Half-year report
13/06/2023 07:00
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13 June 2023
HARGREAVE HALE AIM VCT PLC
(the “Company”)
Unaudited Interim Results
The Company announces its half-year results for the six months ended 31 March
2023.
These half-year results will be available on the Company's website at
https://www.hargreaveaimvcts.co.uk/document-library/.
In accordance with Listing Rule 9.6.1, a copy of this document will also be
submitted to the UK Listing Authority via the National Storage Mechanism and
will be available for viewing shortly
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://www.globenewswire.com/Tracker?data=oTBY2npDtF-cO_aUiw_WwHQgNGanrmbb77XtEQZAMneSnvj_jt-zDTyz9R1pFpCxgcpxkWJb2119r67sYykjOWyFL-57YthOVEdx7yyCp_HCcNIZYln5lNcuFZ9tT4cYeHwMHp7yzSOh3tfzg2V2Uu9XuftJyZOP_j7dSCrn-CFHckhey6w6LmfZ2FigcHph9i3J95vt9KRC30Rr00-0D9d-0q_fUMGGkZ9DQPkw7XKItz1_G4NOiq74Dia1b16zs8OrsC3-Q6Pn1e5h1oPo69S2eWg0RSn7N3mTP4OPQFTUjS8XV6xonM-S7kgokmjbdDTgJ88U3WtzAG_FRj8fwQ==).
For further information, please contact:
JTC (UK) Limited Susan Fadil Uloma Adighibe HHV.CoSec@jtcgroup.com +44 20 3893 1005 +44 20 7409 0181
LEI: 213800LRYA19A69SIT31
Financial highlights for the six month period ending 31 March 2023
Net asset value (NAV) per share NAV total return Tax free dividends paid in the period Share price total return Ongoing charges ratio
52.84p ((1)) -5.57% ((1)) 4.00p -13.94% ((1)) 2.17% ((1))
• £9.2 million invested in Qualifying Companies in the period.
• 95.79% invested by VCT tax value in Qualifying Investments at 31
March 2023.
• Offer for subscription closed to further applications by the
Company on 10 February 2023, having raised £40 million.
• Special dividend of 2.00 pence and final dividend of 2.00 pence
per share paid 10 February 2023.
• Interim dividend of 1 penny approved by the Board.
Summary financial data Six months ending 31-Mar-23 Six months ending 31-Mar-22 Year ending 30 Sept-22
NAV (£m) 174.72 206.37 160.51
NAV per share (p) ((1)) 52.84 77.13 60.19
NAV total return (%) ((1)) -5.57 -17.54 -33.42
Market capitalisation (£m) 165.35 200.00 167.32
Share price (p) 50.00 74.75 62.75
Share price premium/discount to NAV per share (%) ((1) (2)) -5.37 -3.09 +4.25
Share price 5 year average discount to NAV per share (%) ((1) (2)) -5.56 -6.02 -5.65
Share price total return (%) ((1)) -13.94 -16.24 -28.06
Loss/gain per share for the period (p) -3.72 -18.74 -33.42
Dividends paid per share (p) 4.00 5.65 6.65
Ongoing charges ratio (%) ((1)) 2.17 2.10 2.06
(1) Alternative performance measure illustrations and definitions can
be found in this interim report.
(2) The discount/premium is a function of the closing mid-price and
the Net Asset Value per share on the balance sheet date which is typically
published 5 business days after the period end.
Financial Calendar
Record date for interim dividend 30 June 2023
Payment of interim dividend 28 July 2023
Announcement of annual results for the year ending 30 September 2023 December 2023
Annual General Meeting February 2024
Payment of annual dividend (subject to approval by shareholders at the AGM) February 2024
Chair’s statement
Introduction
May I start by welcoming the many new shareholders who have joined us by way
of the recent successful fundraise and of course by thanking all shareholders
for their continuing support, which is greatly appreciated.
I do not think it is too much of an exaggeration to say that we started the
financial year with some significant headwinds, including a forecast by the
Bank of England that the United Kingdom would endure the longest recession of
the last 100 years. Whilst we would not wish to downplay the hardship that
many had to endure over the winter as the cost of living crisis bit hard, nor
the impact on many companies as they sought to navigate falling demand and
higher input costs, it is also true to say that the outlook is much improved
with the United Kingdom now expected to avoid falling into recession this
year.
Uncertainty is a theme that we have all learned to live with these past few
years; that is not likely to change in the short-term. Whilst we are more
encouraged by the improving outlook, we remain mindful of the macro-economic
backdrop and alert to the potential for further upset as the impact of
significantly tighter credit conditions continues to work its way through
financial markets and the wider economy.
When launching the 2022 offer for subscription, we spoke about the opportunity
for value creation over the medium term, which we take to mean 5 years. We
were cautious about the short-term outlook over the course of the current
financial year; our experience over the period under review is consistent with
that view. Generating short-term performance is difficult with the market
applying asymmetrical responses to news flow – positive updates are not
getting full recognition whilst those that disappoint are often treated
harshly. Stock market liquidity is a factor in performance. With many active
managers now deep into their second year of outflows, there are few
institutional buyers of shares in small UK companies. Taken together, this has
left the sector in deep value territory. Private equity has taken note and M&A
has picked up. This is not something we particularly welcome; we would prefer
to see exciting companies with bright futures remain in public ownership for
the long term.
Primary issuance has declined. Over the 6 months to 31 March 2023, the number
of VCT qualifying deals on AIM has fallen by 33% to 12. The value invested by
AIM VCTs over the same period has declined by 58% to £23.1m. IPO activity on
AIM is also down very significantly. This is broadly in line with our
assumptions at the start of the year. Despite this, we are pleased to report
that we have deployed capital ahead of budget. We continue to expect deal flow
to pick up later this year. Although only a hypothesis at this stage, it is
possible that the failure of Silicon Valley Bank will drive increased demand
for equity funding as young companies find banks and shadow banks less willing
to lend on terms that are acceptable to them. To be clear, we are not seeing
evidence of this yet but it will be interesting to see how this plays out.
Finally, there is a flipside to these difficult markets. As a consequence of
the deep value now in evidence, we are being presented with opportunities to
invest on favourable terms that we hope will set us up for improved
performance in future years.
Performance
At 31 March 2023, the NAV per share was 52.84 pence which, after adjusting for
the dividends paid in the half year of 4.00 pence, gives a NAV total return
for the period of -5.57%. The NAV total return (dividends reinvested) for the
half year was -5.98% compared with +1.09% for the FTSE AIM All-Share Index
Total Return (also calculated on a dividends reinvested basis). The Directors
consider this to be the most appropriate benchmark from a shareholder’s
perspective, however, due to the investment restrictions placed on a VCT it is
not wholly comparable.
Rolling Returns to end March 2023 Six months 1Y 3Y 5Y 10Y
NAV total return -5.57% -25.01% 21.50% -2.39% 56.51%
Share price total return -13.94% -26.42% 29.51% -1.35% 55.12%
NAV total return (dividends reinvested) ((1) (2)) -5.98% -25.56% 14.47% -8.19% 53.94%
Share price total return (dividends reinvested) ((1) (2)) -14.42% -27.06% 21.89% -7.15% 52.28%
FTSE AIM All-Share Index Total Return 1.09% -21.16% 22.53% -15.30% 25.20%
Source: Canaccord Genuity Asset Management/Bloomberg
(1) Alternative performance measure illustrations and definitions can
be found in this interim report.
(2) The NAV total return (dividends reinvested) and Share price total
return (dividends reinvested) measures have been included to improve
comparability with the FTSE AIM All-Share index Total Return which is also
calculated on that basis.
The earnings per share total return for the year was a loss of 3.72 pence
(comprising a revenue gain of 0.04 pence and a capital loss of 3.76 pence).
Revenue income in the period increased by 173% to £1.0m following increases
in the bank interest rate, additional investment into high yielding equities
and material new investment into investment grade corporate bonds.
The share price decreased from 62.75 pence to 50.00 pence over the reporting
period which, after adjusting for dividends paid, gives a share price total
return of -13.94%.
Investments
The Investment Manager invested £9.2 million into 6 Qualifying Companies
during the period. The fair value of Qualifying Investments at 31 March 2023
was £101.6 million (58.2% of NAV), invested across 62 AIM companies and 4(1
)unquoted companies. At the half-year end, the fair value of non-qualifying
equities and the Marlborough Special Situations Fund were £20.1 million
(11.5% of NAV) and £14.3 million (8.2% of NAV) respectively, with most of the
non-qualifying equities listed within the FTSE 350 index and offering good
levels of liquidity should the need arise. £17.7 million (10.1% of NAV) was
held in short-dated investment grade corporate bonds, £2.0 million (1.1% of
NAV) was invested in a UK Government bond exchange traded fund and £19.1
million (10.9% of NAV) held in cash at the period end.
1 Excluding companies in administration or at risk of administration with zero
value
Dividend
The Directors continue to maintain their policy of targeting a tax free
dividend yield equivalent to 5% of the year end NAV per share.
A special dividend of 2.00 pence and a final dividend for the year ending 30
September 2022 of 2.00 pence was paid on 10 February 2023.
An interim dividend of 1 penny (2022: 1 penny) will be paid on 28 July 2023,
with an ex-dividend date of 29 June 2023 and a record date of 30 June 2023.
The final dividend will be determined at the year end.
Dividend reinvestment scheme
Shareholders may elect to reinvest their dividends by subscribing for new
shares in the Company. Further information can be found in the shareholder
information section.
On 10 February 2023, 1,836,516 ordinary shares were allotted at a price of
54.95 pence per share, which was calculated in accordance with the terms and
conditions of the dividend reinvestment scheme (DRIS), on the basis of the
last reported NAV per share as at 20 January 2023, to shareholders who elected
to receive shares as an alternative to the final dividend for the year ended
30 September 2022 and special dividend announced on 19 December 2022.
Buybacks
In total, 2,660,431 shares (nominal value: £26,604) were repurchased during
the six month period ending 31 March 2023 at a cost of £1,454,426 (average
price: 54.67 pence per share). As at 9 June 2023, a further 1,481,360 shares
have been repurchased at a cost of £750,823 (average price of 50.68 pence per
share).
Share price discount
The Company aims to improve liquidity and to maintain a discount of
approximately 5 per cent. to the last published NAV per share (as measured
against the mid-price) by making secondary market purchases of its shares in
accordance with parameters set by the Board.
We continued to operate the discount control and management of share liquidity
policy effectively during the period. The Company has 1 and 5 year average
share price discounts of -4.19% and -5.56% respectively.
The share price discount as at 31 March 2023 was -5.37% compared to a premium
of +4.25% at 30 September 2022. The share price premium as reported for the
period ending 30 September 2022 was a consequence of decreases in the
valuation of several private companies incorporated into the 30 September 2022
Net Asset Value per share as published on 10 October 2022.
