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Albion Development VCT PLC: Half-yearly Financial Report

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Albion Development VCT PLC

LEI Code 213800FDDMBD9QLHLB38

As required by the UK Listing Authority's Disclosure Guidance and Transparency Rule 4.2, Albion Development VCT PLC today makes public its information relating to the Half-yearly Financial Report (which is unaudited) for the six months to 30 June 2021. This announcement was approved by the Board of Directors on 8 September 2021.

The full Half-yearly Financial Report (which is unaudited) for the period to 30 June 2021 will shortly be sent to shareholders and will be available on the Albion Capital Group LLP website by clicking www.albion.capital/funds/AADV/30Jun2021.pdf.

Investment policy

The 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.

Funds held pending investment or for liquidity purposes will be held as cash on deposit or up to 8 per cent. of its assets, at the time of investment, in liquid open-ended equity funds providing income and capital equity exposure (where it is considered economic to do so).

Risk diversification and maximum exposures

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 per cent. 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.

The Company's maximum exposure in relation to gearing is restricted to 10 per cent. of the adjusted share capital and reserves.

Background to the Company

The Company is a Venture Capital Trust which raised a total of £33.3 million through the issue of shares between 1999 and 2004. The C shares merged with the Ordinary shares in 2007. A further £6.3 million was raised through an issue of new D shares in 2010. The D shares converted to Ordinary shares in 2015.

An additional £55.0 million has been raised for the Ordinary shares through the Albion VCTs Top Up Offers since January 2011.

Financial calendar

Record date for second dividend for the year

10 September 2021

Payment date for second dividend for the year

30 September 2021

Financial year end

31 December

Financial highlights

Ordinary shares

Unaudited six months ended
30 June 2021
(pence per share)

Unaudited six months ended
30 June 2020
(pence per share)

Audited year ended
31 December 2020
(pence per share)

Opening net asset value

82.42

83.47

83.47

Capital return/(loss)

12.93

(2.03)

3.15

Revenue (loss)/return

(0.46)

0.08

0.02

Total return/(loss)

12.47

(1.95)

3.17

Dividends paid

(2.06)

(2.25)

(4.24)

Impact from share capital movements

(0.42)

0.03

0.02

Net asset value

92.41

79.30

82.42

Total dividends paid to 30 June 2021

106.55

Net asset value as at 30 June 2021

92.41

Total shareholder value to 30 June 2021

198.96

The total shareholder value table above is for the Company, Albion Development VCT PLC Ordinary shares only. Details of the financial performance of the C shares and D shares, which have been merged into the Ordinary shares, can be found at www.albion.capital/funds/AADV under the ‘Financial summary for previous funds’ section.

A more detailed breakdown of the dividends paid per year can be found at www.albion.capital/funds/AADV under the ‘Dividend History’ section.

In addition to the dividends summarised above, the Board has declared a second dividend for the year ending 31 December 2021, of 2.31 pence per Ordinary share to be paid on 30 September 2021 to shareholders on the register on 10 September 2021.

Interim management report

Introduction

The Company has had a strong six months to 30 June 2021, with a total return of 12.47 pence per share, and the net asset value (“NAV”) increasing to 92.41 pence per share, representing a 14.6% return on opening NAV (after adjusting for the dividend paid). Our portfolio companies are demonstrating the value they provide to their customers as the economy emerges from the pandemic.

Valuations and results

There is a £12.5 million total return for the six months to 30 June 2021 compared to a total loss of £1.8 million for the same period in the previous year. The successful series D fundraise in Quantexa and series C fundraise in Oviva have been the major contributors to the positive return. However, we have also seen many of our other portfolio companies performing well. For example, one of our portfolio companies, Arecor Therapeutics, listed onto the AIM stock exchange during the period which led to an increase in value of £0.3 million. Our top 10 portfolio companies, which now account for 50.2% of net asset value, increased in value by £13 million.

There have also been write-downs in our portfolio, the largest being Mirada (£0.5 million) and Abcodia (£0.3 million), both of which operate in the healthcare sector. Mirada’s ability to sell its software to hospitals has been hampered by Covid-19 and Abcodia was impacted by disappointing clinical trial results.

The period saw disposals with proceeds totalling £2.9 million, which has led to realised gains of £1.7 million. The principal exit was the sale of OmPrompt Holdings in March which resulted in a return of 2.3 times cost, and generated proceeds of £2.3 million. SBD Automotive was also sold generating 2.1 times cost. Further details on these disposals can be found in the table below.

Further details of the portfolio of investments can be found below.

Dividends and results

In line with our variable dividend policy targeting around 5% of NAV per annum, the Company paid a dividend totalling 2.06 pence per share during the period to 30 June 2021 (30 June 2020: 2.25 pence per share). The Company will pay a second dividend for the financial year ending 31 December 2021 of 2.31 pence per share on 30 September 2021 to shareholders on the register on 10 September 2021, being 2.5% of the latest reported NAV.

This will bring the total dividends paid for the year ending 31 December 2021 to 4.37 pence per share, which equates to a 5.3% yield on the opening NAV of 82.42 pence per share.

