REG - Seed Innovations Ltd - Final Results
19/06/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240619:nRSS9133Sa&default-theme=true
RNS Number : 9133S Seed Innovations Limited 19 June 2024
Seed Innovations Ltd / AIM: SEED / Sector: Closed End Investments
19 June 2024
SEED Innovations Limited
("SEED" or the "Company")
Final Results
SEED Innovations Ltd, the AIM-quoted investment company offering exposure to
disruptive, high-growth, life sciences and technology ventures typically
inaccessible to everyday investors, is pleased to announce its Final Results
for the year ended 31 March 2024. A copy of the Report & Accounts will be
available on the Company's website,
https://seedinnovations.co/investor-centre/financial-reports.
OVERVIEW
· Shares currently trading at c.70% discount to 31 March 2024 NAV.
· Strong cash position of approximately £3.9 million as at the date of
this announcement (representing approximately the Company's current market
capitalisation).
· Recent programme of building and returning value to shareholders:
o Completed a buyback share programme of 19.8 million Ordinary Shares for
£0.5 million as a reflection of strong financial position.
o Paid a maiden special dividend of 1.0 pence (£0.01) per SEED share post
period end following sale of Leap Gaming.
· Following write-downs and sales of underperforming investments, the
portfolio is rationalised to a tighter group of more established and
capitalised investments.
· Appreciation of value of Avextra showing upward trend of £0.8
million over the period.
· Clean Food Group continues to scale up its precise fermentation
technology, attract non-dilutive capital in the form of grants and welcome
Clean Growth Fund as a new investor raising £2.5 million.
· Optimistic about the outlook for its portfolio companies and agile to
capitalise on emerging trends and other investment opportunities.
CHAIRMAN'S STATEMENT
SEED continues to operate within the dynamic landscape of the small-cap health
and wellness sector, which has undergone a challenging market and economic
environment. Our strategy remains focused on identifying disruptive,
high-growth opportunities within these markets, which we believe present
significant potential for innovation and shareholder value creation. Often the
best time to buy quality companies is when their market sector is unloved by
the market in general. Accordingly, we are optimistic about the outlook for
our portfolio companies and remain ready to capitalise on emerging trends and
investment catalysts in the market.
We remain frustrated that the market does not understand the value and quality
of our Net Asset Value (NAV). We have taken proactive measures during the year
aimed at addressing the persistent, significant discount of the Company's
market cap compared to NAV and to reflect its financial strength and
commitment to shareholder value, including the Share Buyback programme and
Special Dividend described below.
In the latter half of the financial year, we implemented a Share Buyback
programme, which completed in May 2024, whereby Ordinary Shares were
repurchased below net asset value. In total, £513,536 (including fees) was
spent on the purchase of 19,797,500 shares at an average price per share of
£0.0258 (2.58 pence). The programme has been funded from existing cash
resources. The decision to initiate this programme was made considering
shareholder feedback and the significant 56.9% discount in share price at that
time relative to reported NAV, alongside robust cash and receivables of £7.1
million as of 11 September 2023.
We were also delighted to announce a maiden Special Dividend of 1.0 pence
(£0.01) per SEED Share, post period end on 16 April 2024, following the
successful completion of the realisation of the investment in our portfolio
company Fralis LLC, trading as Leap Gaming, which was sold in April 2023.
SEED's proceeds from this sale totalled €5.8 million (£5.1 million), which
was received in two tranches: €3 million (£2.7 million) upon completion;
and the remaining €2.8 million (£2.4 million) on 12 April 2024.
In tandem with the Share Buyback and Special Dividend, we have focused on
utilising other strategic initiatives to enhance investor perception and
communicate our intrinsic value proposition to the market. These include live
investor events and leveraging digital and social media platforms to augment
communication and connectivity with our shareholders and the market generally.
Looking ahead, we remain optimistic about SEED's current investment portfolio.
The sector of the markets we invest in has undoubtedly had a tough time, which
means that there are some investment opportunities available at historically
low prices and, with approximately £3.9 million in cash post dividend, we are
positioned to pursue opportunities that we anticipate will yield substantial
returns for our shareholders.
We look forward to providing further updates on our portfolio in the near
future.
Ian Burns
Non-Executive Chairman
18 June 2024
REPORT OF THE CHIEF EXECUTIVE OFFICER
During the period, we have seen appreciation in one of our larger assets,
Avextra AG, showing positive growth and Juvenescence maintaining stability.
However, it is important to address some disappointing outcomes experienced
with certain investments, namely Northern Leaf, OTO International Limited
(OTO), and Inveniam Capital Partners, Inc. (Inveniam), which have faced
notable challenges stemming from down rounds and struggling business models
and listed positions in Portage and Little Green Pharma which have seen poor
market price performance on their respective exchanges; such occurrences are
unfortunately not uncommon across the market. Our investment pipeline remains
robust, and we are actively seeking new opportunities.
It is evident that investors, both listed and private, remain risk-averse,
particularly towards smaller, developing companies. This sentiment has
affected the share price performance of funds like SEED. Despite these
challenges, we believe that SEED is undervalued, trading (2.1 pence as at 31
May 2024) at a 69% discount to the Company's NAV as at 31 March 2024 (and
still a 64% discount after adjustment for buy backs since 1 April 2024 and the
Special Dividend payment).
As of 31 May 2024, SEED share price of £0.021 (2.1 pence) was up 9% compared
to 31 March 2023 (and up 66.5% when comparing the adjusted close price which
adjusts for the dividend payment), while the FTSE AIM All-Share Index was down
1% and the Thomson Reuters Venture Capital Index was up 43.5% over the same
period.
Regarding our financial position, we ended the period with a healthy cash
balance of £3.8 million, augmented by the final £2.4 million tranche
received just a few days later on the 12 April 2024 from the sale of Leap
Gaming announced in December 2022. After accounting for a Special Dividend and
share buyback initiatives, we retain approximately £3.9 million for new and
follow-on investments as at the publication of this report. Holding cash in
the current economic climate, where interest rates remain high, provides us
with flexibility and strategic advantage.
SEED remains committed to rewarding our shareholders through various
initiatives, including our Share Buyback programme, and recently announced
Special Dividend. We aim to replenish the funds expended on these initiatives
through future NAV increases on our investments as they realise their
potential.
Additionally, we have enhanced our visibility in the market through increased
news flow and the dissemination of G-Force short videos on social media
platforms. We have also hosted in-person events, including a shareholder event
in November 2023, along with appearances by our team at Proactive Investors
and Master Investor events.
In conclusion, SEED is committed to enhancing shareholder engagement and value
through diverse strategies. With our enviable cash position and robust
investment pipeline, we are well-positioned to deliver new investments and
drive growth in the foreseeable future.
The NAV of the Company at 31 March 2024 was £13,604,000 (2023: £16,032,000),
equal to net assets of 6.73p per Ordinary Share (2023: 7.54p per Ordinary
Share).
Ed McDermott
CEO
18 June 2024
INVESTMENT PORTFOLIO REPORT
The table below lists the Company's holdings at 31 March 2024 and 31 March
2023.
Holding Category Valuation at Valuation at % of NAV
31 March 2023 £'000 31 March 2024 £'000
Juvenescence Limited Biotech 2,556 2,509 18.4%
Avextra AG* Biotech/ Cannabis 4,436 2,740 20.1%
Clean Food Group Ltd** Biotech 965 1,182 8.7%
Little Green Pharma Biotech/ Cannabis 715 529 3.9%
Inveniam Capital Partners Inc. Fintech 596 344 2.5%
Portage Biotech Inc. Biotech 94 17 0.1%
OTO International Ltd (SWB)*** CBD Wellness 590 - -
Northern Leaf Ltd Biotech/ Cannabis 960 - -
Leap Gaming Gaming 5,106 - -
Total Investment Value 16,019 7,321 53.8%
Cash and receivables, net of payables and accruals 14 6,283 46.2%
Net Asset Value 16,032 13,604 100%
*Avextra movement in value follows the sale of 55% of this position for £2.45
million - for further information see the Avextra section
below.
