Aurora Investment - Half-year Report
26/09/2024 07:00
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RNS Number : 6768F Aurora Investment Trust PLC 26 September 2024
Aurora Investment Trust plc
LEI: 2138007OUWIZFMAGO575
Half Yearly Report
for the six months ended 30 June 2024
FINANCIAL AND PERFORMANCE HIGHLIGHTS
Performance
At At
30 June 2024
31 December 2023
(unaudited)
(audited)
Net asset value ("NAV") per share(1) 269.44p 274.34p
Share price 247.50p 247.00p
Share price discount to NAV per share(1) (8.1)% (10.0)%
Annualised ongoing charges(1) 0.42% 0.45%
The total returns in sterling for the period/year were as follows:
Six months to Year to
30 June 2024
31 December 2023
(unaudited)
(audited)
% %
NAV total return per share(1,2) (0.5)% 36.3%
Share price total return(1,2) 1.6% 28.5%
FTSE All-Share Index total return ("Benchmark") 7.4% 7.9%
(1) Definitions of these Alternative Performance Measures ("APMs")
together with how these have been calculated can be found on pages 24 and 25.
(2) Including dividend reinvested.
.
CHAIR'S STATEMENT
This report covers your Company's activities over the six months to 30 June
2024 and its financial position at that date.
Performance
Over the six months the Company's net asset value ("NAV") per share fell from
274.34p at 31 December 2023 to 269.44p at 30 June 2024, giving a total return
for the period of -0.5% (2023: +12.4%). The price at which the Company's
shares traded rose from 247.0p per share at 31 December 2023 to 247.5p at 30
June 2024, giving a share price total return of +1.6% (2023: +4.3%). These
compare with the total return over the six months for the FTSE All-Share
Index, the Company's benchmark, of +7.4% (2023: +2.5%). At the end of June the
share price stood at an 8.1% discount to the NAV per share.
Top contributors were Netflix, Lloyds and Hargreaves Lansdown. Notable
detractors included Barratt Developments and Ryanair. The Investment Manager's
Review, starting on page 5, provides further details on activity and outlook.
Investment Manager Presentation Event
Shareholders are invited to Aurora's second Investor Event, being held at 3.30
p.m. on 9 October 2024 at the Queen Elizabeth II Centre, Broad Sanctuary,
Westminster, London SW1P 3EE. Both existing and prospective Aurora
shareholders are welcome and the event will follow last year's successful
format with multiple speakers from the Investment Manager. We plan to record
the event and publish it on the Company's website. If you would like to
attend, please contact phoenix@pamp.co.uk to register.
Share Price Discount
The discount to NAV per share narrowed from 10.0% at the end of 2023 to 8.1%
as at 30 June. This narrowing is welcome and closing the discount continues to
be one of the Board's key objectives, with marketing as a key part of the
strategy. Phoenix, Liberum, and Frostrow Capital continue to promote the
Company proactively.
Merger
On 2 September 2024 the Board announced agreed heads of terms with the Board
of Artemis Alpha Trust plc ("Artemis Alpha") in respect of a proposed
combination of the assets of Artemis Alpha with the assets of the Company. The
combination, if approved by each company's respective shareholders, will be
effected by way of a scheme of reconstruction and winding up of Artemis Alpha
under section 110 of the Insolvency Act 1986 and the associated transfer of
cash and assets from Artemis Alpha to the Company in exchange for the issue of
new ordinary shares to Artemis Alpha shareholders.
If the merger completes the enlarged Company, which we plan to re-name Aurora
UK Alpha plc, will continue to be managed on the same basis as it is currently
by Phoenix Asset Management Partners Limited ("Phoenix"). Aurora's investment
objective and policy will not change and the Company's Board will also remain
unchanged.
A General Meeting circular in respect of the proposals will be published
shortly.
Investment Objective
The Company announced in June that the Board had decided the wording of the
Company's published investment objective should be clarified for consistency
with the Company's investment policy and dividend policy. The previous wording
referred to providing shareholders with "long-term returns through capital and
income growth" and the Board believed it would be clearer if these words were
replaced with "long-term total returns". Whilst these could be considered
synonymous, the Board considered "long-term total returns" to be more accurate
in the Company's context, noting in particular that the Company does not have
a fixed dividend policy or income target. The new investment objective
wording is used in this half year report. There has been no change to the
Company's investment policy or the way in which the investment portfolio is
managed. Moreover, there is no change to the dividend policy and the Board
expects to continue to distribute substantially all of the net revenue arising
from the investment portfolio.
