Baillie Gifford UK - Baillie Gifford UK Growth Trust half yearly report
29/11/2024 07:00
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RNS Number : 0913O Baillie Gifford UK Growth Trust PLC 29 November 2024
RNS Announcement
Baillie Gifford UK Growth Trust plc (BGUK)
Legal Entity Identifier: 549300XX386SYWX8XW22
Results for the six months to 31 October 2024
The following is the unaudited Interim Financial Report for the six months to
31 October 2024 which was approved by the Board on 28 November 2024.
Over the six month period to 31 October 2024, the Company's net asset value
per share total return was +8.1% compared to +1.8% for the FTSE All-Share
Index total return. The share price total return for the same period was
+11.7%.
− As Chairman, I am in the fortunate position of writing my first statement
for the Company at a time when performance has improved. We have in Baillie
Gifford UK Growth Trust a portfolio of growth companies on unusually
attractive valuations.
− Good operational performance was rewarded with notable share price rises
in several holdings.
− We sold our positions in Victrex, Hargreaves Lansdown and IG Group, and
took a new holding in Applied Nutrition.
− The net revenue return per share was 2.45p compared to 2.78p in the
corresponding period last year. As highlighted previously, no interim dividend
will be declared as all dividends are paid as a single final dividend.
− Over the period a total of 4,957,992 shares were bought back for treasury.
Following the purchase of a further 1,748,609 shares since the period end, as
at 27 November 2024 the Company has 20,945,278 shares held in treasury
accounting for 15.0% of the Company's current shares in issue.*
− The UK is full of exciting growth opportunities and the Company is well
placed to maximise on that growth potential.
*This percentage calculation excludes treasury shares from the denominator.
Total return information is sourced from Baillie Gifford/LSEG. See disclaimer
at the end of this announcement. For a definition of terms see Glossary of
terms and Alternative Performance Measures at the end of this announcement.
Baillie Gifford UK Growth Trust plc invests to achieve capital growth
predominantly from investment in UK equities with the aim of providing a total
return in excess of the FTSE All-Share Index total return.
The Company is managed by Baillie Gifford & Co, an Edinburgh based fund
management group with around £224.6 billion under management and advice as at
28 November 2024.
Baillie Gifford UK Growth Trust plc is a listed UK company. The value of its
shares and any income from them can fall as well as rise and investors may not
get back the amount invested. The Company is listed on the London Stock
Exchange and is not authorised or regulated by the Financial Conduct
Authority. You can find up to date performance information about Baillie
Gifford UK Growth Trust plc at bgukgrowthtrust.com(‡).
Past performance is not a guide to future performance. See disclaimer at end
of this announcement.
(‡) Neither the contents of the Managers' website nor the contents of any
website accessible from hyperlinks on the Managers' website (or any other
website) is incorporated into, or forms part of, this announcement.
28 November 2024
For further information please contact:
Anzelm Cydzik, Baillie Gifford & Co
Tel: 0131 275 2000
Jonathan Atkins, Four Communications
Tel: 0203 920 0555 or 07872 495396
Principal risks and uncertainties
The principal risks facing the Company are financial risk, investment strategy
risk, discount risk, climate and governance risk, regulatory risk, custody and
depositary risk, operational risk, leverage risk, political risk, cyber
security risk and emerging risks. An explanation of these risks and how they
are managed is set out on pages 34 to 37 of the Company's Annual Report and
Financial Statements for the year to 30 April 2024 which is available on the
Company's website: bgukgrowthtrust.com
(https://www.bailliegifford.com/en/uk/individual-investors/funds/baillie-gifford-uk-growth-trust/)
. The principal risks and uncertainties have not changed since the date of
that report.
Responsibility statement
We confirm that to the best of our knowledge:
a. the condensed set of Financial Statements has been
prepared in accordance with FRS 104 'Interim Financial Reporting';
b. the Interim Management Report includes a fair review of
the information required by Disclosure Guidance and Transparency Rule 4.2.7R
(indication of important events during the first six months, their impact on
the Financial Statements and a description of the principal risks and
uncertainties for the remaining six months of the year); and
c. the Interim Financial Report includes a fair review of
the information required by Disclosure Guidance and Transparency Rule 4.2.8R
(disclosure of related party transactions and changes therein).