**Clean Food Group includes £216,000 further investment - see Clean Food
Group section below for additional information
***Includes CLN due from SWB
Avextra AG (formally Eurox) ('Avextra')
Avextra is one of Europe's leading vertically integrated medical cannabis
operators focused on the development and production of regulator-approved
medicines. Founded in 2019 and based out of Germany, the company works in
close collaboration with doctors and pharmacists to develop and produce
precisely formulated cannabis-based medicines. Avextra controls the entire
value chain - from cultivation in Portugal to EU-GMP certified extraction and
manufacturing in Germany. Avextra operates across continental Europe through
an expansive distribution network of multiple channels and strategically
developed assets for these key markets.
Avextra remains focused on the German medical market, which is expected to
expand following changes in German law-making medical cannabis a more
mainstream medical treatment. Within the reporting period, Avextra exported
EU-GMP standardised cannabis extracts manufactured at its German facility to
its distribution partner in Italy, increasing its European footprint and
validating its extract focused business strategy. It also announced a
collaboration with the German Pain Association (DGS) to support patients
suffering from Chemotherapy-induced neuropathic pain and announced an
investment over the next five years of up to €15 million in the development
of new medical cannabis research in partnership with the Portuguese Instituto
Universitário de Ciências da Saúde-Cooperativa de Ensino Superior
Politécnico e Universitário (IUCS-CESPU).
During the reporting period, SEED sold 55% of its holding in Avextra,
amounting to 2,900 shares at €1,000 per share and realising €2.9 million
(£2.45 million) in proceeds. It continues to hold 2,242 shares valued at
£2.74 million (€3.21 million) as of 31 March 2024. The value of these
remaining shares increased by approximately €1 million during the period.
The carrying value of the remaining shares, priced at €1,430 each,
represents a 13% discount to Avextra's latest equity raise price of €1,650
per share. This discount reflects the likelihood that the realisable value of
the remaining stake in Avextra, if sold, would be at a discount to the latest
equity raise price per share.
Juvenescence Ltd ('Juvenescence')
Juvenescence is a life sciences company developing therapies to modify aging
and increase healthy human lifespan. It was founded by Jim Mellon, Dr. Greg
Bailey, and Dr. Declan Doogan. The Juvenescence team consists of highly
experienced drug developers, entrepreneurs, marketers, and investors with a
significant history of success in pharmaceutical drug development, synthetic
biology, and tissue and cellular engineering.
Juvenescence has a broad portfolio of products in development and is driving
innovation, with a focus on discovering and developing these therapies to
modify the aging process, through prevention and by regenerating damage, to
support healthy aging and increase health span.
Juvenescence has undergone a strategic refocus towards a
pharmaceutical-oriented offering, with funding raised at its subsidiary JuvRX
to support drug development initiatives. SEED maintains exposure to the
original company and JuvRX through its existing investment in JuvVentures
(formerly known as Juvenescence Ltd). The valuation of this investment remains
broadly unchanged from the prior period.
As well as JuvRx, Juvenescence has various other investments, which continue
to develop. These include LyGenesis, which early in the year formed a research
partnership with Imagine Pharma to develop novel cell therapies for patients
with type 1 diabetes; raised +US$19 million in a Series A-2 financing round to
complete its Phase 2a clinical trial and advance its pipeline of cell
therapies; and post period end, dosed its first patient in its Phase 2a
clinical trial of a first-in-class regenerative cell therapy for patients with
end-stage liver disease.
Meanwhile, Serina Therapeutics. focused on Parkinson's and other neurological
diseases, entered into a merger agreement with AgeX Therapeutics, Inc. (NYSE
American: AGE), and Chrysea formed a partnership with Chalmers University of
Technology to make/discover medicinal compounds called Benzylisoquinoline
alkaloids (BIAs) using yeast and synthetic biology, and strengthened its
capabilities in synthetic biology and biopharmaceutical products development
with the acquisition of Rodon Biologics in February this year.
Fralis LLC, trading as Leap Gaming
In April 2023, Leap Gaming was sold to IMG Arena US, LLC, securing
approximately €5.8 million in cash to SEED over a two-year period, with
initial proceeds of €2.8 million and repayment of a term loan totalling
€268,000. SEED announced the receipt of the remaining circa £2.4 million
(€2.76 million) post period end in April 2024.
Clean Food Group Limited ('CFG')
CFG was co-founded by CEO Alex Neves and Co-Chairman (and SEED CEO) Ed
McDermott in 2022 with the aim of becoming the leading sustainable oils and
fats solutions provider to global food and cosmetics manufacturers. Its focus
is on developing a scalable, non-GMO yeast technology that uses food waste as
its food source, to deliver sustainable alternatives to traditional oil and
fat ingredients. Oil plants, such as Palm and Soy are ubiquitous in food and
cosmetics and remain in massive (and growing) demand despite the negative
environmental impact when produced using traditional agricultural methods. To
this end, Clean Food Group has brought together a knowledgeable board and
advisory team, with deep and broad experience with biotechnology, life
sciences and high-growth industries.
In the first half of the reporting period, SEED invested a further £216,000
in CFG alongside other investors and industrial food specialists such as
AIM-listed Agronomics, Doehler Group, and Alianza Team. CFG raised an
additional £2.5 million in March 2024 from the Clean Growth Fund, which will
be used to accelerate the commercialisation of its sustainable oils and fats
technology. CFG was also awarded £1 million in grant funding from the UK
Government.
CFG and Roberts Bakery have formed a collaboration to use manufactured bread
waste from Robert's as a feedstock for the production of CFG's oils and fats,
pioneering sustainable practices and establishing a circular ecosystem to
address food system challenges in the UK. Another strategic collaboration
within the period was with Latin American food technology specialist Alianza
Team to accelerate the market availability of healthy and sustainable oils and
fats for global food manufacturers, combining CFG's microbial oils expertise
with Alianza Team's experience in developing functional oils and fats.
SEED recognises the significant potential for further capital growth at CFG as
it demonstrates the commercial scalability of its technology in the precision
fermentation space, which is both exciting and fast-growing. There is a
genuine possibility that this technology could have a transformative impact on
the world, as well as creating significant further value for CFGs investors
including SEED.
Little Green Pharma ('LGP')
Little Green Pharma is an Australian ASX-Listed (Ticker: LGP) global,
vertically integrated, and geographically diverse medical cannabis business
with operations from cultivation and production through to manufacturing and
distribution.
Recent results for LGP in the quarter ended 31 March 2024 have been strong,
with highlights including record quarterly cash receipts of A$8.1 million, up
over 20% on previous corresponding period; record quarterly revenue of A$7.3
million (unaudited), up over 36% on previous corresponding period; record
revenue of A$25.6 million (unaudited) for FY24, up nearly 30% on previous
financial year; and cash in bank of A$5.0 million at 31 March 2024, up from
A$3.7 million at 31 December 2023.
News generated during the period included significant findings from a
large-scale cannabis study showing substantial improvements in pain, quality
of life, and fatigue, strengthening its board structure, and the awarding of
various contracts, which have expanded its footprint in Europe.
During the financial accounting period, LGP attempted to spin out RESET Mind
Sciences, which was ultimately unsuccessful, partly due to SEED's regulatory
constraints in the UK that prevented support. SEED continues to engage with
LGP and closely monitor the RESET situation.
SEED views LGP as significantly undervalued compared to peers, with the ASX
lagging behind the US and Canada in its support for medical cannabis stocks'
recovery. SEED hopes that Australia will follow suit in due course, with LGP
potentially pursuing a secondary listing elsewhere to lift its value in line
with its improved trading results.
Inveniam Capital Partners ('Inveniam')
Inveniam is a private fintech company, which built Inveniam.io, a technology
platform that uses big data, AI and blockchain technology to provide surety of
data and high-functioning use of that data in a distributed data ecosystem.
Despite a small position held after recent fundraising rounds, the valuation
has decreased but remains at a 25% premium to the issue price of SEED's
shares. We anticipate further fundraisings and the development of exciting
blockchain technologies that support the tokenisation and potential future
trading of diverse private market assets. Past performance of similar
companies suggests that Inveniam could experience a significant rerating and
valuation increase in the future if its technology can lead the race in
providing these solutions.
OTO International Limited ('OTO')
OTO is an omni-channel premium CBD, wellness, and skincare brand.
SEED held 71,502 shares in OTO, representing approximately 0.44% of the issued
share capital of this privately held company. Unfortunately, OTO experienced a
cash flow crisis in 2023, leading to a down round equity raise later that year
at £0.24 per share, a substantial discount compared to previous equity raises
and the initial issue price of OTO shares to SEED (£5.91 per share) when OTO
acquired SEED's investee company South West Brands ('SWB').
