Albion Development VCT PLCAnnual Financial ReportThe Company will invest in a broad portfolio of higher growth businesses with a stronger focus on technology companies across a variety of sectors of the UK economy. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified in terms of sector and stage of maturity of company.Risk is spread by investing in a number of different businesses within venture capital trust qualifying industry sectors using a mixture of securities. The maximum amount which the Company will invest in a single portfolio company is 15% of the Company’s assets at cost thus ensuring a spread of investment risk. The value of an individual investment may increase over time as a result of trading progress and it is possible that it may grow in value to a point where it represents a significantly higher proportion of total assets prior to a realisation opportunity being available.^{††pence per sharepence per shareAs at 31 December 2023 the net asset value was 88.70 pence per share compared to 88.65 pence per share as at 31 December 2022. The total gain before taxation was £5.8 million compared to a loss of £2.3 million for the previous year.The results for the year showed net gains on investments of £7.3 million, compared with net losses of £0.6 million for the previous year. The results are largely driven by unrealised gains across the portfolio together with realised gains from successful exits during the year. Quantexa, the largest company within our portfolio (18.6% of net asset value), increased its value in the year by £10.0m following an externally led $129 million Series E fundraising which completed in April 2023 and a part disposal in October 2023, which is detailed below. The other largest contributors to the net gain were unrealised gains in Egress Software Technologies by £1.5 million and Proveca by £0.7 million, and a realised gain in Ophelos by £0.6 million following its sale. These gains have been partially offset by unrealised losses, including a £1.7 million loss in Black Swan Data and £0.8 million in Threadneedle Software Holdings (T/A Solidatus).The Company faces a number of significant risks, including higher interest rates, high levels of inflation and the ongoing impact of geopolitical tensions. This complex backdrop is factored into how the Company is managed, including its management of cash.On 9 March 2023, the Board announced the closure of the 2022/23 Top Up Offer having reached its £13.0 million limit.The AGM will be held virtually at noon on 20 June 2024 via the Lumi platform. Information on how to participate in the live webcast can be found on the Manager’s website www.albion.capital/vct-hub/agms-events.Following a formal and rigorous audit tender process, the Board appointed Johnston Carmichael LLP (“Johnston Carmichael”) as the new Auditor of the Company in October 2023. Johnston Carmichael has conducted the audit of the Annual Report and Financial Statements for the year ended 31 December 2023. Shareholders will be asked to confirm the appointment of Johnston Carmichael at the forthcoming AGM. During the audit tender process, prospective auditors were evaluated using guidance issued by the Financial Reporting Council in February 2017 and the Board completed a two-stage process which considered and evaluated relevant expertise, audit firm quality, audit firm resilience and value for money.Chairman
19 April 2024The Company will invest in a broad portfolio of higher growth businesses with a stronger focus on technology companies across a variety of sectors of the UK economy. Allocation of assets will be determined by the investment opportunities which become available but efforts will be made to ensure that the portfolio is diversified in terms of sector and stage of maturity of company.A detailed review of the Company’s business during the year is contained in the Chairman’s statement. The results for the year to 31 December 2023 show total shareholder value per share of 206.78 pence per share since launch (2022: 202.22 pence per share).The Directors believe that the following KPIs and APMs, which are typical for Venture Capital Trusts, used in its own assessment of the Company, will provide shareholders with sufficient information to assess how effectively the Company is applying its investment policy to meet its objectives. The Directors are satisfied that the results shown in the following KPIs and APMs give a good indication that the Company is achieving its investment objective and policy.As defined by the Articles of Association, the Company’s maximum exposure in relation to gearing is restricted to 10% of the share capital and reserves adjusted for any dividends declared. Although the investment policy permits the Company to borrow, the Directors do not currently have any intention of utilising long-term gearing and have not done so in the past.The Company has delegated the investment management of the portfolio to the Manager, Albion Capital Group LLP, which is authorised and regulated by the Financial Conduct Authority. The Manager also provides company secretarial and other accounting and administrative support to the Company.Under the Investment Management agreement (“IMA”), the Manager provides investment management, company secretarial and administrative services to the Company. The IMA can be terminated by either party on 12 months’ notice and is subject to earlier termination in the event of certain breaches or on the insolvency of either party. The Manager is paid an annual fee equal to 2.25% of the net asset value of the Company paid quarterly in arrears.In order to align the interests of the Manager and shareholders with regards to generating positive returns, the Company has a Management performance incentive arrangement with the Manager. Under the incentive arrangement, the Company will pay an incentive fee to the Manager of an amount equal to 20% of any