Baronsmead Venture - Half-year Report
27/05/2022 07:00
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RNS Number : 0061N Baronsmead Venture Trust PLC 27 May 2022
Baronsmead Venture Trust plc
Half-yearly report for the six months ended 31 March 2022
The Directors of Baronsmead 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 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, wherever possible, seek to pay two dividends to
shareholders in each calendar year, typically an interim 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 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 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 the management
resources are in place to deliver profitable growth. The aim is to build on
the business model and grow the company into an attractive target which can be
sold or potentially floated in the medium term.
Financial highlights
444.5p NAV total return to shareholders for every 100.0p invested at launch
(April 1998).
NAV per share decreased 10.8 per cent. to 70.4p, before the deduction of
dividends, in the six months to 31 March 2022.
£37.5mn Funds raised in the period (before costs).
£11.2mn Realised proceeds in the period, returning 2.1x cost.
Cash returned to shareholders
The table below shows the cash returned to shareholders that invested in
Baronsmead 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)
1998 (April) 100.0 20.0 80.0 176.9 196.9
1999 (May) 102.0 20.4 81.6 173.4 190.0
2000 (February) 137.0 27.4 109.6 170.2 144.2
2000 (March) 130.0 26.0 104.0 170.2 150.9
2004 (October) - C shares* 100.0 40.0 60.0 125.6 165.6
2009 (April) 91.6 27.5 64.1 109.0 149.0
2012 (December) 111.8 33.5 78.3 83.5 104.7
2014 (March) 103.8 31.1 72.7 66.0 93.6
2016 (February) 102.8 30.8 72.0 51.5 80.1
2017 (October) 94.8 28.4 66.3 33.5 65.4
2019 (February) 84.2 25.3 58.9 27.0 62.1
2019 (November) 76.8 23.0 53.8 19.5 55.4
2020 (January) 82.4 24.7 57.7 19.5 53.7
2020 (February) 80.1 24.0 56.1 16.0 50.0
2020 (March) 63.8 19.1 44.7 16.0 55.1
2020 (November) 75.2 22.6 52.6 13.0 47.3
2020 (December) 78.0 23.4 54.6 13.0 46.7
2021 (January) 81.3 24.4 56.9 13.0 46.0
2021 (February) 78.8 23.6 55.2 9.5 42.1
2021 (March) 80.9 24.3 56.6 9.5 41.7
2021 (December) 83.1 24.9 58.2 6.5 37.8
2022 (January) 82.4 24.7 57.7 6.5 37.9
2022 (March) 72.6 21.8 50.8 3.0 34.1
* Share dividend calculated using conversion ratio of 0.9657, which is the
rate the C shares were converted into ordinary shares
*Includes interim dividend of 3.0p per share payable on 9 September 2022.
Chairman's statement
Fiona Miller Smith
Chairman
This is my first statement as Chair of Baronsmead Venture Trust plc following
my appointment in March 2022. I am delighted to have been appointed Chair and
look forward to working with both my Board colleagues and the Manager for the
long-term benefit of our shareholders.
As mentioned in the Company's annual report and flagged in other recent
communications to shareholders, the Board anticipated increased levels of
volatility in public markets and greater levels of uncertainty heading into
2022 as the economy continued to emerge from COVID-19. This sentiment was
further exacerbated by a step change in geopolitical risk in Europe, slowing
economic growth and the expectation of a prolonged period of higher inflation.
These headwinds have been reflected predominately 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 portfolio also remains
defensively positioned with high levels of diversification. The portfolio
contains over 80 direct investments, both quoted and unquoted assets, and a
bias towards sectors which have more resilient, contracted or recurring
revenue streams.
The Board is 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
£11.2mn 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
10.8 per cent. from 78.9p to 70.4p 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) 78.9
Valuation decrease (10.8 per cent.) (8.5)
NAV as at 31 March 2022 70.4
The 30 April 2022 NAV was 71.1p, a 1.0 per cent. increase from 31 March 2022.
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 companies** % return in the period***
(£mn)
Unquoted 48 22 35 (5)
AIM- traded companies 64 29 51 (17)
LF Gresham House UK Micro Cap Fund 33 15 48 (16)
LF Gresham House UK Multi Cap Income Fund 8 4 46 (1)
Gresham House UK Smaller Companies Fund 13 5 44 (7)
Liquid assets(#) 57 25 - -
Total 223 100 224 -
*By value at 31 March 2022.
**Includes investee companies with holdings by more than one fund. Total
number of individual companies held is 175.
***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 17 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 ("Micro Cap") decreased by 16 per cent., the LF Gresham House UK
Smaller Companies Fund decreased by 7 per cent. and the LF Gresham House Multi
Cap Income Fund decreased by 1 per cent. This was primarily due to
volatility-driven negative sentiment surrounding inflationary pressures,
expectations of interest rate rises and the cost of living squeeze in the UK.