As of 31 March 2024, SEED valued its investment in OTO at £nil amid concerns
regarding OTO's solvency and ability to continue operations.
Portage Biotech, Inc ('Portage')
NASDAQ listed Portage (Ticker: PRTG) is a clinical-stage immuno-oncology
company advancing multi-targeted therapies to extend survival and
significantly improve the lives of patients with cancer. The company is
focused on advancing its potentially best-in-class adenosine antagonists in
the ADPORT-601 trial of PORT-6 (adenosine 2A inhibitor) and PORT-7 (adenosine
2B inhibitor). These programmes are being advanced using innovative trial
designs and translational data to identify the patient populations most likely
to benefit from treatment. Its unique business model leverages a strong
network of academic experts and large pharma partners to rapidly and
efficiently advance multiple products.
SEED holds a small position in Portage and continues to monitor its share
price with the intention to sell as appropriate.
Northern Leaf Ltd ('Northern Leaf')
Northern Leaf was focused on becoming a key player in the European medical
cannabis supply chain, having already built a secure operational facility in
Jersey.
Following the failure of its IPO ambition, a disappointing emergency fundraise
at a down round in late 2023/early 2024, and unsuccessful merger with
AQUIS-listed Voyager, SEED has written down its investment to a £nil
valuation due to uncertainties regarding Northern Leaf's ability to recover
and raise sufficient funds to sustain operations.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2024
Year ended Year ended
31 March 31 March
Note 2024£'000 2023£'000
Net realised gain/(loss) on disposal of financial assets at fair value through
profit
and loss 12 1,077 (836)
Net unrealised loss on revaluation of financial assets at fair value through
profit
and loss 12 (2,296) (3,056)
Interest income on financial assets at fair value through profit and loss - 102
Total investment loss (1,219) (3,790)
Other income
Bank Interest income 114 3
Arrangement fee - 9
Total other income 114 12
Expenses
Directors' remuneration and expenses 7 (385) (340)
Recognition of Directors share based expense - (30)
Provision for loss on receivables 14 (108) -
Legal and professional fees (132) (77)
Other Expenses 8 (207) (183)
Administration fees (44) (41)
Adviser and broker's fees (76) (73)
Total expenses (952) (744)
Net loss before losses and gains on foreign currency exchange (2,057) (4,522)
Net foreign currency exchange (loss)/gain (63) 63
Total comprehensive loss for the year (2,120) (4,459)
Loss per Ordinary share - basic and diluted 10 (1.01p) (2.10p)
The Company has no recognised gains or losses other than those included in the
results above.
All the items in the above statement are derived from continuing operations.
STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2024
31 March 2024 31 March 2023
Note £'000 £'000
Non-current assets
Financial assets at fair value through profit or loss 12 7,321 16,019
7,321 16,019
Current assets
Cash and cash equivalents 3,885 30
Other receivables 14 2,426 50
6,311 80
Total assets 13,632 16,099
Current liabilities
Payables and accruals 15 (28) (67)
(28) (67)
Net assets 13,604 16,032
Financed by
Share capital 16 2,020 2,127
Other distributable reserve 11,584 13,905
13,604 16,032
Net assets per Ordinary share 17 6.73 7.54
STATEMENT OF CHANGES IN EQUITY
AS AT 31 MARCH 2024
Employee share option Other distributable
reserve reserve
Share Capital Total
£'000 £'000 £'000 £'000
Balance as at 1 April 2022 Note 2,127 212 18,122 20,461
Total comprehensive loss for the year - - (4,459) (4,459)
Transactions with shareholders
Employee share scheme - value of employee services 7 - 30 - 30
Transfer of value of lapsed options (242) 242 -
Balance as at 31 March 2023 2,127 - 13,905 16,032
Balance as at 1 April 2023 2,127 - 13,905 16,032
Total comprehensive loss for the year - - (2,120) (2,120)
Transactions with shareholders
Ordinary Share buyback (107) (201) (308)
Balance as at 31 March 2024 2,020 - 11,584 13,604
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2024
Year ended 31 March 2024 Year ended 31 March 2023
£'000 £'000
Notes
Cash flows from operating activities
Total comprehensive loss for the year (2,120) (4,459)
Adjustments for:
Unrealised loss on fair value adjustments on financial assets at FVTPL 12 2,296 3,056
Realised (gain)/loss on disposal of financial assets at FVTPL 12 (1,077) 836
Foreign exchange movement 63 (63)
Directors' share based payment expense - 30
Finance income - (102)
Changes in working capital:
(Increase)/Decrease in other receivables and prepayments 14 (2,376) 7
(Decrease)/Increase in other payables and accruals 15 (39) 25
Net cash outflow from operating activities (3,253) (670)
Cash flows from investing activities
Acquisition of financial assets at fair value through profit or loss 12 (216) (443)
Disposal of financial assets at fair value through profit or loss 12 7,694 158
Net cash inflow/(outflow) from investing activities 7,478 (285)
Cash flows from financing activities
Ordinary Share buyback 16 (308) -
Net cash outflow from financing activities (308) -
Movement in cash and cash equivalents 3,917 (955)
Cash and cash equivalents brought forward 30 922
Foreign exchange movement (63) 63
Cash and cash equivalents carried forward 3,885 30
NOTES TO THE FINANCIAL STATEMENT
FOR THE YEAR ENDED 31 MARCH 2024
1. General Information
SEED Innovations Limited (the "Company")is an authorised closed-ended
investment scheme. The Company is domiciled and incorporated as a limited
liability company in Guernsey. The registered office of the Company is PO Box
343, Obsidian House, La Rue D'Aval, Vale, GY6 8LB.
The Company's objective is to invest in disruptive technologies with
significant intellectual property rights which they are seeking to exploit,
principally within the technology sector (including digital and content
focused businesses), life sciences sectors (including biotech and
pharmaceuticals) and health and wellness sectors. This includes investing in
the cannabinoid sector where there has been increased investor momentum due to
regulation changes, and as companies' profiles grow and investment in the
sector becomes more mainstream. The Company's main geographical focus will be
in North America and Europe though investments may also be considered in other
regions to the extent that the Board considers that valuable opportunities
exist, and positive returns can be achieved. The objective of the Company is
to also provide its investors with exposure to disruptive growth
opportunities, with a mix of liquid, pre-liquid and longer term investments,
which taken together greatly reduces the risk of the portfolio whilst giving
much clearer visibility on potential returns.
The Company's Ordinary Shares are quoted on AIM, a market operated by the
London Stock Exchange and is authorised as a Closed-ended investment scheme by
the Guernsey Financial Services Commission (the "GFSC") under Section 8 of the
Protection of Investors (Bailiwick of Guernsey) Law, 2020 and the Authorised
Closed-Ended Investment Schemes Guidance and Rules 2021.
2. Basis of Preparation
The financial statements of the Company have been prepared in accordance with
IFRS Accounting Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB") and applicable legal and regulatory requirements of
the Companies (Guernsey) Law, 2008. The financial statements have been
prepared under the historical cost convention except for financial assets at
fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements, are disclosed in Note 4.
In the current year, the Company has adopted all the applicable new and
revised standards and interpretations issued by the IASB and the International
Financial Reporting Interpretations Committee ("IFRIC") of the IASB that are
relevant to its operations and effective for annual reporting periods
beginning on or after 1 April 2023. The adoption of the standards and
interpretations has not had a significant impact on the content or
presentation of these financial statements; refer below for additional
consideration.
(a) Standards and amendments to existing standards effective 1 April 2023
There are no standards, amendments to standards or interpretations that are
effective for the annual period beginning on or after 1 April 2023 that have a
material effect on the financial statements of the Company.
(b) New standards, amendments and interpretations effective after 1 April
2023 and have not been early adopted
A number of new standards, amendments to standards and interpretations are
effective for the annual periods beginning on or after 1 April 2023 and have
not been early adopted in preparing these financial statements. None of these
are expected to have a material effect on the financial statements of the
Company.
3. Material Accounting Policies
The material accounting policies applied in the preparation of these financial
statements are set out below. These policies have been consistently applied to
all the years presented, unless otherwise stated.
a) Investment Income
Investment income is recognised on an accruals basis using the effective
interest method and includes bank interest and interest from debt securities.
