
Share Price was 142.75 pence per ordinary share. Consequently the Hurdle was
exceeded and a performance related incentive of £818,000 for the year ended
31 December 2024 is payable. The Hurdle for the year ending 31 December 2025
is 143.8 pence per ordinary share.
If the IA is terminated, the beneficiaries of the Incentive Agreement will
continue to be entitled to the Incentive Payment. The Incentive Payment will
be modified so as to entitle the recipients to an Incentive Payment that is
fair, having regard to all the circumstances.
Under the terms of the offer launched with British Smaller Companies VCT plc
on 20 September 2023, YFM Private Equity Limited was entitled to 3.0 per cent
of gross subscriptions, (3.5 per cent for Applications received from
Applicants who did not invest their money through a financial intermediary
advisor and invested directly into the Company) less commissions payable to an
execution-only broker or platform. The net amount paid to YFM Private Equity
Limited under this offer amounted to £1,025,000.
Under the terms of the offer launched with British Smaller Companies VCT plc
on 17 October 2024, YFM Private Equity Limited will be entitled to 3.0 per
cent of gross subscriptions, (3.5 per cent for Applications received from
Applicants who did not invest their money through a financial intermediary
advisor and invested directly into the Company) less commissions payable to an
execution-only broker or platform.
The details of directors' remuneration are set out in the Directors'
Remuneration Report on pages 49 and 50 of the annual report under the heading
"Directors' Remuneration for the year ended 31 December 2024 (audited)".
4. Taxation
2024 2023
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Profit before taxation 1,961 649 2,610 842 5,849 6,691
Profit before taxation multiplied by standard rate of corporation tax in UK of 373 123 496 160 1,111 1,271
19%* (2023: 19%)
Effect of:
UK dividends received (152) - (152) (101) - (101)
Non-taxable profits on investments - (634) (634) - (1,721) (1,721)
Deferred tax not recognised (209) 499 290 (59) 610 551
Tax charge (credit) 12 (12) - - - -
* due to taxable losses incurred
The Company has no provided or unprovided deferred tax liability in either
year.
Deferred tax assets of £3,680,000 (2023: £4,420,000) calculated at 19%
(2023: 25%) in respect of unrelieved management expenses (£19.37 million as
at 31 December 2024 and £17.68 million as at 31 December 2023) have not been
recognised as the directors do not currently believe that it is probable that
sufficient taxable profits will be available against which assets can be
recovered.
Due to the Company's status as a venture capital trust and the continued
intention to meet with the conditions required to comply with Section 274 of
the Income Tax Act 2007, the Company has not provided for deferred tax on any
capital gains or losses arising on the revaluation or realisation of
investments.
5. Dividends
Amounts recognised as distributions to equity holders in the period to 31
December:
2024 2023
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
First interim dividend for the year ended 31 December 2024 of 1.5p (2023: 583 3,687 4,270 - 4,097 4,097
2.25p) per ordinary share
Second interim dividend for the year ended 31 December 2024 of 1.5p (2023: 798 3,431 4,229 301 3,130 3,431
1.5p) per ordinary share
Third interim dividend for the year ended 31 December 2023 of 1.5p per - - - - 3,428 3,428
ordinary share
1,381 7,118 8,499 301 10,655 10,956
Proceeds from shares allotted under DRIS (1,399) (2,083)
Dividends paid in Statement of Cash Flows 7,100 8,873
The first interim dividend of 1.5 pence per ordinary share was paid on 28
June 2024 to shareholders on the register as at 31 May 2024.
The second interim dividend of 1.5 pence per ordinary share was paid on 1
November 2024 to shareholders on the register as at 4 October 2024.
A special dividend of 1.0 pence per ordinary share was paid on 27 January 2025
to shareholders on the register on 27 December 2024. This dividend was not
recognised in the year ended 31 December 2024 as the obligation did not exist
at the balance sheet date.
6. Basic and Diluted Earnings per Ordinary Share
The basic and diluted earnings per ordinary share is based on the profit after
tax attributable to shareholders of £2,610,000 (2023: £6,691,000) and
272,756,162 (2023: 217,157,606) ordinary shares being the weighted average
number of ordinary shares in issue during the year.
The basic and diluted revenue earnings per ordinary share is based on the
revenue profit for the year attributable to shareholders of £1,949,000 (2023:
£842,000) and 272,756,162 (2023: 217,157,606) ordinary shares being the
weighted average number of ordinary shares in issue during the year.
