Annual Financial Report
26/07/2023 16:30
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THAMES VENTURES VCT 1 PLC
LEI: 213800R88MRC4Y3OIW86
26 July 2023
Final Results for the year ended 31 March 2023
Audited Audited
31 Mar 31 Mar
202 3 202 2
Pence Pence
Net asset value per share (“NAV”) 51.80 61.60
Cumulative dividends paid since 12 November 2013 44.50 41.25
Total Return (net asset value plus cumulative dividends paid per share) 96.30 102.85
Dividends in respect of financial year
Interim dividend per share 1.50 1.25
Proposed final dividend per share 1.00 1.75
2.50 3.00
Chairman’s Statement
I present the Annual Report covering what has been an eventful and
unfortunately financially largely unsuccessful year for your Company. We have
seen a challenging investment environment for small growth businesses, with
increasing inflation, increasing interest rates and the threat of recession.
Investment Advisory Arrangements
As previously reported, Foresight Group LLP (“Foresight”) was appointed as
Investment Adviser to the Company following agreement by the Company’s
former Investment Adviser, Downing LLP (“Downing”) to sell its
non-healthcare ventures division to Foresight in a transaction that completed
on 4 July 2022.
The structure of the transaction has ensured a good level of continuity with
the core investment team members moving to Foresight and, the former adviser,
Downing LLP, continuing to provide investment advisory services for the
non-venture’s portfolio (quoted growth and yield focused investments), as
well as administration services, for a handover period.
On 2 September 2022, the Company changed its name from Downing ONE VCT plc to
Thames Ventures VCT 1 plc to recognise the change of Investment Adviser.
Net asset value and results
As at 31 March 2023, the net asset value per share (“NAV”) stood at 51.8p,
a decrease of 6.55p (10.6%) over the year after adding back dividends of 3.25p
per share which were paid during the year.
The Income Statement shows losses attributable to equity shareholders for the
year of £11.7 million, comprising a revenue gain of £1.2 million and a
capital loss of £12.9 million.
Investment portfolio
During the year, the Company invested £10.0 million in 16 companies, three of
which were new to the portfolio. Additionally, £1.75 million was rolled over
into a new investment as part of an exit transaction.
£12.5 million of proceeds were received from full and partial disposals of 13
investments, producing a net realised loss of £633,000.
The whole portfolio showed unrealised losses of £11.7 million. £7.8 million
of this arose from the quoted growth investments, £3.5 million from the
unquoted growth investments and £0.4 million from the yield focused
investments. £2.5 million of loan stock interest income was recognised in
respect of the yield focussed investments.
Further details on the investment portfolio can be found within the Investment
Adviser’s Reports and the Review of Investments.
Dividends
Thames Ventures VCT 1’s policy is to seek to pay annual dividends of at
least 4% of net assets per annum.
The Board is proposing to pay a final dividend of 1.0p per share on 15
September 2023, subject to Shareholder approval at the forthcoming AGM, to
Shareholders on the register at 11 August 2023. This will bring total
dividends in respect of the year ended 31 March 2023 to 2.5p per share (2022:
3.0p), equivalent to 4.1% of the opening net assets.
Shareholders are reminded that the Company operates a Dividend Reinvestment
Scheme for those investors that wish to reinvest their dividends and obtain
further income tax relief on the reinvested dividend. Shareholders can change
their election via the Thames Ventures Investor Hub provided by City
Registrars at:
thames-ventures-vcts.cityhub.uk.com
or by contacting the registrar. The last date for elections in respect of the
above dividend under the Company’s Dividend Reinvestment Scheme is 25 August
2023.
Fundraising
The Company launched a non-Prospectus top-up offer in November 2021. The offer
closed during the period at the end of April 2022, having raised £1.9
million, of which £1.8 million was allotted during the period.
The Company launched a full offer for subscription on 31 October 2022. The
offer has raised £1.5 million to date, with funds allotted following the
period end and is scheduled to close on 31 July 2023, although may be extended
for a short further period.
The level of funds raised is disappointing being only slightly more than was
spent on share buybacks. The Board is taking advice on how the marketing of
future offers can be improved.
Share buybacks
The Company continues to operate a policy of buying in its own shares that
become available in the market at a 5% discount to NAV (subject to liquidity
and regulatory restrictions).
During the year, the Company purchased and subsequently cancelled 4,540,024
shares at an average price of 54.8p per share, representing 2.6% of shares in
issue at the date of the last Annual Report.
The Company retains Panmure Gordon as its corporate broker to assist in
operating the share buyback process and ensuring that the quoted spread on the
Company’s shares remains at a reasonable level. Contact details for Panmure
Gordon can be found within the Annual Report.
Responsible investing
The Board notes the Investment Adviser, Foresight Group’s, commitment to
being a “Responsible Investor”. Foresight places Environmental, Social and
Governance (ESG) criteria at the forefront of its business and investment
activities in line with best practice and in order to enhance returns for
their investors.
Further detail on the Investment Adviser’s approach to responsible
investment, including the key principles and their screening approach, can be
found within the Annual Report.
VCT Qualification
At 31 March 2023, qualifying investments represented 87.4% of total
investments (including cash).
The Board expects that the minimum VCT qualification level of 80% will
continue to be maintained for the foreseeable future.
Directorate
Atul Devani joined the Board in December 2022 as a non-executive director of
the Company. Atul has significant experience as a chairman of another VCT and
also with businesses similar to those in which the Company invests and is
proving to be a positive addition to the Board.
Stuart Goldsmith was an original director of the Company, then called The AIM
Distribution Trust plc, in 1996 and has remained on the Board, overseeing the
Company through many phases of its life. With the dust now settled on the
recent changes, Stuart has decided not to stand for re-election at the
forthcoming Annual General Meeting
I and my fellow directors would like to thank Stuart for his significant
contribution to the Company throughout its history, working with a number of
Investment Advisers/Managers and undertaking several VCT mergers and other
corporate transactions to ensure the Company remains well suited for the
current incarnation of the VCT Regulations. We wish Stuart well in his other
ventures.
Following the AGM, the Board will comprise four non-executive directors, which
the Board considers to be an appropriate size for a VCT. All of the Directors
are independent of the Investment Adviser, with the exception of Chris Allner
who is considered non-independent by virtue of being a partner at Downing LLP,
the previous investment adviser to the Company, which still provides some
services to the new investment adviser.
Annual General Meeting (“AGM”)
This year’s AGM will be held at Foresight Group LLP, The Shard, 32 London
Bridge Street, London, SE1 9SG at 12:00 p.m. on 1 September 2023.
If you intend to attend the AGM, please also notify us by email to
tv1agm@downing.co.uk in case there are any changes to arrangements that need
to be communicated at short notice.
Three items of special business are proposed at the AGM:
* one in respect of the authority to buy back shares as noted above; and
* two in respect of the authority to allot shares.
The authority to allot shares provides the Board with the opportunity to
consider raising further funds without having to necessarily incur the expense
of seeking separate approval via a shareholder circular. Any further
fundraising decisions will take account of the level of uninvested funds and
the rate of investment.
Outlook
The Board is naturally disappointed with the fall in net asset value over the
year but does note that nearly 70% of the fall is down to falling share prices
of its quoted investments which could quickly reverse itself if sentiment
towards small, quoted UK companies becomes more positive. The £3.5 million
fall in unquoted growth investments is mainly the result of the write off of
two investments. In an early-stage portfolio, write offs tend to come before
successful gains. The Board is not complacent but does believe that the
portfolio has exhibited signs that it is relatively resilient, and the
portfolio companies can take advantage of better conditions when they arrive.