Performance fee methodology
The Company also announced in June a change to the performance fee methodology
in relation to clawbacks. Performance fees paid to the Investment Manager can
only be retained by the Investment Manager if the Company does not
underperform in the subsequent three year lock-in period. Prior to the change,
if performance fees were clawed back at the end of that three years the high
water mark (or level at which future performance fees are payable) did not get
adjusted, which meant the Investment Manager would have to re-earn performance
that had already been generated. The Board believed this approach did not
reflect the parties' original intention that the Investment Manager should be
rewarded for generating cumulative long-term outperformance. Therefore, with
effect from close of business on 13 June 2024, the performance fee methodology
was modified to provide for the high water mark to be adjusted to take
account of the level of outperformance lost on a clawback. The Board believes
the performance fee, adjusted in this manner, properly incentivises the
Investment Manager for long-term outperformance, consistent with the
expectations of shareholders. There has been no other change to the
performance fee arrangements.
Outlook
After returns of 36.3% in 2023, it is perhaps no surprise performance in 2024
has been more muted. Significant value remains in UK equities, especially
within the portfolio itself. The Investment Manager continues to invest in
great businesses at attractive prices. It is pleasing that over the period the
Board agreed heads of terms to combine with Artemis Alpha. If approved, this
will add over 50% to the Company's market capitalisation, leading to improved
liquidity, and lower fees for shareholders. We look forward to welcoming
investors to the Investor Event in October, and shortly afterwards we look
forward to launching the Company's new website.
Lucy Walker
Chair
25 September 2024
.
OBJECTIVE AND INVESTMENT POLICY
Investment Objective
Aurora Investment Trust plc's (the "Company") objective is to provide
shareholders with long-term total returns by investing predominantly in a
portfolio of UK listed companies.
Investment Policy
The Company seeks to achieve its investment objective by investing
predominantly in a portfolio of UK listed companies. The Company may from
time to time also invest in companies listed outside the UK and unlisted
securities. The investment policy is subject to the following restrictions,
all of which are at the time of investment:
• The maximum permitted investment in companies listed outside
the UK at cost price is 20% of the Company's gross assets.
• The maximum permitted investment in unlisted securities at
cost price is 10% of the Company's gross assets.
• There are no pre-defined maximum or minimum sector exposure
levels but these sector exposures are reported to and monitored by the Board
in order to ensure that adequate diversification is achieved.
• The Company's policy is not to invest more than 15% of its
gross assets in any one underlying issuer (measured at the time of investment)
including in respect of any indirect exposure through Castelnau Group Limited.
• The Company may from time to time invest in other UK listed
investment companies, but the Company will not invest more than 10% in
aggregate of the gross assets of the Company in other listed closed-ended
investment funds.
• Save for Castelnau Group Limited, the Company will not
invest in any other fund managed by the Investment Manager.
While there is a comparable index for the purposes of measuring performance
over material periods, no attention is paid to the composition of this index
when constructing the portfolio and the composition of the portfolio is likely
to vary substantially from that of the index. The portfolio will be relatively
concentrated.
The exact number of individual holdings will vary over time but typically the
portfolio will consist of holdings in 15 to 20 companies. The Company may use
derivatives and similar instruments for the purposes of capital preservation.
The Company does not currently intend to use gearing. However, if the Board
did decide to utilise gearing the aggregate borrowings of the company would be
restricted to 30% of the aggregate of the paid-up nominal capital plus the
capital and revenue reserves.
Any material change to the investment policy of the Company will only be made
with the approval of shareholders at a general meeting. In the event of a
breach of the Company's investment policy, the Directors will announce through
a Regulatory Information Service the actions which will be taken to rectify
the breach.
.
INVESTMENT MANAGER'S REVIEW
Performance
Over the half year to 30 June 2024 the NAV per share total return was 0.3% on
a non-IFRS basis and the share price total return was 1.6%. At the end of
June, the shares were trading at an 8.5% discount to NAV. The FTSE All-Share
Index total return was 7.4% over the same period.
Up to the last month end, 31 August 2024, performance has improved, with the
NAV per share total return on a non-IFRS basis up to 5.1% year-to-date, versus
an 11.3% increase in the FTSE All-Share Index.
From an individual stock perspective, there were a number of significant
price moves in the half year. Hargreaves Lansdown was the most significant,
rising 57% following a bid approach. Netflix was another holding which had a
noteworthy move, rising 38.6% during the half year.
Other moves of note included Lloyds Bank, up 18.9%, and AO World, which was up
12.9%.
Notable price fallers included Barratt Developments, which fell 15.3% after a
bid approach for Redrow, and Ryanair, which fell 13.6%.
From a contribution perspective, Netflix was the most significant after
contributing 2.3% to the half year performance. Other contributions of note
came from Lloyds Bank and Hargreaves Lansdown, which contributed 1.5% and
1.1%, respectively. The main detractor in the half year was Barratt
Developments, where the price fall resulted in a 2% drag on the half year
result.
