TIDMEDV
ELDERSTREET DRAPER ESPRIT VCT PLC
LEI: 2138003I9Q1QPDSQ9Z97
FINAL RESULTS FOR THE PERIODED 31 MARCH 2018
FINANCIAL SUMMARY
31 Mar 31 Dec
2018 2016
pence pence
Net asset value per share ("NAV") 57.5 62.8
Cumulative dividends paid since launch 99.0 96.0
------ ------
Total Return (NAV plus cumulative dividends paid per
share) 156.5 158.8
====== ======
Dividends in respect of financial period ended 31
March 2018
Interim dividend paid per share 1.5 2.5
Final dividend per share (payable on 12 October 2018) 1.5 1.5
------ ------
3.0 4.0
====== ======
CHAIRMAN'S STATEMENT
I present the Company's Annual Report for the period ended 31 March
2018. This has been a busy period for the Company in terms of new
investment activity, as a number of opportunities arising from the
arrangements with Draper Esprit have been backed with the proceeds from
the last year's fundraising. Although most of the larger investments
have performed satisfactorily, there have been some setbacks which have
impacted performance for the year.
Change of year end
As reported previously, the Company changed its year end from 31
December to 31 March to better fit with the financial calendar of Draper
Esprit plc, with whom the Company is now co-investing on most
transactions. This report covers the 15-month period to 31 March 2018.
The next Half-Year Report will be in respect of the six months ended 30
September 2018.
Net asset value and results
As at 31 March 2018, the Company's Net Asset Value per share ("NAV")
stood at 57.5p, representing a decrease of 2.3p (3.7%) over the period,
after adding back dividends paid during the period, of 3.0p per Share.
The Total Return to Shareholders who invested at the launch of the
Company in 1998 (NAV plus cumulative dividends) now stands at 156.5p
compared to the original cost (net of income tax relief) of 80.0p per
share. A summary of the position for Shareholders who invested in the
Company's various other fundraisings is included on page 3 of the Annual
Report.
The loss on ordinary activities after taxation for the 15-month period
(2016: year) was GBP1.65 million (2016: GBP1.0 million), comprising a
revenue return of GBP92,000 (2016: GBP222,000) and a capital loss of
GBP1.74 million (2016: GBP1.3 million).
Venture capital investments
Portfolio activity
During the period, the Company made five new and two follow-on
investments totalling GBP5.6 million. A small number of realisations
also occurred in the period, giving rise to realised gains of
GBP757,000.
Further details on the investment activity can be found in the
Investment Manager's report.
Investment valuations
At the period end, the Company held a portfolio of 26 Venture Capital
investments valued at GBP20.8 million. The top ten investments
constitute the majority of the overall portfolio value.
The Board has reviewed the investment valuations at the period end date
and accordingly some adjustments have been made.
The most significant valuation uplift was in respect of Fords Packaging
Topco Limited. The business continues to perform well, and a GBP2.4
million uplift has been recognised as a result.
Unfortunately, there was a major disappointment in respect of the
investment in AngloINFO Limited. The Manager provided intensive support
to the company throughout the year, bringing in new management and
launching a new website, which it was hoped could unlock the company's
potential. Ultimately, the company has not been able to make sufficient
progress and, since the period end, in view of the considerable further
funding that would be required in order for the business to meet its
immediate operating commitments, the decision was taken not to support
the company further and it has now gone into liquidation. A full
provision has therefore been made, resulting in an unrealised loss of
GBP2.8 million for the year.
Macranet Limited, which has been historically held at cost, was written
down by GBP778,000 to reflect recent trading results.
Baldwin & Francis Limited has also experienced some further challenges
of late, which have led to earnings being below budget. As a result, the
valuation of the VCT's holding has been written down by GBP491,000.
Ridee Limited, the food delivery business trading under the Jinn brand,
in which the VCT invested GBP500,000, has found competition from the
likes of Deliveroo to be extremely aggressive. The investment has now
been fully provided against.