Investment activity

During the period the Company has invested £4.7 million into new and existing portfolio companies, with new investments comprising:

  • £1.2 million into Threadneedle Software Holdings (trading as Solidatus) a provider of data lineage software to enterprise customers in regulated sectors, which allows them to rapidly discover, visualise, catalogue and understand how data flows through their systems;

  • £0.5 million into Gravitee TopCo (trading as Gravitee.io) an API management platform;

  • £0.4 million into NuvoAir a provider of digital therapeutics and decentralised clinical trials for respiratory conditions;

  • £0.3 million into Brytlyt which uses patented software and AI, combined with the superior computation power of graphics processing units (GPUs), to derive insights 1,000s of times faster than legacy systems; and

  • £0.2 million into Accelex Technologies (trading as Accelex) a data extraction and analytics technology for private capital markets.

A further £2.0 million was invested in existing portfolio companies, including £0.6 million into Black Swan to support the restructure of its business to focus primarily on predictive analytics for consumer brands, and £0.6 million into Healios to continue providing psychological care to children and adolescents using a family centric approach.

The pie chart at the end of this announcement illustrates the composition of the portfolio by industry sector as at 30 June 2021.

Share buy-backs

It remains the Board’s policy to buy-back shares in the market, subject to the overall constraint that such purchases are in the Company’s interest. This includes the maintenance of sufficient cash resources for investment in new and existing portfolio companies and the continued payment of dividends to shareholders.

It is the Board’s intention that such buy-backs should be at around a 5% discount to net asset value, in so far as market conditions and liquidity permit.

Transactions with the Manager

Details of transactions with the Manager for the reporting period can be found in note 5. Details of related party transactions can be found in note 11.

Risks and uncertainties

The longer term implications of the Covid-19 crisis is the key risk facing the Company, including its impact on the UK and Global economies. The risk of potential implications of the UK’s departure from the European Union adversely affecting our underlying portfolio companies appears to be reducing. The Manager is continually assessing the exposure to such risks for each portfolio company, and where possible appropriate mitigating actions are being taken.

The increasing maturity and success of some of our portfolio companies has resulted in a high concentration in our top 10, which may result in further volatility in the future.

Other principal risks and uncertainties remain unchanged and are as detailed in note 13.

Albion VCTs Top Up Offers

As announced in the Annual Report and Financial Statements for the year ended 31 December 2020, the Board was pleased to close the 2020/21 Offer, fully subscribed, having raised £10 million.

The proceeds are being used to provide support to our existing portfolio companies and to enable us to take advantage of new and exciting investment opportunities as they arise, five of which are detailed above. Details on the share allotments during the period can be found in note 8.

Shareholder seminar

The Board is pleased to report that the current intention of the Manager, Albion Capital, is to host a physical rather than virtual shareholder seminar this year on 12 November 2021, in central London with the venue to be confirmed. This will be dependent on government guidelines and any changes thereof, and we will keep shareholders informed as the date approaches. The Board and Manager are keen to interact with shareholders and look forward to sharing with you further portfolio updates, as well as answering any questions.

More details will shortly be available on the Albion Capital website: www.albion.capital.

Prospects

The Board is encouraged by the performance of the portfolio as a whole and the prospects for the companies within it. The availability of new investments is strong, demonstrated by the five new investments in the past six months, and the Company continues to invest into exciting new companies with a focus on B2B software and healthcare. We therefore believe that the Company’s portfolio continues to have the potential to deliver attractive returns to shareholders over the long term.

Ben Larkin

Chairman

8 September 2021

Responsibility statement

The Directors, Ben Larkin, Lyn Goleby, Lord O’ Shaughnessy and Patrick Reeve, are responsible for the preparation of the Half-yearly Financial Report. In preparing these condensed Financial Statements for the period to 30 June 2021 we, the Directors of the Company, confirm that to the best of our knowledge:

(a) the condensed set of Financial Statements, which has been prepared in accordance with Financial Reporting Standard 104 “Interim Financial Reporting”, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company as required by DTR 4.2.4R;

(b) the Interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the Interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties’ transactions and changes therein).

This Half-yearly Financial Report has not been audited or reviewed by the Auditor.

For and on behalf of the Board

Ben Larkin

Chairman

8 September 2021

Portfolio of investments

As at 30 June 2021

Fixed asset investments

% voting rights

Cost
£’000

Cumulative movement in value
£’000

Value
£’000

Change in value for the period*
£’000

Quantexa Limited

2.3

2,101

12,768

14,869

7,844

Egress Software Technologies Limited

6.9

2,332

5,780

8,112

519

Proveca Limited

11.8

1,829

5,674

7,503

1,053

Oviva AG

3.3

1,151

2,479

3,630

2,154

Radnor House School (TopCo) Limited

8.5

1,560

1,152

2,712

87

Black Swan Data Limited

6.9

2,213

259

2,472

892

Chonais River Hydro Limited

4.6

1,705

600

2,305

(5)

The Street by Street Solar Programme Limited

12.4

1,291

973

2,264

(174)

The Evewell Group Limited

5.4

1,073

1,007

2,080

736

Regenerco Renewable Energy Limited

11.9

1,204

713

1,917

(135)

Phrasee Limited

3.1

712

1,141

1,853

894

Panaseer Limited

3.1

1,122

534

1,656

(30)

Healios Limited

3.3

847

522

1,369

(67)

MyMeds&Me Limited

9.9

940

276

1,216

322

Threadneedle Software Holdings Limited (T/A Solidatus)

2.0

1,209

-

1,209

-

Alto Prodotto Wind Limited

9.4

696

439

1,135

(55)

Aridhia Informatics Limited

5.8

1,129

(101)

1,028

201

Convertr Media Limited

6.2

992

36

1,028

5

Cantab Research Limited (T/A Speechmatics)

