REG - Dunedin Enterprise - Half-year Report
16/09/2022 07:01
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RNS Number : 6479Z Dunedin Enterprise Inv Trust PLC 16 September 2022
For release
16 September 2022
Dunedin Enterprise Investment Trust PLC
Half year ended 30 June 2022
Dunedin Enterprise Investment Trust PLC, the private equity investment trust
which specialises in investing in UK mid-market buyouts, announces its results
for the half year ended 30 June 2022.
Financial Highlights:
· Net asset value total return: 4.0%
· Net asset value per share at 30 June 2022: 567.5p, after 14.5p
dividend (558.8p at 31/12/21)
· Share price at 30 June 2022: 502p (473p at 31/12/21)
· Realisations: £8.6m in the half year
· Post half year sale of RED
· £156.8m returned to shareholders since 2012
Comparative Total Return Performance (%)
Periods to 30 June 2022 Net asset value (per share) Share price FTSE
Small Cap
(ex Inv Cos)
Index
4.0 9.4 -15.8
Six months
One year 20.5 54.8 -14.6
Three years 51.9 46.6 23.7
Five years 95.3 180.3 20.2
Ten years 100.0 230.7 179.9
( )
For further information please contact:
Graeme Murray
Dunedin LLP
07813 138367
Chairman's Statement
The total return in the half year to 30 June 2022 was 4.0% in terms of net
asset value per share which increased from 558.8p to 567.5p in the half
year. This is stated after allowing for a second interim dividend of 12.6p
(paid in March 2022) and a final dividend of 1.9p (paid in May 2022), both
relating to the year ended 31 December 2021.
The share price total return was 9.4% during the period under review. The
price of 502p at 30 June 2022 represented a discount of 11.5% to the net asset
value of 567.5p per share. The latest share price available was 520p,
representing a discount of 8.4%.
Portfolio
The realisation of Incremental, the market-leading IT services platform, was
completed in March 2022, generating proceeds of £7.9m. The investment was
valued at £5.6m at 31 December 2021. Further proceeds are expected to be
received from the sale as a result of an earn-out provision.
The sale of our remaining holding in CitySprint, the same day courier, was
completed in January 2022 with proceeds received of £1.5m.
Following the half year it was announced that Dunedin Buyout Fund II LP has
entered into a legally binding agreement to realise the investment in RED, the
provider of SAP contract and permanent staff. The transaction is subject to
funding and regulatory approvals and is expected to complete in the second
half of 2022. The investment in RED was valued at £23.7m in the
Preliminary Unaudited Net Asset Value at 30 June 2022 published on 1 August
2022. Proceeds from the sale are expected to amount to £23.7m. There are
also future potential proceeds from an earn-out arrangement which are
dependent upon RED achieving profit targets in the year to 31 March 2023. No
valuation has been placed on the earn-out at 30 June 2022.
Unrealised valuation increases totalling £7.7m were offset by value decreases
of £6.1m. The valuation uplift was primarily generated from RED and
Incremental.
The principal valuation reduction was at GPS (£5.9m). A partial sale of
GPS, a market leader in payment processing technology, was achieved in
December 2021 generating a gross return of 2.2x original cost. In the half
year GPS's revenue has continued to increase by 13%. However, since December
2021 the valuation multiples applied to fintech companies have suffered a
significant downturn. This has resulted in a full provision being made
against the remaining investment.
Further details are provided in the Manager's Review.
Cash, Commitments & Liquidity
At 30 June 2022 the Company held cash and near cash equivalents totalling
£30.0m out of total net assets of £74.6m. Following completion of the RED
realisation cash reserves are expected to increase to £53.7m. There are
outstanding commitments to limited partnership funds of £9.7m at 30 June
2022, consisting of £9.0m to Dunedin-managed funds and £0.7m to Realza.
Tender Offer
The Board is committed to returning proceeds of asset sales to shareholders
and doing so efficiently. While the portfolio realisation process continues,
the Board will look at opportunities to combine the proceeds of more than one
sale before conducting a tender to achieve economies in the process. Once
funding and regulatory approvals are received on the realisation of RED the
Board intends to announce a distribution to shareholders.
Dividends
A second interim dividend of 12.6p per share relating to the year ended 31
December 2021 was paid to shareholders in March 2022, amounting to £1.7m. A
final dividend of 1.9p per share also relating to that year was paid to
shareholders in May 2022, amounting to £0.3m.