Activity
Given our ongoing confidence in the portfolio, activity in the half year was
limited. Notable transactions included the Lloyds Bank holding being increased
by 1%, whilst Ryanair was reduced by 1% following ongoing concerns over
Boeing's ability to deliver their new 737 Max airplane.
In normal circumstances, we only report on holdings which are above a 3%
weight. In late 2023 and early 2024 we instigated a holding in Hargreaves
Lansdown. Unfortunately, after we built a 2% holding the price moved away from
us and subsequently a bid was announced. The holding was sold in August.
We reported in the June factsheet that a good return was earned on Hargreaves
Lansdown over a short period, but that it was frustrating, as we had spent a
long period of time developing our investment thesis only for the upside not
to be fully realised.
In July, Castelnau Group, a major holding in the portfolio, announced a
revaluation of Dignity PLC. This resulted in a circa 35% increase in the
Castelnau NAV. Its weight in the Aurora Investment Trust portfolio increased
as a consequence by circa 3.75% to 13.5% at the half year end.
We reported on the revaluation in the June factsheet, and it is reproduced
below.
"Dignity Update
During the quarter we formally appointed Zillah Byng-Thorne as the new Dignity
CEO who we wrote about in the Castelnau Group Q1 Report. For those who don't
have the Castelnau reports they are available on the Castelnau Group website.
As the capital structure work is so material to the future, Zillah has been
engaged on that in advance of her appointment.
To recap where we were, based upon the level of rollover of Dignity
shareholders who stayed in after the takeover and the amount of equity we
raised for Dignity after the take private, we still had a capital structure
that was more geared than we wanted it to be. Therefore, we had embarked on a
process to seek an investor buyer for the crematoria business who would
partner with us. That process was run, and we had four funded buyers at the
end, but working with SPWOne and Zillah we also looked at alternatives because
of the amount of long-term upside we would be losing if we sell what we all
know to be highly attractive assets. The value today would not reflect any of
the uplift we expect if that business stays in the Dignity Group and remains
part of the original strategy of building a truly great and unique vertically
integrated end of life business.
An alternative way of deleveraging the Dignity Group has been found. With
surplus released from the funeral plan trusts, the business has enough
liquidity to repay £100 million of its debt. Those releases have happened,
and that process is underway as announced by Dignity on 4 July 2024. The
Phoenix facility is being repaid by using a portfolio of unencumbered
freeholds. That process launches this month July , and the proceeds are
expected in the coming months.
Because of the way that the Dignity debt is structured, this repayment has a
much bigger impact on debt service obligation than if it was a normal loan.
The £34 million of current annual debt service cost will fall to £23
million, so the covenant hurdle, which is for EBITDA to be greater than 1.5x
the debt service cost, will drop from £51 million to £34 million, a level we
are already trading over.
£540 million of securitisation debt when we became involved in the company
will be c.£400 million following this repayment. The agreement we have to
repay the B's early at a discount of c.£50 million is still in place until
the end of this year and we are still looking to utilise that.
The steps so far have already necessitated a change in the valuation of the
Dignity holding in Castelnau. This is reflected in the Castelnau NAV that has
just been released, which has risen by c.35%. This is just an initial first
step in value creation at Dignity. The valuation does reflect that even with a
lower death rate, we are on course for rising profitability this year but it
gives little to no recognition to the value of a successful execution of the
strategy, which our intrinsic value does.
Dignity is a sprawling and complicated challenge, but a lot has already been
achieved. We have been really impressed with Zillah, not because she already
has all the answers but because of how she goes about getting them and how she
gets things done. Our confidence in the probability of the potential value in
the business being unlocked has risen materially.
It's 85km to get to the summit of Mount Everest on foot. After trekking the
first 65km you reach Base Camp! That feels like where we are with Dignity."
Outlook
In early July, Gary Channon published some thoughts to investors, which were
outlined in the June factsheet.
The piece was written prior to the general election but the sentiments remain
true today.
That piece is reproduced below.
"Outlook
When a pendulum reaches the extreme point of its swing and changes direction,
it isn't because the forces acting on it change at that time, it is because
the forces pushing it in one direction are diminishing and those forces
pulling it in the other direction are growing, it changes direction when those
forces cross over. Although reluctant to proffer anything that might look like
a forecast, we feel we must share, even at the risk of future ridicule, our
growing impression that the perennial underperformance of the UK market is
turning or has turned.