1.7

685

338

1,023

338

Albion Investment Properties Limited

68.2

929

74

1,003

26

MPP Global Solutions Limited

3.0

1,000

-

1,000

-

uMotif Limited

3.2

941

58

999

-

Beddlestead Limited

8.6

1,026

(253)

773

93

InCrowd Sports Limited

4.3

545

195

740

206

Arecor Therapeutics PLC (previously Arecor Limited)

1.1

387

339

726

339

Limitless Technology Limited

2.4

648

65

713

-

Cisiv Limited

7.6

686

(27)

659

217

Elliptic Enterprises Limited

0.8

639

12

651

12

Innovation Broking Group Limited

8.4

84

519

603

346

Locum's Nest Limited

5.6

550

33

583

67

Concirrus Limited

1.1

575

-

575

-

Imandra Inc.

1.7

166

344

510

344

Koru Kids Limited

2.1

460

48

508

-

Gravitee TopCo Limited (T/A Gravitee.io)

2.3

492

-

492

-

The Voucher Market Limited (T/A WeGift)

1.2

492

-

492

-

AVESI Limited

10.5

340

110

450

(43)

NuvoAir AB

1.4

448

-

448

-

The Q Garden Company Limited

16.6

466

(75)

391

(26)

Oxsensis Limited

1.6

386

(4)

382

-

Seldon Technologies Limited

1.8

356

-

356

-

Credit Kudos Limited

1.6

344

-

344

-

Dragon Hydro Limited

5.5

207

133

340

(4)

Brytlyt Limited

2.0

330

-

330

-

DySIS Medical Limited

1.4

1,038

(749)

289

6

Zift Channel Solutions Inc.

1.7

885

(636)

249

85

Xperiome Limited (previously Raremark)

2.9

378

(142)

236

(206)

TransFICC Limited

1.4

207

-

207

-

MHS 1 Limited

3.3

231

(37)

194

(13)

Greenenerco Limited

1.0

113

74

187

(8)

Accelex Technology Limited (T/A Accelex)

2.0

185

-

185

-

Avora Limited

2.2

400

(249)

151

(249)

uMedeor Limited (T/A uMed)

1.2

128

-

128

-

Premier Leisure (Suffolk) Limited

6.2

109

(7)

102

(7)

Erin Solar Limited

4.3

120

(23)

97

(7)

Sandcroft Avenue Limited (T/A Hussle)

6.4

1,281

(1,208)

73

(100)

Symetrica Limited

0.3

89

(18)

71

-

memsstar Limited

2.8

62

(3)

59

(72)

Abcodia Limited

4.7

838

(832)

6

(309)

Forward Clinical Limited (T/A Pando)

1.8

219

(213)

6

(54)

Elements Software Limited

0.6

3

(3)

-

-

Mirada Medical Limited

7.7

909

(909)

-

(513)

Total fixed asset investments

44,483

31,206

75,689

14,709

* As adjusted for additions and disposals during the year; including realised gains/(losses).

Investment realisations in the period to 30 June 2021

Cost
£’000

Opening value
£’000

Disposal proceeds
£’000

Total realised gain
£’000

Gain/(loss) on opening value
£’000

Disposals:

OmPrompt Holdings Limited

994

2,202

2,276

1,282

74

SBD Automotive Limited

220

459

458

238

(1)

Mi-Pay Group PLC

22

22

25

3

3

Loan stock repayments and other:

Alto Prodotto Wind Limited

23

34

34

11

-

Greenenerco Limited

4

6

6

2

-

Escrow adjustments*

-

-

144

144

144

Total

1,263

2,723

2,943

1,680

220

* These comprise fair value movements on deferred consideration on previously disposed investments, release of the G.Network Communications discount which is treated as a financing transaction, and expenses which are incidental to the purchase or disposal of an investment

Total change in value of investments for the year

14,709

Movement in accrued loan stock interest

(1)

Unrealised gains on fixed asset investments sub-total

14,708

Realised gains in the current period

220

Total gains on investments as per Income statement

14,928

Condensed income statement

Unaudited
six months ended
30 June 2021

Unaudited
six months ended
30 June 2020

Audited
year ended
31 December 2020

Note

Revenue
£’000

Capital
£’000

Total
£’000

Revenue
£’000

Capital
£’000

Total
£’000

Revenue
£’000

Capital
£’000

Total
£’000

Gains/(losses) on investments

3

-

14,928

14,928

-

(1,295)

(1,295)

-

4,073

4,073

Investment income

4

370

-

370

403

-

403

692

-

692

Investment management fee

5

(230)

(692)

(922)

(186)

(558)

(744)

(382)

(1,146)

(1,528)

Performance incentive fee

5

(441)

(1,322)

(1,763)

-

-

-

(11)

(31)

(42)

Other expenses

(159)

-

(159)

(141)

-

(141)

(282)

-

(282)

(Loss)/profit on ordinary activities before tax

(460)

12,914

12,454

76

(1,853)

(1,777)

17

2,896

2,913

Tax (charge)/credit on ordinary activities

-

-

-

(2)

2

-

-

-

-

(Loss)/profit and total comprehensive income attributable to shareholders

(460)

12,914

12,454

74

(1,851)

(1,777)

17

2,896

2,913

Basic and diluted (loss)/return per share (pence)*

7

(0.46)

12.93

12.47

0.08

(2.03)

(1.95)

0.02

3.15

3.17

* adjusted for treasury shares

The accompanying notes below form an integral part of this Half-yearly Financial Report.

Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 June 2020 and the audited statutory accounts for the year ended 31 December 2020.

The total column of this Condensed income statement represents the profit and loss account of the Company. The supplementary revenue and capital columns have been prepared in accordance with The Association of Investment Companies’ Statement of Recommended Practice.

Condensed balance sheet

Note

Unaudited
30 June 2021
£’000

Unaudited
30 June 2020
£’000

Audited
31 December 2020
£’000

Fixed asset investments

75,689

52,585

58,998

Current assets

Current asset investments

-

4,057

-

Trade and other receivables

1,827

177

1,757

Cash and cash equivalents

20,400

17,074

15,645

22,227

21,308

17,402

Total assets

97,916

73,893

76,400

Payables: amounts falling due within one year

Trade and other payables

(2,576)

(446)

(541)

Total assets less current liabilities

95,340

73,447

75,859

Equity attributable to equity holders

Called-up share capital

8

1,163

1,036

1,040

Share premium

54,961

44,687

44,978

Capital redemption reserve

12

12

12

Unrealised capital reserve

31,267

13,383

18,020

Realised capital reserve

10,432

14,619

12,886

Other distributable reserve

(2,495)

(290)

(1,077)

Total equity shareholders’ funds

95,340

73,447

75,859

Basic and diluted net asset value per share (pence)*

92.41

79.30

82.42

*excluding treasury shares

The accompanying notes below form an integral part of this Half-yearly Financial Report.

Comparative figures have been extracted from the unaudited Half-yearly Financial Report for the six months ended 30 June 2020 and the audited statutory accounts for the year ended 31 December 2020.

These Financial Statements were approved by the Board of Directors and authorised for issue on 8 September 2021, and were signed on its behalf by

Ben Larkin

Chairman

Company number: 03654040

Condensed statement of changes in equity

Called-up share
capital

Share premium

Capital redemption reserve

Unrealised capital reserve

Realised capital reserve*

Other distributable reserve*

Total

£’000

£’000

£’000

£’000

£’000

£’000

£’000

As at 1 January 2021

1,040

44,978

12

18,020

12,886

(1,077)

75,859

Profit/(loss) and total comprehensive income for the period

-

-

-

14,708

(1,794)

(460)

12,454

Transfer of previously unrealised gains on disposal of investments

-

-

-

(1,461)

1,461

-

-

Purchase of shares for treasury

-

-

-

-

-

(958)

(958)

Issue of equity

123

10,229

-

-

-

-

10,352

Cost of issue of equity

-

(246)

-

-

-

-

(246)

Dividends paid

-

-

-

-

(2,121)

-

(2,121)

As at 30 June 2021

1,163

54,961

12

31,267

10,432

(2,495)

95,340

As at 1 January 2020

938

36,712

12

14,702

15,151

2,168

69,683

(Loss)/profit and total comprehensive income for the period

-

-

-

(1,338)

(513)

74

(1,777)

Transfer of previously unrealised losses on disposal of investments

-

-

-

19

(19)

-

-

Purchase of shares for treasury

-

-

-

-

-

(455)

(455)

Issue of equity

98

8,172

-

-

-

-

8,270

Cost of issue of equity

-

(197)

-

-

-

-

(197)

Dividends paid

-

-

-

-

-

(2,077)

(2,077)

As at 30 June 2020

1,036

44,687

12

13,383

14,619

(290)

73,447

As at 1 January 2020

938

36,712

12

14,702

15,151

2,168

69,683

Profit/(loss) and total comprehensive income for the year

-

-

-

4,595

(1,699)

17

2,913

Transfer of previously unrealised gains on disposal of investments

-

-

-

(1,277)

1,277

-

-

Purchase of shares for treasury

-

-

-

-

-

(1,189)

(1,189)

Issue of equity

102

8,478

-

-

-

-

8,580

Cost of issue of equity

-

(212)

-

-

-

-

(212)

Dividends paid

-

-

-

-

(1,843)

(2,073)

(3,916)

As at 31 December 2020

1,040

44,978

12

18,020

12,886

(1,077)

75,859

*These reserves amount to £7,937,000 (30 June 2020: £14,329,000; 31 December 2020: £11,809,000) which is considered distributable.

Condensed statement of cash flows

Unaudited
six months ended
30 June 2021
£’000

Unaudited
six months ended
30 June 2020
£’000

Audited
year ended
31 December 2020
£’000

Cash flow from operating activities

Loan stock income received

349

301

583

Deposit interest received

1

34

35

Dividend income received

18

141

191

Investment management fee paid

(827)

(716)

(1,475)

Performance incentive fee paid

(42)

-

-

Other cash payments

(195)

(154)

(283)

Corporation tax paid

-

-

-

Net cash flow from operating activities

(696)

(394)

(949)

Cash flow from investing activities

Purchase of current asset investments

-

(1,190)

(1,190)

Purchase of fixed asset investments

(4,705)

(1,614)

(5,156)

Disposal of current asset investments

-

-

3,945

Disposal of fixed asset investments

2,882

196

1,201

Net cash flow from investing activities

(1,823)

(2,608)

(1,200)

Cash flow from financing activities

Issue of share capital

9,767

7,738

7,737

Cost of issue of shares

(17)

(16)

(33)

Equity dividends paid*

(1,766)

(1,719)

(3,251)

Purchase of own shares (including costs)

(710)

(456)

(1,188)

Net cash flow from financing activities

7,274

5,547

3,265

Increase in cash and cash equivalents

4,755

2,545

1,116

Cash and cash equivalents at start of period

15,645

14,529

14,529

Cash and cash equivalents at end of period

20,400

17,074

15,645

*The dividends paid shown in the cash flow are different to the dividends disclosed in note 6 as a result of the non-cash effect of the Dividend Reinvestment Scheme.

