RNS Number : 6756U | Sure Ventures PLC | 31 July 2020
Sure Ventures plc (‘Sure Ventures’ or ‘the Company’)
Annual Report – for the year ended 31 March 2020
Sure Ventures plc, a venture capital fund which invests in early stage software companies in the rapidly growing tech verticals of augmented reality (‘AR’), virtual reality (‘VR’), and Internet of Things (‘IoT’) and Artificial Intelligence (AI), is pleased to announce its annual results for the first full year investment for the year ending 31 March 2020.
The Company’s annual report and audited financial statements will be posted to shareholders shortly and will be made available on the Company’s website www.sureventuresplc.com
For further information, please visit www.sureventuresplc.com or contact:
Gareth Burchell, Sure Ventures +44 (0) 20 7186 9918
Notes to Editors
Sure Ventures plc listed on the London Stock Exchange in January 2018 giving retail investors access to an asset class that is usually dominated by private venture capital funds. Sure Ventures is focusing on companies in the UK, Republic of Ireland and other European countries, making seed and series A investments in companies with first rate management teams, products which benefit from market validation with target revenue run rates of at least £400,000 over the next 12 months. Website: http-s://www.sureventuresplc.com/
Chairman’s Statement
Dear Shareholders.
On behalf of my fellow directors, I am delighted to present the annual results of Sure Ventures plc (the ‘Company’) for the year ended 31 March 2020.
FINANCIAL PERFORMANCE
The Company’s performance for the year produced a healthy net asset value (‘NAV’) total return per share of +11.54% (31 March 2019 -9.87%), its best return since launch. Given the circumstances of the global stock market collapse during March, this is a pleasing result. While the return since inception is -7.40%, it should be remembered that figure includes not only the March market falls but also the Company’s initial formation costs incurred at incorporation. During the year the Company’s NAV attributable to shareholders grew steadily by £720k to £4.5m as at the year end.
The Company’s share price continues to trade at or around its last published NAV, which the Company believes supports the continued growth potential of its investments and demonstrates an understanding among shareholders of the investment rationale and horizon.
PORTFOLIO UPDATE
The Company’s holdings comprise its 25.9% investment in Sure Valley Ventures Sub-Fund of Suir Valley Fund ICAV (the ‘Fund’) to which the Company has made a total commitment of €7m (increasing its initial commitment from €4.5m in September 2019), as well as investments the Company holds directly – in Immotion Group plc (‘Immotion’), a listed immersive virtual reality (‘VR”) entertainment group and VividQ Limited, a privately owned deep technology company pioneering the application of holography in augmented reality (‘AR’) and VR. The Fund portfolio includes one listed entity, VR Education Holdings plc (‘VR Education’) a developer of VR software and immersive experiences with a specific focus on education, and as at the year end, a further nine privately held companies in the AR, VR, internet of things (‘IoT’) and artificial intelligence (‘AI’) space.
During the year the Fund announced the following additional investments:
- VividQ Limited (April 2019), alongside the Company’s own direct investment, thus increasing the Company’s exposure to this 3D holography specialist
- Ambisense (May 2019), a company that has developed an environmental risk assessment platform encompassing IoT and AI solutions
- Getvisibility (March 2020) an AI security data software development company providing visibility over unstructured data.
Each of these investments brings its own unique qualities and adds to the diverse and well-balanced composition of the Fund’s portfolio of investee companies. Shortly after the year end the Fund announced an investment in Buymie, an AI app-based home grocery delivery service, adding another exciting and relevant portfolio company who have just teamed up with Co-op stores to provide deliveries to over 200,000 households across Bristol.
The year also featured a Series A follow-on investment led by Force Over Mass Capital for Admix, the advertising platform for AR/VR developers. The funding round closed in March 2020 and provided the Company with a substantial uplift from its original investment.
Well ahead of schedule, given the Company’s long-term investment horizon, the Fund’s first successful exit was announced during the year. In December 2019 Artomatix, which provides an AI platform automating the creation of 3D content was sold to Unity Technologies at a multiple of approximately 5x the initial investment, providing the Company with a significant cash return, ensuring an important buffer for future investments.
As COVID-19 continues to negatively impact public markets, March 2020 witnessed one of the most volatile months in financial markets history and so predictably the two listed investments, Immotion and VR Education, came under selling pressure into the year end. Share prices of both companies hit all-time lows during March which more than offset the unrealized gains from the Admix uplift. However, since trading at these lows, whilst Immotion’s recovery is expected to be more gradual, VR Education’s share price has been given a huge boost by a €3m investment announced in May 2020 from HTC Corporation off the back of hosting HTC’s annual conference utilizing VR Education’s ENGAGE platform. At the time of writing, share price of VRE Education has rallied to 13p, while Immotion is trading at 1.85p, in line with its year end mark.
Further information on the investment portfolio is provided in the report of the Investment Manager which follows this statement.
COMMITMENTS AND FUNDING
As mentioned above, on 2 September 2019 the Company announced an increase in subscription to the Fund of €2.5m taking its total commitment to €7m, thereby increasing its share in the Fund from 21.6% to 25.9%. This commitment was made shortly before the Fund closed to new subscribers validating the Company’s belief that the Fund portfolio is now at a mature stage and, with a number of investee companies preparing for further funding rounds, there is demonstrable potential for further uplifts to occur from initial valuations.
The Company believes that it will have sufficient access to funding to meet its commitments to the Fund over the term of the Fund’s investment cycle, through a combination of available cash, anticipated subscriptions and access to undrawn facilities.