The major macro forces that have been pushing it down are:
a.) The long disinvestment of UK equities by domestic
pension schemes. This has now happened and there isn't much left to divest.
b.) The negative political developments that undermined the
external attractiveness of the UK for investment. The government of Rishi
Sunak and Jeremy Hunt has returned the UK to sensible economic governance.
c.) The Brexit effect, which includes the referendum
result, the period of negotiation and then the negative impact of
implementation have now largely happened.
Countering that are:
i.) Pragmatic decisions are beginning to be made,
undoing some of the negative impacts of the way Brexit was implemented. Some
of these are technical agreements that impact trade but also include
collaborative programmes like Horizon for scientists that the UK has rejoined.
ii.) The cheapness of equities, even though bidders must
pay significant premiums to prevailing share prices, has caused a surge in the
number of acquisitions of UK businesses. Even our narrow portfolio has
experienced two takeouts (Hotel Chocolat and Hargreaves Lansdown).
iii.) UK companies are buying back their shares like never
before. It has long been a frustration of ours that there was a negative
perception in the UK about buybacks and a pressure from income funds to pay
dividends over buybacks. When your equity is cheap it is very value enhancing
for remaining shareholders to buy back your equity. What was a trickle 5 years
ago, by last year had risen to 40% of the FTSE100 buying back their shares and
that has increased and extended into the FTSE250 in 2024.
The UK economy, which has lagged since Brexit, is finally showing signs of
performing better relative to its peers and not long after you receive this
report, we are likely to have a new UK Government.
We believe an incoming Labour Government with a big enough majority not to be
hijacked by the extremes of its party, and that has spent so long in
opposition that it is hungry to prove its credentials is likely to be a
positive political force. Knowing they need economic growth to deliver their
plan, they have and need to maintain, a pro-business approach. Not being the
party that delivered Brexit, they (as did the Conservative party at the time)
campaigned for the UK to remain in the EU, however, no one is contemplating a
reversal but what we should expect is pragmatic solutions that reduce the
negative impact, which is also beneficial to the EU.
When a pendulum does reverse, it is very slow to begin with and then builds
momentum. The end of 2023 and 2024, so far, feels like that point where
backwards started to become forwards. The only other thing to say on the
matter is that a reversal in underperformance can happen through a rise in
performance or as relative resilience as others fall further. If the AI
inflated US market crashes, then the UK could be a safe port in the storm.
We have a very UK focused portfolio, which is priced attractively, generating
profits, and buying back shares. If the UK economy continues to pick up
momentum as it has done this year, then they will benefit from that.
Housebuilding is the only part of the portfolio directly impacted by policy
goals of an incoming Labour Government, and so far, the signs are positive.
The executives we speak to in the industry who have been engaging with Labour
are of the view that their plans are likely to be positive for the sector. We
have watched many manifestos arrive post elections and have seen how they
survive exposure to the civil service and then local government, however, if
the goal is more houses, then you need housebuilders to build them, and they
need a planning system that makes that achievable where the demand exists.
That seems to be accepted. Our housebuilding investments are screamingly cheap
without a scintilla of optimism about whether the new Government will succeed,
but if they do, then we are very well placed, the new Barratt Redrow will be
the UK's largest and we believe, best (on many criteria) housebuilder, and it
still trades below liquidation value.
As always, Intrinsic Value is our North Star, and right now it sits high and
shines brightly."
Steve Tatters
Director
Phoenix Asset Management Partners Ltd
25 September 2024
.
Top holdings
As at 30 June 2024
Company Sector Holding in Fair value Percentage
Company
£'000
of net assets
%
Frasers Group plc Retail 4,968,886 43,850 21.34
Barratt Developments plc Construction 5,866,312 27,695 13.47
Castelnau Group Limited(#) Financial 36,421,421 27,680 13.47
Netflix Inc Technology & Entertainment 33,500 17,877 8.70
Lloyds Banking Group plc Financial 31,379,000 17,177 8.36
Ryanair Holdings Plc Leisure 807,000 11,173 5.44
RHI Magnesita N.V. Materials 260,970 9,003 4.38
Bellway Plc Construction 306,940 7,784 3.79
easyJet Plc Leisure 1,667,168 7,631 3.71
AO World Plc Retail 6,396,000 7,100 3.45
Hargreaves Lansdown Plc Financial 545,718 6,179 3.01
Other holdings (less than 3%) 15,035 7.30
Total holdings 198,184 96.42
Other current assets and liabilities 7,382 3.58
Net assets 205,566 100.00
(#) Castelnau is a multi-sector financial holding company, listed on the
Specialist Fund Segment of the London Stock Exchange. Castelnau is also
managed by Phoenix and its value is excluded from the Company's net assets
when calculating performance fees earned by Phoenix to avoid double charging.
.