excess return that is calculated for each financial year.The Board has evaluated the performance of the Manager based on:The Board appointed the Manager as the Company’s AIFM in 2014 as required by the AIFMD. The Manager is a full-scope Alternative Investment Fund Manager under the AIFMD. Ocorian Depositary (UK) Limited is the appointed Depositary and oversees the custody and cash arrangements and provides other AIFMD duties with respect to the Company.The FCA’s Consumer Duty came into effect from 31 July 2023. These rules set a higher standard of consumer protection in financial services. The Manager as AIFM is within scope of the FCA’s Consumer Duty, but the Company itself is not.Under Section 172 of the Companies Act 2006, the Board has a duty to promote the success of the Company for the benefit of its members as a whole in both the long and short term, having regard to the interests of other stakeholders in the Company, such as suppliers, and to do so with an understanding of the impact on the community and environment and with high standards of business conduct, which includes acting fairly between members of the Company.The Company has adopted a number of further policies relating to:The Board carries out a regular review of the risk environment in which the Company operates, together with changes to the environment and individual risks. The Board also identifies emerging risks which might impact on the Company. In the period the most noticeable risks have been the emergence of rising interest rates and inflation, caused in part as a result of the geopolitical tensions, and pricing volatility in world markets. The full impacts of these risks are likely to continue to be uncertain for some time.Whilst the Company itself has limited impact on climate change, due to no employees nor greenhouse gas emissions, the Board works closely with the Manager to ensure the Manager itself is working towards reducing its impact on the environment, and that the Manager takes account of ESG factors, including climate change, when making new investment decisions. With specific reference to the Company, a key operation is increasing the use of electronic communications with Shareholders.In accordance with the FRC UK Corporate Governance Code published in 2018 and provision 36 of the AIC Code of Corporate Governance, the Directors have assessed the prospects of the Company over three years to 31 December 2026. The Directors believe that three years is a reasonable period in which they can assess the ability of the Company to continue to operate and meet its liabilities as they fall due. This is the period used by the Board as part of its strategic planning process, which includes: the estimated timelines for finding, assessing and completing investments; the potential impact of any new regulations; and the availability of cash.This Strategic report of the Company for the year ended 31 December 2023 has been prepared in accordance with the requirements of section 414A of the Companies Act 2006 (the “Act”). The purpose of this report is to provide Shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their duty to promote the success of the Company in accordance with Section 172 of the Act.Chairman
19 April 2024Chairman
19 April 2024Chairman
Company number: 03654040capital31 December 2023£’00031 December 2022
£’000The Financial Statements have been prepared in accordance with applicable United Kingdom law and accounting standards, including Financial Reporting Standard 102 (“FRS 102”), and with the Statement of Recommended Practice “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (“SORP”) issued by The Association of Investment Companies (“AIC”). The Financial Statements have been prepared on a going concern basis and further details can be found in the Directors’ report on page 45 of the full Annual Report and Financial Statements.Fixed asset investmentsThe Company’s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.Receivables (including debtors due after more than one year), payables and cash are carried at amortised cost, in accordance with FRS 102. Debtors due after more than one year meet the definition of a financing transaction held at amortised cost, and interest will be recognised through capital over the credit period using the effective interest method. There are no financial liabilities other than payables.Dividend incomeDividend income is included in revenue when the investment is quoted ex-dividend.Fixed returns on non-equity shares and debt securities are recognised when the Company’s right to receive payment and expect settlement is established. Where interest is rolled up and/or payable at redemption then it is recognised as income unless there is reasonable doubt as to its receipt.Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.Funds income is recognised on an accruals basis using the agreed rate of interest.All expenses have been accounted for on an accruals basis. Expenses are charged through the other distributable reserve except the following which are charged through the realised capital reserve:Taxation is applied on a current basis in accordance with FRS 102. Current tax is tax payable/(refundable) in respect of the taxable profit/(tax loss) for the current period or past reporting periods using the tax rates and laws that have been enacted or substantively enacted at the financial reporting date. Taxation associated with capital expenses is applied in accordance with the SORP.Called-up share capitalThis accounts for the nominal value of the Company’s shares.This accounts for the difference between the price paid for shares and the nominal value of those shares, less issue costs and transfers to the other distributable reserve.Increases and decreases in the valuation of investments held at the year end against cost are included in this reserve.The following are disclosed in this reserve:The special reserve, treasury share reserve and the revenue reserve were combined in 2012 to form a single reserve named other distributable reserve.Dividends by the Company are accounted for when the liability to make the payment (record date) has been established.The Directors are of the opinion that the Company is engaged in a single operating segment of business, being investment in smaller companies principally based in the UK.31 December 2023£’00031 December 2022