Notes to the condensed Financial Statements

1. Basis of accounting

The 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.

The preparation of the Financial Statements requires management to make judgements and estimates that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The most critical estimates and judgements relate to the determination of carrying value of investments at Fair Value Through Profit and Loss (“FVTPL”) in accordance with FRS 102 sections 11 and 12. The Company values investments by following the International Private Equity and Venture Capital Valuation (“IPEV”) Guidelines as updated in 2018 and further detail on the valuation techniques used are outlined in note 2 below.

Company information can be found on page 2 of the full Half-yearly Financial Report.

2. Accounting policies

Fixed and current asset investments

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.

In accordance with the requirements of FRS 102, those undertakings in which the Company holds more than 20 per cent. of the equity as part of an investment portfolio are not accounted for using the equity method. In these circumstances the investment is measured at FVTPL.

Upon initial recognition (using trade date accounting) investments, including loan stock, are classified by the Company as FVTPL and are included at their initial fair value, which is cost (excluding expenses incidental to the acquisition which are written off to the Income statement).

Subsequently, the investments are valued at ‘fair value’, which is measured as follows:

  • Investments listed on recognised exchanges are valued at their bid prices at the end of the accounting period or otherwise at fair value based on published price quotations.

  • Unquoted investments, where there is not an active market, are valued using an appropriate valuation technique in accordance with the IPEV Guidelines. Indicators of fair value are derived using established methodologies including earnings multiples, revenue multiples, the level of third party offers received, cost or price of recent investment rounds, net assets and industry valuation benchmarks. Where price of recent investment is used as a starting point for estimating fair value at subsequent measurement dates, this has been benchmarked using an appropriate valuation technique permitted by the IPEV guidelines.

  • In situations where cost or price of recent investment is used, consideration is given to the circumstances of the portfolio company since that date in determining fair value. This includes consideration of whether there is any evidence of deterioration or strong definable evidence of an increase in value. In the absence of these indicators, the investment in question is valued at the amount reported at the previous reporting date. Examples of events or changes that could indicate a diminution include:

  • the performance and/or prospects of the underlying business are significantly below the expectations on which the investment was based;

  • a significant adverse change either in the portfolio company’s business or in the technological, market, economic, legal or regulatory environment in which the business operates; or

  • market conditions have deteriorated, which may be indicated by a fall in the share prices of quoted businesses operating in the same or related sectors.

Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of an investment.

Dividend income is not recognised as part of the fair value movement of an investment, but is recognised separately as investment income through the other distributable reserve when a share becomes ex-dividend.

Current assets and payables

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.

Investment income

Equity income

Dividend income is included in revenue when the investment is quoted ex-dividend.

Unquoted loan stock income

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.

Bank interest income

Interest income is recognised on an accruals basis using the rate of interest agreed with the bank.

Investment management fee, performance incentive fee and expenses

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:

  • 75 per cent. of management fees and performance incentive fees, if any, are allocated to the realised capital reserve. This is in line with the Board’s expectation that over the long term 75 per cent. of the Company’s investment returns will be in the form of capital gains; and

  • expenses which are incidental to the purchase or disposal of an investment are charged through the realised capital reserve.

Taxation

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.

Deferred tax is provided in full on all timing differences at the reporting date. Timing differences are differences between taxable profits and total comprehensive income as stated in the Financial Statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in the Financial Statements. As a VCT the Company has an exemption from tax on capital gains. The Company intends to continue meeting the conditions required to obtain approval as a VCT in the foreseeable future. The Company therefore, should have no material deferred tax timing differences arising in respect of the revaluation or disposal of investments and the Company has not provided for any deferred tax.

Share capital and reserves

Called-up share capital

Called-up share capital accounts for the nominal value of the Company’s shares.

Share premium

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 and transfers to the other distributable reserve.

Capital redemption reserve

This reserve accounts for amounts by which the issued share capital is diminished through the repurchase and cancellation of the Company’s own shares.

Unrealised capital reserve

Increases and decreases in the valuation of investments held at the year end against cost are included in this reserve.

Realised capital reserve

The following are disclosed in this reserve:

  • gains and losses compared to cost on the realisation of investments, or permanent diminutions in value;

  • 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.

Other distributable reserve

The special reserve, treasury share reserve and the revenue reserve were combined in 2012 to form a single reserve named other distributable reserve.

This reserve accounts for movements from the revenue column of the Income statement, the payment of dividends, the buy-back of shares and other non-capital realised movements.

Dividends

Dividends by the Company are accounted for in the period in which the dividend is paid or approved at the Annual General Meeting.

Segmental reporting

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.