Sector Breakdown
As at 30 June 2023
SECTOR Percentage of
net assets
%
Financial* 28.00
Retail 26.72
Construction 18.14
Leisure 9.85
Technology & Entertainment 8.73
Materials 4.38
Food & Beverage 0.53
Industrials 0.07
Other current assets and liabilities 3.58
Total 100.00
* includes holding in Castelnau Group Limited
.
INTERIM MANAGEMENT REPORT
The Directors are required to provide an Interim Management Report in
accordance with the Financial Conduct Authority's ("FCA") Disclosure Guidance
and Transparency Rules ("DTR"). The Directors consider that the Chair's
Statement on pages 2 and 3 and the Investment Manager's Review on pages 5 to
8 of this Half Yearly Financial Report provide details of the important events
in the period and their impact on the financial statements. The following
statement on the Principal Risks and Uncertainties, the Related Party
Transactions, the Statement of Directors' Responsibilities, and the Investment
Manager's Review together constitute the Interim Management Report of the
Company for the six months ended 30 June 2024. The outlook for the Company for
the remaining six months of the year ending 31 December 2024 is discussed in
the Investment Manager's Review.
Details of the investments held at the period end and the structure of the
portfolio at the period end are provided on pages 9 and 10.
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company are set out on
pages 28 to 30 of the Company's most recent Annual Report, for the year ended
31 December 2023, which can be found on the Company's website at
www.aurorainvestmenttrust.com. The Board believes that the Company's principal
risks and uncertainties have not changed materially since the date of the
Annual Report and are not expected to change materially for the remaining six
months of the Company's financial year.
In summary, the principal risks and uncertainties facing the Company comprise:
• Geopolitical and economic risks: including from rising
interest rates, inflation, recession, local and global politics; and
disruptive local and global events;
• Investment objective and strategy risks: the investment
policy may not achieve the published investment objective;
• Risks related to the Investment Manager: the Company's
success is closely dependent on the performance of the Investment Manager;
• Operational risks: incorporates, amongst other things, the
potential for errors or irregularities in published information, cyber risks,
business continuity risks, and regulatory risks;
• Discount risk; ESG; and Financial Risks.
Related Party Transactions
The Company's Investment Manager is Phoenix Asset Management Partners Limited,
("Phoenix" or the "Investment Manager"). Phoenix is considered a related party
in accordance with the Listing Rules. Phoenix does not earn an ongoing annual
management fee. It will be paid an annual performance fee equal to one third
of the outperformance of the Company's net asset value total return (including
dividends and adjusted for the impact of share buybacks and the issue of new
shares) over the FTSE All-Share Index total return for each financial year.
Details of the investment management arrangements are shown in Note 5 on pages
21 and 22 of these accounts.
The Directors are also considered to be related parties. Details of the
Board's remuneration and shareholdings can be found on pages 51 to 55 of the
Company's Annual Report.
Castelnau Group Limited, one of the Company's holdings, is also managed by
Phoenix and is considered a related party.
Going Concern
The financial statements have been prepared on the going concern basis. The
Directors have a reasonable expectation, after making enquiries, that the
Company has adequate resources to continue in existence for at least 12 months
from the date of approval of this Interim Report. In reaching this conclusion,
the Directors have taken account of the principal risks and uncertainties the
Company faces and considered the liquidity of the Company's portfolio of
investments, together with its cash position, income and expense flows.
As at 30 June 2024, the Company held £7,329,000 (30 June 2023: £143,000) in
cash and cash equivalents, £197,708,000 (30 June 2023: £168,269,000) in
quoted investments and £476,000 (30 June 2023: £168,269,000) in an unquoted
investment. It is estimated that 51.5% of the portfolio could be realised in
seven days under normal conditions. The total operating expenses for the six
months to 30 June 2024 was £466,000 (30 June 2023: £377,000). The total
income during the half-year period was £1,728,000 (30 June 2023:
£1,426,000).
For and on behalf of the Board of Directors
Lucy Walker
Chair
25 September 2024
.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm to the best of their knowledge that:
• The condensed set of financial statements contained within
the Half Yearly Financial Report have been prepared in accordance with
International Accounting Standard 34 "Interim Financial Reporting", gives a
true and fair view of the assets, liabilities, financial position and profit
and loss of the Company; and
• The Interim Management Report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's DTR Rules.
Approved by the Board on 25 September 2024.
