Baronsmead Venture - Half-yearly Report
13/06/2023 07:00
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RNS Number : 4622C Baronsmead Venture Trust PLC 13 June 2023
Baronsmead Venture Trust plc
Half-yearly report for the six months ended 31 March 2023
The Directors of Baronsmead 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 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, wherever 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, networks and undertakes significant active
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
400.9p Net asset Value ("NAV") total return to shareholders for every 100.0p
invested at launch (April 1998).
NAV per share decreased 0.9 per cent. to 58.0p before deduction of dividends
in the six months to 31 March 2023.
£25.0mn raised in the period (before costs).
£4.3mn Investments made into two new and three follow-on opportunities
during the period (Unquoted: £3.2mn, Quoted : £1.1mn).
Cash returned to shareholders by date of investment
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) 100.00 20.00 80.00 181.40 201.4
1999 (May) 102.00 20.40 81.60 177.90 194.4
2000 (February) 137.00 27.40 109.60 174.70 147.5
2000 (March) 130.00 26.00 104.00 174.70 154.4
2004 (October) - C shares* 100.00 40.00 60.00 130.00 170.0
2009 (April) 91.60 27.48 64.12 113.50 153.9
2012 (December) 111.80 33.54 78.26 88.00 108.7
2014 (March) 103.80 31.14 72.66 70.50 97.9
2016 (February) 102.80 30.84 71.96 56.00 84.5
2017 (October) 94.76 28.43 66.33 38.00 70.1
2019 (February) 84.20 25.26 58.94 31.50 67.4
2019 (November) 76.80 23.04 53.76 24.00 61.3
2020 (January) 82.40 24.72 57.68 24.00 59.1
2020 (February) 80.10 24.03 56.07 20.50 55.6
2020 (March) 63.80 19.14 44.66 20.50 62.1
2020 (November) 75.20 22.56 52.64 17.50 53.3
2020 (December) 78.00 23.40 54.60 17.50 52.4
2021 (January) 81.30 24.39 56.91 17.50 51.5
2021 (February) 78.80 23.64 55.16 14.00 47.8
2021 (March) 80.90 24.27 56.63 14.00 47.3
2021 (December) 83.10 24.93 58.17 11.00 43.2
2022 (January) 82.40 24.72 57.68 11.00 43.3
2022 (March) 72.60 21.78 50.82 7.50 40.3
2023 (January) 64.25 19.28 44.97 4.50 37.0
2023 (March) 62.65 18.80 43.85 1.75 32.8
* C Share dividend calculated using conversion ratio of 0.9657, which is the
rate the c shares were converted into ordinary shares.
* Includes proposed Interim dividend of 1.75p.
* 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 63.4p and
67.2p.2. Average effective offer price based on allotment prices between 61.5p
and 64.5p.
Chair's statement
Fiona Miller Smith
Chair
Over what has been a turbulent six months, the Company's net asset value (NAV)
declined slightly by 0.5p per share to 58.0p. Continued weakness in the value
of the Company's unquoted investments was largely although not completely
offset by the modestly positive performance of the listed portfolio. This is
described more fully below, and highlights the benefits of the Company's
investment policy of having a combination of unquoted and listed assets with
the aim of providing a more consistent total return to shareholders over the
medium to long term. After the period end, NAV recovered through further good
performance of the listed portfolio, as reported on below.
Over the six months to 31 March 2023, inflation in the UK remained high and
interest rates rose steadily. Consequently, UK economic conditions continued
to be challenging and this has generated much uncertainty across the financial
markets. This was compounded in the first quarter of 2023 by the collapses of
Silicon Valley Bank and Credit Suisse in close succession which led to fears
of a more widespread banking sector contagion.
At the time of writing, it's fair to say that consumer and business confidence
remain fragile. In such an environment we might expect there to be further
weakness in the valuation of smaller companies and this is particularly the
case with the types of business the VCT rules require the Company to invest
in. However, 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.
Results
During the six months to 31 March 2023, the Company's NAV per share decreased
0.9 per cent. from 58.5p to 58.0p after the payment of a final dividend of
2.75p 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 2.75p) 58.5
Valuation decrease (0.9 per cent.) (0.5)
NAV as at 31 March 2023 58.0
The Board is pleased to report that over the two months to 31 May 2023, NAV
was 59.1p per share, a 1.9 per cent. increase over the NAV as at 31 March
2023. This was driven by firmer quoted markets and further increases in the
value of the Company's listed investments.
Dividends
The Board is pleased to declare an interim dividend of 1.75p per share 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. As such, the Board is aiming to
achieve its dividend policy objective of an annual yield of 7.0 per cent.
based on the NAV at the beginning of the financial year. Having said that, I
must of course remind shareholders this is not a guarantee and that payment
dates and the amount of future dividends depend on the level and timing of
profitable realisations.
