REG - Molten Ventures VCT - Final Results
29/07/2024 07:00
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RNS Number : 1081Y Molten Ventures VCT PLC 29 July 2024
Molten Ventures VCT plc
LEI: 2138003I9Q1QPDSQ9Z97
29 July 2024
Final Results for the year ended 31 March 2024
David Brock, Chairman, comments:
"With some market recovery there are signs that the trough in private equity
technology valuations may now be behind us. M & A activity is on the
increase, and the Board believes that the portfolio contains many investments
with exciting prospects that should be able to take advantage of improving
sentiment."
HIGHLIGHTS
· NAV Total Return - NAV decreased by 5.1 pence to 48.2 pence
giving a total return of -6.8% after adding back dividends paid in the year.
· Funds raised in the year were £18.5 million net of costs.
36,846,664 Ordinary Shares were allotted.
· Investments made in the year totalled £16.4 million with £12.1
million invested in 5 new companies and £4.3 million invested in 4 follow-on
investments.
· Share price - The mid-market share price decreased by 0.9 pence
to 45 pence per share in the year after adding back dividends paid of 1.5
pence.
· Dividends paid - Total dividends of £3.3 million paid in the
year representing a yield of 2.8% on the opening NAV of 53.3 pence per
Ordinary Share.
· Dividend proposed - The Directors are recommending a final
dividend of 1.5 pence payable on 26 September 2024.
OVERVIEW
Molten Ventures VCT is a £117 million, steadily growing, investment company
that gives a distinctive opportunity to invest with the experienced,
technology focused, venture capital team at Molten Ventures plc in early stage
companies that have exciting growth prospects whilst also giving investors tax
relief, tax free dividends and tax free capital returns.
The Company benefits from the Molten team's exceptional experience in
technology with an emphasis on enterprise and consumer technology,
differentiated operating systems, machine learning and digital healthcare, all
of which add to the portfolio's focus on UK growth and leading-edge expertise.
Through Molten Ventures' co-investment connections in future-focused sectors,
and its engagement with investee companies, this VCT provides an enhanced
opportunity for investors to make a serious contribution to the future of the
UK's vital early-stage economy thereby making a key contribution to the UK,
whilst at the same time enjoying tax relief on the investment and tax free
dividends, in particular as further significant reserves become available for
distribution from April 2025. Those reserves will enable the Company to
maintain buybacks and target tax free dividends of at least 5% of net asset
value per share.
FINANCIAL SUMMARY
31 March 2024 31 March 2023
pence pence
Net asset value per share ("NAV") 48.2 53.3
Cumulative dividends paid since launch 115.1 113.6
Total Return (NAV plus cumulative dividends paid per share) 163.3 166.9
Dividends in respect of financial year ended 31 March 2024
Interim dividend paid per share 1.0 1.0
Final dividend per share (payable on 26 September 2024) 1.5 0.5
2.5 1.5
CHAIRMAN'S STATEMENT
Introduction
I present the Company's Annual report for the year ended 31 March 2024.
Your company continues to focus on game-changing technology, particularly
leading-edge expertise in enterprise technology, operating systems, machine
learning and healthcare much of which is accessed in association with Molten's
co-investment connections. This positions your VCT as a leader in supporting
UK expertise and early-stage companies. Supporting and nurturing domestic
talent to drive future growth in the UK is a core purpose of Venture Capital
Trusts.
The portfolio now holds just four significant legacy investments, accounting
for just over 11% of net assets. Three of these are software businesses, and
the other is a technology enabled engineering business producing high
specification machinery for the packaging industry. At the year-end £78.9
million of the portfolio was invested largely in technology and £25 million
of cash reflected another successful fundraising round.
For British companies this has not been the easiest year. Supply chain issues
from Brexit and Ukraine have continued, domestic interest rates have
normalised and there has been significant uncertainty in the UK financial
markets, reflecting the more volatile geopolitical landscape. Significantly
the price of gold shot up as investors sought security. As our valuation
methodology utilises public market comparables this has led to some declines
in valuations, mostly modest. Only one, Fluidic Analytics, active in protein
analysis, sadly failed. The rest of the portfolio carries some exciting,
leading investments. One of these, Endomagnetics, is an example of a
remarkable UK breakthrough in cancer location and has been acquired by Hologic
Inc (Nasdaq: HOLX), a global leader in women's health, for approximately $310
million.
Net asset value and results
As at 31 March 2024, the Company's Net Asset Value per share ("NAV") stood at
48.2p, representing a decrease of 3.6p (6.8%) over the year after adding back
dividends paid. In the economic and financial climate of the year, that was to
be expected for early-stage investment, but performance is the key and the
heart of the Company's portfolio continues to progress and financial
performance will follow.