The Board is pleased to note how the investment advisory team has developed
since moving to Foresight and hopes that, with more resources dedicated to
advising the Company and the support of the wider Foresight Group, we will see
a regular flow of high-quality new investment opportunities, as well as strong
support for the existing portfolio, that can deliver improved results for
Shareholders in future.
Looking ahead, the Board is considering some options for the future of the
Company and will look to pursue any that it concludes may benefit Shareholders
and allow the Company to be better placed to serve them.
Chris Kay
Chairman
Investment Adviser’s Report – Unquoted Growth
Portfolio overview
At 31 March 2023, the Company held total Unquoted investments of £51.8
million (2022: £59.3 million), split £38.0 million (2022: £40.7 million)
Unquoted Growth and £13.8 million (2022: £18.6 million) Unquoted
Yield-focused. Details of the Unquoted Yield-focused portfolio performance are
set out below.
The Unquoted Growth portfolio comprises 36 companies, across a range of
sectors. Following a period of recovery during the year ended 31 March 2022,
investment valuations for the year ended 31 March 2023 have been unfavourably
impacted by the downturn of the UK economy and challenging market environment,
resulting in an overall unrealised loss of £3.5 million (2022: gain of £3.6
million) in the portfolio.
Portfolio composition
With a significant level of investment activity over the year to 31 March
2023, we have aimed to reduce the level of diversification in the Unquoted
Growth portfolio with a focus on deep tech and software enterprise. As at the
year end, the main sector in which this portfolio is invested in is Software
Enterprise, now representing approximately 55% of the investment portfolio
following further investment into this sector during the period of £8.0
million.
Investment activity
During the period, there was a high level of realisation and investment
activity with £10.0 million of proceeds generated from exits and a total of
£11.2 million invested into unquoted growth companies.
Four new investments were added to the unquoted growth portfolio:
Audioscenic Limited (£400,000) is a spin-out from the University of
Southampton’s Institute of Sound and Vibrational Research and has developed
a software-based solution that unlocks the full potential of 3D audio.
Kluster Enterprises Limited (£1,235,000) is a B2B SaaS platform that empowers
companies to plan and execute on their revenue strategy. Kluster integrates
into both CRM and accounting tools to provide detailed and accurate forecasts
which can be used for financial planning.
Flock Limited (£930,000) is a fully digital insurtech Managing General Agent
(MGA) reinventing commercial fleet insurance. Flock leverage connected vehicle
data and geospatial data to accurately quantify driving risk which provides
the fleet of customers with insights to enable safer driving.
CommerceIQ (£1,749,000) is a pioneer in helping brands win on retail
ecommerce channels. Their unified platform applies machine learning and
automation across marketing, supply chain, and sales operations to help brands
gain market share profitably.
Follow on investments totalling £5.2 million were made into eleven companies,
most notably Hackajob Limited (£1.5 million), StorageOS Inc (£825,000),
Vivacity Labs Limited (£789,000), FVRVS Limited (£402,000) and Maestro Media
Limited (£320,000).
Details of the investment realisations during the year are set out below.
Total proceeds of £10.0 million were generated, producing a gain over cost of
£543,000, although representing a loss over holding value of £380,000.
The largest gain in the period related to Efundamentals Group Limited, a
Software as a Service (SaaS) analytics company. The investment was sold in
July 2022, returning £3.7 million, resulting in a gain over cost of £2.2
million, however, a loss over opening value of £137,000.
StorageOS Inc (trading as OnDat), a cloud-based storage management software
solution developed to manage storage issues, was sold in the period,
generating proceeds of £3.0 million, resulting in a loss over cost of
£776,000 and a loss over the opening holding value of £727,000.
Firefly Learning Limited, an edtech e-learning platform which allows teachers,
students and parents to share lesson plans and review homework, was sold
during the period, generating proceeds of £1.0 million. This investment was
valued at cost and the exit produced a small realised loss against both cost
and value of £32,000.
Streethub Limited (trading as Trouva), an online marketplace for a curated
range of homeware and lifestyle products, was sold during the period,
generating proceeds of £194,000. The value of this investment was written
down in 2022 as a result of the business trading significantly behind budget
therefore a gain over value of £115,000 was realised. It should be noted,
however, that this was a disappointing overall loss against the original cost
of £1.3 million.
Further deferred consideration was received from Avid Technology Group Limited
in relation to the exit in 2022, producing further proceeds of £91,000 in the
year.
Portfolio valuation
Although there were some strong performers in the unquoted growth portfolio,
overall, companies have struggled in the challenging macroeconomic environment
which is reflected in the year-on-year movement in valuations. This has
resulted in a total unrealised loss of £3.5 million in the period, including
unrealised foreign exchange gains of £585,000.
Of the £3.5 million total unrealised loss, the most significant movements are
noted below.
The largest gain in value was in Cornelis Networks, Inc, which delivers
purpose-built high-performance fabrics for High Performance Computing (HPC),
High Performance Data Analytics (HPDA) and Artificial Intelligence (AI).
During the period, the company was uplifted by £2.3 million, including the
impact of foreign exchange. This revaluation is the result of a calibration to
the price set by a funding round during the year.
Bulbshare Limited, a company that enables brands to build communities from
their existing customers, has performed well during the year with revenues
continuing to grow resulting in a valuation uplift of £533,000 as at the year
end.
Ayar Labs Inc, the developer of components for high performance computing and
data centre applications, was uplifted by £533,000, including the impact of
foreign exchange. This revaluation is the result of a calibration to the price
set by a funding round during the year.
Maestro Media Limited, a talent-led, e-learning media platform of multichannel
e-commerce technology, increased in value by £389,000 as a result of a
calibration to the price set by a funding round during the year.
Virtual Class Limited (trading as Third Space Learning), a platform offering
personalised online lessons from specialist tutors, was uplifted by £383,000
as a result of revenues and their customer base continuing to grow.
Disappointingly, there were a number of unrealised losses recognised during
the period. Some of these came from the more vulnerable businesses within the
portfolio, however there were some material losses recognised to account for
funding and liquidity risks faced by some of the larger portfolio companies.
The greatest unrealised loss in the period was from Glisser Limited, a virtual
and hybrid events platform, a sector that has been unfavourably impacted
post-pandemic, which was written down to nil during the year. This resulted in
an unrealised loss of £1.9 million in the year.
Carbice Corporation Inc has developed a suite of products based on its carbon
material called Carbice Carbon which is primarily used as thermal management
solutions to enable greater thermal conductivity. The valuation was reduced by
£1.1 million, as a result of the challenging macroeconomic environment and
access to funding.
Trinny London Limited, a cosmetics and skincare brand, was revalued downwards
by £619,000 due to reduced confidence in consumer spending.
FundingXchange Limited, a fintech platform delivering SME lenders insights
into their portfolio trends, was revalued downwards by £510,000 to calibrate
to the price of the last funding round.
Hackajob Limited, a marketplace for technical hires, was revalued downwards by
£437,000 to calibrate to the price of the last funding round.
It is disappointing to report that there were two other investments that were
written down to nil during the year. These were Hummingbird Technologies
Limited and Channel Mum Limited resulting in a combined loss over original
cost of £3.0 million and a loss over carrying value of £2.1 million.
Foresight Group LLP
Investment Adviser’s Report – Yield Focused Portfolio
Downing LLP continues to advise the Company on the Unquoted Yield Focused
Portfolio under a subcontract from Foresight Group LLP.