INVESTMENT ENVIRONMENT
COVID-19 will continue to have a lasting impact on global economies and the investment environment is likely to be challenging for public and private markets investors alike. The Company is confident that the Investment Manager will continue to identify new businesses in which to invest within the Company’s chosen verticals of AR, VR, IoT and AI, and whilst COVID-19 has had little effect on the majority of the portfolio companies, the Company and Investment Manager remain vigilant of risks associated with the pandemic on the portfolio companies.
DIVIDEND
During the year to 31 March 2020, the Company has not declared a dividend (31 March 2019: £nil). Pursuant to the Company’s dividend policy the directors intend to manage the Company’s affairs to achieve shareholder returns through capital growth rather than income. During the current financial year, the Company received income following a distribution from Sure Valley Ventures; the Board considered that the working capital requirements and anticipated draw down cycle of their current commitments did not allow for sufficient excess liquidity as to declare a special dividend.
The Company does not expect to receive a material amount of dividends or other income from its direct or indirect investments. It should not be expected that the Company will pay a significant annual dividend, if any.
GEARING
The Company may deploy gearing of up to 20% of net asset value (calculated at the time of borrowing) to seek to enhance returns and for the purposes of capital flexibility and efficient portfolio management. The Company’s gearing is expected to primarily comprise bank borrowings but may include the use of derivative instruments and such other methods as the Board may determine. During the period to 31 March 2020 the Company did not employ any borrowing (31 March 2019: £nil).
The Board will continue to review the Company’s borrowing, in conjunction with the Company’s Investment Manager on a regular basis pursuant with the Company’s overall cash management and investment strategy.
OUTLOOK
Several investee companies are at different stages of Series A fundraising and upon completion the Company anticipates further positive announcements to this effect within the next one-two quarters. The investment pipeline remains strong and, as well as Buymie, the Company anticipates news in the near term of further portfolio additions, subject to the completion of the Investment Manager’s rigorous filter process and satisfactory due diligence.
COVID-19 has forced structural changes in the way that we now address everyday tasks in the workplace, in education and in entertainment, with “virtual” being increasingly applied to a greater variety of operations. With enforced physical restrictions comes the need to develop technology to counter these measures and the Company believes that its investment portfolio and investment strategy is well placed to benefit from the adoption of these technologies.
On 7 June 2019, the Company announced a placing of 305,208 ordinary shares, followed by a further placing of 250,000 on 19 March 2020 (ultimately allotted on 1 April 2020). As of 31 March 2020, other liabilities comprise of £250,000 of cash and in-species subscriptions received in advance, which was issued by the Company on 1 April 2020 post year-end. Refer note 11. The ordinary shares were admitted to trading on the Specialist Fund Segment of the London Stock Exchange on 10 June 2019, under the existing ISIN: GB00BYWYZ460, taking the total shares in admission as at 31 March 2020 to 4,869,956 (excluding 250,000 allotted 1 April 2020).
The Investment Manager’s Report following this Statement gives further detail on the affairs of the Company. The Board is confident of the long-term prospects for the Company in pursuit of its investment objectives.
BOARD
I am pleased that St. John Agnew was able to join the Board on 15 June 2019. He is a qualified solicitor and an investment manager with more than 25 years of financial markets experience within the asset management industry. He brings to the Board a wealth of knowledge in investment funds and his legal background provides an excellent addition of skill sets to the Company.
Perry Wilson
Chairman
30 July 2020
Income Statement
For the year ended 31 March 2020
|
|
|
2020
|
2019
|
|
|
Notes
|
Revenue
£
|
Capital
£
|
Total
£
|
Revenue
£
|
Capital
£
|
Total
£
|
|
Income
|
|
|
|
|
|
|
|
|
Other net changes in fair value on financial assets at fair value through profit or loss
|
|
–
|
(237,271)
|
(237,271)
|
–
|
(188,802)
|
(188,802)
|
|
Distribution income
|
|
946,817
|
–
|
946,817
|
–
|
–
|
–
|
|
Interest income
|
|
–
|
–
|
–
|
3,174
|
–
|
3,174
|
|
Rebate management fee
|
|
55,495
|
–
|
55,495
|
50,960
|
–
|
50,960
|
|
Total net income
|
|
1,002,312
|
(237,271)
|
765,041
|
54,134
|
(188,802)
|
(134,668)
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Management fee
|
4
|
(13,452)
|
(42,043)
|
(55,495)
|
(11,197)
|
(34,996)
|
(46,193)
|
|
Custodian, secretarial and administration fees
|
|
(94,785)
|
–
|
(94,785)
|
(84,603)
|
–
|
(84,603)
|
|
Other expenses
|
5
|
(169,280)
|
–
|
(169,280)
|
(208,467)
|
–
|
(208,467)
|
|
Total operating expenses
|
|
(277,517)
|
(42,043)
|
(319,560)
|
(304,267)
|
(34,996)
|
(339,263)
|
|
|
|
|
|
|
|
|
|
|
Profit / (loss) before Taxation and after finance costs
|
|
724,795
|
(279,314)
|
445,481
|
(250,133)
|
(223,798)
|
(473,931)
|
|
Taxation
|
6
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Profit / (loss) after taxation
|
|
724,795
|
(279,314)
|
445,481
|
(250,133)
|
(223,798)
|
(473,931)
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
7
|
14.88
|
(5.73)
|
9.15
|
(5.48)p
|
(4.90)p
|
(10.38)p
|
The total column of this statement represents the Income statement prepared in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union. The supplementary revenue return and capital return columns are both prepared under guidance issued by the Association of Investment Companies. All items in the above statement derive from continuing operations.