Several of the Company's investments are quoted on AIM, and such
investments have also been revalued at the period end date, in order to
reflect their quoted prices. The most significant revaluation movement
of the AIM investments was a GBP379,000 uplift to Fulcrum Utility
Services Limited.
Overall, the unrealised valuation movements on the portfolio resulted in
a net write down for the period, of GBP1.8 million.
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.
Fixed Interest investments
The small portfolio of Fixed Interest investments, managed by Smith &
Williamson, was realised during the year. The portfolio generated
proceeds of GBP1.5m, resulting in a profit over cost of GBP26,000. Under
VCT regulations no new fixed interest investments can be made, so the
Board took the decision to realise the remaining holdings and refocus
this capital.
Fundraising
In December 2016 the Company launched a Prospectus Offer for
Subscription which raised gross proceeds of GBP18 million, with issue
costs in respect of the offer amounting to GBP498,000.
The Company launched a further Prospectus Offer during December 2017,
which closed on 31 May 2018, having raised a total of GBP3.9 million.
Dividends
The Board is proposing a final dividend of 1.5p per share, to be paid on
12 October 2018 to Shareholders on the register at 14 September 2018.
This will bring the total dividends paid in respect of the period to
3.0p.
The Company has historically paid dividends in June and December each
year. The Board expects that dividends will be paid in October and April
in future years.
Share buybacks
Historically the Company has operated a policy of buying in shares that
become available in the market, at a discount of approximately 7.5% to
the latest published NAV. The Board has reviewed this policy, taking
into account market factors, and has taken the decision to implement a
revised policy. The revised policy will be to buy in shares at a
discount of approximately 5% to the latest published NAV, subject to
regulatory and liquidity constraints.
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 Shore Capital.
During the period the Company purchased a total of 953,914 shares at an
average price of 55.9p per share. Resolution 13 will be proposed at the
AGM, to renew the authority for the Company to purchase its own shares.
Annual General Meeting ("AGM")
The next AGM of the Company will be held on 18 September 2018 at 20
Garrick Street, London, WC2E 9BT at 11:00 a.m.
Notice of the meeting is at the end of the Annual Report. Four items of
Special Business are proposed; one ordinary resolution and three special
resolutions in relation to the allotment of shares, share buybacks and
the cancellation of Share Premium and the capital redemption reserve.
The Board is seeking authority to issue shares at the AGM, to allow the
Company to consider launching a further share offer during the coming
year, should market and other conditions be appropriate, without
incurring the expense of issuing a Shareholder circular.
The Board is also seeking authority to cancel share premium and the
capital redemption reserve, to allow the Company to utilise these
reserves for the payment of dividends in future years.
VCT regulations and strategy
As Shareholders will be aware, the UK Government made a number of key
changes to VCT regulations in November 2017, as part of the Autumn
Budget.
One such change is the requirement to hold 80% (currently 70%) of funds
in qualifying holdings, by 1 April 2020. This change has been brought in
alongside further measures to refocus VCT investment into young growth
companies. Since the arrangements with Draper Esprit have been in place,
the Company's new investment activity has been focused on backing young
growing technology businesses. Although investing in this area will
increase the risk profile of the portfolio over time, the Board believes
that the Company will be able to meet the new 80% threshold before its
effective date.
As a result of this gradual shift, the delivery of good returns to
Shareholders in the future will depend on major successes from at least
a small number of investments, which can offset losses from the
inevitable failures which we expect to suffer.
Investment Policy
In view of the recent changes to the VCT regulations and the
co-investment arrangement with Draper Esprit, the Board has taken the
decision to review and refine the Company's Investment Policy. We expect
to publish a Shareholder Circular shortly setting out the proposed
changes and seeking Shareholder approval to adopt the refined policy.
