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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK
VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF
ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMED.
ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE,
THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
23 February 2021
Seneca Growth Capital VCT plc
Annual Report and Financial Statements
for the year ended 31 December 2020
NAV Update
and
Notice of Annual General Meeting
The Directors are pleased to announce the audited results of the Company
for the year ended 31 December 2020. A copy of the Annual Report and
Financial Statements will be made available to shareholders shortly, and
extracts are now set out below.
The Company's AGM will be a closed meeting as a result of the Covid-19
("C-19") pandemic and will be held at 14:00 on Monday, 29 March 2021 at
9 The Parks, Haydock, WA12 0JQ. A copy of the Notice of AGM and Annual
Report and Accounts will be available on the Company's website:
https://www.globenewswire.com/Tracker?data=u-Ewvi184t6K0JFXrr-S0qFSC58dXS5-8hJ7iY6c6HNmsVxQnnTTZ1A-K6uDO5pI8zZUAJWuLcu9a54IJwBpoEVcS-m73t_NihkTL5zFaew=
www.senecavct.co.uk
Financial Headlines
Ordinary Shares
95.5p Ordinary share NAV plus cumulative dividends paid at 31 December
2020 ("Total Return")
30.2p Ordinary share NAV at 31 December 2020
13.0p Interim capital dividends paid per Ordinary share during year
B Shares
GBP2.4m Amount raised during the year from the issue of B shares
GBP1.36m Amount invested during the year into six new investee companies
by B share pool
97.8p B share NAV plus cumulative dividends paid at 31 December 2020
("Total Return")
91.8p B share NAV at 31 December 2020
3.0p Interim dividends paid per B share during year
Financial SummarySHYSHYSHY
Year to Year to Year to Year to
31 December 31 December 31 December 31 December
2020 2020 2019 2019
Ordinary B share Ordinary B share
share pool pool share pool pool
Net assets (GBP'000s) 2,453 8,317 2,463 5,921
Return on ordinary activities
after tax (GBP'000s) 1,045 252 (547) (168)
Earnings per share (p) 12.8 3.5 (6.7) (3.2)
Net asset value per share (p) 30.2 91.8 30.4 93.1
Dividends paid since inception
(p) 65.25 6.00 52.25 3.0
Total return (NAV plus cumulative
dividends paid) (p) 95.45 97.8 82.65 96.1
Financial Calendar
The Company's financial calendar is as follows:
29 March 2021 Annual General Meeting ("AGM") will be a
closed meeting as a result of the Covid-19 ("C-19") pandemic and will be
held at 14:00 at 9 The Parks, Haydock, WA12 0JQ
July 2021 Half-yearly results to 30 June 2021
published
February 2022 Annual results for the year to 31 December
2021 announced and Annual Report and Financial Statements published
For further information, please contact:
John Hustler, Seneca Growth Capital VCT Plc at
https://www.globenewswire.com/Tracker?data=VUTZAyI2tOsXQnI3wTnXggIiOIr6VRqO7HFMCwy3vlnB0qO5v1YqRqw07FBZwrZDS1jtIJamSGMjlURnvzwDK9ogyLqBCuQHvIG0au8r4JwtuTsmapqUXkJaJHwGjBxy-JZ7S4AEiu49Es0HFSJjpXwv5AJCMVbDdRQfIjKCBppKIbFPV1yKxuwxIf7GMGwlH40x_kPwAkiyWLl2bLnaNyj_1OB2nBMSV1nGFI_sRVlLPY54uqgmmkFMarStKhO3EqV_T4f5UzwTA7ah0K3wzLQ7WelZwOPsBQE8oqHErHc=
john.hustler@btconnect.com
Richard Manley, Seneca Growth Capital VCT Plc at
https://www.globenewswire.com/Tracker?data=NZU5LUhFeIfLtyWtEnEBBQlBx2wYpHal4PUH3dO5fxtywTrzqkofEDb_IKTlm650eaQPbvXFQcNQyrkh8iOIkShgtP3GP90fnLQrDeo5jp3GM8ZV9fGUzNkiUX-ijWHO9-srrvC0cJhaELLsW74vPK5aISV8a_JMz62bcam4ko0xV7N_juF4ofdrQqHg4M87FlWupe57Np3Swdmyz18sZVzE6__qaao4hgCpMpqgaF_KMS4HnBpGQbg8BGlhZL3r52xU5ru-8qYt3hMhQfZpy0D5-2zZw71ZPl2YCBFrDKQ2oacZW3ffG9qH71jZfZXIzUF7xhfUVeTGQJeee4lnig==
Richard.Manley@senecapartners.co.uk
Please note: page references and defined terms included in the extracts
below refer to the page numbers and definitions in the Annual Report and
Financial Statements.
Chairman's Statement
I am pleased to present the 2020 Annual Report on behalf of the Board to
shareholders.
Overview
As shareholders will recall, Seneca have assumed the investment and
accounting responsibilities of the Company with effect from August 2018,
following which GBP8.7 million has been raised for the B share pool to
31 December 2020. Since this represents the active investment portfolio,
I am reporting on the B share portfolio first and then will give the
results of the legacy Ordinary share portfolio.
I am pleased to say that, despite the unprecedented circumstances which
we are all facing due to the C-19 global pandemic, I am able to report
that both the B share and Ordinary share investment portfolios have
stood up well to the challenges that they have faced. The Total Return
(NAV per share plus cumulative dividends per share) for each share class
increased during the year with the B share increasing by 1.8% to 97.8p
and the Ordinary share increasing by 15.5% to 95.5p.
I am also pleased to be able to report that Seneca continued the
development of the B share pool during the year both in terms of
fundraising and investment activity. In October 2020, the Company
launched its third offer for B shares and allotted an additional GBP1.5
million of shares in December 2020 taking to GBP8.7 million the total
raised by the B share pool from launch in May 2018 to 31 December 2020.
I would like to welcome all new shareholders and thank both existing and
new shareholders for their support. The share offer will remain open
until 28 May 2021 unless it reaches the target of GBP10 million with an
over-allotment facility of GBP10 million before then.
The Company made six new B share pool investments in the year in
addition to achieving one full exit and one partial exit and as a result
the Company's B share pool closed the year with ten investments, an
increase of five on the prior year.
There were two full, and one partial disposal from the Ordinary share
pool. The Ordinary share pool now has just seven investments remaining
with AIM quoted Scancell Holdings Plc ("Scancell") (which encouragingly
secured GBP48 million of new investment in the year) accounting for 66%
of the Ordinary share pool's NAV at the year end. Recent press coverage
regarding Scancell's involvement in a potential C-19 vaccine has led to
a significant rise in its share price, which stood at 24.5p at 19
February 2021 compared to our year end value of 13.5p. Further details
and an updated unaudited NAV per Ordinary share and B share are included
below.
With 54% of the B share pool's NAV as at 31 December 2020 represented by
cash and more than 20% of the Ordinary share pool's NAV, the Company has
ended the year well placed to face the challenges and opportunities
presented by the ongoing C-19 pandemic and to deliver on the key
objectives of continuing to build an attractive portfolio of growth
capital investments in the Company's B share pool whilst also continuing
to realise investments in the Ordinary share pool when the opportunity
arises.
I have set out below the progress made by each of the Company's share
classes during the year.
B Share Pool
B Shares - Results
The key items to impact the NAV of the B share pool during the year were
as follows:
-- Two dividends paid during the year totalling 3.0p per B share.
-- The full realisation of one B share pool AIM quoted investment generating
a 2.1x return.
-- The partial exit of one B share pool AIM quoted investment generating a
1.6x return.
-- An increase in the valuation of two of the B share pool's remaining three
AIM quoted holdings.
-- A reduction in fair value of one of the B share pool's seven unquoted
company investments as a result of the impact of C-19.
-- The Company's running costs.
The net result of the above was an overall increase in the Total Return
per B share to 97.8p as at 31 December 2020 (2019: 96.1p), consisting of
a modest reduction in the NAV per B share to 91.8p as at 31 December
2020 (2019: 93.1p), a positive capital return of 5.7p per B share (2019:
negative 0.7p) and a negative revenue return of 2.2p per B share (2019:
negative 2.5p).
Whilst the negative revenue return of 2.2p per B share is principally a
result of the impact of the Company's running costs on the B share pool,
shareholders will recall that the Company's running expenses are capped
at 3% of the B share NAV until July 2021 (thereafter the total running
costs will continue to be capped at 3% with general expenses being
allocated to the Ordinary share pool and the B share pool pro-rata to
their respective NAVs). As a result, Seneca reduced their annual
management fee for 2020 from GBP127k to GBP41k to ensure the Company's
annual running expenses stayed within this 3% limit.
The positive capital return of 5.7p per B share noted above was
principally due to increases in the share prices of the B share pool's
AIM quoted investments during the year and some harvesting of profit via
partial sales of these AIM quoted investments offset by a reduction in
the carrying value of one of the B share pool's unquoted company
investments. Full details are disclosed in the Investment Manager's
Report on pages 14 to 27.
B Shares - Investment Portfolio Review
As at 31 December 2020, the B share portfolio comprised ten companies,
three of which are quoted on AIM, at a total net investment cost of
GBP3,794k. As at 31 December 2020 this portfolio was valued at
GBP3,982k.
In January 2021, the Company sold 1,750,000 shares in
SkinBioTherapeutics Plc ("SkinBio") which represented 37% of the
original holding of 4,677,107 shares, reducing the remaining holding to
2,752,107 shares. These were sold at a net average price of 35.5p per
share providing a return in the region of 2.2x on original cost.
B Shares -- Update and Outlook
Taking into account further proceeds realised since 31 December 2020 as
detailed above and in note 17 on page 97 and an overall increase in AIM
quoted investment bid prices, the Company is pleased to announce an
updated unaudited NAV per B share of 99.4p per B share at 19 February
2021, an increase of 7.6p per B share from the audited NAV of 91.8p per
B share as at 31 December 2020 and an overall increase in the Total
Return per B share to 105.4p as at 19 February 2021.
Shareholders will be pleased to know the Board declared an interim B
share dividend of 1.5p per B share on 18 February 2021 to be paid on 14
May 2021 to shareholders on the B share register on 30 April 2021, with
an ex-dividend date of 29 April 2021.
Seneca continue to work closely with the investee companies in the B
share portfolio with the aim of ensuring that the potential impact of
C-19 is mitigated and that each investee company has sufficient funds to
support their working capital requirements until normal trading and
economic conditions return. Seneca remain confident that the portfolio
retains its potential to provide attractive returns for B shareholders
over the medium term.
The Board is pleased with the progress that Seneca have made since their
appointment as Investment Manager in 2018, in terms of funds raised, new
investments made and relationships with brokers offering new quoted
securities and now, exits achieved.
Seneca expect to increase the funds raised under the current B share
Offer and add new growth capital investments to the B share portfolio
during the course of 2021 from, inter alia, the investments they
currently have in the later stages of due diligence.
Ordinary Share Pool
Ordinary Shares - Results
Whilst the NAV per Ordinary share decreased by 0.2p from 30.4p to 30.2p
during the year, this was after the payment of dividends per Ordinary
share totalling 13.0p. A better understanding of the underlying
performance of the Company's Ordinary share portfolio during the year is
therefore provided by considering the NAV movement per Ordinary share
during the year before dividends which shows an increase of some 12.8p
(a 42% increase compared to 31 December 2019).
This increase was principally driven by the increase in value of the
Ordinary share portfolio's two AIM quoted investments during the year.
The quoted bid price of Scancell shares increased from 7.0p to 13.5p
from the start of the financial year to the financial year end. During
this period, it was decided to harvest a modest portion of our
shareholding and we now hold 12 million shares. Omega benefited from its
involvement in a partnership to develop a C-19 antibody test and the
share price rose significantly; the Board, therefore, decided it was
appropriate to take advantage of this and we sold our entire holding for
GBP987k, generating a profit over original cost of GBP659k and over our
holding value at 31 December 2019 of GBP666k.
As a result of the realisations noted above, your Board were very
pleased to be able to pay dividends totalling 13p per Ordinary share
during the year with no material adverse impact on the Ordinary pool's
NAV. The Total Return in relation to the Ordinary shares is now 95.5p
comprising cumulative distributions of 65.25p per Ordinary share and a
residual NAV per Ordinary share of 30.2p as at 31 December 2020.
As previously reported, the Board remains focused on identifying exit
opportunities for the remainder of the Ordinary share pool investment
portfolio, and it was particularly pleasing to have been able to
distribute 13p per Ordinary share to shareholders this year with no
material adverse impact on the Ordinary share pool's NAV. Realisations
in the last three years have enabled the payment of a total of 41p per
Ordinary share in dividends to Ordinary shareholders, representing 64.3%
of the NAV per Ordinary share as at 31 December 2017 and we still retain
net assets of 30.2p per Ordinary share as at 31 December 2020.
Notwithstanding this success, we remain confident that, overall, there
remains the opportunity to realise further value for Ordinary
shareholders in due course (particularly in relation to our Scancell
holding): indeed as noted below, earlier this month we realised a
further portion of our Scancell holding. For the time being, we do not
currently consider it appropriate to liquidate any further Scancell
shares and do not see any other immediate opportunities for realisations,
but we continue to monitor the situation closely.
Ordinary Shares - Investment Portfolio
The remaining Ordinary share portfolio now comprises one AIM quoted
holding, Scancell, as referred to above, which has a carrying value of
GBP1,620k as at 31 December 2020, and six unquoted holdings -- the
carrying value of three of which have been reduced to zero with the
combined carrying value of the other three being GBP521k as at 31
December 2020.
Shareholders will note therefore that Scancell represented more than 75%
of the value of the Ordinary share portfolio as at 31 December 2020 and
as a result the NAV per Ordinary share now fluctuates largely in line
with the movement in the Scancell share price. Whilst the Scancell share
price showed volatility during 2020, it is not our policy to update the
market following each of these fluctuations unless there are considered
to be abnormal events (e.g. sale of a significant holding -- see below).
Your Board therefore recommends that shareholders or prospective
shareholders keep the Scancell share price under review and consider its
impact on the Ordinary share NAV per share before taking any action in
relation to an existing or prospective holding in the Company's Ordinary
shares.
Further details in relation to the Ordinary share pool's investment
portfolio are included in the Investment Manager's Report on pages 28 to
35.
Ordinary Shares -- Update and Outlook
As referred to above, and following recent press coverage, the share
price of Scancell has risen significantly from 13.5p at 31 December 2020
and was 24.5p at 19 February 2021. We are pleased that the market is
recognising the continuing developments at Scancell and have taken the
opportunity to realise a further modest part of our holding by selling 1
million shares at 21.7p per Scancell share. Our current holding is 11
million shares and we continue to believe that there is further upside
in this holding.
This increase in the share price has given rise to a significant rise in
the NAV per Ordinary share. Based on the NAV at 31 December 2020,
adjusted solely for the uplift in valuation of our Scancell shares , the
Ordinary share unaudited NAV per share was 44.0p at 19 February 2021.
The Ordinary share pool retained a cash balance of GBP527k as at 31
December 2020 in order to make follow-on investments into existing
Ordinary share portfolio companies where the Board believes this will
protect the Ordinary share pool's existing investment and/or improve the
overall prospects of a timely exit from the investee company. This has
been increased to GBP744k following the recent sale of Scancell shares.
Despite several of the Ordinary share pool portfolio companies seeking
further funds during the year, we did not consider the terms attractive
nor likely to improve the overall prospects for a timely realisation
from the investee company and therefore no further Ordinary share pool
investments were made.
Ordinary shareholders will recall that, following the appointment of
Seneca as Investment Manager in August 2018, the Ordinary share pool
incurs no running costs until July 2021.
Fund Raising
During the year the Company has allotted 2,701,500 B shares raising
gross proceeds of GBP2,403k in the process. The current B share Offer
will remain open until May 2021.
Annual General Meeting
The Company's AGM will be held as a closed meeting at 14.00 on Monday,
29 March 2021 at the Company's registered address 9 The Parks, Haydock,
WA12 0JQ in accordance with the provisions of the Corporate Insolvency
and Governance Act 2020. In light of the unprecedented restrictions on
movement and gatherings due to the C-19 pandemic, shareholders will not
be permitted to attend this year's AGM and the meeting will take place
with either two Directors who hold shares in the Company or one Director
and an investment manager from Seneca Partners, who is also a
shareholder, present only, to constitute the minimum quorum for the AGM
to take place under the Company's articles of association and company
law requirements. Shareholders should note that only the formal business
set out in the Notice of AGM will be considered at the AGM.
Although shareholders will not be permitted to attend the AGM this year
there will be a shareholder update presentation by the Investment
Manager and a question and answer ("Q&A") session at 10:00 on 8 March
2021, further details of which are included below and on
https://senecavct.co.uk/march-2021-shareholder-presentation/.
Shareholders wishing to vote on any of the matters of business are urged
to do so through completion of a proxy form appointing the Chairman of
the AGM, which can be submitted to the Company's Registrar. Proxy forms
should be completed and returned in accordance with the instructions
thereon and the latest time for the receipt of proxy forms is 14.00 on
Saturday, 27 March 2021. Proxy votes can be also be submitted by CREST.
All resolutions will be decided by a poll and therefore it is essential
that shareholders wishing to vote submit their proxy forms by 14.00 on
Saturday, 27 March 2021.
Shareholders will have the opportunity to ask questions prior to
submitting their proxy votes at the shareholder update presentation on 8
March 2021 as detailed below.
The Board has reviewed my performance and has asked me to continue as
Chairman. A resolution for my re-election is included in the AGM Notice.
Resolutions for the re-election of Alex Clarkson, Richard Manley and
Richard Roth are also included in the AGM Notice.
The Notice of the AGM includes resolutions empowering the Directors to
issue further B shares following the date of the AGM, which will
primarily be used for the issue of B shares under a further Offer which
we intend to launch for the 2021/2022 tax year. This requires
authorisation for the Directors to be able to allot up to a further
35,000,000 B shares. Including these resolutions in the AGM business
will avoid the Company having to produce and send out a separate
circular to convene a separate general meeting.