On behalf of the Board
Neil Rogan
Chairman
28 November 2024
Chairman's interim update
I am in the fortunate position of writing my first Chairman's statement for
the Company at a time when performance has improved.
Over the six months to 31 October 2024 your NAV per share total return was
+8.1% and your share price total return was +11.7%, both outperforming the
FTSE All-Share Index total return of +1.8%. As you can see in the table below
the one-year performance numbers are also significantly ahead of the benchmark
index, but the three-year and five-year performance numbers still lag
considerably behind. Iain and Milena analyse performance in more detail in
their report.
Total return performance(*)
6 month 1 Year 3 Year 5 Year
FTSE All-Share Index(†) 1.8% 16.3% 19.7% 31.9%
NAV 8.1% 23.6% (10.2%) 15.3%
Share price 11.7% 27.1% (16.3%) 13.4%
There is still much work to be done by the Managers and by the Board to turn
around this Company. Obviously, the main determinant of our future success
will be building on this performance improvement over the next three to five
years. Your Board believes that the ingredients are in place for Baillie
Gifford to deliver this improvement, with their clear investment philosophy, a
robust investment process and a strong team led by Iain and Milena managing
the portfolio. They have learnt the pitfalls of their style of investing, such
as paying too high an entry price for a good company or holding on too long
when something starts to go wrong. Their response has been an intensive
programme of company meetings to review and upkeep the validity of the
investment case for all your holdings.
What can the Board do? We have introduced a 100% performance conditional
tender, which means that shareholders will be given in 2029 the opportunity to
tender as much of their holding as they wish at a 2% discount to NAV if
performance fails to beat the comparative index over the five-year period to
30 April 2029. We have also committed to an extra continuation vote in 2027.
And we have stepped up our buyback program this year to the extent that we
have bought back 4,957,992 shares in the six months to 31 October 2024,
representing 3.4% of the number of shares in issue at the start of the year.
We can also set expectations. Baillie Gifford's investment style means that
this Company is likely to perform best when markets are rising, when growth
stocks are outperforming value stocks and when mid- and small-cap stocks are
outperforming large-caps. Because the active share of the portfolio is large
(87%; meaning that 87% of the portfolio is different from the FTSE All-Share
Index) performance outcomes are likely to remain significantly different to
the index.
The Board's dividend policy remains unchanged, which is to pay out at least
85% of earned income in one payment per year, putting any excess into revenue
reserves. The Board is responsible for the level of ongoing charges which was
a competitive 0.70% per annum at 30 April 2024. The major component of this
is the 0.50% management fee paid to Baillie Gifford.
Turning to Board composition, I would like to record the Board's thanks to
Carolan Dobson who stood down as Chairman in August having served on the board
for nearly ten years. We are in the final stages of recruiting a new director
whom we expect to join in January 2025.
Outlook
Looking at the numbers reveals we have in Baillie Gifford UK Growth Trust a
portfolio of growth companies on unusually attractive valuations. The blended
historic price to earnings ratio for the portfolio is around 20 times, with
10% earnings growth predicted for the next three years and companies that
should produce superior growth beyond that horizon. This is a much better
starting position for a growth portfolio than has been the case for many
years. Many of the companies held will be able to grow even if the UK economy
remains lacklustre. But the real excitement would come if the UK was able to
unleash its growth potential. The new Government's policy is geared towards
increasing growth in the economy but achieving this will be challenging.
The best-case scenario would see a return to the growth style tailwind that
helps Baillie Gifford perform at the same time as the UK moving back up
towards its normal valuation levels versus world markets and investment trust
discounts reverting to mean. Any one of these would be good news for
shareholders.
Neil Rogan
Chairman
28 November 2024
(*) Alternative Performance Measure, see Glossary of terms and
Alternative Performance Measures below.
(†) Source: LSEG/Baillie Gifford and relevant underlying data
providers. See disclaimers below.
Past performance is not a guide to future performance.