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 44 22 41 (14)
AIM- traded companies 59 29 48 2
LF Gresham House UK Micro Cap Fund 29 14 48 7
LF Gresham House UK Multi Cap Income Fund 12 6 40 7
LF Gresham House UK Smaller Companies Fund 25 12 38 5
Liquid assets(#) 34 17 N/A 2
Total 203 100 215 (1)
*By value at 31 March 2023.
**Includes investee companies with holdings by more than one fund. Total
number of individual companies held is 166.
***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 13.6 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 2.1 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 4.6 per cent. and the LF
Gresham House Multi Cap Income Fund increased by 6.8 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. In the Manager's regular reporting to the
Board, the Directors were pleased to learn that in the six months to 31 March
2023, 85.8 per cent. of the companies in our listed portfolio have reported
positive news flow in terms of the financial performance. This is very welcome
news given the economic and political uncertainties we are currently
experiencing.
Investments
I am pleased to report that the Company made two new investments totalling
£1.3mn and three follow-on investments with a combined value of £3.0mn 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) - helps businesses track their carbon
emissions.
· Patchworks (unquoted) - a platform for connecting businesses'
applications.
· Oberon (quoted) - wealth advisory service for individuals and
businesses.
· Seeen (quoted) - a video technology business.
Following the period end, a total of £1.8mn was invested as follows:
· a new unquoted investment of £0.8mn in Dayrize, a platform for
assessing the sustainability of products,
· a follow‑on investment of £0.6mn into Airfinity, which is in
our unquoted portfolio, and
· a follow‑on investment of £0.4mn into Panthera Biopartners,
which is in our unquoted portfolio
Realisations
During the period both Glisser, a provider of conference and educational
software 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. In addition,
further proceeds from previous sales of unquoted investments were received as
follows:
· deferred consideration from the sale of Key Travel in 2018,
resulting in a gross money multiple of 3.2x original cost, and
· earn‑out consideration from the Pho realisation in 2021,
resulted in a gross money multiple of 3.1x original cost.
In the listed portfolio, the Manager continued to take profits from partial
sales of the Company's holding of Cerillion plc resulting in proceeds of
£0.5mn, and a gross money multiple of 15.8x original cost.
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 March 2023. The Directors are pleased to welcome the 873 new
shareholders who invested for the first time and to thank the 478 existing
shareholders who continue to support the Company.
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 plenty
ofnotice 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 of 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 Venture Trust plc, alongside other
investment companies, are not themselves subject to Consumer Duty.
Instead, in their role as promoter of and 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 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
as the economic and political backdrop remain uncertain. While it is
anticipated that inflation will gradually start to fall later in the year, it
remains stubbornly high, and interest rates seem unlikely to fall and may rise
further over the coming months.
Against this the Company's portfolio remains highly diversified, and is
largely positioned in sectors which the Manager expect to provide long‑term
growth potential. We remain committed to investing through the economic cycle
as experience suggests that this can produce superior returns over the longer
term. This can also provide an opportunity for the Company to make high
quality investments and build strategic stakes in businesses with great
potential at good prices. This applies to both
new investments and follow‑on investments in the portfolio. The Manager
continues to see a good pipeline of potential investments and the Company
remains suitably resourced to support investment into new and existing
portfolio companies.
Fiona Miller Smith
Chair
12 June 2023
Investments in the period
Company Location Sector Activity Book cost
£'000
Unquoted investments
New
Cognassit UK Ltd Newcastle upon Tyne Healthcare & Education A platform for supporting those with learning needs 896
Connect Earth Ltd London Business Services Helps businesses track their carbon emissions 447
Follow on
Patchworks Integration Ltd Nottingham Technology A platform for connecting businesses applications 1,920
Total unquoted investments 3,263
AIM-traded Investments
New
SEEEN plc London Technology A video technology business 609
Oberon Investments Group plc London Business Services Wealth advisory service for individuals and businesses 471
Total AIM-traded investments 1,080
Total investments in the period 4,343
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 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 12 June 2023
and was signed on its behalf by Ms Fiona Miller Smith, Chair.