The ongoing war in Ukraine continues to weigh-in on global equity markets,
with the effect particularly pronounced in UK and European equities. Despite
this, the Board strongly believes that our investments in the Company's quoted
portfolio can provide long term benefits for shareholders. For example, the
Company's investment in the Micro Cap fund has achieved a ten year return of
306 per cent. and a return since its inception in 2009 of 453 per cent.
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
£7.9mn and two follow-on investments with a combined value of £1.7mn 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.
Following the period end, four further follow-on investments were made,
totalling £3.9mn, and a new unquoted investment of £0.9mn was made into
Bidnamic, a market leading provider of Google shopping management software.
Realisations
Proceeds of £3.6m were received during the period from sales of quoted
investments, including:
· Cerillion plc - top-slicing delivered proceeds of £1.2mn,
equating to a money multiple of 11.4x.
· Cloudcall Group plc - takeover by Xplorer Capital Management
resulting in proceeds of £2.4mn 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
£7.6mn, 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.
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 new
shareholders who invested for the first time and to thank the
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.
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.
Board succession
As announced on 15 February 2022, Peter Lawrence has retired as Chairman of
the Company. The Board would like to thank Mr Lawrence for his dedication,
wisdom and considerable contributions to the Board since joining the Company.
He has provided exemplary leadership as the Company has grown, and we wish him
all the very best for the future.
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 enlarged team enhances
the Manager's ability to identify, make and manage attractive early-stage
unquoted investments. This should benefit the Company through more consistent
and increased rates of investment, which, in turn, should feed through to the
delivery of attractive long-term returns for the Company's shareholders.
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 headroom,
scenario plan and more generally reduce execution risk over the next 12
months.
However, the portfolio remains highly diversified, and is largely positioned
in parts of the economy which the Board expects will have long-term structural
growth tailwinds. 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 will drive value creation and
ultimately dividend payments to shareholders over the long-term.
Fiona Miller Smith
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 3,120
Proximity Insight Holdings Ltd London Technology Platform for front-line sales associates of omni-channel retailers to engage 1,148
with customers.
Follow on
Airfinity Ltd London Healthcare & education Provides real time life science intelligence as a subscription service 960
RevLifter Ltd London Technology AI platform using advanced behavioural analytics to deliver tailored 719
promotions to users
Total unquoted investments 5,947
AIM-traded Investments
New
Aptamer Group plc Yorkshire Healthcare & education Platform providing antibody alternatives to the pharma industry. 2,206
Skillcast Group plc London Healthcare & education Compliance e-learning and regulatory technology services 753
Oberon Investments Group plc London Business Services Corporate advisory business 658
Total AIM-traded investments 3,617
Total investments in the period 9,564
Realisations in the period
Company First investment Original book cost (#) Proceeds (‡)
date £'000 £'000 Overall multiple return
Unquoted realisations
Carousel Logistics Ltd Full trade sale Oct 13 1,910 7,636 5.0*
Total unquoted realisations 1,910 7,636 5.0*
AIM-traded realisations
Cloudcall Group plc Take over Apr 14 2,630 2,373 0.9
Cerillion plc Market sale Nov 15 106 1,205 11.4
Mi-Pay Group plc Liquidated Dec 05 800 11 0.0
Total AIM-traded realisations 3,536 3,589 1.0
Total realisations in the period 5,446 11,225† 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 mostly 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 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 Company 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 Fiona Miller Smith, Chairman.