Outlook
Following the invasion of Ukraine our portfolio companies have had to contend
with a level of uncertainty seldom seen. Inflationary pressures and economic
disruption have provided a headwind which looks likely to continue for some
time.
Duncan Budge
16 September 2022
Manager's Review
Results for the six months to 30 June 2022
In the six months to 30 June 2022, the net asset value per share total return
was 4.0%, after taking account of dividends paid for 2021 of 14.5p per share
(paid in March/May 2022). This compares with a decrease in the FTSE Small Cap
Index (ex Inv. Cos) over the same period of 15.8%.
In the six months to 30 June 2022 the Company realised £8.6m from
investments.
Net asset and cash movements in the half year to 30 June 2022
The movement in net asset value is summarised in the table below:-
£'m
Net asset value at 31 December 2021 73.4
Unrealised value increases 7.7
Unrealised value decreases (6.1)
Realised gain over opening valuation 0.9
Dividends paid to shareholders (1.9)
Other movements 0.6
Net asset value at 30 June 2022 74.6
Cash movements in the half year to 30 June 2022 can be summarised as follows:-
£'m
Cash & near cash balances at 31 December 2021 24.4
Investments made (0.3)
Investments realised 8.6
Dividends paid to shareholders (1.9)
Operating activities (0.8)
Cash & near cash balances at 30 June 2022 30.0
Portfolio composition and movements
Dunedin Enterprise holds investments in unquoted companies through:-
• Dunedin managed funds, and
• Third party managed funds.
The portfolio movements can be analysed as shown in the table below:-
Valuation Additions Disposals Realised Unrealised Valuation
at 31-12-21 in half year in half year movement movement at 30-6-22
£'m £'m £'m £'m £'m £'m
Dunedin managed 43.6 0.2 (8.6) 0.9 1.5 37.6
Third party managed 5.2 0.1 - - 0.1 5.4
Investment portfolio 48.8 0.3 (8.6) 0.9 1.6 43.0
AAA rated money market funds (excluding cash on deposit) 11.8 12.3 (9.1) - - 15.0
Total 60.6 12.6 (17.7) 0.9 1.6 58.0
Realisations
In the half year a total of £8.6m was realised from the portfolio of
investments.
In March 2022 Incremental, the market-leading IT services platform which
designs, implements and supports clients with ERP/CRM systems and cloud
infrastructure, was realised by a trade sale to Telefonica. Proceeds from
the realisation amounted to £7.9m, consisting of capital of £7.1m and income
of £0.8m. At 30 June 2022 the investment has been valued at the additional
deferred proceeds of £1.4m which are expected to be received by the year
end. The investment in Incremental was valued at £5.6m at 31 December 2021
and has generated a return of £9.9m, representing a gross return of 2.5x
return original cost.
In January 2022 the remaining investment in CitySprint, the same day courier,
was realised delivering proceeds of £1.5m. Total proceeds from the original
investment totalled £21.3m and generated a 2.1x return on cost of £9.8m.
Following the half year it was announced that Dunedin Buyout Fund II LP has
entered into a legally binding agreement to realise the investment in RED, the
provider of SAP contract and permanent staff. The transaction is subject to
funding and regulatory approvals and is expected to complete in the second
half of 2022. The investment in RED was valued at £23.7m in the
Preliminary Unaudited Net Asset Value at 30 June 2022 published on 1 August
2022. Proceeds from the sale are expected to amount to £23.7m, consisting
of capital of £19.7m and income of £4.0m. Additionally, there are future
potential proceeds from an earn-out arrangement which are dependent upon RED
achieving profit targets in the year to 31 March 2023.
Investment activity
A further £0.2m was drawn down by Dunedin and third-party managed funds to
meet management fees and ongoing expenses.
Unrealised movements in valuations
Unrealised valuation increases in the half year amounted to £7.7m. There were
valuation uplifts at RED (£3.0m), Incremental (£1.4m) and Premier (£0.6m).
RED, the provider of SAP contract and permanent staff, has been valued at the
expected proceeds from the sale announced in August 2022.
As noted above, Incremental was realised in March 2022. There are future
potential proceeds from an earn-out arrangement which are dependent upon
Incremental achieving profit targets in 2022 and 2023. It is expected that
this earn-out will generate £1.4m of further proceeds in 2022 which is
included in the current valuation.