Dividend income from investments designated at fair value through profit or
loss is recognised through the Statement of Comprehensive Income within
dividend income when the Company's right to receive payments is established.
b) Expenses
All expenses are accounted for on an accruals basis and, with the exception of
share issue and share buyback costs, are charged through the Statement of
Comprehensive Income in the period in which they are incurred. Costs of
issuing and buying back equity instruments are accounted for as a deduction
from equity, net of any related income tax benefit.
c) Taxation
The Company is exempt from taxation in Guernsey. However, in some
jurisdictions, investment income and capital gains are subject to withholding
tax deducted at the source of the income. The Company presents the withholding
tax separately from the gross investment income, if any, in the Statement of
Comprehensive Income. For the purpose of the Statement of Cash Flows, cash
inflows from financial assets are presented net of withholding taxes when
applicable.
d) Financial instruments
Financial instruments are classified into financial assets and financial
liabilities. Financial assets and financial liabilities are recognised when
the Company becomes a party to the contractual provisions of the financial
instrument.
(i) Recognition and initial measurement
Financial assets at fair value through profit or loss are recognised initially
on the trade date, which is the date on which the Company becomes a party to
the contractual provisions of the instrument. Other financial assets and
liabilities are recognised on the date they are originated.
Financial assets at fair value through profit or loss are initially recognised
at fair value, with transaction costs recognised in profit or loss. Financial
assets or financial liabilities not at fair value through profit or loss are
initially recognised at fair value plus transaction costs that are directly
attributable to its acquisition or issue.
(ii) Classification
Business model assessment
On initial recognition, the Company classifies financial assets as measured at
amortised cost or fair value through profit or loss ("FVTPL").
A financial asset is measured at amortised cost if it meets both of the
following conditions and is not designated as at FVTPL:
• it is held within a business model whose objective is to hold assets
to collect contractual cash flows; and
• the contractual terms give rise on specified dates to cash flows that
are solely payments of principal and interest ("SPPI").
All other financial assets are classified as measured at FVTPL.
In making an assessment of the objective of the business model in which a
financial asset is held, the Company considers all of the relevant information
about how the business is managed, including:
• the documented investment strategy and the execution of this strategy
in practice. This includes whether the investment strategy
focuses on earning contractual interest income, maintaining a particular
interest rate profile, matching the duration of the financial assets to the
duration of any related liabilities or expected cash outflows or realising
cash flows through the sale of the assets;
• how the performance of the portfolio is evaluated and reported to the
Company's management;
• the risks that affect the performance of the business model (and the
financial assets held within that business model) and how those risks are
managed;
• how the Investment Manager is compensated: e.g. whether compensation
is based on the fair value of the assets managed or the
contractual cash flows collected; and
• the frequency, volume and timing of sales of financial assets in prior
periods, the reasons for such sales and expectations about future sales
activity.
Transfers of financial assets to third parties in transactions that do not
qualify for derecognition are not considered sales for this purpose,
consistent with the Company's continuing recognition of the assets.
The Company has determined that it has two business models:
• Held-to-collect business model: this includes cash and cash
equivalents and other receivables. These financial assets are held to collect
contractual cash flows; and
• Other business model: this includes investment in unquoted securities
that were not held for trading purposes. These financial
assets are managed and their performance is evaluated, on a fair value basis.
(iii) Assessment whether contractual cash flows are SPPI
For the purpose of this assessment, 'principal' is defined as the fair value
of the financial asset on initial recognition. 'Interest' is defined as
consideration for the time value of money and for the credit risk associated
with the principal amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk and
administrative costs), as well as profit margin.
In assessing whether the contractual cash flows are SPPI, the Company
considers the contractual terms of the instrument. This includes assessing
whether the financial asset contains a contractual term that could change the
timing or amount of contractual cash flows such that it would not meet this
condition.
In making the assessment, the Company considers:
• contingent events that would change the amount and timing of cash
flows;
• leverage features;
• prepayment and extension terms;
• terms that limit the Company's claim to cash flows from specified
assets (e.g. non-recourse loans); and
• features that modify consideration of the time value of money (e.g.
periodical reset of interest rates).
(iv) Reclassification
Financial assets are not reclassified subsequent to their initial recognition
unless the Company was to change its business model for managing financial
assets, in which case all affected financial assets would be reclassified on
the first day of the first reporting period following the change in the
business model.
(v) Subsequent measurement
Financial assets at fair value through profit or loss
These assets are subsequently measured at fair value. Net gains and losses,
excluding any interest or dividend income and including foreign exchange gains
and losses are recognised in profit or loss in the Statement of Comprehensive
Income.
Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the effective
interest method. Interest income is recognised in 'interestincome on financial
assets at fair value through profit or loss', foreign exchange gains and
losses are recognised in the Statement of Comprehensive Income. Any gain or
loss on derecognition is also recognised in profit or loss.
(vi) Financial liabilities - classification and subsequent measurement
Non - derivative financial liabilities
The Company initially recognises debt securities issued and subordinated
liabilities on the date that they are originated. All other financial
liabilities (including liabilities designated as at fair value through profit
or loss) are recognised initially on the trade date, which is the date that
the Company becomes a party to the contractual provisions of the instrument.
The Company derecognises a financial liability when its contractual
obligations are discharged, cancelled or expired.
The Company classifies non-derivative financial liabilities into the other
financial liabilities category. Such financial liabilities are recognised
initially at fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at
amortised cost using the effective interest method. Other liabilities include
other payables and accruals.
(vii) Fair value measurements
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value of financial assets and liabilities
traded in active markets (such as publicly traded derivatives and trading
securities) are based on quoted market prices at the close of trading on the
reporting date. The Company utilises the last traded market price for both
financial assets and financial liabilities where the last traded price falls
within the bid-ask spread. In circumstances where the last traded price is not
within the bid-ask spread, management will determine the point within the
bid-ask spread that is most representative of fair value.
If a significant movement in fair value occurs subsequent to the close of
trading up to midnight on the year end date, valuation techniques will be
applied to determine the fair value. A significant event is any event that
occurs after the last market price for a security, close of market or close of
the foreign exchange, but before the Company's valuation time that materially
affects the integrity of the closing prices for any security, instrument,
currency or securities affected by that event so that they cannot be
considered 'readily available' market quotations.
The fair value of financial assets and liabilities that are not traded in an
active market is determined using valuation techniques in accordance with the
International Private Equity and Venture Capital Valuation (IPEV) Guidelines.
The Company uses a variety of methods and makes assumptions that are based on
market conditions existing at each reporting date. Valuation techniques used
include the use of comparable recent ordinary transactions between market
participants, reference to other instruments that are substantially the same,
discounted cash flow analysis, option pricing models and other valuation
techniques commonly used by market participants making the maximum use of
market inputs and relying as little as possible on entity-specific inputs.
Transfers between levels of the fair value hierarchy
Where transfers between levels of the fair value hierarchy occur, they are
deemed to have occurred at the beginning of the reporting period.
(viii) Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount
at which the financial asset or financial liability is measured at initial
recognition, minus principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any difference between the
initial amount recognised and the maturity amount and for financial assets
adjusted for any loss allowance.
The effective interest method is a method of calculating the amortised cost of
a financial asset or a financial liability and of allocating the interest
income or interest expense over the relevant year. The effective interest rate
is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial instrument or, when appropriate, a
shorter period to the net carrying amount of the financial asset or financial
liability at initial recognition. When calculating the effective interest
rate, the Company estimates the future cash flows considering all contractual
terms of the financial instruments but not the future credit losses.
(ix) Impairment
The Company recognises loss allowances for Expected Credit Losses ("ECL") on
financial assets measured at amortised cost.
The Company measures loss allowances at an amount equal to lifetime ECLs,
except for the following, which are measured at 12-month ECLs:
• Financial assets that are determined to have low credit risk at the
reporting date; and
• Other financial assets and bank balances for which credit risk (i.e.
the risk of default occurring over the expected life of the asset) has not
increased significantly since initial recognition.
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Company
considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Company's historical
experience and informed credit assessment and including forward-looking
information.