Interim management report
Even as bottom up investors, it was hard to ignore the chatter surrounding the
UK General Election, interest rate cuts, the political drama across in the US
and efforts by the Chinese to stimulate their economy. However the relatively
small bounce in the FTSE All-Share over the period did highlight that these
factors are often more short term and transitory than many people think. What
was undoubtedly important from a psychological viewpoint was the cut in
interest rates by the Bank of England in August. There has been no doubt that
for growth investors the rapid rise in interest rates since the outbreak of
inflation post the Covid lockdown has been a significant headwind. The fact
that inflation rates have fallen significantly and that interest rates appear
to have peaked should allow the stock market to focus more on fundamentals of
companies bodes well for our highly differentiated portfolio with the growth
potential it contains.
This trend played out to some extent in the period, although it is a very
short period to draw firm conclusions. Nevertheless, good operational
performance was rewarded with notable share price rises in holdings such as
Autotrader, Experian, Games Workshop, Volution, Just Group and AJ Bell. The
welcome absence of no further bad news from the wealth manager St James's
Place also led a large jump in the share price albeit from a fairly low level
at the start of the period. On the less positive side, the market was still
unforgiving of trading disappointments as we saw in holdings such as Diageo
& Burberry (poor trading from both), Page Group (a tough current climate
for recruitment firms) and Kainos (Government IT contract delays). Elsewhere
some of our engineers such as Renishaw and Bodycote fell as markets worried
about the impact of some tough end markets on their near term prospects.
Transactions
There were a few notable transactions in the period. We exited our position in
Victrex, the speciality chemicals business as we grew increasingly downbeat
that the new product areas they are trying to commercialise are taking longer
than hoped and may not be material enough to make a difference to the more
mature core business.
We decided to sell our position in Hargreaves Lansdown following its agreed
takeover by private equity. We have been disappointed by the performance of
this leading savings platform business in recent years, as a number of
management missteps have ultimately led to disappointing inflows into their
platform in comparison to the other platform businesses owned in the portfolio
such as Integrafin and notably AJ Bell. Whilst we had been impressed by the
new CEO at Hargreaves Lansdown and his plans for getting a grip on the
business, we also felt that it would take time and money to fix, so it was not
a total surprise that an opportunistic bid at a difficult time for the
business was accepted by the board given the uplift to the prevailing share
price.
We also sold our longstanding position in the financial spread betting
business IG Group after a decent bounce in the share price. A new CEO has been
installed and has been brutally honest that while the business is very
profitable, it has lost market share and missed out on growth opportunities by
not being nimble enough. While we found that candour refreshing, we decided
that there were risks in his reset strategy which might involve acquisitions
where this business has had decidedly mixed results in the past.
Finally, we bought a new holding in Applied Nutrition at its floatation on the
market. The business is founder led, has built a strong and profitable
position in certain sports related markets and we think it has the opportunity
to grow significantly both in the UK and more importantly internationally.
Encouraging evidence of the latter is signing up well known supermarkets to
stock some of their products and they believe that these relationships can be
materially expanded in the future. We think Applied Nutrition's edge is having
a nimble and innovative culture where the business can test and launch new
flavours or products in relatively short order in comparison to competitors.
Outlook
Our style as managers is to stick to our processes, keep a vigilant eye on our
holdings and try to avoid being unduly despondent or euphoric. While it is
pleasing to see a decent period of performance for the Company, we are not
getting carried away. What we are more concerned with is owning a portfolio of
exciting growth names and trying to ensure that the management teams are
executing on that long term potential. In turbulent times this remains a
challenge, but at the same time the rewards for owners of such businesses that
can execute on their plans is as attractive and as relevant as ever.
Iain McCombie and Milena Mileva
Baillie Gifford & Co
28 November 2024
The principal risks and uncertainties facing the Company are set out above.
Related party transaction disclosures are set out in note 9 below.
The managers' core investment principles
Investment philosophy
The following are the three core principles underpinning our investment
philosophy. We have a consistent, differentiated long-term investment approach
to managing UK equities that should stand investors in the Company in good
stead:
Growth
We search for the few companies which have the potential to grow substantially
and profitably over many years. Whilst we have no insight into the short-term
direction of a company's share price, we believe that, over the longer term,
those companies which deliver above average growth in cash flows will be
rewarded with above average share price performance and that the power of
compounding is often under-appreciated by investors. Successful investments
will benefit from a rising share price and also from income accumulated over
long periods of time.