A summary of the total return for Shareholders who invested in the Company's
various other fundraisings is included on page 6 of the annual report.
The loss on ordinary activities after taxation for the year was £8.1 million
(2023: £7.6 million), comprising a revenue loss of £0.2 million (2023: £1.0
million) and a capital loss of £7.9 million (2023: £6.6 million).
Venture capital investments
Portfolio allocation
In line with the strategy that has been pursued in recent years, the Company's
growth technology investments now form a substantial proportion of the
investment portfolio. The split with the older legacy investments at the
year-end is summarised as follows:
Portfolio split as at 31 March 2024
Growth
Technology Legacy Cash Total
£'000 £'000 £'000 £'000
Cost 66,216 10,903 25,102 102,221
Unrealised gains 12,732 2,070 - 14,802
Valuation 78,948 12,973 25,102 117,023
Percentage of portfolio 67.4% 11.1% 21.5% 100.0%
Portfolio activity
There was a steady flow of new investment opportunities from the Manager
during the year. The Company made five new investments and four follow-on
investments totalling £16.4 million.
There was one investment disposal during the year, clearing out past
investments already held at minimal values including that of Lifesize inc,
producing proceeds of nil, and a further escrow payment from the sale of
Roomex UK Limited, producing proceeds of £29,000.
Further details on the investment activity can be found in the Investment
Manager's report below.
Investment valuations
At the year end, the Company held a portfolio of 39 active investments valued
at £91.9 million.
The Board has reviewed the unquoted investment valuations at the year end,
resulting in a number of movements.
There were some significant uplifts over the year in respect of Fords
Packaging, Form3 UK Limited, and Ravelin Technology which contributed £3.3
million between them. There were also some reductions most notably IESO
Digital Health Limited, Evonetix Limited, Fluidic Analytics, Apperio, and
Thought Machine amounting to £7.3 million between them. Additionally, AIM
quoted Access Intelligence plc (now renamed Pulsar) also saw a significant
fall in its share price amounting to £2.1 million. However, since the year
end, and at the time of writing, Pulsar has recovered all of that value as the
AIM market has bounced back.
Overall, the unrealised valuation movements on the portfolio were a net loss
of £6.0 million for the year.
Further commentary on the portfolio, together with a schedule of additions,
disposals and details of the ten largest investments can be found within the
Investment Manager's Report and Review of Investments on pages 11 to 20 of the
annual report.
Dividends
As Shareholders may be aware, the VCT regulations restrict the payment of
dividends out of reserves related to funds raised in the last three to four
years (depending on the date shares were allotted). As the Company has raised
substantial levels of new funds in recent years, the Board needs to manage
reserves carefully in the short term to ensure that this test is not breached,
but as current reserves become available for distribution, the Company intends
to continue a strong dividend policy for current and future subscribing
Shareholders.
The Board is proposing to pay a final dividend of 1.5p per share. This
dividend will be paid, subject to Shareholder approval, on 26 September 2024
to Shareholders on the register at 23 August 2024. This will bring the total
dividends paid in respect of the year to 2.5p per share.
Shareholders are reminded that the Company operates a Dividend Reinvestment
Scheme ("DRIS"), which allows Shareholders to reinvest their dividends in new
shares and obtain income tax relief on that new investment. Further details
can be found under Shareholder Information on page 2 of the annual report.
Fundraising
The Company received £19.5 million in April 2023 in respect of the 2022 Offer
for Subscription.
The Company launched another successful Offer for Subscription in October
2023.
On 5 April 2024, the Company allotted 26,962,656 Ordinary Shares of 5p each at
an average price of 48.99p per Ordinary Share under the terms of the Offer for
Subscription dated 3 October 2023.
On 24 April 2024, the Company allotted 587,656 Shares at a average price of
48.58p per Ordinary Share under the terms of the Offer for Subscription dated
3 October 2023.
At the date of this announcement, a further £2 million has been subscribed
and is awaiting allotment.
The Company expects to launch another Offer for Subscription later this year,
subject to suitable levels of deal flow.
Share Buybacks
The Company has a policy of purchasing its own shares that become available in
the market at a discount of approximately 5% to the latest published NAV,
subject to regulatory and liquidity constraints.
As Shareholders may be aware, the VCT regulations also restrict share buybacks
out of reserves related to funds raised in the last three to four years
(depending on the date shares were allotted).
Buybacks are expected to be undertaken from time to time, and the Board is
working with the Company's broker to ensure that funds are allocated on a fair
basis at any time where demand might exceed the funds available.