The basic and diluted capital earnings per ordinary share is based on the
capital profit for the year attributable to shareholders of £661,000 (2023:
£5,849,000) and 272,756,162 (2023: 217,157,606) ordinary shares being the
weighted average number of ordinary shares in issue during the year.
During the year the Company allotted 2,460,203 new ordinary shares in respect
of its DRIS and 57,199,459 new ordinary shares from the fundraising.
The Company has also repurchased 7,387,195 of its own shares in the year, and
these shares are held in the capital reserve. The total of 28,770,963 treasury
shares has been excluded in calculating the weighted average number of
ordinary shares for the period. The Company has no securities that would have
a dilutive effect and hence basic and diluted earnings per ordinary share are
the same.
The Company has no potentially dilutive shares and consequently, basic and
diluted earnings per ordinary share are equivalent in both the year ended 31
December 2024 and 31 December 2023.
7. Financial Assets at Fair Value through Profit or Loss
- Investments
2024 2023
£000 £000
Investment portfolio 105,526 96,427
Accrued income and other assets 1,241 1,275
Financial assets at fair value through profit and loss 106,767 97,702
IFRS 13, in respect of financial instruments that are measured in the
balance sheet at fair value, requires disclosure of fair value measurements by
level of the following fair value measurement hierarchy:
Level 1: quoted prices in active markets for identical assets or liabilities.
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. An active market is defined as
a market in which transactions for the asset or liability take place with
sufficient frequency and volume to provide pricing information on an ongoing
basis. The quoted market price used for financial assets held by the Company
is the current bid price. These instruments are included in level 1 and
comprise fixed income securities classified as held at fair value through
profit or loss. The Company's current asset investments fall into this
category at 31 December 2024 or 31 December 2023.
Level 2: the fair value of financial instruments that are not traded in an
active market is determined by using valuation techniques. These valuation
techniques maximise the use of observable market data where it is available
and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the
instrument is included in level 2. The Company held no such instruments in the
current or prior year.
Level 3: the fair value of financial instruments that are not traded in an
active market (for example, investments in unquoted companies) is determined
by using valuation techniques such as revenue and earnings multiples. If one
or more of the significant inputs is not based on observable market data, the
instrument is included in level 3. All of the Company's investments classed as
financial assets at fair value through profit and loss fall into this category
at 31 December 2024 and 31 December 2023.
Each investment is reviewed at least quarterly to ensure that it has not
ceased to meet the criteria of the level in which it is included at the
beginning of each accounting period. The change in fair value for the current
and previous year is recognised through profit or loss.
There have been no transfers between these classifications in either period.
All items held at fair value through profit or loss were designated as such
upon initial recognition.
Valuation of Investments
Full details of the methods used by the Company are set out in note 1 of
the financial statements. Where investments are held in listed investment
funds, fair value is set at the market bid price.
Movements in investments at fair value through profit or loss during the year
to 31 December 2024 are summarised as follows:
IFRS 13 measurement classification Level 3
Unquoted
Investments
£000
Opening cost 56,209
Opening investment holding gain* 40,218
Opening fair value at 1 January 2024 96,427
Additions at cost 15,127
Disposal proceeds (8,976)
Net loss on disposal** (157)
Change in fair value 2,728
Foreign exchange gain 377
Closing fair value at 31 December 2024 105,526
Closing cost 69,273
Closing investment holding gain* 36,253
Closing fair value at 31 December 2024 105,526
* Following the merger between the Company and British Smaller Technologies
Company VCT plc a total of £975,000 of negative goodwill was recognised in
the investment holding gains and losses reserve in respect of the investments
acquired. The relevant amount per investment is realised at the point of
disposal to the capital reserve. At 31 December 2024 a total of £27,000
(2023: £27,000) was held on investments yet to be realised in the investment
holdings gains and losses reserve.
** The net loss on disposal in the table above is £157,000 whereas that shown
in the Statement of Comprehensive Income is a profit of £234,000. The
difference comprises deferred proceeds in respect of assets which have been
disposed of in prior periods and were not included in the portfolio at 1
January 2024 as disclosed on page 77 of the annual report.