The Company assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due. The Company considers a
financial asset to be in default:
• when the borrower is unlikely to pay its credit obligations to the
Company in full, without recourse by the Company to actions such as realising
assets (if any is held); or
• the financial asset is more than 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over
the expected life of a financial instrument. 12-month ECLs are the portion of
ECLs that result from default events that are possible within the 12 months
after the reporting date (or a shorter period if the expected life of the
instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual
period over which the Company is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and
the cash flows that the Company expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried
at amortised cost are credit-impaired. A financial asset is 'credit-impaired'
when one or more events that have a detrimental impact on the estimated future
cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following
observable data:
• significant financial difficulty of the borrower or issuer;
• it is probable that the borrower will enter bankruptcy or other
financial reorganisation;
• the underlying project is put on hold; and
• breach of contract such as a default or being more than 90 days past
due.
Presentation of allowance for ECLs in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted
from the gross carrying amount of the assets. Impairment losses including
reversals of impairment losses and gains are disclosed separately in the
statement of profit or loss and other comprehensive income.
Write-off
The gross carrying amount of a financial asset is written off when the Company
has no reasonable expectations of recovering a financial asset in its entirety
or a portion thereof.
(x) Derecognition
A financial asset (or, where applicable a part of a financial asset or part of
a group of similar financial assets) is derecognised where:
• The rights to receive cash flows from the asset have expired; or
• The Company has transferred its rights to receive cash flows from the
asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a 'pass-through' arrangement;
and
• Either (a) the Company has transferred substantially all the risks and
rewards of the asset; or
(b) the Company has neither transferred nor retained substantially all the
risks and rewards of the asset but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows from an
asset or has entered into a pass-through arrangement and has neither
transferred nor retained substantially all the risks and rewards of the asset
nor transferred control of the asset, the asset is recognised to the extent of
the Company's continuing involvement in the asset. The Company derecognises a
financial liability when the obligation under the liability is discharged,
cancelled or has expired.
(xi) Offsetting
Financial assets and financial liabilities are offset and the net amount
presented in the statement of financial position when, and only when, the
Company has a legal right to offset the amounts and it intends either to
settle on a net basis or to realise the asset and settle the liability
simultaneously.
Income and expenses are presented on a net basis for gains and losses from
financial instruments at fair value through profit or loss and foreign
exchange gains and losses.
e) Cash and cash equivalents
Cash comprises of cash at bank. Cash equivalents are short-term highly liquid
investments that are readily convertible to known amounts of cash, are subject
to an insignificant risk of changes in value and are held for the purpose of
meeting short-term cash commitments rather than for investment or other
purposes.
f) Foreign currency translation
Functional and presentation currency
The Company's Ordinary Shares are denominated in Sterling and are traded on
AIM in Sterling. The primary activity of the Company is detailed in the
Investing Policy on page 10. The performance of the Company is measured and
reported to the investors in Sterling and the majority of the expenses
incurred by the Company are in Sterling. Consequently, the Board of Directors
considers that Sterling is the currency that most faithfully represents the
effects of the underlying transactions, events and conditions. The financial
statements are presented in Sterling, which is the Company's functional and
presentation currency. All amounts are rounded to the nearest thousand.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using rates approximating to the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at year end exchange rates of
monetary assets and liabilities denominated in foreign currencies are
recognised through the Statement of Comprehensive Income. Translation
differences on non-monetary financial assets and liabilities, such as
financial assets designated at fair value through profit or loss, are
recognised through the Statement of Comprehensive Income within the net
unrealised change in fair value of investments.
g) Net assets per share
The net assets per Ordinary Share disclosed on the face of the Statement of
Financial Position is calculated by dividing the net assets of the Company as
at the year-end by the number of Ordinary Shares in issue at the year end.
h) Earnings/(Loss) per share
Basic earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing:
• the profit or loss attributable to owners of the Company, excluding
any costs of servicing equity other than ordinary shares; and
• by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements, if any, in ordinary shares
issued during the year and excluding treasury shares.
Diluted earnings/(loss) per share
Diluted earnings/(loss) per share adjusts the figures used in the
determination of basic earnings/(loss) per share to take into account:
• the after tax effect of interest and other financing costs associated
with dilutive potential ordinary shares; and
• the weighted average number of additional ordinary shares that would
have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
i) Transaction costs
Transaction costs are the incremental costs that are directly attributable to
the acquisition, issue or disposal of a financial asset or financial
liability. An incremental cost is one that would not have been incurred if the
entity had not acquired, issued or disposed of the financial instrument.
Transaction costs are legal and professional fees incurred to structure a deal
to acquire the investments designated as financial assets at fair value
through profit or loss. They include the upfront fees and commissions paid to
agents, advisers, brokers and dealers and due diligence fees.
j) Equity
Share Capital
Ordinary shares are classified as equity. Where the Company purchases its own
equity share (e.g. as the result of a share buyback), the consideration paid,
including any directly attributable incremental costs, is deducted from equity
attributable to the owners of the Company as Treasury Shares until the shares
are cancelled or reissued. The Company will present any Treasury Shares
acquired in the Statement of Changes in Equity as a deduction from Ordinary
Shares.
Employee Share Option Reserve
Employee share options are valued when they are granted using the current
accounting standard's fair value technique. However, the value of the options
may be calculated at the conclusion of the vesting period or when they are
exercised.
Other Distributable Reserve
The Company's cumulative profits and losses are known as distributable
reserves. From time to time, the Company may transfer any sum that it
considers to be realised to the distributable reserve (for example, if
ordinary shares are sold for more than their par value, the excess will be
moved to other distributable reserves).
k) Going concern
After making reasonable enquiries, and assessing all data relating to the
Company's liquidity, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence for the
foreseeable future and do not consider there to be any threat to the going
concern status of the Company. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
The Directors note that the Company has sufficient cash and cash equivalent
resources to meet its obligations for at least one year after the approval of
these financial statements.
4. Critical Accounting Estimates and Judgements
The preparation of financial statements in conformity with IFRS requires the
Board to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates.
The Board makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results.
The Directors believe that the underlying assumptions are appropriate and that
the financial statements are fairly presented. Estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are outlined
below:
Judgements
Assessment as an investment entity
In determining the Company meeting the definition of an investment entity in
accordance with IFRS 10, it has considered the following:
• the Company has raised the commitments from a number of investors in
order to raise capital to invest and to provide investor management services
with respect to these private equity investments;
• the Company intends to generate capital and income returns from its
investments which will, in turn, be distributed to the investors;
and
• the Company evaluates its investment performance on a fair value
basis, in accordance with the policies set out in these financial statements.
Although the Company met all three defining criteria, management has also
assessed the business purpose of the Company, the investment strategies for
the private equity investments, the nature of any earnings from the private
equity investments and the fair value model. Management made this assessment
in order to determine whether any additional areas of judgement exist with
respect to the typical characteristics of an investment entity versus those of
the Company. Management have therefore concluded that from the assessments
made, the Company meets the criteria of an investment entity within IFRS 10.
Part of the assessment in relation to meeting the business purpose aspects of
the IFRS 10 criteria also requires consideration of exit strategies. Given
that the Company does not intend to hold investments indefinitely, management
have determined that the Company's investment plans support its business
purpose as an investment entity.
The Board has also concluded that the Company meets the additional
characteristics of an investment entity, in that: it holds more than one
investment; the investments will predominantly be in the form of equities,
derivatives and similar securities; it has more than one investor and the
majority of its investors are not related parties.
Estimates and assumptions
Fair value of securities not quoted in an active market.
The Company may value positions by using its own models or commissioning
valuation reports from professional third-party valuers. The models used in
either case are based on valuation methods and techniques generally recognised
as standard within the industry and in accordance with International Private
Equity and Venture Capital Valuation (IPEV) Guidelines. The inputs into these
models are primarily revenue or earnings multiples and discounted cash flows.
The inputs in the revenue or earnings multiple models include observable data,
such as the earnings multiples of comparable companies to the relevant
portfolio company, and unobservable data, such as forecast earnings for the
portfolio company. In discounted cash flow models, unobservable inputs are the
projected cash flows of the relevant portfolio company and the risk premium
for liquidity and credit risk that are incorporated into the discount rate. In
some instances, the cost of an investment is the best measure of fair value in
the absence of further information. Models are calibrated by back-testing to
actual results/exit prices achieved to ensure that outputs are reliable, where
possible.
Models use observable data, to the extent practicable. However, areas such as
credit risk (both own and counterparty), volatilities and correlations require
management to make estimates. Changes in assumptions about these factors could
affect the reported fair value of financial instruments. The sensitivity to
unobservable inputs is based on management's expectation of reasonable
possible shifts in these inputs, taking into consideration historical
volatility and estimations of future market movements.