Fiona Miller Smith
Chairman
26 May 2022
Condensed Income Statement (unaudited)
For the six months to 31 March 2022
Six months to Six months to Year to 30 September 2021
31 March 2022
31 March 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 - (23,346) (23,346) - 31,241 31,241 - 49,591 49,591
Income 735 - 735 436 - 436 3,058 - 3,058
Investment management fee (505) (1,513) (2,018) (471) (1,414) (1,885) (1,009) (3,028) (4,037)
Performance fee - - - - (286) (286) - (1,941) (1,941)
Other expenses (361) - (361) (342) - (342) (618) - (618)
(Loss)/profit before taxation (131) (24,859) (24,990) (377) 29,541 29,164 1,431 44,622 46,053
Taxation on ordinary activities - - - - - - (104) 104 -
(Loss)/profit for the period, being the total comprehensive income for the (131) (24,859) (24,990) (377) 29,541 29,164 1,327 44,726 46,053
period after taxation
Return per ordinary share:
Basic and Diluted 2 (0.05p) (8.54p) (8.59p) (0.15p) 11.72p 11.57p
0.51p 17.08p 17.59p
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 Total
£'000
Notes Called-up share capital Share Revaluation Capital Revenue
£'000 premium £'000 reserve reserve £'000 reserve
£'000 £'000
At 1 October 2021 29,501 76,711 68,763 46,248 1,640 222,863
Profit/(loss) on ordinary activities after taxation - - (28,972) 4,113 (131) (24,990)
Net proceeds of share issues, share buybacks & sale of shares from 4,704 31,724 - (850) - 35,578
treasury
3
Dividends paid 4 - - - (10,435) (307) (10,742)
At 31 March 2022 34,205 108,435 39,791 39,076 1,202 222,709
For the six months to 31 March 2021 (Unaudited)
Non-distributable reserves Distributable reserves Total
£'000
Notes Called-up share capital Share Revaluation Capital Revenue
£'000 Premium reserve reserve £'000 reserve
£'000 £'000 £'000
At 1 October 2020 25,268 49,397 29,590 58,399 2,180 164,834
Profit/(loss) after taxation - - 26,534 2,998 (377) 29,164
Net proceeds of share issues, share buybacks & sale of shares from 4,232 27,314 - (784) - 30,762
treasury
3
Dividends paid 4 - - - (8,177) (1,055) (9,232)
At 31 March 2021 29,500 76,711 56,133 52,436 748 215,528
For the year ended 30 September 2021 (Audited)
Non-distributable reserves Distributable reserves Total
£'000
Notes Called-up share capital Share Revaluation Capital Revenue
£'000 premium reserve reserve £'000 reserve
£'000 £'000 £'000
At 1 October 2020 25,268 49,397 29,590 58,399 2,180 164,834
Profit after taxation - - 39,173 5,553 1,327 46,053
Net proceeds of share issues, share buybacks & sale of shares from 4,233 27,314 - (2,221) - 29,326
treasury
Dividends paid - - - (15,483) (1,867) (17,350)
At 30 September 2021 29,501 76,711 68,763 46,248 1,640 222,863
Condensed Balance Sheet
As at 31 March 2022 (Unaudited)
As at As at
31 March 2021
30 September 2021
Notes As at
£'000 £'000
31 March
2022
£'000
Fixed assets
Unquoted investments 5 48,012 44,698 52,012
Traded on AIM 5 64,041 71,151 77,380
Collective investment vehicles 5 67,459 58,155 79,400
Listed on LSE 5 24 25 24
Investments 5 179,536 174,029 208,816
Current assets
Debtors 80 108 91
Cash at bank 44,304 42,849 17,453
44,384 42,957 17,453
Creditors (amounts falling due within one year) (1,211) (1,458) (3,497)
Net current assets 43,173 41,499 14,047
Net assets 222,709 215,528 222,863
Capital and reserves
Called-up share capital 34,205 29,500 29,501
Share premium 108,435 76,711 76,711
Capital reserve 39,076 52,436 46,248
Revaluation reserve 5 39,791 56,133 68,763
Revenue reserve 1,202 748 1,640
Equity shareholders' funds 222,709 215,528 222,863
Net asset value per share 70.37p 79.16p 82.40p
Number of ordinary shares in circulation 316,473,613 272,255,245 270,458,280
Condensed Statement of Cash Flows
For the six months to 31 March 2022 (unaudited)
Six Six Year
months to
months to
31 March 2022
31 March to
2021
30 September 2021
£'000
£'000 £'000
Net cash outflow from operating activities (3,765) (1,159) (1,057)
Net cash inflow/(outflow) from investing activities 6,076 11,497 (4,802)
Net cash inflow/(outflow) before financing activities 2,311 10,338 (5,859)
Net cash inflow from financing activities 24,540 21,469 12,270
Increase in cash 26,851 31,807 6,411
Reconciliation of net cash flow to movement in net cash
Increase in cash 26,851 31,807 6,411
Opening cash at bank and on deposit 17,453 11,042 11,042
Closing cash at bank and on deposit 44,304 42,849 17,453
Reconciliation of (loss) / profit before taxation to net cash outflow from
operating activities
(Loss)/profit before taxation (24,990) 29,164 46,053
(Losses)/gains on investments 23,346 (31,241) (49,591)
Changes in working capital and other non-cash items (2,121) 918 2,481
Net cash outflow from operating activities (3,765) (1,159) (1,057)
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 statements set out on pages 10 to 13 together with the
related notes on pages 14 to 17. 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 accounts 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 2021 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 290,940,471 ordinary shares
in issue (31 March 2021 - 252,148,059 ordinary shares; 30 September 2021 -
261,864,661 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
Allotted, called-up and fully paid:
Ordinary shares £'000
295,007,034 ordinary shares of 10p each listed at 30 September 2021 29,501
