Half-yearly Report
13/06/2023 07:00
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RNS Number : 4602C Baronsmead Second Venture Trust PLC 13 June 2023
Baronsmead Second Venture Trust plc
Half-yearly report for the six months ended 31 March 2023
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
2023. 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 the Alternative Investment Market
("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 financial year, typically an interim dividend in
September and a final dividend following the Annual General Meeting.
· 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
The Company 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 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, for it to be either sold or
potentially floated in the medium term.
Strategic report
Financial highlights
NAV per share decreased 1.8% per cent. to 61.0p, before the deduction of
dividends, in the six months to 31 March 2023.
323.2p Net Asset Value ("NAV") total return to shareholders for every 100.0p
invested at launch (January 2001).
£4.6mn Investments made into two new and three follow-on opportunities during
the period (Unquoted: £3.4mn, Quoted: £1.2mn).
£25.0mn raised in the period (before costs).
Cash returned to shareholders by date of Investment
The chart below shows the cash returned to shareholders based on the
subscription price and the income tax reclaimed on subscription.
Year subscribed Cash invested Income tax reclaim Cumulative dividends Return on cash invested(#) (%)
(p) (p) Net cash invested paid(#)
(p) (p)
2001 (January) 100.00 20.00 80.00 162.55 182.6
2005 (March) - C share* 100.00 40.00 60.00 117.69 157.7
2010 (March) 103.10 30.93 72.17 114.25 140.8
2012 (December) 117.40 35.22 82.18 96.25 112.0
2014 (March) 112.40 33.72 78.68 76.25 97.8
2016 (February) 107.20 32.16 75.04 59.75 85.7
2017 (October) 97.48 29.24 68.24 39.75 70.8
2019 (February) 85.30 25.59 59.71 32.25 67.8
2019 (November) 78.90 23.67 55.23 24.75 61.4
2020 (January) 84.80 25.44 59.36 24.75 59.2
2020 (February) 82.50 24.75 57.75 21.25 55.8
2020 (March) 64.30 19.29 45.01 21.25 63.0
2020 (November) 77.90 23.37 54.53 18.25 53.4
2020 (December) 80.90 24.27 56.63 18.25 52.6
2021 (January) 84.40 25.32 59.08 18.26 51.6
2021 (February) 82.20 24.66 57.54 14.75 47.9
2021 (March) 84.90 25.47 59.43 14.75 47.4
2021 (December) 88.10 26.43 61.67 11.75 43.3
2022 (January) 87.10 26.13 61.97 11.75 43.5
2022 (March) 76.60 22.98 53.62 8.25 40.8
2023 (January) † 68.191 20.46 47.73 5.25 37.7
2023 (March) † 65.722 19.72 46.00 2.25 33.4
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 2.25p per share payable 8 September 2023.
† Shares were allotted pursuant to the 2023 Offer at individual prices for
each investor in accordance with the allotment formula as set out in each
Offer's Securities Note.
1. Average effective offer price based on allotment prices between 67.6p and
71.5p.
2. Average effective offer price based on allotment prices between 64.8p and
67.9p.
Chair's statement
The UK economic backdrop continued to be challenging through the end of 2022
and into the first quarter of 2023. Inflation and interest rates remained at
high levels and there was much uncertainty across the financial markets. This
led to uncertainty in the debt markets and a liquidity squeeze. This was
compounded in the first quarter of 2023 by the collapse of Silicon Valley Bank
and then of Credit Suisse, which led to fears of a more widespread banking
sector contagion. Consumer and business confidence remains fragile.
Against this backdrop, the quoted portfolio delivered strong growth in the
last quarter of 2022 as markets recovered from the declines seen earlier in
the year. This continued into the first quarter of 2023 with some hopes of
inflation and the cost-of-living crisis easing. This partially offset the
declines from the uncertainty generated by the concerns within the banking
sector and recessionary fears. The Manager continues to believe 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 over the medium term. The portfolio also remains
relatively defensively positioned with high levels of diversification. The
portfolio contains over 85 direct investments, both quoted and unquoted
assets, and a bias towards sectors which have more resilient, contracted or
recurring revenue streams.