We present a review of the yield focused investment portfolio for the year
ended 31 March 2023. At the year end, the yield focused portfolio consisted of
15 investments, all of which are unquoted, with a total value of £13.8
million.
Divestment activity
During the year, the focus for the Adviser was towards investment realisations
from the yield focused portfolio which resulted in four full and one partial
exits, generating proceeds of £4.2 million and a loss over holding value of
£253,000. There were no new or follow on investments.
Further details on each of the exits can be found below:
Harrogate Street LLP, a property developer, was fully exited towards the start
of the period, generating cash proceeds of £2.8 million, resulting in a gain
over holding value of £27,000. £128,000 of loan note interest was also
received in addition to the capital proceeds.
Proceeds of £591,000 were received from Downing Pub EIS ONE Limited, a
holding company that owned two London pub companies. The company is in the
process of winding up after the sale of its pubs, with a further and final
distribution expected prior to the end of 2023.
Fenkle Street LLP held an interest in a hotel in central Newcastle. A
transaction to sell the hotel completed at the end of the accounting period,
providing final proceeds of £772,000, resulting in a loss over holding value
of £139,000.
Jito Trading Limited, which has been written down to nil since March 2020 was
finally dissolved during the year following liquidation with no proceeds being
received.
Another disappointing exit during the period related to Rockhopper Renewables
Limited, an Indian solar farm company. In August 2022, following a series of
setbacks, the interest in the company was disposed of for nil consideration,
resulting in a loss over cost of £738,000.
Portfolio valuation
The yield focused portfolio was reduced in value by £440,000 during the year,
with one notable unrealised loss and a number of unrealised gains. The most
notable movements are as follows:
The most significant write down related to Baron House Developments LLP. The
company was created to fund the development of a hotel in Newcastle. With the
hotel facing challenging trading conditions, the value of the investment was
written down by £1.2 million, although it should be noted that the investment
is still valued at £323,000 above cost. A sales process was being progressed
with a potential buyer, however, after a significant price reduction was
sought, the deal has collapsed. Marketing of the hotel for sale is now
starting again to identify another buyer.
Pearce and Saunders Limited, and the related Pearce and Saunders DevCo
Limited, are now in the process of being wound up. Further distributions due
from the company are estimated at £70,000, resulting in a reduction in value
across both companies of £116,000.
The unrealised losses noted above have been offset in part by the following
unrealised gains on Data Centre Response Limited and Cadbury House Holdings
Limited.
Data Centre Response Limited, the maintenance provider to third party owned
data centres has increased in value by £578,000 in line with anticipated exit
proceeds based on corporate advisor feedback.
Cadbury House Holdings Limited owns and operates a health club, restaurant and
conference centre at Cadbury House, near Bristol. The valuation has been
uplifted by £474,000 during the period.
Outlook
The period has seen a number of investment realisations from the yield focused
portfolio. No new yield-focused investments are expected to be made by the
Company as the current VCT regulations make this difficult and all new
investment activity is focused on growth ventures. We continue to closely
monitor and support the existing yield focused investments and work towards
suitable realisation opportunities.
Downing LLP
Investment Adviser’s Report - Quoted Growth Portfolio
Downing LLP continues to advise the Company on the Quoted Growth Portfolio
under a subcontract arrangement with the Foresight Group LLP.
Investment activity
At 31 March 2023 the quoted portfolio was valued at £19.5 million, comprising
35 active investments. Over the 12-month period, the quoted portfolio produced
unrealised losses of £7.8 million, reflecting a 29.3% decrease over the
period compared to the FTSE AIM All Share that fell 22.4%, one of the biggest
falls in the index in many years.
Markets were exceptionally volatile through much of the current reporting
period. There was no shortage of reasons for concern - the Russian invasion of
Ukraine, the continued hangover from Covid lockdowns, particularly in China,
persistent supply chain disruptions, and growing fears over rising interest
rates. The threat of recession and the possibility of a prolonged bear market
also weighed on investor sentiment. The autumnal political disruptions caused
by the economics of Liz Truss created further market volatility. Sentiment
towards UK smaller companies has been persistently negative for investors,
with the largest outflows from UK equities since records began.
Most global equity markets had a positive start to 2023, making steady gains
through January. While the UK economy rallied over the month, performance was
more modest than in many other developed markets. However, this was in welcome
contrast to the widespread doom and gloom that characterised markets for much
of the prior year.
The quoted portfolio saw little activity during the period, with two follow-on
investments into existing holdings and one full exit. In April 2022, £502,000
was invested into existing holding, Downing Strategic Micro-Cap Investment
Trust plc. In December 2022, an investment of £100,000 was made in the
Deepmatter Group plc. Deepmatter Group subsequently delisted from the
Alternative Investment Market (AIM) and continues to trade privately, with the
support of Downing and its major shareholders.
Portfolio Movements
Given the challenging market backdrop, there are few gains of any materiality
to discuss, reflecting the exceptional period of negative market sentiment.
The two largest unrealised gains for the quoted portfolio were Cohort plc
(£59,000), and Feedback plc (£46,000).
Cohort plc is the parent company of six businesses providing a wide range of
services and products for British, Portuguese and other international
customers in defence and security markets. The group has a long track record
of profitable growth and strong execution by a conservative management team.
The Investment Adviser believes that the business will continue to deliver
against a strengthening outlook for defence spending across its regions. The
shares trade at a discount to peers and the Adviser thinks that Cohort could
be a valuable strategic asset for a larger player.
At the reporting period end, Cohort’s latest reported results covered the
six months to 31 October 2022. The group reported a stronger first half, with
growth in both revenue and trading profit. Management reported a record high
order book of £304.2m, with over £80m of revenue deliverable in the second
half of the year. Taking into account revenue recognised in the first half,
this covers over 95% of consensus forecast revenue for the full financial
year.
Feedback plc is a group of companies specialising in clinical communications.
The group offers safer, secure and simpler alternatives to the traditional
ways of working. It produces innovative technology that enhances clinical
communication, accessing and storing medical information.
The group reported results for the six months to 30 November 2022 and
highlighted that it had been awarded a £450k contract for a 12-month pilot
extension of the Sussex Integrated Care Systems Community Diagnostic Centre
development programme. It was also named as a supplier on G-Cloud 13, the UK
Government's digital marketplace. The group also underlined the importance of
the creation of the CareLocker consumer app, giving patients direct access to
their clinical data.
The largest unrealised losses for the quoted portfolio were Anpario plc
(£2.1m), Inland Homes plc (£944k), Tracsis plc (£771k) and Angle plc
(£615k). In the view of the Investment Adviser, Tracsis and Angle were
impacted by negative market sentiment, as opposed to any fundamentals
affecting their business operations, whilst Anpario and Inland Homes have been
impacted by specific headwinds affecting their business.
Anpario plc is an international producer and distributor of high-performance
natural feed additives for animal health, hygiene and nutrition. Its expertise
is focused on intestinal health and nutrition, and it utilises this knowledge
to improve animal performance and producer profitability. The Investment
Adviser believes that Anpario will continue to benefit from the trends in the
growth of the world’s population, the increasing taste for meat and fish
protein in developing countries, and the global tightening in food regulation.
The group announced its full-year results to 31 December 2022. The period was
extremely challenging due to supply chain disruption and significant and
immediate raw material and logistics price inflation. The difficult backdrop
has also adversely affected many producers who have experienced input cost
pressures, notably feed and energy, hurting their profitability and in some
cases viability. The group has been able to implement sensitive sales price
increases to partially mitigate the unprecedented raw material price
inflation, and margins improved in the second half of the year. Trading in the
first couple of months of 2023 has been weak and market conditions are
expected to continue to be challenging through the first half of the year.