Premier Hytemp, the provider of highly engineered components to the oil and
gas industry, has experienced a recovery in profitability following an
increase in margins both in the UK and Singapore. As the market outlook
improves the company is tendering for some significant contracts. The
investment continues to be valued on a discounted net assets basis.
The principal valuation reduction was at GPS (£5.9m). A partial sale of
GPS, a market leader in payment processing technology, was achieved in
December 2021 generating a gross return of 2.2x original cost. In the half
year GPS's revenue has continued to increase by 13%. However, since December
2021 the valuation multiples applied to fintech companies have suffered a
significant downturn. This has resulted in a full provision being made
against the remaining investment.
The average earnings multiple applied to the valuation of the Dunedin managed
portfolio was 8.8x EBITDA (31 December 2021: 9.7x). These multiples are
applied to the maintainable earnings of portfolio companies. Within the
Dunedin managed portfolio, the weighted average gearing of the companies was
3.1x EBITDA (31 December 2021: 3.3x).
The portfolio continues to be valued in accordance with the International
Private Equity Venture Capital valuation guidelines
(www.privateequityvaluation.com).
Dunedin LLP
16 September 2022
Current Investments
by value at 30 June 2022
Approx. Percentage
percentage Cost of Directors of net
of equity investment valuation assets
Company name % £'000 £'000 %
RED 20.1 9,665 23,726 31.8
Weldex 15.1 9,505 6,612 8.9
Realza 8.9 4,321 5,428 7.3
FRA 5.2 1,413 3,848 5.2
Premier Hytemp 23.0 10,136 2,328 3.1
EV 10.6 8,321 1,921 2.6
Incremental - - 1,422 1.9
GPS 1.5 1,994 - -
Hawksford 3.7 - - -
45,355 45,285 60.8
Total return of current investments
at 30 June 2022
Cost of Gross Directors Total
realised
investment to date* valuation return
Company name £'000 £'000 £'000 £'000
RED 11,438 1,432 23,726 25,158
Weldex 9,505 119 6,612 6,731
Realza 11,545 11,651 5,428 17,079
FRA 6,035 5,504 3,848 9,352
Premier Hytemp 10,136 178 2,328 2,506
EV 8,321 - 1,921 1,921
Incremental 3,875 9,852 1,422 11,274
GPS 8,220 18,203 - 18,203
Hawksford 6,910 7,087 - 7,087
75,985 54,026 45,285 99,311
* - dividends and capital.
Top investments
RED
Percentage of equity held 20.1%
Cost of Investment £9.7m
Directors' valuation £23.7m
Percentage of net assets 31.8%
RED is a global supplier of SAP contract and permanent staff to international
corporations and consultancies. SAP is the market leader in ERP software
(Enterprise Resource Planning), which enables companies of all sizes and
industries to operate more efficiently, including many of the world's largest
organisations.
RED, which was founded in 2000, now has a global footprint with access to over
200,000 candidates in 80 countries, and has offices in the UK, Germany,
Switzerland and the USA.
RED has a highly scalable business model. Growth is expected to come from
deeper penetration of the existing client base, development of new clients,
continued focus on service differentiation and increasing market share in
existing geographical markets. Additional growth opportunities include
expansion to support high growth technologies complementary to SAP.
In August 2022 it was announced that a legally binding agreement to realise
the investment in RED had been entered into by Dunedin Buyout Fund II LP.
Proceeds from the sale are expected to amount to £23.7m.
Weldex
Percentage of equity held 15.1%
Cost of Investment £9.5m
Directors' valuation £6.6m
Percentage of net assets 8.9%
Weldex is a market-leading crawler crane hire business in the UK, with the
tenth largest lifting capacity globally. It serves the offshore wind, oil
& gas, commercial construction and infrastructure markets. Its cranes,
including some of the largest in the UK, have been used in a number of
significant construction projects including Heathrow Terminal 5, the iconic
arch at the Wembley Stadium, the 2012 Olympic site and Crossrail. Recent
projects include the HS2 railway, the Thames Tideway Tunnel in London, and the
Peterborough Railway Tunnel where a curved concrete box weighing more than the
Eiffel Tower will be pushed underground to form a new railway tunnel.