The Notice of the AGM also includes a resolution to adopt amended
Articles of Association which are substantially in the same form as the
Company's current Articles of Association but will allow, inter alia,
the holding of partially virtual AGMs and to increase the total
remuneration of the Directors to allow for the recruitment of a new
non-executive Director. Further details of the differences between the
two sets of Articles are set out in the Directors' Report on pages 48 to
49.
A summary of the resolutions to be proposed by the Company at the AGM is
included on pages 48 to 49.
Shareholder Update Presentation
Due to government restrictions impacting shareholders' ability to attend
the 2021 AGM as a result of the C-19 pandemic, a virtual shareholder
update presentation will take place at 10:00 on Monday, 8 March 2021.
Shareholders can register to attend the presentation by visiting:
--https://zoom.us/webinar/register/WN_UyGALLGCQCusM0gYuvud0A.
Further details about the shareholder event can be found on
https://senecavct.co.uk/march-2021-shareholder-presentation/.
A Q&A session will take place where shareholders will have the
opportunity to submit questions directly which we will seek to answer
during the presentation. Questions can be submitted by emailing them to
enquiries@senecavct.co.uk
https://www.globenewswire.com/Tracker?data=gguV8Z2GkYFeSOeY2jAjOS-vx8JD9886O4U7tyg9hcAEqI_WVOudWOtySOdPOwWI_HI1PETCbQr_NsLmbouvY6YeAe_zaJDGomOF8FzKEQ5_8jV4-qXHPZDz2y_koLym
. Both the questions and answers will be published on the Company's
website following the presentation.
VCT Qualifying Status
Philip Hare & Associates LLP provides the Board with advice on the
ongoing compliance with HMRC rules and regulations concerning VCTs; they
have confirmed that the Company remains within all the appropriate VCT
qualifying regulations as at 31 December 2020. In respect of the 80%
Qualifying Holdings test, as at the end of December 2020 the percentage
is 100% by virtue of a disregard of disposal proceeds, of which there
have been GBP1.1m of relevant share sales (exit proceeds that occurred
in the prevailing 12-month period are deducted from the total
investments balance). Note, these exit proceeds are only deducted to the
point that the test reaches 100% but without these the Company was still
well above the 80% qualifying requirement. As at 31 December 2020 39% of
funds raised in the year to 31 December 2019 had been invested in
qualifying investments for the 30% minimum requirement.
Fund Administration
Our administration is conducted by Seneca at the Company's registered
address. Neville Registrars Limited ("Neville") continue to maintain the
shareholder register. All information in respect of both share classes
including Annual Reports and notices of meetings can be found on our
website www.senecavct.co.uk. We would remind shareholders who have not
opted for electronic communications that this is more efficient and
ecologically friendly than receiving paper copies by post and therefore
encourage you to contact Neville, whose details are on page 101, to
advise them of your wish to switch to electronic communication.
Auditor
UHY Hacker Young LLP have audited the Company's annual results for the
year ending 31 December 2020, and shareholders will be asked to
reappoint them at the AGM for the audit of the accounts for the year
ending 31 December 2021.
Future Prospects
We are pleased that Seneca have continued to develop the portfolio of B
share pool investee companies during the year. The B share portfolio
includes a mix of both unquoted and AIM quoted investments and whilst
progress of these investments to date has been generally positive, the
Board and Seneca remain acutely aware of the need to continue to work at
close quarters with all B share portfolio companies as they navigate the
challenges ahead resulting from the C-19 pandemic.
We also note that Seneca expect to see an increase in the number of
businesses seeking investment to support their growth plans over the
next 12 months as a result of the C-19 pandemic. With over GBP4.5
million of cash on the B share pool balance sheet at 31 December 2020.
Seneca believe they are very well placed to continue to support the
existing B share investment portfolio as well as adding attractive new
growth capital investments to the B share portfolio from the strong
pipeline of opportunities presented to them. We therefore look forward
to the continued development of the B share portfolio in due course.
Your Board continues to view the future of our Company with confidence.
John Hustler
Chairman
22 February 2021
Investment Manager's Report
We are pleased to set out in this section further details in relation to
the development of both the B and Ordinary share pools and their
respective investee companies during 2020.
The B Share Pool
Fundraising
Our second B share offer was concluded in July 2020, bringing total
funds raised to GBP7.2 million and our fund-raising efforts have since
continued under our third B share Offer that was launched in October
2020, with GBP1.5 million being raised under this third Offer as at 31
December 2020. We were encouraged by the funds raised in the two months
immediately following launch and remain focused on increasing the size
of the B share pool, which will in turn allow us to increase the number
and diversity of new investments that we make.
Performance and Dividends
Despite the unprecedented economic climate and general turmoil of
financial markets occasioned by the C-19 pandemic, we are pleased with
the development of the B share portfolio, with six additional
investments being made in the year. We are also pleased to report an
increase in the NAV Total Return per B share, from 96.1p at 31 December
2019 to 97.8p as at 31 December 2020.
This increase in NAV Total Return per B share was the result of a slight
reduction in the B share NAV as at 31 December 2020 (which fell to 91.8p
per B share (2019: 93.1p)) which was more than explained by the payment
of two B share dividends totalling 3.0p during the year.
These two B share dividends paid during the year were in line with the
Company's ambition to continue to pay dividends on the B shares and it
should be noted that the Company has sufficient distributable reserves
to enable the continued declaration of B share dividends over the medium
term subject to Board approval, the B share pool investment pipeline and
liquidity levels.
AIM Quoted Investments
With the AIM market demonstrating a heightened level of volatility
during the year as a result of the impact of C-19, we took the
opportunity to realise just over half of the B share pool's shareholding
in OptiBiotix plc ("OptiBiotix") (an investment made during the year),
selling 400,000 shares and realising a gain of GBP92k on the disposal
(1.6x cash return in just 2 months following the original investment).
We also sold our full holding in Genedrive (another investment made in
the year) which is the B share pool's first full exit and generated a
profit of GBP136k versus original cost (2.1x cash return).
We were also encouraged that the during the year we saw an increase in
the bid price of the two largest B share pool AIM quoted investments:
the SkinBio share price increased to 22.0p as at 31 December 2020 (a 57%
increase from 14p as at 31 December 2019) and the OptiBiotix share price
increased to 57.0p as at 31 December 2020 (a 42.5% increase from the
cost price of 40p per share).
Co-investing With Seneca EIS Funds
More generally we continue to develop Seneca's position in the market as
an active growth capital investor and as at 31 December 2020, we have
raised and deployed c.GBP100 million of EIS and VCT investment funds
into over 50 SME companies, through over 100 funding rounds, since we
undertook our first EIS investment in 2012. This includes GBP8.7 million
raised to date by the B share pool.
The ten investments in the B share portfolio had a value of GBP3,982k as
at 31 December 2020 and are co-investments with EIS funds also managed
by Seneca. We believe that the opportunity for the Company's B share
pool to co-invest with EIS funds that are also managed by Seneca
provides the B share pool with a number of advantages including being
able to participate in a higher number of investments, of a larger scale,
into more established businesses than would be possible for the B share
pool on a standalone basis.
Further, as a result of our position in the UK market as an active
growth capital investor we maintain a strong pipeline of investment
opportunities, particularly in the North of England, with a focus on
well managed businesses with strong leadership teams that can
demonstrate established and proven concepts in addition to growth
potential. We aim to invest in both unquoted and AIM quoted companies
and are pleased to have completed three additional AIM quoted
investments in the year.
Investee Company Updates
We are very happy with the development of the B share investment
portfolio. As noted above, we are delighted to have been able to include
some AIM quoted investments in these early investments and are also very
happy that by 31 December 2020 we had already been able to exit some of
these at a profit so early in the development of those businesses (1
full exit and 2 partial exits). These early profits have supported the
performance of the B share pool NAV at the same time as we continue to
develop the unquoted company investment portfolio.
We are excited about the potential that lies with the B share investment
portfolio and have included updates in relation to all of the B share
pool investee companies later in this Investment Manager's Report but
wanted to highlight in particular the progress being made by B share
pool investee companies SilkFred Limited ("SilkFred") and SkinBio below
and also comment on the reduction in fair value introduced against the
carrying value of Qudini.
SilkFred
SilkFred is an online marketplace which specialises in independent
ladies' fashion brands. The B share pool invested GBP500k in SilkFred in
December 2018 and the business made strong progress throughout the first
year of our investment building a strong reputation and brand in the
"event driven" fashion space.
As you would expect however, this left the business exposed to the
impact of the C-19 pandemic in 2020 which brought about a fall in sales
levels as a result of the reduction in the number of celebrations and
events which previously drove the company's growth.
Notwithstanding this, SilkFred's recovery from the UK's first lockdown
was swift and Gross Marketplace Value (total sales value sold through
the SilkFred platform) during the summer months of 2020 actually
exceeded that of 2019. The business traded well for the rest of the year,
remaining profitable throughout, buoyed by the loyalty shown by the
customer base. The management team continue to view their market
position positively and are looking to the future with confidence,
particularly in anticipation of the return of their core markets as the
UK emerges from lockdown. We too, are excited about SilkFred's future.
SkinBio
SkinBio is an AIM quoted life science company focused on skin health and
the B share pool invested GBP750k in February 2019 at 16p per share. The
business made excellent progress during 2020 including raising cGBP4.45m
of funds from new and existing investors, successfully accelerating the
project timeline for its food supplement programme and gaining
commercial interest for its MediBiotix(TM) and CleanBiotix(TM)
programmes. The SkinBio share price closed on 31 December 2020 at 22p
per share.
Having initially invested in SkinBio in February 2019, we sold 175,000
shares in early June 2019 at a profit of c1.5x original cost reducing
the remaining holding to 4,502,107 shares. We did not sell any shares in
2020; however following the 31 December 2020 year end, the positive
progress being made by SkinBio translated into further increases in the
share price and we are pleased to report that we have taken the
opportunity to take some profit from this investment. We sold 1,750,000
shares in January 2021 (37% of the B share pool's original holding of
4,677,107 shares) reducing the remaining holding to 2,752,107 shares.
These were sold at a net average price of 35.5p per share providing a
return in the region of 2.2x on original cost.
The business is well funded, is targeting a valuable market with unmet
cosmetic and clinical needs and we remain confident of SkinBio's
long-term prospects of success.
Qudini
Qudini is a UK based market leading provider of queue management
software for enterprise brands. It generates the vast majority of its
revenue from bricks and mortar retailers. Given the level of uncertainty
caused in this core market by C-19, we took the prudent decision to
reduce the carrying value of the B share pool's investment in Qudini by
40% as at 30 June 2020. Whilst there has been some improvement in the
trading performance of Qudini in H2 2020, some uncertainty remains over
the future of its core bricks and mortar retail market. Therefore, we
have maintained the 40% reduction in fair value and this investment was
held at 60% of cost as at 31 December 2020.
Investments made after the Year End and outlook
Following the year end we also completed an additional unquoted company
investment into Solascure Ltd ("Solascure") for GBP500k. Solascure is an
early stage wound care specialist which was originally spun out of (and
continues to work alongside) world leading German biotech company BRAIN
engaged in the development of a new-to-market wound care product.
Solascure is also backed by strategic investor Eva Pharma and the
business will commence their first clinical trial in 2021. Solascure's
Aurase product is a gel-based product that efficiently and gently cleans
wounds, making the healing process much more straightforward.
We look forward to continuing to increase the funds raised for the B
share pool under the current Offer and with several new investment
opportunities in the later stages of due diligence, we expect to add to
the portfolio of B share investee companies in the coming months.
Investment Portfolio -- B shares
Movement
Carrying in the year
value at to
Equity Unrealised 31 December 31 December
held Investment profit/(loss) 2020 2020
Unquoted Investments % at cost GBP'000 GBP'000 GBP'000 GBP'000
Fabacus Holdings
Limited 2.0 500 63 563 -
-------------------- --------- ---------------- -------------- ------------- ------------
Silkfred Limited <1.0 500 - 500 -
Old St Labs Limited 3.8 500 - 500 -
Ten80 Ltd 7.5 400 - 400 -
Qudini Limited 2.4 500 (200) 300 (200)
Bright Network Ltd 1.7 234 - 234 -
ADC Biotechnology
Ltd <1.0 150 - 150 -
Total unquoted
investments 2,784 (137) 2,647 (200)
Movement
in the year
Carrying to
Unrealised value at 31 December
Shares Investment profit/(loss) 31 December 2020
Quoted Investments held at cost GBP'000 GBP'000 2020 GBP'000 GBP'000
SkinBioTherapeutics
Plc 4,502,107 720 270 990 360
OptiBiotix plc 350,000 140 60 200 60
Abingdon Health plc 156,250 150 (5) 145 (5)
Total quoted
investments 1,010 325 1,335 415
Total investments 3,794 188 3,982 215
No. of Investment Sale Realised
Exits for Investment Shares at cost Proceeds profit/(loss) Exit
the period Date sold GBP'000 GBP'000 GBP'000 Multiple
OptiBiotix
Health
Plc(*) April 2020 400,000 160 252 92 1.6
----------- ----------- ------- ---------- -------- ------------- --------
Genedrive
Plc May 2020 157,437 126 262 136 2.1
Total 286 514 228 1.8
(*) Partial exit
B Share Pool -- Investment Portfolio -- Top Six Unquoted Investments by
value as at 31 December 2020
1. Fabacus Holdings Limited
Fabacus is an independent software company
that has developed a complete product
lifecycle solution: Xelacore, aimed at
bringing transparency to supply chain
networks, with an initial focus on resolving
the interaction and information flow between
global licensors and their licensees.
Currently, there is a fundamentally flawed
data capture process between licensors
and licensees; and a disconnection from
the framework of retail standards that
have underpinned and continue to enable
the retail value chain. This has resulted
in an inability to correctly address known
shortcomings in respect to data management
and hinder the needed digital transformation
of licensors in the digitally evolving
retail landscape.
Fabacus's solution, Xelacore, is a modular,
Software as a Service solution with an
intuitive interface and proprietary data
aggregation and management engine that
allows all stakeholders to operate on
a single unified and collaborative platform.
It bridges the gaps in an inefficient
process within the current retail ecosystem
by creating authenticated, enriched universal
records that unlock opportunities, reduce
risk and drive performance for both licensors
and licensees.
Progress made by the company in 2020 includes:
--Continuing to make excellent progress
with a number of customers, most notably
through its promising relationship with
Amazon.
--Onboarding fee-paying licensees to their
market leading data platform and starting
to generate revenue from their relationship
with IMG (#1 global licensing agency).
--Successfully raising c.GBP1m to fund
the working capital requirements of the
company and to onboard the growing customer
pipeline.
--Collaborating with Amazon to provide
a version of the company's technology
which has the ability to identify and
remove any counterfeit products from online
marketplaces. In turn this has driven
a significant increase in interest in
and demand for Fabacus' platform and ancillary
services which has translated into increased
Initial investment commercial activity and revenue in recent
date: February 2019 months.
-----------------------------------------------
Cost: GBP500,000
-----------------------------------------------
Valuation: GBP563,000
Equity held: 2.0%
Last statutory 31 August
accounts: 2019
Turnover: Not disclosed
Loss before tax: Not disclosed
Net assets: GBP7.6
million
Valuation method: Price of last
fundraise
------------- -----------------------------------------------
2. SilkFred Limited
Initial investment December 2018 SilkFred is an online marketplace for
date: independent ladies' fashion brands. The
business was founded in 2011 with the
aim of creating an efficient marketplace
for emerging fashion designers to bring
products to market and establish their
brand in the sector. The business now
works with c.600 independent brands, selling
to over 500k customers.
SilkFred acts as a central marketing and
sales platform for these brands, charging
commission in exchange for these services,
and as a result the business itself takes
minimal inventory / working capital risk
on new brands, lines or products.
The business model revolves around a market
leading and scalable customer service
platform, and as such SilkFred are continually
investing in core infrastructure and constantly
seeking innovative methods to enhance
the customer experience.
Progress made by the company in 2020 includes:
-- Bouncing back extremely well from the impact of the
first C-19 lockdown which saw the company's primary
market of event driven fashion being adversely
impacted by the C-19 pandemic. Product mix has
changed dramatically in the short term, meaning
SilkFred is well positioned for future growth with a
more diverse customer base and impacted less by
seasonal trends.
-- Continued expansion of SilkFred's international
presence. It is clear that the international
potential of the brand is a key driver of value in
the business and it is therefore encouraging to see
international sales growing by more than 60% in 2020.
-- Despite the C-19 impact being felt to some extent
throughout 2020, SilkFred saw continued growth in its
portfolio of brands, increasing to more than 900 and
once again selling over 1m units for the year. The
company also saw continued improvement in its key
performance metrics with average order value, orders
to repeat customers and return on marketing spend all
increasing during the year.
------------------------------------------------------------
Cost: GBP500,000
------------------------------------------------------------
Valuation: GBP500,000
Equity held: <1%
Last statutory 31 December
accounts: 2019
Turnover: GBP20 million
Loss before tax: GBP3.1 million
Net assets: GBP4.4 million
Valuation method: Cost and price
of recent investment
(reviewed for
any fair value
adjustment)
--------------------- ------------------------------------------------------------
3. Old St Labs Limited
Old St Labs is a provider of cloud based,
supplier collaboration tools for large,
blue chip customers, enabling them to
manage key supplier relationships and
strategic project work. The core product,
Vizibl, seeks to make supplier collaboration
much more straight forward, with key focus
on compliance, savings / efficiency and
driving growth across the business.
Vizibl is the only SaaS workspace that
supports collaborative supplier relationships,
bringing all points of contact together
in one place, providing visibility across
the company and eliminating duplication
of efforts. Vizibl's real-time reporting
speeds up decision making, drawing on
and sharing the expertise of the community
in the process. The offering taps into
a growing trend in supplier collaboration,
having moved on from the initial focus
on compliance, to an increased emphasis
on savings / efficiency, and recent developments
highlighting the benefits in terms of
wider growth strategy for large customers.