The Company does not have any income or expense that is not included in net loss for the year. Accordingly, the net profit / (loss) for the year is also the Total Comprehensive Income for the year, as defined in IAS1 (revised).
Statement of Financial Position
As at 31 March 2020
|
|
Notes
|
31 March 2020
£
|
31 March 2019
£
|
|
Non-current assets
|
|
|
|
|
Investments held at fair value through profit or loss
|
8
|
3,078,560
|
1,700,900
|
|
|
|
3,078,560
|
1,700,900
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
Receivables
|
9
|
18,620
|
–
|
|
Cash and cash equivalents
|
|
1,700,601
|
2,139,842
|
|
|
|
1,719,221
|
2,139,842
|
|
|
|
|
|
|
Total assets
|
|
4,797,781
|
3,840,742
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Other payables
|
10
|
(287,862)
|
(50,654)
|
|
|
|
(287,862)
|
(50,654)
|
|
|
|
|
|
|
Total assets less current liabilities
|
|
4,509,919
|
3,790,088
|
|
|
|
|
|
|
Total net assets
|
|
4,509,919
|
3,790,088
|
|
|
|
|
|
|
Shareholders’ funds
|
|
|
|
|
Ordinary share capital
|
11
|
48,699
|
45,647
|
|
Share premium
|
11
|
4,699,588
|
4,428,290
|
|
Revenue reserves
|
|
223,375
|
(501,420)
|
|
Capital reserves
|
|
(461,743)
|
(182,429)
|
|
Total shareholders’ funds
|
|
4,509,919
|
3,790,088
|
|
|
|
|
|
|
Net asset value per share
|
12
|
92.61p
|
83.03p
|
|
|
|
|
|
The financial statements on pages 50 to 63 were approved by the board of directors and authorised for issue on 30 July 2020. They were signed on its behalf by:
Statement of Changes in Equity
For the year ended 31 March 2020
|
|
Ordinary
Share
Capital
£
|
Share
Premium
£
|
Revenue
Reserves
£
|
Capital
Reserves
£
|
Total
Reserves
£
|
Total
Equity
£
|
|
Balance at 1 April 2019
|
45,647
|
4,428,290
|
(501,420)
|
(182,429)
|
(683,849)
|
3,790,088
|
|
Ordinary shares issued
|
3,052
|
289,948
|
–
|
–
|
–
|
293,000
|
|
Ordinary shares issue costs
|
–
|
(18,650)
|
–
|
–
|
–
|
(18,650)
|
|
Profit/(loss) after taxation
|
–
|
–
|
724,795
|
(279,314)
|
445,481
|
445,481
|
|
Dividends paid in the year
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Balance at 31 March 2020
|
48,699
|
4,699,588
|
223,375
|
(461,743)
|
(238,368)
|
4,509,919
|
For the year ended 31 March 2019
|
|
Ordinary
Share
Capital
£
|
Share
Premium
£
|
Revenue
Reserves
£
|
Capital
Reserves
£
|
Total
Reserves
£
|
Total
Equity
£
|
|
Balance at 1 April 2018
|
33,100
|
3,225,978
|
(251,287)
|
41,369
|
(209,918)
|
3,049,160
|
|
Ordinary shares issued
|
12,547
|
1,265,933
|
–
|
–
|
–
|
1,278,480
|
|
Ordinary shares issue costs
|
–
|
(63,621)
|
–
|
–
|
–
|
(63,621)
|
|
(Loss) after taxation
|
–
|
–
|
(250,133)
|
(223,798)
|
(473,931)
|
(473,931)
|
|
Dividends paid in the period
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Balance at 31 March 2019
|
45,647
|
4,428,290
|
(501,420)
|
(182,429)
|
(683,849)
|
3,790,088
|
As at 31 March 2020 the Company had distributable reserves of £nil (2019: £nil) for the payment of future dividends. The distributable reserves are the revenue reserves £nil (2019: £nil), realised capital reserves (£nil) (2018: (£nil)) and the special distributable reserves (£nil) (2019: (£nil)).
Statement of Cash Flows
For the year ended 31 March 2020
|
|
Notes
|
For the year ended
31 March 2020
£
|
For the year ended
31 March 2019
£
|
|
Cash flows from operating activities:
|
|
|
|
|
Gain/(loss) after taxation
|
|
445,481
|
(473,931)
|
|
Adjustments for:
|
|
|
|
|
Gain on sale on investment
|
|
(946,817)
|
–
|
|
(Increase)/decrease in receivables
|
|
(18,620)
|
689,713
|
|
Increase in payables
|
10
|
237,208
|
7,338
|
|
Unrealised (gain)/loss on foreign exchange
|
8
|
(76,430)
|
26,593
|
|
Net changes in fair value on financial assets at fair value through profit or loss
|
8
|
313,482
|
162,209
|
|
Net cash (outflow)/inflow from operating activities
|
|
(45,696)
|
411,922
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
Purchase of investments
|
8
|
(1,894,014)
|
(2,650,429)
|
|
Sales of investments
|
8
|
1,226,119
|
1,499,985
|
|
Net cash (outflow) investing activities
|
|
(667,895)
|
(1,150,444)
|
|
|
|
|
|
|
Cash flows from financing activities*:
|
|
|
|
|
Proceeds from issue of ordinary shares
|
|
293,000
|
1,278,480
|
|
Share issue costs
|
|
(18,650)
|
(63,621)
|
|
Net cash inflow from financing activities
|
|
274,350
|
1,214,859
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
(439,241)
|
476,337
|
|
Cash and cash equivalents at the beginning of the year
|
|
2,139,842
|
1,663,505
|
|
Net cash and cash equivalents
|
|
1,700,601
|
2,139,842
|
*The Company has no borrowings or liabilities from financing activities.