The determination of what constitutes 'observable' requires significant
judgement by the Company. The Company considers observable data to be market
data that is readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant market.
5. Segmental Information
The Chief Operating Decision Maker, which is the Board, is of the opinion that
the Company is engaged in a single segment of business, through its portfolio
of investments in early stage businesses, with the aim of providing capital
appreciation. The financial information used by the Chief Operating Decision
Maker to manage the Company presents the business as a single segment.
Segment information is measured on the same basis as that used in the
preparation of the Company's Financial Statements.
The Company receives no revenues from external customers. Other than its
investments, the Company holds no non-current assets in any geographical area
other than Guernsey.
6. Administration Fees
Obsidian Fund Services Limited ("Obsidian")was the Administrator of the
Company during the year and was entitled to an administration fee of
£40,000 per annum with an additional fee of £500 per Board or Committee
meeting above the eight meetings covered by the administration fee.
In the year ended 31 March 2024, a total of £43,628 (2023: £40,759) was
charged to the Statement of Comprehensive Income for Obsidian, of which
£4,033 was payable at the financial reporting date (2023: £3,333).
The Administrator is also entitled to recover by way of reimbursement from the
Company, transaction costs associated with the provision of specific services
and reasonable out-of-pocket expenses incurred in the performance of its
services to include any of the Administrator'sapproved services.
7. Directors' Remuneration
The Board agreed the following compensation packages for the Directors of the
Company.
• Ian Burns is entitled to an annual remuneration of £36,000 (2023:
£36,000).
• Ed McDermott is entitled to an annual remuneration of £161,063
(2023: £161,760).
• Lance De Jersey is entitled to an annual remuneration of £106,000
(2023: £106,000).
• Luke Cairns is entitled to an annual remuneration of £36,000 (2023:
£36,000).
• Alfredo Pascual is entitled to an annual remuneration of €106,000
(£90,598) (2023: Nil).
Additional information on Directors' Remuneration is noted in related parties.
Refer to note 18.
Year ended 31 March 2024
Recognition
of share
Discretionary based
Directors' Remuneration Bonus expense Total
£'000 £'000 £'000 £'000
Ian Burns 36 - - 36
Ed McDermott 161 - - 161
Lance De Jersey 106 - - 106
Luke Cairns 36 - - 36
Alfredo Pascual 46 - - 46
385 - - 385
Year ended 31 March 2023
Recognition
Discretionary of share
Bonus based
Directors' Remuneration expense Total
£'000 £'000 £'000 £'000
Ian Burns 36 - - 36
Ed McDermott 162 - 30 192
Lance De Jersey 106 - - 106
Luke Cairns 36 - - 36
Alfredo Pascual - - - -
340 - 30 370
8. Other Expenses
Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Regulatory and listing fees 26 27
Directors' and Officers' liability insurance 37 10
IT Costs 6 7
Consultancy fees 36 43
Salaries and Wages 26 84
Other expenses 76 12
207 183
9. Tax effects of other comprehensive income
The Income Tax Authority of Guernsey has granted the Company exemption from
Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey)
(Amendment) Ordinance, 2012 and the income of the Company may be distributed
or accumulated without deduction of Guernsey income tax. Exemption under the
above mentioned Ordinance entails payment by the Company of an annual fee of
£1,200for the calendar year ended 31 December 2023 and £1,600 from 1 January
2024 for each year in which the exemption is claimed. It should be noted,
however, that interest and dividend income accruing from the Company's
investments may be subject to withholding tax in the country of origin.
There were no tax effects arising from the other comprehensive income
disclosed in the Statement of Comprehensive Income (2023: £Nil).
10. (Loss)/Earnings per Ordinary Share
The loss per Ordinary Share of 1.01p (2023: loss per Ordinary Share of 2.10p)
is based on the loss for the year of £2,119,521(2023: loss
£4,458,743) and on a weighted average number of 208,840,402 Ordinary Shares
in issue during the year (2023: 212,747,395 Ordinary Shares).
There are no dilutive effects on earnings per Ordinary Shares as all issued
Options and Warrants expired without exercise during the prior year.
11. Dividends
During the year ended 31 March 2024, no dividend was paid to shareholders
(2023: £Nil). The Directors do not propose a final dividend for the year
ended 31 March 2024 (2023: £Nil).
Post year-end on 16 April 2024, the Company declared a special dividend of 1.0
pence (£0.01) per Ordinary Share.
12. Financial Assets designated at fair value through profit or loss
31 March 2024 31 March 2023
£'000 £'000
Fair value of investments brought forward 16,019 19,524
Purchases during the year 216 443
Proceeds from disposals during the year (7,694) (158)
Interest capitalised on convertible loan notes held - 102
Realised gains/(losses) on disposals during the year 1,077 (836)
Net unrealised loss on revaluation of investments (2,296) (3,056)
7,321 16,019
13. Fair value of financial instruments
IFRS 13 requires the Company to classify financial instruments at fair value
using a fair value hierarchy that reflects the significance of the inputs used
in making the measurement. The fair value hierarchy has the following levels:
· Level 1 - Quoted prices (unadjusted) in active markets for
identical assets or liabilities that the Company can access at the year-end
date;
· Level 2 - Those involving inputs other than quoted prices
included within Level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices); and
· Level 3 - Those with inputs for the asset or liability that are
not based on observable market data (unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement in its entirety. For
this purpose, the significance of an input is assessed against the fair value
measurement in its entirety.
If a fair value measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that measurement is a Level 3
measurement. Assessing the significance of a particular input to the fair
value measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
The determination of what constitutes 'observable' requires judgement by the
Company. The Company considers observable data to be that market data that is
readily available, regularly distributed or updated, reliable and verifiable,
not proprietary, and provided by independent sources that are actively
involved in the relevant market.
The valuations used to determine fair values are validated and periodically
reviewed by experienced personnel, in most cases this validation and review is
undertaken by members of the Board, however professional third-party valuation
firms are used for some valuations and the Company also has access to a
network of industry experts by virtue of the personal networks of the
directors and substantial shareholders. The valuations prepared by the Company
or received from third parties are in accordance with the IPEV Guidelines. The
valuations, when relevant, are based on a mixture of:
• Market approach (utilising EBITDA or Revenue multiples, industry value
benchmarks and available market prices approaches);
• Income approach (utilising Discounted Cash Flow, Replacement Cost and Net
Asset approaches);
• Price of a recent transaction when transaction price/cost is considered
indicative of fair value; and
• Proposed sale price.
As at 31 March 2024, 2 investments were valued as Level 1 investments within
the fair value hierarchy, with the value being taken from the published bid
price available as at that date (2023: 2 investments).
The remaining six investments were included within the Level 3 category and
subject to a Level 3 valuation approach.
Where investments are considered to be Level 3 investments for valuation
purposes, it is required under IFRS 13 that information be provided about the
significant unobservable inputs used in the fair value measurement. In the
case of the Company a balance is necessary in providing commentary on such
inputs, whilst at the same time not disclosing information about these private
companies which they have indicated cannot be published (primarily for
competitive reasons). The table below provides a summary of the valuations
subject to unobservable inputs across the Company's investment portfolio,
split by valuation methodology and an indicative aggregate value of the effect
of either a more positive or negative valuation approach, without publication
of specific metrics which could be identified as relating to any one investee
company.
Aggregate Valuation Range (input) Sensitivity
Valuation Basis Effect on fair value
£'000 £'000 £'000
Price of recent transaction (deal price) 6,773 n/a n/a -25% / 25% (1,693) 1,693
Cost -
Quoted price 548
Total 7,321
A reconciliation of the opening and closing balances of assets designated at
fair value through profit or loss classified as Level 1 is shown below:
31 March 2024 31 March 2023
£'000 £'000
Fair value of investments brought forward 811 2,632
Purchases during the year - -
Disposals proceeds during the year - (104)
Realised gains on disposals during the year - 4
Net unrealised change in fair value (263) (1,721)
Fair value of investments carried forward 548 811
A reconciliation of the opening and closing balances of assets designated at
fair value through profit or loss classified as Level 3 is shown below:
31 March 2024 31 March 2023
£'000 £'000
Fair value of investments brought forward 15,208 16,892
Purchases during the year 216 443
Disposals proceeds during the year (7,694) (54)
Capitalised interest on loan - 102
Realised gains/(losses) on disposals during the year 1,077 (840)
Net unrealised change in fair value (2,034) (1,335)
Fair value of investments carried forward 6,773 15,208
31 March 2024 31 March 2023
£'000 £'000
Level 1 548 811
Level 2 - -
Level 3 6,773 15,208
Total 7,321 16,019
14. Other receivables
31 March 2024 31 March 2023
£'000 £'000
Prepaid expenses 43 50
Other receivables 2,383 -
2,426 50
The Company has made a provision at a default rate of 100% for £108,314(2023:
£Nil)for an outstanding receivable due from a loan note issued to SWB. See
Note 21 for further details.