However, management expects the group's performance to improve as the year
progresses, supported by a strong balance sheet and new business development
initiatives.
Since the period end, Anpario has announced a tender offer to buy-back shares,
at a premium to the share price before the announcement. The Investment
Adviser believes that this underpins the share price and demonstrates the
management’s confidence in the recovery of their end markets.
Incorporated in the UK in 2005, Inland Homes plc is an AIM-quoted specialist
housebuilder and brownfield developer. The group’s flexible business model
allows it to adapt its activity to suit market conditions and business needs.
It includes the strategic disposal of consented land, as well as the
construction and forward sales of private homes and partnership housing.
Inland Homes issued a trading update on 25 January 2023 which reported that
the group’s expected loss before tax for the year ending 30 September 2022
is £91.0m. In September the board stated that it expected a pre-tax loss of
£37.1m for the year but since then the economic outlook for the UK
housebuilding industry had deteriorated. The losses include provisions of
£28.8m on five ongoing construction projects, increased from £15.4m
following a further review, and a £39.0m provision on asset management
schemes, including the planned £600m Cavalry Barracks development in
Hounslow.
The board said that it had already secured a waiver from one of its lenders in
respect of its revolving credit facility on the interest cover ratio covenant
for the three quarters ending 30 June 2023. Post reporting period end, the
shares in the group were temporarily suspended from trading pending
publication of the company’s annual audited accounts. In April 2023, Inland
Homes announced that it raised £2.5 million with the issue of 25 million new
Ordinary Shares, with the net proceeds used to fund working capital
requirements within the company. The net tangible asset value of Inland Homes
is 107.8p, with a Gross Development Value of £3.0 billion. The Investment
Adviser believes that the value of the underlying equity is likely to be
realised through strategic initiatives put in place by the refreshed board
during the course of the coming 12 months.
Tracsis plc provides transport software solutions and condition monitoring
equipment that automates and optimises the process of labour scheduling for
rail and bus services. The company is predominantly based in the UK but is
expanding its reach to Europe and the US. The Investment Adviser was attracted
by the long-term software licences associated with the rail refranchise
process, underpinning earnings forecasts. There is also significant
international potential for condition monitoring equipment.
The group announced its results for the six months ended 31 January 2023 post
reporting period end. The group’s first half performance was in line with
the board’s expectations. Revenue and adjusted EBITDA growth was underpinned
by strong rail technology recurring revenue growth in both the UK and North
America, and new large contract wins across Remote Condition Monitoring and
Smart Ticketing. There was also good growth in the Data, Analytics,
Consultancy and Events division. The future opportunity pipeline is strong and
the UK rail industry's transition to a new Great British Railways structure
will continue to drive interest in product solutions that will deliver a
data-driven, customer-focused, safety-critical future for the industry.
Angle plc is a world-leading liquid biopsy company. The group announced
results for the year ended 31 December 2022 and highlighted that it was a
breakthrough year for Angle, with both FDA clearance and excellent results
from the ovarian cancer study. Management stated that it was the world's first
ever FDA product clearance for a system to harvest CTCs, intact living cancer
cells, from metastatic breast cancer patient blood for subsequent analysis.
This was followed by Angle's ovarian cancer study demonstrating the clinical
validity of analysing Parsortix CTCs for real-world clinical applications.
The increasing number of published studies for a variety of cancer types
combined with the FDA clearance have placed Angle in a strong position to play
a leading role in the emerging liquid biopsy market for personalised cancer
care. The CTCs harvested by the Parsortix system have wide applicability for
diagnosis, treatment selection, and monitoring to improve patient outcomes and
reduce healthcare costs.
Outlook
With the continuing macro-economic uncertainty, it is difficult to be hugely
positive in the short-term. There have been limited opportunities within the
new issues and IPO market, for VCT qualifying opportunities and we believe
that this depressed market sentiment could continue for the remainder of the
calendar year. Meanwhile, we will continue to focus on the portfolio
management of this maturing, quality collection of smaller companies, where we
believe the strong fundamentals of the underlying businesses will take
advantage of any improvement in their end markets.
Downing LLP
Review of Investments
Portfolio of investments
The following investments, all of which are incorporated in England and Wales,
were held at 31 March 2023:
Cost Valuation Valuation movement in year % of portfolio by value Loan stock I nterest R ecognised in the period Total value of other funds also managed by Foresight ^
£’000 £’000 £’000 £’000 £’000
Quoted growth investments
Tracsis plc* 1,443 6,782 (771) 7.8% - -
Downing Strategic Micro-Cap Investment Trust plc*** 5,699 3,740 (260) 4.3% - 3,162
Impact Healthcare REIT plc*** 1,518 1,421 (353) 1.6% - -
Anpario plc* 1,448 1,206 (2,134) 1.4% - -
Cohort plc* 394 899 59 1.0% -
Craneware plc* 353 874 (388) 1.0% - -
GENinCode plc* 800 700 (382) 0.8% - -
Vianet Group plc* 756 567 (102) 0.7% - -
Let’s Explore Group plc* (formerly Immotion Group plc) 500 425 (121) 0.5% - -
Feedback plc* 400 348 46 0.4% - -
Brooks Macdonald Group plc* 257 333 (112) 0.4% - -
Libertine Holdings plc* 350 298 (147) 0.3% - -
Inland Homes plc* 1,311 210 (944) 0.2% - -
EnerAqua Technology plc* 195 204 18 0.2% - -
Pittards plc* 1,350 169 (529) 0.2% - -
Pennant International Group plc* 335 165 5 0.2% - -
SysGroup plc* 377 157 13 0.2% - -
Angle plc* 570 153 (615) 0.2% - -
Frontier IP Group plc* 30 146 (45) 0.2% - -
Norman Broadbent plc* 906 135 (60) 0.2% - -
One Media Group IP plc* 175 125 (31) 0.1% - -
Verici DX plc* 240 89 (130) 0.1% - -
Dillistone Group plc* 411 64 (7) 0.1% - -
Oncimmune Holdings plc* 278 57 (144) 0.1% - -
Bonhill Group plc* 1,000 56 (38) 0.1% - -
Fireangel Safety Technology Group plc* 545 37 (11) 0.0% - -
Pressure Technologies plc* 248 29 (32) 0.0% - -
Pelatro plc* 290 28 (108) 0.0% - -
Trellus Health plc* 175 26 (57) 0.0% - -
Strip Tinning Holdings plc* 105 23 (63) 0.0% - -
Wheelsure Holdings plc** 48 2 (2) 0.0% - -
AIQ Limited - 1 - 0.0% - -
DeepMatter plc* 563 - (373) 0.0% - -
Flowgroup plc 207 - - 0.0% - -
ACHP plc* 61 - - 0.0% - -
23,338 19,469 (7,818) 22.3% - 3,162
Unquoted growth investments
Cornelis Networks Inc 2,102 4,312 2,256 5.0% - 8,210
Ayar Labs, Inc 1,280 3,127 533 3.6% - 4,231
Hackajob Limited 2,284 2,586 (437) 3.0% - 4,994