Vizibl provides the infrastructure, governance
and reporting capabilities to optimise
present supplier performance and acts
as a springboard for those collaborative
supplier relationships. The product is
CRM / ERP agnostic, working alongside
all major software providers to ensure
the collaboration software is insightful
and informative.
Progress made by the company in 2020 includes:
-- Engaging with global leaders across a wide range of
sectors with keeping annual recurring revenue
consistent at just over GBP1m. In what was initially
a slow period for the business with large corporate
customers slowing down decision making and pausing
project spend upon the onset of C-19, Old St Labs
have worked closely with existing customers and have
returned to growth in the second half of the year
with multiple impressive customer wins.
-- Continuing to expand the Vizibl platform and
enhancing its capabilities and usability. In the
current year, in response to the global pandemic, the
team have pushed more of a sustainability angle into
the platform, adding features and enhancements to
assist both new and existing customers with ensuring
that their projects and organisations remain
resilient.
-- Building on an already impressive customer base by
onboarding Unilever and Sanofi. Not only do these
types of customers improve the financial profile of
the business, but they also further validate the
proposition and serve to demonstrate the viability of
the Vizibl platform across a wider range of sectors.
-- Securing a GBP2.5m funding from the UK
Initial investment Government-backed Future Fund, providing sufficient
date: March 2019 headroom to progress through to profitability.
------------------------------------------------------------
Cost: GBP500,000
------------------------------------------------------------
Valuation: GBP500,000
Equity held: 3.8%
Last statutory 31 March 2020
accounts:
Turnover: Not disclosed
Loss before tax: Not disclosed
Net assets: GBP260,000
Valuation method: Cost and price
of recent investment
(reviewed for
any fair value
adjustment)
--------------------- ------------------------------------------------------------
4. Ten80 Group Limited
Based in Hammersmith, Ten80 Group Limited
("Ten80") was established in early 2019.
The company is a SAP focussed on-demand
outcome-based delivery solution. SAP is
best known for producing enterprise resource
planning software which allows organisations
to manage business operations across procurement,
manufacturing, service, sales, finance,
and HR.
Ten80's aim is to connect every SAP customer
with every SAP consultant globally, delivering
outcome-based projects rather than time-driven
costs through the contractor or freelancer
marketplace.
The SAP global consultancy market is estimated
to be worth in excess of GBP300bn.
Progress since our investment:
-- Securing its first paying customers, providing
further validation that the proposition is of value
to large corporations with significant IT project
spend. Whilst the global pandemic has slowed down
large enterprise decision making, it has also
fast-tracked the shift to remote working and flexible
resource, something which plays into the hands of the
Ten80 proposition.
-- Successfully adding the required skills to the team
scaling it from 5 people at the time of investment to
19 at present. This has added valuable resource
across the business, with key focus on the
development team, sales personnel and customer
success roles.
-- Further, in January 2021 the business secured a GBP1m
funding round under the UK Government-backed Future
Fund. This will in turn provide the business with
additional cash headroom as they focus on converting
an exciting customer pipeline and expanding the
Initial investment customer base, as well as ramping up usage of the
date: March 2020 Ten80 platform within existing customers.
------------------------------------------------------------
Cost: GBP400,000
------------------------------------------------------------
Valuation: GBP400,000
Equity held: 7.5%
Last statutory 31 December
accounts: 2019
Turnover: Not disclosed
Loss before tax: Not disclosed
Net assets: GBP30,000
Valuation method: At cost (reviewed
for any fair
value adjustment)
------------------ ------------------------------------------------------------
5. Qudini Limited
Founded in 2012, Qudini is a B2B software
company that provides customer experience
SaaS solutions to organisations in retail,
hospitality, the public sector and healthcare.
Qudini provides a software solution for
appointment bookings, queue management,
event management and task management --
enabling businesses to improve shop floor
operations by managing staff activity,
breaks and performance, and by assigning
tasks at store or head office level.
Qudini is aiming to revolutionise digital
queue and appointment management. It achieves
this through deployment of its data-centric,
cloud-based (Amazon Web Services), cross-platform
service, which improves a business' ability
to manage the flow of customers awaiting
service, using algorithms to provide accurate,
live data, such as estimated wait times.
Through integration with various software
platforms and compatible with wide variety
of hardware, Qudini enables detailed analytics
focused on customer trends, and provides
a unique insight into areas such as customer
footfall, peak demand times, and wait
times.
2020 update:
-- Given that the company's main source of income is
through the provision of queuing technology for
bricks and mortar retailers, the effect of C-19
during the first UK lockdown was expected to be
significant. As such, the company took the
opportunity to restructure its cost base and reduce
FTE's by c.50% to 19 and put a stop to any
unnecessary spend in order to preserve cash.
Consequently, we applied a 40% reduction in fair
value (in March 2020) against the carrying value of
the B share pool's investment in Qudini to reflect
this uncertainty and have maintained this at 31
December 2020.
-- Although a level of uncertainty remains given the
company's retail market exposure, the outlook has
improved somewhat given the increasing demand for
queuing/customer management technologies as retailers
look to re-open and trade safely.
-- Whilst the environment for new business during the
first lockdown had not been ideal, Qudini now has a
short window of opportunity to continue to gain
market share in H1 2021.
-- The demand noted above has driven an increase in
Annual Recurring Revenue ("ARR") as at December 2020
to c.GBP2.5m (December 2019: GBP1.8m); however, it
will be a key focus of the management team over the
next 12 months to upsell Qudini's other services in
order to help retain the company's new customers
Initial investment post-covid and transition those new customers on to
date: April 2019 longer term contracts.
------------------------------------------------------------
Cost: GBP500,000
------------------------------------------------------------
Valuation: GBP300,000
Equity held: 2.4%
Last statutory 31 December
accounts: 2019
Turnover: Not disclosed
Loss before tax: Not disclosed
Net assets: GBP3.1 million
Valuation method: At cost, less
a 40% reduction
in fair value
to reflect potential
impact of C-19
on the company's
core UK markets
--------------------- ------------------------------------------------------------
6. Bright Network (UK) Limited
Bright Network (UK) Limited ("Bright")
is a Human Resources technology platform
designed to enable leading employers to
reach, identify and recruit high quality
graduates and young professionals. At
the time of our investment, the platform
supported a network of over 255,000 high
calibre candidates and has 300+ leading
employers within its customer base, including
multiple high-quality blue-chip clients.
These employers utilise Bright's services
to fill annual intern and graduate recruitment
scheme places, as well as any bespoke
recruitment requirements.
Data analytics and machine learning is
utilised to support and continuously improve
identification of the best-suited talent
to each employer. Bright provides a free
service to undergraduates, personalising
careers advice and job matches to support
their career journey. The database is
therefore a growing data-rich asset, processing
30 million pieces of data on a new generation
of young professionals.
In March 2020, the VCT invested GBP234,000,
as part of a larger GBP3.5m fundraise
to allow the company to increase the size
of its digital and talent solutions' sales
and marketing resources, together with
improvements to the technical platform
to drive additional service revenues.
Progress since our investment:
--Limiting the potential impact of C-19
by cutting its cost base and through the
launch of online internships which were
extremely well received over the summer.
This has resulted in an increase in registered
users to over 350,000.
--Trading ahead of expectations. Due to
the pandemic the sales season (which typically
ends at the end of August) has been extended,
and the company continues to be on track
to surpass the GBP2.5M revenue target
for the financial year ending 31 March
2021 (FY21).
--Delivering strong top line performance
coupled with tight cost control has resulted
in the company outperforming FY21 planned
gross profit and EBITDA.
--Delivering an improved cash position
which is GBP900k ahead of budget. This
outperformance alongside business agility
puts the company in a strong position
as the UK recovers from the C-19 pandemic.
However, whilst more macro-economic uncertainty
Initial investment remains, this investment will continue
date: March 2020 to be held at cost.
------------------------------------------------
Cost: GBP234,000
------------------------------------------------
Valuation: GBP234,000
Equity held: 1.7%
Last statutory 31 March 2020
accounts:
Turnover: Not disclosed
Loss before tax: Not disclosed
Net assets: GBP4.9 million
Valuation method: At cost (reviewed
for any fair
value adjustment)
------------------ ------------------------------------------------
B Share Pool - Investment Portfolio -- AIM Quoted Investments as at 31
December 2020
1. SkinBioTherapeutics Plc
SkinBioTherapeutics is a life science
company focused on skin health. The company's
proprietary platform technology, SkinBiotix(TM)
, is based upon discoveries made by Dr.
Cath O'Neill and Professor Andrew McBain.
SkinBioTherapeutics' platform applies
research discoveries made on the activities
of lysates derived from probiotic bacteria
when applied to the skin. The company
has shown that the SkinBiotix(TM) platform
can improve the barrier effect of skin
models, protect skin models from infection
and repair skin models. Proof of principle
studies have shown that the SkinBiotix(TM)
platform has beneficial attributes applicable
to each of these areas.
The aim of the company is to develop its
SkinBiotix(TM) technology into commercially
successful products supported by a strong
scientific evidence base. SkinBioTherapeutics'
commercial strategy is to engage health
and wellbeing and/or pharmaceutical companies
in early dialogue to build up relationships
and maintain communication on technical
progress until one or more commercial
deals can be secured.
Progress made by the company in 2020 includes:
-- Announcing a 3 year agreement with Winclove to focus
on the development of a blend of probiotic bacteria
which have been identified as having a positive
impact on the psoriasis disease pathway. Under the
agreement, SkinBio will identify the specific
probiotic strains which Winclove will formulate and
manufacture into a consumable product to be branded
AxisBiotix. Later in the year the company announced
that Winclove had been able to successfully combine
and formulate the blend as a probiotic food
supplement, to be known as AxisBiotix Ps, several
months ahead of schedule. A study is due to commence
in February 2021.
-- Announcing in July 2020 that the SkinBiotix cosmetic
programme had achieved a number of key scientific
milestones with its partner Croda. Croda has
successfully replicated the lysate manufacturing
process and achieved the same performance from the
SkinBiotixTM technology as established by the
company. Croda is now working to validate scale up of
the manufacturing process at different volume levels.
The project is progressing in line with the original
plan and has not been adversely impacted by C-19.
-- Continued progress with live opportunities across its
MediBiotix, CleanBiotix and PharmaBiotix divisions,
including the development of eczema treatments as
well as additional opportunities designed to reduce
hospital acquired infections.
-- Completion of a GBP4.5m funding round in October
2020, providing the business with sufficient cash
headroom to progress with its exciting pipeline of
commercial opportunities, as well as continuing with
Initial investment the development of a number of early stage,
date: February 2019 pre-clinical opportunities.
------------------------------------------------------------
Cost (of the
portion of the
original investment
still held as
at 31 December
2020): GBP720,000
------------------------------------------------------------
Valuation: GBP990,000
Equity held: 2.9%
Last statutory 30 June 2020
accounts:
Turnover: GBPnil
Loss before tax: GBP1.6 million
Net assets: GBP2.5 million
Valuation method: Bid price of
22p per share
-------------- ------------------------------------------------------------
2. OptiBiotix Health Plc
Initial investment April 2020 OptiBiotix Health PLC is a Life Sciences
date: business operating in one of the most
progressive areas of biotechnological
research, developing technologies that
modulate the human microbiome -- the collective
genome of the microbes in the body. The
business identifies and develops microbial
strains, compounds and formulations for
use in food ingredients, supplements and
active compounds that can impact on human
physiology, deriving potential health
benefits.
With an established pipeline of microbiome
modulators, the OptiBiotix team works
today in the prevention and management
of chronic lifestyle diseases including
obesity, hypercholesterolemia and lipid
profiles, and diabetes.
To date, the company has signed in excess
of 50 commercial deals globally to supply
or licence its suite of products/supplements
to manufacturers and retailers and has
launched a number of its own brand products.
The VCT invested GBP300,000 into a GBP1m
fundraise in April 2020, with funds being
used to launch its award-winning products
across Asia and the US, through partners
who have an international reputation and
significant retail network, as well as
further expanding the portfolio of products.
Between investment and 31 December 2020
53% of the shares originally acquired
have been realised at a 60% profit.
Progress since our investment:
--Announcing positive half year results
for the 6 month period to 30 June 2020
including:
o H1 revenue growth of GBP745k.
o a 5x increase in revenues from H1 2019.
o a 15.5% reduction in other administration
costs.
a 50% reduction in loss compared to the
same period in the prior year.
The company is now at a commercial turning
point with the business model now proven
through growing sales from proven products,
established partners in multiple international
territories, and reduced administration
and R&D costs. We believe the company
is therefore well placed to attack the
various attractive markets in which they
are gaining traction.
Optibiotix's first generation products,
SlimBiome(TM) , and LPLDL(TM) , are now
established scientifically, clinically,
and commercially with products being sold
in over 120 countries around the world
and a growing brand presence.
As sales and profitability in first generation
products continues to improve, there is
an expectation this should enhance the
company's reach into new application areas
and territories, and commercialise next
generation products -- all of which have
the ability to further enhance the scale
and growth prospects of the company.
------------------------------------------------
Cost (of the GBP140,000
portion of the
original investment
still held as
at 31 December
2020):
------------------------------------------------
Valuation: GBP200,000
Equity held: <1.0%
Last statutory 31 December
accounts: 2019
Turnover: GBP745,000
Loss before tax: GBP2.2 million
Net assets: GBP5.2 million
Valuation method: Bid price of
57p per share
-------------- ------------------------------------------------
3. Abingdon Health plc
Initial investment December 2020 Abingdon Health is a specialist outsourced
date: Contract Development and Manufacturing
Organisation (CDMO) providing a full suite
of services to the lateral flow diagnostic
market. It is the lead member of the UK's
Rapid Test Consortium (UK-RTC) for a point-of-need
C-19 antibody test (AbC-19) and is investing
in automated manufacturing to significantly
increase capacity and attract new customers
across a range of sectors.
As the lead member of UK-RTC, the company
co-ordinated a consortium of four companies
(including former Ordinary share portfolio
company Omega) and, in under four months,
successfully developed and validated a
rapid lateral flow test ("AbC-19") for
detecting SARS-CoV-2 IgG antibodies. The
UK Government has ordered the first 1m
devices and provided funding for the components
for a further 9m to be delivered in the
coming months. There is a mechanism by
which Abingdon Health can sell any excess
supply externally and it has already had
significant interest from a number of
third parties. It is also working with
a number of partners on rapid antigen
tests, leveraging its key lateral flow
competencies and offering broad exposure
in C-19 diagnostics. The pandemic has
driven a material step change in demand
for lateral flow tests generally and has
catalysed a number of other C-19 and non-C-19
contract development and manufacturing
opportunities.
Abingdon Health has established relationships
with blue chip partners and a strong pipeline
of potential new business, including a
number of signed and qualified opportunities.
It also has an innovative and proprietary
mHealth solution, AppDx, a customisable
smartphone reader that is capable of quantitative
analysis of lateral flow tests and the
transfer of real-time data.
The investment was completed just before
the end of the financial year, so there
is no further progress to report from
2020.
---------------------------------------------------
Cost: GBP150,000
---------------------------------------------------
Valuation: GBP145,000
Equity held: <1.0%
Last statutory 30 June 2019
accounts:
Turnover: GBP2.3 million
Loss before tax: GBP1.5 million
Net assets: GBP6.2 million
Valuation method: Bid price of
93p per share
-------------- ---------------------------------------------------
B Share Pool -- Investment Portfolio -- Post-balance sheet Investments
as at 22 February 2021
1. Solascure Ltd
Solascure is an early stage wound care
specialist, originally spun out of and
working alongside BRAIN (world leading
German biotech company), to develop a
new-to-market wound care product. In 2019,
the company deconsolidated from BRAIN
and brought in additional strategic investment
from Eva Pharma (c.GBP2m) and is now set
to commence clinical trials of its wound
care product Aurase. Solscure's Aurase
is a gel-based product that efficiently
and gently cleans wounds, making the healing
process much more straightforward. Pre-clinical
work has been extremely positive and the
clinical trial planning process is now
well progressed.
Chronic wounds are a growing global problem,
and alternative methods of treatment for
hard to heal wounds are extremely expensive,
impractical and slow. Solascure's proprietary
technology utilises the key mechanism
of maggot debridement without the cost
or labour input of live maggots. In simple
terms, it uses maggot elements to facilitate
and promote the body's own wound cleansing
processes. Core benefits of the product
are the clear practical elements, as well
as the reduced time scale to full debridement
without delaying wound healing.
SolasCure have an approved protocol for
a clinical study in order to reach market
authorisation, which is anticipated to
commence in early 2021 (with phase 1 anticipated
to conclude by the end of the year). Crucially,
the product permits the use of the main
maggot-derived wound debriding enzyme
without the cost or labour input involved
with the use of live maggots, but also
augments and synergises the body's own
wound cleansing processes. The product
is expected to demonstrate 3 key benefits:
1) Speci c swift destabilisation of brin
debris; 2) No irritation or damage to
healthy tissue; 3) Reducing the time to
full debridement without delaying wound
healing.
In January 2021, the VCT invested GBP500,000,
alongside GBP733,000 of Seneca EIS funds
as part of a GBP2.9m fundraise to allow
the company to progress and complete the
Initial investment January full trial (Phase 1 and 2) by the end
date: 2021 of 2022.
-------------------------------------------------
Cost: GBP500,000
-------------------------------------------------
Valuation: GBP500,000
Equity held: 2.8%
Last statutory 30 June
accounts: 2019
Turnover: Not
disclosed
Loss before tax: Not
disclosed
Net assets: GBP 6.7
million
Valuation method: At cost
---------- -------------------------------------------------
The Ordinary Share Pool
Shareholders will recall that whilst Seneca is the Company's Investment
Manager, responsibility for the management of the Ordinary share pool
investments continues to rest with those remaining members of the Board
of Directors who were serving at the point of Seneca's appointment on 23
August 2018, which now includes John Hustler and Richard Roth.