The following disposals (including partial disposals) took place in the year:
Net proceeds Cost Opening
from sale carrying Profit
value as at (loss) on disposal
1 January 2024
£000 £000 £000 £000
Unquoted investments:
DisplayPlan Holdings Limited 4,821 70 4,741 80
Traveltek Group Holdings Limited 2,494 1,163 2,731 (237)
KeTech Holdings Limited/KeTech Technology Holdings Limited* 1,461 - 1,461 -
Arcus Global Limited* 200 830 200 -
Total from portfolio 8,976 2,063 9,133 (157)
Tissuemed Limited 300 - - 300
Ncam Technologies Limited 91 - - 91
Deferred consideration 391 - - 391
Total from investment portfolio** 9,367 2,063 9,133 234
* Partial disposal
** The total from disposals in the year in the table
above is £9,367,000 whereas that shown in total in the Statement of Cash
Flows is £8,406,000. The difference comprises deferred proceeds of £961,000
which will be received in subsequent years.
8. Basic and Diluted Net Asset Value per Ordinary Share
The basic and diluted net asset value per ordinary share is calculated on
attributable assets of £160,451,000 (2023: £135,616,000) and 281,031,132
(2023: 228,758,665) ordinary shares in issue at the year end.
The treasury shares have been excluded in calculating the number of ordinary
shares in issue at 31 December 2024.
The Company has no potentially dilutive shares and consequently, basic and
diluted net asset values per ordinary share are equivalent in both the years
ended 31 December 2024 and 31 December 2023.
9. Total Return per Ordinary Share
The Total Return per ordinary share is calculated on cumulative dividends paid
of 89.25 pence per ordinary share (2023: 86.25 pence per ordinary share) plus
the net asset value as calculated per note 8.
10. Financial Commitments
There are no financial commitments at 31 December 2024 or 31 December 2023.
11. Events after the Balance Sheet Date
Having previously assessed its expected cash requirements, the Company
announced a new share offer on 17 October 2024, alongside British Smaller
Companies VCT plc, with the intention of raising up to £75 million, in
aggregate which included an over-allotment facility of £25 million, in
aggregate. The offers closed to new Applications on 8 January 2025. Gross
Applications of £75 million have been received, of which c.£29 million
relate to the Company. The first allotment of £25 million (£9.8 million
relating to the Company) took place on 30 January 2025. The second and final
allotment will take place between 1 and 4 April 2025.
Subsequent to the year end, the Company invested £1.4 million into one new
investment, Stormharvester, and £2.8 million into portfolio companies
DrDoctor and Vypr. The Company also received £3.1 million from the
realisation of ACC Aviation, as detailed in the Chair's Statement.
On 27 January 2025 the Company issued 831,686 ordinary shares pursuant to its
Dividend Re-investment Scheme, following the special dividend of 1.00 pence
paid that day, and on 30 January 2025 the Company issued 17,313,531 shares in
relation to the 2024/25 fundraising, raising gross proceeds of £9.8 million.
Following these allotments, the Company's issued share capital consists of
299,176,349 ordinary shares with voting rights and 28,770,963 shares held in
treasury.
12. Related Party Transactions
Fees payable during the year to the directors and their interests in the
shares of the Company are disclosed within the Directors' Remuneration Report
on page 50 of the annual report. There were no amounts outstanding and due to
the directors at 31 December 2024 (2023: £nil).
13. Annual Report and Accounts
Copies of the statutory accounts for the year ended 31 December 2024 will
shortly be submitted to the National Storage Mechanism and will be available
to the public for viewing online at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . They can also
shortly be viewed on the Company's website at www.bscfunds.com
(http://www.bscfunds.com) . Hard copies of the statutory accounts for the
year to 31 December 2024 will be distributed by post or electronically to
shareholders and will thereafter be available to members of the public from
the Company's registered office.
14. Directors
The directors of the Company are Ms B L Anderson, Mr A Ahmed and Mr R S
McDowell.
15. Annual General Meeting
The Annual General Meeting of the Company will be held at 9:30 am on 12 June
2025 at Thomas House, 84 Ecclestone Square, London SW1V 1PX. Full details of
the agenda for this meeting are included in the Notice of the Annual General
Meeting on page 88 of the annual report.
16. Inside Information
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU No. 596/2014). Upon the publication of this announcement via Regulatory
Information Service this inside information is now considered to be in the
public domain.
For further information, please contact:
Marcus Karia YFM Equity
Partners Tel: 0113 244 1000
Alex Collins Panmure
Liberum Tel: 0207 886 2767
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