Half-year Report
27/05/2022 07:00
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RNS Number : 0043N Baronsmead Second Venture Trust PLC 27 May 2022
Baronsmead Second Venture Trust plc
Half-yearly report for the six months ended 31 March 2022
The Directors of Baronsmead Second Venture Trust plc are pleased to announce
the unaudited half-yearly financial report for the six months to 31 March
2022. Copies of the half-yearly report can be obtained from the following
website: www.baronsmeadvcts.co.uk (http://www.baronsmeadvcts.co.uk/)
Our investment objective
· Baronsmead Second Venture Trust plc (the "Company") is a tax
efficient listed company which aims to achieve long-term investment returns
for private investors, including tax free dividends.
Investment policy
· To invest primarily in a diverse portfolio of UK growth
businesses, whether unquoted or traded on AIM.
· Investments are made selectively across a range of sectors in
companies that have the potential to grow and enhance their value.
Dividend policy
· The Board will, where possible, seek to pay two dividends to
shareholders in each calendar year, typically an interim dividend in September
and a final dividend following the Annual General Meeting in February.
· The Board will use, as a guide, when setting the dividends for a
financial year, a sum representing 7 per cent. of the opening NAV of that
financial year.
Key elements of the business model
Access to an attractive, diverse portfolio
Baronsmead Second Venture Trust plc gives shareholders access to a diverse
portfolio of growth businesses.
The Company will make investments in growth businesses, whether unquoted or
traded on AIM, which are substantially based in the UK in accordance with the
prevailing VCT legislation. Investments are made selectively across a range of
sectors.
The Manager's approach to investing
The Manager endeavours to select the best opportunities and applies a
distinctive selection criteria based on:
· Primarily investing in parts of the economy which are
experiencing long-term structural growth.
· Businesses that demonstrate, or have the potential for, market
leadership in their niche.
· Management teams that can develop and deliver profitable and
sustainable growth.
· Companies with the potential to become an attractive asset
appealing to a range of buyers at the appropriate time to sell.
In order to ensure a strong pipeline of opportunities, the Manager invests in
building deep sector knowledge and networks and undertakes significant
proactive marketing to interesting target companies in preferred sectors. This
approach generates a network of potentially suitable businesses with which the
Manager maintains a relationship ahead of possible investment opportunities.
The Manager as an influential shareholder
The Manager is an engaged and supportive shareholder (on behalf of the
Company) in both unquoted and significant quoted investments. For unquoted
investments, representatives of the Manager often join the investee board. The
role of the Manager with investees is to ensure that strategy is clear, the
business plan can be implemented and that the management resources are in
place to deliver profitable growth. The intention is to build on the business
model and grow the company into an attractive target able to be either sold or
potentially floated in the medium term.
Strategic report
Financial highlights
-11.9% Net Asset Value (NAV) per share decreased 11.9% per cent. to 74.2p in
the six months to 31 March 2022, before deduction of dividends, in the sixth
months to 31 March 2022.
359.3p NAV total return to shareholders for every 100.0p invested at launch
(January 2001).
£13.7mn Realised proceeds in the period, returning 2.1x cost.
£37.5m Funds raised in the period (before costs).
Cash returned to shareholders
The table below shows the cash returned to shareholders that invested in
Baronsmead Second Venture Trust plc dependent on their subscription cost,
including the income tax available to be reclaimed on the subscription.
Year subscribed Cash invested Income tax reclaim Cumulative dividends Return on cash invested(#) (%)
(p) (p) Net cash invested paid(#)
(p) (p)
2001 (January) 100.0 20.0 80.0 157.3 177.3
2005 (March) - C share* 100.0 40.0 60.0 113.2 153.2
2010 (March) 103.1 30.9 72.2 109.0 135.7
2012 (December) 117.4 35.2 82.2 91.0 107.5
2014 (March) 112.4 33.7 78.7 71.0 93.2
2016 (February) 107.2 32.2 75.0 54.5 80.8
2017 (October) 97.5 29.2 68.2 34.5 65.4
2019 (February) 85.3 25.6 59.7 27.0 61.7
2019 (November) 78.9 23.7 55.2 19.5 54.7
2020 (January) 84.8 25.4 59.4 19.5 53.0
2020 (February) 82.5 24.8 57.7 16.0 49.4
2020 (March) 64.3 19.3 45.0 16.0 54.9
2020 (November) 77.9 23.4 54.5 13.0 46.7
2020 (December) 80.9 24.3 56.6 13.0 46.1
2021 (January) 84.4 25.3 59.1 13.0 45.4
2021 (February) 82.2 24.7 57.5 9.5 41.6
2021 (March) 84.9 25.5 59.4 9.5 41.2
2021 (December) 88.1 26.4 61.7 6.5 37.4
2022 (January) 87.1 26.1 61.0 6.5 37.5
2022 (March) 76.6 23.0 53.6 3.0 33.9
The total return could be higher for those shareholders who were able to defer
a capital gain on subscription and the net sum invested may be less.