Any Shareholders who are considering selling their shares will need to use a
stockbroker. Such Shareholders should ask their stockbroker to register their
interest in selling their shares with Panmure Gordon & Co.
During the year, the Company purchased a total of 1,233,000 shares at an
average price of 48.9p per share. Resolution 13 will be proposed at the AGM,
to renew the authority for the Company to purchase its own shares.
Since the year end, the agreed sale of Endomagnetics has realised
approximately 3x original cost adding a further £6.2 million to the
distributable reserves. This deal gives your Company the flexibility to
increase the level of share buybacks, subject to normal VCT regulatory
qualifying tests.
Directorate
Several of the Board members have now been on the Board for more than the nine
years which is the guideline set by the Corporate Governance Code. With the
significant changes in respect of the investment management of the Company
that have occurred in recent years, it has not been an appropriate time to
make major board changes. After an exercise to identify suitable candidates,
Sally Duckworth was appointed to the Board on 22 January 2024. We were
delighted to welcome Sally and she brings further technology expertise to the
VCT Board having previously had investing and operational roles in the sector.
This is the first step towards a phased succession of the Board and the
process will continue.
Company Secretary
The Board would like to thank Grant Whitehouse who retired as Company
Secretary in February 2024 after over 20 years service. He leaves with our
best wishes and we welcome ISCA Administration Services Limited as our new
Company Secretary.
Annual General Meeting ('AGM')
The AGM will take place at 20 Garrick Street, London WC2E 9BT on 4 September
2024 at 11:15 a.m.
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 issue
shares for the next fundraising that is being planned without having to 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 global economy remains exposed to the effects of the Ukraine and Gaza
conflicts and central banks are showing a reluctance to bring down interest
rates while core inflation remains. However, so far, this collective impact on
the technology sector has been more limited with signs that the trough in
private equity technology valuations may now be behind us. M & A activity
is on the increase, and the Board believes that the portfolio contains many
investments that should be able to take advantage of improving sentiment.
Data from previous downturns suggests that investments made in periods of
economic decline have yielded some of the greatest returns of all vintages for
technology investors. Your Company continues to support innovation through its
fundraising activity, and by offering exposure to investors of privately owned
technology assets in the year.
I look forward to updating Shareholders in the Half Yearly Report which will
be published towards the end of the year.
David Brock
Chairman
26 July 2024
INVESTMENT MANAGER'S REPORT
It has been a busy year for Molten Ventures amid an economic backdrop that has
been challenging for most technology companies and those who invest in them.
Our focus within this context has been on what we can control. We have
maintained discipline around our own investment process and worked closely
with our portfolio companies to extend cash runways, control costs, and retain
talent. The entrepreneurs we have backed continue to transform the industries
in which they operate.
The valuation movements in the first half of the year showed a NAV Total
Return decrease of 3.6% (NAVTR - adding back dividends paid in the period).
In the second half of the year we saw a steadying in the majority of the
company valuations with a decrease in NAVTR of 3.4%.
The resulting outturn for the year was a NAVTR decrease of 6.8%.
Exit Highlight
There were no successful exits in the period. However, post the period end we
were delighted that portfolio company Endomagnetics Ltd ('Endomag'), the VCT's
second highest valued portfolio asset, announced an acquisition offer from
NASDAQ listed Hologic Inc. The acquisition values Endomag at approximately
$310 million and values Molten VCT's stake in Endomag modestly above its last
released September 2023 interim holding value of £8.69 million. This
acquisition completed post-year end and has bolstered the VCTs distributable
reserves which are available for paying dividends and share buybacks.
The VCT first invested in Endomag in 2018 and since then the company has grown
its revenue fourfold. The acquisition demonstrates our ability to support
innovative businesses as they scale and create value for our Shareholders
through the cycle. Endomag's platform has been installed in over 1,350
hospitals in over 45 countries globally, and more than 500,000 women have
received a better standard of breast cancer surgery with Endomag's
technologies. The company received many accolades on its journey and more
recently was awarded the King's Award for Enterprise.
To assist with its future portfolio exit strategy Molten have a relationship
with a leading investment bank advising international technology and climate
companies, developing and executing growth financings and strategic sell-side
M&A. Its CEO is well known to the Molten team having worked on many exits
with Molten partners in the past.
Portfolio
At the year end, Molten technology companies represented 67.4% of the
portfolio and pre-Molten legacy companies 11.1%. The net asset valuation of
£117 million was split 78.5% in investments, and 21.5% in cash and cash
equivalents.
Within the portfolio our view is that, by value, 68% of the portfolio is
performing, or emerging as performing broadly as we might expect. A further
24% are at an early stage of their commercial journey with reasonable
prospects, and the balance require further help to get on to a viable growth
path or exit.