Virtual Class Limited 1,164 2,295 383 2.7% - 3,063
Trinny London Limited 443 1,889 (619) 2.2% - 10,846
Carbice Corporation 3,020 1,883 (1,083) 2.2% - 1,041
Maestro Media Limited 1,320 1,868 389 2.2% - 5,965
Rated People Ltd 1,582 1,821 (273) 2.1% 3 3,287
CommerceIQ, Inc 1,749 1,731 (18) 2.0% - 2,371
Imagen Limited 1,000 1,703 (60) 2.0% - 3,406
Parsable Inc 1,532 1,506 84 1.7% - 2,123
Cambridge Touch Technologies Limited 959 1,466 97 1.7% - 1,809
Vivacity Labs Limited 1,289 1,443 (15) 1.7% - 4,958
Bulbshare Limited 749 1,282 533 1.5% - 2,884
Kluster Enterprises Limited 1,236 1,236 - 1.4% - 392
Ecstase Limited 1,000 1,000 (257) 1.1% - 2,210
Flock Limited 930 930 - 1.1% - 2,878
Upp Technologies Group Limited 1,136 923 (213) 1.1% 4 923
Masters of Pie Limited 886 876 (10) 1.0% 7 3,876
DSTBTD Limited 775 775 - 0.9% - 1,725
Limitless Technology Limited 757 703 (217) 0.8% - 1,545
FVRVS Limited 787 678 (218) 0.8% 2 3,281
FundingXchange Limited 1,335 561 (510) 0.6% - 1,359
Tidalsense Limited (formerly Cambridge Respiratory Innovations Limited) 500 500 - 0.6% - 1,476
Audioscenic Limited 400 400 - 0.5% - 4,800
DiA Imaging Analysis Limited 207 282 67 0.3% - 926
MIP Discovery Limited 225 225 75 0.3% - 1,256
Hummingbird Technologies Limited 2,250 - (1,750) 0.0% - -
Glisser Limited 1,887 - (1,887) 0.0% - -
Empiribox Holdings Limited 1,813 - - 0.0% - -
Lignia Wood Company Limited 1,778 - - 0.0% - -
Live Better With Limited 990 - - 0.0% - -
Channel Mum Limited 757 - (310) 0.0% (2) -
Lineten Limited 750 - - 0.0% - -
Ludorum plc 177 - - 0.0% - -
Resource Reserve Recovery Limited 6 - - 0.0% - -
41,055 38,001 (3,460) 44.1% 14 85,835
Unquoted yield focused investments
Doneloans Limited 3,631 4,156 (57) 4.8% 335 -
Baron House Developments LLP 2,695 3,018 (1,160) 3.5% 162 -
Data Centre Response Limited 557 2,366 578 2.7% - -
Cadbury House Holdings Limited 3,082 2,162 474 2.5% 2,530 791
Kimbolton Lodge Limited 664 850 (146) 1.0% - -
Pilgrim Trading Limited 2,594 778 - 0.9% (704) -
SF Renewables (Solar) Limited 422 263 (15) 0.3% - -
Downing Pub EIS ONE Limited 68 94 2 0.1% - -
Pearce & Saunders DevCo Limited 84 70 - 0.1% - 16
Yamuna Renewables Limited 2,500 - - 0.0% - -
Quadrate Catering Limited 1,500 - - 0.0% - -
Pearce & Saunders Limited 1,122 - (116) 0.0% 107 -
Top Ten Holdings plc 399 - - 0.0% - -
Quadrate Spa Limited 372 - - 0.0% - -
London City Shopping Centre Limited 110 - - 0.0% - -
19,800 13,757 (440) 15.9% 2,430 807
Total investments 84,193 71,227 (11,718) 82.3% 2,444 89,804
Cash at bank and in hand 15,282 17.7%
86,509 100.0%
The Company also holds investments in Golden Rock Global plc and Mining,
Minerals & Metals plc (which does not show in the previous table). These
investments were acquired in prior periods at negligible value as a result of
reorganisations of other investments and continue to be valued at the same
level.
All venture capital investments are unquoted unless otherwise stated.
* Quoted on AIM
** Quoted on the Aquis Stock Exchange Growth Market
*** Quoted on the Main Market of the London Stock Exchange
The valuation movement in the period includes unrealised foreign exchange
gains on £585,000.
^Includes investment made by Thames Ventures EIS, Thames Ventures VCT 2 plc,
Foresight Williams EIS and Foresight Solar and Technology VCT plc.
Investment movements for the year ended 31 March 2023
Additions
£’000
Quoted growth investments
Downing Strategic Micro-Cap Investment Trust plc 502
Deepmatter plc 100
602
Unquoted growth investments
Hackajob Limited* 3,000
CommerceIQ, Inc 1,749
Kluster Enterprises Limited 1,235
Flock Limited 930
StorageOS Inc 825
Vivacity Labs Limited 789
Glisser Limited 588
FVRVS Limited* 537
Audioscenic Limited 400
Maestro Media Limited 320
FundingXchange Limited 285
Masters of Pie Limited 219
Rated People Limited 200
Upp Technologies Group Limited 59
Channel Mum Limited 20
11,156
Total additions 11,758
* The additions related to Hackajob Limited and FVRVS Limited include loan
note to equity conversions equal to £1.5 million and £135,000 respectively.
Disposals
Loan stock
interest
Profit/ Realised recognised
Value at (loss) vs gain/ in the
Cost 01/04/2 2 * Proceeds cost (loss) period
£’000 £’000 £’000 £’000 £’000 £’000
Quoted growth investments
MI Downing UK Micro-Cap Growth Fund 2 2 2 - - -
2 2 2 - - -
Unquoted growth investments (including loan note redemptions)
ADC Biotechnology Limited - - 310 310 310 -
StreetHub Limited 1,446 79 194 (1,252) 115 (2)
Avid Technology Group Limited - - 91 91 91 -
FVRVS Limited** 125 125 125 - - -
Hackajob Limited** 1,500 1,500 1,500 - - -
Firefly Learning Limited 1,047 1,047 1,015 (32) (32) -
E-fundamentals (Group) Limited 1,508 3,847 3,710 2,202 (137) (2)
StorageOS Inc 3,795 3,746 3,019 (776) (727) -
9,421 10,344 9,964 543 (380) (4)
Unquoted yield focused investments (including loan note redemptions)
Harrogate Street LLP 1,400 2,778 2,805 1,405 27 14
Downing Pub EIS ONE Limited 422 576 591 169 15 -
Fenkle Street LLP 346 911 772 426 (139) 21
Jito Trading Limited 2,500 - - (2,500) - -
Rockhopper Renewables Limited 738 156 - (738) (156) -
5,406 4,421 4,168 (1,238) (253) 35
14,829 14,767 14,134 (695) (633) 31
* Adjusted for purchases in the year where applicable
** Conversion of loan notes into further equity
Directors’ responsibilities statement
The Directors are responsible for preparing the Strategic Report, the Report
of the Directors, the Directors’ Remuneration Report, the separate Corporate
Governance Statement and the financial statements in accordance with
applicable law and regulations. They are also responsible for ensuring that
the annual report includes information required by the Listing Rules of the
Financial Conduct Authority.
Company law requires the directors to prepare financial statements for each
financial year. Under that law, the directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law),
including Financial Reporting Standard 102, the financial reporting standard
applicable in the UK and Republic of Ireland (FRS 102). Under company law, the
directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Company and
of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgments and accounting estimates that are reasonable and prudent;
* state whether the financial statements have been prepared in accordance with
applicable UK Accounting Standards, subject to any material departures
disclosed and explained in the financial statements;
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business; and
* prepare a Directors’ Report, Strategic Report and Directors’
Remuneration Report which comply with the requirements of the Companies Act
2006.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company’s transactions, and to disclose
with reasonable accuracy at any time the financial position of the Company and
to enable them to ensure that the financial statements comply with the
Companies Act 2006.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
In addition, each of the directors is responsible for ensuring that the Annual
Report, taken as a whole, is fair, balanced and understandable and provides
the information necessary to assess the Company’s position, performance,
business model and strategy.