15. Payables and accruals
31 March 2024 31 March 2023
£'000 £'000
Administration fees 4 3
Audit fees 18 30
Legal & professional fees 3 6
Other accrued expenses 3 28
28 67
16. Share Capital, Warrants, Options, Treasury shares and Other distributable reserves
31 March 2024 31 March 2023
Authorised: £'000 £'000
1,910,000,000 Ordinary Shares of 1p (2023: 1,910,000,000 Ordinary Shares)
19,100 19,100
100,000,000 Deferred Shares of 0.9p 900 900
(2023: 100,000,000 Deferred Shares)
20,000 20,000
Allotted, called up and fully paid:
202,032,895 Ordinary Shares of 1p (2023: (i) 2,020 2,127
212,747,395 Ordinary Shares)
Nil Deferred Shares of 0.9p (2023: Nil) (ii) - -
Share options (iii) - -
Warrants (vi) - -
Treasury Shares:
13,186.946 Treasury Shares of 1p
(2023: 2,472,446) (v) 132 25
(i) Ordinary Shares
During the year 10,714,500 Ordinary Shares were bought by the Company as part
of a share buyback programme.
(ii) Deferred Shares
There were no changes to the number of deferred shares during the year.
(iii) Options
There are no options outstanding.
(iv) Directors' Authority to Allot Shares
The Directors are generally and unconditionally authorised to exercise all the
powers of the Company to allot relevant securities. The Directors may
determine up to a maximum aggregate nominal amount of 50% of the issued share
capital during the period until the following Annual General Meeting. The
Guernsey Companies Law does not limit the power of Directors to issue shares
or impose any pre-emption rights on the issue of new shares.
(v) Shares held in Treasury
As part of a share buyback programme, share repurchases in the year saw the
number of Ordinary Shares held as Treasury shares increase to 13,186,946
(2023: 2,472,446).
(vi) Warrants
There are no warrants outstanding.
(vii) Other Distributable Reserves
31 March 2024 31 March 2023
£'000 £'000
Opening balance as at 1 April 13,905 18,122
Total comprehensive loss for the year (2,120) (4,459)
Ordinary Share buyback (201) -
Transfer of value of lapsed options - 242
Closing Balance as at 31 March 11,584 13,905
17. Net Assets per Ordinary Share
Basic and diluted
The basic and diluted net asset value per Ordinary Share is based on the net
assets attributable to equity shareholders of £13,604,000 (2023:
£16,032,000) and on 202,032,895 Ordinary Shares (2023: 212,747,395 Ordinary
Shares) in issue at the end of the year. As all Warrants and Options expired
unexercised during the prior year there was no dilutive effect as at 31 March
2024.
18. Related Parties
(i) Directors' remuneration
The Directors'remuneration for the year ended 31 March 2024 is disclosed in
note 7. The Directors consider that there is no immediate or ultimate
controlling party.
Ian Burns
Mr Burns is the legal and beneficial owner of Smoke Rise Holdings Limited,
which held 1,674,024 (0.83%) Ordinary Shares (2023: 1,674,024) in the Company
at 31 March 2024 and the date of signing this report.
Mr Burns received an annual remuneration of £36,000(2023: £36,000)with no
discretionary bonus for the year (2023: Nil). There was no payable at the
financial reporting date (2023: nil).
Ed McDermott
Mr McDermott held 4,680,000 (2.32%) Ordinary Shares (2023: 4,680,000) in the
Company at 31 March 2024 and at the date of signing this report.
Mr McDermott is entitled to an annual remuneration of £160,000 effective 1
April 2021.
Mr McDermott received annual remuneration of £161,063 (2023: £161,760) which
included pension contributions of 1.1% of salary. There was no discretionary
bonus (2023: Nil). There was no payable at the financial reporting date (2023:
£13,168).
Mr McDermott is Co-chairman of Clean Food Group as disclosed in the Investment
Portfolio Report on page 7 of the Report & Accounts.
Lance De Jersey
Mr De Jersey, Finance Director of the Company held 400,000 ordinary shares in
the Company as at 31 March 2024 and at the date of signing of this report.
Mr De Jersey received annual remuneration of £106,000 (2023: £106,000).
There was no discretionary bonus (2023: Nil). There was no payable at the
financial reporting date of (2023: nil).
Luke Cairns
Mr Cairns, Non-Executive Director of the Company is entitled to annual
remuneration of £36,000per annum, effective from the date of his appointment
on 3 January 2020.
Mr Cairns received annual remuneration of £36,000(2023: £36,000)with no
discretionary bonus (2023: Nil). There was no payable at the financial
reporting date (2023: nil).
Alfredo Pascual
Mr Pascual, Executive Director of the Company is entitled to annual
remuneration of€106,000 (£90,598) per annum, effective from the date of his
appointment on 1 September 2023.
Mr Pascual received annual remuneration of £71,781(2023: £63,833)with no
discretionary bonus (2023: Nil). There was no payable at the financial
reporting date (2023: nil).
(ii) Administrator of the Company
Obsidian Fund Services Limited ("Obsidian")was the Administrator of the
Company during the year and was entitled to an administration fee of
£40,000 per annum with an additional fee of £500 per Board or Committee
meeting above the eight meetings covered by the administration fee.
In the year ended 31 March 2024, a total of £43,628 (2023: £40,759) was
charged to the Statement of Comprehensive Income for Obsidian, of which
£4,033 was payable at the financial reporting date (2023: £3,333).
(iii) Digital Marketing
During the year the Company contracted with G-Force Media, a digital content
creator and digital marketer. Ed McDermott, a Director of the Company, is a
one third shareholder of G-Force Media. During the year the Company paid
£12,000 (2023: Nil) to G-Force Media.
19. Financial Risk Management
The main risks arising from the Company's financial instruments are credit
risk, liquidity risk and market risk, and are set out below, together with the
policies currently applied by the Board for their management. Market risk
comprises three types of financial risk, being interest rate risk, currency
risk and other price risk, being the risk that the fair value or future cash
flows will fluctuate because of changes in market prices other than from
interest rate and currency risks.
Treasury policies
The objective of the Company's treasury policies is to manage the Company's
financial risk, secure cost effective funding for the Company'soperations and
to minimise the adverse effects of fluctuations in the financial markets on
the value of the Company's financial assets and liabilities on reported
profitability and on cash flows of the Company.
The Company finances its activities with cash, short-term deposits with
maturities of three months or less and market traded securities. Other
financial assets and liabilities, such as receivables and payables, arise
directly from the Company's operating activities. Derivative instruments may
be used to change the economic characteristics of financial instruments in
accordance with the Company's treasury policies.
The financial assets and liabilities of the Company were:
31 March 2024 31 March 2023
£'000 £'000
Financial assets at fair value through profit or loss
Investments 7,321 16,019
Financial assets at amortised cost
Other receivables 2,383 -
Cash and cash equivalents 3,885 30
6,268 30
Financial liabilities at amortised cost
Other payables 28 67
Prepayments of £42,900 (2023: £50,000) have been excluded from financial
assets.
Credit risk
The Company takes on exposure to credit risk, which is the risk that one party
will cause a financial loss for the other party by failing to discharge an
obligation.
The Company's credit risk is primarily attributable to its cash and cash
equivalents, other receivables, short term loans and convertible loan notes to
investees. In order to mitigate credit risk, the Company seeks to trade only
with reputable counterparties that the management believe to be creditworthy.
The credit risk on cash and cash equivalents is limited by using banks with
high credit ratings assigned by international credit-rating agencies. At the
year end, an amount of cash and cash equivalents of £3,728,206was placed with
HSBC Bank plc (2023: £22,977).The Moody'scounterparty risk rating for HSBC
Bank plc was A3 as at 31 March 2024.