AIM Quoted Investments
The Ordinary share pool's largest investment is AIM quoted Scancell and
this represented 37% of the Ordinary share pool's NAV as at 31 December
2019 when the Scancell share price was 7.0p. During the year, the
Scancell share price almost doubled and ended the year at 13.5p. In view
of this increasing share price, the Company took the opportunity to
realise some profit and sold a small portion of our Scancell shares
during the year (1,049,730 shares (8%) were sold from a holding at the
start of the year of 13,049,730 shares) realising GBP127k and generating
a profit versus original cost of GBP64k (a 2x return on the original
investment) and a profit versus the 31 December 2019 carrying value of
GBP54k. The Ordinary share pool's remaining stake in Scancell of
12,000,000 shares increased by GBP780k during the year to stand at a
value of GBP1,620k as at 31 December 2020.
The Ordinary share pool's investment in AIM quoted Omega gained
significant traction in the year following its involvement in a
partnership to develop a C-19 antibody test. The share price rose
substantially from its 31 December 2019 price when it was 14p and this
allowed the Company to sell the Ordinary share pool's entire holding of
2,293,868 Omega shares in the year for a total of GBP987k. This
generated a profit versus original cost of GBP659k (a 3x return on the
original investment) and similarly a profit of GBP666k versus its 31
December 2019 value.
Unquoted Investments
With regard to the Ordinary share pool's unquoted investments, the
carrying value of OR Productivity Limited ("ORP") and Fuel 3D
Technologies Limited ("Fuel 3D") were both reduced as a result of
fundraises by these companies in 2020. In the case of ORP, the dilutive
impact of the funds raised are such that the Company reduced the
carrying value to GBPnil for the Ordinary share pool's investment in ORP
as at 31 December 2020 (31 December 2019 carrying value: GBP233k) and in
the case of Fuel 3D the carrying value has been reduced to bring it in
line with the price of their 2020 fundraise. Although the Ordinary share
pool has maintained the value of Arecor Ltd at the price of the last
fundraising in 2018, it continues to make excellent technical and
commercial progress.
Performance and Dividends
As a result of the above AIM quoted investee company realisations, the
Ordinary share pool was able to pay dividends totalling 13p per Ordinary
share during the period.
The Total Return in relation to the Ordinary shares is now 95.5p
comprising cumulative distributions of 65.25p per Ordinary share and a
residual NAV per Ordinary share of 30.2p as at 31 December 2020.
As noted in the Chairman's statement, the Company is focussed on
realising assets in the Ordinary share pool at the appropriate time with
the proceeds then being distributed to Ordinary shareholders as
dividends -- it is therefore noteworthy that in the 3 years to 31
December 2020 the Company has paid out dividends totalling 41p per
Ordinary share (equivalent to 64.3% of the NAV per Ordinary share of
63.8p as at 31 December 2017) and the Ordinary share pool also retains
NAV per Ordinary share of 30.2p as at 31 December 2020.
Investment Portfolio -- Ordinary shares
Movement
Carrying in the year
value at to
Equity Investment Unrealised 31 December 31 December
held at cost profit/(loss) 2020 2020
Unquoted Investments % GBP'000 GBP'000 GBP'000 GBP'000
Arecor Limited 1.1 142 63 205 -
--------------------- ---------- -------------- -------------- ------------- -------------------------
Fuel 3D Technologies
Limited <1.0 299 (104) 195 (81)
Insense Limited 4.6 509 (388) 121 -
OR Productivity
Limited 3.7 765 (765) - (232)
Microarray Limited 3.0 132 (132) - -
ImmunoBiology Limited 1.2 868 (868) - -
Total unquoted
investments 2,715 (2,194) 521 (313)
Movement
in the year
Carrying to
Investment Unrealised value at 31 December
Shares at cost profit/(loss) 31 December 2020
Quoted Investments held GBP'000 GBP'000 2020 GBP'000 GBP'000
Scancell plc 12,000,000 726 894 1,620 780
Total quoted
investments 726 894 1,620 780
Total investments 3,441 (1,300) 2,141 467
No. of Investment Sale Realised
Exits for Investment Shares at cost Proceeds profit/(loss) Exit
the period Date sold GBP'000 GBP'000 GBP'000 Multiple
Scancell plc December
(*) 2003 1,049,730 63 127 64 2.0
------------ ----------- --------- ---------- -------- ------------- --------
Omega
Diagnostics
plc August 2007 2,293,868 328 987 659 3.0
Exosect
Limited January
(**) 2010 8,575 270 - (270) -
Total 661 1,114 453 1.7
(*) Partial exit
(**) Dissolved 24 January 2020
Ordinary Share Pool -- Investment Portfolio -- All Six Unquoted
Investments by value as at 31 December 2020
1. Arecor Limited
Arecor was a spin-out from Insense (a
Seneca Growth Capital Ordinary share investee
company -- see below) to commercialise
technology developed by Insense for enabling
biologics to maintain their integrity
without the need for refrigeration - this
both reduces cost and also helps supply
chain logistics in developing countries
where temperature monitored cold storage
facilities are in short supply.
Progress made by the company in 2020 includes:
-- Announcing in March 2020 that Arecor had extended its
multi-product collaboration with a US-based clinical
stage biotechnology company.
-- Announcing in June 2020 positive results of their
phase 1 trial on AT247.
-- Expanding their partnership with Hikma announced 20
October 2020.
-- Commencing in December 2020 dosing patients in the
AT278 clinical study (ultra-concentrated insulin,
first in man study) following a GBP1.9m fund raise:
this is a very significant milestone as they continue
to build momentum with their differentiated portfolio
of superior products.
-- Announcing in late December 2020 that Arecor's
partner, Inhibrx, exercised their option to license a
novel formulation of the investigational clinical
stage product, INH-101, developed by Arecor. This is
the first license under a multi-product collaboration
with Inhibrx and further validates the value of the
Initial investment ArestatTM technology platform in developing superior
date: January 2008 versions of existing therapeutic products.
------------------------------------------------------------
Cost: GBP142,000
------------------------------------------------------------
Valuation: GBP205,000
Equity held: 1.1%
Last statutory 31 December
accounts: 2019
Turnover: GBP748,000
Loss before GBP2.7
tax: million
Net assets: GBP4.2
million
Valuation method: Price of last
fundraise
------------- ------------------------------------------------------------
2. Fuel 3D Technologies Limited
Initial investment March 2010 In 2014 Fuel 3D was formed to acquire
date: the computer 3D imaging IP of Seneca Growth
Capital Ordinary share investee company,
Eykona. The initial application for this
IP targeted by Eykona was measuring the
volume of chronic wounds; however this
has since developed and the current application
focus is on a) measuring tumours in animals
used in drug development via a product
called BioVolume and b) enabling the manufacture
of products to fit a particular individual
e.g. masks used to treat certain medical
conditions.
BioVolume is Fuel 3D's lead product and
improves measurement accuracy, inter-operator
consistency, animal welfare, cost efficiencies,
compliance and the success of pre-clinical
oncology research.
Progress made by the company in 2020 includes:
-- The development of BioVolume in conjunction with
major pharmaceutical companies but have suffered C-19
related delays: trials with three of the majors are
only now coming to an end and the fourth commenced in
January 2021. The data to date looks promising and
has recently enabled the signing of a contract to
sell two units to a specialist research lab.
-- The continued development of the technology for
FitsYou applications (e.g. sleep apnoea masks and
eyewear) has taken longer than expected, partly due
to working at the edge of capability of partners'
platforms. The app that has been designed for the
world's largest manufacturer of sleep apnoea masks
(to allow them to scan customers' faces in order to
assess best fit) has recently been completed and a
three month pilot will start early in the New Year,
hopefully resulting in a commercial licensing
agreement later in 2021. The same technology is also
being used to develop tools targeted at the eyewear
industry, developing apps to bring virtual try on and
best fit to eyewear retailers and brands. Fuel 3d is
exploring the launch of a B2C marketplace and the
company has filed a patent application to cover the
creation of a 3D model using depth data generated by
mobile devices which it expects to form a fundamental
part of its technology offering within FitsYou.
-- The reduction in cash burn, which is now c.40% lower
than this time last year and the raising of GBP3.8m
(at a slightly reduced valuation) means that even in
the absence of revenues, the company has sufficient
runway to take it through to the end of 2021,
although it may seek further investment to accelerate
development and commercialisation of FitsYou.
-- The board of Fuel3D is also considering separating
each business into separate units as the BioVolume
and FitsYou businesses are likely to appeal to
different buyer audiences.
------------------------------------------------------------
Cost: GBP299,000
------------------------------------------------------------
Valuation: GBP195,000
Equity held: < 1%
Last statutory 31 December
accounts: 2019
Turnover: GBP521,000
Loss before tax: GBP4.3
million
Net assets: GBP5.4
million
Valuation method: Price of last
fundraise
------------- ------------------------------------------------------------
3. Insense Limited
Insense is an innovative, biotechnology
company and was spun-out from Unilever's
R&D laboratory in 2001.
It has since had two successful spinouts,
namely Arecor (see above) and Archimed,
from which Microarray (see below) was
also spun-out. Current Insense development
activity is concentrated on dermatology
products for both professional and consumer
applications.
Progress made by the company in 2020 includes:
--Completing testing of the UV lamp that
will be used in a first-in-man trial and
continuing preparations for further formulation
and stability testing. C-19 has affected
progress in 2020, slowing the speed of
Initial investment product and service delivery from Chinese
date: July 2003 and UK-based partners.
------------------------------------------------
Cost: GBP509,000
------------------------------------------------
Valuation: GBP121,000
Equity held: 4.6%
Last statutory 31 December
accounts: 2019
Turnover: Not Disclosed
Loss before Not Disclosed
tax:
Net liabilities: GBP51,000
Valuation method: Price of last
fundraise
------------- ------------------------------------------------
4. OR Productivity Limited
At the end of 2011, Freehand 2010 (a Seneca
Growth Capital Ordinary share investee)
was acquired by OR Productivity plc (ORP)
in exchange for ORP shares.
Freehand 2010 owns the intellectual property
to technology incorporated in a product,
FreeHand, for robotically controlling
the laparoscope (part of the camera system)
used in the growing sector that is keyhole
surgery. The company sells the system
outright and provides consumables although,
increasingly, the business model is built
upon free placement of the system with
recurring revenue then being generated
from the subsequent sale of a consumable
per operation.
Progress made by the company in 2020 includes:
-- An initial fundraising in 2020 which raised
GBP750,000 following which a Crowdcube funding
campaign was launched. To date the fundraising has
achieved GBP1.225 million.
-- Year over year sales being up in spite of C-19 but
pressures on elective surgery have resulted in
significant revenue shortfall to budget.
-- Spanish distributor MBA continuing to lead the way
and has ordered 3 new Panorama robots from the
company.
-- Announcing a new distribution partnership with
Imperial Medical Solutions to support sales in India,
Sri Lanka, Malaysia and the Caribbean.
The current fundraising has been through
the issue of A Ordinary shares which carry
a one times repayment preference. In addition
further A Ordinary shares with the same
preference have been issued to redeem
certain outstanding liabilities. At the
present time the Board considers it unlikely
that the Ordinary share pool investment
in ORP can be valued in excess of the
value of the A Ordinary shares issued.
Initial investment The Ordinary share pool does not hold
date: March 2011 any A Ordinary shares.
------------------------------------------------------------
Cost: GBP765,000
------------------------------------------------------------
Valuation: GBPnil
Equity held: 3.7%
Last statutory 31 March 2020
accounts:
Turnover: Not Disclosed
Loss before tax: Not Disclosed
Net liabilities: GBP4.6 million
Valuation method: Carrying value
reduced to GBPnil
------------------ ------------------------------------------------------------
5. ImmunoBiology Limited
ImmunoBiology ("ImmBio") is a biotechnology
company that is focused on developing
treatments for illnesses such as meningitis,
tuberculosis, influenza and hepatitis
C. The company's technology is based on
the discovery that a group of proteins
known as 'heat shock proteins' has a pivotal
role in controlling the normal immune
response to infections. The focus is currently
on a vaccine for Pneumococcal Disease,
for which the challenge is that there
are >90 strains in circulation but present
treatments address only a small proportion.
In 2016 a first in human study demonstrated
safety in adults.
ImmBio - formally known as ImmunoBiology
Ltd has licensed its pneumococcal vaccine
to China National Biotech Group. It has
completed certain parts of its technology
transfer and is now seeking to start a
phase 2 study of the same vaccine. Coronavirus
has again highlighted the importance of
vaccines to the world and in recent years
pneumococcal disease has claimed a similar
number of deaths as C-19 in 2020. An existing
vaccine has reduced the death rate, but
the existing vaccines only protect against
fewer than 20 of the 90 or so existing
strains. As ImmBio's ImmBioVax technology
utilises heat shock proteins to activate
T-cell responses, it is hoped that it
can be used to create vaccines for a wide
range of currently poorly served infectious
diseases.
ImmBio has a complex equity structure
which has impacted the investment valuation.
As such, the Board does not believe that
the Company's Ordinary share pool's investment
currently has any value.
Progress made by the company in 2020 includes:
-- Continuing with the technology transfer to a
subsidiary company of China National Biotec Group to
co-develop ImmBio's proprietary PnuBioVax vaccine
against pneumococcal disease and launch the
pneumococcal vaccine in the Greater China area upon
completion of successful clinical studies but there
is also a requirement to start a clinical trial
outside China which needs funding.
-- Improving the required storage conditions. (hoping to
achieve refrigerator storage) via their partnership
with CPI (an independent technology innovation
centre) to produce a Pneumococcal vaccine which is
heat stable, thus avoiding the need (and inherent
expense) of the cold chain -- ImmBio estimate there
to be c.50 million patients annually who could
benefit from such a vaccine.
-- Commencing discussion with a number of strategic
partners and vaccine producers, some of whom have
technology to use Immbio's approach; there are
regulatory challenges but C-19 may help in this
scenario. It has certainly made everyone more
receptive to vaccines and with different mutations,
universal vaccines become more popular. Existing C-19
vaccine suppliers are also keen to have a second or
third approach on their books especially which
doesn't need to keep up with changing strains; this
may be beneficial to Immbio.
Initial investment Almost all staff are currently furloughed,
date: November 2005 whilst further funds can be obtained.
------------------------------------------------------------
Cost: GBP868,000
------------------------------------------------------------
Valuation: GBPnil
Equity held: 1.2%
Last statutory 31 May 2020
accounts:
Turnover: GBPnil
Loss before GBP594,000
tax:
Net assets: GBP262,000
Valuation method: Carrying value
reduced to GBPnil
------------------ ------------------------------------------------------------
6. Microarray Limited
Microarray Ltd is a UK-based specialist
wound healing company. Founded in 2000,
Microarray was de-merged from Archimed,
a spin-out from Insense (see above): the
company is now privately owned.
The company has access to wide ranging
expertise in the fields of wound dressing
product development, marketing and sales;
electrochemistry and diagnostic sensor
technologies; biochemistry, oxygen and
iodine chemistry; enzymology, immunology
and inflammation. Current research and
development activities are concentrated
on innovative wound care diagnostics.
Microarray owns and continues to develop
new intellectual property in its specialist
fields. It works independently and with
expert academic and industrial partners.
Progress made by the company in 2020 includes:
-- Designing and gaining the necessary approvals for our
next clinical trial looking at chronic wound state
biomarkers. C-19 has affected the recruitment of
patients for the trial, which is now hoped to start
in Q3/2021.
-- In parallel, the company continues to use
machine-learning methods to analyse the clinical data
collected to date, and is investigating the
commercial potential of these non-biomarker assets.
Previously product testing results have
not provided the indicators that the company
hoped for in terms of assessing whether
a wound is infected or not. As a result
of this adverse outcome in relation to
an area of focus for the company, the
carrying value of the investment of the
Ordinary share portfolio's investment
in Microarray Limited has been reduced
to GBPnil. Notwithstanding the above,
the company is continuing to develop its
Initial investment wound diagnostic products as the progress
date: January 2011 in 2020 indicates.
------------------------------------------------------------
Cost: GBP132,000
------------------------------------------------------------
Valuation: GBPnil
Equity held: 3.0%
Last statutory 31 December
accounts: 2019
Turnover: Not Disclosed
Loss before Not Disclosed
tax:
Net liabilities: GBP(4 million)
Valuation method: Carrying value
reduced to GBPnil
------------------ ------------------------------------------------------------
Ordinary Share Pool -- Investment Portfolio -- AIM Quoted Investment as
at 31 December 2020
1. Scancell plc
Scancell is an AIM listed biotechnology company
that is developing a pipeline of therapeutic
vaccines to target various types of cancer, with
the first target being melanoma.
The Immunobody platform technology, in effect,
educates the immune system how to respond --
this means that the technology can also be licensed
to pharmaceutical companies to assist the development
of their own therapeutic vaccines, which is an
area of emerging importance for which a number
of big pharmas do not have in-house technology.
In addition, in 2012 a second platform technology,
Moditope, was announced and is based on exploiting
the normal immune response to stressed cells
and is complementary to the Immunobody platform.
The AvidMab platform was established in 2018
which allows direct tumour killing.
Scancell continues to develop its multiple technologies.
Progress made by the company in 2020 includes:
-- The company received FDA approval in February 2020 to
initiate the US arm of the Phase 2 SCIB1 clinical
trial although C-19 has delayed patient recruitment.
The Modi-1 Phase1/2 trial is progressing for
regulatory submission with a planned study start in
the UK in the first half of 2021. GMP drug
manufacture is advancing and formal
regulatory-compliant toxicity studies are complete
The new AvidiMab platform has also generated
significant interest and further agreements have been
signed with different partners to evaluate its
potential, which if successful, could translate into
important commercial deals.