* Dividends paid to C shareholders post conversion have been adjusted by the
conversion ratio (0.85642528).
(#) Includes interim dividend of 3.0p per share payable 9 September 2022.
Chairman's statement
The six months to 31 March 2022 saw an increased level of volatility in public
markets due to greater levels of uncertainty heading into 2022. Investor fears
were exacerbated by a rise in geopolitical risk in Europe as Russia invaded
Ukraine, slowing economic growth and increasing expectations of a prolonged
period of higher inflation driven by higher commodity prices.
These headwinds have been reflected mainly in the softer performance of the
AIM traded investments within the portfolio in the six months to 31 March
2022. Despite the drop in the value of the portfolio over the period, the
Manager believes that - in aggregate - the fundamentals of the underlying
portfolio companies remain robust and the growth prospects for the majority of
investee companies continue to be positive.
The Board is also pleased to declare an interim dividend of 3.0p to be paid on
9 September 2022 to shareholders on the register as of 12 August 2022. The
dividend will be paid from realised capital profits generated from the
successful sales of portfolio companies. Over the period, capital proceeds of
£13.7mn were realised from the sale, or partial sale, of four portfolio
companies. The combined return from these sales was 2.1x invested cost.
I must, of course, remind shareholders that payment dates and the amount of
future dividends depend on the level and timing of profitable realisations and
cannot be guaranteed.
Results
During the six months to 31 March 2022, the Company's NAV per share decreased
11.9 per cent. from 84.3p to 74.2p after the payment of a final dividend of
3.5p per share on 4 March 2022. The table below breaks down the movement in
NAV over the six months.
Pence per ordinary share
NAV as at 1 October 2021 (after deducting the final dividend of 3.5p) 84.3
Valuation decrease (11.9 per cent.) (10.1)
NAV as at 31 March 2022 74.2
The 30 April 2022 NAV was 75.1p, a 1.2 per cent. increase driven by slightly
firmer quoted markets.
Portfolio review
The table below provides a summary of each asset class and the return
generated during the period under review.
Asset class NAV* % of NAV* Number of investees** % return in the period***
(£m)
Unquoted 54 22 35 (5)
AIM and LSE-traded companies 84 35 49 (18)
LF Gresham House UK Micro Cap Fund 29 12 48 (16)
LF Gresham House UK Multi Cap Income Fund 13 6 46 (1)
LF Gresham House UK Smaller Companies Fund 6 2 44 (10)
Liquid assets(#) 57 23 - -
Total 243 100 222 -
( )
*By value at 31 March 2022.
**Includes investee companies with holdings by more than one fund. Total
number of individual companies held is 173.
***Return includes interest received on unquoted realisations during the
period.
(#)Represents cash, OEICs and net current assets.
The value of the unquoted portfolio decreased 5 per cent. in the six months to
31 March 2022. The drop in value of the unquoted portfolio was driven by a
combination of softer trading performance in several e-commerce assets and a
general de-rating of valuation multiples in the consumer and marketing
services sectors. These declines were partially offset by uplifts in
healthcare investments which continue to grow strongly and to benefit from the
long-term structural growth drivers in this market.
The value of the Company's portfolio of investments directly held in
AIM-traded companies decreased 18 per cent. in the six months to 31 March
2022. The value of the Company's investment into the LF Gresham House UK Micro
Cap Fund decreased by 16 per cent., the LF Gresham House UK Smaller Companies
Fund decreased by 10 per cent. and the LF Gresham House Multi Cap Income Fund
decreased by 1 per cent. This was primarily driven by negative investor
sentiment surrounding inflationary pressures, expectations of interest rate
rises and the cost-of-living squeeze in the UK. The implications of the
ongoing war in Ukraine continue to impact negatively on global equity markets,
with a particularly pronounced effect on UK and European equities.