The Board is declaring an interim dividend of 2.25p to be paid on 8 September
2023 to shareholders on the register as of 11 August 2023. The Board is aware
that dividends are an important part of the total return to the shareholders'
investment in the Company. Over the period, there were no capital proceeds
realised from the sale, or partial sale, of any portfolio companies. The Board
has considered the capital reserves available along with potential known
realisations and has made the decision to slightly reduce the interim dividend
amount compared to recent years. The Board continues to aim to achieve its
dividend policy objective of an annual yield of 7.0 per cent of opening NAV.
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 2023, the Company's NAV per share decreased
1.8 per cent. from 62.1p to 61.0p after the payment of a final dividend of
3.0p per share on 3 March 2023. The table below breaks down the movement in
NAV over the six months.
Pence per ordinary share
NAV as at 1 October 2022 (after deducting the final dividend of 3.0p) 62.1
Valuation decrease (1.8 per cent.) (1.1)
NAV as at 31 March 2023 61.0
Over the two months to 31 May 2023, NAV was 62.6p per share, a 2.6 per cent.
increase over the NAV as at 31 March 2023. This was driven by 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 Number of % return
(£mn) NAV* investees companies** in the period***
Unquoted 48 23 41 (14)
AIM-traded companies 78 37 46 2
LF Gresham House UK Micro Cap Fund 25 12 48 7
LF Gresham House UK Multi Cap Income Fund 20 9 40 7
LF Gresham House UK Smaller Companies Fund 11 5 38 4
Liquid assets(#) 29 14 N/A 2
Total 211 100 213 (2)
( )
* By value at 31 March 2023.
** Includes investee companies with holdings by more than one
fund. Total number of individual companies held is 164.
*** Return includes interest received on unquoted realisations during
the period.
(# ) Represents cash, OEICs and net current assets. %
return in the period relates only to the OEICs.
The value of the unquoted portfolio decreased 14.2 per cent. in the six months
to 31 March 2023. The drop in value was driven by a combination of lower
benchmark market comparables and softening trading performance of the investee
companies as a result of the decline in consumer confidence.
The value of the Company's portfolio of investments directly held in
AIM-traded companies increased 1.8 per cent. in the six months to 31 March
2023. The value of the Company's investment into the LF Gresham House UK Micro
Cap Fund ("Micro Cap") increased by 7.4 per cent., the LF Gresham House UK
Smaller Companies Fund ("Small Cap") increased by 4.2 per cent. and the LF
Gresham House UK Multi Cap Income Fund ("Multi Cap") increased by 7.2 per
cent. in the period. This was primarily due to positive news flow across the
portfolio being well received by the markets with a number of trading updates
demonstrating better than expected financial performance.
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 two new investments totalling
£1.4mn and three follow-on investments with a combined value of £3.3mn in
the six months to 31 March 2023. Below are descriptions of the new investments
made:
· Cognassist (unquoted) - a platform for supporting those with
learning needs.
· Connect Earth (unquoted) - help businesses track their carbon
emissions.
· Patchworks (unquoted) - a platform for connecting businesses'
applications.
· Seeen (quoted) - a video technology business.
· Oberon (quoted) - wealthy advisory service for individuals and
businesses.
Following the period end, two further follow-on investments were made into
Airfinty and Panthera Biopartners, totalling £1.2mn, and a new unquoted
investment of £0.8mn was made into Dayrize, a platform for assessing the
sustainability of products.
Realisations
There were no realisations during the period. However, Glisser, a provider of
conference and educational software provider and CMME, a specialist mortgage
broker, went into administration. Both businesses had experienced very
challenging trading conditions over the past year and their valuations had
already been written down.
Following the period end, in the unquoted portfolio; Evotix was acquired
resulting in a gross money multiple of 0.7x original cost; the deferred
consideration from the sale of Key Travel in 2018 was received, resulting in a
gross money multiple of 3.2x original cost; and also the earn-out
consideration from the Pho realisation which, in addition to the proceeds
received at the time of the realisation, resulted in a gross money multiple of
3.1x original cost. In the quoted portfolio, we continued to top-slice
Cerillion plc resulting in proceeds of £0.7mn.