3. Gains/(losses) on investments

Unaudited
six months ended
30 June 2021
£’000

Unaudited
six months ended
30 June 2020
£’000

Audited
year ended
31 December 2020
£’000

Unrealised gains/(losses) on fixed asset investments

14,708

(327)

4,595

Unrealised losses on current asset investments

-

(1,011)

-

Realised gains on fixed asset investments

220

43

601

Realised losses on current asset investments

-

-

(1,123)

14,928

(1,295)

4,073

4. Investment income

Unaudited
six months ended
30 June 2021
£’000

Unaudited
six months ended
30 June 2020
£’000

Audited
year ended
31 December 2020
£’000

Loan stock interest

351

302

584

Dividend income

18

68

74

Bank deposit interest

1

33

34

370

403

692

5. Investment management fee and performance incentive fee

Unaudited
six months ended
30 June 2021
£’000

Unaudited
six months ended
30 June 2020
£’000

Audited
year ended
31 December 2020
£’000

Investment management fee charged to revenue

230

186

382

Investment management fee charged to capital

692

558

1,146

Performance incentive fee charged to revenue

441

-

11

Performance incentive fee charged to capital

1,322

-

31

2,685

744

1,570

Further details of the Management agreement under which the investment management fee and performance incentive fee are paid are given in the Strategic report on page 12 of the Annual Report and Financial Statements for the year ended 31 December 2020.

During the period, services to a total value of £922,000 (30 June 2020: £744,000; 31 December 2020: £1,528,000) were purchased by the Company from Albion Capital Group LLP. At the financial period end, the amount due to Albion Capital Group LLP in respect of these services was £495,000 (30 June 2020: £375,000; 31 December 2020: £401,000). The total annual running costs of the Company are capped at an amount equal to 2.5% of the Company’s net assets, with any excess being met by Albion by way of a reduction in management fees. During the period, the management fee was reduced by £41,000 as a result of this cap (30 June 2020: £48,000; 31 December 2020: £97,000). For the period to 30 June 2021, a performance incentive fee of £1,763,000 has been accrued, however any performance incentive fee is calculated on year end results and payable in line with the Management agreement (30 June 2020: £nil; 31 December 2020: £42,000).

During the period, the Company was not charged by Albion Capital Group LLP in respect of Patrick Reeve’s services as a Director (30 June 2020: £nil; 31 December 2020: £nil).

Albion Capital Group LLP, its Partners and staff (including Patrick Reeve) hold 791,411 Ordinary shares in the Company as at 30 June 2021.

The Manager is, from time to time, eligible to receive arrangement fees and monitoring fees from portfolio companies. During the period ended 30 June 2021, fees of £136,000 attributable to the investments of the Company were paid pursuant to these arrangements (30 June 2020: £77,000; 31 December 2020: £168,000).

The Company entered into an offer agreement relating to the Offers with the Company’s investment manager Albion Capital Group LLP, pursuant to which Albion Capital would receive a fee of 2.5% of the gross proceeds of the Offers and out of which Albion Capital would pay the costs of the Offers, as detailed in the Prospectus.

6. Dividends

Unaudited
six months ended
30 June 2021
£’000

Unaudited
six months ended
30 June 2020
£’000

Audited
year ended
31 December 2020
£’000

Dividend of 1.99p per share paid on 30 September 2020

-

-

1,843

Dividend of 2.06p per share paid on 28 May 2021 (29 May 2020: 2.25p per share)

2,126

2,077

2,077

Unclaimed dividends

(5)

-

(4)

2,121

2,077

3,916

In addition to the dividends summarised above, the Board has declared a second dividend for the year ending 31 December 2021 of 2.31 pence per share (total approximately £2,383,000), payable on 30 September 2021 to shareholders on the register on 10 September 2021.

7. Basic and diluted (loss)/return per share

Unaudited
six months ended
30 June 2021

Unaudited
six months ended
30 June 2020

Audited
year ended
31 December 2020

Revenue

Capital

Revenue

Capital

Revenue

Capital

(Loss)/return attributable to Ordinary shares (£’000)

(460)

12,914

74

(1,851)

17

2,896

Weighted average shares in issue

99,832,987

91,020,671

91,755,964

(Loss)/return per Ordinary share (pence)

(0.46)

12.93

0.08

(2.03)

0.02

3.15

The weighted average number of shares is calculated after adjusting for treasury shares of 13,137,307 (30 June 2020: 10,954,270; 31 December 2020: 11,938,106).

There are no convertible instruments, derivatives or contingent share agreements in issue hence there are no dilution effects to the return per share. The basic return per share is therefore the same as the diluted return per share.

8. Called-up share capital

Allotted, called-up and fully paid Ordinary shares of 1 penny each

Unaudited
30 June 2021

Unaudited
30 June 2020

Audited
31 December 2020

Number of shares

116,303,264

103,573,410

103,974,504

Nominal value of allotted shares (£’000)

1,163

1,036

1,040

Voting rights (number of shares net of treasury shares)

103,165,957

92,619,140

92,036,398

During the period to 30 June 2021 the Company purchased 1,199,201 Ordinary shares (nominal value £11,992) for treasury at a cost of £958,000. The total number of Ordinary shares held in treasury as at 30 June 2021 was 13,137,307 (30 June 2020: 10,954,270; 31 December 2020: 11,938,106) representing 11.3% of the Ordinary shares in issue as at 30 June 2021.