Patience
Great growth companies are not built in a day. We firmly believe that
investors need to be patient to fully benefit from the scale of the potential.
Our investment time horizon, therefore, spans decades rather than quarters.
This patient, long-term approach affords a greater chance for the superior
growth and competitive traits of companies to emerge as the dominant influence
on their share prices and allows compounding to work in the investors' favour.
Active investment management
It is our observation that many investors pay too much attention to the
composition of market indices and active managers should make meaningful
investments in their best ideas regardless of the weightings of the index. For
example, we would never invest in a company just because it is large or to
reduce risk. As a result, shareholders should expect the composition of the
portfolio to be significantly different from the benchmark. This
differentiation is a necessary condition for delivering superior returns over
time and shareholders should be comfortable tolerating the inevitable ups and
downs in short-term relative performance that will follow from that. Portfolio
construction flows from the investment beliefs stated above.
List of investments as at 31 October 2024 (unaudited)
Name Business Value % of total
£'000 assets (*)
Basic materials
Rio Tinto Metals and mining company 5,662 1.8
5,662 1.8
Consumer discretionary
Games Workshop Toy manufacturer and retailer 17,802 5.7
Howden Joinery Manufacturer and distributor of kitchens to trade customers 12,111 3.9
4imprint Direct marketer of promotional merchandise 9,679 3.1
RELX Professional publications and information provider 6,327 2.0
Moonpig Online greetings card and gifting platform 5,731 1.8
Burberry Luxury goods retailer 3,128 1.0
54,778 17.5
Consumer staples
Diageo International drinks company 6,824 2.2
Applied Nutrition Premium nutrition supplement retailer 1,333 0.4
8,157 2.6
Financials
AJ Bell UK wealth manager 13,125 4.2
Just Group Provider of retirement income products and services 10,494 3.4
St. James's Place UK wealth manager 8,717 2.8
Legal & General Insurance and investment management company 8,465 2.7
Lancashire Holdings General insurance 7,653 2.5
IntegraFin Provides platform services to financial clients 7,216 2.3
Prudential International life insurer 5,943 1.9
Hiscox Property and casualty insurance 5,232 1.7
Molten Ventures Technology focused venture capital firm 4,428 1.4
71,273 22.9
Healthcare
Genus World leading animal genetics company 8,336 2.7
Creo Medical Designer and manufacturer of medical equipment 835 0.3
Exscientia Biotech company 496 0.1
Oxford Nanopore Novel DNA sequencing technology 415 0.1
10,082 3.2
Industrials
Volution Group Supplier of ventilation products 18,498 5.9
Experian Global provider of credit data and analytics 17,225 5.5
Ashtead Construction equipment rental company 13,929 4.5
Wise Online platform to send and receive money 9,616 3.1
Bunzl Distributor of consumable products 8,794 2.8
Renishaw Metrology company 8,026 2.6
Halma Specialist engineer 7,935 2.5
Inchcape Car wholesaler and retailer 7,015 2.2
Bodycote Heat treatment and materials testing 5,152 1.7
PageGroup Recruitment consultancy 3,902 1.2
FDM Group Provider of professional services focusing on information technology 2,771 0.9
102,863 32.9
Real estate
Rightmove Online property portal 6,262 2.0
Helical Property developer 3,618 1.2
9,880 3.2
Technology
Auto Trader Group Advertising portal for second hand cars in the UK 18,103 5.8
Softcat IT reseller and infrastructure solutions provider 10,501 3.4
Kainos Group IT services and implementer 6,825 2.2
First Derivatives IT consultant and software developer 4,452 1.4
Wayve Technologies Ltd Series B Pref.(§) Developer of fully autonomous driving systems 3,338 1.1
43,219 13.9
Total equities 305,914 98.0
Net liquid assets 6,272 2.0
Total assets (*) 312,186 100.0
(§) Denotes private company investment.
(*) Total assets less current liabilities, before deduction of
borrowings. See Glossary of terms and Alternative Performance Measures below.
Stocks highlighted in bold are the 20 largest holdings.