Fundraising
I am pleased to report that, during the period, the Company successfully
raised £25.0mn (before costs) through an offer for subscription which became
fully subscribed in April 2023. The Directors are pleased to welcome the 1,007
new shareholders who invested during the offer period and are appreciative of
the continued support of 442 pre‑existing shareholders.
The Board will consider whether to raise new funds in the 2023/24 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 ample notice of its
fundraising intentions and will ensure that shareholders are informed of any
such fundraising at the earliest practical time.
Consumer Duty
The Financial Conduct Authority ("FCA") has introduced the concept of Consumer
Duty, the rules and principles which come into effect in July 2023. Consumer
Duty is an advance on the existing concept of 'treating customers fairly' and
looks to ensure good outcomes for purchasers of investment products. As a
listed entity, Baronsmead Second Venture Trust plc, alongside other investment
companies, are not themselves subject to Consumer Duty.
Instead, in their role as promoter of the investment Manager to the Company,
it is Gresham House, and any other FCA regulated parties associated with your
investment in the Company, that must uphold the principles behind the Consumer
Duty. To that end, the Board is working with Gresham House to review the
information that should be provided to assist investors and their advisers to
discharge their obligations under Consumer Duty.
VCT Regulation - Financial Heath Test
Since the various VCT rule changes in both 2015 and 2018, VCT qualifying
investments have become focussed on smaller, younger companies. As a result,
when the Manager makes a new investment, they expect to make further follow-on
investments as the investee company progresses and where the business case for
the investment is justified. These follow-on investments are subject to the
same VCT compliance rules as new deals and both rely on certain criteria being
met, including the Financial Health Test.
The Financial Health Test is not something new and was primarily introduced as
an anti-abuse regulation. However, following amendment to HMRC's guidance,
there has been an effective tightening of the interpretation of the Financial
Health Test. This is resulting in the restriction of potential follow-on VCT
investment to support certain portfolio companies. This has the potential to
negatively impact shareholders' returns as a result of portfolio companies
going into administration when they might otherwise have gone on to be
successful. Furthermore, as this is an industry wide issue, this measure
increases the uncertainties small companies face at a particularly difficult
time and may well result in unnecessary job losses and hardship to employees
and their families and has the potential to reduce the overall tax efficiency
of the VCT scheme as a whole.
The Board continues to monitor developments in this area carefully and
supports the representations being made by the AIC and the VCTA to HMRC and HM
Treasury to seek a change to HMRC's guidance in this area.
Outlook
The Board expects that market conditions will remain volatile throughout 2023.
It is likely that UK inflation will ease - whilst remaining higher than Bank
of England forecasts. Nonetheless, there remains a material possibility of
recession in the UK.
However, the portfolio is well diversified, and is largely positioned in
sectors of the economy which the Board expects will benefit from long-term
structural growth tailwinds. Whilst the geopolitical and economic context for
the next year is liable to be challenging, experience suggests that investing
through the cycle can often produce superior returns. This can also provide an
opportunity for the Company to make high quality investments and build
strategic stakes in businesses with great potential for the future. This
applies to both new investments and further investments in the portfolio.
There are good prospects in the pipeline across a variety of themes and
sectors. The Company remains suitably capitalised and the Manager is well
resourced to support investment into new and existing portfolio companies,
which is expected to drive value creation and steady dividend payments to
shareholders over the long-term.
Sarah Fromson
Chair
12 June 2023
Investments in the period
Company Location Sector Activity Book cost
£'000
Unquoted investments
New
Cognassist UK Ltd Newcastle upon Tyne Healthcare & Education A platform for supporting those with learning needs 902
Connect Earth Ltd London Business Services Helps businesses track their carbon emissions 451
Follow on
Patchworks Integration Ltd Nottingham Technology A platform for connecting businesses' applications 2,080
Total unquoted investments 3,433
AIM-traded investments
Follow - on
SEEEN plc London Technology A wide technology business 659
Oberon Investments Group plc London Business services Wealth advisory service for individuals and businesses 531
Total AIM-traded investments 1,190
Total investments in the period 4,623
Realisations in the period
There were no realisations in the 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 Chair's statement and the Strategic report.