Under the terms of the Dividend Reinvestment Scheme Circular dated 27 August 2008, the following new Ordinary shares, of nominal value 1 penny each, were allotted:

Date of allotment

Number of shares allotted

Aggregate nominal value of shares (£’000)

Issue price (pence per share)

Net invested (£’000)

Opening market price on allotment date (pence per share)

28 May 2021

434,384

4

82.01

339

78.00

Under the terms of the Albion VCTs Prospectus Top Up Offers 2020/21, the following new Ordinary shares, of nominal value 1 penny each, were allotted during the period to 30 June 2021:

Date of allotment

Number of shares allotted

Aggregate nominal value of shares (£’000)

Issue price (pence per share)

Net consideration received (£’000)

Opening market price on allotment date (pence per share)

26 February 2021

1,932,052

19

83.30

1,585

78.00

26 February 2021

515,665

5

83.80

424

78.00

26 February 2021

8,866,225

89

84.20

7,279

78.00

9 April 2021

202,566

2

83.70

167

78.50

9 April 2021

32,777

-

84.20

27

78.50

9 April 2021

345,091

3

84.60

285

78.50

11,894,376

9,767

9. Commitments and contingencies

As at 30 June 2021, the Company had no financial commitments in respect of investments (30 June 2020: £nil; 31 December 2020: £nil).

There were no contingencies or guarantees of the Company as at 30 June 2021 (30 June 2020: £nil; 31 December 2020: £nil).

10. Post balance sheet events

The following are the post balance sheet events since 30 June 2021:

• Investment of £1,450,000 in an existing portfolio company, Oviva AG, a technology enabled service business in medical nutritional therapy (MNT);

• Investment of £334,000 in an existing portfolio company, The Evewell Group Limited, an operator and developer of women’s health centres focusing on fertility; and

• Investment of £70,000 in an existing portfolio company, Imandra Inc., a provider of automated software testing and an enhanced learning experience for artificial neural networks.

11. Related party transactions

Other than transactions with the Manager as disclosed in note 5 and that disclosed above, there are no other related party transactions or balances requiring disclosure.

12. Going concern

The Board has conducted a detailed assessment of the Company’s ability to meet its liabilities as they fall due. Cash flow forecasts are updated and discussed quarterly at Board level and have been stress tested to allow for the forecasted impact of Coronavirus (Covid-19). The Board have revisited and updated their assessment of liquidity risk and concluded that it remains unchanged since the last Annual Report and Financial Statements. Further details can be found on page 65 of those accounts.

The portfolio of investments is diversified in terms of sector and the major cash outflows of the Company (namely investments, dividends and share buy-backs) are within the Company’s control. Accordingly, after making diligent enquiries, the Directors have a reasonable expectation that the Company has adequate cash and liquid resources to continue in operational existence for the foreseeable future. For this reason, the Directors have adopted the going concern basis in preparing this Half-yearly Financial Report and this is in accordance with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued by the Financial Reporting Council in September 2014, and the subsequent updated Going concern, risk and viability guidance issued by the FRC due to Covid-19 in 2020.

13. Risks and uncertainties

In addition to the risks and uncertainties outlined in the Interim management report, the Board confirms that the following major risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Financial Statements for the year ended 31 December 2020. The impact of the Coronavirus (Covid-19) pandemic has created heightened uncertainty but has not changed the nature of these risks. The Board considers that the processes for mitigating these risks remain appropriate.

1. Investment, performance and valuation risk

The risk of investment in poor quality businesses, which could reduce the returns to shareholders and could negatively impact on the Company’s current and future valuations.

By nature, smaller unquoted businesses, such as those that qualify for Venture Capital Trust purposes, are more volatile than larger, long established businesses.

The Company’s investment valuation methodology is reliant on the accuracy and completeness of information that is issued by portfolio companies. In particular, the Directors may not be aware of or take into account certain events or circumstances which occur after the information issued by such companies is reported.

To reduce this risk, the Board places reliance upon the skills and expertise of the Manager and its track record over many years of making successful investments in this segment of the market. In addition, the Manager operates a formal and structured investment appraisal and review process, which includes an Investment Committee, comprising investment professionals from the Manager for all investments, and at least one external investment professional for investments greater than £1 million in aggregate across all the Albion managed VCTs. The Manager also invites and takes account of comments from non-executive Directors of the Company on matters discussed at the Investment Committee meetings. Investments are actively and regularly monitored by the Manager (investment managers normally sit on portfolio company boards), including the level of diversification in the portfolio, and the Board receives detailed reports on each investment as part of the Manager’s report at quarterly board meetings. The Board and Manager regularly review the deployment of investments and cash resources available to the Company in assessing liquidity required for servicing the Company’s buy-backs, dividend payments and operational expenses.

The unquoted investments held by the Company are designated at fair value through profit or loss and valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines updated in 2018. These guidelines set out recommendations, intended to represent current best practice on the valuation of venture capital investments. The valuation takes into account all known material facts up to the date of approval of the Financial Statements by the Board.

2. VCT approval risk

The Company must comply with section 274 of the Income Tax Act 2007 which enables its investors to take advantage of tax relief on their investment and on future returns. Breach of any of the rules enabling the Company to hold VCT status could result in the loss of that status.

To reduce this risk, the Board has appointed the Manager, which has a team with significant experience in Venture Capital Trust management, used to operating within the requirements of the Venture Capital Trust legislation. In addition, to provide further formal reassurance, the Board has appointed Philip Hare & Associates LLP as its taxation adviser, who report quarterly to the Board to independently confirm compliance with the Venture Capital Trust legislation, to highlight areas of risk and to inform on changes in legislation. Each investment in a new portfolio company is also pre-cleared with our professional advisers or H.M. Revenue & Customs. The Company monitors closely the extent of qualifying holdings and addresses this as required.