Investments and divestments
The Company's investments and divestments during the period are set out below.
Investments
I am pleased to report that the Company made five new investments totalling
£8.5mn and two follow-on investments with a combined value of £1.8mn in the
six months to 31 March 2022. Below are descriptions of the new investments
made:
· Aptamer (quoted) - platform providing antibody alternatives to
the pharma industry across a range of applications.
· Oberon (quoted) - corporate advisory business providing advice,
asset management and deal arrangement services.
· Popsa (unquoted) - provider of a mobile app that lets users
design photo albums digitally and have them delivered in print.
· Proximity Insight (unquoted) - platform used by front-line sales
associates of omni-channel retailers to better engage and transact with their
customers.
· Skillcast (quoted) - provider of staff compliance training.
During the period the Company also invested £4.1mn into the LF Gresham House
UK Multi Cap Income Fund and £1.4mn into the LF Gresham House Smaller
Companies Fund.
Following the period end, four further follow-on investments were made,
totalling £4.3mn and a new unquoted investment of £0.9mn was made into
Bidnamic, a market leading provider of Google shopping management software.
Realisations
Proceeds of £4.4m were received during the period from sales of quoted
investments, including:
· Cerillion plc - top-slicing delivered proceeds of £1.5mn,
equating to a money multiple of 11.4x.
· Cloudcall Group plc - takeover by Xplorer Capital Management
resulting in proceeds of £2.9mn and a money multiple of 0.9x.
From the unquoted portfolio, the sale of the investment in Carousel
successfully completed in February 2022. The sale returned proceeds of
£9.3mn, which, in addition to the loan-note interest received during the
lifetime of the investment, resulted in a total gross money multiple of 5.0x
original investment cost.
Venture capital industry
I would also like to draw attention to the UK Parliamentary inquiry into the
venture capital industry, launched in April 2022. The Committee will be
examining the regulation around venture capital, the role of key bodies and
how the industry can be strengthened. The Board and Manager welcome the
opportunity to provide the inquiry with the information they are seeking on
how VCTs provide small UK businesses with funding to assist with their growth
and development.
Fundraising
I am pleased to report that, during the period, the Company successfully
raised £37.5mn (before costs) through an offer for subscription which became
fully subscribed in February 2022. The Board are pleased to welcome the 1,811
new shareholders who invested for the first time and to thank the 524 existing
shareholders who continue to support the Company.
The Board will consider whether to raise new funds in the 2022/23 tax year.
This will be determined by the Company's cashflow and its anticipated
requirements to fund new and follow-on investments over the next two to three
years. The Board appreciates that shareholders would like plenty of notice of
its fundraising intentions and will ensure that shareholders are informed of
any such fundraising at the earliest practical time.
Investment Manager
The Board is pleased to see the integration progress made by the Investment
Manager following the acquisition of the VCT business of Mobeus Equity
Partners LLP in September 2021. The Board believes the combined platform
enhances the Manager's ability to source, invest in and manage attractive
early-stage unquoted investments. The Board believes that this will benefit
the Company through more consistent and increased rates of investment which
will ultimately support the delivery of attractive long-term performance and
dividends for the Company's shareholders. We note that the Baronsmead VCTs
retain their distinctive approach as hybrid VCTs; investing across the
spectrum of fast growing, small, quoted and unquoted companies.
Following the successful integration, Fund Manager Bevan Duncan has decided to
pursue a new career path as Chief Operating Officer at an early stage, high
growth technology company. The Board would like to wish him every success in
his next role and are reassured by the depth and experience of the wider team
to continue to deliver for investors. Trevor Hope will be Managing Director
for the private equity team, working closely with Ken Wotton, Managing
Director of Public Equity, who continues to be responsible for the quoted
portfolio within the Baronsmead VCTs. Clive Austin remains Managing Director
of VCT portfolio with responsibility for portfolio and asset management
alongside Ed Wass, a highly experienced portfolio partner.