Notes to the Financial Statements
1) PRINCIPAL ACCOUNTING POLICIES
Basis of accounting
The financial statements of Sure Ventures plc (the “Company”) have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations (IFRS IC) as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS.
The principal accounting policies adopted by the Company are set out below. Where presentational guidance set out in the Statement of Recommended Practice (‘SORP’) for investment trusts issued by the Association of Investment Companies (‘AIC’) in October 2019 is consistent with the requirements of IFRS, the directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
All values are rounded to the nearest pound unless otherwise indicated.
Foreign Currency
The presentation currency of the Company is pounds sterling, the financial statements are prepared in this currency in accordance with the Company’s prospectus. The Company is required to nominate a functional currency, being the currency in which the Company predominantly operates. The board has determined that sterling is the Company’s functional currency.
Foreign exchange gains and losses relating to the financial assets and liabilities carried at fair value through profit or loss are presented in the income statement within ‘other net changes in fair value on financial assets and financial liabilities at fair value through profit or loss’.
Presentation of Income statement
In order to better to reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the of Income statement between items of a revenue and capital nature has been presented alongside the Income statement.
Income
Dividend income from investments is recognised when the Company’s right to receive payment has been established, normally the ex-dividend date.
Interest income in profit or loss in the Income statement includes bank interest. Interest income is recognised on an accruals basis.
Capital income, all changes in fair value are recognised in profit or loss in the Income statement as net gain on investment at fair value through profit or loss.
Expenses
All expenses are accounted for on the 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:
Transaction costs which are incurred on the purchases or sales of investments designated as fair value through profit or loss are expensed to capital in the Income statement.
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 and, accordingly, the management fee for the financial year has been allocated 24.24% (2019: 24.24%) to revenue and 75.76% (2019: 75.76%) to capital (Investment held at fair value through profit or loss to the net asset value of the Company), in order to reflect the directors’ long term view of the nature of the expected investment returns of the Company.
Capital Reserves
Increases and decreases in the valuation of investments and realised/unrealised foreign exchange gain/(loss) held at the year end are accounted for in the capital reserves.
Taxation
In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Income statement income is the ‘marginal basis’. Under this basis, if taxable income is capable of being entirely offset by expenses in the revenue column of the Income statement, then no tax relief is transferred to the capital return column.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the Statement of Financial Position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the revenue return column of the Income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Investment trusts which have approval under Part 24, Chapter 4 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.
Classification
Financial assets and financial liabilities
In accordance with IFRS, the Company has designated its investments as financial assets at fair value through profit or loss.
i) Financial assets at fair value through profit or loss
The Company has designated all of its investments upon initial recognition as “financial assets at fair value through profit or loss”. Their performance is evaluated on a fair value basis, in accordance with the risk management and investment strategies of the Fund, as set out in the Company’s supplement to the Prospectus.
ii) Financial assets at amortised cost
Financial assets that are classified as “financial assets at amortised cost” include cash and cash equivalents and receivables.
iii) Financial liabilities at fair value through profit or loss
Financial liabilities that are not at fair value through profit or loss include other payables.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the group has transferred substantially all risks and rewards of ownership. If substantially all the risks and rewards have been neither retained nor transferred and the group has retained control, the assets continue to be recognised to the extent of the group’s continuing involvement. Financial liabilities are derecognised when they are extinguished.
Investments
All investments held by the Company have been designated at fair value through profit or loss (‘FVPL’) but are also described in these financial statements as investments held at fair value, and are valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines (‘IPEVCV’) issued in December 2018 as endorsed by the British Private Equity and Venture Capital Association.
Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional.
Receivables
Receivables do not carry any interest and are short term in nature. They are initially stated at their nominal value and reduced by appropriate allowances for estimated irrecoverable amounts (if any).
Cash and cash equivalents
Cash and cash equivalents (which are presented as a single class of asset on the Statement of Financial Position) comprise cash at bank and in hand and deposits with an original maturity of three months or less. The carrying value of these assets approximates their fair value.
Payables
Payables are non-interest bearing.
Dividends
Interim dividends are recognised in the year in which they are paid. Final dividends are recognised when they have been approved by shareholders.
New standards, amendments and interpretations effective from 1 January 2019
The following standards, amendments and interpretations, which became effective in January 2019, are relevant to the Company.
IFRS 16, ‘Leases’
IFRS 16 affects primarily the accounting by lessees and results in the recognition of almost all leases on statement of financial position. The standard removes the current distinction between operating and financing leases and requires recognition of an asset (the right to use the leased item) and a financial liability to pay rentals for virtually all lease contracts. An optional exemption exists for short term and low value leases. IFRS 16 is effective for annual periods starting on or after 1 January 2019.
An assessment has been performed on the effects of applying the new standard on the Company’s financial statements and given the Company does not transact in leases, no material impacts have been identified.