Income statement (unaudited)
For the six months ended 31 October 2024 For the six months to 31 October 2023 For the year ended 30 April 2024 (audited)
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments - 19,037 19,037 - (38,005) (38,005) - (6,288) (6,288)
Currency (losses)/gains - (20) (20) - 54 54 - (93) (93)
Income 4,281 - 4,281 4,812 - 4,812 9,787 - 9,787
Investment management fee 3 (223) (520) (743) (208) (484) (692) (421) (982) (1,403)
Other administrative expenses (306) - (306) (267) - (267) (568) - (568)
Net return before finance costs and taxation 3,752 18,497 22,249 4,337 (38,435) (34,098) 8,798 (7,363) 1,435
Finance cost of borrowings (208) (485) (693) (155) (361) (516) (314) (732) (1,046)
Net return before taxation 3,544 18,012 21,556 4,182 (38,796) (34,614) 8,484 (8,095) 389
Tax - - - - - - - - -
Net return after taxation 3,544 18,012 21,556 4,182 (38,796) (34,614) 8,484 (8,095) 389
Net return per ordinary share 4 2.45p 12.44p 14.89p 2.78p (25.81p) (23.03p) 5.68p (5.42p) 0.26p
Note: 5 - - 5.60p
Dividends paid and payable per share
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital columns are prepared under
guidance published by the Association of Investment Companies.
All revenue and capital items in the above statements derive from continuing
operations.
A Statement of Comprehensive Income is not required as all gains and losses of
the Company have been reflected in the above statement.
The accompanying notes below are an integral part of the Financial Statements.
Balance sheet (unaudited)
Notes At 31 October At 30 April
2024 2024
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 6 305,914 296,590
Current assets
Debtors 563 2,242
Cash and cash equivalents 6,812 1,917
7,375 4,159
Creditors
Amounts falling due within one year:
Bank loan 7 (24,350) (16,350)
Other creditors (1,102) (1,246)
(25,452) (17,596)
Net current liabilities (18,077) (13,437)
Net assets 287,837 283,153
Capital and reserves
Share capital 40,229 40,229
Share premium account 11,664 11,664
Capital redemption reserve 19,759 19,759
Warrant exercise reserve 417 417
Share purchase reserve 40,619 49,380
Capital reserve 161,520 143,508
Revenue reserve 13,629 18,196
Shareholders' funds 287,837 283,153
Net asset value per ordinary share(*) 203.1p 193.0p
Ordinary shares in issue 8 141,720,515 146,678,507
(*) See Glossary of terms and Alternative Performance
Measures below.
The accompanying notes below are an integral part of the Financial Statements.
Statement of changes in equity (unaudited)
Six months to 31 October 2024
Notes Share Share Capital Warrant Share Capital Revenue Shareholders'
capital premium redemption exercise purchase reserve (*) reserve funds
£'000 account reserve reserve reserve £'000 £'000 £'000
£'000 £'000 £'000 £'000
Shareholders' funds at 1 May 2024 40,229 11,664 19,759 417 49,380 143,508 18,196 283,153
Net return after taxation - - - - - 18,012 3,544 21,556
Ordinary shares bought back into treasury 8 - - - - (8,761) - - (8,761)
Dividends paid 5 - - - - - - (8,111) (8,111)
Shareholders' funds at 31 October 2024 40,229 11,664 19,759 417 40,619 161,520 13,629 287,837
Six months to 31 October 2023
Notes Share Share Capital Warrant Share Capital Revenue Shareholders'
capital premium redemption exercise purchase reserve (*) reserve funds
£'000 account reserve reserve reserve £'000 £'000 £'000
£'000 £'000 £'000 £'000
Shareholders' funds at 1 May 2023 40,229 11,664 19,759 417 55,628 151,603 15,122 294,422
Net return after taxation - - - - - (38,796) 4,182 (34,614)
Ordinary shares bought back into treasury 8 - - - - (865) - - (865)
Dividends paid 5 - - - - - - (5,410) (5,410)
Shareholders' funds at 31 October 2023 40,229 11,664 19,759 417 54,763 112,807 13,894 253,533
(*) The Capital Reserve balance at 31 October 2024 includes investment
holding gains of £21,746,000 (31 October 2023 - losses of £41,156,000).
The accompanying notes below are an integral part of the Financial Statements.