Lucy Walker
Chair
25 September 2024
.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Note Six months to 30 June 2024 Six months to 30 June 2023
(unaudited)
(unaudited)
Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
(Losses)/gains on investments - (1,738) (1,738) - 18,089 18,089
Losses on currency - (8) (8) - (2) (2)
4 Income 1,728 - 1,728 1,426 - 1,426
Gross return 1,728 (1,746) (18) 1,426 18,087 19,513
5 Investment management performance fees - 166 166 - - -
Other expenses (466) - (466) (377) - (377)
Net return before tax 1,262 (1,580) (318) 1,049 18,087 19,136
Tax (32) - (32) (25) - (25)
Net return for the period 1,230 (1,580) (350) 1,024 18,087 19,111
8 Return per share -
Basic and diluted 1.6p (2.1)p (0.5)p 1.4p 23.8p 25.1p
The total column of this statement is the Income Statement of the Company,
prepared in accordance with International Financial Reporting Standards
("IFRS"), as adopted by the United Kingdom. The supplementary revenue and
capital columns are presented in accordance with the Statement of Recommended
Practice issued by the AIC ("AIC SORP").
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the period. All
revenue is attributable to the equity holders of the Company.
There is no other comprehensive income, and therefore the net return for the
period is also the total comprehensive income.
The notes on pages 19 to 23 form part of these accounts.
.
CONDENSED STATEMENT OF FINANCIAL POSITION
Note At At
30 June
31 December
2024
2023
(unaudited)
(audited)
£'000
£'000
Non-current assets
Investments held at fair value through profit or loss 198,184 202,209
Current assets
Trade and other receivables 180 372
Cash and cash equivalents 7,329 6,248
7,509 6,620
Total assets 205,693 208,829
Current liabilities:
Other payables (127) (115)
(127) (115)
Net assets 205,566 208,714
Equity:
7 Called up share capital 19,073 19,019
Capital redemption reserve 312 312
Share premium account 111,580 111,166
Other reserve (687) (219)
Share-based payment reserve - 166
Capital reserve 73,419 74,999
Revenue reserve 1,869 3,271
Total equity 205,566 208,714
7 Shares in issue 76,292,724 76,078,460
NAV per share 269.44p 274.34p
The notes on pages 19 to 43 form part of these accounts.
.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Note Six months to Called- Capital Share Share- Other Capital Revenue Total
30 June 2024
up
redemption
premium
based
reserve
reserve
reserve
£'000
(unaudited)
share
reserve
account
payment
£'000
£'000
£'000
capital
£'000
£'000
reserve
£'000
£'000
Opening equity 19,019 312 111,166 166 (219) 74,999 3,271 208,714
Net return for the period - - - - (1,746) 1,230 (516)
Share-based payment credit - - - (166) - 166 - -
7 Share issuance in relation to 2023 performance fee 54 - 414 - (468) - - -
6 Dividends paid - - - - - - (2,632) (2,632)
Closing equity 19,073 312 111,580 - (687) 73,419 1,869 205,566
The notes on pages 19 to 23 form part of these accounts.
.
CONDENSED STATEMENT OF CHANGES IN EQUITY continued
Note Six months to Called- Capital Share Treasury Other Capital Revenue Total
30 June 2023
up
redemption
premium
shares
reserve
reserve
reserve
£'000
(unaudited)
share
reserve
account
£'000
£'000
£'000
£'000
capital
£'000
£'000
£'000
Opening equity 19,152 179 111,166 (133) (2,877) 24,421 2,870 154,778
Profit for the period - - - - - 18,087 1,024 19,111
6 Dividends paid - - - - - - (2,260) (2,260)
7 Share cancellation in relation to 2019 performance fee clawback (133) 133 - 133 - (133) - -
Closing equity 19,019 312 111,166 - (2,877) 42,375 1,634 171,629
The notes on pages 19 to 23 form part of these accounts.
.
CASH FLOW STATEMENT
Six months to Year to
30 June
31 December
2024
2023
(unaudited)
(audited)
£'000
£'000
Net cash inflow from operating activities 1,442 2,607
Investing activities
Payments to acquire non-current asset investments (9,713) (11,503)
Receipts on disposal of non-current asset investments 11,992 12,056
Net cash inflow from investing activities 2,279 553
Financing activities
Dividends paid (2,632) (2,260)
Net cash outflow from financing activities (2,632) (2,260)
Increase in cash and cash equivalents 1,089 900
Cash and cash equivalents at beginning of period/year 6,248 5,348
Losses on currency (8) -
Increase in cash and cash equivalents 1,089 900
Cash and cash equivalents at end of period/year 7,329 6,248
The notes on pages 19 to 23 form part of these accounts.
.
NOTES TO THE FINANCIAL STATEMENTS
1. Status of the financial statements
The condensed financial statements contained in this half yearly report do not
constitute statutory accounts as defined in s434 of the Companies Act 2006.
The financial information for the six months to 30 June 2024 and 30 June 2023
has not been audited or reviewed by the Company's external auditor.
