Kings Arms Yard VCT PLCAnnual Financial ReportLEI Code 213800DK8H27QY3J5R45The Company is a Venture Capital Trust and the investment policy is intended to produce a regular and predictable dividend stream with an appreciation in capital value.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 share(pence per share)In the year to 31 December 2023, the Company delivered a positive total return of 0.42 pence per share, which equates to a 2.2% shareholder return. Despite facing a backdrop of macroeconomic and geopolitical uncertainty, which will likely persist in the short-term, the Board continues to be encouraged by the progress being made by many of the portfolio companies, supported by an increase in young companies looking for funding. We expect the continuing digitalisation strategies of corporate and healthcare customers to create attractive long-term investment opportunities, despite the current economic headwinds.As at 31 December 2023, the net asset value (“NAV”) was £105.5 million or 20.37 pence per share, compared to £104.0 million or 20.95 pence per share at 31 December 2022. The total return before taxation was £2.1 million compared to a return of £0.7 million for the previous year. Further details of the progress of a number of our portfolio companies are discussed later in this statement.The Company had a number of realisations in the year, with proceeds totalling £2.8 million, leading to realised gains of £0.6 million. The most notable exit in the year was the sale of Ophelos, generating £1.5 million in proceeds, and achieving a 2.1x return on cost.On 12 March 2024, a NAV update was announced with a 0.71 pence per share uplift, representing a 1.0% increase on the 31 December 2023 NAV. This uplift is a result of terms being agreed for the sale of a company within the portfolio, however there is no certainty that this deal will complete.The Company faces 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 how it manages its cash.It remains the Board’s primary objective to maintain sufficient resources for investment in existing and new portfolio companies and for the continued payment of dividends to shareholders. The Board’s policy is to buy back shares in the market, subject to the overall constraint that such purchases are in the Company’s interest.Simon Thorpe was appointed to the Board on 1 September 2023, and brings a wealth of knowledge and experience to the Board. Simon is a qualified Chartered Accountant and former chairman and director of Cambridge Angels with extensive experience of analysing and investing in early-stage public and private companies in the technology and technology enabled healthcare sectors.On 16 March 2023, the Board announced the closure of the 2022/23 Top Up Offer having reached its £12.5 million limit.The AGM will be held virtually at noon on 4 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, and with the outgoing auditors approaching the maximum period a firm can act as auditor, Johnston Carmichael LLP (“Johnston Carmichael”) was appointed 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 Annual General Meeting.In order to closer align with the identity of the other VCTs managed by Albion Capital Group LLP, the Board is pleased to announce a change in the Company’s name to Albion KAY VCT PLC, which is expected to take place later this year.The Board is pleased with the positive return for the year, which highlights the resilience of the Company’s portfolio in a challenging climate and supports our emphasis on structural growth trends within the technology and healthcare sectors. We continue to minimise exposure to discretionary consumer expenditure, which should strengthen the Company’s resilience during uncertain economic times. The Manager’s ability to deploy cash into promising new companies has also been encouraging, with five new investments completed during the year.Chairman
19 April 2024The Company operates as a Venture Capital Trust. This means that the Company has no employees and has outsourced the management of all its operations to Albion Capital Group LLP, including secretarial and administrative services. Further details of the Management agreement can be found below.A review of the Company’s business during the year is set out in the Chairman’s statement.The Directors believe that the following KPIs and APMs, which are typical for Venture Capital Trusts, used in their 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 its adjusted share capital and reserves. The Directors do not currently have any intention to utilise gearing for the Company.The Company has delegated the investment management of the portfolio to Albion Capital Group LLP, which is authorised and regulated by the Financial Conduct Authority. Albion Capital Group LLP also provides company secretarial and other accounting and administrative support to the Company.Under the Investment Management Agreement, Albion Capital Group LLP provides investment management, company secretarial and administrative services to the Company. Albion Capital Group LLP is entitled to an annual management fee of 2% of net asset value of the Company, payable quarterly in arrears, along with an annual administration fee of £50,000.As an incentive to maximise the return to investors, the Manager would receive an incentive fee in the event that the returns exceed minimum target levels.The Board has evaluated the performance of the Manager based on:• the continuing achievement of the HMRC tests for VCT status;
• the long term prospects of the current portfolio of investments;
• the management of treasury, including use of buy-backs and participation in fund raising; and
• benchmarking the performance of the Manager to other service providers including the performance of other VCTs that
the Manager is responsible for managing.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.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:●      Global greenhouse gas emissions
●      Anti-bribery
●      Anti-facilitation of tax evasion
●      DiversityThe 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 year ended 31 December 2023, 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 rising volatility in world markets. The full impacts of these risks are likely to continue to be uncertain for some time.Chairman
19 April 2024Chairman
19 April 2024Chairman31 December 202331 December 2022The 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 46 of the full Annual Report and Financial Statements.The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment policy, and information about the portfolio is provided internally on that basis to the Board.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.Income from fixed term funds is recognised on an accruals basis using the rate of interest agreed with the bank.Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.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 reserve accounts for the nominal value of the shares.This reserve accounts for the difference between the price paid for the Company’s shares and the nominal value of those shares, less issue costs.This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company’s own shares.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:•      finance income in respect of the unwinding of the discount on deferred consideration that is not distributable as a matter of law;
•        expenses, together with the related taxation effect, charged in accordance with the above policies; and
•        dividends paid to equity holders where paid out by capital.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 in the period in which the dividend is paid or approved at the AGM.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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£’000£’000£’000Unquoted equity and preference shares£’000£’000Valuation methodology£’000£’000(2022 to 2023)31 December 2023£’000based on current trading£’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 ordinarily take a controlling interest or become involved in the management. The size and structure of 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£’000£’000(£’000)(pence per share)(£’000)(pence per share)allotted(£’000)(pence per share)(£’000)(pence per share)The Company’s capital comprises Ordinary shares as described in note 14. The Company is permitted to buy back its own shares for cancellation or treasury purposes and this policy is described in more detail in the Chairman’s statement.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.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 the profit before tax for the year by approximately £232,000 (2022: £300,000). Furthermore, it is considered that a material fall of 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 an amount equal to its adjusted capital and reserves of the latest published audited Balance sheet, being £102,607,000 (2022: £101,256,000).£’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 (including debtors due after more than one year), payables and cash which are carried at amortised cost, in accordance with FRS 102. 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.As at 31 December 2023, the Company had no financial commitments (2022: £nil).Since the year end, the Company has had the following material post balance sheet events:allotted(£’000)(pence per share)(£’000)(pence per share)Other than transactions with the Manager as disclosed in note 4, and the Directors’ remuneration disclosed in the Directors’ remuneration report on page 61 of the full Annual Report and Financial Statements there are no related party transactions or balances requiring disclosure.
(GlobeNewsWire)