All investments of value get close attention and have investor directors or
observers on their boards. The Molten Partnership Team boasts extensive
cross-sector expertise. Whether facilitating connections or sharing insights,
they are dedicated to supporting growth.
The Molten Platform Team handles investment transactions and post-investment
portfolio engagement. Supported by legal, compliance, investor relations,
finance, and ESG specialists, we work closely to support our portfolio with
branding, regulatory compliance, public markets, governance, and implementing
sustainable ESG strategies as they scale.
Within the portfolio we have 12 companies with revenues or Annual Recurring
Revenue (ARR) above £5 million. Of these 7 companies have revenues/ARR above
£10 million and 5 have revenues above £20 million. *
Valuation movements
Within the year 8 companies had positive valuation uplifts of £4.4 million
and 12 companies had negative valuation movements of £10.4 million.
Positive movements within the portfolio include Form3, Ravelin and Fords
Packaging. Form3 is the largest uplift at £1.3 million followed by Fords
Packaging where a forecast for much improved trading increased the valuation
by £1.2 million.
Detractors are a combination of good companies with sound prospects where in
general valuations set by new investors post VCT investment have declined in
line with the market multiples. The positive is that these companies have cash
reserves to trade forward and grow their businesses.
However, companies in this category do include some companies where the
technology build and commercial roll out has taken longer than expected. This
includes IESO where a provision of £2.6 million was taken as it navigates a
protracted fundraising. While disappointing, the revenue potential from IESO's
technology is very large and if the company can commercialise its new AI
backed 100% digital mental health platform, this could prove to be a very
valuable technology. IESO's other service based business, utilising its unique
database, grew its revenue in the year from single digit to double digit
millions.
Most of our Shareholders will be aware of the development of the Artificial
Intelligence ('AI') market and the positive effect on company valuations for
those companies operating in the sector. Within the VCT portfolio we have a
number of companies developing and leveraging the positive enhancements from
this exciting technology. These include AltruistIQ, BeZero Carbon, Causalens,
Gardin, IESO, Ravelin and Thought Machine, which together represent £20.8
million of value.
* Source: latest management accounts of the companies.
New investments
In the second half of the year one new investment and one follow on investment
was made taking the total investment in the year to £16.4 million. This
compares with a total invested in the previous year of £17.4 million.
New investments alongside the Molten EIS and Molten Ventures plc funds were
made during the year into the following qualifying companies:
Oliva Health Holdings Inc Non clinical mental health solutions £1,627,598
Morressier GmbH Publishers workflow and integrity software £3,162,375
Binalyze OU Cybersecurity forensics and incident response £2,161,115
Melio Healthcare t/a IMU bioscience Immune system bio diagnostics £2,520,000
Anima Group InCare enablement platform £2,653,401
Focal Point Positioning Limited Correlation Software £500,000
Total £12,624,489
AIM Valuations
The VCT has one AIM legacy technology investment. Since the year end it is
pleasing to see a recovery in the share price of AIM listed Pulsar Group plc
LSE:PULS (formerly Access Intelligence until May 2024). The share price has
risen from 54p at the year end to 79p at the time of writing, which at that
price would add a further £2.1 million to the March year end valuation of
£4.2 million.
Deal Flow
At the time of publication two further new and one follow on investment were
completed, with two new investments with agreed term sheets awaiting HMRC
clearance prior to completion. We continue to be disciplined on our approach
to new investments in an environment where valuations have dropped from the
previous highs in 2021. We are actively seeking new investments and supporting
our existing portfolio companies.
Fundraising and other matters
In October 2023 the VCT launched a fundraising offer and to date £16.0
million has been subscribed of which £2.0 million is awaiting allotment at
the time of writing. It is the intention to launch a new fundraising in Q4
this year, subject to suitable levels of deal flow.
The Investment Manager remains an active member of the VCT Association (VCTA)
which represents 14 of the largest VCT fund managers and makes up over 90% of
the £6.6 billion VCT industry. The VCTA worked tirelessly to lobby Government
for an extension of the Sunset Clause on the VCT scheme which is expected to
be extended to 2035 and continues to lobby all political parties as to the
merits of the VCT and EIS tax incentives.
The new Labour government has, whilst in opposition, made very positive noises
about the venture capital sector. Now that it is in government with a very
significant majority and thus a mandate to execute, it has been clear that it
plans to finance its increased spending plans by driving Britain's economic
growth. We are therefore optimistic that the venture capital sector, which
plays a pivotal role in supporting entrepreneurship in the UK may continue to
enjoy government support.