The principal risks facing the Company are mostly unchanged since the date of
the Company's Annual Report for the financial year ended 30 September 2022 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, legislative risk, investment performance risk, risk
of economic, political and other external factors, regulatory and compliance
risk and operational risk. The Board considers the aftermath of 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 their 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 12 June 2023
and was signed on its behalf by Ms Sarah Fromson, Chair.
Sarah Fromson
Chair
12 June 2023
Condensed income statement
For the six months to 31 March 2023 (Unaudited)
Six months to Six months to Year to
31 March 2023 31 March 2022 30 September 2022
Notes
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Losses on investments 5 - (2,132) (2,132) - (27,719) (27,719) - (48,771) (48,771)
Income 1,201 - 1,201 961 - 961 4,951 - 4,951
Investment management fee (620) (1,860) (2,480) (706) (2,116) (2,822) (1,367) (4,101) (5,468)
Other expenses (357) - (357) (359) - (359) (669) - (669)
Profit/(loss) before taxation 224 (3,992) (3,768) (104) (29,835) (29,939) 2,915 (52,872) (49,957)
Taxation on ordinary activities - - - - - - (263) 263 -
Profit /(loss) for the period, being total comprehensive income for the period 224 (3,992) (3,768) (104) (29,835) (29,939) 2,652 (52,609) (49,957)
after taxation
Return per ordinary share:
Basic and Diluted 2 0.07p (1.21p) (1.14p) (0.4p) (10.04p) (10.08p) 0.85p (16.85p) (16.00p)
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
Non-distributable reserves Distributable reserves
Called-up share capital Share Revaluation Capital Revenue Total
£'000 premium £'000 reserve reserve £'000 reserve £'000
£'000 £'000
At 1 October 2022 35,789 106,099 18,834 49,142 3,122 212,986
(Loss)/profit on ordinary activities after taxation - - (3,433) (559) 224 (3,768)
Net proceeds of share issues, share buybacks & sale of shares from 1,933 10,718 - (771) - 11,880
treasury
Dividends paid - - - (9,116) (1,013) (10,129)
At 31 March 2023 37,722 116,817 15,401 38,696 2,333 210,969
For the six months to 31 March 2023 (Unaudited)
For the six months to 31 March 2022 (Unaudited)
Non-distributable reserves Distributable reserves
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 4,583 31,868 - (1,050) - 35,401
treasury
Dividends paid - - - (10,465) (308) (10,773)
At 31 March 2022 35,789 106,099 42,941 56,888 1,346 243,063
For the year ended 30 September 2022 (Audited)
Non-distributable reserves Distributable reserves
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 - - (58,647) 6,038 2,652 (49,957)
Net proceeds of share issues, share buybacks & sale of shares from 4,583 31,868 - (1,302) - 35,149
treasury
Dividends paid - - - (19,292) (1,288) (20,580)
At 30 September 2022 35,789 106,099 18,834 49,142 3,122 212,986
Condensed balance sheet
As at 31 March 2023 (Unaudited)
Notes As at
As at As at 30 September
31 March 31 March 2022
2023 2022 £'000
£'000 £'000
Fixed assets
Unquoted 5 48,545 53,887 53,118
investments
Traded on 5 77,655 83,916 75,051
AIM
Collective investment 5 69,933 60,053 49,502
vehicles
Listed on LSE 5 - 34 34
Investments 5 196,133 197,890 177,705
Current assets
Debtors 1,477 106 152
Cash at bank and on deposit 14,803 46,647 36,622
16,280 46,753 36,774
Creditors (amounts falling due within one year) (1,580) (1,493)
(1,444)
Net current assets 14,836 45,173 35,281
Net assets 210,969 243,063 212,986
Capital and reserves
Called-up share capital 37,722 35,789 35,789
Share premium 116,817 106,099 106,099
Capital reserve 38,696 56,888 49,142
Revaluation 5 15,401 42,941 18,834
reserve
Revenue reserve 2,333 1,346 3,122
Equity shareholders' funds 210,969 243,063 212,986
Net asset value per share 61.0p 74.2p 65.1p