Outlook
The macro-economic environment has undoubtedly become more challenging over
the past six months. The Board and Manager are planning for further market
volatility, ongoing pressure on companies' operating margins due to rising
costs and weaker consumer demand, together with supply chain disruption and
shortages of talent within portfolio companies. The Manager is regularly
engaging with portfolio company management teams to forecast cash levels and
expected usage rates, to plan for stress scenarios and, more generally, to
reduce execution risk over the next 12 months.
We note that the portfolio remains highly diversified, with over 80 direct
holdings, and is largely positioned in parts of the economy which the Board
expects will see long-term structural growth. The volatility and disruption
also provide good opportunities to invest in earlier stage, higher growth
companies that are quickly moving to exploit changes in their target markets.
The Company remains suitably capitalised and the Manager is well resourced to
support investment into new and existing portfolio companies, which are
expected to create value and provide attractive dividend payments
to shareholders over the long-term.
Sarah Fromson
Chairman
26 May 2022
Investments in the period
Company Location Sector Activity Book cost
£'000
Unquoted investments
New
Popsa Holdings Ltd Surrey Technology Mobile-first photobook app provider 3,379
Proximity Insight Holdings Ltd London Technology Platform for front-line sales associate of omni-channel retailers to engage 1,152
with customers
Follow on
Airfinity Ltd London Healthcare & education Provides real time life science intelligence as a subscription service 1,039
RevLifter Ltd London Technology AI platform using advanced behavioural analytics to deliver tailored 779
promotions to users
Total unquoted investments 6,349
AIM-traded investments
New
Aptamer Group plc Yorkshire Healthcare & education Platform providing antibody alternatives to the pharma industry 2,390
Skillscast Group Plc London Healthcare & Education Compliance e-learning and regulatory technology services 817
Oberon Investments Group plc London Business services Corporate advisory business 742
Total AIM-traded investments 3,949
Total investments in the period 10,298
Realisations in the period
Company First Original book cost(†) £'000 Proceeds(‡) Overall
investment £'000 multiple
date return
Unquoted realisations
Carousel Logistics Ltd Full trade sale Oct 13 2,336 9,333 5.0*
Total unquoted realisations 2,336 9,333 5.0*
AIM-traded realisations
CloudCall Group plc Take over Apr 14 3,214 2,900 0.9
Cerillion plc Market sale Jul 15 129 1,474 11.4
Mi-Pay Group plc Liquidated Nov 12 800 11 0.0
Total AIM-traded realisations 4,143 4,385 1.1
Total realisations in the period 6,479 13,718(#) 2.1
†Residual book cost at realisation date.
(‡)Proceeds at time of realisation including interest.
*Includes interest/dividends received, loan note redemptions and partial
realisations accounted for in prior periods.
(#)Deferred consideration of £15,000 was also received in respect of Glide
which had been sold in a prior period.
Responsibility statement of the Directors in respect of the half-yearly
financial report
Half-yearly report
The important events that have occurred during the period under review, the
key factors influencing the financial statements and the principal
uncertainties for the remaining six months of the financial year are set out
in the Chairman's statement and the Strategic report.
The principal risks facing the Company are substantially unchanged since the
date of the Company's Annual Report for the financial year ended 30 September
2021 and continue to be as set out in that Report on pages 18 and 19.
Risks faced by the Company include but are not limited to; loss of approval as
a Venture Capital Trust, investment performance risk, legislative risk,
regulatory and compliance risk, operational risk, and economic and political
risk. The Board considers the COVID-19 pandemic and the Russian invasion of
Ukraine to be factors which permeate these risks, and their impacts for the
remaining six months of the year continue to be kept under review.
Responsibility statement
Each director confirms that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with FRS 104 Interim Financial Reporting Standards and gives a true
and fair view of the assets, liabilities, financial position and profit or
loss of the Company.
· This half-yearly report includes a fair review of the information
required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
The half-yearly report was approved by the Board of Directors on 26 May 2022
and was signed on its behalf by Ms Sarah Fromson, Chairman.