-- In April Scancell announced it had initiated a
research project to use its clinical expertise in
cancer to produce a simple, safe, cost effective and
scalable vaccine which could induce a durable
response against the virus that causes C-19. The
project is funded by a GBP2 million Innovate UK grant
awarded in August to a consortium between Scancell,
University of Nottingham and Nottingham Trent
University. Scancell has now selected their C-19
vaccine candidate, SN14, for further development and
clinical trials. SN14 is a second generation vaccine
which offers several potential advantages over
currently approved and late-stage C-19 vaccines. In
October, it entered into a collaboration with Cobra
Biologics, part of the Cognate BioServices family, to
conduct preliminary work leading to the manufacture
of SN14 with the goal of starting a Phase 1 COVIDITY
clinical trial as soon as possible during 2021.
-- During the year, the company completed two successful
fund raises totalling GBP48 million (GBP46.1 million
net proceeds) from the issue of shares and
convertible loan notes (CLN): In August, it raised
GBP15 million at a price of 5.5p per share (includes
a residual amount of GBP1.75m held in CLN, and which
included a significant new US institutional investor
(Redmile Group LLC, "Redmile"). This funding will
allow planned trials to continue while partnering
discussions are pursued. In October, a further GBP33m
was raised predominately from Redmile: GBP15.1m in
equity at 11p per share and GBP17.9m in CLN. Redmile
now holds just under 30% of the equity and all of the
CLN, and Vulpes Life Science Fund 14.5%. These
additional funds will extend the utility of the
company's ImmunoBodyTM, ModitopeTM, and
AvidiMab(TM)/tumour-associated glycans ("TaG")
antibody products and platforms and to accelerate and
broaden its development pipeline of new potential
novel therapies and increase the funding available
for the company's C-19 vaccine.
As a result of these developments, the Scancell
share price has seen much volatility with prices
ranging from 4p to 20p during the year. These
valuations are based on a bid price of 13.5p
Initial investment December per share and the bid price was 24.5p per share
date: 2003 at 19 February 2021.
------------------------------------------------------------
Cost (of the
portion of
the original
investment
still held
as at 31 December
2020): GBP726,000
------------------------------------------------------------
Valuation: GBP1,620,000
Equity held: 1.5%
Last statutory 30 April
accounts: 2019
Turnover: GBPnil
Loss before GBP6.7
tax: million
Net assets: GBP9.3
million
Valuation Bid price
method: of 13.5p
per share
------------ ------------------------------------------------------------
Richard Manley
Seneca Partners Limited
22 February 2021
Directors' Report
The Directors present their Report and the audited Financial Statements
for the year ended 31 December 2020.
The Directors consider that the Annual Report and Financial Statements,
taken as a whole are fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company's
performance, business model and strategy.
Review of Business Activities
The Directors are required by section 417 of the Companies Act 2006 to
include a Business Review to shareholders. This is set out on page 36
and forms part of the Strategic Report. The purpose of the Business
Review is to inform members of the Company and help them assess how the
Directors have performed their duty under section 172 of the Companies
Act 2006 (duty to promote the success of the Company). The Company's
section 172 Statement on page 6, the Chairman's Statement on page 8 to
13, and the Investment Manager's Report on pages 14 to 35 also form part
of the Strategic Report.
The purpose of this review is to provide shareholders with a snapshot
summary setting out the business objectives of the Company, the Board's
strategy to achieve those objectives, the risks faced, the regulatory
environment and the key performance indicators used to measure
performance.
Directors' Shareholdings -- Ordinary shares
The Directors of the Company during the period and their interests (in
respect of which transactions are notifiable under Disclosure and
Transparency Rule 3.1.2R) in the issued Ordinary shares of 1p are shown
in the table below:
31 December 2020 31 December 2019
Number of Shares Number of Shares
----------------- ------------------ ------------------
John Hustler 190,000 190,000
Alex Clarkson - -
Richard Manley - -
Richard Roth 209,612 209,612
----------------- ------------------ ------------------
All of the Directors' shares were held beneficially. There have been no
changes in the Directors' Ordinary share interests between 31 December
2020 and the date of this report.
Directors' Shareholdings -- B Shares
The Directors of the Company during the period and their interests (in
respect of which transactions are notifiable under Disclosure and
Transparency Rule 3.1.2R) in the issued B shares of 1p are shown in the
table below:
31 December 2020 31 December 2019
Number of Shares Number of Shares
----------------- ------------------ ------------------
John Hustler - -
Alex Clarkson - -
Richard Manley 62,071 51,010
Richard Roth 15,000 15,000
----------------- ------------------ ------------------
All of the Directors' B shares were held beneficially. There have been
no changes in the Directors' B share interests between 31 December 2020
and the date of this report.
Directors' and Officers' Liability Insurance
The Company has maintained directors' and officers' liability insurance
cover on behalf of the Directors, Company Secretary and Investment
Manager.
Whistleblowing
The Board has approved a Whistleblowing Policy for the Company, its
Directors and any employees, consultants and contractors, to allow them
to raise concerns, in confidence, in relation to possible improprieties
in matters of financial reporting and other matters.
Bribery Act
The Board has approved an Anti-Bribery Policy to ensure full compliance
with the Bribery Act 2010 and to ensure that the highest standards of
professional and ethical conduct are maintained.
Management
Seneca as the Company's Investment Manager is responsible for the
management of the Company's B share pool investments. Responsibility for
the management of the Ordinary share pool investments has been delegated
to those members of the current Board of Directors who served
immediately prior to 23 August 2018, namely John Hustler and Richard
Roth.
The strategies and policies which govern the Investment Manager have
been set by the Board in accordance with section 172 of the Companies
Act 2006.
Corporate Governance Statement
The Board has considered the principles and recommendations of the 2019
AIC Code. The Company's Corporate Governance policy is set out on pages
50 to 54.
The 2019 AIC Code is available on the AIC website (www.theaic.co.uk). It
includes an explanation of how the 2019 AIC Code adapts the Principles
and Provisions set out in the UK Corporate Governance Code (the "UK
Code") to make them relevant for investment companies.
The Company has complied with the recommendations of the 2019 AIC Code
and the relevant provisions of the UK Corporate Governance Code, except
as set out below:
-- The Company does not have a Chief Executive Officer or a Senior
Independent Director. The Board does not consider this necessary as it
does not have any executive directors.
-- New Directors do not receive a formal induction on joining the Board,
though they do receive one tailored to them on an individual basis.
-- The Company conducts a formal review as to whether there is a need for an
internal audit function. However, the Directors do not consider that an
internal audit would be an appropriate control for this VCT at this
time.
-- The Company does not have a Remuneration Committee as it does not have
any executive directors.
-- The Company does not have a Nomination Committee as these matters are
dealt with by the Board.
For the reasons set out in the AIC Guide, and as explained in the UK
Corporate Governance Code, the Board considers the above provisions are
not relevant to the position of the Company, being an investment company
run by the Board and managed by the Investment Manager. In particular,
all of the Company's day-to-day administrative functions are outsourced
to third parties. As a result, the Company has no executive directors,
employees or internal operations.
Directors
Biographical details of the Directors are shown on page 42.
In accordance with the Articles of Association and good governance, all
four Directors will retire and offer themselves for re-election at the
forthcoming AGM.
The Board is satisfied that, following individual performance appraisals,
the Directors who are retiring continue to be effective and demonstrate
commitment to their roles and therefore offer themselves for re-election
with the support of the Board. Further details regarding the Company's
succession planning are set out in the Corporate Governance policy on
pages 51 to 52.
The Board did not identify any conflicts of interest between the
Chairman's interest and those of the shareholders, especially with
regard to the relationship between the Chairman and the Investment
Manager.
No concerns about the operation of the Board or the Company were raised
by any Director during the period and had any been raised they would be
mentioned in the minutes or in writing to the Chairman to be circulated
to the Board in accordance with Provision 5.2 of the 2019 AIC Code.
The Board is cognisant of shareholders' preference for Directors not to
sit on the boards of too many listed companies ("over-boarding"). The
Board is satisfied that all Directors have the time to focus on the
requirements of the Company.
International Financial Reporting Standards
As the Company is not part of a group it is not mandatory for it to
comply with International Financial Reporting Standards ("IFRS"). The
Company does not anticipate that it will voluntarily adopt IFRS. The
Company has adopted Financial Reporting Standard 102 -- The Financial
Reporting Standard Applicable in the United Kingdom and the Republic of
Ireland.
Environmental, Social and Governance ("ESG") Practices
The Board recognises the requirement under section 414c of the Companies
Act 2006 to detail information about environmental matters (including
the impact of the Company's business on the environment), employee and
human rights, social and community issues, including information about
any policies it has in relation to these matters and effectiveness of
these policies.
Given the size and nature of the Company's activities and the fact that
it has no employees and only four non-executive Directors, the Board
considers there is limited scope to develop and implement environmental,
social and community policies, but recognises the importance of
including consideration for such matters in investment decisions. The
Board has taken into account the requirement of section 172(1) of the
Companies Act 2006 and the importance of ESG matters when making
decisions which could impact shareholders, stakeholders and the wider
community. The Company's Section 172(1) statement has been provided in
the Strategic Report on page 6, where the Directors consider the
information to be of strategic importance to the Company.
The Company seeks to ensure that its business is conducted in a manner
that is responsible to the environment. The management and
administration of the Company is undertaken by the Investment Manager
who recognises the importance of its environmental responsibilities,
monitors its impact on the environment and implements policies to reduce
any negative environmental impact and which promote environmental
sustainability.
The Investment Manager recognises that managing investments on behalf of
clients involves taking into account a wide set of responsibilities in
addition to seeking to maximise financial returns for investors.
Industry practice in this area has been evolving rapidly and the Company
seeks to be an active participant by working to define and strengthen
its principles accordingly. This involves both integrating ESG
considerations into the Investment Manager's investment decision-making
process as a matter of course, and also signing up to major external
bodies who are leading influencers in the formation of industry best
practice. The following is an outline of the kinds of ESG considerations
that the Investment Manager is taking into account as part of its
investment process.
Environmental
Seneca, as part of its commercial due diligence practices and ongoing
monitoring, examines potential issues which could arise from supply
chains, climate change and environmental policy compliance. The
Investment Manager looks for management teams who are aware of the
issues and are proactive in responding to them.
Social
Seneca seeks to avoid unequivocal social negatives, such as profiting
from forced labour within its investment portfolio and to support
positive impacts which will more likely find support from customers and
see rising demand. Seneca does not tolerate modern slavery or human
trafficking within its business operations and takes a risk-based
approach in respect of our portfolio companies. Seneca actively engages
with portfolio companies and their boards to discuss material risks,
ranging from business and operational risks to environmental and social
risks.
Governance
Seneca examines and, where appropriate, engages with companies on board
membership, remuneration, conflicts of interest such as related party
transactions, and business leadership and culture. In addition, the
Company, as a matter of course, exercises its voting rights when
possible.
Greenhouse Gas ("GHG") Emissions and Streamlined Energy & Carbon
Reporting ("SECR")
Under the Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013 ('the 2013 Regulations') and the Companies (Directors'
Report) and Limited Liability Partnerships (Energy and Carbon Report)
Regulations 2018, quoted companies of any size are required under Part
15 of the Companies Act 2006 to disclose information relating to their
energy use and GHG emissions.
All of the Company's activities are outsourced to third parties. The
Company therefore has no greenhouse gas emissions to report from its
operations, nor does it have direct responsibility for any other
emissions producing sources under the Companies Act 2006 (Strategic
Report and Directors' Reports) Regulations 2013 and the Companies
(Directors' Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018. For the same reasons as set out above,
the Company considers itself to be a low energy user under the SECR
regulations and therefore is not required to disclose energy and carbon
information. A low energy user is defined as an organisation that uses
40 MWh or less during the reporting period.
Going Concern
The Company's business activities and the factors likely to affect its
future performance and financial position are set out in the Chairman's
Statement and Investment Manager's Report on pages 8 to 13 and pages 14
to 35. Further details on the management of the principal risks are set
out on pages 39 to 40 and financial risks may be found in note 16 to the
Financial Statements.
The Board receives regular reports from Seneca who acts as both the
Investment Manager and the Administration Manager, and the Directors
believe that, as no material uncertainties leading to significant doubt
about going concern have been identified, it is appropriate to continue
to adopt the going concern basis in preparing the Financial Statements.
The assets of the Company consist mainly of securities, four of which
are AIM quoted, relatively liquid and readily accessible, as well as
more than GBP5 million of cash as at 31 December 2020 (47% of net
assets). After reviewing the Company's forecasts and expectations, the
Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future. The Company therefore continues to adopt the going concern basis
in preparing its Financial Statements.
The Company is also facing risks resulting from the impact of the C-19
pandemic. The Company's Board and Investment Manager are focused on
ensuring that investee companies are taking the required actions to
minimise the potential impact that the C-19 pandemic could have on them.
The Board and Seneca will continue to review risks posed by C-19 and
keep those risks under regular review but do not consider the pandemic
to have any impact on the Company's own ability to continue as a going
concern.
Share Capital
As disclosed on page 99 the Board has authority to make market purchases
of the Company's own B shares. No shares were purchased by the Company
during the year (2019: nil).
At the last AGM held on 28 April 2020, the Board received authority to
allot up to 35,000,000 B shares in connection with any offer(s) for
subscription (and any subsequent top up offer of B shares) and up to
405,800 Ordinary shares (for any miscellaneous offers of such shares),
which represented approximately 479% of the Company's issued B share
capital and approximately 5% of its issued Ordinary share capital as at
28 April 2020.
During the year, the Company did not issue any Ordinary shares (2019:
nil). During the year, the Company issued 2,701,500 B shares raising
GBP2.4 million before expenses (2019: 2,325,078 shares and GBP2.3
million) No further shares have been issued between 31 December 2020 and
the date of this report.
The Company's issued Ordinary share capital as at 31 December 2020 was
8,115,376 Ordinary shares of 1p each (31 December 2019: 8,115,376
Ordinary shares of 1p each) and 9,062,948 B shares of 1p each (31
December 2019: 6,361,448 B shares of 1p each).
The total number of shares in issue for both the Ordinary shares and B
shares of 1p each as at 31 December 2020 and 19 February 2021 was
17,178,324 (31 December 2019: 14,476,824) with each share having one
vote.
In accordance with Schedule 7 of the Large and Medium Size Companies and
Groups (Accounts and Reports) Regulations 2008, as amended, the
Directors disclose the following information:
-- The Company's capital structure and voting rights are summarised above,
and there are no restrictions on voting rights nor any agreement between
holders of securities that result in restrictions on the transfer of
securities or on voting rights;
-- There exist no securities carrying special rights with regard to the
control of the Company;
-- The rules concerning the appointment and replacement of directors,
amendment of the Articles of Association and powers to issue or buy back
of the Company's shares are contained in the Articles of Association of
the Company and the Companies Act 2006;
-- The Company does not have an employee share scheme;
-- There are no agreements to which the Company is party that may affect its
control following a takeover bid; and
-- There are no agreements between the Company and its Directors providing
for compensation for loss of office that may occur following a takeover
bid or for any other reason, apart from their normal notice period and
any fees potentially due under the performance fee arrangements set out
on page 58 and note 6.
Substantial Shareholdings
At 31 December 2020 and at the date of this report, there was one
holding of 3% and over of the Company's ordinary share capital. This
holding related to Share Nominees Ltd and amounted to 3.34%.
Annual General Meeting
The Notice convening the 2021 AGM of the Company is set out at the end
of this document (and a form of proxy in relation to the meeting is
enclosed separately). Part of the business of the AGM will be to
consider resolutions in relation to the following matters:
Resolutions 3 to 6 will seek the re-election of the existing four
members of the Board as non-executive Directors of the Company.
Resolution 7 will seek the re-appointment of UHY Hacker Young LLP as
Independent Auditor to the Company.
Resolution 8 will seek authorisation to determine the auditor's
remuneration.
Resolution 9 will authorise the Directors to allot further B shares and
Ordinary shares. This will enable the Directors until the next AGM to
allot up to 35,000,000 B shares in connection with any offer(s) for
subscription (and any subsequent top up offer of B shares) and up to
405,800 Ordinary shares (for any miscellaneous offers of such shares),
representing approximately 386% of the Company's issued B share capital
and approximately 5% of its issued Ordinary share capital as at 19
February 2021.
Resolution 10 will authorise the Board, pursuant to the Act, to make one
or more market purchases of up to 14.99% of the issued B share capital
of the Company from time to time. The price paid must not be less than
1p per B share, nor more than 5% above the average middle market price
of a B share for the preceding five business days. Any B shares bought
back under this authority may be cancelled by the Board.
Resolution 11 will, under sections 570 of the Act, disapply pre-emption
rights in respect of any allotment of the B shares and/or Ordinary
shares authorised under Resolution 9.
Resolution 12 will adopt amended Articles of Association which are
substantially in the same form as the Company's current Articles of
Association save that:
1. existing Clause 146 regarding Unclaimed Dividends has been deleted and
replaced with a new Clause 146 which provides the authorisation for all
dividends, interest or other sum payable and unclaimed for 12 months
after having become payable to be invested or otherwise made use of by
the Board for the benefit of the Company until claimed and the Company
shall not be constituted a trustee in respect thereof. All dividends
unclaimed for a period of six years after having been declared or become
due for payment shall (if the Board so resolves) be forfeited and shall
cease to remain owing by the Company; and
2. existing Clauses 53 to 56 (including the insertion of new Clauses 55A and
56A) have been amended to include the ability for the Company to hold
partially virtual general meetings.
3. Existing Clause 102 will be amended to authorise an increase in the total
remuneration payable to the Directors to GBP100,000 to allow for the
appointment of a new non-executive Director.
The Directors intend to use the authorities in Resolutions 9 and 11 for
the purposes of the current Offer and a further offer for subscription
of B shares. The Directors have no current intention to utilise the
authority in relation to the Ordinary shares.