Fiona Miller Smith
Chair
12 June 2023
Condensed Income Statement
For the six months to 31 March 2023 (unaudited)
Six months to Six months to Year to 30 September 2022
31 March 2023
31 March 2022
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Losses on investments 5 - (1,243) (1,243) - 23,346 23,346 - 43,626 43,626
Income 925 - 925 735 - 735 3,949 - 3,949
Investment management fee (437) (1,315) (1,752) (505) (1,513) (2,018) (967) (2,903) (3,870)
Other expenses (336) - (336) (361) - (361) (652) - (652)
Profit /(Loss) before taxation 152 (2,558) (2,406) (131) (24,859) (24,990) 2,330 (46,529) (44,199)
Taxation on ordinary activities - - - - - - (229) 229 -
Profit/(loss) for the period, being the total comprehensive income for the 152 (2,558) (2,406) (131) (24,859) (24,990) 2,101 (46,300) (44,199)
period after taxation
Return per ordinary share:
Basic and Diluted 0.05p (0.80p) (0.75p) (0.05p) (8.54p) (8.59p)
2 0.69p (15.25p) (14.56p)
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 2023 (Unaudited)
Non-distributable reserves Distributable reserves Total
£'000
Called-up share capital Share Revaluation Capital Revenue
£'000 premium reserve reserve £'000 reserve
£'000 £'000 £'000
At 1 October 2022 34,205 108,435 16,912 31,786 2,487 193,825
(Loss)/profit on ordinary activities after taxation - - (2,307) (251) 152 (2,406)
Net proceeds of share issues, share buybacks & sale of shares from 3,674 18,970 - (1, 516) - 21,128
treasury
Dividends paid - - - (8,458) (663) (9,121)
At 31 March 2023 37,879 127,405 14,605 21,561 1,976 203,426
For the six months to 31 March 2022 (Unaudited)
Non-distributable reserves Distributable reserves Total
£'000
Called-up share capital Share Revaluation Capital Revenue
£'000 Premium reserve reserve £'000 reserve
£'000 £'000 £'000
At 1 October 2021 29,501 76,711 68,763 46,248 1,640 222,863
(Loss)/ profit 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
Dividends paid - - - (10,435) (307) (10,742)
At 31 March 2022 34,205 108,435 39,791 39,076 1,202 222,709
For the year ended 30 September 2022 (Audited)
Non-distributable reserves Distributable reserves Total
£'000
Called-up share capital Share Revaluation Capital Revenue
£'000 premium reserve reserve £'000 reserve
£'000 £'000 £'000
At 1 October 2021 29,501 76,711 68,763 46,248 1,640 222,863
(Loss)/ profit after taxation - - (51,851) 5,551 2,101 (44,199)
Net proceeds of share issues, share buybacks & sale of shares from 4,704 31,724 - (1,050) - 35,378
treasury
Dividends paid - - - (18,963) (1,254) (20,217)
At 30 September 2022 34,205 108,435 16,912 31,786 2,487 193,825
Condensed Balance Sheet
As at 31 March 2023 (Unaudited)
As at As at
31 March 2022
30 September 2022
Notes As at
£'000 £'000
31 March
2023
£'000
Fixed assets
Unquoted investments 5 44,426 48,012 48,184
Traded on AIM 5 59,156 64,041 56,819
Collective investment vehicles 5 75,140 67,459 54,740
Listed on LSE 5 - 24 24
Investments 5 178,722 179,536 159,767
Current assets
Debtors 1,213 80 131
Cash at bank and on deposit 24,600 44,304 35,051
25,813 44,384 35,182
Creditors (amounts falling due within one year) (1,109) (1,211) (1,124)
Net current assets 24,704 43,173 34,058
Net assets 203,426 222,709 193,825
Capital and reserves
Called-up share capital 37,879 34,205 34,205
Share premium 127,405 108,435 108,435
Capital reserve 21,561 39,076 31,786
Revaluation reserve 5 14,605 39,791 16,912
Revenue reserve 1,976 1,202 2,487
Equity shareholders' funds 203,426 222,709 193,825
Net asset value per share 57.96p 70.37p 61.29p
Number of ordinary shares in circulation 350,947,945 316,473,613 316,218,166
Condensed Statement of Cash Flows
For the six months to 31 March 2023 (unaudited)
Six Six Year
months to
months to
31 March 2023
31 March to
2022
30 September 2022
£'000
£'000 £'000
Net cash outflow from operating activities (1,384) (3,765) (2,981)
Net cash (outflow)/inflow from investing activities (21,072) 6,076 5,713
Net cash (outflow)/inflow before financing activities (22,456) 2,311 2,732
Net cash inflow from financing activities 12,005 24,540 14,866
(Decrease)/increase in cash (10,451) 26,851 17,598
Reconciliation of new cash flow to movement in net cash
(Decrease)/increase in cash (10,451) 26,851 17,598
Opening cash at bank and on deposit 35,051 17,453 17,453
Closing cash at bank and on deposit 24,600 44,304 35,051
Reconciliation of loss on ordinary activities before taxation to net cash
outflow from operating activities
Loss on ordinary activities before taxation (2,406) (24,990) (44,199)
Losses on investments 1,243 23,346 43,626
Changes in working capital and other non-cash items (221) (2,121) (2,408)
Net cash outflow from operating activities (1,384) (3,765) (2,981)
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 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 AIC
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 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 auditors. 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 has been extracted from the latest published audited
financial statements, which have been filed with the Registrars 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
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 321,742,586 ordinary shares
in issue (31 March 2022 - 290,940,471 ordinary shares; 30 September 2022 -
303,530,368 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
Allotted, called-up and fully paid:
Ordinary shares £'000
342,045,641 ordinary shares of 10p each listed at 30 September 2022 34,205
36,739,031 ordinary shares of 10p each issued during the period 3,674
378,784,672 ordinary shares of 10p each listed at 31 March 2023 37,879
25,827,475 ordinary shares of 10p each held in treasury at 30 September 2022 (2,583)
2,742,252 ordinary shares of 10p each repurchased during the period and held (274)
in treasury
733,000 ordinary shares of 10p each sold from treasury during the period 73
27,836,727 ordinary shares of 10p each held in treasury at 31 March 2023 (2,784)
350,947,945 ordinary shares of 10p each in circulation* at 31 March 2023 35,095
* Carrying one vote each.