Sarah Fromson
Chairman
26 May 2022
Condensed income statement
For the six months to 31 March 2022 (Unaudited)
Six months to Six months to Year to
31 March 2022 31 March 2021 30 September 2021
Notes
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments 5 - (27,719) (27,719) - 37,141 37,141 - 59,071 59,071
Income 961 - 961 566 - 566 3,821 - 3,821
Investment management fee (706) (2,116) (2,822) (661) (1,983) (2,644) (1,424) (4,272) (5,696)
Other expenses (359) - (359) (377) - (377) (665) - (665)
(Loss)/profit before taxation (104) (29,835) (29,939) (472) 35,158 34,686 1,732 54,799 56,531
Taxation on ordinary activities - - - - - - (108) 108 -
(Loss)/profit for the period, being the total comprehensive income for the (104) (29,835) (29,939) (472) 35,158 34,686 1,624 54,907 56,531
period after taxation
Return per ordinary share:
Basic and Diluted 2 (0.04p) (10.04p) (10.07p) (0.18p) 13.23p 13.05p 0.59p 19.96p 20.55p
All items in the above statement derive from continuing operations.
There are no recognised gains and losses other than those disclosed in the
Income Statement.
The revenue column of the Income Statement includes all income and expenses.
The capital column accounts for the realised and unrealised profit or loss on
investments and the proportion of the management fee charged to capital.
The total column of this statement is the unaudited Statement of Total
Comprehensive Income of the Company prepared in accordance with the Financial
Reporting Standard ("FRS"). The supplementary revenue return and capital
return columns are prepared in accordance with the Statement of Recommended
Practice issued by the Association of Investment Companies ("AIC SORP").
Condensed statement of changes in equity
For the six months to 31 March 2022 (Unaudited)
Non-distributable reserves Distributable reserves
Notes Called-up share capital Share Revaluation Capital Revenue Total
£'000 premium £'000 reserve reserve £'000 reserve £'000
£'000 £'000
At 1 October 2021 31,206 74,231 77,481 63,698 1,758 248,374
(Loss)/profit after taxation - - (34,540) 4,705 (104) (29,939)
Net proceeds of share issues, share buybacks & sale of shares from 3 4,583 31,868 - (1,050) - 35,401
treasury
Dividends paid 4 - - - (10,465) (308) (10,773)
At 31 March 2022 35,789 106,099 42,941 56,888 1,346 243,063
For the six months to 31 March 2021 (Unaudited)
Non-distributable reserves Distributable reserves
Notes Called-up share capital Share Revaluation Capital Revenue Total
£'000 premium £'000 reserve reserve £'000 reserve £'000
£'000 £'000
At 1 October 2020 27,146 46,775 30,890 75,290 2,216 182,317
Profit/(loss) after taxation - - 31,462 3,696 (472) 34,686
Net proceeds of share issues, share buybacks & sale of shares from 3 4,060 27,459 - (1,608) - 29,911
treasury
Dividends paid 4 - - - (8,354) (1,232) (9,586)
At 31 March 2021 31,206 74,234 62,352 69,024 512 237,328
For the year ended 30 September 2021 (Audited)
Non-distributable reserves Distributable reserves
Notes Called-up share capital Share Revaluation Capital Revenue Total
£'000 premium£'000 reserve reserve £'000 reserve £'000
£'000 £'000
At 1 October 2020 27,146 46,775 30,890 75,290 2,216 182,317
Profit after taxation - - 46,591 8,316 1,624 56,531
Net proceeds of share issues, share buybacks & sale of shares from 4,060 27,456 - (3,908) - 27,608
treasury
Dividends paid - - - (16,000) (2,082) (18,082)
At 30 September 2021 31,206 74,231 77,481 63,698 1,758 248,374
Condensed balance sheet
As at 31 March 2022 (Unaudited)
Notes As at As at
30 September 2021
As at 31 March
£'000
31 March 2021
2022 £'000
£'000
Fixed assets
Unquoted 5 53,887 52,113 59,971
investments
Traded on 5 83,916 94,364 102,394
AIM
Collective investment 5 60,053 54,503 75,701
vehicles
Listed on LSE 5 34 36 34
Investments 5 197,890 201,016 238,100
Current assets
Debtors 106 110 109
Cash at bank 46,647 37,767 12,312
46,753 37,877 12,421
Creditors (amounts falling due within one year) (1,580) (1,565) (2,147)
Net current assets 45,173 36,312 10,274
Net assets 243,063 237,328 248,374
Capital and reserves
Called-up share capital 35,789 31,206 31,206
Share premium 106,099 74,234 74,231
Capital reserve 56,888 69,024 63,698
Revaluation 5 42,941 62,352 77,481
reserve
Revenue reserve 1,346 512 1,758
Equity shareholders' funds 243,063 237,328 248,374
Net asset value per share 74.2p 83.07p 87.77p
Number of ordinary shares in circulation 327,596,768 285,692,452 282,974,085
Condensed statement of cash flows
For the six months to 31 March 2022 (Unaudited)
Six Six Year to
months to
months to 30 September 2021
31 March 2022 31 March 2021