Copies of the Articles of Association of the Company (including a
mark-up of the new articles of association proposed to be adopted
pursuant to resolution 12) will be available for inspection at the
registered office of the Company during usual business hours on any
weekday (Saturday and Public Holidays excluded) from the date of this
notice, until the end of the Annual General Meeting and at the place of
the Annual General Meeting for at least 15 minutes prior to and during
the meeting. However, given that shareholders will be unable to attend
the AGM this year, the Articles of Association will also be available on
the Company's website at
https://www.globenewswire.com/Tracker?data=WH6r0nUrPl0kSwYClrz2v0vB1qLtxV4SiCu95sf3wWF7lEqSCtV7vZMdvdj27h8pBlrTvlrHPWCS1EdgbckCFHcIYxLnwruyh1tR2oUAdN9ycF01ux5E1q6AymhHhDGm2JwIiM1jX-m7xPYJCdizOw==
https://senecavct.co.uk/reports-documents/.
Recommendation
The Board believes that the passing of the resolutions above are in the
best interests of the Company and its shareholders as a whole and
unanimously recommends that you vote in favour of these resolutions as
the Directors intend to do in respect of their beneficial shareholdings.
By Order of the Board
Craig Hunter
Company Secretary
22 February 2021
Combined Income Statement
Combined Combined
Year to 31 December Year to 31 December
2020 2019
------------------------------------------- -------------------------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ------------- ------------- ------------- ------------- ------------- -------------
Gain on disposal of fixed
asset investments - 948 948 - 52 52
Gain/(loss) on valuation
of fixed asset investments - 682 682 - (752) (752)
Income 2 - - - - - -
Performance fee 6 - (140) (140) - 136 136
Investment management fee
net of cost cap 3 (10) (31) (41) (7) (21) (28)
Other expenses 4 (150) (2) (152) (123) - (123)
---------- ------------- ------------- ------------- ------------- ------------- -------------
Return on ordinary activities
before tax (160) 1,457 1,297 (130) (585) (715)
Taxation on return on ordinary
activities 7 - - - - - -
Return on ordinary activities
after tax (160) 1,457 1,297 (130) (585) (715)
---------- ------------- ------------- ------------- ------------- ------------- -------------
Return on ordinary activities
after tax attributable
to:
Owners of the fund (160) 1,457 1,297 (130) (585) (715)
---------- ------------- ------------- ------------- ------------- ------------- -------------
There was no other Comprehensive Income recognised during the year
-- The 'Total' column of the income statement and statement of comprehensive
income is the profit and loss account of the Company; the supplementary
revenue return and capital return columns have been prepared under
guidance published by the Association of Investment Companies.
-- All revenue and capital items in the above statement derive from
continuing operations.
-- The Company has only one class of business and derives its income from
investments made in shares and securities and from bank and money market
funds.
-- The Company has two share classes, the Ordinary share and B share class.
The Company has no recognised gains or losses other than the results for
the year as set out above.
The accompanying notes are an integral part of the Financial Statements.
Ordinary Share Income Statement
(non-statutory analysis)
Ordinary shares Ordinary shares
Year to 31 December Year to 31 December
2020 2019
------------------------------------------- -------------------------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ------------- ------------- ------------- ------------- ------------- -------------
Gain on disposal of fixed
asset investments - 720 720 - 38 38
Gain/(loss) on valuation
of fixed asset investments 10 - 467 467 - (725) (725)
Income 2 - - - - - -
Performance fee 6 - (140) (140) - 136 136
Investment management fee 3 - - - - - -
Other expenses 4 - (2) (2) 4 - 4
---------- ------------- ------------- ------------- ------------- ------------- -------------
Return on ordinary activities
before tax - 1,045 1,045 4 (551) (547)
Taxation on return on ordinary
activities 7 - - - - - -
Return on ordinary activities
after tax - 1,045 1,045 4 (551) (547)
---------- ------------- ------------- ------------- ------------- ------------- -------------
Return on ordinary activities
after tax attributable
to:
Ordinary shareholders - 1,045 1,045 4 (551) (547)
---------- ------------- ------------- ------------- ------------- ------------- -------------
Earnings per share -- basic
and diluted 8 0.0p 12.8p 12.8p 0.0p (6.7)p (6.7)p
---------- ------------- ------------- ------------- ------------- ------------- -------------
B Share Income Statement (non-statutory analysis)
B shares B shares
Year to 31 December Year to 31 December
2020 2019
------------------------------------------- -------------------------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ------------- ------------- ------------- ------------- ------------- -------------
Gain on disposal of fixed
asset investments - 228 228 - 14 14
Gain/(loss) on valuation
of fixed asset investments 10 - 215 215 - (27) (27)
Income 2 - - - - - -
Performance fee 6 - - - - - -
Investment management fee
net of cost cap 3 (10) (31) (41) (7) (21) (28)
Other expenses 4 (150) - (150) (127) - (127)
---------- ------------- ------------- ------------- ------------- ------------- -------------
Return on ordinary activities
before tax (160) 412 252 (134) (34) (168)
Taxation on return on ordinary
activities 7 - - - - - -
Return on ordinary activities
after tax (160) 412 252 (134) (34) (168)
---------- ------------- ------------- ------------- ------------- ------------- -------------
Return on ordinary activities
after tax attributable
to:
B shareholders (160) 412 252 (134) (34) (168)
---------- ------------- ------------- ------------- ------------- ------------- -------------
Earnings per share -- basic
and diluted 8 (2.2)p 5.7p 3.5p (2.5)p (0.7)p (3.2)p
---------- ------------- ------------- ------------- ------------- ------------- -------------
Combined Statement of Changes in Equity
Capital Capital
reserve reserve
Special realised holding
Share Share distributable gains/ gains/ Revenue
capital premium reserve (losses) (losses) reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------
Balance as at 1 January
2019 121 568 10,839 1,029 (1,309) (1,967) 9,281
B share issue 24 2,238 - - - - 2,262
Revenue return on ordinary
activities after tax - - - - - (130) (130)
Expenses charged to capital - - - (21) - - (21)
Performance fee allocated
as capital expenditure - - - 136 - - 136
Dividends paid - - (2,444) - - - (2,444)
Current period gains
on disposal - - - 52 - - 52
Current period losses
on fair value of investments - - - - (752) - (752)
Balance as at 31 December
2019 145 2,806 8,395 1,196 (2,061) (2,097) 8,384
B share issue 27 2,363 - - - - 2,390
Revenue return on ordinary
activities after tax - - - - - (160) (160)
Expenses charged to capital - - - (33) - - (33)
Performance fee allocated
as capital expenditure - - - (140) - - (140)
Dividends paid - - (1,301) - - - (1,301)
Current period gains
on disposal - - - 948 - - 948
Current period gains
on fair value of investments - - - - 682 - 682
Prior years' unrealised
losses now realised - - - (267) 267 - -
Balance as at 31 December
2020 172 5,169 7,094 1,704 (1,112) (2,257) 10,770
The accompanying notes are an integral part of the Financial Statements.
Ordinary Shares - Statement of Changes in Equity
Capital Capital
reserve reserve
Special realised holding
Share Share distributable gains/ gains/ Revenue
capital premium reserve (losses) (losses) reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------
Balance as at 1 January
2019 81 - 7,412 1,047 (1,309) (1,949) 5,282
Revenue return on ordinary
activities after tax - - - - - 4 4
Performance fee allocated
as capital expenditure - - - 136 - - 136
Dividends paid - - (2,272) - - - (2,272)
Current period gains
on disposal - - - 38 - - 38
Current period losses
on fair value of investments - - - - (725) - (725)
Balance as at 31 December
2019 81 - 5,140 1,221 (2,034) (1,945) 2,463
Revenue return on ordinary
activities after tax - - - - - - -
Expenses charged to
capital - - - (2) - - (2)
Performance fee allocated
as capital expenditure - - - (140) - - (140)
Dividends paid - - (1,055) - - - (1,055)
Current period gains
on disposal - - - 720 - - 720
Current period gains
on fair value of investments - - - - 467 - 467
Prior years' unrealised
losses now realised - - - (267) 267 - -
Balance as at 31 December
2020 81 - 4,085 1,532 (1,300) (1,945) 2,453
B Shares - Statement of Changes in Equity
Capital Capital
reserve reserve
Special realised holding
Share Share distributable gains/ gains/ Revenue
capital premium reserve (losses) (losses) reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------
Balance as at 1 January
2019 40 568 3,427 (18) - (18) 3,999
B share issue 24 2,238 - - - - 2,262
Revenue return on ordinary
activities after tax - - - - - (134) (134)
Expenses charged to capital - - - (21) - - (21)
Dividends paid - - (172) - - - (172)
Current period gains
on disposal - - - 14 - - 14
Current period losses
on fair value of investments - - - - (27) - (27)
Balance as at 31 December
2019 64 2,806 3,255 (25) (27) (152) 5,921
B share issue 27 2,363 - - - - 2,390
Revenue return on ordinary
activities after tax - - - - - (160) (160)
Expenses charged to capital - - - (31) - - (31)
Dividends paid - - (246) - - - (246)
Current period gains
on disposal - - - 228 - - 228
Current period gains
on fair value of investments - - - - 215 - 215
Balance as at 31 December
2020 91 5,169 3,009 172 188 (312) 8,317
Combined Balance Sheet
Combined as at Combined as at
31 December 2020 31 December 2019
Note GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------
Fixed asset investments* 10 - 6,123 4,761
Current assets:
Debtors 11 7 - 3
Cash at bank and in hand 5,056 3,909
Creditors: amounts falling due
within one year 12 (223) - (236)
Net current assets 4,840 3,676
Creditors: amounts falling due
after more than one year 12 (193) (53)
Net assets 10,770 8,384
Called up equity share capital 13 172 145
Share premium 14 5,169 2,806
Special distributable reserve 14 7,094 8,395
Capital reserve -- realised gains
and losses 14 1,704 1,196
-- holding
gains and
losses 14 (1,112) (2,061)
Revenue reserve 14 (2,257) (2,097)
Total equity shareholders' funds 10,770 8,384
*At fair value through profit and loss
The accompanying notes are an integral part of the Financial Statements.
The statements were approved by the Directors and authorised for issue
on 22 February 2021 and are signed on their behalf by:
John Hustler
Chairman
Company No: 04221489
Ordinary Share Balance Sheet
(non-statutory analysis)
Ordinary shares Ordinary shares
as at as at
31 December 2020 31 December 2019
Note GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------
Fixed asset investments* 10 2,141 2,068
Current assets:
Debtors - -
Cash at bank and in hand 527 470
Creditors: amounts falling due
within one year (22) (22)
Net current assets 505 448
Creditors: amounts falling due
after more than one year 12 (193) (53)
Net assets 2,453 2,463
Called up equity share capital 13 81 81
Share premium - -
Special distributable reserve 4,085 5,140
Capital reserve -- realised
gains and losses 1,532 1,221
--
holding
gains
and
losses (1,300) (2,034)
Revenue reserve (1,945) (1,945)
Total equity shareholders' funds 2,453 2,463
Net asset value per share 9 30.2p 30.4p
*At fair value through profit and loss
B Share Balance Sheet (non-statutory analysis)
B shares as at B shares as at
31 December 2020 31 December 2019
Note GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------
Fixed asset investments* 10 3,982 2,693
Current assets:
Debtors 7 3
Cash at bank and in hand 4,529 3,439
Creditors: amounts falling due
within one year (201) (214)
Net current assets 4,335 3,228
Creditors: amounts falling due
after more than one year 12 - -
Net assets 8,317 5,921
Called up equity share capital 13 91 64
Share premium 5,169 2,806
Special distributable reserve 3,009 3,255
Capital reserve -- realised gains
and losses 172 (25)
-- holding
gains and
losses 188 (27)
Revenue reserve (312) (152)
Total equity shareholders' funds 8,317 5,921
Net asset value per share 9 91.8p 93.1p
*At fair value through profit and loss
Combined Statement of Cash Flows
Combined Year Combined Year
to to
31 December 2020 31 December 2019
Note GBP'000 GBP'000
------------------- -------------------
Cash flows from operating
activities
Return on ordinary activities before
tax 1,297 (715)
Adjustments for:
(Increase)/decrease in debtors 11 (4) 20
Increase/(decrease) in creditors 12 143 (143)
Gain on disposal of fixed asset
investments (948) (52)
(Gain)/loss on valuation of fixed
asset investments (682) 752
---------------------------------------- ---------
Cash from operations (194) (138)
Income taxes paid 7 - -
---------------------------------------- ---------
Net cash used in operating
activities (194) (138)
Cash flows from investing activities
Purchase of fixed asset investments 10 (1,360) (2,248)
Sale of fixed asset investments 10 1,628 80
---------
Total cash inflow/(outflow) from
investing activities 268 (2,168)
Cash flows from financing activities
Dividend paid (1,301) (2,444)
Issue of B shares 2,390 2,262
Awaiting B share issue 12 (16) (49)
---------
Total cash inflow/(outflow) from
financing activities 1,073 (231)
Increase/(decrease) in cash and cash
equivalents 1,147 (2,537)
Opening cash and cash equivalents 3,909 6,446
Closing cash and cash equivalents 5,056 3,909
---------
The accompanying notes are an integral part of the Financial Statements.
Ordinary Shares Statement of Cash Flows
(non-statutory analysis)
Ordinary shares Ordinary shares
Year to Year to
31 December 2020 31 December 2019
Note GBP'000 GBP'000
------------------- -------------------
Cash flows from operating
activities
Return on ordinary activities before
tax 1,045 (547)
Adjustments for:
(Increase)/decrease in debtors - -
Increase/(decrease) in creditors 140 (174)
Gain on disposal of fixed asset
investments (720) (38)
(Gain)/loss on valuation of fixed
asset investments 10 (467) 725
---------
Cash from operations (2) (34)
Income taxes paid 7 - -
------------------------------------- ---------
Net cash used in operating
activities (2) (34)
Cash flows from investing activities
Sale of fixed asset investments 10 1,114 38
---------
Total cash inflow from investing
activities 1,114 38
Cash flows from financing activities
Dividend paid (1,055) (2,272)
---------
Total cash outflow from financing
activities (1,055) (2,272)
Increase/(decrease) in cash and cash
equivalents 57 (2,268)
Opening cash and cash equivalents 470 2,738
Closing cash and cash equivalents 527 470
---------
B Shares Statement of Cash Flows
(non-statutory analysis)
B shares B shares
Year to Year to
31 December 31 December
2020 2019
Note GBP'000 GBP'000
-------------- --------------
Cash flows from operating activities
Return on ordinary activities before
tax 252 (168)
Adjustments for:
(Increase)/decrease in debtors (4) 20
Increase in creditors 3 31
Gain on disposal of fixed asset
investments (228) (14)
(Gain)/loss on valuation of fixed asset
investments 10 (215) 27
---------
Cash from operations (192) (104)
Income taxes paid 7 - -
---------------------------------------- ---------
Net cash used in operating
activities (192) (104)
Cash flows from investing activities
Purchase of fixed asset investments 10 (1,360) (2,248)
Sale of fixed asset investments 10 514 42
---------
Total cash outflow from investing
activities (846) (2,206)
Cash flows from financing activities
Dividend paid (246) (172)
Issue of B shares 2,390 2,262
Awaiting B share issue 12 (16) (49)
---------
Total cash inflow from financing
activities 2,128 2,041
Increase/(decrease) in cash and cash
equivalents 1,090 (269)
Opening cash and cash equivalents 3,439 3,708
Closing cash and cash equivalents 4,529 3,439
---------
Notes to the Financial Statements
1. Principal Accounting Policies
Basis of preparation
The Financial Statements have been prepared under the historical cost
convention, except for the measurement at fair value of certain
financial instruments, and in accordance with UK Generally Accepted
Accounting Practice ("GAAP"), including FRS 102 and with the Companies
Act 2006 and the Statement of Recommended Practice (SORP) 'Financial
Statements of Investment Trust Companies and Venture Capital Trusts
(revised 2019)'.
The principal accounting policies have remained materially unchanged
from those set out in the Company's 2019 Annual Report and Financial
Statements. A summary of the principal accounting policies is set out
below.
The Company is a public company and is limited by shares. The Company
held all fixed asset investments at fair value through profit or loss.
Accordingly, all interest income, fee income, expenses and gains and
losses on investments are attributable to assets held at fair value
through profit or loss.
The most important policies affecting the Company's financial position
are those related to investment valuation and require the application of
subjective and complex judgements, often as a result of the need to make
estimates about the effects of matters that are inherently uncertain and
may change in subsequent periods. These are discussed in more detail
below.
Going Concern
The assets of the Company consist mainly of securities, four of which
are AIM quoted, quite liquid and readily accessible, as well as cash. As
at 31 December 2020, 47% of net assets was cash. After reviewing the
Company's forecasts and expectations, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. The Company therefore
continues to adopt the going concern basis in preparing its Financial
Statements.
In addition to the above, the Company is also facing risks resulting
from the impact of the C-19 pandemic. The Company's Board and Investment
Manager are focused on ensuring that investee companies are taking the
required actions to minimise the potential impact that the C-19 pandemic
could have on them. The Board and Seneca will continue to review risks
posed by C-19 and keep those risks under regular review.
Key judgements and estimates
The preparation of the Financial Statements requires the Board to make
judgements and estimates regarding the application of policies affecting
the reported amounts of assets, liabilities, income and expenses.
Estimates and assumptions mainly relate to the fair valuation of the
fixed asset investments particularly unquoted investments. Estimates are
based on historical experience and other assumptions that are considered
reasonable under the circumstances. The estimates and the assumptions
are under continuous review with particular attention paid to the
carrying value of the investments.
Investments are regularly reviewed to ensure that the fair values are
appropriately stated. Unquoted investments are valued in accordance with
current International Private Equity and Venture Capital Valuation
(IPEV) guidelines, which can be found on their website at
www.privateequityvaluation.com, although this does rely on subjective
estimates such as appropriate sector earnings or revenue multiples,
forecast results of investee companies, asset values of investee
companies and liquidity or marketability of the investments held. The
material factors affecting the returns and net assets attributable to
shareholders of the different share classes are the valuations of the
Ordinary and B share pools and ongoing general expenses.
Although the Directors believe that the assumptions concerning the
business environment and estimate of future cash flows are appropriate,
changes in estimates and assumptions could result in changes in the
stated values. This could lead to additional changes in fair value in
the future.