Outlook
Data from previous downturns suggests that investments made in periods of
economic decline have yielded some of the greatest returns of all vintages for
technology investors. We continue to support innovation through our
fundraising activity, and by offering exposure to investors of privately owned
technology assets in the year.
In summary the portfolio remains well diversified among the four technology
investment sectors with companies at different stages of maturity.
With the next financial year showing promise of delivering a more normalised
realisations market we expect divestment proceeds to be meaningfully higher
than the last two years. We remain cautiously optimistic for the year ahead as
the technology markets continue to stabilise.
Elderstreet Investments Limited
Part of the Molten Ventures Group
26 July 2024
REVIEW OF INVESTMENTS
Portfolio of investments
The following investments were held at 31 March 2024. All companies are
registered in England and Wales, with the exception of Fulcrum Utility
Services Limited, which is registered in the Cayman Islands.
Valuation Movement % of portfolio
Cost Valuation in year by value
Largest venture capital investments (by value) £'000 £'000 £'000
Thought Machine Group Limited* 2,400 9,688 (613) 8.3%
Endomagnetics Limited(*) 2,147 8,819 184 7.5%
Form3 UK Limited (formerly Back Office Technology Ltd)(*) 1,420 7,956 1,350 6.8%
Fords Packaging Topco Limited 2,433 7,101 1,234 6.1%
Focal Point Positioning Limited(*) 3,800 6,418 357 5.5%
Global Satellite Vu Limited* 4,089 4,379 274 3.7%
Pulsar Group (formerly Access Intelligence plc)** 2,586 4,156 (2,073) 3.5%
Riverlane Limited(*) 2,661 4,114 - 3.5%
Morressier GmbH (*) 3,162 3,162 - 2.7%
Expanding Circle Limited(*) 2,931 2,931 - 2.5%
Anima Group Limited* 2,653 2,653 - 2.3%
Melio Healthcare Limited* 2,520 2,520 - 2.2%
Juliand Digital(*) 2,439 2,439 - 2.1%
Ravelin Technology Limited* 1,133 2,187 757 1.9%
Binalyze OU* 2,161 2,161 - 1.8%
38,535 70,684 1,470 60.4%
Other venture capital investments 38,584 21,237 (7,440) 18.1%
Cash and cash equivalents 25,102 25,102 - 21.5%
Total investments 102,221 117,023 (5,970) 100.0%
( )
(*)These companies have also received investment from other funds managed by
the Molten Ventures Group (Molten Ventures Plc and Molten Ventures EIS) as at
31 March 2024.
** Quoted on AIM
All venture capital investments are unquoted unless otherwise stated.
Investment movements for the year ended 31 March 2024
Additions
Venture capital investments £'000
Morressier GmbH* 3,162
Global Satellite Vu Limited* 3,112
Anima Group Limited* 2,653
Melio Healthcare Limited* 2,520
Binalyze OU* 2,161
Oliva Health Holdings Inc* 1,628
Focal Point Positioning Limited* 500
Allplants Limited* 400
Apperio Limited* 240
16,376
Disposals
Value at Proceeds Gain/(loss)
Cost 1 April 2022* vs cost
£'000 £'000 £'000 £'000
Venture Capital Investments
Lifesize Inc (formerly Light Blue Optics Limited)* 483 42 - (483)
Roomex UK Limited* - - 29 29
483 42 29 (454)
These investments were revalued over time and until sold with any unrealised
losses included in the fair value of the investments.
*These companies have also received investment from other funds managed by the
Molten Ventures Group (Molten Ventures plc and Molten Ventures EIS) as at 31
March 2024.
DIRECTORS' RESPONSIBILITIES STATEMENT
The Directors are responsible for preparing the Report of the Directors, the
Strategic Report, the Directors' Remuneration Report 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 judgements and accounting estimates that are reasonable and
prudent;
· state whether applicable UK Accounting Standards have been followed,
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, a 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 disclose with
reasonable accuracy at any time the financial position of the Company and
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.
Each of the Directors considers that the Annual Report, taken as a whole, is
fair, balanced and understandable and provides the information necessary for
Shareholders to assess the Company's position, performance, business model and
strategy.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of the financial statements and other information included in annual reports
may differ from legislation in other jurisdictions.