As at 9 June 2023 the discount to NAV is 5.26% of the last published NAV per
share.
Offer for subscription
The Directors of the Company announced on 5 September 2022 the launch of an
offer for subscription for shares to raise up to £20 million, together with
an over-allotment facility of up to a further £30 million. On 10 February
2023, the Company announced it had received valid applications of
approximately £40 million. The Board decided not to utilise any further sums
under the over-allotment facility and therefore the offer for subscription was
closed to further applications.
The offer resulted in gross funds being received of £40 million and the issue
of 66 million shares.
Cancellation of share premium
At the general meeting of the Company held on 7 October 2022, a special
resolution was passed approving the cancellation of the Company’s share
premium account in order to create a pool of distributable reserves.
We are pleased to confirm the cancellation of the share premium account of the
Company has been approved by the High Court of Justice in England and Wales
and accordingly, the amount standing to the credit of the share premium
account (£133.2m) of the Company as at 9 May 2023 has been cancelled.
Cost efficiency
Your Board reviews costs incurred by the Company on a regular basis and is
focused on maintaining a competitive ongoing charges ratio. The period end
ongoing charges ratio was 2.17% (30 Sept 2022: 2.06%) when calculated in
accordance with the AIC’s “Ongoing Charges” methodology, the increase
primarily being a result of the fall in average net assets in the period under
review.
Shareholder events
Both your Board and the Investment Manager are keen to improve interaction
with our shareholders. On 23 November 2022, the Company held a well-attended
shareholder event at Everyman Cinema, Broadgate, City of London. The event
included presentations from several portfolio companies, a panel discussion
and a presentation from the Investment Manager’s VCT team before concluding
with the screening of a feature film. A summary recording of the Investment
Manager’s presentation is available to view on the Company’s website
https://www.hargreaveaimvcts.co.uk.
The 2023 shareholder event will be held at 2pm, Wednesday 29 November at
Everyman Broadgate.
Following feedback from shareholders, we plan to trial a series of shorter and
more regular in person events, which will be more focussed on performance.
These are likely to be held over breakfast or at the end of the day to assist
those who cannot attend the lengthier annual review held in November or who
would like more frequent access to the Investment Manager and members of the
Board. The first event will be at 8am on Wednesday 21 June 2023 at 88 Wood
Street, London, EC2V 7QR. Further information on this event and future events
will be published on the Company’s website and via email.
Shareholders are asked to register their attendance at events via email at
aimvct@canaccord.com.
Electronic communications
As ever, we are respectfully asking shareholders to opt into electronic
communications and update their dividend payment preference from cheque to
bank transfer. Switching to the digital delivery of shareholder communications
and dividend distributions is more cost efficient and more secure whilst also
helping to reduce our environmental footprint.
To assist with this transition, and as highlighted in the September 2022
annual report and accounts, the Company will no longer print and distribute
the interim report to shareholders, unless specifically requested by
shareholders.
To support the digital experience, the Company is investing in an upgraded
website that will improve the experience and include more regular updates to
the content, including recorded updates from the manager and portfolio
companies.
The interim results will continue to be available for download on our website
https://www.hargreaveaimvcts.co.uk and a summary of the results is also
published via a Regulatory Information Service on the London Stock Exchange.
Regulatory update
There were no major changes to VCT legislation during the period under review.
On 23 September 2022, the Government announced that it intended to extend the
sunset clause that, if not otherwise repealed or extended, would result in the
withdrawal of the upfront 30% income tax relief for new investment into VCTs
from 6 April 2025.
The sunset clause, introduced as part of the 2015 EU State aid review, does
not affect the Capital Gains Tax relief or tax free dividend payments, nor
does it affect investors’ income tax relief on VCT investments made before 6
April 2025.
The extension of the sunset clause will require legislation to be laid before
Parliament.
Consumer Duty
The Financial Conduct Authority (FCA) is introducing a new Consumer Duty from
31 July 2023 to improve the standard of care provided by firms that are
involved in the manufacture or supply of products and services to retail
clients. Consumer Duty will compromise a new principle and suite of other
rules and guidance to be followed by firms involved in the manufacture and
distribution of a product to put consumers in a better position to take
responsibility for meeting their financial needs and objectives. For
consumers, this should:
• give confidence that firms are acting in good faith, in line with
their interests;
• allow them to make informed choices about products and services
that are fit for purpose and designed to meet a designated target market;
• improve the information available to assist with the review of
the products and services most likely to meet their needs;
• support the correct delivery of benefits that consumers should
reasonably expect from the product and services they subscribe to;
• improve the standard of customer service; and
• help them obtain fair value from financial products and services.
Canaccord Genuity Asset Management (CGAM) is the designated manufacturer of
the Company. Canaccord Genuity Wealth Limited (CGWL) is the distributor for
the Company. In its capacity as manufacturer, CGAM has conducted a fair value
assessment and a target market assessment. Having reviewed both pieces of
work, the Board is satisfied that CGAM and CGWL have complied with their
obligations.
Two of the four pillars that underpin Consumer Duty relate to consumer
understanding and consumer support. Although the Board is satisfied that these
obligations are met in full, we intend to upgrade the Company’s website to
enhance the services and benefits derived from an investment in the Company.
VCT status
I am pleased to report that we continue to perform well against the
requirements of the legislation and at the period end, the investment test was
95.79% (2022: 85.63%) against an 80% requirement when measured using HMRC’s
methodology. The Company met all other tests relevant to its status as a
Venture Capital Trust.
Key information document
In accordance with the Packaged Retail Investment and Insurance Products
(PRIIPs) regulations, the Company’s Key Information Document (KID) is
published on the Company’s website at https://www.hargreaveaimvcts.co.uk.
Risk review
Your Board has reviewed the risks facing the Company. Further detail can be
found in the principal risks and uncertainties section.
Outlook
Trading continues to vary quite widely by sector.
The fallout from SVB has been most acutely felt by the life sciences sector.
Those companies serving the media industry have noted disruption as content
creators review budgets. Technology companies are reporting mixed trading,
varying by application and the industry served. The UK consumer continues to
spend, albeit selectively, drawing down on accumulated savings. Spending on
retail and dining out has stabilised, whilst demand for overseas travel is
high. Industrials are reporting stronger end markets as supply chain
restrictions continue to ease, whilst the defence sector is trading well and
reporting strong growth in order books. We expect these trends to persist
through to the year end.
Deal flow remains very quiet. There is a growing pipeline of deal flow that is
being held back until the market environment improves. We do not expect a
material pick up in activity before the summer recess, perhaps a quarter later
than we have previously guided to.
Although the larger benchmark indices are trading well, AIM continues to grind
lower. It is difficult to see this dynamic changing until we have more clarity
on when and where interest rates will peak and further evidence emerges of
improving business and consumer confidence. Given the clear evidence of the
value on offer and the gradually improving outlook, we remain optimistic about
the opportunity in 2024 and beyond.
David Brock
Chair
Date: 13 June 2023
Investment Manager’s report
Introduction
This report covers the first half of the Company’s 2022/23 financial year, 1
October 2022 to 31 March 2023. The Investment Manager’s report contains
references to movements in the NAV per share and NAV total return per share
for the period. Movements in the NAV per share do not necessarily mirror the
earnings per share total return reported in the accounts and elsewhere, which
convey the profit after tax of the Company within the reported period as a
function of the weighted average number of shares in issue for the period.
Investment performance measures contained in this report are calculated on a
pence per share basis and include realised and unrealised gains and losses.
Investment report
Investor sentiment improved through the first half of the 2023 financial year,
as investors became more confident that inflation was close to peaking and,
with it, the interest rate tightening cycle that had done so much damage to
risk assets in 2022.
A change of Prime Minister and Chancellor helped to restore confidence in UK
fiscal policy, allowing the currency to recover and credit markets to
stabilise. The economy has withstood the pressure better than many had
predicted. All the same, companies and households have had to navigate an
immensely difficult period of high inflation and stagnating economic activity.
For UK households, real wage growth was strongly negative and budgets came
under pressure from higher energy bills and sharp increases in the cost of
food. Companies came under pressure too, with weak business and consumer
sentiment and higher input costs reflected in company updates. The number of
companies reducing guidance was sharply higher year on year.
UK consumers, very short of confidence, drew down on household savings to
support spending over the key Christmas trading period. In-store retail
bounced back and pubs, bars and restaurants traded marginally ahead of 2019,
the most recent non-COVID comparator, in part helped by the 2022 World Cup.
Those industries and channels most impacted by COVID (travel, leisure, high
street retail) continued to recover whilst COVID beneficiaries (housing, home
improvements, consumer tech, durable goods, online retail) reported more
difficult trading.
Much of the deep pessimism that dominated the early part of the financial year
has moderated. The UK economy continues to outperform against low
expectations. The Office of Budget Responsibility and the Bank of England
(BoE) raised their real GDP forecasts for 2023 in the quarter and again post
period end. In its May 2023 Monetary Policy Report, the BoE significantly
upgraded its guidance with the UK economy now expected to grow by 0.9% over
the 12 months to June 2024.
UK inflation remains stubbornly high at 10.1% in March 2023, defying
predictions that it would fall below 10% in March. In response, the BoE has
continued to raise the base rate with market participants predicting a
terminal rate of 4.8% in Q4’23 with inflation expected to fall back to
around 5% by the end of 2023.
Sentiment was further buoyed by the reopening of the Chinese economy in early
2023, the last of the major economies to relax COVID restrictions. Towards the
end of the period under review, concerns started to surface that some mid and
large sized US regional banks (subject to a lighter touch regulatory regime
than the larger globally systemically important banks) might struggle to
operate profitably in the high interest rate environment that emerged in 2022,
leading to depositor flight. Silicon Valley Bank (SVB) was the first of
several significant bank failures. There were problems in Europe, too, with a
hastily arranged distressed sale of Credit Suisse to UBS. For now, the fallout
appears well-contained with deposits and taxpayers protected by the actions of
the regulators and other market participants.
Terminal interest expectations and the bond market have been unusually
volatile as investors responded to fresh economic data, adjusted for the
tighter credit conditions and assessed the implications for monetary policy.
By some estimates, the failure of SVB might tighten financial conditions by
the equivalent of a 1.5% increase in US base rates.
Amidst such uncertainty, monetary policy committees and market participants
are scrutinising each employment report, inflation and economic survey for
evidence of falling inflation and leading indicators of economic activity.
Future monetary policy is now very data dependent, placing enormous weight on
each announcement, setting us up for further periods of heightened volatility.
Meanwhile, the bond markets continue to forecast a US recession later this
year or early next year.