Functional and presentational currency
The Financial Statements are presented in Sterling (GBP). The functional
currency is also Sterling (GBP).
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call
with banks, other short-term highly liquid investments with original
maturities of three months or less and bank overdrafts.
Fixed asset investments
The Company's principal financial assets are its investments and the
policies in relation to those assets are set out below.
Purchases and sales of investments are recognised in the Financial
Statements at the date of the transaction (trade date).
These investments will be managed and their performance evaluated on a
fair value basis and information about them is provided internally on
that basis to the Board. Accordingly, as permitted by FRS 102, the
investments are measured as being fair value through profit or loss on
the basis that they qualify as a group of assets managed, and whose
performance is evaluated, on a fair value basis in accordance with a
documented investment strategy. The Company's investments are measured
at subsequent reporting dates at fair value.
In the case of investments quoted on a recognised stock exchange, fair
value is established by reference to the closing bid price on the
relevant date or the last traded price, depending upon convention of the
exchange on which the investment is quoted. In the case of AIM quoted
investments this is the closing bid price. In the case of unquoted
investments, fair value is established by using measures of value such
as the price of recent transactions, earnings or revenue multiples,
discounted cash flows and net assets. These are consistent with the IPEV
guidelines.
Gains and losses arising from changes in fair value of investments are
recognised as part of the capital return within the Income Statement and
allocated to the capital reserve - holding gains/(losses).
In the preparation of the valuations of assets the Directors are
required to make judgements and estimates that are reasonable and
incorporate their knowledge of the performance of the investee
companies.
Fair value hierarchy
Paragraph 34.22 of FRS 102 regarding financial instruments that are
measured in the balance sheet at fair value requires disclosure of fair
value measurements dependent on whether the stock is quoted and the
level of the accuracy in the ability to determine its fair value. The
fair value measurement hierarchy is as follows:
For quoted investments:
Level 1: quoted prices in active markets for an identical asset. The
fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. A market is regarded as
active if quoted prices are readily and regularly available, and those
prices represent actual and regularly occurring market transactions on
an arm's length basis. The quoted market price used for financial assets
held is the bid price at the Balance Sheet date.
Level 2: where quoted prices are not available (or where a stock is
normally quoted on a recognised stock exchange that no quoted price is
available), the price of a recent transaction for an identical asset,
providing there has been no significant change in economic circumstances
or a significant lapse in time since the transaction took place. The
Company held no such investments in the current or prior year.
For investments not quoted in an active market:
Level 3: the fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. These
valuation techniques maximise the use of observable data (eg: the price
of recent transactions, earnings/revenue multiple, discounted cash flows
and/or net assets) where it is available and rely as little as possible
on entity specific estimates.
There have been no transfers between these classifications in the year
(2019: none). The change in fair value for the current and previous year
is recognised through the profit and loss account.
Current asset investments
No current asset investments were held at 31 December 2020 or 31
December 2019. Should current assets be held, gains and losses arising
from changes in fair value of investments are recognised as part of the
capital return within the Income Statement and allocated to the capital
reserve - gains/(losses) on disposal.
Income
Investment income includes interest earned on bank balances and from
unquoted loan note securities, and dividends. Fixed returns on debt are
recognised on a time apportionment basis so as to reflect the effective
yield, provided it is probable that payment will be received in due
course.
The Company has not generated any income in 2020 (2019: GBPnil).
Expenses
All expenses are accounted for on an accruals basis. Expenses are
charged wholly to revenue with the exception of the performance and
management fee. The performance fee is charged 100% to the capital
reserve and the investment management fee charged to the B shares has
been split 25% revenue and 75% capital, in line with industry practice
and to reflect the Board's estimated split of investment returns which
will be achieved by the Company's B shares over the long term. Expenses
and liabilities not specific to a share class are allocated to the B
share pool for a period of three years from 1 July 2018 in line with the
Articles of Association.
Revenue and capital
The revenue column of the Income Statement includes all income and
revenue expenses of the Company. The capital column includes gains and
losses on disposal and holding gains and losses on investments, as well
as those expenses that have been charged as capital costs. Gains and
losses arising from changes in fair value of investments are recognised
as part of the capital return within the Income Statement and allocated
to the appropriate capital reserve on the basis of whether they are
realised or unrealised at the Balance Sheet date.
Taxation
Current tax is recognised for the amount of income tax payable in
respect of the taxable profit for the current or past reporting periods
using the applicable tax rate. The tax effect of different items of
income/gain and expenditure/loss is allocated between capital and
revenue return on the "marginal" basis as recommended in the SORP.
Deferred tax is recognised on an undiscounted basis in respect of all
timing differences that have originated but not reversed at the balance
sheet date, except as otherwise indicated.
Deferred tax assets are only recognised to the extent that it is
probable that they will be recovered against the reversal of deferred
tax liabilities or other future taxable profits.
Financial instruments
The Company's principal financial assets are its investments and its
cash and the policies in relation to those assets are set out above.
Financial liabilities and equity instruments are classified according to
the substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the
assets of the entity after deducting all of its financial liabilities.
Where the contractual terms of share capital do not have any terms
meeting the definition of a financial liability then this is classed as
an equity instrument.
Capital management is monitored and controlled using the internal
control procedures set out on page 53 of this report. The capital being
managed includes equity and fixed-interest investments, cash balances
and liquid resources including debtors and creditors.
The Company does not have any externally imposed capital requirements.
Reserves
Called up equity share capital represents the nominal value of shares
that have been issued.
Share premium account includes any premiums received on issue of share
capital. Any transaction costs associated with the issuing of shares are
deducted from share premium.
Special distributable reserve includes cancelled share premium and
capital redemption reserves available for distribution and may be used
to cover dividend payments.
Capital reserve -- holding gains and losses created when the Company
revalues the investments still held during the period with any gains or
losses arising being credited/ charged to the Capital reserve.
Capital reserve -- gains and losses on disposal created when an
investment is sold. Any balance held in the Capital reserve -- holding
gains and losses is transferred to the Capital reserve -- realised gains
and losses on disposal and recognised as a movement in reserves.
Revenue reserve -- represents the aggregate value of accumulated
realised profits (excluding capital profits), less losses and dividends.
Dividends Payable
Dividends payable are recognised as distributions in the Financial
Statements when the Company's liability to make payment has been
established. This liability is established for interim dividends when
they are declared by the Board, and for final dividends when they are
approved by shareholders.
2. Income
Year to Year to
31 December 31 December 2019
2020
GBP'000 GBP'000
Dividends received - -
Loan note interest receivable - -
- -
-----------------------------
Investment income includes interest earned on bank balances and
dividends.
The Company has not generated any income in the period and as such we
have not included any segmental reporting. In the event the Company had
generated income, we would disclose information about the Company's
operating segments and the geographical areas in which they operate,
which is currently in the United Kingdom.
3. Investment Management Fees for B shares
Year to Year to
31 December 31 December
2020 2019
GBP'000 GBP'000
Gross Investment management fee 127 103
Cost cap refund from Seneca (86) (75)
Investment management fee net of cost
cap 41 28
Seneca is entitled to an annual management fee of 2% of the weighted net
asset value of the B share pool (2019: 2%) and, with effect from 1
August 2019, is also entitled to an annual fee of GBP9,000 (plus VAT, if
applicable) in relation to management accounting services. These fees
are payable quarterly in arrears. Seneca will also be entitled to
certain monitoring fees from investee companies and the Board reviews
the amounts (please see note 19).
Seneca are also entitled to receive a performance related incentive fee
(the "Performance Incentive Fee") in relation to the B share pool of an
amount equal to 20% of the shareholder proceeds arising, provided that
the payment of such a fee shall also be conditional upon (i) a return
being generated on the B share pool for B shareholders in respect of
that performance period of more than 5% per annum (pro-rated if that
period is less than a year) and (ii) that such a return calculated for
the period from 23 August 2018 to the end of the relevant performance
period exceeds 5% per annum.
Shareholder proceeds are all amounts paid by way of dividend or other
distributions, share buy backs, proceeds on a sale or liquidation of the
Company in relation to the B shares and calculated on a per share basis,
and any other proceeds or value received or deemed to be received by the
holders of the relevant shares (excluding any income tax relief on
subscription).
For the avoidance of doubt, no Performance Incentive Fee will be payable
to the extent that the shareholder proceeds paid by the Company to the
holders of the B shares have been justified by reference to
distributable reserves otherwise attributable to the Ordinary share pool
(as permitted in accordance with the Articles).
For a three-year period with effect from 1 July 2018, expenses of the
Company are capped at 3% of the weighted average net asset value of the
B shares, including the management fee (but excluding any performance
fee). Following this initial period, expenses are capped at 3% across
both the Ordinary share pool and the B share pool pro-rata to their
respective net asset values.
The Investment Manager will indemnify the Company for any excess over
the cost cap, with an amount equal to such excess either being paid by
Seneca to the Company or refunded by way of a reduction to its fees.
Accordingly, Seneca reduced its management fee by GBP86,000 in the year
to 31 December 2020 (2019: reduced by GBP75,000).
Expenses are charged wholly to revenue with the exception of the (net)
investment management fee which has been charged 75% to the capital
reserve in line with industry practice and the performance fee.
4. Other Expenses
Year to Year to
31 December 2020 31 December 2019
GBP'000 GBP'000
Directors' remuneration 50 33
Fees payable to the Company's auditor
for the audit of the Financial Statements 22 15
Legal and professional expenses 59 49
Accounting and administration services 7 12
Other expenses (revenue) 12 14
Other expenses (capital) 2 -
152 123
All expenses were charged to the Ordinary shares for the period to 30
June 2018. In line with the offer for subscription for B shares, and
following the initial allotment of B shares on 23 August 2018, all the
Company's general expenses are chargeable to the B share pool for a
period of three years from 1 July 2018 (subject to the cost cap
discussed in note 3). Any expenditure related specifically to assets in
one pool is chargeable to that pool. It should be noted that the only
items specifically relating to the Ordinary share pool relate to a GBP2k
legal fee (2019: GBP4k credit of released accruals for advisory fees).
5. Directors' Remuneration
Year to Year to
31 December 2020 31 December 2019
GBP GBP
Directors' emoluments:
John Hustler (Chairman) 15,339 12,897
Charles Breese - 6,375
Richard Roth 19,608 12,897
Alex Clarkson 15,339 981
Richard Manley - -
50,286 33,150
Richard Manley, a director of the Investment Manager, has elected to
waive his Director's fee, until the Company's operating costs are less
than the expenses cost cap.
As part of the Board's regular review of Directors' fees, it was
determined that Richard Roth's Director's fee would increase to
GBP20,000 per annum inclusive of all expenses with effect from 1 October
2020 to reflect the work performed by him in respect of his role as
Chairman of the Audit Committee. It was also decided that Richard Roth
would receive a one-off payment of GBP2,500 in respect of the work he
performed as part of this role for the period prior to 1 October 2020.
Apart from this, none of the Directors received any other remuneration
from the Company during the year.
Directors' emoluments include remuneration and employers' National
Insurance contributions.
Certain Directors may become entitled to receive a share of the
performance incentive fee related to the Ordinary share pool as detailed
in the Directors' Remuneration Report on page 58 and in note 6.
The Company has no employees other than non-executive Directors. The
average number of non-executive Directors in the year was four (2019:
four).
6. Performance Fees for Ordinary shares
The performance incentive fees are calculated separately on the Ordinary
shares and the B shares. Performance incentive fees in relation to the
Ordinary shares are potentially payable to past and current members of
the CAC. The current members of the CAC are John Hustler and Richard
Roth.
The CAC entered into an agreement to take over management of the
Company's investments on 30 July 2007 (the "2007 Agreement"), and at
that time, a revised performance incentive scheme was implemented, such
that its members would be entitled to 20% of all cash returns above the
initial net cost to subscribing shareholders of 80p (the "Accrued
Performance Incentive Fee").
On 7 October 2015, the performance incentive fee structure was further
amended as follows. In respect of the period to 31 December 2014, the
Accrued Performance Incentive Fee on the Ordinary share class of up to
GBP702,000 shall be payable to James Otter (a former director of the
Company who was also a member of the CAC), Charles Breese (a former
director of the Company who was also a member of the CAC) and John
Hustler, in equal proportions (with the liability to pay a director his
share of such fee being extinguished if the fee is due for payment five
years after his ceasing to be a member of the CAC. Such extinguished
fees are credited back to the Company).
The liability to pay James Otter his share of any potential Accrued
Performance Incentive Fee was extinguished on 7 October 2020 - the fifth
anniversary of his ceasing to be a member of the CAC. No payment has, or
will be paid, to James Otter under these schemes as the required
shareholder distributions had not been made in time. The fee of
GBP17,667 that had been accrued at 31 December 2019 for his potential
benefit has been credited back to the Company, with the total potential
liability for the Company now reduced from GBP702,000 to GBP468,000.
As a result of the reduction in the Accrued Performance Incentive Fee by
one third, the amount of the Accrued Performance Incentive Fee shall be
16.67% of any dividends and capital distributions returned to
shareholders, which in total exceed the sum of 80p per Ordinary share
(the "Hurdle"). This includes dividends paid to date on the Ordinary
shares, being 65.25p per share. As a result of this, for every GBP1
potentially distributable in excess of the Hurdle, 80p shall be
distributed to shareholders and 13.33p shall be paid as the Accrued
Performance Incentive Fee, with 6.67p (being one third of the original
20p) retainable by the Company up until an amount of 114.65p per
Ordinary share has been distributed to Ordinary shareholders, after
which no further payment is payable in respect of the Accrued
Performance Incentive Fee or otherwise under the terms of the 2007
Agreement (as amended). The Accrued Performance Incentive Fee shall be
paid at the same time as payments are made to the Ordinary shareholders.
All distributions by way of dividends and capital distributions in
relation to the Ordinary share class shall count towards the Accrued
Performance Incentive Fee and where non-cash dividends are declared, the
Company's auditors shall assess their value by reference to a
distribution per share. Following payment in full of the Accrued
Performance Incentive Fee, a further performance incentive fee may
become payable to the CAC in relation to the period after 7 October 2015
(the, "Further Performance Incentive Fee").
Following the amendment on 7 October 2015, any returns above the 31
December 2014 levels are subject to a further hurdle (the "Further
Hurdle"), and the Further Performance Incentive Fee reduces the share to
the CAC to 10% of sums returned to Ordinary shareholders by way of
dividends and capital distributions of whatever nature, which in total
exceed the Further Hurdle (excluding any initial tax relief on the
subscription for the Ordinary shares). The "Base Figure" for the Further
Hurdle shall be 90.4p per Ordinary share and shall be increased by a sum
equal to notional interest thereon, at the rate of 1.467% per quarter
from 1 January 2015, compounded with quarterly rests. For the purposes
of determining the increase in the Base Figure, the amount on which
notional interest is to accrue in each quarter shall be reduced by the
amount of all sums returned to Ordinary shareholders by way of dividends
and capital distributions in the previous quarter. Shareholders will
need to have received distributions of 114.65p per Ordinary share,
together with the amount to take account of notional interest as
calculated above, before any Further Performance Incentive Fee is
payable.
As at 31 December 2020, the Total Gross Return in respect of the
Ordinary shares is 97.85p, and so 3.57p per Ordinary share, totalling
GBP290,000 would have accrued, though only two thirds of the Accrued
Performance Incentive Fee, 2.38p per Ordinary share totalling
GBP193,000, has been accrued as part of this liability as a result of
James Otter's liability being extinguished as detailed above, resulting
in the remainder being retainable by the Company (31 December 2019:
83.25, 0.65p and GBP53,000).
Assuming no dividends are paid on the Ordinary shares in 2021, the Total
Gross Return would need to exceed 163.3p at 31 December 2021 before any
Further Performance Incentive Fee could be due, and at that time, it
would be 10% of any dividends or capital distributions made above this
threshold. If the Further Performance Incentive Fee is not triggered (as
it has not been in this financial year) the Further Hurdle, net of
dividends paid, increments by a compound annual growth rate of 6%,
applied quarterly as described above.
If the CAC consider it necessary to engage external advisors in support
of managing its portfolio, the costs of this will be borne by the
Ordinary share pool. The Further Performance Incentive Fee shall be
divided among such members of the CAC (past, present and future) who
have been members of that committee since the 7 October 2015, on a pro
rata basis, linked to the relative amount of time since the date of the
7 October 2015 agreement for which each individual has been a member of
the CAC. An individual will not be entitled to payment of any of Further
Performance Incentive Fee if he ceased to be a member of the CAC in
certain conditions, or ceased to be a member of the CAC more than five
years before the payment of any amount of Further Performance Incentive
Fee becomes due and any such fees will be credited back to the Company.
For the purposes of the Further Performance Incentive Fee, the method of
determining distributions will follow that used in calculating the
Accrued Performance Incentive Fee.
7. Tax on Ordinary Activities
The corporation tax charge for the period was GBPnil (2019: GBPnil).
The tax charge is calculated on return on ordinary activities before
taxation at the applicable rate of 19.0% (2019: 19.0%)
Year to Year to
31 December 2020 31 December 2019
Current tax reconciliation: GBP'000 GBP'000
----------------------------------------
Return on Ordinary activities before
tax 1,297 (715)
---------------------------------------- ----------------- -----------------
Current tax at 19% (2019: 19%) 246 (136)
Gains/losses not subject to tax (310) 133
Performance fee accrual not tax
deductible 37 -
Excess management expenses carried
forward 27 3
---------------------------------------- ----------------- -----------------
Total current tax charge and tax - -
on results of ordinary activities
The company has excess management expenses of GBP2,896,000 (2019:
GBP2,755,000) to carry forward to offset against future taxable profits.
Approved VCTs are exempt from tax on capital gains within the Company.
Since the Directors intend that the Company will continue to conduct its
affairs so as to maintain its approval as a VCT, no current deferred tax
has been provided in respect of any capital gains or losses arising on
the revaluation or disposal of investments.