During the six months to 31 March 2023, the Company issued 36,739,031 shares
at net proceeds of 22,334,000 (after costs). During the same period, the
Company purchased 2,742,252 shares to be held in treasury at a cost of
£1,622,000. The Company also sold 733,000 treasury shares at a cost of
£416,000. At 31 March 2023 the Company held 27,836,727 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 350,947,945 ordinary shares in issue at
31 March 2023 (31 March 2022 - 316,473,613 ordinary shares; 30 September
2022 - 316,218,166 ordinary shares).
4. Dividends
The final dividend for the year ended 30 September 2022 of 2.75p per share
(2.55p capital, 0.2p 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 Traded investment £'000
£'000 on LSE vehicles Unquoted
£'000 £'000 £'000
Opening book cost 48,212 2,315 42,931 49,397 142,855
Opening unrealised appreciation/(depreciation) 8,607 (2,291) 11,809 (1,213) 16,912
Opening fair value 56,819 24 54,740 48,184 159,767
Movements in the period:
Purchases at cost 1,080 - 38,669 3,263 43,012
Sale - proceeds - (21,750) (1,064) (22,814)
- realised gains on sales - - 1,064 1,064
Change in unrealised appreciation/ (depreciation) 1,257 (24) 3,481 (7,021) (2,307)
Closing fair value 59,156 - 75,140 44,426 178,722
Closing book cost 49,292 2,315 59,850 52,660 164,117
Closing unrealised appreciation/(depreciation) 9,864 (2,315) 15,290 (8,234) 14,605
Closing fair value 59,156 - 75,140 44,426 178,722
Equity shares 59,156 - - 16,756 75,912
Preference Shares - - - 17,508 17,508
Loan notes - - - 10,162 10,162
Collective investment vehicles - - 75,140 - 75,140
Closing fair value 59,156 - 75,140 44,426 178,722
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 and uncertainties table within the Strategic report section in the
Company's Report and Financial Statements for the year to 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, 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
2022. During the period the Company has incurred management fees of
£1,753,000 (31 March 2022 - £2,018,000; 30 September 2022 - £3,870,000)
and secretarial fees of £74,000 (31 March 2022 - £69,000; 30 September
2022 - £136,000) payable to the Manager. A performance fee of £nil 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.
6.5 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 59.0p was announced on 5 May 2023 and
the 31 May 2023 NAV of 59.1p 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.
· 3 million shares were issued on 3 April 2023 at allotment prices
between 58.9p and 61.8p under the current offer.
· Purchased 0.7 million Ordinary Shares of 10.0p on 5 April 2023 at
a price of 54.3p per share to be held in Treasury.
· Follow‑on investment into Airfnity Ltd completed in April 2023
totalling £0.6mn.
· Follow‑on investment into Panthera Biopartners completed in
June 2023 totalling £0.4mn.
· Two follow‑on investments, into Multi Cap, completed in April
and May 2023, totalling £2.5mn.
· Two follow‑on investments, into Small Cap, completed in April
and May 2023, totalling £2.5mn.
· One new investment, into Dayrize B.V., completed in May 2023
totalling £0.8mn.
· Partial realisation in MXC Capital Ltd was made in April,
following a corporate action, realising proceeds of £0.01mn and making a
return of 0.6x cost.
· Partial realisations in Cerillion plc were made in April and May,
realising proceeds of £0.5mn and making a return of 15.8x cost.
· Received deferred proceeds of £1.1mn 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 £0.7mn,
making a return of 0.7x cost.
· Received deferred proceeds of £0.3mn from Key Travel in May
2023, which was realised in May 2018, making a total return of 3.2x cost.
Directors Registrars and Transfer Office
Fiona Miller Smith (Chair) 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 EC4A 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 W.S
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/)
Corporate Information
Δ Senior Independent Director
* Chair of the Audit Committee
† Chair of the Nomination Committee
†† Chair of the Management Engagement and Remuneration Committee
LEI: 213800VQ1PQHOJXDDQ88
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