Outlook
The Board is satisfied with the progress made during the period in
investing the Company's funds. Despite the setbacks in the existing
portfolio, most of the Company's older investments continue to perform
satisfactorily and have the potential to provide profitable outcomes in
due course.
For many of the Company's newer investments, it is too early to be
confident that they will ultimately be successful, however, at this
stage, most are making progress in line with their plans. We expect
investment activity to remain at a high level over the next year, as the
Manager continues to deploy the Company's available funds.
I look forward to meeting Shareholders 4 at the AGM and to updating
them in the next Half-Year Report to 30 September 2018, which we expect
to be published in December.
David Brock
Chairman
INVESTMENT MANAGER'S REPORT
Since the announcement of the co-investment agreement with Draper Esprit
to share deal flow, management experience, and investment opportunities
going forward, has had a positive start from both the fundraising and
investment perspective.
Following this arrangement in late 2016, the VCT has allotted a total of
GBP21.9 million from prospectus fundraisings which has almost doubled
funds under management over the period.
During the period under review, GBP4.1 million of these funds were
invested into five new companies and a further GBP4.9 million were
invested or committed into six further investments ('committed' means
subscription agreements have been signed and completion is pending HMRC
advanced assurance).
Over the last 15 months the Company recorded 2.3p decrease in the total
return (net asset value including cumulative dividends), from 158.8p to
156.5p. The NAV per share decreased from 62.8p to 57.5p, after paying
dividends of 3.0p during the period.
On a positive note, trading has performed better than expected in Fords
Packaging Topco Limited ('Fords'), which repaid GBP450,000 of its VCT
debt earlier than forecasted, and has reported its highest unaudited
EBITDA results for ten years. The period end valuation has been
increased by GBP2.4 million to reflect this. We believe that Fords has
the potential to provide further growth to the portfolio.
During the year, we continued to support existing portfolio company,
AngloINFO Limited, to launch its new website, SmartExpat. Unfortunately,
the business has not been able to make sufficient progress and has now
gone into liquidation. The consequent write-down of GBP2.8 million for
the period has resulted in a full provision against the GBP3.5 million
investment.
A provision of GBP0.8 million has been taken against Macranet Limited,
and Ridee has been fully provided against, due to the business going
into administration.
Two realisations were made in the year. Concorde Solutions was sold for
a small return over the VCT's cost of GBP1.6 million, and Interquest was
sold for a small loss.
Within the AIM portfolio, Fulcrum Utility Services Limited and Access
Intelligence continue to make upward valuation movements, rising by
GBP0.4 million over the period. As at the date of this report, the
valuation of the AIM portfolio had risen by approximately a further
GBP800,000.
New investments, alongside the Draper Esprit group funds, were made into
the following companies:
GBP million
IESO
a digital platform for healthcare
management 1.5
Push Dr
a leading online GP consultation
platform 0.7
StreetTeam (Verve)
a peer to peer affiliate ticketing
platform 1.3
Blue Light Optics (Kaptivo)
a real-time whiteboard collaboration
tool 0.3
AppUx (Droplet)
enabling technology to deliver
applications on any device 0.3
Further commitments have been made into the following companies, of
which Podpoint, Evonetix, IXL Premfina and Endomag had been completed,
as at the date of this report:
GBP million
Podpoint
installation of electric vehicle
charging points 0.86
Push Dr
tranche 2 of the investment
made above 0.8
Evonetix
DNA synthesis and synthetic
biology technology 0.8
IXL Premfina
insurance broker credit software
platform 0.8
Endomag
cancer detection technology 0.9
Roomex
B2B hotel booking portal 0.75
Together, the investments above total GBP9.0 million into ten separate
companies. These investments are alongside over GBP80 million of funds
from other corporate and venture capitalists. This corroborates the
strategy of investing alongside a strong syndicate of investors. In all
of these new investments, a member of the Draper Esprit group is a
representative on the portfolio company board.