Weldex was established in 1979 and has grown into the UK's largest crawler
crane hire company. The company employs over 100 staff and operates nationwide
and overseas from its headquarters in Inverness and its depot at Alfreton. The
company provides its customers with an established team of fully accredited
operators, site managers and service engineers and also supplies associated
lifting equipment including wheeled cranes, forklifts, lorry loaders and
trailers.
Realza
Percentage of equity held 8.9%
Cost of Investment £4.3m
Directors' valuation £5.4m
Percentage of net assets 7.3%
Realza Capital FCR is a Spanish private equity fund making investments in
Spain and Portugal. The fund is limited to investing 15% of commitments in
Portugal. Dunedin Enterprise's investment is held via Dunedin Fund of Funds
LP.
The fund invests in companies with leading market positions and attractive
growth prospects either through organic growth or through merger &
acquisition activity. Realza seeks to invest in companies with an enterprise
value normally ranging from €20m to €100m. The fund's typical equity
investment ranges from €10m to €25m.
Realza has three investments remaining: -
• a manufacturer of water pumps for the automotive
industry;
• a producer of premium tomatoes; and
• a producer of cannabis for medicinal and
pharmaceutical use.
FRA
Percentage of equity held 5.2%
Cost of Investment £1.4m
Directors' valuation £3.8m
Percentage of net assets 5.2%
FRA is an international consultancy that provides forensic accounting, data
analytics and e-discovery expertise, helping businesses respond to regulatory
investigations in an increasingly regulated global environment.
FRA works on some of the largest and most complex regulatory investigations
globally. Its clients are typically blue-chip multinational corporates seeking
advice to help navigate regulatory scrutiny, effect compliant cross-border
data transfer, and manage risk. The company has offices in London, Dallas, New
York, Washington DC, Philadelphia, Paris, Helsinki and Stockholm. It also runs
data centres near each office location as well as in Montreal and Zurich.
Two re-financings of the business have been undertaken with Dunedin Enterprise
receiving proceeds of £5.5m.
Premier Hytemp
Percentage of equity held 23.0%
Cost of Investment £10.1m
Directors' valuation £2.3m
Percentage of net assets 3.1%
Premier Hytemp is a global market leader in the manufacture and supply of
engineered metal solutions. It is a specialist in the provision of low alloy
and nickel alloy steel components for the upstream oil and gas industry. Its
components are used in complex engineered assemblies required to extract and
control the flow of oil and gas from new reserves, often sub-sea.
Premier Hytemp is headquartered in Edinburgh with manufacturing facilities in
Singapore and Malaysia.
EV
Percentage of equity held 10.6%
Cost of Investment £8.3m
Directors' valuation £1.9m
Percentage of net assets 2.6%
EV is a UK headquartered, global market leader in the provision of high
performance, harsh environment, video cameras and quantitative visual
analytics to the global energy industry.
It offers a highly specialist service, providing skilled engineers to operate
its market leading cameras in the most difficult down-hole conditions. The
high-resolution video images produced by EV's cameras allow oil and gas well
operators to identify, quantify and solve problems rapidly. EV is based in
Dubai, Perth, Kuala Lumpur, Calgary, Aberdeen, Houston and Norwich. It has a
further presence in seventeen worldwide locations across Europe, Canada, USA,
South America, West Africa, the Middle East, Asia and Australasia. The
business employs more than 100 staff.
EV's high value Visual Analytics services and products hold a significant
technological competitive advantage operating in a growing marketplace as
global leader in this field of optical data analytics. The business has a key
technological competitive advantage delivering full 360 degree top to toe
wellbore images in HD colour employing the EV proprietary Optis Infinity
Multi-Side-View-Camera technology. EV are focussed on increasing customer well
performance and providing detailed well integrity information helping
customers extend well life and thereby decrease the global carbon footprint.
GPS
Percentage of equity held 1.5%
Cost of Investment £2.0m
Directors' valuation £-m
Percentage of net assets -%
GPS is a UK headquartered payments processing business providing customers
with leading edge payment processing and ancillary services. Customers include
new emerging fintech or challenger banks, offering a significantly
differentiated proposition for their clients; as well as specialist payment
firms serving the travel, insurance and foreign exchange markets. It offers a
best in class, scalable payment processing platform with flexibility,
innovative features and an accelerated speed to market for new market
entrants. It has over 100 clients, including many UK fintech and challenger
banks, and is seeing significant growth opportunities from emerging overseas
challenger banks as they seek to disrupt their own domestic banking markets.