UK stock markets were positive for most of the period under review. Sentiment
turned in early March 2023 as investors took increasing note of signs of
distress within the US banking industry. AIM (+1.09%) continued to
underperform the FTSE 100 (+12.55%) and FTSE 250 (+11.63%) indices as
investors continued to favour larger more established companies over smaller,
higher risk and less liquid companies.
Performance
In the six months to 31 March 2023, the unaudited NAV per share decreased from
60.19 pence to 52.84 pence. A special dividend of 2.0 pence per share and a
final dividend of 2.0 pence per share was paid on 10 February 2023, giving a
NAV total return to investors of -3.35 pence per share, which translates to a
loss of -5.57%. The NAV total return (dividends reinvested) for the period was
-5.98% compared with +1.09% in the FTSE AIM All-Share Index Total Return and
+12.25% in the FTSE All-Share Index Total Return (also calculated on a
dividends reinvested basis).
The Qualifying Investments made a net contribution of -2.98 pence per share
whilst the Non-Qualifying Investments returned -0.13 pence per share. The
adjusting balance was the net of running costs and investment income. The
contribution to NAV performance is split out in further detail below.
Zoo Digital (+50%, +0.99 pence per share) announced a second strategically
significant platform contract with a major Hollywood studio to support the
localisation and preparation of content for distribution through its streaming
platform. Post period end, the company raised funds and acquired a minority
stake in a Japanese localisation company. At the same time, Zoo reported that
a temporary disruption at its largest client would leave revenues for the 12
months to March 2023 behind previously upgraded forecasts. Profit guidance was
unchanged.
In a January trading update, Learning Technologies Group (+22.9%, +0.36 pence
per share) announced FY22 revenues of £595m and adjusted EBIT of at least
£100m, in line with market expectations. Margin outperformance was driven by
a combination of efficiency gains and organic growth in GP Strategies. Net
debt of £119.8m was in line with consensus. The company confirmed that it
remained confident of delivering its 2025 targets of £850m run-rate revenue
and £175m EBIT. The post period end release of its results for 12 months to
December 2022 included a cautious outlook and revealed a higher than expected
interest charge from floating rate debt. The shares sold off aggressively.
Equipmake (+16%, +0.29 pence per share) raised £6.2m at 5 pence per share in
January. Whilst news has been limited, interim results confirmed trading
remained in line with expectations. The company has a strong pipeline which it
expects to convert into contracts over the remainder of 2023.
XP Factory (+54.2%, +0.29 pence per share) provided a trading update for FY22
with revenue guidance of £21.9m and pre IFRS15 adjusted EBITDA of £2.6m, in
line with market expectations. Including recent site openings, annualised
run-rate revenues have reached £33m. The company closed the year with £3.2m
cash.
Gousto (-79.7%, -0.70 pence per share) raised new equity in February 2023 to
fund capital expenditure and working capital. Operational and financial
performance has improved following a difficult period in mid-2022. Gross
margins remain healthy despite the demanding supply environment. Adjustments
made to overheads and operational footprint (current and future) are starting
to feed through to improving operating profit margins and cash performance.
The company continues to focus on quality and choice whilst elevating its
value proposition, helping to drive higher levels of customer satisfaction.
Although we increased the company’s enterprise value, the addition of a new
class of share resulted in a reduction to the value of the investment.
Initially, the outlook looked promising for Polarean (-50%, -0.43 pence per
share) with the company receiving FDA clearance for Xenoview, its drug-device
combination product that allows MRI scanners to provide detailed evaluation of
lung function. In subsequent updates, the company revised its growth and cost
assumptions, resulting in a substantial cut to guidance. The FY22 closing cash
balance of $16m provides runway until May 2024.
Maxcyte (-32.1%, -0.43 pence per share) reported that FY22 revenues grew +31%
to $44.3m with gross profit margins stable at 88%. Although the company
reported a net loss of $23.6m, it remains very well-funded with cash of
$227.3m as it continues to invest for growth. FY23 guidance was set at 20-25%
revenue growth, with potential upside should the first product developed on
its platform (Exa-cel, a partnership between Vertex Pharma & CRISPR) receive
FDA approval in H2 2023. The longer-term pipeline is positive, with 16
partnered programs currently in the clinic and a pipeline of pre-clinical
milestones of over $1.55bn. Post period end, the company reported a 26%
decline in revenues for the 3 months to 31 March 2023 and revised its guidance
to revenue growth of 8-12%.
In a January update, Angle (-70.5%, -0.34 pence per share) warned that a
weaker economic environment and changes to Canadian R&D tax credits would
require the closure of its Canadian operation. The company also announced that
it would not continue to develop its molecular diagnostics platform and
instead prioritise third party platforms such as those from Thermo Fisher and
Illumina. The company is funded into H2 2024 following a £20m fundraise in
July 2022 and an ongoing cost reduction programme.
Surface Transform (-25.6%, -0.30 pence per share) revised guidance for a
second time following teething problems that emerged with the commissioning of
new equipment installed to support the significant increase in revenues
forecast this year and next. 2023 revenue forecasts were cut from £23m to
£16m. Although disappointing, the company reports the matter is now resolved
and continues to expect to transition into profit this year. The company has a
£290m order book that includes very large contracts with three leading
automotive OEMs.
Within the qualifying portfolio, we exited Diurnal through a takeover, and
sold our investment in In The Style following a period of very difficult
trading. We reduced our investment in Zoo Digital and Faron Pharma following a
period of strong share price performance. We also reduced our investment in
Smoove through a tender offer.
Within the non-qualifying portfolio, we sold investments in JD Sports,
Natwest, NCC, Shaftesbury, Safestore, Seraphine and Workspace.
Portfolio structure
The VCT is comfortably through the HMRC defined investment test and ended the
period at 95.79% invested as measured by the HMRC investment test. By market
value, the VCT had a 58.1% weighting to Qualifying Investments.
Qualifying investment activity was strong in the half year with £9.2m
invested into 6 Qualifying Companies, including 2 new AIM investments and 3
follow-on investments. There was also one follow on investment into a private
company.
In line with the investment policy, we made investments in the Marlborough
Special Situations Fund as a temporary home for proceeds from fundraising,
increasing the weighting from 2.1% to 8.2%. The non-qualifying equity
portfolio increased from 7.7% to 11.1%. For the first time since 2016, we have
invested into short-dated investment grade UK corporate credit, building a
10.1% weighting across six issuers. Cash decreased from 26.1% to 10.9% of net
assets despite inflows from the offer for subscription.
The HMRC investment tests are set out in Chapter 3 of Part 6 Income Tax Act
2007, which should be read in conjunction with this Investment Manager’s
report. Funds raised by VCTs are first included in the investment tests from
the start of the accounting period containing the third anniversary of the
date on which the funds were raised. Therefore, the allocation of qualifying
investments as defined by the legislation can be different to the portfolio
weighting as measured by market value relative to the net assets of the VCT.
Post period end update
Since the period end, the FTSE AIM All-Share Total Return Index has declined
by 1.59%, whilst the FTSE All-Share Total Return Index has increased by 0.78%.
The Company’s NAV has fallen by 2.1% to 51.72 pence (31 May 2023).
As of 9 June 2023, the share price of 49.00 pence represented a discount of
5.26% to the last published NAV per share.
For further information please contact:
Oliver Bedford
Lead Manager
Date: 13 June 2023
Hargreave Hale AIM VCT plc,
Talisman House
Boardmans Way
Blackpool
FY4 5FY
0207 523 4837
aimvct@canaccord.com
Investment portfolio summary
As at 31 March 2023
Net Assets % Cost £000 Cumulative movement in value £000 Valuation £000 Market COI ((1))
Equity Qualifying Investments
Zoo Digital Group plc 4.91 2,159 6,421 8,580 AIM YES
Equipmake Holdings plc 3.59 3,740 2,538 6,278 AIM NO
Learning Technologies Group plc 3.32 2,238 3,562 5,800 AIM YES
Eagle Eye Solutions Group plc 2.77 1,642 3,206 4,848 AIM YES
PCI-PAL plc 1.90 2,280 1,042 3,322 AIM YES
Tortilla Mexican Grill plc 1.65 1,125 1,750 2,875 AIM YES
Surface Transforms plc 1.64 1,744 1,128 2,872 AIM YES
Maxcyte Inc 1.63 1,270 1,580 2,850 AIM YES
Engage XR Holdings plc 1.58 3,453 (690) 2,763 AIM YES
Infinity Reliance Ltd (My 1st Years) ((2)) 1.57 2,500 243 2,743 Unlisted YES
Itaconix plc 1.49 3,025 (415) 2,610 AIM NO
Bidstack Group plc 1.40 2,733 (286) 2,447 AIM NO
XP Factory plc 1.37 4,068 (1,681) 2,387 AIM YES
Beeks Financial Cloud Group plc 1.36 1,038 1,341 2,379 AIM YES
Cohort plc 1.25 619 1,566 2,185 AIM YES
Eneraqua Technologies plc 1.17 1,955 92 2,047 AIM NO
Diaceutics plc 1.17 1,550 489 2,039 AIM YES
Aquis Exchange plc 1.05 765 1,074 1,839 AIM YES
Abcam plc 1.03 55 1,746 1,801 AIM NO
CentralNic Group plc 0.92 588 1,024 1,612 AIM YES
Arecor Therapeutics plc 0.92 1,687 (87) 1,600 AIM NO
C4X Discovery Holdings plc 0.89 2,300 (742) 1,558 AIM NO
Polarean Imaging plc 0.85 2,081 (588) 1,493 AIM NO