£'000
£'000 £'000
Net cash outflow from operating activities (2,536) (1,670) (1,850)
Net cash inflow from investing activities 12,689 16,050 1,083
Net cash before financing activities 10,153 14,380 (767)
Net cash inflow from financing activities 24,182 20,279 9,971
Increase in cash 34,335 34,659 9,204
Reconciliation of net cash flow to movement in net cash
Increase in cash 34,335 34,659 9,204
Opening cash at bank and on deposit 12,312 3,108 3,108
Closing cash at bank and on deposit 46,647 37,767 12,312
Reconciliation of (loss)/ profit/ before taxation to net cash outflow from
operating activities
(Loss)/profit before taxation (29,939) 34,686 56,531
Gains/(losses) on investments 27,719 (37,141) (59,071)
Changes in working capital and other non-cash items (316) 785 690
Net cash outflow from operating activities (2,536) (1,670) (1,850)
Notes to the financial statements
For the six months to 31 March 2022 (Unaudited)
1. Basis of preparation
The condensed financial statements for the six months to 31 March 2022
comprise the unaudited financial statements together with the related notes.
The Company applies FRS 102 and the AIC's Statement of Recommended Practice
('the SORP') for its annual Financial Statements. The condensed financial
statements for the six months to 31 March 2022 have therefore been prepared in
accordance with FRS 104 'Interim Financial Reporting' and the principles of
the SORP. They have been prepared on a going concern basis. The financial
statements have been prepared on the same basis as the accounting policies set
out in the Company's Annual Report and Financial Statements for the year ended
30 September 2021.
The financial information contained in this half-yearly financial report does
not constitute statutory accounts as defined in sections 434 - 436 of the
Companies Act 2006. The half-yearly financial report for the six months ended
31 March 2022 and for the six months ended 31 March 2021 have been neither
audited nor reviewed by the Company's auditors. The information for the year
to 30 September 2021 has been extracted from the latest published audited
financial statements, which have been filed with the Registrar of Companies.
The report of the auditor for the audited financial statements for the year to
30 September 2021 was: (i) unqualified; (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis without
qualifying their report; and (iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006. No statutory accounts in respect of
any period after 30 September 2020 have been reported on by the Company's
auditors or delivered to the Registrar of Companies.
Copies of the half-yearly financial report have been made available to
shareholders and are available from Gresham House, 80 Cheapside, London, EC2V
6EE.
2. Performance and shareholder returns
Return per share is based on a weighted average of 297,083,965 ordinary shares
in issue (31 March 2021 - 265,723,554 ordinary shares; 30 September 2021 -
275,054,819 ordinary shares).
Earnings for the first six months to 31 March 2022 should not be taken as a
guide to the results of the full financial year to 30 September 2022.
3. Called-up share capital
The below table details the movement in called-up share capital during the
period.
Allotted, called-up and fully paid:
Ordinary shares £'000
252, 3312,059,812 ordinary shares of 10p each listed at 30 September 2021 31,206
45,829,661 ordinary shares of 10p each issued during the period 4,583
357,889,473 ordinary shares of 10p each listed at 31 March 2022 35,789
229,085,727 ordinary shares of 10p each held in treasury at 30 September 2021 (2,909)
2,090,978 ordinary shares of 10p each repurchased during the period and held (209)
in treasury
884,000 ordinary shares of 10p each sold from treasury during the period 88
30,292,705 ordinary shares of 10p each held in treasury at 31 March 2022 (3,030)
327,596,768 ordinary shares of 10p each in circulation* at 31 March 2022 32,759
*carrying one vote each
During the six months to 31 March 2022, the Company issued 45,829,661 shares
at net proceeds of £36,451,000 (after costs). During the same period, the
Company purchased 2,090,978 shares to be held in treasury at a cost of
£1,689,000 (including costs). The Company also sold 884,000 shares from
treasury for proceeds of £639,000. At 31 March 2022, the Company held
30,292,705 ordinary shares in treasury. Shares may be sold out of treasury
below Net Asset Value as long as the discount at issue is narrower than the
average discount at which the shares were bought into treasury.