IFRIC 23, ‘Uncertainty over Income Tax Treatments’
The Company is tax-exempt and is only subject to withholding tax on certain dividend and interest income in some countries. If a fund is subject to income tax, including withholding taxes, then it is required to provide specific disclosures under IAS 12 and IAS 1. Additionally, if the Company is subject to income taxes in the scope of IAS 12, including withholding taxes, then the ICAV should consider if there are any uncertain tax treatments. IFRIC 23 Uncertainty over Income Tax Treatments is effective from 1 January 2019; earlier application is permitted.
The application of IFRIC 23 has had no material impact on the financial statements.
There are no other standards, interpretations or amendments to existing standards that are effective for the financial year beginning on 1 January 2019 that have had a material impact on the Company.
Adoption of New and Revised Standards
There are no standards, amendments to standards or interpretations that are effective for annual periods beginning on or after 1 January 2020 that are expected to have a material effect on the financial statements of the Company.
CAPITAL STRUCTURE
Share Capital
Ordinary shares are classed as equity. The ordinary shares in issue have a nominal value of one penny and carry one vote each.
Share Premium
This reserve represents the difference between the issue price of shares and the nominal value of shares at the date of issue, net of related issue costs.
Capital Reserve
Unrealised gains and losses on investments held at the year end arising from movements in fair value are taken to the capital reserve.
Revenue Reserve
Net revenue profits and losses of the Company
2) SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with IFRS as adopted in the EU requires the Company to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting year. Although these estimates are based on the directors’ best knowledge of the amount, actual results may differ ultimately from those estimates.
The areas requiring a higher degree of judgement or complexity and areas where assumptions and estimates are significant to the financial statements are in relation to investments at fair value through profit or loss described below.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Equity Investments
The unquoted equity assets are valued on periodic basis using techniques including a market approach, costs approach and/or income approach. The valuation process is collaborative, involving the finance and investment functions within the manager with the final valuations being reviewed by the manager’s valuation committee.
Shareholders should note that increases or decreases in any of the inputs in isolation may result in higher or lower fair value measurements. Changes in fair value of all investments held at fair value are recognised in the Income statement as a capital item. On disposal, realised gains and losses are also recognised in the Income statement IFRS 9 was adopted but did not have a material impact on the Company.
3) SEGMENTAL REPORTING
The Company’s board and the Investment Manager consider investment activity in selected Equity Assets as the single operating segment of the Company, being the sole purpose for its existence. No other activities are performed.
The directors are of the opinion that the Company is engaged in a single segment of business and operations of the Company are wholly in the United Kingdom.
4) MANAGEMENT AND PERFORMANCE FEE
Management Fee
The management fee is payable quarterly in advance at a rate equal to 1/4 of 1.25% per month of net asset value (the ”Management Fee”). The aggregate fee payable on this basis must not exceed 1.25% of the net assets of the Company in any year.
During the year the Company incurred £55,495 (2019: £46,193) of fees and at 31 March 2020, there was £nil (2019: £nil) payable to the Manager.
Performance Fee
The Manager is entitled to a performance fee, which is calculated in respect of each twelve month period starting on 1 April and ending on 31 March in each calendar year (‘Calculation Period’), and the final Calculation Period shall end on the day on which the management agreement is terminated or, if earlier, the business day immediately preceding the day on which the Company goes into liquidation.
The Manager is entitled to receive a performance fee equal to 15% of any excess returns over a high watermark, subject to achieving a hurdle rate of 8% in respect of each performance period. There is no performance fee charged during the year ended 31 March 2020. (2019: £nil)
5) OTHER EXPENSES
|
|
For the year
ended
31 March 2020
£
|
For the year
ended
31 March 2019
£
|
|
Auditor’s remuneration – audit fees
|
29,940
|
20,000
|
|
Directors’ fees
|
55,609
|
67,324
|
|
VAT Expense
|
12,285
|
22,283
|
|
Legal and other professional
|
7,270
|
48,362
|
|
Listing fees
|
24,433
|
39,719
|
|
Service Fee Expense
|
8,879
|
6,846
|
|
Other expenses
|
30,864
|
3,933
|
|
Total Other expenses
|
169,280
|
208,467
|
All expenses are inclusive of VAT where applicable. Further details on directors’ fees can be found in the directors’ remuneration report on page 36.
6) TAXATION
As an investment trust the Company is exempt from corporation tax on capital gains. The Company’s revenue income is subject to tax, but offset by any interest distribution paid, which has the effect of reducing that corporation tax to nil (2019: nil). This means the interest distribution may be taxable in the hands of the Company’s shareholders.
Any change in the Company’s tax status or in taxation legislation generally could affect the value of investments held by the Company, affect the Company’s ability to provide returns to shareholders, lead the Company to lose its exemption from UK Corporation tax on chargeable gains or alter the post-tax returns to shareholders. It is not possible to guarantee that the Company will remain a non-close company, which is a requirement to maintain status as an investment trust, as the ordinary shares are freely transferable. The Company, in the event that it becomes aware that it is a close company, or otherwise fails to meet the criteria for maintaining investment trust status, will as soon as reasonably practicable, notify shareholders of this fact.
The Company has obtained this approval from HM Revenue & Customs.