Cash flow statement (unaudited)
Six months to Six months to
31 October 2024 31 October 2023
£'000 £'000
Cash flows from operating activities
Net return before taxation 21,556 (34,614)
Adjustments to reconcile company profit before tax to net cash flow from
operating activities
Net (gains)/losses on investments (19,037) 38,005
Currency losses/(gains) 20 (54)
Finance costs of borrowings 693 516
Other capital movements
Changes in debtors 1,087 1,264
Changes in creditors (6) (84)
Cash from operations(*) 4,313 5,033
Interest paid (545) (361)
Net cash inflow from operating activities 3,768 4,672
Cash flows from investing activities
Acquisitions of investments (1,851) (16,732)
Disposals of investments 12,156 16,117
Net cash inflow/(outflow) from investing activities 10,305 (615)
Cash flows from financing activities
Bank loan drawn down 8,000 1,900
Equity dividends paid (8,111) (5,410)
Ordinary shares bought back into treasury and stamp duty thereon (9,047) (865)
Net cash outflow from financing activities (9,158) (4,375)
Increase/(decrease) in cash and cash equivalents 4,915 (318)
Exchange movements (20) 54
Cash and cash equivalents at start of period 1,917 5,512
Cash and cash equivalents at end of period(†) 6,812 5,248
(*) Cash from operations includes dividends received of £5,305,000
(2023 - £5,994,000) and £48,000 deposit interest (2023 - £65,000).
(†) Cash and cash equivalents represent cash at bank.
The accompanying notes below are an integral part of the Financial Statements.
Notes to the Financial Statements (unaudited)
01 Basis of accounting
The condensed Financial Statements for the six months to 31 October 2024
comprise the statements set out above together with the related notes below.
They have been prepared in accordance with FRS 104 'Interim Financial
Reporting' and the AIC's Statement of Recommended Practice issued in November
2014 and updated in July 2022 with consequential amendments and have not been
audited or reviewed by the Auditor pursuant to the Auditing Practices Board
Guidance 'Review of Interim Financial Information'. The Financial Statements
for the six months to 31 October 2024 have been prepared on the basis of the
same accounting policies as set out in the Company's Annual Report and
Financial Statements at 30 April 2024.
Going concern
Having considered the nature of the Company's principal risks and
uncertainties, as set out on the inside front cover, together with its current
position, investment objective and policy, its assets and liabilities and
projected income and expenditure, together with the Company's dividend policy,
it is the Directors' opinion that the Company has adequate resources to
continue in operational existence for the foreseeable future. The Board has,
in particular, considered heightened geopolitical tensions, conflicts and
macroeconomic concerns. It has reviewed the results of specific leverage and
liquidity stress testing, but does not believe the Company's going concern
status is affected. The Company's assets, the majority of which are
investments in quoted securities which are readily realisable, exceed its
liabilities significantly and could be sold to repay borrowings if required.
All borrowing facilities require the prior approval of the Board. Gearing
levels and compliance with borrowing covenants are reviewed by the Board on a
regular basis. In accordance with the Company's Articles of Association,
shareholders have a right to vote on the continuation of the Company every
five years. This resolution was last passed at the 2024 Annual General
Meeting. The Board made a commitment during 2024 to put forward a resolution
at the Annual General Meeting to be held in 2027 for the continuation of the
Company. This is in addition to the five-yearly continuation votes and, as
such, a continuation vote is expected to be held in 2029 as well. The
Directors have considered the continuation vote to be held at the 2027 Annual
General Meeting, along with the other factors set out above, and are satisfied
that it is appropriate to adopt the going concern basis of accounting in
preparing these Financial Statements and confirm that they are not aware of
any material uncertainties which may affect the Company's ability to continue
to do so over a period of at least twelve months from the date of approval of
these Financial Statements.
02 Financial information
The financial information contained within this Interim Financial Report does
not constitute statutory accounts as defined in sections 434 to 436 of the
Companies Act 2006. The financial information for the year ended 30 April
2024 has been extracted from the statutory accounts which have been filed with
the Registrar of Companies. The Auditor's Report on those accounts was not
qualified, did not include a reference to any matters to which the Auditor
drew attention by way of emphasis without qualifying their report, and did not
contain a statement under sections 498(2) or (3) of the Companies Act 2006.