47,038,607 ordinary shares of 10p each issued during the period 4,704
342,045,641 ordinary shares of 10p each listed at 31 March 2022 34,205
24,548,754 ordinary shares of 10p each held in treasury at 30 September 2021 (2,455)
1,984,274 ordinary shares of 10p each repurchased during the period and held (198)
in treasury
961,000 ordinary shares of 10p each sold from treasury during the period 96
25,572,028 ordinary shares of 10p each held in treasury at 31 March 2022 (2,557)
316,473,613 ordinary shares of 10p each in circulation* at 31 March 2022 31,648
* carrying one vote each
During the six months to 31 March 2022, the Company issued 47,038,607 shares
at net proceeds of £36,428,000 (after costs). During the same period, the
Company purchased 1,984,274 shares to be held in treasury at a cost of
£1,506,000. The Company also sold 961,000 treasury shares at a cost of
£656,000. At 31 March 2022 the Company held 25,572,028 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 316,473,613 ordinary shares in issue at
31 March 2022 (31 March 2021 - 272,255,245 ordinary shares; 30 September 2021
- 270,458,280 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 in
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 Traded investment £'000
£'000 on LSE vehicles Unquoted
£'000 £'000 £'000
Opening book cost 47,079 2,315 51,111 39,548 140,053
Opening unrealised appreciation/(depreciation) 30,301 (2,291) 28,289 12,464 68,763
Opening fair value 77,380 24 79,400 52,012 208,816
Movements in the period:
Purchases at cost 3,617 - 7,541 5,947 17,105
Sale - proceeds (3,578) - (12,000) (7,461) (23,039)
Sale - realised gains/ (losses) on sales 1,322 - - (1,766) (444)
Unrealised gains realised during the period (396) - - 6,466 6,070
Decrease in unrealised appreciation (14,304) - (7,482) (7,186) (28,972)
Closing fair value 64,041 24 67,459 48,012 179,536
Closing book cost 48,044 2,315 46,652 42,734 139,745
Closing unrealised appreciation/(depreciation) 15,997 (2,291) 20,807 5,278 39,791
Closing fair value 64,041 24 67,459 48,012 179,536
Equity shares 64,041 24 - 25,778 89,843
Preference Shares - - - 13,209 13,209
Loan notes - - - 9,025 9,025
Collective investment vehicles - - 67,459 - 67,459
Closing fair value 64,041 24 67,459 48,012 179,536
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 financial instruments consist of equity and fixed interest
investments, cash balances 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 Report and Financial Statements for the year to 30 September 2021.
The Board continues to regularly to 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, administrative and custodian services to the Company. Under the
management agreement, the Manager receives a fee of 2.0 per cent. per annum of
the net assets of the Company. This is described in more detail under the
heading 'The management agreement' within the Strategic Report in the
Company's Annual Report and Financial Statements for the year to 30 September
2021. During the period the Company has incurred management fees of
£2,018,000 (31 March 2021 - £1,885,000; 30 September 2021 - £4,037,000) and
secretarial fees of £69,000 (31 March 2021 - £62,000; 30 September 2021 -
£126,000) payable to the Manager. A performance fee of £nil has been accrued
at 31 March 2022 (31 March 2021 - £286,000; 30 September 2021 - £1,941,000).
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
£2,872,000, including £918,000 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 holding is an
investment in an associate, owing to the proportion of equity held and
representation on the board representing significant influence over the
operations of the company. The investment is held as part of an investment
portfolio, and is 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 Ltd UK A Ordinary & B Ordinary 29.2% (3.0) (12.7) 31 December 2020(1)
(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 2021 NAV of 71.1p was announced on 6 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 £2.7mn.
· Two further follow-on investments, into Yappy and Glisser,
completed in May 2022 totalling £1.2mn.
· One new investment, into Bidnamic, completed in May 2022
totalling £0.9mn.
Corporate Information
Directors Registrars and Transfer Office
Fiona Miller Smith (Chairman) Computershare Investor Services PLC
Les Gabb* The Pavilions
Susannah Nicklin Δ† Bridgwater Road
Michael Probin†† Bristol BS99 6ZZ
Tel: 0800 923 1533
Secretary
Gresham House Asset Management Ltd Brokers
Panmure Gordon & Co
Registered Office One New Change
5 New Street Square London EC4M 9AF
London EC41 3TW Tel: 020 7886 2500
Investment Manager Auditor
Gresham House Asset Management Ltd BDO LLP
5 New Street Square 55 Baker Street
London EC4 3TW London W1U 7EU
Tel: 020 7382 0999
Solicitors
Registered Number Dickson Minto
03504214 Broadgate Tower
20 Primrose Street
London EC2A 2EW
VCT Status Adviser
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Website
www.baronsmeadvcts.co.uk (http://www.baronsmeadvcts.co.uk/)
Δ Senior Independent Director
* Chairman of the Audit Committee
† Chairman of the Nomination Committee
†† Chairman of the Management Engagement and Remuneration Committee
LEI: 213800VQ1PQHOJXDDQ88
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