Factors affecting taxation charge for the year
The taxation charge for the year is lower than the standard rate of UK corporation tax of 19.00% (2019: 19.00%). A reconciliation of the taxation charge based on the standard rate of UK corporation tax to the actual taxation charge is shown below.
|
31 March 2020
|
Revenue
£
|
Capital
£
|
Total
£
|
|
Return on ordinary activities before taxation
|
724,794
|
(279,314)
|
445,480
|
|
Return on ordinary activities before taxation multiplied by the standard rate of UK corporation tax of 19%
|
137,711
|
(53,070)
|
84,641
|
|
Effects of:
|
|
|
|
|
Excess management expenses (utilised)/ not utilised
|
(137,711)
|
53,070
|
(84,641)
|
|
Interest distributions paid in respect of the year
|
–
|
–
|
–
|
|
Total tax charge in income statement
|
–
|
–
|
–
|
|
31 March 2019
|
Revenue
£
|
Capital
£
|
Total
£
|
|
Return on ordinary activities before taxation
|
(250,133)
|
(223,798)
|
(473,931)
|
|
Return on ordinary activities before taxation multiplied by the standard rate of UK corporation tax of 19%
|
(47,525)
|
(42,522)
|
(90,047)
|
|
Effects of:
|
|
|
|
|
Excess management expenses not utilised
|
47,525
|
42,522
|
90,047
|
|
Interest distributions paid in respect of the year
|
–
|
–
|
–
|
|
Total tax charge in income statement
|
–
|
–
|
–
|
Overseas taxation
The Company may be subject to taxation under the tax rules of the jurisdictions in which it invests, including by way of withholding of tax from interest and other income receipts. Although the Company will endeavour to minimise any such taxes this may affect the level of returns to shareholders.
7) EARNINGS PER SHARE
|
For the financial year ended 31 from March 2020
|
Revenue
pence
|
Capital
pence
|
Total
pence
|
|
Earnings per ordinary share
|
14.88p
|
(5.74)p
|
9.15p
|
The calculation of the above is based on revenue returns of £724,795 capital returns of (£279,314) and total returns of £445,481 and the weighted average number of ordinary shares of 4,869,956 as at 31 March 2020.
|
For the financial period ended 31 from March 2019
|
Revenue
pence
|
Capital
pence
|
Total
pence
|
|
Earnings per ordinary share
|
(5.48)p
|
(4.90)p
|
(10.38)p
|
The calculation of the above is based on revenue returns of (£250,133) capital returns of (£223,798) and total returns of (£473,931) and the weighted average (including pending issuances) number of ordinary shares of 4,564,748 as at 31 March 2019.
8) FAIR VALUE MEASUREMENTS
(a) Movements in the year
|
|
As of 31 March 2020
£
|
As of 31 March 2019
£
|
|
Opening cost
|
|
|
|
Opening fair value
|
1,700,900
|
739,258
|
|
|
|
|
|
Purchases at cost
|
1,894,014
|
2,740,917
|
|
Sale
|
(279,301)
|
(1,590,473)
|
|
Realised (loss)/gain
|
(22,136)
|
3,400
|
|
Unrealised (loss)
|
(291,347)
|
(165,609)
|
|
Unrealised gain/(loss) on foreign exchange
|
76,430
|
(26,593)
|
|
Closing fair value at 31 March 2020 and 2019
|
3,078,560
|
1,700,900
|
(b) Accounting classifications and fair values
IFRS 13 requires the Company to classify its financial instruments held at fair value using a hierarchy that reflects the significance of the inputs used in the valuation methodologies. These are as follows:
- Level 1 – quoted prices in active markets for identical investments;
- Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayments, credit risk, etc.); and
- Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments).
The following sets out the classifications used as at 31 March 2020 in valuing the Company’s investments:
|
|
Carrying amount
|
|
Fair value
|
|
31 March 2020
|
Mandatorily at FVTPL
|
Financial assets at amortised cost
|
Other financial liabilities
|
Total carrying amount
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
£
|
£
|
£
|
£
|
|
£
|
£
|
£
|
£
|
|
Investments in quoted equity assets
|
148,796
|
–
|
–
|
148,796
|
|
148,796
|
–
|
–
|
148,796
|
|
Investments in unquoted equity assets
|
2,929,764
|
–
|
–
|
2,929,764
|
|
–
|
–
|
2,929,764
|
2,929,764
|
|
|
3,078,560
|
–
|
–
|
3,078,560
|
|
148,796
|
–
|
2,929,764
|
3,078,560
|
|
Financial assets not measured at fair value
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
–
|
1,700,601
|
–
|
1,700,601
|
|
|
|
Receivables
|
–
|
18,620
|
–
|
18,620
|
|
|
|
|
–
|
1,719,221
|
–
|
1,719,221
|
|
|
|
Financial liabilities not measured at fair value
|
|
|
|
|
|
|
|
Other payables
|
–
|
–
|
287,862
|
287,862
|
|
|
|
|
–
|
–
|
287,862
|
287,862
|
|
|
|
|
Carrying amount
|
|
Fair value
|
|
31 March 2019
|
Mandatorily at FVTPL
|
Financial assets at amortised cost
|
Other financial liabilities
|
Total carrying amount
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
£
|
£
|
£
|
£
|
|
£
|
£
|
£
|
£
|
|
Investments in quoted equity assets
|
412,204
|
–
|
–
|
412,204
|
|
412,204
|
–
|
–
|
412,204
|
|
Investments in unquoted equity assets
|
1,288,696
|
–
|
–
|
1,288,696
|
|
–
|
–
|
1,288,696
|
1,288,696
|
|
|
1,700,900
|
–
|
–
|
1,700,900
|
|
412,204
|
–
|
1,288,696
|
1,700,900
|
|
Financial assets not measured at fair value
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
–
|
2,139,842
|
–
|
2,139,842
|
|
|
|
|
–
|
2,139,842
|
–
|
2,139,842
|
|
|
|
Financial liabilities not measured at fair value
|
|
|
|
|
|
|
|
Other payables
|
–
|
–
|
50,654
|
50,654
|
|
|
|
|
–
|
–
|
50,654
|
50,654
|
|
|
9) RECEIVABLES
|
|
31 March 2020
£
|
31 March 2019
£
|
|
Prepayments
|
18,620
|
–
|
|
Total receivables
|
18,620
|
–
|
The above receivables do not carry any interest and are short term in nature. The directors consider that the carrying values of these receivables approximate their fair value.