8. Earnings per Share
The earnings per Ordinary share is based on 8,115,376 (31 December 2019:
8,115,376) shares, being the weighted average number of Ordinary shares
in issue during the year, and a return for the year totalling
GBP1,045,000 (31 December 2019: (GBP547,000)).
The earnings per B share is based on 7,248,338 (31 December 2019:
5,269,973) shares, being the weighted average number of B shares in
issue during the year, and a return for the year totalling GBP252,000
(31 December 2019: (GBP168,000)).
There are no potentially dilutive capital instruments in issue and,
therefore, no diluted returns per share figures are relevant. The basic
and diluted earnings per share are therefore identical.
9. Net Asset Value per Share
The calculation of NAV per Ordinary share as at 31 December 2020 is
based on 8,115,376 Ordinary shares in issue at that date (31 December
2019: 8,115,376).
The calculation of NAV per B share as at 31 December 2020 is based on
9,062,948 B shares in issue at that date (31 December 2019: 6,361,448).
10. Fixed Asset Investments
Ordinary Shares
Level 3:
Level 1: Unquoted Total
AIM-quoted investments investments investments
GBP'000 GBP'000 GBP'000
Valuation and net book
amount:
Book cost as at 1 January
2020 1,117 2,985 4,102
Cumulative revaluation 117 (2,151) (2,034)
Valuation at 1 January 2020 1,234 834 2,068
Movement in the year:
Purchases at cost - - -
Disposals -- cost (391) (270) (661)
Disposals -- revaluation (3) 270 267
Revaluation in year 780 (313) 467
Valuation at 31 December
2020 1,620 521 2,141
Book cost at 31 December
2020 726 2,715 3,441
Revaluation to 31 December
2020 894 (2,194) (1,300)
Valuation at 31 December
2020 1,620 521 2,141
B Shares
Level 1: Level 3:
AIM-quoted Unquoted Total
investments investments investments
GBP'000 GBP'000 GBP'000
Valuation and net book amount:
Book cost as at 1 January 2020 720 2,000 2,720
Cumulative revaluation (90) 63 (27)
Valuation at 1 January 2020 630 2,063 2,693
Movement in the year:
Purchases at cost 576 784 1,360
Disposals -- cost (286) - (286)
Disposals -- revaluation - - -
Revaluation in year 415 (200) 215
Valuation at 31 December 2020 1,335 2,647 3,982
Book cost at 31 December 2020 1,010 2,784 3,794
Revaluation to 31 December 2020 325 (137) 188
Valuation at 31 December 2020 1,335 2,647 3,982
Further details of the fixed asset investments held by the Company are
shown within the Investment Manager's Report on pages 14 to 35.
All investments are initially measured at their transaction price.
Subsequently, at each reporting date, the investments are valued at fair
value through profit or loss, and all capital gains or losses on
investments are so measured. Unquoted fixed asset investments are valued
at fair value in accordance with the IPEV guidelines.
The changes in fair value of such investments recognised in these
Financial Statements are treated as unrealised holding gains or losses.
The launch of the B Share pool took place relatively recently in August
2018, and all but one of the B Share unquoted investments have taken
place in the two years ending 31 December 2020. As these companies are
at an early stage of the investment cycle, it is the Board's view that
the most appropriate valuation methodology is to hold the B Share
unquoted investments at cost or in line with the price of the most
recent investment received by the investee company. This is consistent
with the approach adopted for the valuation of the Ordinary share pool's
unquoted investments.
When using this methodology however, a detailed assessment of the
respective value of each portfolio company is also performed in order to
gain the necessary comfort as to whether a fair value reduction or
uplift is in fact required. This process involves a review of the
progress made by each investee company, recent developments in the M&A
market and comparisons to listed competitors across all relevant key
performance indicators. Further, all of these are considered in the
context of the exit equity waterfall structure as detailed in each
investee company's articles of association.
FRS 102 requires the Directors to consider the impact of changing one or
more of the assumptions used as part of the valuation process to
reasonable possible alternative assumptions. As noted above, whilst the
methodologies adopted for the 31 December 2020 investee company
valuations are not based on revenue or earnings multiples, the Board do
consider revenue multiple based valuation methodologies in support of
the valuations adopted where relevant.
In view of the FRS 102 requirement, the Board have considered the impact
that introducing reasonable alternative assumptions to this revenue
multiple based valuation methodology could have on the value of the
Company's investment pool as at 31 December 2020.
As a result of this analysis the Board have concluded that such
reasonable possible alternative assumptions could result in an increase
in the valuation of the B share pool unquoted investments by GBP81,000
or a decrease in the valuation of B share pool investments by GBP48,000.
It was considered that only one B share portfolio company was relevant
for this exercise due to its more mature trading profile. It was not
considered that any of the Ordinary share pool portfolio companies were
relevant for this exercise.
Throughout this exercise, and in determining the value of the Company's
equity investments where trading multiples are considered, multiples
used are reviewed and compared to industry peers, based on size, stage
of development, revenue generation and growth rate, as well as their
wider strategy and market position. These multiples are calculated in
the traditional manner, by dividing the enterprise value of the
comparable group by its revenue, EBITDA or earnings depending on what is
the norm in a particular sector driven by how acquisitions in that
sector are typically valued. The trading multiple is then adjusted for
considerations such as illiquidity, marketability and other differences,
advantages and disadvantages between the portfolio company and the
comparable public companies based on company specific facts and
circumstances.
11. Debtors
31 December 31 December
2020 2019
GBP'000 GBP'000
Prepayments and accrued income 7 3
12. Creditors
31 December 2020 31 December 2019
GBP'000 GBP'000
Amounts falling due within one year
Trade creditors 1 8
PAYE/NIC 7 -
Awaiting B share allotment 154 170
Other creditors 23 22
Accruals 37 36
Total amounts falling due within
one year 223 236
Amounts falling due after one year
Accruals 193 53
Total amounts falling due after one
year 193 53
The amount falling due after more than one year relates to the potential
liability for a performance fee on the Ordinary share portfolio. More
details are in note 6. The awaiting B share issue included in the
combined and B share cash flow statements shows the movement in cash
awaiting B share issue in the year since the prior year end.
13. Share Capital
31 December 2020 31 December 2019
GBP'000 GBP'000
Allotted and fully paid up:
8,115,376 Ordinary shares of 1p (2019:
8,115,376 shares of 1p)
9,062,948 B shares of 1p (2019 : 81 81
6,361,448) 91 64
172 145
The capital of the Company is managed in accordance with its investment
policy with a view to the achievement of its investment objective as set
on page 4.
During the year, the Company did not issue, nor buy back, any Ordinary
shares.
The Company issued a total of 2,701,500 B shares at prices between 79.5
to 94.7p per B share during the year. These were issued pursuant to the
offer for subscription for B shares launched on 16 July 2019 and a
further offer for subscription for B shares launched on 13 October 2020
to raise, in aggregate, up to GBP10 million with an over-allotment
facility of up to a further GBP10 million (before issue costs). The
Company has not bought back any B shares.
The total proceeds received for the shares issued in the period was
GBP2,390k (net of facilitated fees, gross of Seneca's promoter fee) for
the B share pool.
Share Rights
As regards Income: shareholders shall be entitled to receive such
dividends as the Directors resolve to pay out in accordance with the
Articles. Under the Articles of the Company, all the assets of the
Company and all the liabilities of the Company will be allocated either
to the Ordinary share pool or the B share pool. The Ordinary shares will
be entitled to the economic benefit of the assets allocated to the
Ordinary share pool and the B shares will be entitled to the economic
benefit of assets allocated to the B share pool. Therefore, although the
rules in the CA 2006 and elsewhere in relation to the payment of
distributions will be applicable to the Company on a company-wide basis,
the income arising on the portfolios will belong to one or the other of
the share classes depending on which portfolio generated the income.
As regards Capital: similarly, the capital assets of the Company will be
allocated to either the Ordinary share pool or the B share pool. On a
return of capital on a winding-up or on a return of capital (other than
on a purchase by the Company of its shares) the surplus capital shall be
divided amongst the holders of the relevant share class pro rata
according to the number of shares of the relevant class held and the
aggregate entitlements of that share class. The Ordinary shares will not
be entitled to any capital assets held in the B share pool and the B
shares will not be entitled to any capital assets held in the Ordinary
share pool. In relation to the purchase by the Company of its shares,
the purchase of Ordinary shares may only be financed by assets in the
Ordinary share pool and the purchase of the B shares may only be
financed by assets in the B share pool.
As regards voting and general meetings: subject to disenfranchisement in
the event of noncompliance with a statutory notice requiring disclosure
as to beneficial ownership, each shareholder present in person or by
proxy shall on a poll have one vote for each share of which he/she is
the holder. The Ordinary shareholders may not be entitled to vote on
certain matters which concern the B share class only and vice versa.
As regards Redemption: none of the B shares or the Ordinary shares are
redeemable. The Articles provide that reserves (whether created upon the
cancellation of the share premium account arising from the issue of
Ordinary shares or B shares or otherwise) may also be used for the
benefit of the other share class. While this will not transfer any net
asset value between the different share classes, it will permit those
reserves to be treated as distributable profits on a Company-wide basis
such that on an accounting basis dividends and share buybacks in respect
of both share classes may be facilitated by the availability of those
reserves.
14. Movement in Shareholders' Funds
Year ended Year ended
31 December 2020 31 December 2019
GBP'000 GBP'000
----------------------------------------
Shareholders' funds at start of year 8,384 9,281
Return on ordinary activities after
tax 1,297 (715)
Increase due to issue of B shares 2,390 2,262
Dividend paid (1,301) (2,444)
Shareholders' funds at end of year 10,770 8,384
----------------------------------------
The analysis of changes in equity by the various reserves are shown in
the Statement of Changes in Equity on page 73.
When the Company revalues its investments during the period, any gains
or losses arising are credited/charged to the Income Statement. Changes
in fair value of investments held are then transferred to the capital
reserve - holding gains/(losses). When an investment is sold any balance
held on the capital reserve - holding gains/(losses) reserve is
transferred to the capital reserve -- gains/(losses) on disposal as a
movement in reserves.
The purpose of the special distributable reserve was to create a reserve
which will be capable of being used by the Company to pay dividends and
for the purpose of making repurchases of its own shares in the market
with a view to narrowing the discount at which the Company's shares
trade to net asset value, providing shareholder authority has been
granted.
Distributable reserves are represented by the special distributable
reserve, the capital reserve gains/(losses) on disposal and the revenue
reserve reduced by negative holding reserves (if any) which total
GBP5,429,000 as at 31 December 2020 (2019: GBP5,433,000). Although the
distributable reserves total GBP5,429,000 as at 31 December 2020, only
GBP2,002,000 is actually able to be distributed as the reserves contain
GBP3,427,000 from the cancellation of the share premium account on the
newly issued B shares, which cannot be distributed until the beginning
of 2022 without breaching VCT rules.
An interim capital dividend of 8 pence per Ordinary share for the year
to 31 December 2020 was paid on 28 August 2020. A further interim
capital dividend of 5 pence per Ordinary share for the year to 31
December 2020 was paid on 30 October 2020.
An interim dividend of 1.5 pence per B share for the year to 31 December
2020 was paid on 15 May 2020. A second interim dividend of 1.5 pence per
B share for the year to 31 December 2020 was paid on 24 December 2020.
15. Financial Instruments
The Company's financial instruments comprise equity investments, cash
balances and liquid resources including creditors.
Classification of financial instruments
The Company held the following categories of financial instruments, all
of which are included in the balance sheet at fair value, at 31 December
2020 and 31 December 2019:
31 December 2020 31 December 2019
GBP'000 GBP'000
Financial assets at fair value through
profit or loss
Fixed asset investments 6,123 4,761
Total 6,123 4,761
Financial assets measured at amortised
cost
Cash at bank and in hand 5,056 3,909
Total 5,056 3,909
Financial liabilities measured at
amortised cost
Creditors 31 30
Accruals 37 36
Performance fee 193 53
Total 261 119
Fixed asset investments (see note 10) are valued at fair value. Unquoted
investments are carried at fair value as determined by the Directors in
accordance with the IPEV guidelines. The fair value of all other
financial assets and liabilities is represented by their carrying value
in the balance sheet. The Directors believe that the fair value of the
assets held at the year-end is equal to their book value.
The Company's creditors are initially recognised at fair value, which is
usually the transaction price, and then thereafter at amortised cost.
16. Financial Risk Management
In carrying on its investment activities, the Company is exposed to
various types of risk associated with the financial instruments and
markets in which it invests. The most significant types of financial
risk facing the Company are market risk, credit risk and liquidity risk.
The Company's approach to managing these risks is set out below together
with a description of the nature and amount of the financial instruments
held at the balance sheet date.
Market risk
The Company's strategy for managing investment risk is determined with
regard to the Company's investment objective, as outlined on page 4. The
management of market risk is part of the investment management process.
The Company's portfolio is managed with regard to the possible effects
of adverse price movements and with the objective of maximising overall
returns to shareholders in the medium term. Investments in unquoted
companies, by their nature, usually involve a higher degree of risk than
investments in companies quoted on a recognised stock exchange, though
the risk can be mitigated to a certain extent by diversifying the
portfolio across business sectors and asset classes. The overall
disposition of the Company's assets is regularly monitored by the Board.
Details of the Company's investment portfolio at the balance sheet date
are set out on pages 14 to 35.
29.4% (2019: 34.5%) by value of the Company's net assets comprise
investments in unquoted companies held at fair value. The valuation
methods used by the Company include the application of a price/earnings
ratio derived from listed companies with similar characteristics, and
consequently the value of the unquoted element of the portfolio can be
indirectly affected by price movements on the London Stock Exchange. A
10% overall increase in the valuation of the unquoted investments at 31
December 2020 would have increased net assets and the total return for
the year by GBP317,000 (2019: GBP290,000) disregarding the impact of the
performance fee; an equivalent change in the opposite direction would
have reduced net assets and the total return for the year by the same
amount.
27.4% (2019: 22.2%) by value of the Company's net assets comprises
equity securities quoted on AIM. A 10% increase in the bid price of
these securities as at 31 December 2020 would have increased net assets
and the total return for the year by GBP296,000 (2019: GBP186,000)
disregarding the impact of the performance fee; a corresponding fall
would have reduced net assets and the total return for the year by the
same amount.
Credit risk
There were no significant concentrations of credit risk to
counterparties at 31 December 2020 or 31 December 2019.
Credit risk is the risk that a counterparty to a financial instrument
will fail to discharge an obligation or commitment that it has entered
into with the Company. The Board carries out a regular review of
counterparty risk. The carrying values of financial assets represent the
maximum credit risk exposure at the balance sheet date.
Liquidity risk
The Company's financial assets include investments in unquoted equity
securities which are not traded on a recognised stock exchange and which
generally are illiquid. They also include investments in AIM-quoted
companies, which, by their nature, involve a higher degree of risk than
investments on the main market. As a result, the Company may not be able
to realise some of its investments in these instruments quickly at an
amount close to their fair value in order to meet its liquidity
requirements, or to respond to specific events such as deterioration in
the creditworthiness of any particular issuer.
The Company's liquidity risk is managed and monitored on a continuing
basis by the Board in accordance with policies and procedures laid down
by the Board.
17. Events After the Balance Sheet Date
The share price of SkinBio rose substantially since the year end when it
was 22p and this allowed the Company to sell a total of 1,750,000
SkinBio shares from the B share pool in January 2021 for a total of
GBP621k and generating a profit versus original cost of GBP341k (a 2.2x
return on the original investment).
In addition the Company was able to realise nearly 50% of its holdings
in Abingdon Health Plc ("Abingdon") for a small profit. The Company sold
a total of 78,000 shares in Abingdon from the B share pool in January
2021 for a total of GBP76k at 98 pence per share.
One additional unquoted investment was made in the B share pool in
January 2021 into Solascure Ltd. for GBP500,000.
Following recent press coverage, the share price of Scancell rose
significantly from 13.5p at 31 December 2020 and was 24.5p at 19
February 2021 and this allowed the Company to take the opportunity to
sell 1,000,000 Scancell shares from the Ordinary share pool in February
2021 at 21.7p per Scancell share.
As a result of the above, the Company is pleased to announce an updated
unaudited NAV of 99.4p per B share and 44.0p per Ordinary share at 19
February 2021.
The Company also declared an interim B share dividend of 1.5p per B
share on 18 February 2021 to be paid on 14 May 2021 to shareholders on
the B share register on 30 April 2021, with an ex-dividend date of 29
April 2021.
The Directors are not aware of any other post balance sheet events which
need to be brought to the attention of shareholders.
18. Contingencies, Guarantees and Financial Commitments
There were no contingencies, guarantees or financial commitments as at
31 December 2020 (2019: GBPnil).
19. Related Party Transactions
The Board acted as the investment manager of the Company until Seneca
was appointed on 23 August 2018. Certain Directors are entitled to
participate in a performance bonus as detailed in note 6. During the
year, Seneca has earnt GBP127,000 in management fees (2% of the weighted
average net assets of the B share portfolio) (2019: GBP103,000). However,
only GBP41,000 is recoverable by Seneca as a result of the cost cap, as
detailed in note 3 and this was paid to Seneca during the year (2019:
GBP28,000).
Seneca as Investment Manager accrued GBP76,191 (2019: GBP138,132)
transaction fees and directors' fees from investee companies in relation
to the arrangement and monitoring of investments. As a related party, we
believe that this transaction is disclosable, and the Board ensures it
is managed from a conflicts of interest point of view. Seneca may also
become entitled to a performance fee. See note 3 to the financial
statements for more information on these fees.
As detailed in the offer for subscription document dated 13 October
2020, Seneca (as promoters of the Offer) is entitled to charge the
Company up to 5.5% of investors' subscriptions. A total of GBP6,595 has
been paid to Seneca, based on the allotments of GBP2,396,950 (net of
facilitated fees, gross of the promoter fee) as at 31 December 2020
(2019: GBP20,294).
(END) Dow Jones Newswires
February 23, 2021 02:00 ET (07:00 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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