The information for the year ended 31 December 2023 has been extracted from
the latest published audited financial statements. Those statutory financial
statements have been filed with the Registrar of Companies and included the
report of the auditor, which was unqualified and did not contain a statement
under Sections 498(2) or (3) of the Companies Act 2006.
No statutory accounts in respect of any period after 31 December 2023 have
been reported on by the Company's auditor or delivered to the Registrar of
Companies.
Returns for the first six months should not be taken as a guide to the results
for the full year.
2. Accounting policies
The half yearly financial information has been prepared in accordance with
IAS34 Interim Financial Reporting. The accounting policies are unchanged from
those used in the last published annual financial statements except where
otherwise stated.
3. Investments held at Fair Value Through Profit or Loss ("FVTPL")
At At
30 June
31 December
2024
2023
(unaudited)
(audited)
£'000
£'000
Listed securities 197,708 200,733
Unquoted securities 476 1,476
Total non-current investments held at FVTPL 198,184 202,209
Under IFRS13 investment companies are required to disclose the fair value
hierarchy that classifies financial instruments measured at fair value at one
of three levels according to the relative reliability of the inputs used to
estimate the fair values.
Classification Input
Level 1 Valued using quoted prices in active markets for identical assets
Level 2 Valued by reference to valuation techniques using observable inputs other than
quoted prices included within Level 1
Level 3 Valued by reference to valuation techniques using inputs that are not based on
observable market data
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset.
Classification At At
30 June
31 December
2024
2023
£'000
£'000
Level 1 197,708 200,733
Level 2 - -
Level 3 476 1,476
Total non-current investments held at FVTPL 198,184 202,209
The movement on the Level 3 unquoted investments during the period/year is
shown below:
At At
30 June
31 December
2024
2023
£'000
£'000
Opening balance 1,476 2,871
Unrealised losses at period/year end (1,000) (1,395)
Closing balance 476 1,476
4. Income
Six months to Six months to
30 June 2024
30 June 2023
£'000
£'000
Income from investments:
UK dividends 1,136 1,127
Overseas dividends 415 247
Other income:
Deposit interest 177 52
Total income 1,728 1,426
5. Investment management fees
The Company's Investment Manager does not earn an ongoing annual management
fee, but is instead paid an annual performance fee equal to one third of any
outperformance of the Company's NAV per share total return (including
dividends and adjusted for the impact of share buybacks and the issue of new
shares) over the FTSE All-Share Index total return for each financial year.
The total annual performance fee is capped at 4% per annum of the NAV of the
Company at the end of the relevant financial year if the NAV per share has
increased in absolute terms over the period and 2% if the NAV per share has
decreased in absolute terms over the period. Any outperformance that exceeds
these caps will be carried forward and only paid if the Company outperforms,
and the annual cap is not exceeded, in subsequent years.
The performance fee is subject to a high-water mark so that no fee will be
payable in any year until all underperformance of the Company's net asset
value since the last performance fee was paid has been made up.
Performance fees are settled by issuance of the Company's ordinary shares.
Such shares are issued at the NAV per share on the date of issue, so that the
then current value of the shares equates in terms of NAV to the performance
fees liability.
Any part of the performance fee that relates to the performance of Phoenix SG
will be accrued but will not be paid until such time as the Company's
investment in Phoenix SG has been realised or is capable of realisation. The
position will be reviewed at that time by reference to the realised proceeds
of sale or the fully realisable value of Phoenix SG as compared to the
original cost of acquisition.
Any performance of Castelnau Group Limited will be excluded from the
calculation of the performance fee payable by the Company to Phoenix.
All other performance fees are subject to a review and clawback procedure if
the Company underperforms its benchmark over a period of three years following
the end of the financial year in respect of which the relevant fee was paid.
Shares received by the Investment Manager under this arrangement must be
retained by the Investment Manager throughout the three-year period to which
the clawback procedure applies.
As a result of the above all or any part of the performance fees might become
recoverable. The Company reflects this in the charge recognised in subsequent
accounting periods within the vesting period of the Investment Manager through
the true-up mechanism in IFRS 2.
No performance fee has been charged in the Income Statement for the period
ended 30 June 2024 (30 June 2023: £nil). A credit of £166,000 relating to
the reversal of IFRS 2 charges previously recorded has been recognised in the
Income Statement.
6. Dividends
The final dividend of 3.45p per share or £2,632,000 in total in respect of
the year ended on 31 December 2023 went ex-dividend on 9 May 2024 and had a
record date of 10 May 2024. The dividend was paid on 20 June 2024. This
dividend was not reflected in the financial statements for the year ended 31
December 2023, but is reflected during the period to 30 June 2024.