GPS has a large and growing addressable market. Challenger banks and fintech
companies needing leading edge payment processing services are being created
in all major geographical markets. Many are seeking help from GPS as they
start to disrupt their own domestic markets. As the winners emerge, the volume
of payments that they generate also increases, thereby adding further volume
of processing to the GPS platform. In general, the payments market is growing
globally through a reduction in the use of cash and an increase in the use of
mobile methods of payment (e.g. phones and 'tap to pay' debit cards).
GPS has an increasingly international target market, with recent client wins
in Europe and Australia. GPS has signed a strategic partnership with Visa to
provide fintech clients with payments technology in the Asia Pacific region.
It has also been selected by Mastercard as its chosen processing partner in
its Fintech Express Programme. In 2020 GPS was selected by the Department for
International Trade (DIT) to become a London Export Champion.
In December 2021 a refinancing of GPS was completed with new investors
providing additional capital to finance future growth. Gross proceeds from
the refinancing of 2.2x original cost were received by Dunedin Enterprise,
which retains a 1.5% interest in GPS Newco.
Hawksford
Percentage of equity held 3.7%
Cost of Investment £-m
Directors' valuation £-m
Percentage of net assets -%
Hawksford is a leading international provider of corporate, private client and
funds services. The business offers a comprehensive range of services to, and
solutions for, trusts, companies, foundations, partnerships, family offices
and investment funds.
During 2018 Hawksford completed the acquisitions of P&P, a Hong Kong based
trust business; and the corporate services division of audit and accountancy
practice SH Landes. The P&P acquisition increased Hawksford's Asian
presence, giving the company new representation in China and Japan, building
on its existing presence in Singapore and Hong Kong. Hawksford's international
clients will now have access to a greater depth of services across Asia, while
P&P clients will be able to utilise Hawksford's wider services in other
locations. As a result of the SH Landes acquisition, Hawksford is able to
provide specialist corporate services from its central London offices.
To date Hawksford has completed seven major acquisitions in Jersey, the UK,
the Middle East and the Far East. These acquisitions have further enhanced
Hawksford's position through additional high-quality people and clients. The
focus of the business remains on providing excellent service and increasing
client choice by growing the international footprint.
In February 2021 Hawksford completed a refinancing where proceeds of 1.0x cost were received. Dunedin Enterprise retains a 3.7% interest in Hawksford.
Overview of Portfolio
Fund Analysis
Dunedin Buyout Fund II
76%
Dunedin Buyout Fund III
11%
Realza
13%
Geographic Location
UK
87%
Rest of
Europe
13%
Valuation Method
Earnings -
provision
4%
Earnings -
uplift
20%
Assets
basis
20%
Exit
value
56%
Sector Analysis
Automotive
7%
Consumer products &
services
5%
Industrials
9%
Support
services
79%
Year of Investment
3-5
years
3%
>5
years
97%
Statement of Comprehensive Income
for the six months ended 30 June 2022
Six months ended 30 June 2022 Six months ended 30 June 2021 Year ended 31 December 2021
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment income 3 791 - 791 590 - 590 4,800 - 4,800
Gain on investments - 2,551 2,551 - 15,003 15,003 - 23,408 23,408
Total Income 791 2,551 3,342 590 15,003 15,593 4,800 23,408 28,208
Expenses
Investment management fees (17) (50) (67) (10) (31) (41) (29) (88) (117)
Other expenses (180) (52) (232) (193) (2) (195) (384) (23) (407)
Profit before finance costs and tax 594 2,449 3,043 387 14,970 15,357 4,387 23,297 27,684
Finance costs - - - (12) (37) (49) (10) (32) (42)
Profit before tax 594 2,449 3,043 375 14,933 15,308 4,377 23,265 27,642
Taxation - - - - - - 272 70 342
Profit for the period 594 2,449 3,043 375 14,933 15,308 4,649 23,335 27,984
Earnings per ordinary share (basic & diluted) 6 4.52p 19.04p 23.56p 2.07p 82.50p 84.57p 26.56p 133.33p 159.89p
The Total column of this statement represents the Statement of Comprehensive
Income of the Company, prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006. The
supplementary revenue and capital columns are both prepared under guidance
published by the Association of Investment Companies.