Income Statement
for the year ended 31 March 2023
Year ended 31 March 20 2 3 Year ended 31 March 2022
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
Income 3, 0 31 - 3, 0 31 4,584 - 4,584
(Losses)/gains on investments - (12,351) (12,351) - 8,619 8,619
3, 0 31 (12,351) ( 9 , 3 20) 4,584 8,619 13,203
Investment management fees ( 799 ) ( 799 ) ( 1,598 ) (1,051) (1,051) (2,102)
Other expenses ( 812 ) - ( 812 ) (705) - (705)
Return/(loss) on ordinary activities before tax 1, 4 20 (13,150) (11, 7 30) 2,828 7,568 10,396
Tax on total comprehensive income and ordinary activities ( 228 ) 228 - (300) 300 -
Return/(loss) attributable to equity shareholders 1, 1 92 ( 12,922 ) (11, 7 30) 2,528 7,868 10,396
Basic and diluted return/(loss) per share 0. 7 (7.2) (6. 5 ) 1.4 4.5 5.9
The total column within the Income Statement represents the Statement of Total
Comprehensive Income of the Company prepared in accordance with Financial
Reporting Standards (“FRS 102”). There are no other items of comprehensive
income. The supplementary revenue and capital return columns are prepared in
accordance with the Statement of Recommended Practice issued in November 2014
and updated in July 2022 by the Association of Investment Companies (“AIC
SORP”).
Statement of Changes in Equity
for the year ended 31 March 2023
Called up Share Capital Capital redemption reserve Share premium account Funds held in respect of shares not yet allotted Special reserve Capital reserve realised Revaluation reserve Revenue reserve Total
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
For the year ended 31 March 202 2
At 1 April 202 1 1,611 1,649 66,430 7,545 20,238 - 6,409 (2,529) 101,353
Total comprehensive income - - - - - 2,971 4,897 2,528 10,396
Realisation of revaluations from previous years* - - - - - 794 (794) - -
Realisation of impaired valuations - - - - - (791) 791 - -
Transfer between reserves* - - - - (738) 738 - - -
Transactions with owners
Dividends paid - - - - - (3,712) - (743) (4,455)
Utilised in share issue - - - (7,545) - - - - (7,545)
Unallotted shares - - - 78 - - - - 78
Issue of new shares 213 - 12,605 - - - - - 12,818
Share issue costs - - - - (360) - - - (360)
Purchase of own shares** (48) 48 - - (2,812) - - - (2,812)
At 31 March 202 2 1,776 1,697 79,035 78 16,328 - 11,303 (744) 109,473
For the year ended 31 March 20 2 3
At 1 April 202 2 1,776 1,697 79,035 78 16,328 - 11,303 (744) 109,473
Total comprehensive income - - - - - (1,204) (11,718) 1,192 (11,730)
Realisation of revaluations from previous years* - - - - - 2,438 (2,438) - -
Realisation of impaired valuations - - - - - (5,445) 5,445 - -
Transfer between reserves* - (1,710) (81,236) - 74,984 7,962 - - -
Transactions with owners
Dividends paid - - - - - (3,751) - (2,104) (5,855)
Utilised in share issue - - - (78) - - - - (78)
Unallotted shares - - - - - - - - -
Issue of new shares 43 - 2,680 - - - - - 2,723
Share issue costs - - (51) - - - - - (51)
Purchase of own shares** (45) 45 - - (2,499) - - - (2,499)
At 31 March 202 3 1,774 32 428 - 88,813 - 2,592 (1,656) 91,983
* A transfer of £2.4 million representing previously
recognised unrealised gains on disposal of investments during the year ended
31 March 2023 (2022: gains of £794,000) have been made from the Revaluation
reserve to the Capital Reserve-realised. A transfer of £8.0 million
representing realised gains on disposal of investments, less net investment
impairments and the excess of capital expenses over capital income and capital
dividends in the year (2022: £738,000) has been made from the Special reserve
to the Capital Reserve – realised. Following the cancellation of the Capital
Redemption reserve and Share Premium account subsequent to Court approval in
January 2023, a transfer of £1.7 million and £81.2 million has been made
from the Capital Redemption reserve and the Share Premium account,
respectively, to the Special reserve.
** These shares were subsequently cancelled.
Balance Sheet
as at 31 March 2023
20 2 3 2022
£ ’ 000 £’000
Fixed assets
Investments 71,227 85,954
Current assets
Debtors 6 , 8 28 3,300
Cash at bank and in hand 15,282 20,856
22, 1 10 24,156
Creditors: amounts falling due within one year ( 1,354 ) (637)
Net current assets 2 0 , 7 56 23,519
Net assets 9 1 , 9 83 109,473
9B9 Capital and reserves
Called up share capital 1,774 1,776
Capital redemption reserve 32 1,697
Share premium account 428 79,035
Funds held in respect of shares not yet allotted - 78
Special reserve 88,813 16,328
Revaluation reserve 2,592 11,303
Revenue reserve ( 1, 6 56 ) (744)
Total equity shareholders’ funds 9 1 , 9 83 109,473
Basic and diluted net asset value per share 5 1 . 8 p 61.6p
Cash Flow Statement
for the year ended 31 March 2023
20 2 3 2022
£’000 £’000
Cash flow from operating activities
(Loss)/return on ordinary activities after taxation (11, 7 30) 10,396
Loss/(gain) on investments 12,351 (8,619)
(Increase) in debtors ( 3 , 5 2 9 ) (1,298)
(Decrease)/increase in creditors ( 60 ) 72
Net cash generated (used in)/ from operating activities ( 2,96 8 ) 551
Cash flow from investing activities
Purchase of investments ( 11,75 8 ) (4,619)
Proceeds from disposal of investments 14,134 16,441
Net cash inflow from investing activities 2,37 6 11,822
Cash flows from financing activities
Proceeds from share issue 1,781 12,121
Funds held in respect of shares not yet allotted ( 78 ) (7,467)
Share issue costs ( 51 ) (360)
Purchase of own shares ( 1,723 ) (2,791)
Equity dividends paid ( 4,911 ) (3,758)
Net cash (outflow) from financing activities ( 4,982 ) (2,255)
(Decrease)/i ncrease in cash (5,574) 10,118
Net movement in cash
Beginning of year 20,856 10,738
Net cash (outflow)/inflow (5,574) 10,118
End of year 15,282 20,856
Notes
1. General information
Thames Ventures VCT 1 plc (“the Company”) is a venture capital trust
established under the legislation introduced in the Finance Act 1995 and is
domiciled in the United Kingdom and incorporated in England and Wales, and its
registered office is St. Magnus House, 3 Lower Thames Street, London EC3R 6HD.
2. Accounting policies
Basis of accounting
The Company has prepared its financial statements in accordance with the
Financial Reporting Standard 102 (“FRS 102”) and in accordance with the
Statement of Recommended Practice “Financial Statements of Investment Trust
Companies” issued November 2014 and updated in July 2022 (“SORP”).
The financial statements are presented in Sterling (£) and rounded to
thousands.
Going concern
After reviewing the Company’s forecasts and projections, the Directors have
a reasonable expectation that the major cash outflows of the Company (most
notably investments, share buybacks and dividends) are within the Company’s
control and therefore the Company has sufficient cash to meet its expenses and
liabilities when they fall due. The impact of the conflict in Ukraine as well
as high inflation and rising interest rates has been considered. More detail
on these considerations can be found within the Corporate Governance report.