Additionally, there is a pipeline of further deals, and we are confident
that the new funds raised over the past two fundraising seasons can be
invested within the next 12 months.
Over the period, additional new VCT qualification rules were introduced
by HMRC. We do not currently see any issues around these new rules and
the VCT's refined Investment Policy, as we are investing in knowledge
intensive companies which have benefitted from the rule changes.
After the period end, the VCT allotted a further GBP3.9 million of
shares from the prospectus fundraising. The Board is also considering a
further fundraising for the current tax year.
In summary, it has been a busy period for the Company, which has seen a
significant level of new investment activity. Whilst the new investments
offer some exciting prospects for the future, these businesses are still
at an early stage and it is too soon to judge whether they will
ultimately be successful.
Although there have been some setbacks in several of the older
investments, we are cautiously optimistic that the remainder of the
legacy portfolio has potential for future growth.
Elderstreet Investments Limited
REVIEW OF INVESTMENTS
Portfolio of investments
The following investments were held at 31 March 2018. All companies are
registered in England and Wales, with the exception of Fulcrum Utility
Services Limited which is registered in the Cayman Islands.
Valuation % of
movement Portfolio
Cost Valuation in period by value
GBP'000 GBP'000 GBP'000
Ten largest venture capital investments
(by value)
Fords Packaging Topco Limited 2,433 5,766 2,421 15.7%
Lyalvale Express Limited 1,915 3,903 - 10.6%
Access Intelligence plc * 2,333 3,011 21 8.2%
Fulcrum Utility Services Limited
* 500 2,525 379 6.9%
IESO Digital Health Limited 1,500 1,500 - 4.1%
StreetTeam Software Limited 1,286 1,286 - 3.5%
Push Dr Limited 724 724 - 2.0%
Baldwin & Francis Limited 1,534 422 (491) 1.1%
Cashfac plc 260 394 66 1.1%
AppUx Limited 326 326 - 0.9%
------- --------- ---------- ----------
12,811 19,857 2,396 54.1%
------- --------- ---------- ----------
Other venture capital investments
Light Blue Optics Limited 311 311 - 0.8%
Macranet Limited 1,037 259 (778) 0.7%
Servoca plc * 333 228 - 0.6%
Sift Digital Limited 125 48 - 0.1%
Sift Limited 125 42 - 0.1%
Uvenco UK plc* 1,326 36 (36) 0.1%
SparesFinder Limited 104 34 - 0.1%
Kellan Group plc* 657 7 - -
Proxama plc* 860 6 (116) -
AngloINFO Limited 3,527 - (2,819) -
Ridee Limited 499 - (350) -
Lyalvale Property Limited 300 - (128) -
Infoserve Group plc 128 - - -
The National Solicitors Network
Limited 501 - - -
The QSS Group Limited 268 - - -
RB Sport & Leisure Holdings plc 188 - - -
10,289 971 (4,227) 2.5%
------- --------- ---------- ----------
23,100 20,828 (1,831) 56.6%
======= ==========
Cash at bank and in hand 15,987 43.4%
--------- ----------
Total investments 36,815 100.0%
========= ==========
All venture capital investments are unquoted unless otherwise stated
* Quoted on AIM
REVIEW OF INVESTMENTS (continued)
Investment movements for the period ended 31 March 2018
ADDITIONS
GBP'000
Venture capital investments
IESO Digital Health Limited 1,500
StreetTeam Software Limited 1,286
AngloINFO Limited 1,250
Push Dr Limited 724
AppUx Limited 326
Light Blue Optics Limited 311
Macranet Limited 175
-------
5,572
=======
DISPOSALS
Realised
profit
Value at Profit in
Cost 01/01/17 Proceeds vs cost the period
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Quoted investments
Interquest Group plc * 226 156 172 (53) 16
Fixed income securities
United Kingdom 1.25% Gilt
22/07/2018 892 925 920 28 (5)
United Kingdom 1.00% Gilt
07/09/2017 614 616 613 (2) (3)
S&W Investment Funds Cash Fund 10 10 10 - -
Venture Capital Investments
Concorde Solutions Limited 1,650 1,525 1,749 99 224
Fords Packaging Topco Limited 450 450 450 - -
Retention proceeds
Wessex Advanced Switching Products
Limited - - 525 525 525
3,842 3,682 4,439 597 757
======= ========= ========= ======== ===========
* Quoted on AIM
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 judgments 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; and
-- 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 director's report, a strategic report and director's
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, to
disclose with reasonable accuracy at any time the financial position of
the Company and to enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
In addition, each of the Directors 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
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.