All income is attributable to the equity shareholders of Dunedin Enterprise
Investment Trust PLC.
Statement of Changes in Equity
for the six months ended 30 June 2022
Six months ended 30 June 2022 (unaudited)
Capital Capital Capital Special Total
Share redemption reserve reserve - Distributable Revenue retained earnings Total
capital reserve realised unrealised Reserve account £'000 equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2021 3,284 1,241 19,721 (8,378) 51,001 6,544 68,888 73,413
Profit/(loss) for the period - - (3,544) 5,993 - 594 3,043 3,043
Dividends paid - - - - - (1,905) (1,905) (1,905)
At 30 June 2022 3,284 1,241 16,177 (2,385) 51,001 5,233 70,026 74,551
Six months ended 30 June 2021 (unaudited)
Capital Capital Capital Special Total
Share redemption reserve reserve - Distributable Revenue retained earnings Total
capital reserve realised unrealised Reserve account £'000 equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2020 4,525 49,850 30,600 (16,357) 1,151 5,153 20,547 74,922
Profit/(loss) for the period - - (4,163) 19,096 - 375 15,308 15,308
Dividends paid - - - - - (362) (362) (362)
At 30 June 2021 4,525 49,850 26,437 2,739 1,151 5,166 35,493 89,868
Year ended 31 December 2021 (audited)
Capital Capital Capital Special Total
Share redemption reserve reserve - Distributable Revenue retained earnings Total
capital reserve realised unrealised Reserve account £'000 equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2020 4,525 49,850 30,600 (16,357) 1,151 5,153 20,547 74,922
Profit/(loss) for the year - - 15,356 7,979 - 4,649 27,984 27,984
Cancellation of Capital Redemption Reserve - (49,850) - - 49,850 - 49,850 -
Purchase and cancellation of shares (1,241) 1,241 (26,235) - - - (26,235) (9,975)
Dividends paid - - - - - (3,258) (3,258) (3,258)
At 31 December 2021 3,284 1,241 19,721 (8,378) 51,001 6,544 68,888 73,413
Balance Sheet
As at 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Non-current assets
Investments held at fair value 57,993 90,821 60,588
Current assets
Other receivables 1,650 401 297
Cash and cash equivalents 14,936 171 12,616
16,586 572 12,913
Total assets 74,579 91,393 73,501
Current liabilities
Other liabilities (28) (1,525) (88)
Net assets 74,551 89,868 73,413
Capital and reserves
Share capital 3,284 4,525 3,284
Capital redemption reserve 1,241 49,850 1,241
Capital reserve - realised 16,177 26,437 19,721
Capital reserve - unrealised (2,385) 2,739 (8,378)
Special distributable reserve 51,001 1,151 51,001
Revenue reserve 5,233 5,166 6,544
Total equity 74,551 89,868 73,413
Net asset value per ordinary share (basic and diluted) 567,5p 496.5p 558.8p
Cash Flow Statement
for the six months ended 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Operating activities
Profit before tax 3,043 15,308 27,642
Adjustments for:
(Gains) on investments (2,551) (15,003) (23,408)
Interest paid - 49 42
(Increase)/decrease in debtors (1,352) 656 760
(Decrease) in creditors (60) (746) (2,183)
Net cash from operating activities (920) 264 2,853
Cash flows from investing activities
Purchase of investments (231) (1,342) (1,550)
Drawn from subsidiary (53) (35) (79)
Purchase of 'AAA' rated money market funds (12,327) (6,208) (6,213)
Sale of investments 8,641 6,753 38,547
Distribution from subsidiary - - -
Sale of 'AAA' rated money market funds 9,115 1,000 8,100
Net cash used in investing activities 5,145 168 38,805
Tax
Tax recovered - 342 -
Cash flows from financing activities
Tender offer - (1) (26,235)
Dividends paid (1,905) (362) (3,258)
Interest paid - (49) (42)
Net cash used in financing activities (1,905) (412) (29,535)
Net increase in cash and cash equivalents 2,320 20 12,465
Cash and cash equivalents at the start of the period 12,616 151 151
Cash and cash equivalents at the end of the period 14,936 171 12,616
Statement of Principal Risks and Uncertainties
The Directors have an ongoing process for identifying, evaluating and managing principal risks, emerging risks and uncertainties of the Company. The principal risks faced by the Company related to the Company's investment activities and these are set out below: -
· COVID
· war in Ukraine
· investment and liquidity risk
· portfolio concentration risk
· financial risk
· economic risk
· credit risk
· currency risk
· internal control risk
Information on each of these risks, and an explanation of how they are
managed, is on page 23 of the Company's Annual Report for the year ended 31
December 2021.