03 Investment manager
Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford
& Co, has been appointed by the Company as its Alternative Investment Fund
Manager ('AIFM') and Company Secretary. The investment management function has
been delegated to Baillie Gifford & Co. The management agreement can be
terminated on six months' notice. The annual fee is 0.5% of net asset value,
calculated and payable quarterly.
04 Net return per ordinary share
Six months to Six months to
31 October 2024 31 October 2023
£'000 £'000
Revenue return after taxation 3,544 4,182
Capital return after taxation 18,012 (38,796)
Total net return 21,556 (34,614)
Weighted average number of ordinary shares in issue 144,731,603 150,285,181
Net return per ordinary share is based on the above totals of revenue and
capital and the weighted average number of ordinary shares in issue during
each period.
There are no dilutive or potentially dilutive shares in issue.
05 Dividends
Six months to Six months to
31 October 2024 31 October 2023
£'000 £'000
Amounts recognised as distributions in the period: 8,111 5,410
Previous year's final dividend of 5.60p (2023 - 3.60p), paid 13 September
2024
06 Fixed assets - investments
Fair value hierarchy
The fair value hierarchy used to analyse the basis on which the fair values of
financial instruments held at fair value through the profit or loss account
are measured is described below. Fair value measurements are categorised on
the basis of the lowest level input that is significant to the fair value
measurement.
Level 1 - using unadjusted quoted prices for identical instruments in an
active market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
As at 31 October 2024 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Listed equities 302,576 - - 302,576
Unlisted preference shares(*) - - 3,338 3,338
Total financial asset investments 302,576 - 3,338 305,914
As at 30 April 2024 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Listed equities 293,252 - - 293,252
Unlisted preference shares(*) - - 3,338 3,338
Total financial asset investments 293,252 - 3,338 296,590
(*) The unlisted preference shares investment represents a holding in Wayve
Technologies Ltd.
The fair value of listed investments is quoted bid price. Listed investments
are categorised as Level 1 if they are valued using unadjusted quoted prices
for identical instruments in an active market and as Level 2 if they do not
meet all these criteria but are, nonetheless, valued using market data.
Unlisted investments are valued at fair value by the Directors following a
detailed review and appropriate challenge of the valuations proposed by the
Managers. The Managers' unlisted investment policy applies methodologies
consistent with the International Private Equity and Venture Capital Valuation
Guidelines 2022 ('IPEV'). These methodologies can be categorised as follows:
(a) market approach (multiples, industry valuation benchmarks and available
market prices); (b) income approach (discounted cash flows); and (c)
replacement cost approach (net assets). The Company's holding in an unlisted
investment is categorised as Level 3 as unobservable data is a significant
input to its fair value measurement.
07 Bank loans
At 31 October 2024 the Company had borrowings of £24,350,000 (30 April 2024
- £16,350,000).
This was drawn down under the one year £30 million unsecured revolving credit
loan facility with The Royal Bank of Scotland International Limited which
expires in July 2025.
08 Share capital
At 31 October 2024, the Company had the authority to buy back 19,277,878
ordinary shares and to allot or sell from treasury 14,604,350 ordinary shares
without application of pre-emption rights in accordance with the authorities
granted at the AGM in September 2024. During the six months to 31 October
2024, no shares were sold from treasury (year to 30 April 2024 - no shares
were sold from treasury). During the six months to 31 October 2024, 4,957,992
ordinary shares with a nominal value of £1,239,000 were bought back at a
total cost of £8,761,000 and held in treasury (year to 30 April 2024 -
3,841,977 ordinary shares with a nominal value of £960,000 were bought back
at a total cost of £6,248,000 and held in treasury).
09 Related party transactions
There have been no transactions with related parties during the first six
months of the current financial year that have materially affected the
financial position or the performance of the Company during that period and
there have been no changes in the related party transactions described in the
last Annual Report and Financial Statements that could have had such an effect
on the Company during that period.
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
Glossary of terms and Alternative Performance Measures ('APM')
An alternative performance measure is a financial measure of historical or
future financial performance, financial position, or cash flows, other than a
financial measure defined or specified in the applicable financial reporting
framework.
Total assets
This is the Company's definition of adjusted total assets, being the total
value of all assets held less all liabilities (other than liabilities in the
form of borrowings).