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£’000The amounts paid to and on behalf of the Directors during the year are as follows:31 December 2023£’00031 December 2022
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£’000(i)(ii)31 December 202331 December 2022£’000£’000£’000£’000£’000£’00031 December 2023£’000£’000£’000The principal activity of the Company is to select and hold a portfolio of investments in unquoted securities. Although the Company, through the Manager, will, in some cases, be represented on the board of the portfolio company, it will not take a controlling interest or become involved in the management of a portfolio company. The size and structure of the companies with unquoted securities may result in certain holdings in the portfolio representing a participating interest without there being any partnership, joint venture or management consortium agreement.£’000£’000£’000£’000Date of allotmentThe Company’s capital comprises Ordinary shares as described in note 15. The Company is permitted to buy back its own shares for cancellation or treasury purposes.As a Venture Capital Trust, it is the Company’s specific nature to evaluate the market risk of its portfolio in unquoted companies. Market risk is the exposure of the Company to the revaluation and devaluation of investments as a result of macroeconomic changes. The main driver of market risk is the dynamics of market quoted comparators, as well as the financial and operational performance of portfolio companies. The Board seeks to reduce this risk by having a spread of investments across a variety of sectors. More details on the sectors the Company invests in can be found in the pie chart at the end of this announcement.Investment risk (including investment price risk) is the risk that the fair value of future investment cash flows will fluctuate due to factors specific to an investment instrument or to a market in similar instruments. The management of risk within the venture capital portfolio is addressed through careful investment selection, by diversification across different industry segments, by maintaining a wide spread of holdings in terms of financing stage and by limitation of the size of individual holdings. The Manager receives management accounts from portfolio companies and members of the investment management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and management of investment risk. The Directors monitor the Manager’s compliance with the investment policy, review and agree policies for managing this risk and monitor the overall level of risk on the investment portfolio on a regular basis.It is the Company’s policy to accept a degree of interest rate risk on its financial assets through the effect of interest rate changes. On the basis of the Company’s analysis, it is estimated that a rise of 1% in all interest rates would have increased total return before tax for the year by approximately £244,000 (2022: £218,000). Furthermore, it was considered that a material fall in interest rates below current levels during the year would have been unlikely.£’000£’000£’000£’000£’000£’000Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Company is exposed to credit risk through its receivables, investment in unquoted loan stock and through the holding of cash on deposit with banks.Liquid assets are held as cash on current account, deposit or short term money market accounts or similar instruments. Under the terms of its Articles, the Company has the ability to borrow up to 10% of its adjusted capital and reserves of the latest published audited Balance sheet, which amounts to £11,630,000 as at 31 December 2023 (2022: £11,143,000).£’000£’000£’000£’000£’000£’000£’000£’000All the Company’s financial assets and liabilities as at 31 December 2023 are stated at fair value as determined by the Directors, with the exception of receivables, payables and cash which are carried at amortised cost. There are no financial liabilities other than payables. The Company’s financial liabilities are all non-interest bearing. It is the Directors’ opinion that the book value of the financial liabilities is not materially different to the fair value and all are payable within one year.Since the year end, the Company has had the following material post balance sheet events:Other than transactions with the Manager as disclosed in note 5, and the Directors’ remuneration disclosed in the Directors’ remuneration report on pages 59 to 62 of the full Annual Report and Financial Statements, there are no other related party transactions or balances requiring disclosure.The information set out in this announcement does not constitute the Company’s statutory accounts within the terms of section 434 of the Companies Act 2006 for the years ended 31 December 2023 and 31 December 2022, and is derived from the statutory accounts for those financial years, which have been, or in the case of the accounts for the year ended 31 December 2023, which will be, delivered to the Registrar of Companies. The Auditor reported on those accounts; the reports were unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.The full audited Annual Report and Financial Statements are being sent to shareholders and copies will be made available to the public at the registered office of the Company, Companies House, the National Storage Mechanism and also electronically at www.albion.capital/funds/AADV/31Dec2023.pdf.
(GlobeNewsWire)}