The Company's principal risks, emerging risks and uncertainties have not
changed materially since the date of the Annual Report and are not expected to
change materially for the remaining six months of the Company's financial
year.
On behalf of the Board
Duncan Budge
Chairman
Statement of the Directors' Responsibilities in respect of the half-yearly financial report
In accordance with Chapter 4 of the Disclosure Guidance and Transparency
Rules, the Directors confirm that to the best of their knowledge:
• the condensed set of financial statements has been prepared in
accordance with applicable International Financial Reporting Standards, and
gives a true and fair view of the assets, liabilities, financial position and
net return of the Company;
• the half-yearly report includes a fair review of the development
and performance of the Company and important events that have occurred during
the first six months of the financial year and their impact on the financial
statements;
• the Directors' Statement of Principal Risks and Uncertainties
shown on this page is a fair review of the principal risks and uncertainties
for the remainder of the financial year; and
• the half-yearly report includes a fair review of the related
party transactions that have taken place in the first six months of the
financial year.
On behalf of the Board
Duncan Budge
Chairman
Notes to the Accounts
1. Unaudited Interim Report
The comparative financial information contained in this report for the year
ended 31 December 2021 does not constitute the Company's statutory accounts
but is derived from those accounts. Statutory accounts for the year ended
31 December 2021 have been delivered to the Registrar of Companies. The
auditor has reported on those accounts; their report 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.
The financial statements for the six months ended 30 June 2021 and 30 June
2022 have not been audited.
2. Basis of Preparation
These condensed set of financial statements for the six months ended 30 June
2022 have been prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority (FCA) and IAS 34
'Interim Financial Reporting'. They do not include all the information
required by International Financial Reporting Standards (IFRS) in full annual
financial statements and should be read in conjunction with the Annual Report
and Accounts for the year ended 31 December 2021.
In May 2016 shareholders approved a change in the investment policy of the
Company. The Company's new investment objective is to conduct an orderly
realisation of its relatively illiquid assets, to be effected in a manner that
seeks to achieve a balance between maximising the value of its assets and
progressively returning cash to shareholders. As it is likely this processwill
ultimately lead to the liquidation of the Company, these financial statements
have not been prepared on a going concern basis. No adjustments were necessary
to the investment valuations or other assets and liabilities included in the
financial statement as a consequence of the change in the basis of
preparation.
.
3. Income
Six months to Six months to Year to
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Limited partnership income - UK 747 582 4,788
AAA rated money market funds 27 1 1
Deposit interest 17 7 11
791 590 4,800
4. Dividends
Six months to Six months to Year to
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Dividends paid in the period 1,905 362 3,258
5. Investments
All investments are designated fair value through profit or loss at initial recognition, therefore all gains and losses that arise on investments are designated at fair value through profit or loss. Given the nature of the Company's investments the fair value gains recognised in these financial statements are not considered to be readily convertible to cash in full at the balance sheet date and therefore the movement in these fair values are treated as unrealised.
Fair value hierarchy
The Company measures fair values using the following fair value hierarchy that
reflects the significance of the inputs used in making the measurements:
• Level 1: Quoted market price (unadjusted) in an active
market for an identical instrument.
• Level 2: Valuation techniques based on observable inputs,
either directly (i.e., as prices) or indirectly (i.e., derived from prices).
This category includes instruments valued using: quoted market prices in
active markets for similar instruments; quoted prices for identical or similar
instruments in markets that are considered less than active; or other
valuation techniques where all significant inputs are directly or indirectly
observable from market data.
• Level 3: Valuation techniques using significant
unobservable inputs. This category includes all instruments where the
valuation technique includes inputs not based on observable data and the
unobservable inputs have a significant effect on the instrument's valuation.
This category includes instruments that are valued based on quoted prices for
similar instruments where significant unobservable adjustments or assumptions
are required to reflect differences between the instruments.