10) OTHER PAYABLES
|
|
31 March 2020
£
|
31 March 2019
£
|
|
Accruals and deferred income
|
37,863
|
50,654
|
|
Other creditors
|
250,000
|
–
|
|
Total other payables
|
287,863
|
50,654
|
Other Creditors represents cash subscriptions received in advance, which were issued as new shares by the company on 1 April 2020.
The above payables do not carry any interest and are short term in nature. The directors consider that the carrying values of these payables approximate their fair value.
11) ORDINARY SHARE CAPITAL
The table below details the issued share capital of the Company as at the date of the Financial Statements.
|
Issued and allotted
|
No. of shares
31 March 2020
|
£
|
No. of shares
31 March 2019
|
£
|
|
Ordinary shares of 1 penny each
|
4,869,956
|
48,699
|
4,564,748
|
45,647
|
On incorporation, the issued share capital of the Company was £0.01 represented by one ordinary share of £0.01. Redeemable preference shares of 50,000 were also issued with a nominal value of £1 each, of which 25% was paid. The redeemable shares were issued to enable the Company to obtain a certificate of entitlement to conduct business and to borrow under section 761 of the Companies Act 2006. The redeemable shares were redeemed on listing from the proceeds of the issue of the new ordinary shares upon admission on 19 January 2018.
The following table details the subscription activity for the year ended 31 March 2020.
|
|
31 March 2020
|
31 March 2019
|
|
Balance as at 1 April 2019
|
4,564,748
|
3,310,000
|
|
Ordinary shares issued
|
305,208
|
1,254,748
|
|
Balance as at 31 March 2020
|
4,869,956
|
4,564,748
|
During the year ended 31 March 2020 and 2019, all proceeds from this issue was received.
12) NET ASSET VALUE PER ORDINARY SHARE
|
|
Year ended 31 March 2020
|
Year ended 31 March 2019
|
|
Year ended 31 March 2020
|
Net asset
value per
ordinary share
Pence
|
Net assets
attributable
£
|
Net asset
value per
ordinary share
Pence
|
Net assets
attributable
£
|
|
Ordinary shares of 1 penny each
|
92.61p
|
4,509,919
|
83.03p
|
3,790,088
|
The net asset value per ordinary share is based on net assets at the year ended of £4,509,919 (2019: £3,790,088) and on 4,869,956 (2019: 4,564,748) ordinary shares in issue at the year end.
13) CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
The Company may invest in Sure Valley Ventures or other collective investment vehicles, subscriptions to which are made on a commitment basis. The Company will be expected to make a commitment that may be drawn down, or called, from time to time at the discretion of the manager of the Fund or other collective investment vehicle. The Company will usually be contractually obliged to make such capital call payments and a failure to do so would usually result in the Company being treated as a defaulting investor by the Fund or other collective investment vehicle.
The Company’s has to satisfy capital calls on its commitments and will do through a combination of reserves, and where applicable the realisation, of Cash and Cash Equivalents and Liquid Investments (as each expression is defined in the prospectus dated 17 November 2017), anticipated future cash flows to the Company, the use of borrowings and, potentially, further issues of Shares.
As of 31 March 2020, the Company had outstanding commitments in relation to the Fund in the amount of €3.9 million (2019: €2.9 million).
14) RELATED PARTY TRANSACTIONS AND TRANSACTIONS WITH THE MANAGER
Directors – The remuneration of the directors is set out in the directors’ Remuneration Report on page 36. There were no contracts subsisting during or at the end of the year in which a director of the Company is or was interested and which are or were significant in relation to the Company’s business. There were no other transactions during the year with the directors of the Company. The directors do not hold any ordinary shares of the Company.
At 31 March 2020, there was £1,473 (2019: £1,192) payable to the directors for fees and expenses.
Manager – Shard Capital AIFM LLP (the ‘Manager’), a UK-based company authorised and regulated by the Financial Conduct Authority, has been appointed the Company’s manager and authorised investment fund manager for the purposes of the Alternative Investment Fund Managers Directive. Details of the services provided by the manager and the fees paid are given in Note 4.
During the year the Company incurred £55,495 (2019: £46,193) of fees and at 31 March 2020, there was £nil (2019: £nil) payable to the Manager.
During the year the Company paid £18,650 (2019: £63,621) of placement fees to Shard Capital Partners LLP.
15) FINANCIAL RISK MANAGEMENT
The Company’s investment objective is to achieve capital growth for investors pursuant to the investment policy outlined in the prospectus, this involves certain inherent risks. The main financial risks arising from the Company’s financial instruments are market risk, credit risk and liquidity risk. The board reviews and agrees policies for managing each of these risks as summarised below.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate. Market risk comprises three types of risk, price risk, interest rate risk and currency risk.