Number of ordinary shares in circulation 345,640,159 327,596,768 327,288,384
Condensed statement of cash flows
For the six months to 31 March 2023 (Unaudited)
Six months to Six months to
31 March 30 September 2022
Six months to
2022 £'000
31 March
£'000
2023
£'000
Net cash outflow from operating activities (2,035) (2,536) (1,872)
Net cash (outflow) /inflow from investing activities (21,534) 12,689 12,058
Net cash (outflow)/ inflow before financing activities (23,569) 10,153 10,186
Net cash inflow from financing activities 1,750 24,182 14,124
(Decrease)/ Increase in cash (21,819) 34,335 24,310
Reconciliation of net cash flow to movement in net cash
(Decrease)/ increase in cash (21,819) 34,335 24,310
Opening cash at bank and on deposit 36,622 12,312 12,312
Closing cash at bank and on deposit 14,803 46,647 36,622
Reconciliation of (loss)/ profit/ before taxation to net cash outflow from
operating activities
Loss on ordinary activities before taxation (3,768) (29,939) (49,957)
Losses on investments 2,132 27,719 48,771
Changes in working capital and other non-cash items (399) (316) (686)
Net cash outflow from operating activities (2,035) (2,536) (1,872)
Notes to the financial statements
For the six months to 31 March 2023 (Unaudited)
1. Basis of preparation
The condensed financial statements for the six months to 31 March 2023
comprise the unaudited financial statements set out on pages 13 to 16 together
with the related notes on pages 17 to 21. The Company applies FRS 102 and the
AIC SORP for its annual Financial Statements. The condensed financial
statements for the six months to 31 March 2023 have therefore been prepared in
accordance with FRS 104 'Interim Financial Reporting' and the principles of
the SORP. They have also 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 2022.
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 2023 and for the six months ended 31 March 2022 have been neither
audited nor reviewed by the Company's Auditor. The information for the year to
30 September 2022 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 2022 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 2022 have been reported on by the Company's
Auditor 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 330,678,751 ordinary shares
in issue (31 March 2022 - 297,083,965 ordinary shares; 30 September 2022 -
312,132,990 ordinary shares).
Earnings for the first six months to 31 March 2023 should not be taken as a
guide to the results of the full financial year to 30 September 2023.
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, 3357,889,473 ordinary shares of 10p each listed at 30 September 2022 35,789
19,335,239 ordinary shares of 10p each issued during the period 1,933
377,224,712 ordinary shares of 10p each listed at 31 March 2023 37,722
30,601,089 ordinary shares of 10p each held in treasury at 30 September 2022 (3,060)
2,264,464 ordinary shares of 10p each repurchased during the period and held (226)
in treasury
1,281,000 ordinary shares of 10p each sold from treasury during the period 128
31,584,553 ordinary shares of 10p each held in treasury at 31 March 2023 (3,158)
345,640,159 ordinary shares of 10p each in circulation* at 31 March 2023 34,564
*carrying one vote each
During the six months to 31 March 2023 the Company issued 19,335,239 shares at
net proceeds of £12,543,000 (after costs). During the same period, the
Company purchased 2,264,464 shares to be held in treasury at a cost of
£1,430,000 (including costs). The Company also sold 1,281,000 shares from
treasury for proceeds of £767,000. At 31 March 2023, the Company held
31,584,553 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 345,640,159 ordinary shares in
circulation at 31 March 2023 (31 March 2022 - 327,596,768 ordinary shares; 30
September 2022 - 327,288,384 ordinary shares).