The table below analyses financial instruments, measured at fair value at the
end of the reporting period, by the level in the fair value hierarchy into
which the fair value measurement is categorised:
At At At
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Level 1 15,024 18,907 11,812
'AAA' rated money market funds OEICs
Level 2 - - -
Level 3
Unlisted investments 42,969 71,914 48,776
57,993 90,821 60,588
The Company recognises transfers between the levels of the fair value
hierarchy as of the end of the reporting period during which the transfer
occurred. There were no transfers between Level 1 and Level 2 of the fair
value hierarchy during the six months ended 30 June 2022.
Level 3 fair values
Details of the determination of Level 3 fair value measurements and the
movements in Level 3 fair values during the six months ended 30 June 2022 are
set out below:-
Level 3
£'000
Book cost at 31 December 2020 57,154
Unrealised depreciation (8,378)
Valuation at 31 December 2020 48,776
Purchases at cost 284
Sales - proceeds (8,641)
Sales - realised gain on sales (3,443)
Increase in unrealised appreciation 5,993
Valuation at 30 June 2021 42,969
Book cost at 30 June 2021 45,354
Closing unrealised appreciation (2,385)
Details of the determination of Level 3 fair value measurements and the
movements in Level 3 fair values during the six months ended 30 June 2021 are
set out below:-
Level 3
£'000
Book cost at 31 December 2020 78,643
Unrealised depreciation (16,357)
Valuation at 31 December 2020 62,286
Purchases at cost 1,377
Sales - proceeds (6,753)
Sales - realised gain on sales (4,092)
Increase in unrealised appreciation 19,096
Valuation at 30 June 2021 71,914
Book cost at 30 June 2021 69,175
Closing unrealised appreciation 2,739
Details of the determination of Level 3 fair value measurements and the
movements in Level 3 fair values during the year ended 31 December 2021 are
set out below:-
Level 3
£'000
Book cost at 31 December 2020 78,643
Unrealised depreciation (16,357)
Valuation at 31 December 2020 62,286
Purchases at cost 1,629
Sales - proceeds (38,547)
Sales - realised gain on sales 15,429
Decrease in unrealised appreciation 7,979
Valuation at 31 December 2021 48,776
Book cost at 31 December 2021 57,154
Closing unrealised depreciation (8,378)
Valuation of investments
Unquoted investments are fair valued by the Directors in accordance with the
following rules, which are consistent with the International Private Equity
and Venture Capital Valuation Guidelines:
· Investments are only valued at cost for a limited period after the
date of acquisition, otherwise investments are valued on one of the other
basis detailed below. Generally the earnings multiple basis of valuation
will be used.
· When valuing on an earnings basis, the maintainable earnings of a
company are multiplied by an appropriate multiple.
· When valuing on a revenue basis, the maintainable revenue of a
company is multiplied by an appropriate multiple.
· An investment may be valued by reference to the value of its net
assets. This is appropriate for businesses whose value derives mainly from
the underlying value of its assets rather than its earnings.
· When investments have obtained an exit (either by listing or trade
sale) after the valuation date but before finalisation of the relevant
accounts (interim or final), the valuation is based on the exit valuation.
· Accrued interest on loans to portfolio companies is included in
valuations where there is an expectation that the interest will be received.
IFRS 13 requires disclosure, by class of financial instrument, if the effect
of changing one or more inputs to reasonably possible alternative assumptions
would result in a significant change to the fair value measurement. The
information used in determination of the fair value of Level 3 investments is
chosen with reference to the specific underlying circumstances and position of
the investee company. On that basis the Board believe that the impact of
changing one or more of the inputs to reasonably possible alternative
assumptions would not change the fair value significantly.
The Directors consider the carrying value of financial instruments in the
financial statements to represent their fair value.
6. Earnings per share
Six months to Six months to Year to
30 June 30 June 31 December
2022 2021 2021
£'000 £'000 £'000
Revenue return per ordinary share (p) 4.52 2.07 26.56
Capital return per ordinary share (p) 19.04 82.50 133.33
Earnings per ordinary share (p) 23.56 84.57 159.89
Weighted average number of shares 13.136.810 18.100.180 17,501,856
The earnings per share figures are based on the weighted average numbers of
shares set out above. Earnings per share is based on the revenue profit in the
period as shown in the consolidated income statement.
7. Related party transactions
There have been no material changes to the related party transactions
described in the last annual report.
ENDS
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