Ilika plc 0.85 1,636 (157) 1,479 AIM NO
Zappar Ltd 0.82 1,600 (170) 1,430 Unlisted NO
Belvoir Group plc 0.73 762 509 1,271 AIM YES
Velocys plc 0.71 2,220 (978) 1,242 AIM NO
Craneware plc 0.65 125 1,002 1,127 AIM YES
Idox plc 0.64 135 989 1,124 AIM YES
Kidly Ltd 0.64 1,660 (542) 1,118 Unlisted NO
Quixant plc 0.61 1,209 (150) 1,059 AIM NO
Instem plc 0.60 297 748 1,045 AIM YES
Crimson Tide plc 0.58 1,260 (252) 1,008 AIM YES
Blackbird plc 0.56 615 369 984 AIM NO
Intelligent Ultrasound Group plc 0.55 1,550 (586) 964 AIM NO
EKF Diagnostics Holdings plc 0.53 565 362 927 AIM NO
Verici DX plc 0.53 1,939 (1,012) 927 AIM YES
Equals Group plc 0.52 750 152 902 AIM YES
AnimalCare Group plc 0.52 720 182 902 AIM YES
The Property Franchise Group plc 0.50 377 501 878 AIM YES
Skillcast Group plc 0.49 1,570 (721) 849 AIM NO
OneMedia iP Group plc 0.47 1,141 (326) 815 AIM YES
Crossword Cybersecurity plc 0.45 2,039 (1,254) 785 AIM YES
Bivictrix Therapeutics plc 0.45 1,200 (420) 780 AIM NO
Eden Research plc 0.42 1,355 (621) 734 AIM NO
Globaldata plc 0.39 173 501 674 AIM YES
Hardide plc 0.37 3,566 (2,928) 638 AIM YES
Tristel plc 0.36 543 77 620 AIM NO
Intercede Group plc 0.35 305 311 616 AIM YES
Creo Medical Group plc 0.35 2,329 (1,720) 609 AIM YES
SCA Investments Ltd (Gousto) 0.32 2,484 (1,919) 565 Unlisted YES
Faron Pharmaceuticals Oy 0.28 1,133 (638) 495 AIM NO
Angle plc 0.26 1,158 (711) 447 AIM NO
K3 Business Technology Group plc 0.19 270 60 330 AIM YES
Everyman Media Group plc 0.15 600 (332) 268 AIM YES
Science in Sport plc 0.15 1,479 (1,214) 265 AIM NO
Smoove plc 0.13 621 (392) 229 AIM NO
Strip Tinning Holdings plc 0.13 1,054 (826) 228 AIM NO
Fusion Antibodies plc 0.13 624 (400) 224 AIM NO
Trakm8 Holdings plc 0.08 486 (352) 134 AIM NO
Rosslyn Data Technologies plc 0.04 500 (430) 70 AIM YES
MYCELX Technologies Corporation 0.04 361 (297) 64 AIM YES
Renalytix AI plc 0.03 82 (25) 57 AIM YES
Gfinity plc 0.02 2,026 (1,992) 34 AIM YES
Yourgene Health plc 0.01 472 (459) 13 AIM NO
Osirium Technologies plc — 858 (849) 9 AIM NO
Honest Brew Ltd ((2)) – 2,800 (2,800) – Unlisted NO
Laundrapp Ltd ((2)) — 2,450 (2,450) — Unlisted NO
Airportr Technologies Ltd ((2)) – 1,888 (1,888) – Unlisted NO
Mporium Group plc — 33 (33) — Unlisted NO
Flowgroup plc – 26 (26) – Unlisted NO
Infoserve Group plc ((3)) — — — — Unlisted NO
Total – equity Qualifying Investments 56.03 97,661 206 97,867
Qualifying fixed income investments
Kidly Ltd (convertible loan notes) 1.37 2,400 – 2,400 Unlisted NO
Osirium Technologies plc (convertible loan notes) 0.75 800 511 1,311 Unlisted NO
Honest Brew Ltd (loan notes) – 300 (300) – Unlisted NO
Total qualifying fixed income investments 2.12 3,500 211 3,711
Total Qualifying Investments 58.15 101,161 417 101,578
Non-Qualifying Investments
Funds
Marlborough Special Situations Fund 8.19 16,130 (1,817) 14,313 Unlisted NO
iShares plc ISHRS UK Gilts 0–5Yr ETF GBP (Dist) 1.14 2,001 (5) 1,996 Main NO
Total Funds 9.33 18,131 (1,822) 16,309
Equity Non-Qualifying Investments
Bodycote plc 0.84 1,534 (66) 1,468 Main NO
Hollywood Bowl Group plc 0.80 1,566 (171) 1,395 Main YES
SThree plc 0.80 1,687 (293) 1,394 Main YES
Bytes Technology Group plc 0.78 1,137 222 1,359 Main YES
WH Smith plc 0.68 1,220 (24) 1,196 Main YES
National Grid plc 0.63 1,041 55 1,096 Main YES
The Watches of Switzerland Group plc 0.58 1,216 (197) 1,019 Main YES
TP ICAP Group plc 0.58 1,023 (14) 1,009 Main YES
BAE Systems plc 0.56 782 191 973 Main NO
Energean plc 0.52 926 (15) 911 Main YES
Diversified Energy Company plc 0.49 1,050 (199) 851 Main YES
Chemring Group plc 0.48 920 (86) 834 Main YES
Hilton Food Group plc 0.47 1,262 (433) 829 Main YES
Trifast Group plc 0.44 1,318 (542) 776 Main YES
JD Sports Fashion plc 0.42 771 (34) 737 Main YES
Harbour Energy plc 0.39 922 (236) 686 Main YES
Rotork plc 0.38 737 (76) 661 Main NO
Ashtead Group plc 0.37 771 (127) 644 Main YES
XP Power plc 0.35 743 (135) 608 Main YES
Future plc 0.33 599 (20) 579 Main YES
Wickes Group plc 0.20 585 (240) 345 Main NO
On the Beach Group plc 0.18 868 (545) 323 Main YES
Tortilla Mexican Grill plc 0.18 161 152 313 Main YES
MYCELX Technologies Corporation 0.04 298 (223) 75 Main YES
Genagro Services Ltd ((4)) – – – – Unlisted YES
Total – equity Non-Qualifying Investments 11.49 23,137 (3,056) 20,081
Fixed Income – bonds
British Telecommunications plc 5.75% BDS 17/12/28 1.76 3,171 (95) 3,076 Main NO
NatWest Markets plc 6.375% NTS 08/11/27 1.73 3,067 (51) 3,016 Main NO
Royal Bank of Canada 5.000% SNR NTS 24/01/28 1.70 3,049 (77) 2,972 Main NO
Marks & Spencer plc 3.000% NTS 08/12/23 1.69 2,988 (33) 2,955 Main NO
Next Group plc 4.375% BDS 02/10/26 1.67 2,976 (61) 2,915 Main NO
Barclays plc 3.25% NTS 12/02/27 1.56 2,859 (131) 2,728 Main NO
Total Fixed Income – bonds 10.11 18,110 (448) 17,662
Total – Non-Qualifying Investments 30.93 59,378 (5,326) 54,052
Total investments 89.08 160,539 (4,909) 155,630
Cash at bank 10.94 19,130
Prepayments, accruals (0.02) (35)
Net assets 100.00 174,725
(1) COI – Co-investments with other funds managed by the Investment
Manager at 31 March 2023.
(2) Different classes of shares held in unlisted companies within the
portfolio have been aggregated.
(3) Impaired fully through the profit and loss account and therefore
shows a zero cost.
(4) Company awaiting liquidation.
The investments listed below are either listed, headquartered or registered
outside the UK:
Listed Headquartered Registered
Listed Investments:
Abcam plc UK/USA UK UK
Bytes Technology Group plc UK/South Africa UK UK
Crimson Tide plc UK/Republic of Ireland UK UK
Craneware plc UK UK/USA UK
Diversified Energy Company plc UK USA UK
Engage XR Holdings plc UK ROI UK
Energean plc UK/Israel UK UK
Faron Pharmaceuticals Oy UK/Finland Finland Finland
Itaconix plc UK/USA USA UK
Maxcyte Inc UK/USA USA USA
Mycelx Technologies Corporation plc UK/USA USA USA
National Grid plc UK/USA UK UK
Polarean Imaging plc UK USA UK
Renalytix AI plc UK/USA USA UK
Verici DX plc UK UK/USA UK
Unlisted private companies:
Genagro Ltd ((1)) — UK Jersey
(1) Company awaiting liquidation.
Top ten investments
As at 31 March 2023 (by market value)
The top ten investments are shown below. Each investment is valued by
reference to the bid price, or, in the case of unquoted companies, the IPEV
guidelines using one or more valuation techniques according to the nature,
facts and circumstances of the investment. Forecasts, where given, are drawn
from a combination of broker research and/or Bloomberg consensus forecasts.
Forecasts are in relation to a period end for which the company results are
yet to be released. Published accounts are used for private companies or
public companies with no published broker forecasts. The net asset figures and
net cash values are from published accounts in most cases.
Zoo Digital Group plc Share price: 195.0p
Investment date April 2017 Forecasts for the year to March 2023
Equity held 4.98% Turnover ($’000) 90,400
Av. Purchase Price 49.1p Profit before tax ($’000) 6,800
Cost (£’000) 2,159 Net cash September 2022 ($’000) 1,498
Valuation (£’000) 8,580 Net assets September 2022 ($’000) 30,690
Company description
Zoo Digital is a provider of cloud-based dubbing, subtitling, localisation and
distribution services for the global entertainment industry. Zoo’s clients
include major Hollywood studios, global broadcasters and independent
distributors. Zoo’s point of difference in the marketplace is its
development and use of innovative cloud technology that ensures that content
is localised in any language and delivered to all the major online platforms
with reduced time to market, higher quality and lower costs.
Equipmake Holdings plc Share price: 7.3p
Investment date July 2022 Forecasts for the year to May 2023
Equity held 10.51% Turnover (£’000) 4,800
Av. Purchase Price 4.3p Loss before tax (£’000) (4,400)
Cost (£’000) 3,740 Net cash November 2022 (£’000) 7,443
Valuation (£’000) 6,278 Net assets November 2022 (£’000) 9,491
Company description
Equipmake has developed a range of electrification products for the provision
of electric vehicle (EV) drivetrains to meet the needs of the automotive,
aerospace, space and transport sectors in support of the transition to zero
emission powertrains. Equipmake products can be applied in a variety of other
vehicle electrification contexts, including hybrid, fully electric and fuel
cell vehicles. Equipmake provides individual components to full turnkey
systems.
Learning Technologies Group plc Share price: 128.9p
Investment date July 2015 Forecasts for the year to December 2023
Equity held 0.57% Turnover (£’000) 608,900
Av. Purchase Price 49.7p Profit before tax (£’000) 94,000
Cost (£’000) 2,238 Net debt December 2022 (£’000) (119,811)
Valuation (£’000) 5,800 Net assets December 2022 (£’000) 426,300
Company description
Learning Technologies Group provides workplace digital learning and talent
management software and services to corporate and government clients. The
group offers end-to-end learning and talent solutions ranging from strategic
consultancy, through a range of content and platform solutions to analytical
insights that enable corporate and government clients to meet their
performance objectives.
Eagle Eye Solutions Group plc Share price: 560.0p
Investment date April 2014 Forecasts for the year to June 2023
Equity held 2.96% Turnover (£’000) 38,900
Av. Purchase Price 189.7p Profit before tax (£’000) 3,800
Cost (£’000) 1,642 Net cash December 2022 (£’000) 14,409
Valuation (£’000) 4,848 Net assets December 2022 (£’000) 17,012
Company description
Eagle Eye is a Software-as-a-Service (SaaS) technology company that creates
digital connections enabling personalised, real-time marketing solutions for
large retailers. Through Eagle Eye AIR, the company’s loyalty and promotions
omnichannel SaaS platform, companies connect all aspects of the customer
journey in real time, unlocking the capability to deliver personalisation,
streamline marketing execution and open up new revenue streams through
promotions, loyalty apps, gamification, subscriptions and gift services.