The maintenance and integrity of the Company's website is the
responsibility of the Directors. The Directors' responsibility also
extends to the ongoing integrity of the financial statements contained
therein.
By order of the Board
Grant Whitehouse
Secretary of Elderstreet Draper Esprit VCT plc
INCOME STATEMENT
for the period ended 31 March 2018
Year ended 31 December
Period ended 31 March 2018 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income 673 - 673 603 - 603
Losses on investments - (1,074) (1,074) - (867) (867)
673 (1,074) (401) 603 (867) (264)
Investment management fees (198) (596) (794) (125) (375) (500)
Performance incentive fees - - - - - -
Other expenses (383) (74) (457) (256) (13) (269)
------- ------- --------- ------- ------- ---------
Return/(loss) on ordinary activities before tax 92 (1,744) (1,652) 222 (1,255) (1,033)
Tax on total comprehensive income and ordinary
activities - - - - - -
Return/(loss) attributable to equity shareholders,
being total comprehensive income for the period 92 (1,744) (1,652) 222 (1,255) (1,033)
======= ======= ========= ======= ======= =========
Basic and diluted return/(loss) per share 0.2p (3.1p) (2.9p) 0.6p (3.6p) (3.0p)
All Revenue and Capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period. 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 February
2018 by the Association of Investment Companies ("AIC SORP").
STATEMENT OF CHANGES IN EQUITY
for the period ended 31 March 2018
Capital Capital Capital
Share Redemption Share Merger Special reserve reserve Revenue
capital reserve premium reserve reserve - unrealised - realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
For the year ended 31 December 2016
At 1 January 2016 1,733 474 3,743 1,828 2,629 4,433 9,132 486 24,458
Total
comprehensive
income - - - - - (1,312) 57 222 (1,033)
Transfer
between
reserves - - - - (423) 40 383 - -
Transactions with
owners
Issue of new
shares 130 - 1,709 - - - - - 1,839
Share issue
costs - - - - (9) - - - (9)
Purchase of own
shares (11) 11 - - (139) - - - (139)
Dividends paid - - - - - - (1,484) (372) (1,856)
At 31 December
2016 1,852 485 5,452 1,828 2,058 3,161 8,088 336 23,260
-------- ----------- -------- -------- -------- ------------- ----------- -------- -------
For the period ended 31 March 2018
At 1 January 2017
Total
comprehensive
income - - - - - (1,831) 87 92 (1,652)
Transfer
between
reserves* - - - - (572) 4,185 (3,613) - -
Transactions with
owners
Issue of new
shares 1,390 - 16,602 - - - - - 17,992
Share issue
costs - - - - (498) - - - (498)
Purchase of own
shares (48) 48 - - (536) - - - (536)
Dividends paid - - - - - - (1,231) (615) (1,846)
At 31 March 2018 3,194 533 22,054 1,828 452 5,515 3,331 (187) 36,720
======== =========== ======== ======== ======== ============= =========== ======== =======
* A transfer of GBP4,185,000 (2016: GBP40,000), representing
impairment losses during the year, as well as cumulative unrealised
gains on investments which were disposed of during the period (2016:
year), has been made from the Capital reserve - unrealised to the
Capital Reserves -- realised. A transfer of GBP572,000 (2016:
GBP423,000), representing realised gains on investment disposals, plus
capital expenses and capital dividends in the year, has been made from
Capital Reserve -- realised to the Special reserve.