As such, the Board confirms that the Company has adequate resources to
continue in operational existence for at least 12 months from the date of
approval of the financial statements. The Company therefore continues to adopt
the going concern basis in preparing its financial statements as noted further
within the Corporate Governance Report.
Presentation of income statement
In order to better reflect the activities of a Venture Capital Trust and in
accordance with guidance issued by the Association of Investment Companies
(“AIC”), supplementary information which analyses the income statement
between items of a revenue and capital nature has been presented alongside the
income statement. The net revenue is the measure the Directors believe
appropriate in assessing the Company’s compliance with certain requirements
set out in Part 6 of the Income Tax Act 2007.
Investments
Venture capital investments are designated as “fair value through profit or
loss” assets due to investments being managed and their performance
evaluated on a fair value basis. A financial asset is designated within this
category if it is both acquired and managed on a fair value basis, with a view
to selling after a period of time, in accordance with the Company’s
documented investment policy.
Investments quoted on recognised stock markets are measured using bid prices.
The valuation methodologies for unquoted instruments (comprising equity and
loan notes), used by the International Private Equity Valuation guidelines to
ascertain the fair value of an investment, are as follows:
* Calibration to the price of recent investment;
* Multiples;
* Net assets;
* Discounted cash flows or earnings (of the underlying business);
* Discounted cash flows (from the investment); and
* Industry valuation benchmarks.
The methodology applied takes account of the nature, facts and circumstances
of the individual investment and uses reasonable data, market inputs,
assumptions and estimates in order to ascertain fair value, as explained in
the investment accounting policy above and addressed further in note 10 to the
Annual Report. Where an investee company has gone into receivership,
liquidation or administration and there is little likelihood of a recovery,
the loss on the investment, although not physically disposed of, is treated as
being realised.
Gains and losses arising from changes in fair value are included in the income
statement as a capital item.
It is not the Company’s policy to exercise significant influence or joint
control over investee companies. Therefore, the results of these companies are
not incorporated into the Income Statement, except to the extent of any income
accrued. This is in accordance with the SORP and FRS 102 sections 14 and 15
that do not require portfolio investments to be accounted for using the equity
method of accounting.
Calibration to price of recent investment requires a level of judgment to be
applied in assessing and reviewing any additional information available since
the last investment date. The Board and Adviser consider a range of factors in
order to determine if there is any indication of decline in value or evidence
of increase in value since the recent investment date. If no such indications
are noted the price of the recent investment will be used as the fair value
for the investment.
Examples of signals which could indicate a movement in value are: -
* Changes in results against budget or in expectations of achievement of
technical milestones patents/testing/ regulatory approvals
* Significant changes in the market of the products or in the economic
environment in which it operates
* Significant changes in the performance of comparable companies
* Internal matters such as fraud, litigation or management structure.
In respect of disclosures required by the SORP for the ten largest investments
held by the Company, the most recent publicly available accounts information,
either as filed at Companies House, or announced to the London Stock Exchange,
is disclosed. In the case of unlisted investments, this may be abbreviated
information only.
Judgements in applying accounting policies and key sources of estimation
uncertainty
The key estimate in the financial statements is the determination of the fair
value of the unquoted investments by the Directors, as it impacts the
valuation of the unquoted investments at the balance sheet date.
Of the Company’s assets measured at fair value, it is possible to determine
their fair values within a reasonable range of estimates. The fair value of an
investment upon acquisition is deemed to be cost. Thereafter, investments are
measured at fair value in accordance with FRS 102 sections 11 and 12, together
with the International Private Equity and Venture Capital Valuation Guidelines
(“IPEV”).
A price sensitivity analysis of the unquoted investments is provided within
the Annual Report, under Investment price risk.
Income
Dividend income from investments is recognised when the shareholders’ right
to receive payment has been established, normally the ex-dividend date.
Loan stock interest is accrued on a time apportioned basis, by reference to
the principal outstanding and at the effective interest rate applicable and
only where there is reasonable certainty of collection.
Distributions from investments in limited liability partnerships (“LLPs”)
are recognised as they are paid to the Company. Where such items are
considered capital in nature they are recognised as capital profits.
Expenses
All expenses are accounted for on an accrual’s basis. In respect of the
analysis between revenue and capital items presented within the income
statement, all expenses have been presented as revenue items, except as
follows:
* Expenses which are incidental to the acquisition of an investment are
deducted from the Capital Account.
* Expenses which are incidental to the disposal of an investment are deducted
from the disposal proceeds of the investment.
* Expenses are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments held can
be demonstrated. Investment management fees are allocated 50% to revenue and
50% to capital, in order to reflect the Directors’ expected long-term view
of the nature of the investment returns of the Company.
Taxation
The tax effects on different items in the Income Statement are allocated
between capital and revenue on the same basis as the particular item to which
they relate, using the Company’s effective rate of tax for the accounting
period.
Due to the Company’s status as a Venture Capital Trust and the continued
intention to meet the conditions required to comply with 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.
Deferred taxation is not discounted and is provided in full on timing
differences that result in an obligation at the balance sheet date to pay more
tax, or a right to pay less tax, at a future date, at rates expected to apply
when the obligations or rights crystallise based on tax rates and law enacted
or substantively enacted at the balance sheet date. Timing differences arise
from the inclusion of items of income and expenditure in taxation computations
in periods different from those in which they are included in the accounts.
Deferred tax assets are only recognised if it is expected that future taxable
profits will be available to utilise such assets and are recognised on a
non-discounted basis.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with
banks with an original maturity of three months or less.
Other debtors and other creditors
Other debtors (including accrued income) and other creditors are included
within the accounts at amortised cost.
Share issue costs
Share issue costs have been deducted from the special reserve account.
Segmental reporting
The Company only has one class of business and one market.
Dividends payable
Dividend’s payable are recognised as distributions in the financial
statements when the Company’s liability to make payment has been
established, normally the payment date.
Funds held in respect of shares not yet allotted
Cash received in respect of applications for new shares that have not yet been
allotted is shown as “Funds held in respect of shares not yet allotted”
and recorded on the Balance Sheet and Statement of Changes in Equity.
3. Basic and diluted return per share
20 2 3 2022
£’000 £’000
Return per share based on:
Net revenue gain/(loss) for the financial year 1, 1 92 2,528
Net capital (loss)/gain for the financial year ( 12,922 ) 7,868
Total gain for the financial year (11, 7 30) 10,396
Weighted average number of shares in issue 179,972,333 177,473,899
As the Company has not issued any convertible securities or share options,
there is no dilutive effect on return per share. The return per share
disclosed therefore represents both the basic and diluted return per share.
4. Principal Risks
The Company’s investment activities expose the Company to a number of risks
associated with financial instruments and the sectors in which the Company
invests. The principal financial risks arising from the Company’s operations
are:
* Investment risks;
* Credit risk; and
* Liquidity risk.
The Board regularly reviews these risks and the policies in place for managing
them. There have been no significant changes to the nature of the risks that
the Company is exposed to over the year and there have also been no
significant changes to the policies for managing those risks during the year.
The risk management policies used by the Company in respect of the principal
financial risks and a review of the financial instruments held at the
year-end, are provided below.
Investment risks
As a VCT, the Company is exposed to investment risks in the form of potential
losses and gains that may arise on the investments it holds, in accordance
with its investment policy. The management of these investment risks is a
fundamental part of the investment activities undertaken by the Investment
Adviser and overseen by the Board. The Investment Adviser monitors investments
through regular contact with management of investee companies, regular review
of management accounts and other financial information and attendance at
investee company board meetings. This enables the Investment Adviser to manage
the investment risk in respect of individual investments. Investment risk is
also mitigated by holding a diversified portfolio spread across various
business sectors and asset classes.