Kidly Ltd ((1)) Unquoted
Investment date March 2020 Results for the year to March 2022
Voting rights held 9.90% Turnover (£’000) ((2)) —
Av. Purchase Price 165.6p Profit/(loss) before tax (£’000) ((2)) —
Cost (£’000) 4,060 Net cash March 2022 (£’000) 358
Valuation (£’000) 3,518 Net assets March 2022 (£’000) (1,490)
Income recognised in period (£) 103,233
Company description
Kidly is an online children’s retail platform that curates a range of
attractive third-party brands that sit alongside its own Kidly Label brand,
catering to children between the ages of 0-5 years.
((1)) Includes equity investment of £1.1 million and
convertible loan note investments of £2.4 million.
((2)) Not available, data taken from abbreviated accounts.
PCI PAL plc Share Price: 48.0p
Investment date January 2018 Forecasts for the year to June 2023
Equity held 10.55% Turnover (£’000) 14,900
Av. Purchase Price 32.9p Loss before tax (£’000) (2,200)
Cost (£’000) 2,280 Net cash December 2022 (£’000) 1,876
Valuation (£’000) 3,322 Net assets December 2022 (£’000) (1,477)
Company description
PCI PAL is a provider of SaaS solutions that allows companies to take payments
from their customers securely. Its products secure payments and data in any
business communications environment including voice, chat, social, email, and
contact centre and is integrated to, and resold by, business communications
vendors and payment service providers.
Tortilla Mexican Grill plc Share Price: 115.0p
Investment date October 2009 Forecasts for the year to December 2023
Equity held 7.17% Turnover (£’000) 69,800
Av. Purchase Price 46.4p Profit before tax (£’000) 1,000
Cost (£’000) 1,286 Net debt December 2022 (£’000) (555)
Valuation (£’000) 3,188 Net assets December 2022 (£’000) 3,591
Company description
Tortilla is the UK’s largest fast-casual Mexican restaurant brand, offering
a California-style Mexican menu. Founded in October 2007, Tortilla operates a
multichannel order strategy across dine in, take away, click and collect and
delivery options. The current estate includes more than 59 Tortilla
restaurants across the UK, 9 UK and 3 overseas franchise stores, 3 UK delivery
kitchens and delivery partnerships with Deliveroo, Just Eat and Uber.
Following the acquisition of Chilango Ltd in May 2022, the company operates 3
sites across the UK under the Chilango brand.
Surface Transforms plc Share Price: 29.0p
Investment date March 2016 Forecasts for the year to December 2023
Equity held 5.07% Turnover (£’000) 16,000
Av. Purchase Price 17.6p Loss before tax (£’000) (844)
Cost (£’000) 1,744 Net cash December 2022 (£’000) 13,826
Valuation (£’000) 2,872 Net assets December 2022 (£’000) 33,551
Company description
Surface Transforms develops and produces carbon-ceramic brake discs serving
customers that include major OEMs in the global automotive markets. Surface
Transforms interweaves continuous carbon fibre to form a 3D multi-directional
matrix, producing a stronger, lighter and more durable product with superior
heat conductivity compared to standard production components.
Maxcyte Inc Share Price: 380.0p
Investment date March 2016 Forecasts for the year to December 2023
Equity held 0.73% Turnover ($’000) 49,300
Av. Purchase Price 169.3p (Loss) before tax ($’000) (33,500)
Cost (£’000) 1,270 Net cash March 2023 ($’000) 224,700
Valuation (£’000) 2,850 Net assets March 2023 ($’000) 247,819
Company description
Maxcyte is a cell-engineering focused company providing enabling platform
technologies to advance the discovery, development and commercialization of
next-generation cell therapeutics.
Engage XR Holdings Plc Share Price: 3.20p
Investment date March 2023 Forecasts for the year to December 2023
Equity held 16.45% Turnover (€’000) 5,400
Av. Purchase Price 4.0p (Loss) before tax (€’000) (4,500)
Cost (£’000) 3,453 Net cash December 2022 (€’000) 2,209
Valuation (£’000) 2,763 Net assets December 2022 (€’000) 2,480
Company description
Engage XR is a virtual reality (‘VR’) technology company with a
proprietary cloud-based professional metaverse platform used to deliver
immersive corporate communications, remote collaborations and events, training
and education. The company has a strong reputation for data security and
reliability, with a diverse customer base of more than 200 clients including
several blue-chip companies such as Meta, HP, HTC, KIA and BMW.
For further information please contact:
Oliver Bedford
Lead Manager
Hargreave Hale AIM VCT plc
Talisman House
Boardmans Way
Blackpool
FY4 5FY
0207 523 4837
aimvct@canaccord.com
Principal risks and uncertainties
The principal risks facing the Company relate to the Company’s investment
activities and include venture capital trust approval, investment, compliance,
operational risk and outsourcing, key personnel and exogenous risks such as
economic, political, financial, climate change and health risk. Other risks
faced by the Company include market risk, currency risk, interest rate risk,
liquidity risk and credit risk. These risks and the way in which they are
managed are described in more detail in the Company’s annual report and
accounts for the year ended 30 September 2022. The Company’s principal risks
and uncertainties have not changed materially since the date of that report.
Going concern
The Company’s business activities and the factors affecting its future
development are set out in the Chair’s statement and the Investment
Manager’s report. The Company’s principal risks are set out above.
The Board receives regular reports from the Investment Manager and
Administrator and reviews the financial position, performance and liquidity of
the Company’s investment portfolio. Revenue forecasts and expense budgets
are prepared at the start of each financial year and performance against plan
is reviewed by the Board. Cash forecasts are prepared and reviewed by the
Board as part of the HMRC investment test compliance monitoring.
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for a period of at least twelve
months. No material uncertainties related to events or conditions that may
cast significant doubt about the ability of the Company to continue as a going
concern have been identified by the Directors. For this reason, they continue
to adopt the going concern basis in preparing the financial statements.
On behalf of the Board of Directors.
David Brock
Chair
Date: 13 June 2023
Other matters
Dividend policy
The Company’s dividend policy is to target a tax-free dividend yield
equivalent to 5% of the year end NAV per share. The ability to pay dividends
is dependent on the Company’s available distributable reserves and cash
resources, the Act, the Listing Rules and the VCT Rules. The policy is
non-binding and at the discretion of the Board. Dividend payments may vary
from year to year in both quantum and timing. The level of dividend paid each
year will depend on the performance of the Company’s portfolio. In years
where there is strong investment performance, the Directors may consider a
higher dividend payment, including the payment of special dividends. In years
where investment performance is not as strong, the Directors may reduce or
even pay no dividend.
Discount control and management of share liquidity policy
The Company aims to improve liquidity and to maintain a discount of
approximately 5% to the last published NAV per share (as measured against the
mid-price) by making secondary market purchases of its shares in accordance
with parameters set by the Board.
This policy is non-binding and at the discretion of the Board. Its operation
depends on a range of factors including the Company’s liquidity, shareholder
permissions, market conditions and compliance with all laws and regulations.
These factors may restrict the effective operation of the policy and prevent
the Company from achieving its objectives.
Diversity and inclusion
The Board comprises three male non-executive directors and three female
non-executive directors with a diverse range of experience, skills, length of
service and backgrounds. The Board considers diversity and inclusion when
reviewing Board composition and has made a commitment to consider diversity
and inclusion when making future appointments. The Board will always appoint
the best person for the job. It will not discriminate on the grounds of
gender, race, ethnicity, religion, sexual orientation, age or physical
ability.
Environmental Social and Governance (ESG) Considerations
The Board seeks to maintain high standards of conduct with respect to
environmental, social and governance issues and to conduct the Company’s
affairs responsibly.
The Company does not have any employees or offices and so the Board does not
maintain any specific policies regarding employees, human rights, social and
community issues but does expect the Investment Manager to consider them when
fulfilling its role. The Company is exempt from the Streamlined Energy and
Carbon Reporting requirements.
The management of the Company’s investment portfolio has been delegated to
its Investment Manager, Canaccord Genuity Asset Management Limited. The
Company has not instructed the Investment Manager to include or exclude any
specific types of investment on ESG grounds. However, it expects the
Investment Manager to take account of ESG considerations in its investment
process for the selection and ongoing monitoring of underlying investments.
The Board has also given the Investment Manager discretion to exercise voting
rights on resolutions proposed by investee companies.
The Investment Manager continues to strengthen its approach to ESG issues.
To minimise the direct impact of its activities, the Company offers electronic
communications where acceptable to reduce the volume of paper it uses and uses
Carbon Balanced paper manufactured at a FSC accredited mill to print its
annual financial reports. Vegetable based inks are used in the printing
process where appropriate.
David Brock
Chair
Date: 13 June 2023
Statement of directors’ reponsibilities
in respect of the half-yearly financial report
In accordance with Disclosure Transparency Rule (DTR) 4.2.10, David Brock
(Chair), Oliver Bedford, Angela Henderson, Justin Ward, Megan McCracken and
Busola Sodeinde, the Directors, confirm that to the best of their knowledge
that:
• The half-yearly financial results have been prepared in
accordance with UK GAAP and give a true and fair view of the assets,
liabilities, financial position and profit of the Company as at 31 March 2023
as required by DTR 4.2.4;
• The interim management report consisting of the Chair’s
statement, Investment Manager’s report, investment portfolio summary,
principal risks and uncertainties disclosure and notes to the half-yearly
report includes a fair review of the information required by the Financial
Conduct Authority Disclosure and Transparency Rules, being;
• an indication of the important events that have occurred during
the first six months of the financial year and their impact on the condensed
set of financial statements;
• a description of the principal risks and uncertainties for the
remaining six months of the year; and
• a description of related party transactions that have taken place
in the first six months of the current financial year, that may 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.
On behalf of the Board of Directors.
David Brock
Chair
Date: 13 June 2023
Condensed income statement
for the six month period to 31 March 2023 (unaudited)
For the six month period to 31 March 2023 (unaudited) For the six month period to 31 March 2022 (unaudited)
Note Revenue £000 Capital £000 Total £000 Revenue £000 Capital £000 Total £000
Net (loss) on investments held at fair value through profit or loss 5 — (10,472) (10,472) — (43,893) (43,893)
Income 2 1,008 — 1,008 370 — 370
1,008 (10,472) (9,464) 370 (43,893) (43,523)
Management fee (363) (1,089) (1,452) (475) (1,425) (1900)
Other expenses (515) (26) (541) (587) (5) (592)
(878) (1,115) (1,993) (1,062) (1,430) (2,492)
Profit/(loss) on ordinary activities before taxation 130 (11,587) (11,457) (692) (45,323) (46,015)
Taxation — — — — — —
Profit/(loss) after taxation 130 (11,587) (11,457) (692) (45,323) (46,015)
Basic and diluted earnings/(loss) per share 3 0.04p (3.76)p (3.72)p (0.28)p (18.46)p (18.74)p
The total columns of these statements are the income statements of the
Company. All revenue and capital items in the above statements derive from
continuing operations. There was no other comprehensive income other than the
profits/losses for the six-month periods as set out above. The accompanying
notes are an integral part of these financial statements.