BALANCE SHEET
at 31 March 2018
2018 2016
GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Investments 20,828 20,769
Current assets
Debtors 84 342
Cash at bank and in hand 15,987 2,302
------- -------
16,071 2,644
Creditors: amounts falling due within
one year (179) (153)
------- -------
Net current assets 15,892 2,491
-------- ---------
Net assets 36,720 23,260
======== =========
Capital and reserves
Called up share capital 3,194 1,852
Capital redemption reserve 533 485
Share premium 22,054 5,452
Merger reserve 1,828 1,828
Special reserve 452 2,058
Capital reserve -- unrealised 5,515 3,161
Capital reserve -- realised 3,331 8,088
Revenue reserve (187) 336
-------- ---------
Total equity shareholders' funds 36,720 23,260
======== =========
Basic and diluted net asset value 57.5p 62.8p
per share
STATEMENT OF CASH FLOWS
for the period ended 31 March 2018
2018 2016
GBP'000 GBP'000
Cash flow from operating activities
Loss on ordinary activities before taxation (1,652) (1,033)
Losses on investments 1,074 867
Decrease in debtors 258 1,415
Increase/(decrease) in creditors 26 (448)
Net cash (outflow)/inflow from operating activities (294) 801
------- -------
Cash flow from investing activities
Purchase of investments (5,572) (1,892)
Proceeds from disposal of investments 4,439 445
Net cash outflow from investing activities (1,133) (1,447)
------- -------
Cash flow for financing activities
Equity dividends paid (1,846) (1,856)
Proceeds from share issue 17,992 1,839
Share issue costs (498) (9)
Purchase of own shares (536) (139)
Net cash inflow/(outflow) from financing activities 15,112 (165)
------- -------
Net increase/(decrease) in cash 13,685 (811)
Cash and cash equivalents at start of period 2,302 3,113
------- -------
Cash and cash equivalents at end of period 15,987 2,302
======= =======
Cash and cash equivalents comprise
Cash at bank and in hand 15,987 2,302
------- -------
Total cash and cash equivalents 15,987 2,302
======= =======
NOTES TO THE ACCOUNTS
for the period ended 31 March 2018
1.Accounting policies
General information
Elderstreet Draper Esprit 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 February 2018
("SORP").
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.
Judgement in applying accounting policies and key sources of estimation
uncertainty
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.
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
the International Private Equity and Venture Capital Valuation
Guidelines ("IPEV") together with FRS 102 sections 11 and 12.
Listed fixed income investments and investments quoted on AIM and the
Main Market are measured using bid prices in accordance with the 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:
-Price of recent investment;
-Multiples;
-Net assets;
-Discounted cash flows or earnings (of underlying business);
-Discounted cash flows (from the investment); and
-Industry valuation benchmarks.
The methodology applied takes account of the nature, facts and
circumstances of the individual investment and uses reasonable data,
market inputs, assumptions and estimates in order to ascertain fair
value as explained in the investment accounting policy above and
addressed further in note 9.
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 into the Income Statement except to the extent of any
income accrued. This is in accordance with the SORP and FRS102 sections
14 and 15 that do not require portfolio investments to be accounted for
using the equity method of accounting.
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.
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 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.
Other debtors and other creditors
Other debtors (including accrued income) and other creditors are
included within the accounts at amortised cost.
Issue costs
Issue costs in relation to the shares issued are deducted from the
special reserve.
Dividends
Dividends payable are recognised as distributions in the financial
statements when the company's liability to make payment has been
established.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call
with banks with an original maturity of three months or less.