4. Dividends
The final dividend for the year ended 30 September 2022 of 3.0p per share
(2.7p capital, 0.3p revenue) was paid on 3 March 2023 to shareholders on the
register on 3 February 2023. The ex-dividend date was 2 February 2023.
During the year to 30 September 2022, the Company paid an interim dividend on
9 September 2022 of 3.0p per share (2.7p capital, 0.3p revenue).
5. Investments
All investments are initially recognised and 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 2022. 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 63,764 36,557 55,121 158,871
3,429
Opening unrealised appreciation/(depreciation) 11,287 (3,395) 12,945 (2,003) 18,834
Opening fair value 75,051 34 49,502 53,118 177,705
Movements in the year:
Purchases at cost 1,190 - 39,738 3,433 44,361
Sale - proceeds - - (22,500) (1,301) (23,801)
- realised gains on sales - - - 1,301 1,301
Change in unrealised appreciation/ (depreciation) 1,414 (34) 3,193 (8,006) (3,433)
Closing fair value 77,655 - 69,933 48,545 196,133
Closing book cost 64,954 3,429 53,795 58,554 180,732
Closing unrealised appreciation/(depreciation) 12,701 (3,429) 16,138 (10,009) 15,401
Closing fair value 77,655 - 69,933 48,545 196,133
Equity shares 77,655 - - 23,697 101,352
Preference shares - - - 18,842 18,842
Loan notes - - - 6,006 6,006
Collective investment vehicles - - 69,933 - 69,933
Closing fair value 77,655 - 69,933 48,545 196,133
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 and uncertainties table within the Strategic report
section in the Company's Annual Report and Accounts for the year ended 30
September 2022. 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 2022. During the period the Company has incurred management fees of
£2,480,000 (31 March 2022 - £2,822,000; 30 September 2022 - £5,468,000) and
secretarial and accounting fees of £80,000 (31 March 2022 - £76,000; 30
September 2022 - £149,000) payable to the Manager. No performance fee has
been accrued at 31 March 2023 (31 March 2022 - £nil; 30 September 2022 -
£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 2022.
6.4 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 2023 NAV of 62.3p was announced on 5 May 2023 and
the 31 May 2023 NAV of 62.6p was announced on 6 June 2023. 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.
· 19mn shares were issued on 3 April 2023 at allotment prices
between 61.8p and 65.2p under the current offer.
· Purchased 1.2mn Ordinary Shares of 10.0p on 5 April 2023 at a
price of 57.0p per share to be held in Treasury.
· Follow-on investment, into Airfinity Ltd, completed in April 2023
totalling £0.7mn.
· Follow-on investment, into Panthera Biopartners, completed in
June 2023 totalling £0.5mn.
· Follow-on investments, into LF Gresham House UK Multi Cap Income
Fund, completed in April and May 2023, totalling £0.5mn.
· Follow-on investments, into LF Gresham House UK Smaller Companies
Fund, completed in April and May 2023, totalling £4.5mn.
· One new investment, into Dayrize B.V., completed in May 2023
totalling £0.8mn.
· Partial realisation of MXC Capital in April, as part of a tender
offer, realising proceeds of £0.02mn and making a return of 0.6x cost.
· Partial realisations in Cerillion plc were made in April and May,
realising proceeds of £0.7mn and making a return of 15.8x cost.
· Received earn-out proceeds of £1.4mn from Pho in May 2023, which
was realised in July 2021, making a total return of 3.1x cost.
· Realised Evotix in May 2023, receiving proceeds of £0.8mn and
making a return of 0.7x cost.
· Received deferred proceeds of £0.4mn from Key Travel in May
2023, which was realised in May 2018, making a total return of 3.2x cost.
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 EC4A 3TW Auditor
BDO LLP
Investment Manager 55 Baker Street
Gresham House Asset Management Ltd LondonW1U 7EU
5 New Street Square
London EC4A 3TW
Tel: 020 7382 0999 Solicitors
Dickson Minto
Registered Number Broadgate Tower
04115341 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 Chair of the Audit & Risk Committee.
# Chair of the Management Engagement and Remuneration Committee.
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