INCOME STATEMENT for the year ended 31 March 2024
Year ended 31 March 2024 Year ended 31 March 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income 980 - 980 1 - 1
Losses on investments - (5,983) (5,983) - (4,926) (4,926)
980 (5,983) (5,003) 1 (4,926) (4,925)
Investment management fees (634) (1,903) (2,537) (542) (1,625) (2,167)
Other expenses (514) - (514) (468) - (468)
Loss on ordinary activities before tax (168) (7,886) (8,054) (1,009) (6,551) (7,560)
Tax on loss - - - - - -
Loss attributable to equity shareholders, being total comprehensive income for
the period
(168) (7,886) (8,054) (1,009) (6,551) (7,560)
Pence Pence Pence Pence Pence Pence
Basic and diluted loss per share (0.1) (3.2) (3.3) (0.5) (3.5) (4.0)
All Revenue and Capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued during the year.
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"). The supplementary revenue and capital return
columns are prepared in accordance with the Statement of Recommended Practice
issued in July 2022 by the Association of Investment Companies ("SORP").
There has been no other comprehensive income in the period.
BALANCE SHEET at 31 March 2024
31 March 31 March
2024 2023
£'000 £'000 £'000 £'000
Fixed assets
Investments 91,921 81,557
Current assets
Debtors 213 27
Cash at bank and in hand 3,226 28,845
Money market funds 21,876 -
25,315 28,872
Creditors: amounts falling due within one year (182) (117)
Net current assets 25,133 28,755
Net assets 117,054 110,312
Capital and reserves
Called up share capital 12,146 10,347
Capital redemption reserve 62 -
Share premium account 25,510 8,689
Merger reserve - -
Special reserve 62,190 65,178
Capital reserve - unrealised 25,886 27,346
Capital reserve - realised (6,471) 853
Revenue reserve (2,269) (2,101)
Total equity shareholders' funds 117,054 110,312
Basic and diluted net asset value per share 48.2p 53.3p
STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2024
Share Capital Share Merger Special Capital Capital Revenue Total
capital Redemption Premium reserve reserve reserve -unrealised reserve - realised reserve
reserve account
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
For the year ended 31 March 2023
At 1 April 2022 8,880 794 56,273 673 5,303 35,220 1,516 (1,092) 107,567
Total comprehensive income - - - - - (3,890) (2,661) (1,009) (7,560)
Transfer between reserves* - - - (673) (3,239) (3,984) 7,896 - -
Cancellation of Share Premium - - (63,628) - 63,628 - - - -
Cancellation of Capital Redemption - (925) - - 925 - - - -
Transactions with owners
Issue of new shares 1,598 - 16,915 - - - - - 18,513
Share issue costs - - (871) - - - - - (871)
Purchase of own shares (131) 131 - - (1,439) - - - (1,439)
Dividends paid - - - - - - (5,898) - (5,898)
At 31 March 2023 10,347 - 8,689 - 65,178 27,346 853 (2,101) 110,312
For the year ended 31 March 2024
At 1 April 2023
Total comprehensive income - - - - - (5,529) (2,357) (168) (8,054)
Transfer between reserves* - - - - (2,385) 4,069 (1,684) - -
Transactions with owners
Issue of new shares 1,861 - 17,837 - - - - - 19,698
Share issue costs - - (1,016) - - - - - (1,016)
Purchase of own shares (62) 62 - - (603) - - - (603)
Dividends paid - - - - - - (3,283) - (3,283)
At 31 March 2024 12,146 62 25,510 - 62,190 25,886 (6,471) (2,269) 117,054
* A transfer of £4.1 million (2023: £4.0 million), representing impairment
losses during the year, as well as cumulative unrealised gains on investments
which were disposed of during the year has been made from the Capital reserve
- unrealised to the Capital Reserve - realised. A transfer of £2.4 million
(2023: £3.2 million), representing realised losses on investment disposals
plus capital expenses in the year, has been made from Capital Reserve -
realised to the Special reserve.
A transfer of £nil (2023: £673,000) from Merger Reserve to Capital
reserve-realised has been made following the disposal of an investment which
was held pre-merger.
A transfer of nil (2023: £63.6 million), from the cancellation of Share
premium, has been made from the Share Premium account to the Special Reserve.
A transfer of nil (2023: 925,000), from the cancellation of Capital
Redemption, has been made from the Capital Redemption Reserve to the Special
Reserve.
STATEMENT OF CASH FLOWS for the year ended 31 March 2024
31 March 31 March
2024 2023
£'000 £'000
Cash flow from operating activities
Investment income received 876 1
Investment management fees paid (2,554) (2,284)
Other cash payments (463) (535)
Net cash outflow utilised in operating activities (2,141) (2,818)
Cash flow from investing activities
Purchase of investments (16,376) (17,370)
Proceeds from disposal of investments 29 7,695
Net cash outflow utilised in investing activities (16,347) (9,675)
Cash flow from financing activities
Equity dividends paid (3,098) (5,898)
Proceeds from share issue 19,513 18,513
Share issue costs (1,067) (873)
Purchase of own shares (603) (1,499)
Net cash inflow generated from financing activities 14,745 10,243
Decrease in cash and cash equivalents (3,743) (2,250)
Cash and cash equivalents at start of year 28,845 31,095
Cash and cash equivalents at end of year 25,102 28,845
Total cash and cash equivalents 25,102 28,845
NOTES
1. Accounting policies
General information
Molten Ventures VCT 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. The Company is a
premium listed entity on the London Stock Exchange.