Excluding treasury shares, there were 327,596,768 ordinary shares in issue at
31 March 2022 (31 March 2021 - 285,692,452 ordinary shares; 30 September 2021
- 282,974,085 ordinary shares).
4. Dividends
The final dividend for the year ended 30 September 2021 of 3.5p per share
(3.4p capital, 0.1p revenue) was paid on 4 March 2022 to shareholders on the
register on 4 February 2022. The ex-dividend date was 3 February 2022.
During the year to 30 September 2021, the Company paid an interim dividend on
10 September 2021 of 3.0p per share (2.7p capital, 0.3p revenue).
5. Investments
All investments are initially recognised subsequently measured at fair value.
Changes in fair value are recognised in the Income Statement.
The methods of fair value measurement are classified into a hierarchy based on
reliability of the information used to determine the valuation.
· Level 1 - Fair value is measured based on quoted prices in an
active market.
· Level 2 - Fair value is measured based on directly observable
current market prices or indirectly being derived from market prices.
· Level 3 - Fair value is measured using a valuation technique that
is not based on data from an observable market.
The valuation of unquoted investments contained within level 3 of the Fair
Value hierarchy involves key assumptions dependent upon the valuation
methodology used. The primary methodologies applied are:
- Cost of recent investment
- Earnings Multiple
- Offer less 10 per cent.
The earnings multiple approach involves more subjective inputs than the cost
of recent investment and offer approaches and therefore presents a greater
risk of over or under estimation. Key assumptions for the earnings multiple
approach are the selection of comparable companies and the use of either
historic or forecast revenue or earnings, as considered most appropriate.
Other assumptions include the appropriateness of the discount magnitude
applied for reduced liquidity and other qualitative factors. These assumptions
are described in more detail in Note 2.3 in the Company's Report and Financial
Statements for the year to 30 September 2021. The techniques used in the
valuation of unquoted investments have not changed materially since the date
of that report.
Level 1 Level 2 Level 3
Traded Collective Total
on AIM Listed investment £'000
£'000 on LSE vehicles Unquoted
£'000 £'000 £'000
Opening book cost 63,064 48,404 45,722 160,619
3,429
Opening unrealised appreciation/(depreciation) 39,330 (3,395) 27,297 14,249 77,481
Opening fair value 102,394 34 75,701 59,971 238,100
Movements in the period:
Purchases at cost 3,949 - 5,699 6,349 15,997
Sale - proceeds (4,374) - (15,000) (9,114) (28,488)
- realised gains/(losses) on sales 1,037 - - (1,585) (548)
Unrealised (losses) / gains realised during the period 111 - - 7,528 7,369
Decrease in unrealised depreciation (19,201) - (6,347) (8,992) (34,540)
Closing fair value 83,916 34 60,053 53,887 197,890
Closing book cost 63,787 3,429 39,103 48,630 154,949
Closing unrealised appreciation/(depreciation) 20,129 (3,395) 20,950 5,257 42,941
Closing fair value 83,916 34 60,053 53,887 197,890
Equity shares 83,916 34 - 25,225 109,175
Preference Shares - - - 18,160 18,160
Loan notes - - - 10,502 10,502
Collective investment vehicles - - 60,053 - 60,053
Closing fair value 83,916 34 60,053 53,887 197,890
6. Other required disclosures
6.1 Segmental reporting
The Company has one reportable segment being investing in primarily a
portfolio of UK growth businesses, whether unquoted or traded on AIM.
6.2 Principal risks and uncertainties
The Company's assets consist of equity and fixed interest investments, shares
in collective investment schemes, cash and liquid resources. Its principal
risks are therefore market risk, price risk, credit risk and liquidity risk.
Other risks faced by the Company include loss of approval as a Venture Capital
Trust, legislative, investment performance, economic, political and other
external factors, regulatory and compliance and operational risks. These
risks, and the way in which they are managed, are described in more detail in
the principal risks & uncertainties table within the Strategic report
section in the Company's Annual Report and Accounts for the year to 30
September 2021. The Board continues to regularly review the risk environment
in which the Company operates.