Condensed income statement
for the year ended 30 September 2022 (audited)
For the year to 30 September 2022 (audited)
Note Revenue £000 Capital £000 Total £000
Net (loss) on investments held at fair value through profit or loss 5 — (85,203) (85,203)
Income 2 975 13 988
975 (85,190) (84,215)
Management fee (835) (2,505) (3,340)
Other expenses (1,093) (22) (1,115)
(1,928) (2,527) (4,455)
(Loss) on ordinary activities before taxation (953) (87,717) (88,670)
Taxation — — —
(Loss) after taxation (953) (87,717) (88,670)
Basic and diluted (loss) per share 3 (0.36)p (33.06)p (33.42)p
The total column of this statement is the income statement of the Company. All
revenue and capital items in the above statement derive from continuing
operations. There was no other comprehensive income other than the loss for
the year as set out above. The accompanying notes are an integral part of
these financial statements.
Condensed balance sheet
as at 31 March 2023 (unaudited)
Note 31 March 2023 (unaudited) £000 31 March 2022 (unaudited) £000 30 September 2022 (audited) £000
Fixed assets
Investments at fair value through profit or loss 5 155,631 168,933 119,188
Current assets
Debtors 7 925 496 408
Cash at bank 19,130 38,082 41,911
20,055 38,578 42,319
Creditors: amounts falling due within one year 8 (961) (1,139) (1,000)
Net current assets 19,094 37,439 41,319
Total assets less current liabilities 174,725 206,372 160,507
Capital and Reserves
Called up share capital 3,307 2,675 2,666
Share premium 132,541 92,707 93,660
Capital redemption reserve 227 179 201
Capital reserve – unrealised 22,030 63,852 23,935
Special reserve 50,058 68,107 63,931
Capital reserve – realised (30,456) (18,297) (20,774)
Revenue reserve (2,982) (2,851) (3,112)
Total shareholders’ funds 174,725 206,372 160,507
Net asset value per share (basic and diluted) 4 52.84p 77.13p 60.19p
The accompanying notes are an integral part of these financial statements.
Condensed statement of changes in equity
for the six month period to 31 March 2023 (unaudited)
Non–distributable reserves Distributable reserves ((1))
Note Share capital £000 Share premium £000 Capital redemption reserve £000 Capital reserve unrealised £000 Special reserve £000 Capital reserve realised £000 Revenue reserve £000 Total £000
At 1 October 2022 2,666 93,660 201 23,935 63,931 (20,774) (3,112) 160,507
Loss and total comprehensive income for the period
Realised loss on investments 5 — — — — — (5,075) — (5,075)
Unrealised loss on investments 5 — — — (5,397) — — — (5,397)
Management fee charged to capital — — — — — (1,089) — (1,089)
Income allocated to capital 2 — — — — — — — —
Due diligence investment costs — — — — — (26) — (26)
Revenue profit after taxation for the period — — — — — — 130 130
Total loss after taxation for the period — — — (5,397) — (6,190) 130 (11,457)
Contributions by and distributions to owners
Subscription share issues 9 649 38,720 — — — — — 39,369
Issue costs 14 — (830) — — — — — (830)
Share buybacks 9 (26) — 26 — (1,454) — — (1,454)
DRIS share issues 9 18 991 — — — — — 1,009
Equity dividends paid 6 — — — — (12,419) — — (12,419)
Total contributions by and distributions to owners 641 38,881 26 — (13,873) — — 25,675
Other movements
Diminution in value 5 — — — 3,492 — (3,492) — —
Total other movements — — — 3,492 — (3,492) — —
At 31 March 2023 3,307 132,541 227 22,030 50,058 (30,456) (2,982) 174,725
Reserves available for distribution are capital reserve realised, special
reserve and revenue reserve. Total distributable reserves at 31 March 2023
were £16.6 million. The accompanying notes are an integral part of these
financial statements.
(1) The Income Taxes Act 2007 restricts distribution of capital from
reserves created by the conversion of the share premium account into a special
(distributable) reserve until the third anniversary of the share allotment
that led to the creation of that part of the share premium account. As at 31
March 2023, none of the special reserve was subject to this restriction.
Condensed statement of changes in equity
for the six month period to 31 March 2022 (unaudited)
Non–distributable reserves Distributable reserves ((1))
Note Share capital £000 Share premium £000 Capital redemption reserve £000 Capital reserve unrealised £000 Special reserve £000 Capital reserve realised £000 Revenue reserve £000 Total £000
At 1 October 2021 2,280 53,802 158 102,311 84,004 (11,433) (2,159) 228,963
Loss and total comprehensive income for the period
Realised loss on investments 5 — — — — — (2,161) — (2,161)
Unrealised loss on investments 5 — — — (41,732) — — — (41,732)
Management fee charged to capital — — — — — (1,425) — (1,425)
Income allocated to capital 2 — — — — — — — —
Due diligence investment costs — — — — — (5) — (5)
Revenue (loss) after taxation for the period — — — — — — (692) (692)
Total (loss) after taxation for the period — — — (41,732) — (3,591) (692) (46,015)
Contributions by and distributions to owners
Subscription share issues 406 38,794 — — — — — 39,200
Issue costs (729) — — — — — (729)
Share buybacks (21) — 21 — (1,739) — — (1,739)
DRIS share issues 10 840 — — — — — 850
Equity dividends paid — — — — (14,158) — — (14,158)
Total contributions by and distributions to owners 395 38,905 21 — (15,897) — — 23,424
Other movements
Diminution in value — — — 3,273 — (3,273) — —
Total other movements — — — 3,273 — (3,273) — —
At 31 March 2022 2,675 92,707 179 63,852 68,107 (18,297) (2,851) 206,372
Reserves available for distribution are capital reserve realised, special
reserve and revenue reserve. Total distributable reserves at 31 March 2022
were £47.0 million. The accompanying notes are an integral part of these
financial statements.
(1) The Income Taxes Act 2007 restricts distribution of capital from
reserves created by the conversion of the share premium account into a special
(distributable) reserve until the third anniversary of the share allotment
that led to the creation of that part of the share premium account. As at 31
March 2022, none of the special reserve was subject to this restriction.
Condensed statement of changes in equity
for the year ended 30 September 2022 (audited)
Non–distributable reserves Distributable reserves ((1))
Note Share Capital £000 Share Premium £000 Capital Redemption Reserve £000 Capital Reserve Unrealised £000 Special Reserve £000 Capital Reserve Realised £000 Revenue Reserve £000 Total £000
At 1 October 2021 2,280 53,802 158 102,311 84,004 (11,433) (2,159) 228,963
Loss and total comprehensive income for the year
Realised gains on investments 5 — — — — — 2,056 — 2,056
Unrealised (losses) on investments 5 — — — (87,259) — — — (87,259)
Management fee charged to capital — — — — — (2,505) — (2,505)
Income allocated to capital 2 — — — — — 13 = 13
Due diligence investments costs — — — — — (22) — (22)
Revenue (loss) after taxation for the year — — — — — — (953) (953)
Total (loss) after taxation for the year — — — (87,259) — (458) (953) (88,670)
Contributions by and distributions to owners
Subscription share issues 416 39,579 — — — — — 39,995
Issue costs — (746) — — — — — (746)
Share buybacks (43) — 43 — (3,243) — — (3,243)
DRIS share issues 13 1,025 — — — — — 1,038
Equity dividends paid 6 — — — — (16,830) — — (16,830)
Total contributions by and distributions to owners 386 39,858 43 — (20,073) — — 20,214
Other movements
Diminution in value — — — 8,883 — (8,883) — —
Total other movements — — — 8,883 — (8,883) — —
At 30 September 2022 2,666 93,660 201 23,935 63,931 (20,774) (3,112) 160,507
Reserves available for distribution are capital reserve realised, special
reserve and revenue reserve. Total distributable reserves at 30 September 2022
were £40 million. The accompanying notes are an integral part of these
financial statements.
(1) The Income Taxes Act 2007 restricts distribution of capital from
reserves created by the conversion of the share premium account into a special
(distributable) reserve until the third anniversary of the share allotment
that led to the creation of that part of the share premium account. As at 30
September 2022, none of the special reserve was subject to this restriction.
Condensed statement of cash flows
for the six month period to 31 March 2023 (unaudited)
Note 31 March 2023 (unaudited) £000 31 March 2022 (unaudited) £000 30 September 2022 ((1)) (audited) £000
Total (loss) on ordinary activities before taxation (11,457) (46,015) (88,670)
Realised losses/(gains) on investments 5 5,075 2,161 (2,056)
Unrealised losses on investments 5 5,397 41,732 87,259
(Increase) in debtors 7 (517) (166) (78)
(Decrease)/increase in creditors 8 (39) (44) (183)
Non–cash distributions 2 — (54) (126)
Amortisation (26) — —
Net cash (outflow) from operating activities (1,567) (2,386) (3,854)
Purchase of investments 5 (51,920) (22,737) (29,460)
Sale of investments 5 5,031 12,765 27,995
Net cash (used in) investing activities (46,889) (9,972) (1,465)
Share buybacks 9 (1,454) (1,739) (3,243)
Issue of share capital 9 39,369 39,200 39,995
Issue costs 14 (830) (729) (746)
Dividends paid 6 (11,410) (13,308) (15,792)
Net cash provided by financing activities 25,675 23,424 20,214
Net (decrease)/increase in cash (22,781) 11,066 14,895
Opening cash 41,911 27,016 27,016
Closing cash 19,130 38,082 41,911
The accompanying notes are an integral part of these financial statements.
(1) 30 September 2022 cash flow represents annual results
Explanatory notes
for the six month period to 31 March 2023 (unaudited)
Basis of preparation
The Company has prepared its half-yearly financial results for the six month
period ending 31 March 2023. The condensed financial statements have been
prepared in accordance with UK Generally Accepted Accounting Practice (“UK
GAAP”), including Financial Reporting Standard 104 (“FRS 104”) and with
the Companies Act 2006 and the Statement of Recommended Practice for
“Financial Statements of Investment Trust Companies and Venture Capital
Trusts” July 2022 (“SORP”).
They do not include all disclosures that would otherwise be required in a
complete set of financial statements and should be read in conjunction with
the 2022 annual report.
1. Significant accounting policies
Hargreave Hale AIM VCT plc has applied the same accounting policies and
methods of computation in its interim condensed financial statements as in its
2022 annual financial statements.
Segmental reporting
There is considered to be one operating segment being investment in equity and
debt securities.