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 and Venture Capital Trusts" issued in July 2022 ("SORP") and with
the Companies Act 2006.
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 Ukraine and Gaza conflicts
and the cost of living have been considered, more detail on these
considerations can be found within the Corporate Governance report within the
Annual Report. As such, the Board confirms that the Company has adequate
resources to continues 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 within the
Annual Report.
Presentation of Income Statement
In order to better reflect the activities of a Venture Capital Trust, and in
accordance with the SORP, 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
Investments are designated as "fair value through profit or loss" assets, upon
acquisition, due to investments being managed and performance evaluated on a
fair value basis. A financial asset is designated within this category if it
is both acquired and managed, with a view to selling after a period of time,
in accordance with the Company's documented Investment Policy.
Listed fixed income investments and investments quoted on AIM and the Main
Market are measured using bid prices in accordance with the International
Private Equity and Venture Capital Valuation Guidelines ("IPEV").
For unquoted instruments, fair value is established using the IPEV. The
valuation methodologies for unquoted entities used by the IPEV to ascertain
the fair value of an investment are as follows:
· Multiples;
· Industry valuation benchmarks;
· Discounted cash flows or earnings (of underlying business);
· Discounted cash flows (from the investment);
· Net assets; and
· Calibrating to the price of a recent investment.
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 9 of the
Annual Report.
Where an investee company has gone into receivership, liquidation, or
administration (where there is little likelihood of recovery), the loss on the
investment, although not physically disposed of, is treated as being realised.
Permanent impairments in the value of investments are deemed to be realised
losses and held within the Capital Reserve - Realised.
Gains and losses arising from changes in fair value are included in the Income
Statement for the period as a capital item and transaction costs on
acquisition or disposal of the investment expensed.
It is not the Company's policy to exercise significant influence over investee
companies. Therefore, the results of these companies are not incorporated in
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 Investment Manager 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 10 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.
Judgement in applying accounting policies and key sources of estimation
uncertainty
The key estimates 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 year end 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 IPEV.
A price sensitivity analysis of the unquoted investments is provided in note
15 of the Annual Report, under Investment price risk.
Income
Dividend income from investments is recognised when the Shareholders' rights
to receive payment have been established, normally the ex-dividend date.
Interest income is accrued on a timely basis, by reference to the principal
outstanding and at the effective interest rate applicable and only where there
is reasonable certainty of collection. Where previously accrued income is
considered irrecoverable a corresponding bad debt expense is recognised.
Expenses
All expenses are accounted for on an accruals 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 as a capital item.
· 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. The Company has adopted the policy of allocating
investment manager's fees, 75% to capital and 25% to revenue as permitted by
the SORP. The allocation is in line with the Board's expectation of long term
returns from the Company's investments in the form of capital gains and income
respectively.
· Performance incentive fees arising, if any, are treated as a capital
item.
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 which arise.
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 they crystallise based on current tax rates and law. Timing differences
arise from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included in the
accounts.
A deferred tax asset is only recognised to the extent that it is probable
there will be taxable profits in the future against which the asset can be
offset.
Other debtors and other creditors
Other debtors (including accrued income) and other creditors are included
within the accounts at amortised cost.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with
an original maturity of three months or less. This includes £12.9 million in
the JP Morgan GBP Liquidity NAV Fund and £9.0 million in the Blackrock ICS
Sterling Liquidity Fund.
Dividends
Dividends payable are recognised as distributions in the financial statements
when the Company's liability to make payment has been established, typically
when approved by Shareholders at the AGM or, for interim dividends, the
payment date.
Issue costs
Issue costs in relation to the shares issued are deducted from the special
reserve.
Reportable segments
The Company has one reportable segment as the sole activity of the Company is
to operate as a VCT and all of the Company's resources are allocated to this
activity.
2. Basic and diluted return per share
Year to Year to
31 March 31 March
2024 2023
Basic and diluted loss per share (3.3p) (4.0p)
Return per share based on:
Net revenue loss for the financial year (£'000) (168) (1,009)
Net capital loss for the financial year (£'000) (7,886) (6,551)
Total losses or the financial year (£'000) (8,054) (7,560)
Weighted average number of shares in issue 242,863,047 190,419,643
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 basic and diluted return per share.