6.3 Related parties
Gresham House Asset Management Ltd ('the Manager') manages the investments of
the Company. The Manager also provides or procures the provision of
secretarial, accounting, administrative and custodian services to the Company.
Under the management agreement, the Manager receives a fee of 2.5 per cent.
per annum of the net assets of the Company. This is described in more detail
under the heading 'The Investment Management Agreement' within the Strategic
Report in the Company's Annual Report and Accounts for the year ended 30
September 2021. During the period the Company has incurred management fees of
£2,822,000 (31 March 2021 - £2,644,000; 30 September 2021 - £5,696,000) and
secretarial and accounting fees of £76,000 (31 March 2021 - £71,000; 30
September 2021 - £143,000) payable to the Manager. No performance fee has
been accrued at 31 March 2022 (31 March 2021 - £nil; 30 September 2021 -
£nil). This is described in more detail under the heading 'Performance fees'
within the Strategic Report in the Company's Annual Report and Financial
Statements for the year to 30 September 2021.
A related party relationship exists between the Company and Happy Days
Consultancy Ltd, owing to the significant influence deemed to be held over the
operations of the company. As at 31 March 2022, the loan balance stood at
£3,510,000, including £1,122,000 of capitalised interest, as provided for in
the Agreement with the company.
6.4 Investment in associates
The Company has made the presumption that the following holdings are
investments in associates, owing to the proportion of equity held and
representation on the board representing significant influence over the
operations of the company. The investments held are held as part of an
investment portfolio, and are therefore measured at fair value through profit
and loss, as detailed in note 5 rather than using the equity method, as
permitted by Section 14 of FRS 102:
Name Location Class of Shares held % of Equity Profit (£m) Net Assets (£m) Results for year ended
Happy Days Consultancy UK A Ordinary & B Ordinary 31 December 2020(1)
35.7 (3.0) (12.7)
(1)Latest published set of financial statements available at Companies House.
6.5 Going concern
After making enquiries, and bearing in mind the nature of the Company's
business and assets, the Directors consider that the Company has adequate
resources to continue in operational existence for the foreseeable future. In
arriving at this conclusion, the Directors have considered the Company's cash
balances, the liquidity of the Company's investments and the absence of any
gearing. The Directors are therefore also satisfied that the Company has
adequate financial resources to continue in operation for at least the next 12
months and that, accordingly, it is appropriate to adopt the going concern
basis in preparing the financial statements.
6.6 Post balance sheet events
The following events occurred between the balance sheet date and the signing
of these financial statements:
· The 30 April 2022 NAV of 75.1p was announced on 06 May 2022. At
the date of publishing this report, the Board is unaware of any matter that
will have caused the NAV per share to have changed significantly since the
latest NAV.
· Two follow-on investments into Tribe and Panthera, completed in
April 2022 totalling £2.9mn.
· Two further follow-on investments, into Yappy and Glisser,
completed in May 2022 totalling £1.4mn
· One new investment, into Bidnamic, completed in May 2022,
totalling £0.9mn.
Corporate Information Registrars and Transfer Office
Computershare Investor Services plc
Directors The Pavilions
Sarah Fromson (Chair)† Bridgwater Road
Malcolm Groat* Bristol BS99 6ZZ
Graham McDonald Tel: 0800 923 1534
Tim Farazmand(#)
Brokers
Secretary Panmure Gordon & Co
Gresham House Asset Management Ltd One New Change
London EC4M 9AF
Registered Office Tel: 020 7886 2500
5 New Street Square
London EC41 3TW Auditor
BDO LLP
Investment Manager 55 Baker Street
Gresham House Asset Management Ltd London
5 New Street Square W1U 7EU
London EC41 3TW
020 7382 0999
Solicitors
Registered Number Dickson Minto W.S.
04115341 Broadgate Tower
20 Primrose Street
London EC2A 2EW
VCT Status Adviser
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Website
www.baronsmeadvcts.co.uk
† Chair of the Nomination Committee.
* Senior Independent Director and Chairman of the Audit Committee.
(#)Chairman of the Management Engagement and Remuneration Committee.
LEI 2138008D3WUMF6TW8C28
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