At the year end the Company held convertible loan notes with a face value of
£150,000. In the year £12,500 had been repaid and a provision made on the
remaining outstanding such that the carrying amount at the year end was £Nil
(2023: £167,095).
The Company's activities may give rise to settlement risk. 'Settlement risk'
is the risk of loss due to the failure of an entity to honour its obligations
to deliver cash, securities or other assets as contractually agreed. For the
majority of transactions, the Company mitigates this risk by conducting
settlements through a broker to ensure that a trade is settled only when both
parties have fulfilled their contractual settlement obligations. Settlement
limits form part of the credit approval and limit monitoring processes by the
Board.
The investment in these debt instruments is considered to be of an equal risk
to the equity investments held in other Level 3 investments as disclosed in
Note 13.
Liquidity risk
Liquidity risk is the risk that the Company may not be able to generate
sufficient cash resources to settle its obligations in full as they fall due
or can only do so on terms that are materially disadvantageous. The Company
invests in private equities, which, by their very nature, are illiquid. The
Company incurs a range of fixed expenses for which it can budget.
As such it can appropriately plan as to how to maintain a sufficient cash
balances to meet its working capital requirements.
Should it be identified that additional cash resources are required, the
Company would propose to issue further equity to the market or to sell part of
the investment(s) held in market traded securities.
The contractual undiscounted cash flows of the Company's financial
liabilities, which are equal to the fair value of the Company's financial
liabilities, comprise of payable within one year to the sum of £28,000 (2023:
£57,000). The Company has no contractual commitment to invest further in any
of its existing investments.
Market risk
(i) Price risk
The Company's private equity investments are susceptible to price risk arising
from uncertainties about future values of the private equity investments or
derivative financial instruments. This price risk is the risk that the fair
value or future cash flows will fluctuate because of changes in market prices,
whether those changes are caused by factors specific to the individual
investment or financial instrument or its holder or factors affecting all
similar financial instruments or investments traded in the market, if any.
Investments that are exposed to price risk are disclosed under level 1 in note
13.
Given the higher levels of market volatility in the current year, the
Directors consider 30% (2023: 30%) best represents the margin of price risk
associated with the Company risk. A 30% (2023: 30%) increase/decrease in the
fair value of investments would result in a £163,875 (2023:
£242,580) increase/decrease in the net asset value.
ii) Currency risk
The Company regularly holds assets (both monetary and non-monetary)
denominated in currencies other than the functional currency (Sterling). It is
therefore exposed to currency risk, as the value of the financial instruments
denominated in other currencies will fluctuate due to changes in exchange
rates.
Foreign currency risk, as defined in IFRS 7, arises as the values of
recognised monetary assets and monetary liabilities denominated in other
currencies fluctuate due to changes in foreign exchange rates. IFRS 7
considers the foreign exchange exposure relating to non-monetary assets and
liabilities to be a component of market price risk, not foreign currency risk.
The Company monitors the exposure on all foreign-currency- denominated assets
and liabilities.
The Company monitors its exposure to foreign exchange rates and, where
exposure is considered significant, appropriate measures would be adopted to
minimise these exposures. The proportion of the net financial assets of the
Company were denominated in currencies other than Sterling as follows:
31 March 2024 31 March 2023
£'000 £'000
US Dollar
Cash and cash equivalents 5 4
Financial assets at fair value through profit and loss 2,870 3,247
Euro
Cash and cash equivalents 2,582 22
Financial assets at fair value through profit and loss 2,740 9,542
Canadian dollar
Financial assets at fair value through profit and loss - -
Australian Dollar
Financial assets at fair value through profit and loss 529 715
Net currency exposure 8,727 13,529
At 31 March 2024, if the exchange rate of the US Dollar had
strengthened/weakened by 10% against the Sterling, with all other variables
remaining constant, the increase/(decrease) in the profit for the year would
amount to +/- £261,341 (2023: +/- £325,061).
At 31 March 2024, if the exchange rate of the Euro had strengthened/weakened
by 10% against the Sterling, with all other variables remaining constant, the
increase/(decrease) in the profit for the year would amount to +/- £483,873
(2023: +/- £956,365).
At 31 March 2024, if the exchange rate of the Australian Dollar had
strengthened/weakened by 10% against the Sterling, with all other variables
remaining constant, the increase/(decrease) in the profit for the year would
amount to +/- £48,133 (2023: £71,475).
iii) Interest rate risk
The Company currently funds its operations through the use of equity. Cash at
bank, the majority of which was in Euros at the year end, is held at variable
rates. At the year end, the Company's financial liabilities did not suffer
interest and thus were not subject to any interest rate risk.
20. Capital Management Policy and Procedures
The Company's capital structure is derived solely from the issue of Ordinary
Shares.
The Company does not currently intend to fund any investments through debt or
other borrowings but may do so if appropriate. Investments in early stage
assets are expected to be mainly in the form of equity, with debt potentially
being raised later to fund the development of such assets. Investments in
later stage assets are more likely to include an element of debt to equity
gearing. The Company may also offer new Ordinary Shares as consideration as
well as cash, thereby helping to preserve the Company's cash for working
capital and as a reserve against unforeseen contingencies including, for
example, delays in collecting accounts receivable, unexpected changes in the
economic environment and operational problems.
The Board monitors and reviews the structure of the Company's capital on an ad
hoc basis. This review includes:
· The need to obtain funds for new investments, as and when they
arise;
· The current and future levels of gearing;
· The need to buy back Ordinary Shares for cancellation or to be
held in treasury, which takes account of the difference between the net asset
value per Ordinary Share and the Ordinary Share price;
· The current and future dividend policy; and
· The current and future return of capital policy.
The Company is not subject to any externally imposed capital requirements.
21. Events after the Financial Reporting Date
On 21 May 2024 the Company received information that the majority equity
holding in OTO was being marketed for sale due to concern around the liquidity
and viability of OTO without further investment. The Company treated this as
an adjusting event and revalued OTO to £Nil (2023:
£423,292). The Company also made a provision at a default rate of 100% for
£108,314 (2023: £Nil) for an outstanding receivable due from a loan note
issued to SWB being repaid by OTO following the sale of SWB to OTO in April
2023.
On 16 April the Company declared a special dividend of 1.0 pence (£0.01) per
SEED Share (the "Special Dividend"). This follows the Company's realisation of
its investment in Leap Gaming as originally announced on 7 December 2022. The
Special Dividend was funded from existing cash reserves and was paid on 13 May
2024 to SEED Shareholders on the register of members of the Company on 26
April 2024 (the "Record Date"), with the SEED Shares being marked ex dividend
on 25 April 2024.
On 12 April the Company received in full second and final instalment of monies
from the sale of Fralis LLC (Leap Gaming) of EUR 2,766,048 (GBP 2,364,345).
The Share Buyback programme of Ordinary Shares announced on 29 September 2023
which commenced on 2 October 2023 ended on 31 May 2024. In total the Company
purchased 19,797,500 shares at a volume weighted price of £0.0258 (2.58
pence).
- Ends -
For further information visit: www.seedinnovations.co or contact:
Ed McDermott SEED Innovations Ltd info@seedinnovations.co
Lance de Jersey
James Biddle Beaumont Cornish Limited, (0)20 7628 3396
Roland Cornish Nomad
Isabella Pierre Shard Capital Partners LLP (0)20 7186 9927
Damon Heath Broker
Ana Ribeiro St Brides Partners Ltd, seed@stbridespartners.co.uk
Isabel de Salis Financial PR
Isabelle Morris
Notes
Seed Innovations Ltd is an AIM quoted investment company offering exposure to
disruptive, high-growth, life sciences and technology ventures typically
inaccessible to everyday investors. Its strategy focuses on identifying
early-stage opportunities with upcoming investment catalysts, alongside more
mature investments providing near-term liquidity. With a portfolio of such
investments and cash reserves, the company is agile and poised to capitalise
swiftly on new investment opportunities.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR SFEFEAELSEFMRecent news on Seed Innovations
See all newsREG - Seed Innovations Ltd - Final Results
AnnouncementREG - Seed Innovations Ltd - Completion of share buy-back programme
AnnouncementREG - Seed Innovations Ltd - Investee Company Update: Little Green Pharma Ltd
AnnouncementREG - Seed Innovations Ltd - Transaction in Own Shares & TVR
AnnouncementREG - Seed Innovations Ltd - Transaction in Own Shares
Announcement