3. Basic and diluted net asset value per share
31 March 2024 31 March 2023
Number in issue as at 31 March Net asset value Net asset value
2024 Pence Pence
2023 per share £'000 per share £'000
Ordinary Shares 242,913,196 206,931,912 48.2 117,054 53.3 110,312
As the Company has not issued any convertible securities or share options,
there is no dilutive effect on net asset value per share. The net asset value
per share disclosed therefore represents both basic and diluted net asset
value 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:
· Market 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.
Market risks
As a VCT, the Company is exposed to investment risks in the form of potential
losses 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 investment activities undertaken by the Investment Manager and
overseen by the Board. The Manager 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 Manager 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; and
· Interest rate 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 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 and
on liquidity funds at rates based on the underlying investments. Investments
in loan notes and fixed interest investments attract interest predominately at
fixed rates. A summary of the interest rate profile of the Company's
investments is shown below.
Interest rate risk 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 Bank
of England base rate and comprise cash at bank and money market funds.
· "No interest rate" assets do not attract interest and comprise equity
investments, 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.
Credit risk
Credit risk is the risk that a 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 notes in
investee companies, investments in fixed income securities, cash deposits and
debtors.
The Manager manages credit risk in respect of loan notes with a similar
approach as described under interest rate risk above. In addition, the credit
risk is partially mitigated by registering floating charges over the assets of
certain 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 interest, dividends
and other receivables is covered within the investment management procedures.
Cash of £3.3 million is held at Bank of Scotland plc, which is an A rated
financial institution. In addition the Company holds £21.9 million in money
market funds. Consequently, the Directors consider that the risk profile
associated with cash deposits is low.
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 (31 March 2024:
£182,000, 31 March 2023: £117,000) and has no borrowings. 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 Manager, in line
with guidance agreed with the Board and is reviewed by the Board at regular
intervals.
5. Transactions with related parties and Investment Manager
Nicholas Lewis is a partner of Downing LLP, which provided administration
services to the Company for the year to 31 March 2024. During the year,
£75,000 (2023: £100,000) was due to Downing LLP in respect of these
services. As at 31 March 2024, £nil (2023: £nil) was outstanding and
payable.
Richard Marsh is an employee of Molten Ventures plc, the parent company of
Elderstreet Investments Limited. Elderstreet Investments Limited provided
investment management services to the Company. During the year, £2.5 million
(2023: £2.2 million) was due in respect of these services. No performance
incentive fees were paid to Elderstreet Investments Limited in respect of the
year under review (2023: £nil). As at 31 March 2024, £27,000 (2023:
£17,000) was outstanding and payable.
6. Events after the end of the reporting period
On 5 April 2024, the Company allotted 26,962,656 Ordinary Shares of 5p each at
an average price of 48.99p per Ordinary Share under the terms of the Offer for
Subscription dated 3 October 2023.
The Company also allotted 300,379 Ordinary Shares of 5p each in respect of
Shareholders who agreed to subscribe for shares under the terms of the
Company's Dividend Reinvestment Scheme ("DRIS") in respect of the dividend of
1p per Ordinary Share paid on 5 April 2024. The shares were issued at 47.27p
per share (being the unaudited adjusted net asset value as of 4 April 2024,
which has been adjusted down for payment of the 1p dividend on 5 April 2024).
On 24 April 2024, the Company allotted 587,656 Shares at an average price of
48.58p per Ordinary Share under the terms of the Offer for Subscription dated
3 October 2023.
Since the year end, the Company bought back 1,047,051 of its own Ordinary
Shares at a price 44.91p per share. These shares were subsequently cancelled.
The issued share capital and total voting rights of the Company is now
269,716,836 Ordinary Shares.
Since the year end, the Company has made unquoted investments in three
companies totalling £3.0 million.
On 26 July 2024, the Company received proceeds of £8.3 million from the
acquisition of Endomag by Hologic inc.
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 2024 but has been extracted
from the statutory financial statements for the year ended 31 March 2024 which
were approved by the Board of Directors on 26 July 2024 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 s498(2) and (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2023 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 s498(2) and (3) of the Companies Act 2006.
A copy of the full annual report and financial statements for the year ended
31 March 2024 will be printed and posted/emailed to shareholders shortly.
Copies will also be available to the public at the registered office of the
Company at The Office Suite, Den House, Den Promenade, Teignmouth TQ14 8SY and
will be available for download from www.moltenventures.com
(http://www.moltenventures.com) .
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