Net asset value
Also described as shareholders' funds. Net asset value (NAV) is the value of
total assets less liabilities (including borrowings). The NAV per share is
calculated by dividing this amount by the number of ordinary shares in issue
(excluding treasury shares).
Net liquid assets
Net liquid assets comprise current assets less current liabilities, excluding
borrowings.
Discount/premium (APM)
As stockmarkets and share prices vary, an investment trust's share price is
rarely the same as its net asset value. When the share price is lower than the
net asset value per share it is said to be trading at a discount. The size of
the discount is calculated by subtracting the share price from the net asset
value per share and is usually expressed as a percentage of the net asset
value per share. If the share price is higher than the net asset value per
share, this situation is called a premium.
31 October 30 April
2024 2024
Closing NAV per share 203.1p 193.0p
Closing share price 177.0p 163.5p
Discount (12.9%) (15.3%)
Ongoing charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a
percentage of the average Net Asset Value. The ongoing charges are calculated
on the basis prescribed by the Association of Investment Companies.
Total return (APM)
The total return is the return to shareholders after reinvesting the net
dividend on the date that the share price goes ex-dividend.
31 October 31 October 30 April 30 April
2024 2024 2024 2024
NAV Share price NAV Share price
Closing NAV per share/share price (a) 203.1p 177.0p 193.0p 163.5p
Dividend adjustment factor(*) (b) 1.0276 1.0319 1.0197 1.0226
Adjusted closing NAV per share/share price (c = a x b) 208.7p 182.6p 196.8p 167.2p
Opening NAV per share/share price (d) 193.0p 163.5p 195.6p 168.0p
Total return (c ÷ d) -1 8.1% 11.7% 0.6% (0.5%)
(*) The dividend adjustment factor is calculated on the assumption that
the dividend of 5.60p (2023 - 3.60p) paid by the Company during the year were
reinvested into shares of the Company at the cum income NAV per share/share
price, as appropriate, at the ex-dividend date.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company, an
investment trust can borrow money to invest in additional investments for its
portfolio. The effect of the borrowing on the shareholders' assets is called
'gearing'. If the Company's assets grow, the shareholders' assets grow
proportionately more because the debt remains the same. But if the value of
the Company's assets falls, the situation is reversed. Gearing can therefore
enhance performance in rising markets but can adversely impact performance in
falling markets.
Invested gearing is the Company's borrowings adjusted for cash and cash
equivalents expressed as a percentage of shareholders' funds.
31 October 30 April
2024 2024
Borrowings £24,350,000 £16,350,000
Less: cash and cash equivalents (£6,812,000) (£1,917,000)
Adjusted borrowings £17,538,000 £14,433,000
Shareholders' funds £287,837,000 £283,153,000
Invested gearing 6% 5%
Drawn gearing is the Company's borrowings expressed as a percentage of
shareholders' funds.
31 October 30 April
2024 2024
Borrowings £24,350,000 £16,350,000
Shareholders' funds £287,837,000 £283,153,000
Drawn gearing 8% 6%
Private (unlisted) company
A private (unlisted) company means a company whose shares are not available to
the general public for trading and not listed on a stock exchange.
Active share (APM)
Active share, a measure of how actively a portfolio is managed, is the
percentage of the portfolio that differs from its comparative index. It is
calculated by deducting from 100 the percentage of the portfolio that overlaps
with the comparative index. An active share of 100 indicates no overlap with
the index and an active share of zero indicates a portfolio that tracks the
index.
Leverage (APM)
For the purposes of the UK Alternative Investment Fund Managers (AIFM)
Regulations, leverage is any method which increases the Company's exposure,
including the borrowing of cash and the use of derivatives. It is expressed as
a ratio between the Company's exposure and its net asset value and can be
calculated on a gross and a commitment method. Under the gross method,
exposure represents the sum of the Company's positions after the deduction of
sterling cash balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is calculated without the
deduction of sterling cash balances and after certain hedging and netting
positions are offset against each other.
Treasury shares
The Company has the authority to make market purchases of its ordinary shares
for retention as treasury shares for future reissue, resale, transfer, or for
cancellation. Treasury shares do not receive distributions and the Company is
not entitled to exercise the voting rights attaching to them.
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