- Price risk – the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk);
- Interest rate risk – the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates; and
- Currency risk – the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in foreign exchange rates.
The Company’s exposure, sensitivity to and management of each of these risks is described below. Management of market risk is fundamental to the Company’s investment objective. The investment portfolio is continually monitored to ensure an appropriate balance of risk and reward within the parameters of the investment restrictions outlined in the prospectus.
(a) Price risk
Price risk arises mainly from uncertainty about future prices of financial instruments used in the Company’s business. It represents the potential loss the Company might suffer through holding market positions in the face of price movements (other than those arising from interest rate risk or currency risk) specifically in equity investments purchased in pursuit of the Company’s investment objective, held at fair value through the profit and loss.
As at 31 March 2020 the Company held two direct private equity investment in the participating shares of Sure Valley Ventures (formerly Suir Valley Ventures), a sub-fund of Suir Valley Funds ICAV and VividQ Limited. (2019: the Company held one direct private equity investment in the participating shares of Sure Valley Ventures (formerly Suir Valley Ventures), a sub-fund of Suir Valley Funds ICAV).
As at 31 March 2020 and 2019 the investment in Sure Valley Ventures (formerly Suir Valley Ventures) is valued at the net asset value of the sub-fund, as calculated by its administrator.
At 31 March 2020, had the fair value of investments strengthened by 10% with all other variables held constant, net assets attributable to holders of participating shares would have increased by £307,856 (2019: £170,090). A 10% weakening of the market value of investments against the above would have resulted in an equal but opposite effect on the above financial statement amounts to the amounts shown above, on the basis that all other variables remain constant. Actual trading results may differ from this sensitivity analysis and the difference may be material.
(b) Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments.
The Company’s currently employs no borrowings.
The Company finances its operations mainly through its share capital and reserves, including realised gains on investments.
Exposure of the Company’s financial assets and liabilities to floating interest rates (giving cash flow interest rate risk when rates are reset) and fixed interest rates (giving fair value risk) as at 31 March 2020 and 31 March 2019 is shown below:
|
|
|
31 March 2020
|
31 March 2019
|
|
Financial instrument
|
|
Floating Rate
£
|
Fixed or
Administered Rate
£
|
Total
£
|
Floating Rate
£
|
Fixed or
Administered Rate
£
|
Total
£
|
|
Cash and cash equivalents
|
|
–
|
1,700,601
|
1,700,601
|
–
|
2,139,842
|
2,139,842
|
|
Total exposure
|
|
–
|
1,700,601
|
1,700,601
|
–
|
2,139,842
|
2,139,842
|
An administered rate is not like a floating rate, movements in which are directly linked to LIBOR. The administered rate can be changed at the discretion of the counterparty.
(c) Currency risk
As at 31st March 2020 the Company’s largest investment is denominated in euros whereas its functional and presentation currency is pounds sterling. Consequently, the Company is exposed to risks that the exchange rate of its currency relative to euros may change in a manner that has an adverse effect on the fair value of the Company’s assets.
At the reporting date the carrying value of the Company’s financial assets and liabilities held in individual foreign currencies as a percentage of its net assets were as follows:
|
Foreign currency exposure as a percentage of net assets
|
31 March 2020
|
31 March 2019
|
|
Euros
|
54%
|
34%
|
Sensitivity analysis
If the euro exchange rates increased/decreased by 10% against pounds sterling, with all other variables held constant, the increase/decrease in the net asset attributable to the Company arising from a change financial assets at fair value through profit or loss, which are denominated in euros, would have been +/- £242,976 (2019: £128,870).
16) CREDIT RISK
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
The Company’s credit risks arise principally through cash deposited with banks, which is subject to risk of bank default.
The Company ensures that it only makes deposits with institutions with appropriate financial standing.
Due to the low credit risk of the financial assets at amortised cost, the Expected credit loss “ECL” was determined to be immaterial and no impairment was recognised on the Fund in the year ended 31 March 2020.
Liquidity risk
Liquidity risk is the risk that the Company will have difficulty in meeting its obligations in respect of financial liabilities as they fall due.
The Company manages its liquid resources to ensure sufficient cash is available to meet its expected contractual commitments. It monitors the level of short-term funding and balances the need for access to short-term funding, with the long-term funding needs of the Company.
Capital Management
The Company’s capital is represented by ordinary shares and reserves.
The Company’s primary objectives in relation to the management of capital are:
- to maximise the long-term capital growth for its shareholders pursuant to its investment objective;
- to ensure its ability to continue as a going concern.
The Company manages its capital structure and liquidity resources to meet it’s obligations as described above.
Borrowing limits
Pursuant to the prospectus dated 17 November 2017 the Company can deploy gearing up to 20% of the net asset value of the Company (calculated at the time of borrowing) to seek to enhance returns and for the purpose of capital flexibility and efficient portfolio management. During the year ended 31st March 2020 and 2019 the Company employed no gearing.
17) ULTIMATE CONTROLLING PARTY
It is the opinion of the directors that there is no ultimate controlling party.
18) EVENTS AFTER THE REPORTING PERIOD
Sure Valley Ventures Fund participated in two new investments post year-end. Investments of €300,000 and €750,000 were made in Buymie Technologies Limited and Volograms Limited, respectively.
Since the year end a further 480,769 ordinary shares of 1p have been issued.
There have been no other subsequent events for the year ended 31 March 2020.
-ENDS-