3. Regulatory and compliance risk

The Company is listed on The London Stock Exchange and is required to comply with the rules of the UK Listing Authority, as well as with the Companies Act, Accounting Standards and other legislation. Failure to comply with these regulations could result in a delisting of the Company’s shares, or other penalties under the Companies Act or from financial reporting oversight bodies.

Board members and the Manager have experience of operating at senior levels within or advising quoted companies. In addition, the Board and the Manager receive regular updates on new regulation from its auditor, lawyers and other professional bodies. The Company is subject to compliance checks through the Manager’s compliance officer, and any issues arising from compliance or regulation are reported to its own board on a monthly basis. These controls are also reviewed as part of the quarterly Board meetings, and also as part of the review work undertaken by the Manager’s compliance officer. The report on controls is also evaluated by the internal auditors.

4. Operational and internal control risk

The Company relies on a number of third parties, in particular the Manager, for the provision of investment management and administrative functions. Failures in key systems and controls within the Manager’s business could put assets of the Company at risk or result in reduced or inaccurate information being passed to the Board or to shareholders.

The Company and its operations are subject to a series of rigorous internal controls and review procedures exercised throughout the year, and receives reports from the Manager on its internal controls and risk management, including on matters relating to cyber security.

The Audit Committee reviews the Internal Audit Reports prepared by the Manager’s internal auditors, PKF Littlejohn LLP and has access to the internal audit partner of PKF Littlejohn LLP to provide an opportunity to ask specific detailed questions in order to satisfy itself that the Manager has strong systems and controls in place including those in relation to business continuity and cyber security.

From 1 October 2018, Ocorian Depositary (UK) Limited was appointed as Depositary to oversee the custody and cash arrangements and provide other AIFMD duties. The Board reviews the quarterly reports prepared by Ocorian Depositary (UK) Limited to ensure that Albion Capital is adhering to its policies and procedures as required by the AIFMD.

In addition, the Board regularly reviews the performance of its key service providers, particularly the Manager, to ensure they continue to have the necessary expertise and resources to deliver the Company’s investment objective and policy. The Manager and other service providers have also demonstrated to the Board that there is no undue reliance placed upon any one individual.

5. Economic, political and social risk

Changes in economic conditions, including, for example, interest rates, rates of inflation, industry conditions, competition, political and diplomatic events, such as the impact of Brexit, and other factors could substantially and adversely affect the Company’s prospects in a number of ways. This also includes risks of social upheaval, including from infection and population re-distribution, as well as economic risk challenges as a result of healthcare pandemics/infection.

The current significant exogenous risk to the Company, the wider population and economy, is the Covid-19 pandemic.

The Company invests in a diversified portfolio of companies across a number of industry sectors and in addition often invests in a mixture of instruments in portfolio companies and has a policy of minimising any external bank borrowings within portfolio companies.

At any given time, the Company has sufficient cash resources to meet its operating requirements, including share buy-backs and follow-on investments.

In common with most commercial operations, exogenous risks over which the Company has no control are always a risk and the Company does what it can to address these risks where possible, not least as the nature of the investments the Company makes are long term.

The Board and Manager are continuously assessing the resilience of the portfolio, the Company and its operations and the robustness of the Company’s external agents during the health crisis, as well as considering longer term impacts on how the Company might be positioned in how it invests and operates. Ensuring liquidity in the portfolio to cope with exigent and unexpected pressures on the finances of the portfolio and the Company is an important part of the risk mitigation in these uncertain times. The portfolio is structured as an all-weather portfolio with c.60 companies which are diversified as discussed above. Exposure is relatively small to at-risk sectors that include leisure, hospitality, retail and travel.

6. Market value of Ordinary shares

The market value of Ordinary shares can fluctuate. The market value of an Ordinary share, as well as being affected by its net asset value and prospective net asset value, also takes into account its dividend yield and prevailing interest rates. As such, the market value of an Ordinary share may vary considerably from its underlying net asset value. The market prices of shares in quoted investment companies can, therefore, be at a discount or premium to the net asset value at different times, depending on supply and demand, market conditions, general investor sentiment and other factors. Accordingly, the market price of the Ordinary shares may not fully reflect their underlying net asset value.

The Company operates a share buy-back policy, which is designed to limit the discount at which the Ordinary shares trade to around 5 per cent to net asset value, by providing a purchaser through the Company in absence of market purchasers. From time to time buy-backs cannot be applied, for example when the Company is subject to a close period, or if it were to exhaust any buy-back authorities.

New Ordinary shares are issued at sufficient premium to net asset value to cover the costs of issue and to avoid asset value dilution to existing investors.

7. Reputational risk

The Company relies on the judgement and reputation of the Manager which is itself subject to the risk of loss.

The Board regularly questions the Manager on its ethics, procedures, safeguards and investment philosophy, which should consequently result in the risk to reputational damage being minimised.

14. Other information

The information set out in this Half-yearly Financial Report does not constitute the Company’s statutory accounts within the terms of section 434 of the Companies Act 2006 for the periods ended 30 June 2021 and 30 June 2020 and is unaudited. The information for the year ended 31 December 2020, does not constitute statutory accounts within the terms of section 434 of the Companies Act 2006 but is derived from the audited statutory accounts for the financial year, which have been delivered to the Registrar of Companies. The Auditor reported on those accounts; their report was unqualified and did not contain a statement under s498 (2) or (3) of the Companies Act 2006.

15. Publication

This Half-yearly Financial Report is 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, where the Report can be accessed from the ‘Financial Reports and Circulars’ section.

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