The key investment risks to which the Company is exposed are:
* Investment price risk;
* Interest rate risk; and
* Foreign currency exposure risk
The Company has undertaken sensitivity analysis on its financial instruments,
split into the relevant component parts, taking into consideration the
economic climate at the time of review, in order to ascertain the appropriate
risk allocation.
Investment price risk
Investment price risk arises from uncertainty about the future prices and
valuations of financial instruments held in accordance with the Company’s
investment objectives. It represents the potential loss that the Company might
suffer through investment price movements in respect of quoted investments and
also changes in the fair value of unquoted investments that it holds.
Interest rate risk
The Company accepts exposure to interest rate risk on floating-rate financial
assets through the effect of changes in prevailing interest rates. The Company
receives interest on its cash deposits at a rate agreed with its bankers.
Investments in loan stock and fixed interest securities attract interest
predominately at fixed rates. A summary of the interest rate profile of the
Company’s investments is shown below.
Interest rate profile of financial assets and financial liabilities
There are three levels of interest which are attributable to the financial
instruments as follows:
* “Fixed rate” assets represent investments with predetermined yield
targets and comprise fixed interest and loan note investments.
* “Floating rate” assets predominantly bear interest at rates linked to
the Bank of England base rate and comprise cash at bank.
* “No interest rate” assets do not attract interest and comprise equity
investments, non-interest-bearing convertible loan notes, loans and
receivables (excluding cash at bank) and other financial liabilities.
The Company monitors the level of income received from fixed, floating and
non-interest rate assets and, if appropriate, may make adjustments to the
allocation between the categories, in particular, should this be required to
ensure compliance with the VCT regulations.
During the period the Bank of England base rate has increased from 0.75% per
annum to 4.25% per annum at the period end. Following the period end, in June
2023, the rate increased further, to 5.0% per annum. Any potential change in
the base rate at the current level would not have a material impact on the net
assets and total return of the Company.
Foreign currency exposure risk
The Company has exposure to foreign currency risk through its investments in
companies whose valuation is denominated and who report in US Dollars. This
has resulted in an unrealised foreign exchange gains of £585,000 (2022:
£511,000) during the year. Due to the relatively low exposure to companies
denominated in foreign currencies, the Board considers foreign currency risk
to be at an acceptable level and does not seek to mitigate such exposure as
this could restrict the net returns from the foreign currency investments.
Credit risk
Credit risk is the risk that the counterparty to a financial instrument is
unable to discharge a commitment to the Company made under that instrument.
The Company is exposed to credit risk through its holdings of loan stock in
investee companies, investments in fixed interest securities, cash deposits
and debtors.
The Investment Adviser manages credit risk in respect of loan notes with a
similar approach as described under investment risks above. In addition, with
the exception of new investments, credit risk is mitigated by registering
floating charges, covering the full par value of the loan stock in the form of
fixed and floating charges over the assets of the investee companies. The
strength of this security in each case is dependent on the nature of the
investee company’s business and its identifiable assets. The level of
security is a key means of managing credit risk. Similarly, the management of
credit risk associated with interest, dividends and other receivables is
covered within the investment management procedures.
Cash is mainly held at Royal Bank of Scotland plc, with a balance also
maintained at Bank of Scotland plc, both of which are A-rated financial
institutions. Consequently, the Directors consider that the credit risk
associated with cash deposits is low.
There has been limited changes in fair value during the year that can be
directly attributable to changes in credit risk.
As at 31 March 2023, of the loan stock classified as “past due”,
£5,957,000 relates to the principal of loan notes where the principal has
passed its maturity date. As at the balance sheet date, the extent to which
the principal is past its maturity date, £778,000 falls within the banding of
nil to two years past due and £5.2 million is two to five years past due.
Notwithstanding this information, the Directors do not consider the loan notes
to be impaired at the current time or that maturity dates of the principal
have altered.
As at 31 March 2022, of the loan stock classified as “past due”, below,
£911,000 related to the principal of loan notes where, although the principal
remained within term, the investee company was not fully servicing the
interest obligations under the loan note and was in arrears. Notwithstanding
the arrears of interest, the Directors did not consider that the loan note
itself had been impaired or the maturity of the principal had altered.
As at 31 March 2022, of the loan stock classified as “past due”, below,
£6,760,000 related to the principal of loan notes where the principal had
passed its maturity date. As at 31 March 2022, the extent to which the
principal is past its maturity date, £874,000 falls within the banding of nil
to two years past due and £5.9 million is two to five years past due.
Notwithstanding this information, the Directors did not consider the loan
notes to be impaired at 31 March 2022 or that maturity dates of the principal
had altered.
Liquidity risk
Liquidity risk is the risk that the Company encounters difficulties in meeting
obligations associated with its financial liabilities. Liquidity risk may also
arise from either the inability to sell financial instruments when required at
their fair values or from the inability to generate cash inflows as required.
The Company normally has a relatively low level of creditors (2023:
£1,354,000, 2022: £637,000) and has no borrowings. Most of the quoted
investments held by the Company are considered to be readily realisable. The
Company always holds sufficient levels of funds as cash and readily realisable
investments in order to meet expenses and other cash outflows as they arise.
For these reasons, the Board believes that the Company’s exposure to
liquidity risk is minimal.
The Company’s liquidity risk is managed by the Investment Adviser in line
with guidance agreed with the Board and is reviewed by the Board at regular
intervals.
5. Related party transactions
Fees payable during the year to the Directors and their interest in shares of
the Company are disclosed within the Directors’ Remuneration Report. There
were no amounts outstanding and due to the Directors as at 31 March 2023
(2022: nil).
Further related party transactions include Investment Adviser and
Administration fees payable to Foresight Group LLP, as disclosed in notes 4
and 5 of the Annual Report. Of the total Administration fees, £29,000 was
payable to Downing LLP, who were the Investment Adviser and Administration
Manager for part of the year.
In addition, Downing LLP were paid promoter fees in connection with the
fundraising offer that was open during the period, which totalled £37,000 for
the year ended 31 March 2023 (2022: £206,000).
The Company also has an agreement to pay an ongoing trail fee annually to
Downing LLP and Foresight LLP, in connection with funds raised under original
offers for subscription out of which there is an obligation to pay trail
commission to intermediaries. During the year to 31 March 2023, £192,000
(2022: £172,000) was paid to Downing LLP.
ANNOUNCEMENT BASED ON AUDITED ACCOUNTS
The financial information set out in this announcement does not constitute the
Company's statutory financial statements in accordance with section 434
Companies Act 2006 for the year ended 31 March 2023 but has been extracted
from the statutory financial statements for the year ended 31 March 2023 which
were approved by the Board of Directors on 26 July 2023 and will be delivered
to the Registrar of Companies. The Independent Auditor's Report on those
financial statements was unqualified and did not contain any emphasis of
matter nor statements under s 498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2022 have been delivered to
the Registrar of Companies and received an Independent Auditors report which
was unqualified and did not contain any emphasis of matter nor statements
under s 498(2) and (3) of the Companies Act 2006.
A copy of the full annual report and financial statements for the year ended
31 March 2023 will be printed and posted to shareholders shortly. Copies will
also be available to the public at the registered office of the Company at St.
Magnus House, 3 Lower Thames Street, London EC3R 6HD and will be available for
download from and www.foresightgroup.eu