The final dividend of 2.97p per share in respect of the year ended on
31 December 2022 went ex-dividend on 8 June 2023 and had a record date of 9
June 2023. The dividend was paid on 4 July 2023. This dividend was not
reflected in the financial statements for the year ended 31 December 2022,
but is reflected in the financial statements for the period to 30 June 2023.
7. Share capital
At At
30 June
31 December
2024
2023
Allotted, called up and fully paid Number 76,292,724 76,078,460
Ordinary Shares of 25p £'000 19,073 19,019
The Company did not purchase any of its own shares during the period ended 30
June 2024 or the year ended 31 December 2023. At 30 June 2024, the Company had
76,292,724 (31 December 2023: 76,078,460) shares in issue. The Company has a
single share class, being ordinary shares that each have a nominal value of
25p, and has not issued any other forms of security. There were no shares in
treasury at 30 June 2024, so the total was 76,292,724 (31 December 2023:
76,078,460).
Shares Issued under the Company's Block Listing Facility
The Company has a Block Listing Facility which was last renewed on 17 April
2020. As at period end, 40,245,062 shares remained unallotted under the
facility. No shares were issued under the Block Listing Facility during the
period under review.
Shares Issued to the Investment Manager
On 17 January 2024, 172,373 new shares were issued to the Company's Investment
Manager at a price of 206.32p per share and on 30 April 2024, 41,891 new
shares were issued at a price of 267.79p per share to the Company's Investment
Manager, together representing the performance fee earned for the year ended
31 December 2023. These new shares are subject to a 36-months lock-in from
the date of their issue and a three year clawback period.
The clawback period on restricted shares issued to the Investment Manager in
relation to the performance period ended 31 December 2020 finished on 31
December 2023 and 1,290,932 shares originally issued to the Investment Manager
in respect of that clawback period became unrestricted shares under the
Investment Manager's ownership.
8. Earnings/(loss) per share
The capital, revenue and total return per share are based on the net return
shown in the Income Statement and the weighted average of 76,239,060 (30 June
2023: 76,078,460) shares in issue during the period.
9. Transactions with Related Parties and Investment Manager
The Board of Directors are key management personnel of the Company and
therefore related parties. Fees payable to the Directors in respect of the
period to 30 June 2024 were £67,000 (30 June 2023: £80,000).
Phoenix Asset Management Partners Limited ("Phoenix"), the Company's AIFM and
Investment Manager, and Castelnau Group Limited ("Castelnau") are related
parties under the Listing Rules. Castelnau is a related party as the Company
is a substantial shareholder under the UK Listing Rules.
During the six month ended 30 June 2024, there were no transactions between
the Company and Castelnau, and fees payable to the Investment Manager are
detailed in the Income Statement and Note 5.
.
ALTERNATIVE PERFORMANCE MEASURES
Annualised ongoing charges
A measure of the regular, recurring annual costs of running an investment
company, expressed as a percentage of average net assets. The measure is
calculated by expressing the regular expenses of the year as a percentage of
the average net assets during the year.
At At
30 June 2024
31 December 2023
(unaudited)
(audited)
Average NAV a 205,262 181,978
Annualised expenses b 852 749
Non-recurring credit c - (68)
Annualised ongoing expenses d=b-c 852 817
Annualised ongoing charges figure d÷a 0.42% 0.45%
Share price discount to NAV per share
The amount, expressed as a percentage, by which the share price is less than
the NAV per share.
At At
30 June 2024
31 December 2023
(unaudited)
(audited)
NAV per share a 269.44p 274.34p
Share price b 247.50p 247.00p
Discount (b-a)÷a (8.1)% (10.0)%
Total returns
A measure of performance that includes both income and capital returns. This
takes into account capital gains and reinvestment of dividends paid out by the
Company on the ex-dividend date.
Six months to Year to
30 June 2024
31 December 2023
(unaudited)
(audited)
NAV Share price NAV Share price
Opening balance a 274.34p 247.00p 203.45p 194.50p
Closing balance b 269.44p 247.50p 274.34p 247.00p
Price movement c=(b-a)÷a (1.8)% 0.2% 34.8% 27.0%
Impact of dividend reinvestment d 1.3% 1.4% 1.5% 1.5%
Total returns c+d (0.5)% 1.6% 36.3% 28.5%
NAV Reconciliation
NAV NAV
(£'000)
per share
NAV as published on 1 July 2024 206,348 270.47p
Reversal of performance fee clawback accounted
for under non-IFRS2 approach (782) (1.03)p
NAV as disclosed in this half yearly report 205,566 269.44p
.
Frostrow Capital LLP
Company Secretary
020 3709 8733
25 September 2024
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