Key judgements and estimates
The preparation of the financial statements requires the Board to make
judgements and estimates that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The nature of estimation
means that the actual outcomes could differ from those estimates. Key
judgements and estimates mainly relate to the determination of the fair
valuation of unquoted investments.
The assessment of fair value will reflect the market conditions at the
measurement date irrespective of which valuation technique is used. The IPEV
guidelines describe a range of valuation techniques, as described in the
“financial instruments” section.
Further areas requiring judgement and estimation are recognising and
classifying unusual or special dividends as either capital or revenue in
nature. The estimates and underlying assumptions are under continuous review
with particular attention paid to the carrying value of the investments.
2. Income
Six months to 31 March 2023 (unaudited) £000 Six months to 31 March 2022 (unaudited) £000 Year ended 30 September 2022 (audited) £000
Income from investments
Revenue:
Dividend income 467 251 744
Interest from bonds 146 – —
Interest from loan notes 151 ((1)) 116 ((2)) 184 ((3))
Bank interest 244 3 47
1,008 370 975
Capital:
Return of capital — — —
In-specie dividend — — 13 ((4))
— — 13
Total income 1,008 370 988
(1) Loan stock interest of £18k in respect of the previous financial
year has been recognised in the period following reversal of the impairment
being carried at 30 September 2022.
(2) The Company’s accrued fixed interest from a convertible loan
note in XP Factory plc (£54.0k) was converted into shares on 2 February 2022.
(3) As noted above, the Company’s accrued fixed income from a
convertible loan note in XP Factory (£54k) was converted into shares on 2
February 2022. The Company also converted tranche 1 of the Kidly 2025
convertible loan note at the principal plus accrued fixed income of £59k into
equity in line with the terms of the agreement to meet HMRC investment
requirements ahead of a follow-on investment into the Company in August 2022.
Total loan stock interest due but not recognised in the year was £50.7k. This
was due to Honest Brew Ltd being placed into administration in June 2022 and
impairment of the Osirium plc loan note.
(4) EKF Diagnostics plc distribution in specie of Verici shares
(£13k).
3. Basic and diluted (loss) per share
Six months to 31 March 2023 (unaudited) Six months to 31 March 2022 (unaudited) Year ended 30 September 2022 (audited)
(Loss) per share (3.72p) (18.74p) (33.42)p
Net (loss) for the period (£11,457,253) (£46,014,820) (£88,670,119)
Weighted average number of shares 308,143,674 245,572,062 265,292,558
4. Net asset value per share
Six months to 31 March 2023 (unaudited) Six months to 31 March 2022 (unaudited) Year ended 30 September 2022 (audited)
Net asset value per share 52.84p 77.13p 60.19p
Net assets £174,724,979 £206,371,986 £160,507,390
Number of shares in issue at period end 330,697,542 267,559,694 266,652,209
5. Investments
Listed Investments 31-Mar-23 £000 Unlisted Investments ((1)) 31-Mar-23 £000 Total Investments 31-Mar-23 £000 Total Investments 31-Mar-22 £000 Total Investments 30-Sep-22 £000
Opening valuation 105,321 13,867 119,188 202,800 202,800
Re-classification adjustment — — — — —
Purchases at cost 39,201 12,719 51,920 22,737 29,460
Effective yield adjustment 26 — 26 — —
Non-cash distribution — — — 54 ((2)) 126 ((3))
Sale proceeds (5,031) — (5,031) (12,765) (27,995)
Realised (losses)/gains (5,075) — (5,075) (2,161) ((4)) 2,056 ((4))
Unrealised (losses) (2,691) (2,706) (5,397) (41,732) ((4)) (87,259) ((4))
Closing valuation 131,751 23,880 155,631 168,933 119,188
Cost at period end 125,468 35,071 160,539 122,917 118,699
Unrealised gains/(losses) at period end 26,024 (3,994) 22,030 63,852 23,935
Diminution in value at period end ((5)) (19,741) (7,197) (26,938) (17,836) (23,446)
Valuation at period end 131,751 23,880 155,631 168,933 119,188
(1) Includes £14.3 million invested in the Marlborough Special
Situations Fund.
(2) The Company elected to convert accrued fixed interest from a
convertible loan note in XP Factory into shares (£54k).
(3) As noted above accrued fixed interest of £54k from a loan note
in XP Factory converted into shares, EKF Diagnostics plc distribution in
specie of Verici shares (£13k) and the Company elected to convert accrued
fixed interest from a convertible loan note in Kindly into shares (£59k).
(4) The net (loss) on investments held at fair value through profit
or loss in the income statement is the sum of the realised (losses)/gains and
unrealised (losses) for the period as detailed in the table above.
(5) Diminishments of £7,110,352 were made in the six month period
ending 31 March 2023. Once adjusted for disposals of £3,617,829 diminishments
at the period end are £26,938,099.
Financial Instruments – fair value measurement hierarchy
The table below sets out fair value measurements using FRS102 (appendix to
section 2 fair value measurement) fair value hierarchy. The Company has one
class of assets, being at fair value through profit or loss.
• Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
• Level 2: Inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
• Level 3: Valued by reference to valuation techniques using inputs
that are not based on observable market data.
Level 1 Investments £’000 Level 2 Investments £’000 Level 3 Investments £’000 Total Investments £’000
Six months ended 31 March 2023 (unaudited) 143,615 2,449 9,567 155,631
Year ended 30 September 2022 (audited) 104,999 3,561 10,558 119,188
Six months ended 31 March 2022 (unaudited) 144,368 — 24,570 168,933
The following table sets out the basis of valuation for the material Level 3
investments and those where the value has materially changed during the
period, held within the portfolio at 31 March 2023.
Level 3 Unquoted Investments
SCA Investments Ltd (Gousto) The company raised new equity in February 2023 to fund capital expenditure and working capital. Revenue and EBITDA continues to improve following a difficult period in mid-2022. Although the assessment of value has resulted in an increased enterprise
value, the addition of a new class of share has resulted in a reduction to the value of the investment. EV/Sales and EV/EBITDA peer group ratios and discounted cash flow analysis were used to support the valuation.
Kidly Ltd Trading remained difficult over the winter period with the company closing FY23 with revenues lower year on year. Losses were marginally lower than in the prior year. The company has made changes to its operating model to increase efficiency and reduce
losses in FY24. The company successfully raised new financing from debt and equity investors (including the Company) during the period under review and post period end, potentially sufficient to take the company through to break even. The fair value of the
equity investment, which was reviewed against EV/Sales multiples across a peer group of listed companies, was unchanged. The fair value of the convertible loan note investment was also unchanged. The conversion option is valued using the Black-Scholes
option pricing model.
Infinity Reliance Ltd (My 1st Years) Despite the difficult environment, trading remained resilient and in line with expectations in FY22 with the company continuing to generate positive EBITDA. The company expects to generate modest growth in revenues in FY23. The fair value of the
investment, which was unchanged, was reviewed against EV/Sales multiples across a peer group of listed companies.
Portr Ltd The company continues to generate modest revenues from operations in the United Kingdom and Switzerland. Much of its recent focus has been on securing a new funding to support a growth plan that includes launches into several new territories. The
assessment of fair value was set with reference to FY23 projections and EV/Sales multiples across a peer group of listed peers and led to a reduction in value following a review of several funding scenarios.
Zappar Ltd The company modestly reduced revenue guidance for FY23 to reflect lengthening sales cycles. Profit forecasts were unchanged. Despite a considerably more cautious outlook, the company expects to deliver further growth in FY24. The valuation, which was
unchanged, was reviewed against the revised financial projections for FY23 and EV/Sales multiples across a peer group of listed companies, many of which had increased in value over the period.
Osirium Technologies plc – convertible loan note The company raised new equity in November 2022 and, as a result, set a new lower strike price for the value of the option to convert the loan note into the company’s ordinary shares, which increased the value of the option to convert and, as a result, the
value of the convertible loan note. The value of the conversion option was calculated using the Black-Scholes option pricing model.
Level 3 Unquoted Investment disposals
There were no disposals of unquoted investments in the period.
6. Dividends paid
Summary of dividends paid in the six months to 31 March 2023 and the financial
year ending 30 September 2022 are detailed below:
Six months ended 31 March 2023 (unaudited) £’000 Year ended 30 September 2022 (audited) £’000
Special capital dividend of 2.50 pence per share paid on 29 October 2021 — 5,704
Final capital dividend of 3.15 pence for the year ended 30 September 2021 paid on 10 February 2022 — 8,455
Interim capital dividend of 1.00 pence per share for the year ended 30 September 2022 paid on 29 July 2022 — 2,671
Special capital dividend of 2.00 pence per share paid on 10 February 2023 6,216 —
Final capital dividend of 2.00 pence per share for the year ended 30 September 2022 paid on 10 February 2023 6,216 —
Unclaimed dividends ((1)) (13)
Total 12,419 ((2)) 16,830 ((3))
(1) Unclaimed dividends for a period of 12 years reverted to the
Company.
(2) The difference between total dividends paid for the period ending
31 March 2023, and the cash flow statement is £1,009,000 which is the amount
of dividends reinvested under the DRIS for the period.
(3) The difference between total dividends paid for the period ending
30 September 2022 and the cash flow statement is £1,038,000 which is the
amount of dividends reinvested under the DRIS for the period.
7. Debtors
Six months to 31 March 2023 (unaudited) £000 Six months to 31 March 2022 (unaudited) £000 Year ended 30 September 2022 (audited) £000
Prepayments and accrued income 925 496 408
8. Creditors: amounts falling due within one year
Six months to 31 March 2023 (unaudited) £000 Six months to 31 March 2022 (unaudited) £000 Year ended 30 September 2022 (audited) £000
Trade Creditors — 20 8
Accruals and deferred income 961 1,119 992
961 1,139 1,000
9. Transactions in shares
Buybacks
In total, the Company repurchased 2,660,431 shares during the six month period
ending 31 March 2023 at a total cost of £1,454,426. The repurchased shares
represent 1% of ordinary shares in issue on 1 October 2022. The acquired
shares have been cancelled.
Share issues
In total, the Company issued 64,869,248 new shares (nominal value £648,692)
through an offer for subscription during the six month period ending 31 March
2023, raising gross proceeds of £39,369,083. Once adjusted for issue costs
this resulted in net proceeds of £38,538,938.
The Company also issued 1,836,516 shares under the dividend reinvestment
scheme.
10. Contingencies, guarantees and financial commitments
There were no contingencies, guarantees or financial commitments of the
Company at 31 March 2023.
11. Legal form and principal activities
The Company was incorporated and registered in England and Wales on 16 August
2004 under the Companies Act 1985, registered number 5206425.
The Company has been approved as a Venture Capital Trust by HMRC under section
259 of the Income Taxes Act 2007. The shares of the Company were first
admitted to the Official List of the UK Listing Authority and trading on the
London Stock Exchange on 29 October 2004 and can be found under the TIDM code
“HHV”. The Company is premium listed.