2.Basic and diluted return per share
2018 2016
Return per share based on:
Net revenue return for the financial period
(GBP'000) 92 222
Net capital gains/(losses) for the financial period
(GBP'000) (1,744) (1,255)
---------- ----------
Total Return for the financial period (GBP'000) (1,652) (1,033)
========== ==========
Weighted average number of shares in issue 57,026,412 35,214,342
========== ==========
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 2018 31 December 2016
Shares in issue Net asset value Net asset value
Pence Pence
2018 2016 per share GBP'000 per share GBP'000
Ordinary
Shares 63,884,554 37,034,366 57.5 36,720 62.8 23,260
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 period and there have
also been no significant changes to the policies for managing those
risks during the period.
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 period 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 also changes in the fair value of unquoted
investments that it holds.
Interest rate risk
The Company accepts exposure to interest rate risk on floating-rate
financial assets through the effect of changes in prevailing interest
rates. The Company receives interest on its cash deposits at a rate
agreed with its bankers 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 Cash Trust
investments.
-"No interest rate" assets do not attract interest and comprise equity
investments, loans and receivables (excluding cash at
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.
The Bank of England base rate increased from 0.25% per annum to 0.5% per
annum on 2 November 2017. Any potential change in the base rate, at the
current level, would have an immaterial impact on the net assets and
Total Return of the Company.
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 market risks 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 is mainly held at Bank of Scotland plc, with a balance also
maintained at Royal Bank of Scotland plc, both of which are A-rated
financial institutions and ultimately part-owned by the UK Government.
Consequently, the Directors consider that the risk profile associated
with cash deposits is low.
There have been no changes in fair value during the period that can be
directly attributable to changes in credit risk.
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 2018: GBP179,000, 31 December 2016:
GBP153,000) 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.
Related party transactions
Michael Jackson is a Director of Elderstreet Investments Limited which
provides investment management services to the Company. During the
15-month period (2016: year), GBP794,000 (2016: GBP500,000) was due in
respect of these services. No performance incentive fees were due to
Elderstreet Investments Limited in respect of the period under review
(year ended 31 December 2016: GBPnil).
Nicholas Lewis is a partner of Downing LLP, which provides
administration services to the Company. During the 15-month period
(2016: year), GBP62,500 (2016: GBP50,000) was due to Downing LLP in
respect of these services.
During 2015, as a result of changes to the VCT rules, the Company was
unable to convert its existing loans in Uvenco UK plc (formerly
SnackTime plc). Following advice from specialist VCT advisors, the
Company sold the loans to the Investment Manager, who converted the
loans into equity. Under the terms of the transaction, the Company is
due sums equal to 75% of any disposal proceeds that the Investment
manager may receive on the shares. The market value of those shares
decreased by GBP99,264 and accordingly the debtor due from the
Investment Manager was reduced by GBP74,448, being 75% of the value
adjustment, to GBP74,447.
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 period ended 31 March 2018,
but has been extracted from the statutory financial statements for the
period ended 31 March 2018, which were approved by the Board of
Directors on 30 July 2018 and will be delivered to the Registrar of
Companies following the Company's Annual General Meeting. 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 December 2016 have been
delivered to the Registrar of Companies and received an Independent
Auditors report which was unqualified and did not contain any emphasis
of matter nor statements under s 498(2) and (3) of the Companies Act
2006.
A copy of the full annual report and financial statements for the period
ended 31 March 2018 will be printed and posted to shareholders shortly.
Copies will also be available to the public at the registered office of
the Company at 6(th) Floor, St. Magnus House, 3 Lower Thames Street,
London EC3R 6HD, and will be available for download from
www.downing.co.uk.
(END) Dow Jones Newswires
July 30, 2018 12:16 ET (16:16 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Draper Esprit Vct (LSE:DEVC)
Historical Stock Chart
From Mar 2024 to Apr 2024
Draper Esprit Vct (LSE:DEVC)
Historical Stock Chart
From Apr 2023 to Apr 2024