In common with many other VCTs, the Company revoked its status as an
investment company as defined in Section 256 of the Companies Act 1985 on 23
May 2006 to facilitate the payment of dividends out of capital profits.
The Company’s principal activity is to invest in a diversified portfolio of
qualifying small UK based companies, primarily trading on AIM, with a view to
generating capital returns and income from its portfolio and to make
distributions from capital and income to shareholders whilst maintaining its
status as a VCT.
The Company is registered as a small UK Alternative Investment Fund Manager
(AIFM) with a Board comprising of six non-executive directors, five of whom
are independent. Oliver Bedford is not considered independent as he is an
employee of Canaccord Genuity Asset Management Limited, the Company’s
Investment Manager. Canaccord Genuity Wealth Limited acts as administrator and
custodian and JTC (UK) Limited provide company secretarial services to the
Company.
The Board has overall responsibility for the Company’s affairs including the
determination of its investment policy, however, the Board may exercise these
responsibilities through delegation to Canaccord Genuity Asset Management
Limited, Canaccord Genuity Wealth Limited and JTC (UK) Limited as it considers
appropriate.
The Directors have managed and continue to manage the Company’s affairs in
such a manner as to comply with Section 259 of the Income Taxes Act 2007.
12. Cautionary statement
The results should not be taken as a guide to the results for the financial
period ending 30 September 2023. This report may contain forward looking
statements with regards to the financial condition and results of the Company,
which are made in the light of current economic and business circumstances.
Nothing in this report should be considered as a profit forecast.
13. Publication of non-statutory accounts
The financial information contained in the 31 March 2023 income statement,
balance sheet, statement of cash flows and statement of changes in equity has
not been audited and does not comprise full financial statements within the
meaning of Section 434 of the Companies Act 2006. No statutory accounts in
respect of any period after 30 September 2022 have been reported on by the
Company’s auditor.
The comparative figures for the financial year ended 30 September 2022 have
been extracted from the latest published audited Annual Report and Financial
Statements. Those accounts have been reported on by the Company’s auditor
and lodged with the Registrar of Companies. The report of the auditor 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.
14. Related party transactions and conflicts of interest
The remuneration of the Directors, who are key management personnel of the
Company is disclosed in the table below.
Director Role Fees for the six-month period ending 31 March 2023 (£)
David Brock Chair 19,500
Oliver Bedford Director 14,000
Angela Henderson Director (Chair of Management and Service Provider Engagement Committee) 16,000
Justin Ward Director (Chair of Audit Committee) 16,750
Megan McCracken Director 15,250
Busola Sodeinde Director 15,250
Transactions with the manager
As the Company’s Investment Manager, Canaccord Genuity Asset Management is a
related party to the Company for the purposes of the Listing Rules. As the
Investment Manager and CGWL are part of the same CGWL group, CGWL also falls
into the definition of related party.
Oliver Bedford, a non-executive director of the Company is also an employee of
the Investment Manager which received fees of £14,000 for the period ended 31
March 2023 in respect of his position on the Board (2022: £12,875). Of these
fees £7,000 was owed at the period end.
CGWL act as administrator and custodian to the Company.
31 March 2023 (£) 31 March 2022 (£) 30 September 2022 (£)
Custody 15,000 15,000 30,000
Administration 97,500 97,500 195,000
Total 112,500 112,500 225,000
Still owed at the period end 55,975 55,980 55,240
Under an offer agreement dated 5 September 2022, CGWL were appointed by the
Company to administer the offer for subscription and acted as receiving agent
in relation to the offer. Under the terms of the agreement CGWL received a fee
of 3.5% of the gross proceeds of the offer for providing these services. The
Administrator agreed to discharge commissions payable to financial advisers in
respect of accepted applications for Offer Shares submitted by them, including
any trail commission.
The Administrator also agreed to discharge and/or reimburse all costs and
expenses of and incidental to the offer and the preparation of the prospectus,
including without limitation to the generality of the foregoing, FCA vetting
fees in relation to the prospectus, sponsor and legal fees, expenses of the
Company and CGWL, the Company’s tax adviser’s fees and expenses,
registrar’s fees, costs of printing, postage, advertising, publishing and
circulating the prospectus and marketing the offer, including any introductory
commission and discounts to investors. However, the Administrator was not
responsible for the payment of listing fees associated with the admission of
the ordinary shares to the premium segment of the Official List and to trading
on the main market of the London Stock Exchange.
During the half year, the Company issued 64,869,248 ordinary shares of 1 penny
(nominal value £648,692) in an offer for subscription which resulted in gross
funds being received of £39,369,083. As marketing adviser and receiving agent
to the Company, CGWL was entitled to 3.5% of the gross proceeds (£1,377,918),
often referred to as the ‘premium’. From this, CGWL paid for the allotment
of additional shares to investors with a value of £547,773. A further
reduction of £755 introductory commission was made resulting in net fees
payable to CGWL of £829,390 which were then used to pay other costs
associated with the prospectus and marketing.
Following the final allotment under the offer, CGWL rebated £100,000 to the
Company, being the maximum rebate available under the offer agreement for a
£40 million raise.
Canaccord Genuity Asset Management Limited is appointed as Investment Manager
to the Company and receives an investment management fee of 1.7% per annum.
Investment management fees for the half-year are £1,451,972 (2022:
£1,900,193). Of these fees £701,058 was still owed at the period end. As the
Investment Manager to the Company and the investment advisor to the
Marlborough Special Situations Fund (in which the Company may invest), the
Investment Manager makes an adjustment as necessary to its investment
management fee to ensure the Company is not charged twice for their services.
Upon completion of an investment, the Investment Manager is permitted under
the investment management agreement to charge private investee companies a fee
equal to 1.5% of the investment amount. This fee is subject to a cap of
£40,000 per investment and is payable directly from the investee company to
the Investment Manager. The Investment Manager may recover external due
diligence and transactional services costs directly from private investee
companies. No fees were charged to investee companies in the period to 31
March 2023 under this agreement.
Total commission of £48,447 was paid to CGWL in the half year for broker
services.
The Investment Manager has agreed to indemnify the Company and keep
indemnified the Company in respect of the amount by which the annual running
costs of the Company exceed 3.5% of the net assets of the Company, such costs
shall exclude any VAT payable thereon and any payments to financial
intermediaries, the payment of which is the responsibility of the Company. No
fees were waived by the Investment Manager in the first half of the financial
year under the indemnity.
As at 31 March 2023, the Company had cash deposits of £19,130,255. Of this,
£8,856,608 was held in the client account at CGWL.
15. Post balance sheet events
Buybacks
Since the period end, a further 1,481,360 ordinary shares have been purchased
at an average price of 50.68 pence and a total cost of £750,823.
Share issues
Since the period end, a further 1,047,986 new shares have been issued (nominal
value £10,480) raising net proceeds of £554,210. The offer is now fully
subscribed and closed.
Cancellation of share premium
In accordance with a special resolution passed at a general meeting of the
Company on 7 October 2022, the amount standing to the credit of the share
premium account on 9 May 2023 (£133.2m) has been cancelled.
New investments
The Company has made the following investments since the period end:
Amount Invested £000 Investment into existing company
Qualifying Companies
Fadel Partners Inc 2,300 No
Non-Qualifying Companies
Ashtead Group plc 344 Yes
On the Beach Group plc 320 Yes
Alternative performance measures
An alternative performance measure (“APM”) is a financial measure of the
Company’s historic or future financial performance, financial position or
cash flows which is not defined or specified in the applicable financial
reporting framework.
The Directors assess the Company’s performance against a range of criteria
which are viewed as particularly relevant for a VCT.
APM definitions are available in the interim report. Where the calculation of
the APM is not detailed within the financial statements, an explanation of the
methodology employed is below:
NAV total return
31 March 2023 31 March 2022
Opening NAV per share A 60.19p 100.39p
Special dividend paid B 2.00p 2.50p
Final dividend paid C 2.00p 3.15p
Closing NAV per share D 52.84p 77.13p
NAV total return (B+C+D-A)/A *100 -5.57% -17.54%
NAV total return (dividends reinvested)
31 March 2023 % Return
Opening NAV per share (30 September 2022) A 60.19p
Closing NAV per share (31 March 2023) 52.84p
Special dividend paid February 2023 2.00p
Final dividend for year paid February 2023 2.00p
Total dividend payments 4.00p
Closing NAV per share plus dividends paid 56.84p -5.57% (-17.54% 31 March 2022)
In year performance of reinvested dividends -0.25p
NAV total return (dividends reinvested) ((B-A)/A)*100 B 56.59p -5.98% (-18.49% 31 March 2022)
Share price total return
31 March 2023 31 March 2022
Opening share price A 62.75p 93.00p ((1))
Special dividend paid B 2.00p —
Final dividend paid C 2.00p 3.15p
Closing share price D 50.00p 74.75p
Share price total return ((B+C+D-A)/A)*100 -13.94% -16.24%
(1) Ex-dividend (special).
Share price total return (dividends reinvested)
31 March 2023 % Return
Opening share price (30 September 2022) A 62.75p
Closing share price (31 March 2023) 50.00p
Special dividend paid February 2023 2.00p
Final dividend for year paid February 2023 2.00p
Total dividend payments 4.00p
Closing share price plus dividends paid 54.00p -13.94% (-16.24% 31 March 2022)
In year performance of reinvested dividends -0.30p
Share price total return (dividends reinvested) ((B-A)/A)*100 B 53.70p -14.42% (-16.67% 31 March 2022)
Ongoing charges ratio
The ongoing charges ratio has been calculated using the AIC’s “Ongoing
Charges” methodology.
31 March 2023 £000 31 March 2022 £000
Investment management fee ((1)) 2,904 3,800
Other expenses ((1)(2)) 932 1,086
VCT proportion of MSSF expenses ((1)) 113 34
Ongoing charges A 3,949 4,920
Average net assets B 182,015 234,128
Ongoing charges ratio (A/B)*100 2.17% 2.10%
(1) Figures for the period ending 31 March 2022/23 have been
annualised to calculate the ongoing charges ratio.
(2) Other expenses exclude London Stock Exchange fees of £75k (2023)
and £49k (2022) for admission of shares under the offer for subscription as
the Board do not consider this cost to be an ongoing cost to the fund.
Share price discount
31 March 2023 31 March 2022
Share price A 50.00p 74.75p
NAV per share B 52.84p 77.13p
(Discount) / premium (A/B)-1 *100 -5.37% -3.09%
The 1 year average discount of -4.19% is calculated by taking the average of
the share price discount at each month end between 30 April 2022 and 31 March
2023.
The 5 year average discount of – 5.56% is calculated by taking the average
of the share price discount at each month end between 30